FINANCIAL REVIEW
AND FORM 10-Q
THIRD QUARTER
1997
<PAGE>
TABLE OF CONTENTS PAGE
FINANCIAL SUMMARY...........................................................1
BUSINESS DISCUSSION.........................................................4
Earnings by Global Business Area.........................................4
Global Consumer..........................................................5
Citibanking...........................................................6
Cards.................................................................7
Private Bank..........................................................9
Global Consumer in Emerging Markets..................................10
Global Consumer in Developed Markets.................................11
Consumer Portfolio Review............................................11
Global Corporate Banking................................................14
Emerging Markets.....................................................15
Global Relationship Banking..........................................17
Corporate Items.........................................................18
MANAGING GLOBAL RISK.......................................................18
Liquidity...............................................................18
Price Risk..............................................................19
Price Risk in Non-Trading Portfolios.................................20
Price Risk in Trading Portfolios.....................................21
Estimated Fair Value of Financial Instruments...........................21
Capital.................................................................22
STATEMENT OF INCOME ANALYSIS...............................................25
Net Interest Revenue (Taxable Equivalent Basis).........................25
Fee and Commission Revenue..............................................26
Trading-Related Revenue.................................................27
Securities Transactions.................................................28
Other Revenue...........................................................28
Provision and Credit Loss Reserves......................................29
Operating Expense.......................................................31
Restructuring Expense...................................................31
Income Taxes............................................................32
Effect of Credit Card Securitization Activity...........................33
CONSOLIDATED FINANCIAL STATEMENTS..........................................34
Consolidated Statement of Income........................................34
Consolidated Balance Sheet..............................................35
Consolidated Statement of Changes in Stockholders' Equity...............36
Consolidated Statement of Cash Flows....................................37
Consolidated Balance Sheet -- CITIBANK, N.A. and Subsidiaries.........38
OTHER FINANCIAL INFORMATION................................................39
Securities..............................................................39
Trading Account Assets and Liabilities..................................39
Trading and End-User Derivative and Foreign Exchange Contracts..........40
Cash-Basis, Renegotiated, and Past Due Loans............................42
Other Real Estate Owned (OREO) and Assets Pending Disposition...........42
Details of Credit Loss Experience.......................................43
Calculation of Earnings Per Share.......................................44
Cross-Border Outstandings...............................................44
Average Balances and Interest Rates (Taxable Equivalent Basis)..........46
FORM 10-Q..................................................................48
FORM 10-Q CROSS-REFERENCE INDEX.........................................49
SIGNATURES.................................................................51
<PAGE>
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FINANCIAL SUMMARY
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<TABLE>
<CAPTION>
Third Quarter Nine Months
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
NET INCOME (In Millions of Dollars)............................. $511 $935 $2,530 $2,801
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NET INCOME PER SHARE (A)
On Common and Common Equivalent Shares.......................... $1.01 $1.85 $5.13 $5.53
Assuming Full Dilution.......................................... $1.01 $1.85 $5.12 $5.45
COMMON STOCKHOLDERS' EQUITY PER SHARE........................... $42.94 $38.94 - -
CLOSING STOCK PRICE AT QUARTER END.............................. $133.94 $90.63 - -
DIVIDENDS DECLARED PER COMMON SHARE............................. $0.525 $0.45 $1.575 $1.35
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FINANCIAL RATIOS
Return on Assets................................................ 0.68% 1.39% 1.16% 1.40%
Return on Common Stockholders' Equity........................... 9.64% 19.87% 16.98% 20.27%
Return on Total Stockholders' Equity............................ 9.42% 18.57% 16.08% 18.85%
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<CAPTION>
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
CAPITAL (Dollars in Billions) (see page 22) 1997 1997 1997 1996 1996
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<S> <C> <C> <C> <C> <C>
Tier 1................................................ $20.7 $20.6 $20.3 $19.8 $19.3
Total (Tier 1 and 2).................................. 30.4 30.1 29.3 28.9 28.5
Tier 1 Ratio.......................................... 8.25% 8.18% 8.39% 8.39% 8.36%
Total Ratio (Tier 1 and 2)............................ 12.16% 11.96% 12.11% 12.23% 12.40%
Leverage Ratio........................................ 7.14% 7.30% 7.39% 7.42% 7.47%
Common Equity as a Percentage of Total Assets......... 6.53% 6.41% 6.50% 6.63% 6.74%
Total Equity as a Percentage of Total Assets.......... 7.16% 7.04% 7.16% 7.37% 7.50%
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<CAPTION>
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
EARNINGS ANALYSIS (In Millions of 1997 1997 1997 1996 1996 1996 1996
Dollars)
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<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenue...................... $5,541 $5,311 $5,196 $5,365 $5,010 $4,993 $4,828
Effect of Credit Card Securitization 408 437 434 389 360 349 294
Activity (B)
Net Cost To Carry (C).............. (5) (1) (3) (7) (8) (26) (5)
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ADJUSTED REVENUE................... 5,944 5,747 5,627 5,747 5,362 5,316 5,117
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Total Operating Expense............ 4,237 3,173 3,169 3,281 3,078 2,978 2,860
Net OREO Benefits (D).............. 16 37 10 7 8 17 12
Restructuring Charge............... (889) - - - - - -
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ADJUSTED OPERATING EXPENSE......... 3,364 3,210 3,179 3,288 3,086 2,995 2,872
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OPERATING MARGIN................... 2,580 2,537 2,448 2,459 2,276 2,321 2,245
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Global Consumer Net Write-Offs..... 452 488 459 455 440 420 413
Effect of Credit Card Securitization 408 437 434 389 360 349 294
Activity (B)
Net Cost to Carry and
Net OREO (Benefits) Costs (C) (D) (4) (3) 1 - 3 (7) (1)
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ADJUSTED GLOBAL CONSUMER CREDIT COSTS 856 922 894 844 803 762 706
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Global Corporate Banking
Net Write-Offs (Recoveries)...... 9 (1) (61) (1) (41) 9 31
Net Cost to Carry and
Net OREO Benefits (C) (D)........ (17) (35) (14) (14) (19) (36) (16)
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ADJUSTED GLOBAL CORPORATE
BANKING CREDIT (BENEFITS) COSTS.. (8) (36) (75) (15) (60) (27) 15
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OPERATING MARGIN LESS CREDIT COSTS. 1,732 1,651 1,629 1,630 1,533 1,586 1,524
Additional Provision (E)........... 25 25 25 50 50 50 50
Restructuring Charge............... 889 - - - - - -
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INCOME BEFORE TAXES................ 818 1,626 1,604 1,580 1,483 1,536 1,474
Income Taxes....................... 307 602 609 593 548 584 560
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NET INCOME......................... $ 511 $1,024 $ 995 $ 987 $ 935 $ 952 $ 914
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</TABLE>
(A) Based on net income less preferred stock dividends, except when conversion
is assumed. See page 44 for details.
(B) Commencing with the 1997 first quarter, includes effect related to credit
card receivables held for sale.
(C) Includes the net cost to carry cash-basis loans and other real estate
owned ("OREO").
(D) Includes gains and losses on sales, direct revenue and expense, and
writedowns of OREO.
(E) Represents amounts in excess of net write-offs. See page 29 for
discussion.
1
<PAGE>
Citicorp income for the 1997 third quarter was $1.1 billion or $2.19 per fully
diluted common share, up 14% and 18%, respectively, from the 1996 third quarter,
excluding the $556 million after-tax effect of a restructuring charge ($889
million pretax). Net income including the charge was $511 million or $1.01 per
fully diluted common share. Earnings growth excluding the charge was led by the
Global Corporate Banking businesses, and Citibanking and the Private Bank,
offset by lower Cards earnings primarily due to higher credit costs in U.S.
bankcards. Income for the 1997 nine months was $3.1 billion or $6.30 per fully
diluted common share, up 10% and 16%, excluding the restructuring charge, and
$2.5 billion or $5.12 including the charge. Excluding the charge, return on
common equity was 20.8% in both periods, and return on average assets was 1.42%
in the quarter and 1.41% in the nine months, all improved over 1996.
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EXCLUDING EFFECT OF RESTRUCTURING CHARGE
1997 Third 1997 Nine
Quarter Months
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Income (In Millions of Dollars)..................... $1,067 $3,086
Income Per Share:
On Common and Common Equivalent Shares.......... $2.19 $6.31
Assuming Full Dilution.......................... $2.19 $6.30
Return on Assets.................................... 1.42% 1.41%
Return on Common Stockholders' Equity............... 20.77% 20.84%
Return on Total Stockholders' Equity................ 19.57% 19.58%
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Global Consumer earned $481 million, up 4%, and $1.4 billion, down 1%, in the
1997 third quarter and nine months, excluding the restructuring charge. Global
Consumer net income including the charge was $130 million and $1.1 billion for
the quarter and nine months. Earnings in Global Corporate Banking, excluding the
charge, were $689 million, up 34%, and $2.0 billion, up 24%, in the quarter and
nine months. Global Corporate Banking net income including the charge was $521
million and $1.8 billion for the quarter and nine months.
John S. Reed, Citicorp Chairman, said: "Our results in the quarter were good in
the face of continued pressure on our margins and pricing and an increasingly
competitive environment in virtually all markets. Our customers, both consumer
and corporate, demand that we continuously improve the ways we serve them, even
at reduced prices. We are responding to these conditions, which are not going
away, by pursuing aggressive and focused business strategies in all markets, by
giving central attention to quality, and by realigning our business and
processing structures to give them a global configuration. The actions to
standardize and consolidate our operations and technology platforms and improve
our efficiency will take place over the next 12 to 18 months, and we believe we
can manage the dynamics we confront while improving our growth opportunities."
Events in Asia in the third quarter were not significant to the results of that
quarter, although the impact of continuing events in Asia may affect our overall
business related to that region.
Adjusted revenue of $5.9 billion and $17.3 billion in the 1997 third quarter and
nine months was up $582 million or 11% and $1.5 billion or 10% from the
comparable 1996 periods. Revenue in Global Consumer increased 5% in the quarter
to $3.5 billion, and was up 6% to $10.5 billion in the nine months, led mostly
by growth in Citibanking and the Private Bank. Citibanking revenue in both 1996
periods included the $64 million assessment related to the U.S. Savings
Association Insurance Fund ("SAIF") and a $42 million gain on the sale of the
consumer mortgage portfolio in the United Kingdom. Global Consumer in the
emerging markets grew revenue by 9%, while the developed markets grew 3%. Global
Corporate Banking revenue was up 24% to $2.2 billion in the third quarter, as
Emerging Markets grew 26% and Global Relationship Banking grew 21%; and was up
18% to $6.1 billion in the nine months. Excluding the effect of a stronger
dollar on foreign currency translation, adjusted revenue was up 14% and 12% in
the quarter and nine months.
Adjusted net interest revenue (taxable equivalent basis) of $3.5 billion and
$10.4 billion in the quarter and nine months was up $123 million or 4% and $412
million or 4% from the 1996 periods as the impact of asset growth in most
markets was partially offset by spread compression. Adjusted fee and commission
revenue of $1.5 billion and $4.2 billion was up
2
<PAGE>
$135 million or 10% and $307 million or 8% from 1996, led by growth in Global
Consumer. Trading-related revenue, including related net interest revenue, of
$660 million and $1.8 billion increased $113 million and $394 million from 1996,
helped by increased activity related to the volatile Asian currency markets.
Venture capital revenue of $235 million and $501 million increased $106 million
and $227 million from 1996 levels benefiting from continued buoyant equity
markets. Aggregate securities transactions and net asset gains of $180 million
and $568 million for the 1997 periods increased $71 million and $105 million
from a year ago.
Adjusted operating expense, which excludes the restructuring charge, was $3.4
billion in the quarter, up $278 million or 9%, and $9.8 billion in the nine
months, up $800 million or 9%. Adjusted operating expense growth in the emerging
markets was 12% in the quarter and 13% in the nine months, while expense growth
in the developed markets businesses was 7% in the quarter and 6% year-to-date.
Excluding the effect of a stronger dollar on foreign currency translation,
adjusted operating expense was up 12% and 11% in the quarter and nine months.
The $889 million restructuring charge represents costs expected to be incurred
in connection with cost-management programs and customer service initiatives to
improve operational efficiency and productivity. These programs include global
operations and technology consolidation and standardization, the reconfiguration
of front-end distribution processes, and the outsourcing of various
technological functions. Overall, these programs are estimated to achieve
pay-back within two years. The charge includes $496 million for severance
benefits and $393 million related to writedowns of equipment and premises which
management has committed to dispose, lease terminations, and other exit costs.
These programs are expected to be substantially completed by the end of 1998.
Additional program costs that do not qualify for recognition in the charge will
be expensed as incurred in the implementation of these programs over the next 12
to 18 months, but are not expected to be material. A portion of the expense
savings generated by these programs will be reinvested in new products,
marketing programs, and additional cost and quality initiatives to further
increase revenues and reduce costs. Approximately 9,000 existing positions will
be reduced through the next 12 to 18 months, but about 1,500 new positions will
be added as part of these programs, resulting in a net program reduction of
about 7,500 jobs.
Operating margin grew $304 million or 13% to $2.6 billion in the third quarter
and $723 million or 11% to $7.6 billion in the nine months. The incremental
revenue to expense ratio was 2.1 to 1 for the quarter, 1.9 to 1 year-to-date,
and the efficiency ratio (adjusted operating expense as a percentage of adjusted
revenue) was 57% in the quarter and 56% for the year-to-date. Excluding the
effect of foreign currency translation resulting from the strengthened U.S.
dollar, the increases in operating margin would have been 17% and 13%.
Total credit costs, adjusted for the effect of credit card securitization
activity, were $848 million in the third quarter, down $38 million or 4% from
$886 million in the preceding quarter and up $105 million or 14% from $743
million in the 1996 third quarter. Consumer net credit losses of $860 million or
an annualized 2.50% of average managed loans in the third quarter (including an
$11 million or 3 basis point benefit as a result of the sale of certain
charged-off accounts) decreased $65 million from $925 million or 2.73% in the
prior quarter, and increased by $60 million from $800 million or 2.40% in the
1996 quarter. The changes in consumer credit losses and the related loss ratios
chiefly reflected U.S. bankcards credit losses and improvement in Citibanking.
The managed consumer loan delinquency ratio (90 days or more past due) decreased
to 2.32%, from 2.43% and 2.84% at the end of the preceding and year-ago
quarters.
Commercial credit benefits were $8 million and $119 million in the quarter and
nine months, compared to net benefits of $60 million and $72 million in 1996.
The 1997 nine months included a $50 million recovery from the refinancing
agreement concluded with Peru. The 1996 third quarter included recoveries of $54
million from similar agreements with Panama and Croatia, and the nine months
also included a $21 million recovery from the agreement with Slovenia.
Commercial cash-basis loans and OREO of $1.4 billion at September 30, 1997 were
down $71 million or 5% from year-end, and were down $441 million or 23% from a
year ago, principally reflecting continued reductions in the commercial real
estate portfolio.
At September 30, 1997, total credit loss reserves (including reserves of $189
million for off-balance sheet credit exposures) were $6.0 billion. Global
Consumer continued to build the allowance for credit losses, adding $25 million
above net credit losses.
3
<PAGE>
Citicorp's effective tax rate was 38% in both the 1997 third quarter and nine
months, compared with 37% for the 1996 quarter and 38% for the nine months.
Income taxes are attributed to core businesses, including their restructuring
charges, on the basis of local tax rates, which resulted in effective tax rates
before restructuring charges for the core businesses of 26% for both quarterly
periods and 25% for both nine month periods.
Total capital (Tier 1 and Tier 2) was $30.4 billion or 12.16% of net
risk-adjusted assets, and Tier 1 capital was $20.7 billion or 8.25% at September
30, 1997. Citicorp generated $421 million and $1.2 billion of free capital in
the quarter and nine months. With the repurchase of 1.9 million shares of common
stock in the quarter for $250 million (12.7 million shares of common stock for
$1.5 billion for the nine months), the number of shares acquired since June 20,
1995, when the Board of Directors authorized the stock repurchase program,
totaled 71.9 million for an outlay of $6.1 billion. As expanded in 1996, the
program is authorized to make total purchases for up to $8.5 billion.
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BUSINESS DISCUSSION
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The table below and the discussions that follow analyze Citicorp's results by
global business areas including its Global Consumer and Global Corporate Banking
core business franchises. The table reflects business unit earnings both as
reported, and adjusted for the $556 million after-tax effect of the
restructuring charge. Details of the charge by business unit are shown in
subsequent business discussions.
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EARNINGS BY GLOBAL BUSINESS AREA
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<TABLE>
<CAPTION>
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Third Quarter Nine Months
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Excluding Excluding
As Reported Restructuring As Reported Restructuring
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(In Millions of Dollars) 1997 1996 (A) 1997 1997 1996 (A) 1997
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<S> <C> <C> <C> <C> <C> <C>
Global Consumer........... $130 $464 $ 481 $1,098 $1,457 $1,449
Global Corporate Banking.. 521 514 689 1,834 1,617 2,002
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CORE BUSINESSES.......... 651 978 1,170 2,932 3,074 3,451
Corporate Items........... (140) (43) (103) (402) (273) (365)
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TOTAL CITICORP............ $511 $935 $1,067 $2,530 $2,801 $3,086
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GLOBAL CONSUMER:
Citibanking............... $(90) $159 $ 185 $ 306 $ 514 $ 581
Cards..................... 147 241 205 560 741 618
Private Bank.............. 73 64 91 232 202 250
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TOTAL..................... $130 $464 $ 481 $1,098 $1,457 $1,449
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GLOBAL CONSUMER BUSINESS IN:
Emerging Markets.......... $146 $207 $ 228 $ 643 $ 649 $ 725
Developed Markets......... (16) 257 253 455 808 724
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TOTAL..................... $130 $464 $ 481 $1,098 $1,457 $1,449
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GLOBAL CORPORATE BANKING:
Emerging Markets.......... $390 $336 $422 $1,261 $1,152 $1,293
Global Relationship Banking 131 178 267 573 465 709
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TOTAL..................... $521 $514 $689 $1,834 $1,617 $2,002
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</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
4
<PAGE>
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GLOBAL CONSUMER
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The Global Consumer business -- Citibanking, Cards, and the Private Bank --
delivers financial services to consumer customers around the world.
<TABLE>
<CAPTION>
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GLOBAL CONSUMER Third Quarter Nine Months
----------------------- % ----------------------- %
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
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<S> <C> <C> <C> <C> <C> <C>
Adjusted Revenue........................ $3,513 $3,348 5 $10,530 $9,929 6
Adjusted Operating Expense.............. 1,946 1,842 6 5,728 5,410 6
----------------------------------------------------------------
OPERATING MARGIN........................ 1,567 1,506 4 4,802 4,519 6
Credit Costs (B)........................ 856 803 7 2,672 2,271 18
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OPERATING MARGIN LESS CREDIT COSTS...... 711 703 1 2,130 2,248 (5)
Additional Provision.................... 25 50 (50) 75 150 (50)
Restructuring Charge.................... 580 - NM 580 - NM
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INCOME BEFORE TAXES..................... 106 653 (84) 1,475 2,098 (30)
Income Taxes (Benefit).................. (24) 189 NM 377 641 (41)
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NET INCOME.............................. $ 130 $ 464 (72) $ 1,098 $1,457 (25)
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Average Assets (In Billions of Dollars). $134 $127 6 $132 $126 5
Return on Assets (%).................... 0.38 1.45 - 1.11 1.54 -
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Excluding Restructuring Charge:
Income.................................. $481 $464 4 $1,449 $1,457 (1)
Return on Assets (%).................... 1.42 1.45 - 1.47 1.54 -
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</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
(B) Includes the effect of credit card securitization and, commencing with the
1997 first quarter, the effect related to credit card receivables held for
sale.
NM Not meaningful, as percentage equals or exceeds 100%.
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The Global Consumer business recorded a pretax restructuring charge of $580
million ($351 million after-tax) in the 1997 third quarter for the consolidation
of data centers and operations processing and customer service facilities, the
reconfiguration of electronic and other distribution channels, the outsourcing
of various technological functions, and the rationalization of administrative
and management functions.
Income was $481 million and $1.4 billion in the third quarter and nine months of
1997 (excluding the $351 million after-tax effect of the restructuring charge).
Compared to 1996, income excluding the restructuring charge increased $17
million or 4% in the quarter, but was down slightly in the nine months,
reflecting strong growth in Citibanking and the Private Bank, offset by lower
Cards earnings primarily due to higher credit costs in U.S bankcards. Earnings
in the 1997 periods benefited from lower additional provisions in excess of net
write-offs. Return on assets, excluding the restructuring charge, was 1.42% and
1.47% in the 1997 third quarter and nine months, down from 1.45% and 1.54% in
1996.
Adjusted revenue of $3.5 billion in the quarter and $10.5 billion in the nine
months increased 5% and 6% from 1996 -- 9% and 8% adjusted for the foreign
currency translation effect of a stronger dollar -- driven by account growth in
Citibanking worldwide and Cards businesses in the emerging markets, improvements
in the Private Bank, primarily in its fee-based businesses, and in the nine
months, higher U.S. bankcards revenue. Revenue in 1996 included the $64 million
SAIF assessment and a $42 million gain associated with the sale of the consumer
mortgage portfolio in the United Kingdom. Net interest revenue was up 4% in the
quarter and 5% in the nine months of 1997, while fee and commission revenue grew
10% in both periods, reflecting business volume growth, partially offset by the
impact of foreign currency translation. Additionally, net interest revenue
reflected the 1996 SAIF assessment, a lower yield on the U.S. bankcards
5
<PAGE>
portfolio, spread compression in Asia Pacific, and higher spreads in the
Citibanking businesses in the U.S. and in Latin America.
Adjusted operating expense of $1.9 billion in the quarter and $5.7 billion in
the nine months was up 6% from 1996 -- 10% and 9% adjusted for the effect of
foreign currency translation -- reflecting account growth, certain additional
strategic product development costs, and expansion into new marketplaces.
Credit costs in the quarter were $856 million, an increase from $803 million in
the 1996 third quarter, principally due to higher credit costs in U.S.
bankcards, partially offset by decreases in Citibanking and the Private Bank.
Credit costs were down from $922 million in the 1997 second quarter, principally
due to lower credit costs in U.S. bankcards. The ratio of net credit losses to
average managed loans was 2.50% in the quarter, compared with 2.40% a year ago,
and 2.73% in the preceding quarter.
The Global Consumer business continued to build the allowance for credit losses,
with charges in excess of net write-offs of $25 million and $75 million in the
1997 third quarter and nine months, compared with $50 million and $150 million
in the year-ago periods.
Net credit losses and the related loss ratios, which are influenced by credit
performance of the portfolio (including bankruptcies), economic conditions,
seasonal factors, and other changes in portfolio levels, may increase further
from the 1997 third quarter. See "Consumer Portfolio Review" on page 11 and
"Provision and Credit Loss Reserves" on page 29 for additional discussion of the
consumer portfolio.
Income taxes are attributed to core businesses, including their restructuring
charges, on the basis of local tax rates. Excluding the effect of the
restructuring charge, the Global Consumer business effective rate was 30% in the
third quarter and 29% in the nine months of 1997, compared to 29% and 31% in the
year-ago periods, reflecting changes in the geographic mix and nature of
earnings. The difference between the local tax rates attributed to core
businesses and Citicorp's overall effective tax rate is included in Corporate
Items.
<TABLE>
<CAPTION>
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CITIBANKING
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Third Quarter Nine Months
----------------------- % ----------------------- %
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue................................. $1,511 $1,419 6 $4,496 $4,295 5
Operating Expense....................... 1,100 1,034 6 3,213 3,059 5
----------------------------------------------------------------
OPERATING MARGIN........................ 411 385 7 1,283 1,236 4
Credit Costs............................ 135 160 (16) 428 479 (11)
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OPERATING MARGIN LESS CREDIT COSTS...... 276 225 23 855 757 13
Additional Provision.................... - 2 NM - 4 NM
Restructuring Charge.................... 457 - NM 457 - NM
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INCOME (LOSS) BEFORE TAXES.............. (181) 223 NM 398 753 (47)
Income Taxes (Benefit).................. (91) 64 NM 92 239 (62)
----------------------------------------------------------------
NET (LOSS) INCOME....................... $ (90) $ 159 NM $ 306 $ 514 (40)
----------------------------------------------------------------
Average Assets (In Billions of Dollars). $86 $84 2 $84 $83 1
Return on Assets (%).................... (0.42) 0.75 - 0.49 0.83 -
- -------------------------------------------------------------------------------------------------------------
Excluding Restructuring Charge:
Income.................................. $185 $159 16 $581 $514 13
Return on Assets (%).................... 0.85 0.75 - 0.92 0.83 -
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</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
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6
<PAGE>
Citibanking activities -- delivering products and services to customers through
branches and electronic delivery systems -- had income of $185 million and $581
million (excluding the $275 million after-tax effect of the restructuring
charge) in the 1997 third quarter and nine months up $26 million or 16% and $67
million or 13% from the 1996 periods. Return on assets, excluding the
restructuring charge, was 0.85% and 0.92% in the third quarter and nine months
of 1997, up from 0.75% and 0.83% in the year-ago periods.
Revenue of $1.5 billion in the third quarter and $4.5 billion in the nine months
grew 6% and 5% from 1996 -- 8% and 5% in the developed markets and 4% and 5% in
the emerging markets, respectively. Excluding the effect of a strong dollar on
foreign currency translation and the 1996 SAIF assessment and U.K. mortgage
sale, revenue grew 11% and 8% in the third quarter and nine months, including
12% and 9% in the developed markets and 8% and 6% in the emerging markets,
respectively. Revenue reflected higher business volumes, including customer
account growth of 5% to 20 million and an increase in average customer deposits
of 4% to $94 billion from a year-ago. Developed markets revenue reflected strong
growth in all regions. Emerging markets revenue reflected double-digit growth in
Latin America and difficult economic conditions in certain countries in Asia
Pacific.
Operating expense of $1.1 billion in the third quarter and $3.2 billion in the
nine months was up 6% and 5% from 1996, 6% and 3% in the developed markets and
8% and 9% in the emerging markets, respectively. Excluding the effect of a
stronger dollar on foreign currency translation, expense grew 11% in the quarter
and 8% in the nine months, 11% and 7% in the developed markets and 11% and 10%
in the emerging markets, reflecting account growth and additional strategic
product development costs.
Credit costs in the quarter declined by $25 million or 16% from a year ago,
reflecting the effect of foreign currency translation and improvements in the
U.S., partially offset by higher losses in certain countries in Asia Pacific.
The ratio of net credit losses to average managed loans was 0.80% in the third
quarter of 1997, down from 0.87% in the prior quarter and 0.95% in the 1996
third quarter.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CARDS
- -------------------------------------------------------------------------------------------------------------
Third Quarter % Nine Months %
----------------------- -----------------------
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adjusted Revenue........................ $1,709 $1,678 2 $5,194 $4,887 6
Adjusted Operating Expense.............. 658 633 4 1,981 1,852 7
----------------------------------------------------------------
OPERATING MARGIN........................ 1,051 1,045 1 3,213 3,035 6
Credit Costs............................ 729 639 14 2,254 1,797 25
----------------------------------------------------------------
OPERATING MARGIN LESS CREDIT COSTS...... 322 406 (21) 959 1,238 (23)
Additional Provision.................... 25 48 (48) 75 146 (49)
Restructuring Charge.................... 95 - NM 95 - NM
----------------------------------------------------------------
INCOME BEFORE TAXES..................... 202 358 (44) 789 1,092 (28)
Income Taxes............................ 55 117 (53) 229 351 (35)
----------------------------------------------------------------
NET INCOME.............................. $ 147 $ 241 (39) $ 560 $ 741 (24)
- -------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars). $32 $27 19 $31 $27 15
Return on Assets (%).................... 1.82 3.55 - 2.42 3.67 -
- -------------------------------------------------------------------------------------------------------------
Excluding Restructuring Charge:
Income.................................. $205 $241 (15) $618 $741 (17)
Return on Assets (%).................... 2.54 3.55 - 2.67 3.67 -
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Income from Cards worldwide -- bankcards, Diners Club, and private label cards
- -- was $205 million in the 1997 third quarter and $618 million in the nine
months (excluding the $58 million after-tax effect of the restructuring charge),
down $36 million and $123 million from 1996, primarily due to higher credit
losses in U.S. bankcards. Cards worldwide return
7
<PAGE>
on managed assets, excluding the restructuring charge, was 1.43% in the quarter
and 1.46% in the nine months, compared with 1.80% and 1.88% in the year-ago
periods.
Cards earnings in the developed markets declined 26% in the quarter and 31% in
the nine months (excluding restructuring) from 1996 as U.S. bankcards continued
to operate in a challenging environment. Income for Cards in the emerging
markets, excluding restructuring, increased 12% in the quarter and 20% in the
nine months and represented approximately 38% and 42% of 1997 Cards earnings
compared with 29% in both periods in 1996.
Cards adjusted revenue of $1.7 billion in the 1997 third quarter and $5.2
billion in the nine months increased 2% and 6% from 1996. U.S. bankcards revenue
was essentially unchanged in the quarter and up 5% in the nine months as managed
receivables grew $2.5 billion or 6% to $46.5 billion from a year-ago. Revenue
reflected a lower yield on the portfolio as well as an increase in delinquency
charges reflecting previously implemented pricing changes. Emerging markets
Cards revenue in both the 1997 third quarter and nine months was up 10% and 14%
- -- 17% and 16% excluding the effect of a stronger dollar on foreign currency
translation -- reflecting increases in both Asia Pacific and Latin America.
Adjusted operating expense in worldwide Cards of $658 million in the 1997 third
quarter and $2.0 billion in the nine months increased $25 million or 4% and $129
million or 7%, from the year-ago periods. Developed markets expense increased 2%
and 5% -- 4% and 7% excluding the foreign currency translation effect of a
stronger dollar -- primarily reflecting higher costs in U.S. bankcards
associated with enhanced target marketing initiatives and increased collection
efforts. Expense in emerging markets Cards increased 11% and 13% in the third
quarter and nine months -- 17% and 15% excluding the foreign currency
translation effect of a stronger dollar -- in support of higher business
volumes, as well as continued expansion of the franchise.
Credit costs in U.S. bankcards of $639 million or 5.58% of average managed loans
increased from $550 million or 5.11% in the 1996 third quarter. Credit costs
declined from $683 million or 6.13% in the 1997 second quarter. The
12-month-lagged loss ratio was 5.93% in the quarter, compared with 6.51% in the
prior quarter and 5.39% a year-ago. Credit costs in the 1997 third quarter
reflected an $11 million and 10 basis point benefit from the sale of certain
charged-off accounts. The percent of gross write-offs from bankruptcies in the
quarter was 39.8%, compared with 40.2% in the prior quarter and 37.5% in 1996.
Managed loans delinquent 90 days or more were $806 million or 1.76% at
quarter-end, compared with $843 million or 1.86% for the second quarter and $809
million or 1.86% a year-ago.
Credit costs in non-U.S. bankcards portfolios were $90 million or 3.92% of
average managed loans, compared with $95 million or 4.14% in the prior quarter
and $89 million or 4.35% in the 1996 third quarter. Loans delinquent 90 days or
more were $182 million or 1.98%, compared with $206 million or 2.18% in the
prior quarter and $178 million or 2.13% a year-ago.
8
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PRIVATE BANK
- -------------------------------------------------------------------------------------------------------------
Third Quarter % Nine Months %
----------------------- -----------------------
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adjusted Revenue........................ $293 $251 17 $840 $747 12
Adjusted Operating Expense.............. 188 175 7 534 499 7
----------------------------------------------------------------
OPERATING MARGIN........................ 105 76 38 306 248 23
Credit (Benefits) Costs................. (8) 4 NM (10) (5) NM
----------------------------------------------------------------
OPERATING MARGIN
LESS CREDIT (BENEFITS) COSTS.......... 113 72 57 316 253 25
Restructuring Charge.................... 28 - NM 28 - NM
----------------------------------------------------------------
INCOME BEFORE TAXES..................... 85 72 18 288 253 14
Income Taxes............................ 12 8 50 56 51 10
----------------------------------------------------------------
NET INCOME.............................. $ 73 $ 64 14 $232 $202 15
- -------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars). $16 $16 - $17 $16 6
Return on Assets (%).................... 1.81 1.59 - 1.82 1.69 -
- -------------------------------------------------------------------------------------------------------------
Excluding Restructuring Charge:
Income.................................. $91 $64 42 $250 $202 24
Return on Assets (%).................... 2.26 1.59 - 1.97 1.69 -
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Private Bank income was $91 million for the quarter, excluding the $18 million
after-tax effect of the restructuring charge, up $27 million or 42% from the
1996 third quarter. For the nine months of 1997 earnings were $250 million
(excluding the restructuring charge), up $48 million or 24% from 1996. Strong
pretax income growth in the quarter was reduced by the return to a higher, more
normal tax rate, as the 1996 quarter benefited from various tax refunds and
adjustments.
Client business volumes under management at the end of the quarter reached $101
billion, up 9% from $93 billion a year earlier. Growth in all business lines was
led by the discretionary and advisory investments areas in which custody,
individually managed portfolios/special funds, trust and fiduciary, and mutual
funds grew 20% and contributed substantially all of the increase.
Revenue in the third quarter reflected growth of 28% in the emerging markets and
9% in the developed markets. Emerging markets, led by Asia Pacific, accounted
for 44% of Private Bank revenue, up from 40% in the prior year. For the nine
months, revenue grew 20% in the emerging markets and 7% in the developed
markets. Revenue was driven by higher business volumes and increased revenues
from new investment products introduced during the quarter and earlier this
year, complemented by an increase in client-related foreign exchange revenue.
Adjusted operating expense increased 7% in both the quarter and nine month
periods -- 13% and 11%, respectively, excluding the effect of foreign currency
translation -- primarily reflecting increased spending on marketing and
technology initiatives, as well as staffing needed to support higher business
volumes. The incremental revenue to expense ratio was 3.2 to 1 for the quarter
and 2.7 to 1 for the nine months.
Credit costs were a benefit in both the quarter and year-to-date periods, as a
result of both recoveries and gains on sales of OREO combined with low credit
losses. Overall credit trends continued to improve, with loans delinquent 90
days or more down to $146 million or 0.94% of loans, from $187 million or 1.19%
in the preceding quarter, and $247 million or 1.61% in the third quarter of
1996, reflecting continued active portfolio management.
9
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
GLOBAL CONSUMER IN EMERGING MARKETS
- -------------------------------------------------------------------------------------------------------------
Third Quarter % Nine Months %
----------------------- -----------------------
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adjusted Revenue........................ $967 $888 9 $2,901 $2,652 9
Adjusted Operating Expense.............. 576 527 9 1,675 1,521 10
----------------------------------------------------------------
OPERATING MARGIN........................ 391 361 8 1,226 1,131 8
Credit Costs............................ 91 89 2 280 280 -
----------------------------------------------------------------
OPERATING MARGIN LESS CREDIT COSTS...... 300 272 10 946 851 11
Additional Provision.................... 15 3 NM 26 14 86
Restructuring Charge.................... 131 - NM 131 - NM
----------------------------------------------------------------
INCOME BEFORE TAXES..................... 154 269 (43) 789 837 (6)
Income Taxes............................ 8 62 (87) 146 188 (22)
----------------------------------------------------------------
NET INCOME.............................. $146 $207 (29) $ 643 $ 649 (1)
- -------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars). $43 $39 10 $42 $38 11
Return on Assets (%).................... 1.35 2.11 - 2.05 2.28 -
- -------------------------------------------------------------------------------------------------------------
Excluding Restructuring Charge:
Income.................................. $228 $207 10 $725 $649 12
Return on Assets (%).................... 2.10 2.11 - 2.31 2.28 -
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Global Consumer income in the emerging markets was $228 million and $725 million
in the 1997 third quarter and nine months, excluding the $82 million after-tax
effect of the restructuring charge, up $21 million or 10% and $76 million or 12%
from the respective 1996 periods, as growth in the Private Bank, the Cards
business in North Asia, and the Citibanking business in Latin America was offset
by lower earnings in certain countries in South Asia and an increased additional
provision.
In the emerging markets, the Global Consumer business operates in 41 countries
and territories in Asia Pacific; Latin America; and Central and Eastern Europe,
the Middle East, and Africa. As referred to on page 2, a number of countries in
Asia are experiencing economic volatility. The emerging markets Global Consumer
business in Asia Pacific, which excludes Japan and the Indian subcontinent,
includes 12 countries and territories and generated approximately 8% of
Citicorp's adjusted revenue and 10% of average assets for both 1997 and 1996
third quarter and nine month periods. For the Global Consumer business in these
12 countries and territories, no single country or territory exceeded 2% of
Citicorp's adjusted revenue and average assets, except for average assets in
Australia which slightly exceeded 2% in the 1996 periods.
10
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
GLOBAL CONSUMER IN DEVELOPED MARKETS
- -------------------------------------------------------------------------------------------------------------
Third Quarter % Nine Months %
----------------------- -----------------------
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adjusted Revenue........................ $2,546 $2,460 3 $7,629 $7,277 5
Adjusted Operating Expense.............. 1,370 1,315 4 4,053 3,889 4
----------------------------------------------------------------
OPERATING MARGIN........................ 1,176 1,145 3 3,576 3,388 6
Credit Costs............................ 765 714 7 2,392 1,991 20
----------------------------------------------------------------
OPERATING MARGIN LESS CREDIT COSTS...... 411 431 (5) 1,184 1,397 (15)
Additional Provision.................... 10 47 (79) 49 136 (64)
Restructuring Charge.................... 449 - NM 449 - NM
----------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES.............. (48) 384 NM 686 1,261 (46)
Income Taxes (Benefit).................. (32) 127 NM 231 453 (49)
----------------------------------------------------------------
NET (LOSS) INCOME....................... $ (16) $ 257 NM $ 455 $ 808 (44)
- -------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars). $91 $88 3 $90 $88 2
Return on Assets (%).................... (0.07) 1.16 - 0.68 1.23 -
- -------------------------------------------------------------------------------------------------------------
Excluding Restructuring Charge:
Income.................................. $253 $257 (2) $724 $808 (10)
Return on Assets (%).................... 1.10 1.16 - 1.08 1.23 -
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Global Consumer income in the developed markets was $253 million and $724
million in the 1997 third quarter and nine months, excluding the $269 million
after-tax effect of the restructuring charge, down $4 million or 2% and $84
million or 10% from the respective year-ago periods, reflecting double-digit
earnings growth in the Citibanking businesses in the U.S. and in the Private
Bank, lower earnings in U.S. bankcards, and the net effect of the 1996 SAIF
assessment and U.K. mortgage sale.
- --------------------------------------------------------------------------------
CONSUMER PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
In the consumer portfolio, credit loss experience is often expressed in terms of
annualized net credit losses as a percentage of average loans. Pricing and
credit policies reflect the loss experience of each particular product. Consumer
loans are generally written off no later than a predetermined number of days
past due on a contractual basis, or earlier in the event of bankruptcy. The
number of days is set at an appropriate level according to loan product and
country.
The table on page 12 summarizes delinquency and net credit loss experience in
both the managed and on-balance sheet loan portfolio in terms of loans 90 days
or more past due, net credit losses, and as a percentage of related loans.
11
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CONSUMER LOAN DELINQUENCY AMOUNTS, NET CREDIT LOSSES, AND RATIOS
- -------------------------------------------------------------------------------------------------------------
TOTAL AVERAGE
LOANS 90 DAYS OR MORE PAST DUE (A) LOANS NET CREDIT LOSSES (A)
(In Millions of Dollars, -----------------------------------------------------------------------------
except Loan Amounts in SEPT. 30, SEPT. 30, June 30, Sept. 30, 3RD QTR. 3RD QTR. 2nd Qtr. 3rd Qtr.
Billions ) 1997 1997 1997 1996 1997 1997 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CITIBANKING................ $ 67.9 $2,082 $2,094 $2,527 $ 66.7 $135 $145 $160
Ratio...................... 3.07% 3.13% 3.87% 0.80% 0.87% 0.95%
CARDS
U.S. Bankcards (B)......... 45.9 806 843 809 45.4 639 683 550
Ratio...................... 1.76% 1.86% 1.86% 5.58% 6.13% 5.11%
Other...................... 9.2 182 206 178 9.1 90 95 89
Ratio...................... 1.98% 2.18% 2.13% 3.92% 4.14% 4.35%
PRIVATE BANK............... 15.6 146 187 247 15.3 (4) 2 1
Ratio...................... 0.94% 1.19% 1.61% NM 0.04% 0.05%
- -------------------------------------------------------------------------------------------------------------
TOTAL MANAGED.............. 138.6 3,216 3,330 3,761 136.5 860 925 800
RATIO...................... 2.32% 2.43% 2.84% 2.50% 2.73% 2.40%
- -------------------------------------------------------------------------------------------------------------
Securitized Credit
Card Receivables......... (26.0) (452) (453) (499) (24.8) (378) (404) (360)
Loans Held for Sale (C).... (4.0) (34) (37) - (4.1) (30) (33) -
- -------------------------------------------------------------------------------------------------------------
TOTAL LOAN PORTFOLIO....... $108.6 $2,730 $2,840 $3,262 $107.6 $452 $488 $440
Ratio...................... 2.51% 2.59% 3.07% 1.67% 1.82% 1.64%
- -------------------------------------------------------------------------------------------------------------
MANAGED PORTFOLIO:
DEVELOPED MARKETS.......... $104.0 $2,763 $2,869 $3,377 $102.5 $769 $828 $711
Ratio...................... 2.66% 2.80% 3.36% 2.98% 3.26% 2.79%
EMERGING MARKETS........... 34.6 453 461 384 34.0 91 97 89
Ratio...................... 1.31% 1.32% 1.21% 1.06% 1.15% 1.13%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) The ratios of 90 days or more past due and net credit losses are
calculated based on end-of-period and average loans, respectively, both
net of unearned income.
(B) Net credit losses and the related loss ratio in the 1997 third quarter
were reduced by $11 million and 10 basis points from the sale of certain
charged-off accounts.
(C) Commencing with the 1997 first quarter, Citicorp classifies credit card
and mortgage loans intended for sale as loans held for sale, which are
accounted for at the lower of cost or market value with net credit losses
charged to other revenue.
NM Not meaningful, as net recoveries result in a negative percentage.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CONSUMER LOAN BALANCES, NET OF UNEARNED INCOME
- -------------------------------------------------------------------------------------------------------------
END OF PERIOD AVERAGE
--------------------------------------------------------------------
SEPT. 30, June 30, Sept. 30, 3RD QTR. 2nd Qtr. 3rd Qtr.
(In Billions of Dollars) 1997 1997 1996 1997 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MANAGED............................... $138.6 $137.3 $132.3 $136.5 $135.5 $132.3
Securitized Credit Card Receivables... (26.0) (24.2) (26.1) (24.8) (24.7) (26.2)
Loans Held for Sale (A)............... (4.0) (3.6) - (4.1) (3.4) -
- -------------------------------------------------------------------------------------------------------------
LOAN PORTFOLIO........................ $108.6 $109.5 $106.2 $107.6 $107.4 $106.1
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Commencing with the 1997 first quarter, Citicorp classifies credit card
and mortgage loans intended for sale as loans held for sale, which are
accounted for at the lower of cost or market value with net credit losses
charged to other revenue.
- --------------------------------------------------------------------------------
Total delinquencies in the managed portfolio of $3.2 billion and the related
delinquency ratio of 2.32% at September 30, 1997 were down from $3.3 billion or
2.43% at June 30, 1997 primarily due to a decline in the Private Bank and U.S.
bankcards. Delinquencies decreased from $3.8 billion or 2.84% a year-ago,
primarily due to a decline in Citibanking and the Private Bank. Total managed
net credit losses in the 1997 third quarter of $860 million and the related loss
ratio of 2.50% decreased from $925 million or 2.73% in the 1997 second quarter,
principally due to lower losses in U.S.
12
<PAGE>
bankcards. As compared to a year-ago, net credit losses were up from $800
million or 2.40%, principally due to higher losses in U.S. bankcards, partially
offset by decreases in Citibanking and the Private Bank.
In Citibanking, delinquencies of $2.1 billion and the related ratio of 3.07% at
September 30, 1997 were down from $2.1 billion or 3.13% at June 30, 1997 and
$2.5 billion or 3.87% at September 30, 1996, primarily reflecting improvements
in the U.S. and the effect of foreign currency translation, partially offset by
increases in certain countries in Asia Pacific and Latin America. Net credit
losses in the 1997 third quarter of $135 million and the related loss ratio of
0.80% declined from $145 million or 0.87% in the 1997 second quarter and $160
million or 0.95% in the 1996 third quarter. The decrease in losses from the 1996
third quarter primarily reflects the effect of foreign currency translation and
improvements in the U.S., partially offset by higher losses in certain countries
in Asia Pacific.
U.S. bankcards managed loans delinquent 90 days or more were $806 million or
1.76% at quarter-end, down from $843 million or 1.86% at June 30, 1997 and $809
million or 1.86% a year-ago. Net credit losses of $639 million and the related
loss ratio of 5.58% increased from $550 million or 5.11% in the 1996 third
quarter, but declined from $683 million or 6.13% in the 1997 second quarter. The
12-month-lagged loss ratio was 5.93% in the quarter, compared with 6.51% in the
prior quarter and 5.39% in the year-ago quarter. Net credit losses in the 1997
third quarter reflected an $11 million and 10 basis point benefit from the sale
of certain charged-off accounts. The percent of gross write-offs from
bankruptcies in the quarter was 39.8%, compared with 40.2% in the prior quarter
and 37.5% in the 1996 quarter.
The other Cards businesses primarily include bankcards throughout the emerging
markets, Europe, and Japan, as well as worldwide Diners Club. As of the 1997
third quarter, delinquencies of $182 million or 1.98% and net credit losses of
$90 million or 3.92% declined from the prior quarter by $24 million and $5
million, respectively, principally due to the effect of foreign currency
translation. Compared to a year-ago, delinquencies increased from $178 million
and net credit losses increased from $89 million, primarily reflecting higher
amounts in Asia Pacific and certain businesses in the developed markets,
partially offset by the effect of foreign currency translation.
Private Bank delinquencies declined to 0.94% of loans at September 30, 1997 from
1.19% at June 30, 1997 and from 1.61% a year ago, principally reflecting
improvements in the United States. Net recoveries of $4 million in the 1997
third quarter were improved from net credit losses of $2 million in the
preceding quarter and $1 million in the year-ago quarter, primarily due to
higher credit recoveries and lower gross credit losses.
Total consumer loans on the balance sheet delinquent 90 days or more on which
interest continued to be accrued were $983 million at September 30, 1997,
compared with $937 million at June 30, 1997 and $1.0 billion at September 30,
1996. Included in these amounts are U.S. government-guaranteed student loans of
$250 million, $215 million, and $297 million, respectively. Other consumer loans
delinquent 90 days or more on which interest continued to be accrued (which
primarily include worldwide bankcard receivables and certain portfolios in
Germany) were $733 million, $722 million, and $742 million, respectively. The
majority of these other loans are written off upon reaching a stipulated number
of days past due. See the table entitled "Cash-Basis, Renegotiated, and Past Due
Loans" on page 42.
Citicorp's policy for suspending the accrual of interest on consumer loans
varies depending on the terms, security, and credit loss experience
characteristics of each product, as well as write-off criteria in place. At
September 30, 1997, interest accrual had been suspended on $1.9 billion of
consumer loans, primarily consisting of Citibanking loans, down from $2.0
billion at June 30, 1997 and $2.3 billion at September 30, 1996. The decline
from September 30, 1996 reflects improvements in U.S. mortgages and the Private
Bank and the effect of foreign currency translation. U.S. mortgages on which the
accrual of interest had been suspended were $542 million at September 30, 1997,
down from $604 million at June 30, 1997 and $846 million at September 30, 1996,
due to favorable housing markets, improved collection results, and delinquency
management initiatives.
The portion of Citicorp's allowance for credit losses allocated to the consumer
portfolio was $2.5 billion as of September 30, 1997 and June 30, 1997, up from
$2.0 billion at September 30, 1996, reflecting the 1997 first quarter transfer
of a $373 million other liability reserve that had previously been attributable
to credit card securitization transactions. The allowance for credit losses
reflected an additional provision in excess of net write-offs of $25 million in
both the 1997
13
<PAGE>
second and third quarters, and $50 million in the 1996 third quarter. The
allowance as a percentage of loans on the balance sheet was 2.27% as of
September 30, 1997, compared with 2.24% at June 30, 1997 and 1.92% at September
30, 1996. See "Provision and Credit Loss Reserves" on page 29 for further
discussion.
Consumer credit costs and the related net credit loss ratios, which are
influenced by credit performance of the portfolios (including bankruptcies),
economic conditions, seasonal factors, and other changes in portfolio levels,
may increase further from the 1997 third quarter. Additionally, delinquencies
and loans on which the accrual of interest is suspended could remain at
relatively high levels.
- --------------------------------------------------------------------------------
GLOBAL CORPORATE BANKING
- --------------------------------------------------------------------------------
The Global Corporate Banking business serves corporations, financial
institutions, governments, investors, and other participants in capital markets
throughout the world.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Third Quarter % Nine Months %
----------------------- -----------------------
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adjusted Revenue........................ $2,156 $1,745 24 $6,085 $5,156 18
Adjusted Operating Expense.............. 1,278 1,133 13 3,639 3,241 12
----------------------------------------------------------------
OPERATING MARGIN........................ 878 612 43 2,446 1,915 28
Credit Benefits......................... (8) (60) (87) (119) (72) 65
----------------------------------------------------------------
OPERATING MARGIN PLUS CREDIT BENEFITS... 886 672 32 2,565 1,987 29
Restructuring Charge.................... 281 - NM 281 - NM
----------------------------------------------------------------
INCOME BEFORE TAXES..................... 605 672 (10) 2,284 1,987 15
Income Taxes............................ 84 158 (47) 450 370 22
----------------------------------------------------------------
NET INCOME.............................. $ 521 $ 514 1 $1,834 $1,617 13
- -------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars). $160 $135 19 $153 $137 12
Return on Assets (%).................... 1.29 1.51 - 1.60 1.58 -
- -------------------------------------------------------------------------------------------------------------
Excluding Restructuring Charge:
Income.................................. $689 $514 34 $2,002 $1,617 24
Return on Assets (%).................... 1.71 1.51 - 1.75 1.58 -
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Global Corporate Banking recorded a restructuring charge of $281 million ($168
million after-tax) in the 1997 third quarter related to standardization and
consolidation of operations, the outsourcing of various technological functions,
the rationalization of support functions associated with the recently announced
Global Markets organization, and other organizational realignments designed to
better serve target market customers.
Excluding the restructuring charge, income of $689 million and $2.0 billion in
the 1997 third quarter and nine months increased $175 million or 34% and $385
million or 24% from the comparable 1996 periods while income before taxes grew
$214 million or 32% and $578 million or 29%. Growth in income in the 1997 nine
months was dampened by an increase in the effective income tax rate. Average
assets grew $25 billion or 19% and $16 billion or 12% in the three- and
nine-month comparisons. Excluding the restructuring charge, return on average
assets rose 20 basis points and 17 basis points in the three- and nine-month
comparisons.
Adjusted revenue grew 24% and 18% in the 1997 third quarter and nine months (27%
and 20% excluding the effect of foreign currency translation) compared with the
respective 1996 periods. The results in both 1997 periods primarily reflected
improved trading-related and venture capital revenue, higher levels of asset
sales and securities transactions,
14
<PAGE>
growth in transaction banking services revenue, and net interest revenue spread
compression. Adjusted operating expense increased 13% and 12% in the 1997 third
quarter and nine months (15% and 13% excluding the effect of foreign currency
translation). Revenue growth outpaced expense growth by margins of 2.8 to 1 and
2.3 to 1 in the three- and nine-month comparisons, resulting in growth in
operating margin of 43% and 28% (50% and 30% excluding the effect of foreign
currency translation), respectively. Reduced credit benefits in the 1997 third
quarter are attributable to $54 million of recoveries in the 1996 third quarter
associated with the refinancing agreements completed with Panama and Croatia.
Credit benefits in the 1997 nine months improved due to lower gross write-offs
coupled with continued recoveries. The effective income tax rate, excluding the
restructuring charge, in both the 1997 three- and nine-month periods was 22%
compared with 24% and 19% in the 1996 periods. The increase in the effective
income tax rate in the nine month comparison is attributable to changes in the
geographic mix and nature of pretax earnings coupled with certain 1996 local tax
benefits in the Emerging Markets business and a low effective income tax rate in
Global Relationship Banking associated with a 1996 gain on the sale of a
business.
Commercial cash-basis loans at September 30, 1997 were $969 million, down $428
million or 31% from September 30, 1996. The reduction is primarily attributable
to payoffs and transfers to OREO or accrual status in the real estate portfolio
and was partially offset by additions to cash-basis loans, primarily in
Thailand. The OREO portfolio of $479 million declined $13 million or 3% from
September 30, 1996. See the tables entitled "Cash-Basis, Renegotiated, and Past
Due Loans" and "Other Real Estate Owned and Assets Pending Disposition" on page
42.
Net credit losses, which are influenced by credit performance of the portfolio,
economic conditions, and other factors, may increase from the 1997 third
quarter. See "Provision and Credit Loss Reserves" on page 29 for additional
discussion of the Global Corporate Banking portfolio.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
EMERGING MARKETS
- -------------------------------------------------------------------------------------------------------------
Third Quarter % Nine Months %
----------------------- -----------------------
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adjusted Revenue........................ $1,028 $816 26 $2,941 $2,538 16
Adjusted Operating Expense.............. 503 438 15 1,431 1,232 16
----------------------------------------------------------------
OPERATING MARGIN........................ 525 378 39 1,510 1,306 16
Credit Costs (Benefits)................. 30 (47) NM 18 (45) NM
----------------------------------------------------------------
OPERATING MARGIN LESS CREDIT COSTS 495 425 16 1,492 1,351 10
(BENEFITS)..............................
Restructuring Charge.................... 54 - NM 54 - NM
----------------------------------------------------------------
INCOME BEFORE TAXES..................... 441 425 4 1,438 1,351 6
Income Taxes............................ 51 89 (43) 177 199 (11)
----------------------------------------------------------------
NET INCOME.............................. $ 390 $336 16 $1,261 $1,152 9
- -------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars). $75 $61 23 $70 $58 21
Return on Assets (%).................... 2.06 2.19 - 2.41 2.65 -
- -------------------------------------------------------------------------------------------------------------
Excluding Restructuring Charge:
Income.................................. $422 $336 26 $1,293 $1,152 12
Return on Assets (%).................... 2.23 2.19 - 2.47 2.65 -
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Excluding the $54 million restructuring charge, Emerging Markets income before
taxes of $495 million and $1.5 billion in the 1997 third quarter and nine months
grew $70 million or 16% and $141 million or 10% from the comparable 1996
periods. Excluding the $32 million after-tax restructuring charge, income of
$422 million and $1.3 billion in the 1997 third quarter and nine months grew $86
million or 26% and $141 million or 12% from the comparable 1996 periods. The
effective income tax rates, excluding the restructuring charge, in the 1997
third quarter and nine months were 15% and 13% compared with 21% and 15% in the
1996 periods.
15
<PAGE>
Adjusted revenue grew 26% and 16% in the 1997 third quarter and nine months
compared with the respective 1996 periods. The increases in both periods
reflected growth across a broad range of products and customers, with particular
strength in trading-related revenue complemented by growth in transaction
banking services revenue. Higher asset levels across the franchise mitigated the
effect on revenue growth of net interest revenue spread compression. Revenue
growth also reflected increases of $20 million and $49 million in the 1997 third
quarter and nine months in earnings from an affiliate; the quarterly increase
was primarily attributable to investment gains and dividends while the nine
month improvement was primarily due to a 1997 second quarter investment
dividend. Trading-related revenue in the 1997 third quarter and nine months grew
$68 million and $99 million from the comparable 1996 periods, attributable to
volatile currency markets in certain Asian countries. Revenue from the aggregate
of net asset gains and securities transactions in the 1997 third quarter and
nine months was $113 million and $401 million, up $85 million and $197 million
from the comparable 1996 periods. This revenue included gains of $80 million and
$58 million in the 1997 third and second quarters, respectively, related to the
sale of Brazil Brady bonds, and $52 million in the 1996 first quarter related to
the sale of Brazil interest bonds, a $46 million gain related to the refinancing
agreement concluded with Peru in the 1997 first quarter, and a $28 million gain
related to the refinancing agreement concluded with Panama in the 1996 third
quarter. In each of the 1997 and 1996 periods, about 20% of the revenue in the
Emerging Markets business was attributable to business from multinational
companies managed jointly with Global Relationship Banking, with the revenue in
the 1997 periods having grown at double-digit rates from the respective 1996
periods.
Adjusted operating expense increased 15% and 16% in the 1997 third quarter and
nine months compared with the respective 1996 periods. Expense growth in both
periods primarily reflected business expansion and investment spending to build
the franchise, including costs associated with Citicorp's plan to gain market
share in selected emerging market countries.
Credit costs (benefits) remained low in the 1997 third quarter and nine months.
Credit costs in the 1997 third quarter were concentrated in Thailand. The 1997
nine months included a $50 million recovery from the refinancing agreement
concluded with Peru while the 1996 nine months included recoveries of $75
million attributable to the refinancing agreements concluded with Panama,
Croatia, and Slovenia.
The Emerging Markets business operates in 75 countries and territories in Latin
America; Asia Pacific; and Central and Eastern Europe, the Middle East, and
Africa. As referred to on page 2, a number of countries in Asia are experiencing
economic volatility. The Emerging Markets business in Asia Pacific, which
excludes Japan and the Indian subcontinent, includes 13 countries and
territories and generated approximately 6% of Citicorp's adjusted revenue and
10% of average assets for both 1997 and 1996 third quarter and nine month
periods. For the Emerging Markets business in these 13 countries and
territories, no single country or territory exceeded 2% of Citicorp's adjusted
revenue and average assets.
16
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
GLOBAL RELATIONSHIP BANKING
- -------------------------------------------------------------------------------------------------------------
Third Quarter % Nine Months %
----------------------- -----------------------
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adjusted Revenue........................ $1,128 $929 21 $3,144 $2,618 20
Adjusted Operating Expense.............. 775 695 12 2,208 2,009 10
----------------------------------------------------------------
OPERATING MARGIN........................ 353 234 51 936 609 54
Credit Benefits......................... (38) (13) NM (137) (27) NM
----------------------------------------------------------------
OPERATING MARGIN PLUS CREDIT BENEFITS... 391 247 58 1,073 636 69
Restructuring Charge.................... 227 - NM 227 - NM
----------------------------------------------------------------
INCOME BEFORE TAXES..................... 164 247 (34) 846 636 33
Income Taxes............................ 33 69 (52) 273 171 60
----------------------------------------------------------------
NET INCOME.............................. $ 131 $178 (26) $ 573 $ 465 23
- -------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars). $85 $74 15 $83 $79 5
Return on Assets (%).................... 0.61 0.96 - 0.92 0.79 -
- -------------------------------------------------------------------------------------------------------------
Excluding Restructuring Charge:
Income.................................. $267 $178 50 $709 $465 52
Return on Assets (%).................... 1.25 0.96 - 1.14 0.79 -
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Excluding the $227 million restructuring charge, Global Relationship Banking in
North America, Europe, and Japan income before taxes of $391 million and $1.1
billion in the 1997 third quarter and nine months was up $144 million or 58% and
$437 million or 69% compared with the respective 1996 periods. Excluding the
$136 million after-tax restructuring charge, income of $267 million and $709
million in the 1997 third quarter and nine months grew $89 million or 50% and
$244 million or 52% from the comparable 1996 periods. The effective income tax
rates, excluding the restructuring charge, in the 1997 third quarter and nine
months increased to 32% and 34% from 28% and 27% in the comparable 1996 periods.
Adjusted revenue grew 21% and 20% in the 1997 third quarter and nine months
compared with the respective 1996 periods. The improved results in both 1997
periods primarily reflected higher levels of venture capital and trading-related
revenue and growth in transaction banking services revenue, partially offset by
net interest revenue spread compression. Trading-related revenue of $273 million
and $835 million in the 1997 third quarter and nine months improved $20 million
and $242 million from the comparable 1996 periods. Trading-related revenue in
the 1996 nine months included a $60 million charge related to certain
mortgage-backed securities activities. Venture capital revenue of $235 million
and $501 million in the 1997 third quarter and nine months improved $106 million
and $233 million from the comparable 1996 periods, benefiting from buoyant
equity markets. Revenue also included gains of $23 million and $110 million in
the 1997 and 1996 second quarters related to the disposition of an automated
trading business and a $32 million gain in the 1997 first quarter related to the
sale of an investment from the acquisition finance portfolio.
Adjusted operating expense grew 12% and 10% in the 1997 third quarter and nine
months compared with the respective 1996 periods, and primarily reflected
increased spending on technology, higher incentive compensation associated with
revenue growth, and volume-related expense in transaction banking services,
partially offset by a reduction associated with the disposition of a
non-strategic business in the 1997 first quarter.
Credit benefits in the 1997 third quarter and nine months totaled $38 million
and $137 million, compared with benefits of $13 million and $27 million in the
respective 1996 periods. The improvement in both periods primarily resulted from
lower write-offs while recoveries continued.
17
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CORPORATE ITEMS
- -------------------------------------------------------------------------------------------------------------
Third Quarter % Nine Months %
----------------------- -----------------------
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue................................. $275 $269 2 $703 $710 (1)
----------------------------------------------------------------
Restructuring Charge.................... 28 - NM 28 - NM
Other Operating Expense................. 140 111 26 386 302 28
----------------------------------------------------------------
Total Operating Expense................. 168 111 51 414 302 37
----------------------------------------------------------------
Income Before Taxes..................... 107 158 (32) 289 408 (29)
Income Taxes............................ 247 201 23 691 681 1
----------------------------------------------------------------
NET LOSS................................ ($140) ($43) NM ($402) ($273) 47
- -------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars). $5 $6 (17) $7 $5 40
- -------------------------------------------------------------------------------------------------------------
Excluding Restructuring Charge:
Loss.................................... ($103) ($43) NM ($365) ($273) 34
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- -------------------------------------------------------------------------------
Corporate Items includes revenue derived from charging businesses for funds
employed, based upon a marginal cost of funds concept, unallocated corporate
costs, and the offset created by attributing income taxes to core business
activities on a local tax-rate basis.
Revenue included investment writedowns in Latin America of $23 million in the
1997 quarter, $72 million in the nine months, and $50 million in the 1996 nine
months. Expense in both the 1997 quarter and nine months reflected increases in
corporate costs and employee expense. Expense in the nine months also included
charges associated with performance-based stock options of $72 million and $42
million for 1997 and 1996.
Corporate Items recorded a restructuring charge of $28 million in the quarter,
$17 million after-tax, principally related to the reorganization of various
corporate support functions. In addition, Corporate Items income taxes included
a $20 million charge related to the offset created by attributing income taxes
to core business restructuring charges on a local tax-rate basis.
Citicorp's effective tax rate was 38% in both the 1997 third quarter and nine
months, compared with 37% for the 1996 quarter and 38% for the nine months.
Income taxes are attributed to core businesses, including their restructuring
charges, on the basis of local tax rates, which resulted in effective tax rates
before restructuring charges for the core businesses of 26% in both quarterly
periods, and 25% for both nine month periods.
- --------------------------------------------------------------------------------
MANAGING GLOBAL RISK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIQUIDITY
- --------------------------------------------------------------------------------
Citicorp manages liquidity through a well-defined process described in the 1996
Annual Report and Form 10-K.
A diversity of funding sources, currencies, and maturities is used to gain the
broadest practical access to the investor base. Citicorp deposits of $194.1
billion represented 65% of total funding at September 30, 1997, compared with
$185.0 billion (66% of total funding) at December 31, 1996, and are broadly
diversified by geography and customer segment. Stockholders' equity, which was
$21.5 billion at September 30, 1997 compared with $20.7 billion at December 31,
1996, is also an important component of the overall funding structure. In
addition, long-term debt is issued by Citicorp (the "Parent Company") and its
subsidiaries. Total long-term debt outstanding at September 30, 1997, was $20.3
billion, compared with $18.9 billion at year-end 1996.
18
<PAGE>
Securitization of assets remains an important source of liquidity. Total assets
securitized during the quarter were $4.0 billion, including $3.3 billion of
credit cards ($3.0 billion from the U.S.) and $0.7 billion of U.S. consumer
mortgages. Total assets securitized during the 1997 nine months were $7.7
billion, including $6.1 billion of credit cards ($5.8 billion in the U.S.) and
$1.6 billion of U.S. consumer mortgages. As securitized credit card receivables
transactions amortize, newly originated receivables are recorded on Citicorp's
balance sheet and become available for asset securitization. During the three
months ended September 30, 1997, the scheduled amortization of certain
securitized credit card receivables made available $1.2 billion of new
receivables ($5.0 billion for the nine months), with an additional $0.9 billion
and $6.1 billion scheduled to amortize during the remainder of 1997 and in 1998,
respectively.
The Parent Company is a legal entity separate and distinct from Citibank, N.A.
and its other subsidiaries and affiliates. As discussed in the 1996 Annual
Report and Form 10-K, there are various legal limitations on the extent to which
Citicorp's subsidiaries may extend credit, pay dividends, or otherwise supply
funds to Citicorp. As of September 30, 1997, under their applicable dividend
limitations, Citicorp's national and state-chartered bank subsidiaries could
have declared dividends to their respective parent companies without regulatory
approval of approximately $3.5 billion. In determining whether and to what
extent to pay dividends, each bank subsidiary must also consider the effect of
dividend payments on applicable risk-based capital and leverage ratio
requirements, as well as policy statements of the federal regulatory agencies
that indicate that banking organizations should generally pay dividends out of
current operating earnings. Consistent with these considerations, Citicorp
estimates that as of September 30, 1997, its bank subsidiaries could have
distributed dividends to Citicorp, directly or through their parent holding
company, of approximately $3.0 billion of the available $3.5 billion.
- --------------------------------------------------------------------------------
PRICE RISK
- --------------------------------------------------------------------------------
Citicorp manages the sensitivity of earnings to changes in interest rates,
market prices, foreign exchange rates, and market volatilities through
established procedures described in the 1996 Annual Report and Form 10-K. These
procedures include limits set annually for each major category of risk; these
limits are monitored and managed by the businesses, and reviewed monthly at the
corporate level. Citicorp uses a risk management system based on market factors
that accommodates the diversity of balance sheet and derivative product
exposures and exposure management systems of its various businesses.
The market factor approach identifies the variables that cause a change in the
value of a financial instrument, including the term structure of interest rates,
foreign exchange rates, equity securities and commodities prices and their
volatilities. Price risk is then measured using various tools, including the
earnings at risk method, which is applied to interest rate risk of the
non-trading portfolios, and the potential loss amount method, which is applied
to the trading portfolios. These methods are comparable with value at risk
measurements employed throughout the industry, and are used as indicators to
monitor sensitivity of earnings to market risk rather than as a quantification
of aggregate risk amounts.
In August 1997, the Financial Accounting Standards Board ("FASB") issued for
comment a draft of a new accounting standard on derivatives and hedging. The new
standard is intended to be issued in final form in the fourth quarter of 1997
and to become effective on January 1, 1999. As currently proposed, the new
standard would significantly change the accounting treatment of end-user
derivative and foreign exchange contracts by Citicorp and its customers.
Depending on the underlying risk management strategy, these accounting changes
could affect reported earnings, assets, liabilities, and stockholders' equity.
As a result, Citicorp and the customers to which it provides derivatives and
foreign exchange products may have to reconsider their risk management
strategies, since the proposed new standard would not reflect the results of
many of those strategies in the same manner as current accounting practice.
Citicorp is in the process of evaluating the potential impact of the proposed
new standard.
19
<PAGE>
- -------------------------------------------------------------------------------
PRICE RISK IN NON-TRADING PORTFOLIOS
- -------------------------------------------------------------------------------
Earnings at risk measures the potential pretax earnings impact on non-trading
activities of a specified movement in interest rates for an assumed defeasance
period, which depends upon the depth of liquidity in the market and the
instrument involved. The predominant assumed defeasance period used in
Citicorp's earnings at risk calculations is currently four weeks. The earnings
at risk is calculated separately for each currency by multiplying the repricing
gap between interest sensitive items by the specified interest rate movement,
and then taking into account the impact of options, both explicit and embedded.
The specific rate movements are statistically derived from a two standard
deviation movement, which results in a confidence level of 97.7%. As of
September 30, 1997, the derived two standard deviation rate movement used in
determining the U.S. dollar earnings at risk using a four week defeasance period
was 63 basis points.
Business units manage the potential earnings effect of interest rate movements
by modifying the asset and liability mix, either directly or through the use of
derivatives. These include interest rate swaps and other derivative instruments
which are either designated and effective as hedges or designated and effective
in modifying the interest rate characteristics of specified assets or
liabilities. The utilization of derivatives is modified from time to time in
response to changing market conditions as well as changes in the characteristics
and mix of the related assets and liabilities.
Citicorp's primary non-trading price risk exposure is to worldwide movements in
U.S. dollar interest rates. The table below illustrates that as of September 30,
1997 a two standard deviation increase in U.S. dollar interest rates had a
potential negative impact on Citicorp's pretax earnings of approximately $193
million for the following twelve months and approximately $220 million on a
discounted full life basis.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
U.S. DOLLAR EARNINGS AT RISK
- -------------------------------------------------------------------------------------------------------------
Assuming a Rate Movement of
-----------------------------
Two Standard Two Standard
Deviation Deviation
IMPACT ON PRETAX EARNINGS (In Millions of Dollars at September 30, 1997) Increase Decrease
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Overnight to Three Months................................................... ($70) $72
Four to Six Months.......................................................... (53) 67
Seven to Twelve Months...................................................... (70) 84
-----------------------------
TOTAL OVERNIGHT TO TWELVE MONTHS............................................ (193) 223
Year Two.................................................................... (97) 97
Year Three.................................................................. (32) 23
Year Four................................................................... 27 (39)
Year Five and Beyond........................................................ 81 (107)
Effect of Discounting....................................................... (6) 16
-----------------------------
TOTAL ...................................................................... ($220) $213
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes Citicorp's twelve month U.S. dollar earnings at
risk at recent quarter-ends.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
TWELVE MONTH U.S. DOLLAR EARNINGS AT RISK
- -------------------------------------------------------------------------------------------------------------
IMPACT ON PRETAX EARNINGS Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(In Millions of Dollars) 1997 1997 1997 1996 1996
- -------------------------------------------------------------------------------------------------------------
Assuming a Rate Movement of:
<S> <C> <C> <C> <C> <C>
Two Standard Deviation Increase............ ($193) ($205) ($174) ($165) ($204)
Two Standard Deviation Decrease............ 223 235 204 191 206
- -------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
The tables on page 20 illustrate that Citicorp's pretax earnings over the next
12 months in its non-trading activities would be reduced from an increase in
interest rates and benefit from a decrease in interest rates. This primarily
reflects the utilization of receive-fixed interest rate swaps and similar
instruments to effectively modify the repricing characteristics of certain
consumer and commercial loan portfolios, funding, and long-term debt. Excluding
the effects of these instruments, Citicorp's pretax earnings over the next 12
months in its non-trading activities would have benefited $103 million from a
two standard deviation increase in interest rates and been reduced $80 million
from a similar decrease in interest rates at September 30, 1997.
During the 1997 third quarter, the U.S. dollar earnings at risk for the
following 12 months to a two standard deviation increase in rates had a
potential negative impact which ranged from approximately $145 million to $193
million in the aggregate at each month end, compared with a range from $116
million to $204 million during the full year 1996. The first table on page 20
also illustrates that the risk profile within the three-year time horizon was
directionally similar, but reverses in subsequent periods. This reflects the
fact that the majority of the derivative instruments utilized to modify
repricing characteristics as described above will mature within three years.
Additional detail regarding these derivative instruments may be found on page
40.
Earnings at risk in other currencies also existed at significantly lower levels
than U.S. dollar earnings at risk. The level of exposure taken is based on the
market environment and will vary from period to period based on rate and other
economic expectations.
- --------------------------------------------------------------------------------
PRICE RISK IN TRADING PORTFOLIOS
- --------------------------------------------------------------------------------
The price risk of trading activities is measured using the potential loss amount
method, which estimates the sensitivity of the value of trading activities to
changes in various market factors, such as interest and foreign exchange rates,
over the period necessary to close the position (generally one day). This
measurement includes the foreign exchange risks that arise in traditional
banking businesses as well as explicit trading positions. The method considers
the probability of movements of these market factors (as derived from a two
standard deviation movement), adjusted for correlation among them within each
trading center.
During the 1997 nine months, the potential loss amount in the trading portfolios
averaged $58 million pretax in the aggregate for Citicorp's major trading
centers and the monthly averages of daily exposures ranged from approximately
$42 million to $65 million, which is similar to the range in 1996. The level of
exposure taken is a function of the market environment, and expectations of
future price and market movements; and will vary from period to period. The
trading-related revenue for the 1997 third quarter was $660 million compared
with $511 million in the second quarter and $547 million in the 1996 third
quarter (see "Trading-Related Revenue" on page 27). For the nine months,
trading-related revenue was $1.8 billion in 1997 and $1.4 billion in 1996.
- --------------------------------------------------------------------------------
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
The table on page 22 presents the estimated fair value in excess of (less than)
carrying value of Citicorp's financial instruments as defined in accordance with
applicable requirements, including financial assets and liabilities recorded on
the balance sheet as well as off-balance sheet instruments such as derivative
and foreign exchange contracts and credit card securitizations. To better
reflect Citicorp's values subject to market risk and to illustrate the
interrelationships that characterize risk management strategies, the table on
page 22 also provides estimated fair value data for the expected time period
until runoff of existing deposits with no fixed maturity.
21
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
ESTIMATED FAIR VALUE IN EXCESS OF (LESS THAN) CARRYING VALUE
- -------------------------------------------------------------------------------------------------------------
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(In Billions of Dollars) 1997 1997 1997 1996 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets and Liabilities (A)..................... $6.2 $6.2 $6.2 $5.5 $5.5
End-User Derivative and Foreign Exchange Contracts 0.5 0.1 (0.7) 0.3 (0.2)
Credit Card Securitizations (A) (B)............ (0.2) 0.1 0.3 0.4 0.5
----------------------------------------------------------
6.5 6.4 5.8 6.2 5.8
Deposits with No Fixed Maturity (C)............ 2.9 3.0 3.1 2.7 3.0
----------------------------------------------------------
TOTAL.......................................... $9.4 $9.4 $8.9 $8.9 $8.8
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Commencing March 31, 1997, amounts include the effect of restoring to the
allowance for credit losses a $373 million reserve that had previously been
attributed to securitized credit card receivables, as described on page 30.
(B) Represents the estimated (shortfall) excess in fair value of the underlying
receivables and investor certificates, which is derived by Citicorp in the
form of excess servicing, and principally arises from fixed rates payable
to certificate holders.
(C) Represents the estimated excess fair value related to the expected time
period until runoff of existing deposits with no fixed maturity on the
balance sheet, without assuming any regeneration of balances, based on the
estimated difference between the cost of funds on these deposits and the
cost of funds from alternative sources.
The quarterly fluctuations among financial instruments are primarily due to
changes in the interest rate environment in the U.S. and other countries.
Generally in declining interest rate environments, as experienced in the 1997
second and third quarters and the 1996 fourth quarter, the fair value of
Citicorp's assets and liabilities, deposits with no fixed maturity and credit
card securitizations (primarily fixed rate investor certificates) tend to
decline, while the value of derivative contracts tend to increase.
Correspondingly, in increasing interest rate environments as experienced in the
1997 first quarter, generally, the fair value of assets and liabilities,
deposits with no fixed maturity and credit card securitizations tend to
increase, while the value of derivative contracts tend to decline. In addition,
fair values may vary from period to period based on changes in a variety of
other factors including credit quality, market perceptions of value, and the
changing composition of assets and liabilities.
- --------------------------------------------------------------------------------
CAPITAL
- --------------------------------------------------------------------------------
Citicorp is subject to risk-based capital guidelines issued by the Federal
Reserve Board ("FRB"). These guidelines are supplemented by a leverage ratio
requirement. The risk-based capital guidelines and the leverage ratio
requirement are detailed in the 1996 Annual Report and Form 10-K.
- --------------------------------------------------------------------------------
Sept. 30, June 30, Dec. 31,
CITICORP RATIOS 1997 1997 1996
- --------------------------------------------------------------------------------
Tier 1 Capital...................... 8.25% 8.18% 8.39%
Total Capital (Tier 1 and Tier 2)... 12.16 11.96 12.23
Leverage (A)........................ 7.14 7.30 7.42
Common Stockholders' Equity......... 6.53 6.41 6.63
- --------------------------------------------------------------------------------
(A) Tier 1 capital divided by adjusted average assets.
- --------------------------------------------------------------------------------
Citicorp continued to maintain a strong capital position during the 1997 third
quarter. Total capital (Tier 1 and Tier 2) amounted to $30.4 billion at
September 30, 1997 representing 12.16% of net risk-adjusted assets. This
compares with $30.1 billion and 11.96% at June 30, 1997 and $28.9 billion and
12.23% at December 31, 1996. Tier 1 capital of $20.7 billion at September 30,
1997 represented 8.25% of net risk-adjusted assets, compared with $20.6 billion
and 8.18% at
22
<PAGE>
June 30, 1997 and $19.8 billion and 8.39% at December 31, 1996. The
Tier 1 capital ratio at September 30, 1997 was within Citicorp's target range of
8.00% to 8.30%.
The excess of Tier 1 capital generated during a period reduced by capital
utilized for business expansion is referred to as "free capital." As shown in
the table below, Citicorp generated $2.3 billion and $2.6 billion of Tier 1
capital for the nine months of 1997 and 1996, respectively, of which $1.2
billion and $0.4 billion, respectively, was used to fund the growth in
customer-driven risk-adjusted assets. Citicorp generated $1.2 billion of free
capital in the nine months of 1997.
- --------------------------------------------------------------------------------
FREE CAPITAL
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
-----------------------------
(In Millions of Dollars) 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TIER 1 CAPITAL GENERATED:
Net Income.................................................................. $2,530 $2,801
Issuances/Other (A)......................................................... 634 552
Cash Dividends Declared..................................................... (832) (762)
-----------------------------
TOTAL TIER 1 CAPITAL GENERATED.............................................. 2,332 2,591
Capital Utilized for Growth in Net Risk-Adjusted Assets..................... (1,176) (437)
-----------------------------
FREE CAPITAL GENERATED...................................................... $1,156 $2,154
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Includes issuance of common stock under various employee benefit plans and
the dividend reinvestment plan. 1997 also reflects issuance of guaranteed
preferred beneficial interests in subordinated debt and the redemption of
Series 14 Preferred Stock.
- --------------------------------------------------------------------------------
In order to return available free capital to its shareholders, Citicorp
initiated a common stock repurchase program in June 1995. During 1996, the
program was expanded to a total authorization of $8.5 billion through December
31, 1998. During the nine months of 1997 and 1996, Citicorp repurchased 12.7
million and 28.0 million shares of common stock under the repurchase program
using capital of $1.5 billion ($116.34 average cost per share) and $2.3 billion
($80.45 average cost per share), respectively. Since the program was initiated,
Citicorp has repurchased 71.9 million shares of common stock through September
30, 1997, using capital of $6.1 billion. The amount of free capital is impacted
by a number of factors including the level of income, issuances, dividends, and
changes in risk-adjusted assets.
Common stockholders' equity increased a net $111 million during the third
quarter of 1997 to $19.6 billion at September 30, 1997, representing 6.53% of
assets, compared with 6.41% at June 30, 1997 and 6.63% at December 31, 1996. The
increase in common stockholders' equity during the quarter principally reflected
net income and the issuance of stock under various employee benefit plans,
partially offset by dividends declared on common and preferred stock and shares
repurchased under the common stock repurchase program. The increase in the
common stockholders' equity ratio during the third quarter of 1997 reflected the
above items as well as the reduction in total assets during the quarter.
During the first quarter of 1997, Citicorp redeemed the $175 million Series 14
Preferred Stock and issued an additional $450 million of guaranteed preferred
beneficial interests in Citicorp subordinated debt (commonly known as "trust
preferred securities"). The guaranteed preferred beneficial interests
outstanding at September 30 and June 30, 1997 of $750 million, including $300
million issued in 1996, qualify as Tier 1 capital and are included in long-term
debt on the balance sheet. For the nine months ended September 30, 1997,
interest expense on the guaranteed preferred beneficial interests amounted to
$43 million.
23
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
COMPONENTS OF RISK-BASED CAPITAL UNDER REGULATORY GUIDELINES
- -------------------------------------------------------------------------------------------------------------
Sept. 30, June 30, Dec. 31,
(In Millions of Dollars) 1997 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TIER 1 CAPITAL
Common Stockholders' Equity................................... $19,617 $19,506 $18,644
Perpetual Preferred Stock..................................... 1,903 1,903 2,078
Guaranteed Preferred Beneficial Interests in Subordinated Debt 750 750 300
Minority Interest............................................. 101 98 91
Less: Net Unrealized Gains -- Securities Available for Sale (A) (954) (952) (676)
Intangible Assets (B)......................................... (320) (339) (328)
50% Investment in Certain Subsidiaries (C).................... (446) (336) (313)
-------------------------------------------
TOTAL TIER 1 CAPITAL.......................................... 20,651 20,630 19,796
-------------------------------------------
TIER 2 CAPITAL
Allowance for Credit Losses (D)............................... 3,163 3,186 2,982
Qualifying Debt (E)........................................... 7,057 6,662 6,405
Less: 50% Investment in Certain Subsidiaries (C).............. (446) (336) (313)
-------------------------------------------
TOTAL TIER 2 CAPITAL.......................................... 9,774 9,512 9,074
-------------------------------------------
TOTAL CAPITAL (TIER 1 AND TIER 2)............................. $30,425 $30,142 $28,870
- -------------------------------------------------------------------------------------------------------------
NET RISK-ADJUSTED ASSETS (F).................................. $250,241 $252,065 $236,073
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Tier 1 capital excludes unrealized gains and losses on securities
available for sale in accordance with regulatory risk-based capital
guidelines.
(B) Includes goodwill and certain other identifiable intangible assets.
(C) Primarily Citicorp Securities, Inc.
(D) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is
deducted from risk-adjusted assets.
(E) Includes qualifying senior and subordinated debt in an amount not
exceeding 50% of Tier 1 capital, and subordinated capital notes subject to
certain limitations.
(F) Includes risk-weighted credit equivalent amounts, net of applicable
bilateral netting agreements, of $11.9 billion for interest rate,
commodity and equity derivative contracts, and foreign exchange contracts,
as of September 30, 1997, compared with $10.3 billion as of June 30, 1997
and $9.8 billion as of December 31, 1996. Net risk-adjusted assets also
includes the effect of other off-balance sheet exposures such as unused
loan commitments and letters of credit and reflects deductions for
intangible assets and any excess allowance for credit losses.
- --------------------------------------------------------------------------------
As discussed in the 1996 Annual Report and Form 10-K, Citicorp has entered into
forward purchase agreements on its common stock, to be settled on a net basis,
in order to partially offset the dilutive effects of various employee benefit
plans. At Citicorp's option, such settlements may be made in shares of
Citicorp's common stock or in cash. Both the number of shares covered and the
forward prices of these contracts are adjusted on a quarterly basis and reflect
the stock price at the time of adjustment. As of September 30, 1997, agreements
were in place covering approximately $1.2 billion of Citicorp common stock (9.1
million shares) with forward prices averaging $132.45 per share. During the
third quarter of 1997, settlements resulted in Citicorp receiving approximately
1.1 million shares of its common stock. If these agreements were settled based
on the September 30, 1997 market price of Citicorp common stock ($133.94 per
share), Citicorp would be entitled to receive approximately 0.1 million shares
of its common stock.
Citicorp's subsidiary depository institutions are subject to the risk-based
capital guidelines issued by their respective primary federal bank regulatory
agencies, which are generally similar to the FRB's guidelines. At September 30,
1997 all of Citicorp's subsidiary depository institutions were "well
capitalized" under the federal bank regulatory agencies' definitions.
24
<PAGE>
- --------------------------------------------------------------------------------
Sept. 30, June 30, Dec. 31,
CITIBANK, N.A. RATIOS 1997 1997 1996
- --------------------------------------------------------------------------------
Tier 1 Capital....................... 8.22% 8.16% 8.32%
Total Capital (Tier 1 and Tier 2).... 12.13 12.03 12.11
Leverage............................. 6.44 6.48 6.63
Common Stockholder's Equity.......... 6.88 6.73 6.99
- --------------------------------------------------------------------------------
During the third quarter of 1997, Citibank issued an additional $200 million of
subordinated notes to the Parent Company that qualify for inclusion in
Citibank's Tier 2 Capital. Total subordinated notes outstanding at September 30,
1997 and included in Citibank's Tier 2 Capital amounted to $5.4 billion.
During 1996, the U.S. bank regulatory agencies issued an amendment to their
risk-based capital guidelines to incorporate a measure for market risk in
foreign exchange and commodity activities and in the trading of debt and equity
instruments. The final rules, which must be implemented by January 1, 1998, are
not expected to have a significant impact on Citicorp.
From time to time, the FRB and the Federal Financial Institutions Examination
Council propose amendments to, and issue interpretations of, risk-based capital
guidelines and reporting instructions. Such proposals or interpretations could,
if implemented in the future, affect reported capital ratios and net
risk-adjusted assets.
- --------------------------------------------------------------------------------
STATEMENT OF INCOME ANALYSIS
- --------------------------------------------------------------------------------
NET INTEREST REVENUE (TAXABLE EQUIVALENT BASIS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NET INTEREST REVENUE STATISTICS 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
(TAXABLE EQUIVALENT BASIS) (A) (B) 1997 1997 1997 1996 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INTEREST REVENUE: (In Millions of Dollars)
U.S............................................ $1,829 $1,835 $1,862 $1,785 $1,714
Outside the U.S................................ 1,624 1,619 1,587 1,699 1,616
----------------------------------------------------------
TOTAL ADJUSTED................................. 3,453 3,454 3,449 3,484 3,330
Effect of Credit Card Securitization Activity (C) (565) (578) (630) (650) (613)
----------------------------------------------------------
TOTAL.......................................... $2,888 $2,876 $2,819 $2,834 $2,717
- -------------------------------------------------------------------------------------------------------------
AVERAGE INTEREST-EARNING ASSETS: (In Billions of
Dollars)
U.S............................................ $123.8 $127.2 $123.2 $120.2 $118.7
Outside the U.S................................ 156.7 150.1 144.1 142.0 140.1
----------------------------------------------------------
TOTAL ADJUSTED................................. 280.5 277.3 267.3 262.2 258.8
Securitized Credit Card Receivables (C)........ (24.8) (24.7) (25.1) (25.9) (26.2)
----------------------------------------------------------
TOTAL.......................................... $255.7 $252.6 $242.2 $236.3 $232.6
- -------------------------------------------------------------------------------------------------------------
ADJUSTED NET INTEREST MARGIN:..................
U.S............................................ 5.86% 5.79% 6.13% 5.90% 5.75%
Outside the U.S................................ 4.11% 4.33% 4.47% 4.76% 4.59%
----------------------------------------------------------
TOTAL ADJUSTED................................. 4.88% 5.00% 5.23% 5.28% 5.12%
Effect of Credit Card Securitization Activity (C) (.40)% (.43)% (.51)% (.51)% (.47)%
----------------------------------------------------------
TOTAL.......................................... 4.48% 4.57% 4.72% 4.77% 4.65%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Includes allocations for capital and funding costs based on the location
of the asset.
(B) The taxable equivalent adjustment is based on the U.S. federal statutory
tax rate of 35%.
(C) See page 33 for discussion of the effect of credit card securitization
activity.
- --------------------------------------------------------------------------------
Net interest revenue of $2.9 billion in the 1997 third quarter increased 6% from
the 1996 third quarter reflecting a 10% increase in interest-earning assets,
partially offset by a 17 basis point decline in the net interest margin. Net
interest revenue and net interest margin were reduced in all periods by the
effect of credit card securitization activity. Adjusted
25
<PAGE>
net interest revenue in the quarter of $3.5 billion increased 4% from
the year-ago period. The adjusted net interest margin decreased to 4.88% from
5.00% in the 1997 second quarter and 5.12% in the 1996 third quarter.
In the U.S., the adjusted net interest margin of 5.86% in the quarter increased
from 5.79% in the 1997 second quarter and 5.75% in the 1996 third quarter. The
increase from the 1997 second quarter was primarily the result of a decrease in
the level of lower yielding securities, partially offset by lower spreads in
U.S. bankcards reflecting previously implemented pricing changes. The increase
in the net interest margin from the 1996 third quarter reflected a one time
charge of $64 million related to the U.S. Savings Association Insurance Fund in
the 1996 third quarter as well as higher spreads in the Citibanking business,
partially offset by lower spreads on the U.S. bankcards portfolio and spread
compression in Global Relationship Banking.
Outside the U.S., the net interest margin of 4.11% in the quarter decreased from
4.33% in the second quarter and 4.59% in the 1996 third quarter. The decrease in
the net interest margin primarily reflected spread compression in Corporate
Banking businesses, and in the Consumer business in Asia Pacific. Net interest
revenue from activities outside the U.S. represented 47% of total adjusted net
interest revenue in the 1997 third quarter.
The $21.7 billion or 8% increase in adjusted average interest-earning assets in
the 1997 third quarter from the year-ago period was mainly attributable to
higher levels of commercial loans outside the U.S., consumer loans in the U.S.,
as well as securities both in and outside the U.S.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
FEE AND COMMISSION REVENUE
- -------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
----------------------- % ----------------------- %
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GLOBAL CONSUMER:
Citibanking............................. $ 301 $ 259 16 $ 863 $ 773 12
Cards................................... 487 476 2 1,450 1,348 8
Private Bank............................ 130 99 31 359 303 18
----------------------------------------------------------------
918 834 10 2,672 2,424 10
GLOBAL CORPORATE BANKING AND OTHER...... 537 486 10 1,522 1,463 4
----------------------------------------------------------------
TOTAL ADJUSTED.......................... 1,455 1,320 10 4,194 3,887 8
Effect of Credit Card Securitization
Activity (B) ......................... 23 43 (47) 77 137 (44)
----------------------------------------------------------------
TOTAL................................... $1,478 $1,363 8 $4,271 $4,024 6
- -------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION:
Consumer Business in Emerging Markets... $ 315 $ 265 19 $ 902 $ 784 15
Consumer Business in Developed Markets.. 603 569 6 1,770 1,640 8
----------------------------------------------------------------
$ 918 $ 834 10 $2,672 $2,424 10
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to latest quarter's presentation.
(B) See page 33 for discussion of the effect of credit card securitization
activity.
- --------------------------------------------------------------------------------
Total fee and commission revenue of $1.5 billion for the 1997 third quarter and
$4.3 billion for the nine months increased $115 million or 8% and $247 million
or 6% from the comparable 1996 periods. Fee and commission revenue was increased
in all periods presented by the effect of credit card securitization activity.
Adjusted for the effect of credit card securitization activity, fee and
commission revenue was up 10% and 8% from the year-ago periods.
Fee and commission revenue in the Global Consumer businesses was up 10% in both
the quarter and nine month periods. Growth in emerging markets revenue in the
quarter reflected strong results in all businesses, especially the Private Bank
and Citibanking, particularly in Asia Pacific. For the nine months, emerging
markets revenue growth was led by Cards and Citibanking, as well as Private
Banking in Asia Pacific. In the developed markets, increased fee and commission
26
<PAGE>
revenue in the quarter reflected improved performance by Citibanking and the
Private Bank, and in the nine months increased in all businesses.
Global Corporate Banking business fee and commission revenue was up 10% in the
quarter and 4% in the year-to-date, primarily reflecting growth in transaction
banking services and corporate finance fees in Global Relationship Banking in
North America.
- --------------------------------------------------------------------------------
TRADING-RELATED REVENUE
- --------------------------------------------------------------------------------
Trading-related revenue is composed of the "Foreign Exchange" and "Trading
Account" lines in the Statement of Income and also includes other amounts,
principally reflected in Net Interest Revenue. The table below presents
trading-related revenue by business sector, by trading activity, and by income
statement line.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
TRADING-RELATED REVENUE Third Quarter % Nine Months %
----------------------- -----------------------
(In Millions of Dollars) 1997 1996 (A) Change 1997 1996 (A) Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BY BUSINESS SECTOR:
Global Corporate Banking:
Emerging Markets.................... $291 $223 30 $ 691 $ 592 17
Global Relationship Banking......... 273 253 8 835 593 41
----------------------------------------------------------------
Total Global Corporate Banking.......... 564 476 18 1,526 1,185 29
Global Consumer and Other............... 96 71 35 234 181 29
----------------------------------------------------------------
TOTAL................................... $660 $547 21 $1,760 $1,366 29
- -------------------------------------------------------------------------------------------------------------
BY TRADING ACTIVITY:
Foreign Exchange (B).................... $377 $249 51 $ 924 $ 686 35
Derivative (C).......................... 145 163 (11) 421 447 (6)
Fixed Income (D)........................ 46 42 10 190 24 NM
Other................................... 92 93 (1) 225 209 8
----------------------------------------------------------------
TOTAL................................... $660 $547 21 $1,760 $1,366 29
- -------------------------------------------------------------------------------------------------------------
BY INCOME STATEMENT LINE:
Foreign Exchange........................ $435 $221 97 $1,043 $ 640 63
Trading Account......................... 134 224 (40) 429 420 2
Other (E)............................... 91 102 (11) 288 306 (6)
----------------------------------------------------------------
TOTAL................................... $660 $547 21 $1,760 $1,366 29
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
(B) Foreign exchange activity includes foreign exchange spot, forward, and
option contracts.
(C) Derivative activity primarily includes interest rate and currency swaps,
options, financial futures, and equity and commodity contracts.
(D) Fixed income activity principally includes debt instruments including
government and corporate debt as well as mortgage assets.
(E) Primarily net interest revenue.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Trading-related revenue in the 1997 third quarter and nine months increased $113
million and $394 million from the respective 1996 periods. The increases
primarily reflected higher foreign exchange activity and, in the nine months,
improved fixed income results.
Foreign exchange revenue of $377 million and $924 million in the 1997 third
quarter and nine months increased $128 million and $238 million from the
comparable 1996 periods. The improvements were driven by volatility in certain
Asian currencies, coupled with unusually low results in the 1996 periods
attributable to listless foreign exchange markets in the major currencies.
27
<PAGE>
Derivative revenue of $145 million and $421 million in the 1997 third quarter
and nine months declined $18 million and $26 million from the comparable 1996
periods. While customer demand for risk-management products continued during the
periods, revenue declined primarily due to less favorable market conditions
which resulted in a change in the mix of products, narrower spreads, and lower
trading opportunities.
Fixed income revenue of $46 million in the 1997 third quarter improved $4
million from the comparable 1996 period. Fixed income revenue of $190 million in
the 1997 nine months increased $166 million from the unusually low 1996 period,
when results were adversely affected by volatile interest rates in North America
and a $60 million mortgage-backed securities charge.
Levels of trading-related revenue may fluctuate in the future as a result of
market conditions and other factors.
- --------------------------------------------------------------------------------
SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------
Net gains from the sale of securities were $186 million in the third quarter and
$418 million in the nine months of 1997, compared with $5 million and $146
million in the comparable 1996 periods. The net gains in the third quarter of
1997 reflected gross realized gains of $198 million ($456 million for the nine
months) and gross realized losses of $12 million ($38 million for the nine
months). The 1997 third quarter and nine months included realized gains of $80
million and $138 million, respectively, related to the sale of Government of
Brazil Brady bonds. The nine months of 1996 included a realized gain of $52
million from the sale of Brazil interest bonds.
The fair values of securities may fluctuate over time based on general market
conditions as well as events and trends affecting specific securities.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
OTHER REVENUE
- -------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
----------------------- % ----------------------- %
(In Millions of Dollars) 1997 1996 Change 1997 1996 Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Credit Card Securitization Activity..... $134 $210 (36) $ 417 $ 658 (37)
Venture Capital......................... 235 129 82 501 274 83
Affiliate Earnings...................... 51 43 19 222 188 18
Net Asset Gains and Other Items......... 12 106 (89) 204 359 (43)
----------------------------------------------------------------
TOTAL................................... $432 $488 (11) $1,344 $1,479 (9)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The decrease in revenue related to credit card securitization activity in the
1997 third quarter principally reflected higher net credit loss rates, a decline
in the net interest margin, and lower average securitized volumes. The decrease
in revenue in the 1997 nine months resulted from higher net credit loss rates
and lower average securitized volumes, partially offset by an improved net
interest margin. Additionally, commencing with the 1997 first quarter, revenue
from credit card securitization activity includes net credit losses on loans
held for sale, which totaled $30 million and $95 million in the quarter and nine
months. The effect of credit card securitization activity is discussed in more
detail on page 33.
Venture capital revenue of $235 million and $501 million in the 1997 quarter and
nine months improved $106 million and $227 million from the 1996 periods,
benefiting from continued buoyant equity markets. Investments of venture capital
subsidiaries are carried at fair value and revenue volatility can occur in the
future, based on general market conditions as well as events and trends
affecting specific venture capital investments.
Affiliate earnings in the 1997 nine months improved by $34 million compared to
the prior year, primarily due to an investment dividend.
28
<PAGE>
Net asset gains and other items declined by $94 million compared to the 1996
third quarter due to a $23 million investment writedown in Latin America, and
gains during the 1996 period related to the sale of the consumer mortgage
portfolio in the United Kingdom ($42 million) and the Panama refinancing
agreement ($28 million). Revenue in the 1997 nine months reflected a $46 million
gain related to the refinancing agreement concluded with Peru, a $32 million
gain related to the sale of an investment from the acquisition finance portfolio
by Global Relationship Banking, and a $23 million gain related to the
disposition of an automated trading business, partially offset by investment
writedowns of $72 million in Latin America. Revenue in the nine months of 1996
also included a $110 million gain from the second quarter sale of an automated
trading business and a gain related to the disposition of a portion of
Citicorp's holding in an Asian affiliate, partially offset by an investment
writedown of $50 million in Latin America.
- --------------------------------------------------------------------------------
PROVISION AND CREDIT LOSS RESERVES
- --------------------------------------------------------------------------------
The provision for credit losses of $486 million and $1.4 billion in the 1997
third quarter and nine months increased $37 million or 8% from the 1996 quarter
and was essentially unchanged from the 1996 nine months. Both the quarter and
nine months reflect higher net write-offs partially offset by lower additional
provisions in the Global Consumer business, while Global Corporate Banking net
write-offs increased in the quarter -- reflecting $54 million of recoveries a
year ago associated with the refinancing agreements completed with Panama and
Croatia -- but improved in the 1997 nine months.
Details of net write-offs, additional provision, and the provision for credit
losses are included in the following table:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NET WRITE-OFFS, ADDITIONAL PROVISION, AND PROVISION FOR CREDIT LOSSES
- -------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
----------------------------------------------
(In Millions of Dollars) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET WRITE-OFFS (RECOVERIES):
Global Consumer (A)....................................... $860 $800 $2,678 $2,276
Global Corporate Banking.................................. 9 (41) (53) (1)
----------------------------------------------
TOTAL ADJUSTED NET WRITE-OFFS............................. 869 759 2,625 2,275
Effect of Credit Card Securitization Activity............. (408) (360) (1,279) (1,003)
----------------------------------------------
TOTAL..................................................... $461 $399 $1,346 $1,272
- -------------------------------------------------------------------------------------------------------------
ADDITIONAL PROVISION:
Global Consumer........................................... $25 $50 $75 $150
----------------------------------------------
TOTAL..................................................... $25 $50 $75 $150
- -------------------------------------------------------------------------------------------------------------
PROVISION FOR CREDIT LOSSES:
Global Consumer........................................... $477 $490 $1,474 $1,423
Global Corporate Banking.................................. 9 (41) (53) (1)
----------------------------------------------
TOTAL..................................................... $486 $449 $1,421 $1,422
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Adjusted for the effect of credit card securitization activity, including
the effect related to credit card receivables held for sale commencing
with the 1997 first quarter (see page 33).
- --------------------------------------------------------------------------------
Global Consumer net write-offs, adjusted for the effect of credit card
securitization activity, in the 1997 third quarter and nine months were $860
million and $2.7 billion, up from $800 million and $2.3 billion in the 1996
periods, principally due to higher losses in U.S. bankcards. The Global Consumer
provision for credit losses included an additional provision in excess of net
write-offs of $25 million in the 1997 third quarter and $75 million in the nine
months, compared with $50
29
<PAGE>
million and $150 million in the 1996 periods. Net write-offs and the total
provision may increase from 1997 third quarter levels as a result of credit
performance of the portfolios (including bankruptcies), economic conditions, and
other changes in portfolio levels. See "Consumer Portfolio Review" on page 11
for an additional discussion.
Global Corporate Banking net write-offs in the 1997 third quarter were $9
million and compared with net recoveries of $41 million in the 1996 third
quarter, which included recoveries of $54 million related to the refinancing
agreements concluded with Panama and Croatia. Excluding the refinancing
recoveries, higher net write-offs in the Emerging Markets were offset by lower
net write-offs in Global Relationship Banking. Global Corporate Banking net
recoveries in the 1997 nine months of $53 million (which included a $50 million
recovery in the 1997 first quarter from the refinancing agreement concluded with
Peru) improved $52 million from the 1996 nine months (which included recoveries
of $75 million from the refinancing agreements concluded with Panama and Croatia
in the third quarter, and Slovenia in the second quarter) due to lower
write-offs and continued recoveries. There were no material credit losses
related to derivative and foreign exchange contracts or standby letters of
credit and guarantees in either quarter or nine-month period. Emerging Markets
write-offs in the 1997 third quarter included $20 million related to derivative
and foreign exchange contracts. Citicorp does not expect to continue to
experience net recoveries in the Global Corporate Banking portfolio, and net
write-offs may increase from the current low levels.
All identified losses are immediately written off and the entire allowance is
available to absorb all probable credit losses inherent in the portfolio. For
analytical purposes only, Citicorp attributes the reserve to the credit
exposures as detailed in the table below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CREDIT LOSS RESERVES (A)
- -------------------------------------------------------------------------------------------------------------
Sept. 30, Dec. 31, Sept. 30,
(Dollars In Millions) 1997 1996 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALLOWANCE FOR CREDIT LOSSES:
Global Consumer............................................... $2,470 $2,079 $2,036
Global Corporate Banking...................................... 3,329 3,424 3,424
-------------------------------------------
TOTAL ALLOWANCE FOR CREDIT LOSSES............................. 5,799 5,503 5,460
Reserves for Off-Balance Sheet Credit Exposures............... 189 473 481
-------------------------------------------
TOTAL CREDIT LOSS RESERVES.................................... $5,988 $5,976 $5,941
- -------------------------------------------------------------------------------------------------------------
ALLOWANCE AS A PERCENT OF TOTAL LOANS:
Global Consumer............................................... 2.27% 1.86% 1.92%
Global Corporate Banking...................................... 4.60% 5.46% 5.44%
TOTAL......................................................... 3.20% 3.15% 3.23%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) In the first quarter of 1997, to be consistent with industry practice,
Citicorp changed the apportionment and display of credit loss reserves to
report (1) $50 million in Other Liabilities attributable to standby
letters of credit and guarantees, and (2) $50 million deducted from
Trading Account Assets attributable to derivative and foreign exchange
contracts, and (3) to restore to the Allowance for Credit Losses $373
million that had previously been attributed to securitization transactions
where the exposure to credit losses is contractually limited to the cash
flows from the securitized receivables. Reserves for off-balance sheet
credit exposures at September 30, 1997 consist of $50 million included in
Other Liabilities and $50 million deducted from Trading Account Assets and
also include $89 million deducted from Other Assets attributable to
mortgage loans sold with recourse.Prior period amounts have not been
reclassified.
- --------------------------------------------------------------------------------
The allowance for credit losses and the reserves for off-balance sheet credit
exposures totaled $6.0 billion as of September 30, 1997 and December 31, 1996,
up from $5.9 billion at September 30, 1996. The increase in the reserves
primarily reflected continued reserve building, partially offset by the effect
of foreign currency translation.
Uncertainty related to the credit and economic environment, as well as higher
loan volumes in the worldwide Global Consumer portfolios, may result in further
increases in the allowance for credit losses attributable to the Global Consumer
business.
30
<PAGE>
- --------------------------------------------------------------------------------
OPERATING EXPENSE
- --------------------------------------------------------------------------------
Operating expense was $4.2 billion and $10.6 billion in the 1997 third quarter
and nine months, and reflected the $889 million restructuring charge discussed
in the following section. Operating expense excluding the restructuring charge
was $3.3 billion and $9.7 billion in the 1997 third quarter and nine months, up
$270 million and $774 million, or 9%, from the comparable 1996 periods. The
increases were principally related to business activities in the emerging
markets, a 12% and 13% increase from the 1996 quarter and nine month periods,
while expense related to developed markets businesses was up 7% and 6% from the
1996 periods. Excluding the effect of foreign currency translation resulting
from a strengthened U.S. dollar, operating expense increased 12% in the quarter
and 11% in the nine month period.
Employee expense was $1.7 billion in the third quarter and $4.9 billion in the
nine months, up $95 million or 6% and $355 million or 8% from the 1996 periods.
The increases primarily reflected salary increases, higher staff levels related
to business expansion in the emerging markets, and an increase of $44 million in
the 1997 nine months associated with the vesting of the performance-based stock
options. Staff levels of 92,500 at September 30, 1997 increased 3,500 (2,000 in
the emerging markets) or 4% from year-ago levels.
Net premises and equipment expense was $496 million in the quarter and $1.5
billion in the nine months, up $25 million or 5% and $98 million or 7% from
1996. Other expense was $1.2 billion and $3.3 billion in the quarter and nine
months, up $150 million or 15% and $321 million or 11% from 1996. The increases
primarily reflected investment spending and higher business volumes in the
emerging markets. In addition, enhanced marketing initiatives in U.S. bankcards
and the Private Bank, intensified U.S. bankcard collection efforts, increased
spending on technology initiatives (including Year 2000 costs), and
volume-related expenses in transaction banking services all contributed to the
increase.
Citicorp recognizes that the arrival of the Year 2000 poses a unique worldwide
challenge to the ability of all systems to recognize the date change from
December 31, 1999 to January 1, 2000 and, like other companies, is assessing and
repairing its computer applications and business processes to provide for their
continued functionality. A process of inventory, scoping and analysis,
modification, testing and certification, and implementation is under way, funded
from a combination of a reprioritization of technology development initiatives
and incremental costs. Citicorp does not anticipate that the related overall
costs will be material to any single year or quarter.
Work is also under way to prepare for the coming European monetary union, costs
of which are similarly not expected to be material.
- --------------------------------------------------------------------------------
RESTRUCTURING EXPENSE
- --------------------------------------------------------------------------------
During the 1997 third quarter, Citicorp recorded an $889 million charge related
to cost-management programs and customer service initiatives to improve
operational efficiency and productivity. These programs, which will be
implemented over the next 12 to 18 months, include global operations and
technology consolidation and standardization, the reconfiguration of front-end
distribution processes, and the outsourcing of various technological functions.
Overall, these programs are estimated to achieve pay-back within two years.
The charge includes $496 million for severance benefits and $393 million related
to writedowns of equipment and premises which management has committed to
dispose, lease terminations, and other exit costs. These programs are expected
to be substantially completed by the end of 1998. Additional program costs that
do not qualify for recognition in the charge will be expensed as incurred in the
implementation of these programs over the next 12 to 18 months, but are not
expected to be material. A portion of the expense savings generated by these
programs will be reinvested in new products, marketing programs, and additional
cost and quality initiatives to further increase revenues and reduce costs.
31
<PAGE>
The $889 million charge relates to the following businesses and regions:
- -------------------------------------------------------------------------------
Third Quarter
(In Millions of Dollars) 1997
- -------------------------------------------------------------------------------
GLOBAL CONSUMER:
Citibanking................................................. $457
Cards....................................................... 95
Private Bank................................................ 28
---------------
580
GLOBAL CORPORATE BANKING:
Emerging Markets............................................ 54
Global Relationship Banking................................. 227
---------------
281
Corporate Items............................................. 28
---------------
TOTAL CITICORP.............................................. $889
- -------------------------------------------------------------------------------
Developed................................................... $704
Emerging.................................................... 185
---------------
TOTAL CITICORP.............................................. $889
- -------------------------------------------------------------------------------
The $496 million for severance benefits is related to approximately 9,000
existing positions that will be reduced through the next 12 to 18 months. It is
estimated that about 1,500 new positions will be added as part of this program,
resulting in a net program reduction of about 7,500 jobs. The gross direct staff
reductions are attributed as follows:
- -------------------------------------------------------------------------------
Gross Direct
Staff
Reduction
- -------------------------------------------------------------------------------
Global Consumer............................................. 6,700
Global Corporate Banking.................................... 1,500
Business Support (A)........................................ 800
---------------
TOTAL CITICORP.............................................. 9,000
- -------------------------------------------------------------------------------
(A) Associated costs have been allocated to businesses as appropriate.
- --------------------------------------------------------------------------------
Of the total $889 million restructuring charge, approximately $644 million
represents a liability for future cash outflows associated with employee
severance benefits, lease termination costs, and other exit costs. Citicorp does
not expect that the payment of these amounts will have a significant effect on
its liquidity or financial position. The remaining $245 million represents
writedowns taken on assets to be disposed of, based on estimated fair values.
The remaining carrying amount of these assets is not material.
- --------------------------------------------------------------------------------
INCOME TAXES
- --------------------------------------------------------------------------------
Income taxes were $307 million and $1.5 billion in the third quarter and nine
months of 1997. The 1997 effective tax rate was 38% in both the quarter and nine
month periods, compared with 37% for the 1996 quarter and 38% for the nine
months. The 1996 full-year effective tax rate was 38%.
32
<PAGE>
- --------------------------------------------------------------------------------
EFFECT OF CREDIT CARD SECURITIZATION ACTIVITY
- --------------------------------------------------------------------------------
During the nine months of 1997, $5.8 billion of U.S. credit card receivables
were securitized. As of September 30, 1997, the total amount of securitized
receivables, net of amortization, was $26.0 billion compared with $24.2 billion
as of June 30, 1997 and $26.1 billion as of September 30, 1996.
The securitization of credit card receivables, which is described in the 1996
Annual Report and Form 10-K, does not affect the earnings reported in a period.
However, securitization affects the manner in which revenue and the provision
for credit losses are classified in the income statement. For securitized
receivables, amounts that would otherwise be reported as net interest revenue,
as fee and commission revenue, and as net credit losses on loans are instead
reported as fee and commission revenue (for servicing fees) and as other revenue
(for the remaining cash flows to which Citicorp is entitled, net of credit
losses). Because credit losses are a component of these cash flows, Citicorp's
revenues over the terms of these transactions may vary depending upon credit
performance of the securitized receivables. However, Citicorp's exposure to
credit losses on the securitized receivables is contractually limited to these
cash flows. In addition, commencing with the first quarter of 1997, net credit
losses on credit card receivables held for sale are reported as a reduction of
other revenue rather than included in the provision for credit losses. The table
below shows the net effect of credit card securitization activity as an increase
or (decrease) to the amounts reported in the Consolidated Statement of Income
and Average Balance Sheet, and under the captions of Return on Assets, Net
Interest Margin, and Consumer Net Credit Loss Ratio. The adoption of Statement
of Financial Accounting Standards No. 125 in the 1997 first quarter did not
result in a change in the income recognition policies for credit card
securitization activity due to immateriality.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
----------------------------------------------
(In Millions of Dollars) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Interest Revenue...................................... ($565) ($613) ($1,773) ($1,798)
Fee and Commission Revenue................................ 23 43 77 137
Other Revenue............................................. 134 210 417 658
Provision for Credit Losses............................... (408) (360) (1,279) (1,003)
- -------------------------------------------------------------------------------------------------------------
NET INCOME IMPACT OF SECURITIZATION....................... $ - $ - $ - $ -
- -------------------------------------------------------------------------------------------------------------
Average Assets (In Billions).............................. ($25) ($26) ($25) ($26)
Return on Assets.......................................... .05% .12% .09% .12%
Net Interest Margin....................................... (.40)% (.47)% (.44)% (.45)%
Consumer Net Credit Loss Ratio............................ (.86)% (.76)% (.92)% (.70)%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME CITICORP AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
----------------------------------------------
(In Millions of Dollars, Except Per Share Amounts) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST REVENUE
Loans, including Fees..................................... $4,813 $4,605 $14,084 $13,702
Deposits with Banks....................................... 258 218 727 621
Federal Funds Sold and Securities Purchased Under Resale
Agreements................................................ 223 193 638 695
Securities:
U.S. Treasury and Federal Agencies.................... 62 58 239 170
State and Municipal................................... 35 21 102 62
Other, including dividends (Principally in offices
outside the U.S.)..................................... 448 373 1,320 1,039
Trading Account Assets.................................... 236 347 751 1,053
Loans Held for Sale (A)................................... 120 - 332 -
----------------------------------------------
Total Interest Revenue.................................... 6,195 5,815 18,193 17,342
----------------------------------------------
INTEREST EXPENSE
Deposits.................................................. 2,438 2,256 7,088 6,610
Trading Account Liabilities............................... 78 105 227 243
Purchased Funds and Other Borrowings...................... 468 401 1,333 1,349
Long-Term Debt............................................ 335 344 1,002 1,018
----------------------------------------------
Total Interest Expense.................................... 3,319 3,106 9,650 9,220
----------------------------------------------
----------------------------------------------
NET INTEREST REVENUE...................................... 2,876 2,709 8,543 8,122
----------------------------------------------
PROVISION FOR CREDIT LOSSES............................... 486 449 1,421 1,422
----------------------------------------------
NET INTEREST REVENUE AFTER PROVISION FOR CREDIT LOSSES.... 2,390 2,260 7,122 6,700
----------------------------------------------
FEES, COMMISSIONS, AND OTHER REVENUE
Fees and Commissions...................................... 1,478 1,363 4,271 4,024
Foreign Exchange.......................................... 435 221 1,043 640
Trading Account........................................... 134 224 429 420
Securities Transactions................................... 186 5 418 146
Other Revenue............................................. 432 488 1,344 1,479
----------------------------------------------
Total Fees, Commissions, and Other Revenue................ 2,665 2,301 7,505 6,709
----------------------------------------------
OPERATING EXPENSE
Salaries.................................................. 1,356 1,240 3,906 3,584
Employee Benefits......................................... 317 338 1,039 1,006
----------------------------------------------
Total Employee Expense.................................... 1,673 1,578 4,945 4,590
Net Premises and Equipment Expense........................ 496 471 1,465 1,367
Restructuring Charge...................................... 889 - 889 -
Other Expense............................................. 1,179 1,029 3,280 2,959
----------------------------------------------
Total Operating Expense................................... 4,237 3,078 10,579 8,916
----------------------------------------------
INCOME BEFORE TAXES....................................... 818 1,483 4,048 4,493
INCOME TAXES.............................................. 307 548 1,518 1,692
----------------------------------------------
NET INCOME................................................ $ 511 $ 935 $ 2,530 $ 2,801
- -----------------------------------------------------------------------------------------------------------
INCOME APPLICABLE TO COMMON STOCK......................... $477 $897 $2,424 $2,682
----------------------------------------------
EARNINGS PER SHARE:
ON COMMON AND COMMON EQUIVALENT SHARES................ $1.01 $1.85 $5.13 $5.53
ASSUMING FULL DILUTION................................ $1.01 $1.85 $5.12 $5.45
- -----------------------------------------------------------------------------------------------------------
(A) Commencing with the first quarter 1997, Citicorp classifies credit card
and mortgage loans intended for sale as loans held for sale.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET CITICORP AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------
Sept. 30, Dec. 31,
(In Millions of Dollars) 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and Due from Banks..................................................... $ 7,379 $ 6,905
Deposits at Interest with Banks............................................. 11,343 11,648
Securities, at Fair Value:
Available for Sale...................................................... 30,115 26,062
Venture Capital......................................................... 2,348 2,124
Trading Account Assets...................................................... 35,431 30,785
Loans Held for Sale (A)..................................................... 3,994 -
Federal Funds Sold and Securities Purchased Under Resale Agreements......... 10,646 11,133
Loans, Net
Consumer.................................................................... 108,617 111,847
Commercial.................................................................. 72,378 62,765
-----------------------------
Loans, Net of Unearned Income............................................... 180,995 174,612
Allowance for Credit Losses................................................. (5,799) (5,503)
-----------------------------
Total Loans, Net............................................................ 175,196 169,109
Customers' Acceptance Liability............................................. 2,021 2,077
Premises and Equipment, Net................................................. 4,429 4,667
Interest and Fees Receivable................................................ 3,301 3,068
Other Assets................................................................ 14,178 13,440
-----------------------------
TOTAL....................................................................... $300,381 $281,018
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
Non-Interest-Bearing Deposits in U.S. Offices............................... $ 15,425 $ 14,867
Interest-Bearing Deposits in U.S. Offices................................... 39,034 40,254
Non-Interest-Bearing Deposits in Offices Outside the U.S.................... 10,023 9,891
Interest-Bearing Deposits in Offices Outside the U.S........................ 129,616 119,943
-----------------------------
Total Deposits.............................................................. 194,098 184,955
Trading Account Liabilities................................................. 25,843 22,003
Purchased Funds and Other Borrowings........................................ 20,528 18,191
Acceptances Outstanding..................................................... 2,024 2,104
Accrued Taxes and Other Expense............................................. 6,116 5,992
Other Liabilities........................................................... 9,959 8,201
Long-Term Debt.............................................................. 20,293 18,850
STOCKHOLDERS' EQUITY
Preferred Stock (Without par value)......................................... 1,903 2,078
Common Stock ($1.00 par value).............................................. 506 506
Issued Shares: 506,298,235 in each period
Surplus..................................................................... 6,550 6,595
Retained Earnings........................................................... 16,001 14,303
Net Unrealized Gains -- Securities Available for Sale..................... 954 676
Foreign Currency Translation................................................ (576) (486)
Common Stock in Treasury, at Cost........................................... (3,818) (2,950)
Shares: 49,463,449 and 43,081,217, respectively
-----------------------------
Total Stockholders' Equity.................................................. 21,520 20,722
-----------------------------
TOTAL....................................................................... $300,381 $281,018
- -------------------------------------------------------------------------------------------------------------
(A) Commencing with the first quarter 1997, Citicorp classifies credit card and
mortgage loans intended for sale as loans held for sale, which are accounted
for at the lower of cost or market value.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY CITICORP AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------
Nine Months
-----------------------------
(In Millions of Dollars) 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at Beginning of Period.............................................. $20,722 $19,581
Redemption of Perpetual Preferred Stock, Series 14.......................... (175) -
Convertible Preferred Stock, Series 12
Redemption of Series 12................................................. - (590)
Issuance of Common Stock................................................ - 590
Convertible Preferred Stock, Series 13
Redemption of Series 13................................................. - (403)
Issuance of Common Stock from Treasury Shares........................... - 1,066
Adjustment to Retained Earnings for Treasury Shares Issued.............. - (663)
Net Income.................................................................. 2,530 2,801
Cash Dividends Declared
Common.................................................................. (725) (639)
Preferred............................................................... (107) (123)
Change in Net Unrealized Gains on Securities Available for Sale............. 278 449
Foreign Currency Translation................................................ (90) (38)
Repurchased Common Shares................................................... (1,477) (2,255)
Employee Benefit Plans and Other Activity (A)............................... 564 621
-----------------------------
BALANCE AT END OF PERIOD.................................................... $21,520 $20,397
- -------------------------------------------------------------------------------------------------------------
(A) Primarily issuance of common stock (including treasury shares) under
employee benefit plans and related amortization and tax benefits.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS CITICORP AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------
Nine Months
-----------------------------
(In Millions of Dollars) 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME.................................................................. $ 2,530 $ 2,801
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Provision for Credit Losses................................................. 1,421 1,422
Depreciation and Amortization of Premises and Equipment..................... 570 523
Amortization of Goodwill.................................................... 30 35
Provision for Deferred Taxes................................................ (386) 497
Restructuring Charge........................................................ 889 -
Venture Capital Activity.................................................... (224) (105)
Net Gain on Sale of Securities.............................................. (418) (146)
Changes in Accruals and Other, Net.......................................... 1,718 (1,457)
Net Increase in Loans Held for Sale (A)..................................... (2,881) -
Net (Increase) Decrease in Trading Account Assets........................... (4,646) 3,661
Net Increase in Trading Account Liabilities................................. 3,840 156
-----------------------------
TOTAL ADJUSTMENTS........................................................... (87) 4,586
-----------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................... 2,443 7,387
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net Decrease (Increase) in Deposits at Interest with Banks.................. 305 (2,965)
Securities -- Available for Sale
Purchases............................................................... (39,792) (26,623)
Proceeds from Sales..................................................... 22,001 8,892
Maturities.............................................................. 14,215 11,834
Net Decrease (Increase) in Federal Funds Sold and Securities Purchased Under
Resale Agreements.......................................................... 487 (3,145)
Net Increase in Loans (A)................................................... (84,728) (103,342)
Proceeds from Sales of Loans and Credit Card Receivables (A)................ 74,942 98,217
Capital Expenditures on Premises and Equipment.............................. (865) (1,016)
Proceeds from Sales of Premises and Equipment, Subsidiaries and Affiliates,
and OREO................................................................... 861 988
-----------------------------
NET CASH USED IN INVESTING ACTIVITIES....................................... (12,574) (17,160)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits.................................................... 9,143 12,188
Net Increase in Federal Funds Purchased and Securities Sold Under Repurchase
Agreements................................................................... 145 1,386
Commercial Paper and Funds Borrowed with Original Maturities of Less Than
One Year
Proceeds from Issuance.................................................. 549,155 505,245
Repayment............................................................... (546,559) (505,554)
Proceeds from Issuance of Long-Term Debt.................................... 5,357 3,562
Repayment of Long-Term Debt................................................. (4,078) (2,752)
Redemption of Preferred Stock............................................... (175) -
Proceeds from Issuance of Common Stock...................................... 354 323
Treasury Stock Repurchases.................................................. (1,470) (2,149)
Dividends Paid.............................................................. (832) (762)
-----------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES................................... 11,040 11,487
-----------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS.................. (435) (133)
-----------------------------
NET INCREASE IN CASH AND DUE FROM BANKS..................................... 474 1,581
Cash and Due from Banks at Beginning of Period.............................. 6,905 5,723
-----------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD.................................... $ 7,379 $ 7,304
- -------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR:
Interest.................................................................... $8,550 $8,584
Income Taxes................................................................ 1,767 1,279
NON-CASH INVESTING ACTIVITIES
Transfer from Loans to OREO................................................. 282 348
- -------------------------------------------------------------------------------------------------------------
(A) Commencing with the first quarter 1997, Citicorp classifies credit card
and mortgage loans intended for sale as loans held for sale.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET CITIBANK, N.A. AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------
Sept. 30, Dec. 31,
(In Millions of Dollars) 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and Due from Banks..................................................... $ 6,529 $ 5,947
Deposits at Interest with Banks............................................. 12,319 12,822
Securities, at Fair Value
Available for Sale...................................................... 26,472 21,784
Venture Capital......................................................... 2,005 1,774
Trading Account Assets...................................................... 31,496 27,259
Federal Funds Sold and Securities Purchased Under Resale Agreements......... 11,422 8,181
Loans, Net of Unearned Income............................................... 151,679 143,984
Allowance for Credit Losses................................................. (4,253) (4,382)
-----------------------------
Loans, Net.................................................................. 147,426 139,602
Customers' Acceptance Liability............................................. 2,023 2,077
Premises and Equipment, Net................................................. 3,380 3,538
Interest and Fees Receivable................................................ 2,486 2,121
Other Assets................................................................ 8,371 8,134
-----------------------------
TOTAL....................................................................... $253,929 $233,239
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
Non-Interest-Bearing Deposits in U.S. Offices............................... $ 12,519 $ 12,826
Interest-Bearing Deposits in U.S. Offices................................... 24,268 23,977
Non-Interest-Bearing Deposits in Offices Outside the U.S.................... 9,733 9,605
Interest-Bearing Deposits in Offices Outside the U.S........................ 128,354 118,228
-----------------------------
Total Deposits.............................................................. 174,874 164,636
Trading Account Liabilities................................................. 24,966 20,795
Purchased Funds and Other Borrowings........................................ 14,572 12,334
Acceptances Outstanding..................................................... 2,024 2,104
Accrued Taxes and Other Expense............................................. 3,888 3,588
Other Liabilities........................................................... 5,968 4,104
Long-Term Debt and Subordinated Notes....................................... 10,171 9,380
STOCKHOLDER'S EQUITY
Capital Stock ($20.00 par value)............................................ 751 751
Outstanding Shares: 37,534,553 in each period
Surplus..................................................................... 7,387 7,120
Retained Earnings........................................................... 9,254 8,426
Net Unrealized Gains -- Securities Available for Sale..................... 737 588
Foreign Currency Translation................................................ (663) (587)
-----------------------------
Total Stockholder's Equity.................................................. 17,466 16,298
-----------------------------
TOTAL....................................................................... $253,929 $233,239
- -------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL INFORMATION
- -------------------------------------------------------------------------------------------------------------
SECURITIES
- -------------------------------------------------------------------------------------------------------------
September 30, 1997 December 31, 1996 (B)
---------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized FAIR Amortized Fair
(In Millions of Dollars) Cost Gains Losses VALUE (A) Cost Value (A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SECURITIES -- AVAILABLE FOR SALE (C)
U.S. Treasury and Federal Agency... $ 3,831 $ 56 $ 4 $ 3,883 $ 4,048 $ 4,089
State and Municipal................ 2,580 185 79 2,686 2,327 2,405
Foreign Government................. 17,045 1,274 151 18,168 14,056 14,938
U.S. Corporate..................... 1,667 94 73 1,688 1,586 1,588
Other Debt Securities.............. 1,261 10 16 1,255 1,129 1,129
Equity Securities (D).............. 2,220 253 38 2,435 1,870 1,913
---------------------------------------------------------------------
$28,604 $1,872 $361 $30,115 $25,016 $26,062
---------------------------------------------------------------------
VENTURE CAPITAL (E)................ - - - $ 2,348 - $ 2,124
- -------------------------------------------------------------------------------------------------------------
Securities Available for Sale Include:
Mortgage-Backed Securities..... $ 933 $ 10 $ 3 $ 940 $ 1,064 $ 1,068
Government of Brazil Brady Bonds 1,253 1,002 - 2,255 1,463 2,335
Government of Venezuela Brady Bonds 563 - 28 535 563 482
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) The fair values of securities may fluctuate over time based on general
market conditions as well as events and trends affecting specific
securities.
(B) At December 31, 1996, gross unrealized gains and losses on securities
available for sale totaled $1,438 million and $392 million, respectively.
(C) Securities available for sale held by equity method affiliates are not
included in the table. Citicorp's share of gross unrealized gains and
losses related to those securities at September 30, 1997 was $12 million
and $4 million, respectively, and is included in the net unrealized gains
-- securities available for sale component of stockholders' equity, net of
applicable taxes. At December 31, 1996, Citicorp's share of gross
unrealized gains and losses related to securities available for sale held
by equity method affiliates was $9 million and $4 million, respectively.
(D) Equity securities available for sale include certain nonmarketable equity
securities which are carried at cost. At September 30, 1997, the carrying
amount of those securities was $1,104 million (reported in both the
amortized cost and fair value columns) and the fair value was $1,174
million.
(E) For the nine months ended September 30, 1997, net gains on investments
held by venture capital subsidiaries totaled $501 million, of which $359
million and $66 million represented gross unrealized gains and losses,
respectively. For the nine months ended September 30, 1996, net gains on
investments held by venture capital subsidiaries totaled $274 million, of
which $242 million and $112 million represented gross unrealized gains and
losses, respectively.
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TRADING ACCOUNT ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
Sept. 30 Dec. 31,
(In Millions of Dollars) 1997 1996
- -------------------------------------------------------------------------------
TRADING ACCOUNT ASSETS
Trading Account Securities.......................... $15,220 $13,290
Derivative and Foreign Exchange Contracts (A) (B)... 20,211 17,495
-------------------------
$35,431 $30,785
- -------------------------------------------------------------------------------
TRADING ACCOUNT LIABILITIES
Securities Sold, Not Yet Purchased.................. $ 4,641 $ 4,036
Derivative and Foreign Exchange Contracts (A) (B)... 21,202 17,967
-------------------------
$25,843 $22,003
- -------------------------------------------------------------------------------
(A) Net of master netting agreements. In addition, the asset balance at
September 30, 1997 is reduced by $50 million of credit loss reserves. See
page 30 for additional explanation.
(B) Deferred revenue on derivative and foreign exchange contracts, which is
reported in Other Liabilities and attributable to ongoing costs such as
servicing and credit considerations, totaled $370 million and $310 million
at September 30, 1997 and December 31, 1996, respectively.
- --------------------------------------------------------------------------------
39
<PAGE>
- --------------------------------------------------------------------------------
TRADING AND END-USER DERIVATIVE AND FOREIGN EXCHANGE CONTRACTS
- --------------------------------------------------------------------------------
The table below presents the aggregate notional principal amounts of Citicorp's
outstanding derivative and foreign exchange contracts at September 30, 1997 and
December 31, 1996, along with the related balance sheet credit exposure.
Additional information concerning Citicorp's derivative and foreign exchange
products and activities, including a description of accounting policies, and
credit and market risk management process is provided in the 1996 Annual Report
and Form 10-K.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NOTIONAL BALANCE SHEET
PRINCIPAL AMOUNTS CREDIT EXPOSURE (A)
- -------------------------------------------------------------------------------------------------------------
Sept. 30, Dec. 31, Sept. 30, Dec. 31,
(In Billions of Dollars) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Rate Products.................................... $1,201.3 $1,088.5 $ 10.2 $ 10.7
Foreign Exchange Products................................. 1,773.3 1,397.0 28.5 21.1
Equity Products........................................... 50.4 22.2 1.6 0.7
Commodity Products........................................ 12.5 12.5 0.7 0.5
Credit Derivative Products................................ 4.1 1.9 - -
- -------------------------------------------------------------------------------------------------------------
41.0 33.0
Effects of Master Netting Agreements (B).................. (20.8) (15.5)
-----------------------
$ 20.2 $ 17.5
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Amounts do not reflect credit loss reserves attributable to derivative and
foreign exchange contracts.
(B) Master netting agreements mitigate credit risk by permitting the offset of
amounts due from and to individual counterparties in the event of
counterparty default.
The tables below and on page 41 provide data on the notional principal amounts
and maturities of end-user (non-trading) derivatives, along with additional data
on end-user interest rate swaps and net purchased option positions at the end of
the third quarter of 1997.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
END-USER INTEREST RATE AND FOREIGN EXCHANGE CONTRACTS
- -------------------------------------------------------------------------------------------------------------
NOTIONAL PRINCIPAL AMOUNTS (A) PERCENTAGE OF SEPT. 30, 1997 AMOUNT MATURING
- -------------------------------------------------------------------------------------------------------------
Sept. 30, Dec. 31, Within 1 to 2 to 3 to 4 to After
(In Billions of Dollars) 1997 1996 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE PRODUCTS
Futures Contracts................ $ 28.2 $ 23.4 72% 19% 7% 2% -% -%
Forward Contracts................ 4.1 3.6 70 30 - - - -
Swap Agreements.................. 106.9 111.9 33 17 13 10 9 18
Option Contracts................. 35.2 71.4 82 7 8 - 1 2
FOREIGN EXCHANGE PRODUCTS
Futures and Forward Contracts.... 60.1 60.9 94 5 - - 1 -
Cross-Currency Swaps............. 3.5 2.9 10 6 16 10 41 17
- -------------------------------------------------------------------------------------------------------------
(A) Includes third-party and intercompany contracts.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
END-USER INTEREST RATE SWAPS AND NET PURCHASED OPTIONS AS OF SEPT. 30, 1997
- -------------------------------------------------------------------------------------------------------------
REMAINING CONTRACTS OUTSTANDING AT SEPT. 30, -- NOTIONAL
PRINCIPAL AMOUNTS
- -------------------------------------------------------------------------------------------------------------
(In Billions of Dollars) 1997 1998 1999 2000 2001 2002
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RECEIVE FIXED SWAPS.................................. $82.7 $60.9 $47.8 $35.2 $25.1 $16.1
Weighted-Average Fixed Rate.......................... 6.6% 6.7% 6.8% 6.6% 6.8% 6.8%
PAY FIXED SWAPS...................................... $13.0 $7.2 $5.4 $4.2 $3.9 $3.4
Weighted-Average Fixed Rate.......................... 6.6% 6.8% 7.0% 7.0% 7.1% 7.2%
BASIS SWAPS.......................................... $11.2 $3.5 $0.3 $0.3 $0.2 $0.2
PURCHASED CAPS (INCLUDING COLLARS)................... $19.8 $4.7 $2.3 - - -
Weighted-Average Cap Rate Purchased.................. 6.1% 6.8% 6.8% - - -
PURCHASED FLOORS..................................... $1.8 $0.1 $0.1 $0.1 $0.1 $0.1
Weighted-Average Floor Rate Purchased................ 5.7% 5.8% 5.8% 5.8% 5.8% 5.8%
WRITTEN FLOORS RELATED TO PURCHASED CAPS (COLLARS)... $0.2 $0.2 $0.2 - - -
Weighted-Average Floor Rate Written.................. 8.2% 8.2% 8.2% - - -
WRITTEN CAPS RELATED TO OTHER PURCHASED CAPS (A)..... $13.4 $1.2 $1.2 $1.0 $1.0 $0.5
- -------------------------------------------------------------------------------------------------------------
Weighted-Average Cap Rate Written.................... 6.0% 8.6% 8.6% 8.4% 8.3% 9.8%
- -------------------------------------------------------------------------------------------------------------
THREE-MONTH FORWARD LIBOR RATES (B).................. 5.8% 6.1% 6.3% 6.4% 6.6% 6.7%
- -------------------------------------------------------------------------------------------------------------
(A) Includes written options related to purchased options embedded in other
financial instruments.
(B) Represents the implied forward yield curve for three-month LIBOR as of
September 30, 1997, provided for reference.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS (A)
- -------------------------------------------------------------------------------------------------------------
Sept. 30, Dec. 31, Sept. 30,
(In Millions of Dollars) 1997 1996 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL CASH-BASIS LOANS
Collateral-Dependent (at Lower of Cost or Collateral Value) (B)...... $271 $263 $ 588
Other................................................................ 698 642 809
-----------------------------------
TOTAL................................................................ $969 $905 $1,397
- -------------------------------------------------------------------------------------------------------------
COMMERCIAL CASH-BASIS LOANS
In U.S. Offices...................................................... $336 $292 $ 745
In Offices Outside the U.S........................................... 633 613 652
-----------------------------------
TOTAL................................................................ $969 $905 $1,397
- -------------------------------------------------------------------------------------------------------------
COMMERCIAL RENEGOTIATED LOANS
In U.S. Offices...................................................... $19 $264 $266
In Offices Outside the U.S........................................... 51 57 64
-----------------------------------
TOTAL................................................................ $70 $321 $330
- -------------------------------------------------------------------------------------------------------------
CONSUMER LOANS ON WHICH ACCRUAL OF INTEREST HAD BEEN SUSPENDED
In U.S. Offices (C).................................................. $ 889 $1,116 $1,244
In Offices Outside the U.S........................................... 1,013 1,071 1,089
-----------------------------------
TOTAL................................................................ $1,902 $2,187 $2,333
- -------------------------------------------------------------------------------------------------------------
ACCRUING LOANS 90 OR MORE DAYS DELINQUENT (D)
In U.S. Offices (C).................................................. $ 535 $ 696 $ 683
In Offices Outside the U.S........................................... 470 422 447
-----------------------------------
TOTAL................................................................ $1,005 $1,118 $1,130
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) For a discussion of risks in the consumer loan portfolio and of commercial
cash-basis loans, see pages 11 and 15, respectively.
(B) A cash-basis loan is defined as collateral dependent when repayment is
expected to be provided solely by the underlying collateral and there are
no other available and reliable sources of repayment, in which case the
loans are written down to the lower of cost or collateral value.
(C) Excludes $10 million of consumer loans on which accrual of interest had
been suspended and $25 million of accruing loans 90 or more days
delinquent related to loans held for sale at September 30, 1997.
(D) Includes Consumer loans of $983 million at September 30, 1997 and $1.0
billion at December 31, 1996 and September 30, 1996, of which $250
million, $239 million, and $297 million, respectively, are
government-guaranteed student loans.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER REAL ESTATE OWNED (OREO) AND ASSETS PENDING DISPOSITION (A)
- --------------------------------------------------------------------------------
Sept. 30, Dec. 31, Sept. 30,
(In Millions of Dollars) 1997 1996 1996
- --------------------------------------------------------------------------------
Consumer OREO............................ $309 $ 452 $464
Commercial OREO.......................... 479 614 492
----------------------------------
TOTAL.................................... $788 $1,066 $956
- --------------------------------------------------------------------------------
ASSETS PENDING DISPOSITION (B)........... $88 $160 $182
- --------------------------------------------------------------------------------
(A) Carried at lower of cost or collateral value.
(B) Represents consumer residential mortgage loans that have a high
probability of foreclosure.
- --------------------------------------------------------------------------------
42
<PAGE>
- --------------------------------------------------------------------------------
DETAILS OF CREDIT LOSS EXPERIENCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
(In Millions of Dollars) 1997 1997 1997 1996 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR CREDIT LOSSES AT BEGINNING OF PERIOD $5,782 $5,766 $5,503 $5,460 $5,424
----------------------------------------------------------
Provision for Credit Losses.................... 486 512 423 504 449
----------------------------------------------------------
GROSS CREDIT LOSSES
CONSUMER
In U.S. Offices................................ 367 381 344 356 328
In Offices Outside the U.S..................... 219 221 219 216 222
COMMERCIAL
In U.S. Offices................................ 11 9 3 14 15
In Offices Outside the U.S..................... 42 29 36 71 38
----------------------------------------------------------
639 640 602 657 603
----------------------------------------------------------
CREDIT RECOVERIES
CONSUMER
In U.S. Offices................................ 75 55 48 55 54
In Offices Outside the U.S..................... 59 59 56 62 56
COMMERCIAL
In U.S. Offices................................ 20 31 29 69 16
In Offices Outside the U.S..................... 24 8 71 17 78
----------------------------------------------------------
178 153 204 203 204
----------------------------------------------------------
NET CREDIT LOSSES
In U.S. Offices................................ 283 304 270 246 273
In Offices Outside the U.S..................... 178 183 128 208 126
----------------------------------------------------------
461 487 398 454 399
----------------------------------------------------------
OTHER (A)...................................... (8) (9) 238 (7) (14)
----------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES AT END OF PERIOD... $5,799 $5,782 $5,766 $5,503 $5,460
- -------------------------------------------------------------------------------------------------------------
Net Consumer Credit Losses (B)................. $452 $488 $459 $455 $440
As a Percentage of Average Consumer Loans (B).. 1.67% 1.82% 1.75% 1.68% 1.64%
Net Commercial Credit Losses (Recoveries)...... $9 ($1) ($61) ($1) ($41)
As a Percentage of Average Commercial Loans.... 0.05% NM NM NM NM
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Primarily includes net transfers (to) from the Reserves for Off-Balance
Sheet Credit Exposures and foreign currency translation effects. See
footnote (A) on page 30 for a discussion of the change in the
apportionment and display of credit loss reserves in the first quarter of
1997.
(B) Commencing with the 1997 first quarter, reflects the reclassification of
credit card and mortgage loans intended for sale as loans held for sale
with net credit losses charged to other revenue.
NM Not meaningful, as net recoveries result in a negative percentage.
- --------------------------------------------------------------------------------
43
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CALCULATION OF EARNINGS PER SHARE
- -------------------------------------------------------------------------------------------------------------
On Common
and Common
(In Millions, except Per Share Amounts) Equivalent Shares Assuming Full Dilution
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
THIRD QUARTER 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME APPLICABLE TO COMMON STOCK......................... $477 $897 $477 $897
- -------------------------------------------------------------------------------------------------------------
SHARES
Weighted-Average Common Shares Outstanding................ 457.9 471.0 457.9 471.0
Common Equivalent Shares (A).............................. 13.0 13.8 13.3 14.6
----------------------------------------------
TOTAL..................................................... 470.9 484.8 471.2 485.6
- -------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE (C).................................... $1.01 $1.85 $1.01 $1.85
- -------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------
NINE MONTHS
- ---------------------------------------------------------------
EARNINGS
Income Applicable to Common Stock......................... $2,424 $2,682 $2,424 $2,682
Dividends on Convertible Preferred
Stock, Series 12 and Series 13 (B)...................... - - - 5
----------------------------------------------
INCOME APPLICABLE TO COMMON STOCK, ADJUSTED............... $2,424 $2,682 $2,424 $2,687
- -------------------------------------------------------------------------------------------------------------
SHARES
Weighted-Average Common Shares Outstanding (B)............ 459.3 470.5 459.3 470.5
Convertible Preferred Stock, Series 12 and Series 13 (B).. - - - 6.9
Common Equivalent Shares (A).............................. 13.4 14.6 14.0 15.4
----------------------------------------------
TOTAL..................................................... 472.7 485.1 473.3 492.8
- -------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE (C).................................... $5.13 $5.53 $5.12 $5.45
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Includes the dilutive effect of stock options and stock purchase
agreements computed using the treasury stock method and shares issuable
under deferred stock awards.
(B) During the first quarter of 1996, the remaining Convertible Preferred
Stock, Series 12 and 13 were converted to 59.0 million shares of common
stock. The shares are included in the fully diluted computation on an
if-converted basis up to conversion dates, and from conversion dates
forward these shares are included in weighted-average common shares
outstanding.
(C) In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." The
statement establishes new standards for computing and presenting earnings
per share ("EPS"). It replaces the presentation of primary EPS with basic
EPS and the presentation of fully diluted EPS with diluted EPS. SFAS No.
128 will be effective for year-end 1997. Under the new standard, basic EPS
would have been $1.04 and $1.90 and diluted EPS would have been $1.01 and
$1.85 for the third quarters of 1997 and 1996, respectively. Basic EPS
would have been $5.28 and $5.70 and diluted EPS would have been $5.13 and
$5.46 for the 1997 and 1996 nine months, respectively.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CROSS-BORDER OUTSTANDINGS
- --------------------------------------------------------------------------------
Total cross-border outstandings are presented on a regulatory basis and comprise
cross-border claims on third parties as well as investments in and funding of
local Citicorp franchises.
Effective for the 1997 first quarter, the Federal Financial Institutions
Examination Council ("FFIEC") revised their cross-border reporting guidelines to
more appropriately measure total cross-border outstandings. The effect of
applying the FFIEC's revised guidelines to previously reported December 31, 1996
balances is a reduction of cross-border claims on third parties of $7.1 billion,
and a reduction of investments in and funding of local Citicorp franchises.
44
<PAGE>
The reduction of cross-border claims on third parties reflects the
reclassification of certain claims as investments in and funding of local
Citicorp franchises (where they are reduced by qualifying local country
liabilities), partially offset by the inclusion of revaluation gains on foreign
exchange and derivative products.
Cross-border claims on third parties (trade, short-term, and medium- and
long-term claims) include cross-border loans, securities, deposits at interest
with banks, investments in affiliates, and other monetary assets, as well as net
revaluation gains as discussed above. Adjustments have been made to assign
externally guaranteed outstandings to the country of the guarantor and
outstandings for which tangible, liquid collateral is held outside of the
obligor's country to the country in which the collateral is held. For securities
received as collateral, outstandings are assigned to the domicile of the issuer
of the securities.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
COUNTRIES WITH CROSS-BORDER OUTSTANDINGS EXCEEDING 1% OF TOTAL ASSETS (A) (B)
- -------------------------------------------------------------------------------------------------------------
Investments in
Cross-Border Claims on Third Parties and Funding Total Outstandings
---------------------------------------- of Local -------------------------
Public Private Citicorp Sept. 30, Dec. 31,
(In Billions of Dollars) Banks Sector Sector Total (C) Franchises 1997 1996 (C) (D)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Germany................. $1.5 $0.6 $0.3 $2.4 $2.0 $4.4 $2.3
United Kingdom.......... 1.4 0.7 2.2 4.3 - 4.3 4.0
Brazil.................. 0.3 1.3 1.0 2.6 1.6 4.2 4.9
Mexico.................. 0.1 1.9 0.7 2.7 0.4 3.1 2.9
France.................. 1.4 0.9 0.4 2.7 0.4 3.1 2.1
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Legally binding cross-border commitments (not included in the table
above), including irrevocable letters of credit and commitments to extend
credit, after adjustments to assign externally guaranteed commitments to
the country of the guarantor, amounted to $6.7 billion in the United
Kingdom, $1.9 billion in Germany, $0.6 billion in France, $0.6 billion in
Brazil, and $0.3 billion in Mexico at September 30, 1997.
(B) At September 30, 1997, total cross-border outstandings in Italy ($2.7
billion), Switzerland ($2.7 billion), South Korea ($2.3 billion), and
Japan ($2.3 billion) were between 0.75% and 1.0% of total assets. At
December 31, 1996, under the FFIEC's revised cross-border reporting
guidelines, such countries were Switzerland ($2.5 billion), Germany ($2.3
billion), and Japan ($2.1 billion).
(C) At September 30, 1997 and December 31, 1996, cross-border claims on third
parties included revaluation gains on foreign exchange and derivative
products net of the effects of master netting agreements of $1.3 billion
and $0.6 billion in Germany, $1.2 billion and $0.9 billion in France, $0.8
billion and $1.0 billion in the United Kingdom, respectively, and less
than $0.1 billion for each period in each of Mexico and Brazil.
(D) Restated to conform to the FFIEC's revised cross-border reporting
guidelines.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CROSS-BORDER CLAIMS ON THIRD PARTIES
- -------------------------------------------------------------------------------------------------------------
Public Private Sept. 30, Dec. 31,
(In Billions of Dollars) Banks Sector Sector 1997 (A) 1996 (B)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Western/Eastern Europe, Japan, and Canada...... $10.8 $3.7 $ 9.2 $23.7 $20.6
Latin America.................................. 0.9 5.0 3.8 9.7 9.7
Asia/Middle East............................... 2.0 0.2 3.3 5.5 4.9
Other.......................................... 0.3 0.8 0.4 1.5 1.3
----------------------------------------------------------
TOTAL (C)...................................... $14.0 $9.7 $16.7 $40.4 $36.5
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Included in cross-border claims on third parties at September 30, 1997 are
trade and short-term claims of $29.5 billion comprised of $20.1 billion
for Western/Eastern Europe, Japan, and Canada, $4.2 billion for Latin
America, $4.2 billion for Asia/Middle East, and $1.0 billion for all
other.
(B) Restated to conform to the FFIEC's revised cross-border reporting
guidelines.
(C) Includes investments in affiliates of $1.4 billion at September 30, 1997
and December 31, 1996.
- --------------------------------------------------------------------------------
45
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES AND INTEREST RATES (TAXABLE EQUIVALENT BASIS) (A) (B)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE VOLUME INTEREST REVENUE/EXPENSE % AVERAGE RATE
---------------------------------------------------------------------------------------
3rd Qtr. 2nd Qtr. 3rd Qtr. 3rd Qtr. 2nd Qtr. 3rd Qtr. 3rd Qtr. 2nd Qtr. 3rd Qtr.
(In Millions of Dollars) 1997 1997 1996 1997 1997 1996 1997 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOANS (NET OF UNEARNED INCOME) (C)
Consumer Loans
In U.S. Offices.................... $55,953 $ 55,556 $53,916 $1,476 $1,444 $1,420 10.47 10.43 10.48
In Offices Outside the U.S. (D).... 51,603 51,876 52,217 1,590 1,604 1,638 12.22 12.40 12.48
----------------------------------------------------------
Total Consumer Loans.................... 107,556 107,432 106,133 3,066 3,048 3,058 11.31 11.38 11.46
----------------------------------------------------------
Commercial Loans
In U.S. Offices
Commercial and Industrial...... 10,912 10,460 8,568 242 221 196 8.80 8.47 9.10
Mortgage and Real Estate....... 2,458 2,882 4,175 63 68 79 10.17 9.46 7.53
Loans to Financial Institutions 523 616 519 10 13 14 7.59 8.46 10.73
Lease Financing................ 3,085 3,049 3,222 53 54 56 6.82 7.10 6.91
In Offices Outside the U.S. (D).... 52,067 49,391 43,929 1,380 1,314 1,203 10.52 10.67 10.89
----------------------------------------------------------
Total Commercial Loans.................. 69,045 66,398 60,413 1,748 1,670 1,548 10.04 10.09 10.19
----------------------------------------------------------
Total Loans............................. 176,601 173,830 166,546 4,814 4,718 4,606 10.81 10.89 11.00
----------------------------------------------------------
FEDERAL FUNDS SOLD AND RESALE AGREEMENTS
In U.S. Offices......................... 6,431 7,534 7,121 82 99 97 5.06 5.27 5.42
In Offices Outside the U.S. (D)......... 6,306 5,025 3,465 141 104 96 8.87 8.30 11.02
----------------------------------------------------------
Total................................... 12,737 12,559 10,586 223 203 193 6.95 6.48 7.25
----------------------------------------------------------
SECURITIES, AT FAIR VALUE
In U.S. Offices
Taxable............................ 7,998 11,087 7,545 88 141 86 4.37 5.10 4.53
Exempt from U.S. Income Tax........ 2,642 2,676 1,622 43 43 27 6.46 6.45 6.62
In Offices Outside the U.S. (D)......... 21,672 20,538 16,612 425 424 346 7.78 8.28 8.29
----------------------------------------------------------
Total................................... 32,312 34,301 25,779 556 608 459 6.83 7.11 7.08
----------------------------------------------------------
TRADING ACCOUNT ASSETS (E)
In U.S. Offices......................... 4,828 4,768 5,787 67 70 90 5.51 5.89 6.19
In Offices Outside the U.S. (D)......... 10,061 10,075 11,018 169 203 257 6.66 8.08 9.28
----------------------------------------------------------
Total................................... 14,889 14,843 16,805 236 273 347 6.29 7.38 8.21
----------------------------------------------------------
LOANS HELD FOR SALE, IN U.S. OFFICES.... 4,150 3,414 - 120 107 - 11.47 12.57 -
DEPOSITS AT INTEREST WITH BANKS (D)..... 15,005 13,669 12,909 258 245 218 6.82 7.19 6.72
----------------------------------------------------------
Total Interest-Earning Assets........... 255,694 252,616 232,625 $6,207 $6,154 $5,823 9.63 9.77 9.96
----------------------------------------------------------
Non-Interest-Earning Assets (E)......... 43,103 40,464 35,381
-----------------------------
TOTAL ASSETS............................ $298,797 $293,080 $268,006
- ------------------------------------------------------------------------------------------------------------------------------------
DEPOSITS
In U.S. Offices
Savings Deposits................... $26,683 $ 26,820 $ 26,255 $ 203 $ 197 $ 190 3.02 2.95 2.88
Other Time Deposits................ 12,695 12,677 12,500 152 147 222 4.75 4.65 7.07
In Offices Outside the U.S. (D)......... 130,825 128,899 117,548 2,083 2,077 1,844 6.32 6.46 6.24
----------------------------------------------------------
Total................................... 170,203 168,396 156,303 2,438 2,421 2,256 5.68 5.77 5.74
----------------------------------------------------------
TRADING ACCOUNT LIABILITIES (E)
In U.S. Offices......................... 2,288 2,348 2,005 31 34 29 5.38 5.81 5.75
In Offices Outside the U.S. (D)......... 2,851 2,491 2,167 47 42 76 6.54 6.76 13.95
----------------------------------------------------------
Total................................... 5,139 4,839 4,172 78 76 105 6.02 6.30 10.01
----------------------------------------------------------
PURCHASED FUNDS AND OTHER BORROWINGS
In U.S. Offices......................... 14,156 16,193 13,028 212 252 200 5.94 6.24 6.11
In Offices Outside the U.S. (D)......... 8,225 7,687 6,416 256 175 201 12.35 9.13 12.46
----------------------------------------------------------
Total................................... 22,381 23,880 19,444 468 427 401 8.30 7.17 8.20
----------------------------------------------------------
LONG-TERM DEBT
In U.S. Offices......................... 15,469 14,780 14,852 240 226 235 6.16 6.13 6.29
In Offices Outside the U.S. (D)......... 4,249 4,920 4,522 95 128 109 8.87 10.44 9.59
----------------------------------------------------------
Total................................... 19,718 19,700 19,374 335 354 344 6.74 7.21 7.06
----------------------------------------------------------
Total Interest-Bearing Liabilities...... 217,441 216,815 199,293 $3,319 $3,278 $3,106 6.06 6.06 6.20
----------------------------------------------------------
Demand Deposits in U.S. Offices......... 11,375 10,751 12,566
Other Non-Interest-Bearing Liabilities (E) 48,445 44,678 36,119
Total Stockholders' Equity.............. 21,536 20,836 20,028
-----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $298,797 $293,080 $268,006
- ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST REVENUE AS A PERCENTAGE
OF AVERAGE INTEREST-EARNING ASSETS
In U.S. Offices (F)..................... $99,040 $102,512 $92,538 $1,264 $1,257 $1,101 5.06 4.92 4.73
In Offices Outside the U.S. (F)......... 156,654 150,104 140,087 1,624 1,619 1,616 4.11 4.33 4.59
----------------------------------------------------------
Total................................... $255,694 $252,616 $232,625 $2,888 $2,876 $2,717 4.48 4.57 4.65
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) The taxable equivalent adjustment is based on the U.S. federal statutory
tax rate of 35%.
(B) Interest rates and amounts include the effects of risk management
activities associated with the respective asset and liability categories.
(C) Includes cash-basis loans.
(D) Average rates reflect prevailing local interest rates including
inflationary effects and monetary correction in certain Latin American
countries.
(E) The fair value carrying amounts of derivative and foreign exchange
contracts are reported in non-interest-earning assets and other
non-interest-bearing liabilities.
(F) Includes allocations for capital and funding costs based on the location
of the asset.
- --------------------------------------------------------------------------------
46
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES AND INTEREST RATES (TAXABLE EQUIVALENT BASIS) (A) (B)
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE VOLUME INTEREST REV./EXP. % AVERAGE RATE
----------------------------------------------------------
9 Months 9 Months 9 Months 9 Months 9 Months 9 Months
(In Millions of Dollars) 1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LOANS (NET OF UNEARNED INCOME) (C)
Consumer Loans
In U.S. Offices................................................. $ 55,580 $ 53,412 $ 4,327 $ 4,289 10.41 10.73
In Offices Outside the U.S. (D)................................. 51,562 51,279 4,771 4,848 12.37 12.63
---------------------------------------
Total Consumer Loans................................................. 107,142 104,691 9,098 9,137 11.35 11.66
---------------------------------------
Commercial Loans
In U.S. Offices
Commercial and Industrial................................... 10,210 8,975 665 620 8.71 9.23
Mortgage and Real Estate.................................... 2,771 4,426 190 242 9.17 7.30
Loans to Financial Institutions............................. 583 475 37 28 8.49 7.87
Lease Financing............................................. 3,032 3,218 151 162 6.66 6.72
In Offices Outside the U.S. (D)................................. 49,197 42,804 3,946 3,516 10.72 10.97
---------------------------------------
Total Commercial Loans............................................... 65,793 59,898 4,989 4,568 10.14 10.19
---------------------------------------
Total Loans.......................................................... 172,935 164,589 14,087 13,705 10.89 11.12
---------------------------------------
FEDERAL FUNDS SOLD AND RESALE AGREEMENTS
In U.S. Offices...................................................... 7,264 9,148 281 357 5.17 5.21
In Offices Outside the U.S. (D)...................................... 5,581 3,460 357 338 8.55 13.05
---------------------------------------
Total................................................................ 12,845 12,608 638 695 6.64 7.36
---------------------------------------
SECURITIES, AT FAIR VALUE
In U.S. Offices
Taxable......................................................... 9,213 7,233 331 252 4.80 4.65
Exempt from U.S. Income Tax..................................... 2,610 1,619 127 78 6.51 6.44
In Offices Outside the U.S. (D)...................................... 20,292 14,362 1,238 961 8.16 8.94
---------------------------------------
Total................................................................ 32,115 23,214 1,696 1,291 7.06 7.43
---------------------------------------
TRADING ACCOUNT ASSETS (E)
In U.S. Offices...................................................... 4,844 6,049 207 266 5.71 5.87
In Offices Outside the U.S. (D)...................................... 9,849 11,906 546 788 7.41 8.84
---------------------------------------
Total................................................................ 14,693 17,955 753 1,054 6.85 7.84
---------------------------------------
LOANS HELD FOR SALE, IN U.S. OFFICES................................. 3,562 - 332 - 12.46 -
DEPOSITS AT INTEREST WITH BANKS (D).................................. 14,014 12,247 727 621 6.94 6.77
---------------------------------------
Total Interest-Earning Assets........................................ 250,164 230,613 $18,233 $17,366 9.74 10.06
--------------------------------------
Non-Interest-Earning Assets (E)...................................... 42,134 37,542
--------------------
TOTAL ASSETS......................................................... $292,298 $268,155
- ------------------------------------------------------------------------------------------------------------------------------------
DEPOSITS
In U.S. Offices
Savings Deposits................................................ $ 26,768 $ 25,810 $ 591 $ 566 2.95 2.93
Other Time Deposits............................................. 12,624 12,570 438 541 4.64 5.75
In Offices Outside the U.S. (D)...................................... 127,354 114,982 6,059 5,503 6.36 6.39
---------------------------------------
Total................................................................ 166,746 153,362 7,088 6,610 5.68 5.76
---------------------------------------
TRADING ACCOUNT LIABILITIES (E)
In U.S. Offices...................................................... 2,222 2,540 92 111 5.54 5.84
In Offices Outside the U.S. (D)...................................... 2,597 2,130 135 132 6.95 8.28
---------------------------------------
Total................................................................ 4,819 4,670 227 243 6.30 6.95
---------------------------------------
PURCHASED FUNDS AND OTHER BORROWINGS
In U.S. Offices...................................................... 14,821 15,026 674 703 6.08 6.25
In Offices Outside the U.S. (D)...................................... 7,653 6,175 659 646 11.51 13.97
---------------------------------------
Total................................................................ 22,474 21,201 1,333 1,349 7.93 8.50
---------------------------------------
LONG-TERM DEBT
In U.S. Offices...................................................... 15,029 14,734 681 699 6.06 6.34
In Offices Outside the U.S. (D)...................................... 4,505 4,291 321 319 9.53 9.93
---------------------------------------
Total................................................................ 19,534 19,025 1,002 1,018 6.86 7.15
---------------------------------------
Total Interest-Bearing Liabilities................................... 213,573 198,258 $9,650 $9,220 6.04 6.21
--------------------------------------
Demand Deposits in U.S. Offices...................................... 10,976 12,355
Other Non-Interest-Bearing Liabilities (E)........................... 46,709 37,693
Total Stockholders' Equity........................................... 21,040 19,849
--------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................... $292,298 $268,155
- ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST REVENUE AS A PERCENTAGE
OF AVERAGE INTEREST-EARNING ASSETS
In U.S. Offices (F).................................................. $ 99,866 $ 94,619 $3,753 $3,382 5.02 4.77
In Offices Outside the U.S. (F)...................................... 150,298 135,994 4,830 4,764 4.30 4.68
---------------------------------------
Total................................................................ $250,164 $230,613 $8,583 $8,146 4.59 4.72
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) The taxable equivalent adjustment is based on the U.S. federal statutory
tax rate of 35%.
(B) Interest rates and amounts include the effects of risk management
activities associated with the respective asset and liability categories.
(C) Includes cash-basis loans.
(D) Average rates reflect prevailing local interest rates including
inflationary effects and monetary correction in certain Latin American
countries.
(E) The fair value carrying amounts of derivative and foreign exchange
contracts are reported in non-interest-earning assets and other
non-interest-bearing liabilities.
(F) Includes allocations for capital and funding costs based on the location
of the asset.
- --------------------------------------------------------------------------------
47
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended COMMISSION FILE NUMBER 1-5738
September 30, 1997
CITICORP
(Exact name of registrant as specified in its charter)
DELAWARE 13-2614988
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
399 PARK AVENUE, NEW YORK, NEW YORK 10043
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 559-1000
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 X No
--- ---
Citicorp Common Stock 456,834,786
($1.00 Par Value) (Shares Outstanding on September 30, 1997)
48
<PAGE>
- --------------------------------------------------------------------------------
FORM 10-Q CROSS-REFERENCE INDEX
- --------------------------------------------------------------------------------
This document serves both as an analytical review for analysts, stockholders,
and other interested persons, and as the quarterly report filed on Form 10-Q
with the Securities and Exchange Commission.
PART I FINANCIAL INFORMATION PAGE
Item 1 - Consolidated Financial Statements
Consolidated Financial Statements, Schedules, and Statistics
Statement of Income for the Quarter and Nine Months Ended
SEPTEMBER 30, 1997 AND 1996..................................... 34
Balance Sheet as of
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996........................ 35
Statement of Cash Flows for the Nine Months Ended
SEPTEMBER 30, 1997 AND 1996..................................... 37
Calculation of Earnings Per Share............................... 44
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................1-33
PART II OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K................................ 50
Signatures............................................................... 51
In the opinion of the management of Citicorp, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of the results
of operations for the nine months ended SEPTEMBER 30, 1997 AND 1996 have been
included.
49
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
a) Exhibit 27. Financial Data Schedule.
b) Reports on Form 8-K:
i) Citicorp filed a Form 8-K Current Report dated July 15,
1997 (Item 5) which report included a summary of the
consolidated operations of Citicorp for the six month
period ended June 30, 1997 and (Item 7) the calculation
of the ratio of income to fixed charges (Exhibit 12(a)
thereto) and the calculation of the ratio of income to
fixed charges including preferred stock dividends
(Exhibit 12(b) thereto).
ii) Citicorp filed a Form 8-K Current Report dated October
21, 1997 (Item 5) which report included a summary of the
consolidated operations of Citicorp for the nine month
period ended September 30, 1997 and (Item 7) the
calculation of the ratio of income to fixed charges
(Exhibit 12(a) thereto) and the calculation of the ratio
of income to fixed charges including preferred stock
dividends (Exhibit 12(b) thereto).
50
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
CITICORP By: /S/ Thomas E. Jones
Registrant
-------------------------
Thomas E. Jones
Executive Vice President
Principal Financial Officer
By: /S/ George E. Seegers
-------------------------
George E. Seegers
Assistant Secretary
Date: November 13, 1997
51
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CURRENT
REPORT ON FORM 10-Q FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
ACCOMPANYING DISCLOSURES.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,379
<INT-BEARING-DEPOSITS> 11,343
<FED-FUNDS-SOLD> 10,646<F1>
<TRADING-ASSETS> 35,431
<INVESTMENTS-HELD-FOR-SALE> 30,115
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 180,995
<ALLOWANCE> 5,799
<TOTAL-ASSETS> 300,381
<DEPOSITS> 194,098
<SHORT-TERM> 20,528<F2>
<LIABILITIES-OTHER> 9,959
<LONG-TERM> 20,293
<COMMON> 506
0
1,903
<OTHER-SE> 19,111
<TOTAL-LIABILITIES-AND-EQUITY> 300,381
<INTEREST-LOAN> 14,084
<INTEREST-INVEST> 1,661
<INTEREST-OTHER> 2,448
<INTEREST-TOTAL> 18,193
<INTEREST-DEPOSIT> 7,088
<INTEREST-EXPENSE> 9,650
<INTEREST-INCOME-NET> 8,543
<LOAN-LOSSES> 1,421
<SECURITIES-GAINS> 418
<EXPENSE-OTHER> 3,280
<INCOME-PRETAX> 4,048
<INCOME-PRE-EXTRAORDINARY> 2,530
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,530<F10>
<EPS-PRIMARY> 5.13
<EPS-DILUTED> 5.12<F11>
<YIELD-ACTUAL> 4.59<F3>
<LOANS-NON> 2,871<F4>
<LOANS-PAST> 1,005<F5>
<LOANS-TROUBLED> 70
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,503
<CHARGE-OFFS> 1,881
<RECOVERIES> 535
<ALLOWANCE-CLOSE> 5,799<F6>
<ALLOWANCE-DOMESTIC> 0<F7>
<ALLOWANCE-FOREIGN> 0<F8>
<ALLOWANCE-UNALLOCATED> 0<F9>
<FN>
<F1> Includes Securities Purchased Under Resale Agreements.
<F2> Purchased Funds and Other Borrowings.
<F3> Taxable Equivalent Basis.
<F4> Includes $969MM of cash-basis commercial loans and $1,902MM of consumer
loans on which accrual of interest has been suspended.
<F5> Accruing loans 90 or more days delinquent.
<F6> Allowance activity for the nine months of 1997 includes $221MM in other
changes, primarily net transfers from the Reserves for Off-Balance Sheet
Credit Exposures and foriegn currency translation effects.
<F7> No portion of Citicorp's credit loss allowance is specifically allocated
to any individual loan or group of loans. (see Note 11 to the 1996 Annual
Report).
<F8> See Footnote F7 above.
<F9> See Footnote F7 above.
<F10> Excluding a pre-tax restructuring charge of $889MM, Net income for the
nine months of 1997 is $3,086MM.
<F11> Excluding the pre-tax restructuring charge, EPS-Fully diluted is $6.30 for
the nine months of 1997.
</FN>
</TABLE>
