Citibank 2009 Annual Report Download - page 22

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Citigroup is maintaining a cautious stance in light of this uncertain
market environment and continued macroeconomic headwinds. As it enters
2010, Citi is focused on maintaining high levels of capital and liquidity,
rigorous risk management practices and cost discipline. In Citi Holdings,
Citi will continue to focus on reducing assets, which could result in lower
revenues and operating expenses in 2010. In Citicorp, the focus will remain
on serving the company’s core institutional, corporate and retail client base
in the U.S. and around the world. Citi will continue to focus on credit loss
mitigation and expense control, and may continue to invest in areas such as
Asia and Latin America, where economic recovery and growth appear to be
taking hold. Operating expenses may grow modestly in Citicorp in 2010, as a
portion of the cost reductions achieved in Citi Holdings is re-invested in the
core franchise.
Credit costs will likely remain a significant driver of Citigroup’s results
in 2010, particularly in North America, where credit trends will largely
depend on the broader macroeconomic environment, as well as the impact
of industry factors such as CARD Act implementation and the outcome of the
Home Affordable Modification Program (HAMP) and other loss mitigation
efforts. See “Results of Operations—Citicorp—North America Regional
Consumer Banking,” “—Citi Holdings—Local Consumer Lending”
and “Managing Global Risk—Credit Risk” for additional information.
Citi expects U.S. consumer net credit losses to increase modestly in the first
quarter of 2010 from fourth quarter 2009 levels, due in part to expected
seasonal patterns, after which there may be some slight improvement.
However, net credit losses in the second half of 2010 will be dependent on
the macroeconomic environment and success of the company’s ongoing
loss mitigation efforts. Changes to Citigroup’s consumer loan loss reserve
balances will continue to reflect the losses embedded in Citi’s consumer
loan portfolio due to underlying credit trends as well as the impact of
Citi’s forbearance programs. Citi currently expects NIM to remain under
pressure due to its enhanced liquidity position and ongoing de-risking of the
balance sheet.