Citibank 2013 Annual Report Download - page 123

105
Credit Ratings
Citigroup’s funding and liquidity, its funding capacity, ability to access
capital markets and other sources of funds, the cost of these funds, and its
ability to maintain certain deposits are partially dependent on its credit
ratings. The table below indicates the ratings for Citigroup and Citibank,
N.A. as of December 31, 2013. While not included in the table below,
Citigroup Global Markets Inc. (CGMI) is rated A/A-1 by Standard & Poor’s as
of December 31, 2013.
Debt Ratings as of December 31, 2013
Citigroup Inc. Citibank, N.A.
Senior
debt
Commercial
paper Outlook
Long-
term
Short-
term Outlook
Fitch Ratings (Fitch) A F1 Stable A F1 Stable
Moody’s Investors Service (Moody’s) Baa2 P-2 Stable A2 P-1 Stable
Standard & Poor’s (S&P) A- A-2 Negative A A-1 Stable
Recent Credit Rating Developments
On December 4, 2013, S&P upgraded Citi’s unsupported rating (stand-
alone credit profile) to ‘bbb+’ from ‘bbb,’ and simultaneously removed
the one “transition notch,” resulting in no net change to the long- and
short-term ratings of Citigroup Inc. and Citibank, N.A. As a result of the
unsupported upgrade, Citi’s hybrid instruments were upgraded to ‘BB+’
from ‘BB’. S&P noted Citi’s progress in reducing non-core assets within Citi
Holdings and the firm’s improved risk profile. As of December 31, 2013, S&P
maintains outlooks of ‘Stable’ at Citibank, N.A. and ‘Negative’ at Citigroup
Inc. Citigroup Inc.’s negative outlook reflects S&P’s ongoing assessment
of government support. S&P cited the need for additional guidance from
regulators before adjusting its support assumptions, and in early December
2013, stated that any removal of support is “likely to be gradual or partial.”
On November 14, 2013, Moody’s concluded its support reassessment for
the six largest U.S. banks, including Citi, related to potential implementation
of Orderly Liquidation Authority under the Dodd-Frank Act. Bank level
support assumptions remained unchanged, and Moody’s upgraded Citibank,
N.A.’s unsupported rating, which raised its supported long- and short-term
ratings to ‘A2/P-1’ from ‘A3/P-2’. Moody’s removed Citigroup Inc.’s two
notches of government support, but incorporated one notch of uplift for
reduced loss given default assumptions under the proposed resolution
framework. As a result, Citigroup Inc.’s long- and short-term ratings
remained at ‘Baa2/P-2’. As of December 31, 2013, Moody’s has ‘Stable’
outlooks for both entities.
Potential Impacts of Ratings Downgrades
Ratings downgrades by Moody’s, Fitch or S&P could negatively impact
Citigroup’s and/or Citibank, N.A.’s funding and liquidity due to reduced
funding capacity, including derivatives triggers, which could take the form of
cash obligations and collateral requirements.
The following information is provided for the purpose of analyzing the
potential funding and liquidity impact to Citigroup and Citibank, N.A. of
a hypothetical, simultaneous ratings downgrade across all three major
rating agencies. This analysis is subject to certain estimates, estimation
methodologies, and judgments and uncertainties. Uncertainties include
potential ratings limitations certain entities may have with respect to
permissible counterparties, as well as general subjective counterparty
behavior. For example, certain corporate customers and trading
counterparties could re-evaluate their business relationships with Citi
and limit the trading of certain contracts or market instruments with
Citi. Changes in counterparty behavior could impact Citi’s funding and
liquidity, as well as the results of operations of certain of its businesses. The
actual impact to Citigroup or Citibank, N.A. is unpredictable and may differ
materially from the potential funding and liquidity impacts described below.
For additional information on the impact of credit rating changes on Citi
and its applicable subsidiaries, see “Risk Factors—Liquidity Risks” above.