Citibank 2014 Annual Report Download - page 135

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Emerging Markets Trading Account Assets and Investment Securities
In the ordinary course of business, Citi holds securities in its trading accounts
and investment accounts, including those above. Trading account assets are
marked-to-market daily, with asset levels varying as Citi maintains inventory
consistent with customer needs. Investment securities are recorded at either
fair value or historical cost, based on the underlying accounting treatment,
and are predominantly held as part of the local entity asset and liability
management program, or to comply with local regulatory requirements.
In the markets in the table above, 96% of Citi’s investment securities were
related to sovereign issuers as of December 31, 2014.
Emerging Markets Consumer Lending
GCB’s strategy within the emerging markets is consistent with GCB’s overall
strategy, which is to leverage its global footprint to serve its target clients.
The retail bank seeks to be the preeminent bank for the emerging affluent
and affluent consumers in large urban centers. In credit cards and in certain
retail markets, Citi serves customers in a somewhat broader set of segments
and geographies. Commercial banking generally serves small- and middle-
market enterprises operating in GCB’s geographic markets, focused on clients
that value Citi’s global capabilities. Overall, Citi believes that its customers
are more resilient than the overall market under a wide range of economic
conditions. Citi’s consumer business has a well-established risk appetite
framework across geographies and products that reflects the business strategy
and activities and establishes boundaries around the key risks that arise from
the strategy and activities.
As of December 31, 2014, GCB had approximately $123 billion of
consumer loans outstanding to borrowers in the emerging markets, or
approximately 41% of GCB’s total loans, compared to $128 billion (43%)
and $127 billion (42%) as of September 30, 2014 and December 31, 2013,
respectively. Of the approximate $123 billion as of December 31, 2014, the
five largest emerging markets—Mexico, Korea, Singapore, Hong Kong and
Taiwan—comprised approximately 28% of GCB’s total loans.
Within the emerging markets, 29% of Citi’s GCB loans were mortgages,
26% were commercial markets loans, 24% were personal loans and 22% were
credit cards loans, each as of December 31, 2014.
Overall consumer credit quality remained generally stable in the fourth
quarter of 2014, as net credit losses in the emerging markets were 2.2%
of average loans, compared to 2.1% and 1.9% in the third quarter of 2014
and fourth quarter of 2013, respectively, consistent with Citi’s target market
strategy and risk appetite framework.
Emerging Markets Corporate Lending
Consistent with ICG’s overall strategy, Citi’s corporate clients in the emerging
markets are typically large, multinational corporations that value Citi’s
global network. Citi aims to establish relationships with these clients that
encompass multiple products, consistent with client needs, including
cash management and trade services, foreign exchange, lending, capital
markets and M&A advisory. Citi believes that its target corporate segment
is more resilient under a wide range of economic conditions, and that
its relationship-based approach to client service enables it to effectively
manage the risks inherent in such relationships. Citi has a well-established
risk appetite framework around its corporate lending activities, including
risk-based limits and approval authorities and portfolio concentration
boundaries.
As of December 31, 2014, ICG had approximately $118 billion of
loans outstanding to borrowers in the emerging markets, representing
approximately 43% of ICG total loans outstanding, compared to
$125 billion (45%) and $126 billion (47%) as of September 30, 2014
and December 31, 2013, respectively. No single emerging market country
accounted for more than 6% of Citi’s ICG loans as of the end of the fourth
quarter of 2014.
As of December 31, 2014, approximately 70% of Citi’s emerging markets
corporate credit portfolio (excluding private bank in ICG), including loans
and unfunded lending commitments, was rated investment grade, which
Citi considers to be ratings of BBB or better according to its internal risk
measurement system and methodology (for additional information on
Citi’s internal risk measurement system for corporate credit, see “Corporate
Credit Details” above). The vast majority of the remainder was rated BB or B
according to Citi’s internal risk measurement system and methodology.
Overall ICG net credit losses in the emerging markets were 0.4% of average
loans in the fourth quarter of 2014, compared to 0.0% in each of the third
quarter of 2014 and fourth quarter of 2013, primarily driven by a charge-off
related to a single exposure. The ratio of non-accrual ICG loans to total loans
in the emerging markets remained stable at 0.6% as of December 31, 2014.