10-K 1 citigroup_10k.htm ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2011
 
Commission file number 1-9924
 
Citigroup Inc.
(Exact name of registrant as specified in its charter)
 
Delaware 52-1568099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
   
399 Park Avenue, New York, NY 10022
(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (212) 559-1000
 
Securities registered pursuant to Section 12(b) of the Act: See Exhibit 99.01
 
Securities registered pursuant to Section 12(g) of the Act: none
 
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  o  Yes  X  No
 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  o  Yes  X  No
 
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.  X  Yes  o  No
 
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).  X  Yes  o  No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  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.
 
X  Large accelerated filer o  Accelerated filer o  Non-accelerated filer o  Smaller reporting company
    (Do not check if a smaller reporting company)  

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o  Yes  X  No
 
The aggregate market value of Citigroup Inc. common stock held by non-affiliates of Citigroup Inc. on June 30, 2011 was approximately $121.3 billion.
 
Number of shares of common stock outstanding on January 31, 2012: 2,928,662,136
 
Documents Incorporated by Reference: Portions of the Registrant’s Proxy Statement for the annual meeting of stockholders scheduled to be held on April 17, 2012, are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III.



10-K CROSS-REFERENCE INDEX
 

This Annual Report on Form 10-K incorporates the requirements of the accounting profession and the Securities and Exchange Commission.

FORM 10-K
Item Number Page
  
Part I
  
1. Business    4–36, 40,
116–121,
124–125,
156, 287–289
 
1A. Risk Factors 55–65
 
1B. Unresolved Staff Comments   Not Applicable
 
2. Properties 289
 
3. Legal Proceedings 267–275
 
4. Mine Safety Disclosures Not Applicable
  
Part II
   
5. Market for Registrant’s
Common Equity,
Related Stockholder
Matters, and Issuer
Purchases of
Equity Securities 43, 163, 285,
290–291, 293
         
6. Selected Financial Data 10–11
         
7. Management’s Discussion
and Analysis of Financial
Condition and Results
of Operations
6–54, 66–115
         
7A. Quantitative and Qualitative
Disclosures About Market Risk 66–115,
157–158,
181–212,
215–259
         
8. Financial Statements and
Supplementary Data 131–286
         
9. Changes in and Disagreements
with Accountants on
    Accounting and Financial    
  Disclosure Not Applicable
         
9A. Controls and Procedures 122–123
         
9B.   Other Information Not Applicable
  
Part III
    
10. Directors, Executive Officers and
Corporate Governance    292–293, 295*
  
11. Executive Compensation **
 
12. Security Ownership of Certain
  Beneficial Owners and Management
and Related Stockholder Matters ***
  
13.   Certain Relationships and Related
Transactions, and Director
Independence ****
  
14. Principal Accounting Fees and
Services *****
    
Part IV
  
15. Exhibits and Financial Statement
  Schedules

*        For additional information regarding Citigroup’s Directors, see “Corporate Governance,” “Proposal 1: Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive Proxy Statement for Citigroup’s Annual Meeting of Stockholders scheduled to be held on April 17, 2012, to be filed with the SEC (the Proxy Statement), incorporated herein by reference.
**        See “Executive Compensation—The Personnel and Compensation Committee Report,” “—Compensation Discussion and Analysis” and “—2011 Summary Compensation Table” and in the Proxy Statement, incorporated herein by reference.
***        See “About the Annual Meeting,” “Stock Ownership” and “Proposal 3: Approval of Amendment to the Citigroup 2009 Stock Incentive Plan” in the Proxy Statement, incorporated herein by reference.
****        See “Corporate Governance—Director Independence,” “—Certain Transactions and Relationships, Compensation Committee Interlocks and Insider Participation,” “—Indebtedness,” “Proposal 1: Election of Directors” and “Executive Compensation” in the Proxy Statement, incorporated herein by reference.
*****        See “Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm” in the Proxy Statement, incorporated herein by reference.


2






CITIGROUP’S 2011 ANNUAL REPORT ON FORM 10-K

OVERVIEW   4
CITIGROUP SEGMENTS AND REGIONS 5
MANAGEMENT’S DISCUSSION AND ANALYSIS
     OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS 6
     Executive Summary 6
RESULTS OF OPERATIONS 10
     Five-Year Summary of Selected
          Financial Data 10
SEGMENT AND BUSINESS—INCOME (LOSS)  
     AND REVENUES 12
CITICORP 14
     Global Consumer Banking 15
          North America Regional Consumer Banking 16
          EMEA Regional Consumer Banking 18
          Latin America Regional Consumer Banking 20
          Asia Regional Consumer Banking 22
     Institutional Clients Group 24
          Securities and Banking 26
          Transaction Services 28
CITI HOLDINGS 30
     Brokerage and Asset Management 31
     Local Consumer Lending 32
     Special Asset Pool 35
CORPORATE/OTHER 36
BALANCE SHEET REVIEW 37
     Segment Balance Sheet at December 31, 2011 40
CAPITAL RESOURCES AND LIQUIDITY 41
     Capital Resources 41
     Funding and Liquidity 47
     Off-Balance-Sheet Arrangements 53
CONTRACTUAL OBLIGATIONS 54
RISK FACTORS 55
MANAGING GLOBAL RISK 66
     Risk Management—Overview 66
     Risk Aggregation and Stress Testing 67
     Risk Capital 67
     Credit Risk 67
          Loans Outstanding 68
          Details of Credit Loss Experience 69
          Non-Accrual Loans and Assets, and
               Renegotiated Loans 71
          North America Consumer Mortgage Lending 75
          North America Cards 82
     Consumer Loan Details 84
          Consumer Loan Modification Programs 86
          Consumer Mortgage—Representations and
               Warranties 88
          Securities and Banking-Sponsored Legacy Private-Label
               Residential Mortgage Securitizations—
               Representations and Warranties   91
     Corporate Loan Details 92
     Exposure to Commercial Real Estate   94
     Market Risk 95
     Operational Risk 106
     Country and Cross-Border Risk 107
FAIR VALUE ADJUSTMENTS FOR
     DERIVATIVES AND STRUCTURED DEBT 113
CREDIT DERIVATIVES 114
SIGNIFICANT ACCOUNTING POLICIES AND
     SIGNIFICANT ESTIMATES 116
DISCLOSURE CONTROLS AND PROCEDURES 122
MANAGEMENT’S ANNUAL REPORT ON
     INTERNAL CONTROL OVER FINANCIAL
     REPORTING 123
FORWARD-LOOKING STATEMENTS 124
REPORT OF INDEPENDENT REGISTERED
     PUBLIC ACCOUNTING FIRM—INTERNAL
     CONTROL OVER FINANCIAL REPORTING 126
REPORT OF INDEPENDENT REGISTERED
     PUBLIC ACCOUNTING FIRM—
     CONSOLIDATED FINANCIAL STATEMENTS 127
FINANCIAL STATEMENTS AND NOTES TABLE
     OF CONTENTS 129
CONSOLIDATED FINANCIAL STATEMENTS 131
NOTES TO CONSOLIDATED FINANCIAL
     STATEMENTS 137
FINANCIAL DATA SUPPLEMENT (Unaudited) 286
     Ratios 286
     Average Deposit Liabilities in Offices Outside the U.S. 286
     Maturity Profile of Time Deposits ($100,000 or more)
          in U.S. Offices 286
SUPERVISION AND REGULATION 287
     Customers 288
     Competition 288
     Properties 289
     Legal Proceedings 289
     Unregistered Sales of Equity;
          Purchases of Equity Securities; Dividends 290
     Performance Graph 291
CORPORATE INFORMATION 292
     Citigroup Executive Officers 292
CITIGROUP BOARD OF DIRECTORS     295


3



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. 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, consisting of Brokerage and Asset Management, Local Consumer Lending and Special Asset Pool. 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 4 to the Consolidated Financial Statements.
     
Throughout this report, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.
     
Additional information about Citigroup is available on Citi’s Web site 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 the Citi’s Web site by clicking on the “Investors” page and selecting “All SEC Filings.” The SEC’s Web site also contains current reports, information statements, and other information regarding Citi at www.sec.gov.
     
Within this Form 10-K, please refer to the tables of contents on pages 3 and 129 for page references to Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements, respectively.
     
At December 31, 2011, Citi had approximately 266,000 full-time employees compared to approximately 260,000 full-time employees at December 31, 2010.


     Please see “Risk Factors” below for a discussion of
certain risks and uncertainties that could materially impact
Citigroup’s financial condition and results of operations.


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

    


4



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


* Effective in the first quarter of 2012, Citi will transfer the substantial majority of the retail partner cards business (approximately $45 billion of assets, including approximately $41 billion of loans) from Citi Holdings – Local Consumer Lending to Citicorp—North America RCB.

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

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

5



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

EXECUTIVE SUMMARY

Market and Economic Environment
During 2011, Citigroup remained focused on executing its strategy of growth through increasing the returns on and investments in its core businesses of Citicorp—Global Consumer Banking and Institutional Clients Group—while continuing to reduce the assets and businesses within Citi Holdings in an economically rational manner. While Citi continued to make progress in these areas during the year, its 2011 operating results were impacted by the ongoing challenging operating environment, particularly in the second half of the year, as macroeconomic concerns, including in the U.S. and the Eurozone, weighed heavily on investor and corporate confidence. Market activity was down globally, with a particular impact on capital markets-related activities in the fourth quarter of 2011. This affected Citigroup’s results of operations in many businesses, including not only Securities and Banking, but also the Securities and Fund Services business in Transaction Services and investment sales in Global Consumer Banking. Citi believes that the European sovereign debt crisis and its potential impact on the global markets and growth will likely continue to create macro uncertainty and remain an issue until the market, investors and Citi’s clients and customers believe that a comprehensive resolution to the crisis is structured, and achievable. Such uncertainty could have a continued negative impact on investor activity, and thus on Citi’s activity levels and results of operations, in 2012.
     Compounding this continuing macroeconomic uncertainty is the ongoing uncertainty facing Citigroup and its businesses as a result of the numerous regulatory initiatives underway, both in the U.S. and internationally. As of December 31, 2011, regulatory changes in significant areas, such as Citi’s future capital requirements and prudential standards, the proposed implementation of the “Volcker Rule” and the proposed regulation of the derivatives markets, were incomplete and significant rulemaking and interpretation remained. See “Risk Factors—Regulatory Risks” below. The continued uncertainty, including the potential costs, associated with the actual implementation of these changes will continue to require significant attention by Citi’s management. In addition, it is also not clear what the cumulative impact of regulatory reform will be.

2011 Summary Results

Citigroup
Citigroup reported net income of $11.1 billion and diluted EPS of $3.63 per share in 2011, compared to $10.6 billion and $3.54 per share, respectively, in 2010. In 2011, results included a net positive impact of $1.8 billion from credit valuation adjustments (CVA) on derivatives (excluding monolines), net of hedges, and debt valuation adjustments (DVA) on Citigroup’s fair value option debt, compared to a net negative impact of $(469) million in 2010. In addition, Citi has adjusted its 2011 results of operations that were previously announced on January 17, 2012 for an additional $209 million (after tax) charge. This charge relates to the agreement in principle with the United States and state attorneys general announced on February 9, 2012 regarding the settlement of a number of investigations into residential loan servicing and origination litigation, as well as the resolution of related mortgage litigation (see Notes 29, 30 and 32 to the Consolidated Financial Statements). Excluding CVA/DVA, Citi’s net income declined $952 million, or 9%, to $9.9 billion in 2011, reflecting lower revenues and higher operating expenses as compared to 2010, partially offset by a significant decline in credit costs.
     Citi’s revenues of $78.4 billion were down $8.2 billion, or 10%, compared to 2010. Excluding CVA/DVA, revenues of $76.5 billion were down $10.5 billion, or 12%, as lower revenues in Citi Holdings and Securities and Banking more than offset growth in Global Consumer Banking and Transaction Services. Net interest revenues decreased by $5.7 billion, or 11%, to $48.4 billion in 2011 as compared to 2010, primarily due to continued declining loan balances and lower interest-earning assets in Citi Holdings. Non-interest revenues, excluding CVA/DVA, declined by $4.8 billion, or 15%, to $28.1 billion in 2011 as compared to 2010, driven by lower revenues in Citi Holdings and Securities and Banking.
     Because of Citi’s extensive global operations, foreign exchange translation also impacts Citi’s results of operations as Citi translates revenues, expenses, loan balances and other metrics from foreign currencies to U.S. dollars in preparing its financial statements. During 2011, the U.S. dollar generally depreciated versus local currencies in which Citi operates. As a result, the impact of foreign exchange translation (as used throughout this Form 10-K, FX translation) accounted for an approximately 1% growth in Citi’s revenues and 2% growth in expenses, while contributing less than 1% to Citi’s pretax net income for the year.



6




Expenses
Citigroup expenses were $50.9 billion in 2011, up $3.6 billion, or 8%, compared to 2010. Over two-thirds of this increase resulted from higher legal and related costs (approximately $1.5 billion) and higher repositioning charges (approximately $200 million, including severance) as compared to 2010, as well as the impact of FX translation (approximately $800 million). Excluding these items, expenses were up $1.0 billion, or 2%, compared to the prior year.
     Investment spending was $3.9 billion higher in 2011, of which roughly half was funded with efficiency savings, primarily in operations and technology, labor reengineering and business support functions (e.g., call centers and collections) of $1.9 billion. The $3.9 billion increase in investment spending in 2011 included higher investments in Global Consumer Banking ($1.6 billion, including incremental cards marketing campaigns and new branch openings), Securities and Banking (approximately $800 million, including new hires and technology investments) and Transaction Services (approximately $600 million, including new mandates and platform enhancements), as well as additional firm-wide initiatives and investments to comply with regulatory requirements. All other expense increases, including higher volume-related costs in Citicorp, were more than offset by a decline in Citi Holdings expenses. While Citi will continue some level of incremental investment spending in its businesses going forward, Citi currently believes these increases in investments will be self-funded through ongoing reengineering and efficiency savings. Accordingly, Citi believes that the increased level of investment spending incurred during the latter part of 2010 and 2011 was largely completed by year end 2011.
     
Citicorp expenses were $39.6 billion in 2011, up $3.5 billion, or 10%, compared to 2010. Over one-third of this increase resulted from higher legal and related costs and higher repositioning charges (including severance) as compared to 2010, as well as the impact of FX translation. The remainder of the increase was primarily driven by investment spending (as described above), partially offset by ongoing productivity savings and other expense reductions.
     
Citi Holdings expenses were $8.8 billion in 2011, down $824 million, or 9%, principally due to the continued decline in assets, partially offset by higher legal and related costs.

Credit Costs
Credit trends for Citigroup continued to improve in 2011, particularly for Citi’s North America Citi-branded and retail partner cards businesses, as well as its North America mortgage portfolios in Citi Holdings, although the pace of improvement in these businesses slowed. Citi’s total provisions for credit losses and for benefits and claims of $12.8 billion declined $13.2 billion, or 51%, from 2010. Net credit losses of $20.0 billion in 2011 were down $10.8 billion, or 35%, reflecting improvement in both Consumer and Corporate credit trends. Consumer net credit losses declined $10.0 billion, or 35%, to $18.4 billion, driven by continued improvement in credit in North America Citi-branded cards and retail partner cards and North America real estate lending in Citi Holdings. Corporate net credit losses decreased $810 million, or 33%, to $1.6 billion, as credit quality continued to improve in the Corporate portfolio.
     The net release of allowance for loan losses and unfunded lending commitments was $8.2 billion in 2011, compared to a net release of $5.8 billion in 2010. Of the $8.2 billion net reserve release in 2011, $5.9 billion related to Consumer and was mainly driven by North America Citi-branded cards and retail partner cards. The $2.3 billion net Corporate reserve release reflected continued improvement in Corporate credit trends, partially offset by loan growth.
     
More than half of the net credit reserve release in 2011, or $4.8 billion, was attributable to Citi Holdings. The $3.5 billion net credit release in Citicorp increased from $2.2 billion in the prior year, as a higher net release in Citi-branded cards in North America was partially offset by lower net releases in international Regional Consumer Banking and the Corporate portfolio, each driven by loan growth.



7



Capital and Loan Loss Reserve Positions
Citigroup’s capital and loan loss reserve positions remained strong at year end 2011. Citigroup’s Tier 1 Capital ratio was 13.6% and the Tier 1 Common ratio was 11.8%.
     Citigroup’s total allowance for loan losses was $30.1 billion at year end 2011, or 4.7% of total loans, down from $40.7 billion, or 6.3% of total loans, at the end of the prior year. 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 $27.2 billion, or 6.45%, of total Consumer loans at year end 2011, compared to $35.4 billion, or 7.80%, of total Consumer loans at year end 2010. See details of “Credit Loss Experience—Allowance for Loan Losses” below for additional information on Citi’s loan loss coverage ratios as of December 31, 2011.
     Citigroup’s non-accrual loans of $11.2 billion at year end 2011 declined 42% from the prior year, and the allowance for loan losses represented 268% of non-accrual loans.

Citicorp
Citicorp net income of $14.4 billion in 2011 decreased by $269 million, or 2%, from the prior year. Excluding CVA/DVA, Citicorp’s net income declined $1.6 billion, or 10.6%, to $13.4 billion in 2011, reflecting lower revenues and higher operating expenses, partially offset by the significantly lower credit costs. Asia and Latin America contributed roughly half of Citicorp’s net income for the year.
     
Citicorp revenues were $64.6 billion, down $989 million, or 2%, from 2010. Excluding CVA/DVA, revenues of $62.8 billion were down $3.1 billion, or 5%, as compared to 2010. Net interest revenues decreased by $450 million, or 1%, to $38.1 billion, as lower revenues in North America Regional Consumer Banking and Securities and Banking more than offset growth in Latin America and Asia Regional Consumer Banking and Transaction Services. Non-interest revenues, excluding CVA/DVA, declined by $2.7 billion, or 10%, to $24.7 billion in 2011 as compared to 2010, driven by lower revenues in Securities and Banking.
     
Global Consumer Banking revenues of $32.6 billion were up $211 million year-over-year, as continued growth in Asia and Latin America Regional Consumer Banking was partially offset by lower revenues in North America Regional Consumer Banking. The 2011 results in Global Consumer Banking included continued momentum in Citi’s international regions, as well as early signs of growth in its North America business:

  • International Regional Consumer Banking revenues of $19.0 billion were up 8% year-over-year (5% excluding the impact of FX translation).
  • International average loans were up 15% and average deposits grew 11% (11% and 8% excluding the impact of FX translation, respectively).
  • International card purchase sales grew 19% (13% excluding the impact of FX translation).
  • Asia achieved positive operating leverage (with year-over-year revenue growth in excess of expense growth) in the third and fourth quarters of 2011, and Latin America achieved positive operating leverage in the fourth quarter.
  • North America Regional Consumer Banking grew revenues, card accounts and card loans sequentially in the second, third and fourth quarters of 2011.

     Securities and Banking revenues of $21.4 billion decreased 7% year-over-year. Excluding CVA/DVA (for details on Securities and Banking CVA/DVA amounts, see “Institutional Clients Group—Securities and Banking” below), revenues were $19.7 billion, down 16% from the prior year, due primarily to the continued challenging macroeconomic environment, which resulted in lower revenues across fixed income and equity markets as well as investment banking.
     Fixed income markets revenues, which constituted over 50% of Securities and Banking revenues in 2011, of $10.9 billion, excluding CVA/DVA, decreased 24% in 2011 as compared to 2010, driven primarily by a decline in credit-related and securitized products and, to a lesser extent, a decline in rates and currencies. Equity markets revenues of $2.4 billion, excluding CVA/DVA, were down 35% year-over-year, mainly driven by weak trading performance in equity derivatives as well as losses in equity proprietary trading resulting from the wind down of this business, which was complete as of December 31, 2011. Investment banking revenues of $3.3 billion were down 14% in 2011 as compared to 2010, driven by lower market activity levels across all products. Lending revenues of $1.8 billion were up $840 million, from $962 million in 2010, primarily due to net hedging gains of $73 million in 2011, as compared to net hedging losses of $711 million in 2010, driven by spread tightening in Citi’s lending portfolio.
     
Transaction Services revenues were $10.6 billion in 2011, up 5% from the prior year, driven by growth in Treasury and Trade Solutions as well as Securities and Fund Services. Revenues grew in 2011 in all international regions as strong growth in business volumes was partially offset by continued spread compression. Average deposits and other customer liabilities grew 9% in 2011, while assets under custody remained relatively flat year over year.
     
Citicorp end of period loans increased 14% in 2011 to $465.4 billion, with 7% growth in Consumer loans and 24% growth in Corporate loans.



8



Citi Holdings
Citi Holdings’ net loss of $(2.6) billion in 2011 improved by $1.6 billion as compared to the net loss in 2010. The improvement in 2011 reflected a significant decline in credit costs and lower operating expenses, given the continued decline in assets, partially offset by lower revenues.
     
While Citi Holdings’ impact on Citi has been declining, it will likely continue to present a headwind for Citi’s overall performance due to, among other factors, the lower percentage of interest-earning assets remaining in Citi Holdings, the slower pace of asset reductions and the transfer of the substantial majority of retail partner cards out of Citi Holdings into Citicorp—North America Regional Consumer Banking in the first quarter of 2012. During the first quarter of 2012, Citi will republish its historical segment reporting for Citicorp and Citi Holdings to reflect this transfer in prior periods. The adjusted net loss in Citi Holdings for these historical periods will be higher than previously reported, as the retail partner cards business in Local Consumer Lending was the primary source of profitability in Citi Holdings.
     Citi Holdings’ revenues declined 33% to $12.9 billion from the prior year. Net interest revenues decreased by $4.5 billion, or 30%, to $10.3 billion, primarily due to the decline in assets, including lower interest-earning assets in the
Special Asset Pool. Non-interest revenues declined by $1.9 billion, or 42%, to $2.6 billion in 2011, driven by lower gains on asset sales and other revenue marks as compared to 2010, as well as divestitures.

     Citi Holdings’ assets declined $90 billion, or 25%, to $269 billion at the end of 2011, although Citi believes the pace of asset wind-down in Citi Holdings will decrease going forward. The decline during 2011 reflected nearly $49 billion in asset sales and business dispositions, $35 billion in net run-off and amortization and approximately $6 billion in net cost of credit and net asset marks. As of December 31, 2011, Local Consumer Lending continued to represent the largest segment within Citi Holdings, with $201 billion of assets. Over half of Local Consumer Lending assets, or approximately $109 billion, were related to North America real estate lending. As of December 31, 2011, there were approximately $10 billion of loan loss reserves allocated to North America real estate lending in Citi Holdings, representing roughly 31 months of coincident net credit loss coverage.
     
At the end of 2011, Citi Holdings assets comprised approximately 14% of total Citigroup GAAP assets and 25% of its risk-weighted assets. The first quarter of 2012 transfer of the substantial majority of the retail partner cards business (approximately $45 billion of assets, including approximately $41 billion of loans) will result in Citi Holdings comprising approximately 12% of total Citigroup GAAP assets and 21% of risk-weighted assets.



9



RESULTS OF OPERATIONS

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1 Citigroup Inc. and Consolidated Subsidiaries
 
In millions of dollars, except per-share amounts, ratios and direct staff 2011  (1) 2010  (2)(3)   2009  (3) 2008  (3) 2007  (3)
Net interest revenue $ 48,447 $ 54,186 $ 48,496 $ 53,366 $ 45,300
Non-interest revenue 29,906 32,415   31,789 (1,767 ) 32,000
Revenues, net of interest expense $ 78,353       $ 86,601   $ 80,285       $ 51,599       $ 77,300
Operating expenses 50,933 47,375 47,822 69,240 58,737
Provisions for credit losses and for benefits and claims 12,796 26,042 40,262 34,714 17,917
Income (loss) from continuing operations before income taxes $ 14,624 $ 13,184 $ (7,799 ) $ (52,355 ) $ 646
Income taxes (benefits) 3,521 2,233 (6,733 ) (20,326 ) (2,546 )
Income (loss) from continuing operations $ 11,103 $ 10,951 $ (1,066 ) $ (32,029 ) $ 3,192
Income (loss) from discontinued operations, net of taxes (4) 112   (68 ) (445 ) 4,002 708
Net income (loss) before attribution of noncontrolling interests $ 11,215 $ 10,883        $ (1,511 ) $ (28,027 ) $ 3,900
Net income (loss) attributable to noncontrolling interests 148 281 95   (343 ) 283
Citigroup’s net income (loss) $ 11,067 $ 10,602 $ (1,606 ) $ (27,684 ) $ 3,617
Less:
       Preferred dividends—Basic $ 26 $ 9 $ 2,988 $ 1,695 $ 36
       Impact of the conversion price reset related to the $12.5 billion  
              convertible preferred stock private issuance—Basic 1,285
       Preferred stock Series H discount accretion—Basic 123   37
       Impact of the public and private preferred stock exchange offer 3,242
       Dividends and undistributed earnings allocated to employee restricted
              and deferred shares that contain nonforfeitable rights to dividends,
              applicable to Basic EPS 186 90 2 221 261
Income (loss) allocated to unrestricted common shareholders for Basic EPS $ 10,855 $ 10,503 $ (9,246 ) $ (29,637 ) $ 3,320
       Less: Convertible preferred stock dividends (5) (540 ) (877 )
       Add: Interest expense, net of tax, 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 17 2
Income (loss) allocated to unrestricted common shareholders for diluted EPS (5) $ 10,872 $ 10,505 $ (8,706 ) $ (28,760 ) $ 3,320
Earnings per share (6)
Basic
Income (loss) from continuing operations 3.69 3.66 (7.61 ) (63.89 ) 5.32  
Net income (loss) 3.73 3.65 (7.99 ) (56.29 ) 6.77
Diluted (5)
Income (loss) from continuing operations $ 3.59 $ 3.55 $ (7.61 ) $ (63.89 ) $ 5.30
Net income (loss) 3.63 3.54 (7.99 ) (56.29 ) 6.74
Dividends declared per common share 0.03 0.00 0.10 11.20 21.60

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

10



FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA—PAGE 2 Citigroup Inc. and Consolidated Subsidiaries
         
In millions of dollars, except per-share amounts, ratios and direct staff 2011  (1) 2010  (2) 2009  (3) 2008  (3) 2007  (3)
At December 31                                   
Total assets $ 1,873,878 $ 1,913,902 $ 1,856,646 $ 1,938,470 $ 2,187,480
Total deposits 865,936 844,968 835,903 774,185 826,230
Long-term debt 323,505 381,183 364,019 359,593 427,112
Mandatorily redeemable securities of subsidiary trusts (included in long-term debt) 16,057 18,131 19,345 24,060 23,756
Common stockholders’ equity 177,494 163,156 152,388 70,966 113,447
Total Citigroup stockholders’ equity 177,806 163,468 152,700 141,630 113,447
Direct staff (in thousands) 266 260 265 323 375
Ratios
Return on average common stockholders’ equity (7) 6.3 % 6.8 % (9.4 )% (28.8 )% 2.9 %
Return on average total stockholders’ equity (7) 6.3 6.8 (1.1 ) (20.9 ) 3.0
Tier 1 Common (8) 11.80 % 10.75 % 9.60 % 2.30 % 5.02 %
Tier 1 Capital 13.55 12.91 11.67 11.92   7.12
Total Capital 16.99 16.59 15.25 15.70 10.70
Leverage (9) 7.19 6.60   6.87   6.08 4.03
Common stockholders’ equity to assets 9.47 % 8.52 % 8.21 % 3.66 % 5.19 %
Total Citigroup stockholders’ equity to assets 9.49   8.54 8.22 7.31 5.19
Dividend payout ratio (10) 0.8   NM NM   NM   320.5
Book value per common share (6) $ 60.70 $ 56.15   $ 53.50 $ 130.21 $ 227.12
Ratio of earnings to fixed charges and preferred stock dividends   1.59 x 1.51 x NM NM 1.01 x

(1)      As noted in the “Executive Summary” above, Citi has adjusted its 2011 results of operations that were previously announced on January 17, 2012 for an additional $209 million (after tax) charge. This charge relates to the agreement in principle with the United States and state attorneys general announced on February 9, 2012 regarding the settlement of a number of investigations into residential loan servicing and origination litigation, as well as the resolution of related mortgage litigation. The impact of these adjustments was a $275 million (pretax) increase in Other operating expenses, a $209 million (after-tax) reduction in Net income and a $0.06 (after-tax) reduction in Diluted earnings per share, for the full year of 2011. See Notes 29, 30 and 32 to the Consolidated Financial Statements.
(2) On January 1, 2010, Citigroup adopted SFAS 166/167. Prior periods have not been restated as the standards were adopted prospectively. See Note 1 to the Consolidated Financial Statements.
(3) On January 1, 2009, Citigroup adopted SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (now ASC 810-10-45-15, Consolidation: Noncontrolling Interest in a Subsidiary), and FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (now ASC 260-10-45-59A, Earnings Per Share: Participating Securities and the Two-Class Method). All prior periods have been restated to conform to the current period’s presentation.
(4) Discontinued operations for 2007 to 2009 reflect the sale of Nikko Cordial Securities to Sumitomo Mitsui Banking Corporation, the sale of Citigroup’s German retail banking operations to Crédit Mutuel, and the sale of CitiCapital’s equipment finance unit to General Electric. Discontinued operations for 2007 to 2010 also include the operations and associated gain on sale of Citigroup’s Travelers Life & Annuity, substantially all of Citigroup’s international insurance business, and Citigroup’s Argentine pension business sold to MetLife Inc. Discontinued operations for the second half of 2010 also reflect the sale of The Student Loan Corporation and, for 2011, primarily reflect the sale of the Egg Banking PLC credit card business. See Note 3 to the Consolidated Financial Statements.
(5) The diluted EPS calculation for 2009 and 2008 utilizes basic shares and income allocated to unrestricted common stockholders (Basic) due to the negative income allocated to unrestricted common stockholders. Using diluted shares and income allocated to unrestricted common stockholders (Diluted) would result in anti-dilution.
(6) All per share amounts and Citigroup shares outstanding for all periods reflect Citigroup’s 1-for-10 reverse stock split, which was effective May 6, 2011.
(7) 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.
(8) As defined by the banking regulators, the Tier 1 Common ratio represents Tier 1 Capital less qualifying perpetual preferred stock, qualifying noncontrolling interests in subsidiaries and qualifying mandatorily redeemable securities of subsidiary trusts divided by risk-weighted assets.
(9) The Leverage ratio represents Tier 1 Capital divided by adjusted average total assets.
(10) Dividends declared per common share as a percentage of net income per diluted share.
NM   Not meaningful

11



SEGMENT AND BUSINESSINCOME (LOSS) AND REVENUES

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

CITIGROUP INCOME (LOSS)

% Change % Change
In millions of dollars 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Income (loss) from continuing operations                                   
CITICORP
Global Consumer Banking
       North America $ 2,589 $ 650 $ 789 NM (18 )%
       EMEA 79 91 (220 ) (13 )% NM
       Latin America 1,601 1,789 429 (11 ) NM
       Asia 1,927 2,131 1,391 (10 ) 53
              Total $ 6,196 $ 4,661 $ 2,389 33 % 95 %
Securities and Banking
       North America $ 1,011 $ 2,465 $ 2,369 (59 )% 4 %
       EMEA 2,008 1,805 3,414 11 (47 )
       Latin America 978 1,091 1,558 (10 ) (30 )
       Asia 898 1,138 1,854 (21 ) (39 )
              Total $ 4,895 $ 6,499 $ 9,195 (25 )% (29 )%
Transaction Services
       North America $ 447 $ 529 $ 609 (16 )% (13 )%
       EMEA 1,142 1,225 1,299 (7 ) (6 )
       Latin America 645 664 616 (3 ) 8
       Asia 1,173 1,255 1,254 (7 )
              Total $ 3,407 $ 3,673 $ 3,778 (7 )% (3 )%
       Institutional Clients Group $ 8,302 $ 10,172 $ 12,973 (18 )% (22 )%
Total Citicorp $ 14,498 $ 14,833 $ 15,362 (2 )% (3 )%
CITI HOLDINGS  
Brokerage and Asset Management $ (286 ) $ (226 ) $ 6,850 (27 )% NM
Local Consumer Lending (2,834 ) (4,988 ) (10,484 ) 43 52 %
Special Asset Pool 596 1,158 (5,425 ) (49 ) NM
Total Citi Holdings $ (2,524 ) $ (4,056 ) $ (9,059 ) 38 % 55 %
Corporate/Other $ (871 ) $ 174   $ (7,369 ) NM NM
Income (loss) from continuing operations $ 11,103 $ 10,951 $ (1,066 ) 1 % NM
Discontinued operations $ 112   $ (68 ) $ (445 )
Net income attributable to noncontrolling interests 148   281 95 (47 )% NM
Citigroup’s net income (loss) $ 11,067 $ 10,602 $ (1,606 ) 4 % NM

NM Not meaningful

12



CITIGROUP REVENUES

% Change % Change
In millions of dollars 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
CITICORP                                   
Global Consumer Banking
       North America $ 13,614 $ 14,790 $ 8,575 (8 )% 72 %
       EMEA 1,479 1,503 1,550 (2 ) (3 )
       Latin America 9,483 8,685 7,883 9 10  
       Asia 8,009 7,396 6,746 8 10
              Total $ 32,585 $ 32,374 $ 24,754 1 % 31 %
Securities and Banking
       North America $ 7,558 $ 9,393 $ 8,836 (20 )% 6 %
       EMEA 7,221 6,849 10,056 5 (32 )
       Latin America 2,364 2,547 3,435 (7 ) (26 )
       Asia 4,274 4,326 4,813 (1 ) (10 )
              Total $ 21,417 $ 23,115 $ 27,140 (7 )% (15 )%
Transaction Services
       North America $ 2,442 $ 2,485 $ 2,525 (2 )% (2 )%
       EMEA 3,486 3,356 3,389 4 (1 )
       Latin America 1,705 1,516 1,391 12 9
       Asia 2,936 2,714 2,513 8 8
              Total $ 10,569 $ 10,071 $ 9,818 5 % 3 %
       Institutional Clients Group $ 31,986 $ 33,186 $ 36,958 (4 )% (10 )%
              Total Citicorp $ 64,571 $ 65,560 $ 61,712 (2 )% 6 %
CITI HOLDINGS  
Brokerage and Asset Management $ 282 $ 609 $ 14,623 (54 )% (96 )%
Local Consumer Lending 12,067 15,826 17,765   (24 ) (11 )
Special Asset Pool   547 2,852 (3,260 ) (81 ) NM
Total Citi Holdings $ 12,896 $ 19,287 $ 29,128 (33 )% (34 )%
Corporate/Other $ 886 $ 1,754 $ (10,555 ) (49 )% NM
Total net revenues $ 78,353 $ 86,601 $ 80,285 (10 )% 8 %

NM Not meaningful

13



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. 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 large multinational clients and for meeting the needs of retail, private banking, commercial, public sector and institutional clients around the world. Citigroup’s global footprint provides coverage of the world’s emerging economies, which Citi continues to believe represent a strong area of growth. At December 31, 2011, Citicorp had approximately $1.3 trillion of assets and $797 billion of deposits, representing approximately 70% of Citi’s total assets and approximately 92% of its deposits.
     At December 31, 2011, Citicorp consisted of the following businesses: Global Consumer Banking (which included retail banking and Citi-branded cards in four regions—North America, EMEA, Latin America and Asia) and Institutional Clients Group (which included Securities and Banking and Transaction Services).

% Change % Change
In millions of dollars 2011 2010 2009 2011 vs. 2010        2010 vs. 2009
       Net interest revenue        $ 38,135        $ 38,585        $ 34,197        (1 )% 13 %
       Non-interest revenue 26,436 26,975 27,515 (2 ) (2 )
Total revenues, net of interest expense $ 64,571 $ 65,560 $ 61,712 (2 )% 6 %
Provisions for credit losses and for benefits and claims
Net credit losses $ 8,307 $ 11,789 $ 6,155 (30 )% 92 %
Credit reserve build (release) (3,544 ) (2,167 ) 2,715 (64 ) NM
Provision for loan losses $ 4,763 $ 9,622 $ 8,870 (50 )% 8 %
Provision for benefits and claims 152 151 164 1 (8 )
Provision for unfunded lending commitments 92 (32 ) 138 NM NM
Total provisions for credit losses and for benefits and claims $ 5,007 $ 9,741 $ 9,172 (49 )% 6 %
Total operating expenses $ 39,620 $ 36,144 $ 32,698 10 % 11 %
Income from continuing operations before taxes $ 19,944 $ 19,675   $ 19,842   1 % (1 )%
Provisions for income taxes   5,446 4,842   4,480 12 8 %
Income from continuing operations $ 14,498   $ 14,833 $ 15,362 (2 )% (3 )%
Net income attributable to noncontrolling interests 56 122 68 (54 ) 79
Citicorp’s net income $ 14,442 $ 14,711 $ 15,294 (2 )% (4 )%
Balance sheet data (in billions of dollars)
Total EOP assets $ 1,319 $ 1,284 $ 1,138 3 % 13 %
Average assets $ 1,358 $ 1,257 $ 1,088 8 % 16 %
Total EOP deposits 797 760 734 5 4

NM Not meaningful

14



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. As of December 31, 2011, GCB also contained Citigroup’s branded cards and local commercial banking businesses and, effective in the first quarter of 2012, will also include its retail partner cards business. GCB is a globally diversified business with nearly 4,200 branches in 39 countries around the world. At December 31, 2011, GCB had $340 billion of assets and $313 billion of deposits.

% Change % Change
In millions of dollars 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Net interest revenue        $ 23,090        $ 23,184        $ 16,353               42 %
Non-interest revenue 9,495 9,190 8,401 3 % 9
Total revenues, net of interest expense $ 32,585 $ 32,374 $ 24,754 1 % 31 %
Total operating expenses $ 18,933 $ 16,547 $ 15,125 14 % 9 %
       Net credit losses $ 7,688 $ 11,216 $ 5,395 (31 )% NM
       Credit reserve build (release) (2,988 ) (1,541 ) 1,823 (94 ) NM
       Provisions for unfunded lending commitments 3 (3 ) NM
       Provision for benefits and claims 152 151 164 1 (8 )%
Provisions for credit losses and for benefits and claims $ 4,855 $ 9,823 $ 7,382 (51 )% 33 %
Income (loss) from continuing operations before taxes $ 8,797 $ 6,004 $ 2,247 47 % NM
Income taxes (benefits) 2,601 1,343 (142 ) 94 NM
Income (loss) from continuing operations $ 6,196 $ 4,661 $ 2,389 33 % 95 %
Net income (loss) attributable to noncontrolling interests (9 ) 100
Net income (loss) $ 6,196 $ 4,670 $ 2,389 33 % 95 %
Average assets (in billions of dollars) $ 335 $ 309 $ 242 8 % 28 %
Return on assets 1.85 % 1.51 % 0.99 %  
Total EOP assets $ 340 $ 328 $ 255 4 29
Average deposits (in billions of dollars) 311 295   275 5 7
Net credit losses as a percentage of average loans   3.25 % 5.11 % 3.62 %
Revenue by business
       Retail banking $ 16,229 $ 15,767 $ 14,782 3 % 7 %
       Citi-branded cards 16,356 16,607 9,972 (2 ) 67
              Total $ 32,585 $ 32,374 $ 24,754   1 % 31 %
Income (loss) from continuing operations by business  
       Retail banking $ 2,529   $ 3,082 $ 2,387 (18 )% 29 %
       Citi-branded cards 3,667 1,579 2 NM   NM
              Total $ 6,196 $ 4,661 $ 2,389 33 % 95 %

NM Not meaningful

15



NORTH AMERICA REGIONAL CONSUMER BANKING
North America Regional Consumer Banking (NA RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses in the U.S. Effective in the first quarter of 2012, NA RCB will also include the substantial majority of Citi’s retail partner cards business, which will add approximately $45 billion of assets, including $41 billion of loans, to NA RCB. NA RCB’s 1,016 retail bank branches and 12.7 million customer accounts, as of December 31, 2011, are largely concentrated in the greater metropolitan areas of New York, Los Angeles, San Francisco, Chicago, Miami, Washington, D.C., Boston, Philadelphia and certain larger cities in Texas. At December 31, 2011, NA RCB had $38.9 billion of retail banking loans and $148.8 billion of deposits. In addition, NA RCB had 22.0 million Citi-branded credit card accounts, with $75.9 billion in outstanding card loan balances.

% Change % Change
In millions of dollars        2011        2010        2009        2011 vs. 2010        2010 vs. 2009
Net interest revenue $ 10,367 $ 11,216 $ 5,206 (8 )% NM
Non-interest revenue 3,247 3,574 3,369 (9 ) 6 %
Total revenues, net of interest expense $ 13,614 $ 14,790 $ 8,575 (8 )% 72 %
Total operating expenses $ 7,329 $ 6,163 $ 5,890 19 % 5 %
       Net credit losses $ 4,949 $ 8,019 $ 1,152 (38 )% NM
       Credit reserve build (release) (2,740 ) (312 ) 527 NM NM
       Provisions for benefits and claims 22 24 50 (8 ) (52 )%
Provisions for loan losses and for benefits and claims $ 2,231 $ 7,731 $ 1,729 (71 )% NM
Income from continuing operations before taxes $ 4,054 $ 896 956 NM (6 )%
Income taxes 1,465 246 167 NM 47
Income from continuing operations $ 2,589 $ 650 $ 789 NM (18 )%
Net income attributable to noncontrolling interests
Net income $ 2,589 $ 650 $ 789 NM (18 )%
Average assets (in billions of dollars) $ 123 $ 119 $ 73 3 % 63 %
Average deposits (in billions of dollars) 145 145 141 3
Net credit losses as a percentage of average loans 4.60 % 7.48 % 2.43 %
Revenue by business
       Retail banking $ 5,111 $ 5,325 $ 5,236 (4 )% 2 %
       Citi-branded cards 8,503 9,465 3,339 (10 ) NM  
              Total $ 13,614 $ 14,790 $ 8,575 (8 )% 72 %
Income (loss) from continuing operations by business
       Retail banking $ 488 $ 762 $ 751 (36 )% 1 %
       Citi-branded cards 2,101 (112 ) 38 NM NM
              Total $ 2,589 $ 650 $ 789 NM (18 )%
Total GAAP revenues $ 13,614 $ 14,790 $ 8,575 (8 )% 72 %
       Net impact of credit card securitizations activity (1)   6,672  
Total managed revenues $ 13,614 $ 14,790 $ 15,247   (3 )%
Total GAAP net credit losses $ 4,949 $ 8,019   $ 1,152   (38 )% NM
       Impact of credit card securitizations activity (1)   6,931
Total managed net credit losses $ 4,949 $ 8,019 $ 8,083 (1 )%

(1)      See Note 1 to the Consolidated Financial Statements for a discussion of the impact of SFAS 166/167.
NM   Not meaningful

2011 vs. 2010
Net income increased $1.9 billion as compared to the prior year, driven by higher loan loss reserve releases and an improvement in net credit losses, partly offset by lower revenues and higher expenses. Citi does not expect the same level of loan loss reserve releases in NA RCB in 2012 as it believes credit costs in the business have generally stabilized.

     Revenues decreased 8% mainly due to lower net interest margin and loan balances in the Citi-branded cards business as well as lower mortgage-related revenues, primarily relating to lower refinancing activity and lower margins as compared to the prior year.



16



     Net interest revenue decreased 8%, driven primarily by lower cards net interest margin which was negatively impacted by the look-back provision of The Credit Card Accountability Responsibility and Disclosure Act (CARD Act). As previously disclosed, the look-back provision of the CARD Act generally requires a review to be done once every six months for card accounts where the annual percentage rate (APR) has been increased since January 1, 2009 to assess whether changes in credit risk, market conditions or other factors merit a future decline in the APR. In addition, net interest margin for cards was negatively impacted by higher promotional balances and lower total average loans. As a result, cards net interest revenue as a percentage of average loans decreased to 9.48% from 10.28% in the prior year. Citi expects margin growth to remain under pressure into 2012 given the continued investment spending in the business during 2012, which largely began in the second half of 2011.
     Non-interest revenue decreased 9%, primarily due to lower gains from the sale of mortgage loans as Citi held more loans on-balance sheet. In addition, the decline in non-interest revenue reflected lower banking fee income.
     Expenses increased 19%, primarily driven by the higher investment spending in the business during the second half of 2011, particularly in cards marketing and technology, and increases in litigation accruals related to the interchange litigation (see Note 29 to the Consolidated Financial Statements).
     Provisions decreased $5.5 billion, or 71%, primarily due to a loan loss reserve release of $2.7 billion in 2011, compared to a loan loss reserve release of $0.3 billion in 2010, and lower net credit losses in the Citi-branded cards portfolio. Cards net credit losses were down $3.0 billion, or 39%, from 2010, and the net credit loss ratio decreased 366 basis points to 6.36% for 2011. The decline in credit costs was driven by improving credit conditions as well as continued stricter underwriting criteria, which lowered the cards risk profile. As referenced above, Citi believes the improvements in, and Citi’s resulting benefit from, declining credit costs in NA RCB will likely slow into 2012.

2010 vs. 2009
     Net income declined by $139 million, or 18%, as compared to the prior year, driven by higher credit costs due to Citi’s adoption of SFAS 166/167, partially offset by higher revenues.
     Revenues increased 72% from the prior year, primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167 effective January 1, 2010. On a comparable basis, revenues declined 3% from the prior year, mainly due to lower volumes in Citi-branded cards as well as the net impact of the CARD Act on cards revenues. This decrease was partially offset by better mortgage-related revenues driven by higher refinancing activity.
     Net interest revenue was down 6% on a comparable basis driven primarily by lower volumes in cards, with average managed loans down 7% from the prior year, and in retail banking, where average loans declined 11%. The decline in cards was driven by the stricter underwriting criteria referenced above as well as the impact of CARD Act. The increase in deposit volumes, up 3% from the prior year, was offset by lower spreads due to the then-current interest rate environment.
     Non-interest revenue increased 6% on a comparable basis from the prior year mainly driven by better servicing hedge results and higher gains on sale from the sale of mortgage loans.
     Expenses increased 5% from the prior year, driven by the impact of higher litigation accruals, primarily in the first quarter of 2010, and higher marketing costs.
     Provisions increased $6.0 billion, primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167. On a comparable basis, provisions decreased $0.9 billion, or 11%, primarily due to a net loan loss reserve release of $0.3 billion in 2010 compared to a $0.5 billion loan loss reserve build in the prior year coupled with lower net credit losses in the cards portfolio. Also on a comparable basis, the cards net credit loss ratio increased 61 basis points to 10.02%, driven by lower average loans.



17



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, the Middle East and Africa (remaining retail banking and cards activities in Western Europe are included in Citi Holdings). The countries in which EMEA RCB has the largest presence are Poland, Turkey, Russia and the United Arab Emirates. At December 31, 2011, EMEA RCB had 292 retail bank branches with 3.7 million customer accounts, $4.2 billion in retail banking loans and $9.5 billion in deposits. In addition, the business had 2.6 million Citi-branded card accounts with $2.7 billion in outstanding card loan balances.

% Change % Change
In millions of dollars        2011        2010        2009        2011 vs. 2010        2010 vs. 2009
Net interest revenue $ 893 $ 923 $ 974 (3 )% (5 )%
Non-interest revenue 586 580 576 1 1
Total revenues, net of interest expense $ 1,479 $ 1,503 $ 1,550 (2 )% (3 )%
Total operating expenses $ 1,287 $ 1,179 $ 1,120 9 % 5 %
       Net credit losses $ 172 $ 316 $ 472 (46 )% (33 )%
       Provision for unfunded lending commitments 3 (4 ) NM
       Credit reserve build (release) (118 ) (118 ) 310 NM
Provisions for loan losses $ 57 $ 194 $ 782 (71 )% (75 )%
Income (loss) from continuing operations before taxes $ 135 $ 130 $ (352 ) 4 % NM
Income taxes (benefits) 56 39 (132 ) 44 NM  
Income (loss) from continuing operations $ 79 $ 91 $ (220 ) (13 )% NM
Net income (loss) attributable to noncontrolling interests (1 ) 100
Net income (loss) $ 79 $ 92 $ (220 ) (14 )% NM
Average assets (in billions of dollars) $ 10 $ 10 $ 11 (9 )%
Return on assets 0.79 % 0.92 % (2.01 )%
Average deposits (in billions of dollars) $ 10 $ 9 $ 9 11
Net credit losses as a percentage of average loans 2.38 % 4.45 %   5.64 %
Revenue by business
       Retail banking $ 811 $ 822 $ 884 (1 )% (7 )%
       Citi-branded cards 668 681 666 (2 ) 2
              Total $ 1,479   $ 1,503 $ 1,550   (2 )% (3 )%
Income (loss) from continuing operations by business            
       Retail banking $ (56 ) $ (54 ) $ (188 ) (4 )% 71 %
       Citi-branded cards 135 145 (32 ) (7 ) NM
              Total $ 79 $ 91 $ (220 ) (13 )% NM

NM Not meaningful

2011 vs. 2010
Net income declined 14% as compared to the prior year as an improvement in net credit losses was partially offset by lower revenues and higher expenses from increased investment spending. During 2011, the U.S. dollar generally depreciated versus local currencies. As a result, the impact of FX translation accounted for an approximately 1% growth in revenues and expenses, respectively.
     Revenues declined 2% driven by the continued liquidation of higher yielding non-strategic customer portfolios and a lower contribution from Akbank, Citi’s equity investment in Turkey. The revenue decline was partly offset by the impact of FX translation and improved underlying trends in the core lending portfolio, discussed below.
    
Net interest revenue declined 3% due to the continued decline in the higher yielding non-strategic retail banking portfolio and spread compression in the Citi-branded cards portfolio. Interest rate caps on credit cards, particularly in Turkey and Poland, contributed to the lower spreads in the cards portfolio.

     Non-interest revenue increased 1%, reflecting higher investment sales and cards fees, partly offset by the lower contribution from Akbank. Underlying drivers continued to show growth as investment sales grew 28% from the prior year and cards purchase sales grew 14%.
    
Expenses increased 9%, due to the impact of FX translation, investment spending and higher transactional expenses, partly offset by continued savings initiatives. Expenses could remain at elevated levels in 2012 given continued investment spending.
    
Provisions were 71% lower than the prior year driven by a reduction in net credit losses. Net credit losses decreased 46%, reflecting the continued credit quality improvement during the year, stricter underwriting criteria and the move to lower risk products. Loan loss reserve releases were flat. Assuming the underlying core portfolio continues to grow and season in 2012, Citi expects credit costs to rise.



18



2010 vs. 2009
Net income improved by $313 million, driven by the reduction in credit costs, partly offset by lower revenues and higher expenses. During 2010, the U.S. dollar generally appreciated versus local currencies. As a result, the impact of FX translation accounted for an approximately 1% decline in revenues and expenses, respectively.
     Revenues declined 3% driven by FX translation and the continued liquidation of non-strategic customer portfolios. Net interest revenue was 5% lower due to the continued decline in the higher yielding non-strategic retail banking portfolio. In 2010, Citi focused its lending strategy around higher credit quality customers who tend to revolve less, meaning they have lower average balances than customers previously had. While this led to lower credit costs, it also negatively impacted Net interest revenue as customers paid off their loans more quickly. Non-interest revenue increased 1%, reflecting higher investment sales and a higher contribution from Citi’s equity investment in Akbank.
    
Expenses increased 5%, due to account acquisition-focused investment spending and volumes. As the average customer credit quality improved, Citi focused on volume growth to compensate for the lower revenue. The expansion of the sales force in 2010 drove some of the expense increase as compared to 2009.
    
Provisions decreased 75% from the prior year driven by reduction in net credit losses and higher loan loss reserve releases. Net credit losses decreased 33%, reflecting continued credit quality improvement and the move to lower risk products.



19



LATIN AMERICA REGIONAL CONSUMER BANKING

Latin America Regional Consumer Banking (LATAM RCB) provides traditional banking and branded card services to retail customers and small to mid-size businesses, with the largest presence in Mexico and Brazil. LATAM RCB includes branch networks throughout Latin America as well as Banco Nacional de Mexico, or Banamex, Mexico’s second-largest bank, with over 1,700 branches. At December 31, 2011, LATAM RCB overall had 2,221 retail branches, with 29.2 million customer accounts, $24.0 billion in retail banking loans and $44.8 billion in deposits. In addition, the business had 12.9 million Citi-branded card accounts with $13.7 billion in outstanding loan balances.

% Change % Change
In millions of dollars        2011        2010        2009        2011 vs. 2010        2010 vs. 2009
Net interest revenue   $ 6,465 $ 5,968 $ 5,365 8 % 11 %
Non-interest revenue 3,018 2,717 2,518 11 8
Total revenues, net of interest expense $ 9,483 $ 8,685 $ 7,883 9 % 10 %
Total operating expenses $ 5,734 $ 5,159 $ 4,550 11 % 13 %
       Net credit losses $ 1,684 $ 1,868 $ 2,432 (10 )% (23 )%
       Credit reserve build (release) (67 ) (823 ) 463 92 NM
       Provision for benefits and claims 130 127 114 2 11  
Provisions for loan losses and for benefits and claims $ 1,747 $ 1,172 $ 3,009 49 % (61 )%
Income (loss) from continuing operations before taxes $ 2,002 $ 2,354 $ 324 (15 )% NM
Income taxes (benefits) 401 565 (105 ) (29 ) NM
Income (loss) from continuing operations $ 1,601 $ 1,789 $ 429 (11 )% NM
Net (loss) attributable to noncontrolling interests (8 ) 100
Net income (loss) $ 1,601 $ 1,797 $ 429 (11 )% NM
Average assets (in billions of dollars) $ 80 $ 73 $ 66 10 % 11 %
Return on assets 2.00 % 2.45 % 0.65 %
Average deposits (in billions of dollars) $ 46 $ 41 $ 36 12 % 14 %
Net credit losses as a percentage of average loans 4.64 % 6.05 % 8.52 %
Revenue by business
       Retail banking $ 5,482 $ 5,034 $ 4,401 9 % 14 %
       Citi-branded cards 4,001 3,651 3,482 10 5
              Total $ 9,483 $ 8,685 $ 7,883 9 % 10 %
Income (loss) from continuing operations by business            
       Retail banking $ 923 $ 938   $ 657 (2 )% 43 %
       Citi-branded cards 678 851 (228 ) (20 ) NM
              Total $ 1,601 $ 1,789 $ 429 (11 )% NM

NM Not meaningful

2011 vs. 2010
Net income declined 11% as lower loan loss reserve releases more than offset increased operating margin. During 2011, the U.S. dollar generally depreciated versus local currencies. As a result, FX translation contributed approximately 2% to the growth in each of revenues and expenses.
     Revenues increased 9% primarily due to higher volumes as well as the impact of FX translation. Net interest revenue increased 8% driven by the continued growth in lending and deposit volumes, partially offset by continued spread compression. The declining rate environment negatively impacted Net interest revenue as interest revenue declined at a faster pace than interest expense. Spread compression was also driven by the continued move towards customers with a lower risk profile and stricter underwriting criteria, especially in the branded cards portfolio. Non-interest revenue increased 11%, predominantly driven by an increase in banking fee income from credit card purchase sales, which grew 22%.

     Expenses increased 11% due to higher volumes and investment spending, including increased marketing and customer acquisition costs as well as new branches. These increased expenses were partially offset by continued savings initiatives. The increase in the level of investment spending in the business was largely completed at the end of 2011.
    
Provisions increased 49% reflecting lower loan loss reserve releases in 2011 as compared to 2010. Towards the end of 2011, there was a build in the loan loss reserves, primarily driven by increased volumes, particularly in the personal loan portfolio in Mexico. Net credit losses declined 10%, driven primarily by improvements in the Mexico cards portfolio. The cards net credit loss ratio declined from 11.7% in 2010 to 8.8% in 2011, driven in part by the continued move towards customers with a lower risk profile and stricter underwriting criteria. Citi currently expects the Citi-branded cards net credit loss ratio to stabilize in 2012 as new loans continue to season. Credit costs will likely increase in line with portfolio growth.



20



2010 vs. 2009
Net income increased $1.4 billion driven by lower credit costs as Citi released reserves in 2010 as compared to reserve builds in 2009. During 2010, the U.S. dollar generally appreciated versus local currencies. As a result, FX translation contributed approximately 5% to the decline in both revenues and expenses.
     Revenues increased 10%. Net interest revenue increased 11% as higher loan volumes, particularly in the retail bank, offset the effect of spread compression. Spread compression was driven by the lower interest rates and move towards the above referenced lower risk customer base. Non-interest revenue increased 8% due to higher banking fee income from increased purchase sale activity and FX translation.
     
Expenses increased 13% due to FX translation as well as higher volumes and transaction-related expenses as economic conditions improved. The increase in expenses was also due to increased investment spending, including new cards acquisitions and new branches.
     
Provisions decreased 61% primarily reflecting loan loss reserve releases of $823 million compared to a build of $463 million in the prior year as well as a $564 million improvement in net credit losses. The increase in loan loss reserve releases and decrease in net credit losses primarily resulted from improved credit conditions and portfolio quality in the Citi-branded cards portfolio, primarily in Mexico, as well as the move to customers with a lower risk profile and stricter underwriting criteria referenced above.



21



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 South Korea, Japan, Taiwan, Singapore, Australia, Hong Kong, India and Indonesia. Citi’s Japan Consumer Finance business, which Citi has been exiting since 2008, is included in Citi Holdings (see “Citi Holdings—Local Consumer Lending” below). At December 31, 2011, Asia RCB had 671 retail branches, 16.3 million customer accounts, $66.2 billion in retail banking loans and $109.7 billion in deposits. In addition, the business had 15.9 million Citi-branded card accounts with $21.0 billion in outstanding loan balances.

% Change % Change
In millions of dollars 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Net interest revenue $ 5,365 $ 5,077 $ 4,808 6 % 6 %
Non-interest revenue       2,644       2,319       1,938       14       20
Total revenues, net of interest expense $ 8,009 $ 7,396 $ 6,746 8 % 10 %
Total operating expenses $ 4,583 $ 4,046 $ 3,565 13 % 13 %
       Net credit losses $ 883 $ 1,013 $ 1,339 (13 )% (24 )%
       Credit reserve build (release) (63 ) (287 ) 523 78 NM
Provisions for loan losses and for benefits and claims $ 820 $ 726 $ 1,862 13 % (61 )%
Income from continuing operations before taxes $ 2,606 $ 2,624 $ 1,319 (1 )% 99 %
Income taxes (benefits) 679 493 (72 ) 38 NM
Income from continuing operations $ 1,927 $ 2,131 $ 1,391 (10 )% 53 %
Net income attributable to noncontrolling interests
Net income $ 1,927 $ 2,131 $ 1,391 (10 )% 53 %
Average assets (in billions of dollars) $ 122 $ 108 $ 93 13 % 16 %
Return on assets 1.58 % 1.97 % 1.50 %
Average deposits (in billions of dollars) $ 110 $ 100 $ 89 10 % 12 %
Net credit losses as a percentage of average loans 1.03 % 1.37 % 2.07 %
Revenue by business
       Retail banking   $ 4,825 $ 4,586 $ 4,261 5 % 8 %
       Citi-branded cards 3,184 2,810   2,485 13 13
              Total $ 8,009   $ 7,396 $ 6,746   8 % 10 %
Income from continuing operations by business  
       Retail banking $ 1,174 $ 1,436   $ 1,167 (18 )% 23 %
       Citi-branded cards 753 695 224 8 NM
              Total $ 1,927 $ 2,131 $ 1,391 (10 )% 53 %
 
NM Not meaningful

2011 vs. 2010
Net income decreased 10%, driven by higher operating expenses, lower loan loss reserve releases and a higher effective tax rate, partially offset by growth in revenue. The higher effective tax rate was due to lower tax benefits (APB 23) and a tax charge of $66 million due to a write-down in the value of deferred tax assets due to a change in the tax law, each in Japan. During 2011, the U.S. dollar generally depreciated versus local currencies. As a result, the impact of FX translation accounted for an approximately 5% growth in revenues and expenses.
     Revenues increased 8%, primarily driven by higher business volumes and the impact of FX translation, partially offset by continued spread compression and $65 million of net charges relating to the repurchase of certain Lehman

structured notes (see Note 29 to the Consolidated Financial Statements). Net interest revenue increased 6%, as investment initiatives and sustained economic growth in the region continued to drive higher lending and deposit volumes. Spread compression continued to partly offset the benefit of higher balances and continued to be driven by stricter underwriting criteria resulting in a lowering of the risk profile for personal and other loans. Spread compression will likely continue to have a negative impact on net interest revenue in the near-term. Non-interest revenue increased 14%, primarily due to a 17% increase in Citi-branded cards purchase sales and higher revenues from foreign exchange products, partially offset by a 12% decrease in investment sales, particularly in the second half of 2011, and the net charges for the repurchase of certain Lehman structured notes.



22



     Expenses increased 13% due to continued investment spending, growth in business volumes, repositioning charges and higher legal and related expenses, as well as the impact of FX translation, partially offset by ongoing productivity savings. The increase in the level of incremental investment spending in the business was largely completed at the end of 2011.
     Provisions increased 13% as lower loan loss reserve releases were partially offset by lower net credit losses. The increase in credit provisions reflected the increasing volumes in the region, partially offset by continued credit quality improvement. India remained a significant driver of the improvement in credit quality, as it continued to de-risk elements of its legacy portfolio. Citi believes that provisions could continue to increase as the portfolio continues to grow and season.

2010 vs. 2009
Net income increased 53%, driven by growth in revenue and a decrease in provisions, partially offset by higher operating expenses and a higher effective tax rate. During 2010, the U.S. dollar generally depreciated versus local currencies. As a result, the impact of FX translation accounted for approximately 6% growth in revenues, and 7% growth in expenses.
     
Revenues increased 10%, driven by higher business volumes and the impact of FX translation, partially offset by spread compression. Net interest revenue increased 6%, as investment initiatives and sustained economic growth in the region drove higher lending and deposit volumes, which were partly offset by the spread compression. Non-interest revenue increased 20%, primarily due to higher investment sales and a 19% increase in Citi-branded cards purchase sales.
     
Expenses increased 13%, due to growth in business volumes, investment spending and the impact of FX translation.
     
Provisions decreased 61%, mainly due to the net impact of a loan loss reserve release of $287 million in 2010, compared to a $523 million loan loss reserve build in 2009 and a 24% decline in net credit losses. The decrease in provisions reflected continued credit quality improvement across the region, particularly in India, partially offset by the increasing volumes in the region.



23



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, 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 December 31, 2011, ICG had $979 billion of assets and $484 billion of deposits.

% Change % Change
In millions of dollars 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Commissions and fees $ 4,447 $ 4,266 $ 4,197 4 % 2 %
Administration and other fiduciary fees       2,775       2,751       2,855       1       (4 )
Investment banking 3,029 3,520 4,687 (14 ) (25 )
Principal transactions 4,873 5,567 5,626 (12 ) (1 )
Other 1,817 1,681 1,749 8 (4 )
Total non-interest revenue $ 16,941 $ 17,785 $ 19,114 (5 )% (7 )%
Net interest revenue (including dividends) 15,045 15,401 17,844 (2 ) (14 )
Total revenues, net of interest expense $ 31,986 $ 33,186 $ 36,958 (4 )% (10 )%
Total operating expenses 20,687 19,597 17,573 6 12
       Net credit losses 619 573 760 8 (25 )
       Provision (release) for unfunded lending commitments 89 (29 ) 138 NM NM
       Credit reserve build (release) (556 ) (626 ) 892 11 NM
Provisions for loan losses and benefits and claims $ 152 $ (82 ) $ 1,790 NM NM
Income from continuing operations before taxes $ 11,147 $ 13,671 $ 17,595 (18 )% (22 )%
Income taxes 2,845 3,499 4,622 (19 ) (24 )
Income from continuing operations $ 8,302 $ 10,172 $ 12,973 (18 )% (22 )%
Net income attributable to noncontrolling interests 56 131 68 (57 ) 93
Net income $ 8,246 $ 10,041 $ 12,905 (18 )% (22 )%
Average assets (in billions of dollars) $ 1,024 $ 948 $ 846 8 % 12 %
Return on assets 0.81 % 1.06 % 1.53 %
Revenues by region  
       North America $ 10,000 $ 11,878 $ 11,361 (16 )% 5 %
       EMEA 10,707 10,205 13,445 5 (24 )
       Latin America 4,069 4,063 4,826 (16 )
       Asia 7,210 7,040 7,326   2 (4 )
Total revenues $ 31,986 $ 33,186 $ 36,958 (4 )% (10 )%
Income from continuing operations by region  
       North America $ 1,458 $ 2,994 $ 2,978 (51 )% 1 %
       EMEA 3,150 3,030 4,713 4 (36 )
       Latin America   1,623   1,755   2,174 (8 ) (19 )
       Asia 2,071   2,393 3,108 (13 ) (23 )
Total income from continuing operations $ 8,302 $ 10,172 $ 12,973 (18 )% (22 )%
Average loans by region (in billions of dollars)
       North America $ 69 $ 67 $ 52 3 % 29 %
       EMEA 47 38 45 24 (16 )
       Latin America 29 23 22 26 5
       Asia 52 36 28 44 29
Total average loans $ 197 $ 164 $ 147 20 % 12 %
 
NM Not meaningful

24



 
 
 
 
 
 
 
 
 
 
 
 
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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 retail investors, 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.

% Change % Change
In millions of dollars 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Net interest revenue $ 9,116 $ 9,723 $ 12,170 (6 )% (20 )%
Non-interest revenue 12,301 13,392 14,970 (8 ) (11 )
Revenues, net of interest expense $ 21,417 $ 23,115 $ 27,140 (7 )% (15 )%
Total operating expenses       15,028       14,693       13,090       2       12
       Net credit losses 602 567 758 6 (25 )
       Provision (release) for unfunded lending commitments 86 (29 ) 138 NM NM
       Credit reserve build (release) (572 ) (562 ) 887 (2 ) NM
Provisions for loan losses and benefits and claims $ 116 $ (24 ) $ 1,783 NM NM
Income before taxes and noncontrolling interests $ 6,273 $ 8,446 $ 12,267 (26 )% (31 )%
Income taxes 1,378 1,947 3,072 (29 ) (37 )
Income from continuing operations 4,895 6,499 9,195 (25 ) (29 )
Net income attributable to noncontrolling interests 37 110 55 (66 ) 100
Net income $ 4,858 $ 6,389 $ 9,140 (24 )% (30 )%
Average assets (in billions of dollars) $ 894 $ 841 $ 759 6 % 11 %
Return on assets 0.54 % 0.76 % 1.21 %
Revenues by region  
       North America $ 7,558 $ 9,393 $ 8,836 (20 )% 6 %
       EMEA 7,221 6,849 10,056 5 (32 )
       Latin America 2,364 2,547 3,435 (7 ) (26 )
       Asia 4,274 4,326 4,813 (1 ) (10 )
Total revenues $ 21,417 $ 23,115 $ 27,140 (7 )% (15 )%
Income from continuing operations by region
       North America $ 1,011 $ 2,465 $ 2,369   (59 )% 4 %
       EMEA 2,008 1,805 3,414 11 (47 )
       Latin America   978   1,091     1,558 (10 ) (30 )
       Asia 898   1,138 1,854 (21 ) (39 )
Total income from continuing operations $ 4,895 $ 6,499 $ 9,195 (25 )% (29 )%
Securities and Banking revenue details  
       Total investment banking $ 3,310 $ 3,828 $ 4,767 (14 )% (20 )%
       Lending 1,802 962 (2,447 ) 87 NM
       Equity markets 2,756 3,501 3,183 (21 ) 10
       Fixed income markets 12,263 14,077 21,294 (13 ) (34 )
       Private bank 2,146 2,004 2,068 7 (3 )
       Other Securities and Banking (860 ) (1,257 ) (1,725 ) 32 27
Total Securities and Banking revenues $ 21,417 $ 23,115 $ 27,140 (7 )% (15 )%
 
NM Not meaningful

26



2011 vs. 2010
S&B’s results of operations for 2011 were significantly impacted by the macroeconomic concerns during the year, including the overall pace of U.S. economic recovery, the U.S. debt ceiling debate and subsequent downgrade of U.S. sovereign credit, the ongoing sovereign debt crisis in Europe and general continued concerns about the health of the global economy and financial markets. These concerns led to heightened volatility as well as overall declines in liquidity and market activity during the second half of the year as clients reduced their activity and risk.
     Net income of $4.9 billion decreased 24%. Excluding CVA/DVA (see table below), net income decreased 43% as declines in fixed income and equity markets revenues and investment banking revenues, along with higher expenses, more than offset increases in lending and private bank revenues.
     
Revenues of $21.4 billion decreased 7% from the prior year. CVA/DVA increased by $2.1 billion from the prior year, driven by the widening of Citi’s credit spreads in 2011. Excluding CVA/DVA, S&B revenues decreased 16%, reflecting lower results in fixed income markets, equity markets and investment banking, partially offset by increased revenues in lending and the private bank. 
     
Fixed income markets revenues, which constituted over 50% of S&B revenues in 2011, decreased 24% excluding CVA/DVA. This was driven by lower results in securitized and credit products, reflecting the challenging market environment and reduced customer risk appetite and, to a lesser extent, rates and currencies.
     
Equity markets revenues decreased 35% excluding CVA/DVA, driven by declining revenues in equity proprietary trading (which Citi also refers to as equity principal strategies) as positions in the business were wound down, a decline in equity derivatives revenues and, to a lesser extent, a decline in cash equities. The wind down of Citi’s equity proprietary trading was completed at the end of 2011.
     
Investment banking revenues declined 14%, as the macroeconomic concerns and market uncertainty drove lower volumes in debt and equity issuance.
     
Lending revenues increased 87%, mainly due to the absence of losses on credit default swap hedges in the prior year (see the table below). Excluding the impact of these hedging gains and losses, lending revenues increased 3%, primarily due to growth in the Corporate loan portfolio. Private bank revenues increased 6% excluding CVA/DVA, primarily due to higher loan and deposit balances and improved customer pricing, partially offset by declines in investment and capital markets-related products given the negative market sentiment.
     
Expenses increased 2%, primarily due to investment spending, which largely occurred in the first half of the year, relating to new hires and technology investments. The increase in expenses was also driven by higher repositioning charges and the negative impact of FX translation (which contributed approximately 2% to the expense growth), partially offset by productivity saves and reduced incentive compensation due to business results. The increase in the level of investment spending in S&B was largely completed at the end of 2011.
     Provisions
increased by $140 million, primarily due to builds in the allowance for unfunded lending commitments as a result of portfolio growth and higher net credit losses.

2010 vs. 2009
Net income of $6.4 billion decreased 30%. Excluding CVA/DVA, net income decreased 36%, as an increase in lending was more than offset by declines in fixed income and equity trading activities, investment banking fees and higher expenses.
     
Revenues of $23.1 billion decreased 15% from the prior year, as performance in the first half of 2009 was particularly strong due to higher fixed income markets activity and client activity levels in investment banking. In addition, 2010 CVA/DVA increased $1.6 billion from the prior year, mainly due to a larger narrowing of Citi’s spreads in 2009 compared 2010. Excluding CVA/DVA, revenues decreased 19%, reflecting lower results in fixed income markets, equity markets and investment banking, partially offset by increased revenues in lending.
     
Fixed income markets revenues decreased 32% excluding CVA/DVA, primarily reflecting lower results in rates and currencies, credit products and securitized products due to the overall weaker market environment during 2010.
     
Equity markets revenues decreased 31% excluding CVA/DVA, driven by lower trading revenues linked to the derivatives business and equity proprietary trading.
     
Investment banking revenues declined 20%, reflecting lower levels of market activity in debt and equity underwriting.
     
Lending revenues increased by $3.4 billion, mainly driven by a reduction in losses on credit default swap hedges.
     
Expenses increased 12%, or $1.6 billion, year over year. Excluding the 2010 U.K. bonus tax impact and litigation reserve releases in the first half of 2010 and 2009, expenses increased 8%, or $1.1 billion, mainly as a result of higher compensation, transaction costs and the negative impact of FX translation (which contributed approximately 1% to the expense growth).
     
Provisions decreased by $1.8 billion, to negative $24 million, mainly due to credit reserve releases and lower net credit losses as the result of an improvement in the credit environment during 2010.

In millions of dollars       2011       2010       2009
S&B CVA/DVA
Fixed Income Markets $ 1,368 $ (187 ) $ 276
Equity Markets 355 (207 ) (2,190 )
Private Bank 9   (5 ) (43 )
Total S&B CVA/DVA $ 1,732 $ (399 ) $ (1,957 )
Total S&B Lending Hedge gain (loss) $ 73 $ (711 ) $ (3,421 )



27



TRANSACTION SERVICES
Transaction Services is composed of Treasury and Trade Solutions and Securities and Fund Services. Treasury and Trade Solutions provides comprehensive cash management and trade finance and services for corporations, financial institutions and public sector entities worldwide. Securities and Fund Services provides securities services to investors, such as global asset managers, custody and clearing services to intermediaries such as broker-dealers, and depository and agency/trust services to multinational corporations and governments globally. Revenue is generated from net interest revenue on deposits in these businesses, as well as from trade loans and fees for transaction processing and fees on assets under custody and administration in Securities and Fund Services.

% Change % Change
In millions of dollars       2011       2010       2009       2011 vs. 2010       2010 vs. 2009
Net interest revenue $ 5,929 $ 5,678 $ 5,674 4 %
Non-interest revenue 4,640 4,393 4,144 6 6 %
Total revenues, net of interest expense $ 10,569 $ 10,071 $ 9,818 5 % 3 %
Total operating expenses 5,659 4,904 4,483 15 9
Provisions (releases) for credit losses and for benefits and claims 36 (58 ) 7 NM NM
Income before taxes and noncontrolling interests $ 4,874 $ 5,225 $ 5,328 (7 )% (2 )%
Income taxes 1,467 1,552 1,550 (5 )
Income from continuing operations 3,407 3,673 3,778 (7 ) (3 )
Net income attributable to noncontrolling interests 19 21 13 (10 ) 62
Net income $ 3,388 $ 3,652 $ 3,765 (7 )% (3 )%
Average assets (in billions of dollars) 130 $ 107 $ 87 21 % 23 %
Return on assets 2.61 % 3.41 % 4.34 %
Revenues by region
       North America $ 2,442 $ 2,485 $ 2,525 (2 )% (2 )%
       EMEA 3,486 3,356 3,389 4 (1 )
       Latin America 1,705 1,516 1,391 12 9
       Asia 2,936 2,714 2,513 8 8
Total revenues $ 10,569 $ 10,071 $ 9,818 5 % 3 %
Income from continuing operations by region
       North America $ 447 $ 529 $ 609 (16 )% (13 )%
       EMEA 1,142 1,225 1,299 (7 ) (6 )
       Latin America 645 664 616 (3 ) 8
       Asia 1,173 1,255 1,254 (7 )
Total income from continuing operations $ 3,407 $ 3,673 $ 3,778 (7 )% (3 )%
Key indicators (in billions of dollars)          
Average deposits and other customer liability balances $ 363 $ 333 $ 304 9 % 10 %
EOP assets under custody (1) (In trillions of dollars) 12.5 12.6   12.1 (1 ) 4

(1)       Includes assets under custody, assets under trust and assets under administration.
NM       Not meaningful

2011 vs. 2010
Net income decreased 7%, as higher expenses, driven by investment spending, outpaced revenue growth. Year-over-year, the U.S. dollar generally depreciated versus local currencies. As a result, the impact of FX translation accounted for an approximately 1% growth in revenues and expenses, respectively.
     Revenues grew 5%, driven primarily by international growth, as improvement in fees and increased deposit balances more than offset the continued spread compression, which will likely continue to be a challenge in 2012. Treasury and Trade Solutions revenues increased 5%, driven

primarily by growth in the trade and commercial cards businesses and increased deposits, partially offset by the impact of the continued low rate environment. Overall, Securities and Fund Services revenues increased 4% year-over-year, primarily due to growth in transaction and settlement volumes, driven in part by the increase in activity resulting from market volatility, and new client mandates. During the fourth quarter of 2011, however, Securities and Fund Services experienced a 10% decline in revenues as compared to the prior year period, driven by a significant decrease in settlement volumes reflecting the overall decline in capital markets activity during the latter part of 2011, spread compression and the impact of FX translation.



28



     Expenses increased 15% reflecting investment spending and higher business volumes, partially offset by productivity savings. The increase in the level of investment spending in the business was largely completed at the end of 2011.
     
Provisions increased by $94 million, to $36 million, reflecting reserve builds in 2011 versus a net reserve release in the prior year.
     Average assets grew 21%, driven by a 59% increase in trade assets as a result of focused investment in the business.
Average deposits and other customer liability balances grew 9% and included a favorable shift to operating balances as the business continued to emphasize stable, lower cost deposits as a way to mitigate spread compression.

2010 vs. 2009
Net income decreased 3%, as expenses driven by investment spending outpaced revenue growth. Year-over-year, the U.S. dollar generally depreciated versus local currencies. As a result, the impact of FX translation accounted for approximately 2% growth in revenues. 
     
Revenues grew 3%, despite the low interest rate environment. Treasury and Trade Solutions revenues grew 2% as a result of increased customer liability balances and growth in trade and fees, partially offset by the spread compression. Securities and Fund Services revenues grew by 3% as higher volumes and balances reflected the impact of sales and increased market activity.
     
Expenses increased 9% reflecting investment spending and higher business volumes.
     
Provisions decreased $65 million, to a negative $58 million, as compared to the prior year, reflecting credit reserve releases.
     
Average deposits and other customer liability balances grew 10%, driven primarily by growth in emerging markets.



29



CITI HOLDINGS

Citi Holdings contains businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp businesses. Citi Holdings consists of the following: Brokerage and Asset Management, Local Consumer Lending and Special Asset Pool.
     Consistent with its strategy, Citi intends to continue to exit these businesses and portfolios as quickly as practicable in an economically rational manner. To date, the decrease in Citi Holdings assets has been primarily driven by asset sales and business dispositions, as well as portfolio run-off and pay-downs. Asset levels have also been impacted, and will continue to be impacted, by charge-offs and revenue marks as and when appropriate.
     
As of December 31, 2011, Citi Holdings’ GAAP assets were approximately $269 billion, a decrease of approximately $90 billion, or 25%, from year end 2010, and $558 billion, or 67%, from the peak in the first quarter of 2008. The decline in assets during 2011 reflected approximately $49 billion in asset sales and business dispositions, $35 billion in net run-off and amortization, and $6 billion in net cost of credit and net asset marks. Citi Holdings represented approximately 14% of Citi’s GAAP assets as of December 31, 2011, while Citi Holdings’ risk-weighted assets of approximately $245 billion at December 31, 2011 represented approximately 25% of Citi’s risk-weighted assets as of such date. As previously disclosed, Citi’s ability to continue to decrease the assets in Citi Holdings through the methods discussed above, including sales and dispositions, will not likely occur at the same pace or level as in the past. See also the “Executive Summary” above and “Risk Factors—Business Risks” below.

% Change % Change
In millions of dollars       2011       2010       2009       2011 vs. 2010       2010 vs. 2009
Net interest revenue $ 10,287 $ 14,773 $ 16,139 (30 )% (8 )%
Non-interest revenue 2,609 4,514 12,989 (42 ) (65 )
Total revenues, net of interest expense $ 12,896 $ 19,287 $ 29,128 (33 )% (34 )%
Provisions for credit losses and for benefits and claims
Net credit losses $ 11,731 $ 19,070 $ 24,585 (38 )% (22 )%
Credit reserve build (release) (4,720 ) (3,500 ) 5,305 (35 ) NM
Provision for loan losses $ 7,011 $ 15,570 $ 29,890 (55 )% (48 )%
Provision for benefits and claims 820 813 1,094 1 (26 )
Provision (release) for unfunded lending commitments (41 ) (82 ) 106 50 NM
Total provisions for credit losses and for benefits and claims $ 7,790 $ 16,301 $ 31,090 (52 )% (48 )%
Total operating expenses $ 8,791 $ 9,615 $ 14,085 (9 )% (32 )%
Loss from continuing operations before taxes $ (3,685 ) $ (6,629 ) $ (16,047 ) 44 % 59 %
Benefits for income taxes (1,161 ) (2,573 ) (6,988 ) 55 63
(Loss) from continuing operations $ (2,524 ) $ (4,056 ) $ (9,059 ) 38 % 55 %
Net income (loss) attributable to noncontrolling interests 119 207 29   (43 ) NM  
Citi Holdings net loss $ (2,643 ) $ (4,263 ) $ (9,088 ) 38 % 53 %
Balance sheet data (in billions of dollars)      
Total EOP assets $ 269   $ 359 $ 487 (25 )% (26 )%
Total EOP deposits $ 64 $ 79 $ 89 (19 )% (11 )%
   
NM Not meaningful

30



BROKERAGE AND ASSET MANAGEMENT
Brokerage and Asset Management (BAM) consists of Citi’s global retail brokerage and asset management businesses. At December 31, 2011, BAM had approximately $27 billion of assets, or approximately 10% of Citi Holdings’ assets, primarily consisting of Citi’s investment in, and assets related to, the Morgan Stanley Smith Barney joint venture (MSSB JV). As more fully described in Forms 8-K filed with the SEC on January 14, 2009 and June 3, 2009, Morgan Stanley has options to purchase Citi’s remaining stake in the MSSB JV over three years beginning in 2012.

                     % Change        % Change
In millions of dollars 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Net interest revenue $ (180 ) $ (277 ) $ 390 35 % NM  
Non-interest revenue 462 886 14,233 (48 ) (94 )%
Total revenues, net of interest expense $ 282 $ 609 $ 14,623 (54 )% (96 )%
Total operating expenses $ 729 $ 987 $ 3,276 (26 )% (70 )%
       Net credit losses $ 4 $ 17 $ 1   (76 )% NM
       Credit reserve build (release) (3 ) (18 ) 36 83 NM
       Provision for unfunded lending commitments (1 ) (6 ) (5 ) 83 (20 )%
       Provision (release) for benefits and claims 48 38 40 26 (5 )
Provisions for credit losses and for benefits and claims $ 48 $ 31   $ 72 55 % (57 )%
Income (loss) from continuing operations before taxes $ (495 ) $ (409 ) $ 11,275 (21 )% NM
Income taxes (benefits) (209 ) (183 ) 4,425 (14 ) NM
Income (loss) from continuing operations $ (286 ) $ (226 ) $ 6,850 (27 )% NM
Net income attributable to noncontrolling interests 9 11 12 (18 ) (8 )%
Net income (loss) $ (295 ) $ (237 ) $ 6,838 (24 )% NM
EOP assets (in billions of dollars) $ 27 $ 27 $ 30 (10 )%
EOP deposits (in billions of dollars) 55 58 60 (5 )% (3 )
 
NM Not meaningful

2011 vs. 2010
Net loss increased 24% as lower revenues were only partly offset by lower expenses.
     Revenues decreased by 54%, driven by the 2010 sale of the Habitat and Colfondos businesses (including a $78 million pretax gain on sale related to the transactions in the first quarter of 2010) and lower revenues from the MSSB JV.
    
Expenses decreased 26%, also driven by divestitures, as well as lower legal and related expenses.
    
Provisions increased 55% due to the absence of the prior-year reserve releases.

2010 vs. 2009
Net loss was $0.2 billion in 2010, compared to Net income of $6.9 billion in 2009. The decrease was driven by the absence of the gain on sale related to the MSSB JV transaction in 2009.
    
Revenues decreased 96% versus the prior year driven by the absence of the $11.1 billion pretax gain on sale ($6.7 billion after tax) related to the MSSB JV transaction in the second quarter of 2009 and a $320 million pretax gain on the sale of the managed futures business to the MSSB JV in the third quarter of 2009. Excluding these gains, revenues decreased primarily due to the absence of Smith Barney from May 2009 onwards as well as the absence of Nikko Asset Management, partially offset by higher revenues from the MSSB JV and an improvement in marks in the retail alternative investments business.
    
Expenses decreased 70% from the prior year, mainly driven by the absence of Smith Barney from May 2009 onwards, lower MSSB JV separation-related costs as compared to the prior year and the absence of Nikko and Colfondos, partially offset by higher legal settlements and reserves associated with Smith Barney.
    
Provisions decreased 57%, mainly due to the absence of credit reserve builds in 2009.
    
Assets decreased 10% versus the prior year, mostly driven by the sales of the private equity business and the run-off of tailored loan portfolios.



31



LOCAL CONSUMER LENDING
As of December 31, 2011, Local Consumer Lending (LCL) included a portion of Citigroup’s North America mortgage business, retail partner cards, CitiFinancial North America (consisting of the OneMain and CitiFinancial Servicing businesses), remaining student loans, and other local Consumer finance businesses globally (including Western European cards and retail banking and Japan Consumer Finance). At December 31, 2011, LCL had approximately $201 billion of assets (approximately $186 billion in North America) or approximately 75% of Citi Holdings assets. The North America assets consisted of residential mortgages (residential first mortgages and home equity loans), retail partner card loans, personal loans, commercial real estate, and other consumer loans and assets. As referenced under “Citi Holdings” above, the substantial majority of the retail partner cards business will be transferred to Citicorp—NA RCB, effective in the first quarter of 2012.
     As of December 31, 2011, approximately $108 billion of assets in LCL consisted of North America mortgages in Citi’s CitiMortgage and CitiFinancial operations.

                     % Change        % Change
In millions of dollars 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Net interest revenue $ 10,872 $ 13,831 $ 12,995 (21 )% 6 %
Non-interest revenue 1,195 1,995 4,770 (40 ) (58 )
Total revenues, net of interest expense $ 12,067 $ 15,826 $ 17,765 (24 )% (11 )%
Total operating expenses $ 7,769 $ 8,057 $ 9,898 (4 )% (19 )%
       Net credit losses $ 10,659 $ 17,040 $ 19,185 (37 )% (11 )%
       Credit reserve build (release) (2,862 ) (1,771 ) 5,799 (62 ) NM
       Provision for benefits and claims 772 775 1,054 (26 )
       Provision for unfunded lending commitments
Provisions for credit losses and for benefits and claims $ 8,569 $ 16,044 $ 26,038 (47 )% (38 )%
(Loss) from continuing operations before taxes $ (4,271 ) $ (8,275 ) $ (18,171 ) 48 % 54 %
Benefits for income taxes (1,437 ) (3,287 ) (7,687 ) 56 57
(Loss) from continuing operations $ (2,834 ) $ (4,988 ) $ (10,484 ) 43 % 52 %
Net income attributable to noncontrolling interests 2 8 33 (75 ) (76 )
Net (loss) $ (2,836 ) $ (4,996 ) $ (10,517 ) 43 % 52 %
Average assets (in billions of dollars) $ 228 $ 324 $ 351 (30 )% (8 )%
Net credit losses as a percentage of average loans 5.34 % 6.20 % 6.38 %
Total GAAP revenues $ 12,067 $ 15,826 $ 17,765 (24 )% (11 )%
       Net impact of credit card securitizations activity (1)   4,135
Total managed revenues $ 12,067 $ 15,826 $ 21,900 (24 )% (28 )%
Total GAAP net credit losses $ 10,659 $ 17,040   $ 19,185 (37 )% (11 )%
       Impact of credit card securitizations activity (1) 4,590
Total managed net credit losses $ 10,659 $ 17,040 $ 23,775 (37 )% (28 )%

(1)        See Note 1 to the Consolidated Financial Statements for a discussion of the impact of SFAS 166/167.
NM        Not meaningful

2011 vs. 2010
Net loss decreased 43%, driven primarily by the improving credit environment, including lower net credit losses and higher loan loss reserve releases, in both retail partner cards and mortgages. The improvement in credit was partly offset by lower revenues due to decreasing asset balances and sales.
    
Revenues decreased 24%, driven primarily by the lower asset balances due to asset sales, divestitures and run-offs, which also drove the 21% decline in Net interest revenue. Non-interest revenue decreased 40% due to the impact of divestitures.
     Expenses
decreased 4%, driven by the lower volumes and divestitures, partly offset by higher legal and regulatory expenses, including without limitation those relating to the United States and state attorneys general mortgage servicing discussions and agreement in principle announced on February 9, 2012, reserves related to potential PPI refunds (see “Payment Protection Insurance” below) and, to a lesser extent, implementation costs associated with the OCC/Federal Reserve Board consent orders entered into in April 2011.

     Provisions decreased 47%, driven by lower credit losses and higher loan loss reserve releases. Net credit losses decreased 37%, primarily due to the credit improvements in retail partner cards ($3.0 billion) and North America mortgages ($1.6 billion), although the pace of the decline in net credit losses in both portfolios slowed. Loan loss reserve releases increased 62%, driven by higher releases in retail partner cards and CitiFinancial North America due to better credit quality and lower loan balances.
    
Assets declined 20% from the prior year, primarily driven by portfolio run-off and the impact of asset sales and divestitures, including continued sales of student loans, auto loans and delinquent mortgages (see “North America Consumer Mortgage Lending” below).



32



2010 vs. 2009
Net loss decreased 52%, driven primarily by the improving credit environment. Decreases in revenues driven by lower gains on asset sales were mostly offset by decreased expenses due to lower volumes and divestitures.
    
Revenues decreased 11% from the prior year, driven primarily by portfolio run off, divestitures and asset sales. Net interest revenue increased 6% due to the adoption of SFAS 166/167, partially offset by the impact of lower balances due to portfolio run-off and asset sales. Non-interest revenue declined 58%, primarily due to the absence of the $1.1 billion gain on the sale of Redecard in the first quarter of 2009 and a higher mortgage repurchase reserve charge.
    
Expenses decreased 19%, primarily due to the impact of divestitures, lower volumes, re-engineering actions and the absence of costs associated with the U.S. government loss-sharing agreement, which was exited in the fourth quarter of 2009.
    
Provisions decreased 38%, reflecting a net $1.8 billion loan loss reserve release in 2010 compared to a $5.8 billion build in 2009. Lower net credit losses across most businesses were partially offset by the impact of the adoption of SFAS 166/167. On a comparable basis, net credit losses were lower year-over-year by 28%, driven by improvement in U.S. mortgages, international portfolios and retail partner cards.
    
Assets declined 21% from the prior year, primarily driven by portfolio run-off, higher loan loss reserve balances, and the impact of asset sales and divestitures, partially offset by an increase of $41 billion resulting from the adoption of SFAS 166/167. Key divestitures in 2010 included The Student Loan Corporation, Primerica, auto loans, the Canadian Mastercard business and U.S. retail sales finance portfolios.

Japan Consumer Finance
Citi continues to actively monitor a number of matters involving its Japan Consumer Finance business, including customer defaults, refund claims and litigation, as well as financial and legislative, regulatory, judicial and other political developments, relating to the charging of gray zone interest. Gray zone interest represents interest at rates that are legal but for which claims may not be enforceable. In 2008, Citi decided to exit its Japan Consumer Finance business and has been liquidating its portfolio and otherwise winding down the business since such time. However, this business has incurred, and will continue to face, net credit losses and refunds, due in part to legislative, regulatory and judicial actions taken in recent years. These actions may also reduce credit availability and increase potential claims and losses relating to gray zone interest.
    
In September 2010, one of Japan’s largest consumer finance companies (Takefuji) declared bankruptcy, reflecting the financial distress that Japan’s top consumer finance lenders are facing as they continue to deal with liabilities for gray zone interest refund claims. The publicity relating to Takefuji’s bankruptcy resulted in a significant increase in the number of refund claims during the latter part of 2010 and first half of 2011, although Citi observed a steady decline in such claims during the remainder of 2011. During 2011, LCL recorded a net increase in its reserves related to customer refunds in the Japan Consumer Finance business of approximately $120 million (pretax), in addition to an increase of approximately $325 million (pretax) in 2010.
    
As evidenced by the events described above, the trend in the type, number and amount of refund claims remains volatile, and the potential full amount of losses and their impact on Citi is subject to significant uncertainties and continues to be difficult to predict. In addition, regulators in Japan have stated that they are considering legislation to establish a framework for collective legal action proceedings. If such legislation is passed and implemented, it could potentially introduce a more accessible procedure for current and former customers to pursue refund claims and other types of collective actions. Citi continues to monitor and evaluate these developments and the potential impact to both currently and previously outstanding loans in this business and its reserves related thereto.



33



Payment Protection Insurance
The alleged mis-selling of payment protection insurance products (PPI) by financial institutions in the UK, including Citi, has been, and continues to be, the subject of intense review and focus by the UK regulators, particularly the Financial Services Authority (FSA). PPI is designed to cover a customer’s loan repayments in the event of certain events, such as long-term illness or unemployment. The FSA has found certain problems, across the industry, with how these products were sold, including customers not realizing that the cost of PPI premiums was being added to their loan or PPI being unsuitable for the customer. Prior to 2008, certain of Citi’s UK consumer finance businesses, primarily CitiFinancial Europe plc and Egg Banking plc, engaged in the sale of PPI. While Citi has sold a significant portion of these businesses, and the remaining businesses are in the process of wind down, Citi generally retains the potential liability relating to the sale of PPI by these businesses.
    
As a result of this regulatory focus and resulting publicity, during 2010 and 2011, Citi observed an increase in customer complaints relating to the sale of PPI. In addition, in 2011, the FSA required all firms engaged in the sale of PPI in the UK, including Citi, to review their historical sales processes for PPI, generally from January 2005 forward. In addition, the FSA is requiring these firms to proactively contact any customers who may have been mis-sold PPI after January 2005 and invite them to have their individual sale reviewed. Redress, whether as a result of customer complaints or Citi’s proactive contact with customers, generally involves the repayment of premiums and the refund of all applicable contractual interest together with compensatory interest of 8%. 
    
As a result of these developments during 2011, Citi increased its reserves related to potential PPI refunds by approximately $330 million ($230 million in LCL and $100 million in Corporate/Other for discontinued operations). Citi continues discussions with the FSA regarding its proposed remediation process, and the trend in the number of claims, the potential amount of refunds and the impact on Citi remains volatile and is subject to significant uncertainty and lack of predictability. This is particularly true with respect to the potential customer response to any direct customer contact exercise. Citi continues to monitor and evaluate the PPI remediation process and developments and its related reserves.



34



SPECIAL ASSET POOL
Special Asset Pool (SAP) had approximately $41 billion of assets as of December 31, 2011, which constituted approximately 15% of Citi Holdings assets as of such date. SAP consists of a portfolio of securities, loans and other assets that Citigroup intends to continue to reduce over time through asset sales and portfolio run-off. SAP assets have declined by approximately $287 billion, or 88%, from peak levels in 2007, reflecting cumulative write-downs, asset sales and portfolio run-off.

                     % Change        % Change
In millions of dollars 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Net interest revenue $ (405 ) $ 1,219 $ 2,754 NM (56 )%
Non-interest revenue 952 1,633 (6,014 ) (42 )% NM
Revenues, net of interest expense $ 547 $ 2,852 $ (3,260 ) (81 )% NM
Total operating expenses $ 293 $ 571 $ 911 (49 )% (37 )%
       Net credit losses $ 1,068 $ 2,013 $ 5,399 (47 )% (63 )%
       Provision (releases) for unfunded lending commitments (40 ) (76 ) 111 47 NM
       Credit reserve builds (releases) (1,855 ) (1,711 ) (530 ) (8 ) NM
Provisions for credit losses and for benefits and claims $ (827 ) $ 226 $ 4,980 NM (95 )%
Income (loss) from continuing operations before taxes $ 1,081 $ 2,055 $ (9,151 ) (47 )% NM
Income taxes (benefits) 485   897 (3,726 ) (46 ) NM
Net income (loss) from continuing operations $ 596 $ 1,158 $ (5,425 ) (49 )% NM
Net income (loss) attributable to noncontrolling interests 108 188 (16 ) (43 ) NM
Net income (loss) $ 488 $ 970 $ (5,409 ) (50 )% NM
EOP assets (in billions of dollars) $ 41 $ 80 $ 136 (49 )% (41 )%
 
NM Not meaningful

2011 vs. 2010
Net income decreased 50%, driven by the decrease in revenues due to lower asset balances, partially offset by lower expenses and improved credit.
     Revenues decreased 81%, driven by the overall decline in Net interest revenue during the year, as interest-earning assets declined and thus represent a smaller portion of SAP. Net interest revenue was a negative $405 million in 2011 and Citi expects to incur continued negative carrying costs in SAP going forward as the non-interest-earning assets of SAP, which require funding, now represent the larger portion of the total asset pool. Non-interest revenue decreased by 42% due to lower gains on asset sales and the absence of positive marks from the prior year, such as on subprime exposures.
    
Expenses decreased 49%, driven by lower volume and asset levels, as well as lower legal and related costs.
    
Provisions decreased $1.1 billion as credit conditions continued to improve during the year. The decline of $1.1 billion was driven by a $945 million decrease in net credit losses and an increase in loan loss reserve releases to $1.9 billion in 2011 from a release of $1.7 billion in 2010.
    
Assets declined 49%, primarily driven by sales and amortization and prepayments. Asset sales of $29 billion for 2011 generated pretax gains of approximately $0.5 billion.

2010 vs. 2009
Net income increased $6.4 billion from a net loss of $5.4 billion in 2009. The increase was driven by higher gains on asset sales and improved revenue marks, as well as improved credit.
    
Revenues increased $6.1 billion, primarily due to the improvement of revenue marks in 2010. Aggregate marks were negative $2.6 billion in 2009 as compared to positive marks of $3.4 billion in 2010. 2010 revenues included positive marks of $2.0 billion related to subprime-related direct exposure, a positive $0.5 billion CVA/DVA related to monoline insurers, and $0.4 billion on private equity positions. These positive marks were partially offset by negative revenues of $0.5 billion on Alt-A mortgages and $0.4 billion on commercial real estate.
    
Expenses decreased 37%, mainly driven by the absence of the U.S. government loss-sharing agreement exited in the fourth quarter of 2009, lower compensation, and lower transaction expenses.
    
Provisions decreased 95% as credit conditions improved. The decline in credit costs was driven by a decrease in net credit losses of $3.4 billion and a higher release of loan loss reserves and unfunded lending commitments of $1.4 billion.
    
Assets declined 41%, primarily driven by sales and amortization and prepayments. Asset sales of $39 billion for 2010 generated pretax gains of approximately $1.3 billion.



35



CORPORATE/OTHER

Corporate/Other includes global staff functions (including finance, risk, human resources, legal and compliance) and other corporate expense, global operations and technology, unallocated Corporate Treasury and Corporate items and discontinued operations. At December 31, 2011, this segment had approximately $286 billion of assets, or 15% of Citigroup’s total assets, consisting primarily of Citi’s liquidity portfolio.

In millions of dollars 2011        2010        2009
Net interest revenue $ 25 $ 828 $ (1,840 )
Non-interest revenue 861 926 (8,715 )
Revenues, net of interest expense $ 886 $ 1,754 $ (10,555 )
Total operating expenses $ 2,522 $ 1,616 $ 1,039
Provisions (releases) for loan losses and for benefits and claims (1 )
Income (loss) from continuing operations before taxes $ (1,635 ) $ 138 $ (11,594 )
Provision (benefits) for income taxes (764 ) (36 ) (4,225 )
Income (loss) from continuing operations $ (871 ) $ 174 $ (7,369 )
Income (loss) from discontinued operations, net of taxes 112 (68 ) (445 )
Net income (loss) before attribution of noncontrolling interests $ (759 ) $ 106 $ (7,814 )
Net (loss) attributable to noncontrolling interests (27 ) (48 ) (2 )
Net income (loss) $ (732 ) $ 154 $ (7,812 )

2011 vs. 2010
Net loss of $732 million reflected a decline of $886 million compared to Net income of $154 million in 2010. The decline was primarily due to the decrease in revenues coupled with the increase in expenses, as well as the absence of the net gain on the sale of Nikko Cordial Securities and the related benefit for income taxes recorded in discontinued operations in 2010. This was partially offset by the absence of the net loss on the sale of The Student Loan Corporation in 2010 and a net gain on the sale of the Egg Banking plc credit card business in 2011, each recorded in discontinued operations in the respective year.
     Revenues decreased $868 million, primarily driven by lower investment yields in Treasury and lower gains on sales of AFS securities, partially offset by gains on hedging activities and the gain on the sale of a portion of Citi’s holdings in the Housing Development Finance Corp. (HDFC) in the second quarter of 2011 (approximately $200 million pretax).
    
Expenses increased $906 million, due to higher legal and related costs and continued investment spending, primarily in technology.

2010 vs. 2009
Net loss decreased $8.0 billion, primarily due to the increase in revenues and the absence of prior-year losses related to Nikko Cordial, partially offset by the increase in expenses and the net loss on the sale of The Student Loan Corporation.
    
Revenues increased $12.3 billion, primarily due to the absence of the loss on debt extinguishment related to the repayment of TARP and the exit from the loss-sharing agreement with the U.S. government, each in the fourth quarter of 2009. Revenues also increased due to gains on sales of AFS securities, benefits from lower short-term interest rates and other improved Treasury results in 2010. These increases were partially offset by the absence of the pretax gain related to Citi’s public and private exchange offers in 2009.
    
Expenses increased $577 million, primarily due to various legal and related expenses as well as other non-compensation expenses.



36



BALANCE SHEET REVIEW

The following sets forth a general discussion of the changes in certain of the more significant line items of Citi’s Consolidated Balance Sheet during 2011. For additional information on Citigroup’s deposits, short-term and long-term debt and secured financing transactions, see “Capital Resources and Liquidity—Funding and Liquidity” below.

December 31, Increase        %
In billions of dollars 2011        2010        (decrease) Change
Assets    
Cash and deposits with banks $ 184 $ 190 $ (6 ) (3 )%
Federal funds sold and securities borrowed or purchased under agreements to resell 276 247 29 12
Trading account assets 292 317 (25 ) (8 )
Investments 293 318 (25 ) (8 )
Loans, net of unearned income and allowance for loan losses 617 608 9 1
Other assets 212 234 (22 ) (9 )
Total assets $ 1,874 $ 1,914 $ (40 ) (2 )%
Liabilities  
Deposits $ 866 $ 845 $ 21 2 %
Federal funds purchased and securities loaned or sold under agreements to repurchase 198 190 8 4
Trading account liabilities 126 129 (3 ) (2 )
Short-term borrowings and long-term debt 378 460 (82 ) (18 )
Other liabilities 126 124 2 2
Total liabilities $ 1,694 $ 1,748 $ (54 ) (3 )%
Total equity $ 180 $ 166 $ 14 8 %
Total liabilities and equity $ 1,874 $ 1,914 $ (40 ) (2 )%

ASSETS

Cash and Deposits with Banks
Cash and deposits with banks is comprised of both Cash and due from banks and Deposits with banks. Cash and due from banks includes (i) cash on hand at Citi’s domestic and overseas offices, and (ii) non-interest-bearing balances due from banks, including non-interest-bearing demand deposit accounts with correspondent banks, central banks (such as the Federal Reserve Bank), and other banks or depository institutions for normal operating purposes. Deposits with banks includes interest-bearing balances, demand deposits and time deposits held in or due from banks (including correspondent banks, central banks and other banks or depository institutions) maintained for, among other things, normal operating and regulatory reserve requirement purposes.
     During 2011, Cash and deposits with banks decreased $6 billion, or 3%, driven by a $7 billion, or 4%, decrease in Deposits with banks offset by a $1 billion, or 3%, increase in Cash and due from banks. These changes resulted from Citi’s normal operations during the year.

Federal Funds Sold and Securities Borrowed or Purchased Under Agreements to Resell (Reverse Repos)
Federal funds sold consist of unsecured advances of excess balances in reserve accounts held at the Federal Reserve Banks to third parties. During 2010 and 2011, Citi’s federal funds sold were not significant. Reverse repos and securities borrowing transactions increased by $29 billion, or 12%, during 2011, compared to 2010. The majority of this increase was due to additional secured lending to clients.
    
For further information regarding these Consolidated Balance Sheet categories, see Notes 1 and 12 to the Consolidated Financial Statements.

Trading Account Assets
Trading account assets includes debt and marketable equity securities, derivatives in a net receivable position, residual interests in securitizations and physical commodities inventory. In addition, certain assets that Citigroup has elected to carry at fair value, such as certain loans and purchase guarantees, are also included in Trading account assets.
    
During 2011, Trading account assets decreased $25 billion, or 8%, primarily due to decreases in corporate bonds ($14 billion, or 28%), foreign government securities ($9 billion, or 10%), equity securities ($4 billion, or 11%) and U.S. Treasury and federal agency securities ($4 billion, or 18%), partially offset by a $12 billion, or 24%, increase in derivative assets. A significant portion of the decline in Citi’s Trading account assets occurred in the second half of 2011 as the economic uncertainty that largely began in the third quarter of 2011 continued into the fourth quarter. Citi reduced its rates trading in the G10, particularly in Europe, given the market environment in the region, and credit trading and securitized markets also declined due to reduced client volume and less market liquidity.
    
Average Trading account assets were $270 billion in 2011, compared to $280 billion in 2010.
    
For further information on Citi’s Trading account assets, see Notes 1 and 14 to the Consolidated Financial Statements.



37



Investments
Investments consists of debt and equity securities that are available-for-sale, debt securities that are held-to-maturity, non-marketable equity securities that are carried at fair value, and non-marketable equity securities carried at cost. Debt securities include bonds, notes and redeemable preferred stock, as well as certain mortgage-backed and asset-backed securities and other structured notes. Marketable and non-marketable equity securities carried at fair value include common and nonredeemable preferred stock. Non-marketable equity securities carried at cost primarily include equity shares issued by the Federal Reserve Bank and the Federal Home Loan Banks that Citigroup is required to hold.
     During 2011, Investments decreased by $25 billion, or 8%, primarily due to a $9 billion, or 3%, decrease in available-for-sale securities (predominantly U.S. Treasury and federal agency securities), and a $18 billion decrease in held-to-maturity securities (predominately mortgage-backed and Corporate securities) that included the $12.7 billion of assets in the Special Asset Pool that were reclassified and transferred to Trading account assets in the first quarter of 2011. The majority of the remaining decrease was largely due to a combined reduction in U.S. Treasury and federal agency securities and foreign government securities, which was partially offset by an increase in U.S. government agency mortgage-backed securities, as Citi began to modestly reallocate its portfolio into higher-yielding assets.
    
For further information regarding Investments, see Notes 1 and 15 to the Consolidated Financial Statements.

Loans
Loans represent the largest asset category of Citi’s balance sheet. Citi’s total loans (as discussed throughout this section, net of unearned income) were $647 billion at December 31, 2011, compared to $649 billion at December 31, 2010. Excluding the impact of FX translation, loans increased 1% year over year. At year end 2011, Consumer and Corporate loans represented 65% and 35%, respectively, of Citi’s total loans.
    
In Citicorp, loans have increased for six consecutive quarters as of December 31, 2011, and were up 23% to $465 billion at year end 2011, as compared to $379 billion at the second quarter of 2010. Citicorp Corporate loans increased 24% year over year, and Citicorp Consumer loans were up 7% year over year. Corporate loan growth was driven by Transaction Services (37% growth), particularly from increased trade finance lending in Asia, Latin America and Europe, as well as growth in the Securities and Banking

Corporate loan book (20% growth), with increased borrowing generally across all client segments and geographies. Consumer loan growth was driven by Regional Consumer Banking, as loans increased 7% year over year, led by Asia and Latin America. The growth in Regional Consumer Banking loans reflected the economic growth in these regions, as well as the result of Citi’s investment spending in these areas, which drove growth in both cards and retail loans. North America Consumer loans increased 6%, driven by retail loans as the cards market continued to adapt to the CARD Act and other regulatory changes. In contrast, Citi Holdings loans declined 25% year over year, due to the continued run-off and asset sales in the portfolio.
    
During 2011, average loans of $644 billion yielded an average rate of 7.8%, compared to $686 billion and 8.0%, respectively, in the prior year.
    
For further information on Citi’s loan portfolios, see generally “Managing Global Risk—Credit Risk” below and Notes 1 and 16 to the Consolidated Financial Statements.

Other Assets
Other assets consists of Brokerage receivables, Goodwill, Intangibles and Mortgage servicing rights in addition to Other assets (including, among other items, loans held-for-sale, deferred tax assets, equity-method investments, interest and fees receivable, premises and equipment, certain end-user derivatives in a net receivable position, repossessed assets and other receivables). 
    
During 2011, Other assets decreased $22 billion, or 9%, primarily due to a $3 billion decrease in Brokerage receivables, a $2 billion decrease in Mortgage servicing rights, a $1 billion decrease in Intangible assets, a $1 billion decrease in Goodwill and a $15 billion decrease in Other assets.
    
For further information on Brokerage receivables, see Note 13 to the Consolidated Financial Statements. For further information regarding Goodwill and Intangible assets, see Note 18 to the Consolidated Financial Statements.



38



LIABILITIES

Deposits
Deposits represent customer funds that are payable on demand or upon maturity. For a discussion of Citi’s deposits, see “Capital Resources and Liquidity—Funding and Liquidity” below.

Federal Funds Purchased and Securities Loaned or Sold Under Agreements To Repurchase (Repos)
Federal funds purchased consist of unsecured advances of excess balances in reserve accounts held at the Federal Reserve Banks from third parties. During 2010 and 2011, Citi’s federal funds purchased were not significant.
     For further information on Citi’s secured financing transactions, including repos and securities lending transactions, see “Capital Resources and Liquidity—Funding and Liquidity” below. See also Notes 1 and 12 to the Consolidated Financial Statements for additional information on these balance sheet categories.

Trading Account Liabilities
Trading account liabilities includes securities sold, not yet purchased (short positions), and derivatives in a net payable position, as well as certain liabilities that Citigroup has elected to carry at fair value.
    
During 2011, Trading account liabilities decreased by $3 billion, or 2%, primarily due to a $3 billion, or 6%, decrease in derivative liabilities. In 2011, average Trading account liabilities were $86 billion, compared to $80 billion in 2010.
    
For further information on Citi’s Trading account liabilities, see Notes 1 and 14 to the Consolidated Financial Statements.

Debt
Debt is composed of both short-term and long-term borrowings. Long-term borrowings include senior notes, subordinated notes, trust preferred securities and securitizations. Short-term borrowings include commercial paper and borrowings from unaffiliated banks and other market participants. For further information on Citi’s long-term and short-term debt borrowings during 2011, see “Capital Resources and Liquidity—Funding and Liquidity” below and Notes 1 and 19 to the Consolidated Financial Statements.

Other Liabilities
Other liabilities consists of Brokerage payables and Other liabilities (including, among other items, accrued expenses and other payables, deferred tax liabilities, certain end-user derivatives in a net payable position, and reserves for legal claims, taxes, restructuring, unfunded lending commitments, and other matters).
    
During 2011, Other liabilities increased $2 billion, or 2%, primarily due to a $5 billion increase in Brokerage payables, offset by a $4 billion decrease in Other liabilities.
    
For further information regarding Brokerage payables, see Note 13 to the Consolidated Financial Statements.



39



SEGMENT BALANCE SHEET AT DECEMBER 31, 2011(1)

Corporate/Other,
Discontinued
Operations
Global Institutional and
Consumer        Clients        Subtotal        Citi        Consolidating        Total Citigroup
In millions of dollars Banking Group Citicorp Holdings Eliminations Consolidated
Assets                  
       Cash and due from banks   $ 9,020   $ 17,439 $ 26,459   $ 1,105           $ 1,137        $ 28,701
       Deposits with banks 7,659 52,249 59,908 1,342   94,534 155,784
       Federal funds sold and securities borrowed or purchased  
              under agreements to resell 3,269 269,295 272,564 3,285 275,849
       Brokerage receivables 16,162 16,162 11,181 434 27,777
       Trading account assets 13,224 265,577 278,801 12,933 291,734
       Investments 27,740 95,601 123,341 30,202 139,870 293,413
       Loans, net of unearned income
       Consumer 246,545 246,545 177,186 423,731
       Corporate 218,779 218,779 4,732 223,511
       Loans, net of unearned income $ 246,545 $ 218,779 $ 465,324 $ 181,918 $ $ 647,242
       Allowance for loan losses (10,040 ) (2,615 ) (12,655 ) (17,460 ) (30,115 )
       Total loans, net $ 236,505 $ 216,164 $ 452,669 $ 164,458 $ $ 617,127
       Goodwill 10,236 10,737 20,973 4,440 25,413
       Intangible assets (other than MSRs) 1,915 897 2,812 3,788 6,600
       Mortgage servicing rights (MSRs) 1,389 88 1,477 1,092 2,569
       Other assets 29,393 34,282 63,675 35,392 49,844 148,911
Total assets $ 340,350 $ 978,491 $ 1,318,841 $ 269,218 $ 285,819 $ 1,873,878
Liabilities and equity
       Total deposits $ 312,847 $ 483,557 $ 796,404 $ 64,391 $ 5,141 $ 865,936
       Federal funds purchased and securities loaned or sold
              under agreements to repurchase 6,238 192,134 198,372 1 198,373
       Brokerage payables 55,885 55,885 7 804 56,696
       Trading account liabilities 50 124,684 124,734 1,348 126,082
       Short-term borrowings 213 42,121 42,334 402 11,705 54,441
       Long-term debt 3,077 63,779 66,856 9,884 246,765 323,505
       Other liabilities 15,577 25,034 40,611 11,911 16,750 69,272
       Net inter-segment funding (lending) 2,348 (8,703 ) (6,355 ) 181,274 (174,919 )
       Total Citigroup stockholders’ equity 177,806 177,806
       Noncontrolling interest 1,767 1,767
Total equity $ $ $  — $ $ 179,573 $ 179,573
Total liabilities and equity $ 340,350 $ 978,491 $ 1,318,841 $ 269,218 $ 285,819 $ 1,873,878

(1)        The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment as of December 31, 2011. The respective segment information depicts the assets and liabilities managed by each segment as of such date. While this presentation is not defined by GAAP, Citi believes that these non-GAAP financial measures enhance investors’ understanding of the balance sheet components managed by the underlying business segments, as well as the beneficial inter-relationship of the asset and liability dynamics of the balance sheet components among Citi’s business segments.

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CAPITAL RESOURCES AND LIQUIDITY

CAPITAL RESOURCES

Overview
Citi generates capital through earnings from its operating businesses. Citi may augment its capital through issuances of common stock, perpetual preferred stock and equity issued through awards under employee benefit plans, among other issuances. Citi has also augmented its regulatory capital through the issuance of subordinated debt underlying trust preferred securities, although the treatment of such instruments as regulatory capital will be phased out under Basel III and The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (see “Regulatory Capital Standards” and “Risk Factors—Regulatory Risks” below). Further, the impact of future events on Citi’s business results, such as corporate and asset dispositions, as well as changes in regulatory and accounting standards, may also affect Citi’s capital levels.
     Capital is used primarily to support assets in Citi’s businesses and to absorb market, credit or operational losses. Capital may be used for other purposes, such as to pay dividends or repurchase common stock. However, Citi’s ability to pay regular quarterly cash dividends of more than $0.01 per share, or to redeem or repurchase equity securities or trust preferred securities, is currently restricted (which restriction may be waived) due to Citi’s agreements with certain U.S. government entities, generally for so long as the U.S. government continues to hold any Citi trust preferred securities acquired in connection with the exchange offers consummated in 2009. (See “Risk Factors—Business Risks” below.)
    
Citigroup’s capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with Citi’s risk profile and all applicable regulatory standards and guidelines, as well as external rating agency considerations. Senior management is responsible for the capital and liquidity management process mainly through Citigroup’s Finance and Asset and Liability Committee (FinALCO), with oversight from the Risk Management and Finance Committee of Citigroup’s Board of Directors. Among other things, FinALCO’s responsibilities include: determining the financial structure of Citigroup and its principal subsidiaries; ensuring that Citigroup and its regulated entities are adequately capitalized in consultation with its regulators; determining appropriate asset levels and return hurdles for Citigroup and individual businesses; reviewing the funding and capital markets plan for Citigroup; and setting and monitoring corporate and bank liquidity levels and the impact of currency translation on non-U.S. capital. Asset and liability committees are also established globally and for each region, country and/or major line of business.

Capital Ratios
Citigroup is subject to the risk-based capital guidelines issued by the Federal Reserve Board. Historically, capital adequacy has been measured, in part, based on two risk-based capital ratios, the Tier 1 Capital and Total Capital (Tier 1 Capital + Tier 2 Capital) ratios. Tier 1 Capital consists of the sum of “core capital elements,” such as qualifying common stockholders’ equity, as

adjusted, qualifying noncontrolling interests, and qualifying trust preferred securities, principally reduced by goodwill, other disallowed intangible assets, and disallowed deferred tax assets. Total Capital also includes “supplementary” Tier 2 Capital elements, such as qualifying subordinated debt and a limited portion of the allowance for credit losses. Both measures of capital adequacy are stated as a percentage of risk-weighted assets.
    
In 2009, the U.S. banking regulators developed a new measure of capital termed “Tier 1 Common,” which is defined as Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests, and qualifying trust preferred securities. For more detail on all of these capital metrics, see “Components of Capital Under Regulatory Guidelines” below.
    
Citigroup’s risk-weighted assets are principally derived from application of the risk-based capital guidelines related to the measurement of credit risk. Pursuant to these guidelines, on-balance-sheet assets and the credit equivalent amount of certain off-balance-sheet exposures (such as financial guarantees, unfunded lending commitments, letters of credit and derivatives) are assigned to one of several prescribed risk-weight categories based upon the perceived credit risk associated with the obligor or, if relevant, the guarantor, the nature of the collateral, or external credit ratings. Risk-weighted assets also incorporate a measure for market risk on covered trading account positions and all foreign exchange and commodity positions whether or not carried in the trading account. Excluded from risk-weighted assets are any assets, such as goodwill and deferred tax assets, to the extent required to be deducted from regulatory capital. See “Components of Capital Under Regulatory Guidelines” below.
    
Citigroup is also subject to a Leverage ratio requirement, a non-risk-based measure of capital adequacy, which is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets.
    
To be “well capitalized” under current federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital ratio of at least 6%, a Total Capital ratio of at least 10%, and not be subject to a Federal Reserve Board directive to maintain higher capital levels. In addition, the Federal Reserve Board expects bank holding companies to maintain a minimum Leverage ratio of 3% or 4%, depending on factors specified in its regulations. The following table sets forth Citigroup’s regulatory capital ratios as of December 31, 2011 and December 31, 2010:

Citigroup Regulatory Capital Ratios

At year end 2011       2010
Tier 1 Common 11.80 % 10.75 %
Tier 1 Capital 13.55 12.91
Total Capital (Tier 1 Capital + Tier 2 Capital) 16.99 16.59
Leverage 7.19 6.60

     As indicated in the table above, Citigroup was “well capitalized” under the current federal bank regulatory agency definitions as of December 31, 2011 and December 31, 2010.



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Components of Capital Under Regulatory Guidelines

In millions of dollars at year end 2011       2010
Tier 1 Common Capital
Citigroup common stockholders’ equity $ 177,494 $ 163,156
Less: Net unrealized losses on securities available-for-sale, net of tax (1) (35 ) (2,395 )
Less: Accumulated net losses on cash flow hedges, net of tax (2,820 ) (2,650 )
Less: Pension liability adjustment, net of tax (2) (4,282 ) (4,105 )
Less: Cumulative effect included in fair value of financial liabilities attributable to the change in
       own creditworthiness, net of tax (3) 1,265 164
Less: Disallowed deferred tax assets (4) 37,980 34,946
Less: Intangible assets:
       Goodwill 25,413 26,152
       Other disallowed intangible assets 4,550 5,211
Other (569 ) (698 )
Total Tier 1 Common Capital $ 114,854 $ 105,135
Tier 1 Capital
Qualifying perpetual preferred stock $ 312 $ 312
Qualifying mandatorily redeemable securities of subsidiary trusts 15,929 18,003
Qualifying noncontrolling interests 779 868
Other 1,875
Total Tier 1 Capital $ 131,874 $ 126,193
Tier 2 Capital  
Allowance for credit losses (5) $ 12,423 $ 12,627
Qualifying subordinated debt (6) 20,429   22,423
Net unrealized pretax gains on available-for-sale equity securities (1) 658 976
Total Tier 2 Capital $ 33,510 $ 36,026
Total Capital (Tier 1 Capital + Tier 2 Capital) $ 165,384 $ 162,219
Risk-weighted assets (RWA) (7) $ 973,369 $ 977,629

(1)       Tier 1 Capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values, in accordance with risk-based capital guidelines. In arriving at Tier 1 Capital, banking organizations are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax. Banking organizations are permitted to include in Tier 2 Capital up to 45% of net unrealized pretax gains on available-for-sale equity securities with readily determinable fair values.
(2) The Federal Reserve Board granted interim capital relief for the impact of ASC 715-20, Compensation—Retirement Benefits—Defined Benefits Plans (formerly SFAS 158).
(3) The impact of changes in Citigroup’s own creditworthiness in valuing financial liabilities for which the fair value option has been elected is excluded from Tier 1 Capital, in accordance with risk-based capital guidelines.
(4) Of Citi’s approximately $52 billion of net deferred tax assets at December 31, 2011, approximately $11 billion of such assets were includable without limitation in regulatory capital pursuant to risk-based capital guidelines, while approximately $38 billion of such assets exceeded the limitation imposed by these guidelines and, as “disallowed deferred tax assets,” were deducted in arriving at Tier 1 Capital. Citigroup’s approximately $3 billion of other net deferred tax assets primarily represented effects of the pension liability adjustment, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines.
(5) Includable up to 1.25% of risk-weighted assets. Any excess allowance for credit losses is deducted in arriving at risk-weighted assets.
(6) Includes qualifying subordinated debt in an amount not exceeding 50% of Tier 1 Capital.
(7) Includes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $67.0 billion for interest rate, commodity and equity derivative contracts, foreign exchange contracts, and credit derivatives as of December 31, 2011, compared with $62.1 billion as of December 31, 2010. Market risk equivalent assets included in risk-weighted assets amounted to $46.8 billion at December 31, 2011 and $51.4 billion at December 31, 2010. Risk-weighted assets also include the effect of certain other off-balance-sheet exposures, such as unused lending commitments and letters of credit, and reflect deductions such as certain intangible assets and any excess allowance for credit losses.

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Common Stockholders’ Equity
Citigroup’s common stockholders’ equity increased during 2011 by $14.3 billion to $177.5 billion, and represented 9% of total assets as of December 31, 2011. The table below summarizes the change in Citigroup’s common stockholders’ equity during 2011:

In billions of dollars
Common stockholders’ equity, December 31, 2010 $ 163.2
Citigroup’s net income 11.1
Employee benefit plans and other activities (1) 0.9
Conversion of ADIA Upper DECs equity units purchase  
       contracts to common stock 3.8
Net change in accumulated other comprehensive income (loss), net of tax (1.5 )
Common stockholders’ equity, December 31, 2011 $ 177.5

(1)       As of December 31, 2011, $6.7 billion of common stock repurchases remained under Citi’s authorized repurchase programs. No material repurchases were made in 2011.

Tangible Common Equity and Tangible Book Value
Per Share
Tangible common equity (TCE), as defined by Citigroup, represents common equity less goodwill, intangible assets (other than mortgage servicing rights (MSRs)), and related net deferred tax assets. Other companies may calculate TCE in a manner different from that of Citigroup. Citi’s TCE was $145.4 billion at December 31, 2011 and $129.4 billion at December 31, 2010.
     The TCE ratio (TCE divided by risk-weighted assets) was 14.9% at December 31, 2011 and 13.2% at December 31, 2010.
     TCE and tangible book value per share, as well as related ratios, are capital adequacy metrics used and relied upon by investors and industry analysts; however, they are non-GAAP financial measures for SEC purposes. A reconciliation of Citigroup’s total stockholders’ equity to TCE, and book value per share to tangible book value per share, as of December 31, 2011 and December 31, 2010, follows:

In millions of dollars or shares at year end,
except ratios and per-share data
2011       2010
Total Citigroup stockholders’ equity $ 177,806 $ 163,468
Less:
       Preferred stock 312 312
Common equity $ 177,494 $ 163,156
Less:
       Goodwill 25,413 26,152
       Intangible assets (other than MSRs) 6,600 7,504
       Related net deferred tax assets 44 56
Tangible common equity (TCE) $ 145,437 $ 129,444  
Tangible assets
GAAP assets