Citibank 2011 Annual Report Download - page 122

100
Average Rates - Interest Revenue, Interest Expense and Net Interest Margin
INTEREST REVENUE/EXPENSE AND YIELDS
 
 

        
  
Interest Expense-Average Rate




     
 
 
 
       
Interest Revenue-Average Rate
Net Interest Margin
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
In millions of dollars 2011  
Change
2011 vs. 2010
#HANGEæ
æVSæ
)NTERESTæREVENUE $ 73,201     (8)% 
)NTERESTæEXPENSE 24,229   (3) 
.ETæINTERESTæREVENUEæ $ 48,972     (10)% 
)NTERESTæREVENUEAVERAGEæRATE 4.27%   (28) bps æBPS
)NTERESTæEXPENSEAVERAGEæRATE 1.63   2 bps æBPS
.ETæINTERESTæMARGIN 2.86   (26) bps æBPS
Interest-rate benchmarks æ
&EDERALæ&UNDSæRATEENDæOFæPERIOD 0.00–0.25% n n —
&EDERALæ&UNDSæRATEAVERAGEæRATE 0.00–0.25 næ n —
4WOYEARæ53æ4REASURYæNOTEAVERAGEæRATE 0.45%   (25) bps æBPS
YEARæ53æ4REASURYæNOTEAVERAGEæRATE 2.78   (43) bps æBPS
YEARæVSæTWOYEARæSPREADæ 233 bps æBPS æBPS
æ Net interest revenueæINCLUDESæTHEæTAXABLEæEQUIVALENTæADJUSTMENTSæBASEDæONæTHEæ53æFEDERALæSTATUTORYæTAXæRATEæOFææOFææMILLIONææMILLIONæANDææMILLIONæFORæææANDææRESPECTIVELY
æ %XCLUDESæEXPENSESæASSOCIATEDæWITHæCERTAINæHYBRIDæFINANCIALæINSTRUMENTSæ4HESEæOBLIGATIONSæAREæCLASSIFIEDæASæLong-term debtæANDæACCOUNTEDæFORæATæFAIRæVALUEæWITHæCHANGESæRECORDEDæINæPrincipal transactions
æ 4HEæINCREASEæINæTHEæNETæINTERESTæREVENUEæFROMæTHEæFOURTHæQUARTERæOFææTOæTHEæFIRSTæQUARTERæOFææWASæPRIMARILYæDRIVENæBYæTHEæADOPTIONæOFæ3&!3ææONæ*ANUARYæææ3EEæ.OTEææTOæTHEæ#ONSOLIDATEDæ&INANCIALæ
3TATEMENTSæFORæFURTHERæINFORMATION
As described under “Market Risk” above, a significant portion of Citi’s
business activities are based upon gathering deposits and borrowing money
and then lending or investing those funds, or participating in market-
making activities in tradable securities. Citi’s net interest margin (NIM) is
calculated by dividing gross interest revenue less gross interest expense by
average interest earning assets.
During 2011, Citi’s NIM declined as compared to the prior year, decreasing
by approximately 26 basis points, primarily driven by the continued run-off
and sales of higher-yielding assets in Citi Holdings and lower investment
yields driven by the continued low interest rate environment, partially offset
by the growth of lower-yielding loans in Citicorp and lower borrowing costs
(e.g., substituting maturing long-term debt with deposits as a funding
source). Absent any significant changes or events (e.g., a significant portfolio
sale in Citi Holdings), Citi expects NIM will likely continue to reflect the
pressure of a low interest rate environment, but should generally stabilize
around end-of-year-2011 levels.