10-Q 1 c-9302017x10q.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 September 30, 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 September 30, 2017: 2,644,001,999

Available on the web at www.citigroup.com
 




CITIGROUP’S THIRD 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, including the historical audited consolidated financial statements of Citigroup reflecting certain reclassifications set forth in Citigroup’s Current Report on Form 8-K filed with the SEC on June 16, 2017 (2016 Annual Report on Form 10-K), and Citigroup’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 (First Quarter of 2017 Form 10-Q) and June 30, 2017 (Second Quarter of 2017 Form 10-Q).
Additional information about Citigroup is available on Citi’s website at www.citigroup.com. Citigroup’s annual reports on Form 10-K, quarterly reports on Form 10-Q and 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, 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 Notes 1 and 3 to the Consolidated Financial Statements in Citi’s 2016 Annual Report on Form 10-K.
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:
citisegmentsa20.jpg
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.
citigroupregionsa07.jpg

(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

Third Quarter of 2017—Balanced Growth Across Citi’s Franchise
As described further throughout this Executive Summary, Citi reported balanced operating results in the third quarter of 2017, reflecting continued momentum across businesses and geographies, notably many of those where Citi has been making investments. During the quarter, Citi had revenue and loan growth in both Global Consumer Banking (GCB) and the Institutional Clients Group (ICG) compared to the prior-year quarter, while continuing to wind-down legacy assets in Corporate/Other. Results during the quarter also included a $580 million pretax ($355 million after-tax) gain on the sale of a fixed income analytics business, which was included in ICG’s results.
North America GCB generated positive operating leverage driven by revenue growth in retail banking and Citi retail services as well as strong expense discipline. North America GCB’s results also included higher cost of credit, largely reflecting volume growth, seasoning and additional cards-related loan loss reserve builds. International GCB generated positive operating leverage driven by year-over-year revenue growth in both Latin America and Asia GCB, excluding the impact of foreign currency translation into U.S. dollars for reporting purposes (FX translation). ICG had a strong quarter with revenue growth across all Banking businesses, as well as in equity markets and securities services, partially offset by a decline in fixed income markets revenues. These increases in revenues were partially offset by lower revenues in Corporate/Other, mostly reflecting the continued wind-down of legacy non-core assets.
Citi’s regulatory capital declined slightly during the quarter, as earnings growth was more than offset by the return of approximately $6.4 billion to its common shareholders in the form of common stock repurchases and dividends. Citi repurchased approximately 81 million common shares in the third quarter of 2017, as outstanding common shares declined 3% from the prior quarter and 7% from the prior-year period. Despite this capital return, each of Citigroup’s key regulatory capital metrics remained strong as of the end of the third quarter of 2017 (see “Capital” below). Citi utilized approximately $300 million of deferred tax assets (DTAs) during the quarter and $1.2 billion of its DTAs during the first nine months of 2017.
While the macroeconomic environment remains largely positive, there continues to be various economic, political and other risks and uncertainties that could impact Citi’s businesses and future results. 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’s results of operations and the “Managing Global Risk” and “Risk Factors” sections in Citi’s 2016 Annual Report on Form 10-K.

 


Third Quarter of 2017 Summary Results

Citigroup
Citigroup reported net income of $4.1 billion, or $1.42 per share, compared to $3.8 billion, or $1.24 per share, in the prior-year period. The 8% increase in net income included the gain on sale, which contributed $0.13 to earnings per share. Excluding the gain, net income declined 2%, reflecting higher cost of credit, while earnings per share increased 4%, largely due to a 7% reduction in average shares outstanding. (Citi’s results of operations excluding the gain on sale are non-GAAP financial measures.)
Citigroup revenues of $18.2 billion in the third quarter of 2017 increased 2%, driven by the gain on sale as well as 3% aggregate growth in ICG and GCB, partially offset by a 55% decrease in Corporate/Other due primarily to the continued wind-down of legacy non-core assets.
Citigroup’s end-of-period loans increased 2% to $653 billion versus the prior-year period. Excluding the impact of FX translation, Citigroup’s end-of-period loans also grew 2%, as 5% growth in ICG and 3% growth in GCB was 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 3% to $964 billion versus the prior-year period. Excluding the impact of FX translation, Citigroup’s deposits were up 2%, driven by a 3% increase in ICG deposits and a 1% increase in GCB deposits, slightly offset by a decline in Corporate/Other deposits.

Expenses
Citigroup’s operating expenses decreased 2% to $10.2 billion versus the prior-year period, as the impact of higher volume-related expenses and ongoing investments were more than offset by efficiency savings and the wind-down of legacy assets. Year-over-year, ICG operating expenses were up 5%, while GCB operating expenses were largely unchanged and Corporate/Other operating expenses declined 36%.

Cost of Credit
Citi’s total provisions for credit losses and for benefits and claims of $2.0 billion increased 15% from the prior-year period. The increase was driven by an increase in net credit losses of $252 million, primarily in North America GCB, and a net loan loss reserve build of $194 million, compared to a net build of $176 million in the prior-year period. The net loan loss reserve build in the current quarter included roughly $100 million of loan loss reserves related to the potential impact of hurricane and earthquake events, recorded in North America GCB and Latin America GCB, as well as the legacy portfolio in Corporate/Other.
Net credit losses of $1.8 billion increased 17% versus the prior-year period. Consumer net credit losses of $1.7 billion

4



increased 17%, primarily driven by the Costco portfolio acquisition, episodic charge-offs in the North America GCB commercial portfolio, which were offset by related loan loss reserve releases, and overall volume growth and seasoning in cards. The increase in consumer net credit losses was partially offset by the continued wind-down of legacy assets in Corporate/Other. Corporate net credit losses increased 2% from the prior-year period to $43 million.
For additional information on Citi’s consumer and corporate credit costs and allowance for loan losses, see “Credit Risk” below.

Capital
Citigroup’s Common Equity Tier 1 Capital and Tier 1 Capital ratios, on a fully implemented basis, were 13.0% and 14.6% as of September 30, 2017 (based on Basel III Standardized Approach for determining risk-weighted assets), respectively, compared to 12.6% and 14.2% as of September 30, 2016 (based on the Basel III Advanced Approaches for determining risk-weighted assets). Citigroup’s Supplementary Leverage ratio as of September 30, 2017, on a fully implemented basis, was 7.1%, compared to 7.4% as of September 30, 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 6% to $1.2 billion, as higher revenues were more than offset by higher cost of credit, while operating expenses were unchanged. Operating expenses were $4.4 billion, down 1% excluding the impact of FX translation, as higher volume-related expenses and continued investments were more than offset by ongoing efficiency savings.
GCB revenues of $8.4 billion increased 3% versus the prior-year period. Excluding the impact of FX translation, GCB revenues increased 2%, driven by growth across all regions. North America GCB revenues increased 1% to $5.2 billion, as higher revenues in Citi retail services and retail banking were partially offset by lower revenues in Citi-branded cards. Citi-branded cards revenues of $2.2 billion decreased 1% versus the prior-year period, as the benefit of growth in full rate revolving balances in the core portfolios was outpaced by the continued run-off of non-core portfolios as well as the higher cost to fund growth in transactor and promotional balances, given higher interest rates. Citi retail services revenues of $1.7 billion increased 2% versus the prior-year period, reflecting continued loan growth. Retail banking revenues of $1.4 billion increased 1% from the prior-year period. Excluding mortgage revenues, retail banking revenues were up 12% from the prior-year period, driven by continued growth in loans and assets under management, as well as a benefit from higher interest rates.
North America GCB average deposits of $184 billion were unchanged versus the prior-year period, average retail loans of $56 billion grew 1% and assets under management of $59 billion grew 10%. Average branded card loans of $85 billion increased 8%, while branded card purchase sales of $80 billion increased 10% versus the prior-year period. Average retail services loans of $46 billion were up 5%, while
 
retail services purchase sales of $20 billion were up 2%. For additional information on the results of operations of North America GCB for the third 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)) increased 8% to $3.2 billion versus the prior-year period. Excluding the impact of FX translation, international GCB revenues increased 5% versus the prior-year period. Latin America GCB revenues increased 4% versus the prior-year period, driven by growth in loans and deposit volumes. Asia GCB revenues increased 5% versus the prior-year period, driven by improvement in wealth management and cards revenues, partially offset by lower retail lending revenues. For additional information on the results of operations of Latin America GCB and Asia GCB for the third quarter of 2017, including the impact of FX translation, see “Global Consumer Banking—Latin America GCB” and “Global Consumer Banking—Asia GCB” below.
Year-over-year, international GCB average deposits of $124 billion increased 4%, average retail loans of $89 billion were roughly flat, assets under management of $100 billion increased 10%, average card loans of $24 billion increased 6% and card purchase sales of $25 billion increased 7%, all excluding the impact of FX translation.

Institutional Clients Group
ICG net income of $3.0 billion increased 15%, driven by higher revenues, including the $580 million ($355 million after-tax) gain on the sale of a fixed income analytics business, and a higher benefit from cost of credit, partially offset by higher operating expenses. ICG operating expenses increased 5% to $4.9 billion, as investments and volume-related expenses were partially offset by efficiency savings.
ICG revenues were $9.2 billion in the third quarter of 2017, up 9% from the prior-year period, driven by a 16% increase in Banking revenues and a 3% increase in Markets and securities services revenues, including the gain on sale. The increase in Banking revenues included the impact of $48 million of losses on loan hedges within corporate lending, compared to losses of $218 million in the prior-year period.
Banking revenues of $4.7 billion (excluding the impact of losses on loan hedges within corporate lending) increased 11% compared to the prior-year period, driven by significant growth in investment banking and the private bank as well as continued solid performance in treasury and trade solutions and corporate lending. Investment banking revenues of $1.2 billion increased 14% versus the prior-year period, reflecting continued wallet share gains across all products. Equity underwriting revenues increased 99% to $290 million, debt underwriting revenues increased 1% to $704 million while advisory revenues decreased 1% to $237 million, all versus the prior-year period.
Private bank revenues increased 15% versus the prior-year period to $785 million, driven by growth in clients, loans, investment activity and deposits, as well as improved spreads. Corporate lending revenues increased $233 million to $454 million. Excluding the impact of losses on loan hedges, corporate lending revenues increased 14% to $502 million

5



versus the prior-year period, reflecting lower hedging costs and improved loan sale activity. Treasury and trade solutions revenues increased 8% to $2.1 billion versus the prior-year period, reflecting continued volume growth and improved deposit spreads.
Markets and securities services revenues increased 3% to $4.6 billion versus the prior-year period, as a decline in fixed income markets revenues was more than offset by higher revenues in equity markets, securities services as well as the gain on sale. Fixed income markets revenues decreased 16% to $2.9 billion versus the prior-year period, primarily reflecting lower G10 rates and currencies revenues, given low volatility in the current quarter and the comparison to higher Brexit-related activity a year ago, as well as lower activity in spread products. Equity markets revenues increased 16% to $757 million versus the prior-year period, reflecting client-led growth across cash equities, derivatives and prime finance. Securities services revenues increased 12% to $599 million versus the prior-year period, driven by growth in client volumes across the custody business, along with higher interest revenue. For additional information on the results of operations of ICG for the third quarter of 2017, see “Institutional Clients Group” below.

Corporate/Other
Corporate/Other net loss was $87 million in the third quarter of 2017, compared to a net loss of $48 million in the prior-year period, reflecting lower revenues, partially offset by lower operating expenses and lower cost of credit. Operating expenses of $822 million declined 36% from the prior-year period, reflecting the wind-down of legacy assets and lower legal expenses.
Corporate/Other revenues were $509 million, down 55% from the prior-year period, reflecting the wind-down of legacy assets, divestitures and the impact of hedging activities.
Corporate/Other end-of-period assets decreased 4% to $100 billion from the prior-year period, as Citi continued to wind-down legacy assets. For additional information on the results of operations of Corporate/Other for the third quarter of 2017, see “Corporate/Other” below.





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
2017
2016
% Change
2017
2016
% Change
Net interest revenue
$
11,442

$
11,479

 %
$
33,464

$
33,942

(1
)%
Non-interest revenue
6,731

6,281

7

20,730

18,921

10

Revenues, net of interest expense
$
18,173

$
17,760

2
 %
$
54,194

$
52,863

3
 %
Operating expenses
10,171

10,404

(2
)
31,154

31,296


Provisions for credit losses and for benefits and claims
1,999

1,736

15

5,378

5,190

4

Income from continuing operations before income taxes
$
6,003

$
5,620

7
 %
$
17,662

$
16,377

8
 %
Income taxes
1,866

1,733

8

5,524

4,935

12

Income from continuing operations
$
4,137

$
3,887

6
 %
$
12,138

$
11,442

6
 %
Income (loss) from discontinued operations,
  net of taxes(1)
(5
)
(30
)
83

(2
)
(55
)
96

Net income before attribution of noncontrolling
  interests
$
4,132

$
3,857

7
 %
$
12,136

$
11,387

7
 %
Net income attributable to noncontrolling interests
(1
)
17

NM

41

48

(15
)
Citigroup’s net income
$
4,133

$
3,840

8
 %
$
12,095

$
11,339

7
 %
Less:
 
 


 
 
 
Preferred dividends—Basic
$
272

$
225

21
 %
$
893

$
757

18
 %
Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS
53

53


156

145

8

Income allocated to unrestricted common shareholders
  for basic and diluted EPS
$
3,808

$
3,562

7
 %
$
11,046

$
10,437

6
 %
Earnings per share
 
 


 
 

 
Basic
 
 


 
 

 
Income from continuing operations
1.42

1.25

14

4.05

3.60

13

Net income
1.42

1.24

15

4.05

3.58

13

Diluted
 
 


 
 
 
Income from continuing operations
$
1.42

$
1.25

14
 %
$
4.05

$
3.60

13
 %
Net income
1.42

1.24

15

4.05

3.58

13

Dividends declared per common share
0.32

0.16

100

0.64

0.26

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
2017
2016
% Change
2017
2016
% Change
At September 30:
 
 
 
 
 
 
Total assets
$
1,889,133

$
1,818,117

4
 %
 
 
 
Total deposits
964,038

940,252

3

 
 
 
Long-term debt
232,673

209,051

11

 
 
 
Citigroup common stockholders’ equity
208,381

212,322

(2
)
 
 
 
Total Citigroup stockholders’ equity
227,634

231,575

(2
)
 
 
 
Direct staff (in thousands)
213

220

(3
)
 
 
 
Performance metrics
 
 


 
 
 
Return on average assets
0.87
%
0.83
%


0.87
%
0.84
%
 
Return on average common stockholders’ equity(2)
7.3

6.8



7.2

6.7

 
Return on average total stockholders’ equity(2)
7.2

6.6



7.1

6.6

 
Efficiency ratio (Total operating expenses/Total revenues)
56

59



57

59

 
Basel III ratios—full implementation
 
 
 
 
 
 
Common Equity Tier 1 Capital(3)
12.98
%
12.63
%
 
 
 
 
Tier 1 Capital(3)
14.61

14.23

 
 
 
 
Total Capital(3)
16.95

16.34

 
 
 
 
Supplementary Leverage ratio(4)
7.11

7.40

 
 
 
 
Citigroup common stockholders’ equity to assets
11.03
%
11.68
%
 


 
 
Total Citigroup stockholders’ equity to assets
12.05

12.74

 


 
 
Dividend payout ratio(5)
22.5

12.9

 
15.8
%
7.3
%
 
Total payout ratio(6)
165

83

 
96

56

 
Book value per common share
$
78.81

$
74.51

6
 %


 
 
Tangible book value (TBV) per share(7)
68.55

64.71

6

 
 
 
Ratio of earnings to fixed charges and preferred stock dividends
2.27x

2.61x

 
2.34x

2.60x

 
(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 reportable Common Equity Tier 1 (CET1) Capital and Tier 1 Capital ratios were the lower derived under the U.S. Basel III Standardized Approach at September 30, 2017, and U.S. Basel III Advanced Approaches at September 30, 2016. Citi’s reportable Total Capital ratios were derived under the U.S. Basel III Advanced Approaches for both periods presented. This reflects the U.S. Basel III requirement to report the lower of risk-based capital ratios under both the Standardized Approach and Advanced Approaches in accordance with the Collins Amendment of the Dodd-Frank Act.
(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.
NM Not meaningful



8



SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
CITIGROUP INCOME
 
Third Quarter
 
Nine Months
 
In millions of dollars
2017
2016
% Change
2017
2016
% Change
Income from continuing operations
 
 
 
 
 
 
Global Consumer Banking
 
 
 
 
 
 
  North America
$
655

$
780

(16
)%
$
1,952

$
2,428

(20
)%
  Latin America
164

160

3

430

479

(10
)
  Asia(1)
355

310

15

924

822

12

Total
$
1,174

$
1,250

(6
)%
$
3,306

$
3,729

(11
)%
Institutional Clients Group


 




 


  North America
$
1,322

$
1,067

24
 %
$
3,534

$
2,618

35
 %
  EMEA
746

649

15

2,380

1,718

39

  Latin America
380

389

(2
)
1,188

1,111

7

  Asia
614

555

11

1,751

1,697

3

Total
$
3,062

$
2,660

15
 %
$
8,853

$
7,144

24
 %
Corporate/Other
(99
)
(23
)
NM

(21
)
569

NM

Income from continuing operations
$
4,137

$
3,887

6
 %
$
12,138

$
11,442

6
 %
Discontinued operations
$
(5
)
$
(30
)
83
 %
$
(2
)
$
(55
)
96
 %
Net income attributable to noncontrolling interests
(1
)
17

NM

41

48

(15
)
Citigroup’s net income
$
4,133

$
3,840

8
 %
$
12,095

$
11,339

7
 %

(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
 
Third Quarter
 
Nine Months
 
In millions of dollars
2017
2016
% Change
2017
2016
% Change
Global Consumer Banking
 
 
 
 
 
 
  North America
$
5,194

$
5,161

1
 %
$
15,082

$
14,700

3
 %
  Latin America
1,370

1,245

10

3,811

3,710

3

  Asia(1)
1,869

1,758

6

5,392

5,142

5

Total
$
8,433

$
8,164

3
 %
$
24,285

$
23,552

3
 %
Institutional Clients Group


 


 
 


  North America
$
3,638

$
3,191

14
 %
$
10,661

$
9,564

11
 %
  EMEA
2,655

2,506

6

8,299

7,250

14

  Latin America
1,059

999

6

3,228

2,983

8

  Asia
1,879

1,763

7

5,382

5,246

3

Total
$
9,231

$
8,459

9
 %
$
27,570

$
25,043

10
 %
Corporate/Other
509

1,137

(55
)
2,339

4,268

(45
)
Total Citigroup net revenues
$
18,173

$
17,760

2
 %
$
54,194

$
52,863

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
$
9,963

$
64,994

$
111,152

$

$
186,109

Federal funds sold and securities
  borrowed or purchased under
  agreements to resell
327

251,787

494


252,608

Trading account assets
6,366

250,104

2,437


258,907

Investments
10,143

110,627

233,904


354,674

Loans, net of unearned income and
  allowance for loan losses

291,785

325,055

23,977


640,817

Other assets
38,306

101,387

56,325


196,018

Liquidity assets(4)
62,265

266,523

(328,788
)


Total assets
$
419,155

$
1,370,477

$
99,501

$

$
1,889,133

Liabilities and equity
 
 
 
 
 
Total deposits
$
310,048

$
639,554

$
14,436

$

$
964,038

Federal funds purchased and
  securities loaned or sold under
  agreements to repurchase
4,199

157,076

7


161,282

Trading account liabilities
9

138,253

558


138,820

Short-term borrowings
798

20,806

16,545


38,149

Long-term debt(3)
1,109

35,498

44,152

151,914

232,673

Other liabilities
19,377

86,477

19,695


125,549

Net inter-segment funding (lending)(3)
83,615

292,813

3,120

(379,548
)

Total liabilities
$
419,155

$
1,370,477

$
98,513

$
(227,634
)
$
1,660,511

Total equity(5)


988

227,634

228,622

Total liabilities and equity
$
419,155

$
1,370,477

$
99,501

$

$
1,889,133


(1)
The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment as of September 30, 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 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 2,474 branches in 19 countries and jurisdictions as of September 30, 2017. At September 30, 2017, GCB had approximately $419 billion in assets and $310 billion in 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.

 
Third Quarter
 
Nine Months
 
In millions of dollars except as otherwise noted
2017
2016
% Change
2017
2016
% Change
Net interest revenue
$
7,010

$
6,709

4
 %
$
20,231

$
19,369

4
 %
Non-interest revenue
1,423

1,455

(2
)%
4,054

4,183

(3
)%
Total revenues, net of interest expense
$
8,433

$
8,164

3
 %
$
24,285

$
23,552

3
 %
Total operating expenses
$
4,410

$
4,429

 %
$
13,322

$
13,127

1
 %
Net credit losses
$
1,704

$
1,349

26
 %
$
4,922

$
4,094

20
 %
Credit reserve build (release)
486

436

11
 %
788

544

45
 %
Provision (release) for unfunded lending commitments
(5
)
(3
)
(67
)%

6

(100
)%
Provision for benefits and claims
28

26

8
 %
80

74

8
 %
Provisions for credit losses and for benefits and claims (LLR & PBC)
$
2,213

$
1,808

22
 %
$
5,790

$
4,718

23
 %
Income from continuing operations before taxes
$
1,810

$
1,927

(6
)%
$
5,173

$
5,707

(9
)%
Income taxes
636

677

(6
)
1,867

1,978

(6
)
Income from continuing operations
$
1,174

$
1,250

(6
)%
$
3,306

$
3,729

(11
)%
Noncontrolling interests
2

3

(33
)%
7

6

17

Net income
$
1,172

$
1,247

(6
)%
$
3,299

$
3,723

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


 


 
 


Total EOP assets
$
419

$
411

2
 %
 
 


Average assets
421

409

3

$
415

$
391

6
 %
Return on average assets
1.10
%
1.21
%


1.06
%
1.27
%


Efficiency ratio
52
%
54
%


55
%
56
%


Average deposits
$
308

$
301

2
 %
$
306

$
298

3
 %
Net credit losses as a percentage of average loans
2.26
%
1.87
%


2.24
%
1.97
%


Revenue by business


 


 
 


Retail banking
$
3,493

$
3,330

5
 %
$
9,947

$
9,759

2
 %
Cards(1)
4,940

4,834

2

14,338

13,793

4

Total
$
8,433

$
8,164

3
 %
$
24,285

$
23,552

3
 %
Income from continuing operations by business


 


 
 


Retail banking
$
550

$
461

19
 %
$
1,309

$
1,231

6
 %
Cards(1)
624

789

(21
)
1,997

2,498

(20
)
Total
$
1,174

$
1,250

(6
)%
$
3,306

$
3,729

(11
)%
Table continues on the next page.


13



Foreign currency (FX) translation impact
 
 


 
 
 
Total revenue—as reported
$
8,433

$
8,164

3
 %
$
24,285

$
23,552

3
 %
Impact of FX translation(2)

89




(39
)


Total revenues—ex-FX(3)
$
8,433

$
8,253

2
 %
$
24,285

$
23,513

3
 %
Total operating expenses—as reported
$
4,410

$
4,429

 %
$
13,322

$
13,127

1
 %
Impact of FX translation(2)

43




(10
)


Total operating expenses—ex-FX(3)
$
4,410

$
4,472

(1
)%
$
13,322

$
13,117

2
 %
Total provisions for LLR & PBC—as reported
$
2,213

$
1,808

22
 %
$
5,790

$
4,718

23
 %
Impact of FX translation(2)

20




(20
)


Total provisions for LLR & PBC—ex-FX(3)
$
2,213

$
1,828

21
 %
$
5,790

$
4,698

23
 %
Net income—as reported
$
1,172

$
1,247

(6
)%
$
3,299

$
3,723

(11
)%
Impact of FX translation(2)

17




(10
)


Net income—ex-FX(3)
$
1,172

$
1,264

(7
)%
$
3,299

$
3,713

(11
)%
(1)
Includes both Citi-branded cards and Citi retail services.
(2)
Reflects the impact of FX translation into U.S. dollars at the third quarter of 2017 and year-to-date 2017 average exchange rates for all periods presented.
(3)
Presentation of this metric excluding FX translation is a non-GAAP financial measure.



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 previously announced, the Hilton Honors co-brand credit card partnership with Citi was scheduled to terminate as of year-end 2017. On October 23, 2017, Citi signed an agreement to sell the Hilton credit card portfolio ($1.2 billion in outstanding loan balances in Citi-branded cards) to American Express. In connection with the sale agreement, the existing partnership was extended through the closing date. The sale is expected to close in the first quarter of 2018 with a pretax gain of approximately $150 million, which approximates one year of revenues from the portfolio.
As of September 30, 2017, North America GCB’s 695 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 September 30, 2017, North America GCB had approximately 9.4 million retail banking customer accounts, $55.7 billion in retail banking loans and $185.1 billion in deposits. In addition, North America GCB had approximately 120 million Citi-branded and Citi retail services credit card accounts with $132.2 billion in outstanding card loan balances.

 
Third Quarter
 
Nine Months
 
In millions of dollars, except as otherwise noted
2017
2016
% Change
2017
2016
% Change
Net interest revenue
$
4,825

$
4,696

3
 %
$
14,075

$
13,425

5
 %
Non-interest revenue
369

465

(21
)
1,007

1,275

(21
)
Total revenues, net of interest expense
$
5,194

$
5,161

1
 %
$
15,082

$
14,700

3
 %
Total operating expenses
$
2,460

$
2,595

(5
)%
$
7,613

$
7,521

1
 %
Net credit losses
$
1,239

$
927

34
 %
$
3,610

$
2,814

28
 %
Credit reserve build (release)
463

408

13
 %
716

536

34

Provision for unfunded lending commitments
(3
)

NM

6

7

(14
)
Provisions for benefits and claims
9

8

13
 %
23

25

(8
)
Provisions for credit losses and for benefits and claims
$
1,708

$
1,343

27
 %
$
4,355

$
3,382

29
 %
Income from continuing operations before taxes
$
1,026

$
1,223

(16
)%
$
3,114

$
3,797

(18
)%
Income taxes
371

443

(16
)
1,162

1,369

(15
)
Income from continuing operations
$
655

$
780

(16
)%
$
1,952

$
2,428

(20
)%
Noncontrolling interests


NM


(1
)
100
 %
Net income
$
655

$
780

(16
)%
$
1,952

$
2,429

(20
)%
Balance Sheet data (in billions of dollars)


 


 
 



Average assets
$
249

$
239

4
 %
$
246

$
223

10
 %
Return on average assets
1.04
%
1.30
%


1.06
%
1.45
%


Efficiency ratio
47
%
50
%


50
%
51
%


Average deposits
$
184.1

$
183.9


$
184.9

$
182.2

1
 %
Net credit losses as a percentage of average loans
2.63
%
2.07
%


2.62
%
2.24
%


Revenue by business


 


 
 



Retail banking
$
1,363

$
1,356

1
 %
$
3,910

$
3,959

(1
)%
Citi-branded cards
2,178

2,191

(1
)
6,353

5,937

7

Citi retail services
1,653

1,614

2

4,819

4,804


Total
$
5,194

$
5,161

1
 %
$
15,082

$
14,700

3
 %
Income from continuing operations by business


 


 
 



Retail banking
$
179

$
187

(4
)%
$
402

$
448

(10
)%
Citi-branded cards
345

322

7

898

995

(10
)
Citi retail services
131

271

(52
)
652

985

(34
)
Total
$
655

$
780

(16
)%
$
1,952

$
2,428

(20
)%

NM Not meaningful

15



3Q17 vs. 3Q16
Net income decreased 16% due to higher cost of credit, partially offset by lower expenses and higher revenues.
Revenues increased 1%, reflecting higher revenues in Citi retail services and retail banking, partially offset by lower revenues in Citi-branded cards.
Retail banking revenues increased 1%. Excluding mortgage revenues (decline of 39%), retail banking revenues were up 12%, driven by continued growth in average loans (1%), and asset under management (10%), as well as a benefit from higher interest rates. The decline in mortgage revenues was driven by lower origination activity and higher cost of funds, reflecting the higher interest rate environment, as well as the impact of the previously announced sale of a portion of Citi’s mortgage servicing rights.
In Citi-branded cards, revenues decreased 1%, as the benefit of growth in full-rate revolving balances in the core portfolios was outpaced by the continued run-off of non-core portfolios as well as the higher cost to fund growth in transactor and promotional balances, given the higher interest rates. Average loans grew 8% and purchase sales grew 10%.
Citi retail services revenues increased 2%, reflecting continued loan growth, partially offset by the continued impact of the previously disclosed renewal and extension of certain partnerships within the portfolio. Average loans grew 5% and purchase sales grew 2%.
Expenses decreased 5%, as higher volume-related expenses and continued investments were more than offset by efficiency savings.
Provisions increased 27% from the prior-year period, driven by higher net credit losses and a higher net loan loss reserve build.
Net credit losses increased 34%, largely driven by higher losses in Citi-branded cards, including the impact of acquiring the Costco portfolio, and Citi retail services. In Citi-branded cards, net credit losses increased 36% to $611 million, primarily due to the Costco portfolio acquisition, organic volume growth and seasoning. In Citi retail services, net credit losses increased 26% to $540 million, primarily due to volume growth and seasoning. The higher net credit losses also reflected episodic charge-offs in the commercial portfolio in retail banking, which were offset by related reserve releases.
The net loan loss reserve build in the third quarter of 2017 was $460 million (compared to a build of $408 million in the prior-year period), driven by a build of approximately $500 million related to the cards businesses, partially offset by a reserve release in the commercial portfolio. The loan loss reserve build included approximately $300 million related to the increase in net flow rates in the later delinquency buckets leading to higher inherent credit loss expectations primarily in Citi retail services, as well as a slight increase in delinquencies for the Citi-branded card portfolio. It also includes approximately $150 million driven by volume growth and seasoning, as well as approximately $50 million for the estimated hurricane-related impacts.
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.
 
2017 YTD vs. 2016 YTD
Year-to-date, North America GCB has experienced similar trends to those described above. Net income decreased 20% due to higher cost of credit and higher expenses, partially offset by higher revenues.
Revenues increased 3%, reflecting higher revenues in cards, partially offset by lower revenues in retail banking. Retail banking revenues decreased 1%, driven by lower mortgage revenues, partially offset by the other factors described above. Cards revenues increased 4%. In Citi-branded cards, revenues increased 7%, driven by the impact of the Costco portfolio acquisition, partially offset by the other factors described above. Citi retail services revenues were largely unchanged, as the continued impact of the renewal and extension of certain partnerships, as well as the absence of gains on sales of two cards portfolios in the first quarter of 2016, were offset by the continued loan growth (average loans up 4%).
Expenses increased 1%, primarily driven by the addition of the Costco portfolio, volume-related expenses and continued investments, partially offset by efficiency savings.
Provisions increased 29%, driven by the same factors described above. Net credit losses increased 28% and the net loan loss reserve build of $722 million increased $179 million.







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, one of Mexico’s largest banks.
At September 30, 2017, Latin America GCB had 1,497 retail branches in Mexico, with approximately 27.6 million retail banking customer accounts, $21.0 billion in retail banking loans and $28.3 billion in deposits. In addition, the business had approximately 5.7 million Citi-branded card accounts with $5.6 billion in outstanding loan balances.

 
Third Quarter
 
Nine Months
% Change
In millions of dollars, except as otherwise noted
2017
2016
% Change
2017
2016
Net interest revenue
$
985

$
877

12
 %
$
2,702

$
2,591

4
 %
Non-interest revenue
385

368

5
 %
1,109

1,119

(1
)%
Total revenues, net of interest expense
$
1,370

$
1,245

10
 %
$
3,811

$
3,710

3
 %
Total operating expenses
$
768

$
707

9
 %
$
2,162

$
2,150

1
 %
Net credit losses
$
295

$
254

16
 %
$
825

$
792

4
 %
Credit reserve build (release)
44

32

38
 %
106

47

NM

Provision (release) for unfunded lending commitments
(1
)

NM

(2
)
2

NM

Provision for benefits and claims
19

18

6
 %
57

49

16
 %
Provisions for credit losses and for benefits and claims (LLR & PBC)
$
357

$
304

17
 %
$
986

$
890

11
 %
Income from continuing operations before taxes
$
245

$
234

5
 %
$
663

$
670

(1
)%
Income taxes
81

74

9

233

191

22

Income from continuing operations
$
164

$
160

3
 %
$
430

$
479

(10
)%
Noncontrolling interests
1

2

(50
)
4

4


Net income
$
163

$
158

3
 %
$
426

$
475

(10
)%
Balance Sheet data (in billions of dollars)


 


 
 



Average assets
$
47

$
49

(4
)%
$
45

$
50

(10
)%
Return on average assets
1.38
%
1.28
%


1.27
%
1.27
%


Efficiency ratio
56
%
57
%


57
%
58
%


Average deposits
$
28.8

$
25.7

12
 %
$
27.3

$
25.9

5
 %
Net credit losses as a percentage of average loans
4.37
%
4.18
%


4.39
%
4.35
%


Revenue by business


 


 
 


Retail banking
$
976

$
881

11
 %
$
2,735

$
2,590

6
 %
Citi-branded cards
394

364

8

1,076

1,120

(4
)
Total
$
1,370

$
1,245

10
 %
$
3,811

$
3,710

3
 %
Income from continuing operations by business


 


 
 



Retail banking
$
125

$
84

49
 %
$
298

$
270

10
 %
Citi-branded cards
39

76

(49
)
132

209

(37
)
Total
$
164

$
160

3
 %
$
430

$
479

(10
)%

17



FX translation impact


 


 
 



Total revenues—as reported
$
1,370

$
1,245

10
 %
$
3,811

$
3,710

3
 %
Impact of FX translation(1)

71




(92
)


Total revenues—ex-FX(2)
$
1,370

$
1,316

4
 %
$
3,811

$
3,618

5
 %
Total operating expenses—as reported
$
768

$
707

9
 %
$
2,162

$
2,150

1
 %
Impact of FX translation(1)

33




(43
)


Total operating expenses—ex-FX(2)
$
768

$
740

4
 %
$
2,162

$
2,107

3
 %
Provisions for LLR & PBC—as reported
$
357

$
304

17
 %
$
986

$
890

11
 %
Impact of FX translation(1)

18




(23
)


Provisions for LLR & PBC—ex-FX(2)
$
357

$
322

11
 %
$
986

$
867

14
 %
Net income—as reported
$
163

$
158

3
 %
$
426

$
475

(10
)%
Impact of FX translation(1)

13




(20
)


Net income—ex-FX(2)
$
163

$
171

(5
)%
$
426

$
455

(6
)%
(1)
Reflects the impact of FX translation into U.S. dollars at the third quarter of 2017 and year-to-date 2017 average exchange rates for all periods presented.
(2)
Presentation of this metric excluding FX translation is a non-GAAP financial measure.
NM Not meaningful

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.

3Q17 vs. 3Q16
Net income decreased 5%, primarily driven by higher credit costs and expenses, partially offset by higher revenues.
Revenues increased 4%, driven by higher revenues in
retail banking and cards.
Retail banking revenues increased 5%, reflecting continued growth in volumes, including an increase in average loans (6%), largely driven by the commercial and small business portfolios as well as mortgages, an increase in average deposits (7%) and improved deposit spreads, driven by higher interest rates. While deposits continued to increase during the quarter, Latin America GCB was impacted by lower industry-wide deposit growth due to a slowing of growth in the monetary supply. Cards revenues increased 2%, reflecting continued improvement in full rate revolving loan trends, partially offset by continued higher cost to fund non-revolving loans. Purchase sales grew 5% and average card loans also grew 5%.
Expenses increased 4%, as ongoing investment spending and business growth were partially offset by efficiency savings.
Provisions increased 11%, primarily driven by higher net credit losses (9%) and a higher net loan loss reserve build ($10 million), largely reflecting volume growth, seasonality and a Mexico earthquake-related loan loss reserve build (approximately $25 million).
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.


 
2017 YTD vs. 2016 YTD
Year-to-date, Latin America GCB has experienced similar trends to those described above. Net income decreased 6%, driven by the same factors described above.
Revenues increased 5%, primarily due to higher revenues in retail banking, partially offset by lower revenues in cards. Retail banking revenues increased 8%, driven by the same factors described above as well as the impact of business divestitures. Cards revenues decreased 1%, driven by the continued higher cost to fund non-revolving loans, partially offset by the continued improvement in full rate revolving loans.
Expenses increased 3%, as ongoing investment spending was partially offset by efficiency savings.
Provisions increased 14%, largely driven by the same factors described above.



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 third quarter of 2017, Citi’s most significant revenues in the region were from Singapore, Hong Kong, Korea, Australia, India, Taiwan, Indonesia, Thailand, 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 September 30, 2017, on a combined basis, the businesses had 282 retail branches, approximately 16.2 million retail banking customer accounts, $67.5 billion in retail banking loans and $96.6 billion in deposits. In addition, the businesses had approximately 16.6 million Citi-branded card accounts with $18.8 billion in outstanding loan balances.

 
Third Quarter
 
Nine Months
% Change
In millions of dollars, except as otherwise noted (1)
2017
2016
% Change
2017
2016
Net interest revenue
$
1,200

$
1,136

6
 %
$
3,454

$
3,353

3
 %
Non-interest revenue
669

622

8

1,938

1,789

8

Total revenues, net of interest expense
$
1,869

$
1,758

6
 %
$
5,392

$
5,142

5
 %
Total operating expenses
$
1,182

$
1,127

5
 %
$
3,547

$
3,456

3
 %
Net credit losses
$
170

$
168

1
 %
$
487

$
488

 %
Credit reserve build (release)
(21
)
(4
)
NM

(34
)
(39
)
13

Provision (release) for unfunded lending commitments
(1
)
(3
)
67

(4
)
(3
)
(33
)
Provisions for credit losses
$
148

$
161

(8
)%
$
449

$
446

1
 %
Income from continuing operations before taxes
$
539

$
470

15
 %
$
1,396

$
1,240

13
 %
Income taxes
184

160

15

472

418

13

Income from continuing operations
$
355

$
310

15
 %
$
924

$
822

12
 %
Noncontrolling interests
1

1


3

3


Net income
$
354

$
309

15
 %
$
921

$
819

12
 %
Balance Sheet data (in billions of dollars)






 
 



Average assets
$
125

$
121

3
 %
$
124

$
119

4
 %
Return on average assets
1.12
%
1.02
%


0.99
%
0.92
%


Efficiency ratio
63
%
64
%
 
66
%
67
%


Average deposits
$
95.2

$
91.6

4

$
94.1

$
89.4

5

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


0.77
%
0.77
%


Revenue by business
 
 
 
 
 


Retail banking
$
1,154

$
1,093

6
 %
$
3,302

$
3,210

3
 %
Citi-branded cards
715

665

8

2,090

1,932

8

Total
$
1,869

$
1,758

6
 %
$
5,392

$
5,142

5
 %
Income from continuing operations by business






 
 


Retail banking
$
246

$
190

29
 %
$
609

$
513

19
 %
Citi-branded cards
109

120

(9
)
315

309

2

Total
$
355

$
310

15
 %
$
924

$
822

12
 %

19



FX translation impact



 
 


Total revenues—as reported
$
1,869

$
1,758

6
 %
$
5,392

$
5,142

5
 %
Impact of FX translation(2)

18




53



Total revenues—ex-FX(3)
$
1,869

$
1,776

5
 %
$
5,392

$
5,195

4
 %
Total operating expenses—as reported
$
1,182

$
1,127

5
 %
$
3,547

$
3,456

3
 %
Impact of FX translation(2)

10




33



Total operating expenses—ex-FX(3)
$
1,182

$
1,137

4
 %
$
3,547

$
3,489

2
 %
Provisions for loan losses—as reported
$
148

$
161

(8
)%
$
449

$
446

1
 %
Impact of FX translation(2)

2




3



Provisions for loan losses—ex-FX(3)
$
148

$
163

(9
)%
$
449

$
449

 %
Net income—as reported
$
354

$
309

15
 %
$
921

$
819

12
 %
Impact of FX translation(2)

4




10



Net income—ex-FX(3)
$
354

$
313

13
 %
$
921

$
829

11
 %

(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 third quarter of 2017 and year-to-date 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.

3Q17 vs. 3Q16
Net income increased 13%, reflecting higher revenues and lower cost of credit, partially offset by higher expenses.
Revenues increased 5%, driven by improvement in wealth management and cards revenues, partially offset by continued lower retail lending revenues.
Retail banking revenues increased 4%, primarily due to the continued improvement in wealth management revenues, partially offset by the repositioning of the retail loan portfolio. Wealth management revenues increased due to improvement in investor sentiment, stronger equity markets and increases in assets under management (14%) and investment sales (36%). Average deposits increased 3%. These increases were partially offset by the lower retail lending revenues (down 4%), reflecting continued lower average loans (1%) due to the continued optimization of this portfolio away from lower-yielding mortgage loans to focus on growing higher-return personal loans.
Cards revenues increased 6%, reflecting 6% growth in average loans and 7% growth in purchase sales, both of which benefited from the previously disclosed portfolio acquisition in Australia in the first quarter of 2017.
Expenses increased 4%, resulting from volume growth and ongoing investment spending, partially offset by efficiency savings.
Provisions decreased 9%, primarily driven by an increase in net loan loss reserve releases. 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.

 

2017 YTD vs. 2016 YTD
Year-to-date, Asia GCB has experienced similar trends to
those described above. Net income increased 11% due to higher revenues, partially offset by higher expenses.
Revenues increased 4%, primarily due to an increase in cards revenues and wealth management revenues, partially offset by lower retail lending revenues. Retail banking revenues increased 2%, driven by the same factors described above. Cards revenues increased 7%, driven by the same factors described above as well as a previously disclosed modest gain in the second quarter of 2017 related to the sale of merchant acquiring businesses in certain countries.
Expenses increased 2%, driven by the same factors described above.
Provisions were largely unchanged, as lower net credit losses were offset by lower net credit reserve releases, primarily due to a net loan loss reserve build in the first quarter of 2017 related to the card portfolio acquisition in Australia.









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- 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 98 countries and jurisdictions. At September 30, 2017, ICG had approximately $1.4 trillion of assets and $640 billion of deposits, while two of its businesses—securities services and issuer services—managed approximately $17.1 trillion of assets under custody compared to $15.4 trillion at the end of the prior-year period.
 

21


 
Third Quarter
 
Nine Months
% Change
In millions of dollars, except as otherwise noted
2017
2016
% Change
2017
2016
Commissions and fees
$
1,036

$
929

12
 %
$
3,041

$
2,889

5
 %
Administration and other fiduciary fees
710

610

16

2,073

1,845

12

Investment banking
1,099

917

20

3,323

2,686

24

Principal transactions
1,757

2,064

(15
)
6,504

5,552

17

Other(1)
704

(125
)
NM

939

(86
)
NM

Total non-interest revenue
$
5,306

$
4,395

21
 %
$
15,880

$
12,886

23
 %
Net interest revenue (including dividends)
3,925

4,064

(3
)
11,690

12,157

(4
)
Total revenues, net of interest expense
$
9,231

$
8,459

9
 %
$
27,570

$
25,043

10
 %
Total operating expenses
$
4,939

$
4,687

5
 %
$
14,903

$
14,322

4
 %
Net credit losses
$
44

$
45

(2
)%
$
140

$
397

(65
)%
Credit reserve build (release)
(38
)
(93
)
59

(229
)
(11
)
NM

Provision (release) for unfunded lending commitments
(170
)
(42