10-Q 1 a2195256z10-q.htm FORM 10-Q

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

ý   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

OR

o

 

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
(State or other jurisdiction of incorporation or organization)
  52-1568099
(I.R.S. Employer Identification No.)

399 Park Avenue, New York, New York
(Address of principal executive offices)

 

10043
(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 ý No o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

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

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller
reporting company)
  Smaller reporting company o

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

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

Common stock outstanding as of September 30, 2009: 22,863,947,261

Available on the web at www.citigroup.com


CITIGROUP INC.

THIRD QUARTER OF 2009—FORM 10-Q

THE COMPANY

  3
 

Citigroup Segments and Regions

 
4

SUMMARY OF SELECTED FINANCIAL DATA

 
5

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

   
 

Management Summary

 
7
 

Significant Events in the Third Quarter of 2009

 
9

SEGMENT, BUSINESS AND PRODUCT INCOME (LOSS) AND REVENUES

 
12
 

Citigroup Income (Loss)

 
12
 

Citigroup Revenues

 
13

CITICORP

 
14

Regional Consumer Banking

 
15
 

North America Regional Consumer Banking

 
16
 

EMEA Regional Consumer Banking

 
18
 

Latin America Regional Consumer Banking

 
19
 

Asia Regional Consumer Banking

 
20

Institutional Clients Group (ICG)

 
21
 

Securities and Banking

 
22
 

Transaction Services

 
24

CITI HOLDINGS

 
25
 

Brokerage and Asset Management

 
26
 

Local Consumer Lending

 
27
 

Special Asset Pool

 
29

CORPORATE/OTHER

 
32

GOVERNMENT PROGRAMS

 
33

MANAGING GLOBAL RISK

 
36

LOAN AND CREDIT DETAILS

 
36
 

Loans Outstanding

 
36
 

Details of Credit Loss Experience

 
40
 

Non-Accrual Assets

 
41
 

Consumer Loan Details

 
43
   

Consumer Loan Modification Programs

 
44
   

U.S. Consumer Mortgage Lending

 
45
   

N.A. Cards

 
50
   

U.S. Installment and Other Revolving Loans

 
53
 

Corporate Loan Details

 
54

U.S. Subprime-Related Direct Exposure in Citi Holdings—Special Asset Pool

 
57

Exposure to Commercial Real Estate

 
58

Direct Exposure to Monolines

 
59

Highly Leveraged Financing Transactions

 
60

DERIVATIVES

 
60

Market Risk Management Process

 
64

Operational Risk Management Process

 
66

Country and Cross-Border Risk

 
67

INTEREST REVENUE/EXPENSE AND YIELDS

 
68
 

Average Balances and Interest Rates—Assets

 
69
 

Average Balances and Interest Rates—Liabilities and Equity, and Net Interest Revenue

 
70
 

Analysis of Changes in Interest Revenue

 
73
 

Analysis of Changes in Interest Expense and Net Interest Revenue

 
74

CAPITAL RESOURCES AND LIQUIDITY

 
76
 

Capital Resources

 
76
 

Common Equity

 
78
 

Funding and Liquidity

 
81
 

Off-Balance Sheet Arrangements

 
84

CONTRACTUAL OBLIGATIONS

 
85

FAIR VALUATION

 
85

CONTROLS AND PROCEDURES

 
85

FORWARD-LOOKING STATEMENTS

 
85

TABLE OF CONTENTS FOR FINANCIAL STATEMENTS AND NOTES

 
86

CONSOLIDATED FINANCIAL STATEMENTS

 
87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
93

OTHER INFORMATION

 
195
 

Item 1. Legal Proceedings

 
195
 

Item 1A. Risk Factors

 
198
 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 
199
 

Item 4. Submission of Matters to a Vote of Security Holders

 
200
 

Item 6. Exhibits

 
201
 

Signatures

 
202
 

Exhibit Index

 
203

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THE COMPANY

        Citigroup Inc. (Citigroup and, together with its subsidiaries, the Company, Citi or Citigroup) is a global diversified financial services holding company whose businesses provide a broad range of financial services to consumer and corporate customers. Citigroup has approximately 200 million customer accounts and does business in more than 140 countries. Citigroup was incorporated in 1988 under the laws of the State of Delaware.

        The Company is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 registered with, and subject to examination by, the Board of Governors of the Federal Reserve System (FRB). Citibank, N.A. is a U.S. national bank subject to supervision and examination by the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). Some of the Company's other subsidiaries are also subject to supervision and examination by their respective federal and state authorities or, in the case of overseas subsidiaries, the regulators of the respective jurisdictions.

        This Quarterly Report on Form 10-Q should be read in conjunction with Citigroup's Annual Report on Form 10-K for the year ended December 31, 2008 (2008 Annual Report on Form 10-K), Citigroup's updated 2008 historical financial statements and notes filed on Form 8-K with the Securities and Exchange Commission (SEC) on October 13, 2009 and Citigroup's Quarterly Reports on Form 10-Q for the quarters ended June 30, 2009 and March 31, 2009. Additional financial, statistical, and business-related information for the third quarter of 2009, as well as business and segment trends, are included in a Financial Supplement that was furnished as Exhibit 99.2 to the Company's Form 8-K, filed with the SEC on October 15, 2009.

        The principal executive offices of the Company are located at 399 Park Avenue, New York, New York 10043, telephone number 212 559 1000. Additional information about Citigroup is available on the Company's web site at www.citigroup.com. Citigroup's recent annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, as well as the Company's other filings with the SEC, are available free of charge through the Company's web site by clicking on the "Investors" page and selecting "All SEC Filings." The SEC web site contains reports, proxy and information statements, and other information regarding the Company at www.sec.gov.

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        Citigroup is managed along the following segment and product lines:

GRAPHIC

        The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results.

GRAPHIC


(1)
Asia includes Japan, Latin America includes Mexico, and North America includes U.S., Canada and Puerto Rico.

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CITIGROUP INC. AND SUBSIDIARIES

SUMMARY OF SELECTED FINANCIAL DATA—Page 1

 
   
   
   
  Nine Months Ended
September 30,
   
 
 
  Third Quarter    
   
 
In millions of dollars,
except per share amounts
  %
Change
  %
Change
 
  2009   2008   2009   2008  

Net interest revenue

  $ 11,998   $ 13,404     (10 )% $ 37,753   $ 40,478     (7 )%

Non-interest revenue

    8,392     2,854     NM     37,127     5,475     NM  
                           

Revenues, net of interest expense

  $ 20,390   $ 16,258     25 % $ 74,880   $ 45,953     63 %

Operating expenses

    11,824     14,007     (16 )   35,508     44,598     (20 )

Provisions for credit losses and for benefits and claims

    9,095     9,067         32,078     22,019     46  
                           

Income (Loss) from Continuing Operations before Income Taxes

  $ (529 ) $ (6,816 )   92   $ 7,294   $ (20,664 )   NM  

Income taxes (benefits)

    (1,122 )   (3,295 )   66     620     (9,628 )   NM  
                           

Income (Loss) from Continuing Operations

  $ 593   $ (3,521 )   NM   $ 6,674   $ (11,036 )   NM  

Income (Loss) from Discontinued Operations, net of taxes

    (418 )   613     NM     (677 )   578     NM  
                           

Net Income (Loss) before attribution of Noncontrolling Interests

  $ 175   $ (2,908 )   NM   $ 5,997   $ (10,458 )   NM  

Net Income (Loss) attributable to Noncontrolling Interests

    74     (93 )   NM     24     (37 )   NM  
                           

Citigroup's Net Income (Loss)

  $ 101   $ (2,815 )   NM   $ 5,973   $ (10,421 )   NM  
                           

Less:

                                     
 

Preferred dividends—Basic

  $ (272 ) $ (389 )   30 % $ (2,988 ) $ (833 )   NM  
 

Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance—Basic(1)

                (1,285 )       NM  
 

Preferred stock Series H discount accretion—Basic

    (16 )       NM     (123 )       NM  
 

Impact of the Public and Private Preferred stock exchange offer

    (3,055 )       NM     (3,055 )       NM  
                           

Income (loss) available to common stockholders

    (3,242 )   (3,204 )   (1 )   (1,478 )   (11,254 )   87  
 

Allocation of dividends to common stock and participating securities, net of forfeitures

        (1,738 )   NM     (63 )   (5,151 )   99  
                           

Undistributed earnings (loss) for basic EPS

  $ (3,242 ) $ (4,942 )   34 % $ (1,541 ) $ (16,405 )   91 %

Convertible Preferred Stock Dividends

        270     NM     540     606     (11 )
                           

Undistributed earnings (loss) for diluted EPS

  $ (3,242 ) $ (4,672 )   31 % $ (1,001 ) $ (15,799 )   94 %
                           

Earnings per share

                                     
 

Basic(2)

                                     
 

Income (loss) from continuing operations

  $ (0.23 ) $ (0.72 )   68 % $ (0.10 ) $ (2.28 )   96 %
 

Net income (loss)

    (0.27 )   (0.61 )   56     (0.19 )   (2.17 )   91  
                           
 

Diluted(2)

                                     
 

Income (loss) from continuing operations

  $ (0.23 ) $ (0.72 )   68 % $ (0.10 ) $ (2.28 )   96 %
 

Net income (loss)

    (0.27 )   (0.61 )   56     (0.19 )   (2.17 )   91  
                           

[Continued on the following page, including notes to table.]

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SUMMARY OF SELECTED FINANCIAL DATA—Page 2

 
   
   
   
  Nine Months Ended
September 2009,
   
 
 
  Third Quarter    
   
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

At September 30:

                                     

Total assets

  $ 1,888,599   $ 2,050,131     (8 )%                  

Total deposits

    832,603     780,343     7                    

Long-term debt

    379,557     393,097     (3 )                  

Mandatorily redeemable securities of subsidiary Trusts (included in Long-term debt)

    34,531     23,836     45                    

Common stockholders' equity

    140,530     98,638     42                    

Total stockholders' equity

    140,842     126,062     12                    

Direct staff (in thousands)

    276     352     (22 )                  
                           

Ratios:

                                     

Return on common stockholders' equity(3)

    (12.2 )%   (12.2 )%         (2.3 )%   (13.8 )%      
                           

Tier 1 Common(4)

    9.12 %   3.72 %                        

Tier 1 Capital

    12.76 %   8.19 %                        

Total Capital

    16.58 %   11.68 %                        

Leverage(5)

    6.87 %   4.70 %                        
                           

Common stockholders' equity to assets

    7.4 %   4.8 %                        

Ratio of earnings to fixed charges and preferred stock dividends

    0.96     NM           1.16     NM        
                           

(1)
For the nine months ended September 30, 2009, Income available to common stockholders includes a reduction of $1.285 billion related to a conversion price reset pursuant to Citigroup's prior agreement with the purchasers of $12.5 billion convertible preferred stock issued in a private offering in January 2008. The conversion price was reset from $31.62 per share to $26.35 per share. There was no impact to net income, total stockholders' equity or capital ratios due to the reset. However, the reset resulted in a reclassification from Retained earnings to Additional paid-in capital of $1.285 billion and a reduction in Income available to common stockholders of $1.285 billion. The 2009 third quarter Income available to common stockholders includes a reduction of $3.055 billion related to the preferred stock exchanged for common stock and trust preferred securities as part of the exchange offers.

(2)
The Company adopted Accounting Standards Codification (ASC) 260-10-45 to 65, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" on January 1, 2009. All prior periods have been restated to conform to the current presentation. The Diluted EPS calculation for the third quarter and nine months of 2009 and 2008 utilize Basic shares and Income available to common stockholders (Basic) due to the negative Income available to common stockholders. Using actual Diluted shares and Income available to common stockholders (Diluted) would result in anti-dilution.

(3)
The return on average common stockholders' equity is calculated using income (loss) available to common stockholders.

(4)
As defined by the banking regulators, the Tier 1 Common ratio represents Tier 1 Capital less perpetual preferred stock, qualifying noncontrolling interests in subsidiaries and qualifying mandatorily redeemable securities of subsidiary trusts divided by risk-weighted assets. Tier 1 Common ratio is a non-GAAP measure. See "Capital Resources and Liquidity" below for additional information on this measure.

(5)
The Leverage ratio represents Tier 1 Capital divided by each period's quarterly adjusted average total assets.

NM    Not meaningful

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

        Within this Form 10-Q, please refer to the indices on pages 2 and 86 for page references to the Management's Discussion and Analysis section and Notes to Consolidated Financial Statements, respectively.

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

THIRD QUARTER OF 2009 MANAGEMENT SUMMARY

        Citigroup reported net income of $101 million, and a loss of ($0.27) per diluted share, for the third quarter of 2009. The ($0.27) loss per share reflected a $3.1 billion charge to retained earnings related to the closing of the exchange offers, the remaining preferred stock dividends required to be paid prior to the closing of the exchange offers and the remaining quarterly accretion of the Series H preferred stock discount.

        Revenues of $20.4 billion increased 25% from year-ago levels due primarily to positive revenue marks and gains in Citi Holdings relative to the prior-year period, and a $1.4 billion gain from the extinguishment of debt associated with the closing of the exchange offers. The increase was partially offset by credit valuation adjustments (CVA) of $1.7 billion in Securities and Banking, the absence of Smith Barney revenues of $2.0 billion in the third quarter of 2009 and foreign currency translation.

        Net interest revenue declined 10% from the 2008 third quarter, primarily reflecting the Company's smaller balance sheet. Net interest margin in the third quarter of 2009 was 2.95%, down 20 basis points from the third quarter of 2008, reflecting a decrease in asset yields related to the decrease in the Federal funds rate, largely offset by significantly lower funding costs. Non-interest revenue increased $5.5 billion from a year ago, primarily reflecting the absence of significant losses in the Citi Holdings Special Asset Pool portfolio.

        Operating expenses decreased 16% from the year-ago quarter and were down 1% from the second quarter of 2009 primarily due to divestitures, including Smith Barney, the re-sizing of the Citi Holdings businesses, the re-engineering of Citicorp processes, expense control, and the impact of foreign currency translation. Headcount of 276,000 was down 76,000 from September 30, 2008 and down 3,000 from June 30, 2009.

        The Company's total allowance for loan losses totaled $36.4 billion at September 30, 2009, a coverage ratio of 5.85% of total loans up from 5.6% at June 30, 2009, even though corporate loans declined by $13 billion during the quarter and consumer loans decreased by $6 billion. During the third quarter of 2009, the Company recorded a net build of $802 million to its credit reserves. The build for the quarter was $3.1 billion lower than the second quarter of 2009, consisting of a net build of $893 million for consumer loans and a net release of $91 million for corporate loans.

        Consumer non-accrual loans totaled $17.9 billion at September 30, 2009, compared to $15.8 billion at June 30, 2009 and $10.8 billion at September 30, 2008, primarily related to the recognition of SFAS 114 charge-offs in the quarter. The consumer loan delinquency rate was 4.70% at September 30, 2009, compared to 4.24% at June 30, 2009 and 2.66% a year ago. Delinquencies continue to rise for the first mortgage portfolio in the U.S. due primarily to the lengthening of the foreclosure process by many states and the increasing impact of the Home Affordable Modification Program (HAMP). Loans in the HAMP trial modification period are reported as delinquent if the original contractual payments are not received on time (even if the reduced payments agreed to under the program are made by the borrower) until the loan has completed the trial period under the program (see "Loan and Credit Details—Consumer Loan Modification Programs" and "—U.S. Consumer Mortgage Lending" below).

        Corporate non-accrual loans were $14.8 billion at September 30, 2009, compared to $12.4 billion at June 30, 2009 and $2.7 billion a year ago. The increase from the prior quarter is mainly due to the Company's continued policy of actively moving loans into non-accrual at earlier stages of anticipated distress. Over two-thirds of the non-accrual corporate loans are current and continue to make their contractual payments. The increase from prior-year levels is also attributable to the transfer of non-accrual loans from the held-for-sale portfolio (which are carried at lower-of-cost-or-fair value and excluded from non-accrual loans) to the held-for-investment portfolio during the fourth quarter of 2008. The total allowance for loan loss reserve balance for funded corporate loans remained stable at $8 billion at the end of the quarter, or 4.4% of corporate loans, up from 4.1% in the second quarter of 2009.

        The Company's effective tax rate on continuing operations in the third quarter of 2009 was 212% versus 48% in the prior-year period. The tax provision reflected a higher proportion of income earned and indefinitely reinvested in countries with relatively lower tax rates as well as a higher proportion of income from tax advantaged sources. The current quarter also includes a tax benefit of $103 million in continuing operations relating to a release of tax reserves on interchange fees, which was supported by a favorable Tax Court decision in a case litigated by another financial institution.

        Total deposits were $833 billion at September 30, 2009, up 3% from June 30, 2009 and up 7% from year-ago levels. At September 30, 2009, the Company had increased its structural liquidity (equity, long-term debt and deposits) as a percentage of assets from 66% at December 31, 2008 to 72% at September 30, 2009. Over the past six months, Citigroup and its subsidiaries have issued $20 billion of non-guaranteed debt outside of the FDIC's TLGP.

        Citigroup has continued its deleveraging, reducing total assets from $2,050 billion a year ago to $1,889 billion at September 30, 2009. Asset reductions in Citi Holdings made up approximately 98% of the decline, reflecting the Company's continued strategy of reducing its assets and exposures in this business segment, which are down by almost one-third since the peak levels of early 2008.

        Primarily as a result of the exchange offers, Citigroup increased its Tier 1 Common by $63 billion from the second quarter of 2009 to $90 billion. In addition, the Company's Tangible Common Equity (TCE) increased by $62 billion from the second quarter of 2009 to $102 billion at September 30, 2009. (TCE and Tier 1 Common are non-GAAP financial

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measures. See "Capital Resources and Liquidity" for additional information on these measures.)

        The closing of the exchange offers also resulted in a reconstitution of the Company's equity base. Common Equity increased 98% from December 31, 2008 to $140.5 billion. Citigroup's total stockholders' equity decreased by $11.5 billion during the third quarter of 2009 to $140.8 billion, primarily reflecting the impact of the exchange offers, partially offset by a $4.0 billion improvement in Accumulated Other Comprehensive Income. Citigroup's total equity capital base and trust preferred securities were $175.4 billion at September 30, 2009. The Tier 1 Capital ratio and Tier 1 Common ratio were 12.76% and 9.12%, respectively, at September 30, 2009.

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SIGNIFICANT EVENTS IN THE THIRD QUARTER OF 2009

        Certain significant events have occurred during the fiscal year to date, including events subsequent to September 30, 2009, that had, or could have, an effect on Citigroup's current and future financial condition, results of operations, liquidity and capital resources. These events are summarized below and discussed throughout this MD&A.

EXCHANGE OFFERS

Private Exchange Offers

        On July 23, 2009, Citigroup closed its exchange offers with the private holders of $12.5 billion aggregate liquidation value of preferred stock. The U.S. Treasury (UST) matched these exchange offers by exchanging $12.5 billion aggregate liquidation value of its preferred stock, for a total closing of $25 billion. Following the approval, on September 2, 2009, by Citi shareholders of an increase in Citi's authorized common stock, on September 10, 2009, the private holders and the UST received an aggregate of approximately 7,692 million shares of Citigroup common stock.

Public Exchange Offers

        On July 29, 2009, Citigroup closed its exchange offers with the holders of approximately $20.4 billion in aggregate liquidation value of publicly-held preferred stock and trust preferred securities, representing 99% of the total liquidation value of securities Citigroup was offering to exchange. Upon closing of the public exchange offers, Citi issued approximately 5.8 billion shares of common stock to the public exchange offer participants.

        In addition, on July 30, 2009, the UST matched the public exchange offers by exchanging an additional $12.5 billion aggregate liquidation value of its preferred stock. Following the increase in Citigroup's authorized common stock, on September 10, 2009, the UST received an additional approximately 3.8 billion shares of Citigroup common stock.

        In total, approximately $58 billion in aggregate liquidation value of preferred stock and trust preferred securities were exchanged for common stock upon completion of all stages of the exchange offers. As a result of the exchange offers, the UST owned approximately 33.6% of Citigroup's outstanding common stock, not including the exercise of the warrants issued to the UST as part of TARP and pursuant to the loss-sharing agreement. See "Government Programs" below.

Trust Preferred Securities

        On July 30, 2009, all remaining preferred stock of Citigroup held by the UST and the FDIC that was not exchanged into Citigroup common stock in connection with the exchange offers, in an aggregate liquidation amount of approximately $27.1 billion, was exchanged into newly issued 8% trust preferred securities.

Accounting Impact

        The accounting for the exchange offers resulted in the de-recognition of preferred stock and the recognition of the common stock issued at fair value in the Common stock and Additional paid-in capital accounts in equity. The difference between the carrying amount of preferred stock and the fair value of the common stock was recorded in Retained earnings (impacting net income available to common shareholders and EPS) or Additional paid-in capital accounts in equity, depending on whether the preferred stock was originally non-convertible or convertible.

        For the U.S. Government (USG) preferred stock that was converted to 8% trust preferred securities, the newly issued trust preferred securities were initially recorded at fair value as Long-term debt. The difference between the carrying amount of the preferred stock and the fair value of the trust preferred securities was recorded in Retained earnings after adjusting for the appropriate deferred tax liability (impacting net income available to common shareholders and EPS). For trust preferred securities exchanged for common stock, the carrying amount recorded as long-term debt was de-recognized and the common stock issued was recorded at fair value in the Common Stock and the Additional Paid-in Capital accounts in equity. The difference between the carrying amount of the trust preferred securities and the fair value of the common stock was recorded in Other revenue in the third quarter of 2009.

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        The following table presents the impact of the completion of all stages of the exchange offers to Citigroup's common shares outstanding and to its balance sheet:

(in millions of dollars, except incremental number of Citigroup common shares)
  Impact on  
Security   Notional
Amounts
  Converted
Into
  Incremental
Number of
Citigroup
Common
Shares
  Date of
Settlement
  Other
Assets(3)
  Long-
Term
Debt
  Preferred
Stock
  Common
Stock
  Additional
Paid In
Capital
  Income
Statement(2)
  Retained
Earnings(1)
 
 
   
   
  (in millions)
   
   
   
   
   
   
   
   
 

Convertible Preferred Stock held by Private Investors

  $ 12,500   Common Stock     3,846     7/23/2009   $       $ (12,500 ) $ 38   $ 21,801   $   $ (9,340 )

Convertible Preferred Stock held by Public Investors

    3,146   Common Stock     823     7/29/2009             (3,146 )   8     5,128         (1,990 )

Non-Convertible Preferred Stock held by Public Investors

    11,465   Common Stock     3,351     7/29/2009             (11,465 )   33     9,116         2,316  

Trust Preferred Securities held by Public Investors

    5,773   Common Stock     1,660     7/29/2009     (602 )   (5,972 )       17     4,515     851     851  

USG TARP Preferred Stock matching the Preferred Stock held by Private Investors

    12,500   Common Stock     3,846     7/23/2009             (11,924 )   38     10,615         1,270  

USG TARP Preferred Stock matching the Preferred Stock and Trust Preferred Securities held by Public Investors

    12,500   Common Stock     3,846     7/30/2009             (11,926 )   39     10,615         1,272  

USG TARP Preferred Stock

    20,000   TruPS         7/30/2009     (2,883 )   12,004     (19,514 )               4,627  

Non-Convertible Preferred Stock held by U.S. Treasury and FDIC related to covered asset guarantee (loss-sharing agreement)

    7,059   TruPS         7/30/2009     (503 )   4,237     (3,530 )               (1,210 )

Total

              17,372         $ (3,988 ) $ 10,269   $ (74,005 ) $ 173   $ 61,790   $ 851   $ (2,204 )

Note: Table may not foot due to roundings.

Summary of Impact of Exchange Offers

        During the third quarter of 2009, TCE increased by $60 billion as a result of the exchange of approximately $74 billion carrying amount of preferred shares and $6 billion carrying value of trust preferred securities for 17,372 million shares of common stock and approximately $27.1 billion liquidation amount of trust preferred securities (recorded as Long-term debt at its fair value of $16.2 billion). This resulted in an increase to common stock and APIC of $62 billion and a reduction in Retained earnings of approximately $2 billion, for a total increase in TCE of approximately $60 billion. The additional $64 billion of Tier 1 Common includes the impact of the above plus a reduction in the disallowed Deferred tax asset (which increases Tier 1 Common) that arises from the accounting for the transactions. TCE and Tier 1 Common are non-GAAP financial measures. See "Capital Resources and Liquidity" below for additional information on these measures.

(1)
The Retained earnings impact primarily reflects:

a)
Difference between the carrying value of the preferred stock exchanged versus the fair value of the common stock and trust preferred securities issued.

b)
Value of inducement offer to the convertible preferred stock holders (calculated as the incremental shares received in excess of the original terms multiplied by stock price on the commitment date); and

c)
After-tax gain from extinguishment of debt associated with the trust preferred securities held by public investors.

(2)
After-tax gain reflected in third quarter 2009 earnings of approximately $0.9 billion from the extinguishment of debt associated with the trust preferred securities held by public investors.

(3)
Primarily represents the impact on deferred taxes of the various exchange transactions, which will benefit Tier 1 Common and Tier 1 Capital.

        Earnings per share in the third quarter of 2009 was impacted by (1) the increase in shares outstanding as a result of the issuance of common shares and interim securities and the timing thereof, (2) the net impact to Retained earnings and income statement resulting from the exchange offers and (3) dividends on USG preferred shares accrued up to the date of their conversion to interim securities and trust preferred securities.

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DEFERRED TAX ASSET

        Deferred taxes are recorded for the future consequences of events that have been recognized in the financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets (DTAs) are recognized subject to management's judgment that realization is more likely than not.

        As of September 30, 2009, Citigroup had recognized a net deferred tax asset of approximately $38 billion, down $4 billion from approximately $42 billion at June 30, 2009 and down $6.5 billion from approximately $44.5 billion at December 31, 2008. Approximately $13 billion of the net deferred tax asset is included in Tier 1 and Tier 1 Common regulatory capital. The principal items reducing the deferred tax asset during 2009 were a decrease of approximately $3.9 billion relating to the exchange offers and $2.8 billion due to an increase in Other Comprehensive Income.

        Although realization is not assured, the Company believes that the realization of the recognized net deferred tax asset at September 30, 2009 is more likely than not based upon expectations of future taxable income in the jurisdictions in which it operates and available tax planning strategies.

        Approximately $17 billion of Citigroup's DTA is represented by U.S. federal, state and local tax return carry-forwards subject to expiration substantially beginning in 2017 and continuing through 2028. The remaining $21 billion DTA is largely due to timing differences between the recognition of income for GAAP and tax, representing net deductions that have not yet been taken on a tax return and are not currently subject to expiration. The most significant source of these timing differences is the loan loss reserve build, which accounts for approximately $14 billion of the net DTA. In general, Citigroup would need to generate approximately $85 billion of taxable income during the respective carry-forward periods to fully realize its U.S. federal, state and local DTA.

        Citi's ability to utilize its deferred tax assets to offset future taxable income may be significantly limited if Citi experiences an "ownership change," as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). In general, an ownership change will occur if there is a cumulative change in Citi's ownership by "5% shareholders" (as defined in the Code) that exceeds 50 percentage points over a rolling three-year period.

        The common stock issued pursuant to the exchange offers did not result in an ownership change under the Code. On June 9, 2009, the board of directors of Citigroup adopted a tax benefits preservation plan (the "Plan"). The purpose of the Plan is to minimize the likelihood of an ownership change occurring for Section 382 purposes and thus protect Citigroup's ability to utilize certain of its deferred tax assets, such as net operating loss and tax credit carry forwards, to offset future income. Despite adoption of the Plan, future stock issuance or transactions in our stock that may not be in our control, including sales by the USG, may cause Citi to experience an ownership change and thus limit the Company's ability to utilize its deferred tax asset and reduce its TCE and stockholders' equity.

DIVESTITURES

Sale of Nikko Cordial Securities

        On October 1, 2009, Citigroup completed the sale of its domestic Japanese domestic securities business, conducted principally through Nikko Cordial Securities Inc. (NCS) to Sumitomo Mitsui Banking Corporation in a transaction with a total cash value of approximately $8.7 billion (¥776 billion). The transaction will be recorded in the fourth quarter of 2009. After considering the impact of foreign exchange hedges of the proceeds of the transaction (most of which has been recorded in the second and third quarters of 2009), the sale will result in an immaterial after-tax gain to Citigroup.

        Beginning in the second quarter of 2009, the results of NCS and its related companies are reflected as Discontinued Operations in the Company's Consolidated Financial Statements. At September 30, 2009, assets of $23.6 billion and liabilities of $16.0 billion are reflected on the Consolidated Balance Sheet as "Assets/ Liabilities of discontinued operations held for sale", respectively, including $3.8 billion of identifiable goodwill and intangibles.

SUBSEQUENT EVENTS

        As required by SFAS 165, Subsequent Events, the Company has evaluated subsequent events through November 6, 2009, which is the date its Consolidated Financial Statements were issued.

ACCOUNTING CHANGES AND FUTURE APPLICATION OF ACCOUNTING STANDARDS

        See Note 1 to the Consolidated Financial Statements for a discussion of "Accounting Changes" and "Future Application of Accounting Standards."

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SEGMENT, BUSINESS AND PRODUCT INCOME (LOSS) AND REVENUES

        The following tables show the income (loss) and revenues for Citigroup on a segment, business and product view:


Citigroup Income (Loss)

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars
  2009   2008   2009   2008  

Income from Continuing Operations

                                     

CITICORP

                                     

Regional Consumer Banking

                                     
 

North America

  $ 163   $ (44 )   NM   $ 345   $ 470     (27 )%
 

EMEA

    (23 )   31     NM     (166 )   87     NM  
 

Latin America

    29     102     (72 )%   268     867     (69 )
 

Asia

    446     357     25     969     1,344     (28 )
                           
   

Total

  $ 615   $ 446     38   $ 1,416   $ 2,768     (49 )%
                           

Securities and Banking

                                     
 

North America

  $ (77 ) $ 1,340     NM   $ 2,493   $ 3,368     (26 )%
 

EMEA

    548     102     NM     3,466     674     NM  
 

Latin America

    216     227     (5 )%   1,137     853     33  
 

Asia

    68     569     (88 )   1,720     1,502     15  
                           
   

Total

  $ 755   $ 2,238     (66 )% $ 8,816   $ 6,397     38 %
                           

Transaction Services

                                     
 

North America

  $ 152   $ 94     62 % $ 471   $ 243     94 %
 

EMEA

    308     348     (11 )   984     925     6  
 

Latin America

    148     159     (7 )   458     451     2  
 

Asia

    331     317     4     904     899     1  
                           
   

Total

  $ 939   $ 918     2 % $ 2,817   $ 2,518     12 %
                           
 

Institutional Clients Group

  $ 1,694   $ 3,156     (46 )% $ 11,633   $ 8,915     30 %

Total Citicorp

  $ 2,309   $ 3,602     (36 )% $ 13,049   $ 11,683     12 %
                           

CITI HOLDINGS

                                     

Brokerage and Asset Management

  $ 139   $ (57 )   NM   $ 7,011   $ 96     NM  

Local Consumer Lending

    (2,099 )   (2,285 )   8 %   (7,711 )   (3,366 )   NM  

Special Asset Pool

    142     (4,594 )   NM     (5,095 )   (18,041 )   72 %

Total Citi Holdings

  $ (1,818 ) $ (6,936 )   74 % $ (5,795 ) $ (21,311 )   73 %
                           

Corporate/Other

  $ 102   $ (187 )   NM   $ (580 ) $ (1,408 )   59  

Income (Loss) from Continuing Operations

  $ 593   $ (3,521 )   NM   $ 6,674   $ (11,036 )   NM  
                           

Discontinued Operations

  $ (418 ) $ 613         $ (677 ) $ 578        

Net Income (Loss) attributable to Noncontrolling Interests

    74   $ (93 )         24   $ (37 )      
                           

Citigroup's Net Income (Loss)

  $ 101   $ (2,815 )   NM   $ 5,973   $ (10,421 )   NM  
                           

NM    Not meaningful

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Citigroup Revenues

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars
  2009   2008   2009   2008  

CITICORP

                                     

Regional Consumer Banking

                                     
 

North America

  $ 1,754   $ 1,472     19 % $ 5,604   $ 5,917     (5 )%
 

EMEA

    415     498     (17 )   1,169     1,467     (20 )
 

Latin America

    1,826     2,300     (21 )   5,436     6,906     (21 )
 

Asia

    1,680     1,839     (9 )   4,842     5,674     (15 )
                           
   

Total

  $ 5,675   $ 6,109     (7 )% $ 17,051   $ 19,964     (15 )%
                           

Securities and Banking

                                     
 

North America

  $ 1,312   $ 4,018     (67 )% $ 8,454   $ 11,117     (24 )%
 

EMEA

    2,198     1,395     58     8,974     5,098     76  
 

Latin America

    703     469     50     2,547     1,872     36  
 

Asia

    680     1,463     (54 )   4,214     4,382     (4 )
                           
   

Total

  $ 4,893   $ 7,345     (33 )% $ 24,189   $ 22,469     8 %
                           

Transaction Services

                                     
 

North America

  $ 643   $ 540     19 % $ 1,888   $ 1,557     21 %
 

EMEA

    845     953     (11 )   2,549     2,784     (8 )
 

Latin America

    337     378     (11 )   1,020     1,092     (7 )
 

Asia

    632     695     (9 )   1,857     2,029     (8 )
                           
   

Total

  $ 2,457   $ 2,566     (4 ) $ 7,314   $ 7,462     (2 )%
                           
 

Institutional Clients Group

  $ 7,350   $ 9,911     (26 )% $ 31,503   $ 29,931     5 %

Total Citicorp

  $ 13,025   $ 16,020     (19 )% $ 48,554   $ 49,895     (3 )%
                           

CITI HOLDINGS

                                     

Brokerage and Asset Management

  $ 670   $ 2,094     (68 )% $ 14,710   $ 6,951     NM  

Local Consumer Lending

    4,647     5,432     (14 )   15,030     19,156     (22 )%

Special Asset Pool

    1,377     (6,822 )   NM     (3,844 )   (27,842 )   86  

Total Citi Holdings

  $ 6,694   $ 704     NM   $ 25,896   $ (1,735 )   NM  
                           

Corporate/Other

  $ 671   $ (466 )   NM   $ 430   $ (2,207 )   NM  

Total Net Revenues

  $ 20,390   $ 16,258     25 % $ 74,880   $ 45,953     63 %
                           

NM    Not meaningful

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CITICORP

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  
 

Net interest revenue

  $ 8,435   $ 8,316     1 % $ 25,067   $ 24,980      
 

Non-interest revenue

    4,590     7,704     (40 )   23,487     24,915     (6 )%
                           

Total Revenues, net of interest expense

  $ 13,025   $ 16,020     (19 )% $ 48,554   $ 49,895     (3 )%
                           

Provision for credit losses and for benefits and claims

                                     
 

Net credit losses

  $ 1,718   $ 1,317     30 % $ 4,515   $ 3,535     28 %
 

Credit reserve build (release)

    465     799     (42 )   2,570     1,846     39  
                           
 

Provision for loan losses

  $ 2,183   $ 2,116     3   $ 7,085   $ 5,381     32 %
 

Provision for benefits & claims

    14             41     3     NM  
 

Provision for unfunded lending commitments

        (80 )   100     115     (155 )   NM  
                           
   

Total provision for credit losses and for benefits and claims

  $ 2,197   $ 2,036     8 % $ 7,241   $ 5,229     38 %
                           

Total operating expenses

  $ 8,181   $ 8,948     (9 ) $ 23,227   $ 28,174     (18 )%
                           

Income from continuing operations before taxes

  $ 2,647   $ 5,036     (47 )% $ 18,086   $ 16,492     10 %

Provision for income taxes

    338     1,434     (76 )   5,037     4,809     5  
                           

Income from continuing operations

  $ 2,309   $ 3,602     (36 )% $ 13,049   $ 11,683     12 %

Net income (loss) attributable to noncontrolling interests

    25     16     56     25     50     (50 )
                           

Citicorp's net income

  $ 2,284   $ 3,586     (36 )% $ 13,024   $ 11,633     12 %
                           

Balance Sheet Data (in billions)

                                     

Total EOP assets

  $ 1,014   $ 1,158     (12 )%                  

Average assets

  $ 1,032   $ 1,175     (12 )% $ 1,024   $ 1,287     (20 )%

Total EOP deposits

  $ 728   $ 683     7 %                  
                           

NM    Not meaningful

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REGIONAL CONSUMER BANKING

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

Net interest revenue

  $ 3,992   $ 4,224     (5 )% $ 11,508   $ 12,429     (7 )%

Non-interest revenue

    1,683     1,885     (11 )   5,543     7,535     (26 )
                           

Total Revenues, net of interest expense

  $ 5,675   $ 6,109     (7 )% $ 17,051   $ 19,964     (15 )%
                           

Total operating expenses

  $ 3,547   $ 4,029     (12 )% $ 10,344   $ 12,005     (14 )%
                           
   

Net credit losses

  $ 1,426   $ 1,096     30 % $ 3,978   $ 2,940     35 %
   

Credit reserve build (release)

    319     514     (38 )   1,575     1,346     17  
   

Provision for benefits & claims

    14             41     3     NM  
                           

Provision for loan losses and for benefits and claims

  $ 1,759   $ 1,610     9 % $ 5,594   $ 4,289     30 %
                           

Income from continuing operations before taxes

    369   $ 470     (21 )   1,113   $ 3,670     (70 )%

Income taxes (benefits)

    (246 )   24     NM     (303 )   902     NM  
                           

Income from continuing operations

  $ 615   $ 446     38 % $ 1,416   $ 2,768     (49 )%

Net income (loss) attributable to noncontrolling interests

    2     5     (60 )   2     10     (80 )
                           

Net income

  $ 613   $ 441     39 % $ 1,414   $ 2,758     (49 )%
                           

Average assets (in billions of dollars)

  $ 201   $ 222     (9 )%   191   $ 225     (15 )%

Return on assets

    1.21 %   0.79 %         0.99 %   1.64 %      

Average deposits (in billions of dollars)

    275     266     3 %                  

Net credit losses as a % of average loans

    4.70 %   3.35 %                        
                           

Revenue by business

                                     
 

Retail Banking

  $ 3,315   $ 3,531     (6 )% $ 9,463   $ 10,559     (10 )%
 

Citi-Branded Cards

    2,360     2,578     (8 )   7,588     9,405     (19 )
                           
     

Total revenues

  $ 5,675   $ 6,109     (7 )% $ 17,051   $ 19,964     (15 )%
                           

Income (loss) from continuing operations by business

                                     
 

Retail Banking

  $ 609   $ 563     8 % $ 1,480   $ 1,826     (19 )%
 

Citi-Branded Cards

    6     (117 )   NM     (64 )   942     NM  
                           
     

Total

  $ 615   $ 446     38 % $ 1,416   $ 2,768     (49 )%
                           

NM    Not meaningful

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NORTH AMERICA REGIONAL CONSUMER BANKING

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

Net interest revenue

  $ 1,224   $ 978     25 % $ 3,394   $ 2,673     27 %

Non-interest revenue

    530     494     7     2,210     3,244     (32 )
                           

Total Revenues, net of interest expense

  $ 1,754   $ 1,472     19 % $ 5,604   $ 5,917     (5 )%
                           

Total operating expenses

  $ 1,331   $ 1,444     (8 )% $ 4,023   $ 4,507     (11 )%
                           
 

Net credit losses

  $ 280   $ 144     94 % $ 843   $ 425     98 %
 

Credit reserve build (release)

    30     (9 )   NM     402     286     41  
 

Provision for benefits and claims

    14             41     2     NM  
                           

Provisions for loan losses and for benefits and claims

  $ 324   $ 135     NM   $ 1,286   $ 713     80 %
                           

Income (loss) from continuing operations before taxes

  $ 99   $ (107 )   NM   $ 295   $ 697     (58 )%

Income taxes (benefits)

    (64 )   (63 )   (2 )%   (50 )   227     NM  
                           

Income (loss) from continuing operations

  $ 163   $ (44 )   NM   $ 345   $ 470     (27 )%

Net income (loss) attributable to noncontrolling interests

                         
                           

Net income (loss)

  $ 163   $ (44 )   NM   $ 345   $ 470     (27 )%
                           

Average deposits (in billions of dollars)

  $ 139   $ 121     15 %                  

Net credit losses as a % of average loans

    5.94 %   3.51 %                        
                           

Revenue by business

                                     
 

Retail banking

  $ 1,070   $ 1,004     7 % $ 2,907   $ 2,806     4 %
 

Citi-branded cards

    684     468     46     2,697     3,111     (13 )
                           
   

Total

  $ 1,754   $ 1,472     19 % $ 5,604   $ 5,917     (5 )%
                           

Income (loss) from continuing operations by business

                                     
 

Retail banking

  $ 150   $ 143     5 % $ 319   $ 205     56 %
 

Citi-branded cards

    13     (187 )   NM     26     265     (90 )
                           
   

Total

  $ 163   $ (44 )   NM   $ 345   $ 470     (27 )%
                           

NM    Not meaningful

3Q09 vs. 3Q08

        Overall, most key revenue drivers in North America regional consumer banking were stable or higher in the third quarter of 2009 as compared to the second quarter of 2009. The key focus in Citi's North America consumer businesses will likely remain on engagement with customers to raise deposits and to offer loans. However, recovery is expected to be driven by improvement in credit in the key North American businesses. For a further discussion, see "Loan and Credit Details—Consumer Loan Modification Programs" and "—U.S. Consumer Mortgage Lending" below.

        Revenues, net of interest expense, increased 19%, primarily reflecting higher net interest margin in cards, higher volumes in retail banking, and better securitization revenue, offset by higher credit losses in the securitization trusts. Net interest revenue was up 25% driven by higher net interest margin in cards as a result of higher interest revenue from pricing actions and lower funding costs, and by the impact of higher deposit and loan volumes in retail banking. Average deposits were 15% higher than the prior year, driven by growth in both consumer and commercial deposits. Non-interest revenue increased 7% primarily driven by better securitization revenue, partially offset by higher credit losses flowing through the securitization trusts.

        Operating expenses declined 8%, primarily reflecting the benefits from re-engineering efforts and lower marketing costs.

        Provisions for loan losses and for benefits and claims increased $189 million primarily due to rising net credit losses in both cards and retail banking. Continued weakening of leading credit indicators and trends in the macro-economic environment, including rising unemployment and higher bankruptcy filings, drove higher credit costs. The cards net credit loss ratio increased 339 basis points to 7.06%, while the retail banking net credit loss ratio increased 120 basis points to 4.23%.

        The increase in Net Income also reflected a tax benefit resulting from the federal tax reserve release in the third quarter of 2009.

3Q09 YTD vs. 3Q08 YTD

        Revenues, net of interest expense, declined 5%, primarily reflecting higher credit losses in the securitization trusts, offset by higher net interest margin in cards and higher volumes in retail banking. Net interest revenue was up 27% driven by the impact of pricing actions and lower funding costs in cards, and by higher deposit volumes in retail banking, with average deposits up 10% from the prior-year period. Non-interest revenue declined 32% driven by higher credit losses flowing through the securitization trusts partially offset by better

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securitization revenue, and by the absence of a $349 million gain on the sale of Visa shares and a $170 million gain from a cards portfolio sale in the prior-year period.

        Operating expenses declined 11%, reflecting the benefits from re-engineering efforts, lower marketing costs, and the absence of $126 million of repositioning charges recorded in the prior-year period, offset by the absence of a prior-year $159 million Visa litigation reserve release.

        Provisions for loan losses and for benefits and claims increased $573 million or 80% primarily due to rising net credit losses in both cards and retail banking. Continued weakening of leading credit indicators and trends in the macro-economic environment, including rising unemployment and higher bankruptcy filings, drove higher credit costs. The cards net credit loss ratio increased 332 basis points to 6.74%, while the retail banking net credit loss ratio increased 70 basis points to 4.12%.

17


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EMEA REGIONAL CONSUMER BANKING

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

Net interest revenue

  $ 262   $ 350     (25 )% $ 729   $ 984     (26 )%

Non-interest revenue

    153     148     3     440     483     (9 )
                           

Total Revenues, net of interest expense

  $ 415   $ 498     (17 )% $ 1,169   $ 1,467     (20 )%
                           

Total operating expenses

  $ 270   $ 372     (27 )% $ 808   $ 1,142     (29 )%
                           
 

Net credit losses

  $ 139   $ 55     NM   $ 349   $ 150     NM  
 

Credit reserve build (release)

    67     33     NM     297     64     NM  
                           

Provisions for loan losses and for benefits and claims

  $ 206   $ 88     NM   $ 646   $ 214     NM  
                           

Income (loss) from continuing operations before taxes

  $ (61 ) $ 38     NM   $ (285 ) $ 111     NM  

Income taxes (benefits)

    (38 )   7     NM     (119 )   24     NM  
                           

Income (loss) from continuing operations

  $ (23 ) $ 31     NM   $ (166 ) $ 87     NM  

Net income (loss) attributable to noncontrolling interests

    2     5     (60 )%   2     11     (82 )%
                           

Net income (loss)

  $ (25 ) $ 26     NM   $ (168 ) $ 76     NM  
                           

Average assets (in billions of dollars)

  $ 11   $ 14     (21 )% $ 11   $ 14     (21 )%

Return on assets

    (0.90 )%   0.74 %         (2.04 )%   0.73 %      

Average deposits (in billions of dollars)

    10     11     (9 )%                  

Net credit losses as a % of average loans

    6.34 %   2.10 %                        
                           

Revenue by business

                                     
 

Retail banking

  $ 237   $ 310     (24 )% $ 676   $ 931     (27 )%
 

Citi-branded cards

    178     188     (5 )   493     536     (8 )
                           
   

Total

  $ 415   $ 498     (17 )% $ 1,169   $ 1,467     (20 )%
                           

Income (loss) from continuing operations by business

                                     
 

Retail banking

  $ (23 ) $ (2 )   NM   $ (140 ) $ (4 )   NM  
 

Citi-branded cards

        33     (100 )%   (26 )   91     NM  
                           
   

Total

  $ (23 ) $ 31     NM   $ (166 ) $ 87     NM  
                           

NM    Not meaningful

3Q09 vs. 3Q08

        Revenues, net of interest expense, declined 17%. More than half of the revenue decline was attributable to changes in foreign currency translation (generally referred to throughout this report as "FX translation"). Other drivers included lower wealth management and lending revenues due to lower volumes and spread compression. Investment sales and assets under management declined by 29% and 25%, respectively. Net interest revenue was 25% lower than the prior-year period with average loans for retail banking down 22% as a result of a lower risk profile, branch closures and the impact of FX translation.

        Operating expenses declined 27%, reflecting expense control actions, lower marketing expenditure and the impact of FX translation. Cost savings were primarily achieved by branch closures, headcount reductions and re-engineering efforts.

        Provisions for loan losses and for benefits and claims increased $118 million to $206 million in the third quarter of 2009. While delinquencies improved during the third quarter of 2009 as compared to the second quarter of 2009, net credit losses continued to increase from $55 million to $139 million, and the loan loss reserve build increased from $33 million to $67 million. Higher credit costs reflected continued credit deterioration, particularly in the UAE, Turkey, Poland and Russia.

3Q09 YTD vs. 3Q08 YTD

        Revenues, net of interest expense, declined 20%. Over half of the revenue decline was attributable to the impact of FX translation. Other drivers included lower wealth management and lending revenues due to lower volumes and spread compression. Investment sales and assets under management declined by 42% and 25%, respectively. Net interest revenue was 26% lower than the prior-year period with average loans for retail banking down 20% and average deposits down 22%. Non-interest revenue decreased by 9%, primarily due to the impact of FX translation.

        Operating expenses declined 29%, reflecting expense control actions, lower marketing spend and the impact of FX translation. Cost savings were achieved by branch closures, headcount reductions and re-engineering efforts.

        Provisions for loan losses and for benefits and claims increased $432 million to $646 million. Net credit losses increased from $150 million to $349 million, while the loan loss reserve build increased from $64 million to $297 million. Higher credit costs reflected continued credit deterioration across the region.

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LATIN AMERICA REGIONAL CONSUMER BANKING

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

Net interest revenue

  $ 1,339   $ 1,669     (20 )% $ 3,940   $ 5,046     (22 )%

Non-interest revenue

    487     631     (23 )   1,496     1,860     (20 )
                           

Total Revenues, net of interest expense

  $ 1,826   $ 2,300     (21 )% $ 5,436   $ 6,906     (21 )%
                           

Total operating expenses

  $ 1,077   $ 1,292     (17 )% $ 3,027   $ 3,475     (13 )%
                           
 

Net credit losses

  $ 656   $ 640     3 % $ 1,809   $ 1,661     9 %
 

Credit reserve build (release)

    141     301     (53 )   461     695     (34 )
 

Provision for benefits and claims

                    1     (100 )
                           

Provisions for loan losses and for benefits and claims

  $ 797   $ 941     (15 )% $ 2,270   $ 2,357     (4 )%
                           

Income from continuing operations before taxes

  $ (48 ) $ 67     NM   $ 139   $ 1,074     (87 )%

Income taxes (benefits)

    (77 )   (35 )   NM     (129 )   207     NM  
                           

Income from continuing operations

  $ 29   $ 102     (72 )% $ 268   $ 867     (69 )%

Net income (loss) attributable to noncontrolling interests

                         
                           

Net income

  $ 29   $ 102     (72 )% $ 268   $ 867     (69 )%
                           

Average assets (in billions of dollars)

    61   $ 81     (25 )%   59   $ 78     (24 )%

Return on assets

    0.19 %   0.50 %         0.61 %   1.48 %      

Average deposits (in billions of dollars)

    36     42     (14 )%                  

Net credit losses as a % of average loans

    9.04     7.79                          
                           

Revenue by business

                                     
 

Retail banking

  $ 969   $ 1,067     (9 )% $ 2,843   $ 3,180     (11 )%
 

Citi-branded cards

    857     1,233     (30 )   2,593     3,726     (30 )
                           
   

Total

  $ 1,826   $ 2,300     (21 )% $ 5,436   $ 6,906     (21 )%
                           

Income (loss) from continuing operations by business

                                     
 

Retail banking

  $ 106   $ 112     (5 )% $ 436   $ 573     (24 )%
 

Citi-branded cards

    (77 )   (10 )   NM     (168 )   294     NM  
                           
   

Total

  $ 29   $ 102     (72 )% $ 268   $ 867     (69 )%
                           

NM    Not meaningful

3Q09 vs. 3Q08

        Revenues, net of interest expense, declined 21%, mainly due to the impact of FX translation, lower cards receivables and spread compression, partially offset by higher business volumes in retail banking. Net interest revenue was 20% lower than the prior year caused by the decrease in cards receivables as well as lower spreads resulting from a lower risk profile, partially offset by higher business volumes in retail banking. Average deposits were down 14%, due primarily to the impact of FX translation. Non-interest revenue declined 23%, primarily due to the impact of FX translation.

        Operating expenses declined 17%, reflecting the benefits from re-engineering efforts and the impact of FX translation.

        Provisions for loan losses and for benefits and claims decreased $144 million mainly due to lower loan loss reserve build of $160 million. While delinquencies decreased during the third quarter 2009 as compared to the second quarter 2009, cards net credit loss rates increased from 16.2% to 18.1%. Rising losses were apparent in Brazil and Mexico; however, the business continues to focus on repositioning and de-risking the portfolio, particularly in the Mexico cards business.

3Q09 YTD vs. 3Q08 YTD

        Revenues, net of interest expense, declined 21% driven by the impact of FX translation, lower volumes and spread compression in the cards business. Net interest revenue was 22% lower than the prior year with average credit cards loans down 22%, and net interest margin decreasing as well due to the cards spread compression impact. Non-interest revenue declined 20%, primarily due to the decline in cards fees as well as the impact of FX translation.

        Operating expenses declined 13%, reflecting the benefits from re-engineering efforts and the impact of FX translation. The prior-year period also included a $257 million expense benefit related to a legal vehicle restructuring in Mexico.

        Provisions for loan losses and for benefits and claims decreased $87 million or 4%. Cards net credit loss rates increased from 11.6% to 16.7%. Credit deterioration was apparent in Brazil and Mexico where the business has focused its repositioning and derisking efforts.

19


Table of Contents


ASIA REGIONAL CONSUMER BANKING

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

Net interest revenue

  $ 1,167   $ 1,227     (5 )% $ 3,445   $ 3,726     (8 )%

Non-interest revenue

    513     612     (16 )   1,397     1,948     (28 )
                           

Total Revenues, net of interest expense

  $ 1,680   $ 1,839     (9 )% $ 4,842   $ 5,674     (15 )%
                           

Total operating expenses

  $ 869   $ 921     (6 )% $ 2,486   $ 2,881     (14 )%
                           
 

Net credit losses

  $ 351   $ 257     37     977   $ 704     39 %
 

Credit reserve build (release)

    81     189     (57 )%   415     301     38  
                           

Provisions for loan losses and for benefits and claims

  $ 432   $ 446     (3 )% $ 1,392   $ 1,005     39 %
                           

Income from continuing operations before taxes

  $ 379   $ 472     (20 )% $ 964   $ 1,788     (46 )%

Income taxes (benefits)

    (67 )   115     NM     (5 )   444     NM  
                           

Income from continuing operations

  $ 446   $ 357     25 % $ 969   $ 1,344     (28 )%

Net income (loss) attributable to noncontrolling interests

                    (1 )   100  
                           

Net income

  $ 446   $ 357     25 % $ 969   $ 1,345     (28 )%
                           

Average assets (in billions of dollars)

  $ 92   $ 95     (3 )% $ 87   $ 96     (9 )

Return on assets

    1.92 %   1.49 %         1.49 %   1.87 %      

Average deposits (in billions of dollars)

    91     93     (2 )                  

Net credit losses as a % of average loans

    2.17     1.44                          
                           

Revenue by business

                                     
 

Retail banking

  $ 1,039   $ 1,150     (10 )% $ 3,037   $ 3,642     (17 )%
 

Citi-branded cards

    641     689     (7 )   1,805     2,032     (11 )
                           
   

Total

  $ 1,680   $ 1,839     (9 )% $ 4,842   $ 5,674     (15 )%
                           

Income (loss) from continuing operations by business

                                     
 

Retail banking

  $ 376   $ 310     21 % $ 865   $ 1,052     (18 )%
 

Citi-branded cards

    70     47     49     104     292     (64 )
                           
   

Total

  $ 446   $ 357     25 % $ 969   $ 1,344     (28 )%
                           

NM    Not meaningful

3Q09 vs. 3Q08

        Revenues, net of interest expense, declined 9% driven by the absence of Visa assets sales gains in the 2008 third quarter, lower investment product revenues, lower loan volumes and the impact of FX translation. Net interest revenue was 5% lower than the prior-year period. Average loans and deposits were down 9% and 1%, respectively, in each case primarily due to the impact of FX translation. Non-interest revenue declined 16%, primarily due to the decline in investment revenues, lower Cards Purchase sales, the absence of Visa share sales gains and the impact of FX translation.

        Operating expenses declined 6%, reflecting the benefits from re-engineering efforts and the impact of FX translation.

        Provisions for loan losses and for benefits and claims decreased 3%, mainly due to impact of lower credit reserve build, offset by an increase in net credit losses and the impact of FX translation. Rising credit losses were particularly apparent in the portfolios in India and Korea. Compared to the second quarter of 2009, delinquencies improved and net credit losses flattened as this region showed possible early signs of economic recovery and increased levels of customer activity.

3Q09 YTD vs. 3Q08 YTD

        Revenues, net of interest expense, declined 15% driven by absence of Visa assets sales gains, a 34% decline in investment sales, lower loan and deposit volumes, and the impact of FX translation. Net interest revenue was 8% lower than the prior-year period reflecting lower Average loans and deposits. Non-interest revenue declined 28%, primarily due to the absence of Visa asset sales gains and the decline in investment sales.

        Operating expenses declined 14%, reflecting the benefits from re-engineering efforts and the impact of FX translation.

        Provisions for loan losses and for benefits and claims increased 39% mainly due to higher net credit losses in India and Korea and a higher credit reserve build.

20


Table of Contents


INSTITUTIONAL CLIENTS GROUP (ICG)

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

Commissions and Fees

  $ 565   $ 754     (25 )% $ 1,500   $ 2,269     (34 )%

Administration and Other Fiduciary Fees

    1,258     1,397     (10 )   3,717     4,148     (10 )

Investment banking

    1,063     740     44     3,245     3,005     8  

Principal transactions

    (535 )   3,116     NM     7,699     8,065     (5 )

Other

    556     (188 )   NM     1,783     (107 )   NM  
                           
 

Total non-interest revenue

  $ 2,907   $ 5,819     (50 )% $ 17,944   $ 17,380     3 %
 

Net interest revenue (including dividends)

    4,443     4,092     9     13,559     12,551     8  
                           

Total revenues, net of interest expenses

  $ 7,350   $ 9,911     (26 )% $ 31,503   $ 29,931     5 %

Total operating expenses

    4,634     4,919     (6 )   12,883     16,169     (20 )
 

Net credit losses

    292     221     32     537     595     (10 )
 

Provisions for unfunded lending commitments

        (80 )   100     115     (155 )   NM  
 

Credit reserve build (release)

    146     285     (49 )   995     500     99  
                           

Provision for credit losses

  $ 438   $ 426     3 % $ 1,647   $ 940     75 %
                           

Income from continuing operations before taxes

  $ 2,278   $ 4,566     (50 )% $ 16,973   $ 12,822     32 %

Income taxes (benefits)

    584     1,410     (59 )   5,340     3,907     37  
                           

Income from continuing operations

  $ 1,694   $ 3,156     (46 )% $ 11,633   $ 8,915     30 %

Net income (loss) attributable to noncontrolling interests

    23     11     NM     23     40     (43 )
                           

Net income

  $ 1,671   $ 3,145     (47 )% $ 11,610   $ 8,875     31 %
                           

Average assets (in billions of dollars)

  $ 831   $ 953     (13 )% $ 833   $ 1,062     (22 )%

Return on assets

    0.80 %   1.31 %         1.86 %   1.12 %      
                           

Revenue by region:

                                     
 

North America

  $ 1,955   $ 4,558     (57 )% $ 10,342   $ 12,674     (18 )%
 

EMEA

    3,043     2,348     30     11,523     7,882     46  
 

Latin America

    1,040     847     23     3,567     2,964     20  
 

Asia

    1,312     2,158     (39 )   6,071     6,411     (5 )
                           
   

Total

  $ 7,350   $ 9,911     (26 )% $ 31,503   $ 29,931     5 %
                           

Income (loss) from continuing operations by region:

                                     
 

North America

  $ 75   $ 1,434     (95 )% $ 2,964   $ 3,611     (18 )%
 

EMEA

    856     450     90     4,450     1,599     NM  
 

Latin America

    364     386     (6 )   1,595     1,304     22  
 

Asia

    399     886     (55 )   2,624     2,401     9  
                           
   

Total

  $ 1,694   $ 3,156     (46 )% $ 11,633   $ 8,915     30 %
                           

Average loans by region (in billions):

                                     
 

North America

  $ 43   $ 52     (17 )%                  
 

EMEA

    42     49     (14 )                  
 

Latin America

    21     24     (13 )                  
 

Asia

    27     36     (25 )                  
                           
   

Total

  $ 133   $ 161     (17 )%                  
                           

NM    Not meaningful

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Table of Contents


SECURITIES AND BANKING

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

Net interest revenue

  $ 3,050   $ 2,670     14 % $ 9,305   $ 8,520     9 %

Non-interest revenue

    1,843     4,675     (61 )   14,884     13,949     7  
                           

Revenues, net of interest expense

  $ 4,893   $ 7,345     (33 )% $ 24,189   $ 22,469     8 %

Operating expenses

    3,493     3,667     (5 )   9,580     12,322     (22 )
 

Net credit losses

    294     223     32     539     593     (9 )
 

Provision for unfunded lending commitments

        (74 )   100     115     (149 )   NM  
 

Credit reserve build (release)

    151     288     (48 )   994     494     NM  
                           

Provision for credit losses

  $ 445   $ 437     2 % $ 1,648   $ 938     76 %
                           

Income before taxes and noncontrolling interest

  $ 955   $ 3,241     (71 )% $ 12,961   $ 9,209     41 %

Income taxes

    200     1,003     (80 )   4,145     2,812     47  

Income from continuing operations

    755     2,238     (66 )   8,816     6,397     38  

Net income attributable to noncontrolling interests

    18     2     NM     19     14     36  
                           

Net income

  $ 737   $ 2,236     (67 )% $ 8,797   $ 6,383     38 %
                           

Average assets (in billions of dollars)

  $ 771   $ 883     (13 )% $ 774   $ 990     (22 )%

Return on assets

    0.38 %   1.01 %         1.52 %   0.86 %      
                           

Revenues by region:

                                     
 

North America

  $ 1,312   $ 4,018     (67 )% $ 8,454   $ 11,117     (24 )%
 

EMEA

    2,198     1,395     58     8,974     5,098     76  
 

Latin America

    703     469     50     2,547     1,872     36  
 

Asia

    680     1,463     (54 )   4,214     4,382     (4 )
                           

Total revenues

  $ 4,893   $ 7,345     (33 )% $ 24,189   $ 22,469     8 %
                           

Net income (loss) from continuing operations by region:

                                     
 

North America

  $ (77 ) $ 1,340     NM   $ 2,493   $ 3,368     (26 )%
 

EMEA

    548     102     NM     3,466     674     NM  
 

Latin America

    216     227     (5 )%   1,137     853     33  
 

Asia

    68     569     (88 )   1,720     1,502     15  
                           

Total net income from continuing operations

  $ 755   $ 2,238     (66 )% $ 8,816   $ 6,397     38 %
                           

Securities and Banking

                                     
 

Revenue details:

                                     
 

Net Investment Banking

  $ 1,163   $ 618     88 % $ 3,305   $ 2,783     19 %
 

Lending

    (699 )   1,262     NM     (1,956 )   2,026     NM  
 

Equity markets

    446     550     (19 )   3,151     3,237     (3 )
 

Fixed income markets

    3,945     4,756     (17 )   19,739     13,927     42  
 

Private bank

    520     563     (8 )   1,496     1,789     (16 )
 

Other Securities and Banking

    (482 )   (404 )   (19 )   (1,546 )   (1,293 )   (20 )
                           

Total Securities and Banking Revenues

  $ 4,893   $ 7,345     (33 )% $ 24,189   $ 22,469     8 %
                           

NM    Not meaningful

3Q09 vs. 3Q08

        Revenues, net of interest expense, decreased 33% or $2.5 billion to $4.9 billion mainly from revenue marks of negative $1.4 billion, set forth in greater detail below, and a decrease in lending revenues of $2.0 billion to negative $699 million (mainly from losses on credit derivative positions). Fixed income markets revenues declined $811 million to $3.9 billion due to negative credit value adjustments of $760 million (mainly due to narrowing in Citigroup spreads, partially offset by the narrowing of counterparty spreads), compared to positive credit value adjustments of $2.6 billion in the third quarter of 2008, partially offset by stronger performances across most fixed income categories as market conditions improved. Equity markets revenues declined $104 million or 19% primarily driven by negative credit value adjustments of $878 million, offset by stronger results in proprietary trading and derivatives. Investment banking revenues increased $545 million, led by stronger high yield and investment grade debt issuances in debt underwriting, and stronger volumes in equity underwriting, with a decline in advisory revenues resulting from lower global M&A activity.

        Operating expenses decreased 5% or $174 million to $3.5 billion, mainly driven by lower severance and the benefit of FX translation, offset partially by an increase in compensation costs.

        Provisions for credit losses increased by 2% or $8 million to $445 million, mainly from higher net credit losses and a release of provisions for unfunded lending commitments in the prior-year period, offset partially by lower credit reserve builds.

3Q09 YTD vs. 3Q08 YTD

        Revenues, net of interest expense, increased 8% or $1.7 billion, mainly due to an increase in fixed income markets of $5.8 billion to $19.7 billion reflecting strong trading results, particularly in the first and second quarters of 2009, offset partially by a decrease in lending revenues of $4.0 billion to

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negative $2.0 billion (mainly from losses on credit default swap hedges).

        Operating expenses decreased 22% or $2.7 billion driven by lower compensation due to headcount reductions and benefits from re-engineering and expense management.

        Provisions for credit losses increased 76% or $710 million to $1.6 billion mainly from increased credit reserve builds on funded loans and higher provisions for unfunded lending commitments.

Third Quarter Revenue Impacting Citicorp—Securities and Banking

        While not as significant as in prior quarters, certain items continued to impact Securities and Banking revenues during the third quarter of 2009. These items are set forth in the table below.

 
  Pretax Revenue
(in millions)
 
 
  Third
Quarter
2009
  Third
Quarter
2008
 

Private Equity and equity investments

  $ 79   $ (50 )

Alt-A Mortgages(1)(2)

    142     (221 )

Commercial Real Estate (CRE) positions(1)(3)

    20     130  

CVA on Citi debt liabilities under fair value option

    (955 )   1,526  

CVA on derivatives positions, excluding monoline insurers

    (722 )   1,178  
           

Total significant revenue items

  $ (1,436 ) $ 2,563  
           

(1)
Net of hedges.

(2)
For these purposes, Alt-A mortgage securities are non-agency residential mortgage-backed securities (RMBS) where (i) the underlying collateral has weighted average FICO scores between 680 and 720 or (ii) for instances where FICO scores are greater than 720, RMBS have 30% or less of the underlying collateral composed of full documentation loans. See "Loan and Credit Details—U.S. Consumer Mortgage Lending."

(3)
Securities and Banking's commercial real estate exposure is split into three categories of assets: held at fair value; held to maturity/held for investment; and equity. See "Exposure to Commercial Real Estate" below for a further discussion.

Credit Valuation Adjustment on Citi's Debt Liabilities for Which Citi Has Elected the Fair Value Option

        The Company is required to use its own credit spreads in determining the current value of its derivative liabilities and all other liabilities for which it has elected the fair value option. When Citi's credit spreads widen (deteriorate), Citi recognizes a gain on these liabilities because the value of the liabilities has decreased. When Citi's credit spreads narrow (improve), Citi recognizes a loss on these liabilities because the value of the liabilities has increased. The approximately $955 million of losses recorded by Securities and Banking on its fair value option liabilities (excluding derivative liabilities) during the third quarter of 2009 was principally due to the narrowing (improving) of the Company's credit spreads.

Credit Valuation Adjustment on Derivative Positions, excluding Monoline insurers

        The approximately $722 million of pretax losses recorded by Securities and Banking on its derivative positions during the third quarter of 2009 was due to the narrowing of the Company's credit default swap spreads on its derivative liabilities. These losses were partially offset by gains due to the narrowing of the credit spreads of the Company's counterparties on its derivative assets. See "Derivatives—Fair Valuation Adjustments for Derivatives" below for a further discussion.

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TRANSACTION SERVICES

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

Net interest revenue

  $ 1,393   $ 1,422     (2 )% $ 4,254   $ 4,031     6 %

Non-interest revenue

    1,064     1,144     (7 )   3,060     3,431     (11 )
                           

Revenues, net of interest expense

  $ 2,457   $ 2,566     (4 )% $ 7,314   $ 7,462     (2 )%

Operating expenses

    1,141     1,252     (9 )   3,303     3,847     (14 )

Provision for credit losses and for benefits and claims

    (7 )   (11 )   36     (1 )   2     NM  
                           

Income before taxes and noncontrolling interest

  $ 1,323   $ 1,325       $ 4,012   $ 3,613     11 %

Income taxes

    384     407     (6 )%   1,195     1,095     9  

Income from continuing operations

    939     918     2     2,817     2,518     12  

Net income (loss) attributable to noncontrolling interests

    5     9     (44 )   4     26     (85 )
                           

Net income

  $ 934   $ 909     3 % $ 2,813   $ 2,492     13 %
                           

Average assets (in billions of dollars)

  $ 60   $ 70     (14 )% $ 59   $ 72     (18 )%

Return on assets

    6.18 %   5.17 %         6.37 %   4.62 %      
                           

Revenues by region:

                                     
 

North America

  $ 643   $ 540     19 % $ 1,888   $ 1,557     21 %
 

EMEA

    845     953     (11 )   2,549     2,784     (8 )
 

Latin America

    337     378     (11 )   1,020     1,092     (7 )
 

Asia

    632     695     (9 )   1,857     2,029     (8 )
                           

Total revenues

  $ 2,457   $ 2,566       $ 7,314   $ 7,462     (2 )%
                           

Net income (loss) from continuing operations by region:

                                     
 

North America

  $ 152   $ 94     62 % $ 471   $ 243     94 %
 

EMEA

    308     348     (11 )   984     925     6  
 

Latin America

    148     159     (7 )   458     451     2  
 

Asia

    331     317     4     904     899     1  
                           

Total net income from continuing operations

  $ 939   $ 918     2 % $ 2,817   $ 2,518     12 %
                           

Key Indicators (in billions of dollars)

                                     

Average deposits and other customer liability balances

  $ 314   $ 273     15 %                  

EOP assets under custody (in trillions of dollars)

  $ 11.8   $ 11.9     (1 )                  
                           

NM    Not meaningful

3Q09 vs. 3Q08

        Revenues, net of interest expense, were $2.5 billion, down $109 million or 4% from strong prior-year performance due to spread compression (as global rates declined) and lower volumes as well as negative foreign exchange impact. This was partly offset by strong growth in liability balances and higher trade fees.

        Operating expenses declined 9% or $111 million to $1.1 billion, driven by headcount reductions, re-engineering efforts, expense management initiatives and a benefit from FX translation.

3Q09 YTD vs. 3Q08 YTD

        Revenues, net of interest expense, of $7.3 billion decreased slightly from the prior period driven primarily by the impact of lower fee revenues and negative foreign exchange. Average liability balances grew 6% driven by strong growth in North America as a result of successful implementation of deposit growth strategy.

        Operating expenses declined 14%, driven by headcount reduction and re-engineering benefits.

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CITI HOLDINGS

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  
 

Net interest revenue

  $ 4,024   $ 5,766     (30 )% $ 13,902   $ 17,292     (20 )%
 

Non-interest revenue

    2,670     (5,062 )   NM     11,994     (19,027 )   NM  
                           

Total Revenues, net of interest expense

  $ 6,694   $ 704     NM   $ 25,896   $ (1,735 )   NM  
                           

Provision for credit losses and for benefits and claims

                                     
 

Net credit losses

  $ 6,250   $ 3,603     73 % $ 19,090   $ 9,332     NM  
 

Credit reserve build (release)

    338     3,224     (90 )   4,743     6,790     (30 )%
                           
 

Provision for loan losses

  $ 6,588   $ 6,827     (4 )% $ 23,833   $ 16,122     48 %
 

Provision for benefits & claims

    310     273     14     923     805     15  
 

Provision for unfunded lending commitments

        (70 )   100     80     (138 )   NM  
                           
 

Total provision for credit losses and for benefits and claims

  $ 6,898   $ 7,030     (2 )% $ 24,836   $ 16,789     48 %
                           

Total operating expenses

  $ 3,202   $ 5,136     (38 )% $ 11,417   $ 16,406     (30 )%
                           

Income (loss) from continuing operations before taxes

  $ (3,406 ) $ (11,462 )   70 % $ (10,357 ) $ (34,930 )   70 %

Provision (benefits) for income taxes

    (1,588 )   (4,526 )   65     (4,562 )   (13,619 )   67  
                           

Income (loss) from continuing operations

  $ (1,818 ) $ (6,936 )   74 % $ (5,795 ) $ (21,311 )   73 %

Net income (loss) attributable to noncontrolling interests

    49     (109 )   NM     (1 )   (87 )   99  
                           

Citi Holding's net income (loss)

  $ (1,867 ) $ (6,827 )   73 % $ (5,794 ) $ (21,224 )   73 %
                           

Balance Sheet Data (in billions)

                                     

Total EOP assets

  $ 617   $ 775     (20 )%                  

Total EOP deposits

    90     83     8                    
                           

NM    Not meaningful

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BROKERAGE AND ASSET MANAGEMENT

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

Net interest revenue

  $ (56 ) $ 318     NM   $ 460   $ 727     (37 )%

Non-interest revenue

    726     1,776     (59 )%   14,250     6,224     NM  
                           

Total Revenues, net of interest expense

  $ 670   $ 2,094     (68 )% $ 14,710   $ 6,951     NM  
                           

Total operating expenses

  $ 358   $ 2,085     (83 )% $ 3,000   $ 6,537     (54 )%
                           
   

Net credit losses

      $ 1     (100 )% $ 3   $ 11     (73 )%
   

Credit reserve build (release)

  $ (11 )   (3 )   NM     35     7     NM  
   

Provision for benefits and claims

    38     58     (34 )   113     155     (27 )
                           

Provisions for loan losses and for benefits and claims

  $ 27   $ 56     (52 )% $ 151   $ 173     (13 )%
                           

Income from continuing operations before taxes

  $ 285   $ (47 )   NM   $ 11,559   $ 241     NM  

Income taxes

    146     10     NM     4,548     145     NM  
                           

Income (loss) from continuing operations

  $ 139   $ (57 )   NM   $ 7,011   $ 96     NM  

Net income (loss) attributable to noncontrolling interests

    16     (98 )   NM     5     (60 )   NM  
                           

Net income

  $ 123   $ 41     NM   $ 7,006   $ 156     NM  
                           

EOP assets (in billions of dollars)

  $ 59   $ 62     (5 )%                  

EOP deposits (in billions of dollars)

    60   $ 53     13                    
                           

NM    Not meaningful

3Q09 vs. 3Q08

        Revenues, net of interest expense, decreased 68% primarily driven by the decrease in the Company's share of Smith Barney revenue resulting from the joint venture transaction. Revenues in the prior-year period included a $347 million pre-tax gain on sale of CitiStreet and charges related to settlement of auction rate securities (ARS) of $306 million pre-tax. 2009 third quarter revenue includes a $320 million pre-tax gain on the sale of the Managed Futures business to the Morgan Stanley Smith Barney joint venture.

        Operating expenses decreased 83% from the prior-year period, mainly driven by the absence of Smith Barney expenses and the absence of restructuring expenses in retail alternative investments.

        Provisions for loan losses and for benefits and claims decreased by 52% mainly reflecting lower provisions for benefits and claims.

        End of Period Assets include approximately $24 billion of assets of discontinued operations held for sale.

3Q09 YTD vs. 3Q08 YTD

        Revenues, net of interest expense, increased $7.8 billion due to an $11.1 billion pre-tax gain on sale ($6.7 billion after-tax) on the Morgan Stanley Smith Barney joint venture transaction, which closed on June 1, 2009. Excluding the gain, revenues declined $3.3 billion driven by the absence of Smith Barney revenues as well as the impact of market conditions on Smith Barney transactional and fee-based revenue compared to the prior year.

        Operating expenses decreased $3.5 billion primarily driven by the absence of Smith Barney expenses, lower variable compensation and re-engineering efforts, particularly in retail alternative investments.

        Provisions for loan losses and for benefits and claims declined 13% mainly reflecting lower provisions for benefits and claims.

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LOCAL CONSUMER LENDING

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2009   2008   2009   2008  

Net interest revenue

  $ 3,453   $ 4,612     (25 )% $ 10,730   $ 14,015     (23 )%

Non-interest revenue

    1,194     820     46     4,300     5,141     (16 )
                           

Total Revenues, net of interest expense

  $ 4,647   $ 5,432     (14 )% $ 15,030   $ 19,156     (22 )%
                           

Total operating expenses

  $ 2,611   $ 2,847     (8 )% $ 7,746   $ 9,094     (15 )%
                           
 

Net credit losses

  $ 4,929   $ 3,487     41 % $ 14,617   $ 9,116     60 %
 

Credit reserve build (release)

    604     2,702     (78 )   5,003     5,858     (15 )