Citigroup (C)

Management Comment

“For many quarters we have been consistently and successfully executing our plan to build financial strength and return Citi to sustained profitability and growth.   We have made significant progress in recent quarters as evidenced in the significant decline in expenses, headcount, assets, including Citi’s riskiest assets, as well as our 12.7% Tier 1 capital ratio,” said Vikram Pandit, Chief Executive Officer of Citi.

“This quarter also marks a key milestone in our plan, as we are now reporting our financial results to reflect the separation of Citi into two primary operating segments: Citicorp and Citi Holdings.

“Citicorp is our core franchise and will be the source of Citi’s long term profitability and growth.  Citicorp is unique with institutional and consumer businesses operating on an unmatched global footprint.  We will manage our businesses and assets in Citi Holdings to optimize their value over time.  We have already announced the sale of a number of businesses within Citi Holdings, and its assets have been reduced by approximately $250 billion since the first quarter of 2008.

“Our financial results today reflect the incredibly dedicated efforts of all of our people around the world and their success in implementing our plan.  Our earnings of $4.3 billion reflect the benefit of the closing of the Smith Barney joint venture with Morgan Stanley, which was a key element in our Citi Holdings strategy.  This quarter’s results underscore the earnings power of Citicorp, with over $3 billion of net income.

“As we look forward, we will continue the same relentless focus on executing our plan.  We remain optimistic that our turnaround of Citi will gain speed.  Our institutional business has a strong client franchise.  Our most significant challenge now remains consumer credit.  Losses in our consumer businesses have been growing for some time, but we see some positive signs of moderation in those loss trends.  Sustainable profitability remains our primary goal,” said Pandit.

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Management Comment

“Our results this quarter reflect the strength of Citi’s franchise and we are pleased with our performance.  With revenues of nearly $25 billion and net income of $1.6 billion, we had our best overall quarter since the second quarter of 2007,” said Vikram Pandit, Chief Executive Officer of Citi.

“The clear message from this quarter is that our clients remain engaged.  Citi is a unique franchise in global financial services.  We offer more services in more places around the globe than anyone, which our clients have long recognized.  Despite the challenges we have faced this past year, they remain closely engaged with us.

“As strong as our franchise is, we have been taking steps to strengthen it further.  We have lowered risk and dramatically reduced the problem legacy assets that have caused many of our losses.  We have meaningfully lowered expenses and headcount and improved efficiency.  We have also increased our capital base.

“Additionally, we continued to extend significant amounts of credit to U.S. consumers and continued to focus on supporting the U.S. housing market.  Since October 2008, we successfully worked with borrowers, with combined mortgages totaling approximately $13.5 billion, to avoid potential foreclosure and were able to keep more than 9 out

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Management Comment

“Our results continued to be depressed by an unprecedented dislocation in capital markets and a weak economy.  However, a number of our core customer franchise continued to perform well as Citi’s customers remain active and engaged with us.  We continued to make progress on our primary goal in 2008—which was to get fit.  We significantly strengthened Tier 1 and structural liquidity, we reduced our balance sheet, expenses, and headcount.  We also made significant progress in reducing risk from our balance sheet.  Our legacy assets declined to

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Management Comment

“I am very proud of my Citi colleagues for staying focused on our priorities and for their relentless commitment to serving our clients during these turbulent times. While our third quarter results reflect both a difficult environment as well as continued write-downs on our legacy assets, we are making excellent progress on the parts of our business we control, including expense reduction, headcount, and balance sheet and capital management. We expect these improvements will enable us to realize the full earnings power of our franchise as the economy stabilizes,” said Vikram Pandit, Chief Executive Officer of Citi.

Mr. Pandit also noted:  “We have also been very focused on aggressively managing our risks during this credit cycle and have been taking steps to add hedges as appropriate. We end the quarter with a very strong Tier 1 ratio of 8.2% and a loan loss reserve of $25 billion. Our capital will be further strengthened by the sale of our Germany retail banking operations in the fourth quarter, continued focus on reducing our legacy assets, as well as the latest steps taken by the U.S. Department of the Treasury.”

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Management Comment

“We continue to demonstrate strength in our core franchise.  We cut our second quarter losses in half compared to the first quarter.  The cost of credit increased by 20% from the first quarter, but write-downs in our Securities and Banking business dropped by 42%.  Additionally, headcount and expenses declined sequentially.  While there is still much to do, we are encouraged by our progress in delivering on our commitment to the re-engineering efforts,” said Vikram Pandit, Chief Executive Officer of Citi.

“As part of our efforts to improve capital and balance sheet efficiency, we reduced legacy assets substantially during the quarter.  We recently closed on the sale of CitiStreet and just last Friday, announced the sale of our German retail banking operation for a substantial gain.  We continue to be focused on building the strongest team by attracting world class leaders to Citi and developing our current talent.  This, combined with a sharp focus on customer relationships in all regions and an ongoing commitment to our strategic targets, will drive our earnings power going forward,” said Pandit.

(1) Fully diluted shares are 5,800 million.

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Management Comment

“Our financial results reflect the continuation of the unprecedented market and credit environment and its impact on our historical risk positions. During the first quarter, valuations of our sub-prime related exposures in fixed income markets and leveraged finance assets have further declined and credit costs in our consumer lending businesses have increased. Despite the negative factors in the broader markets, we continue to see strong momentum throughout the organization with robust volumes in many of our products and regions,” said Vikram Pandit, Chief Executive Officer of Citi.

“We have taken decisive and significant actions to strengthen our balance sheet, including over $30 billion of capital raised during December and January, a significant increase in our credit reserves, the sale of Redecard shares, the recently announced divestitures of CitiCapital and Diners Club International, and the realignment of and pending asset reductions in our mortgage business. We continue to enhance our risk management processes, our capital productivity and expense containment, as well as our ability to deliver innovative, world-class products that meet our clients’ specific needs. To achieve this, we recently reorganized the businesses along regional and product lines to bring us closer to our clients.  At the same time, we are taking the necessary steps to make Citi more efficient while fostering a culture of accountability and teamwork.”

“As we move into the second quarter and beyond, we will continue to divest non-strategic assets and allocate capital to the products and regions that will drive increased revenues, enhance the value of our franchise, and ultimately, maximize shareholder value,” said Pandit.

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Management Comment

“Our financial results this quarter are clearly unacceptable. Our poor performance was driven primarily by two factors — significant write-downs and losses on our sub-prime direct exposures in fixed income markets, and a large increase in credit costs in our U.S. consumer loan portfolio.  Looking beyond these two factors, revenues and volumes continued to grow strongly in a number of our franchises and we generated record results in international consumer, transaction services, wealth management, and advisory,” said Vikram Pandit, Chief Executive Officer of Citi.

“We have begun to take actions to ensure that Citi is well positioned to compete and win across our franchises while effectively keeping a tight control over our business risks.  We are taking several steps to strengthen our capital base, including today’s announcement regarding an investment in Citi by several long-term sophisticated investors, our dividend reset, and our continued focus on divesting non-core assets and businesses.   We are taking actions to enhance our risk management processes and to improve expense productivity.  We are also in the midst of a thorough review of our businesses, which when complete, will drive our execution priorities,” said Pandit.

“Over the past five weeks I have been touring our businesses and listening to many of Citi’s important constituents — employees, investors, clients, regulators and many others.  These discussions have only confirmed my deep belief in the power and strength of Citi.  We have a unique franchise that is well positioned in growing markets with tremendous capabilities to serve clients around the world.  We intend to build on our advantages to deliver superior results for our clients, investors, and employees,” said Pandit.

Management Comment

“This was a disappointing quarter, even in the context of the dislocations in the sub-prime mortgage and credit markets.  A significant amount of our income decline was in our fixed income business, where we have a long track record of strong earnings, and this quarter’s performance was well below our expectations.  Although we generated strong momentum in many of our franchises, our fixed income results, along with higher credit costs in global consumer, led to significantly lower net income,” said Charles Prince, Chairman and CEO.

“Importantly, many of our businesses performed well this quarter.  Our international franchise continued to expand rapidly, with revenues up 30%.  Our global wealth management franchise generated record revenues and transaction services posted another record quarter on double-digit earnings growth.  In securities and banking, equity markets and underwriting revenues were up a combined 33%, and our advisory revenues grew 29%.  Volumes in our consumer franchise continued to grow strongly with deposits up 18%, managed loans up 13%, and we opened 96 new branches around the world,” said Prince.

“As we move in to the fourth quarter, we are focusing closely on improving those areas where we performed below expectation, while at the same time continuing to execute on our strategic priorities,” said Prince.

Management Comment

        "We have very clear priorities to drive growth and we are executing on all of them. We generated record revenues, up 20%, and record earnings from continuing operations, up 18%, both driven by our record international results," said Charles Prince, Citi Chairman and Chief Executive Officer.

        "We continued to generate revenue and volume growth in our U.S. consumer franchise, while making excellent progress in re-weighting Citi towards our other businesses, especially our international franchises, where revenues and net income increased over 30%. Our capital markets-driven businesses performed extremely well and international consumer revenues and volumes grew at a double-digit pace," said Prince.

        "We also began to implement the structural expense initiatives announced in April, which are generating improved efficiencies. These initiatives, coupled with strong revenue growth, drove positive operating leverage this quarter and helped offset increased credit costs."

        "We made excellent progress in expanding our business through targeted acquisitions, completing three international transactions, including an increase in our ownership of Nikko Cordial Corporation in Japan to 68%," said Prince.

Management Comment

“We generated strong momentum this quarter, with revenues increasing 15% to a record, driven by growing customer business volumes.  Global consumer deposits were up 12% and global consumer loans grew 11%.  In our international franchises, revenues grew 18%, led by international markets & banking revenue up 20%.  Our revenue growth combined with improving expense management and, after adjusting for certain non-recurring items, we generated positive operating leverage.  Offsetting our improved revenue and expense performance were higher credit costs and a lower level of tax benefits than last year,” said Charles Prince, Chairman and Chief Executive Officer of Citi.

“We continued to invest in expanding our distribution and enhancing our technology as we build a broad, strong foundation for future growth.  We also announced the acquisition of Egg, Ltd. in the U.K., the world’s largest internet bank, and we launched a tender offer to acquire 100% of Nikko Cordial in Japan, consistent with our effort to drive growth through a balance of organic investment and targeted acquisitions and expand internationally.” said Prince.

“We achieved these results while completing our structural expense review, which will help us become a leaner, more efficient organization and lower our rate of expense growth.  As we look ahead, our priorities are clear: we will invest to grow and integrate our businesses, take actions to improve efficiency and lower costs, and continue to build momentum across our franchises,” said Prince.

Management Comment

“Our results were highlighted by double-digit revenue growth in our corporate and investment banking, wealth management and alternative investment businesses.  In U.S. consumer, we continued to see positive trends from our strategic actions.  Performance in these businesses was partially offset by lower results in international consumer, which included significant charges in our Japan consumer finance business.  Customer balances continued to grow strongly, partly driven by our investment in new distribution,” said Charles Prince, Chairman and Chief Executive Officer of Citigroup.

“During the quarter, we continued to expand our business through a balance of organic investment and targeted acquisitions. We opened a record number of branches and continued to invest in our technology and our people.  We also announced five acquisitions, all to expand our international franchise.  We led a consortium that acquired 85% of Guangdong Development Bank in China.  In Central America, we announced the acquisition of Grupo Financiero Uno, a consumer credit card franchise, and Grupo Cuscatlan, a corporate and consumer bank.  We also announced the acquisition of Quilter, one of the United Kingdom’s most respected wealth advisory firms, and the acquisition of a 20% stake in Akbank, a leading Turkish bank,” said Prince.

“Our 2007 priorities are clear:  generating sustainable growth in U.S. consumer, growing international consumer, corporate and investment banking and wealth management businesses more quickly, focusing sharply on expense management, and remaining highly disciplined in credit management.  We will continue to invest to integrate our businesses and expand our reach, while at the same time taking a thorough review of our entire expense base to ensure that we operate as efficiently and effectively as possible,” said Prince.

Management Comment

        "Our third quarter results were driven by strength in several businesses, including international revenues, up 11%. In our U.S. consumer franchise, we are pleased with the trends we are seeing, and throughout all our businesses, we had good expense discipline. That said, results from our capital markets related businesses fell short of my expectations, and I expect improved results from these businesses going forward," said Charles Prince, Chairman and Chief Executive Officer of Citigroup.

        "During the quarter, we continued to execute on our strategic initiatives, investing approximately $320 million to reach and serve our customers in more places, and more effectively. At the same time, we remained highly disciplined on our non-investment expenses." We also repurchased $2 billion of our common shares during the quarter.

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        "On September 26^th, Moody's upgraded Citibank's credit rating to Aaa, a direct reflection of the strength and diversity of our franchise, and the way we are running our business. I am very proud of this accomplishment."

        "As we move into the fourth quarter, our priorities remain clear: executing on our strategic initiatives to drive organic growth, targeted acquisitions, expense discipline, and generating revenue and earnings growth and superior returns for our owners", said Prince.

Management Comment

        "In the second quarter, we achieved our second highest income from continuing operations while making significant progress on our strategic initiatives. We added a record number of new consumer branches during the quarter, bringing our total year-to-date new branch openings to 508. We also opened corporate and investment banking offices in Kuwait and Dubai. The results from our newly launched Citibank e-savings business have been exceptional, with $4.2 billion of deposits since its launch 3 months ago—approximately two-thirds representing new money to Citibank," said Charles Prince, Chairman and Chief Executive Officer of Citigroup.

        "In international consumer, strong volume growth across our franchise drove a 12% increase in revenues. U.S. consumer also achieved strong volume growth and, despite headwinds from spread compression, showed improving momentum from the first quarter. And in corporate and investment banking, we achieved our second highest revenues, despite challenging conditions in the emerging markets," said Prince.

        "We are very pleased with the momentum we are building as we execute on our strategic initiatives, strengthen our franchises, and position Citigroup for continued long-term earnings growth," said Prince.

Management Comment

        "I am very pleased with our first quarter accomplishments, which included strong growth in client activity across many franchises. We are seeing the benefits from our investment spending, which helped generate record revenues in our international businesses and record revenues globally in our corporate and investment banking business. Strength in these franchises more than offset weaker results in our U.S. consumer business," said Charles Prince, Chief Executive Officer of Citigroup.

        "We executed on our strategic initiatives, adding a record 238 new branches in 19 countries, as well as opening our first private bank office in mainland China. We also enhanced our ability to serve more customers through the launch of Citibank Direct, our full-service internet bank, and through a partnership with 7-Eleven convenience stores, we added over 5,500 ATMs to our U.S. distribution network. We remain sharply focused on our strategic initiatives, leveraging our unique strengths to achieve long-term earnings growth and superior returns for our owners," said Prince.