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Citigroup 10-Q 2008

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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to                              

Commission file number 1-9924

Citigroup Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
  52-1568099
(I.R.S. Employer Identification No.)

399 Park Avenue, New York, New York
(Address of principal executive offices)

 

10043
(Zip Code)

(212) 559-1000
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

        Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

Common stock outstanding as of June 30, 2008: 5,445,393,308

Available on the Web at www.citigroup.com





Citigroup Inc.

TABLE OF CONTENTS

Part I—Financial Information

 
 
  Page No.
Item 1. Financial Statements:    

 

Consolidated Statement of Income (Unaudited)—Three and Six Months Ended June 30, 2008 and 2007

 

69

 

Consolidated Balance Sheet—June 30, 2008 (Unaudited) and December 31, 2007

 

71

 

Consolidated Statement of Changes in Stockholders' Equity (Unaudited)—Three and Six Months Ended June 30, 2008 and 2007

 

73

 

Consolidated Statement of Cash Flows (Unaudited)—Three and Six Months Ended June 30, 2008 and 2007

 

75

 

Consolidated Balance Sheet—Citibank, N.A. and Subsidiaries June 30, 2008 (Unaudited) and December 31, 2007

 

76

 

Notes to Consolidated Financial Statements (Unaudited)

 

77

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

6 - 67

 

Summary of Selected Financial Data

 

4

 

Second Quarter of 2008 Management Summary

 

6

 

Events in 2008

 

7

 

Segment, Product and Regional Net Income and Net Revenues

 

9 - 12

 

Managing Global Risk

 

28

 

Interest Revenue/Expense and Yields

 

39

 

Capital Resources and Liquidity

 

47

 

Off-Balance Sheet Arrangements

 

52

 

Forward-Looking Statements

 

67

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

33 - 38
106 - 109

Item 4.

Controls and Procedures

 

67

Part II—Other Information

 

 

Item 1.

Legal Proceedings

 

141

Item 1A.

Risk Factors

 

143

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

143

Item 6.

Exhibits

 

144

Signatures

 

 

145

Exhibit Index

 

146

THE COMPANY

        Citigroup Inc. (Citigroup and, together with its subsidiaries, the Company) is a global diversified financial services holding company whose businesses provide a broad range of financial services to consumer and corporate customers. Citigroup has more than 200 million customer accounts and does business in more than 100 countries. Citigroup was incorporated in 1988 under the laws of the State of Delaware.

        The Company is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 registered with, and subject to examination by, the Board of Governors of the Federal Reserve System (FRB). Some of the Company's subsidiaries are subject to supervision and examination by their respective federal and state authorities.

        This quarterly report on Form 10-Q should be read in conjunction with Citigroup's 2007 Annual Report on Form 10-K and Citigroup's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008. Additional financial, statistical, and business-related information, as well as business and segment trends, is included in a Financial Supplement that was filed as Exhibit 99.2 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission (SEC) on July 18, 2008.

        The principal executive offices of the Company are located at 399 Park Avenue, New York, New York 10043, telephone number 212 559 1000. Additional information about Citigroup is available on the Company's Web site at www.citigroup.com. Citigroup's annual report on Form 10-K, its quarterly reports on Form 10-Q, its current reports on Form 8-K, and all amendments to these reports, are available free of charge through the Company's Web site by clicking on the "Investor Relations" page and selecting "All SEC Filings." The SEC Web site contains reports, proxy and information statements, and other information regarding the Company at www.sec.gov.

        Citigroup is managed along the following segment and regional lines:

GRAPHIC

The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results.

GRAPHIC


(1)
Asia includes Japan, Latin America includes Mexico, and North America includes U.S., Canada and Puerto Rico.

3


CITIGROUP INC. AND SUBSIDIARIES

SUMMARY OF SELECTED FINANCIAL DATA

 
  Second Quarter
   
  Six Months
   
 
In millions of dollars,
except per share amounts

  %
Change

  %
Change

 
  2008
  2007
  2008
  2007
 
Net interest revenue   $ 14,305   $ 11,398   26 % $ 27,704   $ 21,926   26 %
Non-interest revenue     4,347     14,932   (71 )   3,968     29,588   (87 )
   
 
 
 
 
 
 
Revenues, net of interest expense   $ 18,652   $ 26,330   (29 )% $ 31,672   $ 51,514   (39 )%
Operating expenses     15,943     14,691   9     32,014     30,064   6  
Provisions for credit losses and for benefits and claims     7,187     2,710   NM     13,163     5,660   NM  
   
 
 
 
 
 
 
Income (loss) from continuing operations before taxes and minority interest   $ (4,478 ) $ 8,929   NM   $ (13,505 ) $ 15,790   NM  
Income taxes (benefits)     (2,337 )   2,663   NM     (6,220 )   4,509   NM  
Minority interest, net of taxes     76     123   (38 )%   55     170   (68 )%
   
 
 
 
 
 
 
Income (loss) from continuing operations   $ (2,217 ) $ 6,143   NM   $ (7,340 ) $ 11,111   NM  
Income (loss) from discontinued operations, net of taxes(1)     (278 )   83   NM     (266 )   127   NM  
   
 
 
 
 
 
 
Net income (loss)   $ (2,495 ) $ 6,226   NM   $ (7,606 ) $ 11,238   NM  
   
 
 
 
 
 
 
Earnings per share                                  
  Basic                                  
  Income (loss) from continuing operations   $ (0.49 ) $ 1.25   NM   $ (1.50 ) $ 2.27   NM  
  Net Income (loss)     (0.54 )   1.27   NM     (1.55 )   2.29   NM  
  Diluted(2)                                  
  Income (loss) from continuing operations     (0.49 )   1.23   NM     (1.50 )   2.22   NM  
  Net Income (loss)     (0.54 )   1.24   NM     (1.55 )   2.25   NM  
Dividends declared per common share   $ 0.32   $ 0.54   (41 )% $ 0.64   $ 1.08   (41 )%
Preferred Dividends—Basic (in millions)   $ 361   $ 14       $ 444   $ 30      
Preferred Dividends—Diluted (in millions)     91     14         108     30      

At June 30:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Total assets   $ 2,100,385   $ 2,220,715   (5 )%                
Total deposits     803,642     771,761   4                  
Long-term debt     417,928     340,077   23                  
Mandatorily redeemable securities of subsidiary trusts     23,658     10,095   NM                  
Common stockholders' equity     108,981     127,003   (14 )                
Total stockholders' equity     136,405     127,603   7                  
   
 
 
 
 
 
 
Ratios:                                  
Return on common stockholders' equity(3)     (10.4 )%   20.2 %       (14.5 )%   18.7 %    
   
 
 
 
 
 
 
Tier 1 Capital     8.74 %   7.91 %                    
Total Capital     12.29     11.23                      
Leverage(4)     5.04     4.37                      
   
 
 
 
 
 
 
Common Stockholders' equity to assets     5.19 %   5.72 %                    
Dividend payout ratio(5)     N/A     43.5         N/A     48.0      
Ratio of earnings to fixed charges and preferred stock dividends     0.64x     1.47x         0.54x     1.43x      

(1)
Discontinued operations include the operations and associated loss on the sale of CitiCapital's equipment finance unit to General Electric. See Note 2 to the consolidated financial statements on page 80.

(2)
Due to the net loss in the 2008 periods, basic shares were used to calculate diluted earnings per share. Adding diluted securities to the denominator would result in anti-dilution.

(3)
The return on average common stockholders' equity is calculated using net income (loss) minus preferred stock dividends.

(4)
Tier 1 Capital divided by adjusted average assets.

(5)
Dividends declared per common share as a percentage of net income per diluted share. For the first half of 2008, the dividend payout ratio was not calculable due to the net loss.

        NM Not meaningful.

4


        Certain reclassifications have been made to the prior-period's financial statements to conform to the current period's presentation.

        Certain statements in this Form 10-Q, including, but not limited to, statements made in "Management's Discussion and Analysis," are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors including, but not limited to, those described in Citigroup's 2007 Annual Report on Form 10-K under "Risk Factors" beginning on page 38.

5



MANAGEMENT'S DISCUSSION AND ANALYSIS

SECOND QUARTER OF 2008 MANAGEMENT SUMMARY

        Citigroup reported a $2.2 billion loss from continuing operations ($0.49 per share) for the second quarter of 2008. The second quarter results showed solid underlying revenue and expense performance but were more than offset by write-downs and losses related to the continued disruption in the fixed income markets and higher consumer credit costs. The net loss of $2.5 billion in the second quarter includes the results of CitiCapital (which is now reflected as discontinued operations, including the $309 million estimated after-tax loss on sale).

        Revenues were $18.7 billion, down 29% from a year ago, primarily as a result of a $7.3 billion decrease in Securities & Banking revenues, including $3.4 billion in write-downs on subprime-related direct exposures, a downward credit value adjustment of $2.4 billion related to exposure to monoline insurers, $545 million write- downs related to commercial real estate positions, and write-downs of $428 million (net of underwriting fees) on funded and unfunded highly leveraged financing commitments and $325 million impairment on Alt-A mortgage securities.

        Global Cards revenues were up 3% on double-digit growth in EMEA, Latin America and Asia, partially offset by lower securitization results in North America. Consumer Banking revenues were up 1%, where loan and deposit growth were partially offset by a $745 million net loss from the mark-to-market on our mortgage servicing right (MSR) asset and related hedge. GWM revenues grew 4% on strength in banking and lending revenues which were partially offset by a slowdown in capital markets, particularly in Asia. Transaction Services revenues were up 30%. Total revenues improved $5.6 billion from the first quarter of 2008.

        Customer volume growth was strong, with average loans up 9%, average deposits up 6%, and average interest-earning assets down 5%, reflecting our focus on balance sheet management. Global Cards purchase sales were up 6%. Transaction Services customer liability balances were up 15% and assets under custody grew 13%. In GWM, client assets under fee-based management were down 8%.

        Net interest revenue increased 26% from last year, reflecting volume increases across most products. Net interest margin (NIM) in the second quarter of 2008 was 3.18%, up 77 basis points from the second quarter of 2007, reflecting significantly lower cost of funding, partially offset by a decrease in asset yields related to the decrease in the fed funds rate. (See discussion of NIM on page 39).

        Operating expenses increased 9% from the second quarter of 2007. The major components of the change are the $446 million in repositioning charges and the absence of a $300 million litigation reserve release recorded in the prior-year period. Expense growth also reflected the impact of recent acquisitions. Expenses were down 1% from the first quarter of 2008 and headcount was down 6,000 from March 31, 2008, and approximately 11,000 year-to-date reflecting the continued benefits from our re-engineering efforts.

        Total credit costs of $6.9 billion included NCL's of $4.4 billion up from $2.0 billion in the second quarter of 2007 and a net build of $2.5 billion to its credit reserves. The build consisted of $2.3 billion in Consumer ($1.9 billion in North America and $409 million in regions outside of North America) and $224 million in ICG. The incremental net charge to increase loan loss reserves of $2.0 billion was mainly due to residential real estate in North America. The Consumer loans loss rate was 2.82%, a 122 basis-point increase from the second quarter of 2007. Corporate cash-basis loans were $2.3 billion at June 30, 2008, an increase of $1.7 billion from year-ago levels. The total allowance for loan losses and unfunded lending commitments totaled $21.9 billion at June 30, 2008.

        The effective tax rate of 52% in the second quarter of 2008 primarily resulted from the pretax losses in the Company's S&B business taxed in the U.S. (the U.S. is a higher tax rate jurisdiction). In addition, the tax benefits of permanent differences, including the tax benefit for not providing U.S. income taxes on the earnings of certain foreign subsidiaries that are indefinitely invested, favorably affected the Company's effective tax rate.

        Stockholders' equity and trust preferred securities were $160.1 billion at June 30, 2008, reflecting common and preferred stock issuances of $13.0 billion during the second quarter of 2008. We distributed $2.1 billion in dividends to shareholders during the quarter. Citigroup maintained its "well-capitalized" position with a Tier 1 Capital Ratio of 8.74% at June 30, 2008.

        On July 11, 2008, we announced the agreement to sell our German retail banking operation, which is expected to result in an estimated after-tax gain of approximately $4 billion in the fourth quarter of 2008. This is expected to result in a pro forma increase to the June 30, 2008 Tier 1 Capital ratio of approximately 60 basis points.

6



EVENTS IN 2008

Additional Write-Downs on Subprime-Related Direct Exposures

        During the second quarter of 2008, the Company's S&B business recorded losses of $3.4 billion pretax, net of hedges, on its subprime-related direct exposures, bringing the total losses year-to-date to $9.3 billion. The Company's remaining $22.5 billion in U.S. subprime net direct exposure in S&B at June 30, 2008 consisted of (a) approximately $18.1 billion of net exposures to the super senior tranches of collateralized debt obligations, which are collateralized by asset- backed securities, derivatives on asset-backed securities or both and (b) approximately $4.3 billion of subprime-related exposures in its lending and structuring business. See "Exposure to U.S. Residential Real Estate" on page 30 for a further discussion of such exposures and the associated losses recorded during the second quarter of 2008.

Incremental Write-Downs on Highly Leveraged Loans and Financing Commitments

        Due to the continued dislocation of the credit markets and the reduced market interest in higher risk/higher yield instruments that began during the second half of 2007, liquidity in the market for highly leveraged financings has yet to return. This has resulted in the Company recording additional pretax write-downs of $428 million on funded and unfunded highly leveraged finance exposures, bringing year-to-date pretax losses to $3.5 billion.

        Citigroup's exposure to highly leveraged financings totaled $24 billion at June 30, 2008 ($11 billion in funded and $13 billion in unfunded commitments), compared to $38 billion at March 31, 2008 ($21 billion in funded and $17 billion in unfunded commitments). During the second quarter of 2008, the Company transferred approximately $12 billion of loans to third parties, of which $8.5 billion relates to the highly leveraged loans and commitments. This allows Citigroup to lock in the sales proceeds and significantly reduces further downside price risk associated with these commitments. See "Highly Leveraged Financing Commitments" on page 66 for further discussion.

Write-Downs on Monoline Insurers

        During the second quarter of 2008, Citigroup recorded pretax write-downs on credit value adjustments (CVA) of $2.4 billion on its exposure to monoline insurers, bringing the year-to-date write-downs to $3.9 billion. CVA is calculated by applying the counterparty's current credit spread to the expected exposure on the trade. The majority of the exposure relates to hedges on super senior positions that were executed with various monoline insurance companies. During the second quarter of 2008, credit spreads on monoline insurers continued to widen and expected exposures increased. See "Direct Exposure to Monolines" on page 31 for a further discussion.

Gains on Auction Rate Securities (ARS)

        As of June 30, 2008, auction rate securities (ARS) classified as Trading assets totaled $5.6 billion compared to $6.5 billion as of March 31, 2008. Of the total balance, a significant majority is ARS where the underlying assets are student loans, while the remainder is ARS where the underlying assets are U.S. municipal securities as well as various other assets.

        During the second quarter of 2008, S&B recorded $197 million pretax gains in Principal transactions as some liquidity returned to the market with a number of auctions being completed and certain ARS being re-financed by the issuer. This reduced the total year to date losses on ARS to $1.3 billion, a significant majority of which relates to ARS where student loans are the underlying assets.

Incremental Write-downs on Alt-A Mortgage Securities in S&B

        During the second quarter of 2008, Citigroup recorded additional pretax losses of approximately $325 million, net of hedges, on Alt-A mortgage securities held in S&B, bringing the year-to-date net loss to $1.3 billion. For these purposes, Alt-A mortgage securities are non-agency residential mortgage-backed securities (RMBS) where: (1) the underlying collateral has weighted average FICO scores between 680 and 720 or, (2) for instances where FICO scores are greater than 720, RMBS have 30% or less of the underlying collateral composed of full documentation loans.

        The Company had $16.4 billion in Alt-A mortgage securities carried at fair value at June 30, 2008 in S&B, which decreased from $19.5 billion at March 31, 2008. Of the $16.4 billion, $4.3 billion were classified as Trading assets, of which $193 million of fair value write-downs, net of hedging, were recorded in earnings, and $12.1 billion were classified as available-for-sale investments, on which $132 million of write-downs were recorded in earnings due to other-than-temporary impairments. In addition, $237 million of pretax fair value unrealized losses were recorded in Accumulated Other Comprehensive Income (OCI).

Additional Write-Downs on Commercial Real Estate Exposures

        S&B's commercial real estate exposure can be split into three categories: assets held at fair value, loans and commitments, and equity and other investments. For assets that are held at fair value, Citigroup recorded an additional $545 million of fair value write-downs, net of hedges, during the second quarter of 2008, bringing the year-to-date fair value write-downs to $1.1 billion. See "Exposure to Commercial Real Estate" on page 30 for a further discussion.

Credit Reserves

        During the second quarter of 2008, the Company recorded a net build of $2.5 billion to its credit reserves. The build consisted of $2.3 billion in Consumer ($1.9 billion in North America and $409 million in regions outside of North America) and $224 million in ICG.

        The $1.9 billion build in North America Consumer primarily reflected a weakening of leading credit indicators, including higher delinquencies on first and second mortgages, unsecured personal loans and credit cards. Reserves also increased due to trends in the U.S. macro-economic environment, including the housing market downturn and rising unemployment rates.

        The $409 million build in regions outside of North America was primarily driven by portfolio growth and by deterioration in Mexico, Brazil and EMEA cards.

7


        The build of $224 million in ICG primarily reflected a slight deterioration in leading indicators of losses in the corporate loan portfolio.

Loss on Mortgage Servicing Right (MSR) Asset and Related Hedge (MSR-related MTM)

        The U.S. mortgage business recorded a net pretax loss of approximately $745 million in the second quarter of 2008, resulting from a gain of approximately $1.4 billion on the mark-to-market on the MSR, offset by a decrease of $2.1 billion in the value of the related hedge (collectively, the "MSR-related MTM"). During the second quarter of 2008, the net MSR position was impacted by: (i) high volatility in the markets causing divergence between the hedge and the related asset and continuous rebalancing of the hedge and (ii) constraint on further upward valuation of the MSR.

Repositioning Charges

        In the second quarter of 2008, Citigroup recorded repositioning charges of $446 million related to Citigroup's ongoing reengineering plans, which will result in certain branch closings and headcount reductions of approximately 2,900 employees. Including the first quarter of 2008 repositioning charges, the year-to-date charges equal $1.1 billion and a headcount reduction of approximately 12,600 employees.

Issuance of Preferred and Common Stock

        In the second quarter of 2008, Citigroup raised $8.0 billion of capital through public offerings of preferred stock and sold approximately $4.9 billion of common stock. The Company has raised $32.3 billion in equity capital during 2008. See Note 13 on page 93 for further information.

Sale of CitiCapital

        On April 17, 2008, Citigroup signed an agreement to sell CitiCapital, the equipment finance unit in North America. The sale consists of net assets of approximately $12.5 billion. A pretax loss of $517 million, was recorded during the quarter in Discontinued Operations on the Company's Consolidated Statement of Income. In addition, the results of all of CitiCapital businesses have been reported as Discontinued Operations for all periods presented. Furthermore, the assets and liabilities as of June 30, 2008 of the CitiCapital businesses to be sold are included within Assets of discontinued operations held for sale, and Liabilities of discontinued operations held for sale, respectively, on the Company's Consolidated Balance Sheet. The sale closed on July 31, 2008.

Sale of CitiStreet

        In the second quarter of 2008, Citigroup and State Street Corporation entered into a definitive agreement to sell CitiStreet, a benefits servicing business, to ING Group in an all-cash transaction valued at $900 million. CitiStreet is a joint venture formed in 2000, which is owned 50 percent each by Citigroup and State Street. The transaction closed on July 1, 2008 and is estimated to generate an after-tax gain of $225 million ($347 million pretax) in the third quarter of 2008.

Sale of Upromise Cards Portfolio

        During the second quarter, Global Cards sold substantially all of the Upromise Cards portfolio to Bank of America, resulting in an after-tax gain of $107 million. The portfolio sold had balances of approximately $1 billion of credit card receivables.

Divestiture of Diners Club International

        On June 30, 2008, Citigroup completed the sale of Diners Club International (DCI) to Discover Financial Services, resulting in a pretax gain of approximately $111 million for the second quarter of 2008.

        Citigroup will continue to issue Diners Club cards and support its brand and products through ownership of its many Diners Club card issuers around the world.

Sale of Citigroup's German Retail Banking Operation

        On July 11, 2008, Citigroup announced the agreement to sell its German retail banking operations to Credit Mutuel for Euro 4.9 billion ($7.7 billion) in cash plus earnings accrued in 2008 through the closing. The transaction is expected to result in an after-tax gain of approximately $4 billion upon closing. After giving effect to the proposed sale, Citigroup's Tier 1 capital ratio as of June 30 would have a pro forma increase of approximately 60 basis points. The sale does not include the corporate and investment banking business or the Germany-based European data center. The sale is expected to close in the fourth quarter of 2008 pending regulatory approvals.

        The German retail banking operations generated post-tax earnings for the six months of 2008 of approximately $262 million, and for the full year 2007 of approximately $500 million, and had a net asset value of approximately $2.1 billion at June 30, 2008.

8



SEGMENT AND REGIONAL—NET INCOME (LOSS) AND REVENUE

        The following tables present net income (loss) and revenues for Citigroup's businesses on a segment view and on a regional view:

Citigroup Net Income (Loss)—Segment View

 
  Second Quarter
   
  Six Months
   
 
 
  %
Change

  %
Change

 
In millions of dollars
  2008
  2007
  2008
  2007
 
Global Cards                                  
  North America   $ 178   $ 711   (75 )% $ 715   $ 1,583   (55 )%
  EMEA     19     53   (64 )   74     98   (24 )
  Latin America     165     184   (10 )   681     419   63  
  Asia     105     109   (4 )   236     214   10  
   
 
 
 
 
 
 
    Total Global Cards   $ 467   $ 1,057   (56 )% $ 1,706   $ 2,314   (26 )%
   
 
 
 
 
 
 
Consumer Banking                                  
  North America   $ (951 ) $ 891   NM   $ (1,284 ) $ 1,641   NM  
  EMEA     65     89   (27 )%   66     122   (46 )%
  Latin America     76     183   (58 )   347     352   (1 )
  Asia     110     310   (65 )   309     616   (50 )
   
 
 
 
 
 
 
    Total Consumer Banking   $ (700 ) $ 1,473   NM   $ (562 ) $ 2,731   NM  
   
 
 
 
 
 
 
Institutional Clients Group (ICG)                                  
  North America   $ (2,853 ) $ 1,461   NM   $ (8,808 ) $ 2,722   NM  
  EMEA     (89 )   804   NM     (1,231 )   1,498   NM  
  Latin America     402     391   3 %   784     757   4 %
  Asia     496     728   (32 )   854     1,324   (35 )
   
 
 
 
 
 
 
    Total ICG   $ (2,044 ) $ 3,384   NM   $ (8,401 ) $ 6,301   NM  
   
 
 
 
 
 
 
Global Wealth Management (GWM)                                  
  North America   $ 309   $ 334   (7 )% $ 474   $ 695   (32 )%
  EMEA     20     46   (57 )   46     53   (13 )
  Latin America     15     29   (48 )   41     44   (7 )
  Asia     61     103   (41 )   138     168   (18 )
   
 
 
 
 
 
 
    Total GWM   $ 405   $ 512   (21 )% $ 699   $ 960   (27 )%
   
 
 
 
 
 
 
Corporate/Other(1)   $ (345 ) $ (283 ) (22 ) $ (782 ) $ (1,195 ) 35  
   
 
 
 
 
 
 
Income (Loss) from Continuing Operations   $ (2,217 ) $ 6,143   NM   $ (7,340 ) $ 11,111   NM  
Discontinued Operations   $ (278 ) $ 83       $ (266 ) $ 127      
   
 
 
 
 
 
 
Net Income (Loss)   $ (2,495 ) $ 6,226   NM   $ (7,606 ) $ 11,238   NM  
   
 
 
 
 
 
 

(1)
The six months ending June 30, 2007 include a $1,440 million Restructuring charge related to the Company's Structural Expense Initiatives project announced on April 11, 2007.

NM
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9


Citigroup Net Income (Loss)—Regional View

 
  Second Quarter
   
  Six Months
   
 
 
  % Change
  % Change
 
In millions of dollars
  2008
  2007
  2008
  2007
 
North America                                  
  Global Cards   $ 178   $ 711   (75 )% $ 715   $ 1,583   (55 )%
  Consumer Banking     (951 )   891   NM     (1,284 )   1,641   NM  
  ICG     (2,853 )   1,461   NM     (8,808 )   2,722   NM  
    Securities & Banking     (2,904 )   1,409   NM     (8,938 )   2,636   NM  
    Transaction Services     51     52   (2 )   130     86   51  
  GWM     309     334   (7 )   474     695   (32 )
   
 
 
 
 
 
 
    Total North America   $ (3,317 ) $ 3,397   NM   $ (8,903 ) $ 6,641   NM  
   
 
 
 
 
 
 
EMEA                                  
  Global Cards   $ 19   $ 53   (64 )% $ 74   $ 98   (24 )%
  Consumer Banking     65     89   (27 )   66     122   (46 )
  ICG     (89 )   804   NM     (1,231 )   1,498   NM  
    Securities & Banking     (327 )   631   NM     (1,691 )   1,175   NM  
    Transaction Services     238     173   38 %   460     323   42  
  GWM     20     46   (57 )   46     53   (13 )
   
 
 
 
 
 
 
    Total EMEA   $ 15   $ 992   (98 )% $ (1,045 ) $ 1,771   NM  
   
 
 
 
 
 
 
Latin America                                  
  Global Cards   $ 165   $ 184   (10 )% $ 681   $ 419   63 %
  Consumer Banking     76     183   (58 )   347     352   (1 )
  ICG     402     391   3     784     757   4  
    Securities & Banking     260     301   (14 )   510     590   (14 )
    Transaction Services     142     90   58     274     167   64  
  GWM     15     29   (48 )   41     44   (7 )
   
 
 
 
 
 
 
    Total Latin America   $ 658   $ 787   (16 )% $ 1,853   $ 1,572   18 %
   
 
 
 
 
 
 
Asia                                  
  Global Cards   $ 105   $ 109   (4 )% $ 236   $ 214   10 %
  Consumer Banking     110     310   (65 )   309     616   (50 )
  ICG     496     728   (32 )   854     1,324   (35 )
    Securities & Banking     226     527   (57 )   285     936   (70 )
    Transaction Services     270     201   34     569     388   47  
  GWM     61     103   (41 )   138     168   (18 )
   
 
 
 
 
 
 
    Total Asia   $ 772   $ 1,250   (38 )% $ 1,537   $ 2,322   (34 )%
Corporate/Other     (345 )   (283 ) (22 )   (782 )   (1,195 ) 35  
   
 
 
 
 
 
 
Income (Loss) from Continuing Operations   $ (2,217 ) $ 6,143   NM   $ (7,340 ) $ 11,111   NM  
Income (Loss) from Discontinued Operations   $ (278 ) $ 83   NM   $ (266 ) $ 127   NM  
   
 
 
 
 
 
 
Net Income (Loss)   $ (2,495 ) $ 6,226   NM   $ (7,606 ) $ 11,238   NM  
   
 
 
 
 
 
 

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Citigroup Revenues—Segment View

 
  Second Quarter
   
  Six Months
   
 
In millions of dollars

  %
Change

  %
Change

 
  2008
  2007
  2008
  2007
 
Global Cards                                  
  North America   $ 2,928   $ 3,298   (11 )% $ 6,271   $ 6,705   (6 )%
  EMEA     652     506   29     1,274     883   44  
  Latin America     1,229     990   24     3,005     1,857   62  
  Asia     659     531   24     1,334     1,044   28  
   
 
 
 
 
 
 
    Total Global Cards   $ 5,468   $ 5,325   3 % $ 11,884   $ 10,489   13 %
   
 
 
 
 
 
 
Consumer Banking                                  
  North America   $ 4,124   $ 4,224   (2 )% $ 8,609   $ 8,282   4 %
  EMEA     1,296     1,113   16     2,537     2,183   16  
  Latin America     1,038     996   4     2,086     1,942   7  
  Asia     1,431     1,475   (3 )   2,989     2,933   2  
   
 
 
 
 
 
 
    Total Consumer Banking   $ 7,889   $ 7,808   1 % $ 16,221   $ 15,340   6 %
   
 
 
 
 
 
 
Institutional Clients Group                                  
  North America   $ (1,748 ) $ 4,026   NM   $ (9,572 ) $ 8,271   NM  
  EMEA     1,740     2,993   (42 )%   1,873     5,820   (68 )%
  Latin America     1,075     985   9     2,087     1,950   7  
  Asia     1,872     2,257   (17 )   3,593     3,873   (7 )
   
 
 
 
 
 
 
    Total ICG   $ 2,939   $ 10,261   (71 )% $ (2,019 ) $ 19,914   NM  
   
 
 
 
 
 
 
Global Wealth Management                                  
  North America   $ 2,427   $ 2,441   (1 )% $ 4,803   $ 4,826    
  EMEA     153     137   12     323     245   32 %
  Latin America     102     92   11     202     183   10  
  Asia     633     527   20     1,266     761   66  
   
 
 
 
 
 
 
    Total GWM   $ 3,315   $ 3,197   4 % $ 6,594   $ 6,015   10 %
Corporate/Other     (959 )   (261 ) NM     (1,008 )   (244 ) NM  
   
 
 
 
 
 
 
Total Net Revenues   $ 18,652   $ 26,330   (29 )% $ 31,672   $ 51,514   (39 )%
   
 
 
 
 
 
 

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Citigroup Revenues—Regional View

 
  Second Quarter
   
  Six Months
   
 
In millions of dollars

  %
Change

  %
Change

 
  2008
  2007
  2008
  2007
 
North America                                  
  Global Cards   $ 2,928   $ 3,298   (11 )% $ 6,271   $ 6,705   (6 )%
  Consumer Banking     4,124     4,224   (2 )   8,609     8,282   4  
  ICG     (1,748 )   4,026   NM     (9,572 )   8,271   NM  
    Securities & Banking     (2,244 )   3,655   NM     (10,561 )   7,562   NM  
    Transaction Services     496     371   34     989     709   39  
  GWM     2,427     2,441   (1 )   4,803     4,826    
   
 
 
 
 
 
 
    Total North America   $ 7,731   $ 13,989   (45 )% $ 10,111   $ 28,084   (64 )%
   
 
 
 
 
 
 
EMEA                                  
  Global Cards   $ 652   $ 506   29 % $ 1,274   $ 883   44 %
  Consumer Banking     1,296     1,113   16     2,537     2,183   16  
  ICG     1,740     2,993   (42 )   1,873     5,820   (68 )
    Securities & Banking     871     2,313   (62 )   191     4,542   (96 )
    Transaction Services     869     680   28     1,682     1,278   32  
  GWM     153     137   12     323     245   32  
   
 
 
 
 
 
 
    Total EMEA   $ 3,841   $ 4,749   (19 )% $ 6,007   $ 9,131   (34 )%
   
 
 
 
 
 
 
Latin America                                  
  Global Cards   $ 1,229   $ 990   24 % $ 3,005   $ 1,857   62 %
  Consumer Banking     1,038     996   4     2,086     1,942   7  
  ICG     1,075     985   9     2,087     1,950   7  
    Securities & Banking     707     724   (2 )   1,387     1,454   (5 )
    Transaction Services     368     261   41     700     496   41  
  GWM     102     92   11     202     183   10  
   
 
 
 
 
 
 
    Total Latin America   $ 3,444   $ 3,063   12 % $ 7,380   $ 5,932   24 %
   
 
 
 
 
 
 
Asia                                  
  Global Cards   $ 659   $ 531   24 % $ 1,334   $ 1,044   28 %
  Consumer Banking     1,431     1,475   (3 )   2,989     2,933   2  
  ICG     1,872     2,257   (17 )   3,593     3,873   (7 )
    Securities & Banking     1,205     1,722   (30 )   2,217     2,859   (22 )
    Transaction Services     667     535   25     1,376     1,014   36  
  GWM     633     527   20     1,266     761   66  
   
 
 
 
 
 
 
    Total Asia   $ 4,595   $ 4,790   (4 )% $ 9,182   $ 8,611   7 %
   
 
 
 
 
 
 
Corporate/Other     (959 )   (261 ) NM     (1,008 )   (244 ) NM  
   
 
 
 
 
 
 
Total Net Revenue   $ 18,652   $ 26,330   (29 )% $ 31,672   $ 51,514   (39 )%
   
 
 
 
 
 
 

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GLOBAL CARDS

<
 
  Second Quarter
   
  Six Months
   
 
In millions of dollars

  %
Change

  %
Change

 
  2008
  2007
  2008
  2007
 
Net interest revenue   $ 3,024   $ 2,683   13 % $ 5,754   $ 4,988   15 %
Non-interest revenue     2,444     2,642   (7 )   6,130     5,501   11  
   
 
 
 
 
 
 
Revenues, net of interest expense   $ 5,468   $ 5,325   3 % $ 11,884   $ 10,489   13 %
Operating expenses     2,725     2,490   9     5,335     4,902   9  
Provision for credit losses and for benefits and claims     2,023     1,288   57     3,918     2,169   81  
   
 
 
 
 
 
 
Income before taxes and minority interest   $ 720   $ 1,547   (53 )% $ 2,631   $ 3,418   (23 )%
Income taxes     249     487   (49 )   918     1,100   (17 )
Minority interest, net of taxes     4     3   33     7     4   75  
   
 
 
 
 
 
 
Net income   $ 467   $ 1,057   (56 )% $ 1,706   $ 2,314   (26 )%
   
 
 
 
 
 
 
Average assets (in billions of dollars)   $ 124   $ 110   13 % $ 124   $ 108   15 %
Return on assets     1.51 %   3.85 %       2.77 %   4.32 %    
   
 
 
 
 
 
 
Revenues, net of interest expense, by region:                                  
  North America   $ 2,928   $ 3,298