10-Q 1 c-9302018x10q.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, 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 every Interactive Data File required to be submitted 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 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

 
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, 2018: 2,442,136,813

Available on the web at www.citigroup.com
 








CITIGROUP’S THIRD 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 Reports on Form 10-Q for the quarters ended March 31, 2018 (First Quarter of 2018 Form 10-Q) and June 30, 2018 (Second 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.
citisegmentsq318.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

Third Quarter of 2018—Solid Operating Results and Continued Momentum
As described further throughout this Executive Summary, Citi reported solid operating results in the third 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 third quarter of 2018, Citi had solid revenue growth across treasury and trade solutions, fixed income markets, securities services and the private bank in the Institutional Clients Group (ICG) and in international Global Consumer Banking (GCB), with particular strength in Latin America GCB. Results in the current quarter and prior-year period also reflected the impact of gains on sale of businesses in ICG and Latin America GCB (see “Citigroup” below). During the quarter, Citi continued to demonstrate expense and credit discipline, resulting in positive operating leverage and an improvement in pretax earnings. Citi also had broad-based loan growth in GCB and ICG, as well as deposit growth.
In addition, Citi continued to return capital to its shareholders. In the quarter, Citi returned $6.4 billion in the form of common stock repurchases and dividends. Citi repurchased approximately 75 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).
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.

Third Quarter of 2018 Summary Results

Citigroup
Citigroup reported net income of $4.6 billion, or $1.73 per share, compared to net income of $4.1 billion, or $1.42 per share, in the prior-year period. The 12% increase in net income was primarily driven by a lower effective tax rate due to the impact of the Tax Cuts and Jobs Act (Tax Reform), and also reflected lower expenses and lower cost of credit. Earnings per share increased 22% due to the growth in net income and the 8% reduction in average shares outstanding driven by the common stock repurchases.
 
Citigroup revenues of $18.4 billion in the third quarter of 2018 were largely unchanged from the prior-year period, primarily reflecting the net impact of a gain on sale (approximately $580 million) of a fixed income analytics business in ICG in the prior-year period and a gain on sale (approximately $250 million) of an asset management business in Latin America GCB in the current quarter as well as the impact of foreign currency translation (which increased reported revenues in the prior-year period by $335 million). Excluding the gains on sale as well as the impact of foreign currency translation in U.S. dollars for reporting purposes (FX translation), revenues increased 4%, driven by growth in ICG (Citi’s results of operations excluding the gains on sale as well as the impact of FX translation are non-GAAP financial measures).
Citigroup’s end-of-period loans increased 3% to $675 billion versus the prior-year period. Excluding the impact of FX translation, Citigroup’s end-of-period loans grew 4%, as 6% aggregate growth in GCB and ICG was partially offset by the continued wind-down of legacy assets in Corporate/Other. Citigroup’s end-of-period deposits increased 4% to $1.0 trillion versus the prior-year period. Excluding the impact of FX translation, Citigroup’s deposits increased 5%, primarily driven by 8% growth in ICG deposits.

Expenses
Citigroup operating expenses of $10.3 billion decreased 1% versus the prior-year period, as the impact of higher volume-related expenses and ongoing investments was more than offset by efficiency savings and the wind-down of legacy assets. Year-over-year, GCB operating expenses were up 5% and ICG operating expenses increased 1%, while Corporate/Other operating expenses declined 44%, all versus the prior-year period.

Cost of Credit
Citi’s total provisions for credit losses and for benefits and claims of $2.0 billion decreased 1% from the prior-year period. The decrease was primarily driven by lower net loan loss reserve builds in both Citi retail services and Citi-branded cards in North America GCB, partially offset by a net loan loss reserve build in ICG, driven by volume growth.
Net credit losses of $1.8 billion declined 1% versus the prior-year period. Consumer net credit losses of $1.7 billion were largely unchanged from the prior-year period. Corporate net credit losses decreased from $43 million in the prior-year period to $30 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.

Capital
Citigroup’s Common Equity Tier 1 (CET1) Capital and Tier 1 Capital ratios, on a fully implemented basis, were 11.7% and 13.4% as of September 30, 2018, respectively, compared to

3



13.0% and 14.6% as of September 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, the previously disclosed approximate $6 billion reduction in CET1 Capital in the fourth quarter of 2017 due to the impact of Tax Reform as well as an increase in risk-weighted assets, partially offset by net income. Citigroup’s Supplementary Leverage ratio as of September 30, 2018, on a fully implemented basis, was 6.5%, compared to 7.1% as of September 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 $1.6 billion increased 34%, driven primarily by lower cost of credit and a lower effective tax rate, as well as the gain on sale in Latin America GCB, partially offset by higher expenses. Operating expenses were $4.7 billion, up 5%, or 6% excluding the impact of FX translation, driven by the timing of investment spending versus the prior-year period.
GCB revenues of $8.7 billion increased 2% versus the prior-year period, and 3% excluding the impact of FX translation, driven primarily by strength in Latin America GCB as well as the gain on sale. North America GCB revenues decreased 1% to $5.1 billion, as higher revenues in Citi retail services were more than offset by lower revenues in Citi-branded cards and retail banking. Citi-branded cards revenues of $2.1 billion were down 3% versus the prior-year period, as growth in interest-earning balances was more than offset by the impact of the previously disclosed Hilton portfolio sale as well as previously disclosed partnership terms. Citi retail services revenues of $1.7 billion increased 2% versus the prior-year period, primarily reflecting organic loan growth and the benefit of the L.L.Bean portfolio acquisition, partially offset by higher partner payments. Retail banking revenues decreased 3% from the prior-year period to $1.3 billion. Excluding mortgage revenues, retail banking revenues of $1.2 billion were up 1% from the prior-year period, driven by continued growth in deposit margins and investments, largely offset by lower episodic transaction activity in commercial banking.
North America GCB average deposits of $180 billion decreased 2% year-over-year, primarily driven by a reduction in money market balances, as clients transferred money to investments. North America GCB average retail loans of $56 billion grew 1% year-over-year and assets under management of $64 billion grew 9%. Average Citi-branded card loans of $88 billion increased 3%, while Citi-branded card purchase sales of $87 billion increased 9% versus the prior-year period. Average Citi retail services loans of $49 billion increased 7% versus the prior-year period, while Citi retail services purchase sales of $22 billion were up 11%. For additional information on the results of operations of North America GCB for the third 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 8%, versus the prior-year period to $3.5 billion. Excluding the impact of FX translation, international GCB revenues increased 11% versus the prior-year period. On this basis, Latin America GCB revenues increased 26% versus the prior-year period, including the gain on sale. Excluding the gain on sale, Latin America GCB revenues increased 8%, driven by continued volume growth across commercial, mortgage and card loans as well as deposits. Asia GCB revenues increased 1%, as continued growth in deposit, cards and insurance revenues was largely offset by lower investment revenues due to weaker market sentiment. For additional information on the results of operations of Latin America GCB and Asia GCB for the third 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 $127 billion increased 5%, average retail loans of $90 billion increased 4%, assets under management of $105 billion increased 8%, average card loans of $24 billion increased 2% and card purchase sales of $26 billion increased 7%, all excluding the impact of FX translation.

Institutional Clients Group
ICG net income of $3.1 billion increased 2%, driven primarily by the lower effective tax rate, which more than offset the lower revenues as well as the higher cost of credit and operating expenses. ICG operating expenses increased 1% to $5.2 billion, driven by an increase in compensation costs, volume-related expenses and investments, partially offset by efficiency savings.
ICG revenues were $9.2 billion in the third quarter of 2018, down 2% from the prior-year period, as a 1% increase in Banking revenues was more than offset by a 5% decrease in Markets and securities services, reflecting the impact of the gain on sale in the prior-year period. Excluding the gain on sale in the prior-year period, revenues increased 4%, driven by growth in both Markets and securities services (up 8%) and Banking (up 1%). The increase in Banking revenues included the impact of $106 million of losses on loan hedges within corporate lending, compared to losses of $48 million in the prior-year period.
Banking revenues of $4.9 billion (excluding the impact of losses on loan hedges within corporate lending) increased 2%, 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 $1.2 billion decreased 8% versus the prior-year period, as growth in advisory was more than offset by a decline in both debt and equity underwriting, reflecting lower market activity. Advisory revenues increased 9% to $262 million, equity underwriting revenues decreased 17% to $259 million and debt underwriting revenues decreased 9% to $660 million, all versus the prior-year period.
Treasury and trade solutions revenues of $2.3 billion increased 4% versus the prior-year period, and 8% excluding the impact of FX translation, reflecting continued growth in

4



transaction volumes, loans and deposits. Private bank revenues increased 7% to $849 million versus the prior-year period, driven by growth in loans and investments, as well as improved deposit spreads. Corporate lending revenues were largely unchanged at $457 million. Excluding the impact of losses on loan hedges, corporate lending revenues increased 11% versus the prior-year period, primarily driven by loan growth and lower hedging costs.
Markets and securities services revenues of $4.5 billion decreased 5% from the prior-year period. Excluding the gain on sale, Markets and securities services increased 8%, driven by revenue growth in both fixed income and equity markets as well as securities services. Fixed income markets revenues of $3.2 billion increased 9% from the prior-year period, with contributions from both rates and currencies as well as spread products. Equity markets revenues of $792 million increased 1% from the prior-year period, as strength in prime finance and derivatives was largely offset by lower revenues in cash equities, reflecting a more challenging trading environment and lower commissions. Securities services revenues of $672 million increased 11%, and 15% excluding the impact of FX translation, driven by continued growth in client volumes and higher net interest revenue. For additional information on the results of operations of ICG for the third quarter of 2018, see “Institutional Clients Group” below.

Corporate/Other
Corporate/Other net loss was $67 million in the third quarter of 2018, compared to a net loss of $83 million in the prior-year period. Operating expenses of $459 million declined 44% from the prior-year period, largely reflecting the wind-down of legacy assets as well as lower infrastructure costs.
Corporate/Other revenues were $494 million, down 5% 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 third quarter of 2018, see “Corporate/Other” below.









5



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
2018
2017
% Change
2018
2017
% Change
Net interest revenue
$
11,802

$
11,535

2
 %
$
34,639

$
33,748

3
 %
Non-interest revenue
6,587

6,884

(4
)
21,091

21,192


Revenues, net of interest expense
$
18,389

$
18,419

 %
$
55,730

$
54,940

1
 %
Operating expenses
10,311

10,417

(1
)
31,948

31,900


Provisions for credit losses and for benefits and claims
1,974

1,999

(1
)
5,643

5,378

5

Income from continuing operations before income taxes
$
6,104

$
6,003

2
 %
$
18,139

$
17,662

3
 %
Income taxes(1)
1,471

1,866

(21
)
4,356

5,524

(21
)
Income from continuing operations
$
4,633

$
4,137

12
 %
$
13,783

$
12,138

14
 %
Income (loss) from discontinued operations,
  net of taxes(2)
(8
)
(5
)
(60
)

(2
)
100

Net income before attribution of noncontrolling
  interests
$
4,625

$
4,132

12
 %
$
13,783

$
12,136

14
 %
Net income attributable to noncontrolling interests
3

(1
)
NM

51

41

24

Citigroup’s net income
$
4,622

$
4,133

12
 %
$
13,732

$
12,095

14
 %
Less:
 
 


 
 
 
Preferred dividends—Basic
$
270

$
272

(1
)%
$
860

$
893

(4
)%
Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS
51

53

(4
)
151

156

(3
)
Income allocated to unrestricted common shareholders
  for basic and diluted EPS
$
4,301

$
3,808

13
 %
$
12,721

$
11,046

15
 %
Earnings per share
 
 


 
 

 
Basic
 
 


 
 

 
Income from continuing operations
$
1.74

$
1.42

23
 %
$
5.04

$
4.05

24
 %
Net income
1.73

1.42

22

5.04

4.05

24

Diluted
 
 


 
 
 
Income from continuing operations
$
1.74

$
1.42

23
 %
$
5.04

$
4.05

24
 %
Net income
1.73

1.42

22

5.04

4.05

24

Dividends declared per common share
0.45

0.32

41

1.09

0.64

70


Table continues on the next page, including footnotes.

6




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
2018
2017
% Change
2018
2017
% Change
At September 30:
 
 
 
 
 
 
Total assets
$
1,925,165

$
1,889,133

2
 %
 
 
 
Total deposits
1,005,176

964,038

4

 
 
 
Long-term debt
235,270

232,673

1

 
 
 
Citigroup common stockholders’ equity(1)
177,969

208,381

(15
)
 
 
 
Total Citigroup stockholders’ equity(1)
197,004

227,634

(13
)
 
 
 
Direct staff (in thousands)
206

213

(3
)
 
 
 
Performance metrics
 
 


 
 
 
Return on average assets
0.95
%
0.87
%


0.96
%
0.87
%
 
Return on average common stockholders’ equity(1)(3)
9.6

7.3



9.5

7.2

 
Return on average total stockholders’ equity(1)(3)
9.2

7.2



9.2

7.1

 
Efficiency ratio (total operating expenses/total revenues)
56.1

56.6



57.3

58.1

 
Basel III ratios—full implementation(1)(4)
 
 
 
 
 
 
Common Equity Tier 1 Capital(5)
11.73
%
12.98
%
 
 
 
 
Tier 1 Capital(5)
13.36

14.61

 
 
 
 
Total Capital(5)
15.98

16.95

 
 
 
 
Supplementary Leverage ratio
6.50

7.11

 
 
 
 
Citigroup common stockholders’ equity to assets(1)
9.24
%
11.03
%
 


 
 
Total Citigroup stockholders’ equity to assets(1)
10.23

12.05

 


 
 
Dividend payout ratio(6)
26.0

22.5

 
21.6
%
15.8
%
 
Total payout ratio(7)
147.0

164.6

 
98.1

96.5

 
Book value per common share(1)
$
72.88

$
78.81

(8
)%


 
 
Tangible book value (TBV) per share(1)(8)
61.91

68.55

(10
)
 
 
 
(1)
The third quarter and nine 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 risk-based capital and leverage ratios as of September 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.
(5)
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.
(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
 
Third Quarter
 
Nine Months
 
In millions of dollars
2018
2017
% Change
2018
2017
% Change
Income from continuing operations
 
 
 
 
 
 
Global Consumer Banking
 
 
 
 
 
 
  North America
$
850

$
642

32
 %
$
2,407

$
1,913

26
 %
  Latin America
334

169

98

717

445

61

  Asia(1)
383

359

7

1,116

938

19

Total
$
1,567

$
1,170

34
 %
$
4,240

$
3,296

29
 %
Institutional Clients Group


 




 


  North America
$
870

$
1,298

(33
)%
$
2,755

$
3,463

(20
)%
  EMEA
972

753

29

3,072

2,401

28

  Latin America
541

388

39

1,546

1,211

28

  Asia
734

623

18

2,310

1,778

30

Total
$
3,117

$
3,062

2
 %
$
9,683

$
8,853

9
 %
Corporate/Other
(51
)
(95
)
46

(140
)
(11
)
NM

Income from continuing operations
$
4,633

$
4,137

12
 %
$
13,783

$
12,138

14
 %
Discontinued operations
$
(8
)
$
(5
)
(60
)%
$

$
(2
)
100
 %
Net income attributable to noncontrolling interests
3

(1
)
NM

51

41

24

Citigroup’s net income
$
4,622

$
4,133

12
 %
$
13,732

$
12,095

14
 %

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


CITIGROUP REVENUES
 
Third Quarter
 
Nine Months
 
In millions of dollars
2018
2017
% Change
2018
2017
% Change
Global Consumer Banking
 
 
 
 
 
 
  North America
$
5,129

$
5,197

(1
)%
$
15,290

$
15,088

1
 %
  Latin America
1,670

1,388

20

4,398

3,863

14

  Asia(1)
1,855

1,885

(2
)
5,649

5,438

4

Total
$
8,654

$
8,470

2
 %
$
25,337

$
24,389

4
 %
Institutional Clients Group


 


 
 


  North America
$
3,329

$
3,709

(10
)%
$
10,105

$
10,877

(7
)%
  EMEA
2,927

2,703

8

9,137

8,438

8

  Latin America
1,055

1,099

(4
)
3,427

3,354

2

  Asia
1,930

1,919

1

6,111

5,501

11

Total
$
9,241

$
9,430

(2
)%
$
28,780

$
28,170

2
 %
Corporate/Other
494

519

(5
)
1,613

2,381

(32
)
Total Citigroup net revenues
$
18,389

$
18,419

 %
$
55,730

$
54,940

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




8



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
$
10,034

$
66,084

$
123,168

$

$
199,286

Federal funds sold and securities
  borrowed and purchased under
  agreements to resell
157

280,556

228


280,941

Trading account assets
754

249,904

6,844


257,502

Investments
1,271

108,942

235,300


345,513

Loans, net of unearned income and
  allowance for loan losses

299,493

347,050

16,030


662,573

Other assets
37,605

105,200

36,545


179,350

Net inter-segment liquid assets(4)
77,370

246,754

(324,124
)


Total assets
$
426,684

$
1,404,490

$
93,991

$

$
1,925,165

Liabilities and equity
 
 
 
 
 
Total deposits
$
310,689

$
684,623

$
9,864

$

$
1,005,176

Federal funds purchased and
  securities loaned and sold under
  agreements to repurchase
3,054

172,851

10


175,915

Trading account liabilities
141

147,115

396


147,652

Short-term borrowings
473

22,798

10,499


33,770

Long-term debt(3)
1,831

41,351

43,905

148,183

235,270

Other liabilities
19,613

94,913

14,993


129,519

Net inter-segment funding (lending)(3)
90,883

240,839

13,465

(345,187
)

Total liabilities
$
426,684

$
1,404,490

$
93,132

$
(197,004
)
$
1,727,302

Total stockholders’ equity(5)


859

197,004

197,863

Total liabilities and equity
$
426,684

$
1,404,490

$
93,991

$

$
1,925,165


(1)
The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment as of September 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.







9



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 and “Managing Global Risk—Consumer Credit” below). GCB is focused on its priority markets in the U.S., Mexico and Asia with 2,417 branches in 19 countries and jurisdictions as of September 30, 2018. At September 30, 2018, GCB had approximately $427 billion in assets and $311 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 (including commercial banking), Citi serves customers in a somewhat broader set of segments and geographies.

 
Third Quarter
 
Nine Months
 
In millions of dollars except as otherwise noted
2018
2017
% Change
2018
2017
% Change
Net interest revenue
$
7,236

$
7,071

2
 %
$
21,235

$
20,410

4
 %
Non-interest revenue
1,418

1,399

1

4,102

3,979

3

Total revenues, net of interest expense
$
8,654

$
8,470

2
 %
$
25,337

$
24,389

4
 %
Total operating expenses
$
4,661

$
4,452

5
 %
$
13,997

$
13,440

4
 %
Net credit losses
$
1,714

$
1,704

1
 %
$
5,176

$
4,922

5
 %
Credit reserve build (release)
186

486

(62
)
484

788

(39
)
Provision (release) for unfunded lending commitments
6

(5
)
NM

8


NM

Provision for benefits and claims
27

28

(4
)
75

80

(6
)
Provisions for credit losses and for benefits and claims (LLR & PBC)
$
1,933

$
2,213

(13
)%
$
5,743

$
5,790

(1
)%
Income from continuing operations before taxes
$
2,060

$
1,805

14
 %
$
5,597

$
5,159

8
 %
Income taxes
493

635

(22
)
1,357

1,863

(27
)
Income from continuing operations
$
1,567

$
1,170

34
 %
$
4,240

$
3,296

29
 %
Noncontrolling interests
1

2

(50
)
4

7

(43
)
Net income
$
1,566

$
1,168

34
 %
$
4,236

$
3,289

29
 %
Balance Sheet data (in billions of dollars)


 


 
 


Total EOP assets
$
427

$
419

2
 %
 
 


Average assets
424

421

1

$
421

$
415

1
 %
Return on average assets
1.47
%
1.10
%


1.35
%
1.06
%


Efficiency ratio
54

53



55

55



Average deposits
$
307

$
308


$
307

$
306


Net credit losses as a percentage of average loans
2.22
%
2.26
%


2.27
%
2.24
%


Revenue by business


 


 
 


Retail banking
$
3,717

$
3,521

6
 %
$
10,677

$
10,024

7
 %
Cards(1)
4,937

4,949


14,660

14,365

2

Total
$
8,654

$
8,470

2
 %
$
25,337

$
24,389

4
 %
Income from continuing operations by business


 


 
 


Retail banking
$
666

$
546

22
 %
$
1,770

$
1,298

36
 %
Cards(1)
901

624

44

2,470

1,998

24

Total
$
1,567

$
1,170

34
 %
$
4,240

$
3,296

29
 %
Table continues on the next page, including footnotes.


10



Foreign currency (FX) translation impact
 
 


 
 
 
Total revenue—as reported
$
8,654

$
8,470

2
 %
$
25,337

$
24,389

4
 %
Impact of FX translation(2)

(106
)



(11
)


Total revenues—ex-FX(3)
$
8,654

$
8,364

3
 %
$
25,337

$
24,378

4
 %
Total operating expenses—as reported
$
4,661

$
4,452

5
 %
$
13,997

$
13,440

4
 %
Impact of FX translation(2)

(53
)



15



Total operating expenses—ex-FX(3)
$
4,661

$
4,399

6
 %
$
13,997

$
13,455

4
 %
Total provisions for LLR & PBC—as reported
$
1,933

$
2,213

(13
)%
$
5,743

$
5,790

(1
)%
Impact of FX translation(2)

(23
)



(12
)


Total provisions for LLR & PBC—ex-FX(3)
$
1,933

$
2,190

(12
)%
$
5,743

$
5,778

(1
)%
Net income—as reported
$
1,566

$
1,168

34
 %
$
4,236

$
3,289

29
 %
Impact of FX translation(2)

(18
)



(9
)


Net income—ex-FX(3)
$
1,566

$
1,150

36
 %
$
4,236

$
3,280

29
 %
(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 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


11



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 September 30, 2018, North America GCB’s 692 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, 2018, North America GCB had approximately 9.0 million retail banking customer accounts, $56.3 billion in retail banking loans and $181.9 billion in deposits. In addition, North America GCB had approximately 120.2 million Citi-branded and Citi retail services credit card accounts with $137.8 billion in outstanding card loan balances, including the newly acquired $1.5 billion L.L.Bean portfolio.

 
Third Quarter
 
Nine Months
 
In millions of dollars, except as otherwise noted
2018
2017
% Change
2018
2017
% Change
Net interest revenue
$
4,984

$
4,825

3
 %
$
14,514

$
14,074

3
 %
Non-interest revenue
145

372

(61
)
776

1,014

(23
)
Total revenues, net of interest expense
$
5,129

$
5,197

(1
)%
$
15,290

$
15,088

1
 %
Total operating expenses
$
2,668

$
2,482

7
 %
$
7,979

$
7,677

4
 %
Net credit losses
$
1,242

$
1,239

 %
$
3,816

$
3,610

6
 %
Credit reserve build (release)
116

463

(75
)
354

716

(51
)
Provision (release) for unfunded lending commitments
5

(3
)
NM

3

6

(50
)
Provision for benefits and claims
5

9

(44
)
16

23

(30
)
Provisions for credit losses and for benefits and claims
$
1,368

$
1,708

(20
)%
$
4,189

$
4,355

(4
)%
Income from continuing operations before taxes
$
1,093

$
1,007

9
 %
$
3,122

$
3,056

2
 %
Income taxes
243

365

(33
)
715

1,143

(37
)
Income from continuing operations
$
850

$
642

32
 %
$
2,407

$
1,913

26
 %
Noncontrolling interests






Net income
$
850

$
642

32
 %
$
2,407

$
1,913

26
 %
Balance Sheet data (in billions of dollars)


 


 

 



Average assets
$
249

$
250

 %
$
247

$
246

 %
Return on average assets
1.35
%
1.02
%


1.30
%
1.04
%


Efficiency ratio
52

48



52

51



Average deposits
$
180.2

$
184.1

(2
)
$
180.3

$
184.6

(2
)
Net credit losses as a percentage of average loans
2.56
%
2.63
%


2.68
%
2.62
%


Revenue by business


 


 

 



Retail banking
$
1,329

$
1,366

(3
)%
$
3,984

$
3,916

2
 %
Citi-branded cards
2,108

2,178

(3
)
6,402

6,353

1

Citi retail services
1,692

1,653

2

4,904

4,819

2

Total
$
5,129

$
5,197

(1
)%
$
15,290

$
15,088

1
 %
Income from continuing operations by business


 


 

 



Retail banking
$
131

$
169

(22
)%
$
432

$
371

16
 %
Citi-branded cards
375

342

10

1,109

890

25

Citi retail services
344

131

NM

866

652

33

Total
$
850

$
642

32
 %
$
2,407

$
1,913

26
 %

NM Not meaningful

12



3Q18 vs. 3Q17
Net income increased 32%, due to lower cost of credit and a lower effective tax rate due to the impact of Tax Reform, partially offset by lower revenues and higher expenses.
Revenues decreased 1%, as higher revenues in Citi retail services were more than offset by lower revenues in Citi-branded cards and retail banking.
Retail banking revenues decreased 3%. Excluding mortgage revenues (decline of 28%), retail banking revenues were up 1%, driven by continued growth in deposit margins and investments, largely offset by lower episodic transaction activity in commercial banking as well as increasing
rate sensitivity. Average deposits decreased 2% year-over-year, primarily driven by a reduction in money market balances, as clients transferred money to investments. Assets under management were up 9%. The decline in mortgage revenues was driven by lower origination activity and higher cost of funds, reflecting the higher interest rate environment.
Cards revenues decreased 1%. In Citi-branded cards, revenues decreased 3%, as growth in interest-earning balances was more than offset by the impact of the Hilton portfolio sale as well as previously disclosed partnership terms that went into effect earlier in 2018. Average loans increased 3% and purchase sales increased 9%.
Citi retail services revenues increased 2%, primarily reflecting organic loan growth and the benefit of the L.L.Bean portfolio acquisition, partially offset by higher partner payments. Average loans increased 7% and purchase sales increased 11%.
Expenses increased 7%, driven by volume growth and
the timing of investment spending versus the prior-year period.
Provisions decreased 20% from the prior-year period, driven by a lower net loan loss reserve build. The net loan loss reserve build in the current quarter was $121 million, primarily due to volume growth in both cards portfolios. This compares to a build of $460 million in the prior-year period, which included $300 million related to an increase in net flow rates in the later delinquency buckets in Citi retail services and a slight increase in delinquencies for the Citi-branded cards portfolio.
Net credit losses were largely unchanged at $1.2 billion, driven by higher net credit losses in Citi-branded cards (up 5% to $644 million) and Citi retail services (up 5% to $566 million), offset by a $56 million decrease in retail banking, driven by episodic charge-offs in the commercial portfolio in the prior-year period. The increase in the cards net credit losses primarily reflected volume growth and seasoning in both 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.
As part of its Citi retail services business, Citi issues co-brand and private label credit card products with Sears. As has been widely reported, on October 15, 2018, Sears filed for Chapter 11 bankruptcy protection that includes, among other things, plans to close additional stores. The impact to Citi retail services, including on revenues due to reduced new
 
account acquisitions or lower purchase sales, will depend, among other things, on the magnitude and timing of the Sears store closures. Citi retail services could also incur additional costs related to customer communications, including to support spending activity on the predominantly general-purpose MasterCard portfolio. Citi does not currently expect the Chapter 11 filing to have an immediate or ongoing material impact on its consolidated results. For additional information, see “Forward-Looking Statements” below and “Risk-Factors—Strategic Risks” in Citi’s 2017 Annual Report on Form 10-K.
2018 YTD vs. 2017 YTD
Net income increased 26%, driven by higher revenues, a lower effective tax rate due to the impact of Tax Reform and lower cost of credit, partially offset by higher expenses.
Revenues increased 1%, reflecting higher revenues across retail banking, Citi retail services and Citi-branded cards. Retail banking revenues increased 2%. Excluding mortgage revenues (decline of 24%), retail banking revenues increased 6%, driven by growth in deposit margins and investments. Cards revenues increased 1%. In Citi-branded cards, revenues increased 1% driven by the same factors described above, as well as the sale of the Hilton portfolio, which resulted in a gain of approximately $150 million in the first quarter of 2018. This gain was largely offset by the loss of operating revenues from the portfolio. Citi retail services revenues increased 2%, driven by the same factors described above.
Expenses increased 4%, driven by the same factors described above, partially offset by efficiency savings.
Provisions decreased 4%. Net credit losses increased 6%, driven by volume growth and seasoning in both cards portfolios. This increase was more than offset by a 51% decline in the net loan loss reserve build, driven by the same factors described above.







13



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, 2018, Latin America GCB had 1,463 retail branches in Mexico, with approximately 29.1 million retail banking customer accounts, $21.0 billion in retail banking loans and $30.1 billion in deposits. In addition, the business had approximately 5.7 million Citi-branded card accounts with $5.8 billion in outstanding loan balances.

 
Third Quarter
 
Nine Months
% Change
In millions of dollars, except as otherwise noted
2018
2017
% Change
2018
2017
Net interest revenue
$
1,042

$
1,038

 %
$
3,052

$
2,853

7
 %
Non-interest revenue(1)
628

350

79

1,346

1,010

33

Total revenues, net of interest expense
$
1,670

$
1,388

20
 %
$
4,398

$
3,863

14
 %
Total operating expenses
$
828

$
779

6
 %
$
2,369

$
2,191

8
 %
Net credit losses
$
307

$
295

4
 %
$
863

$
825

5
 %
Credit reserve build
31

44

(30
)
106

106


Provision (release) for unfunded lending commitments

(1
)
100

1

(2
)
NM

Provision for benefits and claims
22

19

16

59

57

4

Provisions for credit losses and for benefits and claims (LLR & PBC)
$
360

$
357

1
 %
$
1,029

$
986

4
 %
Income from continuing operations before taxes
$
482

$
252

91
 %
$
1,000

$
686

46
 %
Income taxes
148

83

78

283

241

17

Income from continuing operations
$
334

$
169

98
 %
$
717

$
445

61
 %
Noncontrolling interests

1

(100
)

4

(100
)
Net income
$
334

$
168

99
 %
$
717

$
441

63
 %
Balance Sheet data (in billions of dollars)


 


 

 



Average assets
$
45

$
47

(4
)%
$
44

$
45

(2
)%
Return on average assets
2.94
%
1.42
%


2.18
%
1.31
%


Efficiency ratio
50

56



54

57



Average deposits
$
29.4

$
28.8

2

$
28.9

$
27.3

6

Net credit losses as a percentage of average loans
4.63
%
4.37
%


4.44
%
4.39
%


Revenue by business


 


 
 


Retail banking
$
1,265

$
992

28
 %
$
3,230

$
2,781

16
 %
Citi-branded cards
405

396

2

1,168

1,082

8

Total
$
1,670

$
1,388

20
 %
$
4,398

$
3,863

14
 %
Income from continuing operations by business


 


 

 



Retail banking
$
279

$
129

NM

$
572

$
310

85
 %
Citi-branded cards
55

40

38
 %
145

135

7

Total
$
334

$
169

98
 %
$
717

$
445

61
 %

14



FX translation impact


 


 
 



Total revenues—as reported
$
1,670

$
1,388

20
 %
$
4,398

$
3,863

14
 %
Impact of FX translation(2)

(66
)



(45
)


Total revenues—ex-FX(3)
$
1,670

$
1,322

26
 %
$
4,398

$
3,818

15
 %
Total operating expenses—as reported
$
828

$
779

6
 %
$
2,369

$
2,191

8
 %
Impact of FX translation(2)

(31
)



(21
)


Total operating expenses—ex-FX(3)
$
828

$
748

11
 %
$
2,369

$
2,170

9
 %
Provisions for LLR & PBC—as reported
$
360

$
357

1
 %
$
1,029

$
986

4
 %
Impact of FX translation(2)

(17
)



(12
)


Provisions for LLR & PBC—ex-FX(3)
$
360

$
340

6
 %
$
1,029

$
974

6
 %
Net income—as reported
$
334

$
168

99
 %
$
717

$
441

63
 %
Impact of FX translation(2)

(11
)



(9
)


Net income—ex-FX(3)
$
334

$
157

NM

$
717

$
432

66
 %
(1)
Third quarter of 2018 includes an approximate $250 million gain on the sale of an asset management business. See Note 2 to the Consolidated Financial Statements.
(2)
Reflects the impact of FX translation into U.S. dollars at the third 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 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.

3Q18 vs. 3Q17
Net income increased $177 million to $334 million, 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 26%, including the gain on sale of an asset management business (approximately $250 million). For additional information, see Note 2 to the Consolidated Financial Statements. Excluding the gain on sale, revenues were up 8%, driven by increases in both retail banking and cards.
Retail banking revenues increased 34%. Excluding the gain on sale, retail banking revenues increased 8%, driven by continued growth across commercial and mortgage loans and deposits, as well as improved deposit spreads due to higher interest rates. Average loans grew 4%, average deposits grew 8% and assets under management grew 5%. Cards revenues increased 7%, due to continued volume growth, reflecting higher purchase sales (up 14%) and full-rate revolving loans. Average cards loans grew 6%.
Expenses increased 11%, driven by volume growth, ongoing investment spending and higher repositioning charges, partially offset by efficiency savings.
Provisions increased 6%, as higher net credit losses were partially offset by a lower net loan loss reserve build. The net credit loss increase primarily reflected an episodic commercial charge-off that was fully offset by a related loan loss reserve release.
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 66%, driven by the same factors described above.
Revenues increased 15%, including the gain on sale in the third quarter of 2018. Excluding the gain on sale, revenues increased 9%, reflecting higher revenues in both retail banking and cards. Retail banking revenues increased 8%, driven by the same factors described above. Cards revenues increased 9%, driven by the same factors described above.
Expenses increased 9%, driven by the same factors described above.
Provisions increased 6%, driven by higher net credit losses and a higher net loan loss reserve build, primarily due to volume growth and seasoning in cards. The increase in net credit losses also reflected the episodic commercial charge-off that was fully offset by a related loan loss reserve release.




15



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 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 September 30, 2018, on a combined basis, the businesses had 262 retail branches, approximately 15.9 million retail banking customer accounts, $69.5 billion in retail banking loans and $98.7 billion in deposits. In addition, the businesses had approximately 15.4 million Citi-branded card accounts with $18.6 billion in outstanding loan balances.

 
Third Quarter
 
Nine Months
% Change
In millions of dollars, except as otherwise noted (1)
2018
2017
% Change
2018
2017
Net interest revenue
$
1,210

$
1,208

 %
$
3,669

$
3,483

5
 %
Non-interest revenue
645

677

(5
)
1,980

1,955

1

Total revenues, net of interest expense
$
1,855

$
1,885

(2
)%
$
5,649

$
5,438

4
 %
Total operating expenses
$
1,165

$
1,191

(2
)%
$
3,649

$
3,572

2
 %
Net credit losses
$
165

$
170

(3
)%
$
497

$
487

2
 %
Credit reserve build (release)
39

(21
)
NM

24

(34
)
NM

Provision (release) for unfunded lending commitments
1

(1
)
NM

4

(4
)
NM

Provisions for credit losses
$
205

$
148

39
 %
$
525

$
449

17
 %
Income from continuing operations before taxes
$
485

$
546

(11
)%
$
1,475

$
1,417

4
 %
Income taxes
102

187

(45
)
359

479

(25
)
Income from continuing operations
$
383

$
359

7
 %
$
1,116

$
938

19
 %
Noncontrolling interests
1

1


4

3

33

Net income
$
382

$
358

7
 %
$
1,112

$
935

19
 %
Balance Sheet data (in billions of dollars)






 

 



Average assets
$
130

$
124

5
 %
$
130

$
124

5
 %
Return on average assets
1.17
%
1.15
%


1.14
%
1.01
%


Efficiency ratio
63

63

 
65

66



Average deposits
$
97.6

$
95.2

3

$
98.1

$
94.1

4

Net credit losses as a percentage of average loans
0.75
%
0.78
%


0.75
%
0.77
%


Revenue by business
 
 
 
 
 


Retail banking
$
1,123

$
1,163

(3
)%
$
3,463

$
3,327

4
 %
Citi-branded cards
732

722

1

2,186

2,111

4

Total
$
1,855

$
1,885

(2
)%
$
5,649

$
5,438

4
 %
Income from continuing operations by business






 
 


Retail banking
$
256

$
248

3
 %
$
766

$
617

24
 %
Citi-branded cards
127

111

14

350

321

9

Total
$
383

$
359

7
 %
$
1,116

$
938

19
 %

16



FX translation impact



 
 


Total revenues—as reported
$
1,855

$
1,885

(2
)%
$
5,649

$
5,438

4
 %
Impact of FX translation(2)

(40
)



34



Total revenues—ex-FX(3)
$
1,855

$
1,845

1
 %
$
5,649

$
5,472

3
 %
Total operating expenses—as reported
$
1,165

$
1,191

(2
)%
$
3,649

$
3,572

2
 %
Impact of FX translation(2)

(22
)



36



Total operating expenses—ex-FX(3)
$
1,165

$
1,169

 %
$
3,649

$
3,608

1
 %
Provisions for loan losses—as reported
$
205

$
148

39
 %
$
525

$
449

17
 %
Impact of FX translation(2)

(6
)






Provisions for loan losses—ex-FX(3)
$
205

$
142

44
 %
$
525

$
449

17
 %
Net income—as reported
$
382

$
358

7
 %
$
1,112

$
935

19
 %
Impact of FX translation(2)

(7
)






Net income—ex-FX(3)
$
382

$
351

9
 %
$
1,112

$
935

19
 %

(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 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.

3Q18 vs. 3Q17
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 1%, driven by higher cards revenues, partially offset by lower retail banking revenues.
Retail banking revenues decreased 2%, as continued growth in deposit and insurance revenues was more than offset by lower investment revenues due to weaker market sentiment. Investment sales decreased 22%, while assets under management grew 9% and average deposits increased 4%. Retail lending revenues declined 1%, as volume growth in personal and commercial loans was more than offset by lower mortgage revenues due to spread compression. Average loans grew 4%.
Cards revenues increased 4%, driven by continued growth in average loans (up 2%) and purchase sales (up 6%).
Expenses were largely unchanged, as volume-driven growth and ongoing investment spending were offset by efficiency savings.
Provisions increased 44%, 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 19%, due to higher revenues and the lower effective tax rate, partially offset by higher expenses and a higher cost of credit.
Revenues increased 3%, driven by continued momentum in retail banking and cards. Retail banking revenues increased 3%, driven by growth in deposits, partially offset by lower investment and mortgage revenues. Cards revenues were up 3%, driven by the same factors described above.
Expenses increased 1%, as volume-driven growth and ongoing investment spending were partially offset by efficiency savings.
Provisions were up 17%, primarily driven by a net loan loss reserve build compared to a release in the prior-year period and modestly higher net credit losses related to volume growth and seasoning.











17


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 September 30, 2018, ICG had approximately $1.4 trillion of assets and $685 billion of deposits, while two of its businesses—securities services and issuer services—managed approximately $18.0 trillion of assets under custody compared to $17.1 trillion at the end of the prior-year period.

18


 
Third Quarter
 
Nine Months
% Change
In millions of dollars, except as otherwise noted
2018
2017
% Change
2018
2017
Commissions and fees
$
1,085

$
1,100

(1
)%
$
3,425

$
3,230

6
 %
Administration and other fiduciary fees
686

688


2,093

1,997

5

Investment banking
1,029

1,163

(12
)
3,260

3,516

(7
)
Principal transactions
2,447

1,827

34

7,689

6,709

15

Other(1)
(18
)
704

NM

554

951

(42
)
Total non-interest revenue
$
5,229

$
5,482

(5
)%
$
17,021

$
16,403

4
 %
Net interest revenue (including dividends)
4,012

3,948

2

11,759

11,767


Total revenues, net of interest expense
$
9,241

$
9,430

(2
)%
$
28,780

$
28,170

2
 %
Total operating expenses
$
5,191

$
5,138

1
 %
$
16,152

$
15,503

4
 %
Net credit losses
$
23

$
44

(48
)%
$
127

$
140

(9
)%
Credit reserve build (release)
7

(38
)
NM

(136
)
(229
)
41

Provision (release) for unfunded lending commitments
41

(170