10-Q 1 a2198476z10-q.htm 10-Q

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

Commission file number 1-9924

Citigroup Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
  52-1568099
(I.R.S. Employer Identification No.)

399 Park Avenue, New York, NY
(Address of principal executive offices)

 

10043
(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 ý    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 ý    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller
reporting company)
  Smaller reporting company o

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

        Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

Common stock outstanding as of April 30, 2010: 28,979,879,336

Available on the web at www.citigroup.com


Table of Contents

1


CITIGROUP INC.

FIRST QUARTER 2010—FORM 10-Q

OVERVIEW

  3

CITIGROUP SEGMENTS AND REGIONS

 
4

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

 
5

EXECUTIVE SUMMARY

 
5

RESULTS OF OPERATIONS

 
5

SUMMARY OF SELECTED FINANCIAL DATA

 
7

SEGMENT, BUSINESS AND PRODUCT—INCOME (LOSS) AND REVENUES

 
9
 

Citigroup Income (Loss)

 
9
 

Citigroup Revenues

 
10

CITICORP

 
11
 

Regional Consumer Banking

 
12
     

North America Regional Consumer Banking

 
13
     

EMEA Regional Consumer Banking

 
15
     

Latin America Regional Consumer Banking

 
16
     

Asia Regional Consumer Banking

 
17
 

Institutional Clients Group

 
18
     

Securities and Banking

 
19
     

Transaction Services

 
21

CITI HOLDINGS

 
22
 

Brokerage and Asset Management

 
23
 

Local Consumer Lending

 
24
 

Special Asset Pool

 
26

CORPORATE/OTHER

 
29

SEGMENT BALANCE SHEET

 
30

CAPITAL RESOURCES AND LIQUIDITY

 
31
   

Capital Resources

 
31
   

Funding and Liquidity

 
36

OFF-BALANCE-SHEET ARRANGEMENTS

 
39

MANAGING GLOBAL RISK

 
40
   

Credit Risk

 
40
       

Loan and Credit Overview

 
40
       

Loans Outstanding

 
41
       

Details of Credit Loss Experience

 
46
       

Non-Accrual Assets

 
47
       

Consumer Loan Details

 
50
       

Consumer Loan Delinquency Amounts and Ratios

 
50
       

Consumer Loan Net Credit Losses and Ratios

 
51
       

Consumer Loan Modification Programs

 
52
       

U.S. Consumer Lending

 
53
       

Corporate Credit Portfolio

 
62
   

Market Risk

 
65
       

Average Rates—Interest Revenue, Interest Expense and Net Interest Margin

 
67
       

Average Balances and Interest Rates—Assets

 
68
       

Average Balances and Interest Rates—Liabilities and Equity, and Net Interest Revenue

 
69
       

Analysis of Changes in Interest Revenue

 
70
       

Analysis of Changes in Interest Expense and Net Interest Revenue

 
71
   

Cross-Border Risk

 
72

DERIVATIVES

 
73

INCOME TAXES

 
75

CONTRACTUAL OBLIGATIONS

 
76

CONTROLS AND PROCEDURES

 
76

FORWARD-LOOKING STATEMENTS

 
77

TABLE OF CONTENTS FOR FINANCIAL STATEMENTS AND NOTES

 
78

CONSOLIDATED FINANCIAL STATEMENTS

 
80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
89

OTHER INFORMATION

 
176
   

Item 1. Legal Proceedings

 
176
   

Item 1A. Risk Factors

 
177
   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 
178
   

Item 6. Exhibits

 
179
   

Signatures

 
180
   

Exhibit Index

 
181

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OVERVIEW

Introduction

        Citigroup's history dates back to the founding of Citibank in 1812. Citigroup's original corporate predecessor was incorporated in 1988 under the laws of the State of Delaware. Following a series of transactions over a number of years, Citigroup Inc. was formed in 1998 upon the merger of Citicorp and Travelers Group Inc.

        Citigroup is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services. Citi has approximately 200 million customer accounts and does business in more than 140 countries.

        Citigroup currently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of our Regional Consumer Banking businesses and Institutional Clients Group; and Citi Holdings, consisting of our Brokerage and Asset Management and Local Consumer Lending businesses, and a Special Asset Pool. There is also a third segment, Corporate/Other. For a further description of the business segments and the products and services they provide, see "Citigroup Segments" below, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 to the Consolidated Financial Statements.

        Throughout this report, "Citigroup" and "Citi" refer to Citigroup Inc. and its consolidated subsidiaries.

        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, 2009.

        Additional information about Citigroup is available on the company's Web site at www.citigroup.com. Citigroup's recent annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, as well as its other filings with the Securities and Exchange Commission (SEC) are available free of charge through the company's Web site by clicking on the "Investors" page and selecting "All SEC Filings." The SEC's Web site also contains periodic and current reports, proxy and information statements, and other information regarding Citi, at www.sec.gov.

        Certain reclassifications have been made to the prior periods' financial statements to conform to the current period's presentation.

        Within this Form 10-Q, please refer to the tables of contents on pages 2 and 78 for page references to Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements, respectively.

Impact of Adoption of SFAS 166/167

        Effective January 1, 2010, Citigroup adopted Accounting Standards Codification (ASC) 860, Transfers and Servicing, formerly SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166), and ASC 810, Consolidations, formerly SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). Among other requirements, the adoption of these standards includes the requirement that Citi consolidate certain of its credit card securitization trusts and eliminate sale accounting for transfers of credit card receivables to those trusts. As a result, reported and managed basis presentations are comparable for periods beginning January 1, 2010. For comparison purposes, prior period revenues, net credit losses, provisions for credit losses and for benefits and claims including managed net credit losses and loans are presented on a managed basis in this Form 10-Q. Managed presentations were applicable only to Citi's North American branded and retail partner credit card operations in North America Regional Consumer Banking and Citi Holdings—Local Consumer Lending and any aggregations in which they are included. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary," "Capital Resources and Liquidity" and Note 1 to the Consolidated Financial Statements for an additional discussion of the adoption of SFAS 166/167 and its impact on Citigroup.

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        As described above, Citigroup is managed pursuant to the following segments:

GRAPHIC

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

GRAPHIC


(1)
Asia includes Japan, Latin America includes Mexico, and North America comprises the U.S., Canada and Puerto Rico.

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

FIRST QUARTER 2010 EXECUTIVE SUMMARY

Overview of Results

        Citigroup reported net income of $4.4 billion, or $0.15 per diluted share, for the first quarter of 2010. Results reflected strong capital markets revenues, an improving credit environment and the impact of Citi's continued expense discipline. Citicorp's net income was $5.1 billion; Citi Holdings had a net loss of $0.9 billion. Both segments benefitted from a decline in net credit losses during the first quarter of 2010.

        The first quarter of 2010 results reflected the adoption of SFAS 166/167, which resulted in the consolidation of $137 billion of incremental assets and $146 billion of liabilities onto the Consolidated Balance Sheet, including securitized credit card receivables. On the date of adoption of SFAS 166/167 (January 1, 2010), Citi's risk-weighted assets increased by a net $10 billion, the loan loss allowance was increased by $13.4 billion, deferred tax assets were increased by $5.0 billion, and retained earnings were reduced by $8.4 billion. The adoption also translated into a reduction in Tangible Common Equity of $8.4 billion, and decreased Tier 1 Common by $14.2 billion or 138 basis points. The impact to Citi's capital was largely offset by the earnings in the quarter. The Tier 1 Capital and Tier 1 Common ratios were 11.28% and 9.11%, respectively, at March 31, 2010. (Tangible Common Equity and Tier 1 Common and related ratios are non-GAAP financial measures, as defined by the SEC. See "Capital Resources and Liquidity—Capital Resources" for additional information on these measures.)

        Revenues of $25.4 billion decreased 6% from comparable year-ago levels due primarily to lower revenues in Securities and Banking and Local Consumer Lending, offset by higher revenues in Special Asset Pool. The absence of Smith Barney revenues in the current quarter (which approximated $1.7 billion in the first quarter of 2009, recorded in Brokerage and Asset Management) also contributed to the decline in revenues.

        Securities and Banking revenues were $8 billion in the first quarter of 2010, compared to $12.2 billion in the year-ago period. Securities and Banking revenues were particularly strong in the first quarter of 2009 driven by strong fixed income markets revenues as well as $2.7 billion of positive credit value adjustments (CVA), compared to $289 million of positive CVA in the first quarter of 2010. The first quarter of 2010 saw continued strength in the fixed income markets in Securities and Banking.

        Regional Consumer Banking revenues were up $245 million to $8.1 billion on a comparable basis. Transaction Services revenues were up 3% to $2.4 billion.

        Local Consumer Lending revenues of $4.7 billion in the first quarter of 2010 were down 22% year-over-year on a comparable basis, driven by a declining asset base and the absence of a $1.1 billion gain on the sale of Redecard shares in the first quarter of 2009.

        Revenues in the Special Asset Pool grew to $1.5 billion in the first quarter of 2010, from negative $4.5 billion in the prior year, driven by $1.4 billion of positive net revenue marks in the first quarter of 2010 (versus $4.5 billion of negative marks in the first quarter of 2009).

        Net interest revenue increased 13% from the first quarter of 2009, primarily reflecting the adoption of SFAS 166/167. Citi's net interest margin (NIM) increased by 67 basis points to 3.32% during the first quarter of 2010. Nearly three-quarters of the increase was due to the adoption of SFAS 166/167. The remainder of the increase was driven by the absence of interest payments on trust preferred securities repaid in the fourth quarter of 2009 as well as the deployment of cash into higher-yielding investments.

        Non-interest revenue decreased 6% from a year ago, primarily reflecting adoption of SFAS 166/167 as well as the absence of the $1.1 billion Redecard gain in the first quarter of 2009.

        Operating expenses decreased 1% from the year-ago quarter and were down 6% from the fourth quarter of 2009 reflecting Citigroup's continued expense discipline. Citi's full-time employees were 263,000 at March 31, 2010, down 46,000 from March 31, 2009 and down 2,000 from December 31, 2009.

        Net credit losses of $8.4 billion in the first quarter of 2010 were down 15% from year-ago levels and down 16% from the fourth quarter of 2009. Consumer net credit losses of $8.0 billion were down 3% from last year and down 10% from the prior quarter.

        Citi's total allowance for loan losses was $48.7 billion at March 31, 2010, or 6.8% of total loans. This was up from 6.1% of total loans at December 31, 2009 and reflected an increase in loans of approximately $130 billion and an increase in loan loss reserves of $12.7 billion during the quarter, primarily reflecting the adoption of SFAS 166/167. During the first quarter of 2010, Citi had a net release of $18 million to its credit reserves, compared to a net build of $2.6 billion in the first quarter of 2009 and a net build of $706 million in the fourth quarter of 2009.

        The total allowance for loan losses for consumer loans increased to $41.4 billion at the end of the quarter, or 7.8% of consumer loans, up from 6.7% of consumer loans at the end of the fourth quarter of 2009. The increase was primarily due to the adoption of SFAS 166/167. During the first quarter of 2010, both early- and later-stage delinquencies improved across most of the consumer loan portfolios, driven by improvement in North America mortgages. Delinquencies declined in first and second mortgages reflecting asset sales, organic improvement and modifications under the U.S. Treasury's Home Affordable Modification Program (HAMP) moving to permanent status. For total consumer loans, the 90 days or more consumer loan delinquency rate was 4.02% at March 31, 2010, compared to 4.28% at December 31, 2009 and 3.51% a year ago. The 30 to 89 days past due consumer loan delinquency rate was 3.11% at March 31, 2010, compared to 3.46% at December 31, 2009 and 3.38% a year ago. Consumer non-accrual loans totaled $15.6 billion at

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March 31, 2010, compared to $18.3 billion at December 31, 2009 and $14.9 billion at March 31, 2009.

        The total allowance for loan losses for funded corporate loans declined to $7.3 billion at the end of the quarter, or 3.9% of corporate loans, down from 4.6% in the fourth quarter of 2009. Corporate non-accrual loans were $12.9 billion at March 31, 2010, compared to $13.5 billion at December 31, 2009 and $11.2 billion a year ago. The decrease from the prior quarter was mainly due to loan sales and paydowns, which were partially offset by increases due to weakening of certain specific credits.

        Citi's effective tax rate on continuing operations for the first quarter of 2010 was 20%. The effective tax rate reflected taxable earnings in lower rate jurisdictions, as well as income from tax advantaged sources.

        Total deposits were $828 billion at March 31, 2010, down 1% from December 31, 2009 and up 9% from year-ago levels. At March 31, 2010, Citi's structural liquidity (equity, long-term debt and deposits) as a percentage of assets was 71% at March 31, 2010 compared with 73% at December 31, 2009 and 68% at March 31, 2009.

        Citigroup's total assets of $2.0 trillion increased $146 billion from December 31, 2009, primarily from the adoption of SFAS 166/167, as discussed above.

        Citigroup's total stockholders' equity decreased by $1.3 billion during the first quarter of 2010 to $151.4 billion, primarily reflecting the adoption of SFAS 166/167, partially offset by the net income during the quarter, $1.9 billion related to the ADIA share issuance and $1.1 billion improvement in Accumulated Other Comprehensive Income. Citigroup's total equity capital base and trust preferred securities were $173.1 billion at March 31, 2010.

Business Outlook

        Citi's near-term performance will continue to be impacted by the pace of economic recovery generally, the level of activity in the capital markets and credit costs. Although Citi continued to see signs of economic improvement internationally during the first quarter of 2010, significant uncertainty remains in the U.S., particularly with regard to employment levels and the risk of future legislative actions that could adversely affect various Citi businesses, including possibly requiring the elimination or transformation of certain of its business activities.

        With respect to revenues, while Citi believes Securities and Banking first quarter 2010 results were generally representative of Citi's core business, the first quarter is historically the strongest period of the year, particularly in fixed income. In addition, while pricing actions were able to offset the impact of The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) in the first quarter of 2010, the CARD Act will likely have an increasingly negative impact on U.S. credit card revenues during 2010. Net revenue marks in the Special Asset Pool will continue to be episodic.

        With respect to expenses, while Citi intends to maintain continued expense discipline, operating expenses may increase in Citicorp going forward as a portion of the cost reductions achieved in Citi Holdings is re-invested in the core franchise. In addition, Citi will absorb the cost of the U.K. bonus tax in the second quarter of 2010, currently estimated to be approximately $400 million pretax.

        Credit costs will continue to be a significant driver of Citi's near term results. Internationally, consumer credit trends are expected to stabilize and in some cases show gradual improvement as long as economic recovery in these regions is sustained. In North America, Citi currently believes consumer credit trends may continue to stabilize based on the stable to improving delinquencies observed in the company's major portfolios, as well as early signs of economic recovery, although sustained credit improvement will depend on the broader macroeconomic environment. Consumer loan loss reserve balances will continue to reflect the losses embedded in the company's portfolios due to factors including underlying credit trends as well as the impact of modification programs.

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CITIGROUP INC. AND SUBSIDIARIES

SUMMARY OF SELECTED FINANCIAL DATA—Page 1

 
  First Quarter    
 
In millions of dollars,
except per share amounts
  %
Change
 
  2010   2009  

Total managed revenues(1)

  $ 25,421   $ 26,973     (6 )%

Total managed net credit losses(1)

    8,384     9,830     (15 )

Net interest revenue

  $ 14,561   $ 12,926     13 %

Non-interest revenue

    10,860     11,595     (6 )
               

Revenues, net of interest expense

  $ 25,421   $ 24,521     4 %

Operating expenses

    11,518     11,685     (1 )

Provisions for credit losses and for benefits and claims

    8,618     10,307     (16 )
               

Income from continuing operations before income taxes

  $ 5,285   $ 2,529     NM  

Income taxes (losses)

    1,036     835     24 %
               

Income from continuing operations

  $ 4,249   $ 1,694     NM  

Income from discontinued operations, net of taxes

    211     (117 )   NM  
               

Net Income (losses) before attribution of noncontrolling interests

  $ 4,460   $ 1,577     NM  

Net Income (losses) attributable to noncontrolling interests

    32     (16 )   NM  
               

Citigroup's net income

  $ 4,428   $ 1,593     NM  
               

Less:

                   
 

Preferred dividends—Basic

  $   $ 1,221     (100 )
 

Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance—Basic(2)

        1,285     (100 )
 

Preferred stock Series H discount accretion—Basic

        53     (100 )
               

Income (loss) available to common stockholders

  $ 4,428   $ (966 )   NM  
 

Earnings allocated to participating securities, net of forfeitures

    28         100 %
               

Undistributed earnings (loss) for basic EPS

  $ 4,400   $ (966 )   NM  

Convertible Preferred Stock Dividends

        270     (100 )%
               

Undistributed earnings (loss) for diluted EPS

  $ 4,400   $ (696 )   NM  
               

Earnings per share

                   
 

Basic(3)

                   
 

Income (loss) from continuing operations

  $ 0.15   $ (0.16 )   NM  
 

Net income (loss)

    0.15     (0.18 )   NM  
               
 

Diluted(3)

                   
 

Income (loss) from continuing operations

  $ 0.14   $ (0.16 )   NM  
 

Net income (loss)

    0.15     (0.18 )   NM  
               

[Continued on the following page, including notes to table.]

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SUMMARY OF SELECTED FINANCIAL DATA—Page 2

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars,   2010   2009  

At March 31:

                   

Total assets

  $ 2,002,213   $ 1,822,578     10 %

Total deposits

    827,914     762,696     9  

Long-term debt

    439,274     337,252     30  

Mandatorily redeemable securities of subsidiary Trusts (included in Long-term debt)

    21,682     24,694     (12 )

Common stockholders' equity

    151,109     69,688     NM  

Total stockholders' equity

    151,421     143,934     5  

Direct staff (in thousands)

    263     309     (15 )
               

Ratios:

                   

Return on common stockholders' equity(4)

    12.0 %   (5.6 )%      
               

Tier 1 Common(5)

    9.11 %   2.16 %      

Tier 1 Capital

    11.28 %   11.92 %      

Total Capital

    14.88 %   15.61 %      

Leverage(6)

    6.16 %   6.60 %      
               

Common stockholders' equity to assets

    7.5 %   3.8 %      

Ratio of earnings to fixed charges and preferred
stock dividends

    1.82     1.06        
               

(1)
See discussion of adoption of SFAS 166/167 on page 3 and Note 1 to the Consolidated Financial Statements.

(2)
For the three months ended March 31, 2009, Income available to common stockholders includes a reduction of $1.285 billion related to a conversion price reset pursuant to Citigroup's prior agreement with the purchasers of $12.5 billion convertible preferred stock issued in a private offering in January 2008. The conversion price was reset from $31.62 per share to $26.35 per share. There was no impact to net income, total stockholders' equity or capital ratios due to the reset. However, the reset resulted in a reclassification from Retained earnings to Additional paid-in capital of $1.285 billion and a reduction in Income available to common stockholders of $1.285 billion.

(3)
The Diluted EPS calculation for the first quarter of 2009 utilizes Basic shares and Income available to common stockholders (Basic) due to the negative Income available to common stockholders. Using Diluted shares and Income available to common stockholders (Diluted) would result in anti-dilution.

(4)
The return on average common stockholders' equity is calculated using income (loss) available to common stockholders.

(5)
As defined by the banking regulators, the Tier 1 Common ratio represents Tier 1 Capital less qualifying perpetual preferred stock, qualifying noncontrolling interests in subsidiaries and qualifying mandatorily redeemable securities of subsidiary trusts divided by risk-weighted assets. Tier 1 Common ratio is a non-GAAP financial measure. See "Capital Resources and Liquidity" below for additional information on this measure.

(6)
The Leverage ratio represents Tier 1 Capital divided by each period's quarterly adjusted average total assets.

NM    Not meaningful

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SEGMENT, BUSINESS AND PRODUCT—INCOME (LOSS) AND REVENUES

        The following tables show the income (loss) and revenues for Citigroup on a segment, business and product view:


Citigroup Income (Loss)

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Income (loss) from Continuing Operations

                   

CITICORP

                   

Regional Consumer Banking

                   

    North America

  $ 22   $ 357     (94 )%

    EMEA

    27     (33 )   NM  

    Latin America

    389     219     78  

    Asia

    576     248     NM  
               

        Total

  $ 1,014   $ 791     28 %
               

Securities and Banking

                   

    North America

  $ 1,424   $ 2,497     (43 )%

    EMEA

    1,032     2,171     (52 )

    Latin America

    272     412     (34 )

    Asia

    478     1,056     (55 )
               

        Total

  $ 3,206   $ 6,136     (48 )%
               

Transaction Services

                   

    North America

  $ 159   $ 138     15 %

    EMEA

    306     326     (6 )

    Latin America

    157     160     (2 )

    Asia

    319     280     14  
               

        Total

  $ 941   $ 904     4 %
               

    Institutional Clients Group

  $ 4,147   $ 7,040     (41 )%
               

Total Citicorp

  $ 5,161   $ 7,831     (34 )%
               

CITI HOLDINGS

                   

Brokerage and Asset Management

  $ 81   $ 34     NM  

Local Consumer Lending

    (1,838 )   (1,571 )   (17 )%

Special Asset Pool

    881     (3,948 )   NM  
               

Total Citi Holdings

  $ (876 ) $ (5,485 )   84 %
               

Corporate/Other

  $ (36 ) $ (652 )   94 %
               

Income from continuing operations

  $ 4,249   $ 1,694     NM  
               

Discontinued operations

  $ 211   $ (117 )      

Net income (loss) attributable to noncontrolling interests

    32     (16 )      
               

Citigroup's net income

  $ 4,428   $ 1,593     NM  
               

NM    Not meaningful

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Citigroup Revenues

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

CITICORP

                   

Regional Consumer Banking

                   

    North America

  $ 3,801   $ 2,503     52 %

    EMEA

    405     360     13  

    Latin America

    2,076     1,924     8  

    Asia

    1,800     1,566     15  
               

        Total

  $ 8,082   $ 6,353     27 %
               

Securities and Banking

                   

    North America

  $ 3,553   $ 5,016     (29 )%

    EMEA

    2,515     4,222     (40 )

    Latin America

    607     800     (24 )

    Asia

    1,328     2,162     (39 )
               

        Total

  $ 8,003   $ 12,200     (34 )%
               

Transaction Services

                   

    North America

  $ 639   $ 589     8 %

    EMEA

    833     844     (1 )

    Latin America

    344     343      

    Asia

    621     598     4  
               

        Total

  $ 2,437   $ 2,374     3 %
               

    Institutional Clients Group

  $ 10,440   $ 14,574     (28 )%
               

Total Citicorp

  $ 18,522   $ 20,927     (11 )%
               

CITI HOLDINGS

                   

Brokerage and Asset Management

  $ 340   $ 1,607     (79 )%

Local Consumer Lending

    4,670     6,021     (22 )

Special Asset Pool

    1,540     (4,534 )   NM  
               

Total Citi Holdings

  $ 6,550   $ 3,094     NM  
               

Corporate/Other

  $ 349   $ 500     (30 )%
               

Total net revenues

  $ 25,421   $ 24,521     4 %
               

    Impact of Credit Card Securitization Activity(1)

                   

        Citicorp

      $ 1,484     (100 )%

        Citi Holdings

        968     (100 )
               

Total impact of credit card securitization activity

      $ 2,452     (100 )%
               

Total Citigoup—managed net revenues(1)

  $ 25,421   $ 26,973     (6 )%
               

(1)
See discussion of adoption of SFAS 166/167 on page 3 and Note 1 to the Consolidated Financial Statements.

NM    Not meaningful

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CITICORP

        Citicorp is the company's global bank for consumers and businesses and represents Citi's core franchise. Citicorp is focused on providing best-in-class products and services to customers and leveraging Citigroup's unparalleled global network. Citicorp is physically present in approximately 100 countries, many for over 100 years, and offers services in over 140 countries. Citi believes this global network provides a strong foundation for servicing the broad financial services needs of large multinational clients and for meeting the needs of retail, private banking and commercial customers around the world. Citigroup's global footprint provides coverage of the world's emerging economies, which the company believes represents a strong area of growth. At March 31, 2010, Citicorp had approximately $1.2 trillion of assets and $730 billion of deposits, representing approximately 62% of Citi's total assets and approximately 88% of its deposits.

        Citicorp consists of the following businesses: Regional Consumer Banking (which includes retail banking and Citi-branded cards in four regions—North America, EMEA, Latin America and Asia) and Institutional Clients Group (which includes Securities and Banking and Transaction Services).

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

    Net interest revenue

  $ 9,870   $ 8,511     16 %

    Non-interest revenue

    8,652     12,416     (30 )
               

Total revenues, net of interest expense

  $ 18,522   $ 20,927     (11 )%
               

Provisions for credit losses and for benefits and claims

                   

    Net credit losses

  $ 3,142   $ 1,251     NM  

    Credit reserve build/(release)

    (360 )   998     NM  
               

    Provision for loan losses

  $ 2,782   $ 2,249     24 %

    Provision for benefits and claims

    44     42     5  

    Provision for unfunded lending commitments

    (7 )   32     NM  
               

        Total provisions for credit losses and for benefits and claims

  $ 2,819   $ 2,323     21 %
               

Total operating expenses

  $ 8,485   $ 7,399     15 %
               

Income from continuing operations before taxes

  $ 7,218   $ 11,205     (36 )%

Provisions for income taxes

    2,057     3,374     (39 )
               

Income from continuing operations

  $ 5,161   $ 7,831     (34 )%

Net income (loss) attributable to noncontrolling interests

    21     (3 )   NM  
               

Citicorp's net income

  $ 5,140   $ 7,834     (34 )%
               

Balance sheet data (in billions of dollars)

                   

Total EOP assets

  $ 1,236   $ 1,022     21 %

Average assets

    1,240     1,103     12  

Total EOP deposits

    730     664     10  
               

Total GAAP revenues

  $ 18,522   $ 20,927     (11 )%

    Net impact of credit card securitization activity(1)

        1,484     (100 )
               

Total managed revenues

  $ 18,522   $ 22,411     (17 )%
               

GAAP net credit losses

  $ 3,142   $ 1,251     NM  

    Impact of credit card securitization activity(1)

        1,491     (100 )%
               

Total managed net credit losses

  $ 3,142   $ 2,742     15 %
               

(1)
See discussion of adoption of SFAS 166/167 on page 3 and Note 1 to the Consolidated Financial Statements.

NM    Not meaningful

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REGIONAL CONSUMER BANKING

        Regional Consumer Banking (RCB) consists of Citigroup's four regional consumer banking businesses that provide traditional banking services to retail customers. RCB also contains Citigroup's branded cards business and Citi's local commercial banking business. RCB is a globally diversified business with over 4,200 branches in 39 countries around the world. During the first quarter of 2010, 53% of total RCB revenues were from outside North America. Additionally, the majority of international revenues and loans were from emerging economies in Asia, Latin America, and Central and Eastern Europe. At March 31, 2010, RCB had $313 billion of assets and $295 billion of deposits.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Net interest revenue

  $ 5,917   $ 3,842     54 %

Non-interest revenue

    2,165     2,511     (14 )
               

Total revenues, net of interest expense

  $ 8,082   $ 6,353     27 %
               

Total operating expenses

  $ 3,937   $ 3,504     12 %
               

        Net credit losses

  $ 3,040   $ 1,174     NM  

        Credit reserve build/(release)

    (180 )   686     NM  

        Provisions for benefits and claims

    44     42     5 %
               

Provisions for loan losses and for benefits and claims

  $ 2,904   $ 1,902     53 %
               

Income from continuing operations before taxes

  $ 1,241   $ 947     31 %

Income taxes

    227     156     46  
               

Income from continuing operations

  $ 1,014   $ 791     28 %

Net (loss) attributable to noncontrolling interests

    (5 )        
               

Net income

  $ 1,019   $ 791     29 %
               

Average assets (in billions of dollars)

  $ 308   $ 229     34 %

Return on assets

    1.34 %   1.40 %      

Average deposits (in billions of dollars)

    289     256     13  
               

Managed net credit losses as a percentage of average managed loans

    5.57 %   5.06 %      
               

Revenue by business

                   

    Retail banking

  $ 3,814   $ 3,537     8 %

    Citi-branded cards

    4,268     2,816     52  
               

            Total GAAP revenues

  $ 8,082   $ 6,353     27  

    Net impact of credit card securitization activity(1)

        1,484     (100 )
               

    Total managed revenues

  $ 8,082   $ 7,837     3 %
               

Net credit losses by business

                   

    Retail banking

  $ 289   $ 338     (14 )%

    Citi-branded cards

    2,751     836     NM  
               

        Total GAAP net credit losses

  $ 3,040   $ 1,174     NM  

    Net impact of credit card securitization activity(1)

        1,491     (100 )
               

    Total managed net credit losses

  $ 3,040   $ 2,665     14 %
               

Income (loss) from continuing operations by business

                   

    Retail banking

  $ 848   $ 650     30 %

    Citi-branded cards

    166     141     18  
               

            Total

  $ 1,014   $ 791     28 %
               

(1)
See discussion of adoption of SFAS 166/167 on page 3 and Note 1 to the Consolidated Financial Statements.

NM    Not meaningful

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NORTH AMERICA REGIONAL CONSUMER BANKING

        North America Regional Consumer Banking (NA RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses in the U.S. NA RCB's approximately 1,000 retail bank branches and 13.5 million retail customer accounts are largely concentrated in the greater metropolitan areas of New York, Los Angeles, San Francisco, Chicago, Miami, Washington, D.C., Boston, Philadelphia, and certain larger cities in Texas. At March 31, 2010, NA RCB had approximately $31.5 billion of retail banking and residential real estate loans and $146.3 billion of deposits. In addition, NA RCB had approximately 21.8 million Citi-branded credit card accounts, with $77.7 billion in outstanding loan balances.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Net interest revenue

  $ 2,954   $ 1,192     NM  

Non-interest revenue

    847     1,311     (35 )%
               

Total revenues, net of interest expense

  $ 3,801   $ 2,503     52 %
               

Total operating expenses

  $ 1,611   $ 1,494     8 %
               

    Net credit losses

  $ 2,157   $ 257     NM  

    Credit reserve build

    4     253     (98 )%

    Provisions for benefits and claims

    8     13     (38 )
               

Provisions for loan losses and for benefits and claims

  $ 2,169   $ 523     NM  
               

Income from continuing operations before taxes

  $ 21   $ 486     (96 )%

Income taxes (benefits)

    (1 )   129     (101 )
               

Income from continuing operations

  $ 22   $ 357     (94 )%

Net income attributable to noncontrolling interests

             
               

Net income

  $ 22   $ 357     (94 )%
               

Average assets (in billions of dollars)

  $ 121   $ 72     68 %

Average deposits (in billions of dollars)

    144.2     130.9     10  
               

Managed net credit losses as a percentage of average managed loans(1)

    7.85 %   6.04 %      
               

Revenue by business

                   

    Retail banking

  $ 1,280   $ 1,296     (1 )%

    Citi-branded cards

    2,521     1,207     NM  
               

        Total GAAP revenues

  $ 3,801   $ 2,503     52  

    Net impact of credit card securitization activity(2)

        1,484     (100 )
               

    Total managed revenues

  $ 3,801   $ 3,987     (5 )%
               

Net credit losses by business

                   

    Retail banking

  $ 73   $ 56     30 %

    Citi-branded cards

    2,084     201     NM  
               

        Total GAAP net credit losses

  $ 2,157   $ 257     NM  

    Net impact of credit card securitization activity(2)

        1,491     (100 )
               

    Total managed net credit losses

  $ 2,157   $ 1,748     23 %
               

Income (loss) from continuing operations by business

                   

    Retail banking

  $ 184   $ 241     (24 )%

    Citi-branded cards

    (162 )   116     NM  
               

        Total

  $ 22   $ 357     (94 )%
               

(1)
See "Managed Presentations" below.

(2)
See discussion of adoption of SFAS 166/167 on page 3 and Note 1 to the Consolidated Financial Statements.

NM    Not meaningful

1Q10 vs. 1Q09

        Revenues, net of interest expense, increased 52%, primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of FAS 166/167 effective January 1, 2010. On a managed basis, revenues, net of interest expense, decreased 5%, primarily reflecting lower volumes in cards and mortgages, which were partially offset by pricing actions in the branded cards portfolio in the latter part of 2009 and first quarter of 2010, in anticipation of the CARD Act, and higher deposit volumes in retail banking. See "Executive Summary—Business Outlook" for additional information.

        On a managed basis, net interest revenue was down 1% driven by the impact of lower volumes in cards, where average loans were down 5% from the prior-year period, and in mortgages, with average loans down 10%. This decline was also partially offset by the pricing actions in the branded cards portfolio and higher deposit volumes in retail banking, with average deposits up 10% from the prior-year period.

        On a managed basis, non-interest revenue declined 15%, driven by lower gains from mortgage loan sales and lower fees in cards mainly due to a 15% decline in open accounts from the prior-year period.

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        Operating expenses increased 8% from the prior-year period. Excluding the impact of a litigation reserve in the first quarter of 2010, expenses were down 1% reflecting the benefits from re-engineering efforts and lower marketing costs.

        Provisions for loan losses and for benefits and claims increased $1.6 billion primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167. On a comparable basis, provisions for loan losses and for benefits and claims increased 8% primarily due to rising net credit losses in the branded cards portfolio. Trends in the macroeconomic environment, including high unemployment and increased bankruptcy filings, drove higher credit costs. The branded cards managed net credit loss ratio increased 240 basis points to 10.67%, while the retail banking net credit loss ratio increased 28 basis points to 0.94%. The increase in net credit losses was partially offset by a lower loan loss reserve build, down $249 million from the prior-year period.

Managed Presentations

 
  First Quarter  
 
  2010   2009  

Managed credit losses as a percentage of average managed loans

    7.85 %   6.04 %

Impact from credit card securitizations(1)

        3.91 %
           

Net credit losses as a percentage of average loans

    7.85 %   2.13 %
           

(1)
See discussion of adoption of SFAS 166/167 on page 3 and Note 1 to the Consolidated Financial Statements.

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EMEA REGIONAL CONSUMER BANKING

        EMEA Regional Consumer Banking (EMEA RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, primarily in Central and Eastern Europe, the Middle East and Africa. Western Europe retail banking is included in Citi Holdings. EMEA RCB has repositioned its business, shifting from a strategy of widespread distribution to a focused strategy concentrating on larger urban markets within the region. An exception is Bank Handlowy, which has a mass market presence in Poland. The countries in which EMEA RCB has the largest presence are Poland, Turkey, Russia and the United Arab Emirates. At March 31, 2010, EMEA RCB had approximately 310 retail bank branches with approximately 3.7 million customer accounts, $4.9 billion in retail banking loans and $9.5 billion in deposits. In addition, the business had approximately 2.6 million Citi-branded card accounts with $2.9 billion in outstanding loan balances.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Net interest revenue

  $ 248   $ 224     11 %

Non-interest revenue

    157     136     15  
               

Total revenues, net of interest expense

  $ 405   $ 360     13 %
               

Total operating expenses

  $ 277   $ 256     8 %
               

    Net credit losses

  $ 97     89     9 %

    Credit reserve build/(release)

    (10 )   72     NM  

    Provisions for benefits and claims

               
               

Provisions for loan losses and for benefits and claims

  $ 87   $ 161     (46 )%
               

Income (loss) from continuing operations before taxes

  $ 41   $ (57 )   NM  

Income taxes (benefits)

    14     (24 )   NM  
               

Income (loss) from continuing operations

  $ 27   $ (33 )   NM  

Net income attributable to noncontrolling interests

            NM  
               

Net income (loss)

  $ 27   $ (33 )    
               

Average assets (in billions of dollars)

  $ 10   $ 11     (9 )%

Return on assets

    1.10 %   (1.22 )%      

Average deposits (in billions of dollars)

    9.7     8.3     17  
               

Net credit losses as a percentage of average loans

    4.98 %   4.57 %      
               

Revenue by business

                   

    Retail banking

  $ 222   $ 205     8 %

    Citi-branded cards

    183     155     18  
               

        Total

  $ 405   $ 360     13 %
               

Income (loss) from continuing operations by business

                   

    Retail banking

  $ (6 ) $ (41 )   85 %

    Citi-branded cards

    33     8     NM  
               

        Total

  $ 27   $ (33 )   NM  
               

NM    Not meaningful

1Q10 vs. 1Q09

        Revenues, net of interest expense, increased 13%. The increase in revenue is primarily attributable to the impact of foreign exchange translation (generally referred to throughout this report as "FX translation") and higher revenues in cards, partially offset by lower wealth management revenues due to spread compression and lower lending revenues as a result of lower volumes due to tighter origination criteria. Investment sales were up 75% and assets under management increased by 26%.

        Net interest revenue increased 11% mainly due to higher cards revenues, particularly in Russia and Poland, and the impact of FX translation. Average cards loans grew 16%.

        Non-interest revenue increased 15%, primarily driven by higher results from an equity investment in Turkey.

        Operating expenses increased 8% mainly due to the impact of FX translation, partially offset by cost savings from branch closures, headcount reductions and re-engineering benefits.

        Provisions for loan losses and for benefits and claims decreased by $74 million, to $87 million for the current period. Net credit losses for the period increased by $8 million, primarily driven by higher losses in Poland. Release in loan loss reserves in the current period was driven by improvement in the credit environment in most countries coupled with a decline in receivables. The cards net credit loss ratio increased from 4.68% in the prior year quarter to 6.97% in the current quarter. The retail banking net credit loss ratio decreased from 4.50% in the prior year quarter to 3.88% in the current quarter.

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LATIN AMERICA REGIONAL CONSUMER BANKING

        Latin America Regional Consumer Banking (LATAM RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest presence in Mexico and Brazil. LATAM RCB includes branch networks throughout Latin America as well as Banamex, Mexico's second largest bank with over 1,700 branches. At March 31, 2010, LATAM RCB had approximately 2,203 retail branches, with 25.9 million customer accounts, $19.4 billion in retail banking loan balances and $40.6 billion in deposits. In addition, the business had approximately 12.1 million Citi-branded card accounts with $12.1 billion in outstanding loan balances.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Net interest revenue

  $ 1,458   $ 1,275     14 %

Non-interest revenue

    618     649     (5 )
               

Total revenues, net of interest expense

  $ 2,076   $ 1,924     8 %
               

Total operating expenses

  $ 1,142   $ 958     19 %
               

    Net credit losses

  $ 509   $ 541     (6 )%

    Credit reserve build/(release)

    (136 )   166     NM  

    Provision for benefits and claims

    36     29     24  
               

Provisions for loan losses and for benefits and claims

  $ 409   $ 736     (44 )%
               

Income from continuing operations before taxes

  $ 525   $ 230     NM  

Income taxes

    136     11     NM  
               

Income from continuing operations

  $ 389   $ 219     78 %

Net (loss) attributable to noncontrolling interests

    (5 )        
               

Net income

  $ 394   $ 219     80 %
               

Average assets (in billions of dollars)

  $ 72   $ 60     20 %

Return on assets

    2.22 %   1.48 %      

Average deposits (in billions of dollars)

    39.6     34.1     16  
               

Net credit losses as a percentage of average loans

    6.75 %   8.22 %      
               

Revenue by business

                   

    Retail banking

  $ 1,196   $ 1,026     17 %

    Citi-branded cards

    880     898     (2 )
               

        Total

  $ 2,076   $ 1,924     8 %
               

Income (loss) from continuing operations by business

                   

    Retail banking

  $ 256   $ 230     11 %

    Citi-branded cards

    133     (11 )   NM  
               

        Total

  $ 389   $ 219     78 %
               

NM    Not meaningful

1Q10 vs. 1Q09

        Revenues, net of interest expense, increased 8%, mainly due to the impact of FX translation and higher lending and deposit volumes in retail banking, partially offset by spread compression in the cards portfolio.

        Net interest revenue increased 14%, mainly driven by the impact of FX translation and higher lending and deposit volumes in retail banking. Average retail banking loans and deposits increased 21% and 16%, respectively. The increase in retail banking was partially offset by spread compression in the cards portfolio as a result from a lower risk profile.

        Non-interest revenue decreased 5%, primarily due to lower fees in the cards business. These declines were partially offset by higher investment sale revenues. Investment sales increased 24% compared to the prior-year period.

        Operating expenses increased 19% mainly due to the impact of FX translation. Excluding the impact of FX translation, the increase in operating expenses was driven by the absence of an equity compensation accrual reversal in the prior-year period and the cost of 138 additional branch openings.

        Provisions for loan losses and for benefits and claims decreased 44%, mainly driven by a loan loss reserve release in the current period reflecting improved credit conditions, especially in Mexico cards. The cards net credit loss ratio declined across the region during the period, from 15.3% to 14.0%, reflecting continued economic recovery in the region. The retail banking net credit loss ratio dropped significantly from 2.96% to 1.96%.

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ASIA REGIONAL CONSUMER BANKING

        Asia Regional Consumer Banking (Asia RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest Citi presence in South Korea, Australia, Singapore, India, Taiwan, Malaysia, Japan and Hong Kong. At March 31, 2010, Asia RCB had approximately 704 retail branches, $98.4 billion in customer deposits, 16.1 million customer accounts and $54.8 billion in retail banking loans. In addition, the business had approximately 14.8 million Citi-branded card accounts with $17.5 billion in outstanding loan balances.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Net interest revenue

  $ 1,257   $ 1,151     9 %

Non-interest revenue

    543     415     31  
               

Total revenues, net of interest expense

  $ 1,800   $ 1,566     15 %
               

Total operating expenses

  $ 907   $ 796     14 %
               

    Net credit losses

  $ 277   $ 287     (3 )%

    Credit reserve build/(release)

    (38 )   195     NM  
               

Provisions for loan losses and for benefits and claims

  $ 239   $ 482     (50 )%
               

Income from continuing operations before taxes

  $ 654   $ 288     NM  

Income taxes

    78     40     95 %
               

Income from continuing operations

  $ 576   $ 248     NM  

Net income attributable to noncontrolling interests

             
               

Net income

  $ 576   $ 248     NM  
               

Average assets (in billions of dollars)

  $ 105   $ 86     22 %

Return on assets

    2.22 %   1.17 %      

Average deposits (in billions of dollars)

    95.7     83.1     15  
               

Net credit losses as a percentage of average loans

    1.57 %   1.89 %      
               

Revenue by business

                   

    Retail banking

  $ 1,116   $ 1,010     10 %

    Citi-branded cards

    684     556     23  
               

        Total

  $ 1,800   $ 1,566     15 %
               

Income from continuing operations by business

                   

    Retail banking

  $ 414   $ 220     88 %

    Citi-branded cards

    162     28     NM  
               

        Total

  $ 576   $ 248     NM  
               

NM    Not meaningful

1Q10 vs. 1Q09

        Revenues, net of interest expense increased 15% reflecting the impact of FX translation as well as higher cards purchase sales, investment sales and loan and deposit volumes, partially offset by spread compression in deposits.

        Net interest revenue was 9% higher than the prior-year period, mainly due to the impact of FX translation, and higher lending and deposit volumes. Excluding the impact of FX translation, net interest revenue was essentially flat. Average loans and deposits were up 16% and 15%, respectively, driven mostly by the impact of FX translation. While lending spreads remained relatively constant, lower deposit spreads reflected the continued low interest rate environment across the region.

        Non-interest revenue increased 31%, primarily due to higher investment revenues, higher cards purchase sales, and the impact of FX translation.

        Operating expenses increased 14%, primarily due to the impact of FX translation. Excluding the impact of FX translation, the increase was 4%, driven primarily by an increase in volumes and continued investment.

        Provisions for loan losses and for benefits and claims decreased 50%, mainly due to the impact of a $38 million loan loss reserve release in the first quarter of 2010, compared to a $195 million loan loss reserve build in the prior-year quarter, and lower net credit losses. These declines were partially offset by the impact of FX translation. Delinquencies and net credit losses improved as Asia showed continuing signs of economic recovery and increased levels of customer activity. The cards net credit loss ratio decreased from 4.60% in the prior year period to 4.50% in the current quarter. The retail banking net credit loss ratio decreased from 0.98% in the prior year quarter to 0.60% in the current quarter.

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INSTITUTIONAL CLIENTS GROUP

        Institutional Clients Group (ICG) includes Securities and Banking and Transaction Services. ICG provides corporate, institutional and high net worth clients with a full range of products and services, including cash management, trading, underwriting, lending and advisory services, around the world. ICG's international presence is supported by trading floors in approximately 75 countries and a proprietary network within Transaction Services in approximately 95 countries. At March 31, 2010, ICG had approximately $923 billion of assets and $435 billion of deposits.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Commissions and fees

  $ 554   $ 440     26 %

Administration and other fiduciary fees

    1,275     1,227     4  

Investment banking

    953     941     1  

Principal transactions

    3,344     6,950     (52 )

Other

    361     347     4  
               

    Total non-interest revenue

  $ 6,487   $ 9,905     (35 )%

    Net interest revenue (including dividends)

    3,953     4,669     (15 )
               

Total revenues, net of interest expense

  $ 10,440   $ 14,574     (28 )%

Total operating expenses

    4,548     3,895     17  

    Net credit losses

    102     77     32  

    Provision for unfunded lending commitments

    (7 )   32     NM  

    Credit reserve build/(release)

    (180 )   312     NM  

    Provisions for benefits and claims

             
               

Provisions for loan losses and benefits and claims

  $ (85 ) $ 421     NM  
               

Income from continuing operations before taxes

  $ 5,977   $ 10,258     (42 )%

Income taxes

    1,830     3,218     (43 )
               

Income from continuing operations

  $ 4,147   $ 7,040     (41 )%

Net income (loss) attributable to noncontrolling interests

    26     (3 )   NM  
               

Net income

  $ 4,121   $ 7,043     (41 )%
               

Average assets (in billions of dollars)

  $ 932   $ 874     7 %

Return on assets

    1.79 %   3.27 %      
               

Revenues by region

                   

    North America

  $ 4,192   $ 5,605     (25 )%

    EMEA

    3,348     5,066     (34 )

    Latin America

    951     1,143     (17 )

    Asia

    1,949     2,760     (29 )
               

        Total

  $ 10,440   $ 14,574     (28 )%
               

Income from continuing operations by region

                   

    North America

  $ 1,583   $ 2,635     (40 )%

    EMEA

    1,338     2,497     (46 )

    Latin America

    429     572     (25 )

    Asia

    797     1,336     (40 )
               

        Total

  $ 4,147   $ 7,040     (41 )%
               

Average loans by region (in billions of dollars)

                   

    North America

  $ 64   $ 57     12 %

    EMEA

    36     48     (25 )

    Latin America

    22     21     5  

    Asia

    31     30     3  
               

        Total

  $ 153   $ 156     (2 )%
               

NM    Not meaningful

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Table of Contents


SECURITIES AND BANKING

        Securities and Banking (S&B) offers a wide array of investment and commercial banking services and products for corporations, governments, institutional and retail investors, and ultra-high net worth individuals. S&B includes investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, foreign exchange, structured products, cash instruments and related derivatives, and private banking. S&B revenue is generated primarily from fees for investment banking and advisory services, fees and interest on loans, fees and spread on foreign exchange, structured products, cash instruments and related derivatives, income earned on principal transactions, and fees and spreads on private banking services.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Net interest revenue

  $ 2,565   $ 3,263     (21 )%

Non-interest revenue

    5,438     8,937     (39 )
               

Revenues, net of interest expense

  $ 8,003   $ 12,200     (34 )%

Total operating expenses

    3,397     2,821     20  
 

Net credit losses

    101     74     36  
 

Provisions for unfunded lending commitments

    (7 )   32     NM  
 

Credit reserve build/(release)

    (162 )   314     NM  
 

Provisions for benefits and claims

             
               

Provisions for loan losses and benefits and claims

  $ (68 ) $ 420     NM  
               

Income before taxes and noncontrolling interests

  $ 4,674   $ 8,959     (48 )%

Income taxes

    1,468     2,823     (48 )

Income from continuing operations

    3,206     6,136     (48 )

Net income attributable to noncontrolling interests

    21     1     NM  
               

Net income

  $ 3,185   $ 6,135     (48 )%
               

Average assets (in billions of dollars)

  $ 868   $ 816     6 %

Return on assets

    1.49 %   3.05 %      
               

Revenues by region

                   
 

North America

  $ 3,553   $ 5,016     (29 )%
 

EMEA

    2,515     4,222     (40 )
 

Latin America

    607     800     (24 )
 

Asia

    1,328     2,162     (39 )
               

Total revenues

  $ 8,003   $ 12,200     (34 )%
               

Net income from continuing operations by region

                   
 

North America

  $ 1,424   $ 2,497     (43 )%
 

EMEA

    1,032     2,171     (52 )
 

Latin America

    272     412     (34 )
 

Asia

    478     1,056     (55 )
               

Total net income from continuing operations

  $ 3,206   $ 6,136     (48 )%
               

Securities and Banking revenue details

                   
 

Total investment banking

  $ 1,057   $ 983     8 %
 

Lending

    243     (363 )   NM  
 

Equity markets

    1,213     1,605     (24 )
 

Fixed income markets

    5,380     10,023     (46 )
 

Private bank

    494     504     (2 )
 

Other Securities and Banking

    (384 )   (552 )   30  
               

Total Securities and Banking revenues

  $ 8,003   $ 12,200     (34 )%
               

NM    Not meaningful

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Table of Contents

1Q10 vs. 1Q09

        Revenues, net of interest expense, in the first quarter of 2010, were $8.0 billion, compared to $12.2 billion in the first quarter of 2009, which was a particularly strong quarter driven by strong fixed income markets revenues, as well as $2.7 billion of positive CVA (versus $0.3 billion of positive CVA in the first quarter of 2010). Fixed income markets revenues excluding CVA declined $2.4 billion to $5.1 billion, driven by the high volatility and historically wide spreads exhibited in the first quarter of 2009. Equity markets revenues declined $0.4 billion to $1.2 billion, due to a challenging market environment as volatility trended downward. The $2.4 billion CVA decrease primarily reflected less significant movements in Citigroup spreads in the first quarter of 2010 compared to the prior year period. Investment banking revenues increased $74 million to $1.1 billion, led by stronger market volumes in equity underwriting and increased revenues in debt underwriting due to outperformance in leveraged finance and a strong high-yield bond market in the first quarter of 2010. This was partially offset by a decline in advisory revenues in the first quarter of 2010 resulting from a reduction in completed M&A transaction volume. Lending revenues increased from $(363) million to positive $243 million, driven by a reduction in losses on credit default swap hedges and an improvement in net interest margin.

        Operating expenses increased 20%, or $0.6 billion to $3.4 billion, mainly driven by higher compensation costs.

        Provisions for loan losses and for benefits and claims decreased by $0.5 billion to negative $68 million, primarily attributable to a $162 million net loan loss reserve release in the current quarter (versus a $314 million net loan loss reserve build in the prior year period) as the environment showed signs of stabilization, partially offset by higher net credit losses.

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TRANSACTION SERVICES

        Transaction Services is composed of Treasury and Trade Solutions (TTS) and Securities and Fund Services (SFS). TTS provides comprehensive cash management and trade finance for corporations, financial institutions and public sector entities worldwide. SFS provides custody and funds services to investors such as insurance companies and mutual funds, clearing services to intermediaries such as broker-dealers, and depository and agency/trust services to multinational corporations and governments globally. Revenue is generated from net interest revenue on deposits in TTS and SFS, as well as from trade loans and from fees for transaction processing and fees on assets under custody in SFS.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Net interest revenue

  $ 1,388   $ 1,406     (1 )%

Non-interest revenue

    1,049     968     8  
               

Total revenues, net of interest expense

  $ 2,437   $ 2,374     3 %

Total operating expenses

    1,151     1,074     7  

Provisions for loan losses and for benefits and claims

    (17 )   1     NM  
               

Income before taxes and noncontrolling interests

  $ 1,303   $ 1,299      

Income taxes

    362     395     (8 )%

Income from continuing operations

    941     904     4  

Net income (loss) attributable to noncontrolling interests

    5     (4 )   NM  
               

Net income

  $ 936   $ 908     3 %
               

Average assets (in billions of dollars)

  $ 64   $ 58     10 %

Return on assets

    5.93 %   6.35 %      
               

Revenues by region

                   

    North America

  $ 639   $ 589     8 %

    EMEA

    833     844     (1 )

    Latin America

    344     343      

    Asia

    621     598     4  
               

Total revenues

  $ 2,437   $ 2,374     3 %
               

Revenue Details

                   

    Treasury and Trade Solutions

  $ 1,781   $ 1,750     2 %

    Securities and Fund Services

    656     624     5  
               

Total revenues

  $ 2,437   $ 2,374     3 %
               

Income from continuing operations by region

                   

    North America

  $ 159   $ 138     15 %

    EMEA

    306     326     (6 )

    Latin America

    157     160     (2 )

    Asia

    319     280     14  
               

Total net income from continuing operations

  $ 941   $ 904     4 %
               

Key indicators (in billions of dollars)

                   

Average deposits and other customer liability balances

  $ 319   $ 278     15 %

EOP assets under custody (in trillions of dollars)

    11.8     10.5     12  
               

NM    Not meaningful

1Q10 vs. 1Q09

        Revenues, net of interest expense, grew 3% as improvement in fees in both the TTS and SFS businesses more than offset spread compression. Average deposits and Assets under custody were up 15% and 12%, respectively, from a year ago.

        Treasury and Trade Solutions revenue increased 2%, driven primarily by stronger performances in the Trade business as well as increased balances, offset partially by spread compression.

        Securities and Funds Services revenues increased 5%, driven by higher asset valuations and volumes.

        Operating expenses increased 7%, related to continued increased investment spend required to support future business growth.

        Provisions for loan losses and for benefits and claims declined by $18 million, primarily attributable to overall portfolio improvement.

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Table of Contents


CITI HOLDINGS

        Citi Holdings contains businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp business. These noncore businesses tend to be more asset-intensive and reliant on wholesale funding and also may be product-driven rather than client-driven. Citi intends to exit these businesses as quickly as practicable yet in an economically rational manner through business divestitures, portfolio run-off and asset sales. Citi has made substantial progress divesting and exiting businesses from Citi Holdings, having completed 20 divestitures since the beginning of 2009 through March 31, 2010, including Smith Barney, Nikko Cordial Securities, Nikko Asset Management, Financial Institution Credit Card business (FI) and Diners Club North America. Citi Holdings' assets have been reduced by approximately 16%, or $96 billion, from the first quarter of 2009 and 39% from the peak in the first quarter of 2008. Citi Holdings' assets represented approximately 25% of Citi's assets as of March 31, 2010. Asset reductions from Citi Holdings have the combined benefits of further fortifying Citigroup's capital base, lowering risk, simplifying the organization and allowing Citi to allocate capital to fund long-term strategic businesses.

        Citi Holdings consists of the following businesses: Brokerage and Asset Management; Local Consumer Lending; and Special Asset Pool.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

    Net interest revenue

  $ 4,373   $ 5,057     (14 )%

    Non-interest revenue

    2,177     (1,963 )   NM  
               

Total revenues, net of interest expense

  $ 6,550   $ 3,094     NM  
               

Provisions for credit losses and for benefits and claims

                   

    Net credit losses

  $ 5,241   $ 6,027     (13 )%

    Credit reserve build

    340     1,637     (79 )
               

    Provision for loan losses

  $ 5,581   $ 7,664     (27 )%

    Provision for benefits and claims

    243     290     (16 )

    Provision for unfunded lending commitments

    (26 )   28     NM  
               

    Total provisions for credit losses and for benefits and claims

  $ 5,798   $ 7,982     (27 )%
               

Total operating expenses

  $ 2,574   $ 4,185     (38 )%
               

(Loss) from continuing operations before taxes

  $ (1,822 ) $ (9,073 )   80 %

Benefits for income taxes

    (946 )   (3,588 )   74  
               

Income (loss) from continuing operations

  $ (876 ) $ (5,485 )   84 %

Net income (loss) attributable to noncontrolling interests

    11     (11 )   NM  
               

Citi Holdings net (loss)

  $ (887 ) $ (5,474 )   84 %
               

Balance sheet data (in billions of dollars)

                   

Total EOP assets

  $ 503   $ 599     (16 )%
               

Total EOP deposits

  $ 86   $ 85     1 %
               

Total GAAP Revenues

  $ 6,550   $ 3,094     NM  

    Net Impact of Credit Card Securitization Activity(1)

        968     (100 )%
               

Total Managed Revenues

  $ 6,550   $ 4,062     61 %
               

GAAP Net Credit Losses

  $ 5,241   $ 6,027     (13 )%

    Impact of Credit Card Securitization Activity(1)

        1,057     (100 )
               

Total Managed Net Credit Losses

  $ 5,241   $ 7,084     (26 )%
               

(1)
See discussion of adoption of SFAS 166/167 on page 3 and Note 1 to the Consolidated Financial Statements.

NM    Not meaningful

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Table of Contents


BROKERAGE AND ASSET MANAGEMENT

        Brokerage and Asset Management (BAM), which constituted approximately 6% of Citi Holdings by assets as of March 31, 2010, consists of Citi's global retail brokerage and asset management businesses. This segment was substantially affected by, and reduced in size in 2009 due to, the divestitures of Smith Barney (to the Morgan Stanley Smith Barney joint venture (MSSB JV)) and Nikko Cordial Securities. At March 31, 2010, BAM had approximately $31 billion of assets, primarily consisting of Citi's investment in, and associated earnings from, the MSSB JV. Morgan Stanley has options to purchase Citi's remaining stake in the MSSB JV over three years starting in 2012.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Net interest revenue

  $ (65 ) $ 364     NM  

Non-interest revenue

    405     1,243     (67 )%
               

Total revenues, net of interest expense

  $ 340   $ 1,607     (79 )%
               

Total operating expenses

  $ 265   $ 1,499     (82 )%
               
 

Net credit losses

  $ 11   $      
 

Credit reserve build/(release)

    (7 )   43      
 

Provision for unfunded lending commitments

             
 

Provision for benefits and claims

    9     11     (18 )%
               

Provisions for loan losses and for benefits and claims

  $ 13   $ 54     (76 )%
               

Income from continuing operations before taxes

  $ 62   $ 54     15 %

Income taxes (benefits)

    (19 )   20     NM  
               

Income from continuing operations

  $ 81   $ 34     NM  

Net (loss) attributable to noncontrolling interests

    (5 )   (17 )   71 %
               

Net income

  $ 86   $ 51     69 %
               

EOP assets (in billions of dollars)

  $ 31   $ 47     (34 )%

EOP deposits (in billions of dollars)

    59     59      
               

NM    Not meaningful

1Q10 vs. 1Q09

        Revenues, net of interest expense, decreased 79% from the prior-year period, primarily driven by the absence of Smith Barney revenue, partially offset by favorable net revenue marks in retail alternative investments and the sale of Chilean pension fund administrator AFP Habitat.

        Operating expenses decreased 82% from the prior-year period, mainly driven by the absence of Smith Barney expenses and the absence of restructuring expenses in retail alternative investments incurred in the first quarter of 2009.

        Provisions for loan losses and for benefits and claims decreased 76%, driven by a $50 million change in the reserve build in the first quarter of 2010.

        Assets declined 34% versus the prior-year period, mostly driven by the sales of Nikko Cordial Securities and Nikko Asset Management, offset partially by the net impact of the MSSB JV.

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Table of Contents


LOCAL CONSUMER LENDING

        Local Consumer Lending (LCL), which constituted approximately 69% of Citi Holdings by assets as of March 31, 2010, includes a portion of Citigroup's North American mortgage business, retail partner cards, Western European cards and retail banking, CitiFinancial North America, Primerica (whose IPO closed on April 7, 2010), Student Loan Corporation and other local consumer finance businesses globally. At March 31, 2010, LCL had $346 billion of assets ($314 billion in North America). Approximately $152 billion of assets in LCL as of March 31, 2010 consisted of U.S. mortgages in the company's CitiMortgage and CitiFinancial operations. The North American assets consist of residential mortgage loans, retail partner card loans, student loans, personal loans, auto loans, commercial real estate, and other consumer loans and assets.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Net interest revenue

  $ 4,020   $ 3,704     9 %

Non-interest revenue

    650     2,317     (72 )
               

Total revenues, net of interest expense

  $ 4,670   $ 6,021     (22 )%
               

Total operating expenses

  $ 2,178   $ 2,470     (12 )%
               
 

Net credit losses

  $ 4,938   $ 4,517     9 %
 

Credit reserve build

    386     1,562     (75 )
 

Provision for benefits and claims

    234     279     (16 )
 

Provision for unfunded lending commitments

             
               

Provisions for loan losses and for benefits and claims

  $ 5,558   $ 6,358     (13 )%
               

(Loss) from continuing operations before taxes

  $ (3,066 ) $ (2,807 )   (9 )%

Income taxes (benefits)

    (1,228 )   (1,236 )   1  
               

(Loss) from continuing operations

  $ (1,838 ) $ (1,571 )   (17 )%

Net income attributable to noncontrolling interests

        7     (100 )
               

Net (loss)

  $ (1,838 ) $ (1,578 )   (16 )%
               

Average assets (in billions of dollars)

  $ 355   $ 368     (4 )%
               

Managed net credit losses as a percentage of average managed loans(1)

    6.30 %   6.36 %      
               

Revenue by business

                   
 

International

  $ 335   $ 2,024     (83 )%
 

Retail Partner Cards

    2,206     1,527     44  
 

North America (ex Cards)

    2,129     2,470     (14 )
               
   

Total GAAP Revenues

  $ 4,670   $ 6,021     (22 )%
 

Net impact of credit card securitization activity(2)

        968     (100 )
               
 

Total Managed Revenues

  $ 4,670   $ 6,989     (33 )%
               

Net Credit Losses by business

                   
 

International

  $ 612   $ 818     (25 )%
 

Retail partner cards

    1,932     901     NM  
 

North America (ex Cards)

    2,394     2,798     (14 )
               
   

Total GAAP net credit losses

  $ 4,938   $ 4,517     9 %
 

Net impact of credit card securitization activity(2)

        1,057     (100 )
               
 

Total Managed Net Credit Losses

  $ 4,938   $ 5,574     (11 )%
               

(1)
See "Managed Presentations" below.

(2)
See discussion of adoption of SFAS 166/167 on page 3 and Note 1 to the Consolidated Financial Statements.

1Q10 vs. 1Q09

        Revenues, net of interest expense decreased 22% from the prior-year period, mostly due to lower non-interest revenue (discussed below). Net interest revenue increased 9% primarily due to the adoption of SFAS 166/167 in the first quarter of 2010 and the impact of retail partner cards pricing actions in the latter part of 2009 and first quarter of 2010, in anticipation of the CARD Act. See "Executive Summary—Business Outlook" for additional information. This was partially offset by lower balances and the impact of higher delinquencies, interest write-offs, and loan modification programs. Non-interest revenue decreased 72% mainly driven by the absence of the $1.1 billion gain on the sale of Redecard shares in the prior-year period, losses on asset sales, and the adoption of SFAS 166/167 in the current quarter.

        Operating expenses declined 12% due to lower volumes, re-engineering benefits, and the absence of costs associated with the U.S. government loss-sharing agreement which was exited in the fourth quarter of 2009.

        Provisions for loan losses and for benefits and claims decreased 13% from the prior period reflecting a $1.2 billion decrease in the reserve build, partially offset by higher net credit losses (NCLs) primarily in the retail partner cards business due to the adoption of SFAS 166/167. On a managed basis, NCLs were lower across most businesses, primarily reflecting lower severity of loss, sales of non-performing assets, and the impact of modification programs in real estate, as well as an improvement in international credit trends.

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Table of Contents

Managed Presentations

 
  First Quarter  
 
  2010   2009  

Managed credit losses as a percentage of average managed loans

    6.30 %   6.36 %

Impact from credit card securitizations(1)

        0.62  
           

Net credit losses as a percentage of average loans

    6.30 %   5.74 %
           

(1)
See discussion of adoption of SFAS 166/167 on page 3 and Note 1 to the Consolidated Financial Statements.

        Assets declined 4% versus the prior-year period primarily driven by portfolio run-off, higher loan loss reserve balances, and the impact of asset sales and divestitures, partially offset by an increase of $41 billion resulting from the adoption of SFAS 166/167.

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Table of Contents


SPECIAL ASSET POOL

        Special Asset Pool (SAP), which constituted approximately 25% of Citi Holdings by assets as of March 31, 2010, is a portfolio of securities, loans and other assets that Citigroup intends to actively reduce over time through asset sales and portfolio run-off. At March 31, 2010, SAP had $126 billion of assets. SAP assets have declined by $202 billion, or 62% from peak levels in the fourth quarter of 2007 reflecting cumulative asset sales, write-downs and portfolio run-off. Approximately 58% of SAP assets are now accounted for on an accrual basis, which has helped reduce income volatility.

 
  First Quarter    
 
 
  %
Change
 
In millions of dollars   2010   2009  

Net interest revenue

  $ 418   $ 989     (58 )%

Non-interest revenue

    1,122     (5,523 )   NM  
               

Revenues, net of interest expense

  $ 1,540   $ (4,534 )   NM  
               

Total operating expenses

    131     216     (39 )%
               

    Net credit losses

  $ 292   $ 1,510     (81 )%

    Provision for unfunded lending commitments

    (26 )   28     NM  

    Credit reserve builds/(release)

    (39 )   32     NM  
               

Provisions for loan losses and for benefits and claims

  $ 227   $ 1,570     (86 )%
               

Income (loss) from continuing operations before taxes

  $ 1,182   $ (6,320 )   NM  

Income taxes (benefits)

    301     (2,372 )   NM  
               

Income (loss) from continuing operations

  $ 881   $ (3,948 )   NM  

Net income (loss) attributable to noncontrolling interests

    16     (1 )   NM  
               

Net income (loss)

  $ 865   $ (3,947 )   NM  
               

EOP assets (in billions of dollars)

  $ 126   $ 193     (35 )%
               

NM    Not meaningful

1Q10 vs. 1Q09

        Revenues, net of interest expense, increased $6.1 billion from the prior-year period primarily due to favorable net revenue marks relative to the year-ago levels (positive net revenue marks of $1.4 billion in the first quarter of 2010 versus negative net revenue marks of $4.5 billion in the prior year period). Revenue in the current quarter included positive marks of $804 million on subprime-related direct exposures, $398 million related to CVA on the monoline insurers, and $395 million related to non-credit accretion, offset by negative revenues of $164 million on Alt-A mortgages and $48 million of other net write-downs and losses.

        Operating expenses decreased 39% primarily driven by the absence of costs associated with the U.S. government loss-sharing agreement which was exited in the fourth quarter of 2009, lower franchise taxes, legal fees, and transaction expenses.

        Provisions for loan losses and for benefits and claims decreased 86% to $227 million, driven by a $1.2 billion decrease in net credit losses.

        Assets declined $67 billion, or 35% , versus the prior-year period, primarily driven by amortization and prepayments, sales, marks and charge-offs.

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        The following table provides details of the composition of SAP assets as of March 31, 2010.

 
  Assets within Special Asset Pool as of
March 31, 2010
 
In billions of dollars   Carrying
value
of assets
  Face value   Carrying value
as % of face
value
 

Securities in Available-for-Sale (AFS)

                   

    Corporates

  $ 7.6   $ 7.8     98 %

    Prime and non-U.S. mortgage-backed securities (MBS)

    4.7     5.8     81  

    Auction rate securities (ARS)

    2.4     2.9     82  

    Other securities(1)

    1.7     1.9     89  
               

Total securities in AFS

  $ 16.4   $ 18.4     89 %
               

Securities in Held-to-Maturity (HTM)

                   

    Prime and non-U.S. MBS

  $ 11.8   $ 14.5     81 %

    Alt-A mortgages

    10.3     20.2     51  

    Corporates

    7.6     8.7     87  

    ARS

    5.3     7.4     72  

    Other securities(2)

    7.4     9.9     74  
               

Total securities in HTM

  $ 42.4   $ 60.7     70  
               

Loans, leases and letters of credit (LCs) in Held-for-Investment (HFI)/Held-for-Sale (HFS)(3)

                   

    Corporates

  $ 13.8   $ 15.2     91 %

    Commercial real estate (CRE)

    9.2     10.7     86  

    Other

    2.6     3.2     81  

    Loan loss reserves

    (3.5 )   NM     NM  
               

Total loans, leases and LCs in HFI/HFS

  $ 22.1     NM     NM  
               

Mark-to-market

                   

    Subprime securities

  $ 5.9   $ 12.7     46 %

    Other securities(4)

    5.3     23.2     23  

    Derivatives

    6.8     NM     NM  

    Loans, leases and letters of credit

    4.2     6.8     63  

    Repurchase agreements

    6.4     NM     NM  
               

Total mark to market

  $ 28.6     NM     NM  
               

Highly leveraged finance commitments

  $ 1.7   $ 3.3     52 %

Equities (excludes ARS in AFS)

    6.3     NM     NM  

Monolines

    1.3     NM     NM  

Consumer and other(5)

    6.7     NM     NM  
               

Total

  $ 125.5              
               

(1)
Includes municipals ($1.0 billion) and asset-backed securities (ABS) ($0.6 billion).

(2)
Includes structured investment vehicle (SIV) assets that are not otherwise included in the categories above ($4.6 billion).

(3)
Held-for-sale (HFS) accounts for approximately $1.1 billion of the total.

(4)
Includes $1.5 billion of corporates and $1.5 billion of commercial real estate.

(5)
Includes $2.0 billion of small business banking and finance loans and $1.1 billion of personal loans.

Notes: Assets in the SIVs have been allocated to the corresponding asset categories above. SAP had total CRE assets of $12.8 billion at March 31, 2010 (78% in HFI/HFS, 13% in mark-to-market, 7% in equity method investments and 2% in AFS/HTM).

Excludes Discontinued Operations.

NM    Not meaningful

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Items Impacting SAP Revenues

        The table below provides additional information regarding the net revenue marks affecting the SAP during the first quarter of 2010 and 2009, respectively.

 
  Pretax revenue  
In millions of dollars   First
Quarter
2010
  First
Quarter
2009
 

Subprime-related direct exposures(1)

  $ 804   $ (2,296 )

CVA related to exposure to monoline insurers

    398     (1,090 )

Alt-A mortgages(2)(3)

    (164 )   (503 )

CRE positions(2)(4)

    (58 )   (96 )

CVA on derivatives positions, excluding monoline insurers

    50     313  

SIV assets

    (24 )   (47 )

Private equity and equity investments

    (12 )   (1,015 )

Highly leveraged loans and financing commitments(5)

    (1 )   (247 )

ARS proprietary positions

        (23 )

CVA on Citi debt liabilities under fair value option

    (4 )   (18 )
           

Subtotal

  $ 989   $ (5,022 )

Accretion on reclassified assets(6)

    395     541  
           

Total selected revenue items

  $ 1,384   $ (4,481 )
           

(1)
Net of impact from hedges against direct subprime ABS collateralized debt obligation (CDO) super senior positions.

(2)
Net of hedges.

(3)
For these purposes, Alt-A mortgage securities are non-agency residential MBS (RMBS) where (i) the underlying collateral has weighted average FICO scores between 680 and 720 or (ii) for instances where FICO scores are greater than 720, RMBS have 30% or less of the underlying collateral composed of full documentation loans.

(4)
Excludes positions in SIVs.

(5)
Net of underwriting fees.

(6)
Recorded as net interest revenue.

Credit Valuation Adjustment (CVA) Related to Monoline Insurers

        CVA is calculated by applying forward default probabilities, which are derived using the counterparty's current credit spread, to the expected exposure profile. The exposure primarily relates to hedges on super-senior subprime exposures that were executed with various monoline insurance companies. CVA amounts also reflect expected settlements with certain counterparties.

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CORPORATE/OTHER

        Corporate/Other includes global staff functions (includes finance, risk, human resources, legal and compliance) and other corporate expense, global operations and technology (O&T), residual Corporate Treasury and Corporate items. At March 31, 2010, this segment had approximately $263 billion of assets, consisting primarily of Citi's liquidity portfolio.

 
  First Quarter  
In millions of dollars   2010   2009  

Net interest revenue

  $ 318   $ (642 )

Non-interest revenue

    31     1,142  
           

Total revenues, net of interest expense

  $ 349   $ 500  
           

Total operating expenses

  $ 459   $ 101  

Provisions for loan losses and for benefits and claims

    1     2  
           

Income (loss) from continuing operations before taxes

  $ (111 ) $ 397  

Income taxes (benefits)

    (75 )   1,049  
           

(Loss) from continuing operations

  $ (36 ) $ (652 )

Income (loss) from discontinued operations, net of taxes

    211     (117 )
           

Net income (loss) before attribution of noncontrolling interests

  $ 175   $ (769 )

Net income attributable to noncontrolling interests

        (2 )
           

Net income (loss)

  $ 175   $ (767 )
           

1Q10 vs. 1Q09

        Revenues, net of interest expense, declined primarily due to lower Citi Treasury revenues, driven primarily by lower gains from hedging activity, offset partially by lower short-term funding costs.

        Operating Expenses increased primarily due to compensation related costs, intersegment eliminations, and legal reserve charges.

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SEGMENT BALANCE SHEET AT MARCH 31, 2010

In millions of dollars   Regional
Consumer
Banking
  Institutional
Clients
Group
  Subtotal
Citicorp
  Citi
Holdings
  Corporate/Other,
Discontinued
Operations
and
Consolidating
Eliminations
  Total
Citigroup
Consolidated
 

Assets

                                     
 

Cash and due from banks

  $ 8,515   $ 15,258   $ 23,773   $ 1,444   $ 461   $ 25,678  
 

Deposits with banks

    8,402     42,907     51,309     4,616     107,600     163,525  
 

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

    299     227,270     227,569     6,778     1     234,348  
 

Brokerage receivables

        22,944     22,944     10,977     80     34,001  
 

Trading account assets

    11,787     314,510     326,297     26,570     (7,084 )   345,783  
 

Investments

    37,282     93,863     131,145     76,708     108,880     316,733  
 

Loans, net of unearned income

                                     
 

Consumer

    219,588         219,588     311,881         531,469  
 

Corporate

        159,695     159,695     30,640         190,335  
                           
 

Loans, net of unearned income

  $ 219,588   $ 159,695   $ 379,283   $ 342,521   $   $ 721,804  
 

Allowance for loan losses

    (14,649 )   (3,854 )   (18,503 )   (30,243 )       (48,746 )
                           
 

Total loans, net

  $ 204,939   $ 155,841   $ 360,780   $ 312,278   $   $ 673,058  
 

Goodwill

    10,179     10,757     20,936     4,726         25,662  
 

Intangible assets (other than MSRs)

    2,427     1,052     3,479     4,798         8,277  
 

Mortgage servicing rights (MSRs)

    2,407     71     2,478     3,961         6,439  
 

Other assets

    27,135     37,983     65,118     50,200     53,391     168,709  
                           

Total assets

  $ 313,372   $ 922,456   $ 1,235,828   $ 503,056   $ 263,329   $ 2,002,213  
                           

Liabilities and equity

                                     
 

Total deposits

  $ 294,724   $ 435,027   $ 729,751   $ 85,484   $ 12,679   $ 827,914  
 

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

    4,051     203,540     207,591     2     318     207,911  
 

Brokerage payables

    235     54,800     55,035     1     5     55,041  
 

Trading account liabilities

    26     136,425     136,451     6,297         142,748  
 

Short-term borrowings

    139     55,883     56,022     5,593     35,079     96,694  
 

Long-term debt

    3,138     84,089     87,227     48,784     303,263     439,274  
 

Other liabilities

    18,066     18,229     36,295     25,718     16,839     78,852  
 

Net inter-segment funding (lending)

    (7,007 )   (65,537 )   (72,544 )   331,177     (258,633 )    
 

Total Citigroup stockholders' equity

                  $ 151,421   $ 151,421  
 

Noncontrolling interest

                    2,358     2,358  
                           

Total equity

                    153,779     153,779  
                           

Total liabilities and equity

  $ 313,372   $ 922,456   $ 1,235,828   $ 503,056   $ 263,329   $ 2,002,213  
                           

        The supplemental information presented above reflects Citigroup's consolidated GAAP balance sheet by reporting segment as of March 31, 2010. The respective segment information closely depicts the assets and liabilities managed by each segment as of such date. While this presentation is not defined by GAAP, Citi believes that these non-GAAP financial measures enhance investors' understanding of the balance sheet components managed by the underlying business segments, as well as the beneficial interrelationship of the asset and liability dynamics of the balance sheet components among Citi's business segments.

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CAPITAL RESOURCES AND LIQUIDITY

CAPITAL RESOURCES

Overview

        Historically, capital has been generated by earnings from Citi's operating businesses. In addition, Citi may augment, and during the recent financial crisis has augmented, its capital through issuances of common stock, convertible preferred stock, preferred stock, equity issued through awards under employee benefit plans, and, in the case of regulatory capital, through the issuance of subordinated debt underlying trust preferred securities. Further, the impact of future events on Citi's business results, such as corporate and asset dispositions, as well as changes in accounting standards, also affect Citi's capital levels.

        Generally, capital is used primarily to support assets in Citi's businesses and to absorb market, credit, or operational losses. While capital may be used for other purposes, such as to pay dividends or repurchase common stock, Citi's ability to utilize its capital for these purposes is currently restricted due to its agreements with the U.S. government, generally for so long as the U.S. government continues to hold Citi's common stock or trust preferred securities.

        Citigroup's capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with Citi's risk profile and all applicable regulatory standards and guidelines, as well as external rating agency considerations. The capital management process is centrally overseen by senior management and is reviewed at the consolidated, legal entity, and country levels.

        Senior management is responsible for the capital management process mainly through Citigroup's Finance and Asset and Liability Committee (FinALCO), with oversight from the Risk Management and Finance Committee of Citigroup's Board of Directors. The FinALCO is composed of the senior-most management of Citigroup for the purpose of engaging management in decision-making and related discussions on capital and liquidity matters. Among other things, FinALCO's responsibilities include: determining the financial structure of Citigroup and its principal subsidiaries; ensuring that Citigroup and its regulated entities are adequately capitalized in consultation with its regulators; determining appropriate asset levels and return hurdles for Citigroup and individual businesses; reviewing the funding and capital markets plan for Citigroup; and monitoring interest rate risk, corporate and bank liquidity, and the impact of currency translation on non-U.S. earnings and capital.

Capital Ratios

        Citigroup is subject to the risk-based capital guidelines issued by the Federal Reserve Board. Historically, capital adequacy has been measured, in part, based on two risk-based capital ratios, the Tier 1 Capital and Total Capital (Tier 1 Capital + Tier 2 Capital) ratios. Tier 1 Capital consists of the sum of "core capital elements," such as qualifying common stockholders' equity, as adjusted, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts, principally reduced by goodwill, other disallowed intangible assets, and disallowed deferred tax assets. Total Capital also includes "supplementary" Tier 2 Capital elements, such as qualifying subordinated debt and a limited portion of the allowance for credit losses. Both measures of capital adequacy are stated as a percentage of risk-weighted assets. Further, in conjunction with the conduct of the 2009 Supervisory Capital Assessment Program (SCAP), U.S. banking regulators developed a new measure of capital termed "Tier 1 Common," which has been defined as Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts. Tier 1 Common and related capital adequacy ratios are measures used and relied upon by U.S. banking regulators; however, they are non-GAAP financial measures for SEC purposes. See "Components of Capital Under Regulatory Guidelines" below.

        Citigroup's risk-weighted assets are principally derived from application of the risk-based capital guidelines related to the measurement of credit risk. Pursuant to these guidelines, on-balance-sheet assets and the credit equivalent amount of certain off-balance-sheet exposures (such as financial guarantees, unfunded lending commitments, letters of credit, and derivatives) are assigned to one of several prescribed risk-weight categories based upon the perceived credit risk associated with the obligor, or if relevant, the guarantor, the nature of the collateral, or external credit ratings. Risk-weighted assets also incorporate a measure for market risk on covered trading account positions and all foreign exchange and commodity positions whether or not carried in the trading account. Excluded from risk-weighted assets are any assets, such as goodwill and deferred tax assets, to the extent required to be deducted from regulatory capital. See "Components of Capital Under Regulatory Guidelines" below.

        Citigroup is also subject to a Leverage ratio requirement, a non-risk-based measure of capital adequacy, which is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets.

        To be "well capitalized" under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital ratio of at least 6%, a Total Capital ratio of at least 10%, and a Leverage ratio of at least 3%, and not be subject to a Federal Reserve Board directive to maintain higher capital levels. The following table sets forth Citigroup's regulatory capital ratios as of March 31, 2010 and December 31, 2009.

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Citigroup Regulatory Capital Ratios

 
  Mar. 31,
2010
  Dec. 31,
2009
 

Tier 1 Common

    9.11 %   9.60 %

Tier 1 Capital

    11.28     11.67  

Total Capital (Tier 1 Capital + Tier 2 Capital)

    14.88     15.25  

Leverage

    6.16     6.89  
           

        As noted in the table above, Citigroup was "well capitalized" under the federal bank regulatory agency definitions as of March 31, 2010 and December 31, 2009.

Components of Capital Under Regulatory Guidelines

In millions of dollars   March 31,
2010
  December 31,
2009(1)
 

Tier 1 Common

             

Citigroup common stockholders' equity

  $ 151,109   $ 152,388  

Less: Net unrealized losses on securities available-for-sale, net of tax(2)

    (3,165 )   (4,347 )

Less: Accumulated net losses on cash flow hedges, net of tax

    (2,959 )   (3,182 )

Less: Pension liability adjustment, net of tax(3)

    (3,509 )   (3,461 )

Less: Cumulative effect included in fair value of financial liabilities attributable to the change in own credit worthiness, net of tax(4)

    686     760  

Less: Disallowed deferred tax assets(5)

    30,852     26,044  

Less: Intangible assets:

             

    Goodwill

    25,662     25,392  

    Other disallowed intangible assets

    5,773     5,899  

Other

    (792 )   (788 )
           

Total Tier 1 Common

  $ 96,977   $ 104,495  
           

Qualifying perpetual preferred stock

  $ 312   $ 312  

Qualifying mandatorily redeemable securities of subsidiary trusts

    21,555     19,217  

Qualifying noncontrolling interests

    1,206     1,135  

Other

        1,875  
           

Total Tier 1 Capital

  $ 120,050   $ 127,034  
           

Tier 2 Capital

             

Allowance for credit losses(6)

  $ 13,792   $ 13,934  

Qualifying subordinated debt(7)

    23,658     24,242  

Net unrealized pretax gains on available-for-sale equity securities(2)

    792     773  
           

Total Tier 2 Capital

  $ 38,242   $ 38,949  
           

Total Capital (Tier 1 Capital and Tier 2 Capital)

  $ 158,292   $ 165,983  
           

Risk-weighted assets(8)

  $ 1,064,042   $ 1,088,526  
           

(1)
Reclassified to conform to the current period presentation.

(2)
Tier 1 Capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values, in accordance with risk-based capital guidelines. In arriving at Tier 1 Capital, banking organizations are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax. Banking organizations are permitted to include in Tier 2 Capital up to 45% of net unrealized pretax gains on available-for-sale equity securities with readily determinable fair values.

(3)
The Federal Reserve Board granted interim capital relief for the impact of ASC 715-20, Compensation—Retirement Benefits—Defined Benefits Plans (formerly SFAS 158).

(4)
The impact of including Citigroup's own credit rating in valuing financial liabilities for which the fair value option has been elected is excluded from Tier 1 Capital, in accordance with risk-based capital guidelines.

(5)
Of Citi's approximately $50 billion of net deferred tax assets at March 31, 2010, approximately $15 billion of such assets were includable without limitation in regulatory capital pursuant to risk-based capital guidelines, while approximately $31 billion of such assets exceeded the limitation imposed by these guidelines and, as "disallowed deferred tax assets," were deducted in arriving at Tier 1 Capital. Citigroup's approximately $4 billion of other net deferred tax assets primarily represented approximately $2 billion of deferred tax effects of unrealized gains and losses on available-for-sale debt securities and approximately $2 billion of deferred tax effects of the pension liability adjustment, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines. Citi had approximately $26 billion of disallowed deferred tax assets at December 31, 2009.

(6)
Includable up to 1.25% of risk-weighted assets. Any excess allowance for credit losses is deducted in arriving at risk-weighted assets.

(7)
Includes qualifying subordinated debt in an amount not exceeding 50% of Tier 1 Capital.

(8)
Includes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $61.3 billion for interest rate, commodity, and equity derivative contracts, foreign exchange contracts, and credit derivatives as of March 31, 2010, compared with $64.5 billion as of December 31, 2009. Market risk equivalent assets included in risk-weighted assets amounted to $75.5 billion at March 31, 2010 and $80.8 billion at December 31, 2009. Risk-weighted assets also include the effect of certain other off-balance-sheet exposures, such as unused lending commitments and letters of credit, and reflect deductions such as certain intangible assets and any excess allowance for credit losses.

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Adoption of SFAS 166/167 Impact on Capital

        The adoption of SFAS 166/167 had a significant and immediate impact on Citigroup's capital ratios in the first quarter of 2010.

        As described elsewhere in the Form 10-Q, the adoption of SFAS 166/167 resulted in the consolidation of $137 billion of incremental assets and $146 billion of liabilities onto Citigroup's Consolidated Balance Sheet, including securitized credit card receivables on the date of adoption, January 1, 2010. The adoption of SFAS 166/167 also resulted in a net increase of $10 billion in risk-weighted assets. In addition, Citi added $13.4 billion to the loan loss allowance, increased deferred tax assets by $5.0 billion, and reduced retained earnings by $8.4 billion. This translated into a reduction in Tangible Common Equity of $8.4 billion, and a decrease in Tier 1 Common, Tier 1 Capital, and Total Capital of $14.2 billion, $14.2 billion, and $14.0 billion, respectively, which were partially offset by net income of $4.4 billion and $2.3 billion of qualifying mandatorily redeemable securities of subsidiary trusts issued during the quarter.

        The impact on Citigroup's capital ratios from the January 1, 2010 adoption of SFAS 166/167 was as follows:

As of January 1, 2010   Impact  

Tier 1 Common

    (138 ) bps

Tier 1 Capital

    (141 ) bps

Total Capital

    (142 ) bps

Leverage

    (118 ) bps
       

TCE (TCE/RWA)

    (87 ) bps

        For more information, see Note 1 to the Consolidated Financial Statements below.

Common Stockholders' Equity

        Citigroup's common stockholders' equity decreased during the three months ended March 31, 2010 by $1.3 billion to $151.1 billion, and represented 7.5% of total assets as of March 31, 2010. Citigroup's common stockholders' equity was $152.4 billion, which represented 8.2% of total assets, at December 31, 2009.

        The table below summarizes the change in Citigroup's common stockholders' equity during the first quarter of 2010:

In billions of dollars    
 

Common stockholders' equity, December 31, 2009

  $ 152.4  

Transition adjustment to Retained Earnings associated with the adoption of SFAS 166/167 (as of January 1, 2010)

    (8.4 )

Net income

    4.4  

Employee benefit plans and other activities

    (0.3 )

ADIA Upper DECs equity units purchase contract

    1.9  

Net change in accumulated other comprehensive income (loss), net of tax

    1.1  
       

Common stockholders' equity, March 31, 2010

  $ 151.1  
       

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        As of March 31, 2010, $6.7 billion of stock repurchases remained under Citi's authorized repurchase programs. No material repurchases were made in the first quarter of 2010, or the year ended December 31, 2009. Generally, for so long as the U.S. government holds any Citigroup common stock or trust preferred securities, Citigroup has agreed not to acquire, repurchase, or redeem any Citigroup equity or trust preferred securities, other than pursuant to administering its employee benefit plans or other customary exceptions, or with the consent of the U.S. government. See also Part II, Item 2 of this Form 10-Q.

Tangible Common Equity (TCE)

        TCE, as defined by Citigroup, represents Common equity less Goodwill and Intangible assets (other than Mortgage Servicing Rights (MSRs)) net of the related net deferred taxes. Other companies may calculate TCE in a manner different from that of Citigroup. Citi's TCE was $117.1 billion at March 31, 2010 and $118.2 billion at December 31, 2009.

        The TCE ratio (TCE divided by risk-weighted assets) was 11.0% at March 31, 2010 and 10.9% at December 31, 2009.

        TCE is a capital adequacy metric used and relied upon by industry analysts; however, it is a non-GAAP financial measure for SEC purposes. A reconciliation of Citigroup's total stockholders' equity to TCE follows:

In millions of dollars   Mar. 31,
2010
  Dec. 31,
2009
 

Total Citigroup stockholders' equity

  $ 151,421   $ 152,700  

Less:

             
 

Preferred stock

    312     312  
           

Common equity

  $ 151,109   $ 152,388  

Less:

             
 

Goodwill

    25,662     25,392  
 

Intangible assets (other than MSRs)

    8,277     8,714  
 

Intangible assets (other than MSRs)—recorded as assets held for sale in Other assets

    45      
 

Related net deferred tax assets

    65     68  
           

Tangible common equity (TCE)

  $ 117,060   $ 118,214  
           

Tangible assets

             

GAAP assets

  $ 2,002,213   $ 1,856,646  

Less:

             
 

Goodwill

    25,662     25,392  
 

Intangible assets (other than MSRs)

    8,277     8,714  
 

Intangible assets (other than MSRs)—recorded as assets held for sale in Other assets

    45      
 

Related deferred tax assets

    388     386