10-Q 1 c-3312017x10q.htm 10-Q Document
 
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 March 31, 2017
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.)
388 Greenwich Street, New York, NY
(Address of principal executive offices)
 
10013
(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, smaller reporting, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth 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
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes 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 March 31, 2017: 2,753,257,797

Available on the web at www.citigroup.com
 




CITIGROUP’S FIRST QUARTER 2017—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
SEGMENT BALANCE SHEET
Global Consumer Banking (GCB)
North America GCB
Latin America GCB
Asia GCB
Institutional Clients Group
Corporate/Other
OFF-BALANCE SHEET
  ARRANGEMENTS
CAPITAL RESOURCES
MANAGING GLOBAL RISK TABLE OF
  CONTENTS
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 (UNAUDITED)
UNREGISTERED SALES OF EQUITY SECURITIES, PURCHASES OF EQUITY SECURITIES AND 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, 2016 (2016 Annual Report on Form 10-K).
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 U.S. Securities and Exchange Commission (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 on Form 8-K, information statements and other information regarding Citi at www.sec.gov.
Certain reclassifications, including a realignment of certain businesses, have been made to the prior periods’ financial statements and disclosures to conform to the current period’s presentation. For additional information on certain recent reclassifications, see Note 3 to the Consolidated Financial Statements.
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:
citisegq12017.jpg
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.
citigroupregionsa06.jpg
*
As previously announced, the remaining businesses and portfolios of assets in Citi Holdings are now reported as part of Corporate/Other for all periods presented and Citi Holdings is no longer a separately reported business segment. For additional information, see Note 3 to the Consolidated Financial Statements below.

(1)
Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
(2)
North America includes the U.S., Canada and Puerto Rico, Latin America includes Mexico and Asia includes Japan.

3



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

EXECUTIVE SUMMARY

First Quarter of 2017—Solid Performance Across the Franchise
As described further throughout this executive summary, Citi’s first quarter of 2017 results of operations mark a significant improvement compared to the prior-year period as many businesses benefitted from continued momentum from the end of last year. Citi increased revenues in both Global Consumer Banking (GCB) and Institutional Clients Group (ICG), while continuing to wind down the legacy assets in Corporate/Other and maintaining expense discipline. Citi also continued to make targeted investments to drive revenue growth and improve returns in several businesses, including in equities, Citi-branded cards and Mexico.
In GCB, the North America credit card business continued to benefit from the acquisition of the Costco portfolio, while mortgage revenues were lower reflecting the impact of the higher rate environment on origination activity, as well as the impact of the previously announced sale of a portion of Citi’s U.S. mortgage servicing rights, as part of Citi’s exit of its U.S. mortgage servicing operations. International GCB generated positive operating leverage driven by year-over-year revenue growth in Mexico and Asia, excluding the impact of foreign currency translation into U.S. dollars for reporting purposes (FX translation). ICG showed broad-based momentum, with revenue growth in fixed income and equity markets, treasury and trade solutions, investment banking and the private bank. These increases in revenues were partially offset by lower revenues in Corporate/Other, reflecting the continued wind down of legacy assets, partially offset by certain gains on asset sales, including the sales of the consumer finance business in Canada and the consumer business in Argentina.
Citi also continued to generate significant regulatory capital during the quarter through a combination of earnings and the utilization of approximately $800 million in deferred tax assets (DTAs) (for additional information, see “Income Taxes” below). Citi generated approximately $5.5 billion in regulatory capital during the quarter, before returning approximately $2.2 billion to its common shareholders in the form of common stock repurchases and dividends. Outstanding common shares declined 1% from the prior quarter and 6% from the prior-year period. Despite the return of capital to its shareholders, each of Citigroup’s key regulatory capital metrics remained strong as of the end of the first quarter of 2017 (see “Capital” below).
While economic sentiment has improved, there continue to be various economic and political uncertainties and changes that could impact Citi’s businesses, including as a result of, among others, potential policy changes arising from the U.S. presidential administration and Congress as well as the U.K.’s initiation of the process to withdraw from the European Union. For a more detailed discussion of these risks and uncertainties, see each respective business’s results of operations and “Forward-Looking Statements” below, as well as each respective business’ results of operations and the
 
“Managing Global Risk” and “Risk Factors” sections in Citi’s 2016 Annual Report on Form 10-K.

First Quarter of 2017 Summary Results

Citigroup
Citigroup reported net income of $4.1 billion, or $1.35 per share, compared to $3.5 billion, or $1.10 per share, in the prior-year period. The 17% increase in net income from the prior-year period was primarily driven by higher revenues and lower credit costs, as expenses remained largely unchanged.
Citigroup revenues of $18.1 billion in the first quarter of 2017 increased 3%, driven by a 16% increase in ICG, as well as a 1% increase in GCB, partially offset by a 40% decrease in Corporate/Other due primarily to the continued wind down of legacy assets.
Citigroup’s end-of-period loans increased 2% to $629 billion versus the prior-year period. Excluding the impact of FX translation, Citigroup’s end-of-period loans also grew 2%, as 8% growth in GCB and 3% growth in ICG were partially offset by the continued wind down of legacy assets in Corporate/Other. (Citi’s results of operations excluding the impact of FX translation are non-GAAP financial measures.) Citigroup’s end-of-period deposits increased 2% to $950 billion versus the prior-year period. Excluding the impact of FX translation, Citigroup’s deposits were up 3%, driven by a 4% increase in GCB deposits and a 3% increase in ICG deposits, slightly offset by a decline in Corporate/Other deposits.

Expenses
Citigroup’s operating expenses were largely unchanged versus the prior-year period, as the impact of higher performance-related compensation and higher business volumes were offset by lower repositioning costs and a benefit from FX translation, as investments were largely funded through efficiency savings. Year-over-year, GCB operating expenses were largely flat, ICG operating expenses increased 1% and Corporate/Other operating expenses declined 11%.

Cost of Credit
Citi’s total provisions for credit losses and for benefits and claims of $1.7 billion decreased 19% from the prior-year period. The decrease was driven by a net loan loss reserve release in ICG compared to a net loan loss reserve build driven by energy-related exposures in the prior-year period and a decline in the provision for benefits and claims, as well as a modest decline in net credit losses.
Net credit losses of $1.7 billion declined 1% versus the prior-year period. Consumer net credit losses of $1.7 billion increased 10%, driven by the Costco portfolio acquisition, organic volume growth and seasoning, as well as the impact of changes in collection processes in North America cards, partially offset by the continued wind down of legacy assets in Corporate/Other. Corporate net credit losses decreased $173

4



million to $37 million, driven by improvement in the energy sector.
For additional information on Citi’s consumer and corporate credit costs and allowance for loan losses, see “Credit Risk” below.

Capital
Citigroup’s Tier 1 Capital and Common Equity Tier 1 Capital ratios, on a fully implemented basis, were 14.5% and 12.8% as of March 31, 2017, respectively, compared to 13.8% and 12.3% as of March 31, 2016 (all based on the Basel III Advanced Approaches for determining risk-weighted assets). Citigroup’s Supplementary Leverage ratio as of March 31, 2017, on a fully implemented basis, was 7.3%, compared to 7.4% as of March 31, 2016. 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” below.

Global Consumer Banking
GCB net income decreased 16% to $1.0 billion, as higher revenues were more than offset by higher cost of credit. Operating expenses were largely flat at $4.4 billion, as the addition of the Costco portfolio, volume growth and continued investments were offset by ongoing efficiency savings, lower repositioning costs and a benefit from FX translation.
GCB revenues of $7.8 billion increased 1% versus the prior-year period. Excluding the impact of FX translation, GCB revenues increased 3%, driven by increases in North America GCB, Latin America GCB and Asia GCB. North America GCB revenues increased 2% to $4.9 billion, as higher revenues in Citi-branded cards were partially offset by lower revenues in retail banking and Citi retail services. Citi-branded cards revenues of $2.1 billion were up 13% versus the prior-year period, reflecting the contribution from the Costco portfolio and modest organic growth, partially offset by the ongoing impact of higher promotional rate balances. Citi retail services revenues of $1.6 billion decreased 5% versus the prior-year period, driven by the absence of gains on sales of two cards portfolios sold in the first quarter of 2016. Retail banking revenues decreased 3% from the prior-year period, mainly driven by lower mortgage revenues. Excluding mortgage, retail banking revenues were up 5% from the prior-year period, driven by continued growth in average loans, deposits and assets under management.
North America GCB average deposits of $186 billion were up 3% versus the prior-year period, average retail loans of $55 billion grew 5%, and assets under management of $55 billion grew 12%. Average branded card loans of $83 billion increased 28%, while branded card purchase sales of $73 billion increased 58% versus the prior-year period, both driven by the Costco portfolio acquisition as well as organic growth. Average retail services loans of $45 billion were up 3%, while retail services purchase sales of $17 billion were largely unchanged. For additional information on the results of operations of North America GCB for the first quarter of 2017, see “Global Consumer Banking—North America GCB” below.
International GCB revenues (consisting of Latin America GCB and Asia GCB (which includes the results of operations
 
in certain EMEA countries)) were largely unchanged at $2.9 billion versus the prior-year period. Excluding the impact of FX translation, international GCB revenues increased 3% versus the prior-year period. Latin America GCB revenues increased 4% versus the prior-year period, driven by 8% growth in retail banking, reflecting continued growth in average loans and deposits as well as improved deposit spreads, partially offset by lower cards revenues. Asia GCB revenues increased 3% versus the prior-year period, driven by improvement in cards and wealth management, partially offset by lower retail lending revenues. For additional information on the results of operations of Latin America GCB and Asia GCB for the first quarter of 2017, including the impact of FX translation, see “Global Consumer Banking” below.
Year-over-year, international GCB average deposits of $118 billion increased 6%, average retail loans of $83 billion decreased 3%, assets under management of $92 billion increased 4%, average card loans of $23 billion increased 3% and card purchase sales of $23 billion increased 5%, all excluding the impact of FX translation.

Institutional Clients Group
ICG net income of $3.0 billion increased 61%, driven by the higher revenues and lower cost of credit, partially offset by higher operating expenses. ICG operating expenses increased 1% to $4.9 billion, as higher performance-based compensation was partially offset by lower repositioning costs and a benefit from FX translation.
ICG revenues were $9.1 billion in the first quarter of 2017, up 16% from the prior-year period, driven by an 18% increase in Markets and securities services revenues and a 13% increase in Banking revenues (including the impact of $115 million of mark-to-market losses on loan hedges related to accrual loans within corporate lending compared to losses of $66 million in the prior-year period).
Banking revenues of $4.5 billion (excluding the impact of mark-to-market losses on hedges related to accrual loans within corporate lending) increased 14% compared to the prior-year period, driven by strong performance in investment banking, treasury and trade solutions and the private bank. Investment banking revenues of $1.2 billion increased 39% versus the prior-year period. Advisory revenues increased 8% to $246 million versus the prior-year period. Debt underwriting revenues increased 39% to $733 million and equity underwriting revenues nearly doubled to $235 million.
Private bank revenues increased 9% to $744 million versus the prior-year period, driven by loan and deposit growth and improved spreads. Corporate lending revenues decreased 16% to $319 million. Excluding the mark-to-market impact of loan hedges, corporate lending revenues decreased 3% to $434 million versus the prior-year period due to lower average volumes. Treasury and trade solutions revenues increased 9% to $2.1 billion versus the prior-year period, driven by strong fee growth, higher volumes and improved spreads.

5



Markets and securities services revenues increased 18% to $4.8 billion versus the prior-year period. Fixed income markets revenues increased 19% to $3.6 billion versus the prior-year period, reflecting strength in both rates and currencies as well as spread products. Equity markets revenues increased 10% to $769 million versus the prior-year period, reflecting an improvement in equity derivatives. Securities services revenues decreased 3% to $543 million versus the prior-year period, largely due to the impact of prior-period divestitures. Excluding the divestitures, securities services revenues increased 12%, driven by higher deposit balances and growth in assets under custody. For additional information on the results of operations of ICG for the first quarter of 2017, see “Institutional Clients Group” below.

Corporate/Other
Corporate/Other net income was $92 million in the first quarter of 2017, compared to net income of $450 million in the prior-year period, reflecting lower revenues, partially offset by lower operating expenses and lower cost of credit. Expenses of $1.1 billion declined 11% from the prior-year period, primarily driven by the wind-down of legacy assets, partially offset by approximately $100 million of episodic expenses primarily related to the exit of Citi’s U.S. mortgage servicing operations.
Corporate/Other revenues were $1.2 billion, down 40% from the prior-year period, driven by legacy asset run-off and divestiture activity, as well as lower revenues from treasury-related hedging activity. Revenues in the first quarter of 2017 included nearly $750 million of episodic gains on asset sales, partially offset by an approximate $300 million charge related to the exit of the U.S. mortgage servicing operations. For additional information on the results of operations of Corporate/Other for the first quarter of 2017, see “Corporate/Other” below.
Corporate/Other end-of-period assets decreased 23% to $96 billion from the prior-year period as Citi continued to wind down the legacy assets.


6



RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1
Citigroup Inc. and Consolidated Subsidiaries
 
First Quarter
 
In millions of dollars, except per-share amounts and ratios
2017
2016
% Change
Net interest revenue
$
10,857

$
11,227

(3
)%
Non-interest revenue
7,263

6,328

15

Revenues, net of interest expense
$
18,120

$
17,555

3
 %
Operating expenses
10,477

10,523


Provisions for credit losses and for benefits and claims
1,662

2,045

(19
)
Income from continuing operations before income taxes
$
5,981

$
4,987

20
 %
Income taxes
1,863

1,479

26

Income from continuing operations
$
4,118

$
3,508

17
 %
Income (loss) from discontinued operations,
  net of taxes(1)
(18
)
(2
)
NM

Net income before attribution of noncontrolling
  interests
$
4,100

$
3,506

17
 %
Net income attributable to noncontrolling interests
10

5

100

Citigroup’s net income
$
4,090

$
3,501

17
 %
Less:
 
 


Preferred dividends—Basic
$
301

$
210

43
 %
Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS
55

40

38

Income allocated to unrestricted common shareholders
  for basic and diluted EPS
$
3,734

$
3,251

15
 %
Earnings per share
 
 


Basic
 
 


Income from continuing operations
$
1.36

$
1.11

23

Net income
1.35

1.10

23

Diluted
 
 


Income from continuing operations
$
1.36

$
1.11

23
 %
Net income
1.35

1.10

23

Dividends declared per common share
0.16

0.05

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
 
 
First Quarter
 
In millions of dollars, except per-share amounts, ratios and
  direct staff
2017
2016
% Change
At March 31:
 
 
 
Total assets
$
1,821,635

$
1,800,967

1
 %
Total deposits
949,990

934,591

2

Long-term debt
208,530

207,835


Citigroup common stockholders’ equity
208,879

209,769


Total Citigroup stockholders’ equity
228,132

227,522


Direct staff (in thousands)
215

225

(4
)
Performance metrics
 
 


Return on average assets
0.91
%
0.79
%


Return on average common stockholders’ equity(2)
7.4

6.4



Return on average total stockholders’ equity(2)
7.3

6.3



Efficiency ratio (Total operating expenses/Total revenues)
58

60



Basel III ratios—full implementation
 
 
 
Common Equity Tier 1 Capital(3)
12.83
%
12.34
%
 
Tier 1 Capital(3)
14.49

13.81

 
Total Capital(3)
16.54

15.71

 
Supplementary Leverage ratio(4)
7.28

7.44

 
Citigroup common stockholders’ equity to assets
11.47
%
11.65
%
 
Total Citigroup stockholders’ equity to assets
12.52

12.63

 
Dividend payout ratio(5)
11.9

4.5

 
Total payout ratio(6)

59
%
44
%
 
Book value per common share
$
75.86

$
71.47

6
 %
Tangible book value (TBV) per share(7)
$
65.94

$
62.58

5
 %
Ratio of earnings to fixed charges and preferred stock dividends
2.51x

2.54x

 
(1)
See Note 2 to the Consolidated Financial Statements for additional information on Citi’s discontinued operations.
(2)
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.
(3)
Citi’s regulatory capital ratios reflect full implementation of the U.S. Basel III rules. Risk-weighted assets are based on the Basel III Advanced Approaches for determining total risk-weighted assets.
(4)
Citi’s Supplementary Leverage ratio reflects full implementation of the U.S. Basel III rules.
(5)
Dividends declared per common share as a percentage of net income per diluted share.
(6)
Total common dividends declared plus common stock repurchases as a percentage of net income available to common shareholders. See “Consolidated Statement of Changes in Stockholders’ Equity”, Note 9 to the Consolidated Financial Statements, and “Equity Security Repurchases” below for the component details.
(7)
For information on TBV, see “Capital Resources—Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Returns on Equity” below.




8



SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
CITIGROUP INCOME
 
First Quarter
 
In millions of dollars
2017
2016
% Change
Income from continuing operations
 
 
 
Global Consumer Banking
 
 
 
  North America
$
627

$
833

(25
)%
  Latin America
130

146

(11
)
  Asia(1)
246

215

14

Total
$
1,003

$
1,194

(16
)%
Institutional Clients Group


 


  North America
$
1,100

$
546

NM

  EMEA
855

374

NM

  Latin America
475

330

44

  Asia
581

619

(6
)
Total
$
3,011

$
1,869

61
 %
Corporate/Other
104

445

(77
)%
Income from continuing operations
$
4,118

$
3,508

17
 %
Discontinued operations
$
(18
)
$
(2
)
NM

Net income attributable to noncontrolling interests
10

5

100
 %
Citigroup’s net income
$
4,090

$
3,501

17
 %

(1)
Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
NM Not meaningful

9



CITIGROUP REVENUES
 
First Quarter
 
In millions of dollars
2017
2016
% Change
Global Consumer Banking
 
 
 
  North America
$
4,944

$
4,830

2
 %
  Latin America
1,151

1,229

(6
)
  Asia(1)
1,722

1,655

4

Total
$
7,817

$
7,714

1
 %
Institutional Clients Group


 


  North America
$
3,455

$
2,980

16
 %
  EMEA
2,807

2,167

30

  Latin America
1,127

962

17

  Asia
1,737

1,786

(3
)
Total
$
9,126

$
7,895

16
 %
Corporate/Other
1,177

1,946

(40
)
Total Citigroup Net Revenues
$
18,120

$
17,555

3
 %
(1)
Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.




10



SEGMENT BALANCE SHEET(1) 
In millions of dollars
Global
Consumer
Banking
Institutional
Clients
Group
Corporate/Other
and
consolidating
eliminations(2)
Citigroup
Parent company-
issued long-term
debt and
stockholders’
equity(3)
Total
Citigroup
consolidated
Assets
 
 
 
 
 
Cash and deposits with banks
$
9,371

$
64,322

$
106,352

$

$
180,045

Federal funds sold and securities borrowed or purchased under agreements to resell
302

242,241

386


242,929

Trading account assets
6,512

235,799

2,592


244,903

Investments
11,172

112,252

222,409


345,833

Loans, net of unearned income and
 
 
 
 

allowance for loan losses
282,901

305,404

28,260


616,565

Other assets
38,422

94,798

58,140


191,360

Liquidity assets(4)
63,128

259,291

(322,419
)


Total assets
$
411,808

$
1,314,107

$
95,720

$

$
1,821,635

Liabilities and equity
 
 
 
 
 
Total deposits
$
311,383

$
619,513

$
19,094

$

$
949,990

Federal funds purchased and securities loaned or sold under agreements to repurchase
3,597

144,624

9


148,230

Trading account liabilities
24

143,464

582


144,070

Short-term borrowings
578

19,299

6,250


26,127

Long-term debt(3)
1,225

32,739

32,940

141,626

208,530

Other liabilities
17,811

77,000

20,724


115,535

Net inter-segment funding (lending)(3)
77,190

277,468

15,100

(369,758
)

Total liabilities
$
411,808

$
1,314,107

$
94,699

$
(228,132
)
$
1,592,482

Total equity(5)


1,021

228,132

229,153

Total liabilities and equity
$
411,808

$
1,314,107

$
95,720

$

$
1,821,635


(1)
The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment as of March 31, 2017. The respective segment information depicts the assets and liabilities managed by each segment as of such date.
(2)
Consolidating eliminations for total Citigroup and Citigroup parent company assets and liabilities are recorded within Corporate/Other.
(3)
The total stockholders’ equity and the majority of long-term debt of Citigroup reside in the Citigroup parent company Consolidated Balance Sheet. Citigroup allocates stockholders’ equity and long-term debt to its businesses through inter-segment allocations as shown above.
(4)
Represents the attribution of Citigroup’s liquidity assets (primarily consisting of cash and available-for-sale securities) to the various businesses based on Liquidity Coverage Ratio (LCR) assumptions.
(5)
Corporate/Other equity represents noncontrolling interests.

11










 
























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12



GLOBAL CONSUMER BANKING
Global Consumer Banking (GCB) consists of consumer banking businesses in North America, Latin America (consisting of Citi’s consumer banking business in Mexico) and Asia. GCB provides traditional banking services to retail customers through retail banking, including commercial banking, and Citi-branded cards and Citi retail services (for additional information on these businesses, see “Citigroup Segments” above). GCB is focused on its priority markets in the U.S., Mexico and Asia with 2,601 branches in 19 countries and jurisdictions as of March 31, 2017. At March 31, 2017, GCB had approximately $412 billion of assets and $311 billion of deposits.
GCB’s overall strategy is to leverage Citi’s global footprint and 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.

 
First Quarter
 
In millions of dollars except as otherwise noted
2017
2016
% Change
Net interest revenue
$
6,522

$
6,352

3
 %
Non-interest revenue
1,295

1,362

(5
)
Total revenues, net of interest expense
$
7,817

$
7,714

1
 %
Total operating expenses
$
4,415

$
4,401

 %
Net credit losses
$
1,603

$
1,371

17
 %
Credit reserve build (release)
177

85

NM

Provision (release) for unfunded lending commitments
6

1

NM

Provision for benefits and claims
29

28

4

Provisions for credit losses and for benefits and claims
$
1,815

$
1,485

22
 %
Income from continuing operations before taxes
$
1,587

$
1,828

(13
)%
Income taxes
584

634

(8
)
Income from continuing operations
$
1,003

$
1,194

(16
)%
Noncontrolling interests
1

2

(50
)
Net income
$
1,002

$
1,192

(16
)%
Balance Sheet data (in billions of dollars)


 


Total EOP assets
$
412

$
384

7
 %
Average assets
$
411

$
377

9

Return on average assets
0.99
%
1.27
%


Efficiency ratio
56
%
57
%


Average deposits
$
304

$
294

3

Net credit losses as a percentage of average loans
2.24
%
2.04
%


Revenue by business


 


Retail banking
$
3,155

$
3,187

(1
)%
Cards(1)
4,662

4,527

3

Total
$
7,817

$
7,714

1
 %
Income from continuing operations by business


 


Retail banking
$
339

$
298

14
 %
Cards(1)
664

896

(26
)
Total
$
1,003

$
1,194

(16
)%
Table continues on the next page.


13



Foreign currency (FX) translation impact
 
 


Total revenue—as reported
$
7,817

$
7,714

1
 %
Impact of FX translation(2)

(103
)


Total revenues—ex-FX(3)
$
7,817

$
7,611

3
 %
Total operating expenses—as reported
$
4,415

$
4,401

 %
Impact of FX translation(2)

(42
)


Total operating expenses—ex-FX(3)
$
4,415

$
4,359

1
 %
Total provisions for LLR & PBC—as reported
$
1,815

$
1,485

22
 %
Impact of FX translation(2)

(30
)


Total provisions for LLR & PBC—ex-FX(3)
$
1,815

$
1,455

25
 %
Net income—as reported
$
1,002

$
1,192

(16
)%
Impact of FX translation(2)

(25
)


Net income—ex-FX(3)
$
1,002

$
1,167

(14
)%
(1)
Includes both Citi-branded cards and Citi retail services.
(2)
Reflects the impact of FX translation into U.S. dollars at the first quarter of 2017 average exchange rates for all periods presented.
(3)
Presentation of this metric excluding FX translation is a non-GAAP financial measure.
NM Not meaningful


14



NORTH AMERICA GCB
North America GCB provides traditional retail banking, including commercial banking, and its Citi-branded cards and Citi retail services card products to retail customers and small to mid-size businesses, as applicable, in the U.S. North America GCB’s U.S. cards product portfolio includes its proprietary portfolio (including the Citi Double Cash, Thank You and Value cards) and co-branded cards (including, among others, American Airlines and Costco) within Citi-branded cards as well as its co-brand and private label relationships (including among others, Sears, The Home Depot, Macy’s and Best Buy) within Citi retail services.
As of March 31, 2017, North America GCB’s 705 retail bank branches are concentrated in the six key metropolitan areas of New York, Chicago, Miami, Washington, D.C., Los Angeles and San Francisco. Also as of March 31, 2017, North America GCB had approximately 9.6 million retail banking customer accounts, $55.5 billion in retail banking loans and $188.4 billion in deposits. In addition, North America GCB had approximately 120 million Citi-branded and Citi retail services credit card accounts with $126.4 billion in outstanding card loan balances.

 
First Quarter
% Change
In millions of dollars, except as otherwise noted
2017
2016
Net interest revenue
$
4,617

$
4,398

5
 %
Non-interest revenue
327

432

(24
)
Total revenues, net of interest expense
$
4,944

$
4,830

2
 %
Total operating expenses
$
2,576

$
2,500

3
 %
Net credit losses
$
1,190

$
933

28
 %
Credit reserve build (release)
152

79

92

Provision for unfunded lending commitments
7


NM

Provisions for benefits and claims
6

9

(33
)
Provisions for credit losses and for benefits and claims
$
1,355

$
1,021

33
 %
Income from continuing operations before taxes
$
1,013

$
1,309

(23
)%
Income taxes
386

476

(19
)
Income from continuing operations
$
627

$
833

(25
)%
Noncontrolling interests



Net income
$
627

$
833

(25
)%
Balance Sheet data (in billions of dollars)


 


Average assets
$
245

$
211

16
 %
Return on average assets
1.04
%
1.59
%


Efficiency ratio
52
%
52
%


Average deposits
$
185.5

$
180.6

3

Net credit losses as a percentage of average loans
2.63
%
2.32
%


Revenue by business


 


Retail banking
$
1,256

$
1,290

(3
)%
Citi-branded cards
2,096

1,860

13

Citi retail services
1,592

1,680

(5
)
Total
$
4,944

$
4,830

2
 %
Income from continuing operations by business


 


Retail banking
$
83

$
89

(7
)%
Citi-branded cards
248

353

(30
)
Citi retail services
296

391

(24
)
Total
$
627

$
833

(25
)%

NM Not meaningful


15



1Q17 vs. 1Q16
Net income decreased by 25% due to significantly higher cost of credit and higher expenses, partially offset by higher revenues.
Revenues increased 2%, reflecting higher revenues in Citi-branded cards, partially offset by lower revenues in Citi
retail services and retail banking.
Retail banking revenues declined 3%, mainly due to lower mortgage revenues (decrease of approximately $80 million). The decline in mortgage revenues was driven by lower origination activity and higher cost of funds driven by higher interest rates, as well as the impact of the sale of a portion of Citi’s mortgage servicing rights (MSR) (see “Executive Summary” above). Excluding mortgage revenues, retail banking revenues increased 5%, primarily reflecting continued growth in average loans (5%), average deposits (3%) and assets under management (12%). Citi expects higher interest rates and the impact of the MSR sale to continue to negatively impact mortgage revenues during the remainder of 2017.
Cards revenues increased 4%. In Citi-branded cards, revenues increased 13%, largely reflecting the impact of the Costco portfolio acquisition (completed June 17, 2016) and modest organic growth, partially offset by the ongoing impact of higher promotional rate balances. Average loans grew 28% (4% excluding Costco) and purchase sales grew 58% (4% excluding Costco).
Citi retail services revenues decreased 5%, primarily driven by the absence of gains on the sales of two portfolios sold in the first quarter of 2016. Excluding these gains, revenues increased 1%, driven by volume growth, mostly offset by the continued impact of the previously disclosed renewal and extensions of several partnerships within the portfolio. Average loans were up 3% and purchase sales were largely unchanged.
North America GCB expects revenue growth in the second quarter of 2017 to be largely driven by the impact of the Costco portfolio acquisition.
Expenses increased 3%, primarily driven by the addition of the Costco portfolio, volume growth and continued investments, partially offset by efficiency savings and lower repositioning costs.
Provisions increased 33% from the prior-year period, driven by higher net credit losses and a higher net loan loss reserve build.
Net credit losses increased 28%, primarily driven by higher losses in Citi-branded cards and Citi retail services. In Citi-branded cards, net credit losses increased 39% to $633 million, primarily due to the Costco portfolio acquisition, organic volume growth and seasoning and the impact of changes in collection processes. In Citi retail services, net credit losses increased 15% to $520 million, primarily due to the volume growth and the impact of changes in collection processes. The net loan loss reserve build in the first quarter of 2017 was $159 million, compared to a build of $79 million in the prior-year period, largely supporting volume growth, including the Costco portfolio acquisition.

 
For additional information on North America GCB’s retail banking, including commercial banking, and its Citi-branded cards and Citi retail services portfolios, see “Credit Risk—Consumer Credit” below.






16



LATIN AMERICA GCB
Latin America GCB provides traditional retail banking, including commercial banking, and its Citi-branded card products to retail customers and small to mid-size businesses in Mexico through Citibanamex (previously known as Banco Nacional de Mexico, or Banamex), one of Mexico’s largest banks.
At March 31, 2017, Latin America GCB had 1,499 retail branches in Mexico, with approximately 27.8 million retail banking customer accounts, $19.7 billion in retail banking loans and $27.6 billion in deposits. In addition, the business had approximately 5.7 million Citi-branded card accounts with $5.2 billion in outstanding loan balances.

 
First Quarter
% Change
In millions of dollars, except as otherwise noted
2017
2016
Net interest revenue
$
800

$
853

(6
)%
Non-interest revenue
351

376

(7
)
Total revenues, net of interest expense
$
1,151

$
1,229

(6
)%
Total operating expenses
$
659

$
718

(8
)%
Net credit losses
$
253

$
278

(9
)%
Credit reserve build (release)
12

17

(29
)
Provision (release) for unfunded lending commitments

1

(100
)
Provision for benefits and claims
23

19

21

Provisions for credit losses and for benefits and claims (LLR & PBC)
$
288

$
315

(9
)%
Income from continuing operations before taxes
$
204

$
196

4
 %
Income taxes
74

50

48

Income from continuing operations
$
130

$
146

(11
)%
Noncontrolling interests
1

1


Net income
$
129

$
145

(11
)%
Balance Sheet data (in billions of dollars)


 


Average assets
$
43

$
50

(14
)%
Return on average assets
1.22
%
1.17
%


Efficiency ratio
57
%
58
%


Average deposits
$
25.3

$
26.1

(3
)
Net credit losses as a percentage of average loans
4.44
%
4.58
%


Revenue by business


 


Retail banking
$
836

$
856

(2
)%
Citi-branded cards
315

373

(16
)
Total
$
1,151

$
1,229

(6
)%
Income from continuing operations by business


 


Retail banking
$
86

$
90

(4
)%
Citi-branded cards
44

56

(21
)
Total
$
130

$
146

(11
)%

17



FX translation impact


 


Total revenues—as reported
$
1,151

$
1,229

(6
)%
Impact of FX translation(1)

(122
)


Total revenues—ex-FX(2)
$
1,151

$
1,107

4
 %
Total operating expenses—as reported
$
659

$
718

(8
)%
Impact of FX translation(1)

(57
)


Total operating expenses—ex-FX(2)
$
659

$
661

 %
Provisions for LLR & PBC—as reported
$
288

$
315

(9
)%
Impact of FX translation(1)

(31
)


Provisions for LLR & PBC—ex-FX(2)
$
288

$
284

1
 %
Net income—as reported
$
129

$
145

(11
)%
Impact of FX translation(1)

(27
)


Net income—ex-FX(2)
$
129

$
118

9
 %
(1)
Reflects the impact of FX translation into U.S. dollars at the first quarter of 2017 average exchange rates for all periods presented.
(2)
Presentation of this metric excluding FX translation is a non-GAAP financial measure.


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.

1Q17 vs. 1Q16
Net income increased 9%, primarily driven by higher revenues, partially offset by higher credit costs.
Revenues increased 4%, driven by higher revenues in
retail banking, partially offset by lower revenues in
cards.
Retail banking revenues grew by 8%, reflecting continued growth in volumes, including an increase in average loans (6%), driven by higher personal and commercial loans, and an increase in average deposits (8%), as well as improved deposit spreads. Cards revenues decreased 6%, reflecting lower revolving loans as well as a higher cost to fund non-revolving loans, partially offset by higher volumes (average loans up 5%) and increased purchase sales (8%). While revolving loan balance trends improved during the quarter, Latin America GCB expects cards revenues to continue to remain under pressure in the near term.
Expenses were largely unchanged as ongoing investment spending was offset by efficiency savings and lower repositioning costs.
Provisions increased 1%, driven by a higher provision for
benefits and claims, partially offset by a lower net loan loss reserve build (decline of $4 million). Net credit losses were largely unchanged, as an increase in net credit losses in retail banking was offset by continued improvements in cards, reflecting a continued focus on higher credit quality customers.
For additional information on Latin America GCB’s retail banking, including commercial banking, and its Citi-branded cards portfolios, see “Credit Risk—Consumer Credit” below.





18



ASIA GCB
Asia GCB provides traditional retail banking, including commercial banking, and its Citi-branded card products to retail customers and small to mid-size businesses, as applicable. During the first quarter of 2017, Citi’s most significant revenues in the region were from Singapore, Hong Kong, Korea, Australia, India, Taiwan, Indonesia, Thailand, the Philippines and Malaysia. Included within Asia GCB, traditional retail banking and Citi-branded card products are also provided to retail customers in certain EMEA countries, primarily in Poland, Russia and the United Arab Emirates.
At March 31, 2017, on a combined basis, the businesses had 397 retail branches, approximately 16.4 million retail banking customer accounts, $66.2 billion in retail banking loans and $95.4 billion in deposits. In addition, the businesses had approximately 16.7 million Citi-branded card accounts with $18.3 billion in outstanding loan balances.

 
First Quarter
% Change
In millions of dollars, except as otherwise noted (1)
2017
2016
Net interest revenue
$
1,105

$
1,101

 %
Non-interest revenue
617

554

11

Total revenues, net of interest expense
$
1,722

$
1,655

4
 %
Total operating expenses
$
1,180

$
1,183

 %
Net credit losses
$
160

$
160

 %
Credit reserve build (release)
13

(11
)
NM

Provision (release) for unfunded lending commitments
(1
)

(100
)
Provisions for credit losses
$
172

$
149

15
 %
Income from continuing operations before taxes
$
370

$
323

15
 %
Income taxes
124

108

15

Income from continuing operations
$
246

$
215

14
 %
Noncontrolling interests

1

(100
)
Net income
$
246

$
214

15
 %
Balance Sheet data (in billions of dollars)






Average assets
$
123

$
116

6
 %
Return on average assets
0.81
%
0.74
%


Efficiency ratio
69
%
71
%
 
Average deposits
$
92.7

$
87.2

6

Net credit losses as a percentage of average loans
0.78
%
0.76
%


Revenue by business
 
 
 
Retail banking
$
1,063

$
1,041

2
 %
Citi-branded cards
659

614

7

Total
$
1,722

$
1,655

4
 %
Income from continuing operations by business






Retail banking
$
170

$
119

43
 %
Citi-branded cards
76

96

(21
)
Total
$
246

$
215

14
 %

19



FX translation impact



Total revenues—as reported
$
1,722

$
1,655

4
 %
Impact of FX translation(2)

19



Total revenues—ex-FX(3)
$
1,722

$
1,674

3
 %
Total operating expenses—as reported
$
1,180

$
1,183

 %
Impact of FX translation(2)

15



Total operating expenses—ex-FX(3)
$
1,180

$
1,198

(2
)%
Provisions for loan losses—as reported
$
172

$
149

15
 %
Impact of FX translation(2)

1



Provisions for loan losses—ex-FX(3)
$
172

$
150

15
 %
Net income—as reported
$
246

$
214

15
 %
Impact of FX translation(2)

2



Net income—ex-FX(3)
$
246

$
216

14
 %

(1)
Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
(2)
Reflects the impact of FX translation into U.S. dollars at the first quarter of 2017 average exchange rates for all periods presented.
(3)
Presentation of this metric excluding FX translation is a non-GAAP financial measure.
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.

1Q17 vs. 1Q16
Net income increased 14%, reflecting higher revenues and lower expenses, partially offset by higher cost of credit.
Revenues increased 3%, driven by improvement in cards and wealth management revenues, partially offset by lower retail lending revenues.
Retail banking revenues increased 1%, mainly due to an increase in wealth management revenues and higher insurance revenues, which were largely offset by the repositioning of the retail loan portfolio. Wealth management revenues increased due to modest improvement in investor sentiment, stronger equity markets and an increase in assets under management (5%). These increases were largely offset by a 5% decrease in lending revenues, reflecting continued lower average loans (decrease of 5%). The lower average loans were due to the optimization of this portfolio away from lower-yielding mortgage loans to focus on growing higher return personal loans.
Cards revenues increased 6%, due to higher volumes, improved revolve rates and higher yields. The volume growth was driven by a 3% increase in average loans and a 4% increase in purchase sales, both of which benefited from a portfolio acquisition in Australia.
Expenses decreased 2% as volume growth and ongoing investment spending were more than offset by lower repositioning expenses compared to the prior year.
Provisions increased 15%, primarily due to reserve builds related to the cards portfolio acquisition in Australia, partially offset by lower net credit losses. Overall credit quality continued to remain stable in the region.
For additional information on Asia GCB’s retail banking, including commercial banking, and its Citi-branded cards portfolios, see “Credit Risk—Consumer Credit” below.


 












20


INSTITUTIONAL CLIENTS GROUP
Institutional Clients Group (ICG) includes Banking and Markets and securities services (for additional information on these businesses, see “Citigroup Segments” above). 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. Revenue is also generated from transaction processing and assets under custody and administration. Revenue generated from these activities is primarily recorded in Administration and other fiduciary fees. 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 (for additional information on Principal transactions revenue, see Note 6 to the Consolidated Financial Statements). Other primarily includes mark-to-market gains and losses on certain credit derivatives, gains and losses on available-for-sale (AFS) securities and other non-recurring gains and losses. Interest income earned on assets held less interest paid to customers on deposits and long-term and short-term debt is recorded as Net interest revenue.
The amount and types of Markets revenues are impacted by a variety of interrelated factors, including market liquidity; changes in market variables such as interest rates, foreign exchange rates, equity prices, commodity prices, and credit spreads, as well as their implied volatilities; investor confidence; and other macroeconomic conditions. Assuming all other market conditions do not change, increases in client activity levels or bid/offer spreads generally result in increases in revenues. However, changes in market conditions can significantly impact client activity levels, bid/offer spreads, and the fair value of product inventory. For example, a decrease in market liquidity may increase bid/offer spreads, decrease client activity levels, and widen credit spreads on product inventory positions.
ICG’s management of the Markets businesses involves daily monitoring and evaluating of the above factors at the trading desk as well as the country level. ICG does not separately track the impact on total Markets revenues of the volume of transactions, bid/offer spreads, fair value changes of product inventory positions and economic hedges because, as noted above, these components are interrelated and are not deemed useful or necessary individually to manage the Markets businesses at an aggregate level.
In the Markets businesses, client revenues are those revenues directly attributable to client transactions at the time of inception, including commissions, interest, or fees earned. Client revenues do not include the results of client facilitation activities (for example, holding product inventory in anticipation of client demand) or the results of certain economic hedging activities.
ICG’s international presence is supported by trading floors in approximately 80 countries and a proprietary network in 97 countries and jurisdictions. At March 31, 2017, ICG had approximately $1.3 trillion of assets and $620 billion of deposits, while two of its businesses, securities services and issuer services, managed approximately $15.9 trillion of assets under custody compared to $14.8 trillion at the end of the prior-year period.
 

21


 
First Quarter
% Change
In millions of dollars, except as otherwise noted
2017
2016
Commissions and fees
$
985

$
1,004

(2
)%
Administration and other fiduciary fees
644

597

8

Investment banking
1,044

740

41

Principal transactions
2,668

1,576

69

Other(1)
(5
)
(7
)
29

Total non-interest revenue
$
5,336

$
3,910

36
 %
Net interest revenue (including dividends)
3,790

3,985

(5
)
Total revenues, net of interest expense
$
9,126

$
7,895

16
 %
Total operating expenses
$
4,945

$
4,872

1
 %
Net credit losses
$
25

$
211

(88
)%
Credit reserve build (release)
(176
)
108

NM

Provision (release) for unfunded lending commitments
(54
)
71

NM

Provisions for credit losses
$
(205
)
$
390

NM

Income from continuing operations before taxes
$
4,386

$
2,633

67
 %
Income taxes
1,375

764

80

Income from continuing operations
$
3,011

$
1,869

61
 %
Noncontrolling interests
15

10

50

Net income
$
2,996

$
1,859

61
 %
EOP assets (in billions of dollars)
$
1,314

$
1,293

2
 %
Average assets (in billions of dollars)
$
1,318

$
1,272

4
 %
Return on average assets
0.92
%
0.59
%


Efficiency ratio
54
%
62
%


Revenues by region
 
 


North America
$
3,455

$
2,980

16
 %
EMEA
2,807

2,167

30

Latin America
1,127

962

17

Asia
1,737

1,786

(3
)
Total
$
9,126

$
7,895

16
 %
Income from continuing operations by region
 
 


North America
$
1,100

$
546

NM

EMEA
855

374

NM

Latin America
475

330

44

Asia
581

619

(6
)
Total
$
3,011

$
1,869

61
 %
Average loans by region (in billions of dollars)
 
 


North America
$
140

$
133

5
 %
EMEA
65

63

3

Latin America
37

39

(5
)
Asia
60

60


Total
$
302

$
295

2
 %
EOP deposits by business (in billions of dollars)
 
 
 
Treasury and trade solutions
$
417

$
417

 %
All other ICG businesses
203

192

6

Total
$
620

$
609

2
 %

(1)
First quarter of 2016 includes a previously disclosed charge of approximately $180 million primarily reflecting the write down of Citi’s net investment in Venezuela as a result of changes in the exchange rate during the quarter.
NM Not meaningful

22


ICG Revenue Details—Excluding (Loss) on Loan Hedges
 
First Quarter
% Change
In millions of dollars
2017
2016
Investment banking revenue details
 
 
 
Advisory
$
246

$
227

8
 %
Equity underwriting
235

118

99

Debt underwriting
733

528

39

Total investment banking
$
1,214

$
873

39
 %
Treasury and trade solutions
2,075

1,903

9

Corporate lending—excluding (loss) on loan hedges(1)
434

448

(3
)
Private bank
744

684

9

Total banking revenues (ex-(loss) on loan hedges)
$
4,467

$
3,908

14
 %
Corporate lending—(loss) on loan hedges(1)
$
(115
)
$
(66
)
(74
)%
Total banking revenues (including (loss) on loan hedges)
$
4,352

$
3,842

13
 %
Fixed income markets
$
3,622

$
3,051

19
 %
Equity markets
769

697

10

Securities services
543

561

(3
)
Other(2)
(160
)
(256
)
38

Total markets and securities services revenues
$
4,774

$
4,053

18
 %
Total revenues, net of interest expense
$
9,126

$
7,895

16
 %
    Commissions and fees
$
140

$
124

13
 %
    Principal transactions(3)
2,318

1,344

72

    Other
149

216

(31
)
    Total non-interest revenue
$
2,607

$
1,684

55
 %
    Net interest revenue
1,015

1,367

(26
)
Total fixed income markets
$
3,622

$
3,051

19
 %
    Rates and currencies
$
2,503

$
2,236

12
 %
    Spread products / other fixed income
1,119

815

37

Total fixed income markets
$
3,622

$
3,051

19
 %
    Commissions and fees
$
316

$
357

(11
)%
    Principal transactions(3)
166

51

NM

    Other
8

2

NM

    Total non-interest revenue
$
490

$
410

20
 %
    Net interest revenue
279

287

(3
)
Total equity markets
$
769

$
697

10


(1)
Hedges on accrual loans reflect the mark-to-market on credit derivatives used to economically hedge the corporate loan accrual portfolio. The fixed premium costs of these hedges are netted against the corporate lending revenues to reflect the cost of credit protection.
(2)
First quarter of 2016 includes the previously disclosed charge of approximately $180 million, primarily reflecting the write down of Citi’s net investment in Venezuela as a result of changes in the exchange rate during the quarter.
(3) Excludes principal transactions revenues of ICG businesses other than Markets, primarily treasury and trade solutions and the private bank.

NM Not meaningful



23


1Q17 vs. 1Q16
Net income increased 61%, primarily driven by higher revenues and lower cost of credit, partially offset by higher operating expenses.

Revenues increased 16%, reflecting higher revenues in both Banking (increase of 13%, increase of 14% excluding the loss on hedges on accrual loans), and Markets and securities services (increase of 18%), primarily due to fixed income markets and equity markets. Banking revenues were driven by strong performance in investment banking, treasury and trade solutions and the private bank. Citi expects revenues in ICG will likely continue to reflect the overall market environment during the remainder of 2017, including a normal seasonal decline in Markets and securities services revenues in the second quarter of 2017.

Within Banking:

Investment banking revenues increased 39%, largely reflecting increased industry-wide debt and equity underwriting activity and momentum in advisory during the current quarter. Debt underwriting revenues increased 39%, driven by the increase in market activity and wallet share. Equity underwriting revenues increased 99% largely due to the rebound from the prior year period’s slow activity. Advisory revenues increased 8% reflecting increased wallet share, despite a modest decline in market M&A activity.
Treasury and trade solutions revenues increased 9%, driven by strong fee growth, higher volumes and improved spreads. Client activity in both cash and trade drove revenue growth across all regions. End of period deposit balances were unchanged (1% increase excluding the impact of FX translation) and average trade loans were unchanged (1% increase excluding the impact of FX translation).
Corporate lending revenues decreased 16%. Excluding the impact of losses on hedges on accrual loans, revenues decreased 3% driven by lower average volumes.
Private Bank revenues increased 9%, reflecting revenue growth in all regions. The increase was mostly driven by loan and deposit growth, improved banking spreads and increased managed investments revenues.


 
Within Markets and securities services:

Fixed income markets revenues increased 19%, primarily due to higher revenues in EMEA and North America. The increase was largely driven by higher principal transactions revenues (up 72%), slightly offset by lower net interest revenues (down 26%). The increase in principal transactions revenues was driven by both higher rates and currencies revenues and higher spread products revenues, reflecting increased client revenues and recovery from a challenging trading environment in the prior year. Net interest revenues were lower largely due to a change in mix of trading positions in support of client activity.
Rates and currencies revenues increased 12% driven mainly by higher rates revenues, driven by strength in EMEA and North America, partially offset by a decrease in G10 FX revenues reflecting low volatility and lower client activity, particularly in Asia.  Spread products and other fixed income revenues increased 37% primarily due to recovery from the challenging trading environment in the prior year, particularly in securitized products, and continued momentum and higher client revenues in credit and municipal products.
Equity markets revenues increased by 10%, driven by continued growth in client balances and an improvement in equity derivatives, particularly in EMEA and Asia. These drivers were partially offset by lower cash equities revenues, primarily in North America, driven by lower volumes and commissions, reflecting the ongoing shift to electronic trading by clients across the industry.
Securities services revenues decreased by 3%. Excluding the impact of prior period divestitures, revenues grew 12%, driven by higher deposit balances and higher interest revenue, primarily in North America and Latin America, and higher fee revenue from growth in assets under custody and client volumes.

Expenses increased 1% as higher incentive compensation was partially offset by lower repositioning costs and a benefit from FX translation.
Provisions decreased by $595 million to a benefit of $205 million in the current quarter, reflecting a net loan loss reserve release of $230 million (compared to a $179 million build in the prior-year period largely related to energy and energy-related exposures) and lower net credit losses of $25 million ($211 million in the prior-year period). The lower cost of credit was driven by ratings upgrades and continued stability in commodity prices.





24



CORPORATE/OTHER
Corporate/Other includes certain unallocated costs of global staff functions (including finance, risk, human resources, legal and compliance), other corporate expenses and unallocated global operations and technology expenses, Corporate Treasury, certain North America and international legacy consumer loan portfolios, other legacy assets and discontinued operations (for additional information on Corporate/Other, see “Citigroup Segments” above). At March 31, 2017, Corporate/Other had $96 billion in assets, a decrease of 23% year-over-year and 7% from December 31, 2016.

 
First Quarter
% Change
In millions of dollars
2017
2016
Net interest revenue
$
545

$
890

(39
)%
Non-interest revenue
632

1,056

(40
)%
Total revenues, net of interest expense
$
1,177

$
1,946

(40
)%
Total operating expenses
$
1,117

$
1,250

(11
)%
Net credit losses
$
81

$
142

(43
)%
Credit reserve build (release)
(35
)
(31
)
(13
)
Provision (release) for unfunded lending commitments
5

(1
)
NM

Provision for benefits and claims
1

60

(98
)
Provisions for loan losses and for benefits and claims
52

170

(69
)%
Income from continuing operations before taxes
$
8

$
526

(98
)%
Income taxes (benefits)
(96
)
81

NM

Income from continuing operations
$
104

$
445

(77
)%
Income (loss) from discontinued operations, net of taxes
(18
)
(2
)
NM

Net income before attribution of noncontrolling interests
$
86

$
443

(81
)%
Noncontrolling interests
(6
)
(7
)
14
 %
Net income
$
92

$
450

(80
)%
NM Not meaningful

1Q17 vs. 1Q16
Net income was $92 million, compared to $450 million in the prior-year period, due to lower revenues, partially offset by lower expenses and lower cost of credit.
Revenues decreased 40%, driven by legacy asset run-off and divestiture activity, as well as lower revenue from treasury-related hedging activity. Revenues in the current quarter included approximately $750 million in gains on asset sales, which more than offset a roughly $300 million charge related to the exit of Citi’s U.S. mortgage servicing operations.
Expenses decreased 11%, primarily driven by the wind-down of legacy assets, partially offset by approximately $100 million in episodic expenses primarily related to the exit of the U.S. mortgage servicing operations.
Excluding the episodic items noted above, Corporate/Other generated an approximate $350 million loss from continuing operations before taxes. Citi expects that revenues and expenses in Corporate/Other should continue to decline with the ongoing wind-down of legacy assets, and Corporate/Other should generate underlying negative earnings before taxes per quarter of roughly the same amount going forward.
Provisions decreased 69%, primarily due to lower net credit losses and a lower provision for benefits and claims. Net credit losses declined 43% to $81 million, reflecting the impact of ongoing divestiture activity as well as continued improvement in the legacy North America mortgage portfolio. The provision for benefits and claims declined by $59 million
 
to $1 million, reflecting lower insurance-related business activity.

Payment Protection Insurance (PPI)
In March 2017, the U.K. Financial Conduct Authority (FCA) released a policy statement with the final rules and guidance related to PPI. During the current quarter, Citi increased its PPI reserves by approximately $55 million, driven by the ongoing level of claim volumes and the impact of the final rules and guidance. Citi’s PPI reserve as of March 31, 2017 was $246 million, compared to $228 million as of the end of 2016.
For background information on PPI, see “Citi Holdings” in Citi’s 2016 Annual Report on Form 10-K.





25



OFF-BALANCE SHEET ARRANGEMENTS

The table below shows where a discussion of Citi’s various off-balance sheet arrangements may be found in this Form 10-Q. For additional information on Citi’s off-balance sheet arrangements, see “Off-Balance Sheet Arrangements” and Notes 1, 21 and 26 to the Consolidated Financial Statements in Citigroup’s 2016 Annual Report on Form 10-K.
Types of Off-Balance Sheet Arrangements Disclosures in this Form 10-Q
Variable interests and other obligations, including contingent obligations, arising from variable interests in nonconsolidated VIEs
See Note 18 to the Consolidated Financial Statements.
Letters of credit, and lending and other commitments
See Note 22 to the Consolidated Financial Statements.
Guarantees
See Note 22 to the Consolidated Financial Statements.

26



CAPITAL RESOURCES
Overview
Capital is used principally to support assets in Citi’s businesses and to absorb credit, market, and operational losses. Citi primarily generates capital through earnings from its operating businesses. Citi may augment its capital through issuances of common stock, noncumulative perpetual preferred stock and equity issued through awards under employee benefit plans, among other issuances.
Further, Citi’s capital levels may also be affected by changes in accounting and regulatory standards as well as U.S. corporate tax laws, and the impact of future events on Citi’s business results, such as changes in interest and foreign exchange rates, as well as business and asset dispositions.
During the first quarter of 2017, Citi returned a total of approximately $2.2 billion of capital to common shareholders in the form of share repurchases (approximately 30 million common shares) and dividends.
 
Capital Management
Citi’s capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with each entity’s respective risk profile, management targets, and all applicable regulatory standards and guidelines. For additional information regarding Citi’s capital management, see “Capital Resources—Capital Management” in Citigroup’s 2016 Annual Report on Form 10-K.

Capital Planning and Stress Testing
Citi is subject to an annual assessment by the Federal Reserve Board as to whether Citigroup has effective capital planning processes as well as sufficient regulatory capital to absorb losses during stressful economic and financial conditions, while also meeting obligations to creditors and counterparties and continuing to serve as a credit intermediary. This annual assessment includes two related programs: the Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Testing (DFAST). For additional information regarding Citi’s capital planning and stress testing, including potential changes in Citi’s regulatory capital requirements and future CCAR processes, see “Forward-Looking Statements” below and “Capital Resources—Current Regulatory Capital Standards—Capital Planning and Stress Testing” and “Risk Factors—Strategic Risks” in Citigroup’s 2016 Annual Report on Form 10-K.









 
Current Regulatory Capital Standards
Citi is subject to regulatory capital standards issued by the Federal Reserve Board which constitute the U.S. Basel III rules. These rules establish an integrated capital adequacy framework, encompassing both risk-based capital ratios and leverage ratios. For additional information regarding the risk-based capital ratios, Tier 1 Leverage ratio, and Supplementary Leverage ratio, see “Capital Resources—Current Regulatory Capital Standards” in Citigroup’s 2016 Annual Report on Form 10-K.

GSIB Surcharge
The Federal Reserve Board also adopted a rule which imposes a risk-based capital surcharge upon U.S. bank holding companies that are identified as global systemically important bank holding companies (GSIBs), including Citi. GSIB surcharges under the rule initially range from 1% to 4.5% of total risk-weighted assets. Citi’s initial GSIB surcharge effective January 1, 2016 was 3.5%. However, ongoing efforts in addressing quantitative measures of systemic importance have resulted in a reduction of Citi’s GSIB surcharge to 3%, effective January 1, 2017. For additional information regarding the identification of a GSIB and the methodology for annually determining the GSIB surcharge, see “Capital Resources—Current Regulatory Capital Standards—GSIB Surcharge” in Citigroup’s 2016 Annual Report on Form 10-K.

Transition Provisions
The U.S. Basel III rules contain several differing, largely multi-year transition provisions (i.e., “phase-ins” and “phase-outs”). Citi considers all of these transition provisions as being fully implemented on January 1, 2019 (full implementation). For additional information regarding the transition provisions under the U.S. Basel III rules, including with respect to the GSIB surcharge, see “Capital Resources—Current Regulatory Capital Standards—Transition Provisions” in Citigroup’s 2016 Annual Report on Form 10-K.

27



Citigroup’s Capital Resources Under Current Regulatory Standards
Citi is required to maintain stated minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios of 4.5%, 6% and 8%, respectively.
Citi’s effective minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios during 2017, inclusive of the 50% phase-in of both the 2.5% Capital Conservation Buffer and the 3% GSIB surcharge (all of which is to be composed of Common Equity Tier 1 Capital), are 7.25%, 8.75% and 10.75%, respectively. Citi’s effective minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios during 2016, inclusive of the 25% phase-in of both the 2.5% Capital Conservation Buffer and the 3.5% GSIB surcharge (all of which is to be
 
composed of Common Equity Tier 1 Capital), were 6%, 7.5% and 9.5%, respectively.
Furthermore, 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.
The following tables set forth the capital tiers, total risk-weighted assets, risk-based capital ratios, quarterly adjusted average total assets, Total Leverage Exposure and leverage ratios under current regulatory standards (reflecting Basel III Transition Arrangements) for Citi as of March 31, 2017 and December 31, 2016.

Citigroup Capital Components and Ratios Under Current Regulatory Standards (Basel III Transition Arrangements)
 
March 31, 2017
 
December 31, 2016
In millions of dollars, except ratios
Advanced Approaches
Standardized Approach
 
Advanced Approaches
Standardized Approach
Common Equity Tier 1 Capital
$
161,665

$
161,665

 
$
167,378

$
167,378

Tier 1 Capital
177,104

177,104

 
178,387

178,387

Total Capital (Tier 1 Capital + Tier 2 Capital)(1)
201,500

214,080

 
202,146

214,938

Total Risk-Weighted Assets
1,166,202

1,142,579

 
1,166,764

1,126,314

Common Equity Tier 1 Capital ratio(2)
13.86
%
14.15
%
 
14.35
%
14.86
%
Tier 1 Capital ratio(2)
15.19

15.50

 
15.29

15.84

Total Capital ratio(2)
17.28

18.74

 
17.33

19.08

In millions of dollars, except ratios
March 31, 2017
 
December 31, 2016
Quarterly Adjusted Average Total Assets(3)
 
$
1,776,048

 
 
$
1,768,415

Total Leverage Exposure(4) 
 
2,375,616

 
 
2,351,883

Tier 1 Leverage ratio
 
9.97
%
 
 
10.09
%
Supplementary Leverage ratio
 
7.46

 
 
7.58


(1)
Under the Advanced Approaches framework eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital to the extent the excess reserves do not exceed 0.6% of credit risk-weighted assets, which differs from the Standardized Approach in which the allowance for credit losses is eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any excess allowance for credit losses being deducted in arriving at credit risk-weighted assets.
(2)
As of March 31, 2017 and December 31, 2016, Citi’s reportable Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios were the lower derived under the Basel III Advanced Approaches framework.
(3)
Tier 1 Leverage ratio denominator.
(4)
Supplementary Leverage ratio denominator.

As indicated in the table above, Citigroup’s capital ratios at March 31, 2017 were in excess of the stated and effective minimum requirements under the U.S. Basel III rules. In addition, Citi was also “well capitalized” under current federal bank regulatory agency definitions as of March 31, 2017.




28



Components of Citigroup Capital Under Current Regulatory Standards
(Basel III Advanced Approaches with Transition Arrangements)
In millions of dollars
March 31,
2017
December 31, 2016
Common Equity Tier 1 Capital
 
 
Citigroup common stockholders’ equity(1)
$
209,063

$
206,051

Add: Qualifying noncontrolling interests
197

259

Regulatory Capital Adjustments and Deductions:
 
 
Less: Net unrealized losses on securities available-for-sale (AFS), net of tax(2)(3)
(116
)
(320
)
Less: Defined benefit plans liability adjustment, net of tax(3)
(1,035
)
(2,066
)
Less: Accumulated net unrealized losses on cash flow hedges, net of tax(4)
(562
)
(560
)
Less: Cumulative unrealized net loss related to changes in fair value of financial liabilities
   attributable to own creditworthiness, net of tax(3)(5)
(138
)
(37
)
Less: Intangible assets:
 
 
Goodwill, net of related deferred tax liabilities (DTLs)(6)
21,448

20,858

Identifiable intangible assets other than mortgage servicing rights (MSRs), net of related
   DTLs(3)
3,790

2,926

Less: Defined benefit pension plan net assets(3)
669

514

Less: Deferred tax assets (DTAs) arising from net operating loss, foreign tax credit and general
   business credit carry-forwards(3)(7)
16,862

12,802

Less: Excess over 10%/15% limitations for other DTAs, certain common stock investments,
  and MSRs(3)(7)(8)
6,677

4,815

Total Common Equity Tier 1 Capital
$
161,665

$
167,378

Additional Tier 1 Capital
 
 
Qualifying perpetual preferred stock(1)
$
19,069

$
19,069

Qualifying trust preferred securities(9)
1,372

1,371

Qualifying noncontrolling interests
23

17

Regulatory Capital Adjustment and Deductions:
 
 
Less: Cumulative unrealized net loss related to changes in fair value of financial liabilities
   attributable to own creditworthiness, net of tax(3)(5)
(35
)
(24
)
Less: Defined benefit pension plan net assets(3)
167

343

Less: DTAs arising from net operating loss, foreign tax credit and general
   business credit carry-forwards(3)(7)
4,215

8,535

Less: Permitted ownership interests in covered funds(10)
618

533

Less: Minimum regulatory capital requirements of insurance underwriting subsidiaries(11)
60

61

Total Additional Tier 1 Capital
$
15,439

$
11,009

Total Tier 1 Capital (Common Equity Tier 1 Capital + Additional Tier 1 Capital)
$
177,104

$
178,387

Tier 2 Capital
 
 
Qualifying subordinated debt
$
23,278

$
22,818

Qualifying trust preferred securities(12)
319

317

Qualifying noncontrolling interests
30

22

Excess of eligible credit reserves over expected credit losses(13)
827

660

Regulatory Capital Adjustment and Deduction:
 
 
Add: Unrealized gains on AFS equity exposures includable in Tier 2 Capital
2

3

Less: Minimum regulatory capital requirements of insurance underwriting subsidiaries(11)
60

61

Total Tier 2 Capital
$
24,396

$
23,759

Total Capital (Tier 1 Capital + Tier 2 Capital)
$
201,500

$
202,146




Footnotes are presented on the following page.

29



Citigroup Risk-Weighted Assets Under Current Regulatory Standards (Basel III Transition Arrangements)
 
March 31, 2017
 
December 31, 2016
In millions of dollars
Advanced Approaches

Standardized Approach

 
Advanced Approaches

Standardized Approach

Credit Risk(14)
$
766,382

$
1,070,053

 
$
773,483

$
1,061,786

Market Risk
72,247

72,526

 
64,006

64,528

Operational Risk
327,573


 
329,275


Total Risk-Weighted Assets
$
1,166,202

$
1,142,579

 
$
1,166,764

$
1,126,314


(1)
Issuance costs of $184 million related to preferred stock outstanding at March 31, 2017 and December 31, 2016, are excluded from common stockholders’ equity and netted against preferred stock in accordance with Federal Reserve Board regulatory reporting requirements, which differ from those under U.S. generally accepted accounting principles (GAAP).
(2)
In addition, includes the net amount of unamortized loss on held-to-maturity (HTM) securities. This amount relates to securities that were previously transferred from AFS to HTM, and non-credit-related factors such as changes in interest rates and liquidity spreads for HTM securities with other-than-temporary impairment.
(3)
The transition arrangements for significant regulatory capital adjustments and deductions impacting Common Equity Tier 1 Capital and/or Additional Tier 1 Capital are set forth in the chart entitled “Basel III Transition Arrangements: Significant Regulatory Capital Adjustments and Deductions,” as presented in Citigroup’s 2016 Annual Report on Form 10-K.
(4)
Common Equity Tier 1 Capital is adjusted for accumulated net unrealized gains (losses) on cash flow hedges included in Accumulated other comprehensive income (loss) (AOCI) that relate to the hedging of items not recognized at fair value on the balance sheet.
(5)
The cumulative impact of changes in Citigroup’s own creditworthiness in valuing liabilities for which the fair value option has been elected and own-credit valuation adjustments on derivatives are excluded from Common Equity Tier 1 Capital, in accordance with the U.S. Basel III rules.
(6)
Includes goodwill “embedded” in the valuation of significant common stock investments in unconsolidated financial institutions.
(7)
Of Citi’s approximately $45.9 billion of net DTAs at March 31, 2017, approximately $19.6 billion were includable in regulatory capital pursuant to the U.S. Basel III rules, while approximately $26.3 billion were excluded. Excluded from Citi’s regulatory capital at March 31, 2017 was approximately $27.7 billion of net DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards as well as temporary differences, of which approximately $23.5 billion were deducted from Common Equity Tier 1 Capital and approximately $4.2 billion were deducted from Additional Tier 1 Capital, reduced by approximately $1.4 billion of net DTLs primarily associated with goodwill and certain other intangible assets. Separately, under the U.S. Basel III rules, goodwill and these other intangible assets are deducted net of associated DTLs in arriving at Common Equity Tier 1 Capital. DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards are required to be deducted from both Common Equity Tier 1 Capital and Additional Tier 1 Capital under the transition arrangements of the U.S. Basel III rules; whereas DTAs arising from temporary differences are deducted in full from Common Equity Tier 1 Capital under these rules, if in excess of 10%/15% limitations.
(8)
Assets subject to 10%/15% limitations include MSRs, DTAs arising from temporary differences and significant common stock investments in unconsolidated financial institutions. At March 31, 2017 and December 31, 2016, this deduction related only to DTAs arising from temporary differences that exceeded the 10% limitation. Accordingly, approximately $6.7 billion of DTAs arising from temporary differences were excluded from Citi’s Common Equity Tier 1 Capital at March 31, 2017. Changes to the U.S. corporate tax regime that impact the value of Citi’s DTAs arising from temporary differences, which exceed the then current amount deducted from Citi’s Common Equity Tier 1 Capital, would further reduce Citi’s regulatory capital to the extent of such excess after tax. For additional information regarding potential U.S. corporate tax reform, see “Risk Factors—Strategic Risks” in Citigroup’s 2016 Annual Report on Form 10-K.
(9)
Represents Citigroup Capital XIII trust preferred securities, which are permanently grandfathered as Tier 1 Capital under the U.S. Basel III rules.
(10)
Banking entities are required to be in compliance with the Volcker Rule of the Dodd-Frank Act that prohibits conducting certain proprietary investment activities and limits their ownership of, and relationships with, covered funds. Accordingly, Citi is required by the Volcker Rule to deduct from Tier 1 Capital all permitted ownership interests in covered funds that were acquired after December 31, 2013.
(11)
50% of the minimum regulatory capital requirements of insurance underwriting subsidiaries must be deducted from each of Tier 1 Capital and Tier 2 Capital.
(12)
Effective January 1, 2016, non-grandfathered trust preferred securities are not eligible for inclusion in Tier 1 Capital, but are eligible for inclusion in Tier 2 Capital subject to full phase-out by January 1, 2022. Non-grandfathered trust preferred securities are eligible for inclusion in Tier 2 Capital in an amount up to 50% and 60% during 2017 and 2016, respectively, of the aggregate outstanding principal amounts of such issuances as of January 1, 2014, in accordance with the transition arrangements for non-qualifying capital instruments under the U.S. Basel III rules.
(13)
Advanced Approaches banking organizations are permitted to include in Tier 2 Capital eligible credit reserves that exceed expected credit losses to the extent that the excess reserves do not exceed 0.6% of credit risk-weighted assets.
(14)
Under the U.S. Basel III rules, credit risk-weighted assets during the transition period reflect the effects of transitional arrangements related to regulatory capital adjustments and deductions and, as a result, will differ from credit risk-weighted assets derived under full implementation of the rules.

30



Citigroup Capital Rollforward Under Current Regulatory Standards
(Basel III Advanced Approaches with Transition Arrangements)
In millions of dollars
Three months ended March 31, 2017
Common Equity Tier 1 Capital
 
Balance, beginning of period
$
167,376

Net income
4,090

Common and preferred stock dividends declared
(746
)
Net increase in treasury stock
(1,277
)
Net decrease in common stock and additional paid-in capital
(429
)
Net decrease in foreign currency translation adjustment net of hedges, net of tax
1,318

Net decrease in unrealized losses on securities AFS, net of tax
16

Net increase in defined benefit plans liability adjustment, net of tax
(1,043
)
Net change in adjustment related to changes in fair value of financial liabilities
    attributable to own creditworthiness, net of tax
41

Net increase in goodwill, net of related DTLs
(590
)
Net increase in identifiable intangible assets other than MSRs, net of related DTLs
(864
)
Net increase in defined benefit pension plan net assets
(155
)
Net increase in DTAs arising from net operating loss, foreign tax credit and general
    business credit carry-forwards
(4,034
)
Net increase in excess over 10%/15% limitations for other DTAs, certain common
    stock investments and MSRs
(1,886
)
Other
(152
)
Net decrease in Common Equity Tier 1 Capital
$
(5,711
)
Common Equity Tier 1 Capital Balance, end of period
$
161,665

Additional Tier 1 Capital
 
Balance, beginning of period
$
10,992

Net increase in qualifying trust preferred securities
1

Net change in adjustment related to changes in fair value of financial liabilities
    attributable to own creditworthiness, net of tax
11

Net decrease in defined benefit pension plan net assets
176

Net decrease in DTAs arising from net operating loss, foreign tax credit and general
    business credit carry-forwards
4,337

Net increase in permitted ownership interests in covered funds
(85
)
Other
7

Net increase in Additional Tier 1 Capital
$
4,447

Tier 1 Capital Balance, end of period
$
177,104

Tier 2 Capital
 
Balance, beginning of period
$
23,759

Net increase in qualifying subordinated debt
460

Net increase in qualifying trust preferred securities
2

Net increase in excess of eligible credit reserves over expected credit losses
167

Other
8

Net increase in Tier 2 Capital
$
637

Tier 2 Capital Balance, end of period
$
24,396

Total Capital (Tier 1 Capital + Tier 2 Capital)
$
201,500





 


31



Citigroup Risk-Weighted Assets Rollforward Under Current Regulatory Standards
(Basel III Advanced Approaches with Transition Arrangements)
In millions of dollars
Three months ended March 31, 2017
 Total Risk-Weighted Assets, beginning of period
$
1,166,764

Changes in Credit Risk-Weighted Assets
 
Net decrease in retail exposures(1)
(4,312
)
Net increase in wholesale exposures(2)
4,445

Net decrease in repo-style transactions
(197
)
Net decrease in securitization exposures
(235
)
Net increase in equity exposures
465

Net decrease in over-the-counter (OTC) derivatives(3)
(4,199
)
Net decrease in derivatives CVA(4)
(1,061
)
Net decrease in other exposures(5)
(1,665
)
Net decrease in supervisory 6% multiplier(6)
(342
)
Net decrease in Credit Risk-Weighted Assets
$
(7,101
)
Changes in Market Risk-Weighted Assets
 
Net increase in risk levels(7)
$
10,995

Net decrease due to model and methodology updates(8)
(2,754
)
Net increase in Market Risk-Weighted Assets
$
8,241

Net decrease in Operational Risk-Weighted Assets(9)
$
(1,702
)
Total Risk-Weighted Assets, end of period
$
1,166,202


(1)
Retail exposures decreased during the three months ended March 31, 2017 primarily due to residential mortgage loan sales and repayments, divestitures of certain legacy assets and reductions in qualifying revolving (cards) exposures attributable to seasonal holiday spending repayments, partially offset by the impact of FX translation.
(2)
Wholesale exposures increased during the three months ended March 31, 2017 primarily due to increases in commercial loans and loan commitments, as well as the impact of FX translation.
(3)
OTC derivatives decreased during the three months ended March 31, 2017 primarily due to changes in fair value and improved portfolio credit quality.
(4)
Derivatives CVA decreased during the three months ended March 31, 2017 primarily driven by model enhancements, partially offset by increased exposure and volatility.
(5)
Other exposures include cleared transactions, unsettled transactions, assets other than those reportable in specific exposure categories and non-material portfolios. Other exposures decreased during the three months ended March 31, 2017 primarily due to a reduction in assets subject to risk-weighting arising from the transitioning to higher regulatory capital deductions effective January 1, 2017, and from the previously-announced sale of a portion of Citi’s mortgage servicing rights, which were offset, in part, by an increase in exchange-traded exposures.
(6)
Supervisory 6% multiplier does not apply to derivatives CVA.
(7)
Risk levels increased during the three months ended March 31, 2017 primarily due to increases in exposure levels subject to Stressed Value at Risk and comprehensive risk, as well as an increase in positions subject to securitization charges.
(8)
Risk-weighted assets declined during the three months ended March 31, 2017 due to changes in model inputs regarding volatility, as well as methodology changes for standard specific risk charges.
(9)
During the first quarter of 2017, operational risk-weighted assets decreased by $1.7 billion due to quarterly updates to model parameters.
  


32



Capital Resources of Citigroup’s Subsidiary U.S. Depository Institutions Under Current Regulatory Standards
Citigroup’s subsidiary U.S. depository institutions are also subject to regulatory capital standards issued by their respective primary federal bank regulatory agencies, which are similar to the standards of the Federal Reserve Board.
During 2017, Citi’s primary subsidiary U.S. depository institution, Citibank, N.A. (Citibank), is subject to effective minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios, inclusive of the 50% phase-in of the 2.5% Capital Conservation Buffer, of 5.75%, 7.25% and 9.25%, respectively. Citibank’s effective minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total
 
Capital ratios during 2016, inclusive of the 25% phase-in of the 2.5% Capital Conservation Buffer, were 5.125%, 6.625% and 8.625%, respectively. Citibank is required to maintain stated minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios of 4.5%, 6% and 8%, respectively.
The following tables set forth the capital tiers, total risk-weighted assets, risk-based capital ratios, quarterly adjusted average total assets, Total Leverage Exposure and leverage ratios under current regulatory standards (reflecting Basel III Transition Arrangements) for Citibank, Citi’s primary subsidiary U.S. depository institution, as of March 31, 2017 and December 31, 2016.
Citibank Capital Components and Ratios Under Current Regulatory Standards (Basel III Transition Arrangements)
 
March 31, 2017
 
December 31, 2016
In millions of dollars, except ratios
Advanced Approaches
Standardized Approach
 
Advanced Approaches
Standardized Approach
Common Equity Tier 1 Capital
$
126,543