UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D. C.WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
Commission file number 1-9924
Citigroup Inc.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) | 52-1568099 (I.R.S. Employer Identification No.) | |
399 Park Avenue, New York, (Address of principal executive offices) | 10043 (Zip | |
(212) 559-1000 (Registrant's telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.:
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:
Common stock outstanding as of September 30, 2009: 22,863,947,261October 31, 2010: 29,050,168,996
Available on the web at www.citigroup.com
THIRD QUARTER OF 2009—2010—FORM 10-Q
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 5 | |||||||||
EXECUTIVE SUMMARY | 5 | |||||||||
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SUMMARY OF SELECTED FINANCIAL DATA | 7 | |||||||||
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SEGMENT, BUSINESS AND | ||||||||||
Citigroup Income (Loss) | ||||||||||
Citigroup Revenues | ||||||||||
CITICORP | ||||||||||
Regional Consumer Banking | ||||||||||
North America Regional Consumer Banking | ||||||||||
EMEA Regional Consumer Banking | ||||||||||
Latin America Regional Consumer Banking | ||||||||||
Asia Regional Consumer Banking | ||||||||||
Institutional Clients Group | 21 | |||||||||
Securities and Banking | 22 | |||||||||
Transaction Services | 24 | |||||||||
CITI HOLDINGS | 25 | |||||||||
Brokerage and Asset Management | 26 | |||||||||
Local Consumer Lending | 27 | |||||||||
Special Asset Pool | 29 | |||||||||
CORPORATE/OTHER | 32 | |||||||||
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CAPITAL RESOURCES AND LIQUIDITY | 34 | |||||||||
Capital Resources | 34 | |||||||||
Funding and Liquidity | 40 | |||||||||
OFF-BALANCE-SHEET ARRANGEMENTS | 44 | |||||||||
MANAGING GLOBAL RISK | ||||||||||
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Loan and Credit Overview | 45 | |||||||||
Loans Outstanding | ||||||||||
Details of Credit Loss Experience | ||||||||||
Impaired Loans, Non-Accrual Loans and Assets, and Renegotiated Loans | 48 | |||||||||
Non-Accrual Loans and Assets | ||||||||||
U.S. Consumer Mortgage Lending | 52 | |||||||||
Consumer Loan Details | ||||||||||
Consumer Loan Delinquency Amounts and Ratios | 62 | |||||||||
Consumer Loan Net Credit Losses and Ratios | 63 | |||||||||
Consumer Loan Modification Programs | ||||||||||
Consumer Mortgage Representations and Warranties | 69 | |||||||||
S&B Representations and Warranties | 72 | |||||||||
Corporate Credit Portfolio | 73 | |||||||||
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Average Balances and Interest Rates—Assets | ||||||||||
Average Balances and Interest Rates—Liabilities and Equity, and Net Interest Revenue | ||||||||||
Analysis of Changes in Interest Revenue | ||||||||||
Analysis of Changes in Interest Expense and Net Interest Revenue | ||||||||||
Analysis of Changes in Interest Revenue, Interest Expense and Net Interest Revenue | 85 | |||||||||
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CONTRACTUAL OBLIGATIONS | ||||||||||
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CONTROLS AND PROCEDURES | ||||||||||
FORWARD-LOOKING STATEMENTS | ||||||||||
TABLE OF CONTENTS FOR FINANCIAL STATEMENTS AND NOTES | ||||||||||
CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||
OTHER INFORMATION | ||||||||||
Item 1. Legal Proceedings | ||||||||||
Item 1A. Risk Factors | ||||||||||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | ||||||||||
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Item 6. Exhibits | ||||||||||
Signatures | ||||||||||
Exhibit Index |
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. (Citigroupwas formed in 1998 upon the merger of Citicorp and together with its subsidiaries, the Company, Citi or Citigroup)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 services to consumerproducts and corporate customers. Citigroupservices. Citi has approximately 200 million customer accounts and does business in more than 140 countries.160 countries and jurisidictions.
Citigroup was incorporated in 1988 under the lawscurrently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of Citi'sRegional Consumer Banking businesses andInstitutional Clients Group; and Citi Holdings, consisting of Citi'sBrokerage and Asset Management andLocal Consumer Lending businesses, and aSpecial Asset Pool. There is also a third segment,Corporate/Other. For a further description of the State of Delaware.
The Company is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 registered with, and subject to examination by, the Board of Governors of the Federal Reserve System (FRB). Citibank, N.A. is a U.S. national bank subject to supervision and examination by the Office of the Comptroller of the Currency (OCC)business segments and the Federal Deposit Insurance Corporation (FDIC). Someproducts and services they provide, see "Citigroup Segments" below, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 to the Company's other subsidiaries are also subjectConsolidated Financial Statements.
Throughout this report, "Citigroup" and "Citi" refer to supervisionCitigroup Inc. and examination by their respective federal and state authorities or, in the case of overseas subsidiaries, the regulators of the respective jurisdictions.its consolidated subsidiaries.
This Quarterly Report on Form 10-Q should be read in conjunction with Citigroup's Annual Report on Form 10-K for the year ended December 31, 2008 (20082009 (2009 Annual Report on Form 10-K), Citigroup's updated 20082009 historical financial statements and notes filed on Form 8-K with the Securities and Exchange Commission (SEC) on October 13, 2009June 25, 2010 and Citigroup's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2009 and March 31, 2009. Additional financial, statistical, and business-related information for the third quarter of 2009, as well as business and segment trends, are included in a Financial Supplement that was furnished as Exhibit 99.2 to the Company's Form 8-K, filed with the SEC on October 15, 2009.
The principal executive offices of the Company are located at 399 Park Avenue, New York, New York 10043, telephone number 212 559 1000.2010. Additional information about Citigroup is available on the Company's webcompany's Web site atwww.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 the Company'sits other filings with the SEC are available free of charge through the Company's webcompany's Web site by clicking on the "Investors" page and selecting "All SEC Filings." The SEC webSEC's Web site also contains periodic and current reports, proxy and information statements, and other information regarding the CompanyCiti atwww.sec.gov.
Certain reclassifications have been made to the prior periods' financial statements to conform to the current period's presentation.
Within this Form 10-Q, please refer to the tables of contents on pages 2 and 94 for page references to Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements, respectively.
Impact of Adoption of SFAS 166/167
Effective January 1, 2010, Citigroup adopted Accounting Standards Codification (ASC) 860, Transfers and Servicing, formerly SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166), and ASC 810, Consolidations, formerly SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). Among other requirements, the adoption of these standards includes the requirement that Citi consolidate certain of its credit card securitization trusts and eliminate sale accounting for transfers of credit card receivables to those trusts. As a result, reported and managed-basis presentations are comparable for periods beginning January 1, 2010. For comparison purposes, prior period revenues, net credit losses, provisions for credit losses and for benefits and claims and loans are presented on a managed basis in this Form 10-Q. Managed presentations were applicable only to Citi's North American branded and retail partner credit card operations inNorth 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.
As described above, Citigroup is managed alongpursuant to the following segment and product lines:segments:
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results.results above.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER 2010 EXECUTIVE SUMMARY
During the third quarter of 2010, Citigroup continued its focus on (i) strengthening and investing in its core assets and businesses in Citicorp, (ii) building and maintaining its financial strength, including maintaining its capital, liquidity and continued expense discipline, and (iii) winding down Citi Holdings as quickly as practicable in an economically rational manner.
For the quarter, Citigroup reported net income of $2.2 billion, or $0.07 per diluted share. Results for the quarter included a $435 million (after tax) loss related to the announced sale of The Student Loan Corporation (SLC), which is reflected in discontinued operations for the third quarter of 2010. Revenues of $20.7 billion decreased 10% from comparable year-ago levels. The decline in revenues was due to lower revenues in Citi Holdings (driven by a declining loan balance inLocal Consumer Lending and lower positive net revenue marks in theSpecial Asset Pool) and lowerSecurities and Banking revenues excluding Credit Valuation Adjustment (CVA), offset by positive CVA of $99 million in the third quarter of 2010 (versus negative CVA of $1.8 billion in the prior-year period). Citicorp's net income was $3.5 billion; Citi Holdings had a net loss of $1.1 billion.
In Citicorp,Securities and Banking revenues, excluding CVA, were $5.5 billion in the third quarter of 2010, down 17% from the prior-year period. While overall client market activity remained muted in the third quarter of 2010, Citi continued to benefit from consistent growth inSecurities and Banking emerging markets revenues. Fixed income markets revenues excluding CVA were $3.4 billion compared to $4.9 billion in the third quarter of 2009. Equity markets revenues excluding CVA were $1.1 billion, compared to $1.3 billion in the prior-year quarter. Investment banking revenues declined 20% from the prior-year period to $930 million. Lending revenues were negative $18 million in the third quarter of 2010, compared with a negative $794 million in the third quarter of 2009.
Regional Consumer Banking revenues were up $241 million on a comparable basis from the prior-year quarter to $8.2 billion, driven by growth in Latin America and Asia.
Transaction Services revenues were up from year-ago levels by 3% to $2.5 billion, also driven by growth in Latin America and Asia.
Within Citi Holdings,Local Consumer Lending revenues of $3.5 billion in the third quarter of 2010 were down 33% on a comparable basis from the year-ago period, driven by a lower loan balance and continued asset sales, as well as the addition of $322 million of mortgage repurchase reserves related to North America residential real estate (compared to a build of $33 million in the prior-year period).
Revenues in theSpecial Asset Pool decreased to $0.3 billion in the third quarter of 2010, from $1.4 billion in the prior-year period, largely driven by lower positive net revenue marks of $567 million in the third quarter of 2010, compared to $1,517 million in the same quarter of 2009.
Citi'sNet interest revenue increased 10% from the third quarter of 2009, primarily driven by the impact from the adoption of SFAS 166/167. Sequentially, Citi's net interest margin (NIM) of 3.07% decreased by 8 basis points primarily due to the continued run-off and sales of higher-yielding assets in Citi Holdings and investments in lower-yielding securities, given current rates.
Non-interest revenue decreased 11% from the year-ago period reflecting lower revenues on mortgage servicing rights, partially offset by higher realized gains on investment securities.
Operating expenses decreased 3% from the year-ago quarter and were down 3% from the second quarter of 2010. The decline in expenses from the year-ago quarter reflected the decrease in Citi Holdings expenses, which more than offset the increase in Citicorp expenses resulting from continued investments in the Citicorp businesses. The sequential decline in expenses primarily related to the absence of the U.K. bonus tax in the second quarter of 2010, partially offset by ongoing investments in Citicorp businesses. Citi's full-time employees numbered 258,000 at September 30, 2010, down 18,000 from September 30, 2009 and down 1,000 from June 30, 2010.
Net credit losses of $7.7 billion in the third quarter of 2010 were down 30% from year-ago levels on a comparable basis, and down 4% from the second quarter of 2010. Net credit losses (NCLs) improved for the fifth consecutive quarter. Consumer NCLs of $6.7 billion were down 29% on a comparable basis from the prior-year period and down 10% from the prior quarter. While North America NCLs continued to represent over 80% of Citi's total consumer NCLs, during the third quarter of 2010, losses in North America improved at a faster rate than in Citi's international consumer businesses. North America consumer NCLs were down 11% sequentially, while international consumer NCLs declined by 7%.
Corporate NCLs of $922 million were down 40% from the prior-year period and up 95% from the prior quarter. The sequential increase in corporate NCLs was principally due to a charge-off on a specific corporate credit in Citicorp, and, in Citi Holdings, higher cost of loan sales and the charge-off of loans for which Citi had previously established specific SFAS 114 reserves that were released during the third quarter of 2010 upon recognition of the charge-off.
Citi's total allowance for loan losses was $43.7 billion at September 30, 2010, or 6.73% of total loans. The percentage was essentially flat compared to June 30, 2010, which was 6.72% of total loans. During the third quarter of 2010, Citi had a net release of $2.0 billion to its credit reserves and allowance for unfunded lending commitments, compared to a net build of $802 million in the third quarter of 2009 and a net release of $1.5 billion in the second quarter of 2010. An improving to stabilizing credit environment contributed to the release during the current quarter. Citi experienced continued improvement in NCLs and 90 days or more delinquencies across its North America cards portfolios (both branded and Retail partner
cards) and North America mortgage portfolio in Citi Holdings during the third quarter of 2010.
The total allowance for consumer loan losses decreased $2.0 billion to $37.6 billion at the end of the quarter, but increased as a percentage of total consumer loans to 8.16%, compared to 7.87% at the end of the second quarter of 2010. The increase in the percentage was mainly due to the announced sale of SLC, which moved approximately $30 billion of loans to held-for-sale. The decrease in the total allowance was mainly due to a net release of $1.4 billion as well as reductions from asset sales in the U.S. real estate lending portfolio and certain loan portfolios moving to held-for-sale. The $1.4 billion net release was mainly driven by Retail partner cards in Citi Holdings, as well as the internationalRegional Consumer Banking businesses in Citicorp.
The total allowance for loan losses for funded corporate loans declined by $552 million to $6.1 billion at September 30, 2010, or 3.22% of corporate loans, down from 3.59% in the second quarter of 2010. Corporate non-accrual loans were $9.9 billion at September 30, 2010, compared to $11.0 billion at June 30, 2010 and $14.7 billion in the year-ago period. The decrease in non-accrual loans from the prior quarter was mainly due to loan sales, write-offs and paydowns, which were partially offset by increases due to the weakening of certain borrowers.
The effective tax rate on continuing operations for the third quarter of 2010 was 21%, reflecting taxable earnings in lower tax rate jurisdictions, as well as tax advantaged earnings.
Total deposits were $850 billion at September 30, 2010, up 4% from June 30, 2010 and up 2% from year-ago levels. Citi's structural liquidity (equity, long-term debt and deposits as a percentage of assets) was 71% at September 30, 2010, unchanged as compared with June 30, 2010 and down slightly from 72% at September 30, 2009.
Total assets increased $46 billion from the end of the second quarter of 2010 to $1,983 billion. Citi Holdings assets decreased $44 billion during the third quarter of 2010, consisting of approximately $32 billion of asset sales and business dispositions, $9 billion of net run-off and pay downs and $3 billion of net cost of credit and net asset marks. Citi Holdings total GAAP assets of $421 billion at September 30, 2010, represented 21% of Citi's total GAAP assets. Citi Holdings' risk-weighted assets were approximately $370 billion, or approximately 37% of Citi's risk-weighted assets, as of September 30, 2010.
Citigroup'sTotal stockholders' equity increased by $8.1 billion during the third quarter of 2010 to $162.9 billion, reflecting net income during the quarter, $1.9 billion related to the ADIA share issuance and a $3.9 billion improvement inAccumulated other comprehensive income largely from foreign exchange translation (generally referred to throughout this report as "FX translation"). Citigroup's total equity capital base and trust preferred securities were $183.4 billion at September 30, 2010. Citigroup maintained its "well-capitalized" position with a Tier 1 Capital ratio of 12.50% at September 30, 2010, up from 11.99% at June 30, 2010. Citigroup's Tier 1 Common ratio was 10.33% at September 30, 2010, compared to 9.71% at June 30, 2010.
Business Outlook
Within Citicorp, overall trends in client activity and the global economic and capital markets environment are expected to continue to drive Citi'sSecurities and Banking revenues.
Citi expects continued headwinds in North AmericaRegional Consumer Banking from The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), which will continue to have a negative impact on U.S. credit card revenues. Citi currently estimates that the CARD Act will have a net pre-tax impact on Citi-branded cards for the full year 2010 at the lower end of its previously disclosed range of $400 million to $600 million. As previously disclosed, for Retail partner cards inLocal Consumer Lending, Citi's full-year 2010 estimate of negative net revenue impact resulting from the CARD Act is approximately $150 million to $200 million. Within the international businesses inRegional Consumer Banking, Citi believes revenues should begin to reflect the growth Citi is seeing in the underlying revenue drivers, such as new loan and deposit growth.
Within Citi Holdings, Citi currently believesLocal Consumer Lending revenues should continue to decline given the shrinking loan balance resulting from paydowns and continued asset sales. Citi further believes that net revenue marks in theSpecial Asset Pool, which have been positive for the last six quarters, will remain episodic.
NIM will likely remain under pressure throughout the remainder of the year.
With respect to expenses, Citi expects quarterly expenses to continue to be in the range of $11.5 billion to $12 billion. As previously disclosed, Citicorp's expenses may continue to increase, reflecting ongoing investments in its core businesses, while in Citi Holdings expenses should continue to decline as assets are reduced.
As in recent prior quarters, credit costs are expected to remain a significant component of earnings performance in the fourth quarter. In North America cards, Citi expects NCLs will continue to improve modestly for both portfolios, but likely remain at elevated levels until employment recovers in the U.S. In North America mortgages, Citi remains cautious as the improvement in NCLs and delinquency metrics to date reflects asset sales and loss mitigation efforts. Mortgages also remain at risk to economic factors, including unemployment, home prices, government programs, and foreclosure regulations. Internationally, Citi believes consumer NCLs should remain fairly stable in the fourth quarter.
Consumer loan loss reserve balances will continue to reflect the losses embedded in Citi's consumer portfolios, given underlying credit trends and loss mitigation efforts. The recognition of credit losses and the build or release of loan loss reserves in Citi's corporate credit portfolio will continue to be episodic.
CITIGROUP INC. AND SUBSIDIARIES
SUMMARY OF SELECTED FINANCIAL DATA—Page 1
| | | | Nine Months Ended September 30, | | |||||||||||||||
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| Third Quarter | | | |||||||||||||||||
In millions of dollars, except per share amounts | % Change | % Change | ||||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||||
Net interest revenue | $ | 11,998 | $ | 13,404 | (10 | )% | $ | 37,753 | $ | 40,478 | (7 | )% | ||||||||
Non-interest revenue | 8,392 | 2,854 | NM | 37,127 | 5,475 | NM | ||||||||||||||
Revenues, net of interest expense | $ | 20,390 | $ | 16,258 | 25 | % | $ | 74,880 | $ | 45,953 | 63 | % | ||||||||
Operating expenses | 11,824 | 14,007 | (16 | ) | 35,508 | 44,598 | (20 | ) | ||||||||||||
Provisions for credit losses and for benefits and claims | 9,095 | 9,067 | — | 32,078 | 22,019 | 46 | ||||||||||||||
Income (Loss) from Continuing Operations before Income Taxes | $ | (529 | ) | $ | (6,816 | ) | 92 | $ | 7,294 | $ | (20,664 | ) | NM | |||||||
Income taxes (benefits) | (1,122 | ) | (3,295 | ) | 66 | 620 | (9,628 | ) | NM | |||||||||||
Income (Loss) from Continuing Operations | $ | 593 | $ | (3,521 | ) | NM | $ | 6,674 | $ | (11,036 | ) | NM | ||||||||
Income (Loss) from Discontinued Operations, net of taxes | (418 | ) | 613 | NM | (677 | ) | 578 | NM | ||||||||||||
Net Income (Loss) before attribution of Noncontrolling Interests | $ | 175 | $ | (2,908 | ) | NM | $ | 5,997 | $ | (10,458 | ) | NM | ||||||||
Net Income (Loss) attributable to Noncontrolling Interests | 74 | (93 | ) | NM | 24 | (37 | ) | NM | ||||||||||||
Citigroup's Net Income (Loss) | $ | 101 | $ | (2,815 | ) | NM | $ | 5,973 | $ | (10,421 | ) | NM | ||||||||
Less: | ||||||||||||||||||||
Preferred dividends—Basic | $ | (272 | ) | $ | (389 | ) | 30 | % | $ | (2,988 | ) | $ | (833 | ) | NM | |||||
Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance—Basic(1) | — | — | — | (1,285 | ) | — | NM | |||||||||||||
Preferred stock Series H discount accretion—Basic | (16 | ) | — | NM | (123 | ) | — | NM | ||||||||||||
Impact of the Public and Private Preferred stock exchange offer | (3,055 | ) | — | NM | (3,055 | ) | — | NM | ||||||||||||
Income (loss) available to common stockholders | (3,242 | ) | (3,204 | ) | (1 | ) | (1,478 | ) | (11,254 | ) | 87 | |||||||||
Allocation of dividends to common stock and participating securities, net of forfeitures | — | (1,738 | ) | NM | (63 | ) | (5,151 | ) | 99 | |||||||||||
Undistributed earnings (loss) for basic EPS | $ | (3,242 | ) | $ | (4,942 | ) | 34 | % | $ | (1,541 | ) | $ | (16,405 | ) | 91 | % | ||||
Convertible Preferred Stock Dividends | — | 270 | NM | 540 | 606 | (11 | ) | |||||||||||||
Undistributed earnings (loss) for diluted EPS | $ | (3,242 | ) | $ | (4,672 | ) | 31 | % | $ | (1,001 | ) | $ | (15,799 | ) | 94 | % | ||||
Earnings per share | ||||||||||||||||||||
Basic(2) | ||||||||||||||||||||
Income (loss) from continuing operations | $ | (0.23 | ) | $ | (0.72 | ) | 68 | % | $ | (0.10 | ) | $ | (2.28 | ) | 96 | % | ||||
Net income (loss) | (0.27 | ) | (0.61 | ) | 56 | (0.19 | ) | (2.17 | ) | 91 | ||||||||||
Diluted(2) | ||||||||||||||||||||
Income (loss) from continuing operations | $ | (0.23 | ) | $ | (0.72 | ) | 68 | % | $ | (0.10 | ) | $ | (2.28 | ) | 96 | % | ||||
Net income (loss) | (0.27 | ) | (0.61 | ) | 56 | (0.19 | ) | (2.17 | ) | 91 | ||||||||||
| Third Quarter | | Nine Months Ended | | ||||||||||||||||
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In millions of dollars, except per share amounts | % Change | % Change | ||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||
Total managed revenues(1) | $ | 20,738 | $ | 23,142 | (10 | )% | $ | 68,230 | $ | 83,210 | (18 | )% | ||||||||
Total managed net credit losses(1) | 7,659 | 10,982 | (30 | ) | 24,005 | 32,282 | (26 | ) | ||||||||||||
Net interest revenue | $ | 13,246 | $ | 11,998 | 10 | % | $ | 41,846 | $ | 37,753 | 11 | % | ||||||||
Non-interest revenue | 7,492 | 8,392 | (11 | ) | 26,384 | 37,127 | (29 | ) | ||||||||||||
Revenues, net of interest expense | $ | 20,738 | $ | 20,390 | 2 | % | $ | 68,230 | $ | 74,880 | (9 | )% | ||||||||
Operating expenses | 11,520 | 11,824 | (3 | ) | 34,904 | 35,508 | (2 | ) | ||||||||||||
Provisions for credit losses and for benefits and claims | 5,919 | 9,095 | (35 | ) | 21,202 | 32,078 | (34 | ) | ||||||||||||
Income (loss) from continuing operations before income taxes | $ | 3,299 | $ | (529 | ) | NM | $ | 12,124 | $ | 7,294 | 66 | % | ||||||||
Income taxes (losses) | 698 | (1,122 | ) | NM | 2,546 | 620 | NM | |||||||||||||
Income from continuing operations | $ | 2,601 | $ | 593 | NM | $ | 9,578 | $ | 6,674 | 44 | % | |||||||||
Loss from discontinued operations, net of taxes | (374 | ) | (418 | ) | 11 | (166 | ) | (677 | ) | 75 | ||||||||||
Net income before attribution of noncontrolling interests | $ | 2,227 | $ | 175 | NM | $ | 9,412 | $ | 5,997 | 57 | % | |||||||||
Net income attributable to noncontrolling interests | 59 | 74 | (20 | ) | 119 | 24 | NM | |||||||||||||
Citigroup's net income | $ | 2,168 | $ | 101 | NM | $ | 9,293 | $ | 5,973 | 56 | % | |||||||||
Less: | ||||||||||||||||||||
Preferred dividends—Basic | — | $ | 272 | — | $ | 2,988 | ||||||||||||||
Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance—Basic(2) | — | — | — | 1,285 | ||||||||||||||||
Preferred stock Series H discount accretion—Basic | — | 16 | — | 123 | ||||||||||||||||
Impact of the Public and Private preferred stock exchange offer(2) | — | 3,055 | — | 3,055 | ||||||||||||||||
Dividends and earnings allocated to participating securities, net of forfeitures applicable to Basic EPS | 20 | — | 78 | 2 | ||||||||||||||||
Income (loss) allocated to unrestricted common shareholders for basic EPS | $ | 2,148 | $ | (3,242 | ) | NM | $ | 9,215 | $ | (1,480 | ) | NM | ||||||||
Less: Convertible Preferred Stock Dividends | — | — | — | — | 540 | |||||||||||||||
Add: Incremental dividends and earnings allocated to participating securities, net of forfeitures applicable to Diluted EPS | 1 | — | 2 | — | ||||||||||||||||
Income (loss) allocated to unrestricted common shareholders for diluted EPS | $ | 2,149 | $ | (3,242 | ) | NM | $ | 9,217 | $ | (940 | ) | NM | ||||||||
Earnings per share | ||||||||||||||||||||
Basic(3) | ||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.09 | $ | (0.23 | ) | NM | $ | 0.32 | $ | (0.10 | ) | NM | ||||||||
Net income (loss) | 0.07 | (0.27 | ) | NM | 0.32 | (0.19 | ) | NM | ||||||||||||
Diluted(3) | ||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.08 | $ | (0.23 | ) | NM | $ | 0.32 | $ | (0.10 | ) | NM | ||||||||
Net income (loss) | 0.07 | (0.27 | ) | NM | 0.31 | (0.19 | ) | NM | ||||||||||||
[Continued on the following page, including notes to table.]
SUMMARY OF SELECTED FINANCIAL DATA—Page 2
| | | | Nine Months Ended September 2009, | | | | | Nine Months Ended September 30, | | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Third Quarter | | | Third Quarter | | | ||||||||||||||||||||||||||||||||
| % Change | Nine Months Ended September 2009, | % Change | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
In millions of dollars | 2009 | 2008 | % Change | 2009 | 2010 | 2009 | % Change | 2010 | ||||||||||||||||||||||||||||||
At September 30: | ||||||||||||||||||||||||||||||||||||||
Total assets | $ | 1,888,599 | $ | 2,050,131 | (8 | )% | $ | 1,983,280 | $ | 1,888,599 | 5 | % | ||||||||||||||||||||||||||
Total deposits | 832,603 | 780,343 | 7 | 850,095 | 832,603 | 2 | ||||||||||||||||||||||||||||||||
Long-term debt | 379,557 | 393,097 | (3 | ) | 387,330 | 379,557 | 2 | |||||||||||||||||||||||||||||||
Mandatorily redeemable securities of subsidiary Trusts (included in Long-term debt) | 34,531 | 23,836 | 45 | 20,449 | 34,531 | (41 | ) | |||||||||||||||||||||||||||||||
Common stockholders' equity | 140,530 | 98,638 | 42 | 162,601 | 140,530 | 16 | ||||||||||||||||||||||||||||||||
Total stockholders' equity | 140,842 | 126,062 | 12 | 162,913 | 140,842 | 16 | ||||||||||||||||||||||||||||||||
Direct staff(in thousands) | 276 | 352 | (22 | ) | 258 | 276 | (7 | ) | ||||||||||||||||||||||||||||||
Ratios: | ||||||||||||||||||||||||||||||||||||||
Return on common stockholders' equity | (12.2 | )% | (12.2 | )% | (2.3 | )% | (13.8 | )% | 5.4 | % | (12.2 | )% | 8.1 | % | (2.3 | )% | ||||||||||||||||||||||
Tier 1 Common | 9.12 | % | 3.72 | % | 10.33 | % | 9.12 | % | ||||||||||||||||||||||||||||||
Tier 1 Capital | 12.76 | % | 8.19 | % | 12.50 | 12.76 | ||||||||||||||||||||||||||||||||
Total Capital | 16.58 | % | 11.68 | % | 16.14 | 16.58 | ||||||||||||||||||||||||||||||||
Leverage | 6.87 | % | 4.70 | % | 6.57 | 6.85 | ||||||||||||||||||||||||||||||||
Common stockholders' equity to assets | 7.4 | % | 4.8 | % | 8.20 | % | 7.44 | % | ||||||||||||||||||||||||||||||
Ratio of earnings to fixed charges and preferred stock dividends | 0.96 | NM | 1.16 | NM | 1.53 | 0.95 | 1.63 | 1.16 | ||||||||||||||||||||||||||||||
Certain reclassifications have been made to the prior periods' financial statements to conform to the current period's presentation.
Within this Form 10-Q, please refer to the indices on pages 2 and 86 for page references to the Management's Discussion and Analysis section and Notes to Consolidated Financial Statements, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER OF 2009 MANAGEMENT SUMMARY
Citigroup reported net income of $101 million, and a loss of ($0.27) per diluted share, for the third quarter of 2009. The ($0.27) loss per share reflected a $3.1 billion charge to retained earnings related to the closing of the exchange offers, the remaining preferred stock dividends required to be paid prior to the closing of the exchange offers and the remaining quarterly accretion of the Series H preferred stock discount.
Revenues of $20.4 billion increased 25% from year-ago levels due primarily to positive revenue marks and gains in Citi Holdings relative to the prior-year period, and a $1.4 billion gain from the extinguishment of debt associated with the closing of the exchange offers. The increase was partially offset by credit valuation adjustments (CVA) of $1.7 billion in Securities and Banking, the absence of Smith Barney revenues of $2.0 billion in the third quarter of 2009 and foreign currency translation.
Net interest revenue declined 10% from the 2008 third quarter, primarily reflecting the Company's smaller balance sheet. Net interest margin in the third quarter of 2009 was 2.95%, down 20 basis points from the third quarter of 2008, reflecting a decrease in asset yields related to the decrease in the Federal funds rate, largely offset by significantly lower funding costs.Non-interest revenue increased $5.5 billion from a year ago, primarily reflecting the absence of significant losses in the Citi Holdings Special Asset Pool portfolio.
Operating expenses decreased 16% from the year-ago quarter and were down 1% from the second quarter of 2009 primarily due to divestitures, including Smith Barney, the re-sizing of the Citi Holdings businesses, the re-engineering of Citicorp processes, expense control, and the impact of foreign currency translation. Headcount of 276,000 was down 76,000 from September 30, 2008 and down 3,000 from June 30, 2009.
The Company's total allowance for loan losses totaled $36.4 billion at September 30, 2009, a coverage ratio of 5.85% of total loans up from 5.6% at June 30, 2009, even though corporate loans declined by $13 billion during the quarter and consumer loans decreased by $6 billion. During the third quarter of 2009, the Company recorded a net build of $802 million to its credit reserves. The build for the quarter was $3.1 billion lower than the second quarter of 2009, consisting of a net build of $893 million for consumer loans and a net release of $91 million for corporate loans.
Consumer non-accrual loans totaled $17.9 billion at September 30, 2009, compared to $15.8 billion at June 30, 2009 and $10.8 billion at September 30, 2008, primarily related to the recognition of SFAS 114 charge-offs in the quarter. The consumer loan delinquency rate was 4.70% at September 30, 2009, compared to 4.24% at June 30, 2009 and 2.66% a year ago. Delinquencies continue to rise for the first mortgage portfolio in the U.S. due primarily to the lengthening of the foreclosure process by many states and the increasing impact of the Home Affordable Modification Program (HAMP). Loans in the HAMP trial modification period are reported as delinquent if the original contractual payments are not received on time (even if the reduced payments agreed to under the program are made by the borrower) until the loan has completed the trial period under the program (see "Loan and Credit Details—Consumer Loan Modification Programs" and "—U.S. Consumer Mortgage Lending" below).
Corporate non-accrual loans were $14.8 billion at September 30, 2009, compared to $12.4 billion at June 30, 2009 and $2.7 billion a year ago. The increase from the prior quarter is mainly due to the Company's continued policy of actively moving loans into non-accrual at earlier stages of anticipated distress. Over two-thirds of the non-accrual corporate loans are current and continue to make their contractual payments. The increase from prior-year levels is also attributable to the transfer of non-accrual loans from the held-for-sale portfolio (which are carried at lower-of-cost-or-fair value and excluded from non-accrual loans) to the held-for-investment portfolio during the fourth quarter of 2008. The total allowance for loan loss reserve balance for funded corporate loans remained stable at $8 billion at the end of the quarter, or 4.4% of corporate loans, up from 4.1% in the second quarter of 2009.
The Company's effective tax rate on continuing operations in the third quarter of 2009 was 212% versus 48% in the prior-year period. The tax provision reflected a higher proportion of income earned and indefinitely reinvested in countries with relatively lower tax rates as well as a higher proportion of income from tax advantaged sources. The current quarter also includes a tax benefit of $103 million in continuing operations relating to a release of tax reserves on interchange fees, which was supported by a favorable Tax Court decision in a case litigated by another financial institution.
Total deposits were $833 billion at September 30, 2009, up 3% from June 30, 2009 and up 7% from year-ago levels. At September 30, 2009, the Company had increased its structural liquidity (equity, long-term debt and deposits) as a percentage of assets from 66% at December 31, 2008 to 72% at September 30, 2009. Over the past six months, Citigroup and its subsidiaries have issued $20 billion of non-guaranteed debt outside of the FDIC's TLGP.
Citigroup has continued its deleveraging, reducing total assets from $2,050 billion a year ago to $1,889 billion at September 30, 2009. Asset reductions in Citi Holdings made up approximately 98% of the decline, reflecting the Company's continued strategy of reducing its assets and exposures in this business segment, which are down by almost one-third since the peak levels of early 2008.
Primarily as a result of the exchange offers, Citigroup increased its Tier 1 Common by $63 billion from the second quarter of 2009 to $90 billion. In addition, the Company's Tangible Common Equity (TCE) increased by $62 billion from the second quarter of 2009 to $102 billion at September 30, 2009. (TCE and Tier 1 Common are non-GAAP financial
measures. See "Capital Resources and Liquidity" for additional information on these measures.)
The closing of the exchange offers also resulted in a reconstitution of the Company's equity base. Common Equity increased 98% from December 31, 2008 to $140.5 billion. Citigroup's total stockholders' equity decreased by $11.5 billion during the third quarter of 2009 to $140.8 billion, primarily reflecting the impact of the exchange offers, partially offset by a $4.0 billion improvement inAccumulated Other Comprehensive Income. Citigroup's total equity capital base and trust preferred securities were $175.4 billion at September 30, 2009. The Tier 1 Capital ratio and Tier 1 Common ratio were 12.76% and 9.12%, respectively, at September 30, 2009.
SIGNIFICANT EVENTS IN THE THIRD QUARTER OF 2009
Certain significant events have occurred during the fiscal year to date, including events subsequent to September 30, 2009, that had, or could have, an effect on Citigroup's current and future financial condition, results of operations, liquidity and capital resources. These events are summarized below and discussed throughout this MD&A.
EXCHANGE OFFERS
Private Exchange Offers
On July 23, 2009, Citigroup closed its exchange offers with the private holders of $12.5 billion aggregate liquidation value of preferred stock. The U.S. Treasury (UST) matched these exchange offers by exchanging $12.5 billion aggregate liquidation value of its preferred stock, for a total closing of $25 billion. Following the approval, on September 2, 2009, by Citi shareholders of an increase in Citi's authorized common stock, on September 10, 2009, the private holders and the UST received an aggregate of approximately 7,692 million shares of Citigroup common stock.
Public Exchange Offers
On July 29, 2009, Citigroup closed its exchange offers with the holders of approximately $20.4 billion in aggregate liquidation value of publicly-held preferred stock and trust preferred securities, representing 99% of the total liquidation value of securities Citigroup was offering to exchange. Upon closing of the public exchange offers, Citi issued approximately 5.8 billion shares of common stock to the public exchange offer participants.
In addition, on July 30, 2009, the UST matched the public exchange offers by exchanging an additional $12.5 billion aggregate liquidation value of its preferred stock. Following the increase in Citigroup's authorized common stock, on September 10, 2009, the UST received an additional approximately 3.8 billion shares of Citigroup common stock.
In total, approximately $58 billion in aggregate liquidation value of preferred stock and trust preferred securities were exchanged for common stock upon completion of all stages of the exchange offers. As a result of the exchange offers, the UST owned approximately 33.6% of Citigroup's outstanding common stock, not including the exercise of the warrants issued to the UST as part of TARP and pursuant to the loss-sharing agreement. See "Government Programs" below.
Trust Preferred Securities
On July 30, 2009, all remaining preferred stock of Citigroup held by the UST and the FDIC that was not exchanged into Citigroup common stock in connection with the exchange offers, in an aggregate liquidation amount of approximately $27.1 billion, was exchanged into newly issued 8% trust preferred securities.
Accounting Impact
The accounting for the exchange offers resulted in the de-recognition of preferred stock and the recognition of the common stock issued at fair value in theCommon stock andAdditional paid-in capital accounts in equity. The difference between the carrying amount of preferred stock and the fair value of the common stock was recorded inRetained earnings (impacting net income available to common shareholders and EPS) orAdditional paid-in capital accounts in equity, depending on whether the preferred stock was originally non-convertible or convertible.
For the U.S. Government (USG) preferred stock that was converted to 8% trust preferred securities, the newly issued trust preferred securities were initially recorded at fair value asLong-term debt. The difference between the carrying amount of the preferred stock and the fair value of the trust preferred securities was recorded inRetained earnings after adjusting for the appropriate deferred tax liability (impacting net income available to common shareholders and EPS). For trust preferred securities exchanged for common stock, the carrying amount recorded as long-term debt was de-recognized and the common stock issued was recorded at fair value in theCommon Stock and theAdditional Paid-in Capital accounts in equity. The difference between the carrying amount of the trust preferred securities and the fair value of the common stock was recorded in Other revenue in the third quarter of 2009.
The following table presents the impact of the completion of all stages of the exchange offers to Citigroup's common shares outstanding and to its balance sheet:
(in millions of dollars, except incremental number of Citigroup common shares) | Impact on | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Security | Notional Amounts | Converted Into | Incremental Number of Citigroup Common Shares | Date of Settlement | Other Assets(3) | Long- Term Debt | Preferred Stock | Common Stock | Additional Paid In Capital | Income Statement(2) | Retained Earnings(1) | ||||||||||||||||||||||
| | | (in millions) | | | | | | | | | ||||||||||||||||||||||
Convertible Preferred Stock held by Private Investors | $ | 12,500 | Common Stock | 3,846 | 7/23/2009 | $ | — | — | $ | (12,500 | ) | $ | 38 | $ | 21,801 | $ | — | $ | (9,340 | ) | |||||||||||||
Convertible Preferred Stock held by Public Investors | 3,146 | Common Stock | 823 | 7/29/2009 | — | — | (3,146 | ) | 8 | 5,128 | — | (1,990 | ) | ||||||||||||||||||||
Non-Convertible Preferred Stock held by Public Investors | 11,465 | Common Stock | 3,351 | 7/29/2009 | — | — | (11,465 | ) | 33 | 9,116 | — | 2,316 | |||||||||||||||||||||
Trust Preferred Securities held by Public Investors | 5,773 | Common Stock | 1,660 | 7/29/2009 | (602 | ) | (5,972 | ) | — | 17 | 4,515 | 851 | 851 | ||||||||||||||||||||
USG TARP Preferred Stock matching the Preferred Stock held by Private Investors | 12,500 | Common Stock | 3,846 | 7/23/2009 | — | — | (11,924 | ) | 38 | 10,615 | — | 1,270 | |||||||||||||||||||||
USG TARP Preferred Stock matching the Preferred Stock and Trust Preferred Securities held by Public Investors | 12,500 | Common Stock | 3,846 | 7/30/2009 | — | — | (11,926 | ) | 39 | 10,615 | — | 1,272 | |||||||||||||||||||||
USG TARP Preferred Stock | 20,000 | TruPS | — | 7/30/2009 | (2,883 | ) | 12,004 | (19,514 | ) | — | — | — | 4,627 | ||||||||||||||||||||
Non-Convertible Preferred Stock held by U.S. Treasury and FDIC related to covered asset guarantee (loss-sharing agreement) | 7,059 | TruPS | — | 7/30/2009 | (503 | ) | 4,237 | (3,530 | ) | — | — | — | (1,210 | ) | |||||||||||||||||||
Total | 17,372 | $ | (3,988 | ) | $ | 10,269 | $ | (74,005 | ) | $ | 173 | $ | 61,790 | $ | 851 | $ | (2,204 | ) |
Note: Table may not foot due to roundings.
Summary of Impact of Exchange Offers
During the third quarter of 2009, TCE increased by $60 billion as a result of the exchange of approximately $74 billion carrying amount of preferred shares and $6 billion carrying value of trust preferred securities for 17,372 million shares of common stock and approximately $27.1 billion liquidation amount of trust preferred securities (recorded asLong-term debt at its fair value of $16.2 billion). This resulted in an increase to common stock and APIC of $62 billion and a reduction inRetained earnings of approximately $2 billion, for a total increase in TCE of approximately $60 billion. The additional $64 billion of Tier 1 Common includes the impact of the above plus a reduction in the disallowed Deferred tax asset (which increases Tier 1 Common) that arises from the accounting for the transactions. TCE and Tier 1 Common are non-GAAP financial measures. See "Capital Resources and Liquidity" below for additional information on these measures.
Earnings per share in the third quarter of 2009 was impacted by (1) the increase in shares outstanding as a result of the issuance of common shares and interim securities and the timing thereof, (2) the net impact toRetained earnings and income statement resulting from the exchange offers and (3) dividends on USG preferred shares accrued up to the date of their conversion to interim securities and trust preferred securities.
Deferred taxes are recorded for the future consequences of events that have been recognized in the financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets (DTAs) are recognized subject to management's judgment that realization is more likely than not.
As of September 30, 2009, Citigroup had recognized a net deferred tax asset of approximately $38 billion, down $4 billion from approximately $42 billion at June 30, 2009 and down $6.5 billion from approximately $44.5 billion at December 31, 2008. Approximately $13 billion of the net deferred tax asset is included in Tier 1 and Tier 1 Common regulatory capital. The principal items reducing the deferred tax asset during 2009 were a decrease of approximately $3.9 billion relating to the exchange offers and $2.8 billion due to an increase in Other Comprehensive Income.
Although realization is not assured, the Company believes that the realization of the recognized net deferred tax asset at September 30, 2009 is more likely than not based upon expectations of future taxable income in the jurisdictions in which it operates and available tax planning strategies.
Approximately $17 billion of Citigroup's DTA is represented by U.S. federal, state and local tax return carry-forwards subject to expiration substantially beginning in 2017 and continuing through 2028. The remaining $21 billion DTA is largely due to timing differences between the recognition of income for GAAP and tax, representing net deductions that have not yet been taken on a tax return and are not currently subject to expiration. The most significant source of these timing differences is the loan loss reserve build, which accounts for approximately $14 billion of the net DTA. In general, Citigroup would need to generate approximately $85 billion of taxable income during the respective carry-forward periods to fully realize its U.S. federal, state and local DTA.
Citi's ability to utilize its deferred tax assets to offset future taxable income may be significantly limited if Citi experiences an "ownership change," as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). In general, an ownership change will occur if there is a cumulative change in Citi's ownership by "5% shareholders" (as defined in the Code) that exceeds 50 percentage points over a rolling three-year period.
The common stock issued pursuant to the exchange offers did not result in an ownership change under the Code. On June 9, 2009, the board of directors of Citigroup adopted a tax benefits preservation plan (the "Plan"). The purpose of the Plan is to minimize the likelihood of an ownership change occurring for Section 382 purposes and thus protect Citigroup's ability to utilize certain of its deferred tax assets, such as net operating loss and tax credit carry forwards, to offset future income. Despite adoption of the Plan, future stock issuance or transactions in our stock that may not be in our control, including sales by the USG, may cause Citi to experience an ownership change and thus limit the Company's ability to utilize its deferred tax asset and reduce its TCE and stockholders' equity.
DIVESTITURES
Sale of Nikko Cordial Securities
On October 1, 2009, Citigroup completed the sale of its domestic Japanese domestic securities business, conducted principally through Nikko Cordial Securities Inc. (NCS) to Sumitomo Mitsui Banking Corporation in a transaction with a total cash value of approximately $8.7 billion (¥776 billion). The transaction will be recorded in the fourth quarter of 2009. After considering the impact of foreign exchange hedges of the proceeds of the transaction (most of which has been recorded in the second and third quarters of 2009), the sale will result in an immaterial after-tax gain to Citigroup.
Beginning in the second quarter of 2009, the results of NCS and its related companies are reflected as Discontinued Operations in the Company's Consolidated Financial Statements. At September 30, 2009, assets of $23.6 billion and liabilities of $16.0 billion are reflected on the Consolidated Balance Sheet as "Assets/ Liabilities of discontinued operations held for sale", respectively, including $3.8 billion of identifiable goodwill and intangibles.
SUBSEQUENT EVENTS
As required by SFAS 165, Subsequent Events, the Company has evaluated subsequent events through November 6, 2009, which is the date its Consolidated Financial Statements were issued.
ACCOUNTING CHANGES AND FUTURE APPLICATION OF ACCOUNTING STANDARDS
See Note 1 to the Consolidated Financial Statements for a discussion of "Accounting Changes" and "Future Application of Accounting Standards."
SEGMENT, BUSINESS AND PRODUCT PRODUCT—INCOME (LOSS) AND REVENUES
The following tables show the income (loss) and revenues for Citigroup on a segment, business and product view:
Citigroup Income (Loss)CITIGROUP INCOME (LOSS)
| | Third Quarter | | Nine Months | | | Third Quarter | | Nine Months | | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | % Change | % Change | | % Change | % Change | ||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | 2009 | 2008 | 2009 | 2008 | In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||||||||||
Income from Continuing Operations | ||||||||||||||||||||||||||||||||||||||||||
Income (loss) from Continuing Operations | Income (loss) from Continuing Operations | |||||||||||||||||||||||||||||||||||||||||
CITICORP | CITICORP | CITICORP | ||||||||||||||||||||||||||||||||||||||||
Regional Consumer Banking | Regional Consumer Banking | Regional Consumer Banking | ||||||||||||||||||||||||||||||||||||||||
North America | $ | 163 | $ | (44 | ) | NM | $ | 345 | $ | 470 | (27 | )% | North America | $ | 147 | $ | 206 | (29 | )% | $ | 231 | $ | 702 | (67 | )% | |||||||||||||||||
EMEA | (23 | ) | 31 | NM | (166 | ) | 87 | NM | EMEA | 22 | (23 | ) | NM | 99 | (166 | ) | NM | |||||||||||||||||||||||||
Latin America | 29 | 102 | (72 | )% | 268 | 867 | (69 | ) | Latin America | 558 | 77 | NM | 1,438 | 412 | NM | |||||||||||||||||||||||||||
Asia | 446 | 357 | 25 | 969 | 1,344 | (28 | ) | Asia | 505 | 444 | 14 | % | 1,655 | 971 | 70 | |||||||||||||||||||||||||||
Total | $ | 615 | $ | 446 | 38 | $ | 1,416 | $ | 2,768 | (49 | )% | Total | $ | 1,232 | $ | 704 | 75 | % | $ | 3,423 | $ | 1,919 | 78 | % | ||||||||||||||||||
Securities and Banking | Securities and Banking | Securities and Banking | ||||||||||||||||||||||||||||||||||||||||
North America | $ | (77 | ) | $ | 1,340 | NM | $ | 2,493 | $ | 3,368 | (26 | )% | North America | $ | 456 | $ | 7 | NM | $ | 2,719 | $ | 2,472 | 10 | % | ||||||||||||||||||
EMEA | 548 | 102 | NM | 3,466 | 674 | NM | EMEA | 505 | 550 | (8 | )% | 1,892 | 3,467 | (45 | ) | |||||||||||||||||||||||||||
Latin America | 216 | 227 | (5 | )% | 1,137 | 853 | 33 | Latin America | 266 | 219 | 21 | 735 | 1,158 | (37 | ) | |||||||||||||||||||||||||||
Asia | 68 | 569 | (88 | ) | 1,720 | 1,502 | 15 | Asia | 180 | 71 | NM | 952 | 1,724 | (45 | ) | |||||||||||||||||||||||||||
Total | $ | 755 | $ | 2,238 | (66 | )% | $ | 8,816 | $ | 6,397 | 38 | % | Total | $ | 1,407 | $ | 847 | 66 | % | $ | 6,298 | $ | 8,821 | (29 | )% | |||||||||||||||||
Transaction Services | Transaction Services | Transaction Services | ||||||||||||||||||||||||||||||||||||||||
North America | $ | 152 | $ | 94 | 62 | % | $ | 471 | $ | 243 | 94 | % | North America | $ | 131 | $ | 152 | (14 | )% | $ | 456 | $ | 471 | (3 | )% | |||||||||||||||||
EMEA | 308 | 348 | (11 | ) | 984 | 925 | 6 | EMEA | 305 | 308 | (1 | ) | 929 | 984 | (6 | ) | ||||||||||||||||||||||||||
Latin America | 148 | 159 | (7 | ) | 458 | 451 | 2 | Latin America | 171 | 148 | 16 | 481 | 458 | 5 | ||||||||||||||||||||||||||||
Asia | 331 | 317 | 4 | 904 | 899 | 1 | Asia | 318 | 331 | (4 | ) | 934 | 904 | 3 | ||||||||||||||||||||||||||||
Total | $ | 939 | $ | 918 | 2 | % | $ | 2,817 | $ | 2,518 | 12 | % | Total | $ | 925 | $ | 939 | (1 | )% | $ | 2,800 | $ | 2,817 | (1 | )% | |||||||||||||||||
Institutional Clients Group | Institutional Clients Group | $ | 2,332 | $ | 1,786 | 31 | % | $ | 9,098 | $ | 11,638 | (22 | )% | |||||||||||||||||||||||||||||
Institutional Clients Group | $ | 1,694 | $ | 3,156 | (46 | )% | $ | 11,633 | $ | 8,915 | 30 | % | ||||||||||||||||||||||||||||||
Total Citicorp | Total Citicorp | $ | 2,309 | $ | 3,602 | (36 | )% | $ | 13,049 | $ | 11,683 | 12 | % | Total Citicorp | $ | 3,564 | $ | 2,490 | 43 | % | $ | 12,521 | $ | 13,557 | (8 | )% | ||||||||||||||||
CITI HOLDINGS | CITI HOLDINGS | CITI HOLDINGS | ||||||||||||||||||||||||||||||||||||||||
Brokerage and Asset Management | Brokerage and Asset Management | $ | 139 | $ | (57 | ) | NM | $ | 7,011 | $ | 96 | NM | Brokerage and Asset Management | $ | (147 | ) | $ | 90 | NM | $ | (154 | ) | $ | 6,899 | NM | |||||||||||||||||
Local Consumer Lending | Local Consumer Lending | (2,099 | ) | (2,285 | ) | 8 | % | (7,711 | ) | (3,366 | ) | NM | Local Consumer Lending | (827 | ) | (2,142 | ) | 61 | % | (3,895 | ) | (8,060 | ) | 52 | % | |||||||||||||||||
Special Asset Pool | Special Asset Pool | 142 | (4,594 | ) | NM | (5,095 | ) | (18,041 | ) | 72 | % | Special Asset Pool | (80 | ) | 58 | NM | 922 | (5,136 | ) | NM | ||||||||||||||||||||||
Total Citi Holdings | Total Citi Holdings | $ | (1,818 | ) | $ | (6,936 | ) | 74 | % | $ | (5,795 | ) | $ | (21,311 | ) | 73 | % | Total Citi Holdings | $ | (1,054 | ) | $ | (1,994 | ) | 47 | % | $ | (3,127 | ) | $ | (6,297 | ) | 50 | % | ||||||||
Corporate/Other | Corporate/Other | $ | 102 | $ | (187 | ) | NM | $ | (580 | ) | $ | (1,408 | ) | 59 | Corporate/Other | $ | 91 | $ | 97 | (6 | )% | $ | 184 | $ | (586 | ) | NM | |||||||||||||||
Income (Loss) from Continuing Operations | $ | 593 | $ | (3,521 | ) | NM | $ | 6,674 | $ | (11,036 | ) | NM | ||||||||||||||||||||||||||||||
Discontinued Operations | $ | (418 | ) | $ | 613 | $ | (677 | ) | $ | 578 | ||||||||||||||||||||||||||||||||
Net Income (Loss) attributable to Noncontrolling Interests | 74 | $ | (93 | ) | 24 | $ | (37 | ) | ||||||||||||||||||||||||||||||||||
Income from continuing operations | Income from continuing operations | $ | 2,601 | $ | 593 | NM | $ | 9,578 | $ | 6,674 | 44 | % | ||||||||||||||||||||||||||||||
Citigroup's Net Income (Loss) | $ | 101 | $ | (2,815 | ) | NM | $ | 5,973 | $ | (10,421 | ) | NM | ||||||||||||||||||||||||||||||
Discontinued operations | Discontinued operations | $ | (374 | ) | $ | (418 | ) | $ | (166 | ) | $ | (677 | ) | |||||||||||||||||||||||||||||
Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | 59 | 74 | 119 | 24 | |||||||||||||||||||||||||||||||||||||
Citigroup's net income | Citigroup's net income | $ | 2,168 | $ | 101 | NM | $ | 9,293 | $ | 5,973 | 56 | % | ||||||||||||||||||||||||||||||
NM Not meaningful
Citigroup RevenuesCITIGROUP REVENUES(1)
| | Third Quarter | | Nine Months | | | Third Quarter | | Nine Months | | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | % Change | % Change | | % Change | % Change | ||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | 2009 | 2008 | 2009 | 2008 | In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||||||||||
CITICORP | CITICORP | CITICORP | ||||||||||||||||||||||||||||||||||||||||
Regional Consumer Banking | Regional Consumer Banking | Regional Consumer Banking | ||||||||||||||||||||||||||||||||||||||||
North America | $ | 1,754 | $ | 1,472 | 19 | % | $ | 5,604 | $ | 5,917 | (5 | )% | North America | $ | 3,740 | $ | 2,017 | 85 | % | $ | 11,234 | $ | 6,702 | 68 | % | |||||||||||||||||
EMEA | 415 | 498 | (17 | ) | 1,169 | 1,467 | (20 | ) | EMEA | 349 | 415 | (16 | ) | 1,130 | 1,169 | (3 | ) | |||||||||||||||||||||||||
Latin America | 1,826 | 2,300 | (21 | ) | 5,436 | 6,906 | (21 | ) | Latin America | 2,233 | 1,971 | 13 | 6,427 | 5,845 | 10 | |||||||||||||||||||||||||||
Asia | 1,680 | 1,839 | (9 | ) | 4,842 | 5,674 | (15 | ) | Asia | 1,839 | 1,717 | 7 | 5,484 | 4,958 | 11 | |||||||||||||||||||||||||||
Total | $ | 5,675 | $ | 6,109 | (7 | )% | $ | 17,051 | $ | 19,964 | (15 | )% | Total | $ | 8,161 | $ | 6,120 | 33 | % | $ | 24,275 | $ | 18,674 | 30 | % | |||||||||||||||||
Securities and Banking | Securities and Banking | Securities and Banking | ||||||||||||||||||||||||||||||||||||||||
North America | $ | 1,312 | $ | 4,018 | (67 | )% | $ | 8,454 | $ | 11,117 | (24 | )% | North America | $ | 2,203 | $ | 1,301 | 69 | % | $ | 8,383 | $ | 8,038 | 4 | % | |||||||||||||||||
EMEA | 2,198 | 1,395 | 58 | 8,974 | 5,098 | 76 | EMEA | 1,733 | 2,202 | (21 | ) | 6,010 | 8,982 | (33 | ) | |||||||||||||||||||||||||||
Latin America | 703 | 469 | 50 | 2,547 | 1,872 | 36 | Latin America | 639 | 705 | (9 | ) | 1,804 | 2,554 | (29 | ) | |||||||||||||||||||||||||||
Asia | 680 | 1,463 | (54 | ) | 4,214 | 4,382 | (4 | ) | Asia | 1,018 | 683 | 49 | 3,354 | 4,218 | (20 | ) | ||||||||||||||||||||||||||
Total | $ | 4,893 | $ | 7,345 | (33 | )% | $ | 24,189 | $ | 22,469 | 8 | % | Total | $ | 5,593 | $ | 4,891 | 14 | % | $ | 19,551 | $ | 23,792 | (18 | )% | |||||||||||||||||
Transaction Services | Transaction Services | Transaction Services | ||||||||||||||||||||||||||||||||||||||||
North America | $ | 643 | $ | 540 | 19 | % | $ | 1,888 | $ | 1,557 | 21 | % | North America | $ | 620 | $ | 643 | (4 | )% | $ | 1,895 | $ | 1,888 | — | ||||||||||||||||||
EMEA | 845 | 953 | (11 | ) | 2,549 | 2,784 | (8 | ) | EMEA | 835 | 845 | (1 | ) | 2,516 | 2,549 | (1 | )% | |||||||||||||||||||||||||
Latin America | 337 | 378 | (11 | ) | 1,020 | 1,092 | (7 | ) | Latin America | 384 | 337 | 14 | 1,084 | 1,020 | 6 | |||||||||||||||||||||||||||
Asia | 632 | 695 | (9 | ) | 1,857 | 2,029 | (8 | ) | Asia | 696 | 632 | 10 | 1,979 | 1,857 | 7 | |||||||||||||||||||||||||||
Total | $ | 2,457 | $ | 2,566 | (4 | ) | $ | 7,314 | $ | 7,462 | (2 | )% | Total | $ | 2,535 | $ | 2,457 | 3 | % | $ | 7,474 | $ | 7,314 | 2 | % | |||||||||||||||||
Institutional Clients Group | Institutional Clients Group | $ | 8,128 | $ | 7,348 | 11 | % | $ | 27,025 | $ | 31,106 | (13 | )% | |||||||||||||||||||||||||||||
Institutional Clients Group | $ | 7,350 | $ | 9,911 | (26 | )% | $ | 31,503 | $ | 29,931 | 5 | % | ||||||||||||||||||||||||||||||
Total Citicorp | $ | 13,025 | $ | 16,020 | (19 | )% | $ | 48,554 | $ | 49,895 | (3 | )% | ||||||||||||||||||||||||||||||
Total Citicorp | $ | 16,289 | $ | 13,468 | 21 | % | $ | 51,300 | $ | 49,780 | 3 | % | ||||||||||||||||||||||||||||||
CITI HOLDINGS | CITI HOLDINGS | CITI HOLDINGS | ||||||||||||||||||||||||||||||||||||||||
Brokerage and Asset Management | Brokerage and Asset Management | $ | 670 | $ | 2,094 | (68 | )% | $ | 14,710 | $ | 6,951 | NM | Brokerage and Asset Management | $ | (8 | ) | $ | 525 | NM | $ | 473 | $ | 14,352 | (97 | )% | |||||||||||||||||
Local Consumer Lending | Local Consumer Lending | 4,647 | 5,432 | (14 | ) | 15,030 | 19,156 | (22 | )% | Local Consumer Lending | 3,547 | 4,362 | (19 | )% | 12,423 | 13,864 | (10 | ) | ||||||||||||||||||||||||
Special Asset Pool | Special Asset Pool | 1,377 | (6,822 | ) | NM | (3,844 | ) | (27,842 | ) | 86 | Special Asset Pool | 314 | 1,363 | (77 | ) | 2,426 | (3,547 | ) | NM | |||||||||||||||||||||||
Total Citi Holdings | Total Citi Holdings | $ | 6,694 | $ | 704 | NM | $ | 25,896 | $ | (1,735 | ) | NM | Total Citi Holdings | $ | 3,853 | $ | 6,250 | (38 | )% | $ | 15,322 | $ | 24,669 | (38 | )% | |||||||||||||||||
Corporate/Other | Corporate/Other | $ | 671 | $ | (466 | ) | NM | $ | 430 | $ | (2,207 | ) | NM | Corporate/Other | $ | 596 | $ | 672 | (11 | )% | $ | 1,608 | $ | 431 | NM | |||||||||||||||||
Total Net Revenues | $ | 20,390 | $ | 16,258 | 25 | % | $ | 74,880 | $ | 45,953 | 63 | % | ||||||||||||||||||||||||||||||
Total net revenues | Total net revenues | $ | 20,738 | $ | 20,390 | 2 | % | $ | 68,230 | $ | 74,880 | (9 | )% | |||||||||||||||||||||||||||||
Impact of Credit Card Securitization Activity | ||||||||||||||||||||||||||||||||||||||||||
Citicorp | $ | — | $ | 1,800 | NM | $ | — | $ | 4,928 | NM | ||||||||||||||||||||||||||||||||
Citi Holdings | — | 952 | NM | — | 3,402 | NM | ||||||||||||||||||||||||||||||||||||
Total impact of credit card securitization activity | Total impact of credit card securitization activity | $ | — | $ | 2,752 | NM | $ | — | $ | 8,330 | NM | |||||||||||||||||||||||||||||||
Total Citigroup—managed net revenues | Total Citigroup—managed net revenues | $ | 20,738 | $ | 23,142 | (10 | )% | $ | 68,230 | $ | 83,210 | (18 | )% | |||||||||||||||||||||||||||||
NM Not meaningful
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 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 September 30, 2010, Citicorp had approximately $1.3 trillion of assets and $757 billion of deposits, representing approximately 65% of Citi's total assets and approximately 89% 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 andAsia) andInstitutional Clients Group (which includesSecurities and Banking andTransaction Services).
| | Third Quarter | | Nine Months | | | Third Quarter | | Nine Months | | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | % Change | % Change | | % Change | % Change | ||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | 2009 | 2008 | 2009 | 2008 | In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||||||||||
Net interest revenue | $ | 8,435 | $ | 8,316 | 1 | % | $ | 25,067 | $ | 24,980 | — | Net interest revenue | $ | 9,475 | $ | 8,727 | 9 | % | $ | 29,087 | $ | 26,012 | 12 | % | ||||||||||||||||||
Non-interest revenue | 4,590 | 7,704 | (40 | ) | 23,487 | 24,915 | (6 | )% | Non-interest revenue | 6,814 | 4,741 | 44 | 22,213 | 23,768 | (7 | ) | ||||||||||||||||||||||||||
Total Revenues, net of interest expense | $ | 13,025 | $ | 16,020 | (19 | )% | $ | 48,554 | $ | 49,895 | (3 | )% | ||||||||||||||||||||||||||||||
Total revenues, net of interest expense | Total revenues, net of interest expense | $ | 16,289 | $ | 13,468 | 21 | % | $ | 51,300 | $ | 49,780 | 3 | % | |||||||||||||||||||||||||||||
Provision for credit losses and for benefits and claims | ||||||||||||||||||||||||||||||||||||||||||
Provisions for credit losses and for benefits and claims | Provisions for credit losses and for benefits and claims | |||||||||||||||||||||||||||||||||||||||||
Net credit losses | $ | 1,718 | $ | 1,317 | 30 | % | $ | 4,515 | $ | 3,535 | 28 | % | Net credit losses | $ | 3,020 | $ | 1,734 | 74 | % | $ | 9,127 | $ | 4,560 | 100 | % | |||||||||||||||||
Credit reserve build (release) | 465 | 799 | (42 | ) | 2,570 | 1,846 | 39 | Credit reserve build (release) | (427 | ) | 522 | NM | (1,426 | ) | 2,751 | NM | ||||||||||||||||||||||||||
Provision for loan losses | $ | 2,183 | $ | 2,116 | 3 | $ | 7,085 | $ | 5,381 | 32 | % | Provision for loan losses | $ | 2,593 | $ | 2,256 | 15 | % | $ | 7,701 | $ | 7,311 | 5 | % | ||||||||||||||||||
Provision for benefits & claims | 14 | — | — | 41 | 3 | NM | Provision for benefits and claims | 38 | 43 | (12 | ) | 109 | 127 | (14 | ) | |||||||||||||||||||||||||||
Provision for unfunded lending commitments | — | (80 | ) | 100 | 115 | (155 | ) | NM | Provision for unfunded lending commitments | 1 | — | — | (32 | ) | 115 | NM | ||||||||||||||||||||||||||
Total provision for credit losses and for benefits and claims | $ | 2,197 | $ | 2,036 | 8 | % | $ | 7,241 | $ | 5,229 | 38 | % | Total provisions for credit losses and for benefits and claims | $ | 2,632 | $ | 2,299 | 14 | % | $ | 7,778 | $ | 7,553 | 3 | % | |||||||||||||||||
Total operating expenses | Total operating expenses | $ | 8,181 | $ | 8,948 | (9 | ) | $ | 23,227 | $ | 28,174 | (18 | )% | Total operating expenses | $ | 8,883 | $ | 8,422 | 5 | % | $ | 26,458 | $ | 23,889 | 11 | % | ||||||||||||||||
Income from continuing operations before taxes | Income from continuing operations before taxes | $ | 2,647 | $ | 5,036 | (47 | )% | $ | 18,086 | $ | 16,492 | 10 | % | Income from continuing operations before taxes | $ | 4,774 | $ | 2,747 | 74 | % | $ | 17,064 | $ | 18,338 | (7 | )% | ||||||||||||||||
Provision for income taxes | 338 | 1,434 | (76 | ) | 5,037 | 4,809 | 5 | |||||||||||||||||||||||||||||||||||
Provisions for income taxes | Provisions for income taxes | 1,210 | 257 | NM | 4,543 | 4,781 | (5 | ) | ||||||||||||||||||||||||||||||||||
Income from continuing operations | Income from continuing operations | $ | 2,309 | $ | 3,602 | (36 | )% | $ | 13,049 | $ | 11,683 | 12 | % | Income from continuing operations | $ | 3,564 | $ | 2,490 | 43 | % | $ | 12,521 | $ | 13,557 | (8 | )% | ||||||||||||||||
Net income (loss) attributable to noncontrolling interests | Net income (loss) attributable to noncontrolling interests | 25 | 16 | 56 | 25 | 50 | (50 | ) | Net income (loss) attributable to noncontrolling interests | 30 | 25 | 20 | 71 | 25 | NM | |||||||||||||||||||||||||||
Citicorp's net income | Citicorp's net income | $ | 2,284 | $ | 3,586 | (36 | )% | $ | 13,024 | $ | 11,633 | 12 | % | Citicorp's net income | $ | 3,534 | $ | 2,465 | 43 | % | $ | 12,450 | $ | 13,532 | (8 | )% | ||||||||||||||||
Balance Sheet Data (in billions) | ||||||||||||||||||||||||||||||||||||||||||
Balance sheet data(in billions of dollars) | Balance sheet data(in billions of dollars) | |||||||||||||||||||||||||||||||||||||||||
Total EOP assets | Total EOP assets | $ | 1,014 | $ | 1,158 | (12 | )% | Total EOP assets | $ | 1,283 | $ | 1,075 | 19 | % | ||||||||||||||||||||||||||||
Average assets | Average assets | $ | 1,032 | $ | 1,175 | (12 | )% | $ | 1,024 | $ | 1,287 | (20 | )% | Average assets | 1,252 | 1,096 | 14 | $ | 1,245 | $ | 1,076 | 16 | % | |||||||||||||||||||
Return on assets | Return on assets | 1.12 | % | 0.89 | % | 1.34 | % | 1.68 | % | |||||||||||||||||||||||||||||||||
Total EOP deposits | Total EOP deposits | $ | 728 | $ | 683 | 7 | % | Total EOP deposits | 757 | 731 | 4 | |||||||||||||||||||||||||||||||
Total GAAP revenues | Total GAAP revenues | $ | 16,289 | $ | 13,468 | 21 | % | $ | 51,300 | $ | 49,780 | 3 | % | |||||||||||||||||||||||||||||
Net impact of credit card securitization activity(1) | — | 1,800 | NM | — | 4,928 | NM | ||||||||||||||||||||||||||||||||||||
Total managed revenues | Total managed revenues | $ | 16,289 | $ | 15,268 | 7 | % | $ | 51,300 | $ | 54,708 | (6 | )% | |||||||||||||||||||||||||||||
GAAP net credit losses | GAAP net credit losses | $ | 3,020 | $ | 1,734 | 74 | % | $ | 9,127 | $ | 4,560 | 100 | % | |||||||||||||||||||||||||||||
Impact of credit card securitization activity(1) | — | 1,876 | NM | — | $ | 5,204 | NM | |||||||||||||||||||||||||||||||||||
Total managed net credit losses | Total managed net credit losses | $ | 3,020 | $ | 3,610 | (16 | )% | $ | 9,127 | $ | 9,764 | (7 | )% | |||||||||||||||||||||||||||||
Regional Consumer Banking (RCB) consists of Citigroup's four regional consumer banking businesses that provide traditional banking services to retail customers.RCB also contains Citigroup's branded cards business and Citi's local commercial banking business.RCB is a globally diversified business with over 4,200 branches in 39 countries around the world. During the third quarter of 2010, 54% of totalRCB revenues were from outsideNorth America. Additionally, the majority of international revenues and loans were from emerging economies inAsia, Latin America, and Central and Eastern Europe and the Middle East. At September 30, 2010,RCB had $311 billion of assets and $300 billion of deposits.
| | Third Quarter | | Nine Months | | | Third Quarter | | Nine Months | | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | % Change | % Change | | % Change | % Change | |||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | 2009 | 2008 | 2009 | 2008 | In millions of dollars | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||||||
Net interest revenue | Net interest revenue | $ | 3,992 | $ | 4,224 | (5 | )% | $ | 11,508 | $ | 12,429 | (7 | )% | Net interest revenue | $ | 5,689 | $ | 4,216 | 35 | % | $ | 17,380 | $ | 12,198 | 42 | % | |||||||||||||||||
Non-interest revenue | Non-interest revenue | 1,683 | 1,885 | (11 | ) | 5,543 | 7,535 | (26 | ) | Non-interest revenue | 2,472 | 1,904 | 30 | 6,895 | 6,476 | 6 | |||||||||||||||||||||||||||
Total Revenues, net of interest expense | $ | 5,675 | $ | 6,109 | (7 | )% | $ | 17,051 | $ | 19,964 | (15 | )% | |||||||||||||||||||||||||||||||
Total revenues, net of interest expense | Total revenues, net of interest expense | $ | 8,161 | $ | 6,120 | 33 | % | $ | 24,275 | $ | 18,674 | 30 | % | ||||||||||||||||||||||||||||||
Total operating expenses | Total operating expenses | $ | 3,547 | $ | 4,029 | (12 | )% | $ | 10,344 | $ | 12,005 | (14 | )% | Total operating expenses | $ | 4,087 | $ | 3,778 | 8 | % | $ | 12,006 | $ | 10,985 | 9 | % | |||||||||||||||||
Net credit losses | $ | 1,426 | $ | 1,096 | 30 | % | $ | 3,978 | $ | 2,940 | 35 | % | Net credit losses | $ | 2,731 | $ | 1,442 | 89 | % | $ | 8,693 | $ | 4,022 | NM | |||||||||||||||||||
Credit reserve build (release) | 319 | 514 | (38 | ) | 1,575 | 1,346 | 17 | Credit reserve build (release) | (403 | ) | 356 | NM | (991 | ) | 1,661 | NM | |||||||||||||||||||||||||||
Provision for benefits & claims | 14 | — | — | 41 | 3 | NM | Provision for unfunded lending commitments | — | — | — | (4 | ) | — | — | |||||||||||||||||||||||||||||
Provisions for benefits and claims | 38 | 43 | (12 | )% | 109 | 127 | (14 | )% | |||||||||||||||||||||||||||||||||||
Provision for loan losses and for benefits and claims | $ | 1,759 | $ | 1,610 | 9 | % | $ | 5,594 | $ | 4,289 | 30 | % | |||||||||||||||||||||||||||||||
Provisions for credit losses and for benefits and claims | Provisions for credit losses and for benefits and claims | $ | 2,366 | $ | 1,841 | 29 | % | $ | 7,807 | $ | 5,810 | 34 | % | ||||||||||||||||||||||||||||||
Income from continuing operations before taxes | Income from continuing operations before taxes | 369 | $ | 470 | (21 | ) | 1,113 | $ | 3,670 | (70 | )% | Income from continuing operations before taxes | $ | 1,708 | $ | 501 | NM | $ | 4,462 | $ | 1,879 | NM | |||||||||||||||||||||
Income taxes (benefits) | (246 | ) | 24 | NM | (303 | ) | 902 | NM | |||||||||||||||||||||||||||||||||||
Income taxes | Income taxes | 476 | (203 | ) | NM | 1,039 | (40 | ) | NM | ||||||||||||||||||||||||||||||||||
Income from continuing operations | Income from continuing operations | $ | 615 | $ | 446 | 38 | % | $ | 1,416 | $ | 2,768 | (49 | )% | Income from continuing operations | $ | 1,232 | $ | 704 | 75 | % | $ | 3,423 | $ | 1,919 | 78 | % | |||||||||||||||||
Net income (loss) attributable to noncontrolling interests | Net income (loss) attributable to noncontrolling interests | 2 | 5 | (60 | ) | 2 | 10 | (80 | ) | Net income (loss) attributable to noncontrolling interests | (4 | ) | 2 | NM | (9 | ) | 2 | NM | |||||||||||||||||||||||||
Net income | Net income | $ | 613 | $ | 441 | 39 | % | $ | 1,414 | $ | 2,758 | (49 | )% | Net income | $ | 1,236 | $ | 702 | 76 | % | $ | 3,432 | $ | 1,917 | 79 | % | |||||||||||||||||
Average assets(in billions of dollars) | Average assets(in billions of dollars) | $ | 201 | $ | 222 | (9 | )% | 191 | $ | 225 | (15 | )% | Average assets(in billions of dollars) | $ | 311 | $ | 248 | 25 | % | $ | 308 | $ | 239 | 29 | % | ||||||||||||||||||
Return on assets | Return on assets | 1.21 | % | 0.79 | % | 0.99 | % | 1.64 | % | Return on assets | 1.58 | % | 1.12 | % | 1.49 | % | 1.07 | % | |||||||||||||||||||||||||
Average deposits(in billions of dollars) | Average deposits(in billions of dollars) | 275 | 266 | 3 | % | Average deposits(in billions of dollars) | 296 | 279 | 6 | % | |||||||||||||||||||||||||||||||||
Net credit losses as a % of average loans | 4.70 | % | 3.35 | % | |||||||||||||||||||||||||||||||||||||||
Managed net credit losses as a percentage of average managed loans | Managed net credit losses as a percentage of average managed loans | 4.90 | % | 5.97 | % | ||||||||||||||||||||||||||||||||||||||
Revenue by business | Revenue by business | Revenue by business | |||||||||||||||||||||||||||||||||||||||||
Retail banking | $ | 4,005 | $ | 3,760 | 7 | % | $ | 11,735 | $ | 11,086 | 6 | % | |||||||||||||||||||||||||||||||
Citi-branded cards | 4,156 | 2,360 | 76 | 12,540 | 7,588 | 65 | |||||||||||||||||||||||||||||||||||||
Total GAAP revenues | $ | 8,161 | $ | 6,120 | 33 | % | $ | 24,275 | $ | 18,674 | 30 | % | |||||||||||||||||||||||||||||||
Net impact of credit card securitization activity(1) | — | 1,800 | NM | — | 4,928 | NM | |||||||||||||||||||||||||||||||||||||
Total managed revenues | $ | 8,161 | $ | 7,920 | 3 | % | $ | 24,275 | $ | 23,602 | 3 | % | |||||||||||||||||||||||||||||||
Net credit losses by business | Net credit losses by business | ||||||||||||||||||||||||||||||||||||||||||
Retail banking | $ | 333 | $ | 395 | (16 | )% | $ | 926 | $ | 1,161 | (20 | )% | |||||||||||||||||||||||||||||||
Citi-branded cards | 2,398 | 1,047 | NM | 7,767 | 2,861 | NM | |||||||||||||||||||||||||||||||||||||
Retail Banking | $ | 3,315 | $ | 3,531 | (6 | )% | $ | 9,463 | $ | 10,559 | (10 | )% | Total GAAP net credit losses | $ | 2,731 | $ | 1,442 | 89 | % | $ | 8,693 | $ | 4,022 | NM | |||||||||||||||||||
Citi-Branded Cards | 2,360 | 2,578 | (8 | ) | 7,588 | 9,405 | (19 | ) | Net impact of credit card securitization activity(1) | — | 1,876 | NM | — | 5,204 | NM | ||||||||||||||||||||||||||||
Total revenues | $ | 5,675 | $ | 6,109 | (7 | )% | $ | 17,051 | $ | 19,964 | (15 | )% | Total managed net credit losses | $ | 2,731 | $ | 3,318 | (18 | )% | $ | 8,693 | $ | 9,226 | (6 | )% | ||||||||||||||||||
Income (loss) from continuing operations by business | Income (loss) from continuing operations by business | Income (loss) from continuing operations by business | |||||||||||||||||||||||||||||||||||||||||
Retail Banking | $ | 609 | $ | 563 | 8 | % | $ | 1,480 | $ | 1,826 | (19 | )% | Retail banking | $ | 778 | $ | 698 | 11 | % | $ | 2,510 | $ | 1,983 | 27 | % | ||||||||||||||||||
Citi-Branded Cards | 6 | (117 | ) | NM | (64 | ) | 942 | NM | Citi-branded cards | 454 | 6 | NM | 913 | (64 | ) | NM | |||||||||||||||||||||||||||
Total | $ | 615 | $ | 446 | 38 | % | $ | 1,416 | $ | 2,768 | (49 | )% | Total | $ | 1,232 | $ | 704 | 75 | % | $ | 3,423 | $ | 1,919 | 78 | % | ||||||||||||||||||
NORTH AMERICA REGIONAL CONSUMER BANKING
North America Regional Consumer Banking (NA RCB) provides traditional banking and Citi-branded card services to retail customers and small- to mid-size businesses in the U.S.NA RCB's approximately 1,000 retail bank branches and 13.3 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 September 30, 2010,NA RCB had approximately $29 billion of retail banking and residential real estate loans and $144 billion of deposits. In addition,NA RCB had approximately 21 million Citi-branded credit card accounts, with $77 billion in outstanding card loan balances.
| | Third Quarter | | Nine Months | | | Third Quarter | | Nine Months | | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | % Change | % Change | | % Change | % Change | ||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | 2009 | 2008 | 2009 | 2008 | In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||||||||||
Net interest revenue | Net interest revenue | $ | 1,224 | $ | 978 | 25 | % | $ | 3,394 | $ | 2,673 | 27 | % | Net interest revenue | $ | 2,734 | $ | 1,387 | 97 | % | $ | 8,466 | $ | 3,909 | NM | |||||||||||||||||
Non-interest revenue | Non-interest revenue | 530 | 494 | 7 | 2,210 | 3,244 | (32 | ) | Non-interest revenue | 1,006 | 630 | 60 | 2,768 | 2,793 | (1 | )% | ||||||||||||||||||||||||||
Total Revenues, net of interest expense | $ | 1,754 | $ | 1,472 | 19 | % | $ | 5,604 | $ | 5,917 | (5 | )% | ||||||||||||||||||||||||||||||
Total revenues, net of interest expense | Total revenues, net of interest expense | $ | 3,740 | $ | 2,017 | 85 | % | $ | 11,234 | $ | 6,702 | 68 | % | |||||||||||||||||||||||||||||
Total operating expenses | Total operating expenses | $ | 1,331 | $ | 1,444 | (8 | )% | $ | 4,023 | $ | 4,507 | (11 | )% | Total operating expenses | $ | 1,501 | $ | 1,499 | — | $ | 4,611 | $ | 4,479 | 3 | % | |||||||||||||||||
Net credit losses | $ | 280 | $ | 144 | 94 | % | $ | 843 | $ | 425 | 98 | % | Net credit losses | $ | 1,971 | $ | 279 | NM | $ | 6,254 | $ | 843 | NM | |||||||||||||||||||
Credit reserve build (release) | 30 | (9 | ) | NM | 402 | 286 | 41 | Credit reserve build | 40 | 54 | (26 | )% | 35 | 456 | (92 | )% | ||||||||||||||||||||||||||
Provision for benefits and claims | 14 | — | — | 41 | 2 | NM | Provisions for benefits and claims | 6 | 14 | (57 | ) | 19 | 42 | (55 | ) | |||||||||||||||||||||||||||
Provisions for loan losses and for benefits and claims | Provisions for loan losses and for benefits and claims | $ | 324 | $ | 135 | NM | $ | 1,286 | $ | 713 | 80 | % | Provisions for loan losses and for benefits and claims | $ | 2,017 | $ | 347 | NM | $ | 6,308 | $ | 1,341 | NM | |||||||||||||||||||
Income (loss) from continuing operations before taxes | $ | 99 | $ | (107 | ) | NM | $ | 295 | $ | 697 | (58 | )% | ||||||||||||||||||||||||||||||
Income from continuing operations before taxes | Income from continuing operations before taxes | $ | 222 | $ | 171 | 30 | % | $ | 315 | $ | 882 | (64 | )% | |||||||||||||||||||||||||||||
Income taxes (benefits) | Income taxes (benefits) | (64 | ) | (63 | ) | (2 | )% | (50 | ) | 227 | NM | Income taxes (benefits) | 75 | (35 | ) | NM | 84 | 180 | (53 | ) | ||||||||||||||||||||||
Income (loss) from continuing operations | $ | 163 | $ | (44 | ) | NM | $ | 345 | $ | 470 | (27 | )% | ||||||||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Income from continuing operations | Income from continuing operations | $ | 147 | $ | 206 | (29 | )% | $ | 231 | $ | 702 | (67 | )% | |||||||||||||||||||||||||||||
Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Net income (loss) | $ | 163 | $ | (44 | ) | NM | $ | 345 | $ | 470 | (27 | )% | ||||||||||||||||||||||||||||||
Net income | Net income | $ | 147 | $ | 206 | (29 | )% | $ | 231 | $ | 702 | (67 | )% | |||||||||||||||||||||||||||||
Average assets(in billions of dollars) | Average assets(in billions of dollars) | $ | 118 | $ | 75 | 57 | % | $ | 119 | $ | 74 | 61 | % | |||||||||||||||||||||||||||||
Average deposits(in billions of dollars) | Average deposits(in billions of dollars) | $ | 139 | $ | 121 | 15 | % | Average deposits(in billions of dollars) | 145 | 142 | 2 | |||||||||||||||||||||||||||||||
Net credit losses as a % of average loans | 5.94 | % | 3.51 | % | ||||||||||||||||||||||||||||||||||||||
Managed net credit losses as a percentage of average managed loans(1) | Managed net credit losses as a percentage of average managed loans(1) | 7.40 | % | 7.31 | % | |||||||||||||||||||||||||||||||||||||
Revenue by business | Revenue by business | Revenue by business | ||||||||||||||||||||||||||||||||||||||||
Retail banking | $ | 1,372 | $ | 1,333 | 3 | % | $ | 3,975 | $ | 4,005 | (1 | )% | ||||||||||||||||||||||||||||||
Citi-branded cards(2) | 2,368 | 684 | NM | 7,259 | 2,697 | NM | ||||||||||||||||||||||||||||||||||||
Total GAAP revenues | $ | 3,740 | $ | 2,017 | 85 | % | $ | 11,234 | $ | 6,702 | 68 | % | ||||||||||||||||||||||||||||||
Net impact of credit card securitization activity(2) | — | 1,800 | NM | — | 4,928 | NM | ||||||||||||||||||||||||||||||||||||
Total managed revenues | $ | 3,740 | $ | 3,817 | (2 | )% | $ | 11,234 | $ | 11,630 | (3 | )% | ||||||||||||||||||||||||||||||
Net credit losses by business | Net credit losses by business | |||||||||||||||||||||||||||||||||||||||||
Retail banking | $ | 90 | $ | 78 | 15 | % | $ | 242 | $ | 222 | 9 | % | ||||||||||||||||||||||||||||||
Citi-branded cards(2) | 1,881 | 201 | NM | $ | 6,012 | 621 | NM | |||||||||||||||||||||||||||||||||||
Retail banking | $ | 1,070 | $ | 1,004 | 7 | % | $ | 2,907 | $ | 2,806 | 4 | % | Total GAAP net credit losses | $ | 1,971 | $ | 279 | NM | $ | 6,254 | $ | 843 | NM | |||||||||||||||||||
Citi-branded cards | 684 | 468 | 46 | 2,697 | 3,111 | (13 | ) | Net impact of credit card securitization activity(2) | — | 1,876 | NM | — | 5,204 | NM | ||||||||||||||||||||||||||||
Total | $ | 1,754 | $ | 1,472 | 19 | % | $ | 5,604 | $ | 5,917 | (5 | )% | Total managed net credit losses | $ | 1,971 | $ | 2,155 | (9 | )% | $ | 6,254 | $ | 6,047 | 3 | % | |||||||||||||||||
Income (loss) from continuing operations by business | Income (loss) from continuing operations by business | Income (loss) from continuing operations by business | ||||||||||||||||||||||||||||||||||||||||
Retail banking | $ | 150 | $ | 143 | 5 | % | $ | 319 | $ | 205 | 56 | % | Retail banking | $ | 189 | $ | 193 | (2 | )% | $ | 598 | $ | 676 | (12 | )% | |||||||||||||||||
Citi-branded cards | 13 | (187 | ) | NM | 26 | 265 | (90 | ) | Citi-branded cards | (42 | ) | 13 | NM | (367 | ) | 26 | NM | |||||||||||||||||||||||||
Total | $ | 163 | $ | (44 | ) | NM | $ | 345 | $ | 470 | (27 | )% | Total | $ | 147 | $ | 206 | (29 | )% | $ | 231 | $ | 702 | (67 | )% | |||||||||||||||||
NM Not meaningful
3Q09 vs. 3Q08
Overall, most key revenue drivers
3Q10 vs. 3Q09
Revenues, net of interest expense, increased 19%85% primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167 effective January 1, 2010. On a managed basis,revenues, net of interest expense, decreased 2%, primarily reflecting higher net interest margin inthe impact of the CARD Act on branded cards higher volumes in retail banking, and better securitization revenue,revenues, partially offset by higher credit lossesimproved revenues in mortgages due to an increase in originations in the securitization trusts.current quarter (the vast majority of which were originated for sale).
Net interest revenue was up 25%down 11% on a managed basis driven by higher net interest margin in cards as a result of higher interest revenue from pricing actions and lower funding costs, and by the impact of the CARD Act as well as lower volumes in cards, where average managed loans were down 8% from the prior-year quarter. This decline was partially offset by lower write-offs of accrued interest in cards as credit continued to improve. A decrease in deposit spreads in the current interest rate environment was partially offset by higher deposit and loan volumes, in retail banking. Average deposits were 15% higher thanup 2% from the prior year, driven by growth in both consumer and commercial deposits.prior-year quarter.
Non-interest revenue increased 7%33% on a managed basis primarily driven by better securitization revenue, partially offset bydue to higher credit losses flowing throughgains on mortgage sales resulting from
increased originations, which were up 56% from the securitization trusts.prior-year quarter.
Operating expenses declined 8%, primarily reflectingwere flat compared to the benefits from re-engineering efforts and lower marketing costs.prior-year quarter as increased investment spending was offset by the one-time benefit related to the renegotiation of a third-party contract.
Provisions for loan losses and for benefits and claims increased $189 million$1.7 billion primarily due to risingthe 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 $206 million, or 9%, from the prior-year quarter primarily due to lower net credit losses in both cards and retail banking. Continued weakening of leadingas underlying credit indicators and trends in the macro-economic environment, including rising unemployment and higher bankruptcy filings, drove higher credit costs.cards portfolio continued to improve. The cards managed net credit loss ratio increased 339decreased 16 basis points to 7.06%, while the retail banking net credit loss ratio increased 120 basis points to 4.23%9.82%.
The increase inNet Income also reflected a tax benefit resulting from the federal tax reserve release in the third quarter of 2009.
3Q093Q10 YTD vs. 3Q083Q09 YTD
Revenues, net of interest expense, increased 68% primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167 effective January 1, 2010. On a managed basis,revenues, net of interest expense, declined 5%, primarily reflecting higher credit losses3% from the prior-year period, mainly due to lower volumes in branded cards, as well as the securitization trusts,net impact of the CARD Act on cards revenues. This decrease was partially offset by higher net interest marginbetter servicing hedge results in cards and higher volumes in retail banking.mortgages.
Net interest revenue was up 27%down 7% on a managed basis driven primarily by the impact of pricing actions and lower funding costsvolumes in cards, and by higher deposit volumes in retail banking, with average deposits up 10%managed loans down 6% from the prior-year period. The increase in deposit volumes, up 5% from the prior-year period, was offset by lower spreads in the current interest rate environment.
Non-interest revenue declined 32%increased 9% on a managed basis from the prior-year period mainly driven by higher credit losses flowing through the securitization trusts partially offset by better
securitization revenue, 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 servicing hedge results in the prior-year period.mortgages.
Operating expenses declined 11%, reflectingincreased 3% from the benefits from re-engineering efforts, lower marketing costs, andprior-year period. Expenses were fairly flat excluding the absenceimpact of $126 million of repositioning charges recordeda litigation reserve in the prior-year period, offset by the absencefirst quarter of a prior-year $159 million Visa litigation reserve release.2010.
Provisions for loan losses and for benefits and claims increased $573 million or 80%$5.0 billion primarily due to risingthe 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 $237 million, or 4%, primarily due to a lower loan loss reserve build, down $421 million from the prior-year period, offset by higher net credit losses in boththe branded cards and retail banking. Continued weakening of leading credit indicators and trends in the macro-economic environment, including rising unemployment and higher bankruptcy filings, drove higher credit costs.portfolio, which increased $187 million. The cards managed net credit loss ratio increased 33298 basis points to 6.74%, while10.43%.
Managed Presentations
| Third Quarter | ||||||
---|---|---|---|---|---|---|---|
| 2010 | 2009 | |||||
Managed credit losses as a percentage of average managed loans | 7.40 | % | 7.31 | % | |||
Impact from credit card securitizations(1) | — | (4.91 | )% | ||||
Net credit losses as a percentage of average loans | 7.40 | % | 2.40 | % | |||
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 whichEMEA RCB has the largest presence are Poland, Turkey, Russia and the United Arab Emirates. At September 30, 2010,EMEA RCB had approximately 300 retail bank branches with approximately 4 million customer accounts, $5 billion in retail banking loans and $9 billion in average deposits. In addition, the business had approximately 3 million Citi-branded card accounts with $3 billion in outstanding card loan balances.
| | Third Quarter | | Nine Months | | | Third Quarter | | Nine Months | | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | % Change | % Change | | % Change | % Change | ||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | 2009 | 2008 | 2009 | 2008 | In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||||||||||
Net interest revenue | Net interest revenue | $ | 262 | $ | 350 | (25 | )% | $ | 729 | $ | 984 | (26 | )% | Net interest revenue | $ | 222 | $ | 262 | (15 | )% | $ | 700 | $ | 729 | (4 | )% | ||||||||||||||||
Non-interest revenue | Non-interest revenue | 153 | 148 | 3 | 440 | 483 | (9 | ) | Non-interest revenue | 127 | 153 | (17 | ) | 430 | 440 | (2 | ) | |||||||||||||||||||||||||
Total Revenues, net of interest expense | $ | 415 | $ | 498 | (17 | )% | $ | 1,169 | $ | 1,467 | (20 | )% | ||||||||||||||||||||||||||||||
Total revenues, net of interest expense | Total revenues, net of interest expense | $ | 349 | $ | 415 | (16 | )% | $ | 1,130 | $ | 1,169 | (3 | )% | |||||||||||||||||||||||||||||
Total operating expenses | Total operating expenses | $ | 270 | $ | 372 | (27 | )% | $ | 808 | $ | 1,142 | (29 | )% | Total operating expenses | $ | 303 | $ | 270 | 12 | % | $ | 848 | $ | 808 | 5 | % | ||||||||||||||||
Net credit losses | $ | 139 | $ | 55 | NM | $ | 349 | $ | 150 | NM | Net credit losses | $ | 65 | $ | 139 | (53 | )% | $ | 247 | $ | 349 | (29 | )% | |||||||||||||||||||
Credit reserve build (release) | 67 | 33 | NM | 297 | 64 | NM | Provision for unfunded lending commitments | — | — | — | (4 | ) | — | — | ||||||||||||||||||||||||||||
Credit reserve build (release) | (51 | ) | 67 | NM | (107 | ) | 297 | NM | ||||||||||||||||||||||||||||||||||
Provisions for loan losses and for benefits and claims | $ | 206 | $ | 88 | NM | $ | 646 | $ | 214 | NM | ||||||||||||||||||||||||||||||||
Provisions for benefits and claims | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Provisions for credit losses and for benefits and claims | Provisions for credit losses and for benefits and claims | $ | 14 | $ | 206 | (93 | )% | $ | 136 | $ | 646 | (79 | )% | |||||||||||||||||||||||||||||
Income (loss) from continuing operations before taxes | Income (loss) from continuing operations before taxes | $ | (61 | ) | $ | 38 | NM | $ | (285 | ) | $ | 111 | NM | Income (loss) from continuing operations before taxes | $ | 32 | $ | (61 | ) | NM | $ | 146 | $ | (285 | ) | NM | ||||||||||||||||
Income taxes (benefits) | Income taxes (benefits) | (38 | ) | 7 | NM | (119 | ) | 24 | NM | Income taxes (benefits) | 10 | (38 | ) | NM | 47 | (119 | ) | NM | ||||||||||||||||||||||||
Income (loss) from continuing operations | Income (loss) from continuing operations | $ | (23 | ) | $ | 31 | NM | $ | (166 | ) | $ | 87 | NM | Income (loss) from continuing operations | $ | 22 | $ | (23 | ) | NM | $ | 99 | $ | (166 | ) | NM | ||||||||||||||||
Net income (loss) attributable to noncontrolling interests | Net income (loss) attributable to noncontrolling interests | 2 | 5 | (60 | )% | 2 | 11 | (82 | )% | Net income (loss) attributable to noncontrolling interests | (1 | ) | 2 | NM | (1 | ) | 2 | NM | ||||||||||||||||||||||||
Net income (loss) | Net income (loss) | $ | (25 | ) | $ | 26 | NM | $ | (168 | ) | $ | 76 | NM | Net income (loss) | $ | 23 | $ | (25 | ) | NM | $ | 100 | $ | (168 | ) | NM | ||||||||||||||||
Average assets(in billions of dollars) | Average assets(in billions of dollars) | $ | 11 | $ | 14 | (21 | )% | $ | 11 | $ | 14 | (21 | )% | Average assets(in billions of dollars) | $ | 10 | $ | 11 | (9 | )% | $ | 10 | $ | 11 | (9 | )% | ||||||||||||||||
Return on assets | Return on assets | (0.90 | )% | 0.74 | % | (2.04 | )% | 0.73 | % | Return on assets | 0.91 | % | (0.90 | )% | 1.34 | % | (2.04 | )% | ||||||||||||||||||||||||
Average deposits(in billions of dollars) | Average deposits(in billions of dollars) | 10 | 11 | (9 | )% | Average deposits(in billions of dollars) | 9 | 10 | (4 | ) | ||||||||||||||||||||||||||||||||
Net credit losses as a % of average loans | 6.34 | % | 2.10 | % | ||||||||||||||||||||||||||||||||||||||
Net credit losses as a percentage of average loans | Net credit losses as a percentage of average loans | 3.53 | % | 6.34 | % | |||||||||||||||||||||||||||||||||||||
Revenue by business | Revenue by business | Revenue by business | ||||||||||||||||||||||||||||||||||||||||
Retail banking | $ | 237 | $ | 310 | (24 | )% | $ | 676 | $ | 931 | (27 | )% | Retail banking | $ | 186 | $ | 237 | (22 | )% | $ | 613 | $ | 676 | (9 | )% | |||||||||||||||||
Citi-branded cards | 178 | 188 | (5 | ) | 493 | 536 | (8 | ) | Citi-branded cards | 163 | 178 | (8 | ) | 517 | 493 | 5 | ||||||||||||||||||||||||||
Total | $ | 415 | $ | 498 | (17 | )% | $ | 1,169 | $ | 1,467 | (20 | )% | Total | $ | 349 | $ | 415 | (16 | )% | $ | 1,130 | $ | 1,169 | (3 | )% | |||||||||||||||||
Income (loss) from continuing operations by business | Income (loss) from continuing operations by business | Income (loss) from continuing operations by business | ||||||||||||||||||||||||||||||||||||||||
Retail banking | $ | (23 | ) | $ | (2 | ) | NM | $ | (140 | ) | $ | (4 | ) | NM | Retail banking | $ | (18 | ) | $ | (23 | ) | 22 | % | $ | (15 | ) | $ | (140 | ) | 89 | % | |||||||||||
Citi-branded cards | — | 33 | (100 | )% | (26 | ) | 91 | NM | Citi-branded cards | 40 | — | — | 114 | (26 | ) | NM | ||||||||||||||||||||||||||
Total | $ | (23 | ) | $ | 31 | NM | $ | (166 | ) | $ | 87 | NM | Total | $ | 22 | $ | (23 | ) | NM | $ | 99 | $ | (166 | ) | NM | |||||||||||||||||
3Q093Q10 vs. 3Q083Q09
Revenues, net of interest expense declined 17%, decreased 16%. More than halfA majority of the revenue declinedecrease was attributabledue to changeslower results from Citi's equity investment in foreign currency translation (generally referred to throughout this report as "FX translation"). Other drivers includedAkbank, lower wealth management and lending revenues due to lower volumescredit tightening and spread compression. InvestmentFX translation. This was partially offset by higher revenues in wealth management. Cards purchase sales were up 5% and assetsinvestment sales were up 20%. Assets under management declined by 29%increased 10% primarily due to market valuations and 25%, respectively.the introduction of new, regional initiatives.
Net interest revenue was 25%decreased 15%, primarily due to lower than the prior-year period with average loans for retail banking down 22% as a result of avolumes due to tighter origination criteria and various promotions aimed at client acquisition.
Non-interest revenue decreased 17% due to lower risk profile, branch closures and the impact of FX translation.results from Citi's equity investment in Akbank.
Operating expenses declined 27%,increased 12% reflecting expense control actions, lowerincreased investments and marketing expenditure andexpenditures in the impact of FX translation. Cost savings were primarily achieved by branch closures, headcount reductions and re-engineering efforts.business.
Provisions for loancredit losses and for benefits and claims increased $118decreased 93% mainly due to the impact of a $51 million to $206 millionloan loss reserve release in the thirdcurrent quarter, of 2009. While delinquencies improved during the third quarter of 2009 as compared to a $67 million build in the secondprior-year quarter, of 2009,and a 53% decline in net credit losses, continued to increase from $55 million to $139 million, and thedriven by credit improvements across most markets. The release of loan loss reserve build increased from $33 million to $67 million. Higher credit costs reflected continued credit deterioration, particularlyreserves in the UAE, Turkey, Polandcurrent period was driven by improvement in credit in most countries coupled with a decline in receivables. The cards net credit loss ratio improved to 4.39% in the current quarter from 7.27% and Russia.there was a 7% improvement in the net credit margin. The retail banking net credit loss ratio decreased from 5.85% in the prior-year quarter to 3.00% in the current quarter.
3Q093Q10 YTD vs. 3Q083Q09 YTD
Revenues, net of interest expense declined 20%, decreased 3%. Over half of theThe decrease in revenue decline was primarily attributable to the impact of FX translation. Other drivers included lower wealth management andretail bank lending revenues as a result of lower volumes, which were due to lower volumestighter origination criteria. This was partially offset by FX translation and spread compression. Investmenthigher revenues in cards due to higher volumes. Cards purchase sales and assets under management declined by 42% and 25%, respectively.increased 10%.
Net interest revenue was 26% lower than the prior-year period with average loans for retail banking down 20% and average deposits down 22%.decreased 4%, mainly due to a decline in volumes as a result of tighter origination criteria.
Non-interest revenue decreased by 9%2%, primarily due todriven by a litigation reserve build in the impactfirst half of FX translation.2010.
Operating expenses declined 29%, reflecting expense control actions, lower marketing spend andincreased 5% driven by the impact of FX translation. Costtranslation and increased investment in the business, largely offset by cost savings were achieved byfrom branch closures, headcount reductions and re-engineering efforts.benefits.
Provisions for loancredit losses and for benefits and claims increased $432decreased 79% mainly due to the impact of a $107 million to $646 million. Net credit losses increased from $150 million to $349 million, while the loan loss reserve release in the first nine months of 2010, compared to a $297 million build increased from $64 million to $297 million. Higherin the prior-year period, as well as a 29% decline in net credit costs reflected continuedlosses. The release of loan loss reserves in the current period was driven by an improvement in credit deterioration across the region.in most countries coupled with a decline in receivables.
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 throughoutLatin America as well as Banco Nacional de Mexico, or Banamex, Mexico's second largest bank with over 1,700 branches. At September 30, 2010,LATAM RCB had approximately 2,215 retail branches, with 27 million customer accounts, $21 billion in retail banking loan balances and $41 billion in average deposits. In addition, the business had approximately 12 million Citi-branded card accounts with $13 billion in outstanding loan balances.
| | Third Quarter | | Nine Months | | | Third Quarter | | Nine Months | | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | % Change | % Change | | % Change | % Change | ||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | 2009 | 2008 | 2009 | 2008 | In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||||||||||
Net interest revenue | Net interest revenue | $ | 1,339 | $ | 1,669 | (20 | )% | $ | 3,940 | $ | 5,046 | (22 | )% | Net interest revenue | $ | 1,501 | $ | 1,366 | 10 | % | $ | 4,430 | $ | 4,009 | 11 | % | ||||||||||||||||
Non-interest revenue | Non-interest revenue | 487 | 631 | (23 | ) | 1,496 | 1,860 | (20 | ) | Non-interest revenue | 732 | 605 | 21 | 1,997 | 1,836 | 9 | ||||||||||||||||||||||||||
Total Revenues, net of interest expense | $ | 1,826 | $ | 2,300 | (21 | )% | $ | 5,436 | $ | 6,906 | (21 | )% | ||||||||||||||||||||||||||||||
Total revenues, net of interest expense | Total revenues, net of interest expense | $ | 2,233 | $ | 1,971 | 13 | % | $ | 6,427 | $ | 5,845 | 10 | % | |||||||||||||||||||||||||||||
Total operating expenses | Total operating expenses | $ | 1,077 | $ | 1,292 | (17 | )% | $ | 3,027 | $ | 3,475 | (13 | )% | Total operating expenses | $ | 1,258 | $ | 1,127 | 12 | % | $ | 3,666 | $ | 3,175 | 15 | % | ||||||||||||||||
Net credit losses | $ | 656 | $ | 640 | 3 | % | $ | 1,809 | $ | 1,661 | 9 | % | Net credit losses | $ | 450 | $ | 657 | (32 | )% | $ | 1,416 | $ | 1,808 | (22 | )% | |||||||||||||||||
Credit reserve build (release) | 141 | 301 | (53 | ) | 461 | 695 | (34 | ) | Credit reserve build (release) | (300 | ) | 141 | NM | (677 | ) | 463 | NM | |||||||||||||||||||||||||
Provision for benefits and claims | — | — | — | — | 1 | (100 | ) | Provision for benefits and claims | 32 | 29 | 10 | 90 | 85 | 6 | ||||||||||||||||||||||||||||
Provisions for loan losses and for benefits and claims | Provisions for loan losses and for benefits and claims | $ | 797 | $ | 941 | (15 | )% | $ | 2,270 | $ | 2,357 | (4 | )% | Provisions for loan losses and for benefits and claims | $ | 182 | $ | 827 | (78 | )% | $ | 829 | $ | 2,356 | (65 | )% | ||||||||||||||||
Income from continuing operations before taxes | Income from continuing operations before taxes | $ | (48 | ) | $ | 67 | NM | $ | 139 | $ | 1,074 | (87 | )% | Income from continuing operations before taxes | $ | 793 | $ | 17 | NM | $ | 1,932 | $ | 314 | NM | ||||||||||||||||||
Income taxes (benefits) | (77 | ) | (35 | ) | NM | (129 | ) | 207 | NM | |||||||||||||||||||||||||||||||||
Income taxes | Income taxes | 235 | (60 | ) | NM | 494 | (98 | ) | NM | |||||||||||||||||||||||||||||||||
Income from continuing operations | Income from continuing operations | $ | 29 | $ | 102 | (72 | )% | $ | 268 | $ | 867 | (69 | )% | Income from continuing operations | $ | 558 | $ | 77 | NM | $ | 1,438 | $ | 412 | NM | ||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Net (loss) attributable to noncontrolling interests | Net (loss) attributable to noncontrolling interests | (3 | ) | — | — | (8 | ) | — | — | |||||||||||||||||||||||||||||||||
Net income | Net income | $ | 29 | $ | 102 | (72 | )% | $ | 268 | $ | 867 | (69 | )% | Net income | $ | 561 | $ | 77 | NM | $ | 1,446 | $ | 412 | NM | ||||||||||||||||||
Average assets(in billions of dollars) | Average assets(in billions of dollars) | 61 | $ | 81 | (25 | )% | 59 | $ | 78 | (24 | )% | Average assets(in billions of dollars) | $ | 74 | $ | 66 | 12 | % | $ | 73 | $ | 64 | 14 | % | ||||||||||||||||||
Return on assets | Return on assets | 0.19 | % | 0.50 | % | 0.61 | % | 1.48 | % | Return on assets | 3.01 | % | 0.46 | % | 2.65 | % | 0.86 | % | ||||||||||||||||||||||||
Average deposits(in billions of dollars) | Average deposits(in billions of dollars) | 36 | 42 | (14 | )% | Average deposits(in billions of dollars) | 41 | 36 | 13 | |||||||||||||||||||||||||||||||||
Net credit losses as a % of average loans | 9.04 | 7.79 | ||||||||||||||||||||||||||||||||||||||||
Net credit losses as a percentage of average loans | Net credit losses as a percentage of average loans | 5.48 | % | 8.99 | % | |||||||||||||||||||||||||||||||||||||
Revenue by business | Revenue by business | Revenue by business | ||||||||||||||||||||||||||||||||||||||||
Retail banking | $ | 969 | $ | 1,067 | (9 | )% | $ | 2,843 | $ | 3,180 | (11 | )% | Retail banking | $ | 1,300 | $ | 1,114 | 17 | % | $ | 3,732 | $ | 3,252 | 15 | % | |||||||||||||||||
Citi-branded cards | 857 | 1,233 | (30 | ) | 2,593 | 3,726 | (30 | ) | Citi-branded cards | 933 | 857 | 9 | 2,695 | 2,593 | 4 | |||||||||||||||||||||||||||
Total | $ | 1,826 | $ | 2,300 | (21 | )% | $ | 5,436 | $ | 6,906 | (21 | )% | Total | $ | 2,233 | $ | 1,971 | 13 | % | $ | 6,427 | $ | 5,845 | 10 | % | |||||||||||||||||
Income (loss) from continuing operations by business | Income (loss) from continuing operations by business | Income (loss) from continuing operations by business | ||||||||||||||||||||||||||||||||||||||||
Retail banking | $ | 106 | $ | 112 | (5 | )% | $ | 436 | $ | 573 | (24 | )% | Retail banking | $ | 277 | $ | 154 | 80 | % | $ | 808 | $ | 580 | 39 | % | |||||||||||||||||
Citi-branded cards | (77 | ) | (10 | ) | NM | (168 | ) | 294 | NM | Citi-branded cards | 281 | (77 | ) | NM | 630 | (168 | ) | NM | ||||||||||||||||||||||||
Total | $ | 29 | $ | 102 | (72 | )% | $ | 268 | $ | 867 | (69 | )% | Total | $ | 558 | $ | 77 | NM | $ | 1,438 | $ | 412 | NM | |||||||||||||||||||
3Q093Q10 vs. 3Q083Q09
Revenues, net of interest expense declined 21%, increased 13% mainly due to higher lending and deposit volumes as well as better margins in retail banking and, in cards, higher ANR and fees from new account acquisitions as well as the impact of FX translation, lower cards receivables and spread compression, partially offsettranslation.
Net interest revenue increased 10%, mainly driven by higher businesslending and deposit volumes in retail banking. Net interest revenue was 20% lower than the prior year caused by the decrease in cards receivables as well as lower spreads resulting from a lower risk profile, partially offset by higher business volumes in retail banking. Average deposits were down 14%, due primarily tobanking and the impact of FX translation. Average retail banking loans and deposits increased 20% and 13%, respectively. The increases were also spurred by better spreads and positive FX translation.
Non-interest revenue declined 23% increased 21%, primarily due to higher fees in the cards business and the impact of FX translation.
Operating expenses declined 17%increased 12%, reflectingmainly due to the benefits from re-engineering effortsinvestments initiatives for account acquisitions in cards, the prior-year quarter's release of legal reserves and excess restructuring provisions, and the impact of FX translation.
Provisions for loan losses and for benefits and claims decreased $144 million78%, mainly due to lowerthe impact of a $300 million loan loss reserve build of $160 million. While delinquencies decreased duringrelease in the third quarter 2009 ascurrent period, compared to a $141 million build in the second quarter 2009,same period last year, and a 32% decline in net credit losses, reflecting improved credit conditions, especially in Mexico cards. The cards net credit loss rates increasedratio declined across the region during the period, from 16.2%17.80% to 18.1%. Rising losses were apparent in Brazil and Mexico; however, the business continues10.39%, reflecting continued economic recovery. The retail banking net credit loss ratio dropped from 2.68% to focus on repositioning and de-risking the portfolio, particularly in the Mexico cards business.2.50%.
3Q093Q10 YTD vs. 3Q083Q09 YTD
Revenues, net of interest expense, declined 21% drivenincreased 10%, mainly due to higher lending and deposit volumes in retail banking aided by the impact of FX translation, lower volumes and spread compressiona moderate increase in the cards business. Net interest revenue was 22% lower than the prior year with average credit cards loans down 22%, and net interest margin decreasing as well due to the cards spread compression impact. Non-interest revenue declined 20%, primarily due to the decline in cards fees as well as the impact of FX translation.
Operating expenses declined 13%, reflecting the benefits from re-engineering efforts and the impact of FX translation. The prior-year period also included a $257 million expense benefit related to a legal vehicle restructuring in Mexico.
Provisions for loan losses and for benefits and claims decreased $87 million or 4%. Cards net credit loss rates increased from 11.6% to 16.7%. Credit deterioration was apparent in Brazil and Mexico where the business has focused its repositioning and derisking efforts.
ASIA REGIONAL CONSUMER BANKING
| Third Quarter | | Nine Months | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | |||||||||||||||||||
In millions of dollars | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||
Net interest revenue | $ | 1,167 | $ | 1,227 | (5 | )% | $ | 3,445 | $ | 3,726 | (8 | )% | |||||||||
Non-interest revenue | 513 | 612 | (16 | ) | 1,397 | 1,948 | (28 | ) | |||||||||||||
Total Revenues, net of interest expense | $ | 1,680 | $ | 1,839 | (9 | )% | $ | 4,842 | $ | 5,674 | (15 | )% | |||||||||
Total operating expenses | $ | 869 | $ | 921 | (6 | )% | $ | 2,486 | $ | 2,881 | (14 | )% | |||||||||
Net credit losses | $ | 351 | $ | 257 | 37 | 977 | $ | 704 | 39 | % | |||||||||||
Credit reserve build (release) | 81 | 189 | (57 | )% | 415 | 301 | 38 | ||||||||||||||
Provisions for loan losses and for benefits and claims | $ | 432 | $ | 446 | (3 | )% | $ | 1,392 | $ | 1,005 | 39 | % | |||||||||
Income from continuing operations before taxes | $ | 379 | $ | 472 | (20 | )% | $ | 964 | $ | 1,788 | (46 | )% | |||||||||
Income taxes (benefits) | (67 | ) | 115 | NM | (5 | ) | 444 | NM | |||||||||||||
Income from continuing operations | $ | 446 | $ | 357 | 25 | % | $ | 969 | $ | 1,344 | (28 | )% | |||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | (1 | ) | 100 | ||||||||||||||
Net income | $ | 446 | $ | 357 | 25 | % | $ | 969 | $ | 1,345 | (28 | )% | |||||||||
Average assets(in billions of dollars) | $ | 92 | $ | 95 | (3 | )% | $ | 87 | $ | 96 | (9 | ) | |||||||||
Return on assets | 1.92 | % | 1.49 | % | 1.49 | % | 1.87 | % | |||||||||||||
Average deposits(in billions of dollars) | 91 | 93 | (2 | ) | |||||||||||||||||
Net credit losses as a % of average loans | 2.17 | 1.44 | |||||||||||||||||||
Revenue by business | |||||||||||||||||||||
Retail banking | $ | 1,039 | $ | 1,150 | (10 | )% | $ | 3,037 | $ | 3,642 | (17 | )% | |||||||||
Citi-branded cards | 641 | 689 | (7 | ) | 1,805 | 2,032 | (11 | ) | |||||||||||||
Total | $ | 1,680 | $ | 1,839 | (9 | )% | $ | 4,842 | $ | 5,674 | (15 | )% | |||||||||
Income (loss) from continuing operations by business | |||||||||||||||||||||
Retail banking | $ | 376 | $ | 310 | 21 | % | $ | 865 | $ | 1,052 | (18 | )% | |||||||||
Citi-branded cards | 70 | 47 | 49 | 104 | 292 | (64 | ) | ||||||||||||||
Total | $ | 446 | $ | 357 | 25 | % | $ | 969 | $ | 1,344 | (28 | )% | |||||||||
NM Not meaningful
3Q09 vs. 3Q08
Revenues, net of interest expense, declined 9% driven by the absence of Visa assets sales gains in the 2008 third quarter, lower investment product revenues, lower loan volumes and the impact of FX translation. Net interest revenue was 5% lower than the prior-year period. Average loans and deposits were down 9% and 1%, respectively, in each case primarily due to the impact of FX translation. Non-interest revenue declined 16%, primarily due to the decline in investment revenues, lower Cards Purchase sales, the absence of Visa share sales gains and the impact of FX translation.
Operating expensesNet interest revenue declined 6%increased 11%, reflectingmainly driven by higher lending and deposit volumes in retail banking. Average retail banking loans and deposits increased 21% and 13%, respectively. Additionally, cards ANR moderately increased and there was a positive FX translation.
Non-interest revenue increased 9%, due to higher fees in the benefits from re-engineering effortscards business and the impact of FX translation.
Provisions for loan losses and for benefits and claims decreased 3%65%, mainly due to the impact of lower credita net loan loss reserve release of $677 million year-to-date 2010, compared to a $463 million build offset by an increasein the same period last year, and a 22% decline in net credit losses, reflecting improved credit conditions, especially in Mexico cards. The cards net credit
loss ratio declined from 16.36% to 12.14%, while the retail banking net credit loss ratio declined from 3.01% to 2.17%.
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 impact of FX translation. Rising credit losses were particularly apparentlargest Citi presence in the portfolios inSouth Korea, Japan, Taiwan, Singapore, Australia, Hong Kong, India and Korea. Compared toIndonesia. At September 30, 2010,Asia RCB had approximately 707 retail branches, 16 million retail banking accounts, $101 billion in average customer deposits, and $59 billion in retail banking loans. In addition, the second quarter of 2009, delinquencies improved and net credit losses flattened as this region showed possible early signs of economic recovery and increased levels of customer activity.business had approximately 15 million Citi-branded card accounts with $19 billion in outstanding loan balances.
| Third Quarter | | Nine Months | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | |||||||||||||||||||
In millions of dollars | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||
Net interest revenue | $ | 1,232 | $ | 1,201 | 3 | % | $ | 3,784 | $ | 3,551 | 7 | % | |||||||||
Non-interest revenue | 607 | 516 | 18 | 1,700 | 1,407 | 21 | |||||||||||||||
Total revenues, net of interest expense | $ | 1,839 | $ | 1,717 | 7 | % | $ | 5,484 | $ | 4,958 | 11 | % | |||||||||
Total operating expenses | $ | 1,025 | $ | 882 | 16 | % | $ | 2,881 | $ | 2,523 | 14 | % | |||||||||
Net credit losses | $ | 245 | $ | 367 | (33 | )% | $ | 776 | $ | 1,022 | (24 | )% | |||||||||
Credit reserve build (release) | (92 | ) | 94 | NM | (242 | ) | 445 | NM | |||||||||||||
Provisions for loan losses and for benefits and claims | $ | 153 | $ | 461 | (67 | )% | $ | 534 | $ | 1,467 | (64 | )% | |||||||||
Income from continuing operations before taxes | $ | 661 | $ | 374 | 77 | % | $ | 2,069 | $ | 968 | NM | ||||||||||
Income taxes | 156 | (70 | ) | NM | 414 | (3 | ) | NM | |||||||||||||
Income from continuing operations | $ | 505 | $ | 444 | 14 | % | $ | 1,655 | $ | 971 | 70 | % | |||||||||
Net income attributable to noncontrolling interests | — | — | — | — | — | — | |||||||||||||||
Net income | $ | 505 | $ | 444 | 14 | % | $ | 1,655 | $ | 971 | 70 | % | |||||||||
Average assets(in billions of dollars) | $ | 109 | $ | 96 | 14 | % | $ | 106 | $ | 90 | 18 | % | |||||||||
Return on assets | 1.84 | % | 1.83 | % | 2.09 | % | 1.44 | % | |||||||||||||
Average deposits(in billions of dollars) | 101 | 91 | 11 | ||||||||||||||||||
Net credit losses as a percentage of average loans | 1.29 | % | 2.21 | % | |||||||||||||||||
Revenue by business | |||||||||||||||||||||
Retail banking | $ | 1,147 | $ | 1,076 | 7 | % | $ | 3,415 | $ | 3,153 | 8 | % | |||||||||
Citi-branded cards | 692 | 641 | 8 | 2,069 | 1,805 | 15 | |||||||||||||||
Total | $ | 1,839 | $ | 1,717 | 7 | % | $ | 5,484 | $ | 4,958 | 11 | % | |||||||||
Income from continuing operations by business | |||||||||||||||||||||
Retail banking | $ | 330 | $ | 374 | (12 | )% | $ | 1,119 | $ | 867 | 29 | % | |||||||||
Citi-branded cards | 175 | 70 | NM | 536 | 104 | NM | |||||||||||||||
Total | $ | 505 | $ | 444 | 14 | % | $ | 1,655 | $ | 971 | 70 | % | |||||||||
3Q09 YTD3Q10 vs. 3Q08 YTD3Q09
Revenues, net of interest expense, declined 15% driven by absence of Visa assetsincreased 7%, reflecting higher cards purchase sales, gains, a 34% decline in investment sales, lower loan and deposit volumes, and the impact of FX translation. translation, partially offset by lower spreads.
Net interest revenue was 8% lower3% higher than the prior-year period, reflectingmainly due to higher lending and deposit volumes and the impact of FX translation, partially offset by lower spreads. Average loans and deposits. deposits were up 15% and 11%, respectively.
Non-interest revenue declined 28% increased 18%, primarily due to the absence of Visa assethigher investment revenues, higher cards purchase sales, gains and the decline in investment sales.impact of FX translation.
Operating expenses declined 14%increased 16%, reflectingprimarily due to the benefits from re-engineering effortsincrease in volumes and higher investment spending, and the impact of FX translation.
Provisions for loan losses and for benefits and claims decreased 67%, mainly due to the impact of a $92 million loan loss reserve release in the current quarter, compared to a $94 million loan loss reserve build in the prior-year quarter, and a decrease in net credit losses of 33%. These declines were partially offset by the impact of FX translation. Delinquencies and net credit losses continued to decline from their peak level in the second quarter of 2009 as the region benefitted from continued economic recovery and increased 39%levels of customer activity. The cards net credit loss ratio decreased from 5.89% in the prior-year quarter to 3.54% in the current quarter. The retail banking net credit loss ratio decreased from 0.96% in the prior-year quarter to 0.56% in the current quarter.
3Q10 YTD vs. 3Q09 YTD
Revenues, net of interest expense, increased 11%, driven by higher cards purchase sales, investment sales and loan and deposit volumes, and the impact of FX translation, partially offset by lower spread.
Net interest revenue was 7% 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 21%, primarily due to higher investment revenues, higher cards purchase sales, and the impact of FX translation.
Operating expenses increased 14%, primarily due to increase in volumes, continued investment spending, and the impact of FX translation.
Provisions for loan losses and for benefits and claims decreased 64%, mainly due to the impact of a net loan loss reserve release of $242 million in the first nine months of 2010, compared to a $445 million loan loss 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 provisions for loan losses and for benefits and claims reflects continued credit quality improvement across the region, particularly in India and Korea and a higher credit reserve build.South Korea.
Institutional Clients Group (ICG)
includesSecurities and Banking andTransaction Services.ICG provides corporate, institutional and ultra-high net worth clients with a full range of products and services, including cash management, trading, underwriting, lending and advisory services, around the world.ICG's international presence is supported by trading floors in approximately 75 countries and a proprietary network withinTransaction Services in over 95 countries. At September 30, 2010,ICG had approximately $963 billion of assets and $457 billion of deposits.
| | Third Quarter | | Nine Months | | | Third Quarter | | Nine Months | | |||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | % Change | % Change | | % Change | % Change | |||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | 2009 | 2008 | 2009 | 2008 | In millions of dollars | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||||
Commissions and Fees | $ | 565 | $ | 754 | (25 | )% | $ | 1,500 | $ | 2,269 | (34 | )% | |||||||||||||||||||||||||||||
Administration and Other Fiduciary Fees | 1,258 | 1,397 | (10 | ) | 3,717 | 4,148 | (10 | ) | |||||||||||||||||||||||||||||||||
Commissions and fees | Commissions and fees | $ | 1,016 | $ | 1,122 | (9 | )% | $ | 3,210 | $ | 3,100 | 4 | % | ||||||||||||||||||||||||||||
Administration and other fiduciary fees | Administration and other fiduciary fees | 672 | 702 | (4 | ) | 2,008 | 2,122 | (5 | ) | ||||||||||||||||||||||||||||||||
Investment banking | Investment banking | 1,063 | 740 | 44 | 3,245 | 3,005 | 8 | Investment banking | 829 | 1,066 | (22 | ) | 2,374 | 3,247 | (27 | ) | |||||||||||||||||||||||||
Principal transactions | Principal transactions | (535 | ) | 3,116 | NM | 7,699 | 8,065 | (5 | ) | Principal transactions | 982 | (571 | ) | NM | 5,958 | 7,259 | (18 | ) | |||||||||||||||||||||||
Other | Other | 556 | (188 | ) | NM | 1,783 | (107 | ) | NM | Other | 843 | 518 | 63 | 1,768 | 1,564 | 13 | |||||||||||||||||||||||||
Total non-interest revenue | $ | 2,907 | $ | 5,819 | (50 | )% | $ | 17,944 | $ | 17,380 | 3 | % | Total non-interest revenue | $ | 4,342 | $ | 2,837 | 53 | % | $ | 15,318 | $ | 17,292 | (11 | )% | ||||||||||||||||
Net interest revenue (including dividends) | 4,443 | 4,092 | 9 | 13,559 | 12,551 | 8 | Net interest revenue (including dividends) | 3,786 | 4,511 | (16 | ) | 11,707 | 13,814 | (15 | ) | ||||||||||||||||||||||||||
Total revenues, net of interest expenses | $ | 7,350 | $ | 9,911 | (26 | )% | $ | 31,503 | $ | 29,931 | 5 | % | |||||||||||||||||||||||||||||
Total revenues, net of interest expense | Total revenues, net of interest expense | $ | 8,128 | $ | 7,348 | 11 | % | $ | 27,025 | $ | 31,106 | (13 | )% | ||||||||||||||||||||||||||||
Total operating expenses | Total operating expenses | 4,634 | �� | 4,919 | (6 | ) | 12,883 | 16,169 | (20 | ) | Total operating expenses | 4,796 | 4,644 | 3 | 14,452 | 12,904 | 12 | ||||||||||||||||||||||||
Net credit losses | 292 | 221 | 32 | 537 | 595 | (10 | ) | Net credit losses | 289 | 292 | (1 | ) | 434 | 538 | (19 | ) | |||||||||||||||||||||||||
Provisions for unfunded lending commitments | — | (80 | ) | 100 | 115 | (155 | ) | NM | Provision for unfunded lending commitments | 1 | — | — | (28 | ) | 115 | NM | |||||||||||||||||||||||||
Credit reserve build (release) | 146 | 285 | (49 | ) | 995 | 500 | 99 | Credit reserve build (release) | (24 | ) | 166 | NM | (435 | ) | 1,090 | NM | |||||||||||||||||||||||||
Provisions for benefits and claims | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Provision for credit losses | $ | 438 | $ | 426 | 3 | % | $ | 1,647 | $ | 940 | 75 | % | |||||||||||||||||||||||||||||
Provisions for credit losses and for benefits and claims | Provisions for credit losses and for benefits and claims | $ | 266 | $ | 458 | (42 | )% | $ | (29 | ) | $ | 1,743 | NM | ||||||||||||||||||||||||||||
Income from continuing operations before taxes | Income from continuing operations before taxes | $ | 2,278 | $ | 4,566 | (50 | )% | $ | 16,973 | $ | 12,822 | 32 | % | Income from continuing operations before taxes | $ | 3,066 | $ | 2,246 | 37 | % | $ | 12,602 | $ | 16,459 | (23 | )% | |||||||||||||||
Income taxes (benefits) | 584 | 1,410 | (59 | ) | 5,340 | 3,907 | 37 | ||||||||||||||||||||||||||||||||||
Income taxes | Income taxes | 734 | 460 | 60 | 3,504 | 4,821 | (27 | ) | |||||||||||||||||||||||||||||||||
Income from continuing operations | Income from continuing operations | $ | 1,694 | $ | 3,156 | (46 | )% | $ | 11,633 | $ | 8,915 | 30 | % | Income from continuing operations | $ | 2,332 | $ | 1,786 | 31 | % | $ | 9,098 | $ | 11,638 | (22 | )% | |||||||||||||||
Net income (loss) attributable to noncontrolling interests | 23 | 11 | NM | 23 | 40 | (43 | ) | ||||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | 34 | 23 | 48 | 80 | 23 | NM | ||||||||||||||||||||||||||||||||||
Net income | Net income | $ | 1,671 | $ | 3,145 | (47 | )% | $ | 11,610 | $ | 8,875 | 31 | % | Net income | $ | 2,298 | $ | 1,763 | 30 | % | $ | 9,018 | $ | 11,615 | (22 | )% | |||||||||||||||
Average assets(in billions of dollars) | Average assets(in billions of dollars) | $ | 831 | $ | 953 | (13 | )% | $ | 833 | $ | 1,062 | (22 | )% | Average assets(in billions of dollars) | $ | 941 | $ | 848 | 11 | % | $ | 937 | $ | 837 | 12 | % | |||||||||||||||
Return on assets | Return on assets | 0.80 | % | 1.31 | % | 1.86 | % | 1.12 | % | Return on assets | 0.97 | % | 0.82 | % | 1.29 | % | 1.86 | % | |||||||||||||||||||||||
Revenue by region: | |||||||||||||||||||||||||||||||||||||||||
Revenues by region | Revenues by region | ||||||||||||||||||||||||||||||||||||||||
North America | $ | 1,955 | $ | 4,558 | (57 | )% | $ | 10,342 | $ | 12,674 | (18 | )% | North America | $ | 2,823 | $ | 1,944 | 45 | % | $ | 10,278 | $ | 9,926 | 4 | % | ||||||||||||||||
EMEA | 3,043 | 2,348 | 30 | 11,523 | 7,882 | 46 | EMEA | 2,568 | 3,047 | (16 | ) | 8,526 | 11,531 | (26 | ) | ||||||||||||||||||||||||||
Latin America | 1,040 | 847 | 23 | 3,567 | 2,964 | 20 | Latin America | 1,023 | 1,042 | (2 | ) | 2,888 | 3,574 | (19 | ) | ||||||||||||||||||||||||||
Asia | 1,312 | 2,158 | (39 | ) | 6,071 | 6,411 | (5 | ) | Asia | 1,714 | 1,315 | 30 | 5,333 | 6,075 | (12 | ) | |||||||||||||||||||||||||
Total revenues | Total revenues | $ | 8,128 | $ | 7,348 | 11 | % | $ | 27,025 | $ | 31,106 | (13 | )% | ||||||||||||||||||||||||||||
Total | $ | 7,350 | $ | 9,911 | (26 | )% | $ | 31,503 | $ | 29,931 | 5 | % | |||||||||||||||||||||||||||||
Income (loss) from continuing operations by region: | |||||||||||||||||||||||||||||||||||||||||
Income from continuing operations by region | Income from continuing operations by region | ||||||||||||||||||||||||||||||||||||||||
North America | $ | 75 | $ | 1,434 | (95 | )% | $ | 2,964 | $ | 3,611 | (18 | )% | North America | $ | 587 | $ | 159 | NM | $ | 3,175 | $ | 2,943 | 8 | % | |||||||||||||||||
EMEA | 856 | 450 | 90 | 4,450 | 1,599 | NM | EMEA | 810 | 858 | (6 | )% | 2,821 | 4,451 | (37 | ) | ||||||||||||||||||||||||||
Latin America | 364 | 386 | (6 | ) | 1,595 | 1,304 | 22 | Latin America | 437 | 367 | 19 | 1,216 | 1,616 | (25 | ) | ||||||||||||||||||||||||||
Asia | 399 | 886 | (55 | ) | 2,624 | 2,401 | 9 | Asia | 498 | 402 | 24 | 1,886 | 2,628 | (28 | ) | ||||||||||||||||||||||||||
Total income from continuing operations | Total income from continuing operations | $ | 2,332 | $ | 1,786 | 31 | % | $ | 9,098 | $ | 11,638 | (22 | )% | ||||||||||||||||||||||||||||
Total | $ | 1,694 | $ | 3,156 | (46 | )% | $ | 11,633 | $ | 8,915 | 30 | % | |||||||||||||||||||||||||||||
Average loans by region(in billions): | |||||||||||||||||||||||||||||||||||||||||
Average loans by region(in billions of dollars) | Average loans by region(in billions of dollars) | ||||||||||||||||||||||||||||||||||||||||
North America | $ | 43 | $ | 52 | (17 | )% | North America | $ | 66 | $ | 49 | 35 | % | ||||||||||||||||||||||||||||
EMEA | 42 | 49 | (14 | ) | EMEA | 38 | 43 | (12 | ) | ||||||||||||||||||||||||||||||||
Latin America | 21 | 24 | (13 | ) | Latin America | 22 | 22 | — | |||||||||||||||||||||||||||||||||
Asia | 27 | 36 | (25 | ) | Asia | 37 | 27 | 37 | |||||||||||||||||||||||||||||||||
Total average loans | Total average loans | $ | 163 | $ | 141 | 16 | % | ||||||||||||||||||||||||||||||||||
Total | $ | 133 | $ | 161 | (17 | )% | |||||||||||||||||||||||||||||||||||
Securities and Banking (S&B) offers a wide array of investment and commercial banking services and products for corporations, governments, institutional and retail investors, and ultra-high net worth individuals.S&B includes investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, foreign exchange, structured products, cash instruments and related derivatives, and private banking.S&B revenue is generated primarily from fees for investment banking and advisory services, fees and interest on loans, fees and spread on foreign exchange, structured products, cash instruments and related derivatives, income earned on principal transactions, and fees and spreads on private banking services.
| | Third Quarter | | Nine Months | | | Third Quarter | | Nine Months | | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | % Change | % Change | | % Change | % Change | ||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | 2009 | 2008 | 2009 | 2008 | In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||||||||
Net interest revenue | Net interest revenue | $ | 3,050 | $ | 2,670 | 14 | % | $ | 9,305 | $ | 8,520 | 9 | % | Net interest revenue | $ | 2,353 | $ | 3,118 | (25 | )% | $ | 7,488 | $ | 9,560 | (22 | )% | ||||||||||||||
Non-interest revenue | Non-interest revenue | 1,843 | 4,675 | (61 | ) | 14,884 | 13,949 | 7 | Non-interest revenue | 3,240 | 1,773 | 83 | 12,063 | 14,232 | (15 | ) | ||||||||||||||||||||||||
Revenues, net of interest expense | Revenues, net of interest expense | $ | 4,893 | $ | 7,345 | (33 | )% | $ | 24,189 | $ | 22,469 | 8 | % | Revenues, net of interest expense | $ | 5,593 | $ | 4,891 | 14 | % | $ | 19,551 | $ | 23,792 | (18 | )% | ||||||||||||||
Operating expenses | 3,493 | 3,667 | (5 | ) | 9,580 | 12,322 | (22 | ) | ||||||||||||||||||||||||||||||||
Total operating expenses | Total operating expenses | 3,566 | 3,503 | 2 | 10,901 | 9,601 | 14 | |||||||||||||||||||||||||||||||||
Net credit losses | 294 | 223 | 32 | 539 | 593 | (9 | ) | Net credit losses | 288 | 294 | (2 | ) | 431 | 540 | (20 | ) | ||||||||||||||||||||||||
Provision for unfunded lending commitments | — | (74 | ) | 100 | 115 | (149 | ) | NM | Provisions for unfunded lending commitments | 1 | — | — | (28 | ) | 115 | NM | ||||||||||||||||||||||||
Credit reserve build (release) | 151 | 288 | (48 | ) | 994 | 494 | NM | Credit reserve build (release) | (8 | ) | 171 | NM | (366 | ) | 1,089 | NM | ||||||||||||||||||||||||
Provisions for benefits and claims | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Provision for credit losses | $ | 445 | $ | 437 | 2 | % | $ | 1,648 | $ | 938 | 76 | % | ||||||||||||||||||||||||||||
Income before taxes and noncontrolling interest | $ | 955 | $ | 3,241 | (71 | )% | $ | 12,961 | $ | 9,209 | 41 | % | ||||||||||||||||||||||||||||
Income taxes | 200 | 1,003 | (80 | ) | 4,145 | 2,812 | 47 | |||||||||||||||||||||||||||||||||
Provisions for credit losses and benefits and claims | Provisions for credit losses and benefits and claims | $ | 281 | $ | 465 | (40 | ) | $ | 37 | $ | 1,744 | (98 | )% | |||||||||||||||||||||||||||
Income before taxes and noncontrolling interests | Income before taxes and noncontrolling interests | $ | 1,746 | $ | 923 | 89 | % | $ | 8,613 | $ | 12,447 | (31 | )% | |||||||||||||||||||||||||||
Income taxes (benefits) | Income taxes (benefits) | 339 | 76 | NM | 2,315 | 3,626 | (36 | ) | ||||||||||||||||||||||||||||||||
Income from continuing operations | Income from continuing operations | 755 | 2,238 | (66 | ) | 8,816 | 6,397 | 38 | Income from continuing operations | 1,407 | 847 | 66 | 6,298 | 8,821 | (29 | ) | ||||||||||||||||||||||||
Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | 18 | 2 | NM | 19 | 14 | 36 | Net income attributable to noncontrolling interests | 29 | 18 | 61 | 65 | 19 | NM | ||||||||||||||||||||||||||
Net income | Net income | $ | 737 | $ | 2,236 | (67 | )% | $ | 8,797 | $ | 6,383 | 38 | % | Net income | $ | 1,378 | $ | 829 | 66 | % | $ | 6,233 | $ | 8,802 | (29 | )% | ||||||||||||||
Average assets(in billions of dollars) | Average assets(in billions of dollars) | $ | 771 | $ | 883 | (13 | )% | $ | 774 | $ | 990 | (22 | )% | Average assets(in billions of dollars) | $ | 869 | $ | 788 | 10 | % | $ | 869 | $ | 778 | 12 | % | ||||||||||||||
Return on assets | Return on assets | 0.38 | % | 1.01 | % | 1.52 | % | 0.86 | % | Return on assets | 0.63 | % | 0.42 | % | 0.96 | % | 1.51 | % | ||||||||||||||||||||||
Revenues by region: | ||||||||||||||||||||||||||||||||||||||||
Revenues by region | Revenues by region | |||||||||||||||||||||||||||||||||||||||
North America | $ | 1,312 | $ | 4,018 | (67 | )% | $ | 8,454 | $ | 11,117 | (24 | )% | North America | $ | 2,203 | $ | 1,301 | 69 | % | $ | 8,383 | $ | 8,038 | 4 | % | |||||||||||||||
EMEA | 2,198 | 1,395 | 58 | 8,974 | 5,098 | 76 | EMEA | 1,733 | 2,202 | (21 | ) | 6,010 | 8,982 | (33 | ) | |||||||||||||||||||||||||
Latin America | 703 | 469 | 50 | 2,547 | 1,872 | 36 | Latin America | 639 | 705 | (9 | ) | 1,804 | 2,554 | (29 | ) | |||||||||||||||||||||||||
Asia | 680 | 1,463 | (54 | ) | 4,214 | 4,382 | (4 | ) | Asia | 1,018 | 683 | 49 | 3,354 | 4,218 | (20 | ) | ||||||||||||||||||||||||
Total revenues | Total revenues | $ | 4,893 | $ | 7,345 | (33 | )% | $ | 24,189 | $ | 22,469 | 8 | % | Total revenues | $ | 5,593 | $ | 4,891 | 14 | % | $ | 19,551 | $ | 23,792 | (18 | )% | ||||||||||||||
Net income (loss) from continuing operations by region: | ||||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations by region | Income (loss) from continuing operations by region | |||||||||||||||||||||||||||||||||||||||
North America | $ | (77 | ) | $ | 1,340 | NM | $ | 2,493 | $ | 3,368 | (26 | )% | North America | $ | 456 | $ | 7 | NM | $ | 2,719 | $ | 2,472 | 10 | % | ||||||||||||||||
EMEA | 548 | 102 | NM | 3,466 | 674 | NM | EMEA | 505 | 550 | (8 | )% | 1,892 | 3,467 | (45 | ) | |||||||||||||||||||||||||
Latin America | 216 | 227 | (5 | )% | 1,137 | 853 | 33 | Latin America | 266 | 219 | 21 | 735 | 1,158 | (37 | ) | |||||||||||||||||||||||||
Asia | 68 | 569 | (88 | ) | 1,720 | 1,502 | 15 | Asia | 180 | 71 | NM | 952 | 1,724 | (45 | ) | |||||||||||||||||||||||||
Total net income from continuing operations | $ | 755 | $ | 2,238 | (66 | )% | $ | 8,816 | $ | 6,397 | 38 | % | ||||||||||||||||||||||||||||
Total income from continuing operations | Total income from continuing operations | $ | 1,407 | $ | 847 | 66 | % | $ | 6,298 | $ | 8,821 | (29 | )% | |||||||||||||||||||||||||||
Securities and Banking | ||||||||||||||||||||||||||||||||||||||||
Securities and Banking revenue details | Securities and Banking revenue details | |||||||||||||||||||||||||||||||||||||||
Revenue details: | Fixed income markets | $ | 3,501 | $ | 4,024 | (13 | )% | $ | 12,594 | $ | 19,616 | (36 | )% | |||||||||||||||||||||||||||
Net Investment Banking | $ | 1,163 | $ | 618 | 88 | % | $ | 3,305 | $ | 2,783 | 19 | % | Investment banking | 930 | 1,164 | (20 | ) | 2,661 | 3,308 | (20 | ) | |||||||||||||||||||
Lending | (699 | ) | 1,262 | NM | (1,956 | ) | 2,026 | NM | Equity markets | 1,040 | 446 | NM | 2,905 | 3,152 | (8 | ) | ||||||||||||||||||||||||
Equity markets | 446 | 550 | (19 | ) | 3,151 | 3,237 | (3 | ) | Lending | (18 | ) | (794 | ) | 98 | 747 | (2,261 | ) | NM | ||||||||||||||||||||||
Fixed income markets | 3,945 | 4,756 | (17 | ) | 19,739 | 13,927 | 42 | Private Bank | 497 | 522 | (5 | ) | 1,503 | 1,507 | — | |||||||||||||||||||||||||
Private bank | 520 | 563 | (8 | ) | 1,496 | 1,789 | (16 | ) | Other Securities and Banking | (357 | ) | (471 | ) | 24 | (859 | ) | (1,530 | ) | 44 | |||||||||||||||||||||
Other Securities and Banking | (482 | ) | (404 | ) | (19 | ) | (1,546 | ) | (1,293 | ) | (20 | ) | ||||||||||||||||||||||||||||
Total Securities and Banking revenues | Total Securities and Banking revenues | $ | 5,593 | $ | 4,891 | 14 | % | $ | 19,551 | $ | 23,792 | (18 | )% | |||||||||||||||||||||||||||
Total Securities and Banking Revenues | $ | 4,893 | $ | 7,345 | (33 | )% | $ | 24,189 | $ | 22,469 | 8 | % | ||||||||||||||||||||||||||||
3Q10 vs. 3Q09
Revenues, net of interest expense, were $5.6 billion, compared to $4.9 billion in the prior-year quarter, resulting from an increase in CVA, lending and advisory revenues, partially offset by a decrease in fixed income markets, debt and equity underwriting, equity markets and Private Bank revenues. CVA was $99 million in the third quarter of 2010, reflecting derivative CVA gains as corporate spreads tightened during the quarter. CVA of negative $1.8 billion in the third quarter of 2009 was driven by narrowing of Citigroup spreads during the period. Lending revenues increased from negative $0.8 billion to negative $18 million, due to lower losses on credit default swap hedges. Fixed income markets revenues (excluding CVA, net of hedges, of $0.1 billion and negative $0.8 billion in the current quarter and prior-year quarter, respectively) declined $1.5 billion to $3.4 billion, with a majority of the decline coming from weaker results in Credit Products, Securitized Products and G10 Rates trading, which reflected a challenging market environment. This was partially offset by strong performance in emerging markets. Equity markets revenues (excluding CVA, net of hedges, of
negative $22 million and negative $0.9 billion in the current quarter and prior-year quarter, respectively), decreased $0.3 billion to $1.1 billion, driven by lower client activity levels. Investment banking revenues decreased $0.2 billion to $0.9 billion, reflecting lower levels of market activity in debt and equity underwriting, partially offset by an increase in advisory revenues resulting from increased M&A transaction volume and improvement in completed M&A market share.
Operating expenses increased 2%, or $63 million, to $3.6 billion, reflecting select investments in the businesses.
Provisions for loan losses and for benefits and claims decreased by $0.2 billion to $0.3 billion, primarily attributable to the impact of a $7 million credit reserve release in the current quarter, compared to a $171 million build in the prior-year quarter, as improvements continued in the corporate loan portfolio.
3Q10 YTD vs. 3Q09 YTD
Revenues, net of interest expense for the current period were $19.6 billion, compared to $23.8 billion for the prior-year period, which was a particularly strong nine months driven by robust fixed income markets and higher client activity levels in investment banking. The decrease was partially offset by an increase in lending revenues, due to gains on credit default swap hedges. Revenue declines were also partially offset by an increase in CVA.
Operating expenses increased 14%, or $1.3 billion, to $10.9 billion, mainly driven by higher compensation costs, the U.K. bonus tax in the second quarter of 2010 and a net change in the litigation reserve releases.
Provisions for loan losses and for benefits and claims decreased by $1.7 billion to $37 million primarily attributable to the impact of a $394 million credit reserve release in the current period, compared to a $1.2 billion build in the prior-year period, as the market environment showed signs of stabilization.
Transaction Services is composed of Treasury and Trade Solutions (TTS) and Securities and Fund Services (SFS). TTS provides comprehensive cash management and trade finance for corporations, financial institutions and public sector entities worldwide. SFS provides custody and funds services to investors such as insurance companies, mutual funds and hedge funds, clearing services to intermediaries such as broker-dealers, and depository and agency/trust services to multinational corporations and governments globally. Revenue is generated from net interest revenue on deposits in TTS and SFS, as well as from trade loans and from fees for transaction processing and fees on assets under custody in SFS.
| Third Quarter | | Nine Months | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | ||||||||||||||||||
In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
Net interest revenue | $ | 1,433 | $ | 1,393 | 3 | % | $ | 4,219 | $ | 4,254 | (1 | )% | ||||||||
Non-interest revenue | 1,102 | 1,064 | 4 | 3,255 | 3,060 | 6 | ||||||||||||||
Total revenues, net of interest expense | $ | 2,535 | $ | 2,457 | 3 | % | $ | 7,474 | $ | 7,314 | 2 | % | ||||||||
Total operating expenses | 1,230 | 1,141 | 8 | 3,551 | 3,303 | 8 | ||||||||||||||
Provisions for loan losses and for benefits and claims | (15 | ) | (7 | ) | NM | (66 | ) | (1 | ) | NM | ||||||||||
Income before taxes and noncontrolling interests | $ | 1,320 | $ | 1,323 | — | $ | 3,989 | $ | 4,012 | (1 | )% | |||||||||
Income taxes | 395 | 384 | 3 | 1,189 | 1,195 | (1 | ) | |||||||||||||
Income from continuing operations | 925 | 939 | (1 | ) | 2,800 | 2,817 | (1 | ) | ||||||||||||
Net income attributable to noncontrolling interests | 5 | 5 | — | 15 | 4 | NM | ||||||||||||||
Net income | $ | 920 | $ | 934 | (1 | )% | $ | 2,785 | $ | 2,813 | (1 | )% | ||||||||
Average assets(in billions of dollars) | 72 | 60 | 20 | % | 68 | 59 | 15 | % | ||||||||||||
Return on assets | 5.07 | % | 6.18 | % | 5.48 | % | 6.37 | % | ||||||||||||
Revenues by region | ||||||||||||||||||||
North America | $ | 620 | $ | 643 | (4 | )% | $ | 1,895 | $ | 1,888 | — | |||||||||
EMEA | 835 | 845 | (1 | ) | 2,516 | 2,549 | (1 | )% | ||||||||||||
Latin America | 384 | 337 | 14 | 1,084 | 1,020 | 6 | ||||||||||||||
Asia | 696 | 632 | 10 | 1,979 | 1,857 | 7 | ||||||||||||||
Total revenues | $ | 2,535 | $ | 2,457 | 3 | % | $ | 7,474 | $ | 7,314 | 2 | % | ||||||||
Revenue details | ||||||||||||||||||||
Treasury and Trade Solutions | $ | 1,846 | $ | 1,794 | 3 | % | $ | 5,432 | $ | 5,337 | 2 | % | ||||||||
Securities and Fund Services | 689 | 663 | 4 | 2,042 | 1,977 | 3 | ||||||||||||||
Total revenues | $ | 2,535 | $ | 2,457 | 3 | % | $ | 7,474 | $ | 7,314 | 2 | % | ||||||||
Income from continuing operations by region | ||||||||||||||||||||
North America | $ | 131 | $ | 152 | (14 | )% | $ | 456 | $ | 471 | (3 | )% | ||||||||
EMEA | 305 | 308 | (1 | ) | 929 | 984 | (6 | ) | ||||||||||||
Latin America | 171 | 148 | 16 | 481 | 458 | 5 | ||||||||||||||
Asia | 318 | 331 | (4 | ) | 934 | 904 | 3 | |||||||||||||
Total income from continuing operations | $ | 925 | $ | 939 | (1 | )% | $ | 2,800 | $ | 2,817 | (1 | )% | ||||||||
Key indicators | ||||||||||||||||||||
Average deposits and other customer liability balances(in billions of dollars) | $ | 340 | $ | 314 | 8 | % | ||||||||||||||
EOP assets under custody(in trillions of dollars) | 12.4 | 12.1 | 2 | |||||||||||||||||
3Q10 vs. 3Q083Q09
Revenues, net of interest expense, decreased 33% or $2.5 billion to $4.9 billion mainly fromgrew 3% with increases in both the TTS and SFS businesses. TTS revenue marks of negative $1.4 billion, set forthincreased 3%, driven primarily by growth in greater detail below,Trade and a decrease in lendingCards businesses as well as higher balances which more than offset spread compression. SFS revenues of $2.0 billion to negative $699 million (mainly from losses on credit derivative positions). Fixed income markets revenues declined $811 million to $3.9 billion due to negative credit value adjustments of $760 million (mainly due to narrowing in Citigroup spreads, partially offset by the narrowing of counterparty spreads)increased 4%, compared to positive credit value adjustments of $2.6 billion in the third quarter of 2008, partially offset by stronger performances across most fixed income categories as market conditions improved. Equity markets revenues declined $104 million or 19% primarily driven by negative credit value adjustments of $878 million, offset by stronger results in proprietary trading and derivatives. Investment banking revenueshigher fees as well as increased $545 million, led by stronger high yield and investment grade debt issuances in debt underwriting, and stronger volumes in equity underwriting, with a decline in advisory revenues resulting from lower global M&Aclient activity.
Operating expenses decreased 5% or $174increased 8%, related to increased technology and other investment spend required to support future business growth.
Provisions for loan losses and for benefits and claims declined by $8 million, primarily attributable to $3.5 billion, mainlya credit reserve release of $16 million in the current quarter, reflecting the improved quality of the portfolio.
3Q10 YTD vs. 3Q09 YTD
Revenues, net of interest expense, grew 2% as improvement in fees in both the TTS and SFS businesses more than offset spread compression. TTS revenue increased 2%, driven primarily by growth in Trade and Cards businesses. SFS revenues increased 3%, driven by higher fees as a result of growth in assets under custody and client activity.
Operating expenses increased 8%, related to continued investment spend required to support future business growth, as well as higher transaction related costs.
Provisions for loan losses and for benefits and claims declined by $65 million, primarily attributable to a credit reserve release of $69 million, reflecting the improved quality of the portfolio.
Citi Holdings contains businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp businesses. These noncore businesses tend to be more asset intensive and reliant on wholesale funding and also may be product-driven rather than client-driven. Citi intends to exit these businesses as quickly as practicable in an economically rational manner through business divestitures, portfolio run-offs and asset sales.
Citi has made substantial progress divesting and exiting businesses from Citi Holdings, having completed more than 30 divestiture transactions since the beginning of 2009 through September 30, 2010, including Smith Barney, Nikko Cordial Securities, Nikko Asset Management, Primerica Financial Services, various credit card businesses and Diners Club North America. During the third quarter of 2010, Citi announced sale of The Student Loan Corporation, which is currently expected to close in the fourth quarter of 2010. (The Student Loan Corporation is reported as Discontinued Operations within the Corporate/Other segment for the third quarter of 2010 only.) Citi Holdings' GAAP assets have been reduced by approximately 24%, or $135 billion, from the third quarter of 2009, and 49% from the peak in the first quarter of 2008. Citi Holdings' GAAP assets of $421 billion represent approximately 21% of Citi's assets as of September 30, 2010. Citi Holdings' risk-weighted assets of approximately $370 billion represent approximately 37% of Citi's risk-weighted assets as of September 30, 2010. Asset reductions from Citi Holdings have the combined benefits of further fortifying Citigroup's capital base, lowering risk, simplifying the organization and allowing Citi to allocate capital to fund long-term strategic businesses.
Citi Holdings consists of the following businesses:Brokerage and Asset Management, Local Consumer Lending, andSpecial Asset Pool.
| Third Quarter | | Nine Months | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | ||||||||||||||||||
In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
Net interest revenue | $ | 3,519 | $ | 3,732 | (6 | )% | $ | 11,865 | $ | 12,951 | (8 | )% | ||||||||
Non-interest revenue | 334 | 2,518 | (87 | ) | 3,457 | 11,718 | (70 | ) | ||||||||||||
Total revenues, net of interest expense | $ | 3,853 | $ | 6,250 | (38 | )% | $ | 15,322 | $ | 24,669 | (38 | )% | ||||||||
Provisions for credit losses and for benefits and claims | ||||||||||||||||||||
Net credit losses | $ | 4,640 | $ | 6,234 | (26 | )% | $ | 14,879 | $ | 19,042 | (22 | )% | ||||||||
Credit reserve build (release) | (1,567 | ) | 281 | NM | (2,027 | ) | 4,563 | NM | ||||||||||||
Provision for loan losses | $ | 3,073 | $ | 6,515 | (53 | )% | $ | 12,852 | $ | 23,605 | (46 | )% | ||||||||
Provision for benefits and claims | 189 | 280 | (33 | ) | 617 | 837 | (26 | ) | ||||||||||||
Provision for unfunded lending commitments | 26 | — | — | (45 | ) | 80 | NM | |||||||||||||
Total provisions for credit losses and for benefits and claims | $ | 3,288 | $ | 6,795 | (52 | )% | $ | 13,424 | $ | 24,522 | (45 | )% | ||||||||
Total operating expenses | $ | 2,209 | $ | 2,962 | (25 | )% | $ | 7,207 | $ | 10,756 | (33 | )% | ||||||||
(Loss) from continuing operations before taxes | $ | (1,644 | ) | $ | (3,507 | ) | 53 | % | $ | (5,309 | ) | $ | (10,609 | ) | 50 | % | ||||
Income taxes (benefits) | (590 | ) | (1,513 | ) | 61 | (2,182 | ) | (4,312 | ) | 49 | ||||||||||
(Loss) from continuing operations | $ | (1,054 | ) | $ | (1,994 | ) | 47 | % | $ | (3,127 | ) | $ | (6,297 | ) | 50 | % | ||||
Net income attributable to noncontrolling interests | 80 | 49 | 63 | 99 | 1 | NM | ||||||||||||||
Net (loss) | $ | (1,134 | ) | $ | (2,043 | ) | 44 | % | $ | (3,226 | ) | $ | (6,298 | ) | 49 | % | ||||
Balance sheet data(in billions of dollars) | ||||||||||||||||||||
Total EOP assets | $ | 421 | $ | 556 | (24 | )% | ||||||||||||||
Total EOP deposits | $ | 82 | $ | 87 | (6 | )% | ||||||||||||||
Total GAAP Revenues | $ | 3,853 | $ | 6,250 | (38 | )% | $ | 15,322 | $ | 24,669 | (38 | )% | ||||||||
Net Impact of Credit Card Securitization Activity(1) | — | 952 | NM | — | 3,402 | NM | ||||||||||||||
Total Managed Revenues | $ | 3,853 | $ | 7,202 | (47 | )% | $ | 15,322 | $ | 28,071 | (45 | )% | ||||||||
GAAP Net Credit Losses | $ | 4,640 | $ | 6,234 | (26 | )% | $ | 14,879 | $ | 19,042 | (22 | )% | ||||||||
Impact of Credit Card Securitization Activity(1) | — | 1,137 | NM | — | 3,472 | NM | ||||||||||||||
Total Managed Net Credit Losses | $ | 4,640 | $ | 7,371 | (37 | )% | $ | 14,879 | $ | 22,514 | (34 | )% | ||||||||
BROKERAGE AND ASSET MANAGEMENT
Brokerage and Asset Management (BAM), which constituted approximately 7% of Citi Holdings by assets as of September 30, 2010, consists of Citi's global retail brokerage and asset management businesses. This segment was substantially affected by, and reduced in size, due to the sales of Smith Barney (SB) to the Morgan Stanley Smith Barney joint venture (MSSB JV) and by the sale of Nikko Cordial Securities in 2009. At September 30, 2010,BAM had approximately $28 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.
| Third Quarter | | Nine Months | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | ||||||||||||||||||
In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
Net interest revenue | $ | (87 | ) | $ | (82 | ) | (6 | )% | $ | (223 | ) | $ | 444 | NM | ||||||
Non-interest revenue | 79 | 607 | (87 | ) | 696 | 13,908 | (95 | )% | ||||||||||||
Total revenues, net of interest expense | $ | (8 | ) | $ | 525 | NM | $ | 473 | $ | 14,352 | (97 | )% | ||||||||
Total operating expenses | $ | 221 | $ | 307 | (28 | )% | $ | 744 | $ | 2,850 | (74 | )% | ||||||||
Net credit losses | $ | 2 | $ | 1 | 100 | % | $ | 14 | $ | 1 | NM | |||||||||
Credit reserve build (release) | (4 | ) | (11 | ) | 64 | (14 | ) | 35 | NM | |||||||||||
Provision for benefits and claims | 9 | 8 | 13 | 27 | 27 | — | ||||||||||||||
Provision for unfunded lending commitments | — | — | — | (6 | ) | — | — | |||||||||||||
Provisions for credit losses and for benefits and claims | $ | 7 | $ | (2 | ) | NM | $ | 21 | $ | 63 | (67 | )% | ||||||||
Income (loss) from continuing operations before taxes | $ | (236 | ) | $ | 220 | NM | $ | (292 | ) | $ | 11,439 | NM | ||||||||
Income taxes (benefits) | (89 | ) | 130 | NM | (138 | ) | 4,540 | NM | ||||||||||||
Income from continuing operations | $ | (147 | ) | $ | 90 | NM | $ | (154 | ) | $ | 6,899 | NM | ||||||||
Net income attributable to noncontrolling interests | 6 | 16 | (63 | )% | 8 | 5 | 60 | % | ||||||||||||
Net income (loss) | $ | (153 | ) | $ | 74 | NM | $ | (162 | ) | $ | 6,894 | NM | ||||||||
EOP assets(in billions of dollars) | 28 | $ | 54 | (48 | )% | |||||||||||||||
EOP deposits(in billions of dollars) | $ | 57 | 60 | (5 | ) | |||||||||||||||
NM Not meaningful
3Q10 vs. 3Q09
Revenues, net of interest expense, decreased $533 million primarily due to the absence of the $320 million pre-tax gain on sale ($159 million after-tax) of Managed Futures which occurred in the prior-year quarter. Excluding the gain, revenues declined $213 million driven primarily by lower severancerevenues from the MSSB JV, negative private equity marks and divestitures.
Operating expenses decreased 28% from the benefitprior-year quarter, mainly due to the absence of FX translation, offset partially by an increase in compensation costs.Nikko and other divestitures.
Provisions for credit losses and for benefits and claims increased by 2% or $8 million to $445$9 million, mainly reflecting a lower reserve release of $7 million.
Assets declined 48% versus the prior year, primarily driven by the sale of Nikko Cordial Securities and Nikko Asset Management.
3Q10 YTD vs. 3Q09 YTD
Revenues, net of interest expense, decreased 97% primarily due to the absence of the $11.1 billion pre-tax gain on the sale of SB ($6.7 billion after-tax) which closed on June 1, 2009 and the absence of a $320 million pre-tax gain on sale ($159 million after-tax) of Managed Futures. Excluding the gains, revenue declined $2.5 billion, or 84%, driven primarily by the absence of SB revenues.
Operating expenses decreased 74% from higherthe prior-year period, primarily driven by the absence of expenses from SB and the Nikko businesses.
Provisions for credit losses and for benefits and claims declined 67% primarily due to lower reserve build of $49 million, partially offset by increased net credit losses of $13 million.
Local Consumer Lending (LCL), which constituted approximately 71% of Citi Holdings by assets as of September 30, 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 third quarter of 2010 only. At September 30, 2010,LCL had $298 billion of assets ($269 billion inNorth America). Approximately $137 billion of assets inLCL as of September 30, 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, and other consumer loans and assets.
| Third Quarter | | Nine Months | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | |||||||||||||||||||
In millions of dollars | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||
Net interest revenue | $ | 3,383 | $ | 3,272 | 3 | % | $ | 11,091 | $ | 10,161 | 9 | % | |||||||||
Non-interest revenue | 164 | 1,090 | (85 | ) | 1,332 | 3,703 | (64 | ) | |||||||||||||
Total revenues, net of interest expense(1) | $ | 3,547 | $ | 4,362 | (19 | )% | $ | 12,423 | $ | 13,864 | (10 | )% | |||||||||
Total operating expenses | $ | 1,872 | $ | 2,442 | (23 | )% | $ | 6,096 | $ | 7,288 | (16 | )% | |||||||||
Net credit losses | $ | 3,949 | $ | 4,912 | (20 | )% | $ | 13,422 | $ | 14,573 | (8 | )% | |||||||||
Credit reserve build (release) | (953 | ) | 577 | NM | (988 | ) | 4,923 | NM | |||||||||||||
Provision for benefits and claims | 180 | 272 | (34 | ) | 590 | 810 | (27 | ) | |||||||||||||
Provision for unfunded lending commitments | — | — | — | — | — | — | |||||||||||||||
Provisions for credit losses and for benefits and claims | $ | 3,176 | $ | 5,761 | (45 | )% | $ | 13,024 | $ | 20,306 | (36 | )% | |||||||||
(Loss) from continuing operations before taxes | $ | (1,501 | ) | $ | (3,841 | ) | 61 | % | $ | (6,697 | ) | $ | (13,730 | ) | 51 | ||||||
Income taxes | (674 | ) | (1,699 | ) | 60 | (2,802 | ) | (5,670 | ) | 51 | |||||||||||
Income (Loss) from continuing operations | $ | (827 | ) | $ | (2,142 | ) | 61 | % | $ | (3,895 | ) | $ | (8,060 | ) | 52 | % | |||||
Net income attributable to noncontrolling interests | — | 13 | (100 | ) | 7 | 24 | (71 | ) | |||||||||||||
Net (loss) | $ | (827 | ) | $ | (2,155 | ) | 62 | % | $ | (3,902 | ) | $ | (8,084 | ) | 52 | % | |||||
Average assets(in billions of dollars) | $ | 317 | $ | 345 | (8 | )% | $ | 335 | $ | 357 | (6 | )% | |||||||||
Net credit losses as a percentage of average managed loans(2) | 6.31 | % | 7.21 | % | |||||||||||||||||
Revenue by business | |||||||||||||||||||||
International | $ | 500 | $ | 852 | (41 | )% | $ | 1,279 | $ | 3,565 | (64 | )% | |||||||||
Retail partner cards(1) | 2,060 | 1,441 | 43 | 6,379 | 3,757 | 70 | |||||||||||||||
North America (ex Cards) | 987 | 2,069 | (52 | ) | 4,765 | 6,542 | (27 | ) | |||||||||||||
Total GAAP Revenues | $ | 3,547 | $ | 4,362 | (19 | )% | $ | 12,423 | $ | 13,864 | (10 | )% | |||||||||
Net impact of credit card securitization activity(1) | — | 952 | NM | — | 3,402 | NM | |||||||||||||||
Total Managed Revenues | $ | 3,547 | $ | 5,314 | (33 | )% | $ | 12,423 | $ | 17,266 | (28 | )% | |||||||||
Net Credit Losses by business | |||||||||||||||||||||
International | $ | 444 | $ | 957 | (54 | )% | $ | 1,551 | $ | 2,737 | (43 | )% | |||||||||
Retail partner cards(1) | 1,505 | 867 | 74 | 5,212 | 2,640 | 97 | |||||||||||||||
North America (ex Cards) | 2,000 | 3,088 | (35 | ) | 6,659 | 9,196 | (28 | ) | |||||||||||||
Total GAAP net credit losses | $ | 3,949 | $ | 4,912 | (20 | )% | $ | 13,422 | $ | 14,573 | (8 | )% | |||||||||
Net impact of credit card securitization activity(1) | — | 1,137 | NM | — | 3,472 | NM | |||||||||||||||
Total Managed Net Credit Losses | $ | 3,949 | $ | 6,049 | (35 | )% | $ | 13,422 | $ | 18,045 | (26 | )% | |||||||||
NM Not meaningful
3Q10 vs. 3Q09
Revenues, net of interest expense, decreased 19% due to lower balances from portfolio run-off, asset sales, divestitures and held-for-sale reclassifications (primarily Primerica and The Student Loan Corporation), and a higher mortgage repurchase reserve, partially offset by the adoption of SFAS 166/167. Net interest revenue increased 3%, primarily due to the adoption of SFAS 166/167, partially offset by the impact of lower balances.
Operating expenses declined 23%, due to the impact of divestitures, lower volumes, re-engineering benefits and the absence of costs associated with the U.S. government loss-sharing agreement, which was exited in the fourth quarter of 2009.
Provisions for credit losses and for benefits and claims decreased 45% from the prior-year quarter, reflecting a reserve release of provisions for unfunded lending commitments$1.0 billion, principally related to U.S. Retail partner cards, in the current quarter, compared to a reserve build in the prior-year quarter of $0.6 billion. Lower net credit losses were partially offset by the impact of the adoption of SFAS 166/167. On a managed basis, net credit losses declined for the fifth consecutive quarter, driven by improvement in the international portfolios as well as U.S. mortgages and Retail partner cards.
Assets declined 8% versus the prior year, primarily driven by portfolio run-off and the impact of asset sales, partially
offset by an increase of $41 billion resulting from the adoption of SFAS 166/167.
3Q10 YTD vs. 3Q09 YTD
Revenues, net of interest expense, decreased 10% from the prior-year period. Net interest revenue increased 9% 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 64%, primarily due to the absence of the $1.1 billion gain on sale of Redecard in the first quarter of 2009 and a higher mortgage repurchase reserve in the second and third quarters.
Operating expenses decreased 16%, 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 36%, reflecting a net $1.0 billion reserve release in the first nine months of 2010 compared to a $4.9 billion build in the comparable period of 2009. Lower net credit losses across most businesses were partially offset by the impact of the adoption of SFAS 166/167. On a managed basis, net credit losses were lower, driven by improvement in the international portfolios, as well as U.S. mortgages and Retail partner cards.
Assets declined 6% versus the prior-year period, primarily driven by portfolio run-off, higher loan loss reserve balances, and the impact of asset sales and divestitures, partially offset by an increase of $41 billion resulting from the adoption of SFAS 166/167.
Managed Presentations
| Third Quarter | ||||||
---|---|---|---|---|---|---|---|
| 2010 | 2009 | |||||
Managed credit losses as a percentage of average managed loans | 6.31 | % | 7.21 | % | |||
Impact from credit card securitizations(1) | — | (0.62 | ) | ||||
Net credit losses as a percentage of average loans | 6.31 | % | 6.59 | % | |||
Japan Consumer Finance
As previously disclosed, Citigroup continues to actively monitor a number of matters involving its Japan Consumer Finance business, including customer refund claims and defaults, as well as financial and legislative, regulatory, judicial and other political developments, relating to the charging of "gray zone" interest. Gray zone interest represents interest at rates that are legal but for which claims may not be enforceable.
On September 28, 2010, one of Japan's largest consumer finance companies (Takefuji) declared bankruptcy and is now seeking to restructure, with court protection and assistance. Citi believes this action reflects the financial distress that Japan's top consumer finance lenders are facing as they continue to deal with liabilities for "gray zone" interest refund claims. Citi will continue to monitor and evaluate these matters and its reserves related thereto.
Special Asset Pool (SAP), which constituted approximately 23% of Citi Holdings by assets as of September 30, 2010, is a portfolio of securities, loans and other assets that Citigroup intends to continue to reduce actively over time through asset sales and portfolio run-off. At September 30, 2010,SAPhad $95 billion of assets.SAPassets have declined by $233 billion, or 71%, from peak levels in the fourth quarter of 2007, reflecting cumulative asset sales, write-downs and portfolio run-off.
| Third Quarter | | Nine Months | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | ||||||||||||||||||
In millions of dollars | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
Net interest revenue | $ | 223 | $ | 542 | (59 | )% | $ | 997 | $ | 2,346 | (58 | )% | ||||||||
Non-interest revenue | 91 | 821 | (89 | ) | 1,429 | (5,893 | ) | NM | ||||||||||||
Revenues, net of interest expense | $ | 314 | $ | 1,363 | (77 | )% | $ | 2,426 | $ | (3,547 | ) | NM | ||||||||
Total operating expenses | $ | 116 | $ | 213 | (46 | )% | 367 | $ | 618 | (41 | )% | |||||||||
Net credit losses | $ | 689 | $ | 1,321 | (48 | )% | $ | 1,443 | $ | 4,468 | (68 | )% | ||||||||
Credit reserve builds (release) | (610 | ) | (285 | ) | NM | (1,025 | ) | (395 | ) | NM | ||||||||||
Provision for unfunded lending commitments | 26 | — | — | (39 | ) | 80 | NM | |||||||||||||
Provisions for credit losses and for benefits and claims | $ | 105 | $ | 1,036 | (90 | )% | 379 | $ | 4,153 | (91 | )% | |||||||||
Income (loss) from continuing operations before taxes | $ | 93 | $ | 114 | (18 | )% | $ | 1,680 | $ | (8,318 | ) | NM | ||||||||
Income taxes (benefits) | 173 | 56 | NM | 758 | (3,182 | ) | NM | |||||||||||||
Income (loss) from continuing operations | $ | (80 | ) | $ | 58 | NM | $ | 922 | $ | (5,136 | ) | NM | ||||||||
Net income (loss) attributable to noncontrolling interests | 74 | 20 | NM | 84 | (28 | ) | NM | |||||||||||||
Net income (loss) | $ | (154 | ) | $ | 38 | NM | $ | 838 | $ | (5,108 | ) | NM | ||||||||
EOP assets(in billions of dollars) | $ | 95 | $ | 163 | (42 | )% | ||||||||||||||
3Q10 vs. 3Q09
Revenues, net of interest expense,decreased 77% from the prior-year quarter, driven by lower positive net revenue marks. Revenues in the current quarter included non-credit accretion of $267 million and positive marks of $160 million on subprime-related direct exposures, partially offset by write-downs on commercial real estate of $123 million.
Operating expensesdecreased 46% driven by the absence of the U.S. government loss-sharing agreement, exited in the fourth quarter of 2009, and lower tax charges, transaction expenses and compensation expenses.
Provisions for credit losses and for benefits and claimsdecreased 90%, primarily driven by lower net credit losses of $632 million and a larger reserve builds.release of $325 million.
Assetsdeclined 42% versus the prior-year quarter due to asset sales in the current quarter (approximately $15 billion), amortization and prepayments, partially offset by the impact of the adoption of SFAS 166/167.
3Q093Q10 YTD vs. 3Q083Q09 YTD
Revenues, net of interest expense, increased 8% or $1.7$6.0 billion mainlyprimarily due to an increase in fixed income markets of $5.8 billionfavorable net revenue marks relative to $19.7 billion reflecting strong trading results, particularly inthe prior-year period. Revenues for the first nine months of 2010 include positive marks of $2.0 billion on subprime-related direct exposures and second quartersnon-credit accretion of 2009,$1.0 billion, partially offset partiallyby write-downs on commercial real estate of $355 million and on Alt-A mortgages of $333 million.
Operating expensesdecreased 41% mainly driven by lower volumes, lower transaction expenses, and the absence of the U.S. government loss-sharing agreement.
Provisions for credit losses and for benefits and claimsdecreased 91%, primarily driven by a $3.0 billion decrease in lending revenues of $4.0 billion tonet credit losses versus the prior-year period.
negative $2.0 billion (mainly from losses on credit default swap hedges).
The following table provides details of the composition ofOperating expensesSAP decreased 22% or $2.7 billion driven by lower compensation due to headcount reductions and benefits from re-engineering and expense management.
Provisions for credit losses increased 76% or $710 million to $1.6 billion mainly from increased credit reserve builds on funded loans and higher provisions for unfunded lending commitments.
Third Quarter Revenue Impacting Citicorp—Securities and Banking
While notassets as significant as in prior quarters, certain items continued to impact Securities and Banking revenues during the third quarter of 2009. These items are set forth in the table below.September 30, 2010.
| Pretax Revenue (in millions) | ||||||
---|---|---|---|---|---|---|---|
| Third Quarter 2009 | Third Quarter 2008 | |||||
Private Equity and equity investments | $ | 79 | $ | (50 | ) | ||
Alt-A Mortgages(1)(2) | 142 | (221 | ) | ||||
Commercial Real Estate (CRE) positions(1)(3) | 20 | 130 | |||||
CVA on Citi debt liabilities under fair value option | (955 | ) | 1,526 | ||||
CVA on derivatives positions, excluding monoline insurers | (722 | ) | 1,178 | ||||
Total significant revenue items | $ | (1,436 | ) | $ | 2,563 | ||
| Assets within Special Asset Pool as of September 30, 2010 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Carrying value of assets | Face value | Carrying value as % of face value | ||||||||
Securities in Available-for-Sale (AFS) | |||||||||||
Corporates | $ | 7.1 | $ | 7.3 | 97 | % | |||||
Prime and non-U.S. mortgage-backed securities (MBS) | 1.7 | 2.1 | 81 | ||||||||
Auction rate securities (ARS) | 2.0 | 2.5 | 80 | ||||||||
Other securities | 0.7 | 0.9 | 78 | ||||||||
Total securities in AFS | $ | 11.5 | $ | 12.8 | 90 | % | |||||
Securities in Held-to-Maturity (HTM) | |||||||||||
Prime and non-U.S. MBS | $ | 8.5 | $ | 10.5 | 81 | % | |||||
Alt-A mortgages | 9.0 | 17.6 | 51 | ||||||||
Corporates | 6.3 | 7.0 | 90 | ||||||||
ARS | 1.0 | 1.2 | 83 | ||||||||
Other securities | 3.1 | 4.1 | 76 | ||||||||
Total securities in HTM | $ | 27.9 | $ | 40.4 | 69 | % | |||||
Loans, leases and letters of credit (LCs) in Held-for-Investment (HFI)/Held-for-Sale (HFS)(1) | |||||||||||
Corporates | $ | 9.6 | $ | 10.6 | 91 | % | |||||
Commercial real estate (CRE) | 7.1 | 7.4 | 96 | ||||||||
Other | 2.0 | 2.4 | 83 | ||||||||
Loan loss reserves | (2.5 | ) | — | NM | |||||||
Total loans, leases and LCs in HFI/HFS | $ | 16.2 | $ | 20.5 | 79 | % | |||||
Mark to market | |||||||||||
Subprime securities | $ | 0.2 | $ | 1.6 | 13 | % | |||||
Other securities(2) | 8.7 | 32.2 | 27 | ||||||||
Derivatives | 6.8 | NM | NM | ||||||||
Loans, leases and letters of credit | 3.1 | 4.6 | 67 | ||||||||
Repurchase agreements | 5.7 | NM | NM | ||||||||
Total mark-to-market | $ | 24.5 | NM | NM | |||||||
Highly leveraged finance commitments | $ | 2.0 | $ | 2.8 | 69 | % | |||||
Equities (excludes ARS in AFS) | 5.8 | NM | NM | ||||||||
Monolines | 0.5 | NM | NM | ||||||||
Consumer and other(3) | 6.6 | NM | NM | ||||||||
Total | $ | 95.0 | |||||||||
Notes: Assets previously held by the Citi-advised SIVs have been allocated to the corresponding asset categories above.SAPhad total CRE exposures of $10.5 billion at September 30, 2010, which included unfunded commitments of $2.2 billion.SAPhad total subprime assets of $2.3 billion at September 30, 2010, including assets of $1.0 billion of subprime-related direct exposures and $1.3 billion of trading account positions, which includes securities purchased from CDO liquidations.
Excludes Discontinued Operations.
Totals may not sum due to rounding.
NM Not meaningful
Items Impacting SAP Revenues
The table below provides additional information regarding the net revenue marks affecting theSAP during the third quarters of 2010 and 2009.
| Pretax revenue | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | Third Quarter 2010 | Third Quarter 2009 | |||||
Subprime-related direct exposures(1) | $ | 160 | $ | 1,967 | |||
CVA related to exposure to monoline insurers | 61 | (61 | ) | ||||
Alt-A mortgages(2)(3) | (6 | ) | (196 | ) | |||
CRE positions(2)(4) | (123 | ) | (485 | ) | |||
CVA on derivatives positions, excluding monoline insurers(2) | 19 | (61 | ) | ||||
SIV assets | (4 | ) | (40 | ) | |||
Private equity and equity investments | 87 | (21 | ) | ||||
Highly leveraged loans and financing commitments(5) | — | (24 | ) | ||||
ARS proprietary positions(6) | 109 | — | |||||
CVA on Citi debt liabilities under fair value option | (3 | ) | (64 | ) | |||
Subtotal | $ | 300 | $ | 1,015 | |||
Accretion on reclassified assets(7) | 267 | 502 | |||||
Total selected revenue items | $ | 567 | $ | 1,517 | |||
Credit Valuation Adjustment on Citi's Debt Liabilities for Which Citi Has Elected the Fair Value Option
The Company is required to use its own credit spreads$6 million in determining the current value of its derivative liabilities and all other liabilities for which it has elected the fair value option. When Citi's credit spreads widen (deteriorate), Citi recognizes a gain on these liabilities because the value of the liabilities has decreased. When Citi's credit spreads narrow (improve), Citi recognizes a loss on these liabilities because the value of the liabilities has increased. The approximately $955 million of losses recorded by Securities and Banking on its fair value option liabilities (excluding derivative liabilities) during the third quarter of 2010 and 2009, was principally due to the narrowing (improving) of the Company's credit spreads.
Credit Valuation Adjustment on Derivative Positions, excluding Monoline insurers
The approximately $722 million of pretax losses recorded by Securities and Banking on its derivative positions during the third quarter of 2009 was due to the narrowing of the Company's credit default swap spreads on its derivative liabilities. These losses were partially offset by gains due to the narrowing of the credit spreads of the Company's counterparties on its derivative assets. See "Derivatives—Fair Valuation Adjustments for Derivatives" below for a further discussion.
| Third Quarter | | Nine Months | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | ||||||||||||||||||
In millions of dollars | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||
Net interest revenue | $ | 1,393 | $ | 1,422 | (2 | )% | $ | 4,254 | $ | 4,031 | 6 | % | ||||||||
Non-interest revenue | 1,064 | 1,144 | (7 | ) | 3,060 | 3,431 | (11 | ) | ||||||||||||
Revenues, net of interest expense | $ | 2,457 | $ | 2,566 | (4 | )% | $ | 7,314 | $ | 7,462 | (2 | )% | ||||||||
Operating expenses | 1,141 | 1,252 | (9 | ) | 3,303 | 3,847 | (14 | ) | ||||||||||||
Provision for credit losses and for benefits and claims | (7 | ) | (11 | ) | 36 | (1 | ) | 2 | NM | |||||||||||
Income before taxes and noncontrolling interest | $ | 1,323 | $ | 1,325 | — | $ | 4,012 | $ | 3,613 | 11 | % | |||||||||
Income taxes | 384 | 407 | (6 | )% | 1,195 | 1,095 | 9 | |||||||||||||
Income from continuing operations | 939 | 918 | 2 | 2,817 | 2,518 | 12 | ||||||||||||||
Net income (loss) attributable to noncontrolling interests | 5 | 9 | (44 | ) | 4 | 26 | (85 | ) | ||||||||||||
Net income | $ | 934 | $ | 909 | 3 | % | $ | 2,813 | $ | 2,492 | 13 | % | ||||||||
Average assets(in billions of dollars) | $ | 60 | $ | 70 | (14 | )% | $ | 59 | $ | 72 | (18 | )% | ||||||||
Return on assets | 6.18 | % | 5.17 | % | 6.37 | % | 4.62 | % | ||||||||||||
Revenues by region: | ||||||||||||||||||||
North America | $ | 643 | $ | 540 | 19 | % | $ | 1,888 | $ | 1,557 | 21 | % | ||||||||
EMEA | 845 | 953 | (11 | ) | 2,549 | 2,784 | (8 | ) | ||||||||||||
Latin America | 337 | 378 | (11 | ) | 1,020 | 1,092 | (7 | ) | ||||||||||||
Asia | 632 | 695 | (9 | ) | 1,857 | 2,029 | (8 | ) | ||||||||||||
Total revenues | $ | 2,457 | $ | 2,566 | — | $ | 7,314 | $ | 7,462 | (2 | )% | |||||||||
Net income (loss) from continuing operations by region: | ||||||||||||||||||||
North America | $ | 152 | $ | 94 | 62 | % | $ | 471 | $ | 243 | 94 | % | ||||||||
EMEA | 308 | 348 | (11 | ) | 984 | 925 | 6 | |||||||||||||
Latin America | 148 | 159 | (7 | ) | 458 | 451 | 2 | |||||||||||||
Asia | 331 | 317 | 4 | 904 | 899 | 1 | ||||||||||||||
Total net income from continuing operations | $ | 939 | $ | 918 | 2 | % | $ | 2,817 | $ | 2,518 | 12 | % | ||||||||
Key Indicators(in billions of dollars) | ||||||||||||||||||||
Average deposits and other customer liability balances | $ | 314 | $ | 273 | 15 | % | ||||||||||||||
EOP assets under custody(in trillions of dollars) | $ | 11.8 | $ | 11.9 | (1 | ) | ||||||||||||||
NM Not meaningful
3Q09 vs. 3Q08
Revenues, net of interest expense, were $2.5 billion, down $109 million or 4%respectively, from strong prior-year performance due to spread compression (as global rates declined) and lower volumes as well as negative foreign exchange impact. This was partly offset by strong growth in liability balances and higher trade fees.
Operating expenses declined 9% or $111 million to $1.1 billion, driven by headcount reductions, re-engineering efforts, expense management initiatives and a benefit from FX translation.
3Q09 YTD vs. 3Q08 YTD
Revenues, net of interest expense, of $7.3 billion decreased slightly from the prior period driven primarily by the impact of lower fee revenues and negative foreign exchange. Average liability balances grew 6% driven by strong growth in North America as a result of successful implementation of deposit growth strategy.
Operating expenses declined 14%, driven by headcount reduction and re-engineering benefits.
| Third Quarter | | Nine Months | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | ||||||||||||||||||
In millions of dollars | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||
Net interest revenue | $ | 4,024 | $ | 5,766 | (30 | )% | $ | 13,902 | $ | 17,292 | (20 | )% | ||||||||
Non-interest revenue | 2,670 | (5,062 | ) | NM | 11,994 | (19,027 | ) | NM | ||||||||||||
Total Revenues, net of interest expense | $ | 6,694 | $ | 704 | NM | $ | 25,896 | $ | (1,735 | ) | NM | |||||||||
Provision for credit losses and for benefits and claims | ||||||||||||||||||||
Net credit losses | $ | 6,250 | $ | 3,603 | 73 | % | $ | 19,090 | $ | 9,332 | NM | |||||||||
Credit reserve build (release) | 338 | 3,224 | (90 | ) | 4,743 | 6,790 | (30 | )% | ||||||||||||
Provision for loan losses | $ | 6,588 | $ | 6,827 | (4 | )% | $ | 23,833 | $ | 16,122 | 48 | % | ||||||||
Provision for benefits & claims | 310 | 273 | 14 | 923 | 805 | 15 | ||||||||||||||
Provision for unfunded lending commitments | — | (70 | ) | 100 | 80 | (138 | ) | NM | ||||||||||||
Total provision for credit losses and for benefits and claims | $ | 6,898 | $ | 7,030 | (2 | )% | $ | 24,836 | $ | 16,789 | 48 | % | ||||||||
Total operating expenses | $ | 3,202 | $ | 5,136 | (38 | )% | $ | 11,417 | $ | 16,406 | (30 | )% | ||||||||
Income (loss) from continuing operations before taxes | $ | (3,406 | ) | $ | (11,462 | ) | 70 | % | $ | (10,357 | ) | $ | (34,930 | ) | 70 | % | ||||
Provision (benefits) for income taxes | (1,588 | ) | (4,526 | ) | 65 | (4,562 | ) | (13,619 | ) | 67 | ||||||||||
Income (loss) from continuing operations | $ | (1,818 | ) | $ | (6,936 | ) | 74 | % | $ | (5,795 | ) | $ | (21,311 | ) | 73 | % | ||||
Net income (loss) attributable to noncontrolling interests | 49 | (109 | ) | NM | (1 | ) | (87 | ) | 99 | |||||||||||
Citi Holding's net income (loss) | $ | (1,867 | ) | $ | (6,827 | ) | 73 | % | $ | (5,794 | ) | $ | (21,224 | ) | 73 | % | ||||
Balance Sheet Data (in billions) | ||||||||||||||||||||
Total EOP assets | $ | 617 | $ | 775 | (20 | )% | ||||||||||||||
Total EOP deposits | 90 | 83 | 8 | |||||||||||||||||
NM Not meaningful
BROKERAGE AND ASSET MANAGEMENT
| Third Quarter | | Nine Months | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | |||||||||||||||||||
In millions of dollars | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||
Net interest revenue | $ | (56 | ) | $ | 318 | NM | $ | 460 | $ | 727 | (37 | )% | |||||||||
Non-interest revenue | 726 | 1,776 | (59 | )% | 14,250 | 6,224 | NM | ||||||||||||||
Total Revenues, net of interest expense | $ | 670 | $ | 2,094 | (68 | )% | $ | 14,710 | $ | 6,951 | NM | ||||||||||
Total operating expenses | $ | 358 | $ | 2,085 | (83 | )% | $ | 3,000 | $ | 6,537 | (54 | )% | |||||||||
Net credit losses | — | $ | 1 | (100 | )% | $ | 3 | $ | 11 | (73 | )% | ||||||||||
Credit reserve build (release) | $ | (11 | ) | (3 | ) | NM | 35 | 7 | NM | ||||||||||||
Provision for benefits and claims | 38 | 58 | (34 | ) | 113 | 155 | (27 | ) | |||||||||||||
Provisions for loan losses and for benefits and claims | $ | 27 | $ | 56 | (52 | )% | $ | 151 | $ | 173 | (13 | )% | |||||||||
Income from continuing operations before taxes | $ | 285 | $ | (47 | ) | NM | $ | 11,559 | $ | 241 | NM | ||||||||||
Income taxes | 146 | 10 | NM | 4,548 | 145 | NM | |||||||||||||||
Income (loss) from continuing operations | $ | 139 | $ | (57 | ) | NM | $ | 7,011 | $ | 96 | NM | ||||||||||
Net income (loss) attributable to noncontrolling interests | 16 | (98 | ) | NM | 5 | (60 | ) | NM | |||||||||||||
Net income | $ | 123 | $ | 41 | NM | $ | 7,006 | $ | 156 | NM | |||||||||||
EOP assets(in billions of dollars) | $ | 59 | $ | 62 | (5 | )% | |||||||||||||||
EOP deposits (in billions of dollars) | 60 | $ | 53 | 13 | |||||||||||||||||
NM Not meaningful
3Q09 vs. 3Q08
Revenues, net of interest expense, decreased 68% primarily driven by the decrease in the Company's share of Smith Barney revenue resulting from the joint venture transaction. Revenues in the prior-year period included a $347 million pre-tax gain on sale of CitiStreet and charges related to settlementbuy-backs of auction rate securities (ARS) of $306 million pre-tax. 2009 third quarter revenue includes a $320 million pre-tax gain on the sale of the Managed Futures business to the Morgan Stanley Smith Barney joint venture.
Operating expenses decreased 83% from the prior-year period, mainly driven by the absence of Smith Barney expenses and the absence of restructuring expenses in retail alternative investments.
Provisions for loan losses and for benefits and claims decreased by 52% mainly reflecting lower provisions for benefits and claims.
End of Period Assets include approximately $24 billion of assets of discontinued operations held for sale.
3Q09 YTD vs. 3Q08 YTD
Revenues, net of interest expense, increased $7.8 billion due to an $11.1 billion pre-tax gain on sale ($6.7 billion after-tax) on the Morgan Stanley Smith Barney joint venture transaction, which closed on June 1, 2009. Excluding the gain, revenues declined $3.3 billion driven by the absence of Smith Barney revenues. well as the impact of market conditions on Smith Barney transactional and fee-based revenue compared to the prior year.
Operating expenses decreased $3.5 billion primarily driven by the absence of Smith Barney expenses, lower variable compensation and re-engineering efforts, particularly in retail alternative investments.
Provisions for loan losses and for benefits and claims declined 13% mainly reflecting lower provisions for benefits and claims.
| Third Quarter | | Nine Months | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | % Change | ||||||||||||||||||
In millions of dollars | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||
Net interest revenue | $ | 3,453 | $ | 4,612 | (25 | )% | $ | 10,730 | $ | 14,015 | (23 | )% | ||||||||
Non-interest revenue | 1,194 | 820 | 46 | 4,300 | 5,141 | (16 | ) | |||||||||||||
Total Revenues, net of interest expense | $ | 4,647 | $ | 5,432 | (14 | )% | $ | 15,030 | $ | 19,156 | (22 | )% | ||||||||
Total operating expenses | $ | 2,611 | $ | 2,847 | (8 | )% | $ | 7,746 | $ | 9,094 | (15 | )% | ||||||||
Net credit losses | $ | 4,929 | $ | 3,487 | 41 | % | $ | 14,617 | $ | 9,116 | 60 | % | ||||||||
Credit reserve build (release) | 604 | 2,702 | (78 | ) | 5,003 | 5,858 | (15 | ) | ||||||||||||
Provision for benefits and claims | 272 | 215 | 27 | 810 | 650 | 25 | ||||||||||||||
Provisions for loan losses and for benefits and claims | $ | 5,805 | $ | 6,404 | (9 | )% | $ | 20,430 | $ | 15,624 | 31 | % | ||||||||
Loss from continuing operations before taxes | $ | (3,769 | ) | $ | (3,819 | ) | 1 | % | $ | (13,146 | ) | $ | (5,562 | ) | NM | |||||
Income taxes (benefits) | (1,670 | ) | (1,534 | ) | (9 | ) | (5,435 | ) | (2,196 | ) | NM | |||||||||
Loss from continuing operations | $ | (2,099 | ) | $ | (2,285 | ) | 8 | % | $ | (7,711 | ) | $ | (3,366 | ) | NM | |||||
Net income attributable to noncontrolling interests | 13 | 1 | NM | 23 | 13 | 77 | % | |||||||||||||
Net loss | $ | (2,112 | ) | $ | (2,286 | ) | 8 | % | $ | (7,734 | ) | $ | (3,379 | ) | NM | |||||
Average assets(in billions of dollars) | $ | 384 | $ | 456 | (16 | )% | $ | 397 | $ | 471 | (16 | )% | ||||||||
Net credit losses as a % of average loans | 6.11 | % | 3.83 | % | ||||||||||||||||
NM Not meaningful
3Q09 vs. 3Q08
Revenues, net of interest expense, decreased 14% due to lower net interest margin, partially offset by increased Cards securitization revenues of $0.7 billion.Net interest revenue was 25% lower than the prior year due to lower balances and the impact of delinquencies and loan modifications in Real Estate, North America Consumer Finance, and Cards. Net interest revenue as a percent of average loans decreased 98 basis points from the prior-year quarter in North America (ex Cards) and decreased 99 basis points in International, due principally to volume decreases. Average loans decreased 12%, with North America (ex Cards) down 10%, North America Cards down 19%, and International down 19%.Non-interest revenue increased 46% reflecting the increased revenue from Cards securitization.
Operating expenses declined 8% primarily due to lower volumes and reductions from expense re-engineering actions, partially offset by higher real estate owned (OREO) and collection costs.
Provisions for loan losses and for benefits and claims decreased 9% from the prior period reflecting lower reserve builds of $2.1 billion, partially offset by increased net credit losses of $1.4 billion, primarily in Real Estate and EMEA. The credit reserve build for the quarter included $350 million related to the UK Cards portfolio which was transferred to held-for-sale. The net credit loss ratio increased 228 basis points from the prior-year quarter with North America (ex Cards) up 184 basis points to 4.78%, International up 375 basis points to 9.77%, and North America Cards up 575 basis points to 14.58%.
3Q09 YTD vs. 3Q08 YTD
Revenues, net of interest expense, decreased 22% due to a decline in net interest revenue, higher net credit losses flowing through the securitization trusts in North America and a higher FDIC assessment.Net interest revenue was 23% lower than the prior year driven by lower balances (due to run-off and credit tightening) and spread compression due largely to higher non-accrual loans, the higher FDIC assessment and the impact of loan modifications.Non-interest revenue declined 16% primarily due to higher credit costs flowing through the securitization trusts in North America and lower securitization gains. Year-to-date non-interest revenue for 2009 also included a $1.1 billion pretax gain on the sale of the Company's remaining stake in Redecard as compared to a prior-year period pre-tax gain on sale of Redecard of $663 million.
Operating expenses decreased 15% primarily due to re-engineering actions, lower volumes and marketing expenses and the absence of prior-year repositioning charges. The declines in expenses were partially offset by higher OREO and collections costs.
Provisions for loan losses and for benefits and claims increased 31% reflecting higher net credit losses of $5.5 billion, partially offset by decreased reserve builds of $855 million.
The following table provides additional information, as of September 30, 2009, regarding the Local Consumer Lending loan details. For additional information on loans within Local Consumer Lending, see "Loan and Credit Details—Consumer Loan Details" below.
Composition of Loans within Local Consumer Lending | Carrying Value of Assets | September 30, 2009 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
in billions of dollars | September 30, 2009 | June 30, 2009 | % of Assets under U.S. Government Loss- Sharing Agreement(1) | Net credit loss ratio | 90+ Days Past Due % | ||||||||||||
North America | |||||||||||||||||
First mortgages | $ | 123.3 | $ | 126.9 | 66 | % | 3.46 | % | 10.12 | % | |||||||
Second mortgages | 56.9 | 59.4 | 87 | 7.70 | 3.01 | ||||||||||||
Student | 26.5 | 26.6 | — | 0.39 | 3.25 | ||||||||||||
Cards (Retail Partners) | 21.7 | 22.8 | 4 | 14.58 | 4.08 | ||||||||||||
Personal and Other | 19.3 | 20.1 | 10 | 10.17 | 3.32 | ||||||||||||
Auto | 15.0 | 16.2 | 72 | 6.61 | 1.83 | ||||||||||||
Commercial Real Estate | 10.8 | 11.1 | 88 | 2.42 | 2.38 | ||||||||||||
Total North America | $ | 273.5 | $ | 283.1 | 56 | %. | 5.61 | % | 6.26 | % | |||||||
International | |||||||||||||||||
EMEA | $ | 26.1 | $ | 28.6 | — | 7.69 | % | 4.52 | % | ||||||||
Asia | 10.9 | 11.4 | — | 14.71 | 2.40 | ||||||||||||
Latin America | 0.3 | 0.3 | — | 19.14 | 1.74 | ||||||||||||
Total International | $ | 37.3 | $ | 40.3 | — | 9.77 | % | 3.88 | % | ||||||||
Total | $ | 310.8 | $ | 323.4 | 49 | % | 6.11 | % | 5.97 | % | |||||||
Note: Totals may not sum due to rounding.
| Third Quarter | | Nine Months | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | % Change | 2009 | 2008 | % Change | ||||||||||||||
Net interest revenue | $ | 627 | $ | 836 | (25 | )% | $ | 2,712 | $ | 2,550 | 6 | % | ||||||||
Non-interest revenue | 750 | (7,658 | ) | NM | (6,556 | ) | (30,392 | ) | 78 | |||||||||||
Total Revenues, net of interest expense | $ | 1,377 | $ | (6,822 | ) | NM | $ | (3,844 | ) | $ | (27,842 | ) | 86 | % | ||||||
Total operating expenses | $ | 233 | $ | 204 | 14 | % | $ | 671 | $ | 775 | (13 | )% | ||||||||
Net credit losses | $ | 1,321 | $ | 115 | NM | $ | 4,470 | $ | 205 | NM | ||||||||||
Provision for unfunded lending commitments | — | (70 | ) | 100 | % | 80 | (138 | ) | NM | |||||||||||
Credit reserve builds (release) | (255 | ) | 525 | NM | (295 | ) | 925 | NM | ||||||||||||
Provisions for credit losses and for benefits and claims | $ | 1,066 | $ | 570 | 87 | % | $ | 4,255 | $ | 992 | NM | |||||||||
Income (Loss) from continuing operations before taxes | $ | 78 | $ | (7,596 | ) | NM | $ | (8,770 | ) | $ | (29,609 | ) | 70 | % | ||||||
Income taxes (benefits) | (64 | ) | (3,002 | ) | 98 | % | (3,675 | ) | (11,568 | ) | 68 | |||||||||
Income (Loss) from continuing operations | $ | 142 | $ | (4,594 | ) | NM | $ | (5,095 | ) | $ | (18,041 | ) | 72 | % | ||||||
Net income (loss) attributable to noncontrolling interests | 20 | (12 | ) | NM | 29 | (40 | ) | 28 | ||||||||||||
Net Income (loss) | $ | 122 | $ | (4,582 | ) | NM | $ | (5,066 | ) | $ | (18,001 | ) | 72 | % | ||||||
EOP assets(in billions of dollars) | $ | 182 | $ | 261 | (31 | )% | ||||||||||||||
3Q09 vs. 3Q08
Revenues, net of interest expense, increased $8.2 billion primarily due to favorable net revenue marks relative to the prior-year quarter, which are described in more detail below. Revenue in the current quarter included positive marks of $2.0 billion on subprime-related direct exposures and non-credit accretion of $502 million, partially offset by write-downs on CRE of $586 million and $506 million of other write-downs and losses.
Operating expenses increased 14% driven by the USG loss-sharing agreement (see "Government Programs—U.S. Government Loss-Sharing Agreement" below), partially offset by lower compensation expenses.
Provisions for credit losses and for benefits and claims increased $496 million primarily driven by $1.2 billion in increased net credit losses, partially offset by a lower provision of $780 million.
3Q09 YTD vs. 3Q08 YTD
Revenues, net of interest expense, increased $24.0 billion primarily due to favorable net revenue marks relative to the prior year. Revenue year-to-date included a $1.2 billion positive CVA on derivative positions, excluding monoline insurers, and positive marks of $284 million on subprime-related direct exposures, offset by negative revenue of $1.1 billion on Alt-A mortgages. Revenue year-to-date was also negatively impacted by $3.4 billion related to CVA on fair value option liabilities and monolines, CRE, and negative marks for private equity positions.
Operating expenses decreased 13% mainly driven by lower volumes and lower transaction expenses.
Provisions for credit losses and for benefits and claims increased $3.3 billion primarily driven by the $4.3 billion increase in write-offs over the prior period. Significant write-offs included exposures in Lyondell Basell. The net $295 million net credit reserve release in the current period was driven by a $2.1 billion release for specific counterparties (including Lyondell Basell), partially offset by builds for specific counterparties.
Assets declined 30% versus the prior year primarily driven by amortization/prepayments, sales, and marks/charge-offs.
The following table provides details of the composition of the Special Asset Pool assets as of September 30, 2009.
Assets within Special Asset Pool
| Carrying Value of Assets | September 30, 2009 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
in billions of dollars | September 30, 2009 | June 30, 2009 | % of Assets under U.S. Government Loss-Sharing Program(1) | Face Value | Carrying value as % of Face Value | ||||||||||||
Securities in AFS/HTM(2) | |||||||||||||||||
Corporates | $ | 14.8 | $ | 17.1 | 4 | % | $ | 15.1 | 98 | % | |||||||
Prime and Non-U.S. MBS | 16.0 | 16.2 | 33 | 20.2 | 80 | ||||||||||||
Auction Rate Securities | 8.0 | 8.3 | 15 | 10.8 | 74 | ||||||||||||
Alt-A mortgages | 9.0 | 9.5 | 99 | 17.5 | 52 | ||||||||||||
Government Agencies | 0.7 | 6.2 | — | 0.8 | 97 | ||||||||||||
Other Securities(3) | 6.3 | 7.4 | 35 | 8.7 | 73 | ||||||||||||
Total Securities in AFS/HTM | $ | 54.8 | $ | 64.7 | 33 | % | $ | 72.9 | 75 | % | |||||||
Loan, leases & LC in HFI/HFS(4) | |||||||||||||||||
Corporates | $ | 26.4 | $ | 28.2 | 33 | % | $ | 28.4 | 93 | % | |||||||
Commercial Real Estate (CRE) | 15.3 | 15.8 | 65 | 16.7 | 92 | ||||||||||||
Other | 3.7 | 4.7 | — | 4.3 | 85 | ||||||||||||
Loan Loss Reserves | (4.0 | ) | (4.1 | ) | NM | NM | NM | ||||||||||
Total Loan, leases & LC in HFI/HFS | $ | 41.4 | $ | 44.6 | NM | NM | NM | ||||||||||
Mark to Market | |||||||||||||||||
Subprime securities(5) | $ | 8.0 | $ | 8.0 | — | $ | 20.9 | 38 | % | ||||||||
Other Securities(6) | 6.9 | 8.4 | 8 | % | 29.5 | 24 | |||||||||||
Derivatives | 9.4 | 10.8 | — | NM | NM | ||||||||||||
Loans, Leases and Letters of Credit | 7.3 | 7.8 | 28 | 11.5 | 63 | ||||||||||||
Repurchase agreements | 6.9 | 7.3 | — | NM | NM | ||||||||||||
Total Mark to Market | $ | 38.5 | $ | 42.1 | 9 | % | NM | NM | |||||||||
Highly Lev. Fin. Commitments | $ | 3.5 | $ | 4.6 | 5 | % | $ | 6.1 | 57 | % | |||||||
Equities (excludes ARS in AFS) | 12.9 | 13.8 | — | NM | NM | ||||||||||||
SIVs | 16.2 | 16.2 | 36 | 21.0 | 77 | ||||||||||||
Monolines | 1.3 | 1.7 | — | NM | NM | ||||||||||||
Consumer and Other(7) | 13.3 | 13.2 | NM | NM | NM | ||||||||||||
Total | $ | 181.9 | $ | 201.0 | |||||||||||||
Items Impacting Special Asset Pool Revenues
The table below provides additional information regarding the favorable net revenue marks affecting the Special Asset Pool during the third quarter of 2009.
| Pretax Revenue (in millions) | ||||||
---|---|---|---|---|---|---|---|
| Third Quarter 2009 | Third Quarter 2008 | |||||
Sub-prime related direct exposures(1)(2) | $ | 1,967 | $ | (394 | ) | ||
Private Equity and equity investments | (20 | ) | (430 | ) | |||
Alt-A Mortgages(1)(3) | (196 | ) | (932 | ) | |||
Highly leveraged loans and financing commitments(4) | (24 | ) | (792 | ) | |||
Commercial Real Estate (CRE) positions(1)(5) | (594 | ) | (649 | ) | |||
Structured Investment Vehicles' (SIVs) Assets | (40 | ) | (2,004 | ) | |||
Auction Rate Securities (ARS) proprietary positions | — | (166 | ) | ||||
CVA related to exposure to monoline insurers | (61 | ) | (920 | ) | |||
CVA on Citi debt liabilities under fair value option | (64 | ) | — | ||||
CVA on derivatives positions, excluding monoline insurers | 43 | (64 | ) | ||||
Subtotal | $ | 1,011 | $ | (6,351 | ) | ||
Accretion on reclassified assets | 502 | — | |||||
Total significant revenue items | $ | 1,513 | $ | (6,351 | ) | ||
Credit Valuation Adjustment Related to Monoline Insurers
CVA is calculated by applying forward default probabilities, which are derived using the counterparty's current credit spread, to the expected exposure profile. The exposure primarily relates to hedges on super senior subprime exposures that were executed with various monoline insurance companies. See "Direct Exposure to Monolines" below for a further discussion.
Credit Valuation Adjustment on Citi's Debt Liabilities for Which Citi Has Elected the Fair Value Option
The Company is required to use its own credit spreads in determining the current value for its derivative liabilities and all other liabilities for which it has elected the fair value option. When Citi's credit spreads widen (deteriorate), Citi recognizes a gain on these liabilities because the value of the liabilities has decreased. When Citi's credit spreads narrow (improve), Citi recognizes a loss on these liabilities because the value of the liabilities has increased. The approximately $64 million of losses recorded by Citi Holdings on its fair value option liabilities (excluding derivative liabilities) during the third quarter of 2009 was principally due to the narrowing (improving) of the Company's credit spreads.
Credit Valuation Adjustment on Derivative Positions, excluding Monoline insurers
The approximately $43 million net gain on Citi Holdings' derivative positions during the third quarter of 2009 was due to the narrowing of the Company's counterparties on its derivative assets. See "Derivatives—Fair Valuation Adjustments for Derivatives" below for a further discussion.
Accretion on Reclassified Assets
In the fourth quarter of 2008, Citi Holdings reclassified $33.3 billion of debt securities from trading securities to HTM investments, $4.7 billion of debt securities from trading securities to AFS, and $15.7 billion of loans from held-for-sale to held-for-investment. All assets were reclassified with an amortized cost equal to the fair value on the date of reclassification. The difference between the amortized cost basis and the expected principal cash flows is treated as a purchase discount and accreted into income over the remaining life of the security or loan. During the third quarter of 2009, Citi Holdings recognized approximately $502 million of interest revenue from this accretion.
Corporate/Other includes global staff functions (including finance, risk, human resources, legal and compliance) and other corporate expense, global operations and technology, residual Corporate Treasury and corporate items.
At September 30, 2010, this segment had approximately $279 billion of assets, consisting primarily of Citi's liquidity portfolio. The Student Loan Corporation is reported as Discontinued Operations within the Corporate/Other segment for the third quarter of 2010 period only.
| Third Quarter | Nine Months | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | 2009 | 2008 | |||||||||
Net interest revenue | $ | (461 | ) | $ | (678 | ) | $ | (1,216 | ) | $ | (1,794 | ) | |
Non-interest revenue | 1,132 | 212 | 1,646 | (413 | ) | ||||||||
Total Revenues, net of interest expense | $ | 671 | $ | (466 | ) | $ | 430 | $ | (2,207 | ) | |||
Total operating expenses | 441 | (77 | ) | 864 | 18 | ||||||||
Provisions for loan losses and for benefits and claims | — | 1 | 1 | 1 | |||||||||
Income (Loss) from continuing operations before taxes | $ | 230 | (390 | ) | $ | (435 | ) | $ | (2,226 | ) | |||
Income taxes (benefits) | 128 | (203 | ) | 145 | (818 | ) | |||||||
Income (Loss) from continuing operations | $ | 102 | $ | (187 | ) | $ | (580 | ) | $ | (1,408 | ) | ||
Income (loss) from discontinued operations, net of taxes | (418 | ) | 613 | (677 | ) | 578 | |||||||
Net Income (loss) before attribution of noncontrolling interests | $ | (316 | ) | $ | 426 | $ | (1,257 | ) | $ | (830 | ) | ||
Net Income (loss) attributable to noncontrolling interests | — | — | — | — | |||||||||
Net Income (loss) | $ | (316 | ) | $ | 426 | $ | (1,257 | ) | $ | (830 | ) | ||
| Third Quarter | Nine Months | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | 2010 | 2009 | |||||||||
Net interest revenue | $ | 252 | $ | (461 | ) | $ | 894 | $ | (1,210 | ) | |||
Non-interest revenue | 344 | 1,133 | 714 | 1,641 | |||||||||
Total revenues, net of interest expense | $ | 596 | $ | 672 | $ | 1,608 | $ | 431 | |||||
Total operating expenses | $ | 428 | $ | 440 | $ | 1,239 | $ | 863 | |||||
Provisions for loan losses and for benefits and claims | (1 | ) | 1 | — | 3 | ||||||||
Income (loss) from continuing operations before taxes | $ | 169 | $ | 231 | $ | 369 | $ | (435 | ) | ||||
Income taxes (benefits) | 78 | 134 | 185 | 151 | |||||||||
Income (loss) from continuing operations | $ | 91 | $ | 97 | $ | 184 | $ | (586 | ) | ||||
(Loss) from discontinued operations, net of taxes | (374 | ) | (418 | ) | (166 | ) | (677 | ) | |||||
Net income (loss) before attribution of noncontrolling interests | $ | (283 | ) | $ | (321 | ) | $ | 18 | $ | (1,263 | ) | ||
Net (loss) attributable to noncontrolling interests | (51 | ) | — | (51 | ) | (2 | ) | ||||||
Net income (loss) | $ | (232 | ) | $ | (321 | ) | $ | 69 | $ | (1,261 | ) | ||
3Q093Q10 vs. 3Q083Q09
Revenues, net of interest expense, decreased primarily due to the absence of the pretax gain related to the exchange of preferred stock in 2009, offset partially by gains on sales of AFS securities, benefits from lower short-term interest rates and other improved Treasury results during the current quarter.
3Q10 YTD vs. 3Q09 YTD
Revenues, net of interest expense, increased primarily due to gains on sales of AFS securities, benefits from lower short-term interest rates and other improved Treasury results, offset partially by the absence of the pretax gain related to the preferred exchange, partly offset by the interest cost of the trust preferred securities.referenced above.
Operating Expensesexpenses increased by 44% primarily due to intersegment eliminationscompensation-related costs and the absencelegal reserve charges.
Table of prior-year reserve releases.Contents
3Q09 YTD vs. 3Q08 YTDSEGMENT BALANCE SHEET AT SEPTEMBER 30, 2010
In millions of dollars | Regional Consumer Banking | Institutional Clients Group | Subtotal Citicorp | Citi Holdings | Corporate/Other and Consolidating Eliminations | Total Citigroup Consolidated | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets | ||||||||||||||||||||
Cash and due from banks | $ | 8,203 | $ | 16,320 | $ | 24,523 | $ | 1,203 | $ | 616 | $ | 26,342 | ||||||||
Deposits with banks | 8,593 | 49,006 | 57,599 | 5,081 | 87,391 | 150,071 | ||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | 270 | 233,793 | 234,063 | 5,994 | — | 240,057 | ||||||||||||||
Brokerage receivables | 208 | 25,664 | 25,872 | 11,181 | 85 | 37,138 | ||||||||||||||
Trading account assets | 12,503 | 301,347 | 313,850 | 23,248 | — | 337,098 | ||||||||||||||
Investments | 34,863 | 104,755 | 139,618 | 55,427 | 145,205 | 340,250 | ||||||||||||||
Loans, net of unearned income | ||||||||||||||||||||
Consumer | 223,034 | — | 223,034 | 240,070 | — | 463,104 | ||||||||||||||
Corporate | — | 169,468 | 169,468 | 21,739 | — | 191,207 | ||||||||||||||
Loans, net of unearned income | $ | 223,034 | $ | 169,468 | $ | 392,502 | $ | 261,809 | $ | — | $ | 654,311 | ||||||||
Allowance for loan losses | (13,856 | ) | (3,515 | ) | (17,371 | ) | (26,303 | ) | — | (43,674 | ) | |||||||||
Total loans, net | $ | 209,178 | $ | 165,953 | $ | 375,131 | $ | 235,506 | $ | — | $ | 610,637 | ||||||||
Goodwill | 10,347 | 10,808 | 21,155 | 4,642 | — | 25,797 | ||||||||||||||
Intangible assets (other than MSRs) | 2,254 | 987 | 3,241 | 4,464 | — | 7,705 | ||||||||||||||
Mortgage servicing rights (MSRs) | 1,546 | 75 | 1,621 | 2,355 | — | 3,976 | ||||||||||||||
Other assets | 31,689 | 54,279 | 85,968 | 40,877 | 45,955 | 172,800 | ||||||||||||||
Assets of discontinued operations | — | — | — | 31,409 | — | 31,409 | ||||||||||||||
Total assets | $ | 319,654 | $ | 962,987 | $ | 1,282,641 | $ | 421,387 | $ | 279,252 | $ | 1,983,280 | ||||||||
Liabilities and equity | ||||||||||||||||||||
Total deposits | $ | 300,268 | $ | 456,882 | $ | 757,150 | $ | 82,327 | $ | 10,618 | $ | 850,095 | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 4,946 | 186,676 | 191,622 | 264 | 179 | 192,065 | ||||||||||||||
Brokerage payables | 176 | 51,092 | 51,268 | — | 249 | 51,517 | ||||||||||||||
Trading account liabilities | 36 | 139,727 | 139,763 | 2,242 | — | 142,005 | ||||||||||||||
Short-term borrowings | 137 | 58,776 | 58,913 | 1,046 | 27,054 | 87,013 | ||||||||||||||
Long-term debt | 3,284 | 75,504 | 78,788 | 12,610 | 295,932 | 387,330 | ||||||||||||||
Other liabilities | 18,819 | 22,717 | 41,536 | 15,619 | 21,043 | 78,198 | ||||||||||||||
Liabilities of discontinued operations | — | — | — | 29,874 | — | 29,874 | ||||||||||||||
Net inter-segment funding (lending) | (8,012 | ) | (28,387 | ) | (36,399 | ) | 277,405 | (241,006 | ) | — | ||||||||||
Total Citigroup stockholders' equity | — | — | — | — | $ | 162,913 | $ | 162,913 | ||||||||||||
Noncontrolling interest | — | — | — | — | 2,270 | 2,270 | ||||||||||||||
Total equity | — | — | — | — | 165,183 | 165,183 | ||||||||||||||
Total liabilities and equity | $ | 319,654 | $ | 962,987 | $ | 1,282,641 | 421,387 | $ | 279,252 | $ | 1,983,280 | |||||||||
The supplemental information presented above reflects Citigroup's consolidated GAAP balance sheet by reporting segment as of September 30, 2010. The respective segment information depicts the assets and liabilities managed by each segment as of such date. While this presentation is not defined by GAAP, Citi believes that these non-GAAP financial measures enhance investors' understanding of the balance sheet components managed by the underlying business segments, as well as the beneficial inter-relationship of the asset and liability dynamics of the balance sheet components among Citi's business segments.
CAPITAL RESOURCES AND LIQUIDITY
Overview
Revenues,netHistorically, Citi has generated capital by earnings from its operating businesses. However, Citi may augment, and during the recent financial crisis did augment, its capital through issuances of interest expense, increasedcommon stock, convertible preferred stock, preferred stock, equity issued through awards under employee benefit plans, and, in the case of regulatory capital, through the issuance of subordinated debt underlying trust preferred securities. Further, the impact of future events on Citi's business results, such as corporate and asset dispositions, as well as changes in regulatory and accounting standards, also affects Citi's capital levels.
Capital is used primarily to support assets in Citi's businesses and to absorb market, credit or operational losses. While capital may be used for other purposes, such as to pay dividends or repurchase common stock, Citi's ability to utilize its capital for these purposes is currently restricted due to its agreements with the pretax gainU.S. government, generally for so long as the U.S. government continues to hold Citi's common stock or trust preferred securities.
Citigroup's capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with Citi's risk profile and all applicable regulatory standards and guidelines, as well as external rating agency considerations. The capital management process is centrally overseen by senior management and is reviewed at the consolidated, legal entity and country levels.
Senior management is responsible for the capital management process mainly through Citigroup's Finance and Asset and Liability Committee (FinALCO), with oversight from the Risk Management and Finance Committee of Citigroup's Board of Directors. FinALCO is composed of the senior-most management of Citigroup for the purpose of engaging management in decision-making and related todiscussions on capital and liquidity matters. Among other things, FinALCO's responsibilities include: determining the preferred exchange, intersegment eliminations,financial structure of Citigroup and its principal subsidiaries; ensuring that Citigroup and its regulated entities are adequately capitalized in consultation with its regulators; determining appropriate asset levels and return hurdles for Citigroup and individual businesses; reviewing the funding and capital markets plan for Citigroup; and setting and monitoring corporate and bank liquidity levels, and the impact of currency translation on non-U.S. capital.
Capital Ratios
Citigroup is subject to the risk-based capital guidelines issued by the Federal Reserve Board. Historically, capital adequacy has been measured, in part, based on two risk-based capital ratios, the Tier 1 Capital and Total Capital (Tier 1 Capital + Tier 2 Capital) ratios. Tier 1 Capital consists of the sum of "core capital elements," such as qualifying common stockholders' equity, as adjusted, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts, principally reduced by goodwill, other disallowed intangible assets, and disallowed deferred tax assets. Total Capital also includes "supplementary" Tier 2 Capital elements, such as qualifying subordinated debt and a limited portion of the allowance for credit losses. Both measures of capital adequacy are stated as a percentage of risk-weighted assets.
In 2009, the U.S. banking regulators developed a new measure of capital termed "Tier 1 Common," which is defined as Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts. For more detail on all of these capital metrics, see "Components of Capital Under Regulatory Guidelines" below.
Citigroup's risk-weighted assets are principally derived from application of the risk-based capital guidelines related to the measurement of credit risk. Pursuant to these guidelines, on-balance-sheet assets and the credit equivalent amount of certain off-balance-sheet exposures (such as financial guarantees, unfunded lending commitments, letters of credit, and derivatives) are assigned to one of several prescribed risk-weight categories based upon the perceived credit risk associated with the obligor, or if relevant, the guarantor, the nature of the collateral, or external credit ratings. Risk-weighted assets also incorporate a measure for market risk on covered trading account positions and all foreign exchange and commodity positions whether or not carried in the trading account. Excluded from risk-weighted assets are any assets, such as goodwill and deferred tax assets, to the extent required to be deducted from regulatory capital. See "Components of Capital Under Regulatory Guidelines" below.
Citigroup is also subject to a Leverage ratio requirement, a non-risk-based measure of capital adequacy, which is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets.
To be "well capitalized" under current federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital ratio of at least 6%, a Total Capital ratio of at least 10%, and a Leverage ratio of at least 3%, and not be subject to a Federal Reserve Board directive to maintain higher capital levels. The following table sets forth Citigroup's regulatory capital ratios as of September 30, 2010 and December 31, 2009, respectively.
Citigroup Regulatory Capital Ratios
| Sept. 30, 2010 | Dec. 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Common | 10.33 | % | 9.60 | % | |||
Tier 1 Capital | 12.50 | % | 11.67 | ||||
Total Capital (Tier 1 Capital + Tier 2 Capital) | 16.14 | % | 15.25 | ||||
Leverage | 6.57 | % | 6.87 | ||||
As noted in the table above, Citigroup was "well capitalized" under the current federal bank regulatory agency definitions as of September 30, 2010 and December 31, 2009.
Components of Capital Under Regulatory Guidelines
In millions of dollars | September 30, 2010 | December 31, 2009 | ||||||
---|---|---|---|---|---|---|---|---|
Tier 1 Common | ||||||||
Citigroup common stockholders' equity | $ | 162,601 | $ | 152,388 | ||||
Less: Net unrealized losses on securities available-for-sale, net of tax(1) | (997 | ) | (4,347 | ) | ||||
Less: Accumulated net losses on cash flow hedges, net of tax | (3,305 | ) | (3,182 | ) | ||||
Less: Pension liability adjustment, net of tax(2) | (3,500 | ) | (3,461 | ) | ||||
Less: Cumulative effect included in fair value of financial liabilities attributable to the change in own credit worthiness, net of tax(3) | 662 | 760 | ||||||
Less: Disallowed deferred tax assets(4) | 34,303 | 26,044 | ||||||
Less: Intangible assets: | ||||||||
Goodwill | 25,797 | 25,392 | ||||||
Other disallowed intangible assets | 5,242 | 5,899 | ||||||
Other | (706 | ) | (788 | ) | ||||
Total Tier 1 Common | $ | 103,693 | $ | 104,495 | ||||
Qualifying perpetual preferred stock | $ | 312 | $ | 312 | ||||
Qualifying mandatorily redeemable securities of subsidiary trusts | 20,321 | 19,217 | ||||||
Qualifying noncontrolling interests | 1,121 | 1,135 | ||||||
Other | — | 1,875 | ||||||
Total Tier 1 Capital | $ | 125,447 | $ | 127,034 | ||||
Tier 2 Capital | ||||||||
Allowance for credit losses(5) | $ | 12,971 | $ | 13,934 | ||||
Qualifying subordinated debt(6) | 22,569 | 24,242 | ||||||
Net unrealized pretax gains on available-for-sale equity securities(1) | 971 | 773 | ||||||
Total Tier 2 Capital | $ | 36,511 | $ | 38,949 | ||||
Total Capital (Tier 1 Capital and Tier 2 Capital) | $ | 161,958 | $ | 165,983 | ||||
Risk-weighted assets(7) | $ | 1,003,458 | $ | 1,088,526 | ||||
Adoption of SFAS 166/167 Impact on Capital
As previously disclosed, the adoption of SFAS 166/167 had a significant and immediate impact on Citigroup's capital ratios as of January 1, 2010.
As described further in Note 1 to the Consolidated Financial Statements, the adoption of SFAS 166/167 resulted in the consolidation of $137 billion of incremental assets and $146 billion of liabilities onto Citigroup's Consolidated Balance Sheet, including securitized credit card receivables on the date of adoption, January 1, 2010. The adoption of SFAS 166/167 also resulted in a net increase of $10 billion in risk-weighted assets. In addition, Citi added $13.4 billion to the loan loss allowance, increased deferred tax assets by $5.0 billion, and reduced retained earnings by $8.4 billion. This translated into a decrease in Tier 1 Common, Tier 1 Capital, and Total Capital of $14.2 billion, $14.2 billion and $14.0 billion, respectively, and a reduction in Tangible Common Equity (described below) of $8.4 billion, which were partially offset by net income of $4.4 billion and $2.3 billion of qualifying mandatorily redeemable securities of subsidiary trusts issued during the first quarter of 2010.
The impact on Citigroup's capital ratios from the January 1, 2010 adoption of SFAS 166/167 was as follows:
As of January 1, 2010 | Impact | |||
---|---|---|---|---|
Tier 1 Common | (138 | ) bps | ||
Tier 1 Capital | (141 | ) bps | ||
Total Capital | (142 | ) bps | ||
Leverage | (118 | ) bps | ||
TCE (TCE/RWA) | (87 | ) bps | ||
For more information, see Note 1 to the Consolidated Financial Statements below.
Common Stockholders' Equity
Citigroup's common stockholders' equity increased during the nine months ended September 30, 2010 by $10.2 billion to $162.6 billion, and represented 8.2% of total assets as of September 30, 2010.
The table below summarizes the change in Citigroup's common stockholders' equity during the first nine months of 2010:
In billions of dollars | | |||
---|---|---|---|---|
Common stockholders' equity, December 31, 2009 | $ | 152.4 | ||
Transition adjustment to retained earnings associated with the adoption of SFAS 166/167 (as of January 1, 2010) and the adoption of ASU 2010-11 (recorded on July 1, 2010) | (8.5 | ) | ||
Net income | 9.3 | |||
Employee benefit plans and other activities | 2.0 | |||
ADIA Upper DECs equity units purchase contract | 3.8 | |||
Net change in accumulated other comprehensive income (loss), net of tax | 3.6 | |||
Common stockholders' equity, September 30, 2010 | $ | 162.6 | ||
As of September 30, 2010, $6.7 billion of stock repurchases remained under Citi's authorized repurchase programs. No material repurchases were made in the first nine months of 2010, or the year ended December 31, 2009. For so long as the U.S. government holds any Citigroup common stock or trust preferred securities, Citigroup has generally agreed not to acquire, repurchase or redeem any Citigroup equity or trust preferred securities, other than pursuant to administering its employee benefit plans or other customary exceptions, or with the consent of the U.S. government.
Tangible Common Equity (TCE)
TCE, as defined by Citigroup, representsCommon equity lessGoodwill andIntangible assets (other thanMortgage Servicing Rights (MSRs)), net of the related net deferred taxes. Other companies may calculate TCE in a manner different from that of Citigroup. Citi's TCE was $129.0 billion at September 30, 2010 and $118.2 billion at December 31, 2009.
The TCE ratio (TCE divided by risk-weighted assets) was 12.9% at September 30, 2010 and 10.9% at December 31, 2009.
TCE is a capital adequacy metric used and relied upon by industry analysts; however, it is a non-GAAP financial measure for SEC purposes. A reconciliation of Citigroup's total stockholders' equity to TCE follows:
In millions of dollars | Sept. 30, 2010 | Dec. 31, 2009 | |||||||
---|---|---|---|---|---|---|---|---|---|
Total Citigroup stockholders' equity | $ | 162,913 | $ | 152,700 | |||||
Less: | |||||||||
Preferred stock | 312 | 312 | |||||||
Common equity | $ | 162,601 | $ | 152,388 | |||||
Less: | |||||||||
Goodwill | 25,797 | 25,392 | |||||||
Intangible assets (other than MSRs) | 7,705 | 8,714 | |||||||
Related net deferred tax assets | 59 | 68 | |||||||
Tangible common equity (TCE) | $ | 129,040 | $ | 118,214 | |||||
Tangible assets | |||||||||
GAAP assets | $ | 1,983,280 | $ | 1,856,646 | |||||
Less: | |||||||||
Goodwill | 25,797 | 25,392 | |||||||
Intangible assets (other than MSRs) | 7,705 | 8,714 | |||||||
Related deferred tax assets | 361 | 386 | |||||||
Federal bank regulatory reclassification | — | 5,746 | |||||||
Tangible assets (TA) | $ | 1,949,417 | $ | 1,827,900 | |||||
Risk-weighted assets (RWA) | $ | 1,003,458 | $ | 1,088,526 | |||||
TCE/TA ratio | 6.62 | % | 6.47 | % | |||||
TCE/RWA ratio | 12.86 | % | 10.86 | % | |||||
Capital Resources of Citigroup's Depository Institutions
Citigroup's U.S. subsidiary depository institutions are also subject to risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are similar to the guidelines of the Federal Reserve Board. To be "well capitalized" under current regulatory definitions, Citigroup's depository institutions must have a Tier 1 Capital ratio of at least 6%, a Total Capital (Tier 1 Capital + Tier 2 Capital) ratio of at least 10%, and a Leverage ratio of at least 5%, and not be subject to a regulatory directive to meet and maintain higher capital levels.
At September 30, 2010 and December 31, 2009, all of Citigroup's U.S. subsidiary depository institutions including Citigroup's primary subsidiary depository institution, Citibank, N.A., were "well capitalized" under current federal bank regulatory agency definitions, as noted in the following table:
Citibank, N.A. Components of Capital and Ratios Under Regulatory Guidelines
In billions of dollars | Sept. 30, 2010 | Dec. 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Common | $ | 103.6 | $ | 95.8 | |||
Tier 1 Capital | 104.5 | 96.8 | |||||
Total Capital (Tier 1 Capital + Tier 2 Capital) | 117.9 | 110.6 | |||||
Tier 1 Common ratio | 14.52 | % | 13.02 | % | |||
Tier 1 Capital ratio | 14.64 | 13.16 | |||||
Total Capital ratio | 16.52 | 15.03 | |||||
Leverage ratio(1) | 9.04 | 8.31 | |||||
Similar to pending changes to capital standards applicable to Citigroup and its broker-dealer subsidiaries, as discussed below, the capital requirements applicable to Citigroup's subsidiary depository institutions may be subject to change in light of actions currently being considered, particularly at the regulatory level. Citigroup will continue to monitor these developments closely.
There are various legal and regulatory limitations on the ability of Citigroup's subsidiary depository institutions to pay dividends to Citigroup and its non-bank subsidiaries. In determining the declaration of dividends, each depository institution must also consider its effect on applicable risk-based capital and Leverage ratio requirements, as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Citigroup did not receive any dividends from its bank subsidiaries during the first nine months of 2010. See also "Funding and Liquidity—Other" below.
Impact of Changes on Capital Ratios
The following table presents the estimated sensitivity of Citigroup's and Citibank, N.A.'s capital ratios to changes of $100 million in Tier 1 Common, Tier 1 Capital, or Total Capital (numerator), or changes of $1 billion in risk-weighted assets or adjusted average total assets (denominator), based on financial information as of September 30, 2010. This information is provided for the purpose of analyzing the impact that a change in Citigroup's or Citibank, N.A.'s financial position or results of operations could have on these ratios. These sensitivities only consider a single change to either a component of capital, risk-weighted assets, or adjusted average total assets. Accordingly, an event that affects more than one factor may have a larger basis point impact than is reflected in this table.
Tier 1 Common ratio | Tier 1 Capital ratio | Total Capital ratio | Leverage ratio | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Impact of $100 million change in Tier 1 Common | Impact of $1 billion change in risk-weighted assets | Impact of $100 million change in Tier 1 Capital | Impact of $1 billion change in risk-weighted assets | Impact of $100 million change in Total Capital | Impact of $1 billion change in risk-weighted assets | Impact of $100 million change in Tier 1 Capital | Impact of $1 billion change in adjusted average total assets | ||||||||||||||||||
Citigroup | 1.0 bps | 1.0 bps | 1.0 bps | 1.2 bps | 1.0 bps | 1.6 bps | 0.5 bps | 0.3 bps | |||||||||||||||||
Citibank, N.A. | 1.4 bps | 2.0 bps | 1.4 bps | 2.1 bps | 1.4 bps | 2.3 bps | 0.9 bps | 0.8 bps | |||||||||||||||||
Broker-Dealer Subsidiaries
At September 30, 2010, Citigroup Global Markets Inc., a broker-dealer registered with the SEC that is an indirect wholly owned subsidiary of Citigroup Global Markets Holdings Inc. (CGMHI), had net capital, computed in accordance with the SEC's net capital rule, of $9.0 billion, which exceeded the minimum requirement by $8.2 billion.
In addition, certain of Citi's broker-dealer subsidiaries are subject to regulation in the other countries in which they do business, including requirements to maintain specified levels of net capital or its equivalent. Citigroup's broker-dealer subsidiaries were in compliance with their capital requirements at September 30, 2010.
Similar to pending changes to capital standards applicable to Citigroup, as discussed under "Regulatory Capital and Liquidity Standards Developments" below, net capital requirements applicable to Citigroup's broker-dealer subsidiaries in the U.S. and other jurisdictions will be subject to change in light of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (Financial Reform Act) and other actions currently being considered, particularly at the regulatory level. Citi will continue to monitor these developments closely.
Regulatory Capital and Liquidity Standards Developments
The prospective regulatory capital and liquidity standards for financial institutions are currently subject to significant debate, rulemaking activity and uncertainty, both in the U.S. as well as internationally. Citi will continue to monitor these developments closely.
Basel II and III. In late 2005, the Basel Committee on Banking Supervision (Basel Committee) published a new set of risk-based capital standards (Basel II) which would permit banks, including Citigroup, to leverage internal risk models used to measure credit, operational, and market risk exposures to drive regulatory capital calculations. In late 2007, the U.S. banking regulators adopted these standards for large banks, including Citigroup. As adopted, the standards require Citigroup, as a large and internationally active bank, to comply with the most advanced Basel II approaches for calculating credit and operational risk capital requirements. The U.S. implementation timetable consists of a parallel calculation period under the current regulatory capital regime (Basel I) and Basel II, followed by a three-year transitional period.
Citi began parallel reporting on April 1, 2010. There will be at least four quarters of parallel reporting before Citi enters the three-year transitional period. U.S. regulators have reserved the right to change how Basel II is applied in the U.S. following a review at the end of the second year of the transitional period, and to retain the existing prompt corrective action and leverage capital requirements applicable to banking organizations in the U.S. Citigroup intends to implement Basel II within the timeframe required by the U.S. regulators.
Apart from the Basel II rules regarding credit and operational risks, in June 2010 the Basel Committee proposed revisions to the market risk capital framework which could also result in additional capital requirements.
Further, as an outgrowth of the financial crisis, the Basel Committee undertook to establish global financial reforms designed to strengthen existing capital requirements as well as set forth new liquidity risk measures (Basel III). The Basel III effort, which began with the issuance of capital and liquidity proposals in December 2009, and which were subsequently partially amended, culminated with the announcement by the Basel Committee in September 2010 as to agreement with respect to the calibration of the risk-based capital ratios and newly introduced Leverage ratio, the planned approach for the proposed liquidity ratios, and transitional arrangements for implementing all of the new requirements.
Under these standards, when fully phased-in on January 1, 2019, Citigroup would be required to maintain risk-based capital ratios as follows:
| Tier 1 Common | Tier 1 Capital | Total Capital | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Stated Minimum Ratio | 4.5 | % | 6.0 | % | 8.0 | % | ||||
Plus: Capital Conservation Buffer Requirement | 2.5 | % | 2.5 | % | 2.5 | % | ||||
Effective Minimum Ratio | 7.0 | % | 8.5 | % | 10.5 | % | ||||
While banking organizations may draw on the 2.5% capital conservation buffer to absorb losses during periods of financial or economic stress, restrictions on earnings distributions (e.g., dividends, equity repurchases, and discretionary compensation) would ensue, with the degree of such restrictions greater based upon the extent to which the buffer is utilized. Moreover, subject to national discretion by the respective bank supervisory or regulatory authorities, a countercyclical capital buffer ranging from 0% – 2.5%,
consisting of common equity or other fully loss absorbing capital, would also be invoked on banking organizations when it is deemed that excess aggregate credit growth is resulting in a build-up of systemic risk in a given country. This countercyclical capital buffer, when in effect, would serve as an additional buffer supplementing the capital conservation buffer.
As a systemically important financial institution, Citigroup may also be subject to additional capital requirements. The Basel Committee and the Financial Stability Board are currently developing an integrated approach to systemically important financial institutions which could include combinations of capital surcharges, contingent capital, and bail-in debt.
The Basel Committee's objective of strengthening the quality, consistency and transparency of banking organizations' regulatory capital base is not only evidenced by formalizing the desired predominance of Tier 1 Common capital through a substantial effective minimum ratio requirement, but is also demonstrated by requiring that Tier 1 Common capital be measured after applying generally all regulatory adjustments (including applicable deductions). The impact of these regulatory adjustments on Tier 1 Common capital would be phased-in incrementally at 20% annually beginning on January 1, 2014, with full implementation by January 1, 2018. During the transition period, the portion of the regulatory adjustments (including applicable deductions) not applied against Tier 1 Common capital would continue to be subject to existing national treatments.
Further, under Basel III, certain capital instruments would no longer qualify as non-common components of Tier 1 Capital (e.g., trust preferred securities and cumulative perpetual preferred stock) or Tier 2 Capital. These instruments would be subject to a 10% per-year phase-out over 10 years beginning on January 1, 2013 (although this phase-out period will be substantially shorter in the U.S. as a result of the so-called "Collins Amendment" to the Financial Reform Act discussed below), except for certain limited grandfathering. In addition, the Basel Committee is considering a proposal that would require capital instruments to contain mandatory write-down or common stock conversion features in order to qualify as components of Tier 1 or Tier 2 Capital.
Although U.S. banking organizations, such as Citigroup, are currently subject to a supplementary, non-risk-based measure of leverage for capital adequacy purposes (see "Capital Ratios" above), Basel III would establish a more constrained Leverage ratio requirement. Initially, during a four-year parallel run beginning on January 1, 2013, banking organizations will be required to maintain a minimum 3% Tier 1 Capital Leverage ratio. Disclosure of such ratio, and its components, would start on January 1, 2015. Depending upon the results of the parallel run test period, there could be subsequent adjustments to the Leverage ratio, which is targeted to be finalized in 2017 and a formal requirement by January 1, 2018.
The Basel Committee also proposed the establishment of two formal measures intended to strengthen liquidity risk management and supervision, a short-term Liquidity Coverage Ratio (LCR) as well as a long-term, structural, Net Stable Funding Ratio (NSFR). The LCR, which would become a minimum standard on January 1, 2015 (after an observation period beginning in 2011), has been designed to ensure banking organizations maintain an adequate level of unencumbered cash and high quality unencumbered assets that can be converted into cash to meet liquidity needs. The NSFR would be introduced as a minimum requirement by January 1, 2018 (after an observation period beginning in 2012), and is designed to promote the medium and long-term funding of assets and activities over a one-year time horizon. Both ratios must be at least 100%.
Certain of the Basel III rules are currently expected to be ratified as final in November 2010 and published by January 2011. The U.S. banking agencies will then be required to finalize, within two years, the rules to be applied by U.S. banking organizations commencing on January 1, 2013.
Financial Reform Act. In addition to the implementation of Basel II and Basel III, the Financial Reform Act grants new regulatory authority to various U.S. federal regulators, including the Federal Reserve Board and a newly created Financial Stability Oversight Council (Oversight Council), to impose heightened prudential standards on financial institutions such as Citigroup. These standards could include heightened capital, leverage and liquidity standards, as well as requirements for periodic stress tests. The Federal Reserve Board will also have discretion to impose other prudential standards, including contingent capital requirements, and will retain important flexibility to distinguish among bank holding companies such as Citigroup based on their perceived riskiness, complexity, activities, size and other factors.
Further, the so-called "Collins Amendment" to the Financial Reform Act will result in new minimum capital requirements for bank holding companies such as Citigroup, and could require Citigroup to replace certain of its outstanding securities that are currently counted towards Citi's Tier 1 Capital requirements, such as trust preferred securities, over a period of time.
Overview
Citi's funding and liquidity objective is to both fund its existing asset base and maintain sufficient excess liquidity so that it can operate under a wide variety of market conditions. A wide range of liquidity scenarios are considered based on both historical industry experience and hypothetical situations. The approach is to ensure Citi has sufficient funding that is structural in nature so as to accommodate market disruptions for both short- and long-term periods. Due to various constraints that limit the free transfer of liquidity or capital between Citi-affiliated entities (as discussed below), Citigroup's primary liquidity objectives are established by entity and in aggregate across:
Citigroup's goal is to make certain that there is sufficient funding to ensure that aggregate liquidity resources are available for these two entities. The primary sources of funding include (i) deposits via Citi's bank subsidiaries, which are Citi's lowest-cost source of long-term funding, (ii) long-term debt (including trust preferred securities and other long-term collateralized financing) issued at the parent and broker-dealer and certain bank subsidiaries, and (iii) stockholders' equity. These sources are supplemented by a modest amount of short-term borrowings, primarily in the form of commercial paper and secured financing (securities loaned or sold under agreements to repurchase) at the Citigroup parent and broker-dealer.
Citigroup works to ensure that the structural tenor of these funding sources is sufficiently long in relation to the tenor of its asset base. In fact, the key goal of Citi's asset-liability management is to ensure that there is excess tenor in the liability structure so as to provide excess liquidity to fund the assets. The net tenor profile of this excess liquidity can effectively offset potential draws on liquidity that may occur under stress. This excess funding is held in the form of the aggregate liquidity resources, as described below.
For additional information on prospective regulatory liquidity standards for financial institutions such as Citi, see "Capital Resources—Regulatory Capital and Liquidity Standards Developments" above.
Aggregate Liquidity Resources
| Parent & Broker-Dealer | Significant Bank Entities | Total | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Sept. 30, 2010 | Jun. 30, 2010 | Sept. 30, 2009 | Sept. 30, 2010 | Jun. 30, 2010 | Sept. 30, 2009 | Sept. 30, 2010 | Jun. 30, 2010 | Sept. 30, 2009 | |||||||||||||||||||
Cash at major central banks | $ | 16.1 | $ | 24.7 | $ | 19.6 | $ | 79.1 | $ | 86.0 | $ | 148.8 | $ | 95.2 | $ | 110.7 | $ | 168.4 | ||||||||||
Unencumbered Liquid Securities | 73.9 | 56.8 | 56.4 | 161.7 | 143.4 | 59.4 | 235.6 | 200.2 | 115.8 | |||||||||||||||||||
Total | $ | 90.0 | $ | 81.5 | $ | 76.0 | $ | 240.8 | $ | 229.4 | $ | 208.2 | $ | 330.8 | $ | 310.9 | $ | 284.2 | ||||||||||
As noted in the table above, Citigroup's aggregate liquidity resources totaled $330.8 billion at September 30, 2010, compared with $310.9 billion at June 30, 2010 and $284.2 billion at September 30, 2009. These amounts are as of quarter-end, and may increase or decrease intra-quarter in the ordinary course of business. During the quarter ended September 30, 2010, the intra-quarter amounts did not fluctuate materially from the quarter-end amounts noted above.
At September 30, 2010, Citigroup's parent and broker-dealer "cash box" totaled $90.0 billion, an increase of $8.5 billion from June 30, 2010 and compared with $76.0 billion at September 30, 2009. This includes the liquidity portfolio and "cash box" held in the United States as well as government bonds held by Citigroup's broker-dealer entities in the United Kingdom and Japan.
Citigroup's bank subsidiaries had an aggregate of approximately $79.1 billion of cash on deposit with major central banks (including the U.S. Federal Reserve Banks, European Central Bank, Bank of England, Swiss National Bank, Bank of Japan, the Monetary Authority of Singapore, and the Hong Kong Monetary Authority) at September 30, 2010, compared with approximately $86 billion at June 30, 2010 and $148.8 billion at September 30, 2009.
Citigroup's bank subsidiaries also have significant additional liquidity resources through unencumbered highly liquid government and government-backed securities. These securities are available for sale or secured funding through private markets or by pledging to the major central banks. The value of these liquid securities was $161.7 billion at September 30, 2010, compared with $143.4 billion at June 30, 2010 and $59.4 billion at September 30, 2009. Significant amounts of cash and liquid securities are also available in other Citigroup entities.
In addition to the highly liquid securities noted above, Citigroup's bank subsidiaries also maintain additional unencumbered securities and loans, which are currently pledged to the U.S. Federal Home Loan Banks' and U.S. Federal Reserve Banks discount window.
Deposits
Citi views its deposit base within its bank subsidiaries as its most stable and lowest-cost funding source. Citi continues to focus on maintaining a geographically diverse retail and corporate deposit base that stood at approximately $850 billion at September 30, 2010, as compared with $814 billion at June 30, 2010 and $828 billion at March 31, 2010. Approximately 60% of the deposit increase from the second quarter of 2010 to the third quarter of 2010 was driven by FX translation, with the rest primarily driven by an increase in deposits in our internationalTransaction Services businesses. Citigroup's deposits are diversified across clients, products and regions, with approximately 64% outside of the United States as of September 30, 2010. The Financial Reform Act,
signed into law on July 21, 2010, permanently increased the statutory standard maximum deposit insurance amount for U.S. deposits to $250,000 per depositor.
Long-Term Debt
Long-term debt is an important funding source because of its multi-year maturity structure. At September 30, 2010, long-term debt outstanding for Citigroup, was as follows:
In billions of dollars | Parent & Broker-Dealer | Bank | Total Citigroup(1) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Long-term debt(2) | $ | 271.2 | $ | 116.1 | (3) | $ | 387.3 |
The table below details the long-term debt issuances of Citigroup during the past five quarters.
In billions of dollars | 3Q09 | 4Q09 | 1Q10 | 2Q10 | 3Q10 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Unsecured long-term debt issued under TLGP guarantee | $ | 10.0 | $ | 10.0 | $ | — | $ | — | $ | — | ||||||
Unsecured long-term debt issued without TLGP guarantee: | 12.6 | 4.6 | (1) | 1.3 | 4.4 | (2) | 6.8 | |||||||||
Unsecured long-term debt issued by local country | 2.7 | 2.5 | 1.7 | 1.0 | 2.1 | |||||||||||
Trust Preferred Securities (TRUPS) | 27.1 | — | 2.3 | — | — | |||||||||||
Secured Debt & Securitizations | 5.2 | 2.7 | 2.0 | — | — | |||||||||||
Total | $ | 57.6 | $ | 19.8 | $ | 7.3 | $ | 5.4 | $ | 8.9 | ||||||
Liquidity Ratios
Structural liquidity ensures that the asset base is funded by sufficiently long-dated liabilities. The structural liquidity ratio, defined as the sum of deposits, long-term debt and stockholders' equity as a percentage of total assets, measures this in broad terms. Citi's structural liquidity ratio was 71% at September 30, 2010, virtually unchanged from June 30, 2010 and compared with 72% at September 30, 2009.
Another measure of Citi's structural liquidity is cash capital. Cash capital is a more detailed measure of the ability to fund the structurally illiquid portion of Citigroup's balance sheet than traditional measures, such as deposits to loans or core deposits to loans. Cash capital measures the amount of long-term funding (>1 year) available to fund illiquid assets. Long-term funding includes core customer deposits, long-term debt and equity. Illiquid assets include loans (net of sale/securitization adjustments), illiquid securities, securities haircuts and other assets (i.e., goodwill, intangibles, fixed assets, receivables, etc.). At September 30, 2010, both the parent and broker-dealer and the aggregate bank subsidiaries had a significant excess of cash capital.
In addition, as of September 30, 2010, the parent and broker-dealer maintained liquidity to meet all maturing obligations significantly in excess of a one-year period without access to the unsecured wholesale markets.
Short-Term Borrowings
As noted above, Citi supplements its primary sources of funding with a modest amount of short-term borrowings. Short-term borrowings primarily consist of commercial paper, borrowings from banks and other market participants and secured financing (securities loaned or sold under agreements to repurchase).
At September 30, 2010, commercial paper outstanding for Citigroup's parent and broker-dealer and bank subsidiaries, respectively, was as follows:
In billions of dollars | Parent & Broker-Dealer | Bank(1) | Total Citigroup | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Commercial paper | $ | 9.6 | $ | 26.6 | $ | 36.2 | ||||
As noted in the footnote to the table above, $26.6 billion of the commercial paper outstanding at September 30, 2010 reflects the consolidation of VIEs pursuant to the adoption of SFAS 166/167 effective January 1, 2010. The VIE consolidation led to an increase in bank subsidiary commercial paper, while parent and broker-dealer commercial paper remained at recent levels. For the quarter ended September 30, 2010, the average outstanding commercial paper was approximately $35 billion.
The short-term borrowings line on Citi's balance sheet at September 30, 2010 also includes $41.8 billion of borrowings from banks and other market participants, which includes borrowing from the Federal Home Loan Banks. The average balance of borrowings from banks and other market
participants for the quarter ended September 30, 2010 was approximately $46 billion.
Secured financing is conducted through Citi's broker-dealer subsidiaries to facilitate customer matched-book activity and to efficiently fund a portion of the trading inventory. At September 30, 2010, secured financing was $192.1 billion and averaged approximately $203 billion during the three months ended September 30, 2010.
The majority of this secured financing is collateralized by highly liquid government and government-backed securities. Of the remainder, a portion relates to matched-book transactions that are part of the business activity of secured lending to customers, which appears as an asset on Citi's Consolidated Balance Sheet ("Securities Borrowed or Purchased Under Agreements to Resell"). These matched-book transactions have matching tenor profiles resulting in minimal funding requirements. The balance of secured financing that is not matched-book transactions is carefully calibrated by asset quality, tenor and counterparty exposure and, as discussed above, supplement Citi's other sources of funding.
See Note 12 to the Consolidated Financial Statements for further detail on Citigroup's and its affiliates' outstanding long-term debt and short-term borrowings.
Liquidity Transfer Between Entities
Liquidity is generally transferable across the various affiliates of the parent and broker-dealer, subject to standard legal terms. Similarly, the parent and broker-dealer can generally transfer excess liquidity into its bank subsidiaries, such as Citibank, N.A. In addition, Citigroup's bank subsidiaries, including Citibank, N.A., can lend to the Citigroup parent and broker dealer in accordance with Section 23A of the Federal Reserve Act. As of September 30, 2010, the amount available for lending under Section 23A was approximately $30 billion, provided the funds are collateralized appropriately.
Funding Outlook
Citi currently estimates its long-term debt maturing for the full year 2010 is approximately $36 billion (approximately $31.6 billion had matured as of September 30, 2010). Given the current status of Citi's liquidity resources, Citi currently expects to refinance approximately $20 billion of its long-term debt maturing in 2010, and does not expect to refinance its TLGP debt maturing in 2010. As of September 30, 2010, Citi had issued approximately $15.7 billion of long-term debt, and expects to issue approximately $4.5 billion during the rest of 2010. Looking forward, Citi currently estimates its long-term debt maturing during 2011 is approximately $40 billion, and it expects to re-issue approximately $20 billion of this debt during the year. Citi does not expect to refinance its TLGP debt as it matures during 2011 and 2012 (approximately $58 billion). Citi continues to review its funding and liquidity needs and may adjust its expected issuances due to market conditions or regulatory requirements, among other factors.
Credit Ratings
Citigroup's ability to access the capital markets and other sources of funds, as well as the cost of these funds and its ability to maintain certain deposits, is dependent on its credit ratings. The table below indicates the current ratings for Citigroup. (As a result of the Citigroup guarantee, changes in U.S. dollar rates, partly offset byratings for CFI are the interest costsame as those of Citigroup.)
Citigroup's Debt Ratings as of September 30, 2010
Citigroup Inc/Citigroup Funding Inc. | Citibank, N.A. | |||||||
---|---|---|---|---|---|---|---|---|
Senior debt | Commercial paper | Long- term | Short- term | |||||
Fitch Ratings | A+ | F1+ | A+ | F1+ | ||||
Moody's Investors Service (Moody's) | A3 | P-1 | A1 | P-1 | ||||
Standard & Poor's (S&P) | A | A-1 | A+ | A-1 | ||||
The credit rating agencies included in the chart above have each indicated that they are evaluating the impact of the trust preferred securities.Financial Reform Act on the rating support assumptions currently included in their methodologies as related to large U.S. bank holding companies. These evaluations are generally as a result of agencies' belief that the Financial Reform Act increases the uncertainty regarding the U.S. government's willingness to provide extraordinary support to such companies.
Consistent with such belief and to bring Citi in line with other large U.S. banks, S&P and Moody's revised their outlooks on Citigroup's supported ratings from stable to negative in February and July of 2010, respectively. In addition, Fitch placed Citigroup's supported ratings on rating watch negative in October of 2010, along with most U.S. bank and bank holding companies' support ratings, support floors and other ratings that are sovereign-support dependent. While the ultimate timing of the completion of the credit rating agencies' evaluations, as well as the outcomes, is uncertain, the agencies have indicated that their evaluations for the large, U.S. banks will likely conclude on or around the following time periods:
Ratings downgrades by Fitch, Moody's or S&P could have material impacts on funding and liquidity through cash obligations, reduced funding capacity and due to intersegment eliminationscollateral triggers. Because of the current credit ratings of Citigroup, a one-notch downgrade of its senior debt/long-term rating may or may not impact Citigroup's commercial paper/short-term rating by one notch. As of September 30, 2010, Citi currently believes that a one-notch downgrade of both the senior debt/long-term rating of Citigroup and a one-notch downgrade of Citigroup's commercial paper/short-term rating could result in the absenceassumed loss of prior-year reserve releases.unsecured commercial paper ($8.8 billion) and tender option bonds funding ($0.4 billion) as well as derivative triggers and additional margin requirements ($1.1 billion). Other funding sources, such as secured financing and other margin requirements for which there are no explicit triggers, could also be adversely affected. The aggregate liquidity resources of Citigroup's parent and broker-dealer stood at $90.0 billion as of September 30, 2010, in part as a contingency for such an event, and a broad range of mitigating actions are currently included in the Citigroup Contingency Funding Plan. These mitigating factors include, but are not limited to, accessing funding capacity from existing clients, diversifying funding sources, tailoring levels of secured lending, adjusting the size of select trading books, and collateralized borrowings from significant bank subsidiaries.
Citi currently believes that a more severe ratings downgrade scenario, such as a two-notch downgrade of the senior debt/long-term rating of Citigroup, accompanied by a one-notch downgrade of Citigroup's commercial paper/short-term rating, could result in an additional $1.4 billion in funding requirement in the form of cash obligations and collateral.
Further, as of September 30, 2010, a one-notch downgrade of the senior debt/long-term ratings of Citibank, N.A. could result in an approximate $3.8 billion funding requirement in the form of collateral and cash obligations. Because of the current credit ratings of Citibank, N.A., a one-notch downgrade of its senior debt/long-term rating is unlikely to have any impact on its commercial paper/short-term rating. The significant bank entities, Citibank, N.A., and other bank vehicles have aggregate liquidity resources of $241 billion, and have a detailed contingency funding plan that encompasses a broad range of mitigating actions.
GOVERNMENT PROGRAMSOFF-BALANCE-SHEET ARRANGEMENTS
Common Stock Warrants Issued to UST under TARP
In connection with its participation in TARP in October and December 2008, Citi issued two warrants exercisable for common stock to the UST. These warrants remain outstanding following the completion of the exchange offers.
The warrant issued to the UST in October 2008 has a term of 10 years, an exercise price of $17.85 per share and is exercisable for approximately 210.1 million shares of common stock. The value ascribed to the warrant, or $1.3 billion out of the $25 billion in cash proceeds, on a relative fair value basis, was recorded in Citigroup's stockholders' equity and resulted in an increase inAdditional paid-in capital.
The warrant issued to the UST in December 2008 also has a term of 10 years, an exercise price of $10.61 per share and is exercisable for approximately 188.5 million shares of common stock. The value ascribed to the warrant, or $0.5 billion out of the $20 billion in cash proceeds, on a relative fair value basis, was recorded in Citigroup's stockholders' equity and resulted in an increase inAdditional paid-in capital.
The fair value for the warrants was calculated using the Black-Scholes option pricing model. The valuation was based on the Citigroup stock price, stock volatility, dividend yield, and the risk free rate on the measurement date for both the issuances.
See "U.S. Government Loss-Sharing Agreement" below for a description of the third common stock warrant issued, outstanding and held by the UST.
Implementation and Management of TARP Programs
Citigroup has established a Special TARP Committee composed of senior executives to approve, monitor and track how the USG's TARP funds invested in Citi, or $45 billion, are utilized. Citi is required to adhere to the following objectives as a condition of the USG's capital investments:
The Committee has established specific guidelines, which are consistent with the objectives and spirit of TARP. Pursuant to these guidelines, Citi will use TARP capital only for those purposes expressly approved by the Committee.
Committee approval is the final stage in a four-step review process to evaluate proposals from Citi businesses for the use of TARP capital, considering the risk, the potential financial impact and returns.
On August 11, 2009, Citi published its most recent quarterly report summarizing its TARP spending initiatives for the second quarter of 2009 (the report is available at www.citigroup.com). The report states that the Committee had authorized $50.8 billion in initiatives backed by TARP capital which has subsequently been increased to $53.8 billion. As of September 30, 2009, the Company has deployed approximately $18.3 billion of funds under the approved initiatives.
FDIC's Temporary Liquidity Guarantee Program
Under the terms of the FDIC's Temporary Liquidity Guarantee Program (TLGP), the FDIC guaranteed, until the earlier of either its maturity or June 30, 2012 (for qualifying debt issued before April 1, 2009) or December 31, 2012 (for qualifying debt issued on or after April 1, 2009 through October 31, 2009), certain qualifying senior unsecured debt issued by certain Citigroup entities between October 31, 2008 and October 31, 2009 in amounts up to 125% of the qualifying debt for each qualifying entity. The FDIC charged Citigroup a fee ranging from 50 to 150 basis points in accordance with a prescribed fee schedule for any qualifying debt issued with the FDIC guarantee. The TLGP was terminated on October 31, 2009 and Citigroup and its affiliates have elected not to participatesubsidiaries are involved with several types of off-balance-sheet arrangements, including special purpose entities (SPEs), primarily in any FDIC-approved extension of the program.
As of September 30, 2009,connection with securitization activities inRegional Consumer Banking andInstitutional Clients Group. Citigroup and its affiliates had issued a totalsubsidiaries use SPEs principally to obtain liquidity and favorable capital treatment by securitizing certain of $54.6 billionCitigroup's financial assets, assisting clients in securitizing their financial assets and creating investment products for clients. The adoption of long-term debt that is covered under the FDIC guarantee, with $6.35 billion maturing inSFAS 166/167, effective on January 1, 2010, $18.75 billion maturing in 2011caused certain SPEs, including credit card receivables securitization trusts and $29.5 billion maturing in 2012.
In addition, as of September 30, 2009, Citigroup, through its subsidiaries, had $4.37 billion in outstandingasset-backed commercial paper and interbank deposits backed by the FDIC. The FDIC also charged a fee ranging from 50conduits, to 150 basis pointsbe consolidated in connection with the issuance of those instruments. As approved by the FDIC, effective October 1, 2009 through the termination of the TLGP program on October 31, 2009, Citigroup issued commercial paper of various tenors without the FDIC guarantee.
See "Capital Resources and Liquidity" below forCiti's Consolidated Financial Statements. For further information on Citi's fundingsecuritization activities and liquidity programs.
U.S. Government Loss-Sharing Agreement
Background
On January 15, 2009, Citigroup entered into an agreement with the UST, the FDICinvolvement in SPEs, see Notes 1 and the Federal Reserve Bank of New York (collectively referred to in this section as the USG) on losses arising on a $301 billion portfolio of Citigroup assets (valued as of November 21, 2008, other than as set forth in note 114 to the table below). Primarily as a result of the receipt of principal repayment and charge-offs to date, the total asset pool has declined by approximately $50 billion on a GAAP basis to approximately $250.4 billion as of September 30, 2009.
As consideration for the loss-sharing agreement, Citigroup issued approximately $7.1 billion in preferred stock to the UST and the FDIC, as well as a warrant exercisable for common stock to the UST. As part of the exchange offers, the preferred stock was exchanged for newly issued 8% trust preferred securities. See "Significant Events in the Third Quarter of 2009—Exchange Offers" above. The warrant issued to the UST as consideration for the loss-sharing agreement has a term of 10 years, an exercise price of $10.61 per share and is exercisable for approximately 66.5 million shares of common stock. The fair value of the warrant of $88
Table of ContentsConsolidated Financial Statements.
million was recorded as a credit toAdditional paid-in capital at the time of issuance.
Terms of Agreement
The loss-sharing agreement extends for 10 years for residential assets and five years for non-residential assets. Under the agreement, a "loss" on a portfolio asset is generally defined to include a charge-off or a realized loss upon collection, through a permitted disposition or exchange, or upon a foreclosure or short-sale loss, but not merely through a change in Citigroup's fair value accounting for the asset or the creation or increase of a related loss reserve. Once a loss is recognized under the agreement, the aggregate amount of qualifying losses across the portfolio in a particular period is netted against the aggregate recoveries and gains across the portfolio, all on a pretax basis.
The resulting net loss amount on the portfolio is the basis of the loss-sharing agreement between Citigroup and the USG. Citigroup will bear the first $39.5 billion of such net losses, which amount was determined using (i) an agreed-upon $29 billion of first losses, (ii) Citigroup's then-existing reserve with respect to the portfolio of approximately $9.5 billion, and (iii) an additional $1.0 billion as an agreed-upon amount in exchange for excluding the effects of certain hedge positions from the portfolio. Net losses, if any, on the portfolio after Citigroup's losses exceed the $39.5 billion first-loss amount will be borne 90% by the USG and 10% by Citigroup in the following manner:
Approximately $2.8 billion of GAAP losses on the asset pool were recorded in the third quarter of 2009, bringing the GAAP losses on the portfolio to date to approximately $8.1 billion (i.e., for the period of November 21, 2008 through September 30, 2009). These losses count towards Citigroup's $39.5 billion first-loss position.
The Federal Reserve Bank of New York will implement its loss-sharing obligations under the agreement, if any, by making a loan in an amount equal to the then aggregate value of the remaining covered asset pool (after reductions for charge-offs, pay-downs and realized losses) as determined in accordance with the agreement. Following the loan, as losses are incurred on the remaining covered asset pool, Citigroup will be required to immediately repay 10% of such losses to the Federal Reserve Bank of New York. The loan is non-recourse to Citigroup, other than with respect to the repayment obligation in the preceding sentence and interest on the loan. The loan is recourse only to the remaining covered asset pool, which is the sole collateral to secure the loan. The loan will bear interest at the overnight index swap rate plus 300 basis points.
The covered asset pool includes U.S.-based exposures and transactions that were originated prior to March 14, 2008. Pursuant to the terms of the agreement, the USG had a 120-day period, beginning April 15, 2009, to review the asset pool to confirm asset eligibility. The USG has completed its review and, in October 2009, substantially agreed with Citigroup on the final asset pool's composition. The USG's final approval of the pool is expected in November 2009. After final approval of the pool, the USG has the right to review and confirm Citigroup's first-loss position ($39.5 billion) and the consideration paid by Citigroup for the loss coverage, each based on expected losses and reserves associated with the final pool (using a methodology and assumptions consistent with those used to set the $39.5 billion first-loss position). The USG is expected to complete this review in the fourth quarter of 2009.
The agreement includes guidelines for governance and asset management with respect to the covered asset pool, including reporting requirements and notice and approval rights of the USG at certain thresholds. If covered losses exceed $19 billion, the USG may increase the required reporting or alter the thresholds for notice and approval. If covered losses exceed $27 billion, the USG has the right to replace Citi as the asset manager for the covered asset pool, among other things.
Accounting and Regulatory Capital Treatment
Citigroup accounts for the loss-sharing agreement as an indemnification agreement pursuant to the guidance in ASC 805-20-30-18,Business Combinations. Citigroup recorded an asset of $3.617 billion (equal to the fair value of the consideration issued to the USG) inOther assets on the Consolidated Balance Sheet. The asset will be amortized as anOther operating expense in the Consolidated Statement of Income on a straight-line basis over the coverage periods of 10 years and five years, respectively, based on the relative initial principal amounts of each group. During the quarter and nine months ended September 30, 2009, Citigroup recorded $122 million and $412 million, respectively, as anOther operating expense.
Under indemnification accounting, recoveries (gains), if any, will be recognized in the Consolidated Statement of Income in the same future periods that cumulative losses recorded under U.S. GAAP on the covered assets exceed the $39.5 billion first-loss amount. The Company will recognize and measure an indemnification asset on the same basis that it recognizes losses on the covered assets in the Consolidated Statement of Income. For example, for a covered loan classified as held-for-investment and reported in the balance sheet at amortized cost, the Company would recognize and measure an indemnification asset due from the USG at the same time related loan loss reserves are recorded for that loan equal to 90% of the amount of the loan loss reserve, subject to the first-loss limitation.
Further, under indemnification accounting, recoveries (gains) may be recorded at times when such amounts are not contractually receivable from the USG based on the definition of covered losses in the loss-sharing agreement. Such amounts may or may not thereafter become contractually receivable, depending upon whether or not they become covered "losses" (see above for definition of covered "loss"). Indemnification accounting matches the amount and timing of the recording of recoveries with the amount and timing of the recognition of losses based on the U.S. GAAP accounting for the covered assets, as opposed to the amount and timing of recognition as defined in the loss-sharing agreement. The indemnification asset amount recorded will be adjusted, as appropriate, to take into consideration additional revenue and expense amounts related to the covered assets specifically defined as
recoverable or non-recoverable in the loss-sharing program.
The covered assets are risk-weighted at 20% for purposes of calculating the Tier 1 Capital ratio at September 30, 2009.
Asset Values as of September 30, 2009
The following table summarizes the assets that were part of the covered asset pool agreed to between Citigroup and the USG as of January 15, 2009, with their values as of November 21, 2008 (except as set forth in note 1 to the table below), and the balances as of September 30, 2009, reflecting changes in the balances of assets that remained qualified, plus approximately $10 billion of replacement assets that Citi substituted for non-qualifying assets between January 15, 2009 and April 15, 2009. The $250.4 billion of covered assets at September 30, 2009 are recorded in Citi Holdings within Local Consumer Lending ($171.9 billion) and Special Asset Pool ($78.5 billion). As discussed above, the asset pool, as revised, remains subject to the USG's final approval, which is expected in November 2009.
Assets
In billions of dollars | September 30, 2009 | November 21, 2008(1) | ||||||
---|---|---|---|---|---|---|---|---|
Loans: | ||||||||
First mortgages | $ | 81.0 | $ | 98.0 | ||||
Second mortgages | 49.6 | 55.4 | ||||||
Retail auto loans | 10.8 | 16.2 | ||||||
Other consumer loans | 17.6 | 19.7 | ||||||
Total consumer loans | $ | 159.0 | $ | 189.3 | ||||
CRE loans | $ | 10.8 | $ | 12.0 | ||||
Highly leveraged finance loans | 0.2 | 2.0 | ||||||
Other corporate loans | 10.5 | 14.0 | ||||||
Total corporate loans | $ | 21.5 | $ | 28.0 | ||||
Securities: | ||||||||
Alt-A | $ | 9.1 | $ | 11.4 | ||||
SIVs | 5.8 | 6.1 | ||||||
CRE | 1.5 | 1.4 | ||||||
Other | 8.2 | 11.2 | ||||||
Total securities | $ | 24.6 | $ | 30.1 | ||||
Unfunded lending commitments (ULC) | ||||||||
Second mortgages | $ | 18.3 | $ | 22.4 | ||||
Other consumer loans | 2.4 | 3.6 | ||||||
Highly leveraged finance | 0.0 | 0.1 | ||||||
CRE | 3.8 | 5.5 | ||||||
Other commitments | 20.8 | 22.0 | ||||||
Total ULC | $ | 45.3 | $ | 53.6 | ||||
Total covered assets | $ | 250.4 | $ | 301.0 | ||||
Citigroup's risk management framework balances strong corporate oversight with well-defined independent risk management functions for each business and region, as well as cross-business product expertise. The Citigroup risk management framework is described in Citigroup's 20082009 Annual Report on Form 10-K.
During the third quarter of 2010, Citigroup's aggregate loan portfolio decreased by $37.9 billion to $654.3 billion. Citi's total allowance for loan losses totaled $43.7 billion at September 30, 2010, a coverage ratio of 6.73% of total loans, essentially flat from 6.72% at June 30, 2010 and up from 5.85% at September 30, 2009.
During the third quarter of 2010, Citi had a net release of $2.0 billion from its credit reserves and allowance for unfunded lending commitments, compared to a net build of $802 million in the third quarter of 2009 and a net release of $1.5 billion in the second quarter of 2010. The release consisted of a net release of $601 million for corporate loans (primarily inSAP) and a net release of $1.4 billion for consumer loans (mainly a $403 million release inRCB and a $953 million release inLCL). Despite the reserve release for consumer loans, the coincident months of net credit loss coverage for the consumer portfolio increased from 15.9 to 16.7 months, significantly higher than the year-ago level of 13.3 months.
Net credit losses of $7.7 billion during the third quarter of 2010 decreased $3.3 billion from year-ago levels (on a managed basis). The decrease consisted of a net decrease of $2.7 billion for consumer loans (mainly a $2.1 billion decrease inLCL and a $587 million decrease inRCB) and a decrease of $619 million for corporate loans (almost all of which is related toSAP).
Consumer non-accrual loans (excluding credit card receivables) totaled $12.4 billion at September 30, 2010, compared to $13.8 billion at June 30, 2010 and $18.0 billion at September 30, 2009. For total consumer loans, the 90 days or more past due delinquency rate was 3.38% at September 30, 2010, compared to 3.67% at June 30, 2010 and 4.07% a year ago. The 30 to 89 days past due consumer loan delinquency rate was 3.14% at September 30, 2010, compared to 3.06% at June 30, 2010 and 3.55% a year ago. During the third quarter of 2010, early- and later-stage delinquencies improved on a dollar basis across most of the consumer loan portfolios, driven by improvement in North America mortgages, both in first and second mortgages, Citi-branded cards in Citicorp and Retail partner cards in Citi Holdings. The improvement in first mortgages was driven by asset sales and loans moving from the trial period under HAMP to permanent modification, partially offset by the continued backlog in foreclosures in process. In addition to these improvements, consumer delinquencies declined during the quarter due to the announced sale of SLC, which resulted in moving its loan portfolio to held-for-sale. As a result, SLC is presented as discontinued operations for the third quarter of 2010 only.
Corporate non-accrual loans were $9.9 billion at September 30, 2010, compared to $11.0 billion at June 30, 2010 and $14.7 billion a year ago. The decrease in non-accrual loans from the prior quarter was mainly due to loan sales, write-offs and paydowns, which were partially offset by increases due to the weakening of certain borrowers.
Loan Accounting Policies
Citigroup's accounting policies for loans, allowance for loan losses and related lending activities can be found in Citi's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.
In millions of dollars | In millions of dollars | September 30, 2009 | June 30, 2009 | December 31, 2008 | In millions of dollars | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | ||||||||||||||||||
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Consumer loans | Consumer loans | Consumer loans | ||||||||||||||||||||||||||
In U.S. offices: | ||||||||||||||||||||||||||||
In U.S. offices | In U.S. offices | |||||||||||||||||||||||||||
Mortgage and real estate(1) | $ | 191,748 | $ | 197,358 | $ | 219,482 | Mortgage and real estate(1) | $ | 158,986 | $ | 171,102 | $ | 180,334 | $ | 183,842 | $ | 191,748 | |||||||||||
Installment, revolving credit, and other | 63,668 | 67,661 | 71,360 | Installment, revolving credit, and other | 29,455 | 61,867 | 69,111 | 58,099 | 57,820 | |||||||||||||||||||
Cards | 36,039 | 33,750 | 44,418 | Cards | 120,781 | 125,337 | 127,818 | 28,951 | 36,039 | |||||||||||||||||||
Lease financing | 15 | 16 | 31 | Commercial and industrial | 4,952 | 5,540 | 5,386 | 5,640 | 5,848 | |||||||||||||||||||
Lease financing | 3 | 6 | 7 | 11 | 15 | |||||||||||||||||||||||
$ | 291,470 | $ | 298,785 | $ | 335,291 | |||||||||||||||||||||||
$ | 314,177 | $ | 363,852 | $ | 382,656 | $ | 276,543 | $ | 291,470 | |||||||||||||||||||
In offices outside the U.S.: | ||||||||||||||||||||||||||||
In offices outside the U.S. | In offices outside the U.S. | |||||||||||||||||||||||||||
Mortgage and real estate(1) | $ | 47,568 | $ | 45,986 | $ | 44,382 | Mortgage and real estate(1) | $ | 50,692 | $ | 47,921 | $ | 49,421 | $ | 47,297 | $ | 47,568 | |||||||||||
Installment, revolving credit, and other | 48,027 | 48,467 | 44,189 | Installment, revolving credit, and other | 39,755 | 38,115 | 44,541 | 42,805 | 45,004 | |||||||||||||||||||
Cards | 41,443 | 42,262 | 42,586 | Cards | 39,466 | 37,510 | 38,191 | 41,493 | 41,443 | |||||||||||||||||||
Commercial and industrial | 11,835 | 10,947 | 13,897 | Commercial and industrial | 17,653 | 16,420 | 14,828 | 14,780 | 14,858 | |||||||||||||||||||
Lease financing | 345 | 339 | 304 | Lease financing | 639 | 677 | 771 | 331 | 345 | |||||||||||||||||||
$ | 149,218 | $ | 148,001 | $ | 145,358 | $ | 148,205 | $ | 140,643 | $ | 147,752 | $ | 146,706 | $ | 149,218 | |||||||||||||
Total consumer loans | Total consumer loans | $ | 440,688 | $ | 446,786 | $ | 480,649 | Total consumer loans | $ | 462,382 | $ | 504,495 | $ | 530,408 | $ | 423,249 | $ | 440,688 | ||||||||||
Unearned income | Unearned income | 803 | 866 | 738 | Unearned income | 722 | 951 | 1,061 | 808 | 803 | ||||||||||||||||||
Consumer loans, net of unearned income | Consumer loans, net of unearned income | $ | 441,491 | $ | 447,652 | $ | 481,387 | Consumer loans, net of unearned income | $ | 463,104 | $ | 505,446 | $ | 531,469 | $ | 424,057 | $ | 441,491 | ||||||||||
Corporate loans | Corporate loans | Corporate loans | ||||||||||||||||||||||||||
In U.S. offices: | ||||||||||||||||||||||||||||
In U.S. offices | In U.S. offices | |||||||||||||||||||||||||||
Commercial and industrial | $ | 23,345 | $ | 30,567 | $ | 33,450 | Commercial and industrial | $ | 11,750 | $ | 11,656 | $ | 15,558 | $ | 15,614 | $ | 19,692 | |||||||||||
Loans to financial institutions | 7,666 | 8,181 | 10,200 | Loans to financial institutions | 29,518 | 31,450 | 31,279 | 6,947 | 7,666 | |||||||||||||||||||
Mortgage and real estate(1) | 23,221 | 23,862 | 16,643 | Mortgage and real estate(1) | 21,479 | 22,453 | 21,283 | 22,560 | 23,221 | |||||||||||||||||||
Installment, revolving credit, and other | 14,081 | 15,414 | 15,047 | Installment, revolving credit, and other | 16,182 | 14,812 | 15,792 | 17,737 | 17,734 | |||||||||||||||||||
Lease financing | 1,275 | 1,284 | 1,476 | Lease financing | 1,255 | 1,244 | 1,239 | 1,297 | 1,275 | |||||||||||||||||||
$ | 69,588 | $ | 79,308 | $ | 76,816 | $ | 80,184 | $ | 81,615 | $ | 85,151 | $ | 64,155 | $ | 69,588 | |||||||||||||
In offices outside the U.S.: | ||||||||||||||||||||||||||||
In offices outside the U.S. | In offices outside the U.S. | |||||||||||||||||||||||||||
Commercial and industrial | $ | 73,564 | $ | 78,512 | $ | 85,492 | Commercial and industrial | $ | 67,531 | $ | 63,355 | $ | 62,854 | $ | 66,747 | $ | 71,759 | |||||||||||
Installment, revolving credit, and other | 10,949 | 11,638 | 23,158 | Installment, revolving credit, and other | 10,586 | 11,174 | 10,956 | 9,683 | 10,949 | |||||||||||||||||||
Mortgage and real estate(1) | 12,023 | 11,887 | 11,375 | Mortgage and real estate(1) | 6,272 | 7,301 | 9,771 | 9,779 | 12,023 | |||||||||||||||||||
Loans to financial institutions | 16,906 | 15,856 | 18,413 | Loans to financial institutions | 24,019 | 20,646 | 19,003 | 15,113 | 16,906 | |||||||||||||||||||
Lease financing | 1,462 | 1,560 | 1,850 | Lease financing | 568 | 582 | 663 | 1,295 | 1,462 | |||||||||||||||||||
Governments and official institutions | 826 | 713 | 385 | Governments and official institutions | 3,179 | 3,306 | 3,373 | 2,949 | 2,631 | |||||||||||||||||||
$ | 115,730 | $ | 120,166 | $ | 140,673 | $ | 112,155 | $ | 106,364 | $ | 106,620 | $ | 105,566 | $ | 115,730 | |||||||||||||
Total corporate loans | Total corporate loans | $ | 185,318 | $ | 199,474 | $ | 217,489 | Total corporate loans | $ | 192,339 | $ | 187,979 | $ | 191,771 | $ | 169,721 | $ | 185,318 | ||||||||||
Unearned income | Unearned income | (4,598 | ) | (5,436 | ) | (4,660 | ) | Unearned income | (1,132 | ) | (1,259 | ) | (1,436 | ) | (2,274 | ) | (4,598 | ) | ||||||||||
Corporate loans, net of unearned income | Corporate loans, net of unearned income | $ | 180,720 | $ | 194,038 | $ | 212,829 | Corporate loans, net of unearned income | $ | 191,207 | $ | 186,720 | $ | 190,335 | $ | 167,447 | $ | 180,720 | ||||||||||
Total loans—net of unearned income | Total loans—net of unearned income | $ | 622,211 | $ | 641,690 | $ | 694,216 | Total loans—net of unearned income | $ | 654,311 | $ | 692,166 | $ | 721,804 | $ | 591,504 | $ | 622,211 | ||||||||||
Allowance for loan losses—on drawn exposures | Allowance for loan losses—on drawn exposures | (36,416 | ) | (35,940 | ) | (29,616 | ) | Allowance for loan losses—on drawn exposures | (43,674 | ) | (46,197 | ) | (48,746 | ) | (36,033 | ) | (36,416 | ) | ||||||||||
Total loans—net of unearned income and allowance for credit losses | Total loans—net of unearned income and allowance for credit losses | $ | 585,795 | $ | 605,750 | $ | 664,600 | Total loans—net of unearned income and allowance for credit losses | $ | 610,637 | $ | 645,969 | $ | 673,058 | $ | 555,471 | $ | 585,795 | ||||||||||
Allowance for loan losses as a percentage of total loans—net of unearned income | Allowance for loan losses as a percentage of total loans—net of unearned income | 5.85 | % | 5.60 | % | 4.27 | % | Allowance for loan losses as a percentage of total loans—net of unearned income | 6.73 | % | 6.72 | % | 6.80 | % | 6.09 | % | 5.85 | % | ||||||||||
Allowance for consumer loan losses as a percentage of total consumer loans—net of unearned income | Allowance for consumer loan losses as a percentage of total consumer loans—net of unearned income | 6.44 | % | 6.25 | % | 4.61 | % | Allowance for consumer loan losses as a percentage of total consumer loans—net of unearned income | 8.16 | % | 7.87 | % | 7.84 | % | 6.70 | % | 6.44 | % | ||||||||||
Allowance for corporate loan losses as a percentage of total corporate loans—net of unearned income | 4.42 | 4.11 | 3.48 | |||||||||||||||||||||||||
Allowance for corporate loan losses as a percentage of total corporate loans—net of unearned income(2) | Allowance for corporate loan losses as a percentage of total corporate loans—net of unearned income(2) | 3.22 | % | 3.59 | % | 3.90 | % | 4.56 | % | 4.42 | % | |||||||||||||||||
TableContents
Loan Accounting Policies
The following are the Company's accounting policies for Loans, Allowance for Loan Losses and related lending activities.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs except that credit card receivable balances also include accrued interest and fees. Loan origination fees and certain direct origination costs are generally deferred and recognized as adjustments to income over the lives of the related loans.
As described in Note 17 to the Consolidated Financial Statements, the Company has elected fair value accounting for certain loans. Such2010 exclude loans which are carried at fair value with changes in fair value reported in earnings. Interest income on such loans is recorded inInterest revenue at the contractually specified rate.
Loans for which the fair value option has not been elected are classified upon origination or acquisition as either held-for-investment or held-for-sale. This classification is based on management's initial intent and ability with regard to those loans.
Loans that are held-for-investment are classified asLoans, net of unearned income on the Consolidated Balance Sheet, and the related cash flows areCertain lending products included within the cash flows from investing activities category in the Consolidated Statement of Cash Flows onloan table above have terms that may give rise to additional credit issues. Credit cards with below-market introductory interest rates, multiple loans supported by the line Changes in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale, the loan is reclassified to held-for-sale, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the line Proceeds from salessame collateral (e.g., home equity loans), and securitizations of loans.
Substantially all of the consumer loans sold or securitized by Citigroup are U.S. prime residential mortgage loans or U.S. credit card receivables. The practice of the U.S. prime mortgage business has been to sell all of its loans except for nonconforming adjustable rate loans. U.S. prime mortgage conforminginterest-only loans are classified as held-for-sale at the timeexamples of origination. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the line Change in loans held-for-sale.
U.S. credit card receivables are classified at origination as loans-held-for sale to the extent that managementsuch products. However, Citi does not have the intentbelieve these products are material to hold the receivables for the foreseeable future or until maturity. The U.S. credit card securitization forecast for the three months following the latest balance sheet date is the basis for the amount of such loans classified as held-for-sale. Cash flows related to U.S. credit card loans classified as held-for-sale at origination or acquisition are reported in the cash flows from operating activities category on the line Change in loans held-for-sale.
Consumer Loans
Consumer loans represent loansits financial position and leases managed primarily by theRegional Consumer Banking andLocal Consumer Lending businesses. As a general rule, interest accrual ceases for installment and real estate (both open and closed end) loans when payments are 90 days contractually past due. For credit cards and unsecured revolving loans, however, the Company generally accrues interest until payments are 180 days past due. Citi's charge-off policies follow the general guidelines below:
For a discussion of the impact of mortgage loan and credit card modification and forbearance programs on Citi's consumer loan businesses, see "Consumer Loan Modification Programs" below.
Corporate Loans
Corporate loans represent loans and leases managed by ICG or the Special Asset Pool. Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan.
Impaired corporate loans and leases are written down to the extent that principal is judged to be uncollectible. Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of cost or collateral value. Cash-basis loans are returned to an accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans held-for-sale included inOther assets. With the exception of certain mortgage loans for which the fair-value option has been elected, these loans are accounted for at the lower of cost or market value, with any write-downs or subsequent recoveries charged toOther revenue.
Allowance for Loan Losses
Allowance for loan losses represents management's best estimate of probable losses inherent in the portfolio, as well as probable losses related to large individually evaluated impaired loans and troubled debt restructurings. Attribution of the allowance is made for analytical purposes only, and the entire allowance is available to absorb probable credit losses inherent in the overall portfolio. Additions to the allowance are made through the provision for credit losses. Credit losses are deducted from the allowance, and subsequent recoveries are added. Securities received in exchange for loan claims in debt restructurings are initially recorded at fair value, with any gain or loss reflected as a recovery or charge-off to the allowance,results and are subsequently accounted for as securities available-for-sale.
Corporate Loans
Inclosely managed via credit controls that mitigate the corporate portfolios, larger-balance, non-homogeneous exposures representing significant individual credit exposures are evaluated based upon the borrower's overall financial condition, resources, the prospects for support from any financially responsible guarantors and, if appropriate, the realizable value of any collateral. Reserves are established for these loans based upon an estimate of probable losses for the individual loans deemed to be impaired. This estimate may consider the present value of the expected future cash flows discounted at the loan's contractual effective rate, the secondary market value of the loan or the fair value of collateral less disposal costs. The allowance for credit losses attributed to the remaining portfolio is established via a process that estimates the probable lossadditional inherent in the portfolio based upon various analyses. These analyses consider historical default rates and loss severities, internal risk ratings, and geographic, industry, and other environmental factors.
Management also considers overall portfolio indicators, including trends in internally risk-rated exposures, classified exposures, cash-basis loans, historical and forecasted write-offs, and a review of industry, geographic, and portfolio concentrations, including current developments within those segments. In addition, management considers the current business strategy and credit process, including credit limit setting and compliance, credit approvals, loan underwriting criteria, and loan workout procedures.
Consumer Loans
ForConsumer loans, each portfolio of smaller-balance, homogeneous loans—including consumer mortgage, installment, revolving credit, and most other consumer loans—is independently evaluated for impairment. The allowance for loan losses attributed to these loans is established via a process that estimates the probable losses inherent in the specific portfolio based upon various analyses. These include migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, together with analyses that reflect current trends and conditions.
Management also considers overall portfolio indicators, including historical credit losses, delinquent, non-performing, and classified loans, trends in volumes and terms of loans, an evaluation of overall credit quality, the credit process, including lending policies and procedures, and economic, geographical, product and other environmental factors.
In addition, valuation allowances are determined for impaired smaller-balance homogenous loans whose terms have been modified due to the borrowers' financial difficulties and where it has been determined that a concession will be granted to the borrower. Such modifications may include interest rate reductions, principal forgiveness and/or term extensions. These allowances are determined by comparing estimated cash flows of the loans discounted at the loans' original contractual interest rates to the carrying value of the loans.
Reserve Estimates and Policies
Management provides reserves for an estimate of probable losses inherent in the funded loan portfolio on the balance sheet in the form of an allowance for loan losses. These reserves are established in accordance with Citigroup's Credit Reserve Policies, as approved by the Audit and Risk Management Committee of the Company's Board of Directors. The Company's Chief Risk Officer and Chief Financial Officer review the adequacy of the credit loss reserves each quarter with representatives from the Risk Management and Finance staffs for each applicable business area.
During these reviews, the above-mentioned representatives covering the business area having classifiably managed portfolios (that is, portfolios where internal credit-risk ratings are assigned, which are primarilyICG, Regional Consumer Banking andLocal Consumer Lending) and modified consumer loans where a concession was granted due to the borrowers' financial difficulties, and present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data. The quantitative data include:
In addition, representatives from both the Risk Management and Finance staffs that cover business areas that have delinquency-managed portfolios containing smaller homogeneous loans (primarily the non-commercial lending areas ofConsumer Banking) present their recommended reserve balances based upon leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends including housing prices, unemployment and GDP. This methodology is applied separately for each individual product within each different geographic region in which these portfolios exist.
This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss recovery rates, the size and diversity of individual large credits, and the ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing, among other things, are all taken into account during this review. Changes in these estimates could have a direct impact on the credit costs in any quarter and could result in a change in the allowance. Changes to the reserve flow through the Consolidated Statement of Income on the linesProvision for loan losses andProvision for unfunded lending commitments.
Allowance for Unfunded Lending Commitments
A similar approach to the allowance for loan losses is used for calculating a reserve for the expected losses related to unfunded loan commitments and standby letters of credit. This reserve is classified on the balance sheet inOther liabilities.risk.
Details of Credit Loss Experience
In millions of dollars | In millions of dollars | 3rd Qtr. 2009 | 2nd Qtr. 2009(1) | 1st Qtr. 2009 | 4th Qtr 2008 | 3rd Qtr. 2008 | In millions of dollars | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Allowance for loan losses at beginning of period | Allowance for loan losses at beginning of period | $ | 35,940 | $ | 31,703 | $ | 29,616 | $ | 24,005 | $ | 20,777 | Allowance for loan losses at beginning of period | $ | 46,197 | $ | 48,746 | $ | 36,033 | $ | 36,416 | $ | 35,940 | ||||||||||||||||
Provision for loan losses | Provision for loan losses | Provision for loan losses | ||||||||||||||||||||||||||||||||||||
Consumer | $ | 7,321 | $ | 10,010 | $ | 8,010 | $ | 8,592 | $ | 7,831 | Consumer | $ | 5,345 | $ | 6,672 | $ | 8,244 | $ | 7,077 | $ | 7,321 | |||||||||||||||||
Corporate | 1,450 | 2,223 | 1,905 | 3,579 | 1,112 | Corporate | 321 | (149 | ) | 122 | 764 | 1,450 | ||||||||||||||||||||||||||
$ | 8,771 | $ | 12,233 | $ | 9,915 | $ | 12,171 | $ | 8,943 | $ | 5,666 | $ | 6,523 | $ | 8,366 | $ | 7,841 | $ | 8,771 | |||||||||||||||||||
Gross credit losses | Gross credit losses | Gross credit losses | ||||||||||||||||||||||||||||||||||||
Consumer | Consumer | Consumer | ||||||||||||||||||||||||||||||||||||
In U.S. offices | $ | 4,459 | $ | 4,694 | $ | 4,124 | $ | 3,610 | $ | 3,073 | In U.S. offices | $ | 5,727 | $ | 6,379 | $ | 6,846 | $ | 4,360 | $ | 4,459 | |||||||||||||||||
In offices outside the U.S. | 2,406 | 2,305 | 1,936 | 1,818 | 1,914 | In offices outside the U.S. | 1,701 | 1,774 | 1,797 | 2,187 | 2,406 | |||||||||||||||||||||||||||
Corporate | Corporate | Corporate | ||||||||||||||||||||||||||||||||||||
In U.S. offices | 1,101 | 1,216 | 1,176 | 364 | 156 | In U.S. offices | 806 | 563 | 404 | 478 | 1,101 | |||||||||||||||||||||||||||
In offices outside the U.S. | 483 | 558 | 424 | 756 | 200 | In offices outside the U.S. | 265 | 290 | 155 | 877 | 483 | |||||||||||||||||||||||||||
$ | 8,449 | $ | 8,773 | $ | 7,660 | $ | 6,548 | $ | 5,343 | $ | 8,499 | $ | 9,006 | $ | 9,202 | $ | 7,902 | $ | 8,449 | |||||||||||||||||||
Credit recoveries | Credit recoveries | Credit recoveries | ||||||||||||||||||||||||||||||||||||
Consumer | Consumer | Consumer | ||||||||||||||||||||||||||||||||||||
In U.S. offices | $ | 149 | $ | 131 | $ | 136 | $ | 132 | $ | 137 | In U.S. offices | $ | 341 | $ | 345 | $ | 323 | $ | 160 | $ | 149 | |||||||||||||||||
In offices outside the U.S. | 288 | 261 | 213 | 219 | 252 | In offices outside the U.S. | 350 | 318 | 300 | 327 | 288 | |||||||||||||||||||||||||||
Corporate | Corporate | Corporate | ||||||||||||||||||||||||||||||||||||
In U.S. offices | 30 | 4 | 1 | 2 | 3 | In U.S. offices | 78 | 307 | 177 | 246 | 30 | |||||||||||||||||||||||||||
In offices outside the U.S. | 13 | 22 | 28 | 52 | 31 | In offices outside the U.S. | 71 | 74 | 18 | 34 | 13 | |||||||||||||||||||||||||||
$ | 480 | $ | 418 | $ | 378 | $ | 405 | $ | 423 | $ | 840 | $ | 1,044 | $ | 818 | $ | 767 | $ | 480 | |||||||||||||||||||
Net credit losses | Net credit losses | Net credit losses | ||||||||||||||||||||||||||||||||||||
In U.S. offices | $ | 5,381 | $ | 5,775 | $ | 5,163 | $ | 3,840 | $ | 3,089 | In U.S. offices | $ | 6,114 | $ | 6,290 | $ | 6,750 | $ | 4,432 | $ | 5,381 | |||||||||||||||||
In offices outside the U.S. | 2,588 | 2,580 | 2,119 | 2,303 | 1,831 | In offices outside the U.S. | 1,545 | 1,672 | 1,634 | 2,703 | 2,588 | |||||||||||||||||||||||||||
Total | Total | $ | 7,969 | $ | 8,355 | $ | 7,282 | $ | 6,143 | $ | 4,920 | Total | $ | 7,659 | $ | 7,962 | $ | 8,384 | $ | 7,135 | $ | 7,969 | ||||||||||||||||
Other—net | Other—net | $ | (326 | ) | $ | 359 | $ | (546 | ) | $ | (417 | ) | $ | (795 | ) | Other—net | $ | (530 | ) | $ | (1,110 | ) | $ | 12,731 | $ | (1,089 | ) | $ | (326 | ) | ||||||||
Allowance for loan losses at end of period | Allowance for loan losses at end of period | $ | 36,416 | $ | 35,940 | $ | 31,703 | $ | 29,616 | $ | 24,005 | Allowance for loan losses at end of period | $ | 43,674 | $ | 46,197 | $ | 48,746 | $ | 36,033 | $ | 36,416 | ||||||||||||||||
Allowance for loan losses as a % of total loans | Allowance for loan losses as a % of total loans | 5.85 | % | 5.60 | % | 4.82 | % | 4.27 | % | 3.35 | % | Allowance for loan losses as a % of total loans | 6.73 | % | 6.72 | % | 6.80 | % | 6.09 | % | 5.85 | % | ||||||||||||||||
Allowance for unfunded lending commitments | Allowance for unfunded lending commitments | $ | 1,074 | $ | 1,082 | $ | 947 | $ | 887 | $ | 957 | Allowance for unfunded lending commitments | $ | 1,102 | $ | 1,054 | $ | 1,122 | $ | 1,157 | $ | 1,074 | ||||||||||||||||
Total allowance for loan losses and unfunded lending commitments | Total allowance for loan losses and unfunded lending commitments | $ | 37,490 | $ | 37,022 | $ | 32,650 | $ | 30,503 | $ | 24,962 | Total allowance for loan losses and unfunded lending commitments | $ | 44,776 | $ | 47,251 | $ | 49,868 | $ | 37,190 | $ | 37,490 | ||||||||||||||||
Net consumer credit losses | Net consumer credit losses | $ | 6,428 | $ | 6,607 | $ | 5,711 | $ | 5,077 | $ | 4,598 | Net consumer credit losses | $ | 6,737 | $ | 7,490 | $ | 8,020 | $ | 6,060 | $ | 6,428 | ||||||||||||||||
As a percentage of average consumer loans | As a percentage of average consumer loans | 5.66 | % | 5.88 | % | 4.95 | % | 4.12 | % | 3.57 | % | As a percentage of average consumer loans | 5.78 | % | 5.75 | % | 6.04 | % | 5.43 | % | 5.66 | % | ||||||||||||||||
Net corporate credit losses | Net corporate credit losses | $ | 1,541 | $ | 1,748 | $ | 1,571 | $ | 1,066 | $ | 322 | Net corporate credit losses | $ | 922 | $ | 472 | $ | 364 | $ | 1,075 | $ | 1,541 | ||||||||||||||||
As a percentage of average corporate loans | As a percentage of average corporate loans | 0.82 | % | 0.89 | % | 0.79 | % | 0.60 | % | 0.15 | % | As a percentage of average corporate loans | 0.49 | % | 0.25 | % | 0.19 | % | 0.61 | % | 0.82 | % | ||||||||||||||||
Allowance for loan losses at end of period | Allowance for loan losses at end of period | Allowance for loan losses at end of period | ||||||||||||||||||||||||||||||||||||
Citicorp | $ | 10,286 | $ | 10,046 | $ | 8,520 | $ | 7,684 | $ | 6,651 | Citicorp | $ | 17,371 | $ | 17,524 | $ | 18,503 | $ | 10,731 | $ | 10,956 | |||||||||||||||||
Citi Holdings | 26,130 | 25,894 | 23,183 | 21,932 | 17,354 | Citi Holdings | 26,303 | 28,673 | 30,243 | 25,302 | 25,460 | |||||||||||||||||||||||||||
Total Citigroup | $ | 36,416 | $ | 35,940 | $ | 31,703 | $ | 29,616 | $ | 24,005 | Total Citigroup | $ | 43,674 | $ | 46,197 | $ | 48,746 | $ | 36,033 | $ | 36,416 | |||||||||||||||||
Allowance by type | Allowance by type | |||||||||||||||||||||||||||||||||||||
Consumer(9) | $ | 37,607 | $ | 39,578 | $ | 41,422 | $ | 28,397 | $ | 28,420 | ||||||||||||||||||||||||||||
Corporate | 6,067 | 6,619 | 7,324 | 7,636 | 7,996 | |||||||||||||||||||||||||||||||||
Total Citigroup | $ | 43,674 | $ | 46,197 | $ | 48,746 | $ | 36,033 | $ | 36,416 | ||||||||||||||||||||||||||||
Impaired Loans, Non-Accrual Loans and Assets, and Renegotiated Loans
The following pages include information on Citi's "Impaired Loans," "Non-Accrual Loans and Assets" and "Renegotiated Loans." There is a certain amount of overlap between these categories. The following general summary provides a basic description of each category:
Impaired Loans:
Renegotiated Loans:
Impaired Loans
Impaired loans are those where Citigroup believes it is probable that it will not collect all amounts due according to the original contractual terms of the loan. Impaired loans include corporate and Consumer (commercial market) non-accrual loans as well as smaller-balance homogeneous loans whose terms have been modified due to the borrower's financial difficulties and Citigroup has granted a concession to the borrower. Such modifications may include interest rate reductions and/or principal forgiveness.
Valuation allowances for impaired loans are determined in accordance with ASC 310-10-35 and estimated considering all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan's original contractual effective rate, the secondary market value of the loan and the fair value of collateral less disposal costs.
Consumer impaired loans exclude smaller-balance homogeneous loans that have not been modified and are carried on a non-accrual basis, as well as substantially all loans modified for periods of 12 months or less. As of September 30, 2010, loans included in those short-term programs amounted to approximately $6.8 billion. The allowance for loan losses for these loans is materially consistent with the requirements of ASC 310-10-35.
The following table presents information about impaired loans:
In millions of dollars | Sept. 30, 2010 | Dec. 31, 2009 | ||||||
---|---|---|---|---|---|---|---|---|
Non-accrual corporate loans | ||||||||
Commercial and industrial | $ | 5,596 | $ | 6,347 | ||||
Loans to financial institutions | 750 | 1,794 | ||||||
Mortgage and real estate | 2,138 | 4,051 | ||||||
Lease financing | 57 | — | ||||||
Other | 1,406 | 1,287 | ||||||
Total non-accrual corporate loans | $ | 9,947 | $ | 13,479 | ||||
Impaired consumer loans(1) | ||||||||
Mortgage and real estate | $ | 16,339 | $ | 10,629 | ||||
Installment and other | 4,268 | 3,853 | ||||||
Cards | 5,297 | 2,453 | ||||||
Total impaired consumer loans | $ | 25,904 | $ | 16,935 | ||||
Total(2) | $ | 35,851 | $ | 30,414 | ||||
Non-accrual corporate loans with valuation allowances | $ | 6,383 | $ | 8,578 | ||||
Impaired consumer loans with valuation allowances | 25,430 | 16,453 | ||||||
Non-accrual corporate valuation allowance | $ | 2,082 | $ | 2,480 | ||||
Impaired consumer valuation allowance | 7,234 | 4,977 | ||||||
Total valuation allowances(3) | $ | 9,316 | $ | 7,457 | ||||
The table below summarizes the Company'sCitigroup's view of non-accrual loans as of the periods indicated. Non-accrual loans are loans in which the borrower has fallen behind in interest payments or, for corporate and Consumer (commercial market) loans, where the CompanyCiti has determined that the payment of interest or principal is doubtful, and which are therefore considered impaired. As discussed under "Accounting Policies" above, inIn situations where the CompanyCiti reasonably expects that only a portion of the principal and interest owed will ultimately be collected, all payments received are reflected as a reduction of principal and not as interest income. There is no industry-wide definition of non-accrual assets, however, and as such, analysis againstacross the industry is not always comparable.
As discussed above under "Third Quarter of 2009 Management Summary," the Company has been actively moving corporate loans into the non-accrual category at earlier stages of anticipated distress. Corporate non-accrual loans may still be current on interest payments however. Ofbut are considered non-accrual as Citi has determined that the total portfoliopayment of interest on principal is doubtful. Consistent with industry conventions, Citi generally accrues interest on credit card loans until such loans are charged-off, which typically occurs at 180 days contractual delinquency. As such, the non-accrual corporate loans as of September 30, 2009, over two-thirds are current and continue to make their contractual payments.loan disclosures in this section do not include credit card loans.
Non-accrual loans
In millions of dollars | In millions of dollars | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | 4th Qtr. 2008 | 3rd Qtr. 2008 | In millions of dollars | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Citicorp | Citicorp | $ | 5,131 | $ | 5,314 | $ | 3,829 | $ | 3,193 | $ | 2,408 | Citicorp | $ | 4,928 | $ | 4,510 | $ | 5,024 | $ | 5,353 | $ | 5,507 | ||||||||||||
Citi Holdings | Citi Holdings | 27,553 | 22,932 | 22,282 | 19,104 | 11,135 | Citi Holdings | 17,491 | 20,302 | 23,544 | 26,387 | 27,177 | ||||||||||||||||||||||
Total Non-accrual loans (NAL) | $ | 32,684 | $ | 28,246 | $ | 26,111 | $ | 22,297 | $ | 13,543 | Total non-accrual loans (NAL) | $ | 22,419 | $ | 24,812 | $ | 28,568 | $ | 31,740 | $ | 32,684 | |||||||||||||
Corporate non-accrual loans(1) | ||||||||||||||||||||||||||||||||||
Corporate NAL(1) | Corporate NAL(1) | |||||||||||||||||||||||||||||||||
North America | North America | $ | 5,263 | $ | 3,499 | $ | 3,789 | $ | 2,660 | $ | 851 | North America | $ | 3,299 | $ | 4,411 | $ | 5,660 | $ | 5,621 | $ | 5,263 | ||||||||||||
EMEA | EMEA | 7,969 | 7,690 | 6,479 | 6,330 | 1,406 | EMEA | 5,473 | 5,508 | 5,834 | 6,308 | 7,969 | ||||||||||||||||||||||
Latin America | Latin America | 416 | 230 | 300 | 229 | 125 | Latin America | 658 | 570 | 608 | 569 | 416 | ||||||||||||||||||||||
Asia | Asia | 1,128 | 1,013 | 639 | 513 | 357 | Asia | 517 | 547 | 830 | 981 | 1,061 | ||||||||||||||||||||||
$ | 14,776 | $ | 12,432 | $ | 11,207 | $ | 9,732 | $ | 2,739 | $ | 9,947 | $ | 11,036 | $ | 12,932 | $ | 13,479 | $ | 14,709 | |||||||||||||||
Citicorp | $ | 2,999 | $ | 3,045 | $ | 1,825 | $ | 1,364 | $ | 605 | Citicorp | $ | 2,961 | $ | 2,573 | $ | 2,975 | $ | 3,238 | $ | 3,300 | |||||||||||||
Citi Holdings | $ | 11,777 | $ | 9,387 | $ | 9,382 | $ | 8,368 | $ | 2,134 | Citi Holdings | 6,986 | 8,463 | 9,957 | 10,241 | 11,409 | ||||||||||||||||||
$ | 14,776 | $ | 12,432 | $ | 11,207 | $ | 9,732 | $ | 2,739 | $ | 9,947 | $ | 11,036 | $ | 12,932 | $ | 13,479 | $ | 14,709 | |||||||||||||||
Consumer non-accrual loans(1) | ||||||||||||||||||||||||||||||||||
North America(2) | $ | 14,609 | $ | 12,154 | $ | 11,687 | $ | 9,617 | $ | 7,941 | ||||||||||||||||||||||||
Consumer NAL(1) | Consumer NAL(1) | |||||||||||||||||||||||||||||||||
North America | North America | $ | 9,978 | $ | 11,289 | $ | 12,966 | $ | 15,111 | $ | 14,609 | |||||||||||||||||||||||
EMEA | EMEA | 1,314 | 1,356 | 1,128 | 948 | 904 | EMEA | 758 | 690 | 790 | 1,159 | 1,314 | ||||||||||||||||||||||
Latin America | Latin America | 1,342 | 1,520 | 1,338 | 1,290 | 1,343 | Latin America | 1,150 | 1,218 | 1,246 | 1,340 | 1,342 | ||||||||||||||||||||||
Asia | Asia | 643 | 784 | 751 | 710 | 616 | Asia | 586 | 579 | 634 | 651 | 710 | ||||||||||||||||||||||
$ | 17,908 | $ | 15,814 | $ | 14,904 | $ | 12,565 | $ | 10,804 | $ | 12,472 | $ | 13,776 | $ | 15,636 | $ | 18,261 | $ | 17,975 | |||||||||||||||
Citicorp | $ | 2,132 | $ | 2,269 | $ | 2,004 | $ | 1,829 | $ | 1,803 | Citicorp | $ | 1,967 | $ | 1,937 | $ | 2,049 | $ | 2,115 | $ | 2,207 | |||||||||||||
Citi Holdings | 15,776 | 13,545 | 12,900 | 10,736 | 9,001 | Citi Holdings | 10,505 | 11,839 | 13,587 | 16,146 | 15,768 | |||||||||||||||||||||||
$ | 17,908 | $ | 15,814 | $ | 14,904 | $ | 12,565 | $ | 10,804 | $ | 12,472 | $ | 13,776 | $ | 15,636 | $ | 18,261 | $ | 17,975 | |||||||||||||||
Non-Accrual Loans and Assets (Continued)(continued)
The table below summarizes the Company'sCitigroup's other real estate owned (OREO) assets. This represents the carrying value of all real estate property acquired by foreclosure or other legal proceedings when the CompanyCiti has taken possession of the collateral.
Non-Accrual Assets
OREO | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | 4th Qtr. 2008 | 3rd Qtr. 2008 | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
OREO(in millions of dollars) | OREO(in millions of dollars) | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | ||||||||||||||||||||||||||||
Citicorp | Citicorp | $ | 284 | $ | 291 | $ | 307 | $ | 371 | $ | 425 | Citicorp | $ | 879 | $ | 866 | $ | 881 | $ | 874 | $ | 284 | ||||||||||||
Citi Holdings | Citi Holdings | 585 | 664 | 854 | 1,022 | 1,092 | Citi Holdings | 855 | 800 | 632 | 615 | 585 | ||||||||||||||||||||||
Corporate/Other | Corporate/Other | 15 | 14 | 41 | 40 | 85 | Corporate/Other | 7 | 7 | 8 | 11 | 15 | ||||||||||||||||||||||
Total OREO | $ | 884 | $ | 969 | $ | 1,202 | $ | 1,433 | $ | 1,602 | Total OREO | $ | 1,741 | $ | 1,673 | $ | 1,521 | $ | 1,500 | $ | 884 | |||||||||||||
North America | North America | $ | 682 | $ | 789 | $ | 1,115 | $ | 1,349 | $ | 1,525 | North America | $ | 1,470 | $ | 1,422 | $ | 1,291 | $ | 1,294 | $ | 682 | ||||||||||||
EMEA | EMEA | 105 | 97 | 65 | 66 | 61 | EMEA | 164 | 146 | 134 | 121 | 105 | ||||||||||||||||||||||
Latin America | Latin America | 40 | 29 | 20 | 16 | 14 | Latin America | 53 | 49 | 51 | 45 | 40 | ||||||||||||||||||||||
Asia | Asia | 57 | 54 | 2 | 2 | 2 | Asia | 54 | 56 | 45 | 40 | 57 | ||||||||||||||||||||||
$ | 884 | $ | 969 | $ | 1,202 | $ | 1,433 | $ | 1,602 | $ | 1,741 | $ | 1,673 | $ | 1,521 | $ | 1,500 | $ | 884 | |||||||||||||||
Other repossessed assets | Other repossessed assets | $ | 76 | $ | 72 | $ | 78 | $ | 78 | $ | 81 | Other repossessed assets | $ | 38 | $ | 55 | $ | 64 | $ | 73 | $ | 76 | ||||||||||||
Non-accrual assets—Total Citigroup | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | 4th Qtr. 2008 | 3rd Qtr. 2008 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate non-accrual loans | $ | 14,776 | $ | 12,432 | $ | 11,207 | $ | 9,732 | $ | 2,739 | |||||||
Consumer non-accrual loans | 17,908 | 15,814 | 14,904 | 12,565 | 10,804 | ||||||||||||
Non-accrual loans (NAL) | $ | 32,684 | $ | 28,246 | $ | 26,111 | $ | 22,297 | $ | 13,543 | |||||||
OREO | $ | 884 | $ | 969 | $ | 1,202 | $ | 1,433 | $ | 1,602 | |||||||
Other repossessed assets | 76 | 72 | 78 | 78 | 81 | ||||||||||||
Non-accrual assets (NAA) | $ | 33,644 | $ | 29,287 | $ | 27,391 | $ | 23,808 | $ | 15,226 | |||||||
NAL as a % of total loans | 5.25 | % | 4.40 | % | 3.97 | % | 3.21 | % | 1.89 | % | |||||||
NAA as a % of total assets | 1.78 | % | 1.59 | % | 1.50 | % | 1.23 | % | 0.74 | % | |||||||
Allowance for loan losses as a % of NAL(1) | 111 | % | 127 | % | 121 | % | 133 | % | 177 | % | |||||||
Non-accrual assets (NAA)—Total Citigroup | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate NAL | $ | 9,947 | $ | 11,036 | $ | 12,932 | $ | 13,479 | $ | 14,709 | |||||||
Consumer NAL | 12,472 | 13,776 | 15,636 | 18,261 | 17,975 | ||||||||||||
NAL | $ | 22,419 | $ | 24,812 | $ | 28,568 | $ | 31,740 | $ | 32,684 | |||||||
OREO | $ | 1,741 | $ | 1,673 | $ | 1,521 | $ | 1,500 | $ | 884 | |||||||
Other repossessed assets | 38 | 55 | 64 | 73 | 76 | ||||||||||||
NAA | $ | 24,198 | $ | 26,540 | $ | 30,153 | $ | 33,313 | $ | 33,644 | |||||||
NAL as a percentage of total loans | 3.43 | % | 3.58 | % | 3.96 | % | 5.37 | % | 5.25 | % | |||||||
NAA as a percentage of total assets | 1.22 | % | 1.37 | % | 1.51 | % | 1.79 | % | 1.78 | % | |||||||
Allowance for loan losses as a percentage of NAL(1) | 195 | % | 186 | % | 171 | % | 114 | % | 111 | % | |||||||
NAA—Total Citicorp | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
NAL | $ | 4,928 | $ | 4,510 | $ | 5,024 | $ | 5,353 | $ | 5,507 | |||||||
OREO | 879 | 866 | 881 | 874 | 284 | ||||||||||||
Other repossessed assets | N/A | N/A | N/A | N/A | N/A | ||||||||||||
Non-accrual assets (NAA) | $ | 5,807 | $ | 5,376 | $ | 5,905 | $ | 6,227 | $ | 5,791 | |||||||
NAA as a percentage of total assets | 0.45 | % | 0.44 | % | 0.48 | % | 0.55 | % | 0.54 | % | |||||||
Allowance for loan losses as a percentage of NAL(1) | 352 | % | 389 | % | 368 | % | 200 | % | 199 | % | |||||||
NAA—Total Citi Holdings | |||||||||||||||||
NAL | $ | 17,491 | $ | 20,302 | $ | 23,544 | $ | 26,387 | $ | 27,177 | |||||||
OREO | 855 | 800 | 632 | 615 | 585 | ||||||||||||
Other repossessed assets | N/A | N/A | N/A | N/A | N/A | ||||||||||||
NAA | $ | 18,346 | $ | 21,102 | $ | 24,176 | $ | 27,002 | $ | 27,762 | |||||||
NAA as a percentage of total assets | 4.36 | % | 4.54 | % | 4.81 | % | 5.54 | % | 4.99 | % | |||||||
Allowance for loan losses as a percentage of NAL(1) | 150 | % | 141 | % | 128 | % | 96 | % | 94 | % | |||||||
Non-accrual assets—Total Citicorp | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | 4th Qtr. 2008 | 3rd Qtr. 2008 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non-accrual loans (NAL) | $ | 5,131 | $ | 5,314 | $ | 3,829 | $ | 3,193 | $ | 2,408 | |||||||
OREO | 284 | 291 | 307 | 371 | 425 | ||||||||||||
Other repossessed assets | N/A | N/A | N/A | N/A | N/A | ||||||||||||
Non-accrual assets (NAA) | $ | 5,415 | $ | 5,605 | $ | 4,136 | $ | 3,564 | $ | 2,833 | |||||||
NAA as a % of total assets | 0.53 | % | 0.57 | % | 0.43 | % | 0.36 | % | 0.24 | % | |||||||
Allowance for loan losses as a % of NAL | 200 | % | 189 | % | 223 | % | 241 | % | 276 | % | |||||||
Non-accrual assets—Total Citi Holdings | |||||||||||||||||
Non-accrual loans (NAL) | $ | 27,553 | $ | 22,932 | $ | 22,282 | $ | 19,104 | $ | 11,135 | |||||||
OREO | 585 | 664 | 854 | 1,022 | 1,092 | ||||||||||||
Other repossessed assets | N/A | N/A | N/A | N/A | N/A | ||||||||||||
Non-accrual assets (NAA) | $ | 28,138 | $ | 23,596 | $ | 23,136 | $ | 20,126 | $ | 12,227 | |||||||
NAA as a % of total assets | 4.56 | % | 3.64 | % | 3.49 | % | 2.81 | % | 1.58 | % | |||||||
Allowance for loan losses as a % of NAL | 95 | % | 113 | % | 104 | % | 115 | % | 156 | % | |||||||
Consumer Loan Delinquency Amounts, Net Credit Losses and RatiosTable presents consumer credit information on a held basis.
| Total loans(1) | 90 days or more past due(2) | | Net credit losses(2) | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except total and average loan amounts in billions | Sept. 2009 | Sept. 2009 | June 2009 | Sept. 2008 | Average loans(1) 3Q 2009 | 3Q 2009 | 2Q 2009 | 3Q 2008 | |||||||||||||||||||
Citicorp | |||||||||||||||||||||||||||
Total | $ | 124.3 | $ | 1,909 | $ | 2,218 | $ | 1,634 | $ | 120.5 | $ | 1,426 | $ | 1,392 | $ | 1,096 | |||||||||||
Ratio | 1.54 | % | 1.89 | % | 1.29 | % | 4.70 | % | 4.78 | % | 3.35 | % | |||||||||||||||
Retail Bank | |||||||||||||||||||||||||||
Total | 80.0 | 749 | 831 | 616 | 77.7 | 379 | 414 | 317 | |||||||||||||||||||
Ratio | 0.94 | % | 1.10 | % | 0.77 | % | 1.93 | % | 2.22 | % | 1.51 | % | |||||||||||||||
North America | 7.5 | 93 | 97 | 54 | 7.4 | 79 | 86 | 35 | |||||||||||||||||||
Ratio | 1.24 | % | 1.35 | % | 1.10 | % | 4.23 | % | 4.85 | % | 3.03 | % | |||||||||||||||
EMEA | 5.7 | 62 | 70 | 35 | 5.7 | 84 | 74 | 36 | |||||||||||||||||||
Ratio | 1.09 | % | 1.23 | % | 0.48 | % | 5.84 | % | 5.34 | % | 1.99 | % | |||||||||||||||
Latin America | 17.7 | 324 | 360 | 323 | 16.9 | 113 | 140 | 147 | |||||||||||||||||||
Ratio | 1.83 | % | 2.18 | % | 1.89 | % | 2.65 | % | 3.43 | % | 3.29 | % | |||||||||||||||
Asia | 49.1 | 270 | 304 | 204 | 47.7 | 103 | 114 | 99 | |||||||||||||||||||
Ratio | 0.55 | % | 0.66 | % | 0.40 | % | 0.85 | % | 0.99 | % | 0.73 | % | |||||||||||||||
Citi-Branded Cards(3) | |||||||||||||||||||||||||||
Total | 44.3 | 1,160 | 1,387 | 1,018 | 42.8 | 1,047 | 978 | 779 | |||||||||||||||||||
Ratio | 2.61 | % | 3.29 | % | 2.20 | % | 9.71 | % | 9.32 | % | 6.58 | % | |||||||||||||||
North America(4) | 12.4 | 241 | 248 | 118 | 11.3 | 201 | 219 | 109 | |||||||||||||||||||
Ratio | 1.94 | % | 2.21 | % | 0.94 | % | 7.06 | % | 7.51 | % | 3.67 | % | |||||||||||||||
EMEA | 3.0 | 85 | 94 | 35 | 3.0 | 55 | 47 | 19 | |||||||||||||||||||
Ratio | 2.83 | % | 3.35 | % | 1.12 | % | 7.43 | % | 6.70 | % | 2.45 | % | |||||||||||||||
Latin America | 11.9 | 519 | 695 | 603 | 11.9 | 543 | 472 | 493 | |||||||||||||||||||
Ratio | 4.36 | % | 5.89 | % | 4.31 | % | 18.05 | % | 16.22 | % | 13.16 | % | |||||||||||||||
Asia | 17.0 | 315 | 350 | 262 | 16.6 | 248 | 240 | 158 | |||||||||||||||||||
Ratio | 1.85 | % | 2.15 | % | 1.57 | % | 5.93 | % | 6.00 | % | 3.63 | % | |||||||||||||||
Citi Holdings—Local Consumer Lending | |||||||||||||||||||||||||||
Total | 310.8 | 18,538 | 16,486 | 11,294 | 319.6 | 4,929 | 5,156 | 3,487 | |||||||||||||||||||
Ratio | 5.96 | % | 5.10 | % | 3.13 | % | 6.12 | % | 6.25 | % | 3.83 | % | |||||||||||||||
International | 37.3 | 1,447 | 1,535 | 1,033 | 39.5 | 973 | 976 | 737 | |||||||||||||||||||
Ratio | 3.88 | % | 3.81 | % | 2.21 | % | 9.77 | % | 9.69 | % | 6.02 | % | |||||||||||||||
North America Retail Partners Cards(3)(4) | 21.7 | 885 | 917 | 810 | 23.7 | 867 | 872 | 646 | |||||||||||||||||||
Ratio | 4.08 | % | 4.06 | % | 2.73 | % | 14.51 | % | 14.82 | % | 8.80 | % | |||||||||||||||
North America (excluding Cards) | 251.8 | 16,206 | 14,034 | 9,451 | 256.4 | 3,089 | 3,308 | 2,104 | |||||||||||||||||||
Ratio | 6.44 | % | 5.39 | % | 3.33 | % | 4.78 | % | 4.98 | % | 2.94 | % | |||||||||||||||
Total Citigroup (excluding Special Asset Pool) | $ | 435.1 | $ | 20,447 | $ | 18,704 | $ | 12,928 | $ | 440.1 | $ | 6,355 | $ | 6,548 | $ | 4,583 | |||||||||||
Ratio | 4.70 | % | 4.24 | % | 2.66 | % | 5.73 | % | 5.87 | % | 3.70 | % | |||||||||||||||
Consumer Loan Modification Programs
Renegotiated Loans
The Company has institutedfollowing table presents loans which were modified in TDRs.
In millions of dollars | Sept. 30, 2010 | Dec. 31, 2009 | ||||||
---|---|---|---|---|---|---|---|---|
Corporate renegotiated loans(1) | ||||||||
In U.S. offices | ||||||||
Commercial and industrial(2) | $ | 284 | $ | 203 | ||||
Mortgage and real estate(3) | 35 | — | ||||||
Other | 241 | — | ||||||
$ | 560 | $ | 203 | |||||
In offices outside the U.S. | ||||||||
Commercial and industrial(2) | $ | 218 | $ | 145 | ||||
Mortgage and real estate(3) | 2 | 2 | ||||||
Other | 11 | — | ||||||
$ | 231 | $ | 147 | |||||
Total corporate renegotiated loans | $ | 791 | $ | 350 | ||||
Consumer renegotiated loans(4)(5)(6)(7) | ||||||||
In U.S. offices | ||||||||
Mortgage and real estate | $ | 16,611 | $ | 11,165 | ||||
Cards | 4,288 | 992 | ||||||
Installment and other | 1,972 | 2,689 | ||||||
$ | 22,871 | $ | 14,846 | |||||
In offices outside the U.S. | ||||||||
Mortgage and real estate | $ | 749 | $ | 415 | ||||
Cards | 1,009 | 1,461 | ||||||
Installment and other | 2,368 | 1,401 | ||||||
$ | 4,126 | 3,277 | ||||||
Total consumer renegotiated loans | $ | 26,997 | $ | 18,123 | ||||
In certain circumstances, Citigroup modifies certain of its corporate loans involving a non-troubled borrower. These modifications are subject to Citi's normal underwriting standards for new loans and are made in the normal course of business to match customers' needs with available Citi products or programs to assist(these modifications are not included in the table above). In other cases, loan modifications involve a troubled borrower that Citi may grant a concession (modification). Modifications involving troubled borrowers with financial difficulties. These programsmay include modifyingextension of maturity date, reduction in the original loan terms, reducingstated interest rates, extendingrate, rescheduling of future cash flows, reduction in the remaining loan duration and/or waiving a portionface amount of the remaining principal balance. The Company's programs consistdebt, or reduction of the U.S. Treasury's Home Affordable Modification Program (HAMP), as well as short-term forbearance and long-term modification programs, summarized below. The short and long-term programs are available to credit card, residential mortgage, personal installment, and auto borrowers both internationally and in the U.S.
HAMP. As of September 30, 2009, $5.7 billion of first mortgages, have been enrolled in HAMP, pending successful completion ofpast accrued interest. In cases where Citi grants a trial period (described below). The HAMP is designed to reduce monthly mortgage paymentsconcession to a 31% housing debt ratio by loweringtroubled borrower, Citi accounts for the interest rate, extending the term of the loan and forbearing principal of certain eligible borrowers who have defaulted on their mortgages or who are at risk of imminent default due to economic hardship. In order to be entitled to loan modifications, borrowers must completemodification as a three- to five-month trial period, make the agreed payments and provide the required documentation before the end of the trial period. During the trial period, the original terms of the loans remain in effect pending final modification.
Short-Term Programs. Citigroup has also instituted programs to assist borrowers experiencing temporary hardships. These programs include short-term (twelve months or less) interest rate reductions and deferrals of past due payments. The loan volumeTDR under these short-term programs has increased significantly during 2009. As of September 30, 2009, short-term interest rate reduction programs covered loans in the residential mortgage ($7.4 billion), personal installment ($0.9 billion), credit card ($0.9 billion) and auto ($0.5 billion) businesses. Payment deferrals primarily occur in the U.S. residential mortgage business. Appropriate loan loss reserves have been established, giving consideration to the higher risk associated with those borrowers.
Long-Term Programs. Long-term modification programs, or "Troubled Debt Restructurings" (TDRs), occur when the terms of a loan have been modified due to the borrowers' financial difficulties and a long-term concession has been granted to the borrower. TDRs totaled $13.6 billion as of September 30, 2009. TDRs can be applied to credit card, residential mortgage, personal installment and auto loans. Valuation allowances for TDRs are determined by comparing estimated cash flows of the loans discounted at the loans' original contractual interest rates to the carrying value of the loans.ASC 310-40.
U.S. Consumer Mortgage Lending
Overview
The Company's U.S. Citi's North America consumer mortgage portfolio consists of both first lien and second lien mortgages, managed primarily by Local Consumer Lending (LCL) within Citi Holdings. However, $0.5 billion of first lien mortgages and $1.7 billion of second lien mortgages are reported in Citicorp.mortgages. As of September 30, 2009,2010, the U.S. first lien mortgage portfolio totaled approximately $122$104 billion while the U.S. second lien mortgage portfolio was approximately $53$50 billion.
Data appearing throughout this report, including in Although the tables below, have been sourced frommajority of the Company's risk systems and, as such, may not reconcile with Citi's disclosures elsewhere generally due to differences in methodology and/or inconsistencies or variations in the manner in which information is captured. In addition, while the Company's risk management function continually reviews and refines its data capture and processing systems, certain Fair Isaac Corporation (FICO) and loan-to-value (LTV) data on the Company's mortgage portfolio is not available. The Company has noted such variations or inabilities to capture data, as applicable, below where material.reported inLCL within Citi Holdings, there are $18 billion of first mortgages and $4 billion of second mortgages reported in Citicorp.
It is generally the Company's credit risk policy not to offer option ARMs/negative amortizing mortgage products to its customers. Option ARMs/negative amortizing mortgages represent a very insignificant portion of total balances that were acquired only incidentally as part of prior portfolio and business purchases.
A portion of loans in the Company's U.S. mortgage portfolio currently requires a payment to satisfy only the current accrued interest for the payment period or an interest-only payment. The Company'sCiti's first mortgage portfolio includes approximately $30 billion of first and second lien home equity lines of credit (HELOCs) with the interest-only payment feature that are still within their revolving period and have not commenced amortization. The interest-only payment feature during the revolving period is standard for the HELOC product across the industry. The first mortgage portfolio also contains approximately $35 billion of mostly adjustable rate mortgages (ARMs) that are currently required to make an interest-only payment. These loans will be required to make a fully amortizing payment upon expiration of their interest-only payment period, and most will do so within a few years of origination. Borrowers that are currently required to make an interest only payment cannot select a lower payment that will negatively amortize the loan. First mortgage loans with the interest-only payment feature are primarily to high credit quality borrowers that have on average significantly higher refreshed FICO scores than other loans in the first mortgage portfolio.
Loan Balances
First Mortgages—Loan Balances. Approximately 83% of the Company's first lien mortgage portfolio had FICO credit scores of at least 620 at origination. As a consequence of the difficult economic environment and the decrease in housing prices, LTV ratios and FICO scores have deteriorated since originations, as depicted in the tables below. On a refreshed basis, approximately 31% of first lien mortgages had a FICO score below 620, compared to approximately 17% at origination.
Balances: September 30, 2009—First Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 57 | % | 5 | % | 6 | % | ||||
80% < LTV < 90% | 3 | % | 2 | % | 4 | % | ||||
LTV³ 90% | 10 | % | 6 | % | 7 | % |
Refreshed | FICO³660 | 620£FICO<660 | FICO£620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 29 | % | 4 | % | 11 | % | ||||
80% < LTV < 90% | 8 | % | 1 | % | 4 | % | ||||
LTV³ 90% | 23 | % | 4 | % | 16 | % |
Note: First lien mortgage table excludes loans in Canada, Puerto Rico and loans sold with recourse. Balances exclude deferred fees/costs. Refreshed FICO scores based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Case-Shiller Home Price Index or the Federal Housing Finance Agency Price Index. Tables exclude $3.1 billion from At Origination balances and $2.6 billion from Refreshed balances for which FICO or LTV data was unavailable. The 90 or more days past due (90+DPD) delinquency rate for mortgages with unavailable FICO or LTV is 13.9% At Origination and 10.2% from Refreshed vs. 10.2% for total portfolio. Excluding government-insured loans, loans subject to long-term standby commitments and PMI loans described below, the 90+DPD delinquency rate for the first lien mortgage portfolio as of September 30, 2009 is 9.0%.
The Company's first lien mortgage portfolio includes $4.8$9.9 billion of loans with Federal Housing AdministrationFHA or Veterans AdministrationVA guarantees. These portfolios consist of loans originated to low-to-moderate-income borrowers with lower FICO (Fair Isaac Corporation) scores and generally have higher LTVs. Theseloan-to-value ratios (LTVs). Losses on FHA loans are borne by the sponsoring agency, provided that the insurance has not been breached as a result of an origination defect. The VA establishes a loan-level loss cap, beyond which Citi is liable for loss. FHA and VA loans have high delinquency rates (approximately 37% 90+DPD) but, given the guarantees, the CompanyCiti has experienced negligible credit losses on these loans. The first lien mortgage portfolio also includes $2.4$1.8 billion of loans with LTVs above 80%, which have insurance through private mortgage insurance (PMI) companies, and $4.2$1.8 billion of loans subject to Long-Term Standby Commitments(1)long-term standby commitments(1) (LTSC) with Government Sponsored Enterprises (GSE)U.S. government sponsored entities (GSEs), for which the CompanyCiti has limited exposure to credit losses. Citi's second mortgage portfolio also includes $0.6 billion of loans subject to LTSCs with GSEs, for which Citi has limited exposure to credit losses. Citi's allowance for loan loss calculations take into consideration the impact of these guarantees.
Citi continually reviews its foreclosure processes with respect to its U.S. mortgage portfolios. As a result of increased attention to the foreclosure process on an industry-wide basis, Citi has intensified the review of its foreclosure processes, and numerous governmental entities have commenced proceedings or otherwise sought information in this area (see "Legal Proceedings" below). To date, Citi has not identified systemic deficiencies in its existing foreclosure processes. However, Citi's review of its existing and historical processes continues and, depending on the results of that review, or if any industry-wide adverse regulatory or judicial actions are taken in respect of foreclosures, Citi's ability to continue to carry out its current foreclosure processes, and its financial results of operations and financial condition, could be adversely affected.
Consumer Mortgage Quarterly Trends—Delinquencies and Net Credit Losses
The following charts detail the quarterly trends in delinquencies and net credit losses for Citi's first and second consumer mortgage portfolios in North America.
Delinquencies and net credit losses in the first mortgage portfolio continued to be impacted by the Home Affordable Modification Program (HAMP) trial loans and the growing backlog of foreclosures in process. Loans in the HAMP trial modification period that do not make their original contractual payments are reported as delinquent, even if the reduced payments agreed to under the program are made by the borrower. Upon conclusion of the trial period, loans that are not modified permanently are returned to the delinquency status in which they began their trial period, adjusted for the number of payments received during the trial period. If the loans are modified permanently, they will be returned to current status. For additional information on HAMP, see "Consumer Loan Modification Programs" below.
In addition, as previously disclosed, the growing amount of foreclosures in process, which continues to be related to an industry-wide phenomenon resulting from foreclosure moratoria and other efforts to prevent or forestall foreclosure, have specific implications for the portfolio:
As set forth in the charts below, net credit losses and 90 days or more delinquencies in both first and second mortgages continued to improve during the third quarter of 2010. For first mortgages, the sequential improvement in 90 days or more delinquencies, as well as net credit losses, was driven predominantly by asset sales and HAMP trial modifications converting into permanent modifications, offset by the continued backlog in foreclosures in process. During the third quarter of 2010, Citi sold $1 billion in delinquent mortgages. In addition, as of September 30, 2010, Citi had converted a total of approximately $4.1 billion of HAMP trial modifications to permanent modifications.
For second mortgages, the net credit loss and 90 days or more delinquency improvement was driven by modification programs and, to a lesser extent, overall portfolio dynamics. Citi does not currently sell second mortgages.
Note: Includes loans for Canada and Puerto Rico. Loans 90 days or more past due exclude loans recorded at fair value since 1Q'10 and U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the potential loss predominately resides with the U.S. agencies.
Note: Includes loans for Canada and Puerto Rico. Loans 90 days or more past due exclude loans recorded at fair value since 1Q'10 and U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the potential loss predominately resides with the U.S. agencies.
Consumer Mortgage FICO and LTV
Data appearing in the tables below have been sourced from Citigroup's risk systems and, as such, may not reconcile with disclosures elsewhere generally due to differences in methodology or variations in the manner in which information is captured. Citi has noted such variations in instances where it believes they could be material to reconcile the information presented elsewhere.
Citi's credit risk policy is not to offer option adjustable rate mortgages (ARMs)/negative amortizing mortgage products to its customers. As a result, option ARMs/negative amortizing mortgages represent an insignificant portion of total balances since they were acquired only incidentally as part of prior portfolio and business purchases.
A portion of loans in the U.S. consumer mortgage portfolio currently requires a payment to satisfy only the current accrued interest for the payment period, or an interest-only payment. Citi's mortgage portfolio includes approximately $28 billion of first- and second- mortgage home equity lines of credit (HELOCs) that are still within their revolving period and have not commenced amortization. The interest-only payment feature during the revolving period is standard for the HELOC product across the industry. The first mortgage portfolio contains approximately $26 billion of ARMs that are currently required to make an interest-only payment. These loans will be required to make a fully amortizing payment upon expiration of their interest-only payment period, and most will do so within a few years of origination. Borrowers that are currently required to make an interest-only payment cannot select a lower payment that would negatively amortize the loan. First mortgage loans with this payment feature are primarily to high credit quality borrowers that have on average significantly higher origination and refreshed FICO scores than other loans in the first mortgage portfolio.
Loan Balances
SecondFirst Mortgages—Loan Balances. InAs a consequence of the second lien mortgage portfolio,economic environment and the majority of loans aredecrease in housing prices, LTV and FICO scores have generally deteriorated since origination, as depicted in the higher FICO categories. However,table below, although they have generally stabilized since the challenging economic conditions have createdquarter ended June 30, 2010. On a migration towards lowerrefreshed basis, approximately 29% of first mortgages had a LTV ratio above 100%, compared to approximately 0% at origination. Approximately 29% of the first mortgages had FICO scores and higher LTV ratios. Approximately 61% of that portfolio hadless than 620 on a refreshed LTV ratios of 90% or more,basis, compared to about 36%16% at origination. However, many of the loans in the portfolio are HELOC's, where the LTV ratio is calculated as if the line were fully drawn. As a majority of lines are only partially drawn, current LTVs on a drawn basis will be lower.
Balances: September 30, 2009—Second Lien2010—First Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | FICO³660 | 620£FICO<660 | FICO<620 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 48 | % | 2 | % | 2 | % | 58 | % | 6 | % | 7 | % | ||||||||
80% < LTV < 90% | 10 | % | 1 | % | 1 | % | ||||||||||||||
LTV³ 90% | 33 | % | 2 | % | 1 | % | ||||||||||||||
80% < LTV £ 100% | 13 | % | 7 | % | 9 | % | ||||||||||||||
LTV > 100% | NM | NM | NM |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 22 | % | 2 | % | 3 | % | ||||
80% < LTV < 90% | 9 | % | 1 | % | 2 | % | ||||
LTV³ 90% | 44 | % | 5 | % | 12 | % |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV £ 80% | 27 | % | 4 | % | 9 | % | ||||
80% < LTV £ 100% | 18 | % | 4 | % | 9 | % | ||||
LTV > 100% | 15 | % | 3 | % | 11 | % |
Note: Second lienNM—Not meaningful. First mortgage table excludes loans in Canada and Puerto Rico. Table excludes loans guaranteed by U.S. government sponsored agencies, loans recorded at fair value and loans subject to LTSCs. Table also excludes $1.6 billion from At Origination balances and $0.4 billion from Refreshed balances for which FICO or LTV data was unavailable. Balances exclude deferred fees/costs. Refreshed FICO scores based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Case-Shiller HomeLoan Performance Price Index or the Federal Housing Finance Agency Price Index. Tables exclude $1.8
Second Mortgages—Loan Balances. In the second mortgage portfolio, the majority of loans are in the higher FICO categories. Economic conditions have generally caused a migration towards lower FICO scores and higher LTV ratios, although the negative migration has slowed since the quarter ended June 30, 2010. Approximately 46% of second mortgages had refreshed LTVs above 100%, compared to approximately 0% at origination. Approximately 17% of second mortgages had FICO scores less than 620 on a refreshed basis, compared to 3% at origination.
Balances: September 30, 2010—Second Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV £ 80% | 50 | % | 2 | % | 2 | % | ||||
80% < LTV £ 100% | 42 | % | 3 | % | 1 | % | ||||
LTV > 100% | NM | NM | NM |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV £ 80% | 23 | % | 1 | % | 3 | % | ||||
80% < LTV £ 100% | 21 | % | 2 | % | 4 | % | ||||
LTV > 100% | 31 | % | 5 | % | 10 | % |
Note: N.M.—Not meaningful. Second mortgage table excludes loans in Canada and Puerto Rico. Table excludes loans recorded at fair value and loans subject to LTSCs. Table also excludes $1.5 billion from At Origination balances and $1.6$0.4 billion from Refreshed balances for which FICO or LTV data was unavailable. AsRefreshed FICO scores are based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Loan Performance Price Index or the Federal Housing Finance Agency Price Index.
Table of September 30, 2009, the 90+ DPD delinquency rate for mortgages with unavailable FICO or LTV is 3.8% At Origination and 7.1% from Refreshed vs. 3.1% for total portfolio.
The second lien mortgage portfolio includes $1.8 billion of loans subject to LTSC with one of the GSE, hence limiting the Company's exposure to credit losses.Contents
Delinquencies and Net Credit Losses
The tables below provide delinquency statistics for loans 90+DPD,90 or more days past due (90+DPD) as a percentage of outstandings in each of the FICO/LTV combinations, in both the first lien and second lien mortgage portfolios. For example, loans with FICO³ 660 and LTV£ 80% at origination have a 90+DPD rate of 6.6%5.1%.
As evidenced by the tables below, loans with FICO scores of less than 620 exhibit significantly higher delinquencies than in any other FICO band. Similarly, loans with LTVs equal to or greater than 90%100% have higher delinquencies than LTVs of less than 90%or equal to 100%.
In addition,While the dollar balances of 90+DPD loans have declined for both first mortgage delinquencies continued to rise duringand second mortgages, the third quarter. Further breakout of the FICO below 620 segment indicates that delinquenciesdelinquency rates have declined for first mortgages, and increased for second mortgages, from those reflected in this segment, on a refreshed basis, are about three times higher than in the overall first mortgage portfolio.statistics at June 30, 2010.
Delinquencies: 90+DPD Rates—First Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 6.6 | % | 11.3 | % | 13.5 | % | ||||
80%> < LTV < 90% | 7.9 | % | 14.3 | % | 17.8 | % | ||||
LTV³ 90% | 10.1 | % | 17.6 | % | 24.7 | % |
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV £ 80% | 5.1 | % | 10.3 | % | 11.7 | % | ||||
80% < LTV £ 100% | 7.7 | % | 12.9 | % | 16.3 | % | ||||
LTV > 100% | NM | NM | NM |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | FICO³660 | 620£FICO<660 | FICO<620 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 0.2 | % | 3.4 | % | 17.8 | % | 0.2 | % | 3.5 | % | 14.9 | % | ||||||||
80%£ LTV < 90% | 0.5 | % | 5.9 | % | 24.7 | % | ||||||||||||||
LTV³ 90% | 1.7 | % | 13.7 | % | 36.3 | % | ||||||||||||||
80% < LTV £ 100% | 0.7 | % | 7.4 | % | 21.4 | % | ||||||||||||||
LTV > 100% | 1.8 | % | 13.5 | % | 27.6 | % |
Note: NM—Not meaningful. 90+DPD are based on balances referenced in the tables above.
Delinquencies: 90+DPD Rates—Second Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 1.5 | % | 4.0 | % | 5.1 | % | ||||
80% < LTV < 90% | 3.3 | % | 5.0 | % | 5.8 | % | ||||
LTV³ 90% | 4.7 | % | 5.6 | % | 7.6 | % |
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV £ 80% | 1.7 | % | 4.2 | % | 5.9 | % | ||||
80% < LTV £ 100% | 3.5 | % | 5.4 | % | 7.5 | % | ||||
LTV > 100% | NM | NM | NM |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | FICO³660 | 620£FICO<660 | FICO<620 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 0.0 | % | 0.9 | % | 8.3 | % | 0.0 | % | 1.5 | % | 8.7 | % | ||||||||
80% < LTV < 90% | 0.0 | % | 0.7 | % | 8.5 | % | ||||||||||||||
LTV³ 90% | 0.3 | % | 3.6 | % | 18.1 | % | ||||||||||||||
80% < LTV £ 100% | 0.1 | % | 2.0 | % | 10.7 | % | ||||||||||||||
LTV > 100% | 0.3 | % | 3.3 | % | 16.1 | % |
Note: NM—Not meaningful. 90+DPD are based on balances referenced in the tables above.
The following charts detail the quarterly trends in delinquencies and net credit losses for the Company's first and second N.A. consumer mortgage portfolios.
Both losses and delinquencies for the first mortgage portfolio have been impacted by the HAMP. As set forth in the first chart, first mortgage delinquencies continued to increase in the third quarter of 2009, exacerbated in part by the reduction in loan balances. However, the continued increase in first mortgage delinquencies during the third quarter 2009 is largely explained by the impact of HAMP. As mentioned elsewhere in this report, loans in the HAMP trial modification period are reported as delinquent if the original contractual payments are not received on time (even if the reduced payments agreed to under the program are made by the borrower).
Further, HAMP impacted Citi's net credit losses in the first mortgage portfolio during the third quarter of 2009 as
loans in the trial period are not charged off at 180 DPD as long as they have made at least one payment. Nearly half of the sequential decline in net credit losses on first mortgages during the third quarter 2009 was attributable to HAMP. The Company has increased its loan loss provisions to offset this impact.
Based on these trends described above, the Company believes that the success rate of HAMP will be a key factor influencing net credit losses from delinquent first mortgage loans in the near future, and the outcome of the program will largely depend on the success rates of borrowers completing the trial period and meeting the documentation requirements.
By contrast, during the third quarter of 2009, second mortgage delinquencies began to moderate, as did net credit losses, as compared to the prior quarter. The Company continues to actively manage this exposure by reducing the riskiest accounts, including by tightening credit requirements through higher FICOs, lower LTVs, increased documentation and verifications.
It should be noted that first mortgage net credit losses, as a percentage of average loans, are nearly half the level of those in the second mortgage portfolio, despite much higher delinquencies in the first mortgage portfolio. The Company believes that two major factors explain this relationship:
Note: Includes loans for Canada, Puerto Rico and loans held for sale. Balances include deferred fees/costs.
Note: Includes loans for Canada and Puerto Rico.
Origination Channel, Geographic Distribution and Origination Vintage
The following tables detail the Company'sCiti's first and second U.S. Consumer mortgage portfolios by origination channels, geographic distribution and origination vintage.
By Origination Channel
The Company'sCiti's U.S. consumer mortgage portfolio has been originated from three main channels: retail, broker and correspondent.
First Lien Mortgages: September 30, 20092010
As of September 30, 2010, approximately 53% of the first mortgage portfolio was originated through third-party channels. Given that loans originated through correspondents have exhibited higher 90+DPD delinquency rates than retail originated mortgages, Citi terminated business with a number of correspondent sellers in 2007 and 2008. During 2008, Citi also severed relationships with a number of brokers, only maintaining those who have produced strong, high-quality and profitable volume. 90+DPD delinquency amounts, amount of loans with FICO scores of less than 620, and amount of loans with LTV over 100% have generally improved since June 30, 2010.
CHANNEL ($ in billions) | First Lien Mortgages | Channel % Total | 90+DPD % | *FICO < 620 | *LTV³ 90 | First Lien Mortgages | Channel % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail | $ | 50.5 | 41.5 | % | 4.4 | % | $ | 14.6 | $ | 16.4 | $ | 43.2 | 47.0 | % | 5.2 | % | $ | 13.2 | $ | 9.1 | ||||||||||||
Broker | $ | 21.0 | 17.3 | % | 10.5 | % | $ | 4.2 | $ | 10.0 | $ | 15.9 | 17.2 | % | 7.2 | % | $ | 2.9 | $ | 5.0 | ||||||||||||
Correspondent | $ | 50.2 | 41.2 | % | 15.9 | % | $ | 18.6 | $ | 26.0 | $ | 32.9 | 35.8 | % | 11.1 | % | $ | 10.8 | $ | 12.7 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans sold with recourse.subject to LTSCs.
As of September 30, 2009, approximately 41% of the first lien mortgage portfolio was originated through the correspondent channel, a reduction from approximately 43% as of the end of 2008. Given that loans originated through correspondents have exhibited higher 90+DPD delinquency rates than retail originated mortgages, the Company terminated business with a number of correspondent sellers in 2007 and 2008. During 2008, the Company severed relationships with a number of brokers, only maintaining those who have produced strong, high-quality and profitable volume.
Second Lien Mortgages: September 30, 20092010
CHANNEL ($ in billions) | Second Lien Mortgages | Channel % Total | 90+DPD % | *FICO < 620 | *LTV³ 90 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail | $ | 27.0 | 50.8 | % | 1.6 | % | $ | 3.9 | $ | 12.4 | ||||||
Broker | $ | 13.2 | 24.9 | % | 4.0 | % | $ | 2.2 | $ | 9.9 | ||||||
Correspondent | $ | 12.9 | 24.3 | % | 5.2 | % | $ | 3.1 | $ | 9.5 |
Note: Excludes Canada and Puerto Rico.
For second lien mortgages, approximately 49%47% of the loans were originated through third-party channels. As these mortgages have demonstrated a higher incidence of delinquencies, the CompanyCiti no longer originates second mortgages through third-party channels, which represented approximately 54%channels. 90+DPD delinquency amounts, amount of the portfolio asloans with FICO scores of the endless than 620, and amount of 2008.loans with LTV over 100% have generally slightly improved since June 30, 2010.
CHANNEL ($ in billions) | Second Lien Mortgages | Channel % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail | $ | 23.3 | 53.0 | % | 1.9 | % | $ | 3.7 | $ | 6.6 | ||||||
Broker | $ | 10.8 | 24.6 | % | 3.7 | % | $ | 1.8 | $ | 6.3 | ||||||
Correspondent | $ | 9.8 | 22.4 | % | 3.8 | % | $ | 2.3 | $ | 7.1 |
Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.
By State
Approximately half of the Company'sCiti's U.S. consumer mortgage portfolio is located in five states: California, New York, Florida, TexasIllinois and Illinois. ThoseTexas. These states represent 49%50% of first lien mortgages and 54%55% of second lien mortgages.
With respect to first mortgages, Florida and Illinois havehad above average 90+DPD delinquency rates.rates as of September 30, 2010. Florida has 39%55% of its first mortgage lien portfolio in the FICO<620 band; and 66% of its loan portfolio haswith refreshed LTV³90.LTV>100%, compared to 29% overall for first mortgages. Illinois has 33% of its loans in the FICO<620 band; and 54% of its loan portfolio has LTV³90.with refreshed LTV>100%. Texas, despite having 44%40% of its portfolio with FICO<620, has a lower delinquency rate relative to the overall portfolio. Texas has only 8%6% of its loan portfolio with refreshed LTV³90.LTV>100%.
First Lien Mortgages: September 30, 2009
STATES ($ in billions) | First Lien Mortgages | State % Total | 90+DPD % | *FICO < 620 | *LTV³ 90 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
California | $ | 32.3 | 26.6 | % | 9.0 | % | $ | 5.2 | $ | 18.3 | ||||||
New York | $ | 10.0 | 8.2 | % | 6.8 | % | $ | 2.0 | $ | 1.7 | ||||||
Florida | $ | 7.3 | 6.0 | % | 16.8 | % | $ | 2.8 | $ | 4.8 | ||||||
Texas | $ | 5.3 | 4.3 | % | 8.7 | % | $ | 2.3 | $ | 0.4 | ||||||
Illinois | $ | 5.2 | 4.3 | % | 11.4 | % | $ | 1.7 | $ | 2.8 | ||||||
Others | $ | 61.7 | 50.7 | % | 10.6 | % | $ | 23.4 | $ | 24.3 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs and loans sold with recourse.
In the second lien mortgage portfolio, Florida continuescontinued to experience above-average delinquencies at 4.5% as of September 30, 2010, with approximately 81%71% of theirits loans with refreshed LTV³ 90 > 100%, compared to 60%46% overall for second lien mortgages.
Second Lien Mortgages: September 30, 2009
STATES ($ in billions) | Second Lien Mortgages | State % Total | 90+DPD % | *FICO < 620 | *LTV³ 90 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
California | $ | 14.6 | 27.4 | % | 3.8 | % | $ | 2.0 | $ | 10.4 | ||||||
New York | $ | 6.9 | 12.9 | % | 1.9 | % | $ | 0.8 | $ | 2.2 | ||||||
Florida | $ | 3.6 | 6.8 | % | 5.2 | % | $ | 0.8 | $ | 2.9 | ||||||
Illinois | $ | 2.1 | 3.9 | % | 3.0 | % | $ | 0.4 | $ | 1.5 | ||||||
Texas | $ | 1.5 | 2.8 | % | 1.2 | % | $ | 0.2 | $ | 0.2 | ||||||
Others | $ | 24.5 | 46.1 | % | 2.8 | % | $ | 5.0 | $ | 14.5 |
Note: Excludes Canada and Puerto Rico.
By Vintage
For the Company'sCitigroup's combined U.S. consumer mortgage portfolio (first and second lien mortgages), as of September 30, 2010, approximately half of the portfolio consistsconsisted of 2006 and 2007 vintages, which demonstrate above average delinquencies. In first mortgages, approximately 43%42% of the portfolio is of 2006 and 2007 vintages, which havehad 90+DPD rates well above the overall portfolio rate.rate, at 9.8% for 2006 and 11.0% for 2007. In second mortgages, 64%61% of the portfolio is of 2006 and 2007 vintages, which again havehad higher delinquencies compared to the overall portfolio rate.rate, at 3.4% for 2006 and 3.2% for 2007.
First Lien Mortgages: September 30, 2009FICO and LTV Trend Information—U.S. Consumer Mortgage Lending
VINTAGES ($ in billions) | First Lien Mortgages | Vintage % Total | 90+DPD % | *FICO < 620 | *LTV³ 90 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | $ | 4.1 | 3.3 | % | 0.3 | % | $ | 0.6 | $ | 0.9 | ||||||
2008 | $ | 15.1 | 12.4 | % | 5.2 | % | $ | 3.3 | $ | 5.5 | ||||||
2007 | $ | 30.0 | 24.6 | % | 15.8 | % | $ | 11.5 | $ | 18.7 | ||||||
2006 | $ | 22.2 | 18.2 | % | 13.7 | % | $ | 7.6 | $ | 13.3 | ||||||
2005 | $ | 20.8 | 17.1 | % | 7.5 | % | $ | 5.0 | $ | 9.6 | ||||||
£ 2004 | $ | 29.5 | 24.3 | % | 7.7 | % | $ | 9.5 | $ | 4.5 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs and loans sold with recourse.
1st Mortgage ($B) | 2nd Mortgage ($B) | |
Note: First mortgage chart/table excludes loans in Canada and Puerto Rico, loans guaranteed by U.S. government sponsored agencies, loans recorded at fair value and loans subject to LTSCs. Balances exclude deferred fees/costs. Balances based on refreshed FICO and LTV ratios. Chart/table also excludes balances for which FICO or LTV data was unavailable ($1.0 billion in 4Q09, $0.6 billion in 1Q10, $0.4 billion in 2Q10 and $0.4 billion in 3Q10). | Note: Second mortgage chart/table excludes loans in Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs. Balances based on refreshed FICO and LTV ratios. Chart/table also excludes balances for which FICO or LTV data was unavailable ($0.8 billion in 4Q09, $0.4 billion in 1Q10, $0.4 billion in 2Q10 and $0.4 billion in 3Q10). |
Second Lien Mortgages: As of September 30, 2010, the first mortgage portfolio was approximately $92 billion, a reduction of $15 billion or 14% from December 2009. First mortgage loans with refreshed FICO score below 660 and refreshed LTV above 100% were $13.2 billion as of September 30, 2010, $1.7 billion or 11% lower than the balance as of December 2009. Similarly, the second mortgage portfolio was approximately $44 billion as of September 30, 2010, a reduction of $5 billion or 11% from December 2009. Second mortgage loans with refreshed FICO score below 660 and refreshed LTV above 100% were $6.4 billion as of September 30, 2010, $0.3 billion or 4% lower than the balance as of December 2009. Across both portfolios, 90+ DPD rates have generally improved since December 31, 2009 across each of the FICO/LTV segments outlined above, particularly those segments with refreshed FICO scores below 660.
VINTAGES ($ in billions) | Second Lien Mortgages | Vintage % Total | 90+DPD % | *FICO < 620 | *LTV³ 90 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | $ | 0.5 | 0.9 | % | 0.6 | % | $ | 0.0 | $ | 0.0 | ||||||
2008 | $ | 4.4 | 8.3 | % | 0.9 | % | $ | 0.5 | $ | 1.5 | ||||||
2007 | $ | 16.0 | 30.0 | % | 3.5 | % | $ | 3.0 | $ | 10.4 | ||||||
2006 | $ | 17.8 | 33.6 | % | 3.8 | % | $ | 3.4 | $ | 12.9 | ||||||
2005 | $ | 10.1 | 18.9 | % | 2.7 | % | $ | 1.5 | $ | 6.2 | ||||||
£ 2004 | $ | 4.4 | 8.3 | % | 1.7 | % | $ | 0.7 | $ | 0.9 |
Note: Excludes Canada and Puerto Rico.
N.A. Cards
Interest Rate Risk Associated with Consumer Mortgage Lending Activity
Citigroup originates and funds mortgage loans. As with all other lending activity, this exposes Citigroup to several risks, including credit, liquidity and interest rate risks. For on-balance sheet exposures, these risks are measured and monitored as described in the Credit Risk, Liquidity and Funding, and Interest Rate Exposure sections. To minimize credit and liquidity risk, Citigroup sells most of the mortgage loans it originates, but retains the servicing rights. These sale transactions create an intangible asset referred to as MSRs. The Company's N.A.fair value of this asset is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. The fair value of MSRs declines with increased prepayments, and lower interest rates are generally one factor that tends to lead to increased prepayments. Thus, by continuing to service sold mortgage loans, Citigroup is exposed to interest rate risk.
In managing this risk, Citigroup hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase commitments of mortgage-backed securities, and purchased securities classified as trading (primarily mortgage-backed securities including principal-only strips).
Since the change in the value of these hedging instruments does not perfectly match the change in the value of the MSRs, Citigroup is still exposed to what is commonly referred to as "basis risk." Citigroup manages this risk by reviewing the mix of the various hedging instruments referred to above on a daily basis.
Citigroup's MSRs totaled $3.976 billion and $6.530 billion at September 30, 2010 and December 31, 2009, respectively. For additional information on Citi's MSRs, see Notes 11 and 14 to the Consolidated Financial Statements.
As part of the mortgage lending activity, Citigroup commonly enters into purchase commitments to fund residential mortgage loans at specific interest rates within a given period of time, generally up to 60 days after the rate has been set. If the resulting loans from these commitments will be classified as loans held-for-sale, Citigroup accounts for the commitments as derivatives. Accordingly, the initial and subsequent changes in the fair value of these commitments, which are driven by changes in mortgage interest rates, are recognized in current earnings after taking into consideration the likelihood that the commitment will be funded.
Citigroup hedges its exposure to the change in the value of these commitments by utilizing hedging instruments similar to those referred to above.
North America Cards
Overview
Citi's North America cards portfolio consists of its Citi-branded and retailRetail partner cards portfolios locatedreported in CiticorpCiticorp—Regional Consumer Banking and Citi Holdings—Local Consumer Lending, respectively. As of September 30, 2009,2010, the U.S. Citi-branded portfolio totaled approximately $84$77 billion, while the U.S. retailRetail partner cards portfolio was approximately $57 billion, both reported on a managed basis.$46 billion.
In the Company'seach of its Citi-branded and Retail partner cards portfolios, Citi continues to actively eliminate riskier accounts to mitigate losses. Higher risk customers have either had their available lines of credit reduced or their accounts closed. On a net basis, end of period open accounts are down 13% in Citi-branded cards and down 10% in Retail partner cards versus prior-year levels.
As previously disclosed, in Citi's experience to date, these portfolios have significantly different characteristics:
As a result, loss mitigation efforts, such as stricter underwriting standards for new accounts, decreasing higher risk credit lines, closing high risk accounts and re-pricing, have tended to affect the Retail partner cards portfolio faster than the branded portfolio. (See also "Consumer Loan Modification Programs" for a discussion of modification programs for card loans.)
Citi continues to believe that net credit losses in each of its cards portfolios will likely continue to remain at elevated levels and will continue to be highly dependent on macroeconomic conditions and industry changes, including continued implementation of the CARD Act.
Cards Quarterly Trends—Delinquencies and Net Credit Losses
The following charts detail the quarterly trends in delinquencies and net credit losses for Citigroup'sNorth America Citi-branded and Retail partner cards portfolios.
During the third quarter of 2010, each of the portfolios continued to show improvement in delinquencies and net credit losses. In Citi-branded cards, delinquencies declined for the third consecutive quarter while net credit losses declined for the second consecutive quarter. In Retail partner cards, delinquencies declined for the third consecutive quarter while net credit losses declined for the fifth consecutive quarter.
Note: Includes Puerto Rico.
Note: Includes Canada and Puerto Rico. Includes Installment Lending.
North America Cards—FICO Information
As set forth in the table below, on a refreshed basis approximately 73%75% of the Citi-branded portfolio had FICO credit scores of at least 660 on a refreshed basis as of September 30, 2009,2010, while 62%66% of the retailRetail partner cards portfolio had scores above 660. These percentages reflect a slight improvement since the statistics on a refreshed basis as of at least 660.June 30, 2010.
Balances: September 30, 20092010
Refreshed | Citi Branded | Retail Partners | |||||
---|---|---|---|---|---|---|---|
FICO³ 660 | 73 | % | 62 | % | |||
620£FICO<660 | 11 | % | 13 | % | |||
FICO<620 | 16 | % | 25 | % |
Refreshed | Citi Branded | Retail Partners | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 75 | % | 66 | % | |||
620 £ FICO < 660 | 10 | % | 13 | % | |||
FICO < 620 | 15 | % | 21 | % |
Note: Based on balances of $138 billion.$116 billion (decreased from $120 billion at June 30, 2010). Balances include interest and fees. Excludes Canada, Puerto Rico and Installment and Classified portfolios. Excludes balances where FICO was unavailable ($0.92.7 billion for Citi-branded, $2.2$2.0 billion for retailRetail partner cards). 90+DPD delinquency rate for balances where FICO was unavailable is 9.83% for Citi-branded and 9.38% for retail partner cards vs. overall rate of 2.63% for Citi-branded and 4.49% for retail partner cards.
In each of the two portfolios, Citi has been actively eliminating riskier accounts and sales to mitigate losses. First, the Company has removed high risk customers from the portfolio by either reducing available lines of credit or closing accounts. End-of-period open accounts are down 16% in branded cards and 13% in retail partner cards versus prior year levels. Second, the Company has improved the tools used to identify and manage exposure in each of the portfolios by targeting unique customer attributes. Loss mitigation programs that entail a reduction in customers' monthly payments obligation constitutes less than 5% of the overall managed portfolio as of September 30, 2009. These programs along with other loss mitigation activities have stabilized reported delinquencies and net credit losses and importantly, early indicators of re-default rates related to these programs are within expected norms.
The table below provides delinquency statistics for loans 90+DPD for both the Citi-branded and retailRetail partner cards portfolios as of September 30, 2009.2010. Given the economic environment, customers have generally migrated down from higher FICO score ranges, driven by their delinquencies with Citi and/or with other creditors. As these customers roll through the delinquency buckets, they materially damage their credit score and may ultimately go to charge-off. Loans with FICO scores less than 620, which constitute 16% of the Citi-branded portfolio, have a 90+DPD rate of 15.2%; in the retail partner cards portfolio, loans with FICO scores less than 620 constitute 25% of the portfolio and have a 90+DPD rate of 16.8%.
90+DPD Delinquency Rate: September 30, 2009
Refreshed | Citi Branded 90+DPD% | Retail Partners 90+DPD% | |||||
---|---|---|---|---|---|---|---|
FICO³ 660 | 0.1 | % | 0.2 | % | |||
620£FICO<660 | 0.3 | % | 0.6 | % | |||
FICO<620 | 15.2 | % | 16.8 | % |
Note: Based on balances of $138 billion. Balances include interest and fees. Excludes Canada, Puerto Rico, Installment and Classified portfolios. Loans 90 days or more past due are more likely to be associated with low refreshed FICO scores both because low scores are indicative of repayment risk and because their delinquency has been reported by the CompanyCitigroup to the credit bureaus.
The following charts detail Loans with FICO scores less than 620, which constitute 15% of the quarterly trendsCiti-branded portfolio (down from 16% at June 30, 2010), have a 90+DPD rate of 15.0% (down from 16.3% at June 30, 2010); in delinquencies and net credit losses for the Company's N.A. Citi-branded and retailRetail partner cards portfolios.
90+DPD Delinquency Rate: September 30, 2010
Refreshed | Citi Branded 90+DPD% | Retail Partners 90+DPD% | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 0.1 | % | 0.2 | % | |||
620 £ FICO < 660 | 0.6 | % | 0.8 | % | |||
FICO < 620 | 15.0 | % | 17.3 | % |
Note: Based on a refreshed basis, have contributed to the improvement.
The Company believes that net credit losses in each of the cards portfolios will continue to remain at elevated levels and will continue to be highly dependentare based on the external environment and industry changes.
Note: Includes Puerto Rico.
Note: Includes Canada and Puerto Rico.
The Credit Card Accountability Responsibility and Disclosure Act of 2009
On May 22, 2009, The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) was enacted into law. The CARD Act will affect various credit card practices of card issuers, including Citigroup, such as marketing, underwriting, pricing, billing and disclosure requirements, thus reshaping the way consumers have access to and use their credit cards. Currently, many of the provisionsbalances referenced in the CARD Act are to take effect in February 2010, although some provisions were effective in August 2009 and some will take effect in August 2010. However, legislation has been introduced in Congress to accelerate certain provisions of the CARD Act.
Certain provisions of the CARD Act are consistent with Citigroup's existing practices and will not require any changes or modifications. Other provisions, however, such as those that restrict the ability of an issuer to increase APRs on outstanding balances or that establish standards for penalty fees and payment allocation, will require Citigroup to make fundamental changes to its credit card business model. The impact of the CARD Act on Citigroup's credit businesses is not fully known at this time. The final impact will ultimately depend upon the successful implementation of changes to Citigroup's business model and the continued regulatory actions on and interpretations of the CARD Act, among other considerations.
Table of Contentstable above.
U.S. Installment and Other Revolving Loans
In the table below, the Company'sThe U.S. Installmentinstallment portfolio consists of consumer loans in the following businesses: Consumer Finance, Retail Banking, Auto, Student Lending and Cards. Other Revolving consists of consumer loans (Ready Credit and Checking Plus products) in the Consumer Retail Banking business. Commercial-related loans are not included.
As of September 30, 2009,2010, the U.S. Installment portfolio totaled approximately $58$27 billion, while the U.S. Other Revolving portfolio was approximately $1$0.9 billion. In the table below, the U.S. Installment portfolio excludes the portion of loans associated with the previously-announced sale of The Student Loan Corporation, currently expected to close in the fourth quarter of 2010.
While substantially all of the U.S. Installment portfolio is managed under reported inLCL within Citi Holdings, it does include $0.4 billion of Consumer Retail Banking loans which areis reported in Citicorp. The U.S. Other Revolving portfolio is managed under Citicorp. The U.S. Installment portfolio includes $21 billion of student loans originated under the Federal Family Education Loan Program where losses are substantially mitigated by federal guarantees if the loans are properly serviced.
Approximately 44%48% of the Installment portfolio had FICO credit scores less than 620 on a refreshed basis. The Company continues to execute its strategy to wind down the assets in Citi Holdings. Approximately 29%28% of the Other Revolving portfolio is composed of loans having FICO less than 620.
Balances: September 30, 20092010
Refreshed | Installment | Other Revolving | |||||
---|---|---|---|---|---|---|---|
FICO³ 660 | 41 | % | 56 | % | |||
620£FICO<660 | 15 | % | 15 | % | |||
FICO<620 | 44 | % | 29 | % |
Refreshed | Installment | Other Revolving | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 37 | % | 57 | % | |||
620 £ FICO < 660 | 16 | % | 15 | % | |||
FICO < 620 | 48 | % | 28 | % |
Note: Based on balances of $56$26 billion for Installment and $0.9 billion for Other Revolving. Excludes Canada and Puerto Rico. Excludes balances where FICO was unavailable ($2.31.2 billion for Installment, $0.1 billion for Other Revolving)Installment). 90+ DPD delinquency rate for balances where FICO was unavailable is 3.55% for Installment and 6.34% for Other Revolving vs. overall rate of 2.84% for Installment and 3.12% for Other Revolving.
The table below provides delinquency statistics for loans 90+DPD for both the Installment and Other Revolving portfolios. Loans 90+DPD are more likely to be associated with low refreshed FICO scores both because low scores are indicative of repayment risk and because their delinquency has been reported by Citigroup to the credit bureaus. On a refreshed basis, loans with FICO scores of less than 620 exhibit significantly higher delinquencies than in any other FICO band and will drive the majority of the losses.
90+DPD Delinquency Rate: September 30, 20092010
Refreshed | Installment 90+DPD% | Other Revolving 90+DPD% | |||||
---|---|---|---|---|---|---|---|
FICO³ 660 | 0.1 | % | 0.0 | % | |||
620£FICO<660 | 0.3 | % | 0.4 | % | |||
FICO<620 | 6.2 | % | 9.2 | % |
Refreshed | Installment 90+DPD% | Other Revolving 90+DPD% | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 0.2 | % | 0.0 | % | |||
620 £ FICO < 660 | 0.5 | % | 0.3 | % | |||
FICO < 620 | 7.4 | % | 8.7 | % |
Note: Based on balances of $56$26 billion for Installment and $0.9 billion for Other Revolving. Excludes Canada and Puerto Rico. Loans90+DPD are based on balances referenced in the table above.
FICO and LTV Trend Information—North America Cards
Citi Branded Cards ($B) | Retail Partner Cards ($B) | |
Note: Excludes Canada, Puerto Rico and Installment and Classified portfolios. Balances include interest and fees. Balances based on refreshed FICO. Chart also excludes balances for which FICO was unavailable ($0.7 billion in 4Q09, $2.4 billion in 1Q10, $2.4 billion in 2Q10 and $2.7 billion in 3Q10). | Note: Excludes Canada, Puerto Rico and Installment and Classified portfolios. Balances include interest and fees. Balances based on refreshed FICO. Chart also excludes balances for which FICO was unavailable ($2.1billion in 4Q09, $2.1billion in 1Q10, $2.1billion in 2Q10 and $2.0 billion in 3Q10). |
As of September 30, 2010, the Citi-branded portfolio totaled approximately $76 billion, a reduction of $7 billion or 9% from December 2009 primarily driven by lower balances in the FICO below 660 segment. In the Citi-branded cards portfolio, loans with refreshed FICO scores below 660 were $18.6 billion as of September 30, 2010, $4 billion or 18% lower than the balance as of December 2009. Similarly, the Retail partner cards portfolio was approximately $44 billion as of September 30, 2010, a reduction of $12 billion or 21% from December 2009. In the Retail partner cards portfolio, loans with refreshed FICO scores below 660 were $14.6 billion as of September 30, 2010, $5.4 billion or 27% lower than the balance as of December 31, 2009.
Consumer Loan Delinquency Amounts and Ratios
| Total loans(7) | 90+ days past due(1) | 30-89 days past due(1) | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except EOP loan amounts in billions | Sep. 2010 | Sep. 2010 | Jun. 2010 | Sep. 2009 | Sep. 2010 | Jun. 2010 | Sep. 2009 | |||||||||||||||||
Citicorp(2)(3)(4) | ||||||||||||||||||||||||
Total | $ | 224.8 | $ | 3,377 | $ | 3,733 | $ | 3,899 | $ | 3,728 | $ | 3,858 | $ | 4,352 | ||||||||||
Ratio | 1.51 | % | 1.71 | % | 1.74 | % | 1.66 | % | 1.77 | % | 1.94 | % | ||||||||||||
Retail Bank | ||||||||||||||||||||||||
Total | 113.7 | 787 | 804 | 695 | 1,185 | 1,131 | 1,013 | |||||||||||||||||
Ratio | 0.70 | % | 0.74 | % | 0.64 | % | 1.05 | % | 1.04 | % | 0.94 | % | ||||||||||||
North America | 29.4 | 221 | 245 | 92 | 243 | 241 | 82 | |||||||||||||||||
Ratio | 0.77 | % | 0.81 | % | 0.27 | % | 0.85 | % | 0.80 | % | 0.24 | % | ||||||||||||
EMEA | 4.7 | 40 | 50 | 62 | 142 | 145 | 230 | |||||||||||||||||
Ratio | 0.85 | % | 1.16 | % | 1.09 | % | 3.02 | % | 3.37 | % | 4.04 | % | ||||||||||||
Latin America | 20.8 | 310 | 308 | 279 | 377 | 305 | 315 | |||||||||||||||||
Ratio | 1.49 | % | 1.57 | % | 1.58 | % | 1.81 | % | 1.56 | % | 1.78 | % | ||||||||||||
Asia | 58.8 | 216 | 201 | 262 | 423 | 440 | 386 | |||||||||||||||||
Ratio | 0.37 | % | 0.37 | % | 0.52 | % | 0.72 | % | 0.80 | % | 0.77 | % | ||||||||||||
Citi-Branded Cards | ||||||||||||||||||||||||
Total | 111.1 | 2,590 | 2,929 | 3,204 | 2,543 | 2,727 | 3,399 | |||||||||||||||||
Ratio | 2.33 | % | 2.68 | % | 2.74 | % | 2.29 | % | 2.49 | % | 2.86 | % | ||||||||||||
North America | 76.6 | 1,807 | 2,130 | 2,190 | 1,687 | 1,828 | 2,213 | |||||||||||||||||
Ratio | 2.36 | % | 2.76 | % | 2.59 | % | 2.20 | % | 2.37 | % | 2.61 | % | ||||||||||||
EMEA | 2.9 | 69 | 72 | 90 | 86 | 90 | 155 | |||||||||||||||||
Ratio | 2.38 | % | 2.77 | % | 3.00 | % | 2.97 | % | 3.46 | % | 5.17 | % | ||||||||||||
Latin America | 12.6 | 472 | 481 | 609 | 442 | 485 | 604 | |||||||||||||||||
Ratio | 3.75 | % | 4.01 | % | 5.03 | % | 3.51 | % | 4.04 | % | 4.99 | % | ||||||||||||
Asia | 19.0 | 242 | 246 | 315 | 328 | 324 | 367 | |||||||||||||||||
Ratio | 1.27 | % | 1.40 | % | 1.85 | % | 1.73 | % | 1.84 | % | 2.16 | % | ||||||||||||
Citi Holdings—Local Consumer Lending(2)(3)(5)(6) | ||||||||||||||||||||||||
Total | 237.8 | 11,824 | 14,371 | 18,123 | 10,408 | 11,201 | 14,848 | |||||||||||||||||
Ratio | 5.23 | % | 5.24 | % | 5.72 | % | 4.61 | % | 4.08 | % | 4.69 | % | ||||||||||||
International | 24.7 | 713 | 724 | 1,465 | 978 | 939 | 1,733 | |||||||||||||||||
Ratio | 2.89 | % | 2.94 | % | 4.01 | % | 3.96 | % | 3.82 | % | 4.75 | % | ||||||||||||
North America Retail partner cards | 46.0 | 1,749 | 2,004 | 2,587 | 1,972 | 2,150 | 2,911 | |||||||||||||||||
Ratio | 3.80 | % | 3.99 | % | 4.23 | % | 4.29 | % | 4.28 | % | 4.76 | % | ||||||||||||
North America (excluding cards) | 167.1 | 9,362 | 11,643 | 14,071 | 7,458 | 8,112 | 10,204 | |||||||||||||||||
Ratio | 6.03 | % | 5.84 | % | 6.42 | % | 4.81 | % | 4.07 | % | 4.66 | % | ||||||||||||
Total Citigroup (excludingSpecial Asset Pool) | $ | 462.6 | $ | 15,201 | $ | 18,104 | $ | 22,022 | $ | 14,136 | $ | 15,059 | $ | 19,200 | ||||||||||
Ratio | 3.38 | % | 3.67 | % | 4.07 | % | 3.14 | % | 3.06 | % | 3.55 | % | ||||||||||||
Consumer Loan Net Credit Losses and Ratios
| Average loans(1) | Net credit losses(2) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except average loan amounts in billions | 3Q10 | 3Q10 | 2Q10 | 3Q09 | |||||||||||
Citicorp | |||||||||||||||
Total | $ | 221.0 | $ | 2,731 | $ | 2,922 | $ | 1,442 | |||||||
Add: impact of credit card securitizations(3) | — | — | 1,876 | ||||||||||||
Managed NCL | $ | 2,731 | $ | 2,922 | $ | 3,318 | |||||||||
Ratio | 4.90 | % | 5.38 | % | 5.97 | % | |||||||||
Retail Bank | |||||||||||||||
Total | 111.5 | 333 | 304 | 395 | |||||||||||
Ratio | 1.18 | % | 1.12 | % | 1.48 | % | |||||||||
North America | 29.7 | 90 | 79 | 78 | |||||||||||
Ratio | 1.20 | % | 1.03 | % | 0.90 | % | |||||||||
EMEA | 4.5 | 34 | 46 | 84 | |||||||||||
Ratio | 3.00 | % | 4.10 | % | 5.85 | % | |||||||||
Latin America | 20.3 | 128 | 96 | 114 | |||||||||||
Ratio | 2.50 | % | 1.98 | % | 2.68 | % | |||||||||
Asia | 57.0 | 81 | 83 | 119 | |||||||||||
Ratio | 0.56 | % | 0.61 | % | 0.96 | % | |||||||||
Citi-Branded Cards | |||||||||||||||
Total | 109.5 | 2,398 | 2,618 | 1,047 | |||||||||||
Add: impact of credit card securitizations(3) | — | — | 1,876 | ||||||||||||
Managed NCL | 2,398 | 2,618 | 2,923 | ||||||||||||
Ratio | 8.69 | % | 9.68 | % | 10.14 | % | |||||||||
North America | 76.0 | 1,881 | 2,047 | 201 | |||||||||||
Add: impact of credit card securitizations(3) | — | — | 1,876 | ||||||||||||
Managed NCL | 1,881 | 2,047 | 2,077 | ||||||||||||
Ratio | 9.82 | % | 10.77 | % | 9.98 | % | |||||||||
EMEA | 2.8 | 31 | 39 | 55 | |||||||||||
Ratio | 4.39 | % | 5.79 | % | 7.27 | % | |||||||||
Latin America | 12.3 | 322 | 361 | 543 | |||||||||||
Ratio | 10.39 | % | 12.07 | % | 17.80 | % | |||||||||
Asia | 18.4 | 164 | 171 | 248 | |||||||||||
Ratio | 3.54 | % | 3.90 | % | 5.89 | % | |||||||||
Citi Holdings—Local Consumer Lending | |||||||||||||||
Total | 248.4 | 3,949 | 4,535 | 4,912 | |||||||||||
Add: impact of credit card securitizations(3) | — | — | 1,137 | ||||||||||||
Managed NCL | 3,949 | 4,535 | 6,049 | ||||||||||||
Ratio | 6.31 | % | 6.03 | % | 7.21 | % | |||||||||
International | 25.0 | 444 | 495 | 957 | |||||||||||
Ratio | 7.05 | % | 7.61 | % | 9.79 | % | |||||||||
North America Retail partner cards | 48.8 | 1,505 | 1,775 | 867 | |||||||||||
Add: impact of credit card securitizations(3) | — | — | 1,137 | ||||||||||||
Managed NCL | 1,505 | 1,775 | 2,004 | ||||||||||||
Ratio | 12.24 | % | 13.41 | % | 12.76 | % | |||||||||
North America (excluding cards) | 174.6 | 2,000 | 2,265 | 3,088 | |||||||||||
Ratio | 4.54 | % | 4.08 | % | 5.29 | % | |||||||||
Total Citigroup (excludingSpecial Asset Pool) | $ | 469.4 | $ | 6,680 | $ | 7,457 | $ | 6,354 | |||||||
Add: impact of credit card securitizations(3) | — | — | 3,013 | ||||||||||||
Managed NCL | 6,680 | 7,457 | 9,367 | ||||||||||||
Ratio | 5.65 | % | 5.76 | % | 6.72 | % | |||||||||
CorporateConsumer Loan DetailsModification Programs
Citigroup has instituted a variety of modification programs to assist borrowers with financial difficulties. These programs, as described below, include modifying the original loan terms, reducing interest rates, extending the remaining loan duration and/or waiving a portion of the remaining principal balance. At September 30, 2010, Citi's significant modification programs consisted of the U.S. Treasury's Home Affordable Modification Program (HAMP), as well as short-term and long-term modification programs in the U.S., each as summarized below.
The policy for re-aging modified U.S. consumer loans to current status varies by product. Generally, one of the conditions to qualify for these modifications is that a minimum number of payments (typically ranging from one to three) be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For corporate clientssuch open-ended consumer loans subject to FFIEC guidelines, one of the conditions for the loan to be re-aged to current status is that at least three consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and investment banking activities acrosstwice in five years). Furthermore, Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans are modified under those respective agencies' guidelines, and payments are not always required in order to re-age a modified loan to current.
In the determination of the allowance for loan losses for troubled debt restructurings (TDRs), Citigroup considers a combination of historical re-default rates, the creditcurrent economic environment, and the nature of the modification program in forecasting expected cash flows.
HAMP and Other Long-Term Programs.
Long-term modification programs or TDRs occur when the terms of a loan have been modified due to the borrowers' financial difficulties and a long-term concession has been granted to the borrower. Substantially all long-term programs in place provide interest rate reductions. See "Loan Accounting Policies" in Citi's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 for a discussion of the allowance for loan losses for such modified loans.
The following table presents Citigroup's consumer loan TDRs as of September 30, 2010 and December 31, 2009. As discussed below under "HAMP," HAMP loans whose terms are contractually modified after successful completion of the trial period are included in the balances below:
| Accrual | Non-accrual | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Sept. 30, 2010 | Dec. 31, 2009 | Sept. 30, 2010 | Dec. 31, 2009 | |||||||||
Mortgage and real estate | $ | 14,119 | $ | 8,654 | $ | 1,949 | $ | 1,413 | |||||
Cards(1) | 5,265 | 2,303 | 33 | 150 | |||||||||
Installment and other | 3,408 | 3,128 | 350 | 250 | |||||||||
These TDRs are predominately concentrated in the U.S. Citi's significant long-term U.S. modification programs include:
Mortgages
HAMP. The HAMP is designed to reduce monthly first mortgage payments to a 31% housing debt ratio (monthly mortgage payment, including property taxes, insurance and homeowner dues, divided by monthly gross income) by lowering the interest rate, extending the term of the loan and deferring or forgiving principal of certain eligible borrowers who have defaulted on their mortgages or who are at risk of imminent default due to economic hardship. The interest rate reduction for first mortgages under HAMP is in effect for five years and the rate then increases up to 1% per year until the interest rate cap (the lower of the original rate or the Freddie Mac Weekly Primary Mortgage Market Survey rate for a 30-year fixed rate conforming loan as of the date of the modification) is reached.
In order to be entitled to loan modifications, borrowers must complete a three- to five-month trial period, make the agreed payments and provide the required documentation. Beginning March 1, 2010, documentation is required to be provided prior to beginning the trial period, whereas prior to that date, it was required before the end of the trial period. This change generally means that Citi is able to verify income up front for potential HAMP participants before they begin making lower monthly payments. Early signs indicate that this change will increase the percentage of borrowers who will successfully complete the trial period.
During the trial period, Citi requires that the original terms of the loans remain in effect pending completion of the modification. From inception through September 30, 2010, approximately $9.1 billion of first mortgages were enrolled in the HAMP trial period, while $3.1 billion have successfully completed the trial period. Upon completion of the trial period, the terms of the loan are contractually modified, and it is accounted for as a TDR.
Citi has also agreed to participate in the U.S. Treasury's HAMP second mortgage program (2MP) beginning October 1, 2010. 2MP requires Citi to either: (1) modify the borrower's second mortgage according to a defined protocol; or (2) accept a lump sum payment from the U.S. Treasury in exchange for full extinguishment of the second mortgage. For a borrower to qualify, the borrower must have successfully modified his/her first mortgage under the HAMP and met other criteria. Under the 2MP program, if the first mortgage is modified under HAMP and receives a principal forgiveness, the same percentage of principal forgiveness is required on the second mortgage.
Loans included in the HAMP trial period are not classified as modified under short-term or long-term programs, and the allowance for loan losses for these loans is calculated under ASC 450-20.
As of September 30, 2010, excluding the number of loans that are still in the trial period, 33% of the loans were successfully modified under HAMP, 13% were modified under the Citi Supplemental program (see below), 17% received HAMP Re-age (see below), and 37% have not received any modification from Citi to date.
Citi Supplemental. The Citi Supplemental (CSM) program was designed by Citi to assist borrowers ineligible for HAMP or who become ineligible through the HAMP trial period process. If the borrower already has less than a 31% housing debt ratio, the modification offered is an interest rate reduction (up to 2.5% with a floor rate of 4%) which is in effect for two years, and the rate then increases up to 1% per year until the interest rate is at the pre-modified contractual rate. If the borrower's housing debt ratio is greater than 31%, specific treatment steps for HAMP, including an interest rate reduction, will be followed to achieve a 31% housing debt ratio. The modified interest rate is in effect for two years, and then increases up to 1% per year until the interest rate is at the pre-modified contractual rate. If income documentation was not supplied previously for HAMP, it is required for CSM. Three or more trial payments are required prior to modification. These payments can be made during the HAMP and/or CSM trial period.
HAMP Re-Age. As previously disclosed, loans in the HAMP trial period are aged according to their original contractual terms, rather than the modified HAMP terms. This results in the receivable being reported as delinquent even if the reduced payments agreed to under the program are made by the borrower. Upon conclusion of the trial period, loans that do not qualify for a long-term modification are returned to the delinquency status in which they began their trial period. However, that delinquency status would be further deteriorated for each trial payment not made (HAMP Re-age). HAMP Re-age establishes a non-interest-bearing deferral based on the difference between the original contractual amounts due and the HAMP trial payments made. Citigroup considers this re-age and deferral process to constitute a concession to a borrower in financial difficulty and therefore records the loans as TDRs upon re-age.
2nd FDIC. The 2nd FDIC modification program guidelines were created by the FDIC for delinquent or current borrowers where default is groundedreasonably foreseeable. The program is designed for second mortgages and uses various concessions, including interest rate reductions, non-interest-bearing principal deferral, principal forgiveness, extending maturity dates, and forgiving accrued interest and late fees. These potential concessions are applied in a series of fundamental policies, including:steps (similar to HAMP) that provides an affordable payment to the borrower (generally a combined housing payment ratio of 42%). The first step generally reduces the borrower's interest rate to 2% for fixed-rate home equity loans and 0.5% for home equity lines of credit. The interest rate reduction is in effect for the remaining term of the loan.
FHA/VA. Loans guaranteed by the FHA or VA are modified through the normal modification process required by those respective agencies. Borrowers must be delinquent and concessions include interest rate reductions, principal forgiveness, extending maturity dates, and forgiving accrued interest and late fees. The interest rate reduction is in effect for the remaining loan term. Losses on FHA loans are borne by the sponsoring agency provided that the insurance has not been breached as a result of an origination defect. The VA establishes a loan-level loss cap, beyond which Citi is liable for loss. Historically, Citi's losses on FHA and VA loans have been negligible.
CFNA Adjustment of Terms (AOT). This program is targeted to Consumer Finance customers with a permanent hardship. Payment reduction is provided through the re-amortization of the remaining loan balance, typically at a lower interest rate. Modified loan tenors may not exceed a period of 480 months. Generally, the rescheduled payment cannot be less than 50% of the original payment amount unless the AOT is a result of participation in the CitiFinancial Home Affordability Modification Program (CHAMP) or military service member's Credit Relief Act Program (SCRA), or as a result of settlement, court order, judgment, or bankruptcy. Customers must make a qualifying payment at the reduced payment amount in order to qualify for the modification. In addition, customers must provide income verification (pay stubs and/or tax returns) and monthly obligations are validated through an updated credit report.
Other. Prior to the implementation of the HAMP, CSM and 2nd FDIC programs, Citigroup's U.S. mortgage business offered certain borrowers various tailored modifications, which included reducing interest rates, extending the remaining loan duration and/or waiving a portion of the remaining principal balance. Citigroup currently believes that substantially all of its future long-term U.S. mortgage modifications, at least in the near term, will be included in the programs mentioned above.
Impact of Mortgage Modification Programs
Citi considers various metrics in analyzing the success of U.S. mortgage loan modifications. Payment behavior of customers during the modification (both short-term and long-term) is monitored. For short-term modifications, performance is also measured for an additional period of time after the expiration of the concession. Balance reductions and annualized loss rates are important metrics that are monitored. Based on actual experience, program terms, including eligibility criteria, interest charged and loan tenor, may be refined.
The main objective of the mortgage modification programs is to reduce the payment burden for the borrower and improve the net present value of Citi's expected cash flows. The total balance reduction for modifications in the Other category (noted above and in the table below) after 24 months is approximately 34% (as a percentage of the balance at the time of modification), consisting of approximately 19% of paydowns and 15% of net credit losses. At 18 months after modifying an account, in Citi's experience to date, credit loss rates are estimated to be reduced by approximately one-third compared to accounts that were not modified. The HAMP and CSM programs have less vintage history and limited loss data. However, performance of the HAMP and CSM programs are currently tracking to Citi's expectations and are currently expected to perform better than the pre-HAMP modifications discussed above.
The total balance reduction for long-term CFNA Real Estate AOTs after 24 months is approximately 14% (as a percentage of the balance at the time of modification), consisting of approximately 5% of paydowns and 9% of net credit losses. The U.S. Consumer Mortgage Temporary AOT program (described under Short-Term Programs) has less vintage history and limited loss data.
North America Cards
Paydown. The Paydown program is designed to liquidate a customer's balance within 60 months. It is available to customers who indicate a long-term hardship (e.g., long-term disability, medical issues or a non-temporary income reduction, such as an occupation change). Payment requirements are decreased by reducing interest rates charged to either 9.9% or 0%, depending upon the customer situation, and designed to amortize at least 1.67% of the balance each month. Under this program, fees are discontinued, and charging privileges are permanently rescinded.
CCG. The CCG program handles proposals received via external consumer credit counselors on the customer's behalf. In order to qualify, customers work with a credit counseling agency to develop a plan to handle their overall budget, including money owed to Citi. A copy of the counseling agency's proposal letter is required. The annual percentage rate (APR) is reduced to 9.9%. The account fully amortizes in 60 months. Under this program, fees are discontinued, and charging privileges are permanently rescinded.
Interest Reversal Paydown. The Interest Reversal Paydown program is also designed to liquidate a customer's balance within 60 months. It is available to customers who indicate a long-term hardship. Accumulated interest and fees owed to Citi are reversed upon enrollment, and future interest and fees are discontinued. Payment requirements are reduced and are designed to amortize at least 1.67% of the balance each month. Under this program, like the programs discussed above, fees are discontinued, and charging privileges are permanently rescinded.
Impact of Cards Modification Programs
Citi considers various metrics in analyzing the success of North America credit card loan modifications. Payment behavior of customers during the modification (both short-term and long-term modifications) is monitored. For short-term modifications, performance is also measured for an additional period of time after the expiration of the concession. Balance reductions and annualized loss rates are important metrics that are monitored. Based on actual experience, program terms, including eligibility criteria, interest charged and loan tenor, may be refined.
The main objective of the credit card modification programs is to reduce the payment burden for the borrower and improve the net present value of Citi's expected cash flows. Total balance reduction for long-term modifications after 24 months is approximately 60-70% (as a percentage of the balance at the time of modification), consisting of approximately 30-40% of paydowns and 30% of net credit losses. It is Citi's experience that these credit losses are approximately one-third lower, depending upon the individual program and vintage, than those of similar accounts that were not modified.
Twenty-four months after starting a short-term modification, balances are reduced by approximately 60-70% (as a percentage of the balance at the time of modification), consisting of approximately 20-30% of paydowns and 40% of net credit losses. It is Citi's experience that these credit losses are approximately one-sixth lower, depending upon the individual program and vintage, than those of similar accounts that were not modified.
Based on Citi's experience to date and after consideration of the continuing challenging economic environment, Citigroup will be implementing certain changes to its credit card modification programs beginning in the fourth quarter of 2010, including revisions to the eligibility criteria for modification programs. As a result of these changes, Citi expects the overall volume of new entrants to these modification programs to decrease, particularly for short-term programs. While Citi also expects these changes to negatively impact net credit losses beginning in 2011, Citi believes overall that net credit losses will continue to improve in 2011 for each of the North America Cards businesses. Citi has considered these changes to the modification programs and their effect on net credit losses in determining the loan loss reserve as of September 30, 2010.
U.S. Installment Loans
CFNA AOT. This program is targeted to Consumer Finance customers with a permanent hardship. Payment reduction is provided through the re-amortization of the remaining loan balance, typically at a lower interest rate. Loan payments may be rescheduled over a period not to exceed 120 months. Generally, the rescheduled payment cannot be less than 50% of the original payment amount, unless the AOT is a result of a military service member's SCRA, or as a result of settlement, court order, judgment or bankruptcy. The interest rate generally cannot be reduced below 9% (except in the instances listed above). Customers must make a qualifying payment at the reduced payment amount in order to qualify for the modification. In addition, customers must provide proof of income and monthly obligations are validated through an updated credit report.
Impact of Installment Loan Modification Programs
Citi considers various metrics in analyzing the success of U.S. installment loan modifications. Payment behavior of customers during the modification (both short-term and long-term modifications) is monitored. For short-term modifications, performance is also measured for an additional period of time after the expiration of the concession. Balance reductions and annualized loss rates are important metrics that are monitored. Based on actual experience, program terms, including eligibility criteria, interest charged and loan tenor, may be refined.
The main objective of the installment loan modification programs is to reduce the payment burden for the borrower and improve the net present value of Citi's expected cash flows. The total balance reduction for CFNA AOT modifications after 24 months is approximately 50% (as a percentage of the balance at the time of modification), consisting of approximately 10-15% of paydowns and 35-40% of net credit losses. The Temporary AOT program (described under Short-term Programs) has less vintage history and limited loss data.
Long Term Modification Programs—Summary
The following table sets forth, as of September 30, 2010, information relating to Citi's significant long-term U.S. mortgage, card and installment loan modification programs:
In millions of dollars | Program balance | Program start date(1) | Average interest rate reduction | Average % payment relief | Average tenor of modified loans | Deferred principal | Principal forgiveness | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
U.S. Consumer Mortgage Lending | ||||||||||||||||||||||
HAMP | $ | 2,868 | 3Q09 | 4 | % | 41 | % | 32 years | $ | 373 | $ | 2 | ||||||||||
Citi Supplemental | 1,197 | 4Q09 | 3 | % | 25 | % | 28 years | 61 | 1 | |||||||||||||
HAMP Re-age(2) | 354 | 1Q10 | N/A | N/A | 24 years | 7 | — | |||||||||||||||
2nd FDIC | 368 | 2Q09 | 6 | % | 47 | % | 21 years | 25 | 6 | |||||||||||||
FHA/VA(3) | 3,140 | 2 | % | 20 | % | 28 years | — | — | ||||||||||||||
Adjustment of Terms (AOTs) | 3,829 | 3 | % | 23 | % | 29 years | ||||||||||||||||
Other | 3,541 | 4 | % | 41 | % | 27 years | 43 | 47 | ||||||||||||||
North America Cards | ||||||||||||||||||||||
Paydown | 2,308 | 15 | % | — | 5 years | |||||||||||||||||
CCG | 1,790 | 9 | % | — | 5 years | |||||||||||||||||
Interest Reversal Paydown | 255 | 20 | % | — | 5 years | |||||||||||||||||
U.S. Installment | ||||||||||||||||||||||
CFNA AOTs | 1,000 | 8 | % | 35 | % | 9 years | ||||||||||||||||
Short-term Programs. Citigroup has also instituted short-term programs (primarily in the U.S.) to assist borrowers experiencing temporary hardships. These programs include short-term (12 months or less) interest rate reductions and deferrals of past due payments. The loan volume under these short-term programs has increased significantly over the past 18 months, and loan loss reserves for these loans have been enhanced, giving consideration to the higher risk associated with those borrowers and reflecting the estimated future credit losses for those loans. See "Loan Accounting Policies" in Citi's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 for a discussion of the allowance for loan losses for such modified loans.
The following table presents the amounts of gross loans modified under short-term interest rate reduction programs in the U.S. as of September 30, 2010:
| September 30, 2010 | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | Accrual | Non-accrual | |||||
Cards | $ | 3,497 | — | ||||
Mortgage and real estate | 1,775 | $ | 67 | ||||
Installment and other | 1,393 | 97 | |||||
Significant short-term U.S. programs include:
North America Cards
Universal Payment Program (UPP). The North America cards business provides short-term interest rate reductions to assist borrowers experiencing temporary hardships through the UPP. Under this program, a participant's APR is reduced by at least 500 basis points for a period of up to 12 months. The minimum payment is established based upon the customer's specific circumstances and is designed to amortize at least 1% of the principal balance each month. The participant's APR returns to its original rate at the end of the program or earlier if they fail to make the required payments.
As a result of the changes to be made to the credit card modification programs, as mentioned above, Citi expects the volume of new entrants to be lower for UPP. The impact will be closely monitored.
Mortgages
Temporary AOT. This program is targeted to Consumer Finance customers with a temporary hardship. Examples of temporary hardships would include a short-term medical disability or a temporary reduction of pay. Under this program, which can include both an interest rate reduction and a term extension, the interest rate is reduced for either a five- or an eleven-month period. At the end of the temporary modification period, the interest rate reverts to the pre-modification rate. If the customer is still undergoing hardship at the conclusion of the temporary payment reduction, a second extension of the temporary terms can be considered in either of the time period increments above. In cases where the account is severely past due (over 60 days past due) at the expiration of the temporary modification period, the terms of the modification are made permanent and the payment is kept at the reduced amount for the remaining life of the loan.
U.S Installment Loans
Temporary AOT. This program is targeted to Consumer Finance customers with a temporary hardship. Under this program, which can include both an interest rate reduction and a term extension, the interest rate is reduced for either a five- or an eleven-month period. At the end of the temporary modification period, the interest rate reverts to the pre-modification rate. If the customer is still undergoing hardship at the conclusion of the temporary payment reduction, a second extension of the temporary terms can be considered in either of the time period increments above. In cases where the account is severely past due (over 90 days past due) at the expiration of the temporary modification period, the terms of the modification are made permanent and the payment is kept at the reduced amount for the remaining life of the loan.
Short Term Modification Programs—Summary
The following table sets forth, as of September 30, 2010, information related to Citi's significant short-term U.S. cards, mortgage, and installment loan modification programs:
In millions of dollars | Program balance | Program start date(1) | Average interest rate reduction | Average time period for reduction | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|
UPP | $ | 3,497 | 19 | % | 12 months | ||||||
U.S. Consumer Mortgage Temporary AOT | 1,824 | 1Q09 | 3 | % | 8 months | ||||||
U.S. Installment Temporary AOT | 1,488 | 1Q09 | 5 | % | 7 months | ||||||
Payment deferrals that do not continue to accrue interest (extensions) primarily occur in the U.S. residential mortgage business. Under an extension, payments that are contractually due are deferred to a later date, thereby extending the maturity date by the number of months of payments being deferred. Extensions assist delinquent borrowers who have experienced short-term financial difficulties that have been resolved by the time the extension is granted. An extension can only be offered to borrowers who are past due on their monthly payments but have since demonstrated the ability and willingness to pay as agreed. Other payment deferrals continue to accrue interest and are not deemed to offer concessions to the customer. Other types of concessions are not material.
Consumer Mortgage Representations and Warranties
The majority of Citi's exposure to representation and warranty claims relates to its U.S. consumer mortgage business.
When selling a loan, Citi (through its CitiMortgage business) makes various representations and warranties relating to, among other things, the following:
The specific representations and warranties made by Citi depend on the nature of the transaction and the requirements of the buyer. Market conditions and credit-rating agency requirements may also affect representations and warranties and the other provisions to which Citi may agree in loan sales.
Citi's representations and warranties are generally not subject to stated limits in amount or time of coverage. However, contractual liability arises only when the representations and warranties are breached and generally only when a loss results from the breach. In the event of a breach of these representations and warranties, Citi may be required to either repurchase the mortgage loans (generally at unpaid principal balance plus accrued interest) with the identified defects or indemnify ("make-whole") the investors for their losses.
For the nine months ended September 30, 2010 and 2009, over 75% of Citi's repurchases and make-whole payments were attributable to misrepresentation of facts by either the borrower or a third party (e.g., income, employment, debts, FICO, etc.), appraisal issues (e.g., an error or misrepresentation of value), and program requirements (e.g., a loan that does not meet investor guidelines such as contractual interest rate). For the three months ended September 30, 2010 and 2009, the comparable percentages were 79% and 65%, respectively. To date, there has not been a meaningful difference in incurred or estimated loss for each type of defect.
Corporate In the case of a repurchase, Citi will bear any subsequent credit loss on the mortgage loan and the loan is typically considered a credit-impaired loan and accounted for under SOP 03-3, "Accounting for Certain Loans and Debt Securities, Acquired in a Transfer" (now incorporated into ASC 310-30,Receivables—Loans and Debt Securities Acquired with Deteriorated Credit PortfolioQuality). These repurchases have not had a material impact on Citi's non-performing loan statistics because credit-impaired purchased SOP 03-3 loans are not included in non-accrual loans, since they generally continue to accrue interest until write off.
As evidenced by the tables below, to date, Citi's repurchases have primarily been from the government sponsored entities (GSEs).
The unpaid principal balance of loans repurchased due to representation and warranty claims for the three months ended September 30, 2010 and September 30, 2009 was as follows:
| Three months ended September 30, | ||||||
---|---|---|---|---|---|---|---|
| 2010 | 2009 | |||||
In millions of dollars | Unpaid Principal Balance | Unpaid Principal Balance | |||||
GSEs | $ | 53 | $ | 82 | |||
Private investors | 11 | 4 | |||||
Total | $ | 64 | $ | 86 | |||
The unpaid principal balance of loans repurchased due to representation and warranty claims for the nine months ended September 30, 2010 and September 30, 2009 was as follows:
| Nine months ended September 30, | ||||||
---|---|---|---|---|---|---|---|
| 2010 | 2009 | |||||
In millions of dollars | Unpaid Principal Balance | Unpaid Principal Balance | |||||
GSEs | $ | 203 | $ | 238 | |||
Private investors | 23 | 14 | |||||
Total | $ | 226 | $ | 252 | |||
In addition, Citi recorded make-whole payments of $73 million and $6 million for the three months ended September 30, 2010 and September 30, 2009, respectively, and $139 million and $30 million for the nine months ended September 30, 2010 and September 30, 2009, respectively.
Citi has recorded a reserve for its exposure to losses from the obligation to repurchase previously sold loans (repurchase reserve) that is included inOther liabilities in the Consolidated Balance Sheet. The repurchase reserve considers reimbursements estimated to be received by Citi from third-party correspondent lenders and indemnification agreements relating to previous acquisitions of mortgage servicing rights. In the case of a repurchase of a credit-impaired SOP 03-3 loan, the difference between the loan's fair value and unpaid principal balance at the time of the repurchase is recorded as a utilization of the repurchase reserve. Make-whole payments to the investor are also treated as utilizations and charged directly against the reserve. The repurchase reserve is estimated when Citi sells loans (recorded as an adjustment to the gain on sale, which is included inOther revenue in the Consolidated Statement of Income) and is updated quarterly. Any change in estimate is recorded inOther revenue.
The repurchase reserve is calculated separately by sales vintage (i.e., the year the loans were sold) based on various assumptions. While substantially all of Citi's current loan sales are with GSEs with which Citi has considerable historical experience, these assumptions contain a level of uncertainty and risk that, if different from actual results, could have a material impact on the reserve amounts. The most significant assumptions used to calculate the reserve levels are as follows:
observed an increase in the level of staffing and focus by the GSEs to "put" more loans back to servicers. These factors are considered in the forecast of expected future repurchase claims and changes in these trends could have a positive or negative impact on Citi's repurchase reserve. During 2009 and the nine months ended September 30, 2010, loan documentation requests were trending higher than in previous periods, which increased the repurchase reserve.
As stated above, the request for loan documentation packages is an early indicator of a potential claim. During 2009, loan documentation package requests and the level of outstanding claims increased. In addition, Citi's loss severity estimates increased during 2009 due to the impact of macroeconomic factors and its experience with actual losses at such time. As set forth in the tables below, these factors contributed to change in estimates for the repurchase reserve amounting to $33 million and $280 million for the three and nine months ended September 30, 2009, respectively.
During the third quarter of 2010, loan documentation package requests, the loss per loan and the level of outstanding claims further increased. In addition, there was an overall deterioration in the other key assumptions due to the impact of macroeconomic factors and Citi's continued experience with actual losses. These factors contributed to the $322 million change in estimate for the repurchase reserve in the current quarter.
As discussed above, the repurchase reserve is calculated by sales vintage. The majority of the repurchases in 2010 were from the 2006 through 2008 sales vintages and, in 2009, were from the 2006 and 2007 vintages, which also represent the vintages with the largest loss-given-repurchase. An insignificant percentage of 2010 and 2009 repurchases were from vintages prior to 2006, and Citi currently anticipates that this percentage will decrease, as those vintages are later in the credit cycle. Although early in the credit cycle, Citi has experienced improved repurchase and loss-given-repurchase statistics from the 2009 and 2010 vintages.
As of September 30, 2010, Citi services loans previously sold as follows:
| September 30, 2010 | |||||||
---|---|---|---|---|---|---|---|---|
In millions | Number of Loans | Unpaid Principal Balance | ||||||
Vintage Sold: | ||||||||
2005 and Prior | 1.1 | $ | 120,109 | |||||
2006 | 0.3 | 45,631 | ||||||
2007 | 0.3 | 57,017 | ||||||
2008 | 0.4 | 65,544 | ||||||
2009 | 0.3 | 65,077 | ||||||
2010 | 0.2 | 38,748 | ||||||
Indemnifications(1) | 0.9 | 112,161 | ||||||
Total | 3.5 | $ | 504,287 | |||||
Since 2000, Citi has sold $93 billion of loans to private investors, of which $49 billion were sold through securitizations. As of September 30, 2010, $41 billion of these loans (including $17 billion sold through securitizations) continue to be serviced by Citi and is included in the $504 billion of serviced loans above.
The activity in the repurchase reserve for the three months ended September 30, 2010 and September 30, 2009 was as follows:
| Three months ended September 30, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Balance, beginning of period | $ | 727 | $ | 279 | |||
Additions for new sales | 3 | 10 | |||||
Change in estimate | 322 | 33 | |||||
Utilizations | (100 | ) | (27 | ) | |||
Balance, end of period | $ | 952 | $ | 295 | |||
The activity in the repurchase reserve for the nine months ended September 30, 2010 and September 30, 2009 was as follows:
| Nine months ended September 30, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Balance, beginning of period | $ | 482 | $ | 75 | |||
Additions for new sales | 12 | 29 | |||||
Change in estimate | 669 | 280 | |||||
Utilizations | (211 | ) | (89 | ) | |||
Balance, end of period | $ | 952 | $ | 295 | |||
Citi does not believe a meaningful range of reasonably possible loss related to its repurchase reserve can be determined.
Projected future repurchases are calculated, in part, based on the level of unresolved claims at quarter-end as well as trends in claims being made by investors. For GSEs, the response to the repurchase claim is required within 90 days of the claim receipt. If Citi did not respond within 90 days, the claim would then be discussed between Citi and the GSE. For private investors, the time period for responding is governed by the individual sale agreement. If the specified timeframe is exceeded, the investor may choose to initiate legal action.
As would be expected, as the trend in claims and inventory increases, Citi's reserve for repurchases typically increases. Included in Citi's current reserve estimate is an assumption that repurchase claims will remain at elevated levels for the foreseeable future, although the actual number of claims may differ and is subject to uncertainty. Furthermore, approximately half of the repurchase claims in Citi's recent experience have been successfully appealed and have resulted in no loss to Citi.
The representation and warranty claims by claimant for the three months ended September 30, 2010 and September 30, 2009 were as follows:
| Three months ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | |||||||||||
Dollars in millions | Number of Claims | Original Principal Balance | Number of Claims | Original Principal Balance | |||||||||
GSEs | 1,887 | $ | 408 | 1,514 | $ | 325 | |||||||
Private Investors | 103 | 24 | 109 | 18 | |||||||||
Mortgage insurers(1) | 64 | 14 | 156 | 30 | |||||||||
Total | 2,054 | $ | 446 | 1,779 | $ | 373 | |||||||
The representation and warranty claims for the nine months ended September 30, 2010 and September 30, 2009 were as follows:
| Nine months ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | |||||||||||
Dollars in millions | Number of Claims | Original Principal Balance | Number of Claims | Original Principal Balance | |||||||||
GSEs | 6,720 | $ | 1,444 | 4,478 | $ | 933 | |||||||
Private Investors | 259 | 58 | 358 | 58 | |||||||||
Mortgage insurers | 190 | 41 | 242 | 49 | |||||||||
Total | 7,169 | $ | 1,543 | 5,078 | $ | 1,040 | |||||||
The number of unresolved claims by type of claimant as of September 30, 2010 and December 31, 2009, were as follows:
| September 30, 2010 | December 31, 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dollars in millions | Number of Claims | Original Principal Balance | Number of Claims | Original Principal Balance | |||||||||
GSEs | 4,349 | $ | 954 | 2,600 | $ | 572 | |||||||
Private Investors | 196 | 32 | 311 | 40 | |||||||||
Mortgage insurers | 128 | 27 | 204 | 42 | |||||||||
Total | 4,673 | $ | 1,013 | 3,115 | $ | 654 | |||||||
Securities and Banking-Sponsored Private Label Residential Mortgage Securitizations—Representations and Warranties
Over the years,S&B has been a sponsor of private-label mortgage-backed securitizations. Mortgage securitizations sponsored by Citi'sS&B business represent a much smaller portion of Citi's mortgage business than Citi's consumer business discussed above.
During the period 2005 through 2008,S&B sponsored approximately $65 billion in private-label mortgage-backed securitization transactions, of which approximately $29 billion remained outstanding at September 30, 2010. These outstanding transactions are backed by loan collateral composed of approximately $7.8 billion prime, $6.2 billion Alt-A and $14.8 billion subprime residential mortgage loans. Citi estimates that actual cumulative losses to date incurred by the issuing trusts on these transactions have been approximately $6.3 billion.
The mortgages included in these securitizations were purchased from parties outside ofS&B, and fewer than 3% of the mortgages currently outstanding were originated by Citi. In addition, fewer than 10% of the currently outstanding mortgage loans underlying these securitization transactions are serviced by Citi. The loans serviced by Citi are included in the $504 billion of residential mortgage loans referenced under "Consumer Mortgage Representations and Warranties" above. (Citi acts as master servicer for certain of the transactions.)
In connection with such transactions, representations and warranties (representations) relating to the mortgage loans included in each trust issuing the securities were made either by (1) Citi, or (2) in a relatively small number of cases, third-party sellers (Selling Entities, which were also often the originator of the loans). These representations were generally made or assigned to the issuing trust.
The representations in these securitization transactions generally related to, among other things, the following:
The specific representations relating to the mortgage loans in each securitization may vary, however, depending on various factors such as the Selling Entity, rating agency requirements and whether the mortgage loans were considered prime, Alt-A or subprime in credit quality.
In the event of a breach of its representations, Citi may be required either to repurchase the mortgage loans with the identified defects (generally at unpaid principal balance plus accrued interest) or indemnify the investors for their losses.
For securitizations in which Citi made representations, these representations typically were similar to those provided to Citi by the Selling Entities, with the exception of certain limited representations required by rating agencies. These latter representations overlapped in some cases with the representations described above.
In cases where Citi made representations and also received those representations from the Selling Entity for that loan, if Citi is the subject of a claim based on breach of those representations in respect of that loan, it may have a contractual right to pursue a similar (back-to-back) claim against the Selling Entity. If only the Selling Entity made representations, then only the Selling Entity should be responsible for a claim based on breach of these representations in respect of that loan. (This discussion only relates to contractual claims based on breaches of representations.)
However, in some cases where Citi made representations and received similar representations from Selling Entities, including a majority of such cases involving subprime and Alt-A collateral, Citi believes that those Selling Entities appear to be in bankruptcy, liquidation or financial distress. In those cases, in the event that claims for breaches of representations were to be made against Citi, the Selling Entities' financial condition may effectively preclude Citi from obtaining back-to-back recoveries against them.
To date,S&B has received only a very small number of claims based on breaches of representations relating to the mortgage loans in these securitization transactions. Citi continues to monitor this claim activity relating to itsS&B mortgage securitizations closely.
In addition to sponsoring residential mortgage securitization transactions as described above,S&B engages in other residential mortgage-related activities, including underwriting of residential mortgage-backed securities.S&B participated in the underwriting of theseS&B-sponsored securitizations, as well as underwritings of other residential mortgage-backed securities sponsored and issued by third parties. For additional information on these activities, see "Legal Proceedings" below.
The following table presents credit data for the Company'sCitigroup's corporate loans and unfunded lending commitments at September 30, 2009:2010. The ratings scale is based on Citi's internal risk ratings, which generally correspond to the ratings as defined by S&P and Moody's.
| | At September 30, 2009 | | At September 30, 2010 | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate Loans(1)(in millions of dollars) | Recorded Investment in Loans(2) | % of Total(3) | Unfunded Lending Commitments | % of Total(3) | ||||||||||||||||||||||||||
Corporate loans(1) in millions of dollars | Corporate loans(1) in millions of dollars | Recorded investment in loans(2) | % of total(3) | Unfunded lending commitments | % of total(3) | |||||||||||||||||||||||||
Investment grade(4) | Investment grade(4) | $ | 96,689 | 57 | % | $ | 275,556 | 88 | % | Investment grade(4) | $ | 123,384 | 70 | % | $ | 237,959 | 85 | % | ||||||||||||
Non-investment grade(4) | Non-investment grade(4) | Non-investment grade(4) | ||||||||||||||||||||||||||||
Noncriticized | 21,010 | 12 | 14,268 | 5 | Noncriticized | 22,956 | 13 | 22,168 | 8 | |||||||||||||||||||||
Criticized performing(5) | 36,803 | 22 | 20,384 | 6 | Criticized performing(5) | 19,513 | 11 | 15,993 | 6 | |||||||||||||||||||||
Commercial real estate (CRE) | 6,170 | 4 | 1,786 | 0 | Commercial real estate (CRE) | 5,295 | 3 | 1,684 | 1 | |||||||||||||||||||||
Commercial & Industrial | 30,633 | 18 | 18,598 | 6 | Commercial and industrial and other | 14,218 | 8 | 14,309 | 5 | |||||||||||||||||||||
Criticized non-performing(5) | 14,776 | 9 | 3,246 | 1 | Non-accrual (criticized)(5) | 9,947 | 6 | 2,278 | 1 | |||||||||||||||||||||
Commercial real estate (CRE) | 3,783 | 3 | 913 | 0 | CRE | 2,138 | 1 | 903 | — | |||||||||||||||||||||
Commercial & Industrial | 10,993 | 6 | 2,333 | 1 | Commercial and industrial and other | 7,809 | 5 | 1,375 | 1 | |||||||||||||||||||||
Total non-investment grade | Total non-investment grade | $ | 72,589 | 43 | % | $ | 37,898 | 12 | % | Total non-investment grade | $ | 52,416 | 30 | % | $ | 40,439 | 15 | % | ||||||||||||
Private Banking loans managed on a delinquency basis | Private Banking loans managed on a delinquency basis | 14,565 | 2,275 | Private Banking loans managed on a delinquency basis | 13,784 | 2,166 | ||||||||||||||||||||||||
Loans at fair value | Loans at fair value | 1,475 | — | Loans at fair value | 2,755 | — | ||||||||||||||||||||||||
Total Corporate Loans | $ | 185,318 | $ | 315,754 | ||||||||||||||||||||||||||
Total corporate loans | Total corporate loans | $ | 192,339 | 100 | % | $ | 280,564 | 100 | % | |||||||||||||||||||||
Unearned income | Unearned income | (4,598 | ) | — | Unearned income | (1,132 | ) | — | ||||||||||||||||||||||
Corporate Loans, net of unearned income | $ | 180,720 | $ | 315,754 | ||||||||||||||||||||||||||
Corporate loans, net of unearned income | Corporate loans, net of unearned income | $ | 191,207 | $ | 280,564 | |||||||||||||||||||||||||
The following tables represent the corporate credit portfolio (excluding Private Banking), before consideration of collateral, by maturity at September 30, 2009.2010. The corporate portfolio is broken out by direct outstandings whichthat include drawn loans, overdrafts, interbank placements, bankers' acceptances, certain investment securities and leases and unfunded commitments whichthat include unused commitments to lend, letters of credit and financial guarantees.
| At September 30, 2009 | At September 30, 2010 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | ||||||||||||||||||
Direct outstandings | $ | 158 | $ | 88 | $ | 8 | $ | 254 | $ | 197 | $ | 41 | $ | 9 | $ | 247 | ||||||||||
Unfunded lending commitments | 182 | 126 | 9 | 317 | 172 | 93 | 10 | 275 | ||||||||||||||||||
Total | $ | 340 | $ | 214 | $ | 17 | $ | 571 | $ | 369 | $ | 134 | $ | 19 | $ | 522 | ||||||||||
| At December 31, 2008 | At December 31, 2009 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | ||||||||||||||||||
Direct outstandings | $ | 161 | $ | 100 | $ | 9 | $ | 270 | $ | 213 | $ | 66 | $ | 7 | $ | 286 | ||||||||||
Unfunded lending commitments | 206 | 141 | 12 | 359 | 182 | 120 | 10 | 312 | ||||||||||||||||||
Total | $ | 367 | $ | 241 | $ | 21 | $ | 629 | $ | 395 | $ | 186 | $ | 17 | $ | 598 | ||||||||||
Portfolio Mix
The corporate credit portfolio (excluding Private Banking) is diverse across counterparty, industry and geography. The following table shows direct outstandings and unfunded commitments by region:
| September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
North America | 46 | % | 48 | % | 46 | % | 51 | % | ||||||
EMEA | 32 | 31 | 31 | 27 | ||||||||||
Latin America | 9 | 8 | 7 | 9 | ||||||||||
Asia | 13 | 13 | 16 | 13 | ||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||
The maintenance of accurate and consistent risk ratings across the corporate credit portfolio facilitates the comparison of credit exposure across all lines of business, geographic regions and products.
Obligor risk ratings reflect an estimated probability of default for an obligor and are derived primarily through the use of statistical models (which are validated periodically), external rating agencies (under defined circumstances) or approved scoring methodologies. Facility risk ratings are assigned, using the obligor risk rating, and then factors that affect the loss-givenloss given default of the facility, such as support or collateral, are taken into account. With regard to climate change risk, factors evaluated include consideration of the business impact, impact of regulatory requirements or lack thereof, and impact of physical effects on obligors and their assets.
These factors may adversely affect the ability of some obligors to perform and thus increase the risk of lending activities to these obligors. Citigroup also has incorporated climate risk assessment criteria for certain obligors, as necessary. Internal obligor ratings equivalent to BBB and above are considered investment grade. Ratings below the equivalent of the BBB category are considered non-investment grade.
As described in Citi's Form 10-Q for the quarter ended June 30, 2010, Citi seeks performance on guarantee arrangements in the normal course of business. Seeking performance entails obtaining satisfactory cooperation from the guarantor or borrower to achieve Citi's strategy in the specific situation. This regular cooperation is indicative of pursuit and successful enforcement of the guarantee: the exposure is reduced without the expense and burden of pursuing a legal remedy. Enforcing a guarantee via legal action against the guarantor is not the primary means of resolving a troubled loan situation and rarely occurs.
The following table presents the corporate credit portfolio (excluding Private Banking) by facility risk rating at September 30, 20092010 and December 31, 2008,2009, as a percentage of the total portfolio:
| Direct outstandings and unfunded commitments | Direct outstandings and unfunded commitments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
AAA/AA/A | 54 | % | 57 | % | 55 | % | 58 | % | ||||||
BBB | 25 | 24 | 25 | 24 | ||||||||||
BB/B | 13 | 13 | 13 | 11 | ||||||||||
CCC or below | 8 | 6 | 6 | 7 | ||||||||||
Unrated | — | — | 1 | — | ||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||
The corporate credit portfolio (excluding Private Banking) is diversified by industry, with a concentration only in the financial sector, including banks, other financial institutions, insurance companies, investment banks, and government and central banks. The following table shows the allocation of direct outstandings and unfunded commitments to industries as a percentage of the total corporate portfolio:
| Direct outstandings and unfunded commitments | Direct outstandings and unfunded commitments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
Government and central banks | 14 | % | 12 | % | 12 | % | 12 | % | ||||||
Banks | 9 | 9 | ||||||||||||
Investment banks | 6 | 7 | 7 | 5 | ||||||||||
Banks | 10 | 7 | ||||||||||||
Petroleum | 5 | 4 | ||||||||||||
Other financial institutions | 5 | 5 | 4 | 12 | ||||||||||
Utilities | 5 | 5 | 4 | 4 | ||||||||||
Insurance | 4 | 4 | 4 | 4 | ||||||||||
Petroleum | 5 | 4 | ||||||||||||
Agriculture and food preparation | 5 | 4 | 4 | 4 | ||||||||||
Telephone and cable | 3 | 3 | 3 | 3 | ||||||||||
Real estate | 3 | 3 | ||||||||||||
Industrial machinery and equipment | 3 | 3 | 2 | 2 | ||||||||||
Global information technology | 2 | 3 | 2 | 2 | ||||||||||
Chemicals | 3 | 3 | 2 | 2 | ||||||||||
Other industries(1) | 35 | 40 | 39 | 34 | ||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||
Credit Risk Mitigation
As part of its overall risk management activities, the CompanyCitigroup uses credit derivatives and other risk mitigants to hedge portions of the credit risk in its portfolio, in addition to outright asset sales. The purpose of these transactions is to transferreduce Citigroup's credit risk to third parties.risk. The results of the mark-to-market and any realized gains or losses on credit derivatives are reflected in thePrincipal transactions line on the Consolidated Statement of Income.current period's income.
At September 30, 20092010 and December 31, 2008, $66.32009, $56.8 billion and $95.5$59.6 billion, respectively, of credit risk exposure were economically hedged. Citigroup's expected loss model used in the calculation of its loan loss reserve does not include the favorable impact of credit derivatives and other risk mitigants. In addition, the reported amounts of direct outstandings and unfunded commitments in this report do not reflect the impact of these hedging transactions. At September 30, 20092010 and December 31, 2008,2009, the credit protection was economically hedging underlying credit exposure with the following risk rating distribution, respectively:
Rating of Hedged Exposure
| September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
AAA/AA/A | 45 | % | 54 | % | 52 | % | 45 | % | ||||||
BBB | 37 | 32 | 32 | 37 | ||||||||||
BB/B | 11 | 9 | 12 | 11 | ||||||||||
CCC or below | 7 | 5 | 4 | 7 | ||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||
At September 30, 20092010 and December 31, 2008,2009, the credit protection was economically hedging underlying credit exposure with the following industry distribution, respectively:distribution:
Industry of Hedged Exposure
| September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Utilities | 9 | % | 10 | % | ||||||||||
Government | 11 | % | 0 | % | ||||||||||
Other financial institutions | 6 | 4 | ||||||||||||
Telephone and cable | 8 | 9 | 7 | 9 | ||||||||||
Agriculture and food preparation | 7 | 7 | 7 | 8 | ||||||||||
Chemicals | 6 | 8 | ||||||||||||
Petroleum | 6 | 7 | 6 | 6 | ||||||||||
Utilities | 6 | 9 | ||||||||||||
Industrial machinery and equipment | 6 | 6 | 3 | 6 | ||||||||||
Autos | 6 | 6 | ||||||||||||
Retail | 4 | 4 | ||||||||||||
Insurance | 4 | 5 | 4 | 4 | ||||||||||
Chemicals | 7 | 5 | ||||||||||||
Retail | 4 | 5 | ||||||||||||
Other financial institutions | 4 | 4 | ||||||||||||
Autos | 5 | 4 | ||||||||||||
Pharmaceuticals | 5 | 4 | 3 | 5 | ||||||||||
Natural gas distribution | 4 | 4 | 4 | 3 | ||||||||||
Metals | 5 | 4 | ||||||||||||
Global information technology | 3 | 4 | 2 | 3 | ||||||||||
Metals | 4 | 3 | ||||||||||||
Other industries(1) | 24 | 23 | 20 | 21 | ||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||
U.S. Subprime-Related Direct Exposure in Citi Holdings—Special Asset PoolMARKET RISK
Market risk encompasses liquidity risk and price risk, both of which arise in the normal course of business of a global financial intermediary. Liquidity risk is the risk that an entity may be unable to meet a financial commitment to a customer, creditor, or investor when due. Liquidity risk is discussed in "Capital Resources and Liquidity" above. Price risk is the earnings risk from changes in interest rates, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Price risk arises in non-trading portfolios, as well as in trading portfolios.
Interest Rate Exposure (IRE) for Non-Trading Portfolios
The exposures in the following table represent the approximate annualized risk to net interest revenue (NIR), assuming an unanticipated parallel instantaneous 100 basis points change, as well as a more gradual 100 basis points (25 basis points per quarter) parallel change in rates compared with the market forward interest rates in selected currencies.
| September 30, 2010 | June 30, 2010 | September 30, 2009 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Increase | Decrease | Increase | Decrease | Increase | Decrease | |||||||||||
U.S. dollar | |||||||||||||||||
Instantaneous change | $ | (302 | ) | NM | $ | (264 | ) | NM | $ | (727 | ) | NM | |||||
Gradual change | $ | (189 | ) | NM | $ | (179 | ) | NM | $ | (427 | ) | NM | |||||
Mexican peso | |||||||||||||||||
Instantaneous change | $ | 88 | $(88) | $ | 60 | $(60) | $ | 25 | $ | (25 | ) | ||||||
Gradual change | $ | 50 | $(50) | $ | 33 | $(33) | $ | 11 | $ | (11 | ) | ||||||
Euro | |||||||||||||||||
Instantaneous change | $ | 38 | NM | $ | 13 | NM | $ | 47 | NM | ||||||||
Gradual change | $ | 20 | NM | $ | 3 | NM | $ | 10 | NM | ||||||||
Japanese yen | |||||||||||||||||
Instantaneous change | $ | 85 | NM | $ | 133 | NM | $ | 211 | NM | ||||||||
Gradual change | $ | 58 | NM | $ | 89 | NM | $ | 120 | NM | ||||||||
Pound sterling | |||||||||||||||||
Instantaneous change | $ | 24 | NM | $ | 16 | NM | $ | (9 | ) | NM | |||||||
Gradual change | $ | 14 | NM | $ | 8 | NM | $ | (10 | ) | NM | |||||||
NM Not meaningful. A 100 basis point decrease in interest rates would imply negative rates for the yield curve.
The changes in the U.S. dollar IRE from the previous quarter reflect changes in the customer-related asset and liability mix, asset sales, the expected impact of market rates on customer behavior and purchases in the liquidity portfolio. The changes from the prior-year quarter primarily reflected modeling of mortgages and deposits based on lower rates, pricing changes due to the CARD Act, debt issuance and swapping activities, offset by repositioning of the liquidity portfolio.
Certain trading-oriented businesses within Citi have accrual-accounted positions. The U.S. dollar IRE associated with these businesses is ($106) million for a 100 basis point instantaneous increase in interest rates.
The following table shows the risk to NIR from six different changes in the implied-forward rates. Each scenario assumes that the rate change will occur on a gradual basis every three months over the course of one year.
| Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | Scenario 5 | Scenario 6 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Overnight rate change (bps) | 0 | 100 | 200 | (200 | ) | (100 | ) | 0 | |||||||||||
10-year rate change (bps) | (100 | ) | 0 | 100 | (100 | ) | 0 | 100 | |||||||||||
Impact to net interest revenue | $ | (102 | ) | $ | (195 | ) | $ | (496 | ) | NM | NM | $ | 102 | ||||||
NM Not meaningful. A 100 basis point or more decrease in the overnight rate would imply negative rates for the yield curve.
Value at Risk for Trading Portfolios
For Citigroup's major trading centers, the aggregate pretax value at risk (VAR) in the trading portfolios was $226 million, $214 million, $172 million, and $273 million at September 30, 2010, June 30, 2010, March 31, 2010, and September 30, 2009, respectively. Daily Citigroup trading VAR averaged $213 million and ranged from $192 million to $237 million during the third quarter of 2010.
The following table summarizes Citigroup's U.S. subprime-related direct exposures in Citi HoldingsVAR for Citigroup trading portfolios at September 30, 2009 and2010, June 30, 2009:2010, and September 30, 2009, including the total VAR, the specific risk-only component of VAR, the isolated general market factor VARs, along with the quarterly averages.
In billions of dollars | June 30, 2009 exposures | Third Quarter 2009 write-ups (downs)(1) | Third Quarter 2009 Other(2) | September 30, 2009 exposures | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Direct ABS CDO super senior exposures: | ||||||||||||||
Gross ABS CDO super senior exposures (A) | $ | 14.5 | $ | 15.1 | ||||||||||
Hedged exposures (B) | 6.3 | 6.3 | ||||||||||||
Net ABS CDO super senior exposures: | ||||||||||||||
ABCP/CDO(3) | 7.3 | $ | 1.6 | $ | (1.3 | ) | 7.7 | |||||||
High grade | 0.7 | 0.1 | — | 0.8 | ||||||||||
Mezzanine | 0.2 | 0.2 | (4) | (0.1 | ) | 0.3 | ||||||||
Total net ABS CDO super senior exposures (A-B=C) | $ | 8.3 | $ | 2.0 | $ | (1.5 | )(4) | $ | 8.8 | |||||
Lending and structuring exposures (D) | $ | 1.4 | $ | — | $ | (0.1 | ) | $ | 1.2 | |||||
Total net exposures (C+D)(5)(6) | $ | 9.6 | $ | 2.0 | $ | (1.7 | ) | $ | 10.0 | |||||
Credit adjustment on hedged counterparty exposures (E)(7) | $ | (0.1 | ) | |||||||||||
Total net write-ups (downs) (C+D+E) | $ | 1.9 | ||||||||||||
In millions of dollars | September 30, 2010 | Third Quarter 2010 Average | June 30, 2010(2) | Second Quarter 2010 Average | September 30, 2009 | Third Quarter 2009 Average | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest rate | $ | 274 | $ | 252 | $ | 244 | $ | 224 | $ | 240 | $ | 237 | |||||||
Foreign exchange | 68 | 72 | 57 | 57 | 98 | 90 | |||||||||||||
Equity | 33 | 53 | 71 | 64 | 51 | 62 | |||||||||||||
Commodity | 30 | 26 | 24 | 21 | 41 | 38 | |||||||||||||
Diversification benefit | (179 | ) | (190 | ) | (182 | ) | (178 | ) | (157 | ) | (146 | ) | |||||||
Total—All market risk factors, including general and specific risk | $ | 226 | $ | 213 | $ | 214 | $ | 188 | $ | 273 | $ | 281 | |||||||
Specific risk-only component(1) | $ | 29 | $ | 19 | $ | 17 | $ | 16 | $ | 12 | $ | 17 | |||||||
Total—General market factors only | $ | 197 | $ | 194 | $ | 197 | $ | 172 | $ | 261 | $ | 264 | |||||||
Note: Table may not foot or cross-foot due to roundings.
The table below provides the range of market factor VARs, inclusive of specific risk, across the quarters ended:
| September 30, 2010 | June 30, 2010 | September 30, 2009 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Low | High | Low | High | Low | High | |||||||||||||
Interest rate | $ | 231 | $ | 285 | $ | 198 | $ | 270 | $ | 218 | $ | 260 | |||||||
Foreign exchange | 55 | 90 | 36 | 94 | 55 | 110 | |||||||||||||
Equity | 32 | 86 | 48 | 89 | 51 | 95 | |||||||||||||
Commodity | 22 | 33 | 15 | 27 | 32 | 45 | |||||||||||||
The following table provides the VAR forS&B for the third quarter of 2010 and the second quarter of 2010:
In millions of dollars | September 30, 2010 | June 30, 2010 | |||||
---|---|---|---|---|---|---|---|
Total—All market risk factors, including general and specific risk | $ | 155 | $ | 176 | |||
Average—during quarter | $ | 161 | $ | 139 | |||
High—during quarter | 187 | 180 | |||||
Low—during quarter | 141 | 100 | |||||
INTEREST REVENUE/EXPENSE AND YIELDS
Average Rates—Interest Revenue, Interest Expense, and Net Interest Margin
In millions of dollars | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 3rd Qtr. 2009(1) | Change 3Q10 vs. 3Q09 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest revenue(2) | $ | 19,371 | $ | 20,418 | $ | 18,678 | 4 | % | |||||
Interest expense(3) | 6,125 | 6,379 | 6,680 | (8 | )% | ||||||||
Net interest revenue(2)(3) | $ | 13,246 | $ | 14,039 | $ | 11,998 | 10 | % | |||||
Interest revenue—average rate | 4.48 | % | 4.57 | % | 4.59 | % | (11 | ) bps | |||||
Interest expense—average rate | 1.60 | % | 1.60 | % | 1.83 | % | (23 | ) bps | |||||
Net interest margin | 3.07 | % | 3.15 | % | 2.95 | % | 12 | bps | |||||
Interest-rate benchmarks: | |||||||||||||
Federal Funds rate—end of period | 0.00-0.25 | % | 0.00-0.25 | % | 0.00-0.25 | % | — | ||||||
Federal Funds rate—average rate | 0.00-0.25 | % | 0.00-0.25 | % | 0.00-0.25 | % | — | ||||||
Two-year U.S. Treasury note—average rate | 0.54 | % | 0.87 | % | 1.03 | % | (49 | ) bps | |||||
10-year U.S. Treasury note—average rate | 2.78 | % | 3.49 | % | 3.52 | % | (74 | ) bps | |||||
10-year vs. two-year spread | 224 | bps | 262 | bps | 249 | bps | |||||||
Significant portion of Citi's business activities are based upon gathering deposits and borrowing money and then lending or investing those funds, including market-making activities in tradable securities. Net interest margin (NIM) is calculated by dividing annualized gross interest revenue less gross interest expense by average interest earning assets.
NIM decreased by 8 basis points during the underlying securities was purchasedthird quarter of 2010 due to the continued run-off and sales of higher-yielding assets in liquidations of CDOs and reported asTrading account assets. As of September 30, 2009, $303 million relating to deals liquidated was held in the trading books.
Citi Holdings, had approximately $10.0 billioninvesting the proceeds in net U.S. subprime-related direct exposureslower-yielding securities with a shorter duration and deposit-taking that resulted in the Special Asset Pool at September 30, 2009. The exposure consistedpurchases of (a) approximately $8.8 billion of net exposures in the super senior tranches (i.e., the most senior tranches) of CDOs, which are collateralized by asset-backed securities, derivatives on asset-backed securities, or both (ABS CDOs), and (b) approximately $1.2 billion of exposures in its lending and structuring business.
The Special Asset Pool also has trading positions, both long and short, in U.S. subprime RMBS and related products, including ABS CDOs, which are not included in the figures above. The exposure from these positionsAFS securities. NIM is actively managed and hedged, although the effectiveness of the hedging products used may vary with material changes in market conditions.
Direct ABS CDO Super Senior Exposures
The net $8.8 billion in ABS CDO super senior exposures as of September 30, 2009 is collateralized primarily by subprime RMBS, derivatives on RMBS, or both.
Citi Holdings' CDO super senior subprime direct exposures are Level 3 assets. The valuation of the high-grade and mezzanine ABS CDO positions uses trader prices based on the underlying assets of each high-grade and mezzanine ABS CDO. Unlike the ABCP positions, the high-grade and mezzanine positions are now largely hedged through the ABX and bond short positions, which are trader priced. This results in closer symmetry in the way these long and short positions are valued by the business. Citi Holdings intendsexpected to use trader marks to value this portion of the portfolio going forward so long as it remains largely hedged.
The valuation of the ABCP positions is subject to valuation based on significant unobservable inputs. Fair value of these exposures is based on estimates of future cash flows from the mortgage loans underlying the assets of the ABS CDOs. To determine the performance of the underlying mortgage loan portfolios, the Company estimates the prepayments, defaults and loss severities based on a number of macroeconomic factors. The model is calibrated using available mortgage loan information including historical loan performance. An appropriate discount rate is then applied to the cash flows generated for each ABCP tranche, in order to estimate its fair valueremain under current market conditions.
The valuation as of September 30, 2009 assumes a cumulative decline in U.S. housing prices from peak to trough of 30.5%. This rate assumes declines of 10% in 2009 and flat for 2010, respectively,pressure throughout the remainder of the 30.5% decline having already occurred before the end of 2008.
The primary drivers that currently impact the model valuations are the discount rates used to calculate the present value of projected cash flows and projected mortgage loan performance. Each 10 basis point change in the discount rate used generally results in an approximate $26 million change in the fair value of the Company's direct ABCP exposures as of September 30, 2009.
Estimates of the fair value of the CDO super senior exposures depend on market conditions and are subject to further change over time. For a further discussion of the valuation methodology and assumptions used to value direct ABS CDO super senior exposures to U.S. Subprime Mortgages, see Note 17 to the Consolidated Financial Statements, "Fair Value Measurement."2010.
LendingAVERAGE BALANCES AND INTEREST RATES—ASSETS(1)(2)(3)(4)
| Average Volume | Interest Revenue | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 3rd Qtr. 2009 | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 3rd Qtr. 2009 | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 3rd Qtr. 2009 | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Deposits with banks(5) | $ | 160,541 | $ | 168,330 | $ | 190,269 | $ | 318 | $ | 291 | $ | 313 | 0.79 | % | 0.69 | % | 0.65 | % | |||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell(6) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 155,053 | $ | 186,283 | $ | 140,756 | $ | 441 | $ | 452 | $ | 476 | 1.13 | % | 0.97 | % | 1.34 | % | |||||||||||
In offices outside the U.S.(5) | 91,891 | 83,055 | 70,790 | 366 | 329 | 252 | 1.58 | 1.59 | 1.41 | ||||||||||||||||||||
Total | $ | 246,944 | $ | 269,338 | $ | 211,546 | $ | 807 | $ | 781 | $ | 728 | 1.30 | % | 1.16 | % | 1.37 | % | |||||||||||
Trading account assets(7)(8) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 122,799 | $ | 130,475 | $ | 138,781 | $ | 1,035 | $ | 1,019 | $ | 1,668 | 3.34 | % | 3.13 | % | 4.77 | % | |||||||||||
In offices outside the U.S.(5) | 150,503 | 149,628 | 129,135 | 991 | 992 | 986 | 2.61 | 2.66 | 3.03 | ||||||||||||||||||||
Total | $ | 273,302 | $ | 280,103 | $ | 267,916 | $ | 2,026 | $ | 2,011 | $ | 2,654 | 2.94 | % | 2.88 | % | 3.93 | % | |||||||||||
Investments(1) | |||||||||||||||||||||||||||||
In U.S. offices | |||||||||||||||||||||||||||||
Taxable | $ | 181,513 | $ | 157,621 | $ | 122,608 | $ | 1,102 | $ | 1,301 | $ | 1,568 | 2.41 | % | 3.31 | % | 5.07 | % | |||||||||||
Exempt from U.S. income tax | 14,780 | 15,305 | 18,666 | 185 | 197 | 226 | 4.97 | 5.16 | 4.80 | ||||||||||||||||||||
In offices outside the U.S.(5) | 131,275 | 138,477 | 121,950 | 1,324 | 1,488 | 1,489 | 4.00 | 4.31 | 4.84 | ||||||||||||||||||||
Total | $ | 327,568 | $ | 311,403 | $ | 263,224 | $ | 2,611 | $ | 2,986 | $ | 3,283 | 3.16 | % | 3.85 | % | 4.95 | % | |||||||||||
Loans (net of unearned income)(9) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 396,518 | $ | 460,147 | $ | 370,470 | $ | 8,245 | $ | 9,153 | $ | 5,939 | 8.25 | % | 7.98 | % | 6.36 | % | |||||||||||
In offices outside the U.S.(5) | 253,016 | 249,353 | 268,211 | 5,087 | 5,074 | 5,662 | 7.98 | 8.16 | 8.38 | ||||||||||||||||||||
Total | $ | 649,534 | $ | 709,500 | $ | 638,681 | $ | 13,332 | $ | 14,227 | $ | 11,601 | 8.14 | % | 8.04 | % | 7.21 | % | |||||||||||
Other interest-earning Assets | $ | 56,542 | $ | 51,519 | $ | 43,869 | $ | 277 | $ | 122 | $ | 99 | 1.94 | % | 0.95 | % | 0.90 | % | |||||||||||
Total interest-earning Assets | $ | 1,714,431 | $ | 1,790,193 | $ | 1,615,505 | $ | 19,371 | $ | 20,418 | $ | 18,678 | 4.48 | % | 4.57 | % | 4.59 | % | |||||||||||
Non-interest-earning assets(7) | 219,977 | 226,902 | 253,316 | ||||||||||||||||||||||||||
Total Assets from discontinued operations | 44,671 | — | 21,418 | ||||||||||||||||||||||||||
Total assets | $ | 1,979,079 | $ | 2,017,095 | $ | 1,890,239 | |||||||||||||||||||||||
AVERAGE BALANCES AND INTEREST RATES—LIABILITIES AND EQUITY, AND NET INTEREST REVENUE(1)(2)(3)(4)
| Average Volume | Interest Expense | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 3rd Qtr. 2009 | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 3rd Qtr. 2009 | 3rd Qtr. 2010 | 2nd Qtr. 2010 | 3rd Qtr. 2009 | ||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Deposits | |||||||||||||||||||||||||||||
In U. S. offices | |||||||||||||||||||||||||||||
Savings deposits(5) | $ | 196,724 | $ | 186,070 | $ | 173,999 | $ | 444 | $ | 461 | $ | 613 | 0.90 | % | 0.99 | % | 1.40 | % | |||||||||||
Other time deposits | 44,103 | 48,171 | 62,256 | 98 | 100 | 224 | 0.88 | 0.83 | 1.43 | ||||||||||||||||||||
In offices outside the U.S.(6) | 487,128 | 475,562 | 459,142 | 1,588 | 1,475 | 1,461 | 1.29 | 1.24 | 1.26 | ||||||||||||||||||||
Total | $ | 727,955 | $ | 709,803 | $ | 695,397 | $ | 2,130 | $ | 2,036 | $ | 2,298 | 1.16 | % | 1.15 | % | 1.31 | % | |||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase(7) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 115,961 | $ | 137,610 | $ | 131,641 | $ | 188 | $ | 237 | $ | 248 | 0.64 | % | 0.69 | % | 0.75 | % | |||||||||||
In offices outside the U.S.(6) | 89,454 | 100,759 | 72,302 | 483 | 560 | 524 | 2.14 | 2.23 | 2.88 | ||||||||||||||||||||
Total | $ | 205,415 | $ | 238,369 | $ | 203,943 | $ | 671 | $ | 797 | $ | 772 | 1.30 | % | 1.34 | % | 1.50 | % | |||||||||||
Trading account liabilities(8)(9) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 35,725 | $ | 39,709 | $ | 21,204 | $ | 79 | $ | 88 | $ | 28 | 0.88 | % | 0.89 | % | 0.52 | % | |||||||||||
In offices outside the U.S.(6) | 39,740 | 43,528 | 39,431 | 29 | 18 | 15 | 0.29 | 0.17 | 0.15 | ||||||||||||||||||||
Total | $ | 75,465 | $ | 83,237 | $ | 60,635 | $ | 108 | $ | 106 | $ | 43 | 0.57 | % | 0.51 | % | 0.28 | % | |||||||||||
Short-term borrowings | |||||||||||||||||||||||||||||
In U.S. offices | $ | 103,866 | $ | 122,260 | $ | 108,474 | $ | 153 | $ | 181 | $ | 259 | 0.58 | % | 0.59 | % | 0.95 | % | |||||||||||
In offices outside the U.S.(6) | 41,052 | 33,630 | 30,985 | 60 | 34 | 91 | 0.58 | 0.41 | 1.17 | ||||||||||||||||||||
Total | $ | 144,918 | $ | 155,890 | $ | 139,459 | $ | 213 | $ | 215 | $ | 350 | 0.58 | % | 0.55 | % | 1.00 | % | |||||||||||
Long-term debt(10) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 344,375 | $ | 391,524 | $ | 318,610 | $ | 2,779 | $ | 3,011 | $ | 2,952 | 3.20 | % | 3.08 | % | 3.68 | % | |||||||||||
In offices outside the U.S.(6) | 19,558 | 23,369 | 27,447 | 224 | 214 | 265 | 4.54 | 3.67 | 3.83 | ||||||||||||||||||||
Total | $ | 363,933 | $ | 414,893 | $ | 346,057 | $ | 3,003 | $ | 3,225 | $ | 3,217 | 3.27 | % | 3.12 | % | 3.69 | % | |||||||||||
Total interest-bearing liabilities | $ | 1,517,686 | $ | 1,602,192 | $ | 1,445,491 | $ | 6,125 | $ | 6,379 | $ | 6,680 | 1.60 | % | 1.60 | % | 1.83 | % | |||||||||||
Demand deposits in U.S. offices | 15,046 | 14,986 | 34,592 | ||||||||||||||||||||||||||
Other non-interest-bearing liabilities(8) | 240,974 | 243,892 | 250,768 | ||||||||||||||||||||||||||
Total liabilities from discontinued operations | 44,385 | — | 14,189 | ||||||||||||||||||||||||||
Total liabilities | $ | 1,818,091 | $ | 1,861,070 | $ | 1,745,040 | |||||||||||||||||||||||
Citigroup equity(11) | $ | 158,416 | $ | 153,798 | $ | 143,547 | |||||||||||||||||||||||
Noncontrolling Interest | $ | 2,572 | $ | 2,227 | $ | 1,652 | |||||||||||||||||||||||
Total Equity | $ | 160,988 | $ | 156,025 | $ | 145,199 | |||||||||||||||||||||||
Total Liabilities and Equity | $ | 1,979,079 | $ | 2,017,095 | $ | 1,890,239 | |||||||||||||||||||||||
Net interest revenue as a percentage of average interest-earning assets(12) | |||||||||||||||||||||||||||||
In U.S. offices | 1,006,417 | $ | 1,087,675 | $ | 947,414 | 7,475 | $ | 8,136 | $ | 5,694 | 2.95 | % | 3.00 | % | 2.38 | % | |||||||||||||
In offices outside the U.S.(6) | 708,014 | 702,518 | 668,091 | 5,771 | 5,903 | 6,304 | 3.23 | 3.37 | 3.74 | ||||||||||||||||||||
Total | 1,714,431 | $ | 1,790,193 | $ | 1,615,505 | 13,246 | $ | 14,039 | $ | 11,998 | 3.07 | % | 3.15 | % | 2.95 | % | |||||||||||||
AVERAGE BALANCES AND INTEREST RATES—ASSETS(1)(2)(3)(4)
| Average Volume | Interest Revenue | % Average Rate | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Nine Months 2010 | Nine Months 2009 | Nine Months 2010 | Nine Months 2009 | Nine Months 2010 | Nine Months 2009 | ||||||||||||||
Assets | ||||||||||||||||||||
Deposits with banks(5) | $ | 165,083 | $ | 176,014 | $ | 899 | $ | 1,126 | 0.73 | % | 0.86 | % | ||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell(6) | ||||||||||||||||||||
In U.S. offices | $ | 167,123 | $ | 133,427 | $ | 1,364 | $ | 1,541 | 1.09 | % | 1.54 | % | ||||||||
In offices outside the U.S.(5) | 84,333 | 61,534 | 976 | 866 | 1.55 | 1.88 | ||||||||||||||
Total | $ | 251,456 | $ | 194,961 | $ | 2,340 | $ | 2,407 | 1.24 | % | 1.65 | % | ||||||||
Trading account assets(7)(8) | ||||||||||||||||||||
In U.S. offices | $ | 128,350 | $ | 140,210 | $ | 3,123 | $ | 5,437 | 3.25 | % | 5.18 | % | ||||||||
In offices outside the U.S.(5) | 150,845 | 119,351 | 2,786 | 3,089 | 2.47 | 3.46 | ||||||||||||||
Total | $ | 279,195 | $ | 259,561 | $ | 5,909 | $ | 8,526 | 2.83 | % | 4.39 | % | ||||||||
Investments(1) | ||||||||||||||||||||
In U.S. offices | ||||||||||||||||||||
Taxable | $ | 163,331 | $ | 122,563 | $ | 3,792 | $ | 4,722 | 3.10 | % | 5.15 | % | ||||||||
Exempt from U.S. income tax | 15,218 | 16,511 | 555 | 591 | 4.88 | 4.79 | ||||||||||||||
In offices outside the U.S.(5) | 138,215 | 115,930 | 4,359 | 4,581 | 4.22 | 5.28 | ||||||||||||||
Total | $ | 316,764 | $ | 255,004 | $ | 8,706 | $ | 9,894 | 3.67 | % | 5.19 | % | ||||||||
Loans (net of unearned income)(9) | ||||||||||||||||||||
In U.S. offices | $ | 445,349 | $ | 386,429 | $ | 26,909 | $ | 19,024 | 8.08 | % | 6.58 | % | ||||||||
In offices outside the U.S.(5) | 252,286 | 269,017 | 15,323 | 17,361 | 8.12 | 8.63 | ||||||||||||||
Total | $ | 697,635 | $ | 655,446 | $ | 42,232 | $ | 36,385 | 8.09 | % | 7.42 | % | ||||||||
Other interest-earning assets | $ | 51,318 | $ | 50,972 | $ | 555 | $ | 594 | 1.45 | % | 1.56 | % | ||||||||
Total interest-earning assets | $ | 1,761,451 | $ | 1,591,958 | $ | 60,641 | $ | 58,932 | 4.60 | % | 4.95 | % | ||||||||
Non-interest-earning assets(7) | 226,741 | 277,243 | ||||||||||||||||||
Total assets from discontinued operations | 14,890 | 20,183 | ||||||||||||||||||
Total assets | $ | 2,003,082 | $ | 1,889,384 | ||||||||||||||||
AVERAGE BALANCES AND INTEREST RATES—LIABILITIES AND EQUITY, AND NET INTEREST REVENUE(1)(2)(3)(4)
| Average Volume | Interest Expense | % Average Rate | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Nine Months 2010 | Nine Months 2009 | Nine Months 2010 | Nine Months 2009 | Nine Months 2010 | Nine Months 2009 | ||||||||||||||
Liabilities | ||||||||||||||||||||
Deposits | ||||||||||||||||||||
In U. S. offices | ||||||||||||||||||||
Savings deposits(5) | $ | 187,020 | $ | 170,715 | $ | 1,363 | $ | 2,245 | 0.97 | % | 1.76 | % | ||||||||
Other time deposits | 48,888 | 60,469 | 341 | 918 | 0.93 | 2.03 | ||||||||||||||
In offices outside the U.S.(6) | 481,231 | 432,057 | 4,542 | 4,823 | 1.26 | 1.49 | ||||||||||||||
Total | $ | 717,139 | $ | 663,241 | $ | 6,246 | $ | 7,986 | 1.16 | % | 1.61 | % | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase(7) | ||||||||||||||||||||
In U.S. offices | $ | 124,755 | $ | 139,232 | $ | 604 | $ | 852 | 0.65 | % | 0.82 | % | ||||||||
In offices outside the U.S.(6) | 89,887 | 71,611 | 1,518 | 1,955 | 2.26 | 3.65 | ||||||||||||||
Total | $ | 214,642 | $ | 210,893 | $ | 2,122 | $ | 2,807 | 1.32 | % | 1.78 | % | ||||||||
Trading account liabilities(8)(9) | ||||||||||||||||||||
In U.S. offices | $ | 36,025 | $ | 20,503 | $ | 211 | $ | 171 | 0.78 | % | 1.12 | % | ||||||||
In offices outside the U.S.(6) | 43,391 | 35,728 | 66 | 49 | 0.20 | 0.18 | ||||||||||||||
Total | $ | 79,416 | $ | 56,231 | $ | 277 | $ | 220 | 0.47 | % | 0.52 | % | ||||||||
Short-term borrowings | ||||||||||||||||||||
In U.S. offices | $ | 126,304 | $ | 131,116 | $ | 538 | $ | 835 | 0.57 | % | 0.85 | % | ||||||||
In offices outside the U.S.(6) | 34,114 | 33,833 | 166 | 293 | 0.65 | 1.16 | ||||||||||||||
�� | ||||||||||||||||||||
Total | $ | 160,418 | $ | 164,949 | $ | 704 | $ | 1,128 | 0.59 | % | 0.91 | % | ||||||||
Long-term debt(10) | ||||||||||||||||||||
In U.S. offices | $ | 377,671 | $ | 308,201 | $ | 8,795 | $ | 8,199 | 3.11 | % | 3.56 | % | ||||||||
In offices outside the U.S.(6) | 22,961 | 30,274 | 651 | 839 | 3.79 | 3.71 | ||||||||||||||
Total | $ | 400,632 | $ | 338,475 | $ | 9,446 | $ | 9,038 | 3.15 | % | 3.57 | % | ||||||||
Total interest-bearing liabilities | $ | 1,572,247 | $ | 1,433,789 | $ | 18,795 | $ | 21,179 | 1.60 | % | 1.97 | % | ||||||||
Demand deposits in U.S. offices | 15,569 | 23,186 | ||||||||||||||||||
Other non-interest bearing liabilities(8) | 244,077 | 272,809 | ||||||||||||||||||
Total liabilities from discontinued operations | 14,795 | 12,670 | ||||||||||||||||||
Total liabilities | $ | 1,846,688 | $ | 1,742,454 | ||||||||||||||||
Total Citigroup equity(11) | $ | 154,069 | $ | 145,097 | ||||||||||||||||
Noncontrolling interest | $ | 2,325 | $ | 1,833 | ||||||||||||||||
Total Equity | $ | 156,394 | $ | 146,930 | ||||||||||||||||
Total liabilities and stockholders' equity | $ | 2,003,082 | $ | 1,889,384 | ||||||||||||||||
Net interest revenue as a percentage of average interest-earning assets(12) | ||||||||||||||||||||
In U.S. offices | 1,058,255 | $ | 954,220 | 24,271 | $ | 18,789 | 3.07 | % | 2.63 | % | ||||||||||
In offices outside the U.S.(6) | 703,196 | 637,738 | 17,575 | 18,964 | 3.34 | 3.98 | ||||||||||||||
Total | 1,761,451 | $ | 1,591,958 | 41,846 | $ | 37,753 | 3.18 | % | 3.17 | % | ||||||||||
Exposure to Commercial Real EstateANALYSIS OF CHANGES IN INTEREST REVENUE(1)(2)(3)
ICG
| 3rd Qtr. 2010 vs. 2nd Qtr. 2010 | 3rd Qtr. 2010 vs. 3rd Qtr. 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Increase (Decrease) Due to Change in: | | Increase (Decrease) Due to Change in: | | |||||||||||||||
In millions of dollars | Average Volume | Average Rate | Net Change | Average Volume | Average Rate | Net Change | |||||||||||||
Deposits with banks(4) | (14 | ) | 41 | 27 | (53 | ) | 58 | 5 | |||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | |||||||||||||||||||
In U.S. offices | (82 | ) | 71 | (11 | ) | 45 | (80 | ) | (35 | ) | |||||||||
In offices outside the U.S.(4) | 35 | 2 | 37 | 81 | 33 | 114 | |||||||||||||
Total | (47 | ) | 73 | 26 | 126 | (47 | ) | 79 | |||||||||||
Trading account assets(5) | |||||||||||||||||||
In U.S. offices | (62 | ) | 78 | 16 | (176 | ) | (457 | ) | (633 | ) | |||||||||
In offices outside the U.S.(4) | 6 | (7 | ) | (1 | ) | 151 | (146 | ) | 5 | ||||||||||
Total | (56 | ) | 71 | 15 | (25 | ) | (603 | ) | (628 | ) | |||||||||
Investments(1) | |||||||||||||||||||
In U.S. offices | 185 | (396 | ) | (211 | ) | 548 | (1,055 | ) | (507 | ) | |||||||||
In offices outside the U.S.(4) | (75 | ) | (89 | ) | (164 | ) | 108 | (273 | ) | (165 | ) | ||||||||
Total | 110 | (485 | ) | (375 | ) | 656 | (1,328 | ) | (672 | ) | |||||||||
Loans (net of unearned income)(6) | |||||||||||||||||||
In U.S. offices | (1,309 | ) | 401 | (908 | ) | 441 | 1,865 | 2,306 | |||||||||||
In offices outside the U.S.(4) | 74 | (61 | ) | 13 | (312 | ) | (263 | ) | (575 | ) | |||||||||
Total | (1,235 | ) | 340 | (895 | ) | 129 | 1,602 | 1,731 | |||||||||||
Other interest-earning assets | 13 | 142 | 155 | 35 | 143 | 178 | |||||||||||||
Total interest revenue | (1,229 | ) | 182 | (1,047 | ) | 868 | (175 | ) | 693 | ||||||||||
total net change.
The majority of these exposures are classified as Level 3 in the fair-value hierarchy. Weakening activity in the trading markets for some of these instruments resulted in reduced liquidity, thereby decreasing the observable inputs for such valuations, and could have an adverse impactinterest on how these instruments are valued in the future if such conditions persist.
(2) Assets held at amortized costTrading account assets include approximately $1.8 billion of securities classified as HTM and $22.8 billion of loans and commitments. The HTM securities were classified as such during the fourth quarter of 2008 and were previously classified as either trading or AFS. They are accounted for at amortized cost, subject to other-than-temporary impairment. Loans and commitments are recorded at amortized cost, less loan loss reserves. The impact from changes in credit is reflected in the calculation of the allowance for loan losses and in net credit losses.
(3) Equity and other investmentsTrading account liabilities include approximately $4.9 billion of equity and other investments such as limited partner fund investments which are accounted for under the equity method, which recognizes gains or losses based on the investor's share of the net income of the investee., respectively.
Direct Exposure to MonolinesANALYSIS OF CHANGES IN INTEREST EXPENSE AND NET INTEREST REVENUE(1)(2)(3)
Citi Holdings has exposure, via the Special Asset Pool, to various monoline bond insurers (Monolines), listed in the table below, from hedges on certain investments and from trading positions. The hedges are composed of credit default swaps and other hedge instruments. Citi Holdings recorded an additional $61 million in downward CVA related to exposure to Monolines during the third quarter of 2009, bringing the total CVA balance to $5.3 billion.
The following table summarizes the market value of Citi Holdings' direct exposures to and the corresponding notional amounts of transactions with the various Monolines as well as the aggregate credit valuation adjustment associated with these exposures as of September 30, 2009 and June 30, 2009.
| September 30, 2009 | June 30, 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Fair-value exposure | Notional amount of transactions | Fair-value exposure | Notional amount of transactions | |||||||||
Direct subprime ABS CDO super senior—Ambac | $ | 4,495 | $ | 5,295 | $ | 4,525 | $ | 5,328 | |||||
Trading assets—non-subprime: | |||||||||||||
MBIA | $ | 1,898 | $ | 3,871 | $ | 2,123 | $ | 3,868 | |||||
FSA | 74 | 847 | 128 | 1,108 | |||||||||
Assured | 80 | 458 | 126 | 466 | |||||||||
Radian | 8 | 150 | 19 | 150 | |||||||||
Ambac | — | 407 | — | 407 | |||||||||
Subtotal trading assets—non-subprime | $ | 2,061 | $ | 5,733 | $ | 2,396 | $ | 5,999 | |||||
Total gross fair-value direct exposure | $ | 6,556 | $ | 6,921 | |||||||||
Credit valuation adjustment | (5,274 | ) | (5,213 | ) | |||||||||
Total net fair-value direct exposure | $ | 1,282 | $ | 1,708 | |||||||||
| 3rd Qtr. 2010 vs. 2nd Qtr. 2010 | 3rd Qtr. 2010 vs. 3rd Qtr. 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Increase (Decrease) Due to Change in: | | Increase (Decrease) Due to Change in: | | |||||||||||||||
In millions of dollars | Average Volume | Average Rate | Net Change | Average Volume | Average Rate | Net Change | |||||||||||||
Deposits | |||||||||||||||||||
In U.S. offices | 15 | (34 | ) | (19 | ) | 16 | (311 | ) | (295 | ) | |||||||||
In offices outside the U.S.(4) | 36 | 77 | 113 | 91 | 36 | 127 | |||||||||||||
Total | 51 | 43 | 94 | 107 | (275 | ) | (168 | ) | |||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | |||||||||||||||||||
In U.S. offices | (36 | ) | (13 | ) | (49 | ) | (28 | ) | (32 | ) | (60 | ) | |||||||
In offices outside the U.S.(4) | (61 | ) | (16 | ) | (77 | ) | 109 | (150 | ) | (41 | ) | ||||||||
Total | (97 | ) | (29 | ) | (126 | ) | 81 | (182 | ) | (101 | ) | ||||||||
Trading account liabilities(5) | |||||||||||||||||||
In U.S. offices | (9 | ) | — | (9 | ) | 26 | 25 | 51 | |||||||||||
In offices outside the U.S.(4) | (2 | ) | 13 | 11 | — | 14 | 14 | ||||||||||||
Total | (11 | ) | 13 | 2 | 26 | 39 | 65 | ||||||||||||
Short-term borrowings | |||||||||||||||||||
In U.S. offices | (27 | ) | (1 | ) | (28 | ) | (11 | ) | (95 | ) | (106 | ) | |||||||
In offices outside the U.S.(4) | 9 | 17 | 26 | 24 | (55 | ) | (31 | ) | |||||||||||
Total | (18 | ) | 16 | (2 | ) | 13 | (150 | ) | (137 | ) | |||||||||
Long-term debt | |||||||||||||||||||
In U.S. offices | (375 | ) | 143 | (232 | ) | 227 | (400 | ) | (173 | ) | |||||||||
In offices outside the U.S.(4) | (38 | ) | 48 | 10 | (85 | ) | 44 | (41 | ) | ||||||||||
Total | (413 | ) | 191 | (222 | ) | 142 | (356 | ) | (214 | ) | |||||||||
Total interest expense | (488 | ) | 234 | (254 | ) | 369 | (924 | ) | (555 | ) | |||||||||
Net interest revenue | (741 | ) | (52 | ) | (793 | ) | 499 | 749 | 1,248 | ||||||||||
Credit valuation adjustments are basedinterest on credit spreads
As of September 30, 2009 and June 30, 2009, Citi Holdings had $6.3 billion in notional amount of hedges against its direct subprime ABS CDO super senior positions. Of those amounts, $5.3 billion was purchased from Monolines and is included in the notional amount of transactions in the table above.
With respect to Citi Holdings' trading assets, there were $2.1 billion and $2.4 billion of fair-value exposure to Monolines as of September 30, 2009 and June 30, 2009,
The notional amount of transactions related to the remaining non-subprime trading assets as of September 30, 2009 was $5.7 billion. Of the $5.7 billion, $5.0 billion was in the form of credit default swaps and total return swaps with a fair value exposure of $2.1 billion. The remaining notional amount comprised $697 million primarily in interest-rate swaps with a corresponding fair value exposure of $9 million net payable.
The notional amount of transactions related to the remaining non-subprime trading assets at June 30, 2009 was $6.0 billion with a corresponding fair value exposure of $2.4 billion. Of the $6.0 billion, $5.0 billion was in the form of credit default swaps and total return swaps with a fair value of $2.4 billion. The remaining notional amount comprised $955 million primarily in interest-rate swaps with a corresponding fair value exposure of $2.1 million net payable.
The Company has purchased mortgage insurance from various monoline mortgage insurers on first mortgage loans. The notional amount of this insurance protection was approximately $243 million and $316 million as of September 30, 2009 and June 30, 2009, respectively, with nominal pending claims against this notional amount.
In addition, Citigroup has indirect exposure to Monolines in various other parts of its businesses. Indirect exposure includes circumstances in which the Company is not a contractual counterparty to the Monolines, but instead owns securities which may benefit from embedded credit enhancements provided by a Monoline. For example, corporate or municipal bonds in the trading business may be insured by the Monolines. The table and discussion above do not reflect this type of indirect exposure to the Monolines.
Highly Leveraged Financing Transactions
ANALYSIS OF CHANGES IN INTEREST REVENUE, INTEREST EXPENSE, AND NET INTEREST REVENUE(1)(2)(3)
Highly leveraged financing commitments are agreements that provide funding to a borrower with higher levels of debt (measured by the ratio of debt capital to equity capital of the borrower) than
| Nine Months 2010 vs. Nine Months 2009 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
| Increase (Decrease) Due to Change in: | | ||||||||
In millions of dollars | Average Volume | Average Rate | Net Change(2) | |||||||
Deposits at interest with banks(4) | (67 | ) | (160 | ) | (227 | ) | ||||
Federal funds sold and securities borrowed or purchased under agreements to resell | ||||||||||
In U.S. offices | 336 | (513 | ) | (177 | ) | |||||
In offices outside the U.S.(4) | 282 | (172 | ) | 110 | ||||||
Total | 618 | (685 | ) | (67 | ) | |||||
Trading account assets(5) | ||||||||||
In U.S. offices | (428 | ) | (1,886 | ) | (2,314 | ) | ||||
In offices outside the U.S.(4) | 703 | (1,006 | ) | (303 | ) | |||||
Total | 275 | (2,892 | ) | (2,617 | ) | |||||
Investments(1) | ||||||||||
In U.S. offices | 1,268 | (2,234 | ) | (966 | ) | |||||
In offices outside the U.S.(4) | 794 | (1,016 | ) | (222 | ) | |||||
Total | 2,062 | (3,250 | ) | (1,188 | ) | |||||
Loans (net of unearned income)(6) | ||||||||||
In U.S. offices | 3,165 | 4,720 | 7,885 | |||||||
In offices outside the U.S.(4) | (1,047 | ) | (991 | ) | (2,038 | ) | ||||
Total | 2,118 | 3,729 | 5,847 | |||||||
Other interest-earning assets | 4 | (43 | ) | (39 | ) | |||||
Total interest revenue | 5,010 | (3,301 | ) | 1,709 | ||||||
Deposits | ||||||||||
In U.S. offices | 63 | (1,522 | ) | (1,459 | ) | |||||
In offices outside the U.S.(4) | 513 | (794 | ) | (281 | ) | |||||
Total | 576 | (2,316 | ) | (1,740 | ) | |||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | ||||||||||
In U.S. offices | (83 | ) | (165 | ) | (248 | ) | ||||
In offices outside the U.S.(4) | 423 | (860 | ) | (437 | ) | |||||
Total | 340 | (1,025 | ) | (685 | ) | |||||
Trading account liabilities(5) | ||||||||||
In U.S. offices | 102 | (62 | ) | 40 | ||||||
In offices outside the U.S.(4) | 11 | 6 | 17 | |||||||
Total | 113 | (56 | ) | 57 | ||||||
Short-term borrowings | ||||||||||
In U.S. offices | (30 | ) | (267 | ) | (297 | ) | ||||
In offices outside the U.S.(4) | 2 | (129 | ) | (127 | ) | |||||
Total | (28 | ) | (396 | ) | (424 | ) | ||||
Long-term debt | ||||||||||
In U.S. offices | 1,700 | (1,104 | ) | 596 | ||||||
In offices outside the U.S.(4) | (207 | ) | 19 | (188 | ) | |||||
Total | 1,493 | (1,085 | ) | 408 | ||||||
Total interest expense | 2,494 | (4,878 | ) | (2,384 | ) | |||||
Net interest revenue | 2,516 | 1,577 | 4,093 | |||||||
In these financings, debt service (that is, principal and interest payments) absorbs a significant portion of the cash flows generated by the borrower's business. Consequently, the risk that the borrower may not be able to meet its debt obligations is greater. Due to this risk, the interest rates and fees charged for this type of financing are generally higher than for other types of financing.
Prior to funding, highly leveraged financing commitments are assessed for impairment and losses are recorded when they are probable and reasonably estimable. For the portion of loan commitments that relates to loans that will be held for investment, loss estimates are made based on the borrower's abilityU.S. federal statutory tax rate of 35% and is excluded from this presentation.
CROSS BORDER RISK AND SOVEREIGN EXPOSURE
Cross Border Risk
Total exposure is defined as cross border claims outstanding plus net foreign office claims on local residents and cross border claims outstanding from derivative products.
Net foreign office claims on local residents equals total foreign office claims on local residents less foreign office liabilities. If the difference is negative then the exposure is zero. For example, if Country A branch has deposits from Country A residents of 150 and the Country A branch invests in Country A government securities of 100 then the net foreign exposure would be zero, calculated as follows:100 total local country assets less 150 local country liabilities equals (50), negative exposure defaults to its contractual terms. For the portion of loan commitments that relates to loans that will be held-for-sale, loss estimates are made in reference to current conditionszero.
The countries included in the resale market (both interest rate riskCross Border Risk table below are those countries whose total exposure exceeds 0.75% of total Citigroup assets. Total exposure includes bank and credit riskprivate exposure in addition to public (government) exposure.
| Cross-Border Claims on Third Parties | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of U.S. dollars | Banks | Public | Private | Total | Trading and Short-Term Claims | Investments in and Funding of Local Franchises | Total Cross-Border Outstanding | Commitments | Total Cross-Border Outstandings | Commitments | |||||||||||||||||||||
France | $ | 12.6 | $ | 12.0 | $ | 10.2 | $ | 34.8 | $ | 26.0 | $ | 2.5 | $ | 37.3 | $ | 51.2 | $ | 33.0 | $ | 68.5 | |||||||||||
Germany | 15.9 | 7.4 | 4.8 | 28.1 | 23.1 | 6.4 | 34.5 | 42.0 | 30.2 | 53.1 | |||||||||||||||||||||
India | 2.1 | 0.5 | 7.0 | 9.6 | 7.0 | 19.2 | 28.8 | 2.2 | 24.9 | 1.8 | |||||||||||||||||||||
United Kingdom | 12.9 | 1.8 | 9.1 | 23.8 | 21.1 | — | 23.8 | 96.4 | 17.1 | 138.5 | |||||||||||||||||||||
Italy | 2.2 | 12.6 | 1.4 | 16.2 | 15.2 | 1.0 | 17.2 | 19.2 | 21.7 | 21.2 | |||||||||||||||||||||
Cayman Islands | 0.2 | — | 16.9 | 17.1 | 16.1 | — | 17.1 | 3.6 | 18.0 | 6.1 | |||||||||||||||||||||
South Korea | 1.7 | 1.6 | 3.0 | 6.3 | 6.1 | 10.7 | 17.0 | 16.6 | 17.4 | 14.4 | |||||||||||||||||||||
Brazil | 1.7 | 0.9 | 6.3 | 8.9 | 6.7 | 7.5 | 16.4 | 16.9 | 10.3 | 13.9 | |||||||||||||||||||||
Netherlands | 5.8 | 2.7 | 6.8 | 15.3 | 9.9 | — | 15.3 | 48.8 | 20.3 | 65.5 | |||||||||||||||||||||
Mexico | — | 1.8 | 3.4 | 5.2 | 2.8 | 9.6 | 14.8 | 26.3 | 12.8 | 21.2 | |||||||||||||||||||||
Sovereign Exposure
Total exposure is defined as of loans net of hedges, unfunded lending commitments, available for sale securities, trading securities, and securities purchased under agreements to resell, in which the direct obligor is a foreign government. Trading account assets consist of foreign government securities and other mark-to-market gains on derivative and other trading account positions.
Foreign office liabilities are not considered in the estimate). Loan origination, commitment, underwriting and other feescalculation of sovereign exposure as they are netted against any recorded losses.for cross border exposure (the Country A example above).
Citigroup generally manages the risk associated with highly leveraged financings it has entered into by seeking to sell a majority of its exposures to the market prior to or shortly after funding. In certain cases, all or a portion of a highly leveraged financing to be retained is hedged with credit derivatives or other hedging instruments. Thus, when a highly leveraged financing is funded, Citigroup records the resulting loan as follows:General summary:
DueAt September 30, 2010, Citi's total sovereign exposure approximated $285 billion and consisted of approximately 94% investment grade countries and approximately 6% non-investment grade countries.
Venezuelan Operations
In 2003, the Venezuelan government enacted currency restrictions that have restricted Citigroup's ability to obtain U.S. dollars in Venezuela at the dislocation ofofficial foreign currency rate. In May 2010, the credit marketsgovernment enacted new laws that have closed the parallel foreign exchange market and established a new foreign exchange market. Citigroup does not have access to U.S. dollars in this new market. Citigroup uses the reduced market interest in higher-risk/higher-yield instruments sinceofficial rate to re-measure the latter half of 2007, liquidityforeign currency transactions in the market for highly leveraged financings has been limited. This has resulted in the Company's recording pretax write-downs on funded and unfunded highly leveraged finance exposuresfinancial statements of $24 million in the third quarter of 2009, bringing the cumulative write-downs for the first nine months of 2009 to $508 million.
Citigroup's exposures to highly leveraged financing commitments totaled $6.2 billion atits Venezuelan operations, which have U.S. dollar functional currencies, into U.S. dollars. At September 30, 2009 ($5.9 billion funded and $0.3 billion2010, Citigroup had net monetary assets in unfunded commitments), reflecting a decrease of $2.3 billion from June 30, 2009.
In 2008, the Company completed the transferits Venezuelan operations denominated in bolivars of approximately $12.0 billion of loans to third parties, of which $8.5 billion relates to highly leveraged loan commitments. In these transactions, the third parties purchased subordinate interests backed by the transferred loans. These subordinate interests absorb first loss on the transferred loans and provide the third parties with control of the loans. The Company retained senior debt securities backed by the transferred loans. These transactions were accounted for as sales of the transferred loans. The loans were removed from the balance sheet and the retained securities are classified as AFS securities on the Company's Consolidated Balance Sheet.
In addition, the Company purchased protection on the senior debt securities from the third-party subordinate interest holders via total return swaps (TRS). The counterparty credit risk in the TRS is protected through margin agreements that provide for both initial margin and additional margin at specified triggers. Due to the initial cash margin received, the existing margin requirements on the TRS, and the substantive subordinate investments made by third parties, the Company believes that the transactions largely mitigate the Company's risk related to the transferred loans.
The Company's sole remaining exposure to the transferred loans are the senior debt securities, which have an amortized cost basis of $6.8 billion and fair value of $6.9 billion at September 30, 2009, and the payables under the TRS, which have a fair value of $0.1 billion at September 30, 2009. The change in the value of the retained senior debt securities that are classified as AFS securities are recorded in AOCI as they are deemed temporary. The offsetting change in the TRS are recorded as cash flow hedges within AOCI. See Note 14 to the Consolidated Financial Statements for additional information.$155 million.
See Note 1615 to the Consolidated Financial Statements for a discussion and disclosures related to the Company's DerivativeCitigroup's derivative activities. The following discussions relate to the Fair Valuation AdjustmentAdjustments for Derivatives and Credit Derivatives activities.
Fair Valuation Adjustments for Derivatives
The fair value adjustments applied by the Company to its derivative carrying values consist of the following items:
The Company's CVA methodology comprises two steps. First, the exposure profile for each counterparty is determined using the terms of all individual derivative positions and a Monte Carlo simulation or other quantitative analysis to generate a series of expected cash flows at future points in time. The calculation of this exposure profile considers the effect of credit risk mitigants, including pledged cash or other collateral and any legal right of offset that exists with a counterparty through arrangements such as netting agreements. Individual derivative contracts that are subject to an enforceable master netting agreement with a counterparty are aggregated for this purpose, since it is those aggregate net cash flows that are subject to nonperformance risk. This process identifies specific, point in time future cash flows that are subject to nonperformance risk, rather than using the current recognized net asset or liability as a basis to measure the CVA.
Second, market-based views of default probabilities derived from observed credit spreads in the credit default swap market, are applied to the expected future cash flows determined in step one. Own-credit CVA is determined using Citi-specific CDS spreads for the relevant tenor. Generally, counterparty CVA is determined using CDS spread indices for each credit rating and tenor. For certain identified facilities where individual analysis is practicable (for example, exposures to monoline counterparties) counterparty-specific CDS spreads are used.
The CVA adjustment is designed to incorporate a market view of the credit risk inherent in the derivative portfolio. However, most derivative instruments are negotiated bilateral contracts and are not commonly transferred to third parties. Derivative instruments are normally settled contractually, or if terminated early, are terminated at a value negotiated bilaterally between the counterparties. Therefore, the CVA (both counterparty and own-credit) may not be realized upon a settlement or termination in the normal course of business.
In addition, all or a portion of the CVA may be reversed or otherwise adjusted in future periods in the event of changes in the credit risk of Citi or its counterparties, or changes in the credit mitigants (collateral and netting agreements) associated with the derivative instruments. Historically, Citigroup's credit spreads have moved in tandem with general counterparty credit spreads, thus providing offsetting CVAs affecting revenue. However, in the first quarter of 2009, Citigroup's credit spreads widened and counterparty credit spreads generally narrowed, each of which positively affected revenues. Conversely, in the second and third quarters of 2009, Citigroup's credit spreads narrowed and negatively affected revenues.
The table below summarizes pretax gains (losses) related to changes in CVAs on derivative instruments for the quarters ended September 30, 2009 and 2008, respectively:
| Credit valuation adjustment gain (loss) | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Non-monoline counterparties | $ | 855 | $ | (851 | ) | ||
Citigroup (own) | (1,534 | ) | 1,951 | ||||
Net non-monoline CVA | $ | (679 | ) | $ | 1,100 | ||
Monoline counterparties | (61 | ) | (920 | ) | |||
Total CVA—derivative instruments | $ | (740 | ) | $ | 180 | ||
The table below summarizes pretax gains (losses) related to changes in CVAs on derivative instruments for the nine months ended September 30, 2009 and 2008, respectively:
| Credit valuation adjustment gain (loss) | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Non-monoline counterparties | $ | 5,387 | $ | (2,236 | ) | ||
Citigroup (own) | (1,891 | ) | 3,165 | ||||
Net non-monoline CVA | $ | 3,496 | $ | 929 | |||
Monoline counterparties | (995 | ) | (4,839 | ) | |||
Total CVA—derivative instruments | $ | 2,501 | $ | (3,910 | ) | ||
The table below summarizes the CVA applied to the fair value of derivative instruments as of September 30, 20092010 and December 31, 2008, respectively.2009.
| Credit valuation adjustment Contra liability (contra asset) | Credit valuation adjustment Contra-liability (contra-asset) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
Non-monoline counterparties | $ | (2,878 | ) | $ | (8,266 | ) | $ | (3,642 | ) | $ | (3,010 | ) | ||
Citigroup (own) | 1,754 | 3,611 | 1,497 | 1,401 | ||||||||||
Net non-monoline CVA | $ | (1,124 | ) | $ | (4,655 | ) | $ | (2,145 | ) | $ | (1,609 | ) | ||
Monoline counterparties | (5,274 | ) | (4,279 | ) | (1,576 | ) | (5,580 | ) | ||||||
Total CVA—derivative instruments | $ | (6,398 | ) | $ | (8,934 | ) | $ | (3,721 | ) | $ | (7,189 | ) | ||
The table below summarizes pretax gains (losses) related to changes in credit valuation adjustments on derivative instruments, net of hedges:
| Credit valuation adjustment gain (loss) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Third Quarter 2010 | Third Quarter 2009 | Nine months ended Sept 30, 2010 | Nine months ended Sept 30, 2009 | |||||||||
CVA on derivatives, excluding monolines | $ | 348 | $ | (864 | ) | $ | 415 | $ | 2,351 | ||||
CVA related to monoline counterparties | 61 | (61 | ) | 494 | (994 | ) | |||||||
Total CVA—derivative instruments | $ | 409 | $ | (925 | ) | $ | 909 | $ | 1,357 | ||||
The CVA amounts shown above relate solely to the derivative portfolio, and do not include:
Note 1716 to the Consolidated Financial Statements for further information.
Credit Derivatives
The CompanyCitigroup makes markets in and trades a range of credit derivatives, both on behalf of clients as well as for its own account. Through these contracts the CompanyCitigroup either purchases or writes protection on either a single-name or portfolio basis. The CompanyCiti primarily uses credit derivatives to help mitigate credit risk in its corporate loan portfolio and other cash positions, to take proprietary trading positions, and to facilitate client transactions.
Credit derivatives generally require that the seller of credit protection make payments to the buyer upon the occurrence of pre-definedpredefined events (settlement triggers). These settlement triggers, which are defined by the form of the derivative and the referenced credit, and are generally limited to the market standard of failure to pay on indebtedness and bankruptcy (or comparable events) of the reference credit and, in a more limited range of transactions, debt restructuring.
Credit derivative transactions referring to emerging market reference credits will also typically include additional settlement triggers to cover the acceleration of indebtedness and the risk of repudiation or a payment moratorium. In certain transactions on a portfolio of referenced credits or asset-backed securities, the seller of protection may not be required to make payment until a specified amount of losses has occurred with respect to the portfolio and/or may only be required to pay for losses up to a specified amount.
The following tables summarize the key characteristics of the Company'sCiti's credit derivativederivatives portfolio by counterparty and derivative instrumentform as of September 30, 20092010 and December 31, 2008, respectively:2009:
September 30, 2010:
| Fair values | Notionals | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Receivable | Payable | Beneficiary | Guarantor | |||||||||
By industry/counterparty | |||||||||||||
Bank | $ | 44,250 | $ | 41,271 | $ | 878,776 | $ | 824,452 | |||||
Broker-dealer | 16,948 | 17,057 | 324,807 | 321,330 | |||||||||
Monoline | 2,044 | — | 4,400 | — | |||||||||
Non-financial | 105 | 98 | 1,629 | �� | 1,690 | ||||||||
Insurance and other financial institutions | 10,068 | 9,053 | 172,004 | 116,398 | |||||||||
Total by industry/counterparty | $ | 73,415 | $ | 67,479 | $ | 1,381,616 | $ | 1,263,870 | |||||
By instrument | |||||||||||||
Credit default swaps and options | $ | 72,910 | $ | 65,696 | $ | 1,357,410 | $ | 1,262,408 | |||||
Total return swaps and other | 505 | 1,783 | 24,206 | 1,462 | |||||||||
Total by instrument | $ | 73,415 | $ | 67,479 | $ | 1,381,616 | $ | 1,263,870 | |||||
By rating: | |||||||||||||
Investment grade | $ | 21,267 | $ | 17,113 | $ | 604,594 | $ | 535,545 | |||||
Non-investment grade(1) | 52,148 | 50,366 | 777,022 | 728,325 | |||||||||
Total by Rating | $ | 73,415 | $ | 67,479 | $ | 1,381,616 | $ | 1,263,870 | |||||
By maturity: | |||||||||||||
Within 1 year | $ | 1,961 | $ | 2,229 | $ | 161,369 | $ | 154,308 | |||||
From 1 to 5 years | 43,744 | 37,835 | 962,211 | 871,926 | |||||||||
After 5 years | 27,710 | 27,415 | 258,036 | 237,636 | |||||||||
Total by maturity | $ | 73,415 | $ | 67,479 | $ | 1,381,616 | $ | 1,263,870 | |||||
December 31, 2009:
| Fair values | Notionals | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Receivable | Payable | Beneficiary | Guarantor | |||||||||
By Industry/Counterparty: | |||||||||||||
Bank | $ | 62,785 | $ | 61,679 | $ | 914,418 | $ | 860,437 | |||||
Broker-dealer | 23,425 | 22,323 | 321,199 | 301,216 | |||||||||
Monoline | 6,572 | 1 | 8,299 | — | |||||||||
Non-financial | 181 | 193 | 3,405 | 2,127 | |||||||||
Insurance and other financial institutions | 19,264 | 16,379 | 202,054 | 151,326 | |||||||||
Total by Industry/Counterparty | $ | 112,227 | $ | 100,575 | $ | 1,449,375 | $ | 1,315,106 | |||||
By Instrument: | |||||||||||||
Credit default swaps and options | $ | 107,770 | $ | 99,376 | $ | 1,418,691 | $ | 1,314,282 | |||||
Total return swaps | 4,457 | 1,199 | 30,684 | 824 | |||||||||
Total by Instrument | $ | 112,227 | $ | 100,575 | $ | 1,449,375 | $ | 1,315,106 | |||||
December 31, 2008(1):
| Fair values | Notionals | Fair values | Notionals | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Receivable | Payable | Beneficiary | Guarantor | Receivable | Payable | Beneficiary | Guarantor | ||||||||||||||||||
By Industry/Counterparty: | ||||||||||||||||||||||||||
By industry/counterparty | ||||||||||||||||||||||||||
Bank | $ | 128,042 | $ | 121,811 | $ | 996,248 | $ | 943,949 | $ | 52,383 | $ | 50,778 | $ | 872,523 | $ | 807,484 | ||||||||||
Broker-dealer | 59,321 | 56,858 | 403,501 | 365,664 | 23,241 | 22,932 | 338,829 | 340,949 | ||||||||||||||||||
Monoline | 6,886 | 91 | 9,973 | 139 | 5,860 | — | 10,018 | 33 | ||||||||||||||||||
Non-financial | 4,874 | 2,561 | 5,608 | 7,540 | 339 | 371 | 1,781 | 623 | ||||||||||||||||||
Insurance and other financial institutions | 29,228 | 22,388 | 180,354 | 125,988 | 10,969 | 8,343 | 109,811 | 64,964 | ||||||||||||||||||
Total by Industry/Counterparty | $ | 228,351 | $ | 203,709 | $ | 1,595,684 | $ | 1,443,280 | ||||||||||||||||||
Total by industry/counterparty | $ | 92,792 | $ | 82,424 | $ | 1,332,962 | $ | 1,214,053 | ||||||||||||||||||
By Instrument: | ||||||||||||||||||||||||||
By instrument | ||||||||||||||||||||||||||
Credit default swaps and options | $ | 221,159 | $ | 203,220 | $ | 1,560,222 | $ | 1,441,375 | $ | 91,625 | $ | 81,174 | $ | 1,305,724 | $ | 1,213,208 | ||||||||||
Total return swaps | 7,192 | 489 | 35,462 | 1,905 | ||||||||||||||||||||||
Total return swaps and other | 1,167 | 1,250 | 27,238 | 845 | ||||||||||||||||||||||
Total by Instrument | $ | 228,351 | $ | 203,709 | $ | 1,595,684 | $ | 1,443,280 | ||||||||||||||||||
Total by instrument | $ | 92,792 | $ | 82,424 | $ | 1,332,962 | $ | 1,214,053 | ||||||||||||||||||
By rating: | ||||||||||||||||||||||||||
Investment grade | $ | 26,666 | $ | 22,469 | $ | 656,876 | $ | 576,930 | ||||||||||||||||||
Non-investment grade(1) | 66,126 | 59,995 | 676,086 | 637,123 | ||||||||||||||||||||||
Total by Rating | $ | 92,792 | $ | 82,424 | $ | 1,332,962 | $ | 1,214,053 | ||||||||||||||||||
By maturity: | ||||||||||||||||||||||||||
Within 1 year | $ | 2,167 | $ | 2,067 | $ | 173,880 | $ | 165,056 | ||||||||||||||||||
From 1 to 5 years | 54,079 | 47,350 | 877,573 | 806,143 | ||||||||||||||||||||||
After 5 years | 36,546 | 33,007 | 281,509 | 242,854 | ||||||||||||||||||||||
Total by maturity | $ | 92,792 | $ | 82,424 | $ | 1,332,962 | $ | 1,214,053 | ||||||||||||||||||
The fair values shown are prior to the application of any netting agreements, cash collateral, and market or credit value adjustments.
The CompanyCitigroup actively participates in trading a variety of credit derivatives products as both an active two-way market-maker for clients and to manage credit risk. The majority of this activity was transacted with other financial intermediaries, including both banks and broker-dealers. The CompanyCitigroup generally has a mismatch between the total notional amounts of protection purchased and sold and it may hold the reference assets directly, rather than entering into offsetting credit derivative contracts as and when desired. The open risk exposures from credit derivative contracts are largely matched after certain cash positions in reference assets are considered and after notional amounts are adjusted, either to a duration-based equivalent basis or to reflect the level of subordination in tranched structures.
The CompanyCiti actively monitors its counterparty credit risk in credit derivative contracts. Approximately 87%89% and 85% of the gross receivables as of September 30, 2009 are from counterparties with which the CompanyCiti maintains collateral agreements.agreements as of September 30, 2010 and December 31, 2009, respectively. A majority of the Company'sCiti's top 15 counterparties (by receivable balance owed to the Company)company) are banks, financial institutions or other dealers. Contracts with these counterparties do not include ratings-based termination events. However, counterparty ratingratings downgrades may have an incremental effect by lowering the threshold at which the CompanyCitigroup may call for additional collateral. A number of the remaining significant counterparties are monolines.
Table of Contentsmonolines (which have CVA as shown above).
MARKET RISK MANAGEMENT PROCESSINCOME TAXES
Market risk encompasses liquidity risk and price risk, bothDeferred Tax Assets
Deferred tax assets (DTAs) are recorded for the future consequences of which ariseevents that have been recognized in the normal coursefinancial statements or tax returns, based upon enacted tax laws and rates. DTAs are recognized subject to management's judgment that realization is more likely than not. For additional information, see "Significant Accounting Policies and Significant Estimates—Income Taxes" in Citi's 2009 Annual Report on Form 10-K.
As of businessSeptember 30, 2010, Citigroup had recorded net DTAs of approximately $50.8 billion, an increase of $0.9 billion from $49.9 billion at June 30, 2010 and an increase of $4.7 billion from $46.1 billion at December 31, 2009. Excluding the impact of the adoption of SFAS 166/167, the DTAs decreased $0.2 billion during the first nine months of 2010. The adoption of SFAS 166/167 on January 1, 2010 resulted in an increase to the DTAs of approximately $4.9 billion related to the allowance for loan losses recorded upon consolidation of credit card trusts.
Although realization is not assured, Citi believes that the realization of the recognized net DTAs of $50.8 billion at September 30, 2010 is more likely than not based on expectations as to future taxable income in the jurisdictions in which the DTAs arise and, based on available tax planning strategies as defined in ASC 740,Income Taxes, that could be implemented if necessary to prevent a global financial intermediary. Liquidity riskcarry-forward from expiring.
Approximately $21.4 billion of Citigroup's DTAs at September 30, 2010 is represented by U.S. federal, foreign, state and local tax return carry-forwards subject to expiration substantially beginning in 2017 and continuing through 2029. Also included in Citi's overall net DTAs of $50.8 billion is approximately $29.4 billion of future tax deductions and credits that arose largely due to timing differences between the recognition of income for GAAP and tax purposes and represent net deductions and credits that have not yet been taken on a tax return. The most significant source of these timing differences is the risk that an entity may be unableloan loss reserve build, which accounts for approximately $17 billion of the net DTAs. In general, Citi would need to meet a financial commitmentrecognize approximately $103 billion of taxable income, primarily in U.S. taxable jurisdictions, during the respective carry-forward periods to a customer, creditor, or investor when due. Liquidity risk is discussed in "Capital Resourcesfully realize its U.S. federal, state and Liquidity" below. Price risk is the earnings risk from changes in interest rates, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Price risk arises in non-trading portfolios, as well as in trading portfolios.
Interest Rate Exposure (IRE)local DTAs.
The exposures inU.S. Federal net operating loss (NOL) carry-forward component of the following table representDTAs was approximately $2.3 billion at September 30, 2010, down from $5.1 billion at December 31, 2009. As Citi continues to generate U.S. federal taxable income, the approximate annualized riskdomestic portion of the NOL carry-forward component of the DTAs will continue to Net Interest Revenue (NIR) assuming an unanticipated parallel instantaneous 100 basis points change, as well as a more gradual 100 basis points (25 basis points per quarter) parallel change in rates as compared withdecrease. Under U.S. tax law, NOL carry-forwards are used against taxable income before foreign tax credits (FTCs) or general business credits (GBCs) are utilized. The FTC component of the market forward interest rates in selected currencies.
| September 30, 2009 | June 30, 2009 | September 30, 2008 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Increase | Decrease | Increase | Decrease | Increase | Decrease | |||||||||||||
U.S. dollar | |||||||||||||||||||
Instantaneous change | $ | (1,193 | ) | $ | 1,427 | $ | (1,767 | ) | $ | 1,935 | $ | (1,811 | ) | $ | 893 | ||||
Gradual change | $ | (563 | ) | $ | 526 | $ | (1,005 | ) | $ | 936 | $ | (707 | ) | $ | 490 | ||||
Mexican peso | |||||||||||||||||||
Instantaneous change | $ | 25 | $ | (25 | ) | $ | (21 | ) | $ | 21 | $ | (23 | ) | $ | 23 | ||||
Gradual change | $ | 11 | $ | (11 | ) | $ | (15 | ) | $ | 15 | $ | (19 | ) | $ | 19 | ||||
Euro | |||||||||||||||||||
Instantaneous change | $ | 52 | $ | (4 | ) | $ | (29 | ) | $ | 21 | $ | (52 | ) | $ | 52 | ||||
Gradual change | $ | 12 | $ | (12 | ) | $ | (35 | ) | $ | 35 | $ | (41 | ) | $ | 41 | ||||
Japanese yen | |||||||||||||||||||
Instantaneous change | $ | 228 | NM | $ | 215 | NM | $ | 142 | NM | ||||||||||
Gradual change | $ | 135 | NM | $ | 122 | NM | $ | 72 | NM | ||||||||||
Pound sterling | |||||||||||||||||||
Instantaneous change | $ | (11 | ) | $ | 24 | $ | (11 | ) | $ | 11 | $ | 16 | $ | (16 | ) | ||||
Gradual change | $ | (11 | ) | $ | 11 | $ | (14 | ) | $ | 14 | $ | 13 | $ | (13 | ) | ||||
NM Not meaningful. A 100 basis point decrease in interest rates would imply negative rates forDTA was approximately $13.9 billion at September 30, 2010, and the Japanese yen yield curve.
The changes inGBC component of the DTA was approximately $1.5 billion. Moreover, until the U.S. dollar interest rate exposures from June 30, 2009Federal NOL carry-forward is fully utilized, the FTCs and GBCs will likely continue to September 30, 2009 are relatedincrease. Based on Citi's current expectations of future taxable income, Citi expects the U.S. federal NOL carry-forward to customer-related asset and liability mix, term debt issuance,be utilized in 2011. Citi's net DTA will decline as well as Citigroup's view of prevailing interest rates.additional domestic GAAP taxable income is generated.
Certain risk positions in the non-trading portfolio are economically hedged with offsetting positions in the mark-to-market portfolio, which are reflected in the Value at Risk metrics. If the effect of these hedging transactions were netted against the non-trading portfolio it would reduce Citi's risk from an instantaneous parallel increase in rates from ($1,193) million to ($569) million and decrease Citi's opportunity from an instantaneous parallel decrease in rates from $1,427 million to $803 million.
The following table shows the risk to NIR from six different changes in the implied forward rates. Each scenario assumes that the rate change will occur on a gradual basis every three months over the course of one year.
| Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | Scenario 5 | Scenario 6 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Overnight rate change (bp) | — | 100 | 200 | (200 | ) | (100 | ) | — | |||||||||||
10-year rate change (bp) | (100 | ) | — | 100 | (100 | ) | — | 100 | |||||||||||
Impact to net interest revenue | $ | 8 | $ | (514 | ) | $ | (1,131 | ) | $ | 62 | $ | 269 | $ | (61 | ) | ||||
Value The utilization of Citi's DTAs is necessarily subject to Citi's estimates of future taxable income in the jurisdictions in which it operates during the respective carry-forward periods which is in turn subject to overall market and global economic conditions.
In addition, Citi's ability to utilize its DTAs to offset future taxable income may be significantly limited if Citi experiences an "ownership change," as defined in Section 382 of the Internal Revenue Code of 1986, as amended ("Code"). In general, an ownership change will occur if there is a cumulative change in Citi's ownership by "5% shareholders" (as defined in the Code) that exceeds 50 percentage points over a rolling three-year period. A corporation that experiences an ownership change will generally be subject to an annual limitation on its pre-ownership change DTAs equal to the value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate (subject to certain adjustments); provided that the annual limitation would be increased each year to the extent that there is an unused limitation in a prior year. The limitation arising from an ownership change under Section 382 on Citigroup's ability to utilize its DTAs will depend on the value of Citigroup's stock at Riskthe time of the ownership change.
Under IRS Notice 2010-2, Citigroup will not experience an ownership change within the meaning of Section 382 as a result of the sales of its common stock held by the U.S. Treasury.
Approximately $14 billion of the net DTAs is included in Citigroup's Tier 1 Capital and Tier 1 Common regulatory capital.
Other
For Citigroup's major trading centers,As previously disclosed in Citi's 2009 Annual Report on Form 10-K, Citi's tax provision has historically been reduced because active financing income earned and indefinitely reinvested outside the aggregate pretax valueU.S. is taxed at risk (VAR) inlower local tax rates rather than at the trading portfolios was $273 million, $277 million, $319 million and $237 million at September 30, 2009, June 30, 2009,higher U.S. tax rate. Such reduction has been dependent upon a provision of the U.S. tax law that defers the imposition of U.S. taxes on certain active financial services income until that income is repatriated to the U.S. as a dividend. This "active financing exception" expired for taxable years beginning after December 31, 2008 and September 30, 2008, respectively. Daily Citigroup trading VAR averaged $281 million and ranged from $247 million to $312 million during the third quarter of 2009. The following table summarizes VAR for Citigroup trading portfolios at September 30, 2009, June 30, 2009, December 31, 2008expiration of this exception has moderately increased Citi's 2010 tax provision. To date, the U.S. Congress has not extended the active financing exception. In the event this exception is not extended, the U.S. tax imposed on Citi's active financing income earned outside the U.S. would increase, which would result in Citi's tax expense increasing significantly and, September 30, 2008, including the total VAR, the specific risk only component of VAR, and general market factor VAR's, along with the quarterly averages:
In million of dollars | September 30, 2009 | Third Quarter 2009 Average | June 30, 2009 | Second Quarter 2009 Average | December 31, 2008 | Fourth Quarter 2008 Average | September 30, 2008 | Third Quarter 2008 Average | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest rate | $ | 240 | $ | 237 | $ | 226 | $ | 217 | $ | 320 | $ | 272 | $ | 240 | $ | 265 | |||||||||
Foreign exchange | 98 | 90 | 84 | 61 | 118 | 80 | 40 | 43 | |||||||||||||||||
Equity | 51 | 62 | 65 | 94 | 84 | 94 | 106 | 99 | |||||||||||||||||
Commodity | 41 | 38 | 36 | 38 | 15 | 16 | 20 | 20 | |||||||||||||||||
Diversification benefit | (157 | ) | (146 | ) | (134 | ) | (150 | ) | (218 | ) | (167 | ) | (169 | ) | (187 | ) | |||||||||
Total—All market risk factors, including general and specific risk | $ | 273 | $ | 281 | $ | 277 | $ | 260 | $ | 319 | $ | 295 | $ | 237 | $ | 240 | |||||||||
Specific risk only component | $ | 12 | $ | 17 | $ | 18 | $ | 20 | $ | 8 | 25 | $ | 20 | $ | 14 | ||||||||||
Total—General market factors only | $ | 261 | $ | 264 | $ | 259 | $ | 240 | $ | 311 | $ | 270 | $ | 217 | $ | 226 | |||||||||
The specific risk only component represents the level of equity and debt issuer-specific risk embedded in VAR. Citigroup's specific risk model conforms to the 4x-multiplier treatment and is subject to extensive annual hypothetical back-testing.
The table below provides the range of market factor VARs, inclusive of specific risk, across the quarters ended:
| September 30, 2009 | June 30, 2009 | December 31, 2008 | September 30, 2008 | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Low | High | Low | High | Low | High | Low | High | |||||||||||||||||
Interest rate | $ | 218 | $ | 260 | $ | 193 | $ | 240 | $ | 227 | $ | 328 | $ | 239 | $ | 292 | |||||||||
Foreign exchange | 55 | 110 | 31 | 91 | 43 | 130 | 28 | 71 | |||||||||||||||||
Equity | 51 | 95 | 50 | 153 | 68 | 122 | 80 | 134 | |||||||||||||||||
Commodity | 32 | 45 | 26 | 50 | 12 | 22 | 12 | 46 | |||||||||||||||||
The following table provides the VAR for Citicorp's Securities and Banking business for the second and third quarters of 2009:
In millions of dollars | September 30, 2009 | June 30, 2009 | |||||
---|---|---|---|---|---|---|---|
Total—All market risk factors, including general and specific risk | $ | 168 | $ | 213 | |||
Average—during quarter | 184 | 186 | |||||
High—during quarter | 247 | 214 | |||||
Low—during quarter | 148 | 148 | |||||
Table of Contentsaccordingly, adversely impact Citi's future earnings.
OPERATIONAL RISK MANAGEMENT PROCESSRECLASSIFICATION OF HTM SECURITIES TO AFS
Operational risk is In March 2010, the riskFASB issued ASU 2010-11,Scope Exception Related to Embedded Credit Derivatives. The ASU clarifies that certain embedded derivatives, such as those contained in certain securitizations, CDOs and structured notes, should be considered embedded credit derivatives subject to potential bifurcation and separate fair value accounting. The ASU allows any beneficial interest issued by a securitization vehicle to be accounted for under the fair value option at transition on July 1, 2010.
Citi elected to account for beneficial interests issued by securitization vehicles, with a total fair value of loss resulting from inadequate or failed internal processes, systems or human factors, or from external events. It includes$12.0 billion, under the reputationfair value option on July 1, 2010. Beneficial interests previously classified as HTM were reclassified to AFS on June 30, 2010, because as of that reporting date, Citi did not have the intent to hold the beneficial interests until maturity.
All reclassified debt securities with gross unrealized losses were assessed for other-than-temporary impairment as of June 30, 2010, including an assessment of whether Citi intends to sell the security. For securities that Citi intends to sell, impairment charges of $176 million (pretax) were recorded in earnings in the second quarter of 2010.
On July 1, 2010, Citi recorded a cumulative-effect adjustment to retained earnings for reclassified beneficial interests, consisting of gross unrealized losses recognized inAccumulated other comprehensive income (AOCI) of $420 million and franchise risk associated with business practices or market conductgross unrealized gains recognized in which the Company is involved. Operational risk is inherent in Citigroup's global business activitiesAOCI of $359 million, for a net pretax charge toRetained earnings of $61 million ($41 million after tax).
See Notes 1 and as with other risk types, is managed through an overall framework designed to balance strong corporate oversight with well-defined independent risk management. This framework includes:
The goal is to keep operational risk at appropriate levels relative10 to the characteristics of our businesses, the markets in which we operate our capital and liquidity, and the competitive, economic and regulatory environment. Notwithstanding these controls, Citigroup incurs operational losses.
Framework
To monitor, mitigate and control operational risk, Citigroup maintains a system of comprehensive policies and has established a consistent, value-added frameworkConsolidated Financial Statements for assessing and communicating operational risk and the overall effectiveness of the internal control environment across Citigroup. An Operational Risk Council has been established to provide oversight for operational risk across Citigroup. The Council's membership includes senior members of the Chief Risk Officer's organization covering multiple dimensions of risk management with representatives of the Business and Regional Chief Risk Officers' organizations and the Business Management Group. The Council's focus is on further advancing operational risk management at Citigroup with focus on proactive identification and mitigation of operational risk and related incidents. The Council works with the business segments and the control functions to help ensure a transparent, consistent and comprehensive framework for managing operational risk globally.
Each major business segment must implement an operational risk process consistent with the requirementsdetails of this framework. The process for operational risk management includes the following steps:
The operational risk standards facilitate the effective communication and mitigation of operational risk both within and across businesses. As new products and business activities are developed, processes are designed, modified or sourced through alternative means and operational risks are considered. Information about the businesses' operational risk, historical losses, and the control environment is reported by each major business segment and functional area, and summarized for senior management and the Citigroup Board of Directors.
Measurement and Basel II
To support advanced capital modeling and management, the businesses are required to capture relevant operational risk capital information. An enhanced version of the risk capital model for operational risk has been developed and implemented across the major business segments as a step toward readiness for Basel II capital calculations. The risk capital calculation is designed to qualify as an "Advanced Measurement Approach" under Basel II. It uses a combination of internal and external loss data to support statistical modeling of capital requirement estimates, which are then adjusted to reflect qualitative data regarding the operational risk and control environment.
Information Security and Continuity of Business
Information security and the protection of confidential and sensitive customer data are a priority of Citigroup. The Company has implemented an Information Security Program that complies with the Gramm-Leach-Bliley Act and other regulatory guidance. The Information Security Program is reviewed and enhanced periodically to address emerging threats to customers' information.
The Corporate Office of Business Continuity, with the support of senior management, continues to coordinate global preparedness and mitigate business continuity risks by reviewing and testing recovery procedures.reclassification.
COUNTRY AND CROSS-BORDER RISKEXPOSURE TO COMMERCIAL REAL ESTATE
The table below shows all countries where total Federal Financial Institutions Examination Council (FFIEC) cross-border outstandings exceed 0.75% of total Citigroup assets:
| September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In Billions of U.S. dollars | |||||||||||||||||||||||||||||||
Cross-Border Claims on Third Parties | |||||||||||||||||||||||||||||||
| Banks | Public | Private | Total | Trading and Short-Term Claims | Investments in and Funding of Local Franchises | Total Cross-Border Outstandings | Commitments | Total Cross-Border Outstandings | Commitments | |||||||||||||||||||||
Germany | $ | 9.0 | $ | 4.9 | $ | 7.2 | $ | 21.1 | $ | 19.4 | $ | 6.3 | $ | 27.4 | $ | 56.6 | $ | 29.9 | $ | 48.6 | |||||||||||
France | 10.1 | 5.9 | 8.9 | 24.9 | 21.0 | 0.1 | 25.0 | 75.2 | 21.4 | 66.4 | |||||||||||||||||||||
India | 0.9 | 0.2 | 6.9 | 8.0 | 5.0 | 15.0 | 23.0 | 1.6 | 28.0 | 1.6 | |||||||||||||||||||||
Netherlands | 6.3 | 3.3 | 10.5 | 20.1 | 16.2 | — | 20.1 | 73.8 | 17.7 | 67.4 | |||||||||||||||||||||
South Korea | 2.0 | 0.9 | 5.1 | 8.0 | 7.8 | 11.2 | 19.2 | 14.1 | 22.0 | 15.7 | |||||||||||||||||||||
United Kingdom | 6.3 | 0.2 | 9.5 | 16.0 | 13.4 | — | 16.0 | 135.5 | 26.3 | 128.3 | |||||||||||||||||||||
Italy | 0.8 | 8.7 | 3.0 | 12.5 | 10.1 | 3.1 | 15.6 | 21.7 | 14.7 | 20.2 | |||||||||||||||||||||
Cayman Islands | 0.2 | — | 14.2 | 14.4 | 13.3 | — | 14.4 | 6.8 | 22.1 | 8.2 | |||||||||||||||||||||
Canada | 1.3 | 0.5 | 3.5 | 5.3 | 3.6 | 8.0 | 13.3 | 7.4 | 16.1 | 36.1 | |||||||||||||||||||||
INTEREST REVENUE/EXPENSE AND YIELDS
Average Rates—Interest Revenue, Interest Expense, and Net Interest Margin
In millions of dollars | 3rd Qtr. 2009 | 2nd Qtr. 2009(1) | 3rd Qtr. 2008(1) | Change 3Q09 vs. 3Q08 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest Revenue(2) | $ | 18,678 | $ | 19,671 | $ | 26,130 | (29 | )% | ||||||
Interest Expense(3) | 6,680 | 6,842 | 12,726 | (48 | ) | |||||||||
Net Interest Revenue(2)(3) | $ | 11,998 | $ | 12,829 | $ | 13,404 | (10 | )% | ||||||
Interest Revenue—Average Rate | �� | 4.59 | % | 4.97 | % | 6.14 | % | (155 | ) bps | |||||
Interest Expense—Average Rate | 1.83 | % | 1.93 | % | 3.23 | % | (140 | ) bps | ||||||
Net Interest Margin (NIM) | 2.95 | % | 3.24 | % | 3.15 | % | (20 | ) bps | ||||||
Interest Rate Benchmarks: | ||||||||||||||
Federal Funds Rate—End of Period | 0.00-0.25 | % | 0.00-0.25 | % | 2.00 | % | (175+ | ) bps | ||||||
2 Year U.S. Treasury Note—Average Rate | 1.03 | % | 1.02 | % | 2.36 | % | (133 | ) bps | ||||||
10 Year U.S. Treasury Note—Average Rate | 3.52 | % | 3.32 | % | 3.86 | % | (34 | ) bps | ||||||
10 Year vs. 2 Year Spread | 249 bps | 230 bps | 150 bps | |||||||||||
(1) Assets held at fair value with changes recorded inPrincipal transactions.
A significant portion include approximately $6.7 billion, of the Company's business activitieswhich approximately $4.5 billion are based upon gathering depositssecurities, loans and borrowing money and then lending or investing those funds, including market-making activities in tradable securities. Net interest margin (NIM) is calculated by dividing annualized gross interest revenue less gross interest expense by average interest earning assets.
During the third quarter of 2009, the yields across both the interest earning assets as well as the interest earning liabilities dropped significantly from the same period in 2008. The lower asset yields more than offset the lower cost of funds, resulting in lower NIM comparedother items linked to the prior-year period.
Net interest margin decreased by 29 basis points compared to the second quarter of 2009, driven by two principal items. First, the Company experienced a higher cost of borrowings due to debt issuances outside of the government programs (e.g., non-TLGP debt) as well the increased interest paid on the additional trust preferred securities outstanding as a result of the completion of the exchange offers. Second, Citi's business spread compression, generally of two types—narrowing of yields in Citi's asset businesses, due to the continued de-risking of loan portfolios and expansion of loss mitigation efforts, and the natural compression of spreads in the Company's deposit businesses as a result of the continued low interest rate environment.
AVERAGE BALANCES AND INTEREST RATES—ASSETS(1)(2)(3)(4)
| Average Volume | Interest Revenue | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 3rd Qtr. 2008 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 3rd Qtr. 2008 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 3rd Qtr. 2008 | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Deposits with banks(5) | $ | 190,269 | $ | 168,631 | $ | 65,667 | $ | 313 | $ | 377 | $ | 792 | 0.65 | % | 0.90 | % | 4.80 | % | |||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell(6) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 140,756 | $ | 131,522 | $ | 157,355 | $ | 476 | $ | 515 | $ | 1,272 | 1.34 | % | 1.57 | % | 3.22 | % | |||||||||||
In offices outside the U.S.(5) | 70,790 | 61,382 | 73,631 | 252 | 279 | 943 | 1.41 | 1.82 | 5.10 | ||||||||||||||||||||
Total | $ | 211,546 | $ | 192,904 | $ | 230,986 | $ | 728 | $ | 794 | $ | 2,215 | 1.37 | % | 1.65 | % | 3.81 | % | |||||||||||
Trading account assets(7)(8) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 138,781 | $ | 134,334 | $ | 210,248 | $ | 1,668 | $ | 1,785 | $ | 2,740 | 4.77 | % | 5.33 | % | 5.18 | % | |||||||||||
In offices outside the U.S.(5) | 129,135 | 120,468 | 150,985 | 986 | 1,136 | 1,397 | 3.03 | 3.78 | 3.68 | ||||||||||||||||||||
Total | $ | 267,916 | $ | 254,802 | $ | 361,233 | $ | 2,654 | $ | 2,921 | $ | 4,137 | 3.93 | % | 4.60 | % | 4.56 | % | |||||||||||
Investments(1) | |||||||||||||||||||||||||||||
In U.S. offices | |||||||||||||||||||||||||||||
Taxable | $ | 122,608 | $ | 123,181 | $ | 118,950 | $ | 1,568 | $ | 1,674 | $ | 1,185 | 5.07 | % | 5.45 | % | 3.96 | % | |||||||||||
Exempt from U.S. income tax | 18,666 | 16,293 | 13,057 | 226 | 247 | 136 | 4.80 | 6.08 | 4.14 | ||||||||||||||||||||
In offices outside the U.S.(5) | 121,950 | 118,891 | 92,241 | 1,489 | 1,514 | 1,276 | 4.84 | 5.11 | 5.50 | ||||||||||||||||||||
Total | $ | 263,224 | $ | 258,365 | $ | 224,248 | $ | 3,283 | $ | 3,435 | $ | 2,597 | 4.95 | % | 5.33 | % | 4.61 | % | |||||||||||
Loans (net of unearned income)(9) | |||||||||||||||||||||||||||||
Consumer loans | |||||||||||||||||||||||||||||
In U.S. offices | $ | 299,069 | $ | 306,273 | $ | 329,520 | $ | 5,346 | $ | 5,410 | $ | 6,755 | 7.09 | % | 7.09 | % | 8.16 | % | |||||||||||
In offices outside the U.S.(5) | 151,124 | 153,352 | 179,660 | 3,339 | 3,236 | 4,709 | 8.77 | 8.46 | 10.43 | ||||||||||||||||||||
Total consumer loans | $ | 450,193 | $ | 459,625 | $ | 509,180 | $ | 8,685 | $ | 8,646 | $ | 11,464 | 7.65 | % | 7.55 | % | 8.96 | % | |||||||||||
Corporate loans | |||||||||||||||||||||||||||||
In U.S. offices | $ | 71,401 | $ | 79,074 | $ | 73,976 | $ | 593 | $ | 844 | $ | 778 | 3.30 | % | 4.28 | % | 4.18 | % | |||||||||||
In offices outside the U.S.(5) | 117,087 | 117,242 | 135,766 | 2,323 | 2,439 | 3,286 | 7.87 | 8.34 | 9.63 | ||||||||||||||||||||
Total corporate loans | $ | 188,488 | $ | 196,316 | $ | 209,742 | $ | 2,916 | $ | 3,283 | $ | 4,064 | 6.14 | % | 6.71 | % | 7.71 | % | |||||||||||
Total loans | $ | 638,681 | $ | 655,941 | $ | 718,922 | $ | 11,601 | $ | 11,929 | $ | 15,528 | 7.21 | % | 7.29 | % | 8.59 | % | |||||||||||
Other interest-earning Assets | $ | 43,869 | $ | 57,416 | $ | 91,182 | $ | 99 | $ | 215 | $ | 861 | 0.90 | % | 1.50 | % | 3.76 | % | |||||||||||
Total interest-earning Assets | $ | 1,615,505 | $ | 1,588,059 | $ | 1,692,238 | $ | 18,678 | $ | 19,671 | $ | 26,130 | 4.59 | % | 4.97 | % | 6.14 | % | |||||||||||
Non-interest-earning assets(7) | 253,316 | 262,840 | 357,433 | ||||||||||||||||||||||||||
Total Assets from discontinued operations | $ | 21,418 | $ | 19,048 | $ | 45,337 | |||||||||||||||||||||||
Total assets | $ | 1,890,239 | $ | 1,869,947 | $ | 2,095,008 | |||||||||||||||||||||||
AVERAGE BALANCES AND INTEREST RATES—LIABILITIES AND EQUITY, AND NET INTEREST REVENUE(1)(2)(3)(4)
| Average Volume | Interest Expense | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 3rd Qtr. 2008 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 3rd Qtr. 2008 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 3rd Qtr. 2008 | ||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Deposits | |||||||||||||||||||||||||||||
In U.S. offices | |||||||||||||||||||||||||||||
Savings deposits(5) | $ | 173,999 | $ | 173,168 | $ | 161,437 | $ | 613 | $ | 999 | $ | 611 | 1.40 | % | 2.31 | % | 1.51 | % | |||||||||||
Other time deposits | 62,256 | 57,869 | 54,928 | 224 | 278 | 554 | 1.43 | 1.93 | 4.01 | ||||||||||||||||||||
In offices outside the U.S.(6) | 459,142 | 428,188 | 464,429 | 1,461 | 1,563 | 3,750 | 1.26 | 1.46 | 3.21 | ||||||||||||||||||||
Total | $ | 695,397 | $ | 659,225 | $ | 680,794 | $ | 2,298 | $ | 2,840 | $ | 4,915 | 1.31 | % | 1.73 | % | 2.87 | % | |||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase(7) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 131,641 | $ | 133,948 | $ | 160,202 | $ | 248 | $ | 288 | $ | 1,185 | 0.75 | % | 0.86 | % | 2.94 | % | |||||||||||
In offices outside the U.S.(6) | 72,302 | 74,346 | 99,047 | 524 | 643 | 1,536 | 2.88 | 3.47 | 6.17 | ||||||||||||||||||||
Total | $ | 203,943 | $ | 208,294 | $ | 259,249 | $ | 772 | $ | 931 | $ | 2,721 | 1.50 | % | 1.79 | % | 4.18 | % | |||||||||||
Trading account liabilities(8)(9) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 21,204 | $ | 19,592 | $ | 30,251 | $ | 28 | $ | 50 | $ | 251 | 0.52 | % | 1.02 | % | 3.30 | % | |||||||||||
In offices outside the U.S.(6) | 39,431 | 36,652 | 41,816 | 15 | 19 | 34 | 0.15 | 0.21 | 0.32 | ||||||||||||||||||||
Total | $ | 60,635 | $ | 56,244 | $ | 72,067 | $ | 43 | $ | 69 | $ | 285 | 0.28 | % | 0.49 | % | 1.57 | % | |||||||||||
Short-term borrowings | |||||||||||||||||||||||||||||
In U.S. offices | $ | 108,474 | $ | 136,200 | $ | 149,398 | $ | 259 | $ | 209 | $ | 729 | 0.95 | % | 0.62 | % | 1.94 | % | |||||||||||
In offices outside the U.S.(6) | 30,985 | 35,299 | 45,497 | 91 | 106 | 195 | 1.17 | 1.20 | 1.71 | ||||||||||||||||||||
Total | $ | 139,459 | $ | 171,499 | $ | 194,895 | $ | 350 | $ | 315 | $ | 924 | 1.00 | % | 0.74 | % | 1.89 | % | |||||||||||
Long-term debt(10) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 318,610 | $ | 296,324 | $ | 323,788 | $ | 2,952 | $ | 2,427 | $ | 3,460 | 3.68 | % | 3.29 | % | 4.25 | % | |||||||||||
In offices outside the U.S.(6) | 27,447 | 29,318 | 36,375 | 265 | 260 | 421 | 3.83 | 3.56 | 4.60 | ||||||||||||||||||||
Total | $ | 346,057 | $ | 325,642 | $ | 360,163 | $ | 3,217 | $ | 2,687 | $ | 3,881 | 3.69 | % | 3.31 | % | 4.29 | % | |||||||||||
Total interest-bearing liabilities | $ | 1,445,491 | $ | 1,420,904 | $ | 1,567,168 | $ | 6,680 | $ | 6,842 | $ | 12,726 | 1.83 | % | 1.93 | % | 3.23 | % | |||||||||||
Demand deposits in U.S. offices | 34,592 | 19,584 | 7,326 | ||||||||||||||||||||||||||
Other non-interest-bearing liabilities(8) | 250,768 | 267,055 | 351,379 | ||||||||||||||||||||||||||
Total liabilities from discontinued operations | 14,189 | 12,122 | 30,467 | ||||||||||||||||||||||||||
Total liabilities | $ | 1,745,040 | $ | 1,719,665 | $ | 1,956,340 | |||||||||||||||||||||||
Citigroup equity(11) | $ | 143,547 | $ | 148,448 | $ | 131,771 | |||||||||||||||||||||||
Noncontrolling Interest | 1,652 | 1,834 | 6,897 | ||||||||||||||||||||||||||
Total Equity | $ | 145,199 | $ | 150,282 | $ | 138,668 | |||||||||||||||||||||||
Total Liabilities and Equity | $ | 1,890,239 | $ | 1,869,947 | $ | 2,095,008 | |||||||||||||||||||||||
Net interest revenue as a percentage of average interest-earning assets(12) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 947,414 | $ | 944,819 | $ | 976,773 | $ | 5,694 | $ | 6,452 | 6,424 | 2.38 | % | 2.74 | % | 2.62 | % | ||||||||||||
In offices outside the U.S.(6) | 668,091 | 643,240 | 715,465 | 6,304 | 6,377 | 6,980 | 3.74 | 3.98 | 3.88 | ||||||||||||||||||||
Total | $ | 1,615,505 | $ | 1,588,059 | $ | 1,692,238 | $ | 11,998 | $ | 12,829 | $ | 13,404 | 2.95 | % | 3.24 | % | 3.15 | % | |||||||||||
The majority of the ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in
AVERAGE BALANCES AND INTEREST RATES—ASSETS(1)(2)(3)(4)
| Average Volume | Interest Revenue | % Average Rate | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Nine Months 2009 | Nine Months 2008 | Nine Months 2009 | Nine Months 2008 | Nine Months 2009 | Nine Months 2008 | ||||||||||||||
Assets | ||||||||||||||||||||
Deposits with banks(5) | $ | 176,014 | $ | 63,190 | $ | 1,126 | $ | 2,329 | 0.86 | % | 4.92 | % | ||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell(6) | ||||||||||||||||||||
In U.S. offices | $ | 133,427 | $ | 172,482 | $ | 1,541 | $ | 4,344 | 1.54 | % | 3.36 | % | ||||||||
In offices outside the U.S.(5) | 61,534 | 76,851 | 866 | 3,407 | 1.88 | 5.92 | ||||||||||||||
Total | $ | 194,961 | $ | 249,333 | $ | 2,407 | $ | 7,751 | 1.65 | % | 4.15 | % | ||||||||
Trading account assets(7)(8) | ||||||||||||||||||||
In U.S. offices | $ | 140,210 | $ | 235,157 | $ | 5,437 | $ | 9,623 | 5.18 | % | 5.47 | % | ||||||||
In offices outside the U.S.(5) | 119,351 | 161,297 | 3,089 | 3,939 | 3.46 | 3.26 | ||||||||||||||
Total | $ | 259,561 | $ | 396,454 | $ | 8,526 | $ | 13,562 | 4.39 | % | 4.57 | % | ||||||||
Investments(1) | ||||||||||||||||||||
In U.S. offices | ||||||||||||||||||||
Taxable | $ | 122,563 | $ | 111,467 | $ | 4,722 | $ | 3,469 | 5.15 | % | 4.16 | % | ||||||||
Exempt from U.S. income tax | 16,511 | 13,059 | 591 | 433 | 4.79 | 4.43 | ||||||||||||||
In offices outside the U.S.(5) | 115,930 | 96,486 | 4,581 | 3,930 | 5.28 | 5.44 | ||||||||||||||
Total | $ | 255,004 | $ | 221,012 | $ | 9,894 | $ | 7,832 | 5.19 | % | 4.73 | % | ||||||||
Loans (net of unearned income)(9) | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
In U.S. offices | $ | 309,443 | $ | 343,107 | $ | 16,807 | $ | 20,913 | 7.26 | % | 8.14 | % | ||||||||
In offices outside the U.S.(5) | 151,272 | 180,010 | 10,087 | 14,129 | 8.92 | 10.48 | ||||||||||||||
Total consumer loans | $ | 460,715 | $ | 523,117 | $ | 26,894 | $ | 35,042 | 7.80 | % | 8.95 | % | ||||||||
Corporate loans | ||||||||||||||||||||
In U.S. offices | $ | 76,986 | $ | 75,177 | $ | 2,217 | $ | 2,529 | 3.85 | % | 4.49 | % | ||||||||
In offices outside the U.S.(5) | 117,745 | 147,278 | 7,274 | 10,312 | 8.26 | 9.35 | ||||||||||||||
Total corporate loans | $ | 194,731 | $ | 222,455 | $ | 9,491 | $ | 12,841 | 6.52 | % | 7.71 | % | ||||||||
Total loans | $ | 655,446 | $ | 745,572 | $ | 36,385 | $ | 47,883 | 7.42 | % | 8.58 | % | ||||||||
Other interest-earning assets | $ | 50,972 | $ | 100,709 | $ | 594 | $ | 3,271 | 1.56 | % | 4.34 | % | ||||||||
Total interest-earning assets | $ | 1,591,958 | $ | 1,776,270 | $ | 58,932 | $ | 82,628 | 4.95 | % | 6.21 | % | ||||||||
Non-interest-earning assets(7) | 277,243 | 375,399 | ||||||||||||||||||
Total assets from discontinued operations | 20,183 | 53,742 | ||||||||||||||||||
Total assets | $ | 1,889,384 | $ | 2,205,411 | ||||||||||||||||
AVERAGE BALANCES AND INTEREST RATES—LIABILITIES AND EQUITY, AND NET INTEREST REVENUE(1)(2)(3)(4)
| Average Volume | Interest Expense | % Average Rate | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Nine Months 2009 | Nine Months 2008 | Nine Months 2009 | Nine Months 2008 | Nine Months 2009 | Nine Months 2008 | ||||||||||||||
Liabilities | ||||||||||||||||||||
Deposits | ||||||||||||||||||||
In U.S. offices | ||||||||||||||||||||
Savings deposits(5) | $ | 170,715 | $ | 166,799 | $ | 2,245 | $ | 2,334 | 1.76 | % | 1.87 | % | ||||||||
Other time deposits | 60,469 | 59,210 | 918 | 1,946 | 2.03 | 4.39 | ||||||||||||||
In offices outside the U.S.(6) | 432,057 | 486,320 | 4,823 | 11,912 | 1.49 | 3.27 | ||||||||||||||
Total | $ | 663,241 | $ | 712,329 | $ | 7,986 | $ | 16,191 | 1.61 | % | 3.04 | % | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase(7) | ||||||||||||||||||||
In U.S. offices | $ | 139,282 | $ | 188,653 | $ | 852 | $ | 4,519 | 0.82 | % | 3.20 | % | ||||||||
In offices outside the U.S.(6) | 71,611 | 100,437 | 1,955 | 5,040 | 3.65 | 6.70 | ||||||||||||||
Total | $ | 210,893 | $ | 289,090 | $ | 2,807 | $ | 9,559 | 1.78 | % | 4.42 | % | ||||||||
Trading account liabilities(8)(9) | ||||||||||||||||||||
In U.S. offices | $ | 20,503 | $ | 32,576 | $ | 171 | $ | 934 | 1.12 | % | 3.83 | % | ||||||||
In offices outside the U.S.(6) | 35,728 | 46,387 | 49 | 130 | 0.18 | 0.37 | ||||||||||||||
Total | $ | 56,231 | $ | 78,963 | $ | 220 | $ | 1,064 | 0.52 | % | 1.80 | % | ||||||||
Short-term borrowings | ||||||||||||||||||||
In U.S. offices | $ | 131,116 | $ | 156,458 | $ | 835 | $ | 2,695 | 0.85 | % | 2.30 | % | ||||||||
In offices outside the U.S.(6) | 33,833 | 54,438 | 293 | 538 | 1.16 | 1.32 | ||||||||||||||
Total | $ | 164,949 | $ | 210,896 | $ | 1,128 | $ | 3,233 | 0.91 | % | 2.05 | % | ||||||||
Long-term debt(10) | ||||||||||||||||||||
In U.S. offices | $ | 308,201 | $ | 312,940 | $ | 8,199 | $ | 10,745 | 3.56 | % | 4.59 | % | ||||||||
In offices outside the U.S.(6) | 30,274 | 37,885 | 839 | 1,358 | 3.71 | 4.79 | ||||||||||||||
Total | $ | 338,475 | $ | 350,825 | $ | 9,038 | $ | 12,103 | 3.57 | % | 4.61 | % | ||||||||
Total interest-bearing liabilities | $ | 1,433,789 | $ | 1,642,103 | $ | 21,179 | $ | 42,150 | 1.97 | % | 3.43 | % | ||||||||
Demand deposits in U.S. offices | 23,186 | 7,865 | ||||||||||||||||||
Other non-interest bearing liabilities(8) | 272,809 | 387,673 | ||||||||||||||||||
Total liabilities from discontinued operations | 12,670 | 31,013 | ||||||||||||||||||
Total liabilities | $ | 1,742,454 | $ | 2,068,654 | ||||||||||||||||
Total Citigroup equity(11) | $ | 145,097 | $ | 131,245 | ||||||||||||||||
Noncontrolling interest | 1,833 | 5,512 | ||||||||||||||||||
Total Equity | $ | 146,930 | $ | 136,757 | ||||||||||||||||
Total liabilities and stockholders' equity | $ | 1,889,384 | $ | 2,205,411 | ||||||||||||||||
Net interest revenue as a percentage of average interest-earning assets(12) | ||||||||||||||||||||
In U.S. offices | $ | 954,220 | $ | 1,025,789 | $ | 18,789 | $ | 19,187 | 2.63 | % | 2.50 | % | ||||||||
In offices outside the U.S.(6) | 637,738 | 750,481 | 18,964 | 21,291 | 3.98 | 3.79 | ||||||||||||||
Total | $ | 1,591,958 | $ | 1,776,270 | $ | 37,753 | $ | 40,478 | 3.17 | % | 3.04 | % | ||||||||
ANALYSIS OF CHANGES IN INTEREST REVENUE(1)(2)(3)
| 3rd Qtr. 2009 vs. 2nd Qtr. 2009 | 3rd Qtr. 2009 vs. 3rd Qtr. 2008 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Increase (Decrease) Due to Change in: | | Increase (Decrease) Due to Change in: | | |||||||||||||||
In millions of dollars | Average Volume | Average Rate | Net Change | Average Volume | Average Rate | Net Change | |||||||||||||
Deposits with banks(4) | $ | 44 | $ | (108 | ) | $ | (64 | ) | $ | 611 | $ | (1,090 | ) | $ | (479 | ) | |||
Federal funds sold and securities borrowed or purchased under agreements to resell | |||||||||||||||||||
In U.S. offices | $ | 34 | $ | (73 | ) | $ | (39 | ) | $ | (122 | ) | $ | (674 | ) | $ | (796 | ) | ||
In offices outside the U.S.(4) | 39 | (66 | ) | (27 | ) | (35 | ) | (656 | ) | (691 | ) | ||||||||
Total | $ | 73 | $ | (139 | ) | $ | (66 | ) | $ | (157 | ) | $ | (1,330 | ) | $ | (1,487 | ) | ||
Trading account assets(5) | |||||||||||||||||||
In U.S. offices | $ | 58 | $ | (175 | ) | $ | (117 | ) | $ | (872 | ) | $ | (200 | ) | $ | (1,072 | ) | ||
In offices outside the U.S.(4) | 77 | (227 | ) | (150 | ) | (186 | ) | (225 | ) | (411 | ) | ||||||||
Total | $ | 135 | $ | (402 | ) | $ | (267 | ) | $ | (1,058 | ) | $ | (425 | ) | $ | (1,483 | ) | ||
Investments(1) | |||||||||||||||||||
In U.S. offices | $ | 25 | $ | (152 | ) | $ | (127 | ) | $ | 98 | $ | 375 | $ | 473 | |||||
In offices outside the U.S.(4) | 38 | (63 | ) | (25 | ) | 376 | (163 | ) | 213 | ||||||||||
Total | $ | 63 | $ | (215 | ) | $ | (152 | ) | $ | 474 | $ | 212 | $ | 686 | |||||
Loans—consumer | |||||||||||||||||||
In U.S. offices | $ | (128 | ) | $ | 64 | $ | (64 | ) | $ | (591 | ) | $ | (818 | ) | $ | (1,409 | ) | ||
In offices outside the U.S.(4) | (48 | ) | 151 | 103 | (689 | ) | (681 | ) | (1,370 | ) | |||||||||
Total | $ | (176 | ) | $ | 215 | $ | 39 | $ | (1,280 | ) | $ | (1,499 | ) | $ | (2,779 | ) | |||
Loans—corporate | |||||||||||||||||||
In U.S. offices | $ | (76 | ) | $ | (175 | ) | $ | (251 | ) | $ | (26 | ) | $ | (159 | ) | $ | (185 | ) | |
In offices outside the U.S.(4) | (3 | ) | (113 | ) | (116 | ) | (417 | ) | (546 | ) | (963 | ) | |||||||
Total | $ | (79 | ) | $ | (288 | ) | $ | (367 | ) | $ | (443 | ) | $ | (705 | ) | $ | (1,148 | ) | |
Total loans | $ | (255 | ) | $ | (73 | ) | $ | (328 | ) | $ | (1,723 | ) | $ | (2,204 | ) | $ | (3,927 | ) | |
Other interest-earning assets | $ | (43 | ) | $ | (73 | ) | $ | (116 | ) | $ | (309 | ) | $ | (453 | ) | $ | (762 | ) | |
Total interest revenue | $ | 17 | $ | (1,010 | ) | $ | (993 | ) | $ | (2,162 | ) | $ | (5,290 | ) | $ | (7,452 | ) | ||
ANALYSIS OF CHANGES IN INTEREST EXPENSE AND NET INTEREST REVENUE(1)(2)(3)
| 3rd Qtr. 2009 vs. 2nd Qtr. 2009 | 3rd Qtr. 2009 vs. 3rd Qtr. 2008 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Increase (Decrease) Due to Change in: | | Increase (Decrease) Due to Change in: | | |||||||||||||||
In millions of dollars | Average Volume | Average Rate | Net Change | Average Volume | Average Rate | Net Change | |||||||||||||
Deposits | |||||||||||||||||||
In U.S. offices | $ | 28 | $ | (468 | ) | $ | (440 | ) | $ | 99 | $ | (427 | ) | $ | (328 | ) | |||
In offices outside the U.S.(4) | 108 | (210 | ) | (102 | ) | (42 | ) | (2,247 | ) | (2,289 | ) | ||||||||
Total | $ | 136 | $ | (678 | ) | $ | (542 | ) | $ | 57 | $ | (2,674 | ) | $ | (2,617 | ) | |||
Federal funds purchased and securities loaned or sold under agreements to repurchase | |||||||||||||||||||
In U.S. offices | $ | (5 | ) | $ | (35 | ) | $ | (40 | ) | $ | (181 | ) | $ | (756 | ) | $ | (937 | ) | |
In offices outside the U.S.(4) | (17 | ) | (102 | ) | (119 | ) | (340 | ) | (672 | ) | (1,012 | ) | |||||||
Total | $ | (22 | ) | $ | (137 | ) | $ | (159 | ) | $ | (521 | ) | $ | (1,428 | ) | $ | (1,949 | ) | |
Trading account liabilities(5) | |||||||||||||||||||
In U.S. offices | $ | 4 | $ | (26 | ) | $ | (22 | ) | $ | (59 | ) | $ | (164 | ) | $ | (223 | ) | ||
In offices outside the U.S.(4) | 1 | (5 | ) | (4 | ) | (2 | ) | (17 | ) | (19 | ) | ||||||||
Total | $ | 5 | $ | (31 | ) | $ | (26 | ) | $ | (61 | ) | $ | (181 | ) | $ | (242 | ) | ||
Short-term borrowings | |||||||||||||||||||
In U.S. offices | $ | (49 | ) | $ | 99 | $ | 50 | $ | (164 | ) | $ | (306 | ) | $ | (470 | ) | |||
In offices outside the U.S.(4) | (13 | ) | (2 | ) | (15 | ) | (52 | ) | (52 | ) | (104 | ) | |||||||
Total | $ | (62 | ) | $ | 97 | $ | 35 | $ | (216 | ) | $ | (358 | ) | $ | (574 | ) | |||
Long-term debt | |||||||||||||||||||
In U.S. offices | $ | 191 | $ | 334 | $ | 525 | $ | (55 | ) | $ | (453 | ) | $ | (508 | ) | ||||
In offices outside the U.S.(4) | (17 | ) | 22 | 5 | (93 | ) | (63 | ) | (156 | ) | |||||||||
Total | $ | 174 | $ | 356 | $ | 530 | $ | (148 | ) | $ | (516 | ) | $ | (664 | ) | ||||
Total interest expense | $ | 231 | $ | (393 | ) | $ | (162 | ) | $ | (889 | ) | $ | (5,157 | ) | $ | (6,046 | ) | ||
Net interest revenue | $ | (214 | ) | $ | (617 | ) | $ | (831 | ) | $ | (1,273 | ) | $ | (133 | ) | $ | (1,406 | ) | |
ANALYSIS OF CHANGES IN INTEREST REVENUE, INTEREST EXPENSE, AND NET INTEREST REVENUE(1)(2)(3)
| Nine Months 2009 vs. Nine Months 2008 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
| Increase (Decrease) Due to Change in: | | ||||||||
In millions of dollars | Average Volume | Average Rate | Net Change(2) | |||||||
Deposits at interest with banks(4) | $ | 1,809 | $ | (3,012 | ) | $ | (1,203 | ) | ||
Federal funds sold and securities borrowed or purchased under agreements to resell | ||||||||||
In U.S. offices | $ | (827 | ) | $ | (1,976 | ) | $ | (2,803 | ) | |
In offices outside the U.S.(4) | (574 | ) | (1,967 | ) | (2,541 | ) | ||||
Total | $ | (1,401 | ) | $ | (3,943 | ) | $ | (5,344 | ) | |
Trading account assets(5) | ||||||||||
In U.S. offices | $ | (3,705 | ) | $ | (481 | ) | $ | (4,186 | ) | |
In offices outside the U.S.(4) | (1,074 | ) | 224 | (850 | ) | |||||
Total | $ | (4,779 | ) | $ | (257 | ) | $ | (5,036 | ) | |
Investments(1) | ||||||||||
In U.S. offices | $ | 491 | $ | 920 | $ | 1,411 | ||||
In offices outside the U.S.(4) | 771 | (120 | ) | 651 | ||||||
Total | $ | 1,262 | $ | 800 | $ | 2,062 | ||||
Loans—consumer | ||||||||||
In U.S. offices | $ | (1,946 | ) | $ | (2,160 | ) | $ | (4,106 | ) | |
In offices outside the U.S.(4) | (2,081 | ) | (1,961 | ) | (4,042 | ) | ||||
Total | $ | (4,027 | ) | $ | (4,121 | ) | $ | (8,148 | ) | |
Loans—corporate | ||||||||||
In U.S. offices | $ | 60 | $ | (372 | ) | $ | (312 | ) | ||
In offices outside the U.S.(4) | (1,914 | ) | (1,124 | ) | (3,038 | ) | ||||
Total | $ | (1,854 | ) | $ | (1,496 | ) | $ | (3,350 | ) | |
Total loans | $ | (5,881 | ) | $ | (5,617 | ) | $ | (11,498 | ) | |
Other interest-earning assets | $ | (1,165 | ) | $ | (1,512 | ) | $ | (2,677 | ) | |
Total interest revenue | $ | (10,155 | ) | $ | (13,541 | ) | $ | (23,696 | ) | |
Deposits | ||||||||||
In U.S. offices | $ | 96 | $ | (1,212 | ) | $ | (1,116 | ) | ||
In offices outside the U.S.(4) | (1,206 | ) | (5,883 | ) | (7,089 | ) | ||||
Total | $ | (1,110 | ) | $ | (7,095 | ) | $ | (8,205 | ) | |
Federal funds purchased and securities loaned or sold under agreements to repurchase | ||||||||||
In U.S. offices | $ | (954 | ) | $ | (2,713 | ) | $ | (3,667 | ) | |
In offices outside the U.S.(4) | (1,192 | ) | (1,893 | ) | (3,085 | ) | ||||
Total | $ | (2,146 | ) | $ | (4,606 | ) | $ | (6,752 | ) | |
Trading account liabilities(5) | ||||||||||
In U.S. offices | $ | (262 | ) | $ | (501 | ) | $ | (763 | ) | |
In offices outside the U.S.(4) | (25 | ) | (56 | ) | (81 | ) | ||||
Total | $ | (287 | ) | $ | (557 | ) | $ | (844 | ) | |
Short-term borrowings | ||||||||||
In U.S. offices | $ | (380 | ) | $ | (1,480 | ) | $ | (1,860 | ) | |
In offices outside the U.S.(4) | (185 | ) | (60 | ) | (245 | ) | ||||
Total | $ | (565 | ) | $ | (1,540 | ) | $ | (2,105 | ) | |
Long-term debt | ||||||||||
In U.S. offices | $ | (160 | ) | $ | (2,386 | ) | $ | (2,546 | ) | |
In offices outside the U.S.(4) | (244 | ) | (275 | ) | (519 | ) | ||||
Total | $ | (404 | ) | $ | (2,661 | ) | $ | (3,065 | ) | |
Total interest expense | $ | (4,512 | ) | $ | (16,459 | ) | $ | (20,971 | ) | |
Net interest revenue | $ | (5,643 | ) | $ | 2,918 | $ | (2,725 | ) | ||
CAPITAL RESOURCES AND LIQUIDITY
Overview
Generally, capital is generated by earnings from Citi's operating businesses. Primarily as a result of the exchange offers, Citigroup increased its Tier 1 Common by $63 billion from the second quarter of 2009 to $90 billion. In addition, the Company's Tangible Common Equity (TCE) increased by $62 billion from the second quarter of 2009 to $102 billion at September 30, 2009. Tier 1 Common, TCE and related ratios are used and relied on by the Company's banking regulators as a measure of capital adequacy, but are considered "non-GAAP financial measures" for SEC purposes. See "Capital Ratios," "Components of Capital Under Regulatory Guidelines" and "Tangible Common Equity" below for additional information on these measures.
The Company may also augment its capital through issuances of common stock, convertible preferred stock, preferred stock, subordinated debt underlying trust preferred securities, and equity issued through awards under employee benefit plans. Future business results of the Company, including events such as corporate dispositions, also affect the Company's capital levels. Moreover, changes that the FASB has adopted regarding off-balance sheet assets, consolidation and sale treatment willcould have an incrementaladverse impact on Citi's capital ratios. For more information on this, seehow these instruments are valued in the future if such conditions persist. See Note 1 "Future Application of Accounting Standards" and Note 1516 to the Consolidated Financial Statements, including "Funding, Liquidity Facilities and Subordinate Interests."
Capital is used primarily to support assets in the Company's businesses and to absorb expected and unexpected market, credit or operational losses. While capital may be used for other purposes, such as to pay dividends or repurchase common stock, the Company's ability to utilize its capital for these purposes is currently restricted due to its participation in TARP and other government programs, as explained more fully in the Company's 2008 Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q for the quarters ended June 30, 2009 and March 31, 2009, respectively.
Citigroup's capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with the Company's risk profile, all applicable regulatory standards and guidelines, and external rating agency considerations. The capital management process is centrally overseen by senior management and is reviewed at the consolidated, legal entity and country level.
Senior management oversees the capital management process mainly through Citigroup's Finance and Asset and Liability Committee (FinALCO). The Committee is composed of the senior-most management of Citigroup for the purpose of engaging management in decision-making and related discussions on capital and liquidity matters. Among other things, the Committee's responsibilities include: determining the financial structure of Citigroup and its principal subsidiaries; ensuring that Citigroup and its regulated entities are adequately capitalized; determining appropriate asset levels and return hurdles for Citigroup and individual businesses; reviewing the funding and capital markets plan for Citigroup; and monitoring interest-rate risk, corporate and bank liquidity and the impact of currency translation on non-U.S. earnings and capital.Statements.
Capital Ratios (2)
Citigroup is subject to risk-based capital guidelines issued by the FRB. Historically, capital adequacy has been measured, in part, based on two risk-based capital ratios, the Tier 1 and Total Capital (Tier 1 + Tier 2 Capital) ratios. Tier 1 Capital consists of core capital, while Total Capital also includes other items such as subordinated debt and allowance for credit losses. Both measures of capital adequacy are stated as a percentage of risk-weighted assets. In conjunction with the conclusion of the Supervisory Capital Assessment Program (SCAP), the banking regulators developed a new measure of capital called Tier 1 Common defined as Tier 1 Capital less non-common elements including qualifying perpetual preferred stock, qualifying noncontrolling interests in subsidiaries and qualifying mandatorily redeemable securities of subsidiary trusts.
Citigroup's risk-weighted assets are principally derived from application of the risk-based capital guidelines related to the measurement of credit risk, under which on-balance sheet assets and the credit equivalent amount of certain off-balance sheet exposures (such as financial guarantees, unfunded lending commitments, letters of credit, and derivatives) are assigned to one of several prescribed risk weight categories based upon the perceived credit risk associated with the obligor, or if relevant, the guarantor, the nature of the collateral, or external credit ratings. Risk-weighted assets also incorporate a measure for market risk on covered trading account positions, and all foreign exchange and commodity positions whether or not carried in the trading account. Excluded from risk-weighted assets are any assets, such as goodwill and deferred tax assets, to the extent required to be deducted from regulatory capital. See "Components of Capital Under Regulatory Guidelines" below.
Citigroup is also subject to a Leverage ratio requirement, a non-risk-based measure of capital adequacy, which is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets.
To be "well capitalized" under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital ratio ofAssets held at least 6%, a Total Capital ratio of at least 10%, and a Leverage Ratio of at least 3%, and not be subject to an FRB directive to maintain higher capital levels. The following table sets forth Citigroup's regulatory capital ratios as of September 30, 2009 and December 31, 2008.
amortized costTable of Contents
Citigroup Regulatory Capital Ratios
| Sept. 30, 2009 | Dec. 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Common | 9.12 | % | 2.30 | % | |||
Tier 1 Capital | 12.76 | 11.92 | |||||
Total Capital (Tier 1 and Tier 2) | 16.58 | 15.70 | |||||
Leverage(1) | 6.87 | 6.08 | |||||
As noted in the table above, Citigroup was "well capitalized" under the federal bank regulatory agency definitions as of September 30, 2009 and December 31, 2008.
Components of Capital Under Regulatory Guidelines
In millions of dollars | Sept. 30, 2009 | Dec. 31, 2008(1) | ||||||
---|---|---|---|---|---|---|---|---|
Tier 1 Common | ||||||||
Citigroup common stockholders' equity | $ | 140,530 | $ | 70,966 | ||||
Less: Net unrealized losses on securities available-for-sale, net of tax(2) | (4,242 | ) | (9,647 | ) | ||||
Less: Accumulated net losses on cash flow hedges, net of tax | (4,177 | ) | (5,189 | ) | ||||
Less: Pension liability adjustment, net of tax(3) | (2,619 | ) | (2,615 | ) | ||||
Less: Cumulative effect included in fair value of financial liabilities attributable to the change in own credit worthiness, net of tax(4) | 1,862 | 3,391 | ||||||
Less: Disallowed deferred tax assets(5) | 21,917 | 23,520 | ||||||
Less: Intangible assets: | ||||||||
Goodwill(6) | 26,436 | 27,132 | ||||||
Other disallowed intangible assets(6) | 10,179 | 10,607 | ||||||
Other | (892 | ) | (840 | ) | ||||
Total Tier 1 Common | $ | 90,282 | $ | 22,927 | ||||
Qualifying perpetual preferred stock | $ | 312 | $ | 70,664 | ||||
Qualifying mandatorily redeemable securities of subsidiary trusts | 34,403 | 23,899 | ||||||
Qualifying noncontrolling interests | 1,288 | 1,268 | ||||||
Total Tier 1 Capital | $ | 126,285 | $ | 118,758 | ||||
Tier 2 Capital | ||||||||
Allowance for credit losses(7) | $ | 12,701 | $ | 12,806 | ||||
Qualifying subordinated debt(8) | 24,355 | 24,791 | ||||||
Net unrealized pretax gains on available-for- sale equity securities(2) | 753 | 43 | ||||||
Total Tier 2 Capital | $ | 37,809 | $ | 37,640 | ||||
Total Capital (Tier 1 and Tier 2) | $ | 164,094 | $ | 156,398 | ||||
Risk-Weighted Assets(9) | $ | 989,711 | $ | 996,247 | ||||
Recent Actions Impacting Citigroup's Risk-Weighted Assets
All three of Citigroup's primary credit card securitization trusts—the Master Trust, Omni Trust and Broadway Trust—had bonds placed on ratings watch with negative implications by rating agencies during the first and second quarters of 2009. As a result of the ratings watch status, certain actions were taken by Citi with respect to each of the trusts. In general, the actions subordinated certain senior interests in the trust assets that were retained by Citi, which effectively placed these interests below investor interests in terms of priority of payment.
With respect to the Master Trust, in the first quarter of 2009, Citi subordinated a portion of its "seller's interest," which represents a senior interest in trust receivables, thus making those cash flows available to pay investor coupons each month. In addition, during the second quarter of 2009, a subordinated note with a $3 billion principal amount was issued by the Master Trust and retained by Citibank (South Dakota), N.A. in order to provide additional credit support for the senior note classes. The note is classified as a held-to-maturity investment security.
With respect to the Omni Trust, in the second quarter of 2009, subordinated notes with a principal amount of $2 billion were issued by the trust and retained by Citibank (South Dakota), N.A. in order to provide additional credit support for the senior note classes. The notes are classified as Trading account assets. These notes are in addition to a $265 million subordinated note issued by Omni Trust and retained by Citibank (South Dakota), N.A. insuch during the fourth quarter of 2008 and were previously classified as either trading or AFS. They are accounted for the same purpose of providing additionalat amortized cost, subject to other-than-temporary impairment. Loans and commitments are recorded at amortized cost, less loan loss reserves. The impact from changes in credit support for senior noteholders.
With respect to the Broadway Trust,is reflected in the second quartercalculation of 2009, subordinated notes with a principal amountthe allowance for loan losses and in net credit losses.
(3) Equity and other investments include approximately $3.5 billion of $82 million were issued byequity and other investments, such as limited partner fund investments, that are accounted for under the trust and retained by Citibank, N.A. in order to provide additional credit support for the senior note classes. The notes are classified as Trading account assets.
As a result of these actions,equity method, which recognizes gains or losses based on the applicable regulatory capital rules, Citigroup included the sold assetsinvestor's share of the Master and Omni Trusts (commencing with the first quarter of
2009) and the Broadway Trust (commencing with the second quarter of 2009) in its risk-weighted assets for purposes of calculating its risk-based capital ratios. The effect of these changes increased Citigroup's risk-weighted assets by approximately $82 billion, and decreased Citigroup's Tier 1 Capital ratio by approximately 100 basis points, each as of March 31, 2009, with respect to the Master and Omni Trusts. The inclusionnet income of the Broadway Trust increased Citigroup's risk-weighted assets by an additional approximately $900 million at June 30, 2009. All bond ratings for each of the trusts have been affirmed by the rating agencies, and no downgrades have occurred as of September 30, 2009.
Citigroup's common stockholders' equity increased by approximately $70 billion to $141 billion, and represented 7.4% of total assets as of September 30, 2009, from $71 billion and 3.7% at December 31, 2008.
The table below summarizes the change in Citigroup's common stockholders' equity during the first nine months of 2009:
In billions of dollars | | |||
---|---|---|---|---|
Common equity, December 31, 2008 | $ | 71.0 | ||
Net income(1) | 6.0 | |||
Employee benefit plans and other activities | 0.5 | |||
Dividends | (3.4 | ) | ||
Exchange offers(1) | 58.9 | |||
Net change in Accumulated other comprehensive income (loss), net of tax | 7.5 | |||
Common equity, September 30, 2009 | $ | 140.5 | ||
As of September 30, 2009, $6.7 billion of stock repurchases remained under authorized repurchase programs. No material repurchases were made in 2008 and the first nine months of 2009.
Tangible Common Equity
TCE, as defined by Citigroup, representsCommon equity lessGoodwill andIntangible assets (excluding MSRs) net of therelated net deferred tax liabilities. Other companies may calculate TCE in a manner different from Citigroup. Citi's TCE was $102.3 billion at September 30, 2009 and $31.1 billion at December 31, 2008.
The TCE ratio (TCE divided by risk-weighted assets—see "Components of Capital Under Regulatory Guidelines" above) was 10.3% at September 30, 2009 and 3.1% at December 31, 2008. A reconciliation of Citigroup's total stockholders' equity to TCE follows:
In millions of dollars, except ratio | September 30, 2009 | December 31, 2008 | |||||||
---|---|---|---|---|---|---|---|---|---|
Total Citigroup Stockholders' Equity | $ | 140,842 | $ | 141,630 | |||||
Less: | |||||||||
Preferred Stock | 312 | 70,664 | |||||||
Common Equity | $ | 140,530 | $ | 70,966 | |||||
Less: | |||||||||
Goodwill—as reported | 25,423 | 27,132 | |||||||
Intangible Assets (other than MSRs)—as reported | 8,957 | 14,159 | |||||||
Goodwill and Intangible Assets—recorded as Assets of Discontinued Operations Held for Sale | 3,856 | — | |||||||
Goodwill and Intangible Assets— recorded as Assets held-for-sale | 1,377 | — | |||||||
Less: Related Net Deferred Tax Liabilities | 1,381 | 1,382 | |||||||
Tangible Common Equity (TCE) | $ | 102,298 | $ | 31,057 | |||||
Tangible Assets | |||||||||
GAAP Assets—as reported | $ | 1,888,599 | $ | 1,938,470 | |||||
Less: | |||||||||
Goodwill—as reported | 25,423 | 27,132 | |||||||
Intangible Assets (other than MSRs)—as reported | 8,957 | 14,159 | |||||||
Goodwill and Intangible Assets— recorded as Assets of Discontinued Operations Held for Sale | 3,856 | — | |||||||
Goodwill and Intangible Assets— recorded as Assets held-for-sale | 1,377 | — | |||||||
Related deferred tax assets | 1,272 | 1,285 | |||||||
Tangible Assets (TA) | $ | 1,847,714 | $ | 1,895,894 | |||||
Risk-Weighted Assets (RWA) under"Components of Capital Under Regulatory Guidelines" | $ | 989,711 | $ | 996,247 | |||||
TCE/TA RATIO | 5.5 | % | 1.6 | % | |||||
TCE RATIO (TCE/RWA) | 10.3 | % | 3.1 | % | |||||
Capital Resources of Citigroup's Depository Institutions
Citigroup's U.S. subsidiary depository institutions are subject to risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are similar to the FRB's guidelines. To be "well capitalized" under these regulatory definitions, Citigroup's depository institutions must have a Tier 1 Capital ratio of at least 6%, a Total Capital (Tier 1 + Tier 2 Capital) ratio of at least 10% and a Leverage ratio of at least 5%, and not be subject to a regulatory directive to meet and maintain higher capital levels.
At September 30, 2009, all of Citigroup's subsidiary depository institutions were "well capitalized" under federal bank regulatory agency definitions, including Citigroup's primary depository institution, Citibank, N.A., as noted in the following table:
Citibank, N.A. Components of Capital and Ratios Under Regulatory Guidelines
In billions of dollars | Sept. 30, 2009 | Dec. 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Capital | $ | 95.8 | $ | 71.0 | |||
Total Capital (Tier 1 and Tier 2) | 110.8 | 108.4 | |||||
Tier 1 Capital Ratio | 15.16 | % | 9.94 | % | |||
Total Capital Ratio (Tier 1 and Tier 2) | 17.53 | 15.18 | |||||
Leverage Ratio(1) | 8.37 | 5.82 | |||||
Citibank, N.A. had a net loss of $2.3 billion for the first nine months of 2009.
In addition, during the first nine months of 2009, Citibank, N.A. received capital contributions from its immediate parent company, Citicorp, in the amount of $30.5 billion.
Total subordinated notes issued to Citibank, N.A.'s immediate parent company, Citicorp, included in Citibank, N.A.'s Tier 2 Capital declined from $28.2 billion outstanding at December 31, 2008 to $6.5 billion outstanding at September 30, 2009, reflecting the redemption of $21.7 billion of subordinated notes in the first nine months of 2009.
The significant events in the latter half of 2008 and the first nine months of 2009 impacting the capital of Citigroup also affected, or could affect, Citibank, N.A. which is subject to separate banking regulation and examination.
Table of Contentsinvestee.
The following table presents the estimated sensitivityprovides a summary of Citigroup's Global CRE funded and Citibank, N.A.'s capital ratios to changes of $100 million of Tier 1 or Total Capital (numerator), or changes of $1 billion in risk-weighted assets or adjusted average total assets (denominator) based on financial information as ofunfunded exposures at September 30, 2009. This information is provided solely for the purpose of analyzing the impact that a change in the Company's financial position or results of operations could have on these ratios. These sensitivities only consider a single change to either a component of capital, risk-weighted assets or adjusted average total assets. Accordingly, an event that affects more than one factor may have a larger basis-point impact than is reflected in this table.2010:
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
In billions of dollars | September 30, 2010 | ||||
---|---|---|---|---|---|
Institutional Clients Group | |||||
CRE exposures carried at fair value (including AFS securities) | $ | 4.0 | |||
Loans and unfunded commitments | 15.9 | ||||
HTM securities | 1.6 | ||||
Equity method investments | 3.3 | ||||
Total ICG | $ | 24.8 | |||
Special Asset Pool | |||||
CRE exposures carried at fair value (including AFS) | $ | 2.2 | |||
Loans and unfunded commitments | 8.0 | ||||
HTM securities | 0.1 | ||||
Equity method investments | 0.2 | ||||
Total SAP | $ | 10.5 | |||
Regional Consumer Banking | |||||
Loans and unfunded commitments | $ | 2.7 | |||
Local Consumer Lending | |||||
Loans and unfunded commitments | $ | 6.0 | |||
Brokerage and Asset Management | |||||
CRE exposures carried at fair value | $ | 0.5 | |||
Total Citigroup | $ | 44.5 | |||
Broker-Dealer Subsidiaries On August 10, 2010,
At September 30, 2009, Citigroup Global Markets Inc., an indirect wholly-owned subsidiaryLCL sold a $3.5 billion portfolio of Citigroup Global Markets Holdings Inc., had net capital, computed in accordance with the SEC's net capital rule, of $9.1 billion, which exceeded the minimum requirement by $8.4 billion.
In addition, certain of the Company's broker-dealer subsidiaries are subjectperforming multifamily and CRE loans to regulation in the other countries in which they do business, including requirements to maintain specified levels of net capital or its equivalent. The Company's broker-dealer subsidiaries were in compliance with their capital requirements at September 30, 2009. The requirements applicable to these subsidiaries in the U.S. and in particular other jurisdictions are the subject of political debate and potential change in light of recent events.
Regulatory Capital Standards Developments
Citigroup supports the move toJP Morgan Chase. Citi recorded a new set of risk-based capital standards, published on June 26, 2004 (and subsequently amended in November 2005) by the Basel Committee on Banking Supervision, consisting of central banks and bank supervisors from 13 countries. The international version of the Basel II framework will allow Citigroup to leverage internal risk models used to measure credit, operational, and market risk exposures to drive regulatory capital calculations.
On December 7, 2007, the U.S. banking regulators published the rules for large banks to comply with Basel II in the U.S. These rules require Citigroup, as a large and internationally active bank, to comply with the most advanced Basel II approaches for calculating credit and operational risk capital requirements. The U.S. implementation timetable consists of a parallel calculation period under the current regulatory capital regime (Basel I) and Basel II, starting anytime between April 1, 2008 and April 1, 2010, followed by a three-year transition period, typically starting 12 months after the beginning of parallel reporting. U.S. regulators have reserved the right to change how Basel II is applied in the U.S. following a review at the end of the second year of the transitional period, and to retain the existing prompt corrective action and leverage capital requirements applicable to banking organizations in the U.S. The Company intends to implement Basel II within the timeframe required by the final rules. The Basel II (or its successor) requirements are the subject of political debate and potential change in light of recent events.
Overview
Because Citigroup is a bank holding company, substantially all of its net earnings are generated within its operating subsidiaries. These subsidiaries make funds available to Citigroup, primarily in the form of dividends. Citigroup's liquidity management is structured to optimize the free flow of funds through the Company's legal and regulatory structure; however, various constraints, discussed below, limit certain subsidiaries' dividend-paying abilities. Consistent with these constraints, Citigroup's primary objectives for liquidity management are established by entity and in aggregate across three main operating entities, as follows: (i) Citigroup, as the parent holding company; (ii) banking subsidiaries; and (iii) non-banking subsidiaries.
Citigroup
As a result of continued deleveraging, deposit growth, term securitization under government and non-government programs, and the issuance of long-term debt under government guarantees and non-guaranteed debt, over the last several quarters, Citigroup has substantially increased its cash balances and reduced its short-term borrowings. In addition, as of September 30, 2009, Citigroup had largely eliminated utilization of short-term government funding programs.
Beginning in October 2008, Citi and certain of its subsidiaries participated in the FDIC's TLGP pursuant to which certain qualifying senior unsecured debt issued by such entities is guaranteed, pursuant to the applicable time period, in amounts up to 125% of the qualifying debt for each qualifying entity (see "Government Programs—FDIC's Temporary Liquidity Guarantee Program" above). As of September 30, 2009, Citigroup and its affiliates have issued a totalpretax loss of approximately $54.7 billion of long-term debt that is covered under the FDIC guarantee. Also as of September 30, 2009, Citigroup, through its subsidiaries, has issued approximately $4.37 billion$295 million on this sale in commercial paper and interbank deposits backed by the FDIC program.
The TLGP expired on October 31, 2009 and Citigroup and its affiliates have elected not to participate in any FDIC- approved extension of the program. In anticipation of the expiration of the program, and as market conditions began to improve, Citigroup and its first tier subsidiaries have issued $20 billion of non-guaranteed debt outside of TLGP over the past six months. Such issuances have been at various maturities, with a weighted average maturity of over 10 years, in multiple currencies. In addition, beginning October 1, 2009, Citigroup has been issuing commercial paper, of any tenor, outside of the TLGP and the Company currently anticipates that commercial paper will continue to be an important funding source during 2010, although not at 2008/2009 levels.
At September 30, 2009, long-term debt and commercial paper outstanding for Citigroup, CGMHI, Citigroup Funding Inc. (CFI) and other Citigroup subsidiaries, collectively, were as follows:
In billions of dollars | Citigroup parent company | CGMHI(1) | CFI(1) | Other Citigroup Subsidiaries | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Long-term debt | $ | 215.0 | $ | 15.4 | $ | 51.2 | $ | 98.0 | (2) | ||||
Commercial paper | $ | — | $ | — | $ | 10.0 | $ | 0.4 | |||||
The table below details the long-term debt issuances of Citigroup during the past four quarters.
In billions of dollars | 4Q08 | 1Q09 | 2Q09 | 3Q09 | Total | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Debt issued under TLGP guarantee | $ | 5.8 | $ | 21.9 | $ | 17.0 | $ | 10.0 | $ | 54.7 | |||||||
Debt issued without TLGP guarantee: | |||||||||||||||||
Citigroup parent company/CFI | 0.3 | 2.0 | 7.4 | 12.6 | 22.3 | ||||||||||||
Other Citigroup subsidiaries | 0.5 | 0.5 | 10.1 | (1) | 7.9 | (2) | 19.0 | ||||||||||
Total | $ | 6.6 | $ | 24.4 | $ | 34.5 | $ | 30.5 | $ | 96.0 | |||||||
See Note 12 to the Consolidated Financial Statements for further detail on Citigroup's and its affiliates' long-term debt and commercial paper outstanding.
Outside of long-term debt funding, Citi has been actively building its structural liquidity in two important ways. First, Citi has focused on growing a geographically diverse retail and corporate deposit base which stood at approximately $833 billion as of September 30, 2009, up $28 billion compared to June 30, 2009. On a volume basis, deposit increases were noted in Regional Consumer Banking, particularly in North America, and in Transaction Services due to growth in all regions and strength in Treasury and Trade Solutions, excluding the impact of foreign exchange on a volume basis. Citi's deposit base has increased sequentially over each of the last five quarters. These deposits are diversified across products and regions, with approximately 61% outside of the U.S. This diversification provides the Company with an important and low-cost source of funding. A significant portion of these deposits has been, and is currently expected to be, long-term and stable and is considered to be core.
Second, total assets as of September 30, 2009 have declined 8% as compared to September 30, 2008. Loans, which are one of the Company's most illiquid assets, are down $107 billion, or approximately 15%.
As of September 30, 2009, Citigroup and affiliates liquidity portfolio and broker-dealer "cash box" totaled $76.0 billion as compared with $66.8 billion at December 31, 2008 and $50.5 billion at September 30, 2008, and Citigroup's bank subsidiaries had an aggregate of approximately $148.8 billion of cash on deposit with major Central Banks (including the U.S. Federal Reserve Bank of New York, the European Central Bank, Bank of England, Swiss National Bank and Bank of Japan), compared with approximately $72 billion at December 31, 2008. These amounts are in addition to cash deposited from the broker-dealer "cash box" noted above. Citigroup's bank subsidiaries also have significant additional liquidity resources through unencumbered highly liquid securities and other assets available for secured funding through private markets or that are, or could be, pledged to the major Central Banks and the U.S. Federal Home Loan Banks. The liquidity value of the liquid securities was $59.4 billion at September 30, 2009 compared with $53.3 billion at June 30, 2009. Significant amounts of cash and liquid securities are also available in other Citigroup entities.
As a result of the actions described above and the Company's current funding levels, management currently believes Citi is largely pre-funded heading into 2010, with a deliberately liquid and flexible balance sheet. The combined parent and broker-dealer entities maintain sufficient liquidity to meet all maturing unsecured debt obligations due within a one-year time horizon, without accessing the unsecured markets.
Banking Subsidiaries—Constraints on Dividends
There are various legal limitations on the ability of Citigroup's subsidiary depository institutions to extend credit, pay dividends or otherwise supply funds to Citigroup and its non-bank subsidiaries. Currently, the approval of the OCC, in the case of national banks, or the Office of Thrift Supervision, in the case of federal savings banks, is required if total dividends declared in any calendar year exceed amounts specified by the applicable agency's regulations. State-chartered depository institutions are subject to dividend limitations imposed by applicable state law.
In determining the declaration of dividends, each depository institution must also consider its effect on applicable risk-based capital and leverage ratio requirements, as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Citigroup did not receive any dividends from its banking subsidiaries during the third quarter of 2009.
Non-Banking Subsidiaries—Constraints on Dividends2010.
Citigroup's non-bank subsidiaries, including Citigroup Global Market Holdings Inc. (CGMHI), are generally not subject to regulatory restrictions on dividends. However, the ability of CGMHI to declare dividends can be restricted by capital considerations of its broker-dealer subsidiaries.
CGMHI's consolidated balance sheet is liquid, withThe above CRE exposure represents the vast majority of its assets consisting of marketable securities and collateralized short-term financing agreements arising from securities transactions. CGMHI monitors and evaluates the adequacy of its capital and borrowing base on a daily basisCiti's exposure to maintain liquidity andcommercial real estate. There may be other exposures that have indirect exposures to ensureCRE that its capital base supports the regulatory capital requirements of its subsidiaries.
Some of Citigroup's non-bank subsidiaries, including CGMHI, have credit facilities with Citigroup's subsidiary depository institutions, including Citibank, N.A. Borrowings under these facilities must be secured in accordance with Section 23A of the Federal Reserve Act. There are various legal restrictions on the extent to which a bank holding company and certain of its non-bank subsidiaries can borrow or obtain credit from Citigroup's subsidiary depository institutions or engage in certain other transactions with them. In general, these restrictions require that transactions be on arm's-length terms and be secured by designated amounts of specified collateral. See Note 12 to the Consolidated Financial Statements.
Credit Ratings
Citigroup's ability to access the capital markets and other sources of funds, as well as the cost of these funds and its ability to maintain certain deposits, is highly dependent on its credit ratings. The table below indicates the current ratings for Citigroup. Generally, since May of 2009, Citigroup's ratings have largely been consistent and stable.
As a result of the Citigroup guarantee, changes in ratings and ratings outlooks for CFI are the same as those of Citigroup noted above.
Citigroup's Debt Ratings as of September 30, 2009
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Ratings downgrades by Fitch Ratings, Moody's Investors Service or Standard & Poor's have had and could continue to have impacts on funding and liquidity, and could also have further explicit impact on liquidity due to collateral triggers and other cash requirements. Because of the current credit ratings of Citigroup Inc., a one-notch downgrade of its senior debt/long-term rating would likely impact Citigroup Inc.'s commercial paper/short-term rating. As of September 30, 2009, a one-notch downgrade of the senior debt/long-term rating of Citigroup Inc., accompanied by a one-notch downgrade of Citigroup Inc.'s commercial paper/short-term rating, would result in an approximately $15.9 billion funding requirementnot reflected in the form of collateral and cash obligations. Further, as of September 30, 2009, a one-notch downgrade of the senior debt/long-term ratings of Citibank, N.A. would result in an approximately $4.4 billion funding requirement in the form of collateral and cash obligations. Because of the current credit ratings of Citibank, N.A., a one-notch downgrade of its senior debt/long-term rating is unlikely to have any impact on its commercial paper/short-term rating.table above.
As a result of the adoption of SFAS No. 166 and SFAS 167 (see Note 1 to the Consolidated Financial Statements), certain credit rating agencies have raised concerns about the loss of GAAP sale treatment in certain securitization transactions and the resulting effects under the FDIC's securitization rule. Specifically, under the FDIC's securitization rule, so long as a securitization is accounted for as a sale for GAAP purposes and certain other conditions are satisfied, the FDIC, when acting as conservator or receiver of an insolvent bank, will also treat the transferred assets as sold and thus surrender its rights to reclaim the financial assets transferred in the securitization. With the adoption of SFAS 166 and SFAS 167, GAAP sales treatment will be eliminated in certain securitizations, thus potentially putting securitized assets at risk of seizure by the FDIC in cases of conservatorship or receivership.
The FDIC is considering a revision to its current regulations that would continue to recognize the legal isolation of securitized assets after the adoption of SFAS 166 and SFAS 167; however, it is unclear at this time what changes to the rules, if any, will be made or if the affected securitization structures will need to be modified in order to comply with those rules. If the FDIC does not act and/or if the affected securitization vehicles are unable to take appropriate steps to restructure their programs, the bond ratings of certain notes issued by these securitization vehicles, including Citi's credit card securitization vehicles, could be lowered or withdrawn. In addition, these securitization vehicles may be unable to issue new bonds with a rating that is higher than the sponsoring bank's then-current rating.
OFF-BALANCE SHEET ARRANGEMENTS
Citigroup and its subsidiaries are involved with several types of off-balance sheet arrangements, including special purpose entities (SPEs), primarily in connection with securitization activities in Regional Consumer Banking and Local Consumer Lending. Citigroup and its subsidiaries use SPEs principally to obtain liquidity and favorable capital treatment by securitizing certain of Citigroup's financial assets, assisting clients in securitizing their financial assets and creating investment products for clients. For further information about the Company's securitization activities and involvement in SPEs, see Note 15 to the Consolidated Financial Statements.
The following tables describe certain characteristics of assets owned by certain identified significant unconsolidated variable interest entities (VIEs) as of September 30, 2009. These VIEs and the Company's exposure to the VIEs are described in Note 15 to the Consolidated Financial Statements.
See also Note 1 to the Consolidated Financial Statements, "Elimination of QSPEs and Changes in the Consolidation Model for Variable Interest Entities."
| | | Credit rating distribution | |||||||||||||||
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Citi-Administered Asset-Backed Commercial Paper Conduits | Total assets (in billions) | Weighted average life | AAA | AA | A | BBB/BBB+ and below | ||||||||||||
$ | 39.7 | 4.55 years | 41 | % | 44 | % | 11 | % | 4 | % | ||||||||
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| | | Credit rating distribution | ||||||||||||||||||
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Collateralized Debt and Loan Obligations | Total assets (in billions) | Weighted average life | A or higher | BBB | BB/B | CCC | Unrated | ||||||||||||||
Collateralized debt obligations (CDOs) | $ | 16.1 | 3.9 years | 12 | % | 12 | % | 12 | % | 49 | % | 15 | % | ||||||||
Collateralized loan obligations (CLOs) | $ | 13.8 | 6.6 years | 1 | % | 1 | % | 45 | % | 8 | % | 45 | % | ||||||||
| Credit rating distribution | ||||||||||||||
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Municipal Securities Tender Option Bond Trusts (TOB) | Total assets (in billions) | Weighted average life | AAA/Aaa | AA/Aa1 – AA-/Aa3 | Less than AA-/Aa3 | ||||||||||
Customer TOB trusts (not consolidated) | $ | 8.5 | 12.4 years | 12 | % | 85 | % | 3 | % | ||||||
Proprietary TOB trusts (consolidated and non-consolidated) | $ | 13.0 | 16.3 years | 8 | % | 77 | % | 15 | % | ||||||
QSPE TOB trusts (not consolidated) | $ | 0.7 | 10.9 years | 88 | % | 12 | % | 0 | % | ||||||
See the Company's 2008Citi's 2009 Annual Report on Form 10-K and Note 12 to the Consolidated Financial Statements herein,in this Form 10-Q for a discussion of contractual obligations.
For a discussion of fair value of assets and liabilities, see Note 17 and Note 18 to the Consolidated Financial Statements.
Disclosure
Citigroup's disclosure controls and procedures are designed to ensure that information required to be disclosed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including without limitation that information required to be disclosed by Citi in its SEC filings is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow for timely decisions regarding required disclosure.
Citigroup's Disclosure Committee assists the CEO and CFO in their responsibilities to design, establish, maintain and evaluate the effectiveness of Citi's disclosure controls and procedures. The Company'sDisclosure Committee is responsible for, among other things, the oversight, maintenance and implementation of the disclosure controls and procedures, subject to the supervision and oversight of the CEO and CFO.
Citigroup's management, with the participation of the Company'sits CEO and CFO, has evaluated the effectiveness of the Company'sCitigroup's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 20092010 and, based on that evaluation, the CEO and CFO have concluded that at that date the Company'sCitigroup's disclosure controls and procedures were effective.
Financial Reporting
There were no changes in the Company'sCitigroup's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 20092010 that materially affected, or are reasonably likely to materially affect, the Company'sCiti's internal control over financial reporting.
Certain statements in this Form 10-Q, including but not limited to statements included within the "Management'sManagement's Discussion and Analysis" of Financial Condition and Results of Operations, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Actrules and regulations of 1995.the SEC. Generally, "forward-looking statements"forward-looking statements are not based on historical facts but instead represent only the Company'sCitigroup's and management's beliefs regarding future events. Such statements may be identified by words such as "believe," "expect," "anticipate," "intend," "estimate," "maybelieve, expect, anticipate, intend, estimate, may increase," "may may fluctuate", and similar expressions, or future or conditional verbs such as "will," "should," "would"will, should, would and "could."could.
Such statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors, including but not limited to those described below:
Citigroup Inc.
FINANCIAL STATEMENTS AND NOTES
CONSOLIDATED FINANCIAL STATEMENTSAND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
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Consolidated Statement of Income (Unaudited)— For the Three and Nine Months Ended September 30, | |||
Consolidated Balance Sheet—September 30, | |||
Consolidated Statement of Changes in Stockholders' Equity (Unaudited)—Nine Months Ended September 30, | |||
Consolidated Statement of Cash Flows (Unaudited)—Nine Months Ended | |||
Citibank Consolidated Balance Sheet—Citibank, N.A. and Subsidiaries—September 30, | |||
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Note 1—Basis of Presentation | |||
Note 2—Discontinued Operations | |||
Note 3—Business Segments | |||
Note 4—Interest Revenue and Expense | |||
Note 5—Commissions and Fees | |||
Note 6— | |||
Note 7— | |||
Note 8—Earnings | |||
Note 9—Trading Account Assets and Liabilities | |||
Note 10—Investments | |||
Note 11—Goodwill and Intangible Assets | |||
Note 12—Debt | |||
Note 13— | |||
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Note | |||
Note | |||
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Note | |||
Note | 182 | ||
Note 18—Fair Value of Financial Instruments | |||
Note 19—Guarantees | 188 | ||
Note 20— | |||
Note 21— | |||
Note 22— | |||
Note 23— | |||
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CONSOLIDATED FINANCIAL STATEMENTS
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Citigroup Inc. and Subsidiaries
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||
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In millions of dollars, except per share amounts | 2009 | 2008 | 2009 | 2008 | ||||||||||
Revenues | ||||||||||||||
Interest revenue | $ | 18,678 | $ | 26,130 | $ | 58,932 | $ | 82,628 | ||||||
Interest expense | 6,680 | 12,726 | 21,179 | 42,150 | ||||||||||
Net interest revenue | $ | 11,998 | $ | 13,404 | $ | 37,753 | $ | 40,478 | ||||||
Commissions and fees | $ | 3,218 | $ | 3,208 | $ | 12,823 | $ | 10,348 | ||||||
Principal transactions | 1,660 | (3,013 | ) | 5,763 | (15,447 | ) | ||||||||
Administration and other fiduciary fees | 1,085 | 2,081 | 4,163 | 6,479 | ||||||||||
Realized gains (losses) on sales of investments | 427 | 150 | 1,719 | 376 | ||||||||||
Other-than-temporary impairment losses on investments(1) | ||||||||||||||
Gross impairment losses | (2,453 | ) | (755 | ) | (6,161 | ) | (1,239 | ) | ||||||
Less: Impairments recognized in OCI | 1,741 | — | 4,006 | — | ||||||||||
Net impairment losses recognized in earnings | $ | (712 | ) | $ | (755 | ) | $ | (2,155 | ) | $ | (1,239 | ) | ||
Insurance premiums | 763 | 823 | 2,263 | 2,513 | ||||||||||
Other revenue | 1,951 | 360 | 12,551 | 2,445 | ||||||||||
Total non-interest revenues | $ | 8,392 | $ | 2,854 | $ | 37,127 | $ | 5,475 | ||||||
Total revenues, net of interest expense | $ | 20,390 | $ | 16,258 | $ | 74,880 | $ | 45,953 | ||||||
Provisions for credit losses and for benefits and claims | ||||||||||||||
Provision for loan losses | $ | 8,771 | $ | 8,943 | $ | 30,919 | $ | 21,503 | ||||||
Policyholder benefits and claims | 324 | 274 | 964 | 809 | ||||||||||
Provision for unfunded lending commitments | — | (150 | ) | 195 | (293 | ) | ||||||||
Total provisions for credit losses and for benefits and claims | $ | 9,095 | $ | 9,067 | $ | 32,078 | $ | 22,019 | ||||||
Operating expenses | ||||||||||||||
Compensation and benefits | $ | 6,136 | $ | 7,544 | $ | 18,730 | $ | 24,798 | ||||||
Premises and equipment | 1,035 | 1,342 | 3,209 | 3,983 | ||||||||||
Technology/communication | 1,114 | 1,515 | 3,410 | 4,534 | ||||||||||
Advertising and marketing | 317 | 496 | 1,002 | 1,713 | ||||||||||
Restructuring | (34 | ) | 8 | (79 | ) | (21 | ) | |||||||
Other operating | 3,256 | 3,102 | 9,236 | 9,591 | ||||||||||
Total operating expenses | $ | 11,824 | $ | 14,007 | $ | 35,508 | $ | 44,598 | ||||||
Income (loss) from continuing operations before income taxes | $ | (529 | ) | $ | (6,816 | ) | $ | 7,294 | $ | (20,664 | ) | |||
Provision (benefit) for income taxes | (1,122 | ) | (3,295 | ) | 620 | (9,628 | ) | |||||||
Income (loss) from continuing operations | $ | 593 | $ | (3,521 | ) | $ | 6,674 | $ | (11,036 | ) | ||||
Discontinued operations | ||||||||||||||
Income (loss) from discontinued operations | $ | (204 | ) | $ | 507 | $ | (635 | ) | $ | 898 | ||||
Gain (loss) on sale | — | 9 | 2 | (508 | ) | |||||||||
Provision (benefit) for income taxes | 214 | (97 | ) | 44 | (188 | ) | ||||||||
Income (loss) from discontinued operations, net of taxes | $ | (418 | ) | $ | 613 | $ | (677 | ) | $ | 578 | ||||
Net income (loss) before attribution of noncontrolling interests | $ | 175 | $ | (2,908 | ) | $ | 5,997 | $ | (10,458 | ) | ||||
Net Income (loss) attributable to noncontrolling interests | 74 | (93 | ) | 24 | (37 | ) | ||||||||
Citigroup's net income (loss) | $ | 101 | $ | (2,815 | ) | $ | 5,973 | $ | (10,421 | ) | ||||
Basic earnings per share(2) | ||||||||||||||
Income (loss) from continuing operations | $ | (0.23 | ) | $ | (0.72 | ) | $ | (0.10 | ) | $ | (2.28 | ) | ||
Income (loss) from discontinued operations, net of taxes | (0.04 | ) | 0.11 | (0.09 | ) | 0.11 | ||||||||
Net income (loss) | $ | (0.27 | ) | $ | (0.61 | ) | $ | (0.19 | ) | $ | (2.17 | ) | ||
Weighted average common shares outstanding | 12,104.3 | 5,341.8 | 7,629.6 | 5,238.3 | ||||||||||
Diluted earnings per share(2) | ||||||||||||||
Income (loss) from continuing operations | $ | (0.23 | ) | $ | (0.72 | ) | $ | (0.10 | ) | $ | (2.28 | ) | ||
Income (loss) from discontinued operations, net of taxes | (0.04 | ) | 0.11 | (0.09 | ) | 0.11 | ||||||||
Net income (loss) | $ | (0.27 | ) | $ | (0.61 | ) | $ | (0.19 | ) | $ | (2.17 | ) | ||
Adjusted weighted average common shares outstanding | 12,216.0 | 5,831.1 | 8,045.7 | 5,727.9 | ||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except per-share amounts | 2010 | 2009 | 2010 | 2009 | ||||||||||
Revenues | ||||||||||||||
Interest revenue | $ | 19,371 | $ | 18,678 | $ | 60,641 | $ | 58,932 | ||||||
Interest expense | 6,125 | 6,680 | 18,795 | 21,179 | ||||||||||
Net interest revenue | $ | 13,246 | $ | 11,998 | $ | 41,846 | $ | 37,753 | ||||||
Commissions and fees | $ | 3,248 | $ | 3,698 | $ | 10,122 | $ | 11,766 | ||||||
Principal transactions | 1,528 | 1,343 | 7,898 | 7,044 | ||||||||||
Administration and other fiduciary fees | 976 | 1,085 | 2,908 | 4,163 | ||||||||||
Realized gains (losses) on sales of investments | 962 | 427 | 2,023 | 1,719 | ||||||||||
Other than temporary impairment losses on investments | ||||||||||||||
Gross impairment losses | (230 | ) | (2,453 | ) | (1,237 | ) | (6,161 | ) | ||||||
Less: Impairments recognized in Other comprehensive income (OCI) | 10 | 1,741 | 56 | 4,006 | ||||||||||
Net impairment losses recognized in earnings | $ | (220 | ) | $ | (712 | ) | $ | (1,181 | ) | $ | (2,155 | ) | ||
Insurance premiums | $ | 655 | $ | 763 | $ | 2,039 | $ | 2,263 | ||||||
Other revenue | 343 | 1,788 | 2,575 | 12,327 | ||||||||||
Total non-interest revenues | $ | 7,492 | $ | 8,392 | $ | 26,384 | $ | 37,127 | ||||||
Total revenues, net of interest expense | $ | 20,738 | $ | 20,390 | $ | 68,230 | $ | 74,880 | ||||||
Provisions for credit losses and for benefits and claims | ||||||||||||||
Provision for loan losses | $ | 5,666 | $ | 8,771 | $ | 20,555 | $ | 30,919 | ||||||
Policyholder benefits and claims | 227 | 324 | 727 | 964 | ||||||||||
Provision for unfunded lending commitments | 26 | — | (80 | ) | 195 | |||||||||
Total provisions for credit losses and for benefits and claims | $ | 5,919 | $ | 9,095 | $ | 21,202 | $ | 32,078 | ||||||
Operating expenses | ||||||||||||||
Compensation and benefits | $ | 6,117 | $ | 6,136 | $ | 18,240 | $ | 18,730 | ||||||
Premises and equipment | 964 | 1,035 | 2,865 | 3,209 | ||||||||||
Technology/communication | 1,131 | 1,114 | 3,278 | 3,410 | ||||||||||
Advertising and marketing | 458 | 317 | 1,127 | 1,002 | ||||||||||
Restructuring | — | (34 | ) | (3 | ) | (79 | ) | |||||||
Other operating | 2,850 | 3,256 | 9,397 | 9,236 | ||||||||||
Total operating expenses | $ | 11,520 | $ | 11,824 | $ | 34,904 | $ | 35,508 | ||||||
Income from continuing operations before income taxes | $ | 3,299 | $ | (529 | ) | $ | 12,124 | $ | 7,294 | |||||
Provision for income taxes | 698 | (1,122 | ) | 2,546 | 620 | |||||||||
Income from continuing operations | $ | 2,601 | $ | 593 | $ | 9,578 | $ | 6,674 | ||||||
Discontinued operations | ||||||||||||||
Income (loss) from discontinued operations | $ | 8 | $ | (204 | ) | $ | — | $ | (635 | ) | ||||
Gain (loss) on sale | (784 | ) | — | (690 | ) | 2 | ||||||||
Provision (benefit) for income taxes | (402 | ) | 214 | (524 | ) | 44 | ||||||||
Income (loss) from discontinued operations, net of taxes | $ | (374 | ) | $ | (418 | ) | $ | (166 | ) | $ | (677 | ) | ||
Net income before attribution of noncontrolling interests | $ | 2,227 | $ | 175 | $ | 9,412 | $ | 5,997 | ||||||
Net income attributable to noncontrolling interests | 59 | 74 | 119 | 24 | ||||||||||
Citigroup's net income | $ | 2,168 | $ | 101 | $ | 9,293 | $ | 5,973 | ||||||
Basic earnings per share | ||||||||||||||
Income (loss) from continuing operations | $ | 0.09 | $ | (0.23 | ) | $ | 0.32 | $ | (0.10 | ) | ||||
Income (loss) from discontinued operations, net of taxes | (0.02 | ) | (0.04 | ) | — | (0.09 | ) | |||||||
Net income | $ | 0.07 | $ | (0.27 | ) | $ | 0.32 | $ | (0.19 | ) | ||||
Weighted average common shares outstanding | 28,877.5 | 12,104.3 | 28,723.7 | 7,629.6 | ||||||||||
Diluted earnings per share | ||||||||||||||
Income (loss) from continuing operations | $ | 0.08 | $ | (0.23 | ) | $ | 0.32 | $ | (0.10 | ) | ||||
Income (loss) from discontinued operations, net of taxes | (0.01 | ) | (0.04 | ) | (0.01 | ) | (0.09 | ) | ||||||
Net income | $ | 0.07 | $ | (0.27 | ) | $ | 0.31 | $ | (0.19 | ) | ||||
Adjusted weighted average common shares outstanding | 29,778.3 | 12,216.0 | 29,621.5 | 8,045.7 | ||||||||||
See Notes to the Consolidated Financial Statements.
CITIGROUP INC. AND SUBSIDIARIES
Citigroup Inc. and Subsidiaries
In millions of dollars, except shares | September 30, 2010 | December 31, 2009 | ||||||
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| (Unaudited) | | ||||||
Assets | ||||||||
Cash and due from banks (including segregated cash and other deposits) | $ | 26,342 | $ | 25,472 | ||||
Deposits with banks | 150,071 | 167,414 | ||||||
Federal funds sold and securities borrowed or purchased under agreements to resell (including $94,190 and $87,812 as of September 30, 2010 and December 31, 2009, respectively, at fair value) | 240,057 | 222,022 | ||||||
Brokerage receivables | 37,138 | 33,634 | ||||||
Trading account assets (including $122,318 and $111,219 pledged to creditors at September 30, 2010 and December 31, 2009, respectively) | 337,098 | 342,773 | ||||||
Investments (including $12,835 and $15,154 pledged to creditors at September 30, 2010 and December 31, 2009, respectively and $302,109 and $246,429 at September 30, 2010 and December 31, 2009, respectively, at fair value) | 340,250 | 306,119 | ||||||
Loans, net of unearned income | ||||||||
Consumer (including $2,400 and $34 at September 30, 2010 and December 31, 2009, respectively, at fair value) | 463,104 | 424,057 | ||||||
Corporate (including $2,755 and $1,405 at September 30, 2010 and December 31, 2009, respectively, at fair value) | 191,207 | 167,447 | ||||||
Loans, net of unearned income | $ | 654,311 | $ | 591,504 | ||||
Allowance for loan losses | (43,674 | ) | (36,033 | ) | ||||
Total loans, net | $ | 610,637 | $ | 555,471 | ||||
Goodwill | 25,797 | 25,392 | ||||||
Intangible assets (other than MSRs) | 7,705 | 8,714 | ||||||
Mortgage servicing rights (MSRs) | 3,976 | 6,530 | ||||||
Other assets (including $22,918 and $12,664 as of September 30, 2010 and December 31, 2009, respectively, at fair value) | 172,800 | 163,105 | ||||||
Assets of discontinued operations held for sale | 31,409 | — | ||||||
Total assets | $ | 1,983,280 | $ | 1,856,646 | ||||
The following table presents certain assets of consolidated variable interest entities (VIEs), which are included in the Consolidated Balance Sheet above. The assets in the table below include only those assets that can be used to settle obligations of consolidated VIEs on the following page, and are in excess of those obligations.
| September 30, 2010 | ||||
---|---|---|---|---|---|
Assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs | |||||
Cash and due from banks (including segregated cash and other deposits) | $ | 2,316 | |||
Trading account assets | 4,959 | ||||
Investments | 9,476 | ||||
Loans, net of unearned income | |||||
Consumer (including $2,372 at fair value) | 112,988 | ||||
Corporate (including $648 at fair value) | 23,536 | ||||
Loans, net of unearned income | $ | 136,524 | |||
Allowance for loan losses | (12,007 | ) | |||
Total loans, net | $ | 124,517 | |||
Other assets(1) | 33,112 | ||||
Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs | $ | 174,380 | |||
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Continued)
Citigroup Inc. and Subsidiaries
In millions of dollars, except shares | September 30, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
| (Unaudited) | | |||||
Liabilities | |||||||
Non-interest-bearing deposits in U.S. offices | $ | 64,442 | $ | 71,325 | |||
Interest-bearing deposits in U.S. offices (including $614 and $700 at September 30, 2010 and December 31, 2009, respectively, at fair value) | 237,626 | 232,093 | |||||
Non-interest-bearing deposits in offices outside the U.S. | 52,080 | 44,904 | |||||
Interest-bearing deposits in offices outside the U.S. (including $556 and $845 at September 30, 2010 and December 31, 2009, respectively, at fair value) | 495,947 | 487,581 | |||||
Total deposits | $ | 850,095 | $ | 835,903 | |||
Federal funds purchased and securities loaned or sold under agreements to repurchase (including $119,984 and $104,030 as of September 30, 2010 and December 31, 2009, respectively, at fair value) | 192,065 | 154,281 | |||||
Brokerage payables | 51,517 | 60,846 | |||||
Trading account liabilities | 142,005 | 137,512 | |||||
Short-term borrowings (including $2,494 and $639 at September 30, 2010 and December 31, 2009, respectively, at fair value) | 87,013 | 68,879 | |||||
Long-term debt (including $26,640 and $25,942 at September 30, 2010 and December 31, 2009, respectively, at fair value) | 387,330 | 364,019 | |||||
Other liabilities (including $11,287 and $11,542 as of September 30, 2010 and December 31, 2009, respectively, at fair value) | 78,198 | 80,233 | |||||
Liabilities of discontinued operations held for sale | 29,874 | — | |||||
Total liabilities | $ | 1,818,097 | $ | 1,701,673 | |||
Stockholders' equity | |||||||
Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares:12,038 at September 30, 2010, at aggregate liquidation value | $ | 312 | $ | 312 | |||
Common stock ($0.01 par value; authorized shares: 60 billion), issued shares:29,223,928,169 at September 30, 2010 and 28,626,100,389 at December 31, 2009 | 292 | 286 | |||||
Additional paid-in capital | 100,898 | 98,142 | |||||
Retained earnings | 78,260 | 77,440 | |||||
Treasury stock, at cost:September 30, 2010—174,327,274 shares and December 31, 2009—142,833,099 shares | (1,540 | ) | (4,543 | ) | |||
Accumulated other comprehensive income (loss) | (15,309 | ) | (18,937 | ) | |||
Total Citigroup stockholders' equity | $ | 162,913 | $ | 152,700 | |||
Noncontrolling interest | 2,270 | 2,273 | |||||
Total equity | $ | 165,183 | $ | 154,973 | |||
Total liabilities and equity | $ | 1,983,280 | $ | 1,856,646 | |||
See Notes to the Consolidated Financial Statements.
The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The liabilities in the table below include third-party liabilities of consolidated VIEs only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Citigroup.
| September 30, 2010 | |||
---|---|---|---|---|
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup: | ||||
Short-term borrowings | $ | 32,162 | ||
Long-term debt (including $4,793 at fair value) | 69,639 | |||
Other liabilities(1) | 31,908 | |||
Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | $ | 133,709 | ||
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
Citigroup Inc. and Subsidiaries
| Nine Months Ended September 30, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars, except shares in thousands | 2010 | 2009 | |||||
Preferred stock at aggregate liquidation value | |||||||
Balance, beginning of period | $ | 312 | $ | 70,664 | |||
Issuance of new preferred stock | — | 3,653 | |||||
Conversion of preferred stock | — | (74,005 | ) | ||||
Balance, end of period | $ | 312 | $ | 312 | |||
Common stock and additional paid-in capital | |||||||
Balance, beginning of period | $ | 98,428 | $ | 19,222 | |||
Employee benefit plans(1) | (834 | ) | (3,508 | ) | |||
Issuance of Common Stock | — | 173 | |||||
Issuance of TARP-related warrants | — | 88 | |||||
Reset of convertible preferred stock conversion price | — | 1,285 | |||||
Conversion of preferred stock to common stock | — | 61,790 | |||||
ADIA Upper Decs Equity Units Purchase Contract | 3,750 | �� | — | ||||
Other | (154 | ) | (18 | ) | |||
Balance, end of period | $ | 101,190 | $ | 79,032 | |||
Retained earnings | |||||||
Balance, beginning of period | $ | 77,440 | $ | 86,521 | |||
Adjustment to opening balance, net of taxes(2)(3) | (8,483 | ) | 413 | ||||
Adjusted balance, beginning of period | $ | 68,957 | $ | 86,934 | |||
Citigroup's net income | 9,293 | 5,973 | |||||
Common dividends(4) | 10 | (34 | ) | ||||
Preferred dividends | — | (3,201 | ) | ||||
Preferred stock Series H discount accretion | — | (124 | ) | ||||
Reset of convertible preferred stock conversion price | — | (1,285 | ) | ||||
Convestion of preferred stock | (3,055 | ) | |||||
Balance, end of period | $ | 78,260 | $ | 85,208 | |||
Treasury stock, at cost | |||||||
Balance, beginning of period | $ | (4,543 | ) | $ | (9,582 | ) | |
Issuance of shares pursuant to employee benefit plans | 3,007 | 3,505 | |||||
Treasury stock acquired(5) | (5 | ) | (3 | ) | |||
Other | 1 | 21 | |||||
Balance, end of period | $ | (1,540 | ) | $ | (6,059 | ) | |
Accumulated other comprehensive income (loss) | |||||||
Balance, beginning of period | $ | (18,937 | ) | $ | (25,195 | ) | |
Adjustment to opening balance, net of taxes(2) | — | (413 | ) | ||||
Adjusted balance, beginning of period | $ | (18,937 | ) | $ | (25,608 | ) | |
Net change in unrealized gains and losses on investment securities, net of taxes | 3,350 | 5,818 | |||||
Net change in cash flow hedges, net of taxes | (123 | ) | 1,012 | ||||
Net change in foreign currency translation adjustment, net of taxes | 440 | 1,131 | |||||
Pension liability adjustment, net of taxes | (39 | ) | (4 | ) | |||
Net change inAccumulated other comprehensive income (loss) | $ | 3,628 | $ | 7,957 | |||
Balance, end of period | $ | (15,309 | ) | $ | (17,651 | ) | |
Total Citigroup common stockholders' equity (shares outstanding: 29,049,601 at September 30, 2010 and 28,483,267 at December 31, 2009) | $ | 162,601 | $ | 140,530 | |||
Total Citigroup stockholders' equity | $ | 162,913 | $ | 140,842 | |||
[Statement continues on the following page, including notes to table]
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETSTATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
(Continued)
Citigroup Inc. and Subsidiaries
In millions of dollars, except shares | September 30, 2009 | December 31, 2008 | ||||||
---|---|---|---|---|---|---|---|---|
| (Unaudited) | | ||||||
Assets | ||||||||
Cash and due from banks (including segregated cash and other deposits) | $ | 26,482 | $ | 29,253 | ||||
Deposits with banks | 217,730 | 170,331 | ||||||
Federal funds sold and securities borrowed or purchased under agreements to resell (including $87,886 and $70,305 as of September 30, 2009 and December 31, 2008, respectively, at fair value) | 197,357 | 184,133 | ||||||
Brokerage receivables | 34,667 | 44,278 | ||||||
Trading account assets (including $128,154 and $148,703 pledged to creditors at September 30, 2009 and December 31, 2008, respectively) | 340,697 | 377,635 | ||||||
Investments (including $18,413 and $14,875 pledged to creditors at September 30, 2009 and December 31, 2008, respectively) | 261,890 | 256,020 | ||||||
Loans, net of unearned income | ||||||||
Consumer (including $30 and $36 at September 30, 2009 and December 31, 2008, respectively, at fair value) | 441,491 | 481,387 | ||||||
Corporate (including $1,475 and $2,696 at September 30, 2009 and December 31, 2008, respectively, at fair value) | 180,720 | 212,829 | ||||||
Loans, net of unearned income | $ | 622,211 | $ | 694,216 | ||||
Allowance for loan losses | (36,416 | ) | (29,616 | ) | ||||
Total loans, net | $ | 585,795 | $ | 664,600 | ||||
Goodwill | 25,423 | 27,132 | ||||||
Intangible assets (other than MSRs) | 8,957 | 14,159 | ||||||
Mortgage servicing rights (MSRs) | 6,228 | 5,657 | ||||||
Other assets (including $13,670 and $21,372 as of September 30, 2009 and December 31, 2008 respectively, at fair value) | 159,769 | 165,272 | ||||||
Assets of discontinued operations held for sale | 23,604 | — | ||||||
Total assets | $ | 1,888,599 | $ | 1,938,470 | ||||
Liabilities | ||||||||
Deposits | ||||||||
Non-interest-bearing deposits in U.S. offices | $ | 77,460 | $ | 55,485 | ||||
Interest-bearing deposits in U.S. offices (including $919 and $1,335 at September 30, 2009 and December 31, 2008, respectively, at fair value) | 244,856 | 234,491 | ||||||
Total U.S. deposits | $ | 322,316 | $ | 289,976 | ||||
Non-interest-bearing deposits in offices outside the U.S. | 40,606 | 37,412 | ||||||
Interest-bearing deposits in offices outside the U.S. (including $1,110 and $1,271 at September 30, 2009 and December 31, 2008, respectively, at fair value) | 469,681 | 446,797 | ||||||
Total international deposits | $ | 510,287 | $ | 484,209 | ||||
Total deposits | $ | 832,603 | $ | 774,185 | ||||
Federal funds purchased and securities loaned or sold under agreements to repurchase (including $116,693 and $138,866 as of September 30, 2009 and December 31, 2008, respectively, at fair value) | 178,159 | 205,293 | ||||||
Brokerage payables | 57,672 | 70,916 | ||||||
Trading account liabilities | 130,540 | 165,800 | ||||||
Short-term borrowings (including $1,443 and $17,607 at September 30, 2009 and December 31, 2008, respectively, at fair value) | 64,731 | 126,691 | ||||||
Long-term debt (including $27,186 and $27,263 at September 30, 2009 and December 31, 2008, respectively, at fair value) | 379,557 | 359,593 | ||||||
Other liabilities (including $14,819 and $11,889 as of September 30, 2009 and December 31, 2008, respectively, at fair value) | 86,384 | 91,970 | ||||||
Liabilities of discontinued operations held for sale | 16,004 | — | ||||||
Total liabilities | $ | 1,745,650 | $ | 1,794,448 | ||||
Citigroup stockholders' equity | ||||||||
Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares:12,038 at September 30, 2009, at aggregate liquidation value | $ | 312 | $ | 70,664 | ||||
Common stock ($0.01 par value; authorized shares: 60 billion), issued shares:23,044,331,654 and 5,671,743,807 at September 30, 2009 and December 31, 2008, respectively. | 230 | 57 | ||||||
Additional paid-in capital | 78,802 | 19,165 | ||||||
Retained earnings | 85,208 | 86,521 | ||||||
Treasury stock, at cost:September 30, 2009—180,384,393 shares and December 31, 2008—221,675,719 shares | (6,059 | ) | (9,582 | ) | ||||
Accumulated other comprehensive income (loss) | (17,651 | ) | (25,195 | ) | ||||
Total Citigroup stockholders' equity | $ | 140,842 | $ | 141,630 | ||||
Noncontrolling interest | 2,107 | 2,392 | ||||||
Total equity | $ | 142,949 | $ | 144,022 | ||||
Total liabilities and equity | $ | 1,888,599 | $ | 1,938,470 | ||||
| Nine Months Ended September 30, | |||||||
---|---|---|---|---|---|---|---|---|
In millions of dollars, except shares in thousands | 2010 | 2009 | ||||||
Noncontrolling interest | ||||||||
Balance, beginning of period | $ | 2,273 | $ | 2,392 | ||||
Origination of a noncontrolling interest | 287 | 124 | ||||||
Transactions between noncontrolling interest shareholders and the related consolidating subsidiary | — | (134 | ) | |||||
Transactions between Citigroup and the noncontrolling-interest shareholders | (308 | ) | (350 | ) | ||||
Net income attributable to noncontrolling-interest shareholders | 119 | 24 | ||||||
Dividends paid to noncontrolling—interest shareholders | (99 | ) | (16 | ) | ||||
Accumulated other comprehensive income—net change in unrealized gains and losses on investment securities, net of tax | 6 | 7 | ||||||
Accumulated other comprehensive income—net change in FX translation adjustment, net of tax | (20 | ) | 31 | |||||
All other | 12 | 29 | ||||||
Net change in noncontrolling interests | $ | (3 | ) | $ | (285 | ) | ||
Balance, end of period | $ | 2,270 | $ | 2,107 | ||||
Total equity | $ | 165,183 | $ | 142,949 | ||||
Comprehensive income (loss) | ||||||||
Net income before attribution of noncontrolling interests | $ | 9,412 | $ | 5,997 | ||||
Net change inAccumulated other comprehensive income (loss) | 3,614 | 7,995 | ||||||
Total comprehensive income | $ | 13,026 | $ | 13,992 | ||||
Comprehensive income (loss) attributable to the noncontrolling interests | $ | 105 | $ | 62 | ||||
Comprehensive income attributable to Citigroup | $ | 12,921 | $ | 13,930 | ||||
See Notes
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited)
| Nine Months Ended September 30, | |||||||
---|---|---|---|---|---|---|---|---|
In millions of dollars, except shares in thousands | 2009 | 2008 | ||||||
Preferred stock at aggregate liquidation value | ||||||||
Balance, beginning of period | $ | 70,664 | $ | — | ||||
Issuance of preferred stock | 3,653 | 27,424 | ||||||
Conversion of preferred stock | (74,005 | ) | — | |||||
Balance, end of period | $ | 312 | $ | 27,424 | ||||
Common stock and additional paid-in capital | ||||||||
Balance, beginning of period | $ | 19,222 | $ | 18,062 | ||||
Employee benefit plans | (3,508 | ) | (2,405 | ) | ||||
Issuance of Common stock | 173 | 4,911 | ||||||
Issuance of shares for Nikko Cordial acquisition | — | (3,500 | ) | |||||
Issuance of TARP-related warrants | 88 | — | ||||||
Reset of convertible preferred stock conversion price | 1,285 | — | ||||||
Conversion of preferred stock to common stock | 61,790 | — | ||||||
Other | (18 | ) | (127 | ) | ||||
Balance, end of period | $ | 79,032 | $ | 16,941 | ||||
�� | ||||||||
Retained earnings | ||||||||
Balance, beginning of period | $ | 86,521 | $ | 121,769 | ||||
Adjustment to opening balance, net of tax(1) | 413 | — | ||||||
Adjusted balance, beginning of period | $ | 86,934 | $ | 121,769 | ||||
Net income (loss) | 5,973 | (10,421 | ) | |||||
Common dividends(2) | (34 | ) | (5,175 | ) | ||||
Preferred dividends | (3,201 | ) | (833 | ) | ||||
Preferred stock Series H discount accretion | (124 | ) | — | |||||
Reset of convertible preferred stock conversion price | (1,285 | ) | — | |||||
Conversion of Preferred stock | (3,055 | ) | — | |||||
Balance, end of period | $ | 85,208 | $ | 105,340 | ||||
Treasury stock, at cost | ||||||||
Balance, beginning of period | $ | (9,582 | ) | $ | (21,724 | ) | ||
Issuance of shares pursuant to employee benefit plans | 3,505 | 4,210 | ||||||
Treasury stock acquired(3) | (3 | ) | (7 | ) | ||||
Issuance of shares for Nikko Cordial acquisition | — | 7,858 | ||||||
Other | 21 | 21 | ||||||
Balance, end of period | $ | (6,059 | ) | $ | (9,642 | ) | ||
Accumulated other comprehensive income (loss) | ||||||||
Balance, beginning of period | $ | (25,195 | ) | $ | (4,660 | ) | ||
Adjustment to opening balance, net of tax(1) | (413 | ) | — | |||||
Adjusted balance, beginning of period | $ | (25,608 | ) | $ | (4,660 | ) | ||
Net change in unrealized gains and losses on investment securities, net of tax | 5,818 | (6,657 | ) | |||||
Net change in cash flow hedges, net of tax | 1,012 | (312 | ) | |||||
Net change in FX translation adjustment, net of tax | 1,131 | (2,419 | ) | |||||
Pension liability adjustment, net of tax | (4 | ) | 47 | |||||
Net change in Accumulated other comprehensive income (loss) | $ | 7,957 | $ | (9,341 | ) | |||
Balance, end of period | $ | (17,651 | ) | $ | (14,001 | ) | ||
Total Citigroup common stockholders' equity (shares outstanding: 22,863,947 at September 30, 2009 and 5,450,068 at December 31, 2008) | $ | 140,530 | $ | 98,638 | ||||
Total Citigroup stockholders' equity | $ | 140,842 | $ | 126,062 | ||||
Noncontrolling interests | ||||||||
Balance, beginning of period | $ | 2,392 | $ | 5,308 | ||||
Initial origination of a noncontrolling interest | 124 | 1,409 | ||||||
Transactions between noncontrolling interest shareholders and the related consolidating subsidiary | (134 | ) | (2,347 | ) | ||||
Transactions between Citigroup and the noncontrolling interest shareholders | (350 | ) | (836 | ) | ||||
Net income attributable to noncontrolling interest shareholders | 24 | (37 | ) | |||||
Dividends paid to noncontrolling interest shareholders | (16 | ) | (136 | ) | ||||
Accumulated other comprehensive income—Net change in unrealized gains and losses on investments securities, net of tax | 7 | 3 | ||||||
Accumulated other comprehensive income—Net change in FX translation adjustment, net of tax | 31 | 6 | ||||||
All other | 29 | 92 | ||||||
Net change in noncontrolling interests | $ | (285 | ) | $ | (1,846 | ) | ||
Balance, end of period | $ | 2,107 | $ | 3,462 | ||||
Total equity | $ | 142,949 | $ | 129,524 | ||||
Comprehensive income (loss) | ||||||||
Net income (loss) before attribution of noncontrolling interests | $ | 5,997 | $ | (10,458 | ) | |||
Net change in accumulated other comprehensive income (loss) | 7,995 | (9,332 | ) | |||||
Total comprehensive income (loss) | $ | 13,992 | $ | (19,790 | ) | |||
Comprehensive income (loss) attributable to the noncontrolling interest | 62 | (28 | ) | |||||
Comprehensive income (loss) attributable to Citigroup | $ | 13,930 | $ | (19,762 | ) | |||
See Notes to the Consolidated Financial Statements.Statements
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
| | Nine Months Ended September 30, | | Nine Months Ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | In millions of dollars | 2009 | 2008 | In millions of dollars | 2010 | 2009 | ||||||||||
Cash flows from operating activities of continuing operations | Cash flows from operating activities of continuing operations | Cash flows from operating activities of continuing operations | ||||||||||||||
Net income (loss) before attribution of noncontrolling interests | $ | 5,997 | $ | (10,458 | ) | |||||||||||
Net income (loss) attributable to noncontrolling interests | 24 | (37 | ) | |||||||||||||
Net income before attribution of noncontrolling interests | Net income before attribution of noncontrolling interests | $ | 9,412 | $ | 5,997 | |||||||||||
Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | 119 | 24 | |||||||||||||
Citigroup's net income (loss) | $ | 5,973 | $ | (10,421 | ) | |||||||||||
Citigroup's net income | Citigroup's net income | $ | 9,293 | $ | 5,973 | |||||||||||
Income (loss) from discontinued operations, net of taxes | (679 | ) | 882 | Income (loss) from discontinued operations, net of taxes | 148 | (679 | ) | |||||||||
Gain (loss) on sale, net of taxes | 2 | (304 | ) | (Loss) gain on sale, net of taxes | (314 | ) | 2 | |||||||||
Income (loss) from continuing operations—excluding noncontrolling interests | $ | 6,650 | $ | (10,999 | ) | Income from continuing operations—excluding noncontrolling interests | $ | 9,459 | $ | 6,650 | ||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities of continuing operations | ||||||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations—excluding noncontrolling interests | Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations—excluding noncontrolling interests | |||||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits | 298 | 252 | Amortization of deferred policy acquisition costs and present value of future profits | 229 | 298 | |||||||||||
Additions to deferred policy acquisition costs | (354 | ) | (311 | ) | Additions to deferred policy acquisition costs | 1,925 | (354 | ) | ||||||||
Depreciation and amortization | 1,290 | 1,953 | Depreciation and amortization | 1,379 | 1,290 | |||||||||||
Provision for credit losses | 31,114 | 21,210 | Provision for credit losses | 20,475 | 31,114 | |||||||||||
Change in trading account assets | 28,355 | 81,930 | Change in trading account assets | (4,225 | ) | 28,355 | ||||||||||
Change in trading account liabilities | (32,437 | ) | (12,799 | ) | Change in trading account liabilities | 4,493 | (32,437 | ) | ||||||||
Change in federal funds sold and securities borrowed or purchased under agreements to resell | (19,061 | ) | 48,657 | Change in federal funds sold and securities borrowed or purchased under agreements to resell | (18,035 | ) | (19,061 | ) | ||||||||
Change in federal funds purchased and securities loaned or sold under agreements to repurchase | (24,008 | ) | (53,824 | ) | Change in federal funds purchased and securities loaned or sold under agreements to repurchase | 37,784 | (24,008 | ) | ||||||||
Change in brokerage receivables net of brokerage payables | (2,360 | ) | 9,412 | Change in brokerage receivables net of brokerage payables | (12,833 | ) | (2,360 | ) | ||||||||
Net losses (gains) from sales of investments | (1,719 | ) | 863 | Net gains from sales of investments | (2,023 | ) | (1,719 | ) | ||||||||
Change in loans held-for-sale | (1,605 | ) | 22,398 | Change in loans held-for-sale | (3,331 | ) | (1,605 | ) | ||||||||
Other, net | 3 | (9,796 | ) | Other, net | (11,016 | ) | 315 | |||||||||
Total adjustments | Total adjustments | $ | (20,484 | ) | $ | 109,945 | Total adjustments | $ | 14,822 | $ | (20,172 | ) | ||||
Net cash provided by (used in) operating activities of continuing operations | $ | (13,834 | ) | $ | 98,946 | |||||||||||
Net cash provided by (used in) operating activities of continuing operations—excluding noncontrolling interests | Net cash provided by (used in) operating activities of continuing operations—excluding noncontrolling interests | $ | 24,281 | $ | (13,522 | ) | ||||||||||
Cash flows from investing activities of continuing operations | Cash flows from investing activities of continuing operations | Cash flows from investing activities of continuing operations | ||||||||||||||
Change in deposits at interest with banks | $ | (47,797 | ) | $ | (9,326 | ) | ||||||||||
Change in deposits with banks | Change in deposits with banks | $ | 17,343 | $ | (47,797 | ) | ||||||||||
Change in loans | Change in loans | (127,661 | ) | (187,859 | ) | Change in loans | 56,415 | (127,661 | ) | |||||||
Proceeds from sales and securitizations of loans | Proceeds from sales and securitizations of loans | 185,442 | 203,863 | Proceeds from sales and securitizations of loans | 7,270 | 185,442 | ||||||||||
Purchases of investments | Purchases of investments | (167,115 | ) | (272,815 | ) | Purchases of investments | (334,368 | ) | (167,115 | ) | ||||||
Proceeds from sales of investments | Proceeds from sales of investments | 66,890 | 60,255 | Proceeds from sales of investments | 129,471 | 66,890 | ||||||||||
Proceeds from maturities of investments | Proceeds from maturities of investments | 90,218 | 194,312 | Proceeds from maturities of investments | 153,669 | 90,218 | ||||||||||
Capital expenditures on premises and equipment | Capital expenditures on premises and equipment | (859 | ) | (2,111 | ) | Capital expenditures on premises and equipment | (805 | ) | (859 | ) | ||||||
Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed assets | Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed assets | 5,590 | 15,644 | Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed assets | 1,656 | 5,590 | ||||||||||
Net cash provided by investing activities of continuing operations | Net cash provided by investing activities of continuing operations | $ | 4,708 | $ | 1,963 | Net cash provided by investing activities of continuing operations | $ | 30,651 | $ | 4,708 | ||||||
Cash flows from financing activities of continuing operations | Cash flows from financing activities of continuing operations | Cash flows from financing activities of continuing operations | ||||||||||||||
Dividends paid | Dividends paid | $ | (3,235 | ) | $ | (6,008 | ) | Dividends paid | $ | — | $ | (3,235 | ) | |||
Issuance of common stock | — | 4,961 | ||||||||||||||
Issuance (redemptions) of preferred stock | — | 27,424 | ||||||||||||||
Issuance of ADIA Upper Decs equity units purchase contract | Issuance of ADIA Upper Decs equity units purchase contract | 3,750 | — | |||||||||||||
Treasury stock acquired | Treasury stock acquired | (3 | ) | (7 | ) | Treasury stock acquired | (5 | ) | (3 | ) | ||||||
Stock tendered for payment of withholding taxes | Stock tendered for payment of withholding taxes | (116 | ) | (377 | ) | Stock tendered for payment of withholding taxes | (786 | ) | (116 | ) | ||||||
Issuance of long-term debt | Issuance of long-term debt | 90,464 | 67,311 | Issuance of long-term debt | 22,072 | 90,464 | ||||||||||
Payments and redemptions of long-term debt | Payments and redemptions of long-term debt | (83,850 | ) | (94,073 | ) | Payments and redemptions of long-term debt | (56,839 | ) | (83,850 | ) | ||||||
Change in deposits | Change in deposits | 58,418 | (32,411 | ) | Change in deposits | 14,192 | 58,418 | |||||||||
Change in short-term borrowings | Change in short-term borrowings | (56,143 | ) | (41,633 | ) | Change in short-term borrowings | (37,121 | ) | (56,143 | ) | ||||||
Net cash (used in) provided by financing activities of continuing operations | Net cash (used in) provided by financing activities of continuing operations | $ | 5,535 | $ | (74,813 | ) | Net cash (used in) provided by financing activities of continuing operations | $ | (54,737 | ) | $ | 5,535 | ||||
Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | $ | 582 | $ | (1,105 | ) | Effect of exchange rate changes on cash and cash equivalents | 624 | 582 | |||||||
Net cash from discontinued operations | Net cash from discontinued operations | $ | 238 | $ | (171 | ) | Net cash from discontinued operations | 51 | (74 | ) | ||||||
Change in cash and due from banks | Change in cash and due from banks | $ | (2,771 | ) | $ | 24,820 | Change in cash and due from banks | $ | 870 | $ | (2,771 | ) | ||||
Cash and due from banks at beginning of period | Cash and due from banks at beginning of period | $ | 29,253 | $ | 38,206 | Cash and due from banks at beginning of period | 25,472 | 29,253 | ||||||||
Cash and due from banks at end of period | Cash and due from banks at end of period | $ | 26,482 | $ | 63,026 | Cash and due from banks at end of period | $ | 26,342 | $ | 26,482 | ||||||
Supplemental disclosure of cash flow information for continuing operations | Supplemental disclosure of cash flow information for continuing operations | Supplemental disclosure of cash flow information for continuing operations | ||||||||||||||
Cash (received)paid during the period for income taxes | $ | (1,251 | ) | $ | 2,123 | |||||||||||
Cash paid during the period for income taxes | Cash paid during the period for income taxes | $ | 3,392 | $ | (1,251 | ) | ||||||||||
Cash paid during the period for interest | Cash paid during the period for interest | $ | 21,338 | $ | 44,294 | Cash paid during the period for interest | $ | 17,289 | $ | 21,338 | ||||||
Non-cash investing activities | Non-cash investing activities | Non-cash investing activities | ||||||||||||||
Transfers to repossessed assets | Transfers to repossessed assets | $ | 2,149 | $ | 2,574 | Transfers to repossessed assets | $ | 2,058 | $ | 2,149 | ||||||
See Notes to the Unaudited Consolidated Financial Statements.
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CITIBANK, N.A. AND SUBSIDIARIES
| Citibank, N.A. and Subsidiaries | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars, except shares | September 30, 2010 | December 31, 2009 | |||||
| (Unaudited) | | |||||
Assets | |||||||
Cash and due from banks | $ | 21,533 | $ | 20,246 | |||
Deposits with banks | 137,194 | 154,372 | |||||
Federal funds sold and securities borrowed or purchased under agreements to resell | 40,526 | 31,434 | |||||
Trading account assets (including $504 and $914 pledged to creditors at September 30, 2010 and December 31, 2009, respectively) | 164,408 | 156,380 | |||||
Investments (including $3,625 and $3,849 pledged to creditors at September 30, 2010 and December 31, 2009, respectively) | 272,081 | 233,086 | |||||
Loans, net of unearned income | 446,325 | 477,974 | |||||
Allowance for loan losses | (19,951 | ) | (22,685 | ) | |||
Total loans, net | $ | 426,374 | $ | 455,289 | |||
Goodwill | 10,212 | 10,200 | |||||
Intangible assets, including MSRs | 5,310 | 8,243 | |||||
Premises and equipment, net | 4,580 | 4,832 | |||||
Interest and fees receivable | 6,510 | 6,840 | |||||
Other assets | 89,084 | 80,439 | |||||
Assets of discontinued operations held for sale | 31,409 | — | |||||
Total assets | $ | 1,209,221 | $ | 1,161,361 | |||
The following table presents certain assets of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The assets in the table below include only those assets that can be used to settle obligations of consolidated VIEs on the following page, and are in excess of those obligations.
| September 30, 2010 | ||||
---|---|---|---|---|---|
Assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs | |||||
Cash and due from banks (including segregated cash and other deposits) | $ | 1,828 | |||
Trading account assets | 96 | ||||
Investments | 8,695 | ||||
Loans, net of unearned income | |||||
Consumer (including $2,372 at fair value) | 9,891 | ||||
Corporate (including $362 at fair value) | 22,977 | ||||
Loans, net of unearned income | $ | 32,868 | |||
Allowance for loan losses | (86 | ) | |||
Total loans, net | $ | 32,782 | |||
Other assets(1) | 32,004 | ||||
Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs | $ | 75,405 | |||
[Statement continues on the following page]
CITIBANK, N.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Continued)
| Citibank, N.A. and Subsidiaries | Citibank, N.A. and Subsidiaries | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except shares | September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
| (Unaudited) | | ||||||||||||
Assets | ||||||||||||||
Cash and due from banks | $ | 21,016 | $ | 22,107 | ||||||||||
Deposits with banks | 207,082 | 156,774 | ||||||||||||
Federal funds sold and securities purchased under agreements to resell | 16,396 | 41,613 | ||||||||||||
Trading account assets (including $9,539 and $12,092 pledged to creditors at September 30, 2009 and December 31, 2008, respectively) | 163,542 | 197,052 | ||||||||||||
Investments (including $2,633 and $3,028 pledged to creditors at September 30, 2009 and December 31, 2008, respectively) | 187,406 | 165,914 | ||||||||||||
Loans, net of unearned income | 507,629 | 555,198 | ||||||||||||
Allowance for loan losses | (23,299 | ) | (18,273 | ) | ||||||||||
Total loans, net | $ | 484,330 | $ | 536,925 | ||||||||||
Goodwill | 10,210 | 10,148 | ||||||||||||
Intangible assets | 8,010 | 7,689 | ||||||||||||
Premises and equipment, net | 4,954 | 5,331 | ||||||||||||
Interest and fees receivable | 6,740 | 7,171 | ||||||||||||
Other assets | 77,068 | 76,316 | ||||||||||||
Total assets | $ | 1,186,754 | $ | 1,227,040 | ||||||||||
(Unaudited) | | |||||||||||||
Liabilities | ||||||||||||||
Non-interest-bearing deposits in U.S. offices | $ | 80,425 | $ | 55,223 | $ | 72,577 | $ | 76,729 | ||||||
Interest-bearing deposits in U.S. offices | 188,803 | 185,322 | 183,823 | 176,149 | ||||||||||
Non-interest-bearing deposits in offices outside the U.S. | 39,403 | 33,769 | 47,550 | 39,414 | ||||||||||
Interest-bearing deposits in offices outside the U.S. | 477,170 | 480,984 | 493,401 | 479,350 | ||||||||||
Total deposits | $ | 785,801 | $ | 755,298 | $ | 797,351 | $ | 771,642 | ||||||
Trading account liabilities | 56,917 | 108,921 | 66,922 | 52,010 | ||||||||||
Purchased funds and other borrowings | 88,889 | 116,333 | 72,984 | 89,503 | ||||||||||
Accrued taxes and other expenses | 9,347 | 8,192 | 8,942 | 9,046 | ||||||||||
Long-term debt and subordinated notes | 85,573 | 113,381 | 60,596 | 82,086 | ||||||||||
Other liabilities | 44,508 | 42,475 | 45,224 | 39,181 | ||||||||||
Liabilities of discontinued operations held for sale | 29,874 | — | ||||||||||||
Total liabilities | $ | 1,071,035 | $ | 1,144,600 | $ | 1,081,893 | $ | 1,043,468 | ||||||
Citibank stockholder's equity | ||||||||||||||
Capital stock ($20 par value) outstanding shares: 37,534,553 in each period | $ | 751 | $ | 751 | $ | 751 | $ | 751 | ||||||
Surplus | 105,293 | 74,767 | 109,166 | 107,923 | ||||||||||
Retained earnings | 19,988 | 21,735 | 25,597 | 19,457 | ||||||||||
Accumulated other comprehensive income (loss)(1) | (11,415 | ) | (15,895 | ) | (9,255 | ) | (11,532 | ) | ||||||
Total Citibank stockholder's equity | $ | 114,617 | $ | 81,358 | $ | 126,259 | $ | 116,599 | ||||||
Noncontrolling interest | 1,102 | 1,082 | 1,069 | 1,294 | ||||||||||
Total equity | $ | 115,719 | $ | 82,440 | $ | 127,328 | $ | 117,893 | ||||||
Total liabilities and equity | $ | 1,186,754 | $ | 1,227,040 | $ | 1,209,221 | $ | 1,161,361 | ||||||
See Notes to the Consolidated Financial Statements.
The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The liabilities in the table below include third-party liabilities of consolidated VIEs only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Citigroup.
| September 30, 2010 | |||
---|---|---|---|---|
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup: | ||||
Short-term borrowings | $ | 29,313 | ||
Long-term debt (including $2,557 at fair value) | 5,901 | |||
Other liabilities(1) | 31,148 | |||
Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | $ | 66,362 | ||
CITIGROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The accompanying Unauditedunaudited Consolidated Financial Statements as of September 30, 20092010 and for the three- and nine-month periodsperiod ended September 30, 20092010 include the accounts of Citigroup Inc. (Citigroup) and its subsidiaries (collectively, the Company). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been reflected. The accompanying Unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in Citigroup's 2008 Annual Report on Form 10-K.10-K for the fiscal year ended December 31, 2009, Citigroup's updated 2009 historical financial statements and notes filed on Form 8-K with the Securities and Exchange Commission (SEC) on June 25, 2010 and Citigroup's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.
Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles, but is not required for interim reporting purposes, has been condensed or omitted.
Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related footnote disclosures. While management makes its best judgment, actual results could differ from those estimates. Current market conditions increase the risk and complexity of the judgments in these estimates.
Certain reclassifications have been made to the prior-period's financial statements to conform to the current period's presentation.
As noted above, the Notes to Consolidated Financial Statements are unaudited.
FASB Launches Accounting Standards Codification
The FASB has issued FASB Statement No. 168,The "FASB Accounting Standards Codification™" and the Hierarchy of Generally Accepted Accounting Principles (ASC 105). The Statement establishes the FASB Accounting Standards Codification™ (Codification or ASC) as the single source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other nongrandfathered, non-SEC accounting literature not included in the Codification have become nonauthoritative.Citibank, N.A.
Following the Codification, the Board will not issue new standardsCitibank, N.A. is a commercial bank and wholly owned subsidiary of Citigroup Inc. Citibank's principal offerings include consumer finance, mortgage lending, and retail banking products and services; investment banking, commercial banking, cash management, trade finance and e-commerce products and services; and private banking products and services.
The Company includes a balance sheet and statement of changes in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (ASU), which will servestockholder's equity for Citibank, N.A. to update the Codification, provide background information about the guidancethis entity to shareholders of Citigroup and provide the basis for conclusions on the changesinternational regulatory agencies (see Note 21 to the Codification.
GAAP is not intended to be changed as a result of the FASB's Codification project, but what does change is the way the guidance is organized and presented. As a result, these changes have a significant impact on how companies reference GAAP in their financial statements and in their accounting policiesConsolidated Financial Statements for financial statements issued for interim and annual periods ending after September 15, 2009. Citigroup is providing references to the Codification topics alongside references to the existing standards.further information).
Significant Accounting Policies
The Company's accounting policies are fundamental to understanding management's discussion and analysis of results of operations and financial condition. The Company has identified six policies as being significant because they require management to make subjective and/or complex judgments about matters that are inherently uncertain. These policies relate to Valuations of Financial Instruments, Allowance for Credit Losses, Securitizations, Goodwill, Income Taxes and Legal Reserves. The Company, in consultation with the Audit and Risk Management Committee of the Board of Directors, has reviewed and approved these significant accounting policies, which are further described in the Company's 2008 Annual Report on Form 10-K.10-K for the fiscal year ended December 31, 2009.
A detailed discussion of the Company's accounting policies is included in Citigroup's updated 2009 historical financial statements and notes filed on Form 8-K with the SEC on June 25, 2010.
ACCOUNTING CHANGESPrinciples of Consolidation
Interim Disclosures about Fair Value The Consolidated Financial Statements include the accounts of Financial Instruments
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, "Interim Disclosures about Fair ValueCompany. The Company consolidates subsidiaries in which it holds, directly or indirectly, more than 50% of Financial Instruments," (ASC 825-10-65-1). This FSP requires disclosing qualitative and quantitative information aboutthe voting rights or where it exercises control. Entities where the Company holds 20% to 50% of the voting rights and/or has the ability to exercise significant influence, other than investments of designated venture capital subsidiaries, or investments accounted for at fair value under the fair value option, are accounted for under the equity method, and the pro rata share of all financial instrumentstheir income (loss) is included in
Other-Than-Temporary Impairments on Investment Securities
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments" (ASC 320-10-65-1/FSP FAS 115-2), which amends the recognition guidance for other-than-temporary impairments (OTTI) of debt securities and expands the financial statement disclosures for OTTI on debt and equity securities. Citigroup adopted the FSP in the first quarter of 2009.
As a result of the FSP, the Company's Consolidated Statement of Income reflects the full impairment (thatthat is the difference between the security's amortized cost basis and fair value) on debt securitiesother than temporary, such that the Company intends to sell or would more-likely-than-not be required to sell before the expected recovery of the amortized cost basis. For available-for-sale (AFS) and held-to-maturity (HTM) debt securities that management has no intent to sell and believes that it more-likely-than-not will not be required to sell prior to recovery,carrying amount is deemed unlikely, are included in
onlyACCOUNTING CHANGES
Change in Accounting for Embedded Credit Derivatives
In March 2010, the FASB issued ASU 2010-11,Scope Exception Related to Embedded Credit Derivatives. The ASU clarifies that certain embedded derivatives, such as those contained in certain securitizations, CDOs and structured notes, should be considered embedded credit loss componentderivatives subject to potential bifurcation and separate fair value accounting. The ASU allows any beneficial interest issued by a securitization vehicle to be accounted for under the fair value option at transition on July 1, 2010.
The Company has elected to account for the following beneficial interests issued by securitization vehicles under the fair value option. Beneficial interests previously classified as held-to-maturity (HTM) were reclassified to available-for-sale (AFS) on June 30, 2010, because as of that reporting date, the Company did not have the intent to hold the beneficial interests until maturity.
The following table also shows the gross gains and gross losses that make up the pre-tax cumulative-effect adjustment to retained earnings for reclassified beneficial interests, recorded on July 1, 2010:
| | July 1, 2010 | | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Pre-tax Cumulative effect adjustment to Retained earnings | | |||||||||||
In millions of dollars at June 30, 2010 | Amortized cost | Gross unrealized losses recognized in AOCI(1) | Gross unrealized gains recognized in AOCI | Fair Value | ||||||||||
Mortgage-backed securities | ||||||||||||||
Prime | $ | 390 | $ | — | $ | 49 | $ | 439 | ||||||
Alt-A | 550 | — | 54 | 604 | ||||||||||
Subprime | 221 | — | 6 | 227 | ||||||||||
Non-U.S. residential | 2,249 | — | 38 | 2,287 | ||||||||||
Total mortgage-backed securities | $ | 3,410 | $ | — | $ | 147 | $ | 3,557 | ||||||
Asset-backed securities | ||||||||||||||
Auction rate securities | $ | 4,463 | $ | 401 | $ | 48 | $ | 4,110 | ||||||
Other asset-backed | 4,189 | 19 | 164 | 4,334 | ||||||||||
Total asset-backed securities | $ | 8,652 | $ | 420 | $ | 212 | $ | 8,444 | ||||||
Total reclassified debt securities | $ | 12,062 | $ | 420 | $ | 359 | $ | 12,001 | ||||||
Beginning July 1, 2010, the Company elected to account for these beneficial interests under the fair value option for various reasons, including:
Additional Disclosures Regarding Fair Value Measurements
In January 2010, the FASB issued ASU 2010-06,Improving Disclosures about Fair Value Measurements. The ASU requires disclosing the amounts of significant transfers in and out of Levels 1 and 2 of the fair value loss is recognizedhierarchy and describing the reasons for the transfers. The disclosures are effective for reporting periods beginning after December 15, 2009. The Company adopted ASU 2010-06 as of January 1, 2010. The required disclosures are included inAccumulated other comprehensive income (AOCI). The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term Note 16. Additionally, disclosures of the security as projected using the Company's cash flow projections using its base assumptions. As a resultgross purchases, sales, issuances and settlements activity in Level 3 of the adoptionfair value measurement hierarchy will be required for fiscal years beginning after December 15, 2010.
Table of the FSP, Citigroup's incomeContents
Elimination of Qualifying Special Purpose Entities (QSPEs) and Changes in the first quarter of 2009 was higher by $631 million on a pretax basis ($391 million on an after-tax basis), respectively.Consolidation Model for VIEs
The cumulative effect of the change included an increase in the opening balance ofRetained earnings at January 1, 2009 of $665 million on a pretax basis ($413 million after-tax).
See Note 10 to the Consolidated Financial Statements, Investments, for disclosures related to the Company's investment securities and OTTI.
Measurement of Fair Value in Inactive Markets
In AprilJune 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When the VolumeSFAS No. 166,Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166, now incorporated into ASC Topic 860) and Level of Activity for the Asset or Liability Have Significantly DecreasedSFAS No. 167,Amendments to FASB Interpretation No. 46(R) (SFAS 167, now incorporated into ASC Topic 810). Citigroup adopted both standards on January 1, 2010. Citigroup has elected to apply SFAS 166 and Identifying Transactions That Are Not Orderly" (ASC 820-10-65-4). The FSP reaffirms that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The FSP also reaffirms the need to use judgment in determining whether a formerly active market has become inactive and in determining fair values when the market has become inactive. The adoption of the FSP had no effect on the Company's Consolidated Financial Statements.
Measuring Liabilities at Fair ValueSFAS 167 prospectively. Accordingly, prior periods have not been restated.
In August 2009, the FASB issued ASU No. 2009-05,Fair Value Measurements and Disclosure (Topic 820): Measuring Liabilities at Fair Value. This ASU provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques:
This ASU also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments SFAS 166 eliminates QSPEs. SFAS 167 details three key changes to the quoted price of the asset are required, are Level 1 fair value measurements.
This ASU is effective immediately and does not have a material impact to Citigroup.
Revisions to the Earnings per Share Calculation
In June 2008, the FASB issued FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" (ASC 260-10-45 to 65). Under the FSP, unvested share-based payment awards that contain nonforfeitable rights to dividends are considered to be a separate class of common stock and included in the EPS calculation using the "two-class method." Citigroup's restricted and deferred share awards meet the definition of a participating security. In accordance with the FSP, restricted and deferred sharesconsolidation model. First, former QSPEs are now included in the basic EPS calculation.scope of SFAS 167. Second, the FASB has changed the method of analyzing which party to a VIE should consolidate the VIE (known as the primary beneficiary) to a qualitative determination of which party to the VIE has "power," combined with potentially significant benefits or losses, instead of the previous quantitative risks and rewards model. The party that has "power" has the ability to direct the activities of the VIE that most significantly impact the VIE's economic performance. Third, the new standard requires that the primary beneficiary analysis be re-evaluated whenever circumstances change. The previous rules required reconsideration of the primary beneficiary only when specified reconsideration events occurred.
As a result of implementing these new accounting standards, Citigroup consolidated certain of the VIEs and former QSPEs with which it currently has involvement. Further, certain asset transfers, including transfers of portions of assets, that would have been considered sales under SFAS 140, are considered secured borrowings under the new standards.
In accordance with SFAS 167, Citigroup employed three approaches for newly consolidating certain VIEs and former QSPEs as of January 1, 2010. The first approach requires initially measuring the assets, liabilities, and noncontrolling interests of the VIEs and former QSPEs at their carrying values (the amounts at which the assets, liabilities, and noncontrolling interests would have been carried in the Consolidated Financial Statements, if Citigroup had always consolidated these VIEs and former QSPEs). The second approach measures assets at their unpaid principal amount, and is applied where using carrying values is not practicable. The third approach is to elect the fair value option, in which all of the financial assets and liabilities of certain designated VIEs and former QSPEs are recorded at fair value upon adoption of SFAS 167 and continue to be marked-to-market thereafter, with changes in fair value reported in earnings.
Citigroup consolidated all required VIEs and former QSPEs, as of January 1, 2010, at carrying values or unpaid principal amounts, except for certain private label residential mortgage and mutual fund deferred sales commissions VIEs, for which the fair value option was elected. The following tables present the impact of adopting these new accounting standards applying these approaches.
The incremental impact of these changes on GAAP assets and resulting risk-weighted assets for those VIEs and former QSPEs that were consolidated or deconsolidated for accounting purposes as of January 1, 2010 was as follows:
| Incremental | |||||||
---|---|---|---|---|---|---|---|---|
In billions of dollars | GAAP assets | Risk- weighted assets(3) | ||||||
Impact of consolidation | ||||||||
Credit cards | $ | 86.3 | $ | 0.8 | ||||
Commercial paper conduits | 28.3 | 13.0 | ||||||
Student loans | 13.6 | 3.7 | ||||||
Private label consumer mortgages | 4.4 | 1.3 | ||||||
Municipal tender option bonds | 0.6 | 0.1 | ||||||
Collateralized loan obligations | 0.5 | 0.5 | ||||||
Mutual fund deferred sales commissions | 0.5 | 0.5 | ||||||
Subtotal | $ | 134.2 | $ | 19.9 | ||||
Impact of deconsolidation | ||||||||
Collateralized debt obligations(1) | $ | 1.9 | $ | 3.6 | ||||
Equity-linked notes(2) | 1.2 | 0.5 | ||||||
Total | $ | 137.3 | $ | 24.0 | ||||
The following table showsreflects the effectincremental impact of adopting the changed accounting for participating securitiesSFAS 166/167 on Citigroup's basicGAAP assets, liabilities, and diluted EPS for 2008 and 2009:stockholders' equity.
| 1Q08 | 2Q08 | 3Q08 | 4Q08 | Full Year 2008 | 1Q09 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Basic and Diluted Earnings per Share(1) | |||||||||||||||||||
As reported | $ | (1.02 | ) | $ | (0.54 | ) | $ | (0.60 | ) | $ | (3.40 | ) | $ | (5.59 | ) | N/A | |||
Two-class method | $ | (1.03 | ) | $ | (0.55 | ) | $ | (0.61 | ) | $ | (3.40 | ) | $ | (5.61 | ) | $ | (0.18 | ) | |
In billions of dollars | January 1, 2010 | ||||
---|---|---|---|---|---|
Assets | |||||
Trading account assets | $ | (9.9 | ) | ||
Investments | (0.6 | ) | |||
Loans | 159.4 | ||||
Allowance for loan losses | (13.4 | ) | |||
Other assets | 1.8 | ||||
Total assets | $ | 137.3 | |||
Liabilities | |||||
Short-term borrowings | $ | 58.3 | |||
Long-term debt | 86.1 | ||||
Other liabilities | 1.3 | ||||
Total liabilities | $ | 145.7 | |||
Stockholders' equity | |||||
Retained earnings | $ | (8.4 | ) | ||
Total stockholders' equity | (8.4 | ) | |||
Total liabilities and stockholders' equity | $ | 137.3 | |||
N/A Not Applicable
Additional Disclosures for Derivative Instruments
On January 1, 2009,individual former QSPEs and VIEs, only a portion of the former QSPEs and VIEs with which the Company adopted SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendmentis involved were required to SFAS 133 (ASC 815-10-65-1 /SFAS 161). The standard requires enhanced disclosures about derivative instruments and hedged items that are accounted for under ASC 815-10 (SFAS 133) and related interpretations. No comparative information for periods prior to the effective date is required. See Note 16 to the Consolidated Financial Statements, Derivatives Activities, for disclosures related to the Company's hedging activities and derivative instruments. ASC 815-10-65-1 (SFAS 161) had no impact on how Citigroup accounts for these instruments.
Business Combinationsbe consolidated.
In December 2007,addition, the FASB issued Statement No. 141(revised),cumulative effect of adopting these new accounting standards as of January 1, 2010 resulted in an aggregate after-tax charge toBusiness CombinationsRetained earnings (ASC 805-10/SFAS 141(R)), which is designedof $8.4 billion, reflecting the net effect of an overall pretax charge to improveRetained earnings (primarily relating to the relevance, representational faithfulness, and comparabilityestablishment of the information that a reporting entity provides in its financial reports about a business combination and its effects. The Statement retains the fundamental requirements that the acquisition method of accounting (which was called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. The Statement also retains the guidance for identifying and recognizing intangible assets separately from goodwill. The most significant changes are: (1) acquisition costs and restructuring costs will now be expensed; (2) stock consideration will be measured based on the quoted market price as of the acquisition date instead of the date the deal is announced; and (3) the acquirer will record a 100% step-up to fair value for all assets and liabilities, including the noncontrolling interest portion, and goodwill is recorded as if a 100% interest was acquired.
Citigroup adopted ASC 805-10 (SFAS 141(R)) on January 1, 2009,loan loss reserves and the standard is applied prospectively.
Noncontrolling Interests in Subsidiaries
In December 2007,reversal of residual interests held) of $13.4 billion and the FASB issued Statement No. 160,Noncontrolling Interests in Consolidated Financial Statements (ASC 810-10-65-1/SFAS 160), which establishes standards for the accounting and reportingrecognition of noncontrolling interests in subsidiaries (previously called minority interests) in consolidated financial statements and for the loss of control of subsidiaries. Upon adoption, ASC 810-10-65-1 (SFAS 160) requires that the equity interest of noncontrolling shareholders, partners, or other equity holders in subsidiaries be presented as a separate item in Citigroup's stockholders' equity, rather than as a liability. After the initial adoption, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary must be measured at fair value at the date of deconsolidation.related deferred tax assets amounting to $5.0 billion.
The gain or lossimpact on the deconsolidationcertain of Citigroup's regulatory capital ratios of adopting these new accounting standards, reflecting immediate implementation of the subsidiary is measured using the fair valuerecently issued final risk-based capital rules regarding SFAS 166/167, was as follows:
As of January 1, 2010 | ||||
---|---|---|---|---|
Impact | ||||
Tier 1 Capital | (141) bps | |||
Total Capital | (142) bps | |||
Non-consolidation of the remaining investment, rather than the previous carrying amount of that retained investment.Certain Investment Funds
Citigroup adopted ASC 810-10-65-1 (SFAS 160) on January 1, 2009. As a result, $2.392 billion of noncontrolling interests was reclassified fromThe FASB issued Accounting Standards Update No. 2010-10,Other liabilitiesConsolidation (Topic 810), Amendments for Certain Investment Funds (ASU 2010-10) in the first quarter of 2010. ASU 2010-10 provides a deferral to Citigroup's Stockholders' equity.
Sale with Repurchase Financing Agreements
In February 2008, the FASB issued FASB Staff Position (FSP) FAS 140-3, "Accounting for Transfersrequirements of Financial Assets and Repurchase Financing Transactions" (ASC 860-10-40). This FSP provides implementation guidance on whether a security transfer with a contemporaneous repurchase financing involving the transferred financial asset must be evaluated as one linked transaction or two separate de-linked transactions.
The FSP requires the recognition of the transfer and the repurchase agreement as one linked transaction, unless all ofSFAS 167 where the following criteria are met: (1) the initial transfer and the repurchase financing
A securitization entity;
An asset-backed financing is before the maturityentity;
An entity that was formerly considered a qualifying special-purpose entity.
The Company has determined that a majority of the financial asset. The scopeinvestment vehicles managed by Citigroup are provided a deferral from the requirements of this FSP is limitedSFAS 167, because they meet these criteria. These vehicles continue to transfers and subsequent repurchase financingsbe evaluated under the requirements of ASC 810-10, prior to the implementation of SFAS 167 (FIN 46(R)).
Where the Company has determined that certain investment vehicles are entered into contemporaneously or in contemplationsubject to the consolidation requirements of one another.
Citigroup adoptedSFAS 167, the FSP on January 1, 2009. The impactconsolidation conclusions reached upon initial application of adopting this FSP was not material.SFAS 167 are consistent with the consolidation conclusions reached under the requirements of ASC 810-10, prior to the implementation of SFAS 167.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
Fair Value Disclosures about Pension Plan Assets
In December 2008, the FASB issued FSP FAS 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets" (ASC 715-20-65-2). This FSP requires that information about plan assets be disclosed on an annual basis. Citigroup will be required to separate plan assets into the three fair value hierarchy levels and provide a rollforward of the changes in fair value of plan assets classified as Level 3 in Citigroup's annual Consolidated Financial Statements.
The disclosures about plan assets required by this FSP are effective for fiscal years ending after December 15, 2009. This FSP will have no effect on the Company's accounting for plan benefits and obligations.
Investments in Certain Entities that Calculate Net Asset Value per Share
On September 30,As of December 31, 2009, the FASB issuedCompany adopted Accounting Standards Update (ASU) No. 2009-12,Investments in Certain Entities Thatthat Calculate Net Asset Value per Share (or its Equivalent), to provide, which provides guidance on measuring the fair value of certain alternative investments. The ASU permits entities to use net asset value as a practical expedient to measure the fair value of itstheir investments in certain investment funds. The ASU also requires additional disclosures regarding the nature and risks of such investments. The ASUinvestments and provides guidance on the classification of such investments as Level 2 or Level 3 of the fair-valuefair value hierarchy. The ASU is effective for reporting periods ending after December 15, 2009. This ASU isdid not expected to have a material impact on the Company's accounting for its investments in alternative investment funds.
Proposed Additional Disclosures Regarding Fair Value MeasurementsMultiple Foreign Exchange Rates
On August 28, 2009,In May 2010, the FASB issued ASU 2010-19,Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The ASU requires certain disclosure in situations when an exposure draftentity's reported balances in U.S. dollar monetary assets held by its foreign entities differ from the actual U.S. dollar-denominated balances due to different foreign exchange rates used in remeasurement and translation. The ASU also clarifies the reporting for the difference between the reported balances and the U.S. dollar-denominated balances upon the initial adoption of highly inflationary accounting. The ASU does not have a material impact on the Company's accounting.
Effect of a proposedLoan Modification When the Loan is Part of a Pool Accounted for as a Single Asset (ASU No. 2010-18)
In April 2010, the FASB issued ASU No. 2010-18,Improving Disclosures About Fair Value Measurements,Effect of a Loan Modification When the Loan is Part of a Pool Accounted for as a Single Asset which proposes new disclosures about fair value measurements. Certain. As a result of the proposed amendments in this ASU, modifications of loans that are accounted for within a pool do not result in the removal of those loans from the pool, even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. The ASU was effective for reporting periods ending on or after DecemberJuly 15, 2009. Additional disclosures have been proposed that would require a sensitivity analysis regarding the impact of unobservable inputs2010. The ASU had no material effect on the fair valuation of Level 3 instruments, which would be effective for reporting periods ending after March 15, 2010.Company's financial statements.
FUTURE APPLICATIONS OF ACCOUNTING STANDARDS
Loss-Contingency Disclosures
In June 2008,July 2010, the FASB issued ana second exposure draft proposing expanded disclosures regarding loss contingencies accounted for under FASB Statement No. 5,Accounting for Contingencies (ASC 450-10 to 20), and ASC 805-10 (SFAS 141(R)).contingencies. This proposal increases the number of loss contingencies subject to disclosure and requires substantial quantitative and qualitative information to be provided about those loss contingencies. The proposed effective date for fiscal years ending after December 15, 2009, butproposal will have no effectimpact on the Company's accounting for loss contingencies.
Elimination of QSPEsCredit Quality and Changes in the Consolidation ModelAllowance for Variable Interest EntitiesCredit Losses Disclosures
In May 2009,July 2010, the FASB issued SFASASU No. 166,2010-20,AccountingDisclosures about Credit Quality of Financing Receivables and Allowance for Transfers of Financial Assets, an amendment of FASB Statement No. 140Credit Losses. (SFAS 166), thatThe ASU requires a greater level of disaggregated information about the allowance for credit losses and the credit quality of financing receivables. The period-end balance disclosure requirements for loans and the allowance for loans losses will eliminate Qualifying Special Purpose Entities (QSPEs). This change will have a significant impact on Citigroup's Consolidated Financial Statements as the Company will lose sales treatment for certain assets previously sold to QSPEs, as well as for certain future sales, and for certain transfers of portions of assets that do not meet the definition of participating interests. SFAS 166 isbe effective for fiscal yearsreporting periods ending on or after December 15, 2010, while disclosures for activity during a reporting period that begin after November 15, 2009.
Simultaneously, the FASB issued SFAS No. 167,Amendments to FASB Interpretation No. 46(R) (SFAS 167), which details three key changes to the consolidation model. First, former QSPEs will now be includedoccurs in the scope of SFAS 167. In addition, the FASB has changed the method of analyzing which party to a variable interest entity (VIE) should consolidate the VIE (known as the primary beneficiary) to a qualitative determination of which party to the VIE has power combined with potentially significant benefitsloan and losses, instead of the current quantitative risks and rewards model. The entity that has power has the ability to direct the activities of the VIE that most significantly impact the VIE's economic performance. Finally, the new standard requires that the primary beneficiary analysis be re-evaluated whenever circumstances change. The current rules require reconsideration of the primary beneficiary only when specified reconsideration events occur.
As a result of implementing these new accounting standards, Citigroup expects to be required to consolidate certain of the VIEs and former QSPEs with which it currently has involvement. An ongoing evaluation of the application of these new requirements could, with the resolution of certain uncertainties, result in the identification of additional VIEs and QSPEs, other than those presented below, needing to be consolidated. It is not currently anticipated, however, that any such newly identified VIEs and QSPEs would have a significant impact on Citigroup's Consolidated Financial Statements or capital position.
In accordance with SFAS 167, Citigroup is currently evaluating two approaches for consolidating all of the VIEs and QSPEs that it expects to consolidate. The first approach would require initially measuring the assets, liabilities, and noncontrolling interests of the VIEs and QSPEs at their carrying values (the amounts at which the assets, liabilities, and noncontrolling interests would have been carried in the Consolidated Financial Statements, if Citigroup were to be designated as the primary beneficiary). The second approach under consideration would be to elect the fair value option, in which all of the financial assets and liabilities of certain designated VIEs and QSPEs would be recorded at fair value upon adoption of SFAS 167 and continue to be marked to market thereafter, with changes in fair value reported in earnings.
While this review has not yet been completed, Citigroup's tentative approach would be to consolidate all of the VIEs and QSPEs that it expects to consolidate at carrying value, except for certain private label residential mortgages, for which the
fair value option would be elected. The following tables present the pro forma impact of adopting these new accounting standards applying this tentative approach. The actual impact of adopting these new accounting requirements could, however, be significantly different should Citigroup change from this methodology. For instance, if Citigroup were to consolidate its off-balance sheet credit card securitization vehicles applying the fair value option, an associated allowance for loan losses would notaccounts will be established upon adoption of SFAS 167, with an offsetting chargeeffective for reporting periods beginning on or after December 15, 2010.
Potential Amendments toRetained earnings. Rather, the charge toRetained earnings would be affected by the difference between the fair value of the assets and liabilities that Citigroup would consolidate, which would result in a lesser charge toRetained earnings than under the carrying value approach. Current Accounting Standards
The pro forma impactFASB is currently working on amendments to existing accounting standards governing financial instruments and lease accounting. Upon completion of these impendingthe standards, the Company will need to re-evaluate its accounting and disclosures. The FASB is proposing sweeping changes to the classification and measurement of financial instruments, hedging and impairment guidance. The FASB is also working on incremental GAAP assets and resulting risk-weighted assets for those VIEs and former QSPEsa project that are currently expectedwould require all leases to be consolidated or deconsolidatedcapitalized on the balance sheet. These projects will have significant impacts for accounting purposes as of January 1, 2010 (based on financial information as of September 30, 2009), reflecting Citigroup's present understandingthe Company. However, due to ongoing deliberations of the new requirements, and assuming continued application of existing risk-based capital rules, would be as follows:
| Incremental | |||||||
---|---|---|---|---|---|---|---|---|
In billions of dollars | GAAP assets | Risk- weighted assets(1) | ||||||
Impact of Consolidation: | ||||||||
Credit cards | $ | 84.2 | $ | 0.9 | ||||
Commercial paper conduits | 39.7 | — | ||||||
Student loans | 13.9 | 4.0 | ||||||
Private label consumer mortgages | 7.7 | 4.6 | ||||||
Investment funds | 3.8 | 0.4 | ||||||
Commercial mortgages | 1.4 | 1.3 | ||||||
Muni bonds | 0.6 | 0.1 | ||||||
Mutual fund deferred sales commissions | 0.6 | 0.6 | ||||||
Subtotal | $ | 151.9 | $ | 11.9 | ||||
Impact of Deconsolidation: | ||||||||
Collateralized debt obligations(2) | $ | 1.9 | $ | 5.9 | ||||
Total | $ | 153.8 | $ | 17.8 | ||||
In September 2009, the U.S. banking and thrift regulatory agencies issued a notice of proposed rulemaking in which the agencies proposed, in part, to eliminate the existing provision in the risk-based capital rules that permits a banking organization, if it is required to consolidate for accounting purposes a qualifying ABCP program that it sponsors, to exclude the consolidated assets from its risk-weighted assets.
If this exclusion under the existing risk-based capital rules for qualifying ABCP programs, such as commercial paper conduits, were to be eliminated, as proposed, Citigroup's total incremental risk-weighted assets (based on financial information as of September 30, 2009) would be greater by approximately an additional $15.9 billion.
The above table reflects: (i) the estimated portion of the assets of former QSPEs to which Citigroup, acting as principal, has transferred assets and received sales treatment as of September 30, 2009 (totaling approximately $733.5 billion), and (ii) the estimated assets of significant unconsolidated VIEs as of September 30, 2009 with which Citigroup is involved (totaling approximately $231.4 billion) that would be required to be consolidated under the new accounting standards. Due to the variety of transaction structures and the level of Citigroup involvement in individual former QSPEs and VIEs, only a portion of the former QSPEs and VIEs with whichstandard-setters, the Company is involved is expectedcurrently unable to be consolidated.
In addition,determine the cumulative effect of adopting these newfuture amendments or proposals at this time. The FASB and IASB are currently working on several joint projects aimed at converging the two sets of accounting standards as of January 1, 2010, based on financial information as of September 30, 2009, would result in an estimated aggregate after-tax chargestandards. However, the two Boards have proposed very different models for the Financial Instruments project. Due toRetained earnings of approximately $7.8 billion, reflecting certain differences between the net effect of an overall pretax charge toRetained earnings (primarily relating to the establishment of loan loss reservesFASB and the reversal of residual interests held) of approximately $12.5 billion and the recognition of related deferred tax assets amounting to approximately $4.7 billion.
The pro forma impact on certain of Citigroup's regulatory capital ratios of adopting these new accounting standards (based on financial information as of September 30, 2009), and assuming the continued application of the existing risk-based capital rules, wouldIASB models, Citi believes achieving convergence will be as follows:
| As of September 30, 2009 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
| As Reported | Pro Forma | Impact | |||||||
Tier 1 Capital | 12.76 | % | 11.44 | % | (132) bps | |||||
Total Capital | 16.58 | % | 15.26 | % | (132) bps |
Elimination of the exclusion noted above under the existing risk-based capital rules for qualifying ABCP programs, such as commercial paper conduits, would further adversely affect certain of Citigroup's regulatory capital ratios. The pro forma impact on Citigroup's Tier 1 Capital and Total Capital ratios (based on financial information as of September 30, 2009), including the additional approximately $15.9 billion of risk-weighted assets arising from the consolidation of the commercial paper conduits, would be a total reduction in these ratios from those reported at September 30, 2009 of approximately 151 bps and 154 bps, respectively.
The actual impact of adopting the new accounting standards on January 1, 2010 could differ, as financial information changes from the September 30, 2009 estimates
and as several uncertainties in the application of these new standards are resolved.challenging.
Investment Company Audit Guide (SOP 07-1)
In July 2007, the AICPA issued Statement of Position 07-1, "Clarification of the Scope of the Audit and Accounting Guide for Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies" (ASC 946-10/SOP(SOP 07-1) (now incorporated into ASC 946-10,Financial Services-Investment Companies), which was expected to be effective for fiscal years beginning on or after December 15, 2007. However, in February 2008, the FASB delayed the effective date indefinitely by issuing an FSP SOP 07-1-1, "Effective Date of AICPA Statement of Position 07-1." This statement sets forth more stringent
criteria for qualifying as an investment company than does the predecessor Audit Guide. In addition, ASC 946-10 (SOP 07-1) establishes new criteria for a parent company or equity method investor to retain investment company accounting in their consolidated financial statements. Investment companies record all their investments at fair value with changes in value reflected in earnings. The Company is currently evaluating the potential impact of adopting the SOP.
Sale of The Student Loan Corporation
On September 17, 2010, the Company announced that The Student Loan Corporation (SLC), an indirect subsidiary that is 80% owned by Citibank and 20% owned by public shareholders which is part of the CitiHolding segment, had entered into definitive agreements that will result in the divestiture of Citi's private student loan business and approximately $31 billion of its approximately $41 billion in assets to Discover Financial Services (Discover) and SLM Corporation (Sallie Mae). The sale is currently expected to close in the fourth quarter of 2010.
This sale is reported as discontinued operations for the third quarter of 2010 only. Prior periods were not reclassified due to the immateriality of the impact in those periods. The total third quarter of 2010 loss on the sale of The Student Loan Corporation of ($454) million is composed of ($63) million in Continuing Operations and, ($447) million in Discontinued Operations, partially offset by $56 million in Noncontrolling Interests (Minority Interests).
Total assets and total liabilities (after impairment) of $31 billion and $30 billion, respectively associated with the sale of SLC are included inAssets of discontinued operations held for sale andLiabilities of discontinued operations held for sale on the Consolidated Balance Sheet.
Additionally, as part of the transactions, Citibank, N.A. will purchase approximately $8.7 billion of assets from SLC. Prior to the sale of SLC, sold $4.7 billion in FFELP loans were sold to the Department of Education, as previously disclosed by SLC.
The following is a summary as of September 30, 2010 of the assets and liabilities ofDiscontinued operations held for sale on the Consolidated Balance Sheet for the operations related to the SLC business to be sold:
In millions of dollars | September 30, 2010 | ||||
---|---|---|---|---|---|
Assets | |||||
Loans, net of unearned income | $ | 30,284 | |||
Allowance for loan losses | (54 | ) | |||
Total loans, net | 30,230 | ||||
Other assets | 1,179 | ||||
Total assets | $ | 31,409 | |||
Liabilities | |||||
Long-term debt | $ | 29,556 | |||
Other liabilities | 318 | ||||
Total liabilities | $ | 29,874 | |||
Summarized financial information for discontinued operations, including cash flows, related to the sale of SLC follows:
In millions of dollars | Three and Nine Months Ended Sept. 30, 2010 | |||
---|---|---|---|---|
Total revenues, net of interest expense | $ | (670 | ) | |
Income (loss) from discontinued operations | $ | 20 | ||
Loss on sale | (820 | ) | ||
Benefit for income taxes | (365 | ) | ||
Loss from discontinued operations, net of taxes | $ | (435 | ) | |
In millions of dollars | Nine Months Ended Sept. 30, 2010 | |||
---|---|---|---|---|
Cash flows from operating activities | $ | 4,839 | ||
Cash flows from investing activities | 694 | |||
Cash flows from financing activities | (5,533 | ) | ||
Net cash provided by discontinued operations | $ | — | ||
Sale of Nikko Cordial
On October 1, 2009, the Company announced the successful completion of the sale of Nikko Cordial Securities to Sumitomo Mitsui Banking Corporation. The transaction hashad a total cash value to Citi of ¥776776 billion (US$8.7yen (U.S. $8.7 billion at an exchange rate of ¥89.6089.60 yen to US$1.00U.S. $1.00 as of September 30, 2009). The cash value is composed of the purchase price for the transferred business of ¥545545 billion yen, the purchase price for certain Japanese-listed equity securities held by Nikko Cordial Securities of ¥3030 billion yen, and ¥201201 billion yen of excess cash derived through the repayment of outstanding indebtedness to Citi. After considering the impact of foreign exchange hedges of the proceeds of the transaction, (most of which has been recorded in the second and third quarters of 2009), the sale will resultresulted in an immaterial after-tax gain to Citigroup.in 2009. A total of about 7,800 employees are included in the transaction.
The Nikko Cordial operations had total assets and total liabilities as of September 30, 2009 of $23.6approximately $24 billion and $16.0$16 billion, respectively.respectively, at the time of sale, which were reflected in Citi Holdings prior to the sale.
Results for all of the Nikko Cordial businesses sold are reported asDiscontinued operations for all periods presented. The assets and liabilities of the businesses being sold are included inAssets of discontinued operations held for sale andLiabilities of discontinued operations held for sale on the Consolidated Balance Sheet.
The following is a summary as of September 30, 2009 of the assets and liabilities ofDiscontinued operations held for sale on the Consolidated Balance Sheet for the operations related to the Nikko Cordial businesses to be sold:
In millions of dollars | September 30, 2009 | |||
---|---|---|---|---|
Assets | ||||
Cash due from banks | $ | 224 | ||
Deposits at interest with banks | 398 | |||
Federal funds sold and securities borrowed or purchased under agreements to resell | 5,837 | |||
Brokerage receivables | 1,293 | |||
Trading account assets | 8,583 | |||
Investments | 490 | |||
Goodwill | 567 | |||
Intangibles | 3,289 | |||
Other assets | 2,923 | |||
Total assets | $ | 23,604 | ||
Liabilities | ||||
Federal funds purchased and securities loaned or sold under agreements to repurchase sold under agreements to repurchase | $ | 3,126 | ||
Brokerage payables | 2,566 | |||
Trading account liabilities | 2,823 | |||
Short term borrowings | 5,817 | |||
Other liabilities | 1,672 | |||
Total liabilities | $ | 16,004 | ||
Summarized financial information for discontinued operations, including cash flows, related to the sale of Nikko Cordial follows:
| Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | 2009 | 2008 | |||||||||
Total revenues, net of interest expense | $ | 173 | $ | 422 | $ | 553 | $ | 1,245 | |||||
Income (loss) from discontinued operations | $ | (221 | ) | $ | 6 | $ | (603 | ) | $ | 2 | |||
Provision (benefit) for income taxes and noncontrolling interest, net of taxes(1) | 208 | 1 | 75 | (9 | ) | ||||||||
Income (loss) from discontinued operations, net of taxes | $ | (429 | ) | $ | 5 | $ | (678 | ) | $ | 11 | |||
| Nine Months Ended Sept. 30, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Cash flows from operating activities | $ | (1,320 | ) | $ | (4,519 | ) | |
Cash flows from investing activities | (9,579 | ) | (1,381 | ) | |||
Cash flows from financing activities | 11,108 | 5,907 | |||||
Net cash provided by (used in) discontinued operations | $ | 209 | $ | 7 | |||
Sale of Citigroup's German Retail Banking Operations
On December 5, 2008, Citigroup sold its German retail banking operations to Credit Mutuel for Euro 5.2 billion in cash plus the German retail bank's operating net earnings accrued in 2008 through the closing. The sale resulted in an after-tax gain of approximately $3.9 billion including the after-tax gain on the foreign currency hedge of $383 million recognized during the fourth quarter of 2008.
The sale did not include the corporate and investment banking business or the Germany-based European data center. Results for all of the German retail banking businesses sold are reported asDiscontinued operations for all periods presented.
Summarized financial information forDiscontinued operations, including cash flows, related to the sale of the German retail banking operationsNikko Cordial is as follows:
| Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | 2009 | 2008 | |||||||||
Total revenues, net of interest expense | $ | 25 | $ | 847 | $ | 61 | $ | 2,001 | |||||
Income (loss) from discontinued operations | $ | 18 | $ | 503 | $ | (21 | ) | $ | 851 | ||||
Gain (loss) on sale(1) | — | — | (41 | ) | — | ||||||||
Provision (benefit) for income taxes and noncontrolling interest, net of taxes | 6 | (101 | ) | (42 | ) | 22 | |||||||
Income (loss) from discontinued operations, net of taxes | $ | 12 | $ | 604 | $ | (20 | ) | $ | 829 | ||||
| Nine Months Ended Sept. 30, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Cash flows from operating activities | $ | 6 | $ | (1,252 | ) | ||
Cash flows from investing activities | 1 | 1,833 | |||||
Cash flows from financing activities | (7 | ) | (760 | ) | |||
Net cash provided by (used in) discontinued operations | $ | — | $ | (179 | ) | ||
| Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | 2010 | 2009 | |||||||||
Total revenues, net of interest expense | $ | — | $ | 173 | $ | 92 | $ | 553 | |||||
Loss from discontinued operations | $ | — | $ | (221 | ) | $ | (7 | ) | $ | (603 | ) | ||
Gain on sale | — | — | 94 | — | |||||||||
Provision (benefit) for income taxes | — | $ | 208 | (122 | ) | $ | 75 | ||||||
Income (loss) from discontinued operations, net of taxes | $ | — | $ | (429 | ) | $ | 209 | $ | (678 | ) | |||
CitiCapital
On July 31, 2008, Citigroup sold substantially all of CitiCapital, the equipment finance unit inNorth America. The total proceeds from the transaction were approximately $12.5 billion and resulted in an after-tax loss to Citigroup of $305 million. This loss is included inIncome from discontinued operations on the Company's Consolidated Statement of Income for the second quarter of 2008.
Results for all of the CitiCapital businesses sold are reported asDiscontinued operations for all periods presented.
Summarized financial information forDiscontinued operations, including cash flows, related to the sale of CitiCapital is as follows:
| Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | 2009 | 2008 | |||||||||
Total revenues, net of interest expense | $ | 7 | $ | 96 | $ | 37 | $ | 14 | |||||
Income (loss) from discontinued operations | $ | (1 | ) | $ | (2 | ) | $ | (11 | ) | $ | 45 | ||
Gain (loss) on sale(1) | — | 9 | 14 | (508 | ) | ||||||||
Provision (benefit) for income taxes and noncontrolling interest, net of taxes | — | 3 | 1 | (201 | ) | ||||||||
Income (loss) from discontinued operations, net of taxes | $ | (1 | ) | $ | 4 | $ | 2 | $ | (262 | ) | |||
| Nine Months Ended Sept. 30, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Cash flows from operating activities | $ | (134 | ) | $ | (1,830 | ) | |
Cash flows from investing activities | 185 | 1,727 | |||||
Cash flows from financing activities | — | — | |||||
Net cash provided by (used in) discontinued operations | $ | 51 | $ | (103 | ) | ||
| Nine Months Ended Sept. 30, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Cash flows from operating activities | $ | — | $ | (287 | ) | ||
Cash flows from investing activities | — | 349 | |||||
Cash flows from financing activities | — | (61 | ) | ||||
Net cash provided by (used in) discontinued operations | $ | — | $ | 1 | |||
Combined Results for Discontinued Operations
The following is summarized financial information for the SLC business, Nikko Cordial business, German retail banking operations and CitiCapital business. The German retail banking operation, which was sold on December 5, 2008, and the Citi Capital business, which was sold on July 31, 2008, continue to have minimal residual costs associated with the sales. However, during the third quarter of 2010, the Company completed an income tax audit in Germany related to the business sold in 2008. As a result of completing this audit, the Company has released reserves approximately $68 million. Additionally, contingency consideration payments received during the first quarter of 2009 of $29 million pretax ($19 million after-tax) related to the sale of Citigroup's Asset Management business, which was sold in December 2005, is also included in these balances.
| Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | 2009 | 2008 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Total revenues, net of interest expense | $ | 205 | $ | 1,365 | $ | 651 | $ | 3,260 | $ | (629 | ) | $ | 205 | $ | (494 | ) | $ | 651 | ||||||||
Income (loss) from discontinued operations | $ | (204 | ) | $ | 507 | $ | (635 | ) | $ | 898 | $ | 8 | $ | (204 | ) | $ | — | $ | (635 | ) | ||||||
Gain (loss) on sale | — | 9 | 2 | (508 | ) | |||||||||||||||||||||
Provision (benefit) for income taxes and noncontrolling interest, net of taxes | 214 | (97 | ) | 44 | (188 | ) | ||||||||||||||||||||
Loss on sale | (784 | ) | — | (690 | ) | 2 | ||||||||||||||||||||
(Benefit) provision for income taxes | (402 | ) | 214 | (524 | ) | 44 | ||||||||||||||||||||
Income from discontinued operations, net of taxes | $ | (418 | ) | $ | 613 | $ | (677 | ) | $ | 578 | ||||||||||||||||
Loss from discontinued operations, net of taxes | $ | (374 | ) | $ | (418 | ) | $ | (166 | ) | $ | (677 | ) | ||||||||||||||
Cash Flowsflows from Discontinued Operationsdiscontinued operations
| Nine Months Ended Sept. 30, | Nine Months Ended Sept. 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | 2010 | 2009 | ||||||||||
Cash flows from operating activities | $ | (1,314 | ) | $ | (6,058 | ) | $ | 4,707 | $ | (1,824 | ) | |||
Cash flows from investing activities | (9,549 | ) | 801 | 880 | 1,757 | |||||||||
Cash flows from financing activities | 11,101 | 5,086 | (5,536 | ) | (7 | ) | ||||||||
Net cash provided by (used in) discontinued operations | $ | 238 | $ | (171 | ) | |||||||||
Net cash provided by discontinued operations | $ | 51 | $ | (74 | ) | |||||||||
The following table presents certain information regarding the Company's operations by segment:
| | Revenues, net of interest expense | Provision (benefit) for income taxes | Income (loss) from continuing operations(1) | Identifiable assets(2) | | Revenues, net of interest expense(1) | Provision (benefit) for income taxes | Income (loss) from continuing operations(1)(2) | Identifiable assets | ||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Three Months Ended September 30, | | | | Three Months Ended September 30, | | | ||||||||||||||||||||||||||||||||||||||||||||
In millions of dollars, except identifiable assets in billions | In millions of dollars, except identifiable assets in billions | Sept. 30, 2009 | Dec. 31, 2008 | In millions of dollars, except identifiable assets in billions | Sep. 30, 2010 | Dec. 31, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||||||||||||||
Regional Consumer Banking | Regional Consumer Banking | $ | 5,675 | $ | 6,109 | $ | (246 | ) | $ | 24 | $ | 615 | $ | 446 | $ | 205 | $ | 200 | Regional Consumer Banking | $ | 8,161 | $ | 6,120 | $ | 476 | $ | (203 | ) | $ | 1,232 | $ | 704 | $ | 320 | $ | 257 | ||||||||||||||||
Institutional Clients Group | Institutional Clients Group | 7,350 | 9,911 | 584 | 1,410 | 1,694 | 3,156 | 809 | 802 | Institutional Clients Group | 8,128 | 7,348 | 734 | 460 | 2,332 | 1,786 | 963 | 882 | ||||||||||||||||||||||||||||||||||
Subtotal Citicorp | 13,025 | 16,020 | 338 | 1,434 | 2,309 | 3,602 | 1,014 | 1,002 | Subtotal Citicorp | 16,289 | 13,468 | 1,210 | 257 | 3,564 | 2,490 | 1,283 | 1,139 | |||||||||||||||||||||||||||||||||||
Citi Holdings | Citi Holdings | 6,694 | 704 | (1,588 | ) | (4,526 | ) | (1,818 | ) | (6,936 | ) | 617 | 715 | Citi Holdings | 3,853 | 6,250 | (590 | ) | (1,513 | ) | (1,054 | ) | (1,994 | ) | 421 | 487 | ||||||||||||||||||||||||||
Corporate/Other | Corporate/Other | 671 | (466 | ) | 128 | (203 | ) | 102 | (187 | ) | 258 | 221 | Corporate/Other | 596 | 672 | 78 | 134 | 91 | 97 | 279 | 231 | |||||||||||||||||||||||||||||||
Total | Total | $ | 20,390 | $ | 16,258 | $ | (1,122 | ) | $ | (3,295 | ) | $ | 593 | $ | (3,521 | ) | $ | 1,889 | $ | 1,938 | Total | $ | 20,738 | $ | 20,390 | $ | 698 | $ | (1,122 | ) | $ | 2,601 | $ | 593 | $ | 1,983 | $ | 1,857 | ||||||||||||||
| | Revenues, net of interest expense | Provision (benefit) for income taxes | Income (loss) from continuing operations(1) | | Revenues, net of interest expense(1) | Provision (benefit) for income taxes | Income (loss) from continuing operations(1)(2) | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Nine Months Ended September 30, | | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
In millions of dollars | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
| | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||||||
Regional Consumer Banking | Regional Consumer Banking | $ | 17,051 | $ | 19,964 | $ | (303 | ) | $ | 902 | $ | 1,416 | $ | 2,768 | Regional Consumer Banking | $ | 24,275 | $ | 18,674 | $ | 1,039 | $ | (40 | ) | $ | 3,423 | $ | 1,919 | ||||||||||||
Institutional Clients Group | Institutional Clients Group | 31,503 | 29,931 | 5,340 | 3,907 | 11,633 | 8,915 | Institutional Clients Group | 27,025 | 31,106 | 3,504 | 4,821 | 9,098 | 11,638 | ||||||||||||||||||||||||||
Subtotal Citicorp | 48,554 | 49,895 | 5,037 | 4,809 | 13,049 | 11,683 | Subtotal Citicorp | 51,300 | 49,780 | 4,543 | 4,781 | 12,521 | 13,557 | |||||||||||||||||||||||||||
Citi Holdings | Citi Holdings | 25,896 | (1,735 | ) | (4,562 | ) | (13,619 | ) | (5,795 | ) | (21,311 | ) | Citi Holdings | 15,322 | 24,669 | (2,182 | ) | (4,312 | ) | (3,127 | ) | (6,297 | ) | |||||||||||||||||
Corporate/Other | Corporate/Other | 430 | (2,207 | ) | 145 | (818 | ) | (580 | ) | (1,408 | ) | Corporate/Other | 1,608 | 431 | 185 | 151 | 184 | (586 | ) | |||||||||||||||||||||
Total | Total | $ | 74,880 | $ | 45,953 | $ | 620 | $ | (9,628 | ) | $ | 6,674 | $ | (11,036 | ) | Total | $ | 68,230 | $ | 74,880 | $ | 2,546 | $ | 620 | $ | 9,578 | $ | 6,674 | ||||||||||||
4. INTEREST REVENUE AND EXPENSE
For the three- and nine-month periods ended September 30, 20092010 and 2008,2009, interest revenue and expense consisted of the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | 2009 | 2008 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Interest revenue | ||||||||||||||||||||||||||
Loan interest, including fees | $ | 11,601 | $ | 15,528 | $ | 36,385 | $ | 47,883 | $ | 13,332 | $ | 11,601 | $ | 42,232 | $ | 36,385 | ||||||||||
Deposits at interest with banks | 313 | 792 | 1,126 | 2,329 | ||||||||||||||||||||||
Deposits with banks | 318 | 313 | 899 | 1,126 | ||||||||||||||||||||||
Federal funds sold and securities purchased under agreements to resell | 728 | 2,215 | 2,407 | 7,751 | 807 | 728 | 2,340 | 2,407 | ||||||||||||||||||
Investments, including dividends | 3,283 | 2,597 | 9,894 | 7,832 | 2,611 | 3,283 | 8,706 | 9,894 | ||||||||||||||||||
Trading account assets(1) | 2,654 | 4,137 | 8,526 | 13,562 | 2,026 | 2,654 | 5,909 | 8,526 | ||||||||||||||||||
Other interest | 99 | 861 | 594 | 3,271 | 277 | 99 | 555 | 594 | ||||||||||||||||||
Total interest revenue | $ | 18,678 | $ | 26,130 | $ | 58,932 | $ | 82,628 | $ | 19,371 | $ | 18,678 | $ | 60,641 | $ | 58,932 | ||||||||||
Interest expense | ||||||||||||||||||||||||||
Deposits(2) | $ | 2,298 | $ | 4,915 | $ | 7,986 | $ | 16,191 | $ | 2,130 | $ | 2,298 | $ | 6,246 | $ | 7,986 | ||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 772 | 2,721 | 2,807 | 9,559 | 671 | 772 | 2,122 | 2,807 | ||||||||||||||||||
Trading account liabilities(1) | 43 | 285 | 220 | 1,064 | 108 | 43 | 277 | 220 | ||||||||||||||||||
Short-term borrowing | 350 | 924 | 1,128 | 3,233 | ||||||||||||||||||||||
Short-term borrowings | 213 | 350 | 704 | 1,128 | ||||||||||||||||||||||
Long-term debt | 3,217 | 3,881 | 9,038 | 12,103 | 3,003 | 3,217 | 9,446 | 9,038 | ||||||||||||||||||
Total interest expense | $ | 6,680 | $ | 12,726 | $ | 21,179 | $ | 42,150 | $ | 6,125 | $ | 6,680 | $ | 18,795 | $ | 21,179 | ||||||||||
Net interest revenue | $ | 11,998 | $ | 13,404 | $ | 37,753 | $ | 40,478 | $ | 13,246 | $ | 11,998 | $ | 41,846 | $ | 37,753 | ||||||||||
Provision for loan losses | 8,771 | 8,943 | 30,919 | 21,503 | 5,666 | 8,771 | 20,555 | 30,919 | ||||||||||||||||||
Net interest revenue after provision for loan losses | $ | 3,227 | $ | 4,461 | $ | 6,834 | $ | 18,975 | $ | 7,580 | $ | 3,227 | $ | 21,291 | $ | 6,834 | ||||||||||
Commissions and fees revenue includes charges to customers for credit and bank cards, including transaction-processing fees and annual fees; advisory and equity and debt underwriting services; lending and deposit-related transactions, such as loan commitments, standby letters of credit and other deposit and loan servicing activities; investment management-related fees, including brokerage services and custody and trust services; and insurance fees and commissions.
The following table presents commissions and fees revenue for the three and nine months ended September 30, 2009 and 2008:30:
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | 2009 | 2008 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Credit cards and bank cards | $ | 1,048 | $ | 1,113 | $ | 3,025 | $ | 3,504 | $ | 1,013 | $ | 1,048 | $ | 2,977 | $ | 3,025 | ||||||||||
Investment banking | 774 | 545 | 2,659 | 2,337 | 683 | 784 | 2,001 | 2,659 | ||||||||||||||||||
Smith Barney | 1 | 688 | 837 | 2,196 | — | 1 | — | 837 | ||||||||||||||||||
ICG trading-related | 466 | 628 | 1,288 | 1,930 | 429 | 502 | 1,431 | 1,400 | ||||||||||||||||||
Other Consumer | 323 | 235 | 935 | 870 | ||||||||||||||||||||||
Transaction services | 337 | 359 | 980 | 1,076 | 374 | 336 | 1,085 | 980 | ||||||||||||||||||
Other consumer | 303 | 324 | 933 | 935 | ||||||||||||||||||||||
Checking-related | 261 | 282 | 773 | 868 | 256 | 261 | 789 | 773 | ||||||||||||||||||
Other ICG | 176 | 338 | 364 | 582 | 79 | 93 | 256 | 281 | ||||||||||||||||||
Primerica | 78 | 98 | 227 | 315 | ||||||||||||||||||||||
Primerica-related (prior to March 2010) | — | 78 | 91 | 227 | ||||||||||||||||||||||
Loan servicing(1) | (339 | ) | (336 | ) | 1,224 | 771 | (29 | ) | 141 | 253 | 167 | |||||||||||||||
Corporate finance | 130 | (649 | ) | 551 | (4,149 | ) | 137 | 130 | 320 | 551 | ||||||||||||||||
Other | (37 | ) | (93 | ) | (40 | ) | 48 | 3 | — | (14 | ) | (69 | ) | |||||||||||||
Total commissions and fees | $ | 3,218 | $ | 3,208 | $ | 12,823 | $ | 10,348 | $ | 3,248 | $ | 3,698 | $ | 10,122 | $ | 11,766 | ||||||||||
Principal transactions revenue consists of realized and unrealized gains and losses from trading activities. Trading activities include revenues from fixed income, equities, credit and commodities products, as well as foreign exchange transactions. Not included in the table below is the impact of net interest revenue related to trading activities, which is an integral part of trading activities' profitability. The following tables present principal transactions revenue for the three- and nine-month periods ended September 30, 2010 and 2009:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2010(1) | 2009(1) | 2010(1) | 2009(1) | ||||||||||
Regional Consumer Banking | $ | 150 | $ | 149 | $ | 399 | $ | 1,094 | ||||||
Institutional Clients Group | 982 | (571 | ) | 5,958 | 7,259 | |||||||||
Subtotal Citicorp | $ | 1,132 | $ | (422 | ) | $ | 6,357 | $ | 8,353 | |||||
Local Consumer Lending | (36 | ) | 389 | (190 | ) | 917 | ||||||||
Brokerage and Asset Management | 1 | 1 | (27 | ) | 25 | |||||||||
Special Asset Pool | 343 | 1,385 | 2,094 | (2,863 | ) | |||||||||
Subtotal Citi Holdings | $ | 308 | $ | 1,775 | $ | 1,877 | $ | (1,921 | ) | |||||
Corporate/Other | 88 | (10 | ) | (336 | ) | 612 | ||||||||
Total Citigroup | $ | 1,528 | $ | 1,343 | $ | 7,898 | $ | 7,044 | ||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2010(1) | 2009(1) | 2010(1) | 2009(1) | |||||||||
Interest rate contracts(2) | $ | 76 | $ | 166 | $ | 3,718 | $ | 6,619 | |||||
Foreign exchange contracts(3) | 992 | 522 | 1,495 | 2,386 | |||||||||
Equity contracts(4) | 468 | (353 | ) | 783 | 550 | ||||||||
Commodity and other contracts(5) | (33 | ) | 162 | 197 | 989 | ||||||||
Credit derivatives(6) | 25 | 846 | 1,705 | (3,500 | ) | ||||||||
Total Citigroup | $ | 1,528 | $ | 1,343 | $ | 7,898 | $ | 7,044 | |||||
7. RETIREMENT BENEFITS AND INCENTIVE PLANS
The Company has several non-contributory defined benefit pension plans covering certain U.S. employees and has various defined benefit pension and termination indemnitytermination-indemnity plans covering employees outside the United States. The principal U.S. defined benefit plan which formerly covered substantially all U.S. employees, is closed to new entrants and effectiveEffective January 1, 2008, no longer accrues benefitsthe U.S. qualified pension plan was frozen for most employees. Employees satisfyingAccordingly, no additional compensation-based contributions have been credited to cash balance accounts for existing plan participants after December 31, 2007. However, employees still covered under certain age and service requirements remain covered by a prior final pay formula.
formulas continue to accrue benefits. The Company also offers postretirement health care and life insurance benefits to certain eligible U.S. retired employees, as well as to certain eligible employees outside the United States. For information
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "Act") were signed into law in the U.S. in March 2010. One provision of the Act that impacts Citigroup is the elimination of the tax deductibility for benefits paid that are related to the retiree Medicare Part D subsidy starting in 2013. Citigroup is required to recognize the full accounting impact in the period in which the Act is signed, which resulted in a $45 million reduction in deferred tax assets with a corresponding charge to income from continuing operations in the first quarter of 2010. The other provisions of the Act are not expected to have a significant impact on the Company's retirement benefit plansCitigroup's pension and pension assumptions, see Citigroup's 2008 Annual Report on Form 10-K.post-retirement plans.
The following tables summarize the components of the net (benefit) expense recognized in the Consolidated Statement of Income for the threeCompany's U.S. qualified pension plan, post-retirement plans and nineplans outside the United States. The Company uses a December 31 measurement date for the U.S. plans, as well as the plans outside the United States.
Net (Benefit) Expense
| Three Months Ended September 30, | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pension Plans | Postretirement Benefit Plans | ||||||||||||||||||||||||
| U.S. plans(1) | Non-U.S. plans | U.S. plans | Non-U.S. plans | ||||||||||||||||||||||
In millions of dollars | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Benefits earned during the period | $ | 4 | $ | 1 | $ | 43 | $ | 38 | $ | — | $ | 1 | $ | 5 | $ | 7 | ||||||||||
Interest cost on benefit obligation | 161 | 177 | 84 | 78 | 15 | 16 | 26 | 23 | ||||||||||||||||||
Expected return on plan assets | (220 | ) | (232 | ) | (94 | ) | (87 | ) | (2 | ) | (2 | ) | (24 | ) | (19 | ) | ||||||||||
Amortization of unrecognized | ||||||||||||||||||||||||||
Net transition obligation | — | — | (1 | ) | (1 | ) | — | — | — | — | ||||||||||||||||
Prior service cost (benefit) | — | — | 1 | 1 | (1 | ) | (1 | ) | — | — | ||||||||||||||||
Net actuarial loss | 12 | (1 | ) | 14 | 18 | 3 | — | 5 | 4 | |||||||||||||||||
Curtailment (gain) loss | — | 29 | — | — | — | — | — | — | ||||||||||||||||||
Net (benefit) expense | $ | (43 | ) | $ | (26 | ) | $ | 47 | $ | 47 | $ | 15 | $ | 14 | $ | 12 | $ | 15 | ||||||||
Net Expense (Benefit)
| Three Months Ended September 30, | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pension Plans | Postretirement Benefit Plans | ||||||||||||||||||||||||
| U.S. Plans(1) | Plans Outside U.S. | U.S. Plans | Plans Outside U.S. | ||||||||||||||||||||||
In millions of dollars | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||
Benefits earned during the period | $ | 1 | $ | 3 | $ | 38 | $ | 54 | $ | 1 | $ | — | $ | 7 | $ | 9 | ||||||||||
Interest cost on benefit obligation | 177 | 176 | 78 | 93 | 16 | 17 | 23 | 26 | ||||||||||||||||||
Expected returns on plan assets | (232 | ) | (245 | ) | (87 | ) | (128 | ) | (2 | ) | (4 | ) | (19 | ) | (29 | ) | ||||||||||
Amortization of unrecognized: | ||||||||||||||||||||||||||
Net transition obligation | — | — | (1 | ) | — | — | — | — | — | |||||||||||||||||
Prior service cost (benefit) | — | — | 1 | 1 | (1 | ) | — | — | — | |||||||||||||||||
Net actuarial loss | (1 | ) | — | 18 | 6 | — | 3 | 4 | 5 | |||||||||||||||||
Curtailment (gain) loss | 29 | — | — | — | — | — | — | — | ||||||||||||||||||
Net expense (benefit) | $ | (26 | ) | $ | (66 | ) | $ | 47 | $ | 26 | $ | 14 | $ | 16 | $ | 15 | $ | 11 | ||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pension Plans | Postretirement Benefit Plans | ||||||||||||||||||||||||
| U.S. Plans(1) | Plans Outside U.S. | U.S. Plans | Plans Outside U.S. | ||||||||||||||||||||||
In millions of dollars | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||
Benefits earned during the period | $ | 13 | $ | 18 | $ | 109 | $ | 157 | $ | 1 | $ | 1 | $ | 20 | $ | 28 | ||||||||||
Interest cost on benefit obligation | 503 | 505 | 222 | 275 | 46 | 47 | 66 | 76 | ||||||||||||||||||
Expected returns on plan assets | (690 | ) | (712 | ) | (249 | ) | (378 | ) | (7 | ) | (9 | ) | (57 | ) | (86 | ) | ||||||||||
Amortization of unrecognized: | ||||||||||||||||||||||||||
Net transition obligation | — | — | (1 | ) | 1 | — | — | — | — | |||||||||||||||||
Prior service cost (benefit) | (1 | ) | (1 | ) | 3 | 3 | (1 | ) | — | — | — | |||||||||||||||
Net actuarial loss | 1 | — | 51 | 19 | 1 | 3 | 13 | 16 | ||||||||||||||||||
Curtailment (gain) loss | 29 | — | — | — | — | — | — | — | ||||||||||||||||||
Net expense (benefit) | $ | (145 | ) | $ | (190 | ) | $ | 135 | $ | 77 | $ | 40 | $ | 42 | $ | 42 | $ | 34 | ||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pension Plans | Postretirement Benefit Plans | ||||||||||||||||||||||||
| U.S. plans(1) | Non-U.S. plans | U.S. plans | Non-U.S. plans | ||||||||||||||||||||||
In millions of dollars | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Benefits earned during the period | $ | 13 | $ | 13 | $ | 125 | $ | 109 | $ | — | $ | 1 | $ | 17 | $ | 20 | ||||||||||
Interest cost on benefit obligation | 480 | 503 | 254 | 222 | 44 | 46 | 78 | 66 | ||||||||||||||||||
Expected return on plan assets | (643 | ) | (690 | ) | (281 | ) | (249 | ) | (6 | ) | (7 | ) | (74 | ) | (57 | ) | ||||||||||
Amortization of unrecognized | ||||||||||||||||||||||||||
Net transition obligation | — | — | (1 | ) | (1 | ) | — | — | — | — | ||||||||||||||||
Prior service cost (benefit) | (1 | ) | (1 | ) | 3 | 3 | 1 | (1 | ) | — | — | |||||||||||||||
Net actuarial loss | 34 | 1 | 42 | 51 | 5 | 1 | 15 | 13 | ||||||||||||||||||
Curtailment (gain) loss | — | 29 | — | — | — | — | — | — | ||||||||||||||||||
Net (benefit) expense | $ | (117 | ) | $ | (145 | ) | $ | 142 | $ | 135 | $ | 44 | $ | 40 | $ | 36 | $ | 42 | ||||||||
Employer Contributions
Citigroup's pension funding policy for U.S. plans and non-U.S. plans is generally to fund to applicable minimum funding requirements, rather than to the amounts of accumulated benefit obligations. For the U.S. plans,qualified pension plan, the Company may increase its contributions above the minimum required contribution under the Employee Retirement Income Security Act of 1974, (ERISA),as amended, if appropriate to its tax and cash position and the plan's funded position. AsThe Company made a discretionary cash contribution of $995 million to the U.S. qualified pension plan as of September 30, 2009, the Company contributions to the U.S. pension plan include $9 million relating to certain investment advisory fees that were paid by the Company. There were no minimum required contributions and no discretionary cash or non-cash contributions are currently planned for the U.S. plans.2010. For the non-U.S. pension plans, the Company contributed $124$106 million as of September 30, 2009. Citigroup presently anticipates contributing2010 and expects to contribute an additional $113$57 million in 2010. The Company also expects to fund itscontribute $33 million of benefits to be paid directly by the Company on behalf of the non-U.S. pension plans. For the non-U.S. postretirement benefit plans, expected cash contributions for 2010 are $74 million, which includes $3 million of benefits to be paid directly by the Company. These estimates are subject to change, since contribution decisions are affected by various factors, such as market performance and regulatory requirements; in 2009 for a total of $237 million.addition, management has the ability to change funding policy.
7. RESTRUCTURINGStock-Based Incentive Compensation
In the fourth quarter of 2008, Citigroup recorded a pretax restructuringThe Company recognized compensation expense of $1.581 billion related to the implementationincentive plans of a Company-wide re-engineering plan. For$641 million for the three months ended September 30, 2009,2010, and $1,295 million for the nine months ended September 30, 2010. The Company granted 34 million shares as equity awards in the third quarter of 2010, of which 30 million shares were issued as "stock salary." Except for shares withheld by Citigroup recorded a pretax net restructuring release of $34 million composed of a gross charge of $12 million and a credit of $46 million due to changes in estimates. The charges relatedsatisfy tax withholding obligations, shares delivered as stock salary are subject to sale restrictions. Stock salary, with respect to the 2008 Re-engineering Projects Restructuring Initiative are reportedfirst nine months of fiscal year 2010, will become transferable in nine equal monthly installments beginning on January 20, 2011. Shares with respect to any subsequent months in 2010 will become transferable approximately one year after the Restructuring line on the Company's Consolidated Statementeffective date of Income and are recorded in each segment.their delivery.
In 2007, the Company completed a review of its structural expense base in a Company-wide effort to create a more streamlined organization, reduce expense growth, and provide investment funds for future growth initiatives. As a result of this review, a pretax restructuring charge of $1.4 billion was recorded inCorporate/Other during the first quarter of 2007. Additional net charges of $151 million were recognized in subsequent quarters throughout 2007, and net releases of $31 million and $3 million in 2008 and 2009, due to changes in estimates. The charges related to the 2007 Structural Expense Review Restructuring Initiative are reported in the Restructuring line on the Company's Consolidated Statement of Income.
The primary goals of the 2008 Re-engineering Projects Restructuring Initiative and the 2007 Structural Expense Review Restructuring Initiative were:
The implementation of these restructuring initiatives also caused certain related premises and equipment assets to become redundant. The remaining depreciable lives of these assets were shortened, and accelerated depreciation charges began in the second quarter of 2007 and fourth quarter of 2008 for the 2007 and 2008 initiatives, respectively, in addition to normal scheduled depreciation.
The following tables detail the Company's restructuring reserves.
2008 Re-engineering Projects Restructuring Charges
| Severance | | | | | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contract termination costs | Asset write-downs(3) | Employee termination cost | Total Citigroup | |||||||||||||||
In millions of dollars | ASC 712(1) | ASC 420(2) | |||||||||||||||||
Total Citigroup (pretax) | |||||||||||||||||||
Original restructuring charge | $ | 1,254 | $ | 79 | $ | 55 | $ | 123 | $ | 19 | $ | 1,530 | |||||||
Utilization | (114 | ) | (3 | ) | (2 | ) | (100 | ) | — | (219 | ) | ||||||||
Balance at December 31, 2008 | $ | 1,140 | $ | 76 | $ | 53 | $ | 23 | $ | 19 | $ | 1,311 | |||||||
Additional charge | $ | 14 | $ | 6 | $ | 4 | $ | 5 | $ | — | $ | 29 | |||||||
Foreign exchange | (14 | ) | — | — | (12 | ) | (1 | ) | (27 | ) | |||||||||
Utilization | (541 | ) | (76 | ) | (11 | ) | (7 | ) | (5 | ) | (640 | ) | |||||||
Changes in estimates | (38 | ) | (1 | ) | — | — | — | (39 | ) | ||||||||||
Balance at March 31, 2009 | $ | 561 | $ | 5 | $ | 46 | $ | 9 | $ | 13 | $ | 634 | |||||||
Additional charge | $ | 6 | $ | 17 | $ | 1 | $ | 1 | $ | — | $ | 25 | |||||||
Foreign exchange | 26 | — | 2 | 1 | — | 29 | |||||||||||||
Utilization | (190 | ) | (19 | ) | (8 | ) | (3 | ) | (1 | ) | (221 | ) | |||||||
Changes in estimates | (53 | ) | (1 | ) | (1 | ) | — | (2 | ) | (57 | ) | ||||||||
Balance at June 30, 2009 | $ | 350 | $ | 2 | $ | 40 | $ | 8 | $ | 10 | $ | 410 | |||||||
Additional charge | $ | — | $ | 5 | $ | 6 | $ | 1 | $ | — | $ | 12 | |||||||
Foreign exchange | 3 | — | 1 | — | — | 4 | |||||||||||||
Utilization | (84 | ) | (6 | ) | (6 | ) | (2 | ) | — | (98 | ) | ||||||||
Changes in estimates | (38 | ) | — | (2 | ) | (4 | ) | (2 | ) | (46 | ) | ||||||||
Balance at September 30, 2009 | $ | 231 | $ | 1 | $ | 39 | $ | 3 | $ | 8 | $ | 282 | |||||||
Note: The total Citigroup charge in the table above does not include a $51 million one-time pension curtailment charge related to this restructuring initiative, which is recorded as part of the Company'sRestructuring charge in the Consolidated Statement of Income at December 31, 2008.
2007 Structural Expense Review Restructuring Charges
| Severance | | | | | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contract termination costs | Asset write-downs(3) | Employee termination cost | Total Citigroup | |||||||||||||||
In millions of dollars | ASC 712(1) | ASC 420(2) | |||||||||||||||||
Total Citigroup (pretax) | |||||||||||||||||||
Original restructuring charge | $ | 950 | $ | 11 | $ | 25 | $ | 352 | $ | 39 | $ | 1,377 | |||||||
Additional charge | $ | 42 | $ | 96 | $ | 29 | $ | 27 | $ | 11 | $ | 205 | |||||||
Foreign exchange | 19 | — | 2 | — | — | 21 | |||||||||||||
Utilization | (547 | ) | (75 | ) | (28 | ) | (363 | ) | (33 | ) | (1,046 | ) | |||||||
Changes in estimates | (39 | ) | — | (6 | ) | (1 | ) | (8 | ) | (54 | ) | ||||||||
Balance at December 31, 2007 | $ | 425 | $ | 32 | $ | 22 | $ | 15 | $ | 9 | $ | 503 | |||||||
Additional charge | $ | 10 | $ | 14 | $ | 43 | $ | 6 | $ | — | $ | 73 | |||||||
Foreign exchange | (11 | ) | — | (4 | ) | — | — | (15 | ) | ||||||||||
Utilization | (288 | ) | (34 | ) | (22 | ) | (7 | ) | (6 | ) | (357 | ) | |||||||
Changes in estimates | (93 | ) | (2 | ) | (2 | ) | (4 | ) | (3 | ) | (104 | ) | |||||||
Balance at December 31, 2008 | $ | 43 | $ | 10 | $ | 37 | $ | 10 | $ | — | $ | 100 | |||||||
Foreign exchange | (1 | ) | — | (1 | ) | — | — | (2 | ) | ||||||||||
Utilization | (41 | ) | (10 | ) | (35 | ) | (9 | ) | — | (95 | ) | ||||||||
Changes in estimates | (1 | ) | — | (1 | ) | (1 | ) | — | (3 | ) | |||||||||
Balance at March 31, 2009 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Note: The 2007 structural expense review restructuring initiative was fully utilized as of March 31, 2009.
The total restructuring reserve balance and total charges as of September 30, 2009 and December 31, 2008 related to the 2008 Re-engineering Projects Restructuring Initiatives are presented below by business in the following tables. These charges are reported in the Restructuring line on the Company's Consolidated Statement of Income and are recorded in each business.
2008 Re-engineering Projects
| For the quarter ended September 30, 2009 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Total restructuring reserve balance as of September 30, 2009 | Restructuring charges recorded in the three months ended September 30, 2009 | Total restructuring charges since inception(1)(2) | |||||||
Citicorp | $ | 132 | $ | 5 | $ | 846 | ||||
Citi Holdings | 14 | 1 | 239 | |||||||
Corporate/Other | 136 | 6 | 369 | |||||||
Total Citigroup (pretax) | $ | 282 | $ | 12 | $ | 1,454 | ||||
| For the year ended December 31, 2008 | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | Total restructuring reserve balance as of December 31, 2008 | Total restructuring charges(1) | |||||
Citicorp | $ | 789 | $ | 890 | |||
Citi Holdings | 184 | 267 | |||||
Corporate/Other | 338 | 373 | |||||
Total Citigroup (pretax) | $ | 1,311 | $ | 1,530 | |||
The following is a reconciliation of the income and share data used in the basic and diluted earnings per share (EPS) computations for the three and nine months ended September 30, 2009 and 2008:30:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions, except per share amounts | 2009 | 2008(1) | 2009 | 2008(1) | |||||||||
Income (loss) before attribution of noncontrolling interests | $ | 593 | $ | (3,521 | ) | $ | 6,674 | $ | (11,036 | ) | |||
Noncontrolling interest | 74 | (93 | ) | 24 | (37 | ) | |||||||
Net income (loss) from continuing operations (for EPS purposes) | $ | 519 | $ | (3,428 | ) | $ | 6,650 | $ | (10,999 | ) | |||
Income (loss) from discontinued operations, net of taxes | (418 | ) | 613 | (677 | ) | 578 | |||||||
Citigroup's net income (loss) | $ | 101 | $ | (2,815 | ) | $ | 5,973 | $ | (10,421 | ) | |||
Preferred dividends | (272 | ) | (389 | ) | (2,988 | ) | (833 | ) | |||||
Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance(2) | — | — | (1,285 | ) | — | ||||||||
Preferred stock Series H discount accretion | (16 | ) | — | (123 | ) | — | |||||||
Impact of the Public and Private Preferred Stock exchange offer | (3,055 | ) | — | (3,055 | ) | — | |||||||
Income (loss) available to common stockholders | (3,242 | ) | (3,204 | ) | (1,478 | ) | (11,254 | ) | |||||
Allocation of dividends to common stock and participating securities, net of forfeitures | — | (1,738 | ) | (63 | ) | (5,151 | ) | ||||||
Undistributed earnings (loss) for basic EPS(3) | (3,242 | ) | (4,942 | ) | (1,541 | ) | (16,405 | ) | |||||
Effect of dilutive securities | — | 270 | 540 | 606 | |||||||||
Undistributed earnings (loss) for diluted EPS(4) | $ | (3,242 | ) | $ | (4,672 | ) | $ | (1,001 | ) | $ | (15,799 | ) | |
Weighted average common shares outstanding applicable to basic EPS | 12,104.3 | 5,341.8 | 7,629.6 | 5,238.3 | |||||||||
Effect of dilutive securities: | |||||||||||||
Convertible securities | 111.7 | 489.2 | 416.1 | 489.2 | |||||||||
Options | — | 0.1 | — | 0.4 | |||||||||
Adjusted weighted average common shares outstanding applicable to diluted EPS(3) | 12,216.0 | 5,831.1 | 8,045.7 | 5,727.9 | |||||||||
Basic earnings per share(3)(4) | |||||||||||||
Income (loss) from continuing operations | $ | (0.23 | ) | $ | (0.72 | ) | $ | (0.10 | ) | $ | (2.28 | ) | |
Discontinued operations | (0.04 | ) | 0.11 | (0.09 | ) | 0.11 | |||||||
Net income (loss) | $ | (0.27 | ) | $ | (0.61 | ) | $ | (0.19 | ) | $ | (2.17 | ) | |
Diluted earnings per share(3)(4) | |||||||||||||
Income (loss) from continuing operations | $ | (0.23 | ) | $ | (0.72 | ) | $ | (0.10 | ) | $ | (2.28 | ) | |
Discontinued operations | (0.04 | ) | 0.11 | (0.09 | ) | 0.11 | |||||||
Net income (loss) | $ | (0.27 | ) | $ | (0.61 | ) | $ | (0.19 | ) | $ | (2.17 | ) | |
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions, except per-share amounts | 2010 | 2009 | 2010 | 2009 | ||||||||||
Income before attribution of noncontrolling interests | $ | 2,601 | $ | 593 | $ | 9,578 | $ | 6,674 | ||||||
Noncontrolling interests from continuing operations | 110 | 74 | 170 | 24 | ||||||||||
Net income from continuing operations (for EPS purposes) | $ | 2,491 | $ | 519 | $ | 9,408 | $ | 6,650 | ||||||
Income (loss) from discontinued operations, net of taxes | (374 | ) | (418 | ) | (166 | ) | (677 | ) | ||||||
Noncontrolling interests from discontinuing operations | (51 | ) | — | (51 | ) | — | ||||||||
Citigroup's net income | $ | 2,168 | $ | 101 | $ | 9,293 | $ | 5,973 | ||||||
Less: | ||||||||||||||
Preferred dividends | — | 272 | — | 2,988 | ||||||||||
Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance | — | — | — | 1,285 | ||||||||||
Preferred stock Series H discount accretion | — | 16 | — | 123 | ||||||||||
Impact of the Public and Private preferred stock exchange offer | — | 3,055 | — | 3,055 | ||||||||||
Dividends and undistributed earnings allocated to participating securities | 20 | — | 78 | 2 | ||||||||||
Net income (loss) allocated to unrestricted common shareholders for basic EPS | $ | 2,148 | $ | (3,242 | ) | $ | 9,215 | $ | (1,480 | ) | ||||
Effect of dilutive securities | 1 | — | 2 | 540 | ||||||||||
Net income (loss) allocated to unrestricted common shareholders for diluted EPS | $ | 2,149 | $ | (3,242 | ) | $ | 9,217 | $ | (940 | ) | ||||
Weighted-average common shares outstanding applicable to basic EPS | 28,877.5 | 12,104.3 | 28,723.7 | 7,629.6 | ||||||||||
Effect of dilutive securities | ||||||||||||||
TDECs | 876.2 | — | 878.4 | — | ||||||||||
Other employee plans | 23.9 | — | 17.5 | — | ||||||||||
Convertible securities | 0.7 | 111.7 | 0.7 | 416.1 | ||||||||||
Options | — | — | 1.2 | — | ||||||||||
Adjusted weighted-average common shares outstanding applicable to diluted EPS | 29,778.3 | 12,216.0 | 29,621.5 | 8,045.7 | ||||||||||
Basic earnings per share | ||||||||||||||
Income (loss) from continuing operations | $ | 0.09 | $ | (0.23 | ) | $ | 0.32 | $ | (0.10 | ) | ||||
Discontinued operations | (0.02 | ) | (0.04 | ) | — | (0.09 | ) | |||||||
Net income (loss) | $ | 0.07 | $ | (0.27 | ) | $ | 0.32 | $ | (0.19 | ) | ||||
Diluted earnings per share | ||||||||||||||
Income (loss) from continuing operations | $ | 0.08 | $ | (0.23 | ) | $ | 0.32 | $ | (0.10 | ) | ||||
Discontinued operations | (0.01 | ) | (0.04 | ) | (0.01 | ) | (0.09 | ) | ||||||
Net income (loss) | $ | 0.07 | $ | (0.27 | ) | $ | 0.31 | $ | (0.19 | ) | ||||
During the third quarters of 2010 and 2009, weighted-average options to 65 (FSP EITF 03-6-1) on January 1, 2009. All prior periods have been restated to conformpurchase 384.7 million and 100.5 million shares of common stock, respectively, were outstanding but not included in the computation of earnings per common share, because the weighted-average exercise prices of $9.58 and $41.29, respectively, were greater than the average market price of the Company's common stock during the quarter.
Warrants issued to the current period's presentation.
Equity awards granted under the Management Committee Long-Term Incentive Plan (MC LTIP) were not included in the 2009 computation of earnings per common share, because the performance targets under the terms of the awards were not met and, as a private offeringresult, the awards expired in January 2008. The conversion price was reset from $31.62the first quarter of 2010. In addition, the other performance-based equity awards of approximately 5 million shares were not included in the third quarters of 2010 and 2009 earnings per share to $26.35 per share.
Equity units convertible into approximately 118 million shares and 235 million shares of Citigroup common shareholders for Basic EPSstock held by the Abu Dhabi Investment Authority (ADIA) were not included in the three and nine months ended September 30, 2009 and 2008, loss available to common stockholders for basic EPS was used to calculate Dilutedcomputation of earnings per share. Adding back the effect of dilutive securities would result in anti-dilution.
9. TRADING ACCOUNT ASSETS AND LIABILITIES
Trading account assets andTrading account liabilities, at fair value, consisted of the following at September 30, 20092010 and December 31, 2008:2009:
In millions of dollars | In millions of dollars | September 30, 2009 | December 31, 2008 | In millions of dollars | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trading account assets | Trading account assets | Trading account assets | ||||||||||||||
Trading mortgage-backed securities | ||||||||||||||||
Mortgage-backed securities(1) | Mortgage-backed securities(1) | |||||||||||||||
Agency guaranteed | $ | 23,549 | $ | 32,981 | U.S. government agency guaranteed | $ | 23,782 | $ | 20,638 | |||||||
Prime | 1,177 | 1,416 | Prime | 1,798 | 1,156 | |||||||||||
Alt-A | 1,305 | 913 | Alt-A | 1,416 | 1,229 | |||||||||||
Subprime | 10,638 | 14,552 | Subprime | 1,854 | 9,734 | |||||||||||
Non-U.S. residential | 1,923 | 2,447 | Non-U.S. residential | 2,829 | 2,368 | |||||||||||
Commercial | 3,975 | 2,501 | Commercial | 3,296 | 3,455 | |||||||||||
Total trading mortgage-backed securities | $ | 42,567 | $ | 54,810 | ||||||||||||
Total mortgage-backed securities(1) | Total mortgage-backed securities(1) | $ | 34,975 | $ | 38,580 | |||||||||||
U.S. Treasury and Federal Agencies | ||||||||||||||||
U.S. Treasury and federal agencies | U.S. Treasury and federal agencies | |||||||||||||||
U.S. Treasuries | $ | 20,803 | $ | 7,370 | U.S. Treasuries | $ | 23,785 | $ | 28,938 | |||||||
Agency and direct obligations | 3,933 | 4,017 | Agency and direct obligations | 4,173 | 2,041 | |||||||||||
Total U.S. Treasury and Federal Agencies | $ | 24,736 | $ | 11,387 | ||||||||||||
Total U.S. Treasury and federal agencies | Total U.S. Treasury and federal agencies | $ | 27,958 | $ | 30,979 | |||||||||||
State and municipal securities | State and municipal securities | $ | 7,196 | $ | 9,510 | State and municipal securities | 6,729 | $ | 7,147 | |||||||
Foreign government securities | Foreign government securities | 66,425 | 57,422 | Foreign government securities | 98,200 | 72,769 | ||||||||||
Corporate | Corporate | 47,485 | 54,654 | Corporate | 51,989 | 51,985 | ||||||||||
Derivatives(1) | 68,670 | 115,289 | ||||||||||||||
Derivatives(2) | Derivatives(2) | 55,560 | 58,879 | |||||||||||||
Equity securities | Equity securities | 46,463 | 48,503 | Equity securities | 37,117 | 46,221 | ||||||||||
Asset-backed securities(1) | Asset-backed securities(1) | 9,681 | 4,089 | |||||||||||||
Other debt securities | Other debt securities | 37,155 | 26,060 | Other debt securities | 14,889 | 32,124 | ||||||||||
Total trading account assets | Total trading account assets | $ | 340,697 | $ | 377,635 | Total trading account assets | $ | 337,098 | $ | 342,773 | ||||||
Trading account liabilities | Trading account liabilities | Trading account liabilities | ||||||||||||||
Securities sold, not yet purchased | Securities sold, not yet purchased | $ | 67,988 | $ | 50,693 | Securities sold, not yet purchased | $ | 79,539 | $ | 73,406 | ||||||
Derivatives(1) | 62,552 | 115,107 | ||||||||||||||
Derivatives(2) | Derivatives(2) | 62,466 | 64,106 | |||||||||||||
Total trading account liabilities | Total trading account liabilities | $ | 130,540 | $ | 165,800 | Total trading account liabilities | $ | 142,005 | $ | 137,512 | ||||||
In millions of dollars | September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Securities available-for-sale | $ | 190,252 | $ | 175,189 | $ | 295,682 | $ | 239,599 | ||||||
Debt securities held-to-maturity(1) | 55,816 | 64,459 | 30,107 | 51,527 | ||||||||||
Non-marketable equity securities carried at fair value(2) | 7,765 | 9,262 | 6,427 | 6,830 | ||||||||||
Non-marketable equity securities carried at cost(3) | 8,057 | 7,110 | 8,034 | 8,163 | ||||||||||
Total investments | $ | 261,890 | $ | 256,020 | $ | 340,250 | $ | 306,119 | ||||||
Securities Available-for-Sale
The amortized cost and fair value of securities available-for-sale (AFS) at September 30, 20092010 and December 31, 20082009 were as follows:
| | September 30, 2009 | December 31, 2008(1) | | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | In millions of dollars | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | In millions of dollars | Amortized cost | Gross unrealized gains | Gross unrealized Losses | Fair value | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||||||||||||||||||||||||
Debt securities available-for-sale: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt securities AFS | Debt securities AFS | |||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | Mortgage-backed securities | Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. government agency guaranteed | $ | 23,163 | $ | 487 | $ | 31 | $ | 23,619 | $ | 23,527 | $ | 261 | $ | 67 | $ | 23,721 | U.S. government-agency guaranteed | $ | 22,197 | $ | 605 | $ | 45 | $ | 22,757 | $ | 20,625 | $ | 339 | $ | 50 | $ | 20,914 | |||||||||||||||||||
Prime | 7,436 | 102 | 1,260 | 6,278 | 8,475 | 3 | 2,965 | 5,513 | Prime | 2,687 | 28 | 224 | 2,491 | 7,291 | 119 | 932 | 6,478 | |||||||||||||||||||||||||||||||||||
Alt-A | 390 | 86 | 6 | 470 | 54 | — | 9 | 45 | Alt-A | 69 | 3 | 1 | 71 | 538 | 93 | 4 | 627 | |||||||||||||||||||||||||||||||||||
Subprime | 36 | — | 17 | 19 | 38 | — | 21 | 17 | Subprime | 1 | — | — | 1 | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||||
Non-U.S. residential | 271 | — | 5 | 266 | 185 | 2 | — | 187 | Non-U.S. residential | 340 | 1 | 1 | 340 | 258 | — | 3 | 255 | |||||||||||||||||||||||||||||||||||
Commercial | 919 | 10 | 120 | 809 | 519 | — | 134 | 385 | Commercial | 587 | 28 | 19 | 596 | 883 | 10 | 100 | 793 | |||||||||||||||||||||||||||||||||||
Total mortgage-backed securities | Total mortgage-backed securities | 32,215 | 685 | 1,439 | 31,461 | 32,798 | 266 | 3,196 | 29,868 | Total mortgage-backed securities | $ | 25,881 | $ | 665 | $ | 290 | $ | 26,256 | $ | 29,596 | $ | 561 | $ | 1,089 | $ | 29,068 | ||||||||||||||||||||||||||
U.S. Treasury and federal agency securities | U.S. Treasury and federal agency securities | U.S. Treasury and federal agency securities | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | 6,194 | 41 | 1 | 6,234 | 3,465 | 125 | — | 3,590 | U.S. Treasury | 64,802 | 1,097 | 2 | 65,897 | 26,857 | 36 | 331 | 26,562 | |||||||||||||||||||||||||||||||||||
Agency obligations | 16,897 | 84 | 14 | 16,967 | 20,237 | 215 | 77 | 20,375 | Agency obligations | 48,750 | 400 | 4 | 49,146 | 27,714 | 46 | 208 | 27,552 | |||||||||||||||||||||||||||||||||||
Total U.S. Treasury and federal agency securities | Total U.S. Treasury and federal agency securities | 23,091 | 125 | 15 | 23,201 | 23,702 | 340 | 77 | 23,965 | Total U.S. Treasury and federal agency securities | $ | 113,552 | $ | 1,497 | $ | 6 | $ | 115,043 | $ | 54,571 | $ | 82 | $ | 539 | $ | 54,114 | ||||||||||||||||||||||||||
State and municipal | State and municipal | 17,967 | 197 | 1,339 | 16,825 | 18,156 | 38 | 4,370 | 13,824 | State and municipal | 16,391 | 293 | 2,118 | 14,566 | 16,677 | 147 | 1,214 | 15,610 | ||||||||||||||||||||||||||||||||||
Foreign government | Foreign government | 79,965 | 974 | 268 | 80,671 | 79,505 | 945 | 408 | 80,042 | Foreign government | 102,718 | 1,349 | 212 | 103,855 | 101,987 | 860 | 328 | 102,519 | ||||||||||||||||||||||||||||||||||
Corporate | Corporate | 20,444 | 436 | 172 | 20,708 | 10,646 | 65 | 680 | 10,031 | Corporate | 17,161 | 476 | 39 | 17,598 | 20,024 | 435 | 146 | 20,313 | ||||||||||||||||||||||||||||||||||
Asset-backed securities(1) | Asset-backed securities(1) | 10,260 | 42 | 72 | 10,230 | 10,089 | 50 | 93 | 10,046 | |||||||||||||||||||||||||||||||||||||||||||
Other debt securities | Other debt securities | 11,701 | 201 | 255 | 11,647 | 11,784 | 36 | 224 | 11,596 | Other debt securities | 2,202 | 34 | 95 | 2,141 | 2,179 | 21 | 77 | 2,123 | ||||||||||||||||||||||||||||||||||
Total debt securities available- for-sale | 185,383 | 2,618 | 3,488 | 184,513 | 176,591 | 1,690 | 8,955 | 169,326 | ||||||||||||||||||||||||||||||||||||||||||||
Total debt securities AFS | Total debt securities AFS | $ | 288,165 | $ | 4,356 | $ | 2,832 | $ | 289,689 | $ | 235,123 | $ | 2,156 | $ | 3,486 | $ | 233,793 | |||||||||||||||||||||||||||||||||||
Marketable equity securities available-for-sale | 4,065 | 1,929 | 255 | 5,739 | 5,768 | 554 | 459 | 5,863 | ||||||||||||||||||||||||||||||||||||||||||||
Marketable equity securities AFS | Marketable equity securities AFS | $ | 3,834 | $ | 2,433 | $ | 274 | $ | 5,993 | $ | 4,089 | $ | 1,929 | $ | 212 | $ | 5,806 | |||||||||||||||||||||||||||||||||||
Total securities available-for-sale | $ | 189,448 | $ | 4,547 | $ | 3,743 | $ | 190,252 | $ | 182,359 | $ | 2,244 | $ | 9,414 | $ | 175,189 | ||||||||||||||||||||||||||||||||||||
Total securities AFS | Total securities AFS | $ | 291,999 | $ | 6,789 | $ | 3,106 | $ | 295,682 | $ | 239,212 | $ | 4,085 | $ | 3,698 | $ | 239,599 | |||||||||||||||||||||||||||||||||||
The As discussed in more detail below, the Company conducts and documents periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other than temporary. As discussed in more detail below, prior to January 1, 2009, these reviews were conducted pursuant to FASB Staff Position No. 115-1,The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (ASC 320-10-35).other-than-temporary. Any unrealized loss identified as other than temporary was recorded directly in the Consolidated Statement of Income. As of January 1, 2009, the Company adopted ASC 320-10-65-1 (FSP FAS 115-2 and FAS 124-2). Accordingly, any credit-related impairment related to debt securities the Company does not planintend to sell and is more-likely-than-not will not likely to be required to sell is recognized in the Consolidated Statement of Income, with the non-credit-related impairment recognized in Other Comprehensive Income (OCI).OCI. For other impaired debt securities that the Company intends to sell, the entire impairment is recognized in the Consolidated Statement of Income. See Note 1 to the Consolidated Financial Statements for additional information.
The table below shows the fair value of investments in AFS securities that have been in an unrealized loss position for less than 12 months or for 12 months or longer as of September 30, 20092010 and December 31, 2008:2009:
| | Less than 12 months | 12 months or longer | Total | | Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollar | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | ||||||||||||||||||||||||||||||||||
September 30, 2009 | ||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale | ||||||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | |||||||||||||||||||||||||||||||||
September 30, 2010 | September 30, 2010 | |||||||||||||||||||||||||||||||||||||||
Securities AFS | Securities AFS | |||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | Mortgage-backed securities | Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||
U.S. government agency guaranteed | $ | 3,024 | $ | 23 | $ | 300 | $ | 8 | $ | 3,324 | $ | 31 | U.S. government-agency guaranteed | $ | 5,474 | $ | 45 | $ | 18 | $ | — | $ | 5,492 | $ | 45 | |||||||||||||||
Prime | 4,999 | 1,224 | 268 | 36 | 5,267 | 1,260 | Prime | 169 | 4 | 1,822 | 220 | 1,991 | 224 | |||||||||||||||||||||||||||
Alt-A | 90 | — | 47 | 6 | 137 | 6 | Alt-A | 10 | — | 2 | 1 | 12 | 1 | |||||||||||||||||||||||||||
Subprime | 4 | — | 13 | 17 | 17 | 17 | Subprime | — | — | — | — | — | — | |||||||||||||||||||||||||||
Non-U.S. residential | 266 | 5 | — | — | 266 | 5 | Non-U.S. residential | — | — | 209 | 1 | 209 | 1 | |||||||||||||||||||||||||||
Commercial | 84 | 64 | 389 | 56 | 473 | 120 | Commercial | 48 | 12 | 50 | 7 | 98 | 19 | |||||||||||||||||||||||||||
Total mortgage-backed securities | Total mortgage-backed securities | 8,467 | 1,316 | 1,017 | 123 | 9,484 | 1,439 | Total mortgage-backed securities | $ | 5,701 | $ | 61 | $ | 2,101 | $ | 229 | $ | 7,802 | $ | 290 | ||||||||||||||||||||
U.S. Treasury and federal agency securities | U.S. Treasury and federal agency securities | U.S. Treasury and federal agency securities | ||||||||||||||||||||||||||||||||||||||
U.S. Treasury | 97 | — | 61 | 1 | 158 | 1 | U.S. Treasury | 2,456 | 2 | 51 | — | 2,507 | 2 | |||||||||||||||||||||||||||
Agency obligations | 2,995 | 14 | 1 | — | 2,996 | 14 | Agency obligations | 3,847 | 4 | 1 | — | 3,848 | 4 | |||||||||||||||||||||||||||
Total U.S. Treasury and federal agency securities | Total U.S. Treasury and federal agency securities | 3,092 | 14 | 62 | 1 | 3,154 | 15 | Total U.S. Treasury and federal agency securities | $ | 6,303 | $ | 6 | $ | 52 | $ | — | $ | 6,355 | $ | 6 | ||||||||||||||||||||
State and municipal | State and municipal | 4,321 | 214 | 877 | 1,125 | 5,198 | 1,339 | State and municipal | 880 | 40 | 11,897 | 2,078 | 12,777 | 2,118 | ||||||||||||||||||||||||||
Foreign government | Foreign government | 22,290 | 129 | 5,732 | 139 | 28,022 | 268 | Foreign government | 23,085 | 116 | 4,588 | 96 | 27,673 | 212 | ||||||||||||||||||||||||||
Corporate | Corporate | 956 | 56 | 1,266 | 116 | 2,222 | 172 | Corporate | 656 | 22 | 305 | 17 | 961 | 39 | ||||||||||||||||||||||||||
Asset-backed securities | Asset-backed securities | 280 | 8 | 303 | 64 | 583 | 72 | |||||||||||||||||||||||||||||||||
Other debt securities | Other debt securities | 1,183 | 93 | 1,378 | 162 | 2,561 | 255 | Other debt securities | — | — | 632 | 95 | 632 | 95 | ||||||||||||||||||||||||||
Marketable equity securities available-for-sale | 2,555 | 225 | 117 | 30 | 2,672 | 255 | ||||||||||||||||||||||||||||||||||
Marketable equity securities AFS | Marketable equity securities AFS | 69 | 31 | 2,033 | 243 | 2,102 | 274 | |||||||||||||||||||||||||||||||||
Total securities available-for-sale | $ | 42,864 | $ | 2,047 | $ | 10,449 | $ | 1,696 | $ | 53,313 | $ | 3,743 | ||||||||||||||||||||||||||||
Total securities AFS | Total securities AFS | $ | 36,974 | $ | 284 | $ | 21,911 | $ | 2,822 | $ | 58,885 | $ | 3,106 | |||||||||||||||||||||||||||
December 31, 2008(1) | ||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale | ||||||||||||||||||||||||||||||||||||||||
December 31, 2009 | December 31, 2009 | |||||||||||||||||||||||||||||||||||||||
Securities AFS | Securities AFS | |||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | Mortgage-backed securities | Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||
U.S. government agency guaranteed | $ | 5,281 | $ | 9 | $ | 432 | $ | 58 | $ | 5,713 | $ | 67 | U.S. government-agency guaranteed | $ | 6,793 | $ | 47 | $ | 263 | $ | 3 | $ | 7,056 | $ | 50 | |||||||||||||||
Prime | 2,258 | 1,127 | 3,108 | 1,838 | 5,366 | 2,965 | Prime | 5,074 | 905 | 228 | 27 | 5,302 | 932 | |||||||||||||||||||||||||||
Alt-A | 38 | 8 | 5 | 1 | 43 | 9 | Alt-A | 106 | — | 35 | 4 | 141 | 4 | |||||||||||||||||||||||||||
Subprime | — | — | 15 | 21 | 15 | 21 | Subprime | — | — | — | — | — | — | |||||||||||||||||||||||||||
Non-U.S. residential | 10 | — | — | — | 10 | — | Non-U.S. residential | 250 | 3 | — | — | 250 | 3 | |||||||||||||||||||||||||||
Commercial | 213 | 33 | 233 | 101 | 446 | 134 | Commercial | 93 | 2 | 259 | 98 | 352 | 100 | |||||||||||||||||||||||||||
Total mortgage-backed securities | Total mortgage-backed securities | 7,800 | 1,177 | 3,793 | 2,019 | 11,593 | 3,196 | Total mortgage-backed securities | $ | 12,316 | $ | 957 | $ | 785 | $ | 132 | $ | 13,101 | $ | 1,089 | ||||||||||||||||||||
U.S. Treasury and federal agencies | ||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and federal agency securities | U.S. Treasury and federal agency securities | |||||||||||||||||||||||||||||||||||||||
U.S. Treasury | — | — | — | — | — | — | U.S. Treasury | 23,378 | 224 | 308 | 107 | 23,686 | 331 | |||||||||||||||||||||||||||
Agency obligations | 1,654 | 76 | 1 | 1 | 1,655 | 77 | Agency obligations | 17,957 | 208 | 7 | — | 17,964 | 208 | |||||||||||||||||||||||||||
Total U.S. Treasury and federal agency securities | Total U.S. Treasury and federal agency securities | 1,654 | 76 | 1 | 1 | 1,655 | 77 | Total U.S. Treasury and federal agency securities | $ | 41,335 | $ | 432 | $ | 315 | $ | 107 | $ | 41,650 | $ | 539 | ||||||||||||||||||||
State and municipal | State and municipal | 12,827 | 3,872 | 3,762 | 498 | 16,589 | 4,370 | State and municipal | 769 | 97 | 12,508 | 1,117 | 13,277 | 1,214 | ||||||||||||||||||||||||||
Foreign government | Foreign government | 10,697 | 201 | 9,080 | 207 | 19,777 | 408 | Foreign government | 39,241 | 217 | 10,398 | 111 | 49,639 | 328 | ||||||||||||||||||||||||||
Corporate | Corporate | 1,985 | 270 | 4,393 | 410 | 6,378 | 680 | Corporate | 1,165 | 47 | 907 | 99 | 2,072 | 146 | ||||||||||||||||||||||||||
Asset-backed securities | Asset-backed securities | 627 | 4 | 986 | 89 | 1,613 | 93 | |||||||||||||||||||||||||||||||||
Other debt securities | Other debt securities | 944 | 96 | 303 | 128 | 1,247 | 224 | Other debt securities | 28 | 2 | 647 | 75 | 675 | 77 | ||||||||||||||||||||||||||
Marketable equity securities available-for-sale | 3,254 | 386 | 102 | 73 | 3,356 | 459 | ||||||||||||||||||||||||||||||||||
Marketable equity securities AFS | Marketable equity securities AFS | 102 | 4 | 2,526 | 208 | 2,628 | 212 | |||||||||||||||||||||||||||||||||
Total securities available-for-sale | $ | 39,161 | $ | 6,078 | $ | 21,434 | $ | 3,336 | $ | 60,595 | $ | 9,414 | ||||||||||||||||||||||||||||
Total securitiesAFS | Total securitiesAFS | $ | 95,583 | $ | 1,760 | $ | 29,072 | $ | 1,938 | $ | 124,655 | $ | 3,698 | |||||||||||||||||||||||||||
The following table presents the amortized cost and fair value of AFS debt securities available-for-sale by contractual maturity dates as of September 30, 2009,2010 and December 31, 2008:2009:
| September 30, 2009 | December 31, 2008(1) | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Amortized Cost | Fair value | Amortized cost | Fair value | Amortized Cost | Fair value | Amortized cost | Fair value | ||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||||
Due within 1 year | $ | 2 | $ | 2 | $ | 87 | $ | 80 | $ | — | $ | — | $ | 2 | $ | 3 | ||||||||||
After 1 but within 5 years | 29 | 30 | 639 | 567 | 396 | 392 | 16 | 16 | ||||||||||||||||||
After 5 but within 10 years | 690 | 658 | 1,362 | 1,141 | 418 | 440 | 626 | 597 | ||||||||||||||||||
After 10 years(3) | 31,494 | 30,771 | 30,710 | 28,080 | ||||||||||||||||||||||
After 10 years(2) | 25,067 | 25,424 | 28,952 | 28,452 | ||||||||||||||||||||||
Total | $ | 32,215 | $ | 31,461 | $ | 32,798 | $ | 29,868 | $ | 25,881 | $ | 26,256 | $ | 29,596 | $ | 29,068 | ||||||||||
U.S. Treasury and federal agencies | ||||||||||||||||||||||||||
Due within 1 year | $ | 5,546 | $ | 5,556 | $ | 15,736 | $ | 15,846 | $ | 21,716 | $ | 21,734 | $ | 5,357 | $ | 5,366 | ||||||||||
After 1 but within 5 years | 7,600 | 7,629 | 5,755 | 5,907 | 70,324 | 71,097 | 35,912 | 35,618 | ||||||||||||||||||
After 5 but within 10 years | 6,535 | 6,593 | 1,902 | 1,977 | 18,502 | 19,094 | 8,815 | 8,773 | ||||||||||||||||||
After 10 years(3) | 3,410 | 3,423 | 309 | 235 | ||||||||||||||||||||||
After 10 years(2) | 3,010 | 3,118 | 4,487 | 4,357 | ||||||||||||||||||||||
Total | $ | 23,091 | $ | 23,201 | $ | 23,702 | $ | 23,965 | $ | 113,552 | $ | 115,043 | $ | 54,571 | $ | 54,114 | ||||||||||
State and municipal | ||||||||||||||||||||||||||
Due within 1 year | $ | 219 | $ | 219 | $ | 214 | $ | 214 | $ | 80 | $ | 47 | $ | 7 | $ | 8 | ||||||||||
After 1 but within 5 years | 111 | 121 | 84 | 84 | 49 | 141 | 119 | 129 | ||||||||||||||||||
After 5 but within 10 years | 354 | 381 | 411 | 406 | 399 | 245 | 340 | 359 | ||||||||||||||||||
After 10 years(3) | 17,283 | 16,104 | 17,447 | 13,120 | ||||||||||||||||||||||
After 10 years(2) | 15,863 | 14,133 | 16,211 | 15,114 | ||||||||||||||||||||||
Total | $ | 17,967 | $ | 16,825 | $ | 18,156 | $ | 13,824 | $ | 16,391 | $ | 14,566 | $ | 16,677 | $ | 15,610 | ||||||||||
Foreign government | ||||||||||||||||||||||||||
Due within 1 year | $ | 34,753 | $ | 34,824 | $ | 26,481 | $ | 26,937 | $ | 39,362 | $ | 39,386 | $ | 32,223 | $ | 32,365 | ||||||||||
After 1 but within 5 years | 37,442 | 37,945 | 45,652 | 45,462 | 55,127 | 55,794 | 61,165 | 61,426 | ||||||||||||||||||
After 5 but within 10 years | 6,711 | 6,706 | 6,771 | 6,899 | 7,283 | 7,506 | 7,844 | 7,845 | ||||||||||||||||||
After 10 years(3) | 1,059 | 1,196 | 601 | 744 | ||||||||||||||||||||||
After 10 years(2) | 946 | 1,169 | 755 | 883 | ||||||||||||||||||||||
Total | $ | 79,965 | $ | 80,671 | $ | 79,505 | $ | 80,042 | $ | 102,718 | $ | 103,855 | $ | 101,987 | $ | 102,519 | ||||||||||
All other | ||||||||||||||||||||||||||
Due within 1 year | $ | 2,893 | $ | 2,883 | $ | 4,160 | $ | 4,319 | $ | 3,321 | $ | 3,309 | $ | 4,243 | $ | 4,244 | ||||||||||
After 1 but within 5 years | 23,456 | 23,711 | 2,662 | 2,692 | 13,483 | 13,629 | 14,286 | 14,494 | ||||||||||||||||||
After 5 but within 10 years | 3,282 | 3,327 | 12,557 | 11,842 | 8,491 | 8,683 | 9,483 | 9,597 | ||||||||||||||||||
After 10 years(3) | 2,514 | 2,434 | 3,051 | 2,774 | ||||||||||||||||||||||
After 10 years(2) | 4,328 | 4,348 | 4,280 | 4,147 | ||||||||||||||||||||||
Total | $ | 32,145 | $ | 32,355 | $ | 22,430 | $ | 21,627 | $ | 29,623 | $ | 29,969 | $ | 32,292 | $ | 32,482 | ||||||||||
Total debt securities available-for-sale | $ | 185,383 | $ | 184,513 | $ | 176,591 | $ | 169,326 | ||||||||||||||||||
Total debt securities AFS | $ | 288,165 | $ | 289,689 | $ | 235,123 | $ | 233,793 | ||||||||||||||||||
The following tables present interest and dividends on all investments for the three- and nine-month periods ended September 30, 20092010 and 2008:2009:
| Three months ended | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | Sept 30, 2009 | Sept 30, 2008 | |||||
Taxable interest | $ | 2,956 | $ | 2,334 | |||
Interest exempt from U.S. federal income tax | 226 | 136 | |||||
Dividends | 101 | 127 | |||||
Total interest and dividends | $ | 3,283 | $ | 2,597 | |||
| Three months ended | Nine months ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | September 30, 2010 | September 30, 2009 | September 30, 2010 | September 30, 2009 | |||||||||
Taxable interest | $ | 2,353 | $ | 2,956 | $ | 7,896 | $ | 9,084 | |||||
Interest exempt from U.S. federal income tax | 185 | 226 | 555 | 591 | |||||||||
Dividends | 73 | 101 | 255 | 219 | |||||||||
Total interest and dividends | $ | 2,611 | $ | 3,283 | $ | 8,706 | $ | 9,894 | |||||
| Nine months ended | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | Sept 30, 2009 | Sept 30, 2008 | |||||
Taxable interest | $ | 9,084 | $ | 7,019 | |||
Interest exempt from U.S. federal income tax | 591 | 433 | |||||
Dividends | 219 | 380 | |||||
Total interest and dividends | $ | 9,894 | $ | 7,832 | |||
The following table presents realized gains and losses on all investments for the three- and nine-month periods ended September 30, 20092010 and 2008.2009. The gross realized investment losses exclude losses from other-than-temporary impairment:
| Three months ended | Nine months ended | Three months ended | Nine months ended | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Sept 30, 2009 | Sept 30, 2008 | Sept 30, 2009 | Sept 30, 2008 | September 30, 2010 | September 30, 2009 | September 30, 2010 | September 30, 2009 | ||||||||||||||||||
Gross realized investment gains | $ | 439 | $ | 192 | $ | 1,797 | $ | 506 | $ | 1,133 | $ | 439 | $ | 2,280 | $ | 1,797 | ||||||||||
Gross realized investment losses | (12 | ) | (42 | ) | (78 | ) | (130 | ) | (171 | ) | (12 | ) | (257 | ) | (78 | ) | ||||||||||
Net realized gains (losses) | $ | 427 | $ | 150 | $ | 1,719 | $ | 376 | ||||||||||||||||||
Net realized gains | $ | 962 | $ | 427 | $ | 2,023 | $ | 1,719 | ||||||||||||||||||
Debt Securities Held-to-Maturity
The carrying value and fair value of securities held-to-maturity (HTM) at September 30, 20092010 and December 31, 20082009 were as follows:
In millions of dollars | Amortized cost(1) | Net unrealized loss recognized in OCI | Carrying value(2) | Gross unrecognized gains | Gross unrecognized losses | Fair value | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2009 | ||||||||||||||||||||
Debt securities held-to-maturity | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
U.S. government agency guaranteed | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Prime | 6,388 | 1,211 | 5,177 | 50 | 50 | 5,177 | ||||||||||||||
Alt-A | 15,436 | 4,609 | 10,827 | 411 | 419 | 10,819 | ||||||||||||||
Subprime | 1,165 | 171 | 994 | 56 | 117 | 933 | ||||||||||||||
Non-U.S. residential | 9,485 | 1,168 | 8,317 | 364 | 240 | 8,441 | ||||||||||||||
Commercial | 1,308 | 52 | 1,256 | — | 377 | 879 | ||||||||||||||
Total mortgage-backed securities | 33,782 | 7,211 | 26,571 | 881 | 1,203 | 26,249 | ||||||||||||||
U.S. Treasury and federal agency securities | ||||||||||||||||||||
U.S. Treasury | — | — | — | — | — | — | ||||||||||||||
Agency and direct obligations | — | — | — | — | — | — | ||||||||||||||
Total U.S. Treasury and federal agency securities | — | — | — | — | — | — | ||||||||||||||
State and municipal | 3,169 | 146 | 3,023 | 200 | 138 | 3,085 | ||||||||||||||
Corporate | 7,365 | 307 | 7,058 | 472 | 138 | 7,392 | ||||||||||||||
Asset-backed securities | 19,590 | 427 | 19,163 | 435 | 722 | 18,876 | ||||||||||||||
Other debt securities | 7 | 6 | 1 | — | — | 1 | ||||||||||||||
Total debt securities held-to-maturity | $ | 63,913 | $ | 8,097 | $ | 55,816 | $ | 1,988 | $ | 2,201 | $ | 55,603 | ||||||||
December 31, 2008 | ||||||||||||||||||||
Debt securities held-to-maturity | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
U.S. government agency guaranteed | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Prime | 7,481 | 1,436 | 6,045 | — | 623 | 5,422 | ||||||||||||||
Alt-A | 16,658 | 4,216 | 12,442 | 23 | 1,802 | 10,663 | ||||||||||||||
Subprime | 1,368 | 125 | 1,243 | 15 | 163 | 1,095 | ||||||||||||||
Non-U.S. residential | 10,496 | 1,128 | 9,368 | 5 | 397 | 8,976 | ||||||||||||||
Commercial | 1,021 | — | 1,021 | — | 130 | 891 | ||||||||||||||
Total mortgage-backed securities | 37,024 | 6,905 | 30,119 | 43 | 3,115 | 27,047 | ||||||||||||||
U.S. Treasury and federal agency securities | ||||||||||||||||||||
U.S. Treasury | 1 | — | 1 | — | — | 1 | ||||||||||||||
Agency and direct obligations | — | — | — | — | — | — | ||||||||||||||
Total U.S. Treasury and federal agency securities | 1 | — | 1 | — | — | 1 | ||||||||||||||
State and municipal | 3,371 | 183 | 3,188 | 14 | 253 | 2,949 | ||||||||||||||
Corporate | 6,906 | 175 | 6,731 | 130 | 305 | 6,556 | ||||||||||||||
Asset-backed securities | 22,698 | 415 | 22,283 | 86 | 555 | 21,814 | ||||||||||||||
Other debt securities | 2,478 | 341 | 2,137 | — | 127 | 2,010 | ||||||||||||||
Total debt securities held-to-maturity | $ | 72,478 | $ | 8,019 | $ | 64,459 | $ | 273 | $ | 4,355 | $ | 60,377 | ||||||||
In millions of dollars | Amortized cost(1) | Net unrealized loss recognized in AOCI | Carrying value(2) | Gross unrecognized gains | Gross unrecognized losses | Fair value | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2010 | ||||||||||||||||||||
Debt securities HTM(3) | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
Prime | $ | 4,963 | $ | 870 | $ | 4,093 | $ | 491 | $ | 11 | $ | 4,573 | ||||||||
Alt-A | 12,314 | 3,318 | 8,996 | 774 | 153 | 9,617 | ||||||||||||||
Subprime | 731 | 86 | 645 | 10 | 61 | 594 | ||||||||||||||
Non-U.S. residential | 5,362 | 842 | 4,520 | 331 | 63 | 4,788 | ||||||||||||||
Commercial | 948 | 24 | 924 | — | 115 | 809 | ||||||||||||||
Total mortgage-backed securities | $ | 24,318 | $ | 5,140 | $ | 19,178 | $ | 1,606 | $ | 403 | $ | 20,381 | ||||||||
State and municipal | 2,612 | 129 | 2,483 | 100 | 55 | 2,528 | ||||||||||||||
Corporate | 6,717 | 170 | 6,547 | 494 | 101 | 6,940 | ||||||||||||||
Asset-backed securities(3) | 1,974 | 75 | 1,899 | 62 | 60 | 1,901 | ||||||||||||||
Other debt securities | — | — | — | — | — | — | ||||||||||||||
Total debt securities HTM | $ | 35,621 | $ | 5,514 | $ | 30,107 | $ | 2,262 | $ | 619 | $ | 31,750 | ||||||||
December 31, 2009 | ||||||||||||||||||||
Debt securities HTM(3) | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
Prime | $ | 6,118 | $ | 1,151 | $ | 4,967 | $ | 317 | $ | 5 | $ | 5,279 | ||||||||
Alt-A | 14,710 | 4,276 | 10,434 | 905 | 243 | 11,096 | ||||||||||||||
Subprime | 1,087 | 128 | 959 | 77 | 100 | 936 | ||||||||||||||
Non-U.S. residential | 9,002 | 1,119 | 7,883 | 469 | 134 | 8,218 | ||||||||||||||
Commercial | 1,303 | 45 | 1,258 | 1 | 208 | 1,051 | ||||||||||||||
Total mortgage-backed securities | $ | 32,220 | $ | 6,719 | $ | 25,501 | $ | 1,769 | $ | 690 | $ | 26,580 | ||||||||
State and municipal | 3,067 | 147 | 2,920 | 92 | 113 | 2,899 | ||||||||||||||
Corporate | 7,457 | 264 | 7,193 | 524 | 182 | 7,535 | ||||||||||||||
Asset-backed securities(3) | 16,348 | 435 | 15,913 | 567 | 496 | 15,984 | ||||||||||||||
Other debt securities | — | — | — | — | — | — | ||||||||||||||
Total debt securities HTM | $ | 59,092 | $ | 7,565 | $ | 51,527 | $ | 2,952 | $ | 1,481 | $ | 52,998 | ||||||||
The net unrealized losses classified in accumulated other comprehensive income (AOCI)AOCI relate to debt securities reclassified from AFS investments to HTM investments, and to additionalinvestments. Additionally, for HTM securities that have suffered credit impairment, declines in fair value for HTM securities that sufferreasons other than credit impairment.losses are recorded in AOCI. The AOCI balance was $8.1$5.5 billion as of September 30, 2009,2010, compared to $8.0$7.6 billion as of December 31, 2008. This2009. The AOCI balance for HTM securities is amortized over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on the same transferred debt securities. This will have no impact on the Company's net income because the amortization of the unrealized holding loss reported in equity will offset the effect on interest income of the accretion of the discount on these securities.
The credit-related impairment on HTM securities is recognized in earnings.
The table below shows the fair value of investments in HTM that have been in an unrealizedunrecognized loss position for less than 12 months or for 12 months or longer as of September 30, 20092010 and December 31, 2008:2009:
| Less than 12 months | 12 months or longer | Total | Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrecognized losses | Fair value | Gross unrecognized losses | Fair value | Gross unrecognized losses | ||||||||||||||||||||||||||
September 30, 2009 | ||||||||||||||||||||||||||||||||||||||
Debt securities held-to-maturity | ||||||||||||||||||||||||||||||||||||||
September 30, 2010 | ||||||||||||||||||||||||||||||||||||||
Debt securities HTM | ||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | $ | 5,235 | $ | 1,046 | $ | 13,656 | $ | 157 | $ | 18,891 | $ | 1,203 | $ | 211 | $ | 26 | $ | 14,543 | $ | 377 | $ | 14,754 | $ | 403 | ||||||||||||||
State and municipal | 733 | 138 | — | — | 733 | 138 | 605 | 3 | 950 | 52 | 1,555 | 55 | ||||||||||||||||||||||||||
Corporate | 2,801 | 138 | — | — | 2,801 | 138 | 1,019 | 44 | 1,404 | 57 | 2,423 | 101 | ||||||||||||||||||||||||||
Asset-backed securities | 5,713 | 701 | 807 | 21 | 6,520 | 722 | 268 | 10 | 578 | 50 | 846 | 60 | ||||||||||||||||||||||||||
Other debt securities | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Total debt securities held-to-maturity | $ | 14,482 | $ | 2,023 | $ | 14,463 | $ | 178 | $ | 28,945 | $ | 2,201 | ||||||||||||||||||||||||||
Total debt securities HTM | $ | 2,103 | $ | 83 | $ | 17,475 | $ | 536 | $ | 19,578 | $ | 619 | ||||||||||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||||||||||||||||
Debt securities held-to-maturity | ||||||||||||||||||||||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||||||||||||||||
Debt securities HTM | ||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | $ | 2,348 | $ | 631 | $ | 24,236 | $ | 2,484 | $ | 26,584 | $ | 3,115 | $ | — | $ | — | $ | 16,923 | $ | 690 | $ | 16,923 | $ | 690 | ||||||||||||||
State and municipal | 2,499 | 253 | — | — | 2,499 | 253 | 755 | 79 | 713 | 34 | 1,468 | 113 | ||||||||||||||||||||||||||
Corporate | 23 | — | 4,107 | 305 | 4,130 | 305 | — | — | 1,519 | 182 | 1,519 | 182 | ||||||||||||||||||||||||||
Asset-backed securities | 9,051 | 381 | 4,164 | 174 | 13,215 | 555 | 348 | 18 | 5,460 | 478 | 5,808 | 496 | ||||||||||||||||||||||||||
Other debt securities | 439 | — | 5,246 | 127 | 5,685 | 127 | — | — | — | — | — | — | ||||||||||||||||||||||||||
Total debt securities held-to-maturity | $ | 14,360 | $ | 1,265 | $ | 37,753 | $ | 3,090 | $ | 52,113 | $ | 4,355 | ||||||||||||||||||||||||||
Total debt securities HTM | $ | 1,103 | $ | 97 | $ | 24,615 | $ | 1,384 | $ | 25,718 | $ | 1,481 | ||||||||||||||||||||||||||
Excluded from the gross unrealizedunrecognized losses presented in the above table isare the $8.1$5.5 billion and $8.0$7.6 billion of gross unrealized losses recorded in AOCI mainly related to the HTM securities that were reclassified from AFS investments as of September 30, 20092010 and December 31, 2008,2009, respectively. Approximately $6.6 billion and $5.2 billionVirtually all of these unrealized losses relate to securities that have been in a loss position for 12 months or longer at both September 30, 20092010 and December 31, 2008, respectively.
Table of Contents2009.
The following table presents the carrying value and fair value of HTM debt securities by contractual maturity dates as of September 30, 20092010 and December 31, 2008:2009:
| September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Carrying value | Fair value | Carrying value | Fair value | Carrying value | Fair value | Carrying value | Fair value | ||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||||
Due within 1 year | $ | 1 | $ | 1 | $ | 88 | $ | 65 | $ | — | $ | — | $ | 1 | $ | 1 | ||||||||||
After 1 but within 5 years | 479 | 314 | 363 | 282 | 272 | 238 | 466 | 385 | ||||||||||||||||||
After 5 but within 10 years | 1,922 | 1,787 | 513 | 413 | 499 | 439 | 697 | 605 | ||||||||||||||||||
After 10 years(1) | 24,169 | 24,147 | 29,155 | 26,287 | 18,407 | 19,704 | 24,337 | 25,589 | ||||||||||||||||||
Total | $ | 26,571 | $ | 26,249 | $ | 30,119 | $ | 27,047 | $ | 19,178 | $ | 20,381 | $ | 25,501 | $ | 26,580 | ||||||||||
State and municipal | ||||||||||||||||||||||||||
Due within 1 year | $ | 6 | $ | 6 | $ | 86 | $ | 86 | $ | 6 | $ | 6 | $ | 6 | $ | 6 | ||||||||||
After 1 but within 5 years | 48 | 81 | 105 | 105 | 65 | 66 | 53 | 79 | ||||||||||||||||||
After 5 but within 10 years | 168 | 140 | 112 | 106 | 88 | 89 | 99 | 99 | ||||||||||||||||||
After 10 years(2) | 2,801 | 2,858 | 2,885 | 2,652 | ||||||||||||||||||||||
After 10 years(1) | 2,324 | 2,367 | 2,762 | 2,715 | ||||||||||||||||||||||
Total | $ | 3,023 | $ | 3,085 | $ | 3,188 | $ | 2,949 | $ | 2,483 | $ | 2,528 | $ | 2,920 | $ | 2,899 | ||||||||||
All other(2) | ||||||||||||||||||||||||||
Due within 1 year | $ | 5,618 | $ | 5,888 | $ | 4,482 | $ | 4,505 | $ | 541 | $ | 677 | $ | 4,652 | $ | 4,875 | ||||||||||
After 1 but within 5 years | 5,636 | 5,587 | 10,892 | 10,692 | 1,064 | 1,163 | 3,795 | 3,858 | ||||||||||||||||||
After 5 but within 10 years | 6,852 | 7,087 | 6,358 | 6,241 | 5,149 | 5,280 | 6,240 | 6,526 | ||||||||||||||||||
After 10 years(1) | 8,116 | 7,707 | 9,420 | 8,943 | 1,692 | 1,721 | 8,419 | 8,260 | ||||||||||||||||||
Total | $ | 26,222 | $ | 26,269 | $ | 31,152 | $ | 30,381 | $ | 8,446 | $ | 8,841 | $ | 23,106 | $ | 23,519 | ||||||||||
Total debt securities held-to-maturity | $ | 55,816 | $ | 55,603 | $ | 64,459 | $ | 60,377 | ||||||||||||||||||
Total debt securities HTM | $ | 30,107 | $ | 31,750 | $ | 51,527 | $ | 52,998 | ||||||||||||||||||
Evaluating Investments for Other-than-TemporaryOther-Than-Temporary Impairments
The Company conducts and documents periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other than temporary. Prior to January 1, 2009, these reviews were conducted pursuant to FASB Staff Position No. FAS 115-1,, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments (ASC 320-10-35)(now incorporated into ASC 320-10-35,Investments—Debt and Equity Securities—Subsequent Measurement). Any unrealized loss identified as other than temporaryother-than-temporary was recorded directly in the Consolidated Statement of Income. As of January 1, 2009, the Company adopted FSP FAS 115-2 and FAS 124-2 (ASC 320-10-65-1)(now incorporated into ASC 320-10-35-34,Investments—Debt and Equity Securities: Recognition of an Other-Than-Temporary Impairment). Accordingly, any credit-relatedThis guidance amends the impairment related tomodel for debt securities; the impairment model for equity securities was not affected.
Under the guidance for debt securities, other-than-temporary impairment (OTTI) is recognized in earnings for debt securities which the Company has an intent to sell or which the Company believes it is more-likely-than-not that it will be required to sell prior to recovery of the amortized cost basis. For those securities which the Company does not planintend to sell and is not likelyor expect to be required to sell, credit-related impairment is recognized in the Consolidated Statement of Income,earnings, with the non-credit-related impairment recognizedrecorded in OCI. For other impaired debt securities, the entire impairment is recognized in the Consolidated Statement of Income.AOCI.
An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for AFS securities, while such losses related to HTM securities are not recorded, as these investments are carried at their amortized cost. For securities transferred to HTM fromTrading account assets, amortized cost is defined as the fair value of the securities at the date of transfer, plus any accretion income and less any impairment recognized in earnings subsequent to transfer. For securities transferred to HTM from AFS, amortized cost is defined as the original purchase cost, plus or minus any accretion or amortization of a purchase discount or premium, less any impairment recognized in earnings subsequent to transfer.
Regardless of the classification of the securities as AFS or HTM, the Company has assessed each position for credit impairment.
Factors considered in determining whether a loss is temporary include:
The Company's review for impairment generally entails:
For equity securities, management considers the various factors described above, including its intent and ability to hold the equity security for a period of time sufficient for recovery to amortized cost. Where management lacks that intent or ability, the security's decline in fair value is deemed to be other than temporary and is recorded in earnings. AFS equity securities deemed other-than-temporarily impaired are written down to fair value, with the full difference between fair value and cost recognized in earnings.
For debt securities that are not deemed to be credit impaired, management performs additional analysis to assessassesses whether it intends to sell or whether it is more-likely-than-not that it would not be required to sell the investment before the expected recovery of the amortized cost basis. In most cases, management has asserted that it has no intent to sell and that it believes it is more-likely-than-not that it will not likely to be required to sell the investment before recovery of its amortized cost basis. Where such an assertion has not been made, the security's decline in fair value is deemed to be other than temporaryother-than-temporary and is recorded in earnings.
For debt securities, a critical component of the evaluation for other-than-temporary impairmentsOTTI is the identification of credit impaired securities, where management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. For securities purchased and classified as AFS with the expectation of receiving full principal and interest cash flows as of the date of purchase, this analysis considers the likelihood of receiving all contractual principal and interest. For securities reclassified out of the trading category in the fourth quarter of 2008, the analysis considers the likelihood of receiving the expected principal and interest cash flows anticipated as of the date of reclassification in the fourth quarter of 2008. The extent of the Company's analysis regarding credit quality and the stress on assumptions used in the analysis have been refined for securities where the current fair value or other characteristics of the security warrant. The paragraphs below describe the Company's process for identifying credit impairment in security types with the most significant unrealized losses as of September 30, 2009.2010.
AFS equity securities deemed other-than-temporarily impaired are written down to fair value, with the full difference between fair value and amortized cost recognized in earnings.Table of Contents
Mortgage-Backed SecuritiesMortgage-backed securities
For U.S. mortgage-backed securities (and in particular for Alt-A and other mortgage-backed securities that have significant unrealized losses as a percentage of amortized cost), credit impairment is assessed using a cash flow model that estimates the cash flows on the underlying mortgages, using the security-specific collateral and transaction structure. The model estimates cash flows from the underlying mortgage loans and distributes those cash flows to various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual cash flows on the mortgage-backed securities through the current period and then projects the remaining cash flows using a number of assumptions, including default rates, prepayment rates, and recovery rates (on foreclosed properties).
Management develops specific assumptions using as much market data as possible and includes internal estimates as well as estimates published by rating agencies and other third-party sources. Default rates are projected by considering current underlying mortgage loan performance, generally assuming the default of (1) 10% of current loans, (2) 25% of 30-59 day delinquent loans, (3) 75%70% of 60-90 day delinquent loans and (4) 100% of 91+ day delinquent loans. These estimates are extrapolated along a default timing curve to estimate the total lifetime pool default rate. Other assumptions used contemplate the actual collateral attributes, including geographic concentrations, rating agency loss projections, rating actions and current market prices.
The key base assumptions for mortgage-backed securities as of September 30, 20092010 are in the table below:
| September 30, | |||
---|---|---|---|---|
Prepayment | 3-8 CRR | |||
Loss | 45% | |||
Unemployment rate | ||||
| ||||
The valuation as of September 30, 2010 assumes that U.S. housing prices are unchanged for the remainder of 2010, increase 1.2% in 2011, increase 1.8% in 2012 and increase 3% per year from 2013 onwards.
In addition, cash flow projections are developed using more stressful parameters, and management assesses the results of those stress tests (including the severity of any cash shortfall indicated and the likelihood of the stress scenario'sscenarios actually occurring based on the underlying pool's characteristics and performance) to assess whether management expects to recover the amortized cost basis of the security. If cash flow projections indicate that the Company does not expect to recover its amortized cost basis, the Company recognizes the estimated credit loss in earnings.
State and Municipal Securitiesmunicipal securities
Citigroup's AFS state and municipal bonds consist primarilymainly of bonds that are financed through Tender Option Bond programs. The process for identifying credit impairment for bonds in this program as well as for bonds that were previously financed in this program is largely based on third-party credit ratings. Individual bond positions must meet minimum ratings requirements, which vary based on the sector of the bond issuer. The average portfolio rating, ignoring any insurance, is Aa3/AA-.
Citigroup monitors the bond issuer and insurer ratings on a daily basis. The average portfolio rating, ignoring any insurance, is Aa3/AA-. In the event of a downgrade of the bond below the Aa3/AA-, the subject bond is specifically reviewed for potential shortfall in contractual principal and interest. Citigroup has not recorded any credit impairments on bonds held as part of the Tender Option Bond program or on bonds that were previously held as part of the Tender Option Bond program.
The remainder of Citigroup's AFS state and municipal bonds, outside of the Tender Option Bond Programs,above, are specifically reviewed for credit impairment based on instrument-specific estimates of cash flows, probability of default and loss given default.
Recognition and Measurement of Other-Than-Temporary ImpairmentOTTI
The following table presents the total other-than-temporary impairmentsOTTI recognized in earnings during the three months and nine months ended September 30, 2009:
Other-Than-Temporary Impairments (OTTI) on Investments2010:
| Three months ended Sept. 30, 2009 | Nine months ended Sept. 30, 2009 | |||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
OTTI on Investments | Three months ended Sept 30, 2010 | Nine months ended Sept 30, 2010 | |||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | AFS | HTM | Total | AFS | HTM | Total | AFS | HTM | Total | AFS | HTM | Total | ||||||||||||||||||||||||||
Impairment losses related to securities which the Company does not intend to sell nor will likely be required to sell: | Impairment losses related to securities which the Company does not intend to sell nor will likely be required to sell: | ||||||||||||||||||||||||||||||||||||||
Total OTTI losses recognized during the quarter ended September 30, 2009 | $ | 158 | $ | 2,182 | $ | 2,340 | $ | 263 | $ | 5,730 | $ | 5,993 | |||||||||||||||||||||||||||
Less: portion of OTTI loss recognized in OCI (before taxes) | 25 | 1,716 | 1,741 | 54 | 3,952 | 4,006 | |||||||||||||||||||||||||||||||||
Total OTTI losses recognized during the periods ended September 30, 2010 | $ | 22 | $ | 142 | $ | 164 | $ | 258 | $ | 691 | $ | 949 | |||||||||||||||||||||||||||
Less: portion of OTTI loss recognized in AOCI (before taxes) | 2 | 8 | 10 | 8 | 48 | 56 | |||||||||||||||||||||||||||||||||
Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell | Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell | $ | 133 | $ | 466 | $ | 599 | $ | 209 | $ | 1,778 | $ | 1,987 | $ | 20 | $ | 134 | $ | 154 | $ | 250 | $ | 643 | $ | 893 | ||||||||||||||
OTTI losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery | OTTI losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery | 113 | — | 113 | 168 | — | 168 | 66 | — | 66 | 288 | — | 288 | ||||||||||||||||||||||||||
Total impairment losses recognized in earnings | Total impairment losses recognized in earnings | $ | 246 | $ | 466 | $ | 712 | $ | 377 | $ | 1,778 | $ | 2,155 | $ | 86 | $ | 134 | $ | 220 | $ | 538 | $ | 643 | $ | 1,181 | ||||||||||||||
The following is a three-month roll forward3-month roll-forward of the credit-related position recognized in earnings for AFS and HTM debt securities held as of September 30, 2009:2010:
| | Cumulative Other-Than-Temporary Impairment Credit Losses Recognized in Earnings | | Cumulative OTTI Credit Losses Recognized in Earnings | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | In millions of dollars | June 30, 2009 Balance | Credit impairments recognized in earnings on securities not previously impaired | Credit impairments recognized in earnings on securities than have been previously impaired | Reductions due to sales of credit impaired securities sold or matured | Sept. 30, 2009 Balance | In millions of dollars | June 30, 2010 balance | Credit impairments recognized in earnings on securities not previously impaired | Credit impairments recognized in earnings on securities that have been previously impaired | Reductions due to sales of credit impaired securities sold or matured | September 30, 2010 balance | ||||||||||||||||||||||
AFS debt securities | AFS debt securities | AFS debt securities | ||||||||||||||||||||||||||||||||
Mortgage-backed securities | Mortgage-backed securities | Mortgage-backed securities | ||||||||||||||||||||||||||||||||
Prime | $ | 7 | $ | 92 | $ | — | $ | — | $ | 99 | Prime | $ | 280 | $ | — | $ | 12 | $ | — | $ | 292 | |||||||||||||
Commercial real estate | 2 | — | — | — | 2 | Alt-A | 2 | — | — | — | 2 | |||||||||||||||||||||||
Commercial real estate | 2 | — | — | — | 2 | |||||||||||||||||||||||||||||
Total mortgage-backed securities | 9 | 92 | — | — | 101 | |||||||||||||||||||||||||||||
Total mortgage-backed securities | $ | 284 | $ | — | $ | 12 | $ | — | $ | 296 | ||||||||||||||||||||||||
State and municipal | State and municipal | 3 | — | — | — | 3 | ||||||||||||||||||||||||||||
U.S. Treasury | U.S. Treasury | 36 | 2 | — | — | 38 | ||||||||||||||||||||||||||||
Foreign government | Foreign government | 14 | — | — | (1 | ) | 13 | Foreign government | 159 | — | — | — | 159 | |||||||||||||||||||||
Corporate | Corporate | 97 | 24 | 10 | — | 131 | Corporate | 147 | 6 | — | — | 153 | ||||||||||||||||||||||
Asset backed securities | 3 | — | 5 | — | 8 | |||||||||||||||||||||||||||||
Asset-backed securities | Asset-backed securities | 9 | — | — | — | 9 | ||||||||||||||||||||||||||||
Other debt securities | Other debt securities | 6 | 2 | — | — | 8 | Other debt securities | 52 | — | — | — | 52 | ||||||||||||||||||||||
Total OTTI credit losses recognized for AFS debt securities | Total OTTI credit losses recognized for AFS debt securities | $ | 129 | $ | 118 | $ | 15 | $ | (1 | ) | $ | 261 | Total OTTI credit losses recognized for AFS debt securities | $ | 690 | $ | 8 | $ | 12 | $ | — | $ | 710 | |||||||||||
HTM debt securities | HTM debt securities | HTM debt securities | ||||||||||||||||||||||||||||||||
Mortgage-backed securities | Mortgage-backed securities | Mortgage-backed securities | ||||||||||||||||||||||||||||||||
Prime | $ | 14 | $ | 93 | $ | 1 | $ | — | $ | 108 | Prime | $ | 297 | $ | 1 | $ | 1 | $ | — | $ | 299 | |||||||||||||
Alt-A | 1,901 | 297 | — | — | 2,198 | Alt-A | 2,886 | 49 | 64 | — | 2,999 | |||||||||||||||||||||||
Subprime | 105 | 66 | — | — | 171 | Subprime | 213 | — | 19 | — | 232 | |||||||||||||||||||||||
Non-U.S. residential | 96 | — | — | — | 96 | Non-U.S. residential | 96 | — | — | — | 96 | |||||||||||||||||||||||
Commercial real estate | 4 | — | — | — | 4 | Commercial real estate | 10 | — | — | — | 10 | |||||||||||||||||||||||
Total mortgage-backed securities | 2,120 | 456 | 1 | — | 2,577 | Total mortgage-backed securities | $ | 3,502 | $ | 50 | $ | 84 | $ | — | $ | 3,636 | ||||||||||||||||||
State and municipal | State and municipal | 7 | — | — | — | 7 | ||||||||||||||||||||||||||||
Corporate | Corporate | 320 | 8 | — | (3 | ) | 325 | Corporate | 351 | — | — | — | 351 | |||||||||||||||||||||
Asset backed securities | 32 | — | — | — | 32 | |||||||||||||||||||||||||||||
Asset-backed securities | Asset-backed securities | 108 | — | — | — | 108 | ||||||||||||||||||||||||||||
Other debt securities | Other debt securities | 3 | — | 1 | — | 4 | Other debt securities | 5 | — | — | — | 5 | ||||||||||||||||||||||
Total OTTI credit losses recognized for HTM debt securities | Total OTTI credit losses recognized for HTM debt securities | $ | 2,475 | $ | 464 | $ | 2 | $ | (3 | ) | $ | 2,938 | Total OTTI credit losses recognized for HTM debt securities | $ | 3,973 | $ | 50 | $ | 84 | $ | — | $ | 4,107 | |||||||||||
The following is a nine-month roll forward9-month roll-forward of the credit-related position recognized in earnings for AFS and HTM debt securities held as of September 30, 2009:2010:
| | Cumulative Other-Than-Temporary Impairment Credit Losses Recognized in Earnings | | Cumulative OTTI Credit Losses Recognized in Earnings | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | In millions of dollars | January 1, 2009 Balance | Credit impairments recognized in earnings on securities not previously impaired | Credit impairments recognized in earnings on securities than have been previously impaired | Reductions due to sales of credit impaired securities sold or matured | Sept. 30, 2009 Balance | In millions of dollars | December 31, 2009 balance | Credit impairments recognized in earnings on securities not previously impaired | Credit impairments recognized in earnings on securities that have been previously impaired | Reductions due to sales of credit impaired securities sold or matured | September 30, 2010 balance | ||||||||||||||||||||||
AFS debt securities | AFS debt securities | AFS debt securities | ||||||||||||||||||||||||||||||||
Mortgage-backed securities | Mortgage-backed securities | Mortgage-backed securities | ||||||||||||||||||||||||||||||||
Prime | $ | — | $ | 99 | $ | — | $ | — | $ | 99 | Prime | $ | 242 | $ | 12 | $ | 38 | $ | — | $ | 292 | |||||||||||||
Commercial real estate | 1 | 1 | — | — | 2 | Alt-A | 1 | 1 | — | — | 2 | |||||||||||||||||||||||
Commercial real estate | 2 | — | — | — | 2 | |||||||||||||||||||||||||||||
Total mortgage-backed securities | 1 | 100 | — | — | 101 | |||||||||||||||||||||||||||||
Total mortgage-backed securities | $ | 245 | $ | 13 | $ | 38 | $ | — | $ | 296 | ||||||||||||||||||||||||
State and municipal | State and municipal | — | 3 | — | — | 3 | ||||||||||||||||||||||||||||
U.S. Treasury | U.S. Treasury | — | 38 | — | — | 38 | ||||||||||||||||||||||||||||
Foreign government | Foreign government | — | 14 | — | (1 | ) | 13 | Foreign government | 20 | 139 | — | — | 159 | |||||||||||||||||||||
Corporate | Corporate | 53 | 54 | 25 | (1 | ) | 131 | Corporate | 137 | 11 | 5 | — | 153 | |||||||||||||||||||||
Asset backed securities | — | 3 | 5 | — | 8 | |||||||||||||||||||||||||||||
Asset-backed securities | Asset-backed securities | 9 | — | — | — | 9 | ||||||||||||||||||||||||||||
Other debt securities | Other debt securities | — | 8 | — | — | 6 | Other debt securities | 49 | 3 | — | — | 52 | ||||||||||||||||||||||
Total OTTI credit losses recognized for AFS debt securities | Total OTTI credit losses recognized for AFS debt securities | $ | 54 | $ | 179 | $ | 30 | $ | (2 | ) | $ | 261 | Total OTTI credit losses recognized for AFS debt securities | $ | 460 | $ | 207 | $ | 43 | $ | — | $ | 710 | |||||||||||
HTM debt securities | HTM debt securities | HTM debt securities | ||||||||||||||||||||||||||||||||
Mortgage-backed securities | Mortgage-backed securities | Mortgage-backed securities | ||||||||||||||||||||||||||||||||
Prime | $ | 8 | $ | 99 | $ | 1 | $ | — | $ | 108 | Prime | $ | 170 | $ | 127 | $ | 2 | $ | — | $ | 299 | |||||||||||||
Alt-A | 1,091 | 1,088 | 19 | — | 2,198 | Alt-A | 2,569 | 358 | 72 | — | 2,999 | |||||||||||||||||||||||
Subprime | 85 | 86 | — | — | 171 | Subprime | 210 | 1 | 21 | — | 232 | |||||||||||||||||||||||
Non- U.S. residential | 28 | 68 | — | — | 96 | Non-U.S. residential | 96 | — | — | — | 96 | |||||||||||||||||||||||
Commercial real estate | 4 | — | — | — | 4 | Commercial real estate | 9 | 1 | — | — | 10 | |||||||||||||||||||||||
Total mortgage-backed securities | 1,216 | 1,341 | 20 | — | 2,577 | Total mortgage-backed securities | $ | 3,054 | $ | 487 | $ | 95 | $ | — | $ | 3,636 | ||||||||||||||||||
State and municipal | State and municipal | 7 | — | — | — | 7 | ||||||||||||||||||||||||||||
Corporate | Corporate | — | 398 | — | (73 | ) | 325 | Corporate | 351 | — | — | — | 351 | |||||||||||||||||||||
Asset backed securities | 17 | 15 | — | — | 32 | |||||||||||||||||||||||||||||
Asset-backed securities | Asset-backed securities | 48 | 41 | 19 | — | 108 | ||||||||||||||||||||||||||||
Other debt securities | Other debt securities | — | 3 | 1 | — | 4 | Other debt securities | 4 | — | 1 | — | 5 | ||||||||||||||||||||||
Total OTTI credit losses recognized for HTM debt securities | Total OTTI credit losses recognized for HTM debt securities | $ | 1,233 | $ | 1,757 | $ | 21 | $ | (73 | ) | $ | 2,938 | Total OTTI credit losses recognized for HTM debt securities | $ | 3,464 | $ | 528 | $ | 115 | $ | — | $ | 4,107 | |||||||||||
Investments in Alternative Investment Funds that Calculate Net Asset Value per Share
The Company holds investments in certain alternative investment funds that calculate net asset value (NAV) per share, including hedge funds, private equity funds, fund of funds and real estate funds. The Company's investments include co-investments in funds that are managed by the Company and investments in funds that are managed by third parties. Investments in funds are generally classified as non-marketable equity securities carried at fair value.
The fair values of these investments are estimated using the NAV per share of the Company's ownership interest in the funds, where it is not probable that the Company will sell an investment at a price other than NAV.
In millions of dollars at September 30, 2010 | Fair value | Unfunded commitments | Redemption frequency (if currently eligible) | Redemption notice period | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Hedge funds | $ | 972 | $ | 14 | Monthly, quarterly, annually | 10-95 days | |||||||
Private equity funds(1)(2) | 3,205 | 1,652 | — | — | |||||||||
Real estate funds(3) | 388 | 171 | — | — | |||||||||
Total | $ | 4,565 | (4) | $ | 1,837 | ||||||||
11. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in goodwillGoodwill during the first nine months ended September 30, 2009of 2010 were as follows:
In millions of dollars | Goodwill | |||
---|---|---|---|---|
Balance at December 31, 2008 | $ | 27,132 | ||
Foreign exchange translation | (844 | ) | ||
Purchase accounting adjustments and other | 122 | |||
Balance at March 31, 2009 | $ | 26,410 | ||
Morgan Stanley Smith Barney joint venture | (1,146 | ) | ||
Estimated impact from the Sale of Nikko Cordial Securities, reclassified asAssets of discontinued operations held for sale | (533 | ) | ||
Foreign exchange translation | 847 | |||
Balance at June 30, 2009 | $ | 25,578 | ||
Estimated impact from the Sale of Nikko Asset Management, reclassified asOther Assets of businesses held for sale | (446 | ) | ||
Foreign exchange translation | 409 | |||
Purchase accounting adjustments and other | (118 | ) | ||
Balance at September 30, 2009 | $ | 25,423 | ||
In millions of dollars | ||||
---|---|---|---|---|
Balance at December 31, 2009 | $ | 25,392 | ||
Foreign exchange translation | 294 | |||
Smaller acquisitions/divestitures, purchase accounting adjustments and other | (24 | ) | ||
Balance at March 31, 2010 | $ | 25,662 | ||
Foreign exchange translation | (442 | ) | ||
Smaller acquisitions/divestitures, purchase accounting adjustments and other | (19 | ) | ||
Balance at June 30, 2010 | $ | 25,201 | ||
Foreign exchange translation | 651 | |||
Smaller acquisitions/divestitures, purchase accounting adjustments and other | (55 | ) | ||
Balance at September 30, 2010 | $ | 25,797 | ||
During the first nine months of 2009,2010, no goodwill was written off due to impairment. The Company performed its annual goodwill impairment test during the third quarter of 20092010 and while no impairment was noted in step one for any of the reporting units, goodwill forpresent in the Latin America Regional Consumer Banking and Local Consumer Lending—Cards reporting unitsunit may be particularly sensitive to further deterioration in economic conditions. Additionally, the fair value of theAsia Regional Consumer Banking andTransaction Services reporting units substantially exceeded their respective carrying values.
Citigroup engaged the services of an independent valuation specialist to assist in the valuation of a number of its reporting units, includingLocal Consumer Lending—Cards. The fair value as a percentage of allocated book value for Latin America Regional Consumer Banking and theLocal Consumer Lending—Cards reporting unit is 111%121%. If economic conditions deteriorate or other events adversely impact the business models and 112%, respectively. If the future wererelated assumptions, including the discount rate, expected recovery, and expected loss rates used to differ adversely from management's best estimate of key economic assumptions and associated cash flows were to decrease by a small margin,value this reporting unit, the Company could potentially experience future material impairment charges with respect to the $1,317 million and $4,751$4,577 million of goodwill remaining in our Latin America Regional Consumer Banking and theLocal Consumer Lending—Cards reporting units, respectively.unit. Any such charges, by themselves, would not negatively affect the Company's Tier 1, Tier 1 Common and Total Capital regulatory ratios, its Tangible Common Equity or the Company'scompany's liquidity position. The Company will continue to monitor this reporting unit.
The following tables present the Company's goodwill balances by reporting unit and by segment at September 30, 2009:2010:
In millions of dollars | In millions of dollars | September 30, 2009 | In millions of dollars | ||||||
---|---|---|---|---|---|---|---|---|---|
By Reporting Unit | |||||||||
Reporting unit(1) | Goodwill | ||||||||
North America Regional Consumer Banking | North America Regional Consumer Banking | $ | 2,461 | $ | 2,502 | ||||
EMEA Regional Consumer Banking | EMEA Regional Consumer Banking | 342 | 319 | ||||||
Asia Regional Consumer Banking | Asia Regional Consumer Banking | 5,375 | 5,779 | ||||||
Latin America Regional Consumer Banking | Latin America Regional Consumer Banking | 1,317 | 1,747 | ||||||
Securities and Banking | Securities and Banking | 8,767 | 9,241 | ||||||
Transaction Services | Transaction Services | 1,579 | 1,567 | ||||||
Brokerage and Asset Management | Brokerage and Asset Management | 831 | 65 | ||||||
Local Consumer Lending—Cards | 4,751 | ||||||||
Local Consumer Lending—Other | — | ||||||||
Local Consumer Lending—Cards | 4,577 | ||||||||
Total | $ | 25,423 | |||||||
Total | $ | 25,797 | |||||||
By Segment | By Segment | ||||||||
Regional Consumer Banking | Regional Consumer Banking | $ | 9,495 | $ | 10,347 | ||||
Institutional Clients Group | Institutional Clients Group | 10,346 | 10,808 | ||||||
Citi Holdings | Citi Holdings | 5,582 | 4,642 | ||||||
Total | $ | 25,797 | |||||||
Total | $ | 25,423 | |||||||
Intangible Assets
The components of intangible assets were as follows:
| September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | ||||||||||||||||||||||||||
Purchased credit card relationships | $ | 8,138 | $ | 4,684 | $ | 3,454 | $ | 8,443 | $ | 4,513 | $ | 3,930 | $ | 7,784 | $ | 4,923 | $ | 2,861 | $ | 8,148 | $ | 4,838 | $ | 3,310 | ||||||||||||||
Core deposit intangibles | 1,351 | 744 | 607 | 1,345 | 662 | 683 | 1,424 | 920 | 504 | 1,373 | 791 | 582 | ||||||||||||||||||||||||||
Other customer relationships | 696 | 170 | 526 | 4,031 | 168 | 3,863 | 699 | 190 | 509 | 675 | 176 | 499 | ||||||||||||||||||||||||||
Present value of future profits | 416 | 275 | 141 | 415 | 264 | 151 | 240 | 111 | 129 | 418 | 280 | 138 | ||||||||||||||||||||||||||
Indefinite-lived intangible assets | 540 | — | 540 | 569 | — | 569 | ||||||||||||||||||||||||||||||||
Other(1) | 4,965 | 1,292 | 3,673 | 5,343 | 1,285 | 4,058 | 4,749 | 1,587 | 3,162 | 4,977 | 1,361 | 3,616 | ||||||||||||||||||||||||||
Total amortizing intangible assets | $ | 15,566 | $ | 7,165 | $ | 8,401 | $ | 19,577 | $ | 6,892 | $ | 12,685 | ||||||||||||||||||||||||||
Indefinite-lived intangible assets | 556 | N/A | 556 | 1,474 | N/A | 1,474 | ||||||||||||||||||||||||||||||||
Mortgage servicing rights | 6,228 | N/A | 6,228 | 5,657 | N/A | 5,657 | ||||||||||||||||||||||||||||||||
Intangible assets (excluding MSRs) | $ | 15,436 | $ | 7,731 | $ | 7,705 | $ | 16,160 | $ | 7,446 | $ | 8,714 | ||||||||||||||||||||||||||
MSRs | 3,976 | — | 3,976 | 6,530 | — | 6,530 | ||||||||||||||||||||||||||||||||
Total intangible assets | $ | 22,350 | $ | 7,165 | $ | 15,185 | $ | 26,708 | $ | 6,892 | $ | 19,816 | $ | 19,412 | $ | 7,731 | $ | 11,681 | $ | 22,690 | $ | 7,446 | $ | 15,244 | ||||||||||||||
N/A Not Applicable.
The changes in intangible assets during the first nine months ended September 30, 2009of 2010 were as follows:
In millions of dollars | Net carrying amount at December 31, 2008 | Acquisitions / Divestitures | Amortization | Impairments | FX and other(1) | Net carrying amount at September 30, 2009 | Net carrying amount at December 31, 2009 | Acquisitions/ divestitures | Amortization | Impairments | FX and other(1) | Net carrying amount at September 30, 2010 | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Purchased credit card relationships | $ | 3,930 | $ | (72 | ) | $ | (444 | ) | $ | — | $ | 40 | $ | 3,454 | $ | 3,310 | $ | (53 | ) | $ | (368 | ) | $ | (39 | ) | $ | 11 | $ | 2,861 | |||||||||
Core deposit intangibles | 683 | — | (86 | ) | (3 | ) | 13 | 607 | 582 | — | (81 | ) | — | 3 | 504 | |||||||||||||||||||||||
Other customer relationships | 3,863 | (3,253 | ) | (145 | ) | — | 61 | 526 | 499 | — | (42 | ) | — | 52 | 509 | |||||||||||||||||||||||
Present value of future profits | 151 | — | (10 | ) | — | — | 141 | 138 | — | (10 | ) | — | 1 | 129 | ||||||||||||||||||||||||
Indefinite-lived intangible assets | 1,474 | (967 | ) | — | — | 49 | 556 | 569 | (46 | ) | — | — | 17 | 540 | ||||||||||||||||||||||||
Other | 4,058 | (133 | ) | (222 | ) | (53 | ) | 23 | 3,673 | 3,616 | — | (236 | ) | (32 | ) | (186 | ) | 3,162 | ||||||||||||||||||||
$ | 14,159 | $ | (4,425 | ) | $ | (907 | ) | $ | (56 | ) | $ | 186 | $ | 8,957 | ||||||||||||||||||||||||
Mortgage servicing rights(3) | 5,657 | 6,228 | ||||||||||||||||||||||||||||||||||||
Intangible assets (excluding MSRs) | $ | 8,714 | $ | (99 | ) | $ | (737 | ) | $ | (71 | ) | $ | (102 | ) | $ | 7,705 | ||||||||||||||||||||||
MSRs(2) | 6,530 | 3,976 | ||||||||||||||||||||||||||||||||||||
Total intangible assets | $ | 19,816 | $ | 15,185 | $ | 15,244 | $ | 11,681 | ||||||||||||||||||||||||||||||
Short-Term Borrowings
Short-term borrowings consist of commercial paper and other borrowings as follows:
In millions of dollars | September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Commercial paper | ||||||||||||||
Citigroup Funding Inc. | $ | 9,983 | $ | 28,654 | ||||||||||
Other Citigroup subsidiaries | 433 | 471 | ||||||||||||
Bank | $ | 26,604 | $ | — | ||||||||||
Other non-bank | 9,564 | 10,223 | ||||||||||||
$ | 10,416 | $ | 29,125 | $ | 36,168 | $ | 10,223 | |||||||
Other short-term borrowings | 54,315 | 97,566 | 50,845 | 58,656 | ||||||||||
Total short-term borrowings | $ | 64,731 | $ | 126,691 | $ | 87,013 | $ | 68,879 | ||||||
Borrowings under bank lines of credit may be at interest rates based on LIBOR, CD rates, the prime rate or bids submitted by the banks. Citigroup pays commitment fees for its lines of credit.
Some of Citigroup's non-bank subsidiaries have credit facilities with Citigroup's subsidiary depository institutions, including Citibank, N.A. Borrowings under these facilities must be secured in accordance with Section 23A of the Federal Reserve Act.
Citigroup Global Markets Holdings Inc. (CGMHI) has committed financing with unaffiliated banks. At September 30, 2009, CGMHI had drawn down the full $1.175 billion available under these facilities, of which $725 million is guaranteed by Citigroup. CGMHI has a bilateral facility totaling $400 million with an unaffiliated bank maturing prior to year end. It also has substantial borrowing agreements consisting of facilities that CGMHI has been advised are available, but where no contractual lending obligation exists. These arrangements are reviewed on an ongoing basis to ensure flexibility in meeting CGMHI's short-term requirements.
Long-Term Debt
In millions of dollars | September 30, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Citigroup parent company | $ | 214,981 | $ | 192,290 | |||
Other Citigroup subsidiaries(1) | 97,965 | 109,306 | |||||
Citigroup Global Markets Holdings Inc. (CGMHI) | 15,403 | 20,623 | |||||
Citigroup Funding Inc. (CFI)(2) | 51,208 | 37,374 | |||||
Total long term debt | $ | 379,557 | $ | 359,593 | |||
In millions of dollars | September 30, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Citigroup parent company | $ | 197,948 | $ | 197,804 | |||
Bank(1) | 116,062 | 78,857 | |||||
Other non-bank | 73,320 | 87,358 | |||||
Total long-term debt(2)(3)(4) | $ | 387,330 | $ | 364,019 | |||
CGMHI has a syndicated five-year committed uncollateralized revolving line of credit facility with unaffiliated banks totaling $3.0 billion, which was undrawn at September 30, 2009 and matures in 2011. CGMHI also has committed long-term financing facilities with unaffiliated banks. At September 30, 2009,2010, CGMHI had drawn down the full $900 million available under these facilities, of which $150 million is guaranteed by Citigroup. Generally, a bank can terminate these facilities by giving CGMHI one-year prior notice.
The Company issues both fixed and variable rate debt in a range of currencies. It uses derivative contracts, primarily interest rate swaps, to effectively convert a portion of its fixed rate debt to variable rate debt and variable rate debt to fixed rate debt. The maturity structure of the derivatives generally corresponds to the maturity structure of the debt being hedged. In addition, the Company uses other derivative contracts to manage the impact of FX translation on certain debt issuances.
Citigroup and other U.S. financial services firms are currently benefiting from government programs that are improving markets and providing Citigroup and other institutions with significant current funding capacity and significant liquidity support, including the Temporary Liquidity Guarantee Program (TLGP). See "TARP and Other Regulatory Programs" above.
Long-term debt at September 30, 20092010 and December 31, 20082009 includes $34.5$20.4 billion and $24.1$19.3 billion, respectively, of junior subordinated debt. The Company formed statutory business trusts under the laws of the state of Delaware. The trusts exist for the exclusive purposes of (1) issuing trust securities representing undivided beneficial interests in the assets of the trust; (2) investing the gross proceeds of the trust securities in junior subordinated deferrable interest debentures (subordinated debentures) of its parent; and (3) engaging in only those activities necessary or incidental thereto. Upon approval from the Federal Reserve Board, Citigroup has the right to redeem these securities.
Citigroup has contractually agreed not to redeem or purchase (i) the 6.50% Enhanced Trust Preferred Securities of Citigroup Capital XV before September 15, 2056, (ii) the 6.45% Enhanced Trust Preferred Securities of Citigroup
Capital XVI before December 31, 2046, (iii) the 6.35% Enhanced Trust Preferred Securities of Citigroup Capital XVII before March 15, 2057, (iv) the 6.829% Fixed Rate/Floating Rate Enhanced Trust Preferred Securities of Citigroup Capital XVIII before June 28, 2047, (v) the 7.250% Enhanced Trust Preferred Securities of Citigroup Capital XIX before August 15, 2047, (vi) the 7.875% Enhanced Trust Preferred Securities of Citigroup Capital XX before December 15, 2067, and (vii) the 8.300% Fixed Rate/Floating Rate Enhanced Trust Preferred Securities of Citigroup Capital XXI before December 21, 2067, unless certain conditions, described in Exhibit 4.03 to Citigroup's Current Report on Form 8-K filed on September 18, 2006, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on November 28, 2006, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on March 8, 2007, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on July 2, 2007, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on August 17, 2007, in Exhibit 4.2 to Citigroup's Current Report on Form 8-K filed on November 27, 2007, and in Exhibit 4.2 to Citigroup's Current Report on Form 8-K filed on December 21, 2007, respectively, are met. These agreements are for the benefit of the holders of Citigroup's 6.00% Junior Subordinated Deferrable Interest Debentures due 2034. In addition, see Note 23 to the Consolidated Financial Statements, "Exchange Offers," below.
Citigroup owns all of the voting securities of these subsidiary trusts. These subsidiary trusts have no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the subsidiary trusts and the subsidiary trusts' common securities. These subsidiary trusts' obligations are fully and unconditionally guaranteed by Citigroup.
The following table summarizes the financial structure of each of the Company's subsidiary trusts at September 30, 2009:2010:
| | | | | | Junior subordinated debentures owned by trust | | | | | | Junior subordinated debentures owned by trust | ||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trust securities with distributions guaranteed by Citigroup In millions of dollars, except share amounts | Issuance date | Securities issued | Liquidation value | Coupon rate | Common shares issued to parent | Amount(1) | Maturity | Redeemable by issuer beginning | Issuance date | Securities issued | Liquidation value | Coupon rate | Common shares issued to parent | Amount(1) | Maturity | Redeemable by issuer beginning | ||||||||||||||||||||||||||||||||||
Citigroup Capital III | Dec. 1996 | 194,053 | $ | 194 | 7.625 | % | 6,003 | $ | 200 | Dec. 1, 2036 | Not redeemable | Dec. 1996 | 194,053 | $ | 194 | 7.625 | % | 6,003 | $ | 200 | Dec. 1, 2036 | Not redeemable | ||||||||||||||||||||||||||||
Citigroup Capital VII | July 2001 | 35,885,898 | 897 | 7.125 | % | 1,109,874 | 925 | July 31, 2031 | July 31, 2006 | July 2001 | 35,885,898 | 897 | 7.125 | % | 1,109,874 | 925 | July 31, 2031 | July 31, 2006 | ||||||||||||||||||||||||||||||||
Citigroup Capital VIII | Sept. 2001 | 43,651,597 | 1,091 | 6.950 | % | 1,350,050 | 1,125 | Sept. 15, 2031 | Sept. 17, 2006 | Sept. 2001 | 43,651,597 | 1,091 | 6.950 | % | 1,350,050 | 1,125 | Sept. 15, 2031 | Sept. 17, 2006 | ||||||||||||||||||||||||||||||||
Citigroup Capital IX | Feb. 2003 | 33,874,813 | 847 | 6.000 | % | 1,047,675 | 873 | Feb. 14, 2033 | Feb. 13, 2008 | Feb. 2003 | 33,874,813 | 847 | 6.000 | % | 1,047,675 | 873 | Feb. 14, 2033 | Feb. 13, 2008 | ||||||||||||||||||||||||||||||||
Citigroup Capital X | Sept. 2003 | 14,757,823 | 369 | 6.100 | % | 456,428 | 380 | Sept. 30, 2033 | Sept. 30, 2008 | Sept. 2003 | 14,757,823 | 369 | 6.100 | % | 456,428 | 380 | Sept. 30, 2033 | Sept. 30, 2008 | ||||||||||||||||||||||||||||||||
Citigroup Capital XI | Sept. 2004 | 18,387,128 | 460 | 6.000 | % | 568,675 | 474 | Sept. 27, 2034 | Sept. 27, 2009 | Sept. 2004 | 18,387,128 | 460 | 6.000 | % | 568,675 | 474 | Sept. 27, 2034 | Sept. 27, 2009 | ||||||||||||||||||||||||||||||||
Citigroup Capital XII | Mar. 2010 | 92,000,000 | 2,300 | 8.500 | % | 25 | 2,300 | Mar. 30, 2040 | Mar. 30, 2015 | |||||||||||||||||||||||||||||||||||||||||
Citigroup Capital XIII | Sept. 2010 | 89,840,000 | 2,246 | 7.875 | % | 25 | 2,246 | Oct. 30, 2040 | Oct. 30, 2015 | |||||||||||||||||||||||||||||||||||||||||
Citigroup Capital XIV | June 2006 | 12,227,281 | 306 | 6.875 | % | 40,000 | 307 | June 30, 2066 | June 30, 2011 | June 2006 | 12,227,281 | 306 | 6.875 | % | 40,000 | 307 | June 30, 2066 | June 30, 2011 | ||||||||||||||||||||||||||||||||
Citigroup Capital XV | Sept. 2006 | 25,210,733 | 630 | 6.500 | % | 40,000 | 631 | Sept. 15, 2066 | Sept. 15, 2011 | Sept. 2006 | 25,210,733 | 630 | 6.500 | % | 40,000 | 631 | Sept. 15, 2066 | Sept. 15, 2011 | ||||||||||||||||||||||||||||||||
Citigroup Capital XVI | Nov. 2006 | 38,148,947 | 954 | 6.450 | % | 20,000 | 954 | Dec. 31, 2066 | Dec. 31, 2011 | Nov. 2006 | 38,148,947 | 954 | 6.450 | % | 20,000 | 954 | Dec. 31, 2066 | Dec. 31, 2011 | ||||||||||||||||||||||||||||||||
Citigroup Capital XVII | Mar. 2007 | 28,047,927 | 701 | 6.350 | % | 20,000 | 702 | Mar. 15, 2067 | Mar. 15, 2012 | Mar. 2007 | 28,047,927 | 701 | 6.350 | % | 20,000 | 702 | Mar. 15, 2067 | Mar. 15, 2012 | ||||||||||||||||||||||||||||||||
Citigroup Capital XVIII | June 2007 | 99,901 | 160 | 6.829 | % | 50 | 160 | June 28, 2067 | June 28, 2017 | June 2007 | 99,901 | 157 | 6.829 | % | 50 | 158 | June 28, 2067 | June 28, 2017 | ||||||||||||||||||||||||||||||||
Citigroup Capital XIX | Aug. 2007 | 22,771,968 | 569 | 7.250 | % | 20,000 | 570 | Aug. 15, 2067 | Aug. 15, 2012 | Aug. 2007 | 22,771,968 | 569 | 7.250 | % | 20,000 | 570 | Aug. 15, 2067 | Aug. 15, 2012 | ||||||||||||||||||||||||||||||||
Citigroup Capital XX | Nov. 2007 | 17,709,814 | 443 | 7.875 | % | 20,000 | 443 | Dec. 15, 2067 | Dec. 15, 2012 | Nov. 2007 | 17,709,814 | 443 | 7.875 | % | 20,000 | 443 | Dec. 15, 2067 | Dec. 15, 2012 | ||||||||||||||||||||||||||||||||
Citigroup Capital XXI | Dec. 2007 | 2,345,801 | 2,346 | 8.300 | % | 500 | 2,346 | Dec. 21, 2077 | Dec. 21, 2037 | Dec. 2007 | 2,345,801 | 2,346 | 8.300 | % | 500 | 2,346 | Dec. 21, 2077 | Dec. 21, 2037 | ||||||||||||||||||||||||||||||||
Citigroup Capital XXIX | Nov. 2007 | 1,875,000 | 1,875 | 6.320 | % | 10 | 1,875 | Mar. 15, 2041 | Mar. 15, 2013 | |||||||||||||||||||||||||||||||||||||||||
Citigroup Capital XXX | Nov. 2007 | 1,875,000 | 1,875 | 6.455 | % | 10 | 1,875 | Sept. 15, 2041 | Sept. 15, 2013 | |||||||||||||||||||||||||||||||||||||||||
Citigroup Capital XXXI | Nov. 2007 | 1,875,000 | 1,875 | 6.700 | % | 10 | 1,875 | Mar. 15, 2042 | Mar. 15, 2014 | Nov. 2007 | 1,875,000 | 1,875 | 6.700 | % | 10 | 1,875 | Mar. 15, 2042 | Mar. 15, 2014 | ||||||||||||||||||||||||||||||||
Citigroup Capital XXXII | Nov. 2007 | 1,875,000 | 1,875 | 6.935 | % | 10 | 1,875 | Sept. 15, 2042 | Sept. 15, 2014 | Nov. 2007 | 1,875,000 | 1,875 | 6.935 | % | 10 | 1,875 | Sept. 15, 2042 | Sept. 15, 2014 | ||||||||||||||||||||||||||||||||
Citigroup Capital XXXIII | July 2009 | 27,059,000 | 27,059 | 8.000 | % | 100 | 27,059 | July 30, 2039 | July 30, 2014 | July 2009 | 3,025,000 | 3,025 | 8.000 | % | 100 | 3,025 | July 30, 2039 | July 30, 2014 | ||||||||||||||||||||||||||||||||
Adam Capital Trust III | Dec. 2002 | 17,500 | 18 | 3 mo. LIB +335 bp. | 542 | 18 | Jan. 7, 2033 | Jan. 7, 2008 | Dec. 2002 | 17,500 | 18 | 3 mo. LIB +335 bp. | 542 | 18 | Jan. 7, 2033 | Jan. 7, 2008 | ||||||||||||||||||||||||||||||||||
Adam Statutory Trust III | Dec. 2002 | 25,000 | 25 | 3 mo. LIB +325 bp. | 774 | 26 | Dec. 26, 2032 | Dec. 26, 2007 | Dec. 2002 | 25,000 | 25 | 3 mo. LIB +325 bp. | 774 | 26 | Dec. 26, 2032 | Dec. 26, 2007 | ||||||||||||||||||||||||||||||||||
Adam Statutory Trust IV | Sept. 2003 | 40,000 | 40 | 3 mo. LIB +295 bp. | 1,238 | 41 | Sept. 17, 2033 | Sept. 17, 2008 | Sept. 2003 | 40,000 | 40 | 3 mo. LIB +295 bp. | 1,238 | 41 | Sept. 17, 2033 | Sept. 17, 2008 | ||||||||||||||||||||||||||||||||||
Adam Statutory Trust V | Mar. 2004 | 35,000 | 35 | 3 mo. LIB +279 bp. | 1,083 | 36 | Mar. 17, 2034 | Mar. 17, 2009 | Mar. 2004 | 35,000 | 35 | 3 mo. LIB +279 bp. | 1,083 | 36 | Mar. 17, 2034 | Mar. 17, 2009 | ||||||||||||||||||||||||||||||||||
Total obligated | $ | 44,644 | $ | 44,770 | $ | 21,403 | $ | 21,530 | ||||||||||||||||||||||||||||||||||||||||||
In each case, the coupon rate on the debentures is the same as that on the trust securities. Distributions on the trust securities and interest on the debentures are payable quarterly, except for Citigroup Capital III, Citigroup Capital XVIII and Citigroup Capital XXI, on which distributions are payable semiannually.
During the thirdsecond quarter of 2009, pursuant to the "Exchange Offers",2010 Citigroup converted $5.8 billion liquidation value of trust preferred securities acrossexchanged Citigroup Capital III,Trust XXX for $1.875 billion of senior notes with a coupon of 6% payable semi-annually. The senior notes mature on December 13, 2013.
On September 29, 2010, Citigroup modified the Citigroup Capital VII, Citigroup Capital VIII, Citigroup Capital IX, Citigroup Capital X, Citigroup Capital XI, Citigroup Capital XIV, Citigroup Capital XV, Citigroup Capital XVI, Citigroup Capital XVII, Citigroup Capital XVIII, Citigroup Capital XIX, Citigroup Capital XX and Citigroup Capital XXI to common stock and issued $27.1 billion of Citigroup CapitalTrust XXXIII trust preferred securities to the USG in exchange for the Series G and I of preferred stock.
The following table summarizes the Company's preferred stock outstanding at September 30, 2009, June 30, 2009, and December 31, 2008:
| | | | Carrying value (in millions of dollars) | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Redemption price per depositary share / preference share | | ||||||||||||||||
| Dividend rate | Number of depositary shares | September 30, 2009 | June 30, 2009 | December 31, 2008 | ||||||||||||||
Series A1(1) | 7.000 | % | $ | 50 | 137,600,000 | $ | — | $ | 6,880 | $ | 6,880 | ||||||||
Series B1(1) | 7.000 | % | 50 | 60,000,000 | — | 3,000 | 3,000 | ||||||||||||
Series C1(1) | 7.000 | % | 50 | 20,000,000 | — | 1,000 | 1,000 | ||||||||||||
Series D1(1) | 7.000 | % | 50 | 15,000,000 | — | 750 | 750 | ||||||||||||
Series E(2) | 8.400 | % | 1,000 | 6,000,000 | 121 | 6,000 | 6,000 | ||||||||||||
Series F(3) | 8.500 | % | 25 | 81,600,000 | 71 | 2,040 | 2,040 | ||||||||||||
Series G(4) | 8.000 | % | 1,000,000 | 7,059 | — | 3,529 | — | ||||||||||||
Series H(5) | 5.000 | % | 1,000,000 | 25,000 | — | 23,835 | 23,727 | ||||||||||||
Series I(6) | 8.000 | % | 1,000,000 | 20,000 | — | 19,513 | 19,513 | ||||||||||||
Series J1(1) | 7.000 | % | 50 | 9,000,000 | — | 450 | 450 | ||||||||||||
Series K1(1) | 7.000 | % | 50 | 8,000,000 | — | 400 | 400 | ||||||||||||
Series L2(1) | 7.000 | % | 50 | 100,000 | — | 5 | 5 | ||||||||||||
Series N1(1) | 7.000 | % | 50 | 300,000 | — | 15 | 15 | ||||||||||||
Series T(7) | 6.500 | % | 50 | 63,373,000 | 23 | 3,169 | 3,169 | ||||||||||||
Series AA(8) | 8.125 | % | 25 | 148,600,000 | 97 | 3,715 | 3,715 | ||||||||||||
$ | 312 | $ | 74,301 | $ | 70,664 | ||||||||||||||
Other than securities containing customary anti-dilution provisions, Citigroup's only outstanding instruments subject to potential resets are the warrant to purchase 210,084,034 shares of common stock issued to the U.S. Treasury as part of TARP on November 28, 2008, the warrant to purchase 188,501,414 shares of common stock issued to the U.S. Treasury as part of TARP on December 31, 2008, and the warrant to purchase 66,531,728 shares of common stock issued to the U.S. Treasury as consideration for the loss-sharing agreement on January 15, 2009. Under the terms of the warrants, the number of shares of common stock for which the warrants are exercisable and the exercise price of the warrants will be subject to a reset if, prior to the third anniversary of issue date of the warrants, Citigroup issues shares of common stock (or
rights or warrants or other securities exercisable or convertible into or exchangeable for shares of common stock) (collectively, "convertible securities") without consideration or at a consideration per share (or having a conversion price per share) that is less than 90% of the market price of Citigroup's common stock on the last trading day preceding the date of the agreement on pricing such shares (or such convertible securities), subject to specified exceptions.
Exchange Offers
During the third quarter of 2009, Citigroup closed its exchange offers with the private and public holders of preferred stock. The UST matched $25$2.246 billion of these exchange offers. In total, approximately $74 billion in preferred stock was exchanged for common stock and converted into TRuPs asCitigroup Capital Trust XIII Trust Preferred Securities with a resultcoupon of 7.875%, payable quarterly. The U.S. Treasury then sold all of such securities of Citigroup Capital Trust XIII to the completion of the exchange offers.
Table of Contentspublic.
14.13. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
ChangesThe following table shows the changes in each component of Accumulated"Accumulated Other Comprehensive Income (Loss) (AOCI)" for the first, threesecond and third quarters of 2009 were as follows:2010:
In millions of dollars | Net unrealized gains (losses) on investment securities | Foreign currency translation adjustment, net of hedges | Cash flow hedges | Pension liability adjustments | Accumulated other comprehensive income (loss) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, December 31, 2008 | $ | (9,647 | ) | $ | (7,744 | ) | $ | (5,189 | ) | $ | (2,615 | ) | $ | (25,195 | ) | |
Cumulative effect of accounting change (ASC 320-10-65- 1/FSP FAS 115-2) | (413 | ) | — | — | — | (413 | ) | |||||||||
Balance, January 1, 2009 | $ | (10,060 | ) | $ | (7,744 | ) | $ | (5,189 | ) | $ | (2,615 | ) | $ | (25,608 | ) | |
Decrease (increase) in net unrealized gains (losses) on investment securities, net of taxes(1)(3) | 31 | — | — | — | 31 | |||||||||||
Less: Reclassification adjustment for gains included in net income, net of taxes | (11 | ) | — | — | — | (11 | ) | |||||||||
FX translation adjustment, net of taxes(2) | — | (2,974 | ) | — | — | (2,974 | ) | |||||||||
Cash flow hedges, net of taxes(3) | — | — | 1,483 | — | 1,483 | |||||||||||
Pension liability adjustment, net of taxes | — | — | — | 66 | 66 | |||||||||||
Change | $ | 20 | $ | (2,974 | ) | $ | 1,483 | $ | 66 | $ | (1,405 | ) | ||||
Citigroup Stockholders AOCI balance, March 31, 2009 | $ | (10,040 | ) | $ | (10,718 | ) | $ | (3,706 | ) | $ | (2,549 | ) | $ | (27,013 | ) | |
Decrease (increase) in net unrealized gains (losses) on investment securities, net of taxes(1)(3) | 2,890 | — | — | — | 2,890 | |||||||||||
Less: Reclassification adjustment for gains included in net income, net of taxes | 95 | — | — | — | 95 | |||||||||||
FX translation adjustment, net of taxes(4) | — | 2,406 | — | — | 2,406 | |||||||||||
Cash flow hedges, net of taxes(3) | — | — | 41 | — | 41 | |||||||||||
Pension liability adjustment, net of taxes | — | — | — | (62 | ) | (62 | ) | |||||||||
Change | $ | 2,985 | $ | 2,406 | $ | 41 | $ | (62 | ) | $ | 5,370 | |||||
Citigroup Stockholders AOCI balance, June 30, 2009 | $ | (7,055 | ) | $ | (8,312 | ) | $ | (3,665 | ) | $ | (2,611 | ) | $ | (21,643 | ) | |
Decrease (increase) in net unrealized gains (losses) on investment securities, net of taxes(1)(3) | 2,968 | — | — | — | 2,968 | |||||||||||
Less: Reclassification adjustment for gains included in net income, net of taxes | (155 | ) | — | — | — | (155 | ) | |||||||||
FX translation adjustment, net of taxes(5) | — | 1,699 | — | — | 1,699 | |||||||||||
Cash flow hedges, net of taxes(3) | — | — | (512 | ) | — | (512 | ) | |||||||||
Pension liability adjustment, net of taxes | — | — | — | (8 | ) | (8 | ) | |||||||||
Change | $ | 2,813 | $ | 1,699 | $ | (512 | ) | $ | (8 | ) | $ | 3,992 | ||||
Citigroup Stockholders AOCI balance, September 30, 2009 | $ | (4,242 | ) | $ | (6,613 | ) | $ | (4,177 | ) | $ | (2,619 | ) | $ | (17,651 | ) | |
In millions of dollars | Net unrealized gains (losses) on investment securities | Foreign currency translation adjustment, net of hedges | Cash flow hedges | Pension liability adjustments | Accumulated other comprehensive income (loss) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, December 31, 2009 | $ | (4,347 | ) | $ | (7,947 | ) | $ | (3,182 | ) | $ | (3,461 | ) | $ | (18,937 | ) | |
Change in net unrealized gains (losses) on investment securities, net of taxes(1) | 1,210 | — | — | — | 1,210 | |||||||||||
Reclassification adjustment for net gains included in net income, net of taxes | (28 | ) | — | — | — | (28 | ) | |||||||||
Foreign currency translation adjustment, net of taxes(2) | — | (279 | ) | — | — | (279 | ) | |||||||||
Cash flow hedges, net of taxes(3) | — | — | 223 | — | 223 | |||||||||||
Pension liability adjustment, net of taxes(4) | — | — | — | (48 | ) | (48 | ) | |||||||||
Change | $ | 1,182 | $ | (279 | ) | $ | 223 | $ | (48 | ) | $ | 1,078 | ||||
Balance, March 31, 2010 | $ | (3,165 | ) | $ | (8,226 | ) | $ | (2,959 | ) | $ | (3,509 | ) | $ | (17,859 | ) | |
Change in net unrealized gains (losses) on investment securities, net of taxes(1) | 967 | — | — | — | 967 | |||||||||||
Reclassification adjustment for net gains included in net income, net of taxes | (61 | ) | — | — | — | (61 | ) | |||||||||
Foreign currency translation adjustment, net of taxes(2) | — | (2,036 | ) | — | — | (2,036 | ) | |||||||||
Cash flow hedges, net of taxes(3) | — | — | (225 | ) | — | (225 | ) | |||||||||
Pension liability adjustment, net of taxes(4) | — | — | — | 44 | 44 | |||||||||||
Change | $ | 906 | $ | (2,036 | ) | $ | (225 | ) | $ | 44 | $ | (1,311 | ) | |||
Balance, June 30, 2010 | $ | (2,259 | ) | $ | (10,262 | ) | $ | (3,184 | ) | $ | (3,465 | ) | $ | (19,170 | ) | |
Change in net unrealized gains (losses) on investment securities, net of taxes(1) | 1,729 | — | — | — | 1,729 | |||||||||||
Reclassification adjustment for net gains included in net income, net of taxes | (467 | ) | — | — | — | (467 | ) | |||||||||
Foreign currency translation adjustment, net of taxes(2) | — | 2,755 | — | — | 2,755 | |||||||||||
Cash flow hedges, net of taxes(3) | — | — | (121 | ) | — | (121 | ) | |||||||||
Pension liability adjustment, net of taxes(4) | — | — | — | (35 | ) | (35 | ) | |||||||||
Change | $ | 1,262 | $ | 2,755 | $ | (121 | ) | $ | (35 | ) | $ | 3,861 | ||||
Balance, September 30, 2010 | $ | (997 | ) | $ | (7,507 | ) | $ | (3,305 | ) | $ | (3,500 | ) | $ | (15,309 | ) | |
15.14. SECURITIZATIONS AND VARIABLE INTEREST ENTITIES
Overview
Citigroup and its subsidiaries are involved with several types of off-balance sheet arrangements, including special purpose entities (SPEs). See Note 1 to the Consolidated Financial Statements for a discussion of impending accounting changes to the accounting for transfers and servicing of financial assets and Consolidationconsolidation of Variable Interest Entities,VIEs, including the elimination of qualifying SPEsQSPEs.
Uses of SPEs
An SPE is an entity designed to fulfill a specific limited need of the company that organized it.
The principal uses of SPEs are to obtain liquidity and favorable capital treatment by securitizing certain of Citigroup's financial assets, to assist clients in securitizing their financial assets, and to create investment products for clients. SPEs may be organized in many legal forms including trusts, partnerships or corporations. In a securitization, the company transferring assets to an SPE converts all (or a portion) of those assets into cash before they would have been realized in the normal course of business, through the SPE's issuance of debt and equity instruments, certificates, commercial paper and other notes of indebtedness, which are recorded on the balance sheet of the SPE and not reflected onin the transferring company's balance sheet, assuming applicable accounting requirements are satisfied. Investors usually have recourse to the assets in the SPE and often benefit from other credit enhancements, such as a collateral account or over collateralizationover-collateralization in the form of excess assets in the SPE, a line of credit, or from a liquidity facility, such as a line of credit, liquidity put option or asset purchase agreement. The SPE can typically obtain a more favorable credit rating from rating agencies than the transferor could obtain for its own debt issuances, resulting in less expensive financing costs.costs than unsecured debt. The SPE may also enter into derivative contracts in order to convert the yield or currency of the underlying assets to match the needs of the SPE investors or to limit or change the credit risk of the SPE. Citigroup may be the provider of certain credit enhancements as well as the counterparty to any related derivative contracts.
Since QSPEs were eliminated, most of Citigroup's SPEs may be Qualifying SPEs (QSPEs) or Variable Interest Entities (VIEs) or neither.
Qualifying SPEs
QSPEs are a special class of SPEs that have significant limitations on the types of assets and derivative instruments they may own or enter into and the types and extent of activities and decision-making they may engage in. Generally, QSPEs are passive entities designed to purchase assets and pass through the cash flows from those assets to the investors in the QSPE. QSPEs may not actively manage their assets through discretionary sales and are generally limited to making decisions inherent in servicing activities and issuance of liabilities. QSPEs are generally exempt from consolidation by the transferor of assets to the QSPE and any investor or counterparty.now VIEs.
Variable Interest Entities
VIEs are entities defined as entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights, and right to receive the expected residual returns of the entity andor obligation to absorb the expected losses of the entity). Investors that finance the VIE through debt or equity interests or other counterparties that provide other forms of support, such as guarantees, subordinated fee arrangements, or certain types of derivative contracts, are variable interest holders in the entity. TheSince January 1, 2010, the variable interest holder, if any, that willhas a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Citigroup would be deemed to have a controlling financial interest if it has both of the following characteristics:
The Company must evaluate its involvement in each VIE and understand the purpose and design of the entity, the role the Company had in the entity's design, and its involvement in its ongoing activities. The Company then must evaluate which activities most significantly impact the economic performance of the VIE and who has the power to direct such activities.
For those VIEs where the Company determines that it has the power to direct the activities that most significantly impact the VIE's economic performance, the Company then must evaluate its economic interests, if any, and determine whether it could absorb losses or receive benefits that could potentially be significant to the VIE. When evaluating whether the Company has an obligation to absorb losses that could potentially be significant, it considers the maximum exposure to such loss without consideration of probability. Such obligations could be in various forms, including but not limited to, debt and equity investments, guarantees, liquidity agreements, and certain derivative contracts.
Prior to January 1, 2010, the variable interest holder, if any, that would absorb a majority of the entity's expected losses, receive a majority of the entity's expected residual returns or both iswas deemed to be the primary beneficiary and must consolidateconsolidated the VIE. Consolidation of athe VIE iswas determined based primarily on the variability generated in scenarios that are considered most likely to occur, rather than based on scenarios that are considered more remote. Certain variable interests may absorb significant amounts of losses or residual returns contractually, but if those scenarios are considered very unlikely to occur, they may not lead to consolidation of the VIE.
All of these facts and circumstances are taken into consideration when determining whether the Company has variable interests that would deem it the primary beneficiary and, therefore, require consolidation of the related VIE or otherwise rise to the level where disclosure would provide useful information to the users of the Company's financial statements. In some cases, it is qualitatively clear based on the extent of the Company's involvement or the seniority of its investments that the Company is not the primary beneficiary of the VIE. In othermany cases, a more detailed and quantitative analysis iswas required to make such athis determination.
The Company generally considers the following types of involvement to be significant:
In various other transactions, the Company may act as a derivative counterparty (for example, interest rate swap, cross-currency swap, or purchaser of credit protection under a credit default swap or total return swap where the Company pays the total return on certain assets to the SPE); may act as underwriter or placement agent; may provide administrative, trustee, or other services; or may make a market in debt securities or other instruments issued by VIEs. The Company generally considers such involvement, by itself, "not significant".not to be variable interests and thus not an indicator of power or potentially significant benefits or losses.
Citigroup's involvement with QSPEsconsolidated and Consolidated and Unconsolidatedunconsolidated VIEs with which the Company holds significant variable interests or has continuing involvement through servicing a majority of the assets in a VIE as of September 30, 20092010 and December 31, 20082009 is presented below:
As of September 30, 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
As of September 30, 2010 | As of September 30, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | Maximum exposure to loss in significant unconsolidated VIEs(1) | | | | | Maximum exposure to loss in significant unconsolidated VIEs(1) | |||||||||||||||||||||||||||||||||||||||||
| | | | | Funded exposures(2) | Unfunded exposures(3) | | | | | Funded exposures(2) | Unfunded exposures(3) | Total | ||||||||||||||||||||||||||||||||||||||
| Total involvement with SPE assets | | | | | Total involvement with SPE assets | | | |||||||||||||||||||||||||||||||||||||||||||
In millions of dollars | QSPE assets | Consolidated VIE assets | Significant unconsolidated VIE assets(4) | Debt investments | Equity investments | Funding commitments | Guarantees and derivatives | In millions of dollars | Consolidated VIE / SPE assets(4) | Significant unconsolidated VIE assets(4)(5) | Debt investments | Equity investments | Funding commitments | Guarantees and derivatives | Total | ||||||||||||||||||||||||||||||||||||
Citicorp | Citicorp | ||||||||||||||||||||||||||||||||||||||||||||||||||
Credit card securitizations | $ | 78,346 | $ | 78,346 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | Credit card securitizations | $ | 62,157 | $ | 62,157 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Mortgage securitizations(6) | Mortgage securitizations(6) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. agency-sponsored | 172,133 | — | 172,133 | 1,581 | — | — | 29 | 1,610 | |||||||||||||||||||||||||||||||||||||||||||
Non-agency-sponsored | 8,875 | 2,479 | 6,396 | 415 | — | — | — | 415 | |||||||||||||||||||||||||||||||||||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | 24,733 | — | — | 24,733 | 109 | — | 24,250 | 374 | Citi-administered asset-backed commercial paper conduits (ABCP) | 30,459 | 22,820 | 7,639 | — | — | 7,639 | — | 7,639 | ||||||||||||||||||||||||||||||||||
Third-party commercial paper conduits | 4,114 | — | — | 4,114 | — | — | 353 | — | Third-party commercial paper conduits | 4,334 | — | 4,334 | 288 | — | 298 | — | 586 | ||||||||||||||||||||||||||||||||||
Collateralized debt obligations (CDOs) | 3,477 | — | — | 3,477 | 15 | — | — | — | Collateralized debt obligations (CDOs) | 6,513 | — | 6,513 | 133 | — | — | — | 133 | ||||||||||||||||||||||||||||||||||
Collateralized loan obligations (CLOs) | 3,991 | — | — | 3,991 | 44 | — | — | — | Collateralized loan obligations (CLOs) | 4,426 | — | 4,426 | 96 | — | — | — | 96 | ||||||||||||||||||||||||||||||||||
Mortgage loan securitization | 82,916 | 82,916 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Asset-based financing | 19,763 | — | 1,426 | 18,337 | 3,965 | 44 | 649 | 491 | Asset-based financing | 17,804 | 1,015 | 16,789 | 5,500 | — | 1,937 | 15 | 7,452 | ||||||||||||||||||||||||||||||||||
Municipal securities tender option bond trusts (TOBs) | 19,754 | 710 | 9,781 | 9,263 | — | — | 6,079 | 689 | Municipal securities tender option bond trusts (TOBs) | 19,722 | 9,088 | 10,634 | — | — | 7,443 | 469 | 7,912 | ||||||||||||||||||||||||||||||||||
Municipal investments | 577 | — | — | 577 | — | 40 | 17 | — | Municipal investments | 12,562 | 256 | 12,306 | 641 | 2,798 | 1,110 | — | 4,549 | ||||||||||||||||||||||||||||||||||
Client intermediation | 7,525 | — | 2,948 | 4,577 | 1,225 | 12 | — | — | Client intermediation | 5,612 | 1,235 | 4,377 | 1,236 | 8 | — | — | 1,244 | ||||||||||||||||||||||||||||||||||
Investment funds | 108 | — | 38 | 70 | 13 | — | — | 2 | Investment funds | 3,336 | 233 | 3,103 | 2 | 35 | — | 23 | 60 | ||||||||||||||||||||||||||||||||||
Trust preferred securities | 34,531 | — | — | 34,531 | — | 128 | — | — | Trust preferred securities | 21,673 | — | 21,673 | — | 128 | — | — | 128 | ||||||||||||||||||||||||||||||||||
Other | 7,643 | 1,809 | 1,782 | 4,052 | 258 | — | 10 | — | Other | 4,998 | 1,460 | 3,538 | 542 | 16 | 115 | 133 | 806 | ||||||||||||||||||||||||||||||||||
Total | $ | 287,478 | $ | 163,781 | $ | 15,975 | $ | 107,722 | $ | 5,629 | $ | 224 | $ | 31,358 | $ | 1,556 | Total | $ | 374,604 | $ | 100,743 | $ | 273,861 | $ | 10,434 | $ | 2,985 | $ | 18,542 | $ | 669 | $ | 32,630 | ||||||||||||||||||
Citi Holdings | Citi Holdings | ||||||||||||||||||||||||||||||||||||||||||||||||||
Credit card securitizations | $ | 41,315 | $ | 41,315 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | Credit card securitizations | $ | 33,079 | $ | 32,604 | $ | 475 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Mortgage securitizations | 513,004 | 513,004 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Mortgage securitizations(6) | Mortgage securitizations(6) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. agency-sponsored | 244,496 | — | 244,496 | 2,127 | — | — | 114 | 2,241 | |||||||||||||||||||||||||||||||||||||||||||
Non-agency-sponsored | 23,996 | 3,445 | 20,551 | 122 | — | — | — | 122 | |||||||||||||||||||||||||||||||||||||||||||
Student loan securitizations | 14,691 | 14,691 | — | — | — | — | — | — | Student loan securitizations | 35,041 | 35,041 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Auto loan securitizations | Auto loan securitizations | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | 15,106 | — | 153 | 14,953 | — | — | 14,935 | 18 | Citi-administered asset-backed commercial paper conduits (ABCP) | 105 | 105 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Third-party commercial paper conduits | 7,770 | — | — | 7,770 | 298 | — | 252 | — | Third-party commercial paper conduits | 3,411 | — | 3,411 | — | — | 252 | — | 252 | ||||||||||||||||||||||||||||||||||
Collateralized debt obligations (CDOs) | 21,148 | — | 8,491 | 12,657 | 962 | — | — | 463 | Collateralized debt obligations (CDOs) | 8,344 | 105 | 8,239 | 372 | — | — | 125 | 497 | ||||||||||||||||||||||||||||||||||
Collateralized loan obligations (CLOs) | 9,896 | — | 72 | 9,824 | 1,543 | — | 32 | 247 | Collateralized loan obligations (CLOs) | 13,259 | 291 | 12,968 | 1,554 | — | 8 | 392 | 1,954 | ||||||||||||||||||||||||||||||||||
Asset-based financing | 53,381 | — | 430 | 52,951 | 16,166 | 75 | 1,697 | — | Asset-based financing | 41,237 | 3 | 41,234 | 13,334 | 4 | 455 | 2 | 13,795 | ||||||||||||||||||||||||||||||||||
Municipal securities tender option bond trusts (TOBs) | 2,336 | — | 2,336 | — | — | — | — | — | Municipal securities tender option bond trusts (TOBs) | 5 | 5 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Municipal investments | 16,294 | — | 879 | 15,415 | — | 2,012 | 529 | — | Municipal investments | 4,597 | — | 4,597 | 77 | 193 | 161 | — | 431 | ||||||||||||||||||||||||||||||||||
Client intermediation | 671 | — | 226 | 445 | 43 | — | — | 353 | Client intermediation | 700 | 219 | 481 | 62 | — | — | 347 | 409 | ||||||||||||||||||||||||||||||||||
Investment funds | 10,042 | — | 1,283 | 8,759 | — — | 247 | 169 | — | Investment funds | 3,216 | 795 | 2,421 | 8 | 72 | 284 | — | 364 | ||||||||||||||||||||||||||||||||||
Other | 3,427 | 694 | 1,866 | 867 | 203 | 125 | 224 | — | Other | 2,708 | 1,024 | 1,684 | 262 | 109 | 125 | — | 496 | ||||||||||||||||||||||||||||||||||
Total | $ | 709,081 | $ | 569,704 | $ | 15,736 | $ | 123,641 | $ | 19,215 | $ | 2,459 | $ | 17,838 | $ | 1,081 | Total | $ | 414,194 | $ | 73,637 | $ | 340,557 | $ | 17,918 | $ | 378 | $ | 1,285 | $ | 980 | $ | 20,561 | ||||||||||||||||||
Total Citigroup | $ | 996,559 | $ | 733,485 | $ | 31,711 | $ | 231,363 | $ | 24,844 | $ | 2,683 | $ | 49,196 | $ | 2,637 | Total Citigroup | $ | 788,798 | $ | 174,380 | $ | 614,418 | $ | 28,352 | $ | 3,363 | $ | 19,827 | $ | 1,649 | $ | 53,191 | ||||||||||||||||||
As of September 30, 2009 (continued) | As of December 31, 2008(1) In millions of dollars | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total maximum exposure to loss in significant unconsolidated VIEs (continued)(3) | Total involvement with SPEs | QSPE assets | Consolidated VIE assets | Significant unconsolidated VIE assets(2) | Maximum exposure to loss in significant unconsolidated VIE assets(3) | ||||||||||||
$ | — | $ | 78,254 | $ | 78,254 | $ | — | $ | — | $ | — | ||||||
24,733 | 36,108 | — | — | 36,108 | 36,108 | ||||||||||||
353 | 10,589 | — | — | 10,589 | 579 | ||||||||||||
15 | 4,042 | — | — | 4,042 | 12 | ||||||||||||
44 | 3,343 | — | — | 3,343 | 2 | ||||||||||||
— | 84,953 | 84,953 | — | — | — | ||||||||||||
5,149 | 16,930 | — | 1,629 | 15,301 | 4,556 | ||||||||||||
6,768 | 27,047 | 5,964 | 12,135 | 8,948 | 7,884 | ||||||||||||
57 | 593 | — | — | 593 | 35 | ||||||||||||
1,237 | 8,332 | — | 3,480 | 4,852 | 1,476 | ||||||||||||
15 | 71 | — | 45 | 26 | 31 | ||||||||||||
128 | 23,899 | — | — | 23,899 | 162 | ||||||||||||
268 | 10,394 | 3,737 | 2,419 | 4,238 | 370 | ||||||||||||
$ | 38,767 | $ | 304,555 | $ | 172,908 | $ | 19,708 | $ | 111,939 | $ | 51,215 | ||||||
$ | — | $ | 45,613 | $ | 45,613 | $ | — | $ | — | $ | — | ||||||
— | 586,410 | 586,407 | 3 | — | — | ||||||||||||
— | 15,650 | 15,650 | — | — | — | ||||||||||||
14,953 | 23,527 | — | — | 23,527 | 23,527 | ||||||||||||
550 | 10,166 | — | — | 10,166 | 820 | ||||||||||||
1,425 | 26,018 | — | 11,466 | 14,552 | 1,461 | ||||||||||||
1,822 | 19,610 | — | 122 | 19,488 | 1,680 | ||||||||||||
17,938 | 85,224 | — | 2,218 | 83,006 | 23,676 | ||||||||||||
— | 3,024 | 540 | 2,484 | — | — | ||||||||||||
2,541 | 16,545 | — | 866 | 15,679 | 2,915 | ||||||||||||
396 | 1,132 | — | 331 | 801 | 61 | ||||||||||||
416 | 10,330 | — | 2,084 | 8,246 | 158 | ||||||||||||
552 | 9,472 | 1,014 | 4,306 | 4,152 | 892 | ||||||||||||
$ | 40,593 | $ | 852,721 | $ | 649,224 | $ | 23,880 | $ | 179,617 | $ | 55,190 | ||||||
$ | 79,360 | $ | 1,157,276 | $ | 822,132 | $ | 43,588 | $ | 291,556 | $ | 106,405 | ||||||
| | | | As of December 31, 2009 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Total involvement with SPE assets | QSPE assets | Consolidated VIE assets | Significant unconsolidated VIE assets(1) | Maximum exposure to loss in significant unconsolidated VIEs(2) | ||||||||||||
Citicorp | |||||||||||||||||
Credit card securitizations | $ | 78,833 | $ | 78,833 | $ | — | $ | — | $ | — | |||||||
Mortgage securitizations | |||||||||||||||||
U.S. agency-sponsored | 180,487 | 180,487 | — | — | — | ||||||||||||
Non-agency-sponsored | 84,462 | 84,462 | — | — | — | ||||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | 36,327 | — | — | 36,327 | 36,326 | ||||||||||||
Third-party commercial paper conduits | 3,718 | — | — | 3,718 | 353 | ||||||||||||
Collateralized debt obligations (CDOs) | 2,785 | — | — | 2,785 | 21 | ||||||||||||
Collateralized loan obligations (CLOs) | 5,409 | — | — | 5,409 | 120 | ||||||||||||
Asset-based financing | 19,612 | — | 1,279 | 18,333 | 5,221 | ||||||||||||
Municipal securities tender option bond trusts (TOBs) | 19,455 | 705 | 9,623 | 9,127 | 6,841 | ||||||||||||
Municipal investments | 10,906 | — | 11 | 10,895 | 2,370 | ||||||||||||
Client intermediation | 8,607 | — | 2,749 | 5,858 | 881 | ||||||||||||
Investment funds | 93 | — | 39 | 54 | 10 | ||||||||||||
Trust preferred securities | 19,345 | — | — | 19,345 | 128 | ||||||||||||
Other | 7,380 | 1,808 | 1,838 | 3,734 | 446 | ||||||||||||
Total | $ | 477,419 | $ | 346,295 | $ | 15,539 | $ | 115,585 | $ | 52,717 | |||||||
Citi Holdings | |||||||||||||||||
Credit card securitizations | $ | 42,274 | $ | 42,274 | $ | — | $ | — | $ | — | |||||||
Mortgage securitizations | |||||||||||||||||
U.S. agency-sponsored | 288,605 | 288,605 | — | — | — | ||||||||||||
Non-agency-sponsored | 19,899 | 19,899 | — | — | — | ||||||||||||
Student loan securitizations | 14,343 | 14,343 | — | — | — | ||||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | 98 | — | 98 | — | — | ||||||||||||
Third-party commercial paper conduits | 5,776 | — | — | 5,776 | 439 | ||||||||||||
Collateralized debt obligations (CDOs) | 24,157 | — | 7,614 | 16,543 | 1,158 | ||||||||||||
Collateralized loan obligations (CLOs) | 13,515 | — | 142 | 13,373 | 1,658 | ||||||||||||
Asset-based financing | 52,598 | — | 370 | 52,228 | 18,385 | ||||||||||||
Municipal securities tender option bond trusts (TOBs) | 1,999 | — | 1,999 | — | — | ||||||||||||
Municipal investments | 5,364 | — | 882 | 4,482 | 375 | ||||||||||||
Client intermediation | 675 | — | 230 | 445 | 396 | ||||||||||||
Investment funds | 10,178 | — | 1,037 | 9,141 | 268 | ||||||||||||
Other | 3,732 | 610 | 1,472 | 1,650 | 604 | ||||||||||||
Total | $ | 483,213 | $ | 365,731 | $ | 13,844 | $ | 103,638 | $ | 23,283 | |||||||
Total Citigroup | $ | 960,632 | $ | 712,026 | $ | 29,383 | $ | 219,223 | $ | 76,000 | |||||||
ThisThe previous table does not include:
Prior to January 1, 2010, the table didnot include:
The asset balances for consolidated VIEs represent the carrying amounts of the assets consolidated by the Company. The carrying amount may represent the amortized cost or the current fair value of the assets depending on the legal form of the asset (e.g., security or loan) and the Company's standard accounting policies for the asset type and line of business.
The asset balances for unconsolidated VIEs where the Company has significant involvement represent the most current information available to the Company. In most cases, the asset balances represent an amortized cost basis without regard to impairments in fair value, unless fair value information is readily available to the Company. For VIEs that obtain asset exposures synthetically through derivative instruments (for example, synthetic CDOs), the table includes the full original notional amount of the derivative as an asset.
The maximum funded exposure represents the balance sheet carrying amount of the Company's investment in the VIE. It reflects the initial amount of cash invested in the VIE plus any accrued interest and is adjusted for any impairments in value recognized in earnings and any cash principal payments received. The maximum exposure of unfunded positions represents the remaining undrawn committed amount, including liquidity and credit facilities provided by the Company, or the notional amount of a derivative instrument considered to be a variable interest, adjusted for any declines in fair value recognized in earnings. In certain transactions, the Company has entered into derivative instruments or other arrangements that are not considered variable interests in the VIE (e.g., interest rate swaps, cross-currency swaps, or where the Company is the purchaser of credit protection under a credit default swap or total return swap where the Company pays the total return on certain assets to the SPE). Receivables under such arrangements are not included in the maximum exposure amounts.
Funding Commitments for Significant Unconsolidated VIEs—Liquidity Facilities and Loan Commitments
The following table presents the notional amount of liquidity facilities and loan commitments that are classified as funding commitments in the SPE table as of September 30, 2009:2010:
In billions of dollars | Liquidity Facilities | Loan Commitments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Liquidity Facilities | Loan Commitments | ||||||||||||
Citicorp | ||||||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | $ | 22,456 | $ | 1,794 | $ | 7,639 | $ | — | ||||||
Third-party commercial paper conduits | 353 | — | 298 | — | ||||||||||
Asset-based financing | — | 649 | 5 | 1,932 | ||||||||||
Municipal securities tender option bond trusts (TOBs) | 6,079 | — | 7,443 | — | ||||||||||
Municipal investments | — | 17 | — | 1,110 | ||||||||||
Other | 10 | — | — | 115 | ||||||||||
Total Citicorp | $ | 28,898 | $ | 2,460 | $ | 15,385 | $ | 3,157 | ||||||
Citi Holdings | ||||||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | $ | 13,329 | $ | 1,606 | ||||||||||
Third-party commercial paper conduits | 252 | — | $ | 252 | $ | — | ||||||||
Collateralized loan obligations (CLOs) | 32 | — | — | 8 | ||||||||||
Asset-based financing | — | 1,697 | — | 455 | ||||||||||
Municipal investments | — | 529 | — | 161 | ||||||||||
Investment Funds | — | 169 | ||||||||||||
Investment funds | — | 284 | ||||||||||||
Other | — | 224 | — | 125 | ||||||||||
Total Citi Holdings | $ | 13,613 | $ | 4,225 | $ | 252 | $ | 1,033 | ||||||
Total Citigroup funding commitments | $ | 42,511 | $ | 6,685 | $ | 15,637 | $ | 4,190 | ||||||
Citicorp'sCiticorp and Citi Holdings Consolidated VIEs—Balance Sheet ClassificationVIEs
The following table presents the carrying amounts and classifications of consolidated assets that are collateral for consolidated VIE obligations:and SPE obligations.
In billions of dollars | September 30, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Cash | $ | 0.0 | $ | 0.7 | |||
Trading account assets | 3.5 | 4.3 | |||||
Investments | 10.2 | 12.5 | |||||
Loans | 0.3 | 0.5 | |||||
Other assets | 2.0 | 1.7 | |||||
Total assets of consolidated VIEs | $ | 16.0 | $ | 19.7 | |||
The following table presentsCompany engages in on-balance-sheet securitizations which are securitizations that do not qualify for sales treatment; thus, the carrying amounts and classification ofassets remain on the third-party liabilities of the consolidated VIEs:
In billions of dollars | September 30, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Short-term borrowings | $ | 9.4 | $ | 14.2 | |||
Long-term debt | 5.6 | 5.6 | |||||
Other liabilities | 0.2 | 0.9 | |||||
Total liabilities of consolidated VIEs | $ | 15.2 | $ | 20.7 | |||
Company's balance sheet. The consolidated VIEs included in the table abovetables below represent hundreds of separate entities with which the Company is involved. In general, the third-party investors in the obligations of consolidated VIEs have legal recourse only to the assets of the VIEs and do not have such recourse to the Company, except where the Company has provided a guarantee to the investors or is the counterparty to certain derivative transactions involving the VIE. In addition, the assets are generally restricted only to pay such liabilities. Thus, the Company's maximum legal exposure to loss due to outstanding third-party financing related to consolidated VIEs is significantly less than the carrying value of the consolidated VIE assets. Intercompany assets due to outstanding third-party financing. Intercompanyand liabilities are excluded from the table.
Citi Holdings' Consolidated VIEs—Balance Sheet Classification
All assets are restricted from being sold or pledged as collateral. The following table presentscash flows from these assets are the carrying amounts and classifications of consolidated assets thatonly source used to pay down the associated liabilities, which are collateral for consolidated VIE obligations:non-recourse to the Company's general assets.
In billions of dollars | September 30, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Cash | $ | 0.5 | $ | 1.2 | |||
Trading account assets | 10.9 | 16.6 | |||||
Investments | 3.1 | 3.3 | |||||
Loans | 0.6 | 2.1 | |||||
Other assets | 0.6 | 0.7 | |||||
Total assets of consolidated VIEs | $ | 15.7 | $ | 23.9 | |||
The following table presents the carrying amounts and classification of the third-party liabilities of the consolidated VIEs:
September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | September 30, 2009 | December 31, 2008 | Citicorp | Citi Holdings | Citigroup | Citicorp | Citi Holdings | Citigroup | ||||||||||||||||||
Trading account liabilities | $ | 0.2 | $ | 0.5 | ||||||||||||||||||||||
Cash | $ | 0.3 | $ | 2.0 | $ | 2.3 | $ | — | $ | 0.7 | $ | 0.7 | ||||||||||||||
Trading account assets | 3.5 | 1.4 | 4.9 | 3.7 | 9.5 | 13.2 | ||||||||||||||||||||
Investments | 9.4 | 0.1 | 9.5 | 9.8 | 2.7 | 12.5 | ||||||||||||||||||||
Total loans, net | 86.0 | 38.5 | 124.5 | 0.1 | 0.4 | 0.5 | ||||||||||||||||||||
Other | 1.6 | 31.6 | 33.2 | 1.9 | 0.5 | 2.4 | ||||||||||||||||||||
Total assets | $ | 100.8 | $ | 73.6 | $ | 174.4 | $ | 15.5 | $ | 13.8 | $ | 29.3 | ||||||||||||||
Short-term borrowings | 3.0 | 2.8 | $ | 35.1 | $ | 1.3 | $ | 36.4 | $ | 9.5 | $ | 2.6 | $ | 12.1 | ||||||||||||
Long-term debt | 0.5 | 1.2 | 48.7 | 20.9 | 69.6 | 4.6 | 0.3 | 4.9 | ||||||||||||||||||
Other liabilities | 1.2 | 2.1 | 1.2 | 30.7 | 31.9 | 0.1 | 1.5 | 1.6 | ||||||||||||||||||
Total liabilities of consolidated VIEs | $ | 4.9 | $ | 6.6 | ||||||||||||||||||||||
Total liabilities | $ | 85.0 | $ | 52.9 | $ | 137.9 | $ | 14.2 | $ | 4.4 | $ | 18.6 | ||||||||||||||
Citicorp'sCiticorp and Citi Holdings Significant Interests in Unconsolidated VIEs—Balance Sheet Classification
The following table presentstables present the carrying amounts and classification of significant interests in unconsolidated VIEs:
In billions of dollars | September 30, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Trading account assets | $ | 3.4 | $ | 1.9 | |||
Investments | 0.8 | 0.2 | |||||
Loans | 2.4 | 3.5 | |||||
Other assets | 0.6 | 0.4 | |||||
Total assets of significant interest in unconsolidated VIEs | $ | 7.2 | $ | 6.0 | |||
In billions of dollars | September 30, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Long-term debt | $ | 0.5 | $ | 0.4 | |||
Total liabilities of significant interest in unconsolidated VIEs | $ | 0.5 | $ | 0.4 | |||
Citi Holdings' Significant Interests in Unconsolidated VIEs—Balance Sheet Classification
The following table presents the carrying amounts and classification of significant interests in unconsolidated VIEs:
In billions of dollars | September 30, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Trading account assets | $ | 2.8 | $ | 4.4 | |||
Investments | 8.8 | 8.2 | |||||
Loans | 12.6 | 12.4 | |||||
Other assets | 0.1 | 2.6 | |||||
Total assets of significant interest in unconsolidated VIEs | $ | 24.3 | $ | 27.6 | |||
September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | September 30, 2009 | December 31, 2008 | Citicorp | Citi Holdings | Citigroup | Citicorp | Citi Holdings | Citigroup | ||||||||||||||||||
Trading account liabilities | $ | 0.0 | $ | 0.2 | ||||||||||||||||||||||
Trading account assets | $ | 3.3 | $ | 2.6 | $ | 5.9 | $ | 3.2 | $ | 3.1 | $ | 6.3 | ||||||||||||||
Investments | 3.3 | 6.8 | 10.1 | 2.0 | 7.3 | 9.3 | ||||||||||||||||||||
Loans | 4.4 | 7.7 | 12.1 | 2.3 | 10.5 | 12.8 | ||||||||||||||||||||
Other | 2.2 | 1.9 | 4.1 | 0.5 | 0.1 | 0.6 | ||||||||||||||||||||
Total assets | $ | 13.2 | $ | 19.0 | $ | 32.2 | $ | 8.0 | $ | 21.0 | $ | 29.0 | ||||||||||||||
Long-term debt | $ | 0.5 | $ | 0.5 | $ | 1.0 | $ | 0.5 | $ | — | $ | 0.5 | ||||||||||||||
Other liabilities | 0.3 | 0.6 | 0.1 | — | 0.1 | 0.3 | 0.2 | 0.5 | ||||||||||||||||||
Total liabilities of significant interest in unconsolidated VIEs | $ | 0.3 | $ | 0.8 | ||||||||||||||||||||||
Total liabilities | $ | 0.6 | $ | 0.5 | $ | 1.1 | $ | 0.8 | $ | 0.2 | $ | 1.0 | ||||||||||||||
Credit Card Securitizations
The Company securitizes credit card receivables through trusts that are established to purchase the receivables. Citigroup sellstransfers receivables into the QSPE trusts on a non-recourse basis. Credit card securitizations are revolving securitizations; that is, as customers pay their credit card balances, the cash proceeds are used to purchase new receivables and replenish the receivables in the trust. Prior to 2010, such transfers were accounted for as sale transactions under SFAS 140 and, accordingly, the sold assets were removed from the consolidated balance sheet and a gain or loss was recognized in connection with the transaction. With the adoption of SFAS 166 and SFAS 167, beginning in 2010 the trusts are treated as consolidated entities, because, as servicer, Citigroup has power to direct the activities that most significantly impact the economic performance of the trusts and also holds a seller's interest and certain securities issued by the trusts, and provides liquidity facilities to the trusts, which could result in potentially significant losses or benefits from the trusts. Accordingly, the transferred credit card receivables are required to remain on the Consolidated Balance Sheet with no gain or loss recognized. The debt issued by the trusts to third parties is included in the Consolidated Balance Sheet.
The Company relies on securitizations to fund a significant portion of its managedcredit card businesses in North America Cards business.
America. The following table reflects amounts related to the Company's securitized credit card receivables at September 30, 2009 and December 31, 2008:receivables:
| Citicorp | Citi Holdings | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | |||||||||
Principal amount of credit card receivables in trusts | $ | 78.3 | $ | 78.3 | $ | 41.3 | $ | 45.7 | |||||
Ownership interests in principal amount of trust credit card receivables: | |||||||||||||
Sold to investors via trust-issued securities | 65.5 | 68.2 | 26.5 | 30.0 | |||||||||
Retained by Citigroup as trust-issued securities | 5.1 | 1.2 | 9.5 | 5.4 | |||||||||
Retained by Citigroup via non-certificated interests recorded as consumer loans | 7.7 | 8.9 | 5.3 | 10.3 | |||||||||
Total ownership interests in principal amount of trust credit card receivables | $ | 78.3 | $ | 78.3 | $ | 41.3 | $ | 45.7 | |||||
Other amounts recorded on the balance sheet related to interests retained in the trusts: | |||||||||||||
Other retained interests in securitized assets | $ | 1.3 | $ | 1.2 | $ | 1.6 | $ | 2.0 | |||||
Residual interest in securitized assets(1) | 0.3 | 0.3 | 1.0 | 1.4 | |||||||||
Amounts payable to trusts | 1.1 | 1.0 | 0.7 | 0.7 | |||||||||
| Citicorp | Citi Holdings | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | September 30, 2010 | December 31, 2009 | September 30, 2010 | December 31, 2009(2) | ||||||||||
Principal amount of credit card receivables in trusts | $ | 67.8 | $ | 78.8 | $ | 33.2 | $ | 42.3 | ||||||
Ownership interests in principal amount of trust credit card receivables | ||||||||||||||
Sold to investors via trust-issued securities | 48.1 | 66.5 | 16.3 | 28.2 | ||||||||||
Retained by Citigroup as trust-issued securities | 4.3 | 5.0 | 7.2 | 10.1 | ||||||||||
Retained by Citigroup via non-certificated interests | 15.4 | 7.3 | 9.7 | 4.0 | ||||||||||
Total ownership interests in principal amount of trust credit card receivables | $ | 67.8 | $ | 78.8 | $ | 33.2 | $ | 42.3 | ||||||
Other amounts recorded on the balance sheet related to interests retained in the trusts | ||||||||||||||
Other retained interests in securitized assets | NA | $ | 1.4 | NA | $ | 1.6 | ||||||||
Residual interest in securitized assets(1) | NA | 0.3 | NA | 1.2 | ||||||||||
Amounts payable to trusts | NA | 1.2 | NA | 0.8 | ||||||||||
Credit Card Securitizations—Citicorp
In the third quarter of 2009 and 2008, theThe Company recorded net gains (losses) from securitization of Citicorp's credit card receivables of $102 million and ($682) million, and $253 million during the three and ($828) million for the nine months ended September 30, 2009 and 2008, respectively.2009. Net gains (losses) reflect the following:
The following tables summarizetable summarizes selected cash flow information related to Citicorp's credit card securitizations for the three and nine months ended September 30, 20092010 and 2008:2009:
| Three months ended | Three months ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | September 30, 2009 | September 30, 2008 | 2010 | 2009 | ||||||||||
Proceeds from new securitizations | $ | 1.0 | $ | 0.8 | $ | — | $ | 1.0 | ||||||
Pay down of maturing notes | (1.0 | ) | N/A | |||||||||||
Proceeds from collections reinvested in new receivables | 38.5 | 42.4 | N/A | 38.5 | ||||||||||
Contractual servicing fees received | 0.3 | 0.3 | N/A | 0.3 | ||||||||||
Cash flows received on retained interests and other net cash flows | 0.7 | 1.0 | N/A | 0.7 | ||||||||||
N/A—Not applicable due to the adoption of SFAS 166/167
| Nine months ended | Nine months ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | September 30, 2009 | September 30, 2008 | 2010 | 2009 | ||||||||||
Proceeds from new securitizations | $ | 11.7 | $ | 10.0 | $ | — | $ | 11.7 | ||||||
Pay down of maturing notes | (18.4 | ) | N/A | |||||||||||
Proceeds from collections reinvested in new receivables | 110.0 | 129.1 | N/A | 110.0 | ||||||||||
Contractual servicing fees received | 1.0 | 1.0 | N/A | 1.0 | ||||||||||
Cash flows received on retained interests and other net cash flows | 2.3 | 3.1 | N/A | 2.3 | ||||||||||
N/A—Not applicable due to the adoption of SFAS 166/167
Managed Loans
As of September 30, 2009previously mentioned, prior to 2010, securitized receivables were treated as sold and December 31, 2008,removed from the residual interestbalance sheet. Beginning in 2010, all securitized credit card receivables was valued at $0 for Citicorp. As such, key assumptions usedare included in measuring the fair value ofConsolidated Balance Sheet. Accordingly, the residual interest are not provided for the three months ended September 30, 2009 or as of September 30, 2009. Key assumptions used in measuring the fair value of the residual interests at the date of sale or securitization of Citicorp's credit card receivables for the three months ended September 30 are as follows:
| ||||
| ||||
| ||||
At September 30, 2009, the sensitivity of the fair valueManaged-basis (Managed) presentation is only relevant prior to adverse changes of 10% and 20% in each of the key assumptions were as follows:
In millions of dollars | Residual interest | Retained certificates | Other retained interests | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Carrying value of retained interests | $ | — | $ | 5,186 | $ | 1,547 | |||||
Discount rates | |||||||||||
Adverse change of 10% | $ | — | $ | (6 | ) | $ | (1 | ) | |||
Adverse change of 20% | — | (12 | ) | (2 | ) | ||||||
Constant prepayment rate | |||||||||||
Adverse change of 10% | $ | — | $ | — | $ | — | |||||
Adverse change of 20% | — | — | — | ||||||||
Anticipated net credit losses | |||||||||||
Adverse change of 10% | $ | — | $ | — | $ | (31 | ) | ||||
Adverse change of 20% | — | — | (62 | ) | |||||||
Managed Loans—Citicorp2010.
After securitization of credit card receivables, the Company continues to maintain credit card customer account relationships and provides servicing for receivables transferred to the trusts. As a result, the Company considers the securitized credit card receivables to be part of the business it manages.
Managed-basis (Managed) presentations are non-GAAP financial measures. Managed presentations include results from both the on-balance sheeton-balance-sheet loans and off-balance sheetoff-balance-sheet loans, and exclude the impact of card securitization activity. Managed presentations assume that securitized loans have not been sold and present the results of the securitized loans in the same manner as Citigroup's owned loans. Citigroup's management believes that Managed presentations provide a greater understanding of ongoing operations and enhance comparability of those results in prior periods as well as demonstrating the effects of unusual gains and charges in the current period. Management further believes that a meaningful analysis of the Company's financial performance requires an understanding of the factors underlying that performance and that investors find it useful to see these non-GAAP financial measures to analyze financial performance without the impact of unusual items that may obscure trends in Citigroup's underlying performance.
Managed Loans—Citicorp
The following tables present a reconciliation between the Managed basis and on-balance sheeton-balance-sheet credit card portfolios and the related delinquencies (loans which are 90 days or more past due) and credit losses, net of recoveries.
In millions of dollars, except loans in billions | September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Loan amounts, at period end | ||||||||||||||
On balance sheet | $ | 44.3 | $ | 45.5 | $ | 111.0 | $ | 44.8 | ||||||
Securitized amounts | 70.8 | 69.5 | — | 72.6 | ||||||||||
Total managed loans | $ | 115.1 | $ | 115.0 | $ | 111.0 | $ | 117.4 | ||||||
Delinquencies, at period end | ||||||||||||||
On balance sheet | $ | 1,160 | $ | 1,126 | $ | 2,394 | $ | 1,165 | ||||||
Securitized amounts | 1,730 | 1,543 | — | 2,121 | ||||||||||
Total managed delinquencies | $ | 2,890 | $ | 2,669 | $ | 2,394 | $ | 3,286 | ||||||
Credit losses, net of recoveries, for the three months ended September 30, | 2009 | 2008 | 2010 | 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
On balance sheet | $ | 1,047 | $ | 779 | $ | 2,397 | $ | 1,047 | ||||||
Securitized amounts | 1,876 | 1,123 | — | 1,876 | ||||||||||
Total managed | $ | 2,923 | $ | 1,902 | $ | 2,397 | $ | 2,923 | ||||||
Credit losses, net of recoveries, for the nine months ended September 30, | 2009 | 2008 | 2010 | 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
On balance sheet | $ | 2,862 | $ | 2,117 | $ | 7,766 | $ | 2,862 | ||||||
Securitized amounts | 5,205 | 3,046 | — | 5,205 | ||||||||||
Total managed | $ | 8,067 | $ | 5,163 | $ | 7,766 | $ | 8,067 | ||||||
Credit Card Securitizations—Securitizations—Citi Holdings
In the third quarter of 2009 and 2008, theThe Company recorded net gains (losses)losses from securitization of Citi Holding'sHoldings' credit card receivables of ($105)$(105) million and ($762) million, and ($781) million and ($570)$(781) million for the three and nine months ended September 30, 2009 and 2008, respectively.2009.
The following tables summarizetable summarizes selected cash flow information related to Citi Holding'sHoldings' credit card securitizations for the three and nine months ended September 30, 20092010 and 2008:2009:
| Three months ended | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | September 30, 2009 | September 30, 2008 | |||||
Proceeds from new securitizations | $ | 4.3 | $ | 2.5 | |||
Proceeds from collections reinvested in new receivables | 11.1 | 13.9 | |||||
Contractual servicing fees received | 0.2 | 0.2 | |||||
Cash flows received on retained interests and other net cash flows | 0.7 | 0.8 | |||||
| Three months ended September 30, | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | 2010 | 2009 | |||||
Proceeds from new securitizations | $ | 1.8 | $ | 4.3 | |||
Pay down of maturing notes | (2.1 | ) | N/A | ||||
Proceeds from collections reinvested in new receivables | N/A | 11.1 | |||||
Contractual servicing fees received | N/A | 0.2 | |||||
Cash flows received on retained interests and other net cash flows | N/A | 0.7 | |||||
| Nine months ended | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | September 30, 2009 | September 30, 2008 | |||||
Proceeds from new securitizations | $ | 23.0 | $ | 13.3 | |||
Proceeds from collections reinvested in new receivables | 36.9 | 40.3 | |||||
Contractual servicing fees received | 0.5 | 0.5 | |||||
Cash flows received on retained interests and other net cash flows | 1.9 | 2.6 | |||||
N/A—Not applicable due to the adoption of SFAS 166/167
Key assumptions used in measuring the fair value of the residual interest at the date of sale or securitization of Citi Holding's credit card receivables for the three months ended September 30, 2009 and 2008, respectively, are as follows:
|
N/A—Not applicable due to | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The constant prepayment rate assumption range reflects the projected payment rates over the lifeadoption of a credit card balance, excluding new card purchases. This results in a high payment in the early life of the securitized balances followed by a much lower payment rate, which is depicted in the disclosed range.SFAS 166/167
The effect of two negative changes in each of the key assumptions used to determine the fair value of retained interests is required to be disclosed. The negative effect of each change must be calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact be independent, the net effect of simultaneous adverse changes in the key assumptions may be less than the sum of the individual effects shown below.
At September 30, 2009, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions were as follows:
| ||
| ||
| ||
| ||
In millions of dollars | Residual interest | Retained certificates | Other retained interests | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Carrying value of retained interests | $ | 628 | $ | 9,398 | $ | 1,926 | |||||
Discount rates | |||||||||||
Adverse change of 10% | $ | (31 | ) | $ | (14 | ) | $ | (6 | ) | ||
Adverse change of 20% | (61 | ) | (29 | ) | (12 | ) | |||||
Constant prepayment rate | |||||||||||
Adverse change of 10% | $ | (33 | ) | $ | — | $ | — | ||||
Adverse change of 20% | (63 | ) | — | — | |||||||
Anticipated net credit losses | |||||||||||
Adverse change of 10% | $ | (353 | ) | $ | — | $ | (41 | ) | |||
Adverse change of 20% | (628 | ) | — | (83 | ) | ||||||
Managed Loans—Citi Holdings
After securitization of credit card receivables, the Company continues to maintain credit card customer account relationships and provides servicing for receivables transferred to the trusts. As a result, the Company considers the securitized credit card receivables to be part of the business it manages.
Managed-basis (Managed) presentations are non-GAAP financial measures. Managed presentations include results from both the on-balance sheet loans and off-balance sheet loans, and exclude the impact of card securitization activity. Managed presentations assume that securitized loans have not been sold and present the results of the securitized loans in the same manner as Citigroup's owned loans. Citigroup's management believes that Managed presentations provide a greater understanding of ongoing operations and enhance comparability of those results in prior periods as well as demonstrating the effects of unusual gains and charges in the current period. Management further believes that a meaningful analysis of the Company's financial performance requires an understanding of the factors underlying that performance and that investors find it useful to see these non-GAAP financial measures to analyze financial performance without the impact of unusual items that may obscure trends in Citigroup's underlying performance.
The following tables present a reconciliation between the Managed basis and on-balance sheeton-balance-sheet credit card portfolios and the related delinquencies (loans which are 90 days or more past due) and credit losses, net of recoveries.
In millions of dollars, except loans in billions | September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Loan amounts, at period end | ||||||||||||||
On balance sheet | $ | 21.7 | $ | 30.1 | $ | 52.7 | $ | 27.0 | ||||||
Securitized amounts | 36.5 | 36.3 | — | 38.8 | ||||||||||
Total managed loans | $ | 58.2 | $ | 66.4 | $ | 52.7 | $ | 65.8 | ||||||
Delinquencies, at period end | ||||||||||||||
On balance sheet | $ | 885 | $ | 1,017 | $ | 1,684 | $ | 1,250 | ||||||
Securitized amounts | 1,219 | 1,113 | — | 1,326 | ||||||||||
Total managed delinquencies | $ | 2,104 | $ | 2,130 | $ | 1,684 | $ | 2,576 | ||||||
Credit losses, net of recoveries, for the three months ended September 30, | 2009 | 2008 | 2010 | 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
On balance sheet | $ | 867 | $ | 646 | $ | 1,654 | $ | 867 | ||||||
Securitized amounts | 1,137 | 812 | — | 1,137 | ||||||||||
Total managed | $ | 2,004 | $ | 1,458 | ||||||||||
Total managed credit losses | $ | 1,654 | $ | 2,004 | ||||||||||
Credit losses, net of recoveries, for the nine months ended September 30, | 2009 | 2008 | 2010 | 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
On balance sheet | $ | 2,640 | $ | 1,694 | $ | 5,731 | $ | 2,640 | ||||||
Securitized amounts | 3,472 | 2,248 | — | 3,472 | ||||||||||
Total managed | $ | 6,112 | $ | 3,942 | ||||||||||
Total managed credit losses | $ | 5,731 | $ | 6,112 | ||||||||||
Funding, Liquidity Facilities and Subordinated Interests
Citigroup securitizes credit card receivables through three securitization trusts—trusts—Citibank Credit Card Master Trust ("Master Trust"), which is part of Citicorp, and the Citibank OMNI Master Trust ("Omni Trust") and Broadway Credit Card Trust ("Broadway Trust"), prior to its sale in September 2010, which are part of Citi Holdings.
Master Trust issues fixedfixed- and floating-rate term notes as well as commercial paper. Some of the term notes are issued to multi-seller commercial paper conduits. In the first half of 2009, the Master Trust has issued $4.3 billion of notes that are eligible for the Term Asset-Backed Securities Loan Facility (TALF) program, where investors can borrow from the Federal Reserve using the trust securities as collateral. The
weighted average maturity of the term notes issued by the Master Trust was 3.73.5 years as of September 30, 20092010 and 3.83.6 years as of December 31, 2008.2009. Beginning in 2010, the liabilities of the trusts are included in the Consolidated Balance Sheet.
Master Trust liabilities:liabilities (at par value)
In billions of dollars | September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Term notes issued to multi- seller CP conduits | $ | 0.5 | $ | 1.0 | $ | 0.3 | $ | 0.8 | ||||||
Term notes issued to other third parties | 53.0 | 56.2 | ||||||||||||
Term notes issued to third parties | 42.9 | 51.2 | ||||||||||||
Term notes retained by Citigroup affiliates | 5.1 | 1.2 | 4.3 | 5.0 | ||||||||||
Commercial paper | 12.0 | 11.0 | 5.0 | 14.5 | ||||||||||
Total Master Trust liabilities | $ | 70.6 | $ | 69.4 | ||||||||||
Total Master Trust Liabilities | $ | 52.5 | $ | 71.5 | ||||||||||
BothThe Omni and Broadway Trusts issue fixedTrust issues fixed- and floating-rate term notes, some of which are purchased by multi-seller commercial paper conduits. The Omni Trust also issues commercial paper. From time to time,During 2009, a portion of the Omni Trust commercial paper hashad been purchased by the Federal Reserve's Commercial Paper Funding Facility (CPFF). In addition, some of the multi-seller conduits that hold Omni Trust term notes havehad placed commercial paper with CPFF. No Omni trust liabilities were funded through CPFF as of September 30, 2010. The total amount of Omni Trust liabilities funded directly or indirectly through the CPFF was $5.2 billion at September 30, 2009 and $6.9$2.5 billion at December 31, 2008.2009.
In the third quarter of 2009, Omni Trust issued $3.7 billion of term notes that are eligible for the TALF program. The weighted average maturity of the third partythird-party term notes issued by the Omni Trust was 2.62.0 years as of September 30, 20092010 and 0.52.5 years as of December 31, 2008. The weighted average maturity of the third party term notes issued by the Broadway Trust was 2.4 years as of September 30, 2009 and 3.3 years as of December 31, 2008.2009.
Omni Trust liabilities:liabilities (at par value)
In billions of dollars | September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Term notes issued to multi- seller CP conduits | $ | 12.3 | $ | 17.8 | ||||||||||
Term notes issued to other third parties | 8.3 | 2.3 | ||||||||||||
Term notes issued to multi- seller commercial paper conduits | $ | 7.2 | $ | 13.1 | ||||||||||
Term notes issued to third parties | 9.2 | 9.2 | ||||||||||||
Term notes retained by Citigroup affiliates | 9.2 | 5.1 | 7.1 | 9.8 | ||||||||||
Commercial paper | 4.4 | 8.5 | — | 4.4 | ||||||||||
Total Omni Trust liabilities | $ | 34.2 | $ | 33.7 | $ | 23.5 | $ | 36.5 | ||||||
Broadway Trust liabilities:
In billions of dollars | September 30, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Term notes issued to multi- seller CP conduits | $ | 0.5 | $ | 0.4 | |||
Term notes issued to other third parties | 1.0 | 1.0 | |||||
Term notes retained by Citigroup affiliates | 0.3 | 0.3 | |||||
Total Broadway Trust liabilities | $ | 1.8 | $ | 1.7 | |||
Citibank (South Dakota), N.A. is the sole provider of full liquidity facilities to the commercial paper programs of the Master and Omni Trusts. Both of these facilities, which represent contractual obligations on the part of Citibank (South Dakota), N.A. to provide liquidity for the issued commercial paper, are made available on market terms to each of the trusts. The liquidity facilities require Citibank (South Dakota), N.A. to purchase the commercial paper issued by each trust at maturity, if the commercial paper does not roll over, as long as there are available credit enhancements outstanding, typically in the form of subordinated notes. As there was no Omni trust commercial paper outstanding as of September 30, 2010, there was no liquidity commitment at that time. The liquidity commitment related to the Omni Trust commercial paper programs amounted to $4.4 billion at September 30, 2009 and $8.5 billion at December 31, 2008.2009. The liquidity commitment related to the Master Trust commercial paper program amounted to $12$5.0 billion at September 30, 20092010 and $11$14.5 billion at December 31, 2008.2009. As of September 30, 20092010 and December 31, 2008,2009, none of the Master Trust or Omni Trust liquidity commitments werecommitment was drawn.
In addition, Citibank (South Dakota), N.A. provideshad provided liquidity to a third-party, non-consolidated multi-seller commercial paper conduit, which is not a VIE. The commercial paper conduit hashad acquired notes issued by the Omni Trust. Citibank (South Dakota), N.A. provides the liquidity facility on market terms. Citibank (South Dakota), N.A. will be required to act in its capacity as liquidity provider as long as there are available credit enhancements outstanding and if: (1) the conduit is unable to roll over its maturing commercial paper; or (2) Citibank (South Dakota), N.A. loses its A-1/P-1 credit rating. The liquidity commitment to the third-party conduit was $5.2 billion at September 30, 2009 and $4$2.5 billion at December 31, 2008. As2009, of September 30, 2009 and December 31, 2008,which none of this liquidity commitment was drawn.
All During 2009, all three of Citigroup's primary credit card securitization trusts have trusts—Master Trust, Omni Trust, and Broadway Trust—had bonds placed on ratings watch with negative implications by rating agencies during the first, second and third quarters of 2009.agencies. As a result of the ratings watch status, certain actions were taken by Citi with respect to each of the trusts. In general, the actions subordinated certain senior interests in the trust assets that were retained by Citigroup,Citi, which effectively placed these interests below investor interests in terms of priority of payment. With
As a result of these actions, based on the applicable regulatory capital rules, Citigroup began including the sold assets for all three of the credit card securitization trusts in its risk-weighted assets for purposes of calculating its risk-based capital ratios during 2009. The increase in risk-weighted assets occurred in the quarter during 2009 in which the respective actions took place. The effect of these changes increased Citigroup's risk-weighted assets by approximately $82 billion, and decreased Citigroup's Tier 1 Capital ratio by approximately 100 basis points each as of March 31, 2009, with respect to the Master Trust, in the first quarterand Omni Trusts. The inclusion of 2009, Citigroup subordinated a portion of its "seller's interest", which represents a senior interest in Trust receivables, thus making those cash flows available to pay investor coupon each month. In addition, during the second quarter of 2009, a subordinated note with a $3 billion principal amount was issued by the Master Trust and retained by Citibank (South Dakota), N.A., in order to provide additional credit support for the senior note classes. The note is classified as held-to-maturity investment securities as Citigroup has the intent and ability to hold the security until its maturity. With respect to the Omni Trust, in the second quarter of 2009, subordinated notes with a principal amount of $2 billion were issued by the Trust and retained by Citibank (South Dakota), N.A., in order to provide additional credit support for the senior note classes. The notes are classified asTrading account assets. These notes are in addition to a $265 million subordinated note issued by Omni Trust and retained by Citibank (South Dakota), N.A. in the fourth quarter of 2008 for the purpose of providing additional credit support for senior noteholders. With respect to the Broadway Trust subordinated notes with a principal amountincreased Citigroup's risk-weighted assets by an additional approximately $900 million at June 30, 2009. With the consolidation of $82 million were issuedthe trusts, beginning in 2010 the credit card receivables that had previously been considered sold under SFAS 140 are now included in the Consolidated Balance Sheet and accordingly these assets continue to be included in Citigroup's risk-weighted assets. All bond ratings for each of the trusts have been affirmed by the Trustrating agencies and retained by Citibank, N.A., in order to provide additional credit support for the senior note classes. The notes are classifiedno downgrades have occurred asTrading account assets. of September 30, 2010.
Mortgage Securitizations
The Company provides a wide range of mortgage loan products to a diverse customer base. In connection with the securitization of these loans, the Company's U.S. Consumer mortgage business retains the servicing rights, which entitle the Company to a future stream of cash flows based on the outstanding principal balances of the loans and the contractual servicing fee. Failure to service the loans in accordance with contractual requirements may lead to a termination of the servicing rights and the loss of future servicing fees. In non-recourse servicing, the principal credit risk to the Company is the cost of temporary advances of funds. In recourse servicing, the servicer agrees to share credit risk with the owner of the mortgage loans, such as FNMA or FHLMC, or with a private investor, insurer or guarantor. Losses on recourse servicing occur primarily when foreclosure sale proceeds of the property underlying a defaulted mortgage loan are less than the outstanding principal balance and accrued interest of the loan and the cost of holding and disposing of the underlying property.
The Company's mortgage loan securitizations are primarily non-recourse, thereby effectively transferring the risk of future credit losses to the purchasers of the securities issued by the trust. Securities and Banking and Special Asset Pool retains servicing for a limited number of its mortgage securitizations.
The Company's Consumer business provides a wide range of mortgage loan products to its customers. Once originated, the Company often securitizes these originated and/or purchased loans through the use of SPEs, which prior to 2010 were QSPEs. These QSPEsSPEs are funded through the issuance of Trust Certificates backed solely by the transferred assets. These certificates have the same average life as the transferred assets. In addition to providing a source of liquidity and less expensive funding, securitizing these assets also reduces the Company's credit exposure to the borrowers. These mortgage loan securitizations are primarily non-recourse, thereby effectively transferring the risk of future credit losses to the purchasers of the securities issued by the trust. However, while the CompanyCompany's Consumer business generally retains the servicing rights and in certain instances retains investment securities, interest-only strips and residual interests in future cash flows from the trusts.trusts, Consumer also services a limited number ofSecurities and Banking's and theSpecial Asset Pool's mortgage securitizations.
Consumer securitizes mortgage loans generally through either a government-sponsored agency, such as Ginnie Mae, FNMA or Freddie Mac (U.S. agency—sponsored mortgages), or private label (Non-agency-sponsored mortgages) securitization. The Company is not the primary beneficiary of its U.S. agency-sponsored mortgage securitizations, because Citigroup does not have the power to direct the activities of the SPE that most significantly impact the entity's economic performance. Therefore, Citi does not consolidate these U.S. agency-sponsored mortgage securitizations.Securities and Banking andSpecial Asset Pool securitize mortgage loans only through non-agency-sponsored securitization. In certain instances, the Company has (1) the power to direct the activities and (2) the obligation to either absorb losses or right to receive benefits that could be potentially significant to its non-agency-sponsored mortgage securitizations and, therefore, is the primary beneficiary and consolidates the SPE.
Mortgage Securitizations—Securitizations—Citicorp
The following tables summarize selected cash flow information related to mortgage securitizations for the three and nine months ended September 30, 20092010 and 2008:2009:
Three months ended September 30, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three months ended September 30, 2009 | Three months ended September 30, 2008 | 2010 | 2009 | ||||||||||||||||
In billions of dollars | U.S. agency sponsoredp mortgages | Non-agency sponsored mortgages | Agency and non-agency sponsored mortgages | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages(1) | Agency- and non-agency- sponsored mortgages | ||||||||||||||
Proceeds from new securitizations | $ | 3.5 | $ | 1.5 | $ | 0.7 | $ | 16.8 | $ | 0.8 | $ | 5.0 | ||||||||
Contractual servicing fees received | — | — | — | 0.1 | — | — | ||||||||||||||
Cash flows received on retained interests and other net cash flows | — | — | — | 0.1 | — | — | ||||||||||||||
Nine months ended September 30, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nine months ended September 30, 2009 | Nine months ended September 30, 2008 | 2010 | 2009 | ||||||||||||||||
In billions of dollars | U.S. agency sponsoredp mortgages | Non-agency sponsored mortgages | Agency and non-agency sponsored mortgages | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages(1) | Agency- and non-agency- sponsored mortgages | ||||||||||||||
Proceeds from new securitizations | $ | 8.8 | $ | 3.2 | $ | 5.9 | $ | 40.0 | $ | 1.9 | $ | 12.0 | ||||||||
Contractual servicing fees received | — | — | — | 0.4 | — | — | ||||||||||||||
Cash flows received on retained interests and other net cash flows | — | — | 0.2 | 0.1 | — | — | ||||||||||||||
Gains (losses) recognized on the securitization of agency sponsored mortgage activity during the third quarter of 2009 were $4 million. For the nine months ended September 30, 2009, gains (losses) recognized on the securitization of agency and non-agency sponsoredU.S. agency-sponsored mortgages were ($2)$(4) million and $21$(1) million respectively.
Agency and non-agency securitization gains (losses) for the three and nine months ended September 30, 20082010, respectively. For the three and nine months ended September 30, 2010, losses recognized on the securitization of non-agency-sponsored mortgages were $1$(1) million and ($14)$(2) million, respectively.
Table of Contents Agency and non-agency mortgage securitization gains for the three and nine months ended September 30, 2009 were $4 million and $19 million, respectively.
Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables for the three months ended September 30, 20092010 and 20082009 are as follows:
| ||||||
---|---|---|---|---|---|---|
| U.S. sponsored mortgages | sponsored mortgages(1) | sponsored mortgages | |||
Discount rate | 2.6% to | |||||
Constant prepayment rate | ||||||
Anticipated net credit losses | ||||||
NM Not meaningful. Anticipated net credit losses are not meaningful due to U.S. agency guarantees.
The range in the key assumptions for retained interests in Securities and Banking is due to the different characteristics of the interests retained by the Company. The interests retained by Securities and Banking and Special Asset Pool range from highly rated and/or senior in the capital structure to unrated and/or residual interests.
The effect of adverse changes of 10% and 20% in each of the key assumptions used to determine the fair value of retained interests is disclosed below. The negative effect of each change is calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact be independent, the net effect of simultaneous adverse changes in the key assumptions may be less than the sum of the individual effects shown below.
At September 30, 2009,2010, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions were as follows:
| September 30, | |||
---|---|---|---|---|
| U.S. sponsored mortgages | sponsored mortgages(1) | ||
Discount rate | 2.6% to | |||
Constant prepayment rate | ||||
Anticipated net credit losses | ||||
In millions of dollars | In millions of dollars | U.S. agency sponsored mortgages | Non-agency sponsored mortgages | In millions of dollars | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages(1) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Carrying value of retained interests | Carrying value of retained interests | $ | 396 | $ | 655 | Carrying value of retained interests | $ | 2,752 | $ | 773 | ||||||
Discount rates | Discount rates | Discount rates | ||||||||||||||
Adverse change of 10% | $ | (8 | ) | $ | (17 | ) | Adverse change of 10% | $ | (73 | ) | $ | (34 | ) | |||
Adverse change of 20% | (15 | ) | (33 | ) | Adverse change of 20% | (142 | ) | (65 | ) | |||||||
Constant prepayment rate | Constant prepayment rate | Constant prepayment rate | ||||||||||||||
Adverse change of 10% | $ | (121 | ) | $ | (17 | ) | ||||||||||
Adverse change of 10% | $ | (2 | ) | $ | (4 | ) | Adverse change of 20% | (235 | ) | (34 | ) | |||||
Adverse change of 20% | (4 | ) | (8 | ) | ||||||||||||
Anticipated net credit losses | Anticipated net credit losses | Anticipated net credit losses | ||||||||||||||
Adverse change of 10% | $ | — | $ | (32 | ) | Adverse change of 10% | $ | (6 | ) | $ | (21 | ) | ||||
Adverse change of 20% | — | (58 | ) | Adverse change of 20% | (12 | ) | (37 | ) | ||||||||
Mortgage Securitizations—Citi Holdings
The following tables summarize selected cash flow information related to Citi Holdings mortgage securitizations for the three and nine months ended September 30, 20092010 and 2008:2009:
Three months ended September 30, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three months ended September 30, 2009 | Three months ended September 30, 2008 | 2010 | 2009 | ||||||||||||||||
In billions of dollars | U.S. agency sponsored mortgages | Non-agency sponsored mortgages | Agency and non-agency sponsored mortgages | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages(1) | Agency- and Non-agency- sponsored mortgages | ||||||||||||||
Proceeds from new securitizations | $ | 15.9 | $ | — | $ | 19.1 | $ | 0.6 | $ | — | $ | 15.9 | ||||||||
Contractual servicing fees received | 0.3 | — | 0.4 | 0.2 | — | 0.3 | ||||||||||||||
Cash flows received on retained interests and other net cash flows | 0.1 | — | 0.2 | — | — | 0.1 | ||||||||||||||
Nine months ended September 30, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nine months ended September 30, 2009 | Nine months ended September 30, 2008 | 2010 | 2009 | ||||||||||||||||
In billions of dollars | U.S. agency sponsored mortgages | Non-agency sponsored mortgages | Agency and non-agency sponsored mortgages | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages(1) | Agency- and Non-agency- sponsored Mortgages | ||||||||||||||
Proceeds from new securitizations | $ | 61.0 | $ | — | $ | 65.5 | $ | 0.6 | $ | — | $ | 61.0 | ||||||||
Contractual servicing fees received | 1.0 | — | 1.1 | 0.6 | 0.1 | 1.0 | ||||||||||||||
Cash flows received on retained interests and other net cash flows | 0.3 | 0.1 | 0.6 | 0.1 | — | 0.4 | ||||||||||||||
The Company did not recognize gains (losses) on the securitization of U.S. agencyagency- and non-agency sponsorednon-agency-sponsored mortgages in the third quarter of 2009, as well as thethree and nine months ended September 30, 2009. There were gains (losses) from the securitization of agency2010 and non-agency sponsored mortgages of ($81) million and ($4) million in the third quarter of 2008 and the nine months ended September 30, 2008, respectively.2009.
Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables for the three months ended September 30, 20092010 and 20082009 are as follows:
| Three months ended September 30, | |||||
---|---|---|---|---|---|---|
2010 | ||||||
| U.S. sponsored mortgages | sponsored mortgages(1) | sponsored mortgages | |||
Discount rate | ||||||
Constant prepayment rate | ||||||
Anticipated net credit losses | — | |||||
The range in the key assumptions for the retained interests in Special Asset Pool is due to the different characteristics of the interests retained by the Company. The interests retained by Securities and Banking range from highly rated and/or senior in the capital structure to unrated and/or residual interests.
The effect of adverse changes of 10% and 20% in each of the key assumptions used to determine the fair value of retained interests is disclosed below. The negative effect of each change is calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact be independent, the net effect of simultaneous adverse changes in the key assumptions may be less than the sum of the individual effects shown below.
At September 30, 2009,2010, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions wereare as follows:
| September 30, | |||
---|---|---|---|---|
| U.S. sponsored mortgages | sponsored Mortgages(1) | ||
Discount rate | ||||
Constant prepayment rate | ||||
Anticipated net credit losses | 0.1% | |||
Weighted average life | ||||
In millions of dollars | In millions of dollars | U.S. agency sponsored mortgages | Non-agency sponsored mortgages | In millions of dollars | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages(1) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Carrying value of retained interests | Carrying value of retained interests | $ | 6,037 | $ | 1,011 | Carrying value of retained interests | $ | 2,157 | $ | 450 | ||||||
Discount rates | Discount rates | Discount rates | ||||||||||||||
Adverse change of 10% | $ | (201 | ) | $ | (41 | ) | Adverse change of 10% | $ | (74 | ) | $ | (16 | ) | |||
Adverse change of 20% | (388 | ) | (79 | ) | Adverse change of 20% | (143 | ) | (31 | ) | |||||||
Constant prepayment rate | Constant prepayment rate | Constant prepayment rate | ||||||||||||||
Adverse change of 10% | $ | (155 | ) | $ | (42 | ) | ||||||||||
Adverse change of 10% | $ | (361 | ) | $ | (51 | ) | Adverse change of 20% | (297 | ) | (81 | ) | |||||
Adverse change of 20% | (693 | ) | (96 | ) | ||||||||||||
Anticipated net credit losses | Anticipated net credit losses | Anticipated net credit losses | ||||||||||||||
Adverse change of 10% | $ | (19 | ) | $ | (44 | ) | Adverse change of 10% | $ | (23 | ) | $ | (24 | ) | |||
Adverse change of 20% | (37 | ) | (86 | ) | Adverse change of 20% | (46 | ) | (49 | ) | |||||||
Mortgage Servicing Rights
In connection with the securitization of mortgage loans, the Company's U.S. Consumer mortgage business retains the servicing rights, which entitle the Company to a future stream of cash flows based on the outstanding principal balances of the loans and the contractual servicing fee. Failure to service the loans in accordance with contractual requirements may lead to a termination of the servicing rights and the loss of future servicing fees.
The fair value of capitalized mortgage loan servicing rights (MSR)(MSRs) was $6.2$4.0 billion and $8.3$6.2 billion at September 30, 20092010 and 2008,2009, respectively. The MSRs correspond to principal loan balances of $577$503 billion and $648$577 billion as of September 30, 20092010 and 2008,2009, respectively. The following table summarizes the changes in capitalized MSRs for the three and nine months ended September 30, 20092010 and 2008:2009:
| Three Months Ended September 30, | Three months ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | 2010 | 2009 | ||||||||||
Balance, at June 30 | $ | 6,770 | $ | 8,934 | ||||||||||
Balance, as of June 30 | $ | 4,894 | $ | 6,770 | ||||||||||
Originations | 267 | 297 | 155 | 267 | ||||||||||
Purchases | — | — | ||||||||||||
Changes in fair value of MSRs due to changes in inputs and assumptions | (490 | ) | (595 | ) | (635 | ) | (490 | ) | ||||||
Transfer toTrading account assets | — | — | ||||||||||||
Other changes(1) | (319 | ) | (290 | ) | (438 | ) | (319 | ) | ||||||
Balance, at September 30 | $ | 6,228 | $ | 8,346 | ||||||||||
Balance, as of September 30 | $ | 3,976 | $ | 6,228 | ||||||||||
| Nine Months Ended September 30, | Nine months ended September 30, | ||||||||||||
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In millions of dollars | 2009 | 2008 | 2010 | 2009 | ||||||||||
Balance, beginning of period | $ | 5,657 | $ | 8,380 | ||||||||||
Balance, as of the beginning of year | $ | 6,530 | $ | 5,657 | ||||||||||
Originations | 893 | 1,066 | 424 | 893 | ||||||||||
Purchases | — | 1 | ||||||||||||
Changes in fair value of MSRs due to changes in inputs and assumptions | 1,027 | (90 | ) | (1,929 | ) | 1,027 | ||||||||
Transfer toTrading account assets | — | (163 | ) | |||||||||||
Other changes(1) | (1,349 | ) | (848 | ) | (1,049 | ) | (1,349 | ) | ||||||
Balance, end of period | $ | 6,228 | $ | 8,346 | ||||||||||
Balance, as of September 30 | $ | 3,976 | $ | 6,228 | ||||||||||
The market for MSRs is not sufficiently liquid to provide participants with quoted market prices. Therefore, the Company uses an option-adjusted spread valuation approach to determine the fair value of MSRs. This approach consists of projecting servicing cash flows under multiple interest rate scenarios and discounting these cash flows using risk-adjusted discount rates. The key assumptions used in the valuation of MSRs include mortgage prepayment speeds and discount
rates. The model assumptions and the MSRs' fair value estimates are compared to observable trades of similar MSR portfolios and interest-only security portfolios, as available, as well as to MSR broker valuations and industry surveys. The cash flow model and underlying prepayment and interest rate models used to value these MSRs are subject to validation in accordance with the Company's model validation policies.
The fair value of the MSRs is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. In managing this risk, the Company economically hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase commitments of mortgage-backed securities and purchased securities classified as trading.
The Company receives fees during the course of servicing previously securitized mortgages. The amountamounts of these fees for the three and nine months ended September 30, 20092010 and 20082009 were as follows:
| Three months ended, | Nine months ended, | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | 2009 | 2008 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Servicing fees | $ | 397 | $ | 429 | $ | 1,255 | $ | 1,261 | $ | 336 | $ | 397 | $ | 1,049 | $ | 1,255 | ||||||||||
Late fees | 23 | 25 | 71 | 75 | 22 | 23 | 67 | 71 | ||||||||||||||||||
Ancillary fees | 18 | 16 | 60 | 50 | 53 | 18 | 145 | 60 | ||||||||||||||||||
Total MSR fees | $ | 438 | $ | 470 | $ | 1,386 | $ | 1,386 | $ | 411 | $ | 438 | $ | 1,261 | $ | 1,386 | ||||||||||
These fees are classified in the Consolidated Statement of Income asCommissions and fees.
Re-securitizations
The Company engages in re-securitization transactions in which debt securities are transferred to a VIE in exchange for new beneficial interests. During the three months and nine months ended September 30, 2010, Citi transferred non-agency (private-label) securities with principal of approximately $3,559 million and $4,642 million, respectively, to re-securitization entities. These securities are backed by either residential or commercial mortgages and are often structured on behalf of clients. For the three months and nine months ended September 30, 2010, Citi recognized losses on the sale of securities to private-label re-securitization entities of approximately $117 million and $118 million, respectively. As of September 30, 2010, the market value of Citi owned interests in non-agency re-securitization transactions structured by Citi totaled approximately $421 million and are recorded in trading assets. Of this amount, approximately $257 million and $163 million relate to senior and subordinated beneficial interests, respectively.
The Company also re-securitizes U.S. government-agency guaranteed mortgage-backed (Agency) securities. For the three and nine month periods ending September 30, 2010, Citi transferred Agency securities with principal of approximately $5,897 million and $18,579 million, respectively, to re-securitization entities. As of September 30, 2010, the market value of Citi owned interests in Agency re-securitization transactions structured by Citi totaled approximately $2,546 million and are recorded in trading assets.
As of September 30, 2010, the Company did not consolidate any private-label or Agency re-securitization entities.
Student Loan Securitizations
Through The Company indirectly owns, through Citibank, N.A., 80% of the Company's outstanding common stock of The Student Loan Corporation (SLC), which is part of Citi Holdings—Local Consumer Lending. As further discussed in Note 2, in the third quarter of 2010, Citi announced the sale of SLC. As part of the transaction, Citi has agreed to sell its residual interests in substantially all of the student loans securitization trusts. These transactions are currently expected to close in the fourth quarter of 2010. At September 30, 2010, approximately $31.4 billion of loans have been transferred to Assets of discontinued operations held for sale.
Through this business, within Citi Holdings, the Company maintains programs to securitize certain portfolios of student loan assets. Under these securitization programs, transactions qualifying as sales are off-balance sheet transactions in which the loans are removed from the Consolidated Financial Statements of the Company and sold to a QSPE. These QSPEsVIEs (some of them being former QSPEs), which are funded through the issuance of pass-through term notes collateralized solely by the trust assets. For
The Company has (1) the power to direct the activities of these off-balance sheetVIEs that most significantly impact their economic performance and (2) the obligation to either absorb losses or the right to receive benefits that could be potentially significant to the VIEs.
As a result of the adoption of SFAS 166 and SFAS 167, the Company consolidated all student loan trusts that were formerly QSPEs, as well as newly created securitization VIEs, as the primary beneficiary. Prior to the adoption of SFAS 166 and SFAS 167, the student loan securitizations through QSPEs were accounted for as off-balance-sheet securitizations, with the Company generally retainsretaining interests in the form of subordinated residual interests (i.e., interest-onlyinterest only strips) and servicing rights.
Under terms of the trust arrangements, the Company has no obligationsobligation to provide financial support and has not provided such support. A substantial portion of the credit risk associated with the securitized loans has been transferred to third-party guarantors or insurers either under the Federal Family Education Loan Program (FFEL Program), authorized by the U.S. Department of Education under the Higher Education Act of 1965, as amended, or through private credit insurance. On March 30, 2010, the Health Care and Education Reconciliation Act of 2010 was signed into law, which eliminated new FFEL Program loan originations. Effective July 1, 2010, in compliance with this regulatory change, SLC ceased originating new FFEL Program loans. This change is not currently anticipated to materially impact the Company's financial statements.
The following tables summarize selected cash flow information related to student loan securitizations for the three and nine months ended September 30, 2010 and 2009 (three months end September 30, 2010 and 2008:2009 are nil):
| |||||||
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| Nine months ended | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | September 30, 2009 | September 30, 2008 | |||||
Proceeds from new securitizations | $ | — | $ | 2.0 | |||
Proceeds from collections reinvested in new receivables | — | — | |||||
Contractual servicing fees received | 0.1 | 0.1 | |||||
Cash flows received on retained interests and other net cash flows | 0.1 | 0.1 | |||||
The Company did not recognize any gains or losses during the third quarters of 2009 and 2008. The company recognized a gain of $1 million during the 9 months ended September 30, 2008.
Key assumptions used in measuring the fair value of the residual interest at the date of sale or securitization of Citi Holding's student loan receivables for the three months ended September 30, 2009 and 2008, respectively, are as follows:
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At September 30, 2009, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions were as follows:
| ||
| ||
| ||
|
In millions of dollars | Retained interests | ||||
---|---|---|---|---|---|
Carrying value of retained interests | $ | 1,045 | |||
Discount rates | |||||
Adverse change of 10% | $ | (29 | ) | ||
Adverse change of 20% | (55 | ) | |||
Constant prepayment rate | |||||
Adverse change of 10% | $ | (4 | ) | ||
Adverse change of 20% | (9 | ) | |||
Anticipated net credit losses | |||||
Adverse change of 10% | $ | (5 | ) | ||
Adverse change of 20% | (10 | ) | |||
| Nine months ended September 30, | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | 2010 | 2009 | |||||
Contractual servicing fees received | $ | — | $ | 0.1 | |||
Cash flows received on retained interests and other net cash flows | — | 0.1 |
On-Balance Sheet Securitizations—Citi Holdings
The Company engages in on-balance sheet securitizations. These are securitizations that do not qualify for sales treatment; thus, the assets remain on the Company's balance sheet. The following table presents the carrying amounts and classification of consolidated assets and liabilities transferred in transactions from the Consumer credit card, student loan, mortgage and auto businesses, accounted for as secured borrowings:
In billions of dollars | September 30, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Cash | $ | 0.7 | $ | 0.3 | |||
Available-for-sale securities | 0.1 | 0.1 | |||||
Loans | 21.8 | 7.5 | |||||
Allowance for loan losses | (0.2 | ) | (0.1 | ) | |||
Other | 1.0 | — | |||||
Total assets | $ | 23.4 | $ | 7.8 | |||
Long-term debt | $ | 17.2 | $ | 6.3 | |||
Other liabilities | 3.9 | 0.3 | |||||
Total liabilities | $ | 21.1 | $ | 6.6 | |||
All assets are restricted from being sold or pledged as collateral. The cash flows from these assets are the only source used to pay down the associated liabilities, which are non-recourse to the Company's general assets.
Citi-Administered Asset-Backed Commercial Paper Conduits
The Company is active in the asset-backed commercial paper conduit business as administrator of several multi-seller commercial paper conduits, and also as a service provider to single-seller and other commercial paper conduits sponsored by third parties.
The multi-seller commercial paper conduits are designed to provide the Company's customersclients access to low-cost funding in the commercial paper markets. The conduits purchase assets from or provide financing facilities to customersclients and are funded by issuing commercial paper to third-party investors. The conduits generally do not purchase assets originated by the Company. The funding of the conduit is facilitated by the liquidity support and credit enhancements provided by the Company.
As administrator to the conduits, the Company is generally responsible for selecting and structuring assets purchased or financed by the conduits, making decisions regarding the funding of the conduits, including determining the tenor and other features of the commercial paper issued, monitoring the quality and performance of the conduits' assets, and facilitating the operations and cash flows of the conduits. In return, the Company earns structuring fees from customers for individual transactions and earns an administration fee from the conduit, which is equal to the income from client program and liquidity fees of the conduit after payment of interest costs and other fees. This administration fee is fairly stable, since most risks and rewards of the underlying assets are passed back to the customersclients and, once the asset pricing is negotiated, most ongoing income, costs and fees are relatively stable as a percentage of the conduit's size.
The conduits administered by the Company do not generally invest in liquid securities that are formally rated by third parties. The assets are privately negotiated and structured transactions that are designed to be held by the conduit, rather than actively traded and sold. The yield earned by the conduit on each asset is generally tied to the rate on the commercial paper issued by the conduit, thus passing interest rate risk to the client. Each asset purchased by the conduit is structured with transaction-specific credit enhancement features provided by the third-party client seller, including over-collateralization,over collateralization, cash and excess spread collateral accounts, direct recourse or third-party guarantees. These credit enhancements are sized with the objective of approximating a credit rating of A or above, based on the Company's internal risk ratings.
Substantially all of the funding of the conduits is in the form of short-term commercial paper, with a weighted average life generally ranging from 30-4530 to 60 days. As of September 30, 20092010 and December 31, 2008,2009, the weighted average lifelives of the commercial paper issued wasby consolidated and unconsolidated conduits were approximately 4757 days and 3743 days, respectively. In addition, the conduits have issued subordinate loss notes and equity with a notional amount of approximately $76 million and varying remaining tenors ranging from 10 month to 6 years.
The primary credit enhancement provided to the conduit investors is in the form of transaction-specific credit enhancement described above. In addition, there are generally two additional forms of credit enhancement that protect the commercial paper investors from defaulting assets. First, the subordinate loss notes issued by each conduit absorb any credit losses up to their full notional amount. It is expected that the subordinate loss notes issued by each unconsolidated conduit are sufficient to absorb a majority of the expected losses from each conduit, thereby making the single investor in the subordinate loss note the primary beneficiary. Second, each conduit has obtained a letter of credit from the Company, which is generallyneeds to be sized to at least 8-10% of the conduit's assets. The letters of credit provided by the Company to the consolidated conduits total approximately $3.7 billion and are included in the Company's maximum exposure to loss.$3.4 billion. The net result across all multi-seller conduits administered by the Company is that, in the event defaulted assets exceed the transaction-specific credit enhancement described above, any losses in each conduit are allocated in the following order:
The Company also provides the conduits with two forms of liquidity agreements that are used to provide funding to the conduits in the event of a market disruption, among other events. Each asset of the conduit is supported by a transaction-specific liquidity facility in the form of an asset purchase agreement (APA). Under the APA, the Company has agreed to purchase non-defaulted eligible receivables from the conduit at par. Any assets purchased under the APA are subject to increased pricing. The APA is not designed to provide credit support to the conduit, as it generally does not permit the purchase of defaulted or impaired assets and generally reprices
the assets purchased to consider potential increased credit risk. The APA covers all assets in the conduits and is considered in the Company's maximum exposure to loss. In addition, the Company provides the conduits with program-wide liquidity in the form of short-term lending commitments. Under these commitments, the Company has agreed to lend to the conduits in the event of a short-term disruption in the commercial paper market, subject to specified conditions. The total notional exposure under the program-wide liquidity agreement for the Company's unconsolidated administered conduit as of September 30, 2010, is $11.3$0.6 billion and is considered in the Company's maximum exposure to loss. The Company receives fees for providing both types of liquidity agreement and considers these fees to be on fair market terms.
Finally, the Company is one of several named dealers in the commercial paper issued by the conduits and earns a market-based fee for providing such services. Along with third-party dealers, the Company makes a market in the commercial paper and may from time to time fund commercial paper pending sale to a third party. On specific dates with less liquidity in the market, the Company may hold in inventory commercial paper issued by conduits administered by the Company, as well as conduits administered by third parties. The amount of commercial paper issued by its administered conduits held in inventory fluctuates based on market conditions and activity. As of September 30, 2009,2010, the Company owned $109 millionnone of the commercial paper issued by its unconsolidated administered conduits.conduit.
Upon adoption of SFAS 167 on January 1, 2010, with the exception of the government-guaranteed loan conduit described below, the asset-backed commercial paper conduits were consolidated by the Company. The Company determined that through its role as administrator it had the power to direct the activities that most significantly impacted the entities' economic performance. These powers included
its ability to structure and approve the assets purchased by the conduits, its ongoing surveillance and credit mitigation activities, and its liability management. In addition, as a result of all the Company's involvement described above, it was concluded that the Company had an economic interest that could potentially be significant. However, the assets and liabilities of the Conduits are separate and apart from those of Citigroup. No assets of any Conduit are available to satisfy the creditors of Citigroup or any of its other subsidiaries.
The Company administers one conduit that originates loans to third-party borrowers and those obligations are fully guaranteed primarily by AAA-rated government agencies that support export and development financing programs. The economic performance of this government-guaranteed loan conduit is most significantly impacted by the performance of its underlying assets. The guarantors must approve each loan held by the entity and the guarantors have the ability (through establishment of the servicing terms to direct default mitigation and to purchase defaulted loans) to manage the conduit's loans that become delinquent to improve the economic performance of the conduit. Because the Company does not have the power to direct the activities of this government-guaranteed loan conduit that most significantly impact the economic performance of the entity, it was concluded that the Company should not consolidate the entity. As of September 30, 2010, this unconsolidated government-guaranteed loan conduit held assets of approximately $7.6 billion.
Prior to January 1, 2010, the Company was required to quantitatively analyze the expected variability of theeach conduit quantitatively to determine whether the Company iswas the primary beneficiary of the conduit. The Company performsperformed this analysis on a quarterly basis. For conduits where the subordinate loss notes or third-party guarantees arewere sufficient to absorb a majority of the expected loss of the conduit, the Company doesdid not consolidate. In circumstances where the subordinate loss notes or third-party guarantees arewere insufficient to absorb a majority of the expected loss, the Company consolidatesconsolidated the conduit as its primary beneficiary due to the additional credit enhancement provided by the Company. In conducting this analysis, the Company considersconsidered three primary sources of variability in the conduit: credit risk, interest-rateinterest rate risk and fee variability.
The Company models the credit risk of the conduit's assets using a Credit Value at Risk (C-VAR) model. The C-VAR model considers changes in credit spreads (both within a rating class as well as due to rating upgrades and downgrades), name-specific changes in credit spreads, credit defaults and recovery rates and diversification effects of pools of financial assets. The model incorporates data from independent rating agencies as well as the Company's own proprietary information regarding spread changes, ratings transitions and losses given default. Using this credit data, a Monte Carlo simulation is performed to develop a distribution of credit risk for the portfolio of assets owned by each conduit, which is then applied on a probability-weighted basis to determine expected losses due to credit risk. In addition, the Company continuously monitors the specific credit characteristics of the conduit's assets and the current credit environment to confirm that the C-VAR model used continues to incorporate the Company's best information regarding the expected credit risk of the conduit's assets.
The Company also analyzes the variability in the fees that it earns from the conduit using monthly actual historical cash flow data to determine average fee and standard deviation measures for each conduit. Because any unhedged interest rate and foreign-currency risk not contractually passed on to customers is absorbed by the fees earned by the Company, the fee variability analysis incorporates those risks.
The fee variability and credit risk variability are then combined into a single distribution of the conduit's overall returns. This return distribution is updated and analyzed on at least a quarterly basis to ensure that the amount of the subordinate loss notes issued to third parties is sufficient to absorb greater than 50% of the total expected variability in the conduit's returns. The expected variability absorbed by the subordinate loss note investors is therefore measured to be greater than the expected variability absorbed by the Company through its liquidity arrangements and other fees earned, and the investors in commercial paper and medium-term notes. While the notional amounts of the subordinate loss notes are quantitatively small compared to the size of the conduits, this is reflective of the fact that most of the substantive risks of the conduits are absorbed by the enhancements provided by the sellers (customers) and other third parties that provide transaction-level credit enhancement. Because these risks and related enhancements are generally required to be excluded from the analysis, the remaining risks and expected variability are quantitatively small. The calculation of variability focuses primarily onexpected variability, rather than the risks associated with extreme outcomes (for example, large levels of default) that are expected to occur very infrequently. So while the subordinate loss notes are sized appropriately compared to expected losses, they do not provide significant protection against extreme or unusual credit losses. Where such credit losses occur or become expected to occur, the Company would consolidate the conduit due to the additional credit enhancement provided by the Company.
Third-Party Commercial Paper Conduits
The Company also provides liquidity facilities to single- and multi-seller conduits sponsored by third parties. These conduits are independently owned and managed and invest in a variety of asset classes, depending on the nature of the conduit. The facilities provided by the Company typically represent a small portion of the total liquidity facilities obtained by each conduit, and are collateralized by the assets of each conduit. As of September 30, 2009,2010, the notional amount of these facilities was approximately $903$838 million, and $298of which $288 million was funded under these facilities. The Company is not the party that has the power to direct the activities of these conduits that most significantly impact their economic performance and thus does not consolidate them.
Collateralized Debt and Loan Obligations
A securitized collateralized debt obligation (CDO) is an SPE that purchases a pool of assets consisting of asset-backed securities and synthetic exposures through derivatives on asset-backed securities and issues multiple tranches of equity and notes to investors. A third-party asset manager is typically retained by the CDO to select the pool of assets and manage those assets over the term of the CDO. The Company earns fees for
warehousing assets prior to the creation of a CDO, structuring CDOs and placing debt securities with investors. In addition, the Company has retained interests in many of the CDOs it has structured and makes a market in those issued notes.
A cash CDO, or arbitrage CDO, is a CDO designed to take advantage of the difference between the yield on a portfolio of selected assets, typically residential mortgage-backed securities, and the cost of funding the CDO through the sale of notes to investors. "Cash flow" CDOs are vehicles in which the CDO passes on cash flows from a pool of assets, while "market value" CDOs pay to investors the market value of the pool of assets owned by the CDO at maturity. Both types of CDOs are typically managed by a third-party asset manager. In these transactions, all of the equity and notes issued by the CDO are funded, as the cash is needed to purchase the debt securities. In a typical cash CDO, a third-party investment manager selects a portfolio of assets, which the Company funds through a warehouse financing arrangement prior to the creation of the CDO. The Company then sells the debt securities to the CDO in exchange for cash raised through the issuance of notes. The Company's continuing involvement in cash CDOs is typically limited to investing in a portion of the notes or loans issued by the CDO and making a market in those securities, and acting as derivative counterparty for interest rate or foreign currency swaps used in the structuring of the CDO.
A synthetic CDO is similar to a cash CDO, except that the CDO obtains exposure to all or a portion of the referenced assets synthetically through derivative instruments, such as credit default swaps. Because the CDO does not need to raise cash sufficient to purchase the entire referenced portfolio, a substantial portion of the senior tranches of risk is typically passed on to CDO investors in the form of unfunded liabilities or derivative instruments. Thus, the CDO writes credit protection on select referenced debt securities to the Company or third parties and the risk is then passed on to the CDO investors in the form of funded notes or purchased credit protection through derivative instruments. Any cash raised from investors is invested in a portfolio of collateral securities or investment contracts. The collateral is then used to support the CDO's obligations of the CDO on the credit default swaps written to counterparties. The Company's continuing involvement in synthetic CDOs generally includes purchasing credit protection through credit default swaps with the CDO, owning a portion of the capital structure of the CDO in the form of both unfunded derivative positions (primarily super seniorsuper-senior exposures discussed below) and funded notes, entering into interest-rate swap and total-return swap transactions with the CDO, lending to the CDO, and making a market in those funded notes.
A securitized collateralized loan obligation (CLO) is substantially similar to the CDO transactions described above, except that the assets owned by the SPE (either cash instruments or synthetic exposures through derivative instruments) are corporate loans and to a lesser extent corporate bonds, rather than asset-backed debt securities.
Where a CDO vehicle issues preferred shares, the preferred shares generally represent an insufficient amount of equity
(less than 10%) and create the presumption that the preferred shares are insufficient to finance the entity's activities without subordinated financial support. In addition, although the preferred shareholders generally have full exposure to expected losses on the collateral and uncapped potential to receive expected residual rewards, it is not always clear whether they have the ability to make decisions about the entity that have a significant effect on the entity's financial results because of their limited role in making day-to-day decisions and their limited ability to remove the third-party asset manager. Because one or both of the above conditions will generally be met, we have assumed that, even where a CDO vehicle issued preferred shares, the vehicle should be classified as a VIE.
Consolidation and subsequent deconsolidation of CDOs
Substantially all of the CDOs that the Company is involved with are managed by a third-party asset manager. In general, the third-party asset manager, through its ability to purchase and sell assets or, where the reinvestment period of a CDO has expired, the ability to sell assets, will have the power to direct the activities of the vehicle that most significantly impact the economic performance of the CDO. However, where a CDO has experienced an event of default, the activities of the third-party asset manager may be curtailed and certain additional rights will generally be provided to the investors in a CDO vehicle, including the right to direct the liquidation of the CDO vehicle.
The Company has retained significant portions of the "super senior""super-senior" positions issued by certain CDOs. These positions are referred to as "super senior""super-senior" because they represent the most senior positions in the CDO and, at the time of structuring, were senior to tranches rated AAA by independent rating agencies. These positions include facilities structured in the form of short-term commercial paper, where the Company wrote put options ("liquidity puts") to certain CDOs. Under the terms of the liquidity puts, if the CDO was unable to issue commercial paper at a rate below a specified maximum (generally LIBOR + 35 bps to LIBOR + 40 bps), the Company was obligated to fund the senior tranche of the CDO at a specified interest rate. As of September 30, 2009,2010, the Company no longer had purchasedexposure to this commercial paper as all $25 billion of the commercial paper subject to these liquidity puts.underlying CDOs had been liquidated.
Since the inception of many CDO transactions, the subordinate tranches of the CDOs have diminished significantly in value and in rating. The declines in value of the subordinate tranches and in the super seniorsuper-senior tranches indicate that the super seniorsuper-senior tranches are now exposed to a significant portion of the expected losses of the CDOs, based on current market assumptions.
The Company evaluatesdoes not generally have the power to direct the activities of the vehicle that most significantly impact the economic performance of the CDOs as this power is held by the third-party asset manager of the CDO. As such, certain synthetic and cash CDOs that were consolidated under ASC 810, were deconsolidated upon the adoption of SFAS 167. The deconsolidation of certain synthetic CDOs resulted in the recognition of current receivables and payables related to purchased and written credit default swaps entered into by Citigroup with the CDOs, which had previously been eliminated upon consolidation of these transactionsvehicles.
Where: (i) an event of default has occurred for consolidation when reconsideration events occur.
Upon a reconsideration event,CDO vehicle, (ii) the Company has the unilateral ability to remove the third-party asset manager without cause or liquidate the CDO, and (iii) the Company has exposure to the vehicle that is potentially significant to the vehicle, the Company will consolidate the CDO. In addition, where the Company is at risk for consolidation only ifthe asset manager of the CDO vehicle and has exposure to the vehicle that is potentially significant, the Company owns a majoritywill generally consolidate the CDO.
The net impact of either a single tranche or a groupadopting SFAS 167 for CDOs was an increase in the Company's assets of tranches that absorb the remaining risk$1.9 billion and liabilities of the CDO. Due to reconsideration events during 2007 and 2008, the Company has consolidated 30$1.9 billion as of the 46 CDOs/CLOs in which the Company holds a majority of the senior interests of the transaction.
January 1, 2010. The Company continues to monitor its involvement in unconsolidated VIEs and ifCDOs. If the Company were to acquire additional interests in these vehicles, be provided the right to direct the activities of a CDO (if the Company obtains the unilateral ability to remove the third-party asset manager without cause or liquidate the CDO), or if the CDOs' contractual arrangements were to be changed to reallocate expected losses or residual returns among the various interest holders, the Company may be required to consolidate the CDOs. For cash CDOs, the net result of such consolidation would be to gross up the Company's balance sheet by the current fair value of the subordinate securities held by third parties, whichwhose amounts are not considered material. For synthetic CDOs, the net result of such consolidation may reduce the Company's balance sheet by eliminating intercompany derivative receivables and payables in consolidation.
Cash FlowsKey Assumptions and Retained Interests—Citi Holdings
The following tables summarize selected cash flow information related to CDO and CLO securitizations for the three and nine months ended September 30, 2009:
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The key assumptions, used for the securitization of CDOs and CLOs during the three monthsquarter ended September 30, 2009,2010, in measuring the fair value of retained interests at the date of sale or securitization are as follows:
| CDOs | CLOs | ||
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Discount rate | ||||
The effect of two negative changes in discount rates used to determine the fair value of retained interests is disclosed below.
In millions of dollars | In millions of dollars | CDOs | CLOs | In millions of dollars | CDOs | CLOs | ||||||||||
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Carrying value of retained interests | Carrying value of retained interests | $ | 251 | $ | 709 | Carrying value of retained interests | $ | 51 | $ | 661 | ||||||
Discount rates | Discount rates | Discount rates | ||||||||||||||
Adverse change of 10% | $ | (24 | ) | $ | (11 | ) | Adverse change of 10% | $ | (5 | ) | $ | (8 | ) | |||
Adverse change of 20% | (47 | ) | (23 | ) | Adverse change of 20% | (11 | ) | (17 | ) | |||||||
Asset-Based Financing—CiticorpFinancing
The Company provides loans and other forms of financing to VIEs that hold assets. Those loans are subject to the same credit approvals as all other loans originated or purchased by the Company. Financings in the form of debt securities or derivatives are, in most circumstances, reported inTrading account assets and accounted for at fair value through earnings. The Company does not have the power to direct the activities that most significantly impact these VIEs' economic performance and thus it does not consolidate them.
Asset-Based Financing—Citicorp
The primary types of Citicorp's asset-based financing, total assets of the unconsolidated VIEs with significant involvement and the Company's maximum exposure to loss at September 30, 20092010 are shown below. For the Company to realize that maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.
In billions of dollars Type | Total assets | Maximum exposure | ||||||||||||
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In billions of dollars | Total assets | Maximum exposure | ||||||||||||
Type | ||||||||||||||
Commercial and other real estate | $ | 0.6 | $ | — | $ | 0.6 | $ | 0.1 | ||||||
Hedge funds and equities | 5.8 | 3.1 | 8.6 | 3.7 | ||||||||||
Airplanes, ships and other assets | 11.9 | 2.1 | 7.6 | 3.7 | ||||||||||
Total | $ | 18.3 | $ | 5.2 | $ | 16.8 | $ | 7.5 | ||||||
Asset-Based Financing—Citi Holdings
The Company provides loans and other forms of financing to VIEs that hold assets. Those loans are subject to the same credit approvals as all other loans originated or purchased by the Company. Financings in the form of debt securities or derivatives are, in most circumstances, reported inTrading account assets and accounted for at fair value through earnings.
The primary types of Citi Holdings' asset-based financing, total assets of the unconsolidated VIEs with significant involvement and the Company's maximum exposure to loss at September 30, 20092010 are shown below. For the Company to realize that maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.
In billions of dollars Type | Total assets | Maximum exposure | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Total assets | Maximum exposure | ||||||||||||
Type | ||||||||||||||
Commercial and other real estate | $ | 36.9 | $ | 7.0 | $ | 29.0 | $ | 5.2 | ||||||
Hedge funds and equities | 2.2 | 0.8 | ||||||||||||
Corporate loans | 7.9 | 6.7 | 7.6 | 6.4 | ||||||||||
Airplanes, ships and other assets | 6.0 | 3.4 | 4.6 | 2.2 | ||||||||||
Total | $ | 53.0 | $ | 17.9 | $ | 41.2 | $ | 13.8 | ||||||
The following table summarizes selected cash flow information related to asset-based financing for the three and nine months ended September 30, 20092010 and 2008:2009:
| Three months ended September 30, | Three months ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | 2009 | 2008 | 2010 | 2009 | ||||||||||
Cash flows received on retained interests and other net cash flows | $ | 0.4 | $ | — | $ | 0.2 | $ | 0.1 | ||||||
| Nine months ended September 30, | Nine months ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | 2009 | 2008 | 2010 | 2009 | ||||||||||
Cash flows received on retained interests and other net cash flows | $ | 2.4 | $ | — | $ | 1.2 | $ | 2.0 | ||||||
The effect of two negative changes in discount rates used to determine the fair value of retained interests is disclosed below.
In millions of dollars | In millions of dollars | Asset based financing | In millions of dollars | Asset-based financing | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Carrying value of retained interests | Carrying value of retained interests | $ | 6,882 | Carrying value of retained interests | $ | 6,441 | ||||
Value of underlying portfolio | Value of underlying portfolio | Value of underlying portfolio | ||||||||
Adverse change of 10% | $ | — | Adverse change of 10% | $ | — | |||||
Adverse change of 20% | (436 | ) | Adverse change of 20% | (221 | ) | |||||
Municipal Securities Tender Option Bond (TOB) Trusts
The Company sponsors TOB trusts that hold fixed- and floating-rate, tax-exempt securities issued by state or local municipalities. The trusts are typically single-issuer trusts whose assets are purchased from the Company and from the secondary market. The trusts issueare referred to as Tender Option Bond trusts because the senior interest holders have the ability to tender their interests periodically back to the issuing trust, as described further below.
The TOB trusts fund the purchase of their assets by issuing long-term senior floating rate notes (Floaters) and junior residual securities (Residuals). The Floaters and the Residuals have a long-term rating based ontenor equal to the long-term ratingmaturity of the trust, which is equal to or shorter than the tenor of the underlying municipal bondbond. Residuals are frequently less than 1% of a trust's total funding and a short-term rating based on that ofentitle their holder to the liquidity provider toresidual cash flows from the issuing trust. The Residuals are generally rated based on the long-term rating of the underlying municipal bond and entitle the holder to the residual cash flows from the issuing trust.
bond. The Company sponsors three kinds of TOB trusts: customer TOB trusts, proprietary TOB trusts and QSPE TOB trusts.
Credit rating distribution is based on the external rating of the municipal bonds within the TOB trusts, including any credit enhancement provided by monoline insurance companies or the Company in the primary or secondary markets, as discussed below. The total assets for proprietary TOB Trusts (consolidated and non-consolidated) includes $0.8 billion of assets where the Residuals are held by a hedge fund that is consolidated and managed by the Company.
The TOB trusts fund the purchase of their assets by issuing Floaters along with Residuals, which are frequently less than 1% of a trust's total funding. The tenor of the Floaters matches the maturity of the TOB trust and is equal to or shorter than the tenor of the municipal bond held by the trust, and the Floaters bear interest rates that are typically reset weekly to a new market rate (based on the SIFMA index)index: a seven day high grade market index of tax exempt, variable rate municipal bonds). Floater holders have an option to tender thetheir Floaters they hold back to the trust periodically. The Floaters have a long-term rating based on the long-term rating of the underlying municipal bond, including any credit enhancement provided by monoline insurance companies, and a short-term rating based on that of the liquidity provider to the trust.
The Company sponsors two kinds of TOB trusts: customer TOB trusts and proprietary TOB trusts. Customer TOB trusts issue the Floaters and Residuals to third parties. Proprietary and QSPE TOBare trusts issue the Floaters to third parties and thethrough which customers finance investments in municipal securities. The Residuals are held by customers, and the Company.
Approximately $2.2 billion of the municipal bonds ownedFloaters by third-party investors. Proprietary TOB trusts have an additional credit guarantee provided by the Company. In all other cases, the assets are either unenhanced or are insured with a monoline insurance provider in the primary market or in the secondary market. While the trusts have not encountered any adverse credit events as defined in the underlying trust agreements, certain monoline insurance companies have experienced downgrades. In these cases,through which the Company has proactively managedfinances its own investments in municipal securities. The Company holds the Residuals in proprietary TOB programs by applying additional secondary market insurance on the assets or proceeding with orderly unwinds of the trusts.
The Company in its capacityserves as remarketing agent facilitatesto the trusts, facilitating the sale of the Floaters to third parties at inception of the trust and facilitatesfacilitating the reset of the Floater coupon and tenders of Floaters. If Floaters are tendered and the Company (in its role as remarketing agent) is unable to find a new investor within a specified period of time, it can declare a failed remarketing (in which case the trust is unwound) or it may choose to buy the Floaters into its own inventory and may continue to try to sell itthem to a third-party investor. While the level of the Company's inventory of Floaters fluctuates, the Company held none of the Floater inventory related to the Customer, Proprietary and QSPEcustomer or proprietary TOB programs as of September 30, 2009.2010.
Approximately $0.8 billion of the municipal bonds owned by TOB trusts have a credit guarantee provided by the Company. In all other cases, the assets are either unenhanced or are insured with a monoline insurance company. While the trusts have not encountered any adverse credit events as defined in the underlying trust agreements, certain monoline insurance companies have experienced downgrades. In these cases, the Company has proactively managed the TOB programs by applying additional insurance on the assets or proceeding with orderly unwinds of the trusts.
If a trust is unwound early due to an event other than a credit event on the underlying municipal bond, the underlying municipal bond is sold in the secondary market. If there is an accompanying shortfall in the trust's cash flows to fund the redemption of the Floaters after the sale of the
underlying municipal bond, the trust draws on a liquidity agreement in an amount equal to the shortfall. Liquidity agreements are generally provided to the trust directly by the Company. For customer TOBs where the Residual is less than 25% of the trust's capital structure, the Company has a reimbursement agreement with the Residual holder under which the Residual holder reimburses the Company for any payment made under the liquidity arrangement. Through this reimbursement agreement, the Residual holder remains economically exposed to fluctuations in value of the municipal bond. These reimbursement agreements are actively margined based on changes in value of the underlying municipal bond to mitigate the Company's counterparty credit risk. In cases where a third party provides liquidity to a proprietary or QSPE TOB trust, a similar reimbursement arrangement is made whereby the Company (or a consolidated subsidiary of the Company) as Residual holder absorbs any losses incurred by the liquidity provider. As of September 30, 2009,2010, liquidity agreements provided with respect to customer TOB trusts, and other non-consolidated, customer-sponsored municipal investment funds, totaled $6.1$7.3 billion, offset by reimbursement agreements in place with a notional amount of $4.6$5.8 billion. The remaining exposure relates to TOB transactions where the Residual owned by the customer is at least 25% of the bond value at the inception of the transaction.transaction and no reimbursement agreement is executed. In addition, the Company has provided
liquidity arrangements with a notional amount of $0.2$0.1 billion to QSPE TOB trusts andfor other non-consolidated proprietary TOB trusts described above.below.
The Company considers the customer and proprietary TOB trusts (excluding QSPE TOB trusts) to be VIEs. Customer TOB trusts were not consolidated by the Company in prior periods and remain unconsolidated upon the Company's adoption of SFAS 167. Because third-party investors hold the Residual and Floater interests in the customer TOB trusts, the Company's involvement and variable interests includeincludes only its role as remarketing agent and liquidity provider. OnThe Company has concluded that the basis of the variability absorbedpower over customer TOB trusts is primarily held by the customer throughResidual holder, who may unilaterally cause the reimbursement arrangement or significant residual investment,sale of the trust's bonds. Because the Company does not hold the Residual interest and thus does not have the power to direct the activities that most significantly impact the trust's economic performance, it does not consolidate the Customercustomer TOB trusts.trusts under SFAS 167.
Proprietary TOB trusts generally were consolidated in prior periods. They remain consolidated upon the Company's adoption of SFAS 167. The Company's variable interests ininvolvement with the Proprietary TOB trusts includeincludes holding the Residual interests as well as the remarkingremarketing and liquidity agreements with the trusts. On the basis of the variability absorbed through these contracts (primarily the Residual),Similar to customer TOB trusts, the Company generally consolidateshas concluded that the Proprietary TOB trusts. Finally, certainpower over the proprietary TOB trusts is primarily held by the Residual holder, who may unilaterally cause the sale of the trust's bonds. Because the Company holds the Residual interest, and thus has the power to direct the activities that most significantly impact the trust's economic performance, it continues to consolidate the proprietary TOB trusts under SFAS 167.
Prior to 2010, certain TOB trusts met the definition of a QSPE and were not consolidated in prior periods. Upon the Company's adoption of SFAS 167, former QSPE trusts have been consolidated by the Company as Residual interest holders and are presented as proprietary TOB trusts.
Total assets in proprietary TOB trusts also include $0.5 billion of assets where the Residuals are held by hedge funds that are consolidated and managed by the Company. The assets and the associated liabilities of these TOB trusts are not consolidated by the hedge funds (and, thus, are not consolidated by the Company) under the application of specificASC 946,Financial Services—Investment Companies, which precludes consolidation of owned investments. The Company consolidates the hedge funds, because the Company holds controlling financial interests in the hedge funds. Certain of the Company's equity investments in the hedge funds are hedged with derivatives transactions executed by the Company with third parties referencing the returns of the hedge fund. The Company's accounting literature. Forfor these hedge funds and their interests in the nonconsolidated proprietary TOB trusts and QSPE TOB trusts, the Company recognizes only its residual investment on its balance sheet at fair value and the third-party financing raisedis unchanged by the trusts is off-balance sheet.
The following table summarizes selected cash flow information related to Citicorp's municipal bond securitizations for the three and nine months ended September 30, 2009 and 2008:
| Three months ended September 30, | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | 2009 | 2008 | |||||
Proceeds from new securitizations | $ | 0.1 | $ | 0.6 | |||
Cash flows received on retained interests and other net cash flows | $ | 0.1 | $ | 0.1 | |||
| Nine months ended September 30, | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | 2009 | 2008 | |||||
Proceeds from new securitizations | $ | 0.3 | $ | 1.1 | |||
Cash flows received on retained interests and other net cash flows | $ | 0.7 | $ | 0.4 | |||
The following table summarizes selected cash flow information related to Citi Holdings' municipal bond securitizations for the three and nine months ended September 30, 2009 and 2008:
| |||||||
| |||||||
| Nine months ended September 30, | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | 2009 | 2008 | |||||
Proceeds from new securitizations | $ | — | $ | 0.1 | |||
Cash flows received on retained interests and other net cash flows | $ | — | $ | — | |||
Municipal Investments
Municipal investment transactions representare primarily interests in partnerships that finance the construction and rehabilitation of low-income affordable rental housing.housing, facilitate lending in new or underserved markets, or finance the construction or operation of renewable municipal energy facilities. The Company generally invests in these partnerships as a limited partner and earns a return primarily through the receipt of tax credits and grants earned from the affordable housing investments made by the partnership. These entities are generally considered VIEs. The power to direct the activities of these entities is typically held by the general partner. Accordingly, these entities have remained unconsolidated by the Company upon adoption of SFAS 167.
Client Intermediation
Client intermediation transactions represent a range of transactions designed to provide investors with specified returns based on the returns of an underlying security, referenced asset or index. These transactions include credit-linked notes and equity-linked notes. In these transactions, the SPE typically obtains exposure to the underlying security, referenced asset or index through a derivative instrument, such as a total-return swap or a credit-default swap. In turn the SPE issues notes to investors that pay a return based on the specified underlying security, referenced asset or index. The SPE invests the proceeds in a financial asset or a guaranteed insurance contract (GIC) that serves as collateral for the
derivative contract over the term of the transaction. The Company's involvement in these transactions includes being the counterparty to the SPE's derivative instruments and investing in a portion of the notes issued by the SPE. In certain transactions, the investor's maximum risk of loss is limited and the Company absorbs risk of loss above a specified level. The Company does not have the power to direct the activities of the VIEs which most significantly impact their economic performance and thus it does not consolidate them.
The Company's maximum risk of loss in these transactions is defined as the amount invested in notes issued by the SPE and the notional amount of any risk of loss absorbed by the Company through a separate instrument issued by the SPE. The derivative instrument held by the Company may generate a receivable from the SPE (for example, where the Company purchases credit protection from the SPE in connection with the SPE's issuance of a credit-linked note), which is collateralized by the assets owned by the SPE. These
derivative instruments are not considered variable interests and any associated receivables are not included in the calculation of maximum exposure to the SPE.
Structured Investment Vehicles
Structured Investment Vehicles (SIVs) are SPEs that issue junior notes and senior debt (medium-term notes and short-term commercial paper) to fund the purchase of high quality assets. The Company actsacted as manager for the SIVs.
In order to complete the wind-down of the SIVs, the Company purchased the remaining assets of the SIVs in November 2008. The Company funded the purchase of the SIV assets by assuming the obligation to pay amounts due under the medium-term notes issued by the SIVs as the medium-term notes mature.
Investment Funds
The Company is the investment manager for certain investment funds that invest in various asset classes including private equity, hedge funds, real estate, fixed income and infrastructure. The Company earns a management fee, which is a percentage of capital under management, and may earn performance fees. In addition, for some of these funds the Company has an ownership interest in the investment funds.
The Company has also established a number of investment funds as opportunities for qualified employees to invest in private equity investments. The Company acts as investment manager to these funds and may provide employees with financing on both a recourse and non-recourse basis for a portion of the employees' investment commitments.
The Company has determined that a majority of the investment vehicles managed by Citigroup are provided a deferral from the requirements of SFAS 167, because they meet the criteria in Accounting Standards Update No. 2010-10,Consolidation (Topic 810), Amendments for Certain Investment Funds (ASU 2010-10) (see Note 1). These vehicles continue to be evaluated under the requirements of ASC 810-10, prior to the implementation of SFAS 167 (FIN 46(R)).
Where the Company has determined that certain investment vehicles are subject to the consolidation requirements of SFAS 167, the consolidation conclusions reached upon initial application of SFAS 167 are consistent with the consolidation conclusions reached under the requirements of ASC 810-10, prior to the implementation of SFAS 167.
Trust Preferred Securities
The Company has raised financing through the issuance of trust preferred securities. In these transactions, the Company forms a statutory business trust and owns all of the voting equity shares of the trust. The trust issues preferred equity securities to third-party investors and invests the gross proceeds in junior subordinated deferrable interest debentures issued by the Company. These trusts have no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the preferred equity securities held by third-party investors. These trusts' obligations are fully and unconditionally guaranteed by the Company.
Because the sole asset of the trust is a receivable from the Company and the proceeds to the Company from the receivable exceed the Company's investment in the VIE's equity shares, the Company is not permitted to consolidate the trusts, even though the Company owns all of the voting equity shares of the trust, has fully guaranteed the trusts' obligations, and has the right to redeem the preferred securities in certain circumstances. The Company recognizes the subordinated debentures on its balance sheetConsolidated Balance Sheet as long-term liabilities.
In the ordinary course of business, Citigroup enters into various types of derivative transactions. These derivative transactions include:
Citigroup enters into these derivative contracts relating to interest rate, foreign currency, commodity, and other market/credit risks for the following reasons:
Derivatives may expose Citigroup to market, credit or liquidity risks in excess of the amounts recorded on the Consolidated Balance Sheet. Market risk on a derivative product is the exposure created by potential fluctuations in interest rates, foreign-exchange rates and other factors and is a function of the type of product, the volume of transactions, the tenor and terms of the agreement, and the underlying volatility. Credit risk is the exposure to loss in the event of nonperformance by the other party to the transaction where the value of any collateral held is not adequate to cover such losses. The recognition in earnings of unrealized gains on these transactions is subject to management's assessment as to collectability. Liquidity risk is the potential exposure that arises when the size of the derivative position may not be able to be rapidly adjusted in periods of high volatility and financial stress at a reasonable cost.
Information pertaining to the volume of derivative activity is provided in the tables below. The notional amounts, of Citigroup's derivative instruments for both long and short derivative positions, representing the volume of Citigroup's derivative activity,instruments as of September 30, 2010 and December 31, 2009 are presented in the table below:below.
Derivative Notionals
| | Hedging Instruments under ASC 815 (SFAS 133)(1) | Other Derivative Instruments | | Hedging instruments under ASC 815 (SFAS 133)(1)(2) | Other derivative instruments | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars at September 30, 2009 | | Trading Derivatives | Management Hedges(2) | ||||||||||||||||||||||||||||
| | | | Trading derivatives | Management hedges(3) | ||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | September 30, 2010 | December 31, 2009 | September 30, 2010 | December 31, 2009 | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||||
Interest rate contracts | Interest rate contracts | Interest rate contracts | |||||||||||||||||||||||||||||
Swaps | $ | 130,241 | $ | 14,903,492 | $ | 194,225 | Swaps | $ | 156,634 | $ | 128,797 | $ | 27,006,830 | $ | 20,571,814 | $ | 123,701 | $ | 107,193 | ||||||||||||
Futures and forwards | — | 3,876,745 | 84,999 | Futures and forwards | — | — | 5,726,949 | 3,366,927 | 61,588 | 65,597 | |||||||||||||||||||||
Written options | — | 3,214,707 | 9,493 | Written options | — | — | 3,484,198 | 3,616,240 | 12,232 | 11,050 | |||||||||||||||||||||
Purchased options | — | 3,468,676 | 43,537 | Purchased options | — | — | 3,160,691 | 3,590,032 | 13,935 | 28,725 | |||||||||||||||||||||
Total interest rate contract notionals | Total interest rate contract notionals | $ | 130,241 | $ | 25,463,620 | $ | 332,254 | Total interest rate contract notionals | $ | 156,634 | $ | 128,797 | $ | 39,378,668 | $ | 31,145,013 | $ | 211,456 | $ | 212,565 | |||||||||||
Foreign exchange contracts | Foreign exchange contracts | Foreign exchange contracts | |||||||||||||||||||||||||||||
Swaps | $ | 61,527 | $ | 867,475 | $ | 101,151 | Swaps | $ | 28,296 | $ | 42,621 | $ | 1,087,603 | $ | 855,560 | $ | 27,828 | $ | 24,044 | ||||||||||||
Futures and forwards | 18,190 | 2,025,595 | 10,672 | Futures and forwards | 91,747 | 76,507 | 2,549,208 | 1,946,802 | 31,383 | 54,249 | |||||||||||||||||||||
Written options | 316 | 392,903 | 15,150 | Written options | 2,779 | 4,685 | 592,512 | 409,991 | 278 | 9,305 | |||||||||||||||||||||
Purchased options | 501 | 415,386 | 2,603 | Purchased options | 9,423 | 22,594 | 582,244 | 387,786 | 871 | 10,188 | |||||||||||||||||||||
Total foreign exchange contract notionals | Total foreign exchange contract notionals | $ | 80,534 | $ | 3,701,359 | $ | 129,576 | Total foreign exchange contract notionals | $ | 132,245 | $ | 146,407 | $ | 4,811,567 | $ | 3,600,139 | $ | 60,360 | $ | 97,786 | |||||||||||
Equity contracts | Equity contracts | Equity contracts | |||||||||||||||||||||||||||||
Swaps | $ | — | $ | 81,620 | $ | — | Swaps | $ | — | $ | — | $ | 66,644 | $ | 59,391 | $ | — | $ | — | ||||||||||||
Futures and forwards | — | 14,567 | — | Futures and forwards | — | — | 21,952 | 14,627 | — | — | |||||||||||||||||||||
Written options | — | 528,027 | — | Written options | — | — | 612,793 | 410,002 | — | — | |||||||||||||||||||||
Purchased options | — | 505,812 | — | Purchased options | — | — | 525,234 | 377,961 | — | 275 | |||||||||||||||||||||
Total equity contract notionals | Total equity contract notionals | $ | — | $ | 1,130,026 | $ | — | Total equity contract notionals | $ | — | $ | — | $ | 1,226,623 | $ | 861,981 | $ | — | $ | 275 | |||||||||||
Commodity and other contracts | Commodity and other contracts | Commodity and other contracts | |||||||||||||||||||||||||||||
Swaps | $ | — | $ | 29,746 | $ | — | Swaps | $ | — | $ | — | $ | 20,624 | $ | 25,956 | $ | — | $ | — | ||||||||||||
Futures and forwards | — | 101,574 | — | Futures and forwards | — | — | 120,397 | 91,582 | — | — | |||||||||||||||||||||
Written options | — | 39,066 | — | Written options | — | — | 63,641 | 37,952 | — | — | |||||||||||||||||||||
Purchased options | — | 40,662 | — | Purchased options | — | — | 64,800 | 40,321 | — | 3 | |||||||||||||||||||||
Total commodity and other contract notionals | Total commodity and other contract notionals | $ | — | $ | 211,048 | $ | — | Total commodity and other contract notionals | $ | — | $ | — | $ | 269,462 | $ | 195,811 | $ | — | $ | 3 | |||||||||||
Credit derivatives(3) | |||||||||||||||||||||||||||||||
Credit derivatives(4) | Credit derivatives(4) | ||||||||||||||||||||||||||||||
Citigroup as the Guarantor | $ | — | $ | 1,315,106 | $ | — | Protection sold | $ | — | $ | — | $ | 1,263,870 | $ | 1,214,053 | $ | — | $ | — | ||||||||||||
Citigroup as the Beneficiary | 6,773 | 1,442,602 | — | Protection purchased | 6,506 | 6,981 | 1,340,915 | 1,325,981 | 34,195 | — | |||||||||||||||||||||
Total credit derivatives | Total credit derivatives | $ | 6,773 | $ | 2,757,708 | $ | — | Total credit derivatives | $ | 6,506 | $ | 6,981 | $ | 2,604,785 | $ | 2,540,034 | $ | 34,195 | $ | — | |||||||||||
Total derivative notionals | Total derivative notionals | $ | 217,548 | $ | 33,263,761 | $ | 461,830 | Total derivative notionals | $ | 295,385 | $ | 282,185 | $ | 48,291,105 | $ | 38,342,978 | $ | 306,011 | $ | 310,629 | |||||||||||
Derivative Mark-to-Market (MTM) Receivables/Payables
| | Derivatives classified in Trading account assets / liabilities(1) | Derivatives classified in Other assets / liabilities | Derivatives classified in trading account assets/liabilities(1) | Derivatives classified in other assets/liabilities | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars at September 30, 2009 | Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||||
Derivative instruments designated as hedges | |||||||||||||||||||||||||||
In millions of dollars at September 30, 2010 | Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||||
Derivative instruments designated as ASC 815 (SFAS 133) hedges | |||||||||||||||||||||||||||
Interest rate contracts | $ | 1,123 | $ | 227 | $ | 10,086 | $ | 3,459 | |||||||||||||||||||
Foreign exchange contracts | 469 | 1,449 | 1,283 | 3,122 | |||||||||||||||||||||||
Interest rate contracts | $ | 2,860 | $ | 4,380 | $ | 5,551 | $ | 1,156 | |||||||||||||||||||
Foreign exchange contracts | 134 | 1,246 | 3,942 | 2,826 | |||||||||||||||||||||||
Credit derivatives | — | — | — | 110 | |||||||||||||||||||||||
Total derivative instruments designated as hedges | $ | 2,994 | $ | 5,626 | $ | 9,493 | $ | 4,092 | |||||||||||||||||||
Total derivative instruments designated as ASC 815 (SFAS 133) hedges | $ | 1,592 | $ | 1,676 | $ | 11,369 | $ | 6,581 | |||||||||||||||||||
Other derivative instruments | Other derivative instruments | ||||||||||||||||||||||||||
Interest rate contracts | $ | 523,370 | $ | 505,442 | $ | 3,062 | $ | 4,727 | |||||||||||||||||||
Foreign exchange contracts | 88,944 | 89,225 | 1,233 | 1,240 | |||||||||||||||||||||||
Equity contracts | 23,706 | 47,070 | — | — | |||||||||||||||||||||||
Commodity and other contracts | 16,692 | 16,275 | — | — | |||||||||||||||||||||||
Credit derivatives(2) | 112,227 | 100,575 | — | — | |||||||||||||||||||||||
Interest rate contracts | $ | 668,787 | $ | 666,488 | $ | 3,793 | $ | 2,814 | |||||||||||||||||||
Foreign exchange contracts | 99,464 | 105,722 | 2,519 | 879 | |||||||||||||||||||||||
Equity contracts | 19,557 | 37,749 | — | — | |||||||||||||||||||||||
Commodity and other contracts | 14,159 | 14,863 | — | — | |||||||||||||||||||||||
Credit derivatives(2) | 73,186 | 67,185 | 229 | 294 | |||||||||||||||||||||||
Total other derivative instruments | Total other derivative instruments | $ | 764,939 | $ | 758,587 | $ | 4,295 | $ | 5,967 | $ | 875,153 | $ | 892,007 | $ | 6,541 | $ | 3,987 | ||||||||||
Total derivatives | Total derivatives | $ | 767,933 | $ | 764,213 | $ | 13,788 | $ | 10,059 | $ | 876,745 | $ | 893,683 | $ | 17,910 | $ | 10,568 | ||||||||||
Cash collateral paid/received | Cash collateral paid/received | 54,169 | 43,471 | 510 | 5,720 | 61,457 | 46,590 | 275 | 4,940 | ||||||||||||||||||
Less: Netting agreements and market value adjustments | (882,642 | ) | (877,807 | ) | (4,221 | ) | (4,221 | ) | |||||||||||||||||||
Less: Netting agreements and market value adjustments | (753,432 | ) | (745,132 | ) | (4,713 | ) | (4,713 | ) | |||||||||||||||||||
Net receivables/payables | $ | 55,560 | $ | 62,466 | $ | 13,964 | $ | 11,287 | |||||||||||||||||||
Net receivables/ payables | $ | 68,670 | $ | 62,552 | $ | 9,585 | $ | 11,066 | |||||||||||||||||||
| Derivatives classified in trading account assets/liabilities(1) | Derivatives classified in other assets/liabilities | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars at December 31, 2009 | Assets | Liabilities | Assets | Liabilities | |||||||||
Derivative instruments designated as ASC 815 (SFAS 133) hedges | |||||||||||||
Interest rate contracts | $ | 304 | $ | 87 | $ | 4,267 | $ | 2,898 | |||||
Foreign exchange contracts | 753 | 1,580 | 3,599 | 1,416 | |||||||||
Total derivative instruments designated as ASC 815 (SFAS 133) hedges | $ | 1,057 | $ | 1,667 | $ | 7,866 | $ | 4,314 | |||||
Other derivative instruments | |||||||||||||
Interest rate contracts | $ | 454,974 | $ | 449,551 | $ | 2,882 | $ | 3,022 | |||||
Foreign exchange contracts | 71,005 | 70,584 | 1,498 | 2,381 | |||||||||
Equity contracts | 18,132 | 40,612 | 6 | 5 | |||||||||
Commodity and other contracts | 16,698 | 15,492 | — | — | |||||||||
Credit derivatives(2) | 92,792 | 82,424 | — | — | |||||||||
Total other derivative instruments | $ | 653,601 | $ | 658,663 | $ | 4,386 | $ | 5,408 | |||||
Total derivatives | $ | 654,658 | $ | 660,330 | $ | 12,252 | $ | 9,722 | |||||
Cash collateral paid/received | 48,561 | 38,611 | 263 | 4,950 | |||||||||
Less: Netting agreements and market value adjustments | (644,340 | ) | (634,835 | ) | (4,224 | ) | (4,224 | ) | |||||
Net receivables/payables | $ | 58,879 | $ | 64,106 | $ | 8,291 | $ | 10,448 | |||||
All derivatives are reported on the balance sheet at fair value. In addition, where applicable, all such contracts covered by master netting agreements are reported net. Gross positive fair values are netted with gross negative fair values by counterparty pursuant to a valid master netting agreement. In addition, payables and receivables in respect of cash collateral received from or paid to a given counterparty are included in this netting. However, non-cash collateral is not included.
As of September 30, 2009 theThe amount of payables in respect of cash collateral received that was netted with unrealized gains from derivatives was $36$40 billion while theand $30 billion as of September 30, 2010 and December 31, 2009, respectively. The amount of receivables in respect of cash collateral paid that was netted with unrealized losses from derivatives was $46 billion.$56 billion as of September 30, 2010 and $41 billion as of December 31, 2009, respectively.
The amounts recognized in principalPrincipal transactions in the Consolidated Statement of Income for the three and nine months ended September 30, 2010 and September 30, 2009 related to derivatives not designated in a qualifying hedging relationship as well as the underlying non-derivative instruments are shownincluded in the table below. Citigroup has elected to present this disclosure by business classification, showing derivative gains and losses related to its trading activities together with gains and losses related to non-derivative instruments within the same trading portfolios, as this better represents the way that these portfolios are risk managed.
In millions of dollars | Gains (losses) Three months ended September 30, 2009 | Gains (losses) Nine months ended September 30, 2009 | ||||||
---|---|---|---|---|---|---|---|---|
Fixed Income | $ | 428 | $ | 5,359 | ||||
Foreign exchange | 445 | 2,157 | ||||||
Equity | (353 | ) | 550 | |||||
Commodity and other products | 162 | 990 | ||||||
Credit products | 846 | (3,500 | ) | |||||
Total(1) | $ | 1,528 | $ | 5,556 | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2010(1) | 2009(1) | 2010(1) | 2009(1) | |||||||||
Interest rate contracts | $ | 76 | $ | 166 | $ | 3,718 | $ | 6,619 | |||||
Foreign exchange contracts | 992 | 522 | 1,495 | 2,386 | |||||||||
Equity contracts | 468 | (353 | ) | 783 | 550 | ||||||||
Commodity and other contracts | (33 | ) | 162 | 197 | 989 | ||||||||
Credit derivatives | 25 | 846 | 1,705 | (3,500 | ) | ||||||||
Total Citigroup(2) | $ | 1,528 | $ | 1,343 | $ | 7,898 | $ | 7,044 | |||||
The amounts recognized in otherOther revenue in the Consolidated Statement of Income for the three and nine months ended September 30, 2010 and September 30, 2009 related to derivatives not designated in a qualifying hedging relationship and not recorded withinTrading account assets orTrading account liabilities are shown below. The table below does not include the offsetting gains/losses on the hedged items, which amounts are also recorded inOther revenue.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | In millions of dollars | Gains (losses) Three months ended September 30, 2009 | Gains (losses) Nine months ended September 30, 2009 | 2010(1) | 2009(1) | 2010(1) | 2009(1) | ||||||||||||||
Interest rate contracts | $ | 750 | $ | 91 | $ | 451 | $ | (259 | ) | ||||||||||||
Foreign exchange contracts | 3,895 | 2,077 | (1,930 | ) | 4,545 | ||||||||||||||||
Equity contracts | — | — | — | — | |||||||||||||||||
Commodity and other contracts | — | — | — | — | |||||||||||||||||
Credit derivatives | (389 | ) | — | (248 | ) | — | |||||||||||||||
Interest rate contracts | $ | (384 | ) | $ | 36 | ||||||||||||||||
Total Citigroup(2) | $ | 4,256 | $ | 2,168 | $ | (1,727 | ) | $ | 4,286 | ||||||||||||
Foreign exchange contracts | (2,130 | ) | (4,496 | ) | |||||||||||||||||
Equity contracts | — | — | |||||||||||||||||||
Commodity and other contracts | — | — | |||||||||||||||||||
Credit derivatives | — | — | |||||||||||||||||||
Total(1) | $ | (2,514 | ) | $ | (4,460 | ) | |||||||||||||||
Accounting for Derivative Hedging
Citigroup accounts for its hedging activities in accordance with ASC 815, (SFASDerivatives and Hedging (formerly SFAS 133). As a general rule, hedge accounting is permitted for those situations where the Company is exposed to a particular risk, such as interest-rate or foreign-exchange risk, that causes changes in the fair value of an asset or liability or variability in the expected future cash flows of an existing asset, liability or a forecasted transaction that may affect earnings.
Derivative contracts hedging the risks associated with the changes in fair value are referred to as fair value hedges, while contracts hedging the risks affecting the expected future cash flows are called cash flow hedges. Hedges that utilize derivatives or debt instruments to manage the foreign exchange risk associated with equity investments in non-U.S. dollarnon-U.S.-dollar functional currency foreign subsidiaries (net investment in a foreign operation) are called net investment hedges.
If certain hedging criteria specified in ASC 815 (SFAS 133) are met, including testing for hedge effectiveness, special hedge accounting may be applied. The hedge effectiveness assessment methodologies for similar hedges are performed in a similar manner and are used consistently throughout the hedging relationships. For fair value hedges, the changes in value of the hedging derivative, as well as the changes in value of the related hedged item due to the risk being hedged, are reflected in current earnings. For cash flow hedges and net investment hedges, the changes in value of the hedging derivative are reflected inAccumulated other comprehensive income (loss) in Citigroup's stockholders' equity, to the extent the hedge is effective. Hedge ineffectiveness, in either case, is reflected in current earnings.
For asset/liability management hedging, the fixed-rate long-term debt may be recorded at amortized cost under current U.S. GAAP. However, by electing to use ASC 815 (SFAS 133) hedge accounting, the carrying value of the debt is adjusted for changes in the benchmark interest rate, with any such changes in value recorded in current earnings. The related interest-rate swap is also recorded on the balance sheet at fair value, with any changes in fair value reflected in earnings. Thus, any ineffectiveness resulting from the hedging relationship is recorded in current earnings. Alternatively, an economic hedge, which does not meet the ASC 815 hedging criteria, would involve recording only recording the derivative at fair value on the balance sheet, with its associated changes in fair value recorded in earnings. The debt would continue to be carried at amortized cost and, therefore, current earnings would be impacted only by the interest rate shifts and other factors that cause the change in the swap's value and the underlying yield of the debt. This type of hedge is undertaken when hedgehedging requirements cannot be achieved or management decides not to apply ASC 815 hedge accounting. Another alternative for the Company would be to elect to carry the debt at fair value.value under the fair value option. Once the irrevocable election is made upon issuance of the debt, the full change in fair value of the debt would be reported in earnings. The related interest rate swap, with changes in fair value, would also be reflected in earnings, and provides a natural offset to the debt's fair value change. To the extent the two offsets would not be exactly equal, the difference would be reflected in current earnings. This type of economic hedge is undertaken when the Company prefers to follow this
simpler method that achieves generally similar financial statement results to a fair-valuean ASC 815 fair value hedge.
Key aspects of achieving ASC 815 hedge accounting are documentation of hedging strategy and hedge effectiveness at the hedge inception and substantiating hedge effectiveness on an ongoing basis. A derivative must be highly effective in accomplishing the hedge objective of offsetting either changes in the fair value or cash flows of the hedged item for the risk being hedged. Any ineffectiveness in the hedge relationship is recognized in current earnings. The assessment of effectiveness excludes changes in the value of the hedged item that are unrelated to the risks being hedged. Similarly, the assessment of effectiveness may exclude changes in the fair value of a derivative related to time value that, if excluded, are recognized in current earnings.
Fair value hedgesValue Hedges
Hedging of benchmark interest rate risk
Citigroup hedges exposure to changes in the fair value of outstanding fixed-rate issued debt and borrowings.certificate of deposit. The fixed cash flows from those financing transactions are converted to benchmark variable-rate cash flows by entering into receive fixed,receive-fixed, pay-variable interest rate swaps. These fair-valueMost of these fair value hedge relationships use dollar-offset ratio analysis to determine whether the hedging relationships are highly effective at inception and on an ongoing basis.basis, while others use regression.
Citigroup also hedges exposure to changes in the fair value of fixed-rate assets, including available-for-sale debt securities and loans. The hedging instruments used are receive-variable, pay-fixed interest rate swaps. Most of these fair-valuefair value hedging relationships use dollar-offset ratio analysis to determine whether the hedging relationships are highly effective at inception and on an ongoing basis, while certain others use regression analysis.
Hedging of foreign exchange risk
Citigroup hedges the change in fair value attributable to foreign-exchange rate movements in available-for-sale securities that are denominated in currencies other than the functional currency of the entity holding the securities, which may be within or outside the U.S. The hedging instrument employed is a forward foreign-exchange contract. In this type of hedge, the change in fair value of the hedged available-for-sale security attributable to the portion of foreign exchange risk hedged is reported in earnings and notAccumulated other comprehensive income—income—a process that serves to offset substantially the change in fair value of the forward contract that is also reflected in earnings. Citigroup considers the premium associated with forward contracts (differential between spot and contractual forward rates) as the cost of hedging; this is excluded from the assessment of hedge effectiveness and reflected directly in earnings. Dollar-offset method is used to assess hedge effectiveness. Since that assessment is based on changes in fair value attributable to changes in spot rates on both the available-for-sale securities and the forward contracts for the portion of the relationship hedged, the amount of hedge ineffectiveness is not significant.
The following table summarizes certain information related tothe gains (losses) on the Company's fair value hedges for the three and nine months ended September 30, 2010 and September 30, 2009:
Gains (losses) on fair value hedges(1) | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Three months ended September 30, 2009 | Nine months ended September 30, 2009 | Three Months ended September 30, | Nine Months ended September 30, | ||||||||||||||||||||||
In millions of dollars | In millions of dollars | Principal Transactions | Other Revenue | Principal Transactions | Other Revenue | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Gain (loss) on designated and qualifying fair value hedges | |||||||||||||||||||||||||||
Interest rate contracts | $ | (238 | ) | $ | 1,511 | $ | 727 | $ | (4,375 | ) | |||||||||||||||||
Foreign exchange contracts | (640 | ) | 323 | 663 | 645 | ||||||||||||||||||||||
Gain (loss) on fair value designated and qualifying hedges | |||||||||||||||||||||||||||
Interest rate contracts | $ | 1,603 | $ | 1,273 | $ | 3,945 | $ | (3,648 | ) | ||||||||||||||||||
Foreign exchange contracts | (993 | ) | (317 | ) | 681 | 1,308 | |||||||||||||||||||||
Total gain (loss) on fair value designated and qualifying hedges | Total gain (loss) on fair value designated and qualifying hedges | $ | (878 | ) | $ | 1,834 | $ | 1,390 | $ | (3,730 | ) | $ | 610 | $ | 956 | $ | 4,626 | $ | (2,340 | ) | |||||||
Gain (loss) on the hedged item in designated and qualifying fair value hedges | Gain (loss) on the hedged item in designated and qualifying fair value hedges | ||||||||||||||||||||||||||
Interest rate hedges | $ | (1,712 | ) | $ | (1,223 | ) | $ | (4,160 | ) | $ | 3,725 | ||||||||||||||||
Foreign exchange hedges | 1,095 | 424 | (496 | ) | (1,010 | ) | |||||||||||||||||||||
Interest rate hedges | $ | 293 | $ | (1,516 | ) | $ | (749 | ) | $ | 4,474 | |||||||||||||||||
Foreign exchange hedges | 717 | (293 | ) | (434 | ) | (576 | ) | ||||||||||||||||||||
Total gain (loss) on the hedged item in designated and qualifying fair value hedge | $ | 1,010 | $ | (1,809 | ) | $ | (1,183 | ) | $ | 3,898 | |||||||||||||||||
Total gain (loss) on the hedged item in designated and qualifying fair value hedges | $ | (617 | ) | $ | (799 | ) | $ | (4,656 | ) | $ | 2,715 | ||||||||||||||||
Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges | Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges | ||||||||||||||||||||||||||
Interest rate hedges | $ | 182 | $ | (106 | ) | $ | 313 | $ | (21 | ) | |||||||||||||||||
Foreign exchange hedges | 14 | 60 | 22 | 92 | |||||||||||||||||||||||
Interest rate hedges | $ | (111 | ) | $ | 76 | $ | (178 | ) | $ | 292 | |||||||||||||||||
Foreign exchange hedges | 4 | 74 | 30 | 114 | |||||||||||||||||||||||
Total hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges | Total hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges | $ | 196 | $ | (46 | ) | $ | 335 | $ | 71 | $ | (107 | ) | $ | 150 | $ | (148 | ) | $ | 406 | |||||||
Net gain (loss) excluded from assessment of the effectiveness of fair value hedges | Net gain (loss) excluded from assessment of the effectiveness of fair value hedges | ||||||||||||||||||||||||||
Interest rate contracts | $ | (127 | ) | $ | 101 | $ | (335 | ) | $ | 120 | |||||||||||||||||
Foreign exchange contracts | 63 | (30 | ) | 207 | (23 | ) | |||||||||||||||||||||
Interest rate contracts | $ | 2 | $ | (26 | ) | $ | (37 | ) | $ | (215 | ) | ||||||||||||||||
Foreign exchange contracts | 98 | 33 | 155 | 184 | |||||||||||||||||||||||
Total net gain (loss) excluded from assessment of the effectiveness of fair value hedges | Total net gain (loss) excluded from assessment of the effectiveness of fair value hedges | $ | (64 | ) | $ | 71 | $ | (128 | ) | $ | 97 | $ | 100 | $ | 7 | $ | 118 | $ | (31 | ) | |||||||
Cash flow hedgesFlow Hedges
Hedging of benchmark interest rate risk
Citigroup hedges variable cash flows resulting from floating-rate liabilities and roll overroll-over (re-issuance) of short-term liabilities. Variable cash flows from those liabilities are converted to fixed-rate cash flows by entering into receive-variable, pay-fixed interest-rate swaps and receive-variable, pay-fixed forward-starting interest-rate swaps. For some hedges, the hedge ineffectiveness is eliminated by matching all terms of the hedged item and the hedging derivative at inception and on an ongoing basis. Citigroup does not exclude any terms from consideration when applying the matched terms method. To the extent all terms are not perfectly matched, theseThese cash-flow hedging relationships use either regression analysis or dollar-offset ratio analysis to assess whether the hedging relationships are highly effective at inception and on an ongoing basis. Since efforts are made to match the terms of the derivatives to those of the hedged forecasted cash flows as closely as possible, the amount of hedge ineffectiveness is not significant even when the terms do not match perfectly.significant.
Hedging of foreign exchange risk
Citigroup locks in the functional currency equivalent of cash flows of various balance sheet liability exposures, including short-term borrowings and long-term debt (and the forecasted issuances or rollover of such items) that are denominated in a currency other than the functional currency of the issuing entity. Depending on the risk-management objectives, these types of hedges are designated as either cash-flow hedges of only foreign exchange risk or cash-flow hedges of both foreign-exchange and interest rate risk, and the hedging instruments used are foreign-exchange forward contracts, cross-currency swaps and foreign-currency options. For some hedges, Citigroup matches all terms of the hedged item and the hedging derivative at inception and on an ongoing basis to eliminate hedge ineffectiveness. Citigroup does not exclude any terms from consideration when applying the matched terms method. To the extent all terms are not perfectly matched, any ineffectiveness is measured using the "hypothetical derivative method" from FASB Derivative Implementation Group Issue G7 (now ASC 815-30-35-12 through 35-32). Efforts are made to match up the terms of the hypothetical and actual derivatives used as closely as possible. As a result, the amount of hedge ineffectiveness is not significant even when the terms do not match perfectly.
Hedging total return
Citigroup generally manages the risk associated with highly leveraged financing it has entered into by seeking to sell a majority of its exposures to the market prior to or shortly after funding. The portion of the highly leveraged financing that is retained by Citigroup is hedged with a total return swap.
The amount of hedge ineffectiveness on the cash flow hedges recognized in earnings totals $3 million for the three months ended September 30, 2009 and $12 million for the nine months ended September 30, 2009.
The pretax change in Accumulated other comprehensive income (loss) from cash flow hedges for the three and nine months ended September 30, 2010 and September 30, 2009 is presented below:not significant.
In millions of dollars | Three months ended September 30, 2009 | Nine months ended September 30, 2009 | ||||||
---|---|---|---|---|---|---|---|---|
Effective portion of cash flow hedges included in AOCI | ||||||||
Interest rate contracts | $ | (291 | ) | $ | 279 | |||
Foreign exchange contracts | (312 | ) | 321 | |||||
Credit derivatives | (404 | ) | (46 | ) | ||||
Total effective portion of cash flow hedges included in AOCI | $ | (1,007 | ) | $ | 554 | |||
Effective portion of cash flow hedges reclassified from AOCI to Earnings | ||||||||
Interest rate contracts(1) | $ | (431 | ) | $ | (1,288 | ) | ||
Foreign exchange contracts(2) | (149 | ) | (128 | ) | ||||
Credit derivatives | — | — | ||||||
Total effective portion of cash flow hedges reclassified from AOCI to Earnings | $ | (580 | ) | $ | (1,416 | ) | ||
| Three Months ended September 30, | Nine Months ended September 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | 2010 | 2009 | |||||||||
Effective portion of cash flow hedges included in AOCI | |||||||||||||
Interest rate contracts | $ | (239 | ) | $ | (291 | ) | $ | (864 | ) | $ | 279 | ||
Foreign exchange contracts | (379 | ) | (312 | ) | (768 | ) | 321 | ||||||
Credit derivatives | — | (404 | ) | — | (46 | ) | |||||||
Total effective portion of cash flow hedges included in AOCI | $ | (618 | ) | $ | (1,007 | ) | $ | (1,632 | ) | $ | 554 | ||
Effective portion of cash flow hedges reclassified from AOCI to earnings | |||||||||||||
Interest rate contracts | (326 | ) | $ | (431 | ) | $ | (1,060 | ) | $ | (1,288 | ) | ||
Foreign exchange contracts | (97 | ) | (149 | ) | (378 | ) | (128 | ) | |||||
Total effective portion of cash flow hedges reclassified from AOCI to earnings(1) | $ | (423 | ) | $ | (580 | ) | $ | (1,438 | ) | $ | (1,416 | ) | |
For cash flow hedges, any changes in the fair value of the end-user derivative remaining inAccumulated other comprehensive income (loss) on the Consolidated Balance Sheet will be included in earnings of future periods to offset the variability of the hedged cash flows when such cash flows affect earnings. The net loss associated with cash flow hedges expected to be reclassified fromAccumulated other comprehensive income within 12 months of September 30, 20092010 is approximately $2.1$1.6 billion. The maximum length of time over which forecasted cash flows are hedged is 10 years.
The impact of cash flow hedges on AOCI is also included withinshown in Note 1413 to the Consolidated Financial Statements—Changes in Accumulated Comprehensive Income (Loss).Statements.
Net investment hedgesInvestment Hedges
Consistent with ASC 815-20-25-58 (SFAS 133)830-20,Foreign Currency Matters—Foreign Currency Transactions (formerly SFAS 52,Foreign Currency Translation), ASC 815 allows hedging of the foreign-currency risk of a net investment in a foreign operation. Citigroup uses foreign-currency forwards, options and swaps and foreign-currency-denominated debt instruments to manage the foreign-exchange risk associated with Citigroup's equity investments in several non-U.S. dollar functional currency foreign subsidiaries. Citigroup records the change in the carrying amount of these investments in theCumulative translation adjustment account withinAccumulated other comprehensive income (loss). Simultaneously, the effective portion of the hedge of this exposure is also recorded in theCumulative translation
adjustment account and the ineffective portion, if any, is immediately recorded in earnings.
For derivatives used in net investment hedges, Citigroup follows the forward-rate method.method from FASB Derivative Implementation Group Issue H8 (now ASC 815-35-35-16 through 35-26), "Foreign Currency Hedges: Measuring the Amount of Ineffectiveness in a Net Investment Hedge." According to that method, all changes in fair value, including changes related to the forward-rate component of the foreign-currency forward contracts and the time-value of foreign-currency options, are recorded in the foreign currency.
Cumulative translation adjustment account.account. For foreign-currency denominated debt instruments that are designated as hedges of net investments, the translation gain or loss that is recorded in the cumulativeforeign-currency translation adjustment account is based on the spot exchange rate between the functional currency of the respective subsidiary and the U.S. dollar, which is the functional currency of Citigroup. To the extent the notional amount of the hedging instrument exactly matches the hedged net investment and the underlying exchange rate of the derivative hedging instrument relates to the exchange rate between the functional currency of the net investment and Citigroup's functional currency (or, in the case of a non-derivative debt instrument, such instrument is denominated in the functional currency of the net investment), no ineffectiveness is recorded in earnings.
The following table summarizes certain informationpretax loss recorded in foreign-currency translation adjustment withinAccumulated other comprehensive income (loss), related to the Company'seffective portion of the net investment hedges, is $3.3 billion and $2.8 billion for the three and nine months ended September 30, 2009:
Net Investments Hedges(1) In millions of dollars | Three months ended September 30, 2009 | Nine months ended September 30, 2009 | |||||
---|---|---|---|---|---|---|---|
Pretax gain (loss) included in FX translation adjustment with AOCI | $ | (1,232 | ) | $ | (4,144 | ) | |
Gain (loss) on hedge ineffectiveness on net investment hedges included in Other revenue | $ | — | $ | 4 | |||
Credit Derivatives
A credit derivative is a bilateral contract between a buyer and a seller under which the seller agrees to provide protection to the buyer against the credit risk of a particular entity ("reference entity" or "reference credit"). Credit derivatives generally require that the seller of credit protection make payments to the buyer upon the occurrence of predefined credit events (commonly referred to as "settlement triggers"). These settlement triggers are defined by the form of the derivative and the reference credit and are generally limited to the market standard of failure to pay on indebtedness and bankruptcy of the reference credit and, in a more limited range of transactions, debt restructuring. Credit derivative transactions referring to emerging market reference credits will also typically include additional settlement triggers to cover the acceleration of indebtedness and the risk of repudiation or a payment moratorium. In certain transactions, protection may be provided on a portfolio of referenced credits or asset-backed securities. The seller of such protection may not be required to make payment until a specified amount of losses has occurred with respect to the portfolio and/or may only be required to pay for losses up to a specified amount.
The Company makes markets in and trades a range of credit derivatives, both on behalf of clients as well as for its own account. Through these contracts, the Company either purchases or writes protection on either a single name or a portfolio of reference credits. The Company uses credit derivatives to help mitigate credit risk in its corporate and consumer loan portfolioportfolios and other cash positions, to take proprietary trading positions, and to facilitate client transactions.
The range of credit derivatives sold includes credit default swaps, total return swaps and credit options.
A credit default swap is a contract in which, for a fee, a protection seller (guarantor) agrees to reimburse a protection buyer (beneficiary) for any losses that occur due to a credit event on a reference entity. If there is no credit default event or settlement trigger, as defined by the specific derivative contract, then the guarantorprotection seller makes no payments to the beneficiaryprotection buyer and receives only the contractually specified fee. However, if a credit event occurs as defined in the specific derivative contract sold, the guarantorprotection seller will be required to make a payment to the beneficiary.protection buyer.
A total return swap transfers the total economic performance of a reference asset, which includes all associated cash flows, as well as capital appreciation or depreciation. The protection buyer (beneficiary) receives a floating rate of interest and any depreciation on the reference asset from the protection seller (guarantor) and, in return, the protection seller receives the cash flows associated with the reference asset plus any appreciation. Thus, according to the total return swap agreement, the beneficiaryprotection seller will be obligated to make a payment any timeanytime the floating interest rate payment and any depreciation of the reference asset exceed the cash flows associated with the underlying asset. A total return swap may terminate upon a default of the reference asset subject to the provisions of the related total return swap agreement between the protection seller (guarantor) and the protection buyer (beneficiary).buyer.
A credit option is a credit derivative that allows investors to trade or hedge changes in the credit quality of the reference asset. For example, in a credit spread option, the option writer (guarantor) assumes the obligation to purchase or sell the reference asset at a specified "strike" spread level. The option purchaser (beneficiary) buys the right to sell the reference asset to, or purchase it from, the option writer at the strike spread level. The payments on credit spread options depend either on a particular credit spread or the price of the underlying credit-sensitive asset. The options usually terminate if the underlying assets default.
A credit-linked note is a form of credit derivative structured as a debt security with an embedded credit default swap. The purchaser of the note writes credit protection to the issuer, and receives a return which will be negatively affected by credit events on the underlying reference credit. If the reference entity defaults, the purchaser of the credit-linked note may assume the long position in the debt security and any future cash flows from it, but will lose the amount paid to the issuer of the credit-linked note. Thus the maximum amount of the exposure is the carrying amount of the credit-linked note. As of September 30, 20092010 and December 31,
2008, 2009, the amount of credit-linked notes held by the Company in trading inventory was immaterial.
The following tables summarize the key characteristics of the Company's credit derivative portfolio as protection seller (guarantor) as of September 30, 20092010 and December 31, 2008:2009:
In millions of dollars as of September 30, 2009 | Maximum potential amount of future payments | Fair value payable(1) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars as of September 30, 2010 | Maximum potential amount of future payments | Fair value payable(1) | ||||||||||||
By industry/counterparty | ||||||||||||||
Bank | $ | 860,437 | $ | 46,071 | $ | 824,452 | $ | 28,175 | ||||||
Broker-dealer | 301,216 | 17,661 | 321,330 | 12,789 | ||||||||||
Monoline | — | — | ||||||||||||
Non-financial | 2,127 | 96 | 1,690 | 51 | ||||||||||
Insurance and other financial institutions | 151,326 | 12,753 | 116,398 | 6,716 | ||||||||||
Total by industry/counterparty | $ | 1,315,106 | $ | 76,581 | $ | 1,263,870 | $ | 47,731 | ||||||
By instrument: | ||||||||||||||
By instrument | ||||||||||||||
Credit default swaps and options | $ | 1,314,282 | $ | 76,383 | $ | 1,262,408 | $ | 47,419 | ||||||
Total return swaps | 824 | 198 | ||||||||||||
Total return swaps and other | 1,462 | 312 | ||||||||||||
Total by instrument | $ | 1,315,106 | $ | 76,581 | $ | 1,263,870 | $ | 47,731 | ||||||
By rating: | ||||||||||||||
By rating | ||||||||||||||
Investment grade | $ | 759,845 | 23,362 | $ | 535,545 | 7,587 | ||||||||
Non-investment grade | 422,865 | 33,231 | 472,696 | 26,705 | ||||||||||
Not rated | 132,396 | 19,988 | 255,629 | 13,439 | ||||||||||
Total by rating | $ | 1,315,106 | $ | 76,581 | $ | 1,263,870 | $ | 47,731 | ||||||
By maturity: | ||||||||||||||
Within 1 year | $ | 154,308 | $ | 968 | ||||||||||
From 1 to 5 years | 871,926 | 24,238 | ||||||||||||
After 5 years | 237,636 | 22,525 | ||||||||||||
Total by maturity | $ | 1,263,870 | $ | 47,731 | ||||||||||
In millions of dollars as of December 31, 2008 | Maximum potential amount of future payments | Fair value payable(1) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars as of December 31, 2009 | Maximum potential amount of future payments | Fair value payable(1) | ||||||||||||
By industry/counterparty | ||||||||||||||
Bank | $ | 943,949 | $ | 118,428 | $ | 807,484 | $ | 34,666 | ||||||
Broker-dealer | 365,664 | 55,458 | 340,949 | 16,309 | ||||||||||
Monoline | 139 | 91 | 33 | — | ||||||||||
Non-financial | 7,540 | 2,556 | 623 | 262 | ||||||||||
Insurance and other financial institutions | 125,988 | 21,700 | 64,964 | 7,025 | ||||||||||
Total by industry/counterparty | $ | 1,443,280 | $ | 198,233 | $ | 1,214,053 | $ | 58,262 | ||||||
By instrument: | ||||||||||||||
By instrument | ||||||||||||||
Credit default swaps and options | $ | 1,441,375 | $ | 197,981 | $ | 1,213,208 | $ | 57,987 | ||||||
Total return swaps | 1,905 | 252 | ||||||||||||
Total return swaps and other | 845 | 275 | ||||||||||||
Total by instrument | $ | 1,443,280 | $ | 198,233 | $ | 1,214,053 | $ | 58,262 | ||||||
By rating: | ||||||||||||||
By rating | ||||||||||||||
Investment grade | $ | 851,426 | $ | 83,672 | $ | 576,930 | 9,632 | |||||||
Non-investment grade | 410,483 | 87,508 | 339,920 | 28,664 | ||||||||||
Not rated | 181,371 | 27,053 | 297,203 | 19,966 | ||||||||||
Total by rating | $ | 1,443,280 | $ | 198,233 | $ | 1,214,053 | $ | 58,262 | ||||||
By maturity: | ||||||||||||||
Within 1 year | $ | 165,056 | $ | 873 | ||||||||||
From 1 to 5 years | 806,143 | 30,181 | ||||||||||||
After 5 years | 242,854 | 27,208 | ||||||||||||
Total by maturity | $ | 1,214,053 | $ | 58,262 | ||||||||||
Citigroup evaluates the payment/performance risk of the credit derivatives to which it stands as guarantora protection seller based on the credit rating which has been assigned to the underlying referenced credit. Where external ratings by nationally recognized statistical rating organizations (such as Moody's and S&P), are used, investment grade ratings are considered to be Baa/BBB or above, while anything below is considered non-investment grade. The Citigroup internal ratings are in line with the related external credit rating system. On certain underlying referenced credit,reference credits, mainly related to over-the-counter credit derivatives, ratings are not available, and these are included in the not-rated category. Credit derivatives written on an underlying non-investment grade referencedreference credit represent greater payment risk to the Company. The non-investment grade category in the table above primarily includes credit derivatives where the underlying referenced entity has been downgraded subsequent to the inception of the derivative.
The maximum potential amount of future payments under credit derivative contracts presented in the table above is based on the notional value of the derivatives. The Company believes that the maximum potential amount of future payments for credit protection sold is not representative of the actual loss exposure based on historical experience. This amount has not been reduced by the Company's rights to the underlying assets and the related cash flows. In accordance with most credit derivative contracts, should a credit event (or settlement trigger) occur, the Company is usually liable for the difference between the protection sold and the recourse it holds in the value of the underlying assets. Thus, if the reference entity defaults, Citi will generally have a right to collect on the underlying reference credit and any related cash flows, while being liable for the full notional amount of credit protection sold to the buyer. Furthermore, this maximum potential amount of future payments for credit protection sold has not been reduced for any cash collateral paid to a given counterparty, as such payments would be calculated after netting all derivative exposures, including any credit derivatives with that counterparty in accordance with a related master netting agreement. Due to such netting processes, determining the amount of collateral that corresponds to credit derivative exposures only is not possible. The Company actively monitors open credit risk exposures, and manages this exposure by using a variety of strategies including purchased credit derivatives, cash collateral or direct holdings of the referenced assets. This risk mitigation activity is not captured in the table above.
Credit-Risk-Related Contingent Features in Derivatives
Certain derivative instruments contain provisions that require the Company to either post additional collateral or immediately settle any outstanding liability balances upon the occurrence of a specified credit risk-relatedcredit-risk-related event. These events, which are defined by the existing derivative contracts, are primarily downgrades in the credit ratings of the Company and its affiliates. The fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position at September 30, 2010 and December 31, 2009 is $21 billion.$28 billion and $17 billion, respectively. The Company has posted $13$22 billion and $11 billion as collateral for this exposure in the normal course of business as of September 30, 2009.2010 and December 31, 2009, respectively. Each downgrade would trigger additional collateral requirements for the Company and its affiliates. However, inIn the event that each legal entity was downgraded to below investment grade credit ratinga single notch as of September 30, 2009,2010, the Company would be required to post additional collateral of up to $5$2.1 billion.
17. FAIR-VALUE16. FAIR VALUE MEASUREMENT
Effective January 1, 2007, the Company adoptedSFAS 157 (now ASC 820-10 (SFAS 157). ASC 820-10 (SFAS 157)820-10) defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair-valuefair value measurements. Among other things, the standard requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In addition, it precludes the use of block discounts when measuring the fair value of instruments traded in an active market; such discounts were previously applied to large holdings of publicly traded equity securities. It alsomarket, and requires recognition of trade-date gains related to certain derivative transactions whose fair value has been determined using unobservable market inputs.
This guidance supersedes the guidance in Emerging Issues Task Force Issue No. 02-3, "Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities" (EITF Issue 02-3), which prohibited the recognition of trade-date gains for such derivative transactions when determining the fair value of instruments not traded in an active market.
As a result of the adoption of the standard the Company made some amendments to the techniques used in measuring the fair value of derivative and other positions. These amendments change the wayalso requires that the probability of default of a counterparty is factored into the valuation of derivative positions, include for the first time the impact of Citigroup's own credit risk on derivatives and other liabilities measured at fair value and also eliminatebe factored into the portfolio servicing adjustment that is no longer necessary.valuation.
Fair-ValueFair Value Hierarchy
ASC 820-10 (SFAS 157) also specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair-value hierarchy:
This hierarchy requires the use of observable market data when available. The Company considers relevant and observable market prices in its valuations where possible. The frequency of transactions, the size of the bid-ask spread and the amount of adjustment necessary when comparing similar transactions are all factors in determining the liquidity of markets and the relevance of observed prices in those markets.
The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the end of the reporting period.
Determination of Fair Value
For assets and liabilities carried at fair value, the Company measures such value using the procedures set out below, irrespective of whether these assets and liabilities are carried at fair value as a result of an election or whether they were previously carried at fair value.
When available, the Company generally uses quoted market prices to determine fair value and classifies such items inas Level 1. In some cases where a market price is available, the Company will make use of acceptable practical expedients (such as matrix pricing) to calculate fair value, in which case the items are classified inas Level 2.
If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates, option volatilities, etc. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.
Where available, the Company may also make use of quoted prices for recent trading activity in positions with the same or similar characteristics to that being valued. The frequency and size of transactions and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed prices from those markets. If relevant and observable prices are available, those valuations would be classified as Level 2. If prices are not available, other valuation techniques would be used and the item would be classified as Level 3.
Fair-valueFair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors or brokers. Vendors and brokers' valuations may be based on a variety of inputs ranging from observed prices to proprietary valuation models.
The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair-valuefair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models as well as any significant assumptions.
Securities purchased under agreements to resell and securities sold under agreements to repurchase
No quoted prices exist for such instruments and so fair value is determined using a discounted cash-flow technique. Cash flows are estimated based on the terms of the contract, taking into account any embedded derivative or other features. Expected cash flows are discounted using market rates appropriate to the maturity of the instrument as well as the nature and amount of collateral taken or received. Generally, such instruments are
classified within Level 2 of the fair-valuefair value hierarchy as the inputs used in the fair valuation are readily observable.
Trading Account Assetsaccount assets and Liabilities—Trading Securitiesliabilities—trading securities and Trading Loanstrading loans
When available, the Company uses quoted market prices to determine the fair value of trading securities; such items are classified inas Level 1 of the fair-valuefair value hierarchy. Examples include some government securities and exchange-traded equity securities.
For bonds and secondary market loans traded over the counter, the Company generally determines fair value utilizing internal valuation techniques. Fair-valueFair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources and may apply matrix pricing for similar bonds or loans where no price is observable. If available, the Company may also use quoted prices for recent trading activity of assets with similar characteristics to the bond or loan being valued. Trading securities and loans priced using such methods are generally classified as Level 2. However, when less liquidity exists for a security or loan, a quoted price is stale or prices from independent sources vary, a loan or security is generally classified as Level 3.
Where the Company's principal market for a portfolio of loans is the securitization market, the Company uses the securitization price to determine the fair value of the portfolio. The securitization price is determined from the assumed proceeds of a hypothetical securitization in the current market, adjusted for transformation costs (i.e., direct costs other than transaction costs) and securitization uncertainties such as market conditions and liquidity. As a result of the severe reduction in the level of activity in certain securitization markets since the second half of 2007, observable securitization prices for certain directly comparable portfolios of loans have not been readily available. Therefore, such portfolios of loans are generally classified inas Level 3 of the fair-valuefair value hierarchy. However, for other loan securitization markets, such as those related to conforming prime fixed-rate and conforming adjustable-rate mortgage loans, pricing verification of the hypothetical securitizations has been possible, since these markets have remained active. Accordingly, these loan portfolios are classified as Level 2 in the fair-valuefair value hierarchy.
Trading Account Assetsaccount assets and Liabilities—Derivativesliabilities—derivatives
Exchange-traded derivatives are generally fair valued using quoted market (i.e., exchange) prices and so are classified inas Level 1 of the fair-valuefair value hierarchy.
The majority of derivatives entered into by the Company are executed over the counter and so are valued using internal valuation techniques as no quoted market prices exist for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument. The principal techniques used to value these instruments are discounted cash flows, Black-Scholes and Monte Carlo simulation. The fair values of derivative contracts reflect cash the Company has paid or received (for example, option premiums paid and received).
The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest rate yield curves, foreign-exchange rates, the spot price of the underlying volatility and correlation. The item is placed in either Level 2 or Level 3 depending on the observability of the significant inputs to the model. Correlation and items with longer tenors are generally less observable.
Subprime-Related Direct ExposuresSubprime-related direct exposures in CDOs
The Company accounts for its CDO super senior subprime direct exposures and the underlying securities on a fair-value basis with all changes in fair value recorded in earnings. Citigroup's CDO super senior subprime direct exposures are not subject to valuation based on observable transactions. Accordingly, the fair value of these exposures is based on management's best estimates based on facts and circumstances as of the date of these Consolidated Financial Statements.
Citigroup's CDO super senior subprime direct exposures are Level 3 assets. The valuation of the high-grade and mezzanine ABS CDO positions uses trader prices based on the underlying assets of each high-grade and mezzanine ABS CDO. Unlike the ABCP and CDO-squared positions, theThe high-grade and mezzanine positions are now largely hedged through the ABX and bond short positions, which are by necessity, trader priced. This results in closer symmetry in the way these long and short positions are valued by the Company. Citigroup intends to use trader marks to value this portion of the portfolio going forward so long as it remains largely hedged.
The valuation of the ABCP and CDO-squared positions are subject to valuation based on significant unobservable inputs. Fair value of these exposures is based on estimates of future cash flows from the mortgage loans underlying the assets of the ABS CDOs. To determine the performance of the underlying mortgage loan portfolios, the Company estimates the prepayments, defaults and loss severities based on a number of macroeconomic factors, including housing price changes, unemployment rates, interest rates and borrower and loan attributes, such as age, credit scores, documentation status, loan-to-value (LTV) ratios and debt-to-income (DTI) ratios. The model is calibrated using available mortgage loan information including historical loan performance. In addition, the methodology estimates the impact of geographic concentration of mortgages and the impact of reported fraud in the origination of subprime mortgages. An appropriate discount rate is then applied to the cash flows generated for each ABCP and CDO-squared tranche, in order to estimate its fair value under current market conditions.
When necessary, the valuation methodology used by Citigroup is refined and the inputs used for the purposes of estimation are modified, in part, to reflect ongoing market developments. More specifically, the inputs of home price appreciation (HPA) assumptions and delinquency data were updated along with discount rates that are based upon a weighted average combination of implied spreads from single name ABS bond prices and ABX indices, as well as CLO spreads under current market conditions.
The housing-price changes were estimated using a forward-looking projection, which incorporated the Loan Performance Index. In addition, the Company's mortgage default model also
uses recent mortgage performance data, a period of sharp home price declines and high levels of mortgage foreclosures.
The valuation as of September 30, 2009 assumes a cumulative decline in U.S. housing prices from peak to trough of 30.5%. This rate assumes declines of 10% in 2009 and flat in 2010, respectively, the remainder of the 30.5% decline having already occurred before the end of 2008.
In addition, the discount rates were based on a weighted average combination of the implied spreads from single name ABS bond prices, ABX indices and CLO spreads, depending on vintage and asset types. To determine the discount margin, the Company applies the mortgage default model to the bonds underlying the ABX indices and other referenced cash bonds and solves for the discount margin that produces the current market prices of those instruments.
The primary drivers that currently impact the super senior valuations are the discount rates used to calculate the present value of projected cash flows and projected mortgage loan performance.
For most of the lending and structuring direct subprime exposures, (excluding super seniors), fair value is determined utilizing observable transactions where available, other market data for similar assets in markets that are not active and other internal valuation techniques.
Investments
The investments category includes available-for-sale debt and marketable equity securities, whose fair value is determined using the same procedures described for trading securities above or, in some cases, using vendor prices as the primary source.
Also included in investments are nonpublic investments in private equity and real estate entities held by theS&B business. Determining the fair value of nonpublic securities involves a significant degree of management resources and judgment as no quoted prices exist and such securities are generally very thinly traded. In addition, there may be transfer restrictions on private equity securities. The Company uses an established process for determining the fair value of such securities, using commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. In determining the fair value of nonpublic securities, the Company also considers events such as a proposed sale of the investee company, initial public offerings, equity issuances, or other observable transactions.
Private equity securities are generally classified inas Level 3 of the fair-valuefair value hierarchy.
Short-Term BorrowingsShort-term borrowings and Long-Term Debtlong-term debt
Where fair-valuefair value accounting has been elected, the fair value of non-structured liabilities is determined by discounting expected cash flows using the appropriate discount rate for the applicable maturity. Such instruments are generally classified inas Level 2 of the fair-valuefair value hierarchy as all inputs are readily observable.
The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) and hybrid financial instruments (performance linked to risks other than interest rates, inflation or currency risks) using the appropriate derivative valuation methodology (described above) given the nature of the embedded risk profile. Such instruments are classified inas Level 2 or Level 3 depending on the observability of significant inputs to the model.
Market Valuation Adjustmentsvaluation adjustments
Liquidity adjustments are applied to items in Level 2 and Level 3 of the fair-valuefair value hierarchy to ensure that the fair value reflects the price at which the entire position could be liquidated. The liquidity reserve is based on the bid-offer spread for an instrument, adjusted to take into account the size of the position.
Counterparty credit-risk adjustments are applied to derivatives, such as over-the-counter derivatives, where the base valuation uses market parameters based on the LIBOR interest rate curves. Not all counterparties have the same credit risk as that implied by the relevant LIBOR curve, so it is necessary to consider the market view of the credit risk of a counterparty in order to estimate the fair value of such an item.
Bilateral or "own" credit-risk adjustments are applied to reflect the Company's own credit risk when valuing derivatives and liabilities measured at fair value. Counterparty and own credit adjustments consider the expected future cash flows between Citi and its counterparties under the terms of the instrument and the effect of credit risk on the valuation of those cash flows, rather than a point-in-time assessment of the current recognized net asset or liability. Furthermore, the credit-risk adjustments take into account the effect of credit-risk mitigants, such as pledged collateral and any legal right of offset (to the extent such offset exists) with a counterparty through arrangements such as netting agreements.
Auction Rate Securitiesrate securities
Auction rate securities (ARS) are long-term municipal bonds, corporate bonds, securitizations and preferred stocks with interest rates or dividend yields that are reset through periodic auctions. The coupon paid in the current period is based on the rate determined by the prior auction. In the event of an auction failure, ARS holders receive a "fail rate" coupon, which is specified by the original issue documentation of each ARS.
Where insufficient orders to purchase all of the ARS issue to be sold in an auction were received, the primary dealer or auction agent would traditionally have purchased any residual unsold inventory (without a contractual obligation to do so). This residual inventory would then be repaid through subsequent auctions, typically in a short timeframe. Due to this auction mechanism and generally liquid market, ARS have historically traded and were valued as short-term instruments.
Citigroup acted in the capacity of primary dealer for approximately $72 billion of ARS and continued to purchase residual unsold inventory in support of the auction mechanism until mid-February 2008. After this date, liquidity in the ARS market deteriorated significantly, auctions failed due to a lack of bids from third-party investors and Citigroup ceased to purchase unsold inventory. Following a number of ARS refinancings, at September 30, 2009,2010, Citigroup continued to act in the capacity of primary dealer for approximately $31.5$24.7 billion of outstanding ARS.
The Company classifies its ARS as held-to-maturity, available-for-sale and trading securities.
Prior to ourthe Company's first auction's failing in the first quarter of 2008, Citigroup valued ARS based on observation of auction market prices, because the auctions had a short maturity period (7, 28 and 35 days). This generally resulted in valuations at par. Once the auctions failed, ARS could no longer be valued using observation of auction market prices. Accordingly, the fair value of ARS is currently estimated using internally developed discounted cash flow valuation techniques specific to the nature of the assets underlying each ARS.
For ARS with U.S. municipal securities as underlying assets, future cash flows are estimated based on the terms of the securities underlying each individual ARS and discounted at an estimated discount rate in order to estimate the current fair value. The key assumptions that impact the ARS valuations are estimated prepayments and refinancings, estimated fail rate coupons (i.e., the rate paid in the event of auction failure, which varies according to the current credit rating of the issuer) and the discount rate used to calculate the present value of projected cash flows. The discount rate used for each ARS is based on rates observed for straight issuances of other municipal securities. In order to arrive at the appropriate discount rate, these observed rates were adjusted upward to factor in the specifics of the ARS structure being valued, such as callability, and the illiquidity in the ARS market.
For ARS with student loans as underlying assets, future cash flows are estimated based on the terms of the loans underlying each individual ARS, discounted at an appropriate rate in order to estimate the current fair value. The key assumptions that impact the ARS valuations are the expected weighted average life of the structure, estimated fail rate coupons, the amount of leverage in each structure and the discount rate used to calculate the present value of projected cash flows. The discount rate used for each ARS is based on rates observed for basic securitizations with similar maturities to the loans underlying each ARS being valued. In order to arrive at the appropriate discount rate, these observed rates were adjusted upward to factor in the specifics of the ARS structure being valued, such as callability, and the illiquidity in the ARS market.
During the first quarter of 2008, ARS for which the auctions failed and where no secondary market has developed were moved to Level 3, as the assets were subject to valuation using significant unobservable inputs. The majority of ARS continue to be classified inas Level 3.
Alt-A Mortgage Securitiesmortgage securities
The Company classifies its Alt-A mortgage securities as held-to-maturity, available-for-sale and trading investments. The securities classified as trading and available-for-sale are recorded at fair value with changes in fair value reported in current earnings and AOCI, respectively. For these purposes, Alt-A mortgage securities are non-agency residential mortgage-backed securities (RMBS) where (1) the underlying collateral has weighted average FICO scores between 680 and 720 or (2) for instances where FICO scores are greater than 720, RMBS have 30% or less of the underlying collateral composed of full documentation loans.
Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair value of Alt-A mortgage securities utilizing internal valuation techniques. Fair-value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities with the same or similar characteristics to that being valued.
The internal valuation techniques used for Alt-A mortgage securities, as with other mortgage exposures,
consider estimated housing price changes, unemployment rates, interest rates and borrower attributes. They also consider prepayment rates as well as other market indicators.
Alt-A mortgage securities that are valued using these methods are generally classified as Level 2. However, Alt-A mortgage securities backed by Alt-A mortgages of lower quality or more recent vintages are mostly classified inas Level 3 due to the reduced liquidity that exists for such positions, which reduces the reliability of prices available from independent sources.
Commercial Real Estate Exposurereal estate exposure
Citigroup reports a number of different exposures linked to commercial real estate at fair value with changes in fair value reported in earnings, including securities, loans and investments in entities that hold commercial real estate loans or commercial real estate directly. The Company also reports securities backed by commercial real estate asAvailable-for-sale available-for-sale investments,, which are carried at fair value with changes in fair-value reported in AOCI.
Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair value of securities and loans linked to commercial real estate utilizing internal valuation techniques. Fair-value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities or loans with the same or similar characteristics to thatthose being valued. Securities and loans linked to commercial real estate valued using these methodologies are generally classified as Level 3 as a result of the reduced liquidity currently in the market for such exposures.
The fair value of investments in entities that hold commercial real estate loans or commercial real estate directly is determined using a similar methodology to that used for other non-public investments in real estate held by theS&B business. The Company uses an established process for determining the fair value of such securities, using commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. In determining the fair value of such investments, the Company also considers events, such as a proposed sale of the investee company, initial public offerings, equity issuances, or other observable transactions. Such investments are generally classified inas Level 3 of the fair-value hierarchy.
Highly Leveraged Financing Commitments
The Company reports approximately $900 million of highly leveraged loans as held for sale, which are measured on a LOCOM basis. The fair value of such exposures is determined, where possible, using quoted secondary-market prices and classified in Level 2 of the fair-value hierarchy if there is a sufficient level of activity in the market and quotes or traded prices are available with suitable frequency.
However, due to the dislocation of the credit markets and the reduced market interest in higher risk/higher yield instruments since the latter half of 2007, liquidity in the market for highly leveraged financings has been limited. Therefore, a majority of such exposures are classified in Level 3 as quoted secondary market prices do not generally exist. The fair value for such exposures is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of the loan being valued.
Items Measured at Fair Value on a Recurring Basis
The following tables present for each of the fair-value hierarchy levels the Company's assets and liabilities that are measured at fair value on a recurring basis at September 30, 2009 and December 31, 2008.basis. The Company often hedges positions that have been classified in the Level 3 category with financial instruments that have been classified as Level 1 or Level 2. In addition, the Company also hedges items classified in the Level 3 category with instruments classified in Level 3 of the fair value hierarchy. The effects of these hedges are presented gross in the following table.tables, as of September 30, 2010 and December 31, 2009:
In millions of dollars at September 30, 2009 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | ||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars at September 30, 2010 | In millions of dollars at September 30, 2010 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | |||||||||||||||||||||||||||||||||||||
Assets | Assets | Assets | ||||||||||||||||||||||||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | Federal funds sold and securities borrowed or purchased under agreements to resell | $ | — | $ | 114,841 | $ | — | $ | 114,841 | $ | (26,955 | ) | $ | 87,886 | Federal funds sold and securities borrowed or purchased under agreements to resell | $ | — | $ | 127,104 | $ | 8,180 | $ | 135,284 | $ | (41,094 | ) | $ | 94,190 | ||||||||||||||||
Trading securities | Trading securities | Trading securities | ||||||||||||||||||||||||||||||||||||||||||
Trading mortgage-backed securities | Trading mortgage-backed securities | |||||||||||||||||||||||||||||||||||||||||||
U.S. government sponsored | — | $ | 22,387 | $ | 1,162 | $ | 23,549 | $ | — | $ | 23,549 | U.S. government sponsored | $ | — | $ | 22,937 | $ | 845 | $ | 23,782 | $ | — | $ | 23,782 | ||||||||||||||||||||
Prime | — | 719 | 458 | 1,177 | — | 1,177 | Prime | — | 907 | 891 | 1,798 | — | 1,798 | |||||||||||||||||||||||||||||||
Alt-A | — | 743 | 562 | 1,305 | — | 1,305 | Alt-A | — | 1,065 | 351 | 1,416 | — | 1,416 | |||||||||||||||||||||||||||||||
Subprime | — | 880 | 9,758 | 10,638 | — | 10,638 | Subprime | — | 501 | 1,353 | 1,854 | — | 1,854 | |||||||||||||||||||||||||||||||
Non-U.S. residential | — | 1,633 | 290 | 1,923 | — | 1,923 | Non-U.S. residential | — | 2,488 | 341 | 2,829 | — | 2,829 | |||||||||||||||||||||||||||||||
Commercial | — | 1,244 | 2,731 | 3,975 | — | 3,975 | Commercial | — | 1,749 | 1,547 | 3,296 | — | 3,296 | |||||||||||||||||||||||||||||||
Total trading mortgage-backed securities | $ | — | $ | 27,606 | $ | 14,961 | $ | 42,567 | $ | — | $ | 42,567 | Total trading mortgage-backed securities | $ | — | $ | 29,647 | $ | 5,328 | $ | 34,975 | $ | — | $ | 34,975 | |||||||||||||||||||
U.S. Treasury and federal agencies securities | U.S. Treasury and federal agencies securities | |||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | 20,527 | $ | 276 | $ | — | $ | 20,803 | $ | — | $ | 20,803 | U.S. Treasury | $ | 21,345 | $ | 2,440 | $ | — | $ | 23,785 | $ | — | $ | 23,785 | |||||||||||||||||||
Agency obligations | — | 3,854 | 79 | 3,933 | — | 3,933 | Agency obligations | — | 4,108 | 65 | 4,173 | — | 4,173 | |||||||||||||||||||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 20,527 | $ | 4,130 | $ | 79 | $ | 24,736 | $ | — | $ | 24,736 | Total U.S. Treasury and federal agencies securities | $ | 21,345 | $ | 6,548 | $ | 65 | $ | 27,958 | $ | — | $ | 27,958 | |||||||||||||||||||
Other trading securities | State and municipal | $ | — | $ | 6,424 | $ | 305 | $ | 6,729 | $ | — | $ | 6,729 | |||||||||||||||||||||||||||||||
State and municipal | $ | — | $ | 6,744 | $ | 452 | $ | 7,196 | — | $ | 7,196 | Foreign government | 73,828 | 23,948 | 424 | 98,200 | — | 98,200 | ||||||||||||||||||||||||||
Foreign government | 48,200 | 17,781 | 444 | 66,425 | — | 66,425 | Corporate | — | 45,617 | 6,372 | 51,989 | — | 51,989 | |||||||||||||||||||||||||||||||
Corporate | — | 38,856 | 8,629 | 47,485 | — | 47,485 | Equity securities | 30,414 | 5,852 | 851 | 37,117 | — | 37,117 | |||||||||||||||||||||||||||||||
Equity securities | 34,989 | 10,319 | 1,155 | 46,463 | — | 46,463 | Asset-backed securities | — | 2,178 | 7,503 | 9,681 | — | 9,681 | |||||||||||||||||||||||||||||||
Other debt securities | — | 20,789 | 16,366 | 37,155 | — | 37,155 | Other debt securities | — | 13,796 | 1,093 | 14,889 | — | 14,889 | |||||||||||||||||||||||||||||||
Total trading securities | $ | 103,716 | $ | 126,225 | $ | 42,086 | $ | 272,027 | $ | — | $ | 272,027 | ||||||||||||||||||||||||||||||||
Derivatives | $ | 4,977 | $ | 786,659 | $ | 30,466 | $ | 822,102 | $ | (753,432 | ) | $ | 68,670 | |||||||||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | Total trading securities | $ | 125,587 | $ | 134,010 | $ | 21,941 | $ | 281,538 | $ | — | $ | 281,538 | |||||||||||||||||||||||||||||||
U.S. government sponsored | $ | 1,387 | $ | 22,232 | $ | — | $ | 23,619 | $ | — | $ | 23,619 | ||||||||||||||||||||||||||||||||
Prime | — | 5,405 | 873 | 6,278 | — | 6,278 | Derivatives | |||||||||||||||||||||||||||||||||||||
Alt-A | — | 403 | 67 | 470 | — | 470 | Interest rate contracts | $ | 572 | $ | 666,648 | $ | 2,690 | $ | 669,910 | |||||||||||||||||||||||||||||
Subprime | — | — | 19 | 19 | — | 19 | Foreign exchange contracts | 5 | 98,837 | 1,091 | 99,933 | |||||||||||||||||||||||||||||||||
Non-U.S. Residential | — | 266 | — | 266 | — | 266 | Equity contracts | 2,764 | 14,438 | 2,355 | 19,557 | |||||||||||||||||||||||||||||||||
Commercial | — | 45 | 764 | 809 | — | 809 | Commodity and other contracts | 559 | 12,580 | 1,020 | 14,159 | |||||||||||||||||||||||||||||||||
Credit derivatives | 10 | 60,538 | 12,638 | 73,186 | ||||||||||||||||||||||||||||||||||||||||
Total investment mortgage-backed securities | $ | 1,387 | $ | 28,351 | $ | 1,723 | $ | 31,461 | $ | — | $ | 31,461 | ||||||||||||||||||||||||||||||||
Total gross derivatives | $ | 3,910 | $ | 853,041 | $ | 19,794 | $ | 876,745 | ||||||||||||||||||||||||||||||||||||
U.S. Treasury and federal Agency securities | Cash collateral paid | 61,457 | ||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | 4,599 | $ | 1,635 | $ | — | $ | 6,234 | $ | — | $ | 6,234 | Netting agreements and market value adjustments | $ | (882,642 | ) | ||||||||||||||||||||||||||||
Agency obligations | — | 16,963 | 4 | 16,967 | — | 16,967 | ||||||||||||||||||||||||||||||||||||||
Total derivatives | $ | 3,910 | $ | 853,041 | $ | 19,794 | $ | 938,202 | $ | (882,642 | ) | $ | 55,560 | |||||||||||||||||||||||||||||||
Total U.S. Treasury and federal agency | $ | 4,599 | $ | 18,598 | $ | 4 | $ | 23,201 | $ | — | $ | 23,201 | ||||||||||||||||||||||||||||||||
Investments | Investments | |||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||
State and municipal | $ | — | $ | 16,571 | $ | 254 | $ | 16,825 | $ | — | $ | 16,825 | U.S. government sponsored | $ | 77 | $ | 22,679 | $ | 1 | $ | 22,757 | $ | — | 22,757 | ||||||||||||||||||||
Foreign government | 37,313 | 43,087 | 271 | 80,671 | — | 80,671 | Prime | — | 2,258 | 233 | 2,491 | — | 2,491 | |||||||||||||||||||||||||||||||
Corporate | — | 19,303 | 1,405 | 20,708 | — | 20,708 | Alt-A | — | 49 | 22 | 71 | — | 71 | |||||||||||||||||||||||||||||||
Equity securities | 3,088 | 109 | 2,542 | 5,739 | — | 5,739 | Subprime | — | 1 | — | 1 | — | 1 | |||||||||||||||||||||||||||||||
Other debt securities | 553 | 2,492 | 8,602 | 11,647 | — | 11,647 | Non-U.S. residential | — | 340 | — | 340 | — | 340 | |||||||||||||||||||||||||||||||
Non-marketable equity securities | — | 119 | 7,646 | 7,765 | — | 7,765 | Commercial | — | 45 | 551 | 596 | — | 596 | |||||||||||||||||||||||||||||||
Total investments | $ | 46,940 | $ | 128,630 | $ | 22,447 | $ | 198,017 | $ | — | $ | 198,017 | ||||||||||||||||||||||||||||||||
In millions of dollars at September 30, 2009 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | |||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars at September 30, 2010 | In millions of dollars at September 30, 2010 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | ||||||||||||||||||||||||||||||||||||
Total investment mortgage-backed securities | $ | 77 | $ | 25,372 | $ | 807 | $ | 26,256 | $ | — | $ | 26,256 | |||||||||||||||||||||||||||||||
U.S. Treasury and federal agency securities | |||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | 13,783 | $ | 52,114 | $ | — | $ | 65,897 | $ | — | $ | 65,897 | |||||||||||||||||||||||||||||||
Agency obligations | — | 49,128 | 18 | 49,146 | 49,146 | ||||||||||||||||||||||||||||||||||||||
Total U.S. Treasury and federal agency | $ | 13,783 | $ | 101,242 | $ | 18 | $ | 115,043 | $ | — | $ | 115,043 | |||||||||||||||||||||||||||||||
State and municipal | $ | — | $ | 14,566 | $ | — | $ | 14,566 | $ | — | $ | 14,566 | |||||||||||||||||||||||||||||||
Foreign government | 52,423 | 51,093 | 339 | 103,855 | — | 103,855 | |||||||||||||||||||||||||||||||||||||
Corporate | — | 16,687 | 911 | 17,598 | — | 17,598 | |||||||||||||||||||||||||||||||||||||
Equity securities | 3,782 | 85 | 2,126 | 5,993 | — | 5,993 | |||||||||||||||||||||||||||||||||||||
Asset-backed securities | — | 3,071 | 7,159 | 10,230 | — | 10,230 | |||||||||||||||||||||||||||||||||||||
Other debt securities | — | 1,216 | 925 | 2,141 | — | 2,141 | |||||||||||||||||||||||||||||||||||||
Non-marketable equity securities | — | 137 | 6,290 | 6,427 | — | 6,427 | |||||||||||||||||||||||||||||||||||||
Total investments | Total investments | $ | 70,065 | $ | 213,469 | $ | 18,575 | $ | 302,109 | $ | — | $ | 302,109 | ||||||||||||||||||||||||||||||
Loans(2) | Loans(2) | — | $ | 1,290 | $ | 215 | $ | 1,505 | — | $ | 1,505 | Loans(2) | $ | — | $ | 1,234 | $ | 3,921 | $ | 5,155 | $ | — | $ | 5,155 | |||||||||||||||||||
Mortgage servicing rights | — | — | 6,228 | 6,228 | — | 6,228 | |||||||||||||||||||||||||||||||||||||
Assets of discontinued operations held for sale(3) | 5,961 | 2,516 | 727 | 9,204 | — | 9,204 | |||||||||||||||||||||||||||||||||||||
MSRs | MSRs | — | — | 3,976 | 3,976 | — | 3,976 | ||||||||||||||||||||||||||||||||||||
Other financial assets measured on a recurring basis | Other financial assets measured on a recurring basis | — | 17,199 | 1,184 | 18,383 | (4,713 | ) | $ | 13,670 | Other financial assets measured on a recurring basis | — | 24,441 | 2,698 | 27,139 | (4,221 | ) | 22,918 | ||||||||||||||||||||||||||
Total assets | Total assets | $ | 161,594 | $ | 1,177,360 | $ | 103,353 | $ | 1,442,307 | $ | (785,100 | ) | $ | 657,207 | Total assets | $ | 199,562 | $ | 1,353,299 | $ | 79,085 | $ | 1,693,403 | $ | (927,957 | ) | $ | 765,446 | |||||||||||||||
11.2 | % | 81.6 | % | 7.2 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||
Total as a percentage of gross assets(3) | Total as a percentage of gross assets(3) | 12.2 | % | 82.9 | % | 4.9 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||
Liabilities | Liabilities | Liabilities | |||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | Interest-bearing deposits | $ | — | $ | 1,998 | $ | 31 | $ | 2,029 | $ | — | $ | 2,029 | Interest-bearing deposits | $ | — | $ | 1,009 | $ | 161 | $ | 1,170 | $ | — | $ | 1,170 | |||||||||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | Federal funds purchased and securities loaned or sold under agreements to repurchase | — | 135,165 | 8,483 | 143,648 | (26,955 | ) | 116,693 | Federal funds purchased and securities loaned or sold under agreements to repurchase | — | 159,668 | 1,410 | 161,078 | (41,094 | ) | 119,984 | |||||||||||||||||||||||||||
Trading account liabilities | Trading account liabilities | Trading account liabilities | |||||||||||||||||||||||||||||||||||||||||
Securities sold, not yet purchased | 43,864 | 22,905 | 1,219 | 67,988 | — | 67,988 | Securities sold, not yet purchased | 65,878 | 12,878 | 783 | 79,539 | — | 79,539 | ||||||||||||||||||||||||||||||
Derivatives | 5,601 | 772,149 | 29,934 | 807,684 | (745,132 | ) | 62,552 | Derivatives | |||||||||||||||||||||||||||||||||||
Interest rate contracts | 595 | 663,663 | 2,457 | 666,715 | |||||||||||||||||||||||||||||||||||||||
Foreign exchange contracts | 1 | 106,210 | 960 | 107,171 | |||||||||||||||||||||||||||||||||||||||
Equity contracts | 3,222 | 30,931 | 3,596 | 37,749 | |||||||||||||||||||||||||||||||||||||||
Commodity and other contracts | 447 | 12,597 | 1,819 | 14,863 | |||||||||||||||||||||||||||||||||||||||
Credit derivatives | — | 56,277 | 10,908 | 67,185 | |||||||||||||||||||||||||||||||||||||||
Total gross derivatives | $ | 4,265 | $ | 869,678 | $ | 19,740 | 893,683 | ||||||||||||||||||||||||||||||||||||
Cash collateral received | 46,590 | ||||||||||||||||||||||||||||||||||||||||||
Netting agreements and market value adjustments | (877,807 | ) | |||||||||||||||||||||||||||||||||||||||||
Total derivatives | $ | 4,265 | $ | 869,678 | $ | 19,740 | $ | 940,273 | $ | (877,807 | ) | $ | 62,466 | ||||||||||||||||||||||||||||||
Short-term borrowings | Short-term borrowings | — | 1,284 | 159 | 1,443 | — | 1,443 | Short-term borrowings | — | 1,677 | 817 | 2,494 | — | 2,494 | |||||||||||||||||||||||||||||
Long-term debt | Long-term debt | — | 16,080 | 11,106 | 27,186 | — | 27,186 | Long-term debt | — | 16,108 | 10,532 | 26,640 | — | 26,640 | |||||||||||||||||||||||||||||
Liabilities of discontinued operations held for sale(3) | 1,302 | 1,521 | — | 2,823 | — | 2,823 | |||||||||||||||||||||||||||||||||||||
Other financial liabilities measured on a recurring basis | Other financial liabilities measured on a recurring basis | — | 19,531 | 1 | 19,532 | (4,713 | ) | 14,819 | Other financial liabilities measured on a recurring basis | 1 | 15,507 | — | 15,508 | (4,221 | ) | 11,287 | |||||||||||||||||||||||||||
Total liabilities | Total liabilities | $ | 50,767 | $ | 970,633 | $ | 50,933 | $ | 1,072,333 | $ | (776,800 | ) | $ | 295,533 | Total liabilities | $ | 70,144 | $ | 1,076,525 | $ | 33,443 | $ | 1,226,702 | $ | (923,122 | ) | $ | 303,580 | |||||||||||||||
Total as a percentage of gross liabilities(3) | Total as a percentage of gross liabilities(3) | 6.0 | % | 91.2 | % | 2.8 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||
4.7 | % | 90.6 | % | 4.7 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||
In millions of dollars at December 31, 2008 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets | ||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | $ | — | $ | 96,524 | $ | — | $ | 96,524 | $ | (26,219 | ) | $ | 70,305 | |||||||
Trading account assets | ||||||||||||||||||||
Trading securities and loans | 90,530 | 121,043 | 50,773 | 262,346 | — | 262,346 | ||||||||||||||
Derivatives | 9,675 | 1,102,252 | 60,725 | 1,172,652 | (1,057,363 | ) | 115,289 | |||||||||||||
Investments | 44,342 | 111,836 | 28,273 | 184,451 | — | 184,451 | ||||||||||||||
Loans(2) | — | 2,572 | 160 | 2,732 | — | 2,732 | ||||||||||||||
Mortgage servicing rights | — | — | 5,657 | 5,657 | — | 5,657 | ||||||||||||||
Other financial assets measured on a recurring basis | — | 25,540 | 359 | 25,899 | (4,527 | ) | 21,372 | |||||||||||||
Total assets | $ | 144,547 | $ | 1,459,767 | $ | 145,947 | $ | 1,750,261 | $ | (1,088,109 | ) | $ | 662,152 | |||||||
8.3 | % | 83.4 | % | 8.3 | % | 100.0 | % | |||||||||||||
Liabilities | ||||||||||||||||||||
Interest-bearing deposits | $ | — | $ | 2,552 | $ | 54 | $ | 2,606 | $ | — | $ | 2,606 | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | — | 153,918 | 11,167 | 165,085 | (26,219 | ) | 138,866 | |||||||||||||
Trading account liabilities | ||||||||||||||||||||
Securities sold, not yet purchased | 36,848 | 13,192 | 653 | 50,693 | — | 50,693 | ||||||||||||||
Derivatives | 10,038 | 1,094,435 | 57,139 | 1,161,612 | (1,046,505 | ) | 115,107 | |||||||||||||
Short-term borrowings | — | 16,278 | 1,329 | 17,607 | — | 17,607 | ||||||||||||||
Long-term debt | — | 16,065 | 11,198 | 27,263 | — | 27,263 | ||||||||||||||
Other financial liabilities measured on a recurring basis | — | 18,093 | 1 | 18,094 | (4,527 | ) | 13,567 | |||||||||||||
Total liabilities | $ | 46,886 | $ | 1,314,533 | $ | 81,541 | $ | 1,442,960 | $ | (1,077,251 | ) | $ | 365,709 | |||||||
3.2 | % | 91.1 | % | 5.7 | % | 100.0 | % | |||||||||||||
In millions of dollars at December 31, 2009 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | |||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | $ | — | $ | 138,525 | $ | — | $ | 138,525 | $ | (50,713 | ) | $ | 87,812 | ||||||||
Trading securities | |||||||||||||||||||||
Trading mortgage- backed securities | |||||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | — | $ | 19,666 | $ | 972 | $ | 20,638 | $ | — | $ | 20,638 | |||||||||
Prime | — | 772 | 384 | 1,156 | — | 1,156 | |||||||||||||||
Alt-A | — | 842 | 387 | 1,229 | — | 1,229 | |||||||||||||||
Subprime | — | 736 | 8,998 | 9,734 | — | 9,734 | |||||||||||||||
Non-U.S. residential | — | 1,796 | 572 | 2,368 | — | 2,368 | |||||||||||||||
Commercial | — | 1,004 | 2,451 | 3,455 | — | 3,455 | |||||||||||||||
Total trading mortgage-backed securities | $ | — | $ | 24,816 | $ | 13,764 | $ | 38,580 | $ | — | $ | 38,580 | |||||||||
U.S. Treasury and federal agencies securities | |||||||||||||||||||||
U.S. Treasury | $ | 27,943 | $ | 995 | $ | — | $ | 28,938 | $ | — | $ | 28,938 | |||||||||
Agency obligations | — | 2,041 | — | $ | 2,041 | — | 2,041 | ||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 27,943 | $ | 3,036 | $ | — | $ | 30,979 | $ | — | $ | 30,979 | |||||||||
Other trading securities | |||||||||||||||||||||
State and municipal | $ | — | $ | 6,925 | $ | 222 | $ | 7,147 | $ | — | $ | 7,147 | |||||||||
Foreign government | 59,229 | 13,081 | 459 | 72,769 | — | 72,769 | |||||||||||||||
Corporate | — | 43,365 | 8,620 | 51,985 | — | 51,985 | |||||||||||||||
Equity securities | 33,754 | 11,827 | 640 | 46,221 | — | 46,221 | |||||||||||||||
Other debt securities | — | 19,976 | 16,237 | 36,213 | — | 36,213 | |||||||||||||||
Total trading securities | $ | 120,926 | $ | 123,026 | $ | 39,942 | $ | 283,894 | $ | — | $ | 283,894 | |||||||||
Total derivatives(2) | $ | 4,002 | $ | 671,532 | $ | 27,685 | $ | 703,219 | $ | (644,340 | ) | $ | 58,879 | ||||||||
Investments | |||||||||||||||||||||
Mortgage-backed securities | |||||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | 89 | $ | 20,823 | $ | 2 | $ | 20,914 | $ | — | $ | 20,914 | |||||||||
Prime | — | 5,742 | 736 | 6,478 | — | 6,478 | |||||||||||||||
Alt-A | — | 572 | 55 | 627 | — | 627 | |||||||||||||||
Subprime | — | — | 1 | 1 | — | 1 | |||||||||||||||
Non-U.S. residential | — | 255 | — | 255 | — | 255 | |||||||||||||||
Commercial | — | 47 | 746 | 793 | — | 793 | |||||||||||||||
Total investment mortgage-backed securities | $ | 89 | $ | 27,439 | $ | 1,540 | $ | 29,068 | $ | — | $ | 29,068 | |||||||||
U.S. Treasury and federal agency securities | |||||||||||||||||||||
U.S. Treasury | $ | 5,943 | $ | 20,619 | $ | — | $ | 26,562 | $ | — | $ | 26,562 | |||||||||
Agency obligations | — | 27,531 | 21 | 27,552 | — | 27,552 | |||||||||||||||
Total U.S. Treasury and federal agency | $ | 5,943 | $ | 48,150 | $ | 21 | $ | 54,114 | $ | — | $ | 54,114 | |||||||||
State and municipal | $ | — | $ | 15,393 | $ | 217 | $ | 15,610 | $ | — | $ | 15,610 | |||||||||
Foreign government | 60,484 | 41,765 | 270 | 102,519 | — | 102,519 | |||||||||||||||
Corporate | — | 19,056 | 1,257 | 20,313 | — | 20,313 | |||||||||||||||
Equity securities | 3,056 | 237 | 2,513 | 5,806 | — | 5,806 | |||||||||||||||
Other debt securities | — | 3,337 | 8,832 | 12,169 | — | 12,169 | |||||||||||||||
Non-marketable equity securities | — | 77 | 6,753 | 6,830 | — | 6,830 | |||||||||||||||
Total investments | $ | 69,572 | $ | 155,454 | $ | 21,403 | $ | 246,429 | $ | — | $ | 246,429 | |||||||||
Loans(3) | $ | — | $ | 1,226 | $ | 213 | $ | 1,439 | $ | — | $ | 1,439 |
In millions of dollars at December 31, 2009 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
MSRs | — | — | 6,530 | 6,530 | — | 6,530 | ||||||||||||||
Other financial assets measured on a recurring basis | — | 15,787 | 1,101 | 16,888 | (4,224 | ) | 12,664 | |||||||||||||
Total assets | $ | 194,500 | $ | 1,105,550 | $ | 96,874 | $ | 1,396,924 | $ | (699,277 | ) | $ | 697,647 | |||||||
13.9 | % | 79.2 | % | 6.9 | % | 100.0 | % | |||||||||||||
LIABILITIES | ||||||||||||||||||||
Interest-bearing deposits | $ | — | $ | 1,517 | $ | 28 | $ | 1,545 | $ | — | $ | 1,545 | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | — | 152,687 | 2,056 | 154,743 | (50,713 | ) | 104,030 | |||||||||||||
Trading account liabilities | ||||||||||||||||||||
Securities sold, not yet purchased | 52,399 | 20,233 | 774 | 73,406 | — | 73,406 | ||||||||||||||
Derivatives(2) | 4,980 | 669,384 | 24,577 | 698,941 | (634,835 | ) | 64,106 | |||||||||||||
Short-term borrowings | — | 408 | 231 | 639 | — | 639 | ||||||||||||||
Long-term debt | — | 16,288 | 9,654 | 25,942 | — | 25,942 | ||||||||||||||
Other financial liabilities measured on a recurring basis | — | 15,753 | 13 | 15,766 | (4,224 | ) | 11,542 | |||||||||||||
Total liabilities | $ | 57,379 | $ | 876,270 | $ | 37,333 | $ | 970,982 | $ | (689,772 | ) | $ | 281,210 | |||||||
5.9 | % | 90.2 | % | 3.8 | % | 100.0 | % | |||||||||||||
Changes in Level 3 Fair-Value Category
The following tables present the changes in the Level 3 fair-value category for the three months ended September 30, 2009 and December 31, 2008.category. The Company classifies financial instruments in Level 3 of the fair-value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.
The Company often hedges positions with offsetting positions that are classified in a different level. For example, the gains and losses for assets and liabilities in the Level 3 category presented in the tables below do not reflect the effect of offsetting losses and gains on hedging instruments that have been classified by the Company in the Level 1 and Level 2 categories. In addition, the Company hedges items classified in the Level 3 category with instruments also classified in Level 3 of the fair-value hierarchy. The effects of these hedges are presented gross in the following tables.
| | | Net realized/ unrealized gains (losses) included in | | | | | | | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | | | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | |||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | June 30, 2009 | Principal transactions | Other(1)(2) | Sept. 30, 2009 | In millions of dollars | June 30, 2010 | Principal transactions | Other(1)(2) | Sept. 30, 2010 | |||||||||||||||||||||||||||||||||||||||
Assets | Assets | Assets | |||||||||||||||||||||||||||||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | Federal funds sold and securities borrowed or purchased under agreements to resell | $ | 6,518 | $ | — | $ | — | $ | 1,714 | $ | (52 | ) | $ | 8,180 | $ | — | |||||||||||||||||||||||||||||||||
Trading securities | Trading securities | Trading securities | |||||||||||||||||||||||||||||||||||||||||||||||
Trading mortgage-backed securities | |||||||||||||||||||||||||||||||||||||||||||||||||
U.S. government sponsored | $ | 1,244 | $ | (71 | ) | $ | — | $ | 127 | $ | (138 | ) | $ | 1,162 | $ | (116 | ) | ||||||||||||||||||||||||||||||||
Prime | 623 | (76 | ) | — | (39 | ) | (50 | ) | 458 | (37 | ) | ||||||||||||||||||||||||||||||||||||||
Alt-A | 777 | 18 | — | (75 | ) | (158 | ) | 562 | 18 | ||||||||||||||||||||||||||||||||||||||||
Subprime | 10,001 | 1,752 | — | (515 | ) | (1,480 | ) | 9,758 | 1,785 | Trading mortgage-backed securities | |||||||||||||||||||||||||||||||||||||||
Non-U.S. residential | 345 | (3 | ) | — | (142 | ) | 90 | 290 | (3 | ) | U.S. government sponsored | $ | 758 | (62 | ) | — | 160 | (11 | ) | $ | 845 | (75 | ) | ||||||||||||||||||||||||||
Commercial | 2,808 | (1 | ) | — | 114 | (190 | ) | 2,731 | 2 | Prime | 610 | 23 | — | 188 | 70 | 891 | 3 | ||||||||||||||||||||||||||||||||
Alt-A | 451 | 15 | — | 41 | (156 | ) | 351 | (6 | ) | ||||||||||||||||||||||||||||||||||||||||
Total trading mortgage-backed securities | $ | 15,798 | $ | 1,619 | $ | — | $ | (530 | ) | $ | (1,926 | ) | $ | 14,961 | $ | 1,649 | Subprime | 1,885 | 146 | — | 24 | (702 | ) | 1,353 | 29 | ||||||||||||||||||||||||
Non-U.S. residential | 234 | 29 | — | 904 | (826 | ) | 341 | 3 | |||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and federal agencies securities | Commercial | 2,184 | 70 | — | 57 | (764 | ) | 1,547 | 216 | ||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Agency obligations | 49 | 9 | — | 5 | 16 | 79 | 9 | Total trading mortgage-backed securities | $ | 6,122 | $ | 221 | $ | — | $ | 1,374 | $ | (2,389 | ) | $ | 5,328 | $ | 170 | ||||||||||||||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 49 | $ | 9 | $ | — | $ | 5 | $ | 16 | $ | 79 | $ | 9 | U.S. Treasury and federal agencies securities | — | $ | 2 | $ | — | $ | 47 | $ | 16 | $ | 65 | $ | (2 | ) | ||||||||||||||||||||
State and municipal | $ | 57 | 13 | — | 236 | (1 | ) | $ | 305 | 18 | |||||||||||||||||||||||||||||||||||||||
State and municipal | $ | 109 | $ | (49 | ) | $ | — | $ | 300 | $ | 92 | $ | 452 | $ | (49 | ) | Foreign government | 386 | 6 | — | 5 | 27 | 424 | (4 | ) | ||||||||||||||||||||||||
Foreign government | 590 | 24 | — | (134 | ) | (36 | ) | 444 | 4 | Corporate | 6,211 | 236 | — | 198 | (273 | ) | 6,372 | 189 | |||||||||||||||||||||||||||||||
Corporate | 9,435 | 404 | — | (764 | ) | (446 | ) | 8,629 | 431 | Equity securities | 533 | 14 | — | 362 | (58 | ) | 851 | 62 | |||||||||||||||||||||||||||||||
Equity securities | 1,866 | 161 | — | (899 | ) | 27 | 1,155 | 25 | Asset-backed securities | 4,202 | (55 | ) | — | 4,850 | (1,494 | ) | 7,503 | 66 | |||||||||||||||||||||||||||||||
Other debt securities | 16,846 | 1,133 | (1,122 | ) | (491 | ) | 16,366 | 1,018 | Other debt securities | 1,047 | (39 | ) | — | 108 | (23 | ) | 1,093 | 4 | |||||||||||||||||||||||||||||||
Total trading securities | Total trading securities | $ | 44,693 | $ | 3,301 | $ | — | $ | (3,144 | ) | $ | (2,764 | ) | $ | 42,086 | $ | 3,087 | Total trading securities | $ | 18,558 | $ | 398 | $ | — | $ | 7,180 | $ | (4,195 | ) | $ | 21,941 | $ | 503 | ||||||||||||||||
Derivatives, net(4) | Derivatives, net(4) | $ | 1,180 | $ | (2,407 | ) | $ | — | $ | (1,107 | ) | $ | 2,866 | $ | 532 | $ | (3,064 | ) | Derivatives, net(4) | ||||||||||||||||||||||||||||||
Interest rate contracts | $ | 575 | $ | (91 | ) | $ | — | $ | (37 | ) | $ | (214 | ) | $ | 233 | $ | (84 | ) | |||||||||||||||||||||||||||||||
Foreign exchange contracts | 250 | (162 | ) | — | 62 | (19 | ) | 131 | (222 | ) | |||||||||||||||||||||||||||||||||||||||
Equity contracts | (1,233 | ) | (196 | ) | — | 277 | (89 | ) | (1,241 | ) | (539 | ) | |||||||||||||||||||||||||||||||||||||
Commodity and other contracts | (524 | ) | (158 | ) | — | (5 | ) | (112 | ) | (799 | ) | (62 | ) | ||||||||||||||||||||||||||||||||||||
Credit derivatives | 2,073 | 33 | — | 9 | (385 | ) | 1,730 | (349 | ) | ||||||||||||||||||||||||||||||||||||||||
Total derivatives, net(4) | Total derivatives, net(4) | $ | 1,141 | $ | (574 | ) | $ | — | $ | 306 | $ | (819 | ) | $ | 54 | $ | (1,256 | ) | |||||||||||||||||||||||||||||||
Investments | Investments | Investments | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. government sponsored | $ | 78 | $ | — | $ | 1 | $ | — | $ | (79 | ) | $ | — | $ | 1 | U.S. government-sponsored agency guaranteed | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | 1 | $ | — | |||||||||||||||||||
Prime | 775 | — | 50 | 99 | (51 | ) | 873 | 59 | Prime | 772 | — | 78 | (539 | ) | (78 | ) | 233 | 3 | |||||||||||||||||||||||||||||||
Alt-A | 271 | — | 11 | (114 | ) | (101 | ) | 67 | 16 | Alt-A | 205 | — | 35 | (153 | ) | (65 | ) | 22 | — | ||||||||||||||||||||||||||||||
Subprime | 17 | — | — | 2 | — | 19 | — | Subprime | 14 | — | (1 | ) | (13 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Commercial | 719 | — | 62 | 2 | (19 | ) | 764 | 14 | Non-U.S. Residential | 814 | — | — | (814 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Commercial | 558 | — | 11 | — | (18 | ) | 551 | — | |||||||||||||||||||||||||||||||||||||||||
Total investment mortgage-backed debt securities | $ | 1,860 | $ | — | $ | 124 | $ | (11 | ) | $ | (250 | ) | $ | 1,723 | $ | 90 | |||||||||||||||||||||||||||||||||
Total investment mortgage-backed debt securities | $ | 2,364 | $ | — | $ | 123 | $ | (1,519 | ) | $ | (161 | ) | $ | 807 | $ | 3 | |||||||||||||||||||||||||||||||||
U.S. Treasury and federal agencies securities | |||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and federal agencies securities | U.S. Treasury and federal agencies securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Agency obligations | $ | 19 | $ | — | $ | — | $ | — | $ | (1 | ) | $ | 18 | $ | — | ||||||||||||||||||||||||||||||||||
Total U.S. Treasury and federal agencies securities | Total U.S. Treasury and federal agencies securities | $ | 19 | $ | — | $ | — | $ | — | $ | (1 | ) | $ | 18 | $ | — | |||||||||||||||||||||||||||||||||
U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Agency obligations | 9 | — | — | — | (5 | ) | 4 | — | State and municipal | $ | 457 | $ | — | $ | — | $ | (233 | ) | $ | (224 | ) | $ | — | $ | — | ||||||||||||||||||||||||
Foreign government | 282 | — | 14 | 21 | 22 | 339 | 14 | ||||||||||||||||||||||||||||||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 9 | $ | — | $ | — | $ | — | $ | (5 | ) | $ | 4 | $ | — | Corporate | 1,271 | — | 46 | (294 | ) | (112 | ) | 911 | 17 | ||||||||||||||||||||||||
Equity securities | 2,238 | — | (1 | ) | (12 | ) | (99 | ) | 2,126 | (23 | ) | ||||||||||||||||||||||||||||||||||||||
State and municipal | $ | 252 | $ | — | $ | 2 | $ | — | $ | — | $ | 254 | $ | — | Asset-backed securities | 12,303 | — | (34 | ) | (4,918 | ) | (192 | ) | 7,159 | 121 | ||||||||||||||||||||||||
Foreign government | 168 | — | — | 89 | 14 | 271 | — | Other debt securities | 891 | — | (41 | ) | 42 | 33 | 925 | (11 | ) | ||||||||||||||||||||||||||||||||
Corporate | 1,688 | — | 3 | (86 | ) | (200 | ) | 1,405 | $ | 5 | Non-marketable equity securities | $ | 6,561 | $ | — | $ | 318 | $ | 43 | $ | (632 | ) | $ | 6,290 | $ | 323 | |||||||||||||||||||||||
Equity securities | 2,818 | — | (15 | ) | (22 | ) | (239 | ) | 2,542 | 10 | |||||||||||||||||||||||||||||||||||||||
Other debt securities | 8,429 | — | 523 | (194 | ) | (156 | ) | 8,602 | 454 | ||||||||||||||||||||||||||||||||||||||||
Non-marketable equity securities | 7,800 | — | (40 | ) | (8 | ) | (106 | ) | 7,646 | (226 | ) | ||||||||||||||||||||||||||||||||||||||
Total investments | $ | 23,024 | $ | — | $ | 597 | $ | (232 | ) | $ | (942 | ) | $ | 22,447 | $ | 333 | |||||||||||||||||||||||||||||||||
| | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | ||||||||||||||||||
In millions of dollars | June 30, 2010 | Principal transactions | Other(1)(2) | Sept. 30, 2010 | |||||||||||||||||||
Total investments | $ | 26,386 | $ | — | $ | 425 | $ | (6,870 | ) | $ | (1,366 | ) | $ | 18,575 | $ | 444 | |||||||
Loans | $ | 3,668 | $ | — | $ | (38 | ) | $ | 378 | $ | (87 | ) | $ | 3,921 | $ | 56 | |||||||
MSRs | 4,894 | — | (778 | ) | (140 | ) | 3,976 | (778 | ) | ||||||||||||||
Other financial assets measured on a recurring basis | 3,089 | — | 7 | 44 | (442 | ) | 2,698 | 211 | |||||||||||||||
Liabilities | |||||||||||||||||||||||
Interest-bearing deposits | $ | 183 | $ | — | $ | (10 | ) | $ | (35 | ) | $ | 3 | $ | 161 | $ | (29 | ) | ||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 1,091 | $ | (40 | ) | — | 3 | 276 | 1,410 | (29 | ) | |||||||||||||
Trading account liabilities | |||||||||||||||||||||||
Securities sold, not yet purchased | 621 | (6 | ) | — | (34 | ) | 190 | 783 | (32 | ) | |||||||||||||
Short-term borrowings | 445 | (26 | ) | — | 351 | (5 | ) | 817 | (32 | ) | |||||||||||||
Long-term debt | 10,741 | (187 | ) | (67 | ) | 338 | (801 | ) | 10,532 | (199 | ) | ||||||||||||
Other financial liabilities measured on a recurring basis | 7 | — | (1 | ) | — | (8 | ) | — | |||||||||||||||
| | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | ||||||||||||||||||||
In millions of dollars | December 31, 2009 | Principal transactions | Other(1)(2) | Sept. 30, 2010 | |||||||||||||||||||||
Assets | |||||||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | $ | — | $ | 509 | $ | — | $ | 6,931 | $ | 740 | $ | 8,180 | $ | — | |||||||||||
Trading securities | |||||||||||||||||||||||||
Trading mortgage-backed securities | |||||||||||||||||||||||||
U.S. government sponsored | $ | 972 | $ | (220 | ) | — | 329 | (236 | ) | $ | 845 | (198 | ) | ||||||||||||
Prime | 384 | 56 | — | 338 | 113 | 891 | 4 | ||||||||||||||||||
Alt-A | 387 | 45 | — | 201 | (282 | ) | 351 | 11 | |||||||||||||||||
Subprime | 8,998 | 182 | — | (601 | ) | (7,226 | ) | 1,353 | 82 | ||||||||||||||||
Non-U.S. residential | 572 | 2 | — | 645 | (878 | ) | 341 | — | |||||||||||||||||
Commercial | 2,451 | 59 | — | (126 | ) | (837 | ) | 1,547 | 309 | ||||||||||||||||
Total trading mortgage-backed securities | $ | 13,764 | $ | 124 | $ | — | $ | 786 | $ | (9,346 | ) | $ | 5,328 | $ | 208 | ||||||||||
U.S. Treasury and federal agencies securities | — | $ | 2 | $ | — | $ | 47 | $ | 16 | $ | 65 | $ | (4 | ) | |||||||||||
State and municipal | $ | 222 | 24 | — | 292 | (233 | ) | 305 | 17 | ||||||||||||||||
Foreign government | 459 | 17 | — | (181 | ) | 129 | 424 | (19 | ) | ||||||||||||||||
Corporate | 8,620 | 161 | — | (285 | ) | (2,124 | ) | 6,372 | 7 | ||||||||||||||||
Equity securities | 640 | 30 | — | 350 | (169 | ) | 851 | 84 | |||||||||||||||||
Asset-backed securities | 3,006 | (132 | ) | — | 4,894 | (265 | ) | 7,503 | (151 | ) | |||||||||||||||
Other debt securities | 13,231 | (16 | ) | — | (147 | ) | (11,975 | ) | 1,093 | 8 | |||||||||||||||
Total trading securities | $ | 39,942 | $ | 210 | $ | — | $ | 5,756 | $ | (23,967 | ) | $ | 21,941 | $ | 150 | ||||||||||
Derivatives, net(4) | |||||||||||||||||||||||||
Interest rate contracts | $ | (374 | ) | $ | 574 | $ | — | $ | 300 | $ | (267 | ) | $ | 233 | $ | 504 | |||||||||
Foreign exchange contracts | (38 | ) | 182 | — | (36 | ) | 23 | 131 | 173 | ||||||||||||||||
Equity contracts | (1,110 | ) | (423 | ) | — | (5 | ) | 297 | (1,241 | ) | (774 | ) | |||||||||||||
Commodity and other contracts | (529 | ) | (274 | ) | — | 63 | (59 | ) | (799 | ) | (107 | ) | |||||||||||||
Credit derivatives | 5,159 | (1,242 | ) | — | (866 | ) | (1,321 | ) | 1,730 | (1,271 | ) | ||||||||||||||
Total derivatives, net(4) | $ | 3,108 | $ | (1,183 | ) | $ | — | $ | (544 | ) | $ | (1,327 | ) | $ | 54 | $ | (1,475 | ) | |||||||
Investments | |||||||||||||||||||||||||
Mortgage-backed securities | |||||||||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | 2 | $ | — | $ | (1 | ) | $ | — | $ | — | $ | 1 | $ | — | ||||||||||
Prime | 736 | — | (35 | ) | (469 | ) | 1 | 233 | 3 | ||||||||||||||||
Alt-A | 55 | — | 12 | 37 | (82 | ) | 22 | — | |||||||||||||||||
Subprime | 1 | — | (2 | ) | 1 | — | — | — | |||||||||||||||||
Non-U.S. Residential | — | — | — | — | — | — | — | ||||||||||||||||||
Commercial | 746 | — | $ | (438 | ) | 2 | 241 | 551 | — | ||||||||||||||||
Total investment mortgage-backed debt securities | $ | 1,540 | $ | — | $ | (464 | ) | $ | (429 | ) | $ | 160 | $ | 807 | $ | 3 | |||||||||
| | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | ||||||||||||||||||
In millions of dollars | December 31, 2009 | Principal transactions | Other(1)(2) | Sept. 30, 2010 | |||||||||||||||||||
U.S. Treasury and federal agencies securities | |||||||||||||||||||||||
Agency obligations | $ | 21 | $ | — | $ | (21 | ) | $ | — | $ | 18 | $ | 18 | $ | (1 | ) | |||||||
Total U.S. Treasury and federal agencies securities | $ | 21 | $ | — | $ | (21 | ) | $ | — | $ | 18 | $ | 18 | $ | (1 | ) | |||||||
State and municipal | $ | 217 | $ | — | $ | 7 | $ | — | $ | (224 | ) | $ | — | $ | — | ||||||||
Foreign government | 270 | — | 21 | 11 | 37 | 339 | 5 | ||||||||||||||||
Corporate | 1,257 | — | (33 | ) | (58 | ) | (255 | ) | 911 | 6 | |||||||||||||
Equity securities | 2,513 | — | 25 | 78 | (490 | ) | 2,126 | (79 | ) | ||||||||||||||
Asset-backed securities | 8,272 | — | (70 | ) | (100 | ) | (943 | ) | 7,159 | (133 | ) | ||||||||||||
Other debt securities | 560 | — | (14 | ) | 6 | 373 | 925 | 29 | |||||||||||||||
Non-marketable equity securities | 6,753 | — | 333 | (65 | ) | (731 | ) | 6,290 | 277 | ||||||||||||||
Total investments | $ | 21,403 | $ | — | $ | (216 | ) | $ | (557 | ) | $ | (2,055 | ) | $ | 18,575 | $ | 107 | ||||||
Loans | $ | 213 | $ | — | $ | (178 | ) | $ | 993 | $ | 2,893 | $ | 3,921 | $ | (168 | ) | |||||||
MSRs | 6,530 | — | (1,976 | ) | — | (578 | ) | 3,976 | (1,976 | ) | |||||||||||||
Other financial assets measured on a recurring basis | 1,101 | — | (20 | ) | 2,027 | (410 | ) | 2,698 | (20 | ) | |||||||||||||
Liabilities | |||||||||||||||||||||||
Interest-bearing deposits | $ | 28 | $ | — | $ | (8 | ) | $ | (41 | ) | $ | 166 | $ | 161 | $ | (36 | ) | ||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 2,056 | $ | (138 | ) | — | (973 | ) | 189 | 1,410 | (5 | ) | ||||||||||||
Trading account liabilities | |||||||||||||||||||||||
Securities sold, not yet purchased | 774 | 46 | — | (103 | ) | 158 | 783 | 13 | |||||||||||||||
Short-term borrowings | 231 | (18 | ) | — | 245 | 323 | 817 | (16 | ) | ||||||||||||||
Long-term debt | 9,654 | 85 | 78 | 670 | 371 | 10,532 | (121 | ) | |||||||||||||||
Other financial liabilities measured on a recurring basis | 13 | — | (20 | ) | — | (33 | ) | — | — | ||||||||||||||
| | Net realized/ unrealized gains (losses) included in | | | | | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | |||||||||||||||||||
In millions of dollars | June 30, 2009 | Principal transactions | Other(1)(2) | Sept. 30, 2009 | ||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Trading securities | ||||||||||||||||||||||||
Trading mortgage-backed securities | ||||||||||||||||||||||||
U.S. government sponsored | $ | 1,244 | $ | (71 | ) | $ | — | $ | 127 | $ | (138 | ) | $ | 1,162 | $ | (116 | ) | |||||||
Prime | 623 | (76 | ) | — | (39 | ) | (50 | ) | 458 | (37 | ) | |||||||||||||
Alt-A | 777 | 18 | — | (75 | ) | (158 | ) | 562 | 18 | |||||||||||||||
Subprime | 10,001 | 1,752 | — | (515 | ) | (1,480 | ) | 9,758 | 1,785 | |||||||||||||||
Non-U.S. residential | 345 | (3 | ) | — | (142 | ) | 90 | 290 | (3 | ) | ||||||||||||||
Commercial | 2,808 | (1 | ) | — | 114 | (190 | ) | 2,731 | 2 | |||||||||||||||
Total trading mortgage-backed securities | $ | 15,798 | $ | 1,619 | $ | — | $ | (530 | ) | $ | (1,926 | ) | $ | 14,961 | $ | 1,649 | ||||||||
U.S. Treasury and federal agencies securities | ||||||||||||||||||||||||
U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Agency obligations | 49 | 9 | — | 5 | 16 | 79 | 9 | |||||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 49 | $ | 9 | $ | — | $ | 5 | $ | 16 | $ | 79 | $ | 9 | ||||||||||
State and municipal | $ | 109 | $ | (49 | ) | $ | — | $ | 300 | $ | 92 | $ | 452 | $ | (49 | ) | ||||||||
Foreign government | 590 | 24 | — | (134 | ) | (36 | ) | 444 | 4 | |||||||||||||||
Corporate | 9,435 | 404 | — | (764 | ) | (446 | ) | 8,629 | 431 | |||||||||||||||
Equity securities | 1,866 | 161 | — | (899 | ) | 27 | 1,155 | 25 | ||||||||||||||||
Other debt securities | 16,846 | 1,133 | — | (1,122 | ) | (491 | ) | 16,366 | 1,018 | |||||||||||||||
Total trading securities | $ | 44,693 | $ | 3,301 | $ | — | $ | (3,144 | ) | $ | (2,764 | ) | $ | 42,086 | $ | 3,087 | ||||||||
Derivatives, net(4) | $ | 1,180 | $ | (2,407 | ) | $ | — | $ | (1,107 | ) | $ | 2,866 | $ | 532 | $ | (3,064 | ) | |||||||
Investments | ||||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||
U.S. government sponsored | $ | 78 | $ | — | $ | 1 | $ | — | $ | (79 | ) | $ | — | $ | 1 | |||||||||
Prime | 775 | — | 50 | 99 | (51 | ) | 873 | 59 | ||||||||||||||||
Alt-A | 271 | — | 11 | (114 | ) | (101 | ) | 67 | 16 |
| | | Net realized/ unrealized gains (losses) included in | | | | | | | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | | | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | |||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | June 30, 2009 | Principal transactions | Other(1)(2) | Sept. 30, 2009 | In millions of dollars | June 30, 2009 | Principal transactions | Other(1)(2) | Sept. 30, 2009 | |||||||||||||||||||||||||||||||||||||
Subprime | 17 | — | — | 2 | — | 19 | — | ||||||||||||||||||||||||||||||||||||||||
Commercial | 719 | — | 62 | 2 | (19 | ) | 764 | 14 | |||||||||||||||||||||||||||||||||||||||
Total investment mortgage-backed debt securities | $ | 1,860 | $ | — | $ | 124 | $ | (11 | ) | $ | (250 | ) | $ | 1,723 | $ | 90 | |||||||||||||||||||||||||||||||
U.S. Treasury and federal agencies securities | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||
Agency obligations | 9 | — | — | — | (5 | ) | 4 | — | |||||||||||||||||||||||||||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 9 | $ | — | $ | — | $ | — | $ | (5 | ) | $ | 4 | $ | — | ||||||||||||||||||||||||||||||||
State and municipal | $ | 252 | $ | — | $ | 2 | $ | — | $ | — | $ | 254 | $ | — | |||||||||||||||||||||||||||||||||
Foreign government | 168 | — | — | 89 | 14 | 271 | — | ||||||||||||||||||||||||||||||||||||||||
Corporate | 1,688 | — | 3 | (86 | ) | (200 | ) | 1,405 | $ | 5 | |||||||||||||||||||||||||||||||||||||
Equity securities | 2,818 | — | (15 | ) | (22 | ) | (239 | ) | 2,542 | 10 | |||||||||||||||||||||||||||||||||||||
Other debt securities | 8,429 | — | 523 | (194 | ) | (156 | ) | 8,602 | 454 | ||||||||||||||||||||||||||||||||||||||
Non-marketable equity securities | 7,800 | — | (40 | ) | (8 | ) | (106 | ) | 7,646 | (226 | ) | ||||||||||||||||||||||||||||||||||||
Total investments | Total investments | $ | 23,024 | $ | — | $ | 597 | $ | (232 | ) | $ | (942 | ) | $ | 22,447 | $ | 333 | ||||||||||||||||||||||||||||||
Loans | Loans | $ | 196 | $ | — | $ | 24 | $ | — | $ | (5 | ) | $ | 215 | $ | 24 | Loans | $ | 196 | $ | — | $ | 24 | $ | — | $ | (5 | ) | $ | 215 | $ | 24 | |||||||||||||||
Mortgage servicing rights | $ | 6,770 | $ | — | $ | (444 | ) | $ | — | $ | (98 | ) | $ | 6,228 | $ | (444 | ) | ||||||||||||||||||||||||||||||
MSRs | MSRs | $ | 6,770 | $ | — | $ | (444 | ) | $ | — | $ | (98 | ) | $ | 6,228 | $ | (444 | ) | |||||||||||||||||||||||||||||
Other financial assets measured on a recurring basis | Other financial assets measured on a recurring basis | 1,645 | — | (347 | ) | (67 | ) | (47 | ) | 1,184 | $ | (347 | ) | Other financial assets measured on a recurring basis | 1,645 | — | (347 | ) | (67 | ) | (47 | ) | 1,184 | $ | (347 | ) | |||||||||||||||||||||
Liabilities | Liabilities | Liabilities | |||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | Interest-bearing deposits | $ | 112 | $ | — | $ | 63 | $ | — | $ | (18 | ) | $ | 31 | $ | 63 | Interest-bearing deposits | $ | 112 | $ | — | $ | 63 | $ | — | $ | (18 | ) | $ | 31 | $ | 63 | |||||||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | Federal funds purchased and securities loaned or sold under agreements to repurchase | 7,204 | (32 | ) | — | 1,622 | (375 | ) | 8,483 | (40 | ) | Federal funds purchased and securities loaned or sold under agreements to repurchase | 7,204 | (32 | ) | — | 1,622 | (375 | ) | 8,483 | (40 | ) | |||||||||||||||||||||||||
Trading account liabilities | Trading account liabilities | Trading account liabilities | |||||||||||||||||||||||||||||||||||||||||||||
Securities sold, not yet purchased | 961 | (14 | ) | — | (166 | ) | 410 | 1,219 | 15 | Securities sold, not yet purchased | 961 | (14 | ) | — | (166 | ) | 410 | 1,219 | 15 | ||||||||||||||||||||||||||||
Short-term borrowings | Short-term borrowings | 377 | — | 9 | (75 | ) | (134 | ) | 159 | 9 | Short-term borrowings | 377 | — | 9 | (75 | ) | (134 | ) | 159 | 9 | |||||||||||||||||||||||||||
Long-term debt | Long-term debt | 11,201 | — | (385 | ) | 414 | (894 | ) | 11,106 | (456 | ) | Long-term debt | 11,201 | — | (385 | ) | 414 | (894 | ) | 11,106 | (456 | ) | |||||||||||||||||||||||||
Other financial liabilities measured on a recurring basis | Other financial liabilities measured on a recurring basis | 19 | — | (2 | ) | — | (20 | ) | 1 | (1 | ) | Other financial liabilities measured on a recurring basis | 19 | — | (2 | ) | — | (20 | ) | 1 | (1 | ) | |||||||||||||||||||||||||
| | | Net realized/ unrealized gains (losses) included in | | | | | | | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | | | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | |||||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | December 31, 2008 | Principal transactions | Other(1)(2) | Sept. 30, 2009 | In millions of dollars | December 31, 2008 | Principal transactions | Other(1)(2) | Sept. 30, 2009 | |||||||||||||||||||||||||||||||||||||||
Assets | Assets | Assets | |||||||||||||||||||||||||||||||||||||||||||||||
Trading securities | Trading securities | Trading securities | |||||||||||||||||||||||||||||||||||||||||||||||
Trading mortgage-backed securities | Trading mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. government sponsored | $ | 1,325 | $ | 145 | $ | — | $ | 137 | $ | (445 | ) | $ | 1,162 | $ | 89 | U.S. government sponsored | $ | 1,325 | $ | 145 | $ | — | $ | 137 | $ | (445 | ) | $ | 1,162 | $ | 89 | ||||||||||||||||||
Prime | 147 | (131 | ) | — | 400 | 42 | 458 | (83 | ) | Prime | 147 | (131 | ) | — | 400 | 42 | 458 | (83 | ) | ||||||||||||||||||||||||||||||
Alt-A | 1,153 | (101 | ) | — | (262 | ) | (228 | ) | 562 | (101 | ) | Alt-A | 1,153 | (101 | ) | — | (262 | ) | (228 | ) | 562 | (101 | ) | ||||||||||||||||||||||||||
Subprime | 13,844 | 56 | — | (1,225 | ) | (2,917 | ) | 9,758 | 2,262 | Subprime | 13,844 | 56 | — | (1,225 | ) | (2,917 | ) | 9,758 | 2,262 | ||||||||||||||||||||||||||||||
Non-U.S. residential | 858 | (77 | ) | — | (632 | ) | 141 | 290 | 12 | Non-U.S. residential | 858 | (77 | ) | — | (632 | ) | 141 | 290 | 12 | ||||||||||||||||||||||||||||||
Commercial | 2,949 | (196 | ) | — | 273 | (295 | ) | 2,731 | (207 | ) | Commercial | 2,949 | (196 | ) | — | 273 | (295 | ) | 2,731 | (207 | ) | ||||||||||||||||||||||||||||
Total trading mortgage-backed securities | $ | 20,276 | $ | (304 | ) | $ | — | $ | (1,309 | ) | $ | (3,702 | ) | $ | 14,961 | $ | 1,972 | Total trading mortgage-backed securities | $ | 20,276 | $ | (304 | ) | $ | — | $ | (1,309 | ) | $ | (3,702 | ) | $ | 14,961 | $ | 1,972 | ||||||||||||||
U.S. Treasury and federal agencies securities | U.S. Treasury and federal agencies securities | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
Agency obligations | 59 | — | — | 2 | 18 | 79 | 2 | Agency obligations | 59 | — | — | 2 | 18 | 79 | 2 | ||||||||||||||||||||||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 59 | $ | — | $ | — | $ | 2 | $ | 18 | $ | 79 | $ | 2 | Total U.S. Treasury and federal agencies securities | $ | 59 | $ | — | $ | — | $ | 2 | $ | 18 | $ | 79 | $ | 2 | ||||||||||||||||||||
State and municipal | $ | 233 | $ | (71 | ) | $ | — | $ | 220 | $ | 70 | $ | 452 | $ | (49 | ) | State and municipal | $ | 233 | $ | (71 | ) | $ | — | $ | 220 | $ | 70 | $ | 452 | $ | (49 | ) | ||||||||||||||||
Foreign government | 1,261 | 120 | — | (501 | ) | (436 | ) | 444 | 29 | Foreign government | 1,261 | 120 | — | (501 | ) | (436 | ) | 444 | 29 | ||||||||||||||||||||||||||||||
Corporate | 13,027 | (299 | ) | — | (1,556 | ) | (2,543 | ) | 8,629 | 457 | Corporate | 13,027 | (299 | ) | — | (1,556 | ) | (2,543 | ) | 8,629 | 457 | ||||||||||||||||||||||||||||
Equity securities | 1,387 | 252 | — | (778 | ) | 294 | 1,155 | 90 | Equity securities | 1,387 | 252 | — | (778 | ) | 294 | 1,155 | 90 | ||||||||||||||||||||||||||||||||
Other debt securities | 14,530 | 1,144 | — | (2,320 | ) | 3,012 | 16,366 | 1,044 | Other debt securities | 14,530 | 1,144 | — | (2,320 | ) | 3,012 | 16,366 | 1,044 | ||||||||||||||||||||||||||||||||
Total trading securities | Total trading securities | $ | 50,773 | $ | 842 | $ | — | $ | (6,242 | ) | $ | (3,287 | ) | $ | 42,086 | $ | 3,545 | Total trading securities | $ | 50,773 | $ | 842 | $ | — | $ | (6,242 | ) | $ | (3,287 | ) | $ | 42,086 | $ | 3,545 | |||||||||||||||
Derivatives, net(4) | Derivatives, net(4) | $ | 3,586 | $ | (4,783 | ) | $ | — | $ | (1,824 | ) | $ | 3,553 | $ | 532 | $ | (3,026 | ) | Derivatives, net(4) | $ | 3,586 | $ | (4,783 | ) | $ | — | $ | (1,824 | ) | $ | 3,553 | $ | 532 | $ | (3,026 | ) | |||||||||||||
Investments | Investments | Investments | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. government sponsored | $ | — | $ | — | $ | 1 | $ | 75 | $ | (76 | ) | $ | — | $ | 3 | U.S. government sponsored | $ | — | $ | — | $ | 1 | $ | 75 | $ | (76 | ) | $ | — | $ | 3 | ||||||||||||||||||
Prime | 1,163 | — | 211 | 132 | (633 | ) | 873 | 213 | |||||||||||||||||||||||||||||||||||||||||
Alt-A | 111 | — | 44 | (51 | ) | (37 | ) | 67 | 17 | ||||||||||||||||||||||||||||||||||||||||
Subprime | 25 | — | (9 | ) | (8 | ) | 11 | 19 | — | ||||||||||||||||||||||||||||||||||||||||
Commercial | 964 | — | 71 | (461 | ) | 190 | 764 | 29 | |||||||||||||||||||||||||||||||||||||||||
Total investment mortgage-backed debt securities | $ | 2,263 | $ | — | $ | 318 | $ | (313 | ) | $ | (545 | ) | $ | 1,723 | $ | 262 | |||||||||||||||||||||||||||||||||
U.S. Treasury and federal agencies securities | |||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
Agency obligations | — | — | — | 9 | (5 | ) | 4 | — | |||||||||||||||||||||||||||||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | — | $ | — | $ | — | $ | 9 | $ | (5 | ) | $ | 4 | $ | — | ||||||||||||||||||||||||||||||||||
| | Net realized/ unrealized gains (losses) included in | | | | | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | |||||||||||||||||||
In millions of dollars | December 31, 2008 | Principal transactions | Other(1)(2) | Sept. 30, 2009 | ||||||||||||||||||||
State and municipal | $ | 222 | $ | — | $ | 2 | $ | 30 | $ | — | $ | 254 | $ | — | ||||||||||
Foreign government | 571 | — | — | (313 | ) | 13 | 271 | (1 | ) | |||||||||||||||
Corporate | 1,019 | — | 47 | 568 | (229 | ) | 1,405 | 40 | ||||||||||||||||
Equity securities | 3,807 | — | (495 | ) | (152 | ) | (618 | ) | 2,542 | (34 | ) | |||||||||||||
Other debt securities | 11,324 | — | 96 | (1,142 | ) | (1,676 | ) | 8,602 | 643 | |||||||||||||||
Non-marketable equity securities | 9,067 | — | (746 | ) | (247 | ) | (428 | ) | 7,646 | (238 | ) | |||||||||||||
Total investments | $ | 28,273 | $ | — | $ | (778 | ) | $ | (1,560 | ) | $ | (3,488 | ) | $ | 22,447 | $ | 672 | |||||||
Loans | $ | 160 | $ | — | $ | 43 | $ | — | $ | 12 | $ | 215 | $ | 24 | ||||||||||
Mortgage servicing rights | $ | 5,657 | $ | — | $ | 996 | $ | — | $ | (425 | ) | $ | 6,228 | $ | 996 | |||||||||
Other financial assets measured on a recurring basis | 359 | — | 205 | 689 | (69 | ) | 1,184 | $ | 205 | |||||||||||||||
Liabilities | ||||||||||||||||||||||||
Interest-bearing deposits | $ | 54 | $ | — | $ | 4 | $ | — | $ | (19 | ) | $ | 31 | $ | 49 | |||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 11,167 | 276 | — | (2,098 | ) | (310 | ) | 8,483 | (320 | ) | ||||||||||||||
Trading account liabilities | ||||||||||||||||||||||||
Securities sold, not yet purchased | 653 | 30 | — | (181 | ) | 777 | 1,219 | 25 | ||||||||||||||||
Short-term borrowings | 1,329 | — | (56 | ) | (821 | ) | (405 | ) | 159 | (72 | ) | |||||||||||||
Long-term debt | 11,198 | — | (349 | ) | 88 | (529 | ) | 11,106 | (215 | ) | ||||||||||||||
Other financial liabilities measured on a recurring basis | 1 | — | (45 | ) | — | (45 | ) | 1 | — | |||||||||||||||
| | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | ||||||||||||||||||
In millions of dollars | June 30, 2008 | Principal transactions | Other(1)(2) | Transfers in and/or out of Level 3 | September 30, 2008 | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Trading account assets | |||||||||||||||||||||||
Trading securities and loans | $ | 76,819 | $ | (5,640 | ) | $ | — | $ | 13,283 | $ | 857 | $ | 85,319 | $ | (5,439 | ) | |||||||
Investments | 27,086 | — | (1,287 | ) | 3,818 | (1,381 | ) | 28,236 | (1,190 | ) | |||||||||||||
Loans | 145 | (14 | ) | — | — | 24 | 155 | (22 | ) | ||||||||||||||
Mortgage servicing rights | 8,934 | — | (396 | ) | — | (192 | ) | 8,346 | (396 | ) | |||||||||||||
Other financial assets measured on a recurring basis | 1,451 | — | (26 | ) | 353 | (102 | ) | 1,676 | (3 | ) | |||||||||||||
Liabilities | |||||||||||||||||||||||
Interest-bearing deposits | $ | 111 | $ | 10 | $ | — | $ | — | $ | (17 | ) | $ | 84 | $ | 8 | ||||||||
Securities sold under agreements to repurchase | 3,166 | (159 | ) | — | 73 | (579 | ) | 2,819 | (39 | ) | |||||||||||||
Trading account liabilities | |||||||||||||||||||||||
Securities sold, not yet purchased | 1,718 | 3 | — | 366 | (950 | ) | 1,131 | 34 | |||||||||||||||
Derivatives, net(4) | 102 | 2,904 | — | 3,072 | 2,878 | 3,148 | 3,092 | ||||||||||||||||
Short-term borrowings | 1,160 | 54 | — | 511 | 274 | 1,891 | 38 | ||||||||||||||||
Long-term debt | 38,355 | 940 | — | 3,277 | (6,877 | ) | 33,815 | 403 | |||||||||||||||
Other financial liabilities measured on a recurring basis | 26 | — | (45 | ) | — | (46 | ) | 25 | (45 | ) | |||||||||||||
| | | Net realized/ unrealized gains (losses) included in | | | | | | | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | | | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | |||||||||||||||||||||||||||||||||||
In millions of dollars | In millions of dollars | December 31, 2007 | Principal transactions | Other(1)(2) | September 30, 2008 | In millions of dollars | December 31, 2008 | Principal transactions | Other(1)(2) | Sept. 30, 2009 | |||||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||||||||||||
Securities purchased under agreements to resell | $ | 16 | $ | — | $ | — | $ | — | $ | (16 | ) | $ | — | $ | — | ||||||||||||||||||||||||||||||||
Trading account assets | |||||||||||||||||||||||||||||||||||||||||||||||
Trading securities and loans | 75,573 | (18,831 | ) | — | 32,028 | (3,451 | ) | 85,319 | (14,065 | ) | Prime | 1,163 | — | 211 | 132 | (633 | ) | 873 | 213 | ||||||||||||||||||||||||||||
Investments | 17,060 | — | (2,834 | ) | 6,789 | 7,221 | 28,236 | (1,268 | ) | ||||||||||||||||||||||||||||||||||||||
Alt-A | 111 | — | 44 | (51 | ) | (37 | ) | 67 | 17 | ||||||||||||||||||||||||||||||||||||||
Subprime | 25 | — | (9 | ) | (8 | ) | 11 | 19 | — | ||||||||||||||||||||||||||||||||||||||
Commercial | 964 | — | 71 | (461 | ) | 190 | 764 | 29 | |||||||||||||||||||||||||||||||||||||||
Total investment mortgage-backed debt securities | $ | 2,263 | $ | — | $ | 318 | $ | (313 | ) | $ | (545 | ) | $ | 1,723 | $ | 262 | |||||||||||||||||||||||||||||||
U.S. Treasury and federal agencies securities | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||
Agency obligations | — | — | — | 9 | (5 | ) | 4 | — | |||||||||||||||||||||||||||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | — | $ | — | $ | — | $ | 9 | $ | (5 | ) | $ | 4 | $ | — | ||||||||||||||||||||||||||||||||
State and municipal | $ | 222 | $ | — | $ | 2 | $ | 30 | $ | — | $ | 254 | $ | — | |||||||||||||||||||||||||||||||||
Foreign government | 571 | — | — | (313 | ) | 13 | 271 | (1 | ) | ||||||||||||||||||||||||||||||||||||||
Corporate | 1,019 | — | 47 | 568 | (229 | ) | 1,405 | 40 | |||||||||||||||||||||||||||||||||||||||
Equity securities | 3,807 | — | (495 | ) | (152 | ) | (618 | ) | 2,542 | (34 | ) | ||||||||||||||||||||||||||||||||||||
Other debt securities | 11,324 | — | 96 | (1,142 | ) | (1,676 | ) | 8,602 | 643 | ||||||||||||||||||||||||||||||||||||||
Non-Marketable equity securities | 9,067 | — | (746 | ) | (247 | ) | (428 | ) | 7,646 | (238 | ) | ||||||||||||||||||||||||||||||||||||
Total investments | Total investments | $ | 28,273 | $ | — | $ | (778 | ) | $ | (1,560 | ) | $ | (3,488 | ) | $ | 22,447 | $ | 672 | |||||||||||||||||||||||||||||
Loans | Loans | 9 | (3 | ) | — | — | 149 | 155 | (2 | ) | Loans | $ | 160 | $ | — | $ | 43 | $ | — | $ | 12 | $ | 215 | $ | 24 | ||||||||||||||||||||||
Mortgage servicing rights | Mortgage servicing rights | 8,380 | — | 568 | — | (602 | ) | 8,346 | 568 | Mortgage servicing rights | $ | 5,657 | $ | — | $ | 996 | $ | — | $ | (425 | ) | $ | 6,228 | $ | 996 | ||||||||||||||||||||||
Other financial assets measured on a recurring basis | Other financial assets measured on a recurring basis | 1,171 | — | 21 | 422 | 62 | 1,676 | 21 | Other financial assets measured on a recurring basis | 359 | — | 205 | 689 | (69 | ) | 1,184 | $ | 205 | |||||||||||||||||||||||||||||
Liabilities | Liabilities | Liabilities | |||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | Interest-bearing deposits | $ | 56 | $ | (9 | ) | $ | — | $ | 13 | $ | 6 | $ | 84 | $ | (3 | ) | Interest-bearing deposits | $ | 54 | $ | — | $ | 4 | $ | — | $ | (19 | ) | $ | 31 | $ | 49 | ||||||||||||||
Securities sold under agreements to repurchase | 6,158 | (88 | ) | — | (2,293 | ) | (1,134 | ) | 2,819 | 45 | |||||||||||||||||||||||||||||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | Federal funds purchased and securities loaned or sold under agreements to repurchase | 11,167 | 276 | — | (2,098 | ) | (310 | ) | 8,483 | (320 | ) | ||||||||||||||||||||||||||||||||||||
Trading account liabilities | Trading account liabilities | Trading account liabilities | |||||||||||||||||||||||||||||||||||||||||||||
Securities sold, not yet purchased | 473 | (5 | ) | — | 998 | (345 | ) | 1,131 | 118 | ||||||||||||||||||||||||||||||||||||||
Derivatives, net(4) | 2,470 | 5,701 | — | 3,178 | 3,201 | 3,148 | 3,638 | Securities sold, not yet purchased | 653 | 30 | — | (181 | ) | 777 | 1,219 | 25 | |||||||||||||||||||||||||||||||
Short-term borrowings | Short-term borrowings | 5,016 | 203 | — | (1,772 | ) | (1,150 | ) | 1,891 | 110 | Short-term borrowings | 1,329 | — | (56 | ) | (821 | ) | (405 | ) | 159 | (72 | ) | |||||||||||||||||||||||||
Long-term debt | Long-term debt | 8,953 | 1,349 | — | 41,296 | (15,085 | ) | 33,815 | 875 | Long-term debt | 11,198 | — | (349 | ) | 88 | (529 | ) | 11,106 | (215 | ) | |||||||||||||||||||||||||||
Other financial liabilities measured on a recurring basis | Other financial liabilities measured on a recurring basis | 1 | — | (59 | ) | — | (35 | ) | 25 | (5 | ) | Other financial liabilities measured on a recurring basis | 1 | — | (45 | ) | — | (45 | ) | 1 | — | ||||||||||||||||||||||||||
The following is a discussion of the changes to the Level 3 balances for each of the roll-forward tables presented above.
The significant changes from June 30, 2010 to September 30, 2010 in Level 3 assets and liabilities are due to:
The significant changes from December 31, 2009 to September 30, 2010 in Level 3 assets and liabilities are due to:
The significant changes from June 30, 2009 to September 30, 2009 Level 3 assets and liabilities are due to:
The significant changes from December 31, 2008 to September 30, 2009 Level 3 assets and liabilities are due to:
Transfers between Level 1 and Level 2 of the Fair Value Hierarchy
The following is a discussionCompany did not have any significant transfers of assets or liabilities between Levels 1 and 2 of the changes to the Level 3 balances for each of the rollforward tables presented above.
certificates issued by the U.S credit card securitization trust and retained by the Company were transferred from Level 2 to Level 3fair value hierarchy during the third quarter of 2008.2010.
Items Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurringnon-recurring basis and therefore are not included in the tables above.
These include assets measured at cost that have been written down to fair value during thethese periods as a result of an impairment. In addition, these assets such asinclude loans held for saleheld-for-sale (HFS) that are measured at the lower of cost or market (LOCOM), that were recognized at fair value below cost at the end of the period.
The fair value of loans measured on a LOCOM basis is determined where possible using quoted secondary-market prices. Such loans are generally classified inas Level 2 of the fair-value hierarchy given the level of activity in the market and the frequency of available quotes. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan.
The following table presents all loans held-for-saleHFS that are carried at LOCOM as of September 30, 20092010 and December 31, 20082009 (in billions):
| Aggregate Cost | Fair Value | Level 2 | Level 3 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2009 | $ | 2.8 | $ | 1.6 | $ | 0.5 | $ | 1.1 | |||||
December 31, 2008 | 3.1 | 2.1 | 0.8 | 1.3 | |||||||||
| Aggregate cost | Fair value | Level 2 | Level 3 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2010 | $ | 4.1 | $ | 3.6 | $ | 0.5 | $ | 3.1 | |||||
December 31, 2009 | $ | 2.5 | $ | 1.6 | $ | 0.3 | $ | 1.3 | |||||
18. FAIR-VALUE17. FAIR VALUE ELECTIONS
The Company may elect to report most financial instruments and certain other items at fair value on an instrument-by-instrument basis with changes in fair value reported in earnings. After the initial adoption, theThe election is made upon the acquisition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair-value election may not be revoked once an election is made.
Additionally, the transition provisions of ASC 825-10 (SFAS 159) permit a one-time election for existing positions at the adoption date with a cumulative-effect adjustment included in opening retained earnings and future changes in fair value reported in earnings.
The Company also has elected to adopt the fair-value accounting provisions for certain assets and liabilities prospectively. Hybrid financial instruments, such as structured notes containing embedded derivatives that otherwise would require bifurcation, as well as certain interest-only instruments, may be accounted for at fair value if the Company makes an irrevocable election to do so on an instrument-by-instrument basis. The changes in fair value are recorded in current earnings. Additional discussion regarding the applicable areas in which fair value elections were made is presented in Note 1716 to the Consolidated Financial Statements.
All servicing rights must now be recognized initially at fair value. At its initial adoption, the standard permits a one-time irrevocable election to re-measure each class of servicing rights at fair value, with the changes in fair value recorded in current earnings. The classes of servicing rights are identified based on the availability of market inputs used in determining their fair values and the methods for managing their risks. The Company has elected fair-value accounting for its mortgage and student loan classes of servicing rights. The impact of adopting this standard was not material. See Note 1514 to the Consolidated Financial Statements for further discussions regarding the accounting and reporting of mortgage servicing rights.
Table of ContentsMSRs.
The following table presents, as of September 30, 2010 and December 31, 2009, the fair value of those positions selected for fair-value accounting, as well as the changes in fair value for the nine months ended September 30, 20092010 and September 30, 2008.2009:
| Fair Value at | Changes in fair value gains (losses) for nine months ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | September 30, 2009 | December 31, 2008 | 2009 | 2008(1) | ||||||||||
Assets | ||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | ||||||||||||||
Selected portfolios of securities purchased under agreements to resell, securities borrowed(2) | $ | 87,886 | $ | 70,305 | $ | (1,284 | ) | $ | 675 | |||||
Trading account assets: | ||||||||||||||
Legg Mason convertible preferred equity securities originally classified as available-for-sale | $ | — | $ | — | $ | — | $ | (13 | ) | |||||
Selected letters of credit hedged by credit default swaps or participation notes | 28 | — | 61 | (2 | ) | |||||||||
Certain credit products | 16,695 | 16,254 | 5,461 | (1,143 | ) | |||||||||
Certain hybrid financial instruments | 6 | 33 | — | 3 | ||||||||||
Retained interests from asset securitizations | 2,153 | 3,026 | 1,522 | (521 | ) | |||||||||
Total trading account assets | $ | 18,882 | $ | 19,313 | $ | 7,044 | $ | (1,676 | ) | |||||
Investments: | ||||||||||||||
Certain investments in private equity and real estate ventures | $ | 359 | $ | 469 | $ | (52 | ) | $ | (54 | ) | ||||
Other | 237 | 295 | (83 | ) | (60 | ) | ||||||||
Total investments | $ | 596 | $ | 764 | $ | (135 | ) | $ | (114 | ) | ||||
Loans: | ||||||||||||||
Certain credit products | $ | 997 | $ | 2,315 | $ | 26 | $ | (54 | ) | |||||
Certain mortgage loans | 30 | 36 | (2 | ) | (22 | ) | ||||||||
Certain hybrid financial instruments | 478 | 381 | 54 | 5 | ||||||||||
Total loans | $ | 1,505 | $ | 2,732 | $ | 78 | $ | (71 | ) | |||||
Other assets: | ||||||||||||||
Mortgage servicing rights | $ | 6,228 | $ | 5,657 | $ | 996 | $ | 568 | ||||||
Certain mortgage loans | 2,857 | 4,273 | 81 | 21 | ||||||||||
Certain equity method investments | 769 | 936 | 174 | (154 | ) | |||||||||
Total other assets | $ | 9,854 | $ | 10,866 | $ | 1,251 | $ | 435 | ||||||
Total | $ | 118,723 | $ | 103,980 | $ | 6,954 | $ | (751 | ) | |||||
Liabilities | ||||||||||||||
Interest-bearing deposits: | ||||||||||||||
Certain structured liabilities | $ | 234 | $ | 320 | $ | — | $ | — | ||||||
Certain hybrid financial instruments | 1,795 | 2,286 | (562 | ) | 557 | |||||||||
Total interest-bearing deposits | $ | 2,029 | $ | 2,606 | $ | (562 | ) | $ | 557 | |||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | ||||||||||||||
Selected portfolios of securities sold under agreements to repurchase, securities loaned(2) | $ | 116,693 | $ | 138,866 | $ | 213 | $ | (44 | ) | |||||
Trading account liabilities: | ||||||||||||||
Selected letters of credit hedged by credit default swaps or participation notes | $ | — | $ | 72 | $ | 37 | $ | — | ||||||
Certain hybrid financial instruments | 5,980 | 4,679 | (1,798 | ) | 2,618 | |||||||||
Total trading account liabilities | $ | 5,980 | $ | 4,751 | $ | (1,761 | ) | $ | 2,618 | |||||
Short-term borrowings: | ||||||||||||||
Certain non-collateralized short-term borrowings | $ | 188 | $ | 2,303 | $ | 50 | $ | 45 | ||||||
Certain hybrid financial instruments | 523 | 2,112 | (84 | ) | 176 | |||||||||
Certain structured liabilities | 3 | 3 | — | 10 | ||||||||||
Certain non-structured liabilities | 729 | 13,189 | (33 | ) | — | |||||||||
Total short-term borrowings | $ | 1,443 | $ | 17,607 | $ | (67 | ) | $ | 231 | |||||
Long-term debt: | ||||||||||||||
Certain structured liabilities | $ | 3,395 | $ | 3,083 | $ | (64 | ) | $ | 446 | |||||
Certain non-structured liabilities | 7,510 | 7,189 | (102 | ) | 3,441 | |||||||||
Certain hybrid financial instruments | 16,281 | 16,991 | (1,572 | ) | 2,335 | |||||||||
Total long-term debt | $ | 27,186 | $ | 27,263 | $ | (1,738 | ) | $ | 6,222 | |||||
Total | $ | 153,331 | $ | 191,093 | $ | (3,915 | ) | $ | 9,584 | |||||
| Fair value at | Changes in fair value gains (losses) for the nine months ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | September 30, 2010 | December 31, 2009(1) | 2010 | 2009(1) | ||||||||||
Assets | ||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | ||||||||||||||
Selected portfolios of securities purchased under agreements to resell, securities borrowed(2) | $ | 94,190 | $ | 87,812 | $ | 669 | $ | (1,284 | ) | |||||
Trading account assets | 13,573 | 16,725 | 356 | 7,044 | ||||||||||
Investments | 496 | 574 | 32 | (135 | ) | |||||||||
Loans | ||||||||||||||
Certain corporate loans(3) | 2,755 | 1,405 | (140 | ) | 80 | |||||||||
Certain consumer loans(3) | 2,400 | 34 | 208 | (2 | ) | |||||||||
Total loans | $ | 5,155 | $ | 1,439 | $ | 68 | $ | 78 | ||||||
Other assets | ||||||||||||||
MSRs | $ | 3,976 | $ | 6,530 | $ | (1,976 | ) | $ | 996 | |||||
Certain mortgage loans (HFS) | 6,720 | 3,338 | 188 | 81 | ||||||||||
Certain equity method investments | 252 | 598 | (36 | ) | 174 | |||||||||
Total other assets | $ | 10,948 | $ | 10,466 | $ | (1,824 | ) | $ | 1,251 | |||||
Total assets | $ | 124,362 | $ | 117,016 | $ | (699 | ) | $ | 6,954 | |||||
Liabilities | ||||||||||||||
Interest-bearing deposits | $ | 1,170 | $ | 1,545 | $ | 10 | $ | (562 | ) | |||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | ||||||||||||||
Selected portfolios of securities sold under agreements to repurchase, securities loaned(2) | 119,984 | 104,030 | 53 | 213 | ||||||||||
Trading account liabilities | 4,078 | 5,325 | (223 | ) | (1,761 | ) | ||||||||
Short-term borrowings | 2,494 | 639 | 36 | (67 | ) | |||||||||
Long-term debt | 26,640 | 25,942 | (435 | ) | (1,738 | ) | ||||||||
Total | $ | 154,366 | $ | 137,481 | $ | (559 | ) | $ | (3,915 | ) | ||||
Own-CreditOwn Credit Valuation Adjustment
The fair value of debt liabilities for which the fair-valuefair value option wasis elected (other than non-recourse and similar liabilities) wasis impacted by the narrowing or widening of the Company's credit spread.spreads. The estimated change in the fair value of these debt liabilities due to such changes in the Company's own credit risk (or instrument-specific credit risk) was a loss of $1.019 billion$233 million and a gain of $1.525$1.019 billion for the three months ended September 30, 2010 and 2009, respectively, and September 30, 2008, respectively,a gain of $217 million and a loss of $2.447 billion and a gain of $2.577 billion for the nine months ended September 30, 20092010 and September 30, 2008,2009, respectively. Changes in fair value resulting from changes in instrument-specific credit risk were estimated by incorporating the Company's current observable credit spreads into the relevant valuation technique used to value each liability as described above.
During the fourth quarter of 2008, the Company changed the source of its credit spreads from those observed in the credit default swap market to those observed in the bond market. Had this modification been in place since the beginning of 2008, the change in the Company's own credit spread would have resulted in a gain of $2.48 billion and a gain of $3.53 billion for the three and nine months ended September 30, 2008, respectively.
The Fair-ValueFair Value Option for Financial Assets and Financial Liabilities
Legg Mason convertible preferred equity securities
The Legg Mason convertible preferred equity securities (Legg shares) were acquired in connection with the sale of Citigroup's Asset Management business in December 2005. Prior to the election of fair-value option accounting, the shares were classified as available-for-sale securities with the unrealized loss of $232 million as of December 31, 2006 included inAccumulated other comprehensive income (loss). This unrealized loss was recorded upon election of a fair value as a reduction of January 1, 2007Retained earnings as part of the cumulative-effect adjustment.
During the first quarter of 2008, the Company sold the remaining 8.4 million Legg shares at a pretax loss of $10.3 million ($6.7 million after-tax).
Selected portfolios of securities purchased under agreements to resell, securities borrowed, securities sold under agreements to repurchase, securities loaned and certain non-collateralized short-term borrowings
The Company elected the fair-valuefair value option retrospectively for our United States and United Kingdomcertain portfolios of fixed-income securities purchased under agreements to resell and fixed-income securities sold under agreements to repurchase (and certain non-collateralized short-term borrowings). The fair-value option was also elected prospectively on broker-dealer entities in the second quarter of 2007 for certain portfolios of fixed-income securities lendingUnited States, United Kingdom and borrowing transactions based in Japan. In each case, the election was made because the related interest-rate risk is managed on a portfolio basis, primarily with derivative instruments that are accounted for at fair value through earnings. Previously, these positions were accounted for on an accrual basis.
Changes in fair value for transactions in these portfolios are recorded inPrincipal transactions. The related interest revenue and interest expense are measured based on the contractual rates specified in the transactions and are reported as interest revenue and expense in the Consolidated Statement of Income.
Selected letters of credit and revolving loans hedged by credit default swaps or participation notes
The Company has elected the fair-valuefair value option for certain letters of credit that are hedged with derivative instruments or participation notes. Upon electing the fair-value option, the related portions of the allowance for loan losses and the allowance for unfunded lending commitments were reversed. Citigroup elected the fair-valuefair value option for these transactions because the risk is managed on a fair-valuefair value basis and to mitigatemitigates accounting mismatches.
The notional amount of these unfunded letters of credit was $1.8 billion as of September 30, 20092010 and $1.4 billion as of December 31, 2008.2009. The amount funded was insignificant with no amounts 90 days or more past due or on a non-accrual status at September 30, 20092010 and December 31, 2008.2009.
These items have been classified inTrading account assets orTrading account liabilities on the Consolidated Balance Sheet. Changes in fair value of these items are classified inPrincipal transactions in the Company's Consolidated Statement of Income.
Certain loans and other credit products
Citigroup has elected the fair-valuefair value option for certain originated and purchased loans, including certain unfunded loan products, such as guarantees and letters of credit, executed by Citigroup's trading businesses. None of these credit products is a highly leveraged financing commitment. Significant groups of transactions include loans and unfunded loan products that are expected to be either sold or securitized in the near term, or transactions where the economic risks are hedged with derivative instruments such as purchased credit default swaps or total return swaps where the Company pays the total return on the underlying loans to a third party. Citigroup has elected the fair-valuefair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplifications. Fair value was not elected for most lending transactions across the Company, including where those management objectives would not be met.
The following table provides information about certain credit products carried at fair value:value at September 30, 2010 and December 31, 2009:
| September 30, 2009 | December 31, 2008(1) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Trading assets | Loans | Trading assets | Loans | |||||||||
Carrying amount reported on the Consolidated Balance Sheet | $ | 16,695 | $ | 997 | $ | 16,254 | $ | 2,315 | |||||
Aggregate unpaid principal balance in excess of fair value | $ | 1,016 | $ | (38 | ) | $ | 6,501 | $ | 3 | ||||
Balance of non-accrual loans or loans more than 90 days past due | $ | 794 | $ | — | $ | 77 | $ | — | |||||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | $ | 461 | $ | — | $ | 190 | $ | — | |||||
| September 30, 2010 | December 31, 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Trading assets | Loans | Trading assets | Loans | |||||||||
Carrying amount reported on the Consolidated Balance Sheet | $ | 13,533 | $ | 1,638 | $ | 14,338 | $ | 945 | |||||
Aggregate unpaid principal balance in excess of fair value | 392 | (199 | ) | 390 | (44 | ) | |||||||
Balance of non-accrual loans or loans more than 90 days past due | 249 | — | 312 | — | |||||||||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | 101 | — | 267 | — | |||||||||
In addition to the amounts reported above, $200$441 million and $72$200 million of unfunded loan commitments related to certain credit products selected for fair-valuefair value accounting werewas outstanding as of September 30, 20092010 and December 31, 2008,2009, respectively.
Changes in fair value of funded and unfunded credit products are classified inPrincipal transactions in the Company's Consolidated Statement of Income. Related interest revenue is measured based on the contractual interest rates and reported asInterest revenue on tradingTrading account assets or loansloan interest depending on theirthe balance sheet classifications.classifications of the credit products. The changes in fair value for the nine months ended September 30, 20092010 and 20082009 due to instrument-specific credit risk totaled to a gain of $19 million and a loss of $32 million and $32 million, respectively.
Certain investments in private equity and real estate ventures and certain equity method investments
Citigroup invests in private equity and real estate ventures for the purpose of earning investment returns and for capital appreciation. The Company has elected the fair-valuefair value option for certain of these ventures, because such investments are considered similar to many private equity or hedge fund activities in ourCiti's investment companies, which are reported at fair value. The fair-valuefair value option brings consistency in the accounting and evaluation of certain of these investments. All investments (debt and equity) in such private equity and real estate entities are accounted for at fair value. These investments are classified asInvestments on Citigroup's Consolidated Balance Sheet.
Citigroup also holds various non-strategic investments in leveraged buyout funds and other hedge funds that previously were required to be accounted for underwhich the equity method. The Company elected fair-valuefair value accounting to reduce operational and accounting complexity. Since the funds account for all of their underlying assets at fair value, the impact of applying the equity method to Citigroup's investment in these funds was equivalent to fair-valuefair value accounting. Thus, this fair-value election had no impact on openingRetained earnings. These investments are classified asOther assets on Citigroup's Consolidated Balance Sheet.
Changes in the fair values of these investments are classified inOther revenue in the Company's Consolidated Statement of Income.
Certain structured liabilities
The Company has elected the fair-value option for certain structured liabilities whose performance is linked to structured interest rates, inflation or currency risks ("structured liabilities"). The Company elected the fair-value option, because these exposures are considered to be trading-related positions and, therefore, are managed on a fair-value basis. These positions will continue to be classified as debt, deposits or derivatives (Trading account liabilities) on the Company's Consolidated Balance Sheet according to their legal form.
For those structured liabilities classified asLong-term debt for which the fair-value option has been elected, the aggregate unpaid principal balance exceeded the aggregate fair value by $208 million and $671 million as of September 30, 2009 and December 31, 2008, respectively.
The change in fair value for these structured liabilities is reported inPrincipal transactions in the Company's Consolidated Statement of Income.
Related interest expense is measured based on the contractual interest rates and reported as such in the Consolidated Income Statement.
Certain non-structured liabilities
The Company has elected the fair-value option for certain non-structured liabilities with fixed and floating interest rates ("non-structured liabilities"). The Company has elected the fair-value option where the interest-rate risk of such liabilities is economically hedged with derivative contracts or the proceeds are used to purchase financial assets that will also be accounted for at fair value through earnings. The election has been made to mitigate accounting mismatches and to achieve operational simplifications. These positions are reported inShort-term borrowings andLong-term debt on the Company's Consolidated Balance Sheet.
For those non-structured liabilities classified asShort-term borrowings for which the fair-value option has been elected, the aggregate unpaid principal balance exceeded the aggregate fair value of such instruments by $41 million and $220 million as of September 30, 2009 and December 31, 2008, respectively.
For non-structured liabilities classified asLong-term debt for which the fair-value option has been elected, the aggregate unpaid principal balance exceeded the aggregate fair value by $637 million and $856 million as of September 30, 2009 and December 31, 2008, respectively. The change in fair value for these non-structured liabilities is reported inPrincipal transactions in the Company's Consolidated Statement of Income.
Related interest expense continues to be measured based on the contractual interest rates and reported as such in the Consolidated Income Statement.
Certain mortgage loans (HFS)
Citigroup has elected the fair-valuefair value option for certain purchased and originated prime fixed-rate and conforming adjustable-rate first mortgage loans held-for-sale.HFS. These loans are intended for sale or securitization and are hedged with derivative instruments. The Company has elected the fair-valuefair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplifications. The fair-value option was not elected for loans held-for-investment, as those loans are not hedged with derivative instruments. This election was effective for applicable instruments originated or purchased on or after September 1, 2007.
The following table provides information about certain mortgage loans HFS carried at fair value:value at September 30, 2010 and December 31, 2009:
In millions of dollars | September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Carrying amount reported on the Consolidated Balance Sheet | $ | 2,857 | $ | 4,273 | $ | 6,720 | $ | 3,338 | ||||||
Aggregate fair value in excess of unpaid principal balance | $ | 87 | $ | 138 | 278 | 55 | ||||||||
Balance of non-accrual loans or loans more than 90 days past due | $ | 8 | $ | 9 | 1 | 4 | ||||||||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | $ | 6 | $ | 2 | 1 | 3 | ||||||||
The changes in fair values of these mortgage loans isare reported inOther revenue in the Company's Consolidated Statement of Income. The changes in fair value during the nine months ended September 30, 20092010 and September 30, 20082009 due to instrument-specific credit risk resulted in a $6$1 million loss and $6$4 million loss, respectively. Related interest income continues to be measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income.
Items selected for fair-value accounting
Certain hybrid financial instrumentsConsolidated VIEs
The Company has elected to apply fair-value accountingthe fair value option for certain hybrid financialall qualified assets and liabilities whose performance is linked to risks other than interest rate, foreign exchange or inflation (e.g., equity, credit or commodity risks). In addition,of certain VIEs that were consolidated upon the adoption of SFAS 166/167 on January 1, 2010, including certain private label mortgage securitizations, mutual fund deferred sales commissions and collateralized loan obligation VIEs. The Company elected the fair value option for these VIEs as the Company has elected fair-value accountingbelieves this method better reflects the economic risks, since substantially all of the Company's retained interests in these entities are carried at fair value.
With respect to the consolidated mortgage VIEs, the Company determined the fair value for residual interests retainedthe mortgage loans and long-term debt utilizing internal valuation techniques. The fair value of the long-term debt measured using internal valuation techniques is verified, where possible, to prices obtained from securitizing certain financial assets.
independent vendors. Vendors compile prices from various sources and may apply matrix pricing for similar securities when no price is observable. Security pricing associated with long-term debt that is verified is classified as Level 2 and non-verified debt is classified as Level 3. The Company has elected fair-value accounting for these instruments because these exposures are considered to be trading-related positions and, therefore, are managed on a fair-value basis. In addition, the accounting for these instrumentsfair value of mortgage loans of each VIE is simplified under a fair-value approach as it eliminates the complicated operational requirements of bifurcating the embedded derivativesderived from the host contracts and accounting for each separately. The hybrid financial instrumentssecurity pricing. When substantially all of the long-term debt of a VIE is valued using Level 2 inputs, the corresponding mortgage loans are classified asTrading account assets, Loans,Deposits,Trading account liabilities (for prepaid derivatives),Short-term borrowings orLong-Term Debt on Level 2. Otherwise, the Company's Consolidated Balance Sheet according to their legal form, while residual interests in certain securitizationsmortgage loans of a VIE are classified asTrading account assets. Level 3.
For hybrid financial instrumentsWith respect to the consolidated mortgage VIEs for which fair-value accounting has been elected and that are classified asLong-term debt, the aggregate unpaid principal exceeded the aggregate fair value by $2.4 billion and $4.1 billion as of September 30, 2009 and December 31, 2008, respectively. The difference for those instrumentsoption was elected, the mortgage loans are classified asLoans is immaterial.
Changeson Citigroup's Consolidated Balance Sheet. The changes in fair value for hybrid financial instruments, which in most cases includes a component for accrued interest,of the loans are recorded inreported asPrincipal transactionsOther revenue in the Company's Consolidated Statement of Income. Interest accruals for certain hybrid instruments classified as trading assets are recorded separately fromRelated interest revenue is measured based on the change in fair valuecontractual interest rates and reported asInterest revenue in the Company's Consolidated Statement of Income. Information about these mortgage loans is included in the table below. The change in fair value of these loans due to instrument-specific credit risk was a gain of $138 million for the three months ended September 30, 2010.
Table The debt issued by these consolidated VIEs is classified as long-term debt on Citigroup's Consolidated Balance Sheet. The changes in fair value for the majority of Contentsthese liabilities are reported inOther revenue in the Company's Consolidated Statement of Income. Related interest expense is measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income. The aggregate unpaid principal balance of long-term debt of these consolidated VIEs exceeded the aggregate fair value by $1.3 billion as of September 30, 2010.
The following table provides information about corporate and consumer loans of consolidated VIEs carried at fair value:
| September 30, 2010 | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | Corporate Loans | Consumer Loans | |||||
Carrying amount reported on the Consolidated Balance Sheet | $ | 648 | $ | 2,372 | |||
Aggregate unpaid principal balance in excess of fair value | 630 | 705 | |||||
Balance of non-accrual loans or loans more than 90 days past due | 88 | 197 | |||||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | 133 | 203 | |||||
Mortgage servicing rights
The Company accounts for mortgage servicing rights (MSRs) at fair value. Fair value for MSRs is determined using an option-adjusted spread valuation approach. This approach consists of projecting servicing cash flows under multiple interest-rate scenarios and discounting these cash flows using risk-adjusted rates. The model assumptions used in the valuation of MSRs include mortgage prepayment speeds and discount rates. The fair value of MSRs is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. In managing this risk, the Company hedges a significant portion of the values of its MSRs through the use of interest-rate derivative contracts, forward-purchase commitments of mortgage-backed securities, and purchased securities classified as trading. See Note 15Note14 to the Consolidated Financial Statements for further discussions regarding the accounting and reporting of MSRs.
These MSRs, which totaled $6.2$3.976 billion and $5.7$6.530 billion as of September 30, 20092010 and December 31, 2008,2009, respectively, are classified asMortgage servicing rights on Citigroup's Consolidated Balance Sheet. Changes in fair value of MSRs are recorded inCommissions and feesOther revenue in the Company's Consolidated Statement of Income.
Certain structured liabilities
The Company has elected the fair value option for certain structured liabilities whose performance is linked to structured interest rates, inflation, currency, equity, referenced credit or commodity risks (structured liabilities). The Company elected the fair value option, because these exposures are considered to be trading-related positions and, therefore, are managed on a fair value basis. These positions will continue to be classified as debt, deposits or derivatives (Trading account liabilities) on the Company's Consolidated Balance Sheet according to their legal form.
The change in fair value for these structured liabilities is reported inPrincipal transactions in the Company's Consolidated Statement of Income. Changes in fair value for structured debt with embedded equity, referenced credit or commodity underlyings includes an economic component for accrued interest. For structured debt that contains embedded interest rate, inflation or currency risks, related interest expense is measured based on the contracted interest rates and reported as such in the Consolidated Statement of Income.
Certain non-structured liabilities
The Company has elected the fair value option for certain non-structured liabilities with fixed and floating interest rates (non-structured liabilities). The Company has elected the fair value option where the interest-rate risk of such liabilities is economically hedged with derivative contracts or the proceeds are used to purchase financial assets that will also be accounted for at fair value through earnings. The election has been made to mitigate accounting mismatches and to achieve operational simplifications. These positions are reported inShort-term borrowings andLong-term debt on the Company's Consolidated Balance Sheet. The change in fair value for these non-structured liabilities is reported inPrincipal transactions in the Company's Consolidated Statement of Income.
Related interest expense continues to be measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income.
The following table provides information about long-term debt, excluding the debt issued by the consolidated VIEs at September 30, 2010, carried at fair value at September 30, 2010 and December 31, 2009:
In millions of dollars | September 30, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Carrying amount reported on the Consolidated Balance Sheet | $ | 21,847 | $ | 25,942 | |||
Aggregate unpaid principal balance in excess of fair value | 2,676 | 3,399 |
The following table provides information about short-term borrowings carried at fair value:
In millions of dollars | September 30, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Carrying amount reported on the Consolidated Balance Sheet | $ | 2,494 | $ | 639 | |||
Aggregate unpaid principal balance in excess of fair value | 6 | 53 |
19.18. FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated Fair Value of Financial Instruments
The table below presents the carrying value and fair value of Citigroup's financial instruments. The disclosure excludes leases, affiliate investments, pension and benefit obligations and insurance policy claim reserves. In addition, contract-holder fund amounts exclude certain insurance contracts. Also as required, the disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, excess fair value associated with deposits with no fixed maturity and other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship and intangible values (but includes mortgage servicing rights), which are integral to a full assessment of Citigroup's financial position and the value of its net assets.
The fair value represents management's best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments not accounted for at fair value, as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used when available for investments and for both trading and end-user derivatives, as well as for liabilities, such as long-term debt, with quoted prices. For performing loans not accounted for at fair value, contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectability, expected cash flows are discounted using an appropriate rate considering the time of collection and the premium for the uncertainty of the cash flows. This method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC 820-10 (SFAS No. 157). The value of collateral is also considered. For liabilities such as long-term debt not accounted for at fair value and without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows.
| September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Carrying value | Estimated fair value | Carrying value | Estimated fair value | Carrying value | Estimated fair value | Carrying value | Estimated fair value | ||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Investments | $ | 261.9 | $ | 261.7 | $ | 256.0 | $ | 251.9 | $ | 340.3 | $ | 341.9 | $ | 306.1 | $ | 307.6 | ||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | 197.4 | 197.4 | 184.1 | 184.1 | 240.1 | 240.1 | 222.0 | 222.0 | ||||||||||||||||||
Trading account assets | 340.7 | 340.7 | 377.6 | 377.6 | 337.1 | 337.1 | 342.8 | 342.8 | ||||||||||||||||||
Loans(1) | 582.7 | 573.6 | 660.9 | 642.7 | 608.2 | 593.2 | 552.5 | 542.8 | ||||||||||||||||||
Other financial assets(2) | 344.9 | 344.7 | 316.6 | 316.6 | 281.7 | 281.6 | 290.9 | 290.9 | ||||||||||||||||||
| September 30, 2009 | December 31, 2008 | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Carrying value | Estimated fair value | Carrying value | Estimated fair value | Carrying value | Estimated fair value | Carrying value | Estimated fair value | ||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||
Deposits | $ | 832.6 | $ | 832.3 | $ | 774.2 | $ | 772.9 | $ | 850.1 | $ | 848.2 | $ | 835.9 | $ | 834.5 | ||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 178.2 | 178.2 | 205.3 | 205.3 | 192.1 | 192.1 | 154.3 | 154.3 | ||||||||||||||||||
Trading account liabilities | 130.5 | 130.5 | 165.8 | 165.8 | 142.0 | 142.0 | 137.5 | 137.5 | ||||||||||||||||||
Long-term debt | 379.6 | 374.9 | 359.6 | 317.1 | 387.3 | 385.6 | 364.0 | 354.8 | ||||||||||||||||||
Other financial liabilities(3) | 171.7 | 171.7 | 255.6 | 255.6 | 185.4 | 185.4 | 175.8 | 175.8 | ||||||||||||||||||
Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value and as existing assets and liabilities run off and new transactions are entered into.
The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The carrying values (reduced by theAllowance for loan losses) exceeded the estimated fair values of Citigroup's loans, in aggregate, by $9.1$14.9 billion and $18.2$9.7 billion at September 30, 20092010 and December 31, 2008,2009, respectively. At September 30, 2009,2010, the carrying values, net of allowances, exceeded the estimated fair values by $7$12.2 billion and $2$2.7 billion for consumer loans and corporate loans, respectively.
Citigroup has determined that it isThe estimated fair values of the Company's corporate unfunded lending commitments at September 30, 2010 and December 31, 2009 were $6.3 billion and $5.0 billion, respectively. The Company does not practicable to estimate the fair value on an ongoing basisvalues of consumer unfunded lending commitments, which are generally cancellable by providing notice to the loss sharing program with the United States Government because the program is a unique contract tailored to fit the specific portfolio of assets held by Citigroup, contains various public policy and other non-financial elements, and provides a significant Tier 1 Capital benefit.borrower.
The Company provides a variety of guarantees and indemnifications to Citigroup customers to enhance their credit standing and enable them to complete a wide variety of business transactions. For certain contracts meeting the definition of a guarantee, the guarantor must recognize, at inception, a liability for the fair value of the obligation undertaken in issuing the guarantee.
In addition, the guarantor must disclose the maximum potential amount of future payments the guarantor could be required to make under the guarantee, if there were a total default by the guaranteed parties. The determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. Such amounts bear no relationship to the anticipated losses, if any, on these guarantees.
The following tables present information about the Company's guarantees at September 30, 20092010 and December 31, 2008:2009:
| Maximum potential amount of future payments | | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars at September 30, except carrying value in millions | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions) | |||||||||
2009 | |||||||||||||
Financial standby letters of credit | $ | 48.8 | $ | 48.2 | $ | 97.0 | $ | 465.7 | |||||
Performance guarantees | 9.1 | 5.4 | 14.5 | 32.5 | |||||||||
Derivative instruments considered to be guarantees | 6.8 | 9.6 | 16.4 | 855.2 | |||||||||
Loans sold with recourse | — | 0.3 | 0.3 | 65.6 | |||||||||
Securities lending indemnifications(1) | 66.1 | — | 66.1 | — | |||||||||
Credit card merchant processing(1) | 59.4 | — | 59.4 | — | |||||||||
Custody indemnifications and other | — | 27.5 | 27.5 | 154.6 | |||||||||
Total | $ | 190.2 | $ | 91.0 | $ | 281.2 | $ | 1,573.6 | |||||
| Maximum potential amount of future payments | | Maximum potential amount of future payments | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars at December 31, except carrying value in millions | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions) | ||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||
In billions of dollars at September 30, except carrying value in millions | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions) | ||||||||||||||||||||||
2010 | ||||||||||||||||||||||||||
Financial standby letters of credit | $ | 31.6 | $ | 62.6 | $ | 94.2 | $ | 289.0 | $ | 21.5 | $ | 72.6 | $ | 94.1 | $ | 251.8 | ||||||||||
Performance guarantees | 9.4 | 6.9 | 16.3 | 23.6 | 8.4 | 5.0 | 13.4 | 33.6 | ||||||||||||||||||
Derivative instruments considered to be guarantees | 7.6 | 7.2 | 14.8 | 1,308.4 | 3.4 | 4.6 | 8.0 | 929.4 | ||||||||||||||||||
Guarantees of collection of contractual cash flows(1) | — | 0.3 | 0.3 | — | ||||||||||||||||||||||
Loans sold with recourse | — | 0.3 | 0.3 | 56.4 | — | 0.3 | 0.3 | 73.6 | ||||||||||||||||||
Securities lending indemnifications(1) | 47.6 | — | 47.6 | — | 73.0 | — | 73.0 | — | ||||||||||||||||||
Credit card merchant processing(1) | 56.7 | — | 56.7 | — | 62.7 | — | 62.7 | — | ||||||||||||||||||
Custody indemnifications and other | — | 21.6 | 21.6 | 149.2 | — | 34.0 | 34.0 | 253.8 | ||||||||||||||||||
Total | $ | 152.9 | $ | 98.9 | $ | 251.8 | $ | 1,826.6 | $ | 169.0 | $ | 116.5 | $ | 285.5 | $ | 1,542.2 | ||||||||||
| Maximum potential amount of future payments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars at December 31, except carrying value in millions | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions) | |||||||||
2009 | |||||||||||||
Financial standby letters of credit | $ | 41.4 | $ | 48.0 | $ | 89.4 | $ | 438.8 | |||||
Performance guarantees | 9.4 | 4.5 | 13.9 | 32.4 | |||||||||
Derivative instruments considered to be guarantees | 4.1 | 3.6 | 7.7 | 569.2 | |||||||||
Loans sold with recourse | — | 0.3 | 0.3 | 76.6 | |||||||||
Securities lending indemnifications(1) | 64.5 | — | 64.5 | — | |||||||||
Credit card merchant processing(1) | 59.7 | — | 59.7 | — | |||||||||
Custody indemnifications and other | — | 33.5 | 33.5 | 121.4 | |||||||||
Total | $ | 179.1 | $ | 89.9 | $ | 269.0 | $ | 1,238.4 | |||||
Financial Standby Lettersstandby letters of Creditcredit
Citigroup issues standby letters of credit which substitute its own credit for that of the borrower. If a letter of credit is drawn down, the borrower is obligated to repay Citigroup. Standby letters of credit protect a third party from defaults on contractual obligations. Financial standby letters of credit include guarantees of payment of insurance premiums and reinsurance risks that support industrial revenue bond underwriting and settlement of payment obligations to clearing houses, and also support options and purchases of securities or are in lieu of escrow deposit accounts. Financial standbys also backstop loans, credit facilities, promissory notes and trade acceptances.
Performance Guaranteesguarantees
Performance guarantees and letters of credit are issued to guarantee a customer's tender bid on a construction or systems-installation project or to guarantee completion of such projects in accordance with contract terms. They are also issued to support a customer's obligation to supply specified products, commodities, or maintenance or warranty services to a third party.
Derivative Instruments Consideredinstruments considered to Be Guaranteesbe guarantees
Derivatives are financial instruments whose cash flows are based on a notional amount or an underlying instrument, where there is little or no initial investment, and whose terms require or permit net settlement. Derivatives may be used for a variety of reasons, including risk management, or to enhance returns. Financial institutions often act as intermediaries for their clients, helping clients reduce their risks. However, derivatives may also be used to take a risk position.
The derivative instruments considered to be guarantees, which are presented in the tabletables above, include only those instruments that require Citi to make payments to the counterparty based on changes in an underlying that is related to an asset, a liability, or an equity security held by the guaranteed party. More specifically, derivative instruments considered to be guarantees include certain over-the-counter written put options where the counterparty is not a bank, hedge fund or broker-dealer (such counterparties are considered to be
dealers in these markets and may therefore not hold the underlying instruments). However, credit derivatives sold by the Company are excluded from this presentation.presentation, as they are disclosed separately in Note 15. In addition, non-credit derivative contracts that are cash settled and for which the Company is unable to assert that it is probable the counterparty held the underlying instrument at the inception of the contract also are excluded from the disclosure above. The Company's credit derivative portfolio as protection seller (guarantor) is presented in Note 16 to the Consolidated Financial Statements, "Derivative Activities."
In instances where the Company's maximum potential future payment is unlimited, the notional amount of the contract is disclosed.
Guarantees of Collection of Contractual Cash Flows
Guarantees of collection of contractual cash flows protect investors in credit card receivables securitization trusts from loss of interest relating to insufficient collections on the underlying receivables in the trusts. The notional amount of these guarantees as of December 31, 2008, was $300 million. No such guarantees were outstanding at September 30, 2009.
Loans Soldsold with Recourserecourse
Loans sold with recourse represent the Company's obligations to reimburse the buyers for loan losses under certain circumstances. Recourse refers to the clause in a sales agreement under which a lender will fully reimburse the buyer/investor for any losses resulting from the purchased loans. This may be accomplished by the seller's taking back any loans that become delinquent.
Securities Lending Indemnificationslending indemnifications
Owners of securities frequently lend those securities for a fee to other parties who may sell them short or deliver them to another party to satisfy some other obligation. Banks may administer such securities lending programs for their clients. Securities lending indemnifications are issued by the bank to guarantee that a securities lending customer will be made whole in the event that the security borrower does not return the security subject to the lending agreement and collateral held is insufficient to cover the market value of the security.
Credit Card Merchant Processingcard merchant processing
Credit card merchant processing guarantees represent the Company's indirect obligations in connection with the processing of private label and bankcard transactions on behalf of merchants.
Citigroup's primary credit card business is the issuance of credit cards to individuals. In addition, the CompanyCompany: (a) provides transaction processing services to various merchants with respect to bankcardits private-label cards and private-label cards. In(b) has potential liability for transaction processing services provided by a third-party related to previously transferred merchant credit card processing contracts. The nature of the eventliability in either case arises as a result of a billing dispute with respect to a bankcard transaction between a merchant and a cardholder that is ultimately resolved in the cardholder's favor, the third party holds the primary contingent liabilityfavor. The merchant is liable to credit or refund the amount to the cardholder and charge backcardholder. In general, if the transaction to the merchant. If the third partycredit card processing company is unable to collect this amount from the merchant itthe credit card processing company bears the loss for the amount of the credit or refund paid to the cardholder.
TheWith regard to (a) above, the Company continues to have the primary contingent liability with respect to its portfolio of private-label merchants. The risk of loss is mitigated as the cash flows between the third party or the Company and the merchant are settled on a net basis and the third party or the Company has the right to offset any payments with cash flows otherwise due to the merchant. To further mitigate this risk the third party or the Company may delay settlement, require a merchant to make an escrow deposit, delay settlement, or include event triggers to provide the third party or the Company with more financial and operational control in the event of the financial deterioration of the merchant, or require various credit enhancements (including letters of credit and bank guarantees). In the unlikely event that a private labelprivate-label merchant is unable to deliver products, services or a refund to its private labelprivate-label cardholders, Citigroupthe Company is contingently liable to credit or refund cardholders. In addition, although
With regard to (b) above, the company has a potential liability for bankcard transactions with merchants whose contracts were previously transferred by the Company to a third party holds the primary contingent liability with respectcredit card processor, should that processor fail to the processing of bankcard transactions, in the event that the third party does not have sufficient collateral from the merchant or sufficient financial resources of its own to provide the credit or refunds to the cardholders, Citigroup would be liable to credit or refund the cardholders.perform.
The Company's maximum potential contingent liability related to both bankcard and private labelprivate-label merchant processing services is estimated to be the total volume of credit card transactions that meet the requirements to be valid chargeback transactions at any given time. At September 30, 20092010 and
December 31, 2008,2009, this maximum potential exposure was estimated to be $59$63 billion and $57$60 billion, respectively.
However, the Company believes that the maximum exposure is not representative of the actual potential loss exposure based on the Company's historical experience and its position as a secondary guarantor (in the case of bankcards)previously transferred merchant credit card processing contracts). In mostboth cases, this contingent liability is unlikely to arise, as most products and services are delivered when purchased and amounts are refunded when items are returned to merchants. The Company assesses the probability and amount of its contingent liability related to merchant processing based on the financial strength of the primary guarantor, (in the case of bankcards) and the extent and nature of unresolved chargebackscharge-backs and its historical loss experience. At September 30, 20092010 and December 31, 2008,2009, the estimated losses incurred and the carrying amounts of the Company's contingent obligations related to merchant processing activities were immaterial.
Custody Indemnificationsindemnifications
Custody indemnifications are issued to guarantee that custody clients will be made whole in the event that a third-party subcustodian or depository institution fails to safeguard clients' assets.
Other
As of December 31, 2008, Citigroup carried a reserve of $149 millionhas an accrual related to certain of Visa USA's litigation matters. As
of September 30, 2010 and December 31, 2009, the carrying value of the reserveaccrual was $155 million. This reserve$254 million and $121 million, respectively, and the amount is included inOther liabilities on the Consolidated Balance Sheet.
Other Guaranteesguarantees and Indemnificationsindemnifications
The Company, through its credit card business, provides various cardholder protection programs on several of its card products, including programs that provide insurance coverage for rental cars, coverage for certain losses associated with purchased products, price protection for certain purchases and protection for lost luggage. These guarantees are not included in the table, since the total outstanding amount of the guarantees and the Company's maximum exposure to loss cannot be quantified. The protection is limited to certain types of purchases and certain types of losses and it is not possible to quantify the purchases that would qualify for these benefits at any given time. The Company assesses the probability and amount of its potential liability related to these programs based on the extent and nature of its historical loss experience. At September 30, 20092010 and December 31, 2008,2009, the actual and estimated losses incurred and the carrying value of the Company's obligations related to these programs were immaterial.
In the normal course of business, the Company provides standard representations and warranties to counterparties in contracts in connection with numerous transactions and also provides indemnifications that protect the counterparties to the contracts in the event that additional taxes are owed due either to a change in the tax law or an adverse interpretation of the tax law. Counterparties to these transactions provide the Company with comparable indemnifications. While such representations, warranties and tax indemnifications are essential components of many contractual relationships, they do not represent the underlying business purpose for the transactions. The indemnification clauses are often standard contractual terms related to the Company's own performance under the terms of a contract and are entered into in the normal course of business based on an assessment that the risk of loss is remote. Often these clauses are intended to ensure that terms of a contract are met at inception (for example, that loans transferred to a counterparty in a sales transaction did in fact meet the conditions specified in the contract at the transfer date). No compensation is received for these standard representations and warranties, and it is not possible to determine their fair value because they rarely, if ever, result in a payment. In many cases, there are no stated or notional amounts included in the indemnification clauses and the contingencies potentially triggering the obligation to indemnify have not occurred and are not expected to occur. There are no amounts reflected on the Consolidated Balance Sheet as of September 30, 2009 and December 31, 2008, related to theseThese indemnifications and they are not included in the table.table above. In addition, the repurchase reserve for Consumer mortgages representations and warranties was $952 million and $295 million at September 30, 2010 and December 31, 2009, respectively, and these amounts are included inOther liabilities on the Consolidated Balance Sheet.
In addition, the Company is a member of or shareholder in hundreds of value-transfer networks (VTNs) (payment clearing and settlement systems as well as securities exchanges) around the world. As a condition of membership, many of these VTNs require that members stand ready to backstop the net effect on the VTNs of a member's default on its obligations. The Company's potential obligations as a shareholder or member of VTN associations are not considered to be guarantees,excluded from the scope of FIN 45, since the shareholders and members represent subordinated classes of investors in the VTNs. Accordingly, the Company's participation in VTNs is not reported in the table and there are no amounts reflected on the Consolidated Balance Sheet as of September 30, 20092010 or December 31, 20082009 for potential obligations that could arise from the Company's involvement with VTN associations.
In the sale of an insurance subsidiary, the Company provided an indemnification to an insurance company for policyholder claims and other liabilities relating to a book of long-term care (LTC) business (for the entire term of the LTC policies) that is fully reinsured by another insurance company. The reinsurer has funded two trusts with securities whose fair value (approximately $3.7 billion and $3.3 billion at September 30, 2010 and December 31, 2009, respectively) is designed to cover the insurance company's statutory liabilities for the LTC policies. The assets in these trusts are evaluated and adjusted periodically to ensure that the fair value of the assets continues to cover the estimated statutory liabilities related to the LTC policies, as those statutory liabilities change over time. If the reinsurer fails to perform under the reinsurance agreement for any reason, including insolvency, and the assets in the two trusts are insufficient or unavailable to the ceding insurance company, then Citigroup must indemnify the ceding insurance company for any losses actually incurred in connection with the LTC policies. Since
both events would have to occur before Citi would become responsible for any payment to the ceding insurance company pursuant to its indemnification obligation and the likelihood of such events occurring is currently not probable, there is no liability reflected in the Consolidated Balance Sheet as of September 30, 2010 and December 31, 2009 related to this indemnification.
At September 30, 20092010 and December 31, 2008,2009, the total carrying amounts of the liabilities related to the guarantees and indemnifications included in the table amounted to approximately $1.6$1.5 billion and $1.8$1.2 billion, respectively. The carrying value of derivative instruments is included in eitherTrading account liabilities orOther liabilities, depending upon whether the derivative was entered into for trading or non-trading purposes. The carrying value of financial and performance guarantees is included inOther liabilities. For loans sold with recourse, the carrying value of the liability is included inOther liabilities. In addition, at September 30, 20092010 and December 31, 2008,2009,Other liabilities on the Consolidated Balance Sheet include an allowance for credit losses of $1,074 million$1.102 billion and $887 million$1.157 billion relating to letters of credit and unfunded lending commitments, respectively.
Collateral
Cash collateral available to the Company to reimburse losses realized under these guarantees and indemnifications amounted to $36$34 billion at September 30, 20092010 and $33$31 billion at December 31, 2008.2009. Securities and other marketable assets held as collateral amounted to $39$49 billion and $27$43 billion, at September 30, 2009 and December 31, 2008, respectively, the majority of which collateral is held to reimburse losses realized under securities lending indemnifications. Additionally, letters of credit in favor of the Company held as collateral amounted to $900 million and $503 million$1.7 billion at September 30, 20092010 and $1.4 billion at December 31, 2008, respectively.2009. Other property may also be available to the Company to cover losses under certain guarantees and indemnifications; however, the value of such property has not been determined.
Performance Riskrisk
Citigroup evaluates the performance risk of its guarantees based on the assigned referenced counterparty internal or external ratings. Where external ratings are used, investment-grade ratings are considered to be Baa/BBB and above, while anything below is considered non-investment grade. The Citigroup internal ratings are in line with the related external rating system. On certain underlying referenced credits or entities, ratings are not available. Such referenced credits are included in the "Not-rated"not rated category. The maximum potential amount of the future payments related to guarantees and credit derivatives sold is determined to be the notional amount of these contracts, which is the par amount of the assets guaranteed.
Presented in the tables below isare the maximum potential amountamounts of future payments classified based upon internal and external credit ratings as of September 30, 20092010 and December 31, 2008.2009. As previously mentioned, the determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. Such amounts bear no relationship to the anticipated losses, if any, on these guarantees.
| Maximum potential amount of future payments | Maximum potential amount of future payments | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars as of September 30, 2009 | Investment grade | Non-investment grade | Not rated | Total | ||||||||||||||||||||||
In billions of dollars as of September 30, 2010 | Investment grade | Non-investment grade | Not rated | Total | ||||||||||||||||||||||
Financial standby letters of credit | $ | 48.5 | $ | 21.1 | $ | 27.4 | $ | 97.0 | $ | 56.8 | $ | 12.5 | $ | 24.8 | $ | 94.1 | ||||||||||
Performance guarantees | 7.0 | 3.7 | 3.8 | 14.5 | 6.2 | 3.5 | 3.7 | 13.4 | ||||||||||||||||||
Derivative instruments deemed to be guarantees | — | — | 16.4 | 16.4 | — | — | 8.0 | 8.0 | ||||||||||||||||||
Loans sold with recourse | — | — | 0.3 | 0.3 | — | — | 0.3 | 0.3 | ||||||||||||||||||
Securities lending indemnifications | — | — | 66.1 | 66.1 | — | — | 73.0 | 73.0 | ||||||||||||||||||
Credit card merchant processing | — | — | 59.4 | 59.4 | — | — | 62.7 | 62.7 | ||||||||||||||||||
Custody indemnifications and other | 22.3 | 5.2 | — | 27.5 | 27.9 | 6.1 | — | 34.0 | ||||||||||||||||||
Total | $ | 77.8 | $ | 30.0 | $ | 173.4 | $ | 281.2 | $ | 90.9 | $ | 22.1 | $ | 172.5 | $ | 285.5 | ||||||||||
| Maximum potential amount of future payments | Maximum potential amount of future payments | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars as of December 31, 2008 | Investment grade | Non-investment grade | Not rated | Total | ||||||||||||||||||||||
In billions of dollars as of December 31, 2009 | Investment grade | Non-investment grade | Not rated | Total | ||||||||||||||||||||||
Financial standby letters of credit | $ | 49.2 | $ | 28.6 | $ | 16.4 | $ | 94.2 | $ | 49.2 | $ | 13.5 | $ | 26.7 | $ | 89.4 | ||||||||||
Performance guarantees | 5.7 | 5.0 | 5.6 | 16.3 | 6.5 | 3.7 | 3.7 | 13.9 | ||||||||||||||||||
Derivative instruments deemed to be guarantees | — | — | 14.8 | 14.8 | — | — | 7.7 | 7.7 | ||||||||||||||||||
Guarantees of collection of contractual cash flows | — | — | 0.3 | 0.3 | ||||||||||||||||||||||
Loans sold with recourse | — | — | 0.3 | 0.3 | — | — | 0.3 | 0.3 | ||||||||||||||||||
Securities lending indemnifications | — | — | 47.6 | 47.6 | — | — | 64.5 | 64.5 | ||||||||||||||||||
Credit card merchant processing | — | — | 56.7 | 56.7 | — | — | 59.7 | 59.7 | ||||||||||||||||||
Custody indemnifications and other | 18.5 | 3.1 | — | 21.6 | 27.7 | 5.8 | — | 33.5 | ||||||||||||||||||
Total | $ | 73.4 | $ | 36.7 | $ | 141.7 | $ | 251.8 | $ | 83.4 | $ | 23.0 | $ | 162.6 | $ | 269.0 | ||||||||||
Credit Commitments and Lines of Credit
The table below summarizes Citigroup's othercredit commitments as of September 30, 20092010 and December 31, 2008.2009:
In millions of dollars | U.S. | Outside of U.S. | September 30, 2009 | December 31, 2008 | U.S. | Outside of U.S. | September 30, 2010 | December 31, 2009 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Commercial and similar letters of credit | $ | 1,691 | $ | 5,625 | $ | 7,316 | $ | 8,215 | $ | 1,543 | $ | 6,824 | $ | 8,367 | $ | 7,211 | ||||||||||
One- to four-family residential mortgages | 1,002 | 260 | 1,262 | 937 | 1,824 | 366 | 2,190 | 1,070 | ||||||||||||||||||
Revolving open-end loans secured by one- to four-family residential properties | 22,186 | 2,919 | 25,105 | 25,212 | 18,562 | 2,964 | 21,526 | 23,916 | ||||||||||||||||||
Commercial real estate, construction and land development | 1,059 | 604 | 1,663 | 2,702 | 1,421 | 371 | 1,792 | 1,704 | ||||||||||||||||||
Credit card lines | 680,750 | 134,402 | 815,152 | 1,002,437 | 588,951 | 122,110 | 711,061 | 785,495 | ||||||||||||||||||
Commercial and other consumer loan commitments | 172,708 | 89,451 | 262,159 | 309,997 | 117,805 | 88,787 | 206,592 | 257,342 | ||||||||||||||||||
Total | $ | 879,396 | $ | 233,261 | $ | 1,112,657 | $ | 1,349,500 | $ | 730,106 | $ | 221,422 | $ | 951,528 | $ | 1,076,738 | ||||||||||
The majority of unused commitments are contingent upon customers' maintaining specific credit standards. Commercial commitments generally have floating interest rates and fixed expiration dates and may require payment of fees. Such fees (net of certain direct costs) are deferred and, upon exercise of the commitment, amortized over the life of the loan or, if exercise is deemed remote, amortized over the commitment period.
Commercial and similar letters of credit
A commercial letter of credit is an instrument by which Citigroup substitutes its credit for that of a customer to enable the customerscustomer to finance the purchase of goods or to incur other commitments. Citigroup issues a letter on behalf of its client to a supplier and agrees to pay themthe supplier upon presentation of documentary evidence that the supplier has performed in accordance with the terms of the letter of credit. When a letter of credit is drawn, the customer is then is required to reimburse Citigroup.
One- to four-family residential mortgages
A one- to four-family residential mortgage commitment is a written confirmation from Citigroup to a seller of a property that the bank will advance the specified sums enabling the buyer to complete the purchase.
Revolving open-end loans secured by one- to four-family residential properties
Revolving open-end loans secured by one- to four-family residential properties are essentially home equity lines of credit. A home equity line of credit is a loan secured by a primary residence or second home to the extent of the excess of fair market value over the debt outstanding for the first mortgage.
Commercial Real Estate, Constructionreal estate, construction and Land Developmentland development
Commercial real estate, construction and land development include unused portions of commitments to extend credit for the purpose of financing commercial and multifamily residential properties as well as land development projects.
Both secured-by-real estatesecured-by-real-estate and unsecured commitments are included in this line. In addition,line, as well as undistributed loan proceeds, where there is an obligation to advance for construction progress are also included in this line.payments. However, this line only includes those extensions of credit that, once funded, will be classified as LoansTotal loans, net on the Consolidated Balance Sheet.
Credit card lines
Citigroup provides credit to customers by issuing credit cards. The credit card lines are unconditionally cancellable by the issuer.
Commercial and other consumer loan commitments
Commercial and other consumer loan commitments include overdraft and liquidity facilities, as well as commercial commitments to make or purchase loans, to purchase third-party receivables, and to provide note issuance or revolving underwriting facilities.facilities and to invest in the form of equity. Amounts include $130$76 billion and $140$126 billion with an original maturity of less than one year at September 30, 20092010 and December 31, 2008,2009, respectively.
In addition, included in this line item are highly leveraged financing commitments, which are agreements that provide funding to a borrower with higher levels of debt (measured by the ratio of debt capital to equity capital of the borrower) than is generally considered normal for other companies. This type of financing is commonly employed in corporate acquisitions, management buy-outs and similar transactions.
The CompanyIn accordance with ASC 450 (formerly SFAS 5), Citigroup establishes accruals for litigation and regulatory matters when it is probable that a defendantloss has been incurred and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in numerous lawsuits and other legal proceedings arising outlight of alleged misconduct in connection with certain matters.additional information. In view of the large numberinherent unpredictability of such matters, the uncertainties of the timing and outcome of this type of litigation, the novel issues presented, and the significant amounts involved, it is possible that the ultimate costs of these matters may exceed or be below the Company's litigation reserves. The Company will continue to defend itself vigorously in these cases, and seek to resolve them in the manner management believes is in the best interests of the Company.
In addition, in the ordinary course of business, Citigroup and its subsidiaries are defendants or co-defendants or parties in various litigation and regulatory matters, incidental to and typicalparticularly where the damages sought are substantial or indeterminate, the investigations or proceedings are in the early stages, or the matters involve novel legal theories or a large number of parties, Citigroup cannot at this time estimate the possible loss or range of loss, if any, in excess of the businesses in which they are engaged. Inamounts accrued for these matters or predict the timing of their eventual resolution, and the actual costs of resolving litigation and regulatory matters may be substantially higher or lower than the amounts accrued for those matters.
Subject to the foregoing, it is the opinion of Citigroup's management, based on current knowledge and after taking into account its current accruals, that the Company's management, the ultimate resolutioneventual outcome of these legal and regulatory proceedingsmatters would not be likely to have a material adverse effect on the consolidated financial condition of Citi. Nonetheless, given the Company but, if involving monetary liability, may beinherent unpredictability of litigation and the substantial or indeterminate amounts sought in certain of these matters, an adverse outcome in certain of these matters could, from time to time, have a material to the Company's operatingadverse effect on Citi's consolidated results for anyof operations or cash flows in particular period.quarterly or annual periods.
22.21. CITIBANK, N.A. STOCKHOLDER'S EQUITY
Statement of Changes in Stockholder's Equity (Unaudited)
Citibank, N.A. and Subsidiaries | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
In millions of dollars, except shares | 2009 | 2008 | 2010 | 2009 | ||||||||||
Common stock ($20 par value) | ||||||||||||||
Balance, beginning of period—Shares: 37,534,553 in 2009 and 2008 | $ | 751 | $ | 751 | ||||||||||
Balance, beginning of period—shares: 37,534,553 in 2010 and 2009 | $ | 751 | $ | 751 | ||||||||||
Balance, end of period—Shares: 37,534,553 in 2009 and 2008 | $ | 751 | $ | 751 | ||||||||||
Balance, end of period | $ | 751 | $ | 751 | ||||||||||
Surplus | ||||||||||||||
Balance, beginning of period | $ | 74,767 | $ | 69,135 | $ | 107,923 | $ | 74,767 | ||||||
Capital contribution from parent company | 30,492 | 77 | 858 | 30,492 | ||||||||||
Employee benefit plans | 34 | 107 | 385 | 34 | ||||||||||
Balance, end of period | $ | 105,293 | $ | 69,319 | $ | 109,166 | $ | 105,293 | ||||||
Retained earnings | ||||||||||||||
Balance, beginning of period | $ | 21,735 | $ | 31,915 | $ | 19,457 | $ | 21,735 | ||||||
Adjustment to opening balance, net of taxes(1) | 402 | — | ||||||||||||
Adjustment to opening balance, net of taxes(1)(2) | (288 | ) | 402 | |||||||||||
Adjusted balance, beginning of period | $ | 22,137 | $ | 31,915 | $ | 19,169 | $ | 22,137 | ||||||
Net income (loss) | (2,270 | ) | (1,450 | ) | ||||||||||
Dividends paid | 4 | (34 | ) | |||||||||||
Other(2) | 117 | — | ||||||||||||
Net income | 6,419 | (2,270 | ) | |||||||||||
Dividends(3) | 9 | 4 | ||||||||||||
Other(4) | — | 117 | ||||||||||||
Balance, end of period | $ | 19,988 | $ | 30,431 | $ | 25,597 | $ | 19,988 | ||||||
Accumulated other comprehensive income (loss) | ||||||||||||||
Balance, beginning of period | $ | (15,895 | ) | $ | (2,495 | ) | $ | (11,532 | ) | $ | (15,895 | ) | ||
Adjustment to opening balance, net of taxes(1) | (402 | ) | — | — | (402 | ) | ||||||||
Adjusted balance, beginning of period | $ | (16,297 | ) | $ | (2,495 | ) | $ | (11,532 | ) | $ | (16,297 | ) | ||
Net change in unrealized gains (losses) on investment securities available-for-sale, net of taxes | 3,758 | (4,971 | ) | 2,237 | 3,758 | |||||||||
Net change in FX translation adjustment, net of taxes | 850 | (2,244 | ) | |||||||||||
Net change in foreign currency translation adjustment, net of taxes | (134 | ) | 850 | |||||||||||
Net change in cash flow hedges, net of taxes | 281 | (214 | ) | 143 | 281 | |||||||||
Pension liability adjustment, net of taxes | (7 | ) | 90 | 31 | (7 | ) | ||||||||
Net change in Accumulated other comprehensive income (loss) | $ | 4,882 | $ | (7,339 | ) | |||||||||
Net change in accumulated other comprehensive income (loss) | $ | 2,277 | $ | 4,882 | ||||||||||
Balance, end of period | $ | (11,415 | ) | $ | (9,834 | ) | $ | (9,255 | ) | $ | (11,415 | ) | ||
Total Citibank common stockholder's equity and total Citibank stockholder's equity | $ | 114,617 | $ | 90,667 | ||||||||||
Total Citibank stockholder's equity | $ | 126,259 | $ | 114,617 | ||||||||||
Noncontrolling interest | ||||||||||||||
Balance, beginning of period | $ | 1,082 | $ | 1,266 | $ | 1,294 | $ | 1,082 | ||||||
Initial consolidation of a noncontrolling interest | 123 | — | ||||||||||||
Initial origination of a noncontrolling interest | (75 | ) | 123 | |||||||||||
Transactions between Citigroup and the noncontrolling interest shareholders | (1 | ) | — | |||||||||||
Net income attributable to noncontrolling interest shareholders | 46 | 88 | 15 | 46 | ||||||||||
Dividends paid to noncontrolling interest shareholders | (16 | ) | (86 | ) | (40 | ) | (16 | ) | ||||||
Accumulated other comprehensive income—Net change in unrealized gains and losses on investments securities, net of tax | 7 | 3 | ||||||||||||
Accumulated other comprehensive income—Net change in unrealized gains and losses on investment securities, net of tax | 6 | 7 | ||||||||||||
Accumulated other comprehensive income—Net change in FX translation adjustment, net of tax | 15 | 6 | (20 | ) | 15 | |||||||||
All other | (155 | ) | (5 | ) | (110 | ) | (155 | ) | ||||||
Net change in noncontrolling interest | $ | 20 | $ | 6 | $ | (225 | ) | $ | 20 | |||||
Balance, end of period | $ | 1,102 | $ | 1,272 | $ | 1,069 | $ | 1,102 | ||||||
Total equity | $ | 115,719 | $ | 91,939 | $ | 127,328 | $ | 115,719 | ||||||
Comprehensive income (loss) | ||||||||||||||
Net income (loss) before attribution of noncontrolling interest | $ | (2,224 | ) | $ | (1,362 | ) | $ | 6,434 | $ | (2,224 | ) | |||
Net change in Accumulated other comprehensive income (loss) | 4,904 | (7,330 | ) | |||||||||||
Net change in accumulated other comprehensive income (loss) | 2,263 | 4,904 | ||||||||||||
Total comprehensive income (loss) | $ | 2,680 | $ | (8,692 | ) | $ | 8,697 | $ | 2,680 | |||||
Comprehensive income attributable to the noncontrolling interest | 68 | 97 | 1 | 68 | ||||||||||
Comprehensive income attributable to Citibank | $ | 2,612 | $ | (8,789 | ) | $ | 8,696 | $ | 2,612 | |||||
The Company has evaluated subsequent events through November 6, 2009,5, 2010, which is the date its Consolidated Financial Statements were issued.
24.23. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSTATEMENTS SCHEDULES
These unaudited condensed consolidating financial statementConsolidating Financial Statements schedules are presented for purposes of additional analysis but should be considered in relation to the consolidated financial statementsConsolidated Financial Statements of Citigroup taken as a whole.
Citigroup Parent Company
The holding company, Citigroup Inc.
Citigroup Global Markets Holdings Inc. (CGMHI)
Citigroup guarantees various debt obligations of CGMHI as well as all of the outstanding debt obligations under CGMHI's publicly issued debt.
Citigroup Funding Inc. (CFI)
CFI is a first-tier subsidiary of Citigroup, which issues commercial paper, medium-term notes and structured equity-linked and credit-linked notes, all of which are guaranteed by Citigroup.
CitiFinancial Credit Company (CCC)
An indirect wholly owned subsidiary of Citigroup. CCC is a wholly owned subsidiary of Associates First Capital Corporation (described below).Associates. Citigroup has issued a full and unconditional guarantee of the outstanding indebtedness of CCC.
Associates First Capital Corporation (Associates)
A wholly owned subsidiary of Citigroup. Citigroup has issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates. In addition, Citigroup guaranteed various debt obligations of Citigroup Finance Canada Inc. (CFCI), a wholly owned subsidiary of Associates. CFCI continues to issue debt in the Canadian market supported by a Citigroup guarantee. Associates is the immediate parent company of CCC (described above).CCC.
Other Citigroup Subsidiaries
Includes all other subsidiaries of Citigroup, intercompany eliminations, and income/loss from discontinued operations.
Consolidating Adjustments
Includes Citigroup parent company elimination of distributed and undistributed income of subsidiaries, investment in subsidiaries and the elimination of CCC, which is included in the Associates column.
CONDENSED CONSOLIDATING STATEMENT OF INCOMECondensed Consolidating Statements of Income
| Three Months Ended September 30, 2009 | Three Months Ended September 30, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations | Consolidating adjustments | Citigroup consolidated | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations and income from discontinued operations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends from subsidiary banks and bank holding companies | $ | 1,005 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,005 | ) | $ | — | $ | 1,650 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,650 | ) | $ | — | ||||||||||||||||
Interest revenue | $ | 57 | 1,682 | $ | — | $ | 1,526 | $ | 1,759 | $ | 15,180 | $ | (1,526 | ) | $ | 18,678 | $ | 65 | $ | 1,569 | $ | 8 | $ | 1,255 | $ | 1,439 | $ | 16,290 | $ | (1,255 | ) | $ | 19,371 | |||||||||||||||||
Interest revenue—intercompany | 477 | (90 | ) | 1,053 | 1,689 | 96 | (1,536 | ) | (1,689 | ) | — | 963 | 661 | 741 | 22 | 97 | (2,462 | ) | (22 | ) | — | |||||||||||||||||||||||||||||
Interest expense | 2,495 | 644 | 400 | 17 | 84 | 3,057 | (17 | ) | 6,680 | 2,138 | 522 | 508 | 18 | 66 | 2,891 | (18 | ) | 6,125 | ||||||||||||||||||||||||||||||||
Interest expense—intercompany | (137 | ) | (165 | ) | 260 | 2,212 | 377 | (335 | ) | (2,212 | ) | — | (218 | ) | 903 | 347 | 463 | 384 | (1,416 | ) | (463 | ) | — | |||||||||||||||||||||||||||
Net interest revenue | $ | (1,824 | ) | $ | 1,113 | $ | 393 | $ | 986 | $ | 1,394 | $ | 10,922 | $ | (986 | ) | $ | 11,998 | $ | (892 | ) | $ | 805 | $ | (106 | ) | $ | 796 | $ | 1,806 | $ | 12,353 | $ | (796 | ) | $ | 13,246 | |||||||||||||
Commissions and fees | $ | — | $ | 1,229 | $ | — | $ | 16 | $ | 36 | $ | 1,953 | $ | (16 | ) | $ | 3,218 | $ | — | $ | 1,062 | $ | — | $ | 14 | $ | 34 | $ | 2,152 | $ | (14 | ) | $ | 3,248 | ||||||||||||||||
Commissions and fees—intercompany | — | 188 | — | 51 | 63 | (251 | ) | (51 | ) | — | — | 31 | — | 37 | 41 | (72 | ) | (37 | ) | — | ||||||||||||||||||||||||||||||
Principal transactions | 317 | 2,431 | (610 | ) | — | 2 | (480 | ) | — | 1,660 | (194 | ) | 2,231 | (639 | ) | — | 2 | 128 | — | 1,528 | ||||||||||||||||||||||||||||||
Principal transactions—intercompany | (493 | ) | (1,380 | ) | 192 | — | (13 | ) | 1,694 | — | — | (3 | ) | (1,727 | ) | 653 | — | 1 | 1,076 | — | — | |||||||||||||||||||||||||||||
Other income | (1,158 | ) | 676 | (100 | ) | 112 | 142 | 3,954 | (112 | ) | 3,514 | (3,915 | ) | 170 | 114 | 171 | 178 | 6,169 | (171 | ) | 2,716 | |||||||||||||||||||||||||||||
Other income—intercompany | 2,485 | 23 | 77 | — | 5 | (2,590 | ) | — | — | 4,146 | 47 | (58 | ) | — | 38 | (4,173 | ) | — | — | |||||||||||||||||||||||||||||||
Total non-interest revenues | $ | 1,151 | $ | 3,167 | $ | (441 | ) | $ | 179 | $ | 235 | $ | 4,280 | $ | (179 | ) | $ | 8,392 | $ | 34 | $ | 1,814 | $ | 70 | $ | 222 | $ | 294 | $ | 5,280 | $ | (222 | ) | $ | 7,492 | |||||||||||||||
Total revenues, net of interest expense | $ | 332 | $ | 4,280 | $ | (48 | ) | $ | 1,165 | $ | 1,629 | $ | 15,202 | $ | (2,170 | ) | $ | 20,390 | $ | 792 | $ | 2,619 | $ | (36 | ) | $ | 1,018 | $ | 1,380 | $ | 17,633 | $ | (2,668 | ) | $ | 20,738 | ||||||||||||||
Provisions for credit losses and for benefits and claims | $ | — | $ | 58 | $ | — | $ | 770 | $ | 875 | $ | 8,162 | $ | (770 | ) | $ | 9,095 | $ | — | $ | (5 | ) | $ | — | $ | 550 | $ | 586 | $ | 5,338 | $ | (550 | ) | $ | 5,919 | |||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and benefits | $ | (44 | ) | $ | 1,471 | $ | — | $ | 134 | $ | 179 | $ | 4,530 | $ | (134 | ) | $ | 6,136 | $ | 15 | $ | 1,454 | $ | — | $ | 121 | $ | 162 | $ | 4,486 | $ | (121 | ) | $ | 6,117 | |||||||||||||||
Compensation and benefits— intercompany | 2 | 68 | — | 35 | 35 | (105 | ) | (35 | ) | — | ||||||||||||||||||||||||||||||||||||||||
Compensation and benefits—intercompany | 2 | 54 | — | 30 | 30 | (86 | ) | (30 | ) | — | ||||||||||||||||||||||||||||||||||||||||
Other expense | 192 | 683 | 1 | 169 | 209 | 4,603 | (169 | ) | 5,688 | 50 | 653 | 2 | 2,999 | 3,032 | 1,666 | (2,999 | ) | 5,403 | ||||||||||||||||||||||||||||||||
Other expense—intercompany | 163 | 198 | 2 | 143 | 160 | (523 | ) | (143 | ) | — | 84 | 130 | 1 | 151 | 160 | (375 | ) | (151 | ) | — | ||||||||||||||||||||||||||||||
Total operating expenses | $ | 313 | $ | 2,420 | $ | 3 | $ | 481 | $ | 583 | $ | 8,505 | $ | (481 | ) | $ | 11,824 | $ | 151 | $ | 2,291 | $ | 3 | $ | 3,301 | $ | 3,384 | $ | 5,691 | $ | (3,301 | ) | $ | 11,520 | ||||||||||||||||
Income (Loss) before taxes and equity in undistributed income of subsidiaries | $ | 19 | $ | 1,802 | $ | (51 | ) | $ | (86 | ) | $ | 171 | $ | (1,465 | ) | $ | (919 | ) | $ | (529 | ) | |||||||||||||||||||||||||||||
Income (loss) before taxes and equity in undistributed income of subsidiaries | $ | 641 | $ | 333 | $ | (39 | ) | $ | (2,833 | ) | $ | (2,590 | ) | $ | 6,604 | $ | 1,183 | $ | 3,299 | |||||||||||||||||||||||||||||||
Income taxes (benefits) | (392 | ) | 608 | (18 | ) | (53 | ) | 37 | (1,357 | ) | 53 | (1,122 | ) | (430 | ) | 68 | (10 | ) | (829 | ) | (747 | ) | 1,817 | 829 | 698 | |||||||||||||||||||||||||
Equities in undistributed income of subsidiaries | (310 | ) | — | — | — | — | — | 310 | — | 1,097 | — | — | — | — | — | (1,097 | ) | — | ||||||||||||||||||||||||||||||||
Income (Loss) from continuing operations | $ | 101 | $ | 1,194 | $ | (33 | ) | $ | (33 | ) | $ | 134 | $ | (108 | ) | $ | (662 | ) | $ | 593 | ||||||||||||||||||||||||||||||
Income from discontinued operations, net of taxes | — | — | — | — | — | (418 | ) | — | (418 | ) | ||||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 2,168 | $ | 265 | $ | (29 | ) | $ | (2,004 | ) | $ | (1,843 | ) | $ | 4,787 | $ | (743 | ) | $ | 2,601 | ||||||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of taxes | — | — | — | — | — | (374 | ) | — | (374 | ) | ||||||||||||||||||||||||||||||||||||||||
Net income (Loss) before attribution of Noncontrolling Interests | $ | 101 | $ | 1,194 | $ | (33 | ) | $ | (33 | ) | $ | 134 | $ | (526 | ) | $ | (662 | ) | $ | 175 | ||||||||||||||||||||||||||||||
Net income (loss) before attrition of noncontrolling interest | $ | 2,168 | $ | 265 | $ | (29 | ) | $ | (2,004 | ) | $ | (1,843 | ) | $ | 4,413 | $ | (743 | ) | $ | 2,227 | ||||||||||||||||||||||||||||||
Net Income (Loss) attributable to Noncontrolling Interests | — | 19 | — | — | — | 55 | — | 74 | ||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | 15 | — | — | — | 44 | — | 59 | ||||||||||||||||||||||||||||||||||||||||||
Citigroup's Net Income (Loss) | $ | 101 | $ | 1,175 | $ | (33 | ) | $ | (33 | ) | $ | 134 | $ | (581 | ) | $ | (662 | ) | $ | 101 | ||||||||||||||||||||||||||||||
Citigroup's net income (loss) | $ | 2,168 | $ | 250 | $ | (29 | ) | $ | (2,004 | ) | $ | (1,843 | ) | $ | 4,369 | $ | (743 | ) | $ | 2,168 | ||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENT OF INCOMECondensed Consolidating Statements of Income
| Nine Months Ended September 30, 2009 | Nine Months Ended September 30, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations | Consolidating adjustments | Citigroup consolidated | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations and income from discontinued operations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends from subsidiary banks and bank holding companies | $ | 1,040 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,040 | ) | $ | — | $ | 13,254 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (13,254 | ) | $ | — | ||||||||||||||||
Interest revenue | $ | 234 | $ | 5,881 | $ | 1 | $ | 4,732 | $ | 5,418 | $ | 47,398 | $ | (4,732 | ) | $ | 58,932 | $ | 208 | $ | 4,620 | $ | 8 | $ | 3,983 | $ | 4,568 | $ | 51,237 | $ | (3,983 | ) | $ | 60,641 | ||||||||||||||||
Interest revenue—intercompany | 1,833 | 2,079 | 3,143 | 46 | 325 | (7,380 | ) | (46 | ) | — | 2,010 | 1,657 | 2,378 | 62 | 288 | (6,333 | ) | (62 | ) | — | ||||||||||||||||||||||||||||||
Interest expense | 6,707 | 2,060 | 1,365 | 63 | 303 | 10,744 | (63 | ) | 21,179 | 6,489 | 1,619 | 1,774 | 65 | 213 | 8,700 | (65 | ) | 18,795 | ||||||||||||||||||||||||||||||||
Interest expense—intercompany | (667 | ) | 1,635 | 699 | 1,677 | 1,242 | (2,909 | ) | (1,677 | ) | — | (623 | ) | 1,979 | 139 | 1,488 | 1,024 | (2,519 | ) | (1,488 | ) | — | ||||||||||||||||||||||||||||
Net interest revenue | $ | (3,973 | ) | $ | 4,265 | $ | 1,080 | $ | 3,038 | $ | 4,198 | $ | 32,183 | $ | (3,038 | ) | $ | 37,753 | $ | (3,648 | ) | $ | 2,679 | $ | 473 | $ | 2,492 | $ | 3,619 | $ | 38,723 | $ | (2,492 | ) | $ | 41,846 | ||||||||||||||
Commissions and fees | $ | — | $ | 4,711 | $ | — | $ | 38 | $ | 95 | $ | 8,017 | $ | (38 | ) | $ | 12,823 | $ | — | $ | 3,274 | $ | — | $ | 37 | $ | 109 | $ | 6,739 | $ | (37 | ) | $ | 10,122 | ||||||||||||||||
Commissions and fees—intercompany | — | 247 | — | 86 | 107 | (354 | ) | (86 | ) | — | — | 112 | — | 114 | 127 | (239 | ) | (114 | ) | — | ||||||||||||||||||||||||||||||
Principal transactions | 434 | 1,302 | (869 | ) | — | 2 | 4,894 | — | 5,763 | (263 | ) | 8,278 | (138 | ) | — | (4 | ) | 25 | — | 7,898 | ||||||||||||||||||||||||||||||
Principal transactions—intercompany | (714 | ) | 2,530 | 133 | — | (99 | ) | (1,850 | ) | — | — | (6 | ) | (4,672 | ) | 496 | — | (122 | ) | 4,304 | — | — | ||||||||||||||||||||||||||||
Other income | 3,514 | 13,296 | (25 | ) | 321 | 489 | 1,267 | (321 | ) | 18,541 | (4,253 | ) | 571 | 114 | 385 | 551 | 11,381 | (385 | ) | 8,364 | ||||||||||||||||||||||||||||||
Other income—intercompany | (1,906 | ) | (12 | ) | 16 | 2 | 37 | 1,865 | (2 | ) | — | 4,651 | 52 | (58 | ) | — | 54 | (4,699 | ) | — | — | |||||||||||||||||||||||||||||
Total non-interest revenues | $ | 1,328 | $ | 22,074 | $ | (745 | ) | $ | 447 | $ | 631 | $ | 13,839 | $ | (447 | ) | $ | 37,127 | $ | 129 | $ | 7,615 | $ | 414 | $ | 536 | $ | 715 | $ | 17,511 | $ | (536 | ) | $ | 26,384 | |||||||||||||||
Total revenues, net of interest expense | $ | (1,605 | ) | $ | 26,339 | $ | 335 | $ | 3,485 | $ | 4,829 | $ | 46,022 | $ | (4,525 | ) | $ | 74,880 | $ | 9,735 | $ | 10,294 | $ | 887 | $ | 3,028 | $ | 4,334 | $ | 56,234 | $ | (16,282 | ) | $ | 68,230 | |||||||||||||||
Provisions for credit losses and for benefits and claims | $ | — | $ | 96 | $ | — | $ | 2,708 | $ | 3,044 | $ | 28,938 | $ | (2,708 | ) | $ | 32,078 | $ | — | $ | 22 | $ | — | $ | 1,853 | $ | 2,038 | $ | 19,142 | $ | (1,853 | ) | $ | 21,202 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and benefits | $ | (89 | ) | $ | 5,144 | $ | — | $ | 393 | $ | 514 | $ | 13,161 | $ | (393 | ) | $ | 18,730 | $ | 115 | $ | 4,317 | $ | — | $ | 405 | $ | 551 | $ | 13,257 | $ | (405 | ) | $ | 18,240 | |||||||||||||||
Compensation and benefits— intercompany | 5 | 403 | — | 106 | 106 | (514 | ) | (106 | ) | — | ||||||||||||||||||||||||||||||||||||||||
Compensation and benefits—intercompany | 5 | 160 | — | 97 | 97 | (262 | ) | (97 | ) | — | ||||||||||||||||||||||||||||||||||||||||
Other expense | 600 | 2,011 | 2 | 358 | 471 | 13,694 | (358 | ) | 16,778 | 255 | 2,170 | 2 | 3,234 | 3,351 | 10,886 | (3,234 | ) | 16,664 | ||||||||||||||||||||||||||||||||
Other expense—intercompany | 260 | 538 | 7 | 416 | 465 | (1,270 | ) | (416 | ) | — | 239 | 322 | 5 | 471 | 500 | (1,066 | ) | (471 | ) | — | ||||||||||||||||||||||||||||||
Total operating expenses | $ | 776 | $ | 8,096 | $ | 9 | $ | 1,273 | $ | 1,556 | $ | 25,071 | $ | (1,273 | ) | $ | 35,508 | $ | 614 | $ | 6,969 | $ | 7 | $ | 4,207 | $ | 4,499 | $ | 22,815 | $ | (4,207 | ) | $ | 34,904 | ||||||||||||||||
Income (Loss) before taxes and equity in undistributed income of subsidiaries | $ | (2,381 | ) | $ | 18,147 | $ | 326 | $ | (496 | ) | $ | 229 | $ | (7,987 | ) | $ | (544 | ) | $ | 7,294 | ||||||||||||||||||||||||||||||
Income (loss) before taxes and equity in undistributed income of subsidiaries | $ | 9,121 | $ | 3,303 | $ | 880 | $ | (3,032 | ) | $ | (2,203 | ) | $ | 14,277 | $ | (10,222 | ) | $ | 12,124 | |||||||||||||||||||||||||||||||
Income taxes (benefits) | (1,437 | ) | 6,772 | 97 | (201 | ) | 52 | (4,864 | ) | 201 | 620 | (1,906 | ) | 1,053 | 308 | (901 | ) | (633 | ) | 3,724 | 901 | 2,546 | ||||||||||||||||||||||||||||
Equities in undistributed income of subsidiaries | 6,917 | — | — | — | — | — | (6,917 | ) | — | (1,734 | ) | — | — | — | — | — | 1,734 | — | ||||||||||||||||||||||||||||||||
Income (Loss) from continuing operations | $ | 5,973 | $ | 11,375 | $ | 229 | $ | (295 | ) | $ | 177 | $ | (3,123 | ) | $ | (7,662 | ) | $ | 6,674 | |||||||||||||||||||||||||||||||
Income from discontinued operations, net of taxes | — | — | — | — | — | (677 | ) | — | (677 | ) | ||||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 9,293 | $ | 2,250 | $ | 572 | $ | (2,131 | ) | $ | (1,570 | ) | $ | 10,553 | $ | (9,389 | ) | $ | 9,578 | |||||||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of taxes | — | — | — | — | — | (166 | ) | — | (166 | ) | ||||||||||||||||||||||||||||||||||||||||
Net income (Loss) before attribution of Noncontrolling Interests | $ | 5,973 | $ | 11,375 | $ | 229 | $ | (295 | ) | $ | 177 | $ | (3,800 | ) | $ | (7,662 | ) | $ | 5,997 | |||||||||||||||||||||||||||||||
Net income (loss) before attrition of noncontrolling interest | $ | 9,293 | $ | 2,250 | $ | 572 | $ | (2,131 | ) | $ | (1,570 | ) | $ | 10,387 | $ | (9,389 | ) | $ | 9,412 | |||||||||||||||||||||||||||||||
Net Income (Loss) attributable to Noncontrolling Interests | — | (32 | ) | — | — | — | 56 | — | 24 | |||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | 31 | — | — | — | 88 | — | 119 | ||||||||||||||||||||||||||||||||||||||||||
Citigroup's Net Income (Loss) | $ | 5,973 | $ | 11,407 | $ | 229 | $ | (295 | ) | $ | 177 | $ | (3,856 | ) | $ | (7,662 | ) | $ | 5,973 | |||||||||||||||||||||||||||||||
Citigroup's net income (loss) | $ | 9,293 | $ | 2,219 | $ | 572 | $ | (2,131 | ) | $ | (1,570 | ) | $ | 10,299 | $ | (9,389 | ) | $ | 9,293 | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENT OF INCOMECondensed Consolidating Statements of Income
| Three Months Ended September 30, 2008 | Three Months Ended September 30, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations | Consolidating adjustments | Citigroup consolidated | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends from subsidiary banks and bank holding companies | $ | 169 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (169 | ) | $ | — | $ | 1,005 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,005 | ) | $ | — | ||||||||||||||||
Interest revenue | $ | 226 | $ | 4,455 | $ | — | $ | 1,819 | $ | 2,084 | $ | 19,365 | $ | (1,819 | ) | $ | 26,130 | $ | 57 | 1,682 | $ | — | $ | 1,526 | $ | 1,759 | $ | 15,180 | $ | (1,526 | ) | $ | 18,678 | |||||||||||||||||
Interest revenue—intercompany | 1,098 | 565 | 1,269 | 21 | 147 | (3,079 | ) | (21 | ) | — | 477 | (90 | ) | 1,053 | 1,689 | 96 | (1,536 | ) | (1,689 | ) | — | |||||||||||||||||||||||||||||
Interest expense | 2,388 | 2,740 | 835 | 33 | 154 | 6,609 | (33 | ) | 12,726 | 2,495 | 644 | 400 | 17 | 84 | 3,057 | (17 | ) | 6,680 | ||||||||||||||||||||||||||||||||
Interest expense—intercompany | (101 | ) | 1,867 | (1 | ) | 605 | 490 | (2,255 | ) | (605 | ) | — | (137 | ) | (165 | ) | 260 | 2,212 | 377 | (335 | ) | (2,212 | ) | — | ||||||||||||||||||||||||||
Net interest revenue | $ | (963 | ) | $ | 413 | $ | 435 | $ | 1,202 | $ | 1,587 | $ | 11,932 | $ | (1,202 | ) | $ | 13,404 | $ | (1,824 | ) | $ | 1,113 | $ | 393 | $ | 986 | $ | 1,394 | $ | 10,922 | $ | (986 | ) | $ | 11,998 | ||||||||||||||
Commissions and fees | $ | — | $ | 1,841 | $ | — | $ | 20 | $ | 43 | $ | 1,324 | $ | (20 | ) | $ | 3,208 | $ | — | $ | 1,229 | $ | — | $ | 16 | $ | 36 | $ | 2,433 | $ | (16 | ) | $ | 3,698 | ||||||||||||||||
Commissions and fees—intercompany | 346 | 21 | — | 9 | 11 | (378 | ) | (9 | ) | — | — | 188 | — | 51 | 63 | (251 | ) | (51 | ) | — | ||||||||||||||||||||||||||||||
Principal transactions | (497 | ) | (3,318 | ) | 2,239 | — | (1 | ) | (1,436 | ) | — | (3,013 | ) | 317 | 2,431 | (610 | ) | — | 2 | (797 | ) | — | 1,343 | |||||||||||||||||||||||||||
Principal transactions—intercompany | 335 | (900 | ) | (1,542 | ) | — | 36 | 2,071 | — | — | (493 | ) | (1,380 | ) | 192 | — | (13 | ) | 1,694 | — | — | |||||||||||||||||||||||||||||
Other income | 332 | 784 | (130 | ) | 65 | 87 | 1,586 | (65 | ) | 2,659 | (1,158 | ) | 676 | (100 | ) | 112 | 142 | 3,791 | (112 | ) | 3,351 | |||||||||||||||||||||||||||||
Other income—intercompany | 206 | 35 | 97 | 8 | 3 | (341 | ) | (8 | ) | — | 2,485 | 23 | 77 | — | 5 | (2,590 | ) | — | — | |||||||||||||||||||||||||||||||
Total non-interest revenues | $ | 722 | $ | (1,537 | ) | $ | 664 | $ | 102 | $ | 179 | $ | 2,826 | $ | (102 | ) | $ | 2,854 | $ | 1,151 | $ | 3,167 | $ | (441 | ) | $ | 179 | $ | 235 | $ | 4,280 | $ | (179 | ) | $ | 8,392 | ||||||||||||||
Total revenues, net of interest expense | $ | (72 | ) | $ | (1,124 | ) | $ | 1,099 | $ | 1,304 | $ | 1,766 | $ | 14,758 | $ | (1,473 | ) | $ | 16,258 | $ | 332 | $ | 4,280 | $ | (48 | ) | $ | 1,165 | $ | 1,629 | $ | 15,202 | $ | (2,170 | ) | $ | 20,390 | |||||||||||||
Provisions for credit losses and for benefits and claims | $ | — | $ | 7 | $ | — | $ | 1,288 | $ | 1,368 | $ | 7,692 | $ | (1,288 | ) | $ | 9,067 | $ | — | $ | 58 | $ | — | $ | 770 | $ | 875 | $ | 8,162 | $ | (770 | ) | $ | 9,095 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and benefits | $ | (57 | ) | $ | 2,244 | $ | — | $ | 174 | $ | 232 | $ | 5,125 | $ | (174 | ) | $ | 7,544 | $ | (44 | ) | $ | 1,471 | $ | — | $ | 134 | $ | 179 | $ | 4,530 | $ | (134 | ) | $ | 6,136 | ||||||||||||||
Compensation and benefits— intercompany | 2 | 226 | — | 46 | 46 | (274 | ) | (46 | ) | — | 2 | 68 | — | 35 | 35 | (105 | ) | (35 | ) | — | ||||||||||||||||||||||||||||||
Other expense | 42 | 925 | 1 | 159 | 208 | 5,287 | (159 | ) | 6,463 | 192 | 683 | 1 | 169 | 209 | 4,603 | (169 | ) | 5,688 | ||||||||||||||||||||||||||||||||
Other expense—intercompany | 451 | (120 | ) | 3 | 174 | 162 | (496 | ) | (174 | ) | — | 163 | 198 | 2 | �� | 143 | 160 | (523 | ) | (143 | ) | — | ||||||||||||||||||||||||||||
Total operating expenses | $ | 438 | $ | 3,275 | $ | 4 | $ | 553 | $ | 648 | $ | 9,642 | $ | (553 | ) | $ | 14,007 | $ | 313 | $ | 2,420 | $ | 3 | $ | 481 | $ | 583 | $ | 8,505 | $ | (481 | ) | $ | 11,824 | ||||||||||||||||
Income (Loss) before taxes and equity in undistributed income of subsidiaries | $ | (510 | ) | $ | (4,406 | ) | $ | 1,095 | $ | (537 | ) | $ | (250 | ) | $ | (2,576 | ) | $ | 368 | $ | (6,816 | ) | ||||||||||||||||||||||||||||
Income (loss) before taxes and equity in undistributed income of subsidiaries | $ | 19 | $ | 1,802 | $ | (51 | ) | $ | (86 | ) | $ | 171 | $ | (1,465 | ) | $ | (919 | ) | $ | (529 | ) | |||||||||||||||||||||||||||||
Income taxes (benefits) | (868 | ) | (1,893 | ) | 376 | (185 | ) | (77 | ) | (833 | ) | 185 | (3,295 | ) | (392 | ) | 608 | (18 | ) | (53 | ) | 37 | (1,357 | ) | 53 | (1,122 | ) | |||||||||||||||||||||||
Equities in undistributed income of subsidiaries | (3,386 | ) | — | — | — | — | — | 3,386 | — | (310 | ) | — | — | — | — | — | 310 | — | ||||||||||||||||||||||||||||||||
Income (Loss) from continuing operations | $ | (3,028 | ) | $ | (2,513 | ) | $ | 719 | $ | (352 | ) | $ | (173 | ) | $ | (1,743 | ) | $ | 3,569 | $ | (3,521 | ) | ||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 101 | $ | 1,194 | $ | (33 | ) | $ | (33 | ) | $ | 134 | $ | (108 | ) | $ | (662 | ) | $ | 593 | ||||||||||||||||||||||||||||||
Income from discontinued operations, net of taxes | 213 | — | — | — | — | 400 | — | 613 | — | — | — | — | — | (418 | ) | — | (418 | ) | ||||||||||||||||||||||||||||||||
Net income (Loss) before attribution of Noncontrolling Interests | $ | (2,815 | ) | $ | (2,513 | ) | $ | 719 | $ | (352 | ) | $ | (173 | ) | $ | (1,343 | ) | $ | 3,569 | $ | (2,908 | ) | ||||||||||||||||||||||||||||
Net income (loss) before attribution of noncontrolling interests | $ | 101 | $ | 1,194 | $ | (33 | ) | $ | (33 | ) | $ | 134 | $ | (526 | ) | $ | (662 | ) | $ | 175 | ||||||||||||||||||||||||||||||
Net Income (Loss) attributable to Noncontrolling Interests | — | — | — | — | — | (93 | ) | — | (93 | ) | ||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | 19 | — | — | — | 55 | — | 74 | ||||||||||||||||||||||||||||||||||||||||||
Citigroup's Net Income (Loss) | $ | (2,815 | ) | $ | (2,513 | ) | $ | 719 | $ | (352 | ) | $ | (173 | ) | $ | (1,250 | ) | $ | 3,569 | $ | (2,815 | ) | ||||||||||||||||||||||||||||
Citigroup's net income (loss) | $ | 101 | $ | 1,175 | $ | (33 | ) | $ | (33 | ) | $ | 134 | $ | (581 | ) | $ | (662 | ) | $ | 101 | ||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENT OF INCOMECondensed Consolidating Statements of Income
| Nine Months Ended September 30, 2008 | Nine Months Ended September 30, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations | Consolidating adjustments | Citigroup consolidated | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends from subsidiary banks and bank holding companies | $ | 1,617 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,617 | ) | $ | — | $ | 1,040 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,040 | ) | $ | — | ||||||||||||||||
Interest revenue | $ | 544 | $ | 15,239 | $ | 1 | $ | 5,447 | $ | 6,278 | $ | 60,566 | $ | (5,447 | ) | $ | 82,628 | $ | 234 | $ | 5,881 | $ | 1 | $ | 4,732 | $ | 5,418 | $ | 47,398 | $ | (4,732 | ) | $ | 58,932 | ||||||||||||||||
Interest revenue—intercompany | 3,508 | 1,564 | 3,911 | 57 | 441 | (9,424 | ) | (57 | ) | 1,833 | 2,079 | 3,143 | 46 | 325 | (7,380 | ) | (46 | ) | — | |||||||||||||||||||||||||||||||
Interest expense | 6,987 | 10,076 | 2,645 | 108 | 491 | 21,951 | (108 | ) | 42,150 | 6,707 | 2,060 | 1,365 | 63 | 303 | 10,744 | (63 | ) | 21,179 | ||||||||||||||||||||||||||||||||
Interest expense—intercompany | (242 | ) | 4,293 | 186 | 1,837 | 1,651 | (5,888 | ) | (1,837 | ) | — | (667 | ) | 1,635 | 699 | 1,677 | 1,242 | (2,909 | ) | (1,677 | ) | — | ||||||||||||||||||||||||||||
Net interest revenue | $ | (2,693 | ) | $ | 2,434 | $ | 1,081 | $ | 3,559 | $ | 4,577 | $ | 35,079 | $ | (3,559 | ) | $ | 40,478 | $ | (3,973 | ) | $ | 4,265 | $ | 1,080 | $ | 3,038 | $ | 4,198 | $ | 32,183 | $ | (3,038 | ) | $ | 37,753 | ||||||||||||||
Commissions and fees | $ | — | $ | 6,381 | $ | 1 | $ | 61 | $ | 135 | $ | 3,831 | $ | (61 | ) | $ | 10,348 | $ | — | $ | 4,711 | $ | — | $ | 38 | $ | 95 | $ | 6,960 | $ | (38 | ) | $ | 11,766 | ||||||||||||||||
Commissions and fees—intercompany | — | 453 | — | 24 | 32 | (485 | ) | (24 | ) | — | — | 247 | — | 86 | 107 | (354 | ) | (86 | ) | — | ||||||||||||||||||||||||||||||
Principal transactions | 5 | (20,400 | ) | 3,524 | — | (1 | ) | 1,425 | — | (15,447 | ) | 434 | 1,302 | (869 | ) | — | 2 | 6,175 | — | 7,044 | ||||||||||||||||||||||||||||||
Principal transactions—intercompany | 115 | 4,680 | (2,647 | ) | — | 26 | (2,174 | ) | — | — | (714 | ) | 2,530 | 133 | — | (99 | ) | (1,850 | ) | — | — | |||||||||||||||||||||||||||||
Other income | 443 | 2,798 | (45 | ) | 286 | 378 | 7,000 | (286 | ) | 10,574 | 3,514 | 13,296 | (25 | ) | 321 | 489 | 1,043 | (321 | ) | 18,317 | ||||||||||||||||||||||||||||||
Other income—intercompany | (33 | ) | 619 | 33 | 21 | 78 | (697 | ) | (21 | ) | (1,906 | ) | (12 | ) | 16 | 2 | 37 | 1,865 | (2 | ) | — | |||||||||||||||||||||||||||||
Total non-interest revenues | $ | 530 | $ | (5,469 | ) | $ | 866 | $ | 392 | $ | 648 | $ | 8,900 | $ | (392 | ) | $ | 5,475 | $ | 1,328 | $ | 22,074 | $ | (745 | ) | $ | 447 | $ | 631 | $ | 13,839 | $ | (447 | ) | $ | 37,127 | ||||||||||||||
Total revenues, net of interest expense | $ | (546 | ) | $ | (3,035 | ) | $ | 1,947 | $ | 3,951 | $ | 5,225 | $ | 43,979 | $ | (5,568 | ) | $ | 45,953 | $ | (1,605 | ) | $ | 26,339 | $ | 335 | $ | 3,485 | $ | 4,829 | $ | 46,022 | $ | (4,525 | ) | $ | 74,880 | |||||||||||||
Provisions for credit losses and for benefits and claims | $ | — | $ | 307 | $ | — | $ | 3,046 | $ | 3,315 | $ | 18,397 | $ | (3,046 | ) | $ | 22,019 | $ | — | $ | 96 | $ | — | $ | 2,708 | $ | 3,044 | $ | 28,938 | $ | (2,708 | ) | $ | 32,078 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and benefits | $ | (106 | ) | $ | 7,728 | $ | — | $ | 545 | $ | 747 | $ | 16,429 | $ | (545 | ) | $ | 24,798 | $ | (89 | ) | $ | 5,144 | $ | — | $ | 393 | $ | 514 | $ | 13,161 | $ | (393 | ) | $ | 18,730 | ||||||||||||||
Compensation and benefits— intercompany | 6 | 693 | — | 145 | 146 | (845 | ) | (145 | ) | — | 5 | 403 | — | 106 | 106 | (514 | ) | (106 | ) | — | ||||||||||||||||||||||||||||||
Other expense | 158 | 2,855 | 2 | 416 | 550 | 16,235 | (416 | ) | 19,800 | 600 | 2,011 | 2 | 358 | 471 | 13,694 | (358 | ) | 16,778 | ||||||||||||||||||||||||||||||||
Other expense—intercompany | 596 | 711 | 49 | 336 | 367 | (1,723 | ) | (336 | ) | — | 260 | 538 | 7 | 416 | 465 | (1,270 | ) | (416 | ) | — | ||||||||||||||||||||||||||||||
Total operating expenses | $ | 654 | $ | 11,987 | $ | 51 | $ | 1,442 | $ | 1,810 | $ | 30,096 | $ | (1,442 | ) | $ | 44,598 | $ | 776 | $ | 8,096 | $ | 9 | $ | 1,273 | $ | 1,556 | $ | 25,071 | $ | (1,273 | ) | $ | 35,508 | ||||||||||||||||
Income (Loss) before taxes and equity in undistributed income of subsidiaries | $ | (1,200 | ) | $ | (15,329 | ) | $ | 1,896 | $ | (537 | ) | $ | 100 | $ | (4,514 | ) | $ | (1,080 | ) | $ | (20,664 | ) | ||||||||||||||||||||||||||||
Income (loss) before taxes and equity in undistributed income of subsidiaries | $ | (2,381 | ) | $ | 18,147 | $ | 326 | $ | (496 | ) | $ | 229 | $ | (7,987 | ) | $ | (544 | ) | $ | 7,294 | ||||||||||||||||||||||||||||||
Income taxes (benefits) | (1,643 | ) | (6,273 | ) | 656 | (174 | ) | 54 | (2,422 | ) | 174 | (9,628 | ) | (1,437 | ) | 6,772 | 97 | (201 | ) | 52 | (4,864 | ) | 201 | 620 | ||||||||||||||||||||||||||
Equities in undistributed income of subsidiaries | (11,077 | ) | — | — | — | — | — | 11,077 | — | 6,917 | — | — | — | — | — | (6,917 | ) | — | ||||||||||||||||||||||||||||||||
Income (Loss) from continuing operations | $ | (10,634 | ) | $ | (9,056 | ) | $ | 1,240 | $ | (363 | ) | $ | 46 | $ | (2,092 | ) | $ | 9,823 | $ | (11,036 | ) | |||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 5,973 | $ | 11,375 | $ | 229 | $ | (295 | ) | $ | 177 | $ | (3,123 | ) | $ | (7,662 | ) | $ | 6,674 | |||||||||||||||||||||||||||||||
Income from discontinued operations, net of taxes | 213 | — | — | — | — | 365 | — | 578 | — | — | — | — | — | (677 | ) | — | (677 | ) | ||||||||||||||||||||||||||||||||
Net income (Loss) before attribution of Noncontrolling Interests | $ | (10,421 | ) | $ | (9,056 | ) | $ | 1,240 | $ | (363 | ) | $ | 46 | $ | (1,727 | ) | $ | 9,823 | $ | (10,458 | ) | |||||||||||||||||||||||||||||
Net income (loss) before attribution of noncontrolling interests | $ | 5,973 | $ | 11,375 | $ | 229 | $ | (295 | ) | $ | 177 | $ | (3,800 | ) | $ | (7,662 | ) | $ | 5,997 | |||||||||||||||||||||||||||||||
Net Income (Loss) attributable to Noncontrolling Interests | — | (7 | ) | — | — | — | (30 | ) | — | (37 | ) | |||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | (32 | ) | — | — | — | 56 | — | 24 | |||||||||||||||||||||||||||||||||||||||||
Citigroup's Net Income (Loss) | $ | (10,421 | ) | $ | (9,049 | ) | $ | 1,240 | $ | (363 | ) | $ | 46 | $ | (1,697 | ) | $ | 9,823 | $ | (10,421 | ) | |||||||||||||||||||||||||||||
Citigroup's net income (loss) | $ | 5,973 | $ | 11,407 | $ | 229 | $ | (295 | ) | $ | 177 | $ | (3,856 | ) | $ | (7,662 | ) | $ | 5,973 | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING BALANCE SHEETCondensed Consolidating Balance Sheet
| September 30, 2009 | September 30, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | — | $ | 2,798 | $ | — | $ | 181 | $ | 257 | $ | 23,427 | $ | (181 | ) | $ | 26,482 | $ | — | $ | 1,798 | $ | 1 | $ | 203 | $ | 276 | $ | 24,267 | $ | (203 | ) | $ | 26,342 | ||||||||||||||||
Cash and due from banks—intercompany | 16 | 1,609 | 1 | 140 | 159 | (1,785 | ) | (140 | ) | — | 9 | 2,935 | 1 | 150 | 168 | (3,113 | ) | (150 | ) | — | ||||||||||||||||||||||||||||||
Federal funds sold and resale agreements | — | 176,406 | — | — | — | 20,951 | — | 197,357 | — | 195,153 | — | — | — | 44,904 | — | 240,057 | ||||||||||||||||||||||||||||||||||
Federal funds sold and resale agreements—intercompany | — | 23,165 | — | — | — | (23,165 | ) | — | — | — | 18,254 | — | — | — | (18,254 | ) | — | — | ||||||||||||||||||||||||||||||||
Trading account assets | 25 | 145,444 | 41 | — | 16 | 195,171 | — | 340,697 | 10 | 142,688 | — | — | 8 | 194,392 | — | 337,098 | ||||||||||||||||||||||||||||||||||
Trading account assets—intercompany | 1,152 | 8,592 | 811 | — | 6 | (10,561 | ) | — | — | 66 | 13,161 | 121 | — | — | (13,348 | ) | — | — | ||||||||||||||||||||||||||||||||
Investments | 11,227 | 274 | — | 2,456 | 2,720 | 247,669 | (2,456 | ) | 261,890 | 23,824 | 193 | — | 2,537 | 2,629 | 313,604 | (2,537 | ) | 340,250 | ||||||||||||||||||||||||||||||||
Loans, net of unearned income | — | 430 | — | 43,534 | 49,907 | 571,874 | (43,534 | ) | 622,211 | — | 376 | — | 34,480 | 39,513 | 614,422 | (34,480 | ) | 654,311 | ||||||||||||||||||||||||||||||||
Loans, net of unearned income—intercompany | — | — | 144,343 | 3,512 | 6,716 | (151,059 | ) | (3,512 | ) | — | — | — | 93,278 | 3,464 | 8,131 | (101,409 | ) | (3,464 | ) | — | ||||||||||||||||||||||||||||||
Allowance for loan losses | — | (139 | ) | — | (3,425 | ) | (3,766 | ) | (32,511 | ) | 3,425 | (36,416 | ) | — | (48 | ) | — | (3,379 | ) | (3,702 | ) | (39,924 | ) | 3,379 | (43,674 | ) | ||||||||||||||||||||||||
Total loans, net | $ | — | $ | 291 | $ | 144,343 | $ | 43,621 | $ | 52,857 | $ | 388,304 | $ | (43,621 | ) | $ | 585,795 | $ | — | $ | 328 | $ | 93,278 | $ | 34,565 | $ | 43,942 | $ | 473,089 | $ | (34,565 | ) | $ | 610,637 | ||||||||||||||||
Advances to subsidiaries | 145,529 | — | — | — | — | (145,529 | ) | — | — | 133,365 | — | — | — | — | (133,365 | ) | — | — | ||||||||||||||||||||||||||||||||
Investments in subsidiaries | 210,989 | — | — | — | — | — | (210,989 | ) | — | 207,181 | — | — | — | — | — | (207,181 | ) | — | ||||||||||||||||||||||||||||||||
Other assets | 12,295 | 69,947 | 728 | 6,161 | 7,014 | 362,790 | (6,161 | ) | 452,774 | 18,033 | 70,567 | 604 | 4,323 | 5,332 | 302,951 | (4,323 | ) | 397,487 | ||||||||||||||||||||||||||||||||
Other assets—intercompany | 10,853 | 54,776 | 3,235 | 31 | 1,353 | (70,217 | ) | (31 | ) | — | 16,646 | 40,751 | 2,397 | 1 | 1,877 | (61,671 | ) | (1 | ) | — | ||||||||||||||||||||||||||||||
Assets of discontinued operations held for sale | — | — | — | — | — | 23,604 | — | 23,604 | — | — | — | — | — | 31,409 | — | 31,409 | ||||||||||||||||||||||||||||||||||
Total assets | $ | 392,086 | $ | 483,302 | $ | 149,159 | $ | 52,590 | $ | 64,382 | $ | 1,010,659 | $ | (263,579 | ) | $ | 1,888,599 | $ | 399,134 | $ | 485,828 | $ | 96,402 | $ | 41,779 | $ | 54,232 | $ | 1,154,865 | $ | (248,960 | ) | $ | 1,983,280 | ||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities and equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 832,603 | $ | — | $ | 832,603 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 850,095 | $ | — | $ | 850,095 | ||||||||||||||||||
Federal funds purchased and securities loaned or sold | — | 139,681 | — | — | — | 38,478 | — | 178,159 | — | 155,069 | — | — | — | 36,996 | — | 192,065 | ||||||||||||||||||||||||||||||||||
Federal funds purchased and securities loaned or sold—intercompany | 185 | 4,485 | — | — | — | (4,670 | ) | — | — | 185 | 7,862 | — | — | — | (8,047 | ) | — | — | ||||||||||||||||||||||||||||||||
Trading account liabilities | — | 77,681 | 52 | — | — | 52,807 | — | 130,540 | — | 85,351 | 135 | — | — | 56,519 | — | 142,005 | ||||||||||||||||||||||||||||||||||
Trading account liabilities—intercompany | 989 | 8,839 | 1,260 | — | — | (11,088 | ) | — | — | 66 | 10,887 | 20 | — | — | (10,973 | ) | — | — | ||||||||||||||||||||||||||||||||
Short-term borrowings | 1,249 | 5,554 | 10,065 | — | 434 | 47,429 | — | 64,731 | 18 | 3,005 | 10,967 | 1 | 783 | 72,240 | (1 | ) | 87,013 | |||||||||||||||||||||||||||||||||
Short-term borrowings—intercompany | — | 91,015 | 80,610 | 5,135 | 34,483 | (206,108 | ) | (5,135 | ) | — | — | 66,666 | 30,413 | 10,747 | 2,914 | (99,993 | ) | (10,747 | ) | — | ||||||||||||||||||||||||||||||
Long-term debt | 214,981 | 15,403 | 51,208 | 1,677 | 6,348 | 91,617 | (1,677 | ) | 379,557 | 197,591 | 10,249 | 50,214 | 899 | 4,202 | 125,074 | (899 | ) | 387,330 | ||||||||||||||||||||||||||||||||
Long-term debt—intercompany | 445 | 46,273 | 1,208 | 37,868 | 15,453 | (63,379 | ) | (37,868 | ) | — | 357 | 59,352 | 2,575 | 24,820 | 39,754 | (102,038 | ) | (24,820 | ) | — | ||||||||||||||||||||||||||||||
Advances from subsidiaries | 21,958 | — | — | — | — | (21,958 | ) | — | — | 22,657 | — | — | — | — | (22,657 | ) | — | — | ||||||||||||||||||||||||||||||||
Other liabilities | 5,819 | 66,135 | 651 | 1,910 | 1,588 | 69,863 | (1,910 | ) | 144,056 | 5,359 | 56,611 | 276 | 1,882 | 2,204 | 65,265 | (1,882 | ) | 129,715 | ||||||||||||||||||||||||||||||||
Other liabilities—intercompany | 5,618 | 9,378 | 177 | 700 | 325 | (15,498 | ) | (700 | ) | — | 9,988 | 14,502 | 189 | 578 | 414 | (25,093 | ) | (578 | ) | — | ||||||||||||||||||||||||||||||
Liabilities of discontinued operations held for sale | — | — | — | — | — | 16,004 | — | 16,004 | — | — | — | — | — | 29,874 | — | 29,874 | ||||||||||||||||||||||||||||||||||
Total liabilities | $ | 251,244 | $ | 464,444 | $ | 145,231 | $ | 47,290 | $ | 58,631 | $ | 826,100 | $ | (47,290 | ) | $ | 1,745,650 | $ | 236,221 | $ | 469,554 | $ | 94,789 | $ | 38,927 | $ | 50,271 | $ | 967,262 | $ | (38,927 | ) | $ | 1,818,097 | ||||||||||||||||
Citigroup stockholder's equity | $ | 140,842 | $ | 18,443 | $ | 3,928 | $ | 5,300 | $ | 5,751 | $ | 182,867 | $ | (216,289 | ) | $ | 140,842 | |||||||||||||||||||||||||||||||||
Citigroup stockholders' equity | 162,913 | 15,808 | 1,613 | 2,852 | 3,961 | 185,799 | (210,033 | ) | 162,913 | |||||||||||||||||||||||||||||||||||||||||
Noncontrolling interest | — | 415 | — | — | — | 1,692 | — | 2,107 | — | 466 | — | — | — | 1,804 | — | 2,270 | ||||||||||||||||||||||||||||||||||
Total equity | $ | 140,842 | $ | 18,858 | $ | 3,928 | $ | 5,300 | $ | 5,751 | $ | 184,559 | $ | (216,289 | ) | $ | 142,949 | $ | 162,913 | $ | 16,274 | $ | 1,613 | $ | 2,852 | $ | 3,961 | $ | 187,603 | $ | (210,033 | ) | $ | 165,183 | ||||||||||||||||
Total liabilities and equity | $ | 392,086 | $ | 483,302 | $ | 149,159 | $ | 52,590 | $ | 64,382 | $ | 1,010,659 | $ | (263,579 | ) | $ | 1,888,599 | $ | 399,134 | $ | 485,828 | $ | 96,402 | $ | 41,779 | $ | 54,232 | $ | 1,154,865 | $ | (248,960 | ) | $ | 1,983,280 | ||||||||||||||||
CONDENSED CONSOLIDATING BALANCE SHEETCondensed Consolidating Balance Sheet
| December 31, 2008 | December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | — | $ | 3,142 | $ | — | $ | 149 | $ | 211 | $ | 25,900 | $ | (149 | ) | $ | 29,253 | $ | — | $ | 1,801 | $ | — | $ | 198 | $ | 297 | $ | 23,374 | $ | (198 | ) | $ | 25,472 | ||||||||||||||||
Cash and due from banks—intercompany | 13 | 1,415 | 1 | 141 | 185 | (1,614 | ) | (141 | ) | — | 5 | 3,146 | 1 | 145 | 168 | (3,320 | ) | (145 | ) | — | ||||||||||||||||||||||||||||||
Federal funds sold and resale agreements | — | 167,589 | — | — | — | 16,544 | — | 184,133 | — | 199,760 | — | — | — | 22,262 | — | 222,022 | ||||||||||||||||||||||||||||||||||
Federal funds sold and resale agreements—intercompany | — | 31,446 | — | — | — | (31,446 | ) | — | — | — | 20,626 | — | — | — | (20,626 | ) | — | — | ||||||||||||||||||||||||||||||||
Trading account assets | 20 | 155,136 | 88 | — | 15 | 222,376 | — | 377,635 | 26 | 140,777 | 71 | — | 17 | 201,882 | — | 342,773 | ||||||||||||||||||||||||||||||||||
Trading account assets—intercompany | 818 | 11,197 | 4,439 | — | 182 | (16,636 | ) | — | — | 196 | 6,812 | 788 | — | — | (7,796 | ) | — | — | ||||||||||||||||||||||||||||||||
Investments | 25,611 | 382 | — | 2,059 | 2,366 | 227,661 | (2,059 | ) | 256,020 | 13,318 | 237 | — | 2,293 | 2,506 | 290,058 | (2,293 | ) | 306,119 | ||||||||||||||||||||||||||||||||
Loans, net of unearned income | — | 663 | — | 48,663 | 55,387 | 638,166 | (48,663 | ) | 694,216 | — | 248 | — | 42,739 | 48,821 | 542,435 | (42,739 | ) | 591,504 | ||||||||||||||||||||||||||||||||
Loans, net of unearned income—intercompany | — | — | 134,744 | 3,433 | 11,129 | (145,873 | ) | (3,433 | ) | — | — | — | 129,317 | 3,387 | 7,261 | (136,578 | ) | (3,387 | ) | — | ||||||||||||||||||||||||||||||
Allowance for loan losses | — | (122 | ) | — | (3,415 | ) | (3,649 | ) | (25,845 | ) | 3,415 | (29,616 | ) | — | (83 | ) | — | (3,680 | ) | (4,056 | ) | (31,894 | ) | 3,680 | (36,033 | ) | ||||||||||||||||||||||||
Total loans, net | $ | — | $ | 541 | $ | 134,744 | $ | 48,681 | $ | 62,867 | $ | 466,448 | $ | (48,681 | ) | $ | 664,600 | $ | — | $ | 165 | $ | 129,317 | $ | 42,446 | $ | 52,026 | $ | 373,963 | $ | (42,446 | ) | $ | 555,471 | ||||||||||||||||
Advances to subsidiaries | 167,043 | — | — | — | — | (167,043 | ) | — | — | 144,497 | — | — | — | — | (144,497 | ) | — | — | ||||||||||||||||||||||||||||||||
Investments in subsidiaries | 149,424 | — | — | — | — | — | (149,424 | ) | — | 210,895 | — | — | — | — | — | (210,895 | ) | — | ||||||||||||||||||||||||||||||||
Other assets | 12,148 | 74,740 | 51 | 6,156 | 6,970 | 332,920 | (6,156 | ) | 426,829 | 14,196 | 69,907 | 1,186 | 6,440 | 7,317 | 312,183 | (6,440 | ) | 404,789 | ||||||||||||||||||||||||||||||||
Other assets—intercompany | 14,998 | 108,952 | 3,997 | 254 | 504 | (128,451 | ) | (254 | ) | — | 10,412 | 38,047 | 3,168 | 47 | 1,383 | (53,010 | ) | (47 | ) | — | ||||||||||||||||||||||||||||||
Total assets | $ | 370,075 | $ | 554,540 | $ | 143,320 | $ | 57,440 | $ | 73,300 | $ | 946,659 | $ | (206,864 | ) | $ | 1,938,470 | $ | 393,545 | $ | 481,278 | $ | 134,531 | $ | 51,569 | $ | 63,714 | $ | 994,473 | $ | (262,464 | ) | $ | 1,856,646 | ||||||||||||||||
Liabilities and equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 774,185 | $ | — | $ | 774,185 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 835,903 | $ | — | $ | 835,903 | ||||||||||||||||||
Federal funds purchased and securities loaned or sold | — | 165,914 | — | — | — | 39,379 | — | 205,293 | — | 124,522 | — | — | — | 29,759 | — | 154,281 | ||||||||||||||||||||||||||||||||||
Federal funds purchased and securities loaned or sold—intercompany | 8,673 | 34,007 | — | — | — | (42,680 | ) | — | — | 185 | 18,721 | — | — | — | (18,906 | ) | — | — | ||||||||||||||||||||||||||||||||
Trading account liabilities | — | 70,006 | 14 | — | — | 95,780 | — | 165,800 | — | 82,905 | 115 | — | — | 54,492 | — | 137,512 | ||||||||||||||||||||||||||||||||||
Trading account liabilities—intercompany | 732 | 12,751 | 2,660 | — | — | (16,143 | ) | — | — | 198 | 7,495 | 1,082 | — | — | (8,775 | ) | — | — | ||||||||||||||||||||||||||||||||
Short-term borrowings | 2,571 | 9,735 | 30,994 | — | 222 | 83,169 | — | 126,691 | 1,177 | 4,593 | 10,136 | — | 379 | 52,594 | — | 68,879 | ||||||||||||||||||||||||||||||||||
Short-term borrowings—intercompany | — | 87,432 | 66,615 | 6,360 | 39,637 | (193,684 | ) | (6,360 | ) | — | — | 69,306 | 62,336 | 3,304 | 33,818 | (165,460 | ) | (3,304 | ) | — | ||||||||||||||||||||||||||||||
Long-term debt | 192,290 | 20,623 | 37,374 | 2,214 | 8,333 | 100,973 | (2,214 | ) | 359,593 | 197,804 | 13,422 | 55,499 | 2,893 | 7,542 | 89,752 | (2,893 | ) | 364,019 | ||||||||||||||||||||||||||||||||
Long-term debt—intercompany | — | 60,318 | 878 | 40,722 | 17,655 | (78,851 | ) | (40,722 | ) | — | 367 | 62,050 | 1,039 | 37,600 | 14,278 | (77,734 | ) | (37,600 | ) | — | ||||||||||||||||||||||||||||||
Advances from subsidiaries | 7,660 | — | — | — | — | (7,660 | ) | — | — | 30,275 | — | — | — | — | (30,275 | ) | — | — | ||||||||||||||||||||||||||||||||
Other liabilities | 7,347 | 75,247 | 855 | 1,907 | 1,808 | 77,629 | (1,907 | ) | 162,886 | 5,985 | 70,477 | 585 | 1,772 | 1,742 | 62,290 | (1,772 | ) | 141,079 | ||||||||||||||||||||||||||||||||
Other liabilities—intercompany | 9,172 | 10,213 | 232 | 833 | 332 | (19,949 | ) | (833 | ) | — | 4,854 | 7,911 | 198 | 1,080 | 386 | (13,349 | ) | (1,080 | ) | — | ||||||||||||||||||||||||||||||
Total liabilities | $ | 228,445 | $ | 546,246 | $ | 139,622 | $ | 52,036 | $ | 67,987 | $ | 812,148 | $ | (52,036 | ) | $ | 1,794,448 | $ | 240,845 | $ | 461,402 | $ | 130,990 | $ | 46,649 | $ | 58,145 | $ | 810,291 | $ | (46,649 | ) | $ | 1,701,673 | ||||||||||||||||
Citigroup stockholders' equity | 141,630 | 7,819 | 3,698 | 5,404 | 5,313 | 132,594 | (154,828 | ) | 141,630 | 152,700 | 19,448 | 3,541 | 4,920 | 5,569 | 182,337 | (215,815 | ) | 152,700 | ||||||||||||||||||||||||||||||||
Noncontrolling interest | — | 475 | — | — | — | 1,917 | — | 2,392 | — | 428 | — | — | — | 1,845 | — | 2,273 | ||||||||||||||||||||||||||||||||||
Total equity | $ | 141,630 | $ | 8,294 | $ | 3,698 | $ | 5,404 | $ | 5,313 | $ | 134,511 | $ | (154,828 | ) | $ | 144,022 | $ | 152,700 | $ | 19,876 | $ | 3,541 | $ | 4,920 | $ | 5,569 | $ | 184,182 | $ | (215,815 | ) | $ | 154,973 | ||||||||||||||||
Total liabilities and equity | $ | 370,075 | $ | 554,540 | $ | $143,320 | $ | 57,440 | $ | 73,300 | $ | 946,659 | $ | (206,864 | ) | $ | 1,938,470 | $ | 393,545 | $ | 481,278 | $ | 134,531 | $ | 51,569 | $ | 63,714 | $ | 994,473 | $ | (262,464 | ) | $ | 1,856,646 | ||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWSCondensed Consolidating Statements of Cash Flows
| Nine Months Ended September 30, 2009 | Nine Months Ended September 30, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup Consolidated | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup Consolidated | ||||||||||||||||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (1,854 | ) | $ | 18,928 | $ | 2,185 | $ | 3,312 | $ | 3,757 | $ | (36,850 | ) | $ | (3,312 | ) | $ | (13,834 | ) | ||||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 10,821 | $ | 16,902 | $ | 1,023 | $ | 2,249 | $ | 3,161 | $ | (7,626 | ) | $ | (2,249 | ) | $ | 24,281 | ||||||||||||||||||||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||||||||||||||||||||||||||||||||
Change in loans | $ | — | $ | — | $ | (9,324 | ) | $ | 1,528 | $ | 1,504 | $ | (119,841 | ) | $ | (1,528 | ) | $ | (127,661 | ) | $ | — | $ | 26 | $ | 35,753 | $ | 2,439 | $ | 3,210 | $ | 17,426 | $ | (2,439 | ) | $ | 56,415 | |||||||||||||
Proceeds from sales and securitizations of loans | — | 163 | — | — | — | 185,279 | — | 185,442 | — | 102 | — | 1,864 | 1,864 | 5,304 | (1,864 | ) | 7,270 | |||||||||||||||||||||||||||||||||
Purchases of investments | (13,777 | ) | (13 | ) | — | (531 | ) | (579 | ) | (152,746 | ) | 531 | (167,115 | ) | (23,026 | ) | (11 | ) | — | (472 | ) | (477 | ) | (310,854 | ) | 472 | (334,368 | ) | ||||||||||||||||||||||
Proceeds from sales of investments | 6,892 | — | — | 398 | 435 | 59,563 | (398 | ) | 66,890 | 2,565 | 32 | — | 98 | 208 | 126,666 | (98 | ) | 129,471 | ||||||||||||||||||||||||||||||||
Proceeds from maturities of investments | 20,209 | — | — | 230 | 309 | 69,700 | (230 | ) | 90,218 | 10,323 | — | — | 261 | 270 | 143,076 | (261 | ) | 153,669 | ||||||||||||||||||||||||||||||||
Changes in investments and advances—intercompany | (20,968 | ) | — | — | (290 | ) | 4,202 | 16,766 | 290 | — | 11,330 | 3,536 | — | (77 | ) | (870 | ) | (13,996 | ) | 77 | — | |||||||||||||||||||||||||||||
Business acquisitions | — | — | — | — | — | — | — | — | (20 | ) | — | — | — | — | 20 | — | — | |||||||||||||||||||||||||||||||||
Other investing activities | — | (775 | ) | — | — | — | (42,291 | ) | — | (43,066 | ) | — | (5,245 | ) | — | (22 | ) | (22 | ) | 23,461 | 22 | 18,194 | ||||||||||||||||||||||||||||
Net cash (used in) provided by investing activities | $ | (7,644 | ) | $ | (625 | ) | $ | (9,324 | ) | $ | 1,335 | $ | 5,871 | $ | 16,430 | $ | (1,335 | ) | $ | 4,708 | ||||||||||||||||||||||||||||||
Net cash provided by (used in) investing activities | $ | 1,172 | $ | (1,560 | ) | $ | 35,753 | $ | 4,091 | $ | 4,183 | $ | (8,897 | ) | $ | (4,091 | ) | $ | 30,651 | |||||||||||||||||||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid | $ | (3,235 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | (3,235 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
Dividends paid—intercompany | (122 | ) | (1,000 | ) | — | — | — | 1,122 | — | — | ||||||||||||||||||||||||||||||||||||||||
Dividends paid-intercompany | — | (5,850 | ) | (1,500 | ) | — | — | 7,350 | — | — | ||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | — | — | — | — | — | — | — | — | 3,750 | — | — | — | — | (3,750 | ) | — | — | |||||||||||||||||||||||||||||||||
Issuance of preferred stock | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Treasury stock acquired | (3 | ) | — | — | — | — | — | — | (3 | ) | (5 | ) | — | — | — | — | — | — | (5 | ) | ||||||||||||||||||||||||||||||
Proceeds/(Repayments) from issuance of long-term debt—third-party, net | 12,235 | (2,406 | ) | 14,020 | (537 | ) | (1,985 | ) | (15,250 | ) | 537 | 6,614 | (6,748 | ) | (2,570 | ) | (4,792 | ) | (994 | ) | (2,340 | ) | (18,317 | ) | 994 | (34,767 | ) | |||||||||||||||||||||||
Proceeds/(Repayments) from issuance of long-term debt—intercompany, net | — | (14,450 | ) | — | (2,854 | ) | (2,202 | ) | 16,652 | 2,854 | — | — | (2,908 | ) | — | (12,780 | ) | 25,476 | (22,568 | ) | 12,780 | — | ||||||||||||||||||||||||||||
Change in deposits | — | — | — | — | — | 58,418 | — | 58,418 | — | — | — | — | — | 14,192 | — | 14,192 | ||||||||||||||||||||||||||||||||||
Net change in short-term borrowings and other investment banking and brokerage borrowings—third-party | (1,339 | ) | (4,181 | ) | (20,932 | ) | (1,225 | ) | (226 | ) | (29,465 | ) | 1,225 | (56,143 | ) | 11 | (1,588 | ) | 870 | — | 404 | (36,818 | ) | — | (37,121 | ) | ||||||||||||||||||||||||
Net change in short-term borrowings and other advances—intercompany | 2,081 | 3,583 | 14,056 | — | (5,154 | ) | (14,566 | ) | — | — | (8,211 | ) | (2,640 | ) | (31,353 | ) | 7,444 | (30,904 | ) | 73,108 | (7,444 | ) | — | |||||||||||||||||||||||||||
Capital contributions from parent | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other financing activities | (116 | ) | — | (5 | ) | — | (41 | ) | 46 | — | (116 | ) | (786 | ) | — | — | — | — | 3,750 | — | 2,964 | |||||||||||||||||||||||||||||
Net cash provided by (used in) financing activities | $ | 9,501 | $ | (18,454 | ) | $ | 7,139 | $ | (4,616 | ) | $ | (9,608 | ) | $ | 16,957 | $ | 4,616 | $ | 5,535 | |||||||||||||||||||||||||||||||
Net cash used in financing activities | $ | (11,989 | ) | $ | (15,556 | ) | $ | (36,775 | ) | $ | (6,330 | ) | $ | (7,364 | ) | $ | 16,947 | $ | 6,330 | $ | (54,737 | ) | ||||||||||||||||||||||||||||
Effect of exchange rate changes on cash and due from banks | $ | — | — | — | — | — | $ | 582 | — | $ | 582 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 624 | $ | — | $ | 624 | |||||||||||||||||||||||
Net cash used in discontinued operations | $ | — | — | — | — | — | $ | 238 | — | $ | 238 | |||||||||||||||||||||||||||||||||||||||
Net cash provided by discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 51 | $ | — | $ | 51 | ||||||||||||||||||||||||||||||||||
Net increase (decrease) in cash and due from banks | $ | 3 | $ | (151 | ) | $ | — | $ | 31 | $ | 20 | $ | (2,643 | ) | $ | (31 | ) | $ | (2,771 | ) | $ | 4 | $ | (214 | ) | $ | 1 | $ | 10 | $ | (20 | ) | $ | 1,099 | $ | (10 | ) | $ | 870 | |||||||||||
Cash and due from banks at beginning of period | 13 | 4,557 | 1 | 290 | 396 | 24,286 | (290 | ) | 29,253 | 5 | 4,947 | 1 | 343 | 464 | 20,055 | (343 | ) | 25,472 | ||||||||||||||||||||||||||||||||
Cash and due from banks at end of period | $ | 16 | $ | 4,406 | $ | 1 | $ | 321 | $ | 416 | $ | 21,643 | $ | (321 | ) | $ | 26,482 | $ | 9 | $ | 4,733 | $ | 2 | $ | 353 | $ | 444 | $ | 21,154 | $ | (353 | ) | $ | 26,342 | ||||||||||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash paid during the year for: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes | $ | 613 | $ | (743 | ) | $ | 422 | $ | 96 | $ | 381 | $ | (1,924 | ) | $ | (96 | ) | $ | (1,251 | ) | $ | (332 | ) | $ | 172 | $ | 392 | $ | (55 | ) | $ | 37 | $ | 3,123 | $ | 55 | $ | 3,392 | ||||||||||||
Interest | 6,190 | 6,006 | 2,232 | 2,454 | 469 | 6,441 | (2,454 | ) | 21,338 | 6,941 | 3,926 | 761 | 1,998 | 1,189 | 4,472 | (1,998 | ) | 17,289 | ||||||||||||||||||||||||||||||||
Non-cash investing activities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Transfers to repossessed assets | $ | — | $ | — | $ | — | $ | 1,217 | $ | 1,261 | $ | 888 | $ | (1,217 | ) | $ | 2,149 | $ | — | $ | 220 | $ | — | $ | 996 | $ | 1,042 | $ | 796 | $ | (996 | ) | $ | 2,058 | ||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWSCondensed Consolidating Statements of Cash Flows
| Nine Months Ended September 30, 2008 | Nine Months Ended September 30, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup Consolidated | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup Consolidated | ||||||||||||||||||||||||||||||||||
Net cash (used in) provided by operating activities of continuing operations | $ | (1,519 | ) | $ | 4,587 | $ | 1,981 | $ | 3,232 | $ | 2,920 | $ | 90,977 | $ | (3,232 | ) | $ | 98,946 | ||||||||||||||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (1,854 | ) | $ | 18,928 | $ | 2,185 | $ | 3,312 | $ | 3,757 | $ | (36,538 | ) | $ | (3,312 | ) | $ | (13,522 | ) | ||||||||||||||||||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||||||||||||||||||||||||||||||||
Change in loans | $ | — | $ | 67 | $ | 1,379 | $ | (3,434 | ) | $ | (2,003 | ) | $ | (187,302 | ) | 3,434 | $ | (187,859 | ) | $ | — | $ | — | $ | (9,324 | ) | $ | 1,528 | $ | 1,504 | $ | (119,841 | ) | $ | (1,528 | ) | $ | (127,661 | ) | |||||||||||
Proceeds from sales and securitizations of loans | — | 91 | — | — | — | 203,772 | — | 203,863 | — | 163 | — | — | — | 185,279 | — | 185,442 | ||||||||||||||||||||||||||||||||||
Purchases of investments | (167,093 | ) | (134 | ) | — | (945 | ) | (1,142 | ) | (104,446 | ) | 945 | (272,815 | ) | (13,777 | ) | (13 | ) | — | (531 | ) | (579 | ) | (152,746 | ) | 531 | (167,115 | ) | ||||||||||||||||||||||
Proceeds from sales of investments | 11,727 | — | — | 208 | 473 | 48,055 | (208 | ) | 60,255 | 6,892 | — | — | 398 | 435 | 59,563 | (398 | ) | 66,890 | ||||||||||||||||||||||||||||||||
Proceeds from maturities of investments | 137,005 | — | 2 | 475 | 584 | 56,721 | (475 | ) | 194,312 | 20,209 | — | — | 230 | 309 | 69,700 | (230 | ) | 90,218 | ||||||||||||||||||||||||||||||||
Changes in investments and advances—intercompany | (20,954 | ) | — | — | (1,054 | ) | 913 | 20,041 | 1,054 | — | (20,968 | ) | — | — | (290 | ) | 4,202 | 16,766 | 290 | — | ||||||||||||||||||||||||||||||
Business acquisitions | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other investing activities | — | (19,046 | ) | — | — | — | 23,253 | — | 4,207 | — | (775 | ) | — | — | — | (42,291 | ) | — | (43,066 | ) | ||||||||||||||||||||||||||||||
Net cash (used in) provided by investing activities | $ | (39,315 | ) | $ | (19,022 | ) | $ | 1,381 | $ | (4,750 | ) | $ | (1,175 | ) | $ | 60,094 | $ | 4,750 | $ | 1,963 | $ | (7,644 | ) | $ | (625 | ) | $ | (9,324 | ) | $ | 1,335 | $ | 5,871 | $ | 16,430 | $ | (1,335 | ) | $ | 4,708 | ||||||||||
Cash flows from financing activities | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid | $ | (6,008 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (6,008 | ) | $ | (3,235 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | (3,235 | ) | |||||||||||||||
Dividends paid-intercompany | (180 | ) | (84 | ) | — | — | — | 264 | — | — | (122 | ) | (1,000 | ) | — | — | — | 1,122 | — | — | ||||||||||||||||||||||||||||||
Issuance of common stock | 4,961 | — | — | — | — | — | — | 4,961 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Issuance/(Redemptions) of preferred stock | 27,424 | — | — | — | — | — | — | 27,424 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of preferred stock | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Treasury stock acquired | (6 | ) | — | — | — | — | (1 | ) | — | (7 | ) | (3 | ) | — | — | — | — | — | — | (3 | ) | |||||||||||||||||||||||||||||
Proceeds/(Repayments) from issuance of long-term debt—third-party, net | 14,608 | (9,068 | ) | 6,188 | (720 | ) | (2,223 | ) | (36,267 | ) | 720 | (26,762 | ) | 12,235 | (2,406 | ) | 14,020 | (537 | ) | (1,985 | ) | (15,250 | ) | 537 | 6,614 | |||||||||||||||||||||||||
Proceeds/(Repayments) from issuance of long-term debt—intercompany, net | — | 23,322 | — | (1,513 | ) | (2,181 | ) | (21,141 | ) | 1,513 | — | |||||||||||||||||||||||||||||||||||||||
Proceeds/(Repayments) from issuance of long-term debt-intercompany, net | — | (14,450 | ) | — | (2,854 | ) | (2,202 | ) | 16,652 | 2,854 | — | |||||||||||||||||||||||||||||||||||||||
Change in deposits | — | — | — | — | — | (32,411 | ) | — | (32,411 | ) | — | — | — | — | — | 58,418 | — | 58,418 | ||||||||||||||||||||||||||||||||
Net change in short-term borrowings and other investment banking and brokerage borrowings—third-party | (3,196 | ) | (5,269 | ) | (9,096 | ) | — | (105 | ) | (23,967 | ) | — | (41,633 | ) | (1,339 | ) | (4,181 | ) | (20,932 | ) | (1,225 | ) | (226 | ) | (29,465 | ) | 1,225 | (56,143 | ) | |||||||||||||||||||||
Net change in short-term borrowings and other advances—intercompany | 3,622 | 4,873 | (448 | ) | 3,724 | 2,721 | (10,768 | ) | (3,724 | ) | — | 2,081 | 3,583 | 14,056 | — | (5,154 | ) | (14,566 | ) | — | — | |||||||||||||||||||||||||||||
Capital contributions from parent | — | — | (1 | ) | — | — | 1 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Other financing activities | (377 | ) | — | — | — | — | — | — | (377 | ) | (116 | ) | — | (5 | ) | — | (41 | ) | 46 | — | (116 | ) | ||||||||||||||||||||||||||||
Net cash provided by (used in) financing activities | $ | 40,848 | $ | 13,774 | $ | (3,357 | ) | $ | 1,491 | $ | (1,788 | ) | $ | (124,290 | ) | $ | (1,491 | ) | $ | (74,813 | ) | $ | 9,501 | $ | (18,454 | ) | $ | 7,139 | $ | (4,616 | ) | $ | (9,608 | ) | $ | 16,957 | $ | 4,616 | $ | 5,535 | ||||||||||
Effect of exchange rate changes on cash and due from banks | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,105 | ) | $ | — | $ | (1,105 | ) | $ | — | — | — | — | — | $ | 582 | — | $ | 582 | |||||||||||||||||||||
Net cash from discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (171 | ) | $ | — | $ | (171 | ) | ||||||||||||||||||||||||||||||||
Net cash used in discontinued operations | $ | — | — | — | — | — | $ | (74 | ) | — | $ | (74 | ) | |||||||||||||||||||||||||||||||||||||
Net increase (decrease) in cash and due from banks | $ | 14 | $ | (661 | ) | $ | 5 | $ | (27 | ) | $ | (43 | ) | $ | 25,505 | $ | 27 | $ | 24,820 | $ | 3 | $ | (151 | ) | $ | — | $ | 31 | $ | 20 | $ | (2,643 | ) | $ | (31 | ) | $ | (2,771 | ) | |||||||||||
Cash and due from banks at beginning of period | 19 | 5,297 | 2 | 321 | 440 | 32,448 | (321 | ) | 38,206 | 13 | 4,557 | 1 | 290 | 396 | 24,286 | (290 | ) | 29,253 | ||||||||||||||||||||||||||||||||
Cash and due from banks at end of period | $ | 33 | $ | 4,636 | $ | 7 | $ | 294 | $ | 397 | $ | 57,953 | (294 | ) | $ | 63,026 | $ | 16 | $ | 4,406 | $ | 1 | $ | 321 | $ | 416 | $ | 21,643 | $ | (321 | ) | $ | 26,482 | |||||||||||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash paid during the year for: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes | $ | 339 | $ | (2,867 | ) | $ | 261 | $ | 304 | $ | 261 | $ | 4,129 | $ | (304 | ) | $ | 2,123 | $ | 613 | $ | (743 | ) | $ | 422 | $ | 96 | $ | 381 | $ | (1,924 | ) | $ | (96 | ) | $ | (1,251 | ) | ||||||||||||
Interest | 7,083 | 14,582 | 2,916 | 1,428 | 252 | 19,461 | (1,428 | ) | 44,294 | 6,190 | 6,006 | 2,232 | 2,454 | 469 | 6,441 | (2,454 | ) | 21,338 | ||||||||||||||||||||||||||||||||
Non-cash investing activities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Transfers to repossessed assets | $ | — | $ | — | $ | — | $ | 1,108 | $ | 1,148 | $ | 1,426 | $ | (1,108 | ) | $ | 2,574 | $ | — | $ | — | $ | — | $ | 1,217 | $ | 1,261 | $ | 888 | $ | (1,217 | ) | $ | 2,149 | ||||||||||||||||
The following information supplements and amends our discussion set forth under Part I, Item 3 "Legal Proceedings" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008,2009 (2009 Form 10-K), as updated by our Quarterly Reports on Form 10-Q for the quarters ended March 31, 20092010 and June 30, 2009.2010.
Subprime Mortgage—RelatedCredit-Crisis-Related Litigation and Other Matters
As discussed at pages 263-265 of our 2009 Form 10-K, Citigroup and its affiliates continue to defend lawsuits and arbitrations asserting claims for damages and other relief for losses arising from the global financial credit and subprime-mortgage crisis that began in 2007. These actions, which assert a variety of claims under federal and state law, include, among other matters, class actions brought on behalf of putative classes of investors in various securities issued by Citigroup as well as actions asserted by individual investors and counterparties to various transactions, and are pending in various state and federal courts as well as before arbitration tribunals. These actions are at various procedural stages.
In addition to these litigations and arbitrations, Citigroup continues to cooperate fully in response to subpoenas and requests for information from the Securities Actions.and Exchange Commission (SEC), the Federal Housing Finance Agency, state attorneys general, and other government agencies in connection with various formal and informal inquiries concerning Citigroup's subprime and other mortgage-related conduct and business activities, as well as other business activities affected by the credit crisis. These business activities include, but are not limited to, Citigroup's sponsorship, packaging, issuance, servicing and underwriting of residential mortgage-backed securities and collateralized debt obligations and its origination, sale or other transfer, servicing, and foreclosure of residential mortgages. On July 22, 2009, plaintiffs in BRECHER, ET AL. v. CGMI, ET AL. voluntarily dismissed the claims against the individual defendants and moved to remand the remaining action against Citigroup, CGMI, and the Personnel and Compensation Committee to state court. On September 8, 2009,October 19, 2010, the United States District Court for the Southern District of California ordered that defendants show cause asColumbia entered a Final Judgment approving Citigroup's settlement of the SEC's investigation into certain of Citigroup's 2007 disclosures concerning its subprime-related business activities, pursuant to why there was federal jurisdiction overwhich Citigroup agreed to pay a $75 million civil penalty and maintain certain disclosure policies, practices and procedures for a three-year period. Additional information relating to this action is publicly available in court filings under the case. On September 17, 2009, defendants respondeddocket number 10 Civ. 1277 (D.D.C.) (Huvelle, J.).
In accordance with ASC 450 (formerly SFAS 5), Citigroup establishes accruals for all litigation and regulatory matters, including matters related to the district court's order.credit crisis, when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of loss ultimately incurred in relation to those matters may be substantially higher or lower than the amounts accrued for those matters.
On August 7, 2009,Certain of these matters assert claims for substantial or indeterminate damages. The claims asserted in these matters typically are broad, often spanning a multi-year period and sometimes a wide range of business activities, and the Judicial Panel on Multidistrict Litigation transferred BRECHER, ET AL. v. CITIGROUP INC., ET AL. to the Southern District of New York for coordination with IN RE CITIGROUP INC. SECURITIES LITIGATION.
On August 19, 2009, KOCH, ET AL. v. CITIGROUP INC., ET AL., a putative class action, was filedplaintiffs' alleged damages typically are not quantified or factually supported in the United States District Courtcomplaint. Many of the most significant of these matters remain in very preliminary stages, with few or no substantive legal decisions by the court or tribunal defining the scope of the claims, the class (if any), or the potentially available damages, and fact discovery is still in progress or has not yet begun. In many of these matters, Citigroup has not yet answered the complaint or asserted its defenses. For all these reasons, Citigroup cannot at this time estimate the possible loss or range of loss, if any, for these matters or predict the Southern Districttiming of California on behalf of participants in Citigroup's Voluntary FA Capital Accumulation Program ("FA CAP Program") against various defendants, including Citigrouptheir eventual resolution.
Subprime and CGMI, asserting claims under theOther Mortgage-Related Litigation and Other Matters
Securities Act of 1933, the Securities Exchange Act of 1934, and Minnesota state law in connection with plaintiffs' acquisition of certain securities through the FA CAP Program.Actions: On September 30, 2009,2010, the Judicial Panel on Multidistrict Litigation conditionally transferred KOCH to the United States District Court for the Southern District of New York asdistrict court entered a potential tag-along to IN RE CITIGROUP INC. SECURITIES LITIGATION. On October 8, 2009, a consolidated amended complaint was filedscheduling order in BRECHER, ET AL. v. CITIGROUP INC., ET AL. in the United States District Court for the Southern District of New York, asserting claims under the federal securities laws and Minnesota and California state law. The complaint purports to consolidate the similar claims asserted in KOCH.
On August 31, 2009, ASHER, ET AL. v. CITIGROUP INC., ET AL. and PELLEGRINI, ET AL. v. CITIGROUP INC., ET AL. were consolidated with IN RE CITIGROUP INC. BOND LITIGATION.LITIGATION, and fact discovery has commenced.
ERISA Actions: On October 14, 2009, INTERNATIONAL FUND MANAGEMENT S.A., ET AL.September 28, 2010, the Second Circuit held oral argument on Plaintiffs' appeal from the district court's dismissal of IN RE CITIGROUP INC. ERISA LITIGATION. Additional information relating to this action is publicly available in court filings under the consolidated lead docket number 07 Civ. 9790 (S.D.N.Y.) (Stein, J.) and under GRAY v. CITIGROUP INC., ET AL. was09 Civ. 3804 (2d Cir.).
Derivative Actions and Related Proceedings: On the basis of an investigation, report, and recommendation from an independent committee of Citigroup's Board of Directors, the Board refused certain shareholder demands raising subprime issues. Amended pleadings were filed by several foreign investment funds and fund management companiesin two of the pending derivative actions. Additional information relating to these actions is publicly available in court filings under the index number 650417/09 (N.Y. Super. Ct.) (Fried, J.) and the Cityconsolidated lead docket number 07 Civ. 9841 (S.D.N.Y.) (Stein, J.).
Counterparty and Investor Actions: An arbitration hearing has been scheduled for May 2011 in connection with statutory and common law claims asserted by the Abu Dhabi Investment Authority arising out of Richmondits $7.5 billion investment in Citigroup. Discovery in this matter is ongoing.
In addition, beginning in July 2010, several investors, including Cambridge Place Investment Management, The Charles Schwab Corporation, the Federal Home Loan Bank of Chicago and the Federal Home Loan Bank of Indianapolis, have filed lawsuits against Citigroup and certain of its affiliates alleging actionable misstatements or omissions in connection with the issuance and underwriting of residential mortgage-backed securities. As a general matter, the plaintiffs in these actions are seeking rescission of their investments or other damages. Additional information relating to these actions is publicly available in court filings under the docket numbers 10 Civ. 11376 (D. Mass.) (Gorton, J.), 10 Civ. 4030 (N.D. Cal.) (Illston, J.), 10 CH 45033 (Ill. Cook County Cir. Ct.), LC 091499 (Cal. L.A. County Super. Ct.) and 10 PL 045071 (Ind. Marion County Super. Ct.).
The subprime-mortgage-related proceedings described above are in their preliminary stages. Accordingly, Citigroup cannot at this time estimate the possible loss or range of loss, if any, for these actions or predict the timing of their eventual resolution.
Auction Rate Securities-Related Litigation and Other Matters
On the basis of an investigation, report, and recommendation from an independent committee of Citigroup's Board of Directors, the Board refused a shareholder demand raising issues related to auction rate securities.
Research Analyst Litigation
In HOLMES v. GRUBMAN, No. 10-409 (U.S.), petitioners-plaintiffs submitted a petition for certiorari to the United States DistrictSupreme Court for the Southern Districtseeking review of New York, asserting, among other claims, claims under the Securities Exchange Act of 1934 against various defendants, including Citigroup and several current and former Citigroup executives. The claims asserted in this action are similar to those asserted in IN RE CITIGROUP INC. SECURITIES LITIGATION.
Derivative Actions. On August 25, 2009, the United States District Court for the Southern District of New York dismissed without prejudice the complaint in IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION for failure to make a pre-suit demand on the Board of Directors and failure to plead demand futility. On September 18, 2009, plaintiffs filed a motion for leave to amend the complaint.
Citigroup has received letters on behalf of purported shareholders demanding that the Board of Directors take remedial action, including the filing of legal claims, with respect to certain of the matters alleged in the subprime mortgage—related securities and derivative litigations, among other matters. The Board has formed a committee to consider the demands asserted in the letters.
ERISA Actions. On August 31, 2009, the United States District Court for the Southern District of New York dismissed the complaint in IN RE CITIGROUP ERISA LITIGATION for failure to state a claim that defendants breached their fiduciary duties by offering Citigroup stock as an investment option in the ERISA plans and entered judgment in favor of defendants. On September 8, 2009, plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit.
Other Matters. Underwriting Actions.American Home Mortgage. On July 27, 2009, UTAH RETIREMENT SYSTEMS v. STRAUSS, ET AL. was filed inCircuit's decision affirming dismissal of the United States District Court for the Eastern District of New York asserting, among other claims, claims under the Securities Act of 1933 and Utah state law arising out of an offering of American Home Mortgage common stock underwritten by CGMI.action.
On July 31, 2009, the United States District Court for the Eastern District of New York entered an order preliminarily approving settlements reached with all defendants (includingIn DISHER v. CITIGROUP GLOBAL MARKETS INC., oral argument on Citigroup and CGMI) in IN RE AMERICAN HOME MORTGAGE SECURITIES LITIGATION.
AIG. On August 5, 2009, the underwriter defendants, including CGMI and CGML, moved to dismiss the consolidated amended complaint in IN RE AMERICAN INTERNATIONAL GROUP, INC. 2008 SECURITIES LITIGATION.
Discrimination in Lending Actions. On September 21, 2009, the United States District Court for the Central District of California denied defendant CitiMortgage's motion for summary judgment and granted its motion to strike the jury demand in NAACP v. AMERIQUEST MORTGAGE CO., ET AL.
Public Nuisance and Related Actions. On August 7, 2009, the City of Cleveland dismissed, without prejudice, its claims against CitiFinancial and CitiMortgage in CITY OF CLEVELAND v. JP MORGAN CHASE BANK, N.A., ET AL.
Counterparty Actions. On October 7, 2009, defendants filed aGlobal Markets Inc.'s motion to dismiss the complaint in AMBAC CREDIT PRODUCTS, LLC v. CITIGROUP INC., ET AL.
Governmental and Regulatory Matters. Citigroup and certain of its affiliates and current and former employees are subject to formal and informal investigations, as well as subpoenas and/or requestshas been scheduled for November 16, 2010. Additional information from various governmental and self-regulatory agencies relating to subprime mortgage—related activities. Citigroup and its affiliates are cooperating fully and are engagedthis action is publicly available in efforts to resolve certain of these matters.court filings under docket number 04-L-265 (Cir. Ct. 3d Jud. Cir. Madison County Ill.).
Auction Rate Securities—RelatedAdelphia Litigation and Other Matters
Securities Actions. On July 23, 2009, the Judicial Panel on Multidistrict Litigation issued an order transferring K-V PHARMACEUTICAL CO. v. CGMI from the United States District Court for the Eastern District of Missouri to the United States District Court for the Southern District of New York for coordination with IN RE CITIGROUP AUCTION RATE SECURITIES LITIGATION. On August 24, 2009, CGMI moved to dismiss the complaint.
On September 11, 2009,22, 2010, the United States District CourtAdelphia Recovery Trust agreed in principle to settle its claims against numerous pre-petition lenders and investment banks, including Citigroup, in the action entitled ADELPHIA RECOVERY TRUST v. BANK OF AMERICA N.A., ET AL., 05 Civ. 9050 (S.D.N.Y.) (McKenna, J.). The agreement in principle is subject to execution of a final settlement agreement and court approval.
Terra Firma Litigation
On September 15, 2010, the district court issued an order granting in part and denying in part Citigroup's motion for the Southern District of New York dismissed without prejudice the complaint in IN RE CITIGROUP AUCTION RATE SECURITIES LITIGATION.summary judgment. Plaintiffs' claims for negligent misrepresentation and tortious interference were dismissed. On October 15, 2009, lead plaintiff filed18, 2010, a second consolidated amended complaint assertingjury trial commenced on plaintiffs' remaining claims under Sections 10for fraudulent misrepresentation and 20 offraudulent concealment. The court dismissed the Securities Exchange Act of 1934.
On October 2, 2009,fraudulent concealment claim before sending the Judicial Panel on Multidistrict Litigation transferred OCWEN FINANCIAL CORP., ET AL. v. CGMIcase to the United States District Court forjury. On November 4, 2010, the Southern Districtjury returned a verdict on the fraudulent misrepresentation claim in favor of New York for coordination with IN RE CITIGROUP AUCTION RATE SECURITIES LITIGATION.Citi. Additional information regarding the action is publicly available in court filings under docket number 09 Civ. 10459 (S.D.N.Y.) (Rakoff, J.).
Derivative Actions.Student Loan Corporation Litigation On
Beginning in September, 10, 2009, the United States District Court for the Southern Districtthree shareholders of New York dismissed without prejudice the complaintStudent Loan Corporation (SLC) filed putative class actions in LOUISIANA MUNICIPAL POLICE EMPLOYEES RETIREMENT SYSTEM v. PANDIT, ET AL. for failure to make a pre-suit demand on theDelaware and Connecticut against SLC and its Board of Directors, CBNA, Citigroup Inc., and failureDiscover Financial Services seeking to plead demand futility. On September 16, 2009, Citigroup received a letter on behalf of plaintiff demandingenjoin the SLM Transaction, the DFS Merger and the CBNA Transaction. Among other things, plaintiffs allege that the Boardindividual defendants and CBNA breached their fiduciary duties by failing to maximize the value to be received by SLC's stockholders, and that Citigroup Inc. aided and abetted the other defendants' breaches of Directors take remedial action, including the filing of legal claims, with respect to the matters allegedfiduciary duties. Plaintiffs in the dismissed complaint. The Board has formed a committee to consider the demands asserted in the letter. On September 23, 2009, plaintiff filed a motion for reconsideration of the district court's order of dismissal.
Governmental and Regulatory Actions. Citigroup and certain of its affiliates and current and former employeesthese actions are subject to formal and informal investigations, as well as subpoenas and/or requests for information, from various governmental and self-regulatory agencies relating to auction rate securities. Citigroup and its affiliates are cooperating fully and are engaged in discussions on these matters.
Falcon and ASTA/MAT-Related Litigation and Other Matters
ECA Acquisitions, Inc., et al. v. MAT Three LLC, et al. On September 14, 2009, defendants filed a motion to dismiss the amended complaint.
Governmental and Regulatory Matters. Citigroup and certain of its affiliates are subject to formal and informal investigations, as well as subpoenas and/or requests for information, from various governmental and self-regulatory agencies relating to the marketing and management of the Falcon and ASTA/MAT funds. Citigroup and its affiliates are cooperating fully and are engaged in discussions on these matters.
Adelphia Communications Corporation
Trial of the Adelphia Recovery Trust's claims against Citigroup and numerous other defendants is scheduled to begin in April 2010.
IPO Securities Litigation
In October 2009, the District Court entered an order granting final approval of the settlement.
Other Matters
Destiny Litigations. On June 9 and 12, 2009, two actions—DESTINY USA HOLDINGS, LLC v. CITIGROUP GLOBAL MARKETS REALTY CORP. and CONGEL, ET. AL. v. CITIGROUP GLOBAL MARKETS REALTY CORP.—were filed in New York State Supreme Court, Onondaga County, against Citigroup Global Markets Realty Corp. (CGMRC), respectively relating to CGMRC's issuance of Deficiency and Default Notices (the "Notices") pursuant to a construction loan agreement with Destiny USA Holdings, LLC (Destiny). Destiny seeks declaratory and injunctive relief and damages for CGMRC's alleged breach of the loan agreement. On July 17, 2009, the court granted Destiny's motion for a preliminary injunction, vacated the Notices, and directed CGMRC to pay all sums due under Destiny's existing funding requests and to pay all future sums due as requested under the loan agreement. That order has been stayed pending the outcome of CGMRC's state court appeal.
Investor Actions. Investors in municipal bonds and other instruments affected by the collapse of the credit markets have sued Citigroup on a variety of theories. On August 10, 2009, certain such investors, a Norwegian securities firm and seven Norwegian municipalities, filed an action—TERRA SECURITIES ASA KONKURSBO, ET AL. v. CITIGROUP INC., ET AL.—in the United States District Court for the Southern District of New York against Citigroup, CGMI and Citigroup Alternative Investments LLC, asserting claims under Sections 10 and 20 of the Securities Exchange Act of 1934 and state law arising out of the municipalities' investment in certain notes. On October 7, 2009, defendants filed a motion to dismiss.
Japan Regulatory Matters. Beginning in late 2008, certain Citigroup affiliates received requests for information from Japanese regulators relating to the accuracy of their large shareholding reporting in Japan. These Citigroup affiliates are cooperating fully with such requests and,seeking, among other things, preliminary and permanent injunctive relief against the consummation of the Transactions by the defendants, compensatory damages, and costs and disbursements. Although it is the opinion of Citigroup's management, based on current knowledge, that the eventual outcome of these matters would not be likely to have a material adverse effect on the consolidated financial condition of Citi, in the third quarter of 2009 filed approximately 900 public reports in Japan correcting and supplementing previous large
shareholding reports. Administrative fines and other penalties may be imposed against theseevent an order preliminarily or permanently enjoining the transactions were entered, the benefits to Citigroup affiliates.
Lehman Brothers—Structured Notes. Retail customers outside of the United States continue to file, and threaten to file, claims forSLM Transaction, the loss in value of their investments. There are currently 99 civil actions pending in six European countries related to the distribution of Lehman structured notes. The first court hearing in the Belgian criminal case (in which more than 1300 customers are expected to file as civil complainants seeking compensation) is expected to take place on December 1, 2009. A criminal investigation has begun in Poland,DFS Merger and the criminal investigations in Greece continue. Scrutiny by regulatory authorities outside of the United States is ongoing, and there have been a number of adverse regulatory findings.CBNA Transaction would be delayed or not achieved.
W.R. Huff Asset Management Co., LLC v. Kohlberg Kravis Roberts & Co., L.P. On August 6, 2009, the Circuit Court of Jefferson County, Alabama, granted defendant Robinson Humphrey Co. LLC's motion to strike the Fourth Amended Complaint on statute of limitations grounds, thereby dismissing Robinson Humphrey Co. LLC from the case. On August 25, 2009, the case was consolidated for discovery purposes, but not for trial, with the related case against Salomon Brothers, Inc., 27001 PARTNERSHIP, ET AL. v. BT SECURITIES CORP., ET AL. Trial in the 27001 PARTNERSHIP action remains scheduled to commence in February 2010. On September 18, 2009, defendants Salomon Brothers, Inc. and Chemical Securities, Inc. moved for summary judgment, and plaintiffs moved for partial summary judgment.
Settlement Payments
Any paymentsPayments required by Citigroup or its affiliates in connection with the settlement agreements described above either have been made or are covered by existing litigation reserves.accruals. Additional lawsuits containing claims similar to those described above may be filed in the future.
There are no material changes fromFor a discussion of the risk factors set forth underaffecting Citigroup, see "Risk Factors" in Part I, Item 1A. "Risk Factors" in our1A of Citi's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.2009.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities and Use of Proceeds
None.
(c) Share Repurchases
Under its long-standing repurchase program, the CompanyCitigroup may buy back common shares in the market or otherwise from time to time. This program may beis used for many purposes, including to offsetoffsetting dilution from stock-based compensation programs.
The following table summarizes the Company'sCitigroup's share repurchases during the first nine months of 2009:2010:
In millions, except per share amounts | Total shares purchased(1) | Average price paid per share | Approximate dollar value of shares that may yet be purchased under the plans or programs | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
First quarter 2009 | |||||||||||
Open market repurchases(1) | 0.2 | $ | 3.03 | $ | 6,741 | ||||||
Employee transactions(2) | 10.7 | 3.56 | N/A | ||||||||
Total first quarter 2009 | 10.9 | $ | 3.55 | $ | 6,741 | ||||||
Second quarter 2009 | |||||||||||
Open market repurchases(1) | 0.2 | $ | 3.27 | $ | 6,740 | ||||||
Employee transactions(2) | 4.4 | 3.67 | N/A | ||||||||
Total second quarter 2009 | 4.6 | $ | 3.65 | $ | 6,740 | ||||||
July 2009 | |||||||||||
Open market repurchases(1) | 0.4 | $ | 3.09 | $ | 6,739 | ||||||
Employee transactions(2) | 1.1 | 3.08 | N/A | ||||||||
August 2009 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 0.1 | 3.66 | N/A | ||||||||
September 2009 | |||||||||||
Open market repurchases(1) | 0.1 | $ | 4.67 | $ | 6,739 | ||||||
Employee transactions(2) | 0.1 | 4.52 | N/A | ||||||||
Third quarter 2009 | |||||||||||
Open market repurchases(1) | 0.5 | $ | 3.21 | $ | 6,739 | ||||||
Employee transactions(2) | 1.3 | 3.22 | N/A | ||||||||
Total third quarter 2009 | 1.8 | $ | 3.22 | $ | 6,739 | ||||||
Year-to-date 2009 | |||||||||||
Open market repurchases(1) | 0.9 | $ | 3.18 | $ | 6,739 | ||||||
Employee transactions(2) | 16.4 | 3.56 | N/A | ||||||||
Total year-to-date 2009 | 17.3 | $ | 3.54 | $ | 6,739 | ||||||
In millions, except per share amounts | Total shares purchased(1) | Average price paid per share | Approximate dollar value of shares that may yet be purchased under the plan or programs | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
First quarter 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 12.5 | 3.57 | N/A | ||||||||
Total first quarter 2010 | 12.5 | $ | 3.57 | $ | 6,739 | ||||||
Second quarter 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 121.2 | 4.93 | N/A | ||||||||
Total second quarter 2010 | 121.2 | $ | 4.93 | $ | 6,739 | ||||||
July 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 0.3 | 3.99 | N/A | ||||||||
August 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 0.1 | 4.01 | N/A | ||||||||
September 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 13.9 | 3.95 | N/A | ||||||||
Third quarter 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 14.3 | 3.95 | N/A | ||||||||
Total third quarter 2010 | 14.3 | $ | 3.95 | $ | 6,739 | ||||||
Year-to-date 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 148.0 | 4.72 | N/A | ||||||||
Total year-to-date 2010 | 148.0 | $ | 4.72 | $ | 6,739 | ||||||
N/A Not applicable.applicable
In accordance with the recent exchange agreements with the USG, the Company agreed not to pay a quarterly common stock dividend exceeding $0.01 per share per quarter forFor so long as the USGU.S. government holds any debtCitigroup common stock or trust preferred securities, Citigroup has generally agreed not to acquire, repurchase or redeem any Citigroup equity security of Citigroup (or any affiliate thereof) acquired by the USG in connectionor trust preferred securities, other than pursuant to administrating its employee benefit plans or other customary exceptions, or with the public and private exchange offers, without the consent of the USG. Any dividend on Citi's outstanding common stock would need to be made in compliance with Citi's obligations to any remaining outstanding preferred stock. In addition, pursuant to various of its agreements with the USG, the Company agreed not to repurchase its common stock subject to certain limited exceptions, including in the ordinary course of business as part of employee benefit programs, without the consent of the USG.U.S. government.
Item 4. Submission of Matters to a Vote of Security Holders
On the July 24, 2009 voting deadline for Citigroup's Preferred Proxy Statement dated June 18, 2009, the votes cast on the proposals to amend the Company's restated certificate of incorporation and the certificates of designation of certain series of the Company's preferred stock did not meet the required quorum of a majority of the outstanding shares of the Company's common stock. As a result, the proposals were not approved.
Set forth below, with respect to the proposals covered by Citigroup's Preferred Proxy Statement dated June 18, 2009, are the number of votes consenting to approve the proposal, the number of votes withholding consent, and the number of abstentions.
| | CONSENT | WITHHOLD CONSENT | ABSTAIN | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
(1) | Proposal to eliminate certain requirements with respect to the declaration and payment of dividends on the Company's preferred stock. | 1,616,485,022 | 133,242,379 | 188,213,673 | ||||||||
(2) | Proposal to eliminate the right of holders of the Company's preferred stock to elect two directors if dividends on that preferred stock have not been paid. | 1,608,466,652 | 137,116,210 | 192,358,085 | ||||||||
(3) | Proposal to clarify that shares of certain series of the Company's preferred stock acquired by the Company will be restored to the status of authorized but unissued shares without designation as to series. | 1,134,202,301 | 607,909,223 | 195,824,857 | ||||||||
(4) | Proposal to increase the number of authorized shares of preferred stock from 30 million to 2 billion. | 1,105,887,808 | 629,622,756 | 192,425,539 |
On September 3, 2009, the Company announced that its common stockholders had approved the three proposed amendments to the Company's restated certificate of incorporation submitted to common stockholders in Citigroup's Common Proxy Statement dated June 18, 2009.
Set forth below, with respect to the proposals covered by Citigroup's Common Proxy Statement dated June 18, 2009, are the number of votes consenting to approve the proposal, the number of votes withholding consent, and the number of abstentions.
| | CONSENT | WITHHOLD CONSENT | ABSTAIN | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
(1) | Proposal to increase the number of authorized shares of common stock from 15 billion to 60 billion shares. | 7,056,506,251 | 188,694,489 | 26,840,344 | ||||||||
(2) | Proposal to effect a reverse stock split of the Company's common stock at any time prior to June 30, 2010 at one of seven reverse split ratios, at the sole discretion of the Company's Board of Directors. | 8,558,930,213 | 537,925,274 | 78,420,206 | ||||||||
(3) | Proposal to eliminate the voting rights of shares of common stock with respect to any amendment to the Company's restated certificate of incorporation that relates solely to the terms of one or more outstanding series of the Company's preferred stock. | 6,629,778,336 | 604,659,624 | 37,525,290 |
See Exhibit Index.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 6th5th day of November, 2009.2010.
CITIGROUP INC. (Registrant) | ||||
By | /s/ JOHN C. GERSPACH John C. Gerspach Chief Financial Officer (Principal Financial Officer) | |||
By | /s/ JEFFREY R. WALSH Jeffrey R. Walsh Controller and Chief Accounting Officer (Principal Accounting Officer) |
2.01 | Amended and Restated Joint Venture Contribution and Formation Agreement, dated May 29, 2009, by and among Citigroup Inc. (the Company), Morgan Stanley and Morgan Stanley Smith Barney Holdings LLC, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 3, 2009 (File No. 1-9924). | ||
2.02 | Share Purchase Agreement, dated May 1, 2009, by and among Nikko Citi Holdings Inc., Nikko Cordial Securities Inc., Nikko Citi Business Services Inc., Nikko Citigroup Limited, and Sumitomo Mitsui Banking Corporation, incorporated by reference to Exhibit 2.02 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009 (File No. 1-9924). | ||
2.03 | Share Purchase Agreement, dated July 11, 2008, by and between Citigroup Global Markets Finance Corporation & Co. Beschrankt Haftende KG, CM Akquisitions GmbH, and Banque Federative du Credit Mutuel S.A., incorporated by reference to Exhibit 2.01 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2008 (File No. 1-9924). | ||
3.01 | Restated Certificate of Incorporation of the Company, | ||
3.02 | By-Laws of the Company, as amended, effective | ||
4.01 | Warrant, dated October 28, 2008, issued by the Company to the United States Department of the Treasury (the UST), incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed October 30, 2008 (File No. 1-9924). | ||
4.02 | Warrant, dated December 31, 2008, issued by the Company to the UST, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed December 31, 2008 (File No. 1-9924). | ||
4.03 | Warrant, dated January 15, 2009, issued by the Company to the UST, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed January 16, 2009 (File No. 1-9924). | ||
4.04 | Tax Benefits Preservation Plan, dated June 9, 2009, between the Company and Computershare Trust Company, N.A., incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed June 10, 2009 (File No. 1-9924). | ||
Capital Securities Guarantee Agreement, dated as of July 30, 2009, between the Company, as Guarantor, and The Bank of New York Mellon, as Guarantee Trustee, incorporated by reference to Exhibit 4.03 to the Company's Current Report on Form 8-K filed July 30, 2009 (File No. 1-9924). | |||
10.01+ | Form of Citigroup Equity or Deferred Cash Award Agreement (effective November 1, | ||
Form of 2010 Citi Stock Payment Program Notification for Awards Granted on September 30, 2010. | |||
10.03+ | Form of 2010 Citi Stock Payment Program Notification for Awards Granted in October, November and December 2010. | ||
10.04+ | Form of Citi Long-Term Restricted Stock Award Agreement (effective November 1, 2010). | ||
12.01+ | Calculation of Ratio of Income to Fixed Charges. | ||
Calculation of Ratio of Income to Fixed Charges (including preferred stock dividends). | |||
Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
Financial statements from the Quarterly Report on Form 10-Q of Citigroup Inc. for the quarter ended September 30, | |||
Sheet, (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated Statement of Cash Flows and (v) the Notes to Consolidated Financial |
The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company does not exceed 10% of the total assets of the Company and its consolidated subsidiaries. The Company will furnish copies of any such instrument to the Securities and Exchange Commission upon request.