Citibank 2008 Annual Report Download - page 3

DEAR FELLOW SHAREHOLDERS,
For a little more than a year, I have had the honor of leading Citi through some of the most
challenging circumstances in its long history. I’m acutely aware of the responsibility you — our
owners — have placed on me and the Citi leadership team, and I can assure you, we are committed
to restoring Citi to profitability as quickly as possible.
I recognize the tremendous loss of value you and your fellow Citi shareholders have endured over
the past months. My commitment to you is to rebuild value with all the energy and urgency that the
times demand.
I am equally sensitive to the enormous financial pressures that homeowners and consumers are
under. Too many hard-working people find themselves in financial straits they never thought
possible. At Citi, we are committed to helping those in urgent need and participating in industry
reforms that will enable the financial system to recover its strength and health.
I’m mindful also of the investment made in Citi by the U.S. government and American taxpayers. Our
commitment to them is to work with the Administration and our regulators to address the nation’s
economic priorities and to do all we can to speed the recovery of our markets.
More than ever, we are committed to helping our clients and customers navigate these markets.
Even in the face of extreme uncertainty, Citi’s goal every day is to drive their success.
Finally, we are also committed to creating a strong company where employees — the people of
Citi — continue to have opportunities to learn as well as the resources necessary to drive
performance. Our teams are working together to ensure that the turnaround we all anticipate
happens quickly.
Fulfilling all of these commitments would be ambitious even in the best of times. But history shows
that Citi is at its best when circumstances call for vision, innovation, and bold action. I have no
illusions about the impact of the severe financial turmoil. But I have no doubt that with continued
hard work, Citi will again be at its best in these difficult times and beyond.
GLOBAL REBALANCING
The environment in 2008 was significantly more challenging than expected. Four key economic
cycles — housing, commodities, institutional leverage, and personal consumption — needed to
rebalance before global financial markets could stabilize. The result has been an unprecedented
global economic disruption and severe challenges to the financial services industry. Regrettably, the
burden of rebalancing has fallen most heavily on homeowners, consumers, and individual investors.
Governments around the world have responded to this pressure with decisive action to ensure the
availability of funding and capital for banks. By the beginning of 2009, the financial industry,
policymakers, and the economy were all inextricably linked. The path to restoring economic
strength, globally and nationally, is the same path that will restore profitability to the banking
industry. We recognize that success depends on all of us working together.
TAKING ACTION TO RESTORE CONFIDENCE
Investor confidence in financial institutions was shaken as the economy worsened considerably in
the fourth quarter of 2008. We participated in the government’s Troubled Asset Relief Program
(TARP), which was designed to provide more capital to banks in light of this environment. In
November, Citi received an additional investment from the U.S. government and purchased
insurance against $301 billion of assets. These programs were designed to address issues of
confidence. Statements of support by the U.S. Treasury and other regulators have reinforced this
effort.
The exchange offer we announced in February 2009 was structured to result in the conversion of a
portion of the U.S. government’s preferred stock investment under TARP, as well as a portion of our
private preferred stock into common stock. This exchange offer was designed to strengthen our
tangible common equity and increase confidence in our capital strength. But it was a very difficult
decision because it was a trade-off between dilution for common shareholders versus the
enhancement of our capital base from which to serve clients and grow our business with confidence.
Ultimately, the trade-off we made will be in the best long-term interest of our shareholders.