New York Citigroup today reported net income for the third quarter 2009 of $101 million, and a $0.27 loss per share, based on an average 12.1 billion shares outstanding2. Third quarter revenues were $20.4 billion. Results included $8.0 billion in net credit losses and an $802 million net loan loss reserve build.
During the third quarter, Citigroup completed its previously announced exchange offers. This resulted in an $851 million after-tax gain, but also in a $3.1 billion reduction in income available to common shareholders, resulting in an incremental net $0.18 loss per share. The reported loss per share also reflected preferred stock dividends, which did not affect net income but reduced income available to common shareholders by $288 million or $0.02 per share.
"This was an important quarter for us. The completion of the exchange offers and the significant actions taken during the last few quarters have created a strong foundation. With strong capital, strong liquidity and a strong franchise, we are looking forward. We continue to execute steadily against our plan, and sustainable profitability remains our primary goal in the near term. While consumer credit trends are improving in international markets, the U.S. consumer credit environment remains challenging," said Vikram Pandit, Chief Executive Officer of Citigroup.
"Our Tier 1 and Tier 1 Common ratios ended the quarter at 12.7% and 9.1% respectively. Our client franchise continues to perform well. Customer deposits grew $28 billion during the quarter, Securities and Banking has produced record year-to-date revenues and Global Transaction Services has produced record year-to-date net income and both had a solid third quarter. We are also seeing increased customer activity in our Global Consumer business."
"Looking forward, we will continue to focus on sustainable profitability and growth, repaying TARP and helping support America's economic recovery."
- Citigroup revenues were $20.4 billion. Managed revenues3 were $23.1 billion. Excluding a $1.4 billion gain from the impact of the exchange offers and the $11.1 billion Smith Barney gain on sale, managed revenues were stable versus the prior quarter.
- Citicorp revenues of $13.0 billion (managed revenues3 of $14.8 billion) included a negative $1.7 billion credit value adjustment ("CVA").
- Citi Holdings revenues of $6.7 billion (managed revenues3 of $7.6 billion) included $1.5 billion of positive net revenue marks.
- Net credit losses remained elevated at $8.0 billion, but were down from $8.4 billion in the prior quarter. Managed net credit losses3 were $11.0 billion, down from $11.5 billion in the prior quarter.
- Net loan loss reserve build was $802 million, down from $3.9 billion in the prior quarter.
- The allowance for loan losses increased to $36.4 billion, or 5.9% of total loans.
- Completion of exchange offers resulted in an additional $64 billion of Tier 1 Common and $60 billion of Tangible Common Equity4. As a result, Tangible Common Equity and Tier 1 Common ratios improved during the third quarter to 10.3% and 9.1%, respectively. Tier 1 Capital remained stable at 12.7%. Tangible book value per share was $4.47.
- Deposits were $833 billion, up $28 billion from the second quarter of 2009. Deposit growth was strong in both Transaction Services and Regional Consumer Banking.
- Citi Holdings assets declined $32 billion to $617 billion during the quarter and are now down $281 billion from peak levels in the first quarter 2008.
- Enhanced liquidity position – ended the quarter with $244 billion in cash and due from banks, and deposits with banks, up from $209 billion at June 30, 2009.
- Completed sales of Nikko Cordial Securities and Nikko Asset Management on October 1, 2009, which will result in a further approximate $25 billion decline in Citi Holdings assets in the fourth quarter of 2009.
- Completed more than 24,000 mortgage loan modifications during the quarter. In addition, at the end of the quarter, Citigroup had more than 63,000 loans in the trial modification period under the Home Affordable Modification Program ("HAMP").
Citigroup revenues were $20.4 billion, down from $30.0 billion in the prior quarter, which included an $11.1 billion gain from the Smith Barney transaction. Managed revenues3 were $23.1 billion, down from $33.1 billion in the prior quarter. Third quarter managed revenues included a $1.4 billion gain from the extinguishment of debt associated with the exchange offers. Excluding the impact of this gain and the Smith Barney transaction from the prior quarter, managed revenues were down 1% sequentially.
Citicorp revenues were $13.0 billion, down from $15.0 billion in the prior quarter. Managed revenues3 were $14.8 billion, down from $16.6 billion in the prior quarter. Excluding the impact of negative net revenue marks in each quarter, managed revenues were down approximately 6% sequentially due primarily to declines in Securities and Banking revenue.
- Regional Consumer Banking revenues were $5.7 billion, up 1% sequentially. Managed revenues3 of $7.5 billion were up 3% from the prior quarter. Asia, EMEA and Latin America all showed sequential increases in revenues. North America revenues were flat with the prior quarter, as increasing credit losses flowing through the securitization trusts offset increases in net interest revenue due to higher deposit and loan volumes. North America managed revenues3 were up 4% sequentially. Average deposits were up 3% sequentially to $275 billion, primarily driven by growth in North America and Asia. Investment AUMs increased 7% sequentially to $115 billion on improving markets and stronger investment sales, particularly in Asia. Average retail banking loans increased 4% sequentially to $77.7 billion, while Citi-branded cards average managed loans3 were up about 2% to $112.7 billion.
- Securities and Banking revenues declined to $4.9 billion from $6.9 billion in the prior quarter, reflecting CVA of negative $1.7 billion. Excluding the impact of CVA, revenues were $6.6 billion which compares to an equivalent of $7.7 billion in the prior quarter. Investment banking revenues were $1.2 billion, flat with the prior quarter as an uptick in advisory revenue offset modest declines in debt underwriting. The continued improvement in market liquidity, traditional seasonal factors and lower volatility in many markets resulted in diminished trading opportunities during the quarter, particularly in equity derivatives, credit, and securitized products. Equity markets revenues were $446 million ($1.3 billion excluding CVA) versus $1.1 billion ($1.8 billion excluding CVA) in the prior quarter. Fixed income markets revenues were $3.9 billion ($4.7 billion excluding CVA) versus $5.6 billion ($5.7 billion excluding CVA) in the prior quarter.
- Transaction Services revenues were $2.5 billion, in line with the prior quarter, as higher fees and higher deposits offset spread compression. Average deposits and other customer liability balances increased $26 billion during the quarter to $314 billion. End of period assets under custody increased by $0.7 trillion to $11.8 trillion.
Citi Holdings revenues were $6.7 billion versus $15.8 billion in the prior quarter, which included the $11.1 billion gain from the Smith Barney transaction. Managed revenues3 were $7.6 billion during the quarter, up 25% from the prior quarter excluding the Smith Barney gain, driven primarily by positive net revenue marks within the Special Asset Pool (see Appendix A). The current quarter's results include a $320 million pre-tax gain on the sale of Citigroup's managed futures business to the Smith Barney JV.
Corporate/Other revenues were $671 million versus a $741 million loss in the prior quarter, primarily due to the $1.4 billion gain on debt extinguishment associated with the exchange offers.
Citigroup's credit costs of $9.1 billion included net credit losses of $8.0 billion, a $0.8 billion net loan loss reserve build and $0.3 billion of policyholder benefits and claims. Total credit costs were down 28% sequentially from $12.7 billion in the prior quarter.
- Net credit losses declined $386 million or 5% sequentially. Citigroup consumer managed net credit losses3 were $9.4 billion, down 3% sequentially, driven by lower losses in Retail Partner Cards and North America residential real estate in Citi Holdings. The sequential decline in net credit losses in North America residential real estate primarily reflected a higher volume of trial loan modifications under the HAMP. Loans in the trial modification period under the HAMP continue to remain delinquent even if the reduced payments agreed to under the program are made by the borrower. So long as the required payments are being made, the loans are not charged off. The decision to either charge off or record the loan as a successful modification is made only at the conclusion of the trial period. During the quarter, the recognition of $100 million of net credit losses was deferred because the underlying mortgages were in the trial modification period under the HAMP; however the loan loss reserve was increased to offset this impact. The impact of the HAMP also contributed to the $2.0 billion sequential increase in loans 90+ days past due in the North America residential real estate lending business.
- Outside North America, Citicorp consumer net credit losses were up 5% or $59 million sequentially, driven by increases in Latin America and EMEA. Within Regional Consumer Banking, loans 90+ days past due declined across all regions.
- Total corporate net credit losses declined sequentially from $1.7 billion to $1.5 billion.
- Citigroup's loan loss reserve build for the quarter was $3.1 billion lower than the prior quarter and consisted of a net build of $893 million for consumer loans, and a net release of $91 million for corporate loans. The corporate loan portfolio declined by $13 billion in the third quarter, and overall credit characteristics of this portfolio stabilized. While the consumer loan loss reserve build was lower than the second quarter of 2009, the months of concurrent coverage increased to 13.3 from 12.7 sequentially.
- Citigroup's total allowance for loan losses was $36.4 billion, up from $35.9 billion in the prior quarter, while its total allowance for loan losses increased to 5.9% of total loans from 5.6% in the prior quarter.
Citigroup's operating expenses were $11.8 billion, down from $12.0 billion in the prior quarter. Quarterly operating expenses were down $3.8 billion from the fourth quarter of 2007, reflecting ongoing reengineering efforts and divestitures of noncore businesses.
Citigroup's tax provision for the quarter was a $1.1 billion benefit reflecting a higher proportion of income earned and indefinitely reinvested in countries with relatively lower tax rates as well as a higher proportion of income from tax advantaged sources.
Discontinued operations net loss was $418 million versus a net loss of $142 million in the prior quarter.
Citigroup's net income was $101 million versus $4.3 billion in the second quarter. Excluding the Smith Barney gain on sale, net income was up $2.5 billion sequentially, benefitting from lower credit costs and the gain on debt extinguishment associated with the exchange offers
- Citicorp's income from continuing operations was $2.3 billion, down $0.7 billion from the prior quarter, due primarily to a higher negative CVA and lower Securities and Banking revenues, partially offset by decreases in credit costs and a lower effective tax rate.
- Citi Holdings' loss from continuing operations was $1.8 billion, versus a loss of $5.3 billion in the prior quarter excluding the Smith Barney gain on sale, driven by lower credit costs and positive net revenue marks.
- Total assets were $1.9 trillion, up 2% from the prior quarter primarily reflecting growth in cash and due from banks, and deposits with banks, partially offset by declining loans and securities.
Vikram Pandit, Chief Executive Officer, and John Gerspach, Chief Financial Officer, will host a conference call today at 11:00 AM (EDT). A live webcast of the presentation, as well as financial results and presentation materials, will be available at http://www.citigroup.com/citi/fin. A replay of the webcast will be available at http://www.citigroup.com/citi/fin/pres.htm. Dial-in numbers for the conference call are as follows: (877) 700-4194 in the U.S.; (706) 679-8401 outside of the U.S. The passcode for all numbers is 28581886.
Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 140 countries. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Additional information may be found at www.citigroup.com or www.citi.com.
Additional financial, statistical, and business-related information, as well as business and segment trends, is included in a Financial Supplement. Both the earnings release and the Financial Supplement are available on Citigroup's website at www.citigroup.com or www.citi.com.
Certain statements in this document are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in Citigroup's filings with the Securities and Exchange Commission.
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1 Impact of exchange offers defined as: (Gain on Extinguishment of Debt + Impact of Exchange Offer on Retained Earnings)/Average Common Shares Outstanding = ($851 million + $(3,055) million)/12.1 billion average shares = $(0.18).
2 At September 30, 2009, there were 22.9 billion common shares outstanding, reflecting completion of all stages of the exchange offers.
3 Managed metrics are non-GAAP measures. See Appendix C for additional information on these metrics.
4 Tier 1 Common, Tangible Common Equity and related ratios are non-GAAP measures. See Appendix C for additional information on these metrics.