Docoh
Loading...

C Citigroup

Filed: 21 Feb 20, 5:05pm
0000831001 c:DefinedBenefitPlanVariableAnnuityMember us-gaap:FairValueInputsLevel2Member country:US 2018-12-31 0000831001 srt:NorthAmericaMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2019-01-01 2019-12-31 0000831001 c:TradingAccountsLiabilitiesMember us-gaap:InterestRateContractMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ExchangeClearedMember 2018-12-31 0000831001 c:TradingAssetsExcludingDerivativeAssetsMember us-gaap:EquitySecuritiesMember 2019-01-01 2019-12-31 0000831001 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2019-01-01 2019-12-31
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2019

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to
Commission file number 1-9924
Citigroup Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1568099
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
388 Greenwich Street,New YorkNY 10013
(Address of principal executive offices)

 (Zip code)
(212559-1000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 formatted in Inline XBRL: See Exhibit 99.01

Securities registered pursuant to Section 12(g) of the Act: none

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company
      Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes o    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No x
The aggregate market value of Citigroup Inc. common stock held by non-affiliates of Citigroup Inc. on June 30, 2019 was approximately $158.0 billion.
Number of shares of Citigroup Inc. common stock outstanding on January 31, 2020: 2,106,486,793
Documents Incorporated by Reference: Portions of the registrant’s proxy statement for the annual meeting of stockholders scheduled to be held on April 21, 2020 are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III.
Available on the web at www.citigroup.com
 



FORM 10-K CROSS-REFERENCE INDEX
    
Item NumberPage
    
Part I 
    
1. Business4–27, 112–115,
   118, 146,
   294–295
    
1A. Risk Factors46–55
    
1B. Unresolved Staff CommentsNot Applicable
    
2. PropertiesNot Applicable
    
3. Legal Proceedings—See Note 27 to the Consolidated Financial Statements276–282
    
4. Mine Safety DisclosuresNot Applicable
    
Part II 
    
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities128–129, 152–154, 296–297
    
6. Selected Financial Data10–11
    
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations6–29, 58–111
    
7A. Quantitative and Qualitative Disclosures About Market Risk58–111, 147–151, 172–207, 214–267
    
8. Financial Statements and Supplementary Data124–293
    
9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot Applicable
    
9A. Controls and Procedures116–117
    
9B. Other InformationNot Applicable
    
    
 
    
    
    
Part III 
    
10. Directors, Executive Officers and Corporate Governance298–300*
    
11. Executive Compensation**
    
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters***
    
13. Certain Relationships and Related Transactions and Director Independence****
    
14. Principal Accounting Fees and Services*****
    
    
Part IV 
    
15. Exhibits and Financial Statement Schedules 

*For additional information regarding Citigroup’s Directors, see “Corporate Governance” and “Proposal 1: Election of Directors” in the definitive Proxy Statement for Citigroup’s Annual Meeting of Stockholders scheduled to be held on April 21, 2020, to be filed with the SEC (the Proxy Statement), incorporated herein by reference.
**See “Compensation Discussion and Analysis,” “The Personnel and Compensation Committee Report,” and “2019 Summary Compensation Table and Compensation Information” and “CEO Pay Ratio” in the Proxy Statement, incorporated herein by reference.
***See “About the Annual Meeting,” “Stock Ownership” and “Equity Compensation Plan Information” in the Proxy Statement, incorporated herein by reference.
****See “Corporate Governance—Director Independence,” “—Certain Transactions and Relationships, Compensation Committee Interlocks and Insider Participation” and “—Indebtedness” in the Proxy Statement, incorporated herein by reference.
*****See “Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm” in the Proxy Statement, incorporated herein by reference.


2


CITIGROUP’S 2019 ANNUAL REPORT ON FORM 10-K
OVERVIEW
MANAGEMENT'S DISCUSSION AND
  ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS
Executive Summary
Summary of Selected Financial Data
SEGMENT AND BUSINESS—INCOME (LOSS)
  AND REVENUES
SEGMENT BALANCE SHEET
Global Consumer Banking
North America GCB
Latin America GCB
Asia GCB
Institutional Clients Group
Corporate/Other
OFF-BALANCE SHEET
  ARRANGEMENTS
CONTRACTUAL OBLIGATIONS
CAPITAL RESOURCES
RISK FACTORS
Managing Global Risk Table of Contents
MANAGING GLOBAL RISK
SIGNIFICANT ACCOUNTING POLICIES AND
  SIGNIFICANT ESTIMATES
DISCLOSURE CONTROLS AND
  PROCEDURES
MANAGEMENT’S ANNUAL REPORT ON
  INTERNAL CONTROL OVER FINANCIAL
  REPORTING
FORWARD-LOOKING STATEMENTS
REPORT OF INDEPENDENT REGISTERED
  PUBLIC ACCOUNTING FIRM
FINANCIAL STATEMENTS AND NOTES
  TABLE OF CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
FINANCIAL DATA SUPPLEMENT
SUPERVISION, REGULATION AND OTHER
CORPORATE INFORMATION
Executive Officers
Citigroup Board of Directors



3


OVERVIEW

Citigroup’s history dates back to the founding of the City
Bank of New York in 1812.
Citigroup is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad, yet focused, range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, trade and securities services and wealth management. Citi has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions.
At December 31, 2019, Citi had approximately 200,000 full-time employees, compared to approximately 204,000 full-time employees at December 31, 2018.
Citigroup currently operates, for management reporting purposes, via two primary business segments: Global Consumer Banking (GCB) and Institutional Clients Group (ICG), with the remaining operations in Corporate/Other. For a further description of the business segments and the products and services they provide, see “Citigroup Segments” below, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3 to the Consolidated Financial Statements.
Throughout this report, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.
Additional information about Citigroup is available on Citi’s website at www.citigroup.com. Citigroup’s recent annual reports on Form 10-K, quarterly reports on Form 10-Q and proxy statements, as well as other filings with the U.S. Securities and Exchange Commission (SEC), are available free of charge through Citi’s website by clicking on the “Investors” tab and selecting “SEC Filings,” then “Citigroup Inc.” The SEC’s website also contains current reports on Form 8-K and other information regarding Citi at www.sec.gov.
For a discussion of 2018 versus 2017 results of operations of GCB in North America, Latin America and Asia, ICG and Corporate/Other, see each respective business’s results of operation in Citi’s 2018 Annual Report on Form 10-K.
Certain reclassifications, including a realignment of certain businesses, have been made to the prior periods’ financial statements and disclosures to conform to the current period’s presentation. For additional information on certain recent reclassifications, see Note 3 to the Consolidated Financial Statements.


Please see “Risk Factors” below for a discussion of the most significant risks and uncertainties that could impact Citigroup’s businesses, financial condition and results of operations.




 












































4


As described above, Citigroup is managed pursuant to two business segments: Global Consumer Banking and Institutional Clients Group, with the remaining operations in Corporate/Other.
citisegments123119.jpg
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.
citiregionsq4a04.jpg

(1)
Latin America GCB consists of Citi’s consumer banking business in Mexico.
(2)
Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
(3)
North America includes the U.S., Canada and Puerto Rico, Latin America includes Mexico and Asia includes Japan.
Note: As of the fourth quarter of 2019, Citi’s commercial banking businesses previously reported as part of GCB in North America, Latin America and Asia, including approximately $28 billion in end-of-period loans and approximately $37 billion in end-of-period deposits, are reported in ICG for all periods presented.    


5


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

EXECUTIVE SUMMARY
As described further throughout this Executive Summary, Citi’s 2019 results reflected steady progress toward improving its profitability and returns, despite an uncertain revenue environment, as strong client engagement drove balanced growth across businesses and geographies:

Citi had solid underlying revenue growth in every region in Global Consumer Banking (GCB), excluding the impact of foreign currency translation into U.S. dollars for reporting purposes (FX translation), as well as pretax gains on sale in 2018 of approximately $150 million on the Hilton portfolio in North America GCB and approximately $250 million on an asset management business in Latin America GCB.
Citi had balanced performance across the Institutional Clients Group (ICG), with solid results in fixed income markets, treasury and trade solutions, investment banking and the private bank, while equity markets revenues were negatively impacted by a challenging environment.
Citi demonstrated strong expense discipline, resulting in expenses that were largely unchanged from the prior year, as well as positive operating leverage, even as Citi continued to make investments in the franchise. Citi’s positive operating leverage and continued credit discipline resulted in an improvement in pretax earnings.
Citi reported broad-based loan and deposit growth across GCB and ICG.
Citi returned $22.3 billion of capital to its shareholders in the form of common stock repurchases and dividends; Citi repurchased approximately 264 million common shares, contributing to a 9% reduction in average outstanding common shares from the prior year.
Despite continued progress in capital returns to shareholders, Citi’s key regulatory capital metrics remained strong.

While global growth has continued and the underlying macroeconomic environment remains largely positive, economic forecasts for 2020 have been lowered and various economic, political and other risks and uncertainties could create a more volatile operating environment and impact Citi’s businesses and future results. For a discussion of risks and uncertainties that could impact Citi’s businesses, results of operations and financial condition during 2020, see each respective business’s results of operations, “Risk Factors” and “Managing Global Risk” below. Despite these risks and uncertainties, Citi intends to continue to build on the progress made during 2019 with a focus on further optimizing its performance to benefit shareholders, while remaining flexible and adapting to market and economic conditions as they develop.

 
2019 Results Summary

Citigroup
Citigroup reported net income of $19.4 billion, or $8.04 per share, compared to net income of $18.0 billion, or $6.68 per share, in the prior year. Net income increased 8%, primarily driven by a lower effective tax rate and higher revenues, partially offset by higher cost of credit, while expenses were largely unchanged. Earnings per share increased 20%, driven by higher net income and the 9% reduction in average shares outstanding due to the common stock repurchases. Results in 2019 included a net tax benefit of approximately $0.35 per share related to discrete tax items, including an approximate $0.6 billion benefit from reductions in Citi’s valuation allowance related to its deferred tax assets, primarily recorded in Corporate/Other (see “Significant Accounting Policies and Significant Estimates—Income Taxes” below).
Citigroup revenues of $74.3 billion increased 2%, or 4% excluding the impact of FX translation and the gains on sale in the prior year (see “Executive Summary” above), reflecting higher revenues across GCB and ICG, partially offset by lower revenues in Corporate/Other.
Citigroup’s end-of-period loans increased 2% to $699 billion. Excluding the impact of FX translation, Citigroup end-of-period loans also grew 2%, as 3% aggregate growth in GCB and ICG was partially offset by the continued wind-down of legacy assets in Corporate/Other. Citigroup’s end-of-period deposits increased 6% to $1.1 trillion. Excluding the impact of FX translation, Citigroup’s end-of-period deposits also grew 6%, primarily driven by 7% growth in GCB and 6% growth in ICG, excluding the impact of FX translation. (Citi’s results of operations excluding the gains on sale as well as the impact of FX translation are non-GAAP financial measures. Citi believes the presentation of its results of operations excluding the impact of FX translation and gains on sale provides a meaningful depiction for investors of the underlying fundamentals of its businesses.)

Expenses
Citigroup operating expenses of $42.0 billion were largely unchanged, as efficiency savings and the wind-down of legacy assets offset volume-driven growth and continued investments in the franchise. Operating expenses in GCB and Corporate/Other were down 1% and 5%, respectively, while ICG operating expenses increased 2%.

Cost of Credit
Citi’s total provisions for credit losses and for benefits and claims of $8.4 billion increased 11%. The increase was primarily driven by higher net credit losses in both Citi-branded cards and Citi retail services in North America GCB, as well as higher overall cost of credit in ICG.
Net credit losses of $7.8 billion increased 9%. Consumer net credit losses of $7.4 billion increased 7%, primarily reflecting volume growth and seasoning in the North America cards portfolios. Corporate net credit losses increased to $392

6


million from $205 million in the prior year, reflecting a normalization in credit trends.
For additional information on Citi’s consumer and corporate credit costs and allowance for loan losses, see each respective business’s results of operations and “Credit Risk” below.

Capital
Citigroup’s Common Equity Tier 1 (CET1) Capital ratio was 11.8% as of December 31, 2019, compared to 11.9% as of December 31, 2018, based on the Basel III Standardized Approach for determining risk-weighted assets. The decline in the ratio primarily reflected the return of capital to common shareholders, partially offset by net income and a reduction in risk-weighted assets. Citigroup’s Supplementary Leverage ratio as of December 31, 2019 was 6.2%, compared to 6.4% as of December 31, 2018. For additional information on Citi’s capital ratios and related components, see “Capital Resources” below.

Global Consumer Banking
GCB net income of $5.7 billion increased 7%. Excluding the impact of FX translation, net income increased 8%, driven by higher revenues, partially offset by higher cost of credit. GCB operating expenses of $17.6 billion decreased 1%. Excluding the impact of FX translation, expenses were largely unchanged, as efficiency savings offset continued investments in the franchise and volume-driven growth.
GCB revenues of $33.0 billion increased 2%. Excluding the impact of FX translation and the gains on sale in both North America GCB and Latin America GCB in the prior year, revenues increased 4%, driven by growth in all three regions. North America GCB revenues of $20.4 billion increased 3%, and 4% excluding the gain on sale in the prior year, primarily driven by growth in Citi-branded cards and Citi retail services, partially offset by lower retail banking revenues. In North America GCB, Citi-branded cards revenues of $9.2 billion increased 6%, and 8% excluding the gain on sale in the prior year, primarily reflecting volume growth and spread expansion. Citi retail services revenues of $6.7 billion increased 2%, primarily driven by organic loan growth and the full-year benefit of the L.L.Bean acquisition. Retail banking revenues of $4.5 billion decreased 2%, as the benefit of stronger deposit volumes was more than offset by lower deposit spreads.
North America GCB average deposits of $153 billion increased 3%, average retail banking loans of $49 billion increased 3% and assets under management of $72 billion grew 20% (including the benefit of market movements). Average Citi-branded card loans of $90 billion increased 3%, while Citi-branded card purchase sales of $368 billion increased 7%. Average Citi retail services loans of $50 billion increased 3%, while Citi retail services purchase sales of $88 billion increased 2%. For additional information on the results of operations of North America GCB in 2019, see “Global Consumer Banking—North America GCB” below.
International GCB revenues (consisting of Latin America GCB and Asia GCB (which includes the results of operations in certain EMEA countries)), of $12.6 billion increased 1%.
 
Excluding the impact of FX translation and the gain on sale in Latin America GCB in the prior year, international GCB revenues increased 4%. On this basis, Latin America GCB revenues increased 4%, primarily driven by an increase in cards revenues and improved deposit spreads. Asia GCB revenues increased 4%, primarily reflecting higher deposit, investment and cards revenues. For additional information on the results of operations of Latin America GCB and Asia GCB in 2019, including the impact of FX translation, see “Global Consumer Banking—Latin America GCB” and “Global Consumer Banking—Asia GCB” below.
Year-over-year, excluding the impact of FX translation, international GCB average deposits of $124 billion increased 5%, average retail banking loans of $71 billion increased 4%, assets under management of $104 billion increased 16%(including the benefit of market movements), average card loans of $25 billion increased 3% and card purchase sales of $108 billion increased 6%.

Institutional Clients Group
ICG net income of $12.9 billion increased 3%, primarily driven by higher revenues and a lower effective tax rate, partially offset by higher expenses and cost of credit. ICG operating expenses increased 2% to $22.2 billion, primarily driven by higher compensation costs, investments and volume-driven growth, partially offset by efficiency savings.
ICG revenues of $39.3 billion increased 3%, reflecting a 1% increase in Banking revenues and a 5% increase in Markets and securities services revenues. The increase in Banking revenues included the impact of $432 million of losses on loan hedges within corporate lending, compared to gains of $45 million in the prior year.
Banking revenues of $21.9 billion (excluding the impact of gains (losses) on loan hedges within corporate lending) increased 3%, driven by solid growth in treasury and trade solutions, investment banking and the private bank. Investment banking revenues of $5.2 billion increased 4%, as strength in debt underwriting was partially offset by lower revenues in both equity underwriting and advisory. Advisory revenues decreased 3% to $1.3 billion, equity underwriting revenues decreased 2% to $973 million and debt underwriting revenues increased 10% to $3.0 billion.
Treasury and trade solutions revenues of $10.3 billion increased 4%, and 6% excluding the impact of FX translation, reflecting strong client engagement and volume growth, partially offset by the impact of lower interest rates. Private bank revenues of $3.5 billion increased 2%, driven by higher lending and deposit volumes as well as higher investment activity, partially offset by spread compression. Corporate lending revenues declined 16% to $2.5 billion. Excluding the impact of gains (losses) on loan hedges, corporate lending revenues were largely unchanged, as growth in the commercial loan portfolio was offset by lower volumes in the rest of the portfolio.
Markets and securities services revenues of $17.8 billion increased 5%, including a pretax gain of approximately $350 million on Citi’s investment in Tradeweb in the second quarter of 2019, recorded in fixed income markets. Fixed income markets revenues of $12.9 billion increased 10%, reflecting

7


growth across rates and currencies as well as spread products, including the Tradeweb gain. Equity markets revenues of $2.9 billion decreased 15%, primarily driven by lower revenues across cash equities, derivatives and prime finance. Securities services revenues of $2.6 billion were largely unchanged, but increased 4% excluding the impact of FX translation, reflecting higher net interest revenue due to higher deposits and higher interest rates, particularly in emerging markets, as well as higher client volumes. For additional information on the results of operations of ICG in 2019, see ��Institutional Clients Group” below.

Corporate/Other
Corporate/Other net income was $801 million, compared to $186 million in the prior year, primarily reflecting the benefit of discrete tax items. Operating expenses of $2.2 billion decreased 5%, as the continued wind-down of legacy assets more than offset higher infrastructure costs. Corporate/Other revenues of $2.0 billion decreased 8%, primarily driven by the continued wind-down of legacy assets, partially offset by gains on investments. For additional information on the results of operations of Corporate/Other in 2019, see “Corporate/Other” below.

8




 




























This page intentionally left blank.






9


RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1
Citigroup Inc. and Consolidated Subsidiaries
In millions of dollars, except per share amounts20192018201720162015
Net interest revenue$47,347
$46,562
$45,061
$45,476
$47,093
Non-interest revenue26,939
26,292
27,383
25,321
30,184
Revenues, net of interest expense$74,286
$72,854
$72,444
$70,797
$77,277
Operating expenses42,002
41,841
42,232
42,338
44,538
Provisions for credit losses and for benefits and claims8,383
7,568
7,451
6,982
7,913
Income from continuing operations before income taxes$23,901
$23,445
$22,761
$21,477
$24,826
Income taxes(1)
4,430
5,357
29,388
6,444
7,440
Income (loss) from continuing operations$19,471
$18,088
$(6,627)$15,033
$17,386
Income (loss) from discontinued operations, net of taxes(4)(8)(111)(58)(54)
Net income (loss) before attribution of noncontrolling interests$19,467
$18,080
$(6,738)$14,975
$17,332
Net income attributable to noncontrolling interests
66
35
60
63
90
Citigroup’s net income (loss)(1)
$19,401
$18,045
$(6,798)$14,912
$17,242
Earnings per share     
Basic     
Income (loss) from continuing operations$8.08
$6.69
$(2.94)$4.74
$5.43
Net income (loss)8.08
6.69
(2.98)4.72
5.41
Diluted     
Income (loss) from continuing operations$8.04
$6.69
$(2.94)$4.74
$5.42
Net income (loss)
8.04
6.68
(2.98)4.72
5.40
Dividends declared per common share1.92
1.54
0.96
0.42
0.16
Common dividends$4,403
$3,865
$2,595
$1,214
$484
Preferred dividends1,109
1,174
1,213
1,077
769
Common share repurchases17,875
14,545
14,538
9,451
5,452

Table continues on the next page, including footnotes.

10


SUMMARY OF SELECTED FINANCIAL DATA—PAGE 2
Citigroup Inc. and Consolidated Subsidiaries
  
In millions of dollars, except per share amounts, ratios and direct staff20192018201720162015
At December 31:     
Total assets$1,951,158
$1,917,383
$1,842,465
$1,792,077
$1,731,210
Total deposits1,070,590
1,013,170
959,822
929,406
907,887
Long-term debt248,760
231,999
236,709
206,178
201,275
Citigroup common stockholders’ equity(1)
175,262
177,760
181,487
205,867
205,139
Total Citigroup stockholders’ equity(1)
193,242
196,220
200,740
225,120
221,857
Average assets1,978,805
1,920,242
1,875,438
1,808,728
1,823,875
Direct staff (in thousands)
200
204
209
219
231
Performance metrics     
Return on average assets0.98%0.94%(0.36)%0.82%0.95%
Return on average common stockholders’ equity(1)(2)
10.3
9.4
(3.9)6.6
8.1
Return on average total stockholders’ equity(1)(2)
9.9
9.1
(3.0)6.5
7.9
Return on tangible common equity (RoTCE)(1)(3)
12.1
11.0
8.1
7.6
9.3
Efficiency ratio (total operating expenses/total revenues)56.5
57.4
58.3
59.8
57.6
Basel III ratios(1)(4)
     
Common Equity Tier 1 Capital(5)
11.81%11.86%12.36 %12.57%12.07%
Tier 1 Capital(5)
13.36
13.46
14.06
14.24
13.49
Total Capital(5)
15.97
16.18
16.30
16.24
15.30
Supplementary Leverage ratio6.21
6.41
6.68
7.22
7.08
Citigroup common stockholders’ equity to assets(1)
8.98%9.27%9.85 %11.49%11.85%
Total Citigroup stockholders’ equity to assets(1)
9.90
10.23
10.90
12.56
12.82
Dividend payout ratio(6)
23.9
23.1
         NM
8.9
3.0
Total payout ratio(7)
121.8
109.1
         NM
77.1
36.0
Book value per common share(1)
$82.90
$75.05
$70.62
$74.26
$69.46
Tangible book value (TBV) per share(1)(3)
70.39
63.79
60.16
64.57
60.61
(1)2017 includes the one-time impact related to enactment of the Tax Cuts and Jobs Act (Tax Reform). 2019 and 2018 reflect the tax rate structure post Tax Reform. For additional information, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below. RoTCE for 2017 excludes the one-time impact from Tax Reform.
(2)The return on average common stockholders’ equity is calculated using net income less preferred stock dividends divided by average common stockholders’ equity. The return on average total Citigroup stockholders’ equity is calculated using net income divided by average Citigroup stockholders’ equity.
(3)For information on RoTCE and TBV, see “Capital Resources—Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Returns on Equity” below.
(4)Citi’s risk-based capital and leverage ratios for 2017 and prior years are non-GAAP financial measures, which reflect full implementation of regulatory capital adjustments and deductions prior to the effective date of January 1, 2018.
(5)As of December 31, 2019, 2018, and 2017, Citi’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III Standardized Approach, whereas the reportable Total Capital ratio was the lower derived under the Basel III Advanced Approaches framework. For all prior periods presented, Citi’s Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios were the lower derived under the Basel III Advanced Approaches framework.
(6)Dividends declared per common share as a percentage of net income per diluted share.
(7)
Total common dividends declared plus common stock repurchases as a percentage of net income available to common shareholders (Net income, less preferred dividends). See “Consolidated Statement of Changes in Stockholders’ Equity,” Note 10 to the Consolidated Financial Statements and “Equity Security Repurchases” below for the component details.
NMNot meaningful



11


SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
CITIGROUP INCOME
In millions of dollars20192018
2017(1)
% Change 
 2019 vs. 2018
% Change 
 2018 vs. 2017
Income (loss) from continuing operations     
Global Consumer Banking     
  North America$3,224
$3,087
$1,829
4 %69 %
  Latin America901
802
516
12
55
  Asia(2)
1,577
1,420
1,197
11
19
Total$5,702
$5,309
$3,542
7 %50 %
Institutional Clients Group     
  North America$3,511
$3,675
$2,494
(4)%47 %
  EMEA3,867
3,889
2,828
(1)38
  Latin America2,111
2,013
1,637
5
23
  Asia3,455
2,997
2,416
15
24
Total$12,944
$12,574
$9,375
3 %34 %
Corporate/Other825
205
(19,544)NM
NM
Income (loss) from continuing operations$19,471
$18,088
$(6,627)8 %NM
Discontinued operations$(4)$(8)$(111)50 %93 %
Less: net income attributable to noncontrolling interests66
35
60
89
(42)
Citigroup’s net income (loss)$19,401
$18,045
$(6,798)8 %NM

(1)
2017 includes the one-time impact related to enactment of Tax Reform. For additional information, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below.
(2)
Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
NM Not meaningful

CITIGROUP REVENUES
In millions of dollars201920182017% Change 
 2019 vs. 2018
% Change 
 2018 vs. 2017
Global Consumer Banking     
  North America$20,398
$19,829
$19,570
3 %1 %
  Latin America5,238
5,309
4,794
(1)11
  Asia(1)
7,335
7,201
7,081
2
2
Total$32,971
$32,339
$31,445
2 %3 %
Institutional Clients Group     
  North America$13,459
$13,522
$14,578
 %(7)%
  EMEA12,006
11,770
10,878
2
8
  Latin America5,166
4,954
4,814
4
3
  Asia8,670
8,079
7,552
7
7
Total$39,301
$38,325
$37,822
3 %1 %
Corporate/Other2,014
2,190
3,177
(8)(31)
Total Citigroup net revenues$74,286
$72,854
$72,444
2 %1 %
(1)
Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.



12


SEGMENT BALANCE SHEET(1)—DECEMBER 31, 2019
In millions of dollars
Global
Consumer
Banking
Institutional
Clients
Group
Corporate/Other
and
consolidating
eliminations(2)
Citigroup
parent
company-
issued
long-term
debt and
stockholders’
equity(3)
Total
Citigroup
consolidated
Assets     
Cash and deposits with banks$7,076
$69,363
$117,480
$
$193,919
Securities borrowed and purchased under agreements to resell87
250,968
267

251,322
Trading account assets1,168
265,260
9,712

276,140
Investments1,150
126,481
240,932

368,563
Loans, net of unearned income and allowance for loan losses290,270
387,036
9,394

686,700
Other assets39,071
94,648
40,795

174,514
Net inter-segment liquid assets(4)
68,077
253,463
(321,540)

Total assets$406,899
$1,447,219
$97,040
$
$1,951,158
Liabilities and equity    
Total deposits$291,049
$767,666
$11,875
$
$1,070,590
Securities loaned and sold under agreements to repurchase2,229
164,096
14

166,339
Trading account liabilities549
118,788
557

119,894
Short-term borrowings417
27,082
17,550

45,049
Long-term debt(3)
1,472
64,758
32,053
150,477
248,760
Other liabilities20,847
71,215
14,518

106,580
Net inter-segment funding (lending)(3)
90,336
233,614
19,769
(343,719)
Total liabilities$406,899
$1,447,219
$96,336
$(193,242)$1,757,212
Total stockholders’ equity(5)


704
193,242
193,946
Total liabilities and equity$406,899
$1,447,219
$97,040
$
$1,951,158

(1)The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment. The respective segment information depicts the assets and liabilities managed by each segment.
(2)
Consolidating eliminations for total Citigroup and Citigroup parent company assets and liabilities are recorded within Corporate/Other.
(3)Total stockholders’ equity and the majority of long-term debt of Citigroup reside on the Citigroup parent company balance sheet. Citigroup allocates stockholders’ equity and long-term debt to its businesses through inter-segment allocations as shown above.
(4)Represents the attribution of Citigroup’s liquid assets (primarily consisting of cash, marketable equity securities and available-for-sale debt securities) to the various businesses based on Liquidity Coverage Ratio (LCR) assumptions.
(5)
Corporate/Other equity represents noncontrolling interests.


13


GLOBAL CONSUMER BANKING
Global Consumer Banking (GCB) consists of consumer banking businesses in North America, Latin America (consisting of Citi’s consumer banking business in Mexico) and Asia. GCB provides traditional banking services to retail customers through retail banking, Citi-branded cards and Citi retail services (for additional information on these businesses, see “Citigroup Segments” above). GCB is focused on its priority markets in the U.S., Mexico and Asia with 2,348 branches in 19 countries and jurisdictions as of December 31, 2019. At December 31, 2019, GCB had approximately $407 billion in assets and $291 billion in deposits.
GCB’s overall strategy is to leverage Citi’s global footprint and be the pre-eminent bank for the affluent and emerging affluent consumers in large urban centers. In credit cards and in certain retail markets, Citi serves customers in a somewhat broader set of segments and geographies.

In millions of dollars, except as otherwise noted201920182017% Change 
 2019 vs. 2018
% Change 
 2018 vs. 2017
Net interest revenue$28,205
$27,374
$26,277
3 %4 %
Non-interest revenue4,766
4,965
5,168
(4)(4)
Total revenues, net of interest expense$32,971
$32,339
$31,445
2 %3 %
Total operating expenses$17,628
$17,786
$17,229
(1)%3 %
Net credit losses$7,382
$6,884
$6,462
7 %7 %
Credit reserve build439
568
1,029
(23)(45)
Provision for unfunded lending commitments1


100

Provision for benefits and claims73
103
116
(29)(11)
Provisions for credit losses and for benefits and claims
  (LLR & PBC)
$7,895
$7,555
$7,607
5 %(1)%
Income from continuing operations before taxes$7,448
$6,998
$6,609
6 %6 %
Income taxes1,746
1,689
3,067
3
(45)
Income from continuing operations$5,702
$5,309
$3,542
7 %50 %
Noncontrolling interests6
7
9
(14)(22)
Net income$5,696
$5,302
$3,533
7 %50 %
Balance Sheet data and ratios (in billions of dollars)
     
Total EOP assets$407
$388
$389
5 % %
Average assets389
378
380
3
(1)
Return on average assets1.46%1.40%0.93%  
Efficiency ratio53
55
55
  
Average deposits$277
$269
$267
3
1
Net credit losses as a percentage of average loans2.60%2.48%2.39%  
Revenue by business     
Retail banking$12,549
$12,627
$12,089
(1)%4 %
Cards(1)
20,422
19,712
19,356
4
2
Total$32,971
$32,339
$31,445
2 %3 %
Income from continuing operations by business     
Retail banking$1,842
$1,851
$1,320
 %40 %
Cards(1)
3,860
3,458
2,222
12
56
Total$5,702
$5,309
$3,542
7 %50 %
Table continues on the next page, including footnotes.


14


Foreign currency (FX) translation impact     
Total revenue—as reported$32,971
$32,339
$31,445
2 %3 %
Impact of FX translation(2)

(146)(270)  
Total revenues—ex-FX(3)
$32,971
$32,193
$31,175
2 %3 %
Total operating expenses—as reported$17,628
$17,786
$17,229
(1)%3 %
Impact of FX translation(2)

(100)(154)  
Total operating expenses—ex-FX(3)
$17,628
$17,686
$17,075
 %4 %
Total provisions for LLR & PBC—as reported$7,895
$7,555
$7,607
5 %(1)%
Impact of FX translation(2)

(24)(53)  
Total provisions for LLR & PBC—ex-FX(3)
$7,895
$7,531
$7,554
5 % %
Net income—as reported$5,696
$5,302
$3,533
7 %50 %
Impact of FX translation(2)

(16)(42)  
Net income—ex-FX(3)
$5,696
$5,286
$3,491
8 %51 %
(1)Includes both Citi-branded cards and Citi retail services.
(2)Reflects the impact of FX translation into U.S. dollars at the 2019 average exchange rates for all periods presented.
(3)Presentation of this metric excluding FX translation is a non-GAAP financial measure.
Note: For information on the impact of Citi’s January 1, 2020 adoption of the new accounting standard on credit losses (CECL), see “Risk Factors—Operational Risks” below and Note 1 to the Consolidated Financial Statements.
 



15


NORTH AMERICA GCB
North America GCB provides traditional retail banking and Citi-branded and Citi retail services card products to retail and small business customers in the U.S. North America GCB’s U.S. cards product portfolio includes its proprietary portfolio (including the Citi Double Cash, Thank You and Value cards) and co-branded cards (including, among others, American Airlines and Costco) within Citi-branded cards as well as its co-brand and private label relationships (including, among others, Sears, The Home Depot, Best Buy and Macy’s) within Citi retail services.
At December 31, 2019, North America GCB had 687 retail bank branches concentrated in the six key metropolitan areas of New York, Chicago, Miami, Washington, D.C., Los Angeles and San Francisco. Also as of December 31, 2019, North America GCB had approximately $50.3 billion in retail banking loans and $160.5 billion in deposits. In addition, North America GCB had approximately $149.2 billion in outstanding card loan balances.
In millions of dollars, except as otherwise noted201920182017% Change 
 2019 vs. 2018
% Change 
 2018 vs. 2017
Net interest revenue$19,869
$19,006
$18,298
5 %4 %
Non-interest revenue(1)
529
823
1,272
(36)(35)
Total revenues, net of interest expense$20,398
$19,829
$19,570
3 %1 %
Total operating expenses$10,154
$10,230
$9,867
(1)%4 %
Net credit losses$5,583
$5,085
$4,737
10 %7 %
Credit reserve build469
460
926
2
(50)
Provision for unfunded lending commitments1


100

Provision for benefits and claims19
22
33
(14)(33)
Provisions for credit losses and for benefits and claims$6,072
$5,567
$5,696
9 %(2)%
Income from continuing operations before taxes$4,172
$4,032
$4,007
3 %1 %
Income taxes948
945
2,178

(57)
Income from continuing operations$3,224
$3,087
$1,829
4 %69 %
Noncontrolling interests

(1)
100
Net income$3,224
$3,087
$1,830
4 %69 %
Balance Sheet data and ratios (in billions of dollars)
  
 
  
Average assets$232
$227
$232
2 %(2)%
Return on average assets1.39%1.36%0.79%  
Efficiency ratio50
52
50
  
Average deposits$152.8
$148.0
$151.0
3
(2)
Net credit losses as a percentage of average loans2.97%2.78%2.67%  
Revenue by business  
 
  
Retail banking$4,529
$4,600
$4,565
(2)%1 %
Citi-branded cards9,165
8,628
8,578
6
1
Citi retail services6,704
6,601
6,427
2
3
Total$20,398
$19,829
$19,570
3 %1 %
Income from continuing operations by business  
 
  
Retail banking$196
$312
$251
(37)%24 %
Citi-branded cards1,742
1,581
1,009
10
57
Citi retail services1,286
1,194
569
8
NM
Total$3,224
$3,087
$1,829
4 %69 %

(1)2018 includes an approximate $150 million gain on the Hilton portfolio sale.
NM Not meaningful


16


2019 vs. 2018
Net income increased 4%, as higher revenues and lower expenses were partially offset by higher cost of credit.
Revenues increased 3%. Excluding the impact of the $150 million gain on the Hilton portfolio sale in the prior year, revenues increased 4%, reflecting higher revenues in Citi-branded cards and Citi retail services, partially offset by lower retail banking revenues.
Retail banking revenues decreased 2%, as the benefit of stronger deposit volumes was more than offset by lower deposit spreads. Average deposits increased 3%. Assets under management increased 20%, including the benefit of market movements. Citi expects that retail banking revenues will likely be impacted by the lower interest rate environment in the near term.
Cards revenues increased 4% (5% excluding the Hilton gain). In Citi-branded cards, revenues increased 6% (8% excluding the Hilton gain), primarily driven by volume growth and spread expansion. Average loans increased 3% and purchase sales increased 7%.
Citi retail services revenues increased 2%, primarily driven by organic loan growth and the full-year benefit of the L.L.Bean portfolio acquisition. Average loans increased 3% and purchase sales increased 2%.
Expenses decreased 1%, as efficiency savings more than offset ongoing investments and higher volume-related expenses.
Provisions increased 9%, primarily driven by higher net credit losses. Net credit losses increased 10%, driven by higher net credit losses in Citi-branded cards (up 10% to $2.9 billion) and Citi retail services (up 9% to $2.6 billion). The increase in net credit losses reflected volume growth and seasoning in both cards portfolios. The net loan loss reserve build increased 2%, reflecting volume growth and seasoning in both cards portfolios.
For additional information on North America GCB’s retail banking and its Citi-branded cards and Citi retail services portfolios, see “Credit Risk—Consumer Credit” below.
For information on the impact of Citi’s January 1, 2020 adoption of the new accounting standard on credit losses (CECL), see “Risk Factors—Operational Risks” below and Note 1 to the Consolidated Financial Statements.
As previously disclosed, Sears has continued to close stores since it exited bankruptcy. Although Citi retail services will continue to be impacted from reduced new account acquisitions and lower purchase sales, Citi does not currently expect an immediate or ongoing material impact on its consolidated results. For additional information on the potential impact from a deterioration in or failure to maintain Citi’s co-branding and private label credit card relationships, see “Risk Factors—Strategic Risks” below.








17


LATIN AMERICA GCB
Latin America GCB provides traditional retail banking and Citi-branded card products to retail and small business customers in Mexico through Citibanamex, one of Mexico’s largest banks.
At December 31, 2019, Latin America GCB had 1,419 retail branches in Mexico, with approximately $11.7 billion in retail banking loans and $23.8 billion in deposits. In addition, the business had approximately $6.0 billion in outstanding card loan balances.
In millions of dollars, except as otherwise noted201920182017% Change 
 2019 vs. 2018
% Change 
 2018 vs. 2017
Net interest revenue$3,639
$3,681
$3,491
(1)%5 %
Non-interest revenue(1)
1,599
1,628
1,303
(2)25
Total revenues, net of interest expense$5,238
$5,309
$4,794
(1)%11 %
Total operating expenses$2,883
$2,900
$2,721
(1)%7 %
Net credit losses$1,109
$1,131
$1,083
(2)%4 %
Credit reserve build(38)84
113
NM
(26)
Provision for unfunded lending commitments




Provision for benefits and claims54
81
83
(33)(2)
Provisions for credit losses and for benefits and claims (LLR & PBC)$1,125
$1,296
$1,279
(13)%1 %
Income from continuing operations before taxes$1,230
$1,113
$794
11 %40 %
Income taxes329
311
278
6
12
Income from continuing operations$901
$802
$516
12 %55 %
Noncontrolling interests

5

(100)
Net income$901
$802
$511
12 %57 %
Balance Sheet data and ratios (in billions of dollars)
  
 
  
Average assets$35
$33
$35
6 %(6)%
Return on average assets2.57%2.43%1.46%  
Efficiency ratio55
55
57
  
Average deposits$22.8
$22.7
$21.8

4
Net credit losses as a percentage of average loans6.45%6.50%6.08%  
Revenue by business     
Retail banking$3,585
$3,744
$3,324
(4)%13 %
Citi-branded cards1,653
1,565
1,470
6
6
Total$5,238
$5,309
$4,794
(1)%11 %
Income from continuing operations by business  
 
  
Retail banking$600
$596
$332
1 %80 %
Citi-branded cards301
206
184
46
12
Total$901
$802
$516
12 %55 %
FX translation impact  
 
  
Total revenues—as reported(1)
$5,238
$5,309
$4,794
(1)%11 %
Impact of FX translation(2)

(23)(117)  
Total revenues—ex-FX(3)
$5,238
$5,286
$4,677
(1)%13 %
Total operating expenses—as reported$2,883
$2,900
$2,721
(1)%7 %
Impact of FX translation(2)

(13)(59)  
Total operating expenses—ex-FX(3)
$2,883
$2,887
$2,662
 %8 %
Provisions for LLR & PBC—as reported$1,125
$1,296
$1,279
(13)%1 %
Impact of FX translation(2)

(6)(32)  
Provisions for LLR & PBC—ex-FX(3)
$1,125
$1,290
$1,247
(13)%3 %
Net income—as reported$901
$802
$511
12 %57 %
Impact of FX translation(2)

(3)(19)  
Net income—ex-FX(3)
$901
$799
$492
13 %62 %
(1)2018 includes an approximate $250 million gain on the sale of an asset management business. See Note 2 to the Consolidated Financial Statements.
(2)Reflects the impact of FX translation into U.S. dollars at the 2019 average exchange rates for all periods presented.
(3)Presentation of this metric excluding FX translation is a non-GAAP financial measure.
NM Not meaningful



18


The discussion of the results of operations for Latin America GCB below excludes the impact of FX translation for all periods presented. Presentations of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. For a reconciliation of certain of these metrics to the reported results, see the table above.

2019 vs. 2018
Net income increased 13%, primarily reflecting lower cost of credit, partially offset by lower revenues.
Revenues decreased 1%, including a gain on sale (approximately $250 million) of an asset management business in the prior year. Excluding the gain on sale, revenues increased 4%, reflecting higher revenues in both retail banking and cards.
Retail banking revenues decreased 4%. Excluding the gain on sale, retail banking revenues increased 3%, as improved deposit spreads were partially offset by lower average loans (down 3%), reflecting the ongoing slowdown in overall economic growth and industry volumes in Mexico. Assets under management increased 13%, including the benefit of market movements, while average deposits were
largely unchanged, as clients transferred money to investments. Cards revenues increased 6%, primarily driven by continued volume growth, reflecting higher purchase sales (up 7%) and average loans (up 3%), as well as higher rates.
Expenses were largely unchanged, as efficiency savings offset ongoing investment spending and volume-driven growth.
Provisions decreased 13%, primarily driven by a modest net loan loss reserve release (compared to a net loan loss reserve build in the prior year) and lower net credit losses, reflecting lower volumes in retail banking.
For additional information on Latin America GCB’s retail banking and its Citi-branded cards portfolios, see “Credit Risk—Consumer Credit” below.
For information on the impact of Citi’s January 1, 2020 adoption of the new accounting standard on credit losses (CECL), see “Risk Factors—Operational Risks” below and Note 1 to the Consolidated Financial Statements.




















19


ASIA GCB
Asia GCB provides traditional retail banking and Citi-branded card products to retail and small business customers. During 2019, Asia GCB’s most significant revenues in Asia were from Hong Kong, Singapore, South Korea, Australia, India, Taiwan, Thailand, Philippines, Indonesia and Malaysia. Included within Asia GCB, traditional retail banking and Citi-branded card products are also provided to retail customers in certain EMEA countries, primarily Poland, Russia and the United Arab Emirates.
At December 31, 2019, on a combined basis, the businesses had 242 retail branches, approximately $62.8 billion in retail banking loans and $106.7 billion in deposits. In addition, the businesses had approximately $19.9 billion in outstanding card loan balances.

In millions of dollars, except as otherwise noted(1)
201920182017% Change 
 2019 vs. 2018
% Change 
 2018 vs. 2017
Net interest revenue$4,697
$4,687
$4,488
 %4 %
Non-interest revenue2,638
2,514
2,593
5
(3)
Total revenues, net of interest expense$7,335
$7,201
$7,081
2 %2 %
Total operating expenses$4,591
$4,656
$4,641
(1)% %
Net credit losses$690
$668
$642
3 %4 %
Credit reserve build (release)8
24
(10)(67)NM
Provision (release) for unfunded lending commitments




Provisions for credit losses$698
$692
$632
1 %9 %
Income from continuing operations before taxes$2,046
$1,853
$1,808
10 %2 %
Income taxes469
433
611
8
(29)
Income from continuing operations$1,577
$1,420
$1,197
11 %19 %
Noncontrolling interests6
7
5
(14)40
Net income$1,571
$1,413
$1,192
11 %19 %
Balance Sheet data and ratios (in billions of dollars)
  
 
  
Average assets$122
$119
$114
3 %4 %
Return on average assets1.29%1.19%1.05%  
Efficiency ratio63
65
66
  
Average deposits$101.1
$98.0
$94.6
3
4
Net credit losses as a percentage of average loans0.88%0.86%0.85%  
Revenue by business     
Retail banking$4,435
$4,283
$4,200
4 %2 %
Citi-branded cards2,900
2,918
2,881
(1)1
Total$7,335
$7,201
$7,081
2 %2 %
Income from continuing operations by business     
Retail banking$1,046
$943
$737
11 %28 %
Citi-branded cards531
477
460
11
4
Total$1,577
$1,420
$1,197
11 %19 %
FX translation impact     
Total revenues—as reported$7,335
$7,201
$7,081
2 %2 %
Impact of FX translation(2)

(123)(153)  
Total revenues—ex-FX(3)
$7,335
$7,078
$6,928
4 %2 %
Total operating expenses—as reported$4,591
$4,656
$4,641
(1)% %
Impact of FX translation(2)

(87)(95)  
Total operating expenses—ex-FX(3)
$4,591
$4,569
$4,546
 %1 %
Provisions for credit losses—as reported$698
$692
$632
1 %9 %
Impact of FX translation(2)

(18)(21)  
Provisions for credit losses—ex-FX(3)
$698
$674
$611
4 %10 %
Net income—as reported$1,571
$1,413
$1,192
11 %19 %
Impact of FX translation(2)

(13)(23)  
Net income—ex-FX(3)
$1,571
$1,400
$1,169
12 %20 %

20



(1)
Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
(2)Reflects the impact of FX translation into U.S. dollars at the 2019 average exchange rates for all periods presented.
(3)Presentation of this metric excluding FX translation is a non-GAAP financial measure.
NM Not meaningful

The discussion of the results of operations for Asia GCB below excludes the impact of FX translation for all periods presented. Presentations of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. For a reconciliation of certain of these metrics to the reported results, see the table above.

2019 vs. 2018
Net income increased 12%, primarily driven by higher revenues, partially offset by modestly higher cost of credit.
Revenues increased 4%, primarily driven by growth in retail banking.
Retail banking revenues increased 5%, primarily driven by higher investment revenues due to improved market sentiment and higher deposit revenues. Investment sales increased 8%, assets under management grew 17%, including the benefit of market movements, average deposits increased 6% and average loans increased 5%. Retail lending revenues declined 1%, as continued growth in personal loans was more than offset by lower mortgage revenues due to spread compression.
Cards revenues increased 1%, including a modest episodic gain in the current year, as continued growth in average loans (up 3%) and purchase sales (up 6%) was largely offset by spread compression.
Expenses were largely unchanged, as efficiency savings were offset by ongoing investment spending and volume-driven growth.
Provisions increased 4%, as higher net credit losses reflecting volume growth and seasoning were partially offset by a lower net loan loss reserve build in the current year. Overall credit quality remained stable in the region.
For additional information on Asia GCB’s retail banking portfolios and its Citi-branded cards portfolio, see “Credit Risk—Consumer Credit” below.
For information on the impact of Citi’s January 1, 2020 adoption of the new accounting standard on credit losses (CECL), see “Risk Factors—Operational Risks” below and Note 1 to the Consolidated Financial Statements.












21


INSTITUTIONAL CLIENTS GROUP
Institutional Clients Group (ICG) includes Banking and Markets and securities services (for additional information on these businesses, see “Citigroup Segments” above). ICG provides corporate, institutional, public sector and high-net-worth clients around the world with a full range of wholesale banking products and services, including fixed income and equity sales and trading, foreign exchange, prime brokerage, derivative services, equity and fixed income research, corporate lending, investment banking and advisory services, private banking, cash management, trade finance and securities services. ICG transacts with clients in both cash instruments and derivatives, including fixed income, foreign currency, equity and commodity products.
ICG revenue is generated primarily from fees and spreads associated with these activities. ICG earns fee income for assisting clients with transactional services and clearing and providing brokerage and investment banking services and other such activities. Such fees are recognized at the point in time when Citigroup’s performance under the terms of a contractual arrangement is completed, which is typically at the trade/execution date or closing of a transaction. Revenue generated from these activities is recorded in Commissions and fees and Investment banking. Revenue is also generated from assets under custody and administration, which is recognized as/when the associated promised service is satisfied, which normally occurs at the point in time the service is requested by the customer and provided by Citi. Revenue generated from these activities is primarily recorded in Administration and other fiduciary fees. For additional information on these various types of revenues, see Note 5 to the Consolidated Financial Statements.
In addition, as a market maker, ICG facilitates transactions, including holding product inventory to meet client demand, and earns the differential between the price at which it buys and sells the products. These price differentials and the unrealized gains and losses on the inventory are recorded in Principal transactions. Mark-to-market gains and losses on certain credit derivatives (used to hedge the corporate loan portfolio) are also recorded in Principal transactions, (for additional information on Principal transactions revenue, see Note 6 to the Consolidated Financial Statements). Other primarily includes realized gains and losses on available-for-sale (AFS) debt securities, gains and losses on equity securities not held in trading accounts and other non-recurring gains and losses. Interest income earned on assets held, less interest paid on long- and short-term debt and to customers on deposits, is recorded as Net interest revenue.
The amount and types of Markets revenues are impacted by a variety of interrelated factors, including market liquidity; changes in market variables such as interest rates, foreign exchange rates, equity prices, commodity prices and credit spreads, as well as their implied volatilities; investor confidence and other macroeconomic conditions. Assuming all other market conditions do not change, increases in client activity levels or bid/offer spreads generally result in increases in revenues. However, changes in market conditions can
 
significantly impact client activity levels, bid/offer spreads and the fair value of product inventory. For example, a decrease in market liquidity may increase bid/offer spreads, decrease client activity levels and widen credit spreads on product inventory positions.
ICG’s management of the Markets businesses involves daily monitoring and evaluation of the above factors at the trading desk as well as the country level. ICG does not separately track the impact on total Markets revenues of the volume of transactions, bid/offer spreads, fair value changes of product inventory positions and economic hedges because, as noted above, these components are interrelated and are not deemed useful or necessary individually to manage the Markets businesses at an aggregate level.
In the Markets businesses, client revenues are those revenues directly attributable to client transactions at the time of inception, including commissions, interest or fees earned. Client revenues do not include the results of client facilitation activities (e.g., holding product inventory in anticipation of client demand) or the results of certain economic hedging activities.
ICG’s international presence is supported by trading floors in approximately 80 countries and a proprietary network in 98 countries and jurisdictions. At December 31, 2019, ICG had approximately $1.4 trillion in assets and $768 billion in deposits, while two of its businesses—securities services and issuer services—managed approximately $20.3 trillion and $17.5 trillion in assets under custody as of December 31, 2019 and 2018, respectively.
 

22


In millions of dollars, except as otherwise noted201920182017% Change 
 2019 vs. 2018
% Change 
 2018 vs. 2017
Commissions and fees$4,462
$4,651
$4,456
(4)%4 %
Administration and other fiduciary fees2,756
2,806
2,721
(2)3
Investment banking4,440
4,358
4,666
2
(7)
Principal transactions8,562
8,742
7,527
(2)16
Other(1)
1,829
941
1,711
94
(45)
Total non-interest revenue$22,049
$21,498
$21,081
3 %2 %
Net interest revenue (including dividends)17,252
16,827
16,741
3
1
Total revenues, net of interest expense$39,301
$38,325
$37,822
3 %1 %
Total operating expenses$22,224
$21,780
$21,187
2 %3 %
Net credit losses$394
$208
$465
89 %(55)%
Credit reserve build (release)71
(109)(285)NM
62
Provision (release) for unfunded lending commitments98
116
(161)(16)NM
Provisions for credit losses$563
$215
$19
NM
NM
Income from continuing operations before taxes$16,514
$16,330
$16,616
1 %(2)%
Income taxes3,570
3,756
7,241
(5)(48)
Income from continuing operations$12,944
$12,574
$9,375
3 %34 %
Noncontrolling interests40
17
57
NM
(70)
Net income$12,904
$12,557
$9,318
3 %35 %
EOP assets (in billions of dollars)
$1,447
$1,438
$1,375
1 %5 %
Average assets (in billions of dollars)
1,493
1,449
1,395
3
4
Return on average assets0.86%0.87%0.67%  
Efficiency ratio57
57
56
  
Revenues by region     
North America$13,459
$13,522
$14,578
 %(7)%
EMEA12,006
11,770
10,878
2
8
Latin America5,166
4,954
4,814
4
3
Asia8,670
8,079
7,552
7
7
Total$39,301
$38,325
$37,822
3 %1 %
Income from continuing operations by region  
   
North America$3,511
$3,675
$2,494
(4)%47 %
EMEA3,867
3,889
2,828
(1)38
Latin America2,111
2,013
1,637
5
23
Asia3,455
2,997
2,416
15
24
Total$12,944
$12,574
$9,375
3 %34 %
Average loans by region (in billions of dollars)
  
   
North America$188
$174
$159
8 %9 %
EMEA87
81
69
7
17
Latin America40
42
42
(5)
Asia73
77
72
(5)7
Total$388
$374
$342
4 %9 %
EOP deposits by business (in billions of dollars)
     
Treasury and trade solutions$536
$509
$469
5 %9 %
All other ICG businesses
232
218
208
6
5
Total$768
$727
$677
6 %7 %

(1)2019 includes an approximate $350 million gain on Citi's investment in Tradeweb in the second quarter. 2017 includes the approximate $580 million gain on the sale of a fixed income analytics business.
NM Not meaningful

 


23


ICG Revenue Details
In millions of dollars201920182017% Change 
 2019 vs. 2018
% Change 
 2018 vs. 2017
Investment banking revenue details
     
Advisory$1,259
$1,301
$1,123
(3)%16 %
Equity underwriting973
991
1,121
(2)(12)
Debt underwriting2,984
2,719
3,126
10
(13)
Total investment banking$5,216
$5,011
$5,370
4 %(7)%
Treasury and trade solutions10,293
9,914
9,279
4
7
Corporate lending—excluding gains (losses) on loan hedges(1)
2,921
2,913
2,623

11
Private bank3,458
3,398
3,108
2
9
Total Banking revenues (ex-gains (losses) on
  loan hedges)
$21,888
$21,236
$20,380
3 %4 %
  Corporate lending—gains (losses) on loan hedges(1)
$(432)$45
$(133)NM
NM
Total Banking revenues (including gains (losses) on loan hedges), net of interest expense
$21,456
$21,281
$20,247
1 %5 %
Fixed income markets(2)
$12,884
$11,661
$12,369
10 %(6)%
Equity markets2,908
3,427
2,879
(15)19
Securities services2,631
2,631
2,366

11
Other(3)
(578)(675)(39)14
NM
Total Markets and securities services revenues, net
of interest expense
$17,845
$17,044
$17,575
5 %(3)%
Total revenues, net of interest expense$39,301
$38,325
$37,822
3 %1 %
Commissions and fees$782
$705
$628
11 %12 %
Principal transactions(4)
7,661
7,134
7,001
7
2
Other(2)
1,117
380
619
NM
(39)
Total non-interest revenue$9,560
$8,219
$8,248
16 % %
Net interest revenue3,324
3,442
4,121
(3)(16)
Total fixed income markets(5)
 
$12,884
$11,661
$12,369
10 %(6)%
Rates and currencies$9,225
$8,486
$8,901
9 %(5)%
Spread products/other fixed income3,659
3,175
3,468
15
(8)
Total fixed income markets$12,884
$11,661
$12,369
10 %(6)%
Commissions and fees$1,121
$1,267
$1,282
(12)%(1)%
Principal transactions(4)
775
1,240
494
(38)NM
Other172
110
(21)56
NM
Total non-interest revenue$2,068
$2,617
$1,755
(21)%49 %
Net interest revenue840
810
1,124
4
(28)
Total equity markets(5)
$2,908
$3,427
$2,879
(15)%19 %

(1)Credit derivatives are used to economically hedge a portion of the corporate loan portfolio that includes both accrual loans and loans at fair value. Gains (losses) on loan hedges include the mark-to-market on the credit derivatives and the mark-to-market on the loans in the portfolio that are at fair value. The fixed premium costs of these hedges are netted against the corporate lending revenues to reflect the cost of credit protection. Citigroup’s results of operations excluding the impact of gains (losses) on loan hedges are non-GAAP financial measures.
(2)2019 includes an approximate $350 million gain on Citi's investment in Tradeweb in the second quarter.
(3)2017 includes the approximate $580 million gain on the sale of a fixed income analytics business.
(4)
Excludes principal transactions revenues of ICG businesses other than Markets, primarily treasury and trade solutions and the private bank.
(5)
Citi assesses its Markets business performance on a total revenue basis, as offsets may occur across revenue line items. For example, securities that generate Net interest revenue may be risk managed by derivatives that are recorded in Principal transactions revenue. For a description of the composition of these revenue line items, see Notes 4, 5 and 6 to the Consolidated Financial Statements.
NM Not meaningful


24


The discussion of the results of operations for ICG below excludes (where noted) the impact of gains (losses) on hedges of accrual loans, which are non-GAAP financial measures. For a reconciliation of these metrics to the reported results, see the table above.

2019 vs. 2018
Net income increased 3%, driven primarily by higher revenues and a lower effective tax rate, partially offset by higher expenses and higher cost of credit.
Revenues increased 3%, reflecting higher Banking revenues (increase of 1% including the gains (losses) on loan hedges) and higher Markets and securities services revenues (increase of 5%). Excluding the impact of the gains (losses) on loan hedges, Banking revenues were up 3%, driven by higher revenues in treasury and trade solutions, investment banking and the private bank, as corporate lending was largely unchanged. Markets and securities services revenues were up 5%, including a gain in the second quarter of 2019 from Citi’s investment in Tradeweb, as higher revenues in fixed income markets were partially offset by lower equity markets revenues.
Citi expects that ICG’s revenues will likely be impacted by the lower interest rate environment in the near term.

Within Banking:

Investment banking revenues increased 4%, reflecting gains in wallet share despite a decline in the overall market wallet. Debt underwriting increased 10%, reflecting gains in wallet share, primarily in investment grade underwriting, across North America, EMEA and Asia. Equity underwriting revenues decreased 2%, reflecting a decline in market wallet, particularly in Asia and EMEA, partially offset by gains in wallet share. Advisory revenues decreased 3%, largely due to a comparison to a strong prior year as well as a decline in market wallet, partially offset by gains in wallet share.
Treasury and trade solutions revenues increased 4%. Excluding the impact of FX translation, revenues increased 6%, reflecting strength in all regions, driven by growth across both net interest and fee income. Revenues increased in the cash business, primarily driven by strong client engagement and solid growth in deposit and transaction volumes, partially offset by spread compression in the second half of 2019 due to the impact of lower interest rates. Revenue growth in the trade business was driven by improved spreads, due to growth in structured loans as well as the ability to continue to utilize distribution capabilities to optimize the balance sheet and drive returns, while supporting clients. Average deposits increased 10%, reflecting growth across regions. Average trade loans declined 3%, driven by North America, EMEA and Asia (for additional information, see “Liquidity Risk—Loans” below).
Corporate lending revenues decreased 16%. Excluding the impact of gains (losses) on loan hedges, revenues were largely unchanged versus the prior year, as growth in the commercial loan portfolio was offset by lower
volumes in the rest of the portfolio.
 

Private bank revenues increased 2%, driven primarily by North America and Asia, partially offset by Latin America. The increase in revenues reflected strong client activity, driving higher lending and deposit volumes, as well as higher capital markets revenues, partially offset by lower deposit spreads.

Within Markets and securities services:

Fixed income markets revenues increased 10%, including the Tradeweb gain, reflecting higher revenues across all regions. Non-interest revenues increased due to higher corporate and investor client activity as well as improved market activity, particularly in rates and spread products. The increase in non-interest revenues was partially offset by a decline in net interest revenues, reflecting a change in the mix of trading positions in support of client activity as well as higher funding costs, given the higher interest rate environment in the first half of the year.
Rates and currencies revenues increased 9%, primarily driven by higher G10 rates and currencies revenues in North America, Asia and EMEA, reflecting a more favorable operating environment in the second half of 2019, with higher corporate and investor client activity. Local markets rates and currencies revenues increased modestly despite declining currency volatility.
Spread products and other fixed income revenues increased 15%, including the Tradeweb gain, reflecting higher revenues in both North America and EMEA. The increase in revenues was driven by higher client activity as well as an improved trading environment, particularly in flow trading and financing products. This increase in revenues was partially offset by lower structured products revenues, reflecting a challenging trading environment.
Equity markets revenues decreased 15%, driven by lower revenues across cash equities, equity derivatives and prime finance, particularly in North America and Asia. Cash equities revenues decreased largely due to lower client volumes. Despite strong corporate and investor client activity, equity derivatives revenues decreased due to the impact of a less favorable trading environment, given lower market volatility, as well as a comparison to a strong prior year. The decline in prime finance revenues was primarily driven by lower client activity and lower financing balances. Non-interest revenues decreased, primarily driven by lower principal transaction and commissions and fee revenues, due to lower client activity and a less favorable trading environment, as well as a change in the mix of trading positions in support of client activity.
Securities services revenues were largely unchanged versus the prior year. Excluding the impact of FX translation, revenues increased 4%, reflecting higher revenues in Asia and Latin America. The increase in revenues was driven by higher net interest revenue due to higher deposit volumes and higher interest rates,

25


particularly in emerging markets, as well as higher client activity.

Expenses increased 2%, as higher compensation, volume-related expenses and continued investments were partially offset by efficiency savings and a benefit from FX translation.
Provisions increased $348 million, driven by an increase in net credit losses of $186 million, and an increase in the net loan loss reserve build of $162 million. Both the increase in net credit losses and the higher loan loss reserve build largely reflected a normalization of credit trends.
For information on the impact of Citi’s January 1, 2020 adoption of the new accounting standard on credit losses (CECL), see “Risk Factors—Operational Risks” below and Note 1 to the Consolidated Financial Statements.





26


CORPORATE/OTHER
Corporate/Other includes certain unallocated costs of global staff functions (including finance, risk, human resources, legal and compliance), other corporate expenses and unallocated global operations and technology expenses and income taxes, as well as Corporate Treasury, certain North America legacy consumer loan portfolios, other legacy assets and discontinued operations (for additional information on Corporate/Other, see “Citigroup Segments” above). At December 31, 2019, Corporate/Other had $97 billion in assets.
In millions of dollars201920182017% Change 
 2019 vs. 2018
% Change 
 2018 vs. 2017
Net interest revenue$1,890
$2,361
$2,043
(20)%16 %
Non-interest revenue124
(171)1,134
NM
NM
Total revenues, net of interest expense$2,014
$2,190
$3,177
(8)%(31)%
Total operating expenses$2,150
$2,275
$3,816
(5)%(40)%
Net credit losses$(8)$21
$149
NM
(86)%
Credit reserve build (release)(60)(218)(317)72 %31
Provision (release) for unfunded lending commitments(7)(3)
NM

Provision for benefits and claims
(2)(7)100
71
Provisions (benefits) for credit losses and for benefits and claims$(75)$(202)$(175)63 %(15)%
Income (loss) from continuing operations before taxes$(61)$117
$(464)NM
NM
Income taxes (benefits)(886)(88)19,080
NM
(100)%
Income (loss) from continuing operations$825
$205
$(19,544)NM
NM
Income (loss) from discontinued operations, net of taxes(4)(8)(111)50 %93 %
Net income (loss) before attribution of noncontrolling interests$821
$197
$(19,655)NM
NM
Noncontrolling interests20
11
(6)82 %NM
Net income (loss)$801
$186
$(19,649)NM
NM
NM Not meaningful

2019 vs. 2018
Net income was $801 million, compared to net income of $186 million in the prior year. Net income was largely driven by an income tax benefit of $886 million, compared to an income tax benefit of $88 million in the prior year. The increase in the income tax benefit primarily reflected the reduction in the valuation allowance related to Citi’s deferred tax assets and a pretax loss in the current year (see “Significant Accounting Policies and Significant Estimates—Income Taxes” below). The pretax loss was largely driven by lower revenues from legacy assets, partially offset by higher gains on investments. The pretax loss also reflected higher cost of credit, partially offset by lower expenses.
Revenues decreased 8%, driven by the continued wind-down of legacy assets, partially offset by gains on investments.
Expenses decreased 5%, as the continued wind-down of legacy assets was partially offset by higher infrastructure costs.
Provisions increased $127 million to a net benefit of $75 million, primarily due to a lower net loan loss reserve release, partially offset by lower net credit losses.
Citi expects that Corporate/Other results will likely be impacted by ongoing investments in infrastructure and controls as well as lower interest rates and lower investment gains during 2020.

 





27


OFF-BALANCE SHEET ARRANGEMENTS

Citigroup enters into various types of off-balance sheet arrangements in the ordinary course of business. Citi’s involvement in these arrangements can take many different forms, including without limitation:

purchasing or retaining residual and other interests in unconsolidated special purpose entities, such as mortgage-backed and other asset-backed securitization entities;
holding senior and subordinated debt, interests in limited and general partnerships and equity interests in other unconsolidated special purpose entities; and
providing guarantees, indemnifications, loan commitments, letters of credit and representations and warranties.

Citi enters into these arrangements for a variety of business purposes. For example, securitization arrangements offer investors access to specific cash flows and risks created through the securitization process. Securitization arrangements also assist Citi and its customers in monetizing their financial assets and securing financing at more favorable rates than Citi or the customers could otherwise obtain.
The table below shows where a discussion of Citi’s various off-balance sheet arrangements may be found in this Form 10-K. In addition, see Note 1 to the Consolidated Financial Statements.

Types of Off-Balance Sheet Arrangements Disclosures in this Form 10-K
Variable interests and other obligations, including contingent obligations, arising from variable interests in nonconsolidated VIEsSee Note 21 to the Consolidated Financial Statements.
Letters of credit, and lending and other commitmentsSee Note 26 to the Consolidated Financial Statements.
GuaranteesSee Note 26 to the Consolidated Financial Statements.


28


CONTRACTUAL OBLIGATIONS

The following table includes information on Citigroup’s contractual obligations, as specified and aggregated pursuant to SEC requirements:
 Contractual obligations by year 
In millions of dollars20202021202220232024ThereafterTotal
Long-term debt obligations—principal(1)
$37,257
$38,083
$27,090
$20,128
$16,023
$110,179
$248,760
Long-term debt obligations—interest payments(2)
7,548
6,313
5,244
4,470
3,877
34,220
61,672
Operating lease obligations(3)
801
695
572
425
314
935
3,742
Purchase obligations(4)
584
538
532
316
324
752
3,046
Other liabilities(5)
34,561
474
218
127
114
1,622
37,116
Total$80,751
$46,103
$33,656
$25,466
$20,652
$147,708
$354,336

(1)For additional information about long-term debt obligations, see “Liquidity Risk—Long-Term Debt” below and Note 17 to the Consolidated Financial Statements.
(2)Contractual obligations related to interest payments on long-term debt for 2020–2024 are calculated by applying the December 31, 2019 weighted-average interest rate (3.28%) on average outstanding long-term debt to the average remaining contractual obligations on long-term debt for each of those years. The “Thereafter” interest payments on long-term debt for the remaining years to maturity (2025–2098) are calculated by applying current interest rates on the remaining contractual obligations on long-term debt for each of those years.
(3)For additional information about operating leases, see Note 26 to the Consolidated Financial Statements.
(4)Purchase obligations consist of obligations to purchase goods or services that are enforceable and legally binding on Citi. For presentation purposes, purchase obligations are included in the table above through the termination date of the respective agreements, even if the contract is renewable. Many of the purchase agreements for goods or services include clauses that would allow Citi to cancel the agreement with specified notice; however, that impact is not included in the table above (unless Citi has already notified the counterparty of its intention to terminate the agreement).
(5)
Other liabilities reflected on Citigroup’s Consolidated Balance Sheet includes accounts payable, accrued expenses, uncertain tax positions and other liabilities that have been incurred and will ultimately be paid in cash; legal reserve accruals are not included in the table above. Also includes discretionary contributions in 2018 for Citi’s employee-defined benefit obligations for the pension, postretirement and post employment plans and defined contribution plans.


29


CAPITAL RESOURCES
Overview
Capital is used principally to support assets in Citi’s businesses and to absorb credit, market and operational losses. Citi primarily generates capital through earnings from its operating businesses. Citi may augment its capital through issuances of common stock, noncumulative perpetual preferred stock and equity issued through awards under employee benefit plans, among other issuances. Further, Citi’s capital levels may also be affected by changes in accounting and regulatory standards, as well as U.S. corporate tax laws and the impact of future events on Citi’s business results, such as changes in interest and foreign exchange rates, as well as business and asset dispositions.
During 2019, Citi returned a total of $22.3 billion of capital to common shareholders in the form of share repurchases (approximately 264 million common shares) and dividends.

Capital Management
Citi’s capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with each entity’s respective risk profile, management targets and all applicable regulatory standards and guidelines. Citi assesses its capital adequacy against a series of internal quantitative capital goals, designed to evaluate its capital levels in expected and stressed economic environments. Underlying these internal quantitative capital goals are strategic capital considerations, centered on preserving and building financial strength. The Citigroup Capital Committee, with oversight from the Risk Management Committee of Citigroup’s Board of Directors, has responsibility for Citi’s aggregate capital structure, including the capital assessment and planning process, which is integrated into Citi’s capital plan. Balance sheet management, including oversight of capital adequacy, for Citigroup’s subsidiaries is governed by each entity’s Asset and Liability Committee, where applicable.
Based on Citigroup’s current regulatory capital requirements, as well as consideration of potential future changes to the U.S. Basel III rules, management currently believes that a targeted Common Equity Tier 1 Capital ratio of approximately 11.5% represents the amount necessary to prudently operate and invest in Citi’s franchise, including when considering future growth plans, capital return projections and other factors that may impact Citi’s businesses. However, management may revise Citigroup’s targeted Common Equity Tier 1 Capital ratio in response to changing regulatory capital requirements as well as other relevant factors.
For additional information regarding Citi’s capital planning and stress testing exercises, see “Stress Testing Component of Capital Planning” below.


 
Current Regulatory Capital Standards
Citi is subject to regulatory capital standards issued by the Federal Reserve Board, which constitute the U.S. Basel III rules. These rules establish an integrated capital adequacy framework, encompassing both risk-based capital ratios and leverage ratios.

Risk-Based Capital Ratios
The U.S. Basel III rules set forth the composition of regulatory capital (including the application of regulatory capital adjustments and deductions), as well as two comprehensive methodologies (a Standardized Approach and Advanced Approaches) for measuring total risk-weighted assets. Total risk-weighted assets under the Advanced Approaches, which are primarily models based, include credit, market and operational risk-weighted assets. The Standardized Approach generally applies prescribed supervisory risk weights to broad categories of credit risk exposures. As a result, credit risk-weighted assets calculated under the Advanced Approaches are more risk sensitive than those calculated under the Standardized Approach. Market risk-weighted assets are currently calculated on a generally consistent basis under both approaches. The Standardized Approach excludes operational risk-weighted assets.
The U.S. Basel III rules establish stated minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios for substantially all U.S. banking organizations, including Citi and Citibank, N.A. (Citibank). Moreover, these rules provide for both a fixed 2.5% Capital Conservation Buffer and, for Advanced Approaches banking organizations, such as Citi and Citibank, a discretionary Countercyclical Capital Buffer. These capital buffers would be available to absorb losses in advance of any potential impairment of regulatory capital below the stated minimum risk-based capital ratio requirements. Any breach of the buffers to absorb losses during periods of financial or economic stress would result in restrictions on earnings distributions (e.g., dividends, equity repurchases and discretionary executive bonuses), with the degree of such restrictions based upon the extent to which the buffers are breached. The Federal Reserve Board last voted to affirm the Countercyclical Capital Buffer amount at the current level of 0% in March 2019.
Further, the U.S. Basel III rules implement the “capital floor provision” of the so-called “Collins Amendment” of the Dodd-Frank Act, which requires Advanced Approaches
banking organizations to calculate each of the three risk-based capital ratios (Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital) under both the U.S. Basel III Standardized Approach and the Advanced Approaches and comply with the lower of each of the resulting risk-based capital ratios.








30


GSIB Surcharge
The Federal Reserve Board imposes a risk-based capital surcharge upon U.S. bank holding companies that are identified as global systemically important bank holding companies (GSIBs), including Citi. The GSIB surcharge augments the Capital Conservation Buffer and, if invoked, any Countercyclical Capital Buffer.
Under the Federal Reserve Board’s rule, identification of a GSIB is based on the Basel Committee on Banking Supervision’s (Basel Committee) GSIB methodology, which primarily looks to five equally weighted broad categories of systemic importance: (i) size, (ii) interconnectedness, (iii) cross-jurisdictional activity, (iv) substitutability and (v) complexity. With the exception of size, each of the categories is composed of multiple indicators of equal weight, amounting to 12 indicators in total.
A U.S. bank holding company that is designated a GSIB is required, on an annual basis, to calculate a surcharge using two methods and is subject to the higher of the resulting two surcharges. The first method (“method 1”) is based on the Basel Committee’s GSIB methodology described above. Under the second method (“method 2”), the substitutability category is replaced with a quantitative measure intended to assess a GSIB’s reliance on short-term wholesale funding. In addition, method 1 incorporates relative measures of systemic importance across certain global banking organizations and a year-end spot foreign exchange rate, whereas method 2 uses fixed measures of systemic importance and application of an average foreign exchange rate over a three-year period. The GSIB surcharges calculated under both method 1 and method 2 are based on measures of systemic importance from the year immediately preceding that in which the GSIB surcharge calculations are being performed (e.g., the method 1 and method 2 GSIB surcharges to be calculated by December 31, 2020 will be based on 2019 systemic indicator data). Generally, Citi’s surcharge determined under method 2 will result in a higher surcharge than its surcharge determined under method 1.
Should a GSIB’s systemic importance change year-over-year such that it becomes subject to a higher surcharge, the higher surcharge would not become effective for a full year (e.g., a higher surcharge calculated by December 31, 2020 would not become effective until January 1, 2022). However, if a GSIB’s systemic importance changes such that the GSIB would be subject to a lower surcharge, the GSIB would be subject to the lower surcharge beginning with the next calendar year (e.g., a lower surcharge calculated by December 31, 2020 would become effective January 1, 2021).
 
The following table sets forth Citi’s GSIB surcharge as determined under method 1 and method 2 for 2019 and 2018:
 20192018
Method 12.0%2.0%
Method 23.0
3.0

Citi’s GSIB surcharge effective for both 2019 and 2018 was 3.0%, as derived under the higher method 2 result. Citi’s GSIB surcharge effective for 2020 will remain unchanged at 3.0%, as derived under the higher method 2 result. Citi expects that its method 2 GSIB surcharge will continue to remain higher than its method 1 GSIB surcharge. Citi’s GSIB surcharge effective for 2021 will not exceed 3.0%, and Citi’s GSIB surcharge effective for 2022 is not expected to exceed 3.0%.
 
Transition Provisions
Generally, the U.S. Basel III rules contain several differing, largely multi-year transition provisions, with various “phase-ins” and “phase-outs.” With the exception of the non-grandfathered trust preferred securities, which do not fully phase-out of Tier 2 Capital until January 1, 2022, all other transition provisions have occurred and were entirely reflected in Citi’s regulatory capital ratios beginning January 1, 2018. Moreover, the GSIB surcharge, Capital Conservation Buffer and any Countercyclical Capital Buffer (currently 0%) commenced phase-in on January 1, 2016, and became fully effective on January 1, 2019.

Tier 1 Leverage Ratio
Under the U.S. Basel III rules, Citi is also required to maintain a minimum Tier 1 Leverage ratio of 4.0%. The Tier 1 Leverage ratio, a non-risk-based measure of capital adequacy, is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets less amounts deducted from Tier 1 Capital.

31


Supplementary Leverage Ratio
Citi is also required to calculate a Supplementary Leverage ratio, which differs from the Tier 1 Leverage ratio by also including certain off-balance sheet exposures within the denominator of the ratio (Total Leverage Exposure). The Supplementary Leverage ratio represents end of period Tier 1 Capital to Total Leverage Exposure, with the latter defined as the sum of the daily average of on-balance sheet assets for the quarter and the average of certain off-balance sheet exposures calculated as of the last day of each month in the quarter, less applicable Tier 1 Capital deductions. Advanced Approaches banking organizations are required to maintain a stated minimum Supplementary Leverage ratio of 3.0%.
Further, U.S. GSIBs, including Citi, are subject to enhanced Supplementary Leverage ratio standards. The enhanced Supplementary Leverage ratio standards establish a 2.0% leverage buffer in addition to the stated 3.0% minimum Supplementary Leverage ratio requirement, for a total effective minimum Supplementary Leverage ratio requirement of 5.0%. If a U.S. GSIB fails to exceed the 5.0% effective minimum Supplementary Leverage ratio requirement, it will be subject to increasingly onerous restrictions (depending upon the extent of the shortfall) regarding capital distributions and discretionary executive bonus payments.

Prompt Corrective Action Framework
In general, the Prompt Corrective Action (PCA) regulations direct the U.S. banking agencies to enforce increasingly strict limitations on the activities of insured depository institutions that fail to meet certain regulatory capital thresholds. The PCA framework contains five categories of capital adequacy as measured by risk-based capital and leverage ratios: (i) “well capitalized,” (ii) “adequately capitalized,” (iii) “undercapitalized,” (iv) “significantly undercapitalized” and (v) “critically undercapitalized.”
Accordingly, an insured depository institution, such as Citibank, must maintain minimum Common Equity Tier 1 Capital, Tier 1 Capital, Total Capital and Tier 1 Leverage ratios of 6.5%, 8.0%, 10.0% and 5.0%, respectively, to be considered “well capitalized.” In addition, insured depository institution subsidiaries of U.S. GSIBs, including Citibank, must maintain a minimum Supplementary Leverage ratio of 6.0% to be considered “well capitalized.” Citibank was “well capitalized” as of December 31, 2019.

Stress Testing Component of Capital Planning
Citi is subject to an annual assessment by the Federal Reserve Board as to whether Citigroup has effective capital planning processes as well as sufficient regulatory capital to absorb losses during stressful economic and financial conditions, while also meeting obligations to creditors and counterparties and continuing to serve as a credit intermediary. This annual assessment includes two related programs: the Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Testing (DFAST).
For the largest and most complex firms, such as Citi, CCAR includes both a quantitative evaluation of a firm’s capital adequacy under stress and a qualitative evaluation of its abilities to determine its capital needs on a forward-looking
 
basis. As part of the CCAR process, the Federal Reserve Board evaluates Citi’s capital adequacy, capital adequacy process and its planned capital distributions, such as dividend payments and common stock repurchases. The Federal Reserve Board assesses whether Citi has sufficient capital to continue operations throughout times of economic and financial market stress and whether Citi has robust, forward-looking capital planning processes that account for its unique risks. The Federal Reserve Board may object to Citi’s annual capital plan based on quantitative grounds. If the Federal Reserve Board objects to Citi’s annual capital plan, Citi may not undertake any capital distribution unless the Federal Reserve Board indicates in writing that it does not object to the distribution.
Based on recent changes to the Federal Reserve Board’s Capital Plan Rule, the qualitative objection to a firm’s capital plan will no longer apply. However, all CCAR firms, including Citi, will continue to be subject to a rigorous evaluation of their capital planning process. Firms with weak practices may be subject to a deficient supervisory rating, and potentially an enforcement action, for failing to meet supervisory expectations. For additional information regarding CCAR, see “Risk Factors—Strategic Risks” below.
DFAST is a forward-looking quantitative evaluation of the impact of stressful economic and financial market conditions on Citi’s regulatory capital. This program serves to inform the Federal Reserve Board and the general public as to how Citi’s regulatory capital ratios might change using a hypothetical set of adverse economic conditions as designed by the Federal Reserve Board. In addition to the annual supervisory stress test conducted by the Federal Reserve Board, Citi is required to conduct annual company-run stress tests under the same adverse economic conditions designed by the Federal Reserve Board.
Both CCAR and DFAST include an estimate of projected revenues, losses, reserves, pro forma regulatory capital ratios, and any other additional capital measures deemed relevant by Citi. Projections are required over a nine-quarter planning horizon under two supervisory scenarios (baseline and severely adverse conditions). All risk-based capital ratios reflect application of the Standardized Approach framework under the U.S. Basel III rules. Moreover, the Federal Reserve Board has deferred the use of the Advanced Approaches framework indefinitely.
In addition, Citibank is required to conduct the annual Dodd-Frank Act Stress Test. The annual stress test consists of a forward-looking quantitative evaluation of the impact of stressful economic and financial market conditions under
several scenarios on Citibank’s regulatory capital. This program serves to inform the Office of the Comptroller of
the Currency as to how Citibank’s regulatory capital ratios might change during a hypothetical set of adverse economic
conditions and to ultimately evaluate the reliability of Citibank’s capital planning process.
For additional information on potential changes to the stress testing component of capital planning and assessment process applicable to Citi, see “Regulatory Capital Standards Developments” below.


32


Citigroup’s Capital Resources
Citi is required to maintain stated minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios of 4.5%, 6.0% and 8.0%, respectively. Citi’s effective minimum capital requirements are presented in the table below.
Furthermore, to be “well capitalized” under current federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital ratio of at least 6.0%, a Total Capital ratio of at least 10.0% and not be subject to a Federal Reserve Board directive to maintain higher capital levels.
 
The following tables set forth Citi’s capital components and ratios as of December 31, 2019, September 30, 2019 and December 31, 2018:
 
Effective Minimum Requirement(1)
Advanced ApproachesStandardized Approach
In millions of dollars, except ratios20192018Dec. 31, 2019Sept. 30, 2019Dec. 31, 2018Dec. 31, 2019Sept. 30, 2019Dec. 31, 2018
Common Equity Tier 1 Capital  $137,798
$138,581
$139,252
$137,798
$138,581
$139,252
Tier 1 Capital  155,805
158,033
158,122
155,805
158,033
158,122
Total Capital (Tier 1 Capital + Tier 2 Capital)  181,337
183,996
183,144
193,682
196,354
195,440
Total Risk-Weighted Assets  1,135,553
1,145,091
1,131,933
1,166,523
1,197,050
1,174,448
   Credit Risk  $771,508
$776,367
$758,887
$1,107,775
$1,134,584
$1,109,007
   Market Risk  57,317
61,125
63,987
58,748
62,466
65,441
   Operational Risk  306,728
307,599
309,059



Common Equity Tier 1 Capital ratio(2)
10.0%8.625%12.13%12.10%12.30%11.81%11.58%11.86%
Tier 1 Capital ratio(2)
11.510.12513.72
13.80
13.97
13.36
13.20
13.46
Total Capital ratio(2)
13.512.12515.97
16.07
16.18
16.60
16.40
16.64

In millions of dollars, except ratiosEffective Minimum RequirementDec. 31, 2019Sept. 30, 2019Dec. 31, 2018
Quarterly Adjusted Average Total Assets(3)
 $1,957,039 $1,960,675 $1,896,959 
Total Leverage Exposure(4) 
 2,507,891 2,520,352 2,465,641 
Tier 1 Leverage ratio4.0%7.96%8.06%8.34%
Supplementary Leverage ratio5.06.21 6.27 6.41 

(1)Citi’s effective minimum risk-based capital requirements during 2019 and 2018 are inclusive of the 100% and 75% phase-in, respectively, of both the 2.5% Capital Conservation Buffer and the 3.0% GSIB surcharge (all of which must be composed of Common Equity Tier 1 Capital).
(2)Citi’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III Standardized Approach, whereas the reportable Total Capital ratio was the lower derived under the Basel III Advanced Approaches framework for all periods presented.
(3)Tier 1 Leverage ratio denominator. Represents quarterly average total assets less amounts deducted from Tier 1 Capital.
(4)Supplementary Leverage ratio denominator.

Common Equity Tier 1 Capital Ratio
Citi’s Common Equity Tier 1 Capital ratio was 11.8% under the Basel III Standardized Approach at December 31, 2019, compared to 11.6% at September 30, 2019 and 11.9% at December 31, 2018. The quarter-over-quarter increase was primarily due to net income of $5.0 billion, a reduction in credit risk-weighted assets and beneficial net movements in
 
Accumulated other comprehensive income (AOCI), partially offset by the return of $6.2 billion of capital to common shareholders. The decline year-over-year was primarily due to the return of $22.3 billion of capital to common shareholders, partially offset by net income of $19.4 billion in 2019, beneficial net movements in AOCI and a reduction in risk-weighted assets.

33


Components of Citigroup Capital
In millions of dollarsDecember 31,
2019
December 31,
2018
Common Equity Tier 1 Capital  
Citigroup common stockholders’ equity(1)
$175,414
$177,928
Add: Qualifying noncontrolling interests154
147
Regulatory capital adjustments and deductions:  
Less: Accumulated net unrealized gains (losses) on cash flow hedges, net of tax(2)
123
(728)
Less: Cumulative unrealized net gain (loss) related to changes in fair value of financial liabilities
   attributable to own creditworthiness, net of tax(3)
(679)580
Less: Intangible assets:  
  Goodwill, net of related DTLs(4)
21,066
21,778
    Identifiable intangible assets other than MSRs, net of related DTLs4,087
4,402
Less: Defined benefit pension plan net assets803
806
Less: DTAs arising from net operating loss, foreign tax credit and general business credit
   carry-forwards(5)
12,370
11,985
Total Common Equity Tier 1 Capital (Standardized Approach and Advanced Approaches)$137,798
$139,252
Additional Tier 1 Capital  
Qualifying noncumulative perpetual preferred stock(1)
$17,828
$18,292
Qualifying trust preferred securities(6)
1,389
1,384
Qualifying noncontrolling interests42
55
Regulatory capital deductions:  
Less: Permitted ownership interests in covered funds(7)
1,216
806
Less: Minimum regulatory capital requirements of insurance underwriting subsidiaries(8)
36
55
Total Additional Tier 1 Capital (Standardized Approach and Advanced Approaches)$18,007
$18,870
Total Tier 1 Capital (Common Equity Tier 1 Capital + Additional Tier 1 Capital)
   (Standardized Approach and Advanced Approaches)
$155,805
$158,122
Tier 2 Capital  
Qualifying subordinated debt$23,673
$23,324
Qualifying trust preferred securities(9)
326
321
Qualifying noncontrolling interests46
47
Eligible allowance for credit losses(10)
13,868
13,681
Regulatory capital deduction:  
Less: Minimum regulatory capital requirements of insurance underwriting subsidiaries(8)
36
55
Total Tier 2 Capital (Standardized Approach)$37,877
$37,318
Total Capital (Tier 1 Capital + Tier 2 Capital) (Standardized Approach)$193,682
$195,440
Adjustment for excess of eligible credit reserves over expected credit losses(10)
$(12,345)$(12,296)
Total Tier 2 Capital (Advanced Approaches)$25,532
$25,022
Total Capital (Tier 1 Capital + Tier 2 Capital) (Advanced Approaches)$181,337
$183,144

(1)Issuance costs of $152 million and $168 million related to noncumulative perpetual preferred stock outstanding at December 31, 2019 and 2018, respectively, are excluded from common stockholders’ equity and netted against such preferred stock in accordance with Federal Reserve Board regulatory reporting requirements, which differ from those under U.S. GAAP.
(2)
Common Equity Tier 1 Capital is adjusted for accumulated net unrealized gains (losses) on cash flow hedges included in AOCI that relate to the hedging of items not recognized at fair value on the balance sheet.
(3)The cumulative impact of changes in Citigroup’s own creditworthiness in valuing liabilities for which the fair value option has been elected, and own-credit valuation adjustments on derivatives, are excluded from Common Equity Tier 1 Capital, in accordance with the U.S. Basel III rules.
(4)Includes goodwill “embedded” in the valuation of significant common stock investments in unconsolidated financial institutions.



Footnotes continue on the following page.


34


(5)Of Citi’s $23.1 billion of net DTAs at December 31, 2019, $12.4 billion was includable in Common Equity Tier 1 Capital pursuant to the U.S. Basel III rules, while $10.7 billion was excluded. Excluded from Citi’s Common Equity Tier 1 Capital as of December 31, 2019 was $12.4 billion of net DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards, which was reduced by $1.7 billion of net DTLs primarily associated with goodwill and certain other intangible assets. Separately, under the U.S. Basel III rules, goodwill and these other intangible assets are deducted net of associated DTLs in arriving at Common Equity Tier 1 Capital. DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards are required to be entirely deducted from Common Equity Tier 1 Capital under the U.S. Basel III rules. Citi’s DTAs arising from temporary differences are less than the 10% limitation under the U.S. Basel III rules and therefore not subject to deduction from Common Equity Tier 1 Capital, but are subject to risk-weighting at 250%.
(6)Represents Citigroup Capital XIII trust preferred securities, which are permanently grandfathered as Tier 1 Capital under the U.S. Basel III rules.
(7)Banking entities are required to be in compliance with the Volcker Rule of the Dodd-Frank Act, which prohibits conducting certain proprietary investment activities and limits their ownership of, and relationships with, covered funds. Accordingly, Citi is required by the Volcker Rule to deduct from Tier 1 Capital all permitted ownership interests in covered funds.
(8)50% of the minimum regulatory capital requirements of insurance underwriting subsidiaries must be deducted from each of Tier 1 Capital and Tier 2 Capital.
(9)Represents the amount of non-grandfathered trust preferred securities eligible for inclusion in Tier 2 Capital under the U.S. Basel III rules, which will be fully phased-out of Tier 2 Capital by January 1, 2022.
(10)Under the Standardized Approach, the allowance for credit losses is eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any excess allowance for credit losses being deducted in arriving at credit risk-weighted assets, which differs from the Advanced Approaches framework, in which eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital to the extent that the excess reserves do not exceed 0.6% of credit risk-weighted assets. The total amount of eligible credit reserves in excess of expected credit losses that were eligible for inclusion in Tier 2 Capital, subject to limitation, under the Advanced Approaches framework was $1.5 billion and $1.4 billion at December 31, 2019 and 2018, respectively.






35


Citigroup Capital Rollforward
In millions of dollarsThree Months Ended December 31, 2019Twelve Months Ended 
 December 31, 2019
Common Equity Tier 1 Capital, beginning of period$138,581
$139,252
Net income4,979
19,401
Common and preferred stock dividends declared(1,401)(5,512)
 Net increase in treasury stock(5,119)(17,290)
Net change in common stock and additional paid-in capital92
(98)
Net change in foreign currency translation adjustment net of hedges, net of tax972
(321)
Net change in unrealized gains (losses) on debt securities AFS, net of tax(160)1,985
Net change in defined benefit plans liability adjustment, net of tax15
(552)
Net change in adjustment related to change in fair value of financial liabilities
    attributable to own creditworthiness, net of tax
82
123
Net change in ASC 815—excluded component of fair value hedges(27)25
Net decrease in goodwill, net of related DTLs432
712
Net decrease in identifiable intangible assets other than MSRs, net of related DTLs45
315
Net decrease in defined benefit pension plan net assets187
3
 Net increase in DTAs arising from net operating loss, foreign tax credit and
      general business credit carry-forwards
(883)(385)
Other3
140
Net decrease in Common Equity Tier 1 Capital$(783)$(1,454)
Common Equity Tier 1 Capital, end of period
    (Standardized Approach and Advanced Approaches)
$137,798
$137,798
Additional Tier 1 Capital, beginning of period$19,452
$18,870
Net decrease in qualifying perpetual preferred stock(1,493)(464)
Net increase in qualifying trust preferred securities
5
Net change in permitted ownership interests in covered funds49
(410)
Other(1)6
Net decrease in Additional Tier 1 Capital$(1,445)$(863)
Tier 1 Capital, end of period
    (Standardized Approach and Advanced Approaches)
$155,805
$155,805
Tier 2 Capital, beginning of period (Standardized Approach)$38,321
$37,318
Net change in qualifying subordinated debt(408)349
Net change in eligible allowance for credit losses(46)187
Other10
23
Net change in Tier 2 Capital (Standardized Approach)$(444)$559
Tier 2 Capital, end of period (Standardized Approach)$37,877
$37,877
Total Capital, end of period (Standardized Approach)$193,682
$193,682
Tier 2 Capital, beginning of period (Advanced Approaches)$25,963
$25,022
Net change in qualifying subordinated debt(408)349
Net change in excess of eligible credit reserves over expected credit losses(33)138
Other10
23
Net change in Tier 2 Capital (Advanced Approaches)$(431)$510
Tier 2 Capital, end of period (Advanced Approaches)$25,532
$25,532
Total Capital, end of period (Advanced Approaches)$181,337
$181,337




36


Citigroup Risk-Weighted Assets Rollforward (Basel III Standardized Approach)
In millions of dollarsThree Months Ended December 31, 2019Twelve Months Ended 
 December 31, 2019
 Total Risk-Weighted Assets, beginning of period$1,197,050
$1,174,448
Changes in Credit Risk-Weighted Assets  
General credit risk exposures(1)
2,821
10,376
Repo-style transactions(2)
(19,681)(7,420)
Securitization exposures(277)980
Equity exposures(3)
1,590
5,013
Over-the-counter (OTC) derivatives(4)
(13,283)(6,669)
Other exposures(5)
4,639
9,290
Off-balance sheet exposures(6)
(2,618)(12,802)
Net decrease in Credit Risk-Weighted Assets$(26,809)$(1,232)
Changes in Market Risk-Weighted Assets  
Risk levels(7)
$(4,718)$(6,847)
Model and methodology updates1,000
154
Net decrease in Market Risk-Weighted Assets$(3,718)$(6,693)
Total Risk-Weighted Assets, end of period$1,166,523
$1,166,523

(1)General credit risk exposures include cash and balances due from depository institutions, securities, and loans and leases. General credit risk exposures increased during the three and 12 months ended December 31, 2019, mainly driven by growth in commercial and retail loans and increases in investment securities.
(2)Repo-style transactions include repurchase and reverse repurchase transactions as well as securities borrowing and securities lending transactions. Repo-style transactions decreased during the three and 12 months ended December 31, 2019, driven by volume reduction and matured deals.
(3)Equity exposures increased during the three months ended December 31, 2019, primarily due to increased exposures from existing investments. Equity exposures increased during the 12 months ended December 31, 2019, primarily due to an increase in market value of investments and increased exposures from existing investments.
(4)OTC derivatives decreased during the three and 12 months ended December 31, 2019, primarily due to decreases in notionals.
(5)
Other exposures include cleared transactions, unsettled transactions and other assets. Other exposures increased during the three months ended December 31, 2019, primarily due to increases in centrally cleared derivatives and various other assets. Other exposures increased during the 12 months ended December 31, 2019, primarily due to the recognition of right-of-use (ROU) assets in accordance with the adoption of ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019, as well as increases in centrally cleared derivatives and various other assets.
(6)Off-balance sheet exposures decreased during the three months ended December 31, 2019, primarily due to a decrease in standby letters of credit. Off-balance sheet exposures decreased during the 12 months ended December 31, 2019, primarily due to decreases in standby letters of credit and loan commitments.
(7)Risk levels decreased during the three months ended December 31, 2019, primarily due to a decrease in exposure levels subject to Stressed Value at Risk and Incremental Risk charges. Risk levels decreased during the 12 months ended December 31, 2019, primarily due to a decrease in exposure levels subject to Stressed Value at Risk. 

As set forth in the table above, total risk-weighted assets under the Basel III Standardized Approach decreased from year-end 2018, due to decreases in market risk-weighted assets and credit risk-weighted assets. Market risk-weighted assets decreased from year-end 2018 primarily due to a net reduction in exposure levels. The decrease in credit risk-weighted assets was primarily due to decreases in standby letters of credit and loan commitments as well as volume reduction and matured deals in repo-style transactions and changes in OTC derivative trade activity, partially offset by increases in loan exposures, the recognition of right-of-use (ROU) assets in accordance with the adoption of ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019, and an increase in market value of investments.












37



Citigroup Risk-Weighted Assets Rollforward (Basel III Advanced Approaches)
In millions of dollarsThree Months Ended December 31, 2019Twelve Months Ended 
 December 31, 2019
 Total Risk-Weighted Assets, beginning of period$1,145,091
$1,131,933
Changes in Credit Risk-Weighted Assets  
Retail exposures(1)
6,140
4,959
Wholesale exposures(2)
(3,007)(9,288)
Repo-style transactions(3)
(8,761)(3,184)
Securitization exposures(4)
153
5,889
Equity exposures(5)
1,764
4,924
Over-the-counter (OTC) derivatives(6)
(2,992)8,508
Derivatives CVA(7)
(6,651)(15,034)
Other exposures(8)
8,394
14,282
Supervisory 6% multiplier101
1,565
Net change in Credit Risk-Weighted Assets$(4,859)$12,621
Changes in Market Risk-Weighted Assets  
Risk levels(9)
$(4,808)$(6,824)
Model and methodology updates1,000
154
Net decrease in Market Risk-Weighted Assets$(3,808)$(6,670)
Net decrease in Operational Risk-Weighted Assets(10)
$(871)$(2,331)
Total Risk-Weighted Assets, end of period$1,135,553
$1,135,553

(1)Retail exposures increased during the three months ended December 31, 2019, primarily due to seasonal spending for qualifying revolving (cards) exposures. Retail exposures increased during the 12 months ended December 31, 2019, primarily due to increases in consumer loans, partially offset by decreases due to annual parameter updates.
(2)Wholesale exposures decreased during the three months ended December 31, 2019, primarily due to decreases in commercial loans partially offset by increases in investment securities. Wholesale exposures decreased during the 12 months ended December 31, 2019, primarily due to annual model parameter updates reflecting Citi’s loss experience, partially offset by increases in commercial loans and investment securities.
(3)Repo-style transactions include repurchase and reverse repurchase transactions as well as securities borrowing and securities lending transactions. Repo-style transactions decreased during the three and 12 months ended December 31, 2019, driven by volume reduction and matured deals.
(4)Securitization exposures increased during the 12 months ended December 31, 2019, due to increased exposures from existing deals.
(5)Equity exposures increased during the three months ended December 31, 2019, primarily due to increased exposures from existing investments. Equity exposures increased during the 12 months ended December 31, 2019, primarily due to an increase in market value of investments and increased exposures from existing investments.
(6)OTC derivatives decreased during the three months ended December 31, 2019, primarily due to a reduction in notionals. OTC derivatives increased during the 12 months ended December 31, 2019, primarily due to approved model changes, partially offset by a reduction in notionals.
(7)Derivatives CVA decreased during the three months ended December 31, 2019, primarily due to exposure decreases and changes in credit spreads. Derivatives CVA decreased during the 12 months ended December 31, 2019, primarily due to approved model changes, exposure decreases and changes in credit spreads.
(8)
Other exposures include cleared transactions, unsettled transactions, assets other than those reportable in specific exposure categories and non-material portfolios. Other exposures increased during the three months ended December 31, 2019, primarily due to increases in centrally cleared derivatives and various other assets. Other exposures increased during the 12 months ended December 31, 2019, primarily due to the recognition of ROU assets in accordance with the adoption of ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019, and increases in centrally cleared derivatives and various other assets.
(9)Risk levels decreased during the three months ended December 31, 2019, primarily due to a decrease in exposure levels subject to Stressed Value at Risk and Incremental Risk charges. Risk levels decreased during the 12 months ended December 31, 2019, primarily due to a decrease in exposure levels subject to Stressed Value at Risk. 
(10)Operational risk-weighted assets decreased during the 12 months ended December 31, 2019, primarily due to changes in operational loss severity and frequency.

As set forth in the table above, total risk-weighted assets under the Basel III Advanced Approaches increased from year-end 2018 primarily due to an increase in credit risk-weighted assets, partially offset by decreases in market and operational risk-weighted assets. The increase in credit risk-weighted assets was primarily due to recognition of ROU assets in accordance with the adoption of ASU 2016-02, changes in OTC derivatives trade activities and increases in securitization exposures, loan exposures and equity exposures, partially offset by decreases in derivatives CVA and wholesale exposures mainly due to annual model parameter updates. Market risk-weighted assets decreased from year-end 2018, primarily due to a net reduction in exposure levels. The
 
decrease in operational risk-weighted assets was primarily due to changes in operational loss severity and frequency.

38


Supplementary Leverage Ratio
The following table sets forth Citi’s Supplementary Leverage ratio and related components as of December 31, 2019, September 30, 2019 and December 31, 2018:

In millions of dollars, except ratiosDecember 31, 2019September 30, 2019December 31, 2018
Tier 1 Capital$155,805
$158,033
$158,122
Total Leverage Exposure   
On-balance sheet assets(1)
$1,996,617
$2,000,082
$1,936,791
Certain off-balance sheet exposures:(2)
   
   Potential future exposure on derivative contracts169,478
176,546
187,130
   Effective notional of sold credit derivatives, net(3)
38,481
41,328
49,402
   Counterparty credit risk for repo-style transactions(4)
23,715
24,362
23,715
   Unconditionally cancelable commitments70,870
70,648
69,630
   Other off-balance sheet exposures248,308
246,793
238,805
Total of certain off-balance sheet exposures$550,852
$559,677
$568,682
Less: Tier 1 Capital deductions39,578
39,407
39,832
Total Leverage Exposure$2,507,891
$2,520,352
$2,465,641
Supplementary Leverage ratio6.21%6.27%6.41%

(1)Represents the daily average of on-balance sheet assets for the quarter.
(2)Represents the average of certain off-balance sheet exposures calculated as of the last day of each month in the quarter.
(3)Under the U.S. Basel III rules, banking organizations are required to include in Total Leverage Exposure the effective notional amount of sold credit derivatives, with netting of exposures permitted if certain conditions are met.
(4)Repo-style transactions include repurchase or reverse repurchase transactions as well as securities borrowing or securities lending transactions.

As set forth in the table above, Citigroup’s Supplementary Leverage ratio was 6.2% at December 31, 2019, compared to 6.3% at September 30, 2019 and 6.4% at December 31, 2018. The quarter-over-quarter decrease was primarily driven by a reduction in Tier 1 Capital resulting from the return of $6.2 billion of capital to common shareholders and a preferred stock redemption, partially offset by net income and beneficial net movements in AOCI, as well as a decrease in average off-balance sheet exposures. The year-over-year decrease was primarily driven by a reduction in Tier 1 Capital resulting from the return of $22.3 billion of capital to common shareholders, as well as an increase in average on-balance sheet assets, partially offset by net income and beneficial net movements in AOCI, as well as a decrease in average off-balance sheet exposures.


39


Capital Resources of Citigroup’s Subsidiary U.S.
Depository Institutions
Citigroup’s subsidiary U.S. depository institutions are also subject to regulatory capital standards issued by their respective primary federal bank regulatory agencies, which are similar to the standards of the Federal Reserve Board.
The following tables set forth the capital components and ratios for Citibank, Citi’s primary subsidiary U.S. depository
 
institution, as of December 31, 2019, September 30, 2019 and December 31, 2018:

 
Effective Minimum Requirement(1)
Advanced ApproachesStandardized Approach
In millions of dollars, except ratios20192018Dec. 31, 2019Sept. 30, 2019Dec. 31, 2018Dec. 31, 2019Sept. 30, 2019Dec. 31, 2018
Common Equity Tier 1 Capital  $130,791
$130,067
$129,091
$130,791
$130,067
$129,091
Tier 1 Capital  132,918
132,198
131,215
132,918
132,198
131,215
Total Capital (Tier 1 Capital + Tier 2 Capital)(2)
  145,989
144,829
144,358
157,324
155,735
155,154
Total Risk-Weighted Assets  932,432
946,433
926,229
1,019,916
1,047,550
1,032,809
   Credit Risk  $664,828
$664,014
$654,962
$990,319
$1,005,337
$994,294
   Market Risk  29,167
41,867
38,144
29,597
42,213
38,515
   Operational Risk  238,437
240,552
233,123



Common Equity Tier 1 Capital ratio(3)(4)
7.0%6.375%14.03%13.74%13.94%12.82%12.42%12.50%
Tier 1 Capital ratio(3)(4)
8.57.87514.26
13.97
14.17
13.03
12.62
12.70
Total Capital ratio(3)(4)
10.59.87515.66
15.30
15.59
15.43
14.87
15.02

In millions of dollars, except ratiosEffective Minimum RequirementDec. 31, 2019Sept. 30, 2019Dec. 31, 2018
Quarterly Adjusted Average Total Assets(5)
 $1,459,851 $1,451,352 $1,398,875 
Total Leverage Exposure(6) 
 1,951,701 1,952,628 1,914,663 
Tier 1 Leverage ratio(4)
4.0%9.10%9.11%9.38%
Supplementary Leverage ratio(4)
6.06.81 6.77 6.85 

(1)Citibank’s effective minimum risk-based capital requirements during 2019 and 2018 are inclusive of the 100% and 75% phase-in, respectively, of the 2.5% Capital Conservation Buffer (all of which must be composed of Common Equity Tier 1 Capital).
(2)Under the Advanced Approaches framework, eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital to the extent that the excess reserves do not exceed 0.6% of credit risk-weighted assets, which differs from the Standardized Approach in which the allowance for credit losses is eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any excess allowance for credit losses being deducted in arriving at credit risk-weighted assets.
(3)Citibank’s reportable Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios were the lower derived under the Basel III Standardized Approach for all periods presented.
(4)Citibank must maintain minimum Common Equity Tier 1 Capital, Tier 1 Capital, Total Capital and Tier 1 Leverage ratios of 6.5%, 8.0%, 10.0% and 5.0%, respectively, to be considered “well capitalized” under the revised Prompt Corrective Action (PCA) regulations applicable to insured depository institutions as established by the U.S. Basel III rules. Citibank must also maintain a minimum Supplementary Leverage ratio of 6.0% to be considered “well capitalized.”
(5)Tier 1 Leverage ratio denominator. Represents quarterly average total assets less amounts deducted from Tier 1 Capital.
(6)Supplementary Leverage ratio denominator.

As indicated in the table above, Citibank’s capital ratios at December 31, 2019 were in excess of the stated and effective minimum requirements under the U.S. Basel III rules. In addition, Citibank was also “well capitalized” as of December 31, 2019.



40


Impact of Changes on Citigroup and Citibank Capital Ratios
The following tables present the estimated sensitivity of Citigroup’s and Citibank’s capital ratios to changes of $100 million in Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital (numerator), and changes of $1 billion in Advanced Approaches and Standardized Approach risk-weighted assets and quarterly adjusted average total assets, as well as Total Leverage Exposure (denominator), as of December 31, 2019. This information is provided for the purpose of analyzing the impact that a change in Citigroup’s
 
or Citibank’s financial position or results of operations could have on these ratios. These sensitivities only consider a single change to either a component of capital, risk-weighted assets, quarterly adjusted average total assets or Total Leverage Exposure. Accordingly, an event that affects more than one factor may have a larger basis point impact than is reflected in these tables.


 
Common Equity
Tier 1 Capital ratio
Tier 1 Capital ratioTotal Capital ratio
In basis points
Impact of
$100 million
change in
Common Equity
Tier 1 Capital
Impact of
$1 billion
change in risk-
weighted assets
Impact of
$100 million
change in
Tier 1 Capital
Impact of
$1 billion
change in risk-
weighted assets
Impact of
$100 million
change in
Total Capital
Impact of
$1 billion
change in risk-
weighted assets
Citigroup      
Advanced Approaches0.91.10.91.20.91.4
Standardized Approach0.91.00.91.10.91.4
Citibank      
Advanced Approaches1.11.51.11.51.11.7
Standardized Approach1.01.31.01.31.01.5

 Tier 1 Leverage ratioSupplementary Leverage ratio
In basis points
Impact of
$100 million
change in
Tier 1 Capital
Impact of
$1 billion
change in quarterly adjusted average total assets
Impact of
$100 million
change in
Tier 1 Capital
Impact of
$1 billion
change in Total Leverage Exposure
Citigroup0.50.40.40.2
Citibank0.70.60.50.3

Citigroup Broker-Dealer Subsidiaries
At December 31, 2019, Citigroup Global Markets Inc., a U.S. broker-dealer registered with the SEC that is an indirect wholly owned subsidiary of Citigroup, had net capital, computed in accordance with the SEC’s net capital rule, of $10.1 billion, which exceeded the minimum requirement by $6.9 billion.
Moreover, Citigroup Global Markets Limited, a broker-dealer registered with the United Kingdom’s Prudential Regulation Authority (PRA) that is also an indirect wholly owned subsidiary of Citigroup, had total capital of $21.4 billion at December 31, 2019, which exceeded the PRA's minimum regulatory capital requirements.
 
In addition, certain of Citi’s other broker-dealer
subsidiaries are subject to regulation in the countries in which they do business, including requirements to maintain specified levels of net capital or its equivalent. Citigroup’s other principal broker-dealer subsidiaries were in compliance with their regulatory capital requirements at December 31, 2019.


41


Total Loss-Absorbing Capacity (TLAC)
The table below details Citi’s eligible external TLAC and LTD amounts and ratios, and each effective minimum TLAC and long-term debt (LTD) ratio requirement, as well as the surplus amount in dollars in excess of each requirement.
As of December 31, 2019, Citi exceeded each of the minimum TLAC and LTD requirements, resulting in a $14 billion surplus above its binding TLAC requirement of LTD as a percentage of Total Leverage Exposure.
 December 31, 2019
In billions of dollars, except ratios
External TLAC

LTD
Total eligible amount$289
$127
% of Standardized Approach risk-
  weighted assets
24.7%10.9%
Effective minimum requirement(1)(2)
22.5
9.0
Surplus amount$26
$22
% of Total Leverage Exposure11.5%5.1%
Effective minimum requirement9.5
4.5
Surplus amount$50
$14

(1)External TLAC includes method 1 GSIB surcharge of 2.0%.
(2)LTD includes method 2 GSIB surcharge of 3.0%.

For additional information on Citi’s TLAC-related requirements, see “Liquidity Risk—Long-Term Debt—Total Loss-Absorbing Capacity (TLAC)” and “Risk Factors—Compliance, Conduct and Legal Risks” below.

Regulatory Capital Treatment—Implementation and Transition of the Current Expected Credit Losses (CECL) Methodology
In February 2019, the U.S. banking agencies issued a final rule that provides banking organizations an optional phase-in over a three-year period of the “Day One” adverse regulatory capital effects resulting from adoption of the CECL methodology.
The rule is in recognition of the issuance by the Financial Accounting Standards Board of ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The ASU introduces a new credit loss methodology, the CECL methodology, which requires earlier recognition of credit losses while also providing additional transparency about credit risk. The ASU was effective for Citi as of January 1, 2020. For additional information regarding Citi’s adoption of the CECL methodology, see Note 1 to the Consolidated Financial Statements.
Citi and Citibank have elected the transition provisions provided by the U.S. banking agencies’ rule. Accordingly, the “Day One” regulatory capital effects resulting from adoption of the CECL methodology commenced phase-in on January 1, 2020, and will be fully reflected in Citi’s regulatory capital as of January 1, 2023. Based on Citi’s regulatory capital position as of December 31, 2019, the estimated impact of adopting the CECL methodology would reduce Citi’s Common Equity Tier 1 Capital ratio under the Standardized Approach by approximately 25 basis points in total, or approximately 6
 
basis points per year on January 1 of each year over the transition period. The actual basis point impact of adopting CECL on Citi’s regulatory capital ratios may change, if Citi’s capital position changes over time.
The Federal Reserve Board has issued a statement that it plans to maintain its current framework for calculating allowances on loans in the supervisory stress test for the 2020 and 2021 supervisory stress test cycles, and to evaluate appropriate future enhancements to this framework as best practices for implementing CECL are developed. However, banking organizations are required to incorporate CECL into their stress testing methodologies, data and disclosure beginning in the cycle coinciding with their first full year of CECL adoption (2020 for Citi).

Regulatory Capital Standards Developments
The U.S. banking agencies and the Basel Committee issued numerous proposed and final rules on a variety of topics in 2019. In the U.S., the most significant rule finalized in 2019 relates to the calculation of risk-weighted assets for derivative contracts, while the Stress Capital Buffer proposal from 2018 has not yet been finalized. The Basel Committee, among other things, finalized revisions to the minimum capital requirements for market risk and proposed revisions to its credit valuation adjustment risk framework.

U.S. Banking Agencies

Standardized Approach for Counterparty Credit Risk
In November 2019, the U.S. banking agencies released a final rule to introduce the Standardized Approach for Counterparty Credit Risk (SA-CCR) in the U.S. SA-CCR will replace the Current Exposure Method (CEM), which is the current methodology used to calculate risk-weighted assets for all derivative contracts under the Standardized Approach, as well as risk-weighted assets for derivative contracts under the Advanced Approaches in cases where internal models are not used. In addition, SA-CCR would replace CEM in numerous other instances throughout the regulatory framework, including but not limited to the Supplementary Leverage Ratio, single counterparty credit limits and legal lending limits.
Under SA-CCR, a banking organization would calculate the exposure amount of its derivative contracts at the netting set level. Multiple derivative contracts would generally be considered to be under the same netting set as long as each derivative contract is subject to the same qualifying master netting agreement. SA-CCR also introduces the concept of hedging sets, which would allow a banking organization to fully or partially net derivative contracts within the same netting set that share similar risk factors. Moreover, SA-CCR incorporates updated supervisory and maturity factors to calculate the potential future exposure of a derivative contract, and provides for improved recognition of collateral. Under the proposal, the exposure amount of a netting set would be equal to an alpha factor of 1.4 multiplied by the sum of the replacement cost and potential future exposure of the netting set.

42


The mandatory compliance date of the final rule is January 1, 2022, with early adoption permitted beginning April 1, 2020. Citi’s SA-CCR implementation efforts are already underway. Citi is currently evaluating a decision on its intended implementation date for SA-CCR, including consideration of the impact of SA-CCR on both Citigroup’s and Citibank’s regulatory capital ratios.

Stress Capital Buffer
In April 2018, the Federal Reserve Board issued a proposal that is designed to more closely integrate the results of the quantitative assessment in CCAR with firms’ ongoing minimum capital requirements under the U.S. Basel III rules.
Specifically, the proposed rule would replace the existing Capital Conservation Buffer, currently fixed at 2.5% under the U.S. Basel III rules, with (i) a variable buffer known as the Stress Capital Buffer (as described below), plus (ii) for U.S. GSIBs, the GSIB’s then-current GSIB surcharge, plus (iii) the Countercyclical Capital Buffer, if any. These three components would constitute the new Capital Conservation Buffer under the Standardized Approach. The Stress Capital Buffer (SCB) would be based upon the maximum decline in a bank holding company’s Common Equity Tier 1 Capital ratio under the severely adverse scenario of the supervisory stress test. Under the April 2018 proposal, the SCB would be subject to a floor of 2.5%.
The proposed rule would also modify certain assumptions currently required in supervisory stress tests, including continued capital distributions during the nine-quarter capital planning horizon and balance sheet growth assumptions.
A final rule has not yet been issued. Senior staff at the Federal Reserve Board have indicated publicly that they plan to finalize certain components of the proposal for application in the 2020 CCAR cycle, and that they may re-propose certain other elements of the proposal to better balance the need to preserve the dynamism of stress testing while reducing unnecessary volatility, among other things. Senior staff at the Federal Reserve Board have also indicated publicly that they are considering two options in place of the “dividend add-on,” which was a component of the SCB under the April 2018 proposal: setting the Countercyclical Capital Buffer at a higher baseline level during normal times, or raising the floor of the SCB higher than 2.5%. The potential re-proposal may also address certain other elements of the original proposal, such as the relative timing between stress testing results and the submission of a firm’s capital plan, and the consequences of breaching a buffer.

TLAC Holdings
In April 2019, the U.S. banking agencies released a proposal that would create a new regulatory capital deduction applicable to Advanced Approaches banking organizations for certain investments in covered debt instruments issued by GSIBs. The proposed rule is intended to reduce systemic risk by creating an incentive for Advanced Approaches banking organizations to limit their exposure to GSIBs.
Under the U.S. Basel III rules, investments in the capital of unconsolidated financial institutions are subject to deduction to the extent that they exceed certain thresholds.
 
Under the proposed rule, an investment in a “covered debt instrument” would be treated as an investment in a Tier 2 capital instrument and, therefore, would be subject to deduction from the Advanced Approaches banking organization’s own Tier 2 Capital in accordance with the existing rules for investments in unconsolidated financial institutions. Covered debt instruments would include unsecured debt instruments that are “eligible debt securities” for purposes of the TLAC rule, or that are pari passu or subordinated to such securities, in addition to certain unsecured debt instruments issued by foreign GSIBs.
To support a deep and liquid market for covered debt instruments, the proposed rule provides an exception from the approach described above for covered debt instruments held for 30 days or less for market-making purposes, if the aggregate amount of such debt instruments does not exceed 5% of the banking organization’s Common Equity Tier 1 Capital.
The proposed rule does not specify a proposed effective date for the new regulatory capital deduction. If adopted as proposed, Citi does not expect the proposed rule to have a material impact on its regulatory capital.

Basel Committee

Revisions to the Minimum Capital Requirements for
Market Risk
In January 2019, the Basel Committee issued a final standard that revises the market risk capital framework—the so-called Fundamental Review of the Trading Book, or FRTB. The final rule revises the assessment process under the Advanced Approaches to determine whether a bank’s internal risk management models appropriately reflect the risks of individual trading desks, and clarifies the requirements for identification of risk factors that are eligible for internal modeling. In addition, the risk weights for general interest rate risk and foreign exchange risk under the Standardized Approach have been recalibrated.
If the U.S. banking agencies were to adopt the Basel Committee’s revised market risk framework unchanged, Citi believes its market risk-weighted assets could increase significantly. The ultimate impact on Citi, however, will depend upon the specific provisions of any final rule.

Leverage Ratio Treatment of Client-Cleared Derivatives
In June 2019, the Basel Committee on Banking Supervision issued a final standard that revises its leverage ratio framework to align the leverage ratio measurement of client-cleared derivatives with the measurement as determined per the Basel Committee’s standardized approach for measuring counterparty credit risk exposures, as used for risk-based capital requirements. Under the Basel Committee’s leverage ratio framework, the leverage ratio exposure measure is generally not adjusted for physical or financial collateral, guarantees or other credit risk mitigation techniques, including initial margin received from clients. However, the final rule permits both cash and non-cash forms of initial margin and variation margin received from clients to mitigate replacement cost and potential future exposure for client-cleared

43


derivatives only. The Basel Committee stated in the rule that this revision balances the robustness of the leverage ratio as a non-risk-based safeguard against unsustainable sources of leverage with the policy objective of promoting central clearing of standardized derivative contracts.
In the U.S., the Basel Committee’s leverage ratio framework and leverage ratio exposure measure are most closely aligned with the Supplementary Leverage Ratio and Total Leverage Exposure, respectively. As part of the SA-CCR final rule discussed previously, the U.S. agencies amended the Supplementary Leverage Ratio requirements in a manner similar to the Basel Committee. This particular aspect of the U.S. SA-CCR final rule will likely benefit Citi’s Supplementary Leverage Ratio modestly upon implementation.

Credit Valuation Adjustment Risk—Targeted Revisions
In November 2019, the Basel Committee on Banking Supervision issued a consultative document that proposes a targeted set of revisions to the credit valuation adjustment (CVA) risk framework previously finalized in December 2017. The revisions aim to align the revised CVA risk framework, in part, with the revised market risk capital framework that was finalized in January 2019. The Basel Committee also sought feedback on a possible adjustment to the overall calibration of capital requirements calculated under their CVA risk framework.
The U.S. agencies may consider revisions to the CVA risk framework under the U.S. Basel III rules in the future, based upon any revisions adopted by the Basel Committee.

44


Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Returns on Equity
Tangible common equity (TCE), as defined by Citi, represents common stockholders’ equity less goodwill and identifiable intangible assets (other than MSRs). Other companies may calculate TCE in a different manner. TCE, tangible book value (TBV) per share and return on average TCE are non-GAAP financial measures. Citi believes the presentation of TCE, TBV per share and return on average TCE provides alternate measures of capital strength and performance that are commonly used by investors and industry analysts.
 At December 31,
In millions of dollars or shares, except per share amounts20192018201720162015
Total Citigroup stockholders’ equity$193,242
$196,220
$200,740
$225,120
$221,857
Less: Preferred stock17,980
18,460
19,253
19,253
16,718
Common stockholders’ equity$175,262
$177,760
$181,487
$205,867
$205,139
Less:     
    Goodwill22,126
22,046
22,256
21,659
22,349
    Identifiable intangible assets (other than MSRs)4,327
4,636
4,588
5,114
3,721
    Goodwill and identifiable intangible assets (other than
      MSRs) related to assets held-for-sale (HFS)


32
72
68
Tangible common equity (TCE)$148,809
$151,078
$154,611
$179,022
$179,001
Common shares outstanding (CSO)2,114.1
2,368.5
2,569.9
2,772.4
2,953.3
Book value per share (common equity/CSO)$82.90
$75.05
$70.62
$74.26
$69.46
Tangible book value per share (TCE/CSO)70.39
63.79
60.16
64.57
60.61
 For the Year Ended December 31,
In millions of dollars20192018
2017(1)
20162015
Net income available to common shareholders$18,292
$16,871
$14,583
$13,835
$16,473
Average common stockholders’ equity177,363
179,497
207,747
209,629
204,188
Average TCE150,994
153,343
180,458
182,135
176,505
Return on average common stockholders’ equity10.3%9.4%7.0%6.6%8.1%
Return on average TCE (RoTCE)(2)
12.1
11.0
8.1
7.6
9.3

(1)Year ended December 31, 2017 excludes the one-time impact of Tax Reform. For a reconciliation of these measures, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below.
(2)RoTCE represents net income available to common shareholders as a percentage of average TCE.





45


RISK FACTORS

The following discussion sets forth what management currently believes could be the most significant risks and uncertainties that could impact Citi’s businesses, results of operations and financial condition. Other risks and uncertainties, including those not currently known to Citi or its management, could also negatively impact Citi’s businesses, results of operations and financial condition. Thus, the following should not be considered a complete discussion of all of the risks and uncertainties Citi may face.

STRATEGIC RISKS
Citi’s Ability to Return Capital to Common Shareholders Consistent with Its Capital Planning Efforts and Targets Substantially Depends on the CCAR Process and the Results of Regulatory Stress Tests.
Citi’s ability to return capital to its common shareholders consistent with its capital planning efforts and targets, whether through its common stock dividend or through a share repurchase program, substantially depends, among other things, on regulatory approval, including through the CCAR process required by the Federal Reserve Board (FRB) and the supervisory stress tests required under the Dodd-Frank Act. The ability to return capital also depends on Citi’s results of
operations and effectiveness in managing its level of risk-weighted assets and GSIB surcharge. Citi’s ability to accurately predict, interpret or explain to stakeholders the outcome of the CCAR process, and thus to address any market or investor perceptions, may be limited as the FRB’s assessment of Citi’s capital adequacy is conducted using the FRB’s proprietary stress test models. In addition, all CCAR firms, including Citi, will continue to be subject to a rigorous evaluation of their capital planning practices, including, but not limited to, governance, risk management and internal controls. For additional information on Citi’s return of capital to common shareholders in 2019 as well as the CCAR process, supervisory stress test requirements and GSIB surcharge, see “Capital Resources—Overview” and “Capital Resources—Current Regulatory Capital Standards—Stress Testing Component of Capital Planning” above and the risk management risk factor below.
The FRB has stated that it expects leading capital adequacy practices to continue to evolve and to likely be determined by the FRB each year as a result of its cross-firm review of capital plan submissions. Similarly, the FRB has indicated that, as part of its stated goal to continually evolve its annual stress testing requirements, several parameters of the annual stress testing process may continue to be altered, including the severity of the stress test scenario, the FRB modeling of Citi’s balance sheet and the addition of components deemed important by the FRB.
Citi will be required to incorporate the current expected credit losses (CECL) methodology into its stress testing methodologies, data and disclosure beginning with the 2020 supervisory stress test cycle. The FRB has stated that it plans to maintain its current framework for calculating allowances on loans in the supervisory stress test for the 2020 and 2021
 
supervisory stress test cycles, and to evaluate appropriate future enhancements to this framework as best practices for implementing CECL are developed. The impacts on Citi’s capital adequacy of incorporating CECL on an ongoing basis, and of other potential regulatory changes in the FRB’s stress testing methodologies, remain unclear. For additional information regarding the CECL methodology, including the transition provisions related to the “Day One” adverse regulatory capital effects resulting from adoption of the CECL methodology, see “Capital Resources—Current Regulatory Capital Standards—Regulatory Capital Treatment—Implementation and Transition of the Current Expected Credit Losses (CECL) Methodology” above and Note 1 to the Consolidated Financial Statements.
In addition, in 2018, the FRB proposed to more closely integrate the results of the quantitative assessment in CCAR with firms’ ongoing minimum capital requirements under the U.S. Basel III rules. Proposed changes to the stress testing regime include, among others, introduction of a firm-specific “stress capital buffer” (SCB), which would be equal to the maximum decline in a firm’s Common Equity Tier 1 Capital ratio under a severely adverse scenario over a nine-quarter CCAR measurement period, subject to a minimum requirement of 2.5%. The FRB proposed that the SCB would replace the capital conservation buffer in Citi’s ongoing regulatory capital requirements for Standardized Approach capital ratios. The SCB would be calculated by the FRB using its proprietary data and modeling of each firm’s results. Accordingly, a firm’s SCB would change annually based on the supervisory stress test results, thus potentially resulting in year-to-year volatility in the calculation of the SCB. For additional information on the FRB’s proposal, including calculation of the SCB, see “Capital Resources—Regulatory Capital Standards Developments” above.
Although various uncertainties exist regarding the extent of, and the ultimate impact to Citi from, these changes to the FRB’s stress testing and CCAR regimes, these changes would likely increase the level of capital Citi is required or elects to hold, including as part of Citi’s estimated management buffer, thus potentially impacting the extent to which Citi is able to return capital to shareholders.

Macroeconomic, Geopolitical and Other Challenges and Uncertainties Globally Could Have a Negative Impact on Citi’s Businesses and Results of Operations.
Citi has experienced, and could experience in the future, negative impacts to its businesses and results of operations as a result of macroeconomic, geopolitical and other challenges, uncertainties and volatility. For example, protracted or widespread trade tensions, including changes in trade policies, which have resulted in retaliatory measures from other countries, could result in a further reduction or realignment of trade flows among countries and negatively impact businesses, sectors and economic growth rates. In addition, adverse developments or downturns in one or more of the world’s larger economies would likely have a significant impact on the global economy or the economies of other countries because of global financial and economic linkages. Additional areas of uncertainty include, among others, geopolitical tensions and

46


conflicts, natural disasters, pandemics and election outcomes. For example, it was reported in January 2020 that a novel strain of coronavirus which first surfaced in China, had spread to several other countries, resulting in various uncertainties, including the potential impact to Asian and global economies, trade and consumer and corporate clients.
Governmental fiscal and monetary actions, or expected actions, such as changes in interest rate policies and any program implemented by a central bank to change the size of its balance sheet, could significantly impact interest rates, economic growth rates, the volatility of global financial markets, foreign exchange rates and capital flows among countries. For example, in 2019, the FRB reduced its benchmark U.S. interest rate three times to add additional stimulus to the U.S. economy. The interest rates on Citi loans are typically based off or set at a spread over a benchmark interest rate, including the U.S. benchmark interest rate, and are therefore likely to decline as benchmark rates decline. By contrast, the interest rates at which Citi pays depositors are already low and unlikely to decline much further. Consequently, declining loan rates and largely unchanged deposit rates would likely compress Citi’s net interest revenue. Citi’s net interest revenue could also be adversely affected due to a flattening of the interest rate yield curve (e.g., a lower spread between shorter-term versus longer-term interest rates), as Citi, similar to other banks, typically pays interest on deposits based on shorter-term interest rates and earns money on loans typically based on longer-term interest rates. For additional information on Citi’s interest rate risk, see “Managing Global Risk—Market Risk—Net Interest Revenue at Risk” below.
Despite the U.K.’s official withdrawal from the European Union (EU) as of January 31, 2020, numerous uncertainties continue to exist regarding the U.K.’s future relationship with the EU. For example, the terms of the U.K. withdrawal continue to be negotiated between the U.K. and the EU, including their future trading relationship. It remains unclear whether the parties will be able to agree on terms prior to the end of the currently scheduled transition period on December 31, 2020. If no agreement is reached on terms of the exit in a timely manner, it would likely result in what is commonly referred to as a “no deal” or “hard” exit scenario. A hard exit scenario would result in the U.K. and EU losing reciprocal financial services license-passporting rights and require the U.K. to deal with the EU as a third-country regime, but without an equivalence regime or transition period in place. A hard exit scenario could cause severe disruptions in the movement of goods and services between the U.K. and EU countries and negatively impact financial markets and the U.K. and EU economies. Citi’s business and operations could be impacted by these and other factors, including the preparedness and reaction of clients, counterparties and financial markets infrastructure. For information about Citi’s actions to manage the U.K.’s exit from the EU, see “Managing Global Risk—Strategic Risk—Exit of U.K. from EU” below. Further, the economic and fiscal situations of some EU countries have remained fragile, and concerns and uncertainties remain in the U.K. and Europe over the resulting effects of the U.K.’s exit from the EU.
 
These and additional global macroeconomic, geopolitical and other challenges, uncertainties and volatilities have negatively impacted, and could continue to negatively impact, Citi’s businesses, results of operations and financial condition, including its credit costs, revenues in its Markets and securities services and other businesses, and AOCI (which would in turn negatively impact Citi’s book and tangible book value).

Citi, Its Management and Its Businesses Must Continually Review, Analyze and Successfully Adapt to Ongoing Regulatory and Legislative Uncertainties and Changes in the U.S. and Globally.
Despite the adoption of final regulations and laws in numerous areas impacting Citi and its businesses over the past several years, Citi, its management and its businesses continually face ongoing regulatory and legislative uncertainties and changes, both in the U.S. and globally. While the areas of ongoing regulatory and legislative uncertainties and changes facing Citi are too numerous to list completely, various examples include, but are not limited to (i) potential fiscal, monetary, regulatory and other changes arising from the U.S. federal government and others; (ii) potential changes to various aspects of the regulatory capital framework applicable to Citi (see the capital return risk factor and “Capital Resources—Regulatory Capital Standards Developments” above); and (iii) the terms of and other uncertainties resulting from the U.K.’s exit from the EU (see the macroeconomic challenges and uncertainties risk factor above). When referring to “regulatory,” Citi is including both formal regulation and the views and expectations of its regulators in their supervisory roles.
Ongoing regulatory and legislative uncertainties and changes make Citi’s and its management’s long-term business, balance sheet and budget planning difficult or subject to change. For example, U.S. and other regulators globally have implemented and continue to discuss various changes to certain regulatory requirements, which would require ongoing assessment by management as to the impact to Citi, its businesses and business planning. Business planning is required to be based on possible or proposed rules or outcomes, which can change dramatically upon finalization, or upon implementation or interpretive guidance from numerous regulatory bodies worldwide, and such guidance can change.
Moreover, U.S. and international regulatory and legislative initiatives have not always been undertaken or implemented on a coordinated basis, and areas of divergence have developed and continue to develop with respect to the scope, interpretation, timing, structure or approach, leading to inconsistent or even conflicting requirements, including within a single jurisdiction. For example, in May 2019, the European Commission adopted, as part of Capital Requirements Directive V (CRD V), a new requirement for major banking groups headquartered outside the EU (which would include Citi) to establish an intermediate EU holding company where the foreign bank has two or more institutions (broadly meaning banks, broker-dealers and similar financial firms) established in the EU. While in some respects the requirement mirrors an existing U.S. requirement for non-U.S. banking organizations to form U.S. intermediate holding companies,

47


the implementation of the EU holding company requirement could lead to additional complexity with respect to Citi’s resolution planning, capital and liquidity allocation and efficiency in various jurisdictions. Regulatory and legislative changes have also significantly increased Citi’s compliance risks and costs (see the implementation and interpretation of regulatory changes risk factor below).

Citi’s Continued Investments and Efficiency Initiatives May Not Be as Successful as It Projects or Expects.
Citi continues to leverage its scale and make incremental investments to deepen client relationships, increase revenues and lower expenses. For example, Citi continues to make investments to enhance its digital capabilities across the franchise, including digital platforms and mobile and cloud-based solutions, as well as make investments in risk management and controls. Citi also has been investing in higher-return businesses, such as the U.S. cards and wealth management businesses in Global Consumer Banking (GCB) and treasury and trade solutions, securities services and other businesses in Institutional Clients Group (ICG). Citi also continues to execute on its previously disclosed investment of more than $1 billion in Citibanamex. Further, Citi has been pursuing efficiency improvements through various technology and digital initiatives, organizational simplification and location strategies, which are intended to self-fund Citi’s incremental investment initiatives as well as offset growth-driven expenses.
Citi’s investments and efficiency initiatives are being undertaken as part of its overall strategy to meet operational and financial objectives, including, among others, those relating to shareholder returns. There is no guarantee that these or other initiatives Citi may pursue will be as productive or effective as Citi expects, or at all. Citi’s investment and efficiency initiatives may continue to evolve as its business strategies and the market environment change, which could make the initiatives more costly and more challenging to implement, and limit their effectiveness. Moreover, Citi’s ability to achieve expected returns on its investments and costs savings depends, in part, on factors that it cannot control, such as macroeconomic conditions, customer, client and competitor actions and ongoing regulatory changes, among others.

Uncertainties Regarding the Transition Away from or Possible Discontinuance of the London Inter-Bank Offered Rate (LIBOR) or Any Other Interest Rate Benchmark Could Have Adverse Consequences for Market Participants, Including Citi.
LIBOR is extensively used as a “benchmark” or “reference rate” across financial products and markets globally. The U.K. Financial Conduct Authority (FCA) has raised questions about the future sustainability of LIBOR, and, as a result, the FCA obtained voluntary panel bank support to sustain LIBOR only until 2021, and LIBOR is expected to be discontinued as early as January 1, 2022. In addition, following guidance provided by the Financial Stability Board, other regulators have suggested reforming or replacing other benchmark rates with alternative reference rates. Accordingly, the transition away from and discontinuance of LIBOR or any other benchmark
 
rate presents various uncertainties, risks and challenges to financial markets and institutions, including Citi. These include, among others, the pricing, liquidity, value of, return on and market for financial instruments and contracts that reference LIBOR or any other applicable benchmark rate.
Citi issues, trades, holds or otherwise uses a substantial amount of securities or products that reference LIBOR, including, among others, derivatives, corporate loans, commercial and residential mortgages, credit cards, securitized products and other securities. The transition away from and discontinuation of LIBOR presents significant operational, legal, reputational or compliance, financial and other risks to Citi. For example, LIBOR transition presents various challenges related to contractual mechanics of existing floating rate financial instruments and contracts that reference LIBOR and mature after 2021. Certain of these instruments and contracts do not provide for alternative benchmark rates, which makes it unclear what the future benchmark rates would be after LIBOR’s cessation. Even if the instruments and contracts provide for a transition to alternative benchmark rates, the new benchmark rates may significantly differ from the prior rates. As a result, Citi may need to proactively address any contractual uncertainties or rate differences in such instruments and contracts, which would likely be both time consuming and costly. In addition, the transition away from and discontinuance of LIBOR could result in disputes, including litigation, involving holders of outstanding instruments and contracts that reference LIBOR, whether or not the underlying documentation provides for alternative benchmark rates. Citi will also need to develop significant internal systems and infrastructure to transition to alternative benchmark rates to both manage its businesses and support clients.
For additional information about Citi’s ongoing management of LIBOR transition risk, see “Managing Global Risk—Strategic Risk—LIBOR Transition Risk” below.

Citi’s Ability to Utilize Its DTAs, and Thus Reduce the Negative Impact of the DTAs on Citi’s Regulatory Capital, Will Be Driven by Its Ability to Generate U.S. Taxable Income.
At December 31, 2019, Citi’s net DTAs were $23.1 billion, net of a valuation allowance of $6.5 billion, of which $10.7 billion was excluded from Citi’s Common Equity Tier 1 Capital under the U.S. Basel III rules (for additional information, see “Capital Resources—Components of Citigroup Capital” above). Of the net DTAs at December 31, 2019, $6.3 billion related to foreign tax credit carry-forwards (FTCs), net of a valuation allowance. The carry-forward utilization period for FTCs is 10 years and represents the most time-sensitive component of Citi’s DTAs. The FTC carry-forwards at December 31, 2019 expire over the period of 2020–2029. Citi must utilize any FTCs generated in the then-current-year tax return prior to utilizing any carry-forward FTCs.
The accounting treatment for realization of DTAs, including FTCs, is complex and requires significant judgment and estimates regarding future taxable earnings in the jurisdictions in which the DTAs arise and available tax planning strategies. Citi’s ability to utilize its DTAs will

48


primarily be dependent upon Citi’s ability to generate U.S. taxable income in the relevant tax carry-forward periods. Although utilization of FTCs in any year is generally limited to 21% of foreign source taxable income in that year, overall domestic losses (ODL) that Citi has incurred in the past allow it to reclassify domestic source income as foreign source. Failure to realize any portion of the net DTAs would have a corresponding negative impact on Citi’s net income and financial returns.
Citi does not expect to be subject to the Base Erosion Anti-Abuse Tax (BEAT), which, if applicable to Citi in any given year, would have a significantly adverse effect on both Citi’s net income and regulatory capital.
For additional information on Citi’s DTAs, including FTCs, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below and Notes 1 and 9 to the Consolidated Financial Statements.

Citi’s Interpretation or Application of the Complex Tax Laws to Which It Is Subject Could Differ from Those of the Relevant Governmental Authorities, Which Could Result in the Payment of Additional Taxes, Penalties or Interest.
Citi is subject to various income-based and non-income-based tax laws of the U.S. and its states and municipalities, as well as the numerous non-U.S. jurisdictions in which it operates. These tax laws are inherently complex and Citi must make judgments and interpretations about the application of these laws, including the Tax Cuts and Jobs Act (Tax Reform), to its entities, operations and businesses. Citi’s interpretations and application of the tax laws, including with respect to Tax Reform, withholding, stamp, service and other non-income taxes, could differ from that of the relevant governmental taxing authority, which could result in the payment of additional taxes, penalties or interest, which could be material.

Citi’s Presence in the Emerging Markets Subjects It to Various Risks as well as Increased Compliance and Regulatory Risks and Costs.
During 2019, emerging markets revenues accounted for approximately 37% of Citi’s total revenues (Citi generally defines emerging markets as countries in Latin America, Asia
(other than Japan, Australia and New Zealand), Central and Eastern Europe, the Middle East and Africa). Although Citi continues to pursue its target client strategy, Citi’s presence in the emerging markets subjects it to a number of risks, including limitations of hedges on foreign investments, foreign currency volatility, sovereign volatility, election outcomes, regulatory changes and political events, foreign exchange controls, limitations on foreign investment, sociopolitical instability (including from hyperinflation), fraud, nationalization or loss of licenses, business restrictions, sanctions or asset freezes, potential criminal charges, closure of branches or subsidiaries and confiscation of assets. For example, Citi operates in several countries that have, or have had in the past, strict foreign exchange controls, such as Argentina, that limit its ability to convert local currency into U.S. dollars and/or transfer funds outside of those countries.
Moreover, if the economic situation in an emerging markets country where Citi operates were to deteriorate below
 
a certain level, U.S. regulators may impose mandatory loan loss or other reserve requirements on Citi, which would increase its credit costs and decrease its earnings (see “Strategic Risk—Country Risk—Argentina” below for additional information on emerging markets risk). In addition, political turmoil and instability have occurred in certain regions and countries, including Asia, the Middle East and Latin America, which have required, and may continue to require, management time and attention and other resources (such as monitoring the impact of sanctions on certain emerging markets economies as well as impacting Citi’s businesses and results of operations in affected countries).
Citi’s emerging markets presence also increases its compliance and regulatory risks and costs. For example, Citi’s operations in emerging markets, including facilitating cross-border transactions on behalf of its clients, subject it to higher compliance risks under U.S. regulations that are primarily focused on various aspects of global corporate activities, such as anti-money laundering regulations and the Foreign Corrupt Practices Act. These risks can be more acute in less developed markets and thus require substantial investment in compliance infrastructure or could result in a reduction in certain of Citi’s business activities. Any failure by Citi to comply with applicable U.S. regulations, as well as the regulations in the countries and markets in which it operates as a result of its global footprint, could result in fines, penalties, injunctions or other similar restrictions, many of which could negatively impact Citi’s results of operations and reputation (see the implementation and interpretation of regulatory changes and legal and regulatory proceedings risk factors below).

A Deterioration in or Failure to Maintain Citi’s Co-Branding or Private Label Credit Card Relationships, Including as a Result of Any Bankruptcy or Liquidation, Could Have a Negative Impact on Citi’s Results of Operations or Financial Condition.
Citi has co-branding and private label relationships through its Citi-branded cards and Citi retail services credit card businesses with various retailers and merchants globally, whereby in the ordinary course of business Citi issues credit cards to customers of the retailers or merchants. Citi’s co-branding and private label agreements provide for shared economics between the parties and generally have a fixed term. The five largest relationships, which include Sears, constituted an aggregate of approximately 11% of Citi’s revenues in 2019. These relationships could be negatively impacted by, among other things, the general economic environment, declining sales and revenues or other operational difficulties of the retailer or merchant, termination due to a contractual breach by Citi or by the retailer or merchant, or other factors, including bankruptcies, liquidations, restructurings, consolidations or other similar events.
Over the last several years, a number of U.S. retailers have continued to experience declining sales, which has resulted in significant numbers of store closures and, in a number of cases, bankruptcies, as retailers attempt to cut costs and reorganize. For example, despite its exit from bankruptcy in 2019, Sears continues to close stores and experience declining sales (for additional information regarding Citi retail

49


services’ co-brand and private label credit card products relationship with Sears, see “Global Consumer Banking—North America GCB” above). In addition, as has been widely reported, competition among card issuers, including Citi, for these relationships is significant, and it has become increasingly difficult in recent years to maintain such relationships on the same terms or at all.
While various mitigating factors could be available to Citi if any of the above events were to occur—such as by replacing the retailer or merchant or offering other card products—these events, particularly bankruptcies or liquidations, could negatively impact the results of operations or financial condition of Citi-branded cards, Citi retail services or Citi as a whole, including as a result of loss of revenues, increased expenses, higher cost of credit, impairment of purchased credit card relationships and contract-related intangibles or other losses (for information on Citi’s credit card related intangibles generally, see Note 16 to the Consolidated Financial Statements).

Citi’s Inability in Its Resolution Plan Submissions to Address Any Shortcomings or Deficiencies Identified or Guidance Provided by the FRB and FDIC Could Subject Citi to More Stringent Capital, Leverage or Liquidity Requirements, or Restrictions on Its Growth, Activities or Operations, and Could Eventually Require Citi to Divest Assets or Operations.
Title I of the Dodd-Frank Act requires Citi to prepare and submit a plan to the FRB and the FDIC for the orderly resolution of Citigroup (the bank holding company) and its significant legal entities under the U.S. Bankruptcy Code in the event of future material financial distress or failure. On December 17, 2019, the FRB and FDIC issued feedback on the resolution plans filed on July 1, 2019 by the eight U.S. GSIBs, including Citi. The FRB and FDIC identified one shortcoming, but no deficiencies, in Citi’s resolution plan relating to governance mechanisms. For additional information on Citi’s resolution plan submissions, see “Managing Global Risk—Liquidity Risk” below.
Under Title I, if the FRB and the FDIC jointly determine that Citi’s resolution plan is not “credible” (which, although not defined, is generally believed to mean the regulators do
not believe the plan is feasible or would otherwise allow the regulators to resolve Citi in a way that protects systemically important functions without severe systemic disruption), or would not facilitate an orderly resolution of Citi under the U.S. Bankruptcy Code, and Citi fails to resubmit a resolution plan that remedies any identified deficiencies, Citi could be subjected to more stringent capital, leverage or liquidity requirements, or restrictions on its growth, activities or operations. If within two years from the imposition of any requirements or restrictions Citi has still not remediated any identified deficiencies, then Citi could eventually be required to divest certain assets or operations. Any such restrictions or actions would negatively impact Citi’s reputation, market and investor perception, operations and strategy.

 
Citi’s Performance and the Performance of Its Individual Businesses Could Be Negatively Impacted if Citi Is Not Able to Effectively Compete for Highly Qualified Employees.
Citi’s performance and the performance of its individual businesses largely depends on the talents and efforts of its diverse and highly skilled employees. Specifically, Citi’s continued ability to compete in its businesses, to manage its businesses effectively and to continue to execute its overall global strategy depends on its ability to attract new employees and to retain and motivate its existing employees. If Citi is unable to continue to attract and retain the most highly qualified employees, Citi’s performance, including its competitive position, the successful execution of its overall strategy and its results of operations could be negatively impacted.
Citi’s ability to attract and retain employees depends on numerous factors, some of which are outside of its control. For example, the banking industry generally is subject to more comprehensive regulation of executive and employee compensation than other industries, including deferral and clawback requirements for incentive compensation. Citi often competes in the market for talent with entities that are not subject to such comprehensive regulatory requirements on the structure of incentive compensation, including, among others, technology companies. Other factors that could impact Citi’s ability to attract and retain employees include its culture and the management and leadership of the Company as well as its individual businesses, presence in the particular market or region at issue and the professional opportunities it offers.

Financial Services Companies and Others as well as Emerging Technologies Pose Increasingly Competitive Challenges to Citi.
Citi operates in an increasingly competitive environment, which includes both financial and non-financial services firms, such as traditional banks, online banks, financial technology companies and others. These companies compete on the basis of, among other factors, size, quality and type of products and services offered, price, technology and reputation. Emerging technologies have the potential to intensify competition and accelerate disruption in the financial services industry.
Citi competes with financial services companies in the U.S. and globally that continue to develop and introduce new products and services. In recent years, non-financial services firms, such as financial technology companies, have begun to offer services traditionally provided by financial institutions, such as Citi. These firms attempt to use technology and mobile platforms to enhance the ability of companies and individuals to borrow money, save and invest. To the extent that Citi is not able to compete effectively with these and other firms, Citi could be placed at a competitive disadvantage, which could result in loss of customers and market share, and its businesses, results of operations and financial condition could suffer. For additional information on Citi’s competitors, see the co-brand and private label cards risk factor above and “Supervision, Regulation and Other—Competition” below.


50


OPERATIONAL RISKS
A Disruption of Citi’s Operational Systems Could Negatively Impact Citi’s Reputation, Customers, Clients, Businesses or Results of Operations and Financial Condition.
A significant portion of Citi’s operations relies heavily on the secure processing, storage and transmission of confidential data and other information as well as the monitoring of a large number of complex transactions on a minute-by-minute basis. For example, through GCB and treasury and trade solutions and securities services businesses in ICG, Citi obtains and stores an extensive amount of personal and client-specific information for its retail, corporate and governmental customers and clients and must accurately record and reflect their extensive account transactions.
With the evolving proliferation of new technologies and the increasing use of the internet, mobile devices and cloud technologies to conduct financial transactions, large global financial institutions such as Citi have been, and will continue to be, subject to an increasing risk of operational disruption or cyber or information security incidents from these activities (for additional information, see the cybersecurity risk factor below). These incidents are unpredictable and can arise from numerous sources, not all of which are in Citi’s control, including, among others, human error, fraud or malice on the part of employees, accidental technological failure, electrical or telecommunication outages, failures of computer servers or other similar damage to Citi’s property or assets. These issues can also arise as a result of failures by third parties with which Citi does business, such as failures by internet, mobile technology and cloud service providers or other vendors to adequately safeguard their systems and prevent system disruptions or cyber attacks.
Such events could cause interruptions or malfunctions in the operations of Citi (such as the temporary loss of availability of Citi’s online banking system or mobile banking platform), as well as the operations of its clients, customers or other third parties. Given Citi’s global footprint and the high volume of transactions processed by Citi, certain errors or actions may be repeated or compounded before they are discovered and rectified, which would further increase these costs and consequences. Any such events could also result in financial losses as well as misappropriation, corruption or loss of confidential and other information or assets, which could negatively impact Citi’s reputation, customers, clients, businesses or results of operations and financial condition, perhaps significantly.

Citi’s and Third Parties’ Computer Systems and Networks Have Been, and Will Continue to Be, Susceptible to an Increasing Risk of Continually Evolving, Sophisticated Cybersecurity Activities That Could Result in the Theft, Loss, Misuse or Disclosure of Confidential Client or Customer Information, Damage to Citi’s Reputation, Additional Costs to Citi, Regulatory Penalties, Legal Exposure and Financial Losses.
Citi’s computer systems, software and networks are subject to ongoing cyber incidents such as unauthorized access, loss or destruction of data (including confidential client information), account takeovers, unavailability of service, computer viruses
 
or other malicious code, cyber attacks and other similar events. These threats can arise from external parties, including cyber criminals, cyber terrorists, hacktivists and nation state actors, as well as insiders who knowingly or unknowingly engage in or enable malicious cyber activities.
Third parties with which Citi does business, as well as retailers and other third parties with which Citi’s customers do business, may also be sources of cybersecurity risks, particularly where activities of customers are beyond Citi’s security and control systems. For example, Citi outsources certain functions, such as processing customer credit card transactions, uploading content on customer-facing websites and developing software for new products and services. These relationships allow for the storage and processing of customer information by third-party hosting of or access to Citi websites, which could lead to compromise or the potential to introduce vulnerable or malicious code, resulting in security breaches impacting Citi customers. Furthermore, because financial institutions are becoming increasingly interconnected with central agents, exchanges and clearing houses, including as a result of the derivatives reforms over the last few years, Citi has increased exposure to cyber attacks through third parties. While many of Citi’s agreements with the third parties include indemnification provisions, Citi may not be able to recover sufficiently, or at all, under the provisions to adequately offset any losses Citi may incur from third-party cyber incidents.
Citi has been subject to intentional cyber incidents from external sources over the last several years, including (i) denial of service attacks, which attempted to interrupt service to clients and customers, (ii) data breaches, which obtained unauthorized access to customer account data and (iii) malicious software attacks on client systems, which attempted to allow unauthorized entrance to Citi’s systems under the guise of a client and the extraction of client data. While Citi’s monitoring and protection services were able to detect and respond to the incidents targeting its systems before they became significant, they still resulted in limited losses in some instances as well as increases in expenditures to monitor against the threat of similar future cyber incidents. There can be no assurance that such cyber incidents will not occur again, and they could occur more frequently and on a more significant scale.
Further, although Citi devotes significant resources to implement, maintain, monitor and regularly upgrade its systems and networks with measures such as intrusion detection and prevention and firewalls to safeguard critical business applications, there is no guarantee that these measures or any other measures can provide absolute security. Because the methods used to cause cyber attacks change frequently or, in some cases, are not recognized until launched
or even later, Citi may be unable to implement effective preventive measures or proactively address these methods until they are discovered. In addition, given the evolving nature of cyber threat actors and the frequency and sophistication of the cyber activities they carry out, the determination of the severity and potential impact of a cyber incident may not occur for a substantial period until after the incident has been discovered. Also, while Citi engages in

51


certain actions to reduce the exposure resulting from outsourcing, such as performing security control assessments of third-party vendors and limiting third-party access to the least privileged level necessary to perform job functions, these actions cannot prevent all third-party-related cyber attacks or data breaches.
Cyber incidents can result in the disclosure of personal, confidential or proprietary customer or client information, damage to Citi’s reputation with its clients and the market, customer dissatisfaction and additional costs to Citi, including expenses such as repairing systems, replacing customer payment cards, credit monitoring or adding new personnel or protection technologies. Regulatory penalties, loss of revenues, exposure to litigation and other financial losses, including loss of funds, to both Citi and its clients and customers and disruption to Citi’s operational systems could also result from cyber incidents (for additional information on the potential impact of operational disruptions, see the operational systems risk factor above). Moreover, the increasing risk of cyber incidents has resulted in increased legislative and regulatory scrutiny of firms’ cybersecurity protection services and calls for additional laws and regulations to further enhance protection of consumers’ personal data.
While Citi maintains insurance coverage that may, subject to policy terms and conditions including significant self-insured deductibles, cover certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses.
For additional information about Citi’s management of cybersecurity risk, see “Managing Global Risk—Operational Risk—Cybersecurity Risk” below.

Changes to or Incorrect Assumptions, Judgments or Estimates in Citi’s Financial Statements Could Cause Significant Unexpected Losses or Impacts in the Future.
U.S. GAAP requires Citi to use certain assumptions, judgments and estimates in preparing its financial statements, including the estimate of the allowance for credit losses, reserves related to litigation, regulatory and tax matters exposures, valuation of DTAs and the fair values of certain assets and liabilities, among other items. If Citi’s assumptions, judgments or estimates underlying its financial statements are incorrect or differ from actual or subsequent events, Citi could experience unexpected losses or other adverse impacts, some of which could be significant. For example, Citi has incurred losses related to its foreign operations that are reported in the foreign currency translation adjustment (CTA) components of Accumulated other comprehensive income (loss) (AOCI). In accordance with U.S. GAAP, a sale or substantial liquidation of any foreign operations, such as those related to Citi’s legacy businesses, would result in reclassification of any foreign CTA component of AOCI related to that foreign operation, including related hedges and taxes, into Citi’s earnings. For additional information on Citi’s accounting policy for foreign currency translation and its foreign CTA components of AOCI, see Notes 1 and 19 to the Consolidated Financial Statements.
In addition, changes to financial accounting or reporting standards or interpretations, whether promulgated or required
 
by the FASB or other regulators, could present operational challenges and could also require Citi to change certain of the assumptions or estimates it previously used in preparing its financial statements, which could negatively impact how it records and reports its financial condition and results of operations generally and/or with respect to particular businesses (see the changes to financial accounting and reporting standards risk factor below). For additional information on the key areas for which assumptions and estimates are used in preparing Citi’s financial statements, see “Significant Accounting Policies and Significant Estimates” below and Notes 1 and 27 to the Consolidated Financial Statements.

Changes to Financial Accounting and Reporting Standards or Interpretations Could Have a Material Impact on How Citi Records and Reports Its Financial Condition and Results of Operations.
Periodically, the Financial Accounting Standards Board (FASB) issues financial accounting and reporting standards that may govern key aspects of Citi’s financial statements or interpretations thereof when those standards become effective, including those areas where Citi is required to make assumptions or estimates. For example, the FASB’s new accounting standard on credit losses (CECL), which became effective for Citi on January 1, 2020, requires earlier recognition of credit losses on loans and held-to-maturity securities and other financial assets. The CECL methodology requires that lifetime “expected credit losses” be recorded at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The CECL methodology replaces the multiple existing impairment models under U.S. GAAP that generally required that a loss be “incurred” before it was recognized. The CECL methodology represents a significant change from existing GAAP and may result in material changes to Citi’s accounting for financial instruments. Citi’s ongoing estimates of its expected credit losses will depend upon its CECL models and assumptions, existing and forecasted macroeconomic conditions and the credit quality, composition and other characteristics of Citi’s loan and other applicable portfolios. These factors are likely to cause variability in Citi’s expected credit losses under CECL compared to previous GAAP and, thus, impact its results of operations and regulatory capital. For additional information on this and other accounting standards, including the expected impacts on Citi’s results of operations and financial condition, see Note 1 to the Consolidated Financial Statements.

Citi May Incur Significant Losses and Its Regulatory Capital and Capital Ratios Could Be Negatively Impacted if Its Risk Management Processes, Strategies or Models Are Deficient or Ineffective.
Citi utilizes a broad and diversified set of risk management and mitigation processes and strategies, including the use of risk models in analyzing and monitoring the various risks Citi
assumes in conducting its activities. For example, Citi uses models as part of its comprehensive stress testing initiatives across Citi. Citi also relies on data to aggregate, assess and

52


manage various risk exposures. Management of these risks is made even more challenging within a global financial institution such as Citi, particularly given the complex, diverse and rapidly changing financial markets and conditions in which Citi operates as well as that losses can occur from untimely, inaccurate or incomplete processes caused by unintentional human error.
These processes, strategies and models are inherently limited because they involve techniques, including the use of historical data in many circumstances, assumptions and judgments that cannot anticipate every economic and financial outcome in the markets in which Citi operates, nor can they anticipate the specifics and timing of such outcomes. Citi could incur significant losses, and its regulatory capital and capital ratios could be negatively impacted, if Citi’s risk management processes, including its ability to manage and aggregate data in a timely and accurate manner, strategies or models are deficient or ineffective. Such deficiencies or
ineffectiveness could also result in inaccurate financial, regulatory or risk reporting.
Moreover, Citi’s Basel III regulatory capital models, including its credit, market and operational risk models, currently remain subject to ongoing regulatory review and approval, which may result in refinements, modifications or enhancements (required or otherwise) to these models. Modifications or requirements resulting from these ongoing reviews, as well as any future changes or guidance provided by the U.S. banking agencies regarding the regulatory capital framework applicable to Citi, have resulted in, and could continue to result in, significant changes to Citi’s risk-weighted assets. These changes can negatively impact Citi’s capital ratios and its ability to achieve its regulatory capital requirements as it projects or as required.

CREDIT RISKS
Credit Risk and Concentrations of Risk Can Increase the Potential for Citi to Incur Significant Losses.
Credit risk arises from Citi’s lending and other businesses in both GCB and ICG. Citi has credit exposures to counterparties in the U.S. and various countries and jurisdictions globally, including end-of-period consumer loans of $310 billion and end-of-period corporate loans of $390 billion at year-end 2019. A default by a borrower or other counterparty, or a decline in the credit quality or value of any underlying collateral, exposes Citi to credit risk. Despite Citi’s target client strategy, various macroeconomic, geopolitical and other factors, among other things, can increase Citi’s credit risk and credit costs (for additional information, see the co-branding and private label credit card, macroeconomic challenges and uncertainties and emerging markets risk factors above).
While Citi provides reserves for expected losses for its credit exposures, such reserves are subject to judgments and estimates that could be incorrect or differ from actual future events. Under the new CECL accounting standard, the allowance for credit losses reflects expected losses, rather than incurred losses, which could lead to more volatility in the allowance and the provision for credit losses as forecasts of economic conditions change. In addition, Citi’s future allowance may be affected by seasonality of its cards
 
portfolios based on historical evidence showing that (i) credit card balances along with 30+ days past due balances increase during the third and fourth quarters each year as the holiday season approaches; and (ii) during the first and second quarters, borrowers use tax refunds to pay down balances while delinquent balances from the prior third and fourth quarters are charged off. For additional information, see the incorrect assumptions or estimates and changes to financial accounting and reporting standards risk factors above. For additional information on the impact of CECL, see Note 1 to the Consolidated Financial Statements. For additional information on Citi’s credit and country risk, see each respective business’s results of operations above and “Managing Global Risk—Credit Risk” and “Managing Global Risk—Strategic Risk—Country Risk” below and Note 14 to the Consolidated Financial Statements.
Concentrations of risk, particularly credit and market risks, can also increase Citi’s risk of significant losses. As of year-end 2019, Citi’s most significant concentration of credit
risk was with the U.S. government and its agencies, which primarily results from trading assets and investments issued by the U.S. government and its agencies (for additional information, including concentrations of credit risk to other public sector entities, see Note 23 to the Consolidated Financial Statements). In addition, Citi routinely executes a high volume of securities, trading, derivative and foreign exchange transactions with non-U.S. sovereigns and with counterparties in the financial services industry, including banks, insurance companies, investment banks, governments, central banks and other financial institutions. Moreover, Citi has indemnification obligations in connection with various transactions that expose it to concentrations of risk, including credit risk from hedging or reinsurance arrangements related to those obligations (for additional information about these exposures, see Note 26 to the Consolidated Financial Statements). A rapid deterioration of a large borrower or other counterparty or within a sector or country where Citi has large exposures or guarantees or unexpected market dislocations could cause Citi to incur significant losses.

LIQUIDITY RISKS
The Maintenance of Adequate Liquidity and Funding Depends on Numerous Factors, Including Those Outside of Citi’s Control, Such as Market Disruptions and Increases in
Citi’s Credit Spreads.
As a global financial institution, adequate liquidity and sources of funding are essential to Citi’s businesses. Citi’s liquidity and sources of funding can be significantly and negatively impacted by factors it cannot control, such as general disruptions in the financial markets, governmental
fiscal and monetary policies, regulatory changes or negative investor perceptions of Citi’s creditworthiness, unexpected increases in cash or collateral requirements and the inability to
monetize available liquidity resources. Citi competes with other banks and financial institutions for deposits, which represent Citi’s most stable and lowest cost of long-term funding. The competition for retail banking deposits has increased as a result of online banks and digital banking, among others. Furthermore, given the decline in interest rates,

53


a growing number of customers have transferred deposits to other products, including investments and interest-bearing accounts, and/or other financial institutions. This, along with slower growth in deposits, has resulted in a more challenging environment for Citi. For additional information on the impact of interest rates, see the macroeconomic challenges and uncertainties risk factor above.
Moreover, Citi’s costs to obtain and access secured funding and long-term unsecured funding are directly related to its credit spreads. Changes in credit spreads are driven by both external market factors and factors specific to Citi, and can be highly volatile. For additional information on Citi’s primary sources of funding, see “Managing Global Risk—Liquidity Risk” below.
Citi’s ability to obtain funding may be impaired if other market participants are seeking to access the markets at the same time, or if market appetite declines, as is likely to occur in a liquidity stress event or other market crisis. A sudden drop in market liquidity could also cause a temporary or lengthier dislocation of underwriting and capital markets activity. In addition, clearing organizations, central banks, clients and financial institutions with which Citi interacts may exercise the right to require additional collateral based on their perceptions or the market conditions, which could further impair Citi’s access to and cost of funding.
As a holding company, Citi relies on interest, dividends, distributions and other payments from its subsidiaries to fund dividends as well as to satisfy its debt and other obligations. Several of Citi’s U.S. and non-U.S. subsidiaries are or may be subject to capital adequacy or other regulatory or contractual restrictions on their ability to provide such payments, including any local regulatory stress test requirements. Limitations on the payments that Citi receives from its subsidiaries could also impact its liquidity.

The Credit Rating Agencies Continuously Review the Credit Ratings of Citi and Certain of Its Subsidiaries, and a Ratings Downgrade Could Have a Negative Impact on Citi’s Funding and Liquidity Due to Reduced Funding Capacity and Increased Funding Costs, Including Derivatives Triggers That Could Require Cash Obligations or Collateral Requirements.
The credit rating agencies, such as Fitch, Moody’s and S&P, continuously evaluate Citi and certain of its subsidiaries. Their ratings of Citi and its more significant subsidiaries’ long-term/senior debt and short-term/commercial paper are based on a number of factors, including standalone financial strength, as well as factors that are not entirely within the control of Citi and its subsidiaries, such as the agencies’ proprietary rating methodologies and assumptions, and conditions affecting the financial services industry and markets generally.
Citi and its subsidiaries may not be able to maintain their current respective ratings. A ratings downgrade could negatively impact Citi’s ability to access the capital markets and other sources of funds as well as the costs of those funds, and its ability to maintain certain deposits. A ratings downgrade could also have a negative impact on Citi’s funding and liquidity due to reduced funding capacity and the impact from derivative triggers, which could require Citi to
 
meet cash obligations and collateral requirements. In addition, a ratings downgrade could have a negative impact on other funding sources such as secured financing and other margined transactions for which there may be no explicit triggers, and on contractual provisions and other credit requirements of Citi’s counterparties and clients that may contain minimum ratings thresholds in order for Citi to hold third-party funds. Some entities could have ratings limitations on their permissible counterparties, of which Citi may or may not be aware.
Furthermore, a credit ratings downgrade could have impacts that may not be currently known to Citi or are not possible to quantify. Certain of Citi’s corporate customers and trading counterparties, among other clients, could re-evaluate their business relationships with Citi and limit the trading of certain contracts or market instruments with Citi in response to ratings downgrades. Changes in customer and counterparty behavior could impact not only Citi’s funding and liquidity but also the results of operations of certain Citi businesses. For additional information on the potential impact of a reduction in Citi’s or Citibank’s credit ratings, see “Managing Global Risk—Liquidity Risk” below.

COMPLIANCE RISKS

Ongoing Interpretation and Implementation of Regulatory and Legislative Requirements and Changes in the U.S. and Globally Have Increased Citi’s Compliance and Other Risks and Costs.
Citi is continually required to interpret and implement extensive and frequently changing regulatory and legislative requirements, resulting in substantial compliance, regulatory and other risks and costs. In addition, there are heightened regulatory scrutiny and expectations in the U.S. and globally for large financial institutions, as well as their employees and agents, with respect to, among other things, governance, risk management practices and controls. A failure to comply with these requirements and expectations or resolve any identified deficiencies could result in increased regulatory oversight and restrictions.
Over the past several years, Citi has been required to implement a significant number of regulatory and legislative changes across all of its businesses and functions, and these changes continue. The changes themselves may be complex and subject to interpretation, and will require continued investments in Citi’s global operations and technology solutions. In some cases, Citi’s implementation of a regulatory or legislative requirement is occurring simultaneously with changing or conflicting regulatory guidance, legal challenges or legislative action to modify or repeal existing rules or enact new rules. Moreover, in some cases, there have been entirely new regulatory or legislative requirements or regimes, resulting in large volumes of regulation and potential uncertainty regarding regulatory expectations as to what is required in order to be in compliance.
Examples of regulatory or legislative changes that have resulted in increased compliance risks and costs include (i) a proliferation of laws relating to the limitation of cross-border data movement and/or collection and use of customer

54


information, including data localization and protection and privacy laws, which also can conflict with or increase compliance complexity with respect to other laws, including anti-money laundering laws; and (ii) the FRB’s “total loss absorbing capacity” (TLAC) requirements, including, among other things, consequences of a breach of the clean holding company requirements, given there are no cure periods for the requirements.
Increased and ongoing compliance requirements and uncertainties have resulted in higher costs for Citi. For example, Citi employed roughly 30,000 risk, regulatory and compliance staff as of year-end 2019, out of a total employee population of 200,000, compared to approximately 14,000 as of year-end 2008 with a total employee population of 323,000. These higher compliance costs can require management to incur additional expense, including potentially away from ongoing business investment initiatives.
Extensive and changing compliance requirements can also result in increased reputational and legal risks for Citi, as failure to comply with regulations and requirements, or failure to comply with regulatory expectations, can result in enforcement and/or regulatory proceedings (for additional discussion, see the legal and regulatory proceedings risk factor below).

Citi Is Subject to Extensive Legal and Regulatory Proceedings, Examinations, Investigations and Inquiries That Could Result in Significant Penalties and Other Negative Impacts on Citi, Its Businesses and Results of Operations.
At any given time, Citi is defending a significant number of legal and regulatory proceedings and is subject to numerous governmental and regulatory examinations, investigations and other inquiries. The global judicial, regulatory and political environment has generally been challenging for large financial institutions. The complexity of the federal and state regulatory
and enforcement regimes in the U.S., coupled with the global scope of Citi’s operations, also means that a single event or issue may give rise to a large number of overlapping investigations and regulatory proceedings, either by multiple federal and state agencies and authorities in the U.S. or by multiple regulators and other governmental entities in different jurisdictions, as well as multiple civil litigation claims in multiple jurisdictions. Citi can be subject to enforcement proceedings not only because of violations of law and regulation, but also due to a failure, as determined by its regulators, to have adequate policies and procedures, or to remedy deficiencies on a timely basis.
U.S. and non-U.S. regulators have been increasingly focused on “conduct risk,” a term used to describe the risks associated with behavior by employees and agents, including third parties, that could harm clients, customers or the integrity of the markets, such as improperly creating, selling, marketing or managing products and services or improper incentive compensation programs with respect thereto, failures to safeguard a party’s personal information, or failures to identify and manage conflicts of interest. In addition to the greater focus on conduct risk, the heightened scrutiny and expectations generally from regulators could lead to
 
investigations and other inquiries, as well as remediation requirements, more regulatory or other enforcement proceedings, civil litigation and higher compliance and other risks and costs.
Further, while Citi takes numerous steps to prevent and detect conduct by employees and agents that could potentially harm clients, customers or the integrity of the markets, such behavior may not always be deterred or prevented. Banking regulators have also focused on the overall culture of financial services firms, including Citi. In addition to regulatory restrictions or structural changes that could result from perceived deficiencies in Citi’s culture, such focus could also lead to additional regulatory proceedings.
In addition, the severity of the remedies sought in legal and regulatory proceedings to which Citi is subject has remained elevated. U.S. and certain international governmental entities have increasingly brought criminal actions against, or have sought criminal convictions from,
financial institutions and individual employees, and criminal prosecutors in the U.S. have increasingly sought and obtained criminal guilty pleas or deferred prosecution agreements against corporate entities and individuals and other criminal sanctions from those institutions and individuals. These types of actions by U.S. and international governmental entities may, in the future, have significant collateral consequences for a financial institution, including loss of customers and business, and the inability to offer certain products or services and/or operate certain businesses. Citi may be required to accept or be subject to similar types of criminal remedies, consent orders, sanctions, substantial fines and penalties, remediation and other financial costs or other requirements in the future, including for matters or practices not yet known to Citi, any of which could materially and negatively affect Citi’s businesses, business practices, financial condition or results of operations, require material changes in Citi’s operations or cause Citi reputational harm.
Further, many large claims—both private civil and regulatory—asserted against Citi are highly complex, slow to develop and may involve novel or untested legal theories. The outcome of such proceedings is difficult to predict or estimate until late in the proceedings. Although Citi establishes accruals for its legal and regulatory matters according to accounting requirements, Citi’s estimates of, and changes to, these accruals involve significant judgment and may be subject to significant uncertainty, and the amount of loss ultimately incurred in relation to those matters may be substantially higher than the amounts accrued. In addition, certain settlements are subject to court approval and may not be approved.
For additional information relating to Citi’s legal and regulatory proceedings and matters, including Citi’s policies on establishing legal accruals, see Note 27 to the Consolidated Financial Statements.





55


















 





























This page intentionally left blank.






56


Managing Global Risk Table of Contents

MANAGING GLOBAL RISK 
   Overview 
CREDIT RISK(1)
 
   Overview 
   Consumer Credit 
   Corporate Credit 
   Additional Consumer and Corporate Credit Details 
       Loans Outstanding 
       Details of Credit Loss Experience 
       Allowance for Loan Losses 75
       Non-Accrual Loans and Assets and Renegotiated Loans 
       Forgone Interest Revenue on Loans 79
LIQUIDITY RISK 
    Overview 
    Liquidity Monitoring and Measurement 
    High-Quality Liquid Assets (HQLA) 81
    Loans 82
    Deposits 82
    Long-Term Debt 83
    Secured Funding Transactions and Short-Term Borrowings 86
    Credit Ratings 88
MARKET RISK(1)
 
   Overview 
   Market Risk of Non-Trading Portfolios 
        Net Interest Revenue at Risk 
        Interest Rate Risk of Investment Portfolios—Impact on AOCI 
 
        Changes in Foreign Exchange Rates—Impacts on AOCI and Capital
 92
        Interest Revenue/Expense and Net Interest Margin (NIM) 
        Additional Interest Rate Details 95
   Market Risk of Trading Portfolios 
        Factor Sensitivities 100
        Value at Risk (VAR) 100
        Stress Testing 103
OPERATIONAL RISK 
  Overview 
  Cybersecurity Risk 
COMPLIANCE RISK 
REPUTATION RISK 
STRATEGIC RISK 
   Overview 
   Exit of U.K. from EU 
   LIBOR Transition Risk 
   Country Risk 
       Top 25 Country Exposures 
        Argentina 
       FFIEC—Cross-Border Claims on Third Parties and Local Country Assets 

(1)For additional information regarding certain credit risk, market risk and other quantitative and qualitative information, refer to Citi’s Pillar 3 Basel III Advanced Approaches Disclosures, as required by the rules of the Federal Reserve Board, on Citi’s Investor Relations website.

57


MANAGING GLOBAL RISK

Overview
For Citi, effective risk management is of primary importance to its overall operations. Accordingly, Citi’s risk management process has been designed to monitor, evaluate and manage the principal risks it assumes in conducting its activities. Specifically, the activities that Citi engages in, and the risks those activities generate, must be consistent with Citi’s mission and value proposition, the key principles that guide it and Citi's risk appetite.
Risk management must be built on a foundation of ethical culture. Under Citi’s mission and value proposition, which was developed by its senior leadership and distributed throughout the Company, Citi strives to serve its clients as a trusted partner by responsibly providing financial services that enable growth and economic progress while earning and maintaining the public’s trust by constantly adhering to the highest ethical standards. As such, Citi asks all employees to ensure that their decisions pass three tests: they are in Citi’s clients’ interests, create economic value and are always systemically responsible. In addition, Citi evaluates employees’ performance against behavioral expectations set out in Citi’s leadership standards, which were designed in part to effectuate Citi’s mission and value proposition. Other culture-related efforts in connection with conduct risk, ethics and leadership, escalation and treating customers fairly help Citi to execute its mission and value proposition.
Citi’s Company-wide risk governance framework consists of the key policies, standards and processes through which Citi identifies, assesses, measures, monitors and controls risks across the Company. It also emphasizes Citi’s risk culture and lays out standards, procedures and programs that are designed to set, reinforce and enhance the Company’s risk culture, integrate its values and conduct expectations into the organization, providing employees with tools to assist them with making prudent and ethical risk decisions and to escalate issues appropriately.
Citi selectively takes risks in support of its underlying customer-centric strategy. Citi’s objective is to ensure that those risks are consistent with its mission and value proposition and principle of responsible finance; that they are identified, assessed, measured, monitored and controlled; and that they are captured in Citi’s risk/reward assessment.
Citi’s risk appetite framework, which is approved by the Citigroup Board of Directors, includes both a risk appetite statement, which articulates the aggregate level and types of risk that Citi is willing to accept in order to achieve its business objectives, as well as the overall approach through which risk appetite is established, communicated and monitored. It is built on quantitative boundaries, which include risk limits or thresholds, and on qualitative principles to guide behavior. Citi’s risk appetite framework is comprehensive, incorporating all risks, enterprise-wide and applicable across products, functions and geographies.

 
Citi’s risks are generally categorized and summarized as follows:

Credit risk is the risk of loss resulting from the decline in credit quality or the failure of a borrower, counterparty, third party or issuer to honor its financial or contractual obligations.
Liquidity risk is the risk that the Company will not be able to efficiently meet both expected and unexpected current and future cash flow and collateral needs without adversely affecting either daily operations or financial conditions of the Company. The risk may be exacerbated by the inability of the Company to access funding sources or monetize assets and the composition of liability funding and liquid assets.
Market risk (including price risk and interest rate risk) is the risk of loss arising from changes in the value of Citi’s assets and liabilities resulting from changes in market variables, such as interest rates, exchange rates or credit spreads. Losses can be exacerbated by the negative convexity of positions, as well as the presence of basis or correlation risks.
Operational risk is the risk of loss resulting from inadequate or failed internal processes, systems, human factors or from external events. It includes the reputation and franchise risk impact associated with business practices or market conduct in which Citi is involved. It also includes the risk of failing to comply with applicable laws and regulations, but excludes strategic risk (see below).
Compliance risk is the risk to current or projected financial conditions and resilience arising from violations of laws, rules or regulations, or from nonconformance with prescribed practices, internal policies and procedures or ethical standards. It also includes the exposure to litigation (known as legal risk) from all aspects of banking, traditional and nontraditional. Compliance risk spans across all risk types outlined in the risk governance framework.
Reputation risk is the risk to current or projected financial conditions and resilience arising from negative public opinion.
Strategic risk is the risk to current or anticipated earnings, capital, or franchise or enterprise value arising from poor but authorized business decisions (in compliance with regulations, policies and procedures), an inability to adapt to changes in the operating environment or other external factors that may impair the ability to carry out a business strategy. Strategic risk also includes:

Country risk, which is the risk that an event in a country (precipitated by developments within or external to a country) will impair the value of Citi’s franchise or will adversely affect the ability of obligors within that country to honor their obligations. Country risk events may include sovereign defaults, banking crises, currency crises, currency convertibility and/or transferability restrictions or political events.


58


Citi manages its risks through a “three lines of defense” model: (i) business management; (ii) Independent Risk Management and Independent Compliance Risk Management and other control functions; and (iii) Internal Audit. The three lines of defense collaborate with each other in structured forums and processes to bring together various perspectives and to lead the organization toward outcomes that are in clients’ interests, that create economic value and that are systemically responsible.

First Line of Defense: Business Management
Through Citi’s business management (“frontline units” or the “first line of defense”), each business owns the risks inherent in or arising from its businesses, and is responsible for identifying, assessing and controlling those risks to ensure they are within risk appetite, establishing and operating controls to mitigate those risks, including concentration risks, performing manager assessments of the design and effectiveness of internal controls, implementing appropriate procedures to fulfill its risk governance responsibilities and promoting a culture of compliance and control.
The first line of defense is composed of Citi’s businesses (Institutional Clients Group (ICG) and Global Consumer Bank (GCB)), supporting clients globally as well as in regions and countries that execute Citi’s strategy locally. In addition, there are functional teams, such as Enterprise Infrastructure, Operations and Technology (EIO&T) that support the Citi CEO in a first line capacity. The CEOs of each region, business, EIO&T and certain functional teams report to the Citigroup CEO.
Businesses at Citi organize and chair committees, councils, steering groups and other forums that cover risk considerations with participation from Independent Risk Management, Independent Compliance Risk Management and other control functions. These are often conducted across lines of defense and may include matters related to capital, assets and liabilities, business practices, business risks and controls, mergers and acquisitions, the Community Reinvestment Act and fair lending and incentives.

Second Line of Defense: Independent Risk Management; Control Functions
Citi’s Independent Risk Management (IRM) and Independent Compliance Risk Management (ICRM) together with other control functions (Finance, Human Resources, Legal) set standards that Citi and its businesses and products are required to adhere to in order to manage and oversee risks, including conformance with applicable laws, regulatory requirements, policies and other relevant standards of ethical conduct. IRM and ICRM provide credible challenge to first line units in their assessment and management of risk. In addition, among other responsibilities, IRM, ICRM and the control functions provide advice and training to Citi’s businesses and establish tools, methodologies, processes and oversight of controls used by the businesses to foster a culture of compliance and control. Where certain activities of control functions constitute first line activity, such activities are subject to appropriate review and challenge.

 

Independent Risk Management
The Independent Risk Management organization sets standards for the business and actively manages and oversees aggregate credit, market (price, FX and interest rate), liquidity, strategic, operational, compliance and reputation risks across the Company, including risks that span categories, such as concentration risk.
Independent Risk Management is organized to align to businesses, regions, risk types and to Citi-wide, cross-risk functions or processes. There are teams that report to an independent Chief Risk Officer (CRO) for Citi’s businesses (business CROs) and regions (regional CROs). In addition, there are teams that report to the heads for certain risk categories (e.g., Global Market Risk) and for certain foundational risk areas (e.g., Global Risk Review). All of the risk heads, together with the business and regional CROs, report to the Citigroup CRO.
The head of Independent Risk Management is the Citigroup CRO, who reports directly to the Citigroup CEO and to the Citigroup Risk Management Committee (RMC) of the Board of Directors. As part of its responsibilities, the RMC approves the appointment and removal of the CRO. The CRO has regular and unrestricted access to the full Citigroup Board, as well as the Risk Management Committee of the Board, to discuss risks and issues identified through Independent Risk Management’s activities, including instances in which the CRO’s assessment differs from that of the business or the CEO, and instances in which the business or the CEO may not be adhering to the risk governance framework.

Independent Compliance Risk Management
The Independent Compliance Risk Management organization is an independent risk management function that is designed to oversee and credibly challenge products, functions, jurisdictional activities and legal entities in managing compliance risk, as well as promoting business conduct and activity that is consistent with Citi’s mission and value proposition and the compliance risk appetite. Citi’s objective is to embed an enterprise-wide compliance risk management framework and culture that identifies, escalates, measures, monitors, reports and controls compliance risk across the three lines of defense. For further information on Citi’s compliance risk framework, see “Compliance Risk” below.
The Citigroup Chief Compliance Officer reports to the Citigroup CEO and has regular and unrestricted access to committees of the Citigroup and Citibank Boards of Directors, including the Audit Committees, Risk Management Committees and the Ethics, Conduct and Culture Committee of the Citigroup Board.

Human Resources
Human Resources (HR) provides leadership with respect to Citi’s human capital strategy, which is primarily focused on ensuring employees are appropriately rewarded for demonstrating Citi values and leadership standards and for maintaining a pipeline of new and developing talent to meet Citi’s changing business needs.

59


HR is primarily composed of and organized around the core global disciplines of compensation and benefits, performance management, talent acquisition, talent and diversity and workforce relations, with consideration for support to Citi businesses, products and functions and second line of defense responsibilities. Through its disciplines, HR advises business management, escalates identified risks and establishes policies, standards or processes to manage risk.
The Head of HR reports to the Citigroup CEO and interacts regularly with the Personnel and Compensation Committee of the Citigroup Board of Directors. In addition, the Head of HR has regular and unrestricted access to the full Citigroup Board of Directors, as well as to the Audit Committee of the Board of Directors.

Legal
Citi Legal is responsible for advising Citi’s lines of business and control functions in order to facilitate the prudent management of Citi’s exposure to legal risk.
Citi Legal’s organizational structure is designed to insulate it from potential conflicts of interest that could undermine its role in providing advice in regard to legal obligations and exposures of Citi.
Activities within Citi Legal include providing legal advice to Citi’s businesses and other functions on the interpretation of legal and regulatory requirements, including contractual requirements, and on managing and mitigating legal exposure based on a proper understanding of legal requirements; providing legal advice to promote the reporting of Citi’s and its subsidiaries obligations to identify legal matters to regulators and investors, as required by law; helping to identify current and emerging legal risks that arise in the context of Citi’s provision of products and services to its clients; attending meetings of the Board of Directors and committees of the Board to facilitate the oversight role of these bodies; and participating in management committees and forums where legal risk should be considered and evaluated.
The General Counsel leads Citi Legal and reports directly to the Citigroup CEO. The General Counsel meets regularly with the Board of Directors, the Audit Committee, the Risk Management Committee, the Ethics, Conduct and Culture Committee and the Nomination, Governance and Public Affairs Committee and is involved in the discussion of legal issues that arise in the context of items being presented to the Board and its committees.

Finance
Finance’s mission is to serve as an advisor to the business, delivering timely, accurate and complete information to each of its constituencies, accompanied by insightful analytics, and operating in a cost-efficient manner with highly effective controls.
The Finance organization, led by the Chief Financial Officer (CFO), is composed of a set of core, global disciplines (capital planning, controllers, corporate M&A, corporate
 
treasury, financial planning and analysis, investor relations and tax). Through the disciplines, Finance advises business management, escalates identified risks and establishes policies, standards or processes to manage risk. Also reporting to the Citigroup CFO are a set of product, geographical and legal entity Finance Officers who, along with their teams, interact with the global finance disciplines in the execution of their responsibilities.
Citi’s CFO reports directly to the Citigroup CEO. The CFO chairs or co-chairs several management committees that serve as key governance and oversight forums for business activities. In addition, the CFO has regular and unrestricted access to the full Citigroup Board of Directors as well as to the Audit Committee of the Board of Directors.

Third Line of Defense: Internal Audit
The role of Internal Audit is to provide independent and timely assurance to the Citigroup and Citibank Boards, the Audit Committees of the Boards, senior management and regulators regarding the effectiveness of governance, risk management and controls that mitigate current and evolving risks and enhance the control culture within Citi.
The Internal Audit function has designated Chief Auditors responsible for assessing the design and effectiveness of controls within the various business units, functions, geographies and legal entities in which Citi operates, including specific Chief Auditors for Finance, ICRM and Independent Risk Management.
The Citigroup Chief Auditor manages Internal Audit and reports functionally to the Chair of the Citigroup Audit Committee and administratively to the CEO of Citigroup. Internal Audit’s responsibilities are carried out independently under the oversight of the Audit Committees, and Internal Audit employees accordingly report to the Citigroup Chief Auditor and do not have reporting lines to either first or second line of defense management.

Citigroup Board of Directors and Committees of the Board
Citigroup’s Board of Directors actively oversees Citi’s risk-taking activities and holds management accountable for adhering to the risk governance framework. Directors review reports prepared by and receive presentations from management, and exercise independent judgment to question, probe and challenge recommendations of and decisions made by management.
The standing committees of the Citigroup Board of Directors are the Executive Committee, Risk Management Committee, Audit Committee, Personnel and Compensation Committee, Ethics, Conduct and Culture Committee, Operations and Technology Committee and Nomination, Governance and Public Affairs Committee. In addition to the standing committees, the Board establishes additional committees as necessary or appropriate in response to regulatory, legal or other requirements.





 


60


CREDIT RISK

Overview
Credit risk is the risk of loss resulting from the decline in credit quality or the failure of a borrower, counterparty, third party or issuer to honor its financial or contractual obligations. Credit risk arises in many of Citigroup’s business activities, including:

consumer, commercial and corporate lending;
capital markets derivative transactions;
structured finance; and
securities financing transactions (repurchase and reverse repurchase agreements, and securities loaned and borrowed).

Credit risk also arises from settlement and clearing activities, when Citi transfers an asset in advance of receiving its counter-value or advances funds to settle a transaction on behalf of a client. Concentration risk, within credit risk, is the risk associated with having credit exposure concentrated within a specific client, industry, region or other category.
Credit risk is one of the most significant risks Citi faces as an institution. For additional information, see “Risk Factors—Credit Risk” above. As a result, Citi has a well-established framework in place for managing credit risk across all businesses. This includes a defined risk appetite, credit limits and credit policies, both at the business level as well as at the Company-wide level. Citi’s credit risk management also includes processes and policies with respect to problem recognition, including “watch lists,” portfolio reviews, stress tests, updated risk ratings and classification triggers.
With respect to Citi’s settlement and clearing activities, intraday client usage of lines is monitored against limits, as well as against usage patterns. To the extent that a problem develops, Citi typically moves the client to a secured (collateralized) operating model. Generally, Citi’s intraday settlement and clearing lines are uncommitted and cancelable at any time.
To manage concentration of risk within credit risk, Citi has in place a correlation framework consisting of industry limits, an idiosyncratic framework consisting of single name concentrations for each business and across Citigroup and a specialized framework consisting of product limits.
Credit exposures are generally reported in notional terms for accrual loans, reflecting the value at which the loans as well as loan and other off-balance sheet commitments are carried on the Consolidated Balance Sheet. Credit exposure arising from capital markets activities is generally expressed as the current mark-to-market, net of margin, reflecting the net value owed to Citi by a given counterparty.
The credit risk associated with these credit exposures is a function of the idiosyncratic creditworthiness of the obligor, as well as the terms and conditions of the specific obligation. Citi assesses the credit risk associated with its credit exposures on a regular basis through its loan loss reserve process (see “Significant Accounting Policies and Significant Estimates—Allowance for Credit Losses” below and Notes 1 and 15 to the Consolidated Financial Statements), as well as through regular
 
stress testing at the company, business, geography and product levels. These stress-testing processes typically estimate potential incremental credit costs that would occur as a result of either downgrades in the credit quality or defaults of the obligors or counterparties.
For additional information on Citi’s credit risk management, see Note 14 to the Consolidated Financial Statements.


61


CONSUMER CREDIT
Citi provides traditional retail banking, including small business banking, and credit card products in 19 countries and jurisdictions through North America GCB, Latin America GCB and Asia GCB. The retail banking products include consumer mortgages, home equity, personal and small business loans and lines of credit and similar related products with a focus on lending to prime customers. Citi uses its risk appetite framework to define its lending parameters. In addition, Citi uses proprietary scoring models for new customer approvals.
As stated in “Global Consumer Banking” above, GCB’s overall strategy is to leverage Citi’s global footprint and be the pre-eminent bank for the affluent and emerging affluent consumers in large urban centers. In credit cards and in certain retail markets, Citi serves customers in a somewhat broader set of segments and geographies. As of the fourth quarter of 2019, Citi’s commercial banking businesses previously reported as part of GCB in North America, Latin America and Asia, including approximately $28 billion in end-of-period loans, are now reported in ICG for all periods presented.    

Consumer Credit Portfolio
The following table shows Citi’s quarterly end-of-period consumer loans:(1) 
In billions of dollars4Q’181Q’192Q’193Q’194Q’19
Retail banking:     
Mortgages$80.6
$80.8
$81.9
$83.0
$85.1
Personal, small business and other37.0
37.3
37.8
37.6
39.7
Total retail banking$117.6
$118.1
$119.7
$120.6
$124.8
Cards:     
Citi-branded cards$116.8
$111.4
$115.5
$115.8
$122.2
Citi retail services52.7
48.9
49.6
50.0
52.9
Total cards$169.5
$160.3
$165.1
$165.8
$175.1
Total GCB
$287.1
$278.4
$284.8
$286.4
$299.9
GCB regional distribution:
     
North America67%66%66%66%66%
Latin America6
6
6
6
6
Asia(2)
27
28
28
28
28
Total GCB
100%100%100%100%100%
Corporate/Other(3)
$15.3
$12.6
$11.7
$11.0
$9.6
Total consumer loans$302.4
$291.0
$296.5
$297.4
$309.5

(1)End-of-period loans include interest and fees on credit cards.
(2)
Asia includes loans and leases in certain EMEA countries for all periods presented.
(3)
Primarily consists of legacy assets, principally North America consumer mortgages.

For information on changes to Citi’s end-of-period consumer loans, see “Liquidity Risk—Loans” below.




62


Overall Consumer Credit Trends
The following charts show the quarterly trends in delinquencies (90+ days past due (90+ DPD) ratio) and the net credit losses (NCL) ratio across both retail banking and cards for total GCB and by region.

Global Consumer Banking
legenda75.jpg
cctglobalvf.jpg
North America GCB
legenda75.jpg
cctnav3.jpg

North America GCB provides mortgage, home equity, small business and personal loans through Citi’s retail banking network and card products through Citi-branded cards and Citi retail services businesses. The retail bank is concentrated in six major metropolitan cities in the United States (for additional information on the U.S. retail bank, see “North America GCB” above).
As of December 31, 2019, approximately 75% of North America GCB consumer loans consisted of Citi-branded and Citi retail services cards, which generally drives the overall credit performance of North America GCB (for additional information on North America GCB’s cards portfolios, including delinquency and net credit loss rates, see “Credit Card Trends” below).
As shown in the chart above, the net credit loss rate in North America GCB increased quarter-over-quarter, primarily driven by seasonality in Citi retail services portfolios. The 90+ days past due delinquency rate also increased quarter-over-quarter, primarily due to seasonality in the cards portfolios.
The net credit loss rate and 90+ days past due delinquency rate increased year-over-year, primarily driven by seasoning of more recent vintages in Citi-branded cards and an increase in net flow rates in later delinquency buckets in Citi retail services.


 
Latin America GCB
legenda75.jpg
cctlatamv3.jpg

Latin America GCB operates in Mexico through
Citibanamex, one of Mexico’s largest banks, and provides
credit cards, consumer mortgages and small business and personal loans. Latin America GCB serves a more mass-market segment in Mexico and focuses on developing multi-product relationships with customers.
As shown in the chart above, the net credit loss rate in Latin America GCB decreased quarter-over-quarter, primarily due to seasonality in the cards portfolio, while the 90+ days past due delinquency rate remained broadly stable.
The net credit loss and 90+ days past due rate decreased year-over-year, primarily due to the growth in recent vintages for cards as well as a slower pace of acquisitions in the retail portfolios during 2019.

Asia(1) GCB 
legenda75.jpgcctasiav4a03.jpg

(1)
Asia includes GCB activities in certain EMEA countries for all periods presented.

Asia GCB operates in 17 countries in Asia and EMEA
and provides credit cards, consumer mortgages and small business and personal loans.
As shown in the chart above, the net credit loss rate in Asia GCB decreased quarter-over-quarter, primarily due to seasonality, while the 90+ days past due delinquency rate remained broadly stable quarter-over-quarter. Year-over-year, the net credit loss and the 90+ days past due delinquency rate remained broadly stable.
The stability in Asia GCB’s portfolios reflects the strong credit profiles in the region’s target customer segments. Regulatory changes in many markets in Asia over the past few years have also resulted in stable portfolio credit quality.
For additional information on cost of credit, loan delinquency and other information for Citi’s consumer loan portfolios, see each respective business’s results of operations above and Note 14 to the Consolidated Financial Statements.

63


Credit Card Trends
The following charts show the quarterly trends in delinquencies and net credit losses for total GCB cards, North America Citi-branded cards and Citi retail services portfolios, as well as for Citi’s Latin America and Asia Citi-branded cards portfolios.

Global Cards
legenda75.jpg
ccglobalcardsv2.jpg

North America Citi-Branded Cards
legenda75.jpg
ccnacardsv4.jpg


North America GCB’s Citi-branded cards portfolio issues proprietary and co-branded cards. As shown in the chart above, the net credit loss rate in North America Citi-branded cards was relatively stable quarter-over-quarter, while the 90+ days past due delinquency rate increased, driven by seasonality.
The net credit loss and 90+ days past due delinquency rate increased year-over-year, primarily driven by seasoning of more recent vintages.






 
North America Citi Retail Services
legenda75.jpg
ccnaretailv2.jpg

Citi retail services partners directly with more than 20 retailers and dealers to offer private label and co-branded cards. Citi retail services’ target market is focused on select industry segments such as home improvement, specialty retail, consumer electronics and fuel.
Citi retail services continually evaluates opportunities to add partners within target industries that have strong loyalty, lending or payment programs and growth potential.
As shown in the chart above, the net credit loss and 90+ days past due delinquency rate in Citi retail services increased quarter-over-quarter, primarily due to seasonality.
The net credit loss rate and 90+ days past due delinquency rate increased year-over-year, primarily driven by an increase in net flow rates in later delinquency buckets.

Latin America Citi-Branded Cards
legenda75.jpg
cclatamcardsv2.jpg

Latin America GCB issues proprietary and co-branded cards. As shown in the chart above, the net credit loss rate in Latin America Citi-branded cards decreased quarter-over-quarter, primarily due to seasonality, while the 90+ days past due delinquency rate remained stable.
The net credit loss and 90+ days past due delinquency rate decreased year-over-year, primarily due to growth in recent vintages.


64


Asia Citi-Branded Cards(1)
legenda75.jpg
ccasiacardsv3a01.jpg

(1)
Asia includes loans and leases in certain EMEA countries for all periods presented.

Asia GCB issues proprietary and co-branded cards.
As set forth in the chart above, the net credit loss rate in Asia Citi-branded cards decreased quarter-over-quarter, primarily due to seasonality, while the 90+ days past due delinquency rate remained broadly stable.
Year-over-year, the net credit loss rate and 90+ days past due delinquency rate remained broadly stable.
For additional information on cost of credit, delinquency and other information for Citi’s cards portfolios, see each respective business’s results of operations above and Note 13 to the Consolidated Financial Statements.


 
North America Cards FICO Distribution
The following tables show the current FICO score distributions for Citi’s North America cards portfolios based on end-of-period receivables. FICO scores are updated monthly for substantially all of the portfolio and on a quarterly basis for the remaining portfolio.

Citi-Branded Cards
FICO distribution(1)
Dec 31, 2019Sept. 30, 2019Dec 31, 2018
  > 76042%41%42%
   680–76041
41
41
  < 68017
18
17
Total100%100%100%


Citi Retail Services
FICO distribution(1)
Dec 31, 2019Sept. 30, 2019Dec 31, 2018
   > 76025%24%25%
   680–76042
43
42
  < 68033
33
33
Total100%100%100%

(1)The FICO bands in the tables are consistent with general industry peer presentations.

Both the Citi-branded cards’ and Citi retail services’ cards FICO distributions remained stable as of year-end 2019.
For additional information on FICO scores, see Note 14 to the Consolidated Financial Statements.




65


Additional Consumer Credit Details

Consumer Loan Delinquencies and Ratios
 
EOP
loans(1)
90+ days past due(2)
30–89 days past due(2)
 December 31,December 31,December 31,
In millions of dollars, except EOP loan amounts in billions2019201920182017201920182017
Global Consumer Banking(3)(4)
       
Total$299.9
$2,737
$2,550
$2,378
$3,001
$2,864
$2,687
Ratio 0.91%0.89%0.84%1.00%1.00%0.95%
Retail banking       
Total$124.8
$438
$416
$415
$816
$752
$747
Ratio 0.35%0.36%0.35%0.66%0.64%0.64%
North America50.3
146
135
134
334
265
256
Ratio 0.29%0.29%0.29%0.67%0.56%0.55%
Latin America11.7
106
108
112
180
185
181
Ratio 0.91%0.95%0.96%1.54%1.62%1.55%
Asia(5)
62.8
186
173
169
302
302
310
Ratio 0.30%0.30%0.29%0.48%0.52%0.52%
Cards       
Total$175.1
$2,299
$2,134
$1,963
$2,185
$2,112
$1,940
Ratio 1.31%1.26%1.19%1.25%1.25%1.18%
North America—Citi-branded
96.3
915
812
768
814
755
698
Ratio 0.95%0.88%0.85%0.85%0.82%0.77%
North America—Citi retail services
52.9
1,012
952
845
945
932
830
Ratio 1.91%1.81%1.72%1.79%1.77%1.69%
Latin America6.0
165
171
151
159
170
153
Ratio 2.75%3.00%2.80%2.65%2.98%2.83%
Asia(5)
19.9
207
199
199
267
255
259
Ratio 1.04%1.03%1.01%1.34%1.32%1.31%
Corporate/Other—Consumer(6)
       
Total$9.6
$278
$382
$557
$295
$362
$542
Ratio 3.02%2.63%2.58%3.21%2.50%2.51%
Total Citigroup$309.5
$3,015
$2,932
$2,935
$3,296
$3,226
$3,229
Ratio 0.98%0.97%0.91%1.07%1.07%1.06%
(1)End-of-period (EOP) loans include interest and fees on credit cards.
(2)The ratios of 90+ days past due and 30–89 days past due are calculated based on EOP loans, net of unearned income.
(3)
The 90+ days past due balances for North America—Citi-branded and North America—Citi retail services are generally still accruing interest. Citigroup’s policy is generally to accrue interest on credit card loans until 180 days past due, unless notification of bankruptcy filing has been received earlier.
(4)
The 90+ days past due and 30–89 days past due and related ratios for North America GCB exclude U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies since the potential loss predominantly resides within the agencies. The amounts excluded for loans 90+ days past due and (EOP loans) were $135 million ($0.5 billion), $211 million ($0.7 billion) and $305 million ($0.8 billion) at December 31, 2019, 2018 and 2017, respectively. The amounts excluded for loans 30–89 days past due (EOP loans have the same adjustment as above) were $72 million, $86 million and $93 million at December 31, 2019, 2018 and 2017, respectively.
(5)
Asia includes delinquencies and loans in certain EMEA countries for all periods presented.
(6)The 90+ days past due and 30–89 days past due and related ratios exclude U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies since the potential loss predominantly resides within the agencies. The amounts excluded for loans 90+ days past due and (EOP loans) were $172 million ($0.4 billion), $367 million ($0.8 billion) and $663 million ($1.2 billion) at December 31, 2019, 2018 and 2017, respectively. The amounts excluded for loans 30–89 days past due (EOP loans have the same adjustment as above) were $55 million, $122 million and $164 million at December 31, 2019, 2018 and 2017, respectively.



66


Consumer Loan Net Credit Losses and Ratios
 
Average
loans(1)
Net credit losses(2)(3)
In millions of dollars, except average loan amounts in billions2019201920182017
Global Consumer Banking    
Total$284.1
$7,382
$6,884
$6,462
Ratio 2.60 %2.48%2.39%
Retail banking    
Total$119.7
$910
$913
$923
Ratio 0.76 %0.78%0.79%
North America48.5
161
126
135
Ratio

0.33
0.27
0.29
Latin America11.5
494
545
550
Ratio 4.30
4.58
4.40
Asia(4)
59.7
255
242
238
Ratio 0.43
0.41
0.42
Cards    
Total$164.4
$6,472
$5,971
$5,539
Ratio 3.94 %3.72%3.60%
North America—Citi-branded
89.8
2,864
2,602
2,447
Ratio 3.19
2.97
2.90
North America—Citi retail services
49.9
2,558
2,357
2,155
Ratio 5.13
4.88
4.73
Latin America5.7
615
586
533
Ratio 10.79
10.65
10.06
Asia(4)
19.0
435
426
404
Ratio 2.29
2.25
2.17
Corporate/Other—Consumer(3)
    
Total$11.9
$(6)$24
$156
Ratio (0.05)%0.14%0.57%
International

42
82
Ratio 
6.00
4.32
North America11.9
(6)(18)74
Ratio (0.05)NM
0.29
Other(5)



(21)
Total Citigroup$296.0
$7,376
$6,908
$6,597
Ratio 2.49 %2.33%2.22%
(1)Average loans include interest and fees on credit cards.
(2)The ratios of net credit losses are calculated based on average loans, net of unearned income.
(3)
As a result of Citigroup's entry into agreements in 2016 to sell its Argentina and Brazil consumer banking businesses, these businesses were classified as HFS at the end of the fourth quarter of 2016. Loans HFS are excluded from this table as they are recorded in Other assets. In addition, as a result of HFS accounting treatment, approximately $128 million of net credit losses (NCLs) were recorded as a reduction in revenue (Other revenue) during 2017. Accordingly, these NCLs are not included in this table. The sales of the Argentina and Brazil consumer banking businesses were completed in 2017.
(4)
Asia includes NCLs and average loans in certain EMEA countries for all periods presented.
(5)2017 NCLs reflected a recovery related to legacy assets.




67


Loan Maturities and Fixed/Variable Pricing of
U.S. Consumer Mortgages
In millions of dollars at December 31, 2019
Due
within
1 year
Greater
than 1 year
but within
5 years
Greater
than 5
years
Total
U.S. consumer mortgage loan portfolio    
Residential first mortgages$3
$118
$46,887
$47,008
Home equity loans92
330
8,801
9,223
Total$95
$448
$55,688
$56,231
Fixed/variable pricing of U.S. consumer mortgage loans with maturities due after one year    
Loans at fixed interest rates $430
$35,975
 
Loans at floating or adjustable interest rates 18
19,713
 
Total $448
$55,688
 


68


CORPORATE CREDIT
Consistent with its overall strategy, Citi’s corporate clients are typically large, multinational corporations that value the depth and breadth of Citi’s global network. Citi aims to establish relationships with these clients that, consistent with client needs, encompass multiple products, including cash management and trade services, foreign exchange, lending, capital markets and M&A advisory. As of the fourth quarter of 2019, Citi’s commercial banking businesses previously reported as part of GCB in North America, Latin America and Asia, including approximately $28 billion in end-of-period loans, are now reported in ICG for all periods presented.    

Corporate Credit Portfolio
The following table presents Citi’s corporate credit portfolio within ICG (excluding private bank), before consideration of collateral or hedges, by remaining tenor for the periods indicated:
 December 31, 2019September 30, 2019December 31, 2018
In billions of dollars
Due
within
1 year
Greater
than 1 year
but within
5 years
Greater
than
5 years
Total
exposure
Due
within
1 year
Greater
than 1 year
but within
5 years
Greater
than
5 years
Total
exposure
Due
within
1 year
Greater
than 1 year
but within
5 years
Greater
than
5 years
Total
exposure
Direct outstandings
(on-balance sheet)(1)
$141
$117
$23
$281
$150
$115
$24
$289
$144
$119
$23
$286
Unfunded lending commitments
(off-balance sheet)(2)
145
249
17
411
133
250
16
399
111
253
18
382
Total exposure$286
$366
$40
$692
$283
$365
$40
$688
$255
$372
$41
$668

(1)Includes drawn loans, overdrafts, bankers’ acceptances and leases.
(2)Includes unused commitments to lend, letters of credit and financial guarantees.

Portfolio Mix—Geography, Counterparty and Industry
Citi’s corporate credit portfolio is diverse by geography and counterparty. The following table shows the regional percentages of this portfolio based on Citi’s internal management geography:
 December 31,
2019
September 30,
2019
December 31,
2018
North America55%55%54%
EMEA26
26
26
Asia12
12
12
Latin America7
7
8
Total100%100%100%

The maintenance of accurate and consistent risk ratings across the corporate credit portfolio facilitates the comparison of credit exposure across all lines of business, geographic regions and products. Counterparty risk ratings reflect an estimated probability of default for a counterparty and are derived by leveraging validated statistical models, scorecard models and external agency ratings (under defined circumstances), in combination with consideration of factors specific to the obligor or market, such as management experience, competitive position and regulatory environment
 
and commodity prices. Facility risk ratings are assigned that reflect the probability of default of the obligor and factors that affect the loss given default of the facility, such as support or collateral. Internal obligor ratings that generally correspond to
BBB and above are considered investment grade, while those below are considered non-investment grade.
Citigroup has also incorporated environmental factors such as climate risk assessment and reporting criteria for certain obligors, as necessary. Factors evaluated include consideration of climate risk to an obligor’s business and physical assets and, when relevant, consideration of cost-effective options to reduce greenhouse gas emissions.
The following table presents the corporate credit portfolio by facility risk rating as a percentage of the total corporate credit portfolio:
 Total exposure
 December 31,
2019
September 30,
2019
December 31,
2018
AAA/AA/A46%46%47%
BBB36
36
35
BB/B16
16
17
CCC or below2
2
1
Total100%100%100%


69


Note: Total exposure includes direct outstandings and unfunded lending commitments.

Citi’s corporate credit portfolio is also diversified by industry. The following table shows the allocation of Citi’s total corporate credit portfolio by industry:
 Total exposure
 December 31,
2019
September 30,
2019
December 31,
2018
Transportation and
 industrial
21%21%22%
Consumer retail
and health
17
17
17
Technology, media
and telecom
12
12
13
Power, chemicals,
metals and mining
11
10
10
Banks/broker-dealers/finance companies8
8
8
Real estate8
8
8
Energy and commodities8
8
8
Public sector4
4
5
Insurance and special purpose entities4
4
4
Hedge funds4
4
4
Other industries3
4
1
Total100%100%100%

For additional information on Citi’s corporate credit portfolio, see Note 14 to the Consolidated Financial Statements.

Credit Risk Mitigation
As part of its overall risk management activities, Citigroup uses credit derivatives and other risk mitigants to hedge portions of the credit risk in its corporate credit portfolio, in addition to outright asset sales. Citi may enter into partial-term hedges as well as full-term hedges. In advance of the expiration of partial-term hedges, Citi will determine, among other factors, the economic feasibility of hedging the remaining life of the instrument. The results of the mark-to-market and any realized gains or losses on credit derivatives are reflected primarily in Principal transactions in the Consolidated Statement of Income.
At December 31, 2019, September 30, 2019 and December 31, 2018, Citigroup had economic hedges in place on the corporate credit portfolio of $35.2 billion, $29.5 billion and $30.2 billion, respectively. Citigroup’s expected loss model used in the calculation of its loan loss reserve does not include the favorable impact of credit derivatives and other mitigants that are marked to market. In addition, the reported amounts of direct outstandings and unfunded lending commitments in the tables above do not reflect the impact of these hedging transactions. The credit protection was economically hedging underlying corporate credit portfolio exposures with the following risk rating distribution:
 
Rating of Hedged Exposure
 December 31,
2019
September 30,
2019
December 31,
2018
AAA/AA/A32%34%35%
BBB51
48
50
BB/B15
17
14
CCC or below2
1
1
Total100%100%100%

The credit protection was economically hedging underlying corporate credit portfolio exposures with the following industry distribution:

Industry of Hedged Exposure
 December 31,
2019
September 30,
2019
December 31,
2018
Transportation and industrial24%23%23%
Technology, media and telecom19
19
17
Consumer retail and health18
16
16
Power, chemicals, metals and mining15
14
15
Energy and commodities9
9
11
Insurance and special purpose entities7
5
6
Banks/broker-dealers/finance companies3
5
4
Public sector3
4
3
Real estate2
4
4
Other industries
1
1
Total100%100%100%




















70


Loan Maturities and Fixed/Variable Pricing of Corporate
Loans
In millions of dollars at December 31, 2019
Due
within
1 year
Over 1
year
but
within
5 years
Over 5
years
Total
Corporate loans    
In U.S. offices    
Commercial and industrial loans$20,679
$21,623
$13,627
$55,929
Financial institutions19,938
20,846
13,138
53,922
Mortgage and real estate19,735
20,633
13,003
53,371
Installment, revolving credit and other11,550
12,077
7,611
31,238
Lease financing477
499
314
1,290
In offices outside the U.S.124,384
59,295
10,506
194,185
Total corporate loans$196,763
$134,973
$58,199
$389,935
Fixed/variable
pricing of corporate
loans with
maturities due after
one year(1)
    
Loans at fixed
interest rates
 $22,432
$20,676
 
Loans at floating or
adjustable interest
rates
 112,541
37,523
 
Total
$134,973
$58,199
 

(1)Based on contractual terms. Repricing characteristics may effectively
be modified from time to time using derivative contracts. See Note 22
to the Consolidated Financial Statements.


71


ADDITIONAL CONSUMER AND CORPORATE CREDIT DETAILS

Loans Outstanding
 December 31,
In millions of dollars20192018201720162015
Consumer loans     
In North America offices(1)
     
Residential first mortgages(2)
$47,008
$47,412
$49,375
$53,131
$56,872
Home equity loans(2)
9,223
11,543
14,827
19,454
22,745
Credit cards149,163
144,542
139,718
133,297
113,352
Personal, small business and other3,699
4,046
4,140
5,290
5,396
Total$209,093
$207,543
$208,060
$211,172
$198,365
In offices outside North America(1)
     
Residential first mortgages(2)
$37,686
$35,972
$37,419
$35,336
$40,139
Credit cards25,909
24,951
25,727
23,055
26,617
Personal, small business and other36,860
33,894
34,608
31,153
35,980
Total

$100,455
$94,817
$97,754
$89,544
$102,736
Consumer loans, net of unearned income(3)
$309,548
$302,360
$305,814
$300,716
$301,101
Corporate loans     
In North America offices(1)
     
Commercial and industrial$55,929
$60,861
$60,219
$57,886
$53,611
Financial institutions53,922
48,447
39,128
35,517
36,425
Mortgage and real estate(2)
53,371
50,124
44,683
38,691
32,623
Installment, revolving credit and other31,238
32,425
31,932
31,194
30,426
Lease financing1,290
1,429
1,470
1,518
1,780
Total

$195,750
$193,286
$177,432
$164,806
$154,865
In offices outside North America(1)
     
Commercial and industrial$112,668
$114,029
$113,178
$100,532
$99,442
Financial institutions40,211
36,837
35,273
26,886
28,704
Mortgage and real estate(2)
9,780
7,376
7,309
5,363
5,106
Installment, revolving credit and other27,303
25,685
22,638
19,965
23,185
Lease financing95
103
190
251
303
Governments and official institutions4,128
4,520
5,200
5,850
4,911
Total

$194,185
$188,550
$183,788
$158,847
$161,651
Corporate loans, net of unearned income(4)
$389,935
$381,836
$361,220
$323,653
$316,516
Total loans—net of unearned income$699,483
$684,196
$667,034
$624,369
$617,617
Allowance for loan losses—on drawn exposures(12,783)(12,315)(12,355)(12,060)(12,626)
Total loans—net of unearned income 
and allowance for credit losses
$686,700
$671,881
$654,679
$612,309
$604,991
Allowance for loan losses as a percentage of total loans—
net of unearned income
(5)
1.84%1.81%1.86%1.94%2.06%
Allowance for consumer loan losses as a percentage of
total consumer loans—net of unearned income
(5)
3.20%3.14%3.08%2.94%3.08%
Allowance for corporate loan losses as a percentage of
total corporate loans—net of unearned income
(5)
0.75%0.74%0.82%1.01%1.08%
(1)North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America. The classification of corporate loans between offices in North America and outside North America is based on the domicile of the booking unit. The difference between the domicile of the booking unit and the domicile of the managing unit is not material.
(2)Loans secured primarily by real estate.
(3)Consumer loans are net of unearned income of $783 million, $742 million, $768 million, $803 million and $850 million at December 31, 2019, 2018, 2017, 2016 and 2015, respectively. Unearned income on consumer loans primarily represents unamortized origination fees and costs, premiums and discounts.
(4)Corporate loans are net of unearned income of $(814) million, $(855) million, $(794) million, $(730) million and $(686) million at December 31, 2019, 2018, 2017, 2016 and 2015, respectively. Unearned income on corporate loans primarily represents interest received in advance, but not yet earned, on loans originated on a discounted basis.
(5)All periods exclude loans that are carried at fair value.


72



Details of Credit Loss Experience
In millions of dollars20192018201720162015
Allowance for loan losses at beginning of period$12,315
$12,355
$12,060
$12,626
$15,994
Provision for loan losses     
Consumer$7,751
$7,258
$7,329
$6,207
$6,073
Corporate467
96
174
542
1,035
Total

$8,218
$7,354
$7,503
$6,749
$7,108
Gross credit losses     
Consumer     
In U.S. offices$6,538
$5,971
$5,664
$4,874
$5,439
In offices outside the U.S. 2,316
2,351
2,377
2,594
3,077
Corporate     
Commercial and industrial, and other     
In U.S. offices265
121
223
370
173
In offices outside the U.S. 196
208
401
334
297
Loans to financial institutions     
In U.S. offices
3
3
5

In offices outside the U.S. 3
7
1
5
4
Mortgage and real estate     
In U.S. offices23
2
2
34
8
In offices outside the U.S.
2
2
6
43
Total

$9,341
$8,665
$8,673
$8,222
$9,041
Credit recoveries(1)
     
Consumer     
In U.S. offices$975
$912
$892
$972
$954
In offices outside the U.S. 503
502
552
576
642
Corporate     
Commercial and industrial, and other     
In U.S. offices28
47
31
31
43
In offices outside the U.S. 59
78
117
79
84
Loans to financial institutions     
In U.S. offices

1
1
7
In offices outside the U.S. 
3
1
1
2
Mortgage and real estate     
In U.S. offices8
6
2
1
7
In offices outside the U.S. 
4
1


Total

$1,573
$1,552
$1,597
$1,661
$1,739
Net credit losses     
In U.S. offices$5,815
$5,132
$4,966
$4,278
$4,609
In offices outside the U.S. 1,953
1,981
2,110
2,283
2,693
Total$7,768
$7,113
$7,076
$6,561
$7,302
Other—net(2)(3)(4)(5)(6)(7)(8)
$18
$(281)$(132)$(754)$(3,174)
Allowance for loan losses at end of period$12,783
$12,315
$12,355
$12,060
$12,626
Allowance for loan losses as a percentage of total loans(9)
1.84%1.81%1.86%1.94%2.06%
Allowance for unfunded lending commitments(8)(10)
$1,456
$1,367
$1,258
$1,418
$1,402
Total allowance for loan losses and unfunded lending commitments$14,239
$13,682
$13,613
$13,478
$14,028
Net consumer credit losses$7,376
$6,908
$6,597
$5,920
$6,920

73


As a percentage of average consumer loans2.49%2.33%2.22%2.00%2.19%
Net corporate credit losses$392
$205
$479
$641
$382
As a percentage of average corporate loans0.10%0.05%0.14%0.20%0.12%
Allowance by type at end of period(11)
     
Consumer$9,897
$9,504
$9,412
$8,842
$9,273
Corporate2,886
2,811
2,943
3,218
3,353
Total Citigroup$12,783
$12,315
$12,355
$12,060
$12,626
(1)Recoveries have been reduced by certain collection costs that are incurred only if collection efforts are successful.
(2)Includes all adjustments to the allowance for credit losses, such as changes in the allowance from acquisitions, dispositions, securitizations, FX translation, purchase accounting adjustments, etc.
(3)2019 includes reductions of approximately $42 million related to the transfer to HFS of various real estate loan portfolios. In addition, 2019 includes an increase of approximately $60 million related to FX translation.
(4)2018 includes reductions of approximately $201 million related to the sale or transfer to HFS of various loan portfolios, which include approximately $91 million related to the transfer of various real estate loan portfolios to HFS. In addition, 2018 includes a reduction of approximately $60 million related to FX translation.
(5)2017 includes reductions of approximately $261 million related to the sale or transfer to HFS of various loan portfolios, which include approximately $106 million related to the transfer of various real estate loan portfolios to HFS. In addition, 2017 includes an increase of approximately $115 million related to FX translation.
(6)2016 includes reductions of approximately $574 million related to the sale or transfer to HFS of various loan portfolios, which include approximately $106 million related to the transfer of various real estate loan portfolios to HFS. In addition, 2016 includes a reduction of approximately $199 million related to FX translation.
(7)2015 includes reductions of approximately $2.4 billion related to the sale or transfer to HFS of various loan portfolios, which include approximately $1.5 billion related to the transfer of various real estate loan portfolios to HFS. In addition, 2015 includes a reduction of approximately $474 million related to FX translation.
(8)
2015 includes a reclassification of $271 million of Allowance for loan losses to allowance for unfunded lending commitments, included in the Other line item. This reclassification reflects the re-attribution of $271 million in the allowance for credit losses between the funded and unfunded portions of the corporate credit portfolios and does not reflect a change in the underlying credit performance of these portfolios.
(9)December 31, 2019, 2018, 2017, 2016 and 2015 exclude $4.1 billion, $3.2 billion, $4.4 billion, $3.5 billion and $5.0 billion, respectively, of loans which are carried at fair value.
(10)
Represents additional credit reserves recorded as Other liabilities on the Consolidated Balance Sheet.
(11)Allowance for loan losses represents management’s best estimate of probable losses inherent in the portfolio, as well as probable losses related to large individually evaluated impaired loans and troubled debt restructurings. See “Significant Accounting Policies and Significant Estimates” and Note 1 to the Consolidated Financial Statements below. Attribution of the allowance is made for analytical purposes only and the entire allowance is available to absorb probable credit losses inherent in the overall portfolio.

74


Allowance for Loan Losses
The following tables detail information on Citi’s allowance for loan losses, loans and coverage ratios:
 December 31, 2019
In billions of dollars
Allowance for
loan losses
Loans, net of
unearned income
Allowance as a
percentage of loans(1)
North America cards(2)
$7.0
$149.2
4.7%
North America mortgages(3)
0.3
56.2
0.5
North America other
0.1
3.7
2.7
International cards0.7
25.9
2.7
International other(4)
1.8
74.6
2.4
Total consumer$9.9
$309.6
3.2%
Total corporate2.9
389.9
0.7
Total Citigroup$12.8
$699.5
1.8%
(1)Allowance as a percentage of loans excludes loans that are carried at fair value.
(2)Includes both Citi-branded cards and Citi retail services. The $7.0 billion of loan loss reserves represented approximately 15 months of coincident net credit loss coverage.
(3)
Of the $0.3 billion, nearly all was allocated to North America mortgages in Corporate/Other, including $0.1 billion and $0.2 billion determined in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. Of the $56.2 billion in loans, approximately $54.2 billion and $2.0 billion of the loans were evaluated in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. For additional information, see Note 15 to the Consolidated Financial Statements.
(4)Includes mortgages and other retail loans.

 December 31, 2018
In billions of dollars
Allowance for
loan losses
Loans, net of
unearned income
Allowance as a
percentage of loans(1)
North America cards(2)
$6.6
$144.5
4.6%
North America mortgages(3)
0.4
59.0
0.7
North America other
0.1
4.0
2.5
International cards0.7
25.0
2.8
International other(4)
1.7
69.9
2.4
Total consumer$9.5
$302.4
3.1%
Total corporate2.8
381.8
0.7
Total Citigroup$12.3
$684.2
1.8%
(1)Allowance as a percentage of loans excludes loans that are carried at fair value.
(2)Includes both Citi-branded cards and Citi retail services. The $6.6 billion of loan loss reserves represented approximately 16 months of coincident net credit loss coverage.
(3)
Of the $0.4 billion, nearly all was allocated to North America mortgages in Corporate/Other, including approximately $0.1 billion and $0.3 billion determined in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. Of the $59.0 billion in loans, approximately $56.3 billion and $2.5 billion were evaluated in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. For additional information, see Note 15 to the Consolidated Financial Statements.
(4)Includes mortgages and other retail loans.



75


Non-Accrual Loans and Assets and Renegotiated Loans
There is a certain amount of overlap among non-accrual loans and assets and renegotiated loans. The following summary provides a general description of each category.

Non-Accrual Loans and Assets:
Corporate and consumer (including commercial banking) non-accrual status is based on the determination that payment of interest or principal is doubtful.
A corporate loan may be classified as non-accrual and still be performing under the terms of the loan structure. Non-accrual loans may still be current on interest payments. Approximately 44%, 41% and 48% of Citi’s corporate non-accrual loans were performing at December 31, 2019, September 30, 2019 and December 31, 2018, respectively.
Consumer non-accrual status is generally based on aging, i.e., the borrower has fallen behind on payments.
Consumer mortgage loans, other than Federal Housing Administration (FHA) insured loans, are classified as non-accrual within 60 days of notification that the borrower has filed for bankruptcy. In addition, home equity loans are classified as non-accrual if the related residential first mortgage loan is 90 days or more past due.
North America Citi-branded cards and Citi retail services are not included because, under industry standards, credit card loans accrue interest until such loans are charged off, which typically occurs at 180 days of contractual delinquency.
Renegotiated Loans:
Includes both corporate and consumer loans whose terms have been modified in a troubled debt restructuring (TDR).
Includes both accrual and non-accrual TDRs.


76


Non-Accrual Loans
The table below summarizes Citigroup’s non-accrual loans as of the periods indicated. Non-accrual loans may still be current on interest payments. In situations where Citi reasonably expects that only a portion of the principal owed
 
will ultimately be collected, all payments received are reflected as a reduction of principal and not as interest income. For all other non-accrual loans, cash interest receipts are generally recorded as revenue.
 December 31,
In millions of dollars20192018201720162015
Corporate non-accrual loans(1)(2)
     
North America$1,214
$586
$966
$1,291
$1,005
EMEA430
375
849
904
347
Latin America473
307
348
441
421
Asia71
243
70
220
191
Total corporate non-accrual loans$2,188
$1,511
$2,233
$2,856
$1,964
Consumer non-accrual loans(1)(3)
     
North America$905
$1,138
$1,468
$1,854
$2,328
Latin America632
638
688
648
756
Asia(4)
279
250
243
221
206
Total consumer non-accrual loans$1,816
$2,026
$2,399
$2,723
$3,290
Total non-accrual loans$4,004
$3,537
$4,632
$5,579
$5,254
(1)Excludes purchased distressed loans, as they are generally accreting interest. The carrying value of these loans was $128 million at December 31, 2019, $128 million at December 31, 2018, $167 million at December 31, 2017, $187 million at December 31, 2016 and $250 million at December 31, 2015.
(2)
The 2016 increase in corporate non-accrual loans was primarily related to Citi’s North America and EMEA energy and energy-related corporate credit exposure.
(3)
The 2015 decline in consumer non-accrual loans includes the impact related to the transfer of approximately $8 billion of mortgage loans to Loans HFS (included within Other assets).
(4)
Asia includes balances in certain EMEA countries for all periods presented.

The changes in Citigroup’s non-accrual loans were as follows:

 Year endedYear ended
 December 31, 2019December 31, 2018
In millions of dollarsCorporateConsumerTotalCorporateConsumerTotal
Non-accrual loans at beginning of period$1,511
$2,026
$3,537
$2,233
$2,399
$4,632
Additions3,407
2,954
6,361
2,108
3,148
5,256
Sales and transfers to HFS(23)(171)(194)(119)(268)(387)
Returned to performing(68)(431)(499)(127)(629)(756)
Paydowns/settlements(2,496)(902)(3,398)(2,282)(1,052)(3,334)
Charge-offs(268)(1,444)(1,712)(196)(1,634)(1,830)
Other125
(216)(91)(106)62
(44)
Ending balance$2,188
$1,816
$4,004
$1,511
$2,026
$3,537


77


Non-Accrual Assets
The table below summarizes Citigroup’s other real estate owned (OREO) assets. OREO is recorded on the Consolidated Balance Sheet within Other assets. This represents the carrying value of all real estate property acquired by foreclosure or other legal proceedings when Citi has taken possession of the collateral:
 December 31,
In millions of dollars20192018201720162015
OREO     
North America$39
$64
$89
$161
$166
EMEA1
1
2

1
Latin America14
12
35
18
38
Asia7
22
18
7
4
Total OREO$61
$99
$144
$186
$209
Non-accrual assets     
Corporate non-accrual loans$2,188
$1,511
$2,233
$2,856
$1,964
Consumer non-accrual loans1,816
2,026
2,399
2,723
3,290
Non-accrual loans (NAL)$4,004
$3,537
$4,632
$5,579
$5,254
OREO$61
$99
$144
$186
$209
Non-accrual assets (NAA)$4,065
$3,636
$4,776
$5,765
$5,463
NAL as a percentage of total loans0.57%0.52%0.69%0.89%0.85%
NAA as a percentage of total assets0.21
0.19
0.26
0.32
0.32
Allowance for loan losses as a percentage of NAL(1)
319
348
267
216
240

(1)The allowance for loan losses includes the allowance for Citi’s credit card portfolios and purchased distressed loans, while the non-accrual loans exclude credit card balances (with the exception of certain international portfolios) and purchased distressed loans as these continue to accrue interest until charge-off.



78


Renegotiated Loans
The following table presents Citi’s loans modified in TDRs:
In millions of dollarsDec. 31, 2019Dec. 31, 2018
Corporate renegotiated loans(1)
  
In U.S. offices  
Commercial and industrial$226
$188
Mortgage and real estate57
111
Financial institutions
16
Other4
2
Total$287
$317
In offices outside the U.S.  
Commercial and industrial(2)
$200
$226
Mortgage and real estate22
12
Financial institutions
9
Other40

Total

$262
$247
Total corporate renegotiated loans$549
$564
Consumer renegotiated loans(3)
  
In U.S. offices  
Mortgage and real estate$1,956
$2,520
Cards1,464
1,338
Installment and other17
13
Total

$3,437
$3,871
In offices outside the U.S.  
Mortgage and real estate$305
$299
Cards466
480
Installment and other400
387
Total

$1,171
$1,166
Total consumer renegotiated loans$4,608
$5,037
(1)Includes $472 million and $466 million of non-accrual loans included in the non-accrual loans table above at December 31, 2019 and 2018, respectively. The remaining loans are accruing interest.
(2)In addition to modifications reflected as TDRs at December 31, 2019 and 2018, Citi also modified $26 million and $2 million in offices outside the U.S., respectively, of commercial loans risk rated “Substandard Non-Performing” or worse (asset category defined by banking regulators). These modifications were not considered TDRs because the modifications did not involve a concession.
(3)Includes $814 million and $933 million of non-accrual loans included in the non-accrual loans table above at December 31, 2019 and 2018, respectively. The remaining loans are accruing interest.








 
Forgone Interest Revenue on Loans(1)  

In millions of dollarsIn U.S.
offices
In non-
U.S.
offices
2019
total
Interest revenue that would have been accrued at original contractual rates(2)
$488
$421
$909
Amount recognized as interest revenue(2)
130
112
242
Forgone interest revenue$358
$309
$667

(1)Relates to corporate non-accrual loans, renegotiated loans and consumer loans on which accrual of interest has been suspended.
(2)Interest revenue in offices outside the U.S. may reflect prevailing local interest rates, including the effects of inflation and monetary correction in certain countries.


79


LIQUIDITY RISK
Overview
Adequate and diverse sources of funding and liquidity are essential to Citi’s businesses. Funding and liquidity risks arise from several factors, many of which are mostly or entirely outside Citi’s control, such as disruptions in the financial markets, changes in key funding sources, credit spreads, changes in Citi’s credit ratings and macroeconomic, geopolitical and other conditions. For additional information, see “Risk Factors” above.
Citi’s funding and liquidity management objectives are aimed at (i) funding its existing asset base, (ii) growing its core businesses, (iii) maintaining sufficient liquidity, structured appropriately, so that Citi can operate under a variety of adverse circumstances, including potential Company-specific and/or market liquidity events in varying durations and severity, and (iv) satisfying regulatory requirements, including, among other things, those related to resolution planning (for additional information, see “Resolution Plan” and “Total Loss-Absorbing Capacity (TLAC)” below). Citigroup’s primary liquidity objectives are established by entity, and in aggregate, across two major categories:
 
Citibank (including Citibank Europe plc, Citibank Singapore Ltd. and Citibank (Hong Kong) Ltd.); and
Citi’s non-bank and other entities, including the parent holding company (Citigroup Inc.), Citi’s primary intermediate holding company (Citicorp LLC), Citi’s broker-dealer subsidiaries (including Citigroup Global Markets Inc., Citigroup Global Markets Ltd. and Citigroup Global Markets Japan Inc.) and other bank and non-bank subsidiaries that are consolidated into Citigroup (including Citibanamex).

At an aggregate Citigroup level, Citi’s goal is to maintain sufficient funding in amount and tenor to fully fund customer assets and to provide an appropriate amount of cash and high-quality liquid assets (as discussed below), even in times of stress, in order to meet its payment obligations as they come due. The liquidity risk management framework provides that in addition to the aggregate requirements, certain entities be self-sufficient or net providers of liquidity, including in conditions established under their designated stress tests.
Citi’s primary sources of funding include (i) deposits via Citi’s bank subsidiaries, which are Citi’s most stable and lowest cost source of long-term funding, (ii) long-term debt (primarily senior and subordinated debt) primarily issued at the parent and certain bank subsidiaries, and (iii) stockholders’ equity. These sources may be supplemented by short-term borrowings, primarily in the form of secured funding transactions.
 
As referenced above, Citi’s funding and liquidity framework ensures that the tenor of these funding sources is of sufficient term in relation to the tenor of its asset base. The goal of Citi’s asset/liability management is to ensure that there is excess liquidity and tenor in the liability structure relative to the liquidity profile of the assets. This reduces the risk that liabilities will become due before assets mature or are monetized. This excess liquidity is held primarily in the form of high-quality liquid assets (HQLA), as set forth in the table below.
Citi’s liquidity is managed via a centralized treasury model by Treasury, in conjunction with regional and in-country treasurers with independent oversight provided by Independent Risk Management. Pursuant to this approach, Citi’s HQLA are managed with emphasis on asset-liability management and entity-level liquidity adequacy throughout Citi.
The Chief Risk Officer and Citi’s CFO co-chair Citi’s Asset Liability Management Committee (ALCO), which includes Citi’s Treasurer and other senior executives. ALCO, among other things, sets the strategy of the liquidity portfolio and monitors its performance. Significant changes to portfolio asset allocations need to be approved by ALCO.

Liquidity Monitoring and Measurement

Stress Testing
Liquidity stress testing is performed for each of Citi’s major entities, operating subsidiaries and/or countries. Stress testing and scenario analyses are intended to quantify the potential impact of an adverse liquidity event on the balance sheet and liquidity position, and to identify viable funding alternatives that can be utilized. These scenarios include assumptions about significant changes in key funding sources, market triggers (such as credit ratings), potential uses of funding and macroeconomic, geopolitical and other conditions. These conditions include expected and stressed market conditions as well as Company-specific events.
Liquidity stress tests are performed to ascertain potential mismatches between liquidity sources and uses over a variety of time horizons and over different stressed conditions. Liquidity limits are set accordingly. To monitor the liquidity of an entity, these stress tests and potential mismatches are calculated with varying frequencies, with several tests performed daily.
Given the range of potential stresses, Citi maintains contingency funding plans on a consolidated basis and for individual entities. These plans specify a wide range of readily available actions for a variety of adverse market conditions or idiosyncratic stresses.



80


High-Quality Liquid Assets (HQLA)
 CitibankCiti non-bank and other entitiesTotal
In billions of dollarsDec. 31, 2019Sept. 30, 2019Dec. 31, 2018Dec. 31, 2019Sept. 30, 2019Dec. 31, 2018Dec. 31, 2019Sept. 30, 2019Dec. 31, 2018
Available cash$158.7
$123.7
$97.1
$2.1
$31.8
$27.6
$160.8
$155.5
$124.7
U.S. sovereign100.2
94.3
103.2
29.6
32.4
24.0
129.8
126.7
127.2
U.S. agency/agency MBS56.9
55.5
60.0
4.4
4.6
5.8
61.3
60.1
65.8
Foreign government debt(1)
66.4
65.9
76.8
16.5
10.9
6.3
82.9
76.8
83.1
Other investment grade2.4
2.9
1.5
0.5
0.7
1.4
2.8
3.6
2.9
Total HQLA (AVG)$384.6
$342.3
$338.6
$53.1
$80.4
$65.1
$437.6
$422.7
$403.7

Note: The amounts set forth in the table above are presented on an average basis. For securities, the amounts represent the liquidity value that potentially could be realized and, therefore, exclude any securities that are encumbered and incorporate any haircuts that would be required for securities financing transactions. The table above incorporates various restrictions that could limit the transferability of liquidity between legal entities, including Section 23A of the Federal Reserve Act.
(1)Foreign government debt includes securities issued or guaranteed by foreign sovereigns, agencies and multilateral development banks. Foreign government debt securities are held largely to support local liquidity requirements and Citi’s local franchises and principally include government bonds from Mexico, Hong Kong, South Korea, Singapore, India and Brazil.

The table above includes average amounts of HQLA held at Citigroup’s operating entities that are eligible for inclusion in the calculation of Citigroup’s consolidated Liquidity Coverage Ratio (LCR), pursuant to the U.S. LCR rules. These amounts include the HQLA needed to meet the minimum requirements at these entities and any amounts in excess of these minimums that are assumed to be transferable to other entities within Citigroup. Citigroup’s HQLA increased sequentially, reflecting deposit growth and the issuance of long-term debt.
Citi’s HQLA as set forth above does not include Citi’s available borrowing capacity from the Federal Home Loan Banks (FHLBs) of which Citi is a member, which was approximately $35 billion as of December 31, 2019 (compared to $40 billion as of September 30, 2019 and $29 billion as of December 31, 2018) and maintained by eligible collateral pledged to such banks. The HQLA also does not include Citi’s borrowing capacity at the U.S. Federal Reserve Bank discount window or other central banks, which would be in addition to the resources noted above.

 
Short-Term Liquidity Measurement: Liquidity Coverage Ratio (LCR)
In addition to internal 30-day liquidity stress testing performed for Citi’s major entities, operating subsidiaries and countries, Citi also monitors its liquidity by reference to the LCR.
Generally, the LCR is designed to ensure that banks maintain an adequate level of HQLA to meet liquidity needs under an acute 30-day stress scenario. The LCR is calculated by dividing HQLA by estimated net outflows over a stressed 30-day period, with the net outflows determined by applying prescribed outflow factors to various categories of liabilities, such as deposits, unsecured and secured wholesale borrowings, unused lending commitments and derivatives-related exposures, partially offset by inflows from assets maturing within 30 days. Banks are required to calculate an add-on to address potential maturity mismatches between contractual cash outflows and inflows within the 30-day period in determining the total amount of net outflows. The minimum LCR requirement is 100%.
The table below details the components of Citi’s LCR calculation and HQLA in excess of net outflows for the periods indicated:
In billions of dollarsDec. 31, 2019Sept. 30, 2019Dec. 31, 2018
HQLA$437.6
$422.7
$403.7
Net outflows382.0
373.4
334.8
LCR115%113%121%
HQLA in excess of net outflows$55.6
$49.3
$68.9

Note: The amounts are presented on an average basis.

Citi’s average LCR increased sequentially, reflecting the issuance of long-term debt.


81


Long-Term Liquidity Measurement: Net Stable Funding Ratio (NSFR)
In 2016, the Federal Reserve Board, the FDIC and the OCC issued a proposed rule to implement the Basel III NSFR requirement.
The U.S.-proposed NSFR is largely consistent with the Basel Committee’s final NSFR rules. In general, the NSFR assesses the availability of a bank’s stable funding against a required level. A bank’s available stable funding would include portions of equity, deposits and long-term debt, while its required stable funding would be based on the liquidity characteristics and encumbrance period of its assets, derivatives and commitments. Prescribed factors would be required to be applied to the various categories of asset and liabilities classes. The ratio of available stable funding to required stable funding would be required to be greater than 100%.
While Citi believes that it is compliant with the proposed U.S. NSFR rules as of December 31, 2019, it will need to evaluate a final version of the rules. Citi expects that the NSFR final rules implementation period will be communicated along with the final version of the rules.

Loans
As part of its funding and liquidity objectives, Citi seeks to fund its existing asset base appropriately as well as maintain sufficient liquidity to grow its GCB and ICG businesses, including its loan portfolio. Citi maintains a diversified portfolio of loans to its consumer and institutional clients. The table below details the average loans, by business and/or segment, and the total end-of-period loans for each of the periods indicated:
In billions of dollarsDec. 31, 2019Sept. 30, 2019Dec. 31, 2018
Global Consumer Banking   
North America$192.7
$188.8
$186.8
Latin America17.4
17.0
16.9
Asia(1)
80.9
78.3
76.7
Total$291.0
$284.1
$280.4
Institutional Clients Group   
Corporate lending$154.2
$160.9
$158.2
Treasury and trade solutions (TTS)74.5
72.5
77.0
Private bank106.6
104.0
94.7
Markets and securities services and other
56.0
52.3
49.2
Total$391.3
$389.7
$379.1
Total Corporate/Other
$10.3
$11.2
$16.0
Total Citigroup loans (AVG)$692.6
$685.0
$675.5
Total Citigroup loans (EOP)$699.5
$691.7
$684.2

(1)
Includes loans in certain EMEA countries for all periods presented.

End-of period loans increased 2% year-over-year and 1% quarter-over-quarter. On an average basis, loans increased 3% year-over-year and 1% quarter-over-quarter.
 
Excluding the impact of FX translation, average loans increased 3% year-over-year, driven by 4% aggregate across GCB and ICG. Within GCB, average loans grew 4%, driven by continued growth in North America GCB and Asia GCB. Average loans in Latin America GCB were largely unchanged year-over-year, reflecting lower overall industry volumes.
Average ICG loans increased 3% year-over-year. Treasury and trade solutions (TTS) loans declined 3% year-over-year, as Citi continued to utilize its distribution capabilities in order to optimize its balance sheet while supporting its clients. Corporate lending loans declined 2%, reflecting the episodic nature of clients’ funding needs, as well as an active quarter in debt capital markets originations. Private bank loans increased 13%, reflecting growth across regions, driven by both new clients and the deepening of relationships with existing clients. Markets and securities services loans increased 14%, primarily driven by residential and commercial real estate warehouse lending.
Average Corporate/Other loans continued to decline (down 34%), driven by the wind-down of legacy assets.

Deposits
The table below details the average deposits, by business and/or segment, and the total end-of-period deposits for each of the periods indicated:
In billions of dollarsDec. 31, 2019Sept. 30, 2019Dec. 31, 2018
Global Consumer Banking   
North America$156.2
$153.6
$146.5
Latin America23.0
22.5
22.3
Asia(1)
103.4
100.7
97.7
Total$282.6
$276.8
$266.5
Institutional Clients Group   
Treasury and trade solutions (TTS)$558.7
$541.0
$510.9
Banking ex-TTS
140.7
137.0
128.3
Markets and securities services95.0
95.7
86.7
Total$794.4
$773.7
$725.9
Total Corporate/Other
$12.5
$15.8
$13.3
Total Citigroup deposits (AVG)$1,089.5
$1,066.3
$1,005.7
Total Citigroup deposits (EOP)$1,070.6
$1,087.8
$1,013.2
(1)
Includes deposits in certain EMEA countries for all periods presented.

End-of-period deposits increased 6% year-over-year and declined 2% quarter-over-quarter. On an average basis, deposits increased 8% year-over-year and 2% quarter-over-quarter.
Excluding the impact of FX translation, average deposits increased 9% year-over-year. In GCB, deposits increased 6%, driven by continued growth in Asia GCB and North America GCB. In North America GCB, deposit growth accelerated to 7%, with contributions from both traditional and digital channels.
In ICG, deposits increased 10%, primarily driven by high-quality deposit growth in TTS.


82


Long-Term Debt
Long-term debt (generally defined as debt with original maturities of one year or more) represents the most significant component of Citi’s funding for the Citigroup parent company and Citi’s non-bank subsidiaries and is a supplementary source of funding for the bank entities.
Long-term debt is an important funding source due in part to its multi-year contractual maturity structure. The weighted-average maturity of unsecured long-term debt issued by Citigroup and its affiliates (including Citibank) with a remaining life greater than one year was approximately 8.4 years as of December 31, 2019, unchanged from September 30, 2019 and a slight decline from the prior year. The weighted-average maturity is calculated based on the contractual maturity of each security. For securities that are redeemable prior to maturity at the option of the holder, the weighted-average maturity is calculated based on the earliest date an option becomes exercisable.
Citi’s long-term debt outstanding at the Citigroup parent company includes benchmark senior and subordinated debt and what Citi refers to as customer-related debt, consisting of structured notes, such as equity- and credit-linked notes, as well as non-structured notes. Citi’s issuance of customer-related debt is generally driven by customer demand and supplements benchmark debt issuance as a source of funding for Citi’s non-bank entities. Citi’s long-term debt at the bank includes benchmark senior debt, FHLB advances and securitizations.
 
Long-Term Debt Outstanding
The following table sets forth Citi’s end-of-period total long-term debt outstanding for each of the dates indicated:
In billions of dollarsDec. 31, 2019Sept. 30, 2019Dec. 31, 2018
Parent and other(1)
   
Benchmark debt:   
Senior debt$106.6
$104.3
$104.6
Subordinated debt25.5
25.9
24.5
Trust preferred1.7
1.7
1.7
Customer-related debt53.8
50.1
37.1
Local country and other(2)
7.9
5.3
2.9
Total parent and other$195.5
$187.3
$170.8
Bank   
FHLB borrowings$5.5
$5.5
$10.5
Securitizations(3)
20.7
22.8
28.4
Citibank benchmark senior debt23.1
23.1
18.8
Local country and other(2)
4.0
3.5
3.5
Total bank$53.3
$54.9
$61.2
Total long-term debt$248.8
$242.2
$232.0
Note: Amounts represent the current value of long-term debt on Citi’s Consolidated Balance Sheet which, for certain debt instruments, includes consideration of fair value, hedging impacts and unamortized discounts and premiums.
(1)Parent and other includes long-term debt issued to third parties by the parent holding company (Citigroup) and Citi’s non-bank subsidiaries (including broker-dealer subsidiaries) that are consolidated into Citigroup. As of December 31, 2019, parent and other included $46.9 billion of long-term debt issued by Citi’s broker-dealer subsidiaries.
(2)Local country and other includes debt issued by Citi’s affiliates in support of their local operations. Within parent and other, certain secured financing is also included.
(3)Predominantly credit card securitizations, primarily backed by Citi-branded credit card receivables.

Citi’s total long-term debt outstanding increased both year-over-year and quarter-over-quarter, largely driven by an increase in customer-related debt at the non-bank entities. Year-over-year, this growth was partially offset by a decline in securitizations at the bank.
As part of its liability management, Citi has considered, and may continue to consider, opportunities to repurchase its long-term debt pursuant to open market purchases, tender offers or other means. Such repurchases help reduce Citi’s overall funding costs. During 2019, Citi repurchased $13.1 billion of its outstanding long-term debt, including early redemptions of FHLB advances, but excluding the exercise of call options on $4.0 billion of securities with a remaining life of three months or less.


83


Long-Term Debt Issuances and Maturities
The table below details Citi’s long-term debt issuances and maturities (including repurchases and redemptions) during the periods presented:
 201920182017
In billions of dollarsMaturitiesIssuancesMaturitiesIssuancesMaturitiesIssuances
Parent and other      
Benchmark debt:      
Senior debt$16.5
$16.2
$18.5
$14.8
$14.1
$21.6
Subordinated debt

2.9
0.6
1.6
1.3
Customer-related debt12.7
25.1
6.6
16.9
7.6
12.3
Local country and other1.1
5.4
1.2
2.3
1.2
0.1
Total parent and other$30.3
$46.7
$29.2
$34.6
$24.5
$35.3
Bank      
FHLB borrowings$7.1
$2.1
$15.8
$7.9
$7.8
$5.5
Securitizations7.9
0.1
8.6
6.8
5.3
12.2
Citibank benchmark senior debt4.8
8.8
2.3
8.5

12.6
Local country and other0.9
1.4
2.2
2.9
3.4
2.4
Total bank$20.7
$12.4
$28.9
$26.1
$16.5
$32.7
Total$51.0
$59.1
$58.1
$60.7
$41.0
$68.0

The table below shows Citi’s aggregate long-term debt maturities (including repurchases and redemptions) in 2019, as well as its aggregate expected annual long-term debt maturities as of December 31, 2019:
 Maturities
In billions of dollars201920202021202220232024ThereafterTotal
Parent and other        
Benchmark debt:        
Senior debt$16.5
$6.4
$14.2
$11.3
$12.5
$7.0
$55.2
$106.6
Subordinated debt


0.7
1.2
0.9
22.7
25.5
Trust preferred





1.7
1.7
Customer-related debt12.7
9.2
6.3
5.1
3.7
3.6
25.9
53.8
Local country and other1.1
1.0
3.6
1.5
0.1
0.1
1.6
7.9
Total parent and other$30.3
$16.6
$24.1
$18.6
$17.5
$11.6
$107.1
$195.5
Bank        
FHLB borrowings$7.1
$5.5
$
$
$
$
$
$5.5
Securitizations7.9
4.6
7.3
2.3
2.6
1.1
2.8
20.7
Citibank benchmark senior debt4.8
8.7
6.1
5.6

2.7

23.1
Local country and other0.9
1.9
0.6
0.6

0.6
0.3
4.0
Total bank$20.7
$20.7
$14.0
$8.5
$2.6
$4.4
$3.1
$53.3
Total long-term debt$51.0
$37.3
$38.1
$27.1
$20.1
$16.0
$110.2
$248.8

84


Resolution Plan
Citi is required under Title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) and the rules promulgated by the FDIC and FRB to periodically submit a plan for Citi’s rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure. For additional information on Citi’s resolution plan submissions, see “Risk Factors—Strategic Risks” above. Citigroup’s preferred resolution strategy is “single point of entry” under the U.S. Bankruptcy Code. 
Under Citi’s resolution plan, only Citigroup, the parent holding company, would enter into bankruptcy, while Citigroup’s material legal entities (as defined in the public section of its 2019 resolution plan, which can be found on the FRB’s and FDIC’s websites) would remain operational and outside of any resolution or insolvency proceedings. Citigroup’s resolution plan has been designed to minimize the risk of systemic impact to the U.S. and global financial systems, while maximizing the value of the bankruptcy estate for the benefit of Citigroup’s creditors, including its unsecured long-term debt holders. In addition, in line with the Federal Reserve’s final total loss-absorbing capacity (TLAC) rule, Citigroup believes it has developed the resolution plan so that Citigroup’s shareholders and unsecured creditors—including its unsecured long-term debt holders—bear any losses resulting from Citigroup’s bankruptcy. Accordingly, any value realized by holders of its unsecured long-term debt may not be sufficient to repay the amounts owed to such debt holders in the event of a bankruptcy or other resolution proceeding of Citigroup.
The FDIC has also indicated that it was developing a single point of entry strategy to implement its resolution authority under Title II of the Dodd-Frank Act.
As previously disclosed, in response to feedback received from the Federal Reserve and FDIC, Citigroup took the following actions:

(i)Citicorp LLC (Citicorp), an existing wholly owned subsidiary of Citigroup, was established as an intermediate holding company (an IHC) for certain of Citigroup’s operating material legal entities;
(ii)Citigroup executed an inter-affiliate agreement with Citicorp, Citigroup’s operating material legal entities and certain other affiliated entities pursuant to which Citicorp is required to provide liquidity and capital support to Citigroup’s operating material legal entities in the event Citigroup were to enter bankruptcy proceedings (Citi Support Agreement);
(iii)pursuant to the Citi Support Agreement:

Citigroup made an initial contribution of assets, including certain high-quality liquid assets and inter-affiliate loans (Contributable Assets), to Citicorp, and Citicorp became the business as usual funding vehicle for Citigroup’s operating material legal entities;
Citigroup will be obligated to continue to transfer Contributable Assets to Citicorp over time, subject to certain amounts retained by Citigroup to, among
 
other things, meet Citigroup’s near-term cash needs;
in the event of a Citigroup bankruptcy, Citigroup will be required to contribute most of its remaining assets to Citicorp; and

(iv)the obligations of both Citigroup and Citicorp under the Citi Support Agreement, as well as the Contributable Assets, are secured pursuant to a security agreement.

The Citi Support Agreement provides two mechanisms, besides Citicorp’s issuing of dividends to Citigroup, pursuant to which Citicorp will be required to transfer cash to Citigroup during business as usual so that Citigroup can fund its debt service as well as other operating needs: (i) one or more funding notes issued by Citicorp to Citigroup and (ii) a committed line of credit under which Citicorp may make loans to Citigroup.
On December 17, 2019, the FRB and FDIC issued feedback on the resolution plans filed on July 1, 2019 by the eight U.S. GSIBs, including Citi. The FRB and FDIC identified one shortcoming, but no deficiencies, in Citi’s resolution plan relating to governance mechanisms. Citi is required to submit a plan to address the shortcoming by March 31, 2020, which the FRB and FDIC will take into account in determining the scope of Citi’s targeted resolution plan due on July 1, 2021.

Total Loss-Absorbing Capacity (TLAC)
In 2016, the Federal Reserve Board imposed minimum external TLAC and long-term debt (LTD) requirements on U.S. global systemically important bank holding companies (GSIBs), including Citi, effective as of January 1, 2019. As a result, U.S. GSIBs are required to maintain minimum levels of TLAC and eligible LTD, each set by reference to the GSIB’s consolidated risk-weighted assets (RWA) and total leverage exposure, as described further below. The intended purpose of the requirements is to facilitate the orderly resolution of U.S. GSIBs under the U.S. Bankruptcy Code and Title II of the Dodd-Frank Act. For additional information, including Citi’s TLAC and LTD amounts and ratios, see “Capital Resources�� Current Regulatory Capital Standards” and “Risk Factors—Compliance Risks” above.

Minimum TLAC Requirements
The minimum TLAC requirement is the greater of (i) 18% of the GSIB’s RWA plus the then-applicable RWA-based TLAC buffer (see below) and (ii) 7.5% of the GSIB’s total leverage exposure plus a leveraged-based TLAC buffer of 2% (i.e., 9.5%).
The RWA-based TLAC buffer equals the 2.5% capital conservation buffer, plus any applicable countercyclical capital buffer (currently 0%), plus the GSIB’s capital surcharge as determined under method 1 of the GSIB surcharge rule (2.0% for Citi for 2020). Accordingly, Citi’s total current minimum TLAC requirement is 22.5% of RWA for 2020.
As of December 31, 2019, Citi exceeded each of the minimum TLAC requirements, with ratios of 11.5% of TLAC

85


as a percentage of Total Leverage Exposure and 24.7% of TLAC as a percentage of Standardized Approach RWA.

Minimum Eligible LTD Requirements
The minimum LTD requirement is the greater of (i) 6% of the GSIB’s RWA plus its capital surcharge as determined under method 2 of the GSIB surcharge rule (3.0% for Citi for 2020), for a total current requirement of 9% of RWA for Citi, and (ii) 4.5% of the GSIB’s total leverage exposure.
As of December 31, 2019, Citi exceeded each of the minimum LTD requirements, with ratios of 10.9% of LTD as a percentage of Standardized Approach RWA and 5.1% of LTD as a percentage of Total Leverage Exposure.
For additional discussion of the method 1 and method 2 GSIB capital surcharge methodologies, see “Capital Resources—Current Regulatory Capital Standards” above.

Secured Funding Transactions and Short-Term Borrowings
Citi supplements its primary sources of funding with short-term financings that generally include (i) secured funding transactions consisting of securities loaned or sold under agreements to repurchase, or repos, and (ii) to a lesser extent, short-term borrowings consisting of commercial paper and borrowings from the FHLB and other market participants.

Secured Funding Transactions
Secured funding is primarily accessed through Citi’s broker-dealer subsidiaries to fund efficiently both (i) secured lending activity and (ii) a portion of the securities inventory held in the context of market making and customer activities. Citi also executes a smaller portion of its secured funding transactions through its bank entities, which are typically collateralized by government debt securities. Generally, daily changes in the level of Citi’s secured funding are primarily due to fluctuations in secured lending activity in the matched book (as described below) and securities inventory.
Secured funding of $166 billion as of December 31, 2019 decreased 6% from the prior year and 15% from the prior quarter. Excluding the impact of FX translation, secured funding decreased 7% from the prior year and 17% from the prior quarter, both driven by normal business activity. Average balances for secured funding were $188 billion for the quarter ended December 31, 2019.
The portion of secured funding in the broker-dealer subsidiaries that funds secured lending is commonly referred to as “matched book” activity. The majority of this activity is secured by high-quality liquid securities such as U.S. Treasury securities, U.S. agency securities and foreign government debt securities. Other secured funding is secured by less liquid securities, including equity securities, corporate bonds and asset-backed securities, the tenor of which is generally equal to or longer than the tenor of the corresponding matched book assets.
 
The remainder of the secured funding activity in the broker-dealer subsidiaries serves to fund securities inventory held in the context of market making and customer activities. To maintain reliable funding under a wide range of market conditions, including under periods of stress, Citi manages these activities by taking into consideration the quality of the underlying collateral and establishing minimum required funding tenors. The weighted average maturity of Citi’s secured funding of less liquid securities inventory was greater than 110 days as of December 31, 2019.
Citi manages the risks in its secured funding by conducting daily stress tests to account for changes in capacity, tenors, haircut, collateral profile and client actions. In addition, Citi maintains counterparty diversification by establishing concentration triggers and assessing counterparty reliability and stability under stress. Citi generally sources secured funding from more than 150 counterparties.

Short-Term Borrowings
Citi’s short-term borrowings of $45 billion increased 39% year-over-year and 28% sequentially, primarily driven by an increase in FHLB advances as well as commercial paper issued out of the broker-dealer entities (see Note 17 to the Consolidated Financial Statements for further information on Citigroup’s and its affiliates’ outstanding short-term borrowings).


86


Overall Short-Term Borrowings
The following table contains the year-end, average and maximum month-end amounts for the following respective short-term borrowings categories at the end of each of the three prior years:
  
Securities sold under
agreements to repurchase
Other borrowings(1)(2)
 
 In billions of dollars201920182017201920182017
 Amounts outstanding at year end$166.3
$177.8
$156.3
$93.7
$96.9
$105.8
 
Average outstanding during the year(3)(4)
190.2
172.1
157.7
98.8
108.4
97.7
 Maximum month-end outstanding196.8
191.2
163.0
105.8
113.5
112.3
 
Weighted average interest rate during the year(3)(4)(5)
3.29%2.84%1.69%2.49%2.04%1.08%

(1)Original maturities of less than one year.
(2)Other borrowings include commercial paper, brokerage payables and borrowings from the FHLB and other market participants. See “Average Balances and Interest Rates” below.
(3)Interest rates and amounts include the effects of risk management activities associated with the respective liability categories.
(4)Average volumes of securities sold under agreements to repurchase are reported net pursuant to ASC 210-20-45; average rates exclude the impact of ASC 210-20-45.
(5)Average rates reflect prevailing local interest rates, including inflationary effects and monetary correction in certain countries.





87


Credit Ratings
Citigroup’s funding and liquidity, funding capacity, ability to access capital markets and other sources of funds, the cost of these funds and its ability to maintain certain deposits are partially dependent on its credit ratings.
The table below shows the ratings for Citigroup and Citibank as of December 31, 2019. While not included in the table below, the long-term and short-term ratings of Citigroup Global Markets Holding Inc. (CGMHI) were BBB+/A-2 at Standard & Poor’s and A/F1 at Fitch as of December 31, 2019.

Ratings as of December 31, 2019
 Citigroup Inc.Citibank, N.A.
 
Senior
debt
Commercial
paper
Outlook
Long-
term
Short-
term
Outlook
Fitch Ratings (Fitch)AF1StableA+F1Stable
Moody’s Investors Service (Moody’s)A3P-2StableAa3P-1Stable
Standard & Poor’s (S&P)BBB+A-2StableA+A-1Stable

Potential Impacts of Ratings Downgrades
Ratings downgrades by Moody’s, Fitch or S&P could negatively impact Citigroup’s and/or Citibank’s funding and liquidity due to reduced funding capacity, including derivative triggers, which could take the form of cash obligations and collateral requirements.
The following information is provided for the purpose of analyzing the potential funding and liquidity impact to Citigroup and Citibank of a hypothetical, simultaneous
ratings downgrade across all three major rating agencies. This analysis is subject to certain estimates, estimation methodologies, judgments and uncertainties. Uncertainties include potential ratings limitations that certain entities may have with respect to permissible counterparties, as well as general subjective counterparty behavior. For example, certain corporate customers and markets counterparties could re-evaluate their business relationships with Citi and limit transactions in certain contracts or market instruments with Citi. Changes in counterparty behavior could impact Citi’s funding and liquidity, as well as the results of operations of certain of its businesses. The actual impact to Citigroup or Citibank is unpredictable and may differ materially from the potential funding and liquidity impacts described below. For additional information on the impact of credit rating changes on Citi and its applicable subsidiaries, see “Risk Factors—Liquidity Risks” above.

 Citigroup Inc. and Citibank—Potential Derivative Triggers
As of December 31, 2019, Citi estimates that a hypothetical one-notch downgrade of the senior debt/long-term rating of Citigroup Inc. across all three major rating agencies could impact Citigroup’s funding and liquidity due to derivative triggers by approximately $0.5 billion, compared to $0.3 billion as of September 30, 2019. Other funding sources, such as secured financing transactions and other margin requirements, for which there are no explicit triggers, could also be adversely affected.

 

As of December 31, 2019, Citi estimates that a hypothetical one-notch downgrade of the senior debt/long-term rating of Citibank across all three major rating agencies could impact Citibank’s funding and liquidity by approximately $0.3 billion, compared to $0.7 billion as of September 30, 2019.
In total, as of December 31, 2019, Citi estimates that a one-notch downgrade of Citigroup and Citibank across all three major rating agencies could result in increased aggregate cash obligations and collateral requirements of approximately $0.8 billion, compared to $1.0 billion as of September 30, 2019 (see also Note 22 to the Consolidated Financial Statements). As detailed under “High-Quality Liquid Assets” above, the liquidity resources that are eligible for inclusion in the calculation of Citi’s consolidated HQLA were approximately $385 billion for Citibank and $53 billion for Citi’s non-bank and other entities, for a total of approximately $438 billion as of December 31, 2019. These liquidity resources are available in part as a contingency for the potential events described above.

88


In addition, a broad range of mitigating actions are currently included in Citigroup’s and Citibank’s contingency funding plans. For Citigroup, these mitigating factors include, but are not limited to, accessing surplus funding capacity from existing clients, tailoring levels of secured lending and adjusting the size of select trading books and collateralized borrowings from certain Citibank subsidiaries. Mitigating actions available to Citibank include, but are not limited to, selling or financing highly liquid government securities, tailoring levels of secured lending, adjusting the size of select trading assets, reducing loan originations and renewals, raising additional deposits or borrowing from the FHLB or central banks. Citi believes these mitigating actions could substantially reduce the funding and liquidity risk, if any, of the potential downgrades described above.

Citibank—Additional Potential Impacts
In addition to the above derivative triggers, Citi believes that a potential downgrade of Citibank’s senior debt/long-term rating across any of the three major rating agencies could also have an adverse impact on the commercial paper/short-term rating of Citibank. As of December 31, 2019, Citibank had liquidity commitments of approximately $10.2 billion to consolidated asset-backed commercial paper conduits, compared to $10.0 billion as of September 30, 2019 (as referenced in Note 21 to the Consolidated Financial Statements).
In addition to the above-referenced liquidity resources of certain Citibank entities, Citibank could reduce the funding and liquidity risk, if any, of the potential downgrades described above through mitigating actions, including repricing or reducing certain commitments to commercial paper conduits. In the event of the potential downgrades described above, Citi believes that certain corporate customers could re-evaluate their deposit relationships with Citibank. This re-evaluation could result in clients adjusting their discretionary deposit levels or changing their depository institution, which could potentially reduce certain deposit levels at Citibank. However, Citi could choose to adjust pricing, offer alternative deposit products to its existing customers or seek to attract deposits from new customers, in addition to the mitigating actions referenced above.


89


MARKET RISK

Overview
Market risk is the potential for losses arising from changes in the value of Citi’s assets and liabilities resulting from changes in market variables such as interest rates, foreign exchange rates, equity prices, commodity prices and credit spreads, as well as their implied volatilities. Market risk emanates from both Citi’s trading and non-trading portfolios. For additional information on market risk, see “Risk Factors” above.
Each business is required to establish, with approval from Citi’s market risk management, a market risk limit framework for identified risk factors that clearly defines approved risk profiles and is within the parameters of Citi’s overall risk appetite. These limits are monitored by the Risk organization, Citi’s country and business Asset and Liability Committees and the Citigroup Asset and Liability Committee. In all cases, the businesses are ultimately responsible for the market risks taken and for remaining within their defined limits.

Market Risk of Non-Trading Portfolios
Market risk from non-trading portfolios stems from the potential impact of changes in interest rates and foreign exchange rates on Citi’s net interest revenues, the changes in Accumulated other comprehensive income (loss) (AOCI) from its debt securities portfolios and capital invested in foreign currencies.

Net Interest Revenue at Risk
Net interest revenue, for interest rate exposure purposes, is the difference between the yield earned on the non-trading portfolio assets (including customer loans) and the rate paid on the liabilities (including customer deposits or company borrowings). Net interest revenue is affected by changes in the level of interest rates, as well as the amounts and mix of assets and liabilities, and the timing of contractual and assumed repricing of assets and liabilities to reflect market rates.
Citi’s principal measure of risk to net interest revenue is interest rate exposure (IRE). IRE measures the change in expected net interest revenue in each currency resulting solely from unanticipated changes in forward interest rates.
Citi’s estimated IRE incorporates various assumptions including prepayment rates on loans, customer behavior and the impact of pricing decisions. For example, in rising interest rate scenarios, portions of the deposit portfolio may be assumed to experience rate increases that are less than the change in market interest rates. In declining interest rate scenarios, it is assumed that mortgage portfolios experience higher prepayment rates. Citi’s estimated IRE below assumes that its businesses and/or Citi Treasury make no additional changes in balances or positioning in response to the unanticipated rate changes.
In order to manage changes in interest rates effectively, Citi may modify pricing on new customer loans and deposits, purchase fixed-rate securities, issue debt that is either fixed or floating or enter into derivative transactions that have the opposite risk exposures. Citi regularly assesses the viability of these and other strategies to reduce its interest rate risks and
 
implements such strategies when it believes those actions are prudent.
Citi manages interest rate risk as a consolidated Company-wide position. Citi’s client-facing businesses create interest rate-sensitive positions, including loans and deposits, as part of their ongoing activities. Citi Treasury aggregates these risk positions and manages them centrally. Operating within established limits, Citi Treasury makes positioning decisions and uses tools, such as Citi’s investment securities portfolio, company-issued debt and interest rate derivatives, to target the desired risk profile. Changes in Citi’s interest rate risk position reflect the accumulated changes in all non-trading assets and liabilities, with potentially large and offsetting impacts, as well as in Citi Treasury’s positioning decisions.
Citigroup employs additional measurements, including stress testing the impact of non-linear interest rate movements on the value of the balance sheet, and the analysis of portfolio duration and volatility, particularly as they relate to mortgage loans and mortgage-backed securities and the potential impact of the change in the spread between different market indices.

Interest Rate Risk of Investment Portfolios—Impact
on AOCI
Citi also measures the potential impacts of changes in interest rates on the value of its AOCI, which can in turn impact Citi’s common equity and tangible common equity. This will impact Citi’s Common Equity Tier 1 and other regulatory capital ratios. Citi’s goal is to benefit from an increase in the market level of interest rates, while limiting the impact of changes in AOCI on its regulatory capital position.
AOCI at risk is managed as part of the Company-wide interest rate risk position. AOCI at risk considers potential changes in AOCI (and the corresponding impact on the Common Equity Tier 1 Capital ratio) relative to Citi’s capital generation capacity.


90


The following table sets forth the estimated impact to Citi’s net interest revenue, AOCI and the Common Equity Tier 1 Capital ratio (on a fully implemented basis), each assuming an unanticipated parallel instantaneous 100 basis point (bps) increase in interest rates:
In millions of dollars, except as otherwise notedDec. 31, 2019Sept. 30, 2019Dec. 31, 2018
Estimated annualized impact to net interest revenue   
U.S. dollar(1)
$20
$292
$758
All other currencies606
605
661
Total$626
$897
$1,419
As a percentage of average interest-earning assets0.03%0.05%0.08%
Estimated initial impact to AOCI (after-tax)(2)
$(5,002)$(4,055)$(3,920)
Estimated initial impact on Common Equity Tier 1 Capital ratio (bps)(31)(24)(28)
(1)Certain trading-oriented businesses within Citi have accrual-accounted positions that are excluded from the estimated impact to net interest revenue in the table, since these exposures are managed economically in combination with mark-to-market positions. The U.S. dollar interest rate exposure associated with these businesses was $(240) million for a 100 bps instantaneous increase in interest rates as of December 31, 2019.
(2)
Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments.

The year-over-year decrease in the estimated impact to net interest revenue primarily reflected changes in Citi’s balance sheet composition and Citi Treasury positioning. The year-over-year changes in the estimated impact to AOCI and the Common Equity Tier 1 Capital ratio primarily reflected the impact of the composition of Citi Treasury’s investment and derivatives portfolio.
In the event of an unanticipated parallel instantaneous 100 bps increase in interest rates, Citi expects that the negative impact to AOCI would be offset in shareholders’ equity through the combination of expected incremental net interest
 
revenue and the expected recovery of the impact on AOCI through accretion of Citi’s investment portfolio over a period of time. As of December 31, 2019, Citi expects that the negative $5.0 billion impact to AOCI in such a scenario could potentially be offset over approximately 37 months.
The following table sets forth the estimated impact to Citi’s net interest revenue, AOCI and the Common Equity Tier 1 Capital ratio (on a fully implemented basis) under five different changes in interest rate scenarios for the U.S. dollar and Citi’s other currencies:
In millions of dollars, except as otherwise notedScenario 1Scenario 2Scenario 3Scenario 4Scenario 5
Overnight rate change (bps)100
100


(100)
10-year rate change (bps)100

100
(100)(100)
Estimated annualized impact to net interest revenue 
     
U.S. dollar$20
$92
$39
$(93)$(363)
All other currencies606
558
34
(34)(411)
Total$626
$650
$73
$(127)$(774)
Estimated initial impact to AOCI (after-tax)(1)
$(5,002)$(3,230)$(1,944)$1,570
$4,389
Estimated initial impact to Common Equity Tier 1 Capital ratio (bps)(31)(20)(13)9
26
Note: Each scenario assumes that the rate change will occur instantaneously. Changes in interest rates for maturities between the overnight rate and the 10-year rate are interpolated.
(1)
Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments.

As shown in the table above, the magnitude of the impact to Citi’s net interest revenue and AOCI is greater under scenario 2 as compared to scenario 3. This is because the combination of changes to Citi’s investment portfolio, partially offset by changes related to Citi’s pension liabilities, results in a net position that is more sensitive to rates at shorter- and intermediate-term maturities.


91


Changes in Foreign Exchange Rates—Impacts on AOCI
and Capital
As of December 31, 2019, Citi estimates that an unanticipated parallel instantaneous 5% appreciation of the U.S. dollar against all of the other currencies in which Citi has invested capital could reduce Citi’s tangible common equity (TCE) by approximately $1.5 billion, or 1%, as a result of changes to Citi’s foreign currency translation adjustment in AOCI, net of hedges. This impact would be primarily due to changes in the value of the Mexican peso, Euro, Australian dollar and Indian rupee.
This impact is also before any mitigating actions Citi may take, including ongoing management of its foreign currency translation exposure. Specifically, as currency movements change the value of Citi’s net investments in foreign currency-denominated capital, these movements also change the value of Citi’s risk-weighted assets denominated in those currencies. This, coupled with Citi’s foreign currency hedging strategies, such as foreign currency borrowings, foreign currency forwards and other currency hedging instruments, lessens the impact of foreign currency movements on Citi’s Common Equity Tier 1 Capital ratio. Changes in these hedging strategies, as well as hedging costs, divestitures and tax impacts, can further affect the actual impact of changes in foreign exchange rates on Citi’s capital as compared to an unanticipated parallel shock, as described above.
 
The effect of Citi’s ongoing management strategies with respect to changes in foreign exchange rates and the impact of these changes on Citi’s TCE and Common Equity Tier 1 Capital ratio are shown in the table below. For additional information on the changes in AOCI, see Note 19 to the Consolidated Financial Statements.
 For the quarter ended
In millions of dollars, except as otherwise notedDec. 31, 2019Sept. 30, 2019Dec. 31, 2018
Change in FX spot rate(1)
2.8%(3.0)%(1.6)%
Change in TCE due to FX translation, net of hedges$659
$(1,192)$(491)
As a percentage of TCE0.4%(0.8)%(0.3)%
Estimated impact to Common Equity Tier 1 Capital ratio (on a fully implemented basis) due
  to changes in FX translation, net of hedges (bps)
(3)(1)(1)

(1)FX spot rate change is a weighted average based on Citi’s quarterly average GAAP capital exposure to foreign countries.



92


Interest Revenue/Expense and Net Interest Margin (NIM)
a4qchartforwdeska02.jpg
In millions of dollars, except as otherwise noted2019 2018 2017 Change 
 2019 vs. 2018
 Change 
 2018 vs. 2017
 
Interest revenue(1)
$76,718
 $71,082
 $62,075
 8% 15% 
Interest expense(2)
29,163
 24,266
 16,518
 20
 47
 
Net interest revenue, taxable equivalent basis$47,555
 $46,816
 $45,557
 2% 3% 
Interest revenue—average rate(3)
4.27% 4.08% 3.71% 19
bps37
bps
Interest expense—average rate2.01
 1.77
 1.28
 24
bps49
bps
Net interest margin(3)(4)
2.65
 2.69
 2.73
 (4)bps(4)bps
Interest rate benchmarks          
Two-year U.S. Treasury note—average rate1.97% 2.53% 1.40% (56)bps113
bps
10-year U.S. Treasury note—average rate2.14
 2.91
 2.33
 (77)bps58
bps
10-year vs. two-year spread17
bps38
bps93
bps 
   

Note: All interest expense amounts include FDIC, as well as other similar deposit insurance assessments outside of the U.S. As of the fourth quarter of 2018, Citi’s FDIC surcharge was eliminated (approximately $130 million per quarter).
(1)
Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rates of 21% in 2019 and 2018 and 35% in 2017) of $208 million, $254 million and $496 million for 2019, 2018 and 2017, respectively.
(2)
Interest expense associated with certain hybrid financial instruments, which are classified as Long-term debt and accounted for at fair value, is reported together
with any changes in fair value as part of Principal transactions in the Consolidated Statement of Income and is therefore not reflected in Interest expense in the
table above.
(3)The average rate on interest revenue and net interest margin reflects the taxable equivalent gross-up adjustment. See footnote 1 on “Average Balances and Interest Rates—Assets” below.
(4)Citi’s net interest margin (NIM) is calculated by dividing net interest revenue by average interest-earning assets.


93


Net Interest Revenue Excluding ICG Markets
In millions of dollars201920182017
Net interest revenue—taxable equivalent basis(1) per above
$47,555
$46,816
$45,557
ICG Markets net interest revenue—taxable equivalent basis(1)
4,372
4,506
5,741
Net interest revenue excluding ICG Markets—taxable equivalent basis(1)
$43,183
$42,310
$39,816

(1)
Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rates of 21% in 2019 and 2018 and 35% in 2017) of $208 million, $254 million and $496 million for 2019, 2018 and 2017, respectively.

Citi’s net interest revenue in the fourth quarter of 2019 increased 1% to $12.0 billion (also $12.0 billion on a taxable equivalent basis) versus the prior-year period. Excluding the impact of FX translation, net interest revenue also increased 1%, or approximately $70 million, as growth in ICG Markets (fixed income markets and equity markets) net interest revenue of 21%, or $210 million, was partially offset by a 1% decline, or $150 million, in net interest revenue ex-markets. The increase in markets net interest revenue was driven by ongoing changes in the composition and mix of the business’s revenues between net interest revenue and non-interest revenue. The decline in net interest revenue ex-markets was primarily due to the impact of lower interest rates, partially offset by growth in the non-markets franchise. Citi’s NIM was 2.63% on a taxable equivalent basis in the fourth quarter of 2019, an increase of 7 basis points (bps) from the prior quarter, primarily driven by the higher markets net interest revenue, partially offset by the impact of lower interest rates.
 

Citi’s net interest revenue for the full year 2019 increased 2% to $47.3 billion ($47.6 billion on a taxable equivalent basis) versus the prior year. Excluding the impact of FX translation, Citi’s net interest revenue increased 3%, or approximately $1.4 billion, mainly reflecting strength in Citi-branded cards in North America GCB and treasury and trade solutions, including the impact of volume growth as well as interest rates. On a full-year basis, Citi’s NIM was 2.65% on a taxable equivalent basis, compared to 2.69% in 2018. Citi’s markets and non-markets net interest revenues are non-GAAP financial measures. Citi reviews non-markets net interest revenue to assess the performance of its lending, investing and deposit-raising activities. Citi believes disclosure of this metric assists in providing a meaningful depiction of the underlying fundamentals of its non-markets businesses.
 






94


Additional Interest Rate Details
Average Balances and Interest Rates—Assets(1)(2)(3) 
Taxable Equivalent Basis
 Average volumeInterest revenue% Average rate
In millions of dollars, except rates201920182017201920182017201920182017
Assets         
Deposits with banks(4)
$188,523
$177,294
$169,385
$2,682
$2,203
$1,635
1.42%1.24%0.97%
Securities borrowed and purchased under agreements to resell(5)
         
In U.S. offices$146,030
$149,879
$141,308
$4,752
$3,818
$1,922
3.25%2.55%1.36%
In offices outside the U.S.(4)
119,550
117,695
106,606
2,133
1,674
1,327
1.78
1.42
1.24
Total$265,580
$267,574
$247,914
$6,885
$5,492
$3,249
2.59%2.05%1.31%
Trading account assets(6)(7)
         
In U.S. offices$109,064
$94,065
$99,755
$4,099
$3,706
$3,531
3.76%3.94%3.54%
In offices outside the U.S.(4)
131,217
115,601
104,197
3,589
2,615
2,117
2.74
2.26
2.03
Total$240,281
$209,666
$203,952
$7,688
$6,321
$5,648
3.20%3.01%2.77%
Investments         
In U.S. offices