Citibank 2010 Annual Report Download - page 239

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Credit Card Securitizations
The Company securitizes credit card receivables through trusts that are
established to purchase the receivables. Citigroup transfers receivables into
the trusts on a non-recourse basis. Credit card securitizations are revolving
securitizations; that is, as customers pay their credit card balances, the cash
proceeds are used to purchase new receivables and replenish the receivables
in the trust. Prior to 2010, such transfers were accounted for as sale
transactions under SFAS 140 and, accordingly, the sold assets were removed
from the Consolidated Balance Sheet and a gain or loss was recognized
in connection with the transaction. With the adoption of SFAS 167, beginning
in 2010 the trusts are treated as consolidated entities, because, as servicer,
Citigroup has power to direct the activities that most significantly impact
the economic performance of the trusts and also holds a seller’s interest and
certain securities issued by the trusts, and provides liquidity facilities to the
trusts, which could result in potentially significant losses or benefits from
the trusts. Accordingly, the transferred credit card receivables are required to
remain on the Consolidated Balance Sheet with no gain or loss recognized.
The debt issued by the trusts to third parties is included in the Consolidated
Balance Sheet.
The Company relies on securitizations to fund a significant portion of
its credit card businesses in North America. The following table reflects
amounts related to the Company’s securitized credit card receivables:
Citicorp Citi Holdings
In billions of dollars 2010 2009 2010 2009
Principal amount of credit card receivables in trusts $67.5 $78.8 $34.1 $42.3
Ownership interests in principal amount of trust credit card receivables
Sold to investors via trust-issued securities $42.0 $66.5 $16.4 $28.2
Retained by Citigroup as trust-issued securities 3.4 5.0 7.1 10.1
Retained by Citigroup via non-certificated interests 22.1 7.3 10.6 4.0
Total ownership interests in principal amount of trust credit card receivables $67.5 $78.8 $34.1 $42.3
Other amounts recorded on the balance sheet related to interests retained in the trusts
Other retained interests in securitized assets N/A $ 1.4 N/A $ 1.6
Residual interest in securitized assets (1) N/A 0.3 N/A 1.2
Amounts payable to trusts N/A 1.2 N/A 0.8
(1) December 31, 2009 balances include net unbilled interest of $0.3 billion for Citicorp and $0.4 billion for Citi Holdings.
N/A Not Applicable
Credit Card Securitizations—Citicorp
No gain or loss from securitization was recognized in 2010, since the transfer
of credit card receivables to the trust did not meet the criteria for sale
accounting. In the years ended December 31, 2009 and 2008, the Company
recorded net gains (losses) from securitization of Citicorp’s credit card
receivables of $349 million and $(1,007) million, respectively. Net gains
(losses) reflect the following:
incremental gains (losses) from new securitizations;•฀
the reversal of the allowance for loan losses associated with receivables sold;•฀
net gains on replenishments of the trust assets offset by other-than-•฀
temporary impairments; and
changes in fair value for the portion of the residual interest classified as •฀
trading assets.