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2011 Annual Report

Table of contents

  • Page 1
    2011 Annual Report

  • Page 2
    In 2012, Citi celebrates our 200th anniversary. Our principles - common purpose, responsible finance, ingenuity and leadership - are the bridge that connects our 200-year history with the future we want to create. When these principles guide our actions, we endure and thrive. Our special anniversary...

  • Page 3
    ... One team, with one goal: serving our clients and stakeholders Responsible Finance Conduct that is transparent, prudent and dependable Ingenuity Enhancing our clients' lives through innovation that harnesses the breadth and depth of our information, global network and world-class products Leadership...

  • Page 4
    ... oceans, saving 15,000 ships a year from having to round the tip of South America. Thanks to the world's biggest shortcut, trade flourished, economies expanded, and new markets and jobs emerged. At the request of President Theodore Roosevelt, Citi played a central part in financing the construction...

  • Page 5
    ... through the Citi for Cities team. Championing financial inclusion COMMUNITIES aT WORK FUND THERE IS NEW REaSON to be hopeful in low-income communities across America, where some small businesses are getting loans, community centers are being developed and housing units are being renovated...

  • Page 6
    ... access to cash to make a purchase, pay for a service or cover a bill. In 1977, when Citi introduced its first ATM in New York City, there were a miniscule number of such machines anywhere in the world. Four years later, the convenience of ATMs doubled Citi's share of deposits in the market. Today...

  • Page 7
    ... future of retail banking, a world where people have simple access to credit and savings, anywhere at any time. Wriston believed that Citi had to be "responsive to the needs of society," and he invested billions to create Citi's consumer business through the commercialization of credit cards and the...

  • Page 8
    ... by strong growth in Treasury and Trade Solutions. Revenues in international consumer banking grew by 5% (excluding the impact of foreign exchange (FX)) for the year as we opened three million new accounts while increasing average loans and deposits, on a constant-dollar basis, by $12 billion and...

  • Page 9
    ... activity throughout the world. Market activity was down significantly, and our clients reduced their risk exposures. All of our businesses geared to the capital markets - such as Sales and Trading, Securities and Fund Services in GTS, and even investment sales in consumer banking - were adversely...

  • Page 10
    ... in 2011 to meet regulatory requirements, are not discretionary. Some, such as building a common technology platform for our global consumer business, are vital to improving the customer experience globally. Investments in our North America cards business grew by more than $500 million last year...

  • Page 11
    ...the brand of Citi GPS (Global Perspectives & Solutions), reports that provide deep, thematic research relevant to all our clients on major issues facing the world economy. We are making good progress on our pledge to build best-inclass corporate and investment banking capabilities. In 2011, we built...

  • Page 12
    ... Citi is a good investment. We won numerous awards, including Best Bank in Asia from Euromoney and Best Global Private Bank and Transaction Services Bank of the Year from The Banker. Third, we continue to increase our company's book value. We achieved a 7.8% return on tangible common equity in 2011...

  • Page 13
    ... and Paralympic Games. As America's global bank for nearly 200 years, Citi's mission of helping individuals, businesses, institutions and nations succeed in the global marketplace complements the USOC's mission of supporting Vikram S. Pandit Chief Executive Officer, Citigroup Inc. U.S. Olympic and...

  • Page 14
    ...GCB accounted for nearly 40% of total deposits and 50% of total revenues within Citicorp in 2011. GCB consists of four primary business units - Retail Banking, Citi Branded Cards, CitiMortgage and Commercial Banking - that operate in our four key global regions - North America, Latin America, Europe...

  • Page 15
    ... billion of net income (43% of total) and $32.6 billion in revenues (50% of total). • Combining Branded Cards and Retail Services, Citi remained the #1 credit card issuer in the world. • Commercial Banking loans for small to medium-size companies increased by 19% year over year (excluding impact...

  • Page 16
    ... risk-adjusted returns. The bankers in our private equity and infrastructure investment businesses offer investors years of experience across a broad range of asset classes with an innovative operational and risk management infrastructure, all supported by the vast resources of Citi's global...

  • Page 17
    ... capital markets services across equities, FX, emerging markets, rates, credit, commodities, securitization, municipals and prime finance. Citi Velocity gives our clients exclusive access to pre-trade analytics and research, cutting-edge trading platforms and post-trade analysis. • Citi Private...

  • Page 18
    ...global financing programs across multiple industries. In 2011, clients doing business with Citi in 10 or more countries generated over 60% of GTS' total revenues. More than 400 of the world's top 500 banks and 200 of the top 300 asset managers rely on GTS to provide correspondent banking, investment...

  • Page 19
    ...services to 61 markets globally with new offerings in South Africa, Panama and Kuwait. • Expanded Citi® Commercial Cards business, making cards available now in over 100 countries, including 64 where a local currency program is available. • Expanded private equity and real estate administration...

  • Page 20
    ... clients is based on three pillars: managing the environmental footprint of our own global operations; managing environmental and social risk associated with projects we finance; and developing business opportunities with our partners to address critical environmental issues. In 2011, Citi financed...

  • Page 21
    ... to develop responsible access and use of credit. • The Citi Foundation invested in an innovative pilot program in Latin America and the Caribbean to evaluate the impact of savings accounts for recipients of conditional cash transfers. • Citi co-led an $85 million international bond issue for...

  • Page 22
    ... Net Income Diluted EPS - Income from Continuing Operations Citicorp Assets Citi Holdings Assets Corporate/Other Assets Citigroup assets Deposits Total Stockholders' Equity Tier 1 Capital Ratio Tier 1 Common Ratio Book Value Per Share Common Shares Outstanding (millions) Market Capitalization Direct...

  • Page 23
    UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2011 Commission file number 1-9924 Citigroup Inc. (Exact name of registrant as specified in ...

  • Page 24
    ...Directors, Executive Officers and Corporate Governance ...11. Executive Compensation ...12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...13. Certain Relationships and Related Transactions, and Director Independence ...14. Principal Accounting Fees...

  • Page 25
    ... Commercial Real Estate Market Risk Operational Risk Country and Cross-Border Risk FAIR VALUE ADJUSTMENTS FOR DERIVATIVES AND STRUCTURED DEBT CREDIT DERIVATIVES SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES DISCLOSURE CONTROLS AND PROCEDURES MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL...

  • Page 26
    .... Citigroup currently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of Citi's Global Consumer Banking businesses and Institutional Clients Group; and Citi Holdings, consisting of Brokerage and Asset Management, Local Consumer Lending and Special...

  • Page 27
    ... and trade solutions - Securities and fund services - Consumer finance lending: residential and commercial real estate; personal; and consumer branch lending - Retail partner cards* - Certain international consumer lending (including Western Europe retail banking and cards) • Special Asset Pool...

  • Page 28
    ... capital marketsrelated activities in the fourth quarter of 2011. This affected Citigroup's results of operations in many businesses, including not only Securities and Banking, but also the Securities and Fund Services business in Transaction Services and investment sales in Global Consumer Banking...

  • Page 29
    ... partially offset by higher legal and related costs. Credit Costs Credit trends for Citigroup continued to improve in 2011, particularly for Citi's North America Citi-branded and retail partner cards businesses, as well as its North America mortgage portfolios in Citi Holdings, although the pace of...

  • Page 30
    ...Latin America achieved positive operating leverage in the fourth quarter. ฀ North America Regional Consumer Banking grew revenues, card accounts and card loans sequentially in the second, third and fourth quarters of 2011. Securities and Banking revenues of $21.4 billion decreased 7% yearover-year...

  • Page 31
    ... of coincident net credit loss coverage. At the end of 2011, Citi Holdings assets comprised approximately 14% of total Citigroup GAAP assets and 25% of its risk-weighted assets. The first quarter of 2012 transfer of the substantial majority of the retail partner cards business (approximately $45...

  • Page 32
    ...MPACTæOFæTHEæPUBLICæANDæPRIVATEæPREFERREDæSTOCKæEXCHANGEæOFFER $IVIDENDSæANDæUNDISTRIBUTEDæEARNINGSæALLOCATEDæTOæEMPLOYEEæRESTRICTEDææ ANDæDEFERREDæSHARESæTHATæCONTAINæNONFORFEITABLEæRIGHTSæTOæDIVIDENDS ææ APPLICABLEæTOæ"ASICæ%03 Income (loss) allocated to unrestricted...

  • Page 33
    ...æPREFERREDæSTOCKæDIVIDENDSæDIVIDEDæBYæAVERAGEæCOMMONæSTOCKHOLDERSæEQUITYæ4HEæRETURNæONæAVERAGEæTOTALæ#ITIGROUPæSTOCKHOLDERSæ EQUITYæISæCALCULATEDæUSINGæNETæINCOMEæDIVIDEDæBYæAVERAGEæ#ITIGROUPæSTOCKHOLDERSæEQUITYæ  æ !SæDEFINEDæBYæTHEæBANKINGæREGULATORS æTHE...

  • Page 34
    ...) and revenues for Citigroup on a segment and business view: CITIGROUP INCOME (LOSS) In millions of dollars 2011   % Change 2011 vs. 2010 æ#HANGEæ æVSæ Income (loss) from continuing operations CITICORP Global Consumer Banking North America EMEA Latin America Asia Total...

  • Page 35
    ... Securities and Banking North America EMEA Latin America Asia Total Transaction Services North America EMEA Latin America Asia Total Institutional Clients Group Total Citicorp CITI HOLDINGS Brokerage and Asset Management Local Consumer Lending Special Asset Pool Total Citi Holdings Corporate...

  • Page 36
    ... Citi's total assets and approximately 92% of its deposits. At December 31, 2011, Citicorp consisted of the following businesses: Global Consumer Banking (which included retail banking and Citi-branded cards in four regions-North America, EMEA, Latin America and Asia) and Institutional Clients Group...

  • Page 37
    ... dollars) 2ETURNæONæASSETS 4OTALæ%/0æASSETS !VERAGEæDEPOSITSæ(in billions of dollars) Net credit losses as a percentage of average loans Revenue by business 2ETAILæBANKING #ITI BRANDEDæCARDS Total Income (loss) from continuing operations by business 2ETAILæBANKING #ITI BRANDEDæCARDS Total...

  • Page 38
    ... same level of loan loss reserve releases in NA RCB in 2012 as it believes credit costs in the business have generally stabilized. Revenues decreased 8% mainly due to lower net interest margin and loan balances in the Citi-branded cards business as well as lower mortgage-related revenues, primarily...

  • Page 39
    ... requires a review to be done once every six months for card accounts where the annual percentage rate (APR) has been increased since January 1, 2009 to assess whether changes in credit risk, market conditions or other factors merit a future decline in the APR. In addition, net interest margin...

  • Page 40
    ...income (loss) !VERAGEæASSETSæ(in billions of dollars) 2ETURNæONæASSETS !VERAGEæDEPOSITSæ(in billions of dollars) Net credit losses as a percentage of average loans Revenue by business 2ETAILæBANKING #ITI BRANDEDæCARDS Total Income (loss) from continuing operations by business 2ETAILæBANKING...

  • Page 41
    ... customer credit quality improved, Citi focused on volume growth to compensate for the lower revenue. The expansion of the sales force in 2010 drove some of the expense increase as compared to 2009. Provisions decreased 75% from the prior year driven by reduction in net credit losses and higher loan...

  • Page 42
    ... 8.8% in 2011, driven in part by the continued move towards customers with a lower risk profile and stricter underwriting criteria. Citi currently expects the Citi-branded cards net credit loss ratio to stabilize in 2012 as new loans continue to season. Credit costs will likely increase in line with...

  • Page 43
    ... in net credit losses. The increase in loan loss reserve releases and decrease in net credit losses primarily resulted from improved credit conditions and portfolio quality in the Citi-branded cards portfolio, primarily in Mexico, as well as the move to customers with a lower risk profile and...

  • Page 44
    ... of dollars) Net credit losses as a percentage of average loans Revenue by business 2ETAILæBANKING #ITI BRANDEDæCARDS Total Income from continuing operations by business 2ETAILæBANKING #ITI BRANDEDæCARDS Total .-æ .OTæMEANINGFUL 5% 13 8% (18)% 8 (10)% 2011 vs. 2010 Net income decreased...

  • Page 45
    ...vs. 2009 Net income increased 53%, driven by growth in revenue and a decrease in provisions, partially offset by higher operating expenses and a higher effective tax rate. During 2010, the U.S. dollar generally depreciated versus local currencies. As a result, the impact of FX translation accounted...

  • Page 46
    ... Transaction Services. ICG provides corporate, institutional, public sector and high-net-worth clients around the world with a full range of products and services, including cash management, foreign exchange, trade finance and services, securities services, sales and trading, institutional brokerage...

  • Page 47
    [THIS PAGE INTENTIONALLY LEFT BLANK] 25

  • Page 48
    ... of investment and commercial banking services and products for corporations, governments, institutional and retail investors, and high-net-worth individuals. S&B transacts with clients in both cash instruments and derivatives, including fixed income, foreign currency, equity, and commodity products...

  • Page 49
    ... to as equity principal strategies) as positions in the business were wound down, a decline in equity derivatives revenues and, to a lesser extent, a decline in cash equities. The wind down of Citi's equity proprietary trading was completed at the end of 2011. Investment banking revenues declined 14...

  • Page 50
    ... corporations and governments globally. Revenue is generated from net interest revenue on deposits in these businesses, as well as from trade loans and fees for transaction processing and fees on assets under custody and administration in Securities and Fund Services. In millions of dollars 2011...

  • Page 51
    ... business continued to emphasize stable, lower cost deposits as a way to mitigate spread compression. 2010 vs. 2009 Net income decreased 3%, as expenses driven by investment spending outpaced revenue growth. Year-over-year, the U.S. dollar generally depreciated versus local currencies. As a result...

  • Page 52
    ...continue to decrease the assets in Citi Holdings through the methods discussed above, including sales and dispositions, will not likely occur at the same pace or level as in the past. See also the "Executive Summary" above and "Risk Factors-Business Risks" below. In millions of dollars 2011 $10,287...

  • Page 53
    ... legal settlements and reserves associated with Smith Barney. Provisions decreased 57%, mainly due to the absence of credit reserve builds in 2009. Assets decreased 10% versus the prior year, mostly driven by the sales of the private equity business and the run-off of tailored loan portfolios. 31

  • Page 54
    ...of Citigroup's North America mortgage business, retail partner cards, CitiFinancial North America (consisting of the OneMain and CitiFinancial Servicing businesses), remaining student loans, and other local Consumer finance businesses globally (including Western European cards and retail banking and...

  • Page 55
    ...of costs associated with the U.S. government loss-sharing agreement, which was exited in the fourth quarter of 2009. Provisions decreased 38%, reflecting a net $1.8 billion loan loss reserve release in 2010 compared to a $5.8 billion build in 2009. Lower net credit losses across most businesses were...

  • Page 56
    ... are in the process of wind down, Citi generally retains the potential liability relating to the sale of PPI by these businesses. As a result of this regulatory focus and resulting publicity, during 2010 and 2011, Citi observed an increase in customer complaints relating to the sale of PPI. In...

  • Page 57
    ... on commercial real estate. Expenses decreased 37%, mainly driven by the absence of the U.S. government loss-sharing agreement exited in the fourth quarter of 2009, lower compensation, and lower transaction expenses. Provisions decreased 95% as credit conditions improved. The decline in credit costs...

  • Page 58
    ... the net loss on the sale of The Student Loan Corporation in 2010 and a net gain on the sale of the Egg Banking plc credit card business in 2011, each recorded in discontinued operations in the respective year. Revenues decreased $868 million, primarily driven by lower investment yields in Treasury...

  • Page 59
    ..., or 4%, decrease in Deposits with banks offset by a $1 billion, or 3%, increase in Cash and due from banks. These changes resulted from Citi's normal operations during the year. Federal Funds Sold and Securities Borrowed or Purchased Under Agreements to Resell (Reverse Repos) Federal funds sold...

  • Page 60
    ... securities carried at cost primarily include equity shares issued by the Federal Reserve Bank and the Federal Home Loan Banks that Citigroup is required to hold. During 2011, Investments decreased by $25 billion, or 8%, primarily due to a $9 billion, or 3%, decrease in available-for-sale securities...

  • Page 61
    ... debt borrowings during 2011, see "Capital Resources and Liquidity-Funding and Liquidity" below and Notes 1 and 19 to the Consolidated Financial Statements. Other Liabilities Trading account liabilities includes securities sold, not yet purchased (short positions), and derivatives in a net payable...

  • Page 62
    ...æUNEARNEDæINCOME !LLOWANCEæFORæLOANæLOSSES 4OTALæLOANS æNET 'OODWILL )NTANGIBLEæASSETSæOTHERæTHANæ-32S -ORTGAGEæSERVICINGæRIGHTSæ-32S /THERæASSETS Total assets Liabilities and equity 4OTALæDEPOSITS &EDERALæFUNDSæPURCHASEDæANDæSECURITIESæLOANEDæORæSOLDææ UNDERæAGREEMENTS...

  • Page 63
    ... Citi's capital levels. Capital is used primarily to support assets in Citi's businesses and to absorb market, credit or operational losses. Capital may be used for other purposes, such as to pay dividends or repurchase common stock. However, Citi's ability to pay regular quarterly cash dividends...

  • Page 64
    ...æOFæAPPLICABLEæBILATERALæNETTINGæAGREEMENTS æOFææBILLIONæFORæINTERESTæRATE æCOMMODITYæANDæEQUITYæDERIVATIVEæCONTRACTS æFOREIGNæEXCHANGEæCONTRACTS æANDæCREDITæ DERIVATIVESæASæOFæ$ECEMBER COMPAREDæWITHææBILLIONæASæOFæ$ECEMBER ARKETæRISKæEQUIVALENTæASSETS...

  • Page 65
    ...Value Per Share Common stockholders' equity, December 31, 2010 #ITIGROUPSæNETæINCOME %MPLOYEEæBENEFITæPLANSæANDæOTHERæACTIVITIESæ #ONVERSIONæOFæ!$)!æ5PPERæ$%#SæEQUITYæUNITSæPURCHASEææ CONTRACTSæTOæCOMMONæSTOCK .ETæCHANGEæINæACCUMULATEDæOTHERæCOMPREHENSIVEæINCOMEæLOSS...

  • Page 66
    ... of dollars at year end, except ratios The following table presents the estimated sensitivity of Citigroup's and Citibank, N.A.'s capital ratios to changes of $100 million in Tier 1 Common Capital, Tier 1 Capital or Total Capital (numerator), or changes of $1 billion in risk-weighted assets or...

  • Page 67
    ...credit and operational risks, in June 2010, the Basel Committee agreed on certain revisions to the market risk capital framework (Basel II.5) that would also result in additional capital requirements. In January 2011, the U.S. banking agencies issued a proposal to amend the market risk capital rules...

  • Page 68
    ...leverage limits. The Federal Reserve Board has already implemented the first phase of the proposal's enhanced capital requirements through the adoption of its capital plan rule in December 2011. As a result, Citi, like other covered bank holding companies, is required to develop annual capital plans...

  • Page 69
    ...the form of secured financing transactions (securities loaned or sold under agreements to repurchase, or repos), and commercial paper at the non-bank level. As referenced above, Citigroup works to ensure that the structural tenor of these funding sources is sufficiently long in relation to the tenor...

  • Page 70
    ...as cash management accounts for corporations, and, in Citi's experience, provide wider margins and exhibit retentive behavior. During 2011, operating account deposits grew across most of Citi's deposit-taking businesses, including retail, the private bank and Transaction Services. Operating accounts...

  • Page 71
    ...æDURINGæTHEæYEARæ -AXIMUMæMONTH ENDæOUTSTANDINGæ Weighted-average interest rate $URINGæTHEæYEAR TæYEARæENDæ 2011 $ 198.4 219.9 226.1 1.45% 1.10 Federal funds purchased and securities sold under agreements to repurchase (2 2011 $21.3 25.3 25.3 0.28% 0.38 Commercial paper...

  • Page 72
    ...-Frank Act. The proposed rules include new requirements for liquidity management and corporate governance related thereto. Citi continues to review these proposed rules and any potential impact they may have on its liquidity management practices. .ON BANKæ "ANK Total Dec. 31, 2011 $ 6,414 14,872...

  • Page 73
    ... Rating Changes On September 21, 2011, Moody's concluded its review of government support assumptions for Citi and certain peers and upgraded Citi's unsupported "Baseline Credit Assessment" rating and affirmed Citi's long-term debt ratings at both the Citibank and Citigroup levels. At the same time...

  • Page 74
    ... the senior debt/long-term rating of Citigroup, could result in an additional $0.9 billion in funding requirements in the form of cash obligations and collateral as of December 31, 2011. Other funding sources, such as secured financing transactions and other margin requirements, for which there are...

  • Page 75
    ... of business purposes. These securitization entities offer investors access to specific cash flows and risks created through the securitization process. The securitization arrangements also assist Citi and Citi's customers in monetizing their financial assets at more favorable rates than Citi or...

  • Page 76
    ..., such that the timing of payments and withdrawals is uncertain. The liabilities related to these insurance and investment contracts are included as Other liabilities on the Consolidated Balance Sheet. Contractual obligations by year In millions of dollars at December 31, 2011 ,ONG TERMæDEBT...

  • Page 77
    ...internal controls system as well as extensive data collection and reporting duties with respect to "proprietary trading," and rules for registered swap dealers impose extensive recordkeeping requirements and business conduct rules for dealing with customers. All of these costs negatively impact Citi...

  • Page 78
    ... require significant and costly restructuring of Citi's derivatives businesses in order to meet the new market structures and could affect the competitive position of these businesses. Once fully implemented, the provisions of the Dodd-Frank Act relating to the regulation of derivatives will result...

  • Page 79
    ... Citi could lose market share or profitability in its derivatives business or client relationships in jurisdictions where foreign bank competitors can operate without the same constraints. The proposed restrictions imposed on proprietary trading and funds-related activities under the "Volcker Rule...

  • Page 80
    ...the risks presented by non-bank affiliates. These plans must include information on resolution strategy, major counterparties and "interdependencies," among other things, and will require substantial effort, time and cost. These resolution plans will be subject to review by the Federal Reserve Board...

  • Page 81
    ... a material impact on how Citi records and reports its financial condition and results of operations. The FASB is currently reviewing or proposing changes to several of the financial accounting and reporting standards that govern key aspects of Citi's financial statements. While the outcome of these...

  • Page 82
    ... in its home equity loan portfolio in Citi Holdings has been, and will continue to be, more limited as compared to residential first mortgages. See "Managing Global Risk-Credit Risk-North America Consumer Mortgage Lending" and "-Consumer Loan Modification Programs" below. Concerns about the level of...

  • Page 83
    ... make execution of Citi's global strategy more challenging and could adversely affect Citi's revenues, profits and operations. The maintenance of adequate liquidity depends on numerous factors outside of Citi's control, including without limitation market disruptions and increases in Citi's credit...

  • Page 84
    ... numerous actions relating to claims of misrepresentations or omissions in offering documents of residential mortgage-backed securities sponsored or serviced by Citi affiliates. This litigation has been brought by a number of institutional investors, including the Federal Housing Finance Agency. The...

  • Page 85
    ... stock dividend or engage in share repurchase programs could negatively impact market perceptions of Citi, including the price of its common stock. In addition, pursuant to its agreements with certain U.S. government entities, dated June 9, 2009, executed in connection with Citi's exchange offers...

  • Page 86
    ... its global consumer banking, credit card and Transaction Services businesses, Citi obtains and stores an extensive amount of personal and client-specific information for its retail, corporate and governmental customers and clients and must accurately record and reflect their extensive account...

  • Page 87
    ... during periods of market dislocation, Citi's results of operations could be negatively affected due to a decrease in the fair value of the positions, as well as the loss of revenues associated with selling such securities or loans. Although Citi's activities expose it to the credit risk of many...

  • Page 88
    .... In addition, the positions of Product Chief Risk Officers are created for those risk areas of critical importance to Citigroup, currently real estate and structural market risk as well as fundamental credit. The Product Chief Risk Officers are accountable for the risks within their specialty and...

  • Page 89
    ... and trading; derivatives; securities transactions; settlement; and when Citigroup acts as an intermediary. For Citi's loan accounting policies, see Note 1 to the Consolidated Financial Statements. See Notes 16 and 17 for additional information on Citigroup's Consumer and Corporate loan, credit and...

  • Page 90
    ...of dollars at year end 2011     Consumer loans )Næ53æOFFICES -ORTGAGEæANDæREALæESTATEæ )NSTALLMENT æREVOLVINGæCREDIT æANDæOTHER #ARDSæ  #OMMERCIALæANDæINDUSTRIAL ,EASEæFINANCING )NæOFFICESæOUTSIDEæTHEæ53 -ORTGAGEæANDæREALæESTATEæ )NSTALLMENT...

  • Page 91
    ... dollars at year end 2011 $40,655 $12,512 (739) $11,773 Allowance for loan losses at beginning of year Provision for loan losses #ONSUMER #ORPORATE Gross credit losses Consumer )Næ53æOFFICES )NæOFFICESæOUTSIDEæTHEæ53 Corporate -ORTGAGEæANDæREALæESTATE )Næ53æOFFICES...

  • Page 92
    ...æ-ORTGAGES North Americaæ/THERæ )NTERNATIONALæ#ARDS )NTERNATIONALæ/THERæ Total Consumer Total Corporate Total Citigroup  æ !LLOWANCEæASæAæPERCENTAGEæOFæLOANSæEXCLUDESæLOANSæTHATæAREæCARRIEDæATæFAIRæVALUE  æ )NCLUDESæBOTHæ#ITI BRANDEDæANDæRETAILæPARTNERæCARDS...

  • Page 93
    ... Assets: ฀ Corporate and Consumer (commercial market) non-accrual status is based on the determination that payment of interest or principal is doubtful. ฀ Consumer non-accrual status is based on aging, i.e., the borrower has fallen behind in payments. ฀ North America Citi-branded and retail...

  • Page 94
    ...OFæTOTALæLOANS .!!æASæAæPERCENTAGEæOFæTOTALæASSETS !LLOWANCEæFORæLOANæLOSSESæASæAæPERCENTAGEæOFæ.!,æ  $ $  æ 4HEææBILLIONæOFæNON ACCRUALæLOANSæTRANSFERREDæFROMæTHEæHELD FOR SALEæPORTFOLIOæTOæTHEæHELD FOR INVESTMENTæPORTFOLIOæDURINGæTHEæFOURTHæQUARTER...

  • Page 95
    ..., Citigroup modifies certain of its Corporate loans involving a non-troubled borrower. These modifications are subject to Citi's normal underwriting standards for new loans and are made in the normal course of business to match customers' needs with available Citi products or programs (these...

  • Page 96
    ... of dollars at year end 2011 Total In millions of dollars at year end 2011 Over 5 years Total Corporate loan portfolio maturities In U.S. offices #OMMERCIALæANDæ INDUSTRIALæLOANS &INANCIALæINSTITUTIONS -ORTGAGEæANDæREALæESTATE ,EASEæFINANCING )NSTALLMENT æREVOLVINGæ CREDIT æOTHER...

  • Page 97
    ... mortgage products to its customers. As a result, option adjustable rate mortgages/negative amortizing mortgages represent an insignificant portion of total balances, since they were acquired only incidentally as part of prior portfolio and business purchases. As of December 31, 2011, Citi's North...

  • Page 98
    ...æSUMæDUEæTOæROUNDING nææ &ORæEACHæOFæTHEæTABLESæABOVE æDAYSæPASTæDUEæEXCLUDEæ53æMORTGAGEæLOANSæTHATæAREæGUARANTEEDæBYæ53æGOVERNMENTæAGENCIES æBECAUSEæTHEæPOTENTIALæLOSSæPREDOMINANTLYæRESIDESæWITHæTHEæ53æAGENCIESæANDæLOANSæRECORDEDæATæ FAIRæVALUE 76

  • Page 99
    ...LOANSæRECORDEDæATæFAIRæVALUEæANDæLOANSæSUBJECTæTOæ,43#S As evidenced by the tables above, Citi's residential first mortgages portfolio is primarily concentrated in California and the New York/New Jersey/ Connecticut region (with New York as the largest of the three states). Year over year...

  • Page 100
    ... costs related to the foreclosure process, such as property maintenance. North America Consumer Mortgage Quarterly Credit Trends- Delinquencies and Net Credit Losses-Home Equity Loans Citi's home equity loan portfolio consists of both fixed rate home equity loans and loans extended under home equity...

  • Page 101
    ...quarterly trends in delinquencies and net credit losses for Citi's home equity loan portfolio in North America. Similar to Citi's residential first mortgage portfolio, the majority of Citi's home equity loan exposure arises from its portfolio within Citi Holdings - LCL. Home Equity Loans - Citigroup...

  • Page 102
    ...Similar to residential first mortgages (see "Residential First Mortgages- State Delinquency Trends" above), at December 31, 2011, Citi's home equity loan portfolio was primarily concentrated in California and the New York/New Jersey/Connecticut region. Year over year, 90+ days past due delinquencies...

  • Page 103
    ...these 90+ days past due delinquency ratios from third to fourth quarter 2011 reflects the decline in Citi's asset sales of delinquent first mortgages, the lengthening of the foreclosure process and the continued economic uncertainty, as discussed in the sections above. Although home equity loans are...

  • Page 104
    ... Servicing Rights North America Cards To minimize credit and liquidity risk, Citi sells most of the mortgage loans it originates, but retains the servicing rights. These sale transactions create an intangible asset referred to as mortgage servicing rights (MSRs), which are recorded at fair value...

  • Page 105
    ...    North America Cards-Loan Loss Reserve Coverage At December 31, 2011, approximately $10.1 billion of Citi's total loan loss reserves of $30.1 billion was allocated to Citi's North America cards portfolios, representing over 17 months of coincident net credit loss coverage as of...

  • Page 106
    ... LOANSæ æDAYSæPASTæDUEæANDænæDAYSæPASTæDUEæANDæRELATEDæRATIOSæFORæNorth AmericaæEXCLUDINGæCARDS æEXCLUDEææBILLIONæANDææBILLION æRESPECTIVELY æOFæLOANSæ THATæAREæCARRIEDæATæFAIRæVALUE  æ 4OTALæLOANSæINCLUDEæINTERESTæANDæFEESæONæCREDITæCARDS...

  • Page 107
    ... Citigroup (excluding Special Asset Pool) !DDæIMPACTæOFæCREDITæCARDæSECURITIZATIONSæ -ANAGEDæ.#, 2ATIO  æ !VERAGEæLOANSæINCLUDEæINTERESTæANDæFEESæONæCREDITæCARDS  æ 4HEæRATIOSæOFæNETæCREDITæLOSSESæAREæCALCULATEDæBASEDæONæAVERAGEæLOANS æNETæOFæUNEARNEDæINCOME...

  • Page 108
    ...-term modification program designed to reduce monthly residential first mortgage payments to a 31% housing debt ratio (monthly mortgage payment, including property taxes, insurance and homeowner dues, divided by monthly gross income) by lowering the interest rate, extending the term of the loan and...

  • Page 109
    ...-term modification programs for its Citi-branded and retail partner cards borrowers are designed to liquidate a borrower's balance within 60 months. These programs are available to borrowers who indicate a long-term hardship. Payment requirements are decreased by reducing interest rates charged to...

  • Page 110
    ... by the buyer; and ฀ the loan's compliance with applicable local, state and federal laws. The specific representations and warranties made by Citi depend on the nature of the transaction and the requirements of the buyer. Market conditions and credit-rating agency requirements may also affect...

  • Page 111
    ...Citi sells loans (recorded as an adjustment to the gain on sale, which is included in Other revenue in the Consolidated Statement of Income) and is updated quarterly. Any change in estimate is recorded in Other revenue. The repurchase reserve is calculated by individual sales vintage (i.e., the year...

  • Page 112
    ... is required within 90 days of receipt of the claim. If Citi does not respond within 90 days, the claim is subject to discussions between Citi and the particular GSE. For private investors, the time period for responding to any repurchase claim is governed by the individual sale agreement; however...

  • Page 113
    ...the investors for their losses through make-whole payments. For securitizations in which Citi made representations, Citi generally also received from the Selling Entities similar representations, with the exception of certain limited representations required by, among others, the rating agencies. In...

  • Page 114
    ... Corporate Credit Portfolio For corporate clients and investment banking activities across Citigroup, the credit process is grounded in a series of fundamental policies, in addition to those described under "Managing Global Risk-Risk Management- Overview," above. These include: ฀ joint business...

  • Page 115
    ...DEALERS )NSURANCEæANDæSPECIALæPURPOSEæVEHICLES /THERæINDUSTRIESæ Total 22% 22 15 12 12 10 5 2 100% $ECEMBER As part of its overall risk management activities, Citigroup uses credit derivatives and other risk mitigants to hedge portions of the credit risk in its Corporate credit portfolio...

  • Page 116
    ...other investments (such as limited partner fund investments) at December 31, 2011 that are accounted for under the equity method, which recognizes gains or losses based on the investor's share of the net income (loss) of the investee. The following table provides a summary of Citigroup's global CRE...

  • Page 117
    ... market indices. Net interest revenue and interest rate risk One of Citi's primary business functions is providing financial products that meet the needs of its customers. Loans and deposits are tailored to the customers' requirements with regard to tenor, index (if applicable) and rate type...

  • Page 118
    ... annualized risk to NIR assuming an unanticipated parallel instantaneous 100 bps change, as well as a more gradual 100 bps (25 bps per quarter) parallel change in interest rates compared with the market forward interest rates in selected currencies. In millions of dollars December 31, 2011 Increase...

  • Page 119
    ... a new product approval process for complex products. All trading positions are marked to market, with the result reflected in earnings. In 2011, negative trading-related revenue (net losses) was recorded for 54 of 260 trading days. Of the 54 days on which negative revenue (net losses) was recorded...

  • Page 120
    ... exception where trading losses exceeded the VAR estimate at the Citigroup level (back-testing is the process in which the daily VAR of a portfolio is compared to the actual daily change in the market value of transactions). This occurred on August 8, 2011, after the U.S. government rating was...

  • Page 121
    ...levels and limits. Factor Sensitivities Factor sensitivities are expressed as the change in the value of a position for a defined change in a market risk factor, such as a change in the value of a Treasury bill for a one-basis-point change in interest rates. Citi's independent market risk management...

  • Page 122
    ...æAREæCLASSIFIEDæASæLong-term debtæANDæACCOUNTEDæFORæATæFAIRæVALUEæWITHæCHANGESæRECORDEDæINæPrincipal transactions  æ 4HEæINCREASEæINæTHEæNETæINTERESTæREVENUEæFROMæTHEæFOURTHæQUARTERæOFææTOæTHEæFIRSTæQUARTERæOFææWASæPRIMARILYæDRIVENæBYæTHEæADOPTION...

  • Page 123
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  • Page 124
    ... revenue Average rate In millions of dollars 2011 2011 2011 1.03% Assets Deposits with banks (5) Federal funds sold and securities borrowed or purchased under agreements to resell (6) )Næ53æOFFICES )NæOFFICESæOUTSIDEæTHEæ53æ 4OTAL Trading account assets )Næ53æOFFICES...

  • Page 125
    ...ASæTHESEæOBLIGATIONSæAREæACCOUNTEDæFORæATæFAIRæVALUEæWITHæCHANGESæRECORDEDæINæPrincipal transactions  æ )NCLUDESæSTOCKHOLDERSæEQUITYæFROMæDISCONTINUEDæOPERATIONS  æ )NCLUDESæALLOCATIONSæFORæCAPITALæANDæFUNDINGæCOSTSæBASEDæONæTHEæLOCATIONæOFæTHEæASSET 103

  • Page 126
    ... .ETæ RATE CHANGE In millions of dollars Average volume $ 27 !VERAGEæ VOLUME   Deposits with banks (4) Federal funds sold and securities borrowed or purchased under agreements to resell )Næ53æOFFICES )NæOFFICESæOUTSIDEæTHEæ53æ 4OTAL Trading account assets )Næ53æOFFICES...

  • Page 127
    ...æDECREASE æ DUEæTOæCHANGEæIN !VERAGEæ .ETæ RATE CHANGE In millions of dollars Average volume $ (124) 16 $ (108) !VERAGEæ æ VOLUME    Deposits )Næ53æOFFICES )NæOFFICESæOUTSIDEæTHEæ53æ 4OTAL Federal funds purchased and securities loaned or sold under agreements...

  • Page 128
    ... the effectiveness of controls and managing operational risks across products, business lines and regions Information security and the protection of confidential and sensitive customer data are a priority for Citigroup. Citi has implemented an Information Security Program in accordance with...

  • Page 129
    ..., are important clients in the global Citi franchise. Citi fully expects to maintain its presence in these markets to service all of its global customers. As such, Citi's exposure in these countries may vary over time, based upon its franchise, client needs and transaction structures. GIIPS and...

  • Page 130
    ... structures. At December 31, 2011, the majority of this margin and collateral was in the form of cash, with the remainder in predominantly non-GIIPS, non-French securities, which are included at fair value. Net current funded credit exposure also reflects a reduction for $9.6 billion in purchased...

  • Page 131
    ... as part of its market-making activities for clients in its trading portfolios. Citi also purchases credit protection, through credit default swaps, to hedge its own credit exposure to these underlying entities that arises from loans to these entities or derivative transactions with these entities...

  • Page 132
    ....2 billion fair value of securities collateral as well as $1.1 billion in variation margin, most of which was in cash. Consistent with Citi's risk management systems, secured financing transactions are included in the counterparty derivative mark-to-market exposure at their net credit exposure value...

  • Page 133
    ... of funds. These actions might restrict the transfer of funds or the ability of Citigroup to obtain payment from customers on their contractual obligations. Management of cross-border risk at Citi is performed through a formal review process that includes annual setting of cross-border limits and...

  • Page 134
    ... rate. In May 2010, the government enacted new laws that have closed the parallel foreign exchange market and established a new foreign exchange market. Citigroup does not have access to U.S. dollars in this new market. Citigroup uses the official rate to re-measure the foreign currency transactions...

  • Page 135
    ... in fair value resulting from changes in Citi's instrument-specific credit risk are estimated by incorporating Citi's current credit spreads observable in the bond market into the relevant valuation technique used to value each liability. The table below summarizes pretax gains (losses) related to...

  • Page 136
    ...its own account. Through these contracts, Citi either purchases or writes protection on either a single-name or portfolio basis. Citi primarily uses credit derivatives to help mitigate credit risk in its corporate loan portfolio and other cash positions, and to facilitate client transactions. Credit...

  • Page 137
    ...æSWAPSæANDæOPTIONS 4OTALæRETURNæSWAPSæANDæOTHER Total by instrument By rating )NVESTMENTæGRADE .ON INVESTMENTæGRADEæ Total by rating By maturity 7ITHINææYEAR &ROMææTOææYEARS !FTERææYEARS Total by maturity  æ !LSOæINCLUDESæNOT RATEDæCREDITæDERIVATIVEæINSTRUMENTS 115

  • Page 138
    ... 2011. When or if liquidity returns to these markets, the valuations will revert to using the related observable inputs in verifying internally calculated values. For additional information on Citigroup's fair value analysis, see "Managing Global Risk." Recognition of Changes in Fair Value Changes...

  • Page 139
    ... change in present value is recorded in the Provision for loan losses. ฀ Statistically calculated losses inherent in the classifiably managed portfolio for performing and de minimis non-performing exposures. The calculation is based upon: (i) Citigroup's internal system of credit-risk ratings...

  • Page 140
    ... under the new standards. Citigroup consolidated all required VIEs and former QSPEs, as of January 1, 2010, at carrying values or unpaid principal amounts, except for certain private-label residential mortgage and mutual fund deferred sales commissions VIEs, for which the fair value option was...

  • Page 141
    ...cash flow projections. The DCF method employs a capital asset pricing model in estimating the discount rate. Citi continues to value the remaining reporting units where it believes the risk of impairment to be low, using primarily the market approach. Citi prepares a formal three-year strategic plan...

  • Page 142
    ... none of the Company's reporting units are publicly traded, individual reporting unit fair value determinations cannot be directly correlated to Citigroup's stock price. The sum of the fair values of the reporting units at July 1, 2011 exceeded the overall market capitalization of Citi as of July...

  • Page 143
    ... Tier 1 Capital as of December 31, 2011. Litigation Accruals See the discussion in Note 29 to the Consolidated Financial Statements for information regarding Citi's policies on establishing accruals for legal and regulatory claims. Accounting Changes and Future Application of Accounting Standards...

  • Page 144
    ... is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including without limitation that information required to be disclosed by Citi in its SEC filings is accumulated and communicated to management, including the Chief Executive Officer (CEO...

  • Page 145
    ... of Citi's management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Citi's assets that could have a material effect on its financial statements. Because of its inherent limitations, internal control...

  • Page 146
    ... on Citi's results of operations and Citi's ability to more productively utilize the capital supporting these assets; ฀ the potential negative impact to Citi's common stock price and market perception if Citi is unable to increase its common stock dividend or initiate a share repurchase program...

  • Page 147
    ... as well as ensuring the highest level of productivity of Citi's previous or future investment spending; ฀ the potential negative impact on the value of Citi's deferred tax assets (DTAs) if U.S., state or foreign tax rates are reduced, or if other changes are made to the U.S. tax system, such...

  • Page 148
    ... Company Accounting Oversight Board (United States), the consolidated balance sheets of Citigroup as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2011...

  • Page 149
    ... special purpose entities, variable interest entities and embedded credit derivatives. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Citigroup's internal control over financial reporting as of December 31, 2011, based...

  • Page 150
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  • Page 151
    ... Revenue and Expense Note 6 - Commissions and Fees Note 7 - Principal Transactions Note 8 - Incentive Plans Note 9 - Retirement Benefits Note 10 - Income Taxes Note 11 - Earnings per Share Note 12 - Federal Funds/Securities Borrowed, Loaned, and Subject to Repurchase Agreements Note 13 - Brokerage...

  • Page 152
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  • Page 153
    CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF INCOME In millions of dollars, except per-share amounts Citigroup Inc. and Subsidiaries Year ended December 31, 2011   $ 72,681 24,234 $ 48,447 $ 12,850 7,234 3,995 1,997 (2,413) 159 (2,254) 2,647 3,437 $ 29,906 $ 78,353 $ 11,773 ...

  • Page 154
    ...æSEGREGATEDæCASHæANDæOTHERæDEPOSITS $EPOSITSæWITHæBANKS &EDERALæFUNDSæSOLDæANDæSECURITIESæBORROWEDæORæPURCHASEDæUNDERæAGREEMENTSæTOæRESELLæINCLUDINGæ æAND ASæOFæ$ECEMBER ANDæ æRESPECTIVELY æATæFAIRæVALUE "ROKERAGEæRECEIVABLES 4RADINGæACCOUNTæASSETS...

  • Page 155
    ...æSHARESææBILLION æISSUEDæSHARESæ2,937,755,921 at December 31, 2011æ AND ATæ$ECEMBER DDITIONALæPAID INæCAPITAL 2ETAINEDæEARNINGS 4REASURYæSTOCK æATæCOSTæ2011-13,877,688 sharesæAND SHARES !CCUMULATEDæOTHERæCOMPREHENSIVEæINCOMEæLOSS Total Citigroup stockholders' equity...

  • Page 156
    CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Amounts Citigroup Inc. and Subsidiaries Year ended December 31, Shares In millions of dollars, except shares in thousands 2011 $ 312 - - -  2011 12 - - - 12 2,922,402 3,540 - - - - 11,781 33 2,937,756 Preferred stock at ...

  • Page 157
    ... LLæOPENæMARKETæREPURCHASESæWEREæTRANSACTEDæUNDERæANæEXISTINGæAUTHORIZEDæSHAREæREPURCHASEæPLANæANDæRELATEæTOæCUSTOMERæFAILSERRORS  æ 2EFLECTSæADJUSTMENTSæTOæTHEæFUNDEDæSTATUSæOFæPENSIONæANDæPOSTRETIREMENTæPLANS æWHICHæISæTHEæDIFFERENCEæBETWEENæTHEæFAIRæVALUE...

  • Page 158
    ...æANDæPRESENTæVALUEæOFæFUTUREæPROFITS !DDITIONS REDUCTIONSæTOæDEFERREDæPOLICYæACQUISITIONæCOSTS $EPRECIATIONæANDæAMORTIZATION $EFERREDæTAXæBENEFIT 0ROVISIONæFORæCREDITæLOSSES #HANGEæINæTRADINGæACCOUNTæASSETS #HANGEæINæTRADINGæACCOUNTæLIABILITIES #HANGEæINæFEDERALæFUNDS...

  • Page 159
    ...fair value under the fair value option, are accounted for under the equity method, and the pro rata share of their income (loss) is included in Other revenue. Income from investments in less than 20%owned companies is recognized when dividends are received. As discussed below, Citigroup consolidates...

  • Page 160
    ... from changes in the fair value of such instruments. Interest income on trading assets is recorded in Interest revenue reduced by interest expense on trading liabilities. Physical commodities inventory is carried at the lower of cost or market with related losses reported in Principal transactions...

  • Page 161
    ... managed primarily by the Global Consumer Banking and Local Consumer Lending businesses. Non-accrual and re-aging policies As a general rule, interest accrual ceases for installment and real estate (both open- and closed-end) loans when payments are 90 days contractually past due. For credit cards...

  • Page 162
    ... which the fair value option has been elected, held-for-sale loans are accounted for at the lower of cost or market value, with any write-downs or subsequent recoveries charged to Other revenue. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from...

  • Page 163
    ..., including changes in housing prices and unemployment trends. Citi's allowance for loan losses under ASC 450-20 only considers contractual principal amounts due, except for credit card loans where estimated loss amounts related to accrued interest receivable are also included. Management also...

  • Page 164
    ...Company sells or securitizes loans acquired through purchase or origination and retains the right to service the loans. Mortgage servicing rights are accounted for at fair value, with changes in value recorded in Other Revenue in the Company's Consolidated Statement of Income. Additional information...

  • Page 165
    ...Citi sells loans (recorded as an adjustment to the gain on sale, which is included in Other revenue in the Consolidated Statement of Income) and is updated quarterly. Any change in estimate is recorded in Other revenue. The repurchase reserve is calculated by individual sales vintage (i.e., the year...

  • Page 166
    ... in fair value. Securitizations The Company primarily securitizes credit card receivables and mortgages. Other types of securitized assets include corporate debt instruments (in cash and synthetic form) and student loans. There are two key accounting determinations that must be made relating to...

  • Page 167
    ... carried at fair value, with changes in value included in Principal transactions or Other revenue. Citigroup often uses economic hedges when qualifying for hedge accounting would be too complex or operationally burdensome; examples are hedges of the credit risk component of commercial loans and loan...

  • Page 168
    ... stock split, which was effective May 6, 2011. The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative trading...

  • Page 169
    ...structured notes, should be considered embedded credit derivatives subject to potential bifurcation and separate fair value accounting. The ASU allows any beneficial interest issued by a securitization vehicle to be accounted for under the fair value option at transition on July 1, 2010. The Company...

  • Page 170
    ... to market thereafter, with changes in fair value reported in earnings. Citigroup consolidated all required VIEs and former QSPEs, as of January 1, 2010, at carrying values or unpaid principal amounts, except for certain private label residential mortgage and mutual fund deferred sales commissions...

  • Page 171
    ...æEARNINGS Total stockholders' equity Total liabilities and stockholders' equity    æ 4HEæNETæINCREASEæINæRISK WEIGHTEDæASSETSæ27! æWASææBILLION æPRINCIPALLYæREFLECTINGæTHEæDEDUCTIONæ FROMæGROSSæ27!æOFææBILLIONæOFæLOANæLOSSæRESERVESæ,,2 æRECOGNIZEDæFROM...

  • Page 172
    ... the implementation of SFAS 167. Investments in Certain Entities that Calculate Net Asset Value per Share In May 2010, the FASB issued ASU 2010-19, Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The ASU requires certain disclosure in situations when an entity's reported balances...

  • Page 173
    ... on debt and equity securities. Citigroup adopted the FSP in the first quarter of 2009. As a result of the FSP, the Company's Consolidated Statement of Income reflects the full impairment (that is, the difference between the security's amortized cost basis and fair value) on debt securities that the...

  • Page 174
    ... Company's position is a characteristic, the Company will release reserves of approximately $125 million, increasing pretax income in the first quarter of 2012. Deferred Asset Acquisition Costs In October 2010, the FASB issued ASU No. 2010-26, Financial Services - Insurance (Topic 944): Accounting...

  • Page 175
    ...business lines, which continue to operate and serve the needs of Citi's clients throughout the world. Sale of Citi's Nikko Asset Management Business and Trust and Banking Corporation On June 1, 2009, Citi and Morgan Stanley established a joint venture (JV) that combined the Global Wealth Management...

  • Page 176
    ... Credit Card Business Sale of The Student Loan Corporation On March 1, 2011, the Company announced that Egg Banking plc (Egg), an indirect subsidiary which was part of the Citi Holdings segment, entered into a definitive agreement to sell its credit card business to Barclays PLC. The sale closed...

  • Page 177
    ... Cordial Securities to Sumitomo Mitsui Banking Corporation. The transaction had a total cash value to Citi of 776 billion yen (U.S. $8.7 billion at an exchange rate of 89.60 yen to U.S. $1.00 as of September 30, 2009). The cash value was composed of the purchase price for the transferred business of...

  • Page 178
    ...certain commercial market loans from GCB to ICG. The following table presents certain information regarding the Company's continuing operations by segment: Revenues, net of interest expense (1) In millions of dollars, except identifiable assets in billions Provision (benefit) for income taxes 2011...

  • Page 179
    ... following: executing transactions for clients on exchanges and over-thecounter markets; sale of mutual funds, insurance and other annuity products; and assisting clients in clearing transactions, providing brokerage services and other such activities. Trading-related fees are recognized when earned...

  • Page 180
    ...Statements for information about net interest revenue related to trading activity. The following table presents principal transactions revenue for the years ended December 31: In millions of dollars 2011 $ 716 4,873 $5,589 (102) (11) 1,713 $1,600 45 $7,234 2011 æ Global Consumer Banking...

  • Page 181
    Stock Award Programs Citigroup issues (and/or has issued) shares of its common stock in the form of restricted stock awards, deferred stock awards, and stock payments pursuant to the 2009 Stock Incentive Plan (and predecessor plans) to its officers, employees and non-employee directors. For all ...

  • Page 182
    ... per-share fair value Weighted-average expected life Valuation assumptions %XPECTEDæVOLATILITY 2ISK FREEæINTERESTæRATE %XPECTEDæDIVIDENDæYIELD $22.97 3.85 years From 2003 to 2007, Citigroup granted annual stock awards under its Citigroup Ownership Program (COP) to a broad base of employees...

  • Page 183
    ...of 2.3 years. However, the cost of awards subject to variable accounting will fluctuate with changes in Citigroup's stock price. Stock Option Programs While the Company no longer grants options as part of its annual incentive award programs, Citi may grant stock options to employees or directors on...

  • Page 184
    ... may not be exercised using the reload method unless the market price on the date of exercise is at least 20% greater than the option to purchase. From 1997 to 2002, a broad base of employees participated in annual option grant programs. The options vested over five-year periods, or cliff vested...

  • Page 185
    ...244.50 348.74 428.22 520.90 $ 82.47 Range of exercise prices n n n n n n n As of December 31, 2011, there was $122.5 million of total unrecognized compensation cost related to stock options; this cost is expected to be recognized over a weighted-average period of 0.8 years. 163

  • Page 186
    ... Valuation and related assumption information for Citigroup option programs is presented below. Citigroup uses a lattice-type model to value stock options. For options granted during 2011 $ 13.90 4.95 yrs. 35.64% 2.33% 0.00% 9.62%  YRS YRS Weighted-average per-share fair value, at...

  • Page 187
    ...(benefit) expense recognized in the Consolidated Statement of Income for the Company's U.S. qualified and nonqualified pension plans, postretirement plans and plans outside the United States. The Company uses a December 31 measurement date for its U.S. and non-U.S. plans. Citigroup's funding policy...

  • Page 188
    ... assets at fair value at year end Funded status of the plan at year end Net amount recognized "ENEFITæASSET "ENEFITæLIABILITY Net amount recognized on the balance sheet Amounts recognized in Accumulated other comprehensive income (loss) .ETæTRANSITIONæOBLIGATION 0RIORæSERVICEæCOSTæBENEFIT...

  • Page 189
    ... the change in Accumulated other comprehensive income (loss) for the years ended December 31, 2011 and 2010: In millions of dollars 2011 $(4,105) (820) 197 183 28 235 $ (177) (1) Balance, January 1, net of tax (1) !CTUARIALæASSUMPTIONSæCHANGESæANDæPLANæEXPERIENCEæ .ETæASSETæGAIN...

  • Page 190
    ... status and benefit expense. Changes in the plans' funded status resulting from changes in the PBO and fair value of plan assets will have a corresponding impact on Accumulated other comprehensive income (loss). A discussion of certain assumptions follows. Discount Rate The discount rates for the...

  • Page 191
    ... postretirement plans using a "building block" approach, which focuses on ranges of anticipated rates of return for each asset class. A weighted range of nominal rates is then determined based on target allocations to each asset class. Market performance over a number of earlier years is evaluated...

  • Page 192
    ... 31, 2011  16%  44  5  13  22  100%  Asset category (1) %QUITYæSECURITIESæ $EBTæSECURITIES 2EALæESTATE 0RIVATEæEQUITY /THERæINVESTMENTS Total  æ 4ARGETæASSETæALLOCATIONSæFORæTHEæ53æPLANSæAREæSETæBYæINVESTMENTæSTRATEGY æNOTæBYæINVESTMENTæPRODUCTæ&OR...

  • Page 193
    ... due to changes in valuation methodology and pricing sources. There were no significant transfers of investments between level 1 and level 2 during the years ended December 31, 2011 and 2010. Plan assets by detailed asset categories and the fair value hierarchy are as follows: In millions of dollars...

  • Page 194
    ...æSECURITIES !NNUITYæCONTRACTS 0RIVATEæEQUITY $ERIVATIVES /THERæINVESTMENTSæ 4OTALæINVESTMENTSæATæFAIRæVALUE #ASHæANDæSHORT TERMæINVESTMENTS /THERæINVESTMENTæRECEIVABLES Total assets /THERæINVESTMENTæLIABILITIES Total net assets U.S. pension and postretirement benefit plans (1) Fair...

  • Page 195
    ...FUNDS -ORTGAGE BACKEDæSECURITIES !NNUITYæCONTRACTS $ERIVATIVES /THERæINVESTMENTS 4OTALæINVESTMENTSæATæFAIRæVALUE #ASHæANDæSHORT TERMæINVESTMENTS Total assets In millions of dollars Non-U.S. pension and postretirement benefit plans Fair value measurement at December 31, 2011 Level 1 Level...

  • Page 196
    ... $EBTæSECURITIES 53æCORPORATEæBONDSæ .ON 53æCORPORATEæBONDS (EDGEæFUNDS !NNUITYæCONTRACTS 0RIVATEæEQUITY /THERæINVESTMENTSæ Total assets In millions of dollars Non-U.S. pension and postretirement benefit plans Beginning Level 3 fair value at Dec. 31, 2010 Realized gains (losses...

  • Page 197
    ... (losses Unrealized gains (losses Purchases, sales, and issuances Transfers in and/or out of Level 3 Ending Level 3 fair value at Dec. 31, 2010 Asset categories (1) %QUITYæSECURITIES .ON 53æEQUITY $EBTæSECURITIES .ON 53æCORPORATEæBONDSæ (EDGEæFUNDS /THERæINVESTMENTS Total assets...

  • Page 198
    ... Citigroup sponsors U.S. postemployment plans that provide income continuation and health and welfare benefits to certain eligible U.S. employees on long term disability. For the years ended December 31, 2011 and 2010, the plans' funded status recognized in the Company's Consolidated Balance...

  • Page 199
    ...CUMULATIVEæEFFECTæOFæACCOUNTINGæCHANGES )NCOMEæTAXæEXPENSEæBENEFIT æREPORTEDæINæ STOCKHOLDERSæEQUITYæRELATEDæTO &OREIGNæCURRENCYæTRANSLATION 3ECURITIESæAVAILABLE FOR SALE %MPLOYEEæSTOCKæPLANS #ASHæFLOWæHEDGES 0ENSIONæLIABILITYæADJUSTMENTS 4AXæONæEXCHANGEæOFFERæBOOKEDæTO...

  • Page 200
    ...tax rate differential" line in the reconciliation of the federal statutory rate to the Company's effective income tax rate in the table above. Income taxes are not provided for the Company's "savings bank base year bad debt reserves" that arose before 1988, because under current U.S. tax rules, such...

  • Page 201
    ... business credit carryforwards U.S. separate tax returns federal net operating loss (NOL) carryforwards   Total U.S. separate tax returns federal NOL carryforwards (1) New York State NOL carryforwards Total New York State NOL carryforwards (1) New York City NOL carryforwards Total New York...

  • Page 202
    ... carryforward periods to fully realize its U.S. federal, state and local DTAs. Citi's net DTAs will decline primarily as additional domestic GAAP taxable income is generated. As of December 31, 2011, Citi was no longer in a three-year cumulative loss position for purposes of evaluating its DTAs...

  • Page 203
    ...æDISCONTINUINGæOPERATIONS Citigroup's net income (loss) ,ESSæ)MPACTæOFæTHEæPUBLICæANDæPRIVATEæPREFERREDæSTOCKæEXCHANGEæOFFERS ,ESSæ0REFERREDæDIVIDENDS ,ESSæ)MPACTæOFæTHEæCONVERSIONæPRICEæRESETæRELATEDæTOæTHEææBILLIONæ CONVERTIBLEæPREFERREDæSTOCKæPRIVATEæISSUANCE...

  • Page 204
    ... principally by government and government-agency securities and corporate debt and equity securities. The remaining portion is recorded at fair value as the Company elected the fair value option for certain securities borrowed and loaned portfolios. With respect to securities loaned, the Company...

  • Page 205
    ... have to sell or purchase the financial instruments at prevailing market prices. Credit risk is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transaction and performs for the broker, dealer or customer in question. The Company seeks to protect itself...

  • Page 206
    ...æANDæLOSSESæFORæNON MARKETABLEæEQUITYæSECURITIESæCARRIEDæATæFAIRæVALUEæAREæRECOGNIZEDæINæEARNINGS  æ .ON MARKETABLEæEQUITYæSECURITIESæCARRIEDæATæCOSTæPRIMARILYæCONSISTæOFæSHARESæISSUEDæBYæTHEæ&EDERALæ2ESERVEæ"ANK æ&EDERALæ(OMEæ,OANæ"ANKS æFOREIGNæCENTRALæBANKS...

  • Page 207
    ... 12 months or longer Gross Fair unrealized value losses Total Gross unrealized losses In millions of dollars Fair value December 31, 2011 Securities AFS -ORTGAGE BACKEDæSECURITIES 53æGOVERNMENT SPONSOREDæAGENCYæGUARANTEED 0RIME !LT ! 3UBPRIME .ON 53æRESIDENTIAL #OMMERCIAL 4OTALæMORTGAGE...

  • Page 208
    ...æRIGHTS  æ )NCLUDESæCORPORATE æASSET BACKEDæANDæOTHERæDEBTæSECURITIES The following table presents interest and dividends on investments: In millions of dollars 4AXABLEæINTEREST )NTERESTæEXEMPTæFROMæ53æFEDERALæINCOMEæTAX $IVIDENDS Total interest and dividends 2011 $ 7,441 562...

  • Page 209
    ... requirements. The net unrealized losses classified in AOCI relate to debt securities reclassified from AFS investments to HTM investments in a prior year. Additionally, for HTM securities that have suffered credit impairment, declines in fair value for reasons other than credit losses are recorded...

  • Page 210
    ... when the Company initially reclassified the debt securities from Trading account assets and Investments available-for-sale to Investments held-to-maturity in the fourth quarter of 2008 (see note 1 to the table below), include: (i) the U.S. Basel II credit and operational risk capital standards; (ii...

  • Page 211
    ... from AFS investments. Virtually all of these unrecognized losses relate to securities that have been in a loss position for 12 months or longer at both December 31, 2011 and December 31, 2010. The following table presents the carrying value and fair value of HTM debt securities by contractual...

  • Page 212
    ... impaired equity method investments that Citi plans to sell prior to recovery of value, or would likely be required to sell and there is no expectation that the fair value will recover prior to the expected sale date, the full impairment is recognized in the Consolidated Statement of Income as OTTI...

  • Page 213
    ... its amortized cost basis, the Company recognizes the estimated credit loss in earnings. State and municipal securities Citigroup's AFS state and municipal bonds consist mainly of bonds that are financed through Tender Option Bond programs or were previously financed in this program. The process for...

  • Page 214
    ... the year ended December 31, 2011: OTTI on Investments In millions of dollars Year ended December 31, 2011 AFS HTM Total )MPAIRMENTæLOSSESæRELATEDæTOæSECURITIESæTHATæTHEæ#OMPANYæDOESæNOTæINTENDæTOæSELLæNORæWILLæ LIKELYæBEæREQUIREDæTOæSELL 4OTALæ/44)æLOSSESæRECOGNIZEDæDURING...

  • Page 215
    ... NAV per share of the Company's ownership interest in the funds, where it is not probable that the Company will sell an investment at a price other than NAV. Redemption frequency (if currently eligible) monthly, quarterly, annually - - - In millions of dollars at December 31, 2011 Fair value $ 898...

  • Page 216
    ...31, 2011. Citigroup has a comprehensive risk management process to monitor, evaluate and manage the principal risks associated with its Consumer loan portfolio. Included in the loan table above are lending products whose terms may give rise to additional credit issues. Credit cards with below-market...

  • Page 217
    ...æMARKETæLOANS Total Total GCB and LCL Special Asset Pool (SAP) Total Citigroup $ $ 490 $ 7,626 - $ 7,626 $ 6,686 ,OANSæLESSæTHANææDAYSæPASTæDUEæAREæPRESENTEDæASæCURRENT )NCLUDESææBILLIONæOFæRESIDENTIALæFIRSTæMORTGAGESæRECORDEDæATæFAIRæVALUE %XCLUDESæLOANS...

  • Page 218
    ... all of the portfolio or, otherwise, on a quarterly basis. During the first quarter of 2011, the cards businesses (Citi-branded and retail partner cards) in the U.S. began using a more updated FICO model version to score customer accounts for substantially all of their loans. The change was made to...

  • Page 219
    ...#OMMERCIALæMARKETæLOANS Total (7) 2ECORDEDæINVESTMENTæINæAæLOANæINCLUDESæNETæDEFERREDæLOANæFEESæANDæCOSTS æUNAMORTIZEDæPREMIUMæORæDISCOUNTæANDæDIRECTæWRITE DOWNSæANDæINCLUDESæACCRUEDæINTERESTæONLYæONæCREDITæCARDæLOANS æMILLIONæOFæRESIDENTIALæFIRSTæMORTGAGES...

  • Page 220
    ... ended December 31, 2010 In millions of dollars Recorded investment (1)(2 Unpaid principal balance Related specific allowance (3 Average carrying value (4 Interest income recognized (5)(6 -ORTGAGEæANDæREALæESTATE 2ESIDENTIALæFIRSTæMORTGAGES (OMEæEQUITYæLOANS #REDITæCARDS...

  • Page 221
    ...following table presents information by Corporate loan type as of December 31, 2011 and December 31, 2010: In millions of dollars North America 2ESIDENTIALæFIRSTæMORTGAGES (OMEæEQUITYæLOANS #REDITæCARDS )NSTALLMENTæANDæOTHERæREVOLVING #OMMERCIALæMARKETSæ Total International 2ESIDENTIAL...

  • Page 222
    ...ææDAYSæPASTæDUEæAREæPRESENTEDæASæCURRENT Citigroup has established a risk management process to monitor, evaluate and manage the principal risks associated with its Corporate loan portfolio. As part of its risk management process, Citi assigns numeric risk ratings to its Corporate loan...

  • Page 223
    ...REALæESTATE ,EASES /THERæ Total non-investment grade Private Banking loans managed on a delinquency basis (2) Loans at fair value Corporate loans, net of unearned income Corporate loans and leases identified as impaired and placed on nonaccrual status are written down to the extent that principal...

  • Page 224
    ...æANDæREALæESTATE ,EASEæFINANCING /THER Total non-accrual Corporate loans !TæANDæFORæTHEæPERIODæENDEDæ$ECEMBERæ æ In millions of dollars 2ECORDEDæ INVESTMENT 5NPAID PRINCIPALæBALANCE 2ELATEDæSPECIFICæ ALLOWANCE !VERAGE CARRYINGæVALUE )NTERESTæINCOMEæ RECOGNIZED...

  • Page 225
    ...recorded investment is recognized in income over the life of the loans using a level yield. Accordingly, these loans have been excluded from the impaired loan table information presented above. In addition, per SOP 03-3, subsequent decreases in the expected cash flows for a purchased distressed loan...

  • Page 226
    ...MILLIONæOFæPURCHASEDæLOANSæACCOUNTEDæFORæUNDERæTHEæLEVEL YIELDæMETHODæANDææUNDERæTHEæCOST RECOVERYæMETHODæ4HESEæ BALANCESæREPRESENTæTHEæFAIRæVALUEæOFæTHESEæLOANSæATæTHEIRæACQUISITIONæDATEæ4HEæRELATEDæTOTALæEXPECTEDæCASHæFLOWSæFORæTHEæLEVEL YIELDæLOANSæWERE...

  • Page 227
    ...æTRANSFERSæTOæHELD FOR SALEæOFæ53æREALæESTATEæLENDINGæLOANS æANDææMILLIONæRELATEDæTOæTHEæTRANSFERæOFæTHEæ5+æ CARDSæPORTFOLIOæTOæHELD FOR SALE  æ 2EPRESENTSæADDITIONALæCREDITæLOSSæRESERVESæFORæUNFUNDEDæLENDINGæCOMMITMENTSæANDæLETTERSæOFæCREDITæRECORDED...

  • Page 228
    ... for Credit Losses and Investment in Loans at December 31, 2010 In millions of dollars Corporate Consumer Total !LLOWANCEæFORæLOANæLOSSESæATæBEGINNINGæOFæYEAR #HARGE OFFS 2ECOVERIES 2EPLENISHMENTæOFæNETæCHARGE OFFS .ETæRESERVEæRELEASES .ETæSPECIFICæRESERVEæBUILDSæRELEASES...

  • Page 229
    ...æPRIMARILYæREFLECTæFOREIGNæEXCHANGEæEFFECTSæONæNON DOLLAR DENOMINATEDæGOODWILL æASæWELLæASæPURCHASEæACCOUNTINGæADJUSTMENTS Goodwill impairment testing is performed at a level below the business segments (referred to as a reporting unit). The reporting unit structure in 2011 is...

  • Page 230
    ... terminal year, the assumptions used include a long-term growth rate and a price-to-tangible book multiple based on selected public guideline companies for the reporting unit. The discount rate is based on the reporting unit's estimated cost of equity capital computed under the capital asset pricing...

  • Page 231
    ...æCREDITæCARDæRELATIONSHIPS #OREæDEPOSITæINTANGIBLES /THERæCUSTOMERæRELATIONSHIPS 0RESENTæVALUEæOFæFUTUREæPROFITS )NDEFINITE LIVEDæINTANGIBLEæASSETS /THERæ Intangible assets (excluding MSRs) -ORTGAGEæSERVICINGæRIGHTSæ-32S Total intangible assets  æ )NCLUDESæCONTRACT RELATED...

  • Page 232
    ...æ RELATINGæTOæTRUSTæPREFERREDæ SECURITIES Total 7.10 2.22 3.52 2.68 1.40 2031-2067 2012-2046 2012-2039 2012-2097 2012-2037 16,057 75,685 859 65,063 196 $323,505 $277,216 30,232 Borrowings under bank lines of credit may be at interest rates based on LIBOR, CD rates, the prime rate, or...

  • Page 233
    ...of which $150 million is guaranteed by Citigroup. Generally, a bank can terminate these facilities by giving CGMHI one-year prior notice. The Company issues both fixed and variable rate debt in a range of currencies. It uses derivative contracts, primarily interest rate swaps, to effectively convert...

  • Page 234
    ...æVALUEæRECEIVEDæBYæINVESTORSæFROMæTHEæTRUSTSæATæTHEæTIMEæOFæISSUANCE In each case, the coupon rate on the debentures is the same as that on the trust securities. Distributions on the trust securities and interest on the debentures are payable quarterly, except for Citigroup Capital...

  • Page 235
    ... credit, pay dividends or otherwise supply funds to Citigroup and its non-bank subsidiaries. The approval of the Office of the Comptroller of the Currency is required if total dividends declared in any calendar year exceed amounts specified by the applicable agency's regulations. State-chartered...

  • Page 236
    ...) Changes in each component of Accumulated other comprehensive income (loss) for the three-year period ended December 31, 2011 are as follows: Net unrealized gains (losses) on investment securities 35)  Foreign currency translation adjustment, net of hedges 10,651) In millions of dollars Cash...

  • Page 237
    ...equity investments, guarantees, liquidity agreements, and certain derivative contracts. In various other transactions, the Company may act as a derivative counterparty (for example, interest rate swap, cross-currency swap, or purchaser of credit protection under a credit default swap or total return...

  • Page 238
    ... ææ.ON AGENCY SPONSORED 3TUDENTæLOANæSECURITIZATIONS 4HIRD PARTYæCOMMERCIALæPAPERæCONDUITS #OLLATERALIZEDæDEBTæOBLIGATIONSæ#$/S #OLLATERALIZEDæLOANæOBLIGATIONSæ#,/S !SSET BASEDæFINANCING -UNICIPALæINVESTMENTS #LIENTæINTERMEDIATION )NVESTMENTæFUNDS /THER Total Total Citigroup...

  • Page 239
    ... Funded exposures (2) Total involvement with SPE assets Consolidated VIE / SPE assets Significant unconsolidated VIE assets (4 As of December 31, 2010 Maximum exposure to loss in significant unconsolidated VIEs (1) Unfunded exposures (3) Guarantees and derivatives Debt investments Equity...

  • Page 240
    ... of the assets consolidated by the Company. The carrying amount may represent the amortized cost or the current fair value of the assets depending on the legal form of the asset (e.g., security or loan) and the Company's standard accounting policies for the asset type and line of business. The asset...

  • Page 241
    ... ADMINISTEREDæASSET BACKEDæCOMMERCIALæPAPERæCONDUITSæ!"#0 4HIRD PARTYæCOMMERCIALæPAPERæCONDUITS !SSET BASEDæFINANCING -UNICIPALæSECURITIESæTENDERæOPTIONæBONDæTRUSTSæ4/"S -UNICIPALæINVESTMENTS )NVESTMENTæFUNDS /THER Total Citicorp Citi Holdings #OLLATERALIZEDæLOANæOBLIGATIONS...

  • Page 242
    ... as customers pay their credit card balances, the cash proceeds are used to purchase new receivables and replenish the receivables in the trust. Since the adoption of SFAS 167 on January 1, 2010, the trusts are treated as consolidated entities, because, as servicer, Citigroup has the power to direct...

  • Page 243
    ... selected cash flow information related to Citi Holdings' credit card securitizations for the years ended December 31, 2011, 2010 and 2009: In billions of dollars The Omni Trust issues fixed- and floating-rate term notes, some of which are purchased by multi-seller commercial paper conduits...

  • Page 244
    ... of dollars 0ROCEEDSæFROMæNEWæSECURITIZATIONS #ONTRACTUALæSERVICINGæFEESæRECEIVED #ASHæFLOWSæRECEIVEDæONæRETAINEDæINTERESTSæANDæOTHERæNETæCASHæFLOWS Gains (losses) recognized on the securitization of U.S. agency-sponsored mortgages during 2011 were $(8) million. For the year ended...

  • Page 245
    ...æFROMæNEWæSECURITIZATIONS #ONTRACTUALæSERVICINGæFEESæRECEIVED #ASHæFLOWSæRECEIVEDæONæRETAINEDæINTERESTSæANDæOTHERæNETæCASHæFLOWS The Company did not recognize gains (losses) on the securitization of U.S. agency- and non-agency-sponsored mortgages in the years ended December 31, 2011...

  • Page 246
    ...æPOSITIONæINæTHEæCAPITALæSTRUCTUREæOFæTHEæSECURITIZATION .-æ .OTæMEANINGFULæ!NTICIPATEDæNETæCREDITæLOSSESæAREæNOTæMEANINGFULæDUEæTOæ53æAGENCYæGUARANTEES In millions of dollars Carrying value of retained interests $ISCOUNTæRATES !DVERSEæCHANGEæOFæ !DVERSEæCHANGE...

  • Page 247
    ... of clients. As of December 31, 2011, the fair value of Citi-retained interests in private-label re-securitization transactions structured by Citi totaled approximately $340 million ($39 million of which relates to re-securitization transactions executed in 2011) and are recorded in trading assets...

  • Page 248
    ... conduits' assets, and facilitating the operations and cash flows of the conduits. In return, the Company earns structuring fees from customers for individual transactions and earns an administration fee from the conduit, which is equal to the income from the client program and liquidity fees of the...

  • Page 249
    ... and the risk is then passed on to the CDO investors in the form of funded notes or purchased credit protection through derivative instruments. Any cash raised from investors is invested in a portfolio of collateral securities or investment contracts. The collateral is then used to support the...

  • Page 250
    ... makes a market in the issued notes. The Company's continuing involvement in synthetic CDOs/CLOs generally includes purchasing credit protection through credit default swaps with the CDO/CLO, owning a portion of the capital structure of the CDO/CLO in the form of both unfunded derivative positions...

  • Page 251
    ... 3.9 0.6 $5.2 Type #OMMERCIALæANDæOTHERæREALæESTATE #ORPORATEæLOANS !IRPLANES æSHIPSæANDæOTHERæASSETS Total The following table summarizes selected cash flow information related to asset-based financings for the years ended December 31, 2011, 2010 and 2009: In billions of dollars 2011...

  • Page 252
    ... value at the inception of the transaction and no reimbursement agreement was executed. The Company also provides other liquidity agreements or letters of credit to customer-sponsored municipal investment funds, that are not variable interest entities, and municipality-related issuers that totaled...

  • Page 253
    ... to the VIE's derivative instruments and investing in a portion of the notes issued by the VIE. In certain transactions, the investor's maximum risk of loss is limited and the Company absorbs risk of loss above a specified level. The Company does not have the power to direct the activities of the...

  • Page 254
    ... in cash, based on differentials between specified indices or prices. Citigroup enters into these derivative contracts relating to interest rate, foreign currency, commodity, and other market/credit risks for the following reasons: ฀ Trading Purposes-Customer Needs: Citigroup offers its customers...

  • Page 255
    ...7RITTENæOPTIONS 0URCHASEDæOPTIONS Total equity contract notionals Commodity and other contracts 3WAPS &UTURESæANDæFORWARDS 7RITTENæOPTIONS 0URCHASEDæOPTIONS Total commodity and other contract notionals Credit derivatives (4) 0ROTECTIONæSOLD 0ROTECTIONæPURCHASED Total credit derivatives Total...

  • Page 256
    ...TRADINGæDERIVATIVESæFAIRæVALUESæAREæPRESENTEDæINæ.OTEææTOæTHEæ#ONSOLIDATEDæ&INANCIALæ3TATEMENTS  æ $ERIVATIVEæMARK TO MARKETæRECEIVABLESPAYABLESæRELATEDæTOæMANAGEMENTæHEDGESæAREæRECORDEDæINæEITHERæOther assets/Other liabilities OR Trading account assets/Trading account...

  • Page 257
    ... portfolios are risk managed. In millions of dollars Accounting for Derivative Hedging )NTERESTæRATEæCONTRACTSæ &OREIGNæEXCHANGE %QUITYæCONTRACTSæ #OMMODITYæANDæOTHER #REDITæDERIVATIVESæ Total Citigroup (1)  ææ !LSOæSEEæ.OTEææTOæTHEæ#ONSOLIDATEDæ&INANCIALæ3TATEMENTS Year...

  • Page 258
    ... fair value of a derivative related to time value that, if excluded, are recognized in current earnings. Fair Value Hedges Hedging of benchmark interest rate risk Citigroup hedges exposure to changes in the fair value of outstanding fixedrate issued debt and certificates of deposit. The fixed cash...

  • Page 259
    ... are foreign exchange cross-currency swaps and forward contracts. These cash flow hedge relationships use dollar-offset ratio analysis to determine whether the hedging relationships are highly effective at inception and on an ongoing basis. Hedging total return Citigroup generally manages the risk...

  • Page 260
    ... a Net Investment Hedge." According to that method, all changes in fair value, including changes related to the forward-rate component of the foreign currency forward contracts and the time value of foreign currency options, are recorded in the Foreign currency translation adjustment account within...

  • Page 261
    ... its own account. Through these contracts, the Company either purchases or writes protection on either a single name or a portfolio of reference credits. The Company uses credit derivatives to help mitigate credit risk in its Corporate and Consumer loan portfolios and other cash positions, to take...

  • Page 262
    ...Company actively monitors open credit risk exposures, and manages this exposure by using a variety of strategies including purchased credit derivatives, cash collateral or direct holdings of the referenced assets. This risk mitigation activity is not captured in the table above. Credit-Risk-Related...

  • Page 263
    ... transactions are all factors in determining the liquidity of markets and the relevance of observed prices in those markets. The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the end of the reporting...

  • Page 264
    .... Trading account assets and liabilities-trading securities and trading loans When available, the Company uses quoted market prices to determine the fair value of trading securities; such items are classified as Level 1 of the fair value hierarchy. Examples include some government securities and...

  • Page 265
    ...fair value of these collateralized interest-rate related derivatives. Previously, the Company used the relevant benchmark curve for the currency of the derivative (e.g., the London Interbank Offered Rate for U.S. dollar derivatives) as the discount rate for these collateralized interest-rate related...

  • Page 266
    ... in closed-end mutual funds) and are classified as Equity securities within Investments. Prior to the Company's first auction failing in the first quarter of 2008, Citigroup valued ARS based on observation of auction market prices, because the auctions had a short maturity period (7, 28 or 35 days...

  • Page 267
    ... such positions, which reduces the reliability of prices available from independent sources. Commercial real estate exposure Citigroup reports a number of different exposures linked to commercial real estate at fair value with changes in fair value reported in earnings, including securities, loans...

  • Page 268
    ... securities State and municipal Foreign government Corporate Equity securities Asset-backed securities Other debt securities Total trading securities Trading account derivatives )NTERESTæRATEæCONTRACTS &OREIGNæEXCHANGEæCONTRACTS %QUITYæCONTRACTS #OMMODITYæCONTRACTS #REDITæDERIVATIVES Total...

  • Page 269
    ... account liabilities Securities sold, not yet purchased Trading account derivatives )NTERESTæRATEæCONTRACTS &OREIGNæEXCHANGEæCONTRACTS %QUITYæCONTRACTS #OMMODITYæCONTRACTS #REDITæDERIVATIVES Total trading account derivatives Gross cash collateral received Netting agreements and market value...

  • Page 270
    ...GUARANTEED 0RIME !LT ! 3UBPRIME .ON 53æRESIDENTIAL #OMMERCIAL Total investment mortgage-backed securities U.S. Treasury and federal agency securities 53æ4REASURY !GENCYæOBLIGATIONS Total U.S. Treasury and federal agency State and municipal Foreign government Corporate Equity securities Asset...

  • Page 271
    ... account liabilities Securities sold, not yet purchased Trading account derivatives )NTERESTæRATEæCONTRACTS &OREIGNæEXCHANGEæCONTRACTS %QUITYæCONTRACTS #OMMODITYæCONTRACTS #REDITæDERIVATIVES Total trading account derivatives Gross cash collateral received Netting agreements and market value...

  • Page 272
    ...GUARANTEED 0RIME !LT ! 3UBPRIME #OMMERCIAL Total investment mortgage-backed debt securities U.S. Treasury and federal agency securities State and municipal Foreign government Corporate Equity securities Asset-backed securities Other debt securities Non-marketable equity securities Total investments...

  • Page 273
    ... State and municipal Foreign government Corporate Equity securities Asset-backed securities Other debt securities Total trading securities Derivatives, net (4) )NTERESTæRATEæCONTRACTS &OREIGNæEXCHANGEæCONTRACTS %QUITYæCONTRACTS #OMMODITYæANDæOTHERæCONTRACTS #REDITæDERIVATIVES Total...

  • Page 274
    ...State and municipal Foreign government Corporate Equity securities Asset-backed securities Other debt securities Non-marketable equity securities Total investments Loans Mortgage servicing rights Other financial assets measured on a recurring basis Liabilities Interest-bearing deposits Federal funds...

  • Page 275
    ... of which related to the scheduled termination of a structured transaction, with a corresponding decrease in corporate debt trading securities. The significant changes from December 31, 2009 to December 31, 2010 in Level 3 assets and liabilities are due to: ฀ An increase in Federal funds sold and...

  • Page 276
    ...change in fair value relating to assets that are still held at December 31, 2011 and 2010. In millions of dollars Fair value $ 2,644 271 3,911 $ 6,826 Level 2 $ 1,668 88 3,185 $ 4,941 Level 3 $ 976 183 726 $ 1,885 ,OANSæHELD FOR SALE /THERæREALæESTATEæOWNED ,OANSæ Total nonrecurring fair...

  • Page 277
    ...Changes in fair value gains (losses) for the years ended December 31, 2011  In millions of dollars December 31, 2011 Fair value at $ECEMBER Assets &EDERALæFUNDSæSOLDæANDæSECURITIESæBORROWEDæORæPURCHASEDæUNDERæAGREEMENTSæTOæRESELLæ 3ELECTEDæPORTFOLIOSæOFæSECURITIESæPURCHASED...

  • Page 278
    ... account assets or Trading account liabilities on the Consolidated Balance Sheet. Changes in fair value of these items are classified in Principal transactions in the Company's Consolidated Statement of Income. Certain loans and other credit products Citigroup has elected the fair value option...

  • Page 279
    .... Changes in fair value of funded and unfunded credit products are classified in Principal transactions in the Company's Consolidated Statement of Income. Related interest revenue is measured based on the contractual interest rates and reported as Interest revenue on Trading account assets or loan...

  • Page 280
    ...- $ECEMBER The changes in fair values of these mortgage loans are reported in Other revenue in the Company's Consolidated Statement of Income. The changes in fair value during the years ended December 31, 2011 and 2010 due to instrument-specific credit risk resulted in a loss of $0.1 million and...

  • Page 281
    ..., deposits or derivatives (Trading account liabilities) on the Company's Consolidated Balance Sheet according to their legal form. The change in fair value for these structured liabilities is reported in Principal transactions in the Company's Consolidated Statement of Income. Changes in fair value...

  • Page 282
    ... accounted for at fair value, cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. Expected credit losses...

  • Page 283
    ...under securities laws and regulations, derivative transactions and bank loans. The Company provides a variety of guarantees and indemnifications to Citigroup customers to enhance their credit standing and enable them to complete a wide variety of business transactions. For certain contracts meeting...

  • Page 284
    ... used to take a risk position. The derivative instruments considered to be guarantees, which are presented in the tables above, include only those instruments that require Citi to make payments to the counterparty based on changes in an underlying instrument that is related to an asset, a liability...

  • Page 285
    ... to perform. The Company's maximum potential contingent liability related to both bank card and private-label merchant processing services is estimated to be the total volume of credit card transactions that meet the requirements to be valid charge back transactions at any given time. At December 31...

  • Page 286
    ..., relating to letters of credit and unfunded lending commitments. Collateral Cash collateral available to the Company to reimburse losses realized under these guarantees and indemnifications amounted to $35 billion at December 31, 2011 and December 31, 2010. Securities and other marketable assets...

  • Page 287
    ...æCREDIT 0ERFORMANCEæGUARANTEES $ERIVATIVEæINSTRUMENTSæDEEMEDæTOæBEæGUARANTEES ,OANSæSOLDæWITHæRECOURSE 3ECURITIESæLENDINGæINDEMNIFICATIONS #REDITæCARDæMERCHANTæPROCESSING #USTODYæINDEMNIFICATIONSæANDæOTHER Total Maximum potential amount of future payments Investment Non-investment...

  • Page 288
    ...-family residential properties are essentially home equity lines of credit. A home equity line of credit is a loan secured by a primary residence or second home to the extent of the excess of fair market value over the debt outstanding for the first mortgage. Commercial real estate, construction...

  • Page 289
    ..., investment advisers or other regulated entities and, in those capacities, are subject to regulation by various U.S., state and foreign securities, banking, commodity futures and other regulators. In connection with formal and informal inquiries by these regulators, Citigroup and such affiliates...

  • Page 290
    ... securities (MBS), auction-rate securities (ARS), investment funds, and other structured or leveraged instruments, that have suffered losses as a result of the credit crisis; and (v) individual borrowers asserting claims related to their loans. These matters have been filed in state and federal...

  • Page 291
    ... the Direct Endorsement Lender program, CitiMortgage had certified to the United States Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) that certain loans were eligible for FHA insurance when in fact they were not. The settlement releases Citigroup from...

  • Page 292
    ... 21, 2011. Additional information relating to this action is publicly available in court filings under the docket number 09 Civ. 7359 (S.D.N.Y.) (Stein, J.). Several institutional or high-net-worth investors that purchased debt and equity securities issued by Citigroup and affiliated issuers also...

  • Page 293
    ... Cambridge Place Investment Management, The Charles Schwab Corporation, the Federal Home Loan Bank of Chicago, the Federal Home Loan Bank of Boston, Allstate Insurance Company and affiliated entities, Union Central Life Insurance Co. and affiliated entities, the Federal Housing Finance Agency, the...

  • Page 294
    ... in additional deposits by LBI currently held by Citibank and its affiliates should be returned to the estate. Citigroup has moved to dismiss the adversary complaint. Additional information relating to this adversary proceeding is publicly available in court filings under the docket number 11-01681...

  • Page 295
    ... 2009, plaintiffs, general partners of two related private equity funds, filed a complaint in New York state court, subsequently removed to the Southern District of New York, against certain Citigroup affiliates. Plaintiffs allege that during the May 2007 auction of the music company EMI, Citigroup...

  • Page 296
    ... Citigroup and Related Parties, together with Visa, MasterCard and other banks and their affiliates, in various federal district courts. These actions were consolidated with other related cases in the Eastern District of New York and captioned IN RE PAYMENT CARD INTERCHANGE FEE AND MERCHANT DISCOUNT...

  • Page 297
    ... defaulted on a loan owed to Citi Brazil. The trial court ruled in favor of CIIP and awarded damages that Citigroup had estimated at more than $330 million after taking into account interest, currency adjustments, and current exchange rates. Citi Brazil lost its appeal but filed a special appeal to...

  • Page 298
    ... Federal Government Agencies and State Attorneys General 31. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS SCHEDULES On February 9, 2012, Citi announced that it had reached an agreement in principle with the United States and state attorneys general regarding the settlement of a number of related...

  • Page 299
    ... interest revenue #OMMISSIONSæANDæFEES #OMMISSIONSæANDæFEESˆINTERCOMPANY 0RINCIPALæTRANSACTIONS 0RINCIPALæTRANSACTIONSˆINTERCOMPANY /THERæINCOME /THERæINCOMEˆINTERCOMPANY Total non-interest revenues Total revenues, net of interest expense Provisions for credit losses and for benefits and...

  • Page 300
    ... Statements of Income Year ended December 31, 2010 Other Citigroup subsidiaries, eliminations and income from discontinued operations In millions of dollars Citigroup parent company CGMHI CFI CCC Associates Consolidating adjustments Citigroup consolidated Revenues...

  • Page 301
    ... Statements of Income Year ended December 31, 2009 Other Citigroup subsidiaries, eliminations and income from discontinued operations In millions of dollars Citigroup parent company CGMHI CFI CCC Associates Consolidating adjustments Citigroup consolidated Revenues...

  • Page 302
    ...æINCOMEˆINTERCOMPANY !LLOWANCEæFORæLOANæLOSSESæ 4OTALæLOANS æNET !DVANCESæTOæSUBSIDIARIES )NVESTMENTSæINæSUBSIDIARIES /THERæASSETS /THERæASSETSˆINTERCOMPANY Total assets Liabilities and equity $EPOSITS &EDERALæFUNDSæPURCHASEDæANDæSECURITIESææ LOANEDæORæSOLD &EDERALæFUNDS...

  • Page 303
    ...æINCOMEˆINTERCOMPANY !LLOWANCEæFORæLOANæLOSSESæ 4OTALæLOANS æNET !DVANCESæTOæSUBSIDIARIES )NVESTMENTSæINæSUBSIDIARIES /THERæASSETS /THERæASSETSˆINTERCOMPANY Total assets Liabilities and equity $EPOSITS &EDERALæFUNDSæPURCHASEDæANDæSECURITIESææ LOANEDæORæSOLD &EDERALæFUNDS...

  • Page 304
    ... of exchange rate changes on cash and due from banks Net cash provided by (used in) discontinued operations Net increase (decrease) in cash and due from banks Cash and due from banks at beginning of period Cash and due from banks at end of period Supplemental disclosure of cash flow information for...

  • Page 305
    ... of exchange rate changes on cash and due from banks Net cash provided by (used in) discontinued operations Net increase (decrease) in cash and due from banks Cash and due from banks at beginning of period Cash and due from banks at end of period Supplemental disclosure of cash flow information for...

  • Page 306
    ... of exchange rate changes on cash and due from banks Net cash provided by (used in) discontinued operations Net (decrease) increase in cash and due from banks Cash and due from banks at beginning of period Cash and due from banks at end of period Supplemental disclosure of cash flow information for...

  • Page 307
    ...Sæ FOR æREVERSEæSTOCKæSPLIT æWHICHæWASæEFFECTIVEæ-AY UEæTOæAVERAGINGæOFæSHARES æQUARTERLYæEARNINGSæPERæSHAREæMAYæNOTæADDæUPæTOæTHEæTOTALSæREPORTEDæFORæTHEæFULLæYEAR [End of Consolidated Financial Statements and Notes to Consolidated Financial Statements] 285

  • Page 308
    ...!VERAGEæ INTERESTæRATE VERAGEæ BALANCE VERAGEæ INTERESTæRATE VERAGEæ BALANCE In millions of dollars at year end "ANKS /THERæDEMANDæDEPOSITS /THERæTIMEæANDæSAVINGSæDEPOSITSæ Total  æ )NTERESTæRATESæANDæAMOUNTSæINCLUDEæTHEæEFFECTSæOFæRISKæMANAGEMENTæACTIVITIESæAND...

  • Page 309
    ... at account opening and obligations to monitor client transactions and report suspicious activities. Securities and Commodities Regulation Citigroup conducts securities underwriting, brokerage and dealing activities in the U.S. through Citigroup Global Markets Inc., its primary broker-dealer, and...

  • Page 310
    ... services and advisory companies such as banks, thrifts, credit unions, credit card issuers, mortgage banking companies, trust companies, investment banking companies, brokerage firms, investment advisory companies, hedge funds, private equity funds, securities processing companies, mutual fund...

  • Page 311
    ... from future climate change regulatory requirements or Citi's risk of increased costs from extreme weather events. For further information concerning leases, see Note 28 to the Consolidated Financial Statements. LEGAL PROCEEDINGS For a discussion of Citigroup's litigation and related matters, see...

  • Page 312
    ...ITISæEMPLOYEEæRESTRICTEDæORæ DEFERREDæSTOCKæPROGRAM æWHEREæSHARESæAREæWITHHELDæTOæSATISFYæTAXæREQUIREMENTS .!æ.OTæAPPLICABLE For so long as the U.S. government continues to hold any Citigroup trust preferred securities acquired pursuant to the exchange offers consummated in 2009...

  • Page 313
    ... 32 to the Consolidated Financial Statements. For so long as the U.S. government holds any Citigroup trust preferred securities acquired pursuant to Citi's exchange offers consummated in 2009, Citigroup has agreed not to pay a quarterly common stock dividend exceeding $0.01 per quarter, subject to...

  • Page 314
    ... executive officer has held executive or management positions with Citigroup for at least five years, except that: ฀ Mr. Callahan joined Citigroup in 2007. Prior to joining Citi, Mr. Callahan was a Managing Director and Head of Client Coverage Strategy for the Investment Banking Division at Credit...

  • Page 315
    ... that date must be exchanged for new certificates by contacting Computershare at the address noted above. Citi's 2011 Form 10-K filed with the SEC, as well as other annual and quarterly reports, are available from Citi Document Services toll free at 877 936 2737 (outside the United States at 716 730...

  • Page 316
    ... Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 24th day of February, 2012. Citigroup's Principal Executive Officer and a Director: John C. Gerspach Vikram S. Pandit Citigroup's Principal...

  • Page 317
    ... Federal Reserve Bank of Philadelphia Chief Executive Officer, Retired Pacific Investment Management Company (PIMCO) Ernesto Zedillo Former Chairman and Chief Executive Officer Bank of Hawaii Corporation Director, Center for the Study of Globalization; Professor in the Field of International...

  • Page 318
    [THIS PAGE INTENTIONALLY LEFT BLANK] 296

  • Page 319
    ... new certificates by contacting Computershare at the addresses noted above. Citi's 2011 Form 10-K filed with the U.S. Securities and Exchange Commission (SEC), as well as other annual and quarterly reports, is available from Citi Document Services toll-free at 877 936 2737 (outside the United States...

  • Page 320
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