C-9.30.2014-10Q
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
Commission file number 1-9924
Citigroup Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
 
52-1568099
(I.R.S. Employer Identification No.)
399 Park Avenue, New York, NY
(Address of principal executive offices)
 
10022
(Zip code)
(212) 559-1000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
 
Non-accelerated filer o
 (Do not check if a smaller reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:
Common stock outstanding as of September 30, 2014: 3,029,488,232
Available on the web at www.citigroup.com

 



Inside Cover Page




CITIGROUP INC. THIRD QUARTER 2014 — FORM 10-Q
OVERVIEW
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Summary
Summary of Selected Financial Data
SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
CITICORP
Global Consumer Banking (GCB)
North America GCB
EMEA GCB
Latin America GCB
Asia Global GCB
Institutional Clients Group
Corporate/Other
CITI HOLDINGS
BALANCE SHEET REVIEW
OFF-BALANCE-SHEET
  ARRANGEMENTS
CAPITAL RESOURCES
   Current Regulatory Capital Standards
 
   Overview
 
   Basel III Transition Arrangements
 
      Basel III (Full Implementation)
 
      Supplementary Leverage Ratio
 
   Tangible Common Equity, Tangible Book Value
       Per Share and Book Value Per Share
 
MANAGING GLOBAL RISK
Table of Contents—Credit, Market (Including Funding and Liquidity), Country and Cross-Border Risk Sections
FAIR VALUE ADJUSTMENTS FOR DERIVATIVES AND FAIR VALUE OPTION LIABILITIES
CREDIT DERIVATIVES
INCOME TAXES
DISCLOSURE CONTROLS AND PROCEDURES
DISCLOSURE PURSUANT TO SECTION 219 OF THE IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT
FORWARD-LOOKING STATEMENTS
FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LEGAL PROCEEDINGS
UNREGISTERED SALES OF EQUITY, PURCHASES OF EQUITY SECURITIES, DIVIDENDS


1



OVERVIEW

Citigroup’s history dates back to the founding of Citibank in 1812. Citigroup’s original corporate predecessor was incorporated in 1988 under the laws of the State of Delaware. Following a series of transactions over a number of years, Citigroup Inc. was formed in 1998 upon the merger of Citicorp and Travelers Group Inc.
Citigroup is a global diversified financial services holding company, whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, trade and securities services and wealth management. Citi has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions.
Citigroup currently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of Citi’s Global Consumer Banking businesses and Institutional Clients Group; and Citi Holdings, consisting of businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp businesses. For a further description of the business segments and the products and services they provide, see “Citigroup Segments” below, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3 to the Consolidated Financial Statements.
Throughout this report, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.
This Quarterly Report on Form 10-Q should be read in conjunction with Citigroup’s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the U.S. Securities and Exchange Commission (SEC) on March 3, 2014, including the historical audited consolidated financial statements of Citigroup reflecting certain realignments and reclassifications set forth in Citigroup’s Form 8-K filed with the SEC on June 13, 2014 (2013 Annual Report on Form 10-K), and Citigroup’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 filed with the SEC on May 2, 2014 (First Quarter of 2014 Form 10-Q) and August 1, 2014 (Second Quarter of 2014 Form 10-Q).
Additional information about Citigroup is available on Citi’s website at www.citigroup.com. Citigroup’s recent annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, as well as other filings with the SEC, are available free of charge through Citi’s website by clicking on the “Investors” page and selecting “All SEC Filings.” The SEC’s website also contains current reports, information statements, and other information regarding Citi at www.sec.gov.
Certain reclassifications, including a realignment of certain businesses, have been made to the prior periods’ financial statements to conform to the current period’s presentation. For information on certain recent such reclassifications, see Note 3 to the Consolidated Financial Statements.




2



As described above, Citigroup is managed pursuant to the following segments:
*
On October 14, 2014, Citigroup announced that it intends to exit its consumer businesses in 11 markets as well as its consumer finance business in Korea. For additional information, see “Executive Summary” and “Global Consumer Banking” below. Effective in the first quarter of 2015, these businesses will be reported as part of Citi Holdings. Citi intends to release a revised Quarterly Financial Data Supplement reflecting this realignment prior to the release of first quarter of 2015 earnings information.

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

3



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


EXECUTIVE SUMMARY

On October 30, 2014, Citi announced that it had adjusted downward its third quarter of 2014 financial results, from those previously reported on October 14, 2014, due to a $600 million (pretax and after-tax) increase in legal expenses recorded within Citicorp (within Corporate/Other). For additional information, see Citi’s Form 8-K filed with the SEC on October 30, 2014. Citi’s results of operations and financial condition for the third quarter of 2014, as reported in this Quarterly Report on Form 10-Q for the period ended September 30, 2014, reflects the impact of this adjustment.

Third Quarter of 2014—Solid Business Performance and Continued Progress on Execution Priorities
Citi’s third quarter of 2014 results reflected solid performance in both Global Consumer Banking (GCB) and the Institutional Clients Group (ICG) as well as positive earnings in Citi Holdings. In GCB, revenues, loans and deposits grew in every region, and in ICG, revenues increased across markets, investment banking and treasury and trade solutions from the prior-year period.
Citi also continued to make progress on its execution priorities during the third quarter, including:

Efficient resource allocation and disciplined expense management: Citi continued to benefit from savings resulting from its previously-announced repositioning actions, as well as ongoing efforts to simplify and streamline the organization. As part of these efforts, on October 14, 2014, Citigroup announced strategic actions to accelerate the transformation of GCB by focusing on those markets where it believes it has the greatest scale, growth potential and ability to provide meaningful returns to its shareholders. As part of these actions, Citigroup intends to exit its consumer businesses in 11 markets, plus its consumer finance business in Korea (for additional information on the markets included in these actions, see “Global Consumer Banking” below). Upon completion of these actions, which Citi expects to be substantially completed by the end of 2015, the new GCB footprint will continue to serve nearly 57 million clients in 24 markets that capture over 95% of GCB’s revenue base as of September 30, 2014. Citi will also continue to serve its institutional clients in these markets, which continue to be an important part of Citi’s global network.
Wind down of Citi Holdings: During the current quarter, Citi completed the sales of its consumer businesses in Greece and Spain, which contributed to a 7% decline in Citi Holdings assets during the quarter. Citi Holdings’ assets declined by $19 billion, or 16%, from the prior-year period.
Utilization of deferred tax assets (DTAs): Citi further reduced its DTAs by approximately $700 million during the third quarter of 2014, and has utilized approximately
 
$2.9 billion year-to-date in 2014 (for additional information, see “Income Taxes” below).

During the remainder of 2014, Citi intends to remain focused on its execution priorities while also being mindful of the continued challenging and somewhat volatile macroeconomic environment, including geopolitical tensions, slower growth in certain markets (including in the emerging markets) and uncertainty over the timing of interest rate increases. Further, while Citi has made progress on its expense reduction efforts, legal and related expenses are likely to remain elevated and Citi expects to continue to incur higher regulatory and compliance costs (see “Expenses” below).

Third Quarter of 2014 Summary Results

Citigroup
Citigroup reported third quarter net income of $2.8 billion or $0.88 per diluted share, compared to $3.2 billion or $1.00 per share in the third quarter of 2013. Results in the third quarter of 2014 included negative $371 million (negative $228 million after-tax) of CVA/DVA, which included a $474 million one-time pretax charge related to the implementation of funding valuation adjustments (FVA) on over-the-counter derivatives (for additional information, see “Fair Value Adjustments for Derivatives and Fair Value Option Liabilities” below and Note 22 to the Consolidated Financial Statements), compared to negative $336 million (negative $208 million after-tax) in the third quarter of 2013. Third quarter of 2013 results also included a $176 million tax benefit related to the resolution of certain tax audit items recorded in Corporate/Other.
Excluding CVA/DVA in both periods and the tax benefit in the third quarter of 2013, Citi reported net income of $3.1 billion in the third quarter of 2014, or $0.95 per diluted share, compared to $3.3 billion, or $1.02 per share, in the prior-year period. The 6% year-over-year decrease was driven by higher expenses and a higher effective tax rate, partially offset by increased revenues and a decline in credit costs (for additional information, see “Income Taxes” below).
Citi’s revenues, net of interest expense, were $19.6 billion in the third quarter of 2014, up 9% versus the prior-year period. Excluding CVA/DVA, revenues were $20.0 billion, up 10% from the third quarter of 2013, as revenues rose 8% in Citicorp and 30% in Citi Holdings. Net interest revenues of $12.2 billion were 6% higher than in the prior-year period, mostly driven by lower funding costs. Excluding CVA/DVA, non-interest revenues were $7.8 billion, up 16% from the prior-year period, driven by the higher revenues in ICG and GCB in Citicorp and higher non-interest revenues in Citi Holdings.

Expenses
Citigroup expenses increased 11% versus the prior-year period to $13.0 billion, largely driven by higher legal and related expenses and repositioning costs in Citicorp. Citi incurred legal and related costs of $1.6 billion (compared to $677


4



million in the prior-year period) and repositioning charges of $382 million (compared to $133 million in the prior-year period).
Excluding the impact of legal and related costs, repositioning charges and the impact of foreign exchange translation into U.S. dollars for reporting purposes (FX translation), which increased reported expenses by approximately $13 million in the third quarter of 2014 as compared to the prior-year period, expenses were $11.0 billion compared to $10.9 billion in the prior-year period. The modest increase from the prior-year period primarily reflected an adjustment to incentive compensation expense driven by better than anticipated performance year-to-date in ICG as well as higher regulatory and compliance costs, partially offset by continued cost reduction initiatives and the overall decline in Citi Holdings assets.
Citicorp’s expenses were $12.1 billion, up 17% from the prior-year period, primarily reflecting higher legal and related expenses, largely in Corporate/Other ($1.4 billion in the current quarter, compared to $82 million in the prior-year period), higher repositioning costs ($374 million in the current quarter, compared to $130 million in the prior-year period), higher regulatory and compliance costs and the adjustment to incentive compensation expense in ICG noted above, partially offset by efficiency savings. Citi expects legal and related expenses in Citicorp will likely remain elevated and episodic going forward. Further, consistent with its execution priorities, Citi currently expects its repositioning charges in the fourth quarter of 2014 to remain at approximately the same level as those recorded in the third quarter of 2014.
Citi Holdings’ expenses were $892 million, down 36% from the prior-year period, reflecting lower legal and related expenses as well as productivity savings and the ongoing decline in Citi Holdings assets, partially offset by $59 million of costs related to the sales of the consumer operations in Greece and Spain.

Credit Costs and Allowance for Loan Losses
Citi’s total provisions for credit losses and for benefits and claims of $1.8 billion declined 11% from the third quarter of 2013. Net credit losses of $2.1 billion were down 14% versus the prior-year period. Consumer net credit losses declined 9% to $2.1 billion, reflecting continued improvements in the North America mortgage portfolio within Citi Holdings, as well as North America Citi-branded cards in Citicorp. Corporate net credit losses decreased to negative $18 million in the third quarter of 2014 compared to positive $96 million in the prior-year period, reflecting improvements in ICG.
The net release of allowance for loan losses and unfunded lending commitments was $552 million in the third quarter of 2014 compared to a $675 million release in the prior-year period. Citicorp’s net reserve release increased to $408 million, due to higher reserve releases in North America GCB, international GCB and ICG, reflecting improved credit trends. Citi Holdings’ net reserve release, decreased 79% to $144 million, primarily due to lower releases related to the North America mortgage portfolio.
Citigroup’s total allowance for loan losses was $16.9 billion at quarter end, or 2.60% of total loans, compared to
 
$20.6 billion, or 3.16%, at the end of the prior-year period. The decline in the total allowance for loan losses reflected the continued wind down of Citi Holdings and overall continued improvement in the credit quality of Citi’s loan portfolios.
The consumer allowance for loan losses was $14.6 billion, or 3.87% of total consumer loans, at quarter end, compared to $17.9 billion, or 4.63% of total loans, at September 30, 2013. Total non-accrual assets fell to $8.0 billion, a 19% reduction compared to September 30, 2013. Corporate non-accrual loans declined 38% to $1.4 billion, while consumer non-accrual loans declined 13% to $6.3 billion, both reflecting the continued improvement in credit trends.

Capital
Citi continued to grow its regulatory capital during the third quarter of 2014, primarily through net income and a further reduction of its DTAs. Citigroup’s Tier 1 Capital and Common Equity Tier 1 Capital ratios, on a fully implemented basis, were 11.4% and 10.7% as of September 30, 2014, respectively, compared to 10.9% and 10.5% as of September 30, 2013 (all based on the Advanced Approaches for determining risk-weighted assets). Citigroup’s estimated Supplementary Leverage ratio as of September 30, 2014, based on the revised final U.S. Basel III rules, was 6.0% compared to 5.3% as of September 30, 2013 (on a pro forma basis to conform to the current period presentation). For additional information on Citi’s capital ratios and related components, see “Capital Resources” below.

Citicorp
Citicorp net income decreased 22% from the prior-year period to $2.6 billion. CVA/DVA, recorded in the ICG, was negative $316 million (negative $194 million after-tax) in the third quarter of 2014, including a $430 million one-time pretax charge related to the implementation of FVA, compared to negative $332 million (negative $206 million after-tax) in the prior-year period (for a summary of CVA/DVA by business within ICG for the third quarters of 2014 and 2013, see “Institutional Clients Group” below). Excluding CVA/DVA in both periods and the tax benefit in the prior-year period described above, Citicorp’s net income was $2.8 billion, down 17% from the prior-year period, as higher expenses, a higher effective tax rate and lower income from discontinued operations were partially offset by higher revenues and continued improvement in credit.
Citicorp revenues, net of interest expense, increased 8% from the prior-year period to $18.0 billion. Excluding CVA/DVA, Citicorp revenues were $18.3 billion in the third quarter of 2014, up 8% from the prior-year period. GCB revenues of $9.6 billion increased 4% versus the prior-year period. North America GCB revenues rose 5% to $5.0 billion, reflecting higher revenues in each of retail banking, Citi-branded card and Citi retail services. Retail banking revenues rose 9% to $1.2 billion versus the prior-year period, reflecting continued volume growth and abating spread headwinds, as well as higher revenues in the U.S. mortgage business driven by a repurchase reserve release of approximately $50 million in the current quarter. Citi-branded cards revenues of $2.1 billion


5



were up 1% versus the prior-year period as purchase sales grew and an improvement in spreads mostly offset the impact of lower average loans. Citi retail services revenues increased 8% to $1.6 billion, mainly reflecting the impact of the Best Buy portfolio acquisition in September 2013. North America GCB average deposits of $170 billion grew 2% year-over-year and average retail loans of $47 billion grew 9%. Average card loans of $109 billion increased 3%, and purchase sales of $63 billion increased 5% versus the prior-year period. For additional information on the results of operations of North America GCB for the third quarter of 2014, see “Global Consumer Banking-North America GCB” below.
International GCB revenues (consisting of EMEA GCB, Latin America GCB and Asia GCB) increased 3% versus the prior-year period to $4.6 billion. Excluding the impact of FX translation, international GCB revenues rose 5% from the prior-year period, driven by 6% growth in Latin America GCB, 4% growth in Asia GCB and 1% growth in EMEA GCB (for the impact of FX translation on the third quarter of 2014 results of operations for each of EMEA GCB, Latin America GCB and Asia GCB, see the table accompanying the discussion of each respective business’ results of operations below). This growth in international GCB revenues, excluding the impact of FX translation, mainly reflected volume growth in all regions and higher investment sales revenues in Asia GCB, partially offset by the ongoing impact of regulatory changes and the Korean franchise repositioning in Asia GCB, as well as the previously-disclosed market exits in EMEA GCB. For additional information on the results of operations of EMEA GCB, Latin America GCB and Asia GCB for the third quarter of 2014, see “Global Consumer Banking” below.
Year-over-year, international GCB average deposits increased 3%, average retail loans increased 6%, investment sales increased 29%, average card loans increased 2% and card purchase sales increased 4%, all excluding the impact of FX translation.
ICG revenues were $8.4 billion in the third quarter of 2014, up 14% from the prior-year period. Excluding CVA/DVA, ICG revenues were $8.7 billion, or 13% higher than the prior-year period. Banking revenues of $4.3 billion, excluding CVA/DVA and the impact of mark-to-market gains on hedges related to accrual loans within corporate lending (see below), increased 11% from the prior-year period, primarily reflecting growth in investment banking revenues. Investment banking revenues increased 32% versus the prior-year period, driven by a 90% increase in advisory revenues to $318 million, a 51% increase in equity underwriting to $298 million and a 9% increase in debt underwriting revenues to $632 million. Private bank revenues, excluding CVA/DVA, increased 8% to $663 million from the prior-year period, as growth in client volumes was partially offset by the impact of spread compression. Corporate lending revenues rose 130% to $533 million, including $91 million of mark-to-market gains on hedges related to accrual loans compared to a $147 million loss in the prior-year period. Excluding the mark-to-market impact on hedges related to accrual loans in both periods, corporate lending revenues rose 17% versus the prior-year period to $442 million, reflecting growth in average loans and improved funding costs, partially offset by lower loan yields.
 
Treasury and trade solutions revenues increased by 1% compared to the prior-year period as volume and fee growth was partially offset by the impact of spread compression globally.
Markets and securities services revenues of $4.3 billion, excluding CVA/DVA, increased 8% from the prior-year period. Fixed income markets revenues of $3.0 billion, excluding CVA/DVA, increased 5% from the prior-year period, reflecting higher securitized products revenues as well as an improvement in rates and currencies. Equity markets revenues of $763 million, excluding CVA/DVA, were up 14% versus the prior-year period, reflecting improved client activity in derivatives. Securities services revenues of $600 million increased 8% versus the prior-year period primarily due to increased volumes, assets under custody and overall client activity. For additional information on the results of operations of ICG for the third quarter of 2014, see “Institutional Clients Group” below.
Corporate/Other revenues decreased to $8 million from $42 million in the prior-year period, driven mainly by hedging activities. For additional information on the results of operations of Corporate/Other for the third quarter of 2014, see “Corporate/Other” below.
Citicorp end-of-period loans increased 3% versus the prior-year period to $576 billion, with 2% growth in consumer loans and 3% growth in corporate loans.

Citi Holdings
Citi Holdings’ net income was $238 million in the third quarter of 2014 compared to a net loss of $115 million in the third quarter of 2013. CVA/DVA was negative $55 million (negative $34 million after-tax) in the third quarter of 2014, including a $44 million one-time pretax charge related to the implementation of FVA, compared to negative $4 million (negative $2 million after-tax) in the prior-year period. Excluding the impact of CVA/DVA, Citi Holdings net income was $272 million, reflecting higher revenues, the lower expenses and lower net credit losses, partially offset by a lower net loan loss reserve release.
Citi Holdings’ revenues increased 26% to $1.6 billion from the prior-year period. Excluding CVA/DVA, Citi Holdings revenues increased 30% to $1.6 billion from the prior-year period. Net interest revenues increased 11% year-over-year to $858 million, largely driven by lower funding costs. Non-interest revenues, excluding CVA/DVA, increased 61% to $785 million from $486 million in the prior-year period, primarily driven by gains on sales, the most significant of which were the sales of the consumer operations in Greece and Spain, partially offset by losses on the redemption of debt associated with funding Citi Holdings assets. For additional information on the results of operations of Citi Holdings for the third quarter of 2014, see “Citi Holdings” below.
Citi Holdings’ assets were $103 billion, 16% below the prior-year period, and represented approximately 5% of Citi’s total GAAP assets and 14% of its risk-weighted assets under Basel III as of quarter-end (based on the Advanced Approaches for determining risk-weighted assets).




6



RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1
Citigroup Inc. and Consolidated Subsidiaries
 
Third Quarter
 
Nine Months
 
In millions of dollars, except per-share amounts and ratios
2014
2013
% Change
2014
2013
% Change
Net interest revenue
$
12,187

$
11,511

6
 %
$
35,892

$
34,823

3
 %
Non-interest revenue
7,417

6,393

16

23,178

23,817

(3
)
Revenues, net of interest expense
$
19,604

$
17,904

9
 %
$
59,070

$
58,640

1
 %
Operating expenses
12,955

11,679

11

40,625

36,116

12

Provisions for credit losses and for benefits and claims
1,750

1,959

(11
)
5,454

6,442

(15
)
Income from continuing operations before income taxes
$
4,899

$
4,266

15
 %
$
12,991

$
16,082

(19
)%
Income taxes
1,985

1,080

84

5,873

4,777

23

Income from continuing operations
$
2,914

$
3,186

(9
)%
$
7,118

$
11,305

(37
)%
Income (loss) from discontinued operations, net of taxes (1)
(16
)
92

NM

(1
)
89

NM

Net income before attribution of noncontrolling interests
$
2,898

$
3,278

(12
)%
$
7,117

$
11,394

(38
)%
Net income attributable to noncontrolling interests
59

51

16

154

177

(13
)
Citigroup’s net income
$
2,839

$
3,227

(12
)%
$
6,963

$
11,217

(38
)%
Less:
 
 


 
 


Preferred dividends-Basic
$
128

$
110

16
 %
$
352

$
123

NM

Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to Basic EPS
44

61

(28
)
108

217

(50
)
Income allocated to unrestricted common shareholders for Basic EPS
$
2,667

$
3,056

(13
)%
$
6,503

$
10,877

(40
)%
Add: Interest expense, net of tax, and dividends on convertible securities and adjustment of undistributed earnings allocated to employee restricted and deferred shares with nonforfeitable rights to dividends, applicable to diluted EPS



$

$
2

(100
)
Income allocated to unrestricted common shareholders for diluted EPS
$
2,667

$
3,056

(13
)
$
6,503

$
10,879

(40
)%
Earnings per share
 
 


 
 



Basic
 
 


 
 



Income from continuing operations
$
0.89

$
0.98

(9
)%
$
2.14

$
3.55

(40
)%
Net income
0.88

1.01

(13
)
2.14

3.58

(40
)
Diluted
 
 



 
 



Income from continuing operations
$
0.88

$
0.98

(10
)%
$
2.14

$
3.55

(40
)%
Net income
0.88

1.00

(12
)
2.14

3.57

(40
)
Dividends declared per common share
0.01

0.01


0.03

0.03



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

7



SUMMARY OF SELECTED FINANCIAL DATA—PAGE 2
Citigroup Inc. and Consolidated Subsidiaries
 
Third Quarter
 
Nine Months
 
In millions of dollars, except per-share amounts, ratios and direct staff
2014
2013
% Change
2014
2013
% Change
At September 30:
 
 
 
 
 
 
Total assets
$
1,882,849

$
1,899,511

(1
)%
 
 
 
Total deposits
942,655

955,460

(1
)
 
 
 
Long-term debt
223,842

221,593

1

 
 
 
Citigroup common stockholders’ equity
203,304

195,603

4

 
 
 
Total Citigroup stockholders’ equity
212,272

200,846

6

 
 
 
Direct staff (in thousands)
243

252

(4
)
 
 
 
Performance Metrics
 
 


 
 
 
Return on average assets
0.59
%
0.69
%


0.49
%
0.80
%
 
Return on average common stockholders’ equity (2)
5.3

6.4



4.4

7.8

 
Return on average total stockholders’ equity (2)
5.3

6.5



4.4

7.7

 
Efficiency ratio
66

65



69

62

 
Basel III Ratios—Transition Arrangements
 
 
 
 
 
 
Common Equity Tier 1 Capital (3)
12.97
%
N/A

 
 
 
 
Tier 1 Capital (3)
12.97

N/A

 
 
 
 
Total Capital (3)
14.40

N/A

 


 
 
Tier 1 Leverage (4)
9.03

N/A

 
 
 
 
Basel III Ratios—Full Implementation
 
 
 
 
 
 
Common Equity Tier 1 Capital (5)
10.66
%
10.50
%
 
 
 
 
Tier 1 Capital (5)
11.43

10.93

 
 
 
 
Total Capital (5)
12.77

13.15

 
 
 
 
Estimated Supplementary Leverage Ratio (6)
5.99

5.26

 
 
 
 
Citigroup common stockholders’ equity to assets
10.80
%
10.30
%
 


 
 
Total Citigroup stockholders’ equity to assets
11.27

10.57

 


 
 
Dividend payout ratio (7)
1.1

1.0

 
 
 
 
Book value per common share
$
67.11

$
64.49

4
 %


 
 
Ratio of earnings to fixed charges and preferred stock dividends
2.37x

2.02x

 
2.16x

2.25x

 
(1)
Discontinued operations include Credicard, Citi Capital Advisors and Egg Banking credit card business. See Note 2 to the Consolidated Financial Statements for additional information on Citi’s discontinued operations.
(2)
The return on average common stockholders’ equity is calculated using net income less preferred stock dividends divided by average common stockholders’ equity. The return on average total Citigroup stockholders’ equity is calculated using net income divided by average Citigroup stockholders’ equity.
(3)
Capital ratios reflecting the capital (numerator) derived under the transition provisions of the final U.S. Basel III rules, which became effective January 1, 2014, and risk-weighted assets (denominator) based on the Advanced Approaches for determining total risk-weighted assets.
(4)
The leverage ratio represents Tier 1 Capital divided by quarterly adjusted average total assets.
(5)
Capital ratios based on the final U.S. Basel III rules, with full implementation assumed for capital components; risk-weighted assets based on the Advanced Approaches for determining total risk-weighted assets.
(6)
Citi’s estimated Supplementary Leverage ratio for the third quarter of 2014 is based on the revised final U.S. Basel III rules. Citi’s estimated Supplementary Leverage ratio for the third quarter of 2013 is presented on a pro forma basis to conform to the current period presentation.
(7) Dividends declared per common share as a percentage of net income per diluted share.
N/A Not available.

8



SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
The following tables show the income (loss) and revenues for Citigroup on a segment and business view:
CITIGROUP INCOME
 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars
2014
2013
2014
2013
Income (loss) from continuing operations
 
 
 
 
 
 
CITICORP
 
 
 
 
 
 
Global Consumer Banking
 
 
 
 
 
 
North America
$
1,185

$
894

33
 %
$
3,282

$
3,052

8
 %
EMEA
1

13

(92
)
31

36

(14
)
Latin America
338

264

28

948

966

(2
)
Asia
413

364

13

1,008

1,168

(14
)
Total
$
1,937

$
1,535

26
 %
$
5,269

$
5,222

1
 %
Institutional Clients Group


 




 


North America
$
888

$
508

75
 %
$
3,245

$
2,748

18
 %
EMEA
461

374

23

1,797

2,031

(12
)
Latin America
294

427

(31
)
1,065

1,426

(25
)
Asia
690

431

60

1,753

1,741

1

Total
$
2,333

$
1,740

34
 %
$
7,860

$
7,946

(1
)%
Corporate/Other
$
(1,598
)
$
20

NM

$
(2,488
)
$
(374
)
NM

Total Citicorp
$
2,672

$
3,295

(19
)%
$
10,641

$
12,794

(17
)%
Citi Holdings
$
242

$
(109
)
NM

$
(3,523
)
$
(1,489
)
NM

Income from continuing operations
$
2,914

$
3,186

(9
)%
$
7,118

$
11,305

(37
)%
Discontinued operations
$
(16
)
$
92

NM

$
(1
)
$
89

NM

Net income attributable to noncontrolling interests
59

51

16
 %
154

177

(13
)%
Citigroup’s net income
$
2,839

$
3,227

(12
)%
$
6,963

$
11,217

(38
)%
NM Not meaningful

9



CITIGROUP REVENUES
 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars
2014
2013
2014
2013
CITICORP
 
 
 
 
 
 
Global Consumer Banking
 
 
 
 
 
 
North America
$
4,989

$
4,739

5
 %
$
14,554

$
14,902

(2
)%
EMEA
347

359

(3
)
1,053

1,091

(3
)
Latin America
2,357

2,272

4

6,949

6,913

1

Asia
1,944

1,862

4

5,755

5,790

(1
)
Total
$
9,637

$
9,232

4
 %
$
28,311

$
28,696

(1
)%
Institutional Clients Group


 


 
 


North America
$
3,178

$
2,439

30
 %
$
9,882

$
9,261

7
 %
EMEA
2,263

2,147

5

7,486

7,988

(6
)
Latin America
1,015

1,095

(7
)
3,267

3,541

(8
)
Asia
1,915

1,691

13

5,433

5,733

(5
)
Total
$
8,371

$
7,372

14
 %
$
26,068

$
26,523

(2
)%
Corporate/Other
$
8

$
42

(81
)%
$
184

$
162

14
 %
Total Citicorp
$
18,016

$
16,646

8
 %
$
54,563

$
55,381

(1
)%
Citi Holdings
$
1,588

$
1,258

26
 %
$
4,507

$
3,259

38
 %
Total Citigroup net revenues
$
19,604

$
17,904

9
 %
$
59,070

$
58,640

1
 %


10



CITICORP
Citicorp is Citigroup’s global bank for consumers and businesses and represents Citi’s core franchises. Citicorp is focused on providing best-in-class products and services to customers and leveraging Citigroup’s unparalleled global network, including many of the world’s emerging economies. Citicorp is physically present in approximately 100 countries, many for over 100 years, and offers services in over 160 countries and jurisdictions. Citi believes this global network provides a strong foundation for servicing the broad financial services needs of its large multinational clients and for meeting the needs of retail, private banking, commercial, public sector and institutional clients around the world.
Citicorp consists of the following operating businesses: Global Consumer Banking (which consists of consumer banking in North America, EMEA, Latin America and Asia) and Institutional Clients Group (which includes Banking and Markets and securities services). Citicorp also includes Corporate/Other. At September 30, 2014, Citicorp had $1.8 trillion of assets and $928 billion of deposits, representing 95% of Citi’s total assets and 98% of Citi’s total deposits, respectively.

 
Third Quarter
 
Nine Months
% Change
In millions of dollars except as otherwise noted
2014
2013
% Change
2014
2013
Net interest revenue
$
11,329

$
10,735

6
 %
$
33,159

$
32,510

2
 %
Non-interest revenue
6,687

5,911

13

21,404

22,871

(6
)
Total revenues, net of interest expense
$
18,016

$
16,646

8
 %
$
54,563

$
55,381

(1
)%
Provisions for credit losses and for benefits and claims


 


 
 



Net credit losses
$
1,750

$
1,795

(3
)%
$
5,460

$
5,581

(2
)%
Credit reserve build (release)
(381
)
(104
)
NM

(1,100
)
(722
)
(52
)
Provision for loan losses
$
1,369

$
1,691

(19
)%
$
4,360

$
4,859

(10
)%
Provision for benefits and claims
52

51

2

144

160

(10
)
Provision for unfunded lending commitments
(27
)
108

NM

(78
)
116

NM

Total provisions for credit losses and for benefits and claims
$
1,394

$
1,850

(25
)%
$
4,426

$
5,135

(14
)%
Total operating expenses
$
12,063

$
10,283

17
 %
$
33,675

$
31,639

6
 %
Income from continuing operations before taxes
$
4,559

$
4,513

1
 %
$
16,462

$
18,607

(12
)%
Income taxes
1,887

1,218

55

5,821

5,813


Income from continuing operations
$
2,672

$
3,295

(19
)%
$
10,641

$
12,794

(17
)%
Income (loss) from discontinued operations, net of taxes
(16
)
92

NM

(1
)
89

NM

Noncontrolling interests
55

45

22

149

165

(10
)
Net income
$
2,601

$
3,342

(22
)%
$
10,491

$
12,718

(18
)%
Balance sheet data (in billions of dollars)


 


 
 


Total end-of-period (EOP) assets
$
1,780

$
1,778

 %
 
 


Average assets
1,788

1,735

3

$
1,784

$
1,742

2
 %
Return on average assets
0.58
%
0.76
%


0.79
%
0.98
%


Efficiency ratio (Operating expenses/Total revenues)
67

62



62

57



Total EOP loans
$
576

$
561

3

 
 


Total EOP deposits
$
928

$
914

2

 
 


NM Not meaningful

11



GLOBAL CONSUMER BANKING
Global Consumer Banking (GCB) consists of Citigroup’s four geographical consumer banking businesses that provide traditional banking services to retail customers through retail banking, commercial banking, Citi-branded cards and Citi retail services. GCB is a globally diversified business with 3,436 branches in 35 countries around the world as of September 30, 2014. For the nine months ended September 30, 2014, GCB had $399 billion of average assets and $333 billion of average deposits.
GCB’s overall strategy is to leverage Citi’s global footprint and seek to be the preeminent bank for the emerging affluent and affluent consumers in large urban centers. As of September 30, 2014, Citi had consumer banking operations in 120, or 80%, of the world’s top 150 cities. In credit cards and in certain retail markets, Citi serves customers in a somewhat broader set of segments and geographies.
Citi intends to continue to optimize its branch footprint and further concentrate its presence in major metropolitan areas. Consistent with its strategy, on October 14, 2014, Citi announced that it intends to exit its consumer businesses in the following markets: Costa Rica, El Salvador, Guatemala, Nicaragua, Panama and Peru (in Latin America); Japan, Guam and its consumer finance business in Korea (in Asia); and the Czech Republic, Egypt and Hungary (in EMEA). Citi expects to substantially complete its exit from these businesses by the end of 2015. These consumer businesses, consisting of approximately $29 billion of assets, $7 billion of consumer loans and $26 billion of deposits, each as of September 30, 2014, will be reported as part of Citi Holdings beginning in the first quarter of 2015. For additional information, see “Executive Summary” above.

 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars except as otherwise noted
2014
2013
2014
2013
Net interest revenue
$
7,366

$
7,100

4
 %
$
21,604

$
21,333

1
 %
Non-interest revenue
2,271

2,132

7

6,707

7,363

(9
)
Total revenues, net of interest expense
$
9,637

$
9,232

4
 %
$
28,311

$
28,696

(1
)%
Total operating expenses
$
5,281

$
5,189

2
 %
$
15,932

$
15,826

1
 %
Net credit losses
$
1,738

$
1,730

 %
$
5,305

$
5,424

(2
)%
Credit reserve build (release)
(373
)
(85
)
NM

(909
)
(662
)
(37
)
Provision (release) for unfunded lending commitments
(2
)
15

NM

(8
)
39

NM

Provision for benefits and claims
52

51

2

144

160

(10
)
Provisions for credit losses and for benefits and claims
$
1,415

$
1,711

(17
)%
$
4,532

$
4,961

(9
)%
Income from continuing operations before taxes
$
2,941

$
2,332

26
 %
$
7,847

$
7,909

(1
)%
Income taxes
1,004

797

26

2,578

2,687

(4
)
Income from continuing operations
$
1,937

$
1,535

26
 %
$
5,269

$
5,222

1
 %
Noncontrolling interests
9

4

NM

23

15

53

Net income
$
1,928

$
1,531

26
 %
$
5,246

$
5,207

1
 %
Balance Sheet data (in billions of dollars)


 


 
 


Average assets
$
401

$
391

3
 %
$
399

$
394

1
 %
Return on average assets
1.91
%
1.55
%


1.76
%
1.78
%


Efficiency ratio
55

56



56

55



Total EOP assets
$
400

$
401


 
 


Average deposits
333.0

323.7

3

332.8

326.2

2

Net credit losses as a percentage of average loans
2.30
%
2.41
%


2.38
%
2.55
%


Revenue by business


 


 
 


Retail banking
$
4,164

$
3,928

6
 %
$
12,250

$
13,002

(6
)%
Cards (1)
5,473

5,304

3

16,061

15,694

2

Total
$
9,637

$
9,232

4
 %
$
28,311

$
28,696

(1
)%
Income from continuing operations by business


 


 
 



Retail banking
$
538

$
257

NM

$
1,336

$
1,589

(16
)%
Cards (1)
1,399

1,278

9

3,933

3,633

8

Total
$
1,937

$
1,535

26
 %
$
5,269

$
5,222

1
 %
(Table continues on next page.)


12



Foreign Currency (FX) Translation Impact
 
 


 
 
 
Total revenue-as reported
$
9,637

$
9,232

4
 %
$
28,311

$
28,696

(1
)%
Impact of FX translation (2)

(51
)



(397
)


Total revenues-ex-FX
$
9,637

$
9,181

5
 %
$
28,311

$
28,299

 %
Total operating expenses-as reported
$
5,281

$
5,189

2
 %
$
15,932

$
15,826

1
 %
Impact of FX translation (2)

(29
)



(211
)


Total operating expenses-ex-FX
$
5,281

$
5,160

2
 %
$
15,932

$
15,615

2
 %
Total provisions for LLR & PBC-as reported
$
1,415

$
1,711

(17
)%
$
4,532

$
4,961

(9
)%
Impact of FX translation (2)

(6
)



(69
)


Total provisions for LLR & PBC-ex-FX
$
1,415

$
1,705

(17
)%
$
4,532

$
4,892

(7
)%
Net income-as reported
$
1,928

$
1,531

26
 %
$
5,246

$
5,207

1
 %
Impact of FX translation (2)

(28
)



(92
)


Net income-ex-FX
$
1,928

$
1,503

28
 %
$
5,246

$
5,115

3
 %
(1)
Includes both Citi-branded cards and Citi retail services.
(2)
Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the third quarter of 2014 average exchange rates for all periods presented.
NM Not meaningful


13



NORTH AMERICA GCB
North America GCB provides traditional banking and Citi-branded cards and Citi retail services to retail customers and small to mid-size businesses in the U.S. North America GCB’s 895 retail bank branches as of September 30, 2014 are largely concentrated in the greater metropolitan areas of New York, Chicago, Miami, Washington, D.C., Boston, Los Angeles, San Francisco, Sacramento, San Diego and Las Vegas.
At September 30, 2014, North America GCB had approximately 11.9 million retail banking customer accounts, $47.5 billion of retail banking loans and $171.7 billion of deposits. In addition, North America GCB had approximately 110.7 million Citi-branded and Citi retail services credit card accounts, with $109.5 billion in outstanding card loan balances.

 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars, except as otherwise noted
2014
2013
2014
2013
Net interest revenue
$
4,362

$
4,136

5
 %
$
12,758

$
12,352

3
 %
Non-interest revenue
627

603

4

1,796

2,550

(30
)
Total revenues, net of interest expense
$
4,989

$
4,739

5
 %
$
14,554

$
14,902

(2
)%
Total operating expenses
$
2,404

$
2,423

(1
)%
$
7,177

$
7,368

(3
)%
Net credit losses
$
1,017

$
1,083

(6
)%
$
3,190

$
3,528

(10
)%
Credit reserve build (release)
(340
)
(228
)
(49
)
(1,008
)
(949
)
(6
)
Provisions for benefits and claims
12

17

(29
)
30

44

(32
)
Provision for unfunded lending commitments

3

(100
)
3

3


Provisions for credit losses and for benefits and claims
$
689

$
875

(21
)%
$
2,215

$
2,626

(16
)%
Income from continuing operations before taxes
$
1,896

$
1,441

32
 %
$
5,162

$
4,908

5
 %
Income taxes
711

547

30

1,880

1,856

1

Income from continuing operations
$
1,185

$
894

33
 %
$
3,282

$
3,052

8
 %
Noncontrolling interests
(1
)


(1
)
1

NM

Net income
$
1,186

$
894

33
 %
$
3,283

$
3,051

8
 %
Balance Sheet data (in billions of dollars)


 


 
 



Average assets
$
178

$
173

3
 %
$
177

$
174

2
 %
Return on average assets
2.64
%
2.05
%


2.48
%
2.34
%


Efficiency ratio
48

51



49

49



Average deposits
$
170.4

$
166.5

2

$
170.7

$
165.1

3

Net credit losses as a percentage of average loans
2.59
%
2.88
%


2.74
%
3.19
%


Revenue by business


 


 
 



Retail banking
$
1,228

$
1,124

9
 %
$
3,540

$
4,289

(17
)%
Citi-branded cards
2,115

2,087

1

6,162

6,091

1

Citi retail services
1,646

1,528

8

4,852

4,522

7

Total
$
4,989

$
4,739

5
 %
$
14,554

$
14,902

(2
)%
Income from continuing operations by business


 


 
 



Retail banking
$
105

$
(37
)
NM

$
211

$
432

(51
)%
Citi-branded cards
639

548

17

1,763

1,420

24

Citi retail services
441

383

15

1,308

1,200

9

Total
$
1,185

$
894

33
 %
$
3,282

$
3,052

8
 %


NM Not meaningful


14



3Q14 vs. 3Q13
Net income increased by $292 million to $1.2 billion due to higher revenues, lower expenses and lower cost of credit.
Revenues increased 5%, with revenue growth in each of retail banking, Citi-branded cards and Citi retail services. Net interest revenue increased 5% primarily due to an increase in average loans in Citi retail services driven by the Best Buy portfolio acquisition in September 2013 and continued volume growth in retail banking, which more than offset lower average loans in Citi-branded cards. Non-interest revenue increased 4% primarily due to a representation and warranty repurchase reserve release of approximately $50 million in the current quarter and a 5% increase in total card purchase sales to $63 billion, partially offset by continued declines in revenues due to improving credit and the resulting impact on contractual partner payments in Citi retail services.
Retail banking revenues of $1.2 billion increased 9% due to continued volume-related growth (average loans of $47 billion increased 9% and average deposits of $170 billion increased 2%) versus the prior-year period. The increase in revenues also reflected abating spread compression within the deposit portfolios as well as higher revenues in the U.S. mortgage business driven by the mortgage repurchase reserve release referenced above.
Cards revenues increased 4% as average loans of $109 billion increased 3% versus the prior-year period. In Citi-branded cards, revenues increased 1% as a 4% increase in purchase sales and higher net interest spreads driven by the continued reduction of promotional balances in the portfolio mostly offset the lower average loans (3% decline from the prior-year period). The decline in average loans was driven by the reduction in promotional balances as well as continued increased customer payment rates.
Citi retail services revenues increased 8% primarily due to a 13% increase in average loans driven by the Best Buy acquisition, partially offset by continued declines in revenues due to improving credit and the resulting impact on contractual partner payments. Citi retail services revenues also benefited from lower funding costs, partially offset by a decline in net interest spreads due to a higher percentage of promotional balances within the portfolio. Purchase sales in Citi retail services increased 9% from the prior-year period, driven by the acquisition of the Best Buy portfolio.
Expenses decreased 1% as ongoing cost reduction initiatives were mostly offset by an increase in Citi retail services expenses due to the impact of the Best Buy portfolio acquisition, higher repositioning charges and an increase in legal and related costs. Cost reduction initiatives included the ongoing repositioning of the mortgage business due to the decline in mortgage refinancing activity, as well as continued rationalization of the branch footprint, including reducing the number of overall branches (a 9% decline from the prior-year period).
Provisions decreased 21% due to lower net credit losses (6%) and higher loan loss reserve releases (51%). Net credit losses declined in Citi-branded cards (down 14% to $526 million), partially offset by higher net credit losses in Citi retail services (up 5% to $457 million) driven by the acquisition of the Best Buy portfolio. The loan loss reserve
 
release increased by $115 million from the prior-year period due to the continued improvement in each of the cards portfolios.

2014 YTD vs. 2013 YTD
Year-to-date, North America GCB has experienced similar trends to those described above. Net income increased 8%, mainly due to lower expenses and cost of credit, partially offset by lower revenues.
Revenues decreased 2% primarily due to a 30% decline in non-interest revenues, partially offset by a 3% increase in net interest revenue. Retail banking revenues declined 17% due to significantly lower mortgage origination revenues and spread compression in the deposit portfolios in retail banking, each in the first half of the current year-to-date period as compared to the prior-year period. Cards revenues increased 4% due to a 1% increase in Citi-branded cards revenues and 7% increase in Citi retail services revenues, driven by the factors described above.
Expenses declined 3%, driven by the factors described above.
Provisions decreased 16% due to a 10% decline in net credit losses and a higher loan loss reserve release ($1.0 billion in the current year-to-date period compared to $946 million in the prior-year period), primarily related to cards, partially offset by reserve builds for new loans originated in the Best Buy portfolio.












15



EMEA GCB
    
EMEA GCB provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, primarily in Central and Eastern Europe and the Middle East. The countries in which EMEA GCB has the largest presence are Poland, Russia and the United Arab Emirates. As announced on October 14, 2014, Citi intends to exit its consumer businesses in the Czech Republic, Egypt and Hungary by the end of 2015 (for additional information, see “Executive Summary” and “Global Consumer Banking” above).
At September 30, 2014, EMEA GCB had 146 retail bank branches with approximately 3.2 million retail banking customer accounts, $5.7 billion in retail banking loans, $13.0 billion in deposits, and 2.0 million Citi-branded card accounts with $2.4 billion in outstanding card loan balances.
 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars, except as otherwise noted
2014
2013
2014
2013
Net interest revenue
$
230

$
226

2
 %
$
694

$
709

(2
)%
Non-interest revenue
117

133

(12
)
359

382

(6
)
Total revenues, net of interest expense
$
347

$
359

(3
)%
$
1,053

$
1,091

(3
)%
Total operating expenses
$
326

$
315

3
 %
$
954

$
1,010

(6
)%
Net credit losses
$
25

$
21

19
 %
$
56

$
49

14
 %
Credit reserve build (release)
(2
)
3

NM

1

(17
)
NM

Provision for unfunded lending commitments



1


100

Provisions for credit losses
$
23

$
24

(4
)%
$
58

$
32

81
 %
Income (loss) from continuing operations before taxes
$
(2
)
$
20

NM

$
41

$
49

(16
)%
Income taxes (benefits)
(3
)
7

NM

10

13

(23
)
Income (loss) from continuing operations
$
1

$
13

(92
)%
$
31

$
36

(14
)%
Noncontrolling interests
7

3

NM

17

11

55

Net income (loss)
$
(6
)
$
10

NM

$
14

$
25

(44
)%
Balance Sheet data (in billions of dollars)


 


 
 


Average assets
$
10

$
9

11
 %
$
10

$
10

 %
Return on average assets
(0.24
)%
0.44
%


0.19
%
0.33
%


Efficiency ratio
94

88



91

93



Average deposits
$
13.2

$
12.0

10

$
13.2

$
12.7

4

Net credit losses as a percentage of average loans
1.19
 %
1.08
%


0.91
%
0.82
%


Revenue by business


 


 
 


Retail banking
$
212

$
219

(3
)%
$
650

$
648

 %
Citi-branded cards
135

140

(4
)
403

443

(9
)
Total
$
347

$
359

(3
)%
$
1,053

$
1,091

(3
)%
Income (loss) from continuing operations by business


 


 
 


Retail banking
$
(10
)
$
(7
)
(43
)%
$
(10
)
$
(25
)
60
 %
Citi-branded cards
11

20

(45
)
41

61

(33
)
Total
$
1

$
13

(92
)%
$
31

$
36

(14
)%
Foreign Currency (FX) Translation Impact


 


 
 


Total revenues-as reported
$
347

$
359

(3
)%
$
1,053

$
1,091

(3
)%
Impact of FX translation (1)

(14
)



(28
)


Total revenues-ex-FX
$
347

$
345

1
 %
$
1,053

$
1,063

(1
)%
Total operating expenses-as reported
$
326

$
315

3
 %
$
954

$
1,010

(6
)%
Impact of FX translation (1)

(10
)



(21
)


Total operating expenses-ex-FX
$
326

$
305

7
 %
$
954

$
989

(4
)%
Provisions for credit losses-as reported
$
23

$
24

(4
)%
$
58

$
32

81
 %
Impact of FX translation (1)

(2
)



(3
)


Provisions for credit losses-ex-FX
$
23

$
22

5
 %
$
58

$
29

100
 %
Net income (loss)-as reported
$
(6
)
$
10

NM

$
14

$
25

(44
)%
Impact of FX translation (1)

1




3



Net income (loss)-ex-FX
$
(6
)
$
11

NM

$
14

$
28

(50
)%
(1)
Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the second quarter of 2014 average exchange rates for all periods presented.
NM
Not meaningful

16



The discussion of the results of operations for EMEA GCB below excludes the impact of FX translation for all periods presented. Presentation of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. Citi believes the presentation of EMEA GCB’s results excluding the impact of FX translation is a more meaningful depiction of the underlying fundamentals of the business. For a reconciliation of certain of these metrics to the reported results, see the table above.

3Q14 vs. 3Q13
Net income declined $17 million to a net loss of $6 million as higher expenses and higher credit costs were partially offset by higher revenues.
Revenues increased 1%, mainly driven by volume growth, particularly in investment products, cards and Citi commercial banking, partially offset by lower revenues resulting from the sales of Citi’s consumer operations in Turkey and Romania during 2013. Net interest revenue increased 6%, primarily due to growth in average retail loans (11%) and average cards loans (10%), partially offset by continued spread compression. Interest rate caps on credit cards, particularly in Poland, and the continued low interest rate environment were the main contributors to the lower net interest spreads. Non-interest revenue decreased 9%, mainly reflecting lower revenues due to the sales of the consumer operations in Turkey and Romania, partially offset by continued higher investment fees due to increased sales of higher spread products. Investment sales increased 36%, average deposits increased 10% and cards purchase sales increased 7%. Continued regulatory changes, including caps on interchange rates in Poland, and spread compression will likely continue to negatively impact revenues in EMEA GCB during the remainder of 2014.
Expenses increased 7%, primarily due to higher repositioning charges, continued investment spending on new internal operating platforms and volume-related expenses, partially offset by the impact of the sales of the consumer operations in Turkey and Romania and efficiency savings.
 Provisions increased 5%, as higher net credit losses, primarily in cards and personal installment loans in Russia (see below), were partially offset by a higher loan loss reserve release, particularly in Citi commercial banking (primarily Poland and Turkey).

 

Russia/Ukraine
To date, the imposition of sanctions on Russia has not had a material impact on the results of operations of EMEA GCB, although actions Citi has taken to mitigate its risks and exposures in response to the ongoing political instability, such as limiting its exposure to additional credit risk, have negatively impacted Citi’s ability to grow its consumer business in Russia. In addition, the ongoing economic situation in Russia, coupled with consumer overleveraging in the market, has negatively impacted consumer credit, particularly delinquencies in the Russian card and personal installment loan portfolios (which totaled $1.6 billion as of September 30, 2014, or 0.5% of total GCB loans), and Citi currently expects these trends to continue. Citi has taken these trends into consideration in determining its allowance for loan loss reserves. Any further actions Citi may take to mitigate its exposures or risks, or the imposition of additional sanctions (such as asset freezes) involving Russia or against Russian entities, business sectors, individuals or otherwise, could further negatively impact the results of operations of EMEA GCB. For additional information on Citi’s exposures in these countries, see “Managing Global Risk-Country and Cross-Border Risk” below.

2014 YTD vs. 2013 YTD
Year-to-date, EMEA GCB has experienced similar trends to those described above. Net income decreased 50%, mainly due to higher credit costs and lower revenues, partially offset by lower expenses.
Revenues decreased 1% primarily driven by the lower revenues resulting from the sales of Citi’s consumer operations in Turkey and Romania, partially offset by higher volumes in core markets.
Expenses declined 4%, driven by the impact of the sales of the consumer operations in Turkey and Romania and efficiency savings, partially offset by the continued investment spending on new internal operating platforms.
Provisions increased by $29 million primarily due to the absence of loan loss reserve releases in the current year-to-date period. Net credit losses increased 21% due to a benefit in the prior year-to-date period resulting from the sales of written-off accounts.






17



LATIN AMERICA GCB
Latin America GCB provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest presence in Mexico and Brazil. Latin America GCB includes branch networks throughout Latin America as well as Banco Nacional de Mexico, or Banamex, Mexico’s second-largest bank, with 1,634 branches as of September 30, 2014. As announced on October 14, 2014, Citi intends to exit its consumer businesses in Costa Rica, El Salvador, Guatemala, Nicaragua, Panama and Peru by the end of 2015 (for additional information, see “Executive Summary” and “Global Consumer Banking” above).
At September 30, 2014, Latin America GCB had 1,927 retail branches, with approximately 31.6 million retail banking customer accounts, $29.8 billion in retail banking loans and $45.9 billion in deposits. In addition, the business had approximately 8.9 million Citi-branded card accounts with $11.5 billion in outstanding loan balances.

 
Third Quarter
% Change
Nine Months
% Change
In millions of dollars, except as otherwise noted
2014
2013
2014
2013
Net interest revenue
$
1,611

$
1,575

2
 %
$
4,687

$
4,692

 %
Non-interest revenue
746

697

7

2,262

2,221

2

Total revenues, net of interest expense
$
2,357

$
2,272

4
 %
$
6,949

$
6,913

1
 %
Total operating expenses
$
1,378

$
1,319

4
 %
$
4,052

$
4,011

1
 %
Net credit losses
$
503

$
434

16
 %
$
1,465

$
1,269

15
 %
Credit reserve build (release)
10

168

(94
)
177

310

(43
)
Provision (release) for unfunded lending commitments
(1
)

(100
)
(1
)

(100
)
Provision for benefits and claims
40

34

18

114

116

(2
)
Provisions for loan losses and for benefits and claims (LLR & PBC)
$
552

$
636

(13
)%
$
1,755

$
1,695

4
 %
Income from continuing operations before taxes
$
427

$
317

35
 %
$
1,142

$
1,207

(5
)%
Income taxes
89

53

68

194

241

(20
)
Income from continuing operations
$
338

$
264

28
 %
$
948

$
966

(2
)%
Noncontrolling interests
3

1

NM

7

3

NM

Net income
$
335

$
263

27
 %
$
941

$
963

(2
)%
Balance Sheet data (in billions of dollars)


 


 
 



Average assets
$
80

$
80

 %
$
80

$
82

(2
)%
Return on average assets
1.66
%
1.30
%


1.57
%
1.62
%


Efficiency ratio
58

58



58

58



Average deposits
$
46.9

$
45.0

4

$
46.6

$
45.3

3
 %
Net credit losses as a percentage of average loans
4.81
%
4.22
%


4.69
%
4.16
%


Revenue by business


 


 
 


Retail banking
$
1,534

$
1,483

3
 %
$
4,543

$
4,571

(1
)%
Citi-branded cards
823

789

4

2,406

2,342

3

Total
$
2,357

$
2,272

4
 %
$
6,949

$
6,913

1
 %
Income from continuing operations by business


 


 
 



Retail banking
$
182

$
123

48
 %
$
595

$
541

10
 %
Citi-branded cards
156

141

11

353

425

(17
)
Total
$
338

$
264

28
 %
$
948

$
966

(2
)%
Foreign Currency (FX) Translation Impact


 


 
 



Total revenues-as reported
$
2,357

$
2,272

4
 %
$
6,949

$
6,913

1
 %
Impact of FX translation (1)

(48
)



(273
)


Total revenues-ex-FX
$
2,357

$
2,224

6
 %
$
6,949

$
6,640

5
 %
Total operating expenses-as reported
$
1,378

$
1,319

4
 %
$
4,052

$
4,011

1
 %
Impact of FX translation (1)

(25
)



(149
)


Total operating expenses-ex-FX
$
1,378

$
1,294

6
 %
$
4,052

$
3,862

5
 %
Provisions for LLR & PBC-as reported
$
552

$
636

(13
)%
$
1,755

$
1,695

4
 %
Impact of FX translation (1)

(8
)



(58
)


Provisions for LLR & PBC-ex-FX
$
552

$
628

(12
)%
$
1,755

$
1,637

7
 %
Net income-as reported
$
335

$
263

27
 %
$
941

$
963

(2
)%
Impact of FX translation (1)

(31
)



(70
)


Net income-ex-FX
$
335

$
232

44
 %
$
<