10-Q 1 c-6302018x10q.htm 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 June 30, 2018
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 June 30, 2018: 2,516,605,412

Available on the web at www.citigroup.com
 








CITIGROUP’S SECOND QUARTER 2018—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
FUTURE APPLICATION OF ACCOUNTING
  STANDARDS
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




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, 2017 (2017 Annual Report on Form 10-K) and Citigroup’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 (First Quarter of 2018 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 below and Notes 1 and 3 to the Consolidated Financial Statements in Citi’s 2017 Annual Report on Form 10-K.
Throughout this report, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.


1




Citigroup is managed pursuant to two business segments: Global Consumer Banking and Institutional Clients Group, with the remaining operations in Corporate/Other.
citisegmentsq218.jpg
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.
citiregions18q1.jpg

(1)
Latin America GCB consists of Citi’s consumer banking business in Mexico.
(2)
Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
(3)
North America includes the U.S., Canada and Puerto Rico, Latin America includes Mexico and Asia includes Japan.

2



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

EXECUTIVE SUMMARY

Second Quarter of 2018—Solid Operating Results and Continued Momentum
As described further throughout this Executive Summary, Citi reported solid operating results in the second quarter of 2018, reflecting continued momentum across businesses and geographies, including in many of the areas where Citi has been making ongoing investments.
During the second quarter of 2018, Citi had revenue growth in the Institutional Clients Group (ICG) and across products and regions in Global Consumer Banking (GCB), with particular strength in international GCB, treasury and trade solutions, equity markets, securities services and the private bank. Citi also continued to demonstrate expense and credit discipline, resulting in positive operating leverage and an improvement in pretax earnings.
In addition, Citi continued to return capital to its shareholders. In the quarter, Citi returned $3.1 billion in the form of common stock repurchases and dividends. Citi repurchased approximately 33 million common shares during the quarter and over 200 million over the last 12 months, resulting in an 8% reduction in outstanding common shares from the prior-year period. Despite the continued progress in returning capital to shareholders during the quarter, each of Citi’s key regulatory capital metrics remained strong (see “Capital” below).
During the quarter, the Federal Reserve Board advised Citi that it did not object to the capital plan submitted by Citi as part of the 2018 Comprehensive Capital Analysis and Review (CCAR). Accordingly, Citi intends to return $22.0 billion of capital to its common shareholders over the next four quarters, beginning in the third quarter of 2018 (for additional information, see “Equity Security Repurchases” and “Dividends” below).
While global economic growth has continued and the macroeconomic environment remains largely positive, there continue to be various economic, political and other risks and uncertainties that could impact Citi’s businesses and future results. For a discussion of the risks and uncertainties that could impact Citi’s businesses, results of operations and financial condition during the remainder of 2018, 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 2017 Annual Report on Form 10-K.

Second Quarter of 2018 Summary Results

Citigroup
Citigroup reported net income of $4.5 billion, or $1.63 per share, compared to net income of $3.9 billion, or $1.28 per share, in the prior-year period. The 16% increase in net income was driven by higher revenues and a lower effective tax rate due to the impact of the Tax Cuts and Jobs Act (Tax
 
Reform), partially offset by higher cost of credit. Earnings per share increased 27% due to the growth in net income and the 8% reduction in average shares outstanding driven by the common stock repurchases.
Citigroup revenues of $18.5 billion in the second quarter of 2018 increased 2%, driven by 3% aggregate growth in GCB and ICG, partially offset by a 20% decrease in Corporate/Other, primarily due to the continued wind-down of legacy assets.
Citigroup’s end-of-period loans increased 4% to $671 billion versus the prior-year period. Excluding the impact of foreign currency translation in U.S. dollars for reporting purposes (FX translation), Citigroup’s end-of-period loans grew 5%, as 6% aggregate growth in GCB and ICG 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 4% to $997 billion versus the prior-year period. Excluding the impact of FX translation, Citigroup’s deposits were also up 4%, driven by a 9% increase in ICG deposits, while GCB deposits were largely unchanged.

Expenses
Citigroup operating expenses of $10.7 billion were largely unchanged versus the prior-year period, as the impact of higher volume-related expenses and ongoing investments were offset by efficiency savings and the wind-down of legacy assets. Year-over-year, ICG operating expenses were up 4% and GCB operating expenses increased 3%, while Corporate/Other operating expenses declined 40%, all versus the prior-year period.

Cost of Credit
Citi’s total provisions for credit losses and for benefits and claims of $1.8 billion increased 6% from the prior-year period. The increase was mostly driven by a net loss reserve build of $87 million, compared to a net loan loss reserve release of $16 million in the prior-year period. The increase reflected volume growth and seasoning in the North America and international cards portfolios, the absence of a prior-year release in Asia GCB and the wind-down of legacy assets in Corporate/Other.
Net credit losses of $1.7 billion were largely unchanged versus the prior-year period. Consumer net credit losses increased 4% to $1.7 billion, mostly reflecting volume growth and seasoning in the North America and international cards portfolios. 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 decreased from $77 million in the prior-year period to a net recovery of $2 million.
For additional information on Citi’s consumer and corporate credit costs and allowance for loan losses, see each respective business’s results of operations and “Credit Risk” below.


3



Capital
Citigroup’s Common Equity Tier 1 (CET1) Capital and Tier 1 Capital ratios, on a fully implemented basis, were 12.1% and 13.8% as of June 30, 2018, respectively, compared to 13.1% and 14.7% as of June 30, 2017, both based on the Basel III Standardized Approach for determining risk-weighted assets. The decline in regulatory capital ratios reflected the return of capital to common shareholders and the previously disclosed approximate $6 billion reduction in CET1 Capital in the fourth quarter of 2017 due to the impact of Tax Reform, partially offset by net income. Citigroup’s Supplementary Leverage ratio as of June 30, 2018, on a fully implemented basis, was 6.6%, compared to 7.2% as of June 30, 2017. For additional information on Citi’s capital ratios and related components, including the impact of Tax Reform on its capital ratios, see “Capital Resources” below.

Global Consumer Banking
GCB net income of $1.3 billion increased 14%, as higher revenues across regions and a lower effective tax rate were partially offset by higher expenses and higher cost of credit. Operating expenses were $4.7 billion, up 3%, as efficiency savings across regions were more than offset by higher volume-related expenses and continued investments, as well as a provision of approximately $50 million for an industry-wide legal matter in North America GCB.
GCB revenues of $8.3 billion increased 2% versus the prior-year period, and 3% excluding the impact of FX translation, driven by growth across all regions. North America GCB revenues increased 1% to $5.0 billion, driven by higher revenues in retail banking and Citi retail services, partially offset by lower revenues in Citi-branded cards. Citi-branded cards revenues of $2.1 billion were down 1% versus the prior-year period. Excluding the impact of the previously disclosed Hilton portfolio sale, Citi-branded card revenues increased 1%, as growth in interest-earning balances and a gain of approximately $45 million related to the sale of Visa B shares were partially offset by the impact of additional partnership terms and repricing actions related to APR re-evaluations under the CARD Act. Citi retail services revenues of $1.6 billion increased 1% versus the prior-year period, primarily reflecting continued loan growth. Retail banking revenues increased 4% from the prior-year period to $1.3 billion. Excluding mortgage revenues, retail banking revenues of $1.2 billion were up 9% from the prior-year period, driven by continued growth in deposit margins and investments, as well as increased commercial banking activity.
North America GCB average deposits of $180 billion decreased 3% year-over-year, primarily driven by a reduction in money market balances, reflecting transfers to investments. North America GCB average retail loans of $56 billion were largely unchanged year-over-year and assets under management of $61 billion grew 8%. Average Citi-branded card loans of $87 billion increased 4%, while Citi-branded card purchase sales of $86 billion increased 7% versus the prior-year period. Average Citi retail services loans of $47 billion increased 5% versus the prior-year period, while Citi retail services purchase sales of $22 billion were up 5%. For additional information on the results of operations of North
 
America GCB for the second quarter of 2018, 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 4% versus the prior-year period to $3.2 billion. Excluding the impact of FX translation, international GCB revenues increased 6% versus the prior-year period. On this basis, Latin America GCB revenues increased 11% versus the prior-year period, reflecting growth in cards revenues as well as volume growth across retail loans and deposits. Asia GCB revenues increased 2%. Excluding a modest one-time gain in cards in the prior-year period, Asia GCB revenues increased 4% year-over-year, primarily reflecting an increase in wealth management and cards revenues. For additional information on the results of operations of Latin America GCB and Asia GCB for the second quarter of 2018, 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 $126 billion increased 3%, average retail loans of $90 billion increased 3%, assets under management of $102 billion increased 9%, average card loans of $24 billion increased 2% and card purchase sales of $26 billion increased 6%, all excluding the impact of FX translation.

Institutional Clients Group
ICG net income of $3.2 billion increased 17%, driven by higher revenues, a lower effective tax rate and lower cost of credit, partially offset by higher operating expenses. ICG operating expenses increased 4% to $5.5 billion, driven by an increase in compensation costs, volume-related expenses and investments, partially offset by efficiency savings.
ICG revenues were $9.7 billion in the second quarter of 2018, up 3% from the prior-year period, primarily driven by a 6% increase in Banking revenues, partially offset by a 1% decrease in Markets and securities services. The increase in Banking revenues included the impact of $23 million of gains on loan hedges within corporate lending, compared to gains of $9 million in the prior-year period.
Banking revenues of $5.2 billion (excluding the impact of gains on loan hedges within corporate lending) increased 6%, driven by solid growth in treasury and trade solutions, private bank and corporate lending, partially offset by lower revenues in investment banking. Investment banking revenues of $1.4 billion decreased 7% versus the prior-year period, as growth in advisory and equity underwriting was more than offset by a strong prior-year period comparison in debt underwriting. Advisory revenues increased 14% to $361 million, equity underwriting revenues increased 8% to $335 million and debt underwriting revenues decreased 20% to $726 million, all versus the prior-year period.
Treasury and trade solutions revenues of $2.3 billion increased 11% versus the prior-year period, reflecting volume growth and improved deposit spreads, with growth in both net interest and fee income. Private bank revenues increased 7% to $848 million versus the prior-year period, driven by growth in clients, loans and investments, as well as improved deposit spreads. Corporate lending revenues increased 25% to $612

4



million. Excluding the impact of gains on loan hedges, corporate lending revenues increased 22% versus the prior-year period, primarily driven by loan growth and lower hedging costs.
Markets and securities services revenues of $4.5 billion decreased 1% from the prior-year period, as strong revenue growth in equity markets and securities services was more than offset by a decline in fixed income markets revenues. Fixed income markets revenues of $3.1 billion decreased 6% from the prior-year period, driven by a more challenging market environment and a comparison to a strong prior-year period in G10 rates and securitized products. Equity markets revenues of $864 million increased 19% from the prior-year period, with growth across all products, reflecting the benefit of continued higher market volatility as well as continued momentum with investor clients. Securities services revenues of $665 million increased 12%, driven by continued growth in client volumes and higher net interest revenue. For additional information on the results of operations of ICG for the second quarter of 2018, see “Institutional Clients Group” below.

Corporate/Other
Corporate/Other net loss was $13 million in the second quarter of 2018, compared to a net loss of $14 million in the prior-year period. Operating expenses of $599 million declined 40% from the prior-year period, largely reflecting the wind-down of legacy assets as well as lower legal and infrastructure costs.
Corporate/Other revenues were $528 million, down 20% from the prior-year period, primarily reflecting the continued wind-down of legacy assets.
For additional information on the results of operations of Corporate/Other for the second quarter of 2018, see “Corporate/Other” below.








5



RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1
Citigroup Inc. and Consolidated Subsidiaries
 
Second Quarter
 
Six Months
 
In millions of dollars, except per-share amounts and ratios
2018
2017
% Change
2018
2017
% Change
Net interest revenue
$
11,665

$
11,258

4
 %
$
22,837

$
22,213

3
 %
Non-interest revenue
6,804

6,897

(1
)
14,504

14,308

1

Revenues, net of interest expense
$
18,469

$
18,155

2
 %
$
37,341

$
36,521

2
 %
Operating expenses
10,712

10,760


21,637

21,483

1

Provisions for credit losses and for benefits and claims
1,812

1,717

6

3,669

3,379

9

Income from continuing operations before income taxes
$
5,945

$
5,678

5
 %
$
12,035

$
11,659

3
 %
Income taxes(1)
1,444

1,795

(20
)
2,885

3,658

(21
)
Income from continuing operations
$
4,501

$
3,883

16
 %
$
9,150

$
8,001

14
 %
Income (loss) from discontinued operations,
  net of taxes(2)
15

21

(29
)
8

3

NM

Net income before attribution of noncontrolling
  interests
$
4,516

$
3,904

16
 %
$
9,158

$
8,004

14
 %
Net income attributable to noncontrolling interests
26

32

(19
)
48

42

14

Citigroup’s net income
$
4,490

$
3,872

16
 %
$
9,110

$
7,962

14
 %
Less:
 
 


 
 
 
Preferred dividends—Basic
$
318

$
320

(1
)%
$
590

$
621

(5
)%
Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS
49

48

2

90

103

(13
)
Income allocated to unrestricted common shareholders
  for basic and diluted EPS
$
4,123

$
3,504

18
 %
$
8,430

$
7,238

16
 %
Earnings per share
 
 


 
 

 
Basic
 
 


 
 

 
Income from continuing operations
$
1.62

$
1.27

28
 %
$
3.30

$
2.63

25
 %
Net income
1.63

1.28

27

3.31

2.63

26

Diluted
 
 


 
 
 
Income from continuing operations
$
1.62

$
1.27

28
 %
$
3.30

$
2.63

25
 %
Net income
1.63

1.28

27

3.31

2.63

26

Dividends declared per common share
0.32

0.16

100

0.64

0.32

100


Table continues on the next page, including footnotes.

6




SUMMARY OF SELECTED FINANCIAL DATA—PAGE 2
Citigroup Inc. and Consolidated Subsidiaries
 
Second Quarter
 
Six Months
 
In millions of dollars, except per-share amounts, ratios and direct staff
2018
2017
% Change
2018
2017
% Change
At June 30:
 
 
 
 
 
 
Total assets
$
1,912,334

$
1,864,063

3
 %
 
 
 
Total deposits
996,730

958,743

4

 
 
 
Long-term debt
236,822

225,179

5

 
 
 
Citigroup common stockholders’ equity(1)
181,059

210,766

(14
)
 
 
 
Total Citigroup stockholders’ equity(1)
200,094

230,019

(13
)
 
 
 
Direct staff (in thousands)
205

214

(4
)
 
 
 
Performance metrics
 
 


 
 
 
Return on average assets
0.94
%
0.83
%


0.96
%
0.87
%
 
Return on average common stockholders’ equity(1)(3)
9.2

6.8



9.5

7.1

 
Return on average total stockholders’ equity(1)(3)
9.0

6.8



9.2

7.1

 
Efficiency ratio (total operating expenses/total revenues)
58.0

59.3



57.9

58.8

 
Basel III ratios—full implementation(1)
 
 
 
 
 
 
Common Equity Tier 1 Capital(4)(5)
12.14
%
13.06
%
 
 
 
 
Tier 1 Capital(4)(5)
13.77

14.74

 
 
 
 
Total Capital(4)(5)
16.31

16.93

 
 
 
 
Supplementary Leverage ratio(5)
6.60

7.24

 
 
 
 
Citigroup common stockholders’ equity to assets(1)
9.47
%
11.31
%
 


 
 
Total Citigroup stockholders’ equity to assets(1)
10.46

12.34

 


 
 
Dividend payout ratio(6)
19.6

12.5

 
19.3
%
12.2
%
 
Total payout ratio(7)
74.9

62.6

 
73.1

60.7

 
Book value per common share(1)
$
71.95

$
77.36

(7
)%


 
 
Tangible book value (TBV) per share(8)(1)
61.29

67.32

(9
)
 
 
 
Ratio of earnings to fixed charges and preferred stock dividends
1.93x

2.28x

 
2.01x

2.39x

 
(1)
The second quarter and six months of 2018 reflect the impact of Tax Reform. For additional information on Tax Reform, including the impact on Citi’s fourth quarter and full-year 2017 results, see Citi’s 2017 Annual Report on Form 10-K.
(2)
See Note 2 to the Consolidated Financial Statements for additional information on Citi’s discontinued operations.
(3)
The return on average common stockholders’ equity is calculated using net income less preferred stock dividends divided by average common stockholders’ equity. The return on average total Citigroup stockholders’ equity is calculated using net income divided by average Citigroup stockholders’ equity.
(4)
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 and 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.
(5)
Citi’s risk-based capital and leverage ratios as of June 30, 2017 are non-GAAP financial measures, which reflect full implementation of regulatory capital adjustments and deductions prior to the effective date of January 1, 2018.
(6)
Dividends declared per common share as a percentage of net income per diluted share.
(7)
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.
(8)
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



7



SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
CITIGROUP INCOME
 
Second Quarter
 
Six Months
 
In millions of dollars
2018
2017
% Change
2018
2017
% Change
Income from continuing operations
 
 
 
 
 
 
Global Consumer Banking
 
 
 
 
 
 
  North America
$
719

$
657

9
 %
$
1,557

$
1,271

23
 %
  Latin America
200

141

42

383

276

39

  Asia(1)
360

330

9

733

579

27

Total
$
1,279

$
1,128

13
 %
$
2,673

$
2,126

26
 %
Institutional Clients Group


 




 


  North America
$
1,028

$
1,088

(6
)%
$
1,885

$
2,165

(13
)%
  EMEA
987

786

26

2,100

1,648

27

  Latin America
514

341

51

1,005

823

22

  Asia
708

565

25

1,576

1,155

36

Total
$
3,237

$
2,780

16
 %
$
6,566

$
5,791

13
 %
Corporate/Other
(15
)
(25
)
40

(89
)
84

NM

Income from continuing operations
$
4,501

$
3,883

16
 %
$
9,150

$
8,001

14
 %
Discontinued operations
$
15

$
21

(29
)%
$
8

$
3

NM

Net income attributable to noncontrolling interests
26

32

(19
)
48

42

14
 %
Citigroup’s net income
$
4,490

$
3,872

16
 %
$
9,110

$
7,962

14
 %

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


8




CITIGROUP REVENUES
 
Second Quarter
 
Six Months
 
In millions of dollars
2018
2017
% Change
2018
2017
% Change
Global Consumer Banking
 
 
 
 
 
 
  North America
$
5,004

$
4,946

1
 %
$
10,161

$
9,891

3
 %
  Latin America
1,381

1,308

6

2,728

2,475

10

  Asia(1)
1,865

1,819

3

3,794

3,553

7

Total
$
8,250

$
8,073

2
 %
$
16,683

$
15,919

5
 %
Institutional Clients Group


 


 
 


  North America
$
3,511

$
3,646

(4
)%
$
6,776

$
7,168

(5
)%
  EMEA
3,043

2,881

6

6,210

5,735

8

  Latin America
1,162

1,086

7

2,372

2,255

5

  Asia
1,975

1,808

9

4,181

3,582

17

Total
$
9,691

$
9,421

3
 %
$
19,539

$
18,740

4
 %
Corporate/Other
528

661

(20
)
1,119

1,862

(40
)
Total Citigroup net revenues
$
18,469

$
18,155

2
 %
$
37,341

$
36,521

2
 %
(1)
Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.




9



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
$
8,043

$
59,897

$
132,962

$

$
200,902

Federal funds sold and securities
  borrowed or purchased under
  agreements to resell
143

265,140

243


265,526

Trading account assets
684

255,114

7,151


262,949

Investments
1,209

113,405

235,102


349,716

Loans, net of unearned income and
  allowance for loan losses

296,636

345,125

17,293


659,054

Other assets
36,796

102,526

34,865


174,187

Net inter-segment liquid assets(4)
78,024

256,004

(334,028
)


Total assets
$
421,535

$
1,397,211

$
93,588

$

$
1,912,334

Liabilities and equity
 
 
 
 
 
Total deposits
$
307,935

$
675,634

$
13,161

$

$
996,730

Federal funds purchased and
  securities loaned or sold under
  agreements to repurchase
4,229

173,578

21


177,828

Trading account liabilities
174

140,213

358


140,745

Short-term borrowings
359

21,623

15,251


37,233

Long-term debt(3)
1,839

40,356

46,026

148,601

236,822

Other liabilities
17,597

89,495

14,916


122,008

Net inter-segment funding (lending)(3)
89,402

256,312

2,981

(348,695
)

Total liabilities
$
421,535

$
1,397,211

$
92,714

$
(200,094
)
$
1,711,366

Total stockholders’ equity(5)


874

200,094

200,968

Total liabilities and equity
$
421,535

$
1,397,211

$
93,588

$

$
1,912,334


(1)
The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment as of June 30, 2018. 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 liquid assets (primarily consisting of cash, marketable equity securities, and available-for-sale debt securities) to the various businesses based on Liquidity Coverage Ratio (LCR) assumptions.
(5)
Corporate/Other equity represents noncontrolling interests.






10

































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11



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 2,428 branches in 19 countries and jurisdictions as of June 30, 2018. At June 30, 2018, GCB had approximately $422 billion in assets and $308 billion in deposits.
GCB’s overall strategy is to leverage Citi’s global footprint and be the pre-eminent 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.

 
Second Quarter
 
Six Months
 
In millions of dollars except as otherwise noted
2018
2017
% Change
2018
2017
% Change
Net interest revenue
$
7,019

$
6,760

4
 %
$
13,999

$
13,339

5
 %
Non-interest revenue
1,231

1,313

(6
)
2,684

2,580

4

Total revenues, net of interest expense
$
8,250

$
8,073

2
 %
$
16,683

$
15,919

5
 %
Total operating expenses
$
4,655

$
4,537

3
 %
$
9,336

$
8,988

4
 %
Net credit losses
$
1,726

$
1,615

7
 %
$
3,462

$
3,218

8
 %
Credit reserve build (release)
154

125

23

298

302

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

(1
)
NM

2

5

(60
)
Provision for benefits and claims
22

23

(4
)
48

52

(8
)
Provisions for credit losses and for benefits and claims (LLR & PBC)
$
1,905

$
1,762

8
 %
$
3,810

$
3,577

7
 %
Income from continuing operations before taxes
$
1,690

$
1,774

(5
)%
$
3,537

$
3,354

5
 %
Income taxes
411

646

(36
)
864

1,228

(30
)
Income from continuing operations
$
1,279

$
1,128

13
 %
$
2,673

$
2,126

26
 %
Noncontrolling interests
1

4

(75
)
3

5

(40
)
Net income
$
1,278

$
1,124

14
 %
$
2,670

$
2,121

26
 %
Balance Sheet data (in billions of dollars)


 


 
 


Total EOP assets
$
422

$
418

1
 %
 
 


Average assets
417

414

1

$
420

$
412

2
 %
Return on average assets
1.23
%
1.09
%


1.28
%
1.04
%


Efficiency ratio
56

56



56

56



Average deposits
$
306

$
307


$
307

$
305

1

Net credit losses as a percentage of average loans
2.28
%
2.20
%


2.29
%
2.22
%


Revenue by business


 


 
 


Retail banking
$
3,489

$
3,328

5
 %
$
6,960

$
6,503

7
 %
Cards(1)
4,761

4,745


9,723

9,416

3

Total
$
8,250

$
8,073

2
 %
$
16,683

$
15,919

5
 %
Income from continuing operations by business


 


 
 


Retail banking
$
580

$
419

38
 %
$
1,104

$
752

47
 %
Cards(1)
699

709

(1
)
1,569

1,374

14

Total
$
1,279

$
1,128

13
 %
$
2,673

$
2,126

26
 %
Table continues on the next page, including footnotes.


12



Foreign currency (FX) translation impact
 
 


 
 
 
Total revenue—as reported
$
8,250

$
8,073

2
%
$
16,683

$
15,919

5
%
Impact of FX translation(2)

(51
)



92



Total revenues—ex-FX(3)
$
8,250

$
8,022

3
%
$
16,683

$
16,011

4
%
Total operating expenses—as reported
$
4,655

$
4,537

3
%
$
9,336

$
8,988

4
%
Impact of FX translation(2)

(20
)



70



Total operating expenses—ex-FX(3)
$
4,655

$
4,517

3
%
$
9,336

$
9,058

3
%
Total provisions for LLR & PBC—as reported
$
1,905

$
1,762

8
%
$
3,810

$
3,577

7
%
Impact of FX translation(2)

(15
)



13



Total provisions for LLR & PBC—ex-FX(3)
$
1,905

$
1,747

9
%
$
3,810

$
3,590

6
%
Net income—as reported
$
1,278

$
1,124

14
%
$
2,670

$
2,121

26
%
Impact of FX translation(2)

(9
)



8



Net income—ex-FX(3)
$
1,278

$
1,115

15
%
$
2,670

$
2,129

25
%
(1)
Includes both Citi-branded cards and Citi retail services.
(2)
Reflects the impact of FX translation into U.S. dollars at the second quarter of 2018 and year-to-date 2018 average exchange rates for all periods presented.
(3)
Presentation of this metric excluding FX translation is a non-GAAP financial measure.
NM Not meaningful


13



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, Best Buy and Macy’s) within Citi retail services.
As of June 30, 2018, North America GCB’s 693 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 June 30, 2018, North America GCB had approximately 9.1 million retail banking customer accounts, $55.7 billion in retail banking loans and $181.7 billion in deposits. In addition, North America GCB had approximately 119.2 million Citi-branded and Citi retail services credit card accounts with $136.7 billion in outstanding card loan balances, including the newly acquired $1.5 billion L.L.Bean portfolio.

 
Second Quarter
 
Six Months
 
In millions of dollars, except as otherwise noted
2018
2017
% Change
2018
2017
% Change
Net interest revenue
$
4,780

$
4,632

3
 %
$
9,530

$
9,249

3
 %
Non-interest revenue
224

314

(29
)
631

642

(2
)
Total revenues, net of interest expense
$
5,004

$
4,946

1
 %
$
10,161

$
9,891

3
 %
Total operating expenses
$
2,666

$
2,598

3
 %
$
5,311

$
5,195

2
 %
Net credit losses
$
1,278

$
1,181

8
 %
$
2,574

$
2,371

9
 %
Credit reserve build (release)
115

101

14

238

253

(6
)
Provision for unfunded lending commitments
2

2


(2
)
9

NM

Provision for benefits and claims
5

8

(38
)
11

14

(21
)
Provisions for credit losses and for benefits and claims
$
1,400

$
1,292

8
 %
$
2,821

$
2,647

7
 %
Income from continuing operations before taxes
$
938

$
1,056

(11
)%
$
2,029

$
2,049

(1
)%
Income taxes
219

399

(45
)
472

778

(39
)
Income from continuing operations
$
719

$
657

9
 %
$
1,557

$
1,271

23
 %
Noncontrolling interests






Net income
$
719

$
657

9
 %
$
1,557

$
1,271

23
 %
Balance Sheet data (in billions of dollars)


 


 
 



Average assets
$
244

$
244

 %
$
246

$
245

 %
Return on average assets
1.18
%
1.08
%


1.28
%
1.05
%


Efficiency ratio
53

53



52

53



Average deposits
$
179.9

$
185.1

(3
)
$
180.4

$
184.9

(2
)
Net credit losses as a percentage of average loans
2.72
%
2.58
%


2.74
%
2.61
%


Revenue by business


 


 
 



Retail banking
$
1,348

$
1,293

4
 %
$
2,655

$
2,550

4
 %
Citi-branded cards
2,062

2,079

(1
)
4,294

4,175

3

Citi retail services
1,594

1,574

1

3,212

3,166

1

Total
$
5,004

$
4,946

1
 %
$
10,161

$
9,891

3
 %
Income from continuing operations by business


 


 
 



Retail banking
$
161

$
130

24
 %
$
301

$
202

49
 %
Citi-branded cards
309

302

2

734

548

34

Citi retail services
249

225

11

522

521


Total
$
719

$
657

9
 %
$
1,557

$
1,271

23
 %

NM Not meaningful

14



2Q18 vs. 2Q17
Net income increased 9% due to higher revenues and a lower effective tax rate due to the impact of Tax Reform, partially offset by higher expenses and higher cost of credit.
Revenues increased 1%, reflecting higher revenues in retail banking and Citi retail services, partially offset by lower revenues in Citi-branded cards.
Retail banking revenues increased 4%. Excluding mortgage revenues (decline of 25%), retail banking revenues were up 9%, driven by continued growth in deposit margins, growth in investments, with assets under management up 8%, and increased commercial banking activity. The decline in mortgage revenues was driven by lower origination activity and higher cost of funds reflecting the higher interest rate environment.
Cards revenues were largely unchanged. In Citi-branded cards, revenues decreased 1%. Excluding the impact of the Hilton portfolio sale (closed in the first quarter of 2018), Citi-branded cards revenues increased 1%, as the benefit of higher interest-earning balances and a gain of approximately $45 million related to the sale of Visa B shares were partially offset by the impact of previously disclosed items, including partnership terms and repricing actions related to APR rate re-evaluations under the CARD Act. For the full year 2018, Citi expects the impact of these repricing actions to negatively impact revenues by approximately $50 million. Average loans increased 4% and purchase sales increased 7%.
Citi retail services revenues increased 1%, primarily reflecting continued loan growth. Average loans and purchase sales both increased 5%.
Expenses increased 3%, including a provision of approximately $50 million for an industry-wide legal matter. Excluding the impact of this provision, expenses increased 1%, as higher volume-related expenses and investments were largely offset by efficiency savings.
Provisions increased 8% from the prior-year period, driven by higher net credit losses and a higher net loan loss reserve build.
Net credit losses increased 8% to $1.3 billion, largely driven by higher net credit losses in Citi-branded cards (up 8% to $657 million) and Citi retail services (up 11% to $589 million). The increase in net credit losses primarily reflected volume growth and seasoning in both cards portfolios.
The net loan loss reserve build in the second quarter of 2018 was $117 million (compared to a build of $103 million in the prior-year period), primarily due to volume growth and seasoning in both cards portfolios.
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.
 
2018 YTD vs. 2017 YTD
Year-to-date, North America GCB has experienced similar trends to those described above. Net income increased 23%, driven by higher revenues and a lower effective tax rate due to the impact of Tax Reform, partially offset by higher expenses and higher cost of credit.
Revenues increased 3%, reflecting higher revenues across retail banking, Citi retail services and Citi-branded cards, which included the impact of the Hilton portfolio sale in the first quarter of 2018. Retail banking revenues increased 4%. Excluding mortgage revenues (decline of 22%), retail banking revenues increased 8%, driven by the same factors described above. Cards revenues increased 2%. In Citi-branded cards, revenues increased 3%, driven by the sale of the Hilton portfolio, which resulted in a gain of approximately $150 million in the first quarter of 2018, partially offset by the loss of operating revenues. Excluding the impact of the Hilton portfolio sale, revenues increased 1%, driven by the same factors described above. Citi retail services revenues increased 1%, driven by the same factors described above.
Expenses increased 2%, driven by the same factors described above.
Provisions increased 7%, as a 9% increase in net credit losses was partially offset by a 10% decline in the net loan loss reserve build.







15



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 June 30, 2018, Latin America GCB had 1,462 retail branches in Mexico, with approximately 28.9 million retail banking customer accounts, $20.1 billion in retail banking loans and $28.4 billion in deposits. In addition, the business had approximately 5.7 million Citi-branded card accounts with $5.4 billion in outstanding loan balances.

 
Second Quarter
 
Six Months
% Change
In millions of dollars, except as otherwise noted
2018
2017
% Change
2018
2017
Net interest revenue
$
1,013

$
967

5
 %
$
2,010

$
1,815

11
 %
Non-interest revenue
368

341

8

718

660

9

Total revenues, net of interest expense
$
1,381

$
1,308

6
 %
$
2,728

$
2,475

10
 %
Total operating expenses
$
782

$
745

5
 %
$
1,541

$
1,412

9
 %
Net credit losses
$
278

$
277

 %
$
556

$
530

5
 %
Credit reserve build (release)
33

50

(34
)
75

62

21

Provision (release) for unfunded lending commitments

(1
)
100

1

(1
)
NM

Provision for benefits and claims
17

15

13

37

38

(3
)
Provisions for credit losses and for benefits and claims (LLR & PBC)
$
328

$
341

(4
)%
$
669

$
629

6
 %
Income from continuing operations before taxes
$
271

$
222

22
 %
$
518

$
434

19
 %
Income taxes
71

81

(12
)
135

158

(15
)
Income from continuing operations
$
200

$
141

42
 %
$
383

$
276

39
 %
Noncontrolling interests

2

(100
)

3

(100
)
Net income
$
200

$
139

44
 %
$
383

$
273

40
 %
Balance Sheet data (in billions of dollars)


 


 
 



Average assets
$
43

$
45

(4
)%
$
44

$
44

 %
Return on average assets
1.87
%
1.24
%


1.76
%
1.25
%


Efficiency ratio
57

57



56

57



Average deposits
$
28.3

$
27.8

2

$
28.6

$
26.6

8

Net credit losses as a percentage of average loans
4.37
%
4.36
%


4.33
%
4.38
%


Revenue by business


 


 
 


Retail banking
$
999

$
939

6
 %
$
1,965

$
1,789

10
 %
Citi-branded cards
382

369

4

763

686

11

Total
$
1,381

$
1,308

6
 %
$
2,728

$
2,475

10
 %
Income from continuing operations by business


 


 
 



Retail banking
$
155

$
91

70
 %
$
293

$
181

62
 %
Citi-branded cards
45

50

(10
)
90

95

(5
)
Total
$
200

$
141

42
 %
$
383

$
276

39
 %

16



FX translation impact


 


 
 



Total revenues—as reported
$
1,381

$
1,308

6
 %
$
2,728

$
2,475

10
 %
Impact of FX translation(1)

(60
)



18



Total revenues—ex-FX(2)
$
1,381

$
1,248

11
 %
$
2,728

$
2,493

9
 %
Total operating expenses—as reported
$
782

$
745

5
 %
$
1,541

$
1,412

9
 %
Impact of FX translation(1)

(29
)



10



Total operating expenses—ex-FX(2)
$
782

$
716

9
 %
$
1,541

$
1,422

8
 %
Provisions for LLR & PBC—as reported
$
328

$
341

(4
)%
$
669

$
629

6
 %
Impact of FX translation(1)

(16
)



6



Provisions for LLR & PBC—ex-FX(2)
$
328

$
325

1
 %
$
669

$
635

5
 %
Net income—as reported
$
200

$
139

44
 %
$
383

$
273

40
 %
Impact of FX translation(1)

(10
)



2



Net income—ex-FX(2)
$
200

$
129

55
 %
$
383

$
275

39
 %
(1)
Reflects the impact of FX translation into U.S. dollars at the second quarter of 2018 and year-to-date 2018 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.

2Q18 vs. 2Q17
Net income increased 55%, reflecting higher revenues and a lower effective tax rate as a result of Tax Reform, partially offset by higher expenses and cost of credit.
Revenues increased 11%, driven by higher revenues in
both retail banking and cards.
Retail banking revenues increased 12%, reflecting continued growth in volumes (average loans up 4%, average deposits up 6% and assets under management up 6%), largely driven by the commercial banking business, as well as improved deposit spreads, driven by higher interest rates. Cards revenues increased 9%, reflecting continued growth in purchase sales (up 11%) and full-rate revolving loans. Average cards loans grew 7%.
Expenses increased 9%, as volume-driven growth and ongoing investment spending were partially offset by efficiency savings.
Provisions increased 1%, as higher net credit losses were largely offset by a lower net loan loss reserve build. The net credit loss increase was primarily driven by volume growth and seasoning in cards.
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.

 

2018 YTD vs. 2017 YTD
Year-to-date, Latin America GCB has experienced similar trends to those described above. Net income increased 39%, driven by the same factors described above.
Revenues increased 9%, reflecting higher revenues in retail banking and cards. Retail banking revenues increased 9%, driven by the same factors described above. Cards revenues increased 10%, driven by the same factors described above as well as a favorable comparison to the first quarter of 2017.
Expenses increased 8%, driven by the same factors described above.
Provisions increased 5%, driven by higher net credit losses and a higher net loan loss reserve build, due to volume growth and seasoning in cards.




17



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 second quarter of 2018, Asia GCB’s most significant revenues in Asia were from Singapore, Hong Kong, Korea, India, Australia, Taiwan, Thailand, Philippines, Indonesia 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 Poland, Russia and the United Arab Emirates.
At June 30, 2018, on a combined basis, the businesses had 273 retail branches, approximately 15.9 million retail banking customer accounts, $69.3 billion in retail banking loans and $97.8 billion in deposits. In addition, the businesses had approximately 15.3 million Citi-branded card accounts with $18.8 billion in outstanding loan balances.

 
Second Quarter
 
Six Months
% Change
In millions of dollars, except as otherwise noted (1)
2018
2017
% Change
2018
2017
Net interest revenue
$
1,226

$
1,161

6
 %
$
2,459

$
2,275

8
 %
Non-interest revenue
639

658

(3
)
1,335

1,278

4

Total revenues, net of interest expense
$
1,865

$
1,819

3
 %
$
3,794

$
3,553

7
 %
Total operating expenses
$
1,207

$
1,194

1
 %
$
2,484

$
2,381

4
 %
Net credit losses
$
170

$
157

8
 %
$
332

$
317

5
 %
Credit reserve build (release)
6

(26
)
NM

(15
)
(13
)
(15
)
Provision (release) for unfunded lending commitments
1

(2
)
NM

3

(3
)
NM

Provisions for credit losses
$
177

$
129

37
 %
$
320

$
301

6
 %
Income from continuing operations before taxes
$
481

$
496

(3
)%
$
990

$
871

14
 %
Income taxes
121

166

(27
)
257

292

(12
)
Income from continuing operations
$
360

$
330

9
 %
$
733

$
579

27
 %
Noncontrolling interests
1

2

(50
)
3

2

50

Net income
$
359

$
328

9
 %
$
730

$
577

27
 %
Balance Sheet data (in billions of dollars)






 
 



Average assets
$
130

$
125

4
 %
$
131

$
124

6
 %
Return on average assets
1.11
%
1.05
%


1.12
%
0.94
%


Efficiency ratio
65

66

 
65

67



Average deposits
$
97.6

$
94.3

3

$
98.4

$
93.5

5

Net credit losses as a percentage of average loans
0.77
%
0.74
%


0.75
%
0.76
%


Revenue by business
 
 
 
 
 


Retail banking
$
1,142

$
1,096

4
 %
$
2,340

$
2,164

8
 %
Citi-branded cards
723

723


1,454

1,389

5

Total
$
1,865

$
1,819

3
 %
$
3,794

$
3,553

7
 %
Income from continuing operations by business






 
 


Retail banking
$
264

$
198

33
 %
$
510

$
369

38
 %
Citi-branded cards
96

132

(27
)
223

210

6

Total
$
360

$
330

9
 %
$
733

$
579

27
 %

18



FX translation impact



 
 


Total revenues—as reported
$
1,865

$
1,819

3
 %
$
3,794

$
3,553

7
 %
Impact of FX translation(2)

9




74



Total revenues—ex-FX(3)
$
1,865

$
1,828

2
 %
$
3,794

$
3,627

5
 %
Total operating expenses—as reported
$
1,207

$
1,194

1
 %
$
2,484

$
2,381

4
 %
Impact of FX translation(2)

9




60



Total operating expenses—ex-FX(3)
$
1,207

$
1,203

 %
$
2,484

$
2,441

2
 %
Provisions for loan losses—as reported
$
177

$
129

37
 %
$
320

$
301

6
 %
Impact of FX translation(2)

1




7



Provisions for loan losses—ex-FX(3)
$
177

$
130

36
 %
$
320

$
308

4
 %
Net income—as reported
$
359

$
328

9
 %
$
730

$
577

27
 %
Impact of FX translation(2)

1




6



Net income—ex-FX(3)
$
359

$
329

9
 %
$
730

$
583

25
 %

(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 second quarter of 2018 and year-to-date 2018 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.

2Q18 vs. 2Q17
Net income increased 9%, reflecting higher revenues and a lower effective tax rate as a result of Tax Reform, partially offset by higher cost of credit.
Revenues increased 2%. Excluding the benefit of a modest one-time gain in cards in the prior-year period, revenues increased 4%, driven by growth in retail banking and cards.
Retail banking revenues increased 4%, largely reflecting continued growth in in the wealth management franchise. While investment revenues declined in the second quarter of 2018 reflecting weaker market conditions, these were more than offset by revenue growth in FX products, insurance and deposits. In addition, assets under management grew 11%. Average deposits increased 2%. Retail lending revenues modestly improved (up 1%), as an increase in volumes (average loans up 3%) was largely offset by spread compression.
Cards revenues were largely unchanged. Excluding the benefit of the modest one-time gain, revenues increased 4%, driven by continued growth in average loans (up 1%) and purchase sales (up 5%).
Expenses were largely unchanged, as volume growth and ongoing investment spending were offset by efficiency savings.
Provisions increased 36%, primarily driven by a net loan loss reserve build compared to a net loan loss reserve release in the prior-year period. 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.

 

2018 YTD vs. 2017 YTD
Year-to-date, Asia GCB has experienced similar trends to
those described above. Net income increased 25% due to higher revenues and the lower effective tax rate, partially offset by higher expenses and a higher cost of credit.
Revenues increased 5%, primarily due to an increase in retail banking revenues (up 6%) and card revenues (up 2%). The increase in both retail banking and cards revenues was driven by the same factors described above.
Expenses increased 2%, driven by the same factors described above.
Provisions were up 4%, primarily driven by modestly higher net credit losses related to volume growth and seasoning.











19


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 with transactional services and clearing, providing brokerage and investment banking services and other such activities. Such fees are recognized at the point in time when Citigroup’s performance under the terms of a contractual arrangement is completed, which is typically at the trade/execution date or closing of a transaction. Revenue generated from these activities is recorded in Commissions and fees and Investment banking. Revenue is also generated from assets under custody and administration, which is recognized as/when the associated promised service is satisfied, which normally occurs at the point in time the service is requested by the customer and provided by Citi. Revenue generated from these activities is primarily recorded in Administration and other fiduciary fees. For additional information on these various types of revenues, see Note 5 to the Consolidated Financial Statements.
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) debt securities, gains and losses on equity securities not held in trading accounts, 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 June 30, 2018, ICG had approximately $1.4 trillion of assets and $676 billion of deposits, while two of its businesses—securities services and issuer services—managed approximately $17.8 trillion of assets under custody compared to $16.5 trillion at the end of the prior-year period.

20


 
Second Quarter
 
Six Months
% Change
In millions of dollars, except as otherwise noted
2018
2017
% Change
2018
2017
Commissions and fees
$
1,127

$
1,106

2
 %
$
2,340

$
2,130

10
 %
Administration and other fiduciary fees
713

674

6

1,407

1,309

7

Investment banking
1,246

1,243


2,231

2,353

(5
)
Principal transactions
2,358

2,151

10

5,242

4,882

7

Other
154

246

(37
)
572

247

NM

Total non-interest revenue
$
5,598

$
5,420

3
 %
$
11,792

$
10,921

8
 %
Net interest revenue (including dividends)
4,093

4,001

2

7,747

7,819

(1
)
Total revenues, net of interest expense
$
9,691

$
9,421

3
 %
$
19,539

$
18,740

4
 %
Total operating expenses
$
5,458

$
5,227

4
 %
$
10,961

$
10,365

6
 %
Net credit losses
$
(1
)
$
71

NM

$
104

$
96

8
 %
Credit reserve build (release)
32

(15
)
NM