Citigroup (C)

Revenues were flat with the prior-year period as higher retail distribution and consumer lending revenues were offset by declines in cards and commercial business.  Average deposits grew 16%, and average managed loans were up 8%.  Expenses increased 8% primarily due to acquisitions and lower marketing costs in the prior-year period.  Credit costs increased substantially, primarily due to a weakening of leading credit indicators, including increased delinquencies on mortgages and unsecured personal loans, as well as trends in the U.S. macro-economic environment, portfolio growth, and a change in estimate of loan losses.  Higher credit costs and expenses drove a decline in net income.

·      U.S. Cards

·                  Revenues declined 2% primarily due to lower securitization results.  Lower securitization revenues primarily reflected a decrease in gains on sale of receivables, as well as the net impact of funding costs and higher expected credit losses in the securitization trusts.  Net interest revenues declined 15% as increased receivable securitizations and lower promotional balances led to a decline in loans held on balance sheet.   The managed net interest margin improved 27 basis points to 10.55% primarily due to growth in non-promotional balances.

·                  Average managed loans were approximately flat as a 6% increase in purchase sales, driven by growth in travel, business, and partner portfolios, was offset by lower promotional balances.  Compared to the second quarter 2007, average managed loans increased 1%.

·                  Expenses grew 4% primarily driven by increased collection and servicing expenses, and lower marketing costs in the prior-year period.

·                  Higher credit costs were driven by a $134 million pre-tax charge to increase loan loss reserves, reflecting a weakening of leading credit indicators in the portfolio and trends in the macro-economic environment.  The increase in loan loss reserves compares to a $122 million release in the prior-year period.  The managed net credit loss ratio increased 15 basis points to 4.41%, primarily reflecting unusually low bankruptcy filings in the prior-year period.

·                  Net income declined 21%, reflecting lower securitization revenues, increased expenses and increased credit costs.

·                  U.S. Retail Distribution

·                  Revenues grew 7%, driven by higher average loans and deposits, up 19% and 14%, respectively.  Volume growth was partially offset by lower net interest margins, reflecting a shift in customer deposits to higher cost Direct Bank and time deposit balances.  Checking accounts increased 8%.

·                  Expenses increased 9% due to investment in new branches and higher customer activity.  During the quarter, 35 new consumer finance branches and 14 new Citibank branches were opened.

·                  Credit costs increased substantially, driven by higher net credit losses and a $299 million pre-tax charge to increase loan loss reserves.  Higher credit costs reflected a weakening of leading credit indicators, including higher delinquencies in unsecured personal loans, portfolio growth, and a change in

3

estimate of loan losses. The net credit loss ratio increased 39 basis points to 2.87%, partially reflecting unusually low bankruptcy filings in the prior-year period.

·                  Net income declined 47%, primarily due to higher expenses and credit costs.

·                  U.S. Consumer Lending

·                  Revenues increased 5%, driven by growth in net interest revenues and net servicing revenues, and the acquisition of ABN AMRO Mortgage Group in March 2007.  Net interest revenues grew 16%, reflecting growth in average loans, up 12%.  Non-interest revenues declined due to the absence of gains on sales of mortgage-backed securities recorded in the prior-year period.

·                  Expenses grew 37%, driven by the integration of the ABN AMRO business, increased business volumes, and higher staffing costs related to collections.

·                  Credit costs increased substantially, driven by higher net credit losses and an $854 million pre-tax charge to increase loan loss reserves.  Higher credit costs were primarily driven by a weakening of leading credit indicators, including higher delinquencies in first and second mortgages, as well as trends in the macro-economic environment and a change in estimate of loan losses.

·                  Net income declined significantly reflecting higher expenses and credit costs.

·                  U.S. Commercial Business

·                  Revenues declined as increased loan and deposit balances, up 9% and 28%, respectively, were offset by lower net interest margins, an increase in the mix of tax-advantaged revenues, and business divestitures.

·                  Net income declined as lower revenues and higher credit costs offset increased tax benefits.

        Revenues grew 3%, driven by higher average deposits, up 20%, and managed loans, up 8%; and expenses increased 3%. Credit costs were significantly higher due to the absence of loan loss reserve releases in the prior-year period, an increase in estimate of losses inherent in the cards portfolio, higher delinquencies in second mortgages, and portfolio growth. Higher credit costs drove a decline in net income.

•

U.S. Cards



•

Revenues declined as growth in non-interest revenues was offset by a decline in net interest revenues. Non-interest revenues increased 3%, driven by improved managed yields and higher volumes of securitized loans, offset by lower securitization gains. Net interest revenues declined 11% as improved net interest margins were offset by a decrease in on balance sheet loans. Expenses decreased 7%.



•

Average managed loans were flat as a 6% increase in purchase sales, driven by growth in travel, business, and partner portfolios, was offset by lower promotional balances. Lower promotional balances led to a 36 basis point improvement in the average managed yield.



•

Credit costs reflected a $240 million pre-tax charge to increase loan loss reserves for a change in estimate of losses inherent in the portfolio. The managed net credit loss ratio increased 44 basis points to 4.55%, primarily reflecting an increase in bankruptcy filings over unusually low filing levels experienced in the prior-year period. The credit environment remained stable.



•

Net income declined 17%, reflecting increased credit costs.



•

U.S. Retail Distribution



•

Revenues grew 2%, driven by higher average loans and deposits, up 16% and 20%, respectively, partially offset by the absence of a $132 million pre-tax gain on the sale of branches recorded in the prior-year period. Excluding the gain on sale, revenues grew 8%. Deposits in Citibank Direct Bank reached $13.8 billion. Volume growth was partially offset by lower net interest margins, reflecting a shift in customer deposits to higher yielding Direct Bank and time deposit balances.



•

Expenses increased 12% due to investment in new branches and higher customer activity. During the quarter, 15 new consumer finance branches and 9 new Citibank branches were opened. Total branches increased by 180 versus the prior year.



•

Credit costs were up 22%, driven by portfolio growth and an unusually low level of credit losses in the prior- year period. The net credit loss ratio increased 21 basis points to 2.86%. The credit environment remained stable.



•

Net income declined 20%, reflecting higher expenses and credit costs, and the absence of a gain on sale of branches in the prior-year period. Excluding the gain on sale, net income declined 8%.

3

•

U.S. Consumer Lending



•

Revenues increased 23%, driven by growth in net interest revenues and net servicing revenues, higher gains on sales of loans, and the acquisition of ABN AMRO Mortgage Group in March 2007. Net interest revenues grew 14% as growth in average loans, up 13%, offset a decline in net interest margins.



•

Expenses grew 25%, driven by the integration of the ABN AMRO business and increased business volumes.



•

Higher credit costs primarily reflected increased delinquencies and higher net credit losses on second mortgages, and portfolio growth. Higher credit costs also reflected the absence of a $75 million release of loan loss reserves in the prior-year period. The net credit loss ratio in real estate lending increased 21 basis points to 0.40%.



•

Net income declined 6%, reflecting higher expenses and credit costs.



•

U.S. Commercial Business



•

Revenues declined as increased loan and deposit balances, up 6% and 20%, respectively, were offset by lower net interest margins and an increase in the mix of tax-advantaged revenues.



•

Net income grew 9%, as lower revenues were offset by a decline in expenses and a tax benefit due to increased tax-advantaged revenues.

U.S. Consumer is comprised of four businesses: Cards, Retail Distribution, Consumer Lending and Commercial Business.

(1)

See footnote 4 to the table on page 4.

19

        U.S. Consumer is composed of four businesses: Cards, Retail Distribution, Consumer Lending and Commercial Business.

(1)

See footnote 4 to the table on page 4.

17

        U.S. Consumer is composed of four businesses: Cards, Retail Distribution, Consumer Lending and Commercial Business.

(1)

See footnote 3 to the table on page 4.

15

U.S. Consumer Net Income In billions of dollars		U.S. Consumer 2005 Net Income by Product		U.S. Consumer Average Loans In billions of dollars

U.S. Consumer is composed of four businesses: Cards, Retail Distribution, Consumer Lending and Commercial Business.

(1)

See footnote 5 to the table on page 3.

20