0000831001-15-000157.txt : 20151030 0000831001-15-000157.hdr.sgml : 20151030 20151030162544 ACCESSION NUMBER: 0000831001-15-000157 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 20150930 FILED AS OF DATE: 20151030 DATE AS OF CHANGE: 20151030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIGROUP INC CENTRAL INDEX KEY: 0000831001 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 521568099 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09924 FILM NUMBER: 151187817 BUSINESS ADDRESS: STREET 1: 399 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2125591000 MAIL ADDRESS: STREET 1: 399 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS GROUP INC DATE OF NAME CHANGE: 19950519 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS INC DATE OF NAME CHANGE: 19940103 FORMER COMPANY: FORMER CONFORMED NAME: PRIMERICA CORP /NEW/ DATE OF NAME CHANGE: 19920703 10-Q 1 c-9302015x10q.htm 10-Q 10-Q
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
Commission file number 1-9924
Citigroup Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
 
52-1568099
(I.R.S. Employer Identification No.)
399 Park Avenue, New York, NY
(Address of principal executive offices)
 
10022
(Zip code)
(212) 559-1000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
 
Non-accelerated filer o
 (Do not check if a smaller reporting company)
 
Smaller reporting company o

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

Number of shares of Citigroup Inc. common stock outstanding on September 30, 2015: 2,978,990,460

Available on the web at www.citigroup.com
 




CITIGROUP INC THIRD QUARTER 2015—FORM 10-Q
OVERVIEW
MANAGEMENT'S DISCUSSION AND
  ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS
Executive Summary
Summary of Selected Financial Data
SEGMENT AND BUSINESS—INCOME (LOSS)
  AND REVENUES
CITICORP
Global Consumer Banking (GCB)
North America GCB
Latin America GCB
Asia GCB
Institutional Clients Group
Corporate/Other
CITI HOLDINGS
BALANCE SHEET REVIEW
OFF-BALANCE SHEET
  ARRANGEMENTS
CAPITAL RESOURCES
   Overview
 
   Capital Management
 
   Current Regulatory Capital Standards
 
       Basel III (Full Implementation)
 
  Regulatory Capital Standards Developments
 
       Tangible Common Equity, Tangible Book Value
          Per Share and Book Value Per Share
 
Managing Global Risk Table of Contents
  Credit, Market (including Funding and Liquidity),
  and Country and Risk Sections
MANAGING GLOBAL RISK
INCOME TAXES
DISCLOSURE CONTROLS AND PROCEDURES
DISCLOSURE PURSUANT TO SECTION 219 OF THE IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT
FORWARD-LOOKING STATEMENTS
FINANCIAL STATEMENTS AND NOTES
  TABLE OF CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
   Legal Proceedings (See Note 25 to the
     Consolidated Financial Statements)
 
UNREGISTERED SALES OF EQUITY,
  PURCHASES OF EQUITY SECURITIES,
  DIVIDENDS


1



OVERVIEW

This Quarterly Report on Form 10-Q should be read in conjunction with Citigroup’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the U.S. Securities and Exchange Commission (SEC) on February 25, 2015, including the historical audited consolidated financial statements of Citigroup reflecting the adoption of an accounting change (See Note 1 to the Consolidated Financial Statements) and certain realignments and reclassifications set forth in Citigroup’s Current Report on Form 8-K filed with the SEC on May 27, 2015 (2014 Annual Report on Form 10-K), and Citigroup’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015 filed with the SEC on May 11, 2015 (First Quarter of 2015 Form 10-Q) and August 3, 2015 (Second Quarter of 2015 Form 10-Q).
Additional information about Citigroup is available on Citi’s website at www.citigroup.com. Citigroup’s recent annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, as well as other filings with the SEC, are available free of charge through Citi’s website by clicking on the “Investors” page and selecting “All SEC Filings.” The SEC’s website also contains current reports, information statements, and other information regarding Citi at www.sec.gov.
Certain other reclassifications have been made to the prior periods’ presentation.
Throughout this report, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.

 




2



Citigroup is managed pursuant to the following segments:
(1)
For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented.
Note: Reflects certain readjustments and reclassifications. See “Overview” above for additional information.

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

3



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

EXECUTIVE SUMMARY

Third Quarter of 2015—Solid Results and Progress on Execution Priorities Despite Continued Challenging Environment
Citi’s third quarter of 2015 reflected solid overall results and steady progress on its execution priorities, including:

Efficient resource allocation and disciplined expense management: Citi maintained disciplined expense management during the third quarter of 2015, even as it continued to absorb increased regulatory and compliance costs in Citicorp. Citi’s expense management in the current quarter was further aided by lower legal and related expenses and lower repositioning expenses in Citicorp as compared to the prior-year period, as discussed further below.
Continued wind down of Citi Holdings, while maintaining profitability: Citi continued to wind down Citi Holdings, including reducing its assets by $27 billion, or 20%, from the prior-year period. In addition, as of September 30, 2015, Citi had executed agreements to sell approximately $37 billion of additional assets in Citi Holdings, including OneMain Financial (for additional information, see “Citi Holdings” below). As discussed further below, Citi Holdings also maintained profitability in the third quarter of 2015.
Utilization of deferred tax assets (DTAs): Citi utilized approximately $2.1 billion in DTAs during the first nine months of 2015, including approximately $700 million during the third quarter of 2015 (for additional information, see “Income Taxes” below).

Citi was able to achieve these results and make ongoing progress on its execution priorities during a quarter with continued market volatility and uncertainties, including macroeconomic uncertainties, slower global growth and market volatility resulting from, among other things, expectations as to when U.S. interest rates may begin to rise. For more information on these and other ongoing trends and risks that could impact Citi’s businesses, results of operations and financial condition, see the discussion of each businesses’ results of operations, “Forward-Looking Statements” and Note 25 to the Consolidated Financial Statements below, as well as the “Risk Factors” section of Citi’s 2014 Annual Report on Form 10-K.

Third Quarter of 2015 Summary Results

Citigroup
Citigroup reported net income of $4.3 billion or $1.35 per diluted share, compared to $2.8 billion or $0.88 per share in the prior-year period. Results in the third quarter of 2015 included $196 million ($127 million after-tax) of CVA/DVA, compared to negative $371 million (negative $228 million after-tax) in the third quarter of 2014.
 
Excluding the impact of CVA/DVA in both periods, Citi reported net income of $4.2 billion in the third quarter of 2015, or $1.31 per diluted share, compared to $3.1 billion, or $0.95 per share, in the prior-year period. (Citi’s results of operations excluding the impact of CVA/DVA are a non-GAAP financial measure.) The 36% increase from the prior-year period was primarily driven by lower expenses, lower net credit losses and a lower effective tax rate (for additional information, see “Income Taxes” below), partially offset by lower revenues and a reduced net loan loss reserve release.
Citi’s revenues, net of interest expense, were $18.7 billion in the third quarter of 2015, a decrease of 5% from the prior-year period. Excluding CVA/DVA, revenues were $18.5 billion, down 8% from the prior-year period, as Citicorp revenues decreased by 5% and Citi Holdings revenues decreased 32%. Excluding CVA/DVA and the impact of foreign exchange translation into U.S. dollars for reporting purposes (FX translation), Citigroup revenues decreased 2% from the prior-year period, as a 1% increase in Citicorp revenues was more than offset by the decrease in Citi Holdings revenues. (Citi’s results of operations excluding the impact of FX translation are non-GAAP financial measures.)

Expenses
Citigroup expenses decreased 18% versus the third quarter of 2014 to $10.7 billion driven by lower legal and related expenses ($376 million compared to $1.6 billion in the prior-year period) and repositioning costs ($81 million compared to $382 million in the prior-year period), as well as the impact of FX translation (which lowered expenses by approximately $759 million in the third quarter of 2015 compared to the prior-year period). Excluding the impact of FX translation, Citigroup’s expenses declined 13%, mainly driven by the lower legal and related expenses and repositioning costs.
Excluding the impact of FX translation on Citicorp, which lowered reported expenses by approximately $698 million in the third quarter of 2015 compared to the prior-year period, Citicorp expenses decreased 13% mainly driven by significantly lower legal and related expenses and repositioning costs. Citicorp expenses in the third quarter of 2015 included legal and related expenses of $259 million, compared to $1.4 billion in the prior-year period, and $41 million of repositioning charges, compared to $370 million in the prior-year period.
Citi Holdings’ expenses were $1.1 billion, down 15% from the prior-year period, primarily driven by the ongoing decline in Citi Holdings assets.

Credit Costs
Citi’s total provisions for credit losses and for benefits and claims of $1.8 billion increased 5% from the prior-year period, as a lower net loan loss reserve release was partially offset by lower net credit losses.
Net credit losses of $1.7 billion declined 21% versus the prior-year period. Consumer net credit losses declined 24% to $1.6 billion, reflecting continued improvements in North


4



America Citi-branded cards and Citi retail services in Citicorp as well as the North America mortgage portfolio within Citi Holdings. Corporate net credit losses increased to $46 million from negative $18 million in the prior-year period, with the increase related to a limited number of corporate loans.
The net release of the allowance for loan losses and unfunded lending commitments was $16 million in the third quarter of 2015, compared to a $552 million release in the prior-year period. Citicorp’s net reserve build was $212 million, compared to a net loan loss reserve release of $414 million in the prior-year period. The build in the third quarter of 2015 was primarily driven by net loan loss reserve builds in the Institutional Clients Group (ICG), including approximately $140 million for energy and energy-related exposures (for additional information, see “Institutional Clients Group” and “Credit Risk” below). Citi Holdings’ net reserve release increased $90 million from the prior-year period to $228 million, primarily reflecting the impact of asset sales.
For additional information on Citi’s credit costs and allowance for loan losses, including delinquency trends in its credit portfolios, see “Credit Risk” below.

Capital
Citi continued to grow its regulatory capital during the third quarter of 2015, even as it returned approximately $2.1 billion of capital to its shareholders in the form of common stock repurchases and dividends. Citigroup’s Tier 1 Capital and Common Equity Tier 1 Capital ratios, on a fully implemented basis, were 12.9% and 11.7% as of September 30, 2015, respectively, compared to 11.4% and 10.6% as of September 30, 2014 (all based on the Basel III Advanced Approaches for determining risk-weighted assets). Citigroup’s Supplementary Leverage ratio as of September 30, 2015, on a fully implemented basis, was 6.9%, compared to 6.0% as of September 30, 2014. For additional information on Citi’s capital ratios and related components, including the impact of Citi’s DTAs on its capital ratios, see “Capital Resources” and “Income Taxes” below.

Citicorp
Citicorp net income increased 62% from the prior-year period to $4.3 billion. CVA/DVA, recorded in ICG, was $221 million ($143 million after-tax) in the third quarter of 2015, compared to negative $316 million (negative $194 million after-tax) in the prior-year period (for a summary of CVA/DVA by business within ICG, see “Institutional Clients Group” below).
Excluding CVA/DVA, Citicorp’s net income was $4.1 billion, up 46% from the prior-year period, primarily driven by lower expenses and a lower effective tax rate, partially offset by lower revenues and the higher cost of credit.
Citicorp revenues, net of interest expense, decreased 2% from the prior-year period to $17.3 billion. Excluding CVA/DVA, Citicorp revenues were $17.1 billion in the third quarter of 2015, down 5% from the prior-year period, reflecting a 3% decline in ICG and an 8% decrease in Global Consumer Banking (GCB) revenues. As referenced above, excluding CVA/DVA and the impact of FX translation, Citicorp’s revenues grew 1%.
 
GCB revenues of $8.5 billion decreased 8% versus the prior-year period. Excluding the impact of FX translation, GCB revenues decreased 1%, as decreases in North America GCB and Asia GCB were partially offset by an increase in Latin America GCB. North America GCB revenues decreased 4% to $4.8 billion, as lower revenues in Citi-branded cards and Citi retail services were partially offset by higher retail banking revenues. Citi-branded cards revenues of $1.9 billion were down 9% versus the prior-year period, reflecting the continued impact of lower average loans as well as an increase in acquisition and rewards costs related to new account acquisitions. Citi retail services revenues of $1.6 billion declined 2% versus the prior-year period, reflecting the continued impact of lower fuel prices and higher contractual partner payments. Retail banking revenues increased 3% from the prior-year period to $1.3 billion, reflecting continued loan and deposit growth and improved deposit spreads, partially offset by a lower mortgage repurchase reserve release as compared to the prior-year period. North America GCB average deposits of $172 billion increased 1% year-over-year and average retail loans of $50 billion grew 7%. Average card loans of $107 billion decreased 2%, while purchase sales of $66 billion increased 5% versus the prior-year period. For additional information on the results of operations of North America GCB for the third quarter of 2015, see “Global Consumer BankingNorth America GCB” below.
International GCB revenues (consisting of EMEA GCB, Latin America GCB and Asia GCB) decreased 13% versus the prior-year period to $3.6 billion. Excluding the impact of FX translation, international GCB revenues increased 2% versus the prior-year period. Latin America GCB revenues increased 11% versus the prior-year period, including a gain of approximately $180 million related to the sale of Citi’s merchant acquiring business in Mexico. Excluding the gain, Latin America GCB revenues were approximately unchanged from the prior-year period, as modest increases in loan and deposit balances were offset by the continued impact of spread compression. Asia GCB revenues declined 6% versus the prior-year period, reflecting lower investment sales revenues as well as continued high payment rates and the ongoing impact of regulatory changes in cards, partially offset by growth in lending, deposit and insurance products. For additional information on the results of operations of Latin America GCB and Asia GCB (which includes the results of operations of EMEA GCB for reporting purposes) for the third quarter of 2015, including the impact of FX translation, see “Global Consumer Banking” below. Year-over-year, international GCB average deposits of $126 billion increased 4%, average retail loans of $97 billion increased 3%, investment sales of $18 billion decreased 27%, average card loans of $25 billion increased 2% and card purchase sales of $25 billion increased 5%, all excluding the impact of FX translation.
ICG revenues were $8.6 billion in the third quarter of 2015, up 3% from the prior-year period. Excluding CVA/DVA, ICG revenues were $8.4 billion, down 3% from the prior-year period. Banking revenues of $4.0 billion, excluding CVA/DVA and the impact of mark-to-market gains on hedges related to accrual loans within corporate lending (see below),


5



decreased 7% from the prior-year period, as lower underwriting activity and advisory revenues within investment banking as well as the impact of FX translation was only partially offset by continued growth in the private bank. Investment banking revenues of $937 million decreased 25% versus the prior-year period. Advisory revenues decreased 24% from strong results in the prior-year period to $243 million. Debt underwriting revenues decreased 17% to $525 million, driven by high yield and leveraged loans, while equity underwriting decreased 43% to $169 million, reflecting lower industry-wide underwriting activity during the quarter. Private bank revenues, excluding CVA/DVA, increased 8% to $715 million from the prior-year period, driven by strong growth in managed investments revenue as well as higher loan and deposit balances.
Corporate lending revenues increased 41% to $755 million, including $352 million of mark-to-market gains on hedges related to accrual loans, compared to a $91 million gain in the prior-year period. Excluding the mark-to-market impact on hedges related to accrual loans in both periods, corporate lending revenues declined 9% versus the prior-year period to $403 million. Excluding the impact of FX translation and the mark-to-market impact of loan hedges, corporate lending revenues decreased 4% year-over-year, as growth in average loans was more than offset by the impact of lower spreads and the impact of loan sale activity. Treasury and trade solutions revenues of $1.9 billion were approximately unchanged versus the prior-year period. Excluding the impact of FX translation, treasury and trade solutions revenues increased 7%, as continued growth in deposit balances and spreads was partially offset by lower trade revenues.
Markets and securities services revenues of $4.0 billion, excluding CVA/DVA, decreased 5% from the prior-year period. Fixed income markets revenues of $2.6 billion, excluding CVA/DVA, decreased 16% from the prior-year period, reflecting lower client activity levels and a less favorable trading environment versus the prior-year period. Equity markets revenues of $996 million, excluding CVA/DVA, increased 31% versus the prior-year period. Excluding the impact of reversing $140 million of the previously-disclosed valuation adjustment recognized in the second quarter of 2015 ($175 million), equity markets revenues increased 12% from the prior-year period driven by growth in derivatives. Securities services revenues of $513 million decreased 4% versus the prior-year period, but increased 7% excluding the impact of FX translation, reflecting increased activity and higher client balances. For additional information on the results of operations of ICG for the third quarter of 2015, including the impact of CVA/DVA on the applicable businesses, see “Institutional Clients Group” below.
Corporate/Other revenues were $218 million, a $136 million increase from the prior-year period, primarily driven by gains on debt buybacks. For additional information on the results of operations of Corporate/Other for the third quarter of 2015, see “Corporate/Other” below.
Citicorp end-of-period loans were approximately unchanged from the prior-year period at $567 billion, as consumer loans decreased 5% while corporate loans increased
 
4%. Excluding the impact of FX translation, Citicorp loans grew 5%, with 8% growth in corporate loans and 2% growth in consumer loans.

Citi Holdings
Citi Holdings’ net income was $31 million in the third quarter of 2015, compared to $212 million in the prior-year period. CVA/DVA was negative $25 million (negative $16 million after-tax) in the third quarter of 2015, compared to negative $55 million (negative $34 million after-tax) in the prior-year period. Excluding the impact of CVA/DVA in both periods, Citi Holdings’ net income was $47 million in the current quarter, compared to $246 million in the prior-year period, primarily reflecting lower revenues, partially offset by lower expenses and lower cost of credit.
Citi Holdings’ revenues decreased 32% to $1.4 billion from the prior-year period, primarily driven by a lower level of net gains on asset sales as well as the overall wind-down of the portfolio. For additional information on the results of operations of Citi Holdings in the third quarter of 2015, see “Citi Holdings” below.
At the end of the current quarter, Citi Holdings’ assets were $110 billion, 20% below the prior-year period, and represented approximately 6% of Citi’s total GAAP assets and 13% of its risk-weighted assets under Basel III (based on the Advanced Approaches for determining risk-weighted assets).








6



RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1
Citigroup Inc. and Consolidated Subsidiaries
 
Third Quarter
 
Nine Months
 
In millions of dollars, except per-share amounts and ratios
2015
2014
% Change
2015
2014
% Change
Net interest revenue
$
11,773

$
12,187

(3
)%
$
35,167

$
35,892

(2
)%
Non-interest revenue
6,919

7,502

(8
)
22,731

23,428

(3
)%
Revenues, net of interest expense
$
18,692

$
19,689

(5
)%
$
57,898

$
59,320

(2
)%
Operating expenses
10,669

12,955

(18
)
32,481

40,625

(20
)%
Provisions for credit losses and for benefits and claims
1,836

1,750

5

5,399

5,454

(1
)%
Income from continuing operations before income taxes
$
6,187

$
4,984

24
 %
$
20,018

$
13,241

51
 %
Income taxes
1,881

2,068

(9
)
6,037

6,120

(1
)%
Income from continuing operations
$
4,306

$
2,916

48
 %
$
13,981

$
7,121

96
 %
Income (loss) from discontinued operations, net of taxes (1)
(10
)
(16
)
38
 %
(9
)
(1
)
NM

Net income before attribution of noncontrolling interests
$
4,296

$
2,900

48
 %
$
13,972

$
7,120

96
 %
Net income attributable to noncontrolling interests
5

59

(92
)
65

154

(58
)%
Citigroup’s net income
$
4,291

$
2,841

51

$
13,907

$
6,966

100
 %
Less:
 
 


 
 
 
Preferred dividends—Basic
$
174

$
128

36
 %
$
504

$
352

43
 %
Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS
56

44

27

182

108

69
 %
Income allocated to unrestricted common shareholders for basic and diluted EPS
$
4,061

$
2,669

52
 %
$
13,221

$
6,506

NM

Earnings per share
 
 


 
 

 
Basic
 
 


 
 

 
Income from continuing operations
$
1.36

$
0.89

53
 %
$
4.39

$
2.14

NM

Net income
1.36

0.88

55

4.38

2.14

NM

Diluted
 
 


 
 
 
Income from continuing operations
$
1.36

$
0.88

55
 %
$
4.38

$
2.14

NM

Net income
1.35

0.88

53

4.38

2.14

NM

Dividends declared per common share
0.05

0.01

NM

0.11

0.03

NM


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

7



SUMMARY OF SELECTED FINANCIAL DATA—PAGE 2
 
Citigroup Inc. and Consolidated Subsidiaries
 
Third Quarter
 
Nine Months
 
In millions of dollars, except per-share amounts, ratios and direct staff
2015
2014
% Change
2015
2014
% Change
At September 30:
 
 
 
 
 
 
Total assets
$
1,808,356

$
1,882,505

(4
)%
 
 
 
Total deposits (2)
904,243

942,655

(4
)
 
 
 
Long-term debt
213,533

223,842

(5
)
 
 
 
Citigroup common stockholders’ equity
205,630

202,960

1

 
 
 
Total Citigroup stockholders’ equity
220,848

211,928

4

 
 
 
Direct staff (in thousands)
239

243

(2
)
 
 
 
Performance metrics
 
 


 
 
 
Return on average assets
0.94
%
0.59
%


1.01
%
0.49
%
 
Return on average common stockholders’ equity (3)
8.0

5.3



8.8

4.4

 
Return on average total stockholders’ equity (3)
7.7

5.3



8.6

4.4

 
Efficiency ratio (Operating expenses/Total revenues)
57

66



56

68

 
Basel III ratios—full implementation
 
 
 
 
 
 
Common Equity Tier 1 Capital (4)
11.67
%
10.64
%
 
 
 
 
Tier 1 Capital (4)
12.91

11.41

 
 
 
 
Total Capital (4)
14.60

12.76

 
 
 
 
Supplementary Leverage ratio (5)
6.85

5.98

 
 
 
 
Citigroup common stockholders’ equity to assets
11.37
%
10.78
%
 


 
 
Total Citigroup stockholders’ equity to assets
12.21

11.26

 


 
 
Dividend payout ratio (6)
4

1

 
 
 
 
Book value per common share
$
69.03

$
66.99

3
 %


 
 
Ratio of earnings to fixed charges and preferred stock dividends
2.92x

2.40x

 
3.04x

2.18x

 
(1)
Discontinued operations include Credicard, Citi Capital Advisors and Egg Banking credit card business. See Note 2 to the Consolidated Financial Statements for additional information on Citi’s discontinued operations.
(2)
Reflects reclassification of approximately $21 billion of deposits to held-for-sale (Other liabilities) as a result of the agreement in December 2014 to sell Citi’s retail banking business in Japan. See Note 2 to the Consolidated Financial Statements.
(3)
The return on average common stockholders’ equity is calculated using net income less preferred stock dividends divided by average common stockholders’ equity. The return on average total Citigroup stockholders’ equity is calculated using net income divided by average Citigroup stockholders’ equity.
(4)
Capital ratios based on the U.S. Basel III rules, with full implementation assumed for capital components; risk-weighted assets based on the Advanced Approaches for determining total risk-weighted assets. See “Capital Resources” below.
(5)
Citi’s Supplementary Leverage ratio (SLR) is based on the U.S. Basel III rules, on a fully-implemented basis. Citi’s SLR represents the ratio of Tier 1 Capital to Total Leverage Exposure (TLE). TLE is the sum of the daily average of on-balance sheet assets for the quarter and the average of certain off-balance sheet exposures calculated as of the last day of each month in the quarter, less applicable Tier 1 Capital deductions. See “Capital Resources” below.
(6) Dividends declared per common share as a percentage of net income per diluted share.

NM Not meaningful

8



SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
The following tables show the income (loss) and revenues for Citigroup on a segment and business view:
CITIGROUP INCOME
 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars
2015
2014
2015
2014
Income (loss) from continuing operations
 
 
 
 
 
 
CITICORP
 
 
 
 
 
 
Global Consumer Banking
 
 
 
 
 
 
North America
$
1,063

$
1,183

(10
)%
$
3,270

$
3,275

 %
Latin America
312

329

(5
)
781

895

(13
)
Asia (1)
307

382

(20
)
986

961

3

Total
$
1,682

$
1,894

(11
)%
$
5,037

$
5,131

(2
)%
Institutional Clients Group


 




 


North America
$
928

$
920

1
 %
$
2,921

$
3,321

(12
)%
EMEA
522

477

9

2,063

1,839

12

Latin America
389

294

32

1,272

1,061

20

Asia
571

652

(12
)
1,953

1,636

19

Total
$
2,410

$
2,343

3
 %
$
8,209

$
7,857

4
 %
Corporate/Other
$
183

$
(1,537
)
NM

$
394

$
(2,309
)
NM

Total Citicorp
$
4,275

$
2,700

58
 %
$
13,640

$
10,679

28
 %
Citi Holdings
$
31

$
216

(86
)%
$
341

$
(3,558
)
NM

Income from continuing operations
$
4,306

$
2,916

48
 %
$
13,981

$
7,121

96
 %
Discontinued operations
$
(10
)
$
(16
)
38
 %
$
(9
)
$
(1
)
NM

Net income attributable to noncontrolling interests
5

59

(92
)%
65

154

(58
)%
Citigroup’s net income
$
4,291

$
2,841

51
 %
$
13,907

$
6,966

100
 %

(1)
For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented.
NM Not meaningful

9



CITIGROUP REVENUES
 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars
2015
2014
2015
2014
CITICORP
 
 
 
 
 
 
Global Consumer Banking
 
 
 
 
 
 
North America
$
4,821

$
4,996

(4
)%
$
14,638

$
14,573

 %
Latin America
1,923

2,172

(11
)
5,606

6,391

(12
)
Asia (1)
1,716

2,033

(16
)
5,427

6,025

(10
)
Total
$
8,460

$
9,201

(8
)%
$
25,671

$
26,989

(5
)%
Institutional Clients Group


 


 
 


North America
$
3,273

$
3,219

2
 %
$
9,861

$
9,934

(1
)%
EMEA
2,417

2,252

7

7,723

7,453

4

Latin America
1,069

1,014

5

3,245

3,264

(1
)
Asia
1,838

1,851

(1
)
5,674

5,241

8

Total
$
8,597

$
8,336

3
 %
$
26,503

$
25,892

2
 %
Corporate/Other
$
218

$
82

NM

$
800

$
394

NM

Total Citicorp
$
17,275

$
17,619

(2
)%
$
52,974

$
53,275

(1
)%
Citi Holdings
$
1,417

$
2,070

(32
)%
$
4,924

$
6,045

(19
)%
Total Citigroup net revenues
$
18,692

$
19,689

(5
)%
$
57,898

$
59,320

(2
)%

(1)
For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented.
NM Not meaningful.

10




















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11



CITICORP
Citicorp is Citigroup’s global bank for consumers and businesses and represents Citi’s core franchises. Citicorp is focused on providing best-in-class products and services to customers and leveraging Citigroup’s unparalleled global network, including many of the world’s emerging economies. Citicorp is physically present in approximately 100 countries, many for over 100 years, and offers services in over 160 countries and jurisdictions. Citi believes this global network provides a strong foundation for servicing the broad financial services needs of its large multinational clients and for meeting the needs of retail, private banking, commercial, public sector and institutional clients around the world.
Citicorp consists of the following operating businesses: Global Consumer Banking (which consists of consumer banking in North America, Latin America, EMEA and Asia) and Institutional Clients Group (which includes Banking and Markets and securities services). Citicorp also includes Corporate/Other. At September 30, 2015, Citicorp had $1.7 trillion of assets and $897 billion of deposits, representing 94% of Citi’s total assets and 99% of Citi’s total deposits, respectively.

 
Third Quarter
 
Nine Months
% Change
In millions of dollars except as otherwise noted
2015
2014
% Change
2015
2014
Net interest revenue
$
10,799

$
11,068

(2
)%
$
32,137

$
32,360

(1
)%
Non-interest revenue
6,476

6,551

(1
)
20,837

20,915


Total revenues, net of interest expense
$
17,275

$
17,619

(2
)%
$
52,974

$
53,275

(1
)%
Provisions for credit losses and for benefits and claims


 


 
 


Net credit losses
$
1,445

$
1,692

(15
)%
$
4,656

$
5,305

(12
)%
Credit reserve build (release)
128

(387
)
NM

(113
)
(1,085
)
90

Provision for loan losses
$
1,573

$
1,305

21
 %
$
4,543

$
4,220

8
 %
Provision for benefits and claims
28

38

(26
)
77

105

(27
)
Provision for unfunded lending commitments
84

(27
)
NM

5

(78
)
NM

Total provisions for credit losses and for benefits and claims
$
1,685

$
1,316

28
 %
$
4,625

$
4,247

9
 %
Total operating expenses
$
9,524

$
11,609

(18
)%
$
29,075

$
32,239

(10
)%
Income from continuing operations before taxes
$
6,066

$
4,694

29
 %
$
19,274

$
16,789

15
 %
Income taxes
1,791

1,994

(10
)
5,634

6,110

(8
)
Income from continuing operations
$
4,275

$
2,700

58
 %
$
13,640

$
10,679

28
 %
Income (loss) from discontinued operations, net of taxes
(10
)
(16
)
38

(9
)
(1
)
NM

Noncontrolling interests
5

55

(91
)
64

148

(57
)
Net income
$
4,260

$
2,629

62
 %
$
13,567

$
10,530

29
 %
Balance sheet data (in billions of dollars)


 


 
 


Total end-of-period (EOP) assets
$
1,698

$
1,746

(3
)%
 




Average assets
1,705

1,752

(3
)
1,718

1,748

(2
)%
Return on average assets
0.99
%
0.60
%


1.06
%
0.81
%


Efficiency ratio
55
%
66
%


55
%
61
%


Total EOP loans
$
567

$
569


 




Total EOP deposits
$
897

$
898


 
 


NM Not meaningful

12



GLOBAL CONSUMER BANKING
Global Consumer Banking (GCB) consists of Citigroup’s four geographical consumer banking businesses that provide traditional banking services to retail customers through retail banking, commercial banking, Citi-branded cards and Citi retail services (for additional information on these businesses, see “Citigroup Segments” above). GCB is a globally diversified business with 3,004 branches in 24 countries around the world as of September 30, 2015. At September 30, 2015, GCB had $388 billion of assets and $297 billion of deposits.
GCB’s overall strategy is to leverage Citi’s global footprint and seek to be the preeminent bank for the emerging affluent and affluent consumers in large urban centers. In credit cards and in certain retail markets, Citi serves customers in a somewhat broader set of segments and geographies.

 
Third Quarter
 
Nine Months
 
In millions of dollars except as otherwise noted
2015
2014
% Change
2015
2014
% Change
Net interest revenue
$
6,731

$
7,120

(5
)%
$
20,124

$
20,854

(4
)%
Non-interest revenue
1,729

2,081

(17
)
5,547

6,135

(10
)
Total revenues, net of interest expense
$
8,460

$
9,201

(8
)%
$
25,671

$
26,989

(5
)%
Total operating expenses
$
4,483

$
4,975

(10
)%
$
13,653

$
14,966

(9
)%
Net credit losses
$
1,411

$
1,680

(16
)%
$
4,541

$
5,150

(12
)%
Credit reserve build (release)
(64
)
(379
)
83

(280
)
(894
)
69

Provision (release) for unfunded lending commitments
1

(2
)
NM

(1
)
(8
)
88

Provision for benefits and claims
28

38

(26
)
77

105

(27
)
Provisions for credit losses and for benefits and claims
$
1,376

$
1,337

3
 %
$
4,337

$
4,353

 %
Income from continuing operations before taxes
$
2,601

$
2,889

(10
)%
$
7,681

$
7,670

 %
Income taxes
919

995

(8
)
2,644

2,539

4

Income from continuing operations
$
1,682

$
1,894

(11
)%
$
5,037

$
5,131

(2
)%
Noncontrolling interests
8

9

(11
)
8

22

(64
)
Net income
$
1,674

$
1,885

(11
)%
$
5,029

$
5,109

(2
)%
Balance Sheet data (in billions of dollars)


 


 
 


Average assets
$
387

$
410

(6
)%
$
392

$
408

(4
)%
Return on average assets
1.72
%
1.82
%


1.72
%
1.68
%


Efficiency ratio
53
%
54
%


53
%
55
%


Total EOP assets
$
388

$
410

(5
)
 
 


Average deposits
299

306

(3
)
$
301

$
306

(2
)
Net credit losses as a percentage of average loans
2.01
%
2.28
%


2.16
%
2.37
%


Revenue by business


 


 
 


Retail banking
$
3,732

$
3,936

(5
)%
$
11,282

$
11,570

(2
)%
Cards (1)
4,728

5,265

(10
)
14,389

15,419

(7
)
Total
$
8,460

$
9,201

(8
)%
$
25,671

$
26,989

(5
)%
Income from continuing operations by business


 


 
 


Retail banking
$
566

$
536

6
 %
$
1,695

$
1,319

29
 %
Cards (1)
1,116

1,358

(18
)
3,342

3,812

(12
)
Total
$
1,682

$
1,894

(11
)%
$
5,037

$
5,131

(2
)%
(Table continues on next page.)


13



Foreign currency (FX) translation impact
 
 


 
 
 
Total revenue—as reported
$
8,460

$
9,201

(8
)%
$
25,671

$
26,989

(5
)%
Impact of FX translation (2)

(633
)



(1,489
)


Total revenues—ex-FX
$
8,460

$
8,568

(1
)%
$
25,671

$
25,500

1
 %
Total operating expenses—as reported
$
4,483

$
4,975

(10
)%
$
13,653

$
14,966

(9
)%
Impact of FX translation (2)

(369
)



(884
)


Total operating expenses—ex-FX
$
4,483

$
4,606

(3
)%
$
13,653

$
14,082

(3
)%
Total provisions for LLR & PBC-as reported
$
1,376

$
1,337

3
 %
$
4,337

$
4,353

 %
Impact of FX translation (2)

(134
)



(348
)


Total provisions for LLR & PBC—ex-FX
$
1,376

$
1,203

14
 %
$
4,337

$
4,005

8
 %
Net income—as reported
$
1,674

$
1,885

(11
)%
$
5,029

$
5,109

(2
)%
Impact of FX translation (2)

(81
)



(155
)


Net income—ex-FX
$
1,674

$
1,804

(7
)%
$
5,029

$
4,954

2
 %
(1)
Includes both Citi-branded cards and Citi retail services.
(2)
Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the third quarter of 2015 average exchange rates for all periods presented.
NM Not meaningful


14



NORTH AMERICA GCB
North America GCB provides traditional banking and Citi-branded cards and Citi retail services to retail customers and small to mid-size businesses in the U.S. North America GCB’s 779 retail bank branches as of September 30, 2015 were largely concentrated in the greater metropolitan areas of New York, Chicago, Miami, Washington, D.C., Los Angeles and San Francisco. North America GCB continues to rationalize its branch footprint, including, as previously announced, the planned exit of approximately 50 branches by the end of the first quarter of 2016, which includes North America GCB’s branches in the Boston metropolitan area.
At September 30, 2015, North America GCB had approximately 11.0 million retail banking customer accounts, $50.6 billion of retail banking loans and $170.9 billion of deposits. In addition, North America GCB had approximately 112.8 million Citi-branded and Citi retail services credit card accounts, with $107.9 billion in outstanding card loan balances.

 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars, except as otherwise noted
2015
2014
2015
2014
Net interest revenue
$
4,423

$
4,363

1
 %
$
13,008

$
12,761

2
 %
Non-interest revenue
398

633

(37
)
1,630

1,812

(10
)
Total revenues, net of interest expense
$
4,821

$
4,996

(4
)%
$
14,638

$
14,573

 %
Total operating expenses
$
2,270

$
2,411

(6
)%
$
6,829

$
7,199

(5
)%
Net credit losses
$
878

$
1,019

(14
)%
$
2,839

$
3,193

(11
)%
Credit reserve build (release)
(61
)
(341
)
82

(270
)
(1,009
)
73

Provisions for benefits and claims
11

12

(8
)
30

30


Provision for unfunded lending commitments



1

3

(67
)
Provisions for credit losses and for benefits and claims
$
828

$
690

20
 %
$
2,600

$
2,217

17
 %
Income from continuing operations before taxes
$
1,723

$
1,895

(9
)%
$
5,209

$
5,157

1
 %
Income taxes
660

712

(7
)
1,939

1,882

3

Income from continuing operations
$
1,063

$
1,183

(10
)%
$
3,270

$
3,275

 %
Noncontrolling interests
1


100


(1
)
100

Net income
$
1,062

$
1,183

(10
)%
$
3,270

$
3,276

 %
Balance Sheet data (in billions of dollars)


 


 
 



Average assets
$
208

$
211

(1
)%
$
207

$
210

(1
)%
Return on average assets
2.03
%
2.22
%


2.11
%
2.09
%


Efficiency ratio
47
%
48
%


47
%
49
%


Average deposits
$
172.3

$
170.4

1

$
171.6

$
170.7

1

Net credit losses as a percentage of average loans
2.22
%
2.59
%


2.44
%
2.75
%


Revenue by business


 


 
 



Retail banking
$
1,275

$
1,232

3
 %
$
3,930

$
3,553

11
 %
Citi-branded cards
1,930

2,118

(9
)
5,872

6,168

(5
)
Citi retail services
1,616

1,646

(2
)
4,836

4,852


Total
$
4,821

$
4,996

(4
)%
$
14,638

$
14,573

 %
Income from continuing operations by business


 


 
 



Retail banking
$
144

$
107

35
 %
$
530

$
215

NM

Citi-branded cards
522

636

(18
)
1,560

1,755

(11
)
Citi retail services
397

440

(10
)
1,180

1,305

(10
)
Total
$
1,063

$
1,183

(10
)%
$
3,270

$
3,275

 %


NM Not meaningful


15



3Q15 vs. 3Q14
Net income decreased 10% due to a lower net loan loss reserve release and lower revenues, partially offset by lower expenses and lower net credit losses.
Revenues decreased 4%, reflecting lower revenues in Citi-branded cards and Citi retail services, partially offset by higher revenues in retail banking. Net interest revenue increased 1%, primarily due to continued volume growth in retail banking and improved deposit spreads, which more than offset the continued impact of lower average loans in Citi-branded cards. Non-interest revenue decreased 37%, largely driven by an increase in acquisition and rewards costs related to new account acquisitions in Citi-branded cards as well as the impact of a lower mortgage repurchase reserve release in retail banking as compared to the prior-year period (approximately $50 million). The decrease in non-interest revenues was also due to a continued decline in Citi retail services non-interest revenues, primarily reflecting higher contractual partner payments.
Retail banking revenues increased 3% due to 7% growth in average loans, 7% growth in checking deposits and the improved deposit spreads, partially offset by lower mortgage origination revenues and the lower mortgage repurchase reserve release. This growth occurred despite the fact that, consistent with GCB’s strategy, since the third quarter of 2014, North America GCB has closed or sold 116 branches (a 13% decline from the prior-year period).
Cards revenues declined 6% due to a 2% decrease in average loans, partially offset by a 5% increase in purchase sales. In Citi-branded cards, revenues decreased 9%, primarily reflecting the increase in acquisition and rewards costs related to new account acquisitions and the continued impact of lower average loans (down 3%), partially offset by an 8% increase in purchase sales. The modest decline in average loans was driven primarily by continued high customer payment rates. North America GCB expects these trends in its Citi-branded cards businesses to continue in the near term.
Citi retail services revenues declined 2% driven by the continued impact of lower fuel prices and higher contractual partner payments, as the business continued to share the benefits of higher yields and lower net credit losses with its retail partners, partially offset by the impact of higher spreads and volumes. Purchase sales in Citi retail services increased 1% from the prior-year period, as the continued impact of lower fuel prices was offset by volume growth.
Expenses decreased 6%, primarily due to ongoing cost reduction initiatives, including as a result of the branch rationalization strategy, and lower repositioning charges, partially offset by increased investment spending in Citi-branded cards.
Provisions increased 20% due to lower net loan loss reserve releases (82%), partially offset by lower net credit losses (14%). Net credit losses declined in Citi-branded cards (down 16% to $443 million) and in Citi retail services (down 12% to $401 million). The lower net loan loss reserve release reflected continued stabilization in the cards portfolios.

 
2015 YTD vs. 2014 YTD
Year-to-date, North America GCB has experienced similar trends to those described above. Net income was unchanged, as lower expenses and lower net credit losses were offset by a lower net loan loss reserve release.
Revenues were unchanged, as higher revenues in retail banking were offset by lower revenues in Citi-branded cards. Retail banking revenues increased 11%, primarily due to the same factors described above. Cards revenues decreased 3%, as Citi-branded cards revenues decreased 5%, driven by the same factors described above. Citi retail services revenues were unchanged, as the continued impact of lower fuel prices and higher contractual payments were offset by the impact of higher spreads and volumes.
Expenses decreased 5%, driven by the same factors described above.
Provisions increased 17% due to the lower net loan loss reserve releases (73%), partially offset by lower net credit losses (11%) driven by improvement in cards.



16



LATIN AMERICA GCB
Latin America GCB provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest presence in Mexico. Latin America GCB includes branch networks throughout Latin America as well as Banco Nacional de Mexico, or Banamex, Mexico’s second-largest bank, with 1,495 branches as of September 30, 2015.
At September 30, 2015, Latin America GCB had 1,697 retail branches, with approximately 31.5 million retail banking customer accounts, $23.9 billion in retail banking loans and $38.8 billion in deposits. In addition, the business had approximately 7.9 million Citi-branded card accounts with $7.5 billion in outstanding loan balances.

 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars, except as otherwise noted
2015
2014
2015
2014
Net interest revenue
$
1,187

$
1,472

(19
)%
$
3,670

$
4,268

(14
)%
Non-interest revenue
736

700

5

1,936

2,123

(9
)
Total revenues, net of interest expense
$
1,923

$
2,172

(11
)%
$
5,606

$
6,391

(12
)%
Total operating expenses
$
1,080

$
1,272

(15
)%
$
3,322

$
3,729

(11
)%
Net credit losses
$
355

$
460

(23
)%
$
1,164

$
1,350

(14
)%
Credit reserve build (release)
61

(4
)
NM

90

156

(42
)
Provision (release) for unfunded lending commitments
1

(1
)
NM

1

(1
)
NM

Provision for benefits and claims
17

26

(35
)
47

75

(37
)
Provisions for credit losses and for benefits and claims (LLR & PBC)
$
434

$
481

(10
)%
$
1,302

$
1,580

(18
)%
Income from continuing operations before taxes
$
409

$
419

(2
)%
$
982

$
1,082

(9
)%
Income taxes
97

90

8

201

187

7

Income from continuing operations
$
312

$
329

(5
)%
$
781

$
895

(13
)%
Noncontrolling interests
1

2

(50
)
3

6

(50
)
Net income
$
311

$
327

(5
)%
$
778

$
889

(12
)%
Balance Sheet data (in billions of dollars)


 


 
 



Average assets
$
60

$
76

(21
)%
$
65

$
76

(14
)%
Return on average assets
2.06
%
1.71
%


1.60
%
1.58
%


Efficiency ratio
56
%
59
%


59
%
58
%


Average deposits
$
39.6

$
45.0

(12
)
$
41.2

$
44.7

(8
)
Net credit losses as a percentage of average loans
4.42
%
4.75
%


4.65
%
4.76
%


Revenue by business


 


 
 


Retail banking
$
1,369

$
1,452

(6
)%
$
3,889

$
4,303

(10
)%
Citi-branded cards
554

720

(23
)
1,717

2,088

(18
)
Total
$
1,923

$
2,172

(11
)%
$
5,606

$
6,391

(12
)%
Income from continuing operations by business


 


 
 



Retail banking
$
235

$
189

24
 %
$
532

$
599

(11
)%
Citi-branded cards
77

140

(45
)
249

296

(16
)
Total
$
312

$
329

(5
)%
$
781

$
895

(13
)%
Foreign currency (FX) translation impact


 


 
 



Total revenues—as reported
$
1,923

$
2,172

(11
)%
$
5,606

$
6,391

(12
)%
Impact of FX translation (1)

(433
)



(1,028
)


Total revenues—ex-FX
$
1,923

$
1,739

11
 %
$
5,606

$
5,363

5
 %
Total operating expenses—as reported
$
1,080

$
1,272

(15
)%
$
3,322

$
3,729

(11
)%
Impact of FX translation (1)

(234
)



(544
)


Total operating expenses—ex-FX
$
1,080

$
1,038

4
 %
$
3,322

$
3,185

4
 %
Provisions for LLR & PBC—as reported
$
434

$
481

(10
)%
$
1,302

$
1,580

(18
)%
Impact of FX translation (1)

(107
)



(279
)


Provisions for LLR & PBC—ex-FX
$
434

$
374

16
 %
$
1,302

$
1,301

 %
Net income—as reported
$
311

$
327

(5
)%
$
778

$
889

(12
)%
Impact of FX translation (1)

(62
)



(138
)


Net income—ex-FX
$
311

$
265

17
 %
$
778

$
751

4
 %
(1)
Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the third quarter of 2015 average exchange rates for all periods presented.
NM Not Meaningful

17



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

3Q15 vs. 3Q14
Net income increased 17%, primarily due to higher revenues, partially offset by higher expenses and higher credit costs.
Revenues increased 11%, primarily due to the approximately $180 million gain on sale related to the Mexico merchant acquiring business. Excluding this gain, revenues were relatively unchanged, as the impact of modest volume growth was offset by the continued impact of spread compression, as well as continued slow economic growth in the region. Net interest revenue increased 2% due to loan and deposit growth, partially offset by the ongoing spread compression. Non-interest revenue increased 29%, primarily driven by the gain on sale related to the merchant acquiring business in Mexico.
Retail banking revenues increased 1%, excluding the gain on sale related to the merchant acquiring business, reflecting volume growth, including an increase in average loans (5%) and average deposits (4%). Cards revenues decreased 2%, primarily driven by Mexico, due to declines in average loans and slower growth in purchase sales in Mexico resulting from lower economic growth and ongoing shifts in consumer behavior, including due to the previously disclosed fiscal reforms. Latin America GCB expects cards revenues in Mexico could continue to be impacted by these trends in the near term.
Expenses increased 4%, primarily due to increased regulatory and compliance spending, mandatory salary increases in certain countries and technology infrastructure upgrades, partially offset by lower legal and related costs, lower repositioning charges and efficiency savings.
Provisions increased 16%, primarily due to a higher net loan loss reserve build, partially offset by a 1% decline in net credit losses. The net loan loss reserve build increased by $63 million in part due to a weaker macroeconomic environment in Brazil. Despite this increase and the continued weaker economic environment in Brazil, Citi does not currently expect its consumer exposure in Brazil will have a material impact on its overall GCB cost of credit going forward (for additional information on Citi’s consumer exposures in Brazil, see “Managing Global Risk—Country Risk” below).

Argentina/Venezuela
For additional information on Citi’s exposures and risks in Argentina and Venezuela, see “Risk Factors” in Citi’s 2014 Annual Report on Form 10-K and “Managing Global Risk—Country Risk” below.

 

2015 YTD vs. 2014 YTD
Year-to-date, Latin America GCB has experienced similar trends to those described above. Net income increased 4%, primarily due to higher revenues, partially offset by higher expenses.
Revenues increased 5%, primarily due to the gain on sale related to the merchant acquiring business in Mexico. Excluding this gain, revenues increased 1%, as volume growth (3% increase in average loans and 5% increase in average deposits) was partially offset by the impact of business divestitures in the prior-year period, including the sale of the Honduras consumer business in the second quarter of 2014 and the partial sale of Citi’s indirect investment in Banco de Chile in the first quarter of 2014. Net interest revenue increased 3% due to loan and deposit growth, partially offset by ongoing spread compression and the impact of the business divestitures in the prior-year period. Non-interest revenue increased 7%, primarily due to the gain on sale related to the merchant acquiring business in Mexico, partially offset by the impact of the business divestitures in the prior-year period. Retail banking revenues increased 8%, mainly driven by the net impact of the gain on sale related to the merchant acquiring business in Mexico and the partial sale of Citi’s indirect investment in Banco de Chile in the prior-year period. Cards revenues declined 1%, driven by the same factors described above.
Expenses increased 4%, driven by the factors described above.
Provisions were unchanged, as a lower net loan loss reserve build, was offset by higher net credit losses. Net credit losses increased 5%, primarily driven by portfolio growth. The net loan loss reserve build declined 32% due to a lower build related to Mexico cards, partially offset by higher builds in Brazil.












18



ASIA GCB
Asia GCB provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest Citi presence in Singapore, Korea, Hong Kong, India, Australia, Taiwan, China, Thailand, Malaysia and the Philippines as of September 30, 2015. In addition, for reporting purposes, Asia GCB includes the results of operations of EMEA GCB, which provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, primarily in Poland, Russia and the United Arab Emirates.
At September 30, 2015, on a combined basis, the businesses had 528 retail branches, approximately 17.7 million retail banking customer accounts, $71.4 billion in retail banking loans and $87.1 billion in deposits. In addition, the businesses had approximately 17.1 million Citi-branded card accounts with $17.0 billion in outstanding loan balances.
 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars, except as otherwise noted (1)
2015
2014
2015
2014
Net interest revenue
$
1,121

$
1,285

(13
)%
$
3,446

$
3,825

(10
)%
Non-interest revenue
595

748

(20
)
1,981

2,200

(10
)
Total revenues, net of interest expense
$
1,716

$
2,033

(16
)%
$
5,427

$
6,025

(10
)%
Total operating expenses
$
1,133

$
1,292

(12
)%
$
3,502

$
4,038

(13
)%
Net credit losses
$
178

$
201

(11
)%
$
538

$
607

(11
)%
Credit reserve build (release)
(64
)
(34
)
(88
)
(100
)
(41
)
NM

Provision for unfunded lending commitments

(1
)
100

(3
)
(10
)
70

Provisions for credit losses
$
114

$
166

(31
)%
$
435

$
556

(22
)%
Income from continuing operations before taxes
$
469

$
575

(18
)%
$
1,490

$
1,431

4
 %
Income taxes
162

193

(16
)
504

470

7

Income from continuing operations
$
307

$
382

(20
)%
$
986

$
961

3
 %
Noncontrolling interests
6

7

(14
)
5

17

(71
)
Net income
$
301

$
375

(20
)%
$
981

$
944

4
 %
Balance Sheet data (in billions of dollars)






 
 



Average assets
$
119

$
123

(3
)%
$
120

$
122

(2
)%
Return on average assets
1.00
%
1.21
%


1.09
%
1.03
%


Efficiency ratio
66
%
64
%
 
65
%
67
%


Average deposits
$
86.6

$
91.0

(5
)
$
88.2

$
90.2

(2
)
Net credit losses as a percentage of average loans
0.79
%
0.81
%


0.78
%
0.84
%


Revenue by business
 
 
 
 
 


Retail banking
$
1,088

$
1,252

(13
)%
$
3,463

$
3,714

(7
)%
Citi-branded cards
628

781

(20
)
1,964

2,311

(15
)
Total
$
1,716

$
2,033

(16
)%
$
5,427

$
6,025

(10
)%
Income from continuing operations by business






 
 


Retail banking
$
187

$
240

(22
)%
$
633

$
505

25
 %
Citi-branded cards
120

142

(15
)
353

456

(23
)
Total
$
307

$
382

(20
)%
$
986

$
961

3
 %

19



Foreign currency (FX) translation impact






 
 


Total revenues—as reported
$
1,716

$
2,033

(16
)%
$
5,427

$
6,025

(10
)%
Impact of FX translation (2)

(200
)



(461
)


Total revenues—ex-FX
$
1,716

$
1,833

(6
)%
$
5,427

$
5,564

(2
)%
Total operating expenses—as reported
$
1,133

$
1,292

(12
)%
$
3,502

$
4,038

(13
)%
Impact of FX translation (2)

(135
)



(340
)


Total operating expenses—ex-FX
$
1,133

$
1,157

(2
)%
$
3,502

$
3,698

(5
)%
Provisions for loan losses—as reported
$
114

$
166

(31
)%
$
435

$
556

(22
)%
Impact of FX translation (2)

(27
)



(69
)


Provisions for loan losses—ex-FX
$
114

$
139

(18
)%
$
435

$
487

(11
)%
Net income—as reported
$
301

$
375

(20
)%
$
981

$
944

4
 %
Impact of FX translation (2)

(19
)



(17
)


Net income—ex-FX
$
301

$
356

(15
)%
$
981

$
927

6
 %

(1)
For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented.
(2)
Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the third quarter of 2015 average exchange rates for all periods presented.
NM
Not meaningful

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

3Q15 vs. 3Q14
Net income decreased 15%, primarily due to lower revenues, partially offset by lower expenses and lower credit costs.
Revenues decreased 6% driven by an industry-wide slowdown in activity in the region during the quarter, reflecting changes in consumer sentiment due to slowing economic growth and volatility in the capital markets. Non-interest revenue decreased 14%, primarily due to lower investment sales revenues. Net interest revenue decreased 2% driven by the ongoing impact of regulatory changes and continued spread compression in cards.
Retail banking revenues decreased 5%, primarily due to a 20% decline in investment sales driven by the market and consumer sentiment factors described above, partially offset by increased lending (2% increase in average loans) and deposit products (4% increase in average deposits) and higher insurance fee revenues.
Cards revenues decreased 8%, primarily due to continued high payment rates, spread compression and the ongoing impact of regulatory changes, particularly in Singapore, Taiwan, Australia, Malaysia and Poland. While purchase sales grew 3% and average loans grew 3%, such growth was negatively impacted by the continued high payment rates. Asia GCB expects these negative impacts to cards revenues could continue in the near term.
Expenses decreased 2%, largely due to lower repositioning charges and efficiency savings, partially offset by higher regulatory and compliance costs.
Provisions decreased 18%, primarily due to a higher net loan loss reserve release, primarily in Malaysia and Korea, partially offset by higher net credit losses driven by portfolio growth.



 
Russia
For additional information on Citi’s exposures and risks in Russia, see “EMEA GCB” and “Risk Factors” in Citi’s 2014 Annual Report on Form 10-K and “Managing Global Risk—Country Risk” below.

2015 YTD vs. 2014 YTD
Year-to-date, Asia GCB has experienced similar trends to those described above. Net income increased 6%, primarily due to lower expenses and lower credit costs, partially offset by lower revenues.
Revenues decreased 2%. Non-interest revenue decreased 4%, primarily driven by lower fee revenues. Net interest revenue decreased 1%, driven by the same factors described above. Retail banking revenues were unchanged, as higher insurance fee revenue and volumes (average retail deposits increased 5%, average retail loans increased 3% and investment sales increased 8%) were offset by continued spread compression and regulatory changes, particularly in Poland. Cards revenues decreased 6%, driven by the same factors described above.
Expenses decreased 5%, largely due to lower repositioning charges, including the absence of approximately $270 million of repositioning charges in Korea in the second quarter of 2014, and efficiency savings, partially offset by higher regulatory and compliance costs, investment spending and volume-related growth.
Provisions decreased 11%, primarily due to a higher net loan loss reserve release and modestly lower net credit losses.








20


INSTITUTIONAL CLIENTS GROUP

Institutional Clients Group (ICG) provides corporate, institutional, public sector and high-net-worth clients around the world with a full range of wholesale banking products and services, including fixed income and equity sales and trading, foreign exchange, prime brokerage, derivative services, equity and fixed income research, corporate lending, investment banking and advisory services, private banking, cash management, trade finance and securities services. ICG transacts with clients in both cash instruments and derivatives, including fixed income, foreign currency, equity and commodity products.
ICG revenue is generated primarily from fees and spreads associated with these activities. ICG earns fee income for assisting clients in clearing transactions, providing brokerage and investment banking services and other such activities. Revenue generated from these activities is recorded in Commissions and fees and Investment banking. In addition, as a market maker, ICG facilitates transactions, including holding product inventory to meet client demand, and earns the differential between the price at which it buys and sells the products. These price differentials and the unrealized gains and losses on the inventory are recorded in Principal transactions. Interest income earned on inventory and loans held less interest paid to customers on deposits is recorded as Net interest revenue. Revenue is also generated from transaction processing and assets under custody and administration.
ICG’s international presence is supported by trading floors in approximately 80 countries and a proprietary network in over 95 countries and jurisdictions. At September 30, 2015, ICG had approximately $1.3 trillion of assets and $595 billion of deposits, while two of its businesses, securities services and issuer services, managed approximately $14.9 trillion of assets under custody compared to $15.0 trillion at the end of the prior-year period.
 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars, except as otherwise noted
2015
2014
2015
2014
Commissions and fees
$
954

$
1,015

(6
)%
$
2,935

$
3,021

(3
)%