Citigroup (C)

2007 YTD vs. 2006 YTD

        Revenues, net of interest expense, of $1.719 billion in the first nine months of 2007 increased $126 million, or 8%.

        Total proprietary revenues, net of interest expense, for the first nine months of 2007 of $1.301 billion, were composed of revenues from private equity of $1.305 billion, other investment activity of $38 million and hedge funds of ($42) million. Private equity revenue increased $520 million from the first nine months of 2006, primarily driven by higher realized and unrealized gains. Hedge fund revenue decreased $107 million, largely due to lower investment performance. Other investment activities revenue decreased $420 million from the first nine months of 2006, largely due to the absence of gains from the liquidation during 2006 of Citigroup's investment in St. Paul shares and MetLife shares and a lower market value on Legg Mason shares. Client revenues increased $133 million, reflecting increased management fees from a 49% growth in average client capital under management excluding Old Lane.

        Operating expenses in the first nine months of 2007 of $633 million increased $116 million from the first nine months of 2006, primarily due to increased performance-driven compensation, higher employee-related expenses and the inclusion of Old Lane.

        Minority interest, net of taxes, in the first nine months of 2007 of $84 million increased $41 million from the first nine months of 2006, primarily due to higher private equity gains related to underlying investments held by consolidated majority-owned legal entities. The impact of minority interest is reflected in fees, dividends, and interest, and net realized gains (losses) consistent with proceeds received by minority interests.

        Net Income in the first nine months of 2006 reflects higher tax benefits for $58 million resulting from the resolution of the 2006 Federal Tax Audit.

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2007 YTD vs. 2006 YTD

        Revenues, net of interest expense, increased, primarily due to improved treasury results and a gain on the sale of certain corporate-owned assets, partially offset by higher intersegment eliminations.

        Restructuring expense.    See Note 7 on page 62 for details on the 2007 restructuring charge.

        Other operating expenses increased, primarily due to increased staffing, technology and other unallocated expenses, partially offset by higher intersegment eliminations.

        Income tax benefits increased due to the higher pretax loss in the current year, offset by a prior-year tax reserve release of $69 million relating to the resolution of the 2006 Tax Audits.

        Discontinued operations represent the operations in the Company's Sale of the Asset Management Business to Legg Mason Inc., and the Sale of the Life Insurance and Annuities Business. For 2006, income from discontinued operations included a gain from the Sale of the Asset Management Business in Poland, as well as a tax reserve release of $76 million relating to the resolution of the 2006 Tax Audits. See Note 2 on page 57.

2007 YTD vs. 2006 YTD

Net Interest Revenue was 2% better than the prior year, as growth in average deposits and loans of 20% and 10%, respectively, and higher risk-based fees in Cards, was partially offset by a decrease in net interest margins.  Net interest margins declined due to an increase in higher-cost time deposit and e-savings balances, and the securitization of higher margin credit card receivables.

Non-Interest Revenue increased 8% primarily due to higher loan and deposit volumes, and 6% growth in Card purchase sales.  Non-interest revenues also reflected a $161 million net pretax gain on the sale of MasterCard shares, the impact of the acquisition of ABN AMRO Mortgage Group in the first quarter of 2007, and higher gains on sale of mortgage loan and net servicing revenues.  Second quarter of 2006 results also included a $132 million pretax gain from the sale of upstate New York branches.

Operating expenses increased primarily due to acquisitions, increased investment spending related to the 75 new branch openings during the first half of 2007 (45 in CitiFinancial and 30 in Citibank), and costs associated with Citibank Direct.  The increase in 2007 was also favorably affected by the absence of the charge related to the initial adoption of SFAS 123(R) in the first quarter of 2006.  Higher volume-related expenses primarily reflected 20% growth in loan originations in Consumer Lending businesses.

Provisions for loan losses and for benefits and claims increased primarily reflecting a change in estimate of loan losses inherent in the U.S. Cards portfolio.  The increase in provision for loan losses also reflected the absence of loan loss reserve releases recorded in the prior year, higher loan volumes, portfolio seasoning and increased delinquencies in

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second mortgages, as well as an increase in bankruptcy filings over unusually low filing levels experienced in the first half of 2006.  The net credit loss ratio increased 9 basis points to 1.27%.

The Net income decline in 2007 also reflects the absence of a $175 million tax benefit resulting from the resolution of the Federal Tax Audit from the first quarter of 2006.

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2007 YTD vs. 2006 YTD

Net Interest Revenue increased 15% overall, 26% after excluding the impact of Japan Consumer Finance.  Growth was driven by higher average receivables, as well as the impact of the acquisitions of Grupo Financiero Uno, Egg, Grupo Cuscatlan, and CrediCard, and increased ownership in Nikko Cordial.

Non-Interest Revenue increased 16%, primarily due to higher purchase sales, up 28% in Cards, increased investment product sales, up 40% in Retail Banking, and growth across all regions. The positive impact of foreign currency translation and a year-over-year gain on the MasterCard IPO of $53 million also contributed to the increase in revenues.

Operating expenses increased, reflecting the integration of the CrediCard portfolio and the acquisitions of Grupo Financiero Uno, Grupo Cuscatlan, and Egg, and increased ownership in Nikko along with volume growth across the products and regions, continued investment spending driven by 269 branches opened or acquired, higher customer activity, and the impact of foreign currency translation.  The increase in YTD 2007 expenses was also favorably affected by the absence of the charge related to the initial adoption of FAS 123(R) in the first quarter of 2006.

Provision for loan losses increased 56% driven by portfolio growth, increased past due accounts and portfolio seasoning in Mexico, the integration of acquisitions, and higher net credit losses in Japan Consumer Finance. These increases were partially offset by the absence of a 2006 second quarter loan loss reserve release.

Net Income was also affected by the absence of prior-year tax benefit impact of $190 million primarily resulting from APB 23 and the absence of a prior-year $75 million benefit from tax reserve releases related to the resolution of the Federal Tax Audit in the first quarter of 2006.

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2007 YTD vs. 2006 YTD

Revenues, net of interest expense, increased, driven by broad-based performance across products and regions and by the $402 million benefit from the adoption of SFAS 157.   Equity Markets revenues increased, driven by strong growth globally, including cash trading, derivatives products, equity finance, convertibles and prime brokerage.  Fixed Income Markets revenue increases were driven by improved results across all products, including interest rates and currencies, and credit and securitized products and commodities.  Investment Banking revenue growth was driven by higher equity underwriting and advisory and other fees. Transaction Services revenues increased reflecting growth in liability balances and assets under custody, higher net interest margins in Cash Management and Securities and Funds Services.

Operating expenses growth was primarily driven by higher business volumes and compensation costs.  The growth in 2007 was favorably affected by the absence of a $354 million charge related to the initial adoption of SFAS 123(R) in the first quarter of 2006 and a $300 million pretax release of litigation reserves in the second quarter of 2007.

The provision for credit losses increased due to a net charge of $286 million in the first quarter of 2007 to increase loan loss reserves.  The increase in loan loss reserves was driven by portfolio growth, which includes higher commitments to leveraged transactions and an increase in average loan tenor.  This was partially offset by a decrease in the second quarter reflecting a stable global corporate credit environment and the absence of a $118 million net increase to loan loss reserves recorded in the prior-year second quarter.

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2007 YTD vs. 2006 YTD

Revenues, net of interest expense, of $6.015 billion in the first half of 2007 increased $1.040 billion, or 21%, from the prior-year period, primarily due to a 77% increase in international revenues, driven by the Nikko acquisition, strong Capital Markets activity in Asia and Latin America, and higher domestic syndicate sales.  Net flows were $6 billion compared to ($1) billion in the prior-year first half.

Operating expenses of $4.557 billion in the first half of 2007 increased $541 million from the prior year. The expense increase in 2007 was favorably affected by the absence of the charge related to the initial adoption of SFAS 123(R) in the first quarter of 2006 of $145 million.  Additionally, the increase in expenses was driven by the Nikko and Quilter acquisitions and higher variable compensation associated with increased business volumes.

The provision for loan losses increased $16 million, primarily driven by portfolio growth.

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2007 YTD vs. 2006 YTD

Revenues, net of interest expense, of $1.594 billion in the first six months of 2007 increased $335 million, or 27%.

Total proprietary revenues, net of interest expense, for the first six months of 2007 of $1.346 billion, were composed of revenues from private equity of $1.072 billion, hedge funds of $166 million and other investment activity of $108 million.  Private equity revenue increased $343 million from the first six months of 2006, primarily driven by higher realized and unrealized gains. Hedge fund revenue increased $102 million, largely due to higher investment performance on an increased asset base. Other investment activities revenue decreased $170 million from the first six months of 2006, largely due to the absence of gains from the liquidation during 2006 of Citigroup’s investment in St. Paul shares.  Client revenues increased $60 million, reflecting increased management fees from a 53% growth in average client capital under management.

Operating expenses in the first six months of 2007 of $395 million increased $15 million from the first six months of 2006, primarily due to increased performance-driven compensation and higher employee-related expenses.

Minority interest, net of taxes, in the first six months of 2007 of $85 million increased $52 million from the first six months of 2006, primarily due to higher private equity gains related to underlying investments held by consolidated majority-owned legal entities.  The impact of minority interest is reflected in fees, dividends, and interest, and net realized gains/(losses) consistent with proceeds received by minority interests.

Net Income in the first six months 2006 reflects higher tax benefits including $58 million resulting from the resolution of the Federal Tax Audit in the first quarter of 2006.

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2007 YTD vs. 2006 YTD

Revenues, net of interest expense, increased, primarily due to improved treasury results and a gain on the sale of certain corporate-owned assets, partially offset by higher intersegment eliminations.  Lower overall rates drove the improvement in treasury revenues.

Restructuring expense.  See Note 7 on page 57 for details on the 2007 restructuring charge.

Other operating expenses increased, primarily due to increased staffing, technology and other unallocated expenses, partially offset by higher intersegment eliminations.

Income tax benefits increased due to the higher pretax loss in the current year, offset by a prior-year tax reserve release of $61 million relating to the resolution of the Federal Tax Audit.

Discontinued operations represent the operations in the Company’s Sale of the Asset Management Business to Legg Mason Inc., and the Sale of the Life Insurance and Annuities Business.  For 2006, income from discontinued operations included a gain from the Sale of the Asset Management Business in Poland, as well as a tax reserve release of $59 million relating to the resolution of the Federal Tax Audit.  See Note 2 on page 53.