Citibank 2012 Annual Report Download - page 187

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7. PRINCIPAL TRANSACTIONS
Principal transactions revenue consists of realized and unrealized gains and
losses from trading activities. Trading activities include revenues from fixed
income, equities, credit and commodities products, and foreign exchange
transactions. Not included in the table below is the impact of net interest
revenue related to trading activities, which is an integral part of trading
activities’ profitability. See Note 5 to the Consolidated Financial Statements
for information about net interest revenue related to trading activity.
Principal transactions include CVA and DVA.
The following table presents principal transactions revenue for the years
ended December 31:
In millions of dollars 2012 2011 2010
Global Consumer Banking $ 812 $ 716 $ 533
Institutional Clients Group 4,130 4,873 5,566
Corporate/Other (192) 45 (406)
Subtotal Citicorp $4,750 $ 5,634 $ 5,693
Local Consumer Lending $ (69) $ (102) $ (217)
Brokerage and Asset Management 5(11) (37)
Special Asset Pool 95 1,713 2,078
Subtotal Citi Holdings $ 31 $ 1,600 $ 1,824
Total Citigroup $4,781 $ 7,234 $ 7,517
Interest rate contracts (1) $ 2,301 $ 5,136 $ 3,231
Foreign exchange contracts (2) 2,403 2,309 1,852
Equity contracts (3) 158 3 995
Commodity and other contracts (4) 92 76 126
Credit derivatives (5) (173) (290) 1,313
Total $ 4,781 $ 7,234 $ 7,517
(1) Includes revenues from government securities and corporate debt, municipal securities, preferred
stock, mortgage securities and other debt instruments. Also includes spot and forward trading of
currencies and exchange-traded and over-the-counter (OTC) currency options, options on fixed
income securities, interest rate swaps, currency swaps, swap options, caps and floors, financial
futures, OTC options and forward contracts on fixed income securities.
(2) Includes revenues from foreign exchange spot, forward, option and swap contracts, as well as FX
translation gains and losses.
(3) Includes revenues from common, preferred and convertible preferred stock, convertible corporate
debt, equity-linked notes and exchange-traded and OTC equity options and warrants.
(4) Primarily includes revenues from crude oil, refined oil products, natural gas and other commodities trades.
(5) Includes revenues from structured credit products.
8. INCENTIVE PLANS
Overview
The Company makes restricted or deferred stock and/or deferred cash awards,
as well as stock payments, as part of its discretionary annual incentive award
programs involving a large segment of Citigroup’s employees worldwide.
Stock awards and grants of stock options may also be made at various
times during the year as sign-on awards to induce new hires to join the
Company, or to high-potential employees as long-term retention awards.
Long-term restricted stock awards and salary stock payments have also
been used to fulfill specific regulatory requirements to deliver annual salary
and incentive awards to certain officers and highly-compensated employees
in the form of equity.
Consistent with long-standing practice, a portion of annual compensation
for non-employee directors is also delivered in the form of equity awards.
In addition, equity awards are made occasionally as additional incentives
to retain and motivate officers or employees. Various other incentive award
programs are made on an annual or other regular basis to retain and
motivate certain employees who do not participate in Citigroup’s annual
discretionary incentive awards.
Recipients of Citigroup stock awards generally do not have any
stockholder rights until shares are delivered upon vesting or exercise, or
after the expiration of applicable restricted periods. Recipients of restricted
or deferred stock awards, however, may be entitled to receive dividends or
dividend-equivalent payments during the vesting period, unless the award
is subject to performance criteria. (Citigroup’s 2009 Stock Incentive Plan
currently does not permit the payment or accrual of dividend equivalents on
stock awards subject to performance criteria.) Additionally, because unvested
shares of restricted stock are considered issued and outstanding, recipients of
such awards are generally entitled to vote the shares in their award during
the vesting period. Once a stock award vests, the shares are freely transferable,
unless they are subject to a restriction on sale or transfer for a specified
period. Pursuant to a stock ownership commitment, certain executives have
committed to holding most of their vested shares indefinitely.
All equity awards granted since April 19, 2005, have been made pursuant
to stockholder-approved stock incentive plans that are administered by
the Personnel and Compensation Committee of the Citigroup Board of
Directors (the Committee), which is composed entirely of independent
non-employee directors.
At December 31, 2012, approximately 86.9 million shares of Citigroup
common stock were authorized and available for grant under Citigroup’s
2009 Stock Incentive Plan, the only plan from which equity awards are
currently granted.
The 2009 Stock Incentive Plan and predecessor plans permit the use of
treasury stock or newly issued shares in connection with awards granted
under the plans. Until recently, Citigroup’s practice has been to deliver shares
from treasury stock upon the exercise or vesting of equity awards. However,
newly issued shares were issued to settle certain awards in April 2010, and the
vesting of annual deferred stock awards in January 2011, 2012 and 2013. The
newly issued shares in April 2010 and January 2011 were specifically intended
to increase the Company’s equity capital. The practice of issuing new shares