Citibank 2015 Annual Report Download - page 113

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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 sets forth the ratings for Citigroup and Citibank as of
December 31, 2015. While not included in the table below, the long-term
and short-term ratings of Citigroup Global Markets Inc. (CGMI) were A/A-1
at Standard & Poor’s and A+/F1 at Fitch as of December 31, 2015. The
long-term and short-term ratings of Citigroup Global Markets Holdings
Inc. (CGMHI) were BBB+/A-2 at Standard & Poor’s and A/F1 at Fitch as of
December 31, 2015.
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) Baa1 P-2 Stable A1 P-1 Stable
Standard & Poor’s (S&P) BBB+ A-2 Stable A A-1 Watch Positive
Recent Credit Rating Developments
On December 8, 2015, Fitch affirmed Citigroup Inc.’s Viability Rating (VR)
and Long-Term Issuer Default Rating (IDR) at ‘a/A’, respectively. At the
same time, Fitch affirmed Citibank’s VR and IDR at ‘a/A+’, respectively. The
outlooks for the Long-Term IDRs are stable.
On December 2, 2015, as expected, S&P downgraded the holding company
ratings of all eight U.S. GSIBs, including Citigroup Inc., by one notch,
reflecting its view of the likelihood of extraordinary government support to
be “uncertain.” As a result, Citigroup Inc.’s long-term rating now stands
at BBB+ and the outlook was upgraded to “Stable.” The short-term rating
of Citigroup Inc. remained at A-2. The operating company ratings of the
GSIBs, including Citibank, N.A. and Citigroup Global Markets Inc., remained
unchanged, with a “Watch Positive” outlook, as S&P waits for further clarity
from the regulators regarding TLAC eligibility of certain instruments. S&P
has stated it expects to conclude its credit watch within the first half of 2016.
Potential Impacts of Ratings Downgrades
Ratings downgrades by Moody’s, Fitch or S&P could negatively impact
Citigroup’s and/or Citibank’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 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 that certain entities may have with respect
to permissible counterparties, as well as general subjective counterparty
behavior. For example, certain corporate customers and markets
counterparties could re-evaluate their business relationships with Citi and
limit transactions in 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 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.
Citigroup Inc. and Citibank—Potential Derivative Triggers
As of December 31, 2015, Citi estimates that a hypothetical one-notch
downgrade of the senior debt/long-term rating of Citigroup Inc. across
all three major rating agencies could impact Citigroup’s funding and
liquidity due to derivative triggers by approximately $0.6 billion, compared
to $0.7 billion as of September 30, 2015. Other funding sources, such as
securities financing transactions and other margin requirements, for which
there are no explicit triggers, could also be adversely affected.
As of December 31, 2015, Citi estimates that a hypothetical one-notch
downgrade of the senior debt/long-term rating of Citibank across all three
major rating agencies could impact Citibank’s funding and liquidity by
approximately $1.3 billion, compared to $1.5 billion as of September 30,
2015, due to derivative triggers.