10-Q 1 a2217172z10-q.htm 10-Q

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FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS

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

FORM 10-Q

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

For the quarterly period ended September 30, 2013

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, NY
(Address of principal executive offices)

 

10022
(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, 2013: 3,033,000,777

Available on the web at www.citigroup.com

   


CITIGROUP INC
THIRD QUARTER 2013—FORM 10-Q

OVERVIEW

    5  

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

   
7
 

Executive Summary

   
7
 

Summary of Selected Financial Data

   
11
 

SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES

   
13
 

CITICORP

   
15
 

Global Consumer Banking

   
16
 

North America Regional Consumer Banking

   
17
 

EMEA Regional Consumer Banking

   
19
 

Latin America Regional Consumer Banking

   
21
 

Asia Regional Consumer Banking

   
23
 

Institutional Clients Group

   
25
 

Securities and Banking

   
26
 

Transaction Services

   
29
 

Corporate/Other

   
31
 

CITI HOLDINGS

   
32
 

BALANCE SHEET REVIEW

   
34
 

CAPITAL RESOURCES AND LIQUIDITY

   
38
 

Capital Resources

   
38
 

Funding and Liquidity

   
47
 

OFF-BALANCE-SHEET ARRANGEMENTS

   
55
 

MANAGING GLOBAL RISK

   
55
 

CREDIT RISK

   
56
 

Loans Outstanding

   
56
 

Details of Credit Loss Experience

   
57
 

Non-Accrual Loans and Assets and Renegotiated Loans

   
59
 

North America Consumer Mortgage Lending

   
63
 

North America Cards

   
75
 

Consumer Loan Details

   
76
 

Corporate Credit Details

   
78
 

MARKET RISK

   
80
 

COUNTRYAND CROSS-BORDER RISK

   
92
 

Country Risk

   
92
 

Cross-Border Risk

   
100
 

FAIR VALUE ADJUSTMENTS FOR DERIVATIVES AND STRUCTURED DEBT

   
101
 

CREDIT DERIVATIVES

   
102
 

INCOME TAXES

   
104
 

DISCLOSURE CONTROLS AND PROCEDURES

   
105
 

DISCLOSURE PURSUANT TO SECTION 219 OF THE IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT

   
105
 

FORWARD-LOOKING STATEMENTS

   
106
 

FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS

   
108
 

CONSOLIDATED FINANCIAL STATEMENTS

   
109
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   
115
 

LEGAL PROCEEDINGS

   
244
 

UNREGISTERED SALES OF EQUITY, PURCHASES OF EQUITY SECURITIES, DIVIDENDS

   
245
 

2



CITIGROUP INC.
RISK, CAPITAL AND FUNDING AND LIQUIDITY DISCLOSURES

 
  Third Quarter 2013
Form 10-Q
  2012
Form 10-K
 
 
  Page Reference(s)  

CAPITAL RESOURCES

             

Overview

    38     41  

Current Regulatory Capital Guidelines

    38 - 44     41 - 42, 45 - 46  

Basel III

    41 - 44     43 - 44  

Regulatory Capital Standards and Developments

    44 - 45     47 - 49  

Tangible Common Equity and Tangible Book Value Per Share

    46     45  

FUNDING AND LIQUIDITY

             

Overview

    47     50  

High Quality Liquid Assets

    48     50 - 51  

Deposits

    49     51  

Long-Term Debt

    49 - 50     52 - 54  

Secured Financing Transactions and Short-Term Borrowings

    51     54 - 55  

Liquidity Management, Measures and Stress Testing

    51     55 - 56  

Credit Ratings

    53 - 54     56 - 57  

RISK FACTORS

             

Regulatory Risks

          60 - 63  

Market and Economic Risks

          63 - 65  

Liquidity Risks

          65 - 66  

Legal Risks

          66 - 67  

Business and Operational Risks

          67 - 71  

MANAGING GLOBAL RISK

             

Risk Management—Overview

    55     72  

Risk Aggregation and Stress testing

          73  

Risk Capital

          73  

CREDIT RISK

             

Credit Risk Management and Stress Testing

          74  

Loans Outstanding

    56     75  

Details of Credit Loss Experience and Allowance for Loan Losses

    57 - 58     76 - 77  

Non-Accrual Loans and Assets and Renegotiated Loans

    59 - 62     78 - 81  

North America Consumer Mortgage Lending and Cards

    63 - 75     83 - 97  

Consumer Loan Details

    76 - 77     98 - 99  

Corporate Credit Details

    78 - 79     100 - 101  

MARKET RISK(1)

             

Market Risk Management and Stress Testing

          102  

Price Risk—Non-Trading Portfolios

    80 - 81     102 - 103  

Price Risk—Trading Portfolios

    82 - 83     104 - 106  

OPERATIONAL RISK

             

Operational Risk Management and Stress Testing

          112  

COUNTRY AND CROSS-BORDER RISK

             

Country Risk

    92 - 99     113 - 119  

Cross-Border Risk

    100     120 - 122  

(1)
For further information regarding market risk and related metrics, refer to Citi's Basel II.5 market risk disclosures on its Investor Relations website (www.citigroup.com/citi/investor/reg.htm).

3


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4



OVERVIEW

        Citigroup's history dates back to the founding of Citibank in 1812. Citigroup's original corporate predecessor was incorporated in 1988 under the laws of the State of Delaware. Following a series of transactions over a number of years, Citigroup Inc. was formed in 1998 upon the merger of Citicorp and Travelers Group Inc.

        Citigroup is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. Citi has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions.

        Citigroup currently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of Citi's Global Consumer Banking businesses and Institutional Clients Group; and Citi Holdings. For a further description of the business segments and the products and services they provide, see "Citigroup Segments" below, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 to the Consolidated Financial Statements.

        Throughout this report, "Citigroup," "Citi" and "the Company" refer to Citigroup Inc. and its consolidated subsidiaries.

        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, 2012 filed with the U.S. Securities and Exchange Commission (SEC) on March 1, 2013 (2012 Annual Report on Form 10-K) and Citigroup's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013 filed with the SEC on May 3, 2013 (First Quarter of 2013 Form 10-Q) and August 2, 2013 (Second Quarter of 2013 Form 10-Q), respectively. Additional information about Citigroup is available on Citi's website at www.citigroup.com. Citigroup's recent annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, as well as other filings with the SEC, are available free of charge through Citi's website by clicking on the "Investors" page and selecting "All SEC Filings." The SEC's website also contains current reports, information statements, and other information regarding Citi at www.sec.gov.

        Within this Form 10-Q, please refer to the tables of contents on pages 2, 3 and 108 for page references to Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements, respectively.

        Certain reclassifications have been made to the prior periods' financial statements to conform to the current period's presentation. For information on certain recent such reclassifications, see Citi's Forms 8-K furnished to the SEC on April 5, 2013 and June 28, 2013.

5



As described above, Citigroup is managed pursuant to the following segments:

GRAPHIC

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

GRAPHIC

6


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

EXECUTIVE SUMMARY

Third Quarter of 2013 Summary Results

        Citi's results for the third quarter of 2013 reflected a challenging operating environment, including a slow-down in market activity within Securities and Banking due to macroeconomic uncertainties, including potential changes in U.S. government monetary policy, slowing economic growth, particularly in the emerging markets, and, as expected, significantly lower mortgage origination volumes in North America. Citi's results also continued to be negatively impacted by ongoing spread compression(1) globally, impacting its Global Consumer Banking (GCB) and Transaction Services businesses, as well as continued regulatory changes in certain of its GCB markets. Citi expects these factors will continue to negatively affect the operating environment during the remainder of 2013, and thus its results of operations.

        Legal and related expenses remained elevated as Citi continues to work through its "legacy" legal issues within Citi Holdings. Legal and related expenses are likely to remain elevated and somewhat volatile as Citi works through these challenges, although Citi was able to resolve an additional portion of its legacy representation and warranty issues during the third quarter of 2013, with its announced agreement with Freddie Mac (see "Managing Global Risk—Credit Risk—Citigroup—Residential Mortgages—Representations and Warranties" below).

Citigroup

        Citigroup reported third quarter of 2013 net income of $3.2 billion, or $1.00 per diluted share, compared to $468 million, or $0.15 per diluted share, in the third quarter of 2012. Results for the third quarter of 2013 included a negative credit valuation adjustment (CVA) on derivatives (counterparty and own-credit), net of hedges, and debt valuation adjustment (DVA) on Citi's fair value option debt of $336 million ($208 million after-tax), compared to negative $776 million ($485 million after-tax) in the third quarter of 2012, reflecting the tightening of Citi's credit spreads. Results in the third quarter of 2013 also included a $176 million tax benefit, compared to a $582 million tax benefit in the prior-year period, each of which related to the resolution of certain tax audit items and were recorded in Corporate/Other. Third quarter of 2012 results also included a pre-tax loss of $4.7 billion ($2.9 billion after-tax) related to the Morgan Stanley Smith Barney joint venture (MSSB).(2)

        Excluding CVA/DVA and the tax benefit in both periods as well as the third quarter of 2012 MSSB loss,(3) Citigroup net income remained unchanged as compared to the prior-year period at $3.3 billion, as lower operating expenses and lower credit costs were offset by lower revenues and a higher tax rate (30% in the third quarter of 2013 as compared to a 26% tax rate on a comparable basis in the prior-year period). Earnings per share of $1.02 decreased 4% compared to $1.06 in the prior-year period, including the impact of higher preferred dividends in the third quarter of 2013 ($110 million in the third quarter of 2013, compared to $4 million in the third quarter of 2012).

        Citi's revenues, net of interest expense, were $17.9 billion in the third quarter of 2013, up 30% versus the prior-year period. Excluding CVA/DVA and the third quarter of 2012 MSSB loss, revenues were $18.2 billion, down 5% compared to the prior-year period, as revenues in Citicorp declined by 7% but Citi Holdings revenues increased by 28%. Net interest revenues of $11.5 billion were 2% lower than the prior-year period, as declines in Citicorp, driven by the ongoing impact of spread compression and the impact of foreign exchange translation into U.S. dollars for reporting purposes (as used throughout this report, FX translation),(4) were partially offset by an increase in Citi Holdings. Non-interest revenues were $6.4 billion, up $4.4 billion from the prior-year period, driven by the absence of the third quarter of 2012 MSSB loss. Excluding CVA/DVA in both periods and the third quarter of 2012 MSSB loss, non-interest revenues of $6.7 billion were 10% lower than the prior-year period, mostly reflecting lower revenues in GCB and Securities and Banking.

Operating Expenses

        Citigroup operating expenses decreased 4% versus the prior-year period to $11.7 billion. Citi incurred legal and related expenses of $677 million (compared to $529 million in the prior-year period), primarily in Citi Holdings, and repositioning charges of $133 million in the third quarter of 2013 (compared to $95 million in the prior-year period), primarily in Citicorp. Excluding legal and related expenses, repositioning charges and the impact of FX translation, Citi's operating expenses were $10.8 billion, a 4% reduction versus the prior-year period. This expense decline reflected repositioning savings as well as lower performance-based compensation and lower transaction costs reflecting the challenging revenue environment in the quarter.

        Citicorp's expenses were $10.3 billion, down 6% from the prior-year period, primarily reflecting ongoing expense control initiatives, lower performance-based compensation, lower legal and related expenses and the impact of FX translation. Citicorp legal and related expenses were $84 million in the third quarter of 2013, compared to $279 million in the prior-year period.

        Citi Holdings operating expenses increased 16% from the prior-year period to $1.4 billion, principally due to the higher

   


(1)
As used throughout this report, spread compression refers to the reduction in net interest revenue as a percentage of loans or deposits, as applicable, as driven by either lower yields on interest-earning assets or higher costs to fund such assets (or a combination thereof).

(2)
The MSSB loss consisted of (i) a pre-tax loss on Citigroup's sale of a 14% interest in MSSB to Morgan Stanley of $1.4 billion pre-tax ($800 million after-tax) and (ii) an other-than-temporary impairment of the carrying value of Citigroup's then-remaining 35% interest in MSSB of $3.3 billion pre-tax ($2.1 billion after-tax).

(3)
Citigroup's results of operations, excluding the impact of CVA/DVA, the tax benefits and the MSSB loss, are non-GAAP financial measures. Citi believes the presentation of its results of operations excluding these items provides a more meaningful depiction of the underlying fundamentals of its businesses.

(4)
FX translation decreased both reported revenues and operating expenses by approximately $200 million in the third quarter of 2013 as compared to the prior-year period. For the impact of FX translation on third quarter of 2013 results of operations for each of EMEA Regional Consumer Banking (RCB), Latin America RCB, Asia RCB and Transaction Services, see the table accompanying the discussion of each respective business' results of operations below.

7


legacy legal and related expenses. Citi Holdings legal and related expenses were $593 million in the third quarter of 2013, compared to $250 million in the prior-year period. Excluding legal and related costs, Citi Holdings operating expenses declined 16% versus the prior-year period.

Credit Costs and Loan Loss Reserve Positions

        Citi's credit performance remained favorable in the third quarter of 2013. Total provisions for credit losses and for benefits and claims of $2.0 billion declined 25% from the prior-year period. Net credit losses of $2.4 billion were down 38% from the third quarter of 2012. Consumer net credit losses declined 38% to $2.3 billion. Citigroup's Consumer net credit losses in the third quarter 2012 included approximately $635 million of incremental mortgage charge-offs required by OCC guidance regarding the treatment of mortgage loans where the borrower has gone through Chapter 7 bankruptcy, recorded in Citi Holdings. These incremental charge-offs were substantially offset by a related reserve release of approximately $600 million. Excluding these incremental charge-offs, Citi's Consumer net credit losses declined 26%, principally reflecting improvements in North America mortgages in Citi Holdings. Corporate net credit losses were $96 million in the third quarter of 2013, compared to $117 million in the prior-year period.

        The net release of allowance for loan losses and unfunded lending commitments was $675 million in the third quarter of 2013, 55% lower than the prior-year period which included the loan loss reserve release in Citi Holdings relating to the previously mentioned impact of OCC guidance. Excluding this incremental reserve release in the third quarter of 2012, Citi's net loan loss reserve release in the third quarter of 2013 decreased by 25% from the prior-year period.

        The $675 million net release in the third quarter of 2013 reflected a $737 million net reserve release in Consumer, partially offset by a $62 million net reserve build in Corporate. Of the $675 million net reserve release, $679 million was attributable to Citi Holdings. Within Citi Holdings, $725 million of the reserve release related to North America mortgages, including an approximate $300 million release driven by continued improvement in delinquencies and home prices, partially offset by losses on asset sales. Citicorp recorded a reserve build of $4 million, compared to a reserve release of $689 million in the prior-year period, primarily reflecting a lower reserve release in North America RCB, due to a continued reduction in North America cards releases, as well as reserve builds in Latin America RCB and in Securities and Banking (for additional information, see the discussion of each business' results of operations below).

        Citigroup's total allowance for loan losses was $20.6 billion at quarter end, or 3.2% of total loans, compared to $25.9 billion, or 4.0%, at the end of the prior-year period. The decline in the total allowance for loan losses reflected asset sales, lower non-accrual loans, and overall continued improvement in the credit quality of Citi's loan portfolios.

        The Consumer allowance for loan losses was $17.9 billion, or 4.6% of total Consumer loans, at quarter end, compared to $23.1 billion, or 5.7% of total loans, at September 30, 2012. Total non-accrual assets decreased 23% to $9.8 billion as compared to September 30, 2012. Corporate non-accrual loans declined 10% to $2.2 billion, and Consumer non-accrual loans declined 26%, to $7.2 billion, each versus the prior-year period.

Capital

        Citi continued to grow its regulatory capital during the third quarter of 2013, primarily through net income and continued utilization of its deferred tax assets (DTAs) (for additional information on Citi's DTAs, see "Income Taxes" below). Citigroup's Basel I Tier 1 Capital and Tier 1 Common ratios were 13.6% and 12.7% as of September 30, 2013, compared to 13.2% and 12.2%, respectively, at June 30, 2013. Citi's estimated Tier 1 Common ratio under Basel III was 10.5% at the end of the third quarter of 2013, up from an estimated 10.0% at June 30, 2013, calculated based on the "advanced approaches" for determining total risk-weighted assets under the final U.S. Basel III rules and proposed U.S. Basel III rules, respectively. Citi's estimated Basel III Supplementary Leverage Ratio for the third quarter of 2013 was 5.1%, compared to 4.9% at June 30, 2013.(5)

Citicorp(6)

        Citicorp net income decreased 17% from the prior-year period to $3.3 billion. CVA/DVA in Securities and Banking was a negative $332 million (negative $206 million after-tax), compared to a negative $799 million (negative $499 million after-tax) in the prior-year period. Excluding CVA/DVA and the tax benefits described above in both periods, Citicorp net income decreased 15% from the prior-year period to $3.4 billion, driven by lower revenues and a lower loan loss reserve release, partially offset by the lower operating expenses and lower net credit losses.

        Citicorp revenues, net of interest expense, were $16.6 billion in the third quarter of 2013, down 4% versus the prior-year period. Excluding CVA/DVA, Citicorp revenues were $17.0 billion in the quarter, down 7% from the prior-year period, driven by declines in Global Consumer Banking and Securities and Banking revenues, while Transaction Services revenues were unchanged.

        Global Consumer Banking revenues were $9.2 billion in the third quarter of 2013, a decline of 7% versus the prior-year period. North America RCB revenues of $4.7 billion declined 12% from the prior-year period, driven by a 35% decline in retail banking revenues with total cards revenues (Citi-branded cards and Citi retail services) remaining unchanged. The decline in retail banking revenues primarily reflected the lower mortgage origination revenues as well as the impact of ongoing spread compression, partially offset by 8% growth in average deposits and 4% growth in average loans versus the prior-year period. With respect to cards, improved net interest spreads were offset by continued lower average balances. Citi-branded cards revenues were unchanged at $2.1 billion, as a 4% decline in average cards loans was offset by continued improvement in net interest spreads. Citi retail services revenues declined 1% to $1.5 billion, reflecting the continued negative impact of higher

   


(5)
Citi's estimated Basel III Tier 1 Common ratio and estimated Basel III Supplementary Leverage ratio as of September 30, 2013 are calculated under the final U.S. Basel III rules whereas these ratios as of June 30, 2013 are based on the proposed U.S. Basel III Rules (Basel III NPR). Citi's estimated Basel III Tier 1 Common ratio, Supplementary Leverage ratio and certain related components are non-GAAP financial measures. For additional information on these measures, see "Capital Resources and Liquidity—Capital Resources" below.

(6)
Citicorp includes Citi's three operating businesses—Global Consumer Banking, Securities and Banking and Transaction Services—as well as Corporate/Other. See "Citicorp" below for additional information on the results of operations for each of the businesses in Citicorp.

8


contractual partner share payments due to the impact of improving credit trends. Total card purchase sales increased 3% versus the prior-year period.

        International GCB revenues (consisting of Asia RCB, Latin America RCB and EMEA RCB) declined 1% versus the prior-year period. Excluding the impact of FX translation, international GCB revenues grew 2%, driven by 6% revenue growth in Latin America RCB as volume growth offset the impact of spread compression. Growth in Latin America RCB was partially offset by a 3% decline in EMEA RCB, reflecting the previously-announced market exits over the past year, and a 2% decline in Asia RCB. In Asia RCB, the decline in revenues was driven by spread compression as well as the continued impact of regulatory changes in certain countries, most significantly Korea. Citi expects these factors to negatively impact revenues in Asia RCB throughout 2014. Despite these headwinds, most underlying business metrics showed continued momentum in the third quarter of 2013. International GCB average retail loans increased 6% versus the prior-year period, investment sales grew 1%, average card loans(7) grew 1%, and card purchase sales(7) grew 8%, all excluding the impact of FX translation.

        Securities and Banking revenues were $4.7 billion in the third quarter of 2013, down 2% from the prior-year period. Excluding CVA/DVA,(8)Securities and Banking revenues of $5.1 billion decreased 10% from the prior-year period, driven principally by declines in fixed income markets and investment banking revenues. Citi expects Securities and Banking results of operations will likely continue to reflect the overall market environment.

        Fixed income markets revenues of $2.8 billion, excluding CVA/DVA, decreased 26% from the prior-year period reflecting lower volumes and the impact of the uncertain macroeconomic environment. Sequentially, fixed income markets revenues declined 17%, reflecting the slowdown in market activity given the uncertain macroeconomic environment as well as Citi's actions to reduce risk given increased volatility in the emerging markets. Equity markets revenues of $710 million, excluding CVA/DVA, increased 36% from the prior-year period, reflecting market share gains as well as improved derivatives trading performance. Sequentially, equity market revenues declined 25% as cash equity revenues generally declined in line with overall market volumes and trading performance was weaker in derivatives.

        Investment banking revenues declined 10% from the prior-year period to $839 million, reflecting challenging overall market conditions in the current quarter, driven primarily by declines in debt underwriting and advisory revenues, partially offset by growth in equity underwriting. Private Bank revenues of $614 million, excluding CVA/DVA, increased 1% from the prior-year period, driven by investment products, but were down 5% sequentially primarily due to lower capital markets activity. Lending revenues increased to $230 million from $167 million in the prior-year period, reflecting $147 million of mark-to-market losses on hedges related to accrual loans as credit spreads tightened less significantly during the third quarter of 2013 (compared to a $252 million loss in the prior-year period). Excluding the mark-to-market impact of hedges related to accrual loans, core lending revenues declined 10% to $377 million versus the prior-year period, primarily driven by lower volumes.

        Transaction Services revenues were $2.6 billion, unchanged compared to the prior-year period. Excluding the impact of FX translation, Transaction Services revenues increased 2% versus the prior-year period, as fee income growth was partially offset by a decline in net interest revenues driven by continued spread compression. Treasury and Trade Solutions and Securities and Fund Services revenues were each unchanged on a reported basis as compared to the prior-year period. Excluding the impact of FX translation, Treasury and Trade Solutions revenues increased 1%, as volume and fee growth was partially offset by the ongoing impact of spread compression globally. Securities and Fund Services revenues increased 3% excluding the impact of FX translation, as higher settlement volumes and fees were partially offset by lower net interest spreads. Despite the continued negative impact of spread compression on revenues in Transaction Services, underlying volumes continued to grow, with average deposits and other customer liability balances up 4% and assets under custody up 9%, each versus the prior-year period.

        Citicorp end of period loans increased 5% from the prior-year period to $561 billion,(7) with 3% growth in Consumer loans, including the impact of adding approximately $7 billion of loans related to the previously-announced acquisition of Best Buy's U.S. credit card portfolio in the third quarter of 2013, and 8% growth in Corporate loans, including the impact of adding approximately $7 billion of previously unconsolidated assets in the second quarter of 2013, as previously disclosed.

Citi Holdings

        During the third quarter of 2013, Citi continued to make progress on its goal of reducing the negative impact of Citi Holdings on Citi's overall results of operations. Citi Holdings net loss was $104 million in the third quarter of 2013, compared to a net loss of $3.6 billion in the third quarter of 2012. Excluding CVA/DVA(9) as well as the third quarter of 2012 MSSB loss, Citi Holdings net loss decreased to $102 million compared to a net loss of $670 million in the prior-year period, as higher revenues and lower net credit losses were partially offset by higher operating expenses and lower loan loss reserve release. While the net loss in Citi Holdings continued to improve during the current quarter, Citi expects the results of operations for Citi Holdings could fluctuate going forward, based on episodic gains or losses resulting from the continued wind down of the assets, the volatility of legal and related expenses and the likely absence of the third quarter of 2013 loan loss reserve release related to improved delinquencies and home prices.

        Citi Holdings revenues increased by $4.9 billion to $1.3 billion from the prior-year period. Excluding CVA/DVA and the third quarter of 2012 MSSB loss, Citi Holdings revenues increased 28% to $1.3 billion versus the prior-year period, mostly driven by the absence of residential mortgage repurchase reserve builds for representation and warranty claims in the third quarter of 2013. Net interest revenues increased 14% to $776

   


(7)
Adjusted to exclude Credicard loans of $3.2 billion in third quarter of 2012; Credicard was moved to discontinued operations in Corporate/Other as of the second quarter of 2013. For additional information, see Note 2 to the Consolidated Financial Statements.

(8)
For the summary of CVA/DVA by business within Securities and Banking for the third quarter of 2013 and comparable periods, see "Citicorp—Institutional Clients Group" below.

(9)
CVA/DVA in Citi Holdings was negative $4 million in the third quarter of 2013, compared to $23 million in the prior-year period.

9


million versus the prior-year period due to lower funding costs. Non-interest revenues, excluding CVA/DVA as well as the third quarter of 2012 MSSB loss, increased 59% from the prior-year period to $480 million due to the absence of the residential mortgage repurchase reserve build.

        Citi Holdings end of period assets declined 29% from the prior-year period to $122 billion at the end of the third quarter of 2013 (for additional information on the components of the asset decline during the current quarter, see "Citi Holdings" below). At the end of the quarter, Citi Holdings assets comprised approximately 6% of total Citigroup GAAP assets, 11% of risk-weighted assets (as defined under current regulatory guidelines), and 19% of estimated risk-weighted assets under Basel III (calculated based on the advanced approaches for determining total risk-weighted assets under the final U.S. Basel III rules).

10


RESULTS OF OPERATIONS

SUMMARY OF SELECTED FINANCIAL DATA—Page 1



 
Citigroup Inc. and Consolidated Subsidiaries

 

 


 

Third Quarter

 

 


 

Nine Months

 

 


 
 
  %
Change
  %
Change
 
In millions of dollars, except per-share amounts and ratios   2013   2012   2013   2012  

Net interest revenue

  $ 11,511   $ 11,711     (2 )% $ 34,823   $ 34,770     %

Non-interest revenue

    6,369     1,992     NM     23,763     16,441     45  
                           

Total revenues, net of interest expense

  $ 17,880   $ 13,703     30 % $ 58,586   $ 51,211     14 %

Operating expenses

    11,655     12,092     (4 )   36,062     36,265     (1 )

Provisions for credit losses and for benefits and claims

    1,959     2,620     (25 )   6,442     8,216     (22 )
                           

Income from continuing operations before income taxes

  $ 4,266   $ (1,009 )   NM   $ 16,082   $ 6,730     NM  

Income taxes

    1,080     (1,494 )   NM     4,777     221     NM  
                           

Income from continuing operations

  $ 3,186   $ 485     NM   $ 11,305   $ 6,509     74 %

Income (loss) from discontinued operations, net of taxes(1)

    92     8     NM     89     27     NM  
                           

Net income before attribution of noncontrolling interests

  $ 3,278   $ 493     NM   $ 11,394   $ 6,536     74 %

Net income attributable to noncontrolling interests

    51     25     NM     177     191     (7 )
                           

Citigroup's net income

  $ 3,227   $ 468     NM   $ 11,217   $ 6,345     77 %
                           

Less:

                                     

Preferred dividends—Basic

  $ 110   $ 4     NM   $ 123   $ 17     NM  

Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to Basic EPS

    61     11     NM     217     138     57 %
                           

Income allocated to unrestricted common shareholders for Basic EPS

  $ 3,056   $ 453     NM   $ 10,877   $ 6,190     76 %

Add: Interest expense, net of tax, and dividends on convertible securities and adjustment of undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to diluted EPS

        2     NM     2     10     NM  
                           

Income allocated to unrestricted common shareholders for diluted EPS

  $ 3,056   $ 455     NM   $ 10,879   $ 6,200     75 %

Earnings per share

                                     

Basic

                                     

Income from continuing operations

    0.98     0.15     NM     3.55     2.11     68  

Net income

    1.01     0.15     NM     3.58     2.12     69  
                           

Diluted

                                     

Income from continuing operations

  $ 0.98   $ 0.15     NM   $ 3.55   $ 2.05     73 %

Net income

    1.00     0.15     NM     3.57     2.06     73  

Dividends declared per common share

    0.01     0.01     %   0.03     0.03      
                           

Statement continues on the next page, including notes to the table.

11


SUMMARY OF SELECTED FINANCIAL DATA—Page 2

Citigroup Inc. and Consolidated Subsidiaries
 
 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except per-share amounts, ratios and direct staff
  2013   2012   2013   2012  

At September 30:

                                     

Total assets

  $ 1,899,511   $ 1,931,346     (2 )%                  

Total deposits

    955,460     944,644     1                    

Long-term debt

    221,593     271,862     (18 )                  

Citigroup common stockholders' equity

    195,603     186,465     5                    

Total Citigroup stockholders' equity

    200,846     186,777     8                    

Direct staff (in thousands)

    252     262     (4 )                  
                           

Ratios

                                     

Return on average assets

    0.69 %   0.10 %         0.80 %   .044 %      

Return on average common stockholders' equity(3)

    6.42 %   0.99 %         7.83 %   4.62 %      

Return on average total stockholders' equity(3)

    6.48 %   1.00 %         7.70 %   4.63 %      

Efficiency ratio

    65 %   88 %         62 %   71 %      
                           

Tier 1 Common(4)(5)

    12.68 %   12.73 %                        

Tier 1 Capital(5)

    13.64 %   13.92 %                        

Total Capital(5)

    16.68 %   17.12 %                        

Leverage(6)

    8.13 %   7.39 %                        
                           

Citigroup common stockholders' equity to assets

    10.30 %   9.65 %                        

Total Citigroup stockholders' equity to assets

    10.57     9.67                          

Dividend payout ratio(2)

    1.0     6.7                          

Book value per common share

  $ 64.49   $ 63.59     1                    

Ratio of earnings to fixed charges and preferred stock dividends

    2.02x     0.80x           2.25x     1.41x        
                           

(1)
Discontinued operations for 2013 and 2012 includes the announced sale of Citi's Brazil Credicard business and the sale of the Egg Banking PLC credit card business. Discontinued operations in 2013 also includes the carve-out of Citi's liquid strategies business within Citi Capital Advisors. Discontinued operations in 2013 and 2012 also reflect the sale of the Egg Banking PLC credit card business. Discontinued operations in the third quarter of 2013 also includes the tax benefit related to the conclusion of the audit of Citi's Consumer German tax group. For additional information, see "Income Taxes" and Note 2 to the Consolidated Financial Statements.

(2)
Dividends declared per common share as a percentage of net income per diluted share.

(3)
The return on average common stockholders' equity is calculated using net income less preferred stock dividends divided by average common stockholders' equity. The return on average total Citigroup stockholders' equity is calculated using net income divided by average Citigroup stockholders' equity.

(4)
As currently defined by the U.S. banking regulators, the Tier 1 Common ratio represents Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests in subsidiaries and qualifying trust preferred securities divided by risk-weighted assets.

(5)
Third quarter of 2013 Basel I capital ratios reflect the final (revised) U.S. market risk capital rules (Basel II.5) that were effective on January 1, 2013.

(6)
The leverage ratio represents Tier 1 Capital divided by quarterly adjusted average total assets.

12


SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES

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


CITIGROUP INCOME

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2013   2012   2013   2012  

Income (loss) from continuing operations

                                     

CITICORP

                                     

Global Consumer Banking

                                     

North America

  $ 932   $ 1,277     (27 )% $ 3,169   $ 3,748     (15 )%

EMEA

    19     6     NM     54     6     NM  

Latin America

    289     374     (23 )   1,040     1,084     (4 )

Asia

    386     450     (14 )   1,235     1,400     (12 )
                           

Total

  $ 1,626   $ 2,107     (23 )% $ 5,498   $ 6,238     (12 )%
                           

Securities and Banking

                                     

North America

  $ 420   $ 292     44 % $ 2,421   $ 1,028     NM  

EMEA

    133     348     (62 )   1,365     1,227     11  

Latin America

    257     352     (27 )   919     985     (7 )

Asia

    193     193         1,035     756     37  
                           

Total

  $ 1,003   $ 1,185     (15 )% $ 5,740   $ 3,996     44 %
                           

Transaction Services

                                     

North America

  $ 113   $ 120     (6 )% $ 403   $ 368     10 %

EMEA

    255     268     (5 )   707     885     (20 )

Latin America

    173     154     12     516     509     1  

Asia

    251     280     (10 )   744     846     (12 )
                           

Total

  $ 792   $ 822     (4 )% $ 2,370   $ 2,608     (9 )%
                           

Institutional Clients Group

  $ 1,795   $ 2,007     (11 )% $ 8,110   $ 6,604     23 %
                           

Corporate/Other

  $ (137 ) $ (76 )   (80 )% $ (847 ) $ (854 )   1 %
                           

Total Citicorp

  $ 3,284   $ 4,038     (19 )% $ 12,761   $ 11,988     6 %
                           

Citi Holdings

  $ (98 ) $ (3,553 )   97 % $ (1,456 ) $ (5,479 )   73 %
                           

Income from continuing operations

  $ 3,186   $ 485     NM   $ 11,305   $ 6,509     74 %
                           

Discontinued operations

  $ 92   $ 8     NM   $ 89   $ 27     NM  

Net income attributable to noncontrolling interests

    51     25     NM     177     191     (7 )
                           

Citigroup's net income

  $ 3,227   $ 468     NM   $ 11,217   $ 6,345     77 %
                           

NM Not meaningful

13



CITIGROUP REVENUES

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2013   2012   2013   2012  

CITICORP

                                     

Global Consumer Banking

                                     

North America

  $ 4,738   $ 5,368     (12 )% $ 14,900   $ 15,636     (5 )%

EMEA

    359     374     (4 )   1,091     1,101     (1 )

Latin America

    2,276     2,190     4     6,914     6,473     7  

Asia

    1,862     1,983     (6 )   5,790     5,933     (2 )
                           

Total

  $ 9,235   $ 9,915     (7 )% $ 28,695   $ 29,143     (2 )%
                           

Securities and Banking

                                     

North America

  $ 1,835   $ 1,533     20 % $ 7,404   $ 4,992     48 %

EMEA

    1,268     1,517     (16 )   5,307     5,088     4  

Latin America

    640     780     (18 )   2,157     2,233     (3 )

Asia

    1,006     1,017     (1 )   3,700     3,347     11  
                           

Total

  $ 4,749   $ 4,847     (2 )% $ 18,568   $ 15,660     19 %
                           

Transaction Services

                                     

North America

  $ 614   $ 619     (1 )% $ 1,907   $ 1,921     (1 )%

EMEA

    873     844     3     2,655     2,625     1  

Latin America

    447     442     1     1,361     1,330     2  

Asia

    679     714     (5 )   2,028     2,215     (8 )
                           

Total

  $ 2,613   $ 2,619     % $ 7,951   $ 8,091     (2 )%
                           

Institutional Clients Group

  $ 7,362   $ 7,466     (1 )% $ 26,519   $ 23,751     12 %
                           

Corporate/Other

  $ 31   $ 1     NM   $ 127   $ 176     (28 )%
                           

Total Citicorp

  $ 16,628   $ 17,382     (4 )% $ 55,341   $ 53,070     4 %
                           

Citi Holdings

  $ 1,252   $ (3,679 )   NM   $ 3,245   $ (1,859 )   NM  
                           

Total Citigroup net revenues

  $ 17,880   $ 13,703     30 % $ 58,586   $ 51,211     14 %
                           

NM Not meaningful

14


CITICORP

        Citicorp is Citigroup's global bank for consumers and businesses and represents Citi's core franchises. Citicorp is focused on providing best-in-class products and services to customers and leveraging Citigroup's unparalleled global network, including many of the world's emerging economies. Citicorp is physically present in approximately 100 countries, many for over 100 years, and offers services in over 160 countries and jurisdictions. Citi believes this global network provides a strong foundation for servicing the broad financial services needs of its large multinational clients and for meeting the needs of retail, private banking, commercial, public sector and institutional clients around the world. At September 30, 2013, Citicorp had approximately $1.8 trillion of assets and $914 billion of deposits, representing 94% of Citi's total assets and 96% of Citi's total deposits, respectively.

        Citicorp consists of the following operating businesses: Global Consumer Banking (which consists of Regional Consumer Banking in North America, EMEA, Latin America and Asia) and Institutional Clients Group (which includes Securities and Banking and Transaction Services). Citicorp also includes Corporate/Other.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars except as otherwise noted   2013   2012   2013   2012  

Net interest revenue

  $ 10,735   $ 11,031     (3 )% $ 32,510   $ 32,786     (1 )%

Non-interest revenue

    5,893     6,351     (7 )   22,831     20,284     13  
                           

Total revenues, net of interest expense

  $ 16,628   $ 17,382     (4 )% $ 55,341   $ 53,070     4 %
                           

Provisions for credit losses and for benefits and claims

                                     

Net credit losses

  $ 1,795   $ 2,090     (14 )% $ 5,581   $ 6,376     (12 )%

Credit reserve build (release)

    (104 )   (664 )   84     (722 )   (2,029 )   64  
                           

Provision for loan losses

  $ 1,691   $ 1,426     19 % $ 4,859   $ 4,347     12 %

Provision for benefits and claims

    51     65     (22 )   160     172     (7 )

Provision (release) for unfunded lending commitments

    108     (25 )   NM     116     (11 )   NM  
                           

Total provisions for credit losses and for benefits and claims

  $ 1,850   $ 1,466     26 % $ 5,135   $ 4,508     14 %
                           

Total operating expenses

  $ 10,275   $ 10,905     (6 )% $ 31,633   $ 32,626     (3 )%
                           

Income from continuing operations before taxes

  $ 4,503   $ 5,011     (10 )% $ 18,573   $ 15,936     17 %

Provisions for income taxes

    1,219     973     25     5,812     3,948     47  
                           

Income from continuing operations

  $ 3,284   $ 4,038     (19 )% $ 12,761   $ 11,988     6 %

Income (loss) from discontinued operations, net of taxes

    92     8     NM     89     27     NM  

Noncontrolling interests

    45     25     80     165     188     (12 )
                           

Net income

  $ 3,331   $ 4,021     (17 )% $ 12,685   $ 11,827     7  
                           

Balance sheet data (in billions of dollars)

                                     

Total end-of-period (EOP) assets

  $ 1,778   $ 1,760     1 %                  

Average assets

    1,729     1,725       $ 1,738   $ 1,709     2 %

Return on average assets

    0.76 %   0.93 %         0.98 %   0.93 %      

Efficiency ratio (Operating expenses/Total revenues)

    62 %   63 %         57 %   61 %      

Total EOP loans

    561     537     5                    

Total EOP deposits

    914     878     4                    
                           

NM Not meaningful

15



GLOBAL CONSUMER BANKING

        Global Consumer Banking (GCB) consists of Citigroup's four geographical Regional Consumer Banking (RCB) businesses that provide traditional banking services to retail customers through retail banking, commercial banking, Citi-branded cards and Citi retail services. GCB is a globally diversified business with approximately 3,777 branches in 36 countries around the world as of September 30, 2013.

        For the quarter ended September 30, 2013, GCB had $391 billion of average assets and $324 billion of average deposits. Citi's strategy is to focus on the top 150 cities globally that it believes have the highest growth potential in consumer banking. Consistent with this strategy, as announced in the fourth quarter of 2012 as part of its repositioning efforts, Citi intends to optimize its branch footprint and further concentrate its presence in major metropolitan areas. As of September 30, 2013, Citi had consumer banking operations in approximately 120, or 80%, of these cities.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars except as otherwise noted   2013   2012   2013   2012  

Net interest revenue

  $ 7,106   $ 7,204     (1 )% $ 21,349   $ 21,378     0 %

Non-interest revenue

    2,129     2,711     (21 )   7,346     7,765     (5 )
                           

Total revenues, net of interest expense

  $ 9,235   $ 9,915     (7 )% $ 28,695   $ 29,143     (2 )%
                           

Total operating expenses

  $ 5,048   $ 5,271     (4 )% $ 15,388   $ 15,534     (1 )%
                           

Net credit losses

  $ 1,730   $ 1,948     (11 )% $ 5,424   $ 6,168     (12 )%

Credit reserve build (release)

    (85 )   (515 )   83     (662 )   (2,024 )   67  

Provisions (release) for unfunded lending commitments

    15     1     NM     39          

Provision for benefits and claims

    51     65     (22 )   160     173     (8 )
                           

Provisions for credit losses and for benefits and claims

  $ 1,711   $ 1,499     14 % $ 4,961   $ 4,317     15 %
                           

Income from continuing operations before taxes

  $ 2,476   $ 3,145     (21 )% $ 8,346   $ 9,292     (10 )%

Income taxes

    850     1,038     (18 )   2,848     3,054     (7 )
                           

Income from continuing operations

  $ 1,626   $ 2,107     (23 )% $ 5,498   $ 6,238     (12 )%

Noncontrolling interests

    4     3     33     15     3     NM  
                           

Net income

  $ 1,622   $ 2,104     (23 )% $ 5,483   $ 6,235     (12 )%
                           

Balance Sheet data (in billions of dollars)

                                     

Average assets

  $ 391   $ 389     1 % $ 394   $ 386     2 %

Return on assets

    1.65 %   2.17 %         1.87 %   2.18 %      

Efficiency ratio

    55 %   53 %         54 %   53 %      

Total EOP assets

    401     395     2                    

Average deposits

    324     324         327     320     2  

Net credit losses as a percentage of average loans

    2.40 %   2.74 %         2.55 %   2.92 %      
                           

Revenue by business

                                     

Retail banking

  $ 3,931   $ 4,625     (15 )% $ 13,001   $ 13,604     (4 )%

Cards(1)

    5,304     5,290         15,694     15,539     1  
                           

Total

  $ 9,235   $ 9,915     (7 )% $ 28,695   $ 29,143     (2 )%
                           

Income from continuing operations by business

                                     

Retail banking

  $ 313   $ 802     (61 )% $ 1,762   $ 2,438     (28 )%

Cards(1)

    1,313     1,305     1     3,736     3,800     (2 )
                           

Total

  $ 1,626   $ 2,107     23 % $ 5,498   $ 6,238     (12 )%
                           

Foreign Currency (FX) Translation Impact

                                     

Total revenue—as reported

  $ 9,235   $ 9,915     (7 )% $ 28,695   $ 29,143     (2 )%

Impact of FX translation(2)

        (130 )             (135 )      
                           

Total revenues—ex-FX

  $ 9,235   $ 9,785     (6 )% $ 28,695   $ 29,008     (1 )%
                           

Total operating expenses—as reported

  $ 5,048   $ 5,271     (4 )% $ 15,388   $ 15,534     (1 )%

Impact of FX translation(2)

        (89 )             (147 )      
                           

Total operating expenses—ex-FX

  $ 5,048   $ 5,182     (3 )% $ 15,388   $ 15,387     %
                           

Total provisions for LLR & PBC—as reported

  $ 1,711   $ 1,499     14 % $ 4,961   $ 4,317     15 %

Impact of FX translation(2)

        (22 )             (13 )      
                           

Total provisions for LLR & PBC—ex-FX

  $ 1,711   $ 1,477     16 % $ 4,961   $ 4,304     15 %
                           

Net income—as reported

  $ 1,622   $ 2,104     (23 )% $ 5,483   $ 6,235     (12 )%

Impact of FX translation(2)

        (15 )             12        
                           

Net income—ex-FX

  $ 1,622   $ 2,089     (22 )% $ 5,483   $ 6,247     (12 )%
                           

(1)
Includes both Citi-branded cards and Citi retail services.

(2)
Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the third quarter of 2013 exchange rates for all periods presented.

NM Not meaningful

16



NORTH AMERICA REGIONAL CONSUMER BANKING

        North America Regional Consumer Banking (NA RCB) provides traditional banking and Citi-branded cards and Citi retail services to retail customers and small to mid-size businesses in the U.S. NA RCB's approximately 983 retail bank branches as of September 30, 2013 are largely concentrated in the greater metropolitan areas of New York, Los Angeles, San Francisco, Chicago, Miami, Washington, D.C., Boston, Philadelphia, Dallas, Houston, San Antonio and Austin.

        At September 30, 2013, NA RCB had approximately 12.1 million customer accounts, $43.2 billion of retail banking loans and $168.6 billion of deposits. In addition, NA RCB had approximately 113.5 million Citi-branded and Citi retail services credit card accounts, with $111.8 billion in outstanding card loan balances, including approximately 13 million credit card accounts and $7 billion of loans added in September 2013 as a result of the previously-announced acquisition of Best Buy's U.S. credit card portfolio.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2013   2012   2013   2012  

Net interest revenue

  $ 4,137   $ 4,149     % $ 12,354   $ 12,245     1 %

Non-interest revenue

    601     1,219     (51 )   2,546     3,391     (25 )
                           

Total revenues, net of interest expense

  $ 4,738   $ 5,368     (12 )% $ 14,900   $ 15,636     (5 )%
                           

Total operating expenses

  $ 2,358   $ 2,464     (4 )% $ 7,171   $ 7,256     (1 )%
                           

Net credit losses

  $ 1,083   $ 1,351     (20 )% $ 3,528   $ 4,491     (21 )%

Credit reserve build (release)

    (228 )   (519 )   56     (949 )   (2,174 )   56  

Provisions for benefits and claims

    3     1     NM     3     1     NM  

Provision (release) for unfunded lending commitments

    17     19     (11 )   44     52     (15 )
                           

Provisions for credit losses and for benefits and claims

  $ 875   $ 852     3 % $ 2,626   $ 2,370     11 %
                           

Income from continuing operations before taxes

  $ 1,505   $ 2,052     (27 )% $ 5,103   $ 6,010     (15 )%

Income taxes

    573     775     (26 )   1,934     2,262     (15 )
                           

Income from continuing operations

  $ 932   $ 1,277     (27 )% $ 3,169   $ 3,748     (15 )%

Noncontrolling interests

        1     (100 )   1     1      
                           

Net income

  $ 932   $ 1,276     (27 )% $ 3,168   $ 3,747     (15 )%
                           

Balance Sheet data (in billions of dollars)

                                     

Average assets

  $ 173   $ 174     (1 )% $ 174   $ 171     2 %

Return on average assets

    2.14 %   2.92 %         2.43 %   2.93 %      

Efficiency ratio

    50 %   46 %         48 %   46 %      

Average deposits

  $ 167   $ 154     8   $ 165   $ 152     9  

Net credit losses as a percentage of average loans

    2.88 %   3.60 %         3.19 %   4.00 %      
                           

Revenue by business

                                     

Retail banking

  $ 1,123   $ 1,740     (35 )% $ 4,287   $ 5,019     (15 )%

Citi-branded cards

    2,087     2,087         6,091     6,121      

Citi retail services

    1,528     1,541     (1 )   4,522     4,496     1  
                           

Total

  $ 4,738   $ 5,368     (12 )% $ 14,900   $ 15,636     (5 )%
                           

Income from continuing operations by business

                                     

Retail banking

  $ (22 ) $ 342     NM   $ 481   $ 1,013     (53 )%

Citi-branded cards

    565     555     2     1,470     1,560     (6 )

Citi retail services

    389     380     2     1,218     1,175     4  
                           

Total

  $ 932   $ 1,277     (27 )% $ 3,169   $ 3,748     (15 )%
                           

17



3Q13 vs. 3Q12

        Net income decreased 27%, mainly driven by lower revenues and a $291 million reduction in loan loss reserve releases, partially offset by a $268 million reduction in net credit losses and lower expenses.

        Revenues decreased 12% due to lower retail banking revenues primarily reflecting significantly lower mortgage origination revenues as well as the ongoing impact of spread compression.

        Retail banking revenues of $1.1 billion declined 35% due to lower mortgage origination revenues driven by significantly lower refinancing volumes as a result of higher interest rates during the quarter. In addition, retail banking continued to experience ongoing spread compression in the deposit portfolio. Partially offsetting the spread compression was growth in average deposits (8%), commercial loans (15%) and average retail loans (4%). Citi expects retail banking revenues will continue to be negatively impacted by the lower mortgage origination revenues and spread compression in the deposit portfolio.

        Cards revenues were unchanged, as improved net interest spreads, benefitting from both higher yields and lower funding costs, were offset by continued lower average loan balances. In Citi-branded cards, revenues were unchanged at $2.1 billion, reflecting a 4% decline in average loans, offset by continued improvement in net interest spreads. Citi-branded cards net interest revenue increased 2%, reflecting higher yields and lower cost of funds, partially offset by the decline in average loans and a continued increased payment rate from consumer deleveraging. Citi-branded cards non-interest revenue declined 6% due to higher affinity rebates. Citi retail services revenues decreased 1% due to declining non-interest revenues, driven by improving credit and the resulting impact on contractual partner payments. Citi retail services net interest revenues increased 3% driven by a 4% increase in average loans, primarily due to the Best Buy U.S. portfolio acquisition. Total card purchase sales of $60 billion increased 3% versus the prior-year period. Citi expects cards revenues could continue to be negatively impacted by higher payment rates for consumers, reflecting ongoing economic uncertainty and deleveraging as well as Citi's shift to higher credit quality borrowers.

        As previously disclosed, as part of its U.S. Citi-branded cards business, Citibank, N.A. issues a co-branded credit card product with American Airlines, the Citi/AAdvantage card. AMR Corporation and certain of its subsidiaries, including American Airlines, Inc. (collectively, AMR), filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in November 2011, and on February 14, 2013, AMR and US Airways Group, Inc. announced a merger agreement under which the companies would be combined.

        On August 13, 2013, the U.S. Department of Justice, along with the attorneys general of several states and the District of Columbia, filed an antitrust lawsuit seeking to permanently enjoin the merger, which has resulted in uncertainty regarding when the bankruptcy or merger processes will be resolved. On October 21, 2013, the U.S. Bankruptcy Court approved AMR's plan of reorganization, and the Citi/AAdvantage card program agreements were assumed by AMR, regardless of whether the merger is consummated.

        Expenses decreased 4%, primarily due to lower legal and related costs and marketing costs and repositioning savings, partially offset by higher mortgage origination costs and expenses in cards as a result of the Best Buy portfolio acquisition and a repositioning charge in the current quarter.

        Provisions increased 3%, as lower net credit losses in the cards portfolio and in retail banking were offset by continued lower loan loss reserve releases primarily related to cards ($228 million in the current quarter compared to $519 million in the prior-year period). Citi expects loan loss reserve releases in NA RCB to moderate during the remainder of 2013 and into 2014 as a result of loan loss reserve builds expected for new loans originated in the Best Buy portfolio.


3Q13 YTD vs. 3Q12 YTD

        Year-to-date, NA RCB has experienced similar trends to those described above. Net income decreased 15%, mainly due to lower loan loss reserve releases and lower revenues, partially offset by lower net credit losses.

        Revenues decreased 5%, primarily driven by a 15% decline in retail banking revenues resulting from lower mortgage origination revenues due to lower refinancing volumes and continued spread compression on deposits. These trends were partially offset by higher average deposits and an improved mix from checking account growth. Cards revenues were unchanged as improved net interest spreads were offset by lower volumes, driven by the factors described above.

        Expenses decreased 1% as lower legal and related costs and efficiency savings were offset by higher volume-related mortgage origination costs.

        Provisions increased 11% due to a $1.2 billion reduction in loan loss reserve releases, partially offset by a $963 million reduction in net credit losses in the cards portfolio and retail banking.

18



EMEA REGIONAL CONSUMER BANKING

        EMEA Regional Consumer Banking (EMEA RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, primarily in Central and Eastern Europe and the Middle East. The countries in which EMEA RCB has the largest presence are Poland, Russia and the United Arab Emirates. As part of Citi's previously announced repositioning efforts, during the fourth quarter of 2013, Citi intends to reposition its Polish consumer business, including optimizing its branch footprint and concentrating its presence in major metropolitan areas.

        At September 30, 2013, EMEA RCB had 201 retail bank branches with approximately 3.6 million customer accounts, $5.5 billion in retail banking loans, $12.5 billion in deposits, and 2.2 million Citi-branded card accounts with $2.4 billion in outstanding card loan balances.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2013   2012   2013   2012  

Net interest revenue

  $ 226   $ 251     (10 )% $ 709   $ 752     (6 )%

Non-interest revenue

    133     123     8     382     349     9  
                           

Total revenues, net of interest expense

  $ 359   $ 374     (4 )% $ 1,091   $ 1,101     (1 )%
                           

Total operating expenses

  $ 306   $ 335     (9 )% $ 983   $ 1,031     (5 )%
                           

Net credit losses

  $ 21   $ 29     (28 )% $ 49   $ 72     (32 )%

Credit reserve build (release)

    3     2     50     (17 )   (16 )   (6 )

Provision (release) for unfunded lending commitments

                    (1 )   100  
                           

Provisions for credit losses

  $ 24   $ 31     (23 )% $ 32   $ 55     (42 )%
                           

Income from continuing operations before taxes

  $ 29   $ 8     NM   $ 76   $ 15     NM  

Income taxes

    10     2     NM     22     9     NM  
                           

Income from continuing operations

  $ 19   $ 6     NM   $ 54   $ 6     NM  

Noncontrolling interests

    3     2     50 %   11     4     NM  
                           

Net income (loss)

  $ 16   $ 4     NM   $ 43   $ 2     NM  
                           

Balance Sheet data (in billions of dollars)

                                     

Average assets

  $ 9   $ 9     % $ 10   $ 9     11 %

Return on average assets

    0.71 %   0.18 %         0.57 %   0.03 %      

Efficiency ratio

    85 %   90 %         90 %   94 %      

Average deposits

  $ 12   $ 13     (6 )% $ 13   $ 12     2 %

Net credit losses as a percentage of average loans

    1.08 %   1.54 %         0.83 %   1.30 %      
                           

Revenue by business

                                     

Retail banking

  $ 219   $ 220     % $ 648   $ 646     %

Citi-branded cards

    140     154     (9 )   443     455     (3 )
                           

Total

  $ 359   $ 374     (4 ) $ 1,091   $ 1,101     (1 )
                           

Income (loss) from continuing operations by business

                                     

Retail banking

  $ (2 ) $ (14 )   86 % $ (10 ) $ (49 )   80 %

Citi-branded cards

    21     20     5     64     55     16  
                           

Total

  $ 19   $ 6     NM   $ 54   $ 6     NM  
                           

Foreign Currency (FX) Translation Impact

                                     

Total revenue—as reported

  $ 359   $ 374     (4 )% $ 1,091   $ 1,101     (1 )%

Impact of FX translation(1)

        (2 )             (11 )      
                           

Total revenues—ex-FX

  $ 359   $ 372     (3 )% $ 1,091   $ 1,090     %
                           

Total operating expenses—as reported

  $ 306   $ 335     (9 )% $ 983   $ 1,031     (5 )%

Impact of FX translation(1)

        (4 )             (14 )      
                           

Total operating expenses—ex-FX

  $ 306   $ 331     (8 )% $ 983   $ 1,017     (3 )%
                           

Provisions for credit losses—as reported

  $ 24   $ 31     (23 )% $ 32   $ 55     (42 )%

Impact of FX translation(1)

                      1        
                           

Provisions for credit losses—ex-FX

  $ 24   $ 31     (23 )% $ 32   $ 56     (43 )%
                           

Net income (loss)—as reported

  $ 16   $ 4     NM   $ 43   $ 2     NM  

Impact of FX translation(1)

        2               2        
                           

Net income (loss)—ex-FX

  $ 16   $ 6     NM   $ 43   $ 4     NM  
                           

(1)
Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the third quarter of 2013 exchange rates for all periods presented.

NM Not meaningful

19


        The discussion of the results of operations for EMEA RCB below excludes the impact of FX translation for all periods presented. Presentation of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. Citi believes the presentation of EMEA RCB's results excluding the impact of FX translation is a more meaningful depiction of the underlying fundamentals of the business. For a reconciliation of certain of these metrics to the reported results, see the table above.


3Q13 vs. 3Q12

        Net income of $16 million compared to net income of $6 million in the prior-year period as lower net credit losses and lower expenses were partially offset by lower revenues, primarily due to the previously-announced sales of Citi's consumer operations in Turkey and Romania.

        Revenues decreased 3%, mainly driven by the lower revenues resulting from the sales of the consumer operations referenced above, partially offset by higher volumes in core markets and a gain on sale related to the Turkey sale. Net interest revenue decreased 9%, due to continued spread compression in cards, a 25% decrease in average cards loans and a 6% decrease in average deposits primarily due to the sales in Turkey and Romania, partially offset by growth in average retail loans of 18%. Interest rate caps on credit cards, particularly in Poland, the continued liquidation of a higher yielding non-strategic retail banking portfolio and the continued low interest rate environment were the main contributors to the lower spreads. Citi expects continued regulatory changes, including potential caps on interchange rates, and spread compression to continue to negatively impact revenues in this business during the remainder of 2013. Non-interest revenue increased 8%, mainly reflecting the gain on sale related to Turkey, partially offset by lower revenues due to the sales in Turkey and Romania. Cards purchase sales decreased 13% and investment sales decreased 32%.

        Expenses declined 8%, primarily due to the market exits and efficiency savings, partially offset by continued investment spending on new internal operating platforms and higher repositioning charges related to the sales in Turkey and Romania.

        Provisions declined 23% due to a 30% decrease in net credit losses primarily due to the sales in Turkey and Romania. Net credit losses also continued to reflect stabilizing credit quality and Citi's strategic move toward lower-risk customers.


3Q13 YTD vs. 3Q12 YTD

        Year-to-date, EMEA RCB has experienced similar trends to those described above. Net income of $43 million compared to net income of $4 million in the prior-year period was primarily due to lower expenses and lower net credit losses.

        Revenues were unchanged, as lower revenues due to the sales of the consumer operations in Turkey and Romania were offset by higher volumes in core markets and a gain on sale related to Turkey. Net interest revenue declined 5% primarily due to the sales in Turkey and Romania and continued spread compression, driven by the same factors described above. Non-interest revenue increased 10%, mainly reflecting higher investment fees and card fees due to increased sales volume and a gain on the sale related to Turkey. Cards purchase sales increased 1% and investment sales increased 4%.

        Expenses decreased 3%, primarily due to the sales in Turkey and Romania and efficiency savings, partially offset by the continued investment spending.

        Provisions decreased 43% to $32 million, primarily due to lower net credit losses, driven by the factors described above, and a net credit recovery in the second quarter of 2013 as a result of sales of written off accounts.

20



LATIN AMERICA REGIONAL CONSUMER BANKING

        Latin America Regional Consumer Banking (Latin America RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest presence in Mexico and Brazil. Latin America RCB includes branch networks throughout Latin America as well as Banco Nacional de Mexico, or Banamex, Mexico's second-largest bank, with nearly 1,700 branches. At September 30, 2013, Latin America RCB had 2,031 retail branches, with approximately 32.0 million customer accounts, $29.4 billion in retail banking loans and $47.5 billion in deposits. In addition, the business had approximately 9.5 million Citi-branded card accounts with $11.8 billion in outstanding loan balances.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2013   2012   2013   2012  

Net interest revenue

  $ 1,580   $ 1,532     3 % $ 4,706   $ 4,495     5 %

Non-interest revenue

    696     658     6     2,208     1,978     12  
                           

Total revenues, net of interest expense

  $ 2,276   $ 2,190     4 % $ 6,914   $ 6,473     7 %
                           

Total operating expenses

  $ 1,285   $ 1,266     2 % $ 3,900   $ 3,727     5 %
                           

Net credit losses

  $ 434   $ 351     24 % $ 1,269   $ 999     27 %

Credit reserve build

    168     36     NM     310     222     40  

Provision for benefits and claims

    34     46     (26 )   116     121     (4 )
                           

Provisions for loan losses and for benefits and claims (LLR & PBC)

  $ 636   $ 433     47 % $ 1,695   $ 1,342     26 %
                           

Income from continuing operations before taxes

  $ 355   $ 491     (28 )% $ 1,319   $ 1,404     (6 )%

Income taxes

    66     117     (44 )   279     320     (13 )
                           

Income from continuing operations

  $ 289   $ 374     (23 )% $ 1,040   $ 1,084     (4 )%

Noncontrolling interests

    1             3     (2 )   NM  
                           

Net income

  $ 288   $ 374     (23 )% $ 1,037   $ 1,086     (5 )%
                           

Balance Sheet data (in billions of dollars)

                                     

Average assets

  $ 80   $ 79     1 % $ 82   $ 80     3 %

Return on average assets

    1.43 %   1.98 %         1.72 %   1.90 %      

Efficiency ratio

    56 %   58 %         56 %   58 %      

Average deposits

  $ 46   $ 45     2   $ 46   $ 45     2  

Net credit losses as a percentage of average loans

    4.18 %   3.74 %         4.18 %   3.68 %      
                           

Revenue by business

                                     

Retail banking

  $ 1,487   $ 1,469     1 % $ 4,572   $ 4,348     5 %

Citi-branded cards

    789     721     9     2,342     2,125     10  
                           

Total

  $ 2,276   $ 2,190     4 % $ 6,914   $ 6,473     7 %
                           

Income from continuing operations by business

                                     

Retail banking

  $ 144   $ 222     (35 )% $ 603   $ 676     (11 )%

Citi-branded cards

    145     152     (5 )   437     408     7  
                           

Total

  $ 289   $ 374     (23 )% $ 1,040   $ 1,084     (4 )%
                           

Foreign Currency (FX) Translation Impact

                                     

Total revenue—as reported

  $ 2,276   $ 2,190     4 % $ 6,914   $ 6,473     7 %

Impact of FX translation(1)

        (41 )             19        
                           

Total revenues—ex-FX

  $ 2,276   $ 2,149     6 % $ 6,914   $ 6,492     7 %
                           

Total operating expenses—as reported

  $ 1,285   $ 1,266     2 % $ 3,900   $ 3,727     5 %

Impact of FX translation(1)

        (28 )             (20 )      
                           

Total operating expenses—ex-FX

  $ 1,285   $ 1,238     4 % $ 3,900   $ 3,707     5 %
                           

Provisions for LLR & PBC—as reported

  $ 636   $ 433     47 % $ 1,695   $ 1,342     26 %

Impact of FX translation(1)

        (10 )             (6 )      
                           

Provisions for LLR & PBC—ex-FX                                

  $ 636   $ 423     50 % $ 1,695   $ 1,336     27 %
                           

Net income—as reported

  $ 288   $ 374     (23 )% $ 1,037   $ 1,086     (5 )%

Impact of FX translation(1)

        (5 )             17        
                           

Net income—ex-FX

  $ 288   $ 369     (22 )% $ 1,037   $ 1,103     (6 )%
                           

(1)
Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the third quarter of 2013 exchange rates for all periods presented.

NM Not Meaningful

21


The discussion of the results of operations for Latin America RCB below excludes the impact of FX translation for all periods presented. Presentation of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. Citi believes the presentation of Latin America RCB's results excluding the impact of FX translation is a more meaningful depiction of the underlying fundamentals of the business. For a reconciliation of certain of these metrics to the reported results, see the table above.


3Q13 vs. 3Q12

        Net income decreased 22% as higher credit costs and higher expenses were partially offset by higher revenues.

        Revenues increased 6%, primarily due to volume growth in retail banking and cards, partially offset by continued spread compression. Net interest revenue increased 5% due to increased volumes, partially offset by spread compression. Citi expects slower volume growth and continued spread compression to negatively impact net interest revenues during the remainder of 2013. Non-interest revenue increased 8%, primarily due to higher fees from increased business volumes in retail and cards. Retail banking revenues increased 3% as average loans increased 11% and investment sales increased 8% while average deposits increased 3%. Cards revenues increased 12% as average loans(10) increased 11% and purchase sales(10) increased 13%.

        Despite the year-over-year growth, Citi expects overall volume and revenue growth to slow, particularly in Mexico and Brazil, due to slowing economic growth in the region and spread compression. In addition, as previously disclosed, Mexican governmental authorities are considering various financial reforms as well as tax reforms that could increase taxes on consumers and businesses. These reforms have not yet been adopted, and thus the impact on Citi's businesses remains uncertain. For information on the potential impact to Latin America RCB from foreign exchange controls, see "Managing Global Risk—Cross-Border Risk" below.

        Expenses increased 4% due to increased volume-related costs, mandatory salary increases in certain countries and higher regulatory costs, partially offset by efficiency savings and lower marketing costs.

        Provisions increased 50%, primarily due to higher net credit losses as well as a higher loan loss reserve build. Net credit losses increased 27%, primarily in the Mexico cards and personal loan portfolios, reflecting both portfolio seasoning and volume growth. The higher loan loss reserve build in the current quarter was largely due to an increase in reserves in Mexico related to the top three Mexican homebuilders, with the remainder due to portfolio growth and seasoning and the impact of potential losses related to hurricanes in the region during September 2013. The loan loss reserve build related to the Mexican homebuilders was driven by further deterioration in the financial and operating conditions of these companies and decreases in the value of Citi's collateral securing its loans. Citi's outstanding loans to the top three homebuilders totaled less than $300 million at the end of the current quarter. Citi continues to monitor the performance of its Mexico homebuilder clients, as well as the value of its collateral, to determine whether additional reserves or charge-offs may be required in future periods.

        Citi currently expects the net credit loss rate in Latin America to remain relatively unchanged for the remainder of 2013, although the rate could be higher if any material losses are incurred in the Mexico homebuilder portfolio or as a result of the impact from the recent hurricanes in Mexico.


3Q13 YTD vs. 3Q12 YTD

        Year-to-date, Latin America RCB has experienced similar trends to those described above. Net income decreased 6% as higher revenues were partially offset by higher expenses and credit costs.

        Revenues increased 7%, primarily due to volume growth in retail banking and cards, partially offset by spread compression, driven by the factors described above. Net interest revenue increased 4% due to increased volumes, partially offset by continued spread compression. Non-interest revenue increased 11%, primarily due to higher fees from increased business volumes in retail and cards. Retail banking revenues increased 5% as average loans increased 14%, investment sales increased 11%, and deposits grew 2%. Cards revenues increased 10% as average loans(10) increased 10% and purchase sales(10) increased 9%.

        Expenses increased 5% due to increased volume-related costs, higher repositioning charges, mandatory salary increases in certain countries and higher transactional costs, partially offset by efficiency savings and lower marketing costs.

        Provisions increased 27%, primarily due to higher net credit losses and higher loan loss reserve builds, driven by the same factors described above.

   


(10)
Adjusted to exclude Credicard loans of $3.2 billion in third quarter of 2012; Credicard was moved to discontinued operations in Corporate/Other as of the second quarter of 2013. For additional information, see Note 2 to the Consolidated Financial Statements.

22



ASIA REGIONAL CONSUMER BANKING

        Asia Regional Consumer Banking (Asia RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest Citi presence in Korea, Australia, Singapore, Hong Kong, India, Taiwan, Malaysia, Japan, Thailand and the Philippines.

        At September 30, 2013, Asia RCB had 562 retail branches, approximately 17.0 million customer accounts, $70.3 billion in retail banking loans and $101.6 billion in deposits. In addition, the business had approximately 16.6 million Citi-branded card accounts with $18.7 billion in outstanding loan balances.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2013   2012   2013   2012  

Net interest revenue

  $ 1,163   $ 1,272     (9 )% $ 3,580   $ 3,886     (8 )%

Non-interest revenue

    699     711     (2 )   2,210     2,047     8  
                           

Total revenues, net of interest expense

  $ 1,862   $ 1,983     (6 )% $ 5,790   $ 5,933     (2 )%
                           

Total operating expenses

  $ 1,099   $ 1,206     (9 )% $ 3,334   $ 3,520     (5 )%
                           

Net credit losses

  $ 192   $ 217     (12 )% $ 578   $ 606     (5 )%

Credit reserve build (release)

    (28 )   (34 )   18     (6 )   (56 )   89  

Provision (release) for unfunded lending commitments

    12             36          
                           

Provisions for credit losses

  $ 176   $ 183     (4 )% $ 608   $ 550     11 %
                           

Income from continuing operations before taxes

  $ 587   $ 594     (1 )% $ 1,848   $ 1,863     (1 )%

Income taxes

    201     144     40     613     463     32  
                           

Income from continuing operations

  $ 386   $ 450     (14 )% $ 1,235   $ 1,400     (12 )%

Noncontrolling interests

                         
                           

Net income

  $ 386   $ 450     (14 )% $ 1,235   $ 1,400     (12 )%
                           

Balance Sheet data (in billions of dollars)

                                     

Average assets

  $ 129   $ 127     2 % $ 129   $ 126     2 %

Return on average assets

    1.19 %   1.41 %         1.28 %   1.48 %      

Efficiency ratio

    59 %   61 %         58 %   59 %      

Average deposits

  $ 100   $ 113     (11 ) $ 103   $ 111     (7 )

Net credit losses as a percentage of average loans

    0.87 %   0.98 %         0.88 %   0.92 %      
                           

Revenue by business

                                     

Retail banking

  $ 1,102   $ 1,196     (8 )% $ 3,494   $ 3,591     (3 )%

Citi-branded cards

    760     787     (3 )   2,296     2,342     (2 )
                           

Total

  $ 1,862   $ 1,983     (6 )% $ 5,790   $ 5,933     (2 )%
                           

Income from continuing operations by business

                                     

Retail banking

  $ 193   $ 252     (23 )% $ 688   $ 798     (14 )%

Citi-branded cards

    193     198     (3 )   547     602     (9 )
                           

Total

  $ 386   $ 450     (14 )% $ 1,235   $ 1,400     (12 )%
                           

Foreign Currency (FX) Translation Impact

                                     

Total revenue—as reported

  $ 1,862   $ 1,983     (6 )% $ 5,790   $ 5,933     (2 )%

Impact of FX translation(1)

        (87 )             (143 )      
                           

Total revenues—ex-FX

  $ 1,862   $ 1,896     (2 )% $ 5,790   $ 5,790     %
                           

Total operating expenses—as reported

  $ 1,099   $ 1,206     (9 )% $ 3,334   $ 3,520     (5 )%

Impact of FX translation(1)

        (57 )             (113 )      
                           

Total operating expenses—ex-FX                           

  $ 1,099   $ 1,149     (4 )% $ 3,334   $ 3,407     (2 )%
                           

Provisions for credit losses—as reported

  $ 176   $ 183     (4 )% $ 608   $ 550     11 %

Impact of FX translation(1)

        (12 )             (8 )      
                           

Provisions for credit losses—ex-FX                           

  $ 176   $ 171     3 % $ 608   $ 542     12 %
                           

Net income—as reported

  $ 386   $ 450     (14 )% $ 1,235   $ 1,400     (12 )%

Impact of FX translation(1)

        (12 )             (7 )      
                           

Net income—ex-FX

  $ 386   $ 438     (12 )% $ 1,235   $ 1,393     (11 )%
                           

(1)
Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the third quarter of 2013 exchange rates for all periods presented.

NM Not meaningful

23


The discussion of the results of operations for Asia RCB below excludes the impact of FX translation for all periods presented. Presentation of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. Citi believes the presentation of Asia RCB's results excluding the impact of FX translation is a more meaningful depiction of the underlying fundamentals of the business. For a reconciliation of certain of these metrics to the reported results, see the table above.


3Q13 vs. 3Q12

        Net income decreased 12%, primarily due to a higher effective tax rate (see "Income Taxes" below) and lower revenues, partially offset by lower expenses.

        Revenues decreased 2%, as lower net interest revenue was partially offset by higher non-interest revenue. Net interest revenue declined 4%, primarily driven by spread compression in retail banking as well as the continued negative impact of regulatory changes in certain markets, most significantly Korea. Average retail deposits declined 7% resulting from continued efforts to rebalance the deposit portfolio mix. Average retail loans increased 4% (12% excluding Korea). Non-interest revenue increased 3%, mainly driven by continued growth in cards purchase sales across the region. Sequentially, investment sales declined 23%, primarily reflecting fluctuations in retail investor sentiment and the broader capital markets environment. Despite lower overall revenues in the current quarter, several key markets within the region experienced strong revenue growth, including Hong Kong, India, Thailand and China. Spread compression is expected to continue to have an adverse impact on Asia RCB revenues during the remainder of 2013 and into 2014. In addition, consistent with its strategy to concentrate its consumer banking operations in major metropolitan areas and focus on high quality consumer segments, Citi is in an ongoing process to reposition its consumer franchise in Korea to improve its operating efficiency and returns. While revenues in Korea could begin to stabilize in early 2014, this market could continue to have a negative impact on year-over-year revenue comparisons for Asia RCB through 2014.

        Expenses declined 4%, as efficiency savings were partially offset by increased investment spending, particularly investments in China cards.

        Provisions increased 3%, reflecting lower loan loss reserve releases and volume growth in China, India, Hong Kong and Singapore, partially offset by lower net credit losses. Despite this increase year-over-year, overall credit quality in the region continued to remain stable.


3Q13 YTD vs. 3Q12 YTD

        Year-to-date, Asia RCB has experienced similar trends to those described above. Net income decreased 11%, primarily due to the higher effective tax rate and higher credit costs, partially offset by lower expenses.

        Revenues were unchanged, as higher non-interest revenue was offset by lower net interest revenue. Net interest revenue declined 6%, primarily driven by ongoing spread compression. Average retail deposits declined 4%, due to the efforts to rebalance the deposit portfolio mix. Non-interest revenue increased 11%, reflecting a 31% increase in investment sales and a 7% increase in Citi-branded cards purchase sales.

        Expenses declined 2%, as efficiency savings were partially offset by increased investment spending and higher volume-related growth.

        Provisions increased 12%, primarily reflecting a higher loan loss reserve build due to regulatory requirements in Korea as well as volume growth in China, India and Singapore, partly offset by lower net credit losses.

24



INSTITUTIONAL CLIENTS GROUP

        Institutional Clients Group (ICG) includes Securities and Banking and Transaction Services. ICG provides corporate, institutional, public sector and high-net-worth clients around the world with a full range of products and services, including cash management, foreign exchange, trade finance and services, securities services, sales and trading of loans and securities, institutional brokerage, underwriting, lending and advisory services. ICG's international presence is supported by trading floors in approximately 75 countries and jurisdictions and a proprietary network within Transaction Services in over 95 countries and jurisdictions. At September 30, 2013, ICG had approximately $1.1 trillion of assets and $565 billion of deposits.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2013   2012   2013   2012  

Commissions and fees

  $ 1,115   $ 1,011     10 % $ 3,450   $ 3,233     7 %

Administration and other fiduciary fees

    637     663     (4 )   2,027     2,101     (4 )

Investment banking

    842     1,000     (16 )   2,910     2,604     12  

Principal transactions

    814     731     11     5,636     4,081     38  

Other

    131     37     NM     858     (42 )   NM  
                           

Total non-interest revenue

  $ 3,539   $ 3,442     3 % $ 14,881   $ 11,977     24 %

Net interest revenue (including dividends)

    3,823     4,024     (5 )   11,638     11,774     (1 )
                           

Total revenues, net of interest expense

  $ 7,362   $ 7,466     (1 )% $ 26,519   $ 23,751     12 %
                           

Total operating expenses

  $ 4,795   $ 4,869     (2 )% $ 14,720   $ 14,935     (1 )%
                           

Net credit losses

  $ 65   $ 143     (55 )% $ 157   $ 207     (24 )%

Provision (release) for unfunded lending commitments

    93     (26 )   NM     77     (11 )   NM  

Credit reserve build

    (19 )   (149 )   87     (60 )   (4 )   NM  
                           

Provisions for credit losses

  $ 139   $ (32 )   NM   $ 174   $ 192     (9 )%
                           

Income from continuing operations before taxes

  $ 2,428   $ 2,629     (8 )% $ 11,625   $ 8,624     35 %

Income taxes

    633     622     2     3,515     2,020     74  
                           

Income from continuing operations

  $ 1,795   $ 2,007     (11 )% $ 8,110   $ 6,604     23 %

Noncontrolling interests

    19     14     36     92     105     (12 )
                           

Net income

  $ 1,776   $ 1,993     (11 )% $ 8,018   $ 6,499     23 %
                           

Average assets (in billions of dollars)

  $ 1,052   $ 1,047     % $ 1,071   $ 1,039     3 %

Return on average assets

    0.67 %   0.76 %         1.00 %   0.84 %      

Efficiency ratio

    65 %   65 %         56 %   63 %      
                           

Revenues by region

                                     

North America

  $ 2,449   $ 2,152     14 % $ 9,311   $ 6,913     35 %

EMEA

    2,141     2,361     (9 )   7,962     7,713     3  

Latin America

    1,087     1,222     (11 )   3,518     3,563     (1 )

Asia

    1,685     1,731     (3 )   5,728     5,562     3  
                           

Total revenues

  $ 7,362   $ 7,466     (1 )% $ 26,519   $ 23,751     12 %
                           

Income from continuing operations by region

                                     

North America

  $ 533   $ 412     29 % $ 2,824   $ 1,396     NM  

EMEA

    388     616     (37 )   2,072     2,112     (2 )%

Latin America

    430     506     (15 )   1,435     1,494     (4 )

Asia

    444     473     (6 )   1,779     1,602     11  
                           

Total income from continuing operations

  $ 1,795   $ 2,007     (11 )% $ 8,110   $ 6,604     23 %
                           

Average loans by region (in billions of dollars)

                                     

North America

  $ 100   $ 90     11 % $ 95   $ 83     14 %

EMEA

    54     54         54     52     4  

Latin America

    38     34     12     38     34     12  

Asia

    67     65     3     64     63     2  
                           

Total average loans

  $ 259   $ 243     7 % $ 251   $ 232     8 %
                           

NM Not meaningful

25



SECURITIES AND BANKING

        Securities and Banking (S&B) offers a wide array of investment and commercial banking services and products for corporations, governments, institutional and public sector entities and high-net-worth individuals. S&B transacts with clients in both cash instruments and derivatives, including fixed income, foreign currency, equity and commodity products. S&B includes investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, derivative services and private banking.

        S&B revenue is generated primarily from fees and spreads associated with these activities. S&B earns fee income for assisting clients in clearing transactions, providing brokerage and investment banking services and other such activities. Revenue generated from these activities is recorded in Commissions and fees. In addition, as a market maker, S&B facilitates transactions, including holding product inventory to meet client demand, and earns the differential between the price at which it buys and sells the products. These price differentials and the unrealized gains and losses on the inventory are recorded in Principal transactions. S&B interest income earned on inventory and loans held is recorded as a component of Net interest revenue.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2013   2012   2013   2012  

Net interest revenue

  $ 2,414   $ 2,539     (5 )% $ 7,424   $ 7,247     2 %

Non-interest revenue

    2,335     2,308     1     11,144     8,413     32  
                           

Total revenues, net of interest expense

  $ 4,749   $ 4,847     (2 )% $ 18,568   $ 15,660     19 %
                           

Total operating expenses

  $ 3,367   $ 3,479     (3 )% $ 10,426   $ 10,748     (3 )%
                           

Net credit losses

  $ 49   $ 56     (13 )% $ 121   $ 93     30 %

Provision (release) for unfunded lending commitments

    111     (26 )   NM     95     (17 )   NM  

Credit reserve build

    (40 )   (103 )   61     (103 )   (32 )   NM  
                           

Provisions for credit losses

  $ 120   $ (73 )   NM   $ 113   $ 44     NM  
                           

Income before taxes and noncontrolling interests

  $ 1,262   $ 1,441     (12 )% $ 8,029   $ 4,868     65 %

Income taxes

    259     256     1     2,289     872     NM  
                           

Income from continuing operations

  $ 1,003   $ 1,185     (15 )% $ 5,740   $ 3,996     44 %

Noncontrolling interests

    14     11     27     76     93     (18 )
                           

Net income

  $ 989   $ 1,174     (16 )% $ 5,664   $ 3,903     45 %
                           

Average assets (in billions of dollars)

  $ 885   $ 905     (2 )% $ 915   $ 901     2 %

Return on average assets

    0.44 %   0.52 %         0.83 %   0.58 %      

Efficiency ratio

    71 %   72 %         56 %   69 %      
                           

Revenues by region (ex-CVA/DVA)

                                     

North America

  $ 1,975   $ 1,879     5 % $ 7,554   $ 5,868     29 %

EMEA

    1,449     1,859     (22 )   5,331     6,029     (12 )

Latin America

    647     783     (17 )   2,150     2,239     (4 )

Asia

    1,010     1,125     (10 )   3,713     3,501     6  
                           

Total revenues (ex-CVA/DVA)

  $ 5,081   $ 5,646     (10 )% $ 18,748   $ 17,637     6 %
                           

Income from continuing operations by region

                                     

North America

  $ 420   $ 292     44 % $ 2,421   $ 1,028     NM  

EMEA

    133     348     (62 )   1,365     1,227     11 %

Latin America

    257     352     (27 )   919     985     (7 )

Asia

    193     193         1,035     756     37  
                           

Total income from continuing operations

  $ 1,003   $ 1,185     (15 )% $ 5,740   $ 3,996     44 %
                           

Securities and Banking revenue details (ex-CVA/DVA)

                                     

Total investment banking

  $ 839   $ 933     (10 )% $ 2,941   $ 2,665