2019 ANNUAL REPORT
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N A Mission of Enabling
Growth and Progress
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We protect people’s savings and help them make the purchases —
from everyday transactions to buying a home — that improve the
quality of their lives. We advise people on how to invest for future
needs, such as their children’s education and their own retirement,
and help them buy securities such as stocks and bonds.
What You Can Expect From Us &
What We Expect From Ourselves
Citi’s mission is to serve as a
trusted partner to our clients by
responsibly providing financial
services that enable growth and
economic progress. Our core
activities are safeguarding assets,
lending money, making payments
and accessing the capital markets
on behalf of our clients. We have
200 years of experience helping
our clients meet the world’s
toughest challenges and embrace
its greatest opportunities.
We are Citi, the global bank —
an institution connecting millions
of people across hundreds of
countries and cities.
These capabilities create an obligation to act responsibly, do
everything possible to create the best outcomes, and prudently
manage risk. If we fall short, we will take decisive action and learn
from our experience.
We strive to earn and maintain the public’s trust by constantly
adhering to the highest ethical standards. We ask our colleagues
to ensure that their decisions pass three tests: they are in
our clients’ interests, create economic value, and are always
systemically responsible. When we do these things well, we make
a positive financial and social impact in the communities we serve
and show what a global bank can do.
We work with companies to optimize their daily operations,
whether they need working capital, to make payroll or export
their goods overseas. By lending to companies large and small,
we help them grow, creating jobs and real economic value at home
and in communities around the world. We provide financing and
support to governments at all levels, so they can build sustainable
infrastructure, such as housing, transportation, schools and other
vital public works.
Financial Summary
In billions of dollars, except per-share amounts, ratios and direct staff
Global Consumer Banking Net Revenues
Institutional Clients Group Net Revenues
Corporate/Other Net Revenues
Total Net Revenues
Net Income
Diluted EPS — Net Income
Diluted EPS — Income from Continuing Operations
Assets
Deposits
Citigroup Stockholders’ Equity
Basel III Ratios — Full Implementation1
Common Equity Tier 1 Capital
Tier 1 Capital
Total Capital
Supplementary Leverage
Return on Assets
Return on Common Equity
Return on Tangible Common Equity
Book Value per Share
Tangible Book Value per Share
Common Shares Outstanding (millions)
Total Payout Ratio
Market Capitalization
Direct Staff (thousands)
Totals may not sum due to rounding.
1 Please see Key Capital Metrics on page 3.
2019
2018
$
33.0
$
32.3
$
$
39.3
2.0
74.3
19.4
8.04
8.04
$
$
38.3
2.2
72.9
18.0
6.68
6.69
$
1,951
$
1,917
1,071
193
11.8%
13.4%
16.0%
6.2%
0.98%
10.3%
12.1%
1,013
196
11.9%
13.5%
16.2%
6.4%
0.94%
9.4%
11.0%
$ 82.90
$ 75.05
70.39
2,114
122%
169
200
$
63.79
2,369
109%
$
123
204
1
Letter
to Shareholders
Dear Fellow Shareholders,
In 2019, Citi delivered our most
profitable year since 2006.
The $19.4 billion we earned
on $74.3 billion in revenues
was $1.4 billion higher than in
2018. Our earnings per share
of $8.04 were up more than
20% compared with the year
before. We drove 4% underlying
revenue growth across our
Consumer and Institutional
franchises.1 We have grown
loans and deposits for
16 consecutive quarters.
We continued to make progress
toward the financial targets we have
laid out. We are on a path to return
approximately $62 billion of capital
to our shareholders, exceeding our
commitment. To date, we have returned
approximately $53 billion, including a
portion of the roughly $22 billion we
gained regulatory approval to return
over the 2019 Comprehensive Capital
Analysis and Review cycle. Most
importantly, we closed out 2019 on a
high note, with a Return on Tangible
Common Equity of 12.1%, just above our
12% target and 120 basis points higher
than in 2018.2
These results reflect how well our
model can perform, even in an
uncertain environment. Coming out
of a tough fourth quarter of 2018
for the markets and our industry,
2
we entered 2019 amid widespread
predictions of a global recession and
potential turn of the business cycle.
Against that backdrop, the growth
we drove came — as we said it would
— from working collaboratively and
creatively with clients to manage
and grow their businesses in an
increasingly complex environment
characterized by trade routes shifting
and supply chains realigning. We
again proved the value of our global
client network and unmatched ability
to connect people and businesses to
opportunities worldwide.
The year concluded with several
economic storm clouds lifting. The U.S.
and China signed a Phase 1 trade deal,
the new United States-Mexico-Canada
Agreement was ratified and Brexit was
Michael L. Corbat
Chief Executive Officer
at last confirmed. At Citi, we emerged
in a strong competitive position in
terms of capital, liquidity, technology
and, importantly, talent. Changes to
my management team include a new
President of Citi and CEO of Global
Consumer Banking, Jane Fraser; a new
CEO of our Institutional Clients Group,
Paco Ybarra; a new CFO, Mark Mason;
and new heads of our three regions.
Our positive position across all of
those areas permitted us to realize the
benefits of investments we have made
over the past several years in high-
growth, high-return areas across the
franchise. We also continued to invest
in our infrastructure and culture of
compliance and controls, in light of the
enduring need to be an indisputably
strong and stable institution.
In our Global Consumer Bank, we
sustained momentum by generating
4% annual underlying revenue
growth with contributions from all
three regions: the U.S., Mexico and
Asia.3 Since establishing a client-
centric structure in our largest
Consumer market, the U.S., our
strategy of unifying Branded Cards
and Retail Banking has yielded a
steady stream of compelling new
products and value propositions,
from digital lending to flexible
payments. We are targeting a
significant opportunity to redefine
scale not according to the traditional
metrics of assets and footprint but
with digitally driven experiences.
The strong revenue growth we saw in
Branded Cards and $6 billion in U.S.
digital deposit sales — five times that
of the previous year — are signs that
our integrated client-centric strategy
is working. Two-thirds of our digital
deposit sales came from outside our
physical footprint and half came from
our card customers with no prior
retail banking relationship with us.
We also expanded our relationship
with American Airlines to offer a
new savings account designed to
deepen relationships from cards-only
customers to multi-relationship clients.
And we announced a partnership with
Google to explore launching a new
checking account on Google Play in
2020, aimed at expanding the reach
and breadth of our customer base.
In Asia, we entered into new credit
card partnerships with digital leaders
Grab, Lazada and Indian e-commerce
juggernaut Paytm. In Mexico, we
continued to leverage Citibanamex’s
extraordinary prestige and leading
market position to deliver double-
digit growth in earnings before taxes
even in a muted market environment.
Our Institutional Clients Group turned
in an equally strong performance,
driving balanced 4% underlying
revenue growth across our franchise
that serves corporate (including 90%
of Fortune 500 firms), investor and
government clients and ultra high net
worth households and individuals.4
International Financing Review
summed up the source of our market
and wallet share gains when it named
Citi 2019 Bank of the Year: “Citi is a
truly global — and unique — corporate
bank that joins the developed and
developing world.” Those connections
run deep between our banking teams
and clients and across products,
sectors, markets and regions.
CITIGROUP — KEY CAPITAL METRICS
Common Equity Tier 1 Capital Ratio1
Supplementary Leverage Ratio1
TBV/Share2
12.1%
12.6%
12.4%
11.9%
11.8%
7.1%
7.2%
6.7%
6.4%
6.2%
$60.61
$64.57
$60.16
$63.79
$70.39
4Q’15
4Q’16
4Q’17
4Q’18
4Q’19
1 Citigroup’s Common Equity Tier 1 Capital Ratio and Supplementary Leverage Ratio for 2017 and prior years
are non-GAAP financial measures. For additional information, please see “Capital Resources” in Citi’s 2017
Annual Report on Form 10-K.
2 Tangible Book Value (TBV) per share is a non-GAAP financial measure. For a reconciliation to reported
results, please see “Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and
Returns on Equity” in Citi’s 2019 Annual Report on Form 10-K.
2019 NET REVENUES1
2019 Net Revenues: $72.3 Billion
BY REGION
North America
47%
Europe,
Middle East
and Africa
(EMEA)
17%
Latin America
14%
Asia2
22%
BY BUSINESS
Global
Consumer
Banking (GCB)
45%
ICG Banking
30%
ICG Markets and
Securities Services
25%
ICG — Institutional Clients Group
1 Results exclude Corporate/Other revenues
(of $2.0 billion) and are non-GAAP financial measures.
2 Asia GCB includes the results of operations of GCB
activities in certain EMEA countries.
Our industry-leading Treasury and
Trade Solutions (TTS) business is the
backbone of our institutional franchise
because our global client network
makes Citi the first call to manage
cash, process payments and create
solutions to supply chain challenges
and provides opportunities for clients
in multiple markets and currencies.
TTS has established itself within
our firm and industry as a pioneer
in steering the shift from analog
to digital platforms and processes.
In partnership with fintech firms,
including Feedzai, HighRadius and
Cachematrix, TTS is actively exploring
artificial intelligence, machine learning
and blockchain applications to
automate cash management, foreign
exchange and fraud protection to
consolidate its position as the premier
global commerce banking platform.
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Our Markets and Securities Services
business continues its strong
performance having topped the
Greenwich Associates’ Global Fixed
Income Dealer rankings for the fourth
consecutive year. Securities Services
grew deposit balances versus the
prior year through new mandates and
organic growth from existing clients.
Citi Private Bank retained the award
for the Best Global Private Bank from
the Financial Times for the second
year, finishing 2019 with year-over-
year growth across product areas.
To enhance how we serve midsized
companies that value our global
reach, we realigned our organizational
structure to have Citi Commercial
Bank report into the Institutional
Clients Group globally. This new
alignment leverages the full
breadth of solutions provided by
our client network and gives us new
opportunities to continue to build and
develop our top talent.
A year after we aligned our structure to
create a holistic client coverage model
in the form of the unified Banking,
Capital Markets and Advisory (BCMA)
team, our share rose year-over-year
across mergers and acquisitions (M&A)
and equity and debt capital markets.
Our increased share shows how we
can deliver a full suite of services to
clients who rely on us to sustain steady
transactional flow. BCMA fulfilled its
mandate by executing on an even
higher share of the year’s significant
deals. We were financial advisor to U.S.
biotech firm Celgene on its $96.8 billion
merger with Bristol-Myers Squibb, the
largest-ever healthcare M&A deal. We
were lead financial advisor to Raytheon
on its all-stock merger with United
Technologies’ aerospace unit. We also
were joint global coordinator and
bookrunner on Alibaba Group’s nearly
$13 billion secondary listing in Hong
Kong, the largest global follow-on deal
in the sector and a sign of confidence
in an important hub for Citi, the region
and the world.
In 2019, the expectations of consumer
and institutional clients continued
to converge. Both groups want
simple, seamless experiences that
4
are not just best of bank but best
in life, prompting us to allocate
substantial resources and mindshare
to exceeding our clients’ evolving
expectations of engaging with Citi on
their channel of choice.
Our strategy to capture the abundant
opportunities inherent in this trend
is threefold. First, we partner with
startups that value our model, global
client base and brand to test and
deploy new technologies at scale.
Second, we invest in firms with
demonstrable growth potential and
ability to create solutions that deliver
real benefits to our firm and clients.
And third, we develop proprietary
solutions through our internal D10X
incubation program and network
of Innovation Labs. Regardless of
source, our intent is the same: tapping
technology to eliminate client pain
points and frustrations, streamline
our processes, and deliver holistic,
integrated products and services to
customers and clients of all sizes
and sectors more seamlessly and
efficiently than peers. That strategy
is showing results, and Citi’s digital
leadership has been recognized in
each region. Citi was named Best
Digital Bank in Asia by Euromoney,
principles for responsible firms, I
found the lively debate that ensued
healthy and reassuring, but for us
at Citi, the approach is not new.
The statement said simply that
companies should take the interests
of all stakeholders — including
shareholders, colleagues, clients,
suppliers and communities — into
account when making decisions.
With every action we take, we
strive to demonstrate the value we
contribute and the values we uphold.
Ultimately, taking stakeholder
interests into account benefits our
shareholders. We have been on this
journey for some time and welcome
the actions companies are taking
to hold themselves accountable to
higher environmental, social and
governance standards.
We also see this as a positive
development because these
expectations arise from the higher
levels of trust and credibility
businesses have built, notably with
their own people. Research reveals
that a global majority do not trust
the media or government to do the
right thing for them or for society.
Still, three out of four believe their
own employer will. As colleagues
As colleagues and clients want to work
for, and do business with, companies that
affirmatively reflect their own priorities
and principles, more firms intent on
attracting and retaining top talent are
rising to the challenge.
Best Digital Bank in Mexico by Global
Finance and the firm with the Most
Desirable Mobile Banking Features
in the U.S. by Business Insider
Intelligence.
In August, when the Business
Roundtable — an organization of
CEOs of major U.S. companies, of
which I am a member — announced
a revised statement of purpose and
and clients want to work for, and
do business with, companies that
affirmatively reflect their own
priorities and principles, more firms
intent on attracting and retaining top
talent are rising to the challenge.
As for Citi’s concrete commitments,
our businesses seek out opportunities
to address challenges that impact our
clients and communities.
Our government clients around the
world urgently need infrastructure.
The G20 has estimated that nearly
$100 trillion is needed for global
infrastructure spending by 2040, but
there is a spending gap of $18 trillion.
Citi’s Public Finance team is playing its
part by financing, among other critical
projects, the two largest airport public-
private partnerships in U.S. history. We
also financed the construction of new
subway systems in Panama and Peru,
helping two fast-growing metropolises
in dynamic emerging economies reduce
traffic and carbon emissions.
In the communities we serve, one
particular infrastructure gap is
increasingly pressing: affordable
housing. As urban populations soar and
cities become less affordable for many,
what has long been an acute shortage
is becoming a crisis. In 2019, Citi ranked
first among U.S. financiers of affordable
housing for the 10th year in a row.
We financed over $6 billion worth of
affordable rental housing projects. In
partnership with developers, nonprofits
and governments, our Citi Community
Capital team has helped to create or
preserve nearly 500,000 affordable
units over the past decade.
We have been on the front lines and
in charge of leading our industry
with our sustainability strategy since
joining the United Nations Environment
Programme Finance Initiative in
1997 and co-founding the Equator
Principles in 2003. That is the first
framework developed by responsible
financial institutions to assess and
manage the environmental and social
risks associated with project finance.
Flash forward to September 2019 and
Climate Week in New York: Citi was the
only U.S. bank to sign on to the United
Nations’ Principles for Responsible
Banking, joining a coalition of 130
There are few areas where the gap
between the scale of the need and of the
progress to date is wider than in the field
of inclusive finance.
global financial firms that have agreed
to align their business practices related
to climate risks and opportunities with
the UN’s Sustainable Development
Goals and the Paris Agreement.
In 2013, Citi achieved our first
10-year $50 billion Environmental
Finance Goal three years early, and in
2019, we exceeded our second 10-year
$100 billion Environmental Finance
Goal four years ahead of schedule. In
2019, we were a founding signatory of
the Poseidon Principles, a voluntary
framework aimed at reducing the
carbon emissions of maritime
shipping. We are also on track to
achieve our goal of sourcing 100%
renewable electricity across our global
operations in 2020.
There are few areas where the gap
between the scale of the need and
of the progress to date is wider than
in the field of inclusive finance. With
the world’s unbanked population
estimated at 1.7 billion, our Inclusive
Finance unit has worked with teams
across our firm over the last decade
to provide more than 3.3 million
entrepreneurs, 3 million of them
women, with access to capital and
financial services in 34 countries in
partnership with the U.S. International
Development Finance Corporation,
formerly OPIC. The Citibanamex
Transfer account has attracted over
10 million customers, 80% formerly
unbanked. The Citi Foundation’s
Pathways to Progress program, which
started in 2014 in 10 cities and went
global three years later, has helped
prepare more than 850,000 youth
for the jobs of today through paid
internships, mentorship, workforce
training and leadership development.
We have invested $140 million in this
initiative to date and will soon be
announcing its next stage.
The financial results we reported and
the positive economic and social impact
that we and our model have on our
clients and communities have never
been more closely connected. The
Mission and Value Proposition at the
front of this report describes not just
what we do but how and why we do
it. As we prepare to host our second
Investor Day, in 2020, I have never felt
better about our financial strength and
competitive position, as measured by all
the relevant metrics: revenues, returns,
income and capital. I have also never
felt better or more confident about
who we are, what we stand for, and the
lasting value of the many things we do
for our clients, our communities, our
shareholders, our people and all of our
stakeholders worldwide. While there is
no shortage of challenges ahead, I am
confident in our ability to continue to
rise and meet them.
Sincerely,
Michael L. Corbat
Chief Executive Officer, Citigroup Inc.
1 Excludes the impact of foreign exchange (FX) translation (constant dollars), as well as pretax gains on sale in 2018 of approximately $150 million on a
Hilton portfolio sale in North America Global Consumer Banking (GCB) and approximately $250 million on an asset management business in Latin America
GCB. For a reconciliation of revenues in constant dollars to reported results for Citi’s consumer business (GCB) and institutional business (Institutional
Clients Group), see Slide 31 of Citi’s Fourth Quarter 2019 Earnings Review available on Citi’s investor relations website. As used throughout, Citi’s results of
operations in constant dollars and excluding the gains on sale are non-GAAP financial measures.
2 Return on Tangible Common Equity (ROTCE) is a non-GAAP financial measure. ROTCE in 2018 excludes a one-time benefit of $94 million due to the
finalization of the provisional component of the impact, based on Citi’s analysis, as well as additional guidance received from the U.S. Treasury
Department, related to the Tax Cuts and Jobs Act. For the components of the ROTCE calculation, see “Capital Resources—Tangible Common Equity,
Book Value per Share, Tangible Book Value per Share and Returns on Equity” in Citi’s 2019 Annual Report on Form 10-K included with this letter.
3 Excludes the impact of FX translation, as well as the gains on sale in North America GCB and Latin America GCB described in endnote 1. For a reconciliation
of revenues in constant dollars to reported results, see the tables in “Global Consumer Banking—Latin America GCB” and “Global Consumer Banking—Asia
GCB” in Citi’s 2019 Annual Report on Form 10-K included with this letter.
4 Excludes the impact of FX translation. For a reconciliation to reported results, see Slide 31 of Citi’s Fourth Quarter 2019 Earnings Review available
on Citi’s investor relations website.
5
Global Consumer Banking
Citi’s Global Consumer Bank (GCB), a global leader in
banking, credit cards and wealth management, is a
critical growth engine for Citi. With a strategic focus on
the U.S., Mexico and Asia, the Global Consumer Bank
serves more than 110 million clients in 19 markets.
In 2019, the Global Consumer Bank
successfully executed its strategy
to drive growth. It demonstrated
the power and potential of its new,
integrated client-centric operating
model in the U.S., grew loans
and deposits globally, introduced
an array of industry-first digital
capabilities and expanded its
ecosystem of partners, one of the
most powerful in the industry.
With the full power of the
franchise together for the first
time in GCB’s largest market, U.S.
Consumer Banking implemented
a strategy to deepen relationships
across Cards and Retail and
provide seamless experiences
to customers nationwide.
Capitalizing on our distinct model,
we launched an array of new
products and digital capabilities,
forged new and expanded
partnerships, and introduced new
value propositions to grow and
retain multi-relationship clients.
Globally, we continued to
introduce industry-leading
digital capabilities, redesign the
client experience, and embed
our services in the most popular
social and e-commerce platforms,
enabling customers to bank
anytime, anywhere, on their
channel of choice. Clients and the
industry took note. We generated
double-digit growth in digital and
mobile users globally, and client
engagement and satisfaction
meaningfully improved. Citi was
recognized with a number of
industry awards, including Best
Digital Bank in Asia (Euromoney),
Best Digital Bank in Mexico (Global
Finance) and Most Desirable
Mobile Banking Features in the
U.S. (Business Insider Intelligence).
Importantly, Citi continued to
execute strategic multi-year
investments in key growth areas
— U.S. Branded Cards, Mexico and
Technology — to drive a superior
experience for clients, enhance
our infrastructure and controls,
strengthen cybersecurity and
deliver value for Citi shareholders.
6
GCB operates 2,348 branches and
generated $7.4 billion in pre-tax
earnings in 2019. At year-end 2019, the
business had $291 billion in deposits,
$300 billion in loans and $176 billion in
assets under management.
The world’s largest credit card issuer,
Citi is a global leader in payments,
with over 138 million accounts and
$564 billion in annual purchase sales,
and unrivaled partnerships with
premier brands across Branded Cards
and Retail Services. At year-end, card
receivables were $175 billion.
Branded Cards
Branded Cards provides payment,
credit and lending solutions to
consumers and small businesses, with
55 million accounts globally. In 2019,
Branded Cards generated annual
purchase sales of $476 billion and
ended the year with a loan portfolio of
$122 billion.
Globally, we continued to strengthen
our value propositions, expand
co-brand partnerships, and provide
new digital capabilities that make
purchases faster, convenient and
more rewarding.
In the U.S., we launched several new
products to lay the foundation for
a more integrated, multi-product
relationship model. These included our
new Rewards+SM card, a unique value
proposition that provides cardmembers
with the ability to earn more points
on everyday purchases, as well as
relationship-based offers that leverage
our proprietary ThankYou® and Citi®
Double Cash rewards products.
We expanded digital lending with
two new solutions, Citi Flex Loan
and Citi Flex Pay. Citi Flex Loan
enables customers to convert a
portion of their credit line into a fixed
rate personal loan, while Citi Flex
Pay enables customers to finance
purchases by converting eligible
purchases into a fixed payment plan.
We continued to innovate and enhance
our industry-leading ThankYou
Rewards platform. We also enabled our
real-time Pay with Points functionality.
To deepen relationships with existing
cardmembers, we announced an
expanded partnership with American
Airlines. Our proprietary Citi Flex Pay
capabilities will be available to our
American Airlines co-brand cardholders,
and our existing lending partnership will
expand to include a deposit product,
the Citi Miles AheadSM Savings Account,
which will launch in 2020 to American
Airlines co-brand cardholders who reside
within the U.S. but outside locations in
which Citi has a retail branch.
Internationally, we launched a suite of
new products and digital capabilities. In
Asia, we introduced co-brand and white
label credit card partnerships with
digital leaders, including Grab, Lazada
and Paytm, with over 10 partnerships
now live. We also launched an industry-
first digital payment solution called Citi
PayAll that enables cardmembers to
settle big-ticket purchases in-app while
earning rewards points. The feature
launched in Hong Kong, Singapore,
Thailand and the UAE. To date, nearly
half of all credit card accounts and
more than half of new loans in Asia are
acquired digitally.
In Mexico, Citibanamex remains one of
the leaders in the credit card segment,
with strong market share, compelling
reward programs, ThankYou® Rewards
and Premia, as well as market-leading
promotions, including more than
2,500 agreements with retailers
and businesses.
Globally, we continued to introduce industry-
leading digital capabilities, redesign the client
experience, and embed our services in the
most popular social and e-commerce platforms,
enabling customers to bank anytime, anywhere,
on their channel of choice.
. JANUARY
3
Citi launches new no-annual-fee
credit card, Citi Rewards+ card,
accelerating points-earning potential
on everyday purchases
16
Citi releases unadjusted or “raw” pay
gap for women and U.S. minorities
22
Citi announces inaugural green
bond issuance
30
J.D. Power recognizes Citi with mobile
app certification
Citi tops Greenwich Associates’ global
fixed income dealer rankings for
fourth consecutive year
. FEBRUARY
7
Citi launches new high-yield savings
account in U.S.
13
Citi announces it will power Texas
operations with clean, renewable energy
Citi ranked Top in Quality in Greenwich
Associates’ 2018 Asian Equities Survey
20
Community-based organizations across
the U.S. receive $10 million through
Citi Foundation-funded LISC program
to help train American workers for
growing job sectors
7
2019 Citi Entertainment®, the bank’s award-
winning global entertainment access
program, and its live music platform,
Citi Sound Vault, continued to provide
cardmembers with exclusive access to
extraordinary music experiences. In
2019, in partnership with Live Nation,
Citi offered cardmembers access to
more than 8,000 events with many of
the world’s biggest names in music.
Retail Services
Retail Services is one of North
America’s largest and most
experienced retail credit solution
providers of private label and co-brand
credit cards for retailers. The business
serves 83 million customer accounts
for iconic brands, including Best Buy,
L.L.Bean, Macy’s, Exxon Mobil, Sears,
Shell, Tractor Supply Company and
The Home Depot.
In 2019, Retail Services continued to
enhance value propositions, including
partnering on new rewards benefits
for Tractor Supply Personal Credit
cardholders with a membership to the
Neighbor’s Club, the company’s free
loyalty program.
Retail Services generated purchase
sales of $88 billion and ended the year
with a loan portfolio of $53 billion.
Retail Banking
With a high-touch, segment-driven
relationship model that serves clients
across the full spectrum of consumer
banking needs, Citibank serves as a
trusted advisor to its retail, wealth
management and small business
clients at every stage of their
financial journey.
Through Citibank, Citi Priority, Citigold
and Citigold Private Client, we serve
clients across the full spectrum of
the wealth continuum so once they
become a Citi customer, they can stay
a Citi customer as their needs evolve.
8
Citi CEO
Michael Corbat
Opens
State-of-the-Art
Facility in
Sioux Falls
In September, Citi CEO Michael Corbat officially
marked the opening of Citi’s new state-of-the-art
operations site in Sioux Falls, extending a nearly
four-decades-long commitment to South Dakota.
Mike was joined at the ribbon-cutting ceremony by South Dakota Lieutenant
Governor Larry Rhoden; U.S. Senators John Thune and Mike Rounds; Sioux
Falls Mayor Paul TenHaken; and U.S. Representative Dusty Johnson along
with Citi colleagues, local business leaders and members of the community.
At the event, Mike discussed the pride we feel in the role that Citi has
played as a catalyst of growth in the city and shared how Citi’s $72 million
investment affirms our commitment to Sioux Falls and South Dakota.
Since 1981, when Citi opened a credit card operations center in Sioux Falls,
the breadth of work has diversified, expanding to 22 business functions,
including credit operations, technology, finance, treasury and transactions,
and customer service.
The new building features open-concept working spaces to foster greater
collaboration — a design Citi is using with its new buildings around
the world. Additionally, the site has been certified with a LEED Gold
designation from the U.S. Green Building Council, a testament to Citi’s
commitment to sustainability.
The modern four-story facility occupies 150,000 square feet on 19 acres in
the southwest corridor of Sioux Falls. The new space features an abundance
of natural light and panoramic views throughout the building, coupled with
collaborative workspaces, new amenities and cutting-edge technology,
making it a great place to come to work.
Citi has played an integral role in the Sioux Falls community, impacting
a large number of nonprofit partners through Citi Foundation grants,
investments, training, volunteerism and service.
Citi has a legacy of employee volunteerism and support for a number of
nonprofit partners in Sioux Falls and South Dakota, including the Sioux
Empire Housing Partnership, which helps families in South Dakota fulfill the
dream of home ownership. As part of Citi’s Pathways to Progress initiative,
the Citi Foundation has invested in local organizations, expanding the skills
of over 4,000 young people, and for more than a decade, Citi has partnered
with the rural development organization Dakota Resources, which serves
low-to-moderate income communities across the state.
GLOBAL CONSUMER BANKING In 2019, Citi
continued to
provide a breadth
of products,
services and digital
capabilities to meet
the needs of our
individual, small
business and wealth
management clients
worldwide.
In the U.S., Citi continued to evolve
its retail bank model to drive national
scale. In its six core strategic markets,
Citi is a deposit leader, maintaining
the highest average deposits per
branch versus peers for the past six
years. To deepen and acquire client
relationships outside our branch
footprint, we deployed a digitally
led challenger strategy to drive
incremental growth by leveraging the
strength of our brand, the national
scale and quality of our credit card
franchise, and our leading wealth
management capabilities.
New products were introduced for
customers beyond our branch footprint,
including Citi Accelerate Savings®, a
digital high-yield savings account, and
Citi ElevateSM Checking, a digital high-
yield checking account. Digital deposit
sales reached $6 billion in 2019, five
times that of the prior year. To further
drive national scale and embed our
services on the platforms consumers
use most, we announced our intent to
explore providing checking accounts to
consumers nationwide through Google
Pay in 2020.
Across the U.S., Citi continued to
advance financial inclusion and the
economic strength and growth of
communities. Citi’s Access Account, a
checkless bank account with no or low
monthly fees, no overdraft fees, the
ability to link to a savings account, and
access to Citi’s digital, retail and ATM
channels, has been one of its fastest-
growing products. Introduced in 2014,
the account addresses the needs of
a range of customers, particularly
first-time and younger consumers,
as well as often overlooked portions
of the U.S. market, including low-
income individuals, senior citizens and
immigrants, by reducing the risks of
overdrawn accounts and coinciding fees.
Through retail bank and small business
credit card lending, as well as supply
chain financing through its institutional
bank, Citi invested more than $10.6
billion in small business lending in 2019,
bringing its total for the decade to
nearly $100 billion.
In Mortgage, having successfully
transitioned direct servicing to Cenlar,
Citi continued to intensify its focus on
originations. Our mortgage business,
which provides loans for home purchase
and refinance transactions in the
U.S., originated $16.9 billion in new
loans in 2019.
Citi was proud to receive the #1 rating
in customer satisfaction across the
retail banking industry by the American
Customer Satisfaction Index following
being top rated among national banks in
2016 and 2017.
In Wealth Management, we continued
to enhance our capabilities, investing in
our offerings and digital tools to meet
a wider spectrum of customer needs.
Through Citi Priority, we serve the
needs of emerging affluent clients. With
Citigold and Citigold Private Client, we
provide institutional-grade, personalized
wealth management services, including
dedicated wealth teams, digital planning
tools, fund access, and a range of
exclusive privileges, preferred pricing
and benefits to affluent clients around
the globe.
. FEBRUARY
25
Citi wins multiple Debt Capital
Markets awards
26
Citi Singapore introduces Citi PayAll,
enabling credit card payments for
rent and education on mobile devices
Citi launches digital onboarding
for institutional clients through
CitiDirect BE®
. MARCH
4
Citi wins top awards for innovation in
structured products
8
Citi hires women-owned firms to lead
distribution of $1 billion Citi bond
issuance in celebration of International
Women’s Day
15
Citi signs U.S. Equality Act
26
Citi announces it will build digital
consumer payments businesses
for institutions
28
Citi introduces new Citi Wealth Advisor
Digital Financial Planner
. APRIL
4
United Nations Development
Programme and Citi Foundation jointly
host second Asia Pacific Youth Co:Lab
Summit
9
2019 Citibanamex Drives
Inclusive Finance with
Innovative CoDi QR
Digital Payments
Solution
In 2019, Citibanamex showcased
how an innovative financial
inclusion effort is delivering
on the firm’s mission to enable
growth and economic progress.
In partnership with Banco
de México, Mexican financial
authorities and other banks,
the innovative new electronic
payments platform Cobro
Digital, or CoDi, was launched.
CoDi will enable more than 5.5
million digital clients to transfer
money and make payments of
up to 8,000 pesos (US$400)
per transaction with ease and
at no cost using Quick Response
(QR) codes.
At the announcement in Mexico City at its headquarters, the
Palacio de los Condes de San Mateo de Valparaíso, Ernesto Torres
Cantú, CEO of Citi Latin America, noted that “Citibanamex has
consistently led and promoted the process of financial inclusion.
More than 50% of the progress toward financial inclusion in this
country in the past six years has been made through Citibanamex.”
In a country where 80% of payments are made in cash and
40 million Mexican adults don’t have a bank account, CoDi will
change the way Mexicans transfer money and pay each other.
Fundamentally, it aims to be a tool to help people improve their
quality of life, leave cash behind and encourage financial inclusion.
CoDi is redefining the way charges and payments are made in
Mexico — allowing monetary transactions to be more efficient and
secure. The QR code, generated via Citibanamex Móvil and/or the
Transfer app, can be read immediately, shared via text message or
printed to facilitate payments for products or services. Users can
perform these transactions directly from mobile phone to mobile
phone. In addition, there will be lower commission costs, as well
as a reduction in the use of cash.
The CoDi innovation has global consumer potential. The new
platform is also simple and works with all smartphones, banks and
telephone carriers.
The CoDi story goes beyond growth. It is a key example of how
we are reinforcing our commitment to offer Mexico’s best banking
experience while driving financial inclusion and using new
technologies to meet the expectations, needs and preferences of
each of our clients.
10
GLOBAL CONSUMER BANKING In the U.S., we offered Citigold clients
commission-free purchases on
ETFs and enhanced digital planning
capabilities with Citi® Wealth Advisor,
a digital financial planning solution
for creating custom financial plans
focused on the needs and goals that
matter most. For the third consecutive
year, Citi was named the Best Bank for
High Net Worth Families by Kiplinger.
In Asia, we continued to enhance
the client experience, unveiling a
revitalized Citigold Private Client
experience in China and launching
Citibank Global Wallet in 13 markets,
a market-first product that provides
unrivaled convenience in foreign
currency withdrawal and spending.
In Mexico, Citibanamex is one of the
most well-regarded and historically
significant financial institutions in the
country, with top brand recognition,
leading market share and an extensive
retail branch network complemented
by rapid digital and mobile user
growth. In 2019, Citi continued to pace
its strategic investments in technology,
modernizing its branch and ATM
network and digitizing its products and
client base. Digital account opening
was rolled out in branches across the
country — a 12-minute experience from
start to finish — while new, redesigned
mobile app functionality is driving
robust mobile user growth, up 50%
for the year.
Citibank Global Wallet allows clients in
Asia Pacific to use their ATM card to
withdraw cash or spend and transact
overseas, as well as conduct online
purchase transactions in 12 currencies.
. APRIL
8
Citi launches Volunteer Africa 2019
14
Paco Ybarra named Head of the ICG
and Japan
16
Citi launches biometric authentication
for institutional clients in Asia Pacific
Citi inaugurates new offices at Abu
Dhabi Global Market
17
Citi issues nine structured green bonds
to finance sustainable development
24
Citi releases 2018 Global Citizenship
Report
26
Citi enters into partnership with
Vietnam-based FinTech Payoo
. MAY
7
Citi launches Citi Verify real-time data
validation service for institutions
14
Citi and Paytm collaborate to launch
Paytm First Card
20
Citi Named Celent’s 2019 Model Bank
of the Year, recognized for eight global
treasury solutions initiatives
11
2019 Institutional Clients Group
Citi’s Institutional Clients Group (ICG) enables economic
progress, growth and sustainability for our clients and
for the world through our unparalleled global network.
The Institutional Clients Group
includes five main business lines:
Banking, Capital Markets and
Advisory, Commercial Banking,
Markets and Securities Services,
Private Banking, and Treasury and
Trade Solutions (TTS). Working
together, we provide innovative
solutions to meet the complex
needs of corporations, financial
institutions, public sector entities,
investment managers and ultra
high net worth clients.
With a physical presence in
98 countries, local trading
desks in 77 markets and a
custody network in 63 markets,
we facilitate approximately
$4 trillion in financial flows
daily. We support 90% of Global
Fortune 500 companies in their
daily operations and help them
to hire, grow and succeed.
Our network-driven strategy
allows us to offer an integrated
suite of wholesale banking
products and services to clients
who value our unmatched country
presence and who require a
financial services partner that can
help them grow in any country
where they do business. This
includes multinationals that are
expanding globally, particularly
in the emerging markets, and
emerging markets companies that
are growing beyond their home
market/region.
We are uniquely positioned to
take advantage of important,
evolving global trends, including
mobility, fintech, wellness and
sustainability; deliver responsible,
objective advice; and provide
stellar execution to lead
transformation for our clients.
Banking, Capital
Markets and Advisory
Banking, Capital Markets and
Advisory listens, collaborates and
problem solves, working tirelessly
on behalf of our corporate,
financial institution, public sector
and sponsor clients to deliver
a range of strategic corporate
finance and advisory solutions that
meet their needs, no matter how
complex. Dedicating ourselves to
these relationships and ensuring
our client experience stands above
all else, we leverage the breadth
of our unmatched global network
to provide debt capital raising,
merger and acquisition (M&A), and
equity-related strategic financing
solutions, as well as issuer services.
By serving these companies, we
help them grow, creating jobs and
economic value at home and in
communities worldwide.
12
Citi executed several landmark
underwriting and advisory
transactions for clients in 2019. Citi
acted as financial advisor and lead
provider of committed financing to
Occidental Petroleum Corporation on
its acquisition of Anadarko Petroleum
Corporation, a transaction valued at
$57 billion that was the third largest
energy acquisition globally and the
largest in North America in the last
20 years. Its $21.8 billion bridge
loan facility is the second largest in
energy globally and the largest in
North America. Citi served as Celgene
Corporation’s financial advisor on its
announced merger with Bristol-Myers
Squibb Company, creating a premier
innovative biopharma company in the
largest healthcare M&A transaction in
history. Citi is serving as lead financial
advisor to Raytheon on its all-stock
merger with United Technologies’
aerospace business. The transaction,
which has a combined enterprise value
greater than $155 billion, represents
the largest aerospace and defense
transaction in history. Citi is also
serving as lead financial advisor to
LVMH Moët Hennessy Louis Vuitton
SE and is providing committed
financing for its definitive agreement
to acquire Tiffany & Co. in a $16.9
billion transaction, the largest luxury
acquisition in history. This transaction
is expected to close in mid-2020.
Citi was a joint global coordinator and
joint bookrunner on Alibaba Group’s
$12.9 billion Hong Kong secondary
listing, which was the largest global
technology follow-on in history and
the largest ever follow-on by a Chinese
issuer. Citi acted as global coordinator,
as well as sole financial advisor,
debt structuring agent, hedging
coordinator, documentation agent and
facility agent on a €10.4 billion bridge
facility package for CK Hutchison
Group Telecom Holdings Limited
(CKHGT) to support the creation of
a new telecom holding company.
Additionally, Citi acted as global
coordinator and bookrunner on a €4.2
billion and £800 million bond offering
for CKHGT. Citi also acted as global
coordinator, bookrunner, mandated
lead arranger and facility agent on the
€4.2 billion dual-maturity term loan
facilities and €360 million three-year
revolving credit facility for CKHGT.
Proceeds of the bond offering and
term loan were used for repayment of
the bridge facility.
Citi advised on a $20 billion three-
part strategic liability management
transaction for Petróleos Mexicanos
(Pemex). Citi acted as a joint lead
manager and joint bookrunner
on a $7.5 billion offering of senior
unsecured bonds to refinance short-
term debt, joint dealer manager on
Pemex’s $7.2 billion dual Exchange
With a physical presence in 98 countries,
local trading desks in 77 markets and a
custody network in 63 markets, we facilitate
approximately $4 trillion in financial flows
daily. We support 90% of Global Fortune 500
companies in their daily operations and help
them to hire, grow and succeed.
. MAY
21
Singapore Management University
partners with Citi Ventures to
offer experiential learning in
financial technology
23
Citi hires veteran-owned firms
exclusively to distribute recent
$3.0 billion bond issuance
31
Citi recognized for Innovation,
Leadership in derivatives clearing
. JUNE
8
Citi celebrates its 14th Annual
Global Community Day with 110,000
Citi volunteers
11
Citi and Grab announce launch of Citi-
Grab credit card across Southeast Asia
18
Citi is a founding signatory of the
Poseidon Principles
19
Citi Hong Kong invests in renewable
energy credits
25
Citi enables seamless rewards points
redemption at checkout for ThankYou
cardmembers
26
Citi Payment Outlier Detection
launches in 90 countries using artificial
intelligence and machine learning
30
Citi exceeded its $100 Billion
Environmental Finance Goal
13
2019 Offers, and joint dealer manager on
Pemex’s $5 billion cash tender offer.
Citi also structured a convertible
equity portfolio financing solution for
NextEra Energy Partners (NEP) and
KKR to fund a renewables portfolio,
a unique structure that met the
strategic, corporate finance and return
objectives of both clients. Under the
agreement, KKR will acquire an equity
interest in structured partnership
with NEP that owns a geographically
diverse portfolio of 10 utility-scale
wind and solar projects across the
United States, collectively consisting
of approximately 1,192 megawatts.
Markets and Securities
Services
Markets and Securities Services
relies on global breadth and product
depth to provide an enhanced client
experience. Our sales and trading,
distribution and research capabilities
span a broad range of asset classes,
providing customized solutions that
support the diverse investment and
transaction strategies of investors and
intermediaries worldwide.
We further streamlined our Markets
operating model to drive better client
service in 2019, combining FXLM and
G10 Rates to create a single Rates
and Currencies business line. As our
clients continued to evolve and require
a broad range of services, we also
announced the formation of Equities
and Securities Services, an integrated
offering supporting the pre-trade,
execution and post-trade requirements
of our clients. This includes broad
trading and execution capabilities for
electronic and complex structured
products, financing and hedging
solutions, and clearing, custody and
funds services.
Our digital channel, Citi VelocitySM,
gives unprecedented access to
capital markets intelligence and
execution. More than 87,000 client
users in 160 countries count on our
#1 ranked platform to help them
navigate markets and make trading
decisions. Through our web, mobile
and trading applications, clients can
14
Citi provided the $116 million affordable housing construction loan and $12.5 million
permanent loan for the 14-story, 407-unit development serving people with disabilities
and/or mental illness who have experienced homelessness, as well as families and
veterans overcoming homelessness.
find proprietary data and analytics,
Citi research and market commentary,
access to fast, seamless and stable
execution for foreign exchange
(FX) and rates trades, and a suite
of sophisticated post-trade analysis
tools. Citi Velocity’s API Marketplace
gives clients unparalleled access to
Citi’s extensive proprietary data and
content library.
Last year, we continued our support
of the communities in which we live
and work. Our annual e for Education
campaign raised $8.15 million in
2019 to benefit education-focused
nonprofits. Since its inception in 2013,
the global philanthropic initiative
has raised more than $37 million to
help tackle childhood illiteracy and
improve access to quality education.
Throughout the nine-week campaign,
our Foreign Exchange business
donated $1 for every $1 million traded
on its electronic platforms, including
Citi Velocity, Citi’s flagship trading
platform for institutional clients,
and CitiFX Pulse for corporate and
custody clients. This year, Citi has
expanded the campaign to include a
broader range of electronically traded
products, including local market bonds
and futures and cash equities.
We retained our ranking as the
world’s largest fixed income dealer,
according to Greenwich Associates’
annual benchmark study, which marks
the fourth year running that Citi has
secured the top spot. We ranked #1 in
sales quality and trading quality, as
well as #1 in e-trading.
Private Bank
The Private Bank is dedicated to
helping the world’s wealthiest
individuals, families and law firms
protect and responsibly grow their
wealth. Our unique business model
enables us to focus on fewer, larger
and more sophisticated clients who
have an average net worth above
$100 million. Clients enjoy a highly
customized experience, with access
to a comprehensive range of products
and services spanning investments,
banking, lending, custody, wealth
planning, real estate, art, aircraft
finance and lending, and more.
In everything we do, we emphasize
personalized advice, competitive
pricing and efficient execution. As
part of the ICG, the Private Bank is
able to connect clients’ businesses to
banking, capital markets and advisory
services, as well as to our other
institutional resources.
INSTITUTIONAL CLIENTS GROUP Because our clients are increasingly
global in their presence and in their
financial needs, our unrivaled Global
Client Service enables them to have
dedicated local bankers in as many
regions of the world as they require.
They are, therefore, able to enjoy
seamless, cross-border service from
a worldwide team working together
as one.
A growing number of our clients
seek to align their investments with
their personal values. Investing
with Purpose is our philosophy and
methodology for sustainable and
impactful investing. We help clients
articulate their Investing with Purpose
goals and objectives, provide them
with comprehensive advice and offer
in-house investment management that
incorporates environmental, social
and governance principals, as well as
partner with asset managers to deliver
relevant themes and strategies.
Our offering is continuously evolving
in order to address and anticipate
our clients’ changing needs. Included
among our latest evolutions is the
Private Capital Group, serving 1,400
family-owned businesses, family
offices and private capital firms in
75 countries. We have extensive
experience with the challenges
that families and their Family Office
executives regularly face, and we
address their needs by combining
the personalized service of a private
bank with sophisticated cross-border
strategies that are typically reserved
for major institutions.
We are committed to helping our
clients preserve their wealth for
themselves, for their families and for
future generations. As well as working
with their other advisors to create
appropriate structures and strategies,
we help prepare their heirs for future
responsibilities as wealth owners and
leaders of the family business.
Treasury and Trade
Solutions
Treasury and Trade Solutions
provides integrated cash
management, working capital
and trade finance solutions to
multinational corporations, financial
institutions and public sector
organizations around the globe.
With the industry’s most
comprehensive suite of digitally
enabled platforms, tools and
analytics, TTS leads the way in
delivering innovative and tailored
solutions to its clients. Specific
offerings include payments and
receivables, liquidity management
and investment services, commercial
card programs, and trade services
and trade finance. Based on the belief
that client experience is the driver of
sustainable differentiation, TTS has
focused its efforts on transforming
its business to deliver a seamless,
end-to-end client experience
through the development of its
capabilities, client advocacy, network
management and service delivery
across the entire organization.
Investing with Purpose is our philosophy and
methodology for sustainable and impactful
investing. We help clients articulate their Investing
with Purpose goals and objectives, provide them
with comprehensive advice and offer in-house
investment management that incorporates
environmental, social and governance principals,
as well as partner with asset managers to deliver
relevant themes and strategies.
. JULY
2
Citibank named Best Bank for High Net
Worth Families by Kiplinger for third
straight year
3
Citi is first major U.S. bank to endorse
Principles for Responsible Banking
11
Citi Ireland awarded Best Investment
Bank by Euromoney
19
Citi named Asia’s Best Digital Bank
and Best Bank for Transaction Services
by Euromoney
25
Citi named Top Asia Equities Research
and Sales House by Clients by
Institutional Investor magazine
30
Citi launches biometric authentication
for institutional clients in Latin America
. AUGUST
2
Citi unveils new Citigold® Private Client
experience in China
25
Citi releases For Better or Worse, Has
Globalization Peaked? GPS report
reviewing the advantages of globalization
and its role in increasing disparities
26
Citi APIs for Treasury Services reach
new milestone: over 150 million API calls
processed by clients globally
15
2019 TTS continues its pursuit of
delivering the best possible
experience to its clients, launching
leading-edge solutions and
leveraging co-creation sessions held
in the Innovation Labs, which in
2019 celebrated its 10th anniversary.
The team’s success is based on the
foundation of the industry’s largest
proprietary network, with banking
licenses in 98 countries and globally
integrated technology platforms. In
2019, Euromoney magazine named
TTS the World’s Best Bank for
Transaction Services in its annual
Awards for Excellence.
TTS continues to transform itself to
be the financial platform for global
commerce. Digital technology is driving
change across the industry, and Citi is
adapting by migrating our capabilities
to a digital platform. In 2019, digital
onboarding went live in 25 countries —
covering 58% of our global volumes.
And we took our advisory dialogue
with clients to new levels to help them
accelerate their transformational
journey to a new digital decade. Since
the inception of digital onboarding, we
have led over 3,000 advisory sessions
with clients across our Digital Advisory,
Treasury Diagnostics and Innovation
Lab practices to help them grow,
improve risk controls and enhance
financial returns.
CitiConnect®, our API connectivity
platform, reached a new milestone
with more than 157 million API
calls processed by clients in 2019,
compared with 18 million in 2018,
representing a growth rate of
750%. Core to our drive to digital is
implementing a strategy where we
combine our proprietary solutions
and partner with fintech companies
like HighRadius and Cachematrix,
and key industry players like PayPal,
making the services available on our
industry-leading global network.
In 2019, we launched many innovative
services for our clients, including
Citi®’s Payment Outlier Detection
in 90 countries, with advanced
analytics, artificial intelligence
and machine learning to help
proactively identify outlier payments;
and Cross-Currency Sweeps, a
liquidity management solution that
aggregates foreign currency balances
into a currency and account of choice.
We provided clients with an enhanced
Supplier Finance offering, now with
WorldLink® Payment Services, giving
our clients access to the combined
strength of two powerful platforms.
We also introduced Citi® Global
Collect, a collaboration between
our TTS and Foreign Exchange
businesses — a new cross-border
platform to help clients manage
collecting cross-border business-to-
business payments by digitizing the
transaction process and embedding
FX capabilities.
TTS continues to transform itself to be the
financial platform for global commerce.
Digital technology is driving change across
the industry, and Citi is adapting by migrating
our capabilities to a digital platform.
16
INSTITUTIONAL CLIENTS GROUP ICG Recognition
• Citi retained its ranking as the world’s largest fixed income dealer, according
to Greenwich Associates’ annual benchmark study, which marks the fourth
year running that Citi has secured the top spot. Citi also ranked #1 in sales
quality and trading quality, as well as #1 in e-trading, and was #1 overall in
U.S. fixed income market share. CitiDirect BE® was ranked #1 by Greenwich
Associates’ digital banking benchmark study, claiming the top rank for the
13th consecutive year.
• In addition to being named International Financing Review’s Bank of the
Year, Citi was awarded the Best Global Bank for Governments and was
named Global Equity Derivatives House, Global Emerging Markets Bond
House and EMEA Bond House of the Year.
• Citi was awarded the Financial Times’ The Banker and PWM Global Private
Banking awards for Best Global Private Bank and Best Private Bank for
Customer Service. Additionally, we won Best Global Private Bank for Global
Families and Family Offices. The Private Bank was also named Best Private
Bank for Net Worth of US$25 million or more by Global Finance.
• Global Finance named Citi Best Global Transaction Bank, Best Global Bank
for Cash Management, Best Global Mobile Cash Management Solution and
Best Online Cash Management in Asia. Additionally, Citi was named Best
Bank for Cash Management and Liquidity Management in Latin America,
as well as Best Bank for Payments and Collections in both Latin America
and North America. Citi was also honored as Best Investment Bank for New
Financial Technology Globally and in North America, as well as Best Private
Bank in North America. Global Finance also bestowed several trade finance
awards upon Citi, including Best Bank for Trade Finance in Frontier Markets
and Best in North America and the United States.
• Citi earned top honors from Euromoney as the World’s Best Bank for
Corporates and Best Bank for Transaction Services Globally and in Asia.
Euromoney also named Citi Central and Eastern Europe’s Best
Investment Bank.
• Celent awarded Citi its Model Bank of the Year award, reflecting our
ongoing efforts to drive transformational innovation and digitization.
• Citi was named Derivatives Clearing Bank of the Year by GlobalCapital for
the sixth straight year.
• Citi maintained top position as the largest affordable housing lender in the
United States, according to Affordable Housing Finance magazine’s annual
survey of affordable housing lenders. This marked the 10th consecutive
year that Citi has earned this distinction.
• Citi ranked #1 in Web Based Analytics and #3 Overall in the Institutional
Investor inaugural Global Fixed Income Research Poll. In 2019, Citi was a
leader in Institutional Investor’s ranking of global equity firms coming in at
second place, an increase of two spots from the previous year.
• Citi received a number of regional accolades, including Best Bank in Asia
from CorporateTreasurer magazine, Best Bank for Emerging European,
Middle Eastern and African Currencies from FX Week, and ABS Bank of the
Year from GlobalCapital as part of its European Securitization Awards.
• Citi was named Most Innovative Investment Bank for Equity-Linked
Products from The Banker.
. SEPTEMBER
4
Citi Board elects Alexander Wynaendts
and Grace Dailey to Board of Directors
Citi expands annual e for Education
campaign across a broader range of
electronically traded products
5
Citi opens state-of-the-art operations
site in Sioux Falls
10
Citi unveils its roster of 41 para athletes
one year out from Tokyo 2020
18
Citi ranked Best in Overall U.S. Fixed
Income Market Share, Quality
19
Citi releases Energy Darwinism, GPS
report exploring the path to getting to
net zero carbon
25
Retail Services and Tractor Supply
Company launch new 5% back in
rewards for credit cardholders
. OCTOBER
10
Citi joins United Nations Global
Investors for Sustainable
Development Alliance
16
Citi launches cross-currency sweeps for
liquidity management
24
Jane Fraser named President of Citi
and Head of Global Consumer Banking
17
2019 Environmental, Social and Governance:
Citi as a Corporate Citizen
Citi, as a global bank, employer and philanthropist, is
focused on catalyzing sustainable growth through
transparency, innovation and market-based solutions.
From climate change to social
inequality to financial inclusion,
there are numerous challenges
facing society today. Citi is
committed to contributing to
solutions that address these
issues. We collaborate both
internally across our business
units and externally with
stakeholders to maximize our
impact. We continue to learn
from our experience and to
bring diverse stakeholders to the
table to help us understand what
leadership looks like on these
evolving issues.
Citi has the scale and capabilities
to finance and support the
institutions — governments,
corporations, nonprofits and
aid organizations — that can
contribute to the future that we
want and the future that our
communities deserve.
This section of the report is not
intended to be a comprehensive
collection of our efforts but
rather a sample of highlights to
demonstrate how we deploy our
products, people and financial
resources to help build more
inclusive, resilient and sustainable
communities. Issues core to
our environmental, social and
governance efforts include:
Sustainable Growth and
Climate Change
The impacts of climate change
are becoming increasingly clear
— not just the physical effects of
a warming planet as it threatens
communities and reshapes
urban infrastructure but also the
economic impacts as every sector
examines its material risks and
opportunities associated with
these changes.
In 2015, as part of the launch
of Citi’s Sustainable Progress
strategy, we made a bold, 10-
year commitment, our $100
Billion Environmental Finance
Goal, to help reduce the impacts
of climate change through
environmental finance activities
around the world. In 2019,
we exceeded our $100 billion
goal, more than four years
ahead of schedule, thanks to
increasing focus on the need
to solve the problem, growth in
environmental finance activity
in the global market, and
the development of new and
innovative financial products
such as lending linked to key
environmental, social and
governance indicators. We have
also achieved our environmental
footprint goals and are on track
to achieve our 100% renewable
energy goal in 2020.
18
Environmental, Social and Governance:
Citi as a Corporate Citizen
The $100 billion target we have just
completed was only one step in a long
journey — a marker on a path rather
than an end goal. We have made
significant commitments in support
of a sustainable, low-carbon economy
and are on the record for our strong
support of the Paris Agreement.
We have also been recognized as a
leader in climate risk assessment and
disclosure and were the first major U.S.
bank to publish a Task Force on Climate-
Related Disclosures report in 2018.
The science is clear: climate change
is a monumental challenge, and we
need to move toward a low-carbon
global economy. While scaling financial
flows to low-carbon solutions is a
critical aspect of the transition, we
also need a more holistic approach
that supports the transition of
existing carbon-intensive sectors. In
addition to helping clients realize the
opportunities inherent in transitioning
to a low-carbon economy, we are
conducting sophisticated analyses
of the risks associated with our own
and our clients’ exposure to a variety
of transition scenarios. We are also
assessing our exposure to climate
hazards to inform business continuity
and resilience planning.
As we look ahead toward our new
Sustainable Progress 2025 strategy,
we look forward to continuing to
collaborate with our clients on climate
finance opportunities, as well as to
better understand the challenges that
need to be addressed by Citi, and the
financial sector overall, in order to
drive positive change.
For more information on our
sustainability efforts, please visit
citi.com/citi/sustainability.
Financial Capability and
Access to Capital
Citi is committed to developing
financial solutions that are safe,
transparent and accessible — ones
that provide real economic value,
including for those whose financial
needs are currently unmet. This
year, Citi is on track to reach a
major milestone — $1 billion in
lending toward financial inclusion
across the globe. We seek out
innovative partnerships with financial
institutions, telecommunications
and fintech providers, government
agencies, consumer goods companies
and others that have close
relationships with the unbanked and
the underserved segments of society.
Our partners are trusted leaders in
their sectors who understand the
needs of their local markets.
$100 Billion Environmental Finance Goal: Financial Highlights, 2014–2019
. OCTOBER
31
Citi releases 2019 mid-cycle stress test
disclosures
. NOVEMBER
4
Citi announces new Miles Ahead
Savings Account exclusively for Citi/
AAdvantage cardholders
7
Citi wins Best Corporate/Institutional
Digital Bank in Asia Pacific from Global
Finance magazine
Citi sponsors the 2019 World Para
Athletics Championships in Dubai
as part of partnership with the
International Paralympic Committee
11
Citi enters into mentor-protégé
partnership with Roberts & Ryan
Investments, a service-disabled veteran-
owned institutional broker-dealer
12
Citi launches Regulatory Initial Margin
Calculation Service to help clients
comply with uncleared margin rules
Business Insider Intelligence recognizes
Citi as having the Most Desirable
Mobile Banking Features in the U.S. for
second consecutive year
19
Citi helps clients collect cross-border
B2B payments with new platform, Citi®
Global Collect
Citi introduces new digital high-yield
account with no ATM fees in U.S.
19
2019 We recently launched a $150 million
Citi Impact Fund to invest our own
capital in U.S.-based companies that
are applying innovative solutions to
help address four societal challenges:
workforce development; sustainability;
financial capability; and physical
and social infrastructure. We are
also actively seeking opportunities
to invest in businesses that are led
or owned by women and minority
entrepreneurs. This work complements
Citi Impact
Fund will make
investments in
double bottom-
line startups with
an emphasis
on women
and minority
entrepreneurs.
our existing environmental, social
and governance efforts and aims
to highlight the ability to achieve
financial returns while also making a
positive societal impact.
The Future of Work
According to the U.S. Department of
Labor, there are 7 million jobs at any
one time that employers can’t fill.
Our Pathways to Progress initiative
is designed to help close this job-
skills mismatch by providing young
people with the tools they need
through training, work experience and
entrepreneurial opportunities.
Since 2014, the Citi Foundation has
invested more than $194 million to
impact the lives of youth globally.
This support has enabled community
organizations and municipal leaders
to connect more than 850,000 young
people around the world to jobs, paid
internships, mentorship, workforce
training and leadership development.
And these efforts have leveraged the
time and talent of thousands of Citi
employee volunteers.
We continue to believe that
empowering young people,
providing early work experience
and financial knowledge, incubating
an entrepreneurial mindset, and
creating networks and access to role
models are each integral to enabling
youth to build a stronger future for
themselves, their families and their
communities. As we look ahead, we
remain committed to tackling the
youth unemployment challenge.
One example of these efforts is
Scaling Enterprise, a $100 million loan
guarantee facility launched by Citi,
the U.S. International Development
Finance Corporation (DFC) (formerly
OPIC) and the Ford Foundation in 2019.
Through this facility, we are able to
provide earlier-stage financing in local
currency to companies that expand
access to products and services for
low-income communities in emerging
markets. Loans and working capital
in local currency and at affordable
rates can enable innovative social
impact companies to achieve scale,
greater efficiencies and lower costs.
Scaling Enterprise will facilitate vital
growth financing to companies that
are expanding access to finance,
agriculture, energy, affordable
housing, water and sanitation to
low-income households in emerging
markets. In the first two transactions
under Scaling Enterprise, the partners
have committed $5 million in financing
to InI Farms to help smallholder
banana and pomegranate farmers
in India access export markets and
increase incomes by up to 20%, as
well as $5 million in financing to d.light
to expand access to off-grid solar
energy in Kenya.
Citi has also partnered with the U.S.
International Development Finance
Corporation to expand microfinance
loans to women in emerging markets
around the world. In 2019, we
committed to work with the DFC,
the U.S. Agency for International
Development and private sector
partners to mobilize an additional
$500 million for women in Latin
America. In Tunisia, we recently
announced the launch of a $10 million
loan guarantee facility, which will
provide growth financing to more
than 17,000 microentrepreneurs,
approximately 65% of them women.
And in Jordan, Citi provided $5 million
to Microfund for Women, which will now
be able to give loans to an additional
10,000 underserved Jordanian women.
20
ENVIRONMENTAL, SOCIAL AND GOVERNANCE: CITI AS A CORPORATE CITIZEN “When we set our business priorities, we focus heavily on the balance of our
business — the importance of not being overly reliant on any one product or
geography and the benefits of that diversification to strong and consistent
financial performance. We think about our people in much the same way.
To be a healthy, high-performing organization, we need a well-balanced
team that is representative of the places where we operate, in every part of
the world. It’s simply smart business.”
— Michael L. Corbat, CEO
The Citi Foundation will reaffirm its
philanthropic commitment, and we
will complement these investments
with youth-focused efforts happening
across Citi, including programs that
are helping us build a more diverse
talent pipeline while also preparing the
next generation for today’s workforce.
Talent and Diversity
At Citi, we actively seek diverse
perspectives at all levels of our
organization because we know that it
will improve performance and boost
innovation. Over the last two years,
we have elevated the conversation
around race, gender and equal
pay for equal work. Our increased
transparency, which in turn breeds
accountability and credibility, is a force
for change both inside and outside
our company. We’ve pushed ourselves
beyond our comfort zone — not just
to acknowledge the stark realities
laid bare in the statistics around pay
equity but also to recognize the social
and cultural forces that produced
them. We are being open about our
data, what it means and what needs to
be done to meet our goals.
In 2019, we made a decision to be
transparent about a statistic that our
CEO has described as “disappointing”
and “ugly”: our unadjusted or “raw”
pay gap for women and U.S. minorities.
The analysis showed that Citi’s median
pay for women globally was 71% of the
median for men and that the median
pay for U.S. minorities was 93% of
the median for non-minorities. For
our company, the data reaffirm the
importance of goals we announced in
2018 to increase our representation of
women and U.S. minorities in senior
and higher paying roles at Citi. We
know that is the only effective way for
us to meaningfully reduce our raw pay
gap over time. We also disclosed that
on an adjusted basis, women globally
are paid on average 99% of what men
are paid at Citi. We also repeated the
assessment for U.S. minorities and
are pleased that after actions in 2018,
there was no statistically significant
difference between what U.S. minorities
and non-minorities are paid at Citi.
Following our review, we once again
made appropriate pay adjustments as
part of the 2019 compensation cycle.
While we recognize that we have much
more to do, we are proud of where we
are headed.
We know that engagement with our
people throughout their career paths
at Citi, along with a commitment to
being a company with values that
they can be proud of, is essential to
our success. We are innovating how
we engage with, recruit and develop
talent; we are using data more
effectively to pinpoint our challenges
and areas of opportunity for
improvement; and we have increased
accountability for our representation
goals among people managers. In
2019, we built out our predictive
analytics team to help us better
understand how we attract, retain
and promote top talent.
. NOVEMBER
20
Citibank rated #1 in Customer
Satisfaction by American Customer
Satisfaction Index
21
Citi wins top honor as World’s Best
Digital Bank; wins multiple FX Week
Best Bank awards
29
The Citi Alumni Network extends into
100 countries; membership in 2019
reached 25,000 worldwide
. DECEMBER
2
Citi ranked seventh overall out of 300
firms in Newsweek’s inaugural index of
America’s Most Responsible Companies
9
Citi launches City Builder, a data-driven
platform to support investments in U.S.
Opportunity Zones
13
International Financing Review magazine
names Citi Bank of the Year
16
Citi and PayPal extend partnership to
institutional payments
20
Citi earns 35 spots on Bank Investment
Consultant’s Top 100 Bank Advisors
list for 2019
21
2019 Citi is a proud partner of the International Paralympic Committee.
For more information on the partnership visit citi.com/IPC.
© 2020 Citigroup Inc. All rights reserved. Citi, Citi and Arc Design and other marks used herein are service marks of Citigroup Inc. or its
affiliates, used and registered throughout the world.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2019
OR
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)
388 Greenwich Street, New York
NY
(Address of principal executive offices)
52-1568099
(I.R.S. Employer Identification No.)
10013
(Zip code)
(212) 559-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 formatted in Inline XBRL: See Exhibit 99.01
Securities registered pursuant to Section 12(g) of the Act: none
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
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
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting, or an emerging
growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The aggregate market value of Citigroup Inc. common stock held by non-affiliates of Citigroup Inc. on June 30, 2019 was approximately $158.0 billion.
Number of shares of Citigroup Inc. common stock outstanding on January 31, 2020: 2,106,486,793
Documents Incorporated by Reference: Portions of the registrant’s proxy statement for the annual meeting of stockholders scheduled to be held on April 21,
2020 are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III.
Available on the web at www.citigroup.com
FORM 10-K CROSS-REFERENCE INDEX
Item Number
Part I
1.
Business
Page
4–27, 112–115,
118, 146,
294–295
1A. Risk Factors
46–55
1B. Unresolved Staff Comments
Not Applicable
Properties
Not Applicable
Part III
10.
Directors, Executive
Officers and Corporate
Governance
11.
Executive Compensation
12.
Security Ownership of
Certain Beneficial Owners
and Management and
Related Stockholder
Matters
14.
Principal Accounting Fees
and Services
Part IV
298–300*
**
***
****
*****
* For additional information regarding Citigroup’s Directors, see
“Corporate Governance” and “Proposal 1: Election of Directors” in
the definitive Proxy Statement for Citigroup’s Annual Meeting of
Stockholders scheduled to be held on April 21, 2020, to be filed
with the SEC (the Proxy Statement), incorporated herein by
reference.
** See “Compensation Discussion and Analysis,” “The Personnel and
Compensation Committee Report,” and “2019 Summary
Compensation Table and Compensation Information” and “CEO
Pay Ratio” in the Proxy Statement, incorporated herein by
reference.
*** See “About the Annual Meeting,” “Stock Ownership” and “Equity
Compensation Plan Information” in the Proxy Statement,
incorporated herein by reference.
**** See “Corporate Governance—Director Independence,” “—Certain
Transactions and Relationships, Compensation Committee
Interlocks and Insider Participation” and “—Indebtedness” in the
Proxy Statement, incorporated herein by reference.
***** See “Proposal 2: Ratification of Selection of Independent
Registered Public Accounting Firm” in the Proxy Statement,
incorporated herein by reference.
Legal Proceedings—See
Note 27 to the Consolidated
Financial Statements
276–282
13.
Certain Relationships and
Related Transactions and
Director Independence
4.
Mine Safety Disclosures
Not Applicable
Part II
Market for Registrant’s
Common Equity, Related
Stockholder Matters and
Issuer Purchases of Equity
Securities
128–129, 152–154,
296–297
15.
Exhibits and Financial
Statement Schedules
2.
3.
5.
6.
7.
Selected Financial Data
10–11
Management’s Discussion
and Analysis of Financial
Condition and Results of
Operations
6–29, 58–111
7A. Quantitative and Qualitative
Disclosures About Market
Risk
58–111, 147–151,
172–207, 214–267
8.
9.
Financial Statements and
Supplementary Data
124–293
Changes in and
Disagreements with
Accountants on Accounting
and Financial Disclosure
Not Applicable
9A. Controls and Procedures
116–117
9B. Other Information
Not Applicable
2
CITIGROUP’S 2019 ANNUAL REPORT ON FORM 10-K
OVERVIEW
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Executive Summary
Summary of Selected Financial Data
SEGMENT AND BUSINESS—INCOME (LOSS)
AND REVENUES
SEGMENT BALANCE SHEET
Global Consumer Banking
North America GCB
Latin America GCB
Asia GCB
Institutional Clients Group
Corporate/Other
OFF-BALANCE SHEET
ARRANGEMENTS
CONTRACTUAL OBLIGATIONS
CAPITAL RESOURCES
RISK FACTORS
Managing Global Risk Table of Contents
MANAGING GLOBAL RISK
SIGNIFICANT ACCOUNTING POLICIES AND
SIGNIFICANT ESTIMATES
DISCLOSURE CONTROLS AND
PROCEDURES
MANAGEMENT’S ANNUAL REPORT ON
INTERNAL CONTROL OVER FINANCIAL
REPORTING
FORWARD-LOOKING STATEMENTS
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
FINANCIAL STATEMENTS AND NOTES
TABLE OF CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
FINANCIAL DATA SUPPLEMENT
SUPERVISION, REGULATION AND OTHER
CORPORATE INFORMATION
Executive Officers
Citigroup Board of Directors
4
6
6
10
12
13
14
16
18
20
22
27
28
29
30
46
57
58
112
116
117
118
119
123
124
132
293
294
298
298
299
3
OVERVIEW
Citigroup’s history dates back to the founding of the City
Bank of New York in 1812.
Citigroup is a global diversified financial services holding
company whose businesses provide consumers, corporations,
governments and institutions with a broad, yet focused, range
of financial products and services, including consumer
banking and credit, corporate and investment banking,
securities brokerage, trade and securities services and wealth
management. Citi has approximately 200 million customer
accounts and does business in more than 160 countries and
jurisdictions.
At December 31, 2019, Citi had approximately 200,000
full-time employees, compared to approximately 204,000 full-
time employees at December 31, 2018.
Citigroup currently operates, for management reporting
purposes, via two primary business segments: Global
Consumer Banking (GCB) and Institutional Clients Group
(ICG), with the remaining operations in Corporate/Other. For
a further description of the business segments and the products
and services they provide, see “Citigroup Segments” below,
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and Note 3 to the
Consolidated Financial Statements.
Throughout this report, “Citigroup,” “Citi” and “the
Company” refer to Citigroup Inc. and its consolidated
subsidiaries.
Additional information about Citigroup is available on
Citi’s website at www.citigroup.com. Citigroup’s recent
annual reports on Form 10-K, quarterly reports on Form 10-Q
and proxy statements, as well as other filings with the U.S.
Securities and Exchange Commission (SEC), are available
free of charge through Citi’s website by clicking on the
“Investors” tab and selecting “SEC Filings,” then “Citigroup
Inc.” The SEC’s website also contains current reports on Form
8-K and other information regarding Citi at www.sec.gov.
For a discussion of 2018 versus 2017 results of operations
of GCB in North America, Latin America and Asia, ICG and
Corporate/Other, see each respective business’s results of
operation in Citi’s 2018 Annual Report on Form 10-K.
Certain reclassifications, including a realignment of
certain businesses, have been made to the prior periods’
financial statements and disclosures to conform to the current
period’s presentation. For additional information on certain
recent reclassifications, see Note 3 to the Consolidated
Financial Statements.
Please see “Risk Factors” below for a discussion of the
most significant risks and uncertainties that could impact
Citigroup’s businesses, financial condition and results of
operations.
4
As described above, Citigroup is managed pursuant to two business segments: Global Consumer Banking and Institutional
Clients Group, with the remaining operations in Corporate/Other.
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results
above.
(1) Latin America GCB consists of Citi’s consumer banking business in Mexico.
(2) Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
(3) North America includes the U.S., Canada and Puerto Rico, Latin America includes Mexico and Asia includes Japan.
Note: As of the fourth quarter of 2019, Citi’s commercial banking businesses previously reported as part of GCB in North America, Latin America and Asia, including
approximately $28 billion in end-of-period loans and approximately $37 billion in end-of-period deposits, are reported in ICG for all periods presented.
5
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EXECUTIVE SUMMARY
As described further throughout this Executive Summary,
Citi’s 2019 results reflected steady progress toward improving
its profitability and returns, despite an uncertain revenue
environment, as strong client engagement drove balanced
growth across businesses and geographies:
• Citi had solid underlying revenue growth in every region
in Global Consumer Banking (GCB), excluding the
impact of foreign currency translation into U.S. dollars for
reporting purposes (FX translation), as well as pretax
gains on sale in 2018 of approximately $150 million on
the Hilton portfolio in North America GCB and
approximately $250 million on an asset management
business in Latin America GCB.
• Citi had balanced performance across the Institutional
Clients Group (ICG), with solid results in fixed income
markets, treasury and trade solutions, investment banking
and the private bank, while equity markets revenues were
negatively impacted by a challenging environment.
• Citi demonstrated strong expense discipline, resulting in
expenses that were largely unchanged from the prior year,
as well as positive operating leverage, even as Citi
continued to make investments in the franchise. Citi’s
positive operating leverage and continued credit discipline
resulted in an improvement in pretax earnings.
• Citi reported broad-based loan and deposit growth across
GCB and ICG.
• Citi returned $22.3 billion of capital to its shareholders in
the form of common stock repurchases and dividends;
Citi repurchased approximately 264 million common
shares, contributing to a 9% reduction in average
outstanding common shares from the prior year.
• Despite continued progress in capital returns to
shareholders, Citi’s key regulatory capital metrics
remained strong.
While global growth has continued and the underlying
macroeconomic environment remains largely positive,
economic forecasts for 2020 have been lowered and various
economic, political and other risks and uncertainties could
create a more volatile operating environment and impact Citi’s
businesses and future results. For a discussion of risks and
uncertainties that could impact Citi’s businesses, results of
operations and financial condition during 2020, see each
respective business’s results of operations, “Risk Factors” and
“Managing Global Risk” below. Despite these risks and
uncertainties, Citi intends to continue to build on the progress
made during 2019 with a focus on further optimizing its
performance to benefit shareholders, while remaining flexible
and adapting to market and economic conditions as they
develop.
2019 Results Summary
Citigroup
Citigroup reported net income of $19.4 billion, or $8.04 per
share, compared to net income of $18.0 billion, or $6.68 per
share, in the prior year. Net income increased 8%, primarily
driven by a lower effective tax rate and higher revenues,
partially offset by higher cost of credit, while expenses were
largely unchanged. Earnings per share increased 20%, driven
by higher net income and the 9% reduction in average shares
outstanding due to the common stock repurchases. Results in
2019 included a net tax benefit of approximately $0.35 per
share related to discrete tax items, including an approximate
$0.6 billion benefit from reductions in Citi’s valuation
allowance related to its deferred tax assets, primarily recorded
in Corporate/Other (see “Significant Accounting Policies and
Significant Estimates—Income Taxes” below).
Citigroup revenues of $74.3 billion increased 2%, or 4%
excluding the impact of FX translation and the gains on sale in
the prior year (see “Executive Summary” above), reflecting
higher revenues across GCB and ICG, partially offset by lower
revenues in Corporate/Other.
Citigroup’s end-of-period loans increased 2% to $699
billion. Excluding the impact of FX translation, Citigroup end-
of-period loans also grew 2%, as 3% aggregate growth in GCB
and ICG was partially offset by the continued wind-down of
legacy assets in Corporate/Other. Citigroup’s end-of-period
deposits increased 6% to $1.1 trillion. Excluding the impact of
FX translation, Citigroup’s end-of-period deposits also grew
6%, primarily driven by 7% growth in GCB and 6% growth in
ICG, excluding the impact of FX translation. (Citi’s results of
operations excluding the gains on sale as well as the impact of
FX translation are non-GAAP financial measures. Citi
believes the presentation of its results of operations excluding
the impact of FX translation and gains on sale provides a
meaningful depiction for investors of the underlying
fundamentals of its businesses.)
Expenses
Citigroup operating expenses of $42.0 billion were largely
unchanged, as efficiency savings and the wind-down of legacy
assets offset volume-driven growth and continued investments
in the franchise. Operating expenses in GCB and Corporate/
Other were down 1% and 5%, respectively, while ICG
operating expenses increased 2%.
Cost of Credit
Citi’s total provisions for credit losses and for benefits and
claims of $8.4 billion increased 11%. The increase was
primarily driven by higher net credit losses in both Citi-
branded cards and Citi retail services in North America GCB,
as well as higher overall cost of credit in ICG.
Net credit losses of $7.8 billion increased 9%. Consumer
net credit losses of $7.4 billion increased 7%, primarily
reflecting volume growth and seasoning in the North America
cards portfolios. Corporate net credit losses increased to $392
6
million from $205 million in the prior year, reflecting a
normalization in credit trends.
For additional information on Citi’s consumer and
corporate credit costs and allowance for loan losses, see each
respective business’s results of operations and “Credit Risk”
below.
Capital
Citigroup’s Common Equity Tier 1 (CET1) Capital ratio was
11.8% as of December 31, 2019, compared to 11.9% as of
December 31, 2018, based on the Basel III Standardized
Approach for determining risk-weighted assets. The decline in
the ratio primarily reflected the return of capital to common
shareholders, partially offset by net income and a reduction in
risk-weighted assets. Citigroup’s Supplementary Leverage
ratio as of December 31, 2019 was 6.2%, compared to 6.4% as
of December 31, 2018. For additional information on Citi’s
capital ratios and related components, see “Capital Resources”
below.
Global Consumer Banking
GCB net income of $5.7 billion increased 7%. Excluding the
impact of FX translation, net income increased 8%, driven by
higher revenues, partially offset by higher cost of credit. GCB
operating expenses of $17.6 billion decreased 1%. Excluding
the impact of FX translation, expenses were largely
unchanged, as efficiency savings offset continued investments
in the franchise and volume-driven growth.
GCB revenues of $33.0 billion increased 2%. Excluding
the impact of FX translation and the gains on sale in both
North America GCB and Latin America GCB in the prior year,
revenues increased 4%, driven by growth in all three regions.
North America GCB revenues of $20.4 billion increased 3%,
and 4% excluding the gain on sale in the prior year, primarily
driven by growth in Citi-branded cards and Citi retail services,
partially offset by lower retail banking revenues. In North
America GCB, Citi-branded cards revenues of $9.2 billion
increased 6%, and 8% excluding the gain on sale in the prior
year, primarily reflecting volume growth and spread
expansion. Citi retail services revenues of $6.7 billion
increased 2%, primarily driven by organic loan growth and the
full-year benefit of the L.L.Bean acquisition. Retail banking
revenues of $4.5 billion decreased 2%, as the benefit of
stronger deposit volumes was more than offset by lower
deposit spreads.
North America GCB average deposits of $153 billion
increased 3%, average retail banking loans of $49 billion
increased 3% and assets under management of $72 billion
grew 20% (including the benefit of market movements).
Average Citi-branded card loans of $90 billion increased 3%,
while Citi-branded card purchase sales of $368 billion
increased 7%. Average Citi retail services loans of $50 billion
increased 3%, while Citi retail services purchase sales of $88
billion increased 2%. For additional information on the results
of operations of North America GCB in 2019, see “Global
Consumer Banking—North America GCB” below.
International GCB revenues (consisting of Latin America
GCB and Asia GCB (which includes the results of operations
in certain EMEA countries)), of $12.6 billion increased 1%.
7
Excluding the impact of FX translation and the gain on sale in
Latin America GCB in the prior year, international GCB
revenues increased 4%. On this basis, Latin America GCB
revenues increased 4%, primarily driven by an increase in
cards revenues and improved deposit spreads. Asia GCB
revenues increased 4%, primarily reflecting higher deposit,
investment and cards revenues. For additional information on
the results of operations of Latin America GCB and Asia GCB
in 2019, including the impact of FX translation, see “Global
Consumer Banking—Latin America GCB” and “Global
Consumer Banking—Asia GCB” below.
Year-over-year, excluding the impact of FX translation,
international GCB average deposits of $124 billion increased
5%, average retail banking loans of $71 billion increased 4%,
assets under management of $104 billion increased 16%
(including the benefit of market movements), average card
loans of $25 billion increased 3% and card purchase sales of
$108 billion increased 6%.
Institutional Clients Group
ICG net income of $12.9 billion increased 3%, primarily
driven by higher revenues and a lower effective tax rate,
partially offset by higher expenses and cost of credit. ICG
operating expenses increased 2% to $22.2 billion, primarily
driven by higher compensation costs, investments and
volume-driven growth, partially offset by efficiency savings.
ICG revenues of $39.3 billion increased 3%, reflecting a
1% increase in Banking revenues and a 5% increase in
Markets and securities services revenues. The increase in
Banking revenues included the impact of $432 million of
losses on loan hedges within corporate lending, compared to
gains of $45 million in the prior year.
Banking revenues of $21.9 billion (excluding the impact
of gains (losses) on loan hedges within corporate lending)
increased 3%, driven by solid growth in treasury and trade
solutions, investment banking and the private bank.
Investment banking revenues of $5.2 billion increased 4%, as
strength in debt underwriting was partially offset by lower
revenues in both equity underwriting and advisory. Advisory
revenues decreased 3% to $1.3 billion, equity underwriting
revenues decreased 2% to $973 million and debt underwriting
revenues increased 10% to $3.0 billion.
Treasury and trade solutions revenues of $10.3 billion
increased 4%, and 6% excluding the impact of FX translation,
reflecting strong client engagement and volume growth,
partially offset by the impact of lower interest rates. Private
bank revenues of $3.5 billion increased 2%, driven by higher
lending and deposit volumes as well as higher investment
activity, partially offset by spread compression. Corporate
lending revenues declined 16% to $2.5 billion. Excluding the
impact of gains (losses) on loan hedges, corporate lending
revenues were largely unchanged, as growth in the
commercial loan portfolio was offset by lower volumes in the
rest of the portfolio.
Markets and securities services revenues of $17.8 billion
increased 5%, including a pretax gain of approximately $350
million on Citi’s investment in Tradeweb in the second quarter
of 2019, recorded in fixed income markets. Fixed income
markets revenues of $12.9 billion increased 10%, reflecting
growth across rates and currencies as well as spread products,
including the Tradeweb gain. Equity markets revenues of $2.9
billion decreased 15%, primarily driven by lower revenues
across cash equities, derivatives and prime finance. Securities
services revenues of $2.6 billion were largely unchanged, but
increased 4% excluding the impact of FX translation,
reflecting higher net interest revenue due to higher deposits
and higher interest rates, particularly in emerging markets, as
well as higher client volumes. For additional information on
the results of operations of ICG in 2019, see “Institutional
Clients Group” below.
Corporate/Other
Corporate/Other net income was $801 million, compared to
$186 million in the prior year, primarily reflecting the benefit
of discrete tax items. Operating expenses of $2.2 billion
decreased 5%, as the continued wind-down of legacy assets
more than offset higher infrastructure costs. Corporate/Other
revenues of $2.0 billion decreased 8%, primarily driven by the
continued wind-down of legacy assets, partially offset by
gains on investments. For additional information on the results
of operations of Corporate/Other in 2019, see “Corporate/
Other” below.
8
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9
RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1
In millions of dollars, except per share amounts
2019
2018
2017
2016
2015
Citigroup Inc. and Consolidated Subsidiaries
Net interest revenue
Non-interest revenue
Revenues, net of interest expense
Operating expenses
Provisions for credit losses and for benefits and claims
Income from continuing operations before income taxes
Income taxes(1)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss) before attribution of noncontrolling
interests
Net income attributable to noncontrolling interests
Citigroup’s net income (loss)(1)
Earnings per share
Basic
Income (loss) from continuing operations
Net income (loss)
Diluted
Income (loss) from continuing operations
Net income (loss)
Dividends declared per common share
Common dividends
Preferred dividends
Common share repurchases
$
$
$
$
$
$
$
$
$
47,347 $
46,562 $
45,061 $
45,476 $
26,939
26,292
27,383
25,321
74,286 $
72,854 $
72,444 $
70,797 $
42,002
8,383
41,841
7,568
42,232
7,451
42,338
6,982
23,901 $
23,445 $
22,761 $
21,477 $
4,430
5,357
29,388
6,444
19,471 $
18,088 $
(6,627) $
15,033 $
47,093
30,184
77,277
44,538
7,913
24,826
7,440
17,386
(4)
(8)
(111)
(58)
(54)
19,467 $
18,080 $
(6,738) $
14,975 $
17,332
66
35
60
63
90
19,401 $
18,045 $
(6,798) $
14,912 $
17,242
8.08 $
8.08
6.69 $
6.69
(2.94) $
(2.98)
4.74 $
4.72
8.04 $
6.69 $
(2.94) $
4.74 $
8.04
1.92
6.68
1.54
(2.98)
0.96
4.72
0.42
4,403 $
3,865 $
2,595 $
1,214 $
1,109
17,875
1,174
14,545
1,213
14,538
1,077
9,451
5.43
5.41
5.42
5.40
0.16
484
769
5,452
Table continues on the next page, including footnotes.
10
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 2
Citigroup Inc. and Consolidated Subsidiaries
In millions of dollars, except per share amounts, ratios and direct staff
2019
2018
2017
2016
2015
At December 31:
Total assets
Total deposits
Long-term debt
Citigroup common stockholders’ equity(1)
Total Citigroup stockholders’ equity(1)
Average assets
Direct staff (in thousands)
Performance metrics
Return on average assets
Return on average common stockholders’ equity(1)(2)
Return on average total stockholders’ equity(1)(2)
Return on tangible common equity (RoTCE)(1)(3)
Efficiency ratio (total operating expenses/total revenues)
Basel III ratios(1)(4)
Common Equity Tier 1 Capital(5)
Tier 1 Capital(5)
Total Capital(5)
Supplementary Leverage ratio
Citigroup common stockholders’ equity to assets(1)
Total Citigroup stockholders’ equity to assets(1)
Dividend payout ratio(6)
Total payout ratio(7)
Book value per common share(1)
Tangible book value (TBV) per share(1)(3)
$ 1,951,158
$
1,917,383
$ 1,842,465
$
1,792,077
$
1,731,210
1,070,590
1,013,170
248,760
175,262
193,242
231,999
177,760
196,220
959,822
236,709
181,487
200,740
929,406
206,178
205,867
225,120
907,887
201,275
205,139
221,857
1,978,805
1,920,242
1,875,438
1,808,728
1,823,875
200
204
209
219
231
0.98%
0.94%
(0.36)%
0.82%
0.95%
10.3
9.9
12.1
56.5
9.4
9.1
11.0
57.4
(3.9)
(3.0)
8.1
58.3
6.6
6.5
7.6
59.8
8.1
7.9
9.3
57.6
11.81%
11.86%
12.36 %
12.57%
12.07%
13.36
15.97
6.21
13.46
16.18
6.41
8.98%
9.27%
9.90
23.9
121.8
82.90
70.39
$
10.23
23.1
109.1
$
75.05
$
63.79
14.06
16.30
6.68
9.85 %
10.90
NM
NM
70.62
60.16
14.24
16.24
7.22
13.49
15.30
7.08
11.49%
11.85%
12.56
8.9
77.1
$
74.26
$
64.57
12.82
3.0
36.0
69.46
60.61
(1) 2017 includes the one-time impact related to enactment of the Tax Cuts and Jobs Act (Tax Reform). 2019 and 2018 reflect the tax rate structure post Tax Reform.
For additional information, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below. RoTCE for 2017 excludes the one-time impact
from Tax Reform.
(2) The return on average common stockholders’ equity is calculated using net income less preferred stock dividends divided by average common stockholders’
equity. The return on average total Citigroup stockholders’ equity is calculated using net income divided by average Citigroup stockholders’ equity.
(3) For information on RoTCE and TBV, see “Capital Resources—Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Returns on
Equity” below.
(4) Citi’s risk-based capital and leverage ratios for 2017 and prior years are non-GAAP financial measures, which reflect full implementation of regulatory capital
adjustments and deductions prior to the effective date of January 1, 2018.
(5) As of December 31, 2019, 2018, and 2017, Citi’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III
Standardized Approach, whereas the reportable Total Capital ratio was the lower derived under the Basel III Advanced Approaches framework. For all prior
periods presented, Citi’s Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios were the lower derived under the Basel III Advanced Approaches
framework.
(6) Dividends declared per common share as a percentage of net income per diluted share.
(7) Total common dividends declared plus common stock repurchases as a percentage of net income available to common shareholders (Net income, less preferred
dividends). See “Consolidated Statement of Changes in Stockholders’ Equity,” Note 10 to the Consolidated Financial Statements and “Equity Security
Repurchases” below for the component details.
NM Not meaningful
11
SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
CITIGROUP INCOME
In millions of dollars
Income (loss) from continuing operations
Global Consumer Banking
North America
Latin America
Asia(2)
Total
Institutional Clients Group
North America
EMEA
Latin America
Asia
Total
Corporate/Other
Income (loss) from continuing operations
Discontinued operations
Less: net income attributable to noncontrolling interests
Citigroup’s net income (loss)
2019
2018
2017(1)
% Change
2019 vs. 2018
% Change
2018 vs. 2017
$
$
$
$
$
$
$
3,224 $
3,087 $
901
1,577
802
1,420
5,702 $
5,309 $
3,511 $
3,675 $
3,867
2,111
3,455
3,889
2,013
2,997
12,944 $
12,574 $
825
205
19,471 $
18,088 $
(4) $
66
(8) $
35
1,829
516
1,197
3,542
2,494
2,828
1,637
2,416
9,375
(19,544)
(6,627)
(111)
60
19,401 $
18,045 $
(6,798)
4 %
12
11
7 %
(4)%
(1)
5
15
3 %
NM
8 %
50 %
89
8 %
69%
55
19
50%
47%
38
23
24
34%
NM
NM
93%
(42)
NM
(1) 2017 includes the one-time impact related to enactment of Tax Reform. For additional information, see “Significant Accounting Policies and Significant Estimates
—Income Taxes” below.
(2) Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
NM Not meaningful
CITIGROUP REVENUES
In millions of dollars
Global Consumer Banking
North America
Latin America
Asia(1)
Total
Institutional Clients Group
North America
EMEA
Latin America
Asia
Total
Corporate/Other
Total Citigroup net revenues
2019
2018
2017
% Change
2019 vs. 2018
% Change
2018 vs. 2017
$
$
$
$
$
20,398 $
19,829 $
5,238
7,335
5,309
7,201
32,971 $
32,339 $
13,459 $
13,522 $
12,006
5,166
8,670
39,301 $
2,014
74,286 $
11,770
4,954
8,079
38,325 $
2,190
72,854 $
19,570
4,794
7,081
31,445
14,578
10,878
4,814
7,552
37,822
3,177
72,444
3 %
(1)
2
2 %
— %
2
4
7
3 %
(8)
2 %
1 %
11
2
3 %
(7)%
8
3
7
1 %
(31)
1 %
(1) Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
12
SEGMENT BALANCE SHEET(1)—DECEMBER 31, 2019
Citigroup
parent
company-
issued
long-term
debt and
stockholders’
equity(3)
Corporate/
Other
and
consolidating
eliminations(2)
Total
Citigroup
consolidated
Global
Consumer
Banking
Institutional
Clients
Group
$
7,076 $
69,363 $
117,480 $
— $
87
1,168
1,150
290,270
39,071
68,077
250,968
265,260
126,481
387,036
94,648
253,463
267
9,712
240,932
9,394
40,795
(321,540)
—
—
—
—
—
—
193,919
251,322
276,140
368,563
686,700
174,514
—
$
$
$
$
406,899 $
1,447,219 $
97,040 $
— $
1,951,158
291,049 $
767,666 $
11,875 $
— $
1,070,590
2,229
549
417
1,472
20,847
90,336
164,096
118,788
27,082
64,758
71,215
233,614
14
557
17,550
32,053
14,518
19,769
—
—
—
150,477
—
(343,719)
406,899 $
1,447,219 $
96,336 $
(193,242) $
—
—
704
193,242
406,899 $
1,447,219 $
97,040 $
— $
166,339
119,894
45,049
248,760
106,580
—
1,757,212
193,946
1,951,158
In millions of dollars
Assets
Cash and deposits with banks
Securities borrowed and purchased under
agreements to resell
Trading account assets
Investments
Loans, net of unearned income and allowance
for loan losses
Other assets
Net inter-segment liquid assets(4)
Total assets
Liabilities and equity
Total deposits
Securities loaned and sold under agreements
to repurchase
Trading account liabilities
Short-term borrowings
Long-term debt(3)
Other liabilities
Net inter-segment funding (lending)(3)
Total liabilities
Total stockholders’ equity(5)
Total liabilities and equity
(1) The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment. The respective segment
information depicts the assets and liabilities managed by each segment.
(2) Consolidating eliminations for total Citigroup and Citigroup parent company assets and liabilities are recorded within Corporate/Other.
(3) Total stockholders’ equity and the majority of long-term debt of Citigroup reside on the Citigroup parent company balance sheet. Citigroup allocates stockholders’
equity and long-term debt to its businesses through inter-segment allocations as shown above.
(4) Represents the attribution of Citigroup’s liquid assets (primarily consisting of cash, marketable equity securities and available-for-sale debt securities) to the
various businesses based on Liquidity Coverage Ratio (LCR) assumptions.
(5) Corporate/Other equity represents noncontrolling interests.
13
GLOBAL CONSUMER BANKING
Global Consumer Banking (GCB) consists of consumer banking businesses in North America, Latin America (consisting of Citi’s
consumer banking business in Mexico) and Asia. GCB provides traditional banking services to retail customers through retail banking,
Citi-branded cards and Citi retail services (for additional information on these businesses, see “Citigroup Segments” above). GCB is
focused on its priority markets in the U.S., Mexico and Asia with 2,348 branches in 19 countries and jurisdictions as of December 31,
2019. At December 31, 2019, GCB had approximately $407 billion in assets and $291 billion in deposits.
GCB’s overall strategy is to leverage Citi’s global footprint and be the pre-eminent bank for the affluent and emerging affluent
consumers in large urban centers. In credit cards and in certain retail markets, Citi serves customers in a somewhat broader set of
segments and geographies.
In millions of dollars, except as otherwise noted
2019
2018
2017
% Change
2019 vs. 2018
% Change
2018 vs. 2017
Net interest revenue
Non-interest revenue
Total revenues, net of interest expense
Total operating expenses
Net credit losses
Credit reserve build
Provision for unfunded lending commitments
Provision for benefits and claims
Provisions for credit losses and for benefits and claims
(LLR & PBC)
Income from continuing operations before taxes
Income taxes
Income from continuing operations
Noncontrolling interests
Net income
Balance Sheet data and ratios (in billions of dollars)
Total EOP assets
Average assets
Return on average assets
Efficiency ratio
Average deposits
Net credit losses as a percentage of average loans
Revenue by business
Retail banking
Cards(1)
Total
Income from continuing operations by business
Retail banking
Cards(1)
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
$
28,205
4,766
32,971
17,628
7,382
439
1
73
7,895
7,448
1,746
5,702
6
5,696
407
389
1.46%
53
277
2.60%
12,549
20,422
32,971
1,842
3,860
5,702
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
27,374
4,965
32,339
17,786
6,884
568
—
103
7,555
6,998
1,689
5,309
7
5,302
388
378
1.40%
55
269
$
2.48%
12,627
19,712
32,339
1,851
3,458
5,309
$
$
$
$
26,277
5,168
31,445
17,229
6,462
1,029
—
116
7,607
6,609
3,067
3,542
9
3,533
389
380
0.93%
55
267
2.39%
12,089
19,356
31,445
1,320
2,222
3,542
3 %
(4)
2 %
(1)%
7 %
(23)
100
(29)
5 %
6 %
3
7 %
(14)
7 %
5 %
3
3
(1)%
4
2 %
— %
12
7 %
Table continues on the next page, including footnotes.
4 %
(4)
3 %
3 %
7 %
(45)
—
(11)
(1)%
6 %
(45)
50 %
(22)
50 %
— %
(1)
1
4 %
2
3 %
40 %
56
50 %
14
Foreign currency (FX) translation impact
Total revenue—as reported
Impact of FX translation(2)
Total revenues—ex-FX(3)
Total operating expenses—as reported
Impact of FX translation(2)
Total operating expenses—ex-FX(3)
Total provisions for LLR & PBC—as reported
Impact of FX translation(2)
Total provisions for LLR & PBC—ex-FX(3)
Net income—as reported
Impact of FX translation(2)
Net income—ex-FX(3)
$
$
$
$
$
$
$
$
32,971 $
32,339 $
—
32,971 $
17,628 $
—
17,628 $
7,895 $
—
7,895 $
5,696 $
—
5,696 $
(146)
32,193 $
17,786 $
(100)
17,686 $
7,555 $
(24)
7,531 $
5,302 $
(16)
5,286 $
31,445
(270)
31,175
17,229
(154)
17,075
7,607
(53)
7,554
3,533
(42)
3,491
2 %
2 %
(1)%
— %
5 %
5 %
7 %
8 %
3 %
3 %
3 %
4 %
(1)%
— %
50 %
51 %
Includes both Citi-branded cards and Citi retail services.
(1)
(2) Reflects the impact of FX translation into U.S. dollars at the 2019 average exchange rates for all periods presented.
(3) Presentation of this metric excluding FX translation is a non-GAAP financial measure.
Note: For information on the impact of Citi’s January 1, 2020 adoption of the new accounting standard on credit losses (CECL), see “Risk Factors—Operational Risks”
below and Note 1 to the Consolidated Financial Statements.
15
NORTH AMERICA GCB
North America GCB provides traditional retail banking and Citi-branded and Citi retail services card products to retail and small
business customers in the U.S. North America GCB’s U.S. cards product portfolio includes its proprietary portfolio (including the Citi
Double Cash, Thank You and Value cards) and co-branded cards (including, among others, American Airlines and Costco) within Citi-
branded cards as well as its co-brand and private label relationships (including, among others, Sears, The Home Depot, Best Buy and
Macy’s) within Citi retail services.
At December 31, 2019, North America GCB had 687 retail bank branches concentrated in the six key metropolitan areas of New
York, Chicago, Miami, Washington, D.C., Los Angeles and San Francisco. Also as of December 31, 2019, North America GCB had
approximately $50.3 billion in retail banking loans and $160.5 billion in deposits. In addition, North America GCB had approximately
$149.2 billion in outstanding card loan balances.
In millions of dollars, except as otherwise noted
2019
2018
2017
% Change
2019 vs. 2018
% Change
2018 vs. 2017
Net interest revenue
Non-interest revenue(1)
Total revenues, net of interest expense
Total operating expenses
Net credit losses
Credit reserve build
Provision for unfunded lending commitments
Provision for benefits and claims
Provisions for credit losses and for benefits and claims
Income from continuing operations before taxes
Income taxes
Income from continuing operations
Noncontrolling interests
Net income
Balance Sheet data and ratios (in billions of dollars)
Average assets
Return on average assets
Efficiency ratio
Average deposits
Net credit losses as a percentage of average loans
Revenue by business
Retail banking
Citi-branded cards
Citi retail services
Total
Income from continuing operations by business
Retail banking
Citi-branded cards
Citi retail services
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
19,869
529
20,398
10,154
5,583
469
1
19
6,072
4,172
948
3,224
—
3,224
232
1.39%
50
$
$
$
$
$
$
$
$
$
19,006
823
19,829
10,230
5,085
460
—
22
5,567
4,032
945
3,087
—
3,087
227
1.36%
52
152.8
$
148.0
$
18,298
1,272
19,570
9,867
4,737
926
—
33
5,696
4,007
2,178
1,829
(1)
1,830
232
0.79%
50
151.0
2.97%
2.78%
2.67%
4,529
9,165
6,704
20,398
196
1,742
1,286
3,224
$
$
$
$
4,600
$
8,628
6,601
19,829
312
1,581
1,194
$
$
3,087
$
4,565
8,578
6,427
19,570
251
1,009
569
1,829
5 %
(36)
3 %
(1)%
10 %
2
100
(14)
9 %
3 %
—
4 %
—
4 %
4 %
(35)
1 %
4 %
7 %
(50)
—
(33)
(2)%
1 %
(57)
69 %
100
69 %
2 %
(2)%
3
(2)
(2)%
6
2
3 %
(37)%
10
8
4 %
1 %
1
3
1 %
24 %
57
NM
69 %
(1) 2018 includes an approximate $150 million gain on the Hilton portfolio sale.
NM Not meaningful
16
2019 vs. 2018
Net income increased 4%, as higher revenues and lower
expenses were partially offset by higher cost of credit.
Revenues increased 3%. Excluding the impact of the $150
million gain on the Hilton portfolio sale in the prior year,
revenues increased 4%, reflecting higher revenues in Citi-
branded cards and Citi retail services, partially offset by lower
retail banking revenues.
Retail banking revenues decreased 2%, as the benefit of
stronger deposit volumes was more than offset by lower
deposit spreads. Average deposits increased 3%. Assets under
management increased 20%, including the benefit of market
movements. Citi expects that retail banking revenues will
likely be impacted by the lower interest rate environment in
the near term.
Cards revenues increased 4% (5% excluding the Hilton
gain). In Citi-branded cards, revenues increased 6% (8%
excluding the Hilton gain), primarily driven by volume growth
and spread expansion. Average loans increased 3% and
purchase sales increased 7%.
Citi retail services revenues increased 2%, primarily
driven by organic loan growth and the full-year benefit of the
L.L.Bean portfolio acquisition. Average loans increased 3%
and purchase sales increased 2%.
Expenses decreased 1%, as efficiency savings more than
offset ongoing investments and higher volume-related
expenses.
Provisions increased 9%, primarily driven by higher net
credit losses. Net credit losses increased 10%, driven by
higher net credit losses in Citi-branded cards (up 10% to $2.9
billion) and Citi retail services (up 9% to $2.6 billion). The
increase in net credit losses reflected volume growth and
seasoning in both cards portfolios. The net loan loss reserve
build increased 2%, reflecting volume growth and seasoning
in both cards portfolios.
For additional information on North America GCB’s retail
banking and its Citi-branded cards and Citi retail services
portfolios, see “Credit Risk—Consumer Credit” below.
For information on the impact of Citi’s January 1, 2020
adoption of the new accounting standard on credit losses
(CECL), see “Risk Factors—Operational Risks” below and
Note 1 to the Consolidated Financial Statements.
As previously disclosed, Sears has continued to close
stores since it exited bankruptcy. Although Citi retail services
will continue to be impacted from reduced new account
acquisitions and lower purchase sales, Citi does not currently
expect an immediate or ongoing material impact on its
consolidated results. For additional information on the
potential impact from a deterioration in or failure to maintain
Citi’s co-branding and private label credit card relationships,
see “Risk Factors—Strategic Risks” below.
17
LATIN AMERICA GCB
Latin America GCB provides traditional retail banking and Citi-branded card products to retail and small business customers in
Mexico through Citibanamex, one of Mexico’s largest banks.
At December 31, 2019, Latin America GCB had 1,419 retail branches in Mexico, with approximately $11.7 billion in retail
banking loans and $23.8 billion in deposits. In addition, the business had approximately $6.0 billion in outstanding card loan balances.
In millions of dollars, except as otherwise noted
Net interest revenue
Non-interest revenue(1)
Total revenues, net of interest expense
Total operating expenses
Net credit losses
Credit reserve build
Provision for unfunded lending commitments
Provision for benefits and claims
Provisions for credit losses and for benefits and claims (LLR &
PBC)
Income from continuing operations before taxes
Income taxes
Income from continuing operations
Noncontrolling interests
Net income
Balance Sheet data and ratios (in billions of dollars)
Average assets
Return on average assets
Efficiency ratio
Average deposits
Net credit losses as a percentage of average loans
Revenue by business
Retail banking
Citi-branded cards
Total
Income from continuing operations by business
Retail banking
Citi-branded cards
Total
FX translation impact
Total revenues—as reported(1)
Impact of FX translation(2)
Total revenues—ex-FX(3)
Total operating expenses—as reported
Impact of FX translation(2)
Total operating expenses—ex-FX(3)
Provisions for LLR & PBC—as reported
Impact of FX translation(2)
Provisions for LLR & PBC—ex-FX(3)
Net income—as reported
Impact of FX translation(2)
Net income—ex-FX(3)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2019
2018
2017
3,639
1,599
5,238
2,883
1,109
(38)
—
54
1,125
1,230
329
901
—
901
35
2.57%
55
22.8
6.45%
3,585
1,653
5,238
600
301
901
5,238
—
5,238
2,883
—
2,883
1,125
—
1,125
901
—
901
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3,681
1,628
5,309
2,900
1,131
84
—
81
1,296
1,113
311
802
—
802
33
2.43%
55
22.7
6.50%
3,744
1,565
5,309
596
206
802
5,309
(23)
5,286
2,900
(13)
2,887
1,296
(6)
1,290
802
(3)
799
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3,491
1,303
4,794
2,721
1,083
113
—
83
1,279
794
278
516
5
511
35
1.46%
57
21.8
6.08%
3,324
1,470
4,794
332
184
516
4,794
(117)
4,677
2,721
(59)
2,662
1,279
(32)
1,247
511
(19)
492
% Change
2019 vs. 2018
(1)%
(2)
(1)%
(1)%
(2)%
NM
—
(33)
(13)%
11 %
6
12 %
—
12 %
% Change
2018 vs. 2017
5 %
25
11 %
7 %
4 %
(26)
—
(2)
1 %
40 %
12
55 %
(100)
57 %
6 %
(6)%
—
4
(4)%
6
(1)%
1 %
46
12 %
(1)%
(1)%
(1)%
— %
(13)%
(13)%
12 %
13 %
13 %
6
11 %
80 %
12
55 %
11 %
13 %
7 %
8 %
1 %
3 %
57 %
62 %
(1) 2018 includes an approximate $250 million gain on the sale of an asset management business. See Note 2 to the Consolidated Financial Statements.
(2) Reflects the impact of FX translation into U.S. dollars at the 2019 average exchange rates for all periods presented.
(3) Presentation of this metric excluding FX translation is a non-GAAP financial measure.
NM Not meaningful
18
The discussion of the results of operations for Latin America GCB below excludes the impact of FX translation for all periods
presented. Presentations of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. For a
reconciliation of certain of these metrics to the reported results, see the table above.
2019 vs. 2018
Net income increased 13%, primarily reflecting lower cost of
credit, partially offset by lower revenues.
Revenues decreased 1%, including a gain on sale
(approximately $250 million) of an asset management
business in the prior year. Excluding the gain on sale, revenues
increased 4%, reflecting higher revenues in both retail banking
and cards.
Retail banking revenues decreased 4%. Excluding the
gain on sale, retail banking revenues increased 3%, as
improved deposit spreads were partially offset by lower
average loans (down 3%), reflecting the ongoing slowdown in
overall economic growth and industry volumes in Mexico.
Assets under management increased 13%, including the
benefit of market movements, while average deposits were
largely unchanged, as clients transferred money to
investments. Cards revenues increased 6%, primarily driven
by continued volume growth, reflecting higher purchase sales
(up 7%) and average loans (up 3%), as well as higher rates.
Expenses were largely unchanged, as efficiency savings
offset ongoing investment spending and volume-driven
growth.
Provisions decreased 13%, primarily driven by a modest
net loan loss reserve release (compared to a net loan loss
reserve build in the prior year) and lower net credit losses,
reflecting lower volumes in retail banking.
For additional information on Latin America GCB’s retail
banking and its Citi-branded cards portfolios, see “Credit Risk
—Consumer Credit” below.
For information on the impact of Citi’s January 1, 2020
adoption of the new accounting standard on credit losses
(CECL), see “Risk Factors—Operational Risks” below and
Note 1 to the Consolidated Financial Statements.
19
ASIA GCB
Asia GCB provides traditional retail banking and Citi-branded card products to retail and small business customers. During 2019, Asia
GCB’s most significant revenues in Asia were from Hong Kong, Singapore, South Korea, Australia, India, Taiwan, Thailand,
Philippines, Indonesia and Malaysia. Included within Asia GCB, traditional retail banking and Citi-branded card products are also
provided to retail customers in certain EMEA countries, primarily Poland, Russia and the United Arab Emirates.
At December 31, 2019, on a combined basis, the businesses had 242 retail branches, approximately $62.8 billion in retail
banking loans and $106.7 billion in deposits. In addition, the businesses had approximately $19.9 billion in outstanding card loan
balances.
In millions of dollars, except as otherwise noted(1)
2019
2018
2017
% Change
2019 vs. 2018
% Change
2018 vs. 2017
Net interest revenue
Non-interest revenue
Total revenues, net of interest expense
Total operating expenses
Net credit losses
Credit reserve build (release)
Provision (release) for unfunded lending commitments
Provisions for credit losses
Income from continuing operations before taxes
Income taxes
Income from continuing operations
Noncontrolling interests
Net income
Balance Sheet data and ratios (in billions of dollars)
Average assets
Return on average assets
Efficiency ratio
Average deposits
Net credit losses as a percentage of average loans
Revenue by business
Retail banking
Citi-branded cards
Total
Income from continuing operations by business
Retail banking
Citi-branded cards
Total
FX translation impact
Total revenues—as reported
Impact of FX translation(2)
Total revenues—ex-FX(3)
Total operating expenses—as reported
Impact of FX translation(2)
Total operating expenses—ex-FX(3)
Provisions for credit losses—as reported
Impact of FX translation(2)
Provisions for credit losses—ex-FX(3)
Net income—as reported
Impact of FX translation(2)
Net income—ex-FX(3)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4,697
2,638
7,335
4,591
690
8
—
698
2,046
469
1,577
6
1,571
122
1.29%
63
$
$
$
$
$
$
$
$
$
4,687
2,514
7,201
4,656
668
24
—
692
1,853
433
1,420
7
1,413
119
1.19%
65
101.1
$
0.88%
98.0
$
0.86%
4,283
2,918
7,201
943
477
1,420
7,201
(123)
7,078
4,656
(87)
4,569
692
(18)
674
1,413
(13)
1,400
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4,435
2,900
7,335
1,046
531
1,577
7,335
—
7,335
4,591
—
4,591
698
—
698
1,571
—
1,571
20
4,488
2,593
7,081
4,641
642
(10)
—
632
1,808
611
1,197
5
1,192
114
1.05%
66
94.6
0.85%
4,200
2,881
7,081
737
460
1,197
7,081
(153)
6,928
4,641
(95)
4,546
632
(21)
611
1,192
(23)
1,169
— %
5
2 %
(1)%
3 %
(67)
—
1 %
10 %
8
11 %
(14)
11 %
3 %
3
4 %
(1)
2 %
11 %
11
11 %
2 %
4 %
(1)%
— %
1 %
4 %
11 %
12 %
4%
(3)
2%
—%
4%
NM
—
9%
2%
(29)
19%
40
19%
4%
4
2%
1
2%
28%
4
19%
2%
2%
—%
1%
9%
10%
19%
20%
(1) Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
(2) Reflects the impact of FX translation into U.S. dollars at the 2019 average exchange rates for all periods presented.
(3) Presentation of this metric excluding FX translation is a non-GAAP financial measure.
NM Not meaningful
The discussion of the results of operations for Asia GCB below excludes the impact of FX translation for all periods presented.
Presentations of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. For a
reconciliation of certain of these metrics to the reported results, see the table above.
2019 vs. 2018
Net income increased 12%, primarily driven by higher
revenues, partially offset by modestly higher cost of credit.
Revenues increased 4%, primarily driven by growth in
retail banking.
Retail banking revenues increased 5%, primarily driven
by higher investment revenues due to improved market
sentiment and higher deposit revenues. Investment sales
increased 8%, assets under management grew 17%, including
the benefit of market movements, average deposits increased
6% and average loans increased 5%. Retail lending revenues
declined 1%, as continued growth in personal loans was more
than offset by lower mortgage revenues due to spread
compression.
Cards revenues increased 1%, including a modest
episodic gain in the current year, as continued growth in
average loans (up 3%) and purchase sales (up 6%) was largely
offset by spread compression.
Expenses were largely unchanged, as efficiency savings
were offset by ongoing investment spending and volume-
driven growth.
Provisions increased 4%, as higher net credit losses
reflecting volume growth and seasoning were partially offset
by a lower net loan loss reserve build in the current year.
Overall credit quality remained stable in the region.
For additional information on Asia GCB’s retail banking
portfolios and its Citi-branded cards portfolio, see “Credit
Risk—Consumer Credit” below.
For information on the impact of Citi’s January 1, 2020
adoption of the new accounting standard on credit losses
(CECL), see “Risk Factors—Operational Risks” below and
Note 1 to the Consolidated Financial Statements.
21
significantly impact client activity levels, bid/offer spreads and
the fair value of product inventory. For example, a decrease in
market liquidity may increase bid/offer spreads, decrease
client activity levels and widen credit spreads on product
inventory positions.
ICG’s management of the Markets businesses involves
daily monitoring and evaluation of the above factors at the
trading desk as well as the country level. ICG does not
separately track the impact on total Markets revenues of the
volume of transactions, bid/offer spreads, fair value changes of
product inventory positions and economic hedges because, as
noted above, these components are interrelated and are not
deemed useful or necessary individually to manage the
Markets businesses at an aggregate level.
In the Markets businesses, client revenues are those
revenues directly attributable to client transactions at the time
of inception, including commissions, interest or fees earned.
Client revenues do not include the results of client facilitation
activities (e.g., holding product inventory in anticipation of
client demand) or the results of certain economic hedging
activities.
ICG’s international presence is supported by trading
floors in approximately 80 countries and a proprietary network
in 98 countries and jurisdictions. At December 31, 2019, ICG
had approximately $1.4 trillion in assets and $768 billion in
deposits, while two of its businesses—securities services and
issuer services—managed approximately $20.3 trillion and
$17.5 trillion in assets under custody as of December 31, 2019
and 2018, respectively.
INSTITUTIONAL CLIENTS GROUP
Institutional Clients Group (ICG) includes Banking and
Markets and securities services (for additional information on
these businesses, see “Citigroup Segments” above). ICG
provides corporate, institutional, public sector and high-net-
worth clients around the world with a full range of wholesale
banking products and services, including fixed income and
equity sales and trading, foreign exchange, prime brokerage,
derivative services, equity and fixed income research,
corporate lending, investment banking and advisory services,
private banking, cash management, trade finance and
securities services. ICG transacts with clients in both cash
instruments and derivatives, including fixed income, foreign
currency, equity and commodity products.
ICG revenue is generated primarily from fees and spreads
associated with these activities. ICG earns fee income for
assisting clients with transactional services and clearing and
providing brokerage and investment banking services and
other such activities. Such fees are recognized at the point in
time when Citigroup’s performance under the terms of a
contractual arrangement is completed, which is typically at the
trade/execution date or closing of a transaction. Revenue
generated from these activities is recorded in Commissions
and fees and Investment banking. Revenue is also generated
from assets under custody and administration, which is
recognized as/when the associated promised service is
satisfied, which normally occurs at the point in time the
service is requested by the customer and provided by Citi.
Revenue generated from these activities is primarily recorded
in Administration and other fiduciary fees. For additional
information on these various types of revenues, see Note 5 to
the Consolidated Financial Statements.
In addition, as a market maker, ICG facilitates
transactions, including holding product inventory to meet
client demand, and earns the differential between the price at
which it buys and sells the products. These price differentials
and the unrealized gains and losses on the inventory are
recorded in Principal transactions. Mark-to-market gains and
losses on certain credit derivatives (used to hedge the
corporate loan portfolio) are also recorded in Principal
transactions, (for additional information on Principal
transactions revenue, see Note 6 to the Consolidated Financial
Statements). Other primarily includes realized gains and
losses on available-for-sale (AFS) debt securities, gains and
losses on equity securities not held in trading accounts and
other non-recurring gains and losses. Interest income earned
on assets held, less interest paid on long- and short-term debt
and to customers on deposits, is recorded as Net interest
revenue.
The amount and types of Markets revenues are impacted
by a variety of interrelated factors, including market liquidity;
changes in market variables such as interest rates, foreign
exchange rates, equity prices, commodity prices and credit
spreads, as well as their implied volatilities; investor
confidence and other macroeconomic conditions. Assuming all
other market conditions do not change, increases in client
activity levels or bid/offer spreads generally result in increases
in revenues. However, changes in market conditions can
22
In millions of dollars, except as otherwise noted
2019
2018
2017
Commissions and fees
Administration and other fiduciary fees
Investment banking
Principal transactions
Other(1)
Total non-interest revenue
Net interest revenue (including dividends)
Total revenues, net of interest expense
Total operating expenses
Net credit losses
Credit reserve build (release)
Provision (release) for unfunded lending commitments
Provisions for credit losses
Income from continuing operations before taxes
Income taxes
Income from continuing operations
Noncontrolling interests
Net income
EOP assets (in billions of dollars)
Average assets (in billions of dollars)
Return on average assets
Efficiency ratio
Revenues by region
North America
EMEA
Latin America
Asia
Total
Income from continuing operations by region
North America
EMEA
Latin America
Asia
Total
Average loans by region (in billions of dollars)
North America
EMEA
Latin America
Asia
Total
EOP deposits by business (in billions of dollars)
Treasury and trade solutions
All other ICG businesses
Total
$
$
$
$
$
$
$
$
$
$
4,462
2,756
4,440
8,562
1,829
22,049
17,252
39,301
22,224
394
71
98
563
16,514
3,570
12,944
40
12,904
1,447
1,493
$
4,651
$
2,806
4,358
8,742
941
21,498
16,827
38,325
21,780
208
(109)
116
215
16,330
3,756
12,574
17
12,557
1,438
1,449
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4,456
2,721
4,666
7,527
1,711
21,081
16,741
37,822
21,187
465
(285)
(161)
19
16,616
7,241
9,375
57
9,318
1,375
1,395
0.86%
57
0.87%
57
0.67%
56
$
13,459
$
13,522
$
12,006
5,166
8,670
39,301
3,511
3,867
2,111
3,455
12,944
188
87
40
73
388
536
232
768
$
$
$
$
$
$
$
$
$
$
$
$
$
$
11,770
4,954
8,079
38,325
3,675
3,889
2,013
2,997
12,574
174
81
42
77
374
509
218
727
$
$
$
$
$
$
$
14,578
10,878
4,814
7,552
37,822
2,494
2,828
1,637
2,416
9,375
159
69
42
72
342
469
208
677
% Change
2019 vs. 2018
% Change
2018 vs. 2017
(4)%
4 %
(2)
2
(2)
94
3 %
3
3 %
2 %
89 %
NM
(16)
NM
1 %
(5)
3 %
NM
3 %
1 %
3
3
(7)
16
(45)
2 %
1
1 %
3 %
(55)%
62
NM
NM
(2)%
(48)
34 %
(70)
35 %
5 %
4
— %
(7)%
2
4
7
8
3
7
3 %
1 %
(4)%
47 %
(1)
5
15
3 %
8 %
7
(5)
(5)
4 %
5 %
6
6 %
38
23
24
34 %
9 %
17
—
7
9 %
9 %
5
7 %
(1) 2019 includes an approximate $350 million gain on Citi's investment in Tradeweb in the second quarter. 2017 includes the approximate $580 million gain on the
sale of a fixed income analytics business.
NM Not meaningful
23
ICG Revenue Details
In millions of dollars
Investment banking revenue details
Advisory
Equity underwriting
Debt underwriting
Total investment banking
Treasury and trade solutions
Corporate lending—excluding gains (losses) on loan hedges(1)
Private bank
Total Banking revenues (ex-gains (losses) on
loan hedges)
Corporate lending—gains (losses) on loan hedges(1)
Total Banking revenues (including gains (losses) on loan
hedges), net of interest expense
Fixed income markets(2)
Equity markets
Securities services
Other(3)
Total Markets and securities services revenues, net
of interest expense
Total revenues, net of interest expense
Commissions and fees
Principal transactions(4)
Other(2)
Total non-interest revenue
Net interest revenue
Total fixed income markets(5)
Rates and currencies
Spread products/other fixed income
Total fixed income markets
Commissions and fees
Principal transactions(4)
Other
Total non-interest revenue
Net interest revenue
Total equity markets(5)
2019
2018
2017
% Change
2019 vs. 2018
% Change
2018 vs. 2017
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,259 $
1,301 $
973
2,984
991
2,719
5,216 $
5,011 $
10,293
2,921
3,458
9,914
2,913
3,398
1,123
1,121
3,126
5,370
9,279
2,623
3,108
21,888 $
21,236 $
20,380
(432) $
45 $
(133)
21,456 $
12,884 $
21,281 $
11,661 $
2,908
2,631
(578)
17,845 $
39,301 $
782 $
7,661
1,117
9,560 $
3,324
12,884 $
9,225 $
3,659
12,884 $
1,121 $
775
172
3,427
2,631
(675)
17,044 $
38,325 $
705 $
7,134
380
8,219 $
3,442
11,661 $
8,486 $
3,175
11,661 $
1,267 $
1,240
110
2,068 $
2,617 $
840
810
2,908 $
3,427 $
20,247
12,369
2,879
2,366
(39)
17,575
37,822
628
7,001
619
8,248
4,121
12,369
8,901
3,468
12,369
1,282
494
(21)
1,755
1,124
2,879
(3)%
(2)
10
4 %
4
—
2
3 %
NM
1 %
10 %
(15)
—
14
5 %
3 %
11 %
7
NM
16 %
(3)
10 %
9 %
15
10 %
(12)%
(38)
56
(21)%
4
(15)%
16 %
(12)
(13)
(7)%
7
11
9
4 %
NM
5 %
(6)%
19
11
NM
(3)%
1 %
12 %
2
(39)
— %
(16)
(6)%
(5)%
(8)
(6)%
(1)%
NM
NM
49 %
(28)
19 %
(1) Credit derivatives are used to economically hedge a portion of the corporate loan portfolio that includes both accrual loans and loans at fair value. Gains (losses)
on loan hedges include the mark-to-market on the credit derivatives and the mark-to-market on the loans in the portfolio that are at fair value. The fixed premium
costs of these hedges are netted against the corporate lending revenues to reflect the cost of credit protection. Citigroup’s results of operations excluding the
impact of gains (losses) on loan hedges are non-GAAP financial measures.
(2) 2019 includes an approximate $350 million gain on Citi's investment in Tradeweb in the second quarter.
(3) 2017 includes the approximate $580 million gain on the sale of a fixed income analytics business.
(4) Excludes principal transactions revenues of ICG businesses other than Markets, primarily treasury and trade solutions and the private bank.
(5) Citi assesses its Markets business performance on a total revenue basis, as offsets may occur across revenue line items. For example, securities that generate Net
interest revenue may be risk managed by derivatives that are recorded in Principal transactions revenue. For a description of the composition of these revenue line
items, see Notes 4, 5 and 6 to the Consolidated Financial Statements.
NM Not meaningful
24
The discussion of the results of operations for ICG below excludes (where noted) the impact of gains (losses) on hedges of accrual
loans, which are non-GAAP financial measures. For a reconciliation of these metrics to the reported results, see the table above.
2019 vs. 2018
Net income increased 3%, driven primarily by higher revenues
and a lower effective tax rate, partially offset by higher
expenses and higher cost of credit.
Revenues increased 3%, reflecting higher Banking
revenues (increase of 1% including the gains (losses) on loan
hedges) and higher Markets and securities services revenues
(increase of 5%). Excluding the impact of the gains (losses) on
loan hedges, Banking revenues were up 3%, driven by higher
revenues in treasury and trade solutions, investment banking
and the private bank, as corporate lending was largely
unchanged. Markets and securities services revenues were up
5%, including a gain in the second quarter of 2019 from Citi’s
investment in Tradeweb, as higher revenues in fixed income
markets were partially offset by lower equity markets
revenues.
Citi expects that ICG’s revenues will likely be impacted
by the lower interest rate environment in the near term.
Within Banking:
•
•
Investment banking revenues increased 4%, reflecting
gains in wallet share despite a decline in the overall
market wallet. Debt underwriting increased 10%,
reflecting gains in wallet share, primarily in investment
grade underwriting, across North America, EMEA and
Asia. Equity underwriting revenues decreased 2%,
reflecting a decline in market wallet, particularly in Asia
and EMEA, partially offset by gains in wallet share.
Advisory revenues decreased 3%, largely due to a
comparison to a strong prior year as well as a decline in
market wallet, partially offset by gains in wallet share.
Treasury and trade solutions revenues increased 4%.
Excluding the impact of FX translation, revenues
increased 6%, reflecting strength in all regions, driven by
growth across both net interest and fee income. Revenues
increased in the cash business, primarily driven by strong
client engagement and solid growth in deposit and
transaction volumes, partially offset by spread
compression in the second half of 2019 due to the impact
of lower interest rates. Revenue growth in the trade
business was driven by improved spreads, due to growth
in structured loans as well as the ability to continue to
utilize distribution capabilities to optimize the balance
sheet and drive returns, while supporting clients. Average
deposits increased 10%, reflecting growth across regions.
Average trade loans declined 3%, driven by North
America, EMEA and Asia (for additional information, see
“Liquidity Risk—Loans” below).
• Corporate lending revenues decreased 16%. Excluding
the impact of gains (losses) on loan hedges, revenues
were largely unchanged versus the prior year, as growth in
the commercial loan portfolio was offset by lower
volumes in the rest of the portfolio.
• Private bank revenues increased 2%, driven primarily by
North America and Asia, partially offset by Latin
America. The increase in revenues reflected strong client
activity, driving higher lending and deposit volumes, as
well as higher capital markets revenues, partially offset by
lower deposit spreads.
Within Markets and securities services:
• Fixed income markets revenues increased 10%, including
the Tradeweb gain, reflecting higher revenues across all
regions. Non-interest revenues increased due to higher
corporate and investor client activity as well as improved
market activity, particularly in rates and spread products.
The increase in non-interest revenues was partially offset
by a decline in net interest revenues, reflecting a change
in the mix of trading positions in support of client activity
as well as higher funding costs, given the higher interest
rate environment in the first half of the year.
Rates and currencies revenues increased 9%,
primarily driven by higher G10 rates and currencies
revenues in North America, Asia and EMEA, reflecting a
more favorable operating environment in the second half
of 2019, with higher corporate and investor client activity.
Local markets rates and currencies revenues increased
modestly despite declining currency volatility.
Spread products and other fixed income revenues
increased 15%, including the Tradeweb gain, reflecting
higher revenues in both North America and EMEA. The
increase in revenues was driven by higher client activity
as well as an improved trading environment, particularly
in flow trading and financing products. This increase in
revenues was partially offset by lower structured products
revenues, reflecting a challenging trading environment.
• Equity markets revenues decreased 15%, driven by lower
revenues across cash equities, equity derivatives and
prime finance, particularly in North America and Asia.
Cash equities revenues decreased largely due to lower
client volumes. Despite strong corporate and investor
client activity, equity derivatives revenues decreased due
to the impact of a less favorable trading environment,
given lower market volatility, as well as a comparison to a
strong prior year. The decline in prime finance revenues
was primarily driven by lower client activity and lower
financing balances. Non-interest revenues decreased,
primarily driven by lower principal transaction and
commissions and fee revenues, due to lower client
activity and a less favorable trading environment, as well
as a change in the mix of trading positions in support of
client activity.
Securities services revenues were largely unchanged
versus the prior year. Excluding the impact of FX
translation, revenues increased 4%, reflecting higher
revenues in Asia and Latin America. The increase in
revenues was driven by higher net interest revenue due to
higher deposit volumes and higher interest rates,
•
25
particularly in emerging markets, as well as higher client
activity.
Expenses increased 2%, as higher compensation, volume-
related expenses and continued investments were partially
offset by efficiency savings and a benefit from FX translation.
Provisions increased $348 million, driven by an increase
in net credit losses of $186 million, and an increase in the net
loan loss reserve build of $162 million. Both the increase in
net credit losses and the higher loan loss reserve build largely
reflected a normalization of credit trends.
For information on the impact of Citi’s January 1, 2020
adoption of the new accounting standard on credit losses
(CECL), see “Risk Factors—Operational Risks” below and
Note 1 to the Consolidated Financial Statements.
26
CORPORATE/OTHER
Corporate/Other includes certain unallocated costs of global staff functions (including finance, risk, human resources, legal and
compliance), other corporate expenses and unallocated global operations and technology expenses and income taxes, as well as
Corporate Treasury, certain North America legacy consumer loan portfolios, other legacy assets and discontinued operations (for
additional information on Corporate/Other, see “Citigroup Segments” above). At December 31, 2019, Corporate/Other had $97
billion in assets.
In millions of dollars
Net interest revenue
Non-interest revenue
Total revenues, net of interest expense
Total operating expenses
Net credit losses
Credit reserve build (release)
Provision (release) for unfunded lending commitments
Provision for benefits and claims
Provisions (benefits) for credit losses and for benefits and
claims
Income (loss) from continuing operations before taxes
Income taxes (benefits)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss) before attribution of noncontrolling
interests
Noncontrolling interests
Net income (loss)
NM Not meaningful
2019
2018
2017
% Change
2019 vs. 2018
% Change
2018 vs. 2017
$
$
$
$
$
$
$
$
$
1,890 $
124
2,014 $
2,150 $
(8) $
(60)
(7)
—
(75) $
(61) $
(886)
825 $
(4)
821 $
20
801 $
2,361 $
(171)
2,190 $
2,275 $
21 $
(218)
(3)
(2)
(202) $
117 $
(88)
205 $
(8)
2,043
1,134
3,177
3,816
149
(317)
—
(7)
(175)
(464)
19,080
(19,544)
(111)
197 $
(19,655)
11
(6)
186 $
(19,649)
(20)%
NM
(8)%
(5)%
NM
72 %
NM
100
63 %
NM
NM
NM
50 %
NM
82 %
NM
16 %
NM
(31)%
(40)%
(86)%
31
—
71
(15)%
NM
(100)%
NM
93 %
NM
NM
NM
2019 vs. 2018
Net income was $801 million, compared to net income of $186
million in the prior year. Net income was largely driven by an
income tax benefit of $886 million, compared to an income
tax benefit of $88 million in the prior year. The increase in the
income tax benefit primarily reflected the reduction in the
valuation allowance related to Citi’s deferred tax assets and a
pretax loss in the current year (see “Significant Accounting
Policies and Significant Estimates—Income Taxes” below).
The pretax loss was largely driven by lower revenues from
legacy assets, partially offset by higher gains on investments.
The pretax loss also reflected higher cost of credit, partially
offset by lower expenses.
Revenues decreased 8%, driven by the continued wind-
down of legacy assets, partially offset by gains on
investments.
Expenses decreased 5%, as the continued wind-down of
legacy assets was partially offset by higher infrastructure
costs.
Provisions increased $127 million to a net benefit of $75
million, primarily due to a lower net loan loss reserve release,
partially offset by lower net credit losses.
Citi expects that Corporate/Other results will likely be
impacted by ongoing investments in infrastructure and
controls as well as lower interest rates and lower investment
gains during 2020.
27
OFF-BALANCE SHEET ARRANGEMENTS
Citigroup enters into various types of off-balance sheet
arrangements in the ordinary course of business. Citi’s
involvement in these arrangements can take many different
forms, including without limitation:
•
•
•
purchasing or retaining residual and other interests in
unconsolidated special purpose entities, such as
mortgage-backed and other asset-backed securitization
entities;
holding senior and subordinated debt, interests in limited
and general partnerships and equity interests in other
unconsolidated special purpose entities; and
providing guarantees, indemnifications, loan
commitments, letters of credit and representations and
warranties.
Citi enters into these arrangements for a variety of
business purposes. For example, securitization arrangements
offer investors access to specific cash flows and risks created
through the securitization process. Securitization arrangements
also assist Citi and its customers in monetizing their financial
assets and securing financing at more favorable rates than Citi
or the customers could otherwise obtain.
The table below shows where a discussion of Citi’s
various off-balance sheet arrangements may be found in this
Form 10-K. In addition, see Note 1 to the Consolidated
Financial Statements.
Types of Off-Balance Sheet Arrangements Disclosures in
this Form 10-K
Variable interests and other
obligations, including
contingent obligations,
arising from variable
interests in nonconsolidated
VIEs
Letters of credit, and lending
and other commitments
Guarantees
See Note 21 to the Consolidated
Financial Statements.
See Note 26 to the Consolidated
Financial Statements.
See Note 26 to the Consolidated
Financial Statements.
28
CONTRACTUAL OBLIGATIONS
The following table includes information on Citigroup’s contractual obligations, as specified and aggregated pursuant to SEC
requirements:
In millions of dollars
Long-term debt obligations—principal(1)
Long-term debt obligations—interest payments(2)
Operating lease obligations(3)
Purchase obligations(4)
Other liabilities(5)
Total
Contractual obligations by year
2020
2021
2022
2023
2024
Thereafter
Total
$ 37,257 $ 38,083 $ 27,090 $ 20,128 $ 16,023 $
110,179 $ 248,760
7,548
6,313
5,244
4,470
3,877
34,220
61,672
801
584
34,561
695
538
474
572
532
218
425
316
127
314
324
114
935
752
3,742
3,046
1,622
37,116
$ 80,751 $ 46,103 $ 33,656 $ 25,466 $ 20,652 $
147,708 $ 354,336
(1) For additional information about long-term debt obligations, see “Liquidity Risk—Long-Term Debt” below and Note 17 to the Consolidated Financial Statements.
(2) Contractual obligations related to interest payments on long-term debt for 2020–2024 are calculated by applying the December 31, 2019 weighted-average interest
rate (3.28%) on average outstanding long-term debt to the average remaining contractual obligations on long-term debt for each of those years. The “Thereafter”
interest payments on long-term debt for the remaining years to maturity (2025–2098) are calculated by applying current interest rates on the remaining contractual
obligations on long-term debt for each of those years.
(3) For additional information about operating leases, see Note 26 to the Consolidated Financial Statements.
(4) Purchase obligations consist of obligations to purchase goods or services that are enforceable and legally binding on Citi. For presentation purposes, purchase
obligations are included in the table above through the termination date of the respective agreements, even if the contract is renewable. Many of the purchase
agreements for goods or services include clauses that would allow Citi to cancel the agreement with specified notice; however, that impact is not included in the
table above (unless Citi has already notified the counterparty of its intention to terminate the agreement).
(5) Other liabilities reflected on Citigroup’s Consolidated Balance Sheet includes accounts payable, accrued expenses, uncertain tax positions and other liabilities that
have been incurred and will ultimately be paid in cash; legal reserve accruals are not included in the table above. Also includes discretionary contributions in 2018
for Citi’s employee-defined benefit obligations for the pension, postretirement and post employment plans and defined contribution plans.
29
CAPITAL RESOURCES
Overview
Capital is used principally to support assets in Citi’s
businesses and to absorb credit, market and operational losses.
Citi primarily generates capital through earnings from its
operating businesses. Citi may augment its capital through
issuances of common stock, noncumulative perpetual
preferred stock and equity issued through awards under
employee benefit plans, among other issuances. Further, Citi’s
capital levels may also be affected by changes in accounting
and regulatory standards, as well as U.S. corporate tax laws
and the impact of future events on Citi’s business results, such
as changes in interest and foreign exchange rates, as well as
business and asset dispositions.
During 2019, Citi returned a total of $22.3 billion of
capital to common shareholders in the form of share
repurchases (approximately 264 million common shares) and
dividends.
Capital Management
Citi’s capital management framework is designed to ensure
that Citigroup and its principal subsidiaries maintain sufficient
capital consistent with each entity’s respective risk profile,
management targets and all applicable regulatory standards
and guidelines. Citi assesses its capital adequacy against a
series of internal quantitative capital goals, designed to
evaluate its capital levels in expected and stressed economic
environments. Underlying these internal quantitative capital
goals are strategic capital considerations, centered on
preserving and building financial strength. The Citigroup
Capital Committee, with oversight from the Risk Management
Committee of Citigroup’s Board of Directors, has
responsibility for Citi’s aggregate capital structure, including
the capital assessment and planning process, which is
integrated into Citi’s capital plan. Balance sheet management,
including oversight of capital adequacy, for Citigroup’s
subsidiaries is governed by each entity’s Asset and Liability
Committee, where applicable.
Based on Citigroup’s current regulatory capital
requirements, as well as consideration of potential future
changes to the U.S. Basel III rules, management currently
believes that a targeted Common Equity Tier 1 Capital ratio of
approximately 11.5% represents the amount necessary to
prudently operate and invest in Citi’s franchise, including
when considering future growth plans, capital return
projections and other factors that may impact Citi’s
businesses. However, management may revise Citigroup’s
targeted Common Equity Tier 1 Capital ratio in response to
changing regulatory capital requirements as well as other
relevant factors.
For additional information regarding Citi’s capital
planning and stress testing exercises, see “Stress Testing
Component of Capital Planning” below.
Current Regulatory Capital Standards
Citi is subject to regulatory capital standards issued by the
Federal Reserve Board, which constitute the U.S. Basel III
rules. These rules establish an integrated capital adequacy
framework, encompassing both risk-based capital ratios and
leverage ratios.
Risk-Based Capital Ratios
The U.S. Basel III rules set forth the composition of regulatory
capital (including the application of regulatory capital
adjustments and deductions), as well as two comprehensive
methodologies (a Standardized Approach and Advanced
Approaches) for measuring total risk-weighted assets. Total
risk-weighted assets under the Advanced Approaches, which
are primarily models based, include credit, market and
operational risk-weighted assets. The Standardized Approach
generally applies prescribed supervisory risk weights to broad
categories of credit risk exposures. As a result, credit risk-
weighted assets calculated under the Advanced Approaches
are more risk sensitive than those calculated under the
Standardized Approach. Market risk-weighted assets are
currently calculated on a generally consistent basis under both
approaches. The Standardized Approach excludes operational
risk-weighted assets.
The U.S. Basel III rules establish stated minimum
Common Equity Tier 1 Capital, Tier 1 Capital and Total
Capital ratios for substantially all U.S. banking organizations,
including Citi and Citibank, N.A. (Citibank). Moreover, these
rules provide for both a fixed 2.5% Capital Conservation
Buffer and, for Advanced Approaches banking organizations,
such as Citi and Citibank, a discretionary Countercyclical
Capital Buffer. These capital buffers would be available to
absorb losses in advance of any potential impairment of
regulatory capital below the stated minimum risk-based capital
ratio requirements. Any breach of the buffers to absorb losses
during periods of financial or economic stress would result in
restrictions on earnings distributions (e.g., dividends, equity
repurchases and discretionary executive bonuses), with the
degree of such restrictions based upon the extent to which the
buffers are breached. The Federal Reserve Board last voted to
affirm the Countercyclical Capital Buffer amount at the
current level of 0% in March 2019.
Further, the U.S. Basel III rules implement the “capital
floor provision” of the so-called “Collins Amendment” of the
Dodd-Frank Act, which requires Advanced Approaches
banking organizations to calculate each of the three risk-based
capital ratios (Common Equity Tier 1 Capital, Tier 1 Capital
and Total Capital) under both the U.S. Basel III Standardized
Approach and the Advanced Approaches and comply with the
lower of each of the resulting risk-based capital ratios.
30
The following table sets forth Citi’s GSIB surcharge as
determined under method 1 and method 2 for 2019 and 2018:
Method 1
Method 2
2019
2018
2.0%
3.0
2.0%
3.0
Citi’s GSIB surcharge effective for both 2019 and 2018
was 3.0%, as derived under the higher method 2 result. Citi’s
GSIB surcharge effective for 2020 will remain unchanged at
3.0%, as derived under the higher method 2 result. Citi expects
that its method 2 GSIB surcharge will continue to remain
higher than its method 1 GSIB surcharge. Citi’s GSIB
surcharge effective for 2021 will not exceed 3.0%, and Citi’s
GSIB surcharge effective for 2022 is not expected to exceed
3.0%.
Transition Provisions
Generally, the U.S. Basel III rules contain several differing,
largely multi-year transition provisions, with various “phase-
ins” and “phase-outs.” With the exception of the non-
grandfathered trust preferred securities, which do not fully
phase-out of Tier 2 Capital until January 1, 2022, all other
transition provisions have occurred and were entirely reflected
in Citi’s regulatory capital ratios beginning January 1, 2018.
Moreover, the GSIB surcharge, Capital Conservation Buffer
and any Countercyclical Capital Buffer (currently 0%)
commenced phase-in on January 1, 2016, and became fully
effective on January 1, 2019.
Tier 1 Leverage Ratio
Under the U.S. Basel III rules, Citi is also required to maintain
a minimum Tier 1 Leverage ratio of 4.0%. The Tier 1
Leverage ratio, a non-risk-based measure of capital adequacy,
is defined as Tier 1 Capital as a percentage of quarterly
adjusted average total assets less amounts deducted from Tier
1 Capital.
GSIB Surcharge
The Federal Reserve Board imposes a risk-based capital
surcharge upon U.S. bank holding companies that are
identified as global systemically important bank holding
companies (GSIBs), including Citi. The GSIB surcharge
augments the Capital Conservation Buffer and, if invoked, any
Countercyclical Capital Buffer.
Under the Federal Reserve Board’s rule, identification of
a GSIB is based on the Basel Committee on Banking
Supervision’s (Basel Committee) GSIB methodology, which
primarily looks to five equally weighted broad categories of
systemic importance: (i) size, (ii) interconnectedness, (iii)
cross-jurisdictional activity, (iv) substitutability and (v)
complexity. With the exception of size, each of the categories
is composed of multiple indicators of equal weight, amounting
to 12 indicators in total.
A U.S. bank holding company that is designated a GSIB
is required, on an annual basis, to calculate a surcharge using
two methods and is subject to the higher of the resulting two
surcharges. The first method (“method 1”) is based on the
Basel Committee’s GSIB methodology described above.
Under the second method (“method 2”), the substitutability
category is replaced with a quantitative measure intended to
assess a GSIB’s reliance on short-term wholesale funding. In
addition, method 1 incorporates relative measures of systemic
importance across certain global banking organizations and a
year-end spot foreign exchange rate, whereas method 2 uses
fixed measures of systemic importance and application of an
average foreign exchange rate over a three-year period. The
GSIB surcharges calculated under both method 1 and method
2 are based on measures of systemic importance from the year
immediately preceding that in which the GSIB surcharge
calculations are being performed (e.g., the method 1 and
method 2 GSIB surcharges to be calculated by December 31,
2020 will be based on 2019 systemic indicator data).
Generally, Citi’s surcharge determined under method 2 will
result in a higher surcharge than its surcharge determined
under method 1.
Should a GSIB’s systemic importance change year-over-
year such that it becomes subject to a higher surcharge, the
higher surcharge would not become effective for a full year
(e.g., a higher surcharge calculated by December 31, 2020
would not become effective until January 1, 2022). However,
if a GSIB’s systemic importance changes such that the GSIB
would be subject to a lower surcharge, the GSIB would be
subject to the lower surcharge beginning with the next
calendar year (e.g., a lower surcharge calculated by December
31, 2020 would become effective January 1, 2021).
31
Supplementary Leverage Ratio
Citi is also required to calculate a Supplementary Leverage
ratio, which differs from the Tier 1 Leverage ratio by also
including certain off-balance sheet exposures within the
denominator of the ratio (Total Leverage Exposure). The
Supplementary Leverage ratio represents end of period Tier 1
Capital to Total Leverage Exposure, with the latter defined as
the sum of the daily average of on-balance sheet assets for the
quarter and the average of certain off-balance sheet exposures
calculated as of the last day of each month in the quarter, less
applicable Tier 1 Capital deductions. Advanced Approaches
banking organizations are required to maintain a stated
minimum Supplementary Leverage ratio of 3.0%.
Further, U.S. GSIBs, including Citi, are subject to
enhanced Supplementary Leverage ratio standards. The
enhanced Supplementary Leverage ratio standards establish a
2.0% leverage buffer in addition to the stated 3.0% minimum
Supplementary Leverage ratio requirement, for a total
effective minimum Supplementary Leverage ratio requirement
of 5.0%. If a U.S. GSIB fails to exceed the 5.0% effective
minimum Supplementary Leverage ratio requirement, it will
be subject to increasingly onerous restrictions (depending
upon the extent of the shortfall) regarding capital distributions
and discretionary executive bonus payments.
Prompt Corrective Action Framework
In general, the Prompt Corrective Action (PCA) regulations
direct the U.S. banking agencies to enforce increasingly strict
limitations on the activities of insured depository institutions
that fail to meet certain regulatory capital thresholds. The PCA
framework contains five categories of capital adequacy as
measured by risk-based capital and leverage ratios: (i) “well
capitalized,” (ii) “adequately capitalized,” (iii)
“undercapitalized,” (iv) “significantly undercapitalized” and
(v) “critically undercapitalized.”
Accordingly, an insured depository institution, such as
Citibank, must maintain minimum Common Equity Tier 1
Capital, Tier 1 Capital, Total Capital and Tier 1 Leverage
ratios of 6.5%, 8.0%, 10.0% and 5.0%, respectively, to be
considered “well capitalized.” In addition, insured depository
institution subsidiaries of U.S. GSIBs, including Citibank,
must maintain a minimum Supplementary Leverage ratio of
6.0% to be considered “well capitalized.” Citibank was “well
capitalized” as of December 31, 2019.
Stress Testing Component of Capital Planning
Citi is subject to an annual assessment by the Federal Reserve
Board as to whether Citigroup has effective capital planning
processes as well as sufficient regulatory capital to absorb
losses during stressful economic and financial conditions,
while also meeting obligations to creditors and counterparties
and continuing to serve as a credit intermediary. This annual
assessment includes two related programs: the Comprehensive
Capital Analysis and Review (CCAR) and Dodd-Frank Act
Stress Testing (DFAST).
For the largest and most complex firms, such as Citi,
CCAR includes both a quantitative evaluation of a firm’s
capital adequacy under stress and a qualitative evaluation of
its abilities to determine its capital needs on a forward-looking
32
basis. As part of the CCAR process, the Federal Reserve
Board evaluates Citi’s capital adequacy, capital adequacy
process and its planned capital distributions, such as dividend
payments and common stock repurchases. The Federal
Reserve Board assesses whether Citi has sufficient capital to
continue operations throughout times of economic and
financial market stress and whether Citi has robust, forward-
looking capital planning processes that account for its unique
risks. The Federal Reserve Board may object to Citi’s annual
capital plan based on quantitative grounds. If the Federal
Reserve Board objects to Citi’s annual capital plan, Citi may
not undertake any capital distribution unless the Federal
Reserve Board indicates in writing that it does not object to
the distribution.
Based on recent changes to the Federal Reserve Board’s
Capital Plan Rule, the qualitative objection to a firm’s capital
plan will no longer apply. However, all CCAR firms,
including Citi, will continue to be subject to a rigorous
evaluation of their capital planning process. Firms with weak
practices may be subject to a deficient supervisory rating, and
potentially an enforcement action, for failing to meet
supervisory expectations. For additional information regarding
CCAR, see “Risk Factors—Strategic Risks” below.
DFAST is a forward-looking quantitative evaluation of
the impact of stressful economic and financial market
conditions on Citi’s regulatory capital. This program serves to
inform the Federal Reserve Board and the general public as to
how Citi’s regulatory capital ratios might change using a
hypothetical set of adverse economic conditions as designed
by the Federal Reserve Board. In addition to the annual
supervisory stress test conducted by the Federal Reserve
Board, Citi is required to conduct annual company-run stress
tests under the same adverse economic conditions designed by
the Federal Reserve Board.
Both CCAR and DFAST include an estimate of projected
revenues, losses, reserves, pro forma regulatory capital ratios,
and any other additional capital measures deemed relevant by
Citi. Projections are required over a nine-quarter planning
horizon under two supervisory scenarios (baseline and
severely adverse conditions). All risk-based capital ratios
reflect application of the Standardized Approach framework
under the U.S. Basel III rules. Moreover, the Federal Reserve
Board has deferred the use of the Advanced Approaches
framework indefinitely.
In addition, Citibank is required to conduct the annual
Dodd-Frank Act Stress Test. The annual stress test consists of
a forward-looking quantitative evaluation of the impact of
stressful economic and financial market conditions under
several scenarios on Citibank’s regulatory capital. This
program serves to inform the Office of the Comptroller of
the Currency as to how Citibank’s regulatory capital ratios
might change during a hypothetical set of adverse economic
conditions and to ultimately evaluate the reliability of
Citibank’s capital planning process.
For additional information on potential changes to the
stress testing component of capital planning and assessment
process applicable to Citi, see “Regulatory Capital Standards
Developments” below.
Citigroup’s Capital Resources
Citi is required to maintain stated minimum Common Equity
Tier 1 Capital, Tier 1 Capital and Total Capital ratios of 4.5%,
6.0% and 8.0%, respectively. Citi’s effective minimum capital
requirements are presented in the table below.
Furthermore, to be “well capitalized” under current
federal bank regulatory agency definitions, a bank holding
company must have a Tier 1 Capital ratio of at least 6.0%, a
Total Capital ratio of at least 10.0% and not be subject to a
Federal Reserve Board directive to maintain higher capital
levels.
The following tables set forth Citi’s capital components
and ratios as of December 31, 2019, September 30, 2019 and
December 31, 2018:
Effective
Minimum
Requirement(1)
In millions of dollars, except ratios
2019
2018
Advanced Approaches
Standardized Approach
Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
Common Equity Tier 1 Capital
$
137,798
$
138,581
$
139,252
$
137,798
$
138,581
$
139,252
Tier 1 Capital
Total Capital (Tier 1 Capital +
Tier 2 Capital)
Total Risk-Weighted Assets
Credit Risk
Market Risk
Operational Risk
Common Equity Tier 1 Capital
ratio(2)
Tier 1 Capital ratio(2)
Total Capital ratio(2)
155,805
158,033
158,122
155,805
158,033
158,122
181,337
183,996
183,144
193,682
196,354
195,440
1,135,553
1,145,091
1,131,933
1,166,523
1,197,050
1,174,448
$
771,508
$
776,367
$
758,887
$ 1,107,775
$ 1,134,584
$ 1,109,007
57,317
306,728
61,125
307,599
63,987
309,059
58,748
—
62,466
—
65,441
—
10.0%
8.625%
12.13%
12.10%
12.30%
11.81%
11.58%
11.86%
11.5
13.5
10.125
12.125
13.72
15.97
13.80
16.07
13.97
16.18
13.36
16.60
13.20
16.40
13.46
16.64
In millions of dollars, except ratios
Quarterly Adjusted Average Total Assets(3)
Total Leverage Exposure(4)
Tier 1 Leverage ratio
Supplementary Leverage ratio
Effective
Minimum
Requirement
Dec. 31, 2019
Sept. 30, 2019
Dec. 31, 2018
$
1,957,039
$
1,960,675
$
4.0%
5.0
2,507,891
2,520,352
7.96%
6.21
8.06%
6.27
1,896,959
2,465,641
8.34%
6.41
(1) Citi’s effective minimum risk-based capital requirements during 2019 and 2018 are inclusive of the 100% and 75% phase-in, respectively, of both the 2.5%
Capital Conservation Buffer and the 3.0% GSIB surcharge (all of which must be composed of Common Equity Tier 1 Capital).
(2) Citi’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III Standardized Approach, whereas the
reportable Total Capital ratio was the lower derived under the Basel III Advanced Approaches framework for all periods presented.
(3) Tier 1 Leverage ratio denominator. Represents quarterly average total assets less amounts deducted from Tier 1 Capital.
(4) Supplementary Leverage ratio denominator.
Common Equity Tier 1 Capital Ratio
Citi’s Common Equity Tier 1 Capital ratio was 11.8% under
the Basel III Standardized Approach at December 31, 2019,
compared to 11.6% at September 30, 2019 and 11.9% at
December 31, 2018. The quarter-over-quarter increase was
primarily due to net income of $5.0 billion, a reduction in
credit risk-weighted assets and beneficial net movements in
Accumulated other comprehensive income (AOCI), partially
offset by the return of $6.2 billion of capital to common
shareholders. The decline year-over-year was primarily due to
the return of $22.3 billion of capital to common shareholders,
partially offset by net income of $19.4 billion in 2019,
beneficial net movements in AOCI and a reduction in risk-
weighted assets.
33
Components of Citigroup Capital
In millions of dollars
Common Equity Tier 1 Capital
Citigroup common stockholders’ equity(1)
Add: Qualifying noncontrolling interests
Regulatory capital adjustments and deductions:
Less: Accumulated net unrealized gains (losses) on cash flow hedges, net of tax(2)
Less: Cumulative unrealized net gain (loss) related to changes in fair value of financial liabilities
attributable to own creditworthiness, net of tax(3)
Less: Intangible assets:
Goodwill, net of related DTLs(4)
Identifiable intangible assets other than MSRs, net of related DTLs
Less: Defined benefit pension plan net assets
Less: DTAs arising from net operating loss, foreign tax credit and general business credit
carry-forwards(5)
Total Common Equity Tier 1 Capital (Standardized Approach and Advanced Approaches)
Additional Tier 1 Capital
Qualifying noncumulative perpetual preferred stock(1)
Qualifying trust preferred securities(6)
Qualifying noncontrolling interests
Regulatory capital deductions:
Less: Permitted ownership interests in covered funds(7)
Less: Minimum regulatory capital requirements of insurance underwriting subsidiaries(8)
Total Additional Tier 1 Capital (Standardized Approach and Advanced Approaches)
Total Tier 1 Capital (Common Equity Tier 1 Capital + Additional Tier 1 Capital)
(Standardized Approach and Advanced Approaches)
Tier 2 Capital
Qualifying subordinated debt
Qualifying trust preferred securities(9)
Qualifying noncontrolling interests
Eligible allowance for credit losses(10)
Regulatory capital deduction:
Less: Minimum regulatory capital requirements of insurance underwriting subsidiaries(8)
Total Tier 2 Capital (Standardized Approach)
Total Capital (Tier 1 Capital + Tier 2 Capital) (Standardized Approach)
Adjustment for excess of eligible credit reserves over expected credit losses(10)
Total Tier 2 Capital (Advanced Approaches)
Total Capital (Tier 1 Capital + Tier 2 Capital) (Advanced Approaches)
$
$
$
$
$
$
$
$
$
$
December 31,
2019
December 31,
2018
$
175,414 $
154
123
(679)
21,066
4,087
803
12,370
137,798 $
17,828 $
1,389
42
1,216
36
177,928
147
(728)
580
21,778
4,402
806
11,985
139,252
18,292
1,384
55
806
55
18,007 $
18,870
155,805 $
158,122
23,673 $
23,324
326
46
13,868
36
37,877 $
193,682 $
(12,345) $
25,532 $
181,337 $
321
47
13,681
55
37,318
195,440
(12,296)
25,022
183,144
(1)
Issuance costs of $152 million and $168 million related to noncumulative perpetual preferred stock outstanding at December 31, 2019 and 2018, respectively, are
excluded from common stockholders’ equity and netted against such preferred stock in accordance with Federal Reserve Board regulatory reporting requirements,
which differ from those under U.S. GAAP.
(2) Common Equity Tier 1 Capital is adjusted for accumulated net unrealized gains (losses) on cash flow hedges included in AOCI that relate to the hedging of items
not recognized at fair value on the balance sheet.
(3) The cumulative impact of changes in Citigroup’s own creditworthiness in valuing liabilities for which the fair value option has been elected, and own-credit
valuation adjustments on derivatives, are excluded from Common Equity Tier 1 Capital, in accordance with the U.S. Basel III rules.
Includes goodwill “embedded” in the valuation of significant common stock investments in unconsolidated financial institutions.
(4)
Footnotes continue on the following page.
34
(5) Of Citi’s $23.1 billion of net DTAs at December 31, 2019, $12.4 billion was includable in Common Equity Tier 1 Capital pursuant to the U.S. Basel III rules,
while $10.7 billion was excluded. Excluded from Citi’s Common Equity Tier 1 Capital as of December 31, 2019 was $12.4 billion of net DTAs arising from net
operating loss, foreign tax credit and general business credit carry-forwards, which was reduced by $1.7 billion of net DTLs primarily associated with goodwill
and certain other intangible assets. Separately, under the U.S. Basel III rules, goodwill and these other intangible assets are deducted net of associated DTLs in
arriving at Common Equity Tier 1 Capital. DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards are required to be
entirely deducted from Common Equity Tier 1 Capital under the U.S. Basel III rules. Citi’s DTAs arising from temporary differences are less than the 10%
limitation under the U.S. Basel III rules and therefore not subject to deduction from Common Equity Tier 1 Capital, but are subject to risk-weighting at 250%.
(6) Represents Citigroup Capital XIII trust preferred securities, which are permanently grandfathered as Tier 1 Capital under the U.S. Basel III rules.
(7) Banking entities are required to be in compliance with the Volcker Rule of the Dodd-Frank Act, which prohibits conducting certain proprietary investment
activities and limits their ownership of, and relationships with, covered funds. Accordingly, Citi is required by the Volcker Rule to deduct from Tier 1 Capital all
permitted ownership interests in covered funds.
(8) 50% of the minimum regulatory capital requirements of insurance underwriting subsidiaries must be deducted from each of Tier 1 Capital and Tier 2 Capital.
(9) Represents the amount of non-grandfathered trust preferred securities eligible for inclusion in Tier 2 Capital under the U.S. Basel III rules, which will be fully
phased-out of Tier 2 Capital by January 1, 2022.
(10) Under the Standardized Approach, the allowance for credit losses is eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any
excess allowance for credit losses being deducted in arriving at credit risk-weighted assets, which differs from the Advanced Approaches framework, in which
eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital to the extent that the excess reserves do not exceed 0.6% of
credit risk-weighted assets. The total amount of eligible credit reserves in excess of expected credit losses that were eligible for inclusion in Tier 2 Capital, subject
to limitation, under the Advanced Approaches framework was $1.5 billion and $1.4 billion at December 31, 2019 and 2018, respectively.
35
Citigroup Capital Rollforward
In millions of dollars
Common Equity Tier 1 Capital, beginning of period
Net income
Common and preferred stock dividends declared
Net increase in treasury stock
Net change in common stock and additional paid-in capital
Net change in foreign currency translation adjustment net of hedges, net of tax
Net change in unrealized gains (losses) on debt securities AFS, net of tax
Net change in defined benefit plans liability adjustment, net of tax
Net change in adjustment related to change in fair value of financial liabilities
attributable to own creditworthiness, net of tax
Net change in ASC 815—excluded component of fair value hedges
Net decrease in goodwill, net of related DTLs
Net decrease in identifiable intangible assets other than MSRs, net of related DTLs
Net decrease in defined benefit pension plan net assets
Net increase in DTAs arising from net operating loss, foreign tax credit and
general business credit carry-forwards
Other
Net decrease in Common Equity Tier 1 Capital
Common Equity Tier 1 Capital, end of period
(Standardized Approach and Advanced Approaches)
Additional Tier 1 Capital, beginning of period
Net decrease in qualifying perpetual preferred stock
Net increase in qualifying trust preferred securities
Net change in permitted ownership interests in covered funds
Other
Net decrease in Additional Tier 1 Capital
Tier 1 Capital, end of period
(Standardized Approach and Advanced Approaches)
Tier 2 Capital, beginning of period (Standardized Approach)
Net change in qualifying subordinated debt
Net change in eligible allowance for credit losses
Other
Net change in Tier 2 Capital (Standardized Approach)
Tier 2 Capital, end of period (Standardized Approach)
Total Capital, end of period (Standardized Approach)
Tier 2 Capital, beginning of period (Advanced Approaches)
Net change in qualifying subordinated debt
Net change in excess of eligible credit reserves over expected credit losses
Other
Net change in Tier 2 Capital (Advanced Approaches)
Tier 2 Capital, end of period (Advanced Approaches)
Total Capital, end of period (Advanced Approaches)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Three Months Ended
December 31, 2019
Twelve Months Ended
December 31, 2019
138,581 $
4,979
(1,401)
(5,119)
92
972
(160)
15
82
(27)
432
45
187
(883)
3
(783) $
137,798 $
19,452 $
(1,493)
—
49
(1)
(1,445) $
155,805 $
38,321 $
(408)
(46)
10
(444) $
37,877 $
193,682 $
25,963 $
(408)
(33)
10
(431) $
25,532 $
181,337 $
139,252
19,401
(5,512)
(17,290)
(98)
(321)
1,985
(552)
123
25
712
315
3
(385)
140
(1,454)
137,798
18,870
(464)
5
(410)
6
(863)
155,805
37,318
349
187
23
559
37,877
193,682
25,022
349
138
23
510
25,532
181,337
36
Citigroup Risk-Weighted Assets Rollforward (Basel III Standardized Approach)
In millions of dollars
Total Risk-Weighted Assets, beginning of period
Changes in Credit Risk-Weighted Assets
General credit risk exposures(1)
Repo-style transactions(2)
Securitization exposures
Equity exposures(3)
Over-the-counter (OTC) derivatives(4)
Other exposures(5)
Off-balance sheet exposures(6)
Net decrease in Credit Risk-Weighted Assets
Changes in Market Risk-Weighted Assets
Risk levels(7)
Model and methodology updates
Net decrease in Market Risk-Weighted Assets
Total Risk-Weighted Assets, end of period
Three Months Ended
December 31, 2019
Twelve Months Ended
December 31, 2019
$
1,197,050 $
1,174,448
2,821
(19,681)
(277)
1,590
(13,283)
4,639
(2,618)
(26,809) $
(4,718) $
1,000
(3,718) $
10,376
(7,420)
980
5,013
(6,669)
9,290
(12,802)
(1,232)
(6,847)
154
(6,693)
1,166,523 $
1,166,523
$
$
$
$
(1) General credit risk exposures include cash and balances due from depository institutions, securities, and loans and leases. General credit risk exposures increased
during the three and 12 months ended December 31, 2019, mainly driven by growth in commercial and retail loans and increases in investment securities.
(2) Repo-style transactions include repurchase and reverse repurchase transactions as well as securities borrowing and securities lending transactions. Repo-style
transactions decreased during the three and 12 months ended December 31, 2019, driven by volume reduction and matured deals.
(3) Equity exposures increased during the three months ended December 31, 2019, primarily due to increased exposures from existing investments. Equity exposures
increased during the 12 months ended December 31, 2019, primarily due to an increase in market value of investments and increased exposures from existing
investments.
(4) OTC derivatives decreased during the three and 12 months ended December 31, 2019, primarily due to decreases in notionals.
(5) Other exposures include cleared transactions, unsettled transactions and other assets. Other exposures increased during the three months ended December 31,
2019, primarily due to increases in centrally cleared derivatives and various other assets. Other exposures increased during the 12 months ended December 31,
2019, primarily due to the recognition of right-of-use (ROU) assets in accordance with the adoption of ASU No. 2016-02, Leases (Topic 842), effective January 1,
2019, as well as increases in centrally cleared derivatives and various other assets.
(6) Off-balance sheet exposures decreased during the three months ended December 31, 2019, primarily due to a decrease in standby letters of credit. Off-balance
sheet exposures decreased during the 12 months ended December 31, 2019, primarily due to decreases in standby letters of credit and loan commitments.
(7) Risk levels decreased during the three months ended December 31, 2019, primarily due to a decrease in exposure levels subject to Stressed Value at Risk and
Incremental Risk charges. Risk levels decreased during the 12 months ended December 31, 2019, primarily due to a decrease in exposure levels subject to
Stressed Value at Risk.
As set forth in the table above, total risk-weighted assets
under the Basel III Standardized Approach decreased from
year-end 2018, due to decreases in market risk-weighted assets
and credit risk-weighted assets. Market risk-weighted assets
decreased from year-end 2018 primarily due to a net reduction
in exposure levels. The decrease in credit risk-weighted assets
was primarily due to decreases in standby letters of credit and
loan commitments as well as volume reduction and matured
deals in repo-style transactions and changes in OTC derivative
trade activity, partially offset by increases in loan exposures,
the recognition of right-of-use (ROU) assets in accordance
with the adoption of ASU No. 2016-02, Leases (Topic 842),
effective January 1, 2019, and an increase in market value of
investments.
37
Citigroup Risk-Weighted Assets Rollforward (Basel III Advanced Approaches)
In millions of dollars
Total Risk-Weighted Assets, beginning of period
Changes in Credit Risk-Weighted Assets
Retail exposures(1)
Wholesale exposures(2)
Repo-style transactions(3)
Securitization exposures(4)
Equity exposures(5)
Over-the-counter (OTC) derivatives(6)
Derivatives CVA(7)
Other exposures(8)
Supervisory 6% multiplier
Net change in Credit Risk-Weighted Assets
Changes in Market Risk-Weighted Assets
Risk levels(9)
Model and methodology updates
Net decrease in Market Risk-Weighted Assets
Net decrease in Operational Risk-Weighted Assets(10)
Total Risk-Weighted Assets, end of period
Three Months Ended
December 31, 2019
Twelve Months Ended
December 31, 2019
$
1,145,091 $
1,131,933
6,140
(3,007)
(8,761)
153
1,764
(2,992)
(6,651)
8,394
101
(4,859) $
(4,808) $
1,000
(3,808) $
(871) $
1,135,553 $
4,959
(9,288)
(3,184)
5,889
4,924
8,508
(15,034)
14,282
1,565
12,621
(6,824)
154
(6,670)
(2,331)
1,135,553
$
$
$
$
$
(1) Retail exposures increased during the three months ended December 31, 2019, primarily due to seasonal spending for qualifying revolving (cards) exposures.
Retail exposures increased during the 12 months ended December 31, 2019, primarily due to increases in consumer loans, partially offset by decreases due to
annual parameter updates.
(2) Wholesale exposures decreased during the three months ended December 31, 2019, primarily due to decreases in commercial loans partially offset by increases in
investment securities. Wholesale exposures decreased during the 12 months ended December 31, 2019, primarily due to annual model parameter updates
reflecting Citi’s loss experience, partially offset by increases in commercial loans and investment securities.
(3) Repo-style transactions include repurchase and reverse repurchase transactions as well as securities borrowing and securities lending transactions. Repo-style
transactions decreased during the three and 12 months ended December 31, 2019, driven by volume reduction and matured deals.
(4) Securitization exposures increased during the 12 months ended December 31, 2019, due to increased exposures from existing deals.
(5) Equity exposures increased during the three months ended December 31, 2019, primarily due to increased exposures from existing investments. Equity exposures
increased during the 12 months ended December 31, 2019, primarily due to an increase in market value of investments and increased exposures from existing
investments.
(6) OTC derivatives decreased during the three months ended December 31, 2019, primarily due to a reduction in notionals. OTC derivatives increased during the 12
months ended December 31, 2019, primarily due to approved model changes, partially offset by a reduction in notionals.
(7) Derivatives CVA decreased during the three months ended December 31, 2019, primarily due to exposure decreases and changes in credit spreads. Derivatives
CVA decreased during the 12 months ended December 31, 2019, primarily due to approved model changes, exposure decreases and changes in credit spreads.
(8) Other exposures include cleared transactions, unsettled transactions, assets other than those reportable in specific exposure categories and non-material portfolios.
Other exposures increased during the three months ended December 31, 2019, primarily due to increases in centrally cleared derivatives and various other assets.
Other exposures increased during the 12 months ended December 31, 2019, primarily due to the recognition of ROU assets in accordance with the adoption of
ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019, and increases in centrally cleared derivatives and various other assets.
(9) Risk levels decreased during the three months ended December 31, 2019, primarily due to a decrease in exposure levels subject to Stressed Value at Risk and
Incremental Risk charges. Risk levels decreased during the 12 months ended December 31, 2019, primarily due to a decrease in exposure levels subject to
Stressed Value at Risk.
(10) Operational risk-weighted assets decreased during the 12 months ended December 31, 2019, primarily due to changes in operational loss severity and frequency.
decrease in operational risk-weighted assets was primarily due
to changes in operational loss severity and frequency.
As set forth in the table above, total risk-weighted assets
under the Basel III Advanced Approaches increased from year-
end 2018 primarily due to an increase in credit risk-weighted
assets, partially offset by decreases in market and operational
risk-weighted assets. The increase in credit risk-weighted
assets was primarily due to recognition of ROU assets in
accordance with the adoption of ASU 2016-02, changes in
OTC derivatives trade activities and increases in securitization
exposures, loan exposures and equity exposures, partially
offset by decreases in derivatives CVA and wholesale
exposures mainly due to annual model parameter updates.
Market risk-weighted assets decreased from year-end 2018,
primarily due to a net reduction in exposure levels. The
38
Supplementary Leverage Ratio
The following table sets forth Citi’s Supplementary Leverage
ratio and related components as of December 31, 2019,
September 30, 2019 and December 31, 2018:
In millions of dollars, except ratios
Tier 1 Capital
Total Leverage Exposure
On-balance sheet assets(1)
Certain off-balance sheet exposures:(2)
Potential future exposure on derivative contracts
Effective notional of sold credit derivatives, net(3)
Counterparty credit risk for repo-style transactions(4)
Unconditionally cancelable commitments
Other off-balance sheet exposures
Total of certain off-balance sheet exposures
Less: Tier 1 Capital deductions
Total Leverage Exposure
Supplementary Leverage ratio
December 31, 2019
September 30, 2019 December 31, 2018
$
$
$
$
155,805
1,996,617
169,478
38,481
23,715
70,870
248,308
550,852
39,578
2,507,891
6.21%
$
$
$
$
158,033
2,000,082
176,546
41,328
24,362
70,648
246,793
559,677
39,407
2,520,352
6.27%
$
$
$
$
158,122
1,936,791
187,130
49,402
23,715
69,630
238,805
568,682
39,832
2,465,641
6.41%
(1) Represents the daily average of on-balance sheet assets for the quarter.
(2) Represents the average of certain off-balance sheet exposures calculated as of the last day of each month in the quarter.
(3) Under the U.S. Basel III rules, banking organizations are required to include in Total Leverage Exposure the effective notional amount of sold credit derivatives,
with netting of exposures permitted if certain conditions are met.
(4) Repo-style transactions include repurchase or reverse repurchase transactions as well as securities borrowing or securities lending transactions.
As set forth in the table above, Citigroup’s Supplementary
Leverage ratio was 6.2% at December 31, 2019, compared to
6.3% at September 30, 2019 and 6.4% at December 31, 2018.
The quarter-over-quarter decrease was primarily driven by a
reduction in Tier 1 Capital resulting from the return of $6.2
billion of capital to common shareholders and a preferred
stock redemption, partially offset by net income and beneficial
net movements in AOCI, as well as a decrease in average off-
balance sheet exposures. The year-over-year decrease was
primarily driven by a reduction in Tier 1 Capital resulting
from the return of $22.3 billion of capital to common
shareholders, as well as an increase in average on-balance
sheet assets, partially offset by net income and beneficial net
movements in AOCI, as well as a decrease in average off-
balance sheet exposures.
39
Capital Resources of Citigroup’s Subsidiary U.S.
Depository Institutions
Citigroup’s subsidiary U.S. depository institutions are also
subject to regulatory capital standards issued by their
respective primary federal bank regulatory agencies, which are
similar to the standards of the Federal Reserve Board.
The following tables set forth the capital components and
ratios for Citibank, Citi’s primary subsidiary U.S. depository
institution, as of December 31, 2019, September 30, 2019 and
December 31, 2018:
Effective
Minimum
Requirement(1)
In millions of dollars, except ratios
2019
2018
Advanced Approaches
Standardized Approach
Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
Common Equity Tier 1 Capital
$ 130,791
$
130,067
$
129,091
$ 130,791
$
130,067
$
129,091
Tier 1 Capital
Total Capital (Tier 1 Capital +
Tier 2 Capital)(2)
Total Risk-Weighted Assets
Credit Risk
Market Risk
Operational Risk
Common Equity Tier 1 Capital
ratio(3)(4)
Tier 1 Capital ratio(3)(4)
Total Capital ratio(3)(4)
132,918
132,198
131,215
132,918
132,198
131,215
145,989
932,432
144,829
946,433
144,358
926,229
157,324
155,735
155,154
1,019,916
1,047,550
1,032,809
$ 664,828
$
664,014
$
654,962
$ 990,319
$ 1,005,337
$
994,294
29,167
238,437
41,867
240,552
38,144
233,123
29,597
—
42,213
38,515
—
—
7.0% 6.375%
14.03%
13.74%
13.94%
12.82%
12.42%
12.50%
8.5
10.5
7.875
9.875
14.26
15.66
13.97
15.30
14.17
15.59
13.03
15.43
12.62
14.87
12.70
15.02
In millions of dollars, except ratios
Quarterly Adjusted Average Total Assets(5)
Total Leverage Exposure(6)
Tier 1 Leverage ratio(4)
Supplementary Leverage ratio(4)
Effective
Minimum
Requirement
Dec. 31, 2019
Sept. 30, 2019
Dec. 31, 2018
$
1,459,851
$
1,451,352
$
4.0%
6.0
1,951,701
1,952,628
9.10%
6.81
9.11%
6.77
1,398,875
1,914,663
9.38%
6.85
(1) Citibank’s effective minimum risk-based capital requirements during 2019 and 2018 are inclusive of the 100% and 75% phase-in, respectively, of the 2.5% Capital
Conservation Buffer (all of which must be composed of Common Equity Tier 1 Capital).
(2) Under the Advanced Approaches framework, eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital to the extent that
the excess reserves do not exceed 0.6% of credit risk-weighted assets, which differs from the Standardized Approach in which the allowance for credit losses is
eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any excess allowance for credit losses being deducted in arriving at credit
risk-weighted assets.
(3) Citibank’s reportable Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios were the lower derived under the Basel III Standardized Approach for
all periods presented.
(4) Citibank must maintain minimum Common Equity Tier 1 Capital, Tier 1 Capital, Total Capital and Tier 1 Leverage ratios of 6.5%, 8.0%, 10.0% and 5.0%,
respectively, to be considered “well capitalized” under the revised Prompt Corrective Action (PCA) regulations applicable to insured depository institutions as
established by the U.S. Basel III rules. Citibank must also maintain a minimum Supplementary Leverage ratio of 6.0% to be considered “well capitalized.”
(5) Tier 1 Leverage ratio denominator. Represents quarterly average total assets less amounts deducted from Tier 1 Capital.
(6) Supplementary Leverage ratio denominator.
As indicated in the table above, Citibank’s capital ratios at
December 31, 2019 were in excess of the stated and effective
minimum requirements under the U.S. Basel III rules. In
addition, Citibank was also “well capitalized” as of December
31, 2019.
40
Impact of Changes on Citigroup and Citibank Capital Ratios
The following tables present the estimated sensitivity of
Citigroup’s and Citibank’s capital ratios to changes of $100
million in Common Equity Tier 1 Capital, Tier 1 Capital and
Total Capital (numerator), and changes of $1 billion in
Advanced Approaches and Standardized Approach risk-
weighted assets and quarterly adjusted average total assets, as
well as Total Leverage Exposure (denominator), as of
December 31, 2019. This information is provided for the
purpose of analyzing the impact that a change in Citigroup’s
or Citibank’s financial position or results of operations could
have on these ratios. These sensitivities only consider a single
change to either a component of capital, risk-weighted assets,
quarterly adjusted average total assets or Total Leverage
Exposure. Accordingly, an event that affects more than one
factor may have a larger basis point impact than is reflected in
these tables.
Common Equity
Tier 1 Capital ratio
Impact of
$100 million
change in
Common
Equity
Tier 1 Capital
Impact of
$1 billion
change in
risk-
weighted
assets
0.9
0.9
1.1
1.0
1.1
1.0
1.5
1.3
Tier 1 Capital ratio
Total Capital ratio
Impact of
$100 million
change in
Tier 1 Capital
0.9
0.9
1.1
1.0
Impact of
$1 billion
change in
risk-
weighted
assets
1.2
1.1
1.5
1.3
Impact of
$100 million
change in
Total Capital
0.9
0.9
1.1
1.0
Impact of
$1 billion
change in
risk-
weighted
assets
1.4
1.4
1.7
1.5
In basis points
Citigroup
Advanced Approaches
Standardized Approach
Citibank
Advanced Approaches
Standardized Approach
In basis points
Citigroup
Citibank
Tier 1 Leverage ratio
Supplementary Leverage ratio
Impact of
$1 billion
change in
quarterly
adjusted
average total
assets
0.4
0.6
Impact of
$100 million
change in
Tier 1 Capital
0.4
0.5
Impact of
$1 billion
change in
Total
Leverage
Exposure
0.2
0.3
Impact of
$100 million
change in
Tier 1 Capital
0.5
0.7
Citigroup Broker-Dealer Subsidiaries
At December 31, 2019, Citigroup Global Markets Inc., a U.S.
broker-dealer registered with the SEC that is an indirect
wholly owned subsidiary of Citigroup, had net capital,
computed in accordance with the SEC’s net capital rule, of
$10.1 billion, which exceeded the minimum requirement by
$6.9 billion.
Moreover, Citigroup Global Markets Limited, a broker-
dealer registered with the United Kingdom’s Prudential
Regulation Authority (PRA) that is also an indirect wholly
owned subsidiary of Citigroup, had total capital of $21.4
billion at December 31, 2019, which exceeded the PRA's
minimum regulatory capital requirements.
In addition, certain of Citi’s other broker-dealer
subsidiaries are subject to regulation in the countries in which
they do business, including requirements to maintain specified
levels of net capital or its equivalent. Citigroup’s other
principal broker-dealer subsidiaries were in compliance with
their regulatory capital requirements at December 31, 2019.
41
Total Loss-Absorbing Capacity (TLAC)
The table below details Citi’s eligible external TLAC and LTD
amounts and ratios, and each effective minimum TLAC and
long-term debt (LTD) ratio requirement, as well as the surplus
amount in dollars in excess of each requirement.
As of December 31, 2019, Citi exceeded each of the
minimum TLAC and LTD requirements, resulting in a $14
billion surplus above its binding TLAC requirement of LTD as
a percentage of Total Leverage Exposure.
In billions of dollars, except ratios
December 31, 2019
External
TLAC
LTD
Total eligible amount
$
289
$
127
% of Standardized Approach risk-
weighted assets
Effective minimum requirement(1)(2)
Surplus amount
% of Total Leverage Exposure
Effective minimum requirement
Surplus amount
24.7%
22.5
26
$
10.9%
9.0
22
11.5%
5.1%
9.5
50
$
4.5
14
$
$
(1) External TLAC includes method 1 GSIB surcharge of 2.0%.
(2) LTD includes method 2 GSIB surcharge of 3.0%.
For additional information on Citi’s TLAC-related
requirements, see “Liquidity Risk—Long-Term Debt—Total
Loss-Absorbing Capacity (TLAC)” and “Risk Factors—
Compliance, Conduct and Legal Risks” below.
Regulatory Capital Treatment—Implementation and
Transition of the Current Expected Credit Losses (CECL)
Methodology
In February 2019, the U.S. banking agencies issued a final rule
that provides banking organizations an optional phase-in over
a three-year period of the “Day One” adverse regulatory
capital effects resulting from adoption of the CECL
methodology.
The rule is in recognition of the issuance by the Financial
Accounting Standards Board of ASU No. 2016-13, Financial
Instruments—Credit Losses (Topic 326). The ASU introduces
a new credit loss methodology, the CECL methodology, which
requires earlier recognition of credit losses while also
providing additional transparency about credit risk. The ASU
was effective for Citi as of January 1, 2020. For additional
information regarding Citi’s adoption of the CECL
methodology, see Note 1 to the Consolidated Financial
Statements.
Citi and Citibank have elected the transition provisions
provided by the U.S. banking agencies’ rule. Accordingly, the
“Day One” regulatory capital effects resulting from adoption
of the CECL methodology commenced phase-in on January 1,
2020, and will be fully reflected in Citi’s regulatory capital as
of January 1, 2023. Based on Citi’s regulatory capital position
as of December 31, 2019, the estimated impact of adopting the
CECL methodology would reduce Citi’s Common Equity Tier
1 Capital ratio under the Standardized Approach by
approximately 25 basis points in total, or approximately 6
42
basis points per year on January 1 of each year over the
transition period. The actual basis point impact of adopting
CECL on Citi’s regulatory capital ratios may change, if Citi’s
capital position changes over time.
The Federal Reserve Board has issued a statement that it
plans to maintain its current framework for calculating
allowances on loans in the supervisory stress test for the 2020
and 2021 supervisory stress test cycles, and to evaluate
appropriate future enhancements to this framework as best
practices for implementing CECL are developed. However,
banking organizations are required to incorporate CECL into
their stress testing methodologies, data and disclosure
beginning in the cycle coinciding with their first full year of
CECL adoption (2020 for Citi).
Regulatory Capital Standards Developments
The U.S. banking agencies and the Basel Committee issued
numerous proposed and final rules on a variety of topics in
2019. In the U.S., the most significant rule finalized in 2019
relates to the calculation of risk-weighted assets for derivative
contracts, while the Stress Capital Buffer proposal from 2018
has not yet been finalized. The Basel Committee, among other
things, finalized revisions to the minimum capital
requirements for market risk and proposed revisions to its
credit valuation adjustment risk framework.
U.S. Banking Agencies
Standardized Approach for Counterparty Credit Risk
In November 2019, the U.S. banking agencies released a final
rule to introduce the Standardized Approach for Counterparty
Credit Risk (SA-CCR) in the U.S. SA-CCR will replace the
Current Exposure Method (CEM), which is the current
methodology used to calculate risk-weighted assets for all
derivative contracts under the Standardized Approach, as well
as risk-weighted assets for derivative contracts under the
Advanced Approaches in cases where internal models are not
used. In addition, SA-CCR would replace CEM in numerous
other instances throughout the regulatory framework,
including but not limited to the Supplementary Leverage
Ratio, single counterparty credit limits and legal lending
limits.
Under SA-CCR, a banking organization would calculate
the exposure amount of its derivative contracts at the netting
set level. Multiple derivative contracts would generally be
considered to be under the same netting set as long as each
derivative contract is subject to the same qualifying master
netting agreement. SA-CCR also introduces the concept of
hedging sets, which would allow a banking organization to
fully or partially net derivative contracts within the same
netting set that share similar risk factors. Moreover, SA-CCR
incorporates updated supervisory and maturity factors to
calculate the potential future exposure of a derivative contract,
and provides for improved recognition of collateral. Under the
proposal, the exposure amount of a netting set would be equal
to an alpha factor of 1.4 multiplied by the sum of the
replacement cost and potential future exposure of the netting
set.
The mandatory compliance date of the final rule is
January 1, 2022, with early adoption permitted beginning
April 1, 2020. Citi’s SA-CCR implementation efforts are
already underway. Citi is currently evaluating a decision on its
intended implementation date for SA-CCR, including
consideration of the impact of SA-CCR on both Citigroup’s
and Citibank’s regulatory capital ratios.
Stress Capital Buffer
In April 2018, the Federal Reserve Board issued a proposal
that is designed to more closely integrate the results of the
quantitative assessment in CCAR with firms’ ongoing
minimum capital requirements under the U.S. Basel III rules.
Specifically, the proposed rule would replace the existing
Capital Conservation Buffer, currently fixed at 2.5% under the
U.S. Basel III rules, with (i) a variable buffer known as the
Stress Capital Buffer (as described below), plus (ii) for U.S.
GSIBs, the GSIB’s then-current GSIB surcharge, plus (iii) the
Countercyclical Capital Buffer, if any. These three
components would constitute the new Capital Conservation
Buffer under the Standardized Approach. The Stress Capital
Buffer (SCB) would be based upon the maximum decline in a
bank holding company’s Common Equity Tier 1 Capital ratio
under the severely adverse scenario of the supervisory stress
test. Under the April 2018 proposal, the SCB would be subject
to a floor of 2.5%.
The proposed rule would also modify certain assumptions
currently required in supervisory stress tests, including
continued capital distributions during the nine-quarter capital
planning horizon and balance sheet growth assumptions.
A final rule has not yet been issued. Senior staff at the
Federal Reserve Board have indicated publicly that they plan
to finalize certain components of the proposal for application
in the 2020 CCAR cycle, and that they may re-propose certain
other elements of the proposal to better balance the need to
preserve the dynamism of stress testing while reducing
unnecessary volatility, among other things. Senior staff at the
Federal Reserve Board have also indicated publicly that they
are considering two options in place of the “dividend add-on,”
which was a component of the SCB under the April 2018
proposal: setting the Countercyclical Capital Buffer at a higher
baseline level during normal times, or raising the floor of the
SCB higher than 2.5%. The potential re-proposal may also
address certain other elements of the original proposal, such as
the relative timing between stress testing results and the
submission of a firm’s capital plan, and the consequences of
breaching a buffer.
TLAC Holdings
In April 2019, the U.S. banking agencies released a proposal
that would create a new regulatory capital deduction
applicable to Advanced Approaches banking organizations for
certain investments in covered debt instruments issued by
GSIBs. The proposed rule is intended to reduce systemic risk
by creating an incentive for Advanced Approaches banking
organizations to limit their exposure to GSIBs.
Under the U.S. Basel III rules, investments in the capital
of unconsolidated financial institutions are subject to
deduction to the extent that they exceed certain thresholds.
43
Under the proposed rule, an investment in a “covered debt
instrument” would be treated as an investment in a Tier 2
capital instrument and, therefore, would be subject to
deduction from the Advanced Approaches banking
organization’s own Tier 2 Capital in accordance with the
existing rules for investments in unconsolidated financial
institutions. Covered debt instruments would include
unsecured debt instruments that are “eligible debt securities”
for purposes of the TLAC rule, or that are pari passu or
subordinated to such securities, in addition to certain
unsecured debt instruments issued by foreign GSIBs.
To support a deep and liquid market for covered debt
instruments, the proposed rule provides an exception from the
approach described above for covered debt instruments held
for 30 days or less for market-making purposes, if the
aggregate amount of such debt instruments does not exceed
5% of the banking organization’s Common Equity Tier 1
Capital.
The proposed rule does not specify a proposed effective
date for the new regulatory capital deduction. If adopted as
proposed, Citi does not expect the proposed rule to have a
material impact on its regulatory capital.
Basel Committee
Revisions to the Minimum Capital Requirements for
Market Risk
In January 2019, the Basel Committee issued a final standard
that revises the market risk capital framework—the so-called
Fundamental Review of the Trading Book, or FRTB. The final
rule revises the assessment process under the Advanced
Approaches to determine whether a bank’s internal risk
management models appropriately reflect the risks of
individual trading desks, and clarifies the requirements for
identification of risk factors that are eligible for internal
modeling. In addition, the risk weights for general interest rate
risk and foreign exchange risk under the Standardized
Approach have been recalibrated.
If the U.S. banking agencies were to adopt the Basel
Committee’s revised market risk framework unchanged, Citi
believes its market risk-weighted assets could increase
significantly. The ultimate impact on Citi, however, will
depend upon the specific provisions of any final rule.
Leverage Ratio Treatment of Client-Cleared Derivatives
In June 2019, the Basel Committee on Banking Supervision
issued a final standard that revises its leverage ratio
framework to align the leverage ratio measurement of client-
cleared derivatives with the measurement as determined per
the Basel Committee’s standardized approach for measuring
counterparty credit risk exposures, as used for risk-based
capital requirements. Under the Basel Committee’s leverage
ratio framework, the leverage ratio exposure measure is
generally not adjusted for physical or financial collateral,
guarantees or other credit risk mitigation techniques, including
initial margin received from clients. However, the final rule
permits both cash and non-cash forms of initial margin and
variation margin received from clients to mitigate replacement
cost and potential future exposure for client-cleared
derivatives only. The Basel Committee stated in the rule that
this revision balances the robustness of the leverage ratio as a
non-risk-based safeguard against unsustainable sources of
leverage with the policy objective of promoting central
clearing of standardized derivative contracts.
In the U.S., the Basel Committee’s leverage ratio
framework and leverage ratio exposure measure are most
closely aligned with the Supplementary Leverage Ratio and
Total Leverage Exposure, respectively. As part of the SA-CCR
final rule discussed previously, the U.S. agencies amended the
Supplementary Leverage Ratio requirements in a manner
similar to the Basel Committee. This particular aspect of the
U.S. SA-CCR final rule will likely benefit Citi’s
Supplementary Leverage Ratio modestly upon
implementation.
Credit Valuation Adjustment Risk—Targeted Revisions
In November 2019, the Basel Committee on Banking
Supervision issued a consultative document that proposes a
targeted set of revisions to the credit valuation adjustment
(CVA) risk framework previously finalized in December 2017.
The revisions aim to align the revised CVA risk framework, in
part, with the revised market risk capital framework that was
finalized in January 2019. The Basel Committee also sought
feedback on a possible adjustment to the overall calibration of
capital requirements calculated under their CVA risk
framework.
The U.S. agencies may consider revisions to the CVA risk
framework under the U.S. Basel III rules in the future, based
upon any revisions adopted by the Basel Committee.
44
Tangible Common Equity, Book Value Per Share, Tangible
Book Value Per Share and Returns on Equity
Tangible common equity (TCE), as defined by Citi, represents
common stockholders’ equity less goodwill and identifiable
intangible assets (other than MSRs). Other companies may
calculate TCE in a different manner. TCE, tangible book value
(TBV) per share and return on average TCE are non-GAAP
financial measures. Citi believes the presentation of TCE,
TBV per share and return on average TCE provides alternate
measures of capital strength and performance that are
commonly used by investors and industry analysts.
In millions of dollars or shares, except per share amounts
Total Citigroup stockholders’ equity
Less: Preferred stock
Common stockholders’ equity
Less:
Goodwill
Identifiable intangible assets (other than MSRs)
$
$
2019
193,242
17,980
175,262
22,126
4,327
Goodwill and identifiable intangible assets (other than
MSRs) related to assets held-for-sale (HFS)
—
Tangible common equity (TCE)
Common shares outstanding (CSO)
Book value per share (common equity/CSO)
Tangible book value per share (TCE/CSO)
$
$
148,809
2,114.1
82.90
70.39
In millions of dollars
2019
At December 31,
2018
2017
2016
2015
$
$
$
$
$
$
$
$
196,220
18,460
177,760
22,046
4,636
—
151,078
2,368.5
75.05
63.79
$
$
$
$
200,740
19,253
181,487
22,256
4,588
32
154,611
2,569.9
70.62
60.16
$
$
$
$
225,120
19,253
205,867
21,659
5,114
72
179,022
2,772.4
74.26
64.57
For the Year Ended December 31,
2017(1)
2016
2018
221,857
16,718
205,139
22,349
3,721
68
179,001
2,953.3
69.46
60.61
2015
16,473
204,188
176,505
Net income available to common shareholders
$
18,292
$
16,871
$
14,583
$
13,835
$
Average common stockholders’ equity
Average TCE
Return on average common stockholders’ equity
Return on average TCE (RoTCE)(2)
177,363
150,994
10.3%
12.1
179,497
153,343
9.4%
11.0
207,747
180,458
209,629
182,135
7.0%
8.1
6.6%
7.6
8.1%
9.3
(1) Year ended December 31, 2017 excludes the one-time impact of Tax Reform. For a reconciliation of these measures, see “Significant Accounting Policies and
Significant Estimates—Income Taxes” below.
(2) RoTCE represents net income available to common shareholders as a percentage of average TCE.
45
RISK FACTORS
The following discussion sets forth what management
currently believes could be the most significant risks and
uncertainties that could impact Citi’s businesses, results of
operations and financial condition. Other risks and
uncertainties, including those not currently known to Citi or its
management, could also negatively impact Citi’s businesses,
results of operations and financial condition. Thus, the
following should not be considered a complete discussion of
all of the risks and uncertainties Citi may face.
STRATEGIC RISKS
Citi’s Ability to Return Capital to Common Shareholders
Consistent with Its Capital Planning Efforts and Targets
Substantially Depends on the CCAR Process and the Results
of Regulatory Stress Tests.
Citi’s ability to return capital to its common shareholders
consistent with its capital planning efforts and targets, whether
through its common stock dividend or through a share
repurchase program, substantially depends, among other
things, on regulatory approval, including through the CCAR
process required by the Federal Reserve Board (FRB) and the
supervisory stress tests required under the Dodd-Frank Act.
The ability to return capital also depends on Citi’s results of
operations and effectiveness in managing its level of risk-
weighted assets and GSIB surcharge. Citi’s ability to
accurately predict, interpret or explain to stakeholders the
outcome of the CCAR process, and thus to address any market
or investor perceptions, may be limited as the FRB’s
assessment of Citi’s capital adequacy is conducted using the
FRB’s proprietary stress test models. In addition, all CCAR
firms, including Citi, will continue to be subject to a rigorous
evaluation of their capital planning practices, including, but
not limited to, governance, risk management and internal
controls. For additional information on Citi’s return of capital
to common shareholders in 2019 as well as the CCAR process,
supervisory stress test requirements and GSIB surcharge, see
“Capital Resources—Overview” and “Capital Resources—
Current Regulatory Capital Standards—Stress Testing
Component of Capital Planning” above and the risk
management risk factor below.
The FRB has stated that it expects leading capital
adequacy practices to continue to evolve and to likely be
determined by the FRB each year as a result of its cross-firm
review of capital plan submissions. Similarly, the FRB has
indicated that, as part of its stated goal to continually evolve
its annual stress testing requirements, several parameters of
the annual stress testing process may continue to be altered,
including the severity of the stress test scenario, the FRB
modeling of Citi’s balance sheet and the addition of
components deemed important by the FRB.
Citi will be required to incorporate the current expected
credit losses (CECL) methodology into its stress testing
methodologies, data and disclosure beginning with the 2020
supervisory stress test cycle. The FRB has stated that it plans
to maintain its current framework for calculating allowances
on loans in the supervisory stress test for the 2020 and 2021
46
supervisory stress test cycles, and to evaluate appropriate
future enhancements to this framework as best practices for
implementing CECL are developed. The impacts on Citi’s
capital adequacy of incorporating CECL on an ongoing basis,
and of other potential regulatory changes in the FRB’s stress
testing methodologies, remain unclear. For additional
information regarding the CECL methodology, including the
transition provisions related to the “Day One” adverse
regulatory capital effects resulting from adoption of the CECL
methodology, see “Capital Resources—Current Regulatory
Capital Standards—Regulatory Capital Treatment—
Implementation and Transition of the Current Expected Credit
Losses (CECL) Methodology” above and Note 1 to the
Consolidated Financial Statements.
In addition, in 2018, the FRB proposed to more closely
integrate the results of the quantitative assessment in CCAR
with firms’ ongoing minimum capital requirements under the
U.S. Basel III rules. Proposed changes to the stress testing
regime include, among others, introduction of a firm-specific
“stress capital buffer” (SCB), which would be equal to the
maximum decline in a firm’s Common Equity Tier 1 Capital
ratio under a severely adverse scenario over a nine-quarter
CCAR measurement period, subject to a minimum
requirement of 2.5%. The FRB proposed that the SCB would
replace the capital conservation buffer in Citi’s ongoing
regulatory capital requirements for Standardized Approach
capital ratios. The SCB would be calculated by the FRB using
its proprietary data and modeling of each firm’s results.
Accordingly, a firm’s SCB would change annually based on
the supervisory stress test results, thus potentially resulting in
year-to-year volatility in the calculation of the SCB. For
additional information on the FRB’s proposal, including
calculation of the SCB, see “Capital Resources—Regulatory
Capital Standards Developments” above.
Although various uncertainties exist regarding the extent
of, and the ultimate impact to Citi from, these changes to the
FRB’s stress testing and CCAR regimes, these changes would
likely increase the level of capital Citi is required or elects to
hold, including as part of Citi’s estimated management buffer,
thus potentially impacting the extent to which Citi is able to
return capital to shareholders.
Macroeconomic, Geopolitical and Other Challenges and
Uncertainties Globally Could Have a Negative Impact on
Citi’s Businesses and Results of Operations.
Citi has experienced, and could experience in the future,
negative impacts to its businesses and results of operations as
a result of macroeconomic, geopolitical and other challenges,
uncertainties and volatility. For example, protracted or
widespread trade tensions, including changes in trade policies,
which have resulted in retaliatory measures from other
countries, could result in a further reduction or realignment of
trade flows among countries and negatively impact businesses,
sectors and economic growth rates. In addition, adverse
developments or downturns in one or more of the world’s
larger economies would likely have a significant impact on the
global economy or the economies of other countries because
of global financial and economic linkages. Additional areas of
uncertainty include, among others, geopolitical tensions and
conflicts, natural disasters, pandemics and election outcomes.
For example, it was reported in January 2020 that a novel
strain of coronavirus which first surfaced in China, had spread
to several other countries, resulting in various uncertainties,
including the potential impact to Asian and global economies,
trade and consumer and corporate clients.
Governmental fiscal and monetary actions, or expected
actions, such as changes in interest rate policies and any
program implemented by a central bank to change the size of
its balance sheet, could significantly impact interest rates,
economic growth rates, the volatility of global financial
markets, foreign exchange rates and capital flows among
countries. For example, in 2019, the FRB reduced its
benchmark U.S. interest rate three times to add additional
stimulus to the U.S. economy. The interest rates on Citi loans
are typically based off or set at a spread over a benchmark
interest rate, including the U.S. benchmark interest rate, and
are therefore likely to decline as benchmark rates decline. By
contrast, the interest rates at which Citi pays depositors are
already low and unlikely to decline much further.
Consequently, declining loan rates and largely unchanged
deposit rates would likely compress Citi’s net interest revenue.
Citi’s net interest revenue could also be adversely affected due
to a flattening of the interest rate yield curve (e.g., a lower
spread between shorter-term versus longer-term interest rates),
as Citi, similar to other banks, typically pays interest on
deposits based on shorter-term interest rates and earns money
on loans typically based on longer-term interest rates. For
additional information on Citi’s interest rate risk, see
“Managing Global Risk—Market Risk—Net Interest Revenue
at Risk” below.
Despite the U.K.’s official withdrawal from the European
Union (EU) as of January 31, 2020, numerous uncertainties
continue to exist regarding the U.K.’s future relationship with
the EU. For example, the terms of the U.K. withdrawal
continue to be negotiated between the U.K. and the EU,
including their future trading relationship. It remains unclear
whether the parties will be able to agree on terms prior to the
end of the currently scheduled transition period on December
31, 2020. If no agreement is reached on terms of the exit in a
timely manner, it would likely result in what is commonly
referred to as a “no deal” or “hard” exit scenario. A hard exit
scenario would result in the U.K. and EU losing reciprocal
financial services license-passporting rights and require the
U.K. to deal with the EU as a third-country regime, but
without an equivalence regime or transition period in place. A
hard exit scenario could cause severe disruptions in the
movement of goods and services between the U.K. and EU
countries and negatively impact financial markets and the
U.K. and EU economies. Citi’s business and operations could
be impacted by these and other factors, including the
preparedness and reaction of clients, counterparties and
financial markets infrastructure. For information about Citi’s
actions to manage the U.K.’s exit from the EU, see “Managing
Global Risk—Strategic Risk—Exit of U.K. from EU” below.
Further, the economic and fiscal situations of some EU
countries have remained fragile, and concerns and
uncertainties remain in the U.K. and Europe over the resulting
effects of the U.K.’s exit from the EU.
47
These and additional global macroeconomic, geopolitical
and other challenges, uncertainties and volatilities have
negatively impacted, and could continue to negatively impact,
Citi’s businesses, results of operations and financial condition,
including its credit costs, revenues in its Markets and
securities services and other businesses, and AOCI (which
would in turn negatively impact Citi’s book and tangible book
value).
Citi, Its Management and Its Businesses Must Continually
Review, Analyze and Successfully Adapt to Ongoing
Regulatory and Legislative Uncertainties and Changes in the
U.S. and Globally.
Despite the adoption of final regulations and laws in numerous
areas impacting Citi and its businesses over the past several
years, Citi, its management and its businesses continually face
ongoing regulatory and legislative uncertainties and changes,
both in the U.S. and globally. While the areas of ongoing
regulatory and legislative uncertainties and changes facing Citi
are too numerous to list completely, various examples include,
but are not limited to (i) potential fiscal, monetary, regulatory
and other changes arising from the U.S. federal government
and others; (ii) potential changes to various aspects of the
regulatory capital framework applicable to Citi (see the capital
return risk factor and “Capital Resources—Regulatory Capital
Standards Developments” above); and (iii) the terms of and
other uncertainties resulting from the U.K.’s exit from the EU
(see the macroeconomic challenges and uncertainties risk
factor above). When referring to “regulatory,” Citi is including
both formal regulation and the views and expectations of its
regulators in their supervisory roles.
Ongoing regulatory and legislative uncertainties and
changes make Citi’s and its management’s long-term business,
balance sheet and budget planning difficult or subject to
change. For example, U.S. and other regulators globally have
implemented and continue to discuss various changes to
certain regulatory requirements, which would require ongoing
assessment by management as to the impact to Citi, its
businesses and business planning. Business planning is
required to be based on possible or proposed rules or
outcomes, which can change dramatically upon finalization, or
upon implementation or interpretive guidance from numerous
regulatory bodies worldwide, and such guidance can change.
Moreover, U.S. and international regulatory and
legislative initiatives have not always been undertaken or
implemented on a coordinated basis, and areas of divergence
have developed and continue to develop with respect to the
scope, interpretation, timing, structure or approach, leading to
inconsistent or even conflicting requirements, including within
a single jurisdiction. For example, in May 2019, the European
Commission adopted, as part of Capital Requirements
Directive V (CRD V), a new requirement for major banking
groups headquartered outside the EU (which would include
Citi) to establish an intermediate EU holding company where
the foreign bank has two or more institutions (broadly
meaning banks, broker-dealers and similar financial firms)
established in the EU. While in some respects the requirement
mirrors an existing U.S. requirement for non-U.S. banking
organizations to form U.S. intermediate holding companies,
the implementation of the EU holding company requirement
could lead to additional complexity with respect to Citi’s
resolution planning, capital and liquidity allocation and
efficiency in various jurisdictions. Regulatory and legislative
changes have also significantly increased Citi’s compliance
risks and costs (see the implementation and interpretation of
regulatory changes risk factor below).
Citi’s Continued Investments and Efficiency Initiatives May
Not Be as Successful as It Projects or Expects.
Citi continues to leverage its scale and make incremental
investments to deepen client relationships, increase revenues
and lower expenses. For example, Citi continues to make
investments to enhance its digital capabilities across the
franchise, including digital platforms and mobile and cloud-
based solutions, as well as make investments in risk
management and controls. Citi also has been investing in
higher-return businesses, such as the U.S. cards and wealth
management businesses in Global Consumer Banking (GCB)
and treasury and trade solutions, securities services and other
businesses in Institutional Clients Group (ICG). Citi also
continues to execute on its previously disclosed investment of
more than $1 billion in Citibanamex. Further, Citi has been
pursuing efficiency improvements through various technology
and digital initiatives, organizational simplification and
location strategies, which are intended to self-fund Citi’s
incremental investment initiatives as well as offset growth-
driven expenses.
Citi’s investments and efficiency initiatives are being
undertaken as part of its overall strategy to meet operational
and financial objectives, including, among others, those
relating to shareholder returns. There is no guarantee that these
or other initiatives Citi may pursue will be as productive or
effective as Citi expects, or at all. Citi’s investment and
efficiency initiatives may continue to evolve as its business
strategies and the market environment change, which could
make the initiatives more costly and more challenging to
implement, and limit their effectiveness. Moreover, Citi’s
ability to achieve expected returns on its investments and costs
savings depends, in part, on factors that it cannot control, such
as macroeconomic conditions, customer, client and competitor
actions and ongoing regulatory changes, among others.
Uncertainties Regarding the Transition Away from or
Possible Discontinuance of the London Inter-Bank Offered
Rate (LIBOR) or Any Other Interest Rate Benchmark Could
Have Adverse Consequences for Market Participants,
Including Citi.
LIBOR is extensively used as a “benchmark” or “reference
rate” across financial products and markets globally. The U.K.
Financial Conduct Authority (FCA) has raised questions about
the future sustainability of LIBOR, and, as a result, the FCA
obtained voluntary panel bank support to sustain LIBOR only
until 2021, and LIBOR is expected to be discontinued as early
as January 1, 2022. In addition, following guidance provided
by the Financial Stability Board, other regulators have
suggested reforming or replacing other benchmark rates with
alternative reference rates. Accordingly, the transition away
from and discontinuance of LIBOR or any other benchmark
48
rate presents various uncertainties, risks and challenges to
financial markets and institutions, including Citi. These
include, among others, the pricing, liquidity, value of, return
on and market for financial instruments and contracts that
reference LIBOR or any other applicable benchmark rate.
Citi issues, trades, holds or otherwise uses a substantial
amount of securities or products that reference LIBOR,
including, among others, derivatives, corporate loans,
commercial and residential mortgages, credit cards,
securitized products and other securities. The transition away
from and discontinuation of LIBOR presents significant
operational, legal, reputational or compliance, financial and
other risks to Citi. For example, LIBOR transition presents
various challenges related to contractual mechanics of existing
floating rate financial instruments and contracts that reference
LIBOR and mature after 2021. Certain of these instruments
and contracts do not provide for alternative benchmark rates,
which makes it unclear what the future benchmark rates would
be after LIBOR’s cessation. Even if the instruments and
contracts provide for a transition to alternative benchmark
rates, the new benchmark rates may significantly differ from
the prior rates. As a result, Citi may need to proactively
address any contractual uncertainties or rate differences in
such instruments and contracts, which would likely be both
time consuming and costly. In addition, the transition away
from and discontinuance of LIBOR could result in disputes,
including litigation, involving holders of outstanding
instruments and contracts that reference LIBOR, whether or
not the underlying documentation provides for alternative
benchmark rates. Citi will also need to develop significant
internal systems and infrastructure to transition to alternative
benchmark rates to both manage its businesses and support
clients.
For additional information about Citi’s ongoing
management of LIBOR transition risk, see “Managing Global
Risk—Strategic Risk—LIBOR Transition Risk” below.
Citi’s Ability to Utilize Its DTAs, and Thus Reduce the
Negative Impact of the DTAs on Citi’s Regulatory Capital,
Will Be Driven by Its Ability to Generate U.S. Taxable
Income.
At December 31, 2019, Citi’s net DTAs were $23.1 billion, net
of a valuation allowance of $6.5 billion, of which $10.7 billion
was excluded from Citi’s Common Equity Tier 1 Capital under
the U.S. Basel III rules (for additional information, see
“Capital Resources—Components of Citigroup Capital”
above). Of the net DTAs at December 31, 2019, $6.3 billion
related to foreign tax credit carry-forwards (FTCs), net of a
valuation allowance. The carry-forward utilization period for
FTCs is 10 years and represents the most time-sensitive
component of Citi’s DTAs. The FTC carry-forwards at
December 31, 2019 expire over the period of 2020–2029. Citi
must utilize any FTCs generated in the then-current-year tax
return prior to utilizing any carry-forward FTCs.
The accounting treatment for realization of DTAs,
including FTCs, is complex and requires significant judgment
and estimates regarding future taxable earnings in the
jurisdictions in which the DTAs arise and available tax
planning strategies. Citi’s ability to utilize its DTAs will
primarily be dependent upon Citi’s ability to generate U.S.
taxable income in the relevant tax carry-forward periods.
Although utilization of FTCs in any year is generally limited
to 21% of foreign source taxable income in that year, overall
domestic losses (ODL) that Citi has incurred in the past allow
it to reclassify domestic source income as foreign source.
Failure to realize any portion of the net DTAs would have a
corresponding negative impact on Citi’s net income and
financial returns.
Citi does not expect to be subject to the Base Erosion
Anti-Abuse Tax (BEAT), which, if applicable to Citi in any
given year, would have a significantly adverse effect on both
Citi’s net income and regulatory capital.
For additional information on Citi’s DTAs, including
FTCs, see “Significant Accounting Policies and Significant
Estimates—Income Taxes” below and Notes 1 and 9 to the
Consolidated Financial Statements.
Citi’s Interpretation or Application of the Complex Tax Laws
to Which It Is Subject Could Differ from Those of the
Relevant Governmental Authorities, Which Could Result in
the Payment of Additional Taxes, Penalties or Interest.
Citi is subject to various income-based and non-income-based
tax laws of the U.S. and its states and municipalities, as well
as the numerous non-U.S. jurisdictions in which it operates.
These tax laws are inherently complex and Citi must make
judgments and interpretations about the application of these
laws, including the Tax Cuts and Jobs Act (Tax Reform), to its
entities, operations and businesses. Citi’s interpretations and
application of the tax laws, including with respect to Tax
Reform, withholding, stamp, service and other non-income
taxes, could differ from that of the relevant governmental
taxing authority, which could result in the payment of
additional taxes, penalties or interest, which could be material.
Citi’s Presence in the Emerging Markets Subjects It to
Various Risks as well as Increased Compliance and
Regulatory Risks and Costs.
During 2019, emerging markets revenues accounted for
approximately 37% of Citi’s total revenues (Citi generally
defines emerging markets as countries in Latin America, Asia
(other than Japan, Australia and New Zealand), Central and
Eastern Europe, the Middle East and Africa). Although Citi
continues to pursue its target client strategy, Citi’s presence in
the emerging markets subjects it to a number of risks,
including limitations of hedges on foreign investments,
foreign currency volatility, sovereign volatility, election
outcomes, regulatory changes and political events, foreign
exchange controls, limitations on foreign investment,
sociopolitical instability (including from hyperinflation),
fraud, nationalization or loss of licenses, business restrictions,
sanctions or asset freezes, potential criminal charges, closure
of branches or subsidiaries and confiscation of assets. For
example, Citi operates in several countries that have, or have
had in the past, strict foreign exchange controls, such as
Argentina, that limit its ability to convert local currency into
U.S. dollars and/or transfer funds outside of those countries.
Moreover, if the economic situation in an emerging
markets country where Citi operates were to deteriorate below
49
a certain level, U.S. regulators may impose mandatory loan
loss or other reserve requirements on Citi, which would
increase its credit costs and decrease its earnings (see
“Strategic Risk—Country Risk—Argentina” below for
additional information on emerging markets risk). In addition,
political turmoil and instability have occurred in certain
regions and countries, including Asia, the Middle East and
Latin America, which have required, and may continue to
require, management time and attention and other resources
(such as monitoring the impact of sanctions on certain
emerging markets economies as well as impacting Citi’s
businesses and results of operations in affected countries).
Citi’s emerging markets presence also increases its
compliance and regulatory risks and costs. For example, Citi’s
operations in emerging markets, including facilitating cross-
border transactions on behalf of its clients, subject it to higher
compliance risks under U.S. regulations that are primarily
focused on various aspects of global corporate activities, such
as anti-money laundering regulations and the Foreign Corrupt
Practices Act. These risks can be more acute in less developed
markets and thus require substantial investment in compliance
infrastructure or could result in a reduction in certain of Citi’s
business activities. Any failure by Citi to comply with
applicable U.S. regulations, as well as the regulations in the
countries and markets in which it operates as a result of its
global footprint, could result in fines, penalties, injunctions or
other similar restrictions, many of which could negatively
impact Citi’s results of operations and reputation (see the
implementation and interpretation of regulatory changes and
legal and regulatory proceedings risk factors below).
A Deterioration in or Failure to Maintain Citi’s Co-
Branding or Private Label Credit Card Relationships,
Including as a Result of Any Bankruptcy or Liquidation,
Could Have a Negative Impact on Citi’s Results of
Operations or Financial Condition.
Citi has co-branding and private label relationships through its
Citi-branded cards and Citi retail services credit card
businesses with various retailers and merchants globally,
whereby in the ordinary course of business Citi issues credit
cards to customers of the retailers or merchants. Citi’s co-
branding and private label agreements provide for shared
economics between the parties and generally have a fixed
term. The five largest relationships, which include Sears,
constituted an aggregate of approximately 11% of Citi’s
revenues in 2019. These relationships could be negatively
impacted by, among other things, the general economic
environment, declining sales and revenues or other operational
difficulties of the retailer or merchant, termination due to a
contractual breach by Citi or by the retailer or merchant, or
other factors, including bankruptcies, liquidations,
restructurings, consolidations or other similar events.
Over the last several years, a number of U.S. retailers
have continued to experience declining sales, which has
resulted in significant numbers of store closures and, in a
number of cases, bankruptcies, as retailers attempt to cut costs
and reorganize. For example, despite its exit from bankruptcy
in 2019, Sears continues to close stores and experience
declining sales (for additional information regarding Citi retail
services’ co-brand and private label credit card products
relationship with Sears, see “Global Consumer Banking—
North America GCB” above). In addition, as has been widely
reported, competition among card issuers, including Citi, for
these relationships is significant, and it has become
increasingly difficult in recent years to maintain such
relationships on the same terms or at all.
While various mitigating factors could be available to
Citi if any of the above events were to occur—such as by
replacing the retailer or merchant or offering other card
products—these events, particularly bankruptcies or
liquidations, could negatively impact the results of operations
or financial condition of Citi-branded cards, Citi retail services
or Citi as a whole, including as a result of loss of revenues,
increased expenses, higher cost of credit, impairment of
purchased credit card relationships and contract-related
intangibles or other losses (for information on Citi’s credit
card related intangibles generally, see Note 16 to the
Consolidated Financial Statements).
Citi’s Inability in Its Resolution Plan Submissions to Address
Any Shortcomings or Deficiencies Identified or Guidance
Provided by the FRB and FDIC Could Subject Citi to More
Stringent Capital, Leverage or Liquidity Requirements, or
Restrictions on Its Growth, Activities or Operations, and
Could Eventually Require Citi to Divest Assets or
Operations.
Title I of the Dodd-Frank Act requires Citi to prepare and
submit a plan to the FRB and the FDIC for the orderly
resolution of Citigroup (the bank holding company) and its
significant legal entities under the U.S. Bankruptcy Code in
the event of future material financial distress or failure. On
December 17, 2019, the FRB and FDIC issued feedback on
the resolution plans filed on July 1, 2019 by the eight U.S.
GSIBs, including Citi. The FRB and FDIC identified one
shortcoming, but no deficiencies, in Citi’s resolution plan
relating to governance mechanisms. For additional
information on Citi’s resolution plan submissions, see
“Managing Global Risk—Liquidity Risk” below.
Under Title I, if the FRB and the FDIC jointly determine
that Citi’s resolution plan is not “credible” (which, although
not defined, is generally believed to mean the regulators do
not believe the plan is feasible or would otherwise allow the
regulators to resolve Citi in a way that protects systemically
important functions without severe systemic disruption), or
would not facilitate an orderly resolution of Citi under the
U.S. Bankruptcy Code, and Citi fails to resubmit a resolution
plan that remedies any identified deficiencies, Citi could be
subjected to more stringent capital, leverage or liquidity
requirements, or restrictions on its growth, activities or
operations. If within two years from the imposition of any
requirements or restrictions Citi has still not remediated any
identified deficiencies, then Citi could eventually be required
to divest certain assets or operations. Any such restrictions or
actions would negatively impact Citi’s reputation, market and
investor perception, operations and strategy.
Citi’s Performance and the Performance of Its Individual
Businesses Could Be Negatively Impacted if Citi Is Not Able
to Effectively Compete for Highly Qualified Employees.
Citi’s performance and the performance of its individual
businesses largely depends on the talents and efforts of its
diverse and highly skilled employees. Specifically, Citi’s
continued ability to compete in its businesses, to manage its
businesses effectively and to continue to execute its overall
global strategy depends on its ability to attract new employees
and to retain and motivate its existing employees. If Citi is
unable to continue to attract and retain the most highly
qualified employees, Citi’s performance, including its
competitive position, the successful execution of its overall
strategy and its results of operations could be negatively
impacted.
Citi’s ability to attract and retain employees depends on
numerous factors, some of which are outside of its control. For
example, the banking industry generally is subject to more
comprehensive regulation of executive and employee
compensation than other industries, including deferral and
clawback requirements for incentive compensation. Citi often
competes in the market for talent with entities that are not
subject to such comprehensive regulatory requirements on the
structure of incentive compensation, including, among others,
technology companies. Other factors that could impact Citi’s
ability to attract and retain employees include its culture and
the management and leadership of the Company as well as its
individual businesses, presence in the particular market or
region at issue and the professional opportunities it offers.
Financial Services Companies and Others as well as
Emerging Technologies Pose Increasingly Competitive
Challenges to Citi.
Citi operates in an increasingly competitive environment,
which includes both financial and non-financial services firms,
such as traditional banks, online banks, financial technology
companies and others. These companies compete on the basis
of, among other factors, size, quality and type of products and
services offered, price, technology and reputation. Emerging
technologies have the potential to intensify competition and
accelerate disruption in the financial services industry.
Citi competes with financial services companies in the
U.S. and globally that continue to develop and introduce new
products and services. In recent years, non-financial services
firms, such as financial technology companies, have begun to
offer services traditionally provided by financial institutions,
such as Citi. These firms attempt to use technology and mobile
platforms to enhance the ability of companies and individuals
to borrow money, save and invest. To the extent that Citi is not
able to compete effectively with these and other firms, Citi
could be placed at a competitive disadvantage, which could
result in loss of customers and market share, and its
businesses, results of operations and financial condition could
suffer. For additional information on Citi’s competitors, see
the co-brand and private label cards risk factor above and
“Supervision, Regulation and Other—Competition” below.
50
OPERATIONAL RISKS
A Disruption of Citi’s Operational Systems Could Negatively
Impact Citi’s Reputation, Customers, Clients, Businesses or
Results of Operations and Financial Condition.
A significant portion of Citi’s operations relies heavily on the
secure processing, storage and transmission of confidential
data and other information as well as the monitoring of a large
number of complex transactions on a minute-by-minute basis.
For example, through GCB and treasury and trade solutions
and securities services businesses in ICG, Citi obtains and
stores an extensive amount of personal and client-specific
information for its retail, corporate and governmental
customers and clients and must accurately record and reflect
their extensive account transactions.
With the evolving proliferation of new technologies and
the increasing use of the internet, mobile devices and cloud
technologies to conduct financial transactions, large global
financial institutions such as Citi have been, and will continue
to be, subject to an increasing risk of operational disruption or
cyber or information security incidents from these activities
(for additional information, see the cybersecurity risk factor
below). These incidents are unpredictable and can arise from
numerous sources, not all of which are in Citi’s control,
including, among others, human error, fraud or malice on the
part of employees, accidental technological failure, electrical
or telecommunication outages, failures of computer servers or
other similar damage to Citi’s property or assets. These issues
can also arise as a result of failures by third parties with which
Citi does business, such as failures by internet, mobile
technology and cloud service providers or other vendors to
adequately safeguard their systems and prevent system
disruptions or cyber attacks.
Such events could cause interruptions or malfunctions in
the operations of Citi (such as the temporary loss of
availability of Citi’s online banking system or mobile banking
platform), as well as the operations of its clients, customers or
other third parties. Given Citi’s global footprint and the high
volume of transactions processed by Citi, certain errors or
actions may be repeated or compounded before they are
discovered and rectified, which would further increase these
costs and consequences. Any such events could also result in
financial losses as well as misappropriation, corruption or loss
of confidential and other information or assets, which could
negatively impact Citi’s reputation, customers, clients,
businesses or results of operations and financial condition,
perhaps significantly.
Citi’s and Third Parties’ Computer Systems and Networks
Have Been, and Will Continue to Be, Susceptible to an
Increasing Risk of Continually Evolving, Sophisticated
Cybersecurity Activities That Could Result in the Theft, Loss,
Misuse or Disclosure of Confidential Client or Customer
Information, Damage to Citi’s Reputation, Additional Costs
to Citi, Regulatory Penalties, Legal Exposure and Financial
Losses.
Citi’s computer systems, software and networks are subject to
ongoing cyber incidents such as unauthorized access, loss or
destruction of data (including confidential client information),
account takeovers, unavailability of service, computer viruses
51
or other malicious code, cyber attacks and other similar
events. These threats can arise from external parties, including
cyber criminals, cyber terrorists, hacktivists and nation state
actors, as well as insiders who knowingly or unknowingly
engage in or enable malicious cyber activities.
Third parties with which Citi does business, as well as
retailers and other third parties with which Citi’s customers do
business, may also be sources of cybersecurity risks,
particularly where activities of customers are beyond Citi’s
security and control systems. For example, Citi outsources
certain functions, such as processing customer credit card
transactions, uploading content on customer-facing websites
and developing software for new products and services. These
relationships allow for the storage and processing of customer
information by third-party hosting of or access to Citi
websites, which could lead to compromise or the potential to
introduce vulnerable or malicious code, resulting in security
breaches impacting Citi customers. Furthermore, because
financial institutions are becoming increasingly interconnected
with central agents, exchanges and clearing houses, including
as a result of the derivatives reforms over the last few years,
Citi has increased exposure to cyber attacks through third
parties. While many of Citi’s agreements with the third parties
include indemnification provisions, Citi may not be able to
recover sufficiently, or at all, under the provisions to
adequately offset any losses Citi may incur from third-party
cyber incidents.
Citi has been subject to intentional cyber incidents from
external sources over the last several years, including (i)
denial of service attacks, which attempted to interrupt service
to clients and customers, (ii) data breaches, which obtained
unauthorized access to customer account data and (iii)
malicious software attacks on client systems, which attempted
to allow unauthorized entrance to Citi’s systems under the
guise of a client and the extraction of client data. While Citi’s
monitoring and protection services were able to detect and
respond to the incidents targeting its systems before they
became significant, they still resulted in limited losses in some
instances as well as increases in expenditures to monitor
against the threat of similar future cyber incidents. There can
be no assurance that such cyber incidents will not occur again,
and they could occur more frequently and on a more
significant scale.
Further, although Citi devotes significant resources to
implement, maintain, monitor and regularly upgrade its
systems and networks with measures such as intrusion
detection and prevention and firewalls to safeguard critical
business applications, there is no guarantee that these
measures or any other measures can provide absolute security.
Because the methods used to cause cyber attacks change
frequently or, in some cases, are not recognized until launched
or even later, Citi may be unable to implement effective
preventive measures or proactively address these methods
until they are discovered. In addition, given the evolving
nature of cyber threat actors and the frequency and
sophistication of the cyber activities they carry out, the
determination of the severity and potential impact of a cyber
incident may not occur for a substantial period until after the
incident has been discovered. Also, while Citi engages in
certain actions to reduce the exposure resulting from
outsourcing, such as performing security control assessments
of third-party vendors and limiting third-party access to the
least privileged level necessary to perform job functions, these
actions cannot prevent all third-party-related cyber attacks or
data breaches.
Cyber incidents can result in the disclosure of personal,
confidential or proprietary customer or client information,
damage to Citi’s reputation with its clients and the market,
customer dissatisfaction and additional costs to Citi, including
expenses such as repairing systems, replacing customer
payment cards, credit monitoring or adding new personnel or
protection technologies. Regulatory penalties, loss of
revenues, exposure to litigation and other financial losses,
including loss of funds, to both Citi and its clients and
customers and disruption to Citi’s operational systems could
also result from cyber incidents (for additional information on
the potential impact of operational disruptions, see the
operational systems risk factor above). Moreover, the
increasing risk of cyber incidents has resulted in increased
legislative and regulatory scrutiny of firms’ cybersecurity
protection services and calls for additional laws and
regulations to further enhance protection of consumers’
personal data.
While Citi maintains insurance coverage that may,
subject to policy terms and conditions including significant
self-insured deductibles, cover certain aspects of cyber risks,
such insurance coverage may be insufficient to cover all
losses.
For additional information about Citi’s management of
cybersecurity risk, see “Managing Global Risk—Operational
Risk—Cybersecurity Risk” below.
Changes to or Incorrect Assumptions, Judgments or
Estimates in Citi’s Financial Statements Could Cause
Significant Unexpected Losses or Impacts in the Future.
U.S. GAAP requires Citi to use certain assumptions,
judgments and estimates in preparing its financial statements,
including the estimate of the allowance for credit losses,
reserves related to litigation, regulatory and tax matters
exposures, valuation of DTAs and the fair values of certain
assets and liabilities, among other items. If Citi’s assumptions,
judgments or estimates underlying its financial statements are
incorrect or differ from actual or subsequent events, Citi could
experience unexpected losses or other adverse impacts, some
of which could be significant. For example, Citi has incurred
losses related to its foreign operations that are reported in the
foreign currency translation adjustment (CTA) components of
Accumulated other comprehensive income (loss) (AOCI). In
accordance with U.S. GAAP, a sale or substantial liquidation
of any foreign operations, such as those related to Citi’s legacy
businesses, would result in reclassification of any foreign CTA
component of AOCI related to that foreign operation,
including related hedges and taxes, into Citi’s earnings. For
additional information on Citi’s accounting policy for foreign
currency translation and its foreign CTA components of AOCI,
see Notes 1 and 19 to the Consolidated Financial Statements.
In addition, changes to financial accounting or reporting
standards or interpretations, whether promulgated or required
52
by the FASB or other regulators, could present operational
challenges and could also require Citi to change certain of the
assumptions or estimates it previously used in preparing its
financial statements, which could negatively impact how it
records and reports its financial condition and results of
operations generally and/or with respect to particular
businesses (see the changes to financial accounting and
reporting standards risk factor below). For additional
information on the key areas for which assumptions and
estimates are used in preparing Citi’s financial statements, see
“Significant Accounting Policies and Significant Estimates”
below and Notes 1 and 27 to the Consolidated Financial
Statements.
Changes to Financial Accounting and Reporting Standards
or Interpretations Could Have a Material Impact on How
Citi Records and Reports Its Financial Condition and
Results of Operations.
Periodically, the Financial Accounting Standards Board
(FASB) issues financial accounting and reporting standards
that may govern key aspects of Citi’s financial statements or
interpretations thereof when those standards become effective,
including those areas where Citi is required to make
assumptions or estimates. For example, the FASB’s new
accounting standard on credit losses (CECL), which became
effective for Citi on January 1, 2020, requires earlier
recognition of credit losses on loans and held-to-maturity
securities and other financial assets. The CECL methodology
requires that lifetime “expected credit losses” be recorded at
the time the financial asset is originated or acquired. The
expected credit losses are adjusted each period for changes in
expected lifetime credit losses. The CECL methodology
replaces the multiple existing impairment models under U.S.
GAAP that generally required that a loss be “incurred” before
it was recognized. The CECL methodology represents a
significant change from existing GAAP and may result in
material changes to Citi’s accounting for financial instruments.
Citi’s ongoing estimates of its expected credit losses will
depend upon its CECL models and assumptions, existing and
forecasted macroeconomic conditions and the credit quality,
composition and other characteristics of Citi’s loan and other
applicable portfolios. These factors are likely to cause
variability in Citi’s expected credit losses under CECL
compared to previous GAAP and, thus, impact its results of
operations and regulatory capital. For additional information
on this and other accounting standards, including the expected
impacts on Citi’s results of operations and financial condition,
see Note 1 to the Consolidated Financial Statements.
Citi May Incur Significant Losses and Its Regulatory Capital
and Capital Ratios Could Be Negatively Impacted if Its Risk
Management Processes, Strategies or Models Are Deficient
or Ineffective.
Citi utilizes a broad and diversified set of risk management
and mitigation processes and strategies, including the use of
risk models in analyzing and monitoring the various risks Citi
assumes in conducting its activities. For example, Citi uses
models as part of its comprehensive stress testing initiatives
across Citi. Citi also relies on data to aggregate, assess and
manage various risk exposures. Management of these risks is
made even more challenging within a global financial
institution such as Citi, particularly given the complex, diverse
and rapidly changing financial markets and conditions in
which Citi operates as well as that losses can occur from
untimely, inaccurate or incomplete processes caused by
unintentional human error.
These processes, strategies and models are inherently
limited because they involve techniques, including the use of
historical data in many circumstances, assumptions and
judgments that cannot anticipate every economic and financial
outcome in the markets in which Citi operates, nor can they
anticipate the specifics and timing of such outcomes. Citi
could incur significant losses, and its regulatory capital and
capital ratios could be negatively impacted, if Citi’s risk
management processes, including its ability to manage and
aggregate data in a timely and accurate manner, strategies or
models are deficient or ineffective. Such deficiencies or
ineffectiveness could also result in inaccurate financial,
regulatory or risk reporting.
Moreover, Citi’s Basel III regulatory capital models,
including its credit, market and operational risk models,
currently remain subject to ongoing regulatory review and
approval, which may result in refinements, modifications or
enhancements (required or otherwise) to these models.
Modifications or requirements resulting from these ongoing
reviews, as well as any future changes or guidance provided
by the U.S. banking agencies regarding the regulatory capital
framework applicable to Citi, have resulted in, and could
continue to result in, significant changes to Citi’s risk-
weighted assets. These changes can negatively impact Citi’s
capital ratios and its ability to achieve its regulatory capital
requirements as it projects or as required.
CREDIT RISKS
Credit Risk and Concentrations of Risk Can Increase the
Potential for Citi to Incur Significant Losses.
Credit risk arises from Citi’s lending and other businesses in
both GCB and ICG. Citi has credit exposures to counterparties
in the U.S. and various countries and jurisdictions globally,
including end-of-period consumer loans of $310 billion and
end-of-period corporate loans of $390 billion at year-end
2019. A default by a borrower or other counterparty, or a
decline in the credit quality or value of any underlying
collateral, exposes Citi to credit risk. Despite Citi’s target
client strategy, various macroeconomic, geopolitical and other
factors, among other things, can increase Citi’s credit risk and
credit costs (for additional information, see the co-branding
and private label credit card, macroeconomic challenges and
uncertainties and emerging markets risk factors above).
While Citi provides reserves for expected losses for its
credit exposures, such reserves are subject to judgments and
estimates that could be incorrect or differ from actual future
events. Under the new CECL accounting standard, the
allowance for credit losses reflects expected losses, rather than
incurred losses, which could lead to more volatility in the
allowance and the provision for credit losses as forecasts of
economic conditions change. In addition, Citi’s future
allowance may be affected by seasonality of its cards
53
portfolios based on historical evidence showing that (i) credit
card balances along with 30+ days past due balances increase
during the third and fourth quarters each year as the holiday
season approaches; and (ii) during the first and second
quarters, borrowers use tax refunds to pay down balances
while delinquent balances from the prior third and fourth
quarters are charged off. For additional information, see the
incorrect assumptions or estimates and changes to financial
accounting and reporting standards risk factors above. For
additional information on the impact of CECL, see Note 1 to
the Consolidated Financial Statements. For additional
information on Citi’s credit and country risk, see each
respective business’s results of operations above and
“Managing Global Risk—Credit Risk” and “Managing Global
Risk—Strategic Risk—Country Risk” below and Note 14 to
the Consolidated Financial Statements.
Concentrations of risk, particularly credit and market
risks, can also increase Citi’s risk of significant losses. As of
year-end 2019, Citi’s most significant concentration of credit
risk was with the U.S. government and its agencies, which
primarily results from trading assets and investments issued by
the U.S. government and its agencies (for additional
information, including concentrations of credit risk to other
public sector entities, see Note 23 to the Consolidated
Financial Statements). In addition, Citi routinely executes a
high volume of securities, trading, derivative and foreign
exchange transactions with non-U.S. sovereigns and with
counterparties in the financial services industry, including
banks, insurance companies, investment banks, governments,
central banks and other financial institutions. Moreover, Citi
has indemnification obligations in connection with various
transactions that expose it to concentrations of risk, including
credit risk from hedging or reinsurance arrangements related
to those obligations (for additional information about these
exposures, see Note 26 to the Consolidated Financial
Statements). A rapid deterioration of a large borrower or other
counterparty or within a sector or country where Citi has large
exposures or guarantees or unexpected market dislocations
could cause Citi to incur significant losses.
LIQUIDITY RISKS
The Maintenance of Adequate Liquidity and Funding
Depends on Numerous Factors, Including Those Outside of
Citi’s Control, Such as Market Disruptions and Increases in
Citi’s Credit Spreads.
As a global financial institution, adequate liquidity and
sources of funding are essential to Citi’s businesses. Citi’s
liquidity and sources of funding can be significantly and
negatively impacted by factors it cannot control, such as
general disruptions in the financial markets, governmental
fiscal and monetary policies, regulatory changes or negative
investor perceptions of Citi’s creditworthiness, unexpected
increases in cash or collateral requirements and the inability to
monetize available liquidity resources. Citi competes with
other banks and financial institutions for deposits, which
represent Citi’s most stable and lowest cost of long-term
funding. The competition for retail banking deposits has
increased as a result of online banks and digital banking,
among others. Furthermore, given the decline in interest rates,
a growing number of customers have transferred deposits to
other products, including investments and interest-bearing
accounts, and/or other financial institutions. This, along with
slower growth in deposits, has resulted in a more challenging
environment for Citi. For additional information on the impact
of interest rates, see the macroeconomic challenges and
uncertainties risk factor above.
Moreover, Citi’s costs to obtain and access secured
funding and long-term unsecured funding are directly related
to its credit spreads. Changes in credit spreads are driven by
both external market factors and factors specific to Citi, and
can be highly volatile. For additional information on Citi’s
primary sources of funding, see “Managing Global Risk—
Liquidity Risk” below.
Citi’s ability to obtain funding may be impaired if other
market participants are seeking to access the markets at the
same time, or if market appetite declines, as is likely to occur
in a liquidity stress event or other market crisis. A sudden drop
in market liquidity could also cause a temporary or lengthier
dislocation of underwriting and capital markets activity. In
addition, clearing organizations, central banks, clients and
financial institutions with which Citi interacts may exercise
the right to require additional collateral based on their
perceptions or the market conditions, which could further
impair Citi’s access to and cost of funding.
As a holding company, Citi relies on interest, dividends,
distributions and other payments from its subsidiaries to fund
dividends as well as to satisfy its debt and other obligations.
Several of Citi’s U.S. and non-U.S. subsidiaries are or may be
subject to capital adequacy or other regulatory or contractual
restrictions on their ability to provide such payments,
including any local regulatory stress test requirements.
Limitations on the payments that Citi receives from its
subsidiaries could also impact its liquidity.
The Credit Rating Agencies Continuously Review the Credit
Ratings of Citi and Certain of Its Subsidiaries, and a Ratings
Downgrade Could Have a Negative Impact on Citi’s
Funding and Liquidity Due to Reduced Funding Capacity
and Increased Funding Costs, Including Derivatives
Triggers That Could Require Cash Obligations or Collateral
Requirements.
The credit rating agencies, such as Fitch, Moody’s and S&P,
continuously evaluate Citi and certain of its subsidiaries. Their
ratings of Citi and its more significant subsidiaries’ long-term/
senior debt and short-term/commercial paper are based on a
number of factors, including standalone financial strength, as
well as factors that are not entirely within the control of Citi
and its subsidiaries, such as the agencies’ proprietary rating
methodologies and assumptions, and conditions affecting the
financial services industry and markets generally.
Citi and its subsidiaries may not be able to maintain their
current respective ratings. A ratings downgrade could
negatively impact Citi’s ability to access the capital markets
and other sources of funds as well as the costs of those funds,
and its ability to maintain certain deposits. A ratings
downgrade could also have a negative impact on Citi’s
funding and liquidity due to reduced funding capacity and the
impact from derivative triggers, which could require Citi to
54
meet cash obligations and collateral requirements. In addition,
a ratings downgrade could have a negative impact on other
funding sources such as secured financing and other margined
transactions for which there may be no explicit triggers, and
on contractual provisions and other credit requirements of
Citi’s counterparties and clients that may contain minimum
ratings thresholds in order for Citi to hold third-party funds.
Some entities could have ratings limitations on their
permissible counterparties, of which Citi may or may not be
aware.
Furthermore, a credit ratings downgrade could have
impacts that may not be currently known to Citi or are not
possible to quantify. Certain of Citi’s corporate customers and
trading counterparties, among other clients, could re-evaluate
their business relationships with Citi and limit the trading of
certain contracts or market instruments with Citi in response to
ratings downgrades. Changes in customer and counterparty
behavior could impact not only Citi’s funding and liquidity but
also the results of operations of certain Citi businesses. For
additional information on the potential impact of a reduction
in Citi’s or Citibank’s credit ratings, see “Managing Global
Risk—Liquidity Risk” below.
COMPLIANCE RISKS
Ongoing Interpretation and Implementation of Regulatory
and Legislative Requirements and Changes in the U.S. and
Globally Have Increased Citi’s Compliance and Other Risks
and Costs.
Citi is continually required to interpret and implement
extensive and frequently changing regulatory and legislative
requirements, resulting in substantial compliance, regulatory
and other risks and costs. In addition, there are heightened
regulatory scrutiny and expectations in the U.S. and globally
for large financial institutions, as well as their employees and
agents, with respect to, among other things, governance, risk
management practices and controls. A failure to comply with
these requirements and expectations or resolve any identified
deficiencies could result in increased regulatory oversight and
restrictions.
Over the past several years, Citi has been required to
implement a significant number of regulatory and legislative
changes across all of its businesses and functions, and these
changes continue. The changes themselves may be complex
and subject to interpretation, and will require continued
investments in Citi’s global operations and technology
solutions. In some cases, Citi’s implementation of a regulatory
or legislative requirement is occurring simultaneously with
changing or conflicting regulatory guidance, legal challenges
or legislative action to modify or repeal existing rules or enact
new rules. Moreover, in some cases, there have been entirely
new regulatory or legislative requirements or regimes,
resulting in large volumes of regulation and potential
uncertainty regarding regulatory expectations as to what is
required in order to be in compliance.
Examples of regulatory or legislative changes that have
resulted in increased compliance risks and costs include (i) a
proliferation of laws relating to the limitation of cross-border
data movement and/or collection and use of customer
information, including data localization and protection and
privacy laws, which also can conflict with or increase
compliance complexity with respect to other laws, including
anti-money laundering laws; and (ii) the FRB’s “total loss
absorbing capacity” (TLAC) requirements, including, among
other things, consequences of a breach of the clean holding
company requirements, given there are no cure periods for the
requirements.
Increased and ongoing compliance requirements and
uncertainties have resulted in higher costs for Citi. For
example, Citi employed roughly 30,000 risk, regulatory and
compliance staff as of year-end 2019, out of a total employee
population of 200,000, compared to approximately 14,000 as
of year-end 2008 with a total employee population of 323,000.
These higher compliance costs can require management to
incur additional expense, including potentially away from
ongoing business investment initiatives.
Extensive and changing compliance requirements can
also result in increased reputational and legal risks for Citi, as
failure to comply with regulations and requirements, or failure
to comply with regulatory expectations, can result in
enforcement and/or regulatory proceedings (for additional
discussion, see the legal and regulatory proceedings risk factor
below).
Citi Is Subject to Extensive Legal and Regulatory
Proceedings, Examinations, Investigations and Inquiries
That Could Result in Significant Penalties and Other
Negative Impacts on Citi, Its Businesses and Results of
Operations.
At any given time, Citi is defending a significant number of
legal and regulatory proceedings and is subject to numerous
governmental and regulatory examinations, investigations and
other inquiries. The global judicial, regulatory and political
environment has generally been challenging for large financial
institutions. The complexity of the federal and state regulatory
and enforcement regimes in the U.S., coupled with the global
scope of Citi’s operations, also means that a single event or
issue may give rise to a large number of overlapping
investigations and regulatory proceedings, either by multiple
federal and state agencies and authorities in the U.S. or by
multiple regulators and other governmental entities in different
jurisdictions, as well as multiple civil litigation claims in
multiple jurisdictions. Citi can be subject to enforcement
proceedings not only because of violations of law and
regulation, but also due to a failure, as determined by its
regulators, to have adequate policies and procedures, or to
remedy deficiencies on a timely basis.
U.S. and non-U.S. regulators have been increasingly
focused on “conduct risk,” a term used to describe the risks
associated with behavior by employees and agents, including
third parties, that could harm clients, customers or the integrity
of the markets, such as improperly creating, selling, marketing
or managing products and services or improper incentive
compensation programs with respect thereto, failures to
safeguard a party’s personal information, or failures to identify
and manage conflicts of interest. In addition to the greater
focus on conduct risk, the heightened scrutiny and
expectations generally from regulators could lead to
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investigations and other inquiries, as well as remediation
requirements, more regulatory or other enforcement
proceedings, civil litigation and higher compliance and other
risks and costs.
Further, while Citi takes numerous steps to prevent and
detect conduct by employees and agents that could potentially
harm clients, customers or the integrity of the markets, such
behavior may not always be deterred or prevented. Banking
regulators have also focused on the overall culture of financial
services firms, including Citi. In addition to regulatory
restrictions or structural changes that could result from
perceived deficiencies in Citi’s culture, such focus could also
lead to additional regulatory proceedings.
In addition, the severity of the remedies sought in legal
and regulatory proceedings to which Citi is subject has
remained elevated. U.S. and certain international
governmental entities have increasingly brought criminal
actions against, or have sought criminal convictions from,
financial institutions and individual employees, and criminal
prosecutors in the U.S. have increasingly sought and obtained
criminal guilty pleas or deferred prosecution agreements
against corporate entities and individuals and other criminal
sanctions from those institutions and individuals. These types
of actions by U.S. and international governmental entities
may, in the future, have significant collateral consequences for
a financial institution, including loss of customers and
business, and the inability to offer certain products or services
and/or operate certain businesses. Citi may be required to
accept or be subject to similar types of criminal remedies,
consent orders, sanctions, substantial fines and penalties,
remediation and other financial costs or other requirements in
the future, including for matters or practices not yet known to
Citi, any of which could materially and negatively affect Citi’s
businesses, business practices, financial condition or results of
operations, require material changes in Citi’s operations or
cause Citi reputational harm.
Further, many large claims—both private civil and
regulatory—asserted against Citi are highly complex, slow to
develop and may involve novel or untested legal theories. The
outcome of such proceedings is difficult to predict or estimate
until late in the proceedings. Although Citi establishes accruals
for its legal and regulatory matters according to accounting
requirements, Citi’s estimates of, and changes to, these
accruals involve significant judgment and may be subject to
significant uncertainty, and the amount of loss ultimately
incurred in relation to those matters may be substantially
higher than the amounts accrued. In addition, certain
settlements are subject to court approval and may not be
approved.
For additional information relating to Citi’s legal and
regulatory proceedings and matters, including Citi’s policies
on establishing legal accruals, see Note 27 to the Consolidated
Financial Statements.
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Managing Global Risk Table of Contents
MANAGING GLOBAL RISK
Overview
CREDIT RISK(1)
Overview
Consumer Credit
Corporate Credit
Additional Consumer and Corporate Credit Details
Loans Outstanding
Details of Credit Loss Experience
Allowance for Loan Losses
Non-Accrual Loans and Assets and Renegotiated Loans
Forgone Interest Revenue on Loans
LIQUIDITY RISK
Overview
Liquidity Monitoring and Measurement
High-Quality Liquid Assets (HQLA)
Loans
Deposits
Long-Term Debt
Secured Funding Transactions and Short-Term Borrowings
Credit Ratings
MARKET RISK(1)
Overview
Market Risk of Non-Trading Portfolios
Net Interest Revenue at Risk
Interest Rate Risk of Investment Portfolios—Impact on AOCI
Changes in Foreign Exchange Rates—Impacts on AOCI and Capital
Interest Revenue/Expense and Net Interest Margin (NIM)
Additional Interest Rate Details
Market Risk of Trading Portfolios
Factor Sensitivities
Value at Risk (VAR)
Stress Testing
OPERATIONAL RISK
Overview
Cybersecurity Risk
COMPLIANCE RISK
REPUTATION RISK
STRATEGIC RISK
Overview
Exit of U.K. from EU
LIBOR Transition Risk
Country Risk
Top 25 Country Exposures
Argentina
FFIEC—Cross-Border Claims on Third Parties and Local Country Assets
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(1) For additional information regarding certain credit risk, market risk and other quantitative and qualitative information, refer to Citi’s Pillar 3 Basel III Advanced
Approaches Disclosures, as required by the rules of the Federal Reserve Board, on Citi’s Investor Relations website.
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MANAGING GLOBAL RISK
Citi’s risks are generally categorized and summarized as
Overview
For Citi, effective risk management is of primary importance
to its overall operations. Accordingly, Citi’s risk management
process has been designed to monitor, evaluate and manage
the principal risks it assumes in conducting its activities.
Specifically, the activities that Citi engages in, and the risks
those activities generate, must be consistent with Citi’s
mission and value proposition, the key principles that guide it
and Citi's risk appetite.
Risk management must be built on a foundation of ethical
culture. Under Citi’s mission and value proposition, which
was developed by its senior leadership and distributed
throughout the Company, Citi strives to serve its clients as a
trusted partner by responsibly providing financial services that
enable growth and economic progress while earning and
maintaining the public’s trust by constantly adhering to the
highest ethical standards. As such, Citi asks all employees to
ensure that their decisions pass three tests: they are in Citi’s
clients’ interests, create economic value and are always
systemically responsible. In addition, Citi evaluates
employees’ performance against behavioral expectations set
out in Citi’s leadership standards, which were designed in part
to effectuate Citi’s mission and value proposition. Other
culture-related efforts in connection with conduct risk, ethics
and leadership, escalation and treating customers fairly help
Citi to execute its mission and value proposition.
Citi’s Company-wide risk governance framework consists
of the key policies, standards and processes through which
Citi identifies, assesses, measures, monitors and controls risks
across the Company. It also emphasizes Citi’s risk culture and
lays out standards, procedures and programs that are designed
to set, reinforce and enhance the Company’s risk culture,
integrate its values and conduct expectations into the
organization, providing employees with tools to assist them
with making prudent and ethical risk decisions and to escalate
issues appropriately.
Citi selectively takes risks in support of its underlying
customer-centric strategy. Citi’s objective is to ensure that
those risks are consistent with its mission and value
proposition and principle of responsible finance; that they are
identified, assessed, measured, monitored and controlled; and
that they are captured in Citi’s risk/reward assessment.
Citi’s risk appetite framework, which is approved by the
Citigroup Board of Directors, includes both a risk appetite
statement, which articulates the aggregate level and types of
risk that Citi is willing to accept in order to achieve its
business objectives, as well as the overall approach through
which risk appetite is established, communicated and
monitored. It is built on quantitative boundaries, which
include risk limits or thresholds, and on qualitative principles
to guide behavior. Citi’s risk appetite framework is
comprehensive, incorporating all risks, enterprise-wide and
applicable across products, functions and geographies.
follows:
• Credit risk is the risk of loss resulting from the decline in
•
credit quality or the failure of a borrower, counterparty,
third party or issuer to honor its financial or contractual
obligations.
Liquidity risk is the risk that the Company will not be able
to efficiently meet both expected and unexpected current
and future cash flow and collateral needs without
adversely affecting either daily operations or financial
conditions of the Company. The risk may be exacerbated
by the inability of the Company to access funding sources
or monetize assets and the composition of liability
funding and liquid assets.
• Market risk (including price risk and interest rate risk) is
the risk of loss arising from changes in the value of Citi’s
assets and liabilities resulting from changes in market
variables, such as interest rates, exchange rates or credit
spreads. Losses can be exacerbated by the negative
convexity of positions, as well as the presence of basis or
correlation risks.
• Operational risk is the risk of loss resulting from
inadequate or failed internal processes, systems, human
factors or from external events. It includes the reputation
and franchise risk impact associated with business
practices or market conduct in which Citi is involved. It
also includes the risk of failing to comply with applicable
laws and regulations, but excludes strategic risk (see
below).
• Compliance risk is the risk to current or projected
financial conditions and resilience arising from violations
of laws, rules or regulations, or from nonconformance
with prescribed practices, internal policies and procedures
or ethical standards. It also includes the exposure to
litigation (known as legal risk) from all aspects of
banking, traditional and nontraditional. Compliance risk
spans across all risk types outlined in the risk governance
framework.
•
• Reputation risk is the risk to current or projected financial
conditions and resilience arising from negative public
opinion.
Strategic risk is the risk to current or anticipated earnings,
capital, or franchise or enterprise value arising from poor
but authorized business decisions (in compliance with
regulations, policies and procedures), an inability to adapt
to changes in the operating environment or other external
factors that may impair the ability to carry out a business
strategy. Strategic risk also includes:
• Country risk, which is the risk that an event in a
country (precipitated by developments within or
external to a country) will impair the value of Citi’s
franchise or will adversely affect the ability of
obligors within that country to honor their
obligations. Country risk events may include
sovereign defaults, banking crises, currency crises,
currency convertibility and/or transferability
restrictions or political events.
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Citi manages its risks through a “three lines of defense”
model: (i) business management; (ii) Independent Risk
Management and Independent Compliance Risk Management
and other control functions; and (iii) Internal Audit. The three
lines of defense collaborate with each other in structured
forums and processes to bring together various perspectives
and to lead the organization toward outcomes that are in
clients’ interests, that create economic value and that are
systemically responsible.
First Line of Defense: Business Management
Through Citi’s business management (“frontline units” or the
“first line of defense”), each business owns the risks inherent
in or arising from its businesses, and is responsible for
identifying, assessing and controlling those risks to ensure
they are within risk appetite, establishing and operating
controls to mitigate those risks, including concentration risks,
performing manager assessments of the design and
effectiveness of internal controls, implementing appropriate
procedures to fulfill its risk governance responsibilities and
promoting a culture of compliance and control.
The first line of defense is composed of Citi’s businesses
(Institutional Clients Group (ICG) and Global Consumer Bank
(GCB)), supporting clients globally as well as in regions and
countries that execute Citi’s strategy locally. In addition, there
are functional teams, such as Enterprise Infrastructure,
Operations and Technology (EIO&T) that support the Citi
CEO in a first line capacity. The CEOs of each region,
business, EIO&T and certain functional teams report to the
Citigroup CEO.
Businesses at Citi organize and chair committees,
councils, steering groups and other forums that cover risk
considerations with participation from Independent Risk
Management, Independent Compliance Risk Management and
other control functions. These are often conducted across lines
of defense and may include matters related to capital, assets
and liabilities, business practices, business risks and controls,
mergers and acquisitions, the Community Reinvestment Act
and fair lending and incentives.
Second Line of Defense: Independent Risk Management;
Control Functions
Citi’s Independent Risk Management (IRM) and Independent
Compliance Risk Management (ICRM) together with other
control functions (Finance, Human Resources, Legal) set
standards that Citi and its businesses and products are required
to adhere to in order to manage and oversee risks, including
conformance with applicable laws, regulatory requirements,
policies and other relevant standards of ethical conduct. IRM
and ICRM provide credible challenge to first line units in their
assessment and management of risk. In addition, among other
responsibilities, IRM, ICRM and the control functions provide
advice and training to Citi’s businesses and establish tools,
methodologies, processes and oversight of controls used by
the businesses to foster a culture of compliance and control.
Where certain activities of control functions constitute first
line activity, such activities are subject to appropriate review
and challenge.
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Independent Risk Management
The Independent Risk Management organization sets
standards for the business and actively manages and oversees
aggregate credit, market (price, FX and interest rate), liquidity,
strategic, operational, compliance and reputation risks across
the Company, including risks that span categories, such as
concentration risk.
Independent Risk Management is organized to align to
businesses, regions, risk types and to Citi-wide, cross-risk
functions or processes. There are teams that report to an
independent Chief Risk Officer (CRO) for Citi’s businesses
(business CROs) and regions (regional CROs). In addition,
there are teams that report to the heads for certain risk
categories (e.g., Global Market Risk) and for certain
foundational risk areas (e.g., Global Risk Review). All of the
risk heads, together with the business and regional CROs,
report to the Citigroup CRO.
The head of Independent Risk Management is the
Citigroup CRO, who reports directly to the Citigroup CEO
and to the Citigroup Risk Management Committee (RMC) of
the Board of Directors. As part of its responsibilities, the RMC
approves the appointment and removal of the CRO. The CRO
has regular and unrestricted access to the full Citigroup Board,
as well as the Risk Management Committee of the Board, to
discuss risks and issues identified through Independent Risk
Management’s activities, including instances in which the
CRO’s assessment differs from that of the business or the
CEO, and instances in which the business or the CEO may not
be adhering to the risk governance framework.
Independent Compliance Risk Management
The Independent Compliance Risk Management organization
is an independent risk management function that is designed to
oversee and credibly challenge products, functions,
jurisdictional activities and legal entities in managing
compliance risk, as well as promoting business conduct and
activity that is consistent with Citi’s mission and value
proposition and the compliance risk appetite. Citi’s objective
is to embed an enterprise-wide compliance risk management
framework and culture that identifies, escalates, measures,
monitors, reports and controls compliance risk across the three
lines of defense. For further information on Citi’s compliance
risk framework, see “Compliance Risk” below.
The Citigroup Chief Compliance Officer reports to the
Citigroup CEO and has regular and unrestricted access to
committees of the Citigroup and Citibank Boards of Directors,
including the Audit Committees, Risk Management
Committees and the Ethics, Conduct and Culture Committee
of the Citigroup Board.
Human Resources
Human Resources (HR) provides leadership with respect to
Citi’s human capital strategy, which is primarily focused on
ensuring employees are appropriately rewarded for
demonstrating Citi values and leadership standards and for
maintaining a pipeline of new and developing talent to meet
Citi’s changing business needs.
HR is primarily composed of and organized around the
core global disciplines of compensation and benefits,
performance management, talent acquisition, talent and
diversity and workforce relations, with consideration for
support to Citi businesses, products and functions and second
line of defense responsibilities. Through its disciplines, HR
advises business management, escalates identified risks and
establishes policies, standards or processes to manage risk.
The Head of HR reports to the Citigroup CEO and
interacts regularly with the Personnel and Compensation
Committee of the Citigroup Board of Directors. In addition,
the Head of HR has regular and unrestricted access to the full
Citigroup Board of Directors, as well as to the Audit
Committee of the Board of Directors.
Legal
Citi Legal is responsible for advising Citi’s lines of business
and control functions in order to facilitate the prudent
management of Citi’s exposure to legal risk.
Citi Legal’s organizational structure is designed to insulate
it from potential conflicts of interest that could undermine its
role in providing advice in regard to legal obligations and
exposures of Citi.
Activities within Citi Legal include providing legal advice
to Citi’s businesses and other functions on the interpretation of
legal and regulatory requirements, including contractual
requirements, and on managing and mitigating legal exposure
based on a proper understanding of legal requirements;
providing legal advice to promote the reporting of Citi’s and
its subsidiaries obligations to identify legal matters to
regulators and investors, as required by law; helping to
identify current and emerging legal risks that arise in the
context of Citi’s provision of products and services to its
clients; attending meetings of the Board of Directors and
committees of the Board to facilitate the oversight role of
these bodies; and participating in management committees and
forums where legal risk should be considered and evaluated.
The General Counsel leads Citi Legal and reports directly
to the Citigroup CEO. The General Counsel meets regularly
with the Board of Directors, the Audit Committee, the Risk
Management Committee, the Ethics, Conduct and Culture
Committee and the Nomination, Governance and Public
Affairs Committee and is involved in the discussion of legal
issues that arise in the context of items being presented to the
Board and its committees.
Finance
Finance’s mission is to serve as an advisor to the business,
delivering timely, accurate and complete information to each
of its constituencies, accompanied by insightful analytics, and
operating in a cost-efficient manner with highly effective
controls.
The Finance organization, led by the Chief Financial
Officer (CFO), is composed of a set of core, global disciplines
(capital planning, controllers, corporate M&A, corporate
treasury, financial planning and analysis, investor relations and
tax). Through the disciplines, Finance advises business
management, escalates identified risks and establishes
policies, standards or processes to manage risk. Also reporting
to the Citigroup CFO are a set of product, geographical and
legal entity Finance Officers who, along with their teams,
interact with the global finance disciplines in the execution of
their responsibilities.
Citi’s CFO reports directly to the Citigroup CEO. The
CFO chairs or co-chairs several management committees that
serve as key governance and oversight forums for business
activities. In addition, the CFO has regular and unrestricted
access to the full Citigroup Board of Directors as well as to the
Audit Committee of the Board of Directors.
Third Line of Defense: Internal Audit
The role of Internal Audit is to provide independent and timely
assurance to the Citigroup and Citibank Boards, the Audit
Committees of the Boards, senior management and regulators
regarding the effectiveness of governance, risk management
and controls that mitigate current and evolving risks and
enhance the control culture within Citi.
The Internal Audit function has designated Chief Auditors
responsible for assessing the design and effectiveness of
controls within the various business units, functions,
geographies and legal entities in which Citi operates, including
specific Chief Auditors for Finance, ICRM and Independent
Risk Management.
The Citigroup Chief Auditor manages Internal Audit and
reports functionally to the Chair of the Citigroup Audit
Committee and administratively to the CEO of Citigroup.
Internal Audit’s responsibilities are carried out independently
under the oversight of the Audit Committees, and Internal
Audit employees accordingly report to the Citigroup Chief
Auditor and do not have reporting lines to either first or
second line of defense management.
Citigroup Board of Directors and Committees of the Board
Citigroup’s Board of Directors actively oversees Citi’s risk-
taking activities and holds management accountable for
adhering to the risk governance framework. Directors review
reports prepared by and receive presentations from
management, and exercise independent judgment to question,
probe and challenge recommendations of and decisions made
by management.
The standing committees of the Citigroup Board of
Directors are the Executive Committee, Risk Management
Committee, Audit Committee, Personnel and Compensation
Committee, Ethics, Conduct and Culture Committee,
Operations and Technology Committee and Nomination,
Governance and Public Affairs Committee. In addition to the
standing committees, the Board establishes additional
committees as necessary or appropriate in response to
regulatory, legal or other requirements.
60
stress testing at the company, business, geography and product
levels. These stress-testing processes typically estimate
potential incremental credit costs that would occur as a result
of either downgrades in the credit quality or defaults of the
obligors or counterparties.
For additional information on Citi’s credit risk
management, see Note 14 to the Consolidated Financial
Statements.
CREDIT RISK
Overview
Credit risk is the risk of loss resulting from the decline in
credit quality or the failure of a borrower, counterparty, third
party or issuer to honor its financial or contractual obligations.
Credit risk arises in many of Citigroup’s business activities,
including:
•
•
•
•
consumer, commercial and corporate lending;
capital markets derivative transactions;
structured finance; and
securities financing transactions (repurchase and reverse
repurchase agreements, and securities loaned and
borrowed).
Credit risk also arises from settlement and clearing
activities, when Citi transfers an asset in advance of receiving
its counter-value or advances funds to settle a transaction on
behalf of a client. Concentration risk, within credit risk, is the
risk associated with having credit exposure concentrated
within a specific client, industry, region or other category.
Credit risk is one of the most significant risks Citi faces as
an institution. For additional information, see “Risk Factors—
Credit Risk” above. As a result, Citi has a well-established
framework in place for managing credit risk across all
businesses. This includes a defined risk appetite, credit limits
and credit policies, both at the business level as well as at the
Company-wide level. Citi’s credit risk management also
includes processes and policies with respect to problem
recognition, including “watch lists,” portfolio reviews, stress
tests, updated risk ratings and classification triggers.
With respect to Citi’s settlement and clearing activities,
intraday client usage of lines is monitored against limits, as
well as against usage patterns. To the extent that a problem
develops, Citi typically moves the client to a secured
(collateralized) operating model. Generally, Citi’s intraday
settlement and clearing lines are uncommitted and cancelable
at any time.
To manage concentration of risk within credit risk, Citi
has in place a correlation framework consisting of industry
limits, an idiosyncratic framework consisting of single name
concentrations for each business and across Citigroup and a
specialized framework consisting of product limits.
Credit exposures are generally reported in notional terms
for accrual loans, reflecting the value at which the loans as
well as loan and other off-balance sheet commitments are
carried on the Consolidated Balance Sheet. Credit exposure
arising from capital markets activities is generally expressed
as the current mark-to-market, net of margin, reflecting the net
value owed to Citi by a given counterparty.
The credit risk associated with these credit exposures is a
function of the idiosyncratic creditworthiness of the obligor, as
well as the terms and conditions of the specific obligation. Citi
assesses the credit risk associated with its credit exposures on
a regular basis through its loan loss reserve process (see
“Significant Accounting Policies and Significant Estimates—
Allowance for Credit Losses” below and Notes 1 and 15 to the
Consolidated Financial Statements), as well as through regular
61
CONSUMER CREDIT
Citi provides traditional retail banking, including small
business banking, and credit card products in 19 countries and
jurisdictions through North America GCB, Latin America
GCB and Asia GCB. The retail banking products include
consumer mortgages, home equity, personal and small
business loans and lines of credit and similar related products
with a focus on lending to prime customers. Citi uses its risk
appetite framework to define its lending parameters. In
addition, Citi uses proprietary scoring models for new
customer approvals.
As stated in “Global Consumer Banking” above, GCB’s
overall strategy is to leverage Citi’s global footprint and be the
pre-eminent bank for the affluent and emerging affluent
consumers in large urban centers. In credit cards and in certain
retail markets, Citi serves customers in a somewhat broader
set of segments and geographies. As of the fourth quarter of
2019, Citi’s commercial banking businesses previously
reported as part of GCB in North America, Latin America and
Asia, including approximately $28 billion in end-of-period
loans, are now reported in ICG for all periods presented.
Consumer Credit Portfolio
The following table shows Citi’s quarterly end-of-period consumer loans:(1)
In billions of dollars
Retail banking:
Mortgages
Personal, small business and other
Total retail banking
Cards:
Citi-branded cards
Citi retail services
Total cards
Total GCB
GCB regional distribution:
North America
Latin America
Asia(2)
Total GCB
Corporate/Other(3)
Total consumer loans
4Q’18
1Q’19
2Q’19
3Q’19
4Q’19
$
$
$
$
$
$
$
80.6
37.0
117.6
116.8
52.7
169.5
287.1
$
$
$
$
$
67%
6
27
100%
80.8
37.3
118.1
$
$
81.9
37.8
119.7
$
$
111.4
$
115.5
$
48.9
160.3
278.4
$
$
66%
6
28
100%
49.6
165.1
284.8
$
$
66%
6
28
100%
83.0
37.6
120.6
115.8
50.0
165.8
286.4
$
$
$
$
$
66%
6
28
100%
15.3
302.4
$
$
12.6
291.0
$
$
11.7
296.5
$
$
11.0
297.4
$
$
85.1
39.7
124.8
122.2
52.9
175.1
299.9
66%
6
28
100%
9.6
309.5
(1) End-of-period loans include interest and fees on credit cards.
(2) Asia includes loans and leases in certain EMEA countries for all periods presented.
(3) Primarily consists of legacy assets, principally North America consumer mortgages.
For information on changes to Citi’s end-of-period
consumer loans, see “Liquidity Risk—Loans” below.
62
Overall Consumer Credit Trends
The following charts show the quarterly trends in
delinquencies (90+ days past due (90+ DPD) ratio) and the net
credit losses (NCL) ratio across both retail banking and cards
for total GCB and by region.
Global Consumer Banking
Latin America GCB
North America GCB
North America GCB provides mortgage, home equity,
small business and personal loans through Citi’s retail banking
network and card products through Citi-branded cards and Citi
retail services businesses. The retail bank is concentrated in
six major metropolitan cities in the United States (for
additional information on the U.S. retail bank, see “North
America GCB” above).
As of December 31, 2019, approximately 75% of North
America GCB consumer loans consisted of Citi-branded and
Citi retail services cards, which generally drives the overall
credit performance of North America GCB (for additional
information on North America GCB’s cards portfolios,
including delinquency and net credit loss rates, see “Credit
Card Trends” below).
As shown in the chart above, the net credit loss rate in
North America GCB increased quarter-over-quarter, primarily
driven by seasonality in Citi retail services portfolios. The 90+
days past due delinquency rate also increased quarter-over-
quarter, primarily due to seasonality in the cards portfolios.
The net credit loss rate and 90+ days past due
delinquency rate increased year-over-year, primarily driven by
seasoning of more recent vintages in Citi-branded cards and an
increase in net flow rates in later delinquency buckets in Citi
retail services.
Latin America GCB operates in Mexico through
Citibanamex, one of Mexico’s largest banks, and provides
credit cards, consumer mortgages and small business and
personal loans. Latin America GCB serves a more mass-
market segment in Mexico and focuses on developing multi-
product relationships with customers.
As shown in the chart above, the net credit loss rate in
Latin America GCB decreased quarter-over-quarter, primarily
due to seasonality in the cards portfolio, while the 90+ days
past due delinquency rate remained broadly stable.
The net credit loss and 90+ days past due rate decreased
year-over-year, primarily due to the growth in recent vintages
for cards as well as a slower pace of acquisitions in the retail
portfolios during 2019.
Asia(1) GCB
(1) Asia includes GCB activities in certain EMEA countries for all periods
presented.
Asia GCB operates in 17 countries in Asia and EMEA
and provides credit cards, consumer mortgages and small
business and personal loans.
As shown in the chart above, the net credit loss rate in
Asia GCB decreased quarter-over-quarter, primarily due to
seasonality, while the 90+ days past due delinquency rate
remained broadly stable quarter-over-quarter. Year-over-year,
the net credit loss and the 90+ days past due delinquency rate
remained broadly stable.
The stability in Asia GCB’s portfolios reflects the strong
credit profiles in the region’s target customer segments.
Regulatory changes in many markets in Asia over the past few
years have also resulted in stable portfolio credit quality.
For additional information on cost of credit, loan
delinquency and other information for Citi’s consumer loan
portfolios, see each respective business’s results of operations
above and Note 14 to the Consolidated Financial Statements.
63
Credit Card Trends
The following charts show the quarterly trends in
delinquencies and net credit losses for total GCB cards, North
America Citi-branded cards and Citi retail services portfolios,
as well as for Citi’s Latin America and Asia Citi-branded cards
portfolios.
Global Cards
North America Citi Retail Services
North America Citi-Branded Cards
North America GCB’s Citi-branded cards portfolio issues
proprietary and co-branded cards. As shown in the chart
above, the net credit loss rate in North America Citi-branded
cards was relatively stable quarter-over-quarter, while the 90+
days past due delinquency rate increased, driven by
seasonality.
The net credit loss and 90+ days past due delinquency rate
increased year-over-year, primarily driven by seasoning of
more recent vintages.
Citi retail services partners directly with more than 20
retailers and dealers to offer private label and co-branded
cards. Citi retail services’ target market is focused on select
industry segments such as home improvement, specialty retail,
consumer electronics and fuel.
Citi retail services continually evaluates opportunities to
add partners within target industries that have strong loyalty,
lending or payment programs and growth potential.
As shown in the chart above, the net credit loss and 90+
days past due delinquency rate in Citi retail services increased
quarter-over-quarter, primarily due to seasonality.
The net credit loss rate and 90+ days past due delinquency
rate increased year-over-year, primarily driven by an increase
in net flow rates in later delinquency buckets.
Latin America Citi-Branded Cards
Latin America GCB issues proprietary and co-branded
cards. As shown in the chart above, the net credit loss rate in
Latin America Citi-branded cards decreased quarter-over-
quarter, primarily due to seasonality, while the 90+ days past
due delinquency rate remained stable.
The net credit loss and 90+ days past due delinquency rate
decreased year-over-year, primarily due to growth in recent
vintages.
64
Asia Citi-Branded Cards(1)
(1) Asia includes loans and leases in certain EMEA countries for all periods
presented.
Asia GCB issues proprietary and co-branded cards.
As set forth in the chart above, the net credit loss rate in
Asia Citi-branded cards decreased quarter-over-quarter,
primarily due to seasonality, while the 90+ days past due
delinquency rate remained broadly stable.
Year-over-year, the net credit loss rate and 90+ days past
due delinquency rate remained broadly stable.
For additional information on cost of credit, delinquency
and other information for Citi’s cards portfolios, see each
respective business’s results of operations above and Note 13
to the Consolidated Financial Statements.
North America Cards FICO Distribution
The following tables show the current FICO score
distributions for Citi’s North America cards portfolios based
on end-of-period receivables. FICO scores are updated
monthly for substantially all of the portfolio and on a quarterly
basis for the remaining portfolio.
Citi-Branded Cards
FICO distribution(1)
Dec 31,
2019
Sept. 30,
2019
Dec 31,
2018
> 760
680–760
< 680
Total
42%
41
17
41%
41
18
42%
41
17
100%
100%
100%
Citi Retail Services
FICO distribution(1)
Dec 31,
2019
Sept. 30,
2019
Dec 31,
2018
> 760
680–760
< 680
Total
25%
42
33
24%
43
33
25%
42
33
100%
100%
100%
(1) The FICO bands in the tables are consistent with general industry peer
presentations.
Both the Citi-branded cards’ and Citi retail services’
cards FICO distributions remained stable as of year-end 2019.
For additional information on FICO scores, see Note 14
to the Consolidated Financial Statements.
65
Additional Consumer Credit Details
Consumer Loan Delinquencies and Ratios
In millions of dollars, except EOP loan
amounts in billions
Global Consumer Banking(3)(4)
Total
Ratio
Retail banking
Total
Ratio
North America
Ratio
Latin America
Ratio
Asia(5)
Ratio
Cards
Total
Ratio
North America—Citi-branded
Ratio
North America—Citi retail services
Ratio
Latin America
Ratio
Asia(5)
Ratio
Corporate/Other—Consumer(6)
Total
Ratio
Total Citigroup
Ratio
$
$
124.8 $
50.3
11.7
62.8
$
175.1 $
96.3
52.9
6.0
19.9
EOP
loans(1)
December
31,
90+ days past due(2)
30–89 days past due(2)
December 31,
December 31,
2019
2019
2018
2017
2019
2018
2017
299.9 $
$
2,737
0.91%
$
2,550
0.89%
$
2,378
0.84%
$
3,001
1.00%
$
2,864
1.00%
2,687
0.95%
$
$
438
0.35%
146
0.29%
106
0.91%
186
0.30%
2,299
1.31%
915
0.95%
1,012
1.91%
165
2.75%
207
1.04%
$
$
416
0.36%
135
0.29%
108
0.95%
173
0.30%
2,134
1.26%
812
0.88%
952
1.81%
171
3.00%
199
1.03%
$
$
415
0.35%
134
0.29%
112
0.96%
169
0.29%
1,963
1.19%
768
0.85%
845
1.72%
151
2.80%
199
1.01%
$
$
816
0.66%
334
0.67%
180
1.54%
302
0.48%
2,185
1.25%
814
0.85%
945
1.79%
159
2.65%
267
1.34%
$
$
752
0.64%
265
0.56%
185
1.62%
302
0.52%
2,112
1.25%
755
0.82%
932
1.77%
170
2.98%
255
1.32%
747
0.64%
256
0.55%
181
1.55%
310
0.52%
1,940
1.18%
698
0.77%
830
1.69%
153
2.83%
259
1.31%
542
2.51%
3,229
1.06%
$
$
9.6 $
309.5 $
$
$
278
3.02%
3,015
0.98%
$
$
382
2.63%
2,932
0.97%
$
$
557
2.58%
2,935
0.91%
$
$
295
3.21%
3,296
1.07%
$
$
362
2.50%
3,226
1.07%
(1) End-of-period (EOP) loans include interest and fees on credit cards.
(2) The ratios of 90+ days past due and 30–89 days past due are calculated based on EOP loans, net of unearned income.
(3) The 90+ days past due balances for North America—Citi-branded and North America—Citi retail services are generally still accruing interest. Citigroup’s policy is
generally to accrue interest on credit card loans until 180 days past due, unless notification of bankruptcy filing has been received earlier.
(4) The 90+ days past due and 30–89 days past due and related ratios for North America GCB exclude U.S. mortgage loans that are guaranteed by U.S. government-
sponsored agencies since the potential loss predominantly resides within the agencies. The amounts excluded for loans 90+ days past due and (EOP loans) were
$135 million ($0.5 billion), $211 million ($0.7 billion) and $305 million ($0.8 billion) at December 31, 2019, 2018 and 2017, respectively. The amounts excluded
for loans 30–89 days past due (EOP loans have the same adjustment as above) were $72 million, $86 million and $93 million at December 31, 2019, 2018 and
2017, respectively.
(5) Asia includes delinquencies and loans in certain EMEA countries for all periods presented.
(6) The 90+ days past due and 30–89 days past due and related ratios exclude U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies since
the potential loss predominantly resides within the agencies. The amounts excluded for loans 90+ days past due and (EOP loans) were $172 million ($0.4 billion),
$367 million ($0.8 billion) and $663 million ($1.2 billion) at December 31, 2019, 2018 and 2017, respectively. The amounts excluded for loans 30–89 days past
due (EOP loans have the same adjustment as above) were $55 million, $122 million and $164 million at December 31, 2019, 2018 and 2017, respectively.
66
Consumer Loan Net Credit Losses and Ratios
In millions of dollars, except average loan amounts in billions
Global Consumer Banking
Total
Ratio
Retail banking
Total
Ratio
North America
Ratio
Latin America
Ratio
Asia(4)
Ratio
Cards
Total
Ratio
North America—Citi-branded
Ratio
North America—Citi retail services
Ratio
Latin America
Ratio
Asia(4)
Ratio
Corporate/Other—Consumer(3)
Total
Ratio
International
Ratio
North America
Ratio
Other(5)
Total Citigroup
Ratio
Average
loans(1)
2019
Net credit losses(2)(3)
2018
2019
2017
284.1 $
$
7,382
2.60 %
$
6,884
2.48%
6,462
2.39%
$
$
119.7 $
48.5
11.5
59.7
$
164.4 $
89.8
49.9
5.7
19.0
$
11.9 $
—
11.9
—
296.0 $
$
$
$
910
0.76 %
161
0.33
494
4.30
255
0.43
6,472
3.94 %
2,864
3.19
2,558
5.13
615
10.79
435
2.29
$
$
(6)
(0.05)%
—
—
(6)
(0.05)
—
7,376
2.49 %
$
$
913
0.78%
126
0.27
545
4.58
242
0.41
5,971
3.72%
2,602
2.97
2,357
4.88
586
10.65
426
2.25
$
$
24
0.14%
42
6.00
(18)
NM
—
6,908
2.33%
923
0.79%
135
0.29
550
4.40
238
0.42
5,539
3.60%
2,447
2.90
2,155
4.73
533
10.06
404
2.17
156
0.57%
82
4.32
74
0.29
(21)
6,597
2.22%
(1) Average loans include interest and fees on credit cards.
(2) The ratios of net credit losses are calculated based on average loans, net of unearned income.
(3) As a result of Citigroup's entry into agreements in 2016 to sell its Argentina and Brazil consumer banking businesses, these businesses were classified as HFS at
the end of the fourth quarter of 2016. Loans HFS are excluded from this table as they are recorded in Other assets. In addition, as a result of HFS accounting
treatment, approximately $128 million of net credit losses (NCLs) were recorded as a reduction in revenue (Other revenue) during 2017. Accordingly, these NCLs
are not included in this table. The sales of the Argentina and Brazil consumer banking businesses were completed in 2017.
(4) Asia includes NCLs and average loans in certain EMEA countries for all periods presented.
(5) 2017 NCLs reflected a recovery related to legacy assets.
67
Loan Maturities and Fixed/Variable Pricing of
U.S. Consumer Mortgages
Greater
than 1
year
but
within
5 years
Due
within
1 year
Greater
than 5
years
Total
$
$
3 $
92
95 $
118 $ 46,887 $ 47,008
9,223
8,801
330
448 $ 55,688 $ 56,231
$
$
430 $ 35,975
18
19,713
448 $ 55,688
In millions of dollars at
December 31, 2019
U.S. consumer
mortgage loan
portfolio
Residential first
mortgages
Home equity loans
Total
Fixed/variable
pricing of U.S.
consumer mortgage
loans with maturities
due after one year
Loans at fixed interest
rates
Loans at floating or
adjustable interest
rates
Total
68
CORPORATE CREDIT
Consistent with its overall strategy, Citi’s corporate clients are
typically large, multinational corporations that value the depth
and breadth of Citi’s global network. Citi aims to establish
relationships with these clients that, consistent with client
needs, encompass multiple products, including cash
management and trade services, foreign exchange, lending,
capital markets and M&A advisory. As of the fourth quarter of
2019, Citi’s commercial banking businesses previously
reported as part of GCB in North America, Latin America and
Asia, including approximately $28 billion in end-of-period
loans, are now reported in ICG for all periods presented.
Corporate Credit Portfolio
The following table presents Citi’s corporate credit portfolio
within ICG (excluding private bank), before consideration of
collateral or hedges, by remaining tenor for the periods
indicated:
December 31, 2019
September 30, 2019
December 31, 2018
Greater
than
1 year
but
within
5 years
Due
within
1 year
Greater
than
5 years
Total
exposure
Due
within
1 year
Greater
than
1 year
but
within
5 years
Greater
than
5 years
Total
exposure
Due
within
1 year
Greater
than
1 year
but
within
5 years
Greater
than
5 years
Total
exposure
$ 141 $
117 $
23 $
281 $ 150 $
115 $
24 $
289 $ 144 $
119 $
23 $
286
145
249
17
411
133
250
16
399
111
253
18
$ 286 $
366 $
40 $
692 $ 283 $
365 $
40 $
688 $ 255 $
372 $
41 $
382
668
In billions of dollars
Direct outstandings
(on-balance sheet)(1)
Unfunded lending
commitments
(off-balance sheet)(2)
Total exposure
(1)
(2)
Includes drawn loans, overdrafts, bankers’ acceptances and leases.
Includes unused commitments to lend, letters of credit and financial guarantees.
Portfolio Mix—Geography, Counterparty and Industry
Citi’s corporate credit portfolio is diverse by geography and
counterparty. The following table shows the regional
percentages of this portfolio based on Citi’s internal
management geography:
North America
EMEA
Asia
Latin America
Total
December 31,
2019
September 30,
2019
December 31,
2018
55%
26
12
7
100%
55%
26
12
7
100%
54%
26
12
8
100%
The maintenance of accurate and consistent risk ratings
across the corporate credit portfolio facilitates the comparison
of credit exposure across all lines of business, geographic
regions and products. Counterparty risk ratings reflect an
estimated probability of default for a counterparty and are
derived by leveraging validated statistical models, scorecard
models and external agency ratings (under defined
circumstances), in combination with consideration of factors
specific to the obligor or market, such as management
experience, competitive position and regulatory environment
69
and commodity prices. Facility risk ratings are assigned that
reflect the probability of default of the obligor and factors that
affect the loss given default of the facility, such as support or
collateral. Internal obligor ratings that generally correspond to
BBB and above are considered investment grade, while those
below are considered non-investment grade.
Citigroup has also incorporated environmental factors
such as climate risk assessment and reporting criteria for
certain obligors, as necessary. Factors evaluated include
consideration of climate risk to an obligor’s business and
physical assets and, when relevant, consideration of cost-
effective options to reduce greenhouse gas emissions.
The following table presents the corporate credit portfolio
by facility risk rating as a percentage of the total corporate
credit portfolio:
Total exposure
December 31,
2019
September 30,
2019
December 31,
2018
AAA/AA/A
BBB
BB/B
CCC or below
Total
46%
36
16
2
46%
36
16
2
47%
35
17
1
100%
100%
100%
Note: Total exposure includes direct outstandings and unfunded lending
commitments.
Rating of Hedged Exposure
AAA/AA/A
BBB
BB/B
CCC or below
Total
December 31,
2019
September 30,
2019
December 31,
2018
32%
51
15
2
34%
48
17
1
35%
50
14
1
100%
100%
100%
The credit protection was economically hedging
underlying corporate credit portfolio exposures with the
following industry distribution:
Industry of Hedged Exposure
Transportation and
industrial
Technology,
media and telecom
Consumer retail
and health
Power, chemicals,
metals and mining
Energy and
commodities
Insurance and
special purpose
entities
Banks/broker-
dealers/finance
companies
Public sector
Real estate
Other industries
Total
December 31,
2019
September 30,
2019
December 31,
2018
24%
23%
23%
19
18
15
9
7
3
3
2
—
100%
19
16
14
9
5
5
4
4
1
17
16
15
11
6
4
3
4
1
100%
100%
Citi’s corporate credit portfolio is also diversified by
industry. The following table shows the allocation of Citi’s
total corporate credit portfolio by industry:
Total exposure
December 31,
2019
September 30,
2019
December 31,
2018
21%
21%
22%
17
12
11
8
8
8
4
4
4
3
17
12
10
8
8
8
4
4
4
4
17
13
10
8
8
8
5
4
4
1
100%
100%
100%
Transportation and
industrial
Consumer retail
and health
Technology, media
and telecom
Power, chemicals,
metals and mining
Banks/broker-
dealers/finance
companies
Real estate
Energy and
commodities
Public sector
Insurance and
special purpose
entities
Hedge funds
Other industries
Total
For additional information on Citi’s corporate credit
portfolio, see Note 14 to the Consolidated Financial
Statements.
Credit Risk Mitigation
As part of its overall risk management activities, Citigroup
uses credit derivatives and other risk mitigants to hedge
portions of the credit risk in its corporate credit portfolio, in
addition to outright asset sales. Citi may enter into partial-term
hedges as well as full-term hedges. In advance of the
expiration of partial-term hedges, Citi will determine, among
other factors, the economic feasibility of hedging the
remaining life of the instrument. The results of the mark-to-
market and any realized gains or losses on credit derivatives
are reflected primarily in Principal transactions in the
Consolidated Statement of Income.
At December 31, 2019, September 30, 2019 and
December 31, 2018, Citigroup had economic hedges in place
on the corporate credit portfolio of $35.2 billion, $29.5 billion
and $30.2 billion, respectively. Citigroup’s expected loss
model used in the calculation of its loan loss reserve does not
include the favorable impact of credit derivatives and other
mitigants that are marked to market. In addition, the reported
amounts of direct outstandings and unfunded lending
commitments in the tables above do not reflect the impact of
these hedging transactions. The credit protection was
economically hedging underlying corporate credit portfolio
exposures with the following risk rating distribution:
70
Loan Maturities and Fixed/Variable Pricing of Corporate
Loans
Over 1
year
but
within
5 years
Due
within
1 year
Over 5
years
Total
$ 20,679 $ 21,623 $ 13,627 $ 55,929
In millions of dollars at
December 31, 2019
Corporate loans
In U.S. offices
Commercial and
industrial loans
Financial institutions
19,938
20,846
13,138
53,922
Mortgage and real
estate
Installment,
revolving credit and
other
Lease financing
In offices outside
the U.S.
Total corporate
loans
Fixed/variable
pricing of corporate
loans with
maturities due after
one year(1)
Loans at fixed
interest rates
Loans at floating or
adjustable interest
rates
Total
19,735
20,633
13,003
53,371
11,550
12,077
7,611
31,238
477
499
314
1,290
124,384
59,295
10,506
194,185
$ 196,763 $ 134,973 $ 58,199 $ 389,935
$ 22,432 $ 20,676
112,541
37,523
$ 134,973 $ 58,199
(1) Based on contractual terms. Repricing characteristics may effectively
be modified from time to time using derivative contracts. See Note 22
to the Consolidated Financial Statements.
71
ADDITIONAL CONSUMER AND CORPORATE CREDIT DETAILS
Loans Outstanding
In millions of dollars
Consumer loans
In North America offices(1)
Residential first mortgages(2)
Home equity loans(2)
Credit cards
Personal, small business and other
Total
In offices outside North America(1)
Residential first mortgages(2)
Credit cards
Personal, small business and other
Total
Consumer loans, net of unearned income(3)
Corporate loans
In North America offices(1)
Commercial and industrial
Financial institutions
Mortgage and real estate(2)
Installment, revolving credit and other
Lease financing
Total
In offices outside North America(1)
Commercial and industrial
Financial institutions
Mortgage and real estate(2)
Installment, revolving credit and other
Lease financing
Governments and official institutions
Total
Corporate loans, net of unearned income(4)
Total loans—net of unearned income
Allowance for loan losses—on drawn exposures
Total loans—net of unearned income
and allowance for credit losses
Allowance for loan losses as a percentage of total loans—
net of unearned income(5)
Allowance for consumer loan losses as a percentage of
total consumer loans—net of unearned income(5)
Allowance for corporate loan losses as a percentage of
total corporate loans—net of unearned income(5)
2019
2018
December 31,
2017
2016
2015
$
$
$
$
$
$
$
$
$
$
$
$
47,008
9,223
149,163
3,699
209,093
37,686
25,909
36,860
100,455
309,548
55,929
53,922
53,371
31,238
1,290
195,750
112,668
40,211
9,780
27,303
95
4,128
194,185
389,935
699,483
(12,783)
686,700
$
$
$
$
$
$
$
$
$
$
$
$
47,412
11,543
144,542
4,046
207,543
35,972
24,951
33,894
94,817
302,360
60,861
48,447
50,124
32,425
1,429
193,286
114,029
36,837
7,376
25,685
103
4,520
188,550
381,836
684,196
(12,315)
$
$
$
$
$
$
$
$
$
$
$
49,375
14,827
139,718
4,140
208,060
37,419
25,727
34,608
97,754
305,814
60,219
39,128
44,683
31,932
1,470
177,432
113,178
35,273
7,309
22,638
190
5,200
183,788
361,220
667,034
(12,355)
$
$
$
$
$
$
$
$
$
$
$
53,131
19,454
133,297
5,290
211,172
35,336
23,055
31,153
89,544
300,716
57,886
35,517
38,691
31,194
1,518
164,806
100,532
26,886
5,363
19,965
251
5,850
158,847
323,653
624,369
(12,060)
$
$
$
$
$
$
$
$
$
$
$
56,872
22,745
113,352
5,396
198,365
40,139
26,617
35,980
102,736
301,101
53,611
36,425
32,623
30,426
1,780
154,865
99,442
28,704
5,106
23,185
303
4,911
161,651
316,516
617,617
(12,626)
671,881
$
654,679
$
612,309
$
604,991
1.84%
3.20%
0.75%
1.81%
3.14%
0.74%
1.86%
3.08%
0.82%
1.94%
2.94%
1.01%
2.06%
3.08%
1.08%
(1) North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America. The classification of corporate loans between
offices in North America and outside North America is based on the domicile of the booking unit. The difference between the domicile of the booking unit and the
domicile of the managing unit is not material.
(2) Loans secured primarily by real estate.
(3) Consumer loans are net of unearned income of $783 million, $742 million, $768 million, $803 million and $850 million at December 31, 2019, 2018, 2017, 2016
and 2015, respectively. Unearned income on consumer loans primarily represents unamortized origination fees and costs, premiums and discounts.
(4) Corporate loans are net of unearned income of $(814) million, $(855) million, $(794) million, $(730) million and $(686) million at December 31, 2019, 2018,
2017, 2016 and 2015, respectively. Unearned income on corporate loans primarily represents interest received in advance, but not yet earned, on loans originated
on a discounted basis.
(5) All periods exclude loans that are carried at fair value.
72
Details of Credit Loss Experience
In millions of dollars
Allowance for loan losses at beginning of period
Provision for loan losses
Consumer
Corporate
Total
Gross credit losses
Consumer
In U.S. offices
In offices outside the U.S.
Corporate
Commercial and industrial, and other
In U.S. offices
In offices outside the U.S.
Loans to financial institutions
In U.S. offices
In offices outside the U.S.
Mortgage and real estate
In U.S. offices
In offices outside the U.S.
Total
Credit recoveries(1)
Consumer
In U.S. offices
In offices outside the U.S.
Corporate
Commercial and industrial, and other
In U.S. offices
In offices outside the U.S.
Loans to financial institutions
In U.S. offices
In offices outside the U.S.
Mortgage and real estate
In U.S. offices
In offices outside the U.S.
Total
Net credit losses
In U.S. offices
In offices outside the U.S.
Total
Other—net(2)(3)(4)(5)(6)(7)(8)
Allowance for loan losses at end of period
Allowance for loan losses as a percentage of total loans(9)
Allowance for unfunded lending commitments(8)(10)
Total allowance for loan losses and unfunded lending
commitments
Net consumer credit losses
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2019
12,315
7,751
467
8,218
6,538
2,316
265
196
—
3
23
—
2018
12,355
7,258
96
7,354
$
$
$
2017
12,060
7,329
174
7,503
$
$
$
2016
12,626
6,207
542
6,749
$
$
$
5,971
$
5,664
$
4,874
$
2,351
2,377
2,594
121
208
3
7
2
2
223
401
3
1
2
2
370
334
5
5
34
6
2015
15,994
6,073
1,035
7,108
5,439
3,077
173
297
—
4
8
43
9,341
$
8,665
$
8,673
$
8,222
$
9,041
$
975
503
$
912
502
$
892
552
$
972
576
954
642
47
78
—
3
6
4
31
117
1
1
2
1
31
79
1
1
1
—
1,552
5,132
1,981
7,113
$
$
$
1,597
4,966
2,110
7,076
$
$
$
1,661
4,278
2,283
6,561
$
$
$
(281) $
(132) $
(754) $
12,315
1.81%
1,367
13,682
6,908
$
$
$
$
12,355
1.86%
1,258
13,613
6,597
$
$
$
$
12,060
1.94%
1,418
13,478
5,920
$
$
$
$
43
84
7
2
7
—
1,739
4,609
2,693
7,302
(3,174)
12,626
2.06%
1,402
14,028
6,920
28
59
—
—
8
—
$
$
$
$
$
$
$
$
1,573
5,815
1,953
7,768
18
12,783
1.84%
1,456
14,239
7,376
73
As a percentage of average consumer loans
Net corporate credit losses
As a percentage of average corporate loans
Allowance by type at end of period(11)
Consumer
Corporate
Total Citigroup
2.49%
392
$
0.10%
2.33%
205
$
0.05%
2.22%
479
$
0.14%
2.00%
641
$
0.20%
2.19%
382
0.12%
9,897
2,886
12,783
$
$
9,504
2,811
12,315
$
$
9,412
2,943
12,355
$
$
8,842
3,218
12,060
$
$
9,273
3,353
12,626
$
$
$
(1) Recoveries have been reduced by certain collection costs that are incurred only if collection efforts are successful.
(2)
Includes all adjustments to the allowance for credit losses, such as changes in the allowance from acquisitions, dispositions, securitizations, FX translation,
purchase accounting adjustments, etc.
(3) 2019 includes reductions of approximately $42 million related to the transfer to HFS of various real estate loan portfolios. In addition, 2019 includes an increase
of approximately $60 million related to FX translation.
(4) 2018 includes reductions of approximately $201 million related to the sale or transfer to HFS of various loan portfolios, which include approximately $91 million
related to the transfer of various real estate loan portfolios to HFS. In addition, 2018 includes a reduction of approximately $60 million related to FX translation.
(5) 2017 includes reductions of approximately $261 million related to the sale or transfer to HFS of various loan portfolios, which include approximately $106 million
related to the transfer of various real estate loan portfolios to HFS. In addition, 2017 includes an increase of approximately $115 million related to FX translation.
(6) 2016 includes reductions of approximately $574 million related to the sale or transfer to HFS of various loan portfolios, which include approximately $106 million
related to the transfer of various real estate loan portfolios to HFS. In addition, 2016 includes a reduction of approximately $199 million related to FX translation.
(7) 2015 includes reductions of approximately $2.4 billion related to the sale or transfer to HFS of various loan portfolios, which include approximately $1.5 billion
related to the transfer of various real estate loan portfolios to HFS. In addition, 2015 includes a reduction of approximately $474 million related to FX translation.
(8) 2015 includes a reclassification of $271 million of Allowance for loan losses to allowance for unfunded lending commitments, included in the Other line item.
This reclassification reflects the re-attribution of $271 million in the allowance for credit losses between the funded and unfunded portions of the corporate credit
portfolios and does not reflect a change in the underlying credit performance of these portfolios.
(9) December 31, 2019, 2018, 2017, 2016 and 2015 exclude $4.1 billion, $3.2 billion, $4.4 billion, $3.5 billion and $5.0 billion, respectively, of loans which are
carried at fair value.
(10) Represents additional credit reserves recorded as Other liabilities on the Consolidated Balance Sheet.
(11) Allowance for loan losses represents management’s best estimate of probable losses inherent in the portfolio, as well as probable losses related to large
individually evaluated impaired loans and troubled debt restructurings. See “Significant Accounting Policies and Significant Estimates” and Note 1 to the
Consolidated Financial Statements below. Attribution of the allowance is made for analytical purposes only and the entire allowance is available to absorb
probable credit losses inherent in the overall portfolio.
74
Allowance for Loan Losses
The following tables detail information on Citi’s allowance for loan losses, loans and coverage ratios:
December 31, 2019
(1) Allowance as a percentage of loans excludes loans that are carried at fair value.
(2)
Includes both Citi-branded cards and Citi retail services. The $7.0 billion of loan loss reserves represented approximately 15 months of coincident net credit loss
coverage.
(3) Of the $0.3 billion, nearly all was allocated to North America mortgages in Corporate/Other, including $0.1 billion and $0.2 billion determined in accordance with
ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. Of the $56.2 billion in loans, approximately $54.2 billion and $2.0 billion of the
loans were evaluated in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. For additional information, see Note 15 to
the Consolidated Financial Statements.
Includes mortgages and other retail loans.
(4)
December 31, 2018
Allowance for
loan losses
Loans, net of
unearned income
149.2
56.2
3.7
25.9
74.6
309.6
389.9
699.5
7.0 $
0.3
0.1
0.7
1.8
9.9 $
2.9
12.8 $
Allowance as a
percentage of loans(1)
4.7%
0.5
2.7
2.7
2.4
3.2%
0.7
1.8%
Allowance for
loan losses
Loans, net of
unearned income
144.5
59.0
4.0
25.0
69.9
302.4
381.8
684.2
6.6 $
0.4
0.1
0.7
1.7
9.5 $
2.8
12.3 $
Allowance as a
percentage of loans(1)
4.6%
0.7
2.5
2.8
2.4
3.1%
0.7
1.8%
$
$
$
$
$
$
In billions of dollars
North America cards(2)
North America mortgages(3)
North America other
International cards
International other(4)
Total consumer
Total corporate
Total Citigroup
In billions of dollars
North America cards(2)
North America mortgages(3)
North America other
International cards
International other(4)
Total consumer
Total corporate
Total Citigroup
(1) Allowance as a percentage of loans excludes loans that are carried at fair value.
(2)
Includes both Citi-branded cards and Citi retail services. The $6.6 billion of loan loss reserves represented approximately 16 months of coincident net credit loss
coverage.
(3) Of the $0.4 billion, nearly all was allocated to North America mortgages in Corporate/Other, including approximately $0.1 billion and $0.3 billion determined in
accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. Of the $59.0 billion in loans, approximately $56.3 billion and $2.5
billion were evaluated in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. For additional information, see Note 15 to
the Consolidated Financial Statements.
Includes mortgages and other retail loans.
(4)
75
Non-Accrual Loans and Assets and Renegotiated Loans
There is a certain amount of overlap among non-accrual loans
and assets and renegotiated loans. The following summary
provides a general description of each category.
Non-Accrual Loans and Assets:
• Corporate and consumer (including commercial banking)
non-accrual status is based on the determination that
payment of interest or principal is doubtful.
• A corporate loan may be classified as non-accrual and still
be performing under the terms of the loan structure. Non-
accrual loans may still be current on interest payments.
Approximately 44%, 41% and 48% of Citi’s corporate
non-accrual loans were performing at December 31, 2019,
September 30, 2019 and December 31, 2018, respectively.
• Consumer non-accrual status is generally based on aging,
i.e., the borrower has fallen behind on payments.
• Consumer mortgage loans, other than Federal Housing
Administration (FHA) insured loans, are classified as
non-accrual within 60 days of notification that the
borrower has filed for bankruptcy. In addition, home
equity loans are classified as non-accrual if the related
residential first mortgage loan is 90 days or more past
due.
• North America Citi-branded cards and Citi retail services
are not included because, under industry standards, credit
card loans accrue interest until such loans are charged off,
which typically occurs at 180 days of contractual
delinquency.
Renegotiated Loans:
•
•
Includes both corporate and consumer loans whose terms
have been modified in a troubled debt restructuring
(TDR).
Includes both accrual and non-accrual TDRs.
76
Non-Accrual Loans
The table below summarizes Citigroup’s non-accrual loans as
of the periods indicated. Non-accrual loans may still be
current on interest payments. In situations where Citi
reasonably expects that only a portion of the principal owed
will ultimately be collected, all payments received are
reflected as a reduction of principal and not as interest income.
For all other non-accrual loans, cash interest receipts are
generally recorded as revenue.
In millions of dollars
Corporate non-accrual loans(1)(2)
North America
EMEA
Latin America
Asia
Total corporate non-accrual loans
Consumer non-accrual loans(1)(3)
North America
Latin America
Asia(4)
Total consumer non-accrual loans
Total non-accrual loans
2019
2018
2017
2016
2015
December 31,
$
$
$
$
$
1,214 $
586 $
966 $
1,291 $
1,005
430
473
71
375
307
243
849
348
70
904
441
220
347
421
191
2,188 $
1,511 $
2,233 $
2,856 $
1,964
905 $
1,138 $
1,468 $
1,854 $
632
279
1,816 $
4,004 $
638
250
2,026 $
3,537 $
688
243
2,399 $
4,632 $
648
221
2,723 $
5,579 $
2,328
756
206
3,290
5,254
(1) Excludes purchased distressed loans, as they are generally accreting interest. The carrying value of these loans was $128 million at December 31, 2019, $128
million at December 31, 2018, $167 million at December 31, 2017, $187 million at December 31, 2016 and $250 million at December 31, 2015.
(2) The 2016 increase in corporate non-accrual loans was primarily related to Citi’s North America and EMEA energy and energy-related corporate credit exposure.
(3) The 2015 decline in consumer non-accrual loans includes the impact related to the transfer of approximately $8 billion of mortgage loans to Loans HFS (included
within Other assets).
(4) Asia includes balances in certain EMEA countries for all periods presented.
The changes in Citigroup’s non-accrual loans were as follows:
Year ended
December 31, 2019
Year ended
December 31, 2018
In millions of dollars
Corporate
Consumer
Total
Corporate
Consumer
Total
Non-accrual loans at beginning of period
$
1,511 $
2,026 $
3,537 $
2,233 $
2,399 $
Additions
Sales and transfers to HFS
Returned to performing
Paydowns/settlements
Charge-offs
Other
Ending balance
3,407
(23)
(68)
(2,496)
(268)
125
2,954
(171)
(431)
(902)
(1,444)
(216)
6,361
(194)
(499)
(3,398)
(1,712)
(91)
2,108
(119)
(127)
(2,282)
(196)
(106)
3,148
(268)
(629)
(1,052)
(1,634)
62
$
2,188 $
1,816 $
4,004 $
1,511 $
2,026 $
4,632
5,256
(387)
(756)
(3,334)
(1,830)
(44)
3,537
77
Non-Accrual Assets
The table below summarizes Citigroup’s other real estate owned (OREO) assets. OREO is recorded on the Consolidated Balance
Sheet within Other assets. This represents the carrying value of all real estate property acquired by foreclosure or other legal
proceedings when Citi has taken possession of the collateral:
In millions of dollars
OREO
North America
EMEA
Latin America
Asia
Total OREO
Non-accrual assets
Corporate non-accrual loans
Consumer non-accrual loans
Non-accrual loans (NAL)
OREO
Non-accrual assets (NAA)
NAL as a percentage of total loans
NAA as a percentage of total assets
Allowance for loan losses as a percentage of NAL(1)
2019
2018
2017
2016
2015
December 31,
$
$
$
$
$
$
$
$
$
$
$
$
39
1
14
7
61
2,188
1,816
4,004
61
4,065
0.57%
0.21
319
$
$
$
$
$
$
64
1
12
22
99
1,511
2,026
3,537
99
3,636
0.52%
0.19
348
$
$
$
$
$
$
89
2
35
18
144
2,233
2,399
4,632
144
4,776
0.69%
0.26
267
161
$
—
18
7
186
2,856
2,723
5,579
186
5,765
0.89%
0.32
216
$
$
$
$
$
166
1
38
4
209
1,964
3,290
5,254
209
5,463
0.85%
0.32
240
(1) The allowance for loan losses includes the allowance for Citi’s credit card portfolios and purchased distressed loans, while the non-accrual loans exclude credit
card balances (with the exception of certain international portfolios) and purchased distressed loans as these continue to accrue interest until charge-off.
78
Renegotiated Loans
The following table presents Citi’s loans modified in TDRs:
Forgone Interest Revenue on Loans(1)
In millions of dollars
Interest revenue that
would have been
accrued at original
contractual rates(2)
Amount recognized as
interest revenue(2)
Forgone interest
revenue
$
$
In U.S.
offices
In non-
U.S.
offices
2019
total
488 $
421 $
130
112
358 $
309 $
909
242
667
(1) Relates to corporate non-accrual loans, renegotiated loans and consumer
(2)
loans on which accrual of interest has been suspended.
Interest revenue in offices outside the U.S. may reflect prevailing local
interest rates, including the effects of inflation and monetary correction
in certain countries.
In millions of dollars
Corporate renegotiated loans(1)
In U.S. offices
Commercial and industrial
Mortgage and real estate
Financial institutions
Other
Total
In offices outside the U.S.
Commercial and industrial(2)
Mortgage and real estate
Financial institutions
Other
Total
Total corporate renegotiated loans
Consumer renegotiated loans(3)
In U.S. offices
Mortgage and real estate
Cards
Installment and other
Total
In offices outside the U.S.
Mortgage and real estate
Cards
Installment and other
Total
Total consumer renegotiated loans
Dec. 31,
2019
Dec. 31,
2018
$
$
$
$
$
$
$
$
$
$
226 $
57
—
4
287 $
200 $
22
—
40
262 $
549 $
188
111
16
2
317
226
12
9
—
247
564
1,956 $ 2,520
1,464
1,338
17
13
3,437 $ 3,871
305 $
466
400
299
480
387
1,171 $ 1,166
4,608 $ 5,037
(1)
(2)
(3)
Includes $472 million and $466 million of non-accrual loans included in
the non-accrual loans table above at December 31, 2019 and 2018,
respectively. The remaining loans are accruing interest.
In addition to modifications reflected as TDRs at December 31, 2019
and 2018, Citi also modified $26 million and $2 million in offices
outside the U.S., respectively, of commercial loans risk rated
“Substandard Non-Performing” or worse (asset category defined by
banking regulators). These modifications were not considered TDRs
because the modifications did not involve a concession.
Includes $814 million and $933 million of non-accrual loans included in
the non-accrual loans table above at December 31, 2019 and 2018,
respectively. The remaining loans are accruing interest.
79
LIQUIDITY RISK
Overview
Adequate and diverse sources of funding and liquidity are
essential to Citi’s businesses. Funding and liquidity risks arise
from several factors, many of which are mostly or entirely
outside Citi’s control, such as disruptions in the financial
markets, changes in key funding sources, credit spreads,
changes in Citi’s credit ratings and macroeconomic,
geopolitical and other conditions. For additional information,
see “Risk Factors” above.
Citi’s funding and liquidity management objectives are
aimed at (i) funding its existing asset base, (ii) growing its
core businesses, (iii) maintaining sufficient liquidity,
structured appropriately, so that Citi can operate under a
variety of adverse circumstances, including potential
Company-specific and/or market liquidity events in varying
durations and severity, and (iv) satisfying regulatory
requirements, including, among other things, those related to
resolution planning (for additional information, see
“Resolution Plan” and “Total Loss-Absorbing Capacity
(TLAC)” below). Citigroup’s primary liquidity objectives are
established by entity, and in aggregate, across two major
categories:
• Citibank (including Citibank Europe plc, Citibank
Singapore Ltd. and Citibank (Hong Kong) Ltd.); and
• Citi’s non-bank and other entities, including the parent
holding company (Citigroup Inc.), Citi’s primary
intermediate holding company (Citicorp LLC), Citi’s
broker-dealer subsidiaries (including Citigroup Global
Markets Inc., Citigroup Global Markets Ltd. and
Citigroup Global Markets Japan Inc.) and other bank and
non-bank subsidiaries that are consolidated into Citigroup
(including Citibanamex).
At an aggregate Citigroup level, Citi’s goal is to maintain
sufficient funding in amount and tenor to fully fund customer
assets and to provide an appropriate amount of cash and high-
quality liquid assets (as discussed below), even in times of
stress, in order to meet its payment obligations as they come
due. The liquidity risk management framework provides that
in addition to the aggregate requirements, certain entities be
self-sufficient or net providers of liquidity, including in
conditions established under their designated stress tests.
Citi’s primary sources of funding include (i) deposits via
Citi’s bank subsidiaries, which are Citi’s most stable and
lowest cost source of long-term funding, (ii) long-term debt
(primarily senior and subordinated debt) primarily issued at
the parent and certain bank subsidiaries, and (iii) stockholders’
equity. These sources may be supplemented by short-term
borrowings, primarily in the form of secured funding
transactions.
As referenced above, Citi’s funding and liquidity
framework ensures that the tenor of these funding sources is of
sufficient term in relation to the tenor of its asset base. The
goal of Citi’s asset/liability management is to ensure that there
is excess liquidity and tenor in the liability structure relative to
the liquidity profile of the assets. This reduces the risk that
liabilities will become due before assets mature or are
monetized. This excess liquidity is held primarily in the form
of high-quality liquid assets (HQLA), as set forth in the table
below.
Citi’s liquidity is managed via a centralized treasury
model by Treasury, in conjunction with regional and in-
country treasurers with independent oversight provided by
Independent Risk Management. Pursuant to this approach,
Citi’s HQLA are managed with emphasis on asset-liability
management and entity-level liquidity adequacy throughout
Citi.
The Chief Risk Officer and Citi’s CFO co-chair Citi’s
Asset Liability Management Committee (ALCO), which
includes Citi’s Treasurer and other senior executives. ALCO,
among other things, sets the strategy of the liquidity portfolio
and monitors its performance. Significant changes to portfolio
asset allocations need to be approved by ALCO.
Liquidity Monitoring and Measurement
Stress Testing
Liquidity stress testing is performed for each of Citi’s major
entities, operating subsidiaries and/or countries. Stress testing
and scenario analyses are intended to quantify the potential
impact of an adverse liquidity event on the balance sheet and
liquidity position, and to identify viable funding alternatives
that can be utilized. These scenarios include assumptions
about significant changes in key funding sources, market
triggers (such as credit ratings), potential uses of funding and
macroeconomic, geopolitical and other conditions. These
conditions include expected and stressed market conditions as
well as Company-specific events.
Liquidity stress tests are performed to ascertain potential
mismatches between liquidity sources and uses over a variety
of time horizons and over different stressed conditions.
Liquidity limits are set accordingly. To monitor the liquidity of
an entity, these stress tests and potential mismatches are
calculated with varying frequencies, with several tests
performed daily.
Given the range of potential stresses, Citi maintains
contingency funding plans on a consolidated basis and for
individual entities. These plans specify a wide range of readily
available actions for a variety of adverse market conditions or
idiosyncratic stresses.
80
High-Quality Liquid Assets (HQLA)
In billions of dollars
Available cash
U.S. sovereign
U.S. agency/agency MBS
Foreign government debt(1)
Other investment grade
Dec. 31,
2019
Citibank
Sept. 30,
2019
Dec. 31,
2018
Citi non-bank and other entities
Dec. 31,
Dec. 31,
Sept. 30,
2019
2018
2019
Dec. 31,
2019
Total
Sept. 30,
2019
Dec. 31,
2018
$
158.7 $
123.7 $
97.1 $
2.1 $
31.8 $
27.6 $
160.8 $
155.5 $
100.2
56.9
66.4
2.4
94.3
55.5
65.9
2.9
103.2
60.0
76.8
1.5
29.6
4.4
16.5
0.5
32.4
4.6
10.9
0.7
24.0
5.8
6.3
1.4
129.8
126.7
61.3
82.9
2.8
60.1
76.8
3.6
124.7
127.2
65.8
83.1
2.9
Total HQLA (AVG)
$
384.6 $
342.3 $
338.6 $
53.1 $
80.4 $
65.1 $
437.6 $
422.7 $
403.7
Note: The amounts set forth in the table above are presented on an average basis. For securities, the amounts represent the liquidity value that potentially could be
realized and, therefore, exclude any securities that are encumbered and incorporate any haircuts that would be required for securities financing transactions. The table
above incorporates various restrictions that could limit the transferability of liquidity between legal entities, including Section 23A of the Federal Reserve Act.
(1) Foreign government debt includes securities issued or guaranteed by foreign sovereigns, agencies and multilateral development banks. Foreign government debt
securities are held largely to support local liquidity requirements and Citi’s local franchises and principally include government bonds from Mexico, Hong Kong,
South Korea, Singapore, India and Brazil.
The table above includes average amounts of HQLA held at
Citigroup’s operating entities that are eligible for inclusion in
the calculation of Citigroup’s consolidated Liquidity Coverage
Ratio (LCR), pursuant to the U.S. LCR rules. These amounts
include the HQLA needed to meet the minimum requirements
at these entities and any amounts in excess of these minimums
that are assumed to be transferable to other entities within
Citigroup. Citigroup’s HQLA increased sequentially, reflecting
deposit growth and the issuance of long-term debt.
Citi’s HQLA as set forth above does not include Citi’s
available borrowing capacity from the Federal Home Loan
Banks (FHLBs) of which Citi is a member, which was
approximately $35 billion as of December 31, 2019 (compared
to $40 billion as of September 30, 2019 and $29 billion as of
December 31, 2018) and maintained by eligible collateral
pledged to such banks. The HQLA also does not include Citi’s
borrowing capacity at the U.S. Federal Reserve Bank discount
window or other central banks, which would be in addition to
the resources noted above.
Short-Term Liquidity Measurement: Liquidity Coverage
Ratio (LCR)
In addition to internal 30-day liquidity stress testing performed
for Citi’s major entities, operating subsidiaries and countries,
Citi also monitors its liquidity by reference to the LCR.
Generally, the LCR is designed to ensure that banks
maintain an adequate level of HQLA to meet liquidity needs
under an acute 30-day stress scenario. The LCR is calculated
by dividing HQLA by estimated net outflows over a stressed
30-day period, with the net outflows determined by applying
prescribed outflow factors to various categories of liabilities,
such as deposits, unsecured and secured wholesale
borrowings, unused lending commitments and derivatives-
related exposures, partially offset by inflows from assets
maturing within 30 days. Banks are required to calculate an
add-on to address potential maturity mismatches between
contractual cash outflows and inflows within the 30-day
period in determining the total amount of net outflows. The
minimum LCR requirement is 100%.
The table below details the components of Citi’s LCR
calculation and HQLA in excess of net outflows for the
periods indicated:
In billions of dollars
HQLA
Net outflows
LCR
Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
$ 437.6
$ 422.7
$ 403.7
382.0
373.4
334.8
115%
113%
121%
HQLA in excess of net outflows
$ 55.6
$
49.3
$
68.9
Note: The amounts are presented on an average basis.
Citi’s average LCR increased sequentially, reflecting the
issuance of long-term debt.
81
Long-Term Liquidity Measurement: Net Stable Funding
Ratio (NSFR)
In 2016, the Federal Reserve Board, the FDIC and the OCC
issued a proposed rule to implement the Basel III NSFR
requirement.
The U.S.-proposed NSFR is largely consistent with the
Basel Committee’s final NSFR rules. In general, the NSFR
assesses the availability of a bank’s stable funding against a
required level. A bank’s available stable funding would
include portions of equity, deposits and long-term debt, while
its required stable funding would be based on the liquidity
characteristics and encumbrance period of its assets,
derivatives and commitments. Prescribed factors would be
required to be applied to the various categories of asset and
liabilities classes. The ratio of available stable funding to
required stable funding would be required to be greater than
100%.
While Citi believes that it is compliant with the proposed
U.S. NSFR rules as of December 31, 2019, it will need to
evaluate a final version of the rules. Citi expects that the
NSFR final rules implementation period will be
communicated along with the final version of the rules.
Loans
As part of its funding and liquidity objectives, Citi seeks to
fund its existing asset base appropriately as well as maintain
sufficient liquidity to grow its GCB and ICG businesses,
including its loan portfolio. Citi maintains a diversified
portfolio of loans to its consumer and institutional clients. The
table below details the average loans, by business and/or
segment, and the total end-of-period loans for each of the
periods indicated:
In billions of dollars
Global Consumer Banking
North America
Latin America
Asia(1)
Total
Institutional Clients Group
Corporate lending
Treasury and trade solutions
(TTS)
Private bank
Markets and securities services
and other
Total
Total Corporate/Other
Total Citigroup loans (AVG)
Total Citigroup loans (EOP)
Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
$
192.7 $
188.8 $
186.8
17.4
80.9
17.0
78.3
16.9
76.7
$
291.0 $
284.1 $
280.4
$
154.2 $
160.9 $
158.2
74.5
106.6
72.5
104.0
77.0
94.7
56.0
52.3
49.2
$
$
$
$
391.3 $
389.7 $
379.1
10.3 $
11.2 $
16.0
692.6 $
685.0 $
675.5
699.5 $
691.7 $
684.2
(1)
Includes loans in certain EMEA countries for all periods presented.
End-of period loans increased 2% year-over-year and 1%
quarter-over-quarter. On an average basis, loans increased 3%
year-over-year and 1% quarter-over-quarter.
82
Excluding the impact of FX translation, average loans
increased 3% year-over-year, driven by 4% aggregate across
GCB and ICG. Within GCB, average loans grew 4%, driven
by continued growth in North America GCB and Asia GCB.
Average loans in Latin America GCB were largely unchanged
year-over-year, reflecting lower overall industry volumes.
Average ICG loans increased 3% year-over-year. Treasury
and trade solutions (TTS) loans declined 3% year-over-year,
as Citi continued to utilize its distribution capabilities in order
to optimize its balance sheet while supporting its clients.
Corporate lending loans declined 2%, reflecting the episodic
nature of clients’ funding needs, as well as an active quarter in
debt capital markets originations. Private bank loans increased
13%, reflecting growth across regions, driven by both new
clients and the deepening of relationships with existing clients.
Markets and securities services loans increased 14%,
primarily driven by residential and commercial real estate
warehouse lending.
Average Corporate/Other loans continued to decline
(down 34%), driven by the wind-down of legacy assets.
Deposits
The table below details the average deposits, by business and/
or segment, and the total end-of-period deposits for each of the
periods indicated:
In billions of dollars
Global Consumer Banking
North America
Latin America
Asia(1)
Total
Institutional Clients Group
Treasury and trade solutions
(TTS)
Banking ex-TTS
Markets and securities services
Total
Total Corporate/Other
Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
$
156.2 $
153.6 $
146.5
23.0
103.4
22.5
100.7
22.3
97.7
$
282.6 $
276.8 $
266.5
$
558.7 $
541.0 $
510.9
140.7
95.0
137.0
95.7
$
$
794.4 $
12.5 $
773.7 $
15.8 $
128.3
86.7
725.9
13.3
Total Citigroup deposits (AVG)
$ 1,089.5 $ 1,066.3 $ 1,005.7
Total Citigroup deposits (EOP)
$ 1,070.6 $ 1,087.8 $ 1,013.2
(1)
Includes deposits in certain EMEA countries for all periods presented.
End-of-period deposits increased 6% year-over-year and
declined 2% quarter-over-quarter. On an average basis,
deposits increased 8% year-over-year and 2% quarter-over-
quarter.
Excluding the impact of FX translation, average deposits
increased 9% year-over-year. In GCB, deposits increased 6%,
driven by continued growth in Asia GCB and North America
GCB. In North America GCB, deposit growth accelerated to
7%, with contributions from both traditional and digital
channels.
In ICG, deposits increased 10%, primarily driven by high-
quality deposit growth in TTS.
Long-Term Debt
Long-term debt (generally defined as debt with original
maturities of one year or more) represents the most significant
component of Citi’s funding for the Citigroup parent company
and Citi’s non-bank subsidiaries and is a supplementary source
of funding for the bank entities.
Long-term debt is an important funding source due in part
to its multi-year contractual maturity structure. The weighted-
average maturity of unsecured long-term debt issued by
Citigroup and its affiliates (including Citibank) with a
remaining life greater than one year was approximately
8.4 years as of December 31, 2019, unchanged from
September 30, 2019 and a slight decline from the prior year.
The weighted-average maturity is calculated based on the
contractual maturity of each security. For securities that are
redeemable prior to maturity at the option of the holder, the
weighted-average maturity is calculated based on the earliest
date an option becomes exercisable.
Citi’s long-term debt outstanding at the Citigroup parent
company includes benchmark senior and subordinated debt
and what Citi refers to as customer-related debt, consisting of
structured notes, such as equity- and credit-linked notes, as
well as non-structured notes. Citi’s issuance of customer-
related debt is generally driven by customer demand and
supplements benchmark debt issuance as a source of funding
for Citi’s non-bank entities. Citi’s long-term debt at the bank
includes benchmark senior debt, FHLB advances and
securitizations.
Long-Term Debt Outstanding
The following table sets forth Citi’s end-of-period total long-
term debt outstanding for each of the dates indicated:
In billions of dollars
Parent and other(1)
Benchmark debt:
Senior debt
Subordinated debt
Trust preferred
Customer-related debt
Local country and other(2)
Total parent and other
Bank
FHLB borrowings
Securitizations(3)
Citibank benchmark senior debt
Local country and other(2)
Total bank
Total long-term debt
Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
$ 106.6 $ 104.3 $ 104.6
24.5
1.7
37.1
2.9
$ 195.5 $ 187.3 $ 170.8
25.9
1.7
50.1
5.3
25.5
1.7
53.8
7.9
$
5.5 $
20.7
23.1
4.0
53.3 $
10.5
28.4
18.8
3.5
$
61.2
$ 248.8 $ 242.2 $ 232.0
5.5 $
22.8
23.1
3.5
54.9 $
Note: Amounts represent the current value of long-term debt on Citi’s
Consolidated Balance Sheet which, for certain debt instruments, includes
consideration of fair value, hedging impacts and unamortized discounts and
premiums.
(1) Parent and other includes long-term debt issued to third parties by the
parent holding company (Citigroup) and Citi’s non-bank subsidiaries
(including broker-dealer subsidiaries) that are consolidated into
Citigroup. As of December 31, 2019, parent and other included $46.9
billion of long-term debt issued by Citi’s broker-dealer subsidiaries.
(2) Local country and other includes debt issued by Citi’s affiliates in
support of their local operations. Within parent and other, certain secured
financing is also included.
(3) Predominantly credit card securitizations, primarily backed by Citi-
branded credit card receivables.
Citi’s total long-term debt outstanding increased both
year-over-year and quarter-over-quarter, largely driven by an
increase in customer-related debt at the non-bank entities.
Year-over-year, this growth was partially offset by a decline in
securitizations at the bank.
As part of its liability management, Citi has considered,
and may continue to consider, opportunities to repurchase its
long-term debt pursuant to open market purchases, tender
offers or other means. Such repurchases help reduce Citi’s
overall funding costs. During 2019, Citi repurchased $13.1
billion of its outstanding long-term debt, including early
redemptions of FHLB advances, but excluding the exercise of
call options on $4.0 billion of securities with a remaining life
of three months or less.
83
Long-Term Debt Issuances and Maturities
The table below details Citi’s long-term debt issuances and maturities (including repurchases and redemptions) during the periods
presented:
In billions of dollars
Parent and other
Benchmark debt:
Senior debt
Subordinated debt
Customer-related debt
Local country and other
Total parent and other
Bank
FHLB borrowings
Securitizations
Citibank benchmark senior debt
Local country and other
Total bank
Total
2019
2018
2017
Maturities
Issuances
Maturities
Issuances
Maturities
Issuances
$
$
$
$
$
16.5 $
16.2 $
18.5 $
14.8 $
14.1 $
—
12.7
1.1
—
25.1
5.4
2.9
6.6
1.2
0.6
16.9
2.3
1.6
7.6
1.2
30.3 $
46.7 $
29.2 $
34.6 $
24.5 $
7.1 $
2.1 $
15.8 $
7.9 $
7.8 $
7.9
4.8
0.9
0.1
8.8
1.4
8.6
2.3
2.2
6.8
8.5
2.9
5.3
—
3.4
20.7 $
51.0 $
12.4 $
59.1 $
28.9 $
58.1 $
26.1 $
60.7 $
16.5 $
41.0 $
21.6
1.3
12.3
0.1
35.3
5.5
12.2
12.6
2.4
32.7
68.0
The table below shows Citi’s aggregate long-term debt maturities (including repurchases and redemptions) in 2019, as well as its
aggregate expected annual long-term debt maturities as of December 31, 2019:
In billions of dollars
Parent and other
Benchmark debt:
Senior debt
Subordinated debt
Trust preferred
Customer-related debt
Local country and other
Total parent and other
Bank
FHLB borrowings
Securitizations
Citibank benchmark senior debt
Local country and other
Total bank
Total long-term debt
2019
2020
2021
2022
2023
2024
Thereafter
Total
Maturities
$
16.5 $
6.4 $
14.2 $
11.3 $
12.5 $
7.0 $
55.2 $
106.6
—
—
12.7
1.1
—
—
9.2
1.0
—
—
6.3
3.6
0.7
—
5.1
1.5
1.2
—
3.7
0.1
0.9
—
3.6
0.1
22.7
1.7
25.9
1.6
25.5
1.7
53.8
7.9
30.3 $
16.6 $
24.1 $
18.6 $
17.5 $
11.6 $
107.1 $
195.5
7.1 $
5.5 $
— $
— $
— $
— $
— $
7.9
4.8
0.9
4.6
8.7
1.9
7.3
6.1
0.6
2.3
5.6
0.6
2.6
—
—
1.1
2.7
0.6
2.8
—
0.3
20.7 $
20.7 $
14.0 $
8.5 $
2.6 $
4.4 $
3.1 $
5.5
20.7
23.1
4.0
53.3
51.0 $
37.3 $
38.1 $
27.1 $
20.1 $
16.0 $
110.2 $
248.8
$
$
$
$
84
Resolution Plan
Citi is required under Title I of the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 (Dodd-Frank
Act) and the rules promulgated by the FDIC and FRB to
periodically submit a plan for Citi’s rapid and orderly
resolution under the U.S. Bankruptcy Code in the event of
material financial distress or failure. For additional
information on Citi’s resolution plan submissions, see “Risk
Factors—Strategic Risks” above. Citigroup’s preferred
resolution strategy is “single point of entry” under the U.S.
Bankruptcy Code.
Under Citi’s resolution plan, only Citigroup, the parent
holding company, would enter into bankruptcy, while
Citigroup’s material legal entities (as defined in the public
section of its 2019 resolution plan, which can be found on the
FRB’s and FDIC’s websites) would remain operational and
outside of any resolution or insolvency proceedings.
Citigroup’s resolution plan has been designed to minimize the
risk of systemic impact to the U.S. and global financial
systems, while maximizing the value of the bankruptcy estate
for the benefit of Citigroup’s creditors, including its unsecured
long-term debt holders. In addition, in line with the Federal
Reserve’s final total loss-absorbing capacity (TLAC) rule,
Citigroup believes it has developed the resolution plan so that
Citigroup’s shareholders and unsecured creditors—including
its unsecured long-term debt holders—bear any losses
resulting from Citigroup’s bankruptcy. Accordingly, any value
realized by holders of its unsecured long-term debt may not be
sufficient to repay the amounts owed to such debt holders in
the event of a bankruptcy or other resolution proceeding of
Citigroup.
The FDIC has also indicated that it was developing a
single point of entry strategy to implement its resolution
authority under Title II of the Dodd-Frank Act.
As previously disclosed, in response to feedback received
from the Federal Reserve and FDIC, Citigroup took the
following actions:
(i) Citicorp LLC (Citicorp), an existing wholly owned
subsidiary of Citigroup, was established as an
intermediate holding company (an IHC) for certain of
Citigroup’s operating material legal entities;
(ii) Citigroup executed an inter-affiliate agreement with
Citicorp, Citigroup’s operating material legal entities
and certain other affiliated entities pursuant to which
Citicorp is required to provide liquidity and capital
support to Citigroup’s operating material legal entities
in the event Citigroup were to enter bankruptcy
proceedings (Citi Support Agreement);
(iii) pursuant to the Citi Support Agreement:
• Citigroup made an initial contribution of assets,
including certain high-quality liquid assets and
inter-affiliate loans (Contributable Assets), to
Citicorp, and Citicorp became the business as usual
funding vehicle for Citigroup’s operating material
legal entities;
• Citigroup will be obligated to continue to transfer
Contributable Assets to Citicorp over time, subject
to certain amounts retained by Citigroup to, among
85
•
other things, meet Citigroup’s near-term cash
needs;
in the event of a Citigroup bankruptcy, Citigroup
will be required to contribute most of its remaining
assets to Citicorp; and
(iv) the obligations of both Citigroup and Citicorp under the
Citi Support Agreement, as well as the Contributable
Assets, are secured pursuant to a security agreement.
The Citi Support Agreement provides two mechanisms,
besides Citicorp’s issuing of dividends to Citigroup, pursuant
to which Citicorp will be required to transfer cash to Citigroup
during business as usual so that Citigroup can fund its debt
service as well as other operating needs: (i) one or more
funding notes issued by Citicorp to Citigroup and (ii) a
committed line of credit under which Citicorp may make loans
to Citigroup.
On December 17, 2019, the FRB and FDIC issued
feedback on the resolution plans filed on July 1, 2019 by the
eight U.S. GSIBs, including Citi. The FRB and FDIC
identified one shortcoming, but no deficiencies, in Citi’s
resolution plan relating to governance mechanisms. Citi is
required to submit a plan to address the shortcoming by March
31, 2020, which the FRB and FDIC will take into account in
determining the scope of Citi’s targeted resolution plan due on
July 1, 2021.
Total Loss-Absorbing Capacity (TLAC)
In 2016, the Federal Reserve Board imposed minimum
external TLAC and long-term debt (LTD) requirements on
U.S. global systemically important bank holding companies
(GSIBs), including Citi, effective as of January 1, 2019. As a
result, U.S. GSIBs are required to maintain minimum levels of
TLAC and eligible LTD, each set by reference to the GSIB’s
consolidated risk-weighted assets (RWA) and total leverage
exposure, as described further below. The intended purpose of
the requirements is to facilitate the orderly resolution of U.S.
GSIBs under the U.S. Bankruptcy Code and Title II of the
Dodd-Frank Act. For additional information, including Citi’s
TLAC and LTD amounts and ratios, see “Capital Resources—
Current Regulatory Capital Standards” and “Risk Factors—
Compliance Risks” above.
Minimum TLAC Requirements
The minimum TLAC requirement is the greater of (i) 18% of
the GSIB’s RWA plus the then-applicable RWA-based TLAC
buffer (see below) and (ii) 7.5% of the GSIB’s total leverage
exposure plus a leveraged-based TLAC buffer of 2% (i.e.,
9.5%).
The RWA-based TLAC buffer equals the 2.5% capital
conservation buffer, plus any applicable countercyclical
capital buffer (currently 0%), plus the GSIB’s capital
surcharge as determined under method 1 of the GSIB
surcharge rule (2.0% for Citi for 2020). Accordingly, Citi’s
total current minimum TLAC requirement is 22.5% of RWA
for 2020.
As of December 31, 2019, Citi exceeded each of the
minimum TLAC requirements, with ratios of 11.5% of TLAC
The remainder of the secured funding activity in the
broker-dealer subsidiaries serves to fund securities inventory
held in the context of market making and customer activities.
To maintain reliable funding under a wide range of market
conditions, including under periods of stress, Citi manages
these activities by taking into consideration the quality of the
underlying collateral and establishing minimum required
funding tenors. The weighted average maturity of Citi’s
secured funding of less liquid securities inventory was greater
than 110 days as of December 31, 2019.
Citi manages the risks in its secured funding by
conducting daily stress tests to account for changes in
capacity, tenors, haircut, collateral profile and client actions.
In addition, Citi maintains counterparty diversification by
establishing concentration triggers and assessing counterparty
reliability and stability under stress. Citi generally sources
secured funding from more than 150 counterparties.
Short-Term Borrowings
Citi’s short-term borrowings of $45 billion increased 39%
year-over-year and 28% sequentially, primarily driven by an
increase in FHLB advances as well as commercial paper
issued out of the broker-dealer entities (see Note 17 to the
Consolidated Financial Statements for further information on
Citigroup’s and its affiliates’ outstanding short-term
borrowings).
as a percentage of Total Leverage Exposure and 24.7% of
TLAC as a percentage of Standardized Approach RWA.
Minimum Eligible LTD Requirements
The minimum LTD requirement is the greater of (i) 6% of the
GSIB’s RWA plus its capital surcharge as determined under
method 2 of the GSIB surcharge rule (3.0% for Citi for 2020),
for a total current requirement of 9% of RWA for Citi, and (ii)
4.5% of the GSIB’s total leverage exposure.
As of December 31, 2019, Citi exceeded each of the
minimum LTD requirements, with ratios of 10.9% of LTD as a
percentage of Standardized Approach RWA and 5.1% of LTD
as a percentage of Total Leverage Exposure.
For additional discussion of the method 1 and method 2
GSIB capital surcharge methodologies, see “Capital Resources
—Current Regulatory Capital Standards” above.
Secured Funding Transactions and Short-Term
Borrowings
Citi supplements its primary sources of funding with short-
term financings that generally include (i) secured funding
transactions consisting of securities loaned or sold under
agreements to repurchase, or repos, and (ii) to a lesser extent,
short-term borrowings consisting of commercial paper and
borrowings from the FHLB and other market participants.
Secured Funding Transactions
Secured funding is primarily accessed through Citi’s broker-
dealer subsidiaries to fund efficiently both (i) secured lending
activity and (ii) a portion of the securities inventory held in the
context of market making and customer activities. Citi also
executes a smaller portion of its secured funding transactions
through its bank entities, which are typically collateralized by
government debt securities. Generally, daily changes in the
level of Citi’s secured funding are primarily due to
fluctuations in secured lending activity in the matched book
(as described below) and securities inventory.
Secured funding of $166 billion as of December 31, 2019
decreased 6% from the prior year and 15% from the prior
quarter. Excluding the impact of FX translation, secured
funding decreased 7% from the prior year and 17% from the
prior quarter, both driven by normal business activity. Average
balances for secured funding were $188 billion for the quarter
ended December 31, 2019.
The portion of secured funding in the broker-dealer
subsidiaries that funds secured lending is commonly referred
to as “matched book” activity. The majority of this activity is
secured by high-quality liquid securities such as U.S. Treasury
securities, U.S. agency securities and foreign government debt
securities. Other secured funding is secured by less liquid
securities, including equity securities, corporate bonds and
asset-backed securities, the tenor of which is generally equal
to or longer than the tenor of the corresponding matched book
assets.
86
Overall Short-Term Borrowings
The following table contains the year-end, average and maximum month-end amounts for the following respective short-term
borrowings categories at the end of each of the three prior years:
Securities sold under
agreements to repurchase
Other borrowings(1)(2)
In billions of dollars
2019
2018
2017
2019
2018
2017
Amounts outstanding at year end
Average outstanding during the year(3)(4)
Maximum month-end outstanding
Weighted average interest rate during the year(3)(4)(5)
$
166.3
190.2
196.8
$
177.8
$
156.3
$
172.1
191.2
157.7
163.0
93.7
98.8
105.8
$
96.9
$
108.4
113.5
105.8
97.7
112.3
3.29%
2.84%
1.69%
2.49%
2.04%
1.08%
(1) Original maturities of less than one year.
(2) Other borrowings include commercial paper, brokerage payables and borrowings from the FHLB and other market participants. See “Average Balances and
Interest Rates” below.
Interest rates and amounts include the effects of risk management activities associated with the respective liability categories.
(3)
(4) Average volumes of securities sold under agreements to repurchase are reported net pursuant to ASC 210-20-45; average rates exclude the impact of ASC
210-20-45.
(5) Average rates reflect prevailing local interest rates, including inflationary effects and monetary correction in certain countries.
87
Credit Ratings
Citigroup’s funding and liquidity, 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 shows the ratings for Citigroup and
Citibank as of December 31, 2019. While not included in the
table below, the long-term and short-term ratings of Citigroup
Global Markets Holding Inc. (CGMHI) were BBB+/A-2 at
Standard & Poor’s and A/F1 at Fitch as of December 31, 2019.
Ratings as of December 31, 2019
Fitch Ratings (Fitch)
Moody’s Investors Service (Moody’s)
Standard & Poor’s (S&P)
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 derivative
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, 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, 2019, 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 $0.5 billion, compared to
$0.3 billion as of September 30, 2019. Other funding sources,
such as secured financing transactions and other margin
requirements, for which there are no explicit triggers, could
also be adversely affected.
Citigroup Inc.
Citibank, N.A.
Senior
debt
Commercial
paper
A
A3
BBB+
F1
P-2
A-2
Outlook
Stable
Stable
Stable
Long-
term
Short-
term
A+
Aa3
A+
F1
P-1
A-1
Outlook
Stable
Stable
Stable
As of December 31, 2019, 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 $0.3 billion, compared to $0.7 billion as of
September 30, 2019.
In total, as of December 31, 2019, Citi estimates that a
one-notch downgrade of Citigroup and Citibank across all
three major rating agencies could result in increased aggregate
cash obligations and collateral requirements of approximately
$0.8 billion, compared to $1.0 billion as of September 30,
2019 (see also Note 22 to the Consolidated Financial
Statements). As detailed under “High-Quality Liquid Assets”
above, the liquidity resources that are eligible for inclusion in
the calculation of Citi’s consolidated HQLA were
approximately $385 billion for Citibank and $53 billion for
Citi’s non-bank and other entities, for a total of approximately
$438 billion as of December 31, 2019. These liquidity
resources are available in part as a contingency for the
potential events described above.
88
In addition, a broad range of mitigating actions are
currently included in Citigroup’s and Citibank’s contingency
funding plans. For Citigroup, these mitigating factors include,
but are not limited to, accessing surplus funding capacity from
existing clients, tailoring levels of secured lending and
adjusting the size of select trading books and collateralized
borrowings from certain Citibank subsidiaries. Mitigating
actions available to Citibank include, but are not limited to,
selling or financing highly liquid government securities,
tailoring levels of secured lending, adjusting the size of select
trading assets, reducing loan originations and renewals, raising
additional deposits or borrowing from the FHLB or central
banks. Citi believes these mitigating actions could
substantially reduce the funding and liquidity risk, if any, of
the potential downgrades described above.
Citibank—Additional Potential Impacts
In addition to the above derivative triggers, Citi believes that a
potential downgrade of Citibank’s senior debt/long-term rating
across any of the three major rating agencies could also have
an adverse impact on the commercial paper/short-term rating
of Citibank. As of December 31, 2019, Citibank had liquidity
commitments of approximately $10.2 billion to consolidated
asset-backed commercial paper conduits, compared to $10.0
billion as of September 30, 2019 (as referenced in Note 21 to
the Consolidated Financial Statements).
In addition to the above-referenced liquidity resources of
certain Citibank entities, Citibank could reduce the funding
and liquidity risk, if any, of the potential downgrades
described above through mitigating actions, including
repricing or reducing certain commitments to commercial
paper conduits. In the event of the potential downgrades
described above, Citi believes that certain corporate customers
could re-evaluate their deposit relationships with Citibank.
This re-evaluation could result in clients adjusting their
discretionary deposit levels or changing their depository
institution, which could potentially reduce certain deposit
levels at Citibank. However, Citi could choose to adjust
pricing, offer alternative deposit products to its existing
customers or seek to attract deposits from new customers, in
addition to the mitigating actions referenced above.
89
implements such strategies when it believes those actions are
prudent.
Citi manages interest rate risk as a consolidated
Company-wide position. Citi’s client-facing businesses create
interest rate-sensitive positions, including loans and deposits,
as part of their ongoing activities. Citi Treasury aggregates
these risk positions and manages them centrally. Operating
within established limits, Citi Treasury makes positioning
decisions and uses tools, such as Citi’s investment securities
portfolio, company-issued debt and interest rate derivatives, to
target the desired risk profile. Changes in Citi’s interest rate
risk position reflect the accumulated changes in all non-
trading assets and liabilities, with potentially large and
offsetting impacts, as well as in Citi Treasury’s positioning
decisions.
Citigroup employs additional measurements, including
stress testing the impact of non-linear interest rate movements
on the value of the balance sheet, and the analysis of portfolio
duration and volatility, particularly as they relate to mortgage
loans and mortgage-backed securities and the potential impact
of the change in the spread between different market indices.
Interest Rate Risk of Investment Portfolios—Impact
on AOCI
Citi also measures the potential impacts of changes in interest
rates on the value of its AOCI, which can in turn impact Citi’s
common equity and tangible common equity. This will impact
Citi’s Common Equity Tier 1 and other regulatory capital
ratios. Citi’s goal is to benefit from an increase in the market
level of interest rates, while limiting the impact of changes in
AOCI on its regulatory capital position.
AOCI at risk is managed as part of the Company-wide
interest rate risk position. AOCI at risk considers potential
changes in AOCI (and the corresponding impact on the
Common Equity Tier 1 Capital ratio) relative to Citi’s capital
generation capacity.
MARKET RISK
Overview
Market risk is the potential for losses arising from changes in
the value of Citi’s assets and liabilities resulting from changes
in market variables such as interest rates, foreign exchange
rates, equity prices, commodity prices and credit spreads, as
well as their implied volatilities. Market risk emanates from
both Citi’s trading and non-trading portfolios. For additional
information on market risk, see “Risk Factors” above.
Each business is required to establish, with approval from
Citi’s market risk management, a market risk limit framework
for identified risk factors that clearly defines approved risk
profiles and is within the parameters of Citi’s overall risk
appetite. These limits are monitored by the Risk organization,
Citi’s country and business Asset and Liability Committees
and the Citigroup Asset and Liability Committee. In all cases,
the businesses are ultimately responsible for the market risks
taken and for remaining within their defined limits.
Market Risk of Non-Trading Portfolios
Market risk from non-trading portfolios stems from the
potential impact of changes in interest rates and foreign
exchange rates on Citi’s net interest revenues, the changes in
Accumulated other comprehensive income (loss) (AOCI) from
its debt securities portfolios and capital invested in foreign
currencies.
Net Interest Revenue at Risk
Net interest revenue, for interest rate exposure purposes, is the
difference between the yield earned on the non-trading
portfolio assets (including customer loans) and the rate paid on
the liabilities (including customer deposits or company
borrowings). Net interest revenue is affected by changes in the
level of interest rates, as well as the amounts and mix of assets
and liabilities, and the timing of contractual and assumed
repricing of assets and liabilities to reflect market rates.
Citi’s principal measure of risk to net interest revenue is
interest rate exposure (IRE). IRE measures the change in
expected net interest revenue in each currency resulting solely
from unanticipated changes in forward interest rates.
Citi’s estimated IRE incorporates various assumptions
including prepayment rates on loans, customer behavior and
the impact of pricing decisions. For example, in rising interest
rate scenarios, portions of the deposit portfolio may be
assumed to experience rate increases that are less than the
change in market interest rates. In declining interest rate
scenarios, it is assumed that mortgage portfolios experience
higher prepayment rates. Citi’s estimated IRE below assumes
that its businesses and/or Citi Treasury make no additional
changes in balances or positioning in response to the
unanticipated rate changes.
In order to manage changes in interest rates effectively,
Citi may modify pricing on new customer loans and deposits,
purchase fixed-rate securities, issue debt that is either fixed or
floating or enter into derivative transactions that have the
opposite risk exposures. Citi regularly assesses the viability of
these and other strategies to reduce its interest rate risks and
90
The following table sets forth the estimated impact to Citi’s net interest revenue, AOCI and the Common Equity Tier 1 Capital ratio
(on a fully implemented basis), each assuming an unanticipated parallel instantaneous 100 basis point (bps) increase in interest rates:
In millions of dollars, except as otherwise noted
Estimated annualized impact to net interest revenue
U.S. dollar(1)
All other currencies
Total
As a percentage of average interest-earning assets
Estimated initial impact to AOCI (after-tax)(2)
Estimated initial impact on Common Equity Tier 1 Capital ratio (bps)
Dec. 31, 2019
Sept. 30, 2019
Dec. 31, 2018
$
$
$
20
606
626
$
$
292
605
897
$
$
0.03%
0.05%
(5,002)
$
(4,055) $
(31)
(24)
758
661
1,419
0.08%
(3,920)
(28)
(1) Certain trading-oriented businesses within Citi have accrual-accounted positions that are excluded from the estimated impact to net interest revenue in the table,
since these exposures are managed economically in combination with mark-to-market positions. The U.S. dollar interest rate exposure associated with these
businesses was $(240) million for a 100 bps instantaneous increase in interest rates as of December 31, 2019.
Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments.
(2)
The year-over-year decrease in the estimated impact to net
interest revenue primarily reflected changes in Citi’s balance
sheet composition and Citi Treasury positioning. The year-
over-year changes in the estimated impact to AOCI and the
Common Equity Tier 1 Capital ratio primarily reflected the
impact of the composition of Citi Treasury’s investment and
derivatives portfolio.
In the event of an unanticipated parallel instantaneous 100
bps increase in interest rates, Citi expects that the negative
impact to AOCI would be offset in shareholders’ equity
through the combination of expected incremental net interest
revenue and the expected recovery of the impact on AOCI
through accretion of Citi’s investment portfolio over a period
of time. As of December 31, 2019, Citi expects that the
negative $5.0 billion impact to AOCI in such a scenario could
potentially be offset over approximately 37 months.
The following table sets forth the estimated impact to
Citi’s net interest revenue, AOCI and the Common Equity
Tier 1 Capital ratio (on a fully implemented basis) under five
different changes in interest rate scenarios for the U.S. dollar
and Citi’s other currencies:
In millions of dollars, except as otherwise noted
Scenario 1
Scenario 2
Scenario 3
Scenario 4
Scenario 5
Overnight rate change (bps)
10-year rate change (bps)
Estimated annualized impact to net interest revenue
U.S. dollar
All other currencies
Total
Estimated initial impact to AOCI (after-tax)(1)
Estimated initial impact to Common Equity Tier 1 Capital ratio (bps)
$
$
$
100
100
20 $
606
626 $
100
—
92 $
558
650 $
(5,002) $
(3,230) $
(1,944) $
(31)
(20)
(13)
—
100
—
(100)
39 $
34
73 $
(93) $
(34)
(127) $
1,570 $
9
(100)
(100)
(363)
(411)
(774)
4,389
26
Note: Each scenario assumes that the rate change will occur instantaneously. Changes in interest rates for maturities between the overnight rate and the 10-year rate are
interpolated.
(1)
Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments.
As shown in the table above, the magnitude of the impact
to Citi’s net interest revenue and AOCI is greater under
scenario 2 as compared to scenario 3. This is because the
combination of changes to Citi’s investment portfolio,
partially offset by changes related to Citi’s pension liabilities,
results in a net position that is more sensitive to rates at
shorter- and intermediate-term maturities.
91
Changes in Foreign Exchange Rates—Impacts on AOCI
and Capital
As of December 31, 2019, Citi estimates that an unanticipated
parallel instantaneous 5% appreciation of the U.S. dollar
against all of the other currencies in which Citi has invested
capital could reduce Citi’s tangible common equity (TCE) by
approximately $1.5 billion, or 1%, as a result of changes to
Citi’s foreign currency translation adjustment in AOCI, net of
hedges. This impact would be primarily due to changes in the
value of the Mexican peso, Euro, Australian dollar and Indian
rupee.
This impact is also before any mitigating actions Citi may
take, including ongoing management of its foreign currency
translation exposure. Specifically, as currency movements
change the value of Citi’s net investments in foreign currency-
denominated capital, these movements also change the value
of Citi’s risk-weighted assets denominated in those currencies.
This, coupled with Citi’s foreign currency hedging strategies,
such as foreign currency borrowings, foreign currency
forwards and other currency hedging instruments, lessens the
impact of foreign currency movements on Citi’s Common
Equity Tier 1 Capital ratio. Changes in these hedging
strategies, as well as hedging costs, divestitures and tax
impacts, can further affect the actual impact of changes in
foreign exchange rates on Citi’s capital as compared to an
unanticipated parallel shock, as described above.
In millions of dollars, except as otherwise noted
Change in FX spot rate(1)
Change in TCE due to FX translation, net of hedges
As a percentage of TCE
The effect of Citi’s ongoing management strategies with
respect to changes in foreign exchange rates and the impact of
these changes on Citi’s TCE and Common Equity Tier 1
Capital ratio are shown in the table below. For additional
information on the changes in AOCI, see Note 19 to the
Consolidated Financial Statements.
For the quarter ended
Dec. 31, 2019
Sept. 30, 2019
Dec. 31, 2018
2.8%
(3.0)%
$
659
$
(1,192)
$
0.4%
(0.8)%
(1.6)%
(491)
(0.3)%
Estimated impact to Common Equity Tier 1 Capital ratio (on a fully implemented basis) due
to changes in FX translation, net of hedges (bps)
(3)
(1)
(1)
(1) FX spot rate change is a weighted average based on Citi’s quarterly average GAAP capital exposure to foreign countries.
92
Interest Revenue/Expense and Net Interest Margin (NIM)
In millions of dollars, except as otherwise noted
Interest revenue(1)
Interest expense(2)
Net interest revenue, taxable equivalent basis
Interest revenue—average rate(3)
Interest expense—average rate
Net interest margin(3)(4)
Interest rate benchmarks
Two-year U.S. Treasury note—average rate
10-year U.S. Treasury note—average rate
2019
2018
2017
$ 76,718
$ 71,082
$ 62,075
29,163
24,266
16,518
$ 47,555
$ 46,816
$ 45,557
4.27%
2.01
2.65
1.97%
2.14
4.08%
1.77
2.69
2.53%
2.91
3.71%
1.28
2.73
1.40%
2.33
10-year vs. two-year spread
17
bps
38
bps
93
bps
Change
2019 vs. 2018
Change
2018 vs. 2017
8%
20
2%
19
24
bps
bps
(4) bps
(56) bps
(77) bps
15%
47
3%
37
49
bps
bps
(4) bps
113
58
bps
bps
Note: All interest expense amounts include FDIC, as well as other similar deposit insurance assessments outside of the U.S. As of the fourth quarter of 2018, Citi’s
FDIC surcharge was eliminated (approximately $130 million per quarter).
(1) Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rates of 21% in
(2)
2019 and 2018 and 35% in 2017) of $208 million, $254 million and $496 million for 2019, 2018 and 2017, respectively.
Interest expense associated with certain hybrid financial instruments, which are classified as Long-term debt and accounted for at fair value, is reported together
with any changes in fair value as part of Principal transactions in the Consolidated Statement of Income and is therefore not reflected in Interest expense in the
table above.
(3) The average rate on interest revenue and net interest margin reflects the taxable equivalent gross-up adjustment. See footnote 1 on “Average Balances and Interest
Rates—Assets” below.
(4) Citi’s net interest margin (NIM) is calculated by dividing net interest revenue by average interest-earning assets.
93
Net Interest Revenue Excluding ICG Markets
In millions of dollars
Net interest revenue—taxable equivalent basis(1) per above
ICG Markets net interest revenue—taxable equivalent basis(1)
Net interest revenue excluding ICG Markets—taxable equivalent basis(1)
$
$
2019
2018
2017
47,555
4,372
43,183
$
$
46,816
4,506
42,310
$
$
45,557
5,741
39,816
(1) Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rates of 21% in
2019 and 2018 and 35% in 2017) of $208 million, $254 million and $496 million for 2019, 2018 and 2017, respectively.
Citi’s net interest revenue in the fourth quarter of 2019
increased 1% to $12.0 billion (also $12.0 billion on a taxable
equivalent basis) versus the prior-year period. Excluding the
impact of FX translation, net interest revenue also increased
1%, or approximately $70 million, as growth in ICG Markets
(fixed income markets and equity markets) net interest
revenue of 21%, or $210 million, was partially offset by a 1%
decline, or $150 million, in net interest revenue ex-markets.
The increase in markets net interest revenue was driven by
ongoing changes in the composition and mix of the business’s
revenues between net interest revenue and non-interest
revenue. The decline in net interest revenue ex-markets was
primarily due to the impact of lower interest rates, partially
offset by growth in the non-markets franchise. Citi’s NIM was
2.63% on a taxable equivalent basis in the fourth quarter of
2019, an increase of 7 basis points (bps) from the prior
quarter, primarily driven by the higher markets net interest
revenue, partially offset by the impact of lower interest rates.
Citi’s net interest revenue for the full year 2019 increased
2% to $47.3 billion ($47.6 billion on a taxable equivalent
basis) versus the prior year. Excluding the impact of FX
translation, Citi’s net interest revenue increased 3%, or
approximately $1.4 billion, mainly reflecting strength in Citi-
branded cards in North America GCB and treasury and trade
solutions, including the impact of volume growth as well as
interest rates. On a full-year basis, Citi’s NIM was 2.65% on a
taxable equivalent basis, compared to 2.69% in 2018. Citi’s
markets and non-markets net interest revenues are non-GAAP
financial measures. Citi reviews non-markets net interest
revenue to assess the performance of its lending, investing and
deposit-raising activities. Citi believes disclosure of this
metric assists in providing a meaningful depiction of the
underlying fundamentals of its non-markets businesses.
94
Additional Interest Rate Details
Average Balances and Interest Rates—Assets(1)(2)(3)
Taxable Equivalent Basis
In millions of dollars, except rates
2019
2018
2017
2019
2018
2017
2019
2018
2017
Average volume
Interest revenue
% Average rate
Assets
Deposits with banks(4)
Securities borrowed and
purchased under agreements to
resell(5)
In U.S. offices
In offices outside the U.S.(4)
Total
Trading account assets(6)(7)
In U.S. offices
In offices outside the U.S.(4)
Total
Investments
In U.S. offices
Taxable
Exempt from U.S. income tax
In offices outside the U.S.(4)
Total
Loans (net of unearned income)(8)
In U.S. offices
In offices outside the U.S.(4)
Total
Other interest-earning assets(9)
Total interest-earning assets
Non-interest-earning assets(6)
Total assets
$
188,523 $
177,294 $
169,385 $
2,682 $
2,203 $
1,635
1.42% 1.24%
0.97%
$
$
$
$
146,030 $
149,879 $
141,308 $
4,752 $
3,818 $
1,922
3.25% 2.55%
1.36%
119,550
117,695
106,606
2,133
1,674
1,327
1.78
1.42
1.24
265,580 $
267,574 $
247,914 $
6,885 $
5,492 $
3,249
2.59% 2.05%
1.31%
109,064 $
94,065 $
99,755 $
4,099 $
3,706 $
3,531
3.76% 3.94%
3.54%
131,217
115,601
104,197
3,589
2,615
2,117
2.74
2.26
2.03
240,281 $
209,666 $
203,952 $
7,688 $
6,321 $
5,648
3.20% 3.01%
2.77%
$
221,895 $
228,686 $
226,227 $
5,162 $
5,331 $
4,450
2.33% 2.33%
1.97%
15,227
117,529
17,199
104,033
18,152
106,040
577
4,222
706
3,600
775
3,309
3.79
3.59
4.10
3.46
4.27
3.12
354,651 $
349,918 $
350,419 $
9,961 $
9,637 $
8,534
2.81% 2.75%
2.44%
395,792 $
385,350 $
371,711 $ 30,563 $ 28,627 $ 25,944
7.72% 7.43%
6.98%
288,319
285,505
267,774
17,266
17,129
15,904
5.99
6.00
684,111 $
670,855 $
639,485 $ 47,829 $ 45,756 $ 41,848
6.99% 6.82%
64,322 $
67,269 $
60,626 $
1,673 $
1,673 $
1,161
2.60% 2.49%
$ 1,797,468 $ 1,742,576 $ 1,671,781 $ 76,718 $ 71,082 $ 62,075
4.27% 4.08%
$
181,341 $
177,654 $
203,657
$ 1,978,809 $ 1,920,230 $ 1,875,438
5.94
6.54%
1.92%
3.71%
$
$
$
$
(1) Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rates of 21% in
2019 and 2018 and 35% in 2017) of $208 million, $254 million and $496 million for 2019, 2018 and 2017, respectively.
Interest rates and amounts include the effects of risk management activities associated with the respective asset categories.
(2)
(3) Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable.
(4) Average rates reflect prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.
(5) Average volumes of securities borrowed or purchased under agreements to resell are reported net pursuant to ASC 210-20-45. However, Interest revenue excludes
the impact of ASC 210-20-45.
(6) The fair value carrying amounts of derivative contracts are reported net, pursuant to ASC 815-10-45, in Non-interest-earning assets and Other non-interest-
bearing liabilities.
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral
positions are reported in interest on Trading account assets and Trading account liabilities, respectively.
Includes cash-basis loans.
Includes brokerage receivables.
(7)
(8)
(9)
95
Average Balances and Interest Rates—Liabilities and Equity, and Net Interest Revenue(1)(2)(3)
Taxable Equivalent Basis
In millions of dollars, except rates
2019
2018
2017
2019
2018
2017
2019
2018
2017
Average volume
Interest expense
% Average rate
Liabilities
Deposits
In U.S. offices(4)
In offices outside the U.S.(5)
Total
Securities loaned and sold under
agreements to repurchase(6)
In U.S. offices
In offices outside the U.S.(5)
Total
Trading account liabilities(7)(8)
In U.S. offices
In offices outside the U.S.(5)
Total
Short-term borrowings(9)
In U.S. offices
In offices outside the U.S.(5)
Total
Long-term debt(10)
In U.S. offices
In offices outside the U.S.(5)
Total
$
$
$
$
$
$
$
$
$
$
388,948 $
338,060 $
313,094 $
6,304 $
4,500 $
2,530
1.62% 1.33%
0.81%
487,318
453,793
436,949
6,329
5,116
4,057
1.30
1.13
0.93
876,266 $
791,853 $
750,043 $ 12,633 $
9,616 $
6,587
1.44% 1.21%
0.88%
112,876 $
102,843 $
96,258 $
4,194 $
3,320 $
1,574
3.72% 3.23%
1.64%
77,283
69,264
61,434
2,069
1,569
1,087
2.68
2.27
1.77
190,159 $
172,107 $
157,692 $
6,263 $
4,889 $
2,661
3.29% 2.84%
1.69%
37,099 $
37,305 $
33,399 $
818 $
612 $
51,817
58,919
57,149
490
389
88,916 $
96,224 $
90,548 $
1,308 $
1,001 $
78,230 $
85,009 $
74,825 $
2,138 $
1,885 $
20,575
23,402
22,837
327
324
380
258
638
684
375
2.20% 1.64%
1.14%
0.95
0.66
0.45
1.47% 1.04%
0.70%
2.73% 2.22%
0.91%
1.59
1.38
1.64
98,805 $
108,411 $
97,662 $
2,465 $
2,209 $
1,059
2.49% 2.04%
1.08%
193,972 $
197,933 $
192,079 $
6,398 $
6,386 $
5,382
3.30% 3.23%
2.80%
4,803
4,895
4,615
96
165
191
2.00
3.37
198,775 $
202,828 $
196,694 $
6,494 $
6,551 $
5,573
3.27% 3.23%
4.14
2.83%
1.28%
Total interest-bearing liabilities
$ 1,452,921 $ 1,371,423 $ 1,292,639 $ 29,163 $ 24,266 $ 16,518
2.01% 1.77%
Demand deposits in U.S. offices
$
27,737 $
33,398 $
37,824
Other non-interest-bearing
liabilities(7)
Total liabilities
Citigroup stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and stockholders’
equity
Net interest revenue as a
percentage of average interest-
earning assets(11)
In U.S. offices
In offices outside the U.S.(6)
Total
301,813
315,862
316,129
$ 1,782,471 $ 1,720,683 $ 1,646,592
$
$
195,632 $
198,681 $
227,849
706
866
997
196,338 $
199,547 $
228,846
$ 1,978,809 $ 1,920,230 $ 1,875,438
$ 1,017,021 $
992,543 $
970,439 $ 28,466 $ 28,157 $ 27,551
2.80% 2.84%
2.84%
780,447
750,033
701,342
19,089
18,659
18,006
2.45
2.49
2.57
$ 1,797,468 $ 1,742,576 $ 1,671,781 $ 47,555 $ 46,816 $ 45,557
2.65% 2.69%
2.73%
(1) Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rates of 21% in
2019 and 2018 and 35% in 2017) of $208 million, $254 million and $496 million for 2019, 2018 and 2017, respectively.
Interest rates and amounts include the effects of risk management activities associated with the respective liability categories.
(2)
(3) Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable.
(4) Consists of other time deposits and savings deposits. Savings deposits are made up of insured money market accounts, NOW accounts and other savings deposits.
The interest expense on savings deposits includes FDIC deposit insurance assessments.
(5) Average rates reflect prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.
(6) Average volumes of securities sold under agreements to repurchase are reported net pursuant to ASC 210-20-45. However, Interest expense excludes the impact of
ASC 210-20-45.
(7) The fair value carrying amounts of derivative contracts are reported net, pursuant to ASC 815-10-45, in Non-interest-earning assets and Other non-interest-
(8)
bearing liabilities.
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral
positions are reported in interest on Trading account assets and Trading account liabilities, respectively.
96
Includes Brokerage payables.
(9)
(10) Excludes hybrid financial instruments and beneficial interests in consolidated VIEs that are classified as Long-term debt, as the changes in fair value for these
obligations are recorded in Principal transactions.
(11) Includes allocations for capital and funding costs based on the location of the asset.
Analysis of Changes in Interest Revenue(1)(2)(3)
In millions of dollars
Deposits with banks(3)
Securities borrowed and purchased under agreements to resell
In U.S. offices
In offices outside the U.S.(3)
Total
Trading account assets(4)
In U.S. offices
In offices outside the U.S.(3)
Total
Investments(1)
In U.S. offices
In offices outside the U.S.(3)
Total
Loans (net of unearned income)(5)
In U.S. offices
In offices outside the U.S.(3)
Total
Other interest-earning assets(6)
Total interest revenue
2019 vs. 2018
Increase (decrease)
due to change in:
2018 vs. 2017
Increase (decrease)
due to change in:
Average
volume
Average
rate
Net
change
Average
volume
Average
rate
Net
change
$
$
$
$
$
$
$
$
$
$
$
146 $
333 $
479 $
79 $
489 $
568
(100) $
1,034 $
934 $
123 $
1,773 $
1,896
27
432
459
146
201
347
(73) $
1,466 $
1,393 $
269 $
1,974 $
2,243
570 $
(177) $
393 $
(209) $
384 $
382
592
974
245
253
952 $
415 $
1,367 $
36 $
637 $
(213) $
(85) $
(298) $
32 $
780 $
481
141
622
(64)
355
175
498
673
812
291
268 $
56 $
324 $
(32) $
1,135 $
1,103
789 $
1,149 $
1,938 $
974 $
1,709 $
2,683
169
(34)
135
1,062
163
1,225
958 $
1,115 $
2,073 $
2,036 $
1,872 $
3,908
(75) $
75 $
— $
137 $
375 $
512
2,176 $
3,460 $
5,636 $
2,525 $
6,482 $
9,007
(1) The taxable equivalent adjustments related to the tax-exempt bond portfolio, based on the U.S. federal statutory tax rates of 21% in 2019 and 2018 and 35% in
2017, are included in this presentation.
(2) Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total net change.
(3) Changes in average rates reflect changes in prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.
(4)
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral
positions are reported in interest on Trading account assets and Trading account liabilities, respectively.
Includes cash-basis loans.
Includes Brokerage receivables.
(5)
(6)
97
Analysis of Changes in Interest Expense and Net Interest Revenue(1)(2)(3)
In millions of dollars
Deposits
In U.S. offices
In offices outside the U.S.(3)
Total
Securities loaned and sold under agreements to repurchase
In U.S. offices
In offices outside the U.S.(3)
Total
Trading account liabilities(4)
In U.S. offices
In offices outside the U.S.(3)
Total
Short-term borrowings(5)
In U.S. offices
In offices outside the U.S.(3)
Total
Long-term debt
In U.S. offices
In offices outside the U.S.(3)
Total
Total interest expense
Net interest revenue
2019 vs. 2018
Increase (decrease)
due to change in:
2018 vs. 2017
Increase (decrease)
due to change in:
Average
volume
Average
rate
Net
change
Average
volume
Average
rate
Net
change
$
$
$
$
$
$
$
$
$
$
$
$
738 $
1,066 $
1,804 $
216 $
1,754 $
1,970
397
816
1,213
162
897
1,059
1,135 $
1,882 $
3,017 $
378 $
2,651 $
3,029
343 $
531 $
874 $
115 $
1,631 $
1,746
194
306
500
151
331
482
537 $
837 $
1,374 $
266 $
1,962 $
2,228
(3) $
209 $
206 $
49 $
183 $
(51)
152
101
8
123
(54) $
361 $
307 $
57 $
306 $
232
131
363
(159) $
412 $
253 $
105 $
1,096 $
1,201
(42)
45
3
9
(60)
(51)
(201) $
457 $
256 $
114 $
1,036 $
1,150
(129) $
141 $
12 $
168 $
836 $
1,004
(3)
(66)
(69)
11
(37)
(132) $
75 $
(57) $
179 $
799 $
(26)
978
1,285 $
3,612 $
4,897 $
994 $
6,754 $
7,748
891 $
(152) $
739 $
1,531 $
(272) $
1,259
(1) The taxable equivalent adjustments related to the tax-exempt bond portfolio, based on the U.S. federal statutory tax rates of 21% in 2019 and 2018 and 35% in
2017, are included in this presentation.
(2) Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total net change.
(3) Changes in average rates reflect changes in prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.
(4)
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral
positions are reported in interest on Trading account assets and Trading account liabilities, respectively.
Includes Brokerage payables.
(5)
98
Market Risk of Trading Portfolios
Trading portfolios include positions resulting from market-
making activities, hedges of certain available-for-sale (AFS)
debt securities, the CVA relating to derivative counterparties
and all associated hedges, fair value option loans and hedges
of the loan portfolio within capital markets origination within
ICG.
The market risk of Citi’s trading portfolios is monitored
using a combination of quantitative and qualitative measures,
including, but not limited to:
•
•
•
factor sensitivities;
value at risk (VAR); and
stress testing.
Each trading portfolio across Citi’s businesses has its own
market risk limit framework encompassing these measures and
other controls, including trading mandates, new product
approval, permitted product lists and pre-trade approval for
larger, more complex and less liquid transactions.
The following chart of total daily trading-related revenue
(loss) captures trading volatility and shows the number of days
in which revenues for Citi’s trading businesses fell within
particular ranges. Trading-related revenue includes trading, net
interest and other revenue associated with Citi’s trading
businesses. It excludes DVA, FVA and CVA adjustments
incurred due to changes in the credit quality of counterparties,
as well as any associated hedges of that CVA. In addition, it
excludes fees and other revenue associated with capital
markets origination activities. Trading-related revenues are
driven by both customer flows and the changes in valuation of
the trading inventory. As shown in the chart below, positive
trading-related revenue was achieved for 100% of the trading
days in 2019.
Daily Trading-Related Revenue (Loss)(1)— Twelve Months ended December 31, 2019
In millions of dollars
(1) Reflects the effects of asymmetrical accounting for economic hedges of certain AFS debt securities. Specifically, the change in the fair value of hedging
derivatives is included in trading-related revenue, while the offsetting change in the fair value of hedged AFS debt securities is included in AOCI and not reflected
above.
99
Factor Sensitivities
Factor sensitivities are expressed as the change in the value of
a position for a defined change in a market risk factor, such as
a change in the value of a U.S. Treasury bill for a one-basis-
point change in interest rates. Citi’s market risk management,
within the Risk organization, works to ensure that factor
sensitivities are calculated, monitored and limited for all
material risks taken in the trading portfolios.
Value at Risk (VAR)
VAR estimates, at a 99% confidence level, the potential
decline in the value of a position or a portfolio under normal
market conditions assuming a one-day holding period. VAR
statistics, which are based on historical data, can be materially
different across firms due to differences in portfolio
composition, differences in VAR methodologies and
differences in model parameters. As a result, Citi believes
VAR statistics can be used more effectively as indicators of
trends in risk-taking within a firm, rather than as a basis for
inferring differences in risk-taking across firms.
Citi uses a single, independently approved Monte Carlo
simulation VAR model (see “VAR Model Review and
Validation” below), which has been designed to capture
material risk sensitivities (such as first- and second-order
sensitivities of positions to changes in market prices) of
various asset classes/risk types (such as interest rate, credit
spread, foreign exchange, equity and commodity risks). Citi’s
VAR includes positions that are measured at fair value; it does
not include investment securities classified as AFS or HTM.
For information on these securities, see Note 13 to the
Consolidated Financial Statements.
Citi believes its VAR model is conservatively calibrated
to incorporate fat-tail scaling and the greater of short-term
(approximately the most recent month) and long-term (three
years) market volatility. The Monte Carlo simulation involves
approximately 450,000 market factors, making use of
approximately 350,000 time series, with sensitivities updated
daily, volatility parameters updated intra-monthly and
correlation parameters updated monthly. The conservative
features of the VAR calibration contribute an approximate
26% add-on to what would be a VAR estimated under the
assumption of stable and perfectly, normally distributed
markets.
As set forth in the table below, Citi’s average trading VAR
decreased from 2018 to 2019, mainly due to changes in
interest rates in the ICG Markets businesses. The average
trading and credit portfolio VAR also declined, although the
decrease in average trading VAR was partially offset by
additional hedging related to lending activities in 2019.
Year-end and Average Trading VAR and Trading and Credit Portfolio VAR
In millions of dollars
Interest rate
Credit spread
Covariance adjustment(1)
Fully diversified interest rate and credit spread(2)
Foreign exchange
Equity
Commodity
Covariance adjustment(1)
Total trading VAR—all market risk factors, including general and specific risk
(excluding credit portfolios)(2)
Specific risk-only component(3)
Total trading VAR—general market risk factors only (excluding credit portfolios)
Incremental impact of the credit portfolio(4)
Total trading and credit portfolio VAR
December 31,
2019
2019
Average
December 31,
2018
2018
Average
$
$
$
$
$
$
$
32 $
35 $
44
(27)
44
(23)
49 $
56 $
22
21
13
(52)
53 $
3 $
50 $
30 $
83 $
23
16
24
(62)
57 $
2 $
55 $
14 $
71 $
48 $
55
(23)
80 $
18
25
23
60
47
(24)
83
25
22
19
(66)
(67)
80 $
4 $
76 $
18 $
98 $
82
4
78
10
92
(1) Covariance adjustment (also known as diversification benefit) equals the difference between the total VAR and the sum of the VARs tied to each individual risk
type. The benefit reflects the fact that the risks within each and across risk types are not perfectly correlated and, consequently, the total VAR on a given day will
be lower than the sum of the VARs relating to each individual risk type. The determination of the primary drivers of changes to the covariance adjustment is made
by an examination of the impact of both model parameter and position changes.
(2) The total trading VAR includes mark-to-market and certain fair value option trading positions in ICG, with the exception of hedges to the loan portfolio, fair value
option loans and all CVA exposures. Available-for-sale and accrual exposures are not included.
(3) The specific risk-only component represents the level of equity and fixed income issuer-specific risk embedded in VAR.
(4) The credit portfolio is composed of mark-to-market positions associated with non-trading business units including Citi Treasury, the CVA relating to derivative
counterparties and all associated CVA hedges. FVA and DVA are not included. The credit portfolio also includes hedges to the loan portfolio, fair value option
loans and hedges to the leveraged finance pipeline within capital markets origination in ICG.
100
The table below provides the range of market factor VARs associated with Citi’s total trading VAR, inclusive of specific risk:
In millions of dollars
Interest rate
Credit spread
Fully diversified interest rate and credit spread
Foreign exchange
Equity
Commodity
Total trading
Total trading and credit portfolio
2019
2018
Low
High
Low
High
$
$
$
25 $
36
43 $
12
7
12
38 $
54
58 $
55
89 $
34
29
75
87 $
103
34 $
38
59 $
13
15
13
56 $
66
89
64
118
44
33
27
120
124
Note: No covariance adjustment can be inferred from the above table as the high and low for each market factor will be from different close-of-business dates.
The following table provides the VAR for ICG, excluding
the CVA relating to derivative counterparties, hedges of CVA,
fair value option loans and hedges to the loan portfolio:
In millions of dollars
Dec. 31, 2019
Total—all market risk factors, including
general and specific risk
Average—during year
High—during year
Low—during year
$
$
53
57
86
38
VAR Model Review and Validation
Generally, Citi’s VAR review and model validation process
entails reviewing the model framework, major assumptions
and implementation of the mathematical algorithm. In
addition, as part of the model validation process, product
specific back-testing on portfolios is periodically completed
and reviewed with Citi’s U.S. banking regulators.
Furthermore, Regulatory VAR back-testing (as described
below) is performed against buy-and-hold profit and loss on a
monthly basis for multiple sub-portfolios across the
organization (trading desk level, ICG business segment and
Citigroup) and the results are shared with U.S. banking
regulators.
Significant VAR model and assumption changes must be
independently validated within Citi’s risk management
organization. This validation process includes a review by
model validation group within Citi’s Model Risk
Management. In the event of significant model changes,
parallel model runs are undertaken prior to implementation. In
addition, significant model and assumption changes are
subject to the periodic reviews and approval by Citi’s U.S.
banking regulators.
Citi uses the same independently validated VAR model
for both Regulatory VAR and Risk Management VAR (i.e.,
total trading and total trading and credit portfolios VARs) and,
as such, the model review and validation process for both
purposes is as described above.
Regulatory VAR, which is calculated in accordance with
Basel III, differs from Risk Management VAR due to the fact
that certain positions included in Risk Management VAR are
not eligible for market risk treatment in Regulatory VAR. The
101
composition of Risk Management VAR is discussed under
“Value at Risk” above. The applicability of the VAR model for
positions eligible for market risk treatment under U.S.
regulatory capital rules is periodically reviewed and approved
by Citi’s U.S. banking regulators.
In accordance with Basel III, Regulatory VAR includes all
trading book-covered positions and all foreign exchange and
commodity exposures. Pursuant to Basel III, Regulatory VAR
excludes positions that fail to meet the intent and ability to
trade requirements and are therefore classified as non-trading
book and categories of exposures that are specifically
excluded as covered positions. Regulatory VAR excludes CVA
on derivative instruments and DVA on Citi’s own fair value
option liabilities. CVA hedges are excluded from Regulatory
VAR and included in credit risk-weighted assets as computed
under the Advanced Approaches for determining risk-
weighted assets.
Regulatory VAR Back-Testing
In accordance with Basel III, Citi is required to perform back-
testing to evaluate the effectiveness of its Regulatory VAR
model. Regulatory VAR back-testing is the process in which
the daily one-day VAR, at a 99% confidence interval, is
compared to the buy-and-hold profit and loss (i.e., the profit
and loss impact if the portfolio is held constant at the end of
the day and re-priced the following day). Buy-and-hold profit
and loss represents the daily mark-to-market profit and loss
attributable to price movements in covered positions from the
close of the previous business day. Buy-and-hold profit and
loss excludes realized trading revenue, net interest, fees and
commissions, intra-day trading profit and loss and changes in
reserves.
Based on a 99% confidence level, Citi would expect two
to three days in any one year when buy-and-hold losses
exceed the Regulatory VAR. Given the conservative
calibration of Citi’s VAR model (as a result of taking the
greater of short- and long-term volatilities and fat-tail scaling
of volatilities), Citi would expect fewer exceptions under
normal and stable market conditions. Periods of unstable
market conditions could increase the number of back-testing
exceptions.
The following graph shows the daily buy-and-hold profit
and loss associated with Citi’s covered positions compared to
Citi’s one-day Regulatory VAR during 2019. As of
December 31, 2019, there were no back-testing exceptions
observed for Citi’s Regulatory VAR for the prior 12 months.
The difference between the 54.8% of days with buy-and-
hold gains for Regulatory VAR back-testing and the 100% of
days with trading, net interest and other revenue associated
with Citi’s trading businesses, shown in the histogram of daily
trading-related revenue below, reflects, among other things,
that a significant portion of Citi’s trading-related revenue is
not generated from daily price movements on these positions
and exposures, as well as differences in the portfolio
composition of Regulatory VAR and Risk Management VAR.
Regulatory Trading VAR and Associated Buy-and-Hold Profit and Loss(1)—12 Months ended December 31, 2019
In millions of dollars
(1) Buy-and-hold profit and loss, as defined by the banking regulators under Basel III, represents the daily mark-to-market revenue movement attributable to the
trading position from the close of the previous business day. Buy-and-hold profit and loss excludes realized trading revenue and net interest intra-day trading
profit and loss on new and terminated trades, as well as changes in reserves. Therefore, it is not comparable to the trading-related revenue presented in the chart of
daily trading-related revenue above.
102
Stress Testing
Citi performs market risk stress testing on a regular basis to
estimate the impact of extreme market movements. It is
performed on individual positions and trading portfolios, as
well as in aggregate, inclusive of multiple trading portfolios.
Citi’s market risk management, after consultations with the
businesses, develops both systemic and specific stress
scenarios, reviews the output of periodic stress testing
exercises and uses the information to assess the ongoing
appropriateness of exposure levels and limits. Citi uses two
complementary approaches to market risk stress testing across
all major risk factors (i.e., equity, foreign exchange,
commodity, interest rate and credit spreads): top-down
systemic stresses and bottom-up business-specific stresses.
Systemic stresses are designed to quantify the potential impact
of extreme market movements on an institution-wide basis,
and are constructed using both historical periods of market
stress and projections of adverse economic scenarios.
Business-specific stresses are designed to probe the risks of
particular portfolios and market segments, especially those
risks that are not fully captured in VAR and systemic stresses.
The systemic stress scenarios and business-specific stress
scenarios at Citi are used in several reports reviewed by senior
management and also to calculate internal risk capital for
trading market risk. In general, changes in market values are
defined over a one-year horizon. For the most liquid positions
and market factors, changes in market values are defined over
a shorter two-month horizon. The limited set of positions and
market factors whose market value changes are defined over a
two-month horizon are those that in management’s judgment
have historically remained very liquid during financial crises,
even as the trading liquidity of most other positions and
market factors materially declined.
103
OPERATIONAL RISK
Overview
Operational risk is the risk of loss resulting from inadequate or
failed internal processes, systems or human factors, or from
external events. It includes risk of failing to comply with
applicable laws and regulations, but excludes strategic risk.
Operational risk includes the reputation and franchise risk
associated with business practices or market conduct in which
Citi is involved, as well as compliance, conduct and legal
risks.
Operational risk is inherent in Citi’s global business
activities, as well as related support functions, and can result
in losses arising from events associated with the following,
among others:
•
•
•
•
•
fraud, theft and unauthorized activity;
employment practices and workplace environment;
clients, products and business practices;
physical assets and infrastructure; and
execution, delivery and process management.
Citi manages operational risk consistent with the overall
framework described in “Managing Global Risk—Overview”
above. The Company’s goal is to keep operational risk at
appropriate levels relative to the characteristics of Citi’s
businesses, the markets in which it operates, its capital and
liquidity and the competitive, economic and regulatory
environment.
To anticipate, mitigate and control operational risk, Citi
has established policies and a global framework for assessing,
monitoring and communicating operational risks and the
overall operating effectiveness of the internal control
environment across Citigroup. As part of this framework, Citi
has defined its operational risk appetite and has established a
manager’s control assessment (MCA) process (a process
through which managers at Citi identify, monitor, measure,
report on and manage risks and the related controls) to help
managers self-assess significant operational risks and key
controls and identify and address weaknesses in the design
and/or operating effectiveness of internal controls that mitigate
significant operational risks.
Each major business segment must implement an
operational risk process consistent with the requirements of
this framework. The process for operational risk management
includes the following steps:
•
•
•
•
•
•
identify and assess key operational risks;
design controls to mitigate identified risks;
establish key risk indicators;
implement a process for early problem recognition and
timely escalation;
produce comprehensive operational risk reporting; and
ensure that sufficient resources are available to actively
improve the operational risk environment and mitigate
emerging risks.
As new products and business activities are developed,
processes are designed, modified or sourced through
alternative means and operational risks are considered.
104
An Operational Risk Management Committee has been
established to provide oversight for operational risk across
Citigroup and to provide a forum to assess Citi’s operational
risk profile and ensure actions are taken so that Citi’s
operational risk exposure is actively managed consistent with
Citi’s risk appetite. The Committee seeks to ensure that these
actions address the root causes that persistently lead to
operational risk losses and create lasting solutions to
minimize these losses. Members include Citi’s Chief Risk
Officer and Citi’s Head of Operational Risk and senior
members of their organizations. These members cover
multiple dimensions of risk management and include business
and regional Chief Risk Officers and senior operational risk
managers.
In addition, risk management, including Operational
Risk Management, works proactively with the businesses
and other independent control functions to embed a strong
operational risk management culture and framework across
Citi. Operational Risk Management engages with the
businesses to ensure effective implementation of the
Operational Risk Management framework by focusing on (i)
identification, analysis and assessment of operational risks,
(ii) effective challenge of key control issues and operational
risks and (iii) anticipation and mitigation of operational risk
events.
Information about the businesses’ operational risk,
historical operational risk losses and the control
environment is reported by each major business segment and
functional area. The information is summarized and reported
to senior management, as well as to the Audit and Risk
Committees of Citi’s Board of Directors.
Operational risk is measured and assessed through
Operational Risk Capital and Operational Risk Regulatory
Capital for the Advanced Approaches under Basel III.
Projected operational risk losses under stress scenarios are
also required as part of the Federal Reserve Board’s CCAR
process.
For additional information on Citi’s operational risks, see
“Risk Factors—Operational Risk” above.
Cybersecurity Risk
Cybersecurity risk is the business risk associated with the
threat posed by a cyber attack, cyber breach or the failure to
protect Citi’s most vital business information assets or
operations, resulting in a financial or reputational loss (for
additional information, see the operational systems and
cybersecurity risk factors in “Risk Factors—Operational
Risks” above). With an evolving threat landscape, ever-
increasing sophistication of cybersecurity attacks and use of
new technologies to conduct financial transactions, Citi and its
clients, customers and third parties are and will continue to be
at risk for cyber attacks and information security incidents.
Citi recognizes the significance of these risks and, therefore,
employs an intelligence-led strategy to prevent, detect,
respond to and recover from cyber attacks. Further, Citi
actively participates in financial industry, government and
cross-sector knowledge-sharing groups to enhance individual
and collective cyber resilience.
Citi’s technology and cybersecurity risk management
program is built on three lines of defense. Citi’s first line of
defense under the Office of the Chief Information Security
Officer provides frontline business, operational and technical
controls and capabilities to protect against cybersecurity risks,
and to respond to cyber incidents and data breaches. Citi
manages these threats through state-of-the-art Fusion Centers,
which serve as central command for monitoring and
coordinating responses to cyber threats. The enterprise
information security team is responsible for infrastructure
defense and security controls, performing vulnerability
assessments and third-party information security assessments,
employee awareness and training programs and security
incident management, in each case working in coordination
with a network of information security officers who are
embedded within the businesses and functions on a global
basis.
Citi’s Operational Risk Management-Technology and
Cyber (ORM-T/C) and Independent Compliance Risk
Management-Technology and Information Security (ICRM-T)
groups serve as the second line of defense, and actively
evaluate, anticipate and challenge Citi’s risk mitigation
practices and capabilities. Internal audit serves as the third line
of defense and independently provides assurance on how
effectively the organization as a whole manages cybersecurity
risk. Citi also has multiple senior committees such as the
Information Security Risk Committee (ISRC), which governs
enterprise-level risk tolerance inclusive of cybersecurity risk.
Citi seeks to proactively identify and remediate
technology and cybersecurity risks before they materialize as
incidents that negatively affect business operations.
Accordingly, the ORM-T/C team independently challenges
and monitors capabilities in accordance with Citi’s defined
Technology and Cyber Risk Appetite statements. To address
evolving cybersecurity risks and corresponding regulations,
ORM-T/C also monitors cyber legal and regulatory
requirements, identifies and defines emerging risks, executes
strategic cyber threat assessments, performs new products and
initiative reviews, performs data management risk oversight
and conducts cyber risk assurance reviews (inclusive of third-
party assessments). In addition, ORM-T/C employs tools and
oversees and challenges metrics that are both tailored to
cybersecurity and technology and aligned with Citi’s overall
operational risk management framework to effectively track,
identify and manage risk.
COMPLIANCE RISK
Compliance risk is the risk to current or projected financial
condition and resilience arising from violations of laws or
regulations, or from nonconformance with prescribed
practices, internal policies and procedures or ethical standards.
This risk exposes a bank to fines, civil money penalties,
payment of damages and the voiding of contracts. Compliance
risk is not limited to risk from failure to comply with
consumer protection laws; it encompasses the risk of
noncompliance with all laws and regulations, as well as
prudent ethical standards and contractual obligations. It also
includes the exposure to litigation (known as legal risk) from
all aspects of banking, traditional and nontraditional.
105
Compliance risk spans all risk types in Citi’s risk
governance framework and the risk categories outlined in the
Governance, Risk, Compliance (GRC) taxonomy. Citi seeks to
operate with integrity, maintain strong ethical standards and
adhere to applicable policies and regulatory and legal
requirements. Citi must maintain and execute a proactive
Compliance Risk Management (CRM) Policy that is designed
to manage compliance risk effectively across Citi, with a view
to fundamentally strengthen the compliance risk management
culture across the lines of defense, taking into account Citi’s
risk governance framework and regulatory requirements.
Independent Compliance Risk Management’s (ICRM) primary
objectives are to:
• Maintain and oversee an integrated CRM Policy that
facilitates enterprise-wide compliance with local, national
or cross-border laws, rules or regulations, Citi’s internal
policies, standards and procedures and relevant standards
of conduct;
• Assess compliance risks and issues across product lines,
functions and geographies, supported by globally
consistent systems and compliance risk management
processes;
• Drive and embed a culture of compliance and control
•
throughout Citi; and
Provide compliance risk data aggregation and reporting
capabilities.
To anticipate, control and mitigate compliance risk, Citi has
established the CRM Policy to achieve standardization and
centralization of methodologies and processes, and to enable
more consistent and comprehensive execution of compliance
risk management.
Citi has a commitment, as well as an obligation, to
identify, assess and mitigate compliance risks associated with
its businesses and functions. ICRM is responsible for
oversight of Citi’s CRM Policy, while all businesses and
global control functions are responsible for managing their
compliance risks and operating within the Compliance Risk
Appetite.
Citi carries out its objectives and fulfills its
responsibilities through the integrated CRM Policy, which is
based upon four components: (i) governance and organization;
(ii) compliance risk requirements; (iii) processes and
activities; and (iv) resources and capabilities. To achieve this,
Citi follows these CRM Policy process steps:
•
Identifying regulatory changes and performing the impact
assessment, as well as capturing and monitoring
adherence to existing regulatory requirements.
• Establishing, maintaining and adhering to policies,
standards and procedures for the management of
compliance risk, in accordance with policy governance
requirements.
• Developing and providing training to support the effective
execution of roles and responsibilities related to the
identification, control, reporting and escalation of matters
related to compliance risks.
Self-assessment (e.g., Managers Control Assessment) of
compliance risk.
•
•
•
ICRM is responsible for independently assessing the
management of compliance risks.
Independently testing and monitoring that Citi is
operating within the Compliance Risk Appetite.
Identifying instances of non-conformance with laws,
regulations, rules and breaches of internal policies.
• Escalating through the appropriate channels, which may
include governance forums, the results of monitoring,
testing, reporting or other oversight activities that may
represent a violation of law, regulation, policy or other
significant compliance risk and take reasonable action to
see that the matter is appropriately identified, tracked and
resolved, including through the issuance of corrective
action plans against the first line of defense.
REPUTATION RISK
Citi’s reputation is a vital asset in building trust with its
stakeholders and Citi is diligent in communicating its
corporate values to its employees, customers and investors.
To support this, Citi has defined a reputation risk appetite
approach. Under this approach, each major business segment
has implemented a risk appetite statement and related key
indicators to monitor and address weaknesses that may result
in significant reputation risks. The approach requires that each
business segment or region escalates significant reputation
risks that require review or mitigation through its business
practice committee or equivalent.
The business practices committees are part of the
governance infrastructure that Citi has in place to properly
review business activities, sales practices, product design,
perceived conflicts of interest and other potential franchise or
reputation risks. These committees may also raise potential
franchise, reputation or systemic risks for due consideration by
the business practices committee at the corporate level. All of
these committees, which are composed of Citi’s most senior
executives, provide the guidance necessary for Citi’s business
practices to meet the highest standards of professionalism,
integrity and ethical behavior consistent with Citi’s mission
and value proposition.
Further, the responsibility for maintaining Citi’s
reputation is shared by all employees, who are guided by Citi’s
code of conduct. Employees are expected to exercise sound
judgment and common sense in decisions and actions. They
are also expected to promptly and appropriately escalate all
issues that present potential franchise, reputation and/or
systemic risk.
STRATEGIC RISK
Overview
Citi executive management, with Citi’s CEO at the lead, is
responsible for the development and execution of Citi’s
strategy. This strategy is translated into forward-looking plans
that are then cascaded across the organization. Strategic risk is
monitored through a range of practices: regular Citigroup
Board of Director meetings provide strategic external
checkpoints where management’s progress against executing
the plans is assessed and where decisions to refine the
strategic direction of the Company are evaluated; Citi’s
106
executive management assesses progress against executing the
defined plans; CEO reviews, which include a risk assessment
of the plans, occur across products, regions and functions to
focus on progress against executing the plans; products,
regions and functions have internal reviews to assess
performance at lower levels across the organization; and
specific forums exist to focus on key areas that drive strategic
risk such as balance sheet management, the introduction of
new or modified products and services and country
management, among others. In addition to these day-to-day
practices, significant strategic actions, such as mergers,
acquisitions or capital expenditures, are reviewed and
approved by, or notified to, the Citigroup and Citibank Boards
of Directors, as appropriate.
Exit of U.K. from EU
As a result of a 2016 U.K. referendum, Citi has reorganized
certain U.K. and EU operations and implemented contingency
plans to address the U.K.’s official exit from the EU, which
occurred as of January 31, 2020. In addition, Citi has
established a formal program with senior-level sponsorship
and governance to deliver a coordinated response to the U.K.’s
exit.
Until negotiations between the U.K. and the EU are
finalized and any exit agreement is ratified, Citi continues to
plan for a “hard” exit scenario. Citi’s strategy focuses on
providing continuity of services to its U.K. and EU clients
with minimal disruption. Consequently, Citi has migrated
certain business activities to alternative legal entities and
branches with appropriate regulatory permissions to carry out
such activity, and has established required capabilities in the
U.K. and EU. Citi’s plans for a U.K. exit from the EU have
primarily covered:
•
•
•
•
the enhancement of Citi’s European bank in Ireland,
supported by its substantial European branch network to
ensure business continuity for its EU clients;
the conversion of Citi’s banking subsidiary in Germany
into Citi’s EU investment firm to support broker-dealer
activities with EU clients;
the establishment of a new U.K. consumer bank to focus
on servicing consumer business clients in the U.K.; and
the amendments to existing U.K. legal entities or
branches, where required, to ensure continuity of services
to U.K. and non-EU clients.
Citi has worked closely with clients, regulators and other
relevant stakeholders in the execution of its plans to prepare
for the U.K.’s exit from the EU. In addition, Citi continues to
monitor macroeconomic scenarios and market events and has
been undertaking stress testing to assess potential impacts on
its businesses. For additional information, see “Risk Factors—
Strategic Risks” above.
LIBOR Transition Risk
Citi recognizes that a transition away from and discontinuance
of LIBOR presents risks and challenges that could
significantly impact financial markets and market participants,
including Citi (for information about Citi’s risks from a
transition away from and discontinuation of LIBOR or any
other benchmark, see “Risk Factors—Strategic Risks” above).
Accordingly, Citi has continued its efforts to identify and
manage its LIBOR transition risks.
Citi’s LIBOR governance and implementation program
remains focused on identifying and addressing the LIBOR
transition impacts to Citi’s clients, operational capabilities and
legal and financial contracts, among others. The program
operates globally across Citi’s businesses and functions and
includes active involvement of senior management, oversight
by Citi’s Asset and Liability Committee and reporting to the
Risk Management Committee of Citigroup’s Board of
Directors. As part of the program, Citi has developed LIBOR
transition action plans and associated roadmaps under the
following key workstreams: program management; transition
strategy and risk management; customer management,
including internal communications and training, legal/contract
management and product management; financial exposures
and risk management; regulatory and industry engagement;
operations and technology; and finance, risk, tax and treasury.
During 2019, Citi continued to participate in a number of
working groups formed by global regulators, including the
Alternative Reference Rates Committee (ARRC) convened by
the Federal Reserve Board. These working groups continue to
promote and advance development of alternative reference
rates and to identify and address potential challenges from any
transition to such rates. Citi also continues to engage with and
monitor developments involving regulators, financial
accounting bodies and others on LIBOR transition matters and
relief.
Moreover, Citi has been investing in its systems and
infrastructure, as client activity moves away from LIBOR to
alternative reference rates. Citi also has continued to identify
its LIBOR transition exposures, including existing financial
instruments that do not contain contract provisions that
adequately contemplate the discontinuance of reference rates
and that would require additional negotiation with
counterparties. In addition, Citi has begun to mitigate its
LIBOR transition exposures by, among other things, using
alternative reference rates in certain newly issued financial
instruments and products. For example, since early 2019, Citi
has issued both preferred stock and benchmark debt
referencing the Secured Overnight Financing Rate (SOFR)
and updated the LIBOR determination method in its debt
documentation with the ARRC recommended fallback
language. Citi has also been conducting LIBOR transition-
related training for employees.
107
Country Risk
Top 25 Country Exposures
The following table presents Citi’s top 25 exposures by
country (excluding the U.S.) as of December 31, 2019. The
total exposure as of December 31, 2019 to the top 25 countries
disclosed below, in combination with the U.S., would
represent approximately 95% of Citi’s exposure to all
countries. For purposes of the table, loan amounts are reflected
in the country where the loan is booked, which is generally
based on the domicile of the borrower. For example, a loan to
a Chinese subsidiary of a Switzerland-based corporation will
generally be categorized as a loan in China. In addition, Citi
has developed regional booking centers in certain countries,
most significantly in the United Kingdom (U.K.) and Ireland,
in order to more efficiently serve its corporate customers. As
an example, with respect to the U.K., only 33% of corporate
loans presented in the table below are to U.K. domiciled
entities (35% for unfunded commitments), with the balance of
the loans predominately to European domiciled counterparties.
Approximately 85% of the total U.K. funded loans and 89% of
the total U.K. unfunded commitments were investment grade
as of December 31, 2019. Trading account assets and
investment securities are generally categorized based on the
domicile of the issuer of the security of the underlying
reference entity. For additional information on the assets
included in the table, see the footnotes to the table below.
ICG
loans(1)
GCB
loans
Other
funded(2) Unfunded(3)
Net MTM
on
derivatives
/repos(4)
Total
hedges
(on loans
and
CVA)
Investment
securities(5)
Trading
account
assets(6)
Total
as of
4Q19
Total
as of
3Q19
Total
as of
4Q18
Total as a
% of Citi
as of
4Q19
$ 41.8 $ — $
1.9 $
50.0 $
12.3 $
(5.2) $
7.3 $
(2.3) $ 105.8 $ 116.6 $
111.6
6.5%
17.8
20.5
14.5
12.1
3.1
6.5
12.7
0.5
4.7
7.6
5.9
2.7
2.4
4.1
8.0
8.1
1.9
0.9
2.4
1.9
0.7
—
0.8
—
17.6
12.9
13.3
—
16.5
4.8
—
—
9.8
3.3
8.0
—
0.6
2.0
—
1.5
4.2
2.9
0.9
1.0
1.6
—
—
—
0.3
0.9
0.1
0.5
0.1
0.9
—
0.1
0.1
0.6
0.1
0.1
0.1
0.1
0.1
0.1
0.2
—
—
—
0.1
—
—
—
8.9
7.2
5.0
26.4
2.4
5.9
3.1
6.0
6.2
2.9
1.9
2.5
6.8
2.4
5.1
2.9
1.0
1.8
1.4
0.7
0.5
—
0.7
—
0.8
1.4
0.7
0.5
1.0
1.5
5.6
3.9
1.6
0.8
0.4
2.4
1.7
0.2
—
0.2
0.2
—
0.1
0.2
—
0.7
2.7
0.1
(0.8)
(0.7)
(0.4)
—
(0.4)
(0.6)
(0.9)
(3.9)
(0.4)
(0.5)
(0.1)
(1.7)
(0.7)
(0.1)
(0.4)
(0.1)
(0.1)
—
(0.1)
(0.1)
—
(0.3)
—
(0.6)
16.0
6.2
8.2
—
8.9
10.1
4.1
9.2
1.5
5.0
0.9
5.8
3.9
3.8
—
0.1
1.0
1.7
1.1
1.1
1.9
3.7
—
3.0
4.4
0.6
1.9
0.4
3.1
0.9
3.7
6.0
(2.0)
(1.0)
0.8
5.2
0.4
0.9
—
—
—
0.4
0.1
0.2
0.1
0.5
0.1
1.0
65.0
49.0
43.3
39.9
34.7
30.0
28.3
21.8
21.5
18.7
17.9
17.0
15.2
13.4
12.8
67.3
52.5
41.3
34.8
31.2
29.6
25.7
18.0
20.8
18.6
17.2
18.3
15.9
13.6
13.6
12.8
11.6
8.4
7.7
5.9
5.0
4.9
4.6
4.3
3.5
9.1
7.8
5.9
5.0
4.6
3.1
3.8
3.8
59.6
48.1
40.7
33.7
33.8
30.2
26.0
17.4
23.5
18.0
17.4
17.6
16.0
13.2
10.4
9.6
10.0
7.4
6.3
4.6
5.3
4.9
3.0
2.5
4.0
3.0
2.6
2.4
2.1
1.8
1.7
1.3
1.3
1.1
1.1
1.0
0.9
0.8
0.8
0.8
0.5
0.5
0.4
0.3
0.3
0.3
0.3
0.2
36.0%
89.7%
Total as a % of Citi’s Total Exposure
Total as a % of Citi’s non-U.S. Total Exposure
(1)
ICG loans reflect funded corporate loans and private bank loans, net of unearned income. As of December 31, 2019, private bank loans in the table above totaled
$30 billion, concentrated in Hong Kong ($9.3 billion), Singapore ($7.6 billion) and the U.K. ($7.2 billion).
(2) Other funded includes other direct exposure such as accounts receivable, loans HFS, other loans in Corporate/Other and investments accounted for under the
equity method.
108
In billions of
U.S. dollars
United
Kingdom
Mexico
Hong Kong
Singapore
Ireland
South Korea
India
Brazil
Germany
Australia
China
Taiwan
Japan
Canada
Poland
Jersey
United Arab
Emirates
Malaysia
Thailand
Indonesia
Russia
Philippines
Luxembourg
Czech
Republic
Cayman
Islands
(3) Unfunded exposure includes unfunded corporate lending commitments, letters of credit and other contingencies.
(4) Net mark-to-market counterparty risk on OTC derivatives and securities lending/borrowing transactions (repos). Exposures are shown net of collateral and
(5)
inclusive of CVA. Includes margin loans.
Investment securities include securities available-for-sale, recorded at fair market value, and securities held-to-maturity, recorded at historical cost. Investment
securities are reflected in the country that holds, not issues, the investments.
(6) Trading account assets are shown on a net basis and include issuer risk on cash products and derivative exposure where the underlying reference entity/issuer is
located in that country.
Argentina
Citi operates in Argentina through its ICG businesses. As of
December 31, 2019, Citi’s net investment in its Argentine
operations was approximately $730 million. Citi uses the U.S.
dollar as the functional currency for its operations in Argentina
because the Argentine economy is considered highly
inflationary under U.S. GAAP.
During 2019, the Argentine peso depreciated 59% against
the U.S. dollar, and the U.S. rating agencies downgraded
Argentina’s sovereign debt rating given renewed concerns of a
debt default. In addition, the government of Argentina re-
profiled certain short-term debt obligations, and also
implemented new capital and currency controls during the
third quarter of 2019. Prior to the implementation of these new
capital controls, Citi had already remitted all available
earnings from its Argentine operations that could be remitted
during the 2019 calendar year; the new controls may restrict
Citi’s ability to access U.S. dollars in Argentina and remit
earnings from its Argentine operations in the future.
Citi economically hedges the foreign currency risk in its
net Argentine peso-denominated assets to the extent possible
and prudent using non-deliverable forward (NDF) derivative
instruments that are executed outside of Argentina. As of
December 31, 2019, the international NDF market had very
limited liquidity, resulting in Citi being unable to
economically hedge a significant portion of its Argentine peso
exposure. To the extent that Citi is unable to execute
additional NDF contracts in the future, devaluations on Citi’s
net Argentine peso-denominated assets would be recorded in
earnings, without any benefit from a change in the fair value
of derivative positions used to economically hedge the
exposure.
In addition, Citi continually evaluates its economic
exposure to its Argentine counterparties and reserves for
changes in credit risk and sovereign risk associated with its
Argentine assets. Citi believes it has established appropriate
loan loss reserves on its Argentine loans, and appropriate fair
value adjustments on Argentine assets and liabilities measured
at fair value, for such risks under U.S. GAAP as of December
31, 2019. However, given the recent events in Argentina, U.S.
regulatory agencies may require Citi to record additional
reserves in the future, increasing ICG’s cost of credit, based on
the perceived country risk associated with its Argentine
exposures. For additional information on emerging markets
risks, see “Risk Factors—Strategic Risks” above.
FFIEC—Cross-Border Claims on Third Parties and Local
Country Assets
Citi’s cross-border disclosures are based on the country
exposure bank regulatory reporting guidelines of the Federal
Financial Institutions Examination Council (FFIEC). The
following summarizes some of the FFIEC key reporting
guidelines:
• Amounts are based on the domicile of the ultimate
obligor, counterparty, collateral (only including qualifying
liquid collateral), issuer or guarantor, as applicable (e.g., a
security recorded by a Citi U.S. entity but issued by the
U.K. government is considered U.K. exposure; a loan
recorded by a Citi Mexico entity to a customer domiciled
in Mexico where the underlying collateral is held in
Germany is considered German exposure).
• Amounts do not consider the benefit of collateral received
for secured financing transactions (i.e., repurchase
agreements, reverse repurchase agreements and securities
loaned and borrowed) and are reported based on notional
amounts.
• Netting of derivative receivables and payables, reported at
fair value, is permitted, but only under a legally binding
netting agreement with the same specific counterparty,
and does not include the benefit of margin received or
hedges.
• Credit default swaps (CDS) are included based on the
gross notional amount sold and purchased and do not
include any offsetting CDS on the same underlying entity.
• Loans are reported without the benefit of hedges.
Given the requirements noted above, Citi’s FFIEC cross-
border exposures and total outstandings tend to fluctuate, in
some cases significantly, from period to period. As an
example, because total outstandings under FFIEC guidelines
do not include the benefit of margin or hedges, market
volatility in interest rates, foreign exchange rates and credit
spreads may cause significant fluctuations in the level of total
outstandings, all else being equal.
109
The tables below show each country whose total outstandings exceeded 0.75% of total Citigroup assets:
December 31, 2019
Cross-border claims on third parties and local country assets
Short-term
Other
claims(2)
(corporate
(included
and households)
in (a))
(a)
Total
outstanding(3)
(sum of (a))
Trading
assets(2)
(included
in (a))
Commitments
and
guarantees(4)
Credit
derivatives
purchased(5)
Credit
derivatives
sold(5)
Banks
(a)
Public
(a)
NBFIs(1)
(a)
$ — $ — $
96.8 $
10.3 $
5.3 $
75.9 $
107.1 $
10.0 $
— $
13.3
32.7
2.8
6.8
8.4
2.3
2.0
1.7
0.6
4.8
3.4
3.3
2.9
6.8
0.6
3.3
1.2
0.2
24.4
33.3
26.3
29.8
6.8
17.7
16.0
12.9
10.2
8.7
11.0
13.3
4.7
8.5
6.8
15.9
14.5
0.3
34.8
7.8
9.4
7.7
22.2
7.2
1.7
3.1
3.0
4.7
3.1
1.8
11.5
3.9
1.6
0.7
1.1
8.9
20.6
6.5
35.2
9.7
7.5
16.1
21.7
16.3
20.0
12.9
12.7
11.0
5.0
4.6
14.3
1.7
4.6
5.4
12.9
13.1
5.5
9.3
9.6
2.8
2.6
2.7
4.1
7.9
3.9
6.1
3.1
4.6
2.9
12.8
2.2
4.2
61.3
57.4
37.0
33.6
35.3
36.1
31.4
23.4
27.9
20.6
25.3
20.8
13.5
15.7
13.2
14.9
18.1
12.9
93.1
80.3
73.7
54.0
44.9
43.3
41.4
34.0
33.8
31.1
30.2
29.4
24.1
23.8
23.3
21.6
21.4
14.8
23.2
4.7
22.4
13.1
29.0
12.0
12.0
10.8
13.7
11.8
5.1
3.2
14.7
11.0
14.6
2.5
8.2
5.4
71.6
18.7
8.9
48.0
56.0
2.0
13.9
2.3
2.2
7.4
12.8
8.1
4.3
26.9
0.1
44.5
17.8
1.6
—
71.6
17.1
8.8
46.4
54.3
1.9
13.0
2.0
2.0
7.3
11.6
8.2
5.1
26.5
0.1
44.0
17.3
1.8
December 31, 2018
Cross-border claims on third parties and local country assets
Banks
(a)
Public
(a)
NBFIs(1)
(a)
Other
(corporate
and households)
(a)
Trading
assets(2)
(included
in (a))
Short-term
claims(2)
(included
in (a))
Total
outstanding(3)
(sum of (a))
Commitments
and
guarantees(4)
Credit
derivatives
purchased(5)
Credit
derivatives
sold(5)
$ 14.6 $ 23.5 $
35.7 $
22.4 $
12.3 $
67.8 $
96.2 $
25.1 $
74.3 $
76.4
—
31.4
3.1
6.3
12.4
1.5
2.3
3.3
0.9
5.0
3.1
3.8
0.7
6.8
3.2
1.4
3.4
—
28.8
24.5
45.6
8.5
17.8
22.5
12.7
11.2
11.3
7.8
10.4
7.4
9.0
4.0
13.9
11.0
81.6
8.4
7.4
7.2
30.7
3.0
4.4
3.3
3.2
3.0
4.8
1.4
3.2
3.2
9.9
1.1
0.8
9.2
7.8
34.7
7.6
5.6
22.6
13.4
15.3
16.9
12.3
13.4
10.9
12.6
4.7
5.2
3.6
1.6
5.4
13.6
6.0
6.6
9.1
1.8
1.7
4.3
3.9
4.5
7.1
5.0
1.6
3.7
2.8
1.6
7.9
62.5
40.7
29.1
49.8
49.5
33.2
32.3
22.5
27.5
20.6
14.4
16.8
18.7
14.7
15.5
5.1
10.5
90.8
76.4
69.7
66.7
57.2
44.9
42.6
34.6
32.2
31.6
29.1
26.5
23.9
23.7
22.3
20.0
16.8
5.0
4.0
20.2
10.7
30.7
12.1
11.4
9.7
14.6
4.2
12.1
2.6
13.0
8.6
13.8
6.0
2.5
—
19.9
7.3
51.3
59.9
12.2
1.9
2.5
2.2
15.6
10.6
8.4
0.1
28.4
5.3
19.7
51.3
—
18.3
7.6
50.2
58.5
12.2
1.9
2.0
2.2
14.6
10.5
8.1
0.1
28.3
6.2
19.6
51.5
In billions of
U.S. dollars
Cayman
Islands
United
Kingdom
Japan
Mexico
Germany
France
Singapore
South Korea
India
Hong Kong
Australia
China
Brazil
Canada
Netherlands
Taiwan
Italy
Switzerland
Ireland
In billions of
U.S. dollars
United
Kingdom
Cayman
Islands
Japan
Mexico
Germany
France
South Korea
Singapore
India
Hong Kong
China
Australia
Brazil
Taiwan
Netherlands
Canada
Switzerland
Italy
(1) Non-bank financial institutions.
(2)
(3) Total outstanding includes cross-border claims on third parties, as well as local country assets. Cross-border claims on third parties include cross-border loans,
Included in total outstanding.
securities, deposits with banks and other monetary assets, as well as net revaluation gains on foreign exchange and derivative products.
110
(4) Commitments (not included in total outstanding) include legally binding cross-border letters of credit and other commitments and contingencies as defined by the
FFIEC guidelines. The FFIEC definition of commitments includes commitments to local residents to be funded with local currency liabilities originated within the
country.
(5) Credit default swaps (CDS) are not included in total outstanding.
111
SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
This section contains a summary of Citi’s most significant
accounting policies. Note 1 to the Consolidated Financial
Statements contains a summary of all of Citigroup’s
significant accounting policies. These policies, as well as
estimates made by management, are integral to the
presentation of Citi’s results of operations and financial
condition. While all of these policies require a certain level
of management judgment and estimates, this section
highlights and discusses the significant accounting policies
that require management to make highly difficult, complex
or subjective judgments and estimates at times regarding
matters that are inherently uncertain and susceptible to
change (see also “Risk Factors—Operational Risks” above).
Management has discussed each of these significant
accounting policies, the related estimates and its judgments
with the Audit Committee of the Citigroup Board of
Directors.
Valuations of Financial Instruments
Citigroup holds debt and equity securities, derivatives,
retained interests in securitizations, investments in private
equity and other financial instruments. Substantially all of
these assets and liabilities are reflected at fair value on Citi’s
Consolidated Balance Sheet.
Citi purchases securities under agreements to resell
(reverse repos) and sells securities under agreements
to repurchase (repos), a majority of which are carried at
fair value. In addition, certain loans, short-term borrowings,
long-term debt and deposits, as well as certain securities
borrowed and loaned positions that are collateralized with
cash, are carried at fair value. Citigroup holds its
investments, trading assets and liabilities, and resale and
repurchase agreements on the Consolidated Balance Sheet to
meet customer needs and to manage liquidity needs, interest
rate risks and private equity investing.
When available, Citi generally uses quoted market
prices to determine fair value and classifies such items
within Level 1 of the fair value hierarchy established under
ASC 820-10, Fair Value Measurement. If quoted market
prices are not available, fair value is based upon internally
developed valuation models that use, where possible, current
market-based or independently sourced market parameters,
such as interest rates, currency rates and option volatilities.
Such models are often based on a discounted cash flow
analysis. In addition, items valued using such internally
generated valuation techniques are classified according to
the lowest level input or value driver that is significant to the
valuation. Thus, an item may be classified under the fair
value hierarchy as Level 3 even though there may be some
significant inputs that are readily observable.
Citi is required to exercise subjective judgments relating
to the applicability and functionality of internal valuation
models, the significance of inputs or value drivers to the
valuation of an instrument and the degree of illiquidity and
subsequent lack of observability in certain markets. These
judgments have the potential to impact the Company’s
financial performance for instruments where the changes in
fair value are recognized in either the Consolidated
Statement of Income or in AOCI.
Moreover, for certain investments, decreases in fair
value are only recognized in earnings in the Consolidated
Statement of Income if such decreases are judged to be an
other-than-temporary impairment (OTTI). Adjudicating the
temporary nature of fair value impairments is also inherently
judgmental.
The fair value of financial instruments incorporates the
effects of Citi’s own credit risk and the market view of
counterparty credit risk, the quantification of which is also
complex and judgmental. For additional information on
Citi’s fair value analysis, see Notes 1, 6, 24 and 25 to the
Consolidated Financial Statements.
Allowance for Credit Losses
Management provides reserves for an estimate of probable
losses inherent in the funded loan portfolio and in unfunded
loan commitments and standby letters of credit on the
Consolidated Balance Sheet in the Allowance for loan losses
and in Other liabilities, respectively.
Estimates of these probable losses are based upon (i)
Citigroup’s internal system of credit-risk ratings that are
analogous to the risk ratings of the major credit rating
agencies and (ii) historical default and loss data, including
rating agency information regarding default rates from 1983
to 2017 and internal data dating to the early 1970s on
severity of losses in the event of default. Adjustments may
be made to this data, including (i) statistically calculated
estimates to cover the historical fluctuation of the default
rates over the credit cycle, the historical variability of loss
severity among defaulted loans and the degree to which
there are large obligor concentrations in the global portfolio
and (ii) adjustments made for specifically known items, such
as current environmental factors and credit trends.
In addition, representatives from both the risk
management and finance staffs who cover business areas
with delinquency-managed portfolios containing smaller
balance homogeneous loans present their recommended
reserve balances based upon leading credit indicators,
including loan delinquencies and changes in portfolio size,
as well as economic trends, including housing prices,
unemployment and GDP. This methodology is applied
separately for each individual product within each
geographic region in which these portfolios exist.
This evaluation process is subject to numerous estimates
and judgments. The frequency of default, risk ratings, loss
recovery rates, the size and diversity of individual large
credits and the ability of borrowers with foreign currency
obligations to obtain the foreign currency necessary for
orderly debt servicing, among other things, are all taken into
account during this review. Changes in these estimates could
have a direct impact on Citi’s credit costs and the allowance
in any period.
For a further description of the loan loss reserve and
related accounts, see Notes 1 and 15 to the Consolidated
Financial Statements.
112
For a discussion of the recently adopted CECL
accounting pronouncement, see Note 1 to the Consolidated
Financial Statements.
Goodwill
Citi tests goodwill for impairment annually on July 1 (the
annual test) and through interim assessments between annual
tests if an event occurs or circumstances change that would
more-likely-than-not reduce the fair value of a reporting unit
below its carrying amount, such as a significant adverse
change in the business climate, a decision to sell or dispose
of all or a significant portion of a reporting unit or a
significant decline in Citi’s stock price. During 2019, the
annual test was performed, which resulted in no goodwill
impairment as described in Note 16 to the Consolidated
Financial Statements.
As of December 31, 2019, Citigroup’s activities are
conducted through the Global Consumer Banking and
Institutional Clients Group business segments and
Corporate/Other. Goodwill impairment testing is performed
at the level below the business segment (referred to as a
reporting unit).
Citi utilizes allocated equity as a proxy for the carrying
value of its reporting units for purposes of goodwill
impairment testing. The allocated equity in the reporting
units is determined based on the capital the business would
require if it were operating as a standalone entity,
incorporating sufficient capital to be in compliance with both
current and expected regulatory capital requirements,
including capital for specifically identified goodwill and
intangible assets. The capital allocated to the businesses is
incorporated into the annual budget process, which is
approved by Citi’s Board of Directors.
Goodwill impairment testing involves management
judgment, requiring an assessment of whether the carrying
value of the reporting unit can be supported by the fair value
of the reporting unit using widely accepted valuation
techniques, such as the market approach (earnings multiples
and/or transaction multiples) and/or the income approach
(discounted cash flow (DCF) method). In applying these
methodologies, Citi utilizes a number of factors, including
actual operating results, future business plans, economic
projections and market data.
Similar to 2018, Citigroup engaged an independent
valuation specialist in 2019 to assist in Citi’s valuation for all
the reporting units with goodwill balances, employing both
the market approach and the DCF method. The resulting fair
values were relatively consistent and appropriate weighting
was given to outputs from both methods.
The DCF method utilized at the time of each
impairment test used discount rates that Citi believes
adequately reflected the risk and uncertainty in the financial
markets in the internally generated cash flow projections.
The DCF method employs a capital asset pricing model in
estimating the discount rate.
Since none of the Company’s reporting units are
publicly traded, individual reporting unit fair value
determinations cannot be directly correlated to Citigroup’s
common stock price. The sum of the fair values of the
reporting units exceeded the overall market capitalization of
Citi as of July 1, 2019. However, Citi believes that it is not
meaningful to reconcile the sum of the fair values of the
Company’s reporting units to its market capitalization due to
several factors. The market capitalization of Citigroup
reflects the execution risk in a transaction involving
Citigroup due to its size. However, the individual reporting
units’ fair values are not subject to the same level of
execution risk nor a business model that is perceived to be as
complex. In addition, the market capitalization of Citigroup
does not include consideration of the individual reporting
unit’s control premium.
See Notes 1 and 16 to the Consolidated Financial
Statements for additional information on goodwill, including
the changes in the goodwill balance year-over-year and the
reporting units’ goodwill balances as of December 31, 2019.
Income Taxes
Overview
Citi is subject to the income tax laws of the U.S., its states
and local municipalities and the non-U.S. jurisdictions in
which Citi operates. These tax laws are complex and are
subject to differing interpretations by the taxpayer and the
relevant governmental taxing authorities. Disputes over
interpretations of the tax laws may be subject to review and
adjudication by the court systems of the various tax
jurisdictions or may be settled with the taxing authority upon
audit.
In establishing a provision for income tax expense, Citi
must make judgments and interpretations about the
application of these inherently complex tax laws. Citi must
also make estimates about when in the future certain items
will affect taxable income in the various tax jurisdictions,
both domestic and foreign. Deferred taxes are recorded for
the future consequences of events that have been recognized
in the financial statements or tax returns, based upon enacted
tax laws and rates. Deferred tax assets (DTAs) are
recognized subject to management’s judgment that
realization is more-likely-than-not. For example, if it is
more-likely-than-not that a carry-forward would expire
unused, Citi would set up a valuation allowance against that
DTA. Citi has established valuation allowances as described
below.
As a result of the Tax Cuts and Jobs Act (Tax Reform),
beginning in 2018, Citi is taxed on income generated by its
U.S. operations at a federal tax rate of 21%. The effect on
Citi’s state tax rate is dependent upon how and when the
individual states choose to or automatically adopt the various
new provisions of the U.S. Internal Revenue Code.
Citi’s non-U.S. branches and subsidiaries are subject to
tax at their local tax rates. While non-U.S. branches continue
to be subject to U.S. taxation, Citi expects no material
residual U.S. tax on such earnings since its overall non-U.S.
branch tax rate is in excess of 21%. With respect to non-U.S.
subsidiaries, dividends from these subsidiaries will be
excluded from U.S. taxation. While the majority of Citi’s
non-U.S. subsidiary earnings are classified as Global
Intangible Low Taxed Income (GILTI), Citi similarly
113
expects no material residual U.S. tax on such earnings based
on its non-U.S. subsidiaries’ local tax rates, which exceed,
on average, the GILTI tax rate. Finally, Citi does not expect
the Base Erosion Anti-Abuse Tax (BEAT) to affect its tax
provision.
Deferred Tax Assets and Valuation Allowances
At December 31, 2019, Citi had net DTAs of $23.1 billion.
In the fourth quarter of 2019, Citi’s DTAs increased by $0.6
billion, driven primarily by the release of a portion of the
valuation allowance related to Citi’s general basket FTC
carry-forwards and losses in AOCI. On a full-year basis,
Citi’s DTAs increased $0.2 billion from $22.9 billion at
December 31, 2018, primarily due to the releases of a
portion of the valuation allowance related to Citi’s general
basket FTC carry-forwards, partially offset by gains in
AOCI.
Of Citi’s total net DTAs of $23.1 billion as of December
31, 2019, $10.7 billion, primarily related to tax carry-
forwards, was excluded in calculating Citi’s regulatory
capital. The amount excluded from Citi’s regulatory capital
decreased $0.9 billion in the full year 2019, adjusting for the
impact of the valuation allowance releases. Net DTAs arising
from temporary differences are deducted from regulatory
capital if in excess of the 10%/15% limitations (see “Capital
Resources” above). For the year ended December 31, 2019,
Citi did not have any such DTAs. Accordingly, the remaining
$12.4 billion of net DTAs as of December 31, 2019 was not
deducted in calculating regulatory capital pursuant to Basel
III standards, and was appropriately risk weighted under
those rules.
Citi’s total valuation allowance at December 31, 2019
was $6.5 billion, a decrease of $2.8 billion from $9.3 billion
at December 31, 2018. The decrease was primarily driven by
carry-forward expirations in the FTC branch basket and in a
non-U.S. NOL, FTC general basket valuation allowance
releases and a reduction in the net U.S. residual DTA related
to non-U.S. branches. Citi’s valuation allowance of $6.5
billion is composed of $4.6 billion on its FTC carry-
forwards, $0.8 billion on its U.S. residual DTA related to its
non-U.S. branches, $1.0 billion on local non-U.S. DTAs and
$0.1 billion on state net operating loss and capital loss carry-
forwards.
Citi’s valuation allowance of $3.5 billion against FTC
carry-forwards relating to its non-U.S. branches decreased
by $0.9 billion in 2019, primarily due to the expiration of the
2009 FTC carry-forward. Citi expects that the absolute
amount of its valuation allowance may change in future
years as it generates additional FTCs relating to the higher
overall local tax rate of its non-U.S. branches, reduced by
the expiration of FTC carry-forwards.
Citi’s valuation allowance of $1.1 billion against FTC
carry-forwards in its general basket decreased by $0.5
billion, primarily due to actions taken to increase foreign
source income in the U.S. and the updated forecast of
foreign source income for the FTC carry-forward period. In
the fourth quarter of 2019, Citi committed to a plan to move
a financing business involving non-U.S. clients and its
associated funding to the U.S. The incremental foreign
source income generated by this action over time will more-
likely-than-not enable usage of FTC carry-forwards of $0.2
billion. See Note 9 to the Consolidated Financial Statements.
As stated above, with respect to the portion of the valuation
allowance established on Citi’s FTC carry-forwards that are
available for use in the general basket, changes in the
amount of earnings from sources outside the U.S. could alter
the amount of valuation allowance that is eventually needed
against such FTCs. Citi continues to look for other actions
that may improve foreign source income in the U.S. tax
return and thus affect the valuation allowance. These actions
can include the relocation of certain businesses to the U.S.,
each of which can raise client, regulatory or operational
challenges. No other actions were deemed prudent and
feasible as of December 31, 2019.
Recognized FTCs comprised approximately $6.3 billion
of Citi’s DTAs as of December 31, 2019, compared to
approximately $6.8 billion as of December 31, 2018. The
decrease in FTCs year-over-year was primarily due to
current-year usage, partially offset by the valuation
allowance release. The FTC carry-forward period represents
the most time-sensitive component of Citi’s DTAs.
Citi has an overall domestic loss (ODL) of
approximately $39 billion at December 31, 2019, which
allows Citi to elect a percentage between 50% and 100% of
future years’ domestic source income to be reclassified as
foreign source income. (See Note 9 to the Consolidated
Financial Statements for a description of the ODL).
Citi believes the U.S. federal and New York State and
City net operating loss carry-forward period of 20 years
provides enough time to fully utilize the net DTAs pertaining
to the existing net operating loss carry-forwards. This is due
to Citi’s forecast of sufficient U.S. taxable income and the
continued taxation of Citi’s non-U.S. income by New York
State and City. Although realization is not assured, Citi
believes that the realization of its recognized net DTAs of
$23.1 billion at December 31, 2019 is more-likely-than-not,
based upon management’s expectations as to future taxable
income in the jurisdictions in which the DTAs arise, as well
as available tax planning strategies (as defined in ASC Topic
740, Income Taxes). Citi has concluded that it has the
necessary positive evidence to support the realization of its
net DTAs after taking its valuation allowances into
consideration.
For additional information on Citi’s income taxes,
including its income tax provision, tax assets and liabilities
and a tabular summary of Citi’s net DTAs balance as of
December 31, 2019 (including the FTCs and applicable
expiration dates of the FTCs), see Note 9 to the Consolidated
Financial Statements. For information on Citi’s ability to use
its DTAs, see “Risk Factors—Strategic Risks” above.
Tax Cuts and Jobs Act
On December 22, 2017, the President signed Tax Reform
into law, reflecting changes to U.S. corporate taxation,
including a lower statutory tax rate of 21%, a quasi-
territorial regime and a deemed repatriation of all
accumulated earnings and profits of foreign subsidiaries. The
new law was generally effective January 1, 2018.
114
Citi recorded a one-time, non-cash charge to continuing
operations of $22.6 billion in the fourth quarter of 2017,
composed of (i) a $12.4 billion remeasurement due to the
reduction of the U.S. corporate tax rate and the change to a
“quasi-territorial tax system,” (ii) a $7.9 billion valuation
allowance against Citi’s FTC carry-forwards and its U.S.
residual DTAs related to its non-U.S. branches and (iii) a
$2.3 billion reduction in Citi’s FTC carry-forwards related to
the deemed repatriation of undistributed earnings of non-
U.S. subsidiaries. Of this one-time charge, $16.4 billion was
Provisional Impact of Tax Reform
In billions of dollars
Quasi-territorial tax system
Valuation allowance
Deemed repatriation
Total of provisional items
considered provisional pursuant to Staff Accounting Bulletin
(SAB) 118.
Citi completed its accounting for Tax Reform under
SAB 118 during the fourth quarter of 2018 and recorded a
one-time, non-cash tax benefit of $94 million in Corporate/
Other, related to amounts that were considered provisional
pursuant to SAB 118.
The table below details the fourth quarter of 2018
changes to Citi’s provisional impact from Tax Reform:
Provisional amounts
included in the
2017 Form 10-K
SAB 118 impact to fourth
quarter of 2018
tax provision
$
$
6.2 $
7.9
2.3
16.4 $
0.2
(1.2)
0.9
(0.1)
2017 Impact of Tax Reform
The table below discloses the as-reported GAAP results for 2018 and 2017, as well as the 2017 adjusted results excluding the one-
time 2017 impact of Tax Reform. The table below does not reflect any adjustment to 2018 results.
In millions of dollars, except per share amounts and
as otherwise noted
Net income (loss)
Diluted earnings per share:
Income (loss) from continuing operations
Net income (loss)
2018
as
reported(1)
18,045
$
2017
as
reported
$ (6,798)
2017 one-time
impact of
Tax Reform
$
(22,594)
$
2017
adjusted
results(2)
15,796
2018 increase (decrease)
vs. 2017 ex-Tax Reform
$ Change
% Change
$
2,249
14%
6.69
6.68
(2.94)
(2.98)
(8.31)
(8.31)
5.37
5.33
1.32
1.35
25
25
Effective tax rate
22.8% 129.1 %
(9,930) bps
29.8%
(700) bps
Performance and other metrics:
Return on average assets
Return on average common stockholders’
equity
Return on average total stockholders’ equity
Return on average tangible common equity
Dividend payout ratio
Total payout ratio
0.94%
(0.36)%
(120) bps
0.84%
10
bps
9.4
9.1
11.0
23.1
109.1
(3.9)
(3.0)
(4.6)
(32.2)
(213.9)
(1,090)
(1,000)
(1,270)
(5,020)
(33,140)
7.0
7.0
8.1
18.0
117.5
240
210
290
510
840
(1) 2018 includes the one-time benefit of $94 million, due to the finalization of the provisional component of the impact based on Citi’s analysis as well as
additional guidance received from the U.S. Treasury Department related to Tax Reform, which impacted the tax line within Corporate/Other.
(2) 2017 excludes the one-time impact of Tax Reform.
Litigation Accruals
See the discussion in Note 27 to the Consolidated Financial
Statements for information regarding Citi’s policies on
establishing accruals for litigation and regulatory
contingencies.
115
DISCLOSURE CONTROLS AND
PROCEDURES
Citi’s disclosure controls and procedures are designed to
ensure that information required to be disclosed under the
Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, including without
limitation that information required to be disclosed by Citi in
its SEC filings is accumulated and communicated to
management, including the Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), as appropriate, to allow for
timely decisions regarding required disclosure.
Citi’s Disclosure Committee assists the CEO and CFO in
their responsibilities to design, establish, maintain and
evaluate the effectiveness of Citi’s disclosure controls and
procedures. The Disclosure Committee is responsible for,
among other things, the oversight, maintenance and
implementation of the disclosure controls and procedures,
subject to the supervision and oversight of the CEO and CFO.
Citi’s management, with the participation of its CEO and
CFO, has evaluated the effectiveness of Citigroup’s disclosure
controls and procedures (as defined in Rule 13a-15(e) under
the Securities Exchange Act of 1934) as of December 31,
2019. Based on that evaluation, the CEO and CFO have
concluded that at that date Citigroup’s disclosure controls and
procedures were effective.
116
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Citi’s management is responsible for establishing and
maintaining adequate internal control over financial reporting.
Citi’s internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of its
financial reporting and the preparation of financial statements
for external reporting purposes in accordance with U.S.
generally accepted accounting principles. Citi’s internal
control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that
in reasonable detail accurately and fairly reflect the
transactions and dispositions of Citi’s assets, (ii) provide
reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and
that Citi’s receipts and expenditures are made only in
accordance with authorizations of Citi’s management and
directors and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use
or disposition of Citi’s assets that could have a material effect
on its financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect all
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions or that the degree of compliance with the policies
or procedures may deteriorate. In addition, given Citi’s large
size, complex operations and global footprint, lapses or
deficiencies in internal controls may occur from time to time.
Citi’s management assessed the effectiveness of
Citigroup’s internal control over financial reporting as of
December 31, 2019 based on the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control—Integrated
Framework (2013). Based on this assessment, management
believes that, as of December 31, 2019, Citi’s internal control
over financial reporting was effective. In addition, there were
no changes in Citi’s internal control over financial reporting
during the fiscal quarter ended December 31, 2019 that
materially affected, or are reasonably likely to materially
affect, Citi’s internal control over financial reporting.
The effectiveness of Citi’s internal control over financial
reporting as of December 31, 2019 has been audited by
KPMG LLP, Citi’s independent registered public accounting
firm, as stated in their report below, which expressed an
unqualified opinion on the effectiveness of Citi’s internal
control over financial reporting as of December 31, 2019.
117
FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K, including but not
limited to statements included within the Management’s
Discussion and Analysis of Financial Condition and Results of
Operations, are “forward-looking statements” within the
meaning of the rules and regulations of the SEC. In addition,
Citigroup also may make forward-looking statements in its
other documents filed or furnished with the SEC, and its
management may make forward-looking statements orally to
analysts, investors, representatives of the media and others.
Generally, forward-looking statements are not based on
historical facts but instead represent Citigroup’s and its
management’s beliefs regarding future events.
Such statements may be identified by words such as
believe, expect, anticipate, intend, estimate, may increase, may
fluctuate, target and illustrative, and similar expressions or
future or conditional verbs such as will, should, would and
could. Such statements are based on management’s current
expectations and are subject to risks, uncertainties and changes
in circumstances. Actual results and capital and other financial
conditions may differ materially from those included in these
statements due to a variety of factors, including without
limitation (i) the precautionary statements included within
each individual business’s discussion and analysis of its results
of operations and (ii) the factors listed and described under
“Risk Factors” above.
Any forward-looking statements made by or on behalf of
Citigroup speak only as to the date they are made, and Citi
does not undertake to update forward-looking statements to
reflect the impact of circumstances or events that arise after
the forward-looking statements were made.
118
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Citigroup Inc.:
Opinions on the Consolidated Financial Statements and
Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheet
of Citigroup Inc. and subsidiaries (the Company) as of
December 31, 2019 and 2018, the related consolidated
statements of income, comprehensive income, changes in
stockholders’ equity and cash flows for each of the years in the
three-year period ended December 31, 2019, and the related
notes (collectively, the consolidated financial statements). We
also have audited the Company’s internal control over
financial reporting as of December 31, 2019, based on criteria
established in Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2019
and 2018, and the results of its operations and its cash flows
for each of the years in the three-year period ended
December 31, 2019, in conformity with U.S. generally
accepted accounting principles. Also in our opinion, the
Company maintained, in all material respects, effective
internal control over financial reporting as of December 31,
2019 based on criteria established in Internal Control—
Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these
consolidated financial statements, for maintaining effective
internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting,
included in the accompanying management’s annual report on
internal control over financial reporting. Our responsibility is
to express an opinion on the Company’s consolidated financial
statements and an opinion on the Company’s internal control
over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards
of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and
whether effective internal control over financial reporting was
maintained in all material respects.
119
Our audits of the consolidated financial statements
included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements.
Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists
and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that
our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial
Reporting
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made
only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters
arising from the current period audit of the consolidated
financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the consolidated
financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any
way our opinion on the consolidated financial statements,
taken as a whole, and we are not, by communicating the
critical audit matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to
which they relate.
Assessment of the fair value of hard-to-price financial
instruments
As described in Notes 1, 6, 24 and 25 to the consolidated
financial statements, the Company’s financial assets and
liabilities recorded at fair value on a recurring basis were
$1,148.7 billion and $615.5 billion, respectively at
December 31, 2019. Financial instruments which are
measured at fair value using valuation techniques,
inclusive of complex internal valuation models or
alternative pricing procedures with significant
unobservable inputs, represent all Level 3 assets and
liabilities ($8.0 billion and $23.0 billion, respectively) and
certain Level 2 assets and liabilities (collectively, hard-to-
price financial instruments). The Company estimated the
fair value of hard-to-price financial instruments utilizing
various valuation techniques including, but not limited to,
internal valuation models, price-based or comparables
analysis and discounted cash flows.
We identified the assessment of the fair value for
hard-to-price financial instruments as a critical audit
matter, as the assessment involved complex auditor
judgment. In particular, there was a high level of
subjectivity in the evaluation of the key assumptions and
estimates utilized for prices and/or inputs that are not
readily observable in the current market and complex
internally developed valuation techniques and/or models
were used. This assessment encompassed the evaluation
of the fair value estimate methodologies, including the
Company’s key assumptions and inputs such as interest
rate, price, yield, credit spread, volatilities, correlations
and forward prices. This also included an evaluation of
the underlying models for mathematical accuracy and
assessing if the models are appropriate to value the
financial instruments.
The following are the primary procedures we
performed to address this critical audit matter. We tested
internal controls over hard-to-price financial instruments,
including pricing methodologies and valuation
techniques, and key inputs and assumptions to determine
the fair value. We tested the Company’s process to
develop the fair value estimate. This included performing
an assessment of the key policies and methodologies used
in the fair value determination. We involved valuation
professionals with industry knowledge and experience
120
who assisted in challenging the models’ significant prices,
inputs and assumptions that are not readily observable and
which are used in the fair value determination, by testing
the reliability of the process used by the Company to
determine fair value and evaluating that:
•
•
•
the key assumptions and/or inputs reflected those
which a market participant would use to
determine an exit price in the current market
environment;
the valuation models used were mathematically
accurate and appropriate to value the financial
instruments; and
relevant information that was reasonably
available was considered in the fair value
determination.
We involved valuation professionals with industry
knowledge and experience who assisted in developing an
independent fair value estimate for certain financial
instruments based on independently developed valuation
models and/or assumptions and comparing to the
Company’s fair value measurements.
Assessment of the allowance for loan losses collectively
evaluated for impairment
As discussed in Notes 1 and 15 to the consolidated
financial statements, the Company’s allowance for loan
losses related to loans collectively evaluated for
impairment (ALL) was $11.3 billion as of December 31,
2019. The Company estimated this ALL for consumer
loans utilizing a migration analysis, in which historical
delinquency and credit loss experience is applied to the
current aging of the portfolio, together with analyses that
reflect economic conditions. For corporate loans, the ALL
was determined using a statistical model considering the
portfolio’s size, remaining tenor and credit quality as
measured by internal risk ratings assigned to individual
credit facilities, which reflect probability of default and
loss given default. The statistical model and migration
analysis were each supplemented by qualitative
assessments.
We identified the assessment of the ALL as a critical
audit matter, as the assessment involved significant
measurement uncertainty requiring complex auditor
judgment, and knowledge and experience in the industry.
This assessment encompassed the evaluation of the
various components of the ALL methodology, including
certain key assumptions and inputs for the Company’s
quantitative and qualitative assessments. Key assumptions
and inputs for consumer loans included historical credit
losses, delinquency status and the manner in which they
are applied within a migration analysis. For corporate
loans, key assumptions and inputs included internal risk
ratings, probability of default and loss given default
considered in the statistical model.
The following are the primary procedures we
performed to address this critical audit matter. We tested
certain internal controls over (1) the approval of the ALL
methodologies and (2) the determination of the key
assumptions and inputs used to estimate the quantitative
and qualitative assessments. We evaluated the Company’s
process to develop the ALL estimate by testing certain
sources of data, factors and assumptions that the
Company used and considered the relevance and
reliability of such data, factors and assumptions. We
assessed the methodologies used to develop the resulting
qualitative assessments and the effect of those
assessments on the ALL compared with credit trends. We
involved credit risk professionals with industry
knowledge and experience who assisted in:
•
•
•
reviewing the Company’s ALL methodologies
and key assumptions for compliance with U.S.
generally accepted accounting principles;
testing the key assumptions and inputs in the
consumer loans migration analysis and corporate
loans statistical model; and
evaluating the qualitative assessments of the
ALL.
We tested corporate loan internal risk ratings for a
selection of credit facilities by (1) involving credit risk
professionals with industry knowledge and risk rating
experience to assist in evaluating the appropriateness of
the internal risk ratings and (2) testing the historical
accuracy of internal risk ratings compared to prior
periods.
Assessment of the realizability of deferred tax assets,
specifically as it relates to foreign tax credits
As discussed in Notes 1 and 9 to the consolidated
financial statements, the Company’s net deferred tax
assets (DTA) were $23.1 billion as of December 31, 2019.
This balance is net of a valuation allowance of $6.5
billion recorded by the Company. The estimation of the
DTA for foreign tax credits (FTCs) and related valuation
allowance was $10.9 billion and $4.6 billion respectively.
The Company evaluated the realization of the DTA for
FTCs to determine whether there was more than a 50%
likelihood that the DTA for FTCs would be realized,
based primarily on the Company’s expectations of future
taxable income in each relevant jurisdiction, available tax
planning strategies and timing of tax credit expirations.
We identified the assessment of the realizability of
the DTA for FTCs as a critical audit matter, as the
assessment involved complex auditor judgment and
knowledge of global tax regulations. This assessment
encompassed the evaluation of the Company’s estimations
that are complex due to its global structure and subjective,
given the Company’s assumptions used to determine that
sufficient taxable income will be generated or tax
planning strategies implemented to support the realization
of the DTA for FTCs before expiration of foreign tax
credits.
The following are the primary procedures we
performed to address this critical audit matter. We tested
certain internal controls over the Company’s analysis of
the realizability of the DTA for FTCs, including future
taxable income and tax planning strategies. We tested the
Company’s process to develop the valuation allowance
estimate. This included performing an assessment of the
key policies and methodologies used in the valuation
allowance determination. We involved income tax
professionals with FTC knowledge and experience,
including resources from our national office, who assisted
in assessing:
•
•
•
the assumptions used to determine the
Company’s future taxable income, including the
interpretation of the various tax laws and
regulations and the source and character of future
taxable income;
the timing of tax credit expirations; and
the prudence and feasibility of tax planning
strategies.
We performed sensitivity analyses over the Company’s
expectations of future taxable income and timing of tax
credit expirations.
/s/ KPMG LLP
We have served as the Company’s auditor since 1969.
New York, New York
February 21, 2020
121
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122
FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Income—
For the Years Ended December 31, 2019, 2018 and 2017
124
Consolidated Statement of Comprehensive Income—
For the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheet—December 31, 2019 and 2018
Consolidated Statement of Changes in Stockholders’ Equity
—For the Years Ended December 31, 2019, 2018 and 2017
125
126
128
Consolidated Statement of Cash Flows—
For the Years Ended December 31, 2019, 2018 and 2017
130
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Note 1—Summary of Significant Accounting Policies
Note 2—Discontinued Operations and Significant Disposals
Note 3—Business Segments
Note 4—Interest Revenue and Expense
Note 5—Commissions and Fees; Administration and Other
Fiduciary Fees
Note 6—Principal Transactions
Note 7—Incentive Plans
Note 8—Retirement Benefits
Note 9—Income Taxes
Note 10—Earnings per Share
Note 11—Securities Borrowed, Loaned and
Subject to Repurchase Agreements
Note 12—Brokerage Receivables and Brokerage Payables
Note 13—Investments
Note 14—Loans
Note 15—Allowance for Credit Losses
132
145
146
147
148
151
152
156
168
172
173
176
177
190
201
Note 16—Goodwill and Intangible Assets
Note 17—Debt
Note 18—Regulatory Capital
Note 19—Changes in Accumulated Other Comprehensive
Income (Loss) (AOCI)
Note 20—Preferred Stock
Note 21—Securitizations and Variable Interest Entities
Note 22—Derivatives
Note 23—Concentrations of Credit Risk
Note 24—Fair Value Measurement
Note 25—Fair Value Elections
Note 26—Pledged Assets, Collateral, Guarantees and
Commitments
Note 27—Contingencies
Note 28—Condensed Consolidating Financial Statements
Note 29—Selected Quarterly Financial Data (Unaudited)
204
206
208
209
212
214
226
242
243
264
268
276
283
292
123
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
Citigroup Inc. and Subsidiaries
In millions of dollars, except per share amounts
2019
2018
2017
Years ended December 31,
Revenues
Interest revenue
Interest expense
Net interest revenue
Commissions and fees
Principal transactions
Administration and other fiduciary fees
Realized gains on sales of investments, net
Net impairment losses recognized in earnings
Other revenue
Total non-interest revenues
Total revenues, net of interest expense
Provisions for credit losses and for benefits and claims
Provision for loan losses
Policyholder benefits and claims
Provision (release) for unfunded lending commitments
Total provisions for credit losses and for benefits and claims
Operating expenses
Compensation and benefits
Premises and equipment
Technology/communication
Advertising and marketing
Other operating
Total operating expenses
Income from continuing operations before income taxes
Provision for income taxes
Income (loss) from continuing operations
Discontinued operations
Loss from discontinued operations
Provision (benefit) for income taxes
Loss from discontinued operations, net of taxes
Net income (loss) before attribution of noncontrolling
interests
Noncontrolling interests
Citigroup’s net income (loss)
Basic earnings per share(1)
Income (loss) from continuing operations
Loss from discontinued operations, net of taxes
Net income (loss)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
76,510 $
29,163
47,347 $
11,746 $
8,892
3,411
1,474
(32) $
1,448 $
26,939 $
74,286 $
8,218 $
73
92
8,383 $
70,828 $
24,266
46,562 $
11,857 $
8,905
3,580
421
(132) $
1,661 $
26,292 $
72,854 $
7,354 $
101
113
7,568 $
21,433 $
21,154 $
2,328
7,077
1,516
9,648
42,002 $
23,901 $
4,430
19,471 $
(31) $
(27)
(4) $
19,467 $
66
19,401 $
8.08 $
—
8.08 $
2,324
7,193
1,545
9,625
41,841 $
23,445 $
5,357
18,088 $
(26) $
(18)
(8) $
18,080 $
35
18,045 $
6.69 $
—
6.69 $
Weighted average common shares outstanding (in millions)
2,249.2
2,493.3
61,579
16,518
45,061
12,707
8,940
3,584
778
(63)
1,437
27,383
72,444
7,503
109
(161)
7,451
21,181
2,453
6,909
1,608
10,081
42,232
22,761
29,388
(6,627)
(104)
7
(111)
(6,738)
60
(6,798)
(2.94)
(0.04)
(2.98)
2,698.5
124
CONSOLIDATED STATEMENT OF INCOME
(Continued)
In millions of dollars, except per share amounts
Diluted earnings per share(1)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss)
Adjusted weighted average common shares outstanding
(in millions)
Citigroup Inc. and Subsidiaries
Years ended December 31,
2019
2018
2017
$
$
8.04 $
—
8.04 $
6.69 $
—
6.68 $
(2.94)
(0.04)
(2.98)
2,265.3
2,494.8
2,698.5
(1) Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Citigroup Inc. and Subsidiaries
In millions of dollars
Citigroup’s net income (loss)
Add: Citigroup’s other comprehensive income (loss)
Net change in unrealized gains and losses on debt securities, net of taxes(1)(2)
Net change in debt valuation adjustment (DVA), net of taxes(1)
Net change in cash flow hedges, net of taxes
Benefit plans liability adjustment, net of taxes(3)
Net change in foreign currency translation adjustment, net of taxes and hedges
Net change in excluded component of fair value hedges, net of taxes
Citigroup’s total other comprehensive income (loss)(4)
Citigroup’s total comprehensive income (loss)
Add: Other comprehensive income (loss) attributable to noncontrolling interests
Add: Net income attributable to noncontrolling interests
Total comprehensive income (loss)
Years ended December 31,
2019
2018
2017
19,401 $
18,045 $
(6,798)
1,985 $
(1,136)
851
(552)
(321)
25
852 $
20,253 $
— $
66
(1,089) $
1,113
(30)
(74)
(2,362)
(57)
(2,499) $
15,546 $
(43) $
35
(863)
(569)
(138)
(1,019)
(202)
—
(2,791)
(9,589)
114
60
20,319 $
15,538 $
(9,415)
$
$
$
$
$
$
(1) See Note 1 to the Consolidated Financial Statements.
(2) For the years ended December 31, 2019 and 2018, amounts represent the net change in unrealized gains and losses on available-for-sale (AFS) debt securities.
Effective January 1, 2018, the AFS category was eliminated for equity securities under ASU 2016-01.
(3) See Note 8 to the Consolidated Financial Statements.
(4)
Includes the impact of ASU 2018-02, adopted in 2017. See Note 1 to the Consolidated Financial Statements.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
125
Citigroup Inc. and Subsidiaries
December 31,
2019
2018
CONSOLIDATED BALANCE SHEET
In millions of dollars
Assets
Cash and due from banks (including segregated cash and other deposits)
Deposits with banks
Securities borrowed and purchased under agreements to resell (including $153,193 and $147,701 as of
December 31, 2019 and 2018, respectively, at fair value)
Brokerage receivables
Trading account assets (including $120,236 and $112,932 pledged to creditors at December 31, 2019 and
2018, respectively)
Investments:
Available-for-sale debt securities (including $8,721 and $9,284 pledged to creditors as of December 31,
2019 and 2018, respectively)
Held-to-maturity debt securities (including $1,923 and $971 pledged to creditors as of December 31,
2019 and 2018, respectively)
Equity securities (including $1,162 and $1,109 as of December 31, 2019 and 2018, respectively, at fair
value)
Total investments
Loans:
Consumer (including $18 and $20 as of December 31, 2019 and 2018, respectively, at fair value)
Corporate (including $4,067 and $3,203 as of December 31, 2019 and 2018, respectively, at fair value)
Loans, net of unearned income
Allowance for loan losses
Total loans, net
Goodwill
Intangible assets (including MSRs of $495 and $584 as of December 31, 2019 and 2018,
respectively, at fair value)
Other assets (including $12,830 and $20,788 as of December 31, 2019 and 2018, respectively,
at fair value)
$
$
$
$
23,967 $
169,952
251,322
39,857
276,140
280,265
80,775
7,523
368,563 $
309,548
389,935
699,483 $
(12,783)
686,700 $
22,126
4,822
107,709
Total assets
$
1,951,158 $
23,645
164,460
270,684
35,450
256,117
288,038
63,357
7,212
358,607
302,360
381,836
684,196
(12,315)
671,881
22,046
5,220
109,273
1,917,383
The following table presents certain assets of consolidated variable interest entities (VIEs), which are included on the
Consolidated Balance Sheet above. The assets in the table below include those assets that can only be used to settle obligations of
consolidated VIEs, presented on the following page, and are in excess of those obligations. In addition, the assets in the table below
include third-party assets of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation.
In millions of dollars
Assets of consolidated VIEs to be used to settle obligations of consolidated VIEs
Cash and due from banks
Trading account assets
Investments
Loans, net of unearned income
Consumer
Corporate
Loans, net of unearned income
Allowance for loan losses
Total loans, net
Other assets
Total assets of consolidated VIEs to be used to settle obligations of consolidated VIEs
December 31,
2019
2018
$
$
$
$
108 $
6,719
1,295
46,977
16,175
63,152 $
(1,841)
61,311 $
73
69,506 $
270
917
1,796
49,403
19,259
68,662
(1,852)
66,810
151
69,944
Statement continues on the next page.
126
CONSOLIDATED BALANCE SHEET
(Continued)
In millions of dollars, except shares and per share amounts
Liabilities
Non-interest-bearing deposits in U.S. offices
Interest-bearing deposits in U.S. offices (including $1,624 and $717 as of December 31, 2019 and 2018,
respectively, at fair value)
Non-interest-bearing deposits in offices outside the U.S.
Interest-bearing deposits in offices outside the U.S. (including $695 and $758 as of December 31, 2019
and 2018, respectively, at fair value)
Total deposits
Securities loaned and sold under agreements to repurchase (including $40,651 and $44,510 as of
December 31, 2019 and 2018, respectively, at fair value)
Brokerage payables
Trading account liabilities
Short-term borrowings (including $4,946 and $4,483 as of December 31, 2019 and 2018, respectively,
at fair value)
Long-term debt (including $55,783 and $38,229 as of December 31, 2019 and 2018, respectively,
at fair value)
Other liabilities (including $6,343 and $15,906 as of December 31, 2019 and 2018, respectively,
at fair value)
Total liabilities
Stockholders’ equity
Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares: 719,200 as of December
31, 2019 and 738,400 as of December 31, 2018, at aggregate liquidation value
Common stock ($0.01 par value; authorized shares: 6 billion), issued shares: 3,099,602,856 as of
December 31, 2019 and 3,099,567,177 as of December 31, 2018
Additional paid-in capital
Retained earnings
Treasury stock, at cost: 985,479,501 shares as of December 31, 2019 and 731,099,833 shares as of
December 31, 2018
Accumulated other comprehensive income (loss) (AOCI)
Total Citigroup stockholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
Citigroup Inc. and Subsidiaries
December 31,
2019
2018
98,811 $
105,836
401,418
85,692
484,669
1,070,590 $
166,339
48,601
119,894
45,049
361,573
80,648
465,113
1,013,170
177,768
64,571
144,305
32,346
248,760
231,999
57,979
1,757,212 $
56,150
1,720,309
17,980 $
18,460
31
107,840
165,369
(61,660)
(36,318)
193,242 $
704
193,946 $
1,951,158 $
31
107,922
151,347
(44,370)
(37,170)
196,220
854
197,074
1,917,383
$
$
$
$
$
$
$
The following table presents certain liabilities of consolidated VIEs, which are included on the Consolidated Balance Sheet
above. The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances
that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the
general credit of Citigroup.
In millions of dollars
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have
recourse to the general credit of Citigroup
Short-term borrowings
Long-term debt
Other liabilities
Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have
recourse to the general credit of Citigroup
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
December 31,
2019
2018
$
$
10,031 $
25,582
917
36,530 $
13,134
28,514
697
42,345
127
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Citigroup Inc. and Subsidiaries
In millions of dollars, except shares in thousands
Preferred stock at aggregate liquidation value
Balance, beginning of year
Issuance of new preferred stock
Redemption of preferred stock
Balance, end of period
Common stock and additional paid-in capital
Balance, beginning of year
Employee benefit plans
Preferred stock issuance expense
Other
Balance, end of period
Retained earnings
Balance, beginning of year
Adjustment to opening balance, net of taxes(1)
Adjusted balance, beginning of period
Citigroup’s net income (loss)
Common dividends(2)
Preferred dividends
Impact of Tax Reform related to AOCI reclassification(3)
Other(4)
Balance, end of period
Treasury stock, at cost
Balance, beginning of year
Employee benefit plans(5)
Treasury stock acquired(6)
Balance, end of period
Citigroup’s accumulated other comprehensive income (loss)
Balance, beginning of year
Adjustment to opening balance, net of taxes(1)
Adjusted balance, beginning of period
Citigroup’s total other comprehensive income (loss)(3)
Balance, end of period
Total Citigroup common stockholders’ equity
Total Citigroup stockholders’ equity
Noncontrolling interests
Balance, beginning of year
Transactions between noncontrolling-interest shareholders and
the related consolidated subsidiary
Transactions between Citigroup and the noncontrolling-interest
shareholders
Net income attributable to noncontrolling-interest shareholders
Distributions paid to noncontrolling-interest shareholders
Other comprehensive income (loss) attributable to
noncontrolling-interest shareholders
Other
Net change in noncontrolling interests
Balance, end of period
Total equity
Years ended December 31,
Amounts
2019
2018
2017
2019
Shares
2018
2017
$
$
18,460 $
1,500
(1,980)
17,980 $
19,253 $
—
(793)
18,460 $
19,253
—
—
19,253
738
60
(79)
719
770
—
(32)
738
770
—
—
770
$ 107,953 $ 108,039 $ 108,073
(27)
—
(7)
$ 107,871 $ 107,953 $ 108,039
(112)
(4)
34
(94)
—
8
3,099,567
36
—
—
3,099,603
3,099,523
44
—
—
3,099,567
3,099,482
41
—
—
3,099,523
151
(84)
$ 151,347 $ 138,425 $ 146,477
(660)
$ 151,498 $ 138,341 $ 145,817
(6,798)
(2,595)
(1,213)
3,304
(90)
$ 165,369 $ 151,347 $ 138,425
19,401
(4,403)
(1,109)
—
(18)
18,045
(3,865)
(1,174)
—
—
$
$
$
$
(44,370) $
585
(17,875)
(61,660) $
(30,309) $
484
(14,545)
(44,370) $
(16,302)
531
(14,538)
(30,309)
(731,100)
9,872
(264,252)
(985,480)
(529,615)
10,557
(212,042)
(731,100)
(327,090)
11,651
(214,176)
(529,615)
(37,170) $
(34,668) $
(32,381)
—
(3)
504
(37,170) $
(34,671) $
(31,877)
852
(2,499)
(2,791)
2,114,123
2,368,467
2,569,908
(37,170) $
(36,318) $
(34,668)
$
$ 175,262 $ 177,760 $ 181,487
$ 193,242 $ 196,220 $ 200,740
$
854 $
932 $
1,023
—
(169)
66
(40)
—
(7)
—
(50)
35
(38)
(43)
18
$
$
(150) $
704 $
(78) $
854 $
(28)
(121)
60
(44)
114
(72)
(91)
932
$ 193,946 $ 197,074 $ 201,672
128
(1) See Note 1 to the Consolidated Financial Statements for additional details.
(2) Common dividends declared were $0.45 per share in the first and second quarters of 2019 and $0.51 per share in the third and fourth quarters of 2019; $0.32 per
share in the first and second quarters of 2018 and $0.45 per share in the third and fourth quarters of 2018; and $0.16 in the first and second quarters of 2017 and
$0.32 per share in the third and fourth quarters of 2017.
Includes the impact of ASU 2018-02, which transferred those amounts from AOCI to 2017 Retained earnings. See Notes 1 and 19 to the Consolidated Financial
Statements.
(3)
(4) 2017 includes the impact of ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.
(5)
See Note 1 to the Consolidated Financial Statements.
Includes treasury stock related to (i) certain activity on employee stock option program exercises where the employee delivers existing shares to cover the option
exercise, or (ii) under Citi’s employee restricted or deferred stock programs where shares are withheld to satisfy tax requirements.
(6) Primarily consists of open market purchases under Citi’s Board of Directors-approved common stock repurchase program.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
129
CONSOLIDATED STATEMENT OF CASH FLOWS
Citigroup Inc. and Subsidiaries
In millions of dollars
Cash flows from operating activities of continuing operations
Net income before attribution of noncontrolling interests
Net income attributable to noncontrolling interests
Citigroup’s net income
Loss from discontinued operations, net of taxes
Income (loss) from continuing operations—excluding noncontrolling interests
Adjustments to reconcile net income to net cash provided by (used in) operating activities
of continuing operations
Net gains on significant disposals(1)
Depreciation and amortization
Deferred income taxes(2)
Provision for loan losses
Realized gains from sales of investments
Net impairment losses on investments
Change in trading account assets
Change in trading account liabilities
Change in brokerage receivables net of brokerage payables
Change in loans HFS
Change in other assets
Change in other liabilities
Other, net
Total adjustments
Net cash provided by (used in) operating activities of continuing operations
Cash flows from investing activities of continuing operations
Change in securities borrowed and purchased under agreements to resell
Change in loans
Proceeds from sales and securitizations of loans
Purchases of investments
Proceeds from sales of investments
Proceeds from maturities of investments
Proceeds from significant disposals(1)
Capital expenditures on premises and equipment and capitalized software
Proceeds from sales of premises and equipment, subsidiaries and affiliates
and repossessed assets
Other, net
Net cash used in investing activities of continuing operations
Cash flows from financing activities of continuing operations
Dividends paid
Issuance of preferred stock
Redemption of preferred stock
Treasury stock acquired
Stock tendered for payment of withholding taxes
Change in securities loaned and sold under agreements to repurchase
Issuance of long-term debt
Payments and redemptions of long-term debt
Change in deposits
Change in short-term borrowings
130
$
$
$
$
$
$
$
$
Years ended December 31,
2019
2018
2017
19,467 $
18,080 $
(6,738)
66
35
19,401 $
18,045 $
(4)
(8)
19,405 $
18,053 $
—
3,905
(610)
8,218
(1,474)
32
(20,124)
(24,411)
(20,377)
(909)
4,724
1,829
16,955
(32,242) $
(12,837) $
(247)
3,754
(51)
7,354
(421)
132
(3,469)
19,135
6,163
770
(5,791)
(871)
(7,559)
18,899 $
36,952 $
60
(6,798)
(111)
(6,687)
(602)
3,659
24,877
7,503
(778)
91
(7,038)
(15,375)
(5,307)
247
(3,364)
(3,044)
(2,956)
(2,087)
(8,774)
19,362 $
(38,206) $
4,335
(22,466)
(29,002)
(58,062)
2,878
4,549
8,365
(274,491)
(152,487)
(185,740)
137,173
119,051
—
(5,336)
259
196
61,491
83,604
314
(3,774)
212
181
107,368
84,369
3,411
(3,361)
377
187
(23,374) $
(73,118) $
(38,751)
(5,447) $
(5,020) $
(3,797)
1,496
(1,980)
—
(793)
—
—
(17,571)
(14,433)
(14,541)
(364)
(11,429)
59,134
(51,029)
57,420
12,703
(482)
21,491
60,655
(58,132)
53,348
(12,106)
(405)
14,456
67,960
(40,986)
30,416
13,751
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
In millions of dollars
Net cash provided by financing activities of continuing operations
Effect of exchange rate changes on cash and cash equivalents
Change in cash, due from banks and deposits with banks
Cash, due from banks and deposits with banks at beginning of period(3)
Cash, due from banks and deposits with banks at end of period(3)
Cash and due from banks
Deposits with banks
Cash, due from banks and deposits with banks at end of period
Supplemental disclosure of cash flow information for continuing operations
Cash paid during the year for income taxes
Cash paid during the year for interest
Non-cash investing activities(4)
Transfers to loans HFS (Other assets) from loans
Citigroup Inc. and Subsidiaries
Years ended December 31,
2019
2018
2017
42,933 $
44,528 $
66,854
(908) $
5,814 $
(773) $
7,589 $
188,105
180,516
193,919 $
188,105 $
23,967 $
23,645 $
169,952
164,460
193,919 $
188,105 $
693
20,022
160,494
180,516
23,775
156,741
180,516
4,888 $
4,313 $
28,682
22,963
2,083
15,675
5,500 $
4,200 $
5,900
$
$
$
$
$
$
$
$
(1) See Note 2 to the Consolidated Financial Statements for further information on significant disposals.
(2)
Includes the full impact of the $22.6 billion non-cash charge related to the Tax Cuts and Jobs Act (Tax Reform) in 2017. See Notes 1 and 9 to the
Consolidated Financial Statements for further information.
Includes the impact of ASU 2016-18, Restricted Cash. See Notes 1 and 26 to the Consolidated Financial Statements.
(3)
(4) Operating and finance lease right-of-use assets and lease liabilities represent non-cash investing and financing activities, respectively, and are not included in
the non-cash investing activities presented here. See Note 26 to the Consolidated Financial Statements for more information and balances as of December 31,
2019.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
131
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Throughout these Notes, “Citigroup,” “Citi” and the
“Company” refer to Citigroup Inc. and its consolidated
subsidiaries.
Certain reclassifications have been made to the prior
periods’ financial statements and Notes to conform to the
current period’s presentation.
Principles of Consolidation
The Consolidated Financial Statements include the accounts
of Citigroup and its subsidiaries prepared in accordance with
U.S. generally accepted accounting principles (GAAP). The
Company consolidates subsidiaries in which it holds,
directly or indirectly, more than 50% of the voting rights or
where it exercises control. Entities where the Company
holds 20% to 50% of the voting rights and/or has the ability
to exercise significant influence, other than investments of
designated venture capital subsidiaries or investments
accounted for at fair value under the fair value option, are
accounted for under the equity method, and the pro rata
share of their income (loss) is included in Other revenue.
Income from investments in less-than-20%-owned
companies is recognized when dividends are received. As
discussed in more detail in Note 21 to the Consolidated
Financial Statements, Citigroup also consolidates entities
deemed to be variable interest entities when Citigroup is
determined to be the primary beneficiary. Gains and losses
on the disposition of branches, subsidiaries, affiliates,
buildings and other investments are included in Other
revenue.
Citibank
Citibank, N.A. (Citibank) is a commercial bank and wholly
owned subsidiary of Citigroup. Citibank’s principal offerings
include consumer finance, mortgage lending and retail
banking (including commercial banking) products and
services; investment banking, cash management and trade
finance; and private banking products and services.
Variable Interest Entities (VIEs)
An entity is a variable interest entity (VIE) if it meets either
of the criteria outlined in Accounting Standards Codification
(ASC) Topic 810, Consolidation, which are (i) the entity has
equity that is insufficient to permit the entity to finance its
activities without additional subordinated financial support
from other parties, or (ii) the entity has equity investors that
cannot make significant decisions about the entity’s
operations or that do not absorb their proportionate share of
the entity’s expected losses or expected returns.
The Company consolidates a VIE when it has both the
power to direct the activities that most significantly impact
the VIE’s economic performance and a right to receive
benefits or the obligation to absorb losses of the entity that
could be potentially significant to the VIE (that is, Citi is the
primary beneficiary). In addition to variable interests held in
consolidated VIEs, the Company has variable interests in
other VIEs that are not consolidated because the Company is
not the primary beneficiary.
All unconsolidated VIEs are monitored by the Company
to assess whether any events have occurred to cause its
primary beneficiary status to change.
All entities not deemed to be VIEs with which the
Company has involvement are evaluated for consolidation
under other subtopics of ASC 810. See Note 21 to the
Consolidated Financial Statements for more detailed
information.
Foreign Currency Translation
Assets and liabilities of Citi’s foreign operations are
translated from their respective functional currencies into
U.S. dollars using period-end spot foreign exchange rates.
The effects of those translation adjustments are reported in
Accumulated other comprehensive income (loss), a
component of stockholders’ equity, net of any related hedge
and tax effects, until realized upon sale or substantial
liquidation of the foreign operation, at which point such
amounts related to the foreign entity are reclassified into
earnings. Revenues and expenses of Citi’s foreign operations
are translated monthly from their respective functional
currencies into U.S. dollars at amounts that approximate
weighted average exchange rates.
For transactions that are denominated in a currency
other than the functional currency, including transactions
denominated in the local currencies of foreign operations
that use the U.S. dollar as their functional currency, the
effects of changes in exchange rates are primarily included
in Principal transactions, along with the related effects of
any economic hedges. Instruments used to hedge foreign
currency exposures include foreign currency forward, option
and swap contracts and, in certain instances, designated
issues of non-U.S. dollar debt. Foreign operations in
countries with highly inflationary economies designate the
U.S. dollar as their functional currency, with the effects of
changes in exchange rates primarily included in Other
revenue.
Investment Securities
Investments include debt and equity securities. Debt
securities include bonds, notes and redeemable preferred
stocks, as well as certain loan-backed and structured
securities that are subject to prepayment risk. Equity
securities include common and nonredeemable preferred
stock.
Debt Securities
• Debt securities classified as “held-to-maturity” are
securities that the Company has both the ability and the
intent to hold until maturity and are carried at amortized
cost. Interest income on such securities is included in
Interest revenue.
• Debt securities classified as “available-for-sale” are
carried at fair value with changes in fair value reported
132
in Accumulated other comprehensive income (loss), a
component of stockholders’ equity, net of applicable
income taxes and hedges. Interest income on such
securities is included in Interest revenue.
Equity Securities
• Marketable equity securities are measured at fair value
with changes in fair value recognized in earnings.
• Non-marketable equity securities are measured at fair
value with changes in fair value recognized in earnings
unless (i) the measurement alternative is elected or (ii)
the investment represents Federal Reserve Bank and
Federal Home Loan Bank stock or certain exchange
seats that continue to be carried at cost. Non-marketable
equity securities under the measurement alternative are
carried at cost plus or minus changes resulting from
observed prices for orderly transactions for the identical
or a similar investment of the same issuer.
• Certain investments that would otherwise have been
accounted for using the equity method are carried at fair
value with changes in fair value recognized in earnings,
since the Company elected to apply fair value
accounting.
For investments in debt securities classified as HTM or
AFS, the accrual of interest income is suspended for
investments that are in default or for which it is likely that
future interest payments will not be made as scheduled.
Debt securities not measured at fair value through
earnings, such as securities held in HTM or AFS, and equity
securities under the measurement alternative, are subject to
evaluation for impairment as described in Note 13 to the
Consolidated Financial Statements. Realized gains and
losses on sales of investments are included in earnings,
primarily on a specific identification basis.
The Company uses a number of valuation techniques for
investments carried at fair value, which are described in
Note 24 to the Consolidated Financial Statements.
Trading Account Assets and Liabilities
Trading account assets include debt and marketable equity
securities, derivatives in a receivable position, residual
interests in securitizations and physical commodities
inventory. In addition, as described in Note 25 to the
Consolidated Financial Statements, certain assets that
Citigroup has elected to carry at fair value under the fair
value option, such as loans and purchased guarantees, are
also included in Trading account assets.
Trading account liabilities include securities sold, not
yet purchased (short positions) and derivatives in a net
payable position, as well as certain liabilities that Citigroup
has elected to carry at fair value (as described in Note 25 to
the Consolidated Financial Statements).
Other than physical commodities inventory, all trading
account assets and liabilities are carried at fair value.
Revenues generated from trading assets and trading
liabilities are generally reported in Principal transactions
and include realized gains and losses as well as unrealized
gains and losses resulting from changes in the fair value of
such instruments. Interest income on trading assets is
recorded in Interest revenue reduced by interest expense on
trading liabilities.
Physical commodities inventory is carried at the lower
of cost or market with related losses reported in Principal
transactions. Realized gains and losses on sales of
commodities inventory are included in Principal
transactions. Investments in unallocated precious metals
accounts (gold, silver, platinum and palladium) are
accounted for as hybrid instruments containing a debt host
contract and an embedded non-financial derivative
instrument indexed to the price of the relevant precious
metal. The embedded derivative instrument is separated
from the debt host contract and accounted for at fair value.
The debt host contract is carried at fair value under the fair
value option, as described in Note 25 to the Consolidated
Financial Statements.
Derivatives used for trading purposes include interest
rate, currency, equity, credit and commodity swap
agreements, options, caps and floors, warrants, and financial
and commodity futures and forward contracts. Derivative
asset and liability positions are presented net by counterparty
on the Consolidated Balance Sheet when a valid master
netting agreement exists and the other conditions set out in
ASC Topic 210-20, Balance Sheet—Offsetting, are met. See
Note 22 to the Consolidated Financial Statements.
The Company uses a number of techniques to determine
the fair value of trading assets and liabilities, which are
described in Note 24 to the Consolidated Financial
Statements.
Securities Borrowed and Securities Loaned
Securities borrowing and lending transactions do not
constitute a sale of the underlying securities for accounting
purposes and are treated as collateralized financing
transactions. Such transactions are recorded at the amount of
proceeds advanced or received plus accrued interest. As
described in Note 25 to the Consolidated Financial
Statements, the Company has elected to apply fair value
accounting to a number of securities borrowing and lending
transactions. Fees paid or received for all securities lending
and borrowing transactions are recorded in Interest expense
or Interest revenue at the contractually specified rate.
The Company monitors the fair value of securities
borrowed or loaned on a daily basis and obtains or posts
additional collateral in order to maintain contractual margin
protection.
As described in Note 24 to the Consolidated Financial
Statements, the Company uses a discounted cash flow
technique to determine the fair value of securities lending
and borrowing transactions.
Repurchase and Resale Agreements
Securities sold under agreements to repurchase (repos) and
securities purchased under agreements to resell (reverse
repos) do not constitute a sale (or purchase) of the
underlying securities for accounting purposes and are treated
as collateralized financing transactions. As described in Note
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25 to the Consolidated Financial Statements, the Company
has elected to apply fair value accounting to certain of such
transactions, with changes in fair value reported in earnings.
Any transactions for which fair value accounting has not
been elected are recorded at the amount of cash advanced or
received plus accrued interest. Irrespective of whether the
Company has elected fair value accounting, interest paid or
received on all repo and reverse repo transactions is recorded
in Interest expense or Interest revenue at the contractually
specified rate.
are 90 days contractually past due. For credit cards and other
unsecured revolving loans, however, Citi generally accrues
interest until payments are 180 days past due. As a result of
OCC guidance, home equity loans in regulated bank entities
are classified as non-accrual if the related residential first
mortgage is 90 days or more past due. Also as a result of
OCC guidance, mortgage loans in regulated bank entities are
classified as non-accrual within 60 days of notification that
the borrower has filed for bankruptcy, other than Federal
Housing Administration (FHA)-insured loans.
Where the conditions of ASC 210-20-45-11, Balance
Loans that have been modified to grant a concession to
Sheet—Offsetting: Repurchase and Reverse Repurchase
Agreements, are met, repos and reverse repos are presented
net on the Consolidated Balance Sheet.
The Company’s policy is to take possession of securities
purchased under reverse repurchase agreements. The
Company monitors the fair value of securities subject to
repurchase or resale on a daily basis and obtains or posts
additional collateral in order to maintain contractual margin
protection.
As described in Note 24 to the Consolidated Financial
Statements, the Company uses a discounted cash flow
technique to determine the fair value of repo and reverse
repo transactions.
Loans
Loans are reported at their outstanding principal balances net
of any unearned income and unamortized deferred fees and
costs, except for credit card receivable balances, which
include accrued interest and fees. Loan origination fees and
certain direct origination costs are generally deferred and
recognized as adjustments to income over the lives of the
related loans.
As described in Note 25 to the Consolidated Financial
Statements, Citi has elected fair value accounting for certain
loans. Such loans are carried at fair value with changes in
fair value reported in earnings. Interest income on such loans
is recorded in Interest revenue at the contractually specified
rate.
Loans that are held-for-investment are classified as
Loans, net of unearned income on the Consolidated Balance
Sheet, and the related cash flows are included within the
cash flows from investing activities category in the
Consolidated Statement of Cash Flows on the line Change in
loans. However, when the initial intent for holding a loan
has changed from held-for-investment to held-for-sale
(HFS), the loan is reclassified to HFS, but the related cash
flows continue to be reported in cash flows from investing
activities in the Consolidated Statement of Cash Flows on
the line Proceeds from sales and securitizations of loans.
Consumer Loans
Consumer loans represent loans and leases managed
primarily by the Global Consumer Banking (GCB)
businesses and Corporate/Other.
Consumer Non-accrual and Re-aging Policies
As a general rule, interest accrual ceases for installment and
real estate (both open- and closed-end) loans when payments
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a borrower in financial difficulty may not be accruing
interest at the time of the modification. The policy for
returning such modified loans to accrual status varies by
product and/or region. In most cases, a minimum number of
payments (ranging from one to six) is required, while in
other cases the loan is never returned to accrual status. For
regulated bank entities, such modified loans are returned to
accrual status if a credit evaluation at the time of, or
subsequent to, the modification indicates the borrower is
able to meet the restructured terms, and the borrower is
current and has demonstrated a reasonable period of
sustained payment performance (minimum six months of
consecutive payments).
For U.S. consumer loans, generally one of the
conditions to qualify for modification is that a minimum
number of payments (typically ranging from one to three)
must be made. Upon modification, the loan is re-aged to
current status. However, re-aging practices for certain open-
ended consumer loans, such as credit cards, are governed by
Federal Financial Institutions Examination Council (FFIEC)
guidelines. For open-ended consumer loans subject to FFIEC
guidelines, one of the conditions for the loan to be re-aged to
current status is that at least three consecutive minimum
monthly payments, or the equivalent amount, must be
received. In addition, under FFIEC guidelines, the number of
times that such a loan can be re-aged is subject to limitations
(generally once in 12 months and twice in five years).
Furthermore, FHA and Department of Veterans Affairs (VA)
loans may only be modified under those respective agencies’
guidelines, and payments are not always required in order to
re-age a modified loan to current.
Consumer Charge-Off Policies
Citi’s charge-off policies follow the general guidelines
below:
• Unsecured installment loans are charged off at 120 days
contractually past due.
• Unsecured revolving loans and credit card loans are
charged off at 180 days contractually past due.
• Loans secured with non-real estate collateral are written
down to the estimated value of the collateral, less costs
to sell, at 120 days contractually past due.
• Real estate-secured loans are written down to the
estimated value of the property, less costs to sell, at 180
days contractually past due.
• Real estate-secured loans are charged off no later than
180 days contractually past due if a decision has been
made not to foreclose on the loans.
• Unsecured loans in bankruptcy are charged off within
60 days of notification of filing by the bankruptcy court
or in accordance with Citi’s charge-off policy,
whichever occurs earlier.
• Real estate-secured loans in bankruptcy, other than
FHA-insured loans, are written down to the estimated
value of the property, less costs to sell, within 60 days of
notification that the borrower has filed for bankruptcy or
in accordance with Citi’s charge-off policy, whichever is
earlier.
• Commercial banking loans are written down to the
extent that principal is judged to be uncollectable.
Corporate Loans
Corporate loans represent loans and leases managed by
Institutional Clients Group (ICG). Corporate loans are
identified as impaired and placed on a cash (non-accrual)
basis when it is determined, based on actual experience and
a forward-looking assessment of the collectability of the loan
in full, that the payment of interest or principal is doubtful or
when interest or principal is 90 days past due, except when
the loan is well collateralized and in the process of
collection. Any interest accrued on impaired corporate loans
and leases is reversed at 90 days past due and charged
against current earnings, and interest is thereafter included in
earnings only to the extent actually received in cash. When
there is doubt regarding the ultimate collectability of
principal, all cash receipts are thereafter applied to reduce
the recorded investment in the loan.
Impaired corporate loans and leases are written down to
the extent that principal is deemed to be uncollectable.
Impaired collateral-dependent loans and leases, where
repayment is expected to be provided solely by the sale of
the underlying collateral and there are no other available and
reliable sources of repayment, are written down to the lower
of carrying value or collateral value. Cash-basis loans are
returned to accrual status when all contractual principal and
interest amounts are reasonably assured of repayment and
there is a sustained period of repayment performance in
accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for
sale are classified as loans HFS and included in Other assets.
The practice of Citi’s U.S. prime mortgage business has been
to sell substantially all of its conforming loans. As such, U.S.
prime mortgage conforming loans are classified as HFS and
the fair value option is elected at origination, with changes in
fair value recorded in Other revenue. With the exception of
those loans for which the fair value option has been elected,
HFS loans are accounted for at the lower of cost or market
value, with any write-downs or subsequent recoveries
charged to Other revenue. The related cash flows are
classified in the Consolidated Statement of Cash Flows in
the cash flows from operating activities category on the line
Change in loans held-for-sale.
Allowance for Loan Losses
Allowance for loan losses represents management’s best
estimate of probable losses inherent in the portfolio,
including probable losses related to large individually
evaluated impaired loans and troubled debt restructurings.
Attribution of the allowance is made for analytical purposes
only, and the entire allowance is available to absorb probable
loan losses inherent in the overall portfolio. Additions to the
allowance are made through the Provision for loan losses.
Loan losses are deducted from the allowance and subsequent
recoveries are added. Assets received in exchange for loan
claims in a restructuring are initially recorded at fair value,
with any gain or loss reflected as a recovery or charge-off in
the provision.
Consumer Loans
For consumer loans, each portfolio of non-modified smaller-
balance homogeneous loans is independently evaluated for
impairment by product type (e.g., residential mortgage,
credit card, etc.) in accordance with ASC 450,
Contingencies. The allowance for loan losses attributed to
these loans is established via a process that estimates the
probable losses inherent in the specific portfolio. This
process includes migration analysis, in which historical
delinquency and credit loss experience is applied to the
current aging of the portfolio, together with analyses that
reflect current and anticipated economic conditions,
including changes in housing prices and unemployment
trends. Citi’s allowance for loan losses under ASC 450 only
considers contractual principal amounts due, except for
credit card loans, where estimated loss amounts related to
accrued interest receivable are also included.
Management also considers overall portfolio indicators,
including historical credit losses; delinquent, non-performing
and classified loans; trends in volumes and terms of loans;
an evaluation of overall credit quality; the credit process,
including lending policies and procedures; and economic,
geographical, product and other environmental factors.
Separate valuation allowances are determined for
impaired smaller-balance homogeneous loans whose terms
have been modified in a troubled debt restructuring (TDR).
Long-term modification programs, and short-term (less than
12 months) modifications that provide concessions (such as
interest rate reductions) to borrowers in financial difficulty,
are reported as TDRs. In addition, loan modifications that
involve a trial period are reported as TDRs at the start of the
trial period. The allowance for loan losses for TDRs is
determined in accordance with ASC 310-10-35, Receivables
—Subsequent Measurement, considering all available
evidence, including, as appropriate, the present value of the
expected future cash flows discounted at the loan’s original
contractual effective rate, the secondary market value of the
loan and the fair value of collateral less disposal costs. These
expected cash flows incorporate modification program
default rate assumptions. The original contractual effective
rate for credit card loans is the pre-modification rate, which
may include interest rate increases under the original
contractual agreement with the borrower.
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Corporate Loans
In the corporate portfolios, the Allowance for loan losses
includes an asset-specific component and a statistically
based component. The asset-specific component is
calculated under ASC 310-10-35 for larger-balance, non-
homogeneous loans that are considered impaired. An asset-
specific allowance is established when the discounted cash
flows, collateral value (less disposal costs) or observable
market price of the impaired loan are lower than its carrying
value. This allowance considers the borrower’s overall
financial condition, resources and payment record, the
prospects for support from any financially responsible
guarantors (discussed further below) and, if appropriate, the
realizable value of any collateral. The asset-specific
component of the allowance for smaller-balance impaired
loans is calculated on a pool basis considering historical loss
experience.
The allowance for the remainder of the loan portfolio is
determined under ASC 450 using a statistical methodology,
supplemented by management judgment. The statistical
analysis considers the portfolio’s size, remaining tenor and
credit quality as measured by internal risk ratings assigned to
individual credit facilities, which reflect probability of
default and loss given default. The statistical analysis
considers historical default rates and historical loss severity
in the event of default, including historical average levels
and historical variability. The result is an estimated range for
inherent losses. The best estimate within the range is then
determined by management’s quantitative and qualitative
assessment of current conditions, including general
economic conditions, specific industry and geographic
trends and internal factors including portfolio
concentrations, trends in internal credit quality indicators
and current and past underwriting standards.
For both the asset-specific and the statistically based
components of the Allowance for loan losses, management
may incorporate guarantor support. The financial
wherewithal of the guarantor is evaluated, as applicable,
based on net worth, cash flow statements and personal or
company financial statements, which are updated and
reviewed at least annually. Citi seeks performance on
guarantee arrangements in the normal course of business.
Seeking performance entails obtaining satisfactory
cooperation from the guarantor or borrower in the specific
situation. This regular cooperation is indicative of pursuit
and successful enforcement of the guarantee; the exposure is
reduced without the expense and burden of pursuing a legal
remedy. A guarantor’s reputation and willingness to work
with Citigroup are evaluated based on the historical
experience with the guarantor and knowledge of the
marketplace. In the rare event that the guarantor is unwilling
or unable to perform or facilitate borrower cooperation, Citi
pursues a legal remedy; however, enforcing a guarantee via
legal action against the guarantor is not the primary means of
resolving a troubled loan situation and rarely occurs. If Citi
does not pursue a legal remedy, it is because Citi does not
believe that the guarantor has the financial wherewithal to
perform regardless of legal action or because there are legal
limitations on simultaneously pursuing guarantors and
foreclosure. A guarantor’s reputation does not impact Citi’s
decision or ability to seek performance under the guarantee.
In cases where a guarantee is a factor in the assessment
of loan losses, it is included via adjustment to the loan’s
internal risk rating, which in turn is the basis for the
adjustment to the statistically based component of the
Allowance for loan losses. To date, it is only in rare
circumstances that an impaired commercial loan or
commercial real estate loan is carried at a value in excess of
the appraised value due to a guarantee.
When Citi’s monitoring of the loan indicates that the
guarantor’s wherewithal to pay is uncertain or has
deteriorated, there is either no change in the risk rating,
because the guarantor’s credit support was never initially
factored in, or the risk rating is adjusted to reflect that
uncertainty or deterioration. Accordingly, a guarantor’s
ultimate failure to perform or a lack of legal enforcement of
the guarantee does not materially impact the allowance for
loan losses, as there is typically no further significant
adjustment of the loan’s risk rating at that time. Where Citi is
not seeking performance under the guarantee contract, it
provides for loan losses as if the loans were non-performing
and not guaranteed.
Reserve Estimates and Policies
Management provides reserves for an estimate of probable
losses inherent in the funded loan portfolio on the
Consolidated Balance Sheet in the form of an allowance for
loan losses. These reserves are established in accordance
with Citigroup’s credit reserve policies, as approved by the
Audit Committee of the Citigroup Board of Directors. Citi’s
Chief Risk Officer and Chief Financial Officer review the
adequacy of the credit loss reserves each quarter with
representatives from the risk management and finance staffs
for each applicable business area. Applicable business areas
include those having classifiably managed portfolios, where
internal credit-risk ratings are assigned (primarily ICG and
GCB) or modified consumer loans, where concessions were
granted due to the borrowers’ financial difficulties.
The aforementioned representatives for these business
areas present recommended reserve balances for their funded
and unfunded lending portfolios along with supporting
quantitative and qualitative data discussed below:
Estimated probable losses for non-performing, non-
homogeneous exposures within a business line’s classifiably
managed portfolio and impaired smaller-balance
homogeneous loans whose terms have been modified due to
the borrowers’ financial difficulties, where it was determined
that a concession was granted to the borrower.
Consideration may be given to the following, as appropriate,
when determining this estimate: (i) the present value of
expected future cash flows discounted at the loan’s original
effective rate, (ii) the borrower’s overall financial condition,
resources and payment record and (iii) the prospects for
support from financially responsible guarantors or the
realizable value of any collateral. In the determination of the
allowance for loan losses for TDRs, management considers a
combination of historical re-default rates, the current
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economic environment and the nature of the modification
program when forecasting expected cash flows. When
impairment is measured based on the present value of
expected future cash flows, the entire change in present
value is recorded in Provision for loan losses.
Statistically calculated losses inherent in the classifiably
managed portfolio for performing and de minimis non-
performing exposures. The calculation is based on (i) Citi’s
internal system of credit-risk ratings, which are analogous to
the risk ratings of the major rating agencies, and (ii)
historical default and loss data, including rating agency
information regarding default rates from 1983 to 2017 and
internal data dating to the early 1970s on severity of losses
in the event of default. Adjustments may be made to this
data. Such adjustments include (i) statistically calculated
estimates to cover the historical fluctuation of the default
rates over the credit cycle, the historical variability of loss
severity among defaulted loans and the degree to which
there are large obligor concentrations in the global portfolio
and (ii) adjustments made for specific known items, such as
current environmental factors and credit trends.
In addition, representatives from each of the risk
management and finance staffs who cover business areas
with delinquency-managed portfolios containing smaller-
balance homogeneous loans present their recommended
reserve balances based on leading credit indicators,
including loan delinquencies and changes in portfolio size as
well as economic trends, including current and future
housing prices, unemployment, length of time in foreclosure,
costs to sell and GDP. This methodology is applied
separately for each individual product within each
geographic region in which these portfolios exist.
This evaluation process is subject to numerous estimates
and judgments. The frequency of default, risk ratings, loss
recovery rates, the size and diversity of individual large
credits and the ability of borrowers with foreign currency
obligations to obtain the foreign currency necessary for
orderly debt servicing, among other things, are all taken into
account during this review. Changes in these estimates could
have a direct impact on the credit costs in any period and
could result in a change in the allowance.
Allowance for Unfunded Lending Commitments
A similar approach to the allowance for loan losses is used
for calculating a reserve for the expected losses related to
unfunded lending commitments and standby letters of credit.
This reserve is classified on the Consolidated Balance Sheet
in Other liabilities. Changes to the allowance for unfunded
lending commitments are recorded in Provision for unfunded
lending commitments.
Mortgage Servicing Rights (MSRs)
Mortgage servicing rights (MSRs) are recognized as
intangible assets when purchased or when the Company sells
or securitizes loans acquired through purchase or origination
and retains the right to service the loans. Mortgage servicing
rights are accounted for at fair value, with changes in value
recorded in Other revenue in the Company’s Consolidated
Statement of Income.
For additional information on the Company’s MSRs, see
Notes 16 and 21 to the Consolidated Financial Statements.
Goodwill
Goodwill represents the excess of acquisition cost over the
fair value of net tangible and intangible assets acquired in a
business combination. Goodwill is subject to annual
impairment testing and interim assessments between annual
tests if an event occurs or circumstances change that would
more-likely-than-not reduce the fair value of a reporting unit
below its carrying amount.
Under ASC Topic 350, Intangibles—Goodwill and
Other, the Company has an option to assess qualitative
factors to determine if it is necessary to perform the goodwill
impairment test. If, after assessing the totality of events or
circumstances, the Company determines that it is not more-
likely-than-not that the fair value of a reporting unit is less
than its carrying amount, no further testing is necessary. If,
however, the Company determines that it is more-likely-
than-not that the fair value of a reporting unit is less than its
carrying amount, then the Company must perform the first
step of the two-step goodwill impairment test.
The Company has an unconditional option to bypass the
qualitative assessment for any reporting unit in any reporting
period and proceed directly to the first step of the goodwill
impairment test.
The first step requires a comparison of the fair value of
the individual reporting unit to its carrying value, including
goodwill. If the fair value of the reporting unit is in excess of
the carrying value, the related goodwill is considered not
impaired and no further analysis is necessary. If the carrying
value of the reporting unit exceeds the fair value, this is an
indication of potential impairment and the second step of
testing is performed to measure the amount of impairment, if
any, for that reporting unit.
If required, the second step involves calculating the
implied fair value of goodwill for each of the affected
reporting units. The implied fair value of goodwill is
determined in the same manner as the amount of goodwill
recognized in a business combination, which is the excess of
the fair value of the reporting unit determined in step one
over the fair value of the net assets and identifiable
intangibles as if the reporting unit were being acquired. If
the amount of the goodwill allocated to the reporting unit
exceeds the implied fair value of the goodwill in the pro
forma purchase price allocation, an impairment charge is
recorded for the excess. A recognized impairment charge
cannot exceed the amount of goodwill allocated to a
reporting unit and cannot subsequently be reversed even if
the fair value of the reporting unit recovers.
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Upon any business disposition, goodwill is allocated to,
and derecognized with, the disposed business based on the
ratio of the fair value of the disposed business to the fair
value of the reporting unit.
Additional information on Citi’s goodwill impairment
testing can be found in Note 16 to the Consolidated
Financial Statements.
Intangible Assets
Intangible assets—including core deposit intangibles,
present value of future profits, purchased credit card
relationships, credit card contract related intangibles, other
customer relationships and other intangible assets, but
excluding MSRs—are amortized over their estimated useful
lives. Intangible assets that are deemed to have indefinite
useful lives, primarily trade names, are not amortized and
are subject to annual impairment tests. An impairment exists
if the carrying value of the indefinite-lived intangible asset
exceeds its fair value. For other intangible assets subject to
amortization, an impairment is recognized if the carrying
amount is not recoverable and exceeds the fair value of the
intangible asset.
Other Assets and Other Liabilities
Other assets include, among other items, loans HFS,
deferred tax assets, equity method investments, interest and
fees receivable, lease right-of-use assets, premises and
equipment (including purchased and developed software),
repossessed assets and other receivables. Other liabilities
include, among other items, accrued expenses and other
payables, lease liabilities, deferred tax liabilities and reserves
for legal claims, taxes, unfunded lending commitments,
repositioning reserves and other matters.
Other Real Estate Owned and Repossessed Assets
Real estate or other assets received through foreclosure or
repossession are generally reported in Other assets, net of a
valuation allowance for selling costs and subsequent
declines in fair value.
Securitizations
There are two key accounting determinations that must be
made relating to securitizations. Citi first makes a
determination as to whether the securitization entity must be
consolidated. Second, it determines whether the transfer of
financial assets to the entity is considered a sale under
GAAP. If the securitization entity is a VIE, the Company
consolidates the VIE if it is the primary beneficiary (as
discussed in “Variable Interest Entities” above). For all other
securitization entities determined not to be VIEs in which
Citigroup participates, consolidation is based on which party
has voting control of the entity, giving consideration to
removal and liquidation rights in certain partnership
structures. Only securitization entities controlled by
Citigroup are consolidated.
Interests in the securitized and sold assets may be
retained in the form of subordinated or senior interest-only
strips, subordinated tranches, spread accounts and servicing
rights. In credit card securitizations, the Company retains a
seller’s interest in the credit card receivables transferred to
the trusts, which is not in securitized form. In the case of
consolidated securitization entities, including the credit card
trusts, these retained interests are not reported on Citi’s
Consolidated Balance Sheet. The securitized loans remain on
the balance sheet. Substantially all of the consumer loans
sold or securitized through non-consolidated trusts by
Citigroup are U.S. prime residential mortgage loans.
Retained interests in non-consolidated mortgage
securitization trusts are classified as Trading account assets,
except for MSRs, which are included in Intangible assets on
Citigroup’s Consolidated Balance Sheet.
Debt
Short-term borrowings and Long-term debt are accounted for
at amortized cost, except where the Company has elected to
report the debt instruments, including certain structured
notes at fair value, or the debt is in a fair value hedging
relationship.
Transfers of Financial Assets
For a transfer of financial assets to be considered a sale: (i)
the assets must be legally isolated from the Company, even
in bankruptcy or other receivership, (ii) the purchaser must
have the right to pledge or sell the assets transferred (or, if
the purchaser is an entity whose sole purpose is to engage in
securitization and asset-backed financing activities through
the issuance of beneficial interests and that entity is
constrained from pledging the assets it receives, each
beneficial interest holder must have the right to sell or
pledge their beneficial interests) and (iii) the Company may
not have an option or obligation to reacquire the assets.
If these sale requirements are met, the assets are
removed from the Company’s Consolidated Balance Sheet.
If the conditions for sale are not met, the transfer is
considered to be a secured borrowing, the assets remain on
the Consolidated Balance Sheet and the sale proceeds are
recognized as the Company’s liability. A legal opinion on a
sale generally is obtained for complex transactions or where
the Company has continuing involvement with assets
transferred or with the securitization entity. For a transfer to
be eligible for sale accounting, that opinion must state that
the asset transfer would be considered a sale and that the
assets transferred would not be consolidated with the
Company’s other assets in the event of the Company’s
insolvency.
For a transfer of a portion of a financial asset to be
considered a sale, the portion transferred must meet the
definition of a participating interest. A participating interest
must represent a pro rata ownership in an entire financial
asset; all cash flows must be divided proportionately, with
the same priority of payment; no participating interest in the
transferred asset may be subordinated to the interest of
another participating interest holder; and no party may have
the right to pledge or exchange the entire financial asset
unless all participating interest holders agree. Otherwise, the
transfer is accounted for as a secured borrowing.
See Note 21 to the Consolidated Financial Statements
for further discussion.
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Risk Management Activities—Derivatives Used for
Hedging Purposes
The Company manages its exposures to market movements
outside of its trading activities by modifying the asset and
liability mix, either directly or through the use of derivative
financial products, including interest rate swaps, futures,
forwards and purchased options, as well as foreign-exchange
contracts. These end-user derivatives are carried at fair value
in Trading account assets and Trading account liabilities.
See Note 22 to the Consolidated Financial Statements
for a further discussion of the Company’s hedging and
derivative activities.
Instrument-specific Credit Risk
Citi presents separately in AOCI the portion of the total
change in the fair value of a liability resulting from a change
in the instrument-specific credit risk, when the entity has
elected to measure the liability at fair value in accordance
with the fair value option for financial instruments.
Accordingly, the change in fair value of liabilities for which
the fair value option was elected, related to changes in
Citigroup’s own credit spreads, is presented in AOCI.
Employee Benefits Expense
Employee benefits expense includes current service costs of
pension and other postretirement benefit plans (which are
accrued on a current basis), contributions and unrestricted
awards under other employee plans, the amortization of
restricted stock awards and costs of other employee benefits.
For its most significant pension and postretirement benefit
plans (Significant Plans), Citigroup measures and discloses
plan obligations, plan assets and periodic plan expense
quarterly, instead of annually. The effect of remeasuring the
Significant Plan obligations and assets by updating plan
actuarial assumptions on a quarterly basis is reflected in
Accumulated other comprehensive income (loss) and
periodic plan expense. All other plans (All Other Plans) are
remeasured annually. See Note 8 to the Consolidated
Financial Statements.
Stock-Based Compensation
The Company recognizes compensation expense related to
stock and option awards over the requisite service period,
generally based on the instruments’ grant-date fair value,
reduced by actual forfeitures as they occur. Compensation
cost related to awards granted to employees who meet
certain age plus years-of-service requirements (retirement-
eligible employees) is accrued in the year prior to the grant
date, in the same manner as the accrual for cash incentive
compensation. Certain stock awards with performance
conditions or certain clawback provisions are subject to
variable accounting, pursuant to which the associated
compensation expense fluctuates with changes in Citigroup’s
common stock price. See Note 7 to the Consolidated
Financial Statements.
Income Taxes
The Company is subject to the income tax laws of the U.S.
and its states and municipalities, as well as the non-U.S.
jurisdictions in which it operates. These tax laws are
complex and may be subject to different interpretations by
the taxpayer and the relevant governmental taxing
authorities. In establishing a provision for income tax
expense, the Company must make judgments and
interpretations about these tax laws. The Company must also
make estimates about when in the future certain items will
affect taxable income in the various tax jurisdictions, both
domestic and foreign.
Disputes over interpretations of the tax laws may be
subject to review and adjudication by the court systems of
the various tax jurisdictions, or may be settled with the
taxing authority upon examination or audit. The Company
treats interest and penalties on income taxes as a component
of Income tax expense.
Deferred taxes are recorded for the future consequences
of events that have been recognized in financial statements
or tax returns, based upon enacted tax laws and rates.
Deferred tax assets are recognized subject to management’s
judgment about whether realization is more-likely-than-not.
ASC 740, Income Taxes, sets out a consistent framework to
determine the appropriate level of tax reserves to maintain
for uncertain tax positions. This interpretation uses a two-
step approach wherein a tax benefit is recognized if a
position is more-likely-than-not to be sustained. The amount
of the benefit is then measured to be the highest tax benefit
that is more than 50% likely to be realized. ASC 740 also
sets out disclosure requirements to enhance transparency of
an entity’s tax reserves.
See Note 9 to the Consolidated Financial Statements for
a further description of the Company’s tax provision and
related income tax assets and liabilities.
Commissions, Underwriting and Principal Transactions
Commissions and fees revenues are recognized in income
when earned. Underwriting revenues are recognized in
income typically at the closing of the transaction. Principal
transactions revenues are recognized in income on a trade-
date basis. See Note 5 to the Consolidated Financial
Statements for a description of the Company’s revenue
recognition policies for Commissions and fees, and Note 6 to
the Consolidated Financial Statements for details of
Principal transactions revenue.
Earnings per Share
Earnings per share (EPS) is computed after deducting
preferred stock dividends. The Company has granted
restricted and deferred share awards with dividend rights that
are considered to be participating securities, which are akin
to a second class of common stock. Accordingly, a portion of
Citigroup’s earnings is allocated to those participating
securities in the EPS calculation.
Basic earnings per share is computed by dividing
income available to common stockholders after the
allocation of dividends and undistributed earnings to the
participating securities by the weighted average number of
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common shares outstanding for the period. Diluted earnings
per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were
exercised. It is computed after giving consideration to the
weighted average dilutive effect of the Company’s stock
options and warrants and convertible securities and after the
allocation of earnings to the participating securities. Anti-
dilutive options and warrants are disregarded in the EPS
calculations.
Use of Estimates
Management must make estimates and assumptions that
affect the Consolidated Financial Statements and the related
Notes to the Consolidated Financial Statements. Such
estimates are used in connection with certain fair value
measurements. See Note 24 to the Consolidated Financial
Statements for further discussions on estimates used in the
determination of fair value. Moreover, estimates are
significant in determining the amounts of other-than-
temporary impairments, impairments of goodwill and other
intangible assets, provisions for probable losses that may
arise from credit-related exposures and probable and
estimable losses related to litigation and regulatory
proceedings, and income taxes. While management makes
its best judgment, actual amounts or results could differ from
those estimates.
Cash Flows
Cash equivalents are defined as those amounts included in
Cash and due from banks and predominately all of Deposits
with banks. Cash flows from risk management activities are
classified in the same category as the related assets and
liabilities.
Related Party Transactions
The Company has related party transactions with certain of
its subsidiaries and affiliates. These transactions, which are
primarily short-term in nature, include cash accounts,
collateralized financing transactions, margin accounts,
derivative transactions, charges for operational support and
the borrowing and lending of funds, and are entered into in
the ordinary course of business.
ACCOUNTING CHANGES
Lease Accounting
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842), which increases the transparency and
comparability of accounting for lease transactions. The ASU
requires lessees to recognize liabilities for operating leases
and corresponding right-of-use (ROU) assets on the balance
sheet. The ASU also requires quantitative and qualitative
disclosures regarding key information about leasing
arrangements. Lessee accounting for finance leases, as well
as lessor accounting, are largely unchanged.
Effective January 1, 2019, the Company prospectively
adopted the provisions of the ASU. At adoption, Citi
recognized a lease liability and a corresponding ROU asset
of approximately $4.4 billion on the Consolidated Balance
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Sheet related to its future lease payments as a lessee under
operating leases. In addition, the Company recorded a $151
million increase in Retained earnings for the cumulative
effect of recognizing previously deferred gains on sale/
leaseback transactions. Adoption of the ASU did not have a
material impact on the Consolidated Statement of Income.
See Notes 14 and 26 for additional details.
The Company has elected not to separate lease and non-
lease components in its lease contracts and accounts for
them as a single lease component. Citi has also elected not to
record an ROU asset for short-term leases that have a term
of 12 months or less and do not contain purchase options
that Citi is reasonably certain to exercise. The cost of short-
term leases is recognized in the Consolidated Statement of
Income on a straight-line basis over the lease term. In
addition, Citi applies the portfolio approach to account for
certain equipment leases with nearly identical contractual
terms.
Lessee accounting
Operating lease ROU assets and lease liabilities are included
in Other assets and Other liabilities, respectively, on the
Consolidated Balance Sheet. Finance lease assets and
liabilities are included in Other assets and Long-term debt,
respectively, on the Consolidated Balance Sheet. The
Company uses its incremental borrowing rate, factoring in
the lease term, to determine the lease liability, which is
measured at the present value of future lease payments. The
ROU asset is initially measured at the amount of the lease
liability plus any prepaid rent and remaining initial direct
costs, less any remaining lease incentives and accrued rent.
The ROU asset is subject to impairment, during the lease
term, in a manner consistent with the impairment of long-
lived assets. The lease terms include periods covered by
options to extend or terminate the lease depending on
whether Citi is reasonably certain to exercise such options.
Lessor accounting
Lessor accounting is largely unchanged under the ASU. Citi
acts as a lessor for power, railcar, shipping and aircraft
assets, where the Company has executed operating, direct
financing and leveraged leasing arrangements. In a direct
financing or a leveraged lease, Citi derecognizes the leased
asset and records a lease financing receivable at lease
commencement in Loans. Upon lease termination, Citi may
obtain control of the asset, which is then recorded in Other
assets on the Consolidated Balance Sheet and any remaining
receivable for the asset’s residual value is derecognized.
Under the ASU, leveraged lease accounting is grandfathered
and may continue to be applied until the leveraged lease is
terminated or modified. Upon modification, the lease must
be classified as an operating, direct finance or sales-type
lease in accordance with the ASU.
Separately, as part of managing its real estate footprint,
Citi subleases excess real estate space via operating lease
arrangements.
SEC Staff Accounting Bulletin 118
On December 22, 2017, the SEC issued Staff Accounting
Bulletin (SAB) 118, which set forth the accounting for the
changes in tax law caused by the enactment of the Tax Cuts
and Jobs Act (Tax Reform). SAB 118 provided guidance
where the accounting under ASC 740 was incomplete for
certain income tax effects of Tax Reform, at the time of the
issuance of an entity’s financial statements for the period in
which Tax Reform was enacted (provisional items). Citi
disclosed several provisional items recorded as part of its
$22.6 billion fourth quarter 2017 charge related to Tax
Reform.
Citi completed its accounting for Tax Reform under
SAB 118 during the fourth quarter of 2018 and recorded a
one-time, non-cash tax benefit of $94 million in Corporate/
Other related to amounts that were considered provisional
pursuant to SAB 118. The adjustments for the provisional
amounts consisted of a $1.2 billion benefit relating to a
reduction of the valuation allowance against Citi’s FTC
carry-forwards and its U.S. residual DTAs related to its non-
U.S. branches, offset by additional charges of $0.2 billion
related to the impact of a change to a “quasi-territorial tax
system” and $0.9 billion related to the impact of deemed
repatriation of undistributed earnings of non-U.S.
subsidiaries.
Also, Citi has made a policy election to account for
taxes on Global Intangible Low Taxed Income (GILTI) as
incurred.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue
from Contracts with Customers (Revenue Recognition),
which outlines a single comprehensive model for entities to
use in accounting for revenue arising from contracts with
customers. The core principle of the revenue model is that an
entity recognizes revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled, in
exchange for those goods or services. The ASU defines the
promised good or service as the performance obligation
under the contract.
While the guidance replaces most existing revenue
recognition guidance in GAAP, the ASU is not applicable to
financial instruments and, therefore, does not impact a
majority of the Company’s revenues, including net interest
income, loan fees, gains on sales and mark-to-market
accounting.
In accordance with the new revenue recognition
standard, Citi has identified the specific performance
obligation (promised services) associated with the contract
with the customer and has determined when that specific
performance obligation has been satisfied, which may be at a
point in time or over time depending on how the
performance obligation is defined. The contracts with
customers also contain the transaction price, which consists
of fixed consideration and/or consideration that may vary
(variable consideration), and is defined as the amount of
consideration an entity expects to be entitled to when or as
the performance obligation is satisfied, excluding amounts
collected on behalf of third parties (including transaction
taxes). The amounts recognized at the point in time the
performance obligation is satisfied may differ from the
ultimate transaction price associated with that performance
obligation when a portion of it is based on variable
consideration. For example, some consideration is based on
the client’s month-end balance or market values, which are
unknown at the time the contract is executed. The remaining
transaction price amount, if any, will be recognized as the
variable consideration becomes determinable. In certain
transactions, the performance obligation is considered
satisfied at a point in time in the future. In this instance, Citi
defers revenue on the balance sheet that will only be
recognized upon completion of the performance obligation.
The new revenue recognition standard further clarified
the guidance related to reporting revenue gross as principal
versus net as an agent. In many cases, Citi outsources a
component of its performance obligations to third parties.
The Company has determined that it acts as principal in the
majority of these transactions and therefore presents the
amounts paid to these third parties gross within operating
expenses.
The Company has retrospectively adopted this standard
as of January 1, 2018 and as a result was required to report
amounts paid to third parties where Citi is principal to the
contract within Operating expenses. The adoption resulted in
an increase in both revenue and expenses of approximately
$1 billion for each of the years ended December 31, 2019
and 2018 with similar amounts for prior years. Prior to
adoption, these expense amounts were reported as contra
revenue primarily within Commissions and fees and
Administration and other fiduciary fees revenues.
Accordingly, prior periods have been reclassified to conform
to the new presentation.
See Note 5 to the Consolidated Financial Statements for
a description of the Company’s revenue recognition policies
for Commissions and fees and Administration and other
fiduciary fees.
Income Tax Impact of Intra-Entity Transfers of Assets
In October 2016, the FASB issued ASU No. 2016-16,
Income Taxes—Intra-Entity Transfers of Assets Other Than
Inventory, which requires an entity to recognize the income
tax consequences of an intra-entity transfer of an asset other
than inventory when the transfer occurs. The ASU was
effective January 1, 2018 and was adopted as of that date.
The impact of this standard was an increase of DTAs by
approximately $300 million, a decrease of Retained earnings
by approximately $80 million and a decrease of prepaid tax
assets by approximately $380 million.
Clarifying the Definition of a Business
In January 2017, the FASB issued ASU No. 2017-01,
Business Combinations (Topic 805): Clarifying the
Definition of a Business. The definition of a business directly
and indirectly affects many areas of accounting (e.g.,
acquisitions, disposals, goodwill and consolidation). The
ASU narrows the definition of a business by introducing a
quantitative screen as the first step, such that if substantially
141
all of the fair value of the gross assets acquired is
concentrated in a single identifiable asset or a group of
similar identifiable assets, then the set of transferred assets
and activities is not a business. If the set is not clarified from
the quantitative screen, the entity then evaluates whether the
set meets the requirement that a business include, at a
minimum, an input and a substantive process that together
significantly contribute to the ability to create outputs.
Citi adopted the ASU upon its effective date on January
1, 2018, prospectively. The ongoing impact of the ASU will
depend upon the acquisition and disposal activities of Citi. If
fewer transactions qualify as a business, there could be less
initial recognition of Goodwill, but also less goodwill
allocated to disposals. There was no impact during 2018
from the adoption of this ASU.
Changes in Accounting for Pension and Postretirement
(Benefit) Expense
In March 2017, the FASB issued ASU No. 2017-07,
Compensation—Retirement Benefits (Topic 715): Improving
the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost, which changes the
income statement presentation of net benefit expense and
requires restating the Company’s financial statements for
each of the earlier periods presented in Citi’s annual and
interim financial statements. The change in presentation was
effective for annual and interim periods starting January 1,
2018. The ASU requires that only the service cost
component of net benefit expense be included in
Compensation and benefits on the income statement. The
other components of net benefit expense are required to be
presented outside of Compensation and benefits and are
presented in Other operating expenses. Since both of these
income statement line items are part of Operating expenses,
total Operating expenses and Net income will not
change. This change in presentation did not have a material
effect on Compensation and benefits and Other operating
expenses and was applied prospectively. The components of
the net benefit expense are disclosed in Note 8 to the
Consolidated Financial Statements.
The standard also changes the components of net
benefit expense that are eligible for capitalization when
employee costs are capitalized in connection with various
activities, such as internally developed software,
construction-in-progress and loan origination costs.
Prospectively from January 1, 2018, only the service cost
component of net benefit expense may be capitalized.
Existing capitalized balances are not affected. This change in
amounts eligible for capitalization does not have a material
effect on the Company’s Consolidated Financial Statements
and related disclosures.
Hedging
In August 2017, the FASB issued ASU No. 2017-12,
Targeted Improvements to Accounting for Hedging Activities,
which better aligns an entity’s risk management activities
and financial reporting for hedging relationships through
changes to the designation and measurement guidance for
qualifying hedging relationships and the presentation of
142
hedge results. The ASU requires the change in the fair value
of the hedging instrument to be presented in the same
income statement line as the hedged item and also requires
expanded disclosures. Citi adopted this standard on January
1, 2018 and transferred approximately $4 billion of pre-
payable mortgage-backed securities and municipal bonds
from held-to-maturity (HTM) into available-for-sale (AFS)
securities classification as permitted as a one-time transfer
upon adoption of the standard, as these assets were deemed
to be eligible to be hedged under the last-of-layer hedge
strategy. The impact to opening Retained earnings was
immaterial. See Note 19 to the Consolidated Financial
Statements for more information.
Statement of Cash Flows
In November 2016, the FASB issued ASU No. 2016-18,
Restricted Cash, which requires that companies present cash,
cash equivalents and amounts generally described as
restricted cash or restricted cash equivalents (restricted cash)
when reconciling beginning-of-period and end-of-period
totals on the Consolidated Statement of Cash Flows. In
connection with the adoption of the ASU, Citigroup also
changed its definition of cash and cash equivalents to
include all of Cash and due from banks and predominately
all of Deposits with banks. The Company has retrospectively
adopted this ASU as of January 1, 2018 and as a result Net
cash provided by investing activities of continuing
operations on the Consolidated Statement of Cash Flows for
the year ended December 31, 2017 increased by $19.3
billion.
Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income
On February 14, 2018, the FASB issued ASU No. 2018-02,
Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income. The ASU allows a
reclassification from AOCI to Retained earnings for the
deferred taxes previously recorded in AOCI that exceed the
current federal tax rate of 21%, resulting from the newly
enacted corporate tax rate in Tax Reform, and other stranded
tax amounts related to the application of Tax Reform that
Citi elects to reclassify. The ASU allows adjustments to
reclassification amounts in subsequent periods as a result of
changes to the amounts recorded under SAB 118. Citi
elected to early adopt the ASU effective December 31, 2017,
which applied only to the period in which the effects related
to the one-time Tax Reform charge were recognized. In
addition to the reclassification of deferred taxes recorded in
AOCI that exceed the current federal tax rate, Citi also
reclassified amounts recorded in AOCI related to the effects
of the shift to a territorial system related to the application of
Tax Reform using the portfolio method.
The effect of adopting the ASU resulted in an increase
of $3.3 billion to Retained earnings at December 31, 2017
due to the reclassification of AOCI to Retained earnings.
Premium Amortization on Purchased Callable
Debt Securities
In March 2017, the FASB issued ASU No. 2017-08,
Receivables—Nonrefundable Fees and Other Costs
(Subtopic 310-20): Premium Amortization on Purchased
Callable Debt Securities, which amends the amortization
period for certain purchased callable debt securities held at a
premium. The ASU requires entities to amortize premiums
on debt securities by the first call date when the securities
have fixed and determinable call dates and prices. The scope
of the ASU includes all accounting premiums, such as
purchase premiums and cumulative fair value hedge
adjustments. The ASU does not change the accounting for
discounts, which continue to be recognized over the
contractual life of a security.
Citi early adopted the ASU in the second quarter of
2017, with an effective date of January 1, 2017. Adoption of
the ASU is on a modified retrospective basis through a
cumulative effect adjustment to Retained earnings as of the
beginning of the year of adoption. Adoption of the ASU
primarily affected Citi’s AFS and HTM portfolios of callable
state and municipal debt securities. The ASU adoption
resulted in a net reduction to total stockholders’ equity of
$156 million (after-tax), effective as of January 1, 2017. This
amount is composed of a reduction of approximately $660
million to Retained earnings for the incremental
amortization of purchase premiums and cumulative hedge
adjustments generated under fair value hedges of these
callable debt securities, offset by an increase to AOCI of
$504 million related to the cumulative fair value hedge
adjustments reclassified to Retained earnings for AFS debt
securities.
Fair Value Measurement
In August 2018, the FASB issued ASU No. 2018-13, Fair
Value Measurement (Topic 820): Disclosure Framework—
Changes to the Disclosure Requirements for Fair Value
Measurement. The amendments modify certain disclosure
requirements for fair value measurements and were effective
January 1, 2020, with early adoption permitted. The
Company early adopted this ASU as of December 31, 2019
in its entirety, with no material impact on the Company.
FUTURE ACCOUNTING CHANGES
Accounting for Financial Instruments—Credit Losses
Overview
In June 2016, the Financial Accounting Standards Board
(FASB) issued ASU No. 2016-13, Financial Instruments—
Credit Losses (Topic 326). The ASU introduces a new credit
loss methodology, the Current Expected Credit Losses
(CECL) methodology, which requires earlier recognition of
credit losses while also providing additional transparency
about credit risk. Citi adopted the ASU as of January 1,
2020, which, as discussed below, resulted in an increase in
Citi’s Allowance for credit losses and a decrease to opening
Retained earnings, net of deferred income taxes, at January
1, 2020.
The CECL methodology utilizes a lifetime “expected
credit loss” measurement objective for the recognition of
credit losses for loans, held-to-maturity debt securities,
receivables and other financial assets measured at amortized
cost at the time the financial asset is originated or acquired.
The allowance for credit losses is adjusted each period for
changes in expected lifetime credit losses. The CECL
methodology represents a significant change from prior U.S.
GAAP and replaced the prior multiple existing impairment
methods, which generally required that a loss be incurred
before it was recognized. Within the life cycle of a loan or
other financial asset, the methodology generally results in
the earlier recognition of the provision for credit losses and
the related allowance for credit losses than prior U.S. GAAP.
For available-for-sale debt securities where fair value is less
than cost, that Citi intends to hold or more-likely-than-not
will not be required to sell, credit-related impairment, if any,
is recognized through an allowance for credit losses and
adjusted each period for changes in credit risk.
January 1, 2020 CECL Transition (Day 1) Impact
The CECL methodology’s impact on expected credit losses,
among other things, reflects Citi’s view of the current state
of the economy, forecasted macroeconomic conditions and
Citi’s portfolios. At the January 1, 2020 date of adoption,
based on forecasts of macroeconomic conditions and
exposures at that time, the aggregate impact to Citi was an
approximate $4.1 billion, or an approximate 29%, pretax
increase in the Allowance for credit losses, along with a $3.1
billion after-tax decrease in Retained earnings and a deferred
tax asset increase of $1.0 billion. This transition impact
reflects (i) a $4.9 billion build to the Allowance for credit
losses for Citi’s consumer exposures, primarily driven by the
impact on credit card receivables of longer estimated tenors
under the CECL lifetime expected credit loss methodology
(loss coverage of approximately 23 months) compared to
shorter estimated tenors under the probable loss
methodology under prior U.S. GAAP (loss coverage of
approximately 14 months), net of recoveries; and (ii) a
release of $0.8 billion of reserves primarily related to Citi’s
corporate net loan loss exposures, largely due to more
precise contractual maturities that result in shorter remaining
tenors, incorporation of recoveries and use of more specific
historical loss data based on an increase in portfolio
segmentation across industries and geographies.
Under the CECL methodology, the Allowance for credit
losses consists of quantitative and qualitative components.
Citi’s quantitative component of the Allowance for credit
losses is model based and utilizes a single forward-looking
macroeconomic forecast, complemented by the qualitative
component described below, in estimating expected credit
losses and discounts inputs for the corporate classifiably
managed portfolios. Reasonable and supportable forecast
periods vary by product. For example, Citi’s consumer cards
models use a 13-quarter reasonable and supportable period
and revert to historical loss experience thereafter, while its
corporate loan models use a nine-quarter reasonable and
supportable period followed by a three-quarter graduated
transition to historical loss experience.
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Citi’s qualitative component of the Allowance for credit
losses considers (i) the uncertainty of forward-looking
scenarios based on the likelihood and severity of a possible
recession as another possible scenario; (ii) certain portfolio
characteristics, such as portfolio concentration and collateral
coverage; and (iii) model limitations as well as idiosyncratic
events.
Subsequent Measurement of Goodwill
In January 2017, the FASB issued ASU No. 2017-04,
Intangibles—Goodwill and Other (Topic 350): Simplifying
the Test for Goodwill Impairment. The ASU simplifies the
subsequent measurement of goodwill impairment by
eliminating the requirement to calculate the implied fair
value of goodwill (i.e., the current step 2 of the goodwill
impairment test) to measure a goodwill impairment charge.
Under the ASU, the impairment test is the comparison of the
fair value of a reporting unit with its carrying amount (the
current step 1), with the impairment charge being the deficit
in fair value but not exceeding the total amount of goodwill
allocated to that reporting unit. The simplified one-step
impairment test applies to all reporting units (including those
with zero or negative carrying amounts).
The ASU was adopted by Citi as of January 1, 2020
with prospective application. The impact of the ASU will
depend upon the performance of Citi’s reporting units and
the market conditions impacting the fair value of each
reporting unit going forward.
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2. DISCONTINUED OPERATIONS AND SIGNIFICANT DISPOSALS
Summary of Discontinued Operations
The Company’s Discontinued operations consisted of residual
activities related to the sales of the Brazil Credit Card business
in 2013, the Egg Banking plc Credit Card business in 2011,
and the German Retail Banking business in 2008. All
Discontinued operations results are recorded within
Corporate/Other.
The following summarizes financial information for all
Discontinued operations:
In millions of dollars
2019
2018
2017
Total revenues, net of interest expense
$ — $ — $ —
Loss from discontinued operations
$
(31) $ (26) $ (104)
Provision (benefit) for income taxes
(27)
(18)
7
Loss from discontinued operations, net
of taxes
$
(4) $
(8) $ (111)
Cash flows from Discontinued operations were not
material for all periods presented.
Significant Disposals
There were no significant disposals during 2019. The
transactions described below were identified as significant
disposals during 2018 and 2017.
Sale of Mexico Asset Management Business
On September 21, 2018, Citi completed the sale of its Mexico
asset management business, which was part of Latin America
GCB. As part of the sale, Citi derecognized total assets of
$137 million and total liabilities of $41 million. The
transaction resulted in a pretax gain on sale of approximately
$250 million (approximately $150 million after-tax) recorded
in Other revenue in 2018. Further, Citi and the buyer entered
into a 10-year services framework agreement, with Citi acting
as the distributor in exchange for an ongoing fee.
Income before taxes for the divested business, excluding
the pretax gain on sale, was as follows:
Exit of U.S. Mortgage Service Operations
Citigroup executed agreements during the first quarter of 2017
to effectively exit its direct U.S. mortgage servicing
operations, which included the sale of mortgage servicing
rights and execution of a subservicing agreement for the
remaining Citi-owned loans and certain other mortgage
servicing rights. As part of this transaction, Citi also
transferred certain employees.
This transaction, which was part of Corporate/Other,
resulted in a pretax loss of $331 million ($207 million after-
tax) recorded in Other revenue during 2017. The loss on sale
did not include certain other costs and charges related to the
disposed operation recorded primarily in Operating expenses
during 2017, resulting in a total pretax loss of $382 million. As
part of the sale, Citi derecognized a total of $1,162 million of
servicing-related assets, including $1,046 million of Mortgage
servicing rights, related to approximately 750,000 Fannie Mae
and Freddie Mac held loans with outstanding balances of
approximately $93 billion.
Excluding the loss on sale and the additional charges,
income before taxes for the disposed operation was
immaterial.
Sale of CitiFinancial Canada Consumer Finance Business
On March 31, 2017, Citi completed the sale of CitiFinancial
Canada (CitiFinancial), which was part of Corporate/Other
and included 220 retail branches and approximately 1,400
employees. As part of the sale, Citi derecognized Total assets
of approximately $1.9 billion, including $1.7 billion consumer
loans (net of allowance), and Total liabilities of approximately
$1.5 billion related to intercompany borrowings, which were
settled at closing of the transaction. The sale of CitiFinancial
generated a pretax gain on sale of approximately $350 million
recorded in Other revenue ($178 million after-tax) during
2017.
Income before taxes for the divested business, excluding
the pretax gain on sale, was as follows:
In millions of dollars
Income before taxes
2019
2018
2017
$ — $ 123 $ 164
In millions of dollars
Income before taxes
2019
2018 2017
$ — $ — $ 41
Sale of Fixed Income Analytics and Index Business
On August 31, 2017, Citi completed the sale of a fixed income
analytics business and a fixed income index business that were
part of Markets and securities services within Institutional
Clients Group (ICG). As part of the sale, Citi derecognized
Total assets of $112 million, including goodwill of $72
million, while the derecognized liabilities were $18 million.
The transaction resulted in a pretax gain on sale of
approximately $580 million ($355 million after-tax) recorded
in Other revenue in ICG during 2017.
Income before taxes for the divested businesses,
excluding the pretax gain on sale, was immaterial.
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3. BUSINESS SEGMENTS
Citigroup’s activities are conducted through the following
business segments: Global Consumer Banking (GCB)
and Institutional Clients Group (ICG). In addition, Corporate/
Other includes activities not assigned to a specific business
segment, as well as certain North America loan portfolios,
discontinued operations and other legacy assets.
The business segments are determined based on products
and services provided or type of customers served, of which
those identified as non-core are recorded in Corporate/Other
and are reflective of how management currently evaluates
financial information to make business decisions.
GCB includes a global, full-service consumer franchise
delivering a wide array of banking, credit card lending and
investment services through a network of local branches,
offices and electronic delivery systems and consists of three
GCB businesses: North America, Latin America and Asia
(including consumer banking activities in certain EMEA
countries).
ICG consists of Banking and Markets and securities
services and provides corporate, institutional, public sector
and high-net-worth clients in 98 countries and jurisdictions
with a broad range of banking and financial products and
services.
Corporate/Other includes certain unallocated costs of
global functions, other corporate expenses and net treasury
results, unallocated corporate expenses, offsets to certain line-
item reclassifications and eliminations, the results of certain
North America legacy loan portfolios, discontinued operations
and unallocated taxes.
The accounting policies of these reportable segments are
the same as those disclosed in Note 1 to the Consolidated
Financial Statements.
The prior-period balances reflect reclassifications to
conform the presentation for all periods to the current period’s
presentation. During 2019, financial data was reclassified to
reflect:
• Citi’s commercial banking businesses previously reported
as part of GCB in North America, Latin America and
Asia, including approximately $28 billion in end-of-
period loans and approximately $37 billion in end-of-
period deposits, are reported in ICG for all periods
presented;
the re-attribution of certain costs between Corporate/
Other and GCB and ICG; and
certain other immaterial reclassifications.
•
•
Citi’s consolidated Net income (loss) reported in its 2018
Annual Report on Form 10-K remains unchanged for all
periods presented as a result of the changes and
reclassifications discussed above.
The following table presents certain information
regarding the Company’s continuing operations by segment:
Revenues,
net of interest expense(1)
Provision (benefits)
for income taxes(2)
Income (loss) from
continuing operations(2)(3)
Identifiable assets
In millions of dollars, except
identifiable assets in billions
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
Global Consumer Banking $ 32,971 $ 32,339 $ 31,445 $
Institutional Clients
Group
39,301
37,822
38,325
1,746 $ 1,689 $
3,067 $
5,702 $ 5,309 $
3,542 $
407 $
388
3,570
3,756
7,241
12,944
12,574
9,375
1,447
1,438
Corporate/Other
2,014
2,190
3,177
(886)
(88)
19,080
825
205
(19,544)
97
91
Total
$ 74,286 $ 72,854 $ 72,444 $
4,430 $ 5,357 $ 29,388 $ 19,471 $ 18,088 $ (6,627) $
1,951 $
1,917
(1) Includes total revenues, net of interest expense (excluding Corporate/Other), in North America of $33.9 billion, $33.4 billion and $34.1 billion; in EMEA of $12.0
billion, $11.8 billion and $10.9 billion; in Latin America of $10.4 billion, $10.3 billion and $9.6 billion; and in Asia of $16.0 billion, $15.3 billion and $14.6
billion in 2019, 2018 and 2017, respectively. These regional numbers exclude Corporate/Other, which largely operates within the U.S.
(2) Corporate/Other, GCB and ICG 2017 results include the one-time impact of Tax Reform.
(3) Includes pretax provisions for credit losses and for benefits and claims in the GCB results of $7.9 billion, $7.6 billion and $7.6 billion; in the ICG results of $563
million, $215 million and $19 million; and in the Corporate/Other results of $(75) million, $(202) million and $(175) million in 2019, 2018 and 2017,
respectively.
146
4. INTEREST REVENUE AND EXPENSE
Interest revenue and Interest expense consisted of the following:
In millions of dollars
Interest revenue
Loan interest, including fees
Deposits with banks
Securities borrowed and purchased under agreements to resell
Investments, including dividends
Trading account assets(1)
Other interest
Total interest revenue
Interest expense
Deposits(2)
Securities loaned and sold under agreements to repurchase
Trading account liabilities(1)
Short-term borrowings
Long-term debt
Total interest expense
Net interest revenue
Provision for loan losses
Net interest revenue after provision for loan losses
2019
2018
2017
$
47,751 $
45,682 $
41,736
2,682
6,872
9,860
7,672
1,673
2,203
5,492
9,494
6,284
1,673
1,635
3,249
8,295
5,501
1,163
76,510 $
70,828 $
61,579
12,633 $
9,616 $
6,263
1,308
2,465
6,494
29,163 $
47,347 $
8,218
4,889
1,001
2,209
6,551
24,266 $
46,562 $
7,354
39,129 $
39,208 $
6,587
2,661
638
1,059
5,573
16,518
45,061
7,503
37,558
$
$
$
$
$
(1)
(2)
Interest expense on Trading account liabilities is reported as a reduction of interest revenue from Trading account assets.
Includes deposit insurance fees and charges of $781 million, $1,182 million and $1,249 million for 2019, 2018 and 2017, respectively.
147
5. COMMISSIONS AND FEES; ADMINISTRATION
AND OTHER FIDUCIARY FEES
Commissions and Fees
The primary components of Commissions and fees revenue are
investment banking fees, brokerage commissions, credit card
and bank card income and deposit-related fees.
Investment banking fees are substantially composed of
underwriting and advisory revenues. Such fees are recognized
at the point in time when Citigroup’s performance under the
terms of a contractual arrangement is completed, which is
typically at the closing of a transaction. Reimbursed expenses
related to these transactions are recorded as revenue and are
included within investment banking fees. In certain instances
for advisory contracts, Citi will receive amounts in advance of
the deal’s closing. In these instances, the amounts received
will be recognized as a liability and not recognized in revenue
until the transaction closes. For the periods presented, the
contract liability amount was negligible.
Out-of-pocket expenses associated with underwriting
activity are deferred and recognized at the time the related
revenue is recognized, while out-of-pocket expenses
associated with advisory arrangements are expensed as
incurred. In general, expenses incurred related to investment
banking transactions, whether consummated or not, are
recorded in Other operating expenses. The Company has
determined that it acts as principal in the majority of these
transactions and therefore presents expenses gross within
Other operating expenses.
Brokerage commissions primarily include commissions
and fees from the following: executing transactions for clients
on exchanges and over-the-counter markets; sales of mutual
funds and other annuity products; and assisting clients in
clearing transactions, providing brokerage services and other
such activities. Brokerage commissions are recognized in
Commissions and fees at the point in time the associated
service is fulfilled, generally on the trade execution date.
Gains or losses, if any, on these transactions are included in
Principal transactions (see Note 6 to the Consolidated
Financial Statements). Sales of certain investment products
include a portion of variable consideration associated with the
underlying product. In these instances, a portion of the
revenue associated with the sale of the product is not
recognized until the variable consideration becomes fixed. The
Company recognized $485 million, $521 million and $416
million of revenue related to such variable consideration for
the years ended December 31, 2019, 2018 and 2017,
respectively. These amounts primarily relate to performance
obligations satisfied in prior periods.
Credit card and bank card income is primarily composed
of interchange fees, which are earned by card issuers based on
purchase sales, and certain card fees, including annual fees.
Costs related to customer reward programs and certain
payments to partners (primarily based on program sales,
profitability and customer acquisitions) are recorded as a
reduction of credit card and bank card income. Interchange
revenues are recognized as earned on a daily basis when Citi's
performance obligation to transmit funds to the payment
networks has been satisfied. Annual card fees, net of
origination costs, are deferred and amortized on a straight-line
basis over a 12-month period. Costs related to card reward
programs are recognized when the rewards are earned by the
cardholders. Payments to partners are recognized when
incurred.
Deposit-related fees consist of service charges on deposit
accounts and fees earned from performing cash management
activities and other deposit account services. Such fees are
recognized in the period in which the related service is
provided.
Transactional service fees primarily consist of fees
charged for processing services such as cash management,
global payments, clearing, international funds transfer and
other trade services. Such fees are recognized as/when the
associated service is satisfied, which normally occurs at the
point in time the service is requested by the customer and
provided by Citi.
Insurance distribution revenue consists of commissions
earned from third-party insurance companies for marketing
and selling insurance policies on behalf of such entities. Such
commissions are recognized in Commissions and fees at the
point in time the associated service is fulfilled, generally when
the insurance policy is sold to the policyholder. Sales of
certain insurance products include a portion of variable
consideration associated with the underlying product. In these
instances, a portion of the revenue associated with the sale of
the policy is not recognized until the variable consideration
becomes determinable. The Company recognized $322
million, $386 million and $440 million of revenue related to
such variable consideration for the years ended December 31,
2019, 2018 and 2017, respectively. These amounts primarily
relate to performance obligations satisfied in prior periods.
Insurance premiums consist of premium income from
insurance policies that Citi has underwritten and sold to
policyholders.
148
The following table presents Commissions and fees revenue:
In millions of dollars
ICG
GCB
Corp/
Other
Total
ICG
GCB
Corp/
Other
Total
ICG
GCB
Corp/
Other
Total
Investment banking
$ 3,767 $ — $ — $ 3,767 $ 3,568 $ — $ — $ 3,568 $ 3,817 $ — $ — $ 3,817
2019
2018
2017
Brokerage commissions
Credit card and bank card
income
1,771
841
— 2,612
1,977
815
— 2,792
1,889
826
3
2,718
Interchange fees
1,222
8,621
— 9,843
1,077
8,112
60
718
—
778
63
627
11
12
9,200
702
953
53
7,523
693
99
48
8,575
794
Card-related loan fees
Card rewards and partner
payments
Deposit-related fees(1)
Transactional service fees
Corporate finance(2)
Insurance distribution
revenue
Insurance premiums
Loan servicing
Other
Total commissions and
fees(3)
(691)
(8,883)
— (9,574)
(504)
(8,253)
(12)
(8,769)
(426)
(7,242)
(57)
(7,725)
1,048
824
616
12
—
78
99
470
123
—
524
186
55
261
— 1,518
1,031
—
—
—
—
21
3
947
616
536
186
154
363
733
734
14
—
100
116
572
83
—
565
119
91
139
1
4
—
11
—
37
14
1,604
1,031
820
734
590
119
228
269
751
766
12
—
117
30
642
78
—
562
122
71
90
14
49
—
68
—
95
30
1,687
878
766
642
122
283
150
$ 8,806 $ 2,916 $
24 $11,746 $ 8,909 $ 2,870 $
78 $11,857 $ 8,993 $ 3,365 $
349 $12,707
(1)
Includes overdraft fees of $127 million, $128 million and $135 million for the years ended December 31, 2019, 2018 and 2017, respectively. Overdraft fees are
accounted for under ASC 310.
(2) Consists primarily of fees earned from structuring and underwriting loan syndications or related financing activity. This activity is accounted for under ASC 310.
(3) Commissions and fees includes $(7,695) million, $(6,853) million and $(5,627) million not accounted for under ASC 606, Revenue from Contracts with
Customers, for the years ended December 31, 2019, 2018 and 2017, respectively. Amounts reported in Commissions and fees accounted for under other guidance
primarily include card-related loan fees, card reward programs and certain partner payments, corporate finance fees, insurance premiums and loan servicing fees.
149
Administration and Other Fiduciary Fees
Administration and other fiduciary fees revenue is primarily
composed of custody fees and fiduciary fees.
The custody product is composed of numerous services
related to the administration, safekeeping and reporting for
both U.S. and non-U.S. denominated securities. The services
offered to clients include trade settlement, safekeeping,
income collection, corporate action notification, record-
keeping and reporting, tax reporting and cash management.
These services are provided for a wide range of securities,
including but not limited to equities, municipal and corporate
bonds, mortgage- and asset-backed securities, money market
instruments, U.S. Treasuries and agencies, derivative
instruments, mutual funds, alternative investments and
precious metals. Custody fees are recognized as or when the
associated promised service is satisfied, which normally
occurs at the point in time the service is requested by the
customer and provided by Citi.
Fiduciary fees consist of trust services and investment
management services. As an escrow agent, Citi receives, safe-
keeps, services and manages clients’ escrowed assets, such as
cash, securities, property (including intellectual property),
contracts or other collateral. Citi performs its escrow agent
duties by safekeeping the funds during the specified time
period agreed upon by all parties and therefore earns its
revenue evenly during the contract duration.
Investment management services consist of managing
assets on behalf of Citi’s retail and institutional clients.
Revenue from these services primarily consists of asset-based
fees for advisory accounts, which are based on the market
value of the client’s assets and recognized monthly, when the
market value is fixed. In some instances, the Company
contracts with third-party advisors and with third-party
custodians. The Company has determined that it acts as
principal in the majority of these transactions and therefore
presents the amounts paid to third parties gross within Other
operating expenses.
The following table presents Administration and other
fiduciary fees revenue:
In millions of dollars
ICG GCB
2019
Corp/
Other
Total
ICG
GCB
2018
Corp/
Other
2017
Total
ICG
GCB
Corp/
Other
Total
Custody fees
Fiduciary fees
Guarantee fees
Total administration
and other fiduciary fees(1)
$ 1,453 $
16 $
73 $1,542 $ 1,497 $ 133 $
65 $1,695 $1,508 $ 164 $
56 $ 1,728
647
558
621
8
28
7
1,296
573
645
584
597
9
43
7
1,285
600
593
584
575
5
91
8
1,259
597
$ 2,658 $ 645 $
108 $3,411 $ 2,726 $ 739 $
115 $3,580 $2,685 $ 744 $
155 $ 3,584
(1) Administration and other fiduciary fees includes $573 million, $600 million and $597 million for the years ended December 31, 2019, 2018 and 2017,
respectively, that are not accounted for under ASC 606, Revenue from Contracts with Customers. These amounts include guarantee fees.
150
6. PRINCIPAL TRANSACTIONS
Citi’s Principal transactions revenue consists of realized and
unrealized gains and losses from trading activities. Trading
activities include revenues from fixed income, equities, credit
and commodities products and foreign exchange transactions
that are managed on a portfolio basis characterized by primary
risk. Not included in the table below is the impact of net
interest revenue related to trading activities, which is an
integral part of trading activities’ profitability. See Note 4 to
the Consolidated Financial Statements for information about
net interest revenue related to trading activities. Principal
transactions include CVA (credit valuation adjustments) and
FVA (funding valuation adjustments) on over-the-counter
derivatives, and gains (losses) on certain economic hedges on
loans in ICG. These adjustments are discussed further in Note
24 to the Consolidated Financial Statements.
In certain transactions, Citi incurs fees and presents these
fees paid to third parties in operating expenses. The following
table presents Principal transactions revenue:
In millions of dollars
Interest rate risks(1)
Foreign exchange risks(2)
Equity risks(3)
Commodity and other risks(4)
Credit products and risks(5)
Total
2019
2018
2017
$
$
5,990 $
1,650
872
516
(136)
5,178 $
1,398
1,336
669
324
8,892 $
8,905 $
5,304
2,435
525
425
251
8,940
(1)
(2)
(3)
Includes revenues from government securities and corporate debt, municipal securities, mortgage securities and other debt instruments. Also includes spot and
forward trading of currencies and exchange-traded and over-the-counter (OTC) currency options, options on fixed income securities, interest rate swaps, currency
swaps, swap options, caps and floors, financial futures, OTC options and forward contracts on fixed income securities.
Includes revenues from foreign exchange spot, forward, option and swap contracts, as well as foreign currency translation (FX translation) gains and losses.
Includes revenues from common, preferred and convertible preferred stock, convertible corporate debt, equity-linked notes and exchange-traded and OTC equity
options and warrants.
(4) Primarily includes revenues from crude oil, refined oil products, natural gas and other commodities trades.
(5)
Includes revenues from structured credit products.
151
scheduled to vest will be reduced based on the amount of any
pretax loss in the participant’s business in the calendar year
preceding the scheduled vesting date. A minimum reduction of
20% applies for the first dollar of loss for CAP and deferred
cash stock unit awards.
In addition, deferred cash awards are subject to a
discretionary performance-based vesting condition under
which an amount otherwise scheduled to vest may be reduced
in the event of a “material adverse outcome” for which a
participant has “significant responsibility.” These awards are
also subject to an additional clawback provision pursuant to
which unvested awards may be canceled if the employee
engaged in misconduct or exercised materially imprudent
judgment, or failed to supervise or escalate the behavior of
other employees who did.
Sign-on and Long-Term Retention Awards
Stock awards and deferred cash awards may be made at
various times during the year as sign-on awards to induce new
hires to join Citi or to high-potential employees as long-term
retention awards.
Vesting periods and other terms and conditions pertaining
to these awards tend to vary by grant. Generally, recipients
must remain employed through the vesting dates to vest in the
awards, except in cases of death, disability or involuntary
termination other than for gross misconduct. These awards do
not usually provide for post employment vesting by
retirement-eligible participants.
Outstanding (Unvested) Stock Awards
A summary of the status of unvested stock awards granted as
discretionary annual incentive or sign-on and long-term
retention awards is presented below:
Unvested stock awards
Shares
Weighted-
average grant
date fair
value per
share
Unvested at December 31, 2018
Granted(1)
Canceled
Vested(2)
Unvested at December 31, 2019
31,728,596 $
14,920,917
(1,104,448)
(15,350,350)
30,194,715 $
57.30
61.78
60.45
53.58
61.30
(1) The weighted-average fair value of the shares granted during 2018 and
2017 was $73.87 and $59.12, respectively.
(2) The weighted-average fair value of the shares vesting during 2019 was
approximately $63.38 per share.
Total unrecognized compensation cost related to unvested
stock awards was $538 million at December 31, 2019. The
cost is expected to be recognized over a weighted-average
period of 1.6 years.
7. INCENTIVE PLANS
Discretionary Annual Incentive Awards
Citigroup grants immediate cash bonus payments and various
forms of immediate and deferred awards as part of its
discretionary annual incentive award program involving a
large segment of Citigroup’s employees worldwide. Most of
the shares of common stock issued by Citigroup as part of its
equity compensation programs are issued to settle the vesting
of the stock components of these awards.
Discretionary annual incentive awards are generally
awarded in the first quarter of the year based on the previous
year’s performance. Awards valued at less than U.S. $100,000
(or the local currency equivalent) are generally paid entirely in
the form of an immediate cash bonus. Pursuant to Citigroup
policy and/or regulatory requirements, certain employees and
officers are subject to mandatory deferrals of incentive pay
and generally receive 25%–60% of their awards in a
combination of restricted or deferred stock, deferred cash
stock units or deferred cash. Discretionary annual incentive
awards to many employees in the EU are subject to deferral
requirements regardless of the total award value, with at least
50% of the immediate incentive delivered in the form of a
stock payment award subject to a restriction on sale or transfer
(generally, for 12 months).
Deferred annual incentive awards may be delivered in the
form of one or more award types: a restricted or deferred stock
award under Citi’s Capital Accumulation Program (CAP), or a
deferred cash stock unit award and/or a deferred cash award
under Citi’s Deferred Cash Award Plan. The applicable mix of
awards may vary based on the employee’s minimum deferral
requirement and the country of employment.
Subject to certain exceptions (principally, for retirement-
eligible employees), continuous employment within Citigroup
is required to vest in CAP, deferred cash stock unit and
deferred cash awards. Post employment vesting by retirement-
eligible employees and participants who meet other conditions
is generally conditioned upon their refraining from
competition with Citigroup during the remaining vesting
period, unless the employment relationship has been
terminated by Citigroup under certain conditions.
Generally, the deferred awards vest in equal annual
installments over three- or four-year periods. Vested CAP
awards are delivered in shares of common stock. Deferred
cash awards are payable in cash and, except as prohibited by
applicable regulatory guidance, earn a fixed notional rate of
interest that is paid only if and when the underlying principal
award amount vests. Deferred cash stock unit awards are
payable in cash at the vesting value of the underlying stock.
Generally, in the EU, vested CAP shares are subject to a
restriction on sale or transfer after vesting, and vested deferred
cash awards and deferred cash stock units are subject to hold
back (generally, for 6 or 12 months based on the award type).
Unvested CAP, deferred cash stock units and deferred
cash awards are subject to one or more clawback provisions
that apply in certain circumstances, including gross
misconduct. CAP and deferred cash stock unit awards, made
to certain employees, are subject to a formulaic performance-
based vesting condition pursuant to which amounts otherwise
152
A summary of the performance share unit activity for
2019 is presented below:
Performance share units
Outstanding, beginning of
period
Granted(1)
Canceled
Payments
Weighted-
average grant
date fair
value per unit
Units
1,768,362 $
560,031
(194,782)
(641,611)
51.88
72.83
42.24
27.03
71.69
Outstanding, end of period
1,492,000 $
(1) The weighted-average grant date fair value per unit awarded in 2018 and
2017 was $83.24 and $59.22, respectively.
PSUs granted in 2017 were equitably adjusted after the
enactment of Tax Reform, as required under the terms of those
awards. The adjustments were intended to reproduce the
expected value of the awards immediately prior to the passage
of Tax Reform. The PSUs granted in 2016 were not impacted
by Tax Reform.
Stock Option Programs
All outstanding stock options are fully vested, with the related
expense recognized as a charge to income in prior periods.
Performance Share Units
Certain executive officers were awarded a target number of
performance share units (PSUs) each February from 2016 to
2019, for performance in the year prior to the award date.
The PSUs granted in February 2016 were earned over a
three-year performance period based on Citigroup’s relative
total shareholder return as compared to peers.
The PSUs granted in February 2017, 2018 and 2019 are
earned over a three-year performance period, based half on
return on tangible common equity performance in the last year
of the three-year performance period and the remaining half
on cumulative earnings per share over the three-year
performance period.
For all award years, if the total shareholder return is
negative over the three-year performance period, executives
may earn no more than 100% of the target PSUs, regardless of
the extent to which Citigroup outperforms peer firms. The
number of PSUs ultimately earned could vary from zero, if
performance goals are not met, to as much as 150% of target,
if performance goals are meaningfully exceeded.
For all award years, the value of each PSU is equal to the
value of one share of Citi common stock. Dividend
equivalents will be accrued and paid on the number of earned
PSUs after the end of the performance period.
PSUs are subject to variable accounting, pursuant to
which the associated value of the award will fluctuate with
changes in Citigroup’s stock price and the attainment of the
specified performance goals for each award, until the award is
settled solely in cash after the end of the performance period.
The value of the award, subject to the performance goals, is
estimated using a simulation model that incorporates multiple
valuation assumptions, including the probability of achieving
the specified performance goals of each award. The risk-free
rate used in the model is based on the applicable U.S. Treasury
yield curve. Other significant assumptions for the awards are
as follows:
Valuation assumptions
2019
2018
2017
Expected volatility
25.33% 24.93% 25.79%
Expected dividend yield
2.67
1.75
1.30
153
The following table presents information with respect to stock option activity under Citigroup’s stock option programs:
2019
Weighted-
average
exercise
price
Options
Intrinsic
value
per share
Options
2018
Weighted-
average
exercise
price
Intrinsic
value
per share
Options
2017
Weighted-
average
exercise
price
Intrinsic
value
per share
Outstanding, beginning of
period
Canceled
Expired
Exercised
762,225 $
101.84 $
(11,365)
(449,916)
(134,294)
40.80
142.30
39.00
—
—
—
1,138,813 $ 161.96 $
—
—
(376,588)
283.63
23.50
—
—
Outstanding, end of period
166,650 $
47.42 $
32.47
762,225 $ 101.84 $
—
—
—
—
—
1,527,396 $ 131.78 $
—
—
—
—
—
—
—
(388,583)
43.35
15.67
1,138,813 $ 161.96 $
—
Exercisable, end of period
166,650
762,225
1,138,813
The following table summarizes information about stock options outstanding under Citigroup’s stock option programs at
December 31, 2019:
Range of exercise prices
$41.54–$60.00
Total at December 31, 2019
Options outstanding
Options exercisable
Number
outstanding
Weighted-average
contractual life
remaining
Weighted-average
exercise price
Number
exercisable
Weighted-average
exercise price
166,650
166,650
1.4 years $
1.4 years $
47.42
47.42
166,650 $
166,650 $
47.42
47.42
vests, the shares delivered to the participant are freely
transferable, unless they are subject to a restriction on sale or
transfer for a specified period.
All equity awards granted since April 19, 2005 have been
made pursuant to stockholder-approved stock incentive plans
that are administered by the Personnel and Compensation
Committee of the Citigroup Board of Directors, which is
composed entirely of independent non-employee directors.
At December 31, 2019, approximately 29.7 million shares
of Citigroup common stock were authorized and available for
grant under Citigroup’s 2019 Stock Incentive Plan, the only
plan from which equity awards are currently granted.
The 2019 Stock Incentive Plan and predecessor plans
permit the use of treasury stock or newly issued shares in
connection with awards granted under the plans. Treasury
shares were used to settle vestings from 2016 to 2019, and for
the first quarter of 2020, except where local laws favor newly
issued shares. The use of treasury stock or newly issued shares
to settle stock awards does not affect the compensation
expense recorded in the Consolidated Statement of Income for
equity awards.
Other Variable Incentive Compensation
Citigroup has various incentive plans globally that are used to
motivate and reward performance primarily in the areas of
sales, operational excellence and customer satisfaction.
Participation in these plans is generally limited to employees
who are not eligible for discretionary annual incentive awards.
Other forms of variable compensation include monthly
commissions paid to financial advisors and mortgage loan
officers.
Summary
Except for awards subject to variable accounting, the total
expense recognized for stock awards represents the grant date
fair value of such awards, which is generally recognized as a
charge to income ratably over the vesting period, other than
for awards to retirement-eligible employees and immediately
vested awards. Whenever awards are made or are expected to
be made to retirement-eligible employees, the charge to
income is accelerated based on when the applicable conditions
to retirement eligibility were or will be met. If the employee is
retirement eligible on the grant date, or the award is vested at
the grant date, the entire expense is recognized in the year
prior to grant.
Recipients of Citigroup stock awards generally do not
have any stockholder rights until shares are delivered upon
vesting or exercise, or after the expiration of applicable
required holding periods. Recipients of restricted or deferred
stock awards and deferred cash stock unit awards, however,
may, except as prohibited by applicable regulatory guidance,
be entitled to receive or accrue dividends or dividend-
equivalent payments during the vesting period. Recipients of
restricted stock awards generally are entitled to vote the shares
in their award during the vesting period. Once a stock award
154
Incentive Compensation Cost
The following table shows components of compensation
expense, relating to certain of the incentive compensation
programs described above:
In millions of dollars
2019
2018
2017
Charges for estimated awards to
retirement-eligible employees
Amortization of deferred cash
awards, deferred cash stock units and
performance stock units
Immediately vested stock award
expense(1)
Amortization of restricted and
deferred stock awards(2)
Other variable incentive
compensation
$
683 $
669 $
659
355
202
354
82
404
666
75
435
640
70
474
694
Total
$ 2,190 $ 2,021 $ 2,251
(1) Represents expense for immediately vested stock awards that generally
were stock payments in lieu of cash compensation. The expense is
generally accrued as cash incentive compensation in the year prior to
grant.
(2) All periods include amortization expense for all unvested awards to non-
retirement-eligible employees.
155
8. RETIREMENT BENEFITS
Pension and Postretirement Plans
The Company has several non-contributory defined benefit
pension plans covering certain U.S. employees and has various
defined benefit pension and termination indemnity plans
covering employees outside the U.S.
The U.S. qualified defined benefit plan was frozen
effective January 1, 2008 for most employees. Accordingly, no
additional compensation-based contributions have been
credited to the cash balance portion of the plan for existing plan
participants after 2007. However, certain employees covered
under the prior final pay plan formula continue to accrue
benefits. The Company also offers postretirement health care
and life insurance benefits to certain eligible U.S. retired
employees, as well as to certain eligible employees outside the
U.S.
The Company also sponsors a number of non-contributory,
nonqualified pension plans. These plans, which are unfunded,
provide supplemental defined pension benefits to certain U.S.
employees. With the exception of certain employees covered
under the prior final pay plan formula, the benefits under these
plans were frozen in prior years.
The plan obligations, plan assets and periodic plan expense
for the Company’s most significant pension and postretirement
benefit plans (Significant Plans) are measured and disclosed
quarterly, instead of annually. The Significant Plans captured
approximately 90% of the Company’s global pension and
postretirement plan obligations as of December 31, 2019. All
other plans (All Other Plans) are measured annually with a
December 31 measurement date.
Net (Benefit) Expense
The following table summarizes the components of net
(benefit) expense recognized in the Consolidated Statement of
Income for the Company’s pension and postretirement plans for
Significant Plans and All Other Plans:
Pension plans
Postretirement benefit plans
U.S. plans
Non-U.S. plans
U.S. plans
Non-U.S. plans
In millions of dollars
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
2017
Benefits earned during the year
$
1 $
1 $
3 $
146 $
146 $
153 $ — $ — $ — $
8 $
9 $
9
Interest cost on benefit obligation
469
514
533
287
292
295
Expected return on plan assets
(821)
(844)
(865)
(281)
(291)
(299)
24
(18)
26
(14)
26
(6)
104
(84)
102
(88)
101
(89)
Amortization of unrecognized:
Prior service cost (benefit)
Net actuarial loss
Curtailment loss (gain)(1)
Settlement loss(1)
2
200
1
—
2
165
1
—
2
173
6
—
(4)
61
(6)
6
(4)
53
(1)
7
(3)
61
—
12
—
—
—
—
—
(1)
—
—
—
—
—
—
(10)
(10)
(10)
23
—
—
29
—
—
35
—
—
46
Total net (benefit) expense
$ (148) $ (161) $ (148) $
209 $
202 $
219 $
6 $
11 $
20 $
41 $
42 $
(1) Curtailment and settlement relate to repositioning and divestiture actions.
Contributions
The Company’s funding practice for U.S. and non-U.S. pension
and postretirement plans is generally to fund to minimum
funding requirements in accordance with applicable local laws
and regulations. The Company may increase its contributions
above the minimum required contribution, if appropriate. In
addition, management has the ability to change its funding
practices. For the U.S. pension plans, there were no required
minimum cash contributions for 2019 or 2018.
The following table summarizes the actual Company
contributions for the years ended December 31, 2019 and 2018,
as well as estimated expected Company contributions for 2020.
Expected contributions are subject to change, since contribution
decisions are affected by various factors, such as market
performance, tax considerations and regulatory requirements.
In millions of dollars
U.S. plans(2)
2019
2020
Pension plans(1)
Non-U.S. plans
Postretirement benefit plans(1)
U.S. plans
Non-U.S. plans
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
Contributions made by the Company
$ — $ 425 $ — $ 111 $ 111 $ 140 $ — $ — $ 145 $
4 $ 221 $
Benefits paid directly by the Company
58
56
55
53
39
42
6
4
5
6
4
3
6
(1) Amounts reported for 2020 are expected amounts.
(2) The U.S. pension plans include benefits paid directly by the Company for the nonqualified pension plans.
156
Funded Status and Accumulated Other Comprehensive Income (AOCI)
The following table summarizes the funded status and amounts recognized in the Consolidated Balance Sheet for the Company’s
pension and postretirement plans:
Pension plans
Postretirement benefit plans
U.S. plans
Non-U.S. plans
U.S. plans
Non-U.S. plans
In millions of dollars
2019
2018
2019
2018
2019
2018
2019
2018
Change in projected benefit obligation
Projected benefit obligation at beginning of year
$ 12,655 $ 14,040 $
7,149 $
7,433 $
662 $
699 $
1,159 $
1,261
Benefits earned during the year
Interest cost on benefit obligation
Plan amendments
Actuarial loss (gain)( 1)
Benefits paid, net of participants’ contributions and
government subsidy(2)
Settlement gain(3)
Curtailment loss (gain)(3)
Foreign exchange impact and other
1
469
—
1
514
—
1,263
(1,056)
(936)
(845)
—
1
—
1
—
146
287
7
861
(304)
(84)
(4)
47
146
292
7
(99)
(293)
(121)
(1)
(215)
—
24
—
46
—
26
—
(1)
8
104
—
140
(40)
(62)
(72)
—
—
—
—
—
—
—
—
45
9
102
—
(123)
(68)
—
—
(22)
Projected benefit obligation at year end
$ 13,453 $ 12,655 $
8,105 $
7,149 $
692 $
662 $
1,384 $
1,159
Change in plan assets
Plan assets at fair value at beginning of year
Actual return on plan assets(1)
Company contributions
Benefits paid, net of participants’ contributions and
government subsidy(2)
Settlement gain(3)
Foreign exchange impact and other
$ 11,490 $ 12,725 $
6,699 $
7,128 $
345 $
262 $
1,036 $
1,119
1,682
481
(445)
55
(936)
(845)
—
—
—
—
781
150
(304)
(84)
314
(11)
182
(293)
(121)
(186)
36
4
(40)
—
—
(5)
150
(62)
—
—
138
225
(72)
—
(200)
(26)
9
(68)
—
2
Plan assets at fair value at year end
$ 12,717 $ 11,490 $
7,556 $
6,699 $
345 $
345 $
1,127 $
1,036
Funded status of the plans
Qualified plans(4)
Nonqualified plans(5)
Funded status of the plans at year end
Net amount recognized
Qualified plans
Benefit asset
Benefit liability
Qualified plans
Nonqualified plans
Net amount recognized on the balance sheet
Amounts recognized in AOCI
Net transition obligation
Prior service (cost) benefit
Net actuarial (loss) gain
$
$
$
$
$
$
(23) $
(483) $
(549) $
(450) $
(347) $
(317) $
(257) $
(123)
(713)
(682)
—
—
—
—
—
—
(736) $ (1,165) $
(549) $
(450) $
(347) $
(317) $
(257) $
(123)
— $
— $
808 $
806 $
— $
— $
57 $
(23)
(483)
(1,357)
(1,256)
(347)
(317)
(314)
(23) $
(483) $
(549) $
(450) $
(347) $
(317) $
(257) $
(713)
(682)
—
—
—
—
—
175
(298)
(123)
—
(736) $ (1,165) $
(549) $
(450) $
(347) $
(317) $
(257) $
(123)
Net amount recognized in equity (pretax)
Accumulated benefit obligation at year end
$ (7,104) $ (6,905) $ (1,734) $ (1,409) $
$ 13,447 $ 12,646 $
7,618 $
6,720 $
— $
— $
— $
(1) $
— $
— $
— $
(12)
(13)
1
12
(7,092)
(6,892)
(1,735)
(1,420)
—
24
24 $
692 $
—
53
76
(416)
53 $
(340) $
—
83
(340)
(257)
662 $
1,384 $
1,159
(1) During 2019, the actuarial loss is primarily due to the decline in global discount rates and actual return on plan assets due to favorable asset returns.
(2) U.S. postretirement benefit plans were net of Employer Group Waiver Plan subsidy of $22 million and $15 million in 2019 and 2018, respectively.
(3) Curtailment and settlement (gains) losses relate to repositioning and divestiture activities.
(4) The U.S. qualified pension plan is fully funded under specified Employee Retirement Income Security Act (ERISA) funding rules as of January 1, 2020 and no
minimum required funding is expected for 2020.
(5) The nonqualified plans of the Company are unfunded.
157
The following table shows the change in AOCI related to the Company’s pension, postretirement and post employment plans:
In millions of dollars
Beginning of year balance, net of tax(1)(2)
Actuarial assumptions changes and plan experience
Net asset gain (loss) due to difference between actual and expected returns
Net amortization
Prior service (cost) credit
Curtailment/settlement gain(3)
Foreign exchange impact and other
Impact of Tax Reform(4)
Change in deferred taxes, net
Change, net of tax
End of year balance, net of tax(1)(2)
2019
2018
2017
$
$
$
(6,257) $
(2,300)
1,427
274
(7)
1
(66)
—
119
(6,183) $
1,288
(1,732)
214
(7)
7
136
—
20
(552) $
(6,809) $
(74) $
(6,257) $
(5,164)
(760)
625
229
(4)
17
(93)
(1,020)
(13)
(1,019)
(6,183)
(1) See Note 19 to the Consolidated Financial Statements for further discussion of net AOCI balance.
(2)
Includes net-of-tax amounts for certain profit-sharing plans outside the U.S.
(3) Curtailment and settlement relate to repositioning and divestiture activities.
(4)
In the fourth quarter of 2017, Citi adopted ASU 2018-02, which transferred these amounts from AOCI to Retained earnings. See Note 1 to the Consolidated Financial
Statements.
At December 31, 2019 and 2018, the aggregate projected benefit obligation (PBO), the aggregate accumulated benefit obligation
(ABO) and the aggregate fair value of plan assets are presented for all defined benefit pension plans with a PBO in excess of plan assets
and for all defined benefit pension plans with an ABO in excess of plan assets as follows:
PBO exceeds fair value of plan assets
U.S. plans(1)
Non-U.S. plans
ABO exceeds fair value of plan assets
U.S. plans(1)
Non-U.S. plans
In millions of dollars
2019
2018
2019
2018
2019
2018
2019
2018
Projected benefit obligation
$
13,453 $
12,655 $
4,445 $
3,904 $
13,453 $
12,655 $
2,748 $
Accumulated benefit obligation
Fair value of plan assets
13,447
12,717
12,646
11,490
4,041
3,089
3,528
2,648
13,447
12,717
12,646
11,490
2,435
1,429
3,718
3,387
2,478
(1) At December 31, 2019 and 2018, for both the U.S. qualified plan and nonqualified plans, the aggregate PBO and the aggregate ABO exceeded plan assets.
158
(3)
In 2019 and 2018, the expected rate of return for the VEBA Trust was
3.00%.
During the year
Discount rate
U.S. plans
Qualified pension
Nonqualified
pension
Postretirement
2019
2018
2017
4.25%/3.85%/
3.45%/3.10%
3.60%/3.95%/
4.25%/4.30%
4.10%/4.05%/
3.80%/3.75%
4.25/3.90/
3.50/3.10
4.20/3.80/
3.35/3.00
3.60/3.95/
4.25/4.30
3.50/3.90/
4.20/4.20
4.00/3.95/
3.75/3.65
3.90/3.85/
3.60/3.55
Non-U.S. pension plans(1)
Range(2)
Weighted average
4.47
Non-U.S. postretirement plans(1)
-0.05 to 12.00
0.00 to 10.75
0.25 to 72.50
4.17
4.40
Range
1.75 to 10.75
1.75 to 10.10
1.75 to 11.05
Weighted average
9.05
8.10
8.27
Future compensation increase rate(3)
Non-U.S. pension plans(1)
Range
1.30 to 13.67
1.17 to 13.67
1.25 to 70.00
Weighted average
3.16
3.08
3.21
Expected return on assets
U.S. plans
Qualified pension(4)
6.70
6.80/6.70
Postretirement(4)(5)
6.70/3.00
6.80/6.70/3.00
Non-U.S. pension plans(1)
6.80
6.80
Range
1.00 to 11.50
0.00 to 11.60
1.00 to 11.50
Weighted average
4.30
Non-U.S. postretirement plans(1)
4.52
4.55
Range
8.00 to 9.20
8.00 to 9.80
8.00 to 10.30
Weighted average
8.01
8.01
8.02
(1) Reflects rates utilized to determine the quarterly expense for Significant
non-U.S. pension and postretirement plans.
(2) Due to substantial downward movement in yields, there were negative
discount rates for plans with relatively short duration in major markets,
such as the Eurozone and Switzerland.
(3) Not material for U.S. plans.
(4) The expected rate of return for the U.S. pension and postretirement plans
was lowered from 6.80% to 6.70% effective in the second quarter of 2018
to reflect a change in target asset allocation.
In 2017, the VEBA Trust was funded with an expected rate of return on
assets of 3.00%.
(5)
Plan Assumptions
The Company utilizes a number of assumptions to determine
plan obligations and expenses. Changes in one or a
combination of these assumptions will have an impact on the
Company’s pension and postretirement PBO, funded status and
(benefit) expense. Changes in the plans’ funded status resulting
from changes in the PBO and fair value of plan assets will have
a corresponding impact on Accumulated other comprehensive
income (loss).
The actuarial assumptions at the respective years ended
December 31 in the table below are used to measure the year-
end PBO and the net periodic (benefit) expense for the
subsequent year (period). Since Citi’s Significant Plans are
measured on a quarterly basis, the year-end rates for those plans
are used to calculate the net periodic (benefit) expense for the
subsequent year’s first quarter.
As a result of the quarterly measurement process, the net
periodic (benefit) expense for the Significant Plans is calculated
at each respective quarter end based on the preceding quarter-
end rates (as shown below for the U.S. and non-U.S. pension
and postretirement plans). The actuarial assumptions for All
Other Plans are measured annually.
Certain assumptions used in determining pension and
postretirement benefit obligations and net benefit expense for
the Company’s plans are shown in the following table:
At year end
Discount rate
U.S. plans
Qualified pension
Nonqualified pension
Postretirement
Non-U.S. pension plans
Range(1)
Weighted average
Non-U.S. postretirement plans
Range
Weighted average
2019
2018
3.25%
3.25
3.15
4.25%
4.25
4.20
-0.10 to 11.30 0.25 to 12.00
3.65
4.47
0.90 to 9.10
7.76
1.75 to 10.75
9.05
Future compensation increase rate(2)
Non-U.S. pension plans
Range
Weighted average
Expected return on assets
U.S. plans
Qualified pension
Postretirement(3)
Non-U.S. pension plans
Range
Weighted average
Non-U.S. postretirement plans
Range
Weighted average
1.50 to 11.50
3.17
1.30 to 13.67
3.16
6.70
6.70/3.00
6.70
6.70/3.00
0.00 to 11.50
3.95
1.00 to 11.50
4.30
6.20 to 8.00
7.99
8.00 to 9.20
8.01
(1) Due to substantial downward movement in yields, there were negative
discount rates for plans with relatively short duration in major markets,
such as the Eurozone and Switzerland.
(2) Not material for U.S. plans.
159
Discount Rate
The discount rates for the U.S. pension and postretirement
plans were selected by reference to a Citigroup-specific
analysis using each plan’s specific cash flows and compared
with high-quality corporate bond indices for reasonableness.
The discount rates for the non-U.S. pension and postretirement
plans are selected by reference to high-quality corporate bond
rates in countries that have developed corporate bond markets.
However, where developed corporate bond markets do not
exist, the discount rates are selected by reference to local
government bond rates with a premium added to reflect the
additional risk for corporate bonds in certain countries.
Effective December 31, 2019, the established rounding
convention is to the nearest 5 bps for all countries.
Expected Rate of Return
The Company determines its assumptions for the expected rate
of return on plan assets for its U.S. pension and postretirement
plans using a “building block” approach, which focuses on
ranges of anticipated rates of return for each asset class. A
weighted average range of nominal rates is then determined
based on target allocations to each asset class. Market
performance over a number of earlier years is evaluated
covering a wide range of economic conditions to determine
whether there are sound reasons for projecting any past trends.
The Company considers the expected rate of return to be a
long-term assessment of return expectations and does not
anticipate changing this assumption unless there are significant
changes in investment strategy or economic conditions. This
contrasts with the selection of the discount rate and certain
other assumptions, which are reconsidered annually (or
quarterly for the Significant Plans) in accordance with GAAP.
The expected rate of return for the U.S. pension and
postretirement plans was 6.70% at December 31, 2019 and
2018 and 6.80% at December 31, 2017. The expected return on
assets reflects the expected annual appreciation of the plan
assets and reduces the Company’s annual pension expense. The
expected return on assets is deducted from the sum of service
cost, interest cost and other components of pension expense to
arrive at the net pension (benefit) expense.
The following table shows the expected rates of return
used in determining the Company’s pension expense compared
to the actual rate of return on plan assets during 2019, 2018 and
2017 for the U.S. pension and postretirement plans:
U.S. plans
2019
2018
2017
Expected rate of return
U.S. pension and
postretirement trust
VEBA trust(1)
Actual rate of return(2)
U.S. pension and
postretirement trust
VEBA trust(1)
6.70%
3.00
6.80%/6.70% 6.80%
3.00
3.00
15.20
-3.40
10.90
1.91 to 2.76
0.43 to 1.41
—
(1)
In December 2017, the VEBA Trust was funded for postretirement
benefits with an expected rate of return on assets of 3.00%.
(2) Actual rates of return are presented net of fees.
For the non-U.S. pension plans, pension expense for 2019
was reduced by the expected return of $281 million, compared
with the actual return of $781 million. Pension expense for
2018 and 2017 was reduced by expected returns of $291
million and $299 million, respectively.
Mortality Tables
At December 31, 2019, the Company adopted the Private
Retirement Plans (PRI-2012) mortality table and the Mortality
Projection 2019 (MP-2019) projection table for the U.S. plans.
U.S. plans
Mortality
Pension
2019(1)
2018(2)
PRI-2012/MP-2019 RP-2014/MP-2018
Postretirement
PRI-2012/MP-2019 RP-2014/MP-2018
(1) The PRI-2012 table is the white-collar PRI-2012 table. The MP-2019
projection scale is projected from 2012, with convergence to 0.75%
ultimate rate of annual improvement by 2035.
(2) The RP-2014 table is the white-collar RP-2014 table. The MP-2018
projection scale is projected from 2006, with convergence to 0.75%
ultimate rate of annual improvement by 2034.
160
Sensitivities of Certain Key Assumptions
The following tables summarize the effect on pension expense:
Health Care Cost Trend Rate
Assumed health care cost trend rates were as follows:
Discount rate
One-percentage-point increase
In millions of dollars
2019
2018
2017
U.S. plans
Non-U.S. plans
In millions of dollars
U.S. plans
Non-U.S. plans
$
$
28 $
(19)
25 $
(22)
29
(27)
One-percentage-point decrease
2019
2018
2017
(44) $
32
(37) $
32
(44)
41
The U.S. Qualified Pension Plan was frozen in 2008, and as a
result, most service cost has been eliminated. The pension
expense for the U.S. Qualified Pension Plan is driven primarily
by interest cost rather than by service cost. An increase in the
discount rate generally increases pension expense.
For Non-U.S. Pension Plans that are not frozen (in
countries such as Mexico, the U.K. and South Korea), there is
more service cost. The pension expense for the Non-U.S. Plans
is driven by both service cost and interest cost. An increase in
the discount rate generally decreases pension expense due to
the greater impact on service cost compared to interest cost.
Since the U.S. Qualified Pension Plan was frozen, most of
the prospective service cost has been eliminated and the gain/
loss amortization period was changed to the life expectancy for
inactive participants. As a result, pension expense for the U.S.
Qualified Pension Plan is driven more by interest costs than
service costs, and an increase in the discount rate would
increase pension expense, while a decrease in the discount rate
would decrease pension expense.
The following tables summarize the effect on pension
expense:
Expected rate of return
One-percentage-point increase
In millions of dollars
2019
2018
2017
U.S. plans
Non-U.S. plans
$
(123) $
(126) $
(64)
(64)
(127)
(64)
One-percentage-point decrease
In millions of dollars
2019
2018
2017
U.S. plans
Non-U.S. plans
$
123 $
126 $
64
64
127
64
Health care cost increase rate for
U.S. plans
Following year
Ultimate rate to which cost increase is
assumed to decline
Year in which the ultimate rate is
reached
Health care cost increase rate for
Non-U.S. plans (weighted average)
2019
2018
6.75%
7.00%
5.00
2027
5.00
2027
Following year
6.85%
6.90%
Ultimate rate to which cost increase is
assumed to decline
Year in which the ultimate rate
is reached
6.85
2020
6.90
2019
Interest Crediting Rate
The Company has cash balance plans and other plans with
promised interest crediting rates. For these plans, the interest
crediting rates are set in line with plan rules or country
legislation and do not change with market conditions.
Weighted average interest
crediting rate
2018
2019
2017
2.25%
1.61
3.25%
1.68
2.60%
1.74
At year end
U.S. plans
Non-U.S. plans
161
Plan Assets
Citigroup’s pension and postretirement plans’ asset allocations for the U.S. plans and the target allocations by asset category based on
asset fair values, are as follows:
Asset category(1)
Equity securities(2)
Debt securities(3)
Real estate
Private equity
Other investments
Total
Target asset
allocation
U.S. pension assets
at December 31,
U.S. postretirement assets
at December 31,
2020
0–26%
35–82
0–7
0–10
0–30
2019
2018
2019
2018
17%
58
4
3
18
100%
15%
57
5
3
20
100%
17%
58
4
3
18
100%
15%
57
5
3
20
100%
(1) Asset allocations for the U.S. plans are set by investment strategy, not by investment product. For example, private equities with an underlying investment in real
estate are classified in the real estate asset category, not private equity.
(2) Equity securities in the U.S. pension and postretirement plans do not include any Citigroup common stock at the end of 2019 and 2018.
(3) The VEBA Trust for postretirement benefits are primarily invested in cash equivalents and debt securities in 2019 and 2018, respectively, and are not reflected in the
table above.
Third-party investment managers and advisors provide
their services to Citigroup’s U.S. pension and postretirement
plans. Assets are rebalanced as the Company’s Pension Plan
Investment Committee deems appropriate. Citigroup’s
investment strategy, with respect to its assets, is to maintain a
globally diversified investment portfolio across several asset
classes that, when combined with Citigroup’s contributions to
the plans, will maintain the plans’ ability to meet all required
benefit obligations.
Citigroup’s pension and postretirement plans’ weighted-
average asset allocations for the non-U.S. plans and the actual
ranges, and the weighted-average target allocations by asset
category based on asset fair values, are as follows:
Asset category(1)
Equity securities
Debt securities
Real estate
Other investments
Total
Non-U.S. pension plans
Target asset
allocation
Actual range
at December 31,
2020
0–100%
0–100
0–15
0–100
2019
0–100%
0–100
0–15
0–100
2018
0–66%
0–100
0–12
0–100
Weighted-average
at December 31,
2019
2018
13%
80
1
6
13%
80
1
6
100%
100%
(1) Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.
Asset category(1)
Equity securities
Debt securities
Other investments
Total
Target asset
allocation
2020
0–38%
56–100
0–6
Non-U.S. postretirement plans
Actual range
at December 31,
2019
0–31%
66–100
0–3
2018
0–35%
62–100
0–3
Weighted-average
at December 31,
2019
2018
27%
71
2
100%
35%
62
3
100%
(1) Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.
162
Fair Value Disclosure
For information on fair value measurements, including
descriptions of Levels 1, 2 and 3 of the fair value hierarchy and
the valuation methodology utilized by the Company, see Notes
1 and 24 to the Consolidated Financial Statements. ASU
2015-07 removed the requirement to categorize within the fair
value hierarchy investments for which fair value is measured
using the NAV per share practical expedient.
In millions of dollars
Asset categories
U.S. equities
Non-U.S. equities
Mutual funds and other registered investment companies
Commingled funds
Debt securities
Annuity contracts
Derivatives
Other investments
Total investments
Cash and short-term investments
Other investment liabilities
Net investments at fair value
Other investment receivables redeemed at NAV
Securities valued at NAV
Total net assets
Certain investments may transfer between the fair value
hierarchy classifications during the year due to changes in
valuation methodology and pricing sources.
Plan assets by detailed asset categories and the fair value
hierarchy are as follows:
U.S. pension and postretirement benefit plans(1)
Fair value measurement at December 31, 2019
Level 1
Level 2
Level 3
Total
$
739 $
553
280
—
1,534
—
10
—
3,116 $
93 $
(87)
3,122 $
$
$
$
— $
—
—
1,410
4,046
—
245
—
5,701 $
1,080 $
(249)
6,532 $
— $
—
—
—
—
1
—
75
76 $
— $
—
76 $
$
$
739
553
280
1,410
5,580
1
255
75
8,893
1,173
(336)
9,730
22
3,310
13,062
(1) The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2019, the allocable interests of the U.S. pension and
postretirement plans were 98.0% and 2.0%, respectively. The investments of the VEBA Trust for postretirement benefits are reflected in the above table.
In millions of dollars
Asset categories
U.S. equities
Non-U.S. equities
Mutual funds and other registered investment companies
Commingled funds
Debt securities
Annuity contracts
Derivatives
Other investments
Total investments
Cash and short-term investments
Other investment liabilities
Net investments at fair value
Other investment receivables redeemed at NAV
Securities valued at NAV
Total net assets
U.S. pension and postretirement benefit plans(1)
Fair value measurement at December 31, 2018
Level 1
Level 2
Level 3
Total
$
625 $
481
215
—
1,346
—
16
—
2,683 $
93 $
(100)
2,676 $
$
$
$
— $
—
—
1,344
3,443
—
252
—
5,039 $
897 $
(254)
5,682 $
— $
—
—
—
—
1
—
127
128 $
— $
—
128 $
$
$
625
481
215
1,344
4,789
1
268
127
7,850
990
(354)
8,486
80
3,269
11,835
(1) The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2018, the allocable interests of the U.S. pension and
postretirement plans were 98.0% and 2.0%, respectively. The investments of the VEBA Trust for postretirement benefits are reflected in the above table.
163
In millions of dollars
Asset categories
U.S. equities
Non-U.S. equities
Mutual funds and other registered investment companies
Commingled funds
Debt securities
Real estate
Annuity contracts
Derivatives
Other investments
Total investments
Cash and short-term investments
Other investment liabilities
Net investments at fair value
Securities valued at NAV
Total net assets
In millions of dollars
Asset categories
U.S. equities
Non-U.S. equities
Mutual funds and other registered investment companies
Commingled funds
Debt securities
Real estate
Annuity contracts
Derivatives
Other investments
Total investments
Cash and short-term investments
Other investment liabilities
Net investments at fair value
Securities valued at NAV
Total net assets
Non-U.S. pension and postretirement benefit plans
Fair value measurement at December 31, 2019
Level 1
Level 2
Level 3
Total
$
4 $
12 $
— $
127
3,223
23
4,307
—
—
—
1
7,685 $
86 $
(3)
7,768 $
262
63
—
1,615
3
—
1,590
—
3,545 $
3 $
(2,938)
610 $
—
—
—
10
1
5
—
274
290 $
— $
—
290 $
$
$
16
389
3,286
23
5,932
4
5
1,590
275
11,520
89
(2,941)
8,668
15
8,683
Non-U.S. pension and postretirement benefit plans
Fair value measurement at December 31, 2018
Level 1
Level 2
Level 3
Total
4 $
9 $
— $
100
2,887
21
5,145
—
—
—
1
8,158 $
91 $
(1)
8,248 $
100
63
—
1,500
3
1
156
—
1,832 $
3 $
(2,589)
(754) $
—
—
—
9
1
10
—
210
230 $
— $
—
230 $
$
$
13
200
2,950
21
6,654
4
11
156
211
10,220
94
(2,590)
7,724
11
7,735
$
$
$
$
$
$
$
164
Level 3 Rollforward
The reconciliations of the beginning and ending balances during the year for Level 3 assets are as follows:
In millions of dollars
U.S. pension and postretirement benefit plans
Asset categories
Annuity contracts
Other investments
Total investments
Beginning Level
3 fair value at
Dec. 31, 2018
Realized (losses) Unrealized gains
Purchases,
sales and
issuances
Transfers in and/
or out of Level 3
Ending Level 3
fair value at Dec.
31, 2019
$
$
1 $
127
128 $
— $
(7)
(7) $
— $
12
12 $
— $
(57)
(57) $
— $
—
— $
1
75
76
In millions of dollars
U.S. pension and postretirement benefit plans
Asset categories
Annuity contracts
Other investments
Total investments
Beginning Level 3
fair value at
Dec. 31, 2017
Realized (losses)
Unrealized
(losses)
Purchases,
sales and
issuances
Transfers in and/
or out of Level 3
Ending Level 3
fair value at Dec.
31, 2018
$
$
1 $
148
149 $
— $
(2)
(2) $
— $
(18)
(18) $
— $
(1)
(1) $
— $
—
— $
1
127
128
In millions of dollars
Non-U.S. pension and postretirement benefit plans
Beginning Level 3
fair value at
Dec. 31, 2018
Unrealized gains
Purchases, sales and
issuances
Transfers in and/
or out of Level 3
Ending Level 3 fair
value at Dec. 31,
2019
Asset categories
Debt securities
Real estate
Annuity contracts
Other investments
Total investments
$
$
9 $
1
10
210
230 $
1 $
—
—
7
8 $
— $
—
(5)
57
52 $
In millions of dollars
Non-U.S. pension and postretirement benefit plans
Asset categories
Non-U.S. equities
Debt securities
Real estate
Annuity contracts
Other investments
Total investments
Beginning Level 3
fair value at
Dec. 31, 2017
Unrealized (losses)
Purchases, sales and
issuances
Transfers in and/
or out of Level 3
$
$
1 $
7
1
9
214
232 $
— $
(1)
—
(1)
(3)
(5) $
— $
3
—
1
(1)
3 $
165
— $
—
—
—
— $
(1) $
—
—
1
—
— $
10
1
5
274
290
Ending Level 3 fair
value at
Dec. 31, 2018
—
9
1
10
210
230
Investment Strategy
The Company’s global pension and postretirement funds’
investment strategy is to invest in a prudent manner for the
exclusive purpose of providing benefits to participants. The
investment strategies are targeted to produce a total return that,
when combined with the Company’s contributions to the funds,
will maintain the funds’ ability to meet all required benefit
obligations. Risk is controlled through diversification of asset
types and investments in domestic and international equities,
fixed income securities and cash and short-term investments.
The target asset allocation in most locations outside the U.S. is
primarily in equity and debt securities. These allocations may
vary by geographic region and country depending on the nature
of applicable obligations and various other regional
considerations. The wide variation in the actual range of plan
asset allocations for the funded non-U.S. plans is a result of
differing local statutory requirements and economic conditions.
For example, in certain countries local law requires that all
pension plan assets must be invested in fixed income
investments, government funds or local-country securities.
Significant Concentrations of Risk in Plan Assets
The assets of the Company’s pension plans are diversified to
limit the impact of any individual investment. The U.S.
qualified pension plan is diversified across multiple asset
classes, with publicly traded fixed income, hedge funds,
publicly traded equity and real estate representing the most
significant asset allocations. Investments in these four asset
classes are further diversified across funds, managers,
strategies, vintages, sectors and geographies, depending on the
specific characteristics of each asset class. The pension assets
for the Company’s non-U.S. Significant Plans are primarily
invested in publicly traded fixed income and publicly traded
equity securities.
Oversight and Risk Management Practices
The framework for the Company’s pension oversight process
includes monitoring of retirement plans by plan fiduciaries and/
or management at the global, regional or country level, as
appropriate. Independent Risk Management contributes to the
risk oversight and monitoring for the Company’s U.S. qualified
pension plan and non-U.S. Significant Pension Plans. Although
the specific components of the oversight process are tailored to
the requirements of each region, country and plan, the
following elements are common to the Company’s monitoring
and risk management process:
•
•
•
•
•
periodic asset/liability management studies and strategic
asset allocation reviews;
periodic monitoring of funding levels and funding ratios;
periodic monitoring of compliance with asset allocation
guidelines;
periodic monitoring of asset class and/or investment
manager performance against benchmarks; and
periodic risk capital analysis and stress testing.
Estimated Future Benefit Payments
The Company expects to pay the following estimated benefit
payments in future years:
Pension plans
Non-
U.S. plans
U.S.
plans
Postretirement
benefit plans
U.S.
plans
Non-
U.S. plans
$
821 $
476 $
64 $
840
851
866
873
434
464
480
495
63
61
59
57
75
80
85
91
97
In millions of dollars
2020
2021
2022
2023
2024
2025–2029
4,282
2,651
244
567
166
Defined Contribution Plans
The Company sponsors defined contribution plans in the U.S.
and in certain non-U.S. locations, all of which are administered
in accordance with local laws. The most significant defined
contribution plan is the Citi Retirement Savings Plan (formerly
known as the Citigroup 401(k) Plan) sponsored by the
Company in the U.S.
Under the Citi Retirement Savings Plan, eligible U.S.
employees received matching contributions of up to 6% of their
eligible compensation for 2019 and 2018, subject to statutory
limits. In addition, for eligible employees whose eligible
compensation is $100,000 or less, a fixed contribution of up to
2% of eligible compensation is provided. All Company
contributions are invested according to participants’ individual
elections. The following tables summarize the Company
contributions for the defined contribution plans:
In millions of dollars
2019
2018
2017
Company contributions
$
404 $
396 $
383
U.S. plans
In millions of dollars
2019
2018
2017
Company contributions
$
281 $
283 $
270
Non-U.S. plans
Post Employment Plans
The Company sponsors U.S. post employment plans that
provide income continuation and health and welfare benefits to
certain eligible U.S. employees on long-term disability.
As of December 31, 2019 and 2018, the plans’ funded
status recognized in the Company’s Consolidated Balance
Sheet was $(38) million and $(32) million, respectively. The
pretax amounts recognized in AOCI as of December 31, 2019
and 2018 were $(15) million and $(15) million, respectively.
The following table summarizes the components of net
expense recognized in the Consolidated Statement of Income
for the Company’s U.S. post employment plans:
In millions of dollars
Service-related expense
Interest cost on benefit
obligation
Expected return on plan
assets
Amortization of
unrecognized:
Prior service cost
Net actuarial loss
Total service-related
(benefit) expense
Non-service-related expense
(benefit)
Total net expense (benefit)
Net expense
2018
2019
2017
$
2 $
2 $
(1)
(1)
—
2
3 $
6 $
9 $
(23)
2
(20) $
2 $
(18) $
$
$
$
2
—
(31)
2
(27)
30
3
The following table summarizes certain assumptions used
in determining the post employment benefit obligations and net
benefit expense for the Company’s U.S. post employment
plans:
Discount rate
Expected return on assets
Health care cost increase rate
Following year
Ultimate rate to which cost increase is
assumed to decline
Year in which the ultimate rate is reached
2019
2018
2.90% 3.95%
3.00
3.00
6.75
7.00
5.00
2027
5.00
2027
167
9. INCOME TAXES
Income Tax Provision
Details of the Company’s income tax provision are presented
below:
In millions of dollars
2019
2018
2017
Tax Rate
The reconciliation of the federal statutory income tax rate to
the Company’s effective income tax rate applicable to income
from continuing operations (before noncontrolling interests
and the cumulative effect of accounting changes) for each of
the periods indicated is as follows:
Current
Federal
Non-U.S.
State
$
365 $
834 $
332
4,352
4,290
3,910
323
284
269
Total current income taxes
$ 5,040 $ 5,408 $ 4,511
Deferred
Federal
Non-U.S.
State
$ (907) $ (620) $24,902
10
287
371
198
(377)
352
Total deferred income taxes
$ (610) $
(51) $24,877
Federal statutory rate
State income taxes, net of federal
benefit
Non-U.S. income tax rate differential
Effect of tax law changes(1)
Basis difference in affiliates
Tax advantaged investments
Valuation allowance releases(2)
Other, net
Effective income tax rate
2018
2019
21.0% 21.0% 35.0%
2017
1.8
1.1
1.9
1.3
5.3
(1.6)
(0.5)
(0.6)
99.7
(0.1)
(2.4)
(2.1)
(2.3)
(2.0)
(2.2)
(3.0)
—
—
0.2
(0.8)
(0.3)
18.5% 22.8% 129.1%
$ 4,430 $ 5,357 $29,388
(27)
(18)
7
(1) 2018 includes one-time Tax Reform benefits of $94 million for amounts
that were considered provisional pursuant to SAB 118. 2017 includes the
one-time $22,594 million charge for Tax Reform.
(2) See the Deferred Tax Assets section below for a description of the
components.
Provision for income tax on
continuing operations before
noncontrolling interests(1)
Provision (benefit) for income taxes
on discontinued operations
Income tax expense (benefit) reported
in stockholders’ equity related to:
FX translation
Investment securities
Employee stock plans
Cash flow hedges
Benefit plans
FVO DVA
Excluded fair value hedges
Retained earnings(2)
(11)
648
(16)
269
(119)
(337)
8
46
(263)
(346)
(2)
(8)
(20)
302
(17)
188
(149)
(4)
(12)
13
(250)
—
(305)
(295)
Income taxes before noncontrolling
interests
$ 4,891 $ 4,680 $28,886
(1)
Includes the tax on realized investment gains and other-than-temporary-
impairment losses resulting in a provision (benefit) of $373 million and
$(9) million in 2019, $104 million and $(32) million in 2018 and $272
million and $(22) million in 2017, respectively.
(2) 2019 reflects the tax effect of the accounting change for ASU 2016-02.
2018 reflects the tax effect of the accounting change for ASU 2016-16
and the tax effect of the accounting change for ASU 2018-03, to report
the net unrealized gains on former AFS equity securities. 2017 reflects
the tax effect of the accounting change for ASU 2017-08. See Note 1 to
the Consolidated Financial Statements.
As set forth in the table above, Citi’s effective tax rate for
2019 was 18.5%. The rate is lower than the 22.8% reported in
2018, primarily due to the general basket FTC valuation
allowance release.
Deferred Income Taxes
Deferred income taxes at December 31 related to the
following:
In millions of dollars
Deferred tax assets
Credit loss deduction
Deferred compensation and employee benefits
Repositioning and settlement reserves
U.S. tax on non-U.S. earnings
Investment and loan basis differences
Tax credit and net operating loss carry-forwards
Fixed assets and leases
Other deferred tax assets
Gross deferred tax assets
Valuation allowance
Deferred tax assets after valuation allowance
Deferred tax liabilities
Intangibles and leases
Debt issuances
Non-U.S. withholding taxes
Interest-related items
Other deferred tax liabilities
Gross deferred tax liabilities
Net deferred tax assets
2019
2018
2,224
345
1,030
2,727
19,711
2,607
2,996
$ 3,809 $ 3,419
1,975
428
2,080
4,891
20,759
1,006
2,385
$35,449 $36,943
$ 6,476 $ 9,258
$28,973 $27,685
(201)
(974)
(587)
(1,477)
$ (2,640) $ (1,284)
(530)
(1,040)
(594)
(1,334)
$ (5,879) $ (4,782)
$23,094 $22,903
168
Unrecognized Tax Benefits
The following is a rollforward of the Company’s unrecognized
tax benefits:
In millions of dollars
2019
2018
2017
Total unrecognized tax benefits at
January 1
Net amount of increases for current
year’s tax positions
Gross amount of increases for prior
years’ tax positions
Gross amount of decreases for prior
years’ tax positions
Amounts of decreases relating to
settlements
Reductions due to lapse of statutes of
limitation
Foreign exchange, acquisitions and
dispositions
Total unrecognized tax benefits at
December 31
$
607 $ 1,013 $ 1,092
50
151
40
46
43
324
(44)
(174)
(246)
(21)
(283)
(199)
(23)
(23)
(11)
1
(12)
10
$
721 $
607 $ 1,013
In millions of dollars
The total amounts of unrecognized tax benefits at
December 31, 2019, 2018 and 2017 that, if recognized, would
affect Citi’s tax expense are $0.6 billion, $0.4 billion and $0.8
billion, respectively. The remaining uncertain tax positions
have offsetting amounts in other jurisdictions or are temporary
differences.
Interest and penalties (not included in “unrecognized tax
benefits” above) are a component of Provision for income
taxes.
2019
2018
Pretax Net of tax Pretax Net of tax Pretax Net of tax
2017
Total interest and penalties on the Consolidated Balance Sheet at January 1
$
103 $
85 $ 121 $
101 $ 260 $
Total interest and penalties in the Consolidated Statement of Income
Total interest and penalties on the Consolidated Balance Sheet at December 31(1)
(4)
100
(4)
82
6
103
6
85
5
121
164
21
101
(1)
Includes $3 million, $2 million and $3 million for non-U.S. penalties in 2019, 2018 and 2017. Also includes $1 million, $1 million and $3 million for state
penalties in 2019, 2018 and 2017.
As of December 31, 2019, Citi was under audit by the
Internal Revenue Service and other major taxing jurisdictions
around the world. It is thus reasonably possible that significant
changes in the gross balance of unrecognized tax benefits may
occur within the next 12 months, although Citi does not expect
such audits to result in amounts that would cause a significant
change to its effective tax rate.
The following are the major tax jurisdictions in which the
Company and its affiliates operate and the earliest tax year
subject to examination:
Jurisdiction
United States
Mexico
New York State and City
United Kingdom
India
Singapore
Hong Kong
Ireland
Tax year
2016
2014
2009
2015
2016
2011
2013
2015
169
Non-U.S. Earnings
Non-U.S. pretax earnings approximated $16.7 billion in 2019,
$16.1 billion in 2018 and $13.7 billion in 2017. As a U.S.
corporation, Citigroup and its U.S. subsidiaries are currently
subject to U.S. taxation on all non-U.S. pretax earnings of
non-U.S. branches. Beginning in 2018, there is a separate
foreign tax credit (FTC) basket for branches. Also, dividends
from a non-U.S. subsidiary or affiliate are effectively exempt
from U.S. taxation. The Company provides income taxes on
the book over tax basis differences of non-U.S. subsidiaries
except to the extent that such differences are indefinitely
reinvested outside the U.S.
At December 31, 2019, $10.9 billion of basis differences
of non-U.S. entities was indefinitely invested compared to
$15.5 billion at December 31, 2018. At the existing tax rates,
additional taxes (net of U.S. FTCs) of $4.1 billion would have
to be provided if such assertions were reversed. The decrease
of $4.6 billion in basis differences from the prior year end was
primarily due to a tax election to treat a contiguous country
affiliate as a branch rather than a subsidiary.
Income taxes are not provided for the Company’s
“savings bank base year bad debt reserves” that arose before
1988, because under current U.S. tax rules, such taxes will
become payable only to the extent that such amounts are
distributed in excess of limits prescribed by federal law. At
December 31, 2019, the amount of the base year reserves
In billions of dollars
Jurisdiction/component(1)
U.S. federal(2)
Net operating losses (NOLs)(3)
Foreign tax credits (FTCs)
General business credits (GBCs)
Future tax deductions and credits
Total U.S. federal
State and local
New York NOLs
Other state NOLs
Future tax deductions
Total state and local
Non-U.S.
NOLs
Future tax deductions
Total non-U.S.
Total
DTAs balance
December 31,
2019
DTAs balance
December 31,
2018
$
$
$
$
$
$
$
2.8 $
6.3
2.5
6.2
17.8 $
1.7 $
0.2
1.3
3.2 $
0.5 $
1.6
2.1 $
23.1 $
2.6
6.8
1.0
6.7
17.1
2.0
0.2
1.4
3.6
0.6
1.6
2.2
22.9
(1) All amounts are net of valuation allowances.
(2)
Included in the net U.S. federal DTAs of $17.8 billion as of December
31, 2019 were deferred tax liabilities of $3.4 billion that will reverse in
the relevant carry-forward period and may be used to support the DTAs.
(3) Consists of non-consolidated tax return NOL carry-forwards that are
eventually expected to be utilized in Citigroup’s consolidated tax return.
totaled approximately $358 million (subject to a tax of $75
million).
Deferred Tax Assets
As of December 31, 2019, Citi had a valuation allowance of
$6.5 billion, composed of valuation allowances of $4.6 billion
on its FTC carry-forwards, $0.8 billion on its U.S. residual
DTA related to its non-U.S. branches, $1.0 billion on local
non-U.S. DTAs and $0.1 billion on state net operating loss
carry-forwards. The valuation allowance against FTCs results
from the impact of the lower tax rate and the new separate
FTC basket for non-U.S. branches. The absolute amount of
Citi’s post-Tax Reform-related valuation allowances may
change in future years. First, the separate FTC basket for non-
U.S. branches may result in additional DTAs (for FTCs)
requiring a valuation allowance, given that the local tax rate
for these branches exceeds on average the U.S. tax rate of
21%, offset by expirations of carry-forwards. The valuation
allowance for the branch basket FTCs was reduced from $4.4
billion to $3.5 billion, primarily as a result of the expiration of
the 2009 FTC carry-forward.
Second, in Citi’s general basket for FTCs, changes in the
forecasted amount of income in U.S. locations derived from
sources outside the U.S., as well as actions that Citi may be
able to take to enhance such income, in addition to tax
examination changes from prior years, could alter the amount
of valuation allowance that is needed against such FTCs. The
valuation allowance for the general basket decreased from
$1.6 billion to $1.1 billion. The decrease consists of the
following items. Citi committed to a plan to move a financing
business involving non-U.S. clients and its associated funding
to the U.S. The incremental foreign source income generated
by this action over time will more-likely-than-not enable
usage of FTC carry-forwards of $0.2 billion. In addition, Citi
committed to a plan as part of the Company’s liquidity
management program, to increase its ownership of certain
types of non-U.S. securities and to hold such securities in its
U.S. operations. The incremental foreign source income
generated by this action will more-likely-than-not enable the
usage of FTC carry-forwards of another $0.2 billion. The
remainder of the decrease in the valuation allowance in the
general basket was the result of other increases in foreign
source income of $0.3 billion (of which $0.2 billion is
considered discrete and $0.1 billion is related to changes in
2019 foreign source income), partially offset by an increase of
$0.2 billion relating to prior years’ tax return adjustments that
increased FTCs and the corresponding valuation allowance.
The valuation allowance for U.S. residual DTA related to its
non-U.S. branches decreased from $1.7 billion to $0.8 billion
primarily due to a tax election to convert a contiguous country
subsidiary into a branch, which resulted in $0.9 billion of U.S.
DTLs offsetting non-U.S local DTAs. In addition, the non-
U.S. local valuation allowance was reduced from $1.5 billion
to $1.0 billion, primarily due to an expiration of NOL carry-
forwards in a non-U.S. jurisdiction. The following table
summarizes Citi’s DTAs:
170
The time remaining for utilization of the FTC component
has shortened, given the passage of time. Although realization
is not assured, Citi believes that the realization of the
recognized net DTAs of $23.1 billion at December 31, 2019 is
more-likely-than-not, based upon expectations as to future
taxable income in the jurisdictions in which the DTAs arise
and consideration of available tax planning strategies (as
defined in ASC 740, Income Taxes).
Citi believes the U.S. federal and New York State and
City NOL carry-forward period of 20 years provides enough
time to fully utilize the DTAs pertaining to the existing NOL
carry-forwards. This is due to Citi’s forecast of sufficient U.S.
taxable income and the fact that New York State and City
continue to tax Citi’s non-U.S. income.
With respect to the FTCs component of the DTAs, the
carry-forward period is 10 years. Utilization of FTCs in any
year is generally limited to 21% of foreign source taxable
income in that year. However, overall domestic losses that Citi
has incurred of approximately $39 billion as of December 31,
2019 are allowed to be reclassified as foreign source income
to the extent of 50%–100% (at taxpayer’s election) of
domestic source income produced in subsequent years. Such
resulting foreign source income would substantially cover the
FTC carry-forwards after valuation allowance. As noted in the
tables above, Citi’s FTC carry-forwards were $6.3 billion
($10.9 billion before valuation allowance) as of December 31,
2019, compared to $6.8 billion as of December 31, 2018. Citi
believes that it will generate sufficient U.S. taxable income
within the 10-year carry-forward period to be able to utilize
the net FTCs after the valuation allowance, after considering
any FTCs produced in the tax return for such period, which
must be used prior to any carry-forward utilization.
The following table summarizes the amounts of tax carry-
forwards and their expiration dates:
In billions of dollars
Year of expiration
U.S. tax return general basket foreign
tax credit carry-forwards(1)
2020
2021
2022
2023
2025
2027
Total U.S. tax return general basket
foreign tax credit carry-forwards
U.S. tax return branch basket foreign
tax credit carry-forwards(1)
2019
2020
2021
2022
2028
2029
Total U.S. tax return branch basket
foreign tax credit carry-forwards
U.S. tax return general business credit
carry-forwards
2033
2034
2035
2036
2037
2038
2039
Total U.S. tax return general business
credit carry-forwards
U.S. subsidiary separate federal NOL
carry-forwards
2027
2028
2030
2032
2033
2034
2035
2036
2037
Unlimited carry-forward period
Total U.S. subsidiary separate federal
NOL carry-forwards(2)
New York State NOL carry-forwards(2)
2034
New York City NOL carry-forwards(2)
2034
Non-U.S. NOL carry-forwards(1)
Various
(1) Before valuation allowance.
(2) Pretax.
December
31, 2019
December
31, 2018
$
$
$
$
$
$
$
$
$
$
$
0.9 $
1.1
2.4
0.4
1.4
1.2
7.4 $
— $
0.7
0.6
1.0
0.9
0.3
3.5 $
0.3 $
0.2
0.2
0.1
0.5
0.5
0.7
2.5 $
0.1 $
0.1
0.3
—
1.6
2.0
3.3
2.1
1.0
3.0
2.0
1.1
2.4
0.4
1.4
1.1
8.4
0.9
0.6
0.7
0.9
1.3
—
4.4
—
—
—
0.1
0.4
0.5
—
1.0
0.2
0.1
0.3
0.1
1.6
2.1
3.3
2.1
1.0
1.7
13.5 $
12.5
9.9 $
11.7
10.0 $
11.5
1.5 $
2.0
171
10. EARNINGS PER SHARE
The following table reconciles the income and share data used in the basic and diluted earnings per share (EPS) computations:
In millions of dollars, except per share amounts
Earnings per common share
Income from continuing operations before attribution of noncontrolling interests
Less: Noncontrolling interests from continuing operations
Net income from continuing operations (for EPS purposes)
Loss from discontinued operations, net of taxes
Citigroup's net income
Less: Preferred dividends(1)
Net income available to common shareholders
Less: Dividends and undistributed earnings allocated to employee restricted and deferred shares
with rights to dividends, applicable to basic EPS
Net income allocated to common shareholders for basic EPS
Weighted-average common shares outstanding applicable to basic EPS (in millions)
Basic earnings per share(2)
Income from continuing operations
Discontinued operations
Net income per share—basic
Diluted earnings per share
Net income allocated to common shareholders for basic EPS
Add back: Dividends allocated to employee restricted and deferred shares with rights to dividends
that are forfeitable
Net income allocated to common shareholders for diluted EPS
Weighted-average common shares outstanding applicable to basic EPS (in millions)
Effect of dilutive securities
Options(3)
Other employee plans
Adjusted weighted-average common shares outstanding applicable to diluted EPS (in millions)(4)
Diluted earnings per share(2)
Income from continuing operations
Discontinued operations
Net income per share—diluted
2019
2018
2017
$
$
$
$
19,471 $
18,088 $
(6,627)
66
35
60
19,405 $
18,053 $
(6,687)
(4)
(8)
(111)
19,401 $
18,045 $
(6,798)
1,109
1,174
1,213
18,292 $
16,871 $
(8,011)
121
200
37
$
18,171 $
16,671 $
(8,048)
2,249.2
2,493.3
2,698.5
$
$
$
$
$
$
$
8.08 $
6.69 $
—
—
8.08 $
6.69 $
(2.94)
(0.04)
(2.98)
18,171 $
16,671 $
(8,048)
33
—
—
18,204 $
16,671 $
(8,048)
2,249.2 $
2,493.3 $
2,698.5
0.1
16.0
0.1
1.4
—
—
2,265.3
2,494.8
2,698.5
8.04 $
6.69 $
—
—
8.04 $
6.68 $
(2.94)
(0.04)
(2.98)
(1) See Note 20 to the Consolidated Financial Statements for the potential future impact of preferred stock dividends.
(2) Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.
(3) During 2019, no significant options to purchase shares of common stock were outstanding. During 2018 and 2017, weighted-average options to purchase 0.5
million and 0.8 million shares of common stock, respectively, were outstanding but not included in the computation of earnings per share because the weighted-
average exercise prices of $145.69 and $204.80 per share, respectively, were anti-dilutive.
(4) Due to rounding, common shares outstanding applicable to basic EPS and the effect of dilutive securities may not sum to common shares outstanding applicable to
diluted EPS.
172
11. SECURITIES BORROWED, LOANED AND
SUBJECT TO REPURCHASE AGREEMENTS
Securities borrowed and purchased under agreements to
resell, at their respective carrying values, consisted of the
following:
In millions of dollars
Securities purchased under
agreements to resell
Deposits paid for securities
borrowed
Total(1)
December 31, December 31,
2019
2018
$
$
169,874 $
159,364
81,448
251,322 $
111,320
270,684
Securities loaned and sold under agreements to
repurchase, at their respective carrying values, consisted of the
following:
December 31, December 31,
In millions of dollars
2019
2018
Securities sold under agreements
to repurchase
Deposits received for securities
loaned
Total(1)
$
$
155,164 $
166,090
11,175
11,678
166,339 $
177,768
(1) The above tables do not include securities-for-securities lending
transactions of $6.3 billion and $15.9 billion at December 31, 2019 and
2018, respectively, where the Company acts as lender and receives
securities that can be sold or pledged as collateral. In these transactions,
the Company recognizes the securities received at fair value within
Other assets and the obligation to return those securities as a liability
within Brokerage payables.
The resale and repurchase agreements represent
collateralized financing transactions. Citi executes these
transactions primarily through its broker-dealer subsidiaries to
facilitate customer matched-book activity and to efficiently
fund a portion of Citi’s trading inventory. Transactions
executed by Citi’s bank subsidiaries primarily facilitate
customer financing activity.
To maintain reliable funding under a wide range of market
conditions, including under periods of stress, Citi manages
these activities by taking into consideration the quality of the
underlying collateral and stipulating financing tenor. Citi
manages the risks in its collateralized financing transactions
by conducting daily stress tests to account for changes in
capacity, tenors, haircut, collateral profile and client actions.
In addition, Citi maintains counterparty diversification by
establishing concentration triggers and assessing counterparty
reliability and stability under stress.
It is the Company’s policy to take possession of the
underlying collateral, monitor its market value relative to the
amounts due under the agreements and, when necessary,
require prompt transfer of additional collateral in order to
maintain contractual margin protection. For resale and
repurchase agreements, when necessary, the Company posts
additional collateral in order to maintain contractual margin
protection.
173
Collateral typically consists of government and
government-agency securities, corporate and municipal bonds,
equities and mortgage- and other asset-backed securities.
The resale and repurchase agreements are generally
documented under industry standard agreements that allow the
prompt close-out of all transactions (including the liquidation
of securities held) and the offsetting of obligations to return
cash or securities by the non-defaulting party, following a
payment default or other type of default under the relevant
master agreement. Events of default generally include
(i) failure to deliver cash or securities as required under the
transaction, (ii) failure to provide or return cash or securities
as used for margining purposes, (iii) breach of representation,
(iv) cross-default to another transaction entered into among
the parties, or, in some cases, their affiliates and (v) a
repudiation of obligations under the agreement. The
counterparty that receives the securities in these transactions is
generally unrestricted in its use of the securities, with the
exception of transactions executed on a tri-party basis, where
the collateral is maintained by a custodian and operational
limitations may restrict its use of the securities.
A substantial portion of the resale and repurchase
agreements is recorded at fair value, as described in Notes 24
and 25 to the Consolidated Financial Statements. The
remaining portion is carried at the amount of cash initially
advanced or received, plus accrued interest, as specified in the
respective agreements.
The securities borrowing and lending agreements also
represent collateralized financing transactions similar to the
resale and repurchase agreements. Collateral typically consists
of government and government-agency securities and
corporate debt and equity securities.
Similar to the resale and repurchase agreements, securities
borrowing and lending agreements are generally documented
under industry standard agreements that allow the prompt
close-out of all transactions (including the liquidation of
securities held) and the offsetting of obligations to return cash
or securities by the non-defaulting party, following a payment
default or other default by the other party under the relevant
master agreement. Events of default and rights to use
securities under the securities borrowing and lending
agreements are similar to the resale and repurchase
agreements referenced above.
A substantial portion of securities borrowing and lending
agreements is recorded at the amount of cash advanced or
received. The remaining portion is recorded at fair value as the
Company elected the fair value option for certain securities
borrowed and loaned portfolios, as described in Note 25 to the
Consolidated Financial Statements. With respect to securities
loaned, the Company receives cash collateral in an amount
generally in excess of the market value of the securities
loaned. The Company monitors the market value of securities
borrowed and securities loaned on a daily basis and obtains or
posts additional collateral in order to maintain contractual
margin protection.
The enforceability of offsetting rights incorporated in the
master netting agreements for resale and repurchase
agreements, and securities borrowing and lending agreements,
is evidenced to the extent that (i) a supportive legal opinion
has been obtained from counsel of recognized standing that
provides the requisite level of certainty regarding the
enforceability of these agreements and (ii) the exercise of
rights by the non-defaulting party to terminate and close out
transactions on a net basis under these agreements will not be
stayed or avoided under applicable law upon an event of
default including bankruptcy, insolvency or similar
proceeding.
A legal opinion may not have been sought or obtained for
certain jurisdictions where local law is silent or sufficiently
ambiguous to determine the enforceability of offsetting rights
or where adverse case law or conflicting regulation may cast
doubt on the enforceability of such rights. In some
jurisdictions and for some counterparty types, the insolvency
law for a particular counterparty type may be nonexistent or
unclear as overlapping regimes may exist. For example, this
may be the case for certain sovereigns, municipalities, central
banks and U.S. pension plans.
The following tables present the gross and net resale and
repurchase agreements and securities borrowing and lending
agreements and the related offsetting amounts permitted under
ASC 210-20-45. The tables also include amounts related to
financial instruments that are not permitted to be offset under
ASC 210-20-45, but would be eligible for offsetting to the
extent that an event of default has occurred and a legal opinion
supporting enforceability of the offsetting rights has been
obtained. Remaining exposures continue to be secured by
financial collateral, but the Company may not have sought or
been able to obtain a legal opinion evidencing enforceability
of the offsetting right.
As of December 31, 2019
In millions of dollars
Securities purchased under agreements to
resell
Deposits paid for securities borrowed
Total
Gross amounts
of recognized
assets
Gross amounts
offset on the
Consolidated
Balance Sheet(1)
Net amounts of
assets included on
the Consolidated
Balance Sheet
Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default(2)
Net
amounts(3)
$
$
281,274 $
111,400 $
90,047
8,599
371,321 $
119,999 $
169,874 $
81,448
251,322 $
134,150 $
27,067
161,217 $
35,724
54,381
90,105
In millions of dollars
Securities sold under agreements to
repurchase
Deposits received for securities loaned
Total
Gross amounts
of recognized
liabilities
Gross amounts
offset on the
Consolidated
Balance Sheet(1)
Net amounts of
liabilities included on
the Consolidated
Balance Sheet
Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default(2)
Net
amounts(3)
$
$
266,564 $
111,400 $
19,774
8,599
286,338 $
119,999 $
155,164 $
11,175
166,339 $
91,034 $
64,130
3,138
8,037
94,172 $
72,167
In millions of dollars
Securities purchased under agreements to
resell
Deposits paid for securities borrowed
Total
In millions of dollars
Securities sold under agreements to
repurchase
Deposits received for securities loaned
Total
As of December 31, 2018
Gross amounts
of recognized
assets
Gross amounts
offset on the
Consolidated
Balance Sheet(1)
Net amounts of
assets included on
the Consolidated
Balance Sheet
Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default(2)
Net
amounts(3)
$
$
246,788 $
111,320
358,108 $
87,424 $
—
87,424 $
159,364 $
111,320
270,684 $
124,557 $
35,766
34,807
75,554
160,323 $
110,361
Gross amounts
of recognized
liabilities
Gross amounts
offset on the
Consolidated
Balance Sheet(1)
Net amounts of
liabilities included on
the Consolidated
Balance Sheet
Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default(2)
Net
amounts(3)
$
$
253,514 $
87,424 $
11,678
—
265,192 $
87,424 $
166,090 $
11,678
177,768 $
82,823 $
83,267
3,415
8,263
86,238 $
91,530
174
(1)
(2)
Includes financial instruments subject to enforceable master netting agreements that are permitted to be offset under ASC 210-20-45.
Includes financial instruments subject to enforceable master netting agreements that are not permitted to be offset under ASC 210-20-45, but would be eligible for
offsetting to the extent that an event of default has occurred and a legal opinion supporting enforceability of the offsetting right has been obtained.
(3) Remaining exposures continue to be secured by financial collateral, but the Company may not have sought or been able to obtain a legal opinion evidencing
enforceability of the offsetting right.
The following tables present the gross amounts of liabilities associated with repurchase agreements and securities lending agreements
by remaining contractual maturity:
In millions of dollars
Securities sold under agreements to repurchase
Deposits received for securities loaned
Total
In millions of dollars
Securities sold under agreements to repurchase
Deposits received for securities loaned
Total
As of December 31, 2019
Open and
overnight
Up to 30 days
31–90 days
Greater than
90 days
Total
108,534 $
82,749 $
35,108 $
40,173 $
266,564
15,758
208
1,789
2,019
19,774
124,292 $
82,957 $
36,897 $
42,192 $
286,338
As of December 31, 2018
Open and
overnight
Up to 30 days
31–90 days
Greater than
90 days
Total
108,405 $
70,850 $
29,898 $
44,361 $
253,514
6,296
774
2,626
1,982
11,678
114,701 $
71,624 $
32,524 $
46,343 $
265,192
$
$
$
$
The following tables present the gross amounts of liabilities associated with repurchase agreements and securities lending agreements
by class of underlying collateral:
In millions of dollars
Repurchase
agreements
As of December 31, 2019
Securities lending
agreements
Total
U.S. Treasury and federal agency securities
$
100,781 $
27 $
100,808
State and municipal securities
Foreign government securities
Corporate bonds
Equity securities
Mortgage-backed securities
Asset-backed securities
Other
Total
In millions of dollars
U.S. Treasury and federal agency securities
State and municipal securities
Foreign government securities
Corporate bonds
Equity securities
Mortgage-backed securities
Asset-backed securities
Other
Total
$
$
1,938
95,880
18,761
12,010
28,458
4,873
3,863
5
272
249
19,069
—
—
152
1,943
96,152
19,010
31,079
28,458
4,873
4,015
266,564 $
19,774 $
286,338
Repurchase
agreements
As of December 31, 2018
Securities lending
agreements
Total
86,785 $
41 $
2,605
99,131
21,719
12,920
19,421
6,207
4,726
—
179
749
10,664
—
—
45
86,826
2,605
99,310
22,468
23,584
19,421
6,207
4,771
$
253,514 $
11,678 $
265,192
175
12. BROKERAGE RECEIVABLES AND BROKERAGE
PAYABLES
The Company has receivables and payables for financial
instruments sold to and purchased from brokers, dealers and
customers, which arise in the ordinary course of business.
Citi is exposed to risk of loss from the inability of brokers,
dealers or customers to pay for purchases or to deliver the
financial instruments sold, in which case Citi would have to
sell or purchase the financial instruments at prevailing
market prices. Credit risk is reduced to the extent that an
exchange or clearing organization acts as a counterparty to
the transaction and replaces the broker, dealer or customer in
question.
Citi seeks to protect itself from the risks associated with
customer activities by requiring customers to maintain
margin collateral in compliance with regulatory and internal
guidelines. Margin levels are monitored daily, and customers
deposit additional collateral as required. Where customers
cannot meet collateral requirements, Citi may liquidate
sufficient underlying financial instruments to bring the
customer into compliance with the required margin level.
Exposure to credit risk is impacted by market volatility,
which may impair the ability of clients to satisfy their
obligations to Citi. Credit limits are established and closely
monitored for customers and for brokers and dealers
engaged in forwards, futures and other transactions deemed
to be credit sensitive.
Brokerage receivables and Brokerage payables
consisted of the following:
In millions of dollars
December 31,
2019
2018
Receivables from customers
$
15,912 $
14,415
Receivables from brokers,
dealers and clearing
organizations
Total brokerage receivables(1) $
Payables to customers
$
Payables to brokers, dealers
and clearing organizations
Total brokerage payables(1)
23,945
39,857 $
37,613 $
10,988
$
48,601 $
21,035
35,450
40,273
24,298
64,571
(1) Includes brokerage receivables and payables recorded by Citi broker-
dealer entities that are accounted for in accordance with the AICPA
Accounting Guide for Brokers and Dealers in Securities as codified in
ASC 940-320.
176
13. INVESTMENTS
The following table presents Citi’s investments by category:
In millions of dollars
Debt securities AFS
Debt securities HTM(1)
Marketable equity securities carried at fair value(2)
Non-marketable equity securities carried at fair value(2)
Non-marketable equity securities measured using the measurement alternative(3)
Non-marketable equity securities carried at cost(4)
Total investments
December 31,
2019
2018
$
280,265 $
80,775
458
704
700
5,661
$
368,563 $
288,038
63,357
220
889
538
5,565
358,607
(1) Carried at adjusted amortized cost basis, net of any credit-related impairment.
(2) Unrealized gains and losses are recognized in earnings.
(3)
(4) Primarily consists of shares issued by the Federal Reserve Bank, Federal Home Loan Banks and certain exchanges of which Citigroup is a member.
Impairment losses and adjustments to the carrying value as a result of observable price changes are recognized in earnings.
The following table presents interest and dividend income on investments:
In millions of dollars
Taxable interest
Interest exempt from U.S. federal income tax
Dividend income
Total interest and dividend income
2019
2018
2017
$
$
9,269 $
8,704 $
404
187
521
269
7,538
535
222
9,860 $
9,494 $
8,295
The following table presents realized gains and losses on the sales of investments, which exclude OTTI losses:
In millions of dollars
Gross realized investment gains
Gross realized investment losses
Net realized gains on sale of investments
2019
2018
2017
$
$
1,599 $
(125)
1,474 $
682 $
(261)
421 $
1,039
(261)
778
177
The Company from time to time may sell certain debt
securities that were classified as HTM. These sales were in
response to significant deterioration in the creditworthiness of
the issuers or securities or because the Company has collected
a substantial portion (at least 85%) of the principal
outstanding at acquisition of the security. In addition, certain
other debt securities were reclassified to AFS investments in
response to significant credit deterioration. Because the
Company generally intends to sell these reclassified debt
securities, Citi recorded OTTI on the securities. The following
table presents, for the periods indicated, the carrying value of
HTM debt securities sold and reclassified to AFS, as well as
the related gain (loss) or the OTTI losses recorded on these
securities:
In millions of dollars
Carrying value of HTM debt securities sold
Net realized gain (loss) on sale of HTM debt securities
Carrying value of debt securities reclassified to AFS
OTTI losses on debt securities reclassified to AFS
2019
2018
2017
$
— $
61 $
—
—
—
—
8
—
81
13
74
—
Debt Securities Available-for-Sale
The amortized cost and fair value of AFS debt securities were as follows:
2019
2018
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
In millions of dollars
Debt securities AFS
Mortgage-backed securities(1)
U.S. government agency guaranteed
$
34,963 $
547 $
280 $ 35,230 $
43,504 $
241 $
725 $ 43,020
Non-U.S. residential
Commercial
789
75
3
—
—
—
792
75
1,310
174
4
1
2
2
1,312
173
Total mortgage-backed securities
$
35,827 $
550 $
280 $ 36,097 $
44,988 $
246 $
729 $ 44,505
U.S. Treasury and federal agency
securities
U.S. Treasury
Agency obligations
Total U.S. Treasury and federal agency
securities
State and municipal
Foreign government
Corporate
Asset-backed securities(1)
Other debt securities
$
106,429 $
50 $
380 $ 106,099 $ 109,376 $
33 $
1,339 $ 108,070
5,336
3
20
5,319
9,283
1
132
9,152
$
$
111,765 $
5,024 $
53 $
43 $
400 $ 111,418 $ 118,659 $
89 $
4,978 $
9,372 $
34 $
96 $
1,471 $ 117,222
262 $
9,206
110,958
11,266
524
4,729
586
52
—
1
241
101
2
—
111,303
100,872
11,217
11,714
522
4,730
845
3,973
415
42
2
—
596
157
4
1
100,691
11,599
843
3,972
Total debt securities AFS
$
280,093 $
1,285 $
1,113 $ 280,265 $ 290,423 $
835 $
3,220 $ 288,038
(1) The Company invests in mortgage- and asset-backed securities. These securitization entities are generally considered VIEs. The Company’s maximum exposure
to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage- and asset-backed securitizations in
which the Company has other involvement, see Note 21 to the Consolidated Financial Statements.
At December 31, 2019, the amortized cost of fixed
income securities exceeded their fair value by $1,113 million.
Of the $1,113 million, $802 million represented unrealized
losses on fixed income investments that have been in a gross-
unrealized-loss position for less than a year and, of these,
93% were rated investment grade; and $311 million
represented unrealized losses on fixed income investments
that have been in a gross-unrealized-loss position for a year or
more and, of these, 92% were rated investment grade. Of the
$311 million mentioned above, $132 million represents U.S.
Treasury securities.
178
The following table shows the fair value of AFS debt securities that have been in an unrealized loss position:
In millions of dollars
December 31, 2019
Debt securities AFS
Mortgage-backed securities
U.S. government agency guaranteed
Non-U.S. residential
Commercial
Total mortgage-backed securities
U.S. Treasury and federal agency securities
U.S. Treasury
Agency obligations
Total U.S. Treasury and federal agency securities
State and municipal
Foreign government
Corporate
Asset-backed securities
Other debt securities
Total debt securities AFS
December 31, 2018
Debt securities AFS
Mortgage-backed securities
Less than 12 months
12 months or longer
Total
Fair
value
Gross
unrealized
losses
Fair
value
Gross
unrealized
losses
Fair
value
Gross
unrealized
losses
$
9,780 $
242 $
1,877 $
38 $
11,657 $
$
$
$
$
208
16
—
—
1
27
—
—
209
43
10,004 $
242 $
1,905 $
38 $
11,909 $
45,484 $
248 $
26,907 $
132 $
72,391 $
781
2
3,897
18
4,678
46,265 $
250 $
30,804 $
150 $
77,069 $
362 $
62 $
266 $
27 $
628 $
35,485
2,916
112
1,307
149
8,170
98
1
—
123
166
—
92
3
1
—
43,655
3,039
278
1,307
280
—
—
280
380
20
400
89
241
101
2
—
$
96,451 $
802 $
41,434 $
311 $ 137,885 $
1,113
U.S. government agency guaranteed
$
11,160 $
286 $
13,143 $
439 $
24,303 $
725
Non-U.S. residential
Commercial
Total mortgage-backed securities
U.S. Treasury and federal agency securities
U.S. Treasury
Agency obligations
Total U.S. Treasury and federal agency securities
State and municipal
Foreign government
Corporate
Asset-backed securities
Other debt securities
Total debt securities AFS
$
$
$
$
284
79
2
1
2
82
—
1
286
161
2
2
11,523 $
289 $
13,227 $
440 $
24,750 $
729
8,389 $
42 $
77,883 $
1,297 $
86,272 $
1,339
277
8,666 $
1,614 $
40,655
4,547
441
1,790
2
8,660
130
8,937
132
44 $
86,543 $
1,427 $
95,209 $
1,471
34 $
1,303 $
228 $
2,917 $
265
115
4
1
15,053
2,077
55
—
331
55,708
42
—
—
6,624
496
1,790
262
596
157
4
1
$
69,236 $
752 $ 118,258 $
2,468 $ 187,494 $
3,220
179
The following table presents the amortized cost and fair value of AFS debt securities by contractual maturity dates:
In millions of dollars
Mortgage-backed securities(1)
Due within 1 year
After 1 but within 5 years
After 5 but within 10 years
After 10 years(2)
Total
U.S. Treasury and federal agency securities
Due within 1 year
After 1 but within 5 years
After 5 but within 10 years
After 10 years(2)
Total
State and municipal
Due within 1 year
After 1 but within 5 years
After 5 but within 10 years
After 10 years(2)
Total
Foreign government
Due within 1 year
After 1 but within 5 years
After 5 but within 10 years
After 10 years(2)
Total
All other(3)
Due within 1 year
After 1 but within 5 years
After 5 but within 10 years
After 10 years(2)
Total
Total debt securities AFS
December 31,
2019
2018
Amortized
cost
Fair
value
Amortized
cost
Fair
value
$
$
$
20 $
20 $
14 $
573
594
574
626
662
2,779
34,640
34,877
41,533
35,827 $
36,097 $
44,988 $
40,757 $
40,688 $
41,941 $
70,128
69,850
76,139
854
26
851
29
489
90
14
661
2,828
41,002
44,505
41,867
74,800
462
93
$
111,765 $
111,418 $
118,659 $
117,222
$
$
$
932 $
932 $
2,586 $
714
195
3,183
723
215
3,108
1,676
585
4,525
5,024 $
4,978 $
9,372 $
42,611 $
42,666 $
39,078 $
58,820
59,071
8,192
1,335
8,198
1,368
50,125
10,153
1,516
2,586
1,675
602
4,343
9,206
39,028
49,962
10,149
1,552
$
110,958 $
111,303 $
100,872 $
100,691
$
7,306 $
7,311 $
6,166 $
8,279
818
116
8,275
797
86
8,459
1,474
433
6,166
8,416
1,427
405
$
$
16,519 $
16,469 $
16,532 $
16,414
280,093 $
280,265 $
290,423 $
288,038
(1)
(2)
(3)
Includes mortgage-backed securities of U.S. government-sponsored agencies.
Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment
rights.
Includes corporate, asset-backed and other debt securities.
180
Debt Securities Held-to-Maturity
The carrying value and fair value of debt securities HTM were as follows:
In millions of dollars
December 31, 2019
Debt securities HTM
Mortgage-backed securities(1)(2)
U.S. government agency guaranteed
Non-U.S. residential
Commercial
Total mortgage-backed securities
State and municipal(3)
Foreign government
Asset-backed securities(1)
Total debt securities HTM
December 31, 2018
Debt securities HTM
Mortgage-backed securities(1)(4)
U.S. government agency guaranteed
Non-U.S. residential
Commercial
Total mortgage-backed securities
State and municipal
Foreign government
Asset-backed securities(1)
Total debt securities HTM
Carrying
value
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
$
$
$
$
$
$
$
$
46,637 $
1,047 $
1,039
582
48,258 $
9,104 $
1,934
21,479
5
1
1,053 $
455 $
37
12
21 $
—
—
21 $
28 $
1
59
80,775 $
1,557 $
109 $
34,239 $
1,339
368
35,946 $
7,628 $
1,027
18,756
63,357 $
199 $
12
—
211 $
167 $
—
8
386 $
578 $
1
—
579 $
138 $
24
112
853 $
47,663
1,044
583
49,290
9,531
1,970
21,432
82,223
33,860
1,350
368
35,578
7,657
1,003
18,652
62,890
(2)
(1) The Company invests in mortgage- and asset-backed securities. These securitization entities are generally considered VIEs. The Company’s maximum exposure
to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage- and asset-backed securitizations in
which the Company has other involvement, see Note 21 to the Consolidated Financial Statements.
In March 2019, Citibank transferred $5 billion of agency residential mortgage-backed securities (RMBS) from AFS classification to HTM classification in
accordance with ASC 320. At the time of transfer, the securities were in an unrealized loss position of $56 million. The loss amounts will remain in AOCI and be
amortized over the remaining life of the securities.
In December 2019, Citibank transferred $173 million of state and municipal bonds from AFS classification to HTM classification in accordance with ASC 320.
At the time of transfer, the bonds were in an unrealized gain position of $5 million. The gain amounts will remain in AOCI and be amortized over the remaining
life of the securities.
In November 2018, Citibank transferred $10 billion of agency residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities
(CMBS) from AFS classification to HTM classification in accordance with ASC 320. At the time of transfer, the securities were in an unrealized loss position of
$598 million. This amount will remain in AOCI and be amortized over the remaining life of the securities.
(4)
(3)
181
The Company has the positive intent and ability to hold
these securities to maturity or, where applicable, to exercise
any issuer call options, absent any unforeseen significant
changes in circumstances, including deterioration in credit or
changes in regulatory capital requirements.
The net unrealized losses classified in AOCI for HTM
securities primarily relate to debt securities previously
classified as AFS that were transferred to HTM, and include
any cumulative fair value hedge adjustments. The net
unrealized loss amount also includes any non-credit-related
changes in fair value of HTM debt securities that have
suffered credit impairment recorded in earnings. The AOCI
balance related to HTM debt securities is amortized as an
adjustment of yield, in a manner consistent with the accretion
of any difference between the carrying value at the transfer
date and par value of the same debt securities.
The table below shows the fair value of debt securities HTM that have been in an unrecognized loss position:
In millions of dollars
December 31, 2019
Debt securities HTM
Less than 12 months
12 months or longer
Total
Fair
value
Gross
unrecognized
losses
Fair
value
Gross
unrecognized
losses
Fair
value
Gross
unrecognized
losses
Mortgage-backed securities
$
3,590 $
10 $
1,116 $
11 $
4,706 $
State and municipal
Foreign government
Asset-backed securities
Total debt securities HTM
December 31, 2018
Debt securities HTM
Mortgage-backed securities
State and municipal
Foreign government
Asset-backed securities
Total debt securities HTM
34
1,970
7,972
1
1
11
1,125
—
765
27
—
48
1,159
1,970
8,737
$
13,566 $
23 $
3,006 $
86 $
16,572 $
$
2,822 $
20 $
18,086 $
559 $
20,908 $
981
1,003
13,008
34
24
112
1,242
—
—
104
—
—
2,223
1,003
13,008
$
17,814 $
190 $
19,328 $
663 $
37,142 $
21
28
1
59
109
579
138
24
112
853
Note: Excluded from the gross unrecognized losses presented in the above table are $(582) million and $(653) million of net unrealized losses recorded in AOCI as of
December 31, 2019 and 2018, respectively, primarily related to the difference between the amortized cost and carrying value of HTM debt securities that were
reclassified from AFS. Substantially all of these net unrecognized losses relate to securities that have been in a loss position for 12 months or longer at December 31,
2019 and 2018.
182
The following table presents the carrying value and fair value of HTM debt securities by contractual maturity dates:
In millions of dollars
Mortgage-backed securities
Due within 1 year
After 1 but within 5 years
After 5 but within 10 years
After 10 years(1)
Total
State and municipal
Due within 1 year
After 1 but within 5 years
After 5 but within 10 years
After 10 years(1)
Total
Foreign government
Due within 1 year
After 1 but within 5 years
After 5 but within 10 years
After 10 years(1)
Total
All other(2)
Due within 1 year
After 1 but within 5 years
After 5 but within 10 years
After 10 years(1)
Total
Total debt securities HTM
December 31,
2019
2018
Carrying value
Fair value
Carrying value
Fair value
$
$
$
$
$
$
$
$
$
17 $
17 $
3 $
458
1,662
46,121
463
1,729
47,081
539
997
34,407
48,258 $
49,290 $
35,946 $
2 $
123
597
8,382
9,104 $
650 $
1,284
—
—
26 $
160
590
8,755
9,531 $
652 $
1,318
—
—
37 $
168
540
6,883
7,628 $
60 $
967
—
—
3
540
1,011
34,024
35,578
37
174
544
6,902
7,657
36
967
—
—
1,934 $
1,970 $
1,027 $
1,003
— $
—
8,545
12,934
21,479 $
80,775 $
— $
—
8,543
12,889
21,432 $
82,223 $
— $
—
2,535
16,221
18,756 $
63,357 $
—
—
2,539
16,113
18,652
62,890
(1)
(2)
Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment
rights.
Includes corporate and asset-backed securities.
183
Evaluating Investments for Other-Than-Temporary
Impairment (OTTI)
Debt Securities
Overview
The Company conducts periodic reviews of all debt securities
with unrealized losses to evaluate whether the impairment is
other-than-temporary. This review applies to all debt
securities that are not measured at fair value through earnings.
Effective January 1, 2018, the AFS category was eliminated
for equity securities and, therefore, other-than-temporary
impairment (OTTI) review is not required for those securities.
An unrealized loss exists when the current fair value of
an individual debt security is lower than its adjusted
amortized cost basis. Unrealized losses that are determined to
be temporary in nature are recorded, net of tax, in AOCI for
AFS debt securities. Temporary losses related to HTM debt
securities generally are not recorded, as these investments are
carried at adjusted amortized cost basis. However, for HTM
debt securities with credit-related impairment, the credit loss
is recognized in earnings as OTTI, and any difference
between the cost basis adjusted for the OTTI and fair value is
recognized in AOCI and amortized as an adjustment of yield
over the remaining contractual life of the security. For debt
securities transferred to HTM from Trading account assets,
amortized cost is defined as the fair value of the securities at
the date of transfer, plus any accretion income and less any
impairment recognized in earnings subsequent to transfer. For
debt securities transferred to HTM from AFS, amortized cost
is defined as the original purchase cost, adjusted for the
cumulative accretion or amortization of any purchase discount
or premium, plus or minus any cumulative fair value hedge
adjustments, net of accretion or amortization, and less any
impairment recognized in earnings.
Regardless of the classification of debt securities as AFS
or HTM, the Company assesses each position with an
unrealized loss for OTTI. Factors considered in determining
whether a loss is temporary include:
•
•
•
•
•
the length of time and the extent to which fair value has
been below cost;
the severity of the impairment;
the cause of the impairment and the financial condition
and near-term prospects of the issuer;
activity in the market of the issuer that may indicate
adverse credit conditions; and
the Company’s ability and intent to hold the investment
for a period of time sufficient to allow for any anticipated
recovery.
The Company’s review for impairment generally entails:
•
•
•
identification and evaluation of impaired investments;
analysis of individual positions that have fair values
lower than amortized cost, including consideration of the
length of time the position has been in an unrealized loss
position and the expected recovery period;
consideration of evidential matter, including an
evaluation of factors or triggers that could cause
individual positions to qualify as having other-than-
184
temporary impairment and those that would not support
other-than-temporary impairment; and
documentation of the results of these analyses, as
required under business policies.
•
The entire difference between amortized cost basis and
fair value is recognized in earnings as OTTI for impaired debt
securities that the Company has an intent to sell or for which
the Company believes it will more-likely-than-not be required
to sell prior to recovery of the amortized cost basis. However,
for those debt securities that the Company does not intend to
sell and is not likely to be required to sell, only the credit-
related impairment is recognized in earnings and any non-
credit-related impairment is recorded in AOCI.
For debt securities, credit impairment exists where
management does not expect to receive contractual principal
and interest cash flows sufficient to recover the entire
amortized cost basis of a security.
The sections below describe the Company’s process for
identifying credit-related impairments for debt security types
that have the most significant unrealized losses as of
December 31, 2019.
Mortgage-Backed Securities
For U.S. mortgage-backed securities, credit impairment is
assessed using a cash flow model that estimates the principal
and interest cash flows on the underlying mortgages using the
security-specific collateral and transaction structure. The
model distributes the estimated cash flows to the various
tranches of securities, considering the transaction structure
and any subordination and credit enhancements that exist in
that structure. The cash flow model incorporates actual cash
flows on the mortgage-backed securities through the current
period and then estimates the remaining cash flows using a
number of assumptions, including default rates, prepayment
rates, recovery rates (on foreclosed properties) and loss
severity rates (on non-agency mortgage-backed securities).
Management develops specific assumptions using
market data, internal estimates and estimates published by
rating agencies and other third-party sources. Default rates are
projected by considering current underlying mortgage loan
performance, generally assuming the default of (i) 10% of
current loans, (ii) 25% of 30–59 day delinquent loans,
(iii) 70% of 60–90 day delinquent loans and (iv) 100% of 91+
day delinquent loans. These estimates are extrapolated along a
default timing curve to estimate the total lifetime pool default
rate. Other assumptions contemplate the actual collateral
attributes, including geographic concentrations, rating actions
and current market prices.
Cash flow projections are developed using different stress
test scenarios. Management evaluates the results of those
stress tests (including the severity of any cash shortfall
indicated and the likelihood of the stress scenarios actually
occurring based on the underlying pool’s characteristics and
performance) to assess whether management expects to
recover the amortized cost basis of the security. If cash flow
projections indicate that the Company does not expect to
recover its amortized cost basis, the Company recognizes the
estimated credit loss in earnings.
State and Municipal Securities
The process for identifying credit impairments in Citigroup’s
AFS and HTM state and municipal bonds is primarily based
on a credit analysis that incorporates third-party credit ratings.
Citigroup monitors the bond issuers and any insurers
providing default protection in the form of financial guarantee
insurance. The average external credit rating, ignoring any
insurance, is Aa3/AA-. In the event of an external rating
downgrade or other indicator of credit impairment (i.e., based
on instrument-specific estimates of cash flows or probability
of issuer default), the subject bond is specifically reviewed for
adverse changes in the amount or timing of expected
contractual principal and interest payments.
For state and municipal bonds with unrealized losses that
Citigroup plans to sell, or would be more-likely-than-not
required to sell, the full impairment is recognized in earnings.
Equity Method Investments
Management assesses equity method investments that have
fair values that are lower than their respective carrying values
for OTTI. Fair value is measured as price multiplied by
quantity if the investee has publicly listed securities. If the
investee is not publicly listed, other methods are used (see
Note 24 to the Consolidated Financial Statements).
For impaired equity method investments that Citi plans to
sell prior to recovery of value or would more-likely-than-not
be required to sell, with no expectation that the fair value will
recover prior to the expected sale date, the full impairment is
recognized in earnings as OTTI regardless of severity and
duration. The measurement of the OTTI does not include
partial projected recoveries subsequent to the balance sheet
date.
For impaired equity method investments that
management does not plan to sell and is not more-likely-than-
not to be required to sell prior to recovery of value, the
evaluation of whether an impairment is other-than-temporary
is based on (i) whether and when an equity method
investment will recover in value and (ii) whether the investor
has the intent and ability to hold that investment for a period
of time sufficient to recover the value. The determination of
whether the impairment is considered other-than-temporary
considers the following indicators:
•
•
•
the cause of the impairment and the financial condition
and near-term prospects of the issuer, including any
specific events that may influence the operations of the
issuer;
the intent and ability to hold the investment for a period
of time sufficient to allow for any anticipated recovery in
market value; and
the length of time and extent to which fair value has been
less than the carrying value.
185
Recognition and Measurement of OTTI
The following tables present total OTTI on Investments recognized in earnings:
In millions of dollars
Impairment losses related to debt securities that the Company does not intend to sell nor
will likely be required to sell:
Total OTTI losses recognized during the period
Less: portion of impairment loss recognized in AOCI (before taxes)
Net impairment losses recognized in earnings for debt securities that the Company does
not intend to sell nor will likely be required to sell
Impairment losses recognized in earnings for debt securities that the Company intends to
sell, would be more-likely-than-not required to sell or will be subject to an issuer call
deemed probable of exercise
Total OTTI losses recognized in earnings
In millions of dollars
Impairment losses related to debt securities that the Company does not intend to sell nor
will likely be required to sell:
Total OTTI losses recognized during the period
Less: portion of impairment loss recognized in AOCI (before taxes)
Net impairment losses recognized in earnings for debt securities that the Company does
not intend to sell nor will likely be required to sell
Impairment losses recognized in earnings for debt securities that the Company intends to
sell, would be more-likely-than-not required to sell or will be subject to an issuer call
deemed probable of exercise
Total OTTI losses recognized in earnings
(1) For the year ended December 31, 2018, amounts represent AFS debt securities.
In millions of dollars
Impairment losses related to securities that the Company does not intend to sell nor will
likely be required to sell:
Total OTTI losses recognized during the period
Less: portion of impairment loss recognized in AOCI (before taxes)
Net impairment losses recognized in earnings for securities that the Company does not
intend to sell nor will likely be required to sell
Impairment losses recognized in earnings for securities that the Company intends to sell,
would be more-likely-than-not required to sell or will be subject to an issuer call deemed
probable of exercise
Total OTTI losses recognized in earnings
(1)
Includes OTTI on non-marketable equity securities.
Year ended
December 31, 2019
AFS
HTM
Other
assets
Total
1 $
—
1 $
20
21 $
— $
—
— $
—
— $
1 $
—
1 $
1
2 $
2
—
2
21
23
Year ended
December 31, 2018
AFS(1)
HTM
Other
assets
Total
— $
—
— $
125
125 $
— $
—
— $
—
— $
— $
—
— $
—
— $
—
—
—
125
125
Year ended
December 31, 2017
AFS(1)
HTM
Other
assets
Total
2 $
—
2 $
59
61 $
— $
—
— $
2
2 $
— $
—
— $
—
— $
2
—
2
61
63
$
$
$
$
$
$
$
$
$
186
The following are 12-month rollforwards of the credit-related impairments recognized in earnings for AFS and HTM debt securities
that the Company does not intend to sell nor likely will be required to sell:
Cumulative OTTI credit losses recognized in earnings on debt securities still held
Credit
impairments
recognized in
earnings on
securities not
previously
impaired
Credit
impairments
recognized in
earnings on
securities
that have
been previously
impaired
Dec. 31, 2018
balance
Changes due to
credit-impaired
securities sold,
transferred or
matured(1)
Dec. 31, 2019
balance
$
$
$
1 $
— $
— $
—
4
—
5 $
3
3 $
—
—
1
1 $
—
— $
4
—
—
4 $
—
— $
— $
—
—
—
— $
—
— $
1
4
4
1
10
3
3
Cumulative OTTI credit losses recognized in earnings on debt securities still held
Credit
impairments
recognized in
earnings on
securities not
previously
impaired
Credit
impairments
recognized in
earnings on
securities
that have
been previously
impaired
Dec. 31, 2017
balance
Changes due to
credit-impaired
securities sold,
transferred or
matured(3)
Dec. 31, 2018
balance
$
$
$
$
38 $
4
4
2
48 $
54 $
3
57 $
— $
—
—
—
— $
— $
—
— $
— $
—
—
—
— $
— $
—
— $
(37) $
(4)
—
(2)
(43) $
(54) $
—
(54) $
1
—
4
—
5
—
3
3
In millions of dollars
AFS debt securities
Mortgage-backed securities(1)
State and municipal
Corporate
All other debt securities
Total OTTI credit losses recognized for AFS debt
securities
HTM debt securities
State and municipal
Total OTTI credit losses recognized for HTM
debt securities
In millions of dollars
AFS debt securities
Mortgage-backed securities(1)
State and municipal
Corporate
All other debt securities
Total OTTI credit losses recognized for AFS debt
securities
HTM debt securities
Mortgage-backed securities(2)
State and municipal
Total OTTI credit losses recognized for HTM debt
securities
(1) Primarily consists of Prime securities.
(2) Primarily consists of Alt-A securities.
(3)
Includes $18 million in cumulative OTTI reclassified from HTM to AFS due to the transfer of the related debt securities from HTM to AFS. Citi adopted ASU
2017-12, Targeted Improvements to Accounting for Hedging Activities, on January 1, 2018 and transferred approximately $4 billion of HTM debt securities into
AFS classification as permitted as a one-time transfer under the standard.
187
Non-Marketable Equity Securities Not Carried at
Fair Value
Non-marketable equity securities are required to be measured
at fair value with changes in fair value recognized in earnings
unless (i) the measurement alternative is elected or (ii) the
investment represents Federal Reserve Bank and Federal
Home Loan Bank stock or certain exchange seats that
continue to be carried at cost. See Note 1 to the Consolidated
Financial Statements for additional details.
The election to measure a non-marketable equity security
using the measurement alternative is made on an instrument-
by-instrument basis. Under the measurement alternative, an
equity security is carried at cost plus or minus changes
resulting from observable prices in orderly transactions for
the identical or a similar investment of the same issuer. The
carrying value of the equity security is adjusted to fair value
on the date of an observed transaction. Fair value may differ
from the observed transaction price due to a number of
factors, including marketability adjustments and differences
in rights and obligations when the observed transaction is not
for the identical investment held by Citi.
Equity securities under the measurement alternative are
also assessed for impairment. On a quarterly basis,
management qualitatively assesses whether each equity
security under the measurement alternative is impaired.
Impairment indicators that are considered include, but are not
limited to, the following:
•
•
•
•
•
a significant deterioration in the earnings performance,
credit rating, asset quality or business prospects of the
investee;
a significant adverse change in the regulatory, economic
or technological environment of the investee;
a significant adverse change in the general market
condition of either the geographical area or the industry
in which the investee operates;
a bona fide offer to purchase, an offer by the investee to
sell or a completed auction process for the same or
similar investment for an amount less than the carrying
amount of that investment; and
factors that raise significant concerns about the investee’s
ability to continue as a going concern, such as negative
cash flows from operations, working capital deficiencies
or noncompliance with statutory capital requirements or
debt covenants.
When the qualitative assessment indicates that
impairment exists, the investment is written down to fair
value, with the full difference between the fair value of the
investment and its carrying amount recognized in earnings.
Below is the carrying value of non-marketable equity
securities measured using the measurement alternative at
December 31, 2019 and 2018:
In millions of dollars
Measurement alternative:
December 31,
2019
December 31,
2018
Carrying value
$
700 $
538
Below are amounts recognized in earnings and life-to-
date amounts for non-marketable equity securities measured
using the measurement alternative:
In millions of dollars
Measurement alternative:
Impairment losses(1)
Downward changes for
observable prices(1)
Upward changes for
observable prices(1)
Years Ended December 31,
2019
2018
$
9 $
16
123
7
18
219
(1) See Note 24 to the Consolidated Financial Statements for additional
information on these nonrecurring fair value measurements.
In millions of dollars
Measurement alternative:
Impairment losses
Downward changes for observable prices
Upward changes for observable prices
Life-to-date amounts
on securities still held
December 31, 2019
$
16
34
342
A similar impairment analysis is performed for non-
marketable equity securities carried at cost. For the years
ended December 31, 2019 and 2018, there was no impairment
loss recognized in earnings for non-marketable equity
securities carried at cost.
188
Investments in Alternative Investment Funds That
Calculate Net Asset Value
The Company holds investments in certain alternative
investment funds that calculate net asset value (NAV), or its
equivalent, including private equity funds, funds of funds and
real estate funds, as provided by third-party asset managers.
Investments in such funds are generally classified as non-
marketable equity securities carried at fair value. The fair
values of these investments are estimated using the NAV of
the Company’s ownership interest in the funds. Some of these
investments are in “covered funds” for purposes of the
Volcker Rule, which prohibits certain proprietary investment
activities and limits the ownership of, and relationships with,
covered funds. On April 21, 2017, Citi’s request for extension
of the permitted holding period under the Volcker Rule for
certain of its investments in illiquid funds was approved,
allowing the Company to hold such investments until the
earlier of five years from the July 21, 2017 expiration date of
the general conformance period, or the date such investments
mature or are otherwise conformed with the Volcker Rule.
Fair value
Unfunded
commitments
Redemption frequency
(if currently eligible)
monthly, quarterly, annually
Redemption
notice
period
In millions of dollars
Private equity funds(1)(2)
Real estate funds(2)(3)
Mutual/collective
investment funds
Total
December 31,
2019
December 31,
2018
December 31,
2019
December 31,
2018
$
$
134 $
10
26
170 $
168 $
14
25
207 $
62 $
18
—
80 $
62
19
—
81
—
—
—
—
—
—
(1) Private equity funds include funds that invest in infrastructure, emerging markets and venture capital.
(2) With respect to the Company’s investments in private equity funds and real estate funds, distributions from each fund will be received as the underlying assets
held by these funds are liquidated. It is estimated that the underlying assets of these funds will be liquidated over a period of several years as market conditions
allow. Private equity and real estate funds do not allow redemption of investments by their investors. Investors are permitted to sell or transfer their investments,
subject to the approval of the general partner or investment manager of these funds, which generally may not be unreasonably withheld.
Includes several real estate funds that invest primarily in commercial real estate in the U.S., Europe and Asia.
(3)
189
loans are modified under those respective agencies’ guidelines
and payments are not always required in order to re-age a
modified loan to current.
14. LOANS
Citigroup loans are reported in two categories: consumer and
corporate. These categories are classified primarily according
to the segment and subsegment that manage the loans.
Consumer Loans
Consumer loans represent loans and leases managed primarily
by GCB and Corporate/Other.
Citigroup has established a risk management process to
monitor, evaluate and manage the principal risks associated
with its consumer loan portfolio. Credit quality indicators that
are actively monitored include delinquency status, consumer
credit scores under Fair Isaac Corporation (FICO) and loan to
value (LTV) ratios, each as discussed in more detail below.
Included in the loan table above are lending products
whose terms may give rise to greater credit issues. Credit
cards with below-market introductory interest rates and
interest-only loans are examples of such products. These
products are closely managed using credit techniques that are
intended to mitigate their higher inherent risk.
Delinquency Status
Delinquency status is monitored and considered a key
indicator of credit quality of consumer loans. Principally, the
U.S. residential first mortgage loans use the Mortgage Bankers
Association (MBA) method of reporting delinquencies, which
considers a loan delinquent if a monthly payment has not been
received by the end of the day immediately preceding the
loan’s next due date. All other loans use a method of reporting
delinquencies that considers a loan delinquent if a monthly
payment has not been received by the close of business on the
loan’s next due date.
As a general policy, residential first mortgages, home
equity loans and installment loans are classified as non-accrual
when loan payments are 90 days contractually past due. Credit
cards and unsecured revolving loans generally accrue interest
until payments are 180 days past due. Home equity loans in
regulated bank entities are classified as non-accrual if the
related residential first mortgage is 90 days or more past due.
Mortgage loans, other than Federal Housing Administration
(FHA)-insured loans, are classified as non-accrual within 60
days of notification that the borrower has filed for bankruptcy.
The policy for re-aging modified U.S. consumer loans to
current status varies by product. Generally, one of the
conditions to qualify for these modifications is that a
minimum number of payments (typically ranging from one to
three) be made. Upon modification, the loan is re-aged to
current status. However, re-aging practices for certain open-
ended consumer loans, such as credit cards, are governed by
Federal Financial Institutions Examination Council (FFIEC)
guidelines. For open-ended consumer loans subject to FFIEC
guidelines, one of the conditions for a loan to be re-aged to
current status is that at least three consecutive minimum
monthly payments, or the equivalent amount, must be
received. In addition, under FFIEC guidelines, the number of
times that such a loan can be re-aged is subject to limitations
(generally once in 12 months and twice in five years).
Furthermore, FHA and Department of Veterans Affairs (VA)
190
The following table provides Citi’s consumer loans by type:
Consumer Loan Delinquencies and Non-Accrual Details at December 31, 2019
288
—
1,927
—
2,215
—
242
—
242
549
—
1,764
—
2,313
—
235
—
235
Total
current(1)(2)
30–89 days
past due(3)
90 days
past due(3)
Past due
government
guaranteed(4)
Total
loans(2)
Total
non-
accrual
90 days past due
and accruing
$
45,942 $
411 $
221 $
434 $
47,008 $
479 $
8,860
145,477
3,641
174
1,759
44
189
1,927
14
—
9,223
— 149,163
—
3,699
405
—
21
203,920 $
2,388 $
2,351 $
434 $ 209,093 $
905 $
37,316 $
210 $
160 $
— $
37,686 $
421 $
25,111
36,456
426
272
372
132
—
—
25,909
36,860
310
180
98,883 $
908 $
664 $
— $ 100,455 $
911 $
302,803 $
3,296 $
3,015 $
434 $ 309,548 $
1,816 $
2,457
In millions of dollars
In North America offices(5)
Residential first mortgages(6)
Home equity loans(7)(8)
Credit cards
Personal, small business and other
Total
In offices outside North America(5)
Residential first mortgages(6)
Credit cards
Personal, small business and other
Total
Total Citigroup(9)
In millions of dollars
In North America offices(5)
Residential first mortgages(6)
Home equity loans(7)(8)
Credit cards
Personal, small business and other
Total
In offices outside North America(5)
Residential first mortgages(6)
Credit cards
Personal, small business and other
Total
Total Citigroup (9)
$
$
$
$
$
$
$
$
Consumer Loan Delinquencies and Non-Accrual Details at December 31, 2018
Total
current(1)(2)
30–89 days
past due(3)
90 days
past due(3)
Past due
government
guaranteed(4)
Total
loans(2)
Total
non-accrual
90 days past due
and accruing
$
45,953 $
420 $
253 $
786 $ 47,412 $
583 $
11,135
141,091
3,983
161
1,687
46
247
1,764
17
—
11,543
— 144,542
—
4,046
527
—
28
202,162 $
2,314 $
2,281 $
786 $ 207,543 $
1,138 $
35,624 $
203 $
145 $
— $ 35,972 $
383 $
24,156
33,474
425
284
370
136
—
—
24,951
33,894
312
193
93,254 $
912 $
651 $
— $ 94,817 $
888 $
295,416 $
3,226 $
2,932 $
786 $ 302,360 $
2,026 $
2,548
Includes $18 million and $20 million at December 31, 2019 and 2018, respectively, of residential first mortgages recorded at fair value.
(1) Loans less than 30 days past due are presented as current.
(2)
(3) Excludes loans guaranteed by U.S. government-sponsored agencies.
(4) Consists of residential first mortgages that are guaranteed by U.S. government-sponsored agencies that are 30–89 days past due of $0.1 billion and $0.2 billion and
90 days or more past due of $0.3 billion and $0.6 billion at December 31, 2019 and 2018, respectively.
Includes approximately $0.1 billion and $0.1 billion at December 31, 2019 and 2018, respectively, of residential first mortgage loans in process of foreclosure.
Includes approximately $0.1 billion and $0.1 billion at December 31, 2019 and 2018, respectively, of home equity loans in process of foreclosure.
(5) North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America.
(6)
(7)
(8) Fixed-rate home equity loans and loans extended under home equity lines of credit, which are typically in junior lien positions.
(9) Consumer loans are net of unearned income of $783 million and $742 million at December 31, 2019 and 2018, respectively. Unearned income on consumer loans
primarily represents unamortized origination fees and costs, premiums and discounts.
During the years ended December 31, 2019 and 2018, the
Company sold and/or reclassified to HFS $2.9 billion and $3.2
billion, respectively, of consumer loans.
191
Loan to Value (LTV) Ratios
LTV ratios (loan balance divided by appraised value) are
calculated at origination and updated by applying market price
data.
The following tables provide details on the LTV ratios for
Citi’s U.S. consumer mortgage portfolios. LTV ratios are
updated monthly using the most recent Core Logic Home
Price Index data available for substantially all of the portfolio
applied at the Metropolitan Statistical Area level, if available,
or the state level if not. The remainder of the portfolio is
updated in a similar manner using the Federal Housing
Finance Agency indices.
LTV distribution in
U.S. portfolio(1)(2)
In millions of dollars
Residential first
mortgages
Home equity loans
Total
LTV distribution in
U.S. portfolio(1)(2)
In millions of dollars
Residential first
mortgages
Home equity loans
Total
December 31, 2019
Less than
or
equal to
80%
> 80% but less
than or equal
to
100%
Greater
than
100%
$
$
41,705 $
3,302 $
7,934
819
49,639 $
4,121 $
98
235
333
December 31, 2018
Less than
or
equal to
80%
> 80% but less
than or equal to
100%
Greater
than
100%
$
$
42,379 $
9,465
51,844 $
2,474 $
1,287
3,761 $
197
390
587
(1) Excludes loans guaranteed by U.S. government-sponsored agencies,
loans subject to LTSCs with U.S. government-sponsored agencies and
loans recorded at fair value.
(2) Excludes balances where LTV was not available. Such amounts are not
material.
Consumer Credit Scores (FICO)
In the U.S., independent credit agencies rate an individual’s
risk for assuming debt based on the individual’s credit history
and assign every consumer a FICO credit score. These scores
are continually updated by the agencies based upon an
individual’s credit actions (e.g., taking out a loan or missed or
late payments).
The following tables provide details on the FICO scores
for Citi’s U.S. consumer loan portfolio based on end-of-period
receivables. FICO scores are updated monthly for
substantially all of the portfolio or, otherwise, on a quarterly
basis for the remaining portfolio.
FICO score
distribution in
U.S. portfolio(1)(2)(3)
In millions of dollars
Residential first
mortgages
Home equity loans
Credit cards
Personal, small
business and other
December 31, 2019
Less than
680
680 to 760
Greater
than 760
$
3,602 $
13,178 $
1,881
33,290
3,475
59,536
28,235
3,630
52,935
564
907
1,473
Total
$
39,337 $
77,096 $
86,273
FICO score
distribution in
U.S. portfolio(1)(2)(3)
In millions of dollars
Residential first
mortgages
Home equity loans
Credit cards
Personal, small
business and other
December 31, 2018
Less than
680
680 to 760
Greater
than 760
$
4,530 $
13,848 $
2,438
32,686
4,296
58,722
625
1,097
26,546
4,471
51,299
1,121
83,437
Total
$
40,279 $
77,963 $
(1) The FICO bands in the tables are consistent with general industry peer
presentations.
(2) Excludes loans guaranteed by U.S. government-sponsored agencies,
loans subject to long-term standby commitments (LTSC) with
U.S. government-sponsored agencies and loans recorded at fair value.
(3) Excludes balances where FICO was not available. Such amounts are not
material.
192
Impaired Consumer Loans
A loan is considered impaired when Citi believes it is probable
that all amounts due according to the original contractual
terms of the loan will not be collected. Impaired consumer
loans include non-accrual loans, as well as smaller-balance
homogeneous loans whose terms have been modified due to
the borrower’s financial difficulties and where Citi has granted
a concession to the borrower. These modifications may
include interest rate reductions and/or principal forgiveness.
Impaired consumer loans exclude smaller-balance
homogeneous loans that have not been modified and are
carried on a non-accrual basis.
The following tables present information about impaired
consumer loans and interest income recognized on impaired
consumer loans:
In millions of dollars
Mortgage and real estate
Residential first mortgages
Home equity loans
Credit cards
Installment and other
Personal, small business and other
Total
At and for the year ended December 31, 2019
Recorded
investment(1)(2)
Unpaid
principal
balance
Related
specific
allowance(3)
Average
carrying
value(4)
Interest
income
recognized(5)
$
$
1,666 $
1,838 $
161 $
1,925 $
592
1,931
824
2,288
703
738
123
771
135
637
1,890
754
4,892 $
5,688 $
1,190 $
5,206 $
60
9
103
55
227
(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount and direct write-downs and includes accrued interest
only on credit card loans.
Included in the Allowance for loan losses.
(2) $405 million of residential first mortgages, and $212 million of home equity loans do not have a specific allowance.
(3)
(4) Average carrying value represents the average recorded investment ending balance for the last four quarters and does not include the related specific allowance.
(5)
Includes amounts recognized on both an accrual and cash basis.
In millions of dollars
Mortgage and real estate
Residential first mortgages
Home equity loans
Credit cards
Installment and other
Personal, small business and other
Total
At and for the year ended December 31, 2018
Recorded
investment(1)(2)
Unpaid
principal
balance
Related
specific
allowance(3)
Average
carrying
value(4)
Interest
income
recognized(5)(6)
$
$
2,130 $
2,329 $
178 $
2,483 $
684
1,818
946
1,842
452
666
122
677
139
698
1,815
500
5,084 $
5,783 $
1,116 $
5,496 $
81
12
105
22
220
(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount and direct write-downs and includes accrued interest
only on credit card loans.
Included in the Allowance for loan losses.
(2) $484 million of residential first mortgages and $263 million of home equity loans do not have a specific allowance.
(3)
(4) Average carrying value represents the average recorded investment ending balance for the last four quarters and does not include the related specific allowance.
(5)
(6)
Includes amounts recognized on both an accrual and cash basis.
Interest income recognized for the year ended December 31, 2017 was $342 million.
193
Consumer Troubled Debt Restructurings
In millions of dollars, except number of
loans modified
Number of
loans modified
North America
For the year ended December 31, 2019
Post-
modification
recorded
investment(1)(2)
Deferred
principal(3)
Contingent
principal
forgiveness(4)
Principal
forgiveness(5)
Average
interest rate
reduction
Residential first mortgages
1,122 $
172 $
— $
— $
Home equity loans
Credit cards
Personal, small business and other
Total(6)
International
717
268,778
1,719
79
1,165
15
272,336 $
1,431 $
Residential first mortgages
Credit cards
Personal, small business and other
Total(6)
2,448 $
72,325
29,192
103,965 $
74 $
288
204
566 $
3
—
—
3 $
— $
—
—
— $
—
—
—
— $
— $
—
—
— $
—
—
—
—
—
—
10
6
16
—%
1
17
5
—%
17
9
In millions of dollars, except number of
loans modified
Number of
loans modified
North America
For the year ended December 31, 2018
Post-
modification
recorded
investment(1)(7)
Deferred
principal(3)
Contingent
principal
forgiveness(4)
Principal
forgiveness(5)
Average
interest rate
reduction
Residential first mortgages
2,019 $
300 $
2 $
— $
Home equity loans
Credit cards
Personal, small business and other
Total(6)
International
Residential first mortgages
Credit cards
Personal, small business and other
Total(6)
1,381
243,253
1,349
130
978
12
248,002 $
1,420 $
2,572 $
77,823
30,849
111,244 $
85 $
323
216
624 $
5
—
—
7 $
— $
—
—
— $
—
—
—
— $
— $
—
—
— $
—
—
—
—
—
—
9
7
16
—%
1
18
4
—%
16
9
(1) Post-modification balances include past due amounts that are capitalized at the modification date.
(2) Post-modification balances in North America include $19 million of residential first mortgages and $7 million of home equity loans to borrowers who have gone
through Chapter 7 bankruptcy in the year ended December 31, 2019. These amounts include $11 million of residential first mortgages and $6 million of home
equity loans that were newly classified as TDRs during 2019, based on previously received OCC guidance.
(3) Represents portion of contractual loan principal that is non-interest bearing but still due from the borrower. Such deferred principal is charged off at the time of
permanent modification to the extent that the related loan balance exceeds the underlying collateral value.
(4) Represents portion of contractual loan principal that is non-interest bearing and, depending upon borrower performance, eligible for forgiveness.
(5) Represents portion of contractual loan principal that was forgiven at the time of permanent modification.
(6) The above tables reflect activity for restructured loans that were considered TDRs during the year.
(7) Post-modification balances in North America include $38 million of residential first mortgages and $12 million of home equity loans to borrowers who have gone
through Chapter 7 bankruptcy in the year ended December 31, 2018. These amounts include $27 million of residential first mortgages and $10 million of home
equity loans that were newly classified as TDRs during 2018, based on previously received OCC guidance.
194
The following table presents consumer TDRs that defaulted for which the payment default occurred within one year of a
permanent modification. Default is defined as 60 days past due.
In millions of dollars
North America
Residential first mortgages
Home equity loans
Credit cards
Personal, small business and other
Total
International
Residential first mortgages
Credit cards
Personal, small business and other
Total
Years ended December 31,
2019
2018
$
$
$
$
85 $
15
301
4
405 $
13 $
142
74
229 $
136
23
241
4
404
9
198
80
287
195
Corporate Loans
Corporate loans represent loans and leases managed by ICG.
The following table presents information by corporate loan
type:
In millions of dollars
In North America offices(1)
Commercial and industrial
Financial institutions
Mortgage and real estate(2)
Installment, revolving credit
and other
Lease financing
Total
In offices outside
North America(1)
Commercial and industrial
Financial institutions
Mortgage and real estate(2)
Installment, revolving credit
and other
Lease financing
Governments and official
institutions
Total
Corporate loans, net of
unearned income(3)
December 31,
2019
December 31,
2018
$
55,929 $
53,922
53,371
31,238
1,290
60,861
48,447
50,124
32,425
1,429
$
$
$
$
195,750 $
193,286
112,668 $
114,029
40,211
9,780
27,303
95
36,837
7,376
25,685
103
4,128
194,185 $
4,520
188,550
389,935 $
381,836
(1) North America includes the U.S., Canada and Puerto Rico. Mexico is
included in offices outside North America. The classification between
offices in North America and outside North America is based on the
domicile of the booking unit. The difference between the domicile of
the booking unit and the domicile of the managing unit is not material.
(2) Loans secured primarily by real estate.
(3) Corporate loans are net of unearned income of ($814) million and
($855) million at December 31, 2019 and 2018, respectively.
Unearned income on corporate loans primarily represents interest
received in advance, but not yet earned, on loans originated on a
discounted basis.
The Company sold and/or reclassified to held-for-sale
$2.6 billion and $1.0 billion of corporate loans during the
years ended December 31, 2019 and 2018, respectively. The
Company did not have significant purchases of corporate
loans classified as held-for-investment for the years ended
December 31, 2019 or 2018.
Lease financing
Citi is a lessor in the power, railcars, shipping and aircraft
sectors, where the Company has executed operating, direct
financing and leveraged leases. Citi’s $1.4 billion of lease
financing receivables, as of December 31, 2019, is composed
of approximately equal balances of direct financing lease
receivables and net investments in leveraged leases. Citi uses
the interest rate implicit in the lease to determine the present
value of its lease financing receivables. Interest income on
direct financing and leveraged leases during the year ended
December 31, 2019 was not material.
The Company’s leases have an average remaining
maturity of approximately three and a half years. In certain
cases, Citi obtains residual value insurance from third parties
and/or the lessee to manage the risk associated with the
residual value of the leased assets. The receivable related to
the residual value of the leased assets is $0.9 billion as of
December 31, 2019, while the amount covered by residual
value guarantees is $0.3 billion.
The Company’s operating leases, where Citi is a lessor,
are not significant to the Consolidated Financial Statements.
Delinquency Status
Citi generally does not manage corporate loans on a
delinquency basis. Corporate loans are identified as impaired
and placed on a cash (non-accrual) basis when it is
determined, based on actual experience and a forward-
looking assessment of the collectability of the loan in full,
that the payment of interest or principal is doubtful or when
interest or principal is 90 days past due, except when the
loan is well collateralized and in the process of collection.
Any interest accrued on impaired corporate loans and leases
is reversed at 90 days and charged against current earnings,
and interest is thereafter included in earnings only to the
extent actually received in cash. When there is doubt
regarding the ultimate collectability of principal, all cash
receipts are thereafter applied to reduce the recorded
investment in the loan. While corporate loans are generally
managed based on their internally assigned risk rating (see
further discussion below), the following tables present
delinquency information by corporate loan type.
196
Corporate Loan Delinquencies and Non-Accrual Details at December 31, 2019
In millions of dollars
Commercial and industrial
Financial institutions
Mortgage and real estate
Lease financing
Other
Loans at fair value
Total
30–89 days
past due
and accruing(1)
$
676 $
90 days
past due and
accruing(1)
Total past due
and accruing
Total
non-accrual(2)
Total
current(3)
Total
loans(4)
93 $
769 $
1,828 $
164,249 $
166,846
791
534
58
190
3
4
9
22
794
538
67
212
50
188
41
81
91,008
62,425
1,277
62,341
91,852
63,151
1,385
62,634
4,067
$
2,249 $
131 $
2,380 $
2,188 $
381,300 $
389,935
Corporate Loan Delinquencies and Non-Accrual Details at December 31, 2018
In millions of dollars
Commercial and industrial
Financial institutions
Mortgage and real estate
Lease financing
Other
Loans at fair value
Total
30–89 days
past due
and accruing(1)
$
403 $
90 days
past due and
accruing(1)
Total past due
and accruing
Total
non-accrual(2)
Total
current(3)
Total
loans(4)
111 $
514 $
1,119 $
173,257 $
174,890
87
128
5
151
7
5
10
52
94
133
15
203
102
215
—
75
85,088
57,152
1,517
59,149
85,284
57,500
1,532
59,427
3,203
$
774 $
185 $
959 $
1,511 $
376,163 $
381,836
(1) Corporate loans that are 90 days past due are generally classified as non-accrual. Corporate loans are considered past due when principal or interest is
contractually due but unpaid.
(2) Non-accrual loans generally include those loans that are 90 days or more past due or those loans for which Citi believes, based on actual experience and a
forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful.
(3) Loans less than 30 days past due are presented as current.
(4) Total loans include loans at fair value, which are not included in the various delinquency columns.
Citigroup has a risk management process to monitor,
evaluate and manage the principal risks associated with its
corporate loan portfolio. As part of its risk management
process, Citi assigns numeric risk ratings to its corporate
loan facilities based on quantitative and qualitative
assessments of the obligor and facility. These risk ratings are
reviewed at least annually or more often if material events
related to the obligor or facility warrant. Factors considered
in assigning the risk ratings include financial condition of the
obligor, qualitative assessment of management and strategy,
amount and sources of repayment, amount and type of
collateral and guarantee arrangements, amount and type of
any contingencies associated with the obligor and the
obligor’s industry and geography.
The obligor risk ratings are defined by ranges of default
probabilities. The facility risk ratings are defined by ranges
of loss norms, which are the product of the probability of
default and the loss given default. The investment grade
rating categories are similar to the category BBB-/Baa3 and
above as defined by S&P and Moody’s. Loans classified
according to the bank regulatory definitions as special
mention, substandard and doubtful will have risk ratings
within the non-investment-grade categories.
197
Impaired collateral-dependent loans and leases, where
repayment is expected to be provided solely by the sale of
the underlying collateral and there are no other available and
reliable sources of repayment, are written down to the lower
of carrying value or collateral value, less cost to sell. Cash-
basis loans are returned to an accrual status when all
contractual principal and interest amounts are reasonably
assured of repayment and there is a sustained period of
repayment performance, generally six months, in accordance
with the contractual terms of the loan.
Corporate Loans Credit Quality Indicators
In millions of dollars
Investment grade(2)
Commercial and industrial
Financial institutions
Mortgage and real estate
Lease financing
Other
Total investment grade
Non-investment grade(2)
Accrual
Commercial and industrial
Financial institutions
Mortgage and real estate
Lease financing
Other
Non-accrual
Commercial and industrial
Financial institutions
Mortgage and real estate
Lease financing
Other
Recorded investment in loans(1)
December 31,
December 31,
2018
2019
$
110,797 $
113,925
$
$
80,533
27,571
816
57,339
73,533
26,799
1,035
58,916
277,056 $
274,208
54,220 $
11,269
3,811
528
5,206
1,828
50
188
41
81
53,942
10,866
4,200
497
5,753
1,119
102
215
—
75
Total non-investment grade
$
77,222 $
76,769
Non-rated private bank
loans managed on a
delinquency basis(2)
Loans at fair value
Corporate loans, net of
unearned income
$
$
31,590 $
4,067
27,656
3,203
389,935 $
381,836
(1) Recorded investment in a loan includes net deferred loan fees and
costs, unamortized premium or discount, less any direct write-downs.
(2) Held-for-investment loans are accounted for on an amortized cost
basis.
198
Non-Accrual Corporate Loans
The following tables present non-accrual loan information by corporate loan type and interest income recognized on non-accrual
corporate loans:
In millions of dollars
Non-accrual corporate loans
At and for the year ended December 31, 2019
Recorded
investment(1)
Unpaid
principal balance
Related specific
allowance
Average
carrying value(2)
Interest income
recognized(3)
Commercial and industrial
$
1,828 $
1,942 $
283 $
1,449 $
Financial institutions
Mortgage and real estate
Lease financing
Other
50
188
41
81
120
362
41
202
2
10
—
4
63
192
8
76
Total non-accrual corporate loans
$
2,188 $
2,667 $
299 $
1,788 $
33
—
—
—
9
42
In millions of dollars
Non-accrual corporate loans
At and for the year ended December 31, 2018
Recorded
investment(1)
Unpaid
principal balance
Related specific
allowance
Average
carrying value(2)
Interest income
recognized(3)
Commercial and industrial
$
1,119 $
1,270 $
245 $
1,299 $
Financial institutions
Mortgage and real estate
Lease financing
Other
102
215
—
75
123
323
28
165
35
39
—
6
99
233
21
83
Total non-accrual corporate loans
$
1,511 $
1,909 $
325 $
1,735 $
49
—
1
—
6
56
In millions of dollars
Non-accrual corporate loans with specific allowance
Commercial and industrial
Financial institutions
Mortgage and real estate
Lease financing
Other
Total non-accrual corporate loans with specific
allowance
Non-accrual corporate loans without specific allowance
Commercial and industrial
Financial institutions
Mortgage and real estate
Lease financing
Other
Total non-accrual corporate loans without specific
allowance
$
$
$
$
December 31, 2019
December 31, 2018
Recorded
investment(1)
Related specific
allowance
Recorded
investment(1)
Related specific
allowance
714 $
283 $
801 $
40
48
—
7
2
10
—
4
76
100
—
24
809 $
299 $
1,001 $
1,114
10
140
41
74
1,379
$
N/A $
318
26
115
—
51
510
245
35
39
—
6
325
N/A
(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs.
(2) Average carrying value represents the average recorded investment balance and does not include related specific allowance.
(3)
N/A Not applicable
Interest income recognized for the year ended December 31, 2017 was $35 million.
199
— $
—
—
— $
8 $
—
8 $
264
16
—
280
TDRs
involving changes
in the amount
and/or timing of
both principal and
interest payments
146
57
203
Corporate Troubled Debt Restructurings
For the year ended December 31, 2019:
Carrying value of
TDRs modified during
the period
TDRs
involving changes
in the amount
and/or timing of
principal payments(1)
TDRs
involving changes
in the amount
and/or timing of
interest payments(2)
TDRs
involving changes
in the amount
and/or timing of
both principal and
interest payments
In millions of dollars
Commercial and industrial
Mortgage and real estate
Other
Total
$
$
283 $
16
6
305 $
19 $
—
6
25 $
For the year ended December 31, 2018:
In millions of dollars
Commercial and industrial
Mortgage and real estate
Total
Carrying value of
TDRs modified
during the period
TDRs
involving changes
in the amount
and/or timing of
principal payments(1)
TDRs
involving changes
in the amount
and/or timing of
interest payments(2)
$
$
159 $
60
219 $
5 $
3
8 $
(1) TDRs involving changes in the amount or timing of principal payments may involve principal forgiveness or deferral of periodic and/or final principal
payments. Because forgiveness of principal is rare for corporate loans, modifications typically have little to no impact on the loans’ projected cash flows and
thus little to no impact on the allowance established for the loans. Charge-offs for amounts deemed uncollectable may be recorded at the time of the
restructuring or may have already been recorded in prior periods such that no charge-off is required at the time of the modification.
(2) TDRs involving changes in the amount or timing of interest payments may involve a below-market interest rate.
The following table presents total corporate loans modified in a TDR as well as those TDRs that defaulted and for which the
payment default occurred within one year of a permanent modification. Default is defined as 60 days past due, except for
classifiably managed commercial banking loans, where default is defined as 90 days past due.
In millions of dollars
TDR balances at
December 31, 2019
TDR loans in payment
default during the year
ended December 31, 2019
TDR balances at
December 31, 2018
TDR loans in payment default
during the year ended
December 31, 2018
Commercial and industrial
$
603 $
35 $
568 $
Financial institutions
Mortgage and real estate
Lease financing
Other
Total(1)
—
79
—
44
—
—
—
—
25
123
—
2
$
726 $
35 $
718 $
(1) The above table reflects activity for loans outstanding that were considered TDRs as of the end of the reporting period.
111
—
—
—
—
111
200
15. ALLOWANCE FOR CREDIT LOSSES
In millions of dollars
Allowance for loan losses at beginning of period
Gross credit losses
Gross recoveries(1)
Net credit losses (NCLs)
NCLs
Net reserve builds (releases)
Net specific reserve builds (releases)
Total provision for loan losses
Other, net (see table below)
Allowance for loan losses at end of period
Allowance for credit losses on unfunded lending commitments at beginning of period
Provision (release) for unfunded lending commitments
Other, net
Allowance for credit losses on unfunded lending commitments at end of period(2)
Total allowance for loans, leases and unfunded lending commitments
2019
2018
2017
$
$
$
$
$
$
$
$
12,315 $
12,355 $
(9,341)
1,573
(7,768) $
7,768 $
364
86
8,218 $
18
12,783 $
1,367 $
92
(3)
1,456 $
14,239 $
(8,665)
1,552
(7,113) $
7,113 $
394
(153)
7,354 $
(281)
12,315 $
1,258 $
113
(4)
1,367 $
13,682 $
12,060
(8,673)
1,597
(7,076)
7,076
544
(117)
7,503
(132)
12,355
1,418
(161)
1
1,258
13,613
(1) Recoveries have been reduced by certain collection costs that are incurred only if collection efforts are successful.
(2) Represents additional credit loss reserves for unfunded lending commitments and letters of credit recorded in Other liabilities on the Consolidated Balance Sheet.
Other, net details
In millions of dollars
Sales or transfers of various consumer loan portfolios to HFS
Transfer of real estate loan portfolios
Transfer of other loan portfolios
Sales or transfers of various consumer loan portfolios to HFS
FX translation, primarily consumer
Other
Other, net
2019
2018
2017
$
$
$
(42) $
—
(42) $
60
—
(91) $
(110)
(201) $
(60)
(20)
18 $
(281) $
(106)
(155)
(261)
115
14
(132)
201
Allowance for Credit Losses and End-of-Period Loans at December 31, 2019
In millions of dollars
Allowance for loan losses at beginning of year
Charge-offs
Recoveries
Replenishment of net charge-offs
Net reserve builds (releases)
Net specific reserve builds (releases)
Other
Ending balance
Allowance for loan losses
Collectively evaluated in accordance with ASC 450
Individually evaluated in accordance with ASC 310-10-35
Purchased credit impaired in accordance with ASC 310-30
Total allowance for loan losses
Loans, net of unearned income
Collectively evaluated in accordance with ASC 450
Individually evaluated in accordance with ASC 310-10-35
Purchased credit impaired in accordance with ASC 310-30
Held at fair value
Total loans, net of unearned income
Allowance for Credit Losses and End-of-Period Loans at December 31, 2018
In millions of dollars
Allowance for loan losses at beginning of year
Charge-offs
Recoveries
Replenishment of net charge-offs
Net reserve builds (releases)
Net specific reserve builds (releases)
Other
Ending balance
Allowance for loan losses
Collectively evaluated in accordance with ASC 450
Individually evaluated in accordance with ASC 310-10-35
Purchased credit impaired in accordance with ASC 310-30
Total allowance for loan losses
Loans, net of unearned income
Collectively evaluated in accordance with ASC 450
Individually evaluated in accordance with ASC 310-10-35
Purchased credit impaired in accordance with ASC 310-30
Held at fair value
Total loans, net of unearned income
202
$
$
$
$
$
Corporate
Consumer
Total
2,811 $
(487)
9,504 $
(8,854)
12,315
(9,341)
95
392
96
(21)
—
1,478
7,376
268
107
18
1,573
7,768
364
86
18
2,886 $
9,897 $
12,783
2,587 $
8,706 $
299
—
1,190
1
11,293
1,489
1
2,886 $
9,897 $
12,783
383,828 $
304,510 $
688,338
2,040
—
4,067
4,892
128
18
6,932
128
4,085
$
389,935 $
309,548 $
699,483
$
$
$
$
$
Corporate
Consumer
Total
2,943 $
(343)
9,412 $
(8,322)
138
205
42
(151)
(23)
1,414
6,908
352
(2)
(258)
12,355
(8,665)
1,552
7,113
394
(153)
(281)
2,811 $
9,504 $
12,315
2,486 $
8,386 $
325
—
1,116
2
10,872
1,441
2
2,811 $
9,504 $
12,315
377,186 $
297,128 $
674,314
1,447
—
3,203
5,084
128
20
6,531
128
3,223
$
381,836 $
302,360 $
684,196
Allowance for Credit Losses at December 31, 2017
In millions of dollars
Allowance for loan losses at beginning of year
Charge-offs
Recoveries
Replenishment of net charge-offs
Net reserve builds (releases)
Net specific reserve builds (releases)
Other
Ending balance
Corporate
Consumer
Total
$
3,218 $
(632)
153
479
(274)
(31)
30
8,842 $
(8,041)
1,444
6,597
818
(86)
(162)
12,060
(8,673)
1,597
7,076
544
(117)
(132)
$
2,943 $
9,412 $
12,355
203
16. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in Goodwill by segment were as follows:
In millions of dollars
Balance at December 31, 2016(1)
Foreign exchange translation
Divestitures(2)
Impairment of goodwill(3)
Balance at December 31, 2017
Foreign exchange translation
Divestitures(4)
Balance at December 31, 2018
Foreign exchange translation
Balance at December 31, 2019
Global
Consumer
Banking
Institutional
Clients Group
Corporate/
Other
Total
$
$
$
$
$
$
$
11,874 $
286 $
(32)
—
9,741 $
443 $
(72)
—
12,128 $
10,112 $
(41) $
—
12,087 $
15 $
(153) $
—
9,959 $
65 $
12,102 $
10,024 $
44 $
— $
—
(28)
16 $
— $
(16)
— $
— $
— $
21,659
729
(104)
(28)
22,256
(194)
(16)
22,046
80
22,126
(1) December 31, 2016 has been revised to reflect intersegment goodwill allocations that resulted from the 2019 reorganization of the Citi commercial banking
business from GCB to ICG. See Note 3 to the Consolidated Financial Statements.
(2) Primarily related to the sale of a fixed income analytics business and a fixed income index business completed in 2017 and agreement to sell a Mexico asset
management business as of December 31, 2017. See Note 2 to the Consolidated Financial Statements.
(3) Related to the transfer of the mortgage servicing business from North America GCB to Corporate/Other effective January 1, 2017.
(4) Primarily related to the sale of consumer operations in Colombia in 2018.
Goodwill impairment testing is performed at the level
below each business segment (referred to as a reporting
unit). See Note 3 for further information on business
segments.
The Company performed its annual goodwill
impairment test as of July 1, 2019. The fair values of the
Company’s reporting units exceeded their carrying values
by approximately 33% to 134% and no reporting unit is at
risk of impairment.
Effective in the fourth quarter of 2019, the Citi
commercial banking business, previously included in North
America GCB, Latin America GCB and Asia GCB, was
reorganized and is now part of ICG. Goodwill was allocated
to the transferred business based on relative fair value to the
legacy reporting units. An interim goodwill impairment test
was performed under both the legacy and current reporting
unit structures, which resulted in no impairment. No
additional triggering events were identified and no goodwill
was impaired during the year.
204
Intangible Assets
The components of intangible assets were as follows:
In millions of dollars
Purchased credit card relationships
Credit card contract-related intangibles(1)
Core deposit intangibles
Other customer relationships
Present value of future profits
Indefinite-lived intangible assets
Other
Intangible assets (excluding MSRs)
Mortgage servicing rights (MSRs)(2)
Total intangible assets
December 31, 2019
December 31, 2018
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
$
5,676 $
4,059 $
1,617 $
5,733 $
3,936 $ 1,797
5,393
3,069
2,324
5,225
2,791
2,434
434
424
34
228
82
433
275
31
—
77
1
149
3
228
5
419
470
32
218
84
415
299
29
—
75
4
171
3
218
9
$
$
12,271 $
7,944 $
4,327 $
12,181 $
7,545 $ 4,636
495
—
495
584
—
584
12,766 $
7,944 $
4,822 $
12,765 $
7,545 $ 5,220
(1) Primarily reflects contract-related intangibles associated with the American Airlines, The Home Depot, Costco and AT&T credit card program agreements,
which represented 96% of the aggregate net carrying amount as of December 31, 2019.
(2) For additional information on Citi’s MSRs, see Note 21 to the Consolidated Financial Statements.
Intangible assets amortization expense was $564 million,
$557 million and $603 million for 2019, 2018 and 2017,
respectively. Intangible assets amortization expense is
estimated to be $424 million in 2020, $399 million in 2021,
$1,025 million in 2022, $226 million in 2023 and $219
million in 2024.
The changes in intangible assets were as follows:
Net carrying
amount at
Net carrying
amount at
December 31,
2019
FX
translation
and other
In millions of dollars
Purchased credit card relationships(1)
Credit card contract-related intangibles(2)
Core deposit intangibles
Other customer relationships
Present value of future profits
Indefinite-lived intangible assets
Other
Intangible assets (excluding MSRs)
Mortgage servicing rights (MSRs)(3)
Total intangible assets
December 31,
2018
Acquisitions/
divestitures
Amortization
Impairments
$
$
$
1,797 $
2,434
4
171
3
218
9
9 $
(189) $
— $
73
—
—
—
4
6
(336)
(4)
(24)
—
—
(11)
—
—
—
—
—
—
— $
153
1
2
—
6
1
4,636 $
92 $
(564) $
— $
163 $
584
5,220
$
1,617
2,324
1
149
3
228
5
4,327
495
4,822
(1) Reflects intangibles for the value of cardholder relationships, which are discrete from partner contract-related intangibles and include credit card accounts
primarily in the Costco, Macy’s and Sears portfolios.
(2) Primarily reflects contract-related intangibles associated with the American Airlines, The Home Depot, Costco and AT&T credit card program agreements,
which represent 96% of the aggregate net carrying amount at December 31, 2019 and 2018.
(3) For additional information on Citi’s MSRs, including the rollforward from 2018 to 2019, see Note 21 to the Consolidated Financial Statements.
205
17. DEBT
Short-Term Borrowings
December 31,
2019
2018
In millions of dollars
Balance
Commercial paper
Bank(1)
Broker-dealer and
other(2)
Total commercial
paper
Other borrowings(3)
Total
$10,155
6,321
$16,476
28,573
$45,049
Weighted
average
coupon
Weighted
average
coupon
Balance
$13,238
—
1.98% $13,238
2.57
19,108
$32,346
1.95%
2.99
(1) Represents Citibank entities as well as other bank entities.
(2) Represents broker-dealer and other non-bank subsidiaries that are
consolidated into Citigroup Inc., the parent holding company.
Includes borrowings from the Federal Home Loan Banks and other
market participants. At December 31, 2019 and 2018, collateralized
short-term advances from the Federal Home Loan Banks were $17.6
billion and $9.5 billion, respectively.
(3)
Borrowings under bank lines of credit may be at interest
rates based on LIBOR, CD rates, the prime rate or bids
submitted by the banks. Citigroup pays commitment fees for
its lines of credit.
Some of Citigroup’s non-bank subsidiaries have credit
facilities with Citigroup’s subsidiary depository institutions,
including Citibank. Borrowings under these facilities are
secured in accordance with Section 23A of the Federal
Reserve Act.
Citigroup Global Markets Holdings Inc. (CGMHI) has
borrowing agreements consisting of facilities that CGMHI
has been advised are available, but where no contractual
lending obligation exists. These arrangements are reviewed
on an ongoing basis to ensure flexibility in meeting
CGMHI’s short-term requirements.
Long-Term Debt
Balances at
December 31,
Weighted
average
coupon(1) Maturities
2019
2018
3.11% 2020-2098 $ 123,292 $ 117,511
5.59
2022-2046
25,463
24,545
8.15
2036-2067
1,722
1,711
2.51
2020-2038
53,340
61,237
2.43
2020-2098
44,817
26,947
2.37
2022-2046
126
48
3.28%
$ 248,760 $ 231,999
$ 221,449 $ 205,695
25,589
24,593
1,722
1,711
$ 248,760 $ 231,999
In millions of
dollars
Citigroup Inc.(2)
Senior debt
Subordinated
debt(3)
Trust preferred
securities
Bank(4)
Senior debt
Broker-dealer(5)
Senior debt
Subordinated
debt(3)
Total
Senior debt
Subordinated
debt(3)
Trust preferred
securities
Total
(1) The weighted average coupon excludes structured notes accounted for
at fair value.
(2) Represents the parent holding company.
(3)
Includes notes that are subordinated within certain countries, regions
or subsidiaries.
(4) Represents Citibank entities as well as other bank entities. At
December 31, 2019 and 2018, collateralized long-term advances from
the Federal Home Loan Banks were $5.5 billion and $10.5 billion,
respectively.
(5) Represents broker-dealer and other non-bank subsidiaries that are
consolidated into Citigroup Inc., the parent holding company.
The Company issues both fixed- and variable-rate debt
in a range of currencies. It uses derivative contracts,
primarily interest rate swaps, to effectively convert a portion
of its fixed-rate debt to variable-rate debt. The maturity
structure of the derivatives generally corresponds to the
maturity structure of the debt being hedged. In addition, the
Company uses other derivative contracts to manage the
foreign exchange impact of certain debt issuances. At
December 31, 2019, the Company’s overall weighted
average interest rate for long-term debt, excluding structured
notes accounted for at fair value, was 3.28% on a contractual
basis and 3.54% including the effects of derivative contracts.
206
Aggregate annual maturities of long-term debt obligations (based on final maturity dates) including trust preferred securities are as
follows:
In millions of dollars
Citigroup Inc.
Bank
Broker-dealer
Total
2020
2021
2022
2023
2024
Thereafter
Total
$
$
7,033 $
15,208 $
13,061 $
14,202 $
8,247 $
92,726 $
150,477
20,654
9,570
14,023
8,852
8,471
5,558
2,634
3,292
4,417
3,359
3,141
14,312
53,340
44,943
37,257 $
38,083 $
27,090 $
20,128 $
16,023 $
110,179 $
248,760
The following table summarizes Citi’s outstanding trust preferred securities at December 31, 2019:
Trust
Issuance
date
Securities
issued
Liquidation
value(1)
Coupon
rate(2)
In millions of dollars, except securities and share amounts
Junior subordinated debentures owned by trust
Common
shares
issued
to parent
Amount
Maturity
Redeemable
by issuer
beginning
Citigroup Capital III
Dec. 1996
194,053 $
194
7.625%
6,003 $
200
Dec. 1, 2036
Not redeemable
Citigroup Capital XIII
Sept. 2010 89,840,000
Citigroup Capital XVIII
June 2007
99,901
Total obligated
$
3 mo LIBOR
+ 637 bps
3 mo LIBOR
+ 88.75 bps
2,246
132
2,572
1,000
2,246
Oct. 30, 2040
Oct. 30, 2015
50
132
June 28, 2067
June 28, 2017
$
2,578
Note: Distributions on the trust preferred securities and interest on the subordinated debentures are payable semiannually for Citigroup Capital III and Citigroup
Capital XVIII and quarterly for Citigroup Capital XIII.
(1) Represents the notional value received by outside investors from the trusts at the time of issuance. This differs from Citi’s balance sheet carrying value due
primarily to unamortized discount and issuance costs.
In each case, the coupon rate on the subordinated debentures is the same as that on the trust preferred securities.
(2)
207
18. REGULATORY CAPITAL
Citigroup is subject to risk-based capital and leverage
standards issued by the Federal Reserve Board, which
constitute the U.S. Basel III rules. Citi’s U.S.-insured
depository institution subsidiaries, including Citibank, are
subject to similar standards issued by their respective primary
federal bank regulatory agencies. These standards are used to
evaluate capital adequacy and include the required minimums
shown in the following table. The regulatory agencies are
required by law to take specific, prompt corrective actions
with respect to institutions that do not meet minimum capital
standards.
The following table sets forth for Citigroup and Citibank
the regulatory capital tiers, total risk-weighted assets, quarterly
adjusted average total assets, Total Leverage Exposure, risk-
based capital ratios and leverage ratios:
In millions of dollars, except ratios
Common Equity Tier 1 Capital
Tier 1 Capital
Total Capital (Tier 1 Capital + Tier 2
Capital)—Standardized Approach
Total Capital (Tier 1 Capital + Tier 2
Capital)—Advanced Approaches
Total risk-weighted assets—
Standardized Approach
Total risk-weighted assets—Advanced
Approaches
Quarterly adjusted average total assets(1)
Total Leverage Exposure(2)
Common Equity Tier 1 Capital ratio(3)
Tier 1 Capital ratio(3)
Total Capital ratio(3)
Tier 1 Leverage ratio
Supplementary Leverage ratio
Stated
minimum
Well-
capitalized
minimum
Citigroup
Citibank
December 31,
2019
December 31,
2018
$
137,798
$
155,805
139,252
158,122
Well-
capitalized
minimum
December 31,
2019
December 31,
2018
$
130,791
$
132,918
129,091
131,215
193,682
195,440
157,324
155,154
181,337
183,144
145,989
144,358
1,166,523
1,174,448
1,019,916
1,032,809
1,135,553
1,957,039
2,507,891
1,131,933
1,896,959
2,465,641
932,432
1,459,851
1,951,701
926,229
1,398,875
1,914,663
4.5%
N/A
11.81%
11.86%
6.5%
12.82%
12.50%
6.0
8.0
4.0
3.0
6.0%
10.0
N/A
N/A
13.36
15.97
7.96
6.21
13.46
16.18
8.34
6.41
8.0
10.0
5.0
6.0
13.03
15.43
9.10
6.81
12.70
15.02
9.38
6.85
(1) Tier 1 Leverage ratio denominator.
(2) Supplementary Leverage ratio denominator.
(3) As of December 31, 2019 and 2018, Citigroup’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III
Standardized Approach, whereas the reportable Total Capital ratios were the lower derived under the Basel III Advanced Approaches framework. As of
December 31, 2019 and 2018, Citibank’s reportable Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios were the lower derived under the Basel
III Standardized Approach.
N/A Not applicable
As indicated in the table above, Citigroup and Citibank
were “well capitalized” under the current federal bank
regulatory agency definitions as of December 31, 2019 and
2018.
Banking Subsidiaries—Constraints on Dividends
There are various legal limitations on the ability of Citigroup’s
subsidiary depository institutions to extend credit, pay
dividends or otherwise supply funds to Citigroup and its non-
bank subsidiaries. The approval of the Office of the
Comptroller of the Currency is required if total dividends
declared in any calendar year were to exceed amounts
specified by the agency’s regulations.
In determining the dividends, each subsidiary depository
institution must also consider its effect on applicable risk-
based capital and leverage ratio requirements, as well as
policy statements of the federal bank regulatory agencies that
indicate that banking organizations should generally pay
dividends out of current operating earnings. Citigroup
received $17.3 billion and $8.3 billion in dividends from
Citibank during 2019 and 2018, respectively.
208
19. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)
Changes in each component of Citigroup’s Accumulated other comprehensive income (loss) were as follows:
In millions of dollars
Balance, December 31, 2016
Adjustment to opening balance, net
of taxes(6)
Adjusted balance, beginning of period
Impact of Tax Reform(7)
Other comprehensive income before
reclassifications
Increase (decrease) due to amounts
reclassified from AOCI
Change, net of taxes
Balance, December 31, 2017
Adjustment to opening balance, net
of taxes(8)
Adjusted balance, beginning of period
Other comprehensive income before
reclassifications
Increase (decrease) due to amounts
reclassified from AOCI(9)
Change, net of taxes
Balance at December 31, 2018
Other comprehensive income before
reclassifications
Increase (decrease) due to amounts
reclassified from AOCI
Change, net of taxes
Balance at December 31, 2019
Net
unrealized
gains
(losses)
on
investment
securities
Debt
valuation
adjustment
(DVA)(1)
Cash
flow
hedges(2)
Benefit
plans(3)
Foreign
currency
translation
adjustment
(CTA), net
of hedges(4)
Excluded
component
of fair
value
hedges(5)
Accumulated
other
comprehensive
income (loss)
$
$
$
$
$
$
$
$
$
$
$
$
(799) $
(352) $
(560) $
(5,164) $
(25,506) $
— $
(32,381)
504 $
(295) $
(223) $
— $
— $
— $
— $
(352) $
(139) $
(560) $
(5,164) $
(25,506) $
(113) $
(1,020) $
(1,809) $
(186)
(426)
(111)
(158)
1,607
(454)
(863) $
(4)
86
159
—
(569) $
(138) $
(1,019) $
(202) $
(1,158) $
(921) $
(698) $
(6,183) $
(25,708) $
(3) $
— $
— $
— $
— $
(1,161) $
(921) $
(698) $
(6,183) $
(25,708) $
— $
— $
— $
—
—
— $
— $
— $
— $
504
(31,877)
(3,304)
726
(213)
(2,791)
(34,668)
(3)
(34,671)
(866)
1,081
(135)
(240)
(2,607)
(57)
(2,824)
(223)
(1,089) $
(2,250) $
32
105
166
245
1,113 $
(30) $
(74) $
(2,362) $
192 $
(728) $
(6,257) $
(28,070) $
3,065
(1,151)
(1,080)
15
549
302
(758)
(647)
206
326
1,985 $
(1,136) $
851 $
(552) $
(321) $
(265) $
(944) $
123 $
(6,809) $
(28,391) $
—
(57) $
(57) $
25
—
25 $
(32) $
325
(2,499)
(37,170)
1,083
(231)
852
(36,318)
(1) Changes in DVA are reflected as a component of AOCI, pursuant to the adoption of ASU 2016-01 relating to the presentation of DVA on fair value option
liabilities.
(2) Primarily driven by Citi’s pay fixed/receive floating interest rate swap programs that hedge the floating rates on liabilities.
(3) Primarily reflects adjustments based on the quarterly actuarial valuations of the Company’s significant pension and postretirement plans, annual actuarial
valuations of all other plans and amortization of amounts previously recognized in other comprehensive income.
(4) Primarily reflects the movements in (by order of impact) the Indian rupee, Brazilian real, Chilean peso, and Euro against the U.S. dollar and changes in related
tax effects and hedges for the year ended December 31, 2019. Primarily reflects the movements in (by order of impact) the Brazilian real, Indian rupee,
Mexican peso, and Australian dollar against the U.S. dollar and changes in related tax effects and hedges for the year ended December 31, 2018. Primarily
reflects the movements in (by order of impact) the Euro, Mexican peso, Polish zloty and South Korean won against the U.S. dollar and changes in related tax
effects and hedges for the year ended December 31, 2017. Amounts recorded in the CTA component of AOCI remain in AOCI until the sale or substantial
liquidation of the foreign entity, at which point such amounts related to the foreign entity are reclassified into earnings.
(5) Beginning in the first quarter of 2018, changes in the excluded component of fair value hedges are reflected as a component of AOCI, pursuant to the early
adoption of ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. See Note 1 of the Consolidated Financial Statements for further
information regarding this change.
In the second quarter of 2017, Citi early adopted ASU 2017-08. Upon adoption, a cumulative effect adjustment was recorded to reduce Retained earnings,
effective January 1, 2017, for the incremental amortization of cumulative fair value hedge adjustments on callable state and municipal debt securities. See
Note 1 to the Consolidated Financial Statements.
In the fourth quarter of 2017, Citi adopted ASU 2018-02, which transferred these amounts from AOCI to Retained earnings. See Note 1 to the Consolidated
Financial Statements.
(6)
(7)
(8) Citi adopted ASU 2016-01 and ASU 2018-03 on January 1, 2018. Upon adoption, a cumulative effect adjustment was recorded from AOCI to Retained
earnings for net unrealized gains on former AFS equity securities. For additional information, see Note 1 to the Consolidated Financial Statements.
Includes the impact of the release of foreign currency translation adjustment, net of hedges, upon meeting the accounting trigger for substantial liquidation of
Citi’s Japan Consumer Finance business during the fourth quarter of 2018. See Note 1 to the Consolidated Financial Statements.
(9)
209
The pretax and after-tax changes in each component of Accumulated other comprehensive income (loss) were as follows:
In millions of dollars
Balance, December 31, 2016
Adjustment to opening balance(2)
Adjusted balance, beginning of period
Change in net unrealized gains (losses) on investment securities
Debt valuation adjustment (DVA)
Cash flow hedges
Benefit plans
Foreign currency translation adjustment
Change
Balance, December 31, 2017
Adjustment to opening balance(3)
Adjusted balance, beginning of period
Change in net unrealized gains (losses) on investment securities
Debt valuation adjustment (DVA)
Cash flow hedges
Benefit plans
Foreign currency translation adjustment
Excluded component of fair value hedges
Change
Balance, December 31, 2018
Change in net unrealized gains (losses) on AFS debt securities
Debt valuation adjustment (DVA)
Cash flow hedges
Benefit plans
Foreign currency translation adjustment
Excluded component of fair value hedges
Change
Balance, December 31, 2019
Pretax
Tax effect(1)
After-tax
$
$
$
$
$
$
$
$
$
(42,035) $
803
(41,232) $
(1,088)
(680)
(37)
14
1,795
4 $
(41,228) $
(4)
(41,232) $
(1,435)
1,415
(38)
(94)
(2,624)
(74)
(2,850) $
(44,082) $
2,633
(1,473)
1,120
(671)
(332)
33
1,310 $
(42,772) $
9,654 $
(299)
9,355 $
225
111
(101)
(1,033)
(1,997)
(2,795) $
6,560 $
1
6,561 $
346
(302)
8
20
262
17
351 $
6,912 $
(648)
337
(269)
119
11
(8)
(458) $
6,454 $
(32,381)
504
(31,877)
(863)
(569)
(138)
(1,019)
(202)
(2,791)
(34,668)
(3)
(34,671)
(1,089)
1,113
(30)
(74)
(2,362)
(57)
(2,499)
(37,170)
1,985
(1,136)
851
(552)
(321)
25
852
(36,318)
(1)
(2)
Includes the impact of ASU 2018-02, which transferred amounts from AOCI to Retained earnings. See Note 1 to the Consolidated Financial Statements.
In the second quarter of 2017, Citi early adopted ASU 2017-08. Upon adoption, a cumulative effect adjustment was recorded to reduce Retained earnings,
effective January 1, 2017, for the incremental amortization of cumulative fair value hedge adjustments on callable state and municipal debt securities. See
Note 1 to the Consolidated Financial Statements.
(3) Citi adopted ASU 2016-01 and ASU 2018-03 on January 1, 2018. Upon adoption, a cumulative effect adjustment was recorded from AOCI to Retained
earnings for net unrealized gains on former AFS equity securities. For additional information, see Note 1 to the Consolidated Financial Statements.
210
The Company recognized pretax gains (losses) related to amounts in AOCI reclassified to the Consolidated Statement of Income as
follows:
In millions of dollars
Realized (gains) losses on sales of investments
Gross impairment losses
Subtotal, pretax
Tax effect
Net realized (gains) losses on investments, after-tax(1)
Realized DVA (gains) losses on fair value option liabilities, pretax
Tax effect
Net realized DVA, after-tax
Interest rate contracts
Foreign exchange contracts
Subtotal, pretax
Tax effect
Amortization of cash flow hedges, after-tax(2)
Amortization of unrecognized
Prior service cost (benefit)
Net actuarial loss
Curtailment/settlement impact(3)
Subtotal, pretax
Tax effect
Amortization of benefit plans, after-tax(3)
Foreign currency translation adjustment
Tax effect
Foreign currency translation adjustment
Total amounts reclassified out of AOCI, pretax
Total tax effect
Total amounts reclassified out of AOCI, after-tax
Increase (decrease) in AOCI due to amounts reclassified to
Consolidated Statement of Income
Year ended December 31,
2019
2018
2017
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1,474) $
23
(1,451) $
371
(1,080) $
20 $
(5)
15 $
384 $
7
391 $
(89)
302 $
(12) $
286
1
275 $
(69)
206 $
— $
326
326 $
(765) $
534
(231) $
(421) $
125
(296) $
73
(223) $
41 $
(9)
32 $
301 $
17
318 $
(213)
105 $
(34) $
248
6
220 $
(54)
166 $
34 $
211
245 $
317 $
8
325 $
(778)
63
(715)
261
(454)
(7)
3
(4)
126
10
136
(50)
86
(42)
271
17
246
(87)
159
—
—
—
(340)
127
(213)
(1) The pretax amount is reclassified to Realized gains (losses) on sales of investments, net and Gross impairment losses in the Consolidated Statement of
Income. See Note 13 to the Consolidated Financial Statements for additional details.
(2) See Note 22 to the Consolidated Financial Statements for additional details.
(3) See Note 8 to the Consolidated Financial Statements for additional details.
211
20. PREFERRED STOCK
The following table summarizes the Company’s preferred stock outstanding:
Series A(1)
Series B(2)
Series D(3)
Series J(4)
Series K(5)
Series L(6)
Series M(7)
Series N(8)
Series O(9)
Series P(10)
Series Q(11)
Series R(12)
Series S(13)
Series T(14)
Series U(15)
Issuance date
Redeemable by issuer
beginning
Dividend
rate
October 29, 2012
January 30, 2023
5.950% $
December 13, 2012
February 15, 2023
April 30, 2013
May 15, 2023
September 19, 2013
September 30, 2023
October 31, 2013
November 15, 2023
February 12, 2014
February 12, 2019
April 30, 2014
May 15, 2024
October 29, 2014
November 15, 2019
March 20, 2015
March 27, 2020
April 24, 2015
May 15, 2025
August 12, 2015
August 15, 2020
November 13, 2015
November 15, 2020
February 2, 2016
February 12, 2021
April 25, 2016
August 15, 2026
September 12, 2019
September 12, 2024
5.900
5.350
7.125
6.875
6.875
6.300
5.800
5.875
5.950
5.950
6.125
6.300
6.250
5.000
Redemption
price per
depositary
share/
preference
share
1,000
1,000
1,000
25
25
25
1,000
1,000
1,000
1,000
1,000
1,000
Number
of
depositary
shares
1,500,000 $
750,000
1,250,000
38,000,000
59,800,000
19,200,000
1,750,000
1,500,000
1,500,000
2,000,000
1,250,000
1,500,000
25
41,400,000
1,000
1,000
1,500,000
1,500,000
Carrying value
in millions of dollars
December 31,
2019
December 31,
2018
1,500 $
750
1,250
950
1,495
—
1,750
—
1,500
2,000
1,250
1,500
1,035
1,500
1,500
1,500
750
1,250
950
1,495
480
1,750
1,500
1,500
2,000
1,250
1,500
1,035
1,500
—
$
17,980 $
18,460
(1)
(2)
(3)
(4)
(5)
Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable semiannually on January 30 and July 30 at a fixed rate until January 30, 2023, thereafter payable quarterly on January 30, April 30, July 30 and
October 30 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable semiannually on February 15 and August 15 at a fixed rate until February 15, 2023, thereafter payable quarterly on February 15, May 15, August 15 and
November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable semiannually on May 15 and November 15 at a fixed rate until May 15, 2023, thereafter payable quarterly on February 15, May 15, August 15 and
November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable quarterly on March 30, June 30, September 30 and December 30 at a fixed rate until September 30, 2023, thereafter payable quarterly on the same dates at
a floating rate, in each case when, as and if declared by the Citi Board of Directors.
Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable quarterly on February 15, May 15, August 15 and November 15 at a fixed rate until November 15, 2023, thereafter payable quarterly on the same dates at
a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(6) The Series L preferred stock was redeemed in full on February 12, 2019.
(7)
Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable semiannually on May 15 and November 15 at a fixed rate until May 15, 2024, thereafter payable quarterly on February 15, May 15, August 15 and
November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(8) The Series N preferred stock was redeemed in full on November 15, 2019.
(9)
Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable semiannually on March 27 and September 27 at a fixed rate until, but excluding, March 27, 2020, and thereafter payable quarterly on March 27, June 27,
September 27 and December 27 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(10) Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable semiannually on May 15 and November 15 at a fixed rate until, but excluding, May 15, 2025, and thereafter payable quarterly on February 15, May 15,
August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(11) Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable semiannually on February 15 and August 15 at a fixed rate until, but excluding, August 15, 2020, and thereafter payable quarterly on February 15, May
15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(12) Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable semiannually on May 15 and November 15 at a fixed rate until, but excluding, November 15, 2020, and thereafter payable quarterly on February 15, May
15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(13) Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable quarterly on February 12, May 12, August 12 and November 12 at a fixed rate, in each case when, as and if declared by the Citi Board of Directors.
(14) Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable semiannually on February 15 and August 15 at a fixed rate until, but excluding, August 15, 2026, thereafter payable quarterly on February 15, May 15,
August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
212
(15) Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are
payable semiannually on March 12 and September 12 at a fixed rate until, but excluding, September 12, 2024, thereafter payable quarterly on March 12, June 12,
September 12 and December 12 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
During 2019, Citi distributed $1,109 million in dividends
on its outstanding preferred stock. On January 15, 2020, Citi
declared preferred dividends of approximately $291 million
for the first quarter of 2020. During the first quarter of 2020,
Citi issued 1.5 million Series V preferred shares for $1.5
billion. Semi-annual dividends on Series V, assuming such
dividends are declared by the Citi Board of Directors, will be
distributed beginning in the third quarter of 2020. As of
February 21, 2020, Citi estimates it will distribute preferred
dividends of approximately $253 million, $328 million and
$253 million in the second, third and fourth quarters of 2020,
respectively.
213
21. SECURITIZATIONS AND VARIABLE INTEREST
ENTITIES
Uses of Special Purpose Entities
A special purpose entity (SPE) is an entity designed to fulfill a
specific limited need of the company that organized it. The
principal uses of SPEs by Citi are to obtain liquidity and
favorable capital treatment by securitizing certain financial
assets, to assist clients in securitizing their financial assets and
to create investment products for clients. SPEs may be
organized in various legal forms, including trusts, partnerships
or corporations. In a securitization, through the SPE’s issuance
of debt and equity instruments, certificates, commercial paper
or other notes of indebtedness, the company transferring assets
to the SPE converts all (or a portion) of those assets into cash
before they would have been realized in the normal course of
business. These issuances are recorded on the balance sheet of
the SPE, which may or may not be consolidated onto the
balance sheet of the company that organized the SPE.
Investors usually have recourse only to the assets in the
SPE, but may also benefit from other credit enhancements,
such as a collateral account, a line of credit or a liquidity
facility, such as a liquidity put option or asset purchase
agreement. Because of these enhancements, the SPE issuances
typically obtain a more favorable credit rating than the
transferor could obtain for its own debt issuances. This results
in less expensive financing costs than unsecured debt. The
SPE may also enter into derivative contracts in order to
convert the yield or currency of the underlying assets to match
the needs of the SPE investors or to limit or change the credit
risk of the SPE. Citigroup may be the provider of certain
credit enhancements as well as the counterparty to any related
derivative contracts.
Most of Citigroup’s SPEs are variable interest entities
(VIEs), as described below.
Variable Interest Entities
VIEs are entities that have either a total equity investment that
is insufficient to permit the entity to finance its activities
without additional subordinated financial support or whose
equity investors lack the characteristics of a controlling
financial interest (i.e., ability to make significant decisions
through voting rights or similar rights and a right to receive
the expected residual returns of the entity or an obligation to
absorb the expected losses of the entity). Investors that finance
the VIE through debt or equity interests or other counterparties
providing other forms of support, such as guarantees, certain
fee arrangements or certain types of derivative contracts, are
variable interest holders in the entity.
The variable interest holder, if any, that has a controlling
financial interest in a VIE is deemed to be the primary
beneficiary and must consolidate the VIE. Citigroup would be
deemed to have a controlling financial interest and be the
primary beneficiary if it has both of the following
characteristics:
•
•
power to direct the activities of the VIE that most
significantly impact the entity’s economic performance;
and
an obligation to absorb losses of the entity that could
potentially be significant to the VIE, or a right to receive
benefits from the entity that could potentially be
significant to the VIE.
The Company must evaluate each VIE to understand the
purpose and design of the entity, the role the Company had in
the entity’s design and its involvement in the VIE’s ongoing
activities. The Company then must evaluate which activities
most significantly impact the economic performance of the
VIE and who has the power to direct such activities.
For those VIEs where the Company determines that it has
the power to direct the activities that most significantly impact
the VIE’s economic performance, the Company must then
evaluate its economic interests, if any, and determine whether
it could absorb losses or receive benefits that could potentially
be significant to the VIE. When evaluating whether the
Company has an obligation to absorb losses that could
potentially be significant, it considers the maximum exposure
to such loss without consideration of probability. Such
obligations could be in various forms, including, but not
limited to, debt and equity investments, guarantees, liquidity
agreements and certain derivative contracts.
In various other transactions, the Company may (i) act as
a derivative counterparty (for example, interest rate swap,
cross-currency swap or purchaser of credit protection under a
credit default swap or total return swap where the Company
pays the total return on certain assets to the SPE), (ii) act as
underwriter or placement agent, (iii) provide administrative,
trustee or other services or (iv) make a market in debt
securities or other instruments issued by VIEs. The Company
generally considers such involvement, by itself, not to be
variable interests and thus not an indicator of power or
potentially significant benefits or losses.
214
Citigroup’s involvement with consolidated and unconsolidated VIEs with which the Company holds significant variable interests
or has continuing involvement through servicing a majority of the assets in a VIE is presented below:
As of December 31, 2019
Maximum exposure to loss in significant unconsolidated VIEs(1)
Funded exposures(2)
Unfunded exposures
In millions of dollars
Credit card securitizations
Mortgage securitizations(4)
U.S. agency-sponsored
Non-agency-sponsored
Citi-administered asset-
backed commercial paper
conduits
Collateralized loan
obligations (CLOs)
Asset-based financing
Municipal securities tender
option bond trusts (TOBs)
Municipal investments
Client intermediation
Investment funds
Other
Total
Total
involvement
with SPE
assets
Consolidated
VIE/SPE
assets
Significant
unconsolidated
VIE assets(3)
Debt
investments
Equity
investments
Funding
commitments
Guarantees
and
derivatives
Total
$
43,534 $
43,534 $
— $
— $
— $
— $
— $
—
117,374
39,608
—
1,187
117,374
38,421
2,671
876
15,622
15,622
—
—
17,395
196,728
6,950
20,312
1,455
827
352
460,157 $
$
—
6,139
1,458
—
1,391
174
1
69,506 $
17,395
190,589
4,199
23,756
5,492
20,312
64
653
351
390,651 $
4
2,636
4
5
169
34,320 $
—
—
—
—
1,151
—
4,274
—
—
—
5,425 $
—
—
—
—
9,524
3,544
3,034
—
16
39
16,157 $
72
1
—
2,743
877
—
—
4,199
— 34,431
3,548
—
9,944
—
4
—
22
1
208
—
74 $ 55,976
As of December 31, 2018
Maximum exposure to loss in significant unconsolidated VIEs(1)
Funded exposures(2)
Unfunded exposures
In millions of dollars
Credit card securitizations
Mortgage securitizations(4)
U.S. agency-sponsored
Non-agency-sponsored
Citi-administered asset-
backed commercial paper
conduits
Collateralized loan
obligations (CLOs)
Asset-based financing
Municipal securities tender
option bond trusts (TOBs)
Municipal investments
Client intermediation
Investment funds
Other
Total
Total
involvement
with SPE
assets
Consolidated
VIE/SPE
assets
Significant
unconsolidated
VIE assets(3)
Debt
investments
Equity
investments
Funding
commitments
Guarantees
and
derivatives
Total
$
46,232 $
46,232 $
— $
— $
— $
— $
— $
—
116,563
30,886
—
1,498
116,563
29,388
3,038
431
18,750
18,750
—
—
21,837
99,433
7,998
18,044
858
1,272
63
—
628
1,776
3
614
440
3
21,837
98,805
6,222
18,041
244
832
60
$
361,936 $
69,944 $
291,992 $
5,891
21,640
9
2,813
172
12
37
34,043 $
—
—
—
—
715
—
3,922
—
—
—
4,637 $
—
—
—
—
9,757
4,262
2,738
—
1
23
16,781 $
60
1
—
3,098
432
—
5,900
9
— 32,112
4,271
—
9,473
—
174
2
14
1
—
60
73 $ 55,534
(1) The definition of maximum exposure to loss is included in the text that follows this table.
(2)
Included on Citigroup’s December 31, 2019 and 2018 Consolidated Balance Sheet.
(3) A significant unconsolidated VIE is an entity in which the Company has any variable interest or continuing involvement considered to be significant, regardless of
the likelihood of loss.
(4) Citigroup mortgage securitizations also include agency and non-agency (private label) re-securitization activities. These SPEs are not consolidated. See “Re-
securitizations” below for further discussion.
215
The asset balances for consolidated VIEs represent the
carrying amounts of the assets consolidated by the Company.
The carrying amount may represent the amortized cost or the
current fair value of the assets depending on the legal form of
the asset (e.g., loan or security) and the Company’s standard
accounting policies for the asset type and line of business.
The asset balances for unconsolidated VIEs in which the
Company has significant involvement represent the most
current information available to the Company. In most cases,
the asset balances represent an amortized cost basis without
regard to impairments, unless fair value information is readily
available to the Company.
The maximum funded exposure represents the balance
sheet carrying amount of the Company’s investment in the
VIE. It reflects the initial amount of cash invested in the VIE,
adjusted for any accrued interest and cash principal payments
received. The carrying amount may also be adjusted for
increases or declines in fair value or any impairment in value
recognized in earnings. The maximum exposure of unfunded
positions represents the remaining undrawn committed
amount, including liquidity and credit facilities provided by
the Company or the notional amount of a derivative
instrument considered to be a variable interest. In certain
transactions, the Company has entered into derivative
instruments or other arrangements that are not considered
variable interests in the VIE (e.g., interest rate swaps, cross-
currency swaps or where the Company is the purchaser of
credit protection under a credit default swap or total return
swap where the Company pays the total return on certain
assets to the SPE). Receivables under such arrangements are
not included in the maximum exposure amounts.
The previous tables do not include:
•
•
•
•
•
•
•
certain venture capital investments made by some of the
Company’s private equity subsidiaries, as the Company
accounts for these investments in accordance with the
Investment Company Audit Guide (codified in ASC 946);
certain investment funds for which the Company provides
investment management services and personal estate
trusts for which the Company provides administrative,
trustee and/or investment management services;
certain third-party sponsored private equity funds to
which the Company provides secured credit facilities. The
Company has no decision-making power and does not
consolidate these funds, some of which may meet the
definition of a VIE. The Company’s maximum exposure
to loss is generally limited to a loan or lending-related
commitment (for more information on these positions, see
Notes 14 and 26 to the Consolidated Financial
Statements);
certain VIEs structured by third parties in which the
Company holds securities in inventory, as these
investments are made on arm’s-length terms;
certain positions in mortgage- and asset-backed securities
held by the Company, which are classified as Trading
account assets or Investments, in which the Company has
no other involvement with the related securitization entity
deemed to be significant (for more information on these
positions, see Notes 13 and 24 to the Consolidated
Financial Statements);
certain representations and warranties exposures in legacy
ICG-sponsored mortgage- and asset-backed
securitizations in which the Company has no variable
interest or continuing involvement as servicer. The
outstanding balance of mortgage loans securitized during
2005 to 2008 in which the Company has no variable
interest or continuing involvement as servicer was
approximately $6 billion and $7 billion at December 31,
2019 and 2018, respectively;
certain representations and warranties exposures in
Citigroup residential mortgage securitizations in which
the original mortgage loan balances are no longer
outstanding; and
• VIEs such as trust preferred securities trusts used in
connection with the Company’s funding activities. The
Company does not have a variable interest in these trusts.
216
Funding Commitments for Significant Unconsolidated VIEs—Liquidity Facilities and Loan Commitments
The following table presents the notional amount of liquidity facilities and loan commitments that are classified as funding
commitments in the VIE tables above:
In millions of dollars
Asset-based financing
Municipal securities tender option bond trusts (TOBs)
Municipal investments
Investment funds
Other
Total funding commitments
December 31, 2019
December 31, 2018
Liquidity
facilities
Loan/equity
commitments
Liquidity
facilities
Loan/equity
commitments
$
$
— $
3,544
—
—
—
9,524 $
—
3,034
16
39
— $
4,262
—
—
—
9,757
—
2,738
1
23
3,544 $
12,613 $
4,262 $
12,519
Consolidated VIEs
The Company engages in on-balance sheet securitizations,
which are securitizations that do not qualify for sales
treatment; thus, the assets remain on Citi’s Consolidated
Balance Sheet, and any proceeds received are recognized as
secured liabilities. The consolidated VIEs represent more than
a hundred separate entities with which the Company is
involved. In general, the third-party investors in the
obligations of consolidated VIEs have legal recourse only to
the assets of the respective VIEs and do not have such
recourse to the Company, except where Citi has provided a
guarantee to the investors or is the counterparty to certain
derivative transactions involving the VIE. Thus, Citigroup’s
maximum legal exposure to loss related to consolidated VIEs
is significantly less than the carrying value of the consolidated
VIE assets due to outstanding third-party financing.
Intercompany assets and liabilities are excluded from Citi’s
Consolidated Balance Sheet. All VIE assets are restricted from
being sold or pledged as collateral. The cash flows from these
assets are the only source used to pay down the associated
liabilities, which are non-recourse to Citi’s general assets. See
the Consolidated Balance Sheet for more information about
these Consolidated VIE assets and liabilities.
Significant Interests in Unconsolidated VIEs—Balance Sheet Classification
The following table presents the carrying amounts and classification of significant variable interests in unconsolidated VIEs:
In billions of dollars
Cash
Trading account assets
Investments
Total loans, net of allowance
Other
Total assets
December 31,
2019
December 31,
2018
$
$
— $
2.6
9.9
26.7
0.5
39.7 $
—
3.0
10.7
24.5
0.5
38.7
217
Credit Card Securitizations
The Company securitizes credit card receivables through trusts
established to purchase the receivables. Citigroup transfers
receivables into the trusts on a non-recourse basis. Credit card
securitizations are revolving securitizations: as customers pay
their credit card balances, the cash proceeds are used to
purchase new receivables and replenish the receivables in the
trust.
Substantially all of the Company’s credit card
securitization activity is through two trusts—Citibank Credit
Card Master Trust (Master Trust) and Citibank Omni Master
Trust (Omni Trust), with the substantial majority through the
Master Trust. These trusts are consolidated entities because, as
servicer, Citigroup has the power to direct the activities that
most significantly impact the economic performance of the
trusts. Citigroup holds a seller’s interest and certain securities
issued by the trusts, which could result in exposure to
potentially significant losses or benefits from the trusts.
Accordingly, the transferred credit card receivables remain on
Citi’s Consolidated Balance Sheet with no gain or loss
recognized. The debt issued by the trusts to third parties is
included on Citi’s Consolidated Balance Sheet.
Citi utilizes securitizations as one of the sources of
funding for its business in North America. The following table
reflects amounts related to the Company’s securitized credit
card receivables:
In billions of dollars
Ownership interests in principal amount of trust credit card receivables
Sold to investors via trust-issued securities
Retained by Citigroup as trust-issued securities
Retained by Citigroup via non-certificated interests
Total
The following table summarizes selected cash flow
information related to Citigroup’s credit card securitizations:
In billions of dollars
Proceeds from new securitizations
Pay down of maturing notes
2019
2018
2017
$ — $
(7.6)
6.8 $
(8.3)
11.1
(5.0)
Managed Loans
After securitization of credit card receivables, the Company
continues to maintain credit card customer account
relationships and provides servicing for receivables transferred
to the trusts. As a result, the Company considers the
securitized credit card receivables to be part of the business it
manages. As Citigroup consolidates the credit card trusts, all
managed securitized card receivables are on-balance sheet.
Funding, Liquidity Facilities and Subordinated Interests
As noted above, Citigroup securitizes credit card receivables
through two securitization trusts—Master Trust and Omni
Trust. The liabilities of the trusts are included on the
Consolidated Balance Sheet, excluding those retained by
Citigroup.
December 31,
2019
December 31,
2018
$
$
19.7 $
6.2
17.8
43.7 $
27.3
7.6
11.3
46.2
Master Trust Liabilities (at Par Value)
The Master Trust issues fixed- and floating-rate term notes.
Some of the term notes may be issued to multi-seller
commercial paper conduits. The weighted average maturity of
the third-party term notes issued by the Master Trust was 3.1
years as of December 31, 2019 and 3.0 years as of
December 31, 2018.
In billions of dollars
Term notes issued to third parties
Term notes retained by Citigroup
affiliates
Total Master Trust liabilities
Dec. 31,
2019
Dec. 31,
2018
$
$
18.2 $
4.3
22.5 $
25.8
5.7
31.5
Omni Trust Liabilities (at Par Value)
The Omni Trust issues fixed- and floating-rate term notes,
some of which are purchased by multi-seller commercial
paper conduits. The weighted average maturity of the third-
party term notes issued by the Omni Trust was 1.6 years as of
December 31, 2019 and 2.7 years as of December 31, 2018.
In billions of dollars
Term notes issued to third parties
Term notes retained by Citigroup
affiliates
Total Omni Trust liabilities
$
$
Dec. 31,
2019
Dec. 31,
2018
1.5 $
1.9
3.4 $
1.5
1.9
3.4
218
Mortgage Securitizations
Citigroup provides a wide range of mortgage loan products to
a diverse customer base. Once originated, the Company often
securitizes these loans through the use of VIEs. These VIEs
are funded through the issuance of trust certificates backed
solely by the transferred assets. These certificates have the
same life as the transferred assets. In addition to providing a
source of liquidity and less expensive funding, securitizing
these assets also reduces Citi’s credit exposure to the
borrowers. These mortgage loan securitizations are primarily
non-recourse, thereby effectively transferring the risk of future
credit losses to the purchasers of the securities issued by the
trust.
Citi’s U.S. consumer mortgage business generally retains
the servicing rights and in certain instances retains investment
securities, interest-only strips and residual interests in future
cash flows from the trusts and also provides servicing for a
limited number of ICG securitizations. Citi’s ICG business
may hold investment securities pursuant to credit risk
retention rules or in connection with secondary market-making
activities.
The Company securitizes mortgage loans generally
through either a U.S. government-sponsored agency, such as
Ginnie Mae, Fannie Mae or Freddie Mac (U.S. agency-
sponsored mortgages), or private label (non-agency-sponsored
mortgages) securitization. Citi is not the primary beneficiary
of its U.S. agency-sponsored mortgage securitization entities
because Citigroup does not have the power to direct the
activities of the VIEs that most significantly impact the
entities’ economic performance. Therefore, Citi does not
consolidate these U.S. agency-sponsored mortgage
securitization entities. Substantially all of the consumer loans
sold or securitized through non-consolidated trusts by
Citigroup are U.S. prime residential mortgage loans. Retained
interests in non-consolidated agency-sponsored mortgage
securitization trusts are classified as Trading account assets,
except for MSRs, which are included in Other assets on
Citigroup’s Consolidated Balance Sheet.
Citigroup does not consolidate certain non-agency-
sponsored mortgage securitization entities because Citi is
either not the servicer with the power to direct the significant
activities of the entity or Citi is the servicer, but the servicing
relationship is deemed to be a fiduciary relationship; therefore,
Citi is not deemed to be the primary beneficiary of the entity.
In certain instances, the Company has (i) the power to
direct the activities and (ii) the obligation to either absorb
losses or the right to receive benefits that could be potentially
significant to its non-agency-sponsored mortgage
securitization entities and, therefore, is the primary beneficiary
and, thus, consolidates the VIE.
The following tables summarize selected cash flow information and retained interests related to Citigroup mortgage securitizations:
In billions of dollars
Principal securitized
Proceeds from new securitizations(1)
Contractual servicing fees received
Purchases of previously transferred financial assets
2019
2018
2017
U.S. agency-
sponsored
mortgages
Non-agency-
sponsored
mortgages
U.S. agency-
sponsored
mortgages
Non-agency-
sponsored
mortgages
U.S. agency-
sponsored
mortgages
Non-agency-
sponsored
mortgages
$
5.3 $
5.5
0.1
0.2
18.9 $
18.9
—
—
4.0 $
5.6 $
7.8 $
4.2
0.1
0.2
7.1
—
—
8.1
0.2
0.4
7.3
7.3
—
—
Note: Excludes re-securitization transactions.
(1) The proceeds from new securitizations in 2019 include $0.2 billion related to personal loan securitizations.
For non-consolidated mortgage securitization entities
where the transfer of loans to the VIE meets the conditions for
sale accounting, Citi recognizes a gain or loss based on the
difference between the carrying value of the transferred assets
and the proceeds received (generally cash but may be
beneficial interests or servicing rights).
Agency and non-agency securitization gains for the year
ended December 31, 2019 were $16 million and $99 million,
respectively.
Agency and non-agency securitization gains for the year
ended December 31, 2018 were $17 million and $36 million,
respectively, and $28 million and $70 million, respectively, for
the year ended December 31, 2017.
2019
Non-agency-sponsored
mortgages(1)
2018
Non-agency-sponsored
mortgages(1)
U.S. agency-
sponsored
mortgages
Senior
interests
Subordinated
interests(3)
U.S. agency-
sponsored
mortgages
Senior
interests
Subordinated
interests
$
491 $
748 $
102 $
564 $
300 $
51
In millions of dollars
Carrying value of retained
interests(2)
(1) Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the
securitization.
(2) Retained interests consist of Level 2 or Level 3 assets depending on the observability of significant inputs. See Note 24 to the Consolidated Financial Statements
for more information about fair value measurements.
(3) Senior interests in non-agency-sponsored mortgages include $150 million related to personal loan securitizations at December 31, 2019.
219
Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables
were as follows:
Weighted average discount rate
Weighted average constant prepayment rate
Weighted average anticipated net credit losses(2)
Weighted average life
Weighted average discount rate
Weighted average constant prepayment rate
Weighted average anticipated net credit losses(2)
Weighted average life
U.S. agency-
sponsored mortgages
9.3%
12.9%
NM
6.6 years
December 31, 2019
Non-agency-sponsored mortgages(1)
Subordinated
interests
Senior
interests
3.6%
10.5%
3.9%
3 years
4.6%
7.6%
2.8%
11.4 years
U.S. agency-
sponsored mortgages
December 31, 2018
Non-agency-sponsored mortgages(1)
Subordinated
interests
Senior
interests
9.6%
5.8%
NM
7.5 years
2.8%
8.0%
4.4%
5.5 years
4.4%
9.1%
3.4%
6.7 years
(1) Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the
securitization.
(2) Anticipated net credit losses represent estimated loss severity associated with defaulted mortgage loans underlying the mortgage securitizations disclosed above.
Anticipated net credit losses, in this instance, do not represent total credit losses incurred to date, nor do they represent credit losses expected on retained interests
in mortgage securitizations.
NM Anticipated net credit losses are not meaningful due to U.S. agency guarantees.
The interests retained by the Company range from highly rated and/or senior in the capital structure to unrated and/or residual
interests. Key assumptions used in measuring the fair value of retained interests at period end or securitization of mortgage receivables
were as follows:
Weighted average discount rate
Weighted average constant prepayment rate
Weighted average anticipated net credit losses(2)
Weighted average life
Weighted average discount rate
Weighted average constant prepayment rate
Weighted average anticipated net credit losses(2)
Weighted average life
U.S. agency-
sponsored mortgages
9.8%
10.1%
NM
6.6 years
December 31, 2019
Non-agency-sponsored mortgages(1)
Subordinated
interests
Senior
interests
7.6%
3.6%
5.2%
5.9 years
4.2%
6.1%
2.7%
29.3 years
U.S. agency-
sponsored mortgages
December 31, 2018
Non-agency-sponsored mortgages(1)
Subordinated
interests
Senior
interests
7.8%
9.1%
NM
6.4 years
9.3%
8.0%
40.0%
6.6 years
—
—
—
—
(1) Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the
securitization.
(2) Anticipated net credit losses represent estimated loss severity associated with defaulted mortgage loans underlying the mortgage securitizations disclosed above.
Anticipated net credit losses, in this instance, do not represent total credit losses incurred to date, nor do they represent credit losses expected on retained interests
in mortgage securitizations.
NM Anticipated net credit losses are not meaningful due to U.S. agency guarantees.
220
The sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions are presented in the tables
below. The negative effect of each change is calculated independently, holding all other assumptions constant. Because the key
assumptions may not be independent, the net effect of simultaneous adverse changes in the key assumptions may be less than the sum
of the individual effects shown below.
In millions of dollars
Discount rate
Adverse change of 10%
Adverse change of 20%
Constant prepayment rate
Adverse change of 10%
Adverse change of 20%
Anticipated net credit losses
Adverse change of 10%
Adverse change of 20%
In millions of dollars
Discount rate
Adverse change of 10%
Adverse change of 20%
Constant prepayment rate
Adverse change of 10%
Adverse change of 20%
Anticipated net credit losses
Adverse change of 10%
Adverse change of 20%
December 31, 2019
Non-agency-sponsored mortgages
U.S. agency-
sponsored mortgages
Senior
interests
Subordinated
interests
$
(18) $
(35)
(18)
(35)
NM
NM
— $
(1)
—
—
—
—
December 31, 2018
Non-agency-sponsored mortgages
U.S. agency-
sponsored mortgages
Senior
interests
Subordinated
interests
$
(16) $
(32)
(21)
(41)
NM
NM
— $
—
—
—
—
—
(1)
(1)
—
—
—
—
—
—
—
—
—
—
NM Anticipated net credit losses are not meaningful due to U.S. agency guarantees.
The following table includes information about loan delinquencies and liquidation losses for assets held in non-consolidated, non-
agency-sponsored securitization entities:
In billions of dollars, except liquidation losses in millions
Securitized assets
Residential mortgages
Commercial and other
Total
Securitized assets
90 days past due
Liquidation losses
2019
2018
2019
2018
2019
2018
$
$
11.7 $
22.3
34.0 $
5.2 $
13.1
18.3 $
0.4 $
—
0.4 $
0.4 $
—
0.4 $
49.0 $
—
49.0 $
54.0
—
54.0
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Mortgage Servicing Rights (MSRs)
In connection with the securitization of mortgage loans, Citi’s
U.S. consumer mortgage business generally retains the
servicing rights, which entitle the Company to a future stream
of cash flows based on the outstanding principal balances of
the loans and the contractual servicing fee. Failure to service
the loans in accordance with contractual requirements may
lead to a termination of the servicing rights and the loss of
future servicing fees.
These transactions create intangible assets referred to as
MSRs, which are recorded at fair value on Citi’s Consolidated
Balance Sheet. The fair value of Citi’s capitalized MSRs was
$495 million and $584 million at December 31, 2019 and
2018, respectively. The MSRs correspond to principal loan
balances of $58 billion and $62 billion as of December 31,
2019 and 2018, respectively.
The following table summarizes the changes in
capitalized MSRs:
In millions of dollars
Balance, beginning of year
Originations
Changes in fair value of MSRs due to
changes in inputs and assumptions
Other changes(1)
Sale of MSRs
Balance, as of December 31
2019
2018
$
$
584 $
70
(84)
(75)
—
495 $
558
58
54
(68)
(18)
584
(1) Represents changes due to customer payments and passage of time.
The fair value of the MSRs is primarily affected by
changes in prepayments of mortgages that result from shifts in
mortgage interest rates. Specifically, higher interest rates tend
to lead to declining prepayments, which causes the fair value
of the MSRs to increase. In managing this risk, Citigroup
economically hedges a significant portion of the value of its
MSRs through the use of interest rate derivative contracts,
forward purchase and sale commitments of mortgage-backed
securities and purchased securities, all classified as Trading
account assets.
The Company receives fees during the course of servicing
previously securitized mortgages. The amounts of these fees
were as follows:
In millions of dollars
Servicing fees
Late fees
Ancillary fees
Total MSR fees
2019
2018
2017
$
$
148 $
8
1
157 $
172 $
4
8
184 $
276
10
13
299
In the Consolidated Statement of Income these fees are
primarily classified as Commissions and fees, and changes in
MSR fair values are classified as Other revenue.
Re-securitizations
The Company engages in re-securitization transactions in
which debt securities are transferred to a VIE in exchange for
new beneficial interests. Citi did not transfer non-agency
(private label) securities to re-securitization entities during the
years ended December 31, 2019 and 2018. These securities are
222
backed by either residential or commercial mortgages and are
often structured on behalf of clients.
As of December 31, 2019, Citi held no retained interests
in private label re-securitization transactions structured by
Citi. As of December 31, 2018, the fair value of Citi-retained
interests in private label re-securitization transactions
structured by Citi totaled approximately $16 million (all
related to re-securitization transactions executed prior to
2016). Of this amount, all was related to subordinated
beneficial interests. The original par value of private label re-
securitization transactions in which Citi held a retained
interest as of December 31, 2018 was approximately $271
million.
The Company also re-securitizes U.S. government-agency
guaranteed mortgage-backed (agency) securities. During the
years ended December 31, 2019 and 2018, Citi transferred
agency securities with a fair value of approximately $31.9
billion and $26.3 billion, respectively, to re-securitization
entities.
As of December 31, 2019, the fair value of Citi-retained
interests in agency re-securitization transactions structured by
Citi totaled approximately $2.2 billion (including $1.3 billion
related to re-securitization transactions executed in 2019)
compared to $2.5 billion as of December 31, 2018 (including
$1.4 billion related to re-securitization transactions executed
in 2018), which is recorded in Trading account assets. The
original fair value of agency re-securitization transactions in
which Citi holds a retained interest as of December 31, 2019
and 2018 was approximately $73.5 billion and $70.9 billion,
respectively.
As of December 31, 2019 and 2018, the Company did not
consolidate any private label or agency re-securitization
entities.
Citi-Administered Asset-Backed Commercial Paper Conduits
The Company is active in the asset-backed commercial paper
conduit business as administrator of several multi-seller
commercial paper conduits and also as a service provider to
single-seller and other commercial paper conduits sponsored
by third parties.
Citi’s multi-seller commercial paper conduits are designed
to provide the Company’s clients access to low-cost funding in
the commercial paper markets. The conduits purchase assets
from or provide financing facilities to clients and are funded
by issuing commercial paper to third-party investors. The
conduits generally do not purchase assets originated by Citi.
The funding of the conduits is facilitated by the liquidity
support and credit enhancements provided by the Company.
As administrator to Citi’s conduits, the Company is
generally responsible for selecting and structuring assets
purchased or financed by the conduits, making decisions
regarding the funding of the conduits, including determining
the tenor and other features of the commercial paper issued,
monitoring the quality and performance of the conduits’ assets
and facilitating the operations and cash flows of the conduits.
In return, the Company earns structuring fees from customers
for individual transactions and earns an administration fee
from the conduit, which is equal to the income from the client
program and liquidity fees of the conduit after payment of
conduit expenses. This administration fee is fairly stable, since
most risks and rewards of the underlying assets are passed
back to the clients. Once the asset pricing is negotiated, most
ongoing income, costs and fees are relatively stable as a
percentage of the conduit’s size.
The conduits administered by Citi do not generally invest
in liquid securities that are formally rated by third parties. The
assets are privately negotiated and structured transactions that
are generally designed to be held by the conduit, rather than
actively traded and sold. The yield earned by the conduit on
each asset is generally tied to the rate on the commercial paper
issued by the conduit, thus passing interest rate risk to the
client. Each asset purchased by the conduit is structured with
transaction-specific credit enhancement features provided by
the third-party client seller, including over-collateralization,
cash and excess spread collateral accounts, direct recourse or
third-party guarantees. These credit enhancements are sized
with the objective of approximating a credit rating of A or
above, based on Citi’s internal risk ratings. At December 31,
2019 and 2018, the commercial paper conduits administered
by Citi had approximately $15.6 billion and $18.8 billion of
purchased assets outstanding, respectively, and had
incremental funding commitments with clients of
approximately $16.3 billion and $14.0 billion, respectively.
Substantially all of the funding of the conduits is in the
form of short-term commercial paper. At December 31, 2019
and 2018, the weighted average remaining lives of the
commercial paper issued by the conduits were approximately
49 and 53 days, respectively.
The primary credit enhancement provided to the conduit
investors is in the form of transaction-specific credit
enhancements described above. In addition to the transaction-
specific credit enhancements, the conduits, other than the
government guaranteed loan conduit, have obtained a letter of
credit from the Company, which is equal to at least 8%–10%
of the conduit’s assets with a minimum of $200 million. The
letters of credit provided by the Company to the conduits total
approximately $1.4 billion as of December 31, 2019 and $1.7
billion as of December 31, 2018. The net result across multi-
seller conduits administered by the Company is that, in the
event that defaulted assets exceed the transaction-specific
credit enhancements described above, any losses in each
conduit are allocated first to the Company and then to the
commercial paper investors.
Citigroup also provides the conduits with two forms of
liquidity agreements that are used to provide funding to the
conduits in the event of a market disruption, among other
events. Each asset of the conduits is supported by a
transaction-specific liquidity facility in the form of an asset
purchase agreement (APA). Under the APA, the Company has
generally agreed to purchase non-defaulted eligible
receivables from the conduit at par. The APA is not designed
to provide credit support to the conduit, as it generally does
not permit the purchase of defaulted or impaired assets. Any
funding under the APA will likely subject the underlying
conduit clients to increased interest costs. In addition, the
Company provides the conduits with program-wide liquidity
in the form of short-term lending commitments. Under these
commitments, the Company has agreed to lend to the conduits
in the event of a short-term disruption in the commercial paper
market, subject to specified conditions. The Company receives
223
fees for providing both types of liquidity agreements and
considers these fees to be on fair market terms.
Finally, Citi is one of several named dealers in the
commercial paper issued by the conduits and earns a market-
based fee for providing such services. Along with third-party
dealers, the Company makes a market in the commercial paper
and may from time to time fund commercial paper pending
sale to a third party. On specific dates with less liquidity in the
market, the Company may hold in inventory commercial paper
issued by conduits administered by the Company, as well as
conduits administered by third parties. Separately, in the
normal course of business, Citi purchases commercial paper,
including commercial paper issued by Citigroup's conduits. At
December 31, 2019 and 2018, the Company owned $5.5
billion and $5.5 billion, respectively, of the commercial paper
issued by its administered conduits. The Company's
investments were not driven by market illiquidity and the
Company is not obligated under any agreement to purchase
the commercial paper issued by the conduits.
The asset-backed commercial paper conduits are
consolidated by Citi. The Company has determined that,
through its roles as administrator and liquidity provider, it has
the power to direct the activities that most significantly impact
the entities’ economic performance. These powers include its
ability to structure and approve the assets purchased by the
conduits, its ongoing surveillance and credit mitigation
activities, its ability to sell or repurchase assets out of the
conduits and its liability management. In addition, as a result
of all the Company’s involvement described above, it was
concluded that Citi has an economic interest that could
potentially be significant. However, the assets and liabilities of
the conduits are separate and apart from those of Citigroup.
No assets of any conduit are available to satisfy the creditors
of Citigroup or any of its other subsidiaries.
Collateralized Loan Obligations (CLOs)
A collateralized loan obligation (CLO) is a VIE that purchases
a portfolio of assets consisting primarily of non-investment
grade corporate loans. CLOs issue multiple tranches of debt
and equity to investors to fund the asset purchases and pay
upfront expenses associated with forming the CLO. A third-
party asset manager is contracted by the CLO to purchase the
underlying assets from the open market and monitor the credit
risk associated with those assets. Over the term of a CLO, the
asset manager directs purchases and sales of assets in a
manner consistent with the CLO’s asset management
agreement and indenture. In general, the CLO asset manager
will have the power to direct the activities of the entity that
most significantly impact the economic performance of the
CLO. Investors in a CLO, through their ownership of debt
and/or equity in it, can also direct certain activities of the
CLO, including removing its asset manager under limited
circumstances, optionally redeeming the notes, voting on
amendments to the CLO’s operating documents and other
activities. A CLO has a finite life, typically 12 years.
Citi serves as a structuring and placement agent with
respect to the CLOs. Typically, the debt and equity of the
CLOs are sold to third-party investors. On occasion, certain
Citi entities may purchase some portion of a CLO’s liabilities
for investment purposes. In addition, Citi may purchase,
typically in the secondary market, certain securities issued by
the CLOs to support its market making activities.
The Company generally does not have the power to direct
the activities that most significantly impact the economic
performance of the CLOs, as this power is generally held by a
third-party asset manager of the CLO. As such, those CLOs
are not consolidated.
The following tables summarize selected cash flow
information and retained interests related to Citigroup CLOs:
In millions of dollars
Principal securitized
2019
2018
2017
$
— $
— $
Proceeds from new securitizations
Cash flows received on retained
interests and other net cash flows
—
72
—
127
133
133
107
In millions of dollars
Carrying value of retained
interests
Dec. 31,
2019
Dec. 31,
2018
Dec. 31,
2017
$
1,404 $
3,142 $
4,079
All of Citi’s retained interests were held-to-maturity
securities as of December 31, 2019 and 2018.
Asset-Based Financing
The Company provides loans and other forms of financing to
VIEs that hold assets. Those loans are subject to the same
credit approvals as all other loans originated or purchased by
the Company. Financings in the form of debt securities or
derivatives are, in most circumstances, reported in Trading
account assets and accounted for at fair value through
earnings. The Company generally does not have the power to
direct the activities that most significantly impact these VIEs’
economic performance; thus, it does not consolidate them.
The primary types of Citi’s asset-based financings, total
assets of the unconsolidated VIEs with significant
involvement and Citi’s maximum exposure to loss are shown
below. For Citi to realize the maximum loss, the VIE
(borrower) would have to default with no recovery from the
assets held by the VIE.
December 31, 2019
Total
unconsolidated
VIE assets
Maximum
exposure to
unconsolidated
VIEs
In millions of dollars
Type
Commercial and other real
estate
Corporate loans
Other (including investment
funds, airlines and shipping)
Total
$
$
31,377 $
7,088
152,124
190,589 $
7,489
5,802
21,140
34,431
In millions of dollars
Type
Commercial and other real
estate
Corporate loans
Other (including investment
funds, airlines and shipping)
Total
December 31, 2018
Total
unconsolidated
VIE assets
Maximum
exposure to
unconsolidated
VIEs
$
$
23,918 $
6,973
67,914
98,805 $
6,928
5,744
19,440
32,112
Municipal Securities Tender Option Bond (TOB) Trusts
Municipal TOB trusts may hold fixed- or floating-rate, taxable
or tax-exempt securities issued by state and local governments
and municipalities. TOB trusts are typically structured as
single-issuer entities whose assets are purchased from either
the Company or from other investors in the municipal
securities market. TOB trusts finance the purchase of their
municipal assets by issuing two classes of certificates: long-
dated, floating rate certificates (“Floaters”) that are putable
pursuant to a liquidity facility and residual interest certificates
(“Residuals”). The Floaters are purchased by third-party
investors, typically tax-exempt money market funds. The
Residuals are purchased by the original owner of the
municipal securities that are being financed.
From Citigroup’s perspective, there are two types of TOB
trusts: customer and non-customer. Customer TOB trusts are
those trusts utilized by customers of the Company to finance
their securities, generally municipal securities. The Residuals
issued by these trusts are purchased by the customer being
financed. Non-customer TOB trusts are generally used by the
Company to finance its own municipal securities investments;
the Residuals issued by non-customer TOB trusts are
purchased by the Company.
With respect to both customer and non-customer TOB
trusts, Citi may provide remarketing agent services. If Floaters
are optionally tendered and the Company, in its role as
remarketing agent, is unable to find a new investor to purchase
the optionally tendered Floaters within a specified period of
time, Citigroup may, but is not obligated to, purchase the
tendered Floaters into its own inventory. The level of the
Company’s inventory of such Floaters fluctuates.
For certain customer TOB trusts, Citi may also serve as a
voluntary advance provider. In this capacity, the Company
may, but is not obligated to, make loan advances to customer
TOB trusts to purchase optionally tendered Floaters that have
not otherwise been successfully remarketed to new investors.
Such loans are secured by pledged Floaters. As of
December 31, 2019, Citi had no outstanding voluntary
advances to customer TOB trusts.
For certain non-customer trusts, the Company also
provides credit enhancement. At December 31, 2019 and
2018, none of the municipal bonds owned by non-customer
TOB trusts were subject to a credit guarantee provided by the
Company.
Citigroup also provides liquidity services to many
customer and non-customer trusts. If a trust is unwound early
due to an event other than a credit event on the underlying
224
municipal bonds, the underlying municipal bonds are sold out
of the trust and bond sale proceeds are used to redeem the
outstanding trust certificates. If this results in a shortfall
between the bond sale proceeds and the redemption price of
the tendered Floaters, the Company, pursuant to the liquidity
agreement, would be obligated to make a payment to the trust
to satisfy that shortfall. For certain customer TOB trusts,
Citigroup has also executed a reimbursement agreement with
the holder of the Residual, pursuant to which the Residual
holder is obligated to reimburse the Company for any payment
the Company makes under the liquidity arrangement. These
reimbursement agreements may be subject to daily margining
based on changes in the market value of the underlying
municipal bonds. In cases where a third party provides
liquidity to a non-customer TOB trust, a similar
reimbursement arrangement may be executed, whereby the
Company (or a consolidated subsidiary of the Company), as
Residual holder, would absorb any losses incurred by the
liquidity provider.
For certain other non-customer TOB trusts, Citi serves as
tender option provider. The tender option provider
arrangement allows Floater holders to put their interests
directly to the Company at any time, subject to the requisite
notice period requirements, at a price of par.
At December 31, 2019 and 2018, liquidity agreements
provided with respect to customer TOB trusts totaled $3.5
billion and $4.3 billion, respectively, of which $1.6 billion and
$2.3 billion, respectively, were offset by reimbursement
agreements. For the remaining exposure related to TOB
transactions, where the residual owned by the customer was at
least 25% of the bond value at the inception of the transaction,
no reimbursement agreement was executed.
Citi considers both customer and non-customer TOB
trusts to be VIEs. Customer TOB trusts are not consolidated
by the Company, as the power to direct the activities that most
significantly impact the trust’s economic performance rests
with the customer Residual holder, which may unilaterally
cause the sale of the trust’s bonds.
Non-customer TOB trusts generally are consolidated
because the Company holds the Residual interest and thus has
the unilateral power to cause the sale of the trust’s bonds.
The Company also provides other liquidity agreements or
letters of credit to customer-sponsored municipal investment
funds, which are not variable interest entities, and
municipality-related issuers that totaled $7.0 billion as of
December 31, 2019 and $6.1 billion as of December 31, 2018.
These liquidity agreements and letters of credit are offset by
reimbursement agreements with various term-out provisions.
Municipal Investments
Municipal investment transactions include debt and equity
interests in partnerships that finance the construction and
rehabilitation of low-income housing, facilitate lending in new
or underserved markets or finance the construction or
operation of renewable municipal energy facilities. Citi
generally invests in these partnerships as a limited partner and
earns a return primarily through the receipt of tax credits and
grants earned from the investments made by the partnership.
The Company may also provide construction loans or
permanent loans for the development or operation of real
225
estate properties held by partnerships. These entities are
generally considered VIEs. The power to direct the activities
of these entities is typically held by the general partner.
Accordingly, these entities are not consolidated by Citigroup.
Client Intermediation
Client intermediation transactions represent a range of
transactions designed to provide investors with specified
returns based on the returns of an underlying security,
referenced asset or index. These transactions include credit-
linked notes and equity-linked notes. In these transactions, the
VIE typically obtains exposure to the underlying security,
referenced asset or index through a derivative instrument, such
as a total-return swap or a credit-default swap. In turn, the VIE
issues notes to investors that pay a return based on the
specified underlying security, referenced asset or index. The
VIE invests the proceeds in a financial asset or a guaranteed
insurance contract that serves as collateral for the derivative
contract over the term of the transaction. The Company’s
involvement in these transactions includes being the
counterparty to the VIE’s derivative instruments and investing
in a portion of the notes issued by the VIE. In certain
transactions, the investor’s maximum risk of loss is limited
and the Company absorbs risk of loss above a specified level.
Citi does not have the power to direct the activities of the VIEs
that most significantly impact their economic performance and
thus it does not consolidate them.
Citi’s maximum risk of loss in these transactions is
defined as the amount invested in notes issued by the VIE and
the notional amount of any risk of loss absorbed by Citi
through a separate instrument issued by the VIE. The
derivative instrument held by the Company may generate a
receivable from the VIE (for example, where the Company
purchases credit protection from the VIE in connection with
the VIE’s issuance of a credit-linked note), which is
collateralized by the assets owned by the VIE. These
derivative instruments are not considered variable interests
and any associated receivables are not included in the
calculation of maximum exposure to the VIE.
Investment Funds
The Company is the investment manager for certain
investment funds and retirement funds that invest in various
asset classes including private equity, hedge funds, real estate,
fixed income and infrastructure. Citigroup earns a
management fee, which is a percentage of capital under
management, and may earn performance fees. In addition, for
some of these funds the Company has an ownership interest in
the investment funds. Citi has also established a number of
investment funds as opportunities for qualified employees to
invest in private equity investments. The Company acts as
investment manager for these funds and may provide
employees with financing on both recourse and non-recourse
bases for a portion of the employees’ investment
commitments.
22. DERIVATIVES
In the ordinary course of business, Citigroup enters into
various types of derivative transactions, which include:
• Futures and forward contracts, which are commitments to
•
buy or sell at a future date a financial instrument,
commodity or currency at a contracted price that may be
settled in cash or through delivery of an item readily
convertible to cash.
Swap contracts, which are commitments to settle in cash
at a future date or dates that may range from a few days to
a number of years, based on differentials between
specified indices or financial instruments, as applied to a
notional principal amount.
• Option contracts, which give the purchaser, for a
premium, the right, but not the obligation, to buy or sell
within a specified time a financial instrument, commodity
or currency at a contracted price that may also be settled
in cash, based on differentials between specified indices
or prices.
Swaps, forwards and some option contracts are over-the-
counter (OTC) derivatives that are bilaterally negotiated with
counterparties and settled with those counterparties, except for
swap contracts that are novated and "cleared" through central
counterparties (CCPs). Futures contracts and other option
contracts are standardized contracts that are traded on an
exchange with a CCP as the counterparty from the inception of
the transaction. Citigroup enters into derivative contracts
relating to interest rate, foreign currency, commodity and other
market/credit risks for the following reasons:
•
•
Trading Purposes: Citigroup trades derivatives as an
active market maker. Citigroup offers its customers
derivatives in connection with their risk management
actions to transfer, modify or reduce their interest rate,
foreign exchange and other market/credit risks or for their
own trading purposes. Citigroup also manages its
derivative risk positions through offsetting trade activities,
controls focused on price verification and daily reporting
of positions to senior managers.
Hedging: Citigroup uses derivatives in connection with
its own risk management activities to hedge certain risks
or reposition the risk profile of the Company. Hedging
may be accomplished by applying hedge accounting in
accordance with ASC 815, Derivatives and Hedging, or
by an economic hedge. For example, Citigroup issues
fixed-rate long-term debt and then enters into a receive-
fixed, pay-variable-rate interest rate swap with the same
tenor and notional amount to synthetically convert the
interest payments to a net variable-rate basis. This
strategy is the most common form of an interest rate
hedge, as it minimizes net interest cost in certain yield
curve environments. Derivatives are also used to manage
market risks inherent in specific groups of on-balance
sheet assets and liabilities, including AFS securities,
commodities and borrowings, as well as other interest-
sensitive assets and liabilities. In addition, foreign
exchange contracts are used to hedge non-U.S.-dollar-
226
denominated debt, foreign currency-denominated AFS
securities and net investment exposures.
Derivatives may expose Citigroup to market, credit or
liquidity risks in excess of the amounts recorded on the
Consolidated Balance Sheet. Market risk on a derivative
product is the exposure created by potential fluctuations in
interest rates, market prices, foreign exchange rates and other
factors and is a function of the type of product, the volume of
transactions, the tenor and terms of the agreement and the
underlying volatility. Credit risk is the exposure to loss in the
event of nonperformance by the other party to satisfy a
derivative liability where the value of any collateral held by
Citi is not adequate to cover such losses. The recognition in
earnings of unrealized gains on derivative transactions is
subject to management’s assessment of the probability of
counterparty default. Liquidity risk is the potential exposure
that arises when the size of a derivative position may affect the
ability to monetize the position in a reasonable period of time
and at a reasonable cost in periods of high volatility and
financial stress.
Derivative transactions are customarily documented under
industry standard master netting agreements, which provide
that following an event of default, the non-defaulting party
may promptly terminate all transactions between the parties
and determine the net amount due to be paid to, or by, the
defaulting party. Events of default include (i) failure to make a
payment on a derivative transaction that remains uncured
following applicable notice and grace periods, (ii) breach of
agreement that remains uncured after applicable notice and
grace periods, (iii) breach of a representation, (iv) cross
default, either to third-party debt or to other derivative
transactions entered into between the parties, or, in some
cases, their affiliates, (v) the occurrence of a merger or
consolidation that results in a party’s becoming a materially
weaker credit and (vi) the cessation or repudiation of any
applicable guarantee or other credit support document.
Obligations under master netting agreements are often secured
by collateral posted under an industry standard credit support
annex to the master netting agreement. An event of default
may also occur under a credit support annex if a party fails to
make a collateral delivery that remains uncured following
applicable notice and grace periods.
The netting and collateral rights incorporated in the
master netting agreements are considered to be legally
enforceable if a supportive legal opinion has been obtained
from counsel of recognized standing that provides (i) the
requisite level of certainty regarding enforceability and (ii)
that the exercise of rights by the non-defaulting party to
terminate and close-out transactions on a net basis under these
agreements will not be stayed or avoided under applicable law
upon an event of default, including bankruptcy, insolvency or
similar proceeding.
A legal opinion may not be sought for certain jurisdictions
where local law is silent or unclear as to the enforceability of
such rights or where adverse case law or conflicting regulation
may cast doubt on the enforceability of such rights. In some
jurisdictions and for some counterparty types, the insolvency
law may not provide the requisite level of certainty. For
example, this may be the case for certain sovereigns,
municipalities, central banks and U.S. pension plans.
Exposure to credit risk on derivatives is affected by
market volatility, which may impair the ability of
counterparties to satisfy their obligations to the Company.
Credit limits are established and closely monitored for
customers engaged in derivatives transactions. Citi considers
the level of legal certainty regarding enforceability of its
offsetting rights under master netting agreements and credit
support annexes to be an important factor in its risk
management process. Specifically, Citi generally transacts
much lower volumes of derivatives under master netting
agreements where Citi does not have the requisite level of
legal certainty regarding enforceability, because such
derivatives consume greater amounts of single counterparty
credit limits than those executed under enforceable master
netting agreements.
Cash collateral and security collateral in the form of G10
government debt securities are often posted by a party to a
master netting agreement to secure the net open exposure of
the other party; the receiving party is free to commingle/
rehypothecate such collateral in the ordinary course of its
business. Nonstandard collateral such as corporate bonds,
municipal bonds, U.S. agency securities and/or MBS may also
be pledged as collateral for derivative transactions. Security
collateral posted to open and maintain a master netting
agreement with a counterparty, in the form of cash and/or
securities, may from time to time be segregated in an account
at a third-party custodian pursuant to a tri-party account
control agreement.
As of January 1, 2018, Citigroup early adopted ASU
2017-12, Targeted Improvements to Accounting for Hedge
Activities. This standard primarily impacts Citi’s accounting
for derivatives designated as cash flow hedges and fair value
hedges. Refer to the respective sections below for details.
227
Information pertaining to Citigroup’s derivative activities,
based on notional amounts, is presented in the table below.
Derivative notional amounts are reference amounts from
which contractual payments are derived and do not represent a
complete measure of Citi’s exposure to derivative transactions.
Citi’s derivative exposure arises primarily from market
fluctuations (i.e., market risk), counterparty failure (i.e., credit
risk) and/or periods of high volatility or financial stress (i.e.,
liquidity risk), as well as any market valuation adjustments
that may be required on the transactions. Moreover, notional
amounts do not reflect the netting of offsetting trades. For
example, if Citi enters into a receive-fixed interest rate swap
with $100 million notional, and offsets this risk with an
Derivative Notionals
identical but opposite pay-fixed position with a different
counterparty, $200 million in derivative notionals is reported,
although these offsetting positions may result in de minimis
overall market risk.
In addition, aggregate derivative notional amounts can
fluctuate from period to period in the normal course of
business based on Citi’s market share, levels of client activity
and other factors. All derivatives are recorded in Trading
account assets/Trading account liabilities on the Consolidated
Balance Sheet.
In millions of dollars
Interest rate contracts
Swaps
Futures and forwards
Written options
Purchased options
Total interest rate contracts
Foreign exchange contracts
Swaps
Futures, forwards and spot
Written options
Purchased options
Total foreign exchange contracts
Equity contracts
Swaps
Futures and forwards
Written options
Purchased options
Total equity contracts
Commodity and other contracts
Swaps
Futures and forwards
Written options
Purchased options
Total commodity and other contracts
Credit derivatives(1)
Protection sold
Protection purchased
Total credit derivatives
Total derivative notionals
$
$
$
$
$
$
$
$
$
$
$
Hedging instruments under
ASC 815
Trading derivative instruments
December 31,
2019
December 31,
2018
December 31,
2019
December 31,
2018
318,089 $
273,636 $
17,063,272 $
18,138,686
—
—
—
—
—
—
3,636,658
2,114,511
1,857,770
4,632,257
3,018,469
2,532,479
318,089 $
273,636 $
24,672,211 $
28,321,891
63,104 $
38,275
80
80
57,153 $
6,063,853 $
41,410
1,726
2,104
3,979,188
908,061
959,149
6,738,158
5,115,504
1,566,717
1,543,516
101,539 $
102,393 $
11,910,251 $
14,963,895
— $
—
—
—
— $
— $
1,195
—
—
— $
197,893 $
—
—
—
66,705
560,571
422,393
217,580
52,053
454,675
341,018
— $
1,247,562 $
1,065,326
— $
69,445 $
802
—
—
137,192
91,587
86,631
1,195 $
802 $
384,855 $
— $
—
— $
— $
—
— $
603,387 $
703,926
1,307,313 $
420,823 $
376,831 $
39,522,192 $
79,133
146,647
62,629
61,298
349,707
724,939
795,649
1,520,588
46,221,407
(1) Credit derivatives are arrangements designed to allow one party (protection buyer) to transfer the credit risk of a “reference asset” to another party (protection
seller). These arrangements allow a protection seller to assume the credit risk associated with the reference asset without directly purchasing that asset. The
Company enters into credit derivative positions for purposes such as risk management, yield enhancement, reduction of credit concentrations and diversification
of overall risk.
228
The following tables present the gross and net fair values
of the Company’s derivative transactions and the related
offsetting amounts as of December 31, 2019 and 2018. Gross
positive fair values are offset against gross negative fair values
by counterparty, pursuant to enforceable master netting
agreements. Under ASC 815-10-45, payables and receivables
in respect of cash collateral received from or paid to a given
counterparty pursuant to a credit support annex are included in
the offsetting amount, if a legal opinion supporting the
enforceability of netting and collateral rights has been
obtained. GAAP does not permit similar offsetting for security
collateral.
In addition, the following tables reflect rule changes
adopted by clearing organizations that require or allow entities
to treat derivative assets, liabilities and the related variation
margin as settlement of the related derivative fair values for
legal and accounting purposes, as opposed to presenting gross
derivative assets and liabilities that are subject to collateral,
whereby the counterparties would also record a related
collateral payable or receivable. As a result, the tables reflect a
reduction of approximately $180 billion and $100 billion as of
December 31, 2019 and 2018, respectively, of derivative
assets and derivative liabilities that previously would have
been reported on a gross basis, but are now legally settled and
not subject to collateral. The tables also present amounts that
are not permitted to be offset, such as security collateral or
cash collateral posted at third-party custodians, but which
would be eligible for offsetting to the extent that an event of
default has occurred and a legal opinion supporting
enforceability of the netting and collateral rights has been
obtained.
229
Derivative Mark-to-Market (MTM) Receivables/Payables
In millions of dollars at December 31, 2019
Derivatives instruments designated as ASC 815 hedges
Derivatives classified
in Trading account assets/liabilities(1)(2)
Liabilities
Assets
Over-the-counter
Cleared
Interest rate contracts
Over-the-counter
Cleared
Foreign exchange contracts
Total derivatives instruments designated as ASC 815 hedges
Derivatives instruments not designated as ASC 815 hedges
Over-the-counter
Cleared
Exchange traded
Interest rate contracts
Over-the-counter
Cleared
Exchange traded
Foreign exchange contracts
Over-the-counter
Exchange traded
Equity contracts
Over-the-counter
Exchange traded
Commodity and other contracts
Over-the-counter
Cleared
Credit derivatives
Total derivatives instruments not designated as ASC 815 hedges
Total derivatives
Cash collateral paid/received(3)
Less: Netting agreements(4)
Less: Netting cash collateral received/paid(5)
Net receivables/payables included on the Consolidated Balance Sheet(6)
Additional amounts subject to an enforceable master netting agreement, but not offset
on the Consolidated Balance Sheet
Less: Cash collateral received/paid
Less: Non-cash collateral received/paid
Total net receivables/payables(6)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,682 $
41
1,723 $
1,304 $
—
1,304 $
3,027 $
189,892 $
5,896
157
195,945 $
105,401 $
862
3
106,266 $
21,311 $
7,160
28,471 $
13,582 $
630
14,212 $
8,896 $
1,513
10,409 $
355,303 $
358,330 $
17,926 $
(274,970)
(44,353)
56,933 $
(861) $
(13,143)
42,929 $
143
111
254
908
2
910
1,164
169,749
7,472
180
177,401
108,807
1,015
—
109,822
22,411
8,075
30,486
16,773
542
17,315
8,975
1,763
10,738
345,762
346,926
14,391
(274,970)
(38,919)
47,428
(128)
(7,308)
39,992
(1) The derivatives fair values are presented in Note 24 to the Consolidated Financial Statements.
(2) Over-the-counter (OTC) derivatives are derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central
clearing house. Cleared derivatives include derivatives executed bilaterally with a counterparty in the OTC market, but then novated to a central clearing house,
whereby the central clearing house becomes the counterparty to both of the original counterparties. Exchange-traded derivatives include derivatives executed
directly on an organized exchange that provides pre-trade price transparency.
(3) Reflects the net amount of the $56,845 million and $58,744 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid,
$38,919 million was used to offset trading derivative liabilities and, of the gross cash collateral received, $44,353 million was used to offset trading derivative
assets.
(4) Represents the netting of derivative receivable and payable balances with the same counterparty under enforceable netting agreements. Approximately $262
billion, $6 billion and $7 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange-traded
derivatives, respectively.
(5) Represents the netting of cash collateral paid and received by counterparties under enforceable credit support agreements. Substantially all cash collateral received
and paid is netted against OTC derivative assets and liabilities, respectively.
(6) The net receivables/payables include approximately $7 billion of derivative asset and $6 billion of derivative liability fair values not subject to enforceable master
netting agreements, respectively.
230
In millions of dollars at December 31, 2018
Derivatives instruments designated as ASC 815 hedges
Derivatives classified
in Trading account assets/liabilities(1)(2)
Liabilities
Assets
Over-the-counter
Cleared
Interest rate contracts
Over-the-counter
Cleared
Foreign exchange contracts
Total derivatives instruments designated as ASC 815 hedges
Derivatives instruments not designated as ASC 815 hedges
Over-the-counter
Cleared
Exchange traded
Interest rate contracts
Over-the-counter
Cleared
Exchange traded
Foreign exchange contracts
Over-the-counter
Cleared
Exchange traded
Equity contracts
Over-the-counter
Exchange traded
Commodity and other contracts
Over-the-counter
Cleared
Credit derivatives
Total derivatives instruments not designated as ASC 815 hedges
Total derivatives
Cash collateral paid/received(3)
Less: Netting agreements(4)
Less: Netting cash collateral received/paid(5)
Net receivables/payables included on the Consolidated Balance Sheet(6)
Additional amounts subject to an enforceable master netting agreement, but not offset
on the Consolidated Balance Sheet
Less: Cash collateral received/paid
Less: Non-cash collateral received/paid
Total net receivables/payables(6)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,631 $
238
1,869 $
1,402 $
—
1,402 $
3,271 $
161,183 $
8,489
91
169,763 $
159,099 $
1,900
53
161,052 $
18,253 $
17
11,623
29,893 $
16,661 $
894
17,555 $
6,967 $
3,798
10,765 $
389,028 $
392,299 $
11,518 $
(311,089)
(38,608)
54,120 $
(767) $
(13,509)
39,844 $
172
53
225
736
4
740
965
146,909
7,594
99
154,602
156,904
1,671
40
158,615
21,527
32
12,249
33,808
19,894
795
20,689
6,155
4,196
10,351
378,065
379,030
13,906
(311,089)
(29,911)
51,936
(164)
(13,354)
38,418
(1) The derivatives fair values are presented in Note 24 to the Consolidated Financial Statements.
(2) Over-the-counter (OTC) derivatives include derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central
clearing house. Cleared derivatives include derivatives executed bilaterally with a counterparty in the OTC market, but then novated to a central clearing house,
whereby the central clearing house becomes the counterparty to both of the original counterparties. Exchange-traded derivatives include derivatives executed
directly on an organized exchange that provides pre-trade price transparency.
(3) Reflects the net amount of the $41,429 million and $52,514 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid,
$29,911 million was used to offset trading derivative liabilities and, of the gross cash collateral received, $38,608 million was used to offset trading derivative
assets.
(4) Represents the netting of balances with the same counterparty under enforceable netting agreements. Approximately $296 billion, $4 billion and $11 billion of the
netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange-traded derivatives, respectively.
(5) Represents the netting of cash collateral paid and received by counterparties under enforceable credit support agreements. Substantially all netting of cash
collateral received and paid is against OTC derivative assets and liabilities, respectively.
231
(6) The net receivables/payables include approximately $5 billion of derivative asset and $7 billion of derivative liability fair values not subject to enforceable master
ineffectiveness measured and recorded in current earnings.
Hedge effectiveness assessment methodologies are performed
in a similar manner for similar hedges, and are used
consistently throughout the hedging relationships. The
assessment of effectiveness may exclude changes in the value
of the hedged item that are unrelated to the risks being hedged
and the changes in fair value of the derivative associated with
time value. Prior to January 1, 2018, these excluded items
were recognized in current earnings for the hedging derivative,
while changes in the value of a hedged item that were not
related to the hedged risk were not recorded. Upon adoption of
ASC 2017-12, Citi excludes changes in the cross-currency
basis associated with cross-currency swaps from the
assessment of hedge effectiveness and records it in Other
comprehensive income.
Discontinued Hedge Accounting
A hedging instrument must be highly effective in
accomplishing the hedge objective of offsetting either changes
in the fair value or cash flows of the hedged item for the risk
being hedged. Management may voluntarily de-designate an
accounting hedge at any time, but if a hedging relationship is
not highly effective, it no longer qualifies for hedge
accounting and must be de-designated. Subsequent changes in
the fair value of the derivative are recognized in Other revenue
or Principal transactions, similar to trading derivatives, with
no offset recorded related to the hedged item.
For fair value hedges, any changes in the fair value of the
hedged item remain as part of the basis of the asset or liability
and are ultimately realized as an element of the yield on the
item. For cash flow hedges, changes in fair value of the end-
user derivative remain in Accumulated other comprehensive
income (loss) (AOCI) and are included in the earnings of
future periods when the forecasted hedged cash flows impact
earnings. However, if it becomes probable that some or all of
the hedged forecasted transactions will not occur, any amounts
that remain in AOCI related to these transactions must be
immediately reflected in Other revenue.
The foregoing criteria are applied on a decentralized
basis, consistent with the level at which market risk is
managed, but are subject to various limits and controls. The
underlying asset, liability or forecasted transaction may be an
individual item or a portfolio of similar items.
netting agreements, respectively.
For the years ended December 31, 2019, 2018 and 2017,
the amounts recognized in Principal transactions in the
Consolidated Statement of Income include certain derivatives
not designated in a qualifying hedging relationship. Citigroup
presents this disclosure by business classification, showing
derivative gains and losses related to its trading activities
together with gains and losses related to non-derivative
instruments within the same trading portfolios, as this
represents how these portfolios are risk managed. See Note 6
to the Consolidated Financial Statements for further
information.
The amounts recognized in Other revenue in the
Consolidated Statement of Income related to derivatives not
designated in a qualifying hedging relationship are shown
below. The table below does not include any offsetting gains
(losses) on the economically hedged items to the extent that
such amounts are also recorded in Other revenue.
Gains (losses) included in
Other revenue
Year ended December 31,
In millions of dollars
2019
2018
2017
Interest rate contracts $
Foreign exchange
Total
$
57 $
(29)
28 $
(25) $
(197)
(222) $
(73)
2,062
1,989
Accounting for Derivative Hedging
Citigroup accounts for its hedging activities in accordance
with ASC 815, Derivatives and Hedging. As a general rule,
hedge accounting is permitted where the Company is exposed
to a particular risk, such as interest rate or foreign exchange
risk, that causes changes in the fair value of an asset or
liability or variability in the expected future cash flows of an
existing asset, liability or a forecasted transaction that may
affect earnings.
Derivative contracts hedging the risks associated with
changes in fair value are referred to as fair value hedges, while
contracts hedging the variability of expected future cash flows
are cash flow hedges. Hedges that utilize derivatives or debt
instruments to manage the foreign exchange risk associated
with equity investments in non-U.S.-dollar-functional-
currency foreign subsidiaries (net investment in a foreign
operation) are net investment hedges.
To qualify as an accounting hedge under the hedge
accounting rules (versus an economic hedge where hedge
accounting is not applied), a hedging relationship must be
highly effective in offsetting the risk designated as being
hedged. The hedging relationship must be formally
documented at inception, detailing the particular risk
management objective and strategy for the hedge. This
includes the item and risk(s) being hedged, the hedging
instrument being used and how effectiveness will be assessed.
The effectiveness of these hedging relationships is evaluated at
hedge inception and on an ongoing basis both on a
retrospective and prospective basis, typically using
quantitative measures of correlation, with hedge
232
Fair Value Hedges
Hedging of Benchmark Interest Rate Risk
Citigroup’s fair value hedges are primarily hedges of fixed-
rate long-term debt or assets, such as available-for-sale debt
securities or loans.
For qualifying fair value hedges of interest rate risk, the
changes in the fair value of the derivative and the change in
the fair value of the hedged item attributable to the hedged risk
are presented within Interest revenue or Interest expense based
on whether the hedged item is an asset or a liability.
In the first quarter of 2019, Citigroup executed a last-of-
layer hedge, which permits an entity to hedge the interest rate
risk of a stated portion of a closed portfolio of prepayable
financial assets that are expected to remain outstanding for the
designated tenor of the hedge. In accordance with ASC 815,
an entity may exclude prepayment risk when measuring the
change in fair value of the hedged item attributable to interest
rate risk under the last-of-layer approach. Similar to other fair
value hedges, where the hedged item is an asset, the fair value
of the hedged item attributable to interest rate risk will be
presented in Interest revenue along with the change in the fair
value of the hedging instrument.
Hedging of Foreign Exchange Risk
Citigroup hedges the change in fair value attributable to
foreign exchange rate movements in available-for-sale debt
securities and long-term debt that are denominated in
currencies other than the functional currency of the entity
holding the securities or issuing the debt. The hedging
instrument is generally a forward foreign exchange contract or
a cross-currency swap contract. Citigroup considers the
premium associated with forward contracts (i.e., the
differential between the spot and contractual forward rates) as
the cost of hedging; this amount is excluded from the
assessment of hedge effectiveness and is generally reflected
directly in earnings over the life of the hedge. Citi also
excludes changes in cross-currency basis associated with
cross-currency swaps from the assessment of hedge
effectiveness and records it in Other comprehensive income.
Hedging of Commodity Price Risk
Citigroup hedges the change in fair value attributable to spot
price movements in physical commodities inventory. The
hedging instrument is a futures contract to sell the underlying
commodity. In this hedge, the change in the value of the
hedged inventory is reflected in earnings, which offsets the
change in the fair value of the futures contract that is also
reflected in earnings. Although the change in the fair value of
the hedging instrument recorded in earnings includes changes
in forward rates, Citigroup excludes the differential between
the spot and the contractual forward rates under the futures
contract from the assessment of hedge effectiveness and
reflects it directly in earnings over the life of the hedge.
233
The following table summarizes the gains (losses) on the Company’s fair value hedges:
In millions of dollars
Gain (loss) on the hedging derivatives included in
assessment of the effectiveness of fair value hedges
Interest rate hedges
Foreign exchange hedges
Commodity hedges
Total gain (loss) on the hedging derivatives included in
assessment of the effectiveness of fair value hedges
Gain (loss) on the hedged item in designated and
qualifying fair value hedges
Interest rate hedges
Foreign exchange hedges
Commodity hedges
Total gain (loss) on the hedged item in designated and
qualifying fair value hedges
Net gain (loss) on the hedging derivatives excluded from
assessment of the effectiveness of fair value hedges
Interest rate hedges
Foreign exchange hedges(3)
Commodity hedges
Total net gain (loss) on the hedging derivatives excluded
from assessment of the effectiveness of fair value hedges
Gains (losses) on fair value hedges(1)
Year Ended December 31,
2019
2018
Other revenue
Net interest
revenue
Other
revenue
Net interest
revenue
2017(2)
Other
revenue
$
$
$
$
$
$
— $
2,273 $
— $
794 $
337
(33)
—
—
(2,064)
(123)
—
—
(891)
(824)
(17)
304 $
2,273 $
(2,187) $
794 $
(1,732)
— $
(2,085) $
— $
(747) $
(337)
33
—
—
2,064
124
—
—
853
969
18
(304) $
(2,085) $
2,188 $
(747) $
1,840
— $
(109)
41
(68) $
3 $
—
—
3 $
— $
(4)
(19)
(23) $
(5) $
—
—
(5) $
(7)
96
1
90
(1) Beginning January 1, 2018, gain (loss) amounts for interest rate risk hedges are included in Interest income/Interest expense, while the remaining amounts
including the amounts for interest rate hedges prior to January 1, 2018 are included in Other revenue or Principal transactions on the Consolidated Statement of
Income. The accrued interest income on fair value hedges both prior to and after January 1, 2018 is recorded in Net interest revenue and is excluded from this
table.
(2) Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges for the year ended December 31, 2017 was $(31) million for interest
rate hedges and $49 million for foreign exchange hedges, for a total of $18 million.
(3) Amounts relate to the premium associated with forward contracts (differential between spot and contractual forward rates) that are excluded from the assessment
of hedge effectiveness and are generally reflected directly in earnings. After January 1, 2018, amounts related to cross-currency basis, which are recognized in
AOCI, are not reflected in the table above. The amount of cross-currency basis that was included in AOCI was $33 million and $(74) million for the years ended
December 31, 2019 and 2018, respectively.
234
Cumulative Basis Adjustment
Upon electing to apply ASC 815 fair value hedge accounting,
the carrying value of the hedged item is adjusted to reflect the
cumulative changes in the hedged risk. The hedge basis
adjustment, whether from an active or de-designated hedge
relationship, remains with the hedged item until the hedged
item is derecognized from the balance sheet. The table below
presents the carrying amount of Citi’s hedged assets and
liabilities under qualifying fair value hedges at December 31,
2019 and 2018, along with the cumulative hedge basis
adjustments included in the carrying value of those hedged
assets and liabilities, that would reverse through earnings in
future periods.
In millions of dollars
Balance sheet
line item in
which hedged
item is
recorded
Carrying
amount of
hedged asset/
liability
As of December 31, 2019
Cumulative fair value hedging
adjustment increasing
(decreasing) the carrying
amount
Active
De-designated
Debt securities
AFS(1)(2)
Long-term
debt
$
94,659 $
(114) $
157,387
2,334
As of December 31, 2018
Debt securities
AFS(2)
Long-term
debt
$
$
81,632 $
(196) $
149,054 $
1,211 $
743
3,445
295
869
(1) These amounts include a cumulative basis adjustment of $(8) million for
active hedges and $157 million for de-designated hedges as of
December 31, 2019 related to certain prepayable financial assets
designated as the hedged item in a fair value hedge using the last-of-
layer approach. The Company designated approximately $605 million as
the hedged amount (from a closed portfolio of prepayable financial
assets with a carrying value of $20 billion as of December 31, 2019) in a
last-of-layer hedging relationship, which commenced in the first quarter
of 2019.
(2) Carrying amount represents the amortized cost.
235
Cash Flow Hedges
Citigroup hedges the variability of forecasted cash flows due
to changes in contractually specified interest rates associated
with floating-rate assets/liabilities and other forecasted
transactions. Variable cash flows from those liabilities are
synthetically converted to fixed-rate cash flows by entering
into receive-variable, pay-fixed interest rate swaps and
receive-variable, pay-fixed forward-starting interest rate
swaps. Variable cash flows associated with certain assets are
synthetically converted to fixed-rate cash flows by entering
into receive-fixed, pay-variable interest rate swaps. These cash
flow hedging relationships use either regression analysis or
dollar-offset ratio analysis to assess whether the hedging
relationships are highly effective at inception and on an
ongoing basis. Prior to the adoption of ASU 2017-12,
Citigroup designated the risk being hedged as the risk of
overall variability in the hedged cash flows for certain items.
With the adoption of ASU 2017-12, Citigroup hedges the
variability from changes in a contractually specified rate and
recognizes the entire change in fair value of the cash flow
hedging instruments in AOCI. Prior to the adoption of ASU
2017-12, to the extent that these derivatives were not fully
effective, changes in their fair values in excess of changes in
the value of the hedged transactions were immediately
included in Other revenue. With the adoption of ASU
2017-12, such amounts are no longer required to be
immediately recognized in income, but instead the full change
in the value of the hedging instrument is required to be
recognized in AOCI, and then recognized in earnings in the
same period that the cash flows impact earnings. The pretax
change in AOCI from cash flow hedges is presented below:
In millions of dollars
2019
2018
2017
Amount of gain (loss) recognized in AOCI on derivatives
Interest rate contracts
Foreign exchange contracts
Total gain (loss) recognized in AOCI
Amount of gain (loss) reclassified from AOCI to earnings(1)
Interest rate contracts
Foreign exchange contracts
Total gain (loss) reclassified from AOCI into earnings
Net pretax change in cash flow hedges included within AOCI
$
$
$
$
746 $
(17)
729 $
(361) $
5
(356) $
(165)
(8)
(173)
Other
revenue
Net Interest
revenue
Other
revenue
Net interest
revenue
Other
revenue
— $
(7)
(7) $
$
(384) $
—
(384) $
1,120
— $
(17)
(17) $
$
(301) $
—
(301) $
(38) $
(126)
(10)
(136)
(37)
(1) All amounts reclassified into earnings for interest rate contracts are included in Interest income/Interest expense (Net interest revenue). For all other hedges, the
amounts reclassified to earnings are included primarily in Other revenue and Net interest revenue in the Consolidated Statement of Income.
For cash flow hedges, the entire change in the fair value
of the hedging derivative is recognized in AOCI and then
reclassified to earnings in the same period that the forecasted
hedged cash flows impact earnings. The net gain (loss)
associated with cash flow hedges expected to be reclassified
from AOCI within 12 months of December 31, 2019 is
approximately $84 million. The maximum length of time over
which forecasted cash flows are hedged is 10 years.
The after-tax impact of cash flow hedges on AOCI is
shown in Note 19 to the Consolidated Financial Statements.
236
Net Investment Hedges
Consistent with ASC 830-20, Foreign Currency Matters—
Foreign Currency Transactions, ASC 815 allows the hedging
of the foreign currency risk of a net investment in a foreign
operation. Citigroup uses foreign currency forwards, cross-
currency swaps, options and foreign currency-denominated
debt instruments to manage the foreign exchange risk
associated with Citigroup’s equity investments in several non-
U.S.-dollar-functional-currency foreign subsidiaries. Citigroup
records the change in the carrying amount of these
investments in Foreign currency translation adjustment within
AOCI. Simultaneously, the effective portion of the hedge of
this exposure is also recorded in Foreign currency translation
adjustment and any ineffective portion is immediately
recorded in earnings.
For derivatives designated as net investment hedges,
Citigroup follows the forward-rate method outlined in ASC
815-35-35. According to that method, all changes in fair value,
including changes related to the forward-rate component of
the foreign currency forward contracts and the time value of
foreign currency options, are recorded in Foreign currency
translation adjustment within AOCI.
For foreign currency-denominated debt instruments that
are designated as hedges of net investments, the translation
gain or loss that is recorded in Foreign currency translation
adjustment is based on the spot exchange rate between the
functional currency of the respective subsidiary and the U.S.
dollar, which is the functional currency of Citigroup. To the
extent that the notional amount of the hedging instrument
exactly matches the hedged net investment, and the underlying
exchange rate of the derivative hedging instrument relates to
the exchange rate between the functional currency of the net
investment and Citigroup’s functional currency (or, in the case
of a non-derivative debt instrument, such instrument is
denominated in the functional currency of the net investment),
no ineffectiveness is recorded in earnings.
The pretax gain (loss) recorded in Foreign currency
translation adjustment within AOCI, related to net investment
hedges, is $(556) million, $1,207 million and $2,528 million
for the years ended December 31, 2019, 2018 and 2017,
respectively.
Economic Hedges
Citigroup often uses economic hedges when hedge accounting
would be too complex or operationally burdensome. End-user
derivatives that are economic hedges are carried at fair value,
with changes in value included in either Principal transactions
or Other revenue.
For asset/liability management hedging, fixed-rate long-
term debt is recorded at amortized cost under GAAP.
For other hedges that either do not meet the ASC 815
hedging criteria or for which management decides not to apply
ASC 815 hedge accounting, the derivative is recorded at fair
value on the balance sheet with the associated changes in fair
value recorded in earnings, while the debt continues to be
carried at amortized cost. Therefore, current earnings are
affected by the interest rate shifts and other factors that cause a
change in the swap’s value, but for which no offsetting change
in value is recorded on the debt.
237
Citigroup may alternatively elect to account for the debt
at fair value under the fair value option. Once the irrevocable
election is made upon issuance of the debt, the full change in
fair value of the debt is reported in earnings. The changes in
fair value of the related interest rate swap are also reflected in
earnings, which provides a natural offset to the debt’s fair
value change. To the extent that the two amounts differ
because the full change in the fair value of the debt includes
risks not offset by the interest rate swap, the difference is
automatically captured in current earnings.
Additional economic hedges include hedges of the credit
risk component of commercial loans and loan commitments.
Citigroup periodically evaluates its hedging strategies in other
areas and may designate either an accounting hedge or an
economic hedge after considering the relative costs and
benefits. Economic hedges are also employed when the
hedged item itself is marked to market through current
earnings, such as hedges of commitments to originate one- to
four-family mortgage loans to be HFS and MSRs.
Credit Derivatives
Citi is a market maker and trades a range of credit derivatives.
Through these contracts, Citi either purchases or writes
protection on either a single name or a portfolio of reference
credits. Citi also uses credit derivatives to help mitigate credit
risk in its corporate and consumer loan portfolios and other
cash positions and to facilitate client transactions.
Citi monitors its counterparty credit risk in credit
derivative contracts. As of both December 31, 2019 and 2018,
approximately 98% of the gross receivables are from
counterparties with which Citi maintains collateral
agreements. A majority of Citi’s top 15 counterparties (by
receivable balance owed to Citi) are central clearing houses,
banks, financial institutions or other dealers. Contracts with
these counterparties do not include ratings-based termination
events. However, counterparty ratings downgrades may have
an incremental effect by lowering the threshold at which Citi
may call for additional collateral.
The range of credit derivatives entered into includes credit
default swaps, total return swaps, credit options and credit-
linked notes.
A credit default swap is a contract in which, for a fee, a
protection seller agrees to reimburse a protection buyer for any
losses that occur due to a predefined credit event on a
reference entity. These credit events are defined by the terms
of the derivative contract and the reference credit and are
generally limited to the market standard of failure to pay on
indebtedness and bankruptcy of the reference credit and, in a
more limited range of transactions, debt restructuring. Credit
derivative transactions that reference emerging market entities
also typically include additional credit events to cover the
acceleration of indebtedness and the risk of repudiation or a
payment moratorium. In certain transactions, protection may
be provided on a portfolio of reference entities or asset-backed
securities. If there is no credit event, as defined by the specific
derivative contract, then the protection seller makes no
payments to the protection buyer and receives only the
contractually specified fee. However, if a credit event occurs
as defined in the specific derivative contract sold, the
protection seller will be required to make a payment to the
protection buyer. Under certain contracts, the seller of
protection may not be required to make a payment until a
specified amount of losses has occurred with respect to the
portfolio and/or may only be required to pay for losses up to a
specified amount.
A total return swap typically transfers the total economic
performance of a reference asset, which includes all associated
cash flows, as well as capital appreciation or depreciation. The
protection buyer receives a floating rate of interest and any
depreciation on the reference asset from the protection seller
and, in return, the protection seller receives the cash flows
associated with the reference asset plus any appreciation.
Thus, according to the total return swap agreement, the
protection seller will be obligated to make a payment any time
the floating interest rate payment plus any depreciation of the
reference asset exceeds the cash flows associated with the
underlying asset. A total return swap may terminate upon a
default of the reference asset or a credit event with respect to
the reference entity, subject to the provisions of the related
total return swap agreement between the protection seller and
the protection buyer.
A credit option is a credit derivative that allows investors
to trade or hedge changes in the credit quality of a reference
entity. For example, in a credit spread option, the option writer
assumes the obligation to purchase or sell credit protection on
the reference entity at a specified “strike” spread level. The
option purchaser buys the right to sell credit default protection
on the reference entity to, or purchase it from, the option
writer at the strike spread level. The payments on credit spread
options depend either on a particular credit spread or the price
of the underlying credit-sensitive asset or other reference
entity. The options usually terminate if a credit event occurs
with respect to the underlying reference entity.
A credit-linked note is a form of credit derivative
structured as a debt security with an embedded credit default
swap. The purchaser of the note effectively provides credit
protection to the issuer by agreeing to receive a return that
could be negatively affected by credit events on the underlying
reference credit. If the reference entity defaults, the note may
be cash settled or physically settled by delivery of a debt
security of the reference entity. Thus, the maximum amount of
the note purchaser’s exposure is the amount paid for the
credit-linked note.
238
The following tables summarize the key characteristics of Citi’s credit derivatives portfolio by counterparty and derivative form:
In millions of dollars at December 31, 2019
Receivable(1)
Payable(2)
Protection
purchased
Protection
sold
Fair values
Notionals
By industry of counterparty
Banks
Broker-dealers
Non-financial
Insurance and other financial institutions
Total by industry of counterparty
By instrument
Credit default swaps and options
Total return swaps and other
Total by instrument
By rating of reference entity
Investment grade
Non-investment grade
Total by rating of reference entity
By maturity
Within 1 year
From 1 to 5 years
After 5 years
Total by maturity
$
$
$
$
$
$
$
$
4,017 $
1,724
92
4,576
4,102 $
172,461 $
1,528
76
5,032
54,843
2,601
474,021
10,409 $
10,738 $
703,926 $
9,759 $
650
10,409 $
4,579 $
5,830
10,409 $
1,806 $
7,275
1,328
10,409 $
9,791 $
947
10,738 $
4,578 $
6,160
10,738 $
2,181 $
7,265
1,292
10,738 $
685,643 $
18,283
703,926 $
560,806 $
143,120
703,926 $
231,135 $
414,237
58,554
703,926 $
169,546
53,846
1,968
378,027
603,387
593,850
9,537
603,387
470,778
132,609
603,387
176,188
379,915
47,284
603,387
(1) The fair value amount receivable is composed of $3,415 million under protection purchased and $6,994 million under protection sold.
(2) The fair value amount payable is composed of $7,793 million under protection purchased and $2,945 million under protection sold.
In millions of dollars at December 31, 2018
Receivable(1)
Payable(2)
Protection
purchased
Protection
sold
Fair values
Notionals
By industry of counterparty
Banks
Broker-dealers
Non-financial
Insurance and other financial institutions
Total by industry of counterparty
By instrument
Credit default swaps and options
Total return swaps and other
Total by instrument
By rating of reference entity
Investment grade
Non-investment grade
Total by rating of reference entity
By maturity
Within 1 year
From 1 to 5 years
After 5 years
Total by maturity
$
$
$
$
$
$
$
$
4,785 $
1,706
64
4,210
4,432 $
214,842 $
1,612
87
4,220
62,904
2,687
515,216
10,765 $
10,351 $
795,649 $
10,030 $
735
10,765 $
4,725 $
6,040
10,765 $
2,037 $
6,720
2,008
10,765 $
9,755 $
596
10,351 $
4,544 $
5,807
10,351 $
2,063 $
6,414
1,874
10,351 $
771,865 $
23,784
795,649 $
637,790 $
157,859
795,649 $
251,994 $
493,096
50,559
795,649 $
218,273
63,014
1,192
442,460
724,939
712,623
12,316
724,939
568,849
156,090
724,939
225,597
456,409
42,933
724,939
(1) The fair value amount receivable is composed of $5,126 million under protection purchased and $5,639 million under protection sold.
(2) The fair value amount payable is composed of $5,882 million under protection purchased and $4,469 million under protection sold.
239
Fair values included in the above tables are prior to
application of any netting agreements and cash collateral. For
notional amounts, Citi generally has a mismatch between the
total notional amounts of protection purchased and sold, and it
may hold the reference assets directly rather than entering into
offsetting credit derivative contracts as and when desired. The
open risk exposures from credit derivative contracts are
largely matched after certain cash positions in reference assets
are considered and after notional amounts are adjusted, either
to a duration-based equivalent basis or to reflect the level of
subordination in tranched structures. The ratings of the credit
derivatives portfolio presented in the tables and used to
evaluate payment/performance risk are based on the assigned
internal or external ratings of the reference asset or entity.
Where external ratings are used, investment-grade ratings are
considered to be “Baa/BBB” and above, while anything below
is considered non-investment grade. Citi’s internal ratings are
in line with the related external rating system.
Citigroup evaluates the payment/performance risk of the
credit derivatives for which it stands as a protection seller
based on the credit rating assigned to the underlying reference
credit. Credit derivatives written on an underlying non-
investment grade reference credit represent greater payment
risk to the Company. The non-investment grade category in
the table above also includes credit derivatives where the
underlying reference entity has been downgraded subsequent
to the inception of the derivative.
The maximum potential amount of future payments under
credit derivative contracts presented in the table above is
based on the notional value of the derivatives. The Company
believes that the notional amount for credit protection sold is
not representative of the actual loss exposure based on
historical experience. This amount has not been reduced by the
value of the reference assets and the related cash flows. In
accordance with most credit derivative contracts, should a
credit event occur, the Company usually is liable for the
difference between the protection sold and the value of the
reference assets. Furthermore, the notional amount for credit
protection sold has not been reduced for any cash collateral
paid to a given counterparty, as such payments would be
calculated after netting all derivative exposures, including any
credit derivatives with that counterparty in accordance with a
related master netting agreement. Due to such netting
processes, determining the amount of collateral that
corresponds to credit derivative exposures alone is not
possible. The Company actively monitors open credit-risk
exposures and manages this exposure by using a variety of
strategies, including purchased credit derivatives, cash
collateral or direct holdings of the referenced assets. This risk
mitigation activity is not captured in the table above.
Credit Risk-Related Contingent Features in Derivatives
Certain derivative instruments contain provisions that require
the Company to either post additional collateral or
immediately settle any outstanding liability balances upon the
occurrence of a specified event related to the credit risk of the
Company. These events, which are defined by the existing
derivative contracts, are primarily downgrades in the credit
ratings of the Company and its affiliates.
The fair value (excluding CVA) of all derivative
instruments with credit risk-related contingent features that
were in a net liability position at both December 31, 2019 and
2018 was $30 billion and $33 billion, respectively. The
Company posted $28 billion and $33 billion as collateral for
this exposure in the normal course of business as of
December 31, 2019 and 2018, respectively.
A downgrade could trigger additional collateral or cash
settlement requirements for the Company and certain
affiliates. In the event that Citigroup and Citibank were
downgraded a single notch by all three major rating agencies
as of December 31, 2019, the Company could be required to
post an additional $0.6 billion as either collateral or settlement
of the derivative transactions. In addition, the Company could
be required to segregate with third-party custodians collateral
previously received from existing derivative counterparties in
the amount of $0.2 billion upon the single notch downgrade,
resulting in aggregate cash obligations and collateral
requirements of approximately $0.8 billion.
Derivatives Accompanied by Financial Asset Transfers
The Company executes total return swaps that provide it with
synthetic exposure to substantially all of the economic return
of the securities or other financial assets referenced in the
contract. In certain cases, the derivative transaction is
accompanied by the Company’s transfer of the referenced
financial asset to the derivative counterparty, most typically in
response to the derivative counterparty’s desire to hedge, in
whole or in part, its synthetic exposure under the derivative
contract by holding the referenced asset in funded form. In
certain jurisdictions these transactions qualify as sales,
resulting in derecognition of the securities transferred (see
Note 1 to the Consolidated Financial Statements for further
discussion of the related sale conditions for transfers of
financial assets). For a significant portion of the transactions,
the Company has also executed another total return swap
where the Company passes on substantially all of the
economic return of the referenced securities to a different third
party seeking the exposure. In those cases, the Company is not
exposed, on a net basis, to changes in the economic return of
the referenced securities.
These transactions generally involve the transfer of the
Company’s liquid government bonds, convertible bonds or
publicly traded corporate equity securities from the trading
portfolio and are executed with third-party financial
institutions. The accompanying derivatives are typically total
return swaps. The derivatives are cash settled and subject to
ongoing margin requirements.
When the conditions for sale accounting are met, the
Company reports the transfer of the referenced financial asset
as a sale and separately reports the accompanying derivative
240
transaction. These transactions generally do not result in a gain
or loss on the sale of the security, because the transferred
security was held at fair value in the Company’s trading
portfolio. For transfers of financial assets accounted for as a
sale by the Company and for which the Company has retained
substantially all of the economic exposure to the transferred
asset through a total return swap executed with the same
counterparty in contemplation of the initial sale (and still
outstanding), both the asset amounts derecognized and the
gross cash proceeds received as of the date of derecognition
were $5.8 billion and $4.6 billion as of December 31, 2019
and 2018, respectively.
At December 31, 2019, the fair value of these previously
derecognized assets was $5.9 billion. The fair value of the
total return swaps as of December 31, 2019 was $117 million
recorded as gross derivative assets and $43 million recorded as
gross derivative liabilities. At December 31, 2018, the fair
value of these previously derecognized assets was $4.5 billion,
and the fair value of the total return swaps was $55 million
recorded as gross derivative assets and $40 million recorded as
gross derivative liabilities.
The balances for the total return swaps are on a gross
basis, before the application of counterparty and cash
collateral netting, and are included primarily as equity
derivatives in the tabular disclosures in this Note.
241
23. CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk exist when changes in economic,
industry or geographic factors similarly affect groups of
counterparties whose aggregate credit exposure is material in
relation to Citigroup’s total credit exposure. Although
Citigroup’s portfolio of financial instruments is broadly
diversified along industry, product and geographic lines,
material transactions are completed with other financial
institutions, particularly in the securities trading, derivatives
and foreign exchange businesses.
In connection with the Company’s efforts to maintain a
diversified portfolio, the Company limits its exposure to any
one geographic region, country or individual creditor and
monitors this exposure on a continuous basis. At
December 31, 2019, Citigroup’s most significant
concentration of credit risk was with the U.S. government and
its agencies. The Company’s exposure, which primarily results
from trading assets and investments issued by the U.S.
government and its agencies, amounted to $250.9 billion and
$250.0 billion at December 31, 2019 and 2018, respectively.
The Japanese and German governments and their agencies,
which are rated investment grade by both Moody’s and S&P,
were the next largest exposures. The Company’s exposure to
Japan amounted to $33.3 billion and $28.8 billion at
December 31, 2019 and 2018, respectively, and was composed
of investment securities, loans and trading assets. The
Company’s exposure to Germany amounted to $29.8 billion
and $45.6 billion at December 31, 2019 and 2018,
respectively, and was composed of investment securities, loans
and trading assets.
The Company’s exposure to states and municipalities
amounted to $23.8 billion and $27.9 billion at December 31,
2019 and 2018, respectively, and was composed of trading
assets, investment securities, derivatives and lending activities.
242
24. FAIR VALUE MEASUREMENT
ASC 820-10, Fair Value Measurement, defines fair value,
establishes a consistent framework for measuring fair value
and requires disclosures about fair value measurements. Fair
value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, and
therefore represents an exit price. Among other things, the
standard requires the Company to maximize the use of
observable inputs and minimize the use of unobservable
inputs when measuring fair value.
Under ASC 820-10, the probability of default of a
counterparty is factored into the valuation of derivative and
other positions as well as the impact of Citigroup’s own
credit risk on derivatives and other liabilities measured at
fair value.
Fair Value Hierarchy
ASC 820-10 specifies a hierarchy of inputs based on whether
the inputs are observable or unobservable. Observable inputs
are developed using market data and reflect market
participant assumptions, while unobservable inputs reflect
the Company’s market assumptions. These two types of
inputs have created the following fair value hierarchy:
• Level 1: Quoted prices for identical instruments in
active markets.
• Level 2: Quoted prices for similar instruments in active
markets, quoted prices for identical or similar
instruments in markets that are not active and model-
derived valuations in which all significant inputs and
significant value drivers are observable in active
markets.
• Level 3: Valuations derived from valuation techniques
in which one or more significant inputs or significant
value drivers are unobservable.
As required under the fair value hierarchy, the Company
considers relevant and observable market inputs in its
valuations where possible. The frequency of transactions, the
size of the bid-ask spread and the amount of adjustment
necessary when comparing similar transactions are all
factors in determining the relevance of observed prices in
those markets.
Determination of Fair Value
For assets and liabilities carried at fair value, the Company
measures fair value using the procedures set out below,
irrespective of whether the assets and liabilities are measured
at fair value as a result of an election or whether they are
required to be measured at fair value.
When available, the Company uses quoted market prices
to determine fair value and classifies such items as Level 1.
In some specific cases where a market price is available, the
Company will make use of acceptable practical expedients
(such as matrix pricing) to calculate fair value, in which case
the items are classified as Level 2.
The Company may also apply a price-based
methodology, which utilizes, where available, quoted prices
or other market information obtained from recent trading
activity in positions with the same or similar characteristics
to the position being valued. The frequency and size of
transactions are among the factors that are driven by the
liquidity of markets and determine the relevance of observed
prices in those markets. If relevant and observable prices are
available, those valuations may be classified as Level 2.
When that is not the case, and there are one or more
significant unobservable “price” inputs, then those
valuations will be classified as Level 3. Furthermore, when
less liquidity exists for a security or loan, a quoted price is
stale, a significant adjustment to the price of a similar
security is necessary to reflect differences in the terms of the
actual security or loan being valued, or prices from
independent sources are insufficient to corroborate the
valuation, the “price” inputs are considered unobservable
and the fair value measurements are classified as Level 3.
If quoted market prices are not available, fair value is
based upon internally developed valuation techniques that
use, where possible, current market-based parameters, such
as interest rates, currency rates and option volatilities. Items
valued using such internally generated valuation techniques
are classified according to the lowest level input or value
driver that is significant to the valuation. Thus, an item may
be classified as Level 3 even though there may be some
significant inputs that are readily observable.
Fair value estimates from internal valuation techniques
are verified, where possible, to prices obtained from
independent vendors or brokers. Vendors’ and brokers’
valuations may be based on a variety of inputs ranging from
observed prices to proprietary valuation models, and the
Company assesses the quality and relevance of this
information in determining the estimate of fair value. The
following section describes the valuation methodologies
used by the Company to measure various financial
instruments at fair value, including an indication of the level
in the fair value hierarchy in which each instrument is
generally classified. Where appropriate, the description
includes details of the valuation models, the key inputs to
those models and any significant assumptions.
Market Valuation Adjustments
Generally, the unit of account for a financial instrument is
the individual financial instrument. The Company applies
market valuation adjustments that are consistent with the
unit of account, which does not include adjustment due to
the size of the Company’s position, except as follows. ASC
820-10 permits an exception, through an accounting policy
election, to measure the fair value of a portfolio of financial
assets and financial liabilities on the basis of the net open
risk position when certain criteria are met. Citi has elected to
measure certain portfolios of financial instruments that meet
those criteria, such as derivatives, on the basis of the net
open risk position. The Company applies market valuation
adjustments, including adjustments to account for the size of
the net open risk position, consistent with market participant
assumptions.
243
Valuation adjustments are applied to items classified as
Level 2 or Level 3 in the fair value hierarchy to ensure that
the fair value reflects the price at which the net open risk
position could be exited. These valuation adjustments are
based on the bid/offer spread for an instrument in the market.
When Citi has elected to measure certain portfolios of
financial investments, such as derivatives, on the basis of the
net open risk position, the valuation adjustment may take
into account the size of the position.
Credit valuation adjustments (CVA) and funding
valuation adjustments (FVA) are applied to the relevant
population of over-the-counter (OTC) derivative instruments
where adjustments to reflect counterparty credit risk, own
credit risk and term funding risk are required to estimate fair
value. This principally includes derivatives with a base
valuation (e.g., discounted using overnight indexed swap
(OIS)) requiring adjustment for these effects, such as
uncollateralized interest rate swaps. The CVA represents a
portfolio-level adjustment to reflect the risk premium
associated with the counterparty’s (assets) or Citi’s
(liabilities) non-performance risk.
FVA reflect a market funding risk premium inherent in
the uncollateralized portion of a derivative portfolio and in
certain collateralized derivative portfolios that do not include
standard credit support annexes (CSAs), such as where the
CSA does not permit the reuse of collateral received. Citi’s
FVA methodology leverages the existing CVA methodology
to estimate a funding exposure profile. The calculation of
this exposure profile considers collateral agreements in
which the terms do not permit the Company to reuse the
collateral received, including where counterparties post
collateral to third-party custodians.
Citi’s CVA and FVA methodology consists of two steps:
•
•
First, the exposure profile for each counterparty is
determined using the terms of all individual derivative
positions and a Monte Carlo simulation or other
quantitative analysis to generate a series of expected
cash flows at future points in time. The calculation of
this exposure profile considers the effect of credit risk
mitigants and sources of funding, including pledged
cash or other collateral and any legal right of offset that
exists with a counterparty through arrangements such as
netting agreements. Individual derivative contracts that
are subject to an enforceable master netting agreement
with a counterparty are aggregated as a netting set for
this purpose, since it is those aggregate net cash flows
that are subject to nonperformance risk. This process
identifies specific, point-in-time future cash flows that
are subject to nonperformance risk and unsecured
funding, rather than using the current recognized net
asset or liability as a basis to measure the CVA and
FVA.
Second, for CVA, market-based views of default
probabilities derived from observed credit spreads in the
credit default swap (CDS) market are applied to the
expected future cash flows determined in step one. Citi’s
own-credit CVA is determined using Citi-specific CDS
spreads for the relevant tenor. Generally, counterparty
CVA is determined using CDS spread indices for each
credit rating and tenor. For certain identified netting sets
where individual analysis is practicable (e.g., exposures
to counterparties with liquid CDSs), counterparty-
specific CDS spreads are used. For FVA, a term
structure of future liquidity spreads is applied to the
expected future funding requirement.
The CVA and FVA are designed to incorporate a market
view of the credit and funding risk, respectively, inherent in
the derivative portfolio. However, most unsecured derivative
instruments are negotiated bilateral contracts and are not
commonly transferred to third parties. Derivative
instruments are normally settled contractually or, if
terminated early, are terminated at a value negotiated
bilaterally between the counterparties. Thus, the CVA and
FVA may not be realized upon a settlement or termination in
the normal course of business. In addition, all or a portion of
these adjustments may be reversed or otherwise adjusted in
future periods in the event of changes in the credit or funding
risk associated with the derivative instruments.
The table below summarizes the CVA and FVA applied
to the fair value of derivative instruments at December 31,
2019 and 2018:
Credit and funding valuation
adjustments
contra-liability (contra-asset)
December 31,
December 31,
2018
2019
$
$
(705) $
(530)
341
72
(1,085)
(544)
482
135
(822) $
(1,012)
In millions of dollars
Counterparty CVA
Asset FVA
Citigroup (own-credit) CVA
Liability FVA
Total CVA—derivative
instruments(1)
(1) FVA is included with CVA for presentation purposes.
The table below summarizes pretax gains (losses)
related to changes in CVA on derivative instruments, net of
hedges, FVA on derivatives and debt valuation adjustments
(DVA) on Citi’s own fair value option (FVO) liabilities for
the years indicated:
In millions of dollars
Counterparty CVA
Asset FVA
Own-credit CVA
Liability FVA
Total CVA—derivative
instruments
DVA related to own FVO
liabilities(1)
Total CVA and DVA(2)
Credit/funding/debt valuation
adjustments gain (loss)
2019
2018
2017
149 $
13
(131)
(63)
(109) $
46
178
56
276
90
(153)
(15)
(32) $
171 $
198
(1,473) $
1,415 $
(1,505) $
1,586 $
(680)
(482)
$
$
$
$
(1) See Notes 1, 17 and 19 to the Consolidated Financial Statements.
244
observable securitization prices for certain directly
comparable portfolios of loans have not been readily
available. Therefore, such portfolios of loans are generally
classified as Level 3 of the fair value hierarchy. However, for
other loan securitization markets, such as commercial real
estate loans, price verification of the hypothetical
securitizations has been possible, since these markets have
remained active. Accordingly, this loan portfolio is classified
as Level 2 of the fair value hierarchy.
For most of the lending and structured direct subprime
exposures, fair value is determined utilizing observable
transactions where available, other market data for similar
assets in markets that are not active and other internal
valuation techniques. The valuation of certain asset-backed
security (ABS) CDO positions utilizes prices based on the
underlying assets of the ABS CDO.
Trading Account Assets and Liabilities—Derivatives
Exchange-traded derivatives, measured at fair value using
quoted (i.e., exchange) prices in active markets, where
available, are classified as Level 1 of the fair value
hierarchy.
Derivatives without a quoted price in an active market
and derivatives executed over the counter are valued using
internal valuation techniques. These derivative instruments
are classified as either Level 2 or Level 3 depending on the
observability of the significant inputs to the model.
The valuation techniques depend on the type of
derivative and the nature of the underlying instrument. The
principal techniques used to value these instruments are
discounted cash flows and internal models, such as
derivative pricing models (e.g., Black-Scholes and Monte
Carlo simulations).
The key inputs depend upon the type of derivative and
the nature of the underlying instrument and include interest
rate yield curves, foreign exchange rates, volatilities and
correlation. The Company typically uses OIS curves as fair
value measurement inputs for the valuation of certain
derivatives.
(2) FVA is included with CVA for presentation purposes.
Securities Purchased Under Agreements to Resell and
Securities Sold Under Agreements to Repurchase
No quoted prices exist for these instruments, so fair value is
determined using a discounted cash flow technique. Cash
flows are estimated based on the terms of the contract, taking
into account any embedded derivative or other features.
These cash flows are discounted using interest rates
appropriate to the maturity of the instrument as well as the
nature of the underlying collateral. Generally, when such
instruments are recorded at fair value, they are classified
within Level 2 of the fair value hierarchy, as the inputs used
in the valuation are readily observable. However, certain
long-dated positions are classified within Level 3 of the fair
value hierarchy.
Trading Account Assets and Liabilities—Trading Securities
and Trading Loans
When available, the Company uses quoted market prices in
active markets to determine the fair value of trading
securities; such items are classified as Level 1 of the fair
value hierarchy. Examples include government securities and
exchange-traded equity securities.
For bonds and secondary market loans traded over the
counter, the Company generally determines fair value
utilizing valuation techniques, including discounted cash
flows, price-based and internal models. Fair value estimates
from these internal valuation techniques are verified, where
possible, to prices obtained from independent sources,
including third-party vendors. Vendors compile prices from
various sources and may apply matrix pricing for similar
bonds or loans where no price is observable. A price-based
methodology utilizes, where available, quoted prices or other
market information obtained from recent trading activity of
assets with similar characteristics to the bond or loan being
valued. The yields used in discounted cash flow models are
derived from the same price information. Trading securities
and loans priced using such methods are generally classified
as Level 2. However, when less liquidity exists for a security
or loan, a quoted price is stale, a significant adjustment to the
price of a similar security or loan is necessary to reflect
differences in the terms of the actual security or loan being
valued, or prices from independent sources are insufficient to
corroborate valuation, a loan or security is generally
classified as Level 3. The price input used in a price-based
methodology may be zero for a security, such as a subprime
CDO, that is not receiving any principal or interest and is
currently written down to zero.
When the Company’s principal market for a portfolio of
loans is the securitization market, the Company uses the
securitization price to determine the fair value of the
portfolio. The securitization price is determined from the
assumed proceeds of a hypothetical securitization in the
current market, adjusted for transformation costs (i.e., direct
costs other than transaction costs) and securitization
uncertainties such as market conditions and liquidity. As a
result of the severe reduction in the level of activity in
certain securitization markets since the second half of 2007,
245
Investments
The investments category includes available-for-sale debt
and marketable equity securities whose fair values are
generally determined by utilizing similar procedures
described for trading securities above or, in some cases,
using vendor pricing as the primary source.
Also included in investments are nonpublic investments
in private equity and real estate entities. Determining the fair
value of nonpublic securities involves a significant degree of
management judgment, as no quoted prices exist and such
securities are generally thinly traded. In addition, there may
be transfer restrictions on private equity securities. The
Company’s process for determining the fair value of such
securities utilizes commonly accepted valuation techniques,
including comparables analysis. In determining the fair value
of nonpublic securities, the Company also considers events
such as a proposed sale of the investee company, initial
public offerings, equity issuances or other observable
transactions. Private equity securities are generally classified
as Level 3 of the fair value hierarchy.
In addition, the Company holds investments in certain
alternative investment funds that calculate NAV per share,
including hedge funds, private equity funds and real estate
funds. Investments in funds are generally classified as non-
marketable equity securities carried at fair value. The fair
values of these investments are estimated using the NAV per
share of the Company’s ownership interest in the funds
where it is not probable that the investment will be realized
at a price other than the NAV. Consistent with the provisions
of ASU 2015-07, these investments have not been
categorized within the fair value hierarchy and are not
included in the tables below. See Note 13 to the
Consolidated Financial Statements for additional
information.
Short-Term Borrowings and Long-Term Debt
Where fair value accounting has been elected, the fair value
of non-structured liabilities is determined by utilizing
internal models using the appropriate discount rate for the
applicable maturity. Such instruments are generally
classified as Level 2 of the fair value hierarchy when all
significant inputs are readily observable.
The Company determines the fair value of hybrid
financial instruments, including structured liabilities, using
the appropriate derivative valuation methodology (described
above in “Trading Account Assets and Liabilities—
Derivatives”) given the nature of the embedded risk profile.
Such instruments are classified as Level 2 or Level 3
depending on the observability of significant inputs to the
model.
246
Items Measured at Fair Value on a Recurring Basis
The following tables present for each of the fair value
hierarchy levels the Company’s assets and liabilities that are
measured at fair value on a recurring basis at December 31,
2019 and 2018. The Company may hedge positions that have
been classified in the Level 3 category with other financial
Fair Value Levels
instruments (hedging instruments) that may be classified as
Level 3, but also with financial instruments classified as
Level 1 or Level 2 of the fair value hierarchy. The effects of
these hedges are presented gross in the following tables:
In millions of dollars at December 31, 2019
Level 1
Level 2
Level 3
Gross
inventory Netting(1)
Net
balance
Assets
Securities borrowed and purchased under agreements to resell
Trading non-derivative assets
$
— $
254,253 $
303 $
254,556 $ (101,363) $ 153,193
Trading mortgage-backed securities
U.S. government-sponsored agency guaranteed
Residential
Commercial
Total trading mortgage-backed securities
U.S. Treasury and federal agency securities
State and municipal
Foreign government
Corporate
Equity securities
Asset-backed securities
Other trading assets(2)
Total trading non-derivative assets
Trading derivatives
Interest rate contracts
Foreign exchange contracts
Equity contracts
Commodity contracts
Credit derivatives
Total trading derivatives
Cash collateral paid(3)
Netting agreements
Netting of cash collateral received
Total trading derivatives
Investments
Mortgage-backed securities
U.S. government-sponsored agency guaranteed
Residential
Commercial
Total investment mortgage-backed securities
U.S. Treasury and federal agency securities
State and municipal
Foreign government
Corporate
Marketable equity securities
Asset-backed securities
Other debt securities
Non-marketable equity securities(4)
$
$
$
$
$
$
$
$
$
27,671
—
696
—
—
1,693
— $ 30,060
— $ 29,895
2,637
—
71,326
—
18,891
—
51,641
—
2,716
—
—
12,041
— $ 219,207
—
—
—
— $
26,159 $
—
50,948
1,332
41,663
—
74
120,176 $
27,661
573
1,632
29,866 $
3,736 $
2,573
20,326
17,246
9,878
1,539
11,412
96,576 $
7 $
1
83
—
—
91 $
196,493 $
107,022
28,148
13,498
9,960
355,121 $
10
123
61
194 $
— $
64
52
313
100
1,177
555
2,455 $
1,168 $
547
240
714
449
3,118 $
$
27,671
696
1,693
30,060 $
29,895 $
2,637
71,326
18,891
51,641
2,716
12,041
219,207 $
197,668
107,570
28,471
14,212
10,409
358,330
17,926
91 $
355,121 $
3,118 $
$ (274,970)
(44,353)
376,256 $ (319,323) $ 56,933
— $
—
—
— $
106,103 $
—
69,957
5,150
87
—
—
—
35,198 $
793
74
36,065 $
5,315 $
4,355
41,196
6,076
371
500
4,730
93
98,701 $
32 $
—
—
32 $
— $
623
96
45
—
22
—
441
1,259 $
35,230 $
793
74
36,097 $
111,418 $
4,978
111,249
11,271
458
522
4,730
534
281,257 $
— $ 35,230
793
—
—
74
— $ 36,097
— $ 111,418
—
4,978
— 111,249
11,271
—
458
—
522
—
4,730
—
—
534
— $ 281,257
Total investments
$
181,297 $
Table continues on the next page.
247
In millions of dollars at December 31, 2019
Loans
Mortgage servicing rights
Non-trading derivatives and other financial assets measured on
a recurring basis
Total assets
Total as a percentage of gross assets(5)
Liabilities
Interest-bearing deposits
Securities loaned and sold under agreements to repurchase
—
111,567
Trading account liabilities
Securities sold, not yet purchased
Other trading liabilities
Total trading liabilities
Trading derivatives
Interest rate contracts
Foreign exchange contracts
Equity contracts
Commodity contracts
Credit derivatives
Total trading derivatives
Cash collateral received(6)
Netting agreements
Netting of cash collateral paid
Total trading derivatives
Short-term borrowings
Long-term debt
Level 1
Level 2
Level 3
$
— $
3,683
$
—
—
402
495
Gross
inventory Netting(1)
Net
balance
$
4,085
$
— $
4,085
495
—
495
$
5,628
$
7,201
$
1
$
12,830
$
— $ 12,830
$ 307,192
$ 815,535
$ 8,033
$1,148,686
$ (420,686) $ 728,000
27.2%
72.1%
0.7%
$
— $
2,104
$
60,429
11,965
—
24
$ 60,429
$
11,989
$
215
757
48
—
48
$
2,319
$
— $
2,319
112,324
(71,673)
40,651
72,442
24
—
—
72,442
24
$
72,466
$
— $ 72,466
$
8
—
144
—
—
$ 176,480
$ 1,167
$ 177,655
110,180
28,506
16,542
10,233
552
1,836
773
505
110,732
30,486
17,315
10,738
$
152
$ 341,941
$ 4,833
$ 346,926
$
14,391
$ (274,970)
(38,919)
$
$
152
$ 341,941
$ 4,833
$ 361,317
$ (313,889) $ 47,428
— $
4,933
$
13
$
4,946
$
— $
4,946
—
38,614
17,169
55,783
—
55,783
Total non-trading derivatives and other financial liabilities
measured on a recurring basis
Total liabilities
Total as a percentage of gross liabilities(5)
$
6,280
$
63
$ — $
6,343
$
— $
6,343
$ 66,861
$ 511,211
$ 23,035
$ 615,498
$ (385,562) $ 229,936
11.1%
85.0%
3.8%
(1) Represents netting of (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to
(2)
repurchase and (ii) derivative exposures covered by a qualifying master netting agreement and cash collateral offsetting.
Includes positions related to investments in unallocated precious metals, as discussed in Note 25 to the Consolidated Financial Statements. Also includes physical
commodities accounted for at the lower of cost or fair value and unfunded credit products.
(3) Reflects the net amount of $56,845 million of gross cash collateral paid, of which $38,919 million was used to offset trading derivative liabilities.
(4) Amounts exclude $0.2 billion of investments measured at net asset value (NAV) in accordance with ASU No. 2015-07, Fair Value Measurement (Topic 820):
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).
(5) Because the amount of the cash collateral paid/received has not been allocated to the Level 1, 2 and 3 subtotals, these percentages are calculated based on total
assets and liabilities measured at fair value on a recurring basis, excluding the cash collateral paid/received on derivatives.
(6) Reflects the net amount of $58,744 million of gross cash collateral received, of which $44,353 million was used to offset trading derivative assets.
248
Fair Value Levels
In millions of dollars at December 31, 2018
Level 1
Level 2
Level 3
Gross
inventory
Netting(1)
Net
balance
Assets
Securities borrowed and purchased under agreements to resell
$
— $
214,570 $
115 $
214,685 $
(66,984) $147,701
Trading non-derivative assets
Trading mortgage-backed securities
U.S. government-sponsored agency guaranteed
Residential
Commercial
—
—
—
24,090
709
1,323
156
268
77
24,246
977
1,400
Total trading mortgage-backed securities
U.S. Treasury and federal agency securities
$
$
— $
26,122 $
501 $
26,623 $
26,439 $
4,802 $
1 $
31,242 $
State and municipal
Foreign government
Corporate
Equity securities
Asset-backed securities
Other trading assets(2)
—
43,309
1,026
36,342
—
3
3,782
21,179
14,510
7,308
1,429
12,198
200
31
360
153
1,484
818
3,982
64,519
15,896
43,803
2,913
13,019
Total trading non-derivative assets
$
107,119 $
91,330 $
3,548 $
201,997 $
— 24,246
—
—
977
1,400
— $ 26,623
— $ 31,242
—
3,982
— 64,519
— 15,896
— 43,803
—
2,913
— 13,019
— $201,997
Trading derivatives
Interest rate contracts
Foreign exchange contracts
Equity contracts
Commodity contracts
Credit derivatives
Total trading derivatives
Cash collateral paid(3)
Netting agreements
Netting of cash collateral received
Total trading derivatives
Investments
Mortgage-backed securities
U.S. government-sponsored agency guaranteed
Residential
Commercial
Total investment mortgage-backed securities
U.S. Treasury and federal agency securities
State and municipal
Foreign government
Corporate
Marketable equity securities
Asset-backed securities
Other debt securities
Non-marketable equity securities(4)
Total investments
$
101 $
169,860 $
1,671 $
171,632
$
$
$
$
$
—
647
—
—
162,108
28,903
16,788
9,839
346
343
767
926
162,454
29,893
17,555
10,765
748 $
387,498 $
4,053 $
392,299
$
11,518
748 $
387,498 $
4,053 $
403,817 $ (349,697) $ 54,120
$ (311,089)
(38,608)
— $
42,988 $
32 $
43,020 $
— $ 43,020
—
—
1,313
172
—
—
1,313
172
— $
44,473 $
107,577 $
9,645 $
32 $
— $
44,505 $
117,222 $
—
58,252
4,410
206
—
—
—
8,498
42,371
7,033
14
656
3,972
96
708
68
156
—
187
—
586
9,206
100,691
11,599
220
843
3,972
682
—
—
1,313
172
— $ 44,505
— $117,222
—
9,206
— 100,691
— 11,599
—
—
—
—
220
843
3,972
682
$
170,445 $
116,758 $
1,737 $
288,940 $
— $288,940
Table continues on the next page.
249
In millions of dollars at December 31, 2018
Loans
Mortgage servicing rights
Level 1
Level 2
Level 3
$
— $
2,946
$
—
—
277
584
Gross
inventory
$
3,223
Net
balance
Netting(1)
$
— $ 3,223
584
—
584
Securities loaned and sold under agreements to repurchase
—
110,511
Non-trading derivatives and other financial assets measured on a
recurring basis
Total assets
Total as a percentage of gross assets(5)
Liabilities
Interest-bearing deposits
Trading account liabilities
Securities sold, not yet purchased
Other trading liabilities
Total trading liabilities
Trading account derivatives
Interest rate contracts
Foreign exchange contracts
Equity contracts
Commodity contracts
Credit derivatives
Total trading derivatives
Cash collateral received(6)
Netting agreements
Netting of cash collateral paid
Total trading derivatives
Short-term borrowings
Long-term debt
Non-trading derivatives and other financial liabilities measured
on a recurring basis
Total liabilities
Total as a percentage of gross liabilities(5)
$
15,839
$
4,949
$
— $
20,788
$
— $ 20,788
$ 294,151
$ 818,051
$ 10,314
$1,134,034
$ (416,681) $717,353
26.2%
72.9%
0.9%
$
— $
980
$
78,872
—
11,364
1,547
495
983
586
—
$
1,475
$
— $ 1,475
111,494
(66,984)
44,510
90,822
1,547
— 90,822
—
1,547
$
$
$
$
$
$
$
78,872
$
12,911
$
586
$
92,369
$
— $ 92,369
71
—
351
—
—
422
$ 152,931
159,003
32,330
19,904
9,486
$ 373,654
$ 1,825
352
1,127
785
865
$ 4,954
$ 154,827
159,355
33,808
20,689
10,351
$ 379,030
13,906
$
$ (311,089)
(29,911)
422
— $
—
$ 373,654
4,446
25,659
$ 4,954
37
$
12,570
$ 392,936
4,483
$
38,229
$ (341,000) $ 51,936
— $ 4,483
$
— 38,229
15,839
$
67
$
— $
15,906
$
— $ 15,906
95,133
$ 528,228
$ 19,625
$ 656,892
$ (407,984) $248,908
14.8%
82.1%
3.1%
(1) Represents netting of (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to
(2)
repurchase and (ii) derivative exposures covered by a qualifying master netting agreement and cash collateral offsetting.
Includes positions related to investments in unallocated precious metals, as discussed in Note 25 to the Consolidated Financial Statements. Also includes physical
commodities accounted for at the lower of cost or fair value and unfunded credit products.
(3) Reflects the net amount of $41,429 million of gross cash collateral paid, of which $29,911 million was used to offset trading derivative liabilities.
(4) Amounts exclude $0.2 billion of investments measured at net asset value (NAV) in accordance with ASU 2015-07, Fair Value Measurement (Topic 820):
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).
(5) Because the amount of the cash collateral paid/received has not been allocated to the Level 1, 2 and 3 subtotals, these percentages are calculated based on total
assets and liabilities measured at fair value on a recurring basis, excluding the cash collateral paid/received on derivatives.
(6) Reflects the net amount of $52,514 million of gross cash collateral received, of which $38,608 million was used to offset trading derivative assets.
250
Changes in Level 3 Fair Value Category
The following tables present the changes in the Level 3 fair
value category for the years ended December 31, 2019 and
2018. The gains and losses presented below include changes in
the fair value related to both observable and unobservable
inputs.
The Company often hedges positions with offsetting
positions that are classified in a different level. For example,
the gains and losses for assets and liabilities in the Level 3
Level 3 Fair Value Rollforward
category presented in the tables below do not reflect the effect
of offsetting losses and gains on hedging instruments that may
be classified in the Level 1 and Level 2 categories. In addition,
the Company hedges items classified in the Level 3 category
with instruments also classified in Level 3 of the fair value
hierarchy. The hedged items and related hedges are presented
gross in the following tables:
Net realized/unrealized
gains/losses included in
Transfers
Dec. 31,
2018
Principal
transactions Other(1)(2)
into
Level 3
out of
Level 3 Purchases
Issuances
Sales
Settlements
Unrealized
gains/
losses
still held(3)
Dec. 31,
2019
$
115 $
(5) $
— $
191 $
(4) $
195 $
— $
— $
(189) $
303 $
3
In millions of dollars
Assets
Securities borrowed and
purchased under
agreements to resell
Trading non-derivative
assets
Trading mortgage-
backed securities
U.S. government-
sponsored agency
guaranteed
Residential
Commercial
Total trading mortgage-
backed securities
U.S. Treasury and
federal agency securities $
State and municipal
Foreign government
Corporate
Marketable equity
securities
Asset-backed securities
Other trading assets
Total trading non-
derivative assets
Trading derivatives, net(4)
156
268
77
—
15
14
—
—
—
54
86
150
(72)
(80)
(105)
160
227
136
(1)
—
—
(287)
(393)
(211)
—
—
—
10
123
61
$
501 $
29 $
— $
290 $
(257) $
523 $
(1) $
(891) $
— $
194 $
1 $
(9) $
— $
— $
— $
20 $
— $
(11) $
(1) $
— $
200
31
360
153
1,484
818
(2)
28
284
(21)
(65)
(52)
—
—
—
—
—
—
1
12
213
13
51
97
(19)
(7)
(86)
(19)
(127)
(283)
2
88
323
117
738
598
—
—
(29)
—
—
36
(118)
(100)
(742)
(143)
(904)
(630)
—
—
(10)
—
—
(29)
64
52
313
100
1,177
555
1
10
(4)
7
—
(2)
1
(11)
(51)
29
(257)
$
3,548 $
192 $
— $
677 $
(798) $
2,409 $
6 $ (3,539) $
(40) $
2,455 $
(284)
Interest rate contracts
$
(154) $
116 $
— $
(129) $
172 $
154 $
45 $
(1) $
(202) $
1 $
2,194
Foreign exchange
contracts
Equity contracts
Commodity contracts
Credit derivatives
Total trading derivatives,
net(4)
(6)
(784)
(18)
61
(73)
(425)
(121)
(412)
—
—
—
—
152
(213)
(15)
(114)
(97)
274
(15)
204
113
(111)
252
—
—
(147)
—
—
(114)
(8)
(133)
14
20
(5)
(182)
(1,596)
(9)
191
(59)
(56)
(134)
(422)
(33)
(289)
$
(901) $
(915) $
— $
(319) $
538 $
408 $
(102) $
(242) $
(182) $ (1,715) $
1,316
Table continues on the next page.
251
Net realized/unrealized
gains/losses included in
Transfers
Dec. 31,
2018
Principal
transactions Other(1)(2)
into
Level 3
out of
Level 3 Purchases
Issuances
Sales
Settlements
Unrealized
gains/
losses
still held(3)
Dec. 31,
2019
$
32 $
— $
— $
— $
— $
— $
— $ — $
— $
32 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
32 $
— $
708
68
156
—
187
—
586
$
$
1,737 $
277 $
584
— $
— $
— $
— $
— $
— $ — $
— $
32 $
— $
— $
— $
— $
— $
— $ — $
— $
— $
—
—
—
—
—
—
—
— $
— $
—
86
2
(14)
—
(11)
—
(11)
14
—
3
—
122
—
39
(318)
—
(94)
—
(612)
—
(1)
430
145
—
—
550
—
11
— (297)
— (119)
—
—
(6)
—
— (214)
—
—
—
—
—
—
—
—
623
96
45
—
22
—
— (151)
(32)
441
52 $
178 $ (1,025) $
1,136 $
— $ (787) $
(32) $
1,259 $
192 $
148 $
(189) $
(84)
—
—
16 $
—
— $
(40) $
(2) $
402 $
70
—
(75)
495
(1)
—
—
(1)
—
82
2
—
—
13
—
16
112
186
(68)
—
—
96
6
(2)
2
32
(21)
(112)
1
18
In millions of dollars
Investments
Mortgage-backed
securities
U.S. government-
sponsored agency
guaranteed
Residential
Commercial
Total investment
mortgage-backed
securities
U.S. Treasury and
federal agency securities
State and municipal
Foreign government
Corporate
Marketable equity
securities
Asset-backed securities
Other debt securities
Non-marketable equity
securities
Total investments
Loans
Mortgage servicing rights
Other financial assets
measured on a recurring
basis
Liabilities
Interest-bearing deposits
$
495 $
— $
(16) $
10 $
(783) $
— $
843 $ — $
(366) $
215 $
(25)
Securities loaned and sold
under agreements to
repurchase
Trading account liabilities
Securities sold, not yet
purchased
Other trading liabilities
Short-term borrowings
983
586
—
37
121
122
—
32
Long-term debt
12,570
(2,140)
Other financial liabilities
measured on a recurring
basis
—
—
—
—
—
—
—
4
1
68
—
13
4
(443)
—
(42)
3,892
(5,188)
5
—
—
19
—
—
23
—
— (168)
58
757
(26)
—
—
168
8,262
(12)
—
—
(5)
(48)
—
(131)
48
—
13
3
—
(1)
(4,525)
17,169
(3,300)
4
—
(5)
—
—
(1) Changes in fair value of available-for-sale investments are recorded in AOCI, unless related to other-than-temporary impairment, while gains and losses from sales
are recorded in Realized gains (losses) from sales of investments in the Consolidated Statement of Income.
(2) Unrealized gains (losses) on MSRs are recorded in Other revenue in the Consolidated Statement of Income.
(3) Represents the amount of total gains or losses for the period, included in earnings (and AOCI for changes in fair value of available-for-sale investments),
attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2019.
(4) Total Level 3 trading derivative assets and liabilities have been netted in these tables for presentation purposes only.
252
Net realized/unrealized
gains (losses) included in
Transfers
Dec. 31,
2017
Principal
transactions Other(1)(2)
into
Level 3
out of
Level 3
Purchases
Issuances
Sales
Settlements
Unrealized
gains
(losses)
still held(3)
Dec. 31,
2018
$
16 $
17 $
— $
50 $
— $
95 $
— $
16 $
(79) $
115 $
9
U.S. Treasury and
federal agency securities $
In millions of dollars
Assets
Securities borrowed and
purchased under
agreements to resell
Trading non-derivative
assets
Trading mortgage-
backed securities
U.S. government-
sponsored agency
guaranteed
Residential
Commercial
Total trading mortgage-
backed securities
State and municipal
Foreign government
Corporate
Marketable equity
securities
Asset-backed securities
Other trading assets
Total trading non-
derivative assets
Trading derivatives, net(4)
Foreign exchange
contracts
Equity contracts
Commodity contracts
Credit derivatives
Total trading derivatives,
net(4)
Investments
Mortgage-backed
securities
U.S. government-
sponsored agency
guaranteed
Residential
Commercial
Total investment
mortgage-backed
securities
163
164
57
5
112
(7)
—
—
—
92
124
24
(107)
(133)
(49)
281
154
110
—
—
—
(278)
(153)
(58)
—
—
—
156
268
77
$
384 $
110 $
— $
240 $
(289) $
545 $
— $
(489) $
— $
501 $
— $
— $
— $
6 $
(4) $
1 $
— $
— $
(2) $
1 $
274
16
275
120
1,590
615
22
(2)
(72)
2
28
276
—
—
—
—
—
—
—
5
138
25
77
197
(96)
(13)
(122)
(62)
(90)
(82)
45
75
596
290
1,238
598
—
—
(45)
(50)
(40)
(415)
—
(222)
— (1,359)
8
(777)
—
—
—
—
—
(17)
200
31
360
153
1,484
818
$
3,274 $
364 $
— $
688 $
(758) $
3,388 $
(32) $ (3,357) $
(19) $
3,548 $
153
Interest rate contracts
$
(422) $
414 $
— $
(6) $
(193) $
8 $
17 $
(32) $
60 $
(154) $
336
130
(2,027)
(1,861)
(799)
(99)
479
(505)
261
—
—
—
—
(29)
(131)
(32)
(7)
77
1,114
2,180
391
11
25
62
2
—
(44)
—
—
(89)
(17)
(19)
1
(7)
(6)
(183)
(784)
157
212
(18)
61
(72)
52
(171)
87
$ (4,979) $
550 $
— $
(205) $ 3,569 $
108 $
(27) $
(156) $
239 $
(901) $
232
$
24 $
— $
10 $
— $
— $
— $
— $
(2) $
— $
32 $
—
3
—
—
—
2
—
1
—
(1)
—
—
—
—
—
(5)
—
—
—
—
$
27 $
— $
12 $
1 $
(1) $
— $
— $
(7) $
— $
32 $
U.S. Treasury and
federal agency securities $
State and municipal
Foreign government
Corporate
Marketable equity
securities
Asset-backed securities
Other debt securities
Non-marketable equity
securities
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
737
92
71
2
827
—
681
—
—
—
—
—
—
—
(20)
(3)
(1)
1
(21)
—
—
3
61
—
10
—
(95)
193
(18)
(4)
(66)
—
(524)
—
—
211
141
101
—
63
—
91
—
—
—
—
—
—
—
(202)
(161)
(10)
(2)
(168)
—
(234)
—
—
—
(1)
—
—
(50)
708
68
156
—
187
—
586
Total investments
$
2,437 $
— $
(127) $
268 $
(613) $
607 $
— $
(784) $
(51) $
1,737 $
Table continues on the next page.
253
186
4
—
190
—
9
(28)
(32)
(56)
(21)
91
14
—
—
14
—
(29)
4
—
—
—
—
55
44
In millions of dollars
Dec. 31,
2017
Principal
transactions
Other(1)(2)
into
Level 3
out of
Level 3
Purchases
Issuances
Sales
Settlements
Net realized/unrealized
gains (losses) included in
Transfers
Unrealized
gains
(losses)
still held(3)
Dec. 31,
2018
Loans
$
550 $
— $
(319) $
— $
13 $
140 $
— $ (103) $
(4) $
277 $
Mortgage servicing rights
558
Other financial assets
measured on a recurring
basis
Liabilities
16
—
—
54
51
—
—
—
(11)
—
4
58
(18)
(68)
584
12
(12)
(60)
—
236
59
63
Interest-bearing deposits
$
286 $
— $
14 $
13 $
(1) $
— $
215 $ — $
(4) $
495 $
(355)
Securities loaned and sold
under agreements to
repurchase
Trading account liabilities
Securities sold, not yet
purchased
Other trading liabilities
Short-term borrowings
726
(8)
22
5
18
(454)
5
53
(182)
—
—
—
—
—
1
—
187
—
72
(172)
—
(46)
2,850
(3,514)
Long-term debt
13,082
Other financial liabilities
measured on a recurring
basis
8
—
(2)
1
(10)
—
7
—
—
36
—
243
(31)
36
983
24
226
—
86
(39)
—
—
(99)
—
(40)
586
—
37
(238)
—
25
(18)
(45)
(3)
12,570
(2,871)
2
—
(3)
—
(8)
(1) Changes in fair value of available-for-sale debt securities are recorded in AOCI, unless related to other-than-temporary impairment, while gains and losses from
sales are recorded in Realized gains (losses) from sales of investments in the Consolidated Statement of Income.
(2) Unrealized gains (losses) on MSRs are recorded in Other revenue in the Consolidated Statement of Income.
(3) Represents the amount of total gains or losses for the period, included in earnings (and AOCI for changes in fair value of available-for-sale debt securities),
attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2018.
(4) Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.
Level 3 Fair Value Rollforward
The following were the significant Level 3 transfers for the
period December 31, 2018 to December 31, 2019:
• Transfers of Long-Term Debt of $3.9 billion from Level 2
to Level 3, and of $5.2 billion from Level 3 to Level 2,
mainly related to structured debt, reflecting changes in the
significance of unobservable inputs as well as certain
underlying market inputs becoming less or more
observable.
The following were the significant Level 3 transfers for the
period December 31, 2017 to December 31, 2018:
• Transfers of Equity Contract Derivatives of $1.1 billion
from Level 3 to Level 2, related to equity derivatives
where the unobservable components were deemed
insignificant.
• Transfers of Commodity Contract Derivatives of $2.2
billion from Level 3 to Level 2, related to commodity
derivatives where the unobservable component of the
derivatives were deemed insignificant.
• Transfers of Long-term debt of $2.9 billion from Level 2
to Level 3, and of $3.5 billion from Level 3 to Level 2,
mainly related to structured debt, reflecting changes in the
significance of unobservable inputs as well as certain
underlying market inputs becoming less or more
observable.
254
Valuation Techniques and Inputs for Level 3 Fair
Value Measurements
The Company’s Level 3 inventory consists of both cash
instruments and derivatives of varying complexity. The
valuation methodologies used to measure the fair value of
these positions include discounted cash flow analysis, internal
models and comparative analysis. A position is classified
within Level 3 of the fair value hierarchy when at least one
input is unobservable and is considered significant to its
valuation. The specific reason an input is deemed
unobservable varies; for example, at least one significant
input to the pricing model is not observable in the market, at
least one significant input has been adjusted to make it more
representative of the position being valued or the price quote
available does not reflect sufficient trading activities.
The following tables present the valuation techniques
covering the majority of Level 3 inventory and the most
significant unobservable inputs used in Level 3 fair value
measurements. Differences between this table and amounts
presented in the Level 3 Fair Value Rollforward table
represent individually immaterial items that have been
measured using a variety of valuation techniques other than
those listed.
Fair value(1)
(in millions)
Methodology
Input
Low(2)(3)
High(2)(3)
Weighted
average(4)
As of December 31, 2019
Assets
Securities borrowed and
purchased under agreements
to resell
Mortgage-backed securities
State and municipal, foreign
government, corporate and
other debt securities
Marketable equity securities(5)
Asset-backed securities
Non-marketable equities
\
Derivatives—gross(6)
Interest rate contracts (gross)
Foreign exchange contracts
(gross)
$
$
$
$
$
$
$
$
$
303 Model-based
Credit spread
196 Price-based
22 Model-based
880 Model-based
677 Price-based
70 Price-based
30 Model-based
812 Price-based
Interest rate
Price
Price
Credit spread
Price
WAL
Recovery
(in millions)
Price
368 Yield analysis
Yield
316 Comparables analysis EBITDA multiples
97 Price-based
Appraised value
(in thousands)
Price
PE ratio
Price to book ratio
Discount to price
$
$
$
$
$
$
$
2,196 Model-based
Inflation volatility
1,099 Model-based
Mean reversion
IR normal volatility
FX volatility
IR normal volatility
FX rate
Interest rate
IR-IR correlation
IR-FX correlation
Equity volatility
Forward price
WAL
Recovery
(in millions)
255
15 bps
1.59 %
36
$
15 bps
3.67%
505
$
15 bps
2.72 %
97
$
$
$
$
$
$
— $
35 bps
— $
1.48 years
1,238
295 bps
38,500
1.48 years
$
$
$
$
5,450
4
0.61 %
7.00x
397
3
14.70x
1.50x
— %
0.21 %
1.00 %
0.09 %
1.27 %
0.27 %
37.39 %
2.72 %
(51.00)%
40.00 %
3.16 %
62.60 %
5,450
103
23.38%
17.95x
33,246
2,019
28.70x
3.00x
10.00%
2.74%
20.00%
0.66%
12.16%
0.66%
586.84%
56.14%
40.00%
60.00%
52.80%
112.69%
90
209 bps
2,979
1.48 years
5,450
60
8.88 %
10.34x
8,446
1,020
20.54x
1.88x
2.32 %
0.79 %
10.50 %
0.53 %
9.17 %
0.58 %
80.64 %
13.11 %
32.00 %
50.00 %
28.43 %
98.46 %
1.48 years
1.48 years
1.48 years
$
5,450
$
5,450
$
5,450
Equity contracts (gross)(7)
$
2,076 Model-based
As of December 31, 2019
Commodity and other contracts
(gross)
Fair value(1)
(in millions)
Methodology
Input
Low(2)(3)
High(2)(3)
Weighted
average(4)
$
1,487 Model-based
Forward price
37.62 %
362.57%
119.32 %
Credit derivatives (gross)
Loans and leases
Mortgage servicing rights
Liabilities
Interest-bearing deposits
Securities loaned and sold under
agreements to repurchase
Trading account liabilities
Securities sold, not yet
purchased
Short-term borrowings and
long-term debt
$
$
$
$
$
$
$
613 Model-based
341 Price-based
378 Model-based
418 Cash flow
77 Model-based
215 Model-based
Commodity
volatility
Commodity
correlation
Credit spread
Upfront points
Price
Credit
correlation
Recovery rate
Credit spread
Equity volatility
Yield
WAL
Mean reversion
Forward price
5.25 %
93.63%
23.55 %
(39.65)%
8 bps
2.59 %
87.81%
283 bps
99.94%
41.80 %
80 bps
59.41 %
$
12
$
100
$
87
25.00 %
20.00 %
9 bps
32.00 %
1.78 %
4.07 years
87.00%
65.00%
52 bps
32.00%
12.00%
8.13 years
48.57 %
48.00 %
48 bps
32.00 %
9.49 %
6.61 years
1.00 %
97.59 %
20.00%
111.06%
10.50 %
102.96 %
757 Model-based
Interest rate
1.59 %
2.38%
1.95 %
46 Price-based
Price
$
— $
866
$
96
17,182 Model-based
Mean reversion
IR normal volatility
Forward price
Equity-IR
Correlation
1.00 %
0.09 %
20.00%
0.66%
37.62 %
362.57%
10.50 %
0.46 %
97.52 %
15.00 %
44.00%
32.66 %
Fair value(1)
(in millions)
Methodology
Input
Low(2)(3)
High(2)(3)
Weighted
average(4)
As of December 31, 2018
Assets
Securities borrowed and
purchased under agreements to
resell
Mortgage-backed securities
State and municipal, foreign
government, corporate and
other debt securities
Marketable equity securities(5)
Asset-backed securities
Non-marketable equities
$
$
$
$
$
$
115 Model-based
Interest rate
313 Price-based
198 Yield analysis
Price
Yield
1,212 Price-based
Price
938 Model-based
Credit spread
108 Price-based
45 Model-based
1,608 Price-based
Comparables
analysis
293
Price
WAL
Price
Discount to price
255 Price-based
EBITDA multiples
Net operating income
multiple
2.52 %
11
$
2.27 %
7.43 %
110
$
8.70 %
5.08 %
90
3.74 %
— $
104
35 bps
446 bps
— $
20,255
1.47 years
1.47 years
3
$
101
$
$
$
91
238 bps
1,248
1.47 years
66
$
$
$
$
— %
5.00x
100.00 %
34.00x
24.70x
24.70x
0.66 %
9.73x
24.70x
420
7.06x
Derivatives—gross(6)
256
Price
$
2
$
1,074
$
Revenue multiple
2.25x
16.50x
Fair value(1)
(in millions)
Methodology
Input
Low(2)(3)
High(2)(3)
Weighted
average(4)
As of December 31, 2018
Interest rate contracts (gross)
Foreign exchange contracts
(gross)
$
$
3,467 Model-based
Mean reversion
Inflation volatility
IR normal volatility
Foreign exchange (FX)
626 Model-based
volatility
73 Cash flow
IR-IR correlation
IR-FX correlation
Credit spread
IR basis
Yield
Equity contracts (gross)(7)
$
1,467 Model-based
Equity volatility
Forward price
Equity-Equity
correlation
Equity-FX correlation
1.00 %
0.22 %
0.16 %
3.15 %
(51.00)%
40.00 %
39 bps
(0.65)%
6.98 %
3.00 %
64.66 %
(81.39)%
(86.27)%
20.00 %
2.65 %
0.86 %
17.35 %
40.00 %
60.00 %
676 bps
0.11 %
7.48 %
78.39 %
144.45 %
100.00 %
70.00 %
10.50 %
0.77 %
0.56 %
11.37 %
32.69 %
50.00 %
423 bps
(0.17)%
7.23 %
37.53 %
98.55 %
35.49 %
(1.20)%
59.86 %
92.11 %
85.00 %
99.04 %
1,127 bps
65.00 %
5.00 %
7.41 %
2 bps
5.00 %
$
$
17
$
98
$
138 bps
0.30 %
255 bps
0.47 %
56
$
110
$
4.60 %
12.00 %
20.34 %
40.71 %
41.06 %
58.95 %
87 bps
46.40 %
81
147 bps
0.32 %
92
7.79 %
3.55 years
7.45 years
6.39 years
WAL
1.47 years
1.47 years
1.47 years
1,552 Model-based
Forward price
Commodity volatility
15.30 %
8.92 %
Commodity correlation
(51.90)%
585.07 %
145.08 %
1,089 Model-based
Credit correlation
701 Price-based
Upfront points
Credit spread
Recovery rate
Price
248 Model-based
Credit spread
29 Price-based
501 Cash flow
84 Model-based
Yield
Price
Yield
WAL
495 Model-based
Mean reversion
Forward price
Equity volatility
1.00 %
64.66 %
3.00 %
20.00 %
144.45 %
78.39 %
10.50 %
98.55 %
43.49 %
983 Model-based
Interest rate
2.52 %
3.21 %
2.87 %
Securities sold, not yet purchased $
509 Model-based
Forward price
77 Price-based
Equity volatility
Equity-Equity
correlation
Equity-FX correlation
Commodity volatility
Commodity correlation
Equity-IR correlation
Short-term borrowings and long-
term debt
$
12,289 Model-based
Mean reversion
Forward price
Equity volatility
15.30 %
3.00 %
(81.39)%
(86.27)%
8.92 %
(51.90)%
(40.00)%
1.00 %
64.66 %
3.00 %
585.07 %
78.39 %
100.00 %
70.00 %
59.86 %
92.11 %
70.37 %
20.00 %
144.45 %
78.39 %
105.69 %
43.49 %
34.04 %
(1.20)%
20.34 %
40.71 %
30.80 %
10.50 %
98.58 %
43.24 %
(1) The fair value amounts presented in these tables represent the primary valuation technique or techniques for each class of assets or liabilities.
257
Commodity and other contracts
(gross)
Credit derivatives (gross)
Loans and leases
Mortgage servicing rights
Liabilities
Interest-bearing deposits
Securities loaned and sold under
agreements to repurchase
Trading account liabilities
$
$
$
$
$
$
(2) Some inputs are shown as zero due to rounding.
(3) When the low and high inputs are the same, there is either a constant input applied to all positions, or the methodology involving the input applies to only one
large position.
(4) Weighted averages are calculated based on the fair values of the instruments.
(5) For equity securities, the price inputs are expressed on an absolute basis, not as a percentage of the notional amount.
(6) Both trading and nontrading account derivatives—assets and liabilities—are presented on a gross absolute value basis.
(7)
Includes hybrid products.
Uncertainty of Fair Value Measurements Relating to
Unobservable Inputs
Valuation uncertainty arises when there is insufficient or
disperse market data to allow a precise determination of the
exit value of a fair-valued position or portfolio in today’s
market. This is especially prevalent in Level 3 fair value
instruments, where uncertainty exists in valuation inputs that
may be both unobservable and significant to the instrument’s
(or portfolio’s) overall fair value measurement. The
uncertainties associated with key unobservable inputs on the
Level 3 fair value measurements may not be independent of
one another. In addition, the amount and direction of the
uncertainty on a fair value measurement for a given change in
an unobservable input depends on the nature of the instrument
as well as whether the Company holds the instrument as an
asset or a liability. For certain instruments, the pricing,
hedging and risk management are sensitive to the correlation
between various inputs rather than on the analysis and
aggregation of the individual inputs.
The following section describes some of the most
significant unobservable inputs used by the Company in
Level 3 fair value measurements.
Correlation
Correlation is a measure of the extent to which two or more
variables change in relation to each other. A variety of
correlation-related assumptions are required for a wide range
of instruments, including equity and credit baskets, foreign
exchange options, CDOs backed by loans or bonds,
mortgages, subprime mortgages and many other instruments.
For almost all of these instruments, correlations are not
directly observable in the market and must be calculated using
alternative sources, including historical information.
Estimating correlation can be especially difficult where it may
vary over time, and calculating correlation information from
market data requires significant assumptions regarding the
informational efficiency of the market (e.g., swaption
markets). Uncertainty therefore exists when an estimate of the
appropriate level of correlation as an input into some fair
value measurements is required.
Changes in correlation levels can have a substantial
impact, favorable or unfavorable, on the value of an
instrument, depending on its nature. A change in the default
correlation of the fair value of the underlying bonds
comprising a CDO structure would affect the fair value of the
senior tranche. For example, an increase in the default
correlation of the underlying bonds would reduce the fair
value of the senior tranche, because highly correlated
instruments produce greater losses in the event of default and
a portion of these losses would become attributable to the
senior tranche. That same change in default correlation would
have a different impact on junior tranches of the same
structure.
Volatility
Volatility represents the speed and severity of market price
changes and is a key factor in pricing options. Volatility
generally depends on the tenor of the underlying instrument
and the strike price or level defined in the contract. Volatilities
for certain combinations of tenor and strike are not observable
and need to be estimated using alternative methods, such as
using comparable instruments, historical analysis or other
sources of market information. This leads to uncertainty
around the final fair value measurement of instruments with
unobservable volatilities.
The general relationship between changes in the value of
a portfolio to changes in volatility also depends on changes in
interest rates and the level of the underlying index. Generally,
long option positions (assets) benefit from increases in
volatility, whereas short option positions (liabilities) will
suffer losses. Some instruments are more sensitive to changes
in volatility than others. For example, an at-the-money option
would experience a greater percentage change in its fair value
than a deep-in-the-money option. In addition, the fair value of
an option with more than one underlying security (e.g., an
option on a basket of bonds) depends on the volatility of the
individual underlying securities as well as their correlations.
Yield
In some circumstances, the yield of an instrument is not
observable in the market and must be estimated from historical
data or from yields of similar securities. This estimated yield
may need to be adjusted to capture the characteristics of the
security being valued. In other situations, the estimated yield
may not represent sufficient market liquidity and must be
adjusted as well. Whenever the amount of the adjustment is
significant to the value of the security, the fair value
measurement is classified as Level 3.
Adjusted yield is generally used to discount the projected
future principal and interest cash flows on instruments, such as
asset-backed securities. Adjusted yield is impacted by changes
in the interest rate environment and relevant credit spreads.
Prepayment
Voluntary unscheduled payments (prepayments) change the
future cash flows for the investor and thereby change the fair
value of the security. The effect of prepayments is more
pronounced for residential mortgage-backed securities. An
increase in prepayments—in speed or magnitude—generally
creates losses for the holder of these securities. Prepayment is
generally negatively correlated with delinquency and interest
rate. A combination of low prepayment and high delinquencies
amplifies each input’s negative impact on mortgage securities’
valuation. As prepayment speeds change, the weighted
258
average life of the security changes, which impacts the
valuation either positively or negatively, depending upon the
nature of the security and the direction of the change in the
weighted average life.
Recovery
Recovery is the proportion of the total outstanding balance of
a bond or loan that is expected to be collected in a liquidation
scenario. For many credit securities (such as asset-backed
securities), there is no directly observable market input for
recovery, but indications of recovery levels are available from
pricing services. The assumed recovery of a security may
differ from its actual recovery that will be observable in the
future. The recovery rate impacts the valuation of credit
securities. Generally, an increase in the recovery rate
assumption increases the fair value of the security. An increase
in loss severity, the inverse of the recovery rate, reduces the
amount of principal available for distribution and, as a result,
decreases the fair value of the security.
Credit Spread
Credit spread is a component of the security representing its
credit quality. Credit spread reflects the market perception of
changes in prepayment, delinquency and recovery rates,
therefore capturing the impact of other variables on the fair
value. Changes in credit spread affect the fair value of
securities differently depending on the characteristics and
maturity profile of the security. For example, credit spread is a
more significant driver of the fair value measurement of a high
yield bond as compared to an investment grade bond.
Generally, the credit spread for an investment grade bond is
also more observable and less volatile than its high yield
counterpart.
259
Where the fair value of the related collateral is based on
an unadjusted appraised value, the loan is generally classified
as Level 2. Where significant adjustments are made to the
appraised value, the loan is classified as Level 3. In addition,
for corporate loans, appraisals of the collateral are often based
on sales of similar assets; however, because the prices of
similar assets require significant adjustments to reflect the
unique features of the underlying collateral, these fair value
measurements are generally classified as Level 3.
The fair value of non-marketable equity securities under
the measurement alternative is based on observed transaction
prices for the identical or similar investment of the same
issuer, or an internal valuation technique in the case of an
impairment. Where significant adjustments are made to the
observed transaction price or when an internal valuation
technique is used, the security is classified as Level 3. Fair
value may differ from the observed transaction price due to a
number of factors, including marketability adjustments and
differences in rights and obligations when the observed
transaction is not for the identical investment held by Citi.
Items Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a
nonrecurring basis and, therefore, are not included in the
tables above. These include assets measured at cost that have
been written down to fair value during the periods as a result
of an impairment. These also include non-marketable equity
securities that have been measured using the measurement
alternative and are either (i) written down to fair value during
the periods as a result of an impairment or (ii) adjusted upward
or downward to fair value as a result of a transaction observed
during the periods for the identical or similar investment of the
same issuer. In addition, these assets include loans held-for-
sale and other real estate owned that are measured at the lower
of cost or market value.
The following tables present the carrying amounts of all
assets that were still held for which a nonrecurring fair value
measurement was recorded:
In millions of dollars
Fair value
Level 2
Level 3
December 31, 2019
Loans HFS(1)
Other real estate owned
Loans(2)
Non-marketable equity
securities measured
using the measurement
alternative
$
4,579 $
3,249 $
1,330
20
344
6
93
14
251
249
249
—
Total assets at fair value
on a nonrecurring basis $
5,192 $
3,597 $
1,595
In millions of dollars
Fair value
Level 2
Level 3
December 31, 2018
Loans HFS(1)
Other real estate owned
Loans(2)
Non-marketable equity
securities measured
using the measurement
alternative
Total assets at fair value
on a nonrecurring basis
$
5,055 $
3,261 $
1,794
78
390
62
139
16
251
261
192
69
$
5,784 $
3,654 $
2,130
(1) Net of fair value amounts on the unfunded portion of loans HFS
recognized as Other liabilities on the Consolidated Balance Sheet.
(2) Represents impaired loans held for investment whose carrying amount is
based on the fair value of the underlying collateral less costs to sell,
primarily real estate.
The fair value of loans HFS is determined where possible
using quoted secondary-market prices. If no such quoted price
exists, the fair value of a loan is determined using quoted
prices for a similar asset or assets, adjusted for the specific
attributes of that loan. Fair value for the other real estate
owned is based on appraisals. For loans whose carrying
amount is based on the fair value of the underlying collateral,
the fair values depend on the type of collateral. Fair value of
the collateral is typically estimated based on quoted market
prices if available, appraisals or other internal valuation
techniques.
260
Valuation Techniques and Inputs for Level 3 Nonrecurring Fair Value Measurements
The following tables present the valuation techniques covering the majority of Level 3 nonrecurring fair value measurements and the
most significant unobservable inputs used in those measurements:
As of December 31, 2019
Loans HFS
Other real estate owned
Loans(6)
Fair value(1)
(in millions)
Methodology
Input
$
$
$
$
1,320 Price-based
11 Price-based
5 Recovery analysis
Price
$
Appraised value(4) $
100 Recovery analysis
Recovery rate
54 Cash flow
47 Price-based
29 Price-based
Price
$
Cost of capital
Appraised value(4) $
As of December 31, 2018
Loans HFS
Other real estate owned
Loans(6)
Fair value(1)
(in millions)
Methodology
Input
$
$
$
1,729 Price-based
15 Price-based
2 Recovery analysis
Price
Appraised value(4)
Discount to price
Price
251 Recovery analysis
Recovery rate
Price
Non-marketable equity
securities measured using
the measurement alternative $
66 Price-based
Price
$
$
$
Low(2)
86
2,297,358
0.57%
2
0.10%
17,521,218
Low(2)
$
81
$ 8,394,102
13.00%
56
30.60%
3
High
100
8,394,102
100.00%
54
100.00%
43,646,426
High
100
8,394,102
13.00%
83
100.00%
85
Weighted
average(3)
99
5,615,884
64.78%
27
54.84%
30,583,822
Weighted
average(3)
98
8,394,102
13.00%
58
50.51%
28
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
46
$
1,514
$
570
(1) The fair value amounts presented in this table represent the primary valuation technique or techniques for each class of assets or liabilities.
(2) Some inputs are shown as zero due to rounding.
(3) Weighted averages are calculated based on the fair values of the instruments.
(4) Appraised values are disclosed in whole dollars.
(5)
(6) Represents impaired loans held for investment whose carrying amounts are based on the fair value of the underlying collateral, primarily real estate secured loans.
Includes estimated costs to sell.
Nonrecurring Fair Value Changes
The following tables present total nonrecurring fair value
measurements for the period, included in earnings, attributable
to the change in fair value relating to assets that were still
held:
In millions of dollars
Loans HFS
$
Other real estate owned
Loans(1)
Non-marketable equity securities measured
using the measurement alternative
Total nonrecurring fair value gains (losses)
$
Year ended
December 31,
2019
—
(1)
(56)
99
42
In millions of dollars
Loans HFS
$
Other real estate owned
Loans(1)
Non-marketable equity securities measured
using the measurement alternative
Total nonrecurring fair value gains (losses)
$
Year ended
December 31,
2018
(13)
(2)
(22)
194
157
(1) Represents loans held for investment whose carrying amount is based on
the fair value of the underlying collateral, primarily real estate.
261
Estimated Fair Value of Financial Instruments Not
Carried at Fair Value
The following tables present the carrying value and fair value
of Citigroup’s financial instruments that are not carried at fair
value. The tables below therefore exclude items measured at
fair value on a recurring basis presented in the tables above.
The disclosure also excludes leases, affiliate investments,
pension and benefit obligations, certain insurance contracts
and tax-related items. Also, as required, the disclosure
excludes the effect of taxes, any premium or discount that
could result from offering for sale at one time the entire
holdings of a particular instrument, excess fair value
associated with deposits with no fixed maturity and other
expenses that would be incurred in a market transaction. In
addition, the tables exclude the values of non-financial assets
and liabilities, as well as a wide range of franchise,
relationship and intangible values, which are integral to a full
assessment of Citigroup’s financial position and the value of
its net assets.
Fair values vary from period to period based on changes
in a wide range of factors, including interest rates, credit
quality and market perceptions of value, and as existing assets
and liabilities run off and new transactions are entered into.
In billions of dollars
Assets
Investments
Securities borrowed and purchased under agreements to resell
Loans(1)(2)
Other financial assets(2)(3)
Liabilities
Deposits
Securities loaned and sold under agreements to repurchase
Long-term debt(4)
Other financial liabilities(5)
In billions of dollars
Assets
Investments
Securities borrowed and purchased under agreements to resell
Loans(1)(2)
Other financial assets(2)(3)
Liabilities
Deposits
Securities loaned and sold under agreements to repurchase
Long-term debt(4)
Other financial liabilities(5)
December 31, 2019
Estimated fair value
Carrying
value
Estimated
fair value
Level 1
Level 2
Level 3
$
86.4 $
87.8 $
1.9 $
83.8 $
98.1
681.2
262.4
98.1
677.7
262.4
—
—
177.6
98.1
4.7
16.3
2.1
—
673.0
68.5
$
1,068.3 $
1,066.7 $
— $
875.5 $
191.2
125.7
193.0
110.2
125.7
203.8
110.2
—
—
—
125.7
187.3
37.5
—
16.5
72.7
December 31, 2018
Estimated fair value
Carrying
value
Estimated
fair value
Level 1
Level 2
Level 3
$
68.9 $
68.5 $
1.0 $
65.4 $
123.0
667.1
249.7
123.0
666.9
250.1
—
—
172.3
121.6
5.6
15.8
2.1
1.4
661.3
62.0
$
1,011.7 $
1,009.5 $
— $
847.1 $
162.4
133.3
193.8
103.8
133.3
193.7
103.8
—
—
—
133.3
178.4
17.2
—
15.3
86.6
(1) The carrying value of loans is net of the Allowance for loan losses of $12.8 billion for December 31, 2019 and $12.3 billion for December 31, 2018. In addition,
the carrying values exclude $1.4 billion and $1.6 billion of lease finance receivables at December 31, 2019 and 2018, respectively.
Includes items measured at fair value on a nonrecurring basis.
(2)
262
(3)
Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverables and other financial instruments included in Other assets
on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.
(4) The carrying value includes long-term debt balances under qualifying fair value hedges.
(5)
Includes brokerage payables, separate and variable accounts, short-term borrowings (carried at cost) and other financial instruments included in Other liabilities
on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.
The estimated fair values of the Company’s corporate
unfunded lending commitments at December 31, 2019 and
2018 were liabilities of $5.1 billion and $7.8 billion,
respectively, substantially all of which are classified as
Level 3. The Company does not estimate the fair values of
consumer unfunded lending commitments, which are
generally cancelable by providing notice to the borrower.
263
25. FAIR VALUE ELECTIONS
The Company may elect to report most financial instruments
and certain other items at fair value on an instrument-by-
instrument basis with changes in fair value reported in
earnings, other than DVA (see below). The election is made
upon the initial recognition of an eligible financial asset,
financial liability or firm commitment or when certain
specified reconsideration events occur. The fair value election
may not otherwise be revoked once an election is made. The
changes in fair value are recorded in current earnings, other
than DVA, which is reported in AOCI. Additional discussion
regarding the applicable areas in which fair value elections
were made is presented in Note 24 to the Consolidated
Financial Statements.
The Company has elected fair value accounting for its
mortgage servicing rights (MSRs). See Note 21 to the
Consolidated Financial Statements for further discussions
regarding the accounting and reporting of MSRs.
The following table presents the changes in fair value of those items for which the fair value option has been elected:
In millions of dollars
Assets
Securities borrowed and purchased under agreements to resell
Trading account assets
Investments
Loans
Certain corporate loans
Certain consumer loans
Total loans
Other assets
MSRs
Certain mortgage loans HFS(1)
Total other assets
Total assets
Liabilities
Interest-bearing deposits
Securities loaned and sold under agreements to repurchase
Trading account liabilities
Short-term borrowings
Long-term debt(2)
Total liabilities
Changes in fair value for the years
ended
December 31,
2019
2018
$
$
$
$
$
$
$
6 $
77
—
(222)
—
(222) $
(84) $
91
7 $
(132) $
(205) $
386
27
(78)
(5,174)
(5,044) $
(6)
(337)
—
(116)
—
(116)
54
38
92
(367)
20
(118)
(13)
150
3,048
3,087
Includes gains (losses) associated with interest rate lock commitments for those loans that have been originated and elected under the fair value option.
(1)
(2) Includes DVA that is included in AOCI. See Notes 19 and 24 to the Consolidated Financial Statements.
264
Own Debt Valuation Adjustments (DVA)
Own debt valuation adjustments are recognized on Citi’s
liabilities for which the fair value option has been elected
using Citi’s credit spreads observed in the bond market.
Changes in fair value of fair value option liabilities related to
changes in Citigroup’s own credit spreads (DVA) are reflected
as a component of AOCI. See Note 1 to the Consolidated
Financial Statements for additional information.
Among other variables, the fair value of liabilities for
which the fair value option has been elected (other than non-
recourse debt and similar liabilities) is impacted by the
narrowing or widening of the Company’s credit spreads.
The estimated changes in the fair value of these non-
derivative liabilities due to such changes in the Company’s
own credit spread (or instrument-specific credit risk) were a
loss of $1,473 million and a gain of $1,415 million for the
years ended December 31, 2019 and 2018, respectively.
Changes in fair value resulting from changes in instrument-
specific credit risk were estimated by incorporating the
Company’s current credit spreads observable in the bond
market into the relevant valuation technique used to value
each liability as described above.
The Fair Value Option for Financial Assets and Financial
Liabilities
Selected Portfolios of Securities Purchased Under
Agreements to Resell, Securities Borrowed, Securities Sold
Under Agreements to Repurchase, Securities Loaned and
Certain Non-Collateralized Short-Term Borrowings
The Company elected the fair value option for certain
portfolios of fixed income securities purchased under
agreements to resell and fixed income securities sold under
agreements to repurchase, securities borrowed, securities
loaned and certain uncollateralized short-term borrowings held
primarily by broker-dealer entities in the United States, the
United Kingdom and Japan. In each case, the election was
made because the related interest rate risk is managed on a
portfolio basis, primarily with offsetting derivative
instruments that are accounted for at fair value through
earnings.
Changes in fair value for transactions in these portfolios
are recorded in Principal transactions. The related interest
revenue and interest expense are measured based on the
contractual rates specified in the transactions and are reported
as Interest revenue and Interest expense in the Consolidated
Statement of Income.
Certain Loans and Other Credit Products
Citigroup has also elected the fair value option for certain
other originated and purchased loans, including certain
unfunded loan products, such as guarantees and letters of
credit, executed by Citigroup’s lending and trading businesses.
None of these credit products are highly leveraged financing
commitments. Significant groups of transactions include loans
and unfunded loan products that are expected to be either sold
or securitized in the near term, or transactions where the
economic risks are hedged with derivative instruments, such
as purchased credit default swaps or total return swaps where
the Company pays the total return on the underlying loans to a
third party. Citigroup has elected the fair value option to
mitigate accounting mismatches in cases where hedge
accounting is complex and to achieve operational
simplifications. Fair value was not elected for most lending
transactions across the Company.
The following table provides information about certain credit products carried at fair value:
In millions of dollars
December 31, 2019
December 31, 2018
Trading assets
Loans
Trading assets
Loans
Carrying amount reported on the Consolidated Balance Sheet
$
8,320 $
4,086 $
10,108 $
3,224
Aggregate unpaid principal balance in excess of (less than) fair value
Balance of non-accrual loans or loans more than 90 days past due
Aggregate unpaid principal balance in excess of (less than) fair value for non-accrual
loans or loans more than 90 days past due
410
—
—
315
1
—
435
—
—
741
1
—
In addition to the amounts reported above, $1,062 million
and $1,137 million of unfunded commitments related to
certain credit products selected for fair value accounting were
outstanding as of December 31, 2019 and 2018, respectively.
265
Certain Investments in Private Equity and Real Estate
Ventures
Citigroup invests in private equity and real estate ventures for
the purpose of earning investment returns and for capital
appreciation. The Company has elected the fair value option
for certain of these ventures, because such investments are
considered similar to many private equity or hedge fund
activities in Citi’s investment companies, which are reported at
fair value. The fair value option brings consistency in the
accounting and evaluation of these investments. All
investments (debt and equity) in such private equity and real
estate entities are accounted for at fair value. These
investments are classified as Investments on Citigroup’s
Consolidated Balance Sheet.
Changes in the fair values of these investments are
classified in Other revenue in the Company’s Consolidated
Statement of Income.
Certain Mortgage Loans Held-for-Sale (HFS)
Citigroup has elected the fair value option for certain
purchased and originated prime fixed-rate and conforming
adjustable-rate first mortgage loans HFS. These loans are
intended for sale or securitization and are hedged with
derivative instruments. The Company has elected the fair
value option to mitigate accounting mismatches in cases
where hedge accounting is complex and to achieve operational
simplifications.
Changes in the fair value of funded and unfunded credit
products are classified in Principal transactions in Citi’s
Consolidated Statement of Income. Related interest revenue is
measured based on the contractual interest rates and reported
as Interest revenue on Trading account assets or loan interest
depending on the balance sheet classifications of the credit
products. The changes in fair value for the years ended
December 31, 2019 and 2018 due to instrument-specific credit
risk totaled to a gain of $95 million and a loss of $27 million,
respectively.
Certain Investments in Unallocated Precious Metals
Citigroup invests in unallocated precious metals accounts
(gold, silver, platinum and palladium) as part of its commodity
and foreign currency trading activities or to economically
hedge certain exposures from issuing structured liabilities.
Under ASC 815, the investment is bifurcated into a debt host
contract and a commodity forward derivative instrument.
Citigroup elects the fair value option for the debt host contract,
and reports the debt host contract within Trading account
assets on the Company’s Consolidated Balance Sheet. The
total carrying amount of debt host contracts across unallocated
precious metals accounts was approximately $0.2 billion and
$0.4 billion at December 31, 2019 and 2018, respectively. The
amounts are expected to fluctuate based on trading activity in
future periods.
As part of its commodity and foreign currency trading
activities, Citi trades unallocated precious metals investments
and executes forward purchase and forward sale derivative
contracts with trading counterparties. When Citi sells an
unallocated precious metals investment, Citi’s receivable from
its depository bank is repaid and Citi derecognizes its
investment in the unallocated precious metal. The forward
purchase or sale contract with the trading counterparty
indexed to unallocated precious metals is accounted for as a
derivative, at fair value through earnings. As of December 31,
2019, there were approximately $7.4 billion and $6.8 billion in
notional amounts of such forward purchase and forward sale
derivative contracts outstanding, respectively.
The following table provides information about certain mortgage loans HFS carried at fair value:
In millions of dollars
Carrying amount reported on the Consolidated Balance Sheet
Aggregate fair value in excess of (less than) unpaid principal balance
Balance of non-accrual loans or loans more than 90 days past due
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days
past due
December 31,
2019
December 31,
2018
$
1,254 $
(31)
1
—
556
21
—
—
The changes in the fair values of these mortgage loans are
reported in Other revenue in the Company’s Consolidated
Statement of Income. There was no net change in fair value
during the years ended December 31, 2019 and 2018 due to
instrument-specific credit risk. Related interest income
continues to be measured based on the contractual interest
rates and reported as Interest revenue in the Consolidated
Statement of Income.
266
Certain Structured Liabilities
The Company has elected the fair value option for certain
structured liabilities whose performance is linked to structured
interest rates, inflation, currency, equity, referenced credit or
commodity risks. The Company elected the fair value option
because these exposures are considered to be trading-related
positions and, therefore, are managed on a fair value basis.
These positions will continue to be classified as debt, deposits
or derivatives (Trading account liabilities) on the Company’s
Consolidated Balance Sheet according to their legal form.
The following table provides information about the carrying value of structured notes, disaggregated by type of embedded derivative
instrument:
In billions of dollars
Interest rate linked
Foreign exchange linked
Equity linked
Commodity linked
Credit linked
Total
December 31, 2019 December 31, 2018
$
$
22.9 $
0.9
21.7
1.8
2.4
49.7 $
17.3
0.5
14.8
1.2
1.9
35.7
The portion of the changes in fair value attributable to
changes in Citigroup’s own credit spreads (DVA) is reflected
as a component of AOCI while all other changes in fair value
are reported in Principal transactions. Changes in the fair
value of these structured liabilities include accrued interest,
which is also included in the change in fair value reported in
Principal transactions.
Certain Non-Structured Liabilities
The Company has elected the fair value option for certain non-
structured liabilities with fixed and floating interest rates. The
Company has elected the fair value option where the interest
rate risk of such liabilities may be economically hedged with
derivative contracts or the proceeds are used to purchase
financial assets that will also be accounted for at fair value
through earnings. The elections have been made to mitigate
accounting mismatches and to achieve operational
simplifications. These positions are reported in Short-term
borrowings and Long-term debt on the Company’s
Consolidated Balance Sheet. The portion of the changes in fair
value attributable to changes in Citigroup’s own credit spreads
(DVA) is reflected as a component of AOCI while all other
changes in fair value are reported in Principal transactions.
Interest expense on non-structured liabilities is measured
based on the contractual interest rates and reported as Interest
expense in the Consolidated Statement of Income.
The following table provides information about long-term debt carried at fair value:
In millions of dollars
Carrying amount reported on the Consolidated Balance Sheet
Aggregate unpaid principal balance in excess of (less than) fair value
December 31, 2019 December 31, 2018
$
55,783 $
(2,967)
38,229
3,814
The following table provides information about short-term borrowings carried at fair value:
In millions of dollars
Carrying amount reported on the Consolidated Balance Sheet
Aggregate unpaid principal balance in excess of (less than) fair value
December 31, 2019 December 31, 2018
$
4,946 $
1,411
4,483
861
267
26. PLEDGED ASSETS, COLLATERAL,
GUARANTEES AND COMMITMENTS
Pledged Assets
In connection with Citi’s financing and trading activities,
Citi has pledged assets to collateralize its obligations under
repurchase agreements, secured financing agreements,
secured liabilities of consolidated VIEs and other
borrowings. The approximate carrying values of the
significant components of pledged assets recognized on
Citi’s Consolidated Balance Sheet included the following:
In millions of dollars
Investment securities
Loans
Trading account assets
Total
December 31,
2019
December 31,
2018
$
$
152,352 $
236,033
132,332
520,717 $
148,756
227,840
120,292
496,888
Restricted Cash
Citigroup defines restricted cash (as cash subject to
withdrawal restrictions) to include cash deposited with
central banks that must be maintained to meet minimum
regulatory requirements, and cash set aside for the benefit of
customers or for other purposes such as compensating
balance arrangements or debt retirement. Restricted cash
includes minimum reserve requirements with the Federal
Reserve Bank and certain other central banks and cash
segregated to satisfy rules regarding the protection of
customer assets as required by Citigroup broker-dealers’
primary regulators, including the United States Securities
and Exchange Commission (SEC), the Commodities Futures
Trading Commission and the United Kingdom’s Prudential
Regulation Authority.
Restricted cash is included on the Consolidated Balance
Sheet within the following balance sheet lines:
In millions of dollars
Cash and due from banks
Deposits with banks
Total
December 31,
2019
December 31,
2018
$
$
3,758 $
26,493
30,251 $
4,000
27,208
31,208
In addition, included in Cash and due from banks and
Deposits with banks at December 31, 2019 and 2018 were
$8.5 billion and $8.3 billion, respectively, of cash segregated
under federal and other brokerage regulations or deposited
with clearing organizations.
Collateral
At December 31, 2019 and 2018, the approximate fair value
of collateral received by Citi that may be resold or
repledged, excluding the impact of allowable netting, was
$569.8 billion and $526.0 billion, respectively. This
collateral was received in connection with resale agreements,
securities borrowings and loans, securities for securities
lending transactions, derivative transactions and margined
broker loans.
At December 31, 2019 and 2018, a substantial portion
of the collateral received by Citi had been sold or repledged
in connection with repurchase agreements, securities sold,
not yet purchased, securities borrowings and loans, pledges
to clearing organizations, segregation requirements under
securities laws and regulations, derivative transactions and
bank loans.
In addition, at December 31, 2019 and 2018, Citi had
pledged $389.8 billion and $373.7 billion, respectively, of
collateral that may not be sold or repledged by the secured
parties.
Leases
The Company’s operating leases, where Citi is a lessee,
include real estate, such as office space and branches, and
various types of equipment. These leases have a weighted-
average remaining lease term of approximately six years as
of December 31, 2019. The operating lease ROU asset and
lease liability were $3.1 billion and $3.3 billion, respectively,
as of December 31, 2019. The Company recognizes fixed
lease costs on a straight-line basis throughout the lease term
in the Consolidated Statement of Income. In addition,
variable lease costs are recognized in the period in which the
obligation for those payments is incurred. The total operating
lease expense (principally for offices, branches and
equipment), net of $56 million of sublease income, was
$1,084 million for the year ended December 31, 2019. The
decrease in the lease liability (and related operating lease
financial information) from January 1, 2019 is primarily
related to the purchase of a previously leased property in
London during the second quarter of 2019. See Note 1 for
additional lease liability details and balances at January 1,
2019. The purchased property is included in Other assets on
the Consolidated Balance Sheet at December 31, 2019.
While Citi has certain finance leases as a lessee, such
leases are not material to the Company's Consolidated
Financial Statements.
Citi’s lease arrangements that have not yet commenced
as of December 31, 2019 and the Company’s short-term
lease, variable lease and finance lease costs, for the year
ended December 31, 2019, are not material to the
Consolidated Financial Statements.
268
Citi’s cash outflows related to operating leases were
$942 million for the year ended December 31, 2019, while
the future lease payments are as follows:
In millions of dollars
2020
2021
2022
2023
2024
Thereafter
Total future lease payments
Less imputed interest (based on weighted-average
discount rate of 3.6%)
Lease liability
$
$
$
$
801
695
572
425
314
935
3,742
(402)
3,340
The minimum annual rent commitments under non-
cancelable leases, net of sublease income, as of
December 31, 2018 prior to the adoption of ASU 2016-02,
were as follows:
In millions of dollars
2019
2020
2021
2022
2023
Thereafter
Total lease commitments
$
$
925
748
657
525
394
1,890
5,139
Operating lease expenses were $1.0 billion and $1.1
billion for the years ended December 31, 2018 and 2017,
respectively.
Guarantees
Citi provides a variety of guarantees and indemnifications to
its customers to enhance their credit standing and enable
them to complete a wide variety of business transactions. For
certain contracts meeting the definition of a guarantee, the
guarantor must recognize, at inception, a liability for the fair
value of the obligation undertaken in issuing the guarantee.
In addition, the guarantor must disclose the maximum
potential amount of future payments that the guarantor could
be required to make under the guarantee, if there were a total
default by the guaranteed parties. The determination of the
maximum potential future payments is based on the notional
amount of the guarantees without consideration of possible
recoveries under recourse provisions or from collateral held
or pledged. As such, Citi believes such amounts bear no
relationship to the anticipated losses, if any, on these
guarantees.
269
The following tables present information about Citi’s guarantees:
In billions of dollars at December 31, 2019
Financial standby letters of credit
Performance guarantees
Derivative instruments considered to be guarantees
Loans sold with recourse
Securities lending indemnifications(1)
Credit card merchant processing(1)(2)
Credit card arrangements with partners
Custody indemnifications and other
Total
In billions of dollars at December 31, 2018
Financial standby letters of credit
Performance guarantees
Derivative instruments considered to be guarantees
Loans sold with recourse
Securities lending indemnifications(1)
Credit card merchant processing(1)(2)
Credit card arrangements with partners
Custody indemnifications and other
Total
Maximum potential amount of future
payments
Expire within
1 year
Expire after
1 year
Total amount
outstanding
Carrying value
(in millions of dollars)
$
31.9 $
62.4 $
94.3 $
6.9
37.5
—
87.8
91.6
0.2
—
5.5
60.1
1.2
—
—
0.4
33.7
12.4
97.6
1.2
87.8
91.6
0.6
33.7
$
255.9 $
163.3 $
419.2 $
140
21
289
7
—
—
23
41
521
Maximum potential amount of future payments
Expire within
1 year
Expire after
1 year
Total amount
outstanding
Carrying value
(in millions of dollars)
$
32.1 $
67.5 $
99.6 $
7.7
23.5
—
98.3
94.7
0.3
—
4.2
87.4
1.2
—
—
0.8
35.4
11.9
110.9
1.2
98.3
94.7
1.1
35.4
$
256.6 $
196.5 $
453.1 $
131
29
567
9
—
—
162
41
939
(1) The carrying values of securities lending indemnifications and credit card merchant processing were not material for either period presented, as the probability
of potential liabilities arising from these guarantees is minimal.
(2) At December 31, 2019 and 2018, this maximum potential exposure was estimated to be $92 billion and $95 billion, respectively. However, Citi believes that
the maximum exposure is not representative of the actual potential loss exposure based on its historical experience. This contingent liability is unlikely to
arise, as most products and services are delivered when purchased and amounts are refunded when items are returned to merchants.
Financial Standby Letters of Credit
Citi issues standby letters of credit, which substitute its own
credit for that of the borrower. If a letter of credit is drawn
down, the borrower is obligated to repay Citi. Standby letters
of credit protect a third party from defaults on contractual
obligations. Financial standby letters of credit include
(i) guarantees of payment of insurance premiums and
reinsurance risks that support industrial revenue bond
underwriting, (ii) settlement of payment obligations to
clearing houses, including futures and over-the-counter
derivatives clearing (see further discussion below),
(iii) support options and purchases of securities in lieu of
escrow deposit accounts and (iv) letters of credit that
backstop loans, credit facilities, promissory notes and trade
acceptances.
Performance Guarantees
Performance guarantees and letters of credit are issued to
guarantee a customer’s tender bid on a construction or
systems-installation project or to guarantee completion of
such projects in accordance with contract terms. They are
also issued to support a customer’s obligation to supply
specified products, commodities or maintenance or warranty
services to a third party.
Derivative Instruments Considered to Be Guarantees
Derivatives are financial instruments whose cash flows are
based on a notional amount and an underlying instrument,
reference credit or index, where there is little or no initial
investment, and whose terms require or permit net
settlement. For a discussion of Citi’s derivatives activities,
see Note 22 to the Consolidated Financial Statements.
Derivative instruments considered to be guarantees
include only those instruments that require Citi to make
payments to the counterparty based on changes in an
underlying instrument that is related to an asset, a liability or
an equity security held by the guaranteed party. More
specifically, derivative instruments considered to be
270
Citi has the right to offset any payments with cash flows
otherwise due to the merchant. To further mitigate this risk,
Citi may delay settlement, require a merchant to make an
escrow deposit, include event triggers to provide Citi with
more financial and operational control in the event of the
financial deterioration of the merchant or require various
credit enhancements (including letters of credit and bank
guarantees). In the unlikely event that a private label
merchant is unable to deliver products, services or a refund
to its private label cardholders, Citi is contingently liable to
credit or refund cardholders.
With regard to (ii) above, Citi has a potential liability for
bank card transactions where Citi provides the transaction
processing services as well as those where a third party
provides the services and Citi acts as a secondary guarantor,
should that processor fail to perform.
Citi’s maximum potential contingent liability related to
both bank card and private label merchant processing
services is estimated to be the total volume of credit card
transactions that meet the requirements to be valid charge-
back transactions at any given time. At December 31, 2019
and 2018, this maximum potential exposure was estimated to
be $91.6 billion and $94.7 billion, respectively.
However, Citi believes that the maximum exposure is
not representative of the actual potential loss exposure based
on its historical experience. This contingent liability is
unlikely to arise, as most products and services are delivered
when purchased and amounts are refunded when items are
returned to merchants. Citi assesses the probability and
amount of its contingent liability related to merchant
processing based on the financial strength of the primary
guarantor, the extent and nature of unresolved charge-backs
and its historical loss experience. At December 31, 2019 and
2018, the losses incurred and the carrying amounts of Citi’s
contingent obligations related to merchant processing
activities were immaterial.
Credit Card Arrangements with Partners
Citi, in certain of its credit card partner arrangements,
provides guarantees to the partner regarding the volume of
certain customer originations during the term of the
agreement. To the extent that such origination targets are not
met, the guarantees serve to compensate the partner for
certain payments that otherwise would have been generated
in connection with such originations.
Custody Indemnifications
Custody indemnifications are issued to guarantee that
custody clients will be made whole in the event that a third-
party subcustodian or depository institution fails to safeguard
clients’ assets.
guarantees include certain over-the-counter written put
options where the counterparty is not a bank, hedge fund or
broker-dealer (such counterparties are considered to be
dealers in these markets and may, therefore, not hold the
underlying instruments). Credit derivatives sold by Citi are
excluded from the tables above as they are disclosed
separately in Note 22 to the Consolidated Financial
Statements. In instances where Citi’s maximum potential
future payment is unlimited, the notional amount of the
contract is disclosed.
Loans Sold with Recourse
Loans sold with recourse represent Citi’s obligations to
reimburse the buyers for loan losses under certain
circumstances. Recourse refers to the clause in a sales
agreement under which a seller/lender will fully reimburse
the buyer/investor for any losses resulting from the
purchased loans. This may be accomplished by the seller
taking back any loans that become delinquent.
In addition to the amounts shown in the tables above,
Citi has recorded a repurchase reserve for its potential
repurchases or make-whole liability regarding residential
mortgage representation and warranty claims related to its
whole loan sales to U.S. government-sponsored agencies
and, to a lesser extent, private investors. The repurchase
reserve was approximately $37 million and $49 million at
December 31, 2019 and 2018, respectively, and these
amounts are included in Other liabilities on the Consolidated
Balance Sheet.
Securities Lending Indemnifications
Owners of securities frequently lend those securities for a fee
to other parties who may sell them short or deliver them to
another party to satisfy some other obligation. Banks may
administer such securities lending programs for their clients.
Securities lending indemnifications are issued by the bank to
guarantee that a securities lending customer will be made
whole in the event that the security borrower does not return
the security subject to the lending agreement and collateral
held is insufficient to cover the market value of the security.
Credit Card Merchant Processing
Credit card merchant processing guarantees represent the
Company’s indirect obligations in connection with
(i) providing transaction processing services to various
merchants with respect to its private label cards and
(ii) potential liability for bank card transaction processing
services. The nature of the liability in either case arises as a
result of a billing dispute between a merchant and a
cardholder that is ultimately resolved in the cardholder’s
favor. The merchant is liable to refund the amount to the
cardholder. In general, if the credit card processing company
is unable to collect this amount from the merchant, the credit
card processing company bears the loss for the amount of the
credit or refund paid to the cardholder.
With regard to (i) above, Citi has the primary contingent
liability with respect to its portfolio of private label
merchants. The risk of loss is mitigated as the cash flows
between Citi and the merchant are settled on a net basis, and
271
Other Guarantees and Indemnifications
Credit Card Protection Programs
Citi, through its credit card businesses, provides various
cardholder protection programs on several of its card
products, including programs that provide insurance
coverage for rental cars, coverage for certain losses
associated with purchased products, price protection for
certain purchases and protection for lost luggage. These
guarantees are not included in the table, since the total
outstanding amount of the guarantees and Citi’s maximum
exposure to loss cannot be quantified. The protection is
limited to certain types of purchases and losses, and it is not
possible to quantify the purchases that would qualify for
these benefits at any given time. Citi assesses the probability
and amount of its potential liability related to these programs
based on the extent and nature of its historical loss
experience. At December 31, 2019 and 2018, the actual and
estimated losses incurred and the carrying value of Citi’s
obligations related to these programs were immaterial.
Other Representation and Warranty Indemnifications
In the normal course of business, Citi provides standard
representations and warranties to counterparties in contracts
in connection with numerous transactions and also provides
indemnifications, including indemnifications that protect the
counterparties to the contracts in the event that additional
taxes are owed, due either to a change in the tax law or an
adverse interpretation of the tax law. Counterparties to these
transactions provide Citi with comparable indemnifications.
While such representations, warranties and indemnifications
are essential components of many contractual relationships,
they do not represent the underlying business purpose for the
transactions. The indemnification clauses are often standard
contractual terms related to Citi’s own performance under
the terms of a contract and are entered into in the normal
course of business based on an assessment that the risk of
loss is remote. Often these clauses are intended to ensure that
terms of a contract are met at inception. No compensation is
received for these standard representations and warranties,
and it is not possible to determine their fair value because
they rarely, if ever, result in a payment. In many cases, there
are no stated or notional amounts included in the
indemnification clauses, and the contingencies potentially
triggering the obligation to indemnify have not occurred and
are not expected to occur. As a result, these indemnifications
are not included in the tables above.
Value-Transfer Networks (Including Exchanges and
Clearing Houses) (VTNs)
Citi is a member of, or shareholder in, hundreds of value-
transfer networks (VTNs) (payment, clearing and settlement
systems as well as exchanges) around the world. As a
condition of membership, many of these VTNs require that
members stand ready to pay a pro rata share of the losses
incurred by the organization due to another member’s default
on its obligations. Citi’s potential obligations may be limited
to its membership interests in the VTNs, contributions to the
VTN’s funds, or, in certain narrow cases, to the full pro rata
share. The maximum exposure is difficult to estimate as this
would require an assessment of claims that have not yet
occurred; however, Citi believes the risk of loss is remote
given historical experience with the VTNs. Accordingly,
Citi’s participation in VTNs is not reported in the guarantees
tables above, and there are no amounts reflected on the
Consolidated Balance Sheet as of December 31, 2019 or
2018 for potential obligations that could arise from Citi’s
involvement with VTN associations.
Long-Term Care Insurance Indemnification
In 2000, Travelers Life & Annuity (Travelers), then a
subsidiary of Citi, entered into a reinsurance agreement to
transfer the risks and rewards of its long-term care (LTC)
business to GE Life (now Genworth Financial Inc., or
Genworth), then a subsidiary of the General Electric
Company (GE). As part of this transaction, the reinsurance
obligations were provided by two regulated insurance
subsidiaries of GE Life, which funded two collateral trusts
with securities. Presently, as discussed below, the trusts are
referred to as the Genworth Trusts.
As part of GE’s spin-off of Genworth in 2004, GE
retained the risks and rewards associated with the 2000
Travelers reinsurance agreement by providing a reinsurance
contract to Genworth through GE’s Union Fidelity Life
Insurance Company (UFLIC) subsidiary that covers the
Travelers LTC policies. In addition, GE provided a capital
maintenance agreement in favor of UFLIC that is designed
to assure that UFLIC will have the funds to pay its
reinsurance obligations. As a result of these reinsurance
agreements and the spin-off of Genworth, Genworth has
reinsurance protection from UFLIC (supported by GE) and
has reinsurance obligations in connection with the Travelers
LTC policies. As noted below, the Genworth reinsurance
obligations now benefit Brighthouse Financial, Inc.
(Brighthouse). While neither Brighthouse nor Citi are direct
beneficiaries of the capital maintenance agreement between
GE and UFLIC, Brighthouse and Citi benefit indirectly from
the existence of the capital maintenance agreement, which
helps assure that UFLIC will continue to have funds
necessary to pay its reinsurance obligations to Genworth.
In connection with Citi’s 2005 sale of Travelers to
MetLife Inc. (MetLife), Citi provided an indemnification to
MetLife for losses (including policyholder claims) relating to
the LTC business for the entire term of the Travelers LTC
policies, which, as noted above, are reinsured by subsidiaries
of Genworth. In 2017, MetLife spun off its retail insurance
business to Brighthouse. As a result, the Travelers LTC
policies now reside with Brighthouse. The original
reinsurance agreement between Travelers (now Brighthouse)
and Genworth remains in place and Brighthouse is the sole
beneficiary of the Genworth Trusts. The fair value of the
Genworth Trusts was approximately $8.6 billion as of
December 31, 2019, compared to approximately $7.5 billion
at December 31, 2018. The Genworth Trusts are designed to
provide collateral to Brighthouse in an amount equal to the
statutory liabilities of Brighthouse in respect of the Travelers
LTC policies. The assets in the Genworth Trusts are
evaluated and adjusted periodically by Genworth to ensure
272
brokers, dealers and clearing organizations) or Cash and due
from banks, respectively.
However, for exchange-traded and OTC-cleared
derivatives contracts where Citi does not obtain benefits
from or control the client cash balances, the client cash
initial margin collected from clients and remitted to the CCP
or depository institutions is not reflected on Citi’s
Consolidated Balance Sheet. These conditions are met when
Citi has contractually agreed with the client that (i) Citi will
pass through to the client all interest paid by the CCP or
depository institutions on the cash initial margin, (ii) Citi
will not utilize its right as a clearing member to transform
cash margin into other assets, (iii) Citi does not guarantee
and is not liable to the client for the performance of the CCP
or the depository institution and (iv) the client cash balances
are legally isolated from Citi’s bankruptcy estate. The total
amount of cash initial margin collected and remitted in this
manner was approximately $13.3 billion and $13.8 billion as
of December 31, 2019 and 2018, respectively.
Variation margin due from clients to the respective CCP,
or from the CCP to clients, reflects changes in the value of
the client’s derivative contracts for each trading day. As a
clearing member, Citi is exposed to the risk of non-
performance by clients (e.g., failure of a client to post
variation margin to the CCP for negative changes in the
value of the client’s derivative contracts). In the event of
non-performance by a client, Citi would move to close out
the client’s positions. The CCP would typically utilize initial
margin posted by the client and held by the CCP, with any
remaining shortfalls required to be paid by Citi as clearing
member. Citi generally holds incremental cash or securities
margin posted by the client, which would typically be
expected to be sufficient to mitigate Citi’s credit risk in the
event that the client fails to perform.
As required by ASC 860-30-25-5, securities collateral
posted by clients is not recognized on Citi’s Consolidated
Balance Sheet.
that the fair value of the assets continues to provide
collateral in an amount equal to these estimated statutory
liabilities, as the liabilities change over time.
If both (i) Genworth fails to perform under the original
Travelers/GE Life reinsurance agreement for any reason,
including its insolvency or the failure of UFLIC to perform
under its reinsurance contract or GE to perform under the
capital maintenance agreement, and (ii) the assets of the two
Genworth Trusts are insufficient or unavailable, then Citi,
through its LTC reinsurance indemnification, must reimburse
Brighthouse for any losses incurred in connection with the
LTC policies. Since both events would have to occur before
Citi would become responsible for any payment to
Brighthouse pursuant to its indemnification obligation, and
the likelihood of such events occurring is currently not
probable, there is no liability reflected on the Consolidated
Balance Sheet as of December 31, 2019 and 2018 related to
this indemnification. However, if both events become
reasonably possible (meaning more than remote but less than
probable), Citi will be required to estimate and disclose a
reasonably possible loss or range of loss to the extent that
such an estimate could be made. In addition, if both events
become probable, Citi will be required to accrue for such
liability in accordance with applicable accounting principles.
Citi continues to closely monitor its potential exposure
under the Brighthouse indemnification obligation, given
GE’s 2018 LTC and other charges and the September 2019
AM Best credit ratings downgrade for the two Genworth
insurance subsidiaries.
Separately, Genworth announced that it had agreed to be
purchased by China Oceanwide Holdings Co., Ltd, subject to
a series of conditions and regulatory approvals. Citi is
monitoring these developments.
Futures and Over-the-Counter Derivatives Clearing
Citi provides clearing services on central clearing parties
(CCPs) for clients that need to clear exchange-traded and
over-the-counter (OTC) derivatives contracts with CCPs.
Based on all relevant facts and circumstances, Citi has
concluded that it acts as an agent for accounting purposes in
its role as clearing member for these client transactions. As
such, Citi does not reflect the underlying exchange-traded or
OTC derivatives contracts in its Consolidated Financial
Statements. See Note 22 for a discussion of Citi’s derivatives
activities that are reflected in its Consolidated Financial
Statements.
As a clearing member, Citi collects and remits cash and
securities collateral (margin) between its clients and the
respective CCP. In certain circumstances, Citi collects a
higher amount of cash (or securities) from its clients than it
needs to remit to the CCPs. This excess cash is then held at
depository institutions such as banks or carry brokers.
There are two types of margin: initial and variation.
Where Citi obtains benefits from or controls cash initial
margin (e.g., retains an interest spread), cash initial margin
collected from clients and remitted to the CCP or depository
institutions is reflected within Brokerage payables (payables
to customers) and Brokerage receivables (receivables from
273
Carrying Value—Guarantees and Indemnifications
At December 31, 2019 and 2018, the total carrying amounts
of the liabilities related to the guarantees and
indemnifications included in the tables above amounted to
approximately $0.5 billion and $0.9 billion, respectively. The
carrying value of financial and performance guarantees is
included in Other liabilities. For loans sold with recourse,
the carrying value of the liability is included in Other
liabilities.
Collateral
Cash collateral available to Citi to reimburse losses realized
under these guarantees and indemnifications amounted to
$46.7 billion and $38.0 billion at December 31, 2019 and
2018, respectively. Securities and other marketable assets
held as collateral amounted to $45.8 billion and $54.7 billion
at December 31, 2019 and 2018, respectively. The majority
of collateral is held to reimburse losses realized under
securities lending indemnifications. In addition, letters of
credit in favor of Citi held as collateral amounted to $4.4
billion and $4.1 billion at December 31, 2019 and 2018,
respectively. Other property may also be available to Citi to
cover losses under certain guarantees and indemnifications;
however, the value of such property has not been
determined.
Performance Risk
Citi evaluates the performance risk of its guarantees based
on the assigned referenced counterparty internal or external
ratings. Where external ratings are used, investment-grade
ratings are considered to be Baa/BBB and above, while
anything below is considered non-investment grade. Citi’s
internal ratings are in line with the related external rating
system. On certain underlying referenced assets or entities,
ratings are not available. Such referenced assets are included
in the “not rated” category. The maximum potential amount
of the future payments related to the outstanding guarantees
is determined to be the notional amount of these contracts,
which is the par amount of the assets guaranteed.
Presented in the tables below are the maximum potential
amounts of future payments that are classified based upon
internal and external credit ratings. The determination of the
maximum potential future payments is based on the notional
amount of the guarantees without consideration of possible
recoveries under recourse provisions or from collateral held
or pledged. As such, Citi believes such amounts bear no
relationship to the anticipated losses, if any, on these
guarantees.
In billions of dollars at December 31, 2019
Financial standby letters of credit
Performance guarantees
Derivative instruments deemed to be guarantees
Loans sold with recourse
Securities lending indemnifications
Credit card merchant processing
Credit card arrangements with partners
Custody indemnifications and other
Total
In billions of dollars at December 31, 2018
Financial standby letters of credit
Performance guarantees
Derivative instruments deemed to be guarantees
Loans sold with recourse
Securities lending indemnifications
Credit card merchant processing
Credit card arrangements with partners
Custody indemnifications and other
Total
Maximum potential amount of future payments
Investment
grade
Non-
investment
grade
Not
rated
Total
$
66.4 $
12.5 $
15.4 $
294.6 $
419.2
Maximum potential amount of future payments
Investment
grade
Non-
investment
grade
Not
rated
Total
71.3 $
11.9 $
16.4 $
9.7
—
—
—
—
—
2.3
—
—
—
—
—
21.3
97.4 $
12.4
27.2 $
9.2
—
—
—
—
—
2.1
—
—
—
—
—
22.2
102.7 $
13.2
27.2 $
0.4
97.6
1.2
87.8
91.6
0.6
—
0.6
110.9
1.2
98.3
94.7
1.1
—
94.3
12.4
97.6
1.2
87.8
91.6
0.6
33.7
99.6
11.9
110.9
1.2
98.3
94.7
1.1
35.4
323.2 $
453.1
$
$
$
274
Credit Commitments and Lines of Credit
The table below summarizes Citigroup’s credit commitments:
In millions of dollars
Commercial and similar letters of credit
One- to four-family residential mortgages
Revolving open-end loans secured by one- to four-family residential
properties
Commercial real estate, construction and land development
Credit card lines
Commercial and other consumer loan commitments
Other commitments and contingencies
Total
The majority of unused commitments are contingent
upon customers maintaining specific credit standards.
Commercial commitments generally have floating interest
rates and fixed expiration dates and may require payment of
fees. Such fees (net of certain direct costs) are deferred and,
upon exercise of the commitment, amortized over the life of
the loan or, if exercise is deemed remote, amortized over the
commitment period.
Commercial and Similar Letters of Credit
A commercial letter of credit is an instrument by which
Citigroup substitutes its credit for that of a customer to
enable the customer to finance the purchase of goods or to
incur other commitments. Citigroup issues a letter on behalf
of its client to a supplier and agrees to pay the supplier upon
presentation of documentary evidence that the supplier has
performed in accordance with the terms of the letter of
credit. When a letter of credit is drawn, the customer is then
required to reimburse Citigroup.
One- to Four-Family Residential Mortgages
A one- to four-family residential mortgage commitment is a
written confirmation from Citigroup to a seller of a property
that the bank will advance the specified sums enabling the
buyer to complete the purchase.
Revolving Open-End Loans Secured by One- to Four-
Family Residential Properties
Revolving open-end loans secured by one- to four-family
residential properties are essentially home equity lines of
credit. A home equity line of credit is a loan secured by a
primary residence or second home to the extent of the excess
of fair market value over the debt outstanding for the first
mortgage.
Commercial Real Estate, Construction and Land
Development
Commercial real estate, construction and land development
include unused portions of commitments to extend credit for
the purpose of financing commercial and multifamily
residential properties as well as land development projects.
Both secured-by-real-estate and unsecured
commitments are included in this line, as well as
U.S.
Outside of
U.S.
December 31,
2019
December 31,
2018
746 $
2,088
3,787 $
1,633
4,533 $
3,721
5,461
2,671
9,511
10,623
609,866
212,569
1,852
847,255 $
1,288
2,358
98,157
111,790
96
219,109 $
10,799
12,981
708,023
324,359
1,948
1,066,364 $
11,374
11,293
696,007
300,115
3,321
1,030,242
$
$
undistributed loan proceeds, where there is an obligation to
advance for construction progress payments. However, this
line only includes those extensions of credit that, once
funded, will be classified as Total loans, net on the
Consolidated Balance Sheet.
Credit Card Lines
Citigroup provides credit to customers by issuing credit
cards. The credit card lines are cancelable by providing
notice to the cardholder or without such notice as permitted
by local law.
Commercial and Other Consumer Loan Commitments
Commercial and other consumer loan commitments include
overdraft and liquidity facilities as well as commercial
commitments to make or purchase loans, purchase third-
party receivables, provide note issuance or revolving
underwriting facilities and invest in the form of equity.
Other Commitments and Contingencies
Other commitments and contingencies include all other
transactions related to commitments and contingencies not
reported on the lines above.
Unsettled Reverse Repurchase and Securities Borrowing
Agreements and Unsettled Repurchase and Securities
Lending Agreements
In addition, in the normal course of business, Citigroup
enters into reverse repurchase and securities borrowing
agreements, as well as repurchase and securities lending
agreements, which settle at a future date. At December 31,
2019 and 2018, Citigroup had approximately $34.0 billion
and $36.1 billion in unsettled reverse repurchase and
securities borrowing agreements, respectively, and $38.7
billion and $30.7 billion in unsettled repurchase and
securities lending agreements, respectively. For a further
discussion of securities purchased under agreements to resell
and securities borrowed, and securities sold under
agreements to repurchase and securities loaned, including
the Company’s policy for offsetting repurchase and reverse
repurchase agreements, see Note 11 to the Consolidated
Financial Statements.
275
27. CONTINGENCIES
Accounting and Disclosure Framework
ASC 450 governs the disclosure and recognition of loss
contingencies, including potential losses from litigation,
regulatory, tax and other matters. ASC 450 defines a “loss
contingency” as “an existing condition, situation, or set of
circumstances involving uncertainty as to possible loss to an
entity that will ultimately be resolved when one or more
future events occur or fail to occur.” It imposes different
requirements for the recognition and disclosure of loss
contingencies based on the likelihood of occurrence of the
contingent future event or events. It distinguishes among
degrees of likelihood using the following three terms:
“probable,” meaning that “the future event or events are
likely to occur”; “remote,” meaning that “the chance of the
future event or events occurring is slight”; and “reasonably
possible,” meaning that “the chance of the future event or
events occurring is more than remote but less than likely.”
These three terms are used below as defined in ASC 450.
Accruals. ASC 450 requires accrual for a loss
contingency when it is “probable that one or more future
events will occur confirming the fact of loss” and “the amount
of the loss can be reasonably estimated.” In accordance with
ASC 450, Citigroup establishes accruals for contingencies,
including the litigation, regulatory and tax matters disclosed
herein, when Citigroup believes it is probable that a loss has
been incurred and the amount of the loss can be reasonably
estimated. When the reasonable estimate of the loss is within a
range of amounts, the minimum amount of the range is
accrued, unless some higher amount within the range is a
better estimate than any other amount within the range. Once
established, accruals are adjusted from time to time, as
appropriate, in light of additional information. The amount of
loss ultimately incurred in relation to those matters may be
substantially higher or lower than the amounts accrued for
those matters.
Disclosure. ASC 450 requires disclosure of a loss
contingency if “there is at least a reasonable possibility that a
loss or an additional loss may have been incurred” and there is
no accrual for the loss because the conditions described above
are not met or an exposure to loss exists in excess of the
amount accrued. In accordance with ASC 450, if Citigroup has
not accrued for a matter because Citigroup believes that a loss
is reasonably possible but not probable, or that a loss is
probable but not reasonably estimable, and the reasonably
possible loss is material, it discloses the loss contingency. In
addition, Citigroup discloses matters for which it has accrued
if it believes a reasonably possible exposure to material loss
exists in excess of the amount accrued. In accordance with
ASC 450, Citigroup’s disclosure includes an estimate of the
reasonably possible loss or range of loss for those matters as to
which an estimate can be made. ASC 450 does not require
disclosure of an estimate of the reasonably possible loss or
range of loss where an estimate cannot be made. Neither
accrual nor disclosure is required for losses that are deemed
remote.
Litigation, Regulatory and Other Contingencies
Overview. In addition to the matters described below, in the
ordinary course of business, Citigroup, its affiliates and
subsidiaries, and current and former officers, directors and
employees (for purposes of this section, sometimes
collectively referred to as Citigroup and Related Parties)
routinely are named as defendants in, or as parties to, various
legal actions and proceedings. Certain of these actions and
proceedings assert claims or seek relief in connection with
alleged violations of consumer protection, fair lending,
securities, banking, antifraud, antitrust, anti-money
laundering, employment and other statutory and common
laws. Certain of these actual or threatened legal actions and
proceedings include claims for substantial or indeterminate
compensatory or punitive damages, or for injunctive relief,
and in some instances seek recovery on a class-wide basis.
In the ordinary course of business, Citigroup and Related
Parties also are subject to governmental and regulatory
examinations, information-gathering requests, investigations
and proceedings (both formal and informal), certain of which
may result in adverse judgments, settlements, fines, penalties,
restitution, disgorgement, injunctions or other relief. In
addition, certain affiliates and subsidiaries of Citigroup are
banks, registered broker-dealers, futures commission
merchants, investment advisors or other regulated entities and,
in those capacities, are subject to regulation by various U.S.,
state and foreign securities, banking, commodity futures,
consumer protection and other regulators. In connection with
formal and informal inquiries by these regulators, Citigroup
and such affiliates and subsidiaries receive numerous requests,
subpoenas and orders seeking documents, testimony and other
information in connection with various aspects of their
regulated activities. From time to time Citigroup and Related
Parties also receive grand jury subpoenas and other requests
for information or assistance, formal or informal, from federal
or state law enforcement agencies including, among others,
various United States Attorneys’ Offices, the Asset Forfeiture
and Money Laundering Section and other divisions of the
Department of Justice, the Financial Crimes Enforcement
Network of the United States Department of the Treasury, and
the Federal Bureau of Investigation relating to Citigroup and
its customers.
Because of the global scope of Citigroup’s operations,
and its presence in countries around the world, Citigroup and
Related Parties are subject to litigation and governmental and
regulatory examinations, information-gathering requests,
investigations and proceedings (both formal and informal) in
multiple jurisdictions with legal, regulatory and tax regimes
that may differ substantially, and present substantially
different risks, from those Citigroup and Related Parties are
subject to in the United States. In some instances, Citigroup
and Related Parties may be involved in proceedings involving
the same subject matter in multiple jurisdictions, which may
result in overlapping, cumulative or inconsistent outcomes.
Citigroup seeks to resolve all litigation, regulatory, tax
and other matters in the manner management believes is in
the best interests of Citigroup and its shareholders, and
contests liability, allegations of wrongdoing and, where
276
applicable, the amount of damages or scope of any penalties
or other relief sought as appropriate in each pending matter.
Inherent Uncertainty of the Matters Disclosed. Certain of
the matters disclosed below involve claims for substantial or
indeterminate damages. The claims asserted in these matters
typically are broad, often spanning a multi-year period and
sometimes a wide range of business activities, and the
plaintiffs’ or claimants’ alleged damages frequently are not
quantified or factually supported in the complaint or statement
of claim. Other matters relate to regulatory investigations or
proceedings, as to which there may be no objective basis for
quantifying the range of potential fine, penalty or other
remedy. As a result, Citigroup is often unable to estimate the
loss in such matters, even if it believes that a loss is probable
or reasonably possible, until developments in the case,
proceeding or investigation have yielded additional
information sufficient to support a quantitative assessment of
the range of reasonably possible loss. Such developments may
include, among other things, discovery from adverse parties or
third parties, rulings by the court on key issues, analysis by
retained experts and engagement in settlement negotiations.
Depending on a range of factors, such as the complexity of the
facts, the novelty of the legal theories, the pace of discovery,
the court’s scheduling order, the timing of court decisions and
the adverse party’s, regulator’s or other authority’s willingness
to negotiate in good faith toward a resolution, it may be
months or years after the filing of a case or commencement of
a proceeding or an investigation before an estimate of the
range of reasonably possible loss can be made.
Matters as to Which an Estimate Can Be Made. For some
of the matters disclosed below, Citigroup is currently able to
estimate a reasonably possible loss or range of loss in excess
of amounts accrued (if any). For some of the matters included
within this estimation, an accrual has been made because a
loss is believed to be both probable and reasonably estimable,
but an exposure to loss exists in excess of the amount accrued.
In these cases, the estimate reflects the reasonably possible
range of loss in excess of the accrued amount. For other
matters included within this estimation, no accrual has been
made because a loss, although estimable, is believed to be
reasonably possible, but not probable; in these cases, the
estimate reflects the reasonably possible loss or range of loss.
As of December 31, 2019, Citigroup estimates that the
reasonably possible unaccrued loss for these matters ranges up
to approximately $1.3 billion in the aggregate.
These estimates are based on currently available
information. As available information changes, the matters for
which Citigroup is able to estimate will change, and the
estimates themselves will change. In addition, while many
estimates presented in financial statements and other financial
disclosures involve significant judgment and may be subject
to significant uncertainty, estimates of the range of reasonably
possible loss arising from litigation and regulatory
proceedings are subject to particular uncertainties. For
example, at the time of making an estimate, (i) Citigroup may
have only preliminary, incomplete, or inaccurate information
about the facts underlying the claim, (ii) its assumptions about
the future rulings of the court, other tribunal or authority on
significant issues, or the behavior and incentives of adverse
277
parties, regulators or other authorities, may prove to be wrong
and (iii) the outcomes it is attempting to predict are often not
amenable to the use of statistical or other quantitative
analytical tools. In addition, from time to time an outcome
may occur that Citigroup had not accounted for in its estimate
because it had deemed such an outcome to be remote. For all
of these reasons, the amount of loss in excess of accruals
ultimately incurred for the matters as to which an estimate has
been made could be substantially higher or lower than the
range of loss included in the estimate.
Matters as to Which an Estimate Cannot Be Made. For
other matters disclosed below, Citigroup is not currently able
to estimate the reasonably possible loss or range of loss. Many
of these matters remain in very preliminary stages (even in
some cases where a substantial period of time has passed
since the commencement of the matter), with few or no
substantive legal decisions by the court, tribunal or other
authority defining the scope of the claims, the class (if any) or
the potentially available damages or other exposure, and fact
discovery is still in progress or has not yet begun. In many of
these matters, Citigroup has not yet answered the complaint or
statement of claim or asserted its defenses, nor has it engaged
in any negotiations with the adverse party (whether a
regulator, taxing authority or a private party). For all these
reasons, Citigroup cannot at this time estimate the reasonably
possible loss or range of loss, if any, for these matters.
Opinion of Management as to Eventual Outcome. Subject
to the foregoing, it is the opinion of Citigroup’s management,
based on current knowledge and after taking into account its
current legal or other accruals, that the eventual outcome of all
matters described in this Note would not be likely to have a
material adverse effect on the consolidated financial condition
of Citigroup. Nonetheless, given the substantial or
indeterminate amounts sought in certain of these matters, and
the inherent unpredictability of such matters, an adverse
outcome in certain of these matters could, from time to time,
have a material adverse effect on Citigroup’s consolidated
results of operations or cash flows in particular quarterly or
annual periods.
ANZ Underwriting Matter
In June 2018, the Australian Commonwealth Director of
Public Prosecutions (CDPP) filed charges against Citigroup
Global Markets Australia Pty Limited (CGMA) for alleged
criminal cartel offenses following a referral by the Australian
Competition and Consumer Commission. CDPP alleges that
the cartel conduct took place following an institutional share
placement by Australia and New Zealand Banking Group
Limited (ANZ) in August 2015, where CGMA acted as joint
underwriter and lead manager with other banks. CDPP also
charged other banks and individuals, including current and
former Citi employees. Separately, the Australian Securities
and Investments Commission is conducting an investigation,
and CGMA is cooperating with the investigation. Charges
relating to CGMA are captioned R v. CITIGROUP GLOBAL
MARKETS AUSTRALIA PTY LIMITED. The matter is
before the Downing Centre Local Court in Sydney,
Australia. Additional information concerning this action is
publicly available in court filings under the docket number
2018/00175168.
Foreign Exchange Matters
Regulatory Actions: Government and regulatory agencies in
the U.S. and in other jurisdictions are conducting
investigations or making inquiries regarding Citigroup’s
foreign exchange business. Citigroup is cooperating with these
and related investigations and inquiries.
Antitrust and Other Litigation: In 2018, a number of
institutional investors who opted out of the previously
disclosed August 2018 final settlement filed an action against
Citigroup, Citibank, CGMI and other defendants, captioned
ALLIANZ GLOBAL INVESTORS, ET AL. v. BANK OF
AMERICA CORP., ET AL., in the United States District Court
for the Southern District of New York. Plaintiffs allege that
defendants manipulated, and colluded to manipulate, the
foreign exchange markets. Plaintiffs assert claims under the
Sherman Act and unjust enrichment claims, and seek
consequential and punitive damages and other forms of relief.
In July 2019, defendants moved to dismiss plaintiffs’ second
amended complaint. Additional information concerning this
action is publicly available in court filings under the docket
number 18 Civ. 10364 (S.D.N.Y.) (Schofield, J.).
In December 2018, a group of institutional investors
issued a claim against Citibank, Citigroup and other
defendants, captioned ALLIANZ GLOBAL INVESTORS
GMBH AND OTHERS v. BARCLAYS BANK PLC AND
OTHERS, in the High Court in London. Claimants allege that
defendants manipulated, and colluded to manipulate, the
foreign exchange market in violation of EU and U.K.
competition laws. In July 2019, defendants responded to
plaintiffs’ claims, and in September 2019, claimants filed their
reply. Additional information concerning this action is
publicly available in court filings under the docket number
CL-2018-000840.
In 2015, a putative class of consumers and businesses in
the United States who directly purchased supracompetitive
foreign currency at benchmark exchange rates filed an action
against Citigroup and other defendants, captioned NYPL v.
JPMORGAN CHASE & CO., ET AL., in the United States
District Court for the Northern District of California.
Subsequently, plaintiffs filed a third amended class action
complaint, naming Citigroup, Citibank and Citicorp as
defendants. Plaintiffs allege that they suffered losses as a
result of defendants’ alleged manipulation of, and collusion
with respect to, the foreign exchange market. Plaintiffs assert
claims under federal and California antitrust and consumer
protection laws, and seek compensatory damages, treble
damages and declaratory and injunctive relief. Additional
information concerning this action is publicly available in
court filings under the docket numbers 15 Civ. 2290 (N.D.
Cal.) (Chhabria, J.) and 15 Civ. 9300 (S.D.N.Y.) (Schofield,
J.).
In 2017, putative classes of indirect purchasers of certain
foreign exchange instruments filed an action against
Citigroup, Citibank, Citicorp, CGMI and other defendants,
captioned CONTANT, ET AL. v. BANK OF AMERICA
CORP., ET AL., in the United States District Court for the
278
Southern District of New York. Plaintiffs allege that
defendants engaged in a conspiracy to fix currency prices.
Plaintiffs assert claims under the Sherman Act and various
state antitrust laws, and seek compensatory damages and
treble damages. In July 2019, the court granted preliminary
approval of a settlement between plaintiffs and Citigroup,
Citibank, Citicorp and CGMI. Additional information
concerning this action is publicly available in court filings
under the docket number 17 Civ. 3139 (S.D.N.Y.) (Schofield,
J.).
On May 27, 2019, a putative class action was filed against
Citibank and other defendants, captioned J WISBEY &
ASSOCIATES PTY LTD v. UBS AG & ORS, in the Federal
Court of Australia. Plaintiffs allege that defendants
manipulated the foreign exchange markets. Plaintiffs assert
claims under antitrust laws, and seek compensatory damages
and declaratory and injunctive relief. Additional information
concerning this action is publicly available in court filings
under the docket number VID567/2019.
On July 29, 2019, an application, captioned MICHAEL
O’HIGGINS FX CLASS REPRESENTATIVE LIMITED v.
BARCLAYS BANK PLC AND OTHERS, was made to the
U.K.’s Competition Appeal Tribunal requesting permission to
commence collective proceedings against Citibank, Citigroup
and other defendants. The application seeks compensatory
damages for losses alleged to have arisen from the actions at
issue in the European Commission’s foreign exchange spot
trading infringement decision (European Commission
Decision of May 16, 2019 in Case AT.40135-FOREX (Three
Way Banana Split) C(2019) 3631 final). Additional
information concerning this action is publicly available in
court filings under the docket number 1329/7/7/19.
On December 20, 2019, an application, captioned
PHILLIP EVANS v. BARCLAYS BANK PLC AND
OTHERS, was made to the U.K.’s Competition Appeal
Tribunal requesting permission to commence collective
proceedings against Citibank, Citigroup and other defendants.
The application seeks compensatory damages similar to those
in the Michael O’Higgins FX Class Representative Limited
application. Additional information concerning this action is
publicly available in court filings under the docket number
1336/7/7/19.
In September 2019, two motions for certification of class
actions filed against Citibank, Citigroup and Citicorp and
other defendants were consolidated, under the caption
GERTLER, ET AL. v. DEUTSCHE BANK AG, in the Tel
Aviv Central District Court in Israel. Plaintiffs allege that
defendants manipulated the foreign exchange markets. The
amended motion for certification has not yet been served on
Citigroup or Citicorp. Additional information concerning this
action is publicly available in court filings under the docket
number CA 29013-09-18.
Interbank Offered Rates-Related Litigation and Other
Matters
Antitrust and Other Litigation: In 2016, a putative class action
was filed against Citibank, Citigroup and other defendants,
now captioned FUND LIQUIDATION HOLDINGS LLC, AS
ASSIGNOR AND SUCCESSOR-IN-INTEREST TO
FRONTPOINT ASIAN EVENT DRIVEN FUND L.P., ET
AL. v. CITIBANK, N.A., ET AL., in the United States District
Court for the Southern District of New York. Plaintiffs allege
that defendants manipulated the Singapore Interbank Offered
Rate and Singapore Swap Offer Rate. Plaintiffs assert claims
under the Sherman Act, the Clayton Act, the RICO Act and
state law. In May 2018, plaintiffs entered into a settlement
with Citibank and Citigroup, under which Citibank and
Citigroup agreed to pay approximately $10 million. In July
2019, the court found that it lacked subject-matter jurisdiction
over the non-settling defendants and dismissed the case. The
court also found that it lacked jurisdiction to approve the
settlement and denied plaintiffs’ motion for preliminary
approval of the settlement. In August 2019, plaintiffs filed a
notice of appeal with the United States Court of Appeals for
the Second Circuit. Additional information concerning this
action is publicly available in court filings under the docket
numbers 16 Civ. 5263 (S.D.N.Y.) (Hellerstein, J.) and 19-2719
(2d Cir.).
In 2016, Banque Delubac filed an action against
Citigroup, Citigroup Global Markets Limited (CGML) and
Citigroup Europe Plc, captioned SCS BANQUE DELUBAC
& CIE v. CITIGROUP INC., ET AL., in the Commercial
Court of Aubenas in France. Plaintiff alleges that defendants
suppressed LIBOR submissions between 2005 and 2012 and
that Banque Delubac’s EURIBOR-linked lending activity was
negatively impacted as a result. Plaintiff asserts a claim under
tort law, and seeks compensatory damages and consequential
damages. In November 2018, the Commercial Court of
Aubenas referred the case to the Commercial Court of
Marseille. In March 2019, the Court of Appeal of Nîmes held
that neither the Commercial Court of Aubenas nor any other
court of France has territorial jurisdiction over Banque
Delubac’s claims. In May 2019, plaintiff filed an appeal before
the Cour de cassation of France challenging the Court of
Appeal of Nîmes’s decision. Additional information
concerning this action is publicly available in court filings
under docket numbers RG no. 2018F02750 in the Commercial
Court of Marseille and 19-16.931 in the Cour de cassation.
In May 2019, three putative class actions filed against
Citigroup, Citibank, CGMI and other defendants were
consolidated, under the caption IN RE ICE LIBOR
ANTITRUST LITIGATION, in the United States District
Court of the Southern District of New York. In July 2019,
Plaintiffs filed a consolidated amended complaint. Plaintiffs
allege that defendants suppressed ICE LIBOR. Plaintiffs assert
claims under the Sherman Act, the Clayton Act and unjust
enrichment, and seek compensatory damages, disgorgement
and treble damages. In August 2019, defendants moved to
dismiss the action. Additional information concerning this
action is publicly available in court filings under the docket
number 19 Civ. 439 (S.D.N.Y.) (Daniels, J.).
Interchange Fee Litigation
Beginning in 2005, several putative class actions were filed
against Citigroup, Citibank and Citicorp, together with Visa,
MasterCard and other banks and their affiliates, in various
federal district courts and consolidated with other related
individual cases in a multi-district litigation proceeding in the
279
United States District Court for the Eastern District of New
York. This proceeding is captioned IN RE PAYMENT CARD
INTERCHANGE FEE AND MERCHANT DISCOUNT
ANTITRUST LITIGATION.
The plaintiffs, merchants that accept Visa and
MasterCard branded payment cards as well as various
membership associations that claim to represent certain groups
of merchants, allege, among other things, that defendants have
engaged in conspiracies to set the price of interchange and
merchant discount fees on credit and debit card transactions
and to restrain trade unreasonably through various Visa and
MasterCard rules governing merchant conduct, all in violation
of Section 1 of the Sherman Act and certain California
statutes. Plaintiffs further alleged violations of Section 2 of the
Sherman Act. Supplemental complaints also were filed against
defendants in the putative class actions alleging that Visa’s and
MasterCard’s respective initial public offerings were
anticompetitive and violated Section 7 of the Clayton Act, and
that MasterCard’s initial public offering constituted a
fraudulent conveyance.
In 2014, the district court entered a final judgment
approving the terms of a class settlement providing for, among
other things, cash payment to the class of $6.05 billion; a
rebate to merchants participating in the damages class
settlement of 10 bps on interchange collected for a period of
eight months by the Visa and MasterCard networks; and
changes to certain network rules. Various objectors appealed
from the final class settlement approval order to the United
States Court of Appeals for the Second Circuit.
In 2016, the Court of Appeals reversed the district court’s
approval of the class settlement and remanded for further
proceedings. The district court thereafter appointed separate
interim counsel for a putative class seeking damages and a
putative class seeking injunctive relief. Amended or new
complaints on behalf of the putative classes and various
individual merchants were subsequently filed, including a
further amended complaint on behalf of a putative damages
class and a new complaint on behalf of a putative injunctive
class, both of which named Citigroup and Related Parties. In
addition, numerous merchants have filed amended or new
complaints against Visa, MasterCard, and in some instances
one or more issuing banks. Three of these suits—7-ELEVEN,
INC., ET AL. v. VISA INC., ET AL.; ROUNDY’S
SUPERMARKETS, INC. v. VISA INC. ET AL.; and LUBY’S
FUDDRUCKERS RESTAURANTS, LLC, v. VISA INC., ET
AL—brought on behalf of numerous individual merchants,
name Citigroup and affiliates as defendants.
On December 13, 2019, the district court granted the
damages class plaintiffs’ motion for final approval of a new
settlement with the defendants. The settlement involves the
damages class only and does not settle the claims of the
injunctive relief class or any actions brought on a non-class
basis by individual merchants. The settlement provides for a
cash payment to the damages class of $6.24 billion, though
that amount has been reduced by $700 million based on the
transaction volume of class members that opted-out from the
settlement. Several merchants and merchant groups have
appealed the final approval order. Additional information
concerning these consolidated actions is publicly available in
court filings under the docket number MDL 05-1720
(E.D.N.Y.) (Brodie, J.).
Interest Rate and Credit Default Swap Matters
Regulatory Actions: The Commodity Futures Trading
Commission (CFTC) is conducting an investigation into
alleged anticompetitive conduct in the trading and clearing of
interest rate swaps (IRS) by investment banks. Citigroup is
cooperating with the investigation.
Antitrust and Other Litigation: Beginning in 2015,
Citigroup, Citibank, CGMI, CGML, and numerous other
parties were named as defendants in a number of industry-
wide putative class actions related to IRS trading. These
actions have been consolidated in the United States District
Court for the Southern District of New York under the caption
IN RE INTEREST RATE SWAPS ANTITRUST
LITIGATION. The complaints allege that defendants colluded
to prevent the development of exchange-like trading for IRS
and assert federal and state antitrust claims and claims for
unjust enrichment. Also consolidated under the same caption
are individual actions filed by swap execution facilities,
asserting federal and state antitrust claims, as well as claims
for unjust enrichment and tortious interference with business
relations. Plaintiffs in all of these actions seek treble damages,
fees, costs, and injunctive relief. Lead plaintiffs in the class
action moved for class certification in February 2019, and
subsequently filed a fourth amended complaint. Additional
information concerning these actions is publicly available in
court filings under the docket numbers 18-CV-5361 (S.D.N.Y.)
(Oetken, J.) and 16-MD-2704 (S.D.N.Y.) (Oetken, J.).
In 2017, Citigroup, Citibank, CGMI, CGML and
numerous other parties were named as defendants in an action
filed in the United States District Court for the Southern
District of New York under the caption TERA GROUP, INC.,
ET AL. v. CITIGROUP, INC., ET AL. The complaint alleges
that defendants colluded to prevent the development of
exchange-like trading for credit default swaps and asserts
federal and state antitrust claims and state law tort claims. In
January 2020, plaintiffs filed an amended complaint.
Additional information concerning this action is publicly
available in court filings under the docket number 17-CV-4302
(S.D.N.Y.) (Sullivan, J.).
Parmalat Litigation
In 2004, an Italian commissioner appointed to oversee the
administration of various Parmalat companies filed a
complaint against Citigroup and Related Parties alleging that
the defendants facilitated a number of frauds by Parmalat
insiders. In 2008, a jury rendered a verdict in Citigroup’s favor
and awarded Citi $431 million. Citigroup has taken steps to
enforce the judgment in Italian court. In April 2019, the Italian
Supreme Court affirmed the decision in the full amount of
$431 million. Additional information concerning this action is
publicly available in court filings under the docket numbers
27618/2014 and 10540/2019.
In 2015, Parmalat filed a claim in an Italian civil court in
Milan claiming damages of €1.8 billion against Citigroup and
Related Parties. The Milan court dismissed Parmalat’s claim
on grounds that it was duplicative of Parmalat’s previously
280
unsuccessful claims. In May 2019, the Milan Court of Appeal
rejected Parmalat’s appeal against the decision of the Milan
court. In June 2019, Parmalat filed a further appeal with the
Italian Supreme Court. Additional information concerning this
action is publicly available in court filings under the docket
number 20598/2019.
On January 29, 2020, Parmalat, its three directors and its
sole shareholder, Sofil S.a.s., as co-plaintiffs, filed a claim
before the Italian civil court in Milan seeking a declaratory
judgment that they do not owe compensatory damages of €990
million to Citibank.
Payment Protection Insurance
Regulators and courts in the U.K. have scrutinized the selling
of payment protection insurance (PPI) by financial institutions
for several years. Citibank continues to review customer
claims relating to the sale of PPI in the U.K., to grant redress
in accordance with the requirements of the Financial Conduct
Authority and to defend claims filed in U.K. courts.
Sovereign Securities Matters
Regulatory Actions: Government and regulatory agencies in
the U.S. and in other jurisdictions are conducting
investigations or making inquiries regarding Citigroup’s sales
and trading activities in connection with sovereign and other
government-related securities. Citigroup is cooperating with
these investigations and inquiries.
Antitrust and Other Litigation: In 2015, putative class
actions filed against CGMI and other defendants were
consolidated, under the caption IN RE TREASURY
SECURITIES AUCTION ANTITRUST LITIGATION, in the
United States District Court for the Southern District of New
York. In December 2017, a consolidated amended complaint
was filed, alleging that defendants colluded to fix Treasury
auction bids by sharing competitively sensitive information
ahead of the auctions, and that defendants colluded to boycott
and prevent the emergence of an anonymous, all-to-all
electronic trading platform in the Treasuries secondary market.
The complaint asserts claims under antitrust laws, and seeks
damages, including treble damages where authorized by
statute, and injunctive relief. In February 2018, defendants
moved to dismiss the complaint. Additional information
concerning this action is publicly available in court filings
under the docket number 15-MD-2673 (S.D.N.Y.) (Gardephe,
J.).
In 2016 and 2017, class actions by direct purchasers of
supranational, sub-sovereign and agency (SSA) bonds filed
against Citigroup, Citibank, CGMI, CGML and other
defendants were consolidated, under the caption IN RE SSA
BONDS ANTITRUST LITIGATION, in the United States
District Court for the Southern District of New York. In
November 2018, a second amended consolidated complaint
was filed, alleging that defendants, as market makers and
traders of SSA bonds, colluded to fix the price at which they
bought and sold SSA bonds in the secondary market. The
complaint asserts claims under the antitrust laws and unjust
enrichment, and seeks damages, including treble damages
where authorized by statute, and disgorgement. In September
2019, the court granted defendants’ motion to dismiss certain
defendants, including CGML. Additional information
concerning this action is publicly available in court filings
under the docket number 16 Civ. 3711 (S.D.N.Y.) (Ramos, J.).
On February 7, 2019, a putative class action, captioned
STACHON v. BANK OF AMERICA N.A., ET AL., was filed
against Citigroup, Citibank, CGMI, CGML and other
defendants, captioned STACHON v. BANK OF AMERICA
N.A., ET AL., in the United States District Court for the
Southern District of New York. Plaintiffs assert claims under
New York antitrust laws based on the same conduct alleged in
IN RE SSA BONDS ANTITRUST LITIGATION and seek
treble damages and injunctive relief. The action is currently
stayed pending a decision on the remaining motion to dismiss
in IN RE SSA BONDS ANTITRUST LITIGATION.
Additional information concerning this action is publicly
available in court filings under the docket number 19 Civ.
01205 (S.D.N.Y.) (Swain, J.).
In 2017, a class action related to the SSA bond market
was filed in the Ontario Court of Justice in Canada, against
Citigroup, Citibank, CGMI, CGML, Citibank Canada,
Citigroup Global Markets Canada, Inc. and other defendants,
asserting plaintiff claims under breach of contract, breach of
the competition act, breach of foreign law, unjust enrichment
and civil conspiracy. Plaintiffs seek compensatory and
punitive damages and declaratory relief. Additional
information concerning this action is publicly available in
court filings under the docket number CV-17-586082-00CP
(Ont. S.C.J.).
In 2017, purchasers of SSA bonds filed a similar action
against Citigroup, Citibank, CGMI, CGML, Citibank Canada,
Citigroup Global Markets Canada, Inc. and other defendants,
captioned JOSEPH MANCINELLI, ET AL. v. BANK OF
AMERICA CORPORATION, ET AL., in the Federal Court in
Canada. In October 2019, plaintiffs filed an amended claim.
Plaintiffs allege that defendants manipulated, and colluded to
manipulate, the SSA bonds market. Plaintiffs assert claims
under breach of the competition law, breach of foreign law,
civil conspiracy, unjust enrichment, waiver of tort and breach
of contract. Additional information concerning this action is
publicly available in court filings under the docket number
T-1871-17 (Fed. Ct.).
On September 10, 2019, plaintiffs filed a third
consolidated amended complaint against CGMI and other
defendants, under the caption IN RE GSE BONDS
ANTITRUST LITIGATION, in the United States District
Court for the Southern District of New York. Plaintiffs allege
that defendants conspired to manipulate the market for bonds
issued by U.S. government-sponsored agencies. Plaintiffs
assert a claim under the Sherman Act, and seek treble damages
and injunctive relief. In December 2019, plaintiffs moved for
preliminary approval of a settlement with CGMI and 11 other
defendants. Additional information concerning this action is
publicly available in court filings under the docket number 19
Civ. 1704 (S.D.N.Y.) (Rakoff, J.).
manipulate the market for bonds issued by U.S. government-
sponsored agencies. Plaintiff asserts a claim against
defendants for a violation of the Sherman Act, and seeks treble
damages and injunctive relief. Additional information
concerning this action is publicly available in court filings
under the docket number 19 Civ. 638 (M.D. La.) (Dick, C.J.).
On October 21, 2019, the City of Baton Rouge and related
plaintiffs filed a substantially similar action against CGMI and
other defendants, captioned CITY OF BATON ROUGE, ET
AL. v. BANK OF AMERICA, N.A., ET AL., in the United
States District Court for the Middle District of Louisiana.
Plaintiffs allege that defendants conspired to manipulate the
market for U.S. government-sponsored agencies bonds.
Plaintiffs assert a claim under the Sherman Act, and seek
treble damages and injunctive relief. Additional information
concerning this action is publicly available in court filings
under the docket number 19 Civ. 725 (M.D. La.) (Dick, C.J.).
In 2018, a putative class action was filed against
Citigroup, CGMI, Citigroup Financial Products Inc., Citigroup
Global Markets Holdings Inc., Citibanamex, Grupo Banamex
and other banks, captioned IN RE MEXICAN
GOVERNMENT BONDS ANTITRUST LITIGATION, in the
United States District Court for the Southern District of New
York. Plaintiffs allege that defendants colluded in the Mexican
sovereign bond market. In September 2019, the court granted
defendants’ motion to dismiss. Subsequently, plaintiffs filed an
amended complaint against Citibanamex and other market
makers in the Mexican sovereign bond market. Plaintiffs no
longer assert any claims against Citigroup and any other Citi
affiliates. The amended complaint alleges a conspiracy to fix
prices in the Mexican sovereign bond market from January 1,
2006 to April 19, 2017, and asserts antitrust and unjust
enrichment claims, and seek treble damages, restitution and
injunctive relief. Additional information concerning this
consolidated action is publicly available in court filings under
the docket number 18 Civ. 2830 (S.D.N.Y.) (Oetken, J.).
Transaction Tax Matters
Citigroup and Citibank are engaged in litigation or
examinations with tax authorities in India and Germany
concerning the payment of transaction taxes and other non-
income tax matters.
Tribune Company Bankruptcy
Certain Citigroup affiliates (along with numerous other
parties) have been named as defendants in adversary
proceedings related to the Chapter 11 cases of Tribune
Company (Tribune) filed in the United States Bankruptcy
Court for the District of Delaware, asserting claims arising out
of the approximately $11 billion leveraged buyout of Tribune
in 2007. The actions were consolidated as IN RE TRIBUNE
COMPANY FRAUDULENT CONVEYANCE LITIGATION
and transferred to the United States District Court for the
Southern District of New York.
On September 23, 2019, the State of Louisiana filed an
In the adversary proceeding captioned KIRSCHNER v.
action against CGMI and other defendants, captioned STATE
OF LOUISIANA v. BANK OF AMERICA, N.A., ET AL., in
the United States District Court for the Middle District of
Louisiana. Plaintiff alleges that defendants conspired to
FITZSIMONS, ET AL., the litigation trustee, as successor
plaintiff to the unsecured creditors committee, seeks to avoid
and recover as actual fraudulent transfers the transfers of
Tribune stock that occurred as a part of the leveraged buyout.
281
Several Citigroup affiliates, along with numerous other
parties, were named as shareholder defendants and were
alleged to have tendered Tribune stock to Tribune as a part of
the buyout. In 2017, the United States District Court for the
Southern District of New York dismissed the actual fraudulent
transfer claim against the shareholder defendants, including
the Citigroup affiliates. In July 2019, the litigation trustee filed
an appeal to the United States Court of Appeals for the Second
Circuit.
Several Citigroup affiliates, along with numerous other
parties, are named as defendants in certain actions brought by
Tribune noteholders, which seek to recover the transfers of
Tribune stock that occurred as a part of the leveraged buyout,
as state-law constructive fraudulent conveyances. The
noteholders’ claims were previously dismissed and the
dismissal was affirmed on appeal. In May 2018, the United
States Court of Appeals for the Second Circuit withdrew its
2016 transfer of jurisdiction to the district court to reconsider
its decision in light of a recent United States Supreme Court
decision. In December 2019, the Court of Appeals issued an
amended decision again affirming the dismissal. In January
2020, the noteholders filed a petition for rehearing.
Citigroup Global Markets Inc. (CGMI) was named as a
defendant in a separate action in connection with its role as
advisor to Tribune. In January 2019, the court dismissed the
action, which the litigation trustee has appealed to the United
States Court of Appeals for the Second Circuit.
Additional information concerning these actions is
publicly available in court filings under the docket numbers
08-13141 (Bankr. D. Del.) (Carey, J.), 11 MD 02296
(S.D.N.Y.) (Cote, J.), 12 MC 2296 (S.D.N.Y.) (Cote, J.),
13-3992 (2d Cir.), 19-0449 (2d Cir.), 19-3049 (2d Cir.) and
16-317 (U.S.).
Variable Rate Demand Obligation Litigation
On May 31, 2019, plaintiffs in the consolidated actions CITY
OF PHILADELPHIA v. BANK OF AMERICA CORP., ET
AL. and MAYOR AND CITY COUNCIL OF BALTIMORE v.
BANK OF AMERICA CORP., ET AL. filed a consolidated
complaint naming as defendants Citigroup, Citibank, CGMI,
CGML and numerous other industry participants. The
consolidated complaint asserts violations of the Sherman Act,
as well as claims for breach of contract, breach of fiduciary
duty, and unjust enrichment, and seeks damages and injunctive
relief based on allegations that defendants served as
remarketing agents for municipal bonds called variable rate
demand obligations (VRDOs) and colluded to set artificially
high VRDO interest rates. In July 2019, defendants filed a
motion to dismiss the consolidated complaint. Additional
information concerning these actions is publicly available in
court filings under the docket numbers 19-CV-1608 (S.D.N.Y.)
(Furman, J.) and 19-CV-2667 (S.D.N.Y.) (Furman, J.).
Settlement Payments
Payments required in settlement agreements described above
have been made or are covered by existing litigation accruals.
282
28. CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS
Citigroup amended its Registration Statement on Form S-3 on
file with the SEC (File No. 33-192302) to add its wholly
owned subsidiary, Citigroup Global Markets Holdings Inc.
(CGMHI), as a co-registrant. Any securities issued by CGMHI
under the Form S-3 will be fully and unconditionally
guaranteed by Citigroup.
The following are the Condensed Consolidating
Statements of Income and Comprehensive Income for the
years ended December 31, 2019, 2018 and 2017, Condensed
Consolidating Balance Sheet as of December 31, 2019 and
2018 and Condensed Consolidating Statement of Cash Flows
for the years ended December 31, 2019, 2018 and 2017 for
Citigroup Inc., the parent holding company (Citigroup parent
company), CGMHI, other Citigroup subsidiaries and
eliminations and total consolidating adjustments. “Other
Citigroup subsidiaries and eliminations” includes all other
subsidiaries of Citigroup, intercompany eliminations and
income (loss) from discontinued operations. “Consolidating
adjustments” includes Citigroup parent company elimination
of distributed and undistributed income of subsidiaries and
investment in subsidiaries.
These Condensed Consolidating Financial Statements
have been prepared and presented in accordance with SEC
Regulation S-X Rule 3-10, “Financial Statements of
Guarantors and Issuers of Guaranteed Securities Registered or
Being Registered.”
These Condensed Consolidating Financial Statements
schedules are presented for purposes of additional analysis,
but should be considered in relation to the Consolidated
Financial Statements of Citigroup taken as a whole.
283
Condensed Consolidating Statements of Income and Comprehensive Income
In millions of dollars
Revenues
Dividends from subsidiaries
Interest revenue
Interest revenue—intercompany
Interest expense
Interest expense—intercompany
Net interest revenue
Commissions and fees
Commissions and fees—intercompany
Principal transactions
Principal transactions—intercompany
Other income
Other income—intercompany
Total non-interest revenues
Total revenues, net of interest expense
Provisions for credit losses and for benefits and claims
Operating expenses
Compensation and benefits
Compensation and benefits—intercompany
Other operating
Other operating—intercompany
Total operating expenses
Equity in undistributed income of subsidiaries
Income (loss) from continuing operations before income
taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income before attribution of noncontrolling interests
Noncontrolling interests
Net income (loss)
Comprehensive income
Add: Other comprehensive income (loss)
Total Citigroup comprehensive income (loss)
Add: Other comprehensive income attributable to
noncontrolling interests
Add: Net income attributable to noncontrolling interests
Total comprehensive income (loss)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Year ended December 31, 2019
Citigroup
parent
company
Other Citigroup
subsidiaries and
eliminations
CGMHI
Consolidating
adjustments
Citigroup
consolidated
— $
10,661
1,942
7,010
4,243
1,350 $
5,265 $
354
277
2,464
832
102
9,294 $
10,644 $
— $
4,680 $
—
2,326
2,410
9,416 $
— $
1,228 $
176
1,052 $
—
1,052 $
—
1,052 $
(651) $
401 $
— $
—
401 $
— $
65,849
(7,033)
17,204
(5,281)
46,893 $
6,481 $
(333)
11,152
(3,716)
4,702
(47)
18,239 $
65,132 $
8,383 $
16,721 $
(134)
18,259
(2,430)
32,416 $
— $
24,333 $
5,588
18,745 $
(4)
18,741 $
66
18,675 $
1,600 $
20,275 $
— $
66
20,341 $
(23,347) $
—
—
—
—
— $
— $
—
—
—
—
—
— $
(23,347) $
— $
— $
—
—
—
— $
3,620 $
(19,727) $
—
(19,727) $
—
(19,727) $
—
(19,727) $
(949) $
(20,676) $
— $
—
(20,676) $
—
76,510
—
29,163
—
47,347
11,746
—
8,892
—
6,301
—
26,939
74,286
8,383
21,433
—
20,569
—
42,002
—
23,901
4,430
19,471
(4)
19,467
66
19,401
852
20,253
—
66
20,319
23,347 $
—
5,091
4,949
1,038
(896) $
— $
(21)
(2,537)
1,252
767
(55)
(594) $
21,857 $
— $
32 $
134
(16)
20
170 $
(3,620) $
18,067 $
(1,334)
19,401 $
—
19,401 $
—
19,401 $
852 $
20,253 $
— $
—
20,253 $
284
Condensed Consolidating Statements of Income and Comprehensive Income
In millions of dollars
Revenues
Dividends from subsidiaries
Interest revenue
Interest revenue—intercompany
Interest expense
Interest expense—intercompany
Net interest revenue
Commissions and fees
Commissions and fees—intercompany
Principal transactions
Principal transactions—intercompany
Other income
Other income—intercompany
Total non-interest revenues
Total revenues, net of interest expense
Provisions for credit losses and for benefits and claims
Operating expenses
Compensation and benefits
Compensation and benefits—intercompany
Other operating
Other operating—intercompany
Total operating expenses
Equity in undistributed income of subsidiaries
Income (loss) from continuing operations before income
taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss) before attribution of noncontrolling
interests
Noncontrolling interests
Net income (loss)
Comprehensive income
Add: Other comprehensive income (loss)
Total Citigroup comprehensive income (loss)
Add: Other comprehensive income attributable to
noncontrolling interests
Add: Net income attributable to noncontrolling interests
Total comprehensive income (loss)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Year ended December 31, 2018
Citigroup
parent
company
Other Citigroup
subsidiaries and
eliminations
CGMHI
Consolidating
adjustments
Citigroup
consolidated
— $
8,732
1,659
5,430
3,539
1,422 $
5,146 $
237
1,599
1,328
710
143
9,163 $
10,585 $
(22) $
4,484 $
—
2,224
2,312
9,020 $
— $
1,587 $
1,123
464 $
—
464 $
—
464 $
$
257 $
721 $
— $
—
721 $
— $
62,029
(6,592)
14,053
(4,737)
46,121 $
6,711 $
(235)
8,616
(399)
3,447
(36)
18,104 $
64,225 $
7,590 $
16,666 $
(115)
18,655
(2,361)
32,845 $
— $
23,790 $
3,520
20,270 $
(8)
20,262 $
35
20,227 $
—
3,500 $
23,727 $
(43) $
35
23,719 $
(22,854) $
—
—
—
—
— $
— $
—
—
—
—
—
— $
(22,854) $
— $
— $
—
—
—
— $
2,163 $
(20,691) $
—
(20,691) $
—
(20,691) $
—
(20,691) $
(3,757) $
(24,448) $
— $
—
(24,448) $
—
70,828
—
24,266
—
46,562
11,857
—
8,905
—
5,530
—
26,292
72,854
7,568
21,154
—
20,687
—
41,841
—
23,445
5,357
18,088
(8)
18,080
35
18,045
(2,499)
15,546
(43)
35
15,538
22,854 $
67
4,933
4,783
1,198
(981) $
— $
(2)
(1,310)
(929)
1,373
(107)
(975) $
20,898 $
— $
4 $
115
(192)
49
(24) $
(2,163) $
18,759 $
714
18,045 $
—
18,045 $
—
18,045 $
(2,499) $
15,546 $
— $
—
15,546 $
285
Condensed Consolidating Statements of Income and Comprehensive Income
In millions of dollars
Revenues
Dividends from subsidiaries
Interest revenue
Interest revenue—intercompany
Interest expense
Interest expense—intercompany
Net interest revenue
Commissions and fees
Commissions and fees—intercompany
Principal transactions
Principal transactions—intercompany
Other income
Other income—intercompany
Total non-interest revenues
Total revenues, net of interest expense
Provisions for credit losses and for benefits and claims
Operating expenses
Compensation and benefits
Compensation and benefits—intercompany
Other operating
Other operating—intercompany
Total operating expenses
Equity in undistributed income of subsidiaries
Income (loss) from continuing operations before income
taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income before attribution of noncontrolling interests
Noncontrolling interests
Net income (loss)
Comprehensive income
Add: Other comprehensive income (loss)
Total Citigroup comprehensive income (loss)
Add: Other comprehensive income attributable to
noncontrolling interests
Add: Net income attributable to noncontrolling interests
Total comprehensive income (loss)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Year ended December 31, 2017
Citigroup
parent
company
Other Citigroup
subsidiaries and
eliminations
CGMHI
Consolidating
adjustments
Citigroup
consolidated
— $
5,279
1,178
2,340
2,297
1,820 $
5,366 $
182
1,183
1,200
867
170
8,968 $
10,788 $
— $
4,403 $
—
2,184
2,231
8,818 $
— $
1,970 $
873
1,097 $
—
1,097 $
(1)
1,098 $
$
(117) $
981 $
— $
(1)
980 $
— $
56,299
(5,150)
9,412
(3,126)
44,863 $
7,341 $
(180)
6,103
(2,134)
7,450
(175)
18,405 $
63,268 $
7,451 $
16,885 $
(120)
19,185
(2,196)
33,754 $
— $
22,063 $
19,578
2,485 $
(111)
2,374 $
61
2,313 $
—
(4,160) $
(1,847) $
114 $
61
(1,672) $
(22,499) $
—
—
—
—
— $
— $
—
—
—
—
—
— $
(22,499) $
— $
— $
—
—
—
— $
19,088 $
(3,411) $
—
(3,411) $
—
(3,411) $
—
(3,411) $
4,277 $
866 $
— $
—
866 $
—
61,579
—
16,518
—
45,061
12,707
—
8,940
—
5,736
—
27,383
72,444
7,451
21,181
—
21,051
—
42,232
—
22,761
29,388
(6,627)
(111)
(6,738)
60
(6,798)
(2,791)
(9,589)
114
60
(9,415)
22,499 $
1
3,972
4,766
829
(1,622) $
— $
(2)
1,654
934
(2,581)
5
10 $
20,887 $
— $
(107) $
120
(318)
(35)
(340) $
(19,088) $
2,139 $
8,937
(6,798) $
—
(6,798) $
—
(6,798) $
(2,791) $
(9,589) $
— $
—
(9,589) $
286
Condensed Consolidating Balance Sheet
In millions of dollars
Assets
Cash and due from banks
Cash and due from banks—intercompany
Deposits with banks
Deposits with banks—intercompany
Securities borrowed and purchased under resale agreements
Securities borrowed and purchased under resale agreements—
intercompany
Trading account assets
Trading account assets—intercompany
Investments
Loans, net of unearned income
Loans, net of unearned income—intercompany
Allowance for loan losses
Total loans, net
Advances to subsidiaries
Investments in subsidiaries
Other assets(1)
Other assets—intercompany
Total assets
Liabilities and equity
Deposits
Deposits—intercompany
Securities loaned and sold under repurchase agreements
Securities loaned and sold under repurchase agreements—
intercompany
Trading account liabilities
Trading account liabilities—intercompany
Short-term borrowings
Short-term borrowings—intercompany
Long-term debt
Long-term debt—intercompany
Advances from subsidiaries
Other liabilities
Other liabilities—intercompany
Stockholders’ equity
Total liabilities and equity
December 31, 2019
Citigroup
parent
company
CGMHI
Other
Citigroup
subsidiaries
and
eliminations
Consolidating
adjustments
Citigroup
consolidated
$
$
$
$
$
$
— $
21
—
3,000
—
—
286
426
1
—
—
—
— $
144,587 $
202,116
12,377
2,799
365,613 $
586 $
5,095
4,050
6,710
195,537
21,446
152,115
5,858
541
2,497
—
—
2,497 $
— $
—
54,784
45,588
494,807 $
23,381 $
(5,116)
165,902
(9,710)
55,785
(21,446)
123,739
(6,284)
368,021
696,986
—
(12,783)
684,203 $
(144,587) $
—
107,353
(48,387)
1,292,854 $
— $
—
—
—
—
—
—
—
—
—
—
—
— $
— $
(202,116)
—
—
(202,116) $
23,967
—
169,952
—
251,322
—
276,140
—
368,563
699,483
—
(12,783)
686,700
—
—
174,514
—
1,951,158
— $
—
—
— $
—
145,473
1,070,590 $
—
20,866
— $
—
—
1,070,590
—
166,339
—
1
379
66
—
150,477
—
20,503
937
8
193,242
365,613 $
36,581
80,100
5,109
11,096
17,129
39,578
66,791
—
51,777
8,414
32,759
494,807 $
(36,581)
39,793
(5,488)
33,887
(17,129)
58,705
(66,791)
(20,503)
53,866
(8,422)
170,061
1,292,854 $
—
—
—
—
—
—
—
—
—
—
(202,116)
(202,116) $
—
119,894
—
45,049
—
248,760
—
—
106,580
—
193,946
1,951,158
(1) Other assets for Citigroup parent company at December 31, 2019 included $35.1 billion of placements to Citibank and its branches, of which $24.9 billion had a
remaining term of less than 30 days.
287
Condensed Consolidating Balance Sheet
In millions of dollars
Assets
Cash and due from banks
Cash and due from banks—intercompany
Deposits with banks
Deposits with banks—intercompany
Securities borrowed and purchased under resale agreements
Securities borrowed and purchased under resale agreements—
intercompany
Trading account assets
Trading account assets—intercompany
Investments
Loans, net of unearned income
Loans, net of unearned income—intercompany
Allowance for loan losses
Total loans, net
Advances to subsidiaries
Investments in subsidiaries
Other assets(1)
Other assets—intercompany
Total assets
Liabilities and equity
Deposits
Deposits—intercompany
Securities loaned and sold under repurchase agreements
Securities loaned and sold under repurchase agreements—
intercompany
Trading account liabilities
Trading account liabilities—intercompany
Short-term borrowings
Short-term borrowings—intercompany
Long-term debt
Long-term debt—intercompany
Advances from subsidiaries
Other liabilities
Other liabilities—intercompany
Stockholders’ equity
Total liabilities and equity
December 31, 2018
Citigroup
parent
company
CGMHI
Other
Citigroup
subsidiaries
and
eliminations
Consolidating
adjustments
Citigroup
consolidated
$
$
$
$
$
$
1 $
19
—
3,000
—
—
302
627
7
—
—
—
— $
143,119 $
205,337
9,861
3,037
365,310 $
— $
—
—
—
1
410
207
—
143,767
—
21,471
3,011
223
196,220
365,310 $
689 $
3,545
4,915
6,528
212,720
20,074
146,233
1,728
224
1,292
—
—
1,292 $
— $
—
59,734
44,255
501,937 $
— $
—
155,830
21,109
95,571
1,398
3,656
11,343
25,986
73,884
—
66,732
13,763
32,665
501,937 $
22,955 $
(3,564)
159,545
(9,528)
57,964
(20,074)
109,582
(2,355)
358,376
682,904
—
(12,315)
670,589 $
(143,119) $
—
102,394
(47,292)
1,255,473 $
1,013,170 $
—
21,938
(21,109)
48,733
(1,808)
28,483
(11,343)
62,246
(73,884)
(21,471)
50,978
(13,986)
173,526
1,255,473 $
— $
—
—
—
—
—
—
—
—
—
—
—
— $
— $
(205,337)
—
—
(205,337) $
23,645
—
164,460
—
270,684
—
256,117
—
358,607
684,196
—
(12,315)
671,881
—
—
171,989
—
1,917,383
— $
—
—
1,013,170
—
177,768
—
—
—
—
—
—
—
—
—
—
(205,337)
(205,337) $
—
144,305
—
32,346
—
231,999
—
—
120,721
—
197,074
1,917,383
(1) Other assets for Citigroup parent company at December 31, 2018 included $34.7 billion of placements to Citibank and its branches, of which $22.4 billion had a
remaining term of less than 30 days.
288
Condensed Consolidating Statement of Cash Flows
In millions of dollars
Net cash provided by (used in) operating activities of
continuing operations
Cash flows from investing activities of continuing operations
Purchases of investments
Proceeds from sales of investments
Proceeds from maturities of investments
Change in loans
Proceeds from sales and securitizations of loans
Change in securities borrowed and purchased under agreements
to resell
Changes in investments and advances—intercompany
Other investing activities
Net cash provided by (used in) investing activities of
continuing operations
Cash flows from financing activities of continuing operations
Dividends paid
Issuance of preferred stock
Redemption of preferred stock
Treasury stock acquired
Proceeds (repayments) from issuance of long-term debt, net
Proceeds (repayments) from issuance of long-term debt—
intercompany, net
Change in deposits
Change in securities loaned and sold under agreements to
repurchase
Change in short-term borrowings
Net change in short-term borrowings and other advances—
intercompany
Capital contributions from (to) parent
Other financing activities
Net cash provided by (used in) financing activities of
continuing operations
Effect of exchange rate changes on cash and due from banks
Change in cash and due from banks and deposits with banks
Cash and due from banks and deposits with banks at
beginning of period
Cash and due from banks and deposits with banks at end of
period
Cash and due from banks
Deposits with banks
Cash and due from banks and deposits with banks at end of
period
Supplemental disclosure of cash flow information for
continuing operations
Cash paid during the year for income taxes
Cash paid during the year for interest
Non-cash investing activities
Transfers to loans HFS from loans
$
$
$
$
$
$
$
$
$
$
$
$
Year ended December 31, 2019
Citigroup
parent
company
CGMHI
Other
Citigroup
subsidiaries
and
eliminations
Consolidating
adjustments
Citigroup
consolidated
25,011 $
(35,396) $
(2,452) $
— $
(12,837)
— $
5
—
—
—
— $
—
—
—
—
(274,491) $
137,168
119,051
(22,466)
2,878
—
(1,847)
—
15,811
(870)
(64)
3,551
2,717
(4,817)
— $
—
—
—
—
—
—
—
(274,491)
137,173
119,051
(22,466)
2,878
19,362
—
(4,881)
(1,842) $
14,877 $
(36,409) $
— $
(23,374)
(5,447) $
1,496
(1,980)
(17,571)
1,666
— $
—
—
—
10,389
— $
—
—
—
(3,950)
—
—
—
—
(968)
—
(364)
(7,177)
—
5,115
7,440
5,843
(74)
(253)
7,177
57,420
(16,544)
5,263
(4,875)
74
253
(23,168) $
— $
1 $
21,283 $
— $
764 $
44,818 $
(908) $
5,049 $
— $
—
—
—
—
—
—
—
—
—
—
—
— $
— $
— $
(5,447)
1,496
(1,980)
(17,571)
8,105
—
57,420
(11,429)
12,703
—
—
(364)
42,933
(908)
5,814
3,020
15,677
169,408
—
188,105
3,021 $
16,441 $
174,457 $
21 $
5,681 $
18,265 $
3,000
10,760
156,192
— $
— $
—
193,919
23,967
169,952
3,021 $
16,441 $
174,457 $
— $
193,919
(393) $
3,820
418 $
12,664
4,863 $
12,198
— $
—
4,888
28,682
— $
— $
5,500 $
— $
5,500
289
Condensed Consolidating Statement of Cash Flows
In millions of dollars
Net cash provided by (used in) operating activities of
continuing operations
Cash flows from investing activities of continuing operations
Purchases of investments
Proceeds from sales of investments
Proceeds from maturities of investments
Change in loans
Proceeds from sales and securitizations of loans
Proceeds from significant disposals
Change in securities borrowed and purchased under agreements to
resell
Changes in investments and advances—intercompany
Other investing activities
Net cash provided by (used in) investing activities of
continuing operations
Cash flows from financing activities of continuing operations
Dividends paid
Redemption of preferred stock
Treasury stock acquired
Proceeds from issuance of long-term debt, net
Proceeds (repayments) from issuance of long-term debt—
intercompany, net
Change in deposits
Change in securities loaned and sold under agreements to
repurchase
Change in short-term borrowings
Net change in short-term borrowings and other advances—
intercompany
Capital contributions from parent
Other financing activities
Net cash provided by (used in) financing activities of
continuing operations
Effect of exchange rate changes on cash and due from banks
Change in cash and due from banks and deposits with banks
Cash and due from banks and deposits with banks at
beginning of period
Cash and due from banks and deposits with banks at end of
period
Cash and due from banks
Deposits with banks
Cash and due from banks and deposits with banks at end of
period
Supplemental disclosure of cash flow information for
continuing operations
Cash paid (received) during the year for income taxes
Cash paid during the year for interest
Non-cash investing activities
Transfers to loans HFS from loans
$
$
$
$
$
$
$
$
$
$
$
$
Year ended December 31, 2018
Citigroup
parent
company
CGMHI
Other
Citigroup
subsidiaries
and
eliminations
Consolidating
adjustments
Citigroup
consolidated
21,314 $
13,287 $
2,351 $
— $
36,952
(7,955) $
7,634
—
—
—
—
—
(5,566)
556
(18) $
3
—
—
—
—
(144,514) $
53,854
83,604
(29,002)
4,549
314
(34,018)
(832)
(59)
(4,188)
6,398
(3,878)
— $
—
—
—
—
—
—
—
—
(152,487)
61,491
83,604
(29,002)
4,549
314
(38,206)
—
(3,381)
(5,331) $
(34,924) $
(32,863) $
— $
(73,118)
(5,020) $
(793)
(14,433)
(5,099)
— $
—
—
10,278
— $
—
—
(2,656)
—
—
—
32
1,819
—
(482)
10,708
—
23,454
88
(19,111)
(798)
—
(10,708)
53,348
(1,963)
(12,226)
17,292
798
—
(23,976) $
— $
(7,993) $
24,619 $
— $
2,982 $
43,885 $
(773) $
12,600 $
— $
—
—
—
—
—
—
—
—
—
—
— $
— $
— $
(5,020)
(793)
(14,433)
2,523
—
53,348
21,491
(12,106)
—
—
(482)
44,528
(773)
7,589
11,013
12,695
156,808
—
180,516
3,020 $
15,677 $
169,408 $
20 $
4,234 $
19,391 $
3,000
11,443
150,017
— $
— $
—
188,105
23,645
164,460
3,020 $
15,677 $
169,408 $
— $
188,105
(783) $
3,854
458 $
8,671
4,638 $
10,438
— $
—
4,313
22,963
— $
— $
4,200 $
— $
4,200
290
Condensed Consolidating Statements of Cash Flows
In millions of dollars
Net cash provided by (used in) operating activities of
continuing operations
Cash flows from investing activities of continuing operations
Purchases of investments
Proceeds from sales of investments
Proceeds from maturities of investments
Change in loans
Proceeds from sales and securitizations of loans
Proceeds from significant disposals
Change in securities borrowed and purchased under agreements to
resell
Changes in investments and advances—intercompany
Other investing activities
Net cash provided by (used in) investing activities of
continuing operations
Cash flows from financing activities of continuing operations
Dividends paid
Issuance of preferred stock
Treasury stock acquired
Proceeds (repayments) from issuance of long-term debt, net
Proceeds (repayments) from issuance of long-term debt—
intercompany, net
Change in deposits
Change in securities loaned and sold under agreements to
repurchase
Change in short-term borrowings
Net change in short-term borrowings and other advances—
intercompany
Capital contributions from parent
Other financing activities
Net cash provided by financing activities of continuing
operations
Effect of exchange rate changes on cash and due from banks
Change in cash and due from banks and deposits with banks
Cash and due from banks and deposits with banks at
beginning of period
Cash and due from banks and deposits with banks at end of
period
Cash and due from banks
Deposits with banks
Cash and due from banks and deposits with banks at end of
period
Supplemental disclosure of cash flow information for
continuing operations
Cash paid during the year for income taxes
Cash paid during the year for interest
Non-cash investing activities
Transfers to loans held-for-sale from loans
$
$
$
$
$
$
$
$
$
$
$
$
Year ended December 31, 2017
Citigroup
parent
company
CGMHI
Other
Citigroup
subsidiaries
and
eliminations
Consolidating
adjustments
Citigroup
consolidated
25,270 $
(33,365) $
(679) $
— $
(8,774)
— $
132
—
—
—
—
—
(899)
—
(14) $
18
—
—
—
—
9,731
9,755
(24)
(185,726) $
107,218
84,369
(58,062)
8,365
3,411
(5,396)
(8,856)
(2,773)
— $
—
—
—
—
—
—
—
—
(185,740)
107,368
84,369
(58,062)
8,365
3,411
4,335
—
(2,797)
(767) $
19,466 $
(57,450) $
— $
(38,751)
(3,797) $
—
(14,541)
6,544
— $
—
—
4,909
— $
—
—
15,521
—
—
—
49
(22,152)
—
(405)
(2,031)
—
5,748
2,212
(8,615)
(748)
—
2,031
30,416
8,708
11,490
30,767
748
—
(34,302) $
— $
1,475 $
— $
(9,799) $
(12,424) $
99,681 $
693 $
42,245 $
— $
—
—
—
—
—
—
—
—
—
—
— $
— $
— $
(3,797)
—
(14,541)
26,974
—
30,416
14,456
13,751
—
—
(405)
66,854
693
20,022
20,812
25,119
114,563
—
160,494
11,013 $
12,695 $
156,808 $
13 $
4,128 $
19,634 $
11,000
8,567
137,174
— $
— $
—
180,516
23,775
156,741
11,013 $
12,695 $
156,808 $
— $
180,516
(3,730) $
4,151
678 $
4,513
5,135 $
7,011
— $
—
2,083
15,675
— $
— $
5,900 $
— $
5,900
291
29. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
In millions of dollars, except per share amounts
Fourth
Third
Second
First
Fourth
Third
Second
First
Revenues, net of interest expense
$ 18,378 $ 18,574 $ 18,758 $ 18,576 $ 17,124 $ 18,389 $ 18,469 $ 18,872
Operating expenses
10,454
10,464
10,500
10,584
Provisions for credit losses and for benefits and claims
2,222
2,088
2,093
1,980
9,893
1,925
10,311
10,712
1,974
1,812
10,925
1,857
2019
2018
Income from continuing operations before income
taxes
Income taxes(1)
Income from continuing operations
Income (loss) from discontinued operations, net of
taxes
Net income before attribution of noncontrolling
interests
Noncontrolling interests
Citigroup’s net income
Earnings per share(2)
Basic
$
5,702 $
6,022 $
6,165 $
6,012 $
5,306 $
6,104 $
5,945 $
703
1,079
1,373
1,275
1,001
1,471
1,444
$
4,999 $
4,943 $
4,792 $
4,737 $
4,305 $
4,633 $
4,501 $
6,090
1,441
4,649
(4)
(15)
17
(2)
(8)
(8)
15
(7)
$
4,995 $
4,928 $
4,809 $
4,735 $
4,297 $
4,625 $
4,516 $
4,642
16
15
10
25
(16)
3
26
22
$
4,979 $
4,913 $
4,799 $
4,710 $
4,313 $
4,622 $
4,490 $
4,620
Income from continuing operations
$
2.16 $
2.09 $
1.94 $
1.88 $
1.65 $
1.74 $
1.62 $
Net income
Diluted
2.16
2.09
1.95
1.88
1.65
1.73
1.63
Income from continuing operations
Net income
2.15
2.15
2.08
2.07
1.94
1.95
1.87
1.87
1.65
1.64
1.74
1.73
1.62
1.63
1.68
1.68
1.68
1.68
This Note to the Consolidated Financial Statements is unaudited due to the Company’s individual quarterly results not being subject to an audit.
(1) The fourth quarter of 2019 includes discrete tax items of roughly $540 million including an approximate $430 million benefit of a reduction in Citi’s valuation
allowance related to its DTAs. The third quarter of 2019 includes discrete tax items of roughly $230 million, including an approximate $180 million benefit of a
reduction in Citi’s valuation allowance related to its DTAs.
(2) Due to averaging of shares, quarterly earnings per share may not sum to the totals reported for the full year.
End of Consolidated Financial Statements and Notes to Consolidated Financial Statements
292
FINANCIAL DATA SUPPLEMENT
RATIOS
Citigroup’s net income to average
assets(1)
0.98% 0.94%
0.84%
2019
2018
2017
Return on average common
stockholders’ equity(1)(2)
Return on average total
stockholders’ equity(1)(3)
Total average equity to average
assets(4)
Dividend payout ratio(1)(5)
10.3
9.9
9.9
23.9
9.4
9.1
10.3
23.1
7.0
7.0
12.1
18.0
(1) 2017 excludes the one-time impact of Tax Reform. See “Significant
Accounting Policies and Estimates—Income Taxes” above.
(2) Based on Citigroup’s net income less preferred stock dividends as a
percentage of average common stockholders’ equity.
(3) Based on Citigroup’s net income as a percentage of average total
Citigroup stockholders’ equity.
(4) Based on average Citigroup stockholders’ equity as a percentage of
average assets.
(5) Dividends declared per common share as a percentage of net income per
diluted share.
AVERAGE DEPOSIT LIABILITIES IN OFFICES OUTSIDE THE U.S.(1)
In millions of dollars at year end, except ratios
Banks
Other demand deposits
Other time and savings deposits(2)
Total
Average
interest rate
2019
Average
balance
Average
interest rate
2018
Average
balance
Average
interest rate
2017
Average
balance
1.71% $
1.05
1.05
1.11% $
52,235
300,101
217,944
570,280
1.35% $
0.61
1.31
0.94% $
44,426
287,665
209,410
541,501
0.49% $
0.52
1.23
0.78% $
36,063
293,389
191,363
520,815
Interest rates and amounts include the effects of risk management activities and also reflect the impact of the local interest rates prevailing in certain countries.
(1)
(2) Primarily consists of certificates of deposit and other time deposits in denominations of $100,000 or more.
MATURITY PROFILE OF TIME DEPOSITS IN U.S. OFFICES
In millions of dollars at December 31, 2019
Under 3
months
Over 3 to 6
months
Over 6 to 12
months
Over 12
months
Over $100,000
Certificates of deposit
Other time deposits
Over $250,000
Certificates of deposit
Other time deposits
$
$
15,866 $
8,152 $
9,008 $
3,924
29
38
14,026 $
5,008 $
4,953 $
3,923
29
2
694
1,556
539
11
293
SUPERVISION, REGULATION AND OTHER
SUPERVISION AND REGULATION
Citi is subject to regulation under U.S. federal and state laws,
as well as applicable laws in the other jurisdictions in which it
does business.
General
Citigroup is a registered bank holding company and financial
holding company and is regulated and supervised by the
Federal Reserve Board. Citigroup’s nationally chartered
subsidiary banks, including Citibank, are regulated and
supervised by the Office of the Comptroller of the Currency
(OCC). The Federal Deposit Insurance Corporation (FDIC)
also has examination authority for banking subsidiaries whose
deposits it insures. Overseas branches of Citibank are
regulated and supervised by the Federal Reserve Board and
OCC and overseas subsidiary banks by the Federal Reserve
Board. These overseas branches and subsidiary banks are also
regulated and supervised by regulatory authorities in the host
countries. In addition, the Consumer Financial Protection
Bureau (CFPB) regulates consumer financial products and
services. Citi is also subject to laws and regulations
concerning the collection, use, sharing and disposition of
certain customer, employee and other personal and
confidential information, including those imposed by the
Gramm-Leach-Bliley Act, the Fair Credit Reporting Act and
the EU General Data Protection Regulation. For more
information on U.S. and foreign regulation affecting or
potentially affecting Citi, see “Risk Factors” above.
Other Bank and Bank Holding Company Regulation
Citi, including its banking subsidiaries, is subject to regulatory
limitations, including requirements for banks to maintain
reserves against deposits, requirements as to liquidity, risk-
based capital and leverage (see “Capital Resources” above and
Note 18 to the Consolidated Financial Statements), restrictions
on the types and amounts of loans that may be made and the
interest that may be charged, and limitations on investments
that can be made and services that can be offered. The Federal
Reserve Board may also expect Citi to commit resources to its
subsidiary banks in certain circumstances. Citi is also subject
to anti-money laundering and financial transparency laws,
including standards for verifying client identification at
account opening and obligations to monitor client transactions
and report suspicious activities.
Securities and Commodities Regulation
Citi conducts securities underwriting, brokerage and dealing
activities in the U.S. through Citigroup Global Markets Inc.
(CGMI), its primary broker-dealer, and other broker-dealer
subsidiaries, which are subject to regulations of the U.S.
Securities and Exchange Commission (SEC), the Financial
Industry Regulatory Authority and certain exchanges. Citi
conducts similar securities activities outside the U.S., subject
to local requirements, through various subsidiaries and
affiliates, principally Citigroup Global Markets Limited in
London (CGML), which is regulated principally by the U.K.
Financial Conduct Authority (FCA), and Citigroup Global
294
Markets Japan Inc. in Tokyo, which is regulated principally by
the Financial Services Agency of Japan.
Citi also has subsidiaries that are members of futures
exchanges. In the U.S., CGMI is a member of the principal
U.S. futures exchanges, and Citi has subsidiaries that are
registered as futures commission merchants and commodity
pool operators with the Commodity Futures Trading
Commission (CFTC). Citibank, CGMI, Citigroup Energy Inc.,
Citigroup Global Markets Europe AG and CGML are also
registered as swap dealers with the CFTC. CGMI is also
subject to SEC and CFTC rules that specify uniform minimum
net capital requirements. Compliance with these rules could
limit those operations of CGMI that require the intensive use
of capital and also limits the ability of broker-dealers to
transfer large amounts of capital to parent companies and
other affiliates. See “Capital Resources” and Note 18 to the
Consolidated Financial Statements for a further discussion of
capital considerations of Citi’s non-banking subsidiaries.
Transactions with Affiliates
Transactions between Citi’s U.S. subsidiary depository
institutions and their non-bank affiliates are regulated by the
Federal Reserve Board, and are generally required to be on
arm’s-length terms. See “Managing Global Risk—Liquidity
Risk” above.
COMPETITION
The financial services industry is highly competitive. Citi’s
competitors include a variety of financial services and
advisory companies. Citi competes for clients and capital
(including deposits and funding in the short- and long-term
debt markets) with some of these competitors globally and
with others on a regional or product basis. Citi’s competitive
position depends on many factors, including, among others,
the value of Citi’s brand name, reputation, the types of clients
and geographies served; the quality, range, performance,
innovation and pricing of products and services; the
effectiveness of and access to distribution channels,
technology advances, customer service and convenience; the
effectiveness of transaction execution, interest rates and
lending limits; and regulatory constraints. Citi’s ability to
compete effectively also depends upon its ability to attract
new employees and retain and motivate existing employees,
while managing compensation and other costs. For additional
information on competitive factors and uncertainties
impacting Citi’s businesses, see “Risk Factors—Operational
Risks” above.
CLIMATE CHANGE
Climate change presents immediate and long-term risks to Citi
and to its clients and customers, with the risks potentially
increasing over time. Climate risk can arise from physical
risks (risks related to the physical effects of climate change)
and transition risks (risks related to regulatory, legal,
technological and market changes from a transition to a low-
carbon economy).
Citi’s Environmental and Social Risk Management Policy
incorporates climate risk assessment for credit underwriting
purposes and reporting criteria for certain corporate obligors
DISCLOSURE PURSUANT TO SECTION 219 OF THE
IRAN THREAT REDUCTION AND SYRIA HUMAN
RIGHTS ACT
Pursuant to Section 219 of the Iran Threat Reduction and Syria
Human Rights Act of 2012 (Section 219), which added
Section 13(r) to the Securities Exchange Act of 1934, as
amended, Citi is required to disclose in its annual or quarterly
reports, as applicable, whether it or any of its affiliates
knowingly engaged in certain activities, transactions or
dealings relating to Iran or with individuals or entities that are
subject to sanctions under U.S. law. Disclosure is generally
required even where the activities, transactions or dealings
were conducted in compliance with applicable law. Citi, in its
related quarterly reports on Form 10-Q, previously disclosed
reportable activities pursuant to Section 219 for the first,
second and third quarters of 2019.
Citi had no reportable activities pursuant to Section 219
for the fourth quarter of 2019.
and transactions. Factors evaluated include consideration of
climate risk to an obligor’s business and physical assets and,
when relevant, consideration of cost-effective options to
reduce greenhouse gas (GHG) emissions. Citi engages clients
to support their low-carbon transition, including through Citi’s
growing environmental finance offerings.
To manage the risks of climate change to Citi’s own
operations and facilities, Citi assesses its exposure to climate
hazards to inform business continuity and resilience planning.
In addition, Citi has developed programs for its properties to
achieve long-term energy efficiency objectives and reduce its
GHG emissions to lessen its impact on climate change.
Citi has adopted the Taskforce on Climate-related
Financial Disclosures (TCFD) recommendations and
published its first TCFD report, Finance for a Climate
Resilient Future, in 2018. As detailed in that report, Citi
participated in the United Nations Environment Finance
Initiative Banking Sector TCFD Project in 2017–2018 and
piloted climate scenario analyses on Citi’s North America oil
and gas exploration and production and U.S. power portfolios,
to understand their exposure to climate risk under select
scenarios. Citi continues to participate in financial industry
collaborations to develop and pilot new methodologies and
approaches for measuring and assessing the potential financial
risks of climate change. Citi is also closely monitoring
regulatory developments on climate risk and sustainable
finance, and actively engaging with regulators on these topics.
For information on Citi’s environmental and social
policies and priorities, see Citi’s website at
www.citigroup.com. Click on “About Us” and then
“Corporate Governance” and “Citizenship Report” or
“Environmental and Social Information.” For information on
Citi’s citizenship and sustainability governance, see Citi’s
2019 Annual Meeting Proxy Statement available at
www.citigroup.com. Click on “Investors” and then “Annual
Reports & Proxy Statements.”
295
UNREGISTERED SALES OF EQUITY SECURITIES, REPURCHASES OF EQUITY SECURITIES AND DIVIDENDS
Unregistered Sales of Equity Securities
None.
Equity Security Repurchases
The following table summarizes Citi’s common stock repurchases during the three months ended December 31, 2019:
In millions, except per share amounts
October 2019
Open market repurchases(1)
Employee transactions(2)
November 2019
Open market repurchases(1)
Employee transactions(2)
December 2019
Open market repurchases(1)
Employee transactions(2)
Total shares
purchased
Average
price paid
per share
Approximate dollar
value of shares that
may yet be purchased
under the plan or
programs
21.6 $
69.77 $
—
—
21.0
—
26.6
—
74.80
—
77.03
—
10,473
N/A
8,902
N/A
6,855
N/A
6,855
Total for 4Q19 and remaining program balance as of December 31, 2019
69.2 $
74.09 $
(1) Represents repurchases under the $17.1 billion 2019 common stock repurchase program (2019 Repurchase Program) that was approved by Citigroup’s Board of
Directors and announced on June 27, 2019. The 2019 Repurchase Program was part of the planned capital actions included by Citi as part of the 2019
Comprehensive Capital Analysis and Review (CCAR). Shares repurchased under the 2019 Repurchase Program were added to treasury stock. The 2019
Repurchase Program expires on June 30, 2020.
(2) Consisted of shares added to treasury stock related to (i) certain activity on employee stock option program exercises where the employee delivers existing shares
to cover the option exercise, or (ii) under Citi’s employee restricted share rewards where shares are withheld to satisfy tax requirements.
N/A Not applicable
Dividends
In addition to Board of Directors’ approval, Citi’s ability to
pay common stock dividends substantially depends on
regulatory approval, including an annual regulatory review of
the results of the CCAR process required by the Federal
Reserve Board and the supervisory stress tests required under
the Dodd-Frank Act. For additional information regarding
Citi’s capital planning and stress testing, see “Capital
Resources—Current Regulatory Capital Standards—Stress
Testing Component of Capital Planning” and “Risk Factors—
Strategic Risks” above. Any dividend on Citi’s outstanding
common stock would also need to be made in compliance with
Citi’s obligations on its outstanding preferred stock.
For information on the ability of Citigroup’s subsidiary
depository institutions to pay dividends, see Note 18 to the
Consolidated Financial Statements.
296
PERFORMANCE GRAPH
Comparison of Five-Year Cumulative Total Return
The following graph and table compare the cumulative total
return on Citi’s common stock with the cumulative total return
of the S&P 500 Index and the S&P Financials Index over the
five-year period through December 31, 2019. The graph and
table assume that $100 was invested on December 31, 2014 in
Citi’s common stock, the S&P 500 Index and the S&P
Financials Index, and that all dividends were reinvested.
Comparison of Five-Year Cumulative Total Return
For the years ended
DATE
31-Dec-2014
31-Dec-2015
31-Dec-2016
31-Dec-2017
31-Dec-2018
31-Dec-2019
Citigroup
100.0
95.9
111.2
141.2
101.0
159.4
S&P 500
Index
100.0
101.4
113.5
138.3
132.2
173.9
S&P
Financials
Index
100.0
98.5
120.9
147.7
128.5
169.8
Note: Citi’s common stock is listed on the NYSE under the
ticker symbol “C” and held by 66,990 common stockholders
of record as of January 31, 2020.
297
CORPORATE INFORMATION
• Mr. Mason joined Citi in 2001 and assumed his current
EXECUTIVE OFFICERS
Citigroup’s executive officers as of February 21, 2020 are:
Name
Raja J. Akram
Age Position and office held
47 Controller and Chief Accounting
Peter Babej
Michael L. Corbat
Jane Fraser
Officer
56 CEO, Asia Pacific
59 Chief Executive Officer
52 President; CEO, Global Consumer
Banking
Bradford Hu
56 Chief Risk Officer
David Livingstone
Mark A. L. Mason
Mary McNiff
Ernesto Torres
Cantú
56 CEO, Europe, Middle East and Africa
50 Chief Financial Officer
49 CEO, Citibank, N.A.
55 CEO, Latin America
Sara Wechter
Rohan Weerasinghe
39 Head of Human Resources
69 General Counsel and Corporate
Secretary
Mike Whitaker
56 Head of Operations and Technology
Paco Ybarra
58 CEO, Institutional Clients Group
Each executive officer has held senior executive or
management positions with Citigroup for at least five years,
except that:
• Mr. Akram joined Citi in 2006 and assumed his current
position in November 2017. Previously, he served as
Deputy Controller since April 2017. He held a number of
other roles in Citi Finance, including Lead Finance
Officer for Treasury and Trade Solutions, Brazil Country
Controller, Brazil Country Finance Officer and Head of
the Corporate Accounting Policy team supporting M&A
activities;
• Mr. Babej joined Citi in 2010 and assumed his current
position in October 2019. Previously, he served as ICG’s
Global Head of the Financial Institutions Group (FIG)
from January 2017 to October 2019 and Global Co-Head
of FIG from 2010 to January 2017. Prior to joining Citi,
Mr. Babej served as Co-Head, Financial Institutions—
Americas at Deutsche Bank, among other roles;
• Ms. Fraser joined Citi in 2004 and assumed her current
position in October 2019. Previously, she served as CEO
of Citi Latin America from June 2015 to October 2019.
She held a number of other roles across the organization,
including CEO of U.S. Consumer and Commercial
Banking and CitiMortgage, CEO of Citi’s Global Private
Bank and Global Head of Strategy and M&A;
• Mr. Livingstone joined Citi in 2016 and assumed his
current position in March 2019. Previously, he served as
Citi Country Officer for Australia and New Zealand since
June 2016. Prior to joining Citi, he had a nine-year career
at Credit Suisse, where he was Vice Chairman of the
Investment Banking and Capital Markets Division for the
EMEA region, Head of M&A and CEO of Credit Suisse
Australia;
298
position in February 2019. Previously, he served as CFO
of ICG since September 2014. He held a number of other
senior operational, strategic and financial executive roles
across the organization, including CEO of Citi Private
Bank, CEO of Citi Holdings and CFO and Head of
Strategy and M&A for Citi’s Global Wealth Management
Division;
• Ms. McNiff joined Citi in 2012 and assumed her current
position in April 2019. Previously, she served as Chief
Auditor since February 2017. She held a number of other
roles across the organization, including Chief Auditor of
GCB, Chief Administrative Officer for Citi Latin America
& Mexico and interim Chief Auditor, ICG. She also
previously led the Global Transformation initiative within
Internal Audit;
• Mr. Torres Cantú joined Citi in 1989 and assumed his
current position in October 2019. Previously, he served as
CEO of Citibanamex since October 2014. He served as
CEO of GCB in Mexico from 2006 to 2011 and CEO of
Crédito Familiar from 2003 to 2006. In addition, he
previously held roles in Citibanamex, including Regional
Director and Divisional Director;
• Ms. Wechter joined Citi in 2004 and assumed her current
position in July 2018. Previously, she served as Citi's
Head of Talent and Diversity as well as Chief of Staff to
Citi CEO Michael Corbat. She served as Chief of Staff to
both Michael O'Neill and Richard Parsons during their
terms as Chairman of Citi's Board of Directors. In
addition, she held roles in Citi's ICG, including Corporate
M&A and Strategy and Investment Banking;
• Mr. Whitaker joined Citi in 2009 and assumed his current
position in November 2018. Previously, he served as
Head of Operations & Technology for ICG since
September 2014 and held various other roles at Citi,
including Head of Securities & Banking Operations &
Technology, Head of ICG Technology and Regional Chief
Information Officer; and
• Mr. Ybarra joined Citi in 1987 and assumed his current
position in May 2019. Previously, he served as ICG’s
Global Head of Markets and Securities Services since
November 2013. In addition, he has held a number of
other roles across ICG, including Deputy Head of ICG,
Global Head of Markets and Co-Head of Global Fixed
Income.
Code of Conduct, Code of Ethics
Citi has a Code of Conduct that maintains its commitment to
the highest standards of conduct. The Code of Conduct is
supplemented by a Code of Ethics for Financial Professionals
(including accounting, controllers, financial reporting
operations, financial planning and analysis, treasury, tax,
strategy and M&A, investor relations and regional/product
finance professionals and administrative staff) that applies
worldwide. The Code of Ethics for Financial Professionals
applies to Citi’s principal executive officer, principal financial
officer and principal accounting officer. Amendments and
waivers, if any, to the Code of Ethics for Financial
Professionals will be disclosed on Citi’s website,
www.citigroup.com.
Both the Code of Conduct and the Code of Ethics for
Financial Professionals can be found on the Citi website by
clicking on “About Us,” and then “Corporate Governance.”
Citi’s Corporate Governance Guidelines can also be found
there, as well as the charters for the Audit Committee, the
Ethics and Culture Committee, the Nomination, Governance
and Public Affairs Committee, the Operations and Technology
Committee, the Personnel and Compensation Committee and
the Risk Management Committee of the Board. These
materials are also available by writing to Citigroup Inc.,
Corporate Governance, 388 Greenwich Street, 17th Floor,
New York, New York 10013.
CITIGROUP BOARD OF DIRECTORS
Michael L. Corbat
Chief Executive Officer
Citigroup Inc.
Duncan P. Hennes
Co-Founder and Partner
Atrevida Partners, LLC
Ellen M. Costello
Former President and CEO
BMO Financial Corporation and
Former U.S. Country Head
BMO Financial Group
Grace E. Dailey
Former Senior Deputy Comptroller
for Bank Supervision Policy and
Chief National Bank Examiner
Office of the Comptroller of the
Currency (OCC)
Barbara Desoer
Former Chief Executive Officer
Citibank, N.A.
John C. Dugan
Chair
Citigroup Inc.
Peter Blair Henry
Dean Emeritus and W. R.
Berkley Professor of Economics
and Finance
New York University
Stern School of Business
Renée J. James
Chairman and CEO
Ampere Computing and
Operating Executive
The Carlyle Group
Eugene (Gene) M. McQuade
Former Chief Executive Officer
Citibank, N.A. and
Former Vice Chairman
Citigroup Inc.
S. Leslie Ireland
Former Assistant Secretary for
Intelligence and Analysis
U.S. Department of the Treasury
Gary M. Reiner
Operating Partner
General Atlantic LLC
Lew W. (Jay) Jacobs, IV
Former President and Managing
Director
Pacific Investment Management
Company LLC (PIMCO)
Diana L. Taylor
Former Superintendent of Banks
State of New York
299
James S. Turley
Former Chairman and CEO
Ernst & Young
Deborah C. Wright
Former Chairman
Carver Bancorp, Inc.
Alexander Wynaendts
Chief Executive Officer and
Chairman of the Management
and Executive Boards
Aegon N.V.
Ernesto Zedillo Ponce de Leon
Director, Center for the
Study of Globalization and
Professor in the Field
of International
Economics and Politics
Yale University
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 21st day of
February, 2020.
Citigroup Inc.
(Registrant)
/s/ Mark A. L. Mason
Mark A. L. Mason
Chief Financial Officer
The Directors of Citigroup listed below executed a power of
attorney appointing Mark A. L. Mason their attorney-in-fact,
empowering him to sign this report on their behalf.
Ellen M. Costello
Grace E. Dailey
Barbara Desoer
John C. Dugan
Duncan P. Hennes
Peter Blair Henry
S. Leslie Ireland
Lew W. (Jay) Jacobs, IV Ernesto Zedillo Ponce de Leon
Renée J. James
Eugene M. McQuade
Gary M. Reiner
Diana L. Taylor
James S. Turley
Deborah C. Wright
Alexander Wynaendts
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
indicated on the 21st day of February, 2020.
/s/ Mark A. L. Mason
Mark A. L. Mason
Citigroup’s Principal Executive Officer and a Director:
/s/ Michael L. Corbat
Michael L. Corbat
Citigroup’s Principal Financial Officer:
/s/ Mark A. L. Mason
Mark A. L. Mason
Citigroup’s Principal Accounting Officer:
/s/ Raja J. Akram
Raja J. Akram
300
Exhibit
Number
EXHIBIT INDEX
Description of Exhibit
3.01+
Restated Certificate of Incorporation of Citigroup, as amended, as in effect on the date hereof.
3.02
4.01
4.02
4.03
4.04
4.05
4.06
4.07
4.08
4.09
4.10
By-Laws of Citigroup, as amended, as in effect on the date hereof, incorporated by reference to the Company’s
Current Report on Form 8-K filed on December 18, 2019 (File No. 001-09924).
Form of Senior Indenture between Citigroup and The Bank of New York Mellon, as trustee, incorporated by
reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-3 filed on November 13, 2013 (File
No. 333-192302).
First Supplemental Indenture, dated as of February 1, 2016, between Citigroup and The Bank of New York Mellon,
as trustee, incorporated by reference to Exhibit 4.01 to the Company’s Current Report on Form 8-K filed on
February 1, 2016 (File No. 001-9924).
Second Supplemental Indenture, dated as of December 29, 2016, between Citigroup and The Bank of New York
Mellon, as trustee, incorporated by reference to Exhibit 4.01 to the Company’s Current Report on Form 8-K filed
on December 29, 2016 (File No. 001-9924).
Third Supplemental Indenture dated as of June 26, 2017 among Citigroup Global Markets Holdings Inc., the
Company and The Bank of New York Mellon, as trustee, to Indenture dated as of November 13, 2013,
incorporated by reference to Exhibit 4.01 to the Company’s Quarterly Report on Form 10-Q filed on August 1,
2017 (File No. 001-09924).
Subordinated Debt Indenture, dated as of April 12, 2001, between the Company and The Bank of New York
Mellon, as successor to JPMorgan Chase Bank (formerly Bank One Trust Company, N.A.), as trustee, incorporated
by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3 filed on February 4, 2013 (No.
333-186425).
First Supplemental Indenture, dated as of August 2, 2004, between the Company and J.P. Morgan Trust Company,
N.A. (formerly Bank One Trust Company, N.A.), as trustee, incorporated by reference to Exhibit 4.13 to the
Company’s Registration Statement on Form S-3/A filed on August 31, 2004 (No. 333-117615).
Second Supplemental Indenture, dated as of May 18, 2016, between Citigroup and The Bank of New York Mellon,
as successor to J.P. Morgan Trust Company, N.A. (formerly Bank One Trust Company, N.A.), as trustee,
incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 20, 2016
(No. 001-9924).
Third Supplemental Indenture, dated as of March 1, 2017, between Citigroup and The Bank of New York Mellon,
as successor to J.P. Morgan Trust Company, N.A. (formerly Bank One Trust Company, N.A.), as trustee,
incorporated by reference to Exhibit 4.11 to the Company’s Registration Statement on Form S-3 filed on March 1,
2017 (No. 333-216372).
Indenture, dated as of March 15, 1987, between Primerica Corporation, a New Jersey corporation, and The Bank of
New York, as trustee, incorporated by reference to Exhibit 4.01 to the Company’s Registration Statement on Form
S-3 filed on December 8, 1992 (No. 03355542).
First Supplemental Indenture, dated as of December 15, 1988, among Primerica Corporation, Primerica Holdings,
Inc. and The Bank of New York, as trustee, incorporated by reference to Exhibit 4.02 to the Company’s
Registration Statement on Form S-3 filed on December 8, 1992 (No. 03355542).
301
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
Second Supplemental Indenture, dated as of January 31, 1991, between Primerica Holdings, Inc. and The Bank of
New York, as trustee, incorporated by reference to Exhibit 4.03 to the Company’s Registration Statement on Form
S-3 filed on December 8, 1992 (No. 03355542).
Third Supplemental Indenture, dated as of December 9, 1992, among Primerica Holdings, Inc., Primerica
Corporation and The Bank of New York, as trustee, incorporated by reference to Exhibit 5 to the Company’s Form
8-A dated December 21, 1992, with respect to its 7 3/4% Notes Due June 15, 1999 (No. 001-09924).
Fourth Supplemental Indenture, dated as of November 2, 1998, between the Company and The Bank of New York,
as trustee, incorporated by reference to Exhibit 4.01 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 (No. 001-09924).
Fifth Supplemental Indenture, dated as of December 9, 2008, between the Company and The Bank of New York
Mellon, as trustee, incorporated by reference to Exhibit 4.04 to the Company’s Current Report on Form 8-K filed
on December 11, 2008 (No. 001-09924).
Sixth Supplemental Indenture, dated as of December 20, 2012, between the Company and The Bank of New York
Mellon, as trustee, providing for the issuance of debt securities, incorporated by reference to Exhibit 4.5 to the
Company’s Current Report on Form 8-K filed on December 21, 2012 (No. 001-09924).
Seventh Supplemental Indenture, dated as of May 18, 2016, between Citigroup Inc. and The Bank of New York
Mellon, as trustee, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on
May 20, 2016 (No. 001-9924).
Senior Debt Indenture, dated as of June 1, 2005, among Citigroup Funding Inc., the Company and The Bank of
New York Mellon, as successor trustee to JPMorgan Chase Bank, N.A., incorporated by reference to Exhibit 4(b)
to the Company’s Registration Statement on Form S-3 filed on March 13, 2006 (No. 333-132370-01).
Second Supplemental Indenture, dated as of December 20, 2012, among Citigroup Funding Inc., the Company and
The Bank of New York Mellon, as successor trustee to JPMorgan Chase Bank, N.A., incorporated by reference to
Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on December 21, 2012 (No. 001-09924).
Indenture, dated as of July 23, 2004, between the Company and The Bank of New York Mellon, as successor
trustee to JPMorgan Chase Bank, as trustee, incorporated by reference to Exhibit 4.28 to the Company’s
Registration Statement on Form S-3 filed on July 23, 2004 (No. 333-117615).
Form of Indenture, between the Company and The Bank of New York Mellon, as successor trustee to JPMorgan
Chase Bank, incorporated by reference to Exhibit 4.01 to the Company’s Post-Effective Amendment No. 2 to the
Registration Statement on Form S-3 filed on May 4, 2007 (File No. 333-135163).
Form of Indenture, between the Company and The Bank of New York Mellon, as successor trustee to JPMorgan
Chase Bank (formerly known as The Chase Manhattan Bank), incorporated by reference to Exhibit 4.11 to the
Travelers Group Inc. Registration Statement on Form S-3 filed on September 20, 1996 (File No. 333-12439).
Senior Debt Indenture, dated as of March 8, 2016, between Citigroup Global Markets Holdings Inc., the Company
and The Bank of New York Mellon, as trustee, incorporated by reference to Exhibit 4.1 to the Company’s Current
Report on Form 8-K filed on March 9, 2016 (File No. 1-9924).
Form of Capital Securities Guarantee Agreement between the Company, as Guarantor, and The Bank of New York
Mellon, as Guarantee Trustee, incorporated by reference to Exhibit 4.32 to the Company’s Registration Statement
on Form S-3 filed on July 2, 2004 (File No. 333-117615).
Amended and Restated Declaration of Trust for Citigroup Capital XIII, incorporated by reference to Exhibit 4.02
to the Company’s Current Report on Form 8-K filed on September 30, 2010 (File No. 1-9924).
302
4.25
4.26
4.27
4.28+
10.01*
10.02.1*
10.02.2*
10.02.3*
10.03*
10.04.1*
10.04.2*
10.05*
10.06*
10.07.1*
10.07.2*
10.08*
Form of Amended and Restated Declaration of Trust for Citigroup Capital XVIII, incorporated by reference to
Exhibit 4.07 to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form S-3
(No. 333-135163).
Form of Amended and Restated Declaration of Trust for Citigroup Capital III (previously known as Travelers
Capital III), incorporated by reference to Exhibit 4.8 to Travelers Group Inc.’s Registration Statement on Form S-3
(File No. 333-12439).
Specimen Physical Common Stock Certificate of Citigroup, incorporated by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K filed on May 9, 2011 (File No. 001-09924).
Description of Citigroup’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
Citi Discretionary Incentive and Retention Award Plan (as Amended and Restated Effective as of January 1, 2015),
incorporated by reference to Exhibit 10.01 to the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2014 (File No. 001-09924) (the “Company’s 2014 10-K”).
Citigroup 2009 Stock Incentive Plan (as amended and restated effective April 24, 2013), incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 26, 2013 (File No. 001-09924).
Citigroup 2014 Stock Incentive Plan (as amended and restated effective April 24, 2018), incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 30, 2018 (File No. 001-09924).
Citigroup 2019 Stock Incentive Plan, incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on April 17, 2019 (File No. 001-09924).
Citigroup Inc. Deferred Cash Award Plan (as Amended and Restated Effective as of January 1, 2015), incorporated
by reference to Exhibit 10.03 to the Company’s 2014 10-K.
Form of Citigroup Inc. CAP/DCAP Agreement, incorporated by reference to Exhibit 10.01 to the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015 (File No. 001-09924).
Form of Citigroup Inc. CAP/DCAP Agreement (for awards granted on February 14, 2019 and in future years),
incorporated by reference to Exhibit 10.02 to the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2019 (File No. 001-09924).
Form of Citigroup Inc. CAP Agreement, incorporated by reference to Exhibit 10.01 to the Company’s Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2019 (File No. 001-09924).
The Amended and Restated 2011 Citigroup Executive Performance Plan (as amended and restated as of January 1,
2016, and as further amended on February 16, 2017), incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 10-Q filed for the quarterly period ended March 31, 2017 (File No. 001-09924).
Form of Citigroup Inc. Performance Share Unit Award Agreement (awards dated February 16, 2017 and in future
years), incorporated by reference to Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2017 (File No. 001-09924).
Form of Citigroup Inc. Performance Share Unit Award Agreement (awards dated February 14, 2019 and in future
years), incorporated by reference to Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2019 (File No. 001-09924).
Citigroup Management Committee Termination Notice and Non-Solicitation Policy, effective October 2, 2006,
incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 6, 2006
(File No. 001-09924).
10.09.1*
Citicorp Deferred Compensation Plan, effective October 1995, incorporated by reference to Exhibit 10 to
Citicorp’s Registration Statement on Form S-8 filed on February 15, 1996 (File No. 333-00983).
303
10.09.2*
10.09.3*
10.09.4*
10.10.1*
10.10.2*
10.10.3*
10.10.4*
10.10.5*
10.10.6*
10.10.7*
10.11*
10.12*
10.13*
10.14+*
Amendment to the Citicorp Deferred Compensation Plan, incorporated by reference to Exhibit 10.18.2 to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 001-09924) (the
“Company’s 1999 10-K”).
Amendment to the Citicorp Deferred Compensation Plan, effective as of September 28, 2001, incorporated by
reference to Exhibit 10.17.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2001 (File No. 001-09924).
Amendment to the Citicorp Deferred Compensation Plan, effective November 22, 2009, incorporated by reference
to Exhibit 10.01.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009
(File No. 001-09924) (the “Company’s 2009 10-K”).
Supplemental ERISA Compensation Plan of Citibank, N.A. and Affiliates, as amended and restated (the “Citibank
Supplemental ERISA Plan”), incorporated by reference to Exhibit 10.(G) to Citicorp’s Annual Report on Form 10-
K for the fiscal year ended December 31, 1997 (File No. 001-05378).
Amendment to the Citibank Supplemental ERISA Plan, effective January 1, 2000, incorporated by reference to
Exhibit 10.21.2 to the Company’s 1999 10-K.
Resolution Amending the Citibank Supplemental ERISA Plan, incorporated by reference to Exhibit 10.04.1 to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (File No. 001-09924).
Amendment to the Citibank Supplemental ERISA Plan, effective January 1, 2009, incorporated by reference to
Exhibit 10.01.4 to the Company’s 2009 10-K.
Amendment to the Citibank Supplemental ERISA Plan, effective November 22, 2009, incorporated by reference to
Exhibit 10.01.5 to the Company’s 2009 10-K.
Amendment to the Citibank Supplemental ERISA Plan, effective December 31, 2012, incorporated by reference to
Exhibit 10.01.6 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (File
No. 001-09924).
Amendment to the Citibank Supplemental ERISA Plan, effective December 31, 2018, incorporated by reference to
Exhibit 10.09.7 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File
No. 001-09924).
Citigroup Inc. Omnibus Non-Qualified Plan Amendment, effective as of June 2, 2014, incorporated by reference to
Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 (File
No. 001-09924).
Letter Agreement, dated December 21, 2011, between Citigroup Inc. and Michael Corbat, incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 22, 2011 (File No.
001-09924).
Citigroup Inc. Non-Employee Directors Compensation Plan (effective as of January 1, 2008), incorporated by
reference to Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2007 (File No. 001-09924).
Citigroup Inc. Off-Cycle Award Agreement for Deferred Stock Award and Deferred Cash Award granted to Jane
Fraser (dated November 25, 2019).
10.15+*
Agreement between Stephen Bird and Citibank, N.A. (dated November 8, 2019).
21.01+
Subsidiaries of Citigroup.
304
23.01+
Consent of KPMG LLP, Independent Registered Public Accounting Firm.
24.01+
Powers of Attorney.
31.01+
Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.02+
Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01+
99.01+
101.01+
104
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
List of Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act of 1934, formatted in inline
XBRL.
Financial statements from the Annual Report on Form 10-K of Citigroup for the fiscal year ended December 31,
2019, filed on February 21, 2020, formatted in inline XBRL: (i) the Consolidated Statement of Income, (ii) the
Consolidated Balance Sheet, (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated
Statement of Cash Flows and (v) the Notes to Consolidated Financial Statements.
The cover page of this Current Report on Form 10-K, formatted in inline XBRL.
The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company does
not exceed 10% of the total assets of the Company and its consolidated subsidiaries. The Company will furnish copies of any such
instrument to the SEC upon request.
Copies of any of the exhibits referred to above will be furnished at a cost of $0.25 per page (although no charge will be made for the
2019 Annual Report on Form 10-K) to security holders who make written request to Citigroup Inc., Corporate Governance, 388
Greenwich Street, New York, NY 10013.
* Denotes a management contract or compensatory plan or arrangement.
+ Filed herewith.
305
Stockholder Information
Citigroup common stock is listed on the NYSE under the
ticker symbol “C.” Citigroup preferred stock Series J, K and S
are also listed on the NYSE.
Because Citigroup’s common stock is listed on the NYSE,
the Chief Executive Officer is required to make an annual
certification to the NYSE stating that he was not aware of
any violation by Citigroup of the corporate governance listing
standards of the NYSE. The annual certification to that effect
was made to the NYSE on May 13, 2019.
As of January 31, 2020, Citigroup had approximately 66,990
common stockholders of record. This figure does not
represent the actual number of beneficial owners of common
stock because shares are frequently held in “street name”
by securities dealers and others for the benefit of individual
owners who may vote the shares.
Transfer Agent
Stockholder address changes and inquiries regarding stock
transfers, dividend replacement, 1099-DIV reporting and
lost securities for common and preferred stock should be
directed to:
Computershare
P.O. Box 505004
Louisville, KY 40233-5004
Telephone No. 781 575 4555
Toll-free No. 888 250 3985
E-mail address: shareholder@computershare.com
Web address: www.computershare.com/investor
Exchange Agent
Holders of Golden State Bancorp, Associates First Capital
Corporation or Citicorp common stock should arrange to
exchange their certificates by contacting:
Computershare
P.O. Box 505004
Louisville, KY 40233-5004
Telephone No. 781 575 4555
Toll-free No. 888 250 3985
E-mail address: shareholder@computershare.com
Web address: www.computershare.com/investor
On May 9, 2011, Citi effected a 1-for-10 reverse stock split.
All Citi common stock certificates issued prior to that date
must be exchanged for new certificates by contacting
Computershare at the address noted above.
Citi’s 2019 Form 10-K filed with the SEC, as well as other
annual and quarterly reports, are available from Citi
Document Services toll free at 877 936 2737 (outside the
United States at 716 730 8055), by e-mailing a request to
docserve@citi.com or by writing to:
Citi Document Services
540 Crosspoint Parkway
Getzville, NY 14068
Stockholder Inquiries
Information about Citi, including quarterly earnings
releases and filings with the U.S. Securities and Exchange
Commission, can be accessed via Citi’s website at
www.citigroup.com. Stockholder inquiries can also be
directed by e-mail to shareholderrelations@citi.com.
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The cover and editorial section of this annual report are printed on McCoy, manufactured by Sappi North America with 10% recycled content
and FSC® Chain of Custody Certified. 100% of the electricity used to manufacture McCoy is Green-e® certified renewable energy.
The financial section of this annual report is printed on FSC® certified Accent Opaque from International Paper.
Citi, Citi and Arc Design and other marks used herein are service marks of Citigroup Inc. or its affiliates, used and registered throughout the world.
Cover photo: U.S. wind and solar project owned by NextEra Energy Partners, LP and KKR. Financed by Citi.
www.citigroup.com
© 2020 Citigroup Inc.
1921382 CIT24028 03/20
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