Citibank 2010 Annual Report Download - page 118

116
EXPOSURE TO COMMERCIAL REAL ESTATE
ICG and the SAP, through their business activities and as capital markets
participants, incur exposures that are directly or indirectly tied to the
commercial real estate (CRE) market, and LCL and RCB hold loans that
are collateralized by CRE. These exposures are represented primarily by the
following three categories:
(1) Assets held at fair value include approximately $5.7 billion, of which
approximately $4.5 billion are securities, loans and other items linked to
CRE that are carried at fair value as trading account assets, approximately
$0.7 billion are securities backed by CRE carried at fair value as available-
for-sale (AFS) investments, and approximately $0.5 billion are loans held-
for-sale. Changes in fair value for these trading account assets are reported
in current earnings, while AFS investments are reported in Accumulated
other comprehensive income with credit-related other-than-temporary
impairments reported in current earnings.
The majority of these exposures are classified as Level 3 in the fair value
hierarchy. Over the last several years, weakened activity in the trading
markets for some of these instruments resulted in reduced liquidity, thereby
decreasing the observable inputs for such valuations, and could continue to
have an adverse impact on how these instruments are valued in the future.
See Note 25 to the Consolidated Financial Statements.
(2) Assets held at amortized cost include approximately $1.6 billion
of securities classified as held-to-maturity (HTM) and approximately
$29.3 billion of loans and commitments. HTM securities are accounted for
at amortized cost, subject to other-than-temporary impairment. Loans and
commitments are recorded at amortized cost, less loan loss reserves. The
impact from changes in credit is reflected in the calculation of the allowance
for loan losses and in net credit losses.
(3) Equity and other investments include approximately $3.7 billion of
equity and other investments, such as limited partner fund investments, that
are accounted for under the equity method, which recognizes gains or losses
based on the investor’s share of the net income of the investee.
The following table provides a summary of Citigroup’s global CRE funded
and unfunded exposures at December 31, 2010:
In billions of dollars
December 31,
2010
Institutional Clients Group
CRE exposures carried at fair value (including AFS securities) $ 4.4
Loans and unfunded commitments 17.5
HTM securities 1.5
Equity method investments 3.5
Total ICG $26.9
Special Asset Pool
CRE exposures carried at fair value (including AFS) $ 0.8
Loans and unfunded commitments 5.1
HTM securities 0.1
Equity method investments 0.2
Total SAP $ 6.2
Regional Consumer Banking
Loans and unfunded commitments $ 2.7
Local Consumer Lending
Loans and unfunded commitments $ 4.0
Brokerage and Asset Management
CRE exposures carried at fair value $ 0.5
Total Citigroup $40.3
The above table represents the vast majority of Citi’s direct exposure to
CRE. There may be other transactions that have indirect exposures to CRE
that are not reflected in this table.