SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 21, 1998
Citicorp
(Exact name of registrant as specified in charter)
Delaware 1-5738 13-2614988
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
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
<PAGE>
Item 5. Other Items
-----------
Citicorp per share earnings of $2.23 rose 11%,
Return on equity reached 21.7%
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Summary of Results First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjusted Revenue (A)............................................................ $6,065 $5,627 8
Adjusted Operating Expense (A).................................................. 3,406 3,179 7
-----------------------------------------
Operating Margin................................................................ 2,659 2,448 9
Consumer Credit Costs (A)....................................................... 886 894 (1)
Commercial Credit Costs (Benefits) (A).......................................... 44 (75) NM
-----------------------------------------
Operating Margin Less Credit Costs.............................................. 1,729 1,629 6
Additional Provision............................................................ 25 25 -
-----------------------------------------
Income Before Taxes............................................................. $1,704 $1,604 6
-----------------------------------------
Net Income...................................................................... $1,065 $995 7
- ----------------------------------------------------------------------------------------------------------------------------
Earnings Per Share (Diluted).................................................... $2.23 $2.01 11
Return on Common Equity (%)..................................................... 21.7 20.8 -
Return on Assets (%)............................................................ 1.38 1.41 -
Average Shares Outstanding (Diluted) (In Millions).............................. 463.2 475.7 (3)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) The Margin Basis Reconciliation table on page 16 reconciles the
Consolidated Statement of Income on page 13 to these
adjusted numbers.
NM Not meaningful, as percentage equals or exceeds 100%.
On April 21, 1998, Citicorp reported net income for the 1998 first quarter of
$1.1 billion or $2.23 per diluted common share, increases of 7% and 11%,
respectively, from the 1997 first quarter.
The Consumer businesses -- Citibanking, Cards, and the Private Bank -- earned
$458 million in the quarter on adjusted revenue of $3.5 billion. Net income from
Global Corporate Banking was $753 million in the quarter on adjusted revenue of
$2.3 billion.
John S. Reed, Citicorp Chairman, said: "The results reflect the value of our
geographically diversified and balanced set of businesses and led to our 11%
growth in EPS and 22% return on equity. The favorable effect of strong financial
markets more than offset weakness in Asia. We expect our core business momentum
to pick up as we go through the year."
He noted that consumer credit costs at $886 million were essentially flat; that
corporate credit costs, while remaining at historically low levels, had a
year-to-year swing of $119 million with an increase of $58 million in Asia and
the tailing off of recoveries from the real estate and refinancing portfolios;
and that previously disclosed costs related to preparing computer systems for
the Year 2000, as well as preparations for introduction of the Economic and
Monetary Union in Europe, hurt expense.
Mr. Reed continued: "We are excited by the prospect of our merger with the
Travelers Group, which will bring together highly complementary product lines
and distribution channels. We believe that this merger of equals will benefit
the customers, stockholders, and employees of both companies, and establish a
model for the financial services company of the future."
1
<PAGE>
Adjusted revenue grew $438 million or 8% from the 1997 first quarter. Global
Corporate Banking revenue rose $384 million or 20%, and Global Consumer revenue
in the developed markets grew $82 million or 3%, while Global Consumer revenue
in the emerging markets was lower by $79 million or 8%. Excluding the estimated
effect of foreign currency translation, adjusted revenue would have grown 12%.
Adjusted operating expense increased 7% -- 10% excluding the estimated effect of
foreign currency translation. Operating margin of $2.7 billion increased 9%.
The Global Consumer business income before taxes in Asia Pacific (excluding
Japan and the Indian subcontinent, but including Australia and New Zealand) was
down $67 million, as revenue shortfalls of $77 million and an additional credit
provision of $6 million were partially offset by $17 million of lower expense.
Income before taxes in Global Corporate Banking in Asia Pacific was down $16
million, as an operating margin increase of $42 million was offset by additional
credit costs of $58 million.
Against Citicorp's Business Directions annual performance targets, the first
quarter results included a 7% gain in net income (an 11% rise in diluted income
per share), a return on common equity of 21.7%, a ratio of incremental revenue
to expense of 1.9 to 1, and the generation of an estimated $0.3 billion of free
capital. At March 31, 1998, the Tier 1 capital ratio was estimated at 8.2%.
During the quarter, Citicorp repurchased 4.0 million shares of common stock for
$483 million, bringing the total repurchases since the program was inaugurated
on June 20, 1995 to 82.0 million shares for an outlay of $7.3 billion. The stock
repurchase program has been suspended in connection with the announced agreement
to merge with Travelers Group.
As part of its program to improve service quality and lower costs, Citicorp
chose AT&T Solutions to transform Citibank's multiple data networks to a single
state-of-the-art global networking platform.
<TABLE>
<CAPTION>
Global Consumer business earns $458 million in the first quarter, down from
year-ago quarter, but up from 1997 fourth quarter
- ----------------------------------------------------------------------------------------------------------------------------
Global Consumer First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjusted Revenue................................................................ $3,493 $3,490 -
Adjusted Operating Expense...................................................... 1,915 1,866 3
-----------------------------------------
Operating Margin................................................................ 1,578 1,624 (3)
Credit Costs (B)................................................................ 886 894 (1)
-----------------------------------------
Operating Margin Less Credit Costs.............................................. 692 730 (5)
Additional Provision............................................................ 25 25 -
-----------------------------------------
Income Before Taxes............................................................. 667 705 (5)
Income Taxes.................................................................... 209 212 (1)
-----------------------------------------
Net Income...................................................................... $ 458 $ 493 (7)
- ----------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars)......................................... $131 $131 -
Return on Assets (%)............................................................ 1.42 1.53 -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
(B) Includes the effect of credit card securitization activity and the effect
related to credit card receivables held for sale.
Business Initiatives
o On April 2, 1998, Citibank completed the previously announced acquisition
of AT&T Universal Card Services. This acquisition strengthens Citibank's
position as the leading credit card issuer, adding $15 billion in customer
receivables and 13.5 million accounts for a total of $60 billion in managed
receivables and 38 million accounts in the U.S. bankcard business. The
transaction importantly included a ten-year cobranding and joint marketing
agreement with AT&T.
o The DriversEdge card was launched in the U.S., enabling customers to
accumulate rebates toward the purchase or lease of any new car.
2
<PAGE>
o Bankcards were launched in Italy in the 1998 first quarter. In Singapore,
Citibank launched a secure system of electronic commerce for its
credit-card holders, and in Japan, Citibank issued the first credit card
with settlement in U.S. dollars.
o Citicorp Investment Services launched the CitiFreedom Program for
Retirement, which assists individuals in meeting their retirement needs, at
all Citibank branches in California, in addition to the new Retirement
Planning Store and six Retirement Planning Centers in the Bay Area.
o Citibank announced plans to open two new branches in downtown Chicago, and
to further increase its locations in both the city and its suburbs. During
the quarter, five Citibank mini-branches were opened in Blockbuster stores
in Colombia, bringing the total to 19 in Latin America, augmenting more
than 175 consumer branches in the region.
Financial Performance
o Global Consumer net income in the 1998 first quarter was $458 million,
compared with $493 million in 1997, primarily reflecting strong performance
in the North America, Europe, and Japan Citibanking businesses, that was
more than offset by the effect of foreign currency translation in Asia
Pacific and lower Cards earnings in Latin America. Net income in the
quarter was up $7 million from the fourth quarter of 1997.
o Total consumer accounts were 56 million as of March 31, 1998 in 57
countries and territories. The U.S. bankcards business reported a 4%
decline in accounts, reflecting continued risk management initiatives,
while accounts in other consumer businesses grew by 6% from a year ago,
including 17% account growth in Latin America and 9% in Asia Pacific.
o Adjusted revenue of $3.5 billion was essentially unchanged from 1997.
Excluding the effect of foreign currency translation, revenue increased 5%,
including higher fee and commission revenue across the globe on business
volume growth, including investment products. Revenue overall grew modestly
in relation to business volumes, primarily due to reduced spreads in Asia
Pacific, U.S. bankcards, and Latin America.
o Adjusted operating expense grew 3% -- 6% excluding the effect of foreign
currency translation -- in support of business volume growth, investment
product development, and increased advertising and marketing expense.
o Credit costs in the quarter were $886 million, compared with $866 million
in the 1997 fourth quarter and $894 million in the 1997 first quarter. The
ratio of net credit losses to average managed loans was 2.64% in the
quarter, compared to 2.50% in the 1997 fourth quarter and 2.69% a year-ago.
Global Consumer continued to build the allowance for credit losses, adding
$25 million above net write-offs in the quarter.
3
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Citibanking First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue......................................................................... $1,511 $1,469 3
Operating Expense............................................................... 1,089 1,042 5
-----------------------------------------
Operating Margin................................................................ 422 427 (1)
Credit Costs.................................................................... 137 148 (7)
-----------------------------------------
Operating Margin Less Credit Costs.............................................. 285 279 2
Additional Provision............................................................ (2) - NM
-----------------------------------------
Income Before Taxes............................................................. 287 279 3
Income Taxes.................................................................... 89 89 -
-----------------------------------------
Net Income...................................................................... $ 198 $ 190 4
- ----------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars)......................................... $86 $82 5
Return on Assets (%)............................................................ 0.93 0.94 -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
o Net income from Citibanking activities -- delivering products and services
to customers through branches and electronic delivery systems -- was $198
million in the quarter, up $8 million or 4% from 1997, reflecting a $36
million improvement in the developed markets of North America, Europe, and
Japan, partially offset by a decline of $28 million in the emerging
markets.
o Worldwide Citibanking accounts totaled 20 million as of March 31, 1998, up
6% from a year ago, including 14% and 12% growth in Asia Pacific and Latin
America, respectively. Average customer deposits of $99 billion were up 8%
-- 15% excluding the effect of foreign currency translation -- from a
year-ago, reflecting increased account openings and deposit levels
primarily due to a "flight-to-quality" in Asia Pacific and Japan, and
growth in the U.S. and Latin America.
o Revenue increased 3% in the quarter. Excluding the effect of foreign
currency translation, revenue increased 10% -- 10% in the developed markets
and 9% in the emerging markets. Developed markets revenue reflected growth
in all regions, including higher fee revenue and spread improvements in the
United States. Emerging markets revenue reflected business volume and
account growth in Asia Pacific and Latin America, and reduced spreads due
to higher funding costs and the maintenance of greater liquidity.
o Operating expense in the quarter was up 5% from 1997. Excluding the effect
of foreign currency translation, operating expense increased 8% in both the
developed and emerging markets -- reflecting account and business volume
growth, and business initiatives, including franchise expansion and new
product development.
o Credit costs in the quarter declined by $11 million or 7% from a year ago,
reflecting the effect of foreign currency translation and improvement in
the U.S. and Europe, offset by higher net credit losses in Asia Pacific.
4
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Cards First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjusted Revenue................................................................ $1,701 $1,752 (3)
Adjusted Operating Expense...................................................... 634 659 (4)
-----------------------------------------
Operating Margin................................................................ 1,067 1,093 (2)
Credit Costs.................................................................... 757 747 1
-----------------------------------------
Operating Margin Less Credit Costs.............................................. 310 346 (10)
Additional Provision............................................................ 27 25 8
-----------------------------------------
Income Before Taxes............................................................. 283 321 (12)
Income Taxes.................................................................... 96 98 (2)
-----------------------------------------
Net Income...................................................................... $ 187 $ 223 (16)
- ----------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars)......................................... $29 $32 (9)
Return on Assets (%)............................................................ 2.62 2.83 -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
o Net income from Cards worldwide -- bankcards, Diners Club, and private
label cards -- was $187 million in the quarter, down $36 million from the
1997 quarter, primarily due to a decline in earnings in Credicard, a
33%-owned Brazilian affiliate, and economic conditions in Asia Pacific,
including the effect of foreign currency translation, compounded by lower
consumer spending and more selective credit criteria. U.S. bankcards
earnings were unchanged from the 1997 first quarter. Cards in the emerging
markets represented 22% of Cards net income in the quarter, compared with
41% in the 1997 quarter. Cards worldwide return on managed assets
(including securitized card receivables) in the quarter was 1.35%, compared
with 1.61% in the year-ago quarter.
o Card accounts worldwide totaled 36 million as of March 31, 1998. Excluding
U.S. bankcards, accounts increased 7% from a year ago, including a 12%
increase in the emerging markets. The number of cards in force, including
affiliates, at quarter-end was 64 million, up from 61 million a year ago.
Cards, including Diners Club, operates in 46 countries and territories,
compared with 43 a year ago, due to expansion into Poland, Korea, and
Italy.
o U.S. bankcards adjusted revenue was essentially unchanged in the quarter
as charge volumes increased from a year-ago by $1.1 billion or 5% to $24.1
billion, and managed receivables were up slightly at $45.3 billion, while
spreads declined primarily as a result of competitive pricing. First
quarter revenue in emerging markets Cards was down 20% -- down 2% excluding
the effect of foreign currency translation, reflecting higher loan volumes
offset by reduced spreads, and lower earnings in Credicard.
o Adjusted operating expense declined 4% in the quarter, reflecting a $15
million reclassification of certain collection agency fees from expense to
credit costs in the U.S. bankcards business. Expense was essentially
unchanged after excluding the effect of foreign currency translation -- up
16% in the emerging markets, offset by a 4% decline in the developed
markets. The increase in emerging markets expense reflects franchise
enhancement and expansion efforts, as well as higher volumes.
o Credit costs of $757 million increased $21 million from the preceding
quarter and $10 million from the 1997 quarter. Credit costs in U.S.
bankcards were $668 million or 5.96% of average managed loans for the
quarter, up $13 million from $655 million or 5.64% in the 1997 fourth
quarter and up $12 million from $656 million or 5.91% a year ago. The
12-month-lagged loss ratio was 6.03% in the quarter, compared with 5.86% in
the 1997 fourth quarter and 6.21% a year-ago. U.S. bankcards credit costs
in the quarter included the $15 million (14 bps) increase related to the
reclassification of certain collection agency fees from operating expense.
The percent of gross write-offs from bankruptcies in the quarter was 37.0%,
compared with 40.8% in the prior quarter and 36.6% in the 1997 first
quarter. Managed loans delinquent 90 days or more were $842 million or
1.88% at quarter-end, compared with $856 million or 1.80% for the prior
quarter and $884 million or 1.98% a year-ago.
o Credit costs in non-U.S. bankcard portfolios were $89 million or 3.95% of
managed loans, compared with $81 million or 3.52% in the preceding quarter
and $91 million or 4.25% in the 1997 quarter.
5
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Private Bank First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjusted Revenue................................................................ $281 $269 4
Adjusted Operating Expense...................................................... 192 165 16
-----------------------------------------
Operating Margin................................................................ 89 104 (14)
Credit Benefits................................................................. (8) (1) NM
-----------------------------------------
Income Before Taxes............................................................. 97 105 (8)
Income Taxes.................................................................... 24 25 (4)
-----------------------------------------
Net Income...................................................................... $ 73 $ 80 (9)
- ----------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars)......................................... $16 $17 (6)
Return on Assets (%)............................................................ 1.85 1.91 -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
o Private Bank net income was $73 million for the quarter, down 9% from the
1997 first quarter, reflecting spread compression on revenue and increased
investment spending.
o Client business volumes under management at the end of the quarter reached
$105 billion, up 7% from $98 billion a year earlier, primarily reflecting
growth and investment performance in the U.S., partially offset by a
decrease in assets managed in Asia Pacific due to the effects of foreign
currency translation. Growth in custody, discretionary investment
management, banking, and trust and fiduciary were partially offset by
decreases in certain non-discretionary investment management activities.
o Adjusted revenue increased 4% in the quarter -- 5% excluding the effect of
foreign currency translation -- as growth in client-related foreign
exchange revenue and other fee revenue was partially offset by lower net
interest revenue as a result of reduced net interest margins. Emerging
markets revenue grew 6% in the quarter, reflecting increased client revenue
and investment performance fees in Latin America. More than 40% of revenue
continued to be derived from the emerging markets. Developed markets
revenue was up 3%.
o Adjusted operating expense increased 16% from the 1997 first quarter --
19% excluding the effect of foreign currency translation -- primarily
reflecting investment in additional Private Bankers and product
specialists, as well as higher technology and other expenses. Expenses
decreased $5 million or 3% from the 1997 fourth quarter.
o Credit costs for the quarter were a net benefit of $8 million, primarily
as a result of recoveries in North America. Loans delinquent 90 days or
more were $186 million or 1.21% of loans, compared to $110 million or 0.72%
in the preceding quarter and $198 million or 1.28% in the first quarter of
1997. The increase from the 1997 fourth quarter reflects an increase in
nonaccrual loans in Asia Pacific.
6
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Global Consumer in Emerging Markets First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjusted Revenue................................................................ $ 869 $ 948 (8)
Adjusted Operating Expense...................................................... 554 532 4
-----------------------------------------
Operating Margin................................................................ 315 416 (24)
Credit Costs.................................................................... 101 91 11
-----------------------------------------
Operating Margin Less Credit Costs.............................................. 214 325 (34)
Additional Provision............................................................ 11 4 NM
-----------------------------------------
Income Before Taxes............................................................. 203 321 (37)
Income Taxes.................................................................... 39 74 (47)
-----------------------------------------
Net Income...................................................................... $164 $247 (34)
- ----------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars)......................................... $41 $42 (2)
Return on Assets (%)............................................................ 1.62 2.39 -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
o Net income in the emerging markets was $164 million in the quarter, down
$83 million from a year ago, and down $6 million from the 1997 fourth
quarter, reflecting the economic conditions, including weakened currencies,
in Asia Pacific, and lower earnings in Latin America Cards.
o Adjusted revenue declined by 8% in the quarter. Excluding the effect of
foreign currency translation, revenue was up 5%. Business volume growth,
particularly deposits, was partially offset by reduced spreads, mainly due
to higher funding costs and the maintenance of greater liquidity. Revenue
in Asia Pacific (excluding Japan and the Indian subcontinent, but including
Australia and New Zealand) declined by 17% in the quarter, but was up 8%
excluding the effect of foreign currency translation. Adjusted operating
expense grew 4% -- 11% excluding the effect of foreign currency
translation, reflecting account and volume growth including
"flight-to-quality" deposit flows, increased credit monitoring, and
technology initiatives.
o Credit costs in the emerging markets increased $13 million from the 1997
fourth quarter, and increased $10 million from the 1997 first quarter. The
net credit loss ratio in Asia Pacific was 0.77%, up from 0.69% in the 1997
fourth quarter and 0.73% a year ago. The net credit loss ratio in Latin
America was 1.99% compared to 1.84% in the 1997 fourth quarter and 2.33% a
year ago. Emerging markets managed loans delinquent 90 days or more were
$620 million or 1.85% at quarter-end, compared with $465 million or 1.43%
at December 31, 1997 and $414 million or 1.23% a year-ago, primarily
reflecting increases in the Private Bank. The emerging markets businesses
built the allowance for loan losses by $11 million.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Global Consumer in Developed Markets First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjusted Revenue................................................................ $2,624 $2,542 3
Adjusted Operating Expense...................................................... 1,361 1,334 2
-----------------------------------------
Operating Margin................................................................ 1,263 1,208 5
Credit Costs.................................................................... 785 803 (2)
-----------------------------------------
Operating Margin Less Credit Costs.............................................. 478 405 18
Additional Provision............................................................ 14 21 (33)
-----------------------------------------
Income Before Taxes............................................................. 464 384 21
Income Taxes.................................................................... 170 138 23
-----------------------------------------
Net Income...................................................................... $ 294 $ 246 20
- ----------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars)......................................... $90 $89 1
Return on Assets (%)............................................................ 1.32 1.12 -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
7
<PAGE>
o Net income in the developed markets was $294 million in the quarter, up
$48 million or 20% from 1997, principally reflecting strong performance in
Citibanking in North America, Europe, and Japan.
o Adjusted revenue was up 3% in the quarter -- 5% excluding the effect of
foreign currency translation, primarily in Germany -- reflecting strong
growth in the Citibanking businesses across all regions. Adjusted expense
grew 2% -- 4% excluding the effect of foreign currency translation -- in
support of regional marketing and new product development.
o Credit costs in the developed markets decreased by 2% in the quarter from
the 1997 first quarter, due to improvements in Citibanking and the Private
Bank. Managed loans delinquent 90 days or more were $2.6 billion or 2.54%
at quarter-end, compared with $2.7 billion or 2.58% at December 31, 1997
and $3.1 billion or 3.03% a year ago. The developed markets businesses
built the allowance for loan losses by $14 million.
<TABLE>
<CAPTION>
Global Corporate Banking net income grew 16% to $753 million in the quarter
- ----------------------------------------------------------------------------------------------------------------------------
Global Corporate Banking First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjusted Revenue................................................................ $2,310 $1,926 20
Adjusted Operating Expense...................................................... 1,309 1,146 14
-----------------------------------------
Operating Margin................................................................ 1,001 780 28
Credit Costs (Benefits)......................................................... 44 (75) NM
-----------------------------------------
Income Before Taxes............................................................. 957 855 12
Income Taxes.................................................................... 204 206 (1)
-----------------------------------------
Net Income...................................................................... $ 753 $ 649 16
- ----------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars)......................................... $173 $149 16
Return on Assets (%)............................................................ 1.77 1.77 -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
Business Initiatives
o During the quarter, Citibank was named best bank worldwide in cash
management, foreign exchange, derivatives, commercial paper, and
securitization by Corporate Finance magazine; best derivatives house by
Institutional Investor; best loan house by Asiamoney; best loan house for
emerging markets by International Financing Review; best bank for basic
services by Global Finance; and top bank in Asia and Eastern and Central
Europe by Corporate Finance.
o "Deals of the Year" were announced during the quarter, with 13 Citibank
deals winning top awards for 1997 from 24 financial publications.
o Citibank became the first U.S.-based bank to open a branch office in Ho
Chi Minh City, thereby expanding its Vietnam locations beyond Hanoi and
reestablishing presence in this important commercial center.
o Licenses have been received to open offices in Cameroon and the Ukraine,
our 99th and 100th countries, respectively. The offices are expected to be
opened in the 1998 second quarter.
o The U.S. Veterans Administration awarded a contract to Citibank to provide
fleet, travel, and purchase card services.
8
<PAGE>
Financial Performance
o Global Corporate Banking net income was $753 million in the quarter, up
$104 million or 16% from 1997. Return on average assets of 1.77% was
unchanged compared with the 1997 first quarter, as average assets grew 16%.
o Adjusted revenue in the quarter increased $384 million or 20% (24%
excluding the effect of foreign currency translation) from the year-ago
quarter, with $185 million of the increase attributable to the Emerging
Markets business and $199 million attributable to Global Relationship
Banking. Adjusted operating expense increased $163 million or 14% (18%
excluding the effect of foreign currency translation) from 1997, with $52
million of the increase in the Emerging Markets business and $111 million
in Global Relationship Banking. Credit costs were $44 million, and compared
with a net benefit of $75 million in 1997, which included a $50 million
recovery from the refinancing agreement concluded with Peru. Net income
benefited from a decline in the effective tax rate to 21% from 24%,
attributable to changes in the nature and geographic mix of pretax
earnings.
o Cash-basis loans of $1,344 million increased $280 million and $415 million
from year end and the year-ago quarter, reflecting increases in the
Emerging Markets business, primarily in Thailand and Indonesia, and
improvements in Global Relationship Banking, primarily real estate.
Commercial cash-basis loans in the Emerging Markets were $967 million at
March 31, 1998, an increase of $304 million from year end and $552 million
from a year ago. Emerging Markets cash-basis loans included $83 million and
$59 million at March 31, 1998 and December 31, 1997, respectively, of
balance sheet credit exposures related to foreign currency derivative
contracts from several Asian customers for which the recognition of
revaluation gains has been suspended. The amounts included a year ago were
not material. Commercial OREO of $350 million improved $111 million and
$243 million from year end and the year ago quarter, primarily reflecting
improvements in real estate in Global Relationship Banking.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Emerging Markets First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjusted Revenue................................................................ $1,113 $ 928 20
Adjusted Operating Expense...................................................... 499 447 12
-----------------------------------------
Operating Margin................................................................ 614 481 28
Credit Costs (Benefits)......................................................... 63 (36) NM
-----------------------------------------
Income Before Taxes............................................................. 551 517 7
Income Taxes.................................................................... 52 68 (24)
-----------------------------------------
Net Income...................................................................... $ 499 $449 11
- ----------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars)......................................... $83 $66 26
Return on Assets (%)............................................................ 2.44 2.76 -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
o Emerging Markets net income of $499 million grew $50 million or 11% from
1997. Operating margin grew $133 million or 28%, as revenue growth outpaced
expense growth by a 3.6 to 1 ratio, but credit costs increased to $63
million, resulting in income before taxes increasing only 7% from the 1997
quarter. Net income for the quarter benefited from a decline in the
effective income tax rate due to changes in the geographic mix and nature
of pretax earnings.
o Adjusted revenue in the quarter of $1.1 billion increased $185 million or
20% (27% excluding the effect of foreign currency translation) from the
year-ago first quarter. The increase reflected a $73 million improvement in
trading-related revenue, higher securities transactions and net asset
gains, and double-digit growth in transaction banking and corporate finance
revenue. Securities transactions and net asset gains of $218 million and
$154 million, included $189 million from the sale of Brady bonds and $46
million related to the refinancing agreement concluded with Peru, in the
first quarter of 1998 and 1997, respectively. Revenue in Asia Pacific
(excluding Japan and the Indian subcontinent, but including Australia and
New Zealand) was up 15% from the 1997 first quarter due to improved
trading-related results. Revenue attributed to the Embedded Bank and
Emerging Local Corporate strategies, together with new franchises,
accounted for 8% of Emerging Markets revenue, up 49% from the 1997 quarter.
About 21% of the revenue in the Emerging Markets business was attributable
to business from multinational companies managed jointly with Global
Relationship Banking, with that revenue having grown 27% from the 1997
first quarter.
9
<PAGE>
o Adjusted operating expense of $499 million in 1998 increased $52 million
or 12% (19% excluding the effect of foreign currency translation) from the
year-ago quarter. The growth reflected investment spending to build the
franchise, including costs associated with Citicorp's plan to gain market
share in selected emerging market countries, and broadly-based volume
growth across most products and geographies.
o Credit costs totaled $63 million in the quarter, up from a net benefit of
$36 million in the 1997 quarter, which included a $50 million recovery from
the refinancing agreement concluded with Peru. Credit costs in the 1998
quarter were up $58 million in Asia Pacific, primarily Thailand and
Indonesia. Recoveries included $9 million from the refinancing agreement
concluded with the Ivory Coast.
o Negotiations among the Republic of Korea and international creditor banks,
which were chaired by Citibank, were successful in extending the maturities
of nearly $22 billion in short-term loans to Korean banks. Pursuant to the
terms, on April 8, 1998 Citibank exchanged $398 million of such loans for
new loans guaranteed by the Republic of Korea with maturities of one, two,
and three years.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Global Relationship Banking First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjusted Revenue................................................................ $1,197 $ 998 20
Adjusted Operating Expense...................................................... 810 699 16
-----------------------------------------
Operating Margin................................................................ 387 299 29
Credit Benefits................................................................. (19) (39) (51)
-----------------------------------------
Income Before Taxes............................................................. 406 338 20
Income Taxes.................................................................... 152 138 10
-----------------------------------------
Net Income...................................................................... $ 254 $200 27
- ----------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars)......................................... $90 $83 8
Return on Assets (%)............................................................ 1.14 0.98 -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
o Net income of $254 million from the Global Relationship Banking business
in North America, Europe, and Japan in the 1998 first quarter increased $54
million or 27% from 1997. Operating margin increased $88 million or 29%,
and net credit benefits declined $20 million to $19 million, resulting in a
$68 million or 20% improvement in income before taxes. Net income benefited
from a decline in the effective income tax rate to 37% from 41%.
o Adjusted revenue of $1.2 billion increased $199 million or 20% from the
1997 first quarter, reflecting a $171 million improvement in venture
capital results from the low level a year ago, a $39 million improvement in
trading-related revenue, and moderate growth in transaction banking
services and corporate finance revenue, partially offset by a $32 million
gain recognized in the 1997 quarter from the sale of an investment, and
lower treasury results attributable to a flatter yield curve.
o Adjusted operating expense of $810 million increased $111 million or 16%
compared with the 1997 first quarter, primarily from increased spending on
technology, higher incentive compensation, and volume-related expense in
transaction banking services.
o Credit costs in the quarter were a net benefit of $19 million, down from a
net benefit of $39 million in the 1997 first quarter, due primarily to a
lower level of recoveries.
10
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Corporate Items (A) First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (B) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue......................................................................... $ 262 $ 211 24
Operating Expense............................................................... 182 167 9
-----------------------------------------
Income Before Taxes............................................................. 80 44 82
Income Taxes.................................................................... 226 191 18
-----------------------------------------
Net Loss........................................................................ ($146) ($147) (1)
- ----------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars)......................................... $9 $5 80
- ----------------------------------------------------------------------------------------------------------------------------
(A) 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.
(B) Reclassified to conform to the latest quarter's presentation.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
o Corporate Items revenue in the 1998 quarter included $19 million of gains
on sales of investment securities held in the Corporate portfolio, while
the 1997 quarter reflected investment writedowns of $20 million. Expense in
the 1998 first quarter included a $25 million charge associated with
performance-based stock options granted in January 1998, and increases in
certain technology expenses and other unallocated corporate costs. The 1997
quarter included a $72 million charge related to performance-based stock
options which vested in that quarter.
o Citicorp's effective tax rate was 38% in both the 1998 and 1997 first
quarters. Income taxes are attributed to core businesses on the basis of
local tax rates, which resulted in effective tax rates for the core
businesses of 25% in the 1998 quarter and 27% in the 1997 quarter,
primarily reflecting changes in the nature and geographic mix of earnings.
The difference between the core businesses' tax rates and Citicorp's
overall effective rate in each period is included in Corporate Items.
Other Items
o Of the $889 million restructuring charge recorded in the 1997 third
quarter, approximately $529 million remained in the reserve as of March 31,
1998. The utilization of the reserve included $245 million of premises and
equipment writedowns and $101 million of primarily severance and related
costs (of which $71 million has been paid in cash and $30 million is
legally obligated), together with translation effects. The implementation
of these restructuring programs, which are expected to be substantially
completed by the end of 1998, is designed to ensure a positive effect on
the quality of customer service.
o Total assets increased $19.5 billion from December 31, 1997, including
$9.3 billion of liquid assets to pre-fund the AT&T Universal Card Services
acquisition completed on April 2, 1998.
Merger Agreement with Travelers Group Inc.
As previously announced, on April 5, 1998 Citicorp and Travelers Group Inc.
("Travelers") agreed to merge, subject to approvals of regulators and
stockholders and other customary conditions. Travelers is a diversified
financial services holding company engaged, through its subsidiaries, in
investment, asset management, life insurance, property and casualty insurance
and consumer lending services. Its principal businesses include Salomon Smith
Barney, Salomon Smith Barney Asset Management, Travelers Life & Annuity,
Primerica Financial Services, Travelers Property Casualty and Commercial Credit.
Information about Travelers is included in its periodic reports and other
materials filed with the Securities and Exchange Commission (the "SEC"). These
documents may be read and copied at the public reference rooms maintained by the
SEC in New York, Chicago and Washington, D.C. (Further information on the
reference rooms may be obtained from the SEC at 1-800-SEC-0330.) Travelers'
public filings are also available from commercial document retrieval services
and at the Internet World Wide Web Site maintained by the SEC at
"http://www.sec.gov".
On April 20, 1998, Travelers announced operating earnings of $1.007 billion, or
$.87 per share (basic) and $.84 per share (diluted), for the first quarter ended
March 31, 1998. Net income of $1.093 billion, or $.95 per share (basic) and $.91
per share (diluted), included net investment portfolio gains of $86.5 million.
Revenues were $10.4 billion.
11
<PAGE>
Selected Financial Statements and Tables
Selected financial statements and tables detailing an analysis of earnings and
credit indicators follow. Further details concerning the financial results will
be available in May in Citicorp's Form 10-Q.
12
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Consolidated Statement of Income CITICORP and Subsidiaries
- ----------------------------------------------------------------------------------------------------------------------------
First Quarter %
----------------------------
(In Millions of Dollars, Except Per Share Amounts) 1998 1997 Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Revenue................................................................ $6,303 $5,857 8
Interest Expense................................................................ 3,464 3,053 13
-----------------------------------------
Net Interest Revenue............................................................ 2,839 2,804 1
Provision for Credit Losses..................................................... 507 423 20
-----------------------------------------
Net Interest Revenue after
Provision for Credit Losses................................................... 2,332 2,381 (2)
-----------------------------------------
Fees, Commissions, and Other Revenue
Fees and Commissions............................................................ 1,441 1,352 7
Foreign Exchange................................................................ 349 297 18
Trading Account................................................................. 236 198 19
Securities Transactions......................................................... 241 108 NM
Other Revenue................................................................... 499 437 14
-----------------------------------------
Total Fees, Commissions, and Other Revenue...................................... 2,766 2,392 16
-----------------------------------------
Operating Expense
Salaries........................................................................ 1,355 1,264 7
Employee Benefits............................................................... 359 401 (10)
-----------------------------------------
Total Employee Expense....................................................... 1,714 1,665 3
Net Premises & Equipment Expense................................................ 499 490 2
Other Expense................................................................... 1,181 1,014 16
-----------------------------------------
Total Operating Expense......................................................... 3,394 3,169 7
-----------------------------------------
Income Before Taxes............................................................. 1,704 1,604 6
Income Taxes.................................................................... 639 609 5
-----------------------------------------
Net Income...................................................................... $1,065 $ 995 7
- ----------------------------------------------------------------------------------------------------------------------------
Income Applicable to Common Stock............................................... $1,033 $957 8
-----------------------------------------
Earnings Per Share:
Basic........................................................................ $2.28 $2.07 10
Diluted...................................................................... $2.23 $2.01 11
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NM Not meaningful, as percentage equals or exceeds 100%.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares Outstanding (In Millions)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic........................................................................ 452.1 461.4 (2)
Diluted (A).................................................................. 463.2 475.7 (3)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Includes dilutive effect of shares issuable under employee plans of 11.1
million and 14.3 million for the quarters.
13
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheet CITICORP and Subsidiaries
- ----------------------------------------------------------------------------------------------------------------------------
Mar. 31, Dec. 31, %
(In Millions of Dollars) 1998 1997 Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and Due from Banks......................................................... $ 8,090 $ 8,585 (6)
Deposits at Interest with Banks................................................. 13,787 13,049 6
Securities, at Fair Value:
Available for Sale........................................................... 33,065 30,762 7
Venture Capital.............................................................. 2,857 2,599 10
Trading Account Assets.......................................................... 39,740 40,356 (2)
Loans Held for Sale............................................................. 3,785 3,515 8
Federal Funds Sold and Securities Purchased Under Resale Agreements............. 21,858 10,233 NM
Loans, Net:
Consumer..................................................................... 105,945 108,066 (2)
Commercial................................................................... 82,655 75,947 9
-----------------------------------------
Loans, Net of Unearned Income.............................................. 188,600 184,013 2
Allowance for Credit Losses.................................................. (5,828) (5,816) -
-----------------------------------------
Total Loans, Net................................................................ 182,772 178,197 3
-----------------------------------------
Customers' Acceptance Liability................................................. 1,822 1,726 6
Premises and Equipment, Net..................................................... 4,545 4,474 2
Interest and Fees Receivable.................................................... 3,272 3,288 -
Other Assets.................................................................... 14,821 14,113 5
-----------------------------------------
Total........................................................................... $330,414 $310,897 6
- ----------------------------------------------------------------------------------------------------------------------------
Liabilities
Non-Interest-Bearing Deposits in U.S. Offices................................... $ 16,260 $ 16,901 (4)
Interest-Bearing Deposits in U.S. Offices....................................... 42,061 40,361 4
Non-Interest-Bearing Deposits in Offices Outside the U.S........................ 10,080 9,627 5
Interest-Bearing Deposits in Offices Outside the U.S............................ 146,318 132,232 11
-----------------------------------------
Total Deposits............................................................... 214,719 199,121 8
-----------------------------------------
Trading Account Liabilities..................................................... 31,291 30,986 1
Purchased Funds and Other Borrowings............................................ 21,457 21,231 1
Acceptances Outstanding......................................................... 1,992 1,826 9
Accrued Taxes and Other Expense................................................. 6,313 6,464 (2)
Other Liabilities............................................................... 13,012 10,288 26
Long-Term Debt.................................................................. 20,159 19,785 2
Stockholders' Equity
Preferred Stock (Without par value)............................................. 1,600 1,903 (16)
Common Stock ($1.00 par value).................................................. 506 506 -
Issued Shares: 506,298,235 in each period
Surplus......................................................................... 6,493 6,501 -
Retained Earnings............................................................... 17,564 16,789 5
Net Unrealized Gains -- Securities Available for Sale......................... 661 535 24
Foreign Currency Translation.................................................... (624) (626) -
Common Stock in Treasury, at Cost............................................... (4,729) (4,412) 7
Shares: 54,773,606 and 52,355,947, respectively
-----------------------------------------
Total Stockholders' Equity...................................................... 21,471 21,196 1
-----------------------------------------
Total........................................................................... $330,414 $310,897 6
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NM Not meaningful, as percentage equals or exceeds 100%.
14
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Net Interest Revenue Statistics (Taxable Equivalent Basis) (A)
- ----------------------------------------------------------------------------------------------------------------------------
1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
(In Millions of Dollars) 1998 1997 1997 1997 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Adjusted Net Interest Revenue (B):............... $3,496 $3,467 $3,453 $3,454 $3,449
Effect of Credit Card Securitization Activity.... (640) (596) (565) (578) (630)
-----------------------------------------------------------------------
Total............................................ $2,856 $2,871 $2,888 $2,876 $2,819
- ----------------------------------------------------------------------------------------------------------------------------
(In Billions of Dollars)
- -----------------------------------------------------
Adjusted Average Interest-Earning Assets (B): $292.6 $283.3 $280.5 $277.3 $267.3
Securitized Credit Card Receivables.............. (27.4) (26.3) (24.8) (24.7) (25.1)
-----------------------------------------------------------------------
Total............................................ $265.2 $257.0 $255.7 $252.6 $242.2
- ----------------------------------------------------------------------------------------------------------------------------
Adjusted Net Interest Margin (B):................ 4.85% 4.85% 4.88% 5.00% 5.23%
Effect of Credit Card Securitization Activity.... (.48)% (.42)% (.40)% (.43)% (.51)%
-----------------------------------------------------------------------
Total............................................ 4.37% 4.43% 4.48% 4.57% 4.72%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) The taxable equivalent adjustment is based on the U.S. federal statutory tax
rate of 35%.
(B) Adjusted for the effect of credit card securitization activity.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Trading-Related Revenue First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
By Business Sector:
Global Corporate Banking:
Emerging Markets............................................................. $ 288 $ 215 34
Global Relationship Banking.................................................. 361 322 12
-----------------------------------------
Total Global Corporate Banking.................................................. 649 537 21
Global Consumer and Other....................................................... 79 52 52
-----------------------------------------
Total........................................................................... $728 $589 24
- ----------------------------------------------------------------------------------------------------------------------------
By Trading Activity:
Foreign Exchange (B)............................................................ $ 384 $ 236 63
Derivative (C).................................................................. 231 198 17
Fixed Income (D)................................................................ 63 80 (21)
Other........................................................................... 50 75 (33)
-----------------------------------------
Total........................................................................... $728 $589 24
- ----------------------------------------------------------------------------------------------------------------------------
By Income Statement Line:
Foreign Exchange................................................................ $ 349 $ 297 18
Trading Account................................................................. 236 198 19
Other (E)....................................................................... 143 94 52
-----------------------------------------
Total........................................................................... $728 $589 24
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
(B) Includes foreign exchange spot, forward, and option contracts.
(C) Includes interest rate and currency swaps, options, financial futures, and
equity and commodity contracts.
(D) Includes debt instruments including government and corporate debt, as well
as mortgage assets.
(E) Primarily net interest revenue.
15
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Other Revenue First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 (A) Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Credit Card Securitization Activity............................................. $ 138 $ 165 (16)
Venture Capital................................................................. 264 93 NM
Affiliate Earnings.............................................................. 29 59 (51)
Net Asset Gains................................................................. 31 92 (66)
Other Items..................................................................... 37 28 32
-----------------------------------------
Total........................................................................... $499 $437 14
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Provision for Credit Losses First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Consumer Net Write-Offs.................................................. $ 426 $ 459 (7)
Global Corporate Banking Net Write-Offs (Recoveries)............................ 56 (61) NM
Additional Provision............................................................ 25 25 -
-----------------------------------------
Total........................................................................... $507 $423 20
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NM Not meaningful, as percentage equals or exceeds 100%.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Margin Basis Reconciliation First Quarter %
----------------------------
(In Millions of Dollars) 1998 1997 Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue......................................................................... $ 5,605 $ 5,196 8
Effect of Credit Card Securitization Activity................................... 461 434 6
Net Cost to Carry (A)........................................................... (1) (3) (67)
-----------------------------------------
Adjusted Revenue................................................................ 6,065 5,627 8
Total Operating Expense......................................................... 3,394 3,169 7
Net OREO Benefits (B)........................................................... 12 10 20
-----------------------------------------
Adjusted Operating Expense...................................................... 3,406 3,179 7
-----------------------------------------
Operating Margin................................................................ 2,659 2,448 9
-----------------------------------------
Global Consumer Net Write-Offs.................................................. 426 459 (7)
Effect of Credit Card Securitization Activity................................... 461 434 6
Net Cost to Carry and Net OREO Benefits (A) (B)................................. (1) 1 NM
-----------------------------------------
Adjusted Global Consumer Credit Costs........................................... 886 894 (1)
-----------------------------------------
Global Corporate Banking Net Write-Offs (Recoveries)............................ 56 (61) NM
Net Cost to Carry and Net OREO Benefits (A) (B)................................. (12) (14) (14)
-----------------------------------------
Adjusted Global Corporate Banking Credit Costs (Benefits)....................... 44 (75) NM
-----------------------------------------
Additional Provision (C)........................................................ 25 25 -
-----------------------------------------
Income Before Taxes............................................................. $1,704 $1,604 6
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Includes the net cost to carry cash-basis loans and other real estate owned
("OREO").
(B) Includes gains and losses on sales, direct revenue and expense, and
writedowns of OREO.
(C) Represents amounts in excess of net write-offs.
NM Not meaningful, as percentage equals or exceeds 100%.
16
<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 Mar. 31, Mar. 31, Dec. 31, Mar. 31, 1st Qtr. 1st Qtr. 4th Qtr. 1st Qtr.
Amounts in Billions) 1998 1998 1997 1997 1998 1998 1997 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Citibanking.......... $ 67.7 $2,014 $2,038 $2,193 $ 66.8 $137 $139 $148
Ratio................ 2.97% 3.07% 3.30% 0.83% 0.83% 0.91%
Cards
U.S. Bankcards....... 44.8 842 856 884 45.5 668 655 656
Ratio................ 1.88% 1.80% 1.98% 5.96% 5.64% 5.91%
Other (B)............ 9.4 216 194 214 9.1 89 81 91
Ratio................ 2.30% 2.12% 2.42% 3.95% 3.52% 4.25%
Private Bank......... 15.4 186 110 198 15.1 (7) (9) (2)
Ratio................ 1.21% 0.72% 1.28% NM NM NM
- ----------------------------------------------------------------------------------------------------------------------------
Total Managed........ 137.3 3,258 3,198 3,489 136.5 887 866 893
Ratio................ 2.37% 2.31% 2.58% 2.64% 2.50% 2.69%
- ----------------------------------------------------------------------------------------------------------------------------
Securitized Credit
Card Receivables (27.6) (519) (481) (500) (27.4) (430) (403) (402)
Loans Held for Sale.. (3.8) (39) (35) (39) (3.6) (31) (31) (32)
- ----------------------------------------------------------------------------------------------------------------------------
Total Loans.......... $105.9 $2,700 $2,682 $2,950 $105.5 $426 $432 $459
Ratio................ 2.55% 2.48% 2.76% 1.64% 1.60% 1.75%
- ----------------------------------------------------------------------------------------------------------------------------
Managed Portfolio:
Developed............ $103.8 $2,638 $2,733 $3,075 $103.8 $790 $778 $801
Ratio................ 2.54% 2.58% 3.03% 3.09% 2.96% 3.19%
Emerging............. 33.5 620 465 414 32.7 97 88 92
Ratio................ 1.85% 1.43% 1.23% 1.21% 1.06% 1.12%
- ----------------------------------------------------------------------------------------------------------------------------
Emerging Portfolio (C):
Asia Pacific (D)..... $22.5 $386 $261 $259 $22.0 $42 $39 $43
Ratio................ 1.72% 1.19% 1.06% 0.77% 0.69% 0.73%
Latin America........ 9.6 202 176 150 9.3 46 42 44
Ratio................ 2.10% 1.89% 1.91% 1.99% 1.84% 2.33%
CEEMEA (E)........... 1.4 32 28 5 1.4 9 7 5
Ratio................ 2.26% 2.01% 0.40% 2.78% 1.96% 1.60%
- ----------------------------------------------------------------------------------------------------------------------------
</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) Includes bankcards outside of the U.S, worldwide Diners, and private label
cards.
(C) Includes Private Bank.
(D) Excludes Japan.
(E) Central and Eastern Europe, Middle East, and Africa.
NM Not meaningful.
17
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Cash-Basis and Renegotiated Loans Mar. 31, Dec. 31, Mar. 31,
(In Millions of Dollars) 1998 1997 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial Cash-Basis Loans
Collateral Dependent (at Lower of Cost or Collateral Value) (A).............. $ 242 $ 258 $ 288
Other (B).................................................................... 1,102 806 641
-------------------------------------------
Total Commercial Cash-Basis Loans............................................ $1,344 $1,064 $929
- ----------------------------------------------------------------------------------------------------------------------------
Commercial Renegotiated Loans................................................ $61 $59 $296
- ----------------------------------------------------------------------------------------------------------------------------
Consumer Loans on which Accrual of Interest has been Suspended............... $1,850 $1,849 $2,119
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) 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.
(B) Includes foreign currency derivative contracts with a balance sheet
credit exposure of $83 million and $59 million at March 31, 1998 and
December 31, 1997, respectively, for which the recognition of revaluation
gains has been suspended.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Other Real Estate Owned (OREO) and Assets Pending Disposition (A) Mar. 31, Dec. 31, Mar. 31,
(In Millions of Dollars) 1998 1997 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer OREO................................................................ $ 242 $ 263 $ 408
Commercial OREO.............................................................. 350 461 593
-------------------------------------------
Total........................................................................ $592 $724 $1,001
- ----------------------------------------------------------------------------------------------------------------------------
Assets Pending Disposition (B)............................................... $103 $96 $174
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Carried at lower of cost or collateral value.
(B) Represents consumer residential mortgage loans that have a high probability
of foreclosure.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Credit Loss Reserves Mar.31, Dec. 31, Mar. 31,
(In Millions of Dollars) 1998 1997 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate Allowance for Credit Losses:
Global Consumer.............................................................. $ 2,499 $ 2,487 $ 2,442
Global Corporate Banking (A)................................................. 3,429 3,429 3,424
-------------------------------------------
Total Aggregate Allowance for Credit Losses.................................. 5,928 5,916 5,866
Reserves for Securitization Activities (B)................................... 70 85 91
-------------------------------------------
Total Credit Loss Reserves................................................... $5,998 $6,001 $5,957
- ----------------------------------------------------------------------------------------------------------------------------
Allowance As a Percent of Total Loans:
Global Consumer.............................................................. 2.36% 2.30% 2.29%
Global Corporate Banking (C) ................................................ 4.03% 4.38% 5.06%
Total........................................................................ 3.09% 3.16% 3.34%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Includes $50 million attributable to standby letters of credit and
guarantees included in Other Liabilities and $50 million attributable to
derivative and foreign exchange contracts reported as a deduction from
Trading Account Assets.
(B) Attributable to mortgage loans sold with recourse.
(C) Excludes allowance portion attributable to standby letters of credit and
guarantees, and derivative and foreign exchange contracts.
18
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Consolidated Average Balances 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
(In Billions of Dollars) 1998 1997 1997 1997 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans:
Consumer.......................................... $ 106 $ 107 $ 108 $ 107 $ 106
Commercial........................................ 77 73 69 67 62
-----------------------------------------------------------------------
Total Average Loans............................... $183 $180 $177 $174 $168
- ----------------------------------------------------------------------------------------------------------------------------
Total Average Assets.............................. $313 $302 $299 $293 $285
- ----------------------------------------------------------------------------------------------------------------------------
(In Millions of Dollars)
- -----------------------------------------------------
Common Stockholders' Equity....................... $ 19,259 $ 18,952 $ 19,633 $ 18,933 $ 18,698
Preferred Equity.................................. 1,752 1,903 1,903 1,903 2,049
-----------------------------------------------------------------------
Total Average Stockholders' Equity................ $21,011 $20,855 $21,536 $20,836 $20,747
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Capital and Other Items First Quarter %
----------------------------
(In Billions of Dollars, Except Share Data) 1998 1997 Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stockholders' Equity Per Share........................................... $44.01 $41.08 7
Closing Stock Price At Quarter End.............................................. $142.00 $108.25 31
Dividends Per Common Share -- For the First Quarter........................... $0.575 $0.525 10
Shares Outstanding (In Millions)................................................ 451.5 459.5 (2)
Tier 1 Capital.................................................................. $21.3 $20.3 5
Total Capital (Tier 1 and 2) (A)................................................ $31.2 $29.3 6
Tier 1 Capital Ratio (A)........................................................ 8.2% 8.4% -
Total Capital Ratio (Tier 1 and 2) (A).......................................... 12.1% 12.1% -
Common Equity as a Percentage of Total Assets................................... 6.0% 6.5% -
Total Equity as a Percentage of Total Assets.................................... 6.5% 7.2% -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) 1998 estimated.
19
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
Exhibit No. 12(a) Calculation of Ratio of Income to Fixed Charges.
Exhibit No. 12(b) Calculation of Ratio of Income to Fixed Charges
Including Preferred Stock Dividends.
20
<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
(Registrant)
By: /s/ Roger W. Trupin
--------------------
Roger W. Trupin
Vice President and Controller
Dated: April 21, 1998
21
<TABLE>
<CAPTION>
CITICORP AND SUBSIDIARIES Exhibit 12(a)
CALCULATION OF RATIO OF INCOME TO FIXED CHARGES
(In Millions)
YEAR ENDED DECEMBER 31, THREE MONTHS
MARCH 31,
EXCLUDING INTEREST ON DEPOSITS: 1997 1996 1995 1994 1993 1998 1997
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<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
INTEREST EXPENSE (OTHER THAN
INTEREST ON DEPOSITS) 3,468 3,435 4,110 5,906 6,324 842 824
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147 39 40
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TOTAL FIXED CHARGES 3,627 3,585 4,250 6,049 6,471 881 864
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INCOME:
NET INCOME 3,591 3,788 3,464 3,422 (A) 1,919 (B) 1,065 995
INCOME TAXES 2,131 2,285 2,121 1,189 941 639 609
FIXED CHARGES 3,627 3,585 4,250 6,049 6,471 881 864
---------------------------------------------------------------------------------------
TOTAL INCOME 9,349 9,658 9,835 10,660 9,331 2,585 2,468
=======================================================================================
RATIO OF INCOME TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 2.58 2.69 2.31 1.76 1.44 2.93 2.86
=======================================================================================
INCLUDING INTEREST ON DEPOSITS:
FIXED CHARGES:
INTEREST EXPENSE 13,081 12,409 13,012 14,902 16,121 3,464 3,224
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147 39 40
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TOTAL FIXED CHARGES 13,240 12,559 13,152 15,045 16,268 3,503 3,264
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INCOME:
NET INCOME 3,591 3,788 3,464 3,422(A) 1,919(B) 1,065 995
INCOME TAXES 2,131 2,285 2,121 1,189 941 639 609
FIXED CHARGES 13,240 12,559 13,152 15,045 16,268 3,503 3,264
---------------------------------------------------------------------------------------
TOTAL INCOME 18,962 18,632 18,737 19,656 19,128 5,207 4,868
=======================================================================================
RATIO OF INCOME TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.43 1.48 1.42 1.31 1.18 1.49 1.49
=======================================================================================
</TABLE>
(A) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 EXCLUDES THE CUMULATIVE
EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 112,
"EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS", OF $(56) MILLION.
(B) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1993 EXCLUDES THE CUMULATIVE
EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 109,
"ACCOUNTING FOR INCOME TAXES", OF $300 MILLION.
<TABLE>
<CAPTION>
CITICORP AND SUBSIDIARIES Exhibit 12(b)
CALCULATION OF RATIO OF INCOME TO FIXED CHARGES
INCLUDING PREFERRED STOCK DIVIDENDS
(In Millions) YEAR ENDED DECEMBER 31, THREE MONTHS
MARCH 31,
EXCLUDING INTEREST ON DEPOSITS: 1997 1996 1995 1994 1993 1998 1997
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
INTEREST EXPENSE (OTHER THAN
INTEREST ON DEPOSITS) 3,468 3,435 4,110 5,906 6,324 842 824
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147 39 40
DIVIDENDS--PREFERRED STOCK 223 261 553 505 (A) 465 46 61
---------------------------------------------------------------------------------------
TOTAL FIXED CHARGES 3,850 3,846 4,803 6,554 6,936 927 925
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INCOME:
NET INCOME 3,591 3,788 3,464 3,422 (B) 1,919 (C) 1,065 995
INCOME TAXES 2,131 2,285 2,121 1,189 941 639 609
FIXED CHARGES (EXCLUDING PREFERRED
STOCK DIVIDENDS) 3,627 3,585 4,250 6,049 6,471 881 864
---------------------------------------------------------------------------------------
TOTAL INCOME 9,349 9,658 9,835 10,660 9,331 2,585 2,468
=======================================================================================
RATIO OF INCOME TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 2.43 2.51 2.05 1.63 1.35 2.79 2.67
=======================================================================================
INCLUDING INTEREST ON DEPOSITS:
FIXED CHARGES:
INTEREST EXPENSE 13,081 12,409 13,012 14,902 16,121 3,464 3,224
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147 39 40
DIVIDENDS--PREFERRED STOCK 223 261 553 505(A) 465 46 61
---------------------------------------------------------------------------------------
TOTAL FIXED CHARGES 13,463 12,820 13,705 15,550 16,733 3,549 3,325
---------------------------------------------------------------------------------------
INCOME:
NET INCOME 3,591 3,788 3,464 3,422(B) 1,919(C) 1,065 995
INCOME TAXES 2,131 2,285 2,121 1,189 941 639 609
FIXED CHARGES (EXCLUDING PREFERRED
STOCK DIVIDENDS) 13,240 12,559 13,152 15,045 16,268 3,503 3,264
---------------------------------------------------------------------------------------
TOTAL INCOME 18,962 18,632 18,737 19,656 19,128 5,207 4,868
=======================================================================================
RATIO OF INCOME TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.41 1.45 1.37 1.26 1.14 1.47 1.46
=======================================================================================
</TABLE>
(A) CALCULATED ON A BASIS OF AN ASSUMED TAX RATE OF 29% FOR 1994.
(B) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 EXCLUDES THE CUMULATIVE
EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 112,
"EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS", OF $(56) MILLION.
(C) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1993 EXCLUDES THE CUMULATIVE
EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 109,
"ACCOUNTING FOR INCOME TAXES", OF $300 MILLION.
