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2012 Annual Report

Table of contents

  • Page 1
    2012 Annual Report

  • Page 2

  • Page 3
    NEWS CitiFX Pulse Singapore Private Bank On Campus mobile Global Banking Mobile Brasil Foreign Exchange Rates India

  • Page 4

  • Page 5
    ... EPS - Income from Continuing Operations Citicorp Assets Citi Holdings Assets Citigroup Assets Deposits Citigroup Stockholders' Equity Tier 1 Capital Ratio Tier 1 Common Ratio Book Value per Share Common Shares Outstanding (millions) Market Capitalization Direct Staff (thousands) Totals may not...

  • Page 6
    ... of the world's key markets. 2012 Citicorp Revenues 2012 Revenues: $71 billion By Region By Business NA 42% EMEA 16% LATAM 21% ASIA 21% GCB 57% S&B 28% CTS 15% NA - North America EMEA - Europe, Middle East atd Africa LATAM - Latit America Regiotal results exclude Corporate/Other. GCB - Global...

  • Page 7
    ... by driving client relationships and building revenues organically in our core businesses. The future of our franchise depends on consistently generating quality earnings from our core business activities. Specifically, I want to see us generate risk-adjusted returns above our cost of capital. 5

  • Page 8
    ...I've set clear goals around clear metrics - return on assets, return on tangible common equity and operating efficiency - and will hold my management team accountable for them. And I've made those targets public so you can monitor our progress and hold us - and me - accountable as well. My team and...

  • Page 9
    ... and retail activation. A variety of ads, all featuring our Team Citi athletes, encouraged viewers to join the Every Step of the WaySM program at citi.com/everystep and highlighted some of Citi's most competitive and innovative banking products, including Mobile Check Deposit, Citibank® Popmoney...

  • Page 10
    ...; Latin America; and North America. The primary business lines are Credit Cards, Retail Banking, Mortgage and Commercial Banking. The collective GCB businesses account for $337 billion in deposits, $295 billion in loans, $154 billion in assets under management in Retail Banking and approximately...

  • Page 11
    ... annual fee, no late fees and no wait time for live assistance. It won Kiplinger's Personal Finance magazine's award for Best Credit Cards for Holiday Spending in 2012. Leveraging Our Globality As the pre-eminent global consumer bank internationally, GCB leverages best practices and business models...

  • Page 12
    ...for cash management, foreign exchange, lending and trade, and employee banking. Citi Commercial Bank also offers secure web-based solutions throughout the world, enabling clients to manage their business operation accounts at any time from anywhere via the Internet. In all of the 29 countries where...

  • Page 13
    Citi® Private Pass® in the U.S. offered Citi credit and debit card members access to more than 10,000 events across music, sports, dining and family entertainment. Additional Citi Smart Banking branches, with innovative technologies and concierge-style client services, opened in the Philippines, ...

  • Page 14
    ... Rated Agent Bank recognition in the Global Custodian Agent Banks in Major Markets Survey for the third year in a row. • International Financing Review awarded Citi Best North America Equity House of the Year, Emerging EMEA Bond House, U.S. Investment Grade Bond House, Americas Structured Finance...

  • Page 15
    ... Project Finance House in the United States by Euromoney. • Citi received Best Foreign Exchange Bank for Investors honors from FX Week, as well as Best Bank for Spot FX, FX Prime Brokerage, FX in North America, U.S. Dollar/ Japan Yen, Emerging Latin American Currencies, FX Research and Strategy...

  • Page 16
    ... of the market. In 2012, Citi was recognized as a Greenwich Share Leader in both Global Fixed Income and Global Foreign Exchange based on Greenwich Associates' 2012 Global Foreign Exchange Services and Global Fixed Income Investors Studies. Citi Private Bank Our Private Bank is a trusted advisor to...

  • Page 17
    ... markets. Each Citi Private Bank client is assigned a Private Banker, who is dedicated to creating, managing and enhancing the client's wealth and is supported by a team of specialists. Highlights • Citi was awarded the Structured Products House of the Year in the Americas and Asia by Structured...

  • Page 18
    ...program. • The Citi Foundation and the Inter-American Development Bank selected innovation partners to participate in a threeyear, $6 million fund to test and evaluate new business models to recipients of Conditional Cash Transfers across Latin America and the Caribbean. Citibank Customer Service...

  • Page 19
    ...and the development of financial products and services tailored to the greater military community. Citi currently employs more than 2,000 colleagues with military experience. • Seventy-four employee affinity networks with 12,000 members enrich worklife in 27 locations and offer opportunities for...

  • Page 20
    ... the world and joined together for a Global Community Day to give back to the communities in which we live and work. This page, clockwise: Infinity Plaza, Shanghai, China; Frankfurt Airport, Germany; newspaper advertisement. Opposite, left to right: Citigroup.com/200; 200 Years Citi Anniversary...

  • Page 21
    ... the ATM to helping pioneer digital banking, throughout our bicentenary we shared Citi's history of supporting the people, ideas and solutions that make things better for all of us. As we move into our third century, Citi is proud to continue helping clients and communities progress from ambition to...

  • Page 22
    ...: Enabling Progress Citi works tirelessly to serve individuals, communities, institutions and nations. With 200 years of experience meeting the world's toughest challenges and seizing its greatest opportunities, we strive to create the best outcomes for our clients and customers with financial...

  • Page 23
    ...EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2012 Commission file number 1-9924 Citigroup Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 399 Park Avenue, New York, NY (Address of principal executive...

  • Page 24
    ... and Issuer Purchases of Equity Securities ...6. Selected Financial Data ...7. Management's Discussion and Analysis of Financial Condition and Results of Operations ... 15. Exhibits and Financial Statement Schedules ...44, 169, 288, 294-295, 297 10-11 * For additional information regarding Citigroup...

  • Page 25
    CITIGROUP'S 2012 ANNUAL REPORT ON FORM 10-K OVERVIEW MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary Five-Year Summary of Selected Financial Data SEGMENT AND BUSINESS-INCOME (LOSS) AND REVENUES CITICORP Global Consumer Banking North America ...

  • Page 26
    ...consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. Citi has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citigroup currently operates, for management reporting...

  • Page 27
    ... commercial banking and branch-based financial advisors - Residential real estate - Asset management in Latin America • Transaction Services - Investment banking - Debt and equity markets (including prime brokerage) - Lending - Private equity - Hedge funds - Real estate - Structured products...

  • Page 28
    ... businesses in order to drive improved returns. 1 As used throughout this report, spread compression refers to the reduction in net interest revenue as a percentage of loans or deposits, as applicable, as driven by either lower yields on interest-earning assets or higher costs to fund such assets...

  • Page 29
    ... diluted share, in 2012, an increase of 18% compared to $10.1 billion, or $3.30 per diluted share, reported in 2011, as higher revenues, lower core operating expenses and lower net credit losses were partially offset by higher legal and related costs and a lower net loan loss reserve release.3 Citi...

  • Page 30
    ...branded cards and Citi retail services in Citicorp and Local Consumer Lending within Citi Holdings. Corporate net credit losses decreased 86% year-over-year to $223 million, driven primarily by continued credit improvement in both the Special Asset Pool in Citi Holdings and Securities and Banking in...

  • Page 31
    ... RCB average deposits grew 2% versus the prior year, average retail loans increased 11%, investment sales grew 12%, average card loans grew 6%, and international card purchase sales grew 10%, all excluding the impact of FX translation. In Securities and Banking, fixed income markets revenues of $14...

  • Page 32
    ...-Basic Preferred stock Series H discount accretion-Basic Impact of the public and private preferred stock exchange offers Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to Basic EPS Income (loss...

  • Page 33
    ... close in the first half of 2013. Discontinued operations in 2012 and 2011 reflect the sale of the Egg Banking PLC credit card business. Discontinued operations for 2008 to 2009 reflect the sale of Nikko Cordial Securities to Sumitomo Mitsui Banking Corporation, the sale of Citigroup's German retail...

  • Page 34
    ... income (loss) and revenues for Citigroup on a segment and business view: CITIGROUP INCOME In millions of dollars 2012 2011 2010 % Change 2012 vs. 2011 % Change 2011 vs. 2010 Income (loss) from continuing operations CITICORP Global Consumer Banking North America EMEA Latin America Asia Total...

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

  • Page 36
    ... Income (loss) from discontinued operations, net of taxes Noncontrolling interests Net income Balance sheet data (in billions of dollars) Total end-of-period (EOP) assets Average assets Return on average assets Efficiency ratio (Operating expenses/Total revenues) Total EOP loans Total EOP deposits...

  • Page 37
    ... of dollars) Average assets Return on assets Efficiency ratio Total EOP assets Average deposits Net credit losses as a percentage of average loans Revenue by business Retail banking Cards (1) Total Income from continuing operations by business Retail banking Cards (1) Total Foreign Currency (FX...

  • Page 38
    ... of dollars) Average assets Return on average assets Efficiency ratio Average deposits Net credit losses as a percentage of average loans Revenue by business Retail banking Citi-branded cards Citi retail services Total Income from continuing operations by business Retail banking Citi-branded cards...

  • Page 39
    ... partner payments in Citi retail services. In addition, the decline in non-interest revenue reflected lower retail banking fee income. Expenses increased 15%, primarily driven by higher investment spending in the business during the second half of 2011, particularly in cards marketing and technology...

  • Page 40
    ... of dollars) Average assets Return on average assets Efficiency ratio Average deposits Net credit losses as a percentage of average loans Revenue by business Retail banking Citi-branded cards Total Income (loss) from continuing operations by business Retail banking Citi-branded cards Total Foreign...

  • Page 41
    .... Year-over-year, cards purchase sales increased 12%, investment sales increased 15% and retail loan volume increased 17%. Revenue growth year-over-year was partly offset by the absence of Akbank, Citi's equity investment in Turkey, which was moved to Corporate/Other in the first quarter of 2012...

  • Page 42
    ... of dollars) Average assets Return on average assets Efficiency ratio Average deposits Net credit losses as a percentage of average loans Revenue by business Retail banking Citi-branded cards Total Income from continuing operations by business Retail banking Citi-branded cards Total Foreign Currency...

  • Page 43
    ... quarter of 2012, higher volume-driven expenses and increased legal and related costs. Provisions increased 39%, primarily due to increased loan loss reserve builds driven by underlying business volume growth, primarily in Mexico and Colombia. In addition, net credit losses increased in the retail...

  • Page 44
    ... of dollars) Average assets Return on average assets Efficiency ratio Average deposits Net credit losses as a percentage of average loans Revenue by business Retail banking Citi-branded cards Total Income from continuing operations by business Retail banking Citi-branded cards Total Foreign Currency...

  • Page 45
    ... in Citi-branded cards purchase sales, partially offset by a decrease in revenue from foreign exchange products. Despite the continued spread compression and regulatory changes in the region, the underlying business metrics continued to grow, with average retail loans up 6% and average card loans up...

  • Page 46
    ... and Banking and 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 of loans...

  • Page 47
    ...clients in both cash instruments and derivatives, including fixed income, foreign currency, equity, and commodity products. S&B includes investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, derivative services and private banking. S&B revenue...

  • Page 48
    ... during 2012. Excluding lending hedges related to accrual loans, lending revenues increased 31%, primarily driven by growth in the Corporate loan portfolio and improved spreads in most regions. •฀ Private Bank revenues increased 8%, driven by growth in client assets as a result of client...

  • Page 49
    ... unfunded lending commitments as a result of portfolio growth and higher net credit losses. In millions of dollars 2012 $(2,047) (424) (16) $(2,487) $ (698) 2011 $ 1,368 355 9 $ 1,732 $ 519 2010 $ (187) (207) (5) $ (399) $ (65) S&B CVA/DVA Fixed Income Markets Equity Markets Private Bank Total...

  • Page 50
    ...-dealers, and depository and agency/trust services to multinational corporations and governments globally. Revenue is generated from net interest revenue on deposits and trade loans as well as fees for transaction processing and fees on assets under custody and administration. In millions of dollars...

  • Page 51
    ... trade and commercial cards businesses and increased deposits, partially offset by the impact of the continued low rate environment. Securities and Fund Services revenues increased 1%, primarily due to growth in transaction and settlement volumes, driven in part by the increase in activity resulting...

  • Page 52
    ... loss increased despite a $582 million tax benefit related to the resolution of certain tax audit items in the third quarter of 2012 (see the "Executive Summary" above for a discussion of this tax benefit as well as the impact of minority investments on the results of operations of Corporate/Other...

  • Page 53
    ... continuing operations before taxes Benefits for income taxes (Loss) from continuing operations Noncontrolling interests Citi Holdings net loss Balance sheet data (in billions of dollars) Average assets Return on average assets Efficiency ratio Total EOP assets Total EOP loans Total EOP deposits NM...

  • Page 54
    ... $4.7 billion equity investment and $3 billion of other MSSB financing (consisting of approximately $2 billion of preferred stock and $1 billion of loans). For information on the agreement entered into with Morgan Stanley regarding MSSB on September 11, 2012, see Citigroup's Current Report on Form...

  • Page 55
    ... Citigroup's North America mortgage business (see "North America Consumer Mortgage Lending" below), CitiFinancial North America (consisting of the OneMain and CitiFinancial Servicing businesses), remaining student loans and credit card portfolios, and other local consumer finance businesses globally...

  • Page 56
    ... credit losses in LCL will largely be driven by declines in asset levels, including continued sales of delinquent residential first mortgages (see "Managing Global Risk-Credit Risk-North America Consumer Mortgage Lending-North America Consumer Mortgage Quarterly Credit Trends" below). Average assets...

  • Page 57
    ... subject of intense review and focus by U.K. regulators, particularly the Financial Services Authority (FSA). The FSA has found certain problems across the industry with how these products were sold, including customers not realizing that the cost of PPI premiums was being added to their loan or PPI...

  • Page 58
    ... on asset sales, as well as an aggregate repurchase reserve build in 2012 of approximately $244 million related to private-label mortgage securitizations (see "Managing Global Risk-Credit Risk-Citigroup Residential Mortgages-Representations and Warranties" below). The loss in net interest revenues...

  • Page 59
    ... resell Trading account assets Investments Loans, net of unearned income and allowance for loan losses Other assets Total assets Liabilities Deposits Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities Short-term borrowings Long-term debt...

  • Page 60
    ... non-marketable equity securities carried at fair value include common and nonredeemable preferred stock. Nonmarketable equity 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 2012...

  • Page 61
    ... other regulatory changes. Retail lending in North America, however, increased 10% year-over-year, as a result of higher real estate lending as well as growth in the commercial segment. In contrast, Citi Holdings loans declined 18% year-over-year, due to the continued run-off and asset sales in the...

  • Page 62
    ...account assets Investments Loans, net of unearned income and allowance for loan losses Other assets Total assets Liabilities and equity Total deposits Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities Short-term borrowings Long-term debt...

  • Page 63
    ... and to absorb credit, market and operational losses. Citi primarily generates capital through earnings from its operating businesses. Citi may augment its capital through issuances of common stock, perpetual preferred stock and equity issued through awards under employee benefit plans, among other...

  • Page 64
    ... I credit risk and market risk capital rules. (9) Includes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $62 billion for interest rate, commodity and equity derivative contracts, foreign exchange contracts, and credit derivatives as of December 31, 2012...

  • Page 65
    ... Basel III Tier 1 Common ratio was 8.7%, compared to an estimated 8.6% at September 30, 2012 (each based on total risk-weighted assets calculated under the proposed U.S. Basel III "advanced approaches" and including Basel II.5).12 This slight increase quarter-over-quarter was primarily due to lower...

  • Page 66
    ... tax assets (DTAs) arising from tax credit and net operating loss carryforwards Less: Excess over 10%/15% limitations for other DTAs, certain common equity investments, and MSRs (3) Total Tier 1 Common Capital Risk-Weighted Assets (1) (2) (3) (4) (4) Calculated based on the U.S. banking agencies...

  • Page 67
    ...A reconciliation of Citigroup's total stockholders' equity to TCE, and book value per share to tangible book value per share, as of December 31, 2012 and December 31, 2011, follows: In millions of dollars or shares at year end, except ratios and per share data Citigroup's subsidiary U.S. depository...

  • Page 68
    ...billion in risk-weighted assets or adjusted average total assets (denominator), as of December 31, 2012. This information is provided for the purpose of analyzing the impact that a change in Citigroup's or Citibank, N.A.'s financial position or results of operations could have on these ratios. These...

  • Page 69
    ... and risk sensitive methodology for calculating market risk capital requirements for covered trading positions. Further, the U.S. version of the Basel II.5 rules also implements the DoddFrank Act requirement that all federal agencies remove references to, and reliance on, credit ratings in...

  • Page 70
    ...generally requires a phase-out of these securities over a three-year period beginning January 1, 2013 for bank holding companies, such as Citi, that had $15 billion or more in total consolidated assets as of December 31, 2009. Accordingly, the U.S. banking agencies have proposed that trust preferred...

  • Page 71
    ... and banks, residential mortgages, corporate and securitization exposures, and counterparty credit risk on derivative contracts, as compared to Basel I. Total risk-weighted assets under the Standardized Approach would exclude risk-weighted assets arising from operational risk, require more limited...

  • Page 72
    ..., primarily in the form of secured financing transactions (securities loaned or sold under agreements to repurchase, or repos). As referenced above, Citigroup works to ensure that the structural tenor of these funding sources is sufficiently long in relation to the tenor of its asset base. The key...

  • Page 73
    ... Consumer Banking North America EMEA Latin America Asia Total ICG Securities and Banking Transaction Services Total Corporate/Other Total Citicorp Total Citi Holdings Total Citigroup Deposits (EOP) Total Citigroup Deposits (AVG) Citi continued to focus on maintaining a geographically diverse retail...

  • Page 74
    ... change in qualifying regulatory capital, Citi issued approximately $2.25 billion of preferred stock during 2012. For details on Citi's remaining outstanding trust preferred securities, as well as its long-term debt generally, see Note 19 to the Consolidated Financial Statements. See also "Capital...

  • Page 75
    ... $33.8 Structural long-term debt (1) Local country level, FHLB and other (2) Secured debt and securitizations Total (1) Citi defines structural long-term debt as its long-term debt (original maturities of one year or more), excluding certain structured debt, such as equity-linked and credit-linked...

  • Page 76
    ... secured financing (securities loaned or sold under agreements to repurchase, or repos) and (ii) short-term borrowings consisting of commercial paper and borrowings from the FHLBs and other market participants. See Note 19 to the Consolidated Financial Statements for further information on Citigroup...

  • Page 77
    ... invested in cash, government securities, including U.S. agency debt and U.S. agency mortgage-backed securities, and a certain amount of highly rated investment-grade credits. While the vast majority of Citi's liquidity pool at December 31, 2012 consisted of long positions, Citi utilizes derivatives...

  • Page 78
    ... A-1 Citigroup Global Markets Inc. Longterm NR NR A Senior debt Fitch Ratings (Fitch) Moody's Investors Service (Moody's) Standard & Poor's (S&P) NR Not rated. A Baa2 A- Recent Credit Rating Developments On December 5, 2012, S&P concluded its annual review of Citi with no changes to the ratings...

  • Page 79
    ... funding capacity from existing clients, tailoring levels of secured lending, adjusting the size of select trading books and collateralized borrowings from Citi's significant bank subsidiaries. Mitigating actions available to Citibank, N.A. include, but are not limited to, selling or financing...

  • Page 80
    ... forms, including without limitation: •฀ purchasing or retaining residual and other interests in special purpose entities, such as credit card receivables and mortgage-backed and other asset-backed securitization entities; •฀ holding senior and subordinated debt, interests in limited...

  • Page 81
    ...-interest payments (2) Operating and capital lease obligations Purchase obligations Other liabilities (3) Total (1) For additional information about long-term debt obligations, see "Capital Resources and Liquidity-Funding and Liquidity" above and Note 19 to the Consolidated Financial Statements...

  • Page 82
    ... Citi's results of operations as well as realization of its deferred tax assets (DTAs). For example, regulators have proposed applying limits to certain concentrations of risk, such as through single counterparty credit limits or legal lending limits, and implementation of such limits currently or...

  • Page 83
    ...of Operations and Impedes Long-Term Capital Planning. During 2012, U.S. regulators proposed the U.S. Basel III rules that would be applicable to Citigroup and its depository institution subsidiaries, including Citibank, N.A. U.S. regulators also adopted final rules relating to Basel II.5 market risk...

  • Page 84
    ... and result in regulatory or reputational risk. Further, new derivatives-related systems and infrastructure will likely become the basis on which institutions such as Citi compete for clients. To the extent that Citi's connectivity, product offerings or services for clients in these businesses is...

  • Page 85
    ...Have on Citi's Businesses, Results of Operations or Financial Condition, as well as the Global Financial Markets and Financial Conditions Generally. Several European countries, including Greece, Ireland, Italy, Portugal and Spain (GIIPS), continue to experience credit deterioration due to weaknesses...

  • Page 86
    ... and results of operations. For example, actions by the Federal Reserve Board can impact Citi's cost of funds for lending, investing and capital raising activities and the returns it earns on those loans and investments, both of which affect Citi's net interest margin. Moreover, if a severe global...

  • Page 87
    ... on financial markets and economic conditions generally and, as a result, could have a negative impact on Citi's businesses, results of operations, capital, funding and liquidity. Citi's Extensive Global Network Subjects It to Various International and Emerging Markets Risks as well as Increased...

  • Page 88
    ... and warranties relating to the sale of mortgage loans or the placement of mortgage loans into securitization trusts (for additional information on representation and warranty matters, see "Managing Global Risk-Credit Risk-Citigroup Residential Mortgages-Representations and Warranties" below...

  • Page 89
    ... for as long as the FDIC continues to hold any Citi trust preferred securities acquired in connection with the exchange offers. While these restrictions may be waived, they generally prohibit Citi from paying regular cash dividends in excess of $0.01 per share of common stock per quarter or from...

  • Page 90
    ... North America Regional Consumer Banking (NA RCB), Citi maintains numerous co-branding relationships with third-party retailers and merchants in the ordinary course of business pursuant to which Citi issues credit cards to customers of the retailers or merchants. These agreements provide for shared...

  • Page 91
    ... confidential client information, damage to Citi's reputation with its clients and the market, customer dissatisfaction, additional costs to Citi (such as repairing systems or adding new personnel or protection technologies), regulatory penalties, exposure to litigation and other financial losses to...

  • Page 92
    ... existing impairment models in U.S. GAAP, which generally require that a loss be "incurred" before it is recognized. For additional information on this proposed new accounting model, see Note 1 to the Consolidated Financial Statements. As a result of changes to financial accounting or reporting...

  • Page 93
    ...the market value of trading and non-trading positions resulting from changes in interest rates, credit spreads, foreign exchange rates, equity and commodity prices and in their implied volatilities. Operational risk is the risk for loss resulting from inadequate or failed internal processes, systems...

  • Page 94
    ... business heads and local regulators. The positions of Product Chief Risk Officers are established 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...

  • Page 95
    ...the market value of trading and non-trading positions, including the changes in value resulting from fluctuations in rates. •฀ Operational risk losses result from inadequate or failed internal processes, systems or human factors, or from external events. Citi's risk capital framework is reviewed...

  • Page 96
    ... for financial loss resulting from the failure of a borrower or counterparty to honor its financial or contractual obligations. Credit risk arises in many of Citigroup's business activities, including wholesale and retail lending; capital markets derivative transactions; structured finance; and...

  • Page 97
    ... credit, and other Mortgage and real estate (1) Loans to financial institutions Lease financing Governments and official institutions Total Corporate loans Unearned income Corporate loans, net of unearned income Total loans-net of unearned income Allowance for loan losses-on drawn exposures Total...

  • Page 98
    ...Gross credit losses Consumer In U.S. offices (1)(2) In offices outside the U.S. Corporate Mortgage and real estate In U.S. offices In offices outside the U.S. Governments and official institutions outside the U.S. Loans to financial institutions In U.S. offices In offices outside the U.S. Commercial...

  • Page 99
    ... benefit related to finalizing the impact of the OCC guidance in the fourth quarter of 2012, the $8.6 billion of loans loss reserves for North America mortgages as of December 31, 2012 represented approximately 33 months of coincident net credit loss coverage. (4) Includes mortgages and other retail...

  • Page 100
    .... This guidance added approximately $1.5 billion of Consumer loans to non-accrual status at September 30, 2012, of which approximately $1.3 billion was current. See also Note 1 to the Consolidated Financial Statements. •฀ North America Citi-branded cards and Citi retail services are not included...

  • Page 101
    ..., during 2012, there was an increase in non-accrual Consumer loans in North America during the first quarter of 2012 which was attributable to a $0.8 billion reclassification from accrual to non-accrual status of home equity loans where the related residential first mortgage was 90 days or more...

  • Page 102
    ..., during 2012, there was an increase in non-accrual Consumer loans in North America of $0.8 billion related to a reclassification from accrual to non-accrual status of home equity loans where the related residential first mortgage was 90 days or more past due. For additional information on each...

  • Page 103
    ... cash flows, principal reductions or reduction or waiver of accrued interest or fees. See Note 16 to the Consolidated Financial Statements for a discussion of such modifications. Forgone Interest Revenue on Loans (1) In U.S. offices $ 3,123 1,412 $ 1,711 In nonU.S. offices $965 388 $577 2012 total...

  • Page 104
    ...of dollars at year end 2012 Total Total Corporate loan portfolio maturities In U.S. offices Commercial and industrial loans Financial institutions Mortgage and real estate Lease financing Installment, revolving credit, other In offices outside the U.S. Total corporate loans Fixed/variable pricing...

  • Page 105
    ... 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, 2012, Citi's North America residential first...

  • Page 106
    ...loans related to anticipated forgiveness of principal in connection with the national mortgage settlement. Excluding the impact of these charge-offs, net credit losses would have been $0.45 billion and $0.43 billion for the Citigroup and Citi Holdings portfolios, respectively. (2) The second quarter...

  • Page 107
    ... mortgage loans during 2012 and in the fourth quarter of 2012, respectively, including loan modifications pursuant to the national mortgage settlement. (For additional information on Citi's residential first mortgage loan modifications, see Note 16 to the Consolidated Financial Statements.) Loan...

  • Page 108
    ... the fourth quarter of 2012. Extended foreclosure timelines and the low number of loans moving into the foreclosure inventory resulted in Citi's aged foreclosure inventory (active foreclosures in process for two years or more) increasing to approximately 29% of Citi's total foreclosure inventory as...

  • Page 109
    ... impact on Citi. 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 lines of credit. Fixed-rate home equity loans are fully...

  • Page 110
    ... detail the quarterly trends in delinquencies and net credit losses for Citi's home equity loan portfolio in North America. The vast majority of Citi's home equity loan exposure arises from its portfolio within Citi Holdings-LCL. North America Home Equity Loans-Citigroup In billions of dollars NCLs...

  • Page 111
    ...market in which to sell delinquent home equity loans, as well as the relatively smaller number of home equity loan modifications and modification programs (see Note 16 to the Consolidated Financial Statements), Citi's ability to offset increased delinquencies and net credit losses in its home equity...

  • Page 112
    ... programs (see Note 16 to the Consolidated Financial Statements). The loss mitigation activities include short sales for residential first mortgages and home equity loans, extinguishments and other loss mitigation activities. Based on the nature of the loss mitigation activities (e.g., short sales...

  • Page 113
    ...trends of the unpaid principal balances for Citi's residential first mortgage and home equity loan portfolios by risk segment (FICO and LTV) and the 90+ day delinquency rates for those risk segments. For example, in the fourth quarter of 2012, residential first mortgages had $7.1 billion of balances...

  • Page 114
    ... Holdings. For additional information on Citi's MSRs, see Note 22 to the Consolidated Financial Statements. Citigroup Residential Mortgages-Representations and Warranties To minimize credit and liquidity risk, Citi sells most of the conforming mortgage loans it originates but retains the servicing...

  • Page 115
    ...Loan Sales (principally reflected in Citi Holdings-Local Consumer Lending) Citi is exposed to representation and warranty repurchase claims primarily as a result of its whole loan sales to the GSEs and, to a lesser extent, private investors through its Consumer business in CitiMortgage. When selling...

  • Page 116
    ... to private-label securitizations, and changes in estimate with respect thereto, are recorded in Citi Holdings-Special Asset Pool. Repurchase Reserve-Whole Loan Sales To date, issues related to (i) misrepresentation of facts by either the borrower or a third party (e.g., income, employment, debts...

  • Page 117
    ... of its contingencies analysis. For additional information, see Note 28 to the Consolidated Financial Statements. During 2012, Citi continued to receive significant levels of inquiries and demands for loan files, as well as requests to toll (extend) the applicable statutes of limitation for, among...

  • Page 118
    ..., 2012 $1,222 797 8 $2,027 GSEs and others (1) Private-label securitizations Mortgage insurers (2) Total (1) Predominantly related to claims from the GSEs. (2) Represents the insurer's rejection of a claim for loss reimbursement that has yet to be resolved and includes only GSE whole loan activity...

  • Page 119
    ... services portfolio was approximately $39 billion. See Note 16 to the Consolidated Financial Statements for additional information on Citi's North America cards modifications. Citi-Branded Cards-Citigroup NCLs 90+DPD North America Cards Quarterly Credit Trends-Delinquencies and Net Credit Losses...

  • Page 120
    ...(1) Total loans include interest and fees on credit cards. (2) The ratios of 90+ days past due and 30-89 days past due are calculated based on end-of-period (EOP) loans. (3) The 90+ days past due balances for North America-Citi-branded cards and North America-Citi retail services cards are generally...

  • Page 121
    ... Ratio North America (3)(4) Ratio Total Citigroup (excluding Special Asset Pool) (3)(4) Ratio $ 140.9 41.3 4.7 26.3 68.6 $ 145.5 71.9 36.9 2.8 14.1 19.8 $ 124.3 9.4 114.9 $ 410.7 (1) Average loans include interest and fees on credit cards. (2) The ratios of net credit losses are calculated based...

  • Page 122
    ... 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 and independent risk management...

  • Page 123
    ... to outright asset sales. The purpose of these transactions is to transfer credit risk to third parties. The results of the mark to market and any realized gains or losses on credit derivatives are reflected in Principal transactions on the Consolidated Statement of Income. At December 31, 2012 and...

  • Page 124
    .... Price risk losses arise from fluctuations in the market value of trading and non-trading positions resulting from changes in interest rates, credit spreads, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Market Risk Management Each business is required to...

  • Page 125
    ..., the impact of lower rates, swap activities and repositioning of the liquidity portfolio, including increased AFS investments and decreasing long-term debt (see "Capital Resources and Liquidity- Funding and Liquidity" above). The following table shows the approximate annualized risk to NIR from six...

  • Page 126
    ...across Citi's business segments (Citicorp, Citi Holdings and Corporate/Other) has its own market risk limit framework encompassing these measures and other controls, including trading mandates, permitted product lists and a new product approval process for complex products. All trading positions are...

  • Page 127
    ...during 2012, excluding hedges to the loan portfolio, fair value option loans and DVA/CVA, net of hedges. In millions of dollars Interest rate Foreign exchange Equity Commodity Covariance adjustment (1) Total trading VAR- all market risk factors, including general and specific risk (excluding credit...

  • Page 128
    ...shows the daily buy-and-hold trading revenue compared to the value at risk for Citi's total trading VAR during 2012. Buy-and-Hold Profit and Loss of Trading Businesses Compared to Prior-Day Citigroup Total Trading VAR(1)(2) In millions of dollars Total Buy-and-hold P&L Total Trading VAR 200 150 100...

  • Page 129
    ... 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 2012...

  • Page 130
    ... revenue 2011 2010 2012 0.80% % Average rate 2011 2010 1.03% 0.75% In millions of dollars, except rates 2012 2012 Assets Deposits with banks (5) Federal funds sold and securities borrowed or purchased under agreements to resell (6) In U.S. offices In offices outside the U.S. (5) Total Trading...

  • Page 131
    ... interests in consolidated VIEs that are classified as Long-term debt, as these obligations are accounted for in changes in fair value recorded in Principal transactions. Includes stockholders' equity from discontinued operations. Includes allocations for capital and funding costs based on the...

  • Page 132
    ... 2011 vs. 2010 Increase (decrease) due to change in: Average Net rate change $ 471 $ 498 In millions of dollars Deposits with banks (4) Federal funds sold and securities borrowed or purchased under agreements to resell In U.S. offices In offices outside the U.S. (4) Total Trading account assets In...

  • Page 133
    ... vs. 2010 Increase (decrease) due to change in: Average Net rate change $ 11 282 $ (113) 298 $ 185 In millions of dollars Average volume $ $ 97 40 137 Average volume $ (124) 16 $ (108) Deposits In U.S. offices In offices outside the U.S. (4) Total Federal funds purchased and securities loaned...

  • Page 134
    ... result in losses arising from events related to the following, among others fraud, theft and unauthorized activities; employment practices and workplace environment; clients, products and business practices; physical assets and infrastructure; and execution, delivery and process management. As new...

  • Page 135
    ...), currency crises, foreign exchange and/or capital controls and/or political events and instability. Country risk events could result in mandatory loan loss and other reserve requirements imposed by U.S. regulators due to a particular country's economic situation. See also "Risk Factors-Market and...

  • Page 136
    ... billions of U.S. dollars as of December 31, 2012 Funded loans, before reserves Derivative counterparty mark-to-market, inclusive of CVA (3) Gross funded credit exposure Less: margin and collateral (4) Less: purchased credit protection (5) Net current funded credit exposure Net trading exposure AFS...

  • Page 137
    ... form of cash, with the remainder in predominantly non-GIIPS securities, which are included at fair value. Gross funded credit exposure as of December 31, 2012 has also been reduced by $10.1 billion in purchased credit protection (flat to the September 30, 2012 amount), predominantly from financial...

  • Page 138
    ... 2012, unchanged from September 30, 2012. Citi's unfunded commitments to GIIPS retail customers, in the form of unused credit card lines, are generally cancellable upon the occurrence of significant credit events, including redenomination events. France Sovereign, Financial Institution and Corporate...

  • Page 139
    ...described above, like other banks, Citi also provides settlement and clearing facilities for a variety of clients in France and actively monitors and manages these intra-day exposures. Credit Default Swaps-GIIPS and France Citi buys and sells credit protection, through credit default swaps (CDS), on...

  • Page 140
    ... counterparty derivative mark-to-market exposure at their net credit exposure value, which is typically small or zero given the over-collateralized structure of these transactions. Cash financing out $13.0 Securities collateral in (1) $16.6 In billions of dollars as of December 31, 2012 Lending to...

  • Page 141
    ... in Spain, principally related to offshore exposures related to held-to-maturity securitized retail assets (primarily mortgage-backed securities) and exposures to Private Bank customers (see "GIIPS-Retail, Small Business and Citi Private Bank" above). However, as of December 31, 2012, Citi...

  • Page 142
    ... third parties (trade and short-, mediumand long-term claims) include cross-border loans, securities, deposits with banks, investments in affiliates, and other monetary assets, as well as net revaluation gains on foreign exchange and derivative products. FFIEC cross-border risk measures exposure to...

  • Page 143
    ...entity. Argentina and Venezuela Developments Citi operates in several countries with strict foreign exchange controls that limit its ability to convert local currency into U.S. dollars and/or transfer funds outside the country. In such cases, Citi could be exposed to a risk of loss in the event that...

  • Page 144
    ...net investment hedge year-over-year and sequentially was driven by significantly increased hedging costs. In addition, as of December 31, 2012, Citi hedged foreign currency risk associated with its net investment by holding in its Argentine operations both U.S.-dollar-denominated net monetary assets...

  • Page 145
    ...of the fairvalue hierarchy (see Note 25 to the Consolidated Financial Statements for more details) to ensure that the fair value reflects the price at which the net open risk position could be liquidated. The liquidity reserve is based on the bid/offer spread for an instrument. When Citi has elected...

  • Page 146
    ...including both banks and broker-dealers. Citi generally has a mismatch between the total notional amounts of protection purchased and sold and it may hold the reference assets directly, rather than entering into offsetting credit derivative contracts as and when desired. The open risk exposures from...

  • Page 147
    .../counterparty Bank Broker-dealer Monoline Non-financial Insurance and other financial institutions Total by industry/counterparty By instrument Credit default swaps and options Total return swaps and other Total by instrument By rating Investment grade Non-investment grade (1) Total by rating By...

  • Page 148
    ... For additional information on Citigroup's fair value analysis, see Notes 25 and 26 to the Consolidated Financial Statements. Recognition of Changes in Fair Value Changes in the valuation of the trading assets and liabilities, as well as all other assets (excluding available-for-sale securities (AFS...

  • Page 149
    ... to an agreement dated September 11, 2012 (for additional information, see Citi's Form 8-K filed with the U.S. Securities and Exchange Commission on September 11, 2012 and "Citi Holdings- Brokerage and Asset Management" above). The related approximate $4.5 billion in deposits were transferred to...

  • Page 150
    ... of the loan loss reserve and related accounts, see Notes 1 and 17 to the Consolidated Financial Statements. Securitizations Citigroup securitizes a number of different asset classes as a means of strengthening its balance sheet and accessing competitive financing rates in the market. Under these...

  • Page 151
    ... the first quarter of 2012. As of January 1, 2012, a substantial majority of the Citi retail services business previously included within the Local Consumer Lending-Cards reporting unit was transferred to North America-Regional Consumer Banking. In addition, certain small businesses included within...

  • Page 152
    ... companies for the reporting unit. In arriving at a terminal value for Local Consumer Lending-Cards, using 2015 as the terminal year, the assumptions used included a long-term growth rate. The discount rate used in the analysis is based on the reporting units' estimated cost of equity capital...

  • Page 153
    ... In billions of dollars U.S. federal (1) Consolidated tax return net operating loss (NOL) Consolidated tax return foreign tax credit (FTC) Consolidated tax return general business credit (GBC) Future tax deductions and credits Other (2) Total U.S. federal State and local New York NOLs Other state...

  • Page 154
    ...beginning of 2012 of the "active financing exception." As a result of the enactment of this new tax law, Citigroup expects to have a tax benefit of approximately $45 million in the first quarter of 2013. For additional information on income taxes, see Note 10 to the Consolidated Financial Statements...

  • Page 155
    ... controls and procedures are designed to ensure that information required to be disclosed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including without limitation that information required...

  • Page 156
    ..., given Citi's large size, complex operations and global footprint, lapses or deficiencies in internal controls may occur from time to time. Citi management assessed the effectiveness of Citigroup's internal control over financial reporting as of December 31, 2012 based on the criteria set forth by...

  • Page 157
    ...U.S. government credit rating on Citi's businesses, results of operations, capital, funding and liquidity; •฀ risks arising from Citi's extensive operations outside of the U.S., particularly in emerging markets, including among others foreign exchange controls, limitations on foreign investments...

  • Page 158
    ... financial accounting and reporting standards on how Citi records and reports its financial condition and results of operations; •฀ the potential impact of changes in the method for determining LIBOR on the value of any LIBOR-linked debt securities and other financial obligations held or issued...

  • Page 159
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Citigroup as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for each of the years in the...

  • Page 160
    ...(the "Company" or "Citigroup") as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2012. These consolidated financial statements are...

  • Page 161
    ... 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 Receivables and Brokerage Payables Note 14 - Trading Account Assets and Liabilities Note 15 - Investments Note 16 - Loans...

  • Page 162
    ... Provision (release) for unfunded lending commitments Total provisions for credit losses and for benefits and claims Operating expenses Compensation and benefits Premises and equipment Technology/communication Advertising and marketing Other operating Total operating expenses (3) Income (loss) from...

  • Page 163
    ... and losses on investment securities, net of taxes Net change in cash flow hedges, net of taxes Net change in foreign currency translation adjustment, net of taxes and hedges Pension liability adjustment, net of taxes (1) Citigroup's total other comprehensive income (loss) Other comprehensive income...

  • Page 164
    ... only be used to settle obligations of consolidated VIEs Cash and due from banks Trading account assets Investments Loans, net of unearned income Consumer (including $1,191 and $1,292 as of December 31, 2012 and December 31, 2011, respectively, at fair value) Corporate (including $157 and $198 as of...

  • Page 165
    ..., at fair value) Total deposits Federal funds purchased and securities loaned or sold under agreements to repurchase (including $116,689 and $97,712 as of December 31, 2012 and December 31, 2011, respectively, at fair value) Brokerage payables Trading account liabilities Short-term borrowings...

  • Page 166
    ... of previously issued but unvested employee stock awards related to employees who have left Citigroup. (4) All open market repurchases were transacted under an existing authorized share repurchase plan and relate to customer fails/errors. The Notes to the Consolidated Financial Statements are an...

  • Page 167
    ...and present value of future profits (Additions) reductions to deferred policy acquisition costs Depreciation and amortization Deferred tax benefit Provision for credit losses Realized gains from sales of investments Net impairment losses recognized in earnings Change in trading account assets Change...

  • Page 168
    ...Foreign Currency Translation Citibank, N.A. is a commercial bank and wholly owned subsidiary of Citigroup Inc. Citibank's principal offerings include: Consumer finance, mortgage lending, and retail banking products and services; investment banking, commercial banking, cash management, trade finance...

  • Page 169
    ... at fair value. The debt host contract is accounted for at fair value under the fair value option, as described in Note 26 to the Consolidated Financial Statements. Derivatives used for trading purposes include interest rate, currency, equity, credit, and commodity swap agreements, options, caps and...

  • Page 170
    ...to the Consolidated Financial Statements, Citi has elected fair value accounting for certain loans. Such loans are carried at fair value with changes in fair value reported in earnings. Interest income on such loans is recorded in Interest revenue at the contractually specified rate. Loans for which...

  • Page 171
    ... 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 172
    ...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 operating activities category on the line Change in loans held-for-sale...

  • Page 173
    ... Chief Financial Officer review the adequacy of the credit loss reserves each quarter with representatives from the risk management and finance staffs for each applicable business area. Applicable business areas include those having classifiably managed portfolios, where internal credit-risk ratings...

  • Page 174
    ...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 175
    ...when 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. Repurchase Reserve-Private-Label Securitizations Investors in private-label...

  • Page 176
    ... for selling costs and subsequent declines 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...

  • Page 177
    ...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 commitments...

  • Page 178
    ... 6 to the Consolidated Financial Statements for a description of the Company's revenue recognition policies for commissions and fees. Earnings per Share Cash equivalents are defined as those amounts included in cash and due from banks. Cash flows from risk management activities are classified in...

  • Page 179
    ...their collateral value less cost to sell. FHA-insured loans are reserved for, based on a discounted cash flow model. As a result of implementing this guidance, Citigroup recorded an incremental $635 million of charge-offs in the third quarter of 2012, the vast majority of which related to loans that...

  • Page 180
    ... million deferred tax asset was recorded with an offset to opening retained earnings of $107 million (net of tax). Change in Accounting for Embedded Credit Derivatives In October 2010, the FASB issued ASU No. 2010-26, Financial Services - Insurance (Topic 944): Accounting for Costs Associated with...

  • Page 181
    ... without generating volatility in reported earnings. Additional Disclosures Regarding Fair Value Measurements Non-Consolidation of Certain Investment Funds The FASB issued ASU No. 2010-10, Consolidation (Topic 810): Amendments for Certain Investment Funds in the first quarter of 2010. ASU 2010...

  • Page 182
    ... developed by the FASB with the goal of improving financial reporting about expected credit losses on loans, securities and other financial assets held by banks, financial institutions, and other public and private organizations. The exposure draft proposes a new accounting model intended to require...

  • Page 183
    ... of dollars 2012 $ 60 $ (123) - (44) $ (79) Total revenues, net of interest expense Income (loss) from discontinued operations Gain on sale Benefit for income taxes Income (loss) from discontinued operations, net of taxes Sale of Egg Banking plc Credit Card Business On March 1, 2011, the Company...

  • Page 184
    ... of taxes The following is summarized financial information for the CCA business, the Egg credit card business, The Student Loan Corporation business and previous discontinued operations, for which Citi continues to have minimal residual costs associated with the sales. In millions of dollars 2012...

  • Page 185
    ... quarter of 2012 related to the transfer of the substantial majority of the Company's retail partner cards business (which Citi now refers to as "Citi retail services") from Citi Holdings-Local Consumer Lending to Citicorp-North America Regional Consumer Banking. Additionally, certain consolidated...

  • Page 186
    ...23 $13,658 Credit cards and bank cards Investment banking Trading-related Transaction services Other Consumer (1) Checking-related Primerica Loan servicing Corporate finance (2) Other Total commissions and fees (1) Primarily consists of fees for investment fund administration and management, third...

  • Page 187
    ...Brokerage and Asset Management Special Asset Pool Subtotal Citi Holdings Total Citigroup Interest rate contracts (1) Foreign exchange contracts (2) Equity contracts (3) Commodity and other contracts (4) Credit derivatives (5) Total (1) Includes revenues from government securities and corporate debt...

  • Page 188
    ... two types of deferred cash awards-one subject to a four-year vesting schedule and earning a LIBOR-based return, and the other subject to a two-year vesting schedule and denominated in stock units, the value of which fluctuated based on the price of Citigroup common stock. Other terms and conditions...

  • Page 189
    ... per-share fair value Weighted-average expected life Valuation assumptions Expected volatility Risk-free interest rate Expected dividend yield $22.97 3.85 years 36.07% 1.21% 0.88% From 2003 to 2007, Citigroup granted annual stock awards under its Citigroup Ownership Program (COP) to a broad base of...

  • Page 190
    ...value at the time of grant (which is defined under the 2009 Stock Incentive Plan to be the NYSE closing price on the trading day immediately preceding the grant date or on the grant date for grants to executive officers). Vesting periods and other terms and conditions of sign-on and retention option...

  • Page 191
    ... related to stock options; this cost is expected to be recognized over a weighted-average period of 0.3 years. 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 2012...

  • Page 192
    ... executive officers were awarded a target number of performance share units (PSUs) on February 19, 2013 for performance in 2012. PSUs will be earned only to the extent that Citigroup attains specified performance goals relating to Citigroup's return on assets and relative total shareholder return...

  • Page 193
    ...service cost (benefit) Net actuarial loss Curtailment (gain) loss Settlement (gain) loss Special termination benefits Net qualified (benefit) expense Nonqualified plans expense Total net (benefit) expense Contributions The Company's funding practice for U.S. and non-U.S. pension plans is generally...

  • Page 194
    ... at year end Change in plan assets Plan assets at fair value at beginning of year Actual return on plan assets Company contributions Plan participants contributions Settlements Benefits paid Foreign exchange impact and other Plan assets at fair value at year end Funded status of the plan at year end...

  • Page 195
    ... expected returns Net amortizations Foreign exchange impact and other Change in deferred taxes, net Change, net of tax Balance, December 31, net of tax $(5,270) (1) See Note 21 to the Consolidated Financial Statements for further discussion of net Accumulated other comprehensive income (loss...

  • Page 196
    ... do not exist, the discount rates are selected by reference to local government bond rates with a premium added to reflect the additional risk for corporate bonds in certain countries. Expected Rate of Return The Company determines its assumptions for the expected rate of return on plan assets for...

  • Page 197
    ...point change in the discount rate: In millions of dollars U.S. plans Non-U.S. plans Health-Care Cost-Trend Rate Assumed health-care cost-trend rates were as follows: 2012 Health-care cost increase rate for U.S. plans Following year Ultimate rate to which cost increase is assumed to decline Year in...

  • Page 198
    ... for 2013 by asset category based on asset fair values, are as follows: Target asset allocation Asset category (1) Equity securities (2) Debt securities Real estate Private equity Other investments Total 2013 0 - 30% 25 - 73 0-7 0 - 15 12 - 29 U.S. pension assets at December 31, 2012 17% 45 5 11...

  • Page 199
    ... government debt Non-U.S. corporate bonds State and municipal debt Hedge funds Asset-backed securities Mortgage-backed securities Annuity contracts Private equity Derivatives Other investments Total investments at fair value Cash and short-term investments Other investment receivables Total assets...

  • Page 200
    ... government debt Non-U.S. corporate bonds State and municipal debt Hedge funds Asset-backed securities Mortgage-backed securities Annuity contracts Private equity Derivatives Other investments Total investments at fair value Cash and short-term investments Other investment receivables Total assets...

  • Page 201
    ... Treasuries U.S. corporate bonds Non-U.S. government debt Non-U.S. corporate bonds State and municipal debt Hedge funds Mortgage-backed securities Annuity contracts Derivatives Other investments Total investments at fair value Cash and short-term investments Total assets In millions of dollars - 10...

  • Page 202
    ... (28) Ending Level 3 fair value at Dec. 31, 2012 $ 48 - 4 4 16 6 219 $ 297 3 $ 300 Asset categories Equity securities Non-U.S. equity Mutual funds Debt securities Non-U.S. government bonds Non-U.S. corporate bonds Hedge funds Annuity contracts Other investments Total investments Cash and short-term...

  • Page 203
    ...with the Company's contributions to the funds, will maintain the funds' ability to meet all required benefit obligations. Risk is controlled through diversification of asset types and investments in domestic and international equities, fixed-income securities and cash and short-term investments. The...

  • Page 204
    ... Program The following table summarizes certain assumptions used in determining the postemployment benefit obligations and net benefit expenses for the Company's U.S. postemployment plans. 2012 Discount rate Health-care cost increase rate Following year Ultimate rate to which cost increase...

  • Page 205
    ... (benefit) for income taxes on discontinued operations Provision (benefit) for income taxes on cumulative effect of accounting changes Income tax expense (benefit) reported in stockholders' equity related to: Foreign currency translation Securities available-for-sale Employee stock plans Cash flow...

  • Page 206
    ... tax expense from continuing operations is included in the "Foreign income 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...

  • Page 207
    ... of dollars Jurisdiction/component U.S. federal (1) Consolidated tax return net operating losses (NOLs) Consolidated tax return foreign tax credits (FTCs) Consolidated tax return general business credits (GBCs) Future tax deductions and credits Other (2) Total U.S. federal State and local New York...

  • Page 208
    ...subject to overall market and global economic conditions. Citi's forecasted taxable income incorporates geographic business forecasts and taxable income adjustments to those forecasts (e.g., U.S. tax exempt income, loan loss reserves deductible for U.S. tax reporting in subsequent years), as well as...

  • Page 209
    ...772 shares of Citigroup common stock for the final settlement of the prepaid stock purchase contract. The impact of these additional shares to the weighted-average common shares outstanding applicable to basic EPS for the year ended 2012 was negligible due to the timing of when they were issued. The...

  • Page 210
    ... and lending agreements are recorded at the amount of cash advanced or received and are collateralized 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...

  • Page 211
    ...Trading account assets and Trading account liabilities, at fair value, consisted of the following at December 31: In millions of dollars 2012 2011 Trading account assets Mortgage-backed securities (1) U.S. government-sponsored agency guaranteed Prime Alt-A Subprime Non-U.S. residential Commercial...

  • Page 212
    ... at cost (3) Total investments (1) Recorded at amortized cost less impairment for securities that have credit-related impairment. (2) Unrealized gains and losses for non-marketable equity securities carried at fair value are recognized in earnings. During the third quarter of 2012, the Company sold...

  • Page 213
    ... value losses 12 months or longer Gross Fair unrealized value losses Total Gross unrealized losses In millions of dollars Fair value December 31, 2012 Securities AFS Mortgage-backed securities U.S. government-sponsored agency guaranteed Prime Non-U.S. residential Commercial Total mortgage...

  • Page 214
    ...asset-backed and other debt securities. The following table presents interest and dividends on investments: In millions of dollars 2012 $ 6,509 683 333 $ 7,525 2011 $ 7,257 746 317 $ 8,320 2010 $ 9,922 760 322 $11,004 Taxable interest Interest exempt from U.S. federal income tax Dividends Total...

  • Page 215
    ... of dollars Amortized cost (1) Carrying value (2) Fair value December 31, 2012 Debt securities held-to-maturity Mortgage-backed securities (3) Prime Alt-A Subprime Non-U.S. residential Commercial Total mortgage-backed securities State and municipal Foreign government (4) Corporate Asset-backed...

  • Page 216
    ...value losses 12 months or longer Gross Fair unrecognized value losses Total Gross unrecognized losses In millions of dollars Fair value December 31, 2012 Debt securities held-to-maturity Mortgage-backed securities State and municipal Foreign government Corporate Asset-backed securities Total debt...

  • Page 217
    ...of dollars December 31, 2012 Carrying value Fair value $ - 69 54 4,586 $ - 67 54 4,977 December 31, 2011 Carrying value Fair value $ - 275 238 6,917 $ - 239 224 6,320 Mortgage-backed securities Due within 1 year After 1 but within 5 years After 5 but within 10 years After 10 years (1) Total State...

  • Page 218
    ... AFS securities. Losses related to HTM securities are not recorded, as these investments are carried at amortized cost. For securities transferred to HTM from Trading account assets, amortized cost is defined as the fair value of the securities at the date of transfer, plus any accretion income and...

  • Page 219
    ...interest in Akbank, which it purchased in January 2007, accounted for as an equity method investment. As a result of its decision to sell its share holdings in Akbank, in the first quarter of 2012 Citi recorded an impairment charge related to its total investment in Akbank amounting to approximately...

  • Page 220
    ..., 2012: OTTI on Investments and Other Assets In millions of dollars AFS (1) HTM Year Ended December 31, 2012 Other Assets Total Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell: Total OTTI losses recognized during the year ended...

  • Page 221
    ... Treasury securities Foreign government securities Corporate Asset-backed securities Other debt securities Total OTTI credit losses recognized for AFS debt securities HTM debt securities Mortgage-backed securities Prime Alt-A Subprime Non-U.S. residential Commercial real estate Total mortgage-backed...

  • Page 222
    ... years as market conditions allow. Private equity and real estate funds do not allow redemption of investments by their investors. Investors are permitted to sell or transfer their investments, subject to the approval of the general partner or investment manager of these funds, which generally...

  • Page 223
    ... managed primarily by the Global Consumer Banking and Local Consumer Lending businesses. The following table provides information by loan type: In millions of dollars 2012 2011 Consumer loans In U.S. offices Mortgage and real estate (1) Installment, revolving credit, and other Cards Commercial...

  • Page 224
    ... Home equity loans (6) Credit cards Installment and other Commercial market loans Total In offices outside North America Residential first mortgages Home equity loans (6) Credit cards Installment and other Commercial market loans Total Total GCB and LCL Special Asset Pool (SAP) Total Citigroup...

  • Page 225
    ... Home equity loans Total In millions of dollars Residential first mortgages Home equity loans Credit cards Installment and other Total (1) Excludes loans guaranteed by U.S. government entities, loans subject to LTSCs with U.S. government-sponsored entities and loans recorded at fair value...

  • Page 226
    ... and real estate Residential first mortgages Home equity loans Credit cards Installment and other Individual installment and other Commercial market loans Total (7) (1) (2) (3) (4) (5) (6) (7) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount...

  • Page 227
    ...Principal forgiveness $- - - - 1 $ 1 $ 5 - 2 8 1 $ 16 Average interest rate reduction 2% 4 19 4 - North America Residential first mortgages Home equity loans Credit cards Installment and other revolving Commercial markets (5) Total International Residential first mortgages Home equity loans Credit...

  • Page 228
    ... income (loss) Corporate loans, net of unearned income (1) Loans secured primarily by real estate. North America Residential first mortgages Home equity loans Credit cards Installment and other revolving Commercial markets Total International Residential first mortgages Home equity loans Credit...

  • Page 229
    ...of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan. While Corporate loans are generally managed based on their internally assigned risk rating (see further discussion below), the following tables present delinquency information by Corporate loan type...

  • Page 230
    ... institutions Mortgage and real estate Leases Other Non-accrual Commercial and industrial Financial institutions Mortgage and real estate Leases Other Total non-investment grade Private Banking loans managed on a delinquency basis (2) Loans at fair value Corporate loans, net of unearned income $ 33...

  • Page 231
    ...value (3) $1,446 1,056 1,487 25 420 $4,434 Interest income recognized $ 76 - 14 2 17 $109 Non-accrual Corporate loans Commercial and industrial Financial institutions Mortgage and real estate Lease financing Other Total non-accrual Corporate loans At and for the period ended In millions of dollars...

  • Page 232
    ... of dollars Carrying Value $ 99 - 113 - $212 Balance of principal forgiven or deferred $- - - - $- Net P&L impact (3) $ 1 - - - $ 1 Commercial and industrial Financial institutions Mortgage and real estate Other Total (1) TDRs involving changes in the amount or timing of principal payments may...

  • Page 233
    ... as income prospectively over the remaining life of the loan by increasing the loan's level yield. Where the expected cash flows cannot be reliably estimated, the purchased distressed loan is accounted for under the cost recovery method. The carrying amount of the Company's purchased distressed loan...

  • Page 234
    ...for credit losses on unfunded lending commitments at end of year (4) Total allowance for loans, leases, and unfunded lending commitments (1) 2012 includes approximately $635 million of incremental charge-offs related to OCC guidance issued in the third quarter of 2012, which required mortgage loans...

  • Page 235
    ... specific reserve builds (releases) Other Ending balance Allowance for loan losses Determined in accordance with ASC 450-20 Determined in accordance with ASC 310-10-35 Determined in accordance with ASC 310-30 Total allowance for loan losses Loans, net of unearned income Loans collectively evaluated...

  • Page 236
    ... foreign exchange effects on non-dollar-denominated goodwill, discontinued operations in 2012, and purchase accounting adjustments. (2) Primarily includes the transfer of the substantial majority of the Citi retail services business from Citi Holdings-Local Consumer Lending to Citicorp-North America...

  • Page 237
    ... companies for the reporting unit. In arriving at a terminal value for Local Consumer Lending-Cards, using 2015 as the terminal year, the assumptions used included a long-term growth rate. The discount rate used in the analysis is based on the reporting units' estimated cost of equity capital...

  • Page 238
    ...of dollars Purchased credit card relationships Core deposit intangibles Other customer relationships Present value of future profits Indefinite-lived intangible assets Other (1) Intangible assets (excluding MSRs) Mortgage servicing rights (MSRs) Total intangible assets (1) Includes contract-related...

  • Page 239
    ... no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the Safety First Trust securities and the Safety First Trusts' common securities. CGMHI has committed long-term financing facilities with unaffiliated banks. At December 31, 2012...

  • Page 240
    ...-bank Parent company Total Long-term debt outstanding includes trust preferred securities with a balance sheet carrying value of $10,110 million and $16,057 million at December 31, 2012 and December 31, 2011, respectively. In issuing these trust preferred securities, Citi formed statutory business...

  • Page 241
    ... risk-based capital and leverage ratio requirements, as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Citigroup received $19.1 billion in dividends from Citibank, N.A. in 2012...

  • Page 242
    ... and deposits from banks Trading account assets Investments Advances to subsidiaries Investments in subsidiaries Other assets Total assets Liabilities Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities Short-term borrowings Long-term debt...

  • Page 243
    ...preferred stock Proceeds/(repayments) from issuance of long-term debt-third-party, net Net change in short-term borrowings and other advances-intercompany Other financing activities Net cash used in financing activities of continuing operations Net increase (decrease) in cash and due from banks Cash...

  • Page 244
    ... sales and impairments on Citigroup's investment securities included in income, see Note 15 to the Consolidated Financial Statements. (2) Primarily reflects the movements in (by order of impact) the Mexican peso, Japanese yen, Euro, and Brazilian real against the U.S. dollar, and changes in related...

  • Page 245
    ...own debt issuances, resulting in less expensive financing costs than unsecured debt. The SPE may also enter into derivative contracts in order to convert the yield or currency of the underlying assets to match the needs of the SPE investors or to limit or change the credit risk of the SPE. Citigroup...

  • Page 246
    ...) Asset-based financing Municipal securities tender option bond trusts (TOBs) Municipal investments Client intermediation Investment funds Trust preferred securities Other Total Citi Holdings Credit card securitizations Mortgage securitizations U.S. agency-sponsored Non-agency-sponsored Student loan...

  • Page 247
    ...notional amount of exposure. (5) Citicorp mortgage securitizations also include agency and non-agency (private-label) re-securitization activities. These SPEs are not consolidated. See "Re-Securitizations" below for further discussion. Reclassified to conform to the current year's presentation. 225

  • Page 248
    ... 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 balances for unconsolidated VIEs where the...

  • Page 249
    ... securities tender option bond trusts (TOBs) Municipal investments Other Total Citicorp Citi Holdings Asset-based financing Collateralized loan obligations (CLOs) Municipal investments Total Citi Holdings Total Citigroup funding commitments $ $ 12,262 Citicorp and Citi Holdings Consolidated...

  • Page 250
    ...Sheet with no gain or loss recognized. The debt issued by the trusts to third parties is included in the Consolidated Balance Sheet. The Company relies on securitizations to fund a significant portion of its credit card businesses in North America. The following table reflects amounts related to the...

  • Page 251
    ... Holdings' credit card securitizations were $0.4 billion for the year ended December 31, 2012. Managed Loans After securitization of credit card receivables, the Company continues to maintain credit card customer account relationships and provides servicing for receivables transferred to the trusts...

  • Page 252
    ... trusts and also provides servicing for a limited number of Securities and Banking securitizations. Securities and Banking and Special Asset Pool do not retain servicing for their mortgage securitizations. The Company securitizes mortgage loans generally through either a government-sponsored agency...

  • Page 253
    ...' position in the capital structure of the securitization. (2) Anticipated net credit losses represent estimated loss severity associated with defaulted mortgage loans underlying the mortgage securitizations disclosed above. Anticipated net credit losses, in this instance, do not represent total...

  • Page 254
    ...on retained interests in mortgage securitizations. NM Not meaningful. Anticipated net credit losses are not meaningful due to U.S. agency guarantees. In millions of dollars at December 31, 2012 Carrying value of retained interests Discount rates Adverse change of 10% Adverse change of 20% Constant...

  • Page 255
    ... years ended December 31, 2012, 2011 and 2010: 2012 U.S. agencysponsored mortgages $0.4 0.4 - 2011 Agency- and non-agencysponsored mortgages $1.1 0.6 0.1 2010 Agency- and non-agencysponsored mortgages $0.6 0.8 0.1 In billions of dollars Proceeds from new securitizations Contractual servicing fees...

  • Page 256
    ... Consolidated Statement of Income as Other revenue. Re-securitizations The Company engages in re-securitization transactions in which debt securities are transferred to a VIE in exchange for new beneficial interests. During the year ended December 31, 2012, Citi transferred non-agency (private-label...

  • Page 257
    ... a credit rating of A or above, based on the Company's internal risk ratings. Substantially all of the funding of the conduits is in the form of shortterm commercial paper, with a weighted average life generally ranging from 25 to 45 days. At the respective period ends December 31, 2012 and...

  • Page 258
    ... debt securities to the Company or third parties 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...

  • Page 259
    ... and manage those assets over the term of the SPE. The Company is the manager for a limited number of CLO transactions. The Company earns fees for warehousing assets prior to the creation of a "cash flow" or "market value" CDO/CLO, structuring CDOs/CLOs and placing debt securities with investors. In...

  • Page 260
    ... selected cash flow information related to asset-based financings for the years ended December 31, 2012, 2011 and 2010: In billions of dollars In billions of dollars Type Commercial and other real estate Corporate loans Hedge funds and equities Airplanes, ships and other assets Total 2012...

  • Page 261
    ... of low-income housing, facilitate lending in new or underserved markets, or finance the construction or operation of renewable municipal energy facilities. The Company generally invests in these partnerships as a limited partner and earns a return primarily through the receipt of tax credits and...

  • Page 262
    ... losses or residual returns, or both. Trust Preferred Securities The Company has raised financing through the issuance of trust preferred securities. In these transactions, the Company forms a statutory business trust and owns all of the voting equity shares of the trust. The trust issues preferred...

  • Page 263
    ..., to buy or sell within a specified time a financial instrument, commodity or currency at a contracted price that may also be settled in cash, based on differentials between specified indices or prices. Citigroup enters into these derivative contracts relating to interest rate, foreign currency...

  • Page 264
    ...foreign exchange contract notionals Equity contracts Swaps Futures and forwards Written options Purchased options Total equity contract notionals Commodity and other contracts Swaps Futures and forwards Written options Purchased options Total commodity and other contract notionals Credit derivatives...

  • Page 265
    ... values are presented in Note 14 to the Consolidated Financial Statements. (2) Derivative mark-to-market receivables/payables related to management hedges are recorded in either Other assets/Other liabilities or Trading account assets/Trading account liabilities. (3) The credit derivatives trading...

  • Page 266
    ... Foreign exchange Equity contracts Commodity and other Credit derivatives Total Citigroup (1) (1) Also see Note 7 to the Consolidated Financial Statements. Citigroup accounts for its hedging activities in accordance with ASC 815, Derivatives and Hedging (formerly SFAS 133). As a general rule...

  • Page 267
    ...changes in the fair value of a derivative related to time value that, if excluded, are recognized in current earnings. Fair v alue Hedges Hedging of benchmark interest rate risk Citigroup hedges exposure to changes in the fair value of outstanding fixed-rate issued debt and certificates of deposit...

  • Page 268
    ... value hedges Interest rate contracts Foreign exchange contracts Total net gain (loss) excluded from assessment of the effectiveness of fair value hedges $ 1,677 $ (945) (579) $(1,524) $ $ $ $ (23) 10 (13) 26 140 166 (1) Amounts are included in Other revenue on the Consolidated Statement of Income...

  • Page 269
    ...Interest rate contracts Foreign exchange contracts Total effective portion of cash flow hedges reclassified from AOCI to earnings (1) (1) Included primarily in Other revenue and Net interest revenue on the Consolidated Income Statement. For cash flow hedges, any changes in the fair value of the end...

  • Page 270
    ... a credit derivative that allows investors to trade or hedge changes in the credit quality of the reference asset. For example, in a credit spread option, the option writer assumes the obligation to purchase or sell the reference asset at a specified "strike" spread level. The option purchaser buys...

  • Page 271
    ... by the existing derivative contracts, are primarily downgrades in the credit ratings of the Company and its affiliates. The fair value (excluding CVA) of all derivative instruments with credit-risk-related contingent features that are in a net liability position at December 31, 2012 and December...

  • Page 272
    ..., country or individual creditor and monitors this exposure on a continuous basis. At December 31, 2012, Citigroup's most significant concentration of credit risk was with the U.S. government and its agencies. The Company's exposure, which primarily results from trading assets and investments issued...

  • Page 273
    ...net open risk position, consistent with market participant assumptions and in accordance with the unit of account. Valuation Process for Level 3 Fair Value Measurements Price verification procedures and related internal control procedures are governed by the Citigroup Pricing and Price Verification...

  • Page 274
    ...Examples include some government securities and exchange-traded equity securities. For bonds and secondary market loans traded over the counter, the Company generally determines fair value utilizing valuation techniques, including discounted cash flows, price-based and internal models, such as Black...

  • Page 275
    ...the Consolidated฀Financial฀Statements,฀the฀Company฀uses฀net฀asset฀value฀(NAV)฀ to value certain of these investments. Private฀equity฀securities฀are฀generally฀classified฀as฀Level฀3฀of฀the฀fair฀ value hierarchy. Short-term borrowings and long-term debt Where...

  • Page 276
    ... Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives Total trading account derivatives Gross cash collateral paid Netting agreements and market value adjustments Total trading account derivatives Investments Mortgage-backed securities U.S. government-sponsored agency...

  • Page 277
    ... deposits Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities Securities sold, not yet purchased Trading account derivatives Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives Total...

  • Page 278
    ... Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives Total trading account derivatives Gross cash collateral paid Netting agreements and market value adjustments Total trading account derivatives Investments Mortgage-backed securities U.S. government-sponsored agency...

  • Page 279
    ... deposits Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities Securities sold, not yet purchased Trading account derivatives Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives Total...

  • Page 280
    ... trading securities Trading derivatives, net (4) Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives Total trading derivatives, net (4) Investments Mortgage-backed securities U.S. government-sponsored agency guaranteed Residential Commercial...

  • Page 281
    In millions of dollars Loans Mortgage servicing rights Other financial assets measured on a recurring basis 2,245 Liabilities Interest-bearing deposits $ 431 Federal funds purchased and securities loaned or sold under agreements to repurchase 1,061 Trading account liabilities Securities sold, not ...

  • Page 282
    ... rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives Total trading derivatives, net (4) Investments Mortgage-backed securities U.S. government-sponsored agency guaranteed Residential Commercial Total investment mortgage-backed securities U.S. Treasury...

  • Page 283
    ...were newly issued during the year. At issuance, these securities had limited trading activity and were previously classified as Level 3. As trading activity in these securities increased and pricing became observable, these positions were transferred to Level 2. •฀ Transfers of Long-term debt in...

  • Page 284
    ... Level 3 Fair Value Measurements The Company's Level 3 inventory consists of both cash securities and derivatives of varying complexities. The valuation methodologies applied to measure the fair value of these positions include discounted cash flow analyses, internal models and comparative analysis...

  • Page 285
    ..., foreign government, corporate and other debt securities Equity securities $ $ $ $ $ $ Asset-backed securities Non-marketable equity $ 2,768 1,803 709 Price-based Comparables analysis Cash flow Internal model Derivatives - Gross (4) Interest rate contracts (gross) $ 3,202 Foreign exchange...

  • Page 286
    ... funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities Securities sold, not yet purchased Short-term borrowings and long-term debt $ 841 $ 265 75 $ 5,067 1,112 649 Internal model Internal model Price-based Internal model Price-based Yield analysis...

  • Page 287
    ... the total outstanding balance of a bond or loan that is expected to be collected in a liquidation scenario. For many credit securities (such as asset-backed securities), there is no directly observable market input for recovery, but indications of recovery levels are available from pricing services...

  • Page 288
    ... is the agreed purchase price. See Note 15 to the Consolidated Financial Statements. 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 December 31, 2011 Loans held-for-sale Other real estate owned Loans (1) Total assets at fair...

  • Page 289
    ...15 to the Consolidated Financial Statements. In millions of dollars December 31, 2011 $ (201) (71) (973) $(1,245) Loans held-for-sale Other real estate owned Loans (1) Total nonrecurring fair value gains (losses) (1) Represents loans held for investment whose carrying amount is based on the fair...

  • Page 290
    ... Other financial assets (2)(3) Liabilities Deposits Federal funds purchased and securities loaned or sold under agreements to repurchase Long-term debt (4) Other financial liabilities (5) (1) The carrying value of loans is net of the Allowance for loan losses of $25.5 billion for December 31, 2012...

  • Page 291
    ... (1) Trading account assets Investments Loans Certain Corporate loans (2) Certain Consumer loans (2) Total loans Other assets MSRs Certain mortgage loans held for sale Certain equity method investments Total other assets Total assets Liabilities Interest-bearing deposits Federal funds purchased and...

  • Page 292
    ... been classified in Trading 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...

  • Page 293
    .... 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 294
    ... Interest revenue in the Company's Consolidated Statement of Income. Information about these mortgage loans is included in the table below. The change in fair value of these loans due to instrument-specific credit risk was a loss of $107 million and $275 million for the years ended December 31, 2012...

  • Page 295
    .... These positions are reported in Short-term borrowings and Long-term debt on the Company's Consolidated Balance Sheet. The change in fair value for these non-structured liabilities is reported in Principal transactions in the Company's Consolidated Statement of Income. Related interest expense...

  • Page 296
    ...,663 Investment securities Loans Trading account assets Total In addition, included in cash and due from banks at December 31, 2012 and 2011 are $13.4 billion and $13.6 billion, respectively, of cash segregated under federal and other brokerage regulations or deposited with clearing organizations...

  • Page 297
    ... to clearing houses, and also support options and purchases of securities or are in lieu of escrow deposit accounts. Financial standbys also backstop loans, credit facilities, promissory notes and trade acceptances. Performance guarantees Performance guarantees and letters of credit are issued to...

  • Page 298
    ...the market value of the security. Credit card merchant processing Credit card merchant processing guarantees represent the Company's indirect obligations in connection with the processing of private label and bank card transactions on behalf of merchants. Citigroup's primary credit card business is...

  • Page 299
    ...Networks The Company is a member of, or shareholder in, hundreds of value-transfer networks (VTNs) (payment, clearing and settlement systems as well as exchanges) around the world. As a condition of membership, many of these VTNs require that members stand ready to pay a pro rata share of the losses...

  • Page 300
    ...of December 31, 2012 Financial standby letters of credit Performance guarantees Derivative instruments deemed to be guarantees Loans sold with recourse Securities lending indemnifications Credit card merchant processing Custody indemnifications and other Total In billions of dollars as of December...

  • Page 301
    ... 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 and land development Commercial real estate...

  • Page 302
    ..., the Financial Crimes Enforcement Network of the United States Department of the Treasury, and the Federal Bureau of Investigation, relating to Citigroup and its customers. Because of the global scope of Citigroup's operations, and its presence in countries around the world, Citigroup and Related...

  • Page 303
    ...marketed by Citigroup, including securities issued by other public companies, collateralized debt obligations (CDOs), mortgage-backed securities (MBS), auction rate securities (ARS), investment funds, and other structured or leveraged instruments, which have suffered losses as a result of the credit...

  • Page 304
    ... by the credit crisis. These business activities include, but are not limited to, Citigroup's sponsorship, packaging, issuance, marketing, servicing and underwriting of CDOs and MBS, and its origination, sale or other transfer, servicing, and foreclosure of residential mortgages. Mortgage-Related...

  • Page 305
    ... the management and marketing of the ASTA/ MAT and Falcon funds, alternative investment funds managed and marketed by certain Citigroup affiliates that suffered substantial losses during the credit crisis. In addition to the SEC inquiry, on June 11, 2012, the New York Attorney General served...

  • Page 306
    ... the Korean won in 2008, several local banks in Korea, including a Citigroup subsidiary (CKI), entered into foreign exchange derivative transactions with small and medium-size export businesses (SMEs) to enable the SMEs to hedge their currency risk. The derivatives had "knockin, knock-out" features...

  • Page 307
    ...JFSA issued a business improvement order and suspended CGMJ's trading in derivatives related to yen LIBOR and Euroyen and yen TIBOR from January 10 to January 23, 2012. On the same day, the JFSA also took administrative action against Citibank Japan Ltd. (CJL) for conduct arising out of CJL's retail...

  • Page 308
    ...a period of eight months by the Visa and MasterCard networks; changes to certain network rules that would permit merchants to surcharge some payment card transactions subject to certain limitations and conditions, including disclosure to consumers at the point of sale; and broad releases in favor of...

  • Page 309
    ... other financial institutions. Allied Irish Bank Litigation Certain of Citi's consumer businesses, including its Citi-branded and retail services cards businesses, offer or have in the past offered or participated in the marketing, distribution, or servicing of products, such as payment protection...

  • Page 310
    ...of shares, quarterly earnings per share may not add up to the totals reported for the full year. (2) All per-share amounts for all periods reflect Citigroup's 1-for-10 reverse stock split, which was effective May 6, 2011. [End of Consolidated Financial Statements and Notes to Consolidated Financial...

  • Page 311
    ... total Citigroup stockholders' equity. (3) Based on average Citigroup stockholders' equity as a percentage of average assets. (4) Dividends declared per common share as a percentage of net income per diluted share. NM Not Meaningful AVERAGE DEPOSIT LIABILITIES IN OFFICES OUTSIDE THE U.S. (1) 2012...

  • Page 312
    ...limitations, including requirements for banks to maintain reserves against deposits, requirements as to risk-based capital and leverage (see "Capital Resources and Liquidity-Capital Resources" above and Note 20 to the Consolidated Financial Statements), restrictions on the types and amounts of loans...

  • Page 313
    ... trading activities and the financing of customer account balances, and also limits the ability of broker-dealers to transfer large amounts of capital to parent companies and other affiliates. See also "Capital Resources-BrokerDealer Subsidiaries" and Note 20 to the Consolidated Financial Statements...

  • Page 314
    ...hedge funds, private equity funds, securities processing companies, mutual fund companies, insurance companies, automobile financing companies, and internet-based financial services companies. Citigroup competes for clients and capital (including deposits and funding in the short- and long-term debt...

  • Page 315
    ... intense price competition in some of its businesses. For example, the increased pressure on trading commissions from growing direct access to automated, electronic markets may continue to impact Securities and Banking, and technological advances that enable more companies to provide funds transfers...

  • Page 316
    ...existing shares to cover the option exercise, or under Citi's employee restricted or deferred stock program, where shares are withheld to satisfy tax requirements. N/A Not applicable For so long as the FDIC continues to hold any Citigroup trust preferred securities acquired pursuant to the exchange...

  • Page 317
    ... stock during 2011 and 2012, see Note 29 to the Consolidated Financial Statements. For as long as the FDIC continues to hold any Citigroup trust preferred securities acquired pursuant to the exchange offers consummated in 2009, Citigroup is generally restricted from paying regular cash dividends...

  • Page 318
    ...Co-President; CEO, Institutional Clients Group Chief Financial Officer Head of Franchise Risk and Strategy Head of Human Resources CEO, Citibank, N.A. Co-President; CEO, Global Consumer Banking; Chairman, Mexico CEO, North America Controller and Chief Accounting Officer General Counsel and Corporate...

  • Page 319
    ... name" by securities dealers and others for the benefit of individual owners who may vote the shares. Transfer Agent Stockholder address changes and inquiries regarding stock transfers, dividend replacement, 1099-DIV reporting and lost securities for common and preferred stock should be directed...

  • Page 320
    ... C. Gerspach Chief Financial Officer Pursuant to the requirements of the 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 1st day of March, 2013. Citigroup's Principal Executive Officer and...

  • Page 321
    ... School of Business Senior Advisor IBM Corporation; Jones Day; and Lazard Ltd. Judith Rodin President Rockefeller Foundation Senior Research Scholar Columbia University School of International and Public Affairs Chief Executive Officer, Retired Pacific Investment Management Company (PIMCO...

  • Page 322
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  • Page 323
    ... issued prior to that date must be exchanged for new certificates by contacting Computershare at the addresses noted above. Citi's 2012 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...

  • Page 324
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