SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO _______
COMMISSION FILE NUMBER 1-9924
CITIGROUP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1568099
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
153 EAST 53RD STREET, NEW YORK, NEW YORK 10043
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 559-1000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK AS OF THE LATEST PRACTICABLE DATE:
COMMON STOCK OUTSTANDING AS OF APRIL 30, 2000: 3,374,689,721
NOW AVAILABLE ON THE WEB AT WWW.CITIGROUP.COM
CITIGROUP INC.
TABLE OF CONTENTS
-----------------
Part I - Financial Information
Item 1. Financial Statements: PAGE NO.
Consolidated Statement of Income (Unaudited) -
Three Months Ended March 31, 2000 and 1999 31
Consolidated Statement of Financial Position -
March 31, 2000 (Unaudited) and December 31, 1999 32
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited) - Three Months Ended March 31, 2000 and 1999 33
Consolidated Statement of Cash Flows (Unaudited) -
Three Months Ended March 31, 2000 and 1999 34
Notes to Consolidated Financial Statements (Unaudited) 35
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 1 - 30
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23 - 25
39 - 40
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders 43
Item 6. Exhibits and Reports on Form 8-K 44
Signatures 45
Exhibit Index 46
CITIGROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS FOCUS
The table below shows the core income (loss) for each of Citigroup's businesses:
FIRST QUARTER
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1)
- --------------------------------------------------------------------------------------------------
GLOBAL CONSUMER
Citibanking North America $ 138 $ 72
Mortgage Banking 63 61
Cards 297 276
CitiFinancial 112 71
-----------------------------------
Total Banking/Lending 610 480
-----------------------------------
Travelers Life and Annuity 187 147
Primerica Financial Services 119 110
Personal Lines 75 83
-----------------------------------
Total Insurance 381 340
-----------------------------------
Europe, Middle East & Africa 99 67
Asia Pacific 166 101
Latin America 70 46
-----------------------------------
Total International 335 214
-----------------------------------
e-Citi (93) (35)
Other (26) (18)
-----------------------------------
TOTAL GLOBAL CONSUMER 1,207 981
-----------------------------------
GLOBAL CORPORATE AND INVESTMENT BANK
Salomon Smith Barney 957 648
-----------------------------------
Emerging Markets 396 324
Global Relationship Banking 247 196
-----------------------------------
Total Global Corporate Bank 643 520
-----------------------------------
Commercial Lines Insurance 240 189
-----------------------------------
TOTAL GLOBAL CORPORATE AND INVESTMENT BANK 1,840 1,357
-----------------------------------
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
SSB Citi Asset Management Group 90 80
Citibank Private Bank 82 57
-----------------------------------
TOTAL GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING 172 137
-----------------------------------
Corporate/Other (251) (150)
Investment Activities 634 90
-----------------------------------
CORE INCOME 3,602 2,415
Restructuring-related items, after-tax (2) (12) 74
Cumulative effect of accounting changes (3) - (127)
-----------------------------------
NET INCOME $3,590 $2,362
- --------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE
CORE INCOME $1.04 $0.69
NET INCOME 1.04 0.68
- --------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Includes $20 million pretax ($12 million after-tax) and $81 million
pretax ($51 million after-tax) of accelerated depreciation in 2000 and
1999, respectively, and a credit for the reversal of prior charges of
$211 million pretax ($125 million after-tax) in the 1999 quarter. See
Note 7 of Notes to Consolidated Financial Statements.
(3) First quarter 1999 accounting changes include the adoption of Statement
of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises
for Insurance-Related Assessments" of ($135) million; SOP 98-7,
"Deposit Accounting: Accounting for Insurance and Reinsurance Contracts
That Do Not Transfer Insurance Risk" of $23 million; and SOP 98-5,
"Reporting on the Costs of Start-Up Activities" of ($15) million. See
Note 2 of Notes to Consolidated Financial Statements.
- --------------------------------------------------------------------------------
1
INCOME ANALYSIS
The income analysis reconciles amounts shown in the Consolidated Statement of
Income on page 31 to the basis presented in the business segment discussions.
FIRST QUARTER
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999
- --------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $16,984 $14,070
Effect of credit card securitization activity 519 588
-----------------------------------
ADJUSTED REVENUES, NET OF INTEREST EXPENSE 17,503 14,658
-----------------------------------
Total operating expenses 8,326 7,321
Restructuring-related items (20) 130
-----------------------------------
ADJUSTED OPERATING EXPENSES 8,306 7,451
-----------------------------------
OPERATING MARGIN 9,197 7,207
-----------------------------------
Provisions for benefits, claims, and credit losses 3,002 2,777
Effect of credit card securitization activity 519 588
-----------------------------------
ADJUSTED PROVISIONS FOR BENEFITS, CLAIMS, AND CREDIT LOSSES 3,521 3,365
-----------------------------------
CORE INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 5,676 3,842
Taxes on core income 2,019 1,367
Minority interest, net of income taxes 55 60
-----------------------------------
CORE INCOME 3,602 2,415
Restructuring-related items, after-tax (12) 74
-----------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 3,590 2,489
Cumulative effect of accounting changes - (127)
-----------------------------------
NET INCOME $ 3,590 $ 2,362
- --------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Citigroup reported core income of $3.602 billion or $1.04 per diluted common
share in the 2000 first quarter, up 49% and 51%, respectively, from $2.415
billion or $0.69 in the 1999 first quarter. Core income in the 2000 first
quarter excluded a charge of $12 million for after-tax restructuring-related
items. Core income in the 1999 first quarter excluded a credit of $74 million
for after-tax restructuring-related items, and a charge of $127 million
reflecting the cumulative effect of adopting several new accounting standards as
described in Note 2 of Notes to the Consolidated Financial Statements. Net
income for the quarter was $3.590 billion or $1.04 per diluted share, up 52% and
53%, respectively, from $2.362 billion or $0.68 for the year-ago quarter.
Core income return on common equity was 29.9% compared to 23.6% a year ago.
The Global Corporate and Investment Bank core income in the 2000 first quarter
improved $483 million or 36% reflecting strong growth in all businesses, and was
led by Salomon Smith Barney (SSB), up $309 million or 48%, Emerging Markets, up
$72 million or 22%, Commercial Lines, up $51 million or 27 %, and Global
Relationship Banking (GRB), up $51 million or 26%. Global Consumer increased
$226 million or 23% reflecting growth in virtually all businesses, particularly
in the International businesses where core income grew $121 million or 57% from
the 1999 first quarter, marked by strong performance in Asia Pacific and Europe,
Middle East and Africa, as well as improvements in Latin America.
Banking/Lending core income increased $130 million or 27% reflecting the
continued strong performance of Citibanking North America, CitiFinancial and
Cards. Insurance improved $41 million or 12%, led primarily by Travelers Life
and Annuity, up $40 million or 27% reflecting business volume growth and strong
investment income. The increase in Global Consumer core income was partially
offset by e-Citi, reflecting charges related to the termination of certain
contracts and other initiatives. Global Investment Management and Private
Banking grew $35 million or 26%, as revenue growth outpaced increased business
development expenses and higher credit costs. Investment Activities core income
was up $544 million from the year-ago quarter, primarily reflecting strong
venture capital results.
Adjusted revenues, net of interest expense, of $17.5 billion in the 2000 first
quarter were up $2.8 billion or 19% from the 1999 first quarter. Global
Corporate and Investment Bank revenues of $8.2 billion in the quarter were up
$1.1 billion or 15% from a year ago, led by an increase of $845 million or 25%
in SSB that was driven by volume-related growth in commissions, investment
banking fees and fee-based Private Client revenues. Additionally, Emerging
Markets was up $97 million or 8% reflecting broad-based growth in transaction
services and loan products and GRB was up $78 million or 7%, primarily due to
growth in equity derivatives, transaction services and structured products.
Commercial Lines revenues grew $34 million or 2% as higher net investment income
and favorable pricing were offset by continued selective underwriting. Global
Consumer revenues were up $807 million or 12% in the 2000 first quarter to $7.6
billion, led by Insurance, up $323 million or 15%, with Travelers Life and
Annuity up $239 million or 31%, reflecting double digit volume growth in
annuities and higher net investment revenues. International was up $252 million
or 16%, reflecting higher business volumes, including strong growth in
investment product sales, and the effect of recent acquisitions. Banking/Lending
revenues grew $225 million or 7%, led by CitiFinancial, up $101 million or 28%,
primarily due to recent acquisitions and strong growth in receivables, and
Citibanking North America, up $71 million or 14% reflecting higher deposit
spreads, volumes and fees, and investment product sales, and was partially
offset by lower loan revenues. Global Investment Management and Private Banking
revenues of $790 million in the 2000 first quarter were up $161 million or 26%
from the 1999
2
first quarter, primarily from growth in both assets and client business volumes
under management. Adjusted revenues in Investment Activities increased $862
million from the 1999 first quarter, primarily reflecting increases in venture
capital results and corporate and insurance-related investments, and were
partially offset by losses in insurance-related investments from repositioning
activities and writedowns in the refinancing portfolio.
Net interest revenue as calculated from the Consolidated Statement of Income was
$5.2 billion in the 2000 first quarter, up $327 million or 7% from the
comparable 1999 period, reflecting business volume growth in most markets. Net
interest revenue, adjusted for the effect of credit card securitization of $6.2
billion, was up $262 million or 4% from 1999. Adjusted commissions, asset
management and administration fees, and other fee revenues of $5.3 billion were
up $1.5 billion or 39%, primarily as a result of volume-related growth in
customer trading activities, assets under fee-based management, and investment
banking fees. Insurance premiums of $2.7 billion were up $191 million or 8%,
reflecting particularly strong growth in Travelers Life and Annuity. Principal
transactions revenues of $1.7 billion were down $47 million or 3% from a year
ago, as a decline in global fixed income was partially offset by an increase in
global equities. Realized (losses) gains from sales of investments were down
$222 million to ($169) million in the quarter, primarily reflecting writedowns
and the repositioning of the Insurance portfolio, partially offset by realized
gains. Other income as shown in the Consolidated Statement of Income of $2.3
billion increased $1.2 billion from 1999, primarily reflecting higher venture
capital results.
Adjusted operating expenses of $8.3 billion for the 2000 first quarter, which
exclude restructuring-related items, were up $855 million or 11% from the
comparable 1999 period. Global Consumer expenses increased 10% from the 1999
first quarter, reflecting acquisitions in various businesses, charges related to
the termination of certain contracts and initiatives at e-Citi, an increase in
sales-related expenses, and higher business volume and expansion initiatives,
partially offset by a decrease in fixed expenses from cost-reduction programs.
Global Corporate and Investment Bank expenses were up 7% from the 1999 first
quarter, primarily attributable to production-related expenses at SSB, and was
partially offset by lower year 2000 and European Economic Monetary Union (EMU)
expenses in the GRB. Global Investment Management and Private Banking expenses
increased 22% from the year-ago quarter, primarily reflecting higher costs
associated with the continued expansion of sales and marketing efforts and
investments in technology. Corporate/Other expenses increased $188 million or
122% from the 1999 first quarter, primarily reflecting a $108 million pretax
expense (which had minimal impact on Citigroup's earnings after related tax
benefits and investment gains) for the contribution of appreciated venture
capital securities to the Company's Foundation and higher technology expenses,
and was partially offset by lower corporate staff costs.
Adjusted provisions for benefits, claims, and credit losses were $3.5 billion in
the 2000 first quarter, up $156 million from the 1999 first quarter.
Policyholder benefits and claims increased 10% from the 1999 first quarter to
$2.3 billion in the 2000 first quarter, primarily as a result of increased
volume at Travelers Life and Annuity, and the adjusted provision for credit
losses decreased 4% from a year ago. Global Consumer adjusted provisions for
benefits, claims and credit losses of $2.5 billion were up 7% from the 1999
first quarter. Managed net credit losses were $1.150 billion and the related
loss ratio was 2.30% in the 2000 first quarter, down from $1.162 billion and
2.36% in the preceding quarter and $1.165 billion and 2.61% a year ago. The
managed consumer loan delinquency ratio (90 days or more past due) decreased to
1.87% from 1.91% at December 31, 1999 and 2.09% a year ago. Global Corporate and
Investment Bank provisions for benefits, claims, and credit losses of $963
million in the 2000 quarter decreased 1%. Compared to the 1999 first quarter,
Emerging Markets provision for credit losses improved in Asia and Commercial
Lines experienced favorable prior year loss development and lower
weather-related catastrophes, while GRB credit losses increased in North
America.
Total capital (Tier 1 and Tier 2) was $62.5 billion or 12.47% of net
risk-adjusted assets, and Tier 1 capital was $49.0 billion or 9.78% at March 31,
2000, compared to $60.8 billion or 12.33% and $47.6 billion or 9.65%,
respectively, at December 31, 1999.
GLOBAL CONSUMER
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $7,116 $6,240 14
Effect of credit card securitization activity 519 588 (12)
-----------------------------------
ADJUSTED REVENUES, NET OF INTEREST EXPENSE 7,635 6,828 12
Adjusted operating expenses (2) 3,181 2,881 10
Provisions for benefits, claims, and credit losses 2,019 1,786 13
Effect of credit card securitization activity 519 588 (12)
-----------------------------------
ADJUSTED PROVISIONS FOR BENEFITS, CLAIMS, AND CREDIT LOSSES 2,538 2,374 7
-----------------------------------
CORE INCOME BEFORE TAXES AND MINORITY INTEREST 1,916 1,573 22
Income taxes 691 571 21
Minority interest, after-tax 18 21 (14)
-----------------------------------
CORE INCOME 1,207 981 23
Restructuring-related items, after-tax 4 38 (89)
-----------------------------------
NET INCOME $1,203 $ 943 28
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
3
Global Consumer -- which provides banking, lending, investment and personal
insurance products and services, including credit and charge cards, to customers
around the world -- reported core income of $1.207 billion in the 2000 first
quarter, up $226 million or 23% from 1999, reflecting growth in virtually all
businesses, particularly in the International businesses where core income grew
$121 million or 57% marked by strong performance in Asia Pacific and Europe,
Middle East & Africa, as well as improvements in Latin America. Banking/Lending
core income in the 2000 first quarter increased $130 million or 27% from a year
ago reflecting the continued strong performance of Citibanking, CitiFinancial,
and Cards. In the Insurance segment, core income grew $41 million or 12% from a
year ago. Net losses in e-Citi in the 2000 first quarter increased $58 million
reflecting charges related to the termination of certain contracts and other
initiatives. Net income of $1.203 billion in the 2000 first quarter and $943
million in the 1999 first quarter included restructuring-related items of $4
million ($6 million pretax) and $38 million ($61 million pretax), respectively.
BANKING/LENDING
CITIBANKING NORTH AMERICA
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $576 $505 14
Adjusted operating expenses (2) 335 357 (6)
Provision for credit losses 9 23 (61)
-----------------------------------
CORE INCOME BEFORE TAXES 232 125 86
Income taxes 94 53 77
-----------------------------------
CORE INCOME 138 72 92
Restructuring-related items, after-tax - 14 NM
-----------------------------------
NET INCOME $138 $ 58 138
- --------------------------------------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) $9 $10 (10)
Return on assets 6.17% 2.35%
- --------------------------------------------------------------------------------------------------------------------
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 6.17% 2.92%
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- -------------------------------------------------------------------------------
Citibanking North America -- which delivers banking, lending, and investment
services to customers through Citibank's branches and electronic delivery
systems -- reported core income of $138 million in the 2000 first quarter, up
$66 million or 92% from 1999 due to revenue growth, reduced expenses, and credit
cost improvements. Net income of $58 million in the 1999 first quarter included
restructuring-related items of $14 million ($22 million pretax).
As shown in the following table, Citibanking grew accounts and customer deposits
from 1999. Loans declined from a year ago as loan repayments exceeded loan
originations.
FIRST QUARTER %
-----------------------------------
IN BILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 6.3 5.9 7
Average customer deposits $43.5 $41.6 5
Average loans 7.3 7.7 (5)
- --------------------------------------------------------------------------------------------------------------------
Revenues, net of interest expense, of $576 million in the 2000 first quarter
increased $71 million or 14% from the first quarter of 1999 reflecting higher
customer deposit spreads, volumes, and fees, and higher investment product
sales, and was partially offset by lower loan revenues. Investment product fees
and commissions increased by 54% from the 1999 first quarter. Adjusted operating
expenses in the 2000 first quarter declined $22 million or 6% from a year ago,
reflecting reduced fixed expenses and lower marketing costs.
The provision for credit losses declined to $9 million in the 2000 first quarter
from $23 million in the 1999 first quarter. The net credit loss ratio of 0.96%
in the 2000 first quarter declined from 1.23% in the 1999 fourth quarter and
1.27% a year ago. Loans delinquent 90 days or more of $48 million or 0.66% of
loans at March 31, 2000 declined from $55 million or 0.75% at December 31, 1999
and $103 million or 1.34% a year ago. The declines in the provision for credit
losses and delinquencies reflect continued improvement in the portfolio and a
decline in loan volumes.
4
MORTGAGE BANKING
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $204 $171 19
Total operating expenses 88 59 49
Provision for credit losses 5 3 67
-----------------------------------
INCOME BEFORE TAXES AND MINORITY INTEREST 111 109 2
Income taxes 43 43 -
Minority interest, after-tax 5 5 -
-----------------------------------
NET INCOME $ 63 $ 61 3
- --------------------------------------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) $33 $28 18
Return on assets 0.77% 0.88%
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
- -------------------------------------------------------------------------------
Mortgage Banking -- which originates and services mortgages and student loans
for customers across North America -- reported net income of $63 million in the
2000 first quarter, up $2 million or 3% from 1999, reflecting the effect of the
April 1999 acquisition of the principal operating assets and certain liabilities
of Source One Mortgage Services Corporation (Source One) and growth in student
loans. Excluding Source One, mortgage income declined slightly from the prior
year reflecting the effect of rising interest rates on the volume and mix of
originations.
As shown in the following table, accounts and loans increased in the 2000 first
quarter reflecting growth in student loans and the effect of the Source One
acquisition. Mortgage originations declined as a result of the higher interest
rate environment.
FIRST QUARTER %
-----------------------------------
IN BILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
Accounts (IN MILLIONS) (1) 3.5 2.8 25
Average loans (1) $30.9 $26.6 16
Mortgage originations 3.4 3.8 (11)
- --------------------------------------------------------------------------------------------------------------------
(1) Includes student loans.
- --------------------------------------------------------------------------------
Revenues, net of interest expense, of $204 million in the 2000 first quarter
grew $33 million or 19% from 1999, reflecting the Source One acquisition and
growth in the student loan portfolio. Adjusted operating expenses increased $29
million or 49% from 1999, principally due to Source One.
The provision for credit losses of $5 million in the 2000 first quarter
increased from $3 million in 1999. The net credit loss ratio of 0.14% in the
2000 first quarter declined from 0.15% in the 1999 fourth quarter and 0.20% a
year ago, reflecting improvement in the mortgage portfolio. Loans delinquent 90
days or more were $719 million or 2.29% of loans at March 31, 2000 compared with
$696 million or 2.31% at December 31, 1999 and $610 million or 2.29% a year ago.
The increase in delinquent loans from a year ago reflects higher student loan
volumes and a statutory increase in the length of time Citigroup must hold
delinquent government-guaranteed student loans prior to submitting a claim under
the government guarantee, and was partially offset by an improvement in mortgage
delinquencies.
CARDS
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $1,477 $1,388 6
Effect of credit card securitization activity 519 588 (12)
-----------------------------------
ADJUSTED REVENUES, NET OF INTEREST EXPENSE 1,996 1,976 1
Total operating expenses 727 724 -
Adjusted provision for credit losses (2) 799 818 (2)
-----------------------------------
INCOME BEFORE TAXES 470 434 8
Income taxes 173 158 9
-----------------------------------
NET INCOME $ 297 $ 276 8
- --------------------------------------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) (3) $30 $29 3
Return on assets (4) 3.98% 3.86%
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Adjusted for the effect of credit card securitization.
(3) Adjusted for the effect of credit card securitization, managed average
assets for Cards were $78 billion and $73 billion in the first quarters
of 2000 and 1999, respectively.
(4) Adjusted for the effect of credit card securitization, the return on
managed assets for Cards was 1.53% in the first quarter of both 2000
and 1999.
- --------------------------------------------------------------------------------
5
Cards -- U.S. bankcards, Canada bankcards, and North America Diners Club --
reported net income of $297 million in the 2000 first quarter, up $21 million or
8% from 1999, reflecting an increase in the U.S. bankcards business.
Risk adjusted margin is a measure of profitability that takes adjusted revenues
less managed net credit losses as a percentage of average managed loans,
consistent with the goal of matching the revenues generated by the loan
portfolio with the credit risk undertaken. As shown in the following table, U.S.
bankcards risk adjusted margin of 6.13% declined 29 basis points from the 1999
first quarter reflecting lower spreads offset by credit improvement and an
increase in non-interest revenues, primarily interchange fees.
FIRST QUARTER
-----------------------------------
IN BILLIONS OF DOLLARS 2000 1999
- --------------------------------------------------------------------------------------------------
Risk adjusted revenues (1) $1.101 $1.067
Risk adjusted margin % (2) 6.13% 6.42%
- --------------------------------------------------------------------------------------------------
(1) Adjusted revenues less managed net credit losses.
(2) Risk adjusted revenues as a percentage of average managed loans.
- -------------------------------------------------------------------------------
Adjusted revenues, net of interest expense, of $1.996 billion in the 2000 first
quarter increased $20 million or 1% from 1999 as higher interchange fee revenues
from sales volume growth and pricing changes were offset by lower spreads.
Spread compression in the portfolio principally reflects higher funding costs
due to increased interest rates, changes in portfolio mix, including an
increased percentage of the portfolio priced at low introductory rates, and a
lag in repricing of card member accounts as interest rates rise. Spread
compression may continue in 2000 as a result of a higher interest rate
environment and continued competitive pressures. This paragraph contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 23.
As shown in the following table, on a managed basis, the U.S. bankcard portfolio
experienced a 15% growth in sales volume and a 6% growth in receivables.
Accounts declined 1% from the 1999 first quarter reflecting management
initiatives that resulted in the closing of inactive and/or high-risk accounts.
FIRST QUARTER %
-----------------------------------
IN BILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 40.8 41.4 (1)
Total sales $42.3 $36.8 15
End-of-period managed receivables 73.3 69.4 6
- --------------------------------------------------------------------------------------------------------------------
The adjusted provision for credit losses was $799 million in the 2000 first
quarter, down from $818 million in 1999. U.S. bankcards managed net credit
losses in the 2000 first quarter were $782 million and the related loss ratio
was 4.35%, down from $783 million and 4.43% in the 1999 fourth quarter and $784
million and 4.72% in the 1999 first quarter. U.S. bankcards managed loans
delinquent 90 days or more were $1.058 billion or 1.45% of loans at March 31,
2000, compared with $1.061 billion or 1.44% at December 31, 1999 and $1.007
billion or 1.46% at March 31, 1999. The improvement in the net credit loss ratio
from a year ago reflects stable industry-wide bankruptcy trends and credit risk
management initiatives.
CITIFINANCIAL
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $462 $361 28
Adjusted operating expenses (2) 188 144 31
Provisions for benefits, claims and credit losses 97 104 (7)
-----------------------------------
CORE INCOME BEFORE TAXES 177 113 57
Income taxes 65 42 55
-----------------------------------
CORE INCOME 112 71 58
Restructuring-related items, after-tax - 1 NM
-----------------------------------
NET INCOME $112 $ 70 60
- --------------------------------------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) $18 $14 29
Return on assets 2.50% 2.03%
- --------------------------------------------------------------------------------------------------------------------
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 2.50% 2.06%
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
6
CitiFinancial - which provides community based lending services through its
branch network and through cross-selling initiatives with other Citigroup
businesses - reported core income of $112 million in the 2000 first quarter up
$41 million or 58% from 1999, reflecting the contribution from recent
acquisitions, lower credit costs, and strong business volume growth.
As shown in the following table, receivables grew 24% from the 1999 first
quarter due to higher volumes at CitiFinancial branches, cross selling of
products through Primerica distribution channels and the effect of recent
acquisitions. The average yield on receivables of 14.13% declined 25 basis
points from the 1999 first quarter reflecting a shift in the portfolio mix
toward lower-risk real estate loans that have lower yields. At March 31, 2000,
the portfolio consisted of 58% real estate-secured loans, 34% personal loans,
and 8% sales finance and other compared with 56%, 36%, and 8% in 1999,
respectively.
FIRST QUARTER
----------------------------------- Increase/
2000 1999 Decrease
- --------------------------------------------------------------------------------------------------------------------
End-of-period receivables (IN BILLIONS) $16.0 $12.9 24%
Average yield % 14.13% 14.38% (25) bps
- --------------------------------------------------------------------------------------------------------------------
(1) Excludes $0.2 billion of loans held for sale in the 2000 first quarter.
- --------------------------------------------------------------------------------
Revenues, net of interest expense, of $462 million in the 2000 first quarter
increased $101 million or 28% from 1999 and expenses of $188 million in the 2000
first quarter grew $44 million or 31% from the 1999 first quarter, reflecting
recent acquisitions and strong growth in receivables.
The provisions for benefits, claims and credit losses were $97 million in the
2000 first quarter, down from $104 million in 1999. The net credit loss ratio
was 1.92% in the 2000 first quarter, down from 2.19% in the 1999 fourth quarter
and 2.38% a year ago. The 2000 first quarter net credit loss ratio included a
benefit of approximately 27 basis points related to a change in write-off policy
for certain bankrupt accounts. Loans delinquent 90 days or more were $216
million or 1.33% of loans at March 31, 2000, compared with $203 million or 1.31%
at December 31, 1999 and $183 million or 1.42% a year ago.
INSURANCE
TRAVELERS LIFE AND ANNUITY
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $1,010 $771 31
Provision for benefits and claims 603 442 36
Total operating expenses 126 107 18
-----------------------------------
INCOME BEFORE TAXES 281 222 27
Income taxes 94 75 25
-----------------------------------
NET INCOME (1) $187 $147 27
- --------------------------------------------------------------------------------------------------------------------
(1) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Travelers Life and Annuity -- whose core offerings include individual annuity,
group annuity and individual life insurance -- reported net income of $187
million in the 2000 first quarter, up from $147 million in the comparable period
of 1999. The improvement in 2000 reflects increased business volume and
particularly strong investment income versus the prior year period. During the
first quarter of 2000, this business achieved double-digit business volume
growth in annuity account balances and direct periodic life premiums versus the
prior year first quarter reflecting both greater popularity of retirement
savings and estate planning products and strong momentum from cross-selling
initiatives.
The cross-selling initiative of Travelers Life and Annuity products through the
Primerica Financial Services (Primerica), Citibank, and Salomon Smith Barney
Financial Consultants distribution channels, along with improved sales through
The Copeland Companies (Copeland), and a nationwide network of independent
agents and strong group sales through various intermediaries reflects the
ongoing effort to build market share by strengthening relationships in key
distribution channels.
On April 17, 2000 the Company announced that it had agreed to sell 90% of its
individual long-term care insurance business to General Electric Capital
Assurance Company and will take the form of an indemnity reinsurance
arrangement. The transaction is subject to regulatory approvals and other
customary closing conditions, and is expected to close in the third quarter of
2000.
7
The following table shows net written premiums and deposits by product line:
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
INDIVIDUAL ANNUITIES
Fixed $ 294 $ 194 51
Variable 1,245 976 28
Individual Payout 20 20 -
GICS AND OTHER GROUP ANNUITIES 1,457 1,860 (22)
INDIVIDUAL LIFE INSURANCE
Direct periodic premiums and deposits 117 85 38
Single premium deposits 18 16 13
Reinsurance (19) (17) 12
INDIVIDUAL LONG-TERM CARE INSURANCE 59 53 11
-----------------------------------
$3,191 $3,187 -
- --------------------------------------------------------------------------------------------------------------------
The majority of the annuity business and a substantial portion of the life
business written by Travelers Life and Annuity are accounted for as investment
contracts, with the result that the premiums and deposits collected are not
included in revenues.
Increased individual annuities sales, combined with favorable market returns
from variable annuities, drove account balances to $29.6 billion at March 31,
2000, up 31% from $22.6 billion at March 31, 1999. Net written premiums and
deposits for individual annuities increased 31% in the first quarter of 2000 to
$1.56 billion from $1.19 billion in the comparable period of 1999. The strong
sales reflect the marketing initiatives at Salomon Smith Barney, Primerica and
Copeland's penetration of the small company segment of the 401(k) market, as
well as strong core agent production.
Group annuity account balances and benefit reserves reached $15.6 billion at
March 31, 2000, up 12% from $13.9 billion at the end of the 1999 first quarter.
The group annuity businesses experienced continued strong sales momentum in
guaranteed investment contracts, employer sponsored group plans and
cross-selling structured settlement annuities through Travelers Property
Casualty Corp. (TAP). Net written premiums and deposits (excluding Citigroup's
employee pension plan deposits) were $1.46 billion in the first quarter of 2000,
compared to $1.86 billion in the comparable period of 1999.
Direct periodic premiums and deposits for individual life insurance of $117
million in the first quarter of 2000 were 38% ahead of the $85 million for the
comparable period of 1999 reflecting strong core agency results and the
introduction in the fourth quarter of 1999 of a new corporate owned life
insurance product. Life insurance in force was $61.7 billion at March 31, 2000,
up from $60.6 billion at year-end 1999 and $56.6 billion at March 31, 1999.
PRIMERICA FINANCIAL SERVICES
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $472 $432 9
Provision for benefits and claims 125 120 4
Total operating expenses 162 142 14
-----------------------------------
INCOME BEFORE TAXES 185 170 9
Income taxes 66 60 10
-----------------------------------
NET INCOME (1) $119 $110 8
- --------------------------------------------------------------------------------------------------------------------
(1) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Primerica Financial Services -- which sells life insurance as well as other
products manufactured by the Company, including Salomon Smith Barney mutual
funds, CitiFinancial mortgages and personal loans and Travelers Insurance
Company annuity products -- reported net income of $119 million in the 2000
first quarter, up from $110 million in the comparable period of 1999. The
improvement in 2000 reflects strong mutual fund sales and net investment income
and was partially offset by increased infrastructure investment including
international expansion scheduled for later in the year. Increases in total
production and cross- selling initiatives were achieved during the 2000 first
quarter. Earned premiums, net of reinsurance, were $271 million in the 2000
first quarter, up from $267 million in the comparable period of 1999.
Total face amount of issued term life insurance was $15.0 billion in the 2000
first quarter, compared to $13.6 billion in the prior year period. Life
insurance in force reached $397.8 billion at March 31, 2000 up from $394.9
billion at year-end 1999 and $386.3 billion at March 31, 1999, and continued to
reflect good policy persistency.
In recent years, Primerica has leveraged cross selling through the Financial
Needs Analysis (FNA) -- the diagnostic tool that enhances the ability of the
Personal Financial Analysts to address client needs -- to expand its business
beyond life insurance and now offers its clients a greater array of financial
products and services, delivered personally through more than 100,000
independent
8
representatives. During the first quarter of 2000, 111,000 FNA's were submitted.
Primerica sales of Travelers variable annuities continued to show momentum,
reaching net written premiums and deposits of $250 million in the 2000 first
quarter, up from $223 million in the prior year period. Cash advanced on
$.M.A.R.T. loan(R) and $.A.F.E.(R) loan products underwritten by Travelers Bank
& Trust, fsb and CitiFinancial, respectively, was $492 million in the 2000 first
quarter, up 17% from the comparable period last year. Mutual fund sales were
$1.19 billion for the 2000 first quarter, 52% ahead of last year's first
quarter. During the 2000 first quarter, proprietary mutual funds accounted for
48% of Primerica's U.S. sales and 39% of total sales.
PERSONAL LINES
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $1,027 $983 4
Claims and claim adjustment expenses 654 594 10
Total operating expenses 248 246 1
-----------------------------------
INCOME BEFORE TAXES AND MINORITY INTEREST 125 143 (13)
Income taxes 37 44 (16)
Minority interest, after-tax (1) 13 16 (19)
-----------------------------------
NET INCOME (2) $ 75 $ 83 (10)
- --------------------------------------------------------------------------------------------------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements.
(2) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Personal Lines -- which writes all types of property and casualty insurance
covering personal risks -- reported net income of $75 million in the first
quarter of 2000 compared to $83 million in the prior year period. The 2000 first
quarter results reflect higher catastrophe losses and lower favorable prior-year
reserve development, offset in part by increased net investment income.
The following table shows net written premiums by product line:
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
Personal automobile $583 $619 (6)
Homeowners and other 307 364 (16)
-----------------------------------
Total net written premiums $890 $983 (10)
- --------------------------------------------------------------------------------------------------------------------
Personal Lines net written premiums for the 2000 first quarter were $890 million
compared to $983 million in the comparable period of 1999. Net written premiums
in the 1999 first quarter included an adjustment associated with the termination
of a quota share reinsurance arrangement, which increased homeowners' premiums
written by independent agents by $72 million. The decrease in net written
premiums in the 2000 first quarter compared to the 1999 first quarter, excluding
the reinsurance adjustment, primarily reflects the curtailment of the sale of
the TRAVELERS SECURE(R) auto and homeowners products, a mandated rate decrease
in New Jersey and continued emphasis on disciplined underwriting and risk
management offset in part by growth in affinity group marketing.
Catastrophe losses, net of taxes and reinsurance, were $30 million in the 2000
first quarter, up from $8 million in the comparable period of 1999. Catastrophe
losses in 2000 were primarily due to hailstorms in Louisiana and Texas.
Catastrophe losses in 1999 were due to a wind and ice storm in the Midwest and
the Northeast.
Statutory and generally accepted accounting principles (GAAP) combined ratios
(before allocation of corporate expenses) for Personal Lines were as follows:
FIRST QUARTER
-----------------------------------
2000 1999
- --------------------------------------------------------------------------------------------------
STATUTORY
Loss and LAE ratio (1) 72.1% 66.6%
Underwriting expense ratio 27.0% 27.4%
Combined ratio 99.1% 94.0%
GAAP
Loss and LAE ratio (1) 71.9% 66.6%
Underwriting expense ratio 27.7% 24.8%
Combined ratio 99.6% 91.4%
- --------------------------------------------------------------------------------------------------
(1) LAE represents loss adjustment expenses.
- --------------------------------------------------------------------------------
9
GAAP combined ratios for Personal Lines differ from statutory combined ratios
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.
The first quarter of 1999 statutory and GAAP combined ratios for Personal Lines
include an adjustment associated with the termination of the quota share
reinsurance arrangement. Excluding this adjustment, the statutory and GAAP
combined ratios for the first quarter of 1999 would have been 93.2% and 93.4%,
respectively. The increase in the statutory and GAAP combined ratios for the
first quarter of 2000 compared to the statutory and GAAP combined ratios
(excluding the premium adjustment) for the first quarter of 1999 was primarily
due to higher catastrophe losses and lower favorable prior-year reserve
development.
INTERNATIONAL CONSUMER
EUROPE, MIDDLE EAST & AFRICA
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $593 $561 6
Adjusted operating expenses (2) 362 374 (3)
Provisions for benefits, claims and credit losses 74 80 (8)
-----------------------------------
CORE INCOME BEFORE TAXES 157 107 47
Income taxes 58 40 45
-----------------------------------
CORE INCOME 99 67 48
Restructuring-related items, after-tax - 6 NM
-----------------------------------
NET INCOME $ 99 $ 61 62
- --------------------------------------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) $22 $22 -
Return on assets 1.81% 1.12%
- --------------------------------------------------------------------------------------------------------------------
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 1.81% 1.24%
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Europe, Middle East & Africa (EMEA - including India and Pakistan) -- which
provides banking, lending, and investment services, including credit and charge
cards, to customers throughout the region -- reported core income of $99 million
in the 2000 first quarter, up $32 million or 48% from 1999, reflecting growth
across the region, particularly in Germany and India. Net income of $61 million
in the 1999 first quarter included restructuring-related items of $6 million
($10 million pretax).
The net effects of foreign currency translation reduced core income by
approximately $12 million from the 1999 first quarter and reduced revenue and
expense growth by approximately 12% and 10%, respectively.
As shown in the following table, EMEA reported 8% account growth from a year ago
primarily reflecting loan growth, including credit cards. However, loans and
customer deposits were reduced by the effect of foreign currency translation.
FIRST QUARTER %
-----------------------------------
IN BILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 11.4 10.6 8
Average customer deposits $16.5 $17.6 (6)
Average loans 16.8 16.7 1
- --------------------------------------------------------------------------------------------------------------------
Revenues, net of interest expense, of $593 million in the 2000 first quarter
grew $32 million or 6% from 1999, reflecting loan growth, higher investment
product fees, and improved deposit spreads. Adjusted operating expenses of $362
million in the 2000 first quarter were down $12 million or 3% from 1999 as costs
associated with higher business volumes and franchise growth in Central and
Eastern Europe were more than offset by the effect of foreign currency
translation.
The provisions for benefits, claims and credit losses were $74 million in the
2000 first quarter, down from $80 million in 1999. The net credit loss ratio was
1.70% in the 2000 first quarter, compared with 1.56% in the 1999 fourth quarter
and 1.81% a year ago. Loans delinquent 90 days or more were $875 million or
5.26% of loans at March 31, 2000, down from $914 million or 5.33% at December
31, 1999 and $893 million or 5.40% a year ago.
10
ASIA PACIFIC
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $683 $519 32
Adjusted operating expenses (2) 338 268 26
Provisions for benefits, claims, and credit losses 79 88 (10)
-----------------------------------
CORE INCOME BEFORE TAXES 266 163 63
Income taxes 100 62 61
-----------------------------------
CORE INCOME 166 101 64
Restructuring-related items, after-tax 3 7 (57)
-----------------------------------
NET INCOME $163 $ 94 73
- --------------------------------------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) $33 $29 14
Return on assets 1.99% 1.31%
- --------------------------------------------------------------------------------------------------------------------
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 2.02% 1.41%
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
Asia Pacific (including Japan and Australia) -- which provides banking, lending,
and investment services, including credit and charge cards, to customers
throughout the region -- reported core income of $166 million in the 2000 first
quarter, up $65 million or 64% from 1999, reflecting business growth across the
region. Net income of $163 million in the 2000 first quarter and $94 million in
the 1999 first quarter included restructuring-related items of $3 million ($4
million pretax) and $7 million ($11 million pretax), respectively.
During the 2000 first quarter, Citibank acquired the Diners Club franchise in
Japan which added approximately $0.5 billion in receivables and 0.6 million
accounts.
As shown in the following table, Asia Pacific experienced double-digit growth in
accounts, customer deposits, and loans when compared to the 1999 first quarter,
reflecting significant increases in Japan, growth in the Cards business across
the region, and economic stabilization in most countries.
FIRST QUARTER %
-----------------------------------
IN BILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 10.0 8.1 23
Average customer deposits $46.4 $39.9 16
Average loans 25.1 22.1 14
- --------------------------------------------------------------------------------------------------------------------
Revenues, net of interest expense, of $683 million in the 2000 first quarter,
increased $164 million or 32% from 1999, reflecting higher investment product
sales, growth in customer deposits and loans, and improved spreads. Adjusted
operating expenses in the 2000 first quarter were up $70 million or 26% from the
1999 first quarter, reflecting increased variable compensation, including higher
investment product sales commissions, and increased marketing. Revenue and
expense increases also reflect the acquisition of Diners Club Japan in the 2000
first quarter.
The provisions for benefits, claims and credit losses were $79 million in the
2000 first quarter, down from $88 million in 1999. The net credit loss ratio was
1.19% in the quarter, up slightly from 1.15% in the 1999 fourth quarter, but
down from 1.43% in the 1999 first quarter. Loans delinquent 90 days or more were
$443 million or 1.73% of loans at March 31, 2000, down from $453 million or
1.80% at December 31, 1999 and $513 million or 2.31% at March 31, 1999. The
decline in the provision, the net credit loss ratio, and delinquencies from a
year ago reflects economic stabilization across the region; however, both net
credit losses and delinquencies increased in Taiwan due to the effects of the
earthquake in September 1999.
11
LATIN AMERICA
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $520 $464 12
Adjusted operating expenses (2) 323 292 11
Provision for credit losses 90 101 (11)
-----------------------------------
CORE INCOME BEFORE TAXES 107 71 51
Income taxes 37 25 48
-----------------------------------
CORE INCOME 70 46 52
Restructuring-related items, after-tax 1 10 (90)
-----------------------------------
NET INCOME $ 69 $ 36 92
- --------------------------------------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) $14 $14 -
Return on assets 1.98% 1.04%
- --------------------------------------------------------------------------------------------------------------------
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 2.01% 1.33%
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
Latin America -- which provides banking, lending, and investment services,
including credit and charge cards, to customers throughout the region --
reported core income of $70 million in the 2000 first quarter, up $24 million or
52% from 1999, reflecting an increase in earnings from Credicard, a 33%-owned
Brazilian Card affiliate, a gain related to the sale of an auto loan portfolio
in Puerto Rico, and higher spreads and business volumes in certain countries.
Net income of $69 million in the 2000 first quarter and $36 million in the 1999
first quarter included restructuring-related items of $1 million ($2 million
pretax) and $10 million ($16 million pretax), respectively.
As shown in the following table, Latin America experienced account and customer
deposit growth, including the effect of acquisitions. Average loans declined 3%
from a year ago reflecting the auto loan portfolio sale in Puerto Rico and
credit risk management initiatives.
FIRST QUARTER %
-----------------------------------
IN BILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 9.2 8.0 15
Average customer deposits $13.7 $12.8 7
Average loans 7.6 7.8 (3)
- --------------------------------------------------------------------------------------------------------------------
Revenues, net of interest expense, of $520 million in the 2000 first quarter
were up $56 million or 12% from 1999, reflecting acquisitions in the region, the
gain related to the sale of the auto loan portfolio in Puerto Rico, increased
earnings from Credicard, and higher spreads and volume growth in certain
countries. Adjusted operating expenses in the 2000 first quarter grew $31
million or 11% from a year ago, reflecting acquisitions in the region and costs
associated with business strategy changes in certain countries.
The provision for credit losses was $90 million in the 2000 first quarter, down
from $101 million in 1999. Net credit losses in the 2000 first quarter were $90
million and the related loss ratio was 4.77%, compared with $94 million and
4.71% in the 1999 fourth quarter and $91 million and 4.74% a year ago. Loans
delinquent 90 days or more of $333 million or 4.58% of loans at March 31, 2000
increased from $320 million or 4.10% at December 31, 1999 and $292 million or
3.75% at March 31, 1999 reflecting economic conditions in the region and the
effect of recent acquisitions. The increase in the delinquency ratio also
reflects a change in portfolio mix resulting from the sale of the auto loan
portfolio in Puerto Rico.
12
E-CITI
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 82 $ 54 52
Total operating expenses 231 112 106
Provision for credit losses 3 1 200
-----------------------------------
LOSS BEFORE TAX BENEFITS (152) (59) (158)
Income tax benefits (59) (24) (146)
-----------------------------------
NET LOSS ($ 93) ($ 35) (166)
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
- --------------------------------------------------------------------------------
e-Citi -- the business responsible for developing and implementing the Company's
Internet financial services products and e-commerce solutions -- reported net
losses of $93 million in the 2000 first quarter, up from $35 million a year ago,
reflecting charges related to the termination of certain contracts and other
initiatives and continued investment in Internet financial services as well as
other e-commerce solutions.
Revenues, net of interest expense, were $82 million in the 2000 first quarter,
up from $54 million in 1999, reflecting business volume increases in established
electronic banking services and gains recognized on certain investments. Total
operating expenses of $231 million in the 2000 first quarter increased from $112
million in 1999, reflecting contract and other initiative termination-related
charges, continued investment in new products and services, and volume increases
associated with established electronic banking services.
In the 2000 second quarter, Citigroup announced the creation of new "e" business
units to complement e-Citi and to focus its efforts on key priorities. e-Citi
will continue to function as a center of excellence and expertise on the
Internet and will continue to serve as an incubator of new products and
businesses and a center of strategic investments in Internet and related
technology companies. Consumer Internet efforts will be combined to create
e-Consumer, which will focus on providing Internet payment solutions and
financial services offerings across all consumer businesses, including banking,
insurance, mortgages, student loans, other loan products and discount brokerage
services. Corporate Internet efforts will be combined to create e-Business,
formed by integrating the business to business activities of the Corporate Bank
and e-Citi, and will focus on providing a comprehensive set of Internet
solutions for corporate clients, including the development of business to
business exchanges.
OTHER CONSUMER
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $10 $31 (68)
Total operating expenses 53 56 (5)
-----------------------------------
LOSS BEFORE TAX BENEFITS (43) (25) (72)
Income tax benefits (17) (7) (143)
-----------------------------------
NET LOSS ($26) ($18) (44)
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
- --------------------------------------------------------------------------------
Other Consumer -- which includes certain treasury operations and global
marketing and other programs -- reported net losses of $26 million in the 2000
first quarter, up from $18 million a year ago. The increase in the net loss
compared to a year ago reflects costs associated with the termination of certain
global distribution initiatives and lower treasury earnings, offset by reduced
staff levels and lower marketing costs.
CONSUMER PORTFOLIO REVIEW
In the consumer portfolio, credit loss experience is often expressed in terms of
annualized net credit losses as a percentage of average loans. Pricing and
credit policies reflect the loss experience of each particular product. Consumer
loans are generally written off no later than a predetermined number of days
past due on a contractual basis, or earlier in the event of bankruptcy. The
number of days is set at an appropriate level according to loan product and
country.
13
The following table summarizes delinquency and net credit loss experience in
both the managed and on-balance sheet loan portfolios in terms of loans 90 days
or more past due, net credit losses, and as a percentage of related loans.
CONSUMER LOAN DELINQUENCY AMOUNTS, NET CREDIT LOSSES, AND RATIOS
TOTAL AVERAGE
LOANS 90 DAYS OR MORE PAST DUE(1) LOANS NET CREDIT LOSSES(1)
-------------------------------------------------------------------------------------------------
IN MILLIONS OF DOLLARS, MAR. 31, MAR. 31, Dec. 31, Mar. 31, 1ST QTR. 1ST QTR. 4th Qtr. 1st Qtr.
EXCEPT LOAN AMOUNTS IN BILLIONS 2000 2000 1999 1999 2000 2000 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Citibanking North America $ 7.2 $ 48 $ 55 $ 103 $ 7.3 $ 17 $ 23 $ 24
Ratio 0.66% 0.75% 1.34% 0.96% 1.23% 1.27%
Mortgage Banking 31.5 719 696 610 30.9 11 11 13
Ratio 2.29% 2.31% 2.29% 0.14% 0.15% 0.20%
U.S. Bankcards 73.0 1,058 1,061 1,007 72.3 782 783 784
Ratio 1.45% 1.44% 1.46% 4.35% 4.43% 4.72%
Other North America Cards 2.4 29 30 35 2.0 16 21 20
Ratio 1.23% 1.38% 1.45% 2.98% 3.87% 3.50%
CitiFinancial 16.2 216 203 183 15.9 76 83 71
Ratio 1.33% 1.31% 1.42% 1.92% 2.19% 2.38%
Europe, Middle East & Africa 16.6 875 914 893 16.8 71 67 75
Ratio 5.26% 5.33% 5.40% 1.70% 1.56% 1.81%
Asia Pacific 25.6 443 453 513 25.1 74 71 78
Ratio 1.73% 1.80% 2.31% 1.19% 1.15% 1.43%
Latin America 7.3 333 320 292 7.6 90 94 91
Ratio 4.58% 4.10% 3.75% 4.77% 4.71% 4.74%
Citibank Private Bank (2) 23.4 87 120 191 22.4 10 7 8
Ratio 0.37% 0.54% 1.10% 0.18% 0.13% 0.18%
Other 1.0 2 3 2 0.8 3 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL MANAGED 204.2 3,810 3,855 3,829 201.1 1,150 1,162 1,165
RATIO 1.87% 1.91% 2.09% 2.30% 2.36% 2.61%
- ------------------------------------------------------------------------------------------------------------------------------------
Securitized credit card (48.0) (702) (725) (688) (48.2) (499) (537) (556)
receivables
Loans held for sale (4.2) (31) (32) (39) (4.3) (20) (22) (32)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER LOANS $152.0 $3,077 $3,098 $3,102 $148.6 $ 631 $ 603 $ 577
RATIO 2.02% 2.08% 2.37% 1.71% 1.68% 1.78%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) The ratios of 90 days or more past due and net credit losses are
calculated based on end-of-period and average loans, respectively, both
net of unearned income.
(2) Citibank Private Bank results are reported as part of the Global
Investment Management and Private Banking segment.
- -----------------------------------------------------------------------------------------------------------------------------------
CONSUMER LOAN BALANCES, NET OF UNEARNED INCOME
END OF PERIOD AVERAGE
--------------------------------
--------------------------------
MAR. 31, Dec. 31, Mar. 31, 1ST QTR. 4th Qtr. 1st Qtr.
IN BILLIONS OF DOLLARS 2000 1999 1999 2000 1999 1999
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL MANAGED $204.2 $202.2 $183.2 $201.1 $195.7 $180.8
Securitized credit card receivables (48.0) (49.0) (46.7) (48.2) (48.6) (44.3)
Loans held for sale (4.2) (4.5) (5.6) (4.3) (4.3) (5.2)
-------------------------------- --------------------------------
CONSUMER LOANS $152.0 $148.7 $130.9 $148.6 $142.8 $131.3
- --------------------------------------------------------------------------------------------------------------------------------
Total delinquencies 90 days or more past due in the managed portfolio were $3.8
billion with a related delinquency ratio of 1.87% of loans at March 31, 2000,
compared with $3.9 billion or 1.91% at December 31, 1999 and $3.8 billion or
2.09% at March 31, 1999. Total managed net credit losses in the 2000 first
quarter were $1.2 billion and the related loss ratio was 2.30%, compared with
$1.2 billion and 2.36% in the 1999 fourth quarter and $1.2 billion and 2.61% in
the 1999 first quarter. For a discussion on trends by business, see business
discussions on pages 3 - 13.
Citigroup's allowance for credit losses of $6.7 billion is available to absorb
probable credit losses inherent in the entire portfolio. For analytical purposes
only, the portion of Citigroup's allowance for credit losses attributed to the
consumer portfolio was $3.4 billion at March 31, 2000, December 31, 1999, and
March 31, 1999. The allowance as a percentage of loans on the balance sheet was
2.25% at March 31, 2000, down from 2.31% at December 31, 1999 and 2.56% at March
31, 1999 reflecting improved credit performance in certain portfolios and loan
growth. The attribution of the allowance is made for analytical purposes only
and may change from time to time.
Net credit losses, delinquencies and the related ratios may increase from the
2000 first quarter as a result of portfolio growth, global economic conditions,
the credit performance of the portfolios, including bankruptcies, and seasonal
factors. This statement is a forward-looking statement within the meaning of the
Private Securities Litigation Reform Act. See "Forward-Looking Statements" on
page 23.
14
GLOBAL CORPORATE AND INVESTMENT BANK
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $8,162 $7,108 15
Adjusted operating expenses (2) 4,273 4,005 7
Provisions for benefits, claims, and credit losses 963 976 (1)
-----------------------------------
CORE INCOME BEFORE TAXES AND MINORITY INTEREST 2,926 2,127 38
Income taxes 1,042 733 42
Minority interest, after-tax 44 37 19
-----------------------------------
CORE INCOME 1,840 1,357 36
Restructuring-related items, after-tax - (120) NM
-----------------------------------
NET INCOME (3) $1,840 $1,477 25
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
(3) The 1999 period excludes cumulative effect of accounting changes.
NM Not meaningful
- -------------------------------------------------------------------------------
The Global Corporate and Investment Bank business serves corporations, financial
institutions, governments, investors, and other participants in capital markets
in 100 countries and consists of Salomon Smith Barney (SSB), Emerging Markets,
Global Relationship Banking (GRB) and the Commercial Lines business of TAP.
Global Corporate and Investment Bank reported core income of $1.840 billion in
the 2000 first quarter, exhibiting growth of $483 million or 36% compared to the
1999 first quarter. The 2000 first quarter reflects core income growth from the
1999 first quarter of $309 million or 48% in SSB, $72 million or 22% in Emerging
Markets, $51 million or 27% in Commercial Lines and $51 million or 26% in GRB.
SSB's core income growth was driven by strong revenue momentum in commissions,
investment banking fees and other fee-based Private Client revenues. Emerging
Markets core income growth was driven by broad-based growth in revenues from
transaction services and loans along with improved credit. GRB's core income
growth was a result of revenue growth in equity derivatives, transaction
services and structured products combined with expense reductions, partially
offset by higher net write-offs. Commercial Lines improvement reflects higher
net investment income, an improving rate environment, favorable prior year
reserve development and lower weather-related losses.
Net income in the 1999 first quarter included restructuring-related items of
$120 million ($202 million pretax) consisting mainly of a release of the 1997
restructuring reserve that resulted from SSB's reassessment of space needs due
to the Citicorp merger. See further discussion of the restructuring-related
items in Note 7 of Notes to Consolidated Financial Statements.
The businesses of Global Corporate and Investment Bank are significantly
affected by the levels of activity in the global capital markets which, in turn,
are influenced by macro-economic and political policies and developments, among
other factors, in the 100 countries in which the businesses operate. Global
economic and market events can have both positive and negative effects on the
revenue performance of the businesses and can negatively affect credit
performance. A variety of factors continue to affect the property and casualty
insurance market, including the competitive pressures affecting pricing and
profitability, inflation in the cost of medical care, and litigation. This
paragraph contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page 23.
SALOMON SMITH BARNEY
The following segment data includes the equity earnings of an investment in
Nikko Securities but does not include the Asset Management division of Salomon
Smith Barney, which is included in the SSB Citi Asset Management Group results.
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $4,186 $3,341 25
Adjusted operating expenses (1) 2,664 2,338 14
-----------------------------------
CORE INCOME BEFORE TAXES 1,522 1,003 52
Income taxes 565 355 59
-----------------------------------
CORE INCOME 957 648 48
Restructuring-related items, after-tax - (124) NM
-----------------------------------
NET INCOME (2) $ 957 $ 772 24
- --------------------------------------------------------------------------------------------------------------------
(1) Excludes restructuring-related items.
(2) The 1999 period excludes cumulative effect of accounting changes.
NM Not meaningful
- -------------------------------------------------------------------------------
15
Salomon Smith Barney reported core income in the 2000 first quarter of $957
million, up $309 million or 48% from the 1999 first quarter. Salomon Smith
Barney's earnings reflect strong growth in commissions, investment banking fees
and fee-based Private Client revenues. Total client assets in the Private Client
business grew 26% from a year ago to $1.032 trillion while annualized gross
production per Financial Consultant reached a record $598,000 in the first
quarter of 2000. Included in the 1999 first quarter net income is a net
after-tax restructuring credit of $124 million ($209 million pretax). See Note 7
of Notes to Consolidated Financial Statements for discussions of the
restructuring-related items.
On May 1, 2000, the Company completed the approximately 1.36 billion British
Pound ($2.2 billion) acquisition of the global investment banking business and
related assets of Schroders PLC, including all corporate finance, financial
markets and securities activities. The combined European operations of the
Company will now be known as Schroder Salomon Smith Barney.
Revenues by category were as follows:
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
Commissions $1,309 $ 900 45
Investment banking 905 655 38
Principal transactions 860 974 (12)
Asset management and administration fees (1) 499 377 32
Interest income, net (2) 373 370 1
Other income 240 65 269
-----------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE (2) $4,186 $3,341 25
- --------------------------------------------------------------------------------------------------------------------
(1) Excludes the revenues of the Asset Management division which are
reported in the SSB Citi Asset Management results.
(2) Net of interest expense of $2.953 billion and $2.241 billion in 2000
and 1999, respectively.
- --------------------------------------------------------------------------------
Revenues, net of interest expense, in the 2000 first quarter were $4.186
billion, a 25% improvement over the comparable 1999 period. Commissions
increased 45% reflecting robust sales of listed and over-the-counter securities
and mutual fund commissions. Investment banking revenues grew 38% reflecting an
increase in equity underwriting. Principal transaction revenues were down
primarily due to a decrease in global fixed income and commodities offset in
part by an increase in global equities. The increase in other income primarily
reflects the increase in ownership in Nikko Securities (see Note 1 of Notes to
Consolidated Financial Statements) along with higher income from the Nikko SSB
joint venture which began operations during the 1999 first quarter. The growth
in asset management and administration fees, which include results from assets
managed by the Financial Consultants as well as those managed externally by the
Consulting Group, corresponds to the 29% growth in assets under fee-based
management.
Total assets under fee-based management at March 31, were as follows:
MARCH 31, %
-----------------------------------
IN BILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
Financial Consultant managed accounts $ 31.7 $18.6 70
Consulting Group externally managed assets 86.7 73.1 19
-----------------------------------
TOTAL ASSETS UNDER FEE-BASED MANAGEMENT (1) $118.4 $91.7 29
- --------------------------------------------------------------------------------------------------------------------
(1) Excludes the assets under management of the Asset Management division,
which are reported in the SSB Citi Asset Management results.
- --------------------------------------------------------------------------------
Adjusted operating expenses were $2.664 billion in the 2000 first quarter, up
$326 million or 14% compared to the year-ago quarter. The growth reflects higher
production-related compensation and other expenses resulting from increased
revenues.
16
EMERGING MARKETS
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $1,240 $1,143 8
Adjusted operating expenses (2) 523 507 3
Provision for credit losses 84 115 (27)
-----------------------------------
CORE INCOME BEFORE TAXES AND MINORITY INTEREST 633 521 21
Income taxes 235 196 20
Minority interest, after-tax 2 1 100
-----------------------------------
CORE INCOME 396 324 22
Restructuring-related items, after-tax - 1 NM
-----------------------------------
NET INCOME $ 396 $ 323 23
- --------------------------------------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) $83 $81 2
Return on assets 1.92% 1.62%
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful.
- -------------------------------------------------------------------------------
Emerging Markets core income was $396 million in the first quarter of 2000, up
$72 million or 22% from the 1999 first quarter. Return on assets was 1.92%, up
from 1.62% in 1999.
Revenues, net of interest expense, were $1.240 billion in the 2000 first
quarter, up $97 million or 8% from 1999, driven by strong growth across all
regions in transaction services and loan products. Trading-related revenues
declined in Latin America where exceptional results were reported in the 1999
first quarter. About 23% of the Emerging Markets revenue in the first quarter of
2000 was attributable to business from multinational companies managed jointly
with GRB, with that revenue having grown 10% from the prior year period.
Adjusted operating expenses in the 2000 first quarter were well controlled with
a 3% increase compared to the 1999 first quarter. For both periods presented,
investment spending to gain market share in selected emerging market countries
was essentially funded by savings from restructuring actions and other expense
savings initiatives.
The provision for credit losses totaled $84 million in the 2000 first quarter,
down $31 million from the 1999 first quarter. The decline primarily reflected
lower net write-offs in Asia. Cash-basis loans were $1.066 billion at March 31,
2000, up $22 million from December 31, 1999, principally due to increases in
Latin America partially offset by reductions in Asia and CEEMEA (Central and
Eastern Europe, Middle East and Africa). Compared to a year ago, cash-basis
loans were $29 million lower as declines in Asia were partially offset by
increases in Latin America.
Average assets of $83 billion in the 2000 first quarter reflected growth of $2
billion compared to a year ago, primarily due to higher loans and trading
assets.
GLOBAL RELATIONSHIP BANKING
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $1,168 $1,090 7
Adjusted operating expenses (2) 739 784 (6)
Provision (benefit) for credit losses 37 (4) NM
-----------------------------------
CORE INCOME BEFORE TAXES 392 310 26
Income taxes 145 114 27
-----------------------------------
CORE INCOME 247 196 26
Restructuring-related items, after-tax - 3 NM
-----------------------------------
NET INCOME $ 247 $ 193 28
- --------------------------------------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) $84 $87 (3)
Return on assets 1.18% 0.90%
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- -------------------------------------------------------------------------------
Core income from Global Relationship Banking in North America, Europe and Japan
was $247 million in the 2000 first quarter, up $51 million or 26% from the 1999
first quarter. Return on assets was 1.18%, up from 0.90% in 1999.
17
Revenues, net of interest expense, of $1.168 billion grew $78 million or 7%
compared to 1999. The increase was driven by strong growth in equity
derivatives, transaction services and structured products, partially offset by
lower treasury and foreign exchange results.
Adjusted operating expenses were $739 million in the 2000 first quarter, down
$45 million or 6% from a year ago. The decrease in expenses was due to lower
year 2000 and EMU expenses combined with restructuring actions and business
integration initiatives.
The provision for credit losses was $37 million in the current quarter compared
to net benefits of $4 million in the 1999 first quarter. The increase in 2000
primarily reflects write-offs in the health care industry in North America.
Cash-basis loans were $319 million at March 31, 2000, reflecting increases of
$15 million from December 31, 1999 and $11 million from March 31, 1999. The
Other Real Estate Owned portfolio was $141 million at March 31, 2000, down $15
million from December 31, 1999 and $71 million from March 31, 1999 due to
decreases in the North America real estate portfolio.
Average assets of $84 billion in the first quarter of 2000 declined $3 billion
from the 1999 period, primarily reflecting a decline in fixed income trading
assets.
COMMERCIAL LINES
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $1,568 $1,534 2
Claims and claim adjustment expenses 842 865 (3)
Total operating expenses 347 376 (8)
-----------------------------------
INCOME BEFORE TAXES AND MINORITY INTEREST 379 293 29
Income taxes 97 68 43
Minority interest, after-tax (1) 42 36 17
-----------------------------------
NET INCOME (2) (3) $ 240 $ 189 27
- --------------------------------------------------------------------------------------------------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements.
(2) The 1999 period excludes cumulative effect of accounting changes.
(3) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Commercial Lines -- which offers a broad array of property and casualty
insurance and insurance related services through brokers and independent
agencies -- reported net income, excluding the effect of accounting changes, of
$240 million in the 2000 first quarter, up from $189 million in the comparable
period of 1999. The 27% improvement in the 2000 first quarter over the 1999
first quarter reflects higher net investment income, rate increases achieved in
prior quarters, favorable prior-year reserve development, lower weather-related
losses and continued expense reductions. The Company continues to maintain its
discipline in the competitive commercial lines marketplace and to grow business
only where market conditions warrant.
On April 10, 2000, the Company signed a definitive agreement with Reliance Group
Holdings, Inc. (Reliance) for the $580 million purchase of the surety business
of Reliance. The purchase has been approved by the Boards of Directors of
Reliance, the Company and TAP, and is subject to approval by various regulatory
authorities. The transaction is expected to close in the second quarter of 2000.
Net written premiums by market were as follows:
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 Change
- --------------------------------------------------------------------------------------------------------------------
National Accounts $ 92 $ 150 (39)
Commercial Accounts 487 444 10
Select Accounts 387 372 4
Specialty Accounts 181 148 22
-----------------------------------
TOTAL NET WRITTEN PREMIUMS $1,147 $1,114 3
- --------------------------------------------------------------------------------------------------------------------
Commercial Lines net written premiums in the 2000 first quarter totaled $1.147
billion, up slightly from $1.114 billion in the comparable period of 1999. The
trend in written premiums for all lines continues to reflect the impact of an
improving rate environment as evidenced by the favorable pricing on renewal
business and an increase in new business premiums. Also contributing to the net
written premium increase in Specialty Accounts was the impact of reinsurance
activity. The net written premium decrease in National Accounts was primarily
due to a shift of business mix from premium-based products to fee-based products
and a decrease in the Company's level of involuntary pool participation.
18
National Accounts new business was significantly higher in the 2000 first
quarter than in the comparable period of 1999, reflecting the acquisition of
several large accounts in 2000. National Accounts business retention ratio in
the 2000 first quarter was virtually the same as that in the 1999 first quarter.
Commercial Accounts new business in the 2000 first quarter was significantly
higher than in the 1999 first quarter, reflecting the increased market activity
resulting from the pricing environment. Commercial Accounts business retention
ratio in the 2000 first quarter was virtually the same as that in the 1999 first
quarter. Commercial Accounts continues to focus on maintaining its product
pricing standards and its selective underwriting policy in the renewal of
accounts.
New premium business in Select Accounts was moderately higher in the 2000 first
quarter than in the comparable period of 1999. New business was unusually low in
the 1999 first quarter reflecting its selective underwriting policy in the
highly competitive marketplace. Select Accounts business retention ratio in the
2000 first quarter was moderately lower than in the comparable period of 1999,
reflecting a small increase in lost business due to the renewal price increases
in 2000.
Statutory and GAAP combined ratios (before allocation of corporate expenses) for
Commercial Lines were as follows:
FIRST QUARTER
-----------------------------------
2000 1999
- --------------------------------------------------------------------------------------------------
STATUTORY
Loss and LAE ratio 73.5% 76.2%
Underwriting expense ratio 27.9% 28.5%
Combined ratio before policyholder dividends 101.4% 104.7%
Combined ratio 102.3% 105.7%
GAAP
Loss and LAE ratio 73.2% 75.8%
Underwriting expense ratio 27.3% 31.1%
Combined ratio before policyholder dividends 100.5% 106.9%
Combined ratio 101.4% 107.9%
- --------------------------------------------------------------------------------------------------
GAAP combined ratios for Commercial Lines differ from statutory combined ratios
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.
The improvement in the 2000 first quarter statutory and GAAP combined ratios
before policyholder dividends compared to the 1999 first quarter statutory and
GAAP combined ratios before policyholder dividends was due to favorable
prior-year reserve development, lower weather-related losses and continued
expense reductions.
UNCERTAINTY REGARDING ADEQUACY OF ENVIRONMENTAL AND ASBESTOS RESERVES
The reserves for environmental claims are not established on a claim-by-claim
basis. An aggregate bulk reserve is carried for all of the environmental claims
that are in the dispute process, until the dispute is resolved. This bulk
reserve is established and adjusted based upon the aggregate volume of
in-process environmental claims and the experience in resolving such claims. At
March 31, 2000, approximately 21% of the net aggregate reserve (i.e.,
approximately $136 million) consisted of case reserve for resolved claims. The
balance, approximately 79% of the net aggregate reserve (i.e., approximately
$500 million), was carried in a bulk reserve and included incurred but not
reported environmental claims for which specific claims have not been received.
In general, the Company posts case reserves for pending asbestos claims within
approximately 30 business days of receipt of such claims. At March 31, 2000,
approximately 13% of the net aggregate reserve (i.e., approximately $107
million) was for pending asbestos claims. The balance, approximately 87% of the
net aggregate reserve (i.e., approximately $724 million), represents incurred
but not reported losses for which specific claims have not been received.
It is difficult to estimate the reserves for environmental and asbestos-related
claims due to the vagaries of court coverage decisions, plaintiffs' expanded
theories of liability, the risks inherent in major litigation and other
uncertainties. Conventional actuarial techniques are not used to estimate such
reserves.
The reserves carried for environmental and asbestos claims at March 31, 2000 are
the Company's best estimate of ultimate claims and claim adjustment expenses
based upon known facts and current law. However, the conditions surrounding the
final resolution of these claims continue to change. Currently, it is not
possible to predict changes in the legal and legislative environment and their
impact on the future development of asbestos and environmental claims. Such
development will be affected by future court decisions and interpretations as
well as changes in legislation applicable to such claims. Because of these
future unknowns, additional liabilities may arise for amounts in excess of the
current reserves. These additional amounts, or a range of these additional
amounts, cannot now be reasonably estimated, and could result in a liability
exceeding reserves by an amount that would be material to the Company's
operating results in a future period. However, the Company believes that it is
not likely that these
19
claims will have a material adverse effect on its financial condition or
liquidity. This paragraph contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act. See "Forward-Looking
Statements" on page 23.
COMMERCIAL PORTFOLIO REVIEW
Commercial loans are identified as impaired and placed on a nonaccrual basis
when it is determined that the payment of interest or principal is doubtful of
collection or when interest or principal is past due for 90 days or more, except
when the loan is well secured and in the process of collection. Impaired
commercial loans are written down to the extent that principal is judged to be
uncollectible. Impaired collateral-dependent loans are written down to the lower
of cost or collateral value. The following table summarizes commercial
cash-basis loans at period end and net credit losses (recoveries) for the three
months ended:
MAR. 31, Dec. 31, Mar. 31,
IN MILLIONS OF DOLLARS 2000 1999 1999
- --------------------------------------------------------------------------------------------------------------------
COMMERCIAL CASH-BASIS LOANS
Emerging Markets $1,066 $1,044 $1,095
Global Relationship Banking 319 304 308
-----------------------------------------------------
Total Global Corporate Bank 1,385 1,348 1,403
Insurance and Investment Activities 70 55 232
-----------------------------------------------------
TOTAL COMMERCIAL CASH-BASIS LOANS $1,455 $1,403 $1,635
- --------------------------------------------------------------------------------------------------------------------
NET CREDIT LOSSES (RECOVERIES)
Emerging Markets $ 84 $ 99 $115
Global Relationship Banking 37 - (4)
-----------------------------------------------------
TOTAL NET CREDIT LOSSES (RECOVERIES) $121 $ 99 $ 111
- --------------------------------------------------------------------------------------------------------------------
For a discussion of trends by business, see the business discussions on pages 17
- - 18. The decrease in Insurance and Investment Activities cash-basis loans
compared to a year ago reflected a transfer to other real estate owned during
1999.
Citigroup's allowance for credit losses of $6.7 billion is available to absorb
probable credit losses inherent in the entire portfolio. For analytical purposes
only, the portion of Citigroup's allowance for credit losses attributed to the
commercial portfolio was $3.2 billion at March 31, 2000 and December 31, 1999
compared to $3.3 billion at March 31, 1999. The decline in the allowance in 1999
primarily reflected an improved credit outlook in Emerging Markets.
MAR. 31, Dec. 31, Mar. 31,
IN MILLIONS OF DOLLARS 2000 1999 1999
- --------------------------------------------------------------------------------------------------------------------
Commercial allowance for credit losses $3,244 $3,244 $3,307
As a percentage of total commercial loans 3.21% 3.40% 3.46%
- --------------------------------------------------------------------------------------------------------------------
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $790 $629 26
Total operating expenses 487 398 22
Provision for credit losses 22 8 175
-----------------------------------
INCOME BEFORE TAXES 281 223 26
Income taxes 109 86 27
-----------------------------------
NET INCOME $172 $137 26
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
- --------------------------------------------------------------------------------
The Global Investment Management and Private Banking group is composed of the
SSB Citi Asset Management Group and the Citibank Private Bank. These companies
offer a broad range of asset management products and services from global
investment centers around the world, including mutual funds, closed-end funds,
managed accounts, unit investment trusts, variable annuities, and personalized
wealth management services to institutional, high net worth, and retail clients.
Global Investment Management and Private Banking net income of $172 million in
the 2000 first quarter was up $35 million or 26% from a year ago. Revenues
increased, driven by growth in both assets and client business volumes under
management, and were partially offset by higher costs associated with the
continued expansion of sales and marketing efforts and investments in
technology. The increase in the provision for credit losses related to a loan in
EMEA.
20
SSB CITI ASSET MANAGEMENT GROUP
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $428 $355 21
Total operating expenses 276 223 24
-----------------------------------
INCOME BEFORE TAXES 152 132 15
Income taxes 62 52 19
-----------------------------------
NET INCOME $ 90 $ 80 13
- --------------------------------------------------------------------------------------------------------------------
ASSETS UNDER MANAGEMENT (IN BILLIONS OF DOLLARS) (2) $376 $338 11
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Includes $31 billion and $29 billion in 2000 and 1999, respectively,
for Citibank Private Bank clients.
- --------------------------------------------------------------------------------
SSB Citi Asset Management Group is composed of the substantial resources that
are available through its three primary asset management business platforms:
Salomon Brothers Asset Management, Smith Barney Asset Management, and Citibank
Asset Management. These businesses offer institutional, high net worth,
and retail clients a broad range of investment disciplines from global
investment centers around the world. Products and services offered include
mutual funds, closed-end funds, separately managed accounts, unit investment
trusts, and variable annuities (through affiliated and third party insurance
companies).
Net income of $90 million in the 2000 first quarter was up $10 million, a 13%
increase from the 1999 first quarter, as revenue growth driven by assets under
management growth was partially offset by increased expenses from continued
investments in sales and marketing activities.
Assets under management rose 11% from the year-ago quarter to $376 billion, as
growth continued across all major product categories. Growth in private client
separately managed accounts and equity funds was particularly strong, rising 26%
and 22%, respectively, and was partially offset by declines in fixed income
funds. Institutional client assets rose 7% to $151 billion aided by
cross-selling efforts including $4 billion in client assets raised through the
Global Corporate and Investment Bank channel. Sales of long-term mutual funds
and managed account products through the SSB retail sales channel rose 22% to
$4.7 billion, although market share declined to 29% as a result of a mix shift
towards sector-based funds, which were introduced later in the 2000 first
quarter. In addition, Primerica sold $465 million of U.S. mutual and money funds
in the 2000 first quarter representing 48% of Primerica's sales. Global Consumer
sold $684 million of mutual and money funds in Europe and $347 million in Japan
(including through non-proprietary channels).
Revenues, net of interest expense, increased $73 million or 21% to $428 million
in the 2000 first quarter, primarily reflecting the growth in assets under
management and related revenues. Revenues are also higher from the Garante
acquisition in the Retirement Services business in Mexico, which closed in
February 2000.
Operating expenses increased $53 million or 24% from a year ago to $276 million
in the 2000 first quarter, reflecting global business growth, including sales
and marketing expansion to support distribution efforts through Citigroup and
non-proprietary channels, and the Garante acquisition.
CITIBANK PRIVATE BANK
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $362 $274 32
Total operating expenses 211 175 21
Provision for credit losses 22 8 175
-----------------------------------
INCOME BEFORE TAXES 129 91 42
Income taxes 47 34 38
-----------------------------------
NET INCOME $ 82 $ 57 44
- ----------------------------------------------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) $23 $18 28
Return on assets 1.43% 1.28%
- ----------------------------------------------------------------------------------------------------------------------------
CLIENT BUSINESS VOLUMES UNDER MANAGEMENT (IN BILLIONS OF DOLLARS) $144 $119 21
- ----------------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
- --------------------------------------------------------------------------------
Citibank Private Bank -- which provides personalized wealth management services
for high net worth clients around the world -- reported 2000 first quarter net
income of $82 million, up $25 million or 44% from the 1999 first quarter,
reflecting strong performance across all geographic regions.
21
Client business volumes under management, which comprise loans, deposits, client
assets under fee-based management, and custody accounts, were $144 billion at
March 31, 2000, up 21% from $119 billion a year ago, reflecting growth in all
regions. Business volumes grew in all product lines, led by the custody and
lending businesses.
Total revenues, net of interest expense, were $362 million in the 2000 first
quarter, up $88 million or 32% from 1999. Net interest and recurring fee-based
revenues increased $30 million or 15% year over year, while transaction
revenues, including placement fees on alternative investments, grew $47 million
or 134%. The increase in revenues was led primarily by significant growth in the
international region, up $69 million or 40%, as well as continued favorable
trends in the U.S., up $19 million or 19%.
Total operating expenses of $211 million in 2000 were up $36 million or 21% from
the year-ago quarter, driven by continued investment in front-end sales and
service capabilities.
The provision for credit losses was $22 million for the 2000 first quarter,
compared with $8 million in the 1999 first quarter. The increase related to a
loan in EMEA. Net credit losses in the 2000 first quarter remained at a nominal
level of 0.18% of average loans, compared with 0.13% and 0.18% for the 1999
fourth and first quarters, respectively. Loans 90 days or more past due were
significantly lower at $87 million or 0.37% of loans at March 31, 2000, compared
to $120 million or 0.54% at December 31, 1999 and $191 million or 1.10% at March
31, 1999.
CORPORATE/OTHER
FIRST QUARTER %
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE ($ 99) ($ 60) (65)
Adjusted operating expenses (2) 342 154 122
(Credit) provision for benefits, claims, and credit losses (2) 7 NM
-----------------------------------
LOSS BEFORE TAX BENEFITS (439) (221) (99)
Income tax benefits (188) (71) (165)
-----------------------------------
LOSS (251) (150) (67)
Restructuring-related items, after-tax 8 8 -
-----------------------------------
NET LOSS ($259) ($158) (64)
- --------------------------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- -------------------------------------------------------------------------------
Corporate/Other includes net corporate treasury results and corporate staff and
other corporate expenses. Net loss of $259 million in the 2000 first quarter
increased $101 million or 64% over the prior year period, which reflected a $108
million pretax expense for the contribution of appreciated venture capital
securities to the Company's Foundation, which had minimal impact on Citigroup's
earnings after related tax benefits and investment gains, which are reflected in
Investment Activities. Results also reflect higher treasury costs and technology
expenses, partially offset by decreases in corporate staff expenses as a result
of headcount reductions in the second half of 1999.
INVESTMENT ACTIVITIES
FIRST QUARTER
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999 (1)
- --------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $1,015 $153
Total operating expenses 23 13
-----------------------------------
INCOME BEFORE TAXES AND MINORITY INTEREST 992 140
Income taxes 365 48
Minority interest, after-tax (7) 2
-----------------------------------
NET INCOME $ 634 $ 90
- --------------------------------------------------------------------------------------------------
(1) Reclassified to conform to the current period's presentation.
- --------------------------------------------------------------------------------
Investment Activities comprises Citigroup's venture capital activities, realized
investment gains (losses) related to certain corporate and insurance-related
investments, and the results of certain investments in countries that refinanced
debt under the 1989 Brady Plan or plans of a similar nature.
Revenues, net of interest expense, of $1.0 billion for the 2000 first quarter
increased $862 million from 1999, primarily reflecting an increase in venture
capital results, and realized gains in corporate and insurance-related
investments, reflecting strong equity markets. Partially offsetting the revenue
increases were losses in insurance-related investments from repositioning
activities designed to improve yields and maturity profiles, and writedowns in
the refinancing portfolio.
22
Investment Activities results may fluctuate in the future as a result of market
and asset-specific factors. This statement is a forward-looking statement within
the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" below.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially from
those included in the forward-looking statements. Forward-looking statements are
typically identified by words or phrases such as "believe," "expect,"
"anticipate," "intend," "estimate," "may increase," "may fluctuate," and similar
expressions or future or conditional verbs such as "will," "should," "would,"
and "could." These forward-looking statements involve risks and uncertainties
including, but not limited to, global economic conditions, portfolio growth, the
credit performance of the portfolios, including bankruptcies, and seasonal
factors; changes in general economic conditions including the performance of
global financial markets, prevailing inflation and interest rates, realized
gains from sales of investments, gains from asset sales, and losses on
commercial lending activities; results of various Investment Activities; the
effects of competitors' pricing policies, of changes in laws and regulations on
competition and of demographic changes on target market populations' savings and
financial planning needs; the impact of higher interest rates on spreads in the
Cards business; a proposed rule that would govern the regulatory capital
treatment of equity investments in nonfinancial companies and possible
amendments to, and interpretations of, risk-based capital guidelines and
reporting instructions; the resolution of legal proceedings and related matters;
and the actual amount of liabilities associated with certain environmental and
asbestos-related insurance claims.
MANAGING GLOBAL RISK
THE MARKET RISK MANAGEMENT PROCESS
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 some entity, in some location and in some currency, may be
unable to meet a financial commitment to a customer, creditor, or investor when
due. Price risk is the risk to earnings that arises from changes in interest
rates, foreign exchange rates, equity and commodity prices, and in their implied
volatilities.
Citigroup's business and corporate oversight groups have well-defined market
risk management responsibilities. Within each business, a process is in place to
control market risk exposure. The risk management process includes the
establishment of appropriate market controls, policies and procedures,
appropriate senior management risk oversight with thorough risk analysis and
reporting, and independent risk management with capabilities to evaluate and
monitor risk limits.
The risk management process is described in detail in Citigroup's 1999 Annual
Report and Form 10-K. As Citigroup's businesses become more closely integrated,
it is expected that these management processes will also be more closely
integrated.
Across Citigroup, price risk is measured using various tools, including
Earnings-at-Risk and sensitivity analysis, which are applied to interest rate
risk in the non-trading portfolios and Value-at-Risk, stress and scenario
analyses which are applied to the trading portfolios.
NON-TRADING PORTFOLIOS
Business units manage the potential earnings effect of interest rate movements
by managing the asset and liability mix, either directly or through the use of
derivative financial products. These include interest rate swaps and other
derivative instruments which are either designated and effective as hedges or
designated and effective in modifying the interest rate characteristics of
specified assets or liabilities. The utilization of derivatives is managed in
response to changing market conditions as well as to changes in the
characteristics and mix of the related assets and liabilities.
Price risk in the non-trading portfolios is measured using Earnings-at-Risk
within Citicorp (excluding CitiFinancial Credit Company). All other non-trading
portfolios measure price risk using sensitivity analysis.
At Citicorp, Earnings-at-Risk measures the discounted pretax earnings impact
over a specified time horizon of a specified shift in the interest rate yield
curve for the appropriate currency. The yield curve shift is statistically
derived as a two standard deviation change in a short-term interest rate over
the period required to defease the position (usually four weeks).
Earnings-at-Risk is calculated separately for each currency and reflects the
repricing gaps in the position, as well as option positions, both explicit and
embedded.
Citicorp's primary non-trading price risk exposure is to movements in U.S.
dollar interest rates. As of March 31, 2000, the rate shift over a four-week
defeasance period applied to the U.S. dollar yield curve for purposes of
calculating Earnings-at-Risk was 45 basis points. Citicorp also has
Earnings-at-Risk in various other currencies; however, there are no significant
risk concentrations in any
23
individual non-U.S. dollar currency. As of March 31, 2000, the rate shifts
applied to these currencies for purposes of calculating Earnings-at-Risk over a
one- to four-week defeasance period ranged from 20 to 1,781 basis points,
depending on the currency.
The following table illustrates that, as of March 31, 2000, a 45 basis point
increase in the U.S. dollar yield curve would have a potential negative impact
on Citicorp's pretax earnings of approximately $144 million in the next twelve
months, and approximately $98 million for the total five-year period 2000-2005.
A two standard deviation increase in non-U.S. dollar interest rates would have a
potential negative impact on Citicorp's pretax earnings of approximately $78
million in the next twelve months, and approximately $224 million for the
five-year period 2000-2005.
CITICORP EARNINGS-AT-RISK (IMPACT ON PRETAX EARNINGS)
ASSUMING A U.S. ASSUMING A NON-U.S.
DOLLAR RATE MOVE OF DOLLAR RATE MOVE OF (1)
---------------------------------- ----------------------------------
TWO STANDARD DEVIATIONS TWO STANDARD DEVIATIONS (2)
---------------------------------- ----------------------------------
IN MILLIONS OF DOLLARS AT MARCH 31, 2000 Increase Decrease Increase Decrease
- ------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
Overnight to three months ($ 56) $ 58 ($ 14) $ 14
Four to six months (34) 38 (22) 22
Seven to twelve months (54) 58 (42) 43
----------------- ---------------- ----------------- ----------------
TOTAL OVERNIGHT TO TWELVE MONTHS (144) 154 (78) 79
- ------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
Year two (48) 48 (102) 103
Year three (1) (3) (31) 32
Year four 44 (49) (17) 17
Year five 70 (80) (23) 24
Effect of discounting (19) 23 27 (28)
----------------- ---------------- ----------------- ----------------
TOTAL ($ 98) $ 93 ($224) $227
- ------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
(1) Primarily results from Earnings-at-Risk in Hong Kong dollar and
Singapore dollar.
(2) Total assumes a two standard deviation increase or decrease for every
currency, not taking into account any covariance between currencies.
- -------------------------------------------------------------------------------
The table above also illustrates that Citicorp's U.S. dollar risk profile in the
one- to three-year time horizon was directionally similar, but generally tends
to reverse in subsequent periods. This reflects the fact that the majority of
the derivative instruments utilized to modify repricing characteristics as
described above will mature within three years.
The following table summarizes Citicorp's worldwide Earnings-at-Risk over the
next 12 months from changes in interest rates and illustrates that Citicorp's
pretax earnings in its non-trading activities over the next 12 months would be
reduced by an increase in interest rates and would benefit from a decrease in
interest rates.
CITICORP TWELVE MONTH EARNINGS-AT-RISK (IMPACT ON PRETAX EARNINGS)
U.S. DOLLAR NON-U.S. DOLLAR
----------------------------------------------------------------------------------
MAR. 31, Dec. 31, Mar. 31, MAR. 31, Dec. 31, Mar. 31,
IN MILLIONS OF DOLLARS 2000 1999 1999 2000 1999 1999
- -----------------------------------------------------------------------------------------------------------------------------------
ASSUMING A TWO STANDARD DEVIATION RATE
Increase $(144) ($166) ($129) $(78) ($119) ($109)
Decrease 154 178 139 79 120 110
- -----------------------------------------------------------------------------------------------------------------------------------
Interest rate swaps and similar instruments effectively modify the repricing
characteristics of certain consumer and commercial loan portfolios, deposits,
and long-term debt. Excluding the effects of these instruments, Citicorp's
Earnings-at-Risk over the next twelve months in its non-trading activities would
be as follows:
U.S. DOLLAR NON-U.S. DOLLAR
----------------------------------------------------------------------------------
MAR. 31, Dec. 31, Mar. 31, MAR. 31, Dec. 31, Mar. 31,
IN MILLIONS OF DOLLARS 2000 1999 1999 2000 1999 1999
- -----------------------------------------------------------------------------------------------------------------------------------
ASSUMING A TWO STANDARD DEVIATION RATE
Increase ($20) ($30) (12) ($89) ($120) ($127)
Decrease 31 42 17 90 121 127
- -----------------------------------------------------------------------------------------------------------------------------------
During the first quarter of 2000, Citicorp's U.S. dollar Earnings-at-Risk for
the following 12 months assuming a two standard deviation increase in rates
would have had a potential negative impact ranging from approximately $139
million to $146 million in the aggregate at each month end, compared with a
range from $73 million to $166 million at each month end during 1999. A two
standard deviation increase in non-U.S. dollar interest rates for the following
twelve months would have had a potential negative impact ranging from
approximately $78 million to $123 million in the aggregate at each month end
during the first quarter of 2000, compared with a range from $95 million to $121
million at each month end during 1999.
24
OTHER NON-TRADING PORTFOLIOS
In addition, there are other financial instruments held in the non-trading
portfolio outside Citicorp such as investments, long-term debt, derivatives and
contractholder funds. The price risk associated with these instruments is
measured using sensitivity analysis as described in the 1999 Annual Report and
Form 10-K. At March 31, 2000, there was no significant change to the risk
profile as disclosed at year-end 1999.
TRADING PORTFOLIOS
A tool for measuring the price risk of trading activities is the Value-at-Risk
method, which estimates the potential pretax loss in market value that could
occur over a one day holding period, at a 99% confidence level. The
Value-at-Risk method incorporates the market factors to which the market value
of the trading position is exposed (interest rates, foreign exchange rates,
equity and commodity prices, and their implied volatilities), the sensitivity of
the position to changes in those market factors, and the volatilities and
correlation of those factors. The Value-at-Risk measurement includes the foreign
exchange risks that arise in traditional banking businesses as well as in
explicit trading positions. In addition to Value-at-Risk, stress and scenario
analyses are also applied to the trading portfolios.
The level of exposure taken depends on the market environment and expectations
of future price and market movements, and will vary from period to period. For
Citicorp's major trading centers, the aggregate pretax Value-at-Risk in the
trading portfolios was $24 million at March 31, 2000. Daily exposures at
Citicorp averaged $23 million in the first quarter of 2000 and ranged from $17
million to $27 million. At Salomon Smith Barney, the aggregate pretax
Value-at-Risk in the trading portfolios was $24 million at March 31, 2000.
Quarterly exposures at Salomon Smith Barney averaged $24 million in the first
quarter of 2000 and ranged from $20 million to $27 million.
The following table summarizes Citigroup's Value-at-Risk in its trading
portfolios as of March 31, 2000 and December 31, 1999 along with the 2000 first
quarter averages.
CITICORP SALOMON SMITH BARNEY
----------------------------------------------------------------------------------
2000 2000
First First
MARCH 31, Quarter Dec. 31, MARCH 31, Quarter Dec. 31,
IN MILLIONS OF DOLLARS 2000 Average 1999 2000 Average 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Interest rate $17 $17 $15 $21 $23 $20
Foreign exchange 10 11 17 1 1 -
Equity 12 11 11 11 5 6
All other (primarily commodity) 2 2 2 7 6 8
Covariance adjustment (17) (18) (21) (16) (11) (11)
----------------------------------------------------------------------------------
TOTAL $24 $23 $24 $24 $24 $23
- -----------------------------------------------------------------------------------------------------------------------------------
The table below provides the distribution of Value-at-Risk during the first
quarter of 2000.
CITICORP SALOMON SMITH BARNEY
----------------------------------------------------------------------
IN MILLIONS OF DOLLARS LOW HIGH LOW HIGH
- ----------------------------------------------------------------------------------------------------------------------------
Interest rate $15 $19 $19 $28
Foreign exchange 8 18 - 3
Equity 9 16 1 14
All other (primarily commodity) 1 3 5 8
- ----------------------------------------------------------------------------------------------------------------------------
MANAGEMENT OF CROSS-BORDER RISK
Cross-border risk is the risk that Citigroup will be unable to obtain payment
from customers on their contractual obligations as a result of actions taken by
foreign governments such as exchange controls, debt moratoria, and restrictions
on the remittance of funds. Citigroup manages cross-border risk as part of the
Windows on Risk process described in the 1999 Annual Report and Form 10-K.
Except as described below for cross-border resale agreements and the netting of
certain long and short securities positions, the following table presents total
cross-border outstandings and commitments on a regulatory basis in accordance
with Federal Financial Institutions Examination Council (FFIEC) guidelines. In
regulatory reports under FFIEC guidelines, cross-border resale agreements are
presented based on the domicile of the issuer of the securities that are held as
collateral. However, for purposes of the following table, cross-border resale
agreements are presented based on the domicile of the counterparty because the
counterparty has the legal obligation for repayment. Similarly, under FFIEC
guidelines, long securities positions are required to be reported on a gross
basis. However, for purposes of the following table, certain long and short
securities positions are presented on a net basis consistent with internal
cross-border risk management policies, reflecting a reduction of risk from
offsetting positions.
25
Total cross-border outstandings include cross-border claims on third parties as
well as investments in and funding of local franchises. Countries with FFIEC
outstandings greater than 0.75% of Citigroup assets at March 31, 2000 and
December 31, 1999 include:
MARCH 31, 2000 December 31, 1999
- ------------------------------------------------------------------------------------------------------------ ---------------------
CROSS-BORDER CLAIMS ON THIRD PARTIES INVESTMENTS
-----------------------------------------------------
IN AND
TRADING AND CROSS- FUNDING OF TOTAL Total
IN BILLIONS OF SHORT-TERM BORDER RESALE LOCAL CROSS-BORDER COMMITMENTS Cross-Border Commit-
DOLLARS CLAIMS (1) AGREEMENTS ALL OTHER TOTAL FRANCHISES OUTSTANDINGS (2) Outstandings ments(2)
- ------------------------------------------------------------------------------------------------------------ -----------------------
United Kingdom $5.1 $10.2 $3.1 $18.4 $ - $18.4 $15.0 $19.5 $15.5
Germany 6.8 3.6 0.7 11.1 2.7 13.8 12.2 10.9 3.7
Japan 2.4 4.2 2.6 9.2 - 9.2 0.3 9.8 0.1
France 5.5 2.8 0.4 8.7 0.1 8.8 2.6 7.9 2.2
Netherlands 4.7 2.5 0.9 8.1 - 8.1 1.5 8.1 2.9
Italy 4.8 1.0 0.3 6.1 1.6 7.7 1.3 7.1 0.4
Brazil 1.0 0.1 1.8 2.9 1.7 4.6 0.1 3.8 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Trading and short-term claims include cross-border debt and equity
securities held in the trading account, trade finance receivables, net
revaluation gains on foreign exchange and derivative contracts, and
other claims with a maturity of less than one year.
(2) Commitments (not included in total cross-border outstandings) include
legally binding cross-border letters of credit and other commitments
and contingencies as defined by the FFIEC.
- --------------------------------------------------------------------------------
Total cross-border outstandings for March 31, 2000 under FFIEC guidelines,
including cross-border resale agreements based on the domicile of the issuer of
the securities that are held as collateral, and long securities positions
reported on a gross basis, amount to $9.2 billion for the United Kingdom, $20.2
billion for Germany, $10.5 billion for Japan, $8.1 billion for France, $6.2
billion for the Netherlands, $10.5 billion for Italy, and $6.3 billion for
Brazil.
Total cross-border outstandings for December 31, 1999 under FFIEC guidelines,
including cross-border resale agreements based on the domicile of the issuer of
the securities that are held as collateral, and long securities positions
reported on a gross basis, amounted to $8.7 billion for the United Kingdom,
$14.9 billion for Germany, $10.5 billion for Japan, $7.7 billion for France,
$5.0 billion for the Netherlands, $10.2 billion for Italy, and $4.9 billion for
Brazil.
LIQUIDITY AND CAPITAL RESOURCES
Citigroup services its obligations primarily with dividends and advances that it
receives from subsidiaries. The subsidiaries' dividend paying abilities are
limited by certain covenant restrictions in credit agreements and/or by
regulatory requirements. Citigroup believes it will have sufficient funds to
meet current and future commitments. Each of Citigroup's major operating
subsidiaries finances its operations on a basis consistent with its
capitalization and ratings.
Citigroup, Citicorp, TAP, and The Travelers Insurance Company (TIC) issue
commercial paper directly to investors. Citigroup and Citicorp, both of which
are bank holding companies, maintain combined liquidity reserves of cash,
securities, and unused bank lines of credit at least equal to their combined
outstanding commercial paper. TAP and TIC each maintains unused credit
availability under their respective bank lines of credit at least equal to the
amount of outstanding commercial paper.
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. Each company pays its
banks' commitment fees for its lines of credit.
Citicorp, Salomon Smith Barney, and some of their nonbank subsidiaries have
credit facilities with Citicorp's subsidiary banks, including Citibank, N.A.
Borrowings under these facilities must be secured in accordance with Section 23A
of the Federal Reserve Act.
CITIGROUP INC. (CITIGROUP)
Citigroup and TIC have an agreement with a syndicate of banks to provide $1.0
billion of revolving credit, to be allocated to either of Citigroup or TIC. The
participation of TIC in this agreement is limited to $250 million. The revolving
credit facility consists of a five-year revolving credit facility that expires
in June 2001. At March 31, 2000, all of the facility was allocated to Citigroup.
Under this facility, Citigroup is required to maintain a certain level of
consolidated stockholders' equity (as defined in the agreement). Citigroup
exceeded this requirement by approximately $31.4 billion at March 31, 2000.
Citigroup also has $300 million in 364-day facilities, which expire in the third
quarter of 2000. At March 31, 2000, there were no borrowings outstanding under
either of these facilities.
26
Citigroup is subject to risk-based capital guidelines issued by the Board of
Governors of the Federal Reserve System (FRB). These guidelines are used to
evaluate capital adequacy based primarily on the perceived credit risk
associated with balance sheet assets, as well as certain off-balance sheet
exposures such as unused loan commitments, letters of credit, and derivative and
foreign exchange contracts. The risk-based capital guidelines are supplemented
by a leverage ratio requirement. The 1999 ratios and components of capital have
been restated to reflect the 2000 conversion of a portion of the convertible
debt of Nikko Securities Co., Ltd. into common stock. See Note 1 of Notes to
Consolidated Financial Statements.
CITIGROUP RATIOS
MAR. 31, Dec. 31,
2000 1999
- --------------------------------------------------------------------------------
Tier 1 capital 9.78% 9.65%
Total capital (Tier 1 and Tier 2) 12.47 12.33
Leverage (1) 6.73 6.80
Common stockholders' equity 6.58 6.56
- --------------------------------------------------------------------------------
(1) Tier 1 capital divided by adjusted average assets.
- --------------------------------------------------------------------------------
Citigroup maintained a strong capital position during the first quarter of 2000.
Total capital (Tier 1 and Tier 2) amounted to $62.5 billion at March 31, 2000,
representing 12.47% of net risk-adjusted assets. This compares to $60.8 billion
and 12.33% at December 31, 1999. Tier 1 capital of $49.0 billion at March 31,
2000 represented 9.78% of net risk-adjusted assets, compared to $47.6 billion
and 9.65% at December 31, 1999. Citigroup's leverage ratio was 6.73% at March
31, 2000 compared to 6.80% at December 31, 1999.
COMPONENTS OF CAPITAL UNDER REGULATORY GUIDELINES
MAR. 31, Dec. 31,
IN MILLIONS OF DOLLARS 2000 1999
- --------------------------------------------------------------------------------------------------
TIER 1 CAPITAL
Common stockholders' equity $48,551 $46,965
Perpetual preferred stock 1,775 1,925
Mandatorily redeemable securities of subsidiary trusts 4,920 4,920
Minority interest (1) 1,524 1,501
Less: Net unrealized gains on securities available for sale(2) (1,498) (1,749)
Intangible assets:
Goodwill (4,531) (4,209)
Other intangible assets (1,655) (1,655)
50% investment in certain subsidiaries (3) (113) (107)
-----------------------------------
TOTAL TIER 1 CAPITAL 48,973 47,591
- --------------------------------------------------------------------------------------------------
TIER 2 CAPITAL
Allowance for credit losses (4) 6,269 6,171
Qualifying debt (5) 6,678 6,728
Unrealized marketable equity securities gains (2) 680 400
Less: 50% investment in certain subsidiaries (3) (113) (107)
-----------------------------------
TOTAL TIER 2 CAPITAL 13,514 13,192
-----------------------------------
TOTAL CAPITAL (TIER 1 AND TIER 2) $62,487 $60,783
- --------------------------------------------------------------------------------------------------
NET RISK-ADJUSTED ASSETS (6) $500,999 $493,141
- --------------------------------------------------------------------------------------------------
(1) Primarily related to Travelers Property Casualty Corp. See Note 1 of
Notes to Consolidated Financial Statements.
(2) Tier 1 capital excludes unrealized gains and losses on debt securities
available for sale in accordance with regulatory risk-based capital
guidelines. The federal bank regulatory agencies permit institutions to
include in Tier 2 capital up to 45% of pretax net unrealized holding
gains on available-for-sale equity securities with readily determinable
fair values.
(3) Represents investment in certain overseas insurance activities and
unconsolidated banking and finance subsidiaries.
(4) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is
deducted from risk-adjusted assets.
(5) Includes qualifying senior and subordinated debt in an amount not
exceeding 50% of Tier 1 capital, and subordinated capital notes subject
to certain limitations.
(6) Includes risk-weighted credit equivalent amounts, net of applicable
bilateral netting agreements, of $28.8 billion for interest rate,
commodity and equity derivative contracts and foreign exchange
contracts as of March 31, 2000, compared to $32.8 billion as of
December 31, 1999. Market risk-equivalent assets included in net
risk-adjusted assets amounted to $41.2 billion at March 31, 2000, and
$43.1 billion at December 31, 1999. Net risk-adjusted assets also
includes the effect of other off-balance sheet exposures such as unused
loan commitments and letters of credit and reflects deductions for
intangible assets and any excess allowance for credit losses.
- --------------------------------------------------------------------------------
Common stockholders' equity increased a net $1.6 billion during the first
quarter of 2000 to $48.6 billion at March 31, 2000, representing 6.58% of
assets, compared to $47.0 billion and 6.56% at year-end 1999. The net increase
in common stockholders' equity during the first quarter of 2000 principally
reflected net income of $3.6 billion, partially offset by treasury stock
acquired of $1.2 billion, issuance of shares pursuant to employee benefit plans
and other activity of $0.2 billion and dividends declared on
27
common and preferred stock of $0.6 billion. The increase in the common
stockholders' equity ratio during the first quarter of 2000 reflected the above
items, partially offset by the increase in total assets.
During the 2000 first quarter, Citigroup redeemed its Series T perpetual
preferred stock for $150 million.
All of the mandatorily redeemable securities of subsidiary trusts (trust
securities) outstanding at March 31, 2000 qualify as Tier 1 capital. The amount
outstanding at March 31, 2000 includes $2.3 billion of parent-obligated
securities and $2.62 billion of subsidiary-obligated securities.
Citigroup's subsidiary depository institutions are subject to the risk-based
capital guidelines issued by their respective primary federal bank regulatory
agencies, which are generally similar to the FRB's guidelines. At March 31,
2000, all of Citigroup's subsidiary depository institutions were "well
capitalized" under the federal bank regulatory agencies' definitions.
During the first quarter of 2000, the FRB issued a proposed rule that would
govern the regulatory capital treatment of equity investments in nonfinancial
companies held by bank holding companies. The proposed rule would increase the
capital required for such investments by imposing a 50% capital requirement on
merchant banking investments and certain similar investments, including
investments made by venture capital subsidiaries. The Company cannot determine
whether such proposed rule will be adopted but is in the process of assessing
the impact of this proposed rule in its current form on regulatory capital
ratios. If this proposed rule is adopted in a different form, the Company would
need to reassess the rule's impact on regulatory capital ratios. This paragraph
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 23.
Additionally, from time-to-time, the FRB and the FFIEC propose amendments to,
and issue interpretations of, risk-based capital guidelines and reporting
instructions. Such proposals or interpretations could, if implemented in the
future, affect reported capital ratios and net risk-adjusted assets. This
paragraph contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page 23.
CITICORP
Citicorp manages liquidity through a well-defined process described in the 1999
Annual Report and Form 10-K.
A diversity of funding sources, currencies, and maturities is used to gain a
broad access to the investor base. Citicorp's deposits, which represented 67% of
its total funding at both March 31, 2000 and December 31, 1999, are broadly
diversified by both geography and customer segments.
Stockholder's equity, which grew $1.7 billion during the first three months of
2000 to $27.7 billion at March 31, 2000, continues to be an important component
of the overall funding structure. In addition, long-term debt is issued by
Citicorp and its subsidiaries. Total Citicorp long-term debt outstanding at the
end of the 2000 first quarter was $25.9 billion, down from $26.4 billion at 1999
year end. Asset securitization programs remain an important source of liquidity.
Loans securitized during the first three months of 2000 included $2.5 billion of
U.S. consumer mortgages. As previous credit card securitizations amortize, newly
originated receivables are recorded on Citicorp's balance sheet and become
available for asset securitization. During the first quarter of 2000, the
scheduled amortization of certain credit card securitization transactions made
available $1.1 billion of new receivables. In addition, $5.3 billion of credit
card securitization transactions are scheduled to amortize during the rest of
2000.
Citicorp is a legal entity separate and distinct from Citibank, N.A. and its
other subsidiaries and affiliates. As discussed in the 1999 Annual Report and
Form 10-K, there are various legal limitations on the extent to which Citicorp's
subsidiaries may extend credit, pay dividends, or otherwise supply funds to
Citicorp. As of March 31, 2000, under their applicable dividend limitations,
Citicorp's national and state-chartered bank subsidiaries could have declared
dividends to their respective parent companies without regulatory approval of
approximately $5.0 billion. In determining whether and to what extent to pay
dividends, each bank subsidiary must also consider the effect of dividend
payments 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. Consistent with these considerations, Citicorp estimates that, as of
March 31, 2000, its bank subsidiaries could have distributed dividends to
Citicorp, directly or through their parent holding company, of approximately
$4.4 billion of the available $5.0 billion.
Citicorp also receives dividends from its nonbank subsidiaries. These nonbank
subsidiaries are generally not subject to regulatory restrictions on their
payment of dividends except that the approval of the Office of Thrift
Supervision (OTS) may be required if total dividends declared by a savings
association in any calendar year exceed amounts specified by that agency's
regulations.
Citicorp is subject to risk-based capital guidelines issued by the FRB.
28
CITICORP RATIOS
MAR. 31, Dec. 31,
2000 1999
- --------------------------------------------------------------------------------------------------
Tier 1 capital 8.07% 8.11%
Total capital (Tier 1 and Tier 2) 12.00 12.10
Leverage (1) 6.81 6.83
Common stockholder's equity 6.93 6.70
- --------------------------------------------------------------------------------------------------
(1) Tier 1 capital divided by adjusted average assets.
- --------------------------------------------------------------------------------
Citicorp maintained a strong capital position during the 2000 first quarter.
Total capital (Tier 1 and Tier 2) amounted to $38.4 billion at March 31, 2000,
representing 12.00% of net risk-adjusted assets. This compares with $37.4
billion and 12.10% at December 31, 1999. Tier 1 capital of $25.8 billion at
March 31, 2000 represented 8.07% of net risk-adjusted assets, compared with
$25.0 billion and 8.11% at December 31, 1999. Citicorp's Tier 1 capital ratio at
March 31, 2000 was within Citicorp's target range of 8.00% to 8.30%.
CITIFINANCIAL CREDIT COMPANY (CCC)
At March 31, 2000, CCC had committed and available five-year revolving credit
facilities in the amount of $3.4 billion which expire in 2002. At March 31,
2000, there were no borrowings outstanding under these facilities. Citicorp
guarantees various debt obligations of CCC, including those arising under these
facilities. Under these facilities, Citicorp is required to maintain a certain
level of adjusted consolidated net worth (as defined in the agreements). At
March 31, 2000, this requirement was exceeded by approximately $11.5 billion.
TRAVELERS PROPERTY CASUALTY CORP. (TAP)
TAP has a five-year revolving credit facility in the amount of $250 million with
a syndicate of banks that expires in December 2001. Under this facility, TAP is
required to maintain a certain level of consolidated stockholders' equity (as
defined in the agreement). At March 31, 2000, this requirement was exceeded by
approximately $4.9 billion. At March 31, 2000, there were no borrowings
outstanding under this facility.
TAP's insurance subsidiaries are subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to their parent
without prior approval of insurance regulatory authorities. Dividend payments to
TAP from its insurance subsidiaries are limited to $1.2 billion in 2000 without
prior approval of the Connecticut Insurance Department. TAP received $200
million of dividends from its insurance subsidiaries during the first quarter of
2000.
SALOMON SMITH BARNEY HOLDINGS INC. (SSBHI)
SSBHI manages liquidity and monitors and evaluates capital adequacy through a
well-defined process described in the 1999 Annual Report and Form 10-K. Total
assets were $227 billion at March 31, 2000, up slightly from $224 billion at
year-end 1999. Due to the nature of SSBHI's trading activities, it is not
uncommon for asset levels to fluctuate from period to period.
SSBHI has a $1.5 billion revolving credit agreement with a bank syndicate
that extends through May 2001, and a $3.5 billion 364-day revolving credit
agreement that extends through May 2000. SSBHI may borrow under these
revolving credit facilities at various interest rate options (LIBOR, CD or
base rate) and compensates the banks for the facilities through commitment
fees. Under these facilities, SSBHI is required to maintain a certain level
of consolidated adjusted net worth (as defined in the agreements). At March
31, 2000, this requirement was exceeded by approximately $4.0 billion. At
March 31, 2000, there were no borrowings outstanding under either facility.
SSBHI also has substantial borrowing arrangements consisting of facilities
that it 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 short-term requirements.
Unsecured term debt is a significant component of SSBHI's long-term capital.
Long-term debt totaled $17.7 billion at March 31, 2000 and $18.0 billion at
December 31, 1999. SSBHI utilizes interest rate swaps to convert the majority
of its fixed rate long-term debt used to fund inventory-related working
capital requirements into variable rate obligations. Long-term debt issuances
denominated in currencies other than the U.S. dollar that are not used to
finance assets in the same currency are effectively converted to U.S. dollar
obligations through the use of cross-currency swaps and forward currency
contracts.
29
THE TRAVELERS INSURANCE COMPANY (TIC)
At March 31, 2000, TIC had $27.5 billion of life and annuity product deposit
funds and reserves. Of that total, $13.8 billion is not subject to discretionary
withdrawal based on contract terms. The remaining $13.7 billion is for life and
annuity products that are subject to discretionary withdrawal by the
contractholder. Included in the amount that is subject to discretionary
withdrawal are $2.1 billion of liabilities that are surrenderable with market
value adjustments. Also included are an additional $4.8 billion of the life
insurance and individual annuity liabilities which are subject to discretionary
withdrawals and have an average surrender charge of 4.7%. In the payout phase,
these funds are credited at significantly reduced interest rates. The remaining
$6.8 billion of liabilities are surrenderable without charge. Insurance
liabilities that are surrendered or withdrawn are reduced by outstanding policy
loans and related accrued interest prior to payout.
TIC is subject to various regulatory restrictions that limit the maximum amount
of dividends available to its parent without prior approval of the Connecticut
Insurance Department. A maximum of $679 million of statutory surplus is
available in 2000 for such dividends without Department approval, of which $170
million was paid during the first quarter of 2000.
30
CONSOLIDATED FINANCIAL STATEMENTS
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
-----------------------------------
IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2000 1999
- ------------------------------------------------------------------------------------------------------
REVENUES
Loan interest, including fees $ 6,024 $ 5,888
Other interest and dividends 5,878 5,414
Insurance premiums 2,717 2,526
Commissions and fees 3,998 2,872
Principal transactions 1,723 1,770
Asset management and administration fees 1,284 955
Realized (losses) gains from sales of investments (169) 53
Other income 2,253 1,043
-----------------------------------
TOTAL REVENUES 23,708 20,521
Interest expense 6,724 6,451
-----------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE 16,984 14,070
-----------------------------------
PROVISIONS FOR BENEFITS, CLAIMS, AND CREDIT LOSSES
Policyholder benefits and claims 2,251 2,048
Provision for credit losses 751 729
-----------------------------------
TOTAL PROVISIONS FOR BENEFITS, CLAIMS, AND CREDIT LOSSES 3,002 2,777
-----------------------------------
OPERATING EXPENSES
Non-insurance compensation and benefits 4,125 3,755
Insurance underwriting, acquisition, and operating 828 825
Restructuring-related items 20 (130)
Other operating 3,353 2,871
-----------------------------------
TOTAL OPERATING EXPENSES 8,326 7,321
-----------------------------------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 5,656 3,972
Provision for income taxes 2,011 1,423
Minority interest, net of income taxes 55 60
-----------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 3,590 2,489
Cumulative effect of accounting changes - (127)
-----------------------------------
NET INCOME $ 3,590 $ 2,362
- ------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE
Income before cumulative effect of accounting changes $1.07 $0.73
Cumulative effect of accounting changes - (0.03)
-----------------------------------
NET INCOME $1.07 $0.70
-----------------------------------
Weighted average common shares outstanding 3,331.6 3,340.2
- ------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE
Income before cumulative effect of accounting changes $1.04 $0.71
Cumulative effect of accounting changes - (0.03)
-----------------------------------
NET INCOME $1.04 $0.68
-----------------------------------
Adjusted weighted average common shares outstanding 3,435.7 3,440.0
- ------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
31
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
MARCH 31,
2000 December 31,
IN MILLIONS OF DOLLARS (UNAUDITED) 1999
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents (including segregated cash and other deposits) $ 12,363 $ 14,158
Deposits at interest with banks 13,160 13,429
Investments (1) 112,936 111,345
Federal funds sold and securities borrowed or purchased under agreements to resell 112,119 112,655
Brokerage receivables 25,481 23,769
Trading account assets 118,039 109,155
Loans, net
Consumer 151,960 148,715
Commercial 100,920 95,491
----------------------------------
Loans, net of unearned income 252,880 244,206
Allowance for credit losses (6,657) (6,679)
----------------------------------
Total loans, net 246,223 237,527
Reinsurance recoverables 9,724 9,704
Separate and variable accounts 24,906 23,118
Other assets (1) 63,254 60,830
----------------------------------
TOTAL ASSETS $738,205 $715,690
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Non-interest-bearing deposits in U.S. offices $ 18,813 $ 19,492
Interest-bearing deposits in U.S. offices 48,085 48,584
Non-interest-bearing deposits in offices outside the U.S. 13,757 12,021
Interest-bearing deposits in offices outside the U.S. 187,684 180,994
----------------------------------
Total deposits 268,339 261,091
Federal funds purchased and securities loaned or sold under agreements to repurchase 106,198 92,591
Brokerage payables 18,361 16,641
Trading account liabilities 83,487 91,104
Contractholder funds and separate and variable accounts 43,311 41,335
Insurance policy and claims reserves 44,071 43,822
Investment banking and brokerage borrowings 14,832 13,719
Short-term borrowings 16,759 17,086
Long-term debt 47,272 47,092
Other liabilities (1) 40,329 37,399
Citigroup or subsidiary obligated mandatorily redeemable securities of subsidiary
trusts holding solely junior subordinated debt securities of -- Parent 2,300 2,300
-- Subsidiary 2,620 2,620
- ------------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock ($1.00 par value; authorized shares: 30 million), at aggregate liquidation value 1,775 1,925
Common stock ($.01 par value; authorized shares: 6.0 billion(2)), Issued shares --
3,612,385,458 AT MARCH 31, 2000 and at December 31, 1999 36 36
Additional paid-in capital 10,492 10,036
Retained earnings 46,881 43,865
Treasury stock, at cost: March 31, 2000 -- 241,747,418 shares
and December 31, 1999 -- 244,860,127 shares (8,264) (7,627)
Accumulated other changes in equity from nonowner sources (1) 744 1,111
Unearned compensation (1,338) (456)
----------------------------------
TOTAL STOCKHOLDERS' EQUITY 50,326 48,890
----------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $738,205 $715,690
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Restated to reflect the 2000 conversion of a portion of the convertible
debt of Nikko Securities Co., Ltd. into common stock. See Note 1 of
Notes to Consolidated Financial Statements.
(2) On April 18, 2000, shareholders approved an increase in the Company's
authorized shares of common stock to 10.0 billion shares.
- --------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
32
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
-----------------------------------
IN MILLIONS OF DOLLARS 2000 1999
- --------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK AT AGGREGATE LIQUIDATION VALUE
Balance, beginning of period $ 1,925 $ 2,313
Redemption or retirement of preferred stock (150) (200)
-----------------------------------
Balance, end of period 1,775 2,113
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period 10,072 8,929
Employee benefit plans 456 194
Other - (19)
-----------------------------------
Balance, end of period 10,528 9,104
- --------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance, beginning of period 43,865 35,971
Net income 3,590 2,362
Common dividends (1) (542) (407)
Preferred dividends (32) (40)
-----------------------------------
Balance, end of period 46,881 37,886
- --------------------------------------------------------------------------------------------------------------------
TREASURY STOCK, AT COST
Balance, beginning of period (7,627) (4,789)
Issuance of shares pursuant to employee benefit plans and other 589 484
Treasury stock acquired (1,226) (1,083)
-----------------------------------
Balance, end of period (8,264) (5,388)
- --------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER SOURCES
Balance, beginning of period 1,111 781
Net change in unrealized gains and losses on investment securities, net of tax (251) 80
Foreign currency translations adjustment, net of tax (116) (75)
-----------------------------------
Balance, end of period 744 786
- --------------------------------------------------------------------------------------------------------------------
UNEARNED COMPENSATION
Balance, beginning of period (456) (497)
Issuance of restricted stock, net of amortization (882) (160)
-----------------------------------
Balance, end of period (1,338) (657)
- --------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKHOLDERS' EQUITY (SHARES OUTSTANDING: 3,370,638 IN 2000
and 3,380,308 in 1999) 48,551 41,731
- --------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $50,326 $43,844
- --------------------------------------------------------------------------------------------------------------------
SUMMARY OF CHANGES IN EQUITY FROM NONOWNER SOURCES
Net income $3,590 $2,362
Other changes in equity from nonowner sources, net of tax (367) 5
-----------------------------------
TOTAL CHANGES IN EQUITY FROM NONOWNER SOURCES $3,223 $2,367
- --------------------------------------------------------------------------------------------------------------------
(1) Common dividends declared were 16 cents per share in the first quarter
of 2000 and 12 cents per share in the first quarter of 1999.
- -------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
33
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------------
IN MILLIONS OF DOLLARS 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,590 $ 2,362
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of deferred policy acquisition costs and value of insurance in force 233 408
Additions to deferred policy acquisition costs (331) (476)
Depreciation and amortization 454 414
Provision for credit losses 751 729
Change in trading account assets (8,884) 891
Change in trading account liabilities (7,617) (7,264)
Change in federal funds sold and securities borrowed or purchased under agreements to resell 536 (16,764)
Change in federal funds purchased and securities loaned or sold under agreements to 13,607 23,297
repurchase
Change in brokerage receivables net of brokerage payables 8 (7,230)
Change in insurance policy and claims reserves 249 456
Net losses (gains) from sales of investments 169 (53)
Venture capital activity (845) 157
Restructuring-related items 20 (130)
Cumulative effect of accounting changes, net of tax - 127
Other, net 2,276 1,331
----------------------------------
TOTAL ADJUSTMENTS 626 (4,107)
----------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 4,216 (1,745)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Change in deposits at interest with banks 269 69
Change in loans (17,415) (34,414)
Proceeds from sales of loans 8,079 29,813
Purchases of investments (26,604) (22,430)
Proceeds from sales of investments 15,835 13,059
Proceeds from maturities of investments 9,811 7,774
Other investments, primarily short-term, net (1,200) (971)
Capital expenditures on premises and equipment (376) (399)
Proceeds from sales of premises and equipment, subsidiaries and affiliates, and other real 174 139
estate owned
Business acquisitions (607) (1,344)
----------------------------------
NET CASH USED IN INVESTING ACTIVITIES (12,034) (8,704)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (574) (447)
Issuance of common stock 291 137
Issuance of mandatorily redeemable securities of subsidiary trusts - 600
Redemption of preferred stock (150) (200)
Treasury stock acquired (1,226) (1,083)
Stock tendered for payment of withholding taxes (281) (222)
Issuance of long-term debt 3,727 2,642
Payments and redemptions of long-term debt (3,493) (1,796)
Change in deposits 7,248 10,329
Change in short-term borrowings and investment banking and brokerage borrowings 471 (1,826)
Contractholder fund deposits 1,522 1,977
Contractholder fund withdrawals (1,372) (1,552)
----------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,163 8,559
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (140) (248)
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN CASH AND CASH EQUIVALENTS (1,795) (2,138)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,158 13,837
----------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,363 $ 11,699
- ------------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for income taxes $ 359 $ 445
Cash paid during the period for interest 6,429 6,192
NON-CASH INVESTING ACTIVITIES
Transfers from loans to other real estate owned $ 95 $ 56
- ------------------------------------------------------------------------------------------------------------------------------------
Noncash effects of accounting for the conversion
of investments in Nikko Securities Co., Ltd. 702 --
See Notes to Consolidated Financial Statements.
34
CITIGROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements as of March 31, 2000 and for
the three-month periods ended March 31, 2000 and 1999 are unaudited and 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 consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's 1999 Annual Report and Form 10-K.
In March 2000, the Company converted into common stock a portion of its
investment in convertible bonds of the Nikko Securities Co., Ltd. (Nikko),
increasing its ownership of Nikko common stock from 9.5% to 20.7%. As a
result of the conversion, the common stock investment in Nikko is accounted
for under the equity method and is reported in other assets at a cost basis
of $1.170 billion. The Company's proportionate share of Nikko's income is
reflected in other income. The Consolidated Statements of Financial Condition
and Changes in Stockholders' Equity have been restated to account for the
original 9.5% ownership under the equity method from the date of original
acquisition in August 1998. Previously, this 9.5% ownership was reported in
available-for-sale securities with changes in fair value, net of applicable
taxes, recorded in stockholders' equity.
During April 2000, The Travelers Insurance Group Inc. (TIGI), an indirect wholly
owned subsidiary of the Company, completed a cash tender offer to purchase all
of the outstanding shares of Class A Common Stock of Travelers Property Casualty
Corp. (TAP) at a price of $41.95 per share. After giving effect to the purchase
of the shares tendered (approximately 52 million shares) and together with the
328,020,170 shares of TAP's Class B Common Stock, which were converted by TIGI
into an equal number of shares of Class A Common Stock, TIGI beneficially owned
approximately 99% of the outstanding shares of TAP's Class A Common Stock. TIGI
also established a wholly owned subsidiary which effected a merger pursuant to
which TAP subsequently became an indirect wholly owned subsidiary of the
Company, and all remaining shares of Class A Common Stock of TAP (other than the
shares owned by the Company and its subsidiaries) were converted into a right to
receive $41.95 per share in cash.
Certain financial information that is normally included in annual financial
statements prepared in accordance with generally accepted accounting principles,
but is not required for interim reporting purposes, has been condensed or
omitted.
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
2. ACCOUNTING CHANGES
Accounting changes in the first quarter of 1999 refer to the adoption of:
Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises
for Insurance-Related Assessments" (SOP 97-3) of ($135) million; adoption of SOP
98-7, "Deposits Accounting: Accounting for Insurance and Reinsurance Contracts
That Do Not Transfer Insurance Risk" of $23 million; and the adoption of SOP
98-5, "Reporting on the Costs of Start-Up Activities" of ($15) million.
DERIVATIVES AND HEDGE ACCOUNTING. In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133). In June 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133," which delayed the effective
date of SFAS No. 133 to January 1, 2001 for calendar year companies such as
the Company. In March 2000, the FASB proposed an amendment of SFAS No. 133.
The new standard will significantly change the accounting treatment of
end-user derivative and foreign exchange contracts used by the Company and
its customers. Depending on the underlying risk management strategy, these
accounting changes could affect reported earnings, assets, liabilities, and
stockholders' equity. As a result, the Company and the customers to which it
provides derivatives and foreign exchange products will have to reconsider
their risk management strategies, since the new standard will not reflect the
results of many of those strategies in the same manner as current accounting
practice. The Company continues to evaluate the potential impact of
implementing the new accounting standard, which will depend, among other
things, on the amendment and additional interpretations of the standard prior
to the effective date.
35
3. BUSINESS SEGMENT INFORMATION
The following table presents certain information regarding the Company's
industry segments:
INCOME (LOSS)
BEFORE CUMULATIVE
TOTAL REVENUES, NET PROVISION FOR EFFECT OF ACCOUNTING
OF INTEREST EXPENSE INCOME TAXES CHANGES (1) (2) IDENTIFIABLE ASSETS
-----------------------------------------------------------------------------------
FIRST QUARTER MAR. 31, Dec. 31,
---------------------------------------------------------------
IN MILLIONS OF DOLLARS, EXCEPT IDENTIFIABLE 2000 1999 (3) 2000 1999 (3) 2000 1999 (3) 2000 1999 (3)
ASSETS IN BILLIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Global Consumer $ 7,116 $ 6,240 $ 689 $ 548 $1,203 $ 943 $244 $237
Global Corporate and Investment Bank 8,162 7,108 1,041 815 1,840 1,477 445 429
Global Investment Management
and Private Banking 790 629 109 86 172 137 27 26
Investment Activities 1,015 153 365 48 634 90 11 11
Corporate/Other (99) (60) (193) (74) (259) (158) 11 13
-----------------------------------------------------------------------------------
TOTAL $16,984 $14,070 $2,011 $1,423 $3,590 $2,489 $738 $716
- ------------------------------------------------------------------------------------------------------------------------------------
(1) The 2000 quarter results reflect after-tax restructuring-related items
of $4 million in Global Consumer, and $8 million in Corporate/Other.
The 1999 quarter results reflect after-tax restructuring-related items
of $38 million in Global Consumer, ($120) million in Global Corporate
and Investment Bank, and $8 million in Corporate/Other.
(2) Includes pretax provisions for benefits, claims, and credit losses in
the Global Consumer results of $2.0 billion and $1.8 billion, in the
Global Corporate and Investment Bank results of $963 million and $976
million and in the Global Investment Management and Private Banking
results of $22 million and $8 million for the first quarters of 2000
and 1999, respectively.
(3) Reclassified to conform to the current period's presentation.
- --------------------------------------------------------------------------------
4. INVESTMENTS
MARCH 31, December 31,
IN MILLIONS OF DOLLARS 2000 1999
- --------------------------------------------------------------------------------------------------
Fixed maturities, primarily available for sale at fair value $ 94,725 $ 95,849
Equity securities, primarily at fair value (1) 6,728 6,014
Venture capital, at fair value (2) 5,005 4,160
Short-term and other 6,478 5,322
-----------------------------------
$112,936 $111,345
- --------------------------------------------------------------------------------------------------
(1) Restated to reflect the 2000 conversion of a portion of the convertible
debt of Nikko into common stock. See Note 1.
(2) For the three months ended March 31, 2000, net gains on investments
held by venture capital subsidiaries totaled $1.31 billion, of which
$1.28 billion and $246 million represented gross unrealized gains and
losses, respectively. For the three months ended March 31, 1999, net
gains on investments held by venture capital subsidiaries totaled $138
million, of which $96 million and $158 million represented gross
unrealized gains and losses, respectively.
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in fixed maturities and equity
securities at March 31, 2000 and December 31, 1999 were as follows:
MARCH 31, 2000 December 31, 1999 (1)
----------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR Amortized Fair
IN MILLIONS OF DOLLARS COST GAINS LOSSES VALUE Cost Value
- -----------------------------------------------------------------------------------------------------------------------------------
FIXED MATURITY SECURITIES HELD TO MATURITY,
PRINCIPALLY MORTGAGE-BACKED SECURITIES $32 $ - $ - $32 $33 $36
----------------------------------------------------------------------------------
FIXED MATURITY SECURITIES AVAILABLE FOR SALE
Mortgage-backed securities, principally
obligations of U.S. Federal agencies $14,528 $ 48 $ 434 $14,142 $14,165 $13,735
U.S. Treasury and Federal agency 5,661 115 57 5,719 7,082 6,998
State and municipal 13,621 330 235 13,716 13,733 13,489
Foreign government 25,608 562 237 25,933 25,565 25,761
U.S. corporate 24,713 224 578 24,359 24,386 23,888
Other debt securities (2) 9,623 1,329 128 10,824 9,083 11,945
----------------------------------------------------------------------------------
$93,754 $2,608 $1,669 $94,693 $94,014 $95,816
----------------------------------------------------------------------------------
EQUITY SECURITIES (3) (4) $5,218 $1,688 $178 $6,728 $5,126 $6,014
- -----------------------------------------------------------------------------------------------------------------------------------
(1) At December 31, 1999, gross unrealized gains and losses on fixed
maturities and equity securities totaled $5,174 million and $2,484
million, respectively.
(2) Investments in convertible debt of Nikko are included in other debt
securities.
(3) Includes non-marketable equity securities carried at cost, which are
reported in both the amortized cost and fair value columns.
(4) Restated to reflect the 2000 conversion of a portion of the convertible
debt of Nikko into common stock. See Note 1.
- --------------------------------------------------------------------------------
36
5. TRADING ACCOUNT ASSETS AND LIABILITIES
Trading account assets and liabilities at market value consisted of the
following:
MARCH 31, December 31,
IN MILLIONS OF DOLLARS 2000 1999
- --------------------------------------------------------------------------------------------------
TRADING ACCOUNT ASSETS
U.S. Treasury and Federal agency securities $ 27,060 $25,865
State and municipal securities 1,954 2,121
Foreign government securities 9,972 9,243
Corporate and other debt securities 17,113 13,858
Derivative and other contractual commitments (1) 33,992 31,646
Equity securities 14,476 11,910
Mortgage loans and collateralized mortgage securities 5,966 5,663
Other 7,506 8,849
-----------------------------------
$118,039 $109,155
- --------------------------------------------------------------------------------------------------
TRADING ACCOUNT LIABILITIES
Securities sold, not yet purchased $44,404 $52,051
Derivative and other contractual commitments (1) 39,083 39,053
-----------------------------------
$83,487 $91,104
- --------------------------------------------------------------------------------------------------
(1) Net of master netting agreements and securitization.
- --------------------------------------------------------------------------------
6. DEBT
Investment banking and brokerage borrowings consisted of the following:
MARCH 31, December 31,
IN MILLIONS OF DOLLARS 2000 1999
- --------------------------------------------------------------------------------------------------
Commercial paper $13,720 $12,578
Bank borrowings 524 536
Other 588 605
-----------------------------------
$14,832 $13,719
- --------------------------------------------------------------------------------------------------
Short-term borrowings consisted of commercial paper and other short-term
borrowings as follows:
MARCH 31, December 31,
IN MILLIONS OF DOLLARS 2000 1999
- --------------------------------------------------------------------------------------------------
COMMERCIAL PAPER
Citigroup Inc. $ 893 $ -
Citicorp 3,903 5,027
-----------------------------------
4,796 5,027
OTHER SHORT-TERM BORROWINGS 11,963 12,059
-----------------------------------
$16,759 $17,086
- --------------------------------------------------------------------------------------------------
Long-term debt, including its current portion, consisted of the following:
MARCH 31, December 31,
IN MILLIONS OF DOLLARS 2000 1999
- --------------------------------------------------------------------------------------------------
Citigroup Inc. $ 5,225 $ 4,181
Citicorp 23,526 24,068
Salomon Smith Barney Holdings Inc. 17,650 17,970
Travelers Property Casualty Corp. 850 850
The Travelers Insurance Group Inc. 21 23
-----------------------------------
$47,272 $47,092
- --------------------------------------------------------------------------------------------------
37
RESTRUCTURING-RELATED ITEMS
In 1999, Citigroup recorded restructuring charges of $131 million, including
additional severance charges of $49 million as a result of the continuing
implementation of 1998 restructuring initiatives, as well as $82 million (the
1999 charge) of exit costs associated with new initiatives in the Global
Consumer business primarily related to the reconfiguration of certain branch
operations outside the U.S., the downsizing of certain marketing operations, and
the exit of a non-strategic business. These initiatives will be fully
implemented during 2000. The 1999 charge included $62 million related to
employee severance, $14 million related to exiting leasehold and other
contractual obligations, and $6 million related to the write-down to estimated
salvage value of assets available for immediate disposal. The $62 million
portion of the charge related to employee severance reflects the costs of
eliminating approximately 750 positions.
In December 1998, Citigroup recorded a restructuring charge of $1.122 billion,
reflecting exit costs associated with business improvement and integration
initiatives to be implemented over a 12 to 18 month period. The charge included
$760 million related to employee severance for the elimination of approximately
11,900 positions, after considering attrition and redeployment within the
Company. The overall workforce reduction, net of anticipated rehires to fill
relocated positions, was expected to be approximately 10,400 positions
worldwide. The charge also included $327 million related to exiting leasehold
and other contractual obligations, and $35 million related to the write-down to
estimated salvage value of assets that were available for immediate disposal.
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 (in addition to normal scheduled depreciation on these assets) is being
recognized over these shortened lives, $20 million and $81 million of which were
recorded in the first quarters of 2000 and 1999, respectively.
In 1997, Citigroup recorded restructuring charges of $1.718 billion, consisting
of an $880 million restructuring charge related to cost-management programs and
customer service initiatives to improve operational efficiency and productivity
in the Citicorp businesses, and an $838 million charge related to the Salomon
merger. The 1997 restructuring reserve was fully utilized as of December 31,
1999.
The status of the 1999, 1998 and 1997 restructuring initiatives is summarized in
the following table.
RESTRUCTURING INITIATIVES ACTIVITY
RESTRUCTURING INITIATIVES
- ----------------------------------------------------------------------------------------------------------------------------
IN MILLIONS OF DOLLARS 1999 1998 1997 Total
- ----------------------------------------------------------------------------------------------------------------------------
Restructuring Charges $ 82 $1,122 $1,718 $2,922
Additional Severance Charges - 49 - 49
Utilization (1) (38) (894) (1,076) (2,008)
Changes in Estimates - (151) (642) (793)
----------------------------------------------------------------------
BALANCE AT MARCH 31, 2000 $ 44 $ 126 $ - $ 170
- ----------------------------------------------------------------------------------------------------------------------------
(1) Utilization amounts include translation effects on the restructuring
reserve.
- --------------------------------------------------------------------------------
The 1999 restructuring reserve utilization included $6 million related to the
write-down to estimated salvage value of assets available for immediate
disposal, as well as $32 million of severance and other exit costs, occurring
primarily in 1999 (of which $11 million related to employee severance and $3
million related to leasehold and other exit costs have been paid in cash and $18
million is legally obligated), together with translation effects. At March 31,
2000, approximately 160 gross staff positions have been eliminated under these
programs, including 100 in the 2000 first quarter.
The 1998 restructuring reserve utilization includes $35 million of non-cash
charges for equipment and premises write-downs as well as $816 million of
severance and other exit costs, occurring primarily in 1999 (of which $461
million related to employee severance and $154 million related to leasehold and
other exit costs have been paid in cash and $201 million is legally obligated),
together with translation effects. Utilization, including translation effects,
in the first quarter of 2000 was $81 million. Through March 31, 2000,
approximately 6,500 gross staff positions have been eliminated under these
programs, including 600 in the 2000 first quarter.
Changes in estimates are attributable to facts and circumstances arising
subsequent to an original restructuring charge. During the second half of 1999,
changes in estimates resulted in a $151 million reduction in the reserve for
1998 restructuring initiatives, attributable to lower than anticipated costs of
implementing certain projects and a reduction in the scope of certain
initiatives. Changes in estimates related to the 1997 restructuring initiatives
included $568 million of reductions (of which $211 million occurred in the first
quarter of 1999) related to the Salomon Smith Barney reserve, primarily related
to the Seven World Trade Center lease, and $74 million related to the Citicorp
reserve. Adjustments related to the Seven World Trade Center lease during 1999
were attributable to the reassessment of space needed due to the Citicorp
merger, which indicated the need for increased occupancy and the utilization of
space previously considered excessive; adjustments during 1998 resulted from
negotiations on a
38
sublease which indicated that excess space could be disposed of on terms more
favorable than had been originally estimated. Other changes in estimates are
attributable to lower severance costs due to higher than anticipated levels of
attrition and redeployment within the Company, and other unforeseen changes
including those resulting from the Citicorp merger.
Additional information about restructuring-related items, including the business
segments affected, may be found in the 1999 Annual Report and Form 10-K.
8. EARNINGS PER SHARE
The following reflects the income and share data used in the basic and diluted
earnings per share computations for the three months ended March 31, 2000 and
1999.
THREE MONTHS ENDED MARCH 31,
- --------------------------------------------------------------------------------------------------
IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2000 1999
- --------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES $3,590 $2,489
Cumulative effect of accounting changes - (127)
Preferred dividends (30) (40)
-----------------------------------
INCOME AVAILABLE TO COMMON STOCKHOLDERS FOR BASIC EPS 3,560 2,322
Effect of dilutive securities - 3
-----------------------------------
INCOME AVAILABLE TO COMMON STOCKHOLDERS FOR DILUTED EPS $3,560 $2,325
- --------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING APPLICABLE TO 3,331.6 3,340.2
BASIC EPS
Effect of dilutive securities:
Options 81.0 65.7
Restricted stock 22.3 23.7
Convertible securities 0.8 10.4
-----------------------------------
ADJUSTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,435.7 3,440.0
APPLICABLE TO DILUTED EPS
- --------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE
Income before cumulative effect of accounting changes $1.07 $0.73
Cumulative effect of accounting changes - (0.03)
-----------------------------------
NET INCOME $1.07 $0.70
- --------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE
Income before cumulative effect of accounting changes $1.04 $0.71
Cumulative effect of accounting changes - (0.03)
-----------------------------------
NET INCOME $1.04 $0.68
- --------------------------------------------------------------------------------------------------
9. TRADING SECURITIES, COMMODITIES, DERIVATIVES AND RELATED RISKS
DERIVATIVE AND FOREIGN EXCHANGE CONTRACTS
The table below presents the aggregate notional principal amounts of Citigroup's
outstanding derivative and foreign exchange contracts at March 31, 2000 and
December 31, 1999, along with the related balance sheet credit exposure.
Additional information concerning Citigroup's derivative and foreign exchange
products and activities, including a description of accounting policies, and
credit and market risk management process is provided in the 1999 Annual Report
and Form 10-K.
NOTIONAL BALANCE SHEET
PRINCIPAL AMOUNTS CREDIT EXPOSURE (1) (2)
----------------------------------------------------------------------
MAR. 31, Dec. 31, MAR. 31, Dec. 31,
IN BILLIONS OF DOLLARS 2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
Interest rate products $5,447.6 $5,351.0 $8.9 $10.2
Foreign exchange products 2,077.1 1,797.1 14.5 11.4
Equity products 179.1 144.2 9.6 9.3
Commodity products 38.8 34.9 0.7 0.4
Credit derivative products 50.3 46.0 0.3 0.3
-----------------------------------
$34.0 $31.6
- ----------------------------------------------------------------------------------------------------------------------------
(1) There is no balance sheet credit exposure for futures contracts because
they settle daily in cash, and none for written options because they
represent obligations (rather than assets) of Citigroup.
(2) The balance sheet credit exposure reflects $63.3 billion and $65.4
billion of master netting agreements in effect at March 31, 2000 and
December 31, 1999, respectively. Master netting agreements mitigate
credit risk by permitting the offset of amounts due from and to
individual counterparties in the event of counterparty default. In
addition, Citibank has securitized and sold net receivables, and the
associated credit risk related to certain derivative and foreign
exchange contracts via Markets Assets Trust, which amounted to $2.2
billion at both March 31, 2000 and December 31, 1999.
- --------------------------------------------------------------------------------
39
The tables below provide data on the notional principal amounts and maturities
of end-user (non-trading) derivatives, along with additional data on end-user
interest rate swaps and net purchased option positions at the end of the first
quarter of 2000.
END-USER DERIVATIVE INTEREST RATE AND FOREIGN EXCHANGE CONTRACTS
NOTIONAL PRINCIPAL
AMOUNTS PERCENTAGE OF MARCH 31, 2000 AMOUNT MATURING
------------------------------------------------------------------------------
MAR. 31, Dec. 31, Within 1 to 2 to 3 to 4 to After
IN BILLIONS OF DOLLARS 2000 1999 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE PRODUCTS
Futures contracts $ 13.9 $ 7.1 100% -% -% -% -% -%
Forward contracts 3.1 3.3 100 - - - - -
Swap agreements 103.0 104.7 32 11 12 13 9 23
Option contracts 8.9 7.1 26 13 11 3 29 18
FOREIGN EXCHANGE PRODUCTS
Futures and forward contracts 80.5 50.6 97 2 1 - - -
Cross-currency swaps 6.9 7.0 11 14 30 11 14 20
CREDIT DERIVATIVES PRODUCTS 29.2 29.2 2 3 8 6 40 41
- ------------------------------------------------------------------------------------------------------------------------------------
END-USER INTEREST RATE SWAPS AND NET PURCHASED OPTIONS AS OF MARCH 31, 2000
REMAINING CONTRACTS OUTSTANDING --
NOTIONAL PRINCIPAL AMOUNTS
----------------------------------------------------------
IN BILLIONS OF DOLLARS 2000 2001 2002 2003 2004 2005
- -------------------------------------------------------------------------------------------------------------------------
RECEIVE FIXED SWAPS $71.0 $56.8 $47.8 $37.7 $26.0 $17.7
Weighted-average fixed rate 6.3% 6.4% 6.4% 6.4% 6.5% 6.6%
PAY FIXED SWAPS 14.7 10.5 8.9 7.2 6.0 5.3
Weighted-average fixed rate 6.1% 6.2% 6.2% 6.3% 6.3% 6.4%
BASIS SWAPS 17.3 2.3 1.1 0.8 0.4 0.4
PURCHASED CAPS (INCLUDING COLLARS) 0.8 - - - - -
Weighted-average cap rate purchased 7.1% -% -% -% -% -%
PURCHASED FLOORS 5.7 4.4 3.8 2.8 2.7 0.1
Weighted-average floor rate purchased 6.2% 6.2% 6.2% 7.3% 7.3% 5.8%
WRITTEN FLOORS RELATED TO PURCHASED CAPS (COLLARS) 0.1 - - - - -
Weighted-average floor rate written 8.4% -% -% -% -% -%
WRITTEN CAPS RELATED TO OTHER PURCHASED CAPS (1) 2.3 2.2 1.7 1.7 1.5 1.5
Weighted-average cap rate written 9.8% 9.8% 10.6% 10.6% 10.7% 10.7%
- -------------------------------------------------------------------------------------------------------------------------
THREE-MONTH FORWARD LIBOR RATES (2) 6.3% 7.2% 7.3% 7.2% 7.2% 7.3%
- -------------------------------------------------------------------------------------------------------------------------
(1) Includes written options related to purchased options embedded in other
financial instruments.
(2) Represents the implied forward yield curve for three-month LIBOR as of
March 31, 2000, provided for reference.
- --------------------------------------------------------------------------------
10. CONTINGENCIES
It is difficult to estimate the reserves for environmental and asbestos-related
claims due to the vagaries of court coverage decisions, plaintiffs' expanded
theories of liability, the risks inherent in major litigation and other
uncertainties. Conventional actuarial techniques are not used to estimate such
reserves.
The reserves carried for environmental and asbestos claims at March 31, 2000 are
the Company's best estimate of ultimate claims and claim adjustment expenses,
based upon known facts and current law. However, the conditions surrounding the
final resolution of these claims continue to change. Currently, it is not
possible to predict changes in the legal and legislative environment and their
impact on the future development of asbestos and environmental claims. Such
development will be affected by future court decisions and interpretations as
well as changes in legislation applicable to such claims. Because of these
future unknowns, additional liabilities may arise for amounts in excess of the
current reserves. These additional amounts, or a range of these additional
amounts, cannot now be reasonably estimated, and could result in a liability
exceeding reserves by an amount that would be material to the Company's
operating results in a future period. However, the Company believes that it is
not likely that these claims will have a material adverse effect on the
Company's financial condition or liquidity.
In the ordinary course of business, Citigroup and/or its subsidiaries are
also defendants or co-defendants in various litigation matters, other than
those described above. Although there can be no assurances, the Company
believes, based on information currently available, that the ultimate
resolution of these legal proceedings would not be likely to have a material
adverse effect on its results of operations, financial condition or liquidity.
40
FINANCIAL DATA SUPPLEMENT
CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS
MAR. 31, Dec. 31, Mar. 31,
IN MILLIONS OF DOLLARS 2000 1999 1999
- ----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL CASH-BASIS LOANS
Collateral dependent (at lower of cost or collateral value) (1) $ 237 $ 241 $ 358
Other 1,218 1,162 1,277
----------------------------------------------------
TOTAL $1,455 $1,403 $1,635
- ----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL CASH-BASIS LOANS
In U.S. offices $ 299 $ 256 $ 452
In offices outside the U.S. 1,156 1,147 1,183
----------------------------------------------------
TOTAL $1,455 $1,403 $1,635
- ----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL RENEGOTIATED LOANS
In U.S. offices $15 $16 $ -
In offices outside the U.S. 31 43 47
----------------------------------------------------
TOTAL $46 $59 $47
- ----------------------------------------------------------------------------------------------------------------------------
CONSUMER LOANS ON WHICH ACCRUAL OF INTEREST HAD BEEN SUSPENDED
In U.S. offices $ 713 $ 724 $ 771
In offices outside the U.S. 1,504 1,506 1,481
----------------------------------------------------
TOTAL $2,217 $2,230 $2,252
- ----------------------------------------------------------------------------------------------------------------------------
ACCRUING LOANS 90 OR MORE DAYS DELINQUENT (2)
In U.S. offices $ 774 $ 732 $ 610
In offices outside the U.S. 418 452 477
----------------------------------------------------
TOTAL $1,192 $1,184 $1,087
- ----------------------------------------------------------------------------------------------------------------------------
(1) A cash-basis loan is defined as collateral dependent when repayment is
expected to be provided solely by the underlying collateral and there
are no other available and reliable sources of repayment, in which case
the loans are written down to the lower of cost or collateral value.
(2) Substantially all consumer loans, of which $409 million, $379 million,
and $302 million are government-guaranteed student loans at March 31,
2000, December 31, 1999, and March 31, 1999, respectively.
- --------------------------------------------------------------------------------
OTHER REAL ESTATE OWNED AND ASSETS PENDING DISPOSITION
MAR. 31, Dec. 31, Mar. 31,
IN MILLIONS OF DOLLARS 2000 1999 1999
- --------------------------------------------------------------------------------------------------------------------
Consumer (1) $189 $204 $217
Commercial (1) 469 486 455
Corporate/Other 9 14 8
-----------------------------------------------------
TOTAL $667 $704 $680
- --------------------------------------------------------------------------------------------------------------------
ASSETS PENDING DISPOSITION (2) $97 $86 $95
- --------------------------------------------------------------------------------------------------------------------
(1) Represents repossessed real estate, carried at lower of cost or
collateral value.
(2) Represents consumer residential mortgage loans that have a high
probability of foreclosure, carried at lower of cost or collateral
value.
- --------------------------------------------------------------------------------
41
DETAILS OF CREDIT LOSS EXPERIENCE
1ST QTR. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
IN MILLIONS OF DOLLARS 2000 1999 1999 1999 1999
- ---------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES
AT BEGINNING OF PERIOD $6,679 $6,706 $6,743 $6,662 $6,617
------------------------------------------------------------------
PROVISION FOR CREDIT LOSSES
Consumer 630 596 595 680 618
Commercial 121 90 37 110 111
------------------------------------------------------------------
751 686 632 790 729
------------------------------------------------------------------
GROSS CREDIT LOSSES
CONSUMER
In U.S. offices 466 429 420 440 391
In offices outside the U.S. 312 310 324 332 304
COMMERCIAL
In U.S. offices 46 26 8 2 1
In offices outside the U.S. 94 130 95 132 130
------------------------------------------------------------------
918 895 847 906 826
------------------------------------------------------------------
CREDIT RECOVERIES
CONSUMER
In U.S. offices 74 54 66 70 55
In offices outside the U.S. 73 82 79 70 63
COMMERCIAL
In U.S. offices 8 11 1 3 2
In offices outside the U.S. 11 46 15 21 18
------------------------------------------------------------------
166 193 161 164 138
------------------------------------------------------------------
NET CREDIT LOSSES
In U.S. offices 430 390 361 369 335
In offices outside the U.S. 322 312 325 373 353
------------------------------------------------------------------
752 702 686 742 688
------------------------------------------------------------------
Other -- net (1) (21) (11) 17 33 4
------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES AT END OF PERIOD $6,657 $6,679 $6,706 $6,743 $6,662
- ---------------------------------------------------------------------------------------------------------------
Net consumer credit losses $631 $603 $599 $632 $577
As a percentage of average consumer loans 1.71% 1.68% 1.73% 1.89% 1.78%
- ---------------------------------------------------------------------------------------------------------------
Net commercial credit losses $121 $99 $87 $110 $111
As a percentage of average commercial loans 0.51% 0.42% 0.37% 0.48% 0.46%
- ---------------------------------------------------------------------------------------------------------------
(1) Primarily includes foreign currency translation effects and the
addition of allowance for credit losses related to acquisitions.
- --------------------------------------------------------------------------------
42
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
Citigroup's Annual Meeting of Stockholders was held on April 18, 2000. At the
meeting:
(1) 16 persons were elected to serve as directors of Citigroup;
(2) the selection of KPMG LLP to serve as the independent auditors
of Citigroup for 2000 was ratified;
(3) an increase in Citigroup's authorized common stock to 10
billion shares was approved;
(4) the Citigroup 2000 Stock Purchase Plan was approved;
(5) a stockholder proposal regarding the honorary director was
defeated;
(6) a stockholder proposal regarding a matching gift program for
stockholders was defeated; and
(7) a stockholder proposal regarding a matching gift program for
employees and retirees was defeated.
The number of votes cast for, against or withheld, and the number of abstentions
with respect to each such matter is set forth below, as are the number of broker
non-votes, where applicable.
FOR AGAINST/WITHHELD ABSTAINED BROKER NON-VOTES
(1) Election of Directors:
NOMINEE
C. Michael Armstrong 2,786,552,388 17,541,883
Alain J.P. Belda 2,787,345,572 16,748,699
Kenneth J. Bialkin 2,755,659,765 48,434,506
Kenneth T. Derr 2,787,122,265 16,972,006
John M. Deutch 2,783,017,052 21,077,219
Ann Dibble Jordan 2,756,055,356 46,424,058
Reuben Mark 2,787,063,165 17,031,106
Michael T. Masin 2,787,244,954 16,849,317
Dudley C. Mecum 2,786,442,718 17,651,553
Richard D. Parsons 2,758,024,061 46,070,210
Andrall E. Pearson 2,756,448,612 47,645,659
Robert E. Rubin 2,786,009,504 18,084,767
Franklin A. Thomas 2,755,887,545 48,206,726
Sanford I. Weill 2,784,641,364 19,452,907
Edgar S. Woolard, Jr. 2,758,106,604 45,987,667
Arthur Zankel 2,757,073,413 47,020,858
(2) Ratification of Auditors 2,786,889,770 6,197,416 11,007,085
(3) Approval of Increase in 2,617,487,314 172,437,120 14,169,837 0
Share Capital
(4) Approval of Citigroup 2000 2,714,520,834 72,303,896 17,269,541
Stock Purchase Plan
(5) Approval of Stockholder 130,090,071 2,087,471,229 55,185,600 531,347,371
Proposal Regarding Honorary
Director
(6) Approval of Stockholder 79,656,995 2,062,716,916 130,372,989 531,347,371
Proposal Regarding Matching
Gift Program for Stockholders
43
(7) Approval of Stockholder 116,575,567 2,025,639,764 130,531,569 531,347,371
Proposal Regarding Matching
Gift Program for Employees
and Retirees
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K.
On January 19, 2000, the Company filed a Current Report on Form 8-K,
dated January 18, 2000, reporting under Item 5 thereof the results of
its operations for the quarter and year ended December 31, 1999, and
certain other selected financial data.
On February 16, 2000, the Company filed a Current Report on Form 8-K,
dated February 16, 2000, reporting under Item 5 thereof and filing as
an exhibit under Item 7 thereof the 1998 Financial Supplement of the
Company.
On February 28, 2000, the Company filed a Current Report on Form 8-K,
dated February 28, 2000, reporting under Item 5 thereof the issuance of
a press release announcing the retirement of John S. Reed, Chairman and
Co-Chief Executive Officer.
No other reports on Form 8-K were filed during the first quarter of
2000; however, on April 18, 2000, the Company filed a Current Report on
Form 8-K, dated April 17, 2000, reporting under Item 5 thereof the
results of its operations for the quarter ended March 31, 2000, and
certain other selected financial data.
44
SIGNATURES
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 12th day of May, 2000.
CITIGROUP INC.
(Registrant)
By /s/TODD S. THOMSON
---------------------------
Todd S. Thomson
Chief Financial Officer
Principal Financial Officer
By /s/IRWIN R. ETTINGER By /s/ROGER W. TRUPIN
--------------------------------- ----------------------------------
Irwin R. Ettinger Roger W. Trupin
Principal Accounting Officer Principal Accounting Officer
45
EXHIBIT INDEX
Exhibit
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
3.01.1 Restated Certificate of Incorporation of Citigroup Inc. (the Company),
incorporated by reference to Exhibit 4.01 to the Company's Registration
Statement on Form S-3 filed December 15, 1998 (No. 333-68949).
3.01.2 Certificate of Designation of 5.321% Cumulative Preferred Stock, Series
YY, of the Company, incorporated by reference to Exhibit 4.45 to
Amendment No. 1 to the Company's Registration Statement on Form S-3
filed January 22, 1999 (No. 333-68949).
3.01.3 Certificate of Amendment to the Restated Certificate of Incorporation
of the Company dated April 18, 2000.
3.02 By-Laws of the Company, as amended, effective October 26, 1999,
incorporated by reference to Exhibit 3.02 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1999
(File No. 1-9924).
10.01 Citigroup 2000 Stock Purchase Plan (effective May 1, 2000),
incorporated by reference to Annex B to the Company's Proxy Statement
dated March 17, 2000 (File No. 1-9924).
12.01 Computation of Ratio of Earnings to Fixed Charges.
12.02 Computation of Ratio of Earnings to Fixed Charges (including preferred
stock dividends).
27.01 Financial Data Schedule.
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.
46