Citibank 2009 Annual Report Download - page 45

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SPECIAL ASSET POOL
Special Asset Pool (SAP), which constituted approximately 28% of Citi Holdings by assets as of December 31, 2009, is a portfolio of securities, loans and other
assets that Citigroup intends to actively reduce over time through asset sales and portfolio run-off. At December 31, 2009, SAP had $154 billion of assets. SAP
assets have declined by $197 billion or 56% from peak levels in 2007 reflecting cumulative write-downs, asset sales and portfolio run-off. Assets have been
reduced by $87 billion from year-ago levels. Approximately 60% of SAP assets are now accounted for on an accrual basis, which has helped reduce income
volatility.
In millions of dollars 2009 2008 2007
% Change
2009 vs. 2008
% Change
2008 vs. 2007
Net interest revenue $ 3,173 $ 3,332 $ 2,723 (5)% 22%
Non-interest revenue (6,855) (42,906) (20,619) 84 NM
Revenues, net of interest expense $(3,682) $(39,574) $(17,896) 91% NM
Total operating expenses $ 896 $ 988 $ 1,070 (9)% (8)%
Net credit losses $ 5,420 $ 909 $ 436 NM NM
Provision for unfunded lending commitments 111 (172) 71 NM NM
Credit reserve builds/(release) (483) 2,844 378 NM NM
Provisions for credit losses and for benefits and claims $ 5,048 $ 3,581 $ 885 41% NM
(Loss) from continuing operations before taxes $(9,626) $(44,143) $(19,851) 78% NM
Income taxes (benefits) (4,323) (17,149) (7,740) 75 NM
(Loss) from continuing operations $(5,303) $(26,994) $(12,111) 80% NM
Net income (loss) attributable to noncontrolling interests (17) (205) 149 92 NM
Net (loss) $(5,286) $(26,789) $(12,260) 80% NM
EOP assets (in billions of dollars) $ 154 $ 241 $ 351 (36)% (31)%
NM Not meaningful
2009 vs. 2008
Revenues, net of interest expense increased $35.9 billion in 2009, primarily
due to the absence of significant negative revenue marks occurring in the
prior year. Total negative marks were $1.9 billion in 2009 as compared to
$38.1 billion in 2008, as described in more detail below. Revenue in the
current year included a positive $1.3 billion CVA on derivative positions,
excluding monoline insurers, and positive marks of $0.8 billion on
subprime-related direct exposures. These positive revenues were partially
offset by negative revenues of $1.5 billion on Alt-A mortgages, $1.3 billion
of write-downs on commercial real estate, and a negative $1.6 billion CVA
on the monoline insurers and fair value option liabilities. Revenue was also
affected by negative marks on private equity positions and write-downs on
highly leveraged finance commitments.
Operating expenses decreased 9% in 2009, mainly driven by lower
compensation and lower volumes and transaction expenses, partially offset
by costs associated with the U.S. government loss-sharing agreement, which
Citi exited in the fourth quarter of 2009.
Provisions for credit losses and for benefits and claims increased
$1.5 billion, primarily driven by $4.5 billion in increased net credit losses,
partially offset by a lower reserve build of $3.0 billion.
Assets declined 36% versus the prior year, primarily driven by amortization
and prepayments, sales, marks and charge-offs. Asset sales during the
fourth quarter of 2009 ($10 billion) were executed at or above Citi’s marks
generating $800 million in pretax gains for the quarter.
2008 vs. 2007
Revenues, net of interest expense decreased $21.7 billion, primarily due
to negative net revenue marks. Revenue included $14.3 billion of write-
downs on subprime-related direct exposures and a negative $6.8 billion CVA
related to the monoline insurers and derivative positions. Revenue was also
negatively affected by write-downs on highly leveraged finance commitments,
Alt-A mortgage revenue, write-downs on structured investment vehicles and
commercial real estate, and mark-to-market on auction rate securities. Total
negative marks were $38.1 billion in 2008 as compared to $20.2 billion in
2007, which are described in more detail below.
Operating expenses decreased 8%, mainly driven by lower compensation
and transaction expenses.
Provisions for credit losses and for benefits and claims increased $2.7
billion, primarily due to a $2.2 billion increase in the reserve build and an
increase in net credit losses of $0.5 billion.
Assets declined 31% versus the prior year, primarily driven by amortization
and prepayments, sales, and marks and charge-offs.