10-K 1 citigroup_10k.htm ANNUAL REPORT citigroup_10k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2010
 
Commission file number 1-9924
 
Citigroup Inc.
(Exact name of registrant as specified in its charter)
 
Delaware 52-1568099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
   
399 Park Avenue, New York, NY 10043
(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (212) 559-1000
 
Securities registered pursuant to Section 12(b) of the Act: See Exhibit 99.01
 
Securities registered pursuant to Section 12(g) of the Act: none
 
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  o  Yes  X  No
 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  o  Yes  X  No
 
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.  X  Yes  o  No
 
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).  X  Yes  o  No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  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.
 
X  Large accelerated filer o  Accelerated filer o  Non-accelerated filer o  Smaller reporting company
    (Do not check if a smaller reporting company)  

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o  Yes  X  No
 
The aggregate market value of Citigroup Inc. common stock held by non-affiliates of Citigroup Inc. on June 30, 2010 was approximately $108.8 billion.
 
Number of shares of common stock outstanding on January 31, 2011: 29,056,025,228
 
Documents Incorporated by Reference: Portions of the Registrant’s Proxy Statement for the annual meeting of stockholders scheduled to be held on April 21, 2011, are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III.
 
1
 

 

10-K CROSS-REFERENCE INDEX
 

This Annual Report on Form 10-K incorporates the requirements of the accounting profession and the Securities and Exchange Commission.
 
Form 10-K    
Item Number      Page
     
Part I    
     
1.     Business   4-33, 37, 114-121,
        124-125, 162, 281-282
         
1A.   Risk Factors   51-60
         
1B.   Unresolved Staff Comments   Not Applicable
         
2.   Properties   282-283
         
3.   Legal Proceedings   263-268
         
4.   (Removed and Reserved)  
     
Part II    
     
5.   Market for Registrant’s Common    
    Equity, Related Stockholder    
    Matters, and Issuer Purchases of    
    Equity Securities   40, 169, 279,
        283-284, 286
         
6.   Selected Financial Data   8-9
         
7.   Management’s Discussion and    
    Analysis of Financial Condition    
    and Results of Operations   4-50, 61-113
         
7A.   Quantitative and Qualitative    
    Disclosures About Market Risk   61-113, 163-164,
        183-208,
        211-255
         
8.   Financial Statements and    
    Supplementary Data   131-280
         
9.   Changes in and Disagreements    
    with Accountants on Accounting    
    and Financial Disclosure   Not Applicable
         
9A.   Controls and Procedures   122-123
         
9B.   Other Information   Not Applicable
       
Part III    
     
10.     Directors, Executive Officers and    
    Corporate Governance   285-286, 288*
         
11.   Executive Compensation   **
         
12.   Security Ownership of Certain    
    Beneficial Owners and    
    Management and Related    
    Stockholder Matters   ***
         
13.   Certain Relationships and Related    
    Transactions, and Director    
    Independence   ****
         
14.   Principal Accounting Fees and    
    Services   *****
     
Part IV    
     
15.   Exhibits and Financial Statement    
    Schedules    

*        For additional information regarding Citigroup’s Directors, see “Corporate Governance,” “Proposal 1: Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive Proxy Statement for Citigroup’s Annual Meeting of Stockholders scheduled to be held on April 21, 2011, to be filed with the SEC (the Proxy Statement), incorporated herein by reference.
**        See “Executive Compensation—Compensation Discussion and Analysis,” “—2010 Summary Compensation Table” and “—The Personnel and Compensation Committee Report” in the Proxy Statement, incorporated herein by reference.
***        See “About the Annual Meeting,” “Stock Ownership” and “Proposal 3: Approval of Amendment to the Citigroup 2009 Stock Incentive Plan” in the Proxy Statement, incorporated herein by reference.
****        See “Corporate Governance—Director Independence,” “—Certain Transactions and Relationships, Compensation Committee Interlocks and Insider Participation,” “—Indebtedness,” “Proposal 1: Election of Directors” and “Executive Compensation” in the Proxy Statement, incorporated herein by reference.
*****        See “Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm” in the Proxy Statement, incorporated herein by reference.


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CITIGROUP’S 2010 ANNUAL REPORT ON FORM 10-K
 
 
OVERVIEW       4
CITIGROUP SEGMENTS AND REGIONS   5
MANAGEMENT’S DISCUSSION AND ANALYSIS    
     OF FINANCIAL CONDITION AND RESULTS
   
     OF OPERATIONS
  6
EXECUTIVE SUMMARY   6
RESULTS OF OPERATIONS   8
FIVE-YEAR SUMMARY OF SELECTED    
     FINANCIAL DATA
  8
SEGMENT, BUSINESS AND PRODUCT—    
     INCOME (LOSS) AND REVENUES
  10
CITICORP   12
     Regional Consumer Banking
  13
     North America Regional Consumer Banking
  14
     EMEA Regional Consumer Banking
  16
     Latin America Regional Consumer Banking
  18
     Asia Regional Consumer Banking
  20
     Institutional Clients Group
  22
     Securities and Banking
  23
     Transaction Services
  25
CITI HOLDINGS   26
     Brokerage and Asset Management
  27
     Local Consumer Lending
  28
     Special Asset Pool
  30
CORPORATE/OTHER   33
BALANCE SHEET REVIEW   34
     Segment Balance Sheet at December 31, 2010
  37
CAPITAL RESOURCES AND LIQUIDITY   38
     Capital Resources
  38
     Funding and Liquidity
  44
CONTRACTUAL OBLIGATIONS   50
RISK FACTORS   51
MANAGING GLOBAL RISK   61
     Risk Management—Overview
  61
     Risk Aggregation and Stress Testing
  62
     Risk Capital
  62
     Credit Risk
  63
          Loan and Credit Overview
  63
          Loans Outstanding
  64
          Details of Credit Loss Experience
  66
          Impaired Loans, Non-Accrual
               Loans and Assets, and
   
               Renegotiated Loans
  68
          U.S. Consumer Mortgage Lending
  72
          North America Cards
  79
          Consumer Loan Details
  83
          Consumer Loan Modification Programs
  85
          Consumer Mortgage Representations and Warranties
  90
          Securities and Banking-Sponsored Private Label
   
               Residential Mortgage Securitizations
  93
          Corporate Loan Details
  94
          Exposure to Commercial Real Estate
  96
     Market Risk
      97
     Operational Risk
  106
     Country and Cross-Border Risk
          Management Process;
   
          Sovereign Exposure
  108
DERIVATIVES   110
SIGNIFICANT ACCOUNTING POLICIES AND    
     SIGNIFICANT ESTIMATES
  114
DISCLOSURE CONTROLS AND PROCEDURES   122
MANAGEMENT’S ANNUAL REPORT ON    
     INTERNAL CONTROL OVER FINANCIAL
   
     REPORTING
  123
FORWARD-LOOKING STATEMENTS   124
REPORT OF INDEPENDENT REGISTERED    
     PUBLIC ACCOUNTING FIRM—INTERNAL
   
     CONTROL OVER FINANCIAL REPORTING
  126
REPORT OF INDEPENDENT REGISTERED    
     PUBLIC ACCOUNTING FIRM—
   
     CONSOLIDATED FINANCIAL STATEMENTS
  127
FINANCIAL STATEMENTS AND NOTES TABLE    
     OF CONTENTS
  129
CONSOLIDATED FINANCIAL STATEMENTS   131
NOTES TO CONSOLIDATED FINANCIAL    
     STATEMENTS
  139
FINANCIAL DATA SUPPLEMENT (Unaudited)   280
     Ratios
  280
     Average Deposit Liabilities in Offices
          Outside the U.S.
  280
     Maturity Profile of Time Deposits
          ($100,000 or more) in U.S. Offices
  280
SUPERVISION AND REGULATION   281
CUSTOMERS   282
COMPETITION   282
PROPERTIES   282
LEGAL PROCEEDINGS   283
UNREGISTERED SALES OF EQUITY;    
     PURCHASES OF EQUITY SECURITIES;
   
     DIVIDENDS
  283
PERFORMANCE GRAPH   284
CORPORATE INFORMATION   285
     Citigroup Executive Officers
  285
CITIGROUP BOARD OF DIRECTORS   288


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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 160 countries and jurisdictions.
    
Citigroup currently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of Citi’s Regional Consumer Banking businesses and Institutional Clients Group; and Citi Holdings, consisting of Citi’s 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 4 to the Consolidated Financial Statements.
    
Throughout this report, “Citigroup”, “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.
    
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 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.
    
Within this Form 10-K, please refer to the tables of contents on pages 3 and 129 for page references to Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements, respectively.
    
At December 31, 2010, Citi had approximately 260,000 full-time employees compared to approximately 265,300 full-time employees at December 31, 2009.
 

 
Please see “Risk Factors” below for a discussion of
certain risks and uncertainties that could materially impact
Citigroup’s financial condition and results of operations.
 

 
     Certain reclassifications have been made to the prior periods’ financial statements to conform to the current period’s presentation.
 
Impact of Adoption of SFAS 166/167
As previously disclosed, 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 cease 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 and loans are presented where indicated on a managed basis in this Form 10-K. 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 “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.
 

4
 

 

As described above, Citigroup is managed pursuant to the following segments:
 
 
     The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.
 
(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
 
EXECUTIVE SUMMARY
 
2010 Summary Results
During 2010, Citi continued to execute its strategy of growing and investing in its core businesses in Citicorp—Regional Consumer Banking, Securities and Banking and Transaction Services—while at the same time winding down the assets and businesses in Citi Holdings in an economically rational manner.
 
Citigroup
Citigroup reported net income for 2010 of $10.6 billion, compared to a net loss of $1.6 billion in 2009. Diluted EPS was $0.35 per share in 2010 versus a loss of $0.80 per share in 2009, and net revenues were $86.6 billion in 2010, versus $91.1 billion in 2009, on a comparable basis. On a reported basis, net interest revenue increased by $5.7 billion, or 12%, to $54.7 billion in 2010, generally as a result of the adoption of SFAS 166/167, partially offset by the continued run-off of higher-yielding assets in Citi Holdings and investments in lower-yielding securities. Non-interest revenues improved by approximately $578 million, or 2%, to $31.9 billion in 2010, primarily due to positive gross revenue marks in the Special Asset Pool in Citi Holdings of $2.0 billion in 2010 versus negative revenue marks of $4.6 billion in 2009, a $11.1 billion gain in 2009 on the sale of Smith Barney, a $1.4 billion pretax gain related to the public and private exchange offers consummated in July and September of 2009, and a $10.1 billion pretax loss associated with the repayment of TARP and the exit from the loss-sharing agreement with the U.S. government in December 2009.
 
Citicorp
Despite continued weaker market conditions, Citicorp net income remained strong in 2010 at $14.9 billion versus $15.3 billion in 2009, with earnings in Asia and Latin America contributing more than half of the total. The continued strength of the core Citi franchise was demonstrated by Citicorp revenues of $65.6 billion for 2010, with a 3% growth in revenues in Regional Consumer Banking on a comparable basis and a 3% growth in Transaction Services, offset by lower revenues in Securities and Banking.
     Business drivers in international Regional Consumer Banking reflected the impact in 2010 of the accelerating pace of economic recovery in regions outside of North America and increased investment spending by Citi:
 
  • Revenues of $17.7 billion were up 9% year over year.
  • Net income more than doubled to $4.2 billion.
  • Average deposits and average loans each grew by 12% year over year.
  • Card purchase sales grew 17% year over year.
     Securities and Banking revenues declined 15% to $23.1 billion in 2010. Excluding the impact of credit value adjustments (CVA), revenues were down 19% year over year to $23.5 billion. The decrease mainly reflected the impact of lower overall client market activity and more challenging global capital market conditions in 2010, as compared to 2009, which was a particularly strong year driven by robust fixed income markets and higher client activity levels in investment banking, especially in the first half of the year.
 
Citi Holdings
Citi Holdings’ net loss decreased 52%, from $8.9 billion to $4.2 billion, as compared to 2009. Lower revenues reflected the absence of the $11.1 billion pretax gain on the sale of Smith Barney in 2009 as well as a declining loan balance resulting mainly from asset sales and net paydowns.
    
Citi Holdings assets stood at $359 billion at the end of 2010, down $128 billion, or 26%, from $487 billion at the end of 2009. Adjusting for the impact of adopting SFAS 166/167, which added approximately $43 billion of assets to the balance sheet on January 1, 2010, Citi Holdings assets were down by $171 billion during 2010, consisting of approximately:
 
  • $108 billion in asset sales and business dispositions;
  • $50 billion of net run-off and paydowns; and
  • $13 billion of net cost of credit and net asset marks.
 
     As of December 31, 2010, Citi Holdings represented 19% of Citigroup assets, as compared to 38% in the first quarter of 2008. At December 31, 2010, Citi Holdings risk-weighted assets were approximately $330 billion, or 34%, of total Citigroup risk-weighted assets.
 
Credit Costs
Global credit continued to recover with the sixth consecutive quarter of sustained improvement in credit costs in the fourth quarter of 2010. For the full year, Citigroup net credit losses declined $11.4 billion, or 27%, to $30.9 billion in 2010 on a comparable basis, reflecting improvement in net credit losses in every region. During 2010, Citi released $5.8 billion in net reserves for loan losses and unfunded lending commitments, primarily driven by international Regional Consumer Banking, retail partner cards in Local Consumer Lending and the Corporate loan portfolio, while it built $8.3 billion of reserves in 2009. The total provision for credit losses and for benefits and claims of $26.0 billion in 2010 decreased 50% on a comparable basis year over year.
    
Net credit losses in Citicorp declined 10% year-over-year on a comparable basis to $11.8 billion, and Citicorp released $2.2 billion in net reserves for loan losses and unfunded lending commitments, compared to a $2.9 billion reserve build in 2009. Net credit losses in Citi Holdings declined 35% on a comparable basis to $19.1 billion, and Citi Holdings released $3.6 billion in net reserves for loan losses and unfunded lending commitments, compared to a $5.4 billion reserve build in 2009.
 


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Operating Expenses
Citigroup operating expenses were down 1% versus the prior year at $47.4 billion in 2010, as increased investment spending, FX translation, and inflation in Citicorp were more than offset by lower expenses in Citi Holdings. In Citicorp, expenses increased 10% year over year to $35.9 billion, mainly due to higher investment spending across all Citicorp businesses as well as FX translation and inflation. In Citi Holdings, operating expenses were down 31% year over year to $9.6 billion, reflecting the continued reduction of assets.
 
Capital and Loan Loss Reserve Positions
Citi increased its Tier 1 Common and Tier 1 Capital ratios during 2010. At December 31, 2010, Citi’s Tier 1 Common ratio was 10.8% and its Tier 1 Capital ratio was 12.9%, compared to 9.6% and 11.7% at December 31, 2009, respectively. Tier 1 Common was relatively flat year over year at $105 billion, even after absorbing a $14.2 billion reduction from the impact of SFAS 166/167 in the first quarter, while total risk-weighted assets declined 10% to $978 billion.
     Citigroup ended the year with a total allowance for loan losses of $40.7 billion, up $4.6 billion, or 13%, from the prior year, reflecting the impact of adopting SFAS 166/167 which added $13.4 billion on January 1, 2010. The allowance represented 6.31% of total loans and 209% of non-accrual loans as of December 31, 2010, up from 6.09% and 114%, respectively, at the end of 2009. The consumer loan loss reserve was $35.4 billion at December 31, 2010, representing 7.77% of total loans, versus $28.4 billion, or 6.70%, at December 31, 2009.
 
Liquidity and Funding
Citigroup maintained a high level of liquidity, with aggregate liquidity resources (including cash at major central banks and unencumbered liquid securities) of $322 billion at year-end 2010, up from $316 billion at year-end 2009. Citi also continued to grow its deposit base, closing 2010 with $845 billion in deposits, up 1% from year-end 2009. Structural liquidity (defined as deposits, long-term debt and equity as a percentage of total assets) remained strong at 73% as of December 31, 2010, flat compared to December 31, 2009, and up from 66% at December 31, 2008.
    
Citigroup issued approximately $22 billion (excluding local country and securitizations) of long-term debt in 2010, representing just over half of its 2010 long-term maturities, due to its strong liquidity position and proceeds received from asset reductions in Citi Holdings. For additional information, see “Capital Resources and Liquidity—Funding and Liquidity” below.
 
2011 Business Outlook
In 2011, management will continue its focus on growing and investing in the core Citicorp franchise, while economically rationalizing Citi Holdings. However, Citigroup’s results will continue to be affected by factors outside of its control, such as the global economic and regulatory environment in the regions in which Citi operates. In particular, the macroeconomic environment in the U.S. remains challenging, with unemployment levels still elevated and continued pressure and uncertainty in the housing market, including home prices. Additionally, the continued implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Financial Reform Act), including the ongoing extensive rulemaking and interpretive issues, as well as the new capital standards for bank holding companies as adopted by the Basel Committee on Banking Supervision (Basel Committee) and U.S. regulators, will remain a significant source of uncertainty in 2011. Moreover, the implementation of the change in methodology for calculating FDIC insurance premiums, to be effective in the second quarter 2011, will have a negative impact on Citi’s earnings. (For additional information on these factors, see “Capital Resources and Liquidity” and “Risk Factors” below.)
     In Citicorp, Securities and Banking results for 2011 will depend on the level of client activity and on macroeconomic conditions, market valuations and volatility, interest rates and other market factors. Transaction Services business performance will also continue to be impacted by macroeconomic conditions as well as market factors, including interest rate levels, global economic and trade activity, volatility in capital markets, foreign exchange and market valuations.
    
In Regional Consumer Banking, results during the year are likely to be driven by different trends in North America versus the international regions. In North America, if economic recovery is sustained, revenues could grow modestly, particularly in the second half of the year, assuming loan demand begins to recover. However, net credit margin in North America will likely continue to be driven primarily by improvement in net credit losses. Internationally, given continued economic expansion in these regions, net credit margin is likely to be driven by revenue growth, particularly in the second half of the year, as investment spending should continue to generate volume growth to outpace spread compression. International credit costs are likely to increase in 2011, reflecting a growing loan portfolio.
    
In Citi Holdings, revenues for Local Consumer Lending should continue to decline reflecting a shrinking loan balance resulting from paydowns and asset sales. Based on current delinquency trends and ongoing loss-mitigation actions, credit costs are expected to continue to improve. Overall, however, Local Consumer Lending will likely continue to drive results in Citi Holdings.
     Operating expenses are expected to show some variability across quarters as the Company continues to invest in Citicorp while rationalizing Citi Holdings and maintaining expense discipline. Although Citi currently expects net interest margin (NIM) to remain under pressure during the first quarter of 2011, driven by continued low yields on investments and the run-off of higher yielding loan assets, NIM could begin to stabilize during the remainder of the year.
 


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RESULTS OF OPERATIONS
 
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1   Citigroup Inc. and Consolidated Subsidiaries  
                               
In millions of dollars, except per-share amounts, ratios and direct staff   2010  (1)(2)   2009  (2)   2008  (2)   2007  (2)   2006  (2)
Net interest revenue $ 54,652       $ 48,914       $ 53,749       $ 45,389       $ 37,928  
Non-interest revenue   31,949     31,371     (2,150 )   31,911     48,399  
Revenues, net of interest expense $ 86,601   $ 80,285   $ 51,599   $ 77,300   $ 86,327  
Operating expenses   47,375     47,822     69,240     58,737     50,301  
Provisions for credit losses and for benefits and claims   26,042     40,262     34,714     17,917     7,537  
Income (loss) from continuing operations before income taxes $ 13,184   $ (7,799 ) $ (52,355 ) $ 646   $ 28,489  
Income taxes (benefits)   2,233     (6,733 )   (20,326 )   (2,546 )   7,749  
Income (loss) from continuing operations $ 10,951   $ (1,066 ) $ (32,029 ) $ 3,192   $ 20,740  
Income (loss) from discontinued operations, net of taxes (3)   (68 )   (445 )   4,002     708     1,087  
Net income (loss) before attribution of noncontrolling interests $ 10,883   $ (1,511 ) $ (28,027 ) $ 3,900   $ 21,827  
Net income (loss) attributable to noncontrolling interests   281     95     (343 )   283     289  
Citigroup’s net income (loss) $ 10,602   $ (1,606 ) $ (27,684 ) $ 3,617   $ 21,538  
Less:                              
       Preferred dividends–Basic $ 9   $ 2,988   $ 1,695   $ 36   $ 64  
       Impact of the conversion price reset related to the $12.5 billion                              
              convertible preferred stock private issuance—Basic       1,285              
       Preferred stock Series H discount accretion—Basic       123     37          
       Impact of the public and private preferred stock exchange offer       3,242              
       Dividends and undistributed earnings allocated to participating                              
              securities, applicable to Basic EPS   90     2     221     261     512  
Income (loss) allocated to unrestricted common shareholders for basic EPS $ 10,503   $ (9,246 ) $ (29,637 ) $ 3,320   $ 20,962  
       Less: Convertible preferred stock dividends       (540 )   (877 )        
       Add: Incremental dividends and undistributed earnings allocated to participating securities,                              
              applicable to Diluted EPS   2                 2  
Income (loss) allocated to unrestricted common shareholders for diluted EPS $ 10,505   $ (8,706 ) $ (28,760 ) $ 3,320   $ 20,964  
Earnings per share                              
Basic                              
Income (loss) from continuing operations   0.37     (0.76 )   (6.39 )   0.53     4.07  
Net income (loss)   0.36     (0.80 )   (5.63 )   0.68     4.29  
Diluted (4)                              
Income (loss) from continuing operations $ 0.35   $ (0.76 ) $ (6.39 ) $ 0.53   $ 4.05  
Net income (loss)   0.35     (0.80 )   (5.63 )   0.67     4.27  
Dividends declared per common share   0.00     0.01     1.12     2.16     1.96  

Statement continues on the next page, including notes to the table.
 
8
 

 

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA—PAGE 2   Citigroup Inc. and Consolidated Subsidiaries  
         
In millions of dollars, except per-share amounts, ratios and direct staff   2010  (1) 2009  (2) 2008  (2) 2007  (2) 2006  (2)
At December 31                                                    
Total assets   $ 1,913,902   $ 1,856,646   $ 1,938,470   $ 2,187,480   $ 1,884,167  
Total deposits     844,968     835,903     774,185     826,230     712,041  
Long-term debt     381,183     364,019     359,593     427,112     288,494  
Mandatorily redeemable securities of subsidiary trusts (included in long-term debt)     18,131     19,345     24,060     23,756     8,972  
Common stockholders’ equity     163,156     152,388     70,966     113,447     118,632  
Total stockholders’ equity     163,468     152,700     141,630     113,447     119,632  
Direct staff (in thousands)     260     265     323     375     327  
Ratios                                
Return on average common stockholders’ equity (5)     6.8 %   (9.4 )%   (28.8 )%   2.9 %   18.8 %
Return on average total stockholders’ equity (5)     6.8     (1.1 )   (20.9 )   3.0     18.7  
Tier 1 Common (6)     10.75 %   9.60 %   2.30 %   5.02 %   7.49 %
Tier 1 Capital     12.91     11.67     11.92     7.12     8.59  
Total Capital     16.59     15.25     15.70     10.70     11.65  
Leverage (7)     6.60     6.87     6.08     4.03     5.16  
Common stockholders’ equity to assets     8.52 %   8.21 %   3.66 %   5.19 %   6.30 %
Total stockholders’ equity to assets     8.54     8.22     7.31     5.19     6.35  
Dividend payout ratio (8)     NM     NM     NM     322.4     45.9  
Book value per common share   $ 5.61   $ 5.35   $ 13.02   $ 22.71   $ 24.15  
Ratio of earnings to fixed charges and preferred stock dividends     1.52 x   NM     NM     1.01 x   1.50 x

(1)        On January 1, 2010, Citigroup adopted SFAS 166/167. Prior periods have not been restated as the standards were adopted prospectively. See Note 1 to the Consolidated Financial Statements.
(2)        On January 1, 2009, Citigroup adopted SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (now ASC 810-10-45-15, Consolidation: Noncontrolling Interest in a Subsidiary), and FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (now ASC 260-10-45-59A, Earnings Per Share: Participating Securities and the Two-Class Method). All prior periods have been restated to conform to the current period’s presentation.
(3)        Discontinued operations for 2006 to 2009 reflect the sale of Nikko Cordial Securities to Sumitomo Mitsui Banking Corporation, the sale of Citigroup’s German retail banking operations to Crédit Mutuel, and the sale of CitiCapital’s equipment finance unit to General Electric. In addition, discontinued operations for 2006 include the operations and associated gain on sale of substantially all of Citigroup’s asset management business. Discontinued operations for 2006 to 2010 also include the operations and associated gain on sale of Citigroup’s Travelers Life & Annuity; substantially all of Citigroup’s international insurance business; and Citigroup’s Argentine pension business sold to MetLife Inc. Discontinued operations for the second half of 2010 also reflect the sale of The Student Loan Corporation. See Note 3 to the Consolidated Financial Statements.
(4)        The diluted EPS calculation for 2009 and 2008 utilizes basic shares and income allocated to unrestricted common stockholders (Basic) due to the negative income allocated to unrestricted common stockholders. Using diluted shares and income allocated to unrestricted common stockholders (Diluted) would result in anti-dilution.
(5)        The return on average common stockholders’ equity is calculated using net income less preferred stock dividends divided by average common stockholders’ equity. The return on total stockholders’ equity is calculated using net income divided by average stockholders’ equity.
(6)        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.
(7)        The Leverage ratio represents Tier 1 Capital divided by adjusted average total assets.
(8)        Dividends declared per common share as a percentage of net income per diluted share.
NM Not meaningful

9
 

 

SEGMENT, BUSINESS AND PRODUCTINCOME (LOSS) AND REVENUES
 
The following tables show the income (loss) and revenues for Citigroup on a segment, business and product view:
 
CITIGROUP INCOME (LOSS)
 
                      % Change   % Change  
In millions of dollars     2010     2009     2008   2010 vs. 2009   2009 vs. 2008  
Income (loss) from continuing operations                                                
CITICORP                            
Regional Consumer Banking                            
       North America   $ 607   $ 730   $ (1,504 ) (17 )% NM  
       EMEA     103     (209 )   50   NM   NM  
       Latin America     1,885     525     (3,083 ) NM   NM  
       Asia     2,172     1,432     1,770   52   (19 )%
              Total   $ 4,767   $ 2,478   $ (2,767 ) 92 % NM  
Securities and Banking                            
       North America   $ 2,537   $ 2,385   $ 2,395   6 %  
       EMEA     1,832     3,426     588   (47 ) NM  
       Latin America     1,072     1,536     1,113   (30 ) 38 %
       Asia     1,138     1,838     1,970   (38 ) (7 )
              Total   $ 6,579   $ 9,185   $ 6,066   (28 )% 51 %
Transaction Services                            
       North America   $ 544   $ 615   $ 323   (12 )% 90 %
       EMEA     1,224     1,287     1,246   (5 ) 3  
       Latin America     653     604     588   8   3  
       Asia     1,253     1,230     1,196   2   3  
              Total   $ 3,674   $ 3,736   $ 3,353   (2 )% 11 %
       Institutional Clients Group   $ 10,253   $ 12,921   $ 9,419   (21 )% 37 %
Total Citicorp   $ 15,020   $ 15,399   $ 6,652   (2 )% NM  
CITI HOLDINGS                            
Brokerage and Asset Management   $ (203 ) $ 6,937   $ (851 ) NM   NM  
Local Consumer Lending     (4,993 )   (10,416 )   (8,357 ) 52 % (25 )%
Special Asset Pool     1,173     (5,369 )   (27,289 ) NM   80  
Total Citi Holdings   $ (4,023 ) $ (8,848 ) $ (36,497 ) 55 % 76 %
Corporate/Other   $ (46 ) $ (7,617 ) $ (2,184 ) 99 % NM  
Income (loss) from continuing operations   $ 10,951   $ (1,066 ) $ (32,029 ) NM   97 %
Discontinued operations   $ (68 ) $ (445 ) $ 4,002   NM   NM  
Net income (loss) attributable to noncontrolling interests     281     95     (343 ) NM   NM  
Citigroup’s net income (loss)   $ 10,602   $ (1,606 ) $ (27,684 ) NM   94 %

NM Not meaningful
 
10
 

 

CITIGROUP REVENUES
 
                      % Change   % Change  
In millions of dollars     2010     2009     2008   2010 vs. 2009   2009 vs. 2008  
CITICORP                                                
Regional Consumer Banking                            
       North America   $ 14,790   $ 8,576   $ 8,607   72 % %
       EMEA     1,511     1,555     1,865   (3 ) (17 )
       Latin America     8,727     7,917     9,488   10   (17 )
       Asia     7,414     6,766     7,461   10   (9 )
              Total   $ 32,442   $ 24,814   $ 27,421   31 % (10 )%
Securities and Banking                            
       North America   $ 9,392   $ 8,833   $ 10,821   6 % (18 )%
       EMEA     6,842     10,049     5,963   (32 ) 69  
       Latin America     2,532     3,421     2,374   (26 ) 44  
       Asia     4,318     4,806     5,570   (10 ) (14 )
              Total   $ 23,084   $ 27,109   $ 24,728   (15 )% 10 %
Transaction Services                            
       North America   $ 2,483   $ 2,526   $ 2,161   (2 )% 17 %
       EMEA     3,356     3,389     3,677   (1 ) (8 )
       Latin America     1,490     1,373     1,439   9   (5 )
       Asia     2,705     2,501     2,669   8   (6 )
              Total   $ 10,034   $ 9,789   $ 9,946   3 % (2 )%
       Institutional Clients Group   $ 33,118   $ 36,898   $ 34,674   (10 )% 6 %
              Total Citicorp   $ 65,560   $ 61,712   $ 62,095   6 % (1 )%
CITI HOLDINGS                            
Brokerage and Asset Management   $ 609   $ 14,623   $ 7,963   (96 )% 84 %
Local Consumer Lending     15,826     17,765     23,498   (11 ) (24 )
Special Asset Pool     2,852     (3,260 )   (39,699 ) NM   92  
Total Citi Holdings   $ 19,287   $ 29,128   $ (8,238 ) (34 )% NM  
Corporate/Other   $ 1,754   $ (10,555 ) $ (2,258 ) NM   NM  
Total net revenues   $ 86,601   $ 80,285   $ 51,599   8 % 56 %

NM Not meaningful
 
11
 

 

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 160 countries and jurisdictions. 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, commercial, public sector and institutional customers around the world. Citigroup’s global footprint provides coverage of the world’s emerging economies, which Citi believes represent a strong area of growth. At December 31, 2010, Citicorp had approximately $1.3 trillion of assets and $760 billion of deposits, representing approximately 67% of Citi’s total assets and approximately 90% 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).
 
                      % Change   % Change  
In millions of dollars         2010         2009         2008       2010 vs. 2009       2009 vs. 2008  
       Net interest revenue   $ 38,820   $ 34,432   $ 35,328   13 % (3 )%
       Non-interest revenue     26,740     27,280     26,767   (2 ) 2  
Total revenues, net of interest expense   $ 65,560   $ 61,712   $ 62,095   6 % (1 )%
Provisions for credit losses and for benefits and claims                            
       Net credit losses   $ 11,789   $ 6,155   $ 4,984   92 % 23 %
       Credit reserve build(release)     (2,167 )   2,715     3,405   NM   (20 )
       Provision for loan losses   $ 9,622   $ 8,870   $ 8,389   8 % 6 %
       Provision for benefits and claims     151     164     176   (8 ) (7 )
       Provision for unfunded lending commitments     (32 )   138     (191 ) NM   NM  
              Total provisions for credit losses and for benefits and claims   $ 9,741   $ 9,172   $ 8,374   6 % 10 %
Total operating expenses   $ 35,859   $ 32,640   $ 44,625   10 % (27 )%
Income from continuing operations before taxes   $ 19,960   $ 19,900   $ 9,096     NM  
Provisions for income taxes     4,940     4,501     2,444   10 % 84 %
Income from continuing operations   $ 15,020   $ 15,399   $ 6,652   (2 )% NM  
Net income attributable to noncontrolling interests     122     68     29   79   NM  
Citicorp’s net income   $ 14,898   $ 15,331   $ 6,623   (3 )% NM  
Balance sheet data (in billions of dollars)                            
Total EOP assets   $ 1,283   $ 1,138   $ 1,067   13 % 7 %
Average assets     1,257     1,088     1,325   16 % (18 )%
Total EOP deposits     760     734     675   4 % 9 %

NM Not meaningful
 
12
 

 

REGIONAL CONSUMER BANKING
Regional Consumer Banking (RCB) consists of Citigroup’s four RCB 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 2010, 54% 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, Central and Eastern Europe and the Middle East. At December 31, 2010, RCB had $330 billion of assets and $309 billion of deposits.
 
                                            % Change         % Change  
In millions of dollars     2010       2009       2008     2010 vs. 2009     2009 vs. 2008  
Net interest revenue   $ 23,244     $ 16,404     $ 17,275     42 %   (5 )%
Non-interest revenue     9,198       8,410       10,146     9     (17 )
Total revenues, net of interest expense   $ 32,442     $ 24,814     $ 27,421     31 %   (10 )%
Total operating expenses   $ 16,454     $ 15,041     $ 23,618     9 %   (36 )%
       Net credit losses   $ 11,221     $ 5,410     $ 4,068     NM     33 %
       Credit reserve build (release)     (1,543 )     1,819       2,091     NM     (13 )
       Provisions for unfunded lending commitments     (4 )                    
       Provision for benefits and claims     151       164       176     (8 )%   (7 )
Provisions for credit losses and for benefits and claims   $ 9,825     $ 7,393     $ 6,335     33 %   17 %
Income (loss) from continuing operations before taxes   $ 6,163     $ 2,380     $ (2,532 )   NM     NM  
Income taxes (benefits)     1,396       (98 )     235     NM     NM  
Income (loss) from continuing operations   $ 4,767     $ 2,478     $ (2,767 )   92 %   NM  
Net income (loss) attributable to noncontrolling interests     (9 )           11         (100 )
Net income (loss)   $ 4,776     $ 2,478     $ (2,778 )   93 %   NM  
Average assets (in billions of dollars)   $ 311       242       268     29 %   (10 )%
Return on assets     1.54 %     1.02 %     (1.04 )%            
Total EOP assets   $ 330     $ 256     $ 245     29     5  
Average deposits (in billions of dollars)     295       275       269     7     2  
Net credit losses as a percentage of average loans     5.07 %     3.63 %     2.58 %            
Revenue by business                                    
       Retail banking   $ 15,834     $ 14,842     $ 15,427     7 %   (4 )%
       Citi-branded cards     16,608       9,972       11,994     67     (17 )
              Total   $ 32,442     $ 24,814     $ 27,421     31 %   (10 )%
Income (loss) from continuing operations by business                                    
       Retail banking   $ 3,231     $ 2,593     $ (3,592 )   25 %   NM  
       Citi-branded cards     1,536       (115 )     825     NM     NM  
              Total   $ 4,767     $ 2,478     $ (2,767 )   92 %   NM  
                                     
NM Not meaningful
  
13
 

 

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 approximate 1,000 retail bank branches and 13.1 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 December 31, 2010, NA RCB had $30.7 billion of retail banking and residential real estate loans and $144.8 billion of average deposits. In addition, NA RCB had 21.2 million Citi-branded credit card accounts, with $77.5 billion in outstanding card loan balances.
 
                                            % Change         % Change  
In millions of dollars     2010       2009       2008     2010 vs. 2009     2009 vs. 2008  
Net interest revenue   $ 11,216     $ 5,204     $ 4,332     NM     20 %
Non-interest revenue     3,574       3,372       4,275     6 %   (21 )
Total revenues, net of interest expense   $ 14,790     $ 8,576     $ 8,607     72 %    
Total operating expenses   $ 6,224     $ 5,987     $ 9,105     4 %   (34 )%
       Net credit losses   $ 8,022     $ 1,151     $ 617     NM     87 %
       Credit reserve build (release)     (313 )     527       465     NM     13  
       Provisions for benefits and claims     24       50       4     (52 )%   NM  
Provisions for loan losses and for benefits and claims   $ 7,733     $ 1,728     $ 1,086     NM     59 %
Income (loss) from continuing operations before taxes   $ 833       861     $ (1,584 )   (3 )%   NM  
Income taxes (benefits)     226       131       (80 )   73     NM  
Income (loss) from continuing operations   $ 607     $ 730     $ (1,504 )   (17 )%   NM  
Net income attributable to noncontrolling interests                          
Net income (loss)   $ 607     $ 730     $ (1,504 )   (17 )%   NM  
Average assets (in billions of dollars)   $ 119     $ 73     $ 75     63 %   (3 )%
Average deposits (in billions of dollars)   $ 145     $ 140     $ 125     4 %   12 %
Net credit losses as a percentage of average loans     7.48 %     2.43 %     1.39 %            
Revenue by business                                    
       Retail banking   $ 5,325     $ 5,237     $ 4,613     2 %   14 %
       Citi-branded cards     9,465       3,339       3,994     NM     (16 )
              Total   $ 14,790     $ 8,576     $ 8,607     72 %    
Income (loss) from continuing operations by business                                    
       Retail banking   $ 771     $ 805     $ (1,714 )   (4 )%   NM  
       Citi-branded cards     (164 )     (75 )     210     NM     NM  
              Total   $ 607     $ 730     $ (1,504 )   (17 )%   NM  
                                     
NM Not meaningful

2010 vs. 2009
Revenues, net of interest expense increased 72% from the prior year, primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167 effective January 1, 2010. On a comparable basis, Revenues, net of interest expense, declined 3% from the prior year, mainly due to lower volumes in branded cards as well as the net impact of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) on cards revenues. This decrease was partially offset by better mortgage-related revenues.
    
Net interest revenue was down 6% on a comparable basis driven primarily by lower volumes in cards, with average managed loans down 7% from the prior year, and in retail banking, where average loans declined 11%. The increase in deposit volumes, up 4% from the prior year, was offset by lower spreads in the current interest rate environment.
 
     Non-interest revenue increased 9% on a comparable basis from the prior year mainly driven by better servicing hedge results and higher gains from loan sales in mortgages.
    
Operating expenses increased 4% from the prior year, driven by the impact of litigation reserves in the first quarter of 2010 and higher marketing costs.
    
Provisions for loan losses and for benefits and claims increased $6.0 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 decreased $0.9 billion, or 11%, primarily due to a net loan loss reserve release of $0.3 billion in 2010 compared to a $0.5 billion loan loss reserve build in the prior year, and lower net credit losses in the branded cards portfolio. Also on a comparable basis, the cards net credit loss ratio increased 61 basis points to 10.02%, driven by lower average loans.
 


14
 

 

2009 vs. 2008
Revenues, net of interest expense were fairly flat as higher credit losses in the securitization trusts were offset by higher net interest margin in cards, higher volumes in retail banking, and higher gains from loan sales in mortgages.
     Net interest revenue was up 20% driven by the impact of pricing actions relating to the CARD Act and lower funding costs in Citi-branded cards, and by higher deposit and loan volumes in retail banking, with average deposits up 12% and average loans up 11%. 
     Non-interest revenue declined 21%, driven by higher credit losses flowing through the securitization trusts and by the absence of a $349 million gain on the sale of Visa shares and a $170 million gain from a cards portfolio sale in 2008. This decline was partially offset by higher gains from loan sales in mortgages.
     Operating expenses declined 34%. Excluding a 2008 goodwill impairment charge of $2.3 billion, expenses were down 12% reflecting the benefits from re-engineering efforts, lower marketing costs, and the absence of $217 million of repositioning charges in 2008 offset by the absence of a $159 million Visa litigation reserve release in 2008.
     Provisions for credit losses and for benefits and claims increased $642 million, or 59%, primarily due to rising net credit losses in both cards and retail banking. The continued weakening of leading credit indicators and trends in the macroeconomic environment during the period, including rising unemployment and higher bankruptcy filings, drove higher credit costs. The cards managed net credit loss ratio increased 376 basis points to 9.41%, while the retail banking net credit loss ratio increased 44 basis points to 0.90%.
 


15
 

 

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. Remaining activities in respect of Western Europe retail banking are included in Citi Holdings. EMEA RCB has generally 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 December 31, 2010, EMEA RCB had 298 retail bank branches with 3.7 million customer accounts, $4.4 billion in retail banking loans and $9.2 billion in average deposits. In addition, the business had 2.5 million Citi-branded card accounts with $2.8 billion in outstanding card loan balances.
 
                                            % Change         % Change  
In millions of dollars     2010       2009       2008     2010 vs. 2009     2009 vs. 2008  
Net interest revenue   $ 931     $ 979     $ 1,269     (5 )%   (23 )%
Non-interest revenue     580       576       596     1     (3 )
Total revenues, net of interest expense   $ 1,511     $ 1,555     $ 1,865     (3 )%   (17 )%
Total operating expenses   $ 1,169     $ 1,094     $ 1,500     7 %   (27 )%
       Net credit losses   $ 320     $ 487     $ 237     (34 )%   NM  
       Provision for unfunded lending commitments     (4 )                   NM  
       Credit reserve build (release)     (119 )     307       75     NM     NM  
Provisions for loan losses   $ 197     $ 794     $ 312     (75 )%   NM  
Income (loss) from continuing operations before taxes   $ 145     $ (333 )   $ 53     NM     NM  
Income taxes (benefits)     42       (124 )     3     NM     NM  
Income (loss) from continuing operations   $ 103     $ (209 )   $ 50     NM     NM  
Net income (loss) attributable to noncontrolling interests     (1 )           12         (100 )%
Net income (loss)   $ 104     $ (209 )   $ 38     NM     NM  
Average assets (in billions of dollars)   $ 10     $ 11     $ 13     (9 )%   (15 )%
Return on assets     1.04 %     (1.90 )%     0.29 %            
Average deposits (in billions of dollars)   $ 9     $ 9     $ 11         (18 )
Net credit losses as a percentage of average loans     4.34 %     5.81 %     2.48 %            
Revenue by business                                    
       Retail banking   $ 830     $ 889     $ 1,160     (7 )%   (23 )%
       Citi-branded cards     681       666       705     2     (6 )
              Total   $ 1,511     $ 1,555     $ 1,865     (3 )%   (17 )%
Income (loss) from continuing operations by business                                    
       Retail banking   $ (40 )   $ (179 )   $ (57 )   78 %   NM  
       Citi-branded cards     143       (30 )     107     NM     NM  
              Total   $ 103     $ (209 )   $ 50     NM     NM  
                                     
NM Not meaningful

2010 vs. 2009
Revenues, net of interest expense declined 3% from the prior-year period. The decrease was due to lower lending revenues, driven by the repositioning of the lending strategy toward better profile customer segments for new acquisitions and liquidation of the existing non-strategic customer portfolios, across EMEA RCB markets. The lower lending revenues were partially offset by a 45% growth in investment sales with assets under management increasing by 14%.
     Net interest revenue was 5% lower than the prior year due to lower retail volumes, with average loans for retail banking down 17%. 
    
Non-interest revenue was higher by 1%, reflecting a marginal increase in the contribution from an equity investment in Turkey.
 
     Operating expenses increased by 7%, reflecting targeted investment spending, expansion of the sales force and regulatory and legal expenses.
    
Provisions for loan losses decreased by $597 million to $197 million. Net credit losses decreased from $487 million to $320 million, while the loan loss reserve had a release of $119 million in 2010 compared to a build of $307 million in 2009. These numbers reflected the ongoing improvement in credit quality during the period.
 


16
 

 

2009 vs. 2008
Revenues, net of interest expense declined 17%. More than half of the revenue decline was attributable to the impact of foreign currency translation (FX translation). Other drivers included lower wealth-management and lending revenues due to lower volumes and spread compression from credit tightening initiatives. Investment sales declined by 26% due to market conditions at the start of 2009, with assets under management increasing by 9% by year end.
     Net interest revenue was 23% lower than the prior year due to external competitive pressure on rates and higher funding costs, with average loans for retail banking down 18% and average deposits down 18%.
     Non-interest revenue decreased by 3%, primarily due to the impact of FX translation. Excluding FX translation, there was marginal growth.
     Operating expenses declined 27%, reflecting expense control actions, lower marketing expenses and the impact of FX translation. Cost savings were achieved by branch closures, headcount reductions and process re-engineering efforts.
     Provisions for loan losses increased $482 million to $794 million. Net credit losses increased from $237 million to $487 million, while the loan loss reserve build increased from $75 million to $307 million. Higher credit costs reflected the continued credit deterioration across the region during the period.
 


17
 

 

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 Banco Nacional de Mexico, or Banamex, Mexico’s second largest bank, with over 1,700 branches. At December 31, 2010, LATAM RCB had 2,190 retail branches, with 26.6 million customer accounts, $21.3 billion in retail banking loan balances and $42.6 billion in average deposits. In addition, the business had 12.5 million Citi-branded card accounts with $13.4 billion in outstanding loan balances.
 
                                            % Change         % Change  
In millions of dollars     2010       2009       2008     2010 vs. 2009     2009 vs. 2008  
Net interest revenue   $ 6,009     $ 5,399     $ 6,604     11 %   (18 )%
Non-interest revenue     2,718       2,518       2,884     8     (13 )
Total revenues, net of interest expense   $ 8,727     $ 7,917     $ 9,488     10 %   (17 )%
Total operating expenses   $ 5,060     $ 4,438     $ 9,123     14 %   (51 )%
       Net credit losses   $ 1,867     $ 2,433     $ 2,204     (23 )%   10 %
       Credit reserve build (release)     (826 )     462       1,116     NM     (59 )
       Provision for benefits and claims     127       114       172     11     (34 )
Provisions for loan losses and for benefits and claims   $ 1,168     $ 3,009     $ 3,492     (61 )%   (14 )%
Income (loss) from continuing operations before taxes   $ 2,499     $ 470     $ (3,127 )   NM     NM  
Income taxes (benefits)     614       (55 )     (44 )   NM     (25 )%
Income (loss) from continuing operations   $ 1,885     $ 525     $ (3,083 )   NM     NM  
Net (loss) attributable to noncontrolling interests     (8 )               NM      
Net income (loss)   $ 1,893     $ 525     $ (3,083 )   NM     NM  
Average assets (in billions of dollars)   $ 74       66     $ 83     12 %   (20 )%
Return on assets     2.56 %     0.80 %     (3.72 )%            
Average deposits (in billions of dollars)   $ 40     $ 36     $ 40     11 %   (10 )%
Net credit losses as a percentage of average loans     5.79 %     8.52 %     7.05 %            
Revenue by business                                    
       Retail banking   $ 5,075     $ 4,435     $ 4,807     14 %   (8 )%
       Citi-branded cards     3,652       3,482       4,681     5     (26 )
              Total   $ 8,727     $ 7,917     $ 9,488     10 %   (17 )%
Income (loss) from continuing operations by business                                    
       Retail banking   $ 1,039     $ 749     $ (3,235 )   39 %   NM  
       Citi-branded cards     846       (224 )     152     NM     NM  
              Total   $ 1,885     $ 525     $ (3,083 )   NM     NM  
                                      
NM Not meaningful

2010 vs. 2009
Revenues, net of interest expense increased 10%, driven by higher loan volumes and higher investment assets under management in the retail business, as well as the impact of FX translation.
     Net interest revenue increased 11%, driven by higher loan volumes, primarily in the retail business, and FX translation impact offset by spread compression.
     Non-interest revenue increased 8%, driven by higher branded cards fee income from increased customer activity.
     Operating expenses increased 14% as compared to the prior year, primarily driven by investments and the impact of FX translation. The
 
increase in 2010 was primarily driven by an increase in transaction volumes, higher investment spending and FX translation.
    
Provisions for loan losses and for benefits and claims decreased 61%, primarily reflecting loan loss reserve releases of $826 million compared to a build of $426 million in the prior year. This decrease resulted from improved credit conditions, improved portfolio quality and lower net credit losses in the branded cards portfolio driven by Mexico, partially offset by higher credit costs attributable to higher volumes, particularly as the year progressed.
 


18
 

 

2009 vs. 2008
Revenues, net of interest expense declined 17%, driven by the impact of FX translation as well as lower activity in the branded cards business.
     Net interest revenue decreased 18%, mainly driven by FX translation as well as lower volumes and spread compression in the branded cards business that offset the growth in loans, deposits and investment products in the retail business.
     Non-interest revenue decreased 13%, driven also by FX translation and lower branded cards fee income from lower customer activity.
     Operating expenses decreased 51%, primarily driven by the absence of the goodwill impairment charge of $4.3 billion in 2008, the benefit associated with FX translation and savings from restructuring actions implemented primarily at the end of 2008. A $125 million restructuring charge in 2008 was offset by an expense benefit of $257 million related to a legal vehicle restructuring. Expenses increased slightly in the fourth quarter 2009, primarily due to selected marketing and investment spending.
     Provisions for loan losses and for benefits and claims decreased 14% primarily reflecting lower loan loss reserve builds as a result of lower volumes, improved portfolio quality and lower net credit losses in the branded cards portfolio, primarily in Mexico due to repositioning in the portfolio.
 


19
 

 

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, Japan, Taiwan, Singapore, Australia, Hong Kong, India and Indonesia. At December 31, 2010, Asia RCB had 711 retail branches, 16.1 million retail banking accounts, $105.6 billion in average customer deposits, and $61.2 billion in retail banking loans. In addition, the business had 15.1 million Citi-branded card accounts with $20.4 billion in outstanding loan balances.
 
                                            % Change         % Change  
In millions of dollars     2010       2009       2008     2010 vs. 2009     2009 vs. 2008  
Net interest revenue   $ 5,088     $ 4,822     $ 5,070     6 %   (5 )%
Non-interest revenue     2,326       1,944       2,391     20     (19 )
Total revenues, net of interest expense   $ 7,414     $ 6,766     $ 7,461     10 %   (9 )%
Total operating expenses   $ 4,001     $ 3,522     $ 3,890     14 %   (9 )%
       Net credit losses   $ 1,012     $ 1,339     $ 1,010     (24 )%   33 %
       Credit reserve build (release)     (285 )     523       435     NM     20  
Provisions for loan losses and for benefits and claims   $ 727     $ 1,862     $ 1,445     (61 )%   29 %
Income from continuing operations before taxes   $ 2,686     $ 1,382     $ 2,126     94 %   (35 )%
Income taxes (benefits)     514       (50 )     356     NM     NM  
Income from continuing operations   $ 2,172     $ 1,432     $ 1,770     52 %   (19 )%
Net income attributable to noncontrolling interests                 (1 )        
Net income   $ 2,172     $ 1,432     $ 1,771     52 %   (19 )%
Average assets (in billions of dollars)   $ 108     $ 93     $ 98     16 %   (5 )%
Return on assets     2.01 %     1.54 %     1.81 %            
Average deposits (in billions of dollars)   $ 100     $ 89     $ 93     12 %   (4 )%
Net credit losses as a percentage of average loans     1.36 %     2.07 %     1.40 %            
Revenue by business                                    
       Retail banking   $ 4,604     $ 4,281     $ 4,847     8 %   (12 )%
       Citi-branded cards     2,810       2,485       2,614     13     (5 )
              Total   $ 7,414     $ 6,766     $ 7,461     10 %   (9 )%
Income from continuing operations by business                                    
       Retail banking   $ 1,461     $ 1,218     $ 1,414     20 %   (14 )%
       Citi-branded cards     711       214       356     NM     (40 )
              Total   $ 2,172     $ 1,432     $ 1,770     52 %   (19 )%
                                     
NM Not meaningful

2010 vs. 2009
Revenues, net of interest expense increased 10%, driven by higher cards purchase sales, investment sales and loan and deposit volumes, as well as the impact of FX translation, partially offset by lower spreads.
     Net interest revenue was 6% higher than the prior-year period, mainly due to higher lending and deposit volumes and the impact of FX translation, partially offset by lower spreads.
     Non-interest revenue increased 20%, primarily due to higher investment revenues, higher cards purchase sales, and the impact of FX translation.
     Operating expenses increased 14%, primarily due to an increase in volumes, continued investment spending, and the impact of FX translation. 
     Provisions for loan losses and for benefits and claims decreased 61%, mainly due to the impact of a net credit reserve release of $285 million in 2010, compared to a $523 million net credit reserve build in the prior-
 
year period, and a 24% decline in net credit losses. These declines were partially offset by the impact of FX translation. The decrease in provision for loan losses and for benefits and claims reflected continued credit quality improvement across the region, particularly in India, partially offset by increasing volumes. 
    
During 2010, the effective tax rate in Japan was approximately 19%, which reflected continued tax benefits (APB 23). These benefits are not likely to continue, or continue at the same levels, in 2011, however, which will likely lead to an increase in the effective tax rate for Asia RCB in 2011.
 


20
 

 

2009 vs. 2008
Revenues, net of interest expense declined 9%, driven by the absence of the gain on Visa shares in 2008, lower investment product revenues and cards purchase sales, lower spreads, and the impact of FX translation.
     Net interest revenue was 5% lower than in 2008. Average loans and deposits were down 10% and 4%, respectively, in each case partly due to the impact of FX translation.
     Non-interest revenue declined 19%, primarily due to the decline in investment revenues, lower cards purchase sales, the absence of the gain on Visa shares and the impact of FX translation.
     Operating expenses declined 9%, reflecting the benefits of re-engineering efforts and the impact of FX translation. Expenses increased slightly in the fourth quarter 2009, primarily due to targeted marketing and investment spending.
     Provisions for loan losses and for benefits and claims increased 29%, mainly due to the impact of a higher credit reserve build and an increase in net credit losses, partially offset by the impact of FX translation. In the first half of 2009, rising credit losses were particularly apparent in the portfolios in India and South Korea. However, delinquencies improved in the latter part of the year and net credit losses flattened as the region showed early signs of economic recovery and increased levels of customer activity.
 


21
 

 

INSTITUTIONAL CLIENTS GROUP
Institutional Clients Group (ICG) includes Securities and Banking and Transaction Services. ICG provides corporate, institutional, public sector and high-net-worth clients with a full range of products and services, including cash management, trade finance and services, securities services, 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 over 95 countries. At December 31, 2010, ICG had $953 billion of assets and $451 billion of deposits.
 
                                            % Change         % Change  
In millions of dollars     2010       2009       2008     2010 vs. 2009     2009 vs. 2008  
Commissions and fees   $ 4,266     $ 4,194     $ 5,136     2 %   (18 )%
Administration and other fiduciary fees     2,747       2,850       3,178     (4 )   (10 )
Investment banking     3,520       4,687       3,334     (25 )   41  
Principal transactions     5,567       5,626       6,102     (1 )   (8 )
Other     1,442       1,513       (1,129 )   (5 )   NM  
       Total non-interest revenue   $ 17,542     $ 18,870     $ 16,621     (7 )%   14 %
       Net interest revenue (including dividends)     15,576       18,028       18,053     (14 )    
Total revenues, net of interest expense   $ 33,118     $ 36,898     $ 34,674     (10 )%   6 %
Total operating expenses     19,405       17,599       21,007     10     (16 )
       Net credit losses     568       745       916     (24 )   (19 )
       Provision (release) for unfunded lending commitments     (28 )     138       (191 )   NM     NM  
       Credit reserve build (release)     (624 )     896       1,314     NM     (32 )
Provisions for loan losses and benefits and claims   $ (84 )   $ 1,779     $ 2,039     NM     (13 )%
Income from continuing operations before taxes   $ 13,797     $ 17,520     $ 11,628     (21 )%   51 %
Income taxes     3,544       4,599       2,209     (23 )   NM  
Income from continuing operations   $ 10,253     $ 12,921     $ 9,419     (21 )%   37 %
Net income attributable to noncontrolling interests     131       68       18     93     NM  
Net income   $ 10,122     $ 12,853     $ 9,401     (21 )%   37 %
Average assets (in billions of dollars)   $ 946     $ 846     $ 1,057     12 %   (20 )%
Return on assets     1.07 %     1.52 %     0.89 %            
Revenues by region                                    
       North America   $ 11,875     $ 11,359     $ 12,982     5 %   (13 )%
       EMEA     10,198       13,438       9,640     (24 )   39  
       Latin America     4,022       4,794       3,813     (16 )   26  
       Asia     7,023       7,307       8,239     (4 )   (11 )
Total   $ 33,118     $ 36,898     $ 34,674     (10 )%   6 %
Income from continuing operations by region                                    
       North America   $ 3,081     $ 3,000     $ 2,718     3 %   10 %
       EMEA     3,056       4,713       1,834     (35 )   NM  
       Latin America     1,725       2,140       1,701     (19 )   26  
       Asia     2,391       3,068       3,166     (22 )   (3 )
Total   $ 10,253     $ 12,921     $ 9,419     (21 )%   37 %
Average loans by region (in billions of dollars)                                    
       North America   $ 66     $ 52     $ 58     27 %   (10 )%
       EMEA     38       45       56     (16 )   (20 )
       Latin America     22       22       25         (12 )
       Asia     36       28       37     29     (24 )
Total   $ 162     $ 147     $ 176     10 %   (16 )%
                                     
NM Not meaningful
  
22
 

 
      
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 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.
 
                                            % Change         % Change  
In millions of dollars     2010       2009       2008     2010 vs. 2009     2009 vs. 2008  
Net interest revenue   $ 9,927     $ 12,377     $ 12,568     (20 )%   (2 )%
Non-interest revenue     13,157       14,732       12,160     (11 )   21  
Revenues, net of interest expense   $ 23,084     $ 27,109     $ 24,728     (15 )%   10 %
Total operating expenses     14,537       13,084       15,851     11     (17 )
       Net credit losses     563       742       898     (24 )   (17 )
       Provisions for unfunded lending commitments     (28 )     138       (185 )   NM     NM  
       Credit reserve build (release)     (560 )     892       1,291     NM     (31 )
Provisions for loan losses and benefits and claims   $ (25 )   $ 1,772     $ 2,004     NM     (12 )%
Income before taxes and noncontrolling interests   $ 8,572     $ 12,253     $ 6,873     (30 )%   78 %
Income taxes     1,993       3,068       807     (35 )   NM  
Income from continuing operations     6,579       9,185       6,066     (28 )   51  
Net income (loss) attributable to noncontrolling interests     110       55       (13 )   100     NM  
Net income   $ 6,469     $ 9,130     $ 6,079     (29 )%   50 %
Average assets (in billions of dollars)   $ 875     $ 786     $ 986     11 %   (20 )%
Return on assets     0.74 %     1.16 %     0.62 %            
Revenues by region                                    
       North America   $ 9,392     $ 8,833     $ 10,821     6 %   (18 )%
       EMEA     6,842       10,049       5,963     (32 )   69  
       Latin America     2,532       3,421       2,374     (26 )   44  
       Asia     4,318       4,806       5,570     (10 )   (14 )
Total revenues   $ 23,084     $ 27,109     $ 24,728     (15 )%   10 %
Net income from continuing operations by region                                    
       North America   $ 2,537     $ 2,385     $ 2,395     6 %    
       EMEA     1,832       3,426       588     (47 )   NM  
       Latin America     1,072       1,536       1,113     (30 )   38 %
       Asia     1,138       1,838       1,970     (38 )   (7 )
Total net income from continuing operations   $ 6,579     $ 9,185     $ 6,066     (28 )%   51 %
Securities and Banking revenue details                                    
       Total investment banking   $ 3,828     $ 4,767     $ 3,251     (20 )%   47 %
       Lending     932       (2,480 )     4,771     NM     NM  
       Equity markets     3,501       3,183       2,878     10     11  
       Fixed income markets     14,075       21,296       13,606     (34 )   57  
       Private bank     2,004       2,068       2,326     (3 )   (11 )
       Other Securities and Banking     (1,256 )     (1,725 )     (2,104 )   27     18  
Total Securities and Banking revenues   $ 23,084     $ 27,109     $ 24,728     (15 )%   10 %
                                     
NM Not meaningful
 
23
 

 

2010 vs. 2009
Revenues, net of interest expense of $23.1 billion decreased 15%, or $4.0 billion, from $27.1 billion in 2009, which was a particularly strong year driven by robust fixed income markets and higher client activity levels in investment banking, especially in the first half of that year. The decline in revenue was mainly due to fixed income markets, which decreased from $21.0 billion to $14.3 billion (excluding CVA, net of hedges, of negative $0.2 billion and positive $0.3 billion in the current year and prior year, respectively). This decrease primarily reflected weaker results in rates and currencies, credit products and securitized products, due to an overall weaker market environment. Equity markets declined from $5.4 billion to $3.7 billion (excluding CVA, net of hedges, of negative $0.2 billion and negative $2.2 billion in the current year and prior year, respectively), driven by lower trading revenues linked to the derivatives business and principal positions. Investment banking revenues declined from $4.8 billion to $3.8 billion, reflecting lower levels of market activity in debt and equity underwriting. The declines were partially offset by an increase in lending revenues and CVA. Lending revenues increased from negative $2.5 billion to positive $0.9 billion, mainly driven by a reduction in losses on credit default swap hedges. CVA increased $1.6 billion to negative $0.4 billion, mainly due to a larger narrowing of Citigroup spreads in 2009 compared to 2010.
     Operating expenses increased 11%, or $1.5 billion. Excluding the 2010 U.K. bonus tax impact and litigation reserve releases in 2010 and 2009, operating expenses increased 8%, or $1.0 billion, mainly as a result of higher compensation and transaction costs.
     Provisions for loan losses and for benefits and claims decreased by $1.8 billion, to negative $25 million, mainly due to credit reserve releases and lower net credit losses as the result of an improvement in the credit environment during 2010.
 
2009 vs. 2008
Revenues, net of interest expense of $27.1 billion increased 10%, or $2.4 billion, from $24.7 billion, as markets began to recover in the early part of 2009, bringing back higher levels of volume activity and higher levels of liquidity, which began to decline again in the third quarter of 2009. The growth in revenue was driven mainly by an $8.1 billion increase to $21.0 billion in fixed income markets (excluding CVA, net of hedges, of positive $0.3 billion and positive $0.7 billion in 2009 and 2008, respectively), reflecting strong trading opportunities across all asset classes in the first half of 2009. Equity markets doubled from $2.7 billion to $5.4 billion (excluding CVA, net of hedges, of negative $2.2 billion and positive $0.1 billion in 2009 and 2008, respectively), with growth being driven by derivatives, convertibles, and equity trading. Investment banking revenues grew $1.5 billion, from $3.3 billion to $4.8 billion, primarily from increases in debt and equity underwriting activities reflecting higher transaction volumes from depressed 2008 levels. These increases were partially offset by decreases in lending revenues and CVA. Lending revenues decreased by $7.3 billion, from $4.8 billion to negative $2.5 billion, primarily from losses on credit default swap hedges. CVA decreased from $0.9 billion to negative $2.0 billion, mainly due to the narrowing of Citigroup spreads throughout 2009.
    
Operating expenses decreased 17%, or $2.8 billion. Excluding the 2008 repositioning and restructuring charges and a 2009 litigation reserve release, operating expenses declined 9%, or $1.4 billion, mainly as a result of headcount reductions and benefits from expense management.
    
Provisions for loan losses and for benefits and claims decreased 12%, or $232 million, to $1.8 billion, mainly due to lower credit reserve builds and net credit losses, due to an improved credit environment, particularly in the latter part of 2009.
 

  
24
 

 

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 and services for corporations, financial institutions and public sector entities worldwide. SFS provides securities services to investors, such as global asset managers, custody and 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 fees for transaction processing and fees on assets under custody and administration in SFS.
 
                      % Change   % Change  
In millions of dollars           2010           2009           2008           2010 vs. 2009           2009 vs. 2008  
Net interest revenue   $ 5,649   $ 5,651   $ 5,485     3 %
Non-interest revenue     4,385     4,138     4,461   6 % (7 )
Total revenues, net of interest expense   $ 10,034   $ 9,789   $ 9,946   3 % (2 )%
Total operating expenses     4,868     4,515     5,156   8   (12 )
Provisions (releases) for credit losses and for benefits and claims     (59 )   7     35   NM   (80 )
Income before taxes and noncontrolling interests   $ 5,225   $ 5,267   $ 4,755   (1 )% 11 %
Income taxes     1,551     1,531     1,402   1   9  
Income from continuing operations     3,674     3,736     3,353   (2 ) 11  
Net income attributable to noncontrolling interests     21     13     31   62   (58 )
Net income   $ 3,653   $ 3,723   $ 3,322   (2 )% 12 %
Average assets (in billions of dollars)   $ 71   $ 60   $ 71   18 % (15 )%
Return on assets     5.15 %   6.21 %   4.69 %        
Revenues by region                            
       North America   $ 2,483   $ 2,526   $ 2,161   (2 )% 17 %
       EMEA     3,356     3,389     3,677   (1 ) (8 )
       Latin America     1,490     1,373     1,439   9   (5 )
       Asia     2,705     2,501     2,669   8   (6 )
Total revenues   $ 10,034   $ 9,789   $ 9,946   3 % (2 )%
Income from continuing operations by region                            
       North America   $ 544   $ 615   $ 323   (12 )% 90 %
       EMEA     1,224     1,287     1,246   (5 ) 3  
       Latin America     653     604     588   8   3  
       Asia     1,253     1,230     1,196   2   3  
Total net income from continuing operations   $ 3,674   $ 3,736   $ 3,353   (2 )% 11 %
Key indicators (in billions of dollars)                            
Average deposits and other customer liability balances   $ 333   $ 304   $ 281   10 % 8 %
EOP assets under custody (in trillions of dollars)     12.6     12.1     11.0   4   10  
 
NM Not meaningful
 
2010 vs. 2009
Revenues, net of interest expense, grew 3% compared to 2009, reflecting a strong year despite a low interest rate environment, driven by growth in both the TTS and SFS businesses. TTS revenues grew 2% as a result of increased customer liability balances and solid growth in trade and fees, partially offset by spread compression. SFS revenues improved by 3% on higher volumes and balances reflecting the impact of sales and increased market activity.
     Average deposits and other customer liability balances grew 10%, driven by strong growth in the emerging markets.
     Operating expenses grew 8% due to investment spending and higher business volumes.
     Provisions for credit losses and for benefits and claims declined as compared to 2009, attributable to overall improvement in portfolio quality.
2009 vs. 2008
Revenues, net of interest expense declined 2% compared to 2008 as strong growth in balances was more than offset by lower spreads driven by low interest rates and reduced securities asset valuations globally. TTS revenues grew 7% as a result of strong growth in balances and higher trade revenues. SFS revenues declined 18%, attributable to reductions in asset valuations and volumes.
     Average deposits and other customer liability balances grew 8%, driven by strong growth in all regions.
     Operating expenses declined 12%, mainly as a result of benefits from expense management and re-engineering initiatives.
     Provisions for credit losses and for benefits and claims declined 80%, primarily attributable to overall portfolio management.


25
 

 
 

CITI HOLDINGS
 
Citi Holdings contains businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp businesses. Consistent with its strategy, Citi intends to exit these businesses as quickly as practicable in an economically rational manner through business divestitures, portfolio run-offs and asset sales. During 2009 and 2010, Citi made substantial progress divesting and exiting businesses from Citi Holdings, having completed more than 30 divestiture transactions, including Smith Barney, Nikko Cordial Securities, Nikko Asset Management, Primerica Financial Services, various credit card businesses (including Diners Club North America) and The Student Loan Corporation (which is reported as discontinued operations within the Corporate/Other segment for the second half of 2010 only). Citi Holdings’ GAAP assets of $359 billion have been reduced by $128 billion from December 31, 2009, and $468 billion from the peak in the first quarter of 2008. Citi Holdings’ GAAP assets of $359 billion represent approximately 19% of Citi’s assets as of December 31, 2010. Citi Holdings’ risk-weighted assets of approximately $330 billion represent approximately 34% of Citi’s risk-weighted assets as of December 31, 2010.
     
Citi Holdings consists of the following: Brokerage and Asset Management, Local Consumer Lending, and Special Asset Pool.
 
                                              % Change           % Change  
In millions of dollars           2010   2009   2008   2010 vs. 2009   2009 vs. 2008  
Net interest revenue   $ 14,773   $ 16,139   $ 21,092   (8 )% (23 )%
Non-interest revenue     4,514     12,989     (29,330 ) (65 ) NM  
Total revenues, net of interest expense   $ 19,287   $ 29,128   $ (8,238 ) (34 )% NM  
Provisions for credit losses and for benefits and claims                            
Net credit losses   $ 19,070   $ 24,585   $ 14,026   (22 )% 75 %
Credit reserve build (release)     (3,500 )   5,305     11,258   NM   (53 )
Provision for loan losses   $ 15,570   $ 29,890   $ 25,284   (48 )% 18 %
Provision for benefits and claims     813     1,094     1,228   (26 ) (11 )
Provision (release) for unfunded lending commitments     (82 )   106     (172 ) NM   NM  
Total provisions for credit losses and for benefits and claims   $ 16,301   $ 31,090   $ 26,340   (48 )% 18 %
Total operating expenses   $ 9,563   $ 13,764   $ 24,104   (31 ) (43 )%
Loss from continuing operations before taxes   $ (6,577 ) $ (15,726 ) $ (58,682 ) 58 % 73 %
Benefits for income taxes     (2,554 )   (6,878 )   (22,185 ) 63   69  
(Loss) from continuing operations   $ (4,023 ) $ (8,848 ) $ (36,497 ) 55 % 76 %
Net income (loss) attributable to noncontrolling interests     207     29     (372 ) NM   NM  
Citi Holdings net loss   $ (4,230 ) $ (8,877 ) $ (36,125 ) 52 % 75 %
Balance sheet data (in billions of dollars)                            
Total EOP assets   $ 359   $ 487   $ 650   (26 )% (25 )%
Total EOP deposits   $ 79   $ 89   $ 81   (11 )% 10 %
 
NM Not meaningful
 
26
 

 

BROKERAGE AND ASSET MANAGEMENT
Brokerage and Asset Management (BAM), which constituted approximately 8% of Citi Holdings by assets as of December 31, 2010, consists of Citi’s global retail brokerage and asset management businesses. This segment was substantially reduced in size due to the sale in 2009 of Smith Barney to the Morgan Stanley Smith Barney joint venture (MSSB JV) and of Nikko Cordial Securities (reported as discontinued operations within Corporate/Other for all periods presented). At December 31, 2010, BAM had approximately $27 billion of assets, primarily consisting of Citi’s investment in, and assets related to, the MSSB JV. Morgan Stanley has options to purchase Citi’s remaining stake in the MSSB JV over three years starting in 2012.
 
                               % Change            % Change  
In millions of dollars            2010            2009            2008   2010 vs. 2009   2009 vs. 2008  
Net interest revenue   $ (277 ) $ 390   $ 1,280   NM   (70 )%
Non-interest revenue     886     14,233     6,683   (94 )% NM  
Total revenues, net of interest expense   $ 609   $ 14,623   $ 7,963   (96 )% 84 %
Total operating expenses   $ 951   $ 3,141   $ 8,973   (70 )% (65 )%
       Net credit losses   $ 17   $ 1   $ 9   NM   (89 )%
       Credit reserve build (release)     (18 )   36     8   NM   NM  
       Provision for unfunded lending commitments     (6 )   (5 )     (20 )%  
       Provision (release) for benefits and claims     38     40     36   (5 ) 11  
Provisions for credit losses and for benefits and claims   $ 31   $ 72   $ 53   (57 )% 36 %
Income (loss) from continuing operations before taxes   $ (373 ) $ 11,410   $ (1,063 ) NM   NM  
Income taxes (benefits)     (170 )   4,473     (212 ) NM   NM  
Income (loss) from continuing operations   $ (203 ) $ 6,937   $ (851 ) NM   NM  
Net income attributable to noncontrolling interests     11     12     (179 ) (8 )% NM  
Net income (loss)   $ (214 ) $ 6,925   $ (672 ) NM   NM  
EOP assets reflecting the sale of Nikko Cordial Securities                            
       (in billions of dollars)   $ 27   $ 30   $ 31   (10 )% (3 )%
EOP deposits (in billions of dollars)     58     60     58   (3 ) 3  
 
NM Not meaningful
 
2010 vs. 2009
Revenues, net of interest expense decreased 96% versus the prior year mainly driven by the absence of the $11.1 billion pretax gain on sale ($6.7 billion after tax) related to the MSSB JV transaction in the second quarter of 2009 and a $320 million pretax gain on the sale of the managed futures business to the MSSB JV in the third quarter of 2009. Excluding these gains, revenue decreased primarily due to the absence of Smith Barney from May 2009 onwards and the absence of Nikko Asset Management, partially offset by higher revenues from the MSSB JV and an improvement in marks in Retail Alternative Investments.
     
Operating expenses decreased 70% from the prior year, mainly driven by the absence of Smith Barney from May 2009 onwards, lower MSSB JV separation-related costs and the absence of Nikko and Colfondos, partially offset by higher legal settlements and reserves associated with Smith Barney.
     
Provisions for credit losses and for benefits and claims decreased 57%, mainly due to the absence of credit reserve builds.
     
Assets decreased 10% versus the prior year, mostly driven by the sales of the Citi private equity business and the run-off of tailored loan portfolios.
2009 vs. 2008
Revenues, net of interest expense increased 84% versus the prior year mainly driven by the gain on sale related to the MSSB JV transaction and the gain on the sale of the managed futures business to the MSSB JV. Excluding these gains, revenue decreased primarily due to the absence of Smith Barney from May 2009 onwards and the absence of 2009 fourth-quarter revenue of Nikko Asset Management, partially offset by an improvement in marks in Retail Alternative Investments. Revenues in 2008 included a $347 million pretax gain on the sale of CitiStreet and charges related to the settlement of auction rate securities of $393 million pretax.
     
Operating expenses decreased 65% from 2008, mainly driven by the absence of Smith Barney and Nikko Asset Management expenses, re-engineering efforts and the absence of 2008 one-time expenses ($0.9 billion intangible impairment, $0.2 billion of restructuring and $0.5 billion of write-downs and other charges).
     
Provisions for credit losses and for benefits and claims increased 36%, mainly reflecting an increase in reserve builds of $28 million.
     
Assets decreased 3% versus the prior year, mostly driven by the impact of the sale of Nikko Asset Management.


27
 

 

LOCAL CONSUMER LENDING
Local Consumer Lending (LCL), which constituted approximately 70% of Citi Holdings by assets as of December 31, 2010, includes a portion of Citigroup’s North American mortgage business, retail partner cards, Western European cards and retail banking, CitiFinancial North America and other local Consumer finance businesses globally. The Student Loan Corporation is reported as discontinued operations within the Corporate/Other segment for the second half of 2010 only. At December 31, 2010, LCL had $252 billion of assets ($226 billion in North America). Approximately $129 billion of assets in LCL as of December 31, 2010 consisted of U.S. mortgages in the Company’s CitiMortgage and CitiFinancial operations. The North American assets consist of residential mortgage loans (first and second mortgages), retail partner card loans, personal loans, commercial real estate (CRE), and other consumer loans and assets.
 
                      % Change   % Change  
In millions of dollars            2010            2009            2008            2010 vs. 2009            2009 vs. 2008  
Net interest revenue   $ 13,831   $ 12,995   $ 17,136   6 % (24 )%
Non-interest revenue     1,995     4,770     6,362   (58 ) (25 )
Total revenues, net of interest expense   $ 15,826   $ 17,765   $ 23,498   (11 )% (24 )%
Total operating expenses   $ 8,064   $ 9,799   $ 14,238   (18 )% (31 )%
       Net credit losses   $ 17,040   $ 19,185   $ 13,111   (11 )% 46 %
       Credit reserve build (release)     (1,771 )   5,799     8,573   NM   (32 )
       Provision for benefits and claims     775     1,054     1,192   (26 ) (12 )
       Provision for unfunded lending commitments                  
Provisions for credit losses and for benefits and claims   $ 16,044   $ 26,038   $ 22,876   (38 )% 14 %
(Loss) from continuing operations before taxes   $ (8,282 ) $ (18,072 ) $ (13,616 ) 54 % (33 )%
Benefits for income taxes     (3,289 )   (7,656 )   (5,259 ) 57   (46 )
(Loss) from continuing operations   $ (4,993 ) $ (10,416 ) $ (8,357 ) 52 % (25 )%
Net income attributable to noncontrolling interests     8     33     12   (76 ) NM  
Net (loss)   $ (5,001 ) $ (10,449 ) $ (8,369 ) 52 % (25 )%
Average assets (in billions of dollars)   $ 324   $ 351   $ 420   (8 )% (16 )
Net credit losses as a percentage of average loans     6.20 %   6.38 %   3.80 %        
 
NM Not meaningful
 
2010 vs. 2009
Revenues, net of interest expense decreased 11% from the prior year. Net interest revenue increased 6% due to the adoption of SFAS 166/167, partially offset by the impact of lower balances due to portfolio run-off and asset sales. Non-interest revenue declined 58%, primarily due to the absence of the $1.1 billion gain on the sale of Redecard in the first quarter of 2009 and a higher mortgage repurchase reserve charge.
     
Operating expenses decreased 18%, primarily due to the impact of divestitures, lower volumes, re-engineering actions 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 credit losses and for benefits and claims decreased 38%, reflecting a net $1.8 billion credit reserve release in 2010 compared to a $5.8 billion build in 2009. Lower net credit losses across most businesses were partially offset by the impact of the adoption of SFAS 166/167. On a comparable basis, net credit losses were lower year-over-year, driven by improvement in U.S. mortgages, international portfolios and retail partner cards.
     
Assets declined 21% from the prior year, 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. Key divestitures in 2010 included The Student Loan Corporation, Primerica, auto loans, the Canadian Mastercard business and U.S. retail sales finance portfolios.
2009 vs. 2008
Revenues, net of interest