-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rx1tak7LT8NtHLl+GC634emTQUd9etcDb+KaMpqNa594Vt4YrcdrnJ51mQAiOcSW zb1+IM0FnJrFISxZnWyBaQ== /in/edgar/work/20000811/0001005477-00-005689/0001005477-00-005689.txt : 20000921 0001005477-00-005689.hdr.sgml : 20000921 ACCESSION NUMBER: 0001005477-00-005689 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIGROUP INC CENTRAL INDEX KEY: 0000831001 STANDARD INDUSTRIAL CLASSIFICATION: [6021 ] IRS NUMBER: 521568099 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09924 FILM NUMBER: 694903 BUSINESS ADDRESS: STREET 1: 153 E 53RD ST CITY: NEW YORK STATE: NY ZIP: 10043 BUSINESS PHONE: 2125591000 MAIL ADDRESS: STREET 1: 153 E 53RD ST CITY: NEW YORK STATE: NY ZIP: 10043 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS GROUP INC DATE OF NAME CHANGE: 19950519 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS INC DATE OF NAME CHANGE: 19940103 FORMER COMPANY: FORMER CONFORMED NAME: PRIMERICA CORP /NEW/ DATE OF NAME CHANGE: 19920703 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 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 (I.R.S. Employer incorporation or organization) Identification No.) 153 East 53rd Street, New York, New York 10043 (Address of principal executive offices) (Zip Code) (212) 559-1000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: Common stock outstanding as of July 31, 2000: 4,497,705,841 (adjusted to give effect to the four-for-three stock split payable on August 25, 2000) Now available on the Web at www.citigroup.com Citigroup Inc. TABLE OF CONTENTS ----------------- Part I - Financial Information Item 1. Financial Statements: Page No. -------- Consolidated Statement of Income (Unaudited) - Three and Six Months Ended June 30, 2000 and 1999 35 Consolidated Statement of Financial Position - June 30, 2000 (Unaudited) and December 31, 1999 36 Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - Six Months Ended June 30, 2000 and 1999 37 Consolidated Statement of Cash Flows (Unaudited) - Six Months Ended June 30, 2000 and 1999 38 Notes to Consolidated Financial Statements (Unaudited) 39 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1 - 34 Item 3. Quantitative and Qualitative Disclosures About Market Risk 26 - 29 44 - 45 Part II - Other Information Item 2. Changes in Securities and Use of Proceeds 48 Item 4. Submission of Matters to a Vote of Security Holders 48 Item 6. Exhibits and Reports on Form 8-K 48 Signatures 49 Exhibit Index 50 CITIGROUP INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS Business Focus The table below shows the core income (loss) for each of Citigroup's businesses:
Three Months Ended June 30, Six Months Ended June 30, --------------------------------------------------------------------- In millions of dollars, except per share data 2000 1999 (1) 2000 1999 (1) - ------------------------------------------------------------------------------------------------------------------------------------ Global Consumer Citibanking North America $ 138 $ 102 $ 275 $ 173 Mortgage Banking 66 52 127 111 North America Cards 308 279 604 557 CitiFinancial 117 78 229 149 --------------------------------------------------------------------- Total Banking/Lending 629 511 1,235 990 --------------------------------------------------------------------- Travelers Life and Annuity 202 173 389 320 Primerica Financial Services 125 113 244 223 Personal Lines 82 79 157 162 --------------------------------------------------------------------- Total Insurance 409 365 790 705 --------------------------------------------------------------------- Europe, Middle East & Africa 92 73 194 141 Asia Pacific 183 108 357 210 Latin America 41 41 111 88 --------------------------------------------------------------------- Total International 316 222 662 439 --------------------------------------------------------------------- e-Consumer (2) (46) (28) (115) (51) Other (28) (23) (56) (39) --------------------------------------------------------------------- Total Global Consumer 1,280 1,047 2,516 2,044 --------------------------------------------------------------------- Global Corporate and Investment Bank Salomon Smith Barney 641 610 1,598 1,258 --------------------------------------------------------------------- Emerging Markets 370 286 762 601 Global Relationship Banking 259 147 499 334 --------------------------------------------------------------------- Total Global Corporate Bank 629 433 1,261 935 --------------------------------------------------------------------- Commercial Lines Insurance 267 201 507 390 --------------------------------------------------------------------- Total Global Corporate and Investment Bank 1,537 1,244 3,366 2,583 --------------------------------------------------------------------- Global Investment Management and Private Banking SSB Citi Asset Management Group and Global Retirement Services 93 84 185 165 Global Private Bank 79 71 160 126 --------------------------------------------------------------------- Total Global Investment Management and Private Banking 172 155 345 291 --------------------------------------------------------------------- Corporate/Other (199) (120) (455) (261) e-Citi (2) (17) (11) (31) (16) --------------------------------------------------------------------- Total Corporate/Other (216) (131) (486) (277) --------------------------------------------------------------------- Investment Activities 234 162 868 251 --------------------------------------------------------------------- Core income 3,007 2,477 6,609 4,892 Restructuring-related items, after-tax (3) (2) (29) (14) 45 Cumulative effect of accounting changes (4) - - - (127) --------------------------------------------------------------------- Net income $3,005 $2,448 $6,595 $4,810 - ---------------------------------------------------------------===================================================================== Diluted earnings per share (5) Core income $0.65 $0.53 $1.43 $1.05 Net income 0.65 0.52 1.43 1.03 - ---------------------------------------------------------------=====================================================================
(1) Reclassified to conform to the current period's presentation. (2) Previously shown as part of e-Citi and presented in the Global Consumer segment. (3) The 2000 second quarter and six months include accelerated depreciation of $19 million and $31 million, respectively, new charges of $14 million and a $31 million credit for the reversal of prior charges. The 1999 second quarter and six months include accelerated depreciation of $29 million and $80 million, respectively, and in the six-month period, a $125 million credit for the reversal of prior charges. See Note 7 of Notes to Consolidated Financial Statements. (4) Accounting changes include the 1999 first quarter adoption of Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" of ($135) million; SOP 98-7, "Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk" of $23 million; and SOP 98-5, "Reporting on the Costs of Start-Up Activities" of ($15) million. See Note 2 of Notes to Consolidated Financial Statements. (5) Earnings per share have been adjusted to reflect the four-for-three split in Citigroup's common stock, payable on August 25, 2000. See Note 1 of Notes to Consolidated Financial Statements. - -------------------------------------------------------------------------------- 1 Income Analysis The income analysis reconciles amounts shown in the Consolidated Statement of Income on page 35 to the basis presented in the business segment discussions.
Three Months Ended June 30, Six Months Ended June 30, --------------------------------------------------------------------- In millions of dollars 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $15,904 $14,380 $32,888 $28,450 Effect of credit card securitization activity 469 570 988 1,158 --------------------------------------------------------------------- Adjusted revenues, net of interest expense 16,373 14,950 33,876 29,608 --------------------------------------------------------------------- Total operating expenses 8,242 7,524 16,568 14,845 Restructuring-related items (3) (47) (23) 83 --------------------------------------------------------------------- Adjusted operating expenses 8,239 7,477 16,545 14,928 --------------------------------------------------------------------- Operating margin 8,134 7,473 17,331 14,680 --------------------------------------------------------------------- Provisions for benefits, claims, and credit losses 3,018 2,941 6,020 5,718 Effect of credit card securitization activity 469 570 988 1,158 --------------------------------------------------------------------- Adjusted provisions for benefits, claims, and credit losses 3,487 3,511 7,008 6,876 --------------------------------------------------------------------- Core income before income taxes and minority interest 4,647 3,962 10,323 7,804 Taxes on core income 1,617 1,420 3,636 2,787 Minority interest, net of income taxes 23 65 78 125 --------------------------------------------------------------------- Core income 3,007 2,477 6,609 4,892 Restructuring-related items, after-tax (2) (29) (14) 45 --------------------------------------------------------------------- Income before cumulative effect of accounting changes 3,005 2,448 6,595 4,937 Cumulative effect of accounting changes - - - (127) --------------------------------------------------------------------- Net income $ 3,005 $ 2,448 $ 6,595 $ 4,810 - ---------------------------------------------------------------=====================================================================
Results of Operations Citigroup reported core income of $3.007 billion or $0.65 per diluted common share in the 2000 second quarter, up 21% and 23%, respectively, from $2.477 billion or $0.53 in the 1999 second quarter. Core income excluded charges of $2 million and $29 million in the second quarter of 2000 and 1999, respectively, for after-tax restructuring-related items. Net income for the 2000 second quarter was $3.005 billion or $0.65 per diluted share, up 23% and 25%, respectively, from $2.448 billion or $0.52 for the year-ago quarter. Core income return on common equity was 24.8% compared to 23.2% a year ago. Core income for the 2000 six months of $6.609 billion or $1.43 per diluted common share was up 35% and 36%, respectively, from $4.892 billion or $1.05 in the 1999 six months. Core income in the 2000 six months excluded a charge of $14 million for after-tax restructuring-related items. Core income in the 1999 six months excluded a credit of $45 million for after-tax restructuring-related items and a charge of $127 million reflecting the cumulative effect of adopting several new accounting standards as described in Note 2 of Notes to the Consolidated Financial Statements. Net income for the 2000 six months was $6.595 billion or $1.43 per diluted share, up 37% and 39%, respectively, from $4.810 billion or $1.03 a year ago. Core income return on common equity was 27.3% compared to 23.4% a year ago. The Board of Directors on July 18, 2000 declared a four-for-three split in Citigroup's common stock, which is payable in the form of a 33 1/3% stock dividend on August 25, 2000 to stockholders of record on August 7, 2000. Current and prior-year information has been restated to reflect this split. The Board of Directors also approved an increase in the quarterly common stock dividend from 12 to 14 cents per share on a post-split basis (from 16 to 18 2/3 cents per share on a pre-split basis), payable August 25, 2000 to stockholders of record on August 7, 2000. Core income growth in the 2000 second quarter and six months was led by Global Corporate and Investment Bank, which, when compared to 1999, improved $293 million or 24% in the second quarter and $783 million or 30% in the six months, and Global Consumer, which was up $233 million or 22% and $472 million or 23%, in the respective 2000 periods compared to 1999, reflecting strong growth in most businesses. Global Investment Management and Private Banking grew $17 million or 11% and $54 million or 19% in the quarter and six months, respectively, primarily reflecting acquisitions in the Global Retirement Services business and volume-related growth in customer revenue, partially offset by increased business development expenses. Investment Activities core income was up $72 million and $617 million from the 1999 second quarter and six months, primarily reflecting strong venture capital results and higher levels of realized gains on sales of investments. The decreases in Corporate/Other included higher treasury costs, and in the six-month period a contribution made to the Citigroup Foundation. Global Corporate and Investment Bank core income growth in the 2000 second quarter and six months compared to 1999 was driven by revenue growth in Private Client revenues, transaction services and structured products, and Commercial Lines price improvements. Core income growth was $112 million or 76% in Global Relationship Banking (GRB), $84 million or 29% in Emerging Markets, $66 million or 33% in Commercial Lines, and $31 million or 5% in Salomon Smith Barney (SSB) in the 2000 second quarter. For the six months, SSB improved $340 million or 27%, GRB was up $165 million or 49%, Emerging Markets was 2 up $161 million or 27%, and Commercial Lines was up $117 million or 30%. Global Consumer increases were driven by improvement in the global cards business and strong sales of investment products across most businesses. In the 2000 second quarter, Banking/Lending core income increased $118 million or 23% from 1999 reflecting the continued strong performance of CitiFinancial (up $39 million or 50%), Citibanking North America (up $36 million or 35%), and North America Cards (up $29 million or 10%). The International businesses core income grew $94 million or 42% from the 1999 second quarter, marked by an especially strong performance in Asia Pacific (up $75 million or 69%), and Insurance improved $44 million or 12%, led primarily by Travelers Life and Annuity (TLA) (up $29 million or 17%). Global Consumer growth in the 2000 six months was led by Banking/Lending, up $245 million or 25% from 1999, with Citibanking North America up $102 million or 59%, CitiFinancial up $80 million or 54%, and North America Cards up $47 million or 8%. Also, the International businesses in the 2000 six months were up $223 million or 51% (Asia Pacific up $147 million or 70%, Europe, Middle East, and Africa up $53 million or 38% and Latin America up $23 million or 26%), and Insurance improved $85 million or 12% (TLA up $69 million or 22%). Adjusted revenues, net of interest expense, of $16.4 billion and $33.9 billion in the 2000 second quarter and six months, respectively, were up $1.4 billion or 10% and $4.3 billion or 14% from the 1999 periods. Global Corporate and Investment Bank revenues of $7.9 billion in the 2000 quarter and $16.1 billion in the 2000 six months were up $893 million or 13% and $2.0 billion or 14% from 1999. The increases were led by SSB, up $424 million or 13% and $1.3 billion or 19%, driven by growth in fee-based Private Client revenues, commissions, investment banking fees, and earnings from the investment in Nikko Securities Co., Ltd. GRB was up $227 million or 22% in the 2000 second quarter and $317 million or 15% in the 2000 six months, primarily due to growth in transaction services, equity derivatives and structured products, and Emerging Markets was up $174 million or 16% and $269 million or 12% reflecting broad-based growth in transaction services and structured products. Commercial Lines revenues grew $68 million or 4% and $102 million or 3% reflecting incremental earnings from the minority interest buyback of Travelers Property Casualty Corp. (TAP), higher net investment income, and favorable pricing, partially offset by increased loss trends. Global Consumer revenues were up $417 million or 6% in the quarter to $7.5 billion, and up $1.2 billion or 9% in the six months to $15.1 billion, led by Insurance, up $188 million or 8% and $511 million or 11% in the quarter and six months, respectively. Insurance growth was driven by TLA, whose double digit volume growth in individual annuities and higher net investment revenues increased $116 million or 13% in the 2000 second quarter and $355 million or 22% year-to-date. Banking/Lending revenues grew $143 million or 5% and $383 million or 6% in the quarter and six months, led by CitiFinancial which increased $78 million or 20% and $179 million or 24%, primarily due to strong growth in receivables, and Citibanking North America, which was up $53 million or 10% and $122 million or 12%, reflecting higher customer deposit spreads and volumes, and higher investment product sales, partially offset by lower loan revenues. International revenues were up $130 million or 8% and $383 million or 12%, primarily due to growth in Asia Pacific. Global Investment Management and Private Banking revenues of $818 million in the quarter and $1.6 billion in the six months were up $159 million or 24% and $321 million or 25% from the 1999 periods, primarily from acquisitions and growth in both assets and client business volumes under management. Revenues in Investment Activities increased $117 million and $980 million from the 1999 second quarter and six months, respectively, primarily reflecting increases in venture capital results and realized gains on investments, and in the 2000 six months, were partially offset by losses in insurance-related investments from repositioning activities and writedowns in the refinancing portfolio. Net interest revenue, as calculated from the Consolidated Statements of Income, rose 7% to $5.4 billion in the 2000 second quarter and $10.5 billion in the six months, up $346 million and $673 million, respectively, from the comparable 1999 periods, reflecting business volume growth in most markets. Net interest revenue, adjusted for the effect of credit card securitization of $6.2 billion and $12.4 billion in the quarter and six months, was up $170 million or 3% and $432 million or 4% from the 1999 periods. Adjusted commissions, asset management and administration fees, and other fee revenues of $5.2 billion in the quarter and $10.4 billion in the six months were up $1.0 billion or 24% and $2.5 billion or 31% from 1999, primarily as a result of volume-related growth in customer trading activities, assets under fee-based management and investment banking fees and the impact of recent acquisitions. Insurance premiums of $2.7 billion and $5.5 billion in the quarter and six months were up $117 million or 4% and $308 million or 6%, reflecting strong growth in TLA. Principal transactions revenues of $1.4 billion and $3.2 billion for the quarter and six months were up $163 million or 13% and $116 million or 4% from the year-ago periods, reflecting strong results in GRB in both 2000 periods, partially offset by lower results in SSB and Emerging Markets. Realized gains from sales of investments were up $92 million to $280 million in the quarter and were down $130 million to $111 million in the six months, primarily reflecting realized gains in both periods and partially offset by writedowns in the refinancing portfolio and the repositioning of the Insurance portfolio in the year-to-date period. Other income as shown in the Consolidated Statement of Income of $942 million in the quarter was down $199 million from the 1999 second quarter reflecting lower net asset gains and credit card securitization revenues, but was up $1.0 billion to $3.2 billion in the six months, primarily reflecting higher venture capital results. Adjusted operating expenses of $8.2 billion and $16.5 billion for the 2000 second quarter and six months, which exclude restructuring-related items, were up $762 million or 10% in the quarter and $1.6 billion or 11% in the six months compared to 1999. Global Corporate and Investment Bank expenses were up 13% in the quarter and 10% in the six months, primarily attributable to production-related compensation, increased business volumes, and costs associated with newly acquired businesses, and were partially offset by lower year 2000 expenses in the GRB. Global Consumer expenses increased 5% in the second quarter and 7% in the six months, reflecting an increase in sales-related expenses, higher business volume and expansion initiatives, and charges related to the termination of certain contracts and initiatives at e-Consumer. Global Investment Management and Private Banking expenses increased 33% and 27% from the year-ago quarter and six-month periods, primarily reflecting acquisitions in the 3 Global Retirement Services business and higher costs associated with the continued expansion of sales and marketing efforts and investments in technology. Corporate/Other expenses decreased $22 million in the quarter, but increased $194 million in the six months, primarily reflecting a $108 million pretax expense (which had minimal impact on Citigroup's earnings after related tax benefits and investment gains) for the contribution of appreciated venture capital securities to the Company's Foundation. Adjusted provisions for benefits, claims, and credit losses were $3.5 billion and $7.0 billion in the 2000 second quarter and six months, decreasing $24 million in the quarter and increasing $132 million year-to-date. Policyholder benefits and claims increased 7% from the 1999 quarter to $2.3 billion, and were up 9% to $4.6 billion for the 2000 six months, primarily as a result of increased volume at TLA. The adjusted provision for credit losses decreased 13% in the quarter to $1.2 billion and 8% in the six months to $2.5 billion from the 1999 periods. Global Consumer managed net credit losses were $1.064 billion and the related loss ratio was 2.06% in the 2000 second quarter, down from $1.147 billion and 2.30% in the preceding quarter and $1.201 billion and 2.60% a year ago. The managed consumer loan delinquency ratio (90 days or more past due) decreased to 1.67% from 1.87% at March 31, 2000 and 2.00% a year ago. The Global Corporate and Investment Bank provision for credit losses reflected increases of $20 million in the quarter to $131 million, and $32 million in the six months to $255 million, as compared to 1999. Total capital (Tier 1 and Tier 2) was $60.4 billion or 11.12% of net risk-adjusted assets, and Tier 1 capital was $46.8 billion or 8.62% at June 30, 2000, compared to $62.5 billion or 12.47% and $49.0 billion or 9.78%, respectively, at March 31, 2000. The decreases in the capital levels and related ratios were primarily a result of an increase in net risk-adjusted assets, disallowable intangibles related to acquisitions, and a reduction in minority interest associated with the TAP buyback. GLOBAL CONSUMER
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $7,004 $6,486 8 $14,068 $12,696 11 Effect of credit card securitization activity 469 570 (18) 988 1,158 (15) ------------------------------- ------------------------------- Adjusted revenues, net of interest expense 7,473 7,056 6 15,056 13,854 9 Adjusted operating expenses (2) 3,010 2,864 5 6,101 5,691 7 ------------------------------- ------------------------------- Provisions for benefits, claims, and credit losses 1,983 1,942 2 3,999 3,727 7 Effect of credit card securitization activity 469 570 (18) 988 1,158 (15) ------------------------------- ------------------------------- Adjusted provisions for benefits, claims, and credit losses 2,452 2,512 (2) 4,987 4,885 2 ------------------------------- ------------------------------- Core income before taxes and minority interest 2,011 1,680 20 3,968 3,278 21 Income taxes 722 612 18 1,425 1,192 20 Minority interest, after-tax 9 21 (57) 27 42 (36) ------------------------------- ------------------------------- Core income 1,280 1,047 22 2,516 2,044 23 Restructuring-related items, after-tax 11 (18) NM 7 (56) NM ------------------------------- ------------------------------- Net income $1,291 $1,029 25 $ 2,523 $ 1,988 27 - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- Global Consumer -- which provides banking, lending, investment and personal insurance products and services, including credit and charge cards, to customers around the world -- reported core income of $1.280 billion and $2.516 billion in the 2000 second quarter and six months, up $233 million or 22% and $472 million or 23% from the 1999 periods, reflecting growth in virtually all businesses. Banking/Lending core income increased $118 million or 23% in the quarter and $245 million or 25% in the six months reflecting strong performance across all businesses. In the International businesses, core income grew $94 million or 42% in the quarter and $223 million or 51% in the six months, marked by strong performance in Asia Pacific and Europe, Middle East & Africa. In Latin America, core income was unchanged in the quarter, but was up $23 million or 26% in the six months. In the Insurance segment, core income grew $44 million or 12% and $85 million or 12% from the 1999 periods. Net income of $1.291 billion and $2.523 billion in the 2000 second quarter and six months included restructuring-related credits of $11 million ($18 million pretax) and $7 million ($12 million pretax), respectively. Net income of $1.029 billion and $1.988 billion in the 1999 second quarter and six months included restructuring-related items of $18 million ($30 million pretax) and $56 million ($91 million pretax), respectively. 4 Banking/Lending Citibanking North America
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $570 $517 10 $1,145 $1,023 12 Adjusted operating expenses (2) 331 324 2 667 684 (2) Provision for credit losses 7 15 (53) 16 38 (58) ------------------------------- ------------------------------- Core income before taxes 232 178 30 462 301 53 Income taxes 94 76 24 187 128 46 ------------------------------- ------------------------------- Core income 138 102 35 275 173 59 Restructuring-related items, after-tax 8 (5) NM 8 (19) NM ------------------------------- ------------------------------- Net income $146 $ 97 51 $ 283 $ 154 84 - ------------------------------------------========================================================================================== Average assets (in billions of dollars) $9 $10 (10) $9 $10 (10) Return on assets 6.52% 3.89% 6.32% 3.11% - ------------------------------------------------------------------------------------------------------------------------------------ Excluding restructuring-related items Return on assets 6.17% 4.09% 6.14% 3.49% - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- Citibanking North America -- which delivers banking, lending, and investment services to customers through Citibank's branches and electronic delivery systems -- reported core income of $138 million and $275 million in the 2000 second quarter and six months, up $36 million or 35% and $102 million or 59% from the 1999 periods, primarily driven by revenue growth. Net income of $146 million and $283 million in the 2000 second quarter and six months included restructuring-related credits of $8 million ($14 million pretax) in both periods. Net income of $97 million and $154 million in the 1999 second quarter and six months included restructuring-related charges of $5 million ($9 million pretax) and $19 million ($31 million pretax), respectively. As shown in the following table, Citibanking grew accounts and customer deposits from 1999. Loans declined from a year ago as loan repayments exceeded loan originations.
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In billions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Accounts (in millions) 6.4 6.0 7 6.4 6.0 7 Average customer deposits $44.3 $42.2 5 $43.9 $41.9 5 Average loans $ 7.1 $ 7.6 (7) $ 7.2 $ 7.6 (5) - ------------------------------------------==========================================================================================
Revenues, net of interest expense, of $570 million and $1.145 billion in the 2000 second quarter and six months increased $53 million or 10% and $122 million or 12% from the 1999 periods reflecting higher customer deposit spreads and volumes and higher investment product sales, and were partially offset by lower loan revenues. Investment product fees and commissions increased by 22% and 37% from the 1999 second quarter and six months. Adjusted operating expenses increased $7 million or 2% in the quarter and declined $17 million or 2% in the six months reflecting higher variable compensation due to an increased sales force and higher investment product sales, partially offset by lower marketing expenses, and in the six months reflecting reduced fixed costs. The provision for credit losses declined to $7 million and $16 million in the 2000 second quarter and six months from $15 million and $38 million in the 1999 periods. The net credit loss ratio of 0.86% in the 2000 second quarter declined from 0.98% in the 2000 first quarter and 1.21% a year ago. Loans delinquent 90 days or more of $33 million or 0.46% of loans at June 30, 2000 continued to improve from $48 million or 0.67% at March 31, 2000 and $92 million or 1.22% a year ago. The declines in the provision for credit losses and delinquencies reflect continued improvement in the portfolio and a decline in loan volumes. 5 Mortgage Banking
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $206 $183 13 $410 $352 16 Total operating expenses 94 84 12 185 145 28 (Benefit) provision for credit losses (4) 5 NM 1 8 (88) ------------------------------- ------------------------------- Income before taxes and minority interest 116 94 23 224 199 13 Income taxes 44 37 19 86 78 10 Minority interest, after-tax 6 5 20 11 10 10 ------------------------------- ------------------------------- Net income $ 66 $ 52 27 $127 $111 14 - ------------------------------------------========================================================================================== Average assets (in billions of dollars) $35 $29 21 $34 29 17 Return on assets 0.76% 0.72% 0.75% 0.77% - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. NM Not meaningful - -------------------------------------------------------------------------------- Mortgage Banking -- which originates and services mortgages and student loans for customers across North America -- reported net income of $66 million and $127 million in the 2000 second quarter and six months, up $14 million or 27% and $16 million or 14% from the 1999 periods, reflecting growth in both the mortgage and student loan businesses, including the effect of the April 1999 acquisition of the principal operating assets and certain liabilities of Source One Mortgage Services Corporation (Source One). As shown in the following table, accounts and loans increased from the 1999 periods reflecting growth in both student loans and mortgages. Accounts reflect growth in student loans and serviced mortgage accounts. Average loans also reflect student loan growth and an increase in on-balance sheet mortgages. Mortgage originations declined as a result of the higher interest rate environment; however, a larger proportion of the originations are at variable interest rates which are typically held on-balance sheet rather than securitized.
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In billions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Accounts (in millions) (1) 3.9 3.0 30 3.9 3.0 30 Average loans (1) $33.1 $27.3 21 $32.0 $27.0 19 Mortgage originations $ 4.8 $ 4.9 (2) $ 8.2 $ 8.7 (6) - ------------------------------------------==========================================================================================
(1) Includes student loans. - -------------------------------------------------------------------------------- Revenues, net of interest expense, of $206 million and $410 million in the 2000 second quarter and six months grew $23 million or 13% and $58 million or 16% from the 1999 periods, reflecting higher mortgage servicing revenues, offset by lower securitization gains. Revenue increases also reflect the effect of Source One and growth in the student loan portfolio. Operating expenses increased $10 million or 12% and $40 million or 28% from the 1999 periods primarily due to Source One. The (benefit) provision for credit losses of ($4) million and $1 million in the 2000 second quarter and six months declined from $5 million and $8 million in the 1999 periods. The net credit loss ratio of 0.05% in the 2000 second quarter declined from 0.14% in the 2000 first quarter and 0.17% a year ago, reflecting improvement in the mortgage portfolio. Loans delinquent 90 days or more were $709 million or 1.98% of loans at June 30, 2000, compared with $719 million or 2.29% at March 31, 2000 and $575 million or 2.09% a year ago. The increase in delinquent loans from a year ago reflects higher student loan volumes and a statutory increase in the length of time Citigroup must hold delinquent government-guaranteed student loans prior to submitting a claim under the government guarantee. 6 North America Cards
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $1,500 $1,410 6 $2,977 $2,783 7 Effect of credit card securitization activity 469 570 (18) 988 1,158 (15) ------------------------------- ------------------------------- Adjusted revenues, net of interest expense 1,969 1,980 (1) 3,965 3,941 1 Adjusted operating expenses (2) 720 712 1 1,448 1,422 2 Adjusted provision for credit losses (3) 758 825 (8) 1,557 1,636 (5) ------------------------------- ------------------------------- Core income before taxes 491 443 11 960 883 9 Income taxes 183 164 12 356 326 9 ------------------------------- ------------------------------- Core income 308 279 10 604 557 8 Restructuring-related items, after-tax 4 - NM 4 - NM ------------------------------- ------------------------------- Net income $ 312 $ 279 12 $ 608 $ 557 9 - ------------------------------------------========================================================================================== Average assets (in billions of dollars)(4) $35 $28 25 $33 $29 14 Return on assets 3.59% 4.00% 3.71% 3.87% - ------------------------------------------========================================================================================== Excluding restructuring-related items Return on assets (5) 3.54% 4.00% 3.68% 3.87% - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. (3) Adjusted for the effect of credit card securitization. (4) Adjusted for the effect of credit card securitization, managed average assets were $81 billion and $80 billion in the 2000 second quarter and six months, respectively, compared to $75 billion and $74 billion in the 1999 second quarter and six months, respectively. (5) Adjusted for the effect of credit card securitization, the return on managed assets, excluding restructuring-related items, was 1.53% and 1.49% in the second quarters of 2000 and 1999 and 1.52% for the six months of both 2000 and 1999. NM Not meaningful - -------------------------------------------------------------------------------- North America Cards -- U.S. bankcards, Canada bankcards, and North America Diners Club -- reported core income of $308 million and $604 million in the 2000 second quarter and six months, up $29 million or 10% and $47 million or 8% from the 1999 periods, principally reflecting an increase in the U.S. bankcards business. Net income of $312 million and $608 million in the 2000 second quarter and six months included restructuring-related credits of $4 million ($5 million pretax) in both periods. Risk adjusted margin is a measure of profitability calculated as adjusted revenues less managed net credit losses as a percentage of average managed loans, consistent with the goal of matching the revenues generated by the loan portfolio with the credit risk undertaken. As shown in the following table, U.S. bankcards risk adjusted margin of 6.02% and 6.07% in the 2000 second quarter and six months declined 19 basis points and 26 basis points from the 1999 periods, respectively, reflecting lower spreads offset by credit improvements and an increase in non-interest revenues, primarily interchange fees.
Three Months Ended June 30, Six Months Ended June 30, --------------------------------------------------------------------- In billions of dollars 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Risk adjusted revenues (1) $1.125 $1.076 $2.226 2.147 Risk adjusted margin % (2) 6.02% 6.21% 6.07% 6.33% - ---------------------------------------------------------------=====================================================================
(1) Adjusted revenues less managed net credit losses. (2) Risk adjusted revenues as a percentage of average managed loans. - -------------------------------------------------------------------------------- Adjusted revenues, net of interest expense, of $1.969 billion and $3.965 billion in the 2000 second quarter and six months declined $11 million or 1% from the 1999 second quarter, but increased $24 million or 1% from the 1999 six months as higher interchange fee revenues from sales volume growth and increased fees from cardmember enhancement services were offset by lower spreads. Spread compression in the portfolio principally reflects changes in portfolio mix, including an increased percentage of the portfolio priced at low introductory rates, and higher funding costs due to increased interest rates. Spread compression may continue in 2000 as a result of a higher interest rate environment and continued competitive pressures. This paragraph contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. 7 As shown in the following table, on a managed basis, the U.S. bankcard portfolio experienced a 19% growth in sales volume and a 13% growth in receivables in the 2000 second quarter. Account growth of 2% from the 1999 second quarter reflects new account acquisitions offset by cardmember attrition.
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In billions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Accounts (in millions) 42.1 41.1 2 42.1 41.1 2 Total sales $48.4 $40.8 19 $90.7 $77.6 17 End-of-period managed receivables $79.1 $70.3 13 $79.1 $70.3 13 - ------------------------------------------==========================================================================================
The adjusted provision for credit losses was $758 million and $1.557 billion in the 2000 second quarter and six months, down from $825 million and $1.636 billion in the 1999 periods. U.S. bankcards managed net credit losses in the 2000 second quarter were $740 million and the related loss ratio was 3.96%, down from $782 million and 4.35% in the 2000 first quarter and $803 million and 4.63% in the 1999 second quarter. U.S. bankcards managed loans delinquent 90 days or more were $922 million or 1.18% of loans at June 30, 2000, compared with $1.058 billion or 1.45% at March 31, 2000 and $954 million or 1.36% at June 30, 1999. The improvement in the net credit loss ratio from a year ago reflects stable industry-wide bankruptcy trends and continued credit risk management initiatives. CitiFinancial
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $474 $396 20 $936 $757 24 Adjusted operating expenses (2) 187 154 21 375 298 26 Provisions for benefits, claims and credit losses 102 117 (13) 199 221 (10) ------------------------------- ------------------------------- Core income before taxes 185 125 48 362 238 52 Income taxes 68 47 45 133 89 49 ------------------------------- ------------------------------- Core income 117 78 50 229 149 54 Restructuring-related items, after-tax - - - - (1) NM ------------------------------- ------------------------------- Net income $117 $ 78 50 $229 $148 55 - ------------------------------------------========================================================================================== Average assets (in billions of dollars) $19 $15 27 $19 15 27 Return on assets 2.48% 2.09% 2.42% 1.99% - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- CitiFinancial -- which provides community based lending services through its branch network and through cross-selling initiatives with other Citigroup businesses -- reported core income of $117 million and $229 million in the 2000 second quarter and six months, up $39 million or 50% and $80 million or 54% from the 1999 periods, reflecting lower credit costs and strong business volume growth. As shown in the following table, receivables grew 23% from the 1999 second quarter due to higher volumes at CitiFinancial branches and cross selling of products through other Citigroup distribution channels. The average net interest margin on receivables of 8.16% in the 2000 second quarter and 8.26% in the 2000 six months declined 83 and 66 basis points, respectively, from the 1999 periods reflecting a continued shift in the portfolio mix toward lower yielding real estate loans and higher funding costs due to increased interest rates. At June 30, 2000, the portfolio consisted of 59% real estate-secured loans, 34% personal loans, and 7% sales finance and other compared with 56%, 36%, and 8%, respectively, at June 30, 1999.
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- Increase/ ------------------------------- Increase/ 2000 1999 Decrease 2000 1999 Decrease - ------------------------------------------------------------------------------------------------------------------------------------ End-of-period receivables (in billions) (1) $16.7 $13.6 23% $16.7 $13.6 23% Average net interest margin % 8.16% 8.99% (83) bps 8.26% 8.92% (66) bps - ------------------------------------------------------------------------------------------------------------------------------------
(1) Excludes $0.6 billion of loans held for sale in the 2000 periods. - -------------------------------------------------------------------------------- Revenues, net of interest expense, of $474 million and $936 million in the 2000 second quarter and six months increased $78 million or 20% and $179 million or 24% from the 1999 periods. Adjusted operating expenses of $187 million and $375 million in the 2000 second quarter and six months grew $33 million or 21% and $77 million or 26% from the 1999 periods. The increase in both revenues and expenses principally reflects strong growth in receivables. The provisions for benefits, claims, and credit losses were $102 million and $199 million in the 2000 second quarter and six months, down from $117 million and $221 million in the 1999 periods. Net credit losses in the 2000 second quarter were $80 million and 8 the related loss ratio was 1.93%, compared with $76 million and 1.92% in the 2000 first quarter and $70 million and 2.14% a year ago. The 2000 first and second quarters net credit loss ratios included a benefit of approximately 27 basis points in each period, related to changes in the write-off policy for certain bankrupt accounts. Loans delinquent 90 days or more were $229 million or 1.32% of loans at June 30, 2000, compared with $216 million or 1.33% at March 31, 2000 and $172 million or 1.26% a year ago. The increase in delinquencies from a year ago reflects the impact of previous acquisitions. Insurance Travelers Life and Annuity
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $983 $867 13 $1,993 $1,638 22 Provision for benefits and claims 586 494 19 1,189 936 27 Total operating expenses 97 110 (12) 223 217 3 ------------------------------- ------------------------------- Income before taxes 300 263 14 581 485 20 Income taxes 98 90 9 192 165 16 ------------------------------- ------------------------------- Net income (1) $202 $173 17 $ 389 $ 320 22 - ------------------------------------------==========================================================================================
(1) Excludes investment gains/losses included in Investment Activities segment. - -------------------------------------------------------------------------------- Travelers Life and Annuity -- whose core offerings include individual annuity, group annuity and individual life insurance -- reported net income of $202 million and $389 million in the 2000 second quarter and six months, respectively, up from $173 million and $320 million in the comparable periods of 1999. The improvements in 2000 reflect increased business volume and particularly strong investment income versus the prior-year periods. During the first half of 2000, this business achieved double-digit business volume growth in individual annuity account balances and life premiums versus the prior-year reflecting growth in retirement savings and estate planning products and strong momentum from cross-selling initiatives. Total operating expenses decreased in the second quarter of 2000 compared to the prior-year period due to the contribution of The Copeland Companies (Copeland) to the CitiStreet joint venture. The increase in revenues was also mitigated by the contribution of Copeland. The cross-selling initiative of Travelers Life and Annuity products through the Primerica Financial Services (Primerica), Citibank, and Salomon Smith Barney Financial Consultants distribution channels, along with improved sales through CitiStreet via Copeland, and a nationwide network of independent agents and strong group sales through various intermediaries reflects the ongoing effort to build market share by strengthening relationships in key distribution channels. On July 31, 2000, the Company sold 90% of its individual long-term care insurance business to General Electric Capital Assurance Company in the form of an indemnity reinsurance arrangement. The following table shows net written premiums and deposits by product line, excluding long-term care insurance written premiums:
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Individual annuities Fixed $ 302 $ 250 21 $ 596 $ 444 34 Variable 1,259 1,048 20 2,504 2,024 24 Individual payout 22 16 36 42 36 16 GICs and other group annuities 1,439 1,609 (11) 2,896 3,469 (17) Individual life insurance Direct periodic premiums and deposits 113 86 31 230 171 34 Single premium deposits 21 21 - 39 37 5 Reinsurance (20) (18) (11) (39) (34) (15) ------------------------------- ------------------------------- $3,136 $3,012 4 $6,268 $6,147 2 - ------------------------------------------==========================================================================================
The majority of the annuity business and a substantial portion of the life business written by Travelers Life and Annuity are accounted for as investment contracts, with the result that the premiums and deposits collected are not included in revenues. Increased individual annuities sales, combined with favorable market returns from variable annuities, drove account balances to $29.5 billion at June 30, 2000, up 22% from $24.2 billion at June 30, 1999. Net written premiums and deposits for individual annuities increased 20% and 25% in the second quarter and six months of 2000 to $1.583 billion and $3.142 billion, respectively, from $1.314 billion and $2.504 billion in the comparable periods of 1999. The strong sales reflect the marketing initiatives at both Salomon Smith Barney and Primerica and Copeland's penetration of the small company segment of the 401(k) market, as well as strong core agent production. 9 Group annuity account balances and benefit reserves reached $15.8 billion at June 30, 2000, up 4% from $15.2 billion at the end of the 1999 second quarter. The group annuity businesses experienced continued strong sales momentum in variable rate guaranteed investment contracts, employer sponsored group plans and cross-selling structured settlement annuities through TAP. Net written premiums and deposits (excluding Citigroup's employee pension plan deposits) were $1.439 billion and $2.896 billion in the second quarter and six months of 2000, respectively, compared to $1.609 billion and $3.469 in the comparable periods of 1999. Direct periodic premiums and deposits for individual life insurance of $113 million and $230 million in the second quarter and six months of 2000, respectively, were 31% and 34% ahead of the $86 million and $171 million for the comparable periods of 1999 reflecting strong core agency results and the introduction in the fourth quarter of 1999 of a new corporate-owned life insurance product. Life insurance in force was $63.2 billion at June 30, 2000, up from $60.6 billion at year-end 1999 and $57.7 billion at June 30, 1999. Primerica Financial Services
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $479 $443 8 $951 $875 9 Provision for benefits and claims 126 121 4 251 241 4 Adjusted operating expenses (1) 159 146 9 321 288 11 ------------------------------- ------------------------------- Core Income before taxes 194 176 10 379 346 10 Income taxes 69 63 10 135 123 10 ------------------------------- ------------------------------- Core Income 125 113 11 244 223 9 Restructuring-related items, after-tax 1 - NM 1 - NM ------------------------------- ------------------------------- Net income (2) $126 $113 12 $245 $223 10 - ------------------------------------------==========================================================================================
(1) Excludes restructuring-related items. (2) Excludes investment gains/losses included in Investment Activities segment. NM Not meaningful - -------------------------------------------------------------------------------- Primerica Financial Services -- which sells life insurance as well as other products manufactured by the Company, including Salomon Smith Barney mutual funds, CitiFinancial mortgages and personal loans and Travelers Insurance Company annuity products -- reported core income of $125 million and $244 million in the 2000 second quarter and six months, respectively, up from $113 million and $223 million in the comparable periods of 1999. The improvement in 2000 reflects strong mutual fund sales and net investment income and was partially offset by increased infrastructure investment including international expansion scheduled for later in the year. Increases in total production and cross-selling initiatives were achieved during the 2000 second quarter and six months. Earned premiums, net of reinsurance, were $277 million and $548 million in the 2000 second quarter and six months, respectively, up from $269 million and $536 million in the comparable periods of 1999. Total face amount of issued term life insurance was $18.5 billion and $33.5 billion in the 2000 second quarter and six months, respectively, compared to $15.5 billion and $29.1 billion in the prior-year periods. Life insurance in force reached $403.6 billion at June 30, 2000, up from $394.9 billion at year-end 1999 and $391.7 billion at June 30, 1999, and continued to reflect good policy persistency. In recent years, Primerica has leveraged cross selling through the Financial Needs Analysis (FNA) -- the diagnostic tool that enhances the ability of the Personal Financial Analysts to address client needs -- to expand its business beyond life insurance and now offers its clients a greater array of financial products and services, delivered personally through more than 100,000 independent representatives. During the 2000 six months, more than 220,000 FNA's were submitted. Variable annuity sales continued to show momentum with net written premiums and deposits of $248 million and $498 million in the 2000 second quarter and six months, respectively, compared to $279 million and $502 million in the prior-year periods. As a result of the increased emphasis placed on cross-selling initiatives, sales of Travelers Life and Annuity variable annuity products in the 2000 second quarter and six months accounted for 96% and 95%, respectively, of total variable annuity sales. Cash advanced on $.M.A.R.T. loan(R) and $.A.F.E.(R) loan products underwritten by Travelers Bank & Trust, fsb and CitiFinancial, respectively, was $476 million and $968 million in the 2000 second quarter and six months, respectively, compared to $493 million and $912 million in the comparable periods last year. Mutual fund sales were $1.15 billion and $2.34 billion for the 2000 second quarter and six months, respectively, 42% and 47% ahead of last year's second quarter and six months. During the 2000 six months, proprietary mutual funds accounted for 47% of Primerica's U.S. sales and 40% of total sales. 10 Personal Lines
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $1,041 $1,005 4 $2,068 $1,988 4 Claims and claim adjustment expenses 667 627 6 1,321 1,221 8 Total operating expenses 253 242 5 501 488 3 ------------------------------- ------------------------------- Income before taxes and minority interest 121 136 (11) 246 279 (12) Income taxes 36 41 (12) 73 85 (14) Minority interest, after-tax (1) 3 16 (81) 16 32 (50) ------------------------------- ------------------------------- Net income (2) $ 82 $ 79 4 $ 157 $ 162 (3) - ------------------------------------------==========================================================================================
(1) See Note 1 of Notes to Consolidated Financial Statements. (2) Excludes investment gains/losses included in Investment Activities segment. - -------------------------------------------------------------------------------- Personal Lines -- which writes all types of property and casualty insurance covering personal risks -- reported net income of $82 million and $157 million in the second quarter and six months of 2000, respectively, compared to $79 million and $162 million in the prior-year periods. The 2000 results reflect increased loss trends and lower favorable prior-year reserve development, offset in part by increased net investment income. Additionally, catastrophe losses were lower in the 2000 second quarter and higher in the 2000 six months when compared to the comparable periods in 1999. Also reflected in the 2000 second quarter and six months are the incremental earnings from the minority interest buyback. The following table shows net written premiums by product line:
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Personal automobile $608 $597 2 $1,191 $1,216 (2) Homeowners and other 375 354 6 682 718 (5) ------------------------------- ------------------------------- Total net written premiums $983 $951 3 $1,873 $1,934 (3) - ------------------------------------------==========================================================================================
Personal Lines net written premiums for the 2000 second quarter and six months were $983 million and $1.873 billion, respectively, compared to $951 million and $1.934 billion in the comparable periods of 1999. Net written premiums in the 1999 first quarter included an adjustment associated with the termination of a quota share reinsurance arrangement, which increased homeowners' premiums written by independent agents by $72 million. The increase in net written premiums in the 2000 second quarter and six months compared to the 1999 periods, excluding the reinsurance adjustment, primarily reflects growth in target markets served by independent agents and growth in affinity group marketing and joint marketing arrangements and is offset in part by the curtailment of the sale of the TRAVELERS SECURE(R) auto and homeowners products, a mandated rate decrease in New Jersey and continued emphasis on disciplined underwriting and risk management. Catastrophe losses, net of taxes and reinsurance, were $17 million and $48 million in the 2000 second quarter and six months, respectively, compared to $23 million and $31 million in the comparable periods of 1999. Catastrophe losses in 2000 were primarily due to Texas, Midwest and Northeast wind and hailstorms in the second quarter and hailstorms in Louisiana and Texas in the first quarter. Catastrophe losses in 1999 were due to wind and hailstorms on the East Coast and tornadoes in the Midwest in the second quarter and a wind and ice storm in the Midwest and the Northeast in the first quarter. The statutory combined ratio for Personal Lines in the 2000 second quarter and six months was 98.1% and 98.6%, respectively, compared to 94.8% and 94.5% in the comparable periods of 1999. The GAAP combined ratio for Personal Lines in the 2000 second quarter and six months was 98.0% and 98.8%, respectively, compared to 94.7% and 93.1% in the comparable periods of 1999. GAAP combined ratios for Personal Lines differ from statutory combined ratios primarily due to the deferral and amortization of certain expenses for GAAP reporting purposes only. The increase in the statutory and GAAP combined ratios for the second quarter of 2000 compared to the statutory and GAAP combined ratios for the second quarter of 1999 was primarily due to increased loss trends and lower favorable prior-year reserve development, offset in part by lower catastrophe losses. The 1999 six months statutory and GAAP combined ratios for Personal Lines include an adjustment associated with the termination of the quota share reinsurance arrangement. Excluding this adjustment, the statutory and GAAP combined ratios for the first six months of 1999 would have been 94.1%. The increase in the statutory and GAAP combined ratios for the first six months of 2000 compared to the statutory and GAAP combined ratios (excluding the premium adjustment) for the first six months of 1999 was primarily due to increased loss trends, higher catastrophe losses and lower favorable prior-year reserve development. 11 International Consumer Europe, Middle East & Africa
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $576 $563 2 $1,169 $1,124 4 Adjusted operating expenses (2) 362 369 (2) 718 742 (3) Provisions for benefits, claims and credit losses 67 77 (13) 141 157 (10) ------------------------------- ------------------------------- Core income before taxes 147 117 26 310 225 38 Income taxes 55 44 25 116 84 38 ------------------------------- ------------------------------- Core income 92 73 26 194 141 38 Restructuring-related items, after-tax 7 (3) NM 7 (9) NM ------------------------------- ------------------------------- Net income $ 99 $ 70 41 $ 201 $ 132 52 - ------------------------------------------========================================================================================== Average assets (in billions of dollars) $21 $22 (5) $22 $22 - Return on assets 1.90% 1.28% 1.84% 1.21% - ------------------------------------------========================================================================================== Excluding restructuring-related items Return on assets 1.76% 1.33% 1.77% 1.29% - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- Europe, Middle East & Africa (EMEA - including India and Pakistan) -- which provides banking, lending, and investment services, including credit and charge cards, to customers throughout the region -- reported core income of $92 million and $194 million in the 2000 second quarter and six months, up $19 million or 26% and $53 million or 38% from the 1999 periods, reflecting growth across the region, particularly in Germany and India. Net income of $99 million and $201 million in the 2000 second quarter and six months included restructuring-related credits of $7 million ($11 million pretax) in both periods. Net income of $70 million and $132 million in the 1999 second quarter and six months included restructuring-related charges of $3 million ($5 million pretax) and $9 million ($15 million pretax), respectively. The net effects of foreign currency translation reduced core income in the 2000 second quarter and six months by approximately $16 million and $27 million from the 1999 second quarter and six months and reduced revenue growth by approximately 12% and expense growth by approximately 9% in both the 2000 second quarter and six months compared to the comparable periods of 1999. As shown in the following table, EMEA reported 9% account growth from a year ago primarily reflecting loan growth, particularly credit cards. However, loan and customer deposit growth was reduced by the effect of foreign currency translation.
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In billions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Accounts (in millions) 11.7 10.7 9 11.7 10.7 9 Average customer deposits $16.1 $17.1 (6) $16.3 $17.4 (6) Average loans $16.5 $16.4 1 $16.7 $16.6 1 - ------------------------------------------==========================================================================================
Revenues, net of interest expense, of $576 million and $1.169 billion in the 2000 second quarter and six months grew $13 million or 2% and $45 million or 4% from the 1999 periods, reflecting loan growth, improved deposit spreads, and higher investment product fees, partially offset by the effect of foreign currency translation. Adjusted operating expenses of $362 million and $718 million in the 2000 second quarter and six months were down $7 million or 2% and $24 million or 3% from the 1999 periods as costs associated with higher business volumes and franchise growth in Central and Eastern Europe were more than offset by the effect of foreign currency translation. The provisions for benefits, claims, and credit losses were $67 million and $141 million in the 2000 second quarter and six months, down from $77 million and $157 million in the 1999 periods. Net credit losses in the 2000 second quarter were $65 million and the related loss ratio was 1.57%, down from $71 million and 1.70% in the 2000 first quarter and $70 million and 1.71% a year ago. Loans delinquent 90 days or more were $868 million or 5.09% of loans at June 30, 2000, down from $875 million or 5.26% at March 31, 2000 and $899 million or 5.46% a year ago. The declines in the net credit loss ratio and the delinquency ratio reflect the stable economic conditions across the region. 12 Asia Pacific
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $691 $543 27 $1,374 $1,060 30 Adjusted operating expenses (2) 340 281 21 674 547 23 Provisions for benefits, claims, and credit losses 67 89 (25) 146 177 (18) ------------------------------- ------------------------------- Core income before taxes 284 173 64 554 336 65 Income taxes 101 65 55 197 126 56 ------------------------------- ------------------------------- Core income 183 108 69 357 210 70 Restructuring-related items, after-tax (1) (2) (50) (4) (9) (56) ------------------------------- ------------------------------- Net income $182 $106 72 $ 353 $ 201 76 - ------------------------------------------========================================================================================== Average assets (in billions of dollars) $33 $30 10 $33 $30 10 Return on assets 2.22% 1.42% 2.15% 1.35% - ------------------------------------------========================================================================================== Excluding restructuring-related items Return on assets 2.23% 1.44% 2.18% 1.41% - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- Asia Pacific (including Japan and Australia) -- which provides banking, lending, and investment services, including credit and charge cards, to customers throughout the region -- reported core income of $183 million and $357 million in the 2000 second quarter and six months, up $75 million or 69% and $147 million or 70% from the 1999 periods, reflecting business growth across the region. Net income of $182 million and $353 million in the 2000 second quarter and six months included restructuring-related items of $1 million ($2 million pretax) and $4 million ($6 million pretax), respectively. Net income of $106 million and $201 million in the 1999 second quarter and six months included restructuring-related items of $2 million ($4 million pretax) and $9 million ($15 million pretax), respectively. As shown in the following table, Asia Pacific experienced double-digit growth in accounts, customer deposits, and loans when compared to the 1999 second quarter and six months, reflecting significant increases in Japan, growth in the Cards business across the region, and economic stabilization in most countries. The growth in Japan includes the Diners Club acquisition in the 2000 first quarter which added approximately $0.5 billion in loans and 0.6 million accounts.
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In billions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Accounts (in millions) 10.1 8.6 17 10.1 8.6 17 Average customer deposits $47.0 $40.6 16 $46.7 $40.3 16 Average loans $25.4 $22.9 11 $25.3 $22.5 12 - ------------------------------------------==========================================================================================
Revenues, net of interest expense, of $691 million and $1.374 billion in the 2000 second quarter and six months, increased $148 million or 27% and $314 million or 30% from the 1999 periods, reflecting growth in customer deposits and loans, higher investment product sales, and improved spreads. Adjusted operating expenses were up $59 million or 21% and $127 million or 23% from the 1999 second quarter and six months, reflecting increased variable compensation, including higher investment product sales commissions, and increased marketing. Revenue and expense increases also reflect the acquisition of Diners Club Japan. The provisions for benefits, claims, and credit losses were $67 million and $146 million in the 2000 second quarter and six months, respectively, down from $89 million and $177 million in the 1999 periods. Net credit losses in the 2000 second quarter were $64 million and the related loss ratio was 1.01%, down from $74 million and 1.19% in the 2000 first quarter and $76 million and 1.33% a year ago. Loans delinquent 90 days or more were $405 million or 1.56% of loans at June 30, 2000, down from $443 million or 1.73% at March 31, 2000 and $509 million or 2.17% a year ago. The declines in the provision, the net credit loss ratio and delinquencies from a year ago reflect economic stabilization in most countries, however, net credit losses increased in Taiwan. 13 Latin America
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $466 $497 (6) $985 $961 2 Adjusted operating expenses (2) 328 299 10 652 590 11 Provision for credit losses 76 135 (44) 166 236 (30) ------------------------------- ------------------------------- Core income before taxes 62 63 (2) 167 135 24 Income taxes 21 22 (5) 56 47 19 ------------------------------- ------------------------------- Core income 41 41 - 111 88 26 Restructuring-related items, after-tax (10) (8) 25 (11) (18) (39) ------------------------------- ------------------------------- Net income $ 31 $ 33 (6) $100 $ 70 43 - ------------------------------------------========================================================================================== Average assets (in billions of dollars) $12 $15 (20) $13 $15 (13) Return on assets 1.04% 0.88% 1.55% 0.94% - ------------------------------------------========================================================================================== Excluding restructuring-related items Return on assets 1.37% 1.10% 1.72% 1.18% - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- Latin America -- which provides banking, lending, and investment services, including credit and charge cards, to customers throughout the region -- reported core income of $41 million and $111 million in the 2000 second quarter and six months, unchanged from the 1999 second quarter, but up $23 million or 26% from the 1999 six months, reflecting lower credit costs and an increase in earnings from Credicard, a 33%-owned Brazilian Card affiliate, and offset by reduced interest income related to Confia, a Mexican bank acquired in August 1998, and lower business volumes in certain countries. Core income in the 2000 six months also reflects a 2000 first quarter gain related to the sale of an auto loan portfolio in Puerto Rico. Net income of $31 million and $100 million in the 2000 second quarter and six months included restructuring-related items of $10 million ($12 million pretax) and $11 million ($14 million pretax), respectively. Net income of $33 million and $70 million in the 1999 second quarter and six months included restructuring-related items of $8 million ($12 million pretax) and $18 million ($28 million pretax), respectively. The net effects of foreign currency translation reduced core income in the 2000 second quarter and six months by approximately $4 million and $3 million from the 1999 second quarter and six months and reduced revenues by approximately 3% and 2%, and expenses by approximately 2% and 1% in the 2000 second quarter and six months, respectively, compared to 1999. As shown in the following table, Latin America experienced account growth, including the effect of recent acquisitions. Average loans declined 10% and 6% from the 1999 second quarter and six months primarily reflecting the auto loan portfolio sale in Puerto Rico.
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- In billions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Accounts (in millions) 8.4 8.0 5 8.4 8.0 5 Average customer deposits $13.7 $13.8 (1) $13.7 $13.3 3 Average loans $ 7.2 $ 8.0 (10) $ 7.4 $ 7.9 (6) - ------------------------------------------==========================================================================================
Revenues, net of interest expense, of $466 million and $985 million in the 2000 second quarter and six months were down $31 million or 6% from the 1999 second quarter, but up $24 million or 2% from the 1999 six months. Revenue in both the 2000 quarter and six months reflects increased earnings from Credicard and is offset by reduced interest revenue from Confia and business volume declines in certain countries, including the effect of the 2000 first quarter auto portfolio sale in Puerto Rico. Revenues in the six months include the gain related to the auto portfolio sale in Puerto Rico. Adjusted operating expenses grew $29 million or 10% and $62 million or 11% from the 1999 second quarter and six months reflecting costs associated with new business initiatives and strategy changes in certain countries. In the 2000 six months, both revenue and expense increases reflect recent acquisitions. The provision for credit losses was $76 million and $166 million in the 2000 second quarter and six months, down from $135 million and $236 million in the 1999 periods. Net credit losses in the 2000 second quarter were $76 million and the related loss ratio was 4.25%, down from $90 million and 4.77% in the 2000 first quarter and $124 million and 6.17% a year ago. Loans delinquent 90 days or more were $323 million or 4.52% of loans at June 30, 2000 compared with $333 million or 4.58% at March 31, 2000 and $346 million or 4.32% a year ago. The increase in the delinquency ratio from a year ago primarily reflects the effect of the 2000 first quarter sale of the auto loan portfolio in Puerto Rico. 14 e-Consumer (1)
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $ 28 $ 23 22 $ 59 $ 47 26 Total operating expenses 103 69 49 244 130 88 ------------------------------- ------------------------------- Loss before tax benefits (75) (46) (63) (185) (83) NM Income tax benefits (29) (18) (61) (70) (32) NM ------------------------------- ------------------------------- Net loss ($46) ($28) (64) ($115) ($51) NM - ------------------------------------------==========================================================================================
(1) Includes the portion of Internet development directly related to Citigroup's consumer businesses, previously shown as a part of e-Citi. NM Not meaningful - -------------------------------------------------------------------------------- e-Consumer -- the business responsible for developing and implementing Global Consumer Internet financial services products and e-commerce solutions -- reported net losses of $46 million and $115 million in the 2000 second quarter and six months, up from $28 million and $51 million in the 1999 periods, reflecting continued investment in Internet financial services and charges related to the termination of certain contracts and other initiatives. Other Consumer
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense ($10) $39 NM $ 1 $ 88 (99) Adjusted operating expenses (2) 36 74 (51) 93 140 (34) Provision for credit losses - 7 NM - 14 NM ------------------------------- ------------------------------- Loss before tax benefits (46) (42) (10) (92) (66) (39) Income tax benefits (18) (19) 5 (36) (27) (33) ------------------------------- ------------------------------- Loss (28) (23) (22) (56) (39) (44) Restructuring-related items, after-tax 2 - NM 2 - NM ------------------------------- ------------------------------- Net loss ($26) ($23) (13) ($54) ($39) (38) - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- Other Consumer -- which includes certain treasury operations and global marketing and other programs -- reported net losses of $26 million and $54 million in the 2000 second quarter and six months, up from $23 million and $39 million in the 1999 periods. The increase in the net loss compared to a year ago reflects lower treasury earnings, offset by reduced staff levels and lower marketing costs. The increase in the six months net loss also reflects costs associated with the termination of certain global distribution initiatives. 1999 second quarter and six months revenue, expense, and provision for credit losses include the results of the private label cards business that was discontinued in early 2000. Consumer Portfolio Review In the consumer portfolio, credit loss experience is often expressed in terms of annualized net credit losses as a percentage of average loans. Pricing and credit policies reflect the loss experience of each particular product. Consumer loans are generally written off no later than a predetermined number of days past due on a contractual basis, or earlier in the event of bankruptcy. The number of days is set at an appropriate level according to loan product and country. 15 The following table summarizes delinquency and net credit loss experience in both the managed and on-balance sheet loan portfolios in terms of loans 90 days or more past due, net credit losses, and as a percentage of related loans. Consumer Loan Delinquency Amounts, Net Credit Losses, and Ratios
Total Average Loans 90 Days or More Past Due (1) Loans Net Credit Losses (1) -------------------------------------------------------------------------------------------------- In millions of dollars, June 30, June 30, Mar. 31, June 30, 2nd Qtr. 2nd Qtr. 1st Qtr. 2nd Qtr. except loan amounts in billions 2000 2000 2000 1999 2000 2000 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Citibanking North America $ 7.2 $ 33 $ 48 $ 92 $ 7.1 $ 15 $ 17 $ 23 Ratio 0.46% 0.67% 1.22% 0.86% 0.98% 1.21% Mortgage Banking 35.8 709 719 575 33.1 4 11 11 Ratio 1.98% 2.29% 2.09% 0.05% 0.14% 0.17% U.S. Bankcards 78.4 922 1,058 954 75.2 740 782 803 Ratio 1.18% 1.45% 1.36% 3.96% 4.35% 4.63% Other North America Cards 2.4 31 29 24 2.3 17 16 16 Ratio 1.24% 1.21% 1.08% 3.03% 2.98% 2.99% CitiFinancial 17.3 229 216 172 16.7 80 76 70 Ratio 1.32% 1.33% 1.26% 1.93% 1.92% 2.14% Europe, Middle East & Africa 17.0 868 875 899 16.5 65 71 70 Ratio 5.09% 5.26% 5.46% 1.57% 1.70% 1.71% Asia Pacific 26.0 405 443 509 25.4 64 74 76 Ratio 1.56% 1.73% 2.17% 1.01% 1.19% 1.33% Latin America 7.1 323 333 346 7.2 76 90 124 Ratio 4.52% 4.58% 4.32% 4.25% 4.77% 6.17% Global Private Bank (2) 24.5 78 87 162 23.8 3 10 2 Ratio 0.32% 0.37% 0.88% 0.05% 0.18% 0.05% Other 0.1 - - 9 0.1 - - 6 - ------------------------------------------------------------------------------------------------------------------------------------ Total managed 215.8 3,598 3,808 3,742 207.4 1,064 1,147 1,201 Ratio 1.67% 1.87% 2.00% 2.06% 2.30% 2.60% - -----------------------------------================================================================================================= Securitized credit card receivables (44.8) (544) (702) (652) (45.8) (441) (499) (541) Loans held for sale (8.1) (62) (31) (35) (5.8) (28) (20) (29) - ------------------------------------------------------------------------------------------------------------------------------------ Consumer loans $162.9 $2,992 $3,075 $3,055 $155.8 $ 595 $ 628 $ 631 Ratio 1.84% 2.03% 2.29% 1.54% 1.71% 1.91% - -----------------------------------=================================================================================================
(1) The ratios of 90 days or more past due and net credit losses are calculated based on end-of-period and average loans, respectively, both net of unearned income. (2) Global Private Bank results are reported as part of the Global Investment Management and Private Banking segment. - -------------------------------------------------------------------------------- Consumer Loan Balances, Net of Unearned Income
End of Period Average -------------------------------- ------------------------------ June 30, Mar. 31, June 30, 2nd Qtr. 1st Qtr. 2nd Qtr. In billions of dollars 2000 2000 1999 2000 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Total managed $215.8 $203.3 $187.4 $207.4 $200.3 $185.1 Securitized credit card receivables (44.8) (48.0) (47.4) (45.8) (48.2) (46.7) Loans held for sale (8.1) (4.2) (6.5) (5.8) (4.3) (6.2) -------------------------------- ------------------------------ Consumer loans $162.9 $151.1 $133.5 $155.8 $147.8 $132.2 - -----------------------------------------------------------=========================================================================
Total delinquencies 90 days or more past due in the managed portfolio were $3.6 billion with a related delinquency ratio of 1.67% of loans at June 30, 2000, compared with $3.8 billion or 1.87% at March 31, 2000 and $3.7 billion or 2.00% a year ago. Total managed net credit losses in the 2000 second quarter were $1.1 billion and the related loss ratio was 2.06%, compared with $1.1 billion and 2.30% in the 2000 first quarter and $1.2 billion and 2.60% in the 1999 second quarter. For a discussion on trends by business, see business discussions on pages 4 - 15. Citigroup's allowance for credit losses of $6.7 billion is available to absorb probable credit losses inherent in the entire portfolio. For analytical purposes only, the portion of Citigroup's allowance for credit losses attributed to the consumer portfolio was $3.4 billion at June 30, 2000, March 31, 2000, and June 30, 1999. The allowance as a percentage of loans on the balance sheet was 2.08% at June 30, 2000, down from 2.25% at March 31, 2000 and 2.57% at June 30, 1999 reflecting improved credit performance in certain portfolios and loan growth. The attribution of the allowance is made for analytical purposes only and may change from time to time. Net credit losses, delinquencies and the related ratios may increase from the 2000 second quarter as a result of portfolio growth, global economic conditions, the credit performance of the portfolios, including bankruptcies, and seasonal factors. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. 16 In the fourth quarter of 2000, Citigroup will adopt the Federal Financial Institutions Examination Council's (FFIEC) revised Uniform Retail Credit Classification and Account Management Policy. The policy provides guidance on the reporting of delinquent consumer loans and the timing of associated credit charge-offs for Citigroup's financial institution subsidiaries. The revised policy is not expected to have a material effect on financial results since Citigroup believes that it maintains adequate reserves for credit losses inherent in its loan portfolios. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. GLOBAL CORPORATE AND INVESTMENT BANK
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $7,855 $6,962 13 $16,055 $14,098 14 Adjusted operating expenses (2) 4,512 4,008 13 8,851 8,071 10 Provisions for benefits, claims, and credit losses 1,034 984 5 2,000 1,961 2 ------------------------------- ------------------------------- Core income before taxes and minority interest 2,309 1,970 17 5,204 4,066 28 Income taxes 757 685 11 1,779 1,405 27 Minority interest, after-tax 15 41 (63) 59 78 (24) ------------------------------- ------------------------------- Core income 1,537 1,244 24 3,366 2,583 30 Restructuring-related items, after-tax 3 (3) NM 3 117 (97) ------------------------------- ------------------------------- Net income (3) $1,540 $1,241 24 $ 3,369 $ 2,700 25 - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. (3) The 1999 six-month period excludes cumulative effect of accounting changes. NM Not meaningful - -------------------------------------------------------------------------------- The Global Corporate and Investment Bank business serves corporations, financial institutions, governments, investors, and other participants in capital markets in 100 countries and consists of Salomon Smith Barney (SSB), Emerging Markets, Global Relationship Banking (GRB) and the Commercial Lines business of TAP. Global Corporate and Investment Bank core income of $1.537 billion and $3.366 billion grew $293 million or 24% in the 2000 second quarter and $783 million or 30% in the 2000 six months compared to 1999. The 2000 second quarter reflects core income growth from the comparable 1999 quarter of $112 million or 76% in GRB, $84 million or 29% in Emerging Markets, $66 million or 33% in Commercial Lines and $31 million or 5% in SSB. The 2000 six months reflects core income growth from 1999 of $340 million or 27% in SSB, $165 million or 49% in GRB, $161 million or 27% in Emerging Markets and $117 million or 30% in Commercial Lines. SSB's core income growth was driven by strong revenue momentum in commissions, investment banking fees and other fee-based Private Client revenues along with earnings from the investment in Nikko Securities. Emerging Markets core income growth was driven by broad-based growth in revenues from transaction services and improved credit. GRB's core income growth was a result of revenue growth in transaction services and equity derivatives, partially offset by higher net write-offs. Commercial Lines improvement primarily reflects revenue growth from rate increases achieved in prior quarters, and higher net investment income and fee income. Net income in the 1999 six months included restructuring-related items of $117 million ($198 million pretax) consisting mainly of a release of the 1997 restructuring reserve that resulted from SSB's reassessment of space needs due to the Citicorp merger. See further discussion of the restructuring-related items in Note 7 of Notes to Consolidated Financial Statements. The businesses of Global Corporate and Investment Bank are significantly affected by the levels of activity in the global capital markets which, in turn, are influenced by macro-economic policies and credit environments, among other factors, in the 100 countries in which the businesses operate. Economic and market events can have both positive and negative effects on the revenue performance of the businesses and can negatively affect credit performance. A variety of factors continue to affect the property and casualty insurance market, including the competitive pressures affecting pricing and profitability, inflation in the cost of medical care, and litigation. This paragraph contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. 17 Salomon Smith Barney The following segment data includes the earnings of an investment in Nikko Securities but does not include the Asset Management division of Salomon Smith Barney, which is included in the SSB Citi Asset Management Group and Global Retirement Services results.
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $3,693 $3,269 13 $7,879 $6,610 19 Adjusted operating expenses (1) 2,752 2,308 19 5,416 4,646 17 ------------------------------- ------------------------------- Core income before taxes 941 961 (2) 2,463 1,964 25 Income taxes 300 351 (15) 865 706 23 ------------------------------- ------------------------------- Core income 641 610 5 1,598 1,258 27 Restructuring-related items, after-tax - - - - 124 NM ------------------------------- ------------------------------- Net income (2) $ 641 $ 610 5 $1,598 $1,382 16 - ------------------------------------------==========================================================================================
(1) Excludes restructuring-related items. (2) The 1999 six-month period excludes cumulative effect of accounting changes. NM Not meaningful - -------------------------------------------------------------------------------- Salomon Smith Barney reported core income in the 2000 second quarter and six months of $641 million and $1.598 billion, respectively, compared to $610 million and $1.258 billion in the 1999 periods. Salomon Smith Barney's earnings reflect strong growth in commissions, investment banking fees and fee-based Private Client revenues combined with earnings from the investment in Nikko Securities. Total client assets in the Private Client business grew 21% from a year ago to $1.032 trillion while annualized gross production per Financial Consultant reached $548,000 in the first six months of 2000 compared to $478,000 in the first six months of 1999. Included in the 1999 six months net income is a net after-tax restructuring credit of $124 million ($209 million pretax). See Note 7 of Notes to Consolidated Financial Statements for discussions of the restructuring-related items. On May 1, 2000, the Company completed the approximately 1.36 billion British Pound ($2.2 billion) acquisition of the global investment banking business and related net assets of Schroders PLC (Schroders), including all corporate finance, financial markets and securities activities. The combined European operations of the Company are now known as Schroder Salomon Smith Barney. Revenues by category were as follows:
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Commissions $1,017 $ 903 13 $2,326 $1,803 29 Investment banking 826 762 8 1,731 1,417 22 Principal transactions 636 698 (9) 1,496 1,672 (11) Asset management and administration fees 545 400 36 1,044 777 34 Interest income, net (1) 449 457 (2) 822 827 (1) Other income 220 49 NM 460 114 NM ------------------------------- ------------------------------- Total revenues, net of interest expense (1) $3,693 $3,269 13 $7,879 $6,610 19 - ------------------------------------------==========================================================================================
(1) Net of interest expense of $3.479 billion and $2.407 billion in the 2000 and 1999 second quarters, and $6.432 billion and $4.648 billion in the 2000 and 1999 six months. NM Not meaningful - -------------------------------------------------------------------------------- Revenues, net of interest expense, in the 2000 second quarter and six months were $3.693 billion and $7.879 billion, respectively, a 13% and 19% improvement over the comparable 1999 periods. The increase in commissions reflects robust sales of listed and over-the-counter securities. Investment banking revenue growth reflects increases in merger and acquisition fees and equity underwriting and was partially offset by a decline in high yield underwriting. Principal transaction revenues were down primarily due to less robust conditions in the fixed income markets. The increase in other income primarily reflects the increase in ownership in Nikko Securities (see Note 1 of Notes to Consolidated Financial Statements) along with higher income from the Nikko SSB joint venture which began operations during the 1999 first quarter. The growth in asset management and administration fees, which include results from assets managed by the Financial Consultants as well as those managed externally by the Consulting Group, corresponds to the 36% growth in assets under fee-based management. 18 Total assets under fee-based management at June 30, were as follows:
June 30, ----------------------------------- % In billions of dollars 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Financial Consultant managed accounts $ 58.2 $ 29.5 97 Consulting Group externally managed assets 135.8 113.6 20 ----------------------------------- Total assets under fee-based management $194.0 $143.1 36 - ---------------------------------------------------------------------------------===================================================
Adjusted operating expenses were $2.752 billion and $5.416 billion in the 2000 second quarter and six months, respectively, up 19% and 17% compared to the year-ago periods. The growth reflects higher production-related compensation and other expenses resulting from increased revenues and the Schroders acquisition in the 2000 second quarter. Emerging Markets
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $1,270 $1,096 16 $2,508 $2,239 12 Adjusted operating expenses (2) 602 523 15 1,136 1,044 9 Provision for credit losses 79 110 (28) 163 225 (28) ------------------------------- ------------------------------- Core income before taxes and minority interest 589 463 27 1,209 970 25 Income taxes 215 175 23 441 366 20 Minority interest, after-tax 4 2 NM 6 3 NM ------------------------------- ------------------------------- Core income 370 286 29 762 601 27 Restructuring-related items, after-tax 3 (1) NM 3 (2) NM ------------------------------- ------------------------------- Net income $ 373 $ 285 31 $ 765 $ 599 28 - ------------------------------------------========================================================================================== Average assets (in billions of dollars) $87 $83 5 $85 $82 4 Return on assets 1.72% 1.38% 1.81% 1.47% - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful. - -------------------------------------------------------------------------------- Emerging Markets core income was $370 million and $762 million in the 2000 second quarter and six months, up $84 million or 29% and $161 million or 27% from 1999. In June 2000, Emerging Markets completed the acquisition of a majority interest in Bank Handlowy, Poland's largest commercial bank. Return on assets was 1.72% in the 2000 second quarter, up from 1.38% in 1999. In the six months ended June 30, 2000, return on assets was 1.81%, up from 1.47% in the 1999 six months. Revenues, net of interest expense, were $1.270 billion and $2.508 billion in the 2000 second quarter and six months, up $174 million or 16% and $269 million or 12%, respectively, from 1999. Revenue growth in the 2000 second quarter was led by CEEMEA (Central and Eastern Europe, Middle East and Africa), up 28%, primarily due to growth in trading-related revenue and transaction services as well as the acquisition of Bank Handlowy. Latin America revenues were up 11% in the 2000 second quarter primarily due to growth in transaction services and structured products and partially offset by a decline in trading-related revenue, while Asia revenues were up 6% reflecting growth in transaction services and realized investment gains and partially offset by lower trading-related revenue. The six-month comparison reflected strong growth across all regions in transaction services and structured products along with higher realized investment gains, partially offset by lower trading-related revenue in Latin America and Asia. About 23% of the Emerging Markets revenue in the 2000 second quarter and six months was attributable to business from multinational companies managed jointly with GRB, with that revenue having grown 8% and 9%, respectively, from the prior-year periods. Adjusted operating expenses in the 2000 second quarter and six months increased 15% and 9% compared to 1999. The growth in expenses was primarily due to the acquisition of Bank Handlowy, investment spending to gain market share in selected emerging market countries and increases in incentive compensation and other operating expenses. The provision for credit losses totaled $79 million and $163 million in the 2000 second quarter and six months, down $31 million and $62 million from the respective 1999 periods. Net write-offs declined in Asia, partially offset by an increase in Latin America. Cash-basis loans were $1.132 billion at June 30, 2000, up $66 million from March 31, 2000, principally due to the addition of Bank Handlowy and partially offset by reductions in Asia and CEEMEA. Compared to a year ago, cash-basis loans were $65 million lower as declines in Asia were partially offset by the acquisition of Bank Handlowy and increases in Latin America. Average assets of $87 billion and $85 billion in the 2000 second quarter and six months reflected growth of $4 billion and $3 billion, respectively, compared to a year ago, primarily due to higher loans and trading assets and the Bank Handlowy acquisition. 19 Global Relationship Banking
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $1,266 $1,039 22 $2,474 $2,157 15 Adjusted operating expenses (2) 805 805 - 1,599 1,633 (2) Provision (benefit) for credit losses 52 1 NM 92 (2) NM ------------------------------- ------------------------------- Core income before taxes and minority interest 409 233 76 783 526 49 Income taxes 147 86 71 281 192 46 Minority interest, after-tax 3 - NM 3 - NM ------------------------------- ------------------------------- Core income 259 147 76 499 334 49 Restructuring-related items, after-tax - (2) NM - (5) NM ------------------------------- ------------------------------- Net income $ 259 $ 145 79 $ 499 $ 329 52 - ------------------------------------------========================================================================================== Average assets (in billions of dollars) $95 $81 17 $90 $85 6 Return on assets 1.10% 0.72% 1.11% 0.78% - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- Core income from Global Relationship Banking in North America, Europe and Japan was $259 million and $499 million in the 2000 second quarter and six months, up $112 million or 76% and $165 million or 49% from 1999. During the 2000 second quarter, GRB strengthened its position in the U.S. leasing market through the purchase of Copelco. Return on assets was 1.10% in the 2000 second quarter, up from 0.72% in 1999. In the 2000 six months, return on assets was 1.11%, up from 0.78% in the comparable 1999 period. Revenues, net of interest expense, of $1.266 billion in the 2000 second quarter and $2.474 billion in the 2000 six months grew $227 million or 22% and $317 million or 15%, respectively, compared to 1999. The increases were driven by strong growth in transaction services, equity derivatives and structured products, which includes the effect of the Copelco acquisition. Both comparisons were negatively impacted by lower funding and gapping results in 2000. Adjusted operating expenses of $805 million and $1.599 billion in the 2000 second quarter and six months were flat compared to the related 1999 quarter and down $34 million or 2% in the six-month comparison. The decrease in expenses in the 2000 six months was due to lower year 2000 and European Economic Monetary Union expenses, the impact of previous restructuring actions and business integration initiatives and was partially offset by higher incentive compensation and the acquisition of Copelco. The provision for credit losses was $52 million and $92 million in the current quarter and six months compared to $1 million in the 1999 second quarter and a net benefit of $2 million in the 1999 six months. Net write-offs in 2000 increased primarily due to exposure in the health-care industry in North America. Cash-basis loans were $465 million at June 30, 2000, up $146 million from March 31, 2000 and $186 million from June 30, 1999. The increase in cash-basis loans in the 2000 second quarter was primarily attributable to the acquisition of Copelco. The Other Real Estate Owned portfolio was $135 million at June 30, 2000, down $6 million from March 31, 2000 and $43 million from June 30, 1999 due to decreases in the North America real estate portfolio. Average assets of $95 billion and $90 billion in the 2000 second quarter and six months increased $14 billion and $5 billion from 1999, primarily reflecting increases in trading assets and loans as well as the acquisition of Copelco. 20 Commercial Lines
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $1,626 $1,558 4 $3,194 $3,092 3 Claims and claim adjustment expenses 903 873 3 1,745 1,738 - Total operating expenses 353 372 (5) 700 748 (6) ------------------------------- ------------------------------- Income before taxes and minority interest 370 313 18 749 606 24 Income taxes 95 73 30 192 141 36 Minority interest, after-tax (1) 8 39 (79) 50 75 (33) ------------------------------- ------------------------------- Net income (2) (3) $ 267 $ 201 33 $ 507 $ 390 30 - ------------------------------------------==========================================================================================
(1) See Note 1 of Notes to Consolidated Financial Statements. (2) The 1999 six-month period excludes cumulative effect of accounting changes. (3) Excludes investment gains/losses included in Investment Activities segment. - -------------------------------------------------------------------------------- Commercial Lines -- which offers a broad array of property and casualty insurance and insurance-related services through brokers and independent agencies -- reported net income, excluding the effect of accounting changes, of $267 million and $507 million in the 2000 second quarter and six months, up from $201 million and $390 million in the comparable periods of 1999. The improvements in the 2000 periods over the 1999 periods reflect rate increases achieved in prior quarters, higher net investment income, lower catastrophe losses, higher fee income, a benefit resulting from legislative action in South Carolina that changed the manner in which it finances its workers' compensation second-injury funds, and continued expense reductions which were partially offset by increased loss trends in the 2000 second quarter and six-month periods and lower favorable prior-year reserve development in the second quarter. Also reflected in the 2000 second quarter and six months are the incremental earnings from the minority interest buyback. The Company continues to maintain its discipline in the competitive commercial lines marketplace and to grow business only where market conditions warrant. Net written premiums by market were as follows:
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ National Accounts $ 58 $ 101 (43) $ 150 $ 251 (40) Commercial Accounts 458 440 4 945 884 7 Select Accounts 407 394 3 794 766 4 Specialty Accounts 310 160 94 491 308 59 ------------------------------- ------------------------------- Total net written premiums $1,233 $1,095 13 $2,380 $2,209 8 - ------------------------------------------==========================================================================================
Commercial Lines net written premiums in the 2000 second quarter and six months totaled $1.233 billion and $2.380 billion, respectively, compared to $1.095 billion and $2.209 billion in the comparable periods of 1999. Included in Specialty Accounts net written premiums in the 2000 second quarter and six months is an adjustment of $131 million due to a reinsurance transaction associated with the acquisition of the Reliance surety business. The trend in written premiums for all lines continues to reflect the impact of an improving rate environment as evidenced by the favorable pricing on renewal business and an increase in new business premiums. Also contributing to the net written premium increase in Specialty Accounts was the impact of the ongoing business associated with the Reliance surety acquisition as well as reinsurance activity. The net written premium decrease in National Accounts was primarily due to a shift of business mix from premium-based products to fee-based products and a decrease in the Company's level of involuntary pool participation. National Accounts new business was significantly lower in the 2000 second quarter than in the 1999 second quarter and was significantly higher in the 2000 six months than in the 1999 six months, reflecting the acquisition of several large accounts in 2000. National Accounts business retention ratio in the 2000 second quarter was significantly lower than in the 1999 second quarter and in the 2000 six months was moderately lower than in the 1999 six months, reflecting the loss of several large accounts in 2000. Commercial Accounts new business in the 2000 second quarter was moderately higher and in the 2000 six months was significantly higher than the comparable periods in 1999, reflecting the increased market activity resulting from the pricing environment. Commercial Accounts business retention ratio in the 2000 second quarter was significantly lower and in the 2000 six months was moderately lower than the comparable periods in 1999, reflecting an increase in lost business due to the renewal price increases in 2000. Commercial Accounts continues to focus on maintaining its product pricing standards and its selective underwriting policy in the renewal of accounts. New premium business in Select Accounts was significantly higher in both the 2000 second quarter and six months than the comparable periods in 1999. New business was low in the 1999 second quarter and six months reflecting its selective underwriting policy in the highly competitive marketplace. Select Accounts business retention ratio in the 2000 second quarter was moderately lower than the comparable period in 1999, reflecting a small increase in lost business due to the renewal price increases in 2000. 21 Select Accounts business retention ratio remained strong in the 2000 six months and was virtually the same as that in the 1999 six months. The statutory combined ratio before policyholder dividends for Commercial Lines in the 2000 second quarter and six months was 106.6% and 104.0%, respectively, compared to 105.6% and 105.2% in the comparable periods of 1999. The GAAP combined ratio before policyholder dividends for Commercial Lines in the 2000 second quarter and six months was 101.1% and 100.8%, respectively, compared to 106.2% and 106.6% in the comparable periods of 1999. GAAP combined ratios for Commercial Lines differ from statutory combined ratios primarily due to the deferral and amortization of certain expenses for GAAP reporting purposes only. The 2000 second quarter and six months statutory and GAAP combined ratios include an adjustment due to a reinsurance transaction associated with the acquisition of the Reliance surety business. Excluding this adjustment, the 2000 second quarter statutory and GAAP combined ratios before policyholder dividends would have been 105.4% and 104.0%, respectively, and the 2000 six-month statutory and GAAP combined ratios before policyholder dividends would have been 103.4% and 102.3%, respectively. The improvement in the 2000 second quarter and six-month statutory and GAAP combined ratios before policyholder dividends, excluding this adjustment, compared to the 1999 second quarter and six-month statutory and GAAP combined ratios before policyholder dividends was due to rate increases achieved in prior quarters, lower catastrophe losses, the benefit of the South Carolina legislative action, higher fee income and continued expense reductions which were partially offset by increased loss trends in the 2000 second quarter and six-month periods and lower favorable prior-year reserve development in the second quarter. Uncertainty Regarding Adequacy of Environmental and Asbestos Reserves The reserves for environmental claims are not established on a claim-by-claim basis. An aggregate bulk reserve is carried for all of the environmental claims that are in the dispute process, until the dispute is resolved. This bulk reserve is established and adjusted based upon the aggregate volume of in-process environmental claims and the experience in resolving such claims. At June 30, 2000, approximately 24% of the net aggregate reserve (i.e., approximately $149 million) consisted of case reserve for resolved claims. The balance, approximately 76% of the net aggregate reserve (i.e., approximately $474 million), was carried in a bulk reserve and included incurred but not reported environmental claims for which specific claims have not been received. In general, the Company posts case reserves for pending asbestos claims within approximately 30 business days of receipt of such claims. At June 30, 2000, approximately 13% of the net aggregate reserve (i.e., approximately $106 million) was for pending asbestos claims. The balance, approximately 87% of the net aggregate reserve (i.e., approximately $714 million), represents incurred but not reported losses for which specific claims have not been received. It is difficult to estimate the reserves for environmental and asbestos-related claims due to the vagaries of court coverage decisions, plaintiffs' expanded theories of liability, the risks inherent in major litigation and other uncertainties. Conventional actuarial techniques are not used to estimate such reserves. The reserves carried for environmental and asbestos claims at June 30, 2000 are the Company's best estimate of ultimate claims and claim adjustment expenses based upon known facts and current law. However, the conditions surrounding the final resolution of these claims continue to change. Currently, it is not possible to predict changes in the legal and legislative environment and their impact on the future development of asbestos and environmental claims. Such development will be affected by future court decisions and interpretations as well as changes in legislation applicable to such claims. Because of these future unknowns, additional liabilities may arise for amounts in excess of the current reserves. These additional amounts, or a range of these additional amounts, cannot now be reasonably estimated, and could result in a liability exceeding reserves by an amount that would be material to the Company's operating results in a future period. However, in the opinion of the Company's management, it is not likely that these claims will have a material adverse effect on its financial condition or liquidity. This paragraph contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. 22 Commercial Portfolio Review Commercial loans are identified as impaired and placed on a nonaccrual basis when it is determined that the payment of interest or principal is doubtful of collection or when interest or principal is past due for 90 days or more, except when the loan is well secured and in the process of collection. Impaired commercial loans are written down to the extent that principal is judged to be uncollectible. Impaired collateral-dependent loans are written down to the lower of cost or collateral value. The following table summarizes commercial cash-basis loans at period end and net credit losses for the three months ended:
June 30, Mar. 31, June 30, In millions of dollars 2000 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Commercial cash-basis loans Emerging Markets $1,132 $1,066 $1,197 Global Relationship Banking 465 319 279 --------------------------------------------------- Total Global Corporate Bank 1,597 1,385 1,476 Insurance and Investment Activities 41 70 79 --------------------------------------------------- Total commercial cash-basis loans $1,638 $1,455 $1,555 - ---------------------------------------------------------------------------------=================================================== Net credit losses Emerging Markets $ 79 $ 84 $110 Global Relationship Banking 52 40 1 --------------------------------------------------- Total net credit losses $131 $124 $111 - ---------------------------------------------------------------------------------===================================================
For a discussion of trends by business, see the business discussions on pages 19 - - 20. Citigroup's allowance for credit losses of $6.7 billion is available to absorb probable credit losses inherent in the entire portfolio. For analytical purposes only, the portion of Citigroup's allowance for credit losses attributed to the commercial portfolio was $3.3 billion at June 30, 2000, $3.2 billion at March 31, 2000 and $3.3 billion at June 30, 1999. The increase in the allowance in the second quarter of 2000 reflects acquisitions.
June 30, Mar. 31, June 30, In millions of dollars 2000 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Commercial allowance for credit losses $3,345 $3,248 $3,307 As a percentage of total commercial loans 3.01% 3.19% 3.35% - ---------------------------------------------------------------------------------===================================================
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $818 $659 24 $1,611 $1,290 25 Adjusted operating expenses (2) 536 404 33 1,026 805 27 Provision for credit losses 3 2 50 25 10 NM ------------------------------- ------------------------------- Core income before taxes 279 253 10 560 475 18 Income taxes 107 98 9 215 184 17 ------------------------------- ------------------------------- Core income 172 155 11 345 291 19 Restructuring-related items, after-tax 1 - NM 1 - NM ------------------------------- ------------------------------- Net income $173 $155 12 $ 346 $ 291 19 - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- The Global Investment Management and Private Banking group is composed of the SSB Citi Asset Management Group and Global Retirement Services and the Global Private Bank. These companies offer a broad range of asset management products and services from global investment centers around the world, including mutual funds, closed-end funds, managed accounts, unit investment trusts, variable annuities, and personalized wealth management services to institutional, high net worth, and retail clients. Global Investment Management and Private Banking core income of $172 million in the 2000 second quarter and $345 million in the 2000 six months was up $17 million or 11% and $54 million or 19% from a year ago. Revenues increased, driven by acquisitions and growth in both assets and client business volumes under management, and were partially offset by higher costs associated with the acquisitions and continued expansion of sales and marketing efforts and investments in technology. The increase in the provision for credit losses in the six-month period related to a loan in EMEA. 23 SSB Citi Asset Management Group and Global Retirement Services
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $480 $358 34 $910 $714 27 Total operating expenses 326 218 50 603 440 37 ------------------------------- ------------------------------- Income before taxes 154 140 10 307 274 12 Income taxes 61 56 9 122 109 12 ------------------------------- ------------------------------- Net income $ 93 $ 84 11 $185 $165 12 - ------------------------------------------========================================================================================== Assets under management (in billions of dollars) (2) $389 $360 8 $389 $360 8 - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Includes $31 billion and $35 billion in the 2000 and 1999 periods, respectively, for Global Private Bank clients. - -------------------------------------------------------------------------------- SSB Citi Asset Management Group and Global Retirement Services is composed of the substantial resources that are available through its three primary asset management business platforms -- Salomon Brothers Asset Management, Smith Barney Asset Management and Citibank Asset Management -- and also includes the pension management businesses of Global Retirement Services. These businesses offer institutional, high net worth, and retail clients a broad range of investment disciplines from global investment centers around the world. Products and services offered include mutual funds, closed-end funds, separately managed accounts, unit investment trusts, and variable annuities (through affiliated and third party insurance companies). Net income of $93 million and $185 million in the 2000 second quarter and six months was up $9 million or 11% and $20 million or 12% from the comparable 1999 periods, reflecting the impact of acquisitions and growth in asset-based fee revenues and partially offset by increased expenses. Assets under management rose 8% from the year-ago second quarter to $389 billion, as growth continued across most product categories. Growth in private client separately managed accounts and equity funds was strong, rising 20% and 16%, respectively, from the 1999 second quarter and was partially offset by declines in fixed income funds. Institutional client assets in the 2000 second quarter rose 6% to $153 billion aided by cross-selling efforts including $6 billion in client assets raised from Global Corporate and Investment Bank customers. Sales of long-term mutual funds and managed account products through the SSB retail sales channel rose 13% from the 1999 second quarter to $4.8 billion, representing 38% of all such products distributed through the retail channel. In addition, in the 2000 second quarter, Primerica sold $469 million of U.S. mutual and money funds representing 46% of Primerica's sales, and other Global Consumer businesses sold $3.5 billion of mutual and money funds through its channels, including $506 million in Europe and $322 million in Japan. Revenues, net of interest expense, of $480 million and $910 million in the 2000 second quarter and six months increased $122 million or 34% and $196 million or 27% from the 1999 second quarter and six months, respectively, primarily reflecting the Siembra and Garante acquisitions in the Latin America Retirement Services business and growth in asset-based fee revenues. Operating expenses of $326 million and $603 million in the 2000 quarter and six months increased $108 million or 50% and $163 million or 37% from the 1999 periods, reflecting the acquisitions, additional investments in sales and marketing activities, technology, and product development. Global Private Bank
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $338 $301 12 $701 $576 22 Adjusted operating expenses (2) 210 186 13 423 365 16 Provision for credit losses 3 2 50 25 10 NM ------------------------------- ------------------------------- Core income before taxes 125 113 11 253 201 26 Income taxes 46 42 10 93 75 24 ------------------------------- ------------------------------- Core income 79 71 11 160 126 27 Restructuring-related items, after-tax 1 - NM 1 - NM ------------------------------- ------------------------------- Net income $ 80 $ 71 13 $161 $126 28 - ------------------------------------------========================================================================================== Average assets (in billions of dollars) $24 $19 26 $24 $19 26 Return on assets 1.34% 1.50% 1.35% 1.34% - ------------------------------------------========================================================================================== Client business volumes under management (in billions of dollars) $149 $125 19 $149 $125 19 - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- 24 Global Private Bank -- which provides personalized wealth management services for high net worth clients around the world -- reported core income of $79 million for the 2000 second quarter, up $8 million or 11% from 1999, reflecting continued strong customer revenue momentum and partially offset by increased front-end staff expenses. Core income for the 2000 six months was $160 million, up $34 million or 27% from 1999, reflecting the above, as well as a higher provision for credit losses. Client business volumes under management, which comprise loans, deposits, client assets under fee-based management and custody accounts, were $149 billion at June 30, 2000, up 19% from $125 billion a year ago, reflecting growth in all regions, especially in the U.S. and Asia Pacific. Business volumes grew in all product lines, led by the custody and lending businesses. Total revenues, net of interest expense, were $338 million in the 2000 second quarter and $701 million in the 2000 six months, up $37 million or 12% and $125 million or 22% from the 1999 periods. Net interest and recurring fee-based revenues increased $38 million or 19% from the 1999 second quarter and $73 million or 18% from the 1999 six months, while transaction revenues, including placement fees on alternative investments, grew $7 million or 13% from the 1999 second quarter and $49 million or 52% from the 1999 six months. The increase in revenues was led primarily by significant growth internationally, up $25 million or 13% and $95 million or 26% from the comparable 1999 quarter and six months, as well as continued favorable trends in the U.S., up $12 million or 11% and $30 million or 14% from the respective 1999 periods. Total operating expenses of $210 million and $423 million in the quarter and six months were up $24 million or 13% and $58 million or 16% from the 1999 periods, primarily reflecting higher levels of bankers and product specialists (up 12%) hired to boost front-end sales and service capabilities. The provision for credit losses was $3 million for the 2000 second quarter and $25 million year-to-date, compared with $2 million and $10 million for the 1999 periods. The increase in the 2000 six months related to a loan in EMEA. Net credit losses in the 2000 second quarter remained at a nominal level of 0.05% of average loans, compared with 0.18% and 0.05% for the 2000 first quarter and 1999 second quarter, respectively. Loans 90 days or more past due were lower at $78 million or 0.32% of loans at June 30, 2000, compared to $87 million or 0.37% at March 31, 2000 and $162 million or 0.88% at June 30, 1999. CORPORATE/OTHER
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- % ------------------------------- % In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense ($160) $ 3 NM ($249) ($57) NM Adjusted operating expenses (2) 162 184 (12) 524 330 59 (Credit) provision for benefits, claims, and credit losses (2) 13 NM (4) 20 NM ------------------------------- ------------------------------- Loss before tax benefits (320) (194) 65 (769) (407) 89 Income tax benefits (104) (63) 65 (283) (130) NM ------------------------------- ------------------------------- Loss (216) (131) 65 (486) (277) 75 Restructuring-related items, after-tax (17) (8) NM (25) (16) 56 ------------------------------- ------------------------------- Net loss ($233) ($139) 68 ($511) ($293) 74 - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- Corporate/Other includes net corporate treasury results, corporate staff and other corporate expenses, certain intersegment eliminations, and the remainder of internet-related development activities (e-Citi) not allocated to the individual businesses. Net loss of $233 million and $511 million in the 2000 second quarter and six months increased $94 million or 68% and $218 million or 74% over the respective prior-year periods, primarily reflecting higher treasury costs and increases in certain unallocated corporate costs. The 2000 six-month period loss also includes a $108 million pretax expense for the contribution of appreciated venture capital securities to Citigroup's Foundation, which had minimal impact on Citigroup's earnings after related tax benefits and investment gains, which are reflected in Investment Activities. 25 INVESTMENT ACTIVITIES
Three Months Ended June 30, Six Months Ended June 30, --------------------------------------------------------------------- In millions of dollars 2000 1999 (1) 2000 1999 (1) - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues, net of interest expense $387 $270 $1,403 $423 Total operating expenses 19 17 43 31 --------------------------------------------------------------------- Income before taxes and minority interest 368 253 1,360 392 Income taxes 135 88 500 136 Minority interest, after-tax (1) 3 (8) 5 --------------------------------------------------------------------- Net income $234 $162 $ 868 $251 - ---------------------------------------------------------------=====================================================================
(1) Reclassified to conform to the current period's presentation. - -------------------------------------------------------------------------------- Investment Activities comprises Citigroup's venture capital activities, realized investment gains (losses) related to certain corporate and insurance-related investments, and the results of certain investments in countries that refinanced debt under the 1989 Brady Plan or plans of a similar nature. Investment Activities net income of $234 million and $868 million for the 2000 second quarter and six months, respectively, was up $72 million and $617 million from the comparable 1999 periods, primarily reflecting strong performance in the venture capital portfolios and a higher level of realized gains. Revenues, net of interest expense, of $387 million for the 2000 second quarter increased $117 million from 1999, primarily reflecting an increase in venture capital results and realized gains in corporate and refinancing portfolio investments. For the 2000 six months, revenues, net of interest expense, of $1.4 billion increased $980 million from 1999, primarily reflecting an increase in venture capital results and realized gains in corporate and insurance-related investments, reflecting strong equity markets. Partially offsetting the revenue increases were losses in insurance-related investments from repositioning activities designed to improve yields and maturity profiles, and writedowns in the refinancing portfolio. Investment Activities results may fluctuate in the future as a result of market and asset-specific factors. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" below. FORWARD-LOOKING STATEMENTS Certain of the statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. The Company's actual results may differ materially from those included in the forward-looking statements. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intend," "estimate," "may increase," "may fluctuate," and similar expressions or future or conditional verbs such as "will," "should," "would," and "could." These forward-looking statements involve risks and uncertainties including, but not limited to, global economic conditions, portfolio growth, the credit performance of the portfolios, including bankruptcies, and seasonal factors; changes in general economic conditions including the performance of global financial markets, prevailing inflation and interest rates, realized gains from sales of investments, gains from asset sales, and losses on commercial lending activities; results of various Investment Activities; the effects of competitors' pricing policies, of changes in laws and regulations on competition and of demographic changes on target market populations' savings and financial planning needs; the impact of higher interest rates on spreads in the Cards business; the adoption by the Company of an FFIEC policy that provides guidance on the reporting of delinquent consumer loans and the timing of associated credit charge-offs for financial institution subsidiaries; the resolution of legal proceedings and related matters; and the actual amount of liabilities associated with certain environmental and asbestos-related insurance claims. MANAGING GLOBAL RISK The Market Risk Management Process Market risk encompasses liquidity risk and price risk, both of which arise in the normal course of business of a global financial intermediary. Liquidity risk is the risk that some entity, in some location and in some currency, may be unable to meet a financial commitment to a customer, creditor, or investor when due. Price risk is the risk to earnings that arises from changes in interest rates, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Citigroup's business and corporate oversight groups have well-defined market risk management responsibilities. Within each business, a process is in place to control market risk exposure. The risk management process includes the establishment of appropriate market controls, policies and procedures, appropriate senior management risk oversight with thorough risk analysis and reporting, and independent risk management with capabilities to evaluate and monitor risk limits. 26 The risk management process is described in detail in Citigroup's 1999 Annual Report and Form 10-K. As Citigroup's businesses become more closely integrated, it is expected that these management processes will also be more closely integrated. Across Citigroup, price risk is measured using various tools, including Earnings-at-Risk and sensitivity analysis, which are applied to interest rate risk in the non-trading portfolios and Value-at-Risk, stress and scenario analyses which are applied to the trading portfolios. Non-Trading Portfolios Business units manage the potential earnings effect of interest rate movements by managing the asset and liability mix, either directly or through the use of derivative financial products. These include interest rate swaps and other derivative instruments which are either designated and effective as hedges or designated and effective in modifying the interest rate characteristics of specified assets or liabilities. The utilization of derivatives is managed in response to changing market conditions as well as to changes in the characteristics and mix of the related assets and liabilities. Price risk in the non-trading portfolios is measured using Earnings-at-Risk within Citicorp (excluding CitiFinancial Credit Company). All other non-trading portfolios measure price risk using sensitivity analysis. At Citicorp, Earnings-at-Risk measures the discounted pretax earnings impact over a specified time horizon of a specified shift in the interest rate yield curve for the appropriate currency. The yield curve shift is statistically derived as a two standard deviation change in a short-term interest rate over the period required to defease the position (usually four weeks). Earnings-at-Risk is calculated separately for each currency and reflects the repricing gaps in the position, as well as option positions, both explicit and embedded. Citicorp's primary non-trading price risk exposure is to movements in U.S. dollar interest rates. As of June 30, 2000, the rate shift over a four-week defeasance period applied to the U.S. dollar yield curve for purposes of calculating Earnings-at-Risk was 45 basis points. Citicorp also has Earnings-at-Risk in various other currencies; however, there are no significant risk concentrations in any individual non-U.S. dollar currency. As of June 30, 2000, the rate shifts applied to these currencies for purposes of calculating Earnings-at-Risk over a one- to four-week defeasance period ranged from 20 to 1,851 basis points, depending on the currency. The following table illustrates that, as of June 30, 2000, a 45 basis point increase in the U.S. dollar yield curve would have a potential negative impact on Citicorp's pretax earnings of approximately $109 million in the next twelve months, and approximately $110 million for the total five-year period 2000-2005. A two standard deviation increase in non-U.S. dollar interest rates would have a potential negative impact on Citicorp's pretax earnings of approximately $78 million in the next twelve months, and approximately $118 million for the five-year period 2000-2005. Citicorp Earnings-at-Risk (impact on pretax earnings)
Assuming a U.S. Assuming a Non-U.S. Dollar Rate Move of Dollar Rate Move of (1) Two Standard Deviations Two Standard Deviations (2) -------------------------------------------------------------------- In millions of dollars at June 30, 2000 Increase Decrease Increase Decrease - ------------------------------------------------------------------------------------------------------------------------------------ Overnight to three months ($ 26) $ 28 ($ 17) $ 17 Four to six months (28) 31 (23) 23 Seven to twelve months (55) 57 (38) 38 -------------------------------------------------------------------- Total overnight to twelve months (109) 116 (78) 78 - ----------------------------------------------------------------==================================================================== Year two (58) 57 (27) 28 Year three (16) 14 (18) 19 Year four 34 (38) (4) 4 Year five 47 (53) - - Effect of discounting (8) 11 9 (10) -------------------------------------------------------------------- Total ($110) $107 ($118) $119 - ----------------------------------------------------------------====================================================================
(1) Primarily results from Earnings-at-Risk in the Euro, Singapore dollar, Japanese yen, Mexico Peso and Hong Kong dollar. (2) Total assumes a two standard deviation increase or decrease for every currency, not taking into account any covariance between currencies. - -------------------------------------------------------------------------------- The table above also illustrates that Citicorp's U.S. dollar risk profile in the one- to three-year time horizon was directionally similar, but generally tends to reverse in subsequent periods. This reflects the fact that the majority of the derivative instruments utilized to modify repricing characteristics as described above will mature within three years. The following table summarizes Citicorp's worldwide Earnings-at-Risk over the next 12 months from changes in interest rates and illustrates that Citicorp's pretax earnings in its non-trading activities over the next 12 months would be reduced by an increase in interest rates and would benefit from a decrease in interest rates. 27 Citicorp Twelve Month Earnings-at-Risk (impact on pretax earnings)
U.S. Dollar Non-U.S. Dollar ----------------------------------------------------------------------------------- June 30, Dec. 31, June 30, June 30, Dec. 31, June 30, In millions of dollars 2000 1999 1999 2000 1999 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Assuming a two standard deviation rate Increase ($109) ($166) ($133) ($78) ($119) ($120) Decrease 116 178 154 78 120 $120 - -------------------------------------------------===================================================================================
Interest rate swaps and similar instruments effectively modify the repricing characteristics of certain consumer and commercial loan portfolios, deposits, and long-term debt. Excluding the effects of these instruments, Citicorp's Earnings-at-Risk over the next twelve months in its non-trading activities would be as follows:
U.S. Dollar Non-U.S. Dollar ----------------------------------------------------------------------------------- June 30, Dec. 31, June 30, June 30, Dec. 31, June 30, In millions of dollars 2000 1999 1999 2000 1999 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Assuming a two standard deviation rate Increase ($6) ($30) 7 ($65) ($120) ($137) Decrease 15 42 12 65 121 138 - -------------------------------------------------===================================================================================
During the first six months of 2000, Citicorp's U.S. dollar Earnings-at-Risk for the following 12 months assuming a two standard deviation increase in rates would have had a potential negative impact ranging from approximately $109 million to $146 million in the aggregate at each month end, compared with a range from $73 million to $166 million at each month end during 1999. A two standard deviation increase in non-U.S. dollar interest rates for the following twelve months would have had a potential negative impact ranging from approximately $78 million to $123 million in the aggregate at each month end during the first six months of 2000, compared with a range from $95 million to $121 million at each month end during 1999. Other Non-Trading Portfolios In addition, there are other financial instruments held in the non-trading portfolio outside Citicorp such as investments, long-term debt, derivatives and contractholder funds. The price risk associated with these instruments is measured using sensitivity analysis as described in the 1999 Annual Report and Form 10-K. At June 30, 2000, there was no significant change to the risk profile as disclosed at year-end 1999. Trading Portfolios A tool for measuring the price risk of trading activities is the Value-at-Risk method, which estimates the potential pretax loss in market value that could occur over a one-day holding period, at a 99% confidence level. The Value-at-Risk method incorporates the market factors to which the market value of the trading position is exposed (interest rates, foreign exchange rates, equity and commodity prices, and their implied volatilities), the sensitivity of the position to changes in those market factors, and the volatilities and correlation of those factors. The Value-at-Risk measurement includes the foreign exchange risks that arise in traditional banking businesses as well as in explicit trading positions. In addition to Value-at-Risk, stress and scenario analyses are also applied to the trading portfolios. The level of exposure taken depends on the market environment and expectations of future price and market movements, and will vary from period to period. For Citicorp's major trading centers, the aggregate pretax Value-at-Risk in the trading portfolios was $35 million at June 30, 2000. Daily exposures at Citicorp averaged $24 million in the second quarter of 2000 and ranged from $19 million to $35 million. At Salomon Smith Barney, the aggregate pretax Value-at-Risk in the trading portfolios was $23 million at June 30, 2000. Quarterly exposures at Salomon Smith Barney averaged $24 million in the second quarter of 2000 and ranged from $20 million to $30 million. 28 The following table summarizes Citigroup's Value-at-Risk in its trading portfolios as of June 30, 2000 and December 31, 1999 along with the 2000 second quarter averages.
Citicorp Salomon Smith Barney ----------------------------------------------------------------------------------- 2000 2000 Second Second June 30, Quarter Dec. 31, June 30, Quarter Dec. 31, In millions of dollars 2000 Average 1999 2000 Average 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate $29 $20 $15 $20 $22 $20 Foreign exchange 11 9 17 1 1 - Equity 19 12 11 2 5 6 All other (primarily commodity) 2 2 2 12 9 8 Covariance adjustment (26) (19) (21) (12) (13) (11) ----------------------------------------------------------------------------------- Total $35 $24 $24 $23 $24 $23 - -------------------------------------------------===================================================================================
The table below provides the distribution of Value-at-Risk during the second quarter of 2000.
Citicorp Salomon Smith Barney --------------------------------------------------------------------- In millions of dollars Low High Low High - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate $15 $29 $19 $26 Foreign exchange 6 11 - 2 Equity 10 19 1 13 All other (primarily commodity) 1 4 7 13 - ---------------------------------------------------------------=====================================================================
Management of Cross-Border Risk Cross-border risk is the risk that Citigroup will be unable to obtain payment from customers on their contractual obligations as a result of actions taken by foreign governments such as exchange controls, debt moratoria, and restrictions on the remittance of funds. Citigroup manages cross-border risk as part of the Windows on Risk process described in the 1999 Annual Report and Form 10-K. Except as described below for cross-border resale agreements and the netting of certain long and short securities positions, the following table presents total cross-border outstandings and commitments on a regulatory basis in accordance with Federal Financial Institutions Examination Council (FFIEC) guidelines. In regulatory reports under FFIEC guidelines, cross-border resale agreements are presented based on the domicile of the issuer of the securities that are held as collateral. However, for purposes of the following table, cross-border resale agreements are presented based on the domicile of the counterparty because the counterparty has the legal obligation for repayment. Similarly, under FFIEC guidelines, long securities positions are required to be reported on a gross basis. However, for purposes of the following table, certain long and short securities positions are presented on a net basis consistent with internal cross-border risk management policies, reflecting a reduction of risk from offsetting positions. Beginning April 1, 2000, the FFIEC revised their cross-border reporting guidelines to allow credit derivative contracts containing cross-border provisions to be treated as effective guarantees. Purchased credit derivative contracts where Citigroup is the beneficiary shift the underlying exposure to the guarantor country. Written credit derivative contracts where Citigroup provides an effective guarantee are included as cross-border commitments in the country of the underlying credit exposure. The effect of adopting the FFIEC's revised guidelines as of June 30, 2000 was an increase (decrease) in reported cross-border claims on third parties of $0.9 billion in Germany, ($1.0) billion in the United Kingdom, $1.2 billion in France, $2.1 billion in Italy, $0.1 billion in Japan, and ($0.4) billion in the Netherlands. The effect on cross-border commitments was an increase (decrease) of $1.8 billion in Germany, ($0.3) billion in the United Kingdom, $4.8 billion in France, $5.3 billion in Italy, and $0.1 billion in Brazil. Total cross-border outstandings and commitments at December 31, 1999 have not been restated. 29 Total cross-border outstandings include cross-border claims on third parties as well as investments in and funding of local franchises. Countries with FFIEC outstandings greater than 0.75% of Citigroup assets at June 30, 2000 or December 31, 1999 include:
June 30, 2000 December 31, 1999 - ------------------------------------------------------------------------------------------------------------ --------------------- Cross-Border Claims on Third Parties ------------------------------------------------ Investments In and Trading and Cross- Funding of Total Total In billions of Short-term Border Resale Local Cross-Border Commit- Cross-Border Commit- Dollars Claims (1) Agreements All Other Total Franchises Outstandings ments (2) Outstandings ments (2) - --------------------------------------------------------------------------------------------------------- --------------------- Germany $5.8 $4.2 $1.2 $11.2 $3.0 $14.2 $ 6.7 $10.9 $ 3.7 United Kingdom 4.1 4.6 3.1 11.8 - 11.8 16.8 19.5 15.5 France 5.0 3.9 1.8 10.7 - 10.7 9.1 7.9 2.2 Italy 5.4 0.7 2.2 8.3 1.1 9.4 6.1 7.1 0.4 Japan 2.8 3.3 2.0 8.1 - 8.1 0.8 9.8 0.1 Netherlands 4.2 1.0 1.3 6.5 - 6.5 3.6 8.1 2.9 Brazil 1.9 - 2.0 3.9 2.2 6.1 0.3 3.8 0.1 - -----------------================================================================================================================
(1) Trading and short-term claims include cross-border debt and equity securities held in the trading account, trade finance receivables, net revaluation gains on foreign exchange and derivative contracts, and other claims with a maturity of less than one year. (2) Commitments (not included in total cross-border outstandings) include legally binding cross-border letters of credit and other commitments and contingencies as defined by the FFIEC. - -------------------------------------------------------------------------------- Total cross-border outstandings for June 30, 2000 under FFIEC guidelines, including cross-border resale agreements based on the domicile of the issuer of the securities that are held as collateral, and long securities positions reported on a gross basis, amount to $18.4 billion for Germany, $9.7 billion for the United Kingdom, $10.1 billion for France, $13.3 billion for Italy, $9.4 billion for Japan, $6.9 billion for the Netherlands, $8.0 billion for Brazil. Total cross-border outstandings for December 31, 1999 under FFIEC guidelines, including cross-border resale agreements based on the domicile of the issuer of the securities that are held as collateral, and long securities positions reported on a gross basis, amounted to $14.9 billion for Germany, $8.7 billion for the United Kingdom, $7.7 billion for France, $10.2 billion for Italy, $10.5 billion for Japan, $5.0 billion for the Netherlands, $4.9 billion for Brazil. LIQUIDITY AND CAPITAL RESOURCES Citigroup services its obligations primarily with dividends and advances that it receives from subsidiaries. The subsidiaries' dividend paying abilities are limited by certain covenant restrictions in credit agreements and/or by regulatory requirements. Citigroup believes it will have sufficient funds to meet current and future commitments. Each of Citigroup's major operating subsidiaries finances its operations on a basis consistent with its capitalization and ratings. Citigroup, Citicorp, TAP, and The Travelers Insurance Company (TIC) issue commercial paper directly to investors. Citigroup and Citicorp, both of which are bank holding companies, maintain combined liquidity reserves of cash, securities, and unused bank lines of credit at least equal to their combined outstanding commercial paper. TAP and TIC each maintains unused credit availability under their respective bank lines of credit at least equal to the amount of outstanding commercial paper. Borrowings under bank lines of credit may be at interest rates based on LIBOR, CD rates, the prime rate or bids submitted by the banks. Each company pays its banks' commitment fees for its lines of credit. Citicorp, Salomon Smith Barney, and some of their nonbank subsidiaries have credit facilities with Citicorp's subsidiary banks, including Citibank, N.A. Borrowings under these facilities must be secured in accordance with Section 23A of the Federal Reserve Act. Citigroup Inc. (Citigroup) Citigroup and TIC have an agreement with a syndicate of banks to provide $1.0 billion of revolving credit, to be allocated to either of Citigroup or TIC. The participation of TIC in this agreement is limited to $250 million. The revolving credit facility consists of a five-year revolving credit facility that expires in June 2001. At June 30, 2000, all of the facility was allocated to Citigroup. Under this facility, Citigroup is required to maintain a certain level of consolidated stockholders' equity (as defined in the agreement). Citigroup exceeded this requirement by approximately $32.9 billion at June 30, 2000. At June 30, 2000, there were no borrowings outstanding under this facility. Citigroup is subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System (FRB). These guidelines are used to evaluate capital adequacy based primarily on the perceived credit risk associated with balance sheet assets, as 30 well as certain off-balance sheet exposures such as unused loan commitments, letters of credit, and derivative and foreign exchange contracts. The risk-based capital guidelines are supplemented by a leverage ratio requirement. The 1999 ratios and components of capital have been restated to reflect the 2000 conversion of a portion of the convertible debt of Nikko Securities Co., Ltd. into common stock. See Note 1 of Notes to Consolidated Financial Statements. Citigroup Ratios
June 30, Mar. 31, Dec. 31, 2000 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Tier 1 capital 8.62% 9.78% 9.65% Total capital (Tier 1 and Tier 2) 11.12 12.47 12.33 Leverage (1) 6.07 6.73 6.80 Common stockholders' equity 6.29 6.58 6.56 - -------------------------------------------------------------------------------=====================================================
(1) Tier 1 capital divided by adjusted average assets. - -------------------------------------------------------------------------------- Citigroup maintained a strong capital position during the 2000 second quarter. Total capital (Tier 1 and Tier 2) amounted to $60.4 billion at June 30, 2000, representing 11.12% of net risk-adjusted assets. This compares to $62.5 billion and 12.47% at March 31, 2000 and $60.8 billion and 12.33% at December 31, 1999. Tier 1 capital of $46.8 billion at June 30, 2000 represented 8.62% of net risk-adjusted assets, compared to $49.0 billion and 9.78% at March 31, 2000 and $47.6 billion and 9.65% at December 31, 1999. Citigroup's leverage ratio was 6.07% at June 30, 2000 compared to 6.73% at March 31, 2000 and 6.80% at December 31, 1999. Components of Capital Under Regulatory Guidelines
June 30, Mar. 31, Dec. 31, In millions of dollars 2000 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Tier 1 Capital Common stockholders' equity $49,801 $48,551 $46,965 Perpetual preferred stock 1,775 1,775 1,925 Mandatorily redeemable securities of subsidiary trusts 4,920 4,920 4,920 Minority interest (1) 400 1,524 1,501 Less: Net unrealized gains on securities available for sale (2) (505) (1,498) (1,749) Intangible assets: Goodwill (3) (7,388) (4,531) (4,209) Other intangible assets (3) (2,126) (1,655) (1,655) 50% investment in certain subsidiaries (4) (56) (113) (107) --------------------------------------------------- Total Tier 1 capital 46,821 48,973 47,591 - ------------------------------------------------------------------------------------------------------------------------------------ Tier 2 Capital Allowance for credit losses (5) 6,794 6,269 6,171 Qualifying debt (6) 6,565 6,678 6,728 Unrealized marketable equity securities gains (2) 301 680 400 Less: 50% investment in certain subsidiaries (4) (56) (113) (107) --------------------------------------------------- Total Tier 2 capital 13,604 13,514 13,192 --------------------------------------------------- Total capital (Tier 1 and Tier 2) $60,425 $62,487 $60,783 - ---------------------------------------------------------------------------------=================================================== Net risk-adjusted assets (7) $543,467 $500,999 $493,141 - ---------------------------------------------------------------------------------===================================================
(1) The decrease is primarily related to the purchase of all of the outstanding shares of Common Stock of Travelers Property Casualty Corp. not previously owned. See Note 1 of Notes to Consolidated Financial Statements. (2) Tier 1 capital excludes unrealized gains and losses on debt securities available for sale in accordance with regulatory risk-based capital guidelines. The federal bank regulatory agencies permit institutions to include in Tier 2 capital up to 45% of pretax net unrealized holding gains on available-for-sale equity securities with readily determinable fair values. (3) The increase in goodwill and other intangibles during the 2000 second quarter was attributable to the acquisitions completed during the quarter, including TAP's minority interest, Schroders, Handlowy, Reliance, Copelco and Siembra. (4) Represents investment in certain overseas insurance activities and unconsolidated banking and finance subsidiaries. (5) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is deducted from risk-adjusted assets. (6) Includes qualifying senior and subordinated debt in an amount not exceeding 50% of Tier 1 capital, and subordinated capital notes subject to certain limitations. (7) The increase in net risk-adjusted assets during the 2000 second quarter was primarily attributable to the growth in consumer and commercial loans and acquisitions completed during the quarter. Net risk-adjusted assets includes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $26.7 billion for interest rate, commodity and equity derivative contracts and foreign exchange contracts as of June 30, 2000, compared to $28.8 billion as of March 31, 2000 and $32.8 billion as of December 31, 1999. Market risk-equivalent assets included in net risk-adjusted assets amounted to $43.9 billion at June 30, 2000, $41.2 billion at March 31, 2000 and $43.1 billion at December 31, 1999. Net risk-adjusted assets also includes the effect of other off-balance sheet exposures such as unused loan commitments and letters of credit and reflects deductions for intangible assets and any excess allowance for credit losses. - -------------------------------------------------------------------------------- Common stockholders' equity increased a net $2.8 billion during the first six months of 2000 to $49.8 billion at June 30, 2000, representing 6.29% of assets, compared to $47.0 billion and 6.56% at year-end 1999. The net increase in common stockholders' equity during the six months of 2000 principally reflected net income of $6.6 billion which was partially offset by treasury stock 31 acquired of $2.3 billion, issuance of shares pursuant to employee benefit plans and other net activity of $0.4 billion and dividends declared on common and preferred stock of $1.1 billion. The decrease in the common stockholders' equity ratio during the six months of 2000 reflected the above items, which was more than offset by the increase in total assets. During the 2000 second quarter, the Board of Directors approved an additional $5 billion in the existing authority for the repurchase of Citigroup common stock. During the 2000 first quarter, Citigroup redeemed its Series T perpetual preferred stock for $150 million. All of the mandatorily redeemable securities of subsidiary trusts (trust securities) outstanding at June 30, 2000 qualify as Tier 1 capital. The amount outstanding at June 30, 2000 includes $2.3 billion of parent-obligated securities and $2.62 billion of subsidiary-obligated securities. Citigroup's subsidiary depository institutions are subject to the risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are generally similar to the FRB's guidelines. At June 30, 2000, all of Citigroup's subsidiary depository institutions were "well capitalized" under the federal bank regulatory agencies' definitions. During the first quarter of 2000, the FRB issued a proposed rule that would govern the regulatory capital treatment of merchant banking investments and certain similar equity investments, including investments made by venture capital subsidiaries in nonfinancial companies held by bank holding companies. The proposed rule would increase the capital required for such investments by imposing a 50% capital requirement. The Company is monitoring the status and progress of the proposed rule. Additionally, from time-to-time, the FRB and the FFIEC propose amendments to, and issue interpretations of, risk-based capital guidelines and reporting instructions. Such proposals or interpretations could, if implemented in the future, affect reported capital ratios and net risk-adjusted assets. This paragraph contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. Citicorp Citicorp manages liquidity through a well-defined process described in the 1999 Annual Report and Form 10-K. A diversity of funding sources, currencies, and maturities is used to gain a broad access to the investor base. Citicorp's deposits, which represented 67% of its total funding at both June 30, 2000 and December 31, 1999, are broadly diversified by both geography and customer segments. Stockholder's equity, which grew $4.0 billion during the first six months of 2000 to $30.0 billion at June 30, 2000, continues to be an important component of the overall funding structure. In addition, long-term debt is issued by Citicorp and its subsidiaries. Total Citicorp long-term debt outstanding at the end of the 2000 second quarter was $27.4 billion, up from $26.4 billion at 1999 year-end. Loans securitized during the six months of 2000 included $4.5 billion of U.S. consumer mortgages. While securitization activity in the first half of 2000 primarily related to U.S. consumer mortgages, securitization of both credit card receivables and consumer mortgages continues to be an important source of liquidity. As previous credit card securitizations amortize, newly originated receivables are recorded on Citicorp's balance sheet and become available for asset securitization. During the first six months of 2000, the scheduled amortization of certain credit card securitization transactions made available $4.4 billion of new receivables. In addition, $3.8 billion of credit card securitization transactions are scheduled to amortize during the rest of 2000. Citicorp is a legal entity separate and distinct from Citibank, N.A. and its other subsidiaries and affiliates. As discussed in the 1999 Annual Report and Form 10-K, there are various legal limitations on the extent to which Citicorp's subsidiaries may extend credit, pay dividends, or otherwise supply funds to Citicorp. As of June 30, 2000, under their applicable dividend limitations, Citicorp's national and state-chartered bank subsidiaries could have declared dividends to their respective parent companies without regulatory approval of approximately $6.3 billion. In determining whether and to what extent to pay dividends, each bank subsidiary must also consider the effect of dividend payments on applicable risk-based capital and leverage ratio requirements, as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Consistent with these considerations, Citicorp estimates that, as of June 30, 2000, its bank subsidiaries could have distributed dividends to Citicorp, directly or through their parent holding company, of approximately $5.7 billion of the available $6.4 billion. Citicorp also receives dividends from its nonbank subsidiaries. These nonbank subsidiaries are generally not subject to regulatory restrictions on their payment of dividends except that the approval of the Office of Thrift Supervision (OTS) may be required if total dividends declared by a savings association in any calendar year exceed amounts specified by that agency's regulations. Citicorp is subject to risk-based capital guidelines issued by the FRB. These guidelines are used to evaluate capital adequacy based primarily on the perceived credit risk associated with balance sheet assets, as well as certain off-balance sheet exposures such as 32 unused loan commitments, letters of credit, and derivative and foreign exchange contracts. The risk-based capital guidelines are supplemented by a leverage ratio requirement. Citicorp Ratios
June 30, Mar. 31, Dec. 31, 2000 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Tier 1 capital 8.02% 8.07% 8.11% Total capital (Tier 1 and Tier 2) 11.95 12.00 12.10 Leverage (1) 6.90 6.81 6.83 Common stockholder's equity 7.08 6.93 6.70 - --------------------------------------------------------------------------------====================================================
(1) Tier 1 capital divided by adjusted average assets. - -------------------------------------------------------------------------------- Citicorp maintained a strong capital position during the 2000 second quarter. Total capital (Tier 1 and Tier 2) amounted to $41.5 billion at June 30, 2000, representing 11.95% of net risk-adjusted assets. This compares with $38.4 billion and 12.00% at March 31, 2000 and $37.4 billion and 12.10% at December 31, 1999. Tier 1 capital of $27.9 billion at June 30, 2000 represented 8.02% of net risk-adjusted assets, compared with $25.8 billion and 8.07% at March 31, 2000 and $25.0 billion and 8.11% at December 31, 1999. Citicorp's Tier 1 capital ratio at June 30, 2000 was within Citicorp's target range of 8.00% to 8.30%. CitiFinancial Credit Company (CCC) At June 30, 2000, CCC had committed and available credit facilities in the amount of $3.4 billion which expire in 2002. At June 30, 2000, there were no borrowings outstanding under these facilities. Citicorp guarantees various debt obligations of CCC, including those arising under these facilities. Under these facilities, Citicorp is required to maintain a certain level of adjusted consolidated net worth (as defined in the agreements). At June 30, 2000, this requirement was exceeded by approximately $14.4 billion. Travelers Property Casualty Corp. (TAP) TAP has a five-year revolving credit facility in the amount of $250 million with a syndicate of banks that expires in December 2001. Under this facility, TAP is required to maintain a certain level of consolidated stockholder's equity (as defined in the agreement). At June 30, 2000, this requirement was exceeded by approximately $6.1 billion. At June 30, 2000, there were no borrowings outstanding under this facility. TAP's insurance subsidiaries are subject to various regulatory restrictions that limit the maximum amount of dividends available to be paid to their parent without prior approval of insurance regulatory authorities. Dividend payments to TAP from its insurance subsidiaries are limited to $1.2 billion in 2000 without prior approval of the Connecticut Insurance Department. TAP received $350 million of dividends from its insurance subsidiaries during the first six months of 2000. Salomon Smith Barney Holdings Inc. (SSBHI) SSBHI manages liquidity and monitors and evaluates capital adequacy through a well-defined process described in the 1999 Annual Report and Form 10-K. Total assets were $256 billion at June 30, 2000, up from $224 billion at year-end 1999. Due to the nature of SSBHI's trading activities, it is not uncommon for asset levels to fluctuate from period to period. SSBHI has a $5.0 billion 364-day revolving credit agreement with a bank syndicate that extends through May 2001. SSBHI may borrow under this revolving credit facility at various interest rate options (LIBOR, CD or base rate) and compensates the banks for the facility through commitment fees. Under this facility, SSBHI is required to maintain a certain level of consolidated adjusted net worth (as defined in the agreements). At June 30, 2000, this requirement was exceeded by approximately $3.5 billion. At June 30, 2000, there were no borrowings outstanding under this facility. SSBHI also has substantial borrowing arrangements consisting of facilities that it has been advised are available, but where no contractual lending obligation exists. These arrangements are reviewed on an ongoing basis to ensure flexibility in meeting short-term requirements. Unsecured term debt is a significant component of SSBHI's long-term capital. Long-term debt totaled $19.2 billion at June 30, 2000 and $18.0 billion at December 31, 1999. SSBHI utilizes interest rate swaps to convert the majority of its fixed rate long-term debt used to fund inventory-related working capital requirements into variable rate obligations. Long-term debt issuances denominated in currencies other than the U.S. dollar that are not used to finance assets in the same currency are effectively converted to U.S. dollar obligations through the use of cross-currency swaps and forward currency contracts. The Travelers Insurance Company (TIC) At June 30, 2000, TIC had $27.9 billion of life and annuity product deposit funds and reserves. Of that total, $14.8 billion is not subject to discretionary withdrawal based on contract terms. The remaining $13.1 billion is for life and annuity products that are 33 subject to discretionary withdrawal by the contractholder. Included in the amount that is subject to discretionary withdrawal are $2.3 billion of liabilities that are surrenderable with market value adjustments. Also included are an additional $5.2 billion of the life insurance and individual annuity liabilities which are subject to discretionary withdrawals and have an average surrender charge of 4.4%. In the payout phase, these funds are credited at significantly reduced interest rates. The remaining $5.6 billion of liabilities are surrenderable without charge. Insurance liabilities that are surrendered or withdrawn are reduced by outstanding policy loans and related accrued interest prior to payout. TIC is subject to various regulatory restrictions that limit the maximum amount of dividends available to its parent without prior approval of the Connecticut Insurance Department. A maximum of $679 million of statutory surplus is available in 2000 for such dividends without Department approval, of which $340 million was paid during the first six months of 2000. 34 CONSOLIDATED FINANCIAL STATEMENTS CITIGROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30, --------------------------------------------------------------------- In millions, except per share amounts 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Revenues Loan interest, including fees $6,563 $5,614 $12,587 $11,502 Other interest and dividends 6,581 5,449 12,459 10,863 Insurance premiums 2,733 2,616 5,450 5,142 Commissions and fees 3,829 3,153 7,827 6,025 Principal transactions 1,435 1,272 3,158 3,042 Asset management and administration fees 1,332 1,003 2,616 1,958 Realized gains from sales of investments 280 188 111 241 Other income 942 1,141 3,195 2,184 --------------------------------------------------------------------- Total revenues 23,695 20,436 47,403 40,957 Interest expense 7,791 6,056 14,515 12,507 --------------------------------------------------------------------- Total revenues, net of interest expense 15,904 14,380 32,888 28,450 --------------------------------------------------------------------- Provisions for benefits, claims, and credit losses Policyholder benefits and claims 2,307 2,151 4,558 4,199 Provision for credit losses 711 790 1,462 1,519 --------------------------------------------------------------------- Total provisions for benefits, claims, and credit losses 3,018 2,941 6,020 5,718 --------------------------------------------------------------------- Operating expenses Non-insurance compensation and benefits 4,188 3,615 8,313 7,370 Insurance underwriting, acquisition, and operating 800 817 1,648 1,658 Restructuring-related items 3 47 23 (83) Other operating 3,251 3,045 6,584 5,900 --------------------------------------------------------------------- Total operating expenses 8,242 7,524 16,568 14,845 --------------------------------------------------------------------- Income before income taxes, minority interest and cumulative effect of accounting changes 4,644 3,915 10,300 7,887 Provision for income taxes 1,616 1,402 3,627 2,825 Minority interest, net of income taxes 23 65 78 125 --------------------------------------------------------------------- Income before cumulative effect of accounting changes 3,005 2,448 6,595 4,937 Cumulative effect of accounting changes - - - (127) --------------------------------------------------------------------- Net income $3,005 $2,448 $ 6,595 $ 4,810 - ---------------------------------------------------------------===================================================================== Basic Earnings Per Share (1) Income before cumulative effect of accounting changes $0.67 $0.54 $1.47 $1.09 Cumulative effect of accounting changes - - - (0.03) --------------------------------------------------------------------- Net income $0.67 $0.54 $1.47 $1.06 ===================================================================== Weighted average common shares outstanding (1) 4,443.6 4,443.6 4,442.8 4,448.5 - ---------------------------------------------------------------===================================================================== Diluted Earnings Per Share (1) Income before cumulative effect of accounting changes $0.65 $0.52 $1.43 $1.06 Cumulative effect of accounting changes - - - (0.03) --------------------------------------------------------------------- Net income $0.65 $0.52 $1.43 $1.03 ===================================================================== Adjusted weighted average common shares outstanding (1) 4,586.9 4,600.4 4,584.0 4,593.6 - ---------------------------------------------------------------=====================================================================
(1) Adjusted to reflect the four-for-three split in Citigroup's common stock, payable on August 25, 2000. See Note 1. - -------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements. 35 CITIGROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION
June 30, 2000 December 31, In millions of dollars (Unaudited) 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Assets Cash and cash equivalents (including segregated cash and other deposits) $ 12,229 $ 14,158 Deposits at interest with banks 13,836 13,429 Federal funds sold and securities borrowed or purchased under agreements to resell 120,274 112,655 Brokerage receivables 31,421 23,769 Trading account assets 128,801 109,155 Investments (1) 110,455 111,345 Loans, net Consumer 162,943 147,968 Commercial 111,148 96,238 ---------------------------------- Loans, net of unearned income 274,091 244,206 Allowance for credit losses (6,736) (6,679) ---------------------------------- Total loans, net 267,355 237,527 Reinsurance recoverables 9,812 9,704 Separate and variable accounts 25,030 23,118 Other assets (1) 72,120 60,830 ---------------------------------- Total assets $791,333 $715,690 - --------------------------------------------------------------------------------------------------================================== Liabilities Non-interest-bearing deposits in U.S. offices $ 20,021 $ 19,492 Interest-bearing deposits in U.S. offices 52,675 48,584 Non-interest-bearing deposits in offices outside the U.S. 12,970 12,021 Interest-bearing deposits in offices outside the U.S. 200,295 180,994 ---------------------------------- Total deposits 285,961 261,091 Federal funds purchased and securities loaned or sold under agreements to repurchase 129,057 92,591 Brokerage payables 20,018 16,641 Trading account liabilities 75,827 91,104 Contractholder funds and separate and variable accounts 43,323 41,335 Insurance policy and claims reserves 44,644 43,822 Investment banking and brokerage borrowings 21,701 13,719 Short-term borrowings 23,388 17,086 Long-term debt 51,296 47,092 Other liabilities (1) 39,622 37,399 Citigroup or subsidiary obligated mandatorily redeemable securities of subsidiary trusts holding solely junior subordinated debt securities of -- Parent 2,300 2,300 -- Subsidiary 2,620 2,620 - --------------------------------------------------------------------------------------------------================================== Stockholders' equity Preferred stock ($1.00 par value; authorized shares: 30 million), at aggregate liquidation value 1,775 1,925 Common stock ($.01 par value; authorized shares: 10.0 billion), Issued shares -- 4,816,513,944 at both June 30, 2000 and December 31, 1999 (2) 48 48 Additional paid-in capital (2) 10,618 10,024 Retained earnings 49,318 43,865 Treasury stock, at cost: June 30, 2000 -- 323,504,516 shares and December 31, 1999 -- 326,480,169 shares (2) (8,889) (7,627) Accumulated other changes in equity from nonowner sources (1) (307) 1,111 Unearned compensation (987) (456) ---------------------------------- Total stockholders' equity 51,576 48,890 ---------------------------------- Total liabilities and stockholders' equity $791,333 $715,690 - --------------------------------------------------------------------------------------------------==================================
(1) Restated to reflect the 2000 conversion of a portion of the convertible debt of Nikko Securities Co., Ltd. into common stock. See Note 1. (2) Reflects the four-for-three split in Citigroup's common stock, payable on August 25, 2000. - -------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements. 36 CITIGROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Six Months Ended June 30, ---------------------------------- In millions of dollars 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Preferred stock at aggregate liquidation value Balance, beginning of period $ 1,925 $ 2,313 Redemption or retirement of preferred stock (150) (200) ---------------------------------- Balance, end of period 1,775 2,113 - ------------------------------------------------------------------------------------------------------------------------------------ Common stock and additional paid-in capital Balance, beginning of period 10,072 8,929 Employee benefit plans 546 372 Other 48 (28) ---------------------------------- Balance, end of period 10,666 9,273 - ------------------------------------------------------------------------------------------------------------------------------------ Retained earnings Balance, beginning of period 43,865 35,971 Net income 6,595 4,810 Common dividends (1) (1,081) (881) Preferred dividends (61) (78) ---------------------------------- Balance, end of period 49,318 39,822 - ------------------------------------------------------------------------------------------------------------------------------------ Treasury stock, at cost Balance, beginning of period (7,627) (4,789) Treasury stock acquired (2,274) (2,042) Issuance of shares pursuant to employee benefit plans and other 988 750 Other 24 - ---------------------------------- Balance, end of period (8,889) (6,081) - ------------------------------------------------------------------------------------------------------------------------------------ Accumulated other changes in equity from nonowner sources Balance, beginning of period 1,111 864 Net change in unrealized gains and losses on investment securities, net of tax (1,244) (497) Foreign currency translations adjustment, net of tax (174) (46) ---------------------------------- Balance, end of period (307) 321 - ------------------------------------------------------------------------------------------------------------------------------------ Unearned compensation Balance, beginning of period (456) (497) Issuance of restricted stock, net of amortization (531) (28) ---------------------------------- Balance, end of period (987) (525) - ------------------------------------------------------------------------------------------------------------------------------------ Total common stockholders' equity (shares outstanding: 4,493,009,428 in 2000 and 4,502,284,679 in 1999) (2) 49,801 42,810 - ------------------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity $51,576 $44,923 - --------------------------------------------------------------------------------------------------================================== Summary of changes in equity from nonowner sources Net income $6,595 $4,810 Other changes in equity from nonowner sources, net of tax (1,418) (543) ---------------------------------- Total changes in equity from nonowner sources $5,177 $4,267 - --------------------------------------------------------------------------------------------------==================================
(1) Common dividends declared were 12 cents per share in both the first and second quarters of 2000, and 9 cents and 10.5 cents per share in the first and second quarters of 1999, respectively. (2) Shares outstanding reflect the four-for-three split in Citigroup's common stock, payable on August 25, 2000. - -------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements. 37 CITIGROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ---------------------------------- In millions of dollars 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities Net income $ 6,595 $ 4,810 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Amortization of deferred policy acquisition costs and value of insurance in force 796 798 Additions to deferred policy acquisition costs (1,017) (957) Depreciation and amortization 936 823 Provision for credit losses 1,462 1,519 Change in trading account assets (19,646) 8,361 Change in trading account liabilities (15,277) (6,295) Change in federal funds sold and securities borrowed or purchased under agreements to resell (7,619) (10,198) Change in federal funds purchased and securities loaned or sold under agreements to repurchase 36,466 12,636 Change in brokerage receivables net of brokerage payables (4,275) (7,180) Change in insurance policy and claims reserves 822 86 Net gains from sales of investments (111) (241) Venture capital activity (1,096) (112) Restructuring-related items 23 (83) Cumulative effect of accounting changes, net of tax - 127 Other, net (3,118) 2,947 ---------------------------------- Total adjustments (11,654) 2,231 ---------------------------------- Net cash (used in) provided by operating activities (5,059) 7,041 - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from investing activities Change in deposits at interest with banks (407) (221) Change in loans (40,713) (66,087) Proceeds from sales of loans 15,352 54,736 Purchases of investments (45,572) (45,847) Proceeds from sales of investments 27,285 26,952 Proceeds from maturities of investments 18,969 15,981 Other investments, primarily short-term, net (1,398) (885) Capital expenditures on premises and equipment (818) (755) Proceeds from sales of premises and equipment, subsidiaries and affiliates, and other real estate owned 524 336 Business acquisitions (6,357) (2,150) ---------------------------------- Net cash used in investing activities (33,135) (17,940) - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities Dividends paid (1,142) (959) Issuance of common stock 667 521 Issuance of mandatorily redeemable securities of subsidiary trusts - 600 Redemption of preferred stock (150) (200) Treasury stock acquired (2,274) (2,042) Stock tendered for payment of withholding taxes (360) (305) Issuance of long-term debt 9,147 5,222 Payments and redemptions of long-term debt (6,450) (4,733) Change in deposits 24,870 15,741 Change in short-term borrowings and investment banking and brokerage borrowings 11,928 (2,889) Contractholder fund deposits 3,060 3,772 Contractholder fund withdrawals (2,751) (2,687) ---------------------------------- Net cash provided by financing activities 36,545 12,041 - ------------------------------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash and cash equivalents (280) (291) - ------------------------------------------------------------------------------------------------------------------------------------ Change in cash and cash equivalents (1,929) 851 Cash and cash equivalents at beginning of period 14,158 13,837 ---------------------------------- Cash and cash equivalents at end of period $12,229 $ 14,688 - --------------------------------------------------------------------------------------------------================================== Supplemental disclosure of cash flow information Cash paid during the period for income taxes $ 1,171 $ 1,677 Cash paid during the period for interest 13,694 12,027 Non-cash investing activities Transfers from loans to other real estate owned $ 155 $ 111 Noncash effects of accounting for the conversion of investments in Nikko Securities Co., Ltd. $ 702 $ - - --------------------------------------------------------------------------------------------------==================================
See Notes to Consolidated Financial Statements. 38 CITIGROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation The accompanying consolidated financial statements as of June 30, 2000 and for the three- and six-month periods ended June 30, 2000 and 1999 are unaudited and include the accounts of Citigroup Inc. (Citigroup) and its subsidiaries (collectively, the Company). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been reflected. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's 1999 Annual Report and Form 10-K. In March 2000, the Company converted into common stock a portion of its investment in convertible bonds of the Nikko Securities Co., Ltd. (Nikko), increasing its ownership of Nikko common stock from 9.5% to 20.7%. As a result of the conversion, the common stock investment in Nikko is accounted for under the equity method and is reported in other assets. The Company's proportionate share of Nikko's income is reflected in other income. The Consolidated Statements of Financial Condition and Changes in Stockholders' Equity have been restated to account for the original 9.5% ownership under the equity method from the date of original acquisition in August 1998. Previously, this 9.5% ownership was reported in available-for-sale securities with changes in fair value, net of applicable taxes, recorded in stockholders' equity. During April 2000, The Travelers Insurance Group Inc. (TIGI), an indirect wholly owned subsidiary of the Company, completed a cash tender offer to purchase all of the outstanding shares of Travelers Property Casualty Corp. (TAP) not previously owned. The Board of Directors on July 18, 2000 declared a four-for-three split in Citigroup's common stock, which is payable in the form of a 33 1/3% stock dividend on August 25, 2000 to stockholders of record on August 7, 2000. Current and prior-year information has been restated to reflect the stock split. The Board also approved an increase in the quarterly common stock dividend from 12 to 14 cents per share on a post-split basis (from 16 to 18 2/3 cents per share on a pre-split basis), payable on August 25, 2000 to stockholders of record on August 7, 2000. Certain financial information that is normally included in annual financial statements prepared in accordance with generally accepted accounting principles, but is not required for interim reporting purposes, has been condensed or omitted. Certain reclassifications have been made to the prior year's financial statements to conform to the current year's presentation. 2. Accounting Changes Accounting changes in the first quarter of 1999 refer to the adoption of: Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" (SOP 97-3) of ($135) million; adoption of SOP 98-7, "Deposits Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk" of $23 million; and the adoption of SOP 98-5, "Reporting on the Costs of Start-Up Activities" of ($15) million. Derivatives and hedge accounting. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133). In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," which delayed the effective date of SFAS No. 133 to January 1, 2001 for calendar year companies such as the Company. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - An Amendment of FASB Statement No. 133," which amended certain provisions of SFAS No. 133. These new standards will significantly change the accounting treatment of end-user derivative and foreign exchange contracts used by the Company and its customers. Depending on the underlying risk management strategy, these accounting changes could affect reported earnings, assets, liabilities, and stockholders' equity. As a result, the Company and the customers to which it provides derivatives and foreign exchange products will have to reconsider their risk management strategies, since the new standard will not reflect the results of many of those strategies in the same manner as current accounting practice. The Company continues to evaluate the potential impact of implementing these new accounting standards, which will depend, among other things, on additional interpretations of the standards prior to the effective date. 39 3. Business Segment Information The following table presents certain information regarding the Company's industry segments:
Income (Loss) Before Cumulative Effect of Total Revenues, Net Provision for Accounting Changes of Interest Expense Income Taxes (1) (2) Identifiable Assets ----------------------------------------------------------------------------------- Three Months Ended June 30, --------------------------------------------------------------- In millions of dollars, except identifiable June 30, Dec. 31, assets in billions 2000 1999 (3) 2000 1999 (3) 2000 1999 (3) 2000 1999 (3) - ------------------------------------------------------------------------------------------------------------------------------------ Global Consumer $ 7,004 $ 6,486 $ 729 $ 600 $1,291 $1,029 $255 $236 Global Corporate and Investment Bank 7,855 6,962 758 684 1,540 1,241 487 430 Global Investment Management and Private Banking 818 659 108 98 173 155 28 26 Investment Activities 387 270 135 88 234 162 11 11 Corporate/Other (160) 3 (114) (68) (233) (139) 10 13 ----------------------------------------------------------------------------------- Total $15,904 $14,380 $1,616 $1,402 $3,005 $2,448 $791 $716 - -------------------------------------------------===================================================================================
Income (Loss) Before Cumulative Effect of Total Revenues, Net Provision for Accounting Changes of Interest Expense Income Taxes (1) (2) -------------------------------------------------------------- Six Months Ended June 30, -------------------------------------------------------------- In millions of dollars 2000 1999 (3) 2000 1999 (3) 2000 1999 (3) - ------------------------------------------------------------------------------------------------------------------------------------ Global Consumer $14,068 $12,696 $1,430 $1,157 $2,523 $1,988 Global Corporate and Investment Bank 16,055 14,098 1,779 1,486 3,369 2,700 Global Investment Management and Private Banking 1,611 1,290 216 184 346 291 Investment Activities 1,403 423 500 136 868 251 Corporate/Other (249) (57) (298) (138) (511) (293) -------------------------------------------------------------- Total $32,888 $28,450 $3,627 $2,825 $6,595 $4,937 - ----------------------------------------------------------------------==============================================================
(1) Results in the 2000 second quarter and six-month periods reflect after-tax restructuring-related (credits) charges of ($11) million and ($7) million in Global Consumer and $17 million and $25 million in Corporate/Other, respectively, ($3) million in both periods in Global Corporate and Investment Bank, and ($1) million in both periods in Global Investment Management and Private Banking. The 1999 second quarter and six-month results reflect after-tax restructuring-related (credits) charges of $18 million and $56 million in Global Consumer, $3 million and ($117) million in Global Corporate and Investment Bank, and $8 million and $16 million in Corporate/Other, respectively. (2) Results in the 2000 second quarter and six-month periods include pretax provisions (credits) for benefits, claims, and credit losses in Global Consumer of $2.0 billion and $4.0 billion, in Global Corporate and Investment Bank of $1.0 billion and $2.0 billion, in Global Investment Management and Private Banking of $3 million and $25 million and in Corporate/Other of ($2) million and ($4) million, respectively. The 1999 second quarter and six-month period results reflect pretax provisions for benefits, claims and credit losses in Global Consumer of $1.9 billion and $3.7 billion, in Global Corporate and Investment Bank of $1.0 billion and $2.0 billion, in Global Investment Management and Private Banking of $2 million and $10 million and in Corporate/Other of $13 million and $20 million, respectively. (3) Reclassified to conform to the current period's presentation. - -------------------------------------------------------------------------------- 4. Investments
June 30, December 31, In millions of dollars 2000 1999 (1) - ------------------------------------------------------------------------------------------------------------------------------------ Fixed maturities, primarily available for sale at fair value $ 92,380 $ 95,849 Equity securities, primarily at fair value 6,270 6,014 Venture capital, at fair value (2) 5,256 4,160 Short-term and other 6,549 5,322 ---------------------------------- $110,455 $111,345 - --------------------------------------------------------------------------------------------------==================================
(1) Restated to reflect the 2000 conversion of a portion of the convertible debt of Nikko into common stock. See Note 1. (2) For the six months ended June 30, 2000, net gains on investments held by venture capital subsidiaries totaled $1.59 billion, of which $1.50 billion and $274 million represented gross unrealized gains and losses, respectively. For the six months ended June 30, 1999, net gains on investments held by venture capital subsidiaries totaled $333 million, of which $342 million and $265 million represented gross unrealized gains and losses, respectively. - -------------------------------------------------------------------------------- 40 The amortized cost and fair value of investments in fixed maturities and equity securities at June 30, 2000 and December 31, 1999 were as follows:
June 30, 2000 December 31, 1999 (1) ----------------------------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Amortized Fair In millions of dollars Cost Gains Losses Value Cost Value - ------------------------------------------------------------------------------------------------------------------------------------ Fixed maturity securities held to maturity, principally mortgage-backed securities $ 31 $ - $ - $ 31 $ 33 $ 36 ----------------------------------------------------------------------------------- Fixed maturity securities available for sale Mortgage-backed securities, principally obligations of U.S. Federal agencies $14,356 $ 47 $ 414 $13,989 $14,165 $13,735 U.S. Treasury and Federal agency 5,714 74 53 5,735 7,082 6,998 State and municipal 13,652 314 210 13,756 13,733 13,489 Foreign government 23,193 443 257 23,379 25,565 25,761 U.S. corporate 25,177 217 659 24,735 24,386 23,888 Other debt securities (2) 10,027 893 165 10,755 9,083 11,945 ----------------------------------------------------------------------------------- $92,119 $1,988 $1,758 $92,349 $94,014 $95,816 =================================================================================== Equity securities (3) (4) $ 5,601 $ 883 $ 214 $ 6,270 $ 5,126 $ 6,014 - -------------------------------------------------===================================================================================
(1) At December 31, 1999, gross unrealized gains and losses on fixed maturities and equity securities totaled $5,174 million and $2,484 million, respectively. (2) Investments in convertible debt of Nikko are included in other debt securities. (3) Includes non-marketable equity securities carried at cost, which are reported in both the amortized cost and fair value columns. (4) Restated to reflect the 2000 conversion of a portion of the convertible debt of Nikko into common stock. See Note 1. - -------------------------------------------------------------------------------- 5. Trading Account Assets and Liabilities Trading account assets and liabilities at market value consisted of the following:
June 30, December 31, In millions of dollars 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Trading Account Assets U.S. Treasury and Federal agency securities $ 35,267 $ 25,865 State and municipal securities 2,231 2,121 Foreign government securities 14,856 9,243 Corporate and other debt securities 17,360 13,858 Derivative and other contractual commitments (1) 27,344 31,646 Equity securities 14,906 11,910 Mortgage loans and collateralized mortgage securities 5,718 5,663 Other 11,119 8,849 ---------------------------------- $128,801 $109,155 - --------------------------------------------------------------------------------------------------================================== Trading Account Liabilities Securities sold, not yet purchased $43,405 $52,051 Derivative and other contractual commitments (1) 32,422 39,053 ---------------------------------- $75,827 $91,104 - --------------------------------------------------------------------------------------------------==================================
(1) Net of master netting agreements and securitization. - -------------------------------------------------------------------------------- 6. Debt Investment banking and brokerage borrowings consisted of the following:
June 30, December 31, In millions of dollars 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Commercial paper $18,744 $12,578 Bank borrowings 598 536 Other 2,359 605 ---------------------------------- $21,701 $13,719 - --------------------------------------------------------------------------------------------------==================================
41 Short-term borrowings consisted of commercial paper and other short-term borrowings as follows:
June 30, December 31, In millions of dollars 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Commercial paper Citigroup Inc. $ 477 $ - Citicorp 7,893 5,027 ---------------------------------- 8,370 5,027 Other short-term borrowings 15,018 12,059 ---------------------------------- $23,388 $17,086 - --------------------------------------------------------------------------------------------------==================================
Long-term debt, including its current portion, consisted of the following:
June 30, December 31, In millions of dollars 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Citigroup Inc. $ 7,335 $ 4,181 Citicorp 23,840 24,068 Salomon Smith Barney Holdings Inc. 19,250 17,970 Travelers Property Casualty Corp. 850 850 The Travelers Insurance Group Inc. 21 23 ---------------------------------- $51,296 $47,092 - --------------------------------------------------------------------------------------------------==================================
7. Restructuring-Related Items During the 2000 second quarter, Citigroup recorded restructuring charges of $22 million, including $17 million (the 2000 charge) relating to new initiatives in the Global Consumer business and in Corporate/Other, as well as additional severance charges of $5 million as a result of the continuing implementation of 1998 restructuring initiatives. The 2000 charge is solely related to employee severance costs associated with the downsizing of various functions. These initiatives will be fully implemented during 2000. In 1999, Citigroup recorded restructuring charges of $131 million, including $82 million (the 1999 charge) of exit costs associated with new initiatives in the Global Consumer business primarily related to the reconfiguration of certain branch operations outside the U.S., the downsizing of certain marketing operations, and the exit of a non-strategic business, as well as additional severance charges of $49 million as a result of the continuing implementation of 1998 restructuring initiatives. The 1999 charge included $62 million related to employee severance, $14 million related to exiting leasehold and other contractual obligations, and $6 million related to the write-down to estimated salvage value of assets that were available for immediate disposal. The $62 million portion of the charge related to employee severance reflects the costs of eliminating approximately 750 positions. The 1999 restructuring reserve was fully utilized as of June 30, 2000. In December 1998, Citigroup recorded a restructuring charge of $1.122 billion, reflecting exit costs associated with business improvement and integration initiatives. These initiatives were substantially completed at June 30, 2000. The charge included $760 million related to employee severance for the elimination of approximately 11,900 positions, after considering attrition and redeployment within the Company. The overall workforce reduction, net of anticipated rehires to fill relocated positions, was expected to be approximately 10,400 positions worldwide. The charge also included $327 million related to exiting leasehold and other contractual obligations, and $35 million related to the write-down to estimated salvage value of assets that were available for immediate disposal. The implementation of these restructuring initiatives also caused certain related premises and equipment assets to become redundant. The remaining depreciable lives of these assets were shortened, and accelerated depreciation charges (in addition to normal scheduled depreciation on these assets) is being recognized over these shortened lives. Accelerated depreciation of $29 million and $49 million was recorded during the 2000 second quarter and six months, respectively. Accelerated depreciation of $47 million and $128 was recorded during the 1999 second quarter and six months, respectively. In 1997, Citigroup recorded restructuring charges of $1.718 billion, consisting of an $880 million restructuring charge related to cost-management programs and customer service initiatives to improve operational efficiency and productivity in the Citicorp businesses, and an $838 million charge related to the Salomon merger. The 1997 restructuring reserve was fully utilized as of December 31, 1999. 42 The status of the restructuring initiatives is summarized in the following table. Restructuring Initiatives Activity
Restructuring Initiatives - ------------------------------------------------------------------------------------------------------------------------------------ In millions of dollars 2000 1999 1998 1997 Total - ------------------------------------------------------------------------------------------------------------------------------------ Restructuring Charges $17 $ 82 $1,122 $1,718 $2,939 Additional Severance Charges - - 54 - 54 Utilization (1) (7) (82) (976) (1,073) (2,138) Changes in Estimates - - (196) (645) (841) --------------------------------------------------------------------------------------- Balance at June 30, 2000 $10 $ - $ 4 $ - $ 14 - ---------------------------------------------=======================================================================================
(1) Utilization amounts include translation effects on the restructuring reserve. - -------------------------------------------------------------------------------- The 1999 restructuring reserve utilization included $6 million related to the write-down to estimated salvage value of assets available for immediate disposal, as well as $76 million of severance and other exit costs (of which $21 million related to employee severance and $12 million related to leasehold and other exit costs have been paid in cash and $43 million is legally obligated), together with translation effects. Utilization, including translation effects, was $44 million and $51 million in the 2000 second quarter and six months, respectively. Through June 30, 2000, approximately 750 gross staff positions have been eliminated under these programs, including 590 in the 2000 second quarter. The 1998 restructuring reserve utilization includes $35 million of non-cash charges for equipment and premises write-downs as well as $903 million of severance and other exit costs, occurring primarily in 1999 (of which $529 million related to employee severance and $177 million related to leasehold and other exit costs have been paid in cash and $197 million is legally obligated), together with translation effects. Utilization, including translation effects, was $82 million and $163 million in the 2000 second quarter and six months, respectively. Through June 30, 2000, approximately 7,300 gross staff positions have been eliminated under these programs, including 800 in the 2000 second quarter. Changes in estimates are attributable to facts and circumstances arising subsequent to an original restructuring charge. During the 2000 second quarter and the second half of 1999, changes in estimates resulted in reductions of $45 million and $151 million, respectively, in the reserve for 1998 restructuring initiatives, attributable to lower than anticipated costs of implementing certain projects and a reduction in the scope of certain initiatives. Changes in estimates related to the 1997 restructuring initiatives included $568 million of reductions (of which $211 million occurred in the 1999 first quarter), primarily related to the Seven World Trade Center lease, and $77 million of other reductions. Adjustments related to the Seven World Trade Center lease during 1999 were attributable to the reassessment of space needed due to the Citicorp merger, which indicated the need for increased occupancy and the utilization of space previously considered excessive; adjustments during 1998 resulted from negotiations on a sublease which indicated that excess space could be disposed of on terms more favorable than had been originally estimated. Other changes in estimates are attributable to lower severance costs due to higher than anticipated levels of attrition and redeployment within the Company, and other unforeseen changes including those resulting from the Citicorp merger. Additional information about restructuring-related items, including the business segments affected, may be found in the 1999 Annual Report and Form 10-K. 43 8. Earnings Per Share The following reflects the income and share data used in the basic and diluted earnings per share computations for the three and six months ended June 30, 2000 and 1999. Shares have been adjusted to give effect to the four-for-three split in Citigroup's common stock as discussed in Note 1.
Three Months Ended June 30, Six Months Ended June 30, - ------------------------------------------------------------------------------------------------------------------------------------ In millions, except per share amounts 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Income before cumulative effect of accounting changes $3,005 $2,448 $6,595 $4,937 Cumulative effect of accounting changes - - - (127) Preferred dividends (29) (38) (59) (78) --------------------------------------------------------------------- Income available to common stockholders for basic EPS 2,976 2,410 6,536 4,732 Effect of dilutive securities - 3 - 6 --------------------------------------------------------------------- Income available to common stockholders for diluted EPS $2,976 $2,413 $6,536 $4,738 - ---------------------------------------------------------------===================================================================== Weighted average common shares outstanding applicable to basic EPS 4,443.6 4,443.6 4,442.8 4,448.5 Effect of dilutive securities: Options 108.9 107.6 108.5 97.8 Restricted stock 33.3 35.6 31.6 33.6 Convertible securities 1.1 13.6 1.1 13.7 --------------------------------------------------------------------- Adjusted weighted average common shares outstanding applicable to diluted EPS 4,586.9 4,600.4 4,584.0 4,593.6 - ---------------------------------------------------------------===================================================================== Basic earnings per share Income before cumulative effect of accounting changes $0.67 $0.54 $1.47 $1.09 Cumulative effect of accounting changes - - - (0.03) --------------------------------------------------------------------- Net income $0.67 $0.54 $1.47 $1.06 - ---------------------------------------------------------------===================================================================== Diluted earnings per share Income before cumulative effect of accounting changes $0.65 $0.52 $1.43 $1.06 Cumulative effect of accounting changes - - - (0.03) --------------------------------------------------------------------- Net income $0.65 $0.52 $1.43 $1.03 - ---------------------------------------------------------------=====================================================================
9. Trading Securities, Commodities, Derivatives and Related Risks Derivative and Foreign Exchange Contracts The table below presents the aggregate notional principal amounts of Citigroup's outstanding derivative and foreign exchange contracts at June 30, 2000 and December 31, 1999, along with the related balance sheet credit exposure. Additional information concerning Citigroup's derivative and foreign exchange products and activities, including a description of accounting policies, and credit and market risk management process is provided in the 1999 Annual Report and Form 10-K.
Notional Balance Sheet Principal Amounts Credit Exposure (1) (2) --------------------------------------------------------------------- June 30, Dec. 31, June 30, Dec. 31, In billions of dollars 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate products $5,412.2 $5,351.0 $ 8.0 $10.2 Foreign exchange products 2,094.6 1,797.1 10.3 11.4 Equity products 168.5 144.2 7.8 9.3 Commodity products 33.6 34.9 0.9 0.4 Credit derivative products 54.5 46.0 0.3 0.3 ---------------------------------- $27.3 $31.6 - ---------------------------------------------------------------=====================================================================
(1) There is no balance sheet credit exposure for futures contracts because they settle daily in cash, and none for written options because they represent obligations (rather than assets) of Citigroup. (2) The balance sheet credit exposure reflects $62.1 billion and $65.4 billion of master netting agreements in effect at June 30, 2000 and December 31, 1999, respectively. Master netting agreements mitigate credit risk by permitting the offset of amounts due from and to individual counterparties in the event of counterparty default. In addition, Citibank has securitized and sold net receivables, and the associated credit risk related to certain derivative and foreign exchange contracts via Markets Assets Trust, which amounted to $2.5 billion at June 30, 2000 and $2.2 billion at December 31, 1999. - -------------------------------------------------------------------------------- 44 The tables below provide data on the notional principal amounts and maturities of end-user (non-trading) derivatives, along with additional data on end-user interest rate swaps and net purchased option positions at the end of the second quarter of 2000. End-User Derivative Interest Rate and Foreign Exchange Contracts
Notional Principal Amounts (1) Percentage of June 30, 2000 Amount Maturing ------------------------------------------------------------------------------ June 30, Dec. 31, Within 1 to 2 to 3 to 4 to After In billions of dollars 2000 1999 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate products Futures contracts $15.1 $ 7.1 100% -% -% -% -% -% Forward contracts 2.8 3.3 100 - - - - - Swap agreements 110.6 104.7 32 18 13 10 7 20 Option contracts 7.9 7.1 16 27 - 3 43 11 Foreign exchange products Futures and forward contracts 89.4 50.6 98 1 1 - - - Cross-currency swaps 6.5 7.0 13 23 30 7 6 21 Credit derivatives products 29.1 29.2 3 3 7 6 31 50 - ------------------------------------------------------==============================================================================
(1) Includes third-party and intercompany contracts. - -------------------------------------------------------------------------------- End-User Interest Rate Swaps and Net Purchased Options as of June 30, 2000
Remaining Contracts Outstanding -- Notional Principal Amounts --------------------------------------------------------- In billions of dollars 2000 2001 2002 2003 2004 2005 - ------------------------------------------------------------------------------------------------------------------------------------ Receive fixed swaps $67.8 $53.6 $45.0 $33.4 $23.7 $16.6 Weighted-average fixed rate 6.3% 6.4% 6.3% 6.4% 6.6% 6.6% Pay fixed swaps 28.3 18.9 9.8 7.5 6.1 5.2 Weighted-average fixed rate 6.3% 6.2% 6.3% 6.3% 6.2% 6.3% Basis swaps 14.5 2.7 1.0 0.7 0.4 0.3 Purchased floors 5.6 4.4 2.8 2.8 2.8 0.1 Weighted-average floor rate purchased 6.2% 6.2% 7.3% 7.3% 7.3% 5.8% Written caps related to other purchased caps (1) 2.3 2.2 1.7 1.7 1.5 0.8 Weighted-average cap rate written 9.8% 9.8% 10.6% 10.6% 10.7% 10.5% - ---------------------------------------------------------------------------========================================================= Three-month forward LIBOR rates (2) 6.8% 7.1% 7.1% 7.1% 7.1% 7.3% - ---------------------------------------------------------------------------=========================================================
(1) Includes written options related to purchased options embedded in other financial instruments. (2) Represents the implied forward yield curve for three-month LIBOR as of June 30, 2000, provided for reference. - -------------------------------------------------------------------------------- 10. Contingencies It is difficult to estimate the reserves for environmental and asbestos-related claims due to the vagaries of court coverage decisions, plaintiffs' expanded theories of liability, the risks inherent in major litigation and other uncertainties. Conventional actuarial techniques are not used to estimate such reserves. The reserves carried for environmental and asbestos claims at June 30, 2000 are the Company's best estimate of ultimate claims and claim adjustment expenses, based upon known facts and current law. However, the conditions surrounding the final resolution of these claims continue to change. Currently, it is not possible to predict changes in the legal and legislative environment and their impact on the future development of asbestos and environmental claims. Such development will be affected by future court decisions and interpretations as well as changes in legislation applicable to such claims. Because of these future unknowns, additional liabilities may arise for amounts in excess of the current reserves. These additional amounts, or a range of these additional amounts, cannot now be reasonably estimated, and could result in a liability exceeding reserves by an amount that would be material to the Company's operating results in a future period. However, the Company believes that it is not likely that these claims will have a material adverse effect on the Company's financial condition or liquidity. In the ordinary course of business, Citigroup and/or its subsidiaries are also defendants or co-defendants in various litigation matters, other than those described above. Although there can be no assurances, the Company believes, based on information currently available, that the ultimate resolution of these legal proceedings would not be likely to have a material adverse effect on its results of operations, financial condition or liquidity. 45 FINANCIAL DATA SUPPLEMENT Cash-Basis, Renegotiated, and Past Due Loans
June 30, Dec. 31, June 30, In millions of dollars 2000 1999 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Commercial cash-basis loans Collateral dependent (at lower of cost or collateral value) (1) $ 210 $ 241 $ 214 Other 1,428 1,162 1,341 --------------------------------------------------- Total $1,638 $1,403 $1,555 - ---------------------------------------------------------------------------------=================================================== Commercial cash-basis loans In U.S. offices $ 405 $ 256 $ 265 In offices outside the U.S. 1,233 1,147 1,290 --------------------------------------------------- Total $1,638 $1,403 $1,555 - ---------------------------------------------------------------------------------=================================================== Commercial renegotiated loans In U.S. offices $ - $16 $ - In offices outside the U.S. 27 43 50 --------------------------------------------------- Total $27 $59 $50 - ---------------------------------------------------------------------------------=================================================== Consumer loans on which accrual of interest had been suspended In U.S. offices $ 716 $ 724 $ 732 In offices outside the U.S. 1,475 1,506 1,527 --------------------------------------------------- Total $2,191 $2,230 $2,259 - ---------------------------------------------------------------------------------=================================================== Accruing loans 90 or more days delinquent (2) In U.S. offices $ 771 $ 732 $ 598 In offices outside the U.S. 397 452 472 --------------------------------------------------- Total $1,168 $1,184 $1,070 - ---------------------------------------------------------------------------------===================================================
(1) A cash-basis loan is defined as collateral dependent when repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment, in which case the loans are written down to the lower of cost or collateral value. (2) Substantially all consumer loans, of which $423 million, $379 million, and $284 million are government-guaranteed student loans at June 30, 2000, December 31, 1999, and June 30, 1999, respectively. - -------------------------------------------------------------------------------- Other Real Estate Owned and Assets Pending Disposition
June 30, Dec. 31, June 30, In millions of dollars 2000 1999 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Other real estate owned Consumer (1) $180 $204 $213 Commercial (1) 267 486 626 Corporate/Other 8 14 8 --------------------------------------------------- Total $455 $704 $847 - ---------------------------------------------------------------------------------=================================================== Assets pending disposition (2) $93 $86 $89 - ---------------------------------------------------------------------------------===================================================
(1) Represents repossessed real estate, carried at lower of cost or collateral value. (2) Represents consumer residential mortgage loans that have a high probability of foreclosure, carried at lower of cost or collateral value. - -------------------------------------------------------------------------------- 46 Details of Credit Loss Experience
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. In millions of dollars 2000 2000 1999 1999 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Allowance for credit losses at beginning of period $6,657 $6,679 $6,706 $6,743 $6,662 --------------------------------------------------------------------------------------- Provision for credit losses Consumer 580 627 594 594 679 Commercial 131 124 92 38 111 --------------------------------------------------------------------------------------- 711 751 686 632 790 --------------------------------------------------------------------------------------- Gross credit losses Consumer In U.S. offices 481 463 427 419 439 In offices outside the U.S. 285 312 310 324 332 Commercial In U.S. offices 56 49 28 9 3 In offices outside the U.S. 99 94 130 95 132 --------------------------------------------------------------------------------------- 921 918 895 847 906 --------------------------------------------------------------------------------------- Credit recoveries Consumer In U.S. offices 89 74 54 66 70 In offices outside the U.S. 82 73 82 79 70 Commercial In U.S. offices 3 8 11 1 3 In offices outside the U.S. 21 11 46 15 21 --------------------------------------------------------------------------------------- 195 166 193 161 164 --------------------------------------------------------------------------------------- Net credit losses In U.S. offices 445 430 390 361 369 In offices outside the U.S. 281 322 312 325 373 --------------------------------------------------------------------------------------- 726 752 702 686 742 --------------------------------------------------------------------------------------- Other -- net (1) 94 (21) (11) 17 33 --------------------------------------------------------------------------------------- Allowance for credit losses at end of period $6,736 $6,657 $6,679 $6,706 $6,743 - ---------------------------------------------======================================================================================= Net consumer credit losses $595 $628 $601 $598 $631 As a percentage of average consumer loans 1.54% 1.71% 1.68% 1.74% 1.91% - ------------------------------------------------------------------------------------------------------------------------------------ Net commercial credit losses $131 $124 $101 $88 $111 As a percentage of average commercial loans 0.51% 0.52% 0.42% 0.37% 0.48% - ---------------------------------------------=======================================================================================
(1) Primarily includes foreign currency translation effects and the addition of allowance for credit losses related to acquisitions. - -------------------------------------------------------------------------------- 47 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds. (c) The Company issued an aggregate of 790,044 shares (split-adjusted) of its common stock to the former shareholders of Schroder Holdings (Jersey) Limited, a company organized in Jersey, Channel Islands, in connection with an exchange offer. The exchange offer was made pursuant to an exemption from registration provided by Rule 802 under the Securities Act of 1933 for exchange offers made for securities of a foreign private issuer. In the exchange offer, Salomon Smith Barney Holdings Inc., a wholly owned subsidiary of the Company, exchanged cash, Loan Notes and Exchangeable Loan Notes for all of the outstanding share capital of Schroder Holdings (Jersey) Limited. Pursuant to the terms of the exchange offer, the Exchangeable Loan Notes were immediately exchanged for the shares of the Company's common stock issued in connection with the exchange offer. The shares of the Company's common stock were issued on or around the settlement dates of the exchange offer, which began May 5, 2000 and ended May 25, 2000. Item 4. Submission of Matters to a Vote of Security Holders. Information concerning all matters voted on by stockholders at Citigroup's Annual Meeting of Stockholders held on April 18, 2000 is incorporated herein by reference to Item 4 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits See Exhibit Index. (b) Reports on Form 8-K. On April 18, 2000, the Company filed a Current Report on Form 8-K, dated April 17, 2000, reporting under Item 5 thereof the results of its operations for the quarter ended March 31, 2000, and certain other selected financial data. On June 20, 2000, the Company filed a Current Report on Form 8-K, dated June 19, 2000, filing as an exhibit under Item 7 thereof the Distribution Agreement, dated June 19, 2000, between the Company and Salomon Smith Barney Inc., relating to the offer and sale of the Company's Medium-Term Senior Notes, Series C, Due Nine Months or More from Date of Issue and Medium-Term Subordinated Notes, Series C, Due Nine Months or More from Date of Issue. No other reports on Form 8-K were filed during the second quarter of 2000; however, (1) On July 20, 2000, the Company filed a Current Report on Form 8-K, dated July 19, 2000, reporting under Item 5 thereof the results of its operations for the quarter ended June 30, 2000, and certain other selected financial data. (2) On July 20, 2000, the Company filed a Current Report on Form 8-K, dated July 11, 2000, filing as exhibits under Item 7 thereof: (A) Terms Agreement, dated July 11, 2000, among the Company and Salomon Brothers International Limited, Bear, Stearns International Limited, Daiwa Securities SB Capital Markets Europe Limited, Deutsche Bank AG London, Goldman Sachs International, IBJ International plc, Nomura International plc, Sanwa International plc and Tokyo-Mitsubishi International plc, as Underwriters, relating to the offer and sale of the Company's (Y)55 billion 1.40% Notes due July 18, 2005. (B) Form of DTC Global Note for the Company's 1.40% Notes due July 18, 2005. (C) Form of International Global Note for the Company's 1.40% Notes due July 18, 2005. (D) Form of Fiscal Agency Agreement among Citibank, N.A. London Office, the Company and Banque Internationale a Luxembourg S.A. (3) On July 25, 2000, the Company filed a Current Report on Form 8-K, dated July 21, 2000, reporting under Item 5 thereof the announcement that the Board of Directors of the Company had elected Robert I. Lipp to the Board of Directors and appointed him Vice Chairman and a Member of the Office of the Chairman. 48 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 11th day of August, 2000. CITIGROUP INC. (Registrant) By /s/Todd S. Thomson ------------------ Todd S. Thomson Chief Financial Officer Principal Financial Officer By /s/Irwin R. Ettinger By /s/Roger W. Trupin -------------------- ------------------ Irwin R. Ettinger Roger W. Trupin Principal Accounting Officer Principal Accounting Officer 49 EXHIBIT INDEX Exhibit Number Description of Exhibit - ------- ---------------------- 3.01.1 Restated Certificate of Incorporation of Citigroup Inc. (the Company), incorporated by reference to Exhibit 4.01 to the Company's Registration Statement on Form S-3 filed December 15, 1998 (No. 333-68949). 3.01.2 Certificate of Designation of 5.321% Cumulative Preferred Stock, Series YY, of the Company, incorporated by reference to Exhibit 4.45 to Amendment No. 1 to the Company's Registration Statement on Form S-3 filed January 22, 1999 (No. 333-68949). 3.01.3 Certificate of Amendment to the Restated Certificate of Incorporation of the Company dated April 18, 2000, incorporated by reference to Exhibit 3.01.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2000 (File No. 1-9924). 3.02 By-Laws of the Company, as amended, effective October 26, 1999, incorporated by reference to Exhibit 3.02 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1999 (File No. 1-9924). 12.01 Computation of Ratio of Earnings to Fixed Charges. 12.02 Computation of Ratio of Earnings to Fixed Charges (including preferred stock dividends). 27.01 Financial Data Schedule. The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company does not exceed 10% of the total assets of the Company and its consolidated subsidiaries. The Company will furnish copies of any such instrument to the Securities and Exchange Commission upon request. 50 EX-12.01 2 0002.txt EXHIBIT 12.01 CITIGROUP, INC. CALCULATION OF RATIO OF INCOME TO FIXED CHARGES (In Millions)
YEAR ENDED DECEMBER 31, Six Months June 30, EXCLUDING INTEREST ON DEPOSITS: 1999 1998 1997 1996 1995 2000 1999 ------ ------ ------ ------ ------ ------ ------ FIXED CHARGES: INTEREST EXPENSE (OTHER THAN INTEREST ON DEPOSITS) 13,894 15,849 14,911 12,362 13,488 8,509 7,020 INTEREST FACTOR IN RENT EXPENSE 262 394 301 282 275 171 162 ------ ------ ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 14,156 16,243 15,212 12,644 13,763 8,680 7,182 ------ ------ ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 15,948 9,269 10,750 11,087 8,914 10,300 7,887 OTHER - - - 1 - - - FIXED CHARGES 14,156 16,243 15,212 12,644 13,763 8,680 7,182 ------ ------ ------ ------ ------ ------ ------ TOTAL INCOME 30,104 25,512 25,962 23,732 22,677 18,980 15,069 ====== ====== ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS 2.13 1.57 1.71 1.88 1.65 2.19 2.10 ====== ====== ====== ====== ====== ====== ====== INCLUDING INTEREST ON DEPOSITS: FIXED CHARGES: INTEREST EXPENSE 24,768 27,495 24,524 21,336 22,390 14,515 12,507 INTEREST FACTOR IN RENT EXPENSE 262 394 301 282 275 171 162 ------ ------ ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 25,030 27,889 24,825 21,618 22,665 14,686 12,669 ------ ------ ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 15,948 9,269 10,750 11,087 8,914 10,300 7,887 OTHER - - - 1 - - - FIXED CHARGES 25,030 27,889 24,825 21,618 22,665 14,686 12,669 ------ ------ ------ ------ ------ ------ ------ TOTAL INCOME 40,978 37,158 35,575 32,706 31,579 24,986 20,556 ====== ====== ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES INCLUDING INTEREST ON DEPOSITS 1.64 1.33 1.43 1.51 1.39 1.70 1.62 ====== ====== ====== ====== ====== ====== ======
EX-12.02 3 0003.txt EXHIBIT 12.02 CITIGROUP, INC. CALCULATION OF RATIO OF INCOME TO FIXED CHARGES INCLUDING PREFERRED STOCK DIVIDENDS
(In Millions) YEAR ENDED DECEMBER 31, Six Months June 30 EXCLUDING INTEREST ON DEPOSITS: 1999 1998 1997 1996 1995 2000 1999 ------ ------ ------ ------ ------ ------ ------ FIXED CHARGES: INTEREST EXPENSE (OTHER THAN INTEREST ON DEPOSITS) 13,894 15,849 14,911 12,362 13,488 8,509 7,020 INTEREST FACTOR IN RENT EXPENSE 262 394 301 282 275 171 162 DIVIDENDS--PREFERRED STOCK 232 332 433 505 800 91 121 ------ ------ ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 14,388 16,575 15,645 13,149 14,563 8,771 7,303 ------ ------ ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 15,948 9,269 10,750 11,087 8,914 10,300 7,887 OTHER - - - 1 - - - FIXED CHARGES (EXCLUDING PREFERRED STOCK DIVIDENDS) 14,156 16,243 15,212 12,644 13,763 8,680 7,182 ------ ------ ------ ------ ------ ------ ------ TOTAL INCOME 30,104 25,512 25,962 23,732 22,677 18,980 15,069 ====== ====== ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS 2.09 1.54 1.66 1.80 1.56 2.16 2.06 ====== ====== ====== ====== ====== ====== ====== INCLUDING INTEREST ON DEPOSITS: FIXED CHARGES: INTEREST EXPENSE 24,768 27,495 24,524 21,336 22,390 14,515 12,507 INTEREST FACTOR IN RENT EXPENSE 262 394 301 282 275 171 162 DIVIDENDS--PREFERRED STOCK 232 332 433 505 800 91 121 ------ ------ ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 25,262 28,221 25,258 22,123 23,465 14,777 12,790 ------ ------ ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 15,948 9,269 10,750 11,087 8,914 10,300 7,887 OTHER - - - 1 - - - FIXED CHARGES (EXCLUDING PREFERRED STOCK DIVIDENDS) 25,030 27,889 24,825 21,618 22,665 14,686 12,669 ------ ------ ------ ------ ------ ------ ------ TOTAL INCOME 40,978 37,158 35,575 32,706 31,579 24,986 20,556 ====== ====== ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES INCLUDING INTEREST ON DEPOSITS 1.62 1.32 1.41 1.48 1.35 1.69 1.61 ====== ====== ====== ====== ====== ====== ======
EX-27.01 4 0004.txt EXHIBIT 27.01
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CITIGROUP'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND ACCOMPANYING DISCLOSURES. 0000831001 CITIGROUP 2000 1,000,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 12,229 13,836 120,274 128,801 110,455 0 0 274,091 6,736 791,333 285,961 23,388 39,622 51,296 4,920 1,775 48 49,753 791,333 12,587 0 12,459 25,046 0 14,515 10,531 1,462 111 6,584 10,300 6,595 0 0 6,595 1.47 1.43 0 3,829 1,168 27 0 6,679 1,839 361 6,736 0 0 0 Includes securities borrowed or purchased under agreements to resell. Allowance activity for the first half of 2000 includes $73MM in other changes, principally foreign currency translation effects and the addition of allowance for credit losses related to acquisitions. Commercial paper and other short-term borrowings. The Board of Directors on July 18, 2000 declared a four-for-three split in Citigroup's common stock, effective August 25, 2000. Earnings per share information has been restated to reflect the stock split. Not disclosed. Includes $1,638MM of cash-basis commercial loans and $2,191MM of consumer loans on which accrual of interest has been suspended. Accruing loans 90 or more days delinquent. No portion of Citigroup's credit loss allowance is specifically allocated to any individual loan or group of loans.
-----END PRIVACY-ENHANCED MESSAGE-----