Citicorp Annual Report 1997
[GRAPHIC OMIITED]
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CONTENTS
[GRAPHIC OMIITED]
Chairman's Letter 2
Building a Global Growth Company 4
Involvement with Our Communities 7
Delivering on the Brand Promise 11
Corporate Clients in 98 Countries 16
Information and Communications 22
Financial Information 25
Corporate Information 93
Stockholder Information 96
<PAGE>
CHAIRMAN'S LETTER
to Stockholders
Nineteen ninety-seven was a good year. We reported earnings of $3.6 billion
($4.1 billion without the restructuring charge). Your stock closed the year at
$126 7/16, up 23%. We increased the dividend to $2.30 in January.
Our objective is to build a company that serves consumers around the
world, and that "banks" corporate customers in the emerging markets and
corporations and investors who value our ability to help them globally. We have
said that we would use 1996, 1997 and 1998 to get "fully engaged" in this
endeavor. I called 1997 a good year because we have made solid progress in
moving toward this objective.
[TABLES:
INCOME
$ Billion
93 94 95 96 97
Excluding Restructuring Charges 2.5 -- -- -- 4.1
As Reported 2.2 3.4 3.5 3.8 3.6
<TABLE>
STOCK PRICE
Quarterly in Dollars
<CAPTION>
1Q95 2Q95 3Q95 4Q95 1Q96 2Q96 3Q96 4Q96 1Q97 2Q97 3Q97 4Q97
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$42.63 $57.88 $70.75 $67.25 $80.00 $82.75 $90.63 $103.00 $108.25 $120.56 $133.94 $126.44
</TABLE>
]
The market seems concerned about the events in Asia. A long period of
growth has been interrupted, and while the liquidity issues surrounding the
current situation are likely to be resolved, the adjustments that will be
required prior to a resumption of sustained strong performance will be difficult
and take time. Citibank's commitment to the area dates back to 1902. We will
maintain our position, and seek to expand it in support of our customers and
core strategy as the opportunities arise.
On January 1, 1999, the Euro is likely to be introduced. The year 2000 is
a certainty. We are preparing for these events, which are likely to have an
impact on global markets during 1998 and beyond.
Over the last two years, we have absorbed an increase in consumer
write-offs in our U.S. Card business of $1.2 billion and a reduction of pricing
(margin) in the Emerging Markets of $400 million to $500 million.
These changes seem to be behind us. In the case of Emerging Markets
pricing, there could even be a reversal of the trends, but it is likely that the
level of activity in 1998 will be down. We continue to be concerned about the
level of U.S. consumer write-offs, but the trend is flat.
We took a restructuring charge of $889 million in the third quarter. This
is important because it is a first step in moving toward a global processing
base. The competitive situation and our business objectives require that we move
in
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[TABLE: INCOME PER DILUTED SHARE
In Dollars
93 94 95 96 97
Excluding Restructuring Charges 4.62 -- -- -- 8.51
As Reported 4.13 6.29 6.50 7.43 7.33
[TABLE: RETURN ON COMMON EQUITY
Percent
93 94 95 96 97
Excluding Restructuring Charges 23.9 -- -- -- 20.9
As Reported 21.1 25.8 20.8 20.4 18.1]
that direction, and we will be pursuing this in the years ahead. We are putting
emphasis on cost management because we believe that the structure of our
expenses should be improved.
Our franchise position around the world is strong and we expect it to
strengthen importantly during 1998 and 1999. Over time, the Consumer business
will grow more rapidly than the more traditional banking business. We continue
to invest in expanding our franchise and recently completed an agreement to buy
AT&T's Universal Card and to enter into a joint marketing relationship with that
company.
Indeed, we expect that in the mid-term we will join other global consumer
companies in deriving our business momentum and performance from our ability to
serve the broad middle market of young, middle-aged and older households around
the world. This is an exciting market and a singular opportunity.
I am extremely pleased with the franchise that we have in the corporate
banking business, which we believe to be the most valuable of its kind in the
world.
During 1997 we added Alain Belda to our Board. Mr. Belda is President and
Chief Operating Officer of Alcoa and an experienced international executive. We
are delighted that he joined us.
I have written that this has been a year of progress. We owe that fact to
the hard work, dedication and loyalty of nearly ninety-four thousand Citibankers
around the world who, together with our customers, make us what we are. To each,
thank you.
-------------------------------
Commitment to
Stockholders
-------------------------------
Core earnings growth
10%-12%/year
-------------------------------
Returns in excess of 18%
-------------------------------
Free capital of $2 billion/year
-------------------------------
Incremental revenue/expense
ratio of 2:1
-------------------------------
Low risk, low volatility
-------------------------------
Strong control
-------------------------------
/S/ John S. Reed Use technology as a
competitive tool
John S. Reed -------------------------------
Solid community values
-------------------------------
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BUILDING A GLOBAL GROWTH COMPANY
Citibank's growth strategy
begins with our globality
The breadth of our reach and depth of our presence in markets around the world
have long distinguished Citibank from its competition. We are using that unique
advantage to be both the best corporate bank in the world and the bank of choice
to meet the expanding needs of consumers everywhere.
As our strategy becomes fully implemented, the Citibank name, long one of
the most widely recognized and respected in banking, is being established as a
global financial services brand. The Citibank brand makes a simple promise: We
will help our customers achieve their aspirations. We are committed to
delivering on that brand promise--wherever, whenever and by whatever means our
customers choose.
Keeping our promise to our customers is the key to delivering on our
commitment to our shareholders.
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CITIBANK [LOGO]
[] We are developing and marketing consumer products and services that are
consistent globally, recognizing that people's financial needs and aspirations
are shaped far more by lifestage and interests than by geography.
[] We are using the insight gained as an embedded bank in emerging markets
to help both multinational corporations and local companies achieve their goals.
[] Systems and platforms are being unified to transform our worldwide
presence into integrated global operations.
[] We are applying advanced technology to ensure that we offer, today and
in the future, a full range of secure, easily used access points, around the
world and around the clock.
[] A major Citibank initiative to reduce service defects is expected to
produce the quality and consistency of performance that not only creates
customer satisfaction and loyalty, but also leads to fulfilled and engaged
employees.
[] We are committed to balance--in our businesses, across geographies and
in our performance. This is the basis for our sustained competitive advantage.
[PHOTO PAGES 4 & 5: Chinatown, New York]
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[PHOTO: VALLE DE CHALCO, MEXICO]
{ Under our $10 million Banking on Enterprise initiative, grants to
microlenders are enabling small businesses, such as this brick factory in
Mexico, to grow and expand job opportunities.
} Aiding education is one of the bank's global community priorities. Fu
Shan Elementary School is in a remote and mountainous part of Taiwan occupied by
native inhabitants. To these rural children, Citibank donated a state-of-the-art
classroom, with multimedia PCs, Internet access and teleconferencing.
6
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MORE THAN A NAME IN EVERY COMMUNITY
Involvement with our
communities is an important
component of Citibank's performance
As a trusted financial institution, we must stay in touch with the core
values of the many communities within which we function. As a global
institution, we have a broadly diverse staff and we serve diverse customers.
Wherever Citibank is present, we work to earn the respect of our neighbors
by contributing to the health and vitality of the community as well as
strengthening its economy.
Our profile as a corporate citizen starts with our role as an employer. We
recruit the best people from diverse backgrounds. Their most important
contribution to the local and global economy is their ability to help consumers
and corporations achieve their financial goals.
As an employer, our selectivity, consistently high employment practices
and training ensure that Citibankers have the right skills.
These skilled and trained Citibankers participate in their local financial
communities and the broader community as well. They provide technical skills to
government commissions, civic organizations and local community-based groups.
Citibank's financial and tech-
[PHOTO: WU LAI, TAIWAN]
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nical support of educational and community development programs improves the
skills, and increases the breadth, of the local workforce from which we draw
employees. It also increases other local employment opportunities. For example,
in Las Vegas we have worked closely with the Southern Nevada Community College
and local government to develop a welfare-to-work training program, and we have
hired many of its graduates. Citicorp Diners Club Inc. in the U.S. has found
that hiring individuals with disabilities provides an additional source of
quality employees.
Our philanthropy, combined with business practices that have a positive
impact on the local economy, instills pride in our employees and helps to make
Citibank the employer of choice for the outstanding employees we seek to
recruit.
We cultivate such connections in everything we do.
Banking on Education and Banking on Enterprise are Citibank's and the
Citicorp Foundation's principal philanthropic initiatives worldwide.
Banking on Education is a $25 million, decade-long commitment to create
"smarter classrooms" and "smarter schools." Grants support the local development
and use of new learning technologies in communities from Miami, Sioux Falls and
Washington, D.C., to Prague, Johannesburg and Hong Kong. For example, in Hungary
we have supported, with contributions and Citibank expert technologists, the
recent completion of a PC lab for one of the local teacher training schools.
Through the $10 million Banking on Enterprise program, we are helping to
make available small loans that enable some of the world's poorest people to
start and expand small businesses.In addition to grants, we provide financial
support, lending, training, board members and management expertise to community
[PHOTO: PRAGUE, CZECH REPUBLIC]
} The Citicorp Foundation has made a multi-year grant of $500,000 to the
Center for Economic Research and Graduate Education to underwrite a new Ph.D.
program in economics at Charles University in Prague. Students are drawn from
countries transitioning to market economies.
8
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[GRAPHIC OMMITTED]
Citibank's growing portfolio of community development investments promotes
affordable housing and economic development in our markets in the U.S. through a
variety of forms. For example:
[ ] Our purchase of shares in Founders National Bank creates a strategic
alliance that strengthens the ability of this minority-owned bank to
market real-estate and small-business loans in South Central Los Angeles.
[ ] Created by Citibank, in association with the National Community
Capital Association, our equity-equivalent investment product has been
used by Citibank, as well as other banks, for such community development
financial institutions as the Nonprofit Facilities Fund in New York.
[ ] Our private placement investment in Habitat for Humanity provides
liquidity for new housing construction in Washington, D.C., and Rochester,
New York.
development financial institutions around the world. We also are working with
Junior Achievement in Latin America and Central Europe to encourage
entrepreneurship by leveraging technology.
Our support of grassroots financial institutions in the U.S. has been
cited by the U.S. Treasury and recognized at the first Global Microcredit
Summit, convened in Washington, D.C., in February 1997.
In these and other programs, our community success stems from using our
business expertise in partnership with local people and local institutions. Our
engagement ranges from adapting products for new purposes, such as the
underwriting of near-equity financing for U.S. nonprofit community-based
organizations, to investing in U.S. tax credits for affordable housing. We are
proud that, in the New York metropolitan area, we continue double-digit annual
growth in our community development financing.
Citibankers and retirees multiply the reach of our institutional
initiatives by volunteering time every year and giving generously from their own
pockets. In the U.S. alone, Citibankers in 1997 contributed more than $5 million
that was eligible for matching by the Citicorp Foundation.
Citibank has supported, with
contributions and long-term
loans, the Esperanza Community
Housing Corporation of Los
Angeles. It has a special
focus on serving children by
integrating child care into
its real estate developments.
[PHOTO: LOS ANGELES,
CALIFORNIA]
9
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GLOBAL CONSUMER - UNPARALLELED GEOGRAPHIC SCOPE
[GRAPHIC: MAP OF THE WORLD]
TABLES:
NORTH AMERICA (*) EUROPE
- ----------------------------------- -----------------------------------
COUNTRIES 2 COUNTRIES 13
REVENUE $8.0B REVENUE $2.0B
LOANS $87.8B LOANS $16.7B
ACCOUNTS 35.6MM ACCOUNTS 8.1MM
BRANCHES 380 BRANCHES 464
CENTRAL &
EASTERN EUROPE,
LATIN AMERICA MIDDLE EAST, AFRICA
- ----------------------------------- -----------------------------------
COUNTRIES 19 COUNTRIES 10
REVENUE $1.7B REVENUE $0.3B
LOANS $9.3B LOANS $1.4B
ACCOUNTS 4.9MM ACCOUNTS 1.3MM
BRANCHES 166 BRANCHES 21
ASIA PACIFIC(**)
- -----------------------------------
COUNTRIES 13
REVENUE $2.1B
LOANS $23.2B
ACCOUNTS 6.2MM
BRANCHES 93
(*) Revenues and loans are adjusted
for the effect of credit card
receivables securitization.
(**) Includes Japan]
[PHOTO] { CitiSelect (R) portfolios, a new family of asset allocation
mututal funds that bring sophisticated investing to individual
investors, were launched in June 1996 in the U.S. Other versions
of the CitiSelect portfolios were launched in Asia and Europe.
Global assets under management in these funds by the end of 1997
reached over $2 billion.
} Citibank is the undisputed leader in the Cards business, with
more than 36 million cardmember accounts worldwide. Growth
continues with the planned acquisition of the AT&T Universal Card
business, introduction of the Drivers' Edge card, and the
continuation of the Citibank-American Airlines partnership. The
Citibank AAdvantage card is the most successful co-branded card
in the industry.
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DELIVERING ON THE BRAND PROMISE
TO CONSUMERS AROUND THE WORLD
Helping people fulfill their aspirations
By the year 2010, an estimated four to five billion people worldwide will be
active users of a vast range of financial products and services. Our goal is for
Citibank to be the name that most often comes to mind when people think about
money. The only truly global consumer bank, Citibank is well along in its
strategy to be the bank of choice for people everywhere.
We already have relationships with one in five U.S. households, and are present
in all of the world's fastest-growing consumer markets. We are extending our
reach both physically and electronically; we are creating global products and
platforms, developing new delivery channels and forging strategic alliances with
a broad range of partners.
Building a Powerful Global Brand
The Citibank name already approaches brand status in some markets. The company's
long-standing reputation provides an excellent foundation for building the most
powerful global brand in the financial services industry.
Programs aimed at making every customer's experience with Citibank consistent,
positive and satisfying are progressing throughout the company. They range from
design standards that make every Citibank access point instantly recognizable,
to expanding access gateways, to training
[PHOTO]
11
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every employee to improve service and product quality.
Quality is essential in creating brand value, and is in itself a breakout
growth strategy. Customer satisfaction with financial institutions is
notoriously low, particularly in the U.S., where most banks do not reach 70%.
Citibank, however, achieved a customer satisfaction level of 75% in 1997 several
Asian and Latin American markets reached satisfaction scores in the high 80s.
Our quality initiative is expected to reduce defects--defined as anything
the customer perceives as less than perfect--to below half of current levels by
the end of 1998. By 2000, we will have brought defects down to under 10% of
today's levels. A similar focus on eliminating wasted time and effort will
greatly compress the time required for routine process cycles.
Building Lifelong Relationships
An emergent global middle class is a driving force in today's world
economy. Growing in sophistication as well as size, this consumer population has
the same aspirations worldwide--to buy houses, cars and appliances; to send
their children to college; to ensure a comfortable retirement.
Meeting the financial services needs of these consumers is
[GRAPHIC: LIFELONG RELATIONSHIPS AROUND THE WORLD
STUDENTS SINGLES & YOUNG FAMILIES ESTABLISHED FAMILY UNITS RETIREES
- -------- ------------------------ ------------------------ --------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX CHECKING XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX CARDS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX MORTGAGES XXXXXXXXXXXXXXXXXXXXXXXXX
XXXXX COLLEGE LOANS XXXXX XXXX COLLEGE LOANS XXXX
XXXXXXXXXXXXXXXXXXXXXXXXX AUTO LOANS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXX SAVINGS & CDs XXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXX INVESTMENTS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXX LIFE INSURANCE XXXXXXXXXXX
XXXXXX DISABILITY INSURANCE XXXXXXXXXXX
XXXX TRUST & ESTATE XXXX]
[PHOTO PAGES 12 & 13: FIFTH AVENUE, NEW YORK]
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undoubtedly one of the best business opportunities in the world today, and no
one is better positioned than Citibank to reap that opportunity. By providing
the right product sets, Citibank can work with customers throughout their
financial lives.
Operating globally improves quality and drives down expenses by consolidating
processing and other common functions. "Success transfer" of innovative products
and practices can be accomplished quickly and economically. With a worldwide
portfolio of products and businesses, temporary economic problems in a
particular region can be offset by strong performance in others.
Opening New Delivery Channels
Extending our physical presence does not require that we build or acquire
massive branch networks. Citibank has long used technology to increase customer
access. Electronic branches, smaller and less expensive to operate, are being
installed in many markets. Our proprietary Citicard Banking Centers, introduced
over 20 years ago, are now much more than automated tellers, placing customers'
entire financial relationships at their fingertips.
Customers may use Direct
[PHOTO PAGES 12 & 13:
FIFTH AVENUE, NEW YORK] HELPING THE AFFLUENT MANAGE
THEIR WEALTH
Citibank has earned a long-standing reputation for
providing people who have achieved high net worth,
and their families, with the capabilities and
personal service they need to manage wealth
effectively. Managed client business volumes of the
Private Bank passed $100 billion in 1997. The
Private Bank relationship managers use their depth
of knowledge about their clients' individual
circumstances to bring them an assemblage of
personal banking services from the Consumer Bank,
coupled with investment expertise drawn from the
Corporate Bank and Citibank Global Asset Management
professionals.
CitiGold brings priority-service branch banking
around the world to customers who have substantial
relationships with the Global Consumer Bank.
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Access personal computer banking on our private network, or a new Internet-based
version now online in the U.S. In most of our emerging markets, we are the only
bank offering 24-hour, seven-day telephone access.
We expect innovative cards that combine advanced technology with our
strengths in the credit card business to be key components of delivery systems
using satellite communications.
Electronic access is also key for Citibank to span the U.S. with a
coast-to-coast mix of modern branches, electronic kiosks, home banking and other
access points.
Forging Strategic Alliances
Alliances, joint ventures and other partnerships are an efficient and practical
way to gain new technology, extend our product set, reach new customers for
existing products, or increase our coverage of a particular market.
We have a strong record of success with strategic partners. We've worked
with American Airlines for over 10 years, and have introduced the Citibank
AAdvantage Card in 16 countries. Joint ventures with pension fund and insurance
companies in Latin America have made us a leader in privatized pension systems,
which we expect to put to good advantage in
- --------------------------------------------------
SIR ELTON JOHN TAKES
THE CITIBANK BRAND
AROUND THE WORLD [PHOTO]
Citibank is the sole sponsor of entertainer Elton John's 1998 world tour.
"The Big Picture" tour will carry the Citibank name through 65 cities in North
America, Europe, Asia and Australia.
Academy Award winner Sir Elton John has won
numerous entertainment industry awards and was
knighted by Queen Elizabeth for his services to
music and charity. He will appear in Citibank
advertising and will participate in consumer
retail promotions. The partnership includes
cause-related marketing to benefit the Elton John
AIDS Foundation.
- --------------------------------------------------
[PHOTO PAGES 14 & 15: BUDAPEST, HUNGARY]
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Central and Eastern Europe.
[PHOTO: San Borja, Peru]
In 1997, new alliances ranged from the planned joint marketing
relationship with AT&T as part of the agreement to buy its Universal Card
business in the U.S., to the opening of eight mini-branches in Blockbuster store
locations in Peru. We are working with CNN and MECA Software L.L.C., two leading
communication and technology companies, to enhance our delivery platform. Tests
of new marketing partnerships are under way with major retailers in Europe and
the U.S.
[PHOTO PAGES 14 & 15: BUDAPEST, HUNGARY]
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AROUND THE GLOBE, CORPORATE CLIENTS
COUNT ON THEIR BRAND OF CHOICE`
Heritage of more than a century
strategy for the future
Corporate banking is the deepest part of our heritage, and serving
companies--wherever their business takes them--is still the primary strategic
purpose of the Corporate Bank.
We began our international expansion because our customers needed a bank
they could rely on as they entered new markets around the globe. Our
foreign-exchange service dates back a hundred years, to 1897. Our presence in
Asia goes back to 1902, and we opened our first corporate banking office in
Latin America in 1904.
All around the world, our customers count on us for global expertise and
local insight, for quality and consistency, for commitment to markets even
through crises, and for innovation and responsiveness.
Today, the Corporate Bank has four principal client groups:
[] Global companies that value the depth and breadth of Citibank's
presence in almost 100 countries;
[] Investors who turn to Citibank's Global Markets unit to uncover
opportunities for superior returns around the world;
[] Top-tier local corporations and financial institutions in emerging
markets that, as they expand regionally, value our global perspective;
KEY AWARDS -
GLOBAL CORPORATE BANKING
ACKNOWLEDGED "BEST" WORLDWIDE
When publications release their rankings of banks in particular categories,
Citibank is always at or near the top. Some 1997 examples are:
Best Bank Best in Transaction Processing
Global Finance Euromoney
Best Emerging Market Bank Best in Cash Management
Global Finance Corporate Finance
Best in FX Best in Emerging Markets Custody
Euromoney - 19th year Global Custodian
Global Investor
Asiamoney Best in Latin America
Corporate Finance Euromoney
Best in Securitization Best in Africa
Euromoney Euromoney
Corporate Finance
Best in Middle East
Best in Emerging Market Loans Euromoney
International Financing Review
Best in ADRs Custody
Best in Derivatives World Equity
Institutional Investor
Asiamoney Best Bank in Asia
Far Eastern Economic Review
[PHOTO: Manufacturing fiber-optic glass strands]
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[PHOTO: MUMBAI, INDIA]
{ Lucent Technologies turned to Citibank for customer financing as advanced as
its telecommunications systems. Citibank's Securitized Vendor Finance program
gave Lucent Technologies a flexible resource for financing vendor sales in the
emerging markets. The transaction was named a Deal of the Year by Corporate
Finance magazine.
^ As markets evolve, electronic trading eliminates the need for the physical
exchange of paper shares of stocks and bonds via armored courier, as pictured
here in Mumbai, India. Regulators and businesses in emerging markets routinely
look to Citibank Worldwide Securities Services for help in developing the
financial infrastructures needed to minimize trading and settlement risk,
increase liquidity and improve efficiency.
Citibank has a long history in helping investors and issuers manage change in
emerging markets. Clients count on our local expertise and insight for more
effective risk management, particularly in areas where markets may be volatile.
With an expanding client base doing more business globally, Citibank Worldwide
Securities Services generated 20% revenue growth in 1997.
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[ ] Emerging local companies--the multinationals of tomorrow--that appreciate
having a hometown bank regarded as best all around the world.
Serving Global
Companies Globally
Nowhere is Citibank's customer focus more evident than in Global Relationship
Banking, which performs business transactions for multinational companies and
their subsidiaries all over the world. This business is organized, managed and
measured by customer, rather than by region or product. A single, dedicated
relationship team serves each parent company and its subsidiaries everywhere
they operate.
Our product offerings are determined by what these, our most sophisticated
customers, demand from us. Our transaction and securities services combine
product superiority with executional excellence. Our expertise in corporate
finance and capital markets is unsurpassed. We are a major participant in
significant markets throughout the world, every day. Citibank has been ranked as
best in foreign exchange for 19 consecutive years and consistently wins
accolades for its emerging-market and derivatives expertise.
Global Relationship Banking is big business for Citibank today and still
offers considerable growth potential. Multinational companies today spend around
$70 billion annually on financial services. Our share of this market, although
well ahead of our competitors', allows considerable room for growth with these
customers. Their expenditures are
[PHOTO PAGES 18 & 19: Singapore, Caption on page 19]
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growing absolutely, and at disproportionately high rates in those areas where
Citibank has its greatest strengths--emerging markets and structured products.
Being the Best Local Bank ... All Around the World
Citibank's long-standing strength in emerging markets translates into an
extraordinary growth opportunity. Global Relationship customers are growing in
these markets at two or three times their growth rate in developed countries. In
addition, most newcomers to the ranks of global companies are from the emerging
markets, where an embedded Citibank already has a track record and established
relationships. We are acquiring new local corporate customers in the emerging
markets at a rate of more than 2,000 annually.
Foreign and local corporations currently spend more than $165 billion
annually for financial services across these countries. Spending is growing at
more than 7% per year.
We designate as "emerging markets" those Citibank locations outside the
economies of North America, Western and Northern Europe, and Japan. Their state
of development actually ranges from such advanced economies as
[TABLES:
----------------------------------
GLOBAL CORPORATE BANKING -
THE ONLY GLOBAL BANK THAT IS LOCAL
IN ALMOST 100 MARKETS
----------------------------------
GLOBAL CORPORATE BANKING
REVENUE
$ Billions
95 96 97
Global Relationship Banking 3.6 3.7 4.4
Emerging Markets 2.9 3.4 3.9
GLOBAL CORPORATE BANKING
REVENUE BY PRODUCT
Transaction Services 28%
Capital Markets/Corporate Finance 19%
Venture Capital 9%
Securities Transactions/Other 8%
Loan Products 14%
Trading 22%
GLOBAL CORPORATE BANKING
REVENUE BY REGION
North America 33%
Europe, Japan 20%
Central/Eastern Europe, Middle East, and
Africa 10%
Asia Pacific 16%
Latin America 21%]
[PHOTO PAGES 18 & 19: Singapore, Caption follows:
In 1997, Citibank opened an expanded trading room in Singapore, one of 80
trading sites worldwide which trade currencies, bonds and derivatives around the
clock. Some traders work for corporate and institutional investors, and others
for Citibank's asset management organization, which offers mutual funds through
the Consumer Bank. Trading is part of our Global Markets unit, bringing together
Capital Markets and Corporate Finance in emerging and developed markets to serve
issuers and investors.]
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[PHOTO: Buenos Aires, Argentina] EVOLUTION OF A DEVELOPING MARKET
Citibank usually enters a country to
serve global customers, providing them
with cash management, short-term loans,
and foreign-exchange services. As the
market begins to develop, we offer trade
services, project finance, and
fixed-income issuance and trading. As
development progresses, securities
custody, loan syndications and
derivatives services are introduced. At
this stage, services for locally
headquartered companies become
significant and consumer banking services
are introduced.
{ Leveraging our presence in 98
countries, Citibank is adept at providing
issuers with access to investors around
the world. In 1997, we underwrote bond
issues in the U.S., Europe, Eastern
Europe, Asia and Latin America, including
an offering for Autopistas del Sol, the
company which operates Argentina's
largest toll road. The $380 million bond
issue was sold to investors outside
Argentina.
} An innovative structure that works like
a credit card, "Green Card" enables
Hoechst Schering AgrEvo do Brasil (a
company of clients Hoechst AG and
Schering AG) to provide
balance-sheet-friendly financing of sales
of seeds, chemicals and other crop
supplies to farmers, dealers and
cooperatives. The structure provides
flexible financing options and
documentation processes, meeting primary
needs of Citibank's agro-chemical
clients.
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Singapore, Australia and Brazil to the embryonic market economies of Eastern
Europe, Southeast Asia and a number of African countries.
Our "embedded bank" strategy in those markets is successful because of a
combination of factors that are unique to Citibank.
We seek leading market share because size brings economies of scale, along
with visibility and stature in the local economy, and a sustainable stream of
revenues.
A diverse array of products differentiates Citibank from most competitors
and enables us to deepen relationships as markets and customers grow.
Our ability to stick with our customers, particularly when competitors are
pulling back, strengthens existing relationships and attracts new customers.
Insight developed over time helps us manage our own and customers' risk. We have
been part of some local business communities for nearly a century.
Our senior managers are recruited locally. With a blend of international
and indigenous staff, we have the insight and commitment that sustain
relationships.
Citibank's tradition of community involvement--as an institution and
through our employees--is particularly strong and effective in the emerging
markets.
By cultivating each of these factors over time, Citibank has become the
lead international bank in emerging markets, more local than any other foreign
bank, and as close to our customers as any local bank.
---------------------------------
[PHOTO]
---------------------------------
^ Over 50,000 music lovers braved
the rain to attend the New York
Philharmonic Orchestra's free
outdoor concert in Ibirapuera Park,
Sao Paulo, Brazil, in 1997. Since
1980, Citibank's sponsorship has
brought the Philharmonic to
audiences in 77 cities in 43
countries and territories. The 1998
tour will include 10 cities in 6
countries throughout Asia.
---------------------------------
[PHOTO on Page 21: Sao Paulo, Brazil]
21
<PAGE>
NO MORE THAN A CLICK,
A CALL OR A MILE AWAY
Citibank's business is as much
information and communications
as financial services
Executing our global growth strategy relies heavily on state-of-the-art
technology. Our current technology thrust is twofold:
[] To integrate our current systems into a standard global platform;
[] To introduce new technology-based products and delivery systems.
Global integration is the charge of our Operations and Technology
organization over the next 18 to 36 months. This is a huge undertaking. We've
been building our global presence for more than a century. We will be altering
our operating base to take advantage of the regulatory environment, to
standardize our systems and processes, creating
- ----------------------------------------
[PHOTO]
- ----------------------------------------
{ Forgot your Citicard? Citibank is exploring how biometric technologies like
iris scanning might unobtrusively and reliably verify customers' identities,
which could make bankcards and PIN numbers things of the past.
} Operations and Technology is organized to deliver customer solutions that cut
across product and geographic boundaries. We have established centers of
excellence where we are building global platforms to support customer needs from
any location. Our focus is on sharing best practices to improve customer
service.
- ----------------------------------------
22
<PAGE>
compatible infrastructures for everything from telecommunications to opening
checking accounts.
Today, Citibank's back office functions account for about half of our
operating expenses and employ about 65% of Citibankers around the world.
Increasing Service Quality
by Standardizing
Our systems compete with the best available in any local market. However, to
serve our customers seamlessly across boundaries with consistently high quality,
we need global integration of our systems and processes. Fortunately, as our
customers' needs have evolved we have seen deregulation in economies around the
world, declining telecommunications costs and compatible technology
infrastructures. These changes make boundaryless systems feasible.
Progress has been realized as we realign our infrastructure to optimize
our efficiencies, driving toward consolidated credit card processing, customer
service centers, securities processing and foreign exchange market-making
centers. Our customers will benefit from these global platforms.
Standardization brings many benefits. We can broaden the range of products
we offer through our network and speed distribution of "best practices"
throughout Citibank. Resulting efficiencies will enable us to be the low-cost
producer in many of our service areas. Response time for most customer inquiries
will be in real time.
Making the Virtual Real
As we bring our current systems into the global arena, our
[PHOTO: MUMBAI,INDIA, CAPTION ON PAGE 22]
23
<PAGE>
Advanced Development Group is working to take us to the forefront of electronic
banking and commerce.
Advanced Development employs new computer and electronic technologies, a
cost base dramatically lower than traditional banking, and delivery vehicles
like the telephone, the Internet and satellite and cable TV to reach the
customer--around the globe.
Much of our business in 2010 will come from customers we don't have today,
and it will be in products and services that don't yet exist, delivered in
totally new ways.
Central to Advanced Development's work is electronic commerce, which is a
key to achieving Citibank's ambitious customer goals around the world.
We are moving quickly to capitalize on the new opportunities presented by
electronic delivery. This requires an emphasis on faster product-development
cycles, taking customer feedback into account early on. We can make greater use
of external technology partnerships, which flatten the learning curve. Both our
Advanced Development and Operations and Technology groups have formed much
tighter alignments with the business goals of our corporate and consumer
businesses.
People everywhere will be able to turn to Citibank for all their financial
needs, to do their banking however and wherever they choose, whether in person,
over the phone or by computer. And no matter what method is chosen, our
customers can be assured of an environment that is safe, reliable, private and
secure.
----------------------------------------
Do your banking in cyberspace. A new web
browser-based Direct Access home-banking
service is the centerpiece of Citibank's
redesigned web site
(http://www.citibank.com). It's free,
and it lets customers check balances,
review account activity, transfer funds,
pay bills and manage investments on the
Internet anytime from their personal
computer.
----------------------------------------
[PHOTO]
Anytime, Anywhere
24
<PAGE>
FINANCIAL INFORMATION
CITICORP IN BRIEF 26
OVERVIEW OF 1997 RESULTS 27
THE BUSINESSES OF CITICORP 29
GLOBAL CONSUMER 30
Citibanking 31
Cards 32
Private Bank 33
Consumer Businesses in
Developed and Emerging Markets 34
Consumer Portfolio Review 35
GLOBAL CORPORATE BANKING 37
Emerging Markets 38
Global Relationship Banking 39
CORPORATE ITEMS 40
MANAGING GLOBAL RISK 41
SUMMARY OF FINANCIAL RESULTS 49
STATEMENT OF INCOME ANALYSIS 49
FINANCIAL REPORTING RESPONSIBILITY 55
REPORT OF INDEPENDENT AUDITORS 55
CONSOLIDATED FINANCIAL STATEMENTS 56
STATEMENT OF ACCOUNTING POLICIES 61
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS 64
QUARTERLY FINANCIAL INFORMATION 82
10-K CROSS-REFERENCE INDEX 83
FINANCIAL DATA SUPPLEMENT 84
25
<PAGE>
<TABLE>
<CAPTION>
CITICORP IN BRIEF
In Millions of Dollars Except Share Data 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income--Before Accounting Changes $ 3,591 $ 3,788 $ 3,464 $ 3,422 $ 1,919
Net Income--After Accounting Changes (1) 3,591 3,788 3,464 3,366 2,219
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income Per Share (2)
Basic
Before Accounting Changes $ 7.53 $ 7.73 $ 7.60 $ 7.84 $ 4.26
After Accounting Changes (1) 7.53 7.73 7.60 7.69 5.05
Diluted
Before Accounting Changes 7.33 7.43 6.50 6.40 3.54
After Accounting Changes (1) 7.33 7.43 6.50 6.29 4.13
Dividends Declared Per Common Share (3) 2.10 1.80 1.20 0.45 --
As a Percentage of Income, Assuming Dilution,
After Accounting Changes (1) (3) 28.65% 24.23% 18.46% 7.15% --
- ------------------------------------------------------------------------------------------------------------------------------------
At Year-End
Total Loans, Net of Unearned Income and Allowance
for Credit Losses(4) $ 178,197 $ 169,109 $ 160,274 $ 147,265 $ 134,588
Total Assets (5) 310,897 281,018 256,853 250,489 216,574
Total Deposits 199,121 184,955 167,131 155,726 145,089
Long-Term Debt 19,785 18,850 18,488 17,894 18,160
Common Stockholders' Equity (6) 19,293 18,644 16,510 13,582 10,066
Total Stockholders' Equity (6) 21,196 20,722 19,581 17,769 13,953
Tier 1 Capital 21,096 19,796 18,915 16,919 13,388
Total Capital (Tier 1 and Tier 2) 31,156 28,870 27,725 26,119 23,152
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Ratios
Net Income to Average Assets (5) 1.22 1.40 1.29 1.29 0.97
Return on Common Stockholders' Equity (6) 18.11 20.35 20.80 25.81 21.06
Return on Total Stockholders' Equity (6) 17.10 18.95 18.33 21.43 17.72
Average Common Stockholders' Equity to Average Assets (5) (6) 6.46 6.60 5.59 4.47 3.95
Average Total Stockholders' Equity to Average Assets (5) (6) 7.12 7.40 7.03 6.02 5.48
Common Stockholders' Equity to Assets (5) (6) 6.21 6.63 6.43 5.42 4.65
Total Stockholders' Equity to Assets (5) (6) 6.82 7.37 7.62 7.09 6.44
Tier 1 Capital Ratio 8.34 8.39 8.41 7.80 6.62
Total Capital Ratio (Tier 1 and Tier 2) 12.31 12.23 12.33 12.04 11.45
Leverage Ratio (5) 7.01 7.42 7.45 6.67 6.15
- ------------------------------------------------------------------------------------------------------------------------------------
Share Data
Year End Stock Price (7) $ 126 7/16 $ 103 $ 67 1/4 $ 41 3/8 $ 36 7/8
Common Equity Per Share (6) 42.50 40.25 38.64 34.38 26.04
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings Analysis
Total Revenue $ 21,616 $ 20,196 $ 18,678 $ 16,748 $ 16,075
Effect of Credit Card Securitization Activity (8) 1,713 1,392 917 934 1,282
Net Cost to Carry (9) (5) (46) 23 89 252
Capital Building Transactions -- -- -- (80) 2
--------- --------- --------- --------- ---------
Adjusted Revenue 23,324 21,542 19,618 17,691 17,611
--------- --------- --------- --------- ---------
Total Operating Expense 13,987 12,197 11,102 10,256 10,615
Net OREO Benefits (Costs) (10) 72 44 105 (9) (245)
Restructuring Charges (889) -- -- -- (425)
--------- --------- --------- --------- ---------
Adjusted Operating Expense 13,170 12,241 11,207 10,247 9,945
--------- --------- --------- --------- ---------
Operating Margin 10,154 9,301 8,411 7,444 7,666
--------- --------- --------- --------- ---------
Global Consumer Credit Costs (11) 3,538 3,115 2,473 2,338 2,740
Global Corporate Banking Credit (Benefits) Costs (12) (95) (87) 72 239 1,036
--------- --------- --------- --------- ---------
Operating Margin Less Credit Costs 6,711 6,273 5,866 4,867 3,890
Additional Provision (13) 100 200 281 336 603
Restructuring Charges 889 -- -- -- 425
Capital Building Transactions -- -- -- 80 (2)
--------- --------- --------- --------- ---------
Income Before Taxes and Cumulative Effects of Accounting Changes 5,722 6,073 5,585 4,611 2,860
Income Taxes 2,131 2,285 2,121 1,189 941
--------- --------- --------- --------- ---------
Income Before Cumulative Effects of Accounting Changes 3,591 3,788 3,464 3,422 1,919
Cumulative Effects of Accounting Changes (1) -- -- -- (56) 300
--------- --------- --------- --------- ---------
Net Income $ 3,591 $ 3,788 $ 3,464 $ 3,366 $ 2,219
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Refers to the adoption in 1994 of Statement of Financial Accounting
Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment
Benefits," and in 1993 of SFAS No. 109, "Accounting for Income Taxes."
(2) Reflects the adoption in 1997 of SFAS No. 128, "Earnings Per Share." Prior
periods have been restated. See page 78.
(3) Citicorp resumed paying dividends on its common stock on April 18, 1994,
after having suspended the dividend on October 15, 1991.
(4) Commencing in 1997, Citicorp classifies credit card and mortgage loans
intended for sale as loans held for sale.
(5) Reflects the effects of adopting as of January 1, 1994 Financial
Accounting Standards Board ("FASB") Interpretation No. 39, "Offsetting of
Amounts Related to Certain Contracts."
(6) Reflects the effects of adopting as of January 1, 1994 SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
(7) Based on the New York Stock Exchange Composite Listing.
(8) Commencing in 1997, includes effect related to credit card receivables
held for sale. See page 54 for a description of the effect of credit card
securitization activity.
(9) Principally the net cost to carry commercial cash-basis loans and other
real estate owned ("OREO").
(10) Principally gains and losses on sales, direct revenue and expense, and
writedowns of commercial OREO.
(11) Principally consumer net credit write-offs adjusted for the effect of
credit card securitization activity.
(12) Includes commercial net credit write-offs, net cost to carry, and net OREO
benefits (costs).
(13) Represents amounts in excess of net write-offs. See page 52 for
discussion.
26
<PAGE>
OVERVIEW OF 1997 RESULTS
Citicorp reported 1997 income of $4.1 billion or $8.51 per diluted common share,
up 9% and 15%, respectively, from $3.8 billion or $7.43 in 1996, excluding the
$556 million after-tax effect of a restructuring charge ($889 million pretax)
taken in the 1997 third quarter. Net income including the charge was $3.6
billion or $7.33 per diluted common share. Earnings excluding the charge were
led by continued momentum in Global Corporate Banking, the Private Bank, and
Citibanking in the U.S., and were dampened by increased credit costs in U.S.
bankcards.
Excluding the charge, return on common equity of 20.9% for 1997 was up
from a year-ago, and return on average assets was virtually unchanged at 1.41%.
Global Consumer earned $1.9 billion in 1997, down 6% from 1996, excluding
the restructuring charge, as margin growth, driven by higher revenue, was offset
by increased Cards credit costs. Net income including the charge was $1.6
billion. Earnings in Global Corporate Banking of $2.6 billion excluding the
charge, were up 18% from 1996, reflecting revenue and operating margin growth.
Net income including the charge was $2.4 billion.
Events in Asia during the last half of 1997, which have continued into
1998, reduced pretax results by approximately $300 million, due primarily to the
effect of foreign currency translation on our business results, spread
compression in the Asian and Brazilian consumer businesses, and movements in
financial markets which resulted in reduced trading income offset by increased
foreign exchange earnings. The impact of events in Asia may continue to affect
Citicorp's overall business related to that region.
Adjusted revenue of $23.3 billion was up $1.8 billion or 8% from 1996, up
11% excluding the effect of foreign currency translation, which reduced revenue
by $566 million. Revenue in Global Consumer increased 4% to $14.1 billion, up 7%
excluding the translation effects, led by Citibanking and Cards worldwide, and
by the Private Bank. Revenue of $8.3 billion in Global Corporate Banking was up
$1.1 billion or 16%, up 18% excluding the translation effects, as Global
Relationship Banking increased by 18% and Emerging Markets increased by 13%.
Adjusted net interest revenue (taxable equivalent basis) of $13.8 billion
was up $395 million or 3% from 1996 as the impact of asset growth in most
markets was partially offset by spread compression and the effect of foreign
currency translation. Adjusted fee and commission revenue of $5.7 billion was up
$400 million or 8%, led by growth in Global Consumer. Trading-related revenue,
including related net interest revenue, of $2.1 billion increased $198 million
from 1996, as strong foreign exchange revenue was partially offset by a decline
in trading account results, largely in derivative instruments. Venture capital
revenue of $749 million increased $299 million from 1996, benefiting from
buoyant equity markets during much of 1997. Aggregate securities transactions
and net asset gains of $1.0 billion for 1997 increased $434 million from a year
ago.
[GRAPHIC OMITTED
Tables:
- --------------------------------------------------------------------------------
Income Before Taxes
$ Billions
93 94 95 96 97
Excluding Restructuring Charges 3.3 -- -- -- 6.6
As Reported 2.9 4.6 5.6 6.1 5.7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Adjusted Revenue
$ Billions
93 94 95 96 97
- --------------------------------------------
17.6 17.7 19.6 21.5 23.3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Capital
$ Billions
93 94 95 96 97
Tier 1 13.4 16.9 18.9 19.8 21.1
Tier 2 9.8 9.2 8.8 9.1 10.1
---- ---- ---- ---- ----
23.2 26.1 27.7 28.9 31.2
Tier 1 Ratio 6.6% 7.8% 8.4% 8.4% 8.3%
- --------------------------------------------------------------------------------
27
<PAGE>
Adjusted operating expense of $13.2 billion, which excluded the
restructuring charge, was up $929 million or 8% from 1996, up 10% excluding the
effect of foreign currency translation, which reduced expense by $315 million.
Expense increased in the emerging markets by 12%, up 16% excluding the
translation effects, reflecting business expansion. Developed markets expense
was up 6%, up 8% excluding translation effects.
The $889 million restructuring charge represented costs expected to be
incurred in connection with cost-management programs and customer service
initiatives to improve operational efficiency and productivity, including global
operations and technology consolidation and standardization, the reconfiguration
of front-end distribution processes, and the outsourcing of various
technological functions.
Operating margin grew $853 million, or 9%, to $10.2 billion excluding the
restructuring charge. The incremental revenue to expense ratio was 1.9 to 1 for
the year, and the efficiency ratio (adjusted operating expense as a percentage
of adjusted revenue) was 56% compared with 57% in 1996.
Total credit costs were $3.4 billion in the year, up $415 million or 14%
from 1996. The effect of foreign currency translation reduced credit costs by
$90 million in 1997. Global Consumer credit costs of $3.5 billion in 1997 were
up $423 million or 14% from 1996, and the ratio of net credit losses to average
managed loans was 2.61% compared to 2.37% for 1996. The increases in credit
costs and the related loss ratio chiefly reflected higher losses in U.S.
bankcards partially offset by a decline in Citibanking. The managed consumer
loan delinquency ratio (90 days or more past due) decreased to 2.31% from 2.62%
at the end of 1996.
Global Corporate Banking credit costs remained low at a net benefit of $95
million in 1997 compared to a net benefit of $87 million in 1996. Commercial
cash-basis loans and OREO of $1.5 billion at year-end were unchanged from a year
earlier.
At December 31, 1997, total credit loss reserves were $6.0 billion. Global
Consumer continued to build its allowance for credit losses, adding $100 million
above net credit losses in 1997 and $200 million in 1996, primarily related to
Cards.
Citicorp's effective tax rate was 37% for 1997 and 38% for 1996. Income
taxes are attributed to core businesses, including their restructuring charges,
on the basis of local tax rates, which resulted in effective tax rates for the
core businesses of 25% in 1997 and 26% in 1996.
Total capital (Tier 1 and Tier 2) was $31.2 billion or 12.31% of net
risk-adjusted assets, and Tier 1 capital was $21.1 billion or 8.34% at December
31, 1997. During 1997, Citicorp generated $2.2 billion of free capital and
repurchased 18.8 million shares of common stock for $2.3 billion. With these
repurchases, the number of shares acquired since June 20, 1995, when the Board
of Directors authorized the stock repurchase program, totaled 78.0 million at a
cost of $6.9 billion. As expanded in January and November 1996, the program is
authorized to make total purchases of up to $8.5 billion.
28
<PAGE>
THE BUSINESSES OF CITICORP
Citicorp, with its subsidiaries and affiliates, is a global financial services
organization. Its staff of 93,700 (including 54,800 outside the U.S.) serves
individuals, businesses, governments, and financial institutions in
approximately 3,000 locations (including branches and representative,
subsidiary, and affiliate offices) in 98 countries and territories throughout
the world as of December 31, 1997.
Citicorp, a U.S. bank holding company, was incorporated in 1967 under the
laws of Delaware and is the sole shareholder of Citibank, N.A. ("Citibank"), its
major subsidiary.
Citicorp is regulated under the Bank Holding Company Act of 1956 and is
subject to examination by the Federal Reserve Board ("FRB"). Citibank is a
member of the Federal Reserve System and is subject to regulation and
examination by the Office of the Comptroller of the Currency ("OCC"). See page
90 for further discussion of regulation and supervision.
[GRAPHIC OMITTED:
- ---------------------------------
Core Business 1997 Income*
CITIBANKING 17%
CARDS 18%
PRIVATE BANK 7%
GLOBAL RELATIONSHIP BANKING 22%
EMERGING MARKETS 36%
* Excluding restructuring charge
- ---------------------------------]
Citicorp's activities are conducted primarily within the two franchises of
Global Consumer and Global Corporate Banking. The Global Consumer business
operates a uniquely global, full-service consumer franchise encompassing branch
and electronic banking ("Citibanking"), credit and charge cards ("Cards"), and
personalized wealth management services for high net-worth clients ("the Private
Bank"). The Global Corporate Banking business serves corporations, financial
institutions, governments, investors, and other participants in developed and
emerging markets throughout the world.
[GRAPHIC OMITTED:
- ---------------------------------
Core Business 1997 Income*
DEVELOPED 44%
EMERGING 56%
* Excluding restructuring charge
- ---------------------------------]
Additional information on the business and geographic distribution of
revenue, income and average assets is disclosed in Note 12 to the consolidated
financial statements.
The table below shows the net income, average assets, and return on assets
for each of Citicorp's businesses for the three years ended December 31, 1997.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
BUSINESS FOCUS
<CAPTION>
Net Income (Loss) Average Assets Return on Assets
$ Millions $ Billions %
- ---------------------------------------------------------------------- --------------------------- ---------------------------
1997(1) 1996(2) 1995(2) 1997 1996(2) 1995(2) 1997(1) 1996(2) 1995(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Global Consumer $ 1,553 $ 2,028 $ 1,963 $ 132 $ 126 $ 120 1.18% 1.61% 1.64%
Global Corporate Banking 2,390 2,161 1,760 156 139 144 1.53 1.55 1.22
------- ------- ------- ------- ------- ------- ---- ---- ----
Core Businesses 3,943 4,189 3,723 288 265 264 1.37 1.58 1.41
Corporate Items (352) (401) (259) 7 5 5 NM NM NM
------- ------- ------- ------- ------- -------
Total Citicorp $ 3,591 $ 3,788 $ 3,464 $ 295 $ 270 $ 269 1.22 1.40 1.29
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Information
Global Consumer
Citibanking $ 478 $ 723 $ 573 $ 85 $ 83 $ 80 0.56% 0.87% 0.72%
Cards 764 1,024 1,164 31 27 25 2.46 3.79 4.66
Private Bank 311 281 226 16 16 15 1.94 1.76 1.51
------- ------- ------- ------- ------- -------
Total $ 1,553 $ 2,028 $ 1,963 $ 132 $ 126 $ 120 1.18 1.61 1.64
- ----------------------------------------------------------------------------------------------------------------------------------
Global Consumer Businesses in:
Emerging Markets $ 819 $ 933 $ 801 $ 42 $ 38 $ 35 1.95% 2.46% 2.29%
Developed Markets 734 1,095 1,162 90 88 85 0.82 1.24 1.37
------- ------- ------- ------- ------- -------
Total $ 1,553 $ 2,028 $ 1,963 $ 132 $ 126 $ 120 1.18 1.61 1.64
- ----------------------------------------------------------------------------------------------------------------------------------
Global Corporate Banking
Emerging Markets $ 1,559 $ 1,436 $ 1,132 $ 72 $ 60 $ 50 2.17% 2.39% 2.26%
Global Relationship Banking 831 725 628 84 79 94 0.99 0.92 0.67
------- ------- ------- ------- ------- -------
Total $ 2,390 $ 2,161 $ 1,760 $ 156 $ 139 $ 144 1.53 1.55 1.22
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes after-tax restructuring charge of $556 million for total
Citicorp. Global Consumer, Global Corporate Banking, and Corporate Items
reflect after-tax restructuring charges of $351 million, $168 million, and
$37 million, respectively. Refer to "Corporate Items" on page 40 and Note
9 for additional details.
(2) Reclassified to conform to the 1997 presentation.
NM Not meaningful.
29
<PAGE>
GLOBAL CONSUMER
In Millions of Dollars 1997 1996(1) 1995(1)
- --------------------------------------------------------------------------------
Total Revenue $ 12,350 $ 12,113 $ 11,436
Effect of Credit Card
Securitization Activity 1,713 1,392 917
Net Cost to Carry Cash-Basis
Loans and OREO (2) (10) 12
-------- -------- --------
Adjusted Revenue 14,061 13,495 12,365
-------- -------- --------
Total Operating Expense 8,271 7,302 6,816
Net OREO Benefits (Costs) (2) 4 (5) --
Restructuring Charge (580) -- --
-------- -------- --------
Adjusted Operating Expense 7,695 7,297 6,816
-------- -------- --------
Operating Margin 6,366 6,198 5,549
-------- -------- --------
Net Write-offs 1,831 1,728 1,544
Effect of Credit Card
Securitization Activity 1,713 1,392 917
Net Cost to Carry and Net OREO (Benefits)
Costs (6) (5) 12
-------- -------- --------
Credit Costs 3,538 3,115 2,473
-------- -------- --------
Operating Margin Less Credit Costs 2,828 3,083 3,076
-------- -------- --------
Additional Provision 100 200 200
Restructuring Charge 580 -- --
-------- -------- --------
Income Before Taxes 2,148 2,883 2,876
Income Taxes 595 855 913
-------- -------- --------
Net Income $ 1,553 $ 2,028 $ 1,963
-------- -------- --------
- --------------------------------------------------------------------------------
Average Assets (In Billions of Dollars) $ 132 $ 126 $ 120
Return on Assets 1.18% 1.61% 1.64%
-------- -------- --------
- --------------------------------------------------------------------------------
Excluding Restructuring Charge
Income $ 1,904 $ 2,028 $ 1,963
Return on Assets 1.44% 1.61% 1.64%
-------- -------- --------
- --------------------------------------------------------------------------------
(1) Reclassified to conform to the 1997 presentation.
(2) Includes amounts related to writedowns, gains and losses on sales, and
direct expense related to OREO for certain real estate lending activities.
The Global Consumer business meets the financial services needs of consumer
customers across the regions of the world. In 1997, the Global Consumer business
recorded a pretax restructuring charge of $580 million ($351 million after-tax)
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.
During 1997, the Global Consumer business agreed to acquire AT&T Universal
Card Services at a purchase price of $3.5 billion, which will add approximately
$15 billion in managed customer receivables and 13.6 million accounts. The
transaction is expected to close by the end of the 1998 second quarter following
regulatory reviews. The agreement also established a co-branding and joint
marketing arrangement with AT&T. The acquisition is expected to have a dilutive
impact on 1998 earnings.
Global Consumer net income was $1.6 billion in 1997, down $475 million or
23% from 1996. Excluding the restructuring charge, income was $1.9 billion, a
decline of $124 million or 6% from 1996, reflecting a decline in Cards earnings
of 20%, and increases in the Private Bank and Citibanking of 17% and 4%,
respectively. Income in 1997 reflected higher U.S. bankcards credit costs, lower
earnings in the Asia Pacific region, and strong earnings growth in U.S.
Citibanking and in the Private Bank. Earnings growth in 1997 was negatively
impacted by the effect of foreign currency translation, particularly in Germany
and the Asia Pacific region. Net income in 1996 was up $65 million or 3% from
1995, despite a $140 million or 12% decline in Cards, reflecting increases of
26% and 24% in Citibanking and in the Private Bank , respectively.
[GRAPHIC OMITTED
Global Consumer
$ Billions
95 96 97(*)
---- ---- ----
Adjusted Rev. 12.4 13.5 14.1
Income 2.0 2.0 1.9
* Excluding restructuring charge.]
Adjusted revenue of $14.1 billion in 1997 was up $566 million or 4%--7%
adjusted for the effect of foreign currency translation --from 1996. Net
interest revenue was up 3%--6% adjusted for the effect of foreign currency
translation--reflecting worldwide business volume growth, the 1996 $64 million
assessment to recapitalize the U.S. Savings Association Insurance Fund ("SAIF"),
and higher spreads in the U.S. Citibanking business, partially offset by lower
spreads in Asia Pacific and U.S. bankcards. Fee and commission revenue grew
8%--12% adjusted for the effect of foreign currency translation--reflecting
double digit growth in worldwide Citibanking, the Private Bank and in the Cards
business in Asia Pacific and Latin America. Revenue in 1996 was up $1.1 billion
or 9% from 1995, reflecting growth across the three consumer businesses and
gains of $54 million from the sale of an Asian affiliate and $42 million from
the sale of the mortgage portfolio in the United Kingdom.
Adjusted operating expense of $7.7 billion , excluding the $580 million
restructuring charge, was up $398 million or 5% from 1996. Adjusted for the
effect of foreign currency translation, expense increased 9%, reflecting growth
across the franchise in support of account and business volume growth,
additional strategic product development costs, and expansion into new
marketplaces. Expense in 1996 increased $481 million or 7% from 1995,
principally reflecting increases in Citibanking worldwide, Cards in Asia Pacific
and Latin America, and in the Private Bank.
Global Consumer credit costs of $3.5 billion in 1997 were up from $3.1
billion in 1996 and $2.5 billion in 1995, reflecting higher losses in U.S.
bankcards and in the Asia Pacific region, partially offset by declines in the
Citibanking and the Private Bank businesses in the United States and by the
effect of foreign currency translation, principally in Germany and Asia Pacific.
The ratio of net credit losses to average managed loans was 2.61%, 2.37%, and
1.99% in 1997, 1996, and 1995, respectively. The additional provisions, which
represent charges in excess of net write-offs to build the allowance, totaled
$100 million in 1997, compared with $200 million in 1996 and 1995.
Income taxes are attributed to core businesses, including their
restructuring charge, on the basis of local tax rates, which resulted in an
effective rate of 28% in 1997 compared with 30% in 1996 and 32% in 1995,
reflecting changes in the nature and geographic mix of earnings. The difference
between the local tax rates attributed to core businesses and Citicorp's overall
effective tax rate in each year is included in Corporate Items.
30
<PAGE>
GLOBAL CONSUMER
Citibanking
In Millions of Dollars 1997 1996(1) 1995(1)
- --------------------------------------------------------------------------------
Total Revenue $ 6,030 $ 5,796 $ 5,441
------- ------- -------
Total Operating Expense 4,790 4,129 3,831
Restructuring Charge (457) -- --
------- ------- -------
Adjusted Operating Expense 4,333 4,129 3,831
------- ------- -------
Operating Margin 1,697 1,667 1,610
Credit Costs 567 634 706
------- ------- -------
Operating Margin Less Credit Costs 1,130 1,033 904
------- ------- -------
Additional Provision -- 4 42
Restructuring Charge 457 -- --
------- ------- -------
Income Before Taxes 673 1,029 862
Income Taxes 195 306 289
------- ------- -------
Net Income $ 478 $ 723 $ 573
------- ------- -------
- --------------------------------------------------------------------------------
Average Assets (In Billions of Dollars) $ 85 $ 83 $ 80
Return on Assets 0.56% 0.87% 0.72%
------- ------- -------
- --------------------------------------------------------------------------------
Excluding Restructuring Charge
Income $ 753 $ 723 $ 573
Return on Assets 0.89% 0.87% 0.72%
------- ------- -------
- --------------------------------------------------------------------------------
(1) Reclassified to conform to the 1997 presentation.
Citibanking--which delivers a wide array of products and services to customers
through Citicorp's worldwide branch network and electronic delivery
systems--reported net income of $478 million in 1997, down $245 million or 34%
from 1996. Excluding the $275 million after-tax effect of the restructuring
charge, Citibanking earned $753 million in 1997, up $30 million or 4% from 1996,
reflecting strong growth in the United States, increases in Latin America, and
lower earnings in Asia Pacific. The results in Asia Pacific reflected the
economic turmoil that occurred in the region in the second half of 1997, as well
as the 1996 gain on sale of an interest in an Asian affiliate. Net income in
1996 increased $150 million or 26% from 1995, principally reflecting improved
credit performance, modest operating margin growth, and the benefit of a lower
effective tax rate. Return on assets was 0.89% in 1997, excluding the
restructuring charge, up from 0.87% in 1996 and 0.72% in 1995.
[GRAPHIC OMITTED:
- -----------------------------------------------------------
Citibanking Accounts
In Millions
95 96 97
---- ---- ----
North America 7 8 8
Europe & CEEMEA* 7 6 7
Latin America 3 3 3
Asia** 2 2 2
19 19 20
* Central/Eastern Europe, Middle East and Africa
** Including Japan
- -----------------------------------------------------------]
Revenue of $6.0 billion grew $234 million or 4% from 1996, including 5% in
the developed markets and 2% in the emerging markets. Adjusted for the effect of
foreign currency translation, revenue grew 9%, 11% in the developed markets and
5% in the emerging markets, reflecting higher worldwide business volumes and
improved spreads in the United States and Latin America, partially offset by
lower spreads in Asia Pacific and Europe. Revenue in 1996 was up $355 million or
7% from 1995, reflecting higher business volumes, partially offset by spread
tightening in Latin America and Asia Pacific, and the 1996 SAIF assessment.
Revenue in 1996 also included gains associated with the sale of an interest in
an Asian affiliate and from the sale of the consumer mortgage portfolio in the
United Kingdom.
Adjusted operating expense of $4.3 billion, excluding the $457 million
restructuring charge, grew $204 million or 5% from 1996, including 10% in the
emerging markets and 3% in the developed markets. Adjusted for the effect of
foreign currency translation, expense was up 8%, 12% in the emerging markets and
7% in the developed markets, reflecting account and business volume growth, new
product development costs, franchise expansion, and technology initiatives.
Expense in 1996 was up $298 million or 8% from 1995, including 18% in the
emerging markets and 4% in the developed markets, reflecting business volume
growth and continued investment spending.
Credit costs of $567 million in 1997 declined from $634 million in 1996
and $706 million in 1995, primarily reflecting the effect of foreign currency
translation and lower losses in the United States, partially offset by higher
losses in Asia Pacific. The net credit loss ratio was 0.86% in 1997, down from
0.96% in 1996 and 1.12% in 1995. In 1997, the additional provision, which
represents charges in excess of net write-offs to build the allowance, reflected
increases in Asia Pacific and Latin America that were offset by a reserve
release in the United States due to continued credit improvement in the mortgage
portfolio. The additional provision was $4 million in 1996, and $42 million in
1995.
31
<PAGE>
GLOBAL CONSUMER
Cards
- ----------------------------------------------------------------
In Millions of Dollars 1997 1996(1) 1995(1)
- ----------------------------------------------------------------
Total Revenue $5,190 $5,274 $5,066
Effect of Credit Card
Securitization Activity 1,713 1,392 917
----- ------ ------
Adjusted Revenue 6,903 6,666 5,983
----- ----- -----
Total Operating Expense 2,729 2,482 2,352
Restructuring Charge (95) -- --
----- ----- -----
Adjusted Operating Expense 2,634 2,482 2,352
----- ------ ------
Operating Margin 4,269 4,184 3,631
----- ------ ------
Net Write-offs 1,277 1,090 814
Effect of Credit Card
Securitization Activity 1,713 1,392 917
----- ------ -------
Credit Costs 2,990 2,482 1,731
----- ------ ------
Operating Margin Less Credit Costs 1,279 1,702 1,900
----- ------ -----
Additional Provision 100 196 158
Restructuring Charge 95 -- --
------ ------- -------
Income Before Taxes 1,084 1,506 1,742
Income Taxes 320 482 578
------ ------- -------
Net Income $ 764 $1,024 $1,164
- ----------------------------------------------------------------
Average Assets (In Billions of
Dollars) $ 31 $ 27 $ 25
Return on Assets 2.46% 3.79% 4.66%
- ----------------------------------------------------------------
Excluding Restructuring Charge
Income $ 822 $1,024 $1,164
Return on Assets (2) 2.65% 3.79% 4.66%
- -----------------------------------------------------------------
(1) Reclassified to conform to the 1997 presentation.
(2) Adjusted for the effect of credit card securitization, the return on
managed assets for worldwide Cards was 1.45% in 1997, 1.92% in 1996, and
2.40% in 1995.
Cards worldwide--bankcards, Diners Club, and private label cards--reported net
income of $764 million in 1997, down $260 million or 25% from 1996. Excluding
the $58 million after-tax effect of the 1997 restructuring charge, Cards earned
$822 million in 1997, down $202 million or 20% from 1996. Earnings in the
developed markets declined by 27%, principally in U.S. bankcards, as credit cost
increases were partially offset by modest operating margin growth as the
business continues to operate in a challenging environment. Income in the
emerging markets business declined by 3%, reflecting lower earnings from
Credicard, a Brazilian Cards affiliate, due to higher credit losses and losses
from fraudulent card usage, and a decline in certain countries in Asia Pacific.
Earnings in the emerging markets represented approximately 38% of Cards
earnings, compared to 31% in 1996. Net income in 1996 decreased by $140 million
or 12%, principally reflecting higher U.S. bankcard credit costs, partially
offset by earnings improvements in Latin America and Asia Pacific.
[GRAPHIC OMITTED
- -----------------------------------------------------
Worldwide Card
Accounts
In Millions
95 96 97
-- -- --
U.S. Bankcards 25 26 25
Other Cards 9 10 11
-- -- --
34 36 36
- -----------------------------------------------------]
The return on managed assets, excluding restructuring, was 1.45% in 1997,
down from 1.92% in 1996 and 2.40% in 1995, while on-balance sheet asset returns
were 2.65%, 3.79%, and 4.66%, respectively.
Cards adjusted revenue of $6.9 billion increased $237 million or 4% from
1996, reflecting increases of 3% in the developed markets and 6% in the emerging
markets. U.S. bankcards revenue increased 3%, reflecting business volume growth
and increased delinquency charges, partially offset by lower spreads due to
competitive pricing. The increase in delinquency charges resulted from a pricing
change implemented at the end of 1996. Revenue in the emerging markets grew by
6% - 12% adjusted for the effect of foreign currency translation - reflecting
business volume growth in both Asia Pacific and Latin America, partially offset
by lower earnings in Credicard, and lower spreads due to competitive pressures
and the economic conditions in Asia Pacific in the second half of 1997. Revenue
in 1996 increased $683 million or 11% from 1995, reflecting increases of 9% in
the developed markets and 24% in the emerging markets.
As shown in the following table, the U.S. bankcard business experienced
moderate portfolio growth and a decline in accounts as a result of competitive
pressures, credit risk management initiatives on the part of Citicorp, and
moderating increases in consumer personal debt levels.
U.S. Bankcards (Managed Basis)
Increase (Decrease)
--------------------
Dollars in Billions 1997 1996 1995(1)
- ------------------------------------------------------------------
Accounts (In Millions) 25 (2%) (1%)
Cards in Force (In Millions) 40 5% 2%
Charge Volumes $102.8 7% 9%
End-of-Period Receivables $ 48.2 3% 4%
- ------------------------------------------------------------------
(1) Compound annual growth rate.
Adjusted operating expense of $2.6 billion, excluding the $95 million
restructuring charge, was up $152 million or 6%--9% adjusted for the effect of
foreign currency translation--from 1996. Expense in the developed markets
increased 5% due to costs associated with credit risk management initiatives and
enhanced target marketing efforts in U.S. bankcards. Expense in the emerging
markets grew 11%--17% adjusted for the effect of foreign currency
translation--in support of higher loan volumes as well as continued investment
to expand the franchise. Expense in 1996 increased $130 million or 6% from 1995,
principally reflecting an increase of 27% in the emerging markets, reflecting
growth and expansion of the franchise.
Cards credit costs in 1997 were $3.0 billion, up from $2.5 billion in 1996
and $1.7 billion in 1995, reflecting increased losses in U.S. bankcards, which
have been moderating during 1997, and higher losses in Asia Pacific. Credit
costs in U.S. bankcards increased to $2.6 billion, or 5.81% of average managed
loans, up from $2.1 billion or 4.99% in 1996 and $1.5 billion or 3.70% in 1995.
Cards continued to build the allowance for credit losses, with charges in
excess of net write-offs of $100 million, $196 million, and $158 million in
1997, 1996, and 1995, respectively.
32
<PAGE>
GLOBAL CONSUMER
Private Bank
In Millions of Dollars 1997 1996(1) 1995(1)
- --------------------------------------------------------------------------------
Total Revenue $ 1,130 $ 1,043 $ 929
Net Cost to Carry Cash-Basis Loans
and OREO (2) (10) 12
------- ------- -------
Adjusted Revenue 1,128 1,033 941
------- ------- -------
Total Operating Expense 752 691 633
Net OREO Benefits (Costs)(2) 4 (5) --
Restructuring Charge (28) -- --
------- ------- -------
Adjusted Operating Expense 728 686 633
------- ------- -------
Operating Margin 400 347 308
------- ------- -------
Net (Recoveries) Write-offs (13) 4 24
Net Cost to Carry and Net OREO
(Benefits) Costs (6) (5) 12
------- ------- -------
Credit (Benefits) Costs (19) (1) 36
------- ------- -------
Operating Margin Less Credit Costs 419 348 272
------- ------- -------
Restructuring Charge 28 -- --
------- ------- -------
Income Before Taxes 391 348 272
Income Taxes 80 67 46
------- ------- -------
Net Income $ 311 $ 281 $ 226
------- ------- -------
- --------------------------------------------------------------------------------
Average Assets (In Billions of Dollars) $ 16 $ 16 $ 15
Return on Assets 1.94% 1.76% 1.51%
------- ------- -------
- --------------------------------------------------------------------------------
Excluding Restructuring Charge
Income $ 329 $ 281 $ 226
Return on Assets 2.06% 1.76% 1.51%
------- ------- -------
- --------------------------------------------------------------------------------
(1) Reclassified to conform to the 1997 presentation.
(2) Includes amounts related to writedowns, gains and losses on sales, and
direct expense related to OREO for certain real estate lending activities.
Private Bank--which provides personalized wealth management service for high
net-worth clients--reported net income in 1997 of $311 million, up $30 million
or 11% from 1996. Excluding the $18 million after-tax effect of the
restructuring charge, Private Bank income was $329 million in the year, up $48
million or 17% from 1996. The increase in 1997 reflected continued revenue
growth throughout the Private Bank together with lower credit costs. Net income
growth in the year was reduced by the effects of a higher tax rate. Net income
of $281 million in 1996 was up $55 million or 24% from 1995, also reflecting
solid revenue growth and reduced credit costs.
Client business volumes under management were $101 billion at the end of
the year, up $5 billion or 5% from 1996. Growth was led by the custody business,
investment funds management, and trust and fiduciary relationships. Growth in
client business volumes in 1996 was $9 billion or 11%, and was balanced across
the advisory and discretionary investment areas and most other product lines.
Adjusted revenue for 1997 was $1.1 billion, up $95 million or 9% from
1996, up 11% excluding the effect of foreign currency translation. Emerging
markets revenue grew 14%, reflecting strong growth for much of the year,
dampened by the market volatility in Asia Pacific. Revenue in the emerging
markets represented 43% of total Private Bank revenue in 1997, up from 41% in
1996. Revenue in the developed markets increased 6% in 1997. The increase in
total revenue primarily reflected 13% growth in fees and commissions resulting
from new investment products introduced during the year, complemented by a 41%
increase in client-related foreign exchange. Revenue for 1996 was $1.0 billion,
up $92 million or 10% from 1995, reflecting higher spreads and credit volumes in
both the developed and emerging markets, aided by the successful launch of
several new investment products.
[GRAPHIC OMITTED
- ----------------------------------
Private Bank
Managed Client Business Volumes
$ Billions
95 96 97
---- ---- ----
87 96 101
- ----------------------------------]
Adjusted expense of $728 million in the year was up $42 million or 6% from
1996, 10% excluding the effect of foreign currency translation. The increase
reflected a rise in staffing needed to support higher business volumes, as well
as increased spending on technology initiatives. Expense of $686 million in 1996
was up $53 million or 8% from 1995 due to higher employee expense (including new
hires), reengineering efforts, and higher costs related to activities in the
funds business.
Total credit costs for 1997 were a net benefit of $19 million, compared
with a net benefit of $1 million in 1996 and credit costs of $36 million in
1995, as the U.S. business continued to benefit from recoveries, gains on sale
of OREO, and income on cash-basis loans. Overall credit trends continued to
improve with loans delinquent 90 days or more down to $110 million or 0.72% of
loans from $193 million or 1.26% a year earlier and $307 million or 2.15% in
1995, reflecting continued active portfolio management.
33
<PAGE>
<TABLE>
GLOBAL CONSUMER
Consumer Businesses In Developed and Emerging Markets
<CAPTION>
Developed Markets(1) Emerging Markets(1)
------------------------------------ ----------------------------------
In Millions of Dollars 1997 1996(2) 1995(2) 1997 1996(2) 1995(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Revenue $8,540 $8,478 $8,318 $3,810 $3,635 $3,118
Effect of Credit Card Securitization Activity 1,713 1,392 917 -- -- --
Net Cost to Carry Cash-Basis Loans and OREO (2) (10) 12 -- -- --
------ ------ ------ ------ ------ ------
Adjusted Revenue 10,251 9,860 9,247 3,810 3,635 3,118
------ ------ ------ ------ ------ ------
Total Operating Expense 5,880 5,242 5,093 2,391 2,060 1,723
Net OREO Benefits (Costs)(3) 4 (5) -- -- -- --
Restructuring Charge (449) -- -- (131) -- --
------ ------ ------ ------ ------ ------
Adjusted Operating Expense 5,435 5,237 5,093 2,260 2,060 1,723
------ ------ ------ ------ ------ ------
Operating Margin 4,816 4,623 4,154 1,550 1,575 1,395
------ ------ ------ ------ ------ ------
Net Write-offs 1,463 1,371 1,247 368 357 297
Effect of Credit Card Securitization Activity 1,713 1,392 917 -- -- --
Net Cost to Carry and Net OREO Costs (6) (5) 12 -- -- --
------ ------ ------ ------ ------ ------
Credit Costs 3,170 2,758 2,176 368 357 297
------ ------ ------ ------ ------ ------
Operating Margin Less Credit Costs 1,646 1,865 1,978 1,182 1,218 1,098
------ ------ ------ ------ ------ ------
Additional Provision 49 185 170 51 15 30
Restructuring Charge 449 -- -- 131 -- --
------ ------ ------ ------ ------ ------
Income Before Taxes 1,148 1,680 1,808 1,000 1,203 1,068
Income Taxes 414 585 646 181 270 267
------ ------ ------ ------ ------ ------
Net Income $ 734 $1,095 $1,162 $ 819 $ 933 $ 801
------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
Average Assets (In Billions of Dollars) $90 $88 $85 $42 $38 $35
Return on Assets 0.82% 1.24% 1.37% 1.95% 2.46% 2.29%
------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
Excluding Restructuring Charge
Income $1,003 $1,095 $1,162 $ 901 $ 933 $ 801
Return on Assets 1.11% 1.24% 1.37% 2.15% 2.46% 2.29%
------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Developed markets comprise activities in North America, Europe, and Japan.
Emerging markets comprises activities in all other geographic areas.
(2) Reclassified to conform to the 1997 presentation.
(3) Includes amounts related to writedowns, gains and losses on sales, and
direct expense related to OREO for certain real estate lending activities.
[GRAPHIC OMITTED
- -------------------------------------------------
Developed Markets
$ Billions
95 96 97*
Adjusted Revenue 9.2 9.9 10.3
Income 1.2 1.1 1.0
*Excluding restructuring charge
- -------------------------------------------------]
The Global Consumer businesses in the developed markets reported net income of
$734 million in 1997, down $361 million or 33% from 1996. Excluding the $269
million after-tax effect of the restructuring charge, the Global Consumer
businesses in the developed markets earned $1.0 billion in 1997, down $92
million or 8% from 1996, primarily due to increased credit costs in the U.S.
bankcard business, partially offset by higher earnings in both the Citibanking
and the Private Bank businesses in the United States. Adjusted revenue grew $391
million or 4%--7% adjusted for the effect of foreign currency
translation--reflecting improvements in the United States. Adjusted operating
expense, excluding the $449 million restructuring charge, grew 4%--7% adjusted
for the effect of foreign currency translation--from 1996, due to spending on
Citibanking initiatives in the United States and for risk management initiatives
and enhanced target marketing efforts in U.S. bankcards. Net income in 1996 was
down $67 million or 6% from 1995, principally reflecting increases in U.S.
bankcards credit costs.
[GRAPHIC OMITTED
- -------------------------------------------------
Emerging Markets
$ Billions
95 96 97*
Adjusted Revenue 3.1 3.6 3.8
Income 0.8 0.9 0.9
*Excluding restructuring charge
- -------------------------------------------------]
Net income in the emerging markets was $819 million, down $114 million or
12% from 1996. Excluding the $82 million after-tax effect of the restructuring
charge, income in the emerging markets was $901 million in 1997, down $32
million or 3% from 1996, reflecting the economic turmoil in the Asia Pacific
region in the second half of 1997. The results for the year reflected revenue
growth of $175 million or 5% - 9% adjusted for the effect of foreign currency
translation - reflecting higher business volumes, partially offset by lower
spreads in Asia Pacific, the 1996 gain associated with the sale of an Asia
affiliate, and lower earnings from Credicard, a Brazilian Cards affiliate, due
to higher credit losses and losses from fraudulent card usage. Adjusted
operating expense, excluding the $131 million restructuring charge, increased
10% - 14% adjusted for the effect of foreign currency translation-reflecting
account and business volume growth, and product development, markets expansion,
and technology initiatives. Credit costs increased $11 million or 3% in 1997,
reflecting higher losses in Asia Pacific partially offset by the effect of
foreign currency translation. Net income in 1996 was up $132 million or 16% from
1995, principally reflecting improvements in both the Cards and Citibanking
businesses, and the 1996 gain associated with the sale of an Asia affiliate.
34
<PAGE>
GLOBAL CONSUMER
Consumer Portfolio Review
[GRAPHIC OMITTED
- -------------------------------------------------
Global Consumer
Managed Loans
$ Billions
95 96 97
-- -- --
Private Bank 14 15 15
Cards 51 56 57
Citibanking 66 66 66
--- --- ---
131 137 138
- -------------------------------------------------]
Managed loans of $138.4 billion as of December 31, 1997, were up from $137.0
billion and $131.1 billion as of December 31, 1996 and 1995, respectively. The
increase in managed consumer loans since December 31, 1996 reflected growth in
the United States and Latin America, partially offset by the effect of
foreign currency translation. At December 31, 1997, Cards represented 41% of the
overall consumer portfolio, growing from 40% and 39% at December 31, 1996 and
1995, respectively.
In the consumer portfolio, credit loss experience is often expressed in
terms of annual net credit losses as a percent 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 36 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.
Total delinquencies 90 days or more past due in the managed portfolio of
$3.2 billion and the related delinquency ratio of 2.31% at December 31, 1997
decreased from $3.6 billion or 2.62% at December 31, 1996 and $4.0 billion or
3.01% at December 31, 1995, primarily due to declines in Citibanking, including
the effect of foreign currency translation, and the Private Bank. Total managed
net credit losses of $3.5 billion and the related loss ratio of 2.61% increased
from $3.1 billion and 2.37% in 1996 and $2.5 billion and 1.99% in 1995,
reflecting higher losses in U.S. bankcards and Asia Pacific, partially offset by
declines in the Citibanking and the Private Bank businesses in the United States
and the effect of foreign currency translation.
In Citibanking, loans delinquent 90 days or more of $2.0 billion and the
related ratio of 3.07% at December 31, 1997 declined from $2.3 billion or 3.50%
at December 31, 1996 and $2.8 billion or 4.23% at December 31, 1995, primarily
reflecting improvements in the United States and the effect of foreign currency
translation, partially offset by increases in Asia Pacific and in certain
countries in Latin America. The decline in delinquencies from 1995 also reflects
the 1996 U.K. mortgage portfolio sale. Net credit losses in 1997 of $567 million
and the related loss ratio of 0.86% declined from $634 million and 0.96% in 1996
and $706 million and 1.12% in 1995, primarily reflecting the effect of foreign
currency translation and improvements in the United States, partially offset by
higher losses in Asia Pacific.
U.S. bankcards managed loans delinquent 90 days or more were $856 million
or 1.80% as of December 31, 1997, compared to $886 million or 1.90% at December
31, 1996 and $732 million or 1.66% at December 31, 1995. Net credit losses of
$2.6 billion and the related loss ratio of 5.81% in 1997 increased from $2.1
billion and 4.99% in 1996 and $1.5 billion and 3.70% in 1995. The increases in
U.S. bankcards credit losses have been moderating in 1997. Personal bankruptcies
accounted for 39.4% of gross write-offs in 1997, up from 37.3% in 1996 and 34.8%
in 1995. Citicorp continues to write off bankrupt accounts upon notice of filing
of bankruptcy.
The other Cards businesses include bankcards outside the United States,
worldwide Diners Club, and private label cards. Loans delinquent 90 days or more
of $194 million increased by $5 million from 1996, primarily due to increases in
Asia Pacific and Latin America, partially offset by the effect of foreign
currency translation. Net credit losses of $357 million increased by $21 million
from 1996, primarily due to higher losses in Asia Pacific and the private label
business, partially offset by the effect of foreign currency translation.
Delinquencies and net credit losses in 1996 increased from 1995 primarily due to
increases in Asia Pacific.
Private Bank loans delinquent 90 days or more declined to $110 million or
0.72% of loans at December 31, 1997 from $193 million or 1.26% a year ago and
$307 million or 2.15% at December 31, 1995. Net recoveries of $13 million in
1997 were improved from net credit losses of $4 million in 1996 and $24 million
in 1995. The decline in both delinquencies and net credit losses primarily
reflects improvements in the United States.
Total consumer loans on the balance sheet delinquent 90 days or more on
which interest continued to be accrued were $1.0 billion at both December 31,
1997 and 1996 and $951 million at December 31, 1995. Included in these amounts
are U.S. government-guaranteed student loans of $240 million, $239 million, and
$208 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 loans in Germany) were $762 million, $770
million, and $743 million, respectively. The majority of these other loans are
written off upon reaching a stipulated number of days past due. See the table of
"Cash-Basis, Renegotiated, and Past Due Loans" on page 87.
[GRAPHIC OMITTED
- ----------------------------------------------------
Global Consumer Managed
Loans by Region
December 31, 1997
North America 63%
Europe & CEEMEA* 13%
Asia** 17%
Latin America 7%
* Central/Eastern Europe, Middle East, and Africa
** Includes Japan
- -----------------------------------------------------]
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
December 31, 1997, interest accrual had been suspended on $1.8 billion of
consumer loans, primarily consisting of Citibanking loans, down from $2.2
billion at December 31, 1996 and $2.7 billion at December 31, 1995. The decline
from 1996 reflects improvements in U.S. mortgages and the Private Bank, and the
effect of foreign currency translation, partially offset by increases in Asia
Pacific. U.S. mortgages on which the accrual of interest has been suspended were
$514 million at December 31, 1997, down from $734 million and $979 million at
December 31, 1996 and 1995, respectively, reflecting continued improvement in
the credit quality of the portfolio, improved collection efforts, and
delinquency management initiatives.
35
<PAGE>
<TABLE>
Consumer Loan Delinquency Amounts, Net Credit Losses, and Ratios
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Average
Loans 90 Days or More Past Due(1) Loans Net Credit Losses(1)
(In Millions of Dollars, ------ ----------------------------- ------- -----------------------------
except Loan Amounts in Billions) 1997 1997 1996 1995 1997 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Citibanking $ 66.4 $ 2,038 $ 2,320 $ 2,770 $ 66.4 $ 567 $ 634 $ 706
Ratio 3.07% 3.50% 4.23% 0.86% 0.96% 1.12%
Cards
U.S. Bankcards 47.6 856 886 732 45.3 2,633 2,146 1,476
Ratio 1.80% 1.90% 1.66% 5.81% 4.99% 3.70%
Other(2) 9.2 194 189 141 9.0 357 336 255
Ratio 2.12% 2.13% 1.93% 3.96% 4.23% 3.88%
Private Bank 15.2 110 193 307 15.3 (13) 4 24
Ratio 0.72% 1.26% 2.15% NM 0.02% 0.16%
------ ------- ------- ------- ------ ------- ------- -------
Total Managed 138.4 3,198 3,588 3,950 136.0 3,544 3,120 2,461
------- ------- ------- ------- ------- -------
Ratio 2.31% 2.62% 3.01% 2.61% 2.37% 1.99%
Securitized Credit Card Receivables(3) (26.8) (481) (501) (440) (25.2) (1,587) (1,392) (917)
Loans Held for Sale (4) (3.5) (35) -- -- (3.6) (126) -- --
------ ------- ------- ------- ------ ------- ------- -------
Total Loans $108.1 $ 2,682 $ 3,087 $ 3,510 $107.2 $ 1,831 $ 1,728 $ 1,544
------ ------- ------- ------- ------ ------- ------- -------
Ratio 2.48% 2.76% 3.32% 1.71% 1.64% 1.55%
- ------------------------------------------------------------------------------------------------------------------------------------
Managed Portfolio in:
Developed markets $105.8 $ 2,733 $ 3,218 $ 3,665 $102.5 $ 3,176 $ 2,763 $ 2,164
Ratio 2.58% 3.10% 3.58% 3.10% 2.74% 2.25%
Emerging markets 32.6 465 370 285 33.5 368 357 297
Ratio 1.43% 1.12% 0.99% 1.10% 1.15% 1.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Emerging Portfolio in:
Asia Pacific $ 20.1 $ 288 $ 243 $ 171 $ 21.6 $ 191 $ 169 $ 94
Ratio 1.43% 1.12% 0.88% 0.89% 0.83% 0.51%
Latin America 7.4 173 124 110 6.6 175 185 203
Ratio 2.34% 2.05% 2.16% 2.66% 3.44% 4.28%
Private Bank 5.1 4 3 4 5.3 2 3 --
Ratio 0.08% 0.06% 0.08% 0.03% 0.06% NM
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 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.
(2) Includes bankcards outside the U.S., worldwide Diners Club, and private
label cards.
(3) See page 54 for a description of the effect of credit card securitization
activity.
(4) Commencing in 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 with net credit losses charged to other
revenue.
NM Not meaningful.
Consumer Loan Balances, Net of Unearned Income
<TABLE>
<CAPTION>
End of Period Average
------------------------------- -------------------------------
In Billions of Dollars 1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Managed $138.4 $137.0 $131.1 $136.0 $131.6 $123.3
Securitized Credit Card Receivables (26.8) (25.2) (25.5) (25.2) (26.1) (23.6)
Loans Held for Sale(1) (3.5) -- -- (3.6) -- --
------ ------ ------ ------ ------ ------
On-Balance Sheet $108.1 $111.8 $105.6 $107.2 $105.5 $ 99.7
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Commencing in 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 with net credit losses charged to other
revenue.
The portion of Citicorp's aggregate allowance for credit losses attributed
to the consumer portfolio was $2.5 billion as of December 31, 1997, up from $2.1
billion and $1.9 billion as of December 31, 1996 and 1995, respectively,
reflecting the 1997 transfer of $373 million of reserves that had previously
been attributable to credit card securitization transactions. The aggregate
allowance for credit losses reflected an additional provision in excess of net
write-offs of $100 million in 1997 and $200 million in both 1996 and 1995. The
allowance as a percentage of loans on the balance sheet was 2.30% as of December
31, 1997, compared with 1.86% and 1.84% at December 31, 1996 and 1995,
respectively. The attribution of the aggregate allowance is made for analytical
purposes only and may change from time to time. Furthermore, the entire Citicorp
allowance is available to absorb all probable credit losses inherent in the
portfolio. See "Provision and Credit Loss Reserves" on page 52 for further
discussion.
Consumer credit costs and the related net credit loss ratios may increase
from 1997 levels as a result of economic conditions, particularly in the Asia
Pacific region, credit performance of the portfolios (including bankruptcies),
and changes in portfolio levels. Additionally, delinquencies and loans on which
the accrual of interest is suspended could remain at relatively high levels.
36
<PAGE>
GLOBAL CORPORATE BANKING
In Millions of Dollars 1997 1996(1) 1995(1)
- -----------------------------------------------------------------
Total Revenue $8,272 $7,188 $6,522
Net Cost to Carry Cash-Basis Loans
and OREO (3) (36) 11
------ ------ ------
Adjusted Revenue 8,269 7,152 6,533
------ ------ ------
Total Operating Expense 5,213 4,418 3,946
Net OREO Benefits 68 49 105
Restructuring Charge (281) -- --
------ ------ ------
Adjusted Operating Expense 5,000 4,467 4,051
------ ------ ------
Operating Margin 3,269 2,685 2,482
------ ------ ------
Net (Recoveries) Write-offs (24) (2) 166
Net Cost to Carry and Net OREO
Benefits (71) (85) (94)
------ ------ ------
Credit (Benefits) Costs (95) (87) 72
------ ------ ------
Operating Margin Less
Credit (Benefits) Costs 3,364 2,772 2,410
----- ----- -----
Additional Provision -- -- 81
Restructuring Charge 281 -- --
Income Before Taxes 3,083 2,772 2,329
Income Taxes 693 611 569
------- -------- -------
Net Income $2,390 $2,161 $1,760
- -----------------------------------------------------------------
Average Assets (In Billions of
Dollars) $ 156 $ 139 $ 144
Return on Assets 1.53% 1.55% 1.22%
- -----------------------------------------------------------------
Excluding Restructuring Charge
Income $2,558 $2,161 $1,760
Return on Assets 1.64% 1.55% 1.22%
- -----------------------------------------------------------------
(1) Reclassified to conform to the 1997 presentation.
[GRAPHIC OMITTED
- -----------------------------------------------------
Global Corporate Banking Income
$ Billions
95 96 97*
Global Corporate Banking 1.8 2.2 2.6
Emerging Markets 1.2 1.5 1.6
Global Relationship Banking 0.6 0.7 1.0
*Excluding restructuring charge
- -----------------------------------------------------]
Global Corporate Banking net income in 1997 was $2.4 billion, up $229 million or
11% from 1996. Included in the 1997 results is a restructuring charge of $281
million ($168 million after-tax) related to standardization and consolidation of
operations, the outsourcing of various technological functions, the
rationalization of support functions associated with the formation of the Global
Markets organization, and other organizational realignments designed to better
serve target market customers. Excluding the restructuring charge, income of
$2.6 billion increased $397 million or 18% compared with 1996 and represented a
return on assets of 1.64%, up 9 basis points from 1996. The improved results
were driven by growth in operating margin of 22% and stable credit benefits.
Global Relationship Banking reported a 33% improvement in income while the
Emerging Markets business reported an 11% improvement. Net income of $2.2
billion in 1996 increased $401 million or 23% compared with 1995. Growth in the
Emerging Markets business coupled with improved credit results in Global
Relationship Banking drove the improved 1996 results.
Adjusted revenue of $8.3 billion in 1997 grew $1.1 billion or 16% (18%
excluding the effect of foreign currency translation) from 1996. Revenue growth
reflected a higher level of securities transactions, strong venture capital
results, growth in transaction banking services revenue, and improved
trading-related revenue, partially offset by net interest spread compression.
Adjusted revenue of $7.2 billion in 1996 grew $619 million or 9% from 1995
reflecting growth in fee-based corporate finance activity and transaction
banking services together with higher levels of securities transactions and
asset gains.
Trading-related revenue totaled $1.8 billion, $1.7 billion, and $1.7
billion in 1997, 1996, and 1995, respectively, with 1997 benefiting from higher
foreign exchange revenue attributable to volatile foreign currency markets,
particularly in Asia. Venture capital revenue totaled $749 million, $450
million, and $390 million in 1997, 1996, and 1995, respectively, reflecting
buoyant U.S. equity markets in the three-year period. Securities transactions
totaled $575 million, $191 million, and $60 million in 1997, 1996, and 1995,
respectively. Increased securities transactions in 1997 primarily reflected the
redeployment of certain sovereign debt portfolios into local-country investments
and toward supporting customer-based activity. Levels of trading-related,
venture capital, and securities transactions revenue may fluctuate in the future
as a result of market and asset-specific factors. See pages 50 and 51 for
additional discussions of trading-related and venture capital revenues and
securities transactions.
Adjusted operating expense of $5.0 billion in 1997 grew $533 million or
12% (14% excluding the effect of foreign currency translation) compared with
1996. Expense grew $264 million or 16% in the Emerging Markets business and $269
million or 10% in Global Relationship Banking. Adjusted operating expense of
$4.5 billion in 1996 grew $416 million or 10% compared with 1995. Expense grew
$300 million or 21% in the Emerging Markets business and $116 million or 4% in
Global Relationship Banking. The expense growth in both years is primarily
attributable to investment spending to build the Emerging Markets franchise,
costs associated with implementing Citicorp's plan to gain market share in
selected emerging market countries, increased spending on technology, and
volume-related increases.
Credit costs were a net benefit of $95 million in 1997, an $8 million
improvement from the net benefit of $87 million in 1996. The results reflect a
decline in gross write-offs in Global Relationship Banking, partially offset by
higher gross write-offs in the Emerging Markets business and lower, but still
substantial, recoveries in both businesses (including $50 million from the
refinancing agreement concluded with Peru). Credit costs were a net benefit of
$87 million in 1996, a $159 million improvement from the net charge of $72
million in 1995. The
37
<PAGE>
1996 results primarily reflect a decline in gross write-offs in Global
Relationship Banking coupled with an increase in recoveries in both businesses
(including $75 million from the refinancing agreements concluded with Panama,
Slovenia, and Croatia). Losses on commercial lending activities can vary widely
with respect to timing and amount, particularly within any narrowly-defined
business or loan type. During 1998, credit costs may increase from the 1997
level due to conditions in Asia or other factors, but are expected to remain
moderate.
Citicorp attributes income taxes to core businesses on the basis of local
tax rates, which resulted in effective income tax rates, excluding the
restructuring charge, of 24%, 22%, and 24% in 1997, 1996, and 1995,
respectively. The difference between the local tax rates attributed to core
businesses and Citicorp's overall effective tax rate in each year is included in
Corporate Items. Fluctuations in the effective income tax rates resulted from
changes in the nature and geographic mix of pretax earnings.
Cash-basis loans at December 31, 1997 were $1.1 billion, up $159 million
or 18% from year-end 1996 reflecting a $281 million increase in the Emerging
Markets business (primarily in Southeast Asia and southern Latin America),
partially offset by a $122 million improvement in Global Relationship Banking,
primarily real estate related. The increase in Southeast Asia includes
approximately $59 million of balance sheet credit exposure related to foreign
currency derivative contracts for which the recognition of revaluation gains has
been suspended. The OREO portfolio of $461 million declined $153 million or 25%
from December 31, 1996, primarily due to sales of OREO properties. See the
tables entitled "Cash-Basis, Renegotiated, and Past Due Loans" and "Other Real
Estate Owned and Assets Pending Disposition" on page 87. [GRAPHIC OMITTED]
Average assets of $156 billion in 1997 grew $17 billion or 12% from 1996.
Average assets of $72 billion in the Emerging Markets business grew $12 billion
or 20% reflecting continued business expansion. Average assets of $84 billion in
Global Relationship Banking grew $5 billion or 6% from 1996, primarily in
trading-related activities and the loan portfolio. Average assets of $139
billion in 1996 declined $5 billion or 3% from 1995. Average assets of $60
billion in the Emerging Markets business grew $10 billion or 20% reflecting
continued business expansion. Average assets of $79 billion in Global
Relationship Banking declined $15 billion or 16% from 1995 as the business
focused on asset utilization, primarily in trading-related activities.
GLOBAL CORPORATE BANKING
Emerging Markets
In Millions of Dollars 1997 1996(1) 1995(1)
- -----------------------------------------------------------------
Total Revenue $3,888 $3,444 $2,895
Net Cost to Carry Cash-Basis Loans
and OREO 15 3 14
------ ------ ------
Adjusted Revenue 3,903 3,447 2,909
------ ------ ------
Total Operating Expense 2,018 1,696 1,393
Net OREO Benefits -- 4 7
Restructuring Charge (54) -- --
------ ------ ------
Adjusted Operating Expense 1,964 1,700 1,400
------ ------ ------
Operating Margin 1,939 1,747 1,509
------ ------ ------
Net Write-offs (Recoveries) 56 (3) 26
Net Cost to Carry and
Net OREO Costs (Benefits) 15 (1) 7
------ ------ ------
Credit Costs (Benefits) 71 (4) 33
------ ------ ------
Operating Margin Less
Credit Costs (Benefits) 1,868 1,751 1,476
------ ------ ------
Additional Provision -- -- (19)
Restructuring Charge 54 -- --
Income Before Taxes 1,814 1,751 1,495
Income Taxes 255 315 363
------ ------ ------
Net Income $1,559 $1,436 $1,132
- -----------------------------------------------------------------
Average Assets (In Billions of
Dollars) $ 72 $ 60 $50
Return on Assets 2.17% 2.39% 2.26%
- -----------------------------------------------------------------
Excluding Restructuring Charge
Income $1,591 $1,436 $1,132
Return on Assets 2.21% 2.39% 2.26%
- -----------------------------------------------------------------
(1) Reclassified to conform to the 1997 presentation.
Emerging Markets net income was $1.6 billion in 1997, up $123 million or 9% from
1996. Included in the 1997 results is a restructuring charge of $54 million ($32
million after-tax). Excluding the restructuring charge, Emerging Markets income
of $1.6 billion in 1997 grew $155 million or 11% compared with 1996. The results
reflected growth in operating margin of $192 million or 11%, higher credit
costs, and a lower effective income tax rate. Emerging Markets net income of
$1.4 billion in 1996 grew $304 million or 27% compared with 1995 as
broadly-based revenue growth across most regions and products coupled with
higher levels of securities transactions and net asset gains outpaced expense
growth by a ratio of 1.8 to 1.
Adjusted revenue of $3.9 billion grew $456 million or 13% compared with
1996 reflecting a $294 million increase in securities transactions, growth in
transaction banking services revenue, and improved treasury results. The
increase in securities transactions primarily reflected the redeployment of
certain sovereign debt portfolios into local-country investments and toward
supporting customer-based activity. Trading-related revenue increased $14
million to $777 million reflecting strong growth in foreign exchange revenue
approximately offset by lower derivative and fixed income revenue attributable
to volatile global financial markets, particularly in the second half of the
year. Higher asset levels across the franchise mitigated the effect on revenue
growth of net interest spread compression. About 22% of the
38
<PAGE>
revenue in the Emerging Markets business was attributable to business from
multinational companies managed jointly with Global Relationship Banking, with
that revenue having grown 19% from 1996. Adjusted revenue of $3.4 billion in
1996 grew $538 million or 18% compared with 1995. The improvement was primarily
attributable to growth in transaction banking services and credit- and fee-based
corporate finance activities, a $146 million increase in securities
transactions, a $48 million increase in net asset gains, and improved
trading-related results.
Adjusted operating expense was $2.0 billion, $1.7 billion, and $1.4
billion in 1997, 1996, and 1995. The growth in expense in the three-year period
is primarily attributable to investment spending to build the franchise and
costs associated with implementing Citicorp's plan to gain market share in
selected emerging market countries coupled with increased technology spending
and volume growth.
Credit costs were $71 million in 1997 compared with a net benefit of $4
million in 1996. The increase primarily is attributable to higher gross
write-offs, largely in Thailand, coupled with lower recoveries. Credit costs in
1997 included $35 million related to foreign currency derivative contracts.
Recoveries in 1997 included $50 million from the refinancing agreement concluded
with Peru while 1996 included $75 million from the refinancing agreements
concluded with Panama, Slovenia, and Croatia. Credit costs were a net benefit of
$4 million in 1996, an improvement of $37 million from 1995, and primarily
reflected higher recoveries partially offset by a modest rise in gross
write-offs.
Excluding the restructuring charge, the effective income tax rates in
1997, 1996, and 1995 were 15%, 18%, and 24%, respectively. Fluctuations in the
effective income tax rates result from changes in the nature and geographic mix
of pretax earnings.
GLOBAL CORPORATE BANKING
Global Relationship Banking
In Millions of Dollars 1997 1996(1) 1995(1)
- -----------------------------------------------------------------
Total Revenue $4,384 $3,744 $3,627
Net Cost to Carry Cash-Basis Loans
and OREO (18) (39) (3)
------ ------ ------
Adjusted Revenue 4,366 3,705 3,624
------ ------ ------
Total Operating Expense 3,195 2,722 2,553
Net OREO Benefits 68 45 98
Restructuring Charge (227) -- --
------ ------ ------
Adjusted Operating Expense 3,036 2,767 2,651
------ ------ ------
Operating Margin 1,330 938 973
------ ------ ------
Net (Recoveries) Write-offs (80) 1 140
Net Cost to Carry and Net OREO
Benefits (86) (84) (101)
------ ------ ------
Credit (Benefits) Costs (166) (83) 39
------ ------ ------
Operating Margin Less
Credit (Benefits) Costs 1,496 1,021 934
------ ------ ------
Additional Provision -- -- 100
Restructuring Charge 227 -- --
------ ------ ------
Income Before Taxes 1,269 1,021 834
Income Taxes 438 296 206
------ ------ ------
Net Income $ 831 $ 725 $ 628
- -----------------------------------------------------------------
Average Assets (In Billions of
Dollars) $ 84 $ 79 $ 94
Return on Assets 0.99% 0.92% 0.67%
- -----------------------------------------------------------------
Excluding Restructuring Charge
Income $ 967 $ 725 $ 628
Return on Assets 1.15% 0.92% 0.67%
- -----------------------------------------------------------------
(1) Reclassified to conform to the 1997 presentation.
Net income from Global Relationship Banking in North America, Europe, and Japan
was $831 million in 1997, up $106 million or 15% from 1996. Included in the 1997
results is a restructuring charge of $227 million ($136 million after-tax).
Excluding the restructuring charge, income in 1997 of $967 million improved $242
million or 33% from 1996 reflecting growth in operating margin of $392 million
or 42% and improved credit benefits, partially offset by a higher effective
income tax rate. Net income was $725 million in 1996, up $97 million or 15% from
1995, due primarily to lower credit costs and a lower additional provision.
Adjusted revenue of $4.4 billion grew $661 million or 18% from 1996.
Revenue reflected a $305 million increase in venture capital results to $749
million, trading-related revenue of $1.0 billion--up $123 million from 1996,
double digit growth rates in transaction banking services and corporate finance
revenue, and higher levels of securities
39
<PAGE>
transactions and net asset gains, partially offset by net interest spread
compression. Adjusted revenue in 1996 of $3.7 billion grew $81 million or 2%
compared with 1995 reflecting growth in fee-based corporate finance activities
and transaction banking services, partially offset by a decline in credit-based
corporate finance activities due to lower net interest spreads. A $171 million
decline in trading-related revenue was offset by a $129 million gain on the sale
of a stand-alone automated trading business and by improved venture capital
results.
Adjusted operating expense of $3.0 billion grew $269 million or 10% from
1996 reflecting increased spending on technology, higher incentive compensation,
and volume-related expense growth in transaction banking services. Adjusted
operating expense of $2.8 billion in 1996 grew $116 million or 4% compared with
1995 reflecting increased spending on technology and risk management and higher
volume-related expenses.
Credit costs were a net benefit of $166 million in 1997 and improved $83
million from 1996. The improvement reflected lower gross write-offs in both the
real estate and non-real estate portfolios together with a continued high level
of recoveries. Credit costs were a net benefit of $83 million in 1996 and
improved $122 million from 1995 reflecting lower gross write-offs, primarily
related to real estate, and a continued high level of recoveries.
Excluding the restructuring charge, the effective income tax rates in
1997, 1996, and 1995 were 35%, 29%, and 25%, respectively. Fluctuations in the
effective income tax rates result from changes in the nature and geographic mix
of pretax earnings.
CORPORATE ITEMS
In Millions of Dollars 1997 1996 (1) 1995 (1)
- -----------------------------------------------------------------
Total Revenue $994 $ 895 $ 720
---- ----- -----
Restructuring Charge 28 -- --
Other Operating Expense 475 477 340
----- ----- -----
Total Operating Expense 503 477 340
----- ----- -----
Income Before Taxes 491 418 380
Income Taxes 843 819 639
----- ----- -----
Net Loss $(352) $(401) $(259)
- -----------------------------------------------------------------
Average Assets (In Billions of
Dollars) $ 7 $ 5 $ 5
- -----------------------------------------------------------------
Excluding Restructuring Charge
Loss $(315) $(401) $(259)
- -----------------------------------------------------------------
(1) Reclassified to conform to the 1997 presentation.
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. The core businesses' effective tax rates
were 25%, 26%, and 28%, for 1997, 1996, and 1995, respectively, while Citicorp's
effective tax rate was 37% for 1997 and 38% for both 1996 and 1995. See Note 10
to the consolidated financial statements for further discussion of income taxes.
Corporate Items revenue of $994 million in 1997 increased $99 million or
11% from 1996, primarily due to $74 million of gains on sales of investment
securities held in the Corporate portfolio. Revenue in 1997 also reflected
writedowns of $72 million related to a Latin American investment, compared with
$100 million in 1996 and $95 million in 1995. Revenue in 1996 increased $175
million or 24% from 1995 reflecting a decrease in funding costs and the funding
benefits associated with higher equity levels.
Operating expense included charges of $72 million, $113 million, and $89
million in 1997, 1996, and 1995, respectively, associated with the vesting of
performance based options.
In 1997 Corporate Items recorded a restructuring charge of $28 million,
$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.
40
<PAGE>
MANAGING GLOBAL RISK
Risk management is the cornerstone of Citicorp's business. Risks arise from
lending, underwriting, trading, and other activities routinely undertaken on
behalf of customers around the world. Outlined below is the process that
management employs to provide oversight and direction, followed by discussions
of the credit and market risk management processes in place across the
corporation.
The Windows on Risk Committee evaluates and proactively manages the risk
profile of the corporation. The Committee is chaired by the Vice Chairman
responsible for risk management and includes inside directors, senior line and
staff officers, and the Chairman of Citicorp. The Committee uses an analytical
framework called Windows on Risk to control country, consumer product, industry,
and client concentrations; to reduce portfolio, process, operational,
technological, and legal vulnerabilities; to decide on portfolio actions; and to
help create a balance among Citicorp's risk profile, earnings, and capital.
The Windows on Risk process has three major components: the Committee
develops a near-term outlook for the global external environment highlighting
key risks; examines Citicorp's risk profile in terms of 16 windows, or risks
that impact Citicorp's businesses and operations; and, in response to perceived
risks in the environment and portfolio, the Committee initiates actions to
manage the risk profile.
The review of the external environment encompasses the outlook for major
country and regional economies, significant consumer markets and global
industries; the potential near-term critical economic and geopolitical events;
and the implications of potential unfavorable developments as they relate to
specific businesses.
The review of the risk profile covers the following credit-related and
market risks, as well as control risk and legal and technological
vulnerabilities:
o Risk ratings, including trends in client creditworthiness together with a
comparison of risk against return;
o Industry concentrations, globally and within regions;
o Limits assigned to relationship concentrations and consumer programs;
o Product concentrations in consumer managed receivables, by product and by
region;
o Global real estate limits and exposure, including commercial and consumer
portfolios;
o Country risk, encompassing political and cross-border risk;
o Counterparty risk, evaluating presettlement risk on foreign exchange and
derivative products, as well as securities trades;
o Dependency, linking and evaluating specific industry and consumer product
exposure to external environmental factors;
o Distribution and underwriting risk, capturing the risk that arises when
Citicorp commits to purchase an instrument from an issuer for subsequent sale;
o Business risk review, evaluating by business the risk captured by
portfolio and process ratings;
o Price risk, capturing the earnings risk resulting from changing levels and
volatilities of interest rates, foreign exchange rates, and commodity and equity
prices;
o Liquidity risk, evaluating funding exposure;
o Equity and subordinated debt investment risk, monitored against portfolio
limits;
o Audit, evaluating operations and control risk based on internal audits;
o Legal, evaluating vulnerability and business implications of legal issues;
and
o Technology, assessing the vulnerability to the electronic environment.
Based on this coordinated review of major risks impacting the corporation,
the Windows on Risk Committee formulates recommendations and assigns
responsibility for recommended portfolio actions. The review is intended to
provide Citicorp with a view of the environment in which it operates and of the
risk inherent in its businesses.
THE CREDIT PROCESS
Guided by the overall risk appetite and portfolio targets set by senior
management, line management conducts the day-to-day credit process in accordance
with core policies established by the Credit Policy Committee.
Line management initiates and approves all extensions of credit and is
responsible for credit quality. Line managers must also establish supplementary
credit policies specific to each business, deploy the credit talent needed, and
monitor portfolio and process quality. The managers are required to identify
problem credits or programs as they develop, and to correct deficiencies as
needed through remedial management.
Business Risk Review conducts independent periodic examinations of both
portfolio quality and the credit process at the individual business level.
Citicorp's credit policies are organized around two basic approaches --
Credit Programs and Credit Transactions. Credit Programs, used primarily for the
Consumer businesses, focus on the decision to extend credit to sets of customers
with similar characteristics and/or product needs. Approvals under this approach
cover the expected level of aggregate exposure, the terms, risk acceptance
criteria, operating systems, and reporting mechanisms. This is a cost-effective
way of handling high-volume, small-dollar amount transactions. Credit programs
are reviewed annually, with approvals tiered on the basis of projected
outstandings as well as the maturity and performance of the product.
The Credit Transaction approach focuses on the decision to extend credit
to an individual customer or customer relationship. It starts with target market
definition and risk acceptance criteria, and requires detailed customized
financial analysis. Approval requirements for each decision are tiered based on
the transaction amount, the customer's aggregate facilities, credit risk
ratings, and the banking business serving the customer.
41
<PAGE>
Credit Programs and Credit Transactions are approved by three line credit
officers, with one designated as responsible to ensure that all aspects of the
credit process are properly coordinated and executed. As the size or risk
increases, the three approvals may include one or two Senior Credit or
Securities Officers. These individuals consist of over 500 of Citicorp's most
experienced lenders and underwriters appointed by the Credit Policy Committee,
with their designation reviewed annually. In addition, approvals from
underwriting, product, industry or functional specialists may be required. At
certain higher levels of risk, Credit Policy Committee members as well as senior
management review individual credit decisions.
Derivative And Foreign Exchange Contracts
Citicorp manages its credit exposure on derivative and foreign exchange
instruments as part of the overall extension of credit to individual customer
relationships, subject to the same credit approvals, limits and monitoring
procedures it uses for other activities, using the Credit Transaction approach.
The extension of credit in a derivative or foreign exchange contract is
the loss that could result if the counterparty were to default. In managing the
aggregate credit extension to individual customers, Citicorp measures the amount
at risk on a derivative or foreign exchange instrument as the sum of two
factors: the current replacement cost (i.e., balance sheet credit exposure), and
the potential increase in the replacement cost over the remaining life of the
instrument should market rates change.
The current replacement cost of a derivative or foreign exchange contract
is equal to the amount, if any, of Citicorp's unrealized gain on the contract.
The potential increase in replacement cost of a contract is estimated based on a
statistical simulation of values that would result from changing market rates.
See page 67 for additional details.
THE MARKET RISK MANAGEMENT PROCESS
Market risk encompasses liquidity risk and price risk, both of which are
fundamental to the business of a financial intermediary. Liquidity risk is the
risk that some entity, in some location and in some currency, will be unable to
meet a financial commitment to a customer, creditor, or investor when due. Price
risk is the risk to earnings that arises from changes in interest rates, foreign
exchange rates, equity and commodity prices, and in their implied volatilities.
The Market Risk Policy Committee serves an oversight role in the
management of all market risks. The committee is a group of Citicorp's most
senior market risk professionals, chaired by the Corporate Treasurer, which
establishes and oversees corporate market risk policies and standards to serve
as a check and balance in the business risk management process. Market risk
management is an evolutionary process which integrates changes in markets,
products, and technologies into policies and practices.
Within Citicorp, business and corporate oversight groups have well-defined
market risk management responsibilities. Within each business, a process is in
place to control market risk exposure. Management of this process begins with
the professionals nearest to Citicorp's customers, products, and markets, and
extends up to the senior executives who manage these businesses and to country
Asset/Liability Management Committees ("ALCO"). Market risk positions are
controlled by limits on exposure based on the size and nature of a business.
Risk limits are approved by the Finance and Capital Committee, which is composed
of senior management, including the Corporate Treasurer, and are overseen by the
Market Risk Policy Committee.
Periodic reviews are conducted by Corporate Audit to ensure compliance
with institutional policies and procedures for the assessment, management, and
control of market risk.
LIQUIDITY MANAGEMENT
Management of liquidity at Citicorp is the responsibility of the Corporate
Treasurer. The Country Corporate Officer and the Country Treasurer ensure that
all funding obligations in each country are met when due. The Country Treasurer
is appointed by the Market Risk Policy Committee upon the recommendation of line
management and Regional Treasurers.
The in-country forum for liquidity issues is the ALCO, which includes
senior executives within each country. The ALCO reviews the current and
prospective funding requirements for all businesses and legal entities within
the country, as well as the capital position and balance sheet. All businesses
within the country are represented on the committee with the focal point being
the Country Treasurer.
Each Country Treasurer must prepare a liquidity plan at least annually
that is approved by the Country Corporate Officer, the Regional Treasurer, and
the Market Risk Policy Committee. The liquidity profile is monitored on an
on-going basis and reported monthly. Limits are established on the extent to
which businesses in a country can take liquidity risk. The size of the limit
depends on the depth of the market, experience level of local management, the
stability of the liabilities, and liquidity of the assets.
Regional Treasurers generally have responsibility for monitoring liquidity
risk across a number of countries within a defined geography. They are also
available for consultation and special approvals, especially in unusual or
volatile market conditions.
42
<PAGE>
Citicorp's assets and liabilities are diversified across many currencies,
geographic areas, and businesses. Particular attention is paid to those
businesses which for tax, sovereign risk, or regulatory reasons cannot be freely
and readily funded in the international markets.
A diversity of funding sources, currencies, and maturities is used to gain
a broad access to the investor base. Citicorp's deposits, which represent 64%
and 66% of total funding at December 31, 1997 and 1996, respectively, are
broadly diversified by both geography and customer segments as indicated by the
charts that follow:
[GRAPHIC OMITTED]
Stockholders' equity, which grew $474 million during the year to $21.2
billion at year-end 1997, continues to be 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
year-end 1997 was $19.8 billion, compared with $18.9 billion at year-end 1996.
Asset securitization programs remain an important source of liquidity. Loans
securitized during 1997 included $7.6 billion of U.S. credit cards, $3.2 billion
of U.S. consumer mortgages, and $0.5 billion of non-U.S. consumer loans. As
credit card securitization transactions amortize, newly originated receivables
are recorded on Citicorp's balance sheet and become available for asset
securitization. In 1997, the scheduled amortization of certain credit card
securitization transactions made available $6.0 billion of new receivables. In
addition, $6.5 billion of credit card securitization transactions are scheduled
to amortize during 1998.
MANAGEMENT OF PRICE RISK EXPOSURE
Price risk is the risk to earnings from changes in interest rates, foreign
exchange rates, commodity and equity prices, and in their implied volatilities.
This exposure arises in the normal course of business of a global financial
intermediary.
Citicorp has established procedures for managing price risk within its
business units worldwide. Decentralization is the essential organizational
principle for managing price risk. It is balanced by strong centralized controls
exercised by corporate oversight bodies. The level of price risk assumed by a
business is based on its objectives and earnings, its capacity to manage risk,
and by the sophistication of its local markets. The nature of the price risk
assumed by a business varies according to the products and services it provides
and the customers it serves. Limits for each major category of risk are
established, with exposures monitored and managed by the businesses, and
reviewed monthly at the corporate level.
The Financial Accounting Standards Board ("FASB") is in the process of
finalizing a new accounting standard on derivatives and hedging. The new
standard is intended to be issued in final form in the second quarter of 1998
and to become effective on January 1, 2000 for calendar year companies such as
Citicorp. 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.
Non-Trading Portfolios
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 managed in response to changing
market conditions as well as to changes in the characteristics and mix of the
related assets and liabilities. Additional information about non-trading
derivatives is located on page 68. Citicorp does not utilize instruments with
leverage features in connection with its risk management activities.
As part of the annual planning process, limits are set for
Earnings-at-Risk on a business, country and total Citicorp basis, with exposures
reviewed on a regular basis by the Finance and Capital Committee in relation to
limits and the current interest rate environment.
Earnings-at-Risk measures the discounted pretax earnings impact over a
specified time horizon of a specified shift in the interest rate yield curve for
the appropriate currency. The yield curve shift is statistically derived as a
two standard deviation change in a short-term interest rate over the period
required to defease the position (usually four weeks). Earnings-at-Risk is
calculated separately for each currency and reflects the repricing gaps in the
position, as well as option positions, both explicit and embedded.
43
<PAGE>
Citicorp's primary non-trading price risk exposure is to movements in U.S.
dollar interest rates. As of December 31, 1997, the rate shift over a four week
defeasance period applied to the U.S. dollar yield curve for purposes of
calculating Earnings-at-Risk was 63 basis points. Citicorp also has
Earnings-at-Risk in various other currencies; however, there are no significant
risk concentrations in any individual non-U.S. dollar currency. As of December
31, 1997, the rate shifts applied to these currencies for purposes of
calculating Earnings-at-Risk over a one to four week defeasance period ranged
from 18 to 800 basis points, depending on the currency.
The table below illustrates that, as of December 31, 1997, a 63 basis
point increase in the U.S. dollar yield curve would have a potential negative
impact on Citicorp's pretax earnings of approximately $180 million for 1998, and
approximately $88 million for the five year period 1998-2002, while a two
standard deviation increase in non-U.S. dollar interest rates would have had a
potential negative impact on Citicorp's pretax earnings of approximately $25
million for 1998, and approximately $49 million for the five year period
1998-2002.
Earnings-at-Risk (impact on pretax earnings)
Assuming a U.S. Assuming a
Dollar Rate Move Non-U.S. Dollar
of Rate Move of
---------------------------------------
Two Standard Two Standard
In Millions of Dollars at Deviations (1) Deviations (1)
---------------------------------------
December 31, 1997 Increase Decrease Increase Decrease
- -----------------------------------------------------------------
Overnight to three months ($ 66) $ 75 ($11) $11
Four to six months (52) 67 (8) 8
Seven to twelve months (62) 69 (6) 6
----- ----- ---- -----
Total overnight
to twelve months (180) 211 (25) 25
- -----------------------------------------------------------------
Year two (71) 75 (25) 25
Year three 3 (9) (7) 7
Year four 65 (73) (2) 2
Year five 126 (146) 3 (3)
Effect of Discounting (31) 37 7 (7)
----- ----- ----- ----
Total ($ 88) $ 95 ($49) $49
- -----------------------------------------------------------------
(1) Total assumes a two standard deviation increase or decrease for every
currency, not taking into account any covariance between currencies.
The table below summarizes Citicorp's worldwide Earnings-at-Risk over the
next 12 months from changes in interest rates and shows a relatively stable
trend over the three year period.
Twelve Month Earnings-at-Risk (impact on pretax earnings)
U.S. Dollar Non-U.S. Dollar
In Millions of ------------------------------------------------
Dollars 1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------
Assuming a
Two Standard
Deviation Rate:
Increase ($180) ($165) ($163) ($25) ($22) ($19)
Decrease 211 191 217 25 17 19
- -----------------------------------------------------------------
The tables above illustrate that Citicorp's pretax earnings in its
non-trading activities over the next 12 months would be reduced by an increase
in interest rates and would benefit from a decrease in interest rates and are
mainly impacted by changes in U.S. dollar 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, deposits, and long-term debt. Excluding
the effects of these instruments, Citicorp's Earnings-at-Risk over the next
twelve months in its non-trading activities would be as follows:
Twelve Month Earnings-at-Risk
(excluding effect of derivatives)
U.S. Dollar (1)
-----------------------------
In Millions of Dollars 1997 1996 1995
- -----------------------------------------------------------------
Assuming a Two Standard
Deviation Rate:
Increase $64 $80 $159
Decrease (44) (70) (124)
- -----------------------------------------------------------------
(1) Excluding the effects of derivatives, Citicorp's non-U.S. dollar
Earnings-at-Risk would have had a negative $26 million impact assuming a
two standard deviation increase in rates and a positive $27 million impact
assuming a two standard deviation decrease in rates at December 31, 1997.
During 1997, the U.S. dollar Earnings-at-Risk for the following 12 months
assuming a two standard deviation increase in rates would have had a potential
negative impact ranging from approximately $142 million to $209 million in the
aggregate at each month end, compared with a range from $116 million to $204
million during 1996 and a range from $30 million to $165 million during 1995.
Similarly, during 1997, a two standard deviation increase in non-U.S. dollar
interest rates for the following twelve months would have had a potential
negative impact ranging from approximately $15 million to $33 million in the
aggregate at each month end, compared with a range from $17 million to $28
million during 1996 and a range from $5 million to $26 million during 1995.
The first table above also illustrates that the risk profile in the
one-to-two year time horizon was directionally similar, but generally tends to
reverse 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 67.
Trading Portfolios
The price risk of trading activities is measured using the Value-at-Risk method,
which estimates, at a specified confidence level, the largest potential loss in
pretax market value that could occur over a one day holding period. The
Value-at-Risk method incorporates the market factors to which the market value
of the trading position is exposed (interest rates, foreign exchange rates,
equity and commodity prices, and their implied volatilities), the sensitivity of
the position to changes in those market factors, and the volatilities and
correlations of those factors. The Value-at-Risk measurement includes the
foreign exchange risks that arise in traditional banking businesses and net
capital investments in non-U.S. operations, as well as in explicit trading
positions.
44
<PAGE>
The trading portfolios are subject to a well-defined series of
Value-at-Risk exposure limits. The daily price risk process monitors exposures
against limits and triggers specific management actions to ensure that the
potential impact on earnings, due to the many dimensions of price risk, is
managed within acceptable limits. The Finance and Capital Committee approves the
Value-at-Risk exposure limits annually and reviews usage of these exposures on a
monthly basis.
During 1997, Value-at-Risk at a 97.7% confidence level averaged $56
million 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 ranges in 1996 and 1995. The level of exposure
taken depends on the market environment and expectations of future price and
market movements, and will vary from period to period. The trading-related
revenue for 1997 was $2,107 million, compared with $1,909 million in 1996 and
$1,989 in 1995 (see "Trading-Related Revenue" on page 50). Quarterly
trading-related revenue ranged from $255 million to $570 million during 1997
compared with $392 million to $547 million in 1996, and $395 million to $558
million in 1995.
As of January 1, 1998, Citicorp adopted an amendment to the capital
adequacy guidelines, issued in 1996 by the Federal Reserve Board and other U.S.
banking regulators, incorporating price risk as an adjustment to risk-weighted
assets. In connection with adopting the amendment, Citicorp modified the
confidence level used for its Value-at-Risk calculation from 97.7% to 99%, and
refined the calculation of the covariance adjustment which reflects the
correlation among market risks.
The table below summarizes Citicorp's Value-at-Risk in its trading
portfolio as of December 31, 1997, calculated in accordance with the market risk
amendment.
Value-at-Risk
In Millions of Dollars at December 31, 1997
- -----------------------------------------------------------------
Interest Rate $ 23
Foreign Exchange 8
All Other (primarily Equity and Commodity) 8
Covariance Adjustment (14)
- -----------------------------------------------------------------
Total $ 25
- -----------------------------------------------------------------
MANAGEMENT OF CROSS-BORDER RISK
Cross-border risk is the risk that Citicorp will be unable to obtain payment
from customers on their contractual obligations as a result of actions taken by
foreign governments such as exchange controls, debt moratorium and restrictions
on the remittance of funds.
Citicorp manages cross-border risk as part of the Windows on Risk process
described on page 41. Management oversight of cross-border risk is performed
through a formal country risk review process which includes setting of
cross-border limits, at least annually, in each country in which Citicorp has
cross-border exposure, monitoring of economic conditions globally and within
individual countries with proactive action as warranted, and the establishment
of internal risk management policies. The Country Corporate Officer is required
to prepare an annual country risk review that is subject to approval by senior
management and the Windows on Risk Committee depending on the size of the
country limit, and may also be updated periodically on an as needed basis.
Cross-border limits are also established in the aggregate for certain products
that meet risk acceptance criteria.
The table on page 46 presents total cross-border outstandings on a
regulatory basis in accordance with Federal Financial Institutions Examination
Council ("FFIEC") guidelines. Total cross-border outstandings include
cross-border claims on third parties as well as investments in and funding of
local franchises.
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 on foreign exchange and derivative products. 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.
Investments in and funding of local franchises represents the excess of
local country assets over local country liabilities, as defined by the FFIEC.
Local country assets are claims on local residents recorded by branches and
majority-owned subsidiaries of Citicorp domiciled in the country, adjusted for
externally guaranteed outstandings and certain collateral. Local country
liabilities are obligations of branches and majority-owned subsidiaries of
Citicorp domiciled in the country for which no cross-border guarantee is issued
by Citicorp offices outside the country.
Effective January 1, 1997, the FFIEC revised their cross-border reporting
guidelines. 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 franchises of $8.6 billion.
The FFIEC's revised guidelines expand the scope of financial instruments
that are reported, change the reporting of some local country assets, and
increase the amount of local country liabilities that are applied to reduce
reported exposure. Specifically, net revaluation gains on derivative and foreign
exchange products are now included in the data. Local country assets that are
denominated in non-local currencies have been removed from cross-border claims
on third parties and are now included in investments in and funding of local
franchises. Local country obligations denominated in non-local currencies are
now included in the amount of local country liabilities that are applied to
reduce reported investments in and funding of local franchises.
The table on page 46 presents Citicorp's cross-border outstandings and
commitments at year-end 1997 and 1996 in accordance with current FFIEC reporting
guidelines.
45
<PAGE>
<TABLE>
<CAPTION>
Cross Border Outstandings and Commitments
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996(1)
Cross-Border Claims on Third Parties
- --------------------------------------------------------------
Investments
In Billions of Trading in and
Dollars and Funding of Total Total
- ----------------------------------------------------Short-Term Local Cross-Border Cross-Border
At Year-End Banks Public Private Total Claims(2) Franchises Outstandings Commitments(3) Outstandings Commitments(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Germany $1.5 $0.5 $0.4 $2.4 $2.3 $2.3 $4.7(4) $1.7 $2.3(5) $1.4
United Kingdom 1.5 0.5 2.5 4.5 3.3 -- 4.5(4) 7.8 4.0(4) 6.7
Italy 0.5 0.1 0.3 0.9 0.8 2.5 3.4(4) 0.5 2.0 0.3
Japan 2.4 0.2 0.6 3.2 2.8 -- 3.2(4) 1.1 2.1(5) 1.0
France 1.5 0.7 0.7 2.9 2.7 0.2 3.1(4) 0.6 1.5 0.9
Switzerland 1.2 -- 1.5 2.7 2.5 -- 2.7(5) 1.1 2.5(5) 1.2
Spain 0.3 -- 0.2 0.5 0.4 1.8 2.3(5) 0.4 1.0 0.1
Netherlands 0.7 0.3 0.9 1.9 1.5 0.3 2.2 0.8 1.3 0.5
Canada 0.8 0.1 0.4 1.3 1.1 0.3 1.6 1.8 1.4 1.4
Sweden 0.5 0.2 0.3 1.0 1.0 0.1 1.1 0.7 0.9 0.7
Belgium 0.4 0.2 0.3 0.9 0.8 -- 0.9 0.2 1.2 0.7
Finland 0.3 -- 0.4 0.7 0.5 -- 0.7 0.4 0.5 0.4
Other (21
countries) 0.9 0.4 1.8 3.1 2.3 0.9 4.0 1.6 4.5 1.9
- ------------------------------------------------------------------------------------------------------------------------------------
Europe, Canada,
and Japan 12.5 3.2 10.3 26.0 22.0 8.4 34.4 18.7 25.2 17.2
- ------------------------------------------------------------------------------------------------------------------------------------
Brazil 0.4 1.4 1.2 3.0 1.3 1.4 4.4(4) 0.1 4.9(4) 0.2
Mexico -- 2.0 0.6 2.6 1.0 0.4 3.0(5) 0.6 2.9(4) 0.1
Argentina 0.2 0.1 1.0 1.3 0.6 0.9 2.2 0.1 1.4 0.2
Chile -- 0.1 0.5 0.6 0.2 0.4 1.0 -- 1.4 0.1
Venezuela 0.1 0.7 0.1 0.9 0.2 0.1 1.0 -- 0.9 --
Colombia 0.2 -- 0.2 0.4 0.3 0.5 0.9 0.1 1.0 0.2
Peru -- 0.1 0.2 0.3 0.2 0.1 0.4 0.1 0.2 0.1
Uruguay -- 0.3 -- 0.3 0.1 -- 0.3 -- 0.3 --
Other (20
countries) 0.2 0.3 0.4 0.9 0.5 0.2 1.1 0.6 0.8 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
Latin America 1.1 5.0 4.2 10.3 4.4 4.0 14.3 1.6 13.8 1.3
- ------------------------------------------------------------------------------------------------------------------------------------
South Korea 0.5 0.2 0.8 1.5 1.4 1.1 2.6(5) 0.2 1.9 0.5
Saudi Arabia 0.7 -- 0.1 0.8 0.4 -- 0.8 0.3 0.7 0.2
Malaysia 0.1 -- 0.2 0.3 0.3 0.4 0.7 0.1 0.9 0.1
Hong Kong 0.4 -- 0.3 0.7 0.6 -- 0.7 0.3 0.2 0.3
Indonesia 0.1 -- 0.5 0.6 0.4 -- 0.6 0.2 0.9 0.3
China 0.1 -- 0.1 0.2 0.2 0.4 0.6 0.4 0.3 0.3
Singapore 0.2 -- 0.3 0.5 0.3 -- 0.5 0.3 0.7 0.4
Taiwan -- -- 0.4 0.4 0.4 -- 0.4 0.5 0.3 0.5
Thailand 0.1 -- 0.2 0.3 0.3 -- 0.3 0.1 0.9 0.3
Bahrain 0.2 0.1 -- 0.3 0.3 -- 0.3 0.1 0.2 --
Kuwait 0.2 -- -- 0.2 0.2 -- 0.2 -- 0.2 0.1
India 0.1 -- 0.1 0.2 0.1 -- 0.2 0.3 0.1 0.4
Pakistan -- 0.1 -- 0.1 0.1 0.1 0.2 -- 0.4 --
Philippines -- -- 0.2 0.2 0.1 -- 0.2 0.1 0.4 0.3
Other
(11 countries) 0.1 -- 0.2 0.3 -- -- 0.3 0.4 0.9 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
Asia/ Middle East 2.8 0.4 3.4 6.6 5.1 2.0 8.6 3.3 9.0 4.1
- ------------------------------------------------------------------------------------------------------------------------------------
Australia 0.5 -- 0.2 0.7 0.6 -- 0.7 0.4 0.8 0.1
New Zealand 0.1 -- -- 0.1 0.1 0.6 0.7 -- 0.4 --
All Other -- 1.0 0.2 1.2 1.1 0.3 1.5 0.4 1.0 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
Total Other 0.6 1.0 0.4 2.0 1.8 0.9 2.9 0.8 2.2 0.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total Citicorp $17.0 $9.6 $18.3 $44.9 $33.3 $15.3 $60.2 $24.4 $50.2 $23.1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Restated to conform to the FFIEC's current cross-border reporting
guidelines.
(2) Included in total cross-border claims on third parties.
(3) Commitments (not included in total cross-border outstandings) include
legally binding cross-border letters of credit and loan commitments.
(4) Total cross-border outstandings were in excess of 1.0% of total assets as
of the respective year-end. At December 31, 1995, based on the FFIEC's
cross-border reporting guidelines in effect at that date, countries with
total cross-border outstandings exceeding 1.0% of total assets were:
In Billions of Total
Dollars at Cross-Border
Year-End Outstandings Commitments(3)
-----------------------------------------------------
United Kingdom $7.6 $5.8
Brazil 5.1 -
Japan 3.6 0.9
Argentina 2.9 -
Mexico 2.9 -
Germany 2.7 1.2
(5) Total cross-border outstandings were between 0.75% and 1.0% of total
assets as of the respective year-end. At December 31, 1995, based on the
FFIEC's cross-border reporting guidelines in effect at that date,
countries with total cross-border outstandings between 0.75% and 1.0% of
total assets were:
In Billions of Total
Dollars at Cross-Border
Year-End Outstandings Commitments(3)
-----------------------------------------------------
Singapore $2.5 $0.3
Australia 2.4 0.3
South Korea 2.1 0.5
46
<PAGE>
Details of investments in and funding of local franchises for selected Asian
countries included in the table on page 46 at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Local Country Assets
-----------------------------------------------------------------------------
Gross
Unrealized
Gains on
Derivative and
In Billions Foreign All Local
of Dollars Consumer Commercial Exchange Other Country
at Year-End Loans Loans Contracts Assets (1) Adjustments(2) Assets
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
South Korea $0.8 $1.0 $1.2 $1.9 ($0.4) $4.5
Indonesia 0.3 0.4 0.4 1.0 (0.1) 2.0
Thailand 1.0 0.7 0.6 0.8 (0.4) 2.7
Philippines 0.3 0.9 0.1 1.3 (0.4) 2.2
Malaysia 1.3 0.8 0.2 1.4 (0.3) 3.4
<CAPTION>
Local Country Liabilities
-------------------------------
Gross
Unrealized
Losses on Investments
Derivative and All Other in and
In Billions Foreign Local Funding of
of Dollars Exchange Country Local
at Year-End Contracts Liabilities(3) Franchises
- ------------------------------------------------------------
<S> <C> <C> <C>
South Korea $1.0 $2.4 $1.1
Indonesia 0.5 1.7 -
Thailand 0.5 2.5 -
Philippines 0.1 2.1 -
Malaysia 0.1 2.9 1.4
- ------------------------------------------------------------
</TABLE>
(1) Includes deposits at interest with banks, securities, customers'
acceptance liabilities, and other monetary assets.
(2) Adjustments include externally guaranteed outstandings, locally booked
claims on nonresidents, and certain other claims as defined by the FFIEC.
(3) Primarily deposits, purchased funds and other borrowings, and acceptances
outstanding.
On January 28, 1998 an agreement in principle was reached between the
Republic of Korea and a group of international banks (including Citicorp) on a
plan to extend the maturities of short-term credits to the Korean banking
system. Under the plan, Korean banks will offer to exchange their short-term,
non-trade credits for new loans with maturities of one-, two-, or three- years,
guaranteed by the Republic of Korea, and bearing a floating rate of interest at
rates of 2.25%, 2.50%, and 2.75%, respectively, over the six-month London
Interbank Offering Rate (LIBOR). It is anticipated that the agreement will be
signed by March 31, 1998.
CAPITAL ANALYSIS
Citicorp is subject to risk-based capital guidelines issued by the Board of
Governors of the FRB. These guidelines are used to evaluate capital adequacy
based primarily on the perceived credit risk associated with balance sheet
assets, as well as certain off-balance sheet exposures such as unused loan
commitments, letters of credit, and derivative and foreign exchange contracts.
The risk-based capital guidelines are supplemented by a leverage ratio
requirement.
Citicorp Ratios
At Year-End 1997 1996
- --------------------------------------------------------------
Tier 1 Capital 8.34% 8.39%
Total Capital (Tier 1 and Tier 2) 12.31 12.23
Leverage(1) 7.01 7.42
Common Stockholders' Equity 6.21 6.63
- --------------------------------------------------------------
(1) Tier 1 capital divided by adjusted average assets.
Citicorp continued to maintain a strong capital position during 1997.
Total capital (Tier 1 and Tier 2) amounted to $31.2 billion at December 31,
1997, representing 12.31% of net risk-adjusted assets. This compares with $28.9
billion and 12.23% at December 31, 1996. Tier 1 capital of $21.1 billion at
year-end 1997 represented 8.34% of net risk-adjusted assets, compared with $19.8
billion and 8.39% at year-end 1996. The Tier 1 capital ratio at year-end 1997
exceeded 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 following table, Citicorp generated $2.2 billion and $3.0 billion of free
capital during 1997 and 1996.
Free Capital
In Millions of Dollars 1997 1996
- -----------------------------------------------------------------
Tier 1 Capital Generated:
Net Income $3,591 $3,788
Issuances/Other(1) 1,073 1,180
Cash Dividends Declared (1,105) (1,012)
------ ------
Total Tier 1 Capital Generated 3,559 3,956
Capital Utilized for Growth in Net (1,405) (926)
------ ------
Risk-Adjusted Assets
Free Capital Generated $2,154 $3,030
- -----------------------------------------------------------------
(1) Primarily includes issuance of common stock under various staff benefits
plans and the dividend reinvestment plan. Also includes issuance of
guaranteed preferred beneficial interests in subordinated debt, and the
redemption of the $175 million Series 14 Preferred Stock in 1997.
In order to return this 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. Citicorp repurchased 18.8 million and 36.1 million shares of common
stock under the program using free capital of $2.3 billion ($119.92 average cost
per share) and $3.1 billion ($85.13 average cost per share) in 1997 and 1996,
respectively. Citicorp began both 1997 and 1996 with Tier 1 capital in excess of
its target, enabling repurchases to exceed the amount of free capital generated
for each year. Since the program was initiated, Citicorp has repurchased 78.0
million shares of common stock using free capital of $6.9 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 $0.6 billion during the year
to $19.3 billion at December 31, 1997, representing 6.21% of assets, compared
with 6.63% at year-end 1996. The increase in common stockholders' equity during
the year principally reflected net income and the issuance of stock under
various staff benefit plans, partially offset by shares repurchased under the
common stock repurchase program and dividends declared on common and preferred
stock. The decrease in the common stockholders' equity ratio during the year
reflected the above items as well as the increase in total assets.
During 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
47
<PAGE>
"trust preferred securities"). The guaranteed preferred beneficial interests
outstanding at December 31, 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. Interest expense on the guaranteed preferred beneficial interests
amounted to $58 million in 1997 and less than $1 million in 1996.
In January 1998, Citicorp announced that in February 1998 it will redeem
for cash all outstanding shares of its Adjustable Rate Preferred Stock, Second
and Third Series.
In January 1998, Citicorp raised the quarterly dividend on common stock to
$.575 per share for an annual dividend rate of $2.30 per share.
Components of Capital Under Regulatory Guidelines
In Millions of Dollars at Year-End 1997 1996
- -----------------------------------------------------------------
Tier 1 Capital
Common Stockholders' Equity $19,293 $18,644
Perpetual Preferred Stock 1,903 2,078
Guaranteed Preferred Beneficial
Interests in Subordinated Debt 750 300
Minority Interest 104 91
Less: Net Unrealized Gains --
Securities Available for Sale (1) (535) (676)
Intangible Assets (2) (304) (328)
50% Investment in Certain Subsidiaries (3) (115) (313)
------- -------
Total Tier 1 Capital $21,096 $19,796
- -----------------------------------------------------------------
Tier 2 Capital
Allowance for Credit Losses (4) $ 3,198 $ 2,982
Qualifying Debt (5) 6,977 6,405
Less: 50% Investment in Certain
Subsidiaries (3) (115) (313)
------- -------
Total Tier 2 Capital 10,060 9,074
------- -------
Total Capital (Tier 1 and Tier 2) $31,156 $28,870
------- -------
- -----------------------------------------------------------------
Net Risk-Adjusted Assets (6) $252,999 $236,073
- -----------------------------------------------------------------
(1) Tier 1 capital excludes unrealized gains and losses on securities
available for sale in accordance with regulatory risk-based capital
guidelines.
(2) Includes goodwill and certain other identifiable intangible assets.
(3) For 1997, represents investment in certain overseas insurance activities.
For 1996, primarily includes investment in Citicorp Securities, Inc.
("CSI"). During 1997, the FRB eliminated the capital deduction required
for Section 20 subsidiaries, including CSI.
(4) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is
deducted from risk-adjusted assets.
(5) Includes qualifying senior and subordinated debt in an amount not
exceeding 50% of Tier 1 capital, and subordinated capital notes subject to
certain limitations.
(6) Includes risk-weighted credit equivalent amounts net of applicable
bilateral netting agreements of $13.7 billion for interest rate, commodity
and equity derivative contracts and foreign exchange contracts, as of
December 31, 1997, compared with $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.
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
December 31, 1997 all of Citicorp's subsidiary depository institutions were
"well capitalized" under the federal bank regulatory agencies' definitions.
Citibank, N.A. Ratios
At Year-End 1997 1996
- -----------------------------------------------------------------
Tier 1 Capital 8.18% 8.32%
Total Capital (Tier 1 and
Tier 2) 12.16 12.11
Leverage 6.39 6.63
Common Stockholder's Equity 6.54 6.99
- -----------------------------------------------------------------
During 1997, Citibank issued an additional $900 million of subordinated
notes to the Parent Company that qualify for inclusion in Citibank's Tier 2
Capital. Total subordinated notes outstanding at December 31, 1997 and included
in Citibank's Tier 2 Capital amounted to $5.6 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 were adopted by Citicorp on January 1, 1998,
did not 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.
48
<PAGE>
SUMMARY OF FINANCIAL RESULTS
<TABLE>
<CAPTION>
In Millions of Dollars 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Interest Revenue $11,402 $10,940 $9,951 $8,911 $7,690
Fees, Commissions, and Other Revenue 10,214 9,256 8,727 7,837 8,385
------- ------- ------ ------ ------
Total Revenue 21,616 20,196 18,678 16,748 16,075
Provision for Credit Losses 1,907 1,926 1,991 1,881 2,600
Operating Expense 13,987 12,197 11,102 10,256 10,615
------- ------- ------ ------ ------
Income Before Taxes and Cumulative Effects of Accounting Changes 5,722 6,073 5,585 4,611 2,860
Income Taxes 2,131 2,285 2,121 1,189 941
------- ------- ------ ------ ------
Income Before Cumulative Effects of Accounting Changes 3,591 3,788 3,464 3,422 1,919
Cumulative Effects of Accounting Changes(1) -- -- -- (56) 300
------- ------- ------ ------ ------
Net Income $ 3,591 $ 3,788 $3,464 $3,366 $2,219
------- ------- ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Refers to the adoption of SFAS No. 112 in 1994 and the adoption of SFAS
No. 109 in 1993.
STATEMENT OF INCOME ANALYSIS
NET INTEREST REVENUE (TAXABLE EQUIVALENT BASIS) (1)
1997 1996 1995
- --------------------------------------------------------------
Net Interest Revenue
(In Millions of Dollars)
Interest Revenue $24,535 $23,389 $22,996
Interest Expense 13,081 12,409 13,012
------- ------- -------
Net Interest Revenue 11,454 10,980 9,984
Effect of Credit Card
Securitization Activity 2,369 2,448 2,010
------- ------- -------
Total Adjusted (2) $13,823 $13,428 $11,994
- --------------------------------------------------------------
Average Interest-Earning Assets
(In Billions of Dollars)
Total $251.9 $232.0 $224.0
Effect of Credit Card
Securitization Activity 25.2 26.1 23.6
------- ------- -------
Total Adjusted (2) $277.1 $258.1 $247.6
- --------------------------------------------------------------
Net Interest Margin (%)
Total 4.55% 4.73% 4.46%
Effect of Credit Card
Securitization Activity 0.44 0.47 0.38
Total Adjusted (2) 4.99% 5.20% 4.84%
- --------------------------------------------------------------
(1) The taxable equivalent adjustment is based on the U.S. federal statutory
rate of 35%.
(2) See page 54 for discussion of the effect of credit card securitization
activity.
Net interest revenue of $11.5 billion in 1997 increased $474 million or 4% from
1996 as revenue from an increase in interest-earning assets was partially offset
by an overall decline in the net interest margin, which reflected a decline in
the yields earned on assets that exceeded a decline in rates paid on
liabilities, causing spread compression. Net interest revenue was also reduced
by the effect of foreign currency translation. From the standpoint of the Core
businesses, the increase in net interest revenue was led by loan growth in
Global Consumer, and the effect of a sharp decline in rates on interest-bearing
liabilities in Citibanking in the developed markets. Net interest revenue in
Global Corporate Banking was relatively unchanged as volume driven revenue
increases were largely offset by volume and rate impacted expense increases. Net
interest revenue was up 10% in 1996 reflecting higher net rate spreads,
including lower funding costs, and the funding benefits associated with higher
equity levels, as well as an increase in average interest-earning assets. Net
interest revenue and net interest margin for all periods presented were reduced
by the effect of credit card securitization activity. Adjusted for the effect of
credit card securitization activity, net interest revenue increased 3% in 1997
and was up 12% in 1996. The adjusted net interest margin of 4.99% in 1997 was
down from 5.20% in 1996 and up from 4.84% in 1995.
[GRAPHIC OMITTED]
Interest revenue improved 5% in 1997 primarily due to a 9% increase in
average interest-earning assets, partially offset by a 34 basis point drop in
the average yield to 9.74%. The increase largely reflected higher levels of
loans and financial markets assets in Emerging Markets, as well as increased
loans in Global Consumer, partially offset by lower yields earned on these
assets. Interest revenue in 1996 improved compared to 1995 as a result of a 4%
increase in average interest-earning assets, primarily loans, partially offset
by a decline in yields earned on most assets.
49
<PAGE>
Interest expense increased 5% in 1997 primarily due to an 8% increase in
average interest-bearing liabilities, partially offset by a 14 basis point drop
in the average rate paid to 6.09%. The increase principally reflected higher
levels of time deposits and purchased funds in Emerging Markets, including the
effect of increased rates in Asia Pacific, as well as increased borrowings in
U.S. bankcards. This increase in interest expense was partially offset by a
decline in rates paid on time deposits in Citibanking in the U.S. and Europe, as
well as a one-time charge of $64 million related to the U.S. Savings Association
Insurance Fund in 1996. Interest expense in 1996 improved by 5% compared with
1995 primarily as a result of a 6% decrease in rates paid on interest-bearing
liabilities, which was driven by a shift of the funding mix from higher rate
purchased funds to lower rate deposits, partially offset by a small increase in
total average interest-bearing liabilities.
FEES, COMMISSIONS, AND OTHER REVENUE
Fee and Commission Revenue
In Millions of Dollars 1997 1996(1) 1995(1)
- -----------------------------------------------------------------
Global Consumer:
Citibanking $1,161 $1,042 $977
Cards 1,955 1,858 1,855
Private Bank 486 430 400
------- ------- -------
Total Global Consumer 3,602 3,330 3,232
Global Corporate Banking and Other 2,118 1,990 1,828
------ ------ ------
Total Adjusted (2) 5,720 5,320 5,060
Effect of Credit Card
Securitization Activity 97 149 105
-------- ------- -------
Total $5,817 $5,469 $5,165
- -----------------------------------------------------------------
Supplemental Information:
Global Consumer businesses in:
Emerging markets $1,197 $1,083 $ 932
Developed markets 2,405 2,247 2,300
------- ------ ------
Total $3,602 $3,330 $3,232
- -----------------------------------------------------------------
(1) Reclassified to conform to the 1997 presentation.
(2) See page 54 for discussion of the effect of credit card securitization
activity.
Total fee and commission revenue of $5.8 billion in 1997 increased $348 million
or 6% from 1996. 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, fee and commission revenue in 1997 of $5.7
billion was up $400 million or 8% from 1996.
Global Consumer fee and commission revenue was up $272 million or 8% in
1997 from 1996, reflecting growth in all businesses and markets. New investment
offerings and increases in assets under management resulted in strong growth in
trust, agency, and custodial fees, primarily in the Private Bank and in
Citibanking worldwide. Growth in credit card-related fees was at a moderate rate
in the developed markets, double-digit rates in Latin America, and flat in Asia
Pacific as business volume growth was offset by the effects of foreign currency
translation. Citibanking also reflected increased fees related to deposit
accounts.
Global Corporate Banking and Other fee and commission revenue increased
$128 million or 6% from 1996, primarily reflecting increased institutional
trust, agency, and custodial fees due to growth in assets under management and
the custody business, and as a result of higher business volumes in corporate
finance in Global Relationship Banking and transaction banking services in both
Global Relationship Banking and Emerging Markets.
Total fee and commission revenue in 1996 of $5.5 billion increased $304
million or 6% from 1995. Fee revenue in Global Consumer increased 3% and
reflected double-digit growth in the emerging markets across a variety of
consumer products, particularly credit card-related and investment-related fees.
Growth in Citibanking and Private Bank fees in the developed markets was offset
by lower credit card-related fees. In Global Corporate Banking and Other, the 9%
growth in fee and commission revenue reflected higher volumes in Emerging
Markets in corporate finance, transaction banking services, and trust, agency,
and custodial fees, as well as increased transaction banking services fees in
Global Relationship Banking.
Trading-Related Revenue
In Millions of Dollars 1997 1996 (1) 1995 (1)
- -----------------------------------------------------------------
By Business Sector:
Global Corporate Banking
Emerging Markets $ 777 $ 763 $ 674
Global Relationship Banking 1,015 892 1,063
------ ------ ------
Total Global Corporate Banking 1,792 1,655 1,737
Global Consumer and Other 315 254 252
------ ------ ------
Total $2,107 $1,909 $1,989
- -----------------------------------------------------------------
By Trading Activity:
Foreign Exchange(2) $1,255 $ 926 $1,134
Derivative(3) 401 557 455
Fixed Income(4) 198 156 96
Other 253 270 304
------ ------ ------
Total $2,107 $1,909 $1,989
- -----------------------------------------------------------------
By Income Statement Line:
Foreign Exchange $1,486 $ 864 $1,053
Trading Account 241 637 559
Other(5) 380 408 377
------ ------ ------
Total $2,107 $1,909 $1,989
- -----------------------------------------------------------------
(1) Reclassified to conform to the 1997 presentation.
(2) Foreign exchange activity includes foreign exchange spot, forward, and
option contracts.
(3) Derivative activity primarily includes interest rate and currency swaps,
options, financial futures, and equity and commodity contracts.
(4) Fixed income activity principally includes debt instruments including
government and corporate debt as well as mortgage assets.
(5) Primarily net interest revenue.
50
<PAGE>
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.
Trading-related revenue totaled $2.1 billion in 1997, up $198 million or
10% from 1996. The improvement was primarily attributable to growth in foreign
exchange revenue partially offset by lower derivative results in Global
Relationship Banking and the Emerging Markets business. Trading-related revenue
of $1.9 billion in 1996 was down $80 million or 4% from 1995, attributable to
lower foreign exchange revenue in Global Relationship Banking, partially offset
by improvements in derivative results in the Emerging Markets business and fixed
income results in both businesses.
Foreign exchange revenue of $1.3 billion grew $329 million or 36% from
1996. Revenue growth was strong throughout the year and across most geographies
reflecting unusually low results in 1996, attributable to listless foreign
exchange markets in the major currencies, coupled with high volatility in
certain Asian currencies in the second half of 1997. Foreign exchange revenue of
$926 million in 1996 declined 18% from the strong 1995 level, when volatile
foreign exchange markets in the major currencies provided substantial revenue
opportunities.
Derivative revenue of $401 million declined $156 million or 28% from 1996.
The decline was broadly based across most geographies and was concentrated in
the 1997 fourth quarter when the global financial markets experienced unusual
volatility stemming from economic turmoil in certain Asian countries. Customer
demand for risk-management products remained strong, although spreads narrowed.
Derivative revenue of $557 million in 1996 rose 22% from 1995 reflecting growth
in customer demand, particularly in the Emerging Markets business.
Fixed-income revenue in 1997 of $198 million grew $42 million or 27% from
1996. The growth reflected improved results in Global Relationship Banking
partially offset by weaker results in the Emerging Markets business. The results
in Global Relationship Banking primarily reflected improvement from the
difficult 1996 period when results were adversely affected by volatile interest
rates in North America. The weak results in the Emerging Markets business were
attributable to the Asian financial turmoil in the second half of 1997.
Fixed-income revenue in 1996 increased $60 million compared with 1995 reflecting
improved emerging markets debt trading results, a higher level of commercial
real estate securitization transactions, and improved government and corporate
debt trading results in North America.
Levels of trading-related revenue may fluctuate in the future as a result
of market and asset-specific factors.
Securities Transactions
In 1997, net gains from the sale of securities were $668 million, up $458
million, compared with $210 million in 1996 and $132 million in 1995. The 1997,
1996, and 1995 amounts included gains of $324 million, $74 million, and $55
million, respectively, realized on the sale of Government of Brazil Brady bonds.
The net gains for 1997 reflected gross realized gains of $754 million and
gross realized losses of $86 million.
The fair value of securities available for sale and the related adjustment
to stockholders' equity may fluctuate over time based on general market
conditions as well as events and trends affecting specific securities.
Other Revenue
In Millions of Dollars 1997 1996 1995
- -----------------------------------------------------------------
Credit Card Securitization
Activity (1) $ 559 $ 907 $ 988
Venture Capital 749 450 390
Affiliate Earnings 255 290 208
Net Asset Gains and Other Items 439 429 232
-------- -------- --------
Total $2,002 $2,076 $1,818
- -----------------------------------------------------------------
(1) See page 54 for a discussion of credit card securitization activity.
Revenue in 1997 from credit card securitization activity decreased $348 million
or 38% from 1996, principally reflecting a higher net credit loss ratio and
lower average securitized volumes. Additionally, commencing in 1997, revenue
from credit card securitization activity included net credit losses on loans
held for sale, which totaled $126 million. The decrease in revenue in 1996
resulted from a higher net credit loss ratio, partially offset by an improved
net interest margin and higher average securitized volumes.
Venture capital revenue improved $299 million from 1996, benefiting from
buoyant U.S. equity markets including public offerings by investees. 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 1997 were down $35 million from 1996, primarily due
to lower earnings in Latin America, partially offset by an investment dividend.
Affiliate earnings in 1996 were up from 1995, largely due to improved results in
Latin America.
Net asset gains and other items in 1997 of $439 million, compared with
$429 million in 1996, reflected gains on the sale of real estate assets, the
disposition of an automated trading business, a gain related to the refinancing
agreement concluded with Peru, and the sale of an investment from an acquisition
finance portfolio, partially offset by investment writedowns of $72 million in
Latin America. Revenue in 1996 of $429 million included gains from the sale of
an automated trading business, the disposition of Citicorp's holding in an Asian
affiliate, the sale of the consumer mortgage portfolio in the U.K., and a gain
related to the Panama refinancing agreement, partially offset by investment
writedowns of $100 million in Latin America.
51
<PAGE>
PROVISION AND CREDIT LOSS RESERVES
The provision for credit losses of $1.9 billion in 1997 declined $19 million or
1% from 1996, reflecting a decline in the Global Consumer additional provision
and higher Global Corporate Banking net recoveries, partially offset by higher
net write-offs in the Global Consumer business. The provision for credit losses
declined $65 million or 3% in 1996, reflecting lower net write-offs and a
decline in the additional provision in Global Corporate Banking, partially
offset by higher net write-offs in the Global Consumer business.
Net Write-Offs, Additional Provision,
and Provision for Credit Losses
In Millions of Dollars 1997 1996 1995
- -----------------------------------------------------------------
Net Write-offs (Recoveries):
Global Consumer(1) $3,544 $3,120 $2,461
Global Corporate Banking(2) (24) (2) 148
------ ------ ------
Total Adjusted Net Write-offs 3,520 3,118 2,609
Effect of Credit Card
Securitization Activity (1,713) (1,392) (917)
------ ------ ------
Total $1,807 $1,726 $1,692
- -----------------------------------------------------------------
Additional Provision:
Global Consumer $ 100 $ 200 $ 200
Global Corporate Banking -- -- 81
------ ------ ------
Total $ 100 $ 200 $ 281
- -----------------------------------------------------------------
Provision for Credit Losses:
Global Consumer $1,931 $1,928 $1,744
Global Corporate Banking (24) (2) 247
------ ------ ------
Total $1,907 $1,926 $1,991
- -----------------------------------------------------------------
(1) Adjusted for the effect of credit card securitization activity, including
the effect related to credit card receivables held for sale commencing in
1997 (see page 54).
(2) Included in Global Corporate Banking net write-offs in 1995 are net
recoveries of $18 million related to cross-border refinancing agreements
that were credited directly to the allowance for credit losses and did not
affect the provision for credit losses.
Global Consumer net write-offs, adjusted for the effect of credit card
securitization activity, were $3.5 billion in 1997, up from $3.1 billion in 1996
and $2.5 billion in 1995, reflecting higher net credit losses in U.S. bankcards
and Asia Pacific. The increases in net write-offs were partially offset by
declines in the Citibanking and the Private Bank businesses in the United
States, and the effect of foreign currency translation. The Global Consumer
provision for credit losses included an additional provision in excess of net
write-offs of $100 million in 1997, compared with $200 million in 1996 and 1995.
Net write-offs and the total provision may increase from 1997 levels as a result
of economic conditions, particularly in the Asia Pacific region, credit
performance of the portfolios (including bankruptcies) and changes in portfolio
levels. See "Consumer Portfolio Review" on page 35 for an additional discussion.
Global Corporate Banking net recoveries in 1997 of $24 million improved
$22 million from 1996 reflecting a decline in gross write-offs in Global
Relationship Banking, partially offset by higher gross write-offs in the
Emerging Markets business, and lower, but still substantial, recoveries in both
businesses (including $50 million from the refinancing agreement concluded with
Peru). Global Corporate Banking net recoveries in 1996 of $2 million improved
$150 million from 1995 due to higher recoveries, primarily attributable to the
refinancing agreements concluded with Panama, Slovenia, and Croatia (which
aggregated $75 million) coupled with lower real-estate-related gross write-offs.
During the three years ended December 31, 1997 there were no material credit
losses related to derivative and foreign exchange contracts, standby letters of
credit, or loan commitments. During 1997, credit losses related to foreign
currency derivative contracts totaled $35 million. During 1998, Global Corporate
Banking net write-offs may increase from the 1997 level due to conditions in
Asia or other factors, but are expected to remain moderate.
All identified losses are immediately written off and the credit loss
reserves described below are available to absorb all probable credit losses
inherent in the portfolio. For analytical purposes only, Citicorp attributes its
credit loss reserves as detailed in the following table:
Credit Loss Reserves (1)
In Millions of Dollars 1997 1996 1995
- -----------------------------------------------------------------
Aggregate Allowance for Credit
Losses:
Global Consumer $2,487 $2,079 $1,944
Global Corporate Banking 3,429 3,424 3,424
------- ------- -------
Total Aggregate
Allowance for Credit Losses 5,916 5,503 5,368
Reserves for Securitization
Activities 85 473 486
------- ------- -------
Total Credit Loss Reserves $6,001 $5,976 $5,854
- -----------------------------------------------------------------
Aggregate Allowance As a Percent of Total
Loans:
Global Consumer 2.30% 1.86% 1.84%
Global Corporate Banking (2) 4.38% 5.46% 5.71%
Total 3.16% 3.15% 3.24%
- -----------------------------------------------------------------
(1) In 1997, Citicorp changed the apportionment and display of the aggregate
allowance for credit losses to report $5,816 million attributable to loans
and loan commitments as a deduction from Loans, $50 million attributable
to standby letters of credit and guarantees included in Other Liabilities,
and $50 million attributable to derivative and foreign exchange contracts
as a deduction from Trading Account Assets. Citicorp also restored to the
aggregate allowance for credit losses $373 million that had previously
been attributed to credit card securitization transactions where the
exposure to credit losses is contractually limited to the cash flows from
the securitized receivables. Reserves for securitization activities at
December 31, 1997 reflect $85 million deducted from Other Assets
attributable to mortgage loans sold with recourse. Prior year amounts have
not been reclassified.
(2) Excludes portion attributable to standby letters of credit and guarantees
and derivative and foreign exchange contacts.
52
<PAGE>
Credit loss reserves totaled $6.0 billion at December 31, 1997 and 1996,
up from $5.9 billion at December 31, 1995. The increase in the reserves
primarily reflected continued reserve building, partially offset by the effect
of foreign currency translation. Refer to the discussion on page 52 regarding
the additional provision.
Uncertainty related to the economic and credit environment, particularly
in the Asia Pacific region, as well as higher loan volumes in the Global
Consumer portfolios, may result in further increases in the allowance for credit
losses.
OPERATING EXPENSE
Total operating expense was $14.0 billion in 1997, and reflected the $889
million restructuring charge discussed below. Operating expense excluding the
charge was $13.1 billion, an increase of $901 million or 7% from 1996, (9%
excluding the effect of foreign currency translation). Excluding net OREO
benefits, expense was up 8% from 1996. The increases were principally related to
business activities in the emerging markets, a 12% increase from 1996, while
adjusted expense in the developed markets was up 6%. Total operating expense for
1996 of $12.2 billion was up $1.1 billion or 10% from 1995, 9% excluding net
OREO benefits.
Employee Expense
Employee expense was $6.6 billion in 1997, up $373 million or 6% from 1996. The
expense growth primarily reflected salary increases, higher staff levels related
to volume growth and business expansion in the emerging markets, and higher
incentive compensation. Staff levels of 93,700 at December 31, 1997 were up
4,300 or 5% from a year-ago, including an increase of 2,400 or 7% in the
emerging markets.
Employee expense in 1996 of $6.2 billion was up $518 million or 9% from
1995, also reflecting business expansion, higher staff levels, and higher
performance-based compensation.
Net Premises and Equipment Expense
Net premises and equipment expense was $2.0 billion in 1997, up $118 million or
6% from 1996. The increase primarily resulted from growth in the emerging
markets businesses and the upgrading of branches in all regions to the
Citibanking standard.
Similarly, 1996 net premises and equipment expense of $1.8 billion was up
$145 million or 9% from 1995.
Restructuring Charge
During 1997, 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 15
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 included $496 million for severance benefits and $393 million
related to writedowns of equipment and premises which management has committed
to dispose of, lease terminations, and other exit costs. These programs are
expected to be substantially completed by the end of 1998. Additional program
costs that did not qualify for recognition in the charge will be expensed as
incurred in the implementation of these programs over the next 12 to 15 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.
The $496 million for severance benefits related to approximately 9,000
positions that will be reduced. 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.
Of the total $889 million restructuring charge, approximately $245 million
of premises and equipment writedowns were recognized during 1997, based on
estimated fair values, and $39 million of reserves were utilized, primarily for
severance and related costs. Approximately 650 gross direct staff reductions
occurred during the 1997 fourth quarter. The remaining reserve 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. See Note 9 to the consolidated financial statements for
additional details regarding the restructuring charge.
Other Expense
Other expense was $4.5 billion in 1997, up $410 million or 10% from 1996. The
increase primarily reflected business expansion and investment spending to build
the franchise in the emerging markets; increased spending on technology in all
markets to improve and enhance customer service delivery mechanisms and improve
the efficiency and quality of various operating systems; costs associated with
enhanced target marketing initiatives and additional strategic product
development; and general expenses which resulted from volume increases in all
businesses.
Other expense was $4.1 billion in 1996, up $432 million or 12% from 1995.
The increase primarily reflected business expansion in the emerging markets,
investment in operational and technological infrastructure, and reengineering
efforts. The expense growth was also attributed to higher volumes and account
growth in the Cards, Citibanking, and transaction services businesses, as well
as lower Global Corporate Banking net OREO benefits.
53
<PAGE>
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, has
assessed and is repairing its computer applications and business processes to
provide for their continued functionality. An assessment of the readiness of
external entities which it interfaces with, such as vendors, counterparties,
customers, payment systems, and others, is ongoing.
Citicorp expects that the principal costs will be those associated with
the remediation and testing of its computer applications. This effort is under
way across the corporation, and is following a process of inventory, scoping and
analysis, modification, testing and certification, and implementation. A major
portion of these costs will be met from existing resources through a
reprioritization of technology development initiatives, with the remainder
representing incremental costs.
Citicorp does not anticipate that the related overall costs will be
material to any single year. In total, Citicorp's global operations and
technology organization estimates that its costs for the remediation and testing
of computer applications will amount to approximately $600 million over the
three-year period from 1997 through 1999, of which approximately $150 million
was incurred in 1997.
In addition, work is under way to prepare for the coming European monetary
union, costs of which are also not expected to be material.
INCOME TAXES
Income tax expense for 1997 was $2.1 billion, compared with $2.3 billion in 1996
and $2.1 billion in 1995, representing effective tax rates of 37% in 1997 and
38% in both 1996 and 1995. See Note 10 to the consolidated financial statements
for further details.
On August 5, 1997, the Taxpayer Relief Act of 1997 was signed into law.
The corporate tax provisions under the new law did not have a material impact on
1997 results, and are not expected to have a material impact on future liquidity
or net income.
EFFECT OF CREDIT CARD SECURITIZATION ACTIVITY
The initial and ongoing effects of adopting SFAS No. 125 in 1997 did not result
in a change in the income recognition policies for credit card securitization
activity due to immateriality. As a result, the securitization of credit card
receivables does not affect the earnings reported for each period. Revenue on
securitized receivables is recorded monthly as realized over the term of each
securitization transaction, which may range up to 12 years. The revolving nature
of the receivables sold and the monthly recognition of revenue result in a
pattern of recognition that is similar to the pattern that would be experienced
if the receivables had not been sold. However, because securitization changes
Citicorp's involvement from that of a lender to that of a loan servicer, it
removes the receivables from Citicorp's balance sheet and 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 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, which are 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 the 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 in 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.
During 1997, $7.6 billion of U.S. credit card receivables were sold,
compared with $5.3 billion and $8.9 billion during 1996 and 1995. The total
credit card receivables securitized, net of amortization as of December 31,
1997, were $26.8 billion, compared with $25.2 billion and $25.5 billion as of
December 31, 1996 and 1995. The following table 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.
In Millions of Dollars 1997 1996 1995
- ----------------------------------------------------------------
Net Interest Revenue $(2,369) $(2,448) $(2,010)
Fee and Commission Revenue 97 149 105
Other Revenue 559 907 988
Provision for Credit Losses (1,713) (1,392) (917)
- ----------------------------------------------------------------
Net Income Effect of
Securitization Activity $0 $0 $0
- ----------------------------------------------------------------
Average Assets (In Billions) $ (25) $ (26) $ (24)
Return on Assets 0.10% 0.12% 0.11%
Net Interest Margin (0.44%) (0.47%) (0.38%)
Consumer Net Credit Loss Ratio (0.92%) (0.73%) (0.44%%
- ----------------------------------------------------------------
The effect of securitization on net interest revenue and the provision for
credit losses in 1997 compared with 1996 reflected lower average securitized
volumes and higher loss ratios, while the effect in 1996 compared with 1995
reflected wider spreads and higher loss ratios.
54
<PAGE>
FINANCIAL REPORTING RESPONSIBILITY
The management of Citicorp is responsible for the preparation and fair
presentation of the financial statements and other financial information
contained in this annual report. The accompanying financial statements have been
prepared in conformity with generally accepted accounting principles appropriate
in the circumstances. Where amounts must be based on estimates and judgments,
they represent the best estimates and judgments of management. The financial
information appearing throughout this annual report is consistent with that in
the financial statements.
The management of Citicorp is also responsible for establishing and
maintaining effective internal control and procedures for financial reporting
and safeguarding of assets. There are inherent limitations in the effectiveness
of any system of internal control, and accordingly, even an effective internal
control system can provide only reasonable assurance with respect to financial
statement preparation. Management assessed Citicorp's internal control and
procedures for financial reporting and safeguarding of assets as of December 31,
1997, based on recognized criteria for effective internal control. Based on this
assessment, management believes that Citicorp maintained effective internal
control and procedures for financial reporting and safeguarding of assets as of
December 31, 1997.
The accounting policies and internal control are under the general
oversight of the Citicorp and Citibank Boards of Directors, acting through the
Audit Committees described on page 93. The committees are composed entirely of
directors who are not officers or employees of Citicorp. The Chief Auditor of
Citicorp, who reports directly to the Board of Directors, conducts an extensive
program of audits and business risk reviews worldwide. In addition, KPMG Peat
Marwick LLP, independent auditors, are engaged to audit our financial
statements.
KPMG Peat Marwick LLP obtain and maintain an understanding of Citicorp's
internal control and procedures for financial reporting and conduct such tests
and other auditing procedures as they consider necessary in the circumstances to
express the opinion in their report that follows. KPMG Peat Marwick LLP have
free access to the Audit Committees, with no members of management present, to
discuss their audit and their findings as to the integrity of Citicorp's
financial reporting and the adequacy of internal control described above.
/s/ John S. Reed
John S. Reed
Chairman
/s/ Thomas E. Jones
Thomas E. Jones
Executive Vice President
REPORT OF INDEPENDENT AUDITORS
[Logo] KPMG Peat Marwick LLP
Certified Public Accountants
The Board of Directors and Stockholders of Citicorp:
We have audited the accompanying consolidated balance sheets of Citicorp and
subsidiaries as of December 31, 1997 and 1996, the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1997, and the related
consolidated balance sheets of Citibank, N.A. and subsidiaries as of December
31, 1997 and 1996. These financial statements are the responsibility of Citicorp
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform these audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Citicorp and
subsidiaries as of December 31, 1997 and 1996, the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 1997, and the financial position of Citibank, N.A. and subsidiaries
as of December 31, 1997 and 1996 in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
January 20, 1998
55
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
Citicorp and Subsidiaries
In Millions of Dollars Except Per Share Amounts 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Revenue
Loans, including Fees $18,967 $18,509 $17,808
Deposits with Banks 995 858 770
Federal Funds Sold and Securities Purchased Under Resale Agreements 872 902 1,056
Securities, including Dividends (Note 1) 2,197 1,770 1,544
Trading Account Assets 1,012 1,310 1,785
Loans Held For Sale (Note 1) 440 -- --
------- ------- -------
24,483 23,349 22,963
------- ------- -------
Interest Expense
Deposits 9,613 8,974 8,902
Trading Account Liabilities 310 313 300
Purchased Funds and Other Borrowings (Note 1) 1,814 1,775 2,379
Long-Term Debt (Note 1) 1,344 1,347 1,431
------- ------- -------
13,081 12,409 13,012
------ ------ ------
Net Interest Revenue 11,402 10,940 9,951
------ ------ -------
Provision for Credit Losses (Note 1) 1,907 1,926 1,991
------- ------- -------
Net Interest Revenue after Provision for Credit Losses 9,495 9,014 7,960
------- ------- -------
Fees, Commissions, and Other Revenue
Fees and Commissions (Note 7) 5,817 5,469 5,165
Foreign Exchange 1,486 864 1,053
Trading Account 241 637 559
Securities Transactions (Notes 1 and 10) 668 210 132
Other Revenue 2,002 2,076 1,818
------- ------- -------
10,214 9,256 8,727
------ ------- -------
Operating Expense
Salaries 5,286 4,880 4,445
Employee Benefits (Note 8) 1,331 1,364 1,281
------ ------ ------
Total Employee Expense 6,617 6,244 5,726
Net Premises and Equipment Expense (Notes 2 and 13) 1,961 1,843 1,698
Restructuring Charge (Note 9) 889 -- --
Other Expense 4,520 4,110 3,678
------- ------- -------
13,987 12,197 11,102
------ ------ ------
Income Before Taxes 5,722 6,073 5,585
Income Taxes (Note 10) 2,131 2,285 2,121
------- ------- -------
Net Income $3,591 $3,788 $3,464
- --------------------------------------------------------------------------------------------------------
Income Applicable to Common Stock $3,451 $3,631 $3,126
------- ------- -------
Earnings Per Share (Note 11)
Basic $ 7.53 $ 7.73 $ 7.60
------- ------- -------
Diluted $ 7.33 $ 7.43 $ 6.50
- --------------------------------------------------------------------------------------------------------
</TABLE>
Accounting policies and explanatory notes on pages 61 through 81 form an
integral part of the financial statements.
56
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
Citicorp and Subsidiaries
In Millions of Dollars December 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and Due from Banks $8,585 $6,905
Deposits at Interest with Banks 13,049 11,648
Securities, at Fair Value (Note 1)
Available for Sale 30,762 26,062
Venture Capital 2,599 2,124
Trading Account Assets (Note 1) 40,356 30,785
Loans Held for Sale (Note 1) 3,515 --
Federal Funds Sold and Securities Purchased Under Resale Agreements 10,233 11,133
Loans, Net (Note 1)
Consumer 108,066 111,847
Commercial 75,947 62,765
-------- --------
Loans, Net of Unearned Income 184,013 174,612
Allowance for Credit Losses (5,816) (5,503)
-------- --------
Total Loans, Net 178,197 169,109
Customers' Acceptance Liability 1,726 2,077
Premises and Equipment, Net (Note 2) 4,474 4,667
Interest and Fees Receivable 3,288 3,068
Other Assets (Notes 1, 3, 8, and 10) 14,113 13,440
-------- --------
Total $310,897 $281,018
-------- --------
- --------------------------------------------------------------------------------------------------------------------
Liabilities
Non-Interest-Bearing Deposits in U.S. Offices $ 16,901 $14,867
Interest-Bearing Deposits in U.S. Offices 40,361 40,254
Non-Interest-Bearing Deposits in Offices Outside the U.S. 9,627 9,891
Interest-Bearing Deposits in Offices Outside the U.S. 132,232 119,943
-------- --------
Total Deposits 199,121 184,955
Trading Account Liabilities (Note 1) 30,986 22,003
Purchased Funds and Other Borrowings (Note 1) 21,231 18,191
Acceptances Outstanding 1,826 2,104
Accrued Taxes and Other Expense (Note 10) 6,464 5,992
Other Liabilities (Notes 8 and 9) 10,288 8,201
Long-Term Debt (Note 1) 19,785 18,850
Stockholders' Equity
Preferred Stock (Without par value) (Note 4) 1,903 2,078
Common Stock ($1.00 par value) (Note 5) 506 506
Issued Shares: 506,298,235 in each period
Surplus 6,501 6,595
Retained Earnings 16,789 14,303
Net Unrealized Gains-- Securities Available for Sale (Note 1) 535 676
Foreign Currency Translation (626) (486)
Common Stock in Treasury, at Cost (4,412) (2,950)
Shares: 52,355,947 in 1997 and 43,081,217 in 1996
-------- --------
Total Stockholders' Equity 21,196 20,722
-------- --------
Total $310,897 $281,018
-------- --------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Accounting policies and explanatory notes on pages 61 through 81 form an
integral part of the financial statements.
57
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Citicorp and Subsidiaries
In Millions of Dollars 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock (without par value) (Note 4)
Balance at Beginning of Year $ 2,078 $ 3,071 $ 4,187
Redemption of Perpetual Preferred Stock, Series 14 (175) -- --
Conversion of Convertible Preferred Stock, Series 12 -- (590) --
Conversions of Convertible Preferred Stock, Series 13 -- (403) (257)
Issuance of Stock -- -- 400
Redemptions of Conversion Preferred Stock, Series 15 -- -- (1,134)
Redemption and Retirement of Other Preferred Stock -- -- (125)
-------- -------- --------
Balance at End of Year $ 1,903 $ 2,078 $ 3,071
-------- -------- --------
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock ($1.00 par value) (Note 5)
Balance at Beginning of Year--Shares: 506,298,235 in 1997, 461,319,265 in 1996, and
420,589,459 in 1995 $ 506 $ 461 $ 421
Issuance of 36,875,000 Shares on Conversion of Convertible Preferred Stock, Series 12 -- 37 --
Issuance of 6,535,926 Shares on Conversions of Convertible Preferred Stock, Series 13 -- -- 6
Issuance of 21,146,076 Shares on Redemptions of Conversion Preferred Stock, Series 15 -- -- 21
Issuance of Stock under Dividend Reinvestment and Common Stock Purchase Plan
Shares: 7,882 in 1996, and 1,138,166 in 1995 -- -- 1
Issuance of Stock under Employee Benefit Plans (Note 8)
Shares: 8,096,088 in 1996, and 11,909,638 in 1995 -- 8 12
-------- -------- --------
Balance at End of Year--Shares: 506,298,235 in 1997 and in 1996, and 461,319,265 in 1995 $ 506 $ 506 $ 461
- ------------------------------------------------------------------------------------------------------------------------------------
Surplus
Balance at Beginning of Year $ 6,595 $ 5,702 $ 4,194
Issuance of Stock under Dividend Reinvestment and Common Stock Purchase Plan 15 12 53
Issuance of Stock under Employee Benefit Plans and Related Tax Benefits (Notes 8 and 10) (196) 209 405
Amortization related to Employee Benefit Plans (Note 8) 87 119 96
Issuance of Stock on Conversion of Convertible Preferred Stock, Series 12 -- 553 --
Issuance of Stock on Conversions of Convertible Preferred Stock, Series 13 -- -- 115
Issuance of Stock on Redemptions of Conversion Preferred Stock, Series 15 -- -- 855
Preferred Stock Issuance Cost and Other Activity -- -- (16)
-------- -------- --------
Balance at End of Year $ 6,501 $ 6,595 $ 5,702
- ------------------------------------------------------------------------------------------------------------------------------------
Retained Earnings
Balance at Beginning of Year $ 14,303 $ 12,190 $ 9,561
Net Income 3,591 3,788 3,464
Cash Dividends Declared - Common (Note 5) (964) (850) (492)
Cash Dividends Declared - Preferred (Note 4) (141) (162) (343)
Adjustment for Treasury Shares Issued on Conversions of Convertible
Preferred Stock, Series 13 -- (663) --
-------- -------- --------
Balance at End of Year $ 16,789 $ 14,303 $ 12,190
- ------------------------------------------------------------------------------------------------------------------------------------
Net Unrealized Gains - Securities Available for Sale (Note 1)
Balance at Beginning of Year $ 676 $ 132 $ 278
Effect of Transfer from Securities Held to Maturity to Securities Available for Sale -- -- (260)
Change in Net Unrealized Gains--Securities Available for Sale (141) 544 114
-------- -------- --------
Balance at End of Year $ 535 $ 676 $ 132
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Currency Translation
Balance at Beginning of Year $ (486) $ (437) $ (471)
Change in Foreign Currency Translation (140) (49) 34
Balance at End of Year $ (626) $ (486) $ (437)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock in Treasury, at Cost
Balance at Beginning of Year--Shares: 43,081,217 in 1997, 34,030,205 in 1996, and
25,508,610 in 1995 $ (2,950) $ (1,538) $ (401)
Repurchase of 18,836,904 Shares in 1997, 36,121,889 Shares in 1996 and 23,060,373
Shares in 1995 (2,259) (3,075) (1,526)
Delivery of 22,077,369 Shares in 1996 and 7,550,978 Shares in 1995
on Conversions of Convertible Preferred Stock, Series 13 -- 1,066 136
Delivery of 6,399,064 Shares on Redemptions of Conversion Preferred Stock, Series 15 -- -- 258
Other Transactions, including issuances under Employee Benefit Plans (Note 8)
Shares: (9,562,174) in 1997, (4,993,508) in 1996, and (588,736) in 1995 797 597 (5)
-------- -------- --------
Balance at End of Year--Shares: 52,355,947 in 1997, 43,081,217 in 1996, and 34,030,205 in 1995 $ (4,412) $ (2,950) $ (1,538)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity
Balance at Beginning of Year $ 20,722 $ 19,581 $ 17,769
Changes During the Year, Net 474 1,141 1,812
-------- -------- --------
Balance at End of Year $ 21,196 $ 20,722 $ 19,581
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Accounting policies and explanatory notes on pages 61 through 81 form an
integral part of the financial statements.
58
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Citicorp and
Subsidiaries
<CAPTION>
In Millions of Dollars 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Income $3,591 $3,788 $3,464
------- ------- -------
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Provision for Credit Losses 1,907 1,926 1,991
Depreciation and Amortization of Premises and Equipment 758 706 636
Amortization of Goodwill 39 46 49
Provision for Deferred Taxes (884) 425 (70)
Restructuring Charge 889 -- --
Venture Capital Activity (475) (270) 155
Net Gain on Sale of Securities (668) (210) (132)
Changes in Accruals and Other, Net 3,460 (2,604) 2,387
Net Increase in Loans Held for Sale (2,402) -- --
Net (Increase) Decrease in Trading Account Assets (9,571) 1,308 6,782
Net Increase (Decrease) in Trading Account Liabilities 8,983 3,729 (4,108)
------- ------- -------
Total Adjustments 2,036 5,056 7,690
------- ------- -------
Net Cash Provided by Operating Activities 5,627 8,844 11,154
------- ------- -------
Cash Flows from Investing Activities
Net Increase in Deposits at Interest with Banks (1,401) (2,620) (2,166)
Securities--Available for Sale
Purchases (52,775) (39,743) (21,198)
Proceeds from Sales 27,974 16,145 9,495
Maturities 19,339 16,662 11,853
Securities--Held to Maturity
Purchases -- -- (6,852)
Maturities -- -- 7,149
Net Decrease (Increase) in Federal Funds Sold and Securities
Purchased Under Resale Agreements 900 (3,020) (1,118)
Net Increase in Loans (116,989) (120,950) (107,853)
Proceeds from Sales of Loans and Credit Card Receivables 103,705 109,621 92,884
Capital Expenditures on Premises and Equipment (1,239) (1,392) (1,189)
Proceeds from Sales of Premises and Equipment, Subsidiaries
and Affiliates, and Other Real Estate Owned ("OREO") 1,157 1,360 1,468
------- ------- -------
Net Cash Used in Investing Activities (19,329) (23,937) (17,527)
------- ------- -------
Cash Flows from Financing Activities
Net Increase in Deposits 14,166 17,824 11,405
Net Increase (Decrease) in Federal Funds Purchased
and Securities Sold Under Repurchase Agreements 1,187 2,091 (4,193)
Commercial Paper and Funds Borrowed
with Original Maturities of Less Than One Year
Proceeds from Issuance 785,725 643,923 514,298
Repayment (782,955) (644,235) (514,656)
Proceeds from Issuance of Long-Term Debt 6,821 4,627 4,669
Repayment of Long-Term Debt (5,769) (4,241) (4,150)
Proceeds from Issuance of Preferred Stock -- -- 390
Redemption of Preferred Stock (175) -- (125)
Proceeds from Issuance of Common Stock 434 537 416
Treasury Stock Repurchases (2,259) (3,069) (1,531)
Dividends Paid (1,105) (1,012) (835)
------- ------- -------
Net Cash Provided by Financing Activities 16,070 16,445 5,688
------- ------- -------
Effect of Exchange Rate Changes on Cash and Due from Banks (688) (170) (62)
------- ------- -------
Net Increase (Decrease) in Cash and Due from Banks 1,680 1,182 (747)
Cash and Due from Banks at Beginning of Year 6,905 5,723 6,470
------- ------- -------
Cash and Due from Banks at End of Year $8,585 $6,905 $5,723
- ---------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $11,578 $11,373 $12,037
Income Taxes 2,358 1,888 1,723
Non-Cash Investing Activities
Transfers from Loans to OREO and Assets Pending Disposition 336 632 730
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Accounting policies and explanatory notes on pages 61 through 81 form an
integral part of the financial statements.
59
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
Citibank, N.A. and Subsidiaries
In Millions of Dollars December 31, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and Due from Banks $7,788 $5,947
Deposits at Interest with Banks 14,245 12,822
Securities, at Fair Value
Available for Sale 26,749 21,784
Venture Capital 2,202 1,774
Trading Account Assets 36,106 27,259
Federal Funds Sold and Securities Purchased Under Resale Agreements 9,776 8,181
Loans (Net of unearned income of $864 in 1997 and $1,030 in 1996) 153,670 143,984
Allowance for Credit Losses (4,264) (4,382)
---------- ----------
Loans, Net 149,406 139,602
Customers' Acceptance Liability 1,726 2,077
Premises and Equipment, Net 3,338 3,538
Interest and Fees Receivable 2,441 2,121
Other Assets 8,723 8,134
--------- ---------
Total $262,500 $233,239
- ----------------------------------------------------------------------------------------------------------------
Liabilities
Non-Interest-Bearing Deposits in U.S. Offices $ 13,538 $12,826
Interest-Bearing Deposits in U.S. Offices 24,932 23,977
Non-Interest-Bearing Deposits in Offices Outside the U.S. 9,394 9,605
Interest-Bearing Deposits in Offices Outside the U.S. 130,705 118,228
--------- ---------
Total Deposits 178,569 164,636
Trading Account Liabilities 27,811 20,795
Purchased Funds and Other Borrowings 16,334 12,334
Acceptances Outstanding 1,826 2,104
Accrued Taxes and Other Expense 4,003 3,588
Other Liabilities 6,862 4,104
Long-Term Debt and Subordinated Notes 9,927 9,380
Stockholder's Equity (Note 15)
Capital Stock ($20.00 par value) 751 751
Outstanding Shares: 37,534,553 in 1997 and 1996
Surplus 7,453 7,120
Retained Earnings 9,318 8,426
Net Unrealized Gains--Securities Available for Sale 345 588
Foreign Currency Translation (699) (587)
---------- ----------
Total Stockholder's Equity 17,168 16,298
---------- ----------
Total $262,500 $233,239
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Accounting policies and explanatory notes on pages 61 through 81 form an
integral part of the financial statements.
60
<PAGE>
STATEMENT OF ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Citicorp, its
wholly owned subsidiary, Citibank, N.A., and their majority-owned subsidiaries,
after the elimination of all material intercompany transactions. Twenty percent
to 50%-owned affiliates, other than venture capital investments, are accounted
for under the equity method, and the pro rata share of their income (loss) is
included in other revenue. Income from investments in less than 20%-owned
companies is recognized when dividends are received. Gains and losses on
disposition of branches, subsidiaries, affiliates, and other investments and
charges for management's estimate of impairment in value that is other than
temporary, such that recovery of the carrying amount is deemed unlikely, are
included in other revenue.
Foreign currency translation, which represents the effects of translating
into U.S. dollars, at current exchange rates, financial statements of operations
outside the U.S. with a functional currency other than the U.S. dollar, is
included in stockholders' equity along with related hedge and tax effects. The
effects of translating non-dollar financial statements of operations with the
U.S. dollar as the functional currency, including those in highly inflationary
environments, are included in other revenue along with related hedge effects.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
SECURITIES AND TRADING ACCOUNT ACTIVITIES
Marketable equity securities and debt securities available for sale are carried
at fair value, with unrealized gains and losses reported in a separate component
of stockholders' equity net of applicable income taxes. In the 1995 fourth
quarter Citicorp elected to transfer securities previously classified as held to
maturity into the available-for-sale category, in accordance with guidelines
issued by the Financial Accounting Standards Board which permitted such a
one-time election. Realized gains and losses on sales of securities are included
in earnings on a specific identified cost basis.
Citicorp's venture capital subsidiaries include subsidiaries registered as
Small Business Investment Companies and those other subsidiaries that engage
exclusively in venture capital activities. Venture capital investments are
carried at fair value, with changes in fair value recognized in other revenue.
The fair values of publicly-traded securities held by these subsidiaries are
generally based upon quoted market prices. In certain situations, including
thinly-traded securities, large-block holdings, restricted shares or other
special situations, the quoted market price is adjusted to produce an estimate
of the attainable fair value for the securities. For securities that are not
publicly traded, estimates of fair value are made based upon review of the
investee's financial results, condition, and prospects.
Trading account assets include securities and money market instruments
held in anticipation of short-term market movements and for resale to customers,
and are valued at market. Gains and losses, both realized and unrealized, are
included in trading account revenue. Obligations to deliver securities sold but
not yet purchased are also valued at market and included in trading account
liabilities.
Trading account activities also include derivative and foreign exchange
products. Derivative trading positions are carried at fair value, with realized
and unrealized gains and losses included in trading account revenue. Foreign
exchange trading positions are valued at prevailing market rates on a present
value basis, and the resulting gains and losses are included in foreign exchange
revenue. For other than short-term derivative and foreign exchange contracts,
Citicorp defers, at the inception of each contract, an appropriate portion of
the initial market value attributable to ongoing costs, such as servicing and
credit considerations, and amortizes this amount into trading account or foreign
exchange revenue over the life of the contract. The recognition of unrealized
gains on these contracts is subject to management's assessment as to
collectibility.
Revaluation gains (losses) on derivative and foreign exchange contracts
are reported gross in trading account assets (liabilities), reduced by the
effects of qualifying netting agreements with counterparties.
RISK MANAGEMENT ACTIVITIES
Citicorp manages its exposures to market rate movements outside of its trading
activities by modifying the asset and liability mix, either directly or through
the use of derivative financial products including interest rate swaps, futures,
forwards, and purchased option positions such as interest rate caps, floors, and
collars. These end-user derivative contracts include qualifying hedges and
qualifying positions that modify the interest rate characteristics of specified
financial instruments. Derivative instruments not qualifying as end-user
positions are treated as trading positions and carried at fair value.
To qualify as a hedge, the swap, futures, forward, or purchased option
position must be designated as a hedge and effective in reducing the market risk
of an existing asset, liability, firm commitment, or identified anticipated
transaction which is probable to occur.
To qualify as a position modifying the interest rate characteristics of an
instrument, there must be a documented and approved objective to synthetically
alter the market risk characteristics of an existing asset, liability, firm
commitment or identified anticipated transaction which is probable to occur, and
the swap, forward or purchased option position must be designated as such a
position and effective in accomplishing the underlying objective.
The foregoing criteria are applied on a decentralized basis, consistent
with the level at which market risk is managed, but are subject to various
limits and controls. The underlying assets, liability, firm commitment or
anticipated transaction may be an individual item or a portfolio of similar
items.
The effectiveness of these contracts is evaluated on an initial and ongoing
basis using quantitative measures of correlation. If a contract is found to be
ineffective, it no longer qualifies as an end-user position and any excess gains
and losses attributable to such ineffectiveness as well as subsequent changes in
fair value are recognized in earnings.
61
<PAGE>
End-user contracts are primarily employed in association with on-balance
sheet instruments accounted for at amortized cost, including loans, deposits,
and long-term debt, and with credit card securitizations. These qualifying
end-user contracts are accounted for consistent with the risk management
strategy as follows. Amounts payable and receivable on interest rate swaps and
options are accrued according to the contractual terms and included currently in
the related revenue and expense category as an element of the yield on the
associated instrument (including the amortization of option premiums). Amounts
paid or received over the life of futures contracts are deferred until the
contract is closed; accumulated deferred amounts on futures contracts and
amounts paid or received at settlement of forward contracts are accounted for as
elements of the carrying value of the associated instrument, affecting the
resulting yield.
End-user contracts related to instruments that are carried at fair value
are also carried at fair value, with amounts payable and receivable accounted
for as an element of the yield on the associated instrument. When related to
securities available for sale, fair value adjustments are reported in
stockholders' equity, net of tax.
If an end-user derivative contract is terminated, any resulting gain or
loss is deferred and amortized over the original term of the agreement provided
that the effectiveness criteria have been met. If the underlying designated
items are no longer held, or if an anticipated transaction is no longer likely
to occur, any previously unrecognized gain or loss on the derivative contract is
recognized in earnings and the contract is subsequently accounted for at fair
value.
Foreign exchange contracts which qualify under applicable accounting
guidelines as hedges of foreign currency exposures, including net capital
investments outside the U.S., are revalued at the spot rate with any forward
premium or discount recognized over the life of the contract in net interest
revenue. Gains and losses on foreign exchange contracts which qualify as a hedge
of a firm commitment are deferred and recognized as part of the measurement of
the related transaction, unless deferral of a loss would lead to recognizing
losses on the transaction in later periods.
LOANS
The consumer loan category represents loans managed by Citicorp's Global
Consumer businesses. Consumer loans are generally written off not 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 by loan
product and by country. The policy for suspending accruals of interest on
consumer loans varies depending on the terms, security and loan loss experience
characteristics of each product, and in consideration of write-off criteria in
place.
The commercial loan category represents loans managed by Citicorp's Global
Corporate Banking businesses. Commercial loans are identified as impaired and
placed on a cash (nonaccrual) basis when it is determined that the payment of
interest or principal is doubtful of collection, or when interest or principal
is past due for 90 days or more, except when the loan is well secured and in the
process of collection. Any interest accrued is reversed and charged against
current earnings, and interest is thereafter included in earnings only to the
extent actually received in cash. When there is doubt regarding the ultimate
collectibility of principal, all cash receipts are thereafter applied to reduce
the recorded investment in the loan. Impaired commercial loans are written down
to the extent that principal is judged to be uncollectible. Impaired
collateral-dependent loans where repayment is expected to be provided solely by
the underlying collateral and there are no other available and reliable sources
of repayment are written down to the lower of cost or collateral value.
Cash-basis loans are returned to an accrual status when all contractual
principal and interest amounts are reasonably assured of repayment and there is
a sustained period of repayment performance in accordance with the contractual
terms.
Loans include Citicorp's share of aggregate rentals on lease financing
transactions and residual values net of related unearned income. Lease financing
transactions substantially represent direct financing leases and also include
leveraged leases. Unearned income is amortized under a method which
substantially results in an approximate level rate of return when related to the
unrecovered lease investment. Gains and losses from sales of residual values of
leased equipment are included in other revenue.
Commencing January 1, 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 with net credit losses charged to other revenue.
AGGREGATE ALLOWANCE FOR CREDIT LOSSES
Commencing in 1997, Citicorp changed the apportionment and display of the
aggregate allowance for credit losses into three components. The portion
attributable to loans and loan commitments is reported as a deduction from
loans; the portion attributable to standby letters of credit and guarantees is
reported in other liabilities; and the portion attributable to derivative and
foreign exchange contracts is reported as a deduction from trading account
assets. Also during 1997, amounts that had previously been attributed to credit
card securitization transactions where the exposure to credit losses is
contractually limited to the cash flows from the securitized receivables were
restored to the portion of the allowance deducted from loans. Prior period
amounts were not reclassified for these items. The entire allowance is available
to absorb credit losses from activities involving the extension of credit.
Additions to the allowance are made by means of the provision for credit
losses charged to expense. Credit losses are deducted from the allowance, and
subsequent recoveries are added. Securities received in exchange for loan claims
in debt restructurings are initially recorded at fair value, with any gain or
loss reflected as a recovery or charge-off to the allowance, and are
subsequently accounted for as securities available for sale. The amount of the
provision is determined based on management's assessment of actual past and
expected future net credit losses, business and economic conditions, the
character, quality and performance of the portfolios, and other pertinent
indicators. This evaluation encompasses all activities involving the extension
of credit
62
<PAGE>
and also includes an assessment of the ability of borrowers with foreign
currency obligations to obtain the foreign exchange necessary for orderly debt
servicing. The resulting allowance is deemed adequate to absorb all probable
credit losses inherent in the portfolio.
Impairment of larger-balance, non-homogenous loans is measured by
comparing the net carrying amount of the loan to the present value of the
expected future cash flows discounted at the loan's effective rate, the
secondary market value of the loan, or the fair value of the collateral for
collateral-dependent loans. A valuation allowance is established if necessary
within the portion of the allowance deducted from loans. Smaller balance,
homogenous loans, including consumer mortgage, installment, revolving credit and
most other consumer loans, are collectively evaluated for impairment.
OTHER REAL ESTATE OWNED
Upon repossession, loans are adjusted if necessary to the estimated fair value
of the underlying collateral and transferred to Other Real Estate Owned
("OREO"), which is reported in other assets net of a valuation allowance for
selling costs and net declines in value as appropriate.
EMPLOYEE BENEFITS
Employee benefits expense includes prior and current service costs of pension
and other postretirement benefit plans, which are accrued on a current basis,
contributions and unrestricted awards under other employee plans, the
amortization of restricted stock awards, and costs of other employee benefits.
There are no charges to earnings upon the grant or exercise of fixed stock
options or the subscription for or purchase of stock under stock purchase
agreements. Compensation expense related to performance-based stock options is
recorded over the period to the estimated vesting dates.
Upon issuance of previously unissued shares under employee plans, proceeds
received in excess of par value are credited to surplus. Upon issuance of
treasury shares, the difference between the proceeds received and the average
cost of treasury shares is recorded in surplus.
INCOME TAXES
Deferred taxes are recorded for the future tax consequences of events that have
been recognized in the financial statements or tax returns, based upon enacted
tax laws and rates, including an appropriate provision for taxes on
undistributed income of subsidiaries and affiliates. Deferred tax assets are
recognized subject to management's judgment that realization is more likely than
not.
SECURITIZATION OF CREDIT CARD RECEIVABLES
The initial and ongoing effects of adopting Statement of Financial Accounting
Standards ("SFAS") No. 125 during 1997 did not result in a change in the income
recognition policies for credit card securitization activity due to
immateriality. Revenue from securitized credit card receivables is recorded
monthly as realized over the term of each securitization transaction. The
revolving nature of the receivables sold and the monthly recognition of revenue
result in a pattern of recognition that is similar to the pattern that would be
experienced if the receivables had not been securitized.
Because securitization changes Citicorp's involvement from that of a
lender to that of a loan servicer, it causes the receivables to be removed from
the balance sheet and affects the manner in which the amounts are classified in
the statement of income. For securitized receivables, amounts that would
otherwise be reported as net interest revenue, as fee and commission revenue,
and as 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). Citicorp's exposure to credit
losses on the securitized receivables is contractually limited to these cash
flows.
EARNINGS PER SHARE
In the fourth quarter of 1997, Citicorp adopted SFAS No. 128, Earnings per Share
("SFAS No. 128"), which establishes new standards for computing and presenting
earnings per share. As required by the standard, all prior-period earnings per
share data have been restated.
Under SFAS No. 128, basic earnings per share excludes dilution and is
computed by dividing income applicable to common stock (net income after
deducting preferred stock dividends) by the weighted-average number of common
shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or otherwise resulted in the issuance of common
stock, and is computed similarly to "fully diluted" earnings per share that was
reported under previous accounting standards. Under the new rules, computations
of dilutive effects are based upon the average market price of the common stock
during the reported period, while under the old rules the end of period market
price would be used if more dilutive.
Citicorp's diluted earnings per share reflects any dilutive effects of
stock options, stock purchase agreements, conversion preferred stock,
convertible preferred stock, forward purchase contracts on common stock, and
shares issuable under deferred stock awards.
The dilutive effects of stock options and stock purchase agreements are
computed using the treasury-stock method. Prior to redemption or conversion into
common shares, Conversion Preferred Stock, Series 15 and convertible preferred
stock are included in the diluted computation, using the if-converted method, if
dilutive. Shares deliverable under forward purchase contracts on Citicorp common
stock (see Note 5) are included to the extent that the forward price exceeds the
market price of the common stock. Shares receivable by Citicorp under forward
contracts are not deducted from the number of shares used in the computation
until the final number of shares to be received has been determined. Shares
issuable under deferred stock awards are included in the computation and the
amount of after-tax dividend equivalents on shares issuable is added back to
income applicable to common stock.
CASH FLOWS
Cash flows from risk management activities are classified in the same category
as the related assets and liabilities. Cash equivalents are defined as those
amounts included in cash and due from banks.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL INSTRUMENTS
Citicorp provides a wide variety of financial instruments as products to its
customers, and it also uses these instruments in connection with its own
activities. Following are explanatory notes regarding financial assets and
liabilities, off-balance sheet financial instruments, credit loss reserves,
concentrations of credit risk, and the estimated fair value of financial
instruments. Collateral requirements are made on a case-by-case evaluation of
each customer and product, and may include cash, securities, receivables, real
estate, and other assets.
A. Financial Assets and Liabilities
Loans
In Millions of Dollars
at Year-End 1997 1996
- -----------------------------------------------------------------
Consumer
In U.S. Offices
Mortgage and Real Estate (1)(2)(3) $22,599 $23,421
Installment, Revolving Credit,
and Other (1) 35,747 36,285
--------- ----------
58,346 59,706
- -----------------------------------------------------------------
In Offices Outside the U.S.
Mortgage and Real Estate (2) (4) 17,685 18,379
Installment, Revolving Credit, 32,179 33,905
and Other
Lease Financing 544 754
----------- ------------
50,408 53,038
- -----------------------------------------------------------------
108,754 112,744
Unearned Income (688) (897)
----------- ------------
Consumer Loans - Net of Unearned
Income $108,066 $111,847
- -----------------------------------------------------------------
Commercial
In U.S. Offices
Commercial and Industrial (5) $11,234 $8,747
Mortgage and Real Estate (2) 2,398 2,977
Loans to Financial Institutions 371 1,035
Lease Financing 3,087 3,017
---------- ----------
17,090 15,776
- -----------------------------------------------------------------
In Offices Outside the U.S.
Commercial and Industrial (5) 47,417 36,901
Mortgage and Real Estate (2) 1,651 1,815
Loans to Financial Institutions 6,480 4,837
Governments and Official 2,376 2,252
Institutions
Lease Financing 1,092 1,294
---------- -----------
59,016 47,099
- -----------------------------------------------------------------
76,106 62,875
Unearned Income (159) (110)
----------- ------------
Commercial Loans - Net of
Unearned Income $75,947 $62,765
- -----------------------------------------------------------------
(1) Commencing in 1997, Citicorp classifies credit card and mortgage loans
intended for sale as loans held for sale. In 1996, includes $1.1 billion
of mortgage loans held for sale carried at the lower of aggregate cost or
market value.
(2) Loans secured primarily by real estate.
(3) Includes $3.4 billion in 1997 and $3.8 billion in 1996 of commercial real
estate loans related to community banking and private banking activities.
(4) Includes $2.3 billion in 1997 and $2.7 billion in 1996 of loans secured by
commercial real estate.
(5) Includes loans not otherwise separately categorized.
The following table presents information about impaired loans. Impaired loans
are those on which Citicorp believes it is not probable that it will be able to
collect all amounts due according to the contractual terms of the loan,
excluding smaller-balance homogeneous loans that are evaluated collectively for
impairment, and are carried on a cash basis:
In Millions of Dollars at Year-End 1997 1996
- -----------------------------------------------------------------
Impaired Commercial Loans $ 971 $ 868
Other Impaired Loans(1) 241 360
-------- --------
Total Impaired Loans(2) $1,212 $1,228
- -----------------------------------------------------------------
Impaired Loans with Valuation
Allowances $ 98 $ 186
Total Valuation Allowances(3) 16 32
- -----------------------------------------------------------------
During the Year:
Average Balance of Impaired
Loans $1,188 $1,657
Interest Income Recognized on
Impaired Loans 62 116
- -----------------------------------------------------------------
(1) Primarily commercial real estate loans related to community and private
banking activities.
(2) At year-end 1997, approximately 39% of these loans were measured for
impairment using the fair value of the collateral, with the remaining 61%
measured using the present value of the expected future cash flows,
discounted at the loan's effective interest rate, compared with
approximately 44% and 56%, respectively, at year-end 1996.
(3) Included in the allowance for credit losses.
64
<PAGE>
Securities
<TABLE>
<CAPTION>
1997 1996
------------------------------------------ ------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
In Millions of Dollars at Year-End Cost Gains Losses Value Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities Available for Sale
U.S. Treasury and Federal Agency $4,031 $58 $ 2 $ 4,087 $4,048 $46 $5 $4,089
State and Municipal 2,616 206 115 2,707 2,327 133 55 2,405
Foreign Government 18,106 826 262 18,670 14,056 1,062 180 14,938
U.S. Corporate 1,809 157 101 1,865 1,586 67 65 1,588
Other Debt Securities 1,198 10 79 1,129 1,129 11 11 1,129
Equity Securities(1) 2,131 235 62 2,304 1,870 119 76 1,913
------- ------ ---- ------- ------- ------ ---- -------
$29,891 $1,492 $621 $30,762 $25,016 $1,438 $392 $26,062
------- ------ ---- ------- ------- ------ ---- -------
- ------------------------------------------------------------------------------------------------------------------------------------
Venture Capital $ 2,599 $2,124
- ------------------------------------------------------------------------------------------------------------------------------------
Securities Available for Sale Include:
Mortgage-Backed Securities $ 1,091 $ 12 $ 2 $ 1,101 $1,064 $ 7 $ 3 $1,068
Government of Brazil Brady Bonds 1,436 612 -- 2,048 1,463 872 -- 2,335
Government of Venezuela Brady Bonds 535 -- 55 480 563 -- 81 482
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Includes non-marketable equity securities carried at cost which are reported
in both the amortized cost and fair value columns. The amortized cost of
non-marketable equity securities was $1,112 million and $896 million, and the
estimated fair value was $1,172 million and $929 million at December 31, 1997
and 1996, respectively.
Not included in the table above are securities available for sale held by
unconsolidated affiliates carried on the equity method of accounting. At
December 31, 1997 and 1996, the gross unrealized gains related to these
securities were $19 million and $9 million, respectively, and gross unrealized
losses were $8 million and $4 million, respectively, which are included in the
net unrealized gains--securities available for sale component of stockholders'
equity, net of applicable taxes.
The accompanying table shows components of interest and dividends on
securities, net gains from sales of securities available for sale, and net gains
on investments held by venture capital subsidiaries.
In Millions of Dollars 1997 1996 1995
- -----------------------------------------------------------------
Taxable Interest $1,966 $1,600 $1,391
Interest Exempt from U.S. Federal
Income Tax 136 87 89
Dividends 95 83 64
- -----------------------------------------------------------------
Gross Realized Securities Gains $ 754 $ 261 $ 177
Gross Realized Securities Losses 86 51 45
- -----------------------------------------------------------------
Net Realized and Unrealized
Venture Capital Gains $749 $ 450 $ 390
Which Included:
Gross Unrealized Gains 612 416 487
Gross Unrealized Losses 82 150 300
- -----------------------------------------------------------------
The following table presents the amortized cost, fair value, and average
yield on amortized cost of debt securities available for sale by contractual
maturity dates as of December 31, 1997:
Amortized Fair
In Millions of Dollars Cost Value Yield
- -----------------------------------------------------------------
U.S. Treasury and Federal
Agency
Due Within 1 Year $1,787 $1,786 5.29%
After 1 but Within 5 Years 1,194 1,240 6.70
After 5 but Within 10 Years 208 174 6.16
After 10 Years(1) 842 887 7.28
------- -------
Total $4,031 $4,087 6.16
- -----------------------------------------------------------------
State and Municipal
Due Within 1 Year $ -- $ -- $ --%
After 1 but Within 5 Years 64 56 5.19
After 5 but Within 10 Years 719 733 5.70
After 10 Years(1) 1,833 1,918 6.45
------- -------
Total $2,616 $2,707 6.21
- -----------------------------------------------------------------
All Other(2)
Due Within 1 Year $6,821 $6,770 11.61%
After 1 but Within 5 Years 7,733 7,677 6.82
After 5 but Within 10 Years 2,645 2,604 6.98
After 10 Years(1) 3,914 4,613 8.41
------- -------
Total $21,113 $21,664 8.68
- -----------------------------------------------------------------
(1) Securities with no stated maturities are included as contractual
maturities of greater than 10 years. Actual maturities may differ due to
call or prepayment rights.
(2) Includes foreign government, U.S. corporate, and other debt securities.
Yields reflect the impact of local interest rates prevailing in countries
outside the U.S.
65
<PAGE>
Trading Account Assets and Liabilities
In Millions of Dollars at Year-End 1997 1996
- ----------------------------------------------------------------
Trading Account Assets
U.S. Treasury and Federal Agency $3,431 $ 2,560
Securities
State and Municipal Securities 108 123
Foreign Government, Corporate
and Other 12,352 10,607
Securities
Derivative and Foreign Exchange
Contracts (1) 24,465 17,495
------- -------
$40,356 $30,785
- ----------------------------------------------------------------
Trading Account Liabilities
Securities Sold, Not Yet Purchased $5,769 $4,036
Derivative and Foreign Exchange 25,217 17,967
Contracts (1) $30,986 $22,003
- ----------------------------------------------------------------
(1) Net of master netting agreements and securitization. In addition, the
asset balance at December 31, 1997 is reduced by $50 million of credit
loss reserves (see Credit Loss Reserves on page 69).
The average fair value of trading account assets during 1997 was $35.1 billion,
including $20.3 billion relating to derivative and foreign exchange contracts,
compared with $32.5 billion and $15.4 billion, respectively, during 1996. The
average fair value of trading account liabilities during 1997 was $26.6 billion,
including $21.6 billion relating to derivative and foreign exchange contracts,
compared with $19.9 billion and $15.3 billion, respectively, during 1996.
Deferred revenue on derivative and foreign exchange contracts,
attributable to ongoing costs such as servicing and credit considerations,
totaled $391 million and $310 million at December 31, 1997 and 1996,
respectively, which is reported in Other Liabilities. Commitments to purchase
when-issued securities were $3 million and $465 million at December 31, 1997 and
1996, respectively.
Purchased Funds and Other Borrowings (1)
In Millions of Dollars
at Year-End 1997 1996
- -----------------------------------------------------------------
Federal Funds Purchased and
Securities Sold
under Repurchase Agreements $11,182 $9,995
Commercial Paper Issued by
Parent Company 1,941 775
The Student Loan Corporation -- 463
(80% owned)
Other Funds Borrowed 8,108 6,958
------- -------
Total $21,231 $18,191
- -----------------------------------------------------------------
(1) Original maturities of less than one year.
Long-Term Debt (1)
In Millions of Dollars
at Year-End 1997 1996
- -----------------------------------------------------------------
Various
Various Floating
Fixed-Rate Rate
Obligations(2) Obligations(2) Total Total
- -----------------------------------------------------------------
Parent Company
Due in 1997 $ -- $ -- $ -- $1,649
Due in 1998 409 409 818 1,242
Due in 1999 668 774 1,442 1,717
Due in 2000 406 1,736 2,142 1,046
Due in 2001 618 930 1,548 902
Due in 2002 461 1,119 1,580 796
Due in 2003-2007 3,506 1,254 4,760 3,898
Due in 2008-2012 1,776 115 1,891 1,368
Due after 2012 61 357 418 545
--------- -------- -------- --------
7,905(3) 6,694 14,599 13,163
--------- -------- -------- --------
Subsidiaries(4)
Due in 1997 -- -- -- 1,524
Due in 1998 999 346 1,345 1,843
Due in 1999 615 119 734 741
Due in 2000 455 104 559 398
Due in 2001 220 89 309 362
Due in 2002 889 77 966 78
Due in 2003-2007 68 208 276 246
Due in 2008-2012 43 88 131 94
Due after 2012 757 109 866 401
-------- -------- ------- -------
4,046 1,140 5,186 5,687
-------- -------- ------- -------
Total $11,951 $7,834 $19,785 $18,850
- -----------------------------------------------------------------
(1) Original maturities of one year or more. Maturity distribution is based
upon contractual maturities or earlier dates at which debt is repayable at
the option of the holder, due to required mandatory sinking fund payments
or due to call notices issued.
(2) Based on contractual terms. Repricing characteristics may be effectively
modified from time to time using derivative contracts.
(3) All of the parent company long-term fixed rate obligations have been
synthetically converted to floating rates by the use of derivative
contracts (primarily swaps).
(4) Approximately 14% in 1997 and 5% in 1996 of subsidiary long-term debt was
guaranteed by Citicorp, and of the debt not guaranteed by Citicorp,
approximately 12% in 1997 and 35% in 1996 was secured by the assets of the
subsidiary.
Long-term debt is denominated in various currencies with both fixed and floating
interest rates, summarized below. Certain of the agreements under which
long-term debt obligations were issued prohibit Citicorp, under certain
conditions, from paying dividends in shares of Citibank capital stock and from
creating encumbrances on such shares. Floating rates are determined periodically
by formulas based on certain money market rates or, in certain instances, by
minimum rates as specified in the governing agreements. A portion of Parent
Company and subsidiary debt represents local currency borrowings where
prevailing rates may vary significantly from rates in the United States.
1997 1996
- ---------------------------------------------- --------------------------
Weighted- Weighted-
In %'s Range Average(1) Range Average(1)
- ---------------------------------------------- --------------------------
Parent Company
Fixed rate (2) 2.42 to 10.60 7.42 2.42 to 10.50 7.32
Floating rate (3) 4.03 to 7.03 5.95 3.50 to 8.23 5.99
Subsidiaries (4)
Fixed rate 1.03 to 18.69 7.49 3.50 to 18.69 9.07
Floating rate 3.00 to 34.69 17.17 3.00 to 32.84 11.51
- ---------------------------------------------------------------------------
(1) Reflects contractual interest rates. The overall weighted average interest
rate for long-term debt in 1997 was 7.50% on a contractual basis and 6.96%
including the effects of derivative contracts.
(2) Predominantly denominated in U.S. dollars (94% in 1997 and 96% in 1996) ,
Japanese yen, and German marks, and matures over the period to 2035.
(3) Predominantly denominated in U.S. dollars (95% in 1997 and 96% in 1996)
and matures over the period to 2035.
(4) Denominated in U.S. dollars (38% in 1997 and 47% in 1996) and various
foreign currencies including Australian dollars, Dutch guilders, Chilean
pesos, Malaysian ringgit, and Italian lire. Fixed and floating rate debt
matures over the period to 2027 and 2017, respectively.
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<PAGE>
Included in long-term debt are $0.8 billion of subordinated capital notes
at December 31, 1997 and 1996, certain of which require Citicorp to exchange the
notes at maturity or at certain other specified times for capital securities
that have a market value equal to the principal amounts of the notes or, at
Citicorp's option, to pay the principal of the notes from amounts representing
designated proceeds from the sale of capital securities. At the option of
Citicorp, the exchange or the proceeds from sale, as applicable, may be for or
from common stock, non-redeemable preferred stock, or other marketable capital
securities of Citicorp. Citicorp has designated proceeds from the sales of
capital securities in an amount sufficient to satisfy all the dedication
commitments of its subordinated capital notes.
Also included in long-term debt at December 31,1997 are $750 million of
guaranteed preferred beneficial interests in Citicorp subordinated debt issued
by Citicorp Capital I and II, wholly-owned trusts whose sole assets are $309
million of 7.93% and $464 million of 8.015%, respectively, of Junior
Subordinated Deferrable Interest Debentures of Citicorp due 2027. Long-term debt
at December 31, 1996 included $300 million related to Citicorp Capital I. Under
the terms of these arrangements, taken as a whole, Citicorp has provided a full
and unconditional guarantee on a subordinated basis of payments due.
B. Off-Balance Sheet Financial Instruments
In addition to the financial assets and liabilities discussed above, Citicorp's
financial instruments include off-balance sheet products. The market and credit
risks associated with these products, as well as the operating risks, are
similar to those relating to other types of financial instruments, and Citicorp
manages these risks in a consistent manner.
Derivative and Foreign Exchange Contracts
Notional
Principal Balance Sheet
Amounts Credit
Exposure(1)
------------------ ------------------
In Billions of Dollars
at Year-End 1997 1996 1997 1996
- -----------------------------------------------------------------
Interest Rate Products
Futures Contracts $139.1 $160.6 $ -- $ --
Forward Contracts 282.7 132.7 0.1 0.1
Swap Agreements 627.0 476.2 9.5 9.4
Purchased Options 105.7 126.7 1.2 1.2
Written Options 143.8 192.3 -- --
Foreign Exchange
Products
Futures Contracts 0.9 0.7 -- --
Forward Contracts 1,317.0 1,146.7 28.8 17.6
Cross-Currency Swaps 58.9 44.0 3.3 1.8
Purchased Options 163.3 101.1 3.7 1.7
Written Options 184.2 104.5 -- --
Equity Products 61.6 22.2 2.0 0.7
Commodity Products 14.7 12.5 0.8 0.5
Credit Derivative
Products 6.9 1.9 -- --
---- ----
49.4 33.0
Effects of Master Netting
Agreements (2) (24.1) (15.5)
Effects of
Securitization (3) (0.8) --
----- -----
$24.5 $17.5
----- -----
- -----------------------------------------------------------------
(1) There is no balance sheet credit exposure for futures contracts because
they settle daily in cash, and none for written options because they
represent obligations (rather than assets) of Citicorp. Amounts do not
reflect credit loss reserves attributable to derivative and foreign
exchange contracts.
(2) Master netting agreements mitigate credit risk by permitting the offset of
amounts due from and to individual counterparties in the event of
counterparty default.
(3) Citibank has securitized and sold net receivables, and the associated
credit risk related to certain derivative and foreign exchange contracts
via Citibank Capital Markets Assets Trust.
Citicorp enters into derivative and foreign exchange futures, forwards, options,
and swaps, which enable customers to transfer, modify, or reduce their interest
rate, foreign exchange, and other market risks, and also trades these products
for its own account. In addition, Citicorp uses derivatives and other
instruments, primarily interest rate products, as an end-user in connection with
its risk management activities. Derivatives are used to manage interest rate
risk relating to specific groups of on-balance sheet assets and liabilities,
including commercial and consumer loans, deposit liabilities, long-term debt,
and other interest-sensitive assets and liabilities, as well as credit card
securitizations. In addition, foreign exchange contracts are used to hedge net
capital exposures and foreign exchange transactions. Through the effective use
of derivatives, Citicorp has been able to modify the volatility of its revenue
from asset and liability positions. The preceding table presents the aggregate
notional principal amounts of Citicorp's outstanding derivative and foreign
exchange contracts at December 31, 1997 and 1996, along with the related balance
sheet credit exposure. The table includes all contracts with third parties,
including both trading and end-user positions.
Futures and forward contracts are commitments to buy or sell at a future
date a financial instrument, commodity, or currency at a contracted price, and
may be settled in cash or through delivery. Swap contracts are commitments to
settle in cash at a future date or dates, based on differentials between
specified financial indices, as applied to a notional principal amount. Option
contracts give the purchaser, for a fee, the right, but not the obligation, to
buy or sell within a limited time a financial instrument or currency at a
contracted price that may also be settled in cash, based on differentials
between specified indices.
Market risk on a derivative or foreign exchange product is the exposure
created by potential fluctuations in interest rates, foreign exchange rates, and
other values, and is a function of the type of product, the volume of
transactions, the tenor and terms of the agreement, and the underlying
volatility. Credit risk is the exposure to loss in the event of nonperformance
by the other party to the transaction. The recognition in earnings of unrealized
gains on these transactions is subject to management's assessment as to
collectibility.
Balance sheet credit exposure represents the current cost of replacing the
contracts and is equal to the amount of Citicorp's unrealized gain. As measured
by Citicorp in connection with the management of overall credit relationships
with individual customers, total exposure on derivative and foreign exchange
contracts also includes the potential increase in replacement cost estimated
based on a statistical simulation of values that would result from a change in
market rates. In the aggregate for all contracts, the estimate of the potential
increase in replacement cost ranged from approximately $33.1 billion to $42.3
billion during 1997. Substantially all of the total exposure was to
counterparties considered by Citicorp to be investment grade; the substantial
majority was under three years tenor. At December 31,1997, the balance sheet
credit exposure of foreign currency derivative contracts for which the
recognition of revaluation gains had been suspended amounted to $59 million.
There were no significant non-performing contracts in 1996. For the three years
ended December 31, 1997 there were no material credit losses related to
derivative and foreign exchange contracts. During 1997, credit losses related to
foreign currency derivative contracts totaled $35 million.
67
<PAGE>
<TABLE>
End-User Derivative Interest Rate and Foreign Exchange Contracts
<CAPTION>
Notional Principal
Amounts(1) Percentage of 1997 Amount Maturing
------------------------------------------------------------------------------------
Dec. 31, 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 $29.3 $23.4 63% 27% 10% --% --% --%
Forward Contracts 6.9 3.6 97 3 -- -- -- --
Swap Agreements 106.0 111.9 35 15 11 11 9 19
Option Contracts 20.1 71.4 68 16 10 1 2 3
Foreign Exchange Products
Futures and Forward Contracts 62.4 60.9 93 5 1 -- 1 --
Cross-Currency Swaps 3.4 2.9 8 8 14 11 41 18
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes third-party and intercompany contracts.
<TABLE>
End-User Interest Rate Swaps and Net Purchased Options as of December 31, 1997
<CAPTION>
Remaining Contracts Outstanding--Notional Principal Amounts
-------------------------------------------------------------------------
In Billions of Dollars at Year-End 1997 1998 1999 2000 2001 2002
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Receive Fixed Swaps $ 81.8 $ 59.0 $ 46.7 $ 35.3 $ 24.6 $ 16.1
Weighted-Average Fixed Rate 6.5% 6.7% 6.6% 6.6% 6.7% 6.8%
Pay Fixed Swaps 13.7 7.7 5.4 4.6 4.1 3.5
Weighted-Average Fixed Rate 6.8% 7.1% 6.7% 6.8% 6.8% 7.1%
Basis Swaps 10.5 1.8 0.3 0.3 0.2 0.2
Purchased Caps (Including Collars) 10.0 4.9 1.8 -- -- --
Weighted-Average Cap Rate Purchased 6.4% 6.8% 7.1% -- % -- % -- %
Purchased Floors 2.0 0.1 0.1 0.1 0.1 0.1
Weighted-Average Floor Rate Purchased 5.5% 5.8% 5.8% 5.8% 5.8% 5.8%
Written Floors Related to Purchased Caps (Collars) 1.0 0.2 0.2 -- -- --
Weighted-Average Floor Rate Written 6.0% 8.2% 8.2% -- % -- % -- %
Written Caps Related to Other Purchased Caps(1) 7.1 1.2 1.1 1.1 0.9 0.5
Weighted-Average Cap Rate Written 6.8% 8.6% 8.4% 8.4% 8.3% 9.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Three-Month Forward LIBOR Rates(2) 5.8% 5.9% 6.1% 6.1% 6.1% 6.3%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes written options related to purchased options embedded in other
financial instruments.
(2) Represents the implied forward yield curve for three-month LIBOR as of
December 31, 1997, provided for reference.
The tables above 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 year-end 1997 with
three-month LIBOR forward rates included for reference. The tables are intended
to provide an overview of these components of the end-user portfolio, but should
be viewed only in the context of Citicorp's related assets and liabilities.
The net impact on Citicorp's pretax earnings of end-user derivatives was
an increase of $76 million during 1997 and $143 million during 1996.
The majority of derivative positions used in Citicorp's asset and
liability management activities are established via intercompany transactions
with independently managed Citicorp dealer units, with the dealer acting as a
conduit to the marketplace. Contract maturities are related to the underlying
risk management strategy.
Citicorp's utilization of these instruments 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. In this
connection, during 1997 interest rate futures, swaps and options with a notional
principal amount of $22.4 billion were closed out which resulted in a net
deferred loss of approximately $67 million. Total unamortized net deferred
losses, including those from prior year close-outs, were approximately $63
million at December 31, 1997, which will be amortized into earnings over the
remaining life of the original contracts (approximately 71% in 1998, 19% in
1999, and 10% in subsequent years), consistent with the risk management
strategy.
Loan Commitments
In Billions of Dollars at Year-End 1997 1996
- ----------------------------------------------------------------
Unused Commercial Commitments to Make or
Purchase Loans, to Purchase Third-Party
Receivables, and to Provide Note Issuance
or Revolving Underwriting Facilities $107.0 $ 89.9
- ----------------------------------------------------------------
Unused Credit Card and Other Consumer
Revolving Commitments $126.8 $119.9
- ----------------------------------------------------------------
The majority of unused commitments are contingent upon customers maintaining
specific credit standards. Commercial commitments generally have floating
interest rates and fixed expiration dates and may require payment of fees. Such
fees (net of certain direct costs) are deferred and, upon exercise of the
commitment, amortized over the life of the loan or, if exercise is deemed
remote, amortized over the commitment period. The table does not include
commercial letters of credit issued on behalf of customers and collateralized by
the underlying shipment of goods which totaled $5.8 billion at December 31, 1997
and $5.6 billion at December 31, 1996.
68
<PAGE>
Loans Sold with Credit Enhancements
Amounts
------------------
In Billions of 1997 1996 Form of Credit
Dollars at Year-End Enhancement
- -----------------------------------------------------------------
Residential Mortgages $8.1 $11.3 Recourse
and Other Loans obligation
Sold with Recourse(1) $4.7 in 1997 and
$7.3 in 1996
- -----------------------------------------------------------------
GNMA Sales/Servicing 1.0 1.0 Secondary recourse
Agreements(2) obligation
- -----------------------------------------------------------------
Securitized Credit 26.8 25.2 Net revenue over the
Card Receivables life of the
transaction
- -----------------------------------------------------------------
(1) Residential mortgages represent 92% of amounts in 1997 and 94% in 1996.
(2) Government National Mortgage Association sales/servicing agreements
covering securitized residential mortgages.
Citicorp and its subsidiaries are obligated under various credit enhancements
related to certain sales of loans or sales of participations in pools of loans,
summarized above.
Net revenue on securitized credit card receivables is recognized over the
life of each sale transaction. The net revenue is based upon the sum of finance
charges and fees received from cardholders and interchange revenue earned on
cardholder transactions, less the sum of the yield paid to investors, credit
losses, transaction costs, and a contractual servicing fee, which is also
retained by certain Citicorp subsidiaries as servicers. As specified in certain
of the sale agreements, the net revenue collected each month is deposited in an
account, up to a predetermined maximum amount, and is available over the
remaining term of that transaction to make payments of yield, fees, and
transaction costs in the event that net cash flows from the receivables are not
sufficient. When the account reaches the predetermined amount, net revenue is
passed directly to the Citicorp subsidiary that sold the receivables. The amount
contained in these accounts is included in other assets and was $20 million at
December 31, 1997 and $383 million at December 31, 1996. During 1997, Citicorp
securitized and sold approximately $288 million of balances included in these
accounts.
Citicorp maintains reserves relating to asset securitization programs.
These reserves totaled $85 million at December 31, 1997 and $473 million at
December 31, 1996. During 1997, Citicorp restored to the aggregate allowance for
credit losses $373 million that had previously been attributed to credit card
securitization transactions where the exposure to credit losses is contractually
limited to the cash flows from the securitized receivables.
Standby Letters of Credit
1997 1996(1)
------------------------------------------------------------
In Billions of Expire Expire Total Total
Dollars Within After 1 Amount Amount
at Year-End 1 Year Year Outstanding Outstanding
- -------------------------------------------------------------------------------
Financial
Insurance, Surety $2.0 $5.4 $7.4 $7.7
Options, Purchased
Securities, and
Escrow 0.8 0.2 1.0 0.9
Clean Payment 1.2 0.3 1.5 1.5
Backstop State,
County, and
Municipal Securities 0.4 0.3 0.7 0.7
Other Debt Related 4.5 1.7 6.2 6.6
Performance 3.1 2.0 5.1 4.2
----- ---- ----- -----
Total (2) $12.0 $9.9 $21.9 $21.6
- --------------------------------------------------------------------------------
(1) Reclassified to conform to 1997 presentation.
(2) Total is net of cash collateral of $1.6 billion in 1997 and $1.5 billion
in 1996. Collateral other than cash covered 21% of the total in 1997 and
20% in 1996.
Standby letters of credit, summarized above, are used in various transactions to
enhance the credit standing of Citibank customers. They represent irrevocable
assurances that Citibank will make payment in the event that the customer fails
to fulfill its obligations to third parties. Financial standby letters of credit
are obligations to pay a third-party beneficiary when a customer fails to repay
an outstanding loan or debt instrument, such as assuring payments by a foreign
reinsurer to a U.S. insurer, to act as a substitute for an escrow account, to
provide a payment mechanism for a customer's third-party obligations, and to
assure payment of specified financial obligations of a customer. Performance
standby letters of credit are obligations to pay a third-party beneficiary when
a customer fails to perform a nonfinancial contractual obligation, such as to
ensure contract performance or irrevocably assure payment by the customer under
supply, service and maintenance contracts or construction projects. Fees are
recognized ratably over the term of the standby letter of credit. The table does
not include securities lending indemnifications issued to customers, which are
fully collateralized and totaled $9.8 billion at December 31, 1997 and $4.2
billion at December 31, 1996.
C. Credit Loss Reserves
In Millions of Dollars 1997 1996 1995
- -----------------------------------------------------------------
Aggregate Allowance for
Credit Losses at Beginning of Year $5,503 $5,368 $5,155
Additions
Provision for Credit Losses 1,907 1,926 1,991
Deductions
Consumer Credit Losses (1) 2,305 2,172 1,962
Consumer Credit Recoveries (1) (474) (444) (418)
------ ------ ------
Net Consumer Credit Losses (1) 1,831 1,728 1,544
Commercial Credit Losses 197 266 376
Commercial Credit Recoveries (221) (268) (228)
------ ------ ------
Net Commercial Credit
(Recoveries) Losses (24) (2) 148
Other-- Net (2) 313 (65) (86)
------ ------ ------
Aggregate Allowance
for Credit Losses at End of Year(3) 5,916 5,503 5,368
Reserves for Securitization Activities 85 473 486
------ ------ ------
Total Credit Loss Reserves $6,001 $5,976 $5,854
------ ------ ------
- -----------------------------------------------------------------
(1) Commencing in 1997, reflects the classification of credit card receivables
intended for sale as loans held for sale with net credit losses charged to
other revenue.
(2) Primarily includes net transfers from (to) the reserves for securitization
activities and foreign currency translation effects. In 1997, Citicorp
restored to the aggregate allowance for credit losses $373 million that
had previously been attributed to credit card securitization transactions
where the exposure to credit losses is contractually limited to the cash
flows from the securitized receivables.
(3) In 1997, Citicorp changed the apportionment and display of the aggregate
allowance for credit losses to report $5,816 million attributable to loans
and loan commitments as a deduction from Loans, $50 million attributable
to standby letters of credit and guarantees included in Other Liabilities,
and $50 million attributable to derivative and foreign exchange contracts
as a deduction from Trading Account Assets.
D. Concentrations of Credit Risk
Concentrations of credit risk exist when changes in economic, industry or
geographic factors similarly affect groups of counterparties whose aggregate
credit exposure is material in relation to Citicorp's total credit exposure.
Although Citicorp's portfolio of financial instruments is broadly diversified
along industry, product, and geographic lines, material transactions are
completed with other financial institutions, particularly in the securities
trading, derivative, and foreign exchange businesses. Additionally, U.S. credit
card receivables represent an area of significant credit exposure.
69
<PAGE>
E. Estimated Fair Value of Financial Instruments
1997 1996
------------------------------------------
Estimated Estimated
Fair Fair
Value In Value In
Excess Excess
of (Less of (Less
Than) Than)
In Billions Dollars Carrying Estimated Carrying Carrying
at Year-End Value Fair Value Value Value
- -------------------------------------------------------------------------
Assets (1) $290.4 $296.6 $ 6.2 $ 6.0
Liabilities 280.8 280.8 -- (0.5)
End-User Derivative and
Foreign Exchange Contracts 1.4 2.1 0.7 0.3
Credit Card
Securitizations (1) -- (0.3) (0.3) 0.4
------ ------
Subtotal 6.6 6.2
Deposits with
No Fixed Maturity (2) 3.3 2.7
------ ------
Total $ 9.9 $ 8.9
- -------------------------------------------------------------------------
(1) Commencing in 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 69.
(2) 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 at year-end, 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 increase
during 1997 was primarily due to an increase in deposits as well as a
higher spread between the cost of funds on the deposits and the cost of
funds from alternative sources. Under applicable requirements, excess fair
values of these deposits are excluded from amounts included under the
Liabilities caption above and from the table below, in which the estimated
fair value is shown as being equal to the carrying value.
Citicorp's financial instruments, as defined in accordance with applicable
requirements, include 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 above also provides estimated
fair value data for the expected time period until runoff of existing deposits
with no fixed maturity.
In the aggregate, estimated fair values exceeded the carrying values by
approximately $9.9 billion at December 31, 1997 and $8.9 billion at December 31,
1996. Fair values vary from period to period based on changes in a wide range of
factors, including interest rates, credit quality, and market perceptions of
value, and as existing assets and liabilities run off and new items are
generated. The increase from the prior year is primarily due to a higher value
of deposits with no fixed maturity, derivative contracts due to a lower interest
rate environment in the U.S., and deposits, partially offset by a decline in the
fair value of credit card securitizations and long-term debt due to lower U.S.
interest rates.
Additional detail is provided in the following table. In accordance with
applicable requirements, the disclosures exclude leases, affiliate investments,
and pension and benefit obligations, and the disclosures also exclude the effect
of taxes and other expenses that would be incurred in a market transaction. In
addition, the table excludes the values of nonfinancial assets and liabilities,
as well as a wide range of franchise, relationship, and intangible values, which
are integral to a full assessment of Citicorp's financial position and the value
of its net assets.
The data represents management's best estimates based on a range of
methodologies and assumptions. Quoted market prices are used for most
securities, for loans where available, and for both trading and end-user
derivative and foreign exchange contracts, as well as for liabilities with
quoted prices. For performing loans where no quoted market prices are available,
contractual cash flows are discounted at quoted secondary market rates or
estimated market rates if available. Otherwise, current market origination rates
for loans with similar terms and risk characteristics are used. For loans with
doubt as to collectibility, expected cash flows are discounted using an
appropriate rate considering the time of collection and a premium for the
uncertainty of the flows. The value of collateral is also considered. For
liabilities without quoted market prices, market borrowing rates of interest are
used to discount contractual cash flows.
Fair values of credit card securitizations reflect the various components
of these transactions but principally arise from fixed rates payable to
certificate holders. Under the applicable requirements, the estimated fair value
of deposits with no fixed maturity in the following table excludes the premium
values available in the market for such deposits, and the estimated value is
shown in the table as being equal to the carrying value.
1997 1996
---------------------------------------
Estimated Estimated
In Billions of Dollars Carrying Fair Carrying Fair
at Year-End Value Value Value Value
- -----------------------------------------------------------------
Assets and Related Instruments
Loans (1) $173.5 $179.6 $164.0 $169.9
Related Derivatives 0.3 0.5 0.3 0.5
Securities 33.4 33.4 28.2 28.2
Trading Account Assets 40.4 40.4 30.8 30.8
Other Financial Assets (2) 43.1 43.2 37.0 37.1
Credit Card
Securitizations -- (0.3) 0.1 0.5
Related Derivatives 0.5 0.5 0.5 0.4
- -----------------------------------------------------------------
Liabilities and Related Instruments
Non-Interest-Bearing $26.5 $26.5 $24.8 $24.8
Deposits
Interest-Bearing Deposits 172.6 172.4 160.2 160.4
Related Derivatives (0.4) (0.7) (0.2) (0.3)
Trading Account 31.0 31.0 22.0 22.0
Liabilities
Other Financial 30.9 30.7 28.2 28.2
Liabilities (3)
Related Derivatives -- 0.1 0.1 0.1
Long-Term Debt 19.8 20.2 18.9 19.2
Related Derivatives (0.2) (0.5) (0.2) (0.3)
- -----------------------------------------------------------------
(1) The carrying value of loans is net of the allowance for credit losses and
also excludes $4.7 billion and $5.1 billion of lease finance receivables
in 1997 and 1996, respectively.
(2) Includes cash and due from banks, deposits at interest with banks, federal
funds sold and securities purchased under resale agreements, and
customers' acceptance liability, for which the carrying value is a
reasonable estimate of fair value, and the carrying value and estimated
fair value of financial instruments included in loans held for sale,
interest and fees receivable and other assets on the balance sheet.
(3) Includes federal funds purchased and securities sold under repurchase
agreements and acceptances outstanding, for which the carrying value is a
reasonable estimate of fair value, and the carrying value and estimated
fair value of commercial paper, other funds borrowed, and financial
instruments included in accrued taxes and other expense and other
liabilities on the balance sheet.
70
<PAGE>
The estimated fair values of loans reflect changes in credit status since
the loans were made, changes in interest rates in the case of fixed-rate loans,
and premium values at origination of certain loans. The estimated fair values of
Citicorp's loans, in the aggregate, exceeded carrying values (reduced by the
allowance for credit losses) by $6.1 billion at year-end 1997 compared with $5.9
billion at year-end 1996, an improvement of $0.2 billion. Within these totals,
estimated fair values exceeded carrying values for consumer loans net of the
allowance by $3.1 billion, an improvement of $0.2 billion from year-end 1996,
and for commercial loans net of the allowance by $3.0 billion, which was
unchanged from year-end 1996. The improvement in estimated fair values in excess
of carrying values of consumer loans primarily reflects the effects of restoring
to the allowance a $0.4 billion reserve that had previously been attributed to
securitized credit card receivables (as described on page 69) partially offset
by a decline in the credit quality of loans in Asia. The estimated fair values
in excess of carrying values of commercial loans were unchanged from year-end
1996 because the increases that were experienced in secondary market prices on
certain loans and improved credit conditions on commercial real estate loans in
North America were somewhat offset by a decline in the credit quality of
commercial loans in Asia.
The estimated fair value of credit card securitizations was $0.3 billion
less than their carrying value at December 31, 1997, which is $0.7 billion lower
than December 31, 1996, when the estimated fair value exceeded the carrying
value by $0.4 billion. This decrease is due to restoring to the allowance a $0.4
billion reserve that had previously been attributed to securitized credit card
receivables as well as the effects of a lower interest rate environment on the
fixed-rate investor certificates.
The estimated fair value of interest-bearing deposits and long-term debt
reflects changes in market rates since the deposits were taken or the debt was
issued.
For all derivative and foreign exchange contracts in the tables on page
70, the gross difference between the fair value and carrying amount as of
December 31, 1997 and 1996 was $1.3 billion and $1.0 billion, respectively, for
contracts whose fair value exceeds carrying value, and $0.6 billion and $0.7
billion for contracts whose carrying value exceeds fair value.
2. PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Generally, depreciation and amortization are computed on the
straight-line basis over the estimated useful life of the asset or the lease
term. Depreciation and amortization expense was $758 million in 1997, $706
million in 1996, and $636 million in 1995.
3. GOODWILL
Goodwill, which is included in other assets, represents the excess of purchase
price over the estimated fair value of net assets acquired, accounted for under
the purchase method of accounting. At December 31, 1997 and 1996, goodwill
amounted to $251 million and $278 million, respectively. Goodwill is being
amortized, primarily using the straight-line method, over the periods estimated
to be benefited. The remaining period of amortization, on a weighted-average
basis, approximated 11 years as of December 31, 1997.
4. PREFERRED STOCK
In Millions of Dollars at Year-End Rate 1997 1996
- -------------------------------------------------------------------------
Perpetual Preferred Stock
Second Series, 2,195,636 Shares Adjustable $ 220 $ 220
Third Series, 834,867 Shares Adjustable 83 83
Series 8A and 8B, 1,250,000 Shares Graduated 125 125
Series 14, 700,000 Shares 9.08% -- 175
Series 16, 1,300,000 Shares 8.00% 325 325
Series 17, 1,400,000 Shares 7.50% 350 350
Series 18, 700,000 Shares Adjustable 175 175
Series 19, 400,000 Shares Adjustable 100 100
Series 20, 500,000 Shares 8.30% 125 125
Series 21, 600,000 Shares 8.50% 150 150
Series 22, 500,000 Shares 7.75% 125 125
Series 23, 250,000 Shares Fixed/Adjustable 125 125
------ ------
$1,903 $2,078
- -------------------------------------------------------------------------
In the first quarter of 1997, Citicorp redeemed the Series 14 Preferred Stock.
In the first quarter of 1996, Citicorp converted $590 million of its Convertible
Preferred Stock, Series 12 into 36,875,000 shares of common stock, and converted
$403 million of its Convertible Preferred Stock, Series 13 into 22,077,369
shares of common stock. In January 1998, Citicorp announced that it will call
the Second and Third Series Preferred Stock for redemption in February 1998.
Total dividends declared on non-redeemable preferred stock were $141
million in 1997, $162 million in 1996, and $342 million in 1995.
Dividends are payable quarterly and, except for Series 16, 17, 20, and 21,
are cumulative.
Dividends on the Second and Third Series, as well as on Series 18 and 19,
are payable at rates determined quarterly by formulas based on interest rates of
certain U.S. Treasury obligations, subject to certain minimum and maximum rates
as specified in the certificates of designation. The weighted-average dividend
rates on the Second and Third Series, as well as Series 18 and 19 were 6.0%,
7.0%, 5.6%, and 5.6%, respectively, for 1997.
Dividends on Series 8A are payable at 7.55% through August 15, 1998 and
thereafter at the three-year treasury rate plus an amount initially equal to
2.25% and increasing to 2.75% for dividend periods ending from August 15, 2001
through August 15, 2004 and 3% thereafter. Series 8B dividends are payable at
8.25% through August 15, 1999 and thereafter at a rate equal to the five-year
treasury rate plus an amount initially equal to 2.25% and increasing to 3% for
all dividend periods ending after August 15, 2004. For both Series 8A and 8B,
dividend rates through August 15, 2004 cannot be less than 7% or greater than
14%, and thereafter cannot be less than 8% or greater than 16%.
Dividends on Series 23 are payable at 5.86% through February 15, 2006 and
thereafter at rates determined quarterly by a formula based on certain interest
rate indices, subject to a minimum rate of 6% and a maximum rate of 12%. The
rate of dividends on Series 23 is subject to adjustment based upon the
applicable percentage of the dividends received deduction.
71
<PAGE>
Citicorp may, at its option, redeem the perpetual preferred stock at
stated values plus accrued dividends, as follows: Second and Third Series, at
any time; Series 8A and 8B, on any of the dividend repricing dates through
August 15, 2004, and from time to time after August 15, 2004; Series 16, on or
after June 1, 1998; Series 17, on or after September 1, 1998; Series 18, on or
after May 31, 1999; Series 19, on or after August 31, 1999; Series 20, on or
after November 15, 1999; Series 21, on or after February 15, 2000; Series 22, on
or after May 15, 2000; and Series 23, on or after February 15, 2006. Under
various circumstances, Citicorp may redeem certain series of preferred stock at
times other than as described above.
Authorized preferred stock (issuable as either nonredeemable or
redeemable) was 50 million shares at December 31, 1997 and 1996. Total shares of
nonredeemable preferred stock issued and outstanding were 9,930,503 and
10,630,503 at December 31, 1997 and 1996, respectively.
5. COMMON STOCK
At December 31, 1997 and 1996, authorized common stock was 800 million shares.
Additionally, Citicorp has authorized, but not issued, 20 million shares of
Class B common stock with a par value of $1.00 and one vote per share.
Citicorp's Dividend Reinvestment and Common Stock Purchase Plan allows
stockholders of record, without payment of brokerage fees, commissions, or
service charges, to reinvest all or part of any common stock dividends in
additional shares of common stock and make optional cash purchases of such
shares.
At December 31, 1997, shares were reserved for issuance as follows:
In Millions of Shares at Year-End 1997
- ------------------------------------------------------------------
Savings Incentive Plan (1) (2) 2.7
Stock Purchase Plan (1) (2) 15.5
Stock Incentive Plan (1) 52.8
Dividend Reinvestment and Common Stock Purchase Plan (1)(2) 10.1
Directors' Deferred Compensation Plan 0.1
Executive Incentive Compensation Plan (1) 0.6
- ------------------------------------------------------------------
(1) Shares delivered may also be sourced from treasury shares.
(2) Shares delivered may also be purchased in the open market.
During 1997 and 1996, Citicorp entered into a series of forward purchase
agreements on its common stock. These agreements are settled on a net basis in
shares of Citicorp common stock, or in cash at Citicorp's election. To the
extent that the market price of Citicorp common stock on a settlement date is
higher (lower) than the forward purchase price, the net differential is received
(paid) by Citicorp. As of December 31, 1997, agreements were in place covering
approximately $1.2 billion of Citicorp common stock (10 million shares) which
had forward prices averaging $121.22 per share. If these agreements were settled
based on the December 31, 1997 market price of Citicorp's common stock ($126.44
per share), Citicorp would be entitled to receive approximately 410,000 shares.
During 1997, settlements resulted in Citicorp receiving 2.1 million shares and
paying 1.3 million shares which were recorded as treasury share transactions.
6. REGULATORY CAPITAL
Citicorp Citibank, N.A.
-----------------------------------
In Millions of Minimum
Dollars Required 1997 1996 1997 1996
at Year-End (1)
- -----------------------------------------------------------------
Tier 1 Capital $21,096 $19,796 $16,611 $15,511
Total Capital (2) 31,156 28,870 24,694 22,566
Tier 1 Capital Ratio 4.00% 8.34% 8.39% 8.18% 8.32%
Total Capital 8.00 12.31 12.23 12.16 12.11
Ratio (2)
Leverage Ratio (3) 3.00+ 7.01 7.42 6.39 6.63
- -----------------------------------------------------------------
(1) As set forth in guidelines issued by the U.S. federal bank regulators.
(2) Total capital includes Tier 1 and Tier 2.
(3) Tier 1 capital divided by adjusted average assets.
Citicorp is subject to risk-based capital and leverage guidelines issued by the
Board of Governors of the Federal Reserve System ("FRB"), and its U.S. insured
depository institution subsidiaries, including Citibank, N.A., are subject to
similar guidelines issued by their respective primary regulators. These
guidelines are used to evaluate capital adequacy and include the required
minimums shown above.
To be "well capitalized" under federal bank regulatory agency definitions,
a depository institution must have a Tier 1 ratio of at least 6%, a combined
Tier 1 and Tier 2 ratio of at least 10%, and a leverage ratio of at least 5% and
not be subject to a directive, order, or written agreement to meet and maintain
specific capital levels. The regulatory agencies are required by law to take
specific prompt actions with respect to institutions that do not meet minimum
capital standards. As of December 31, 1997 and 1996, all of Citicorp's U.S.
insured subsidiary depository institutions were "well capitalized."
7. FEES AND COMMISSIONS
Trust, agency, and custodial fees included in fees and commissions were $1.3
billion in 1997, $1.1 billion in 1996, and $983 million in 1995.
72
<PAGE>
8. EMPLOYEE BENEFITS
Pension and Postretirement Benefit Plans
Citicorp has several non-contributory defined benefit pension plans covering
substantially all U.S. employees. Retirement benefits for the U.S. plans are
based on years of credited service, the highest average compensation (as
defined), and the primary social security benefit. While the qualified U.S.
plans are adequately funded, it is Citicorp's policy to fund these plans to the
extent contributions are tax deductible. Non-qualified U.S. plans are not funded
because contributions to these plans are not tax deductible.
Citicorp has various defined benefit pension and termination indemnity
plans covering employees outside the United States. The benefit formulas and
funding strategies vary reflecting local practices and legal requirements.
Citicorp offers postretirement health care and life insurance benefits to
all eligible U.S. retired employees. U.S. retirees share in the cost of their
health care benefits through copayments, service-related contributions and
salary-related deductibles. Retiree life insurance benefits are
non-contributory. It is Citicorp's policy to fund retiree health care and life
insurance benefits to the extent such contributions are tax deductible. Retiree
health care and life insurance benefits are also provided to certain employees
outside the United States.
The following tables summarize the components of net benefit expense
recognized in the consolidated statement of income and the funded status and
amounts recognized in the consolidated balance sheet for U.S. plans and
significant plans outside the U.S.
<TABLE>
Net Benefit Expense
<CAPTION>
Pension Plans Postretirement Benefit
Plans(1)
-------------------------------------------------------- --------------------------
U.S. Plans Plans Outside U.S. U.S. Plans
--------------------------- -------------------------- --------------------------
In Millions of Dollars 1997 1996 1995 1997 1996 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Benefits Earned During the Year $ 118 $ 123 $ 98 $ 56 $ 60 $ 56 $ 10 $ 11 $ 8
Interest Cost on Benefit Obligation 204 192 165 75 76 68 30 32 32
Actual Return on Plan Assets (619) (395) (498) (97) (65) (66) (24) (13) (13)
Net Deferral and Amortization 375 196 301 35 10 19 14 7 8
Amortization of Transition Obligation
(Asset)(2)(3) (20) (20) (20) 6 7 7 19 20 20
------ ------ ------ ------ ------ ------ ----- ----- -----
Net Benefit Expense $ 58 $ 96 $ 46 $ 75 $ 88 $ 84 $ 49 $ 57 $ 55
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For plans outside the U.S., net postretirement benefit expense totaled $9
million in 1997, $8 million in 1996, and $6 million in 1995.
(2) U.S. pension transition asset is being amortized over 14 years, with 2
years remaining at December 31, 1997.
(3) U.S. postretirement transition obligation is being amortized over 20
years, with 15 years remaining at December 31, 1997.
<TABLE>
Prepaid Benefit Cost (Benefit Liability)
<CAPTION>
Pension Plans Postretirement
---------------------------------------------------------------------- Benefit Plans(1)
Qualified Non-Qualified Funded Plans Other Plans -----------------
U.S. Plans U.S. Plans Outside U.S. Outside U.S. U.S. Plans
---------------------------------------------------------------------------------------
In Millions of Dollars 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Plan Assets at Fair Value(2) $3,709 $3,118 $ -- $$ -- $798 $763 $ -- $ -- $159 $119
Benefit Obligation 2,850 2,567 278 248 851 814 288 311 440 459
----- ------ ----- ----- --- ----- ------ ------ ----- -----
Plan Assets in Excess of (Less Than) 859 551 (278) (248) (53) (51) (288) (311) (281) (340)
Benefit Obligation
Unrecognized Prior Service Cost 70 73 33 41 (2) 13 1 -- (2) (7)
Unrecognized Net Actuarial (Gain) Loss (275) 27 50 42 72 39 (3) (8) 1 41
Unamortized Transition (Asset) Obligation (37) (58) 5 6 33 46 25 31 247 277
Adjustment to Recognize Minimum Liability -- -- (21) (33) (1) (1) (14) (7) -- --
----- ------ ----- ----- --- ----- ------ ------ ----- -----
Prepaid Benefit Cost (Benefit Liability) $617 $ 593 $(211) $(192) $49 $ 46 $(279) $(295) $(35) $ (29)
- ------------------------------------------------------------------------------------------------------------------------------------
Projected Pension Benefit Obligation
Includes:
Accumulated Benefit Obligation $2,361 $2,086 $191 $192 $625 $613 $237 $249
Vested Benefit Obligation 2,046 1,830 173 153 580 550 209 224
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated Postretirement Benefit
Obligation to:
Retirees $282 $ 309
Employees Eligible for Full Benefits 37 23
Other Employees 121 127
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For plans outside the U.S., the accumulated postretirement benefit
obligation was $62 million and $54 million and the postretirement benefit
liability was $8 million and $4 million at December 31, 1997 and 1996,
respectively.
(2) For U.S. plans, plan assets are primarily listed stocks, commingled funds,
and fixed-income securities.
Included in the 1997 restructuring charge (Note 9) was a $9 million
curtailment loss in the U.S. postretirement benefit plans, which represented the
accelerated amortization of a portion of the transition obligation. Also, in
connection with the restructuring, there was a $76 million curtailment gain in
the U.S. pension plans, which will be recognized in future periods as employee
terminations occur.
73
<PAGE>
The expected long-term rates of return on assets used in determining
pension and postretirement expense are shown below.
1997 1996 1995
- -----------------------------------------------------------------------------
Rate of Return on Assets
U.S. Plans 9.0% 9.0% 8.75%
Plans Outside the U.S.(1) 4.5% to 13.0% 6.0% to 13.0% 6.0% to 13.0%
- -----------------------------------------------------------------------------
(1) Excluding highly inflationary countries.
The principal assumptions used in determining pension and postretirement
benefit obligations are shown below.
At Year-End 1997 1996
- -----------------------------------------------------------------
Discount Rate
U.S. Plans 7.25% 7.5%
Plans Outside the U.S.(1) 3.5% to 12.0% 4.0% to 12.0%
Future Compensation Increase Rate
U.S. Plans 5.0% 5.0%
Plans Outside the U.S.(1) 1.0% to 10.0% 1.5% to 10.0%
Health Care Cost Increase Rate--U.S. Plans
Following Year 8.0% 9.0%
Decreasing to the Year 2001 to 5.0% 5.0%
- -----------------------------------------------------------------
(1) Excluding highly inflationary countries.
As an indicator of sensitivity, increasing the assumed health care cost
trend rate by 1% in each year would have increased the accumulated
postretirement benefit obligation as of December 31, 1997 by $16 million and the
aggregate of the benefits earned and interest components of 1997 net
postretirement benefit expense by $1 million.
Savings Incentive Plan
Under the Savings Incentive Plan, eligible employees receive awards equal to 3%
of their covered salary. Employees have the option of receiving their award in
cash or deferring some or all of it in various investment funds. Citicorp grants
an additional award equal to the amount elected to be deferred by the employee.
Several investment options are available, including Citicorp common stock.
Shares of Citicorp common stock delivered under the Savings Incentive Plan may
be sourced from authorized but unissued shares, treasury shares, or purchased in
the open market. The expense associated with the plan amounted to $101 million
in 1997, $95 million in 1996, and $92 million in 1995.
Stock Incentive Plan
The 1997 Stock Incentive Plan provides for the issuance of options to purchase
shares of Citicorp common stock at prices not less than 100% of the market value
at the date of grant, incentive stock options, stock appreciation rights, or any
other award based on or related to Citicorp common stock, any of which may be
granted singly, in combination, or in tandem. Shares of Citicorp common stock
may be sourced from authorized but unissued common stock or treasury shares.
The 1988 Stock Incentive Plan provided for the issuance of options to
purchase shares of Citicorp common stock or shares of Class B common stock at
prices not less than 50% of the market value at the date of grant, incentive
stock options, stock appreciation rights, restricted stock, or performance unit
awards, any of which may be granted singly, in combination, or in tandem. Shares
of Citicorp common stock delivered under the 1988 Plan may be sourced from
authorized but unissued shares or treasury shares.
Since April 9, 1997, new stock incentive awards are granted out of the
1997 plan. Prior to that date, stock incentive awards were made from predecessor
plans.
Shares of restricted stock have been awarded to key executives contingent
upon their continued employment over periods of up to 11 years as summarized in
the following table:
Dollars in Millions 1997 1996 1995
- -----------------------------------------------------------------
Shares Granted 832,976 137,000 125,000
Aggregate Market Value
at Award Date $106 $10 $6
Expense Recognized for All Awards 13 4 4
- -----------------------------------------------------------------
The value of the restricted shares at the date of grant is recorded as a
reduction of surplus and amortized to expense over the restriction period.
Under the 1997 Stock Incentive Plan and two predecessor plans, options
have been granted to key employees for terms of up to 10 years to purchase
common stock at not less than the market value of the shares at the date of
grant. Generally, 50% of the options granted prior to 1995 are exercisable
beginning on the first anniversary and 50% beginning on the second anniversary
of the date of grant, and, generally, 50% of the options granted in 1995 and
thereafter are exercisable beginning on the third anniversary and 50% beginning
on the fourth anniversary of the date of grant.
Options granted in 1995 and 1996 to a group of key employees have included
five-year performance-based stock options that only vest as Citicorp's common
stock price achieves specified target levels and remains above the target levels
for twenty of thirty consecutive trading days. Performance-based options granted
in 1995 and 1996 were at prices ranging from $64.875 to $70.125, equal to market
prices on the respective dates of grant, and expire in 2000 and 2001. One-half
vested
74
<PAGE>
in 1996 when Citicorp's stock price reached $100 per share, and the balance
vested in 1997 when such price reached $115 per share. Vesting and expense
related to performance-based options are summarized in the following table.
Dollars in Millions 1997 1996 1995
- --------------------------------------------------------------------------
Options Vested During the Year 2,393,750(1) 2,427,500(1) 6,597,500(2)
Expense Recognized for All
Grants $72 $113 $89
Options Unvested at Year-End -- 2,423,750(1) 4,902,500(3)
- --------------------------------------------------------------------------
(1) Relates to 1995 and 1996 grants.
(2) Relates to 1993 and 1994 grants with vesting targets of $50, $55, and $60,
expiring in 1998.
(3) Relates to 1995 grants.
Citicorp measures the cost of performance-based options as the difference
between the exercise price and market price required for vesting and recognizes
this expense over the period to the estimated vesting dates and in full for
options that have vested, by a charge to expense with an offsetting increase in
common stockholders' equity. All of the expense related to vested grants has
been recognized.
Changes in options and shares under option are summarized in the following
table.
1997 1996 1995
- -------------------------------------------------------------------------
Granted 8,209,290 5,801,955 7,409,750
Average Option Price $112.20 $70.10 $58.14
Exercised 9,673,081 12,090,773 9,930,333
Average Option Price $36.92 $29.06 $26.68
Expired 5,270 16,200 25,950
Average Option Price $29.81 $29.63 $24.15
Terminated 798,500 868,630 964,867
Average Option Price $80.58 $50.89 $32.53
- -------------------------------------------------------------------------
At Year-End:
Shares Under Option 28,449,057 30,716,618 37,890,266
Average Option Price $64.52 $43.50 $34.98
Exercisable 13,861,342 20,717,293 28,677,293
Granted, Not Yet Exercisable 14,587,715 9,999,325 9,212,973
Available for Grant (1) 29,785,196 13,027,562 18,124,387
- -------------------------------------------------------------------------
(1) Shares authorized but not issued that are available for the granting of
stock options or other forms of stock-related awards. Additional shares
may become available for grant to the extent that presently outstanding
options under a predecessor plan terminate or expire unexercised.
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1997.
Outstanding Exercisable
-----------------------------------
Average Average
Option Average Option Option
Price Range Shares Life(1) Price Shares Price
- -------------------------------------------------------------------------------
$13 5/8-$46 1/8 12,369,258 4.9 $31.57 10,849,258 $ 30.21
$47 1/8-$72 3/4 6,747,746 5.8 65.52 2,873,046 65.35
$79 1/8-$110 1/2 8,622,603 8.9 105.61 139,038 108.25
$116 1/2-$143 709,450 9.6 130.20 -- --
---------- ----------
Total 28,449,057 6.4 64.52 13,861,342 38.28
- -------------------------------------------------------------------------------
(1) Weighted-average contractual life remaining in years.
In January 1998, Citicorp granted 7,796,050 options at a strike price of
$120.625 per share. A group of key employees was granted 2,536,000 of these
options in the form of five-year performance-based stock options. The
performance-based options will vest when Citicorp's common stock price reaches
$200 per share, provided that the price remains at or above $200 for ten of
thirty consecutive trading days. The performance-based options expire in January
2003. The remaining 5,260,050 options to purchase Citicorp common stock have
terms of up to ten years.
Stock Purchase Plan
The 1997 and 1994 offerings under the Stock Purchase Plan allow all eligible
employees to enter into fixed subscription agreements to purchase shares at the
market value on the date of the agreements. Such shares can be purchased from
time to time through the expiration date. Shares of Citicorp common stock
delivered under the Stock Purchase Plan may be sourced from authorized but
unissued shares, treasury shares or purchased in the open market.
Following is the share activity under the 1997 and 1994 fixed-price
offerings for the purchase of shares at $113.25 per share and $39.8125 per
share, respectively. The 1997 offering will expire on June 30, 1999, and the
1994 offering expired on September 27, 1996.
1997 1996
- -----------------------------------------------------------------
Outstanding Agreements at
Beginning of Year -- 5,575,006
Agreements Entered Into 4,468,983 --
Shares Purchased 254,016 5,477,290
Cancelled or Terminated 139,215 97,716
Outstanding Agreements at Year-End 4,075,752 --
- -----------------------------------------------------------------
Annual Incentive and Performance Plans
The purpose of the 1994 Citicorp Annual Incentive Plan is to attract, retain,
and motivate executives to promote the profitability and growth of Citicorp and
to permit a federal income tax deduction for annual awards granted to covered
employees. Currently covered employees include the Chairman and next four most
highly paid executives. Under the Plan, awards can be granted to covered
employees in cash, stock or any other form of consideration in either one
installment or on a deferred basis. Shares of Citicorp common stock delivered
under the Plan may be sourced from authorized but unissued shares or treasury
shares. The aggregate awards were approximately $5 million in 1997, $4 million
in 1996, and $6 million in 1995.
Under the Citicorp Annual Performance Plan, cash awards may be granted to
key employees who have a significant impact on the success of Citicorp. Awards
may be paid either in one installment or on a deferred basis. The aggregate
awards were approximately $20 million in 1997, $7 million in 1996, and $9
million in 1995.
75
<PAGE>
Under the Executive Incentive Compensation Plan, awards in cash or stock
may be made to key employees, payable at the election of the participants, in
one installment or on a deferred basis. Shares of Citicorp common stock
delivered under the Plan may be sourced from authorized but unissued shares or
treasury shares. No awards have been made since 1989.
Deferred Compensation Plan
Under the Deferred Compensation Plan, adopted in 1995, participants must defer
25% of their variable compensation awards into mandatory deferral accounts whose
return equals the return on Citicorp common stock. Beginning with the 1996
awards, select participants are allowed to defer from 10% to 85% of the
remainder of their variable compensation awards into voluntary deferral
accounts, which may be allocated among a variety of investments, including an
account whose return equals the return on Citicorp common stock. The amounts
credited to the mandatory deferral accounts generally are payable to the
participant in cash five years after they are credited. However, participants
may elect to postpone cash distribution of the amounts in the mandatory deferral
account by having such amounts credited to a voluntary deferral account.
Accounting for Stock Awards
Citicorp uses the intrinsic value accounting method for stock awards under which
there is generally no charge to earnings for employee stock option awards other
than performance-based options as described above, and the dilutive effect of
outstanding options is reflected as additional share dilution in the computation
of earnings per share.
Alternatively, FASB rules would permit a method under which a compensation
cost for all stock awards would be calculated and recognized over the service
period (generally equal to the vesting period). This compensation cost would be
determined in a manner prescribed by the FASB using option pricing models,
intended to estimate the fair value of the awards at the grant date. Earnings
per share dilution would be recognized as well.
Under both methods, an offsetting increase to stockholders' equity is
recorded equal to the amount of compensation expense charged.
The following table compares compensation expense recorded for stock
awards, net income, earnings per share data, and the related increment to
stockholders' equity as reported by Citicorp with corresponding pro forma
amounts as if the alternative accounting permitted by the FASB had been used.
1997 1996 1995
- -----------------------------------------------------------------
In millions of As Pro As Pro As Pro
dollars Reported Forma Reported Forma Reported Forma
except per
share amounts
- -----------------------------------------------------------------
Compensation
expense related
to stock plans $87 $162 $119 $72 $ 96 $89
Net income 3,591 3,521 3,788 3,813 3,464 3,468
Earnings per share
Basic 7.53 7.38 7.73 7.79 7.60 7.61
Diluted 7.33 7.19 7.43 7.47 6.50 6.50
Related increase to
stockholders'
equity 87 162 119 72 96 89
- -----------------------------------------------------------------
Compensation expense amounts shown as reported primarily represent expense
related to performance-based options. Pro forma amounts reflect the lesser
amounts of expense related to performance-based options that would be calculated
under FASB guidelines and also include amortization of compensation costs for
regular awards. Increases in compensation expense for regular awards reflect
increases in the number of shares granted (including the 1997 stock purchase
plan offering), amortization effects of 1996 and 1995 grants (because FASB
guidelines do not permit application of the alternative accounting to grants
before 1995), and increases in the estimated fair value per option shown in the
following table of data used in computing the pro forma amounts.
Weighted Average per Option
- -----------------------------------------------------------------
Estimated
Exercise Fair
Price Value(1)
- -----------------------------------------------------------------
Regular Options:
1995 $43.67 $11.11
1996 70.10 16.48
1997 112.20 31.49
1995 Performance Options 65.21 10.00
1997 Stock Purchase Offering 113.25 16.78
- -----------------------------------------------------------------
(1) Estimated using option pricing models that take into account the grant
date stock price, the exercise price, assumptions about the expected life
of the options (six years for regular options, four years for 1995
performance options, and two years for 1997 stock purchase offering), the
expected volatility of the stock price (25% per annum), the expected
dividend yield for the expected life of the option (weighted average
2.39%, 3.27%, and 3.50% in 1997, 1996, and 1995, respectively), and the
risk-free interest rate for the expected life of the option (weighted
average 6.30%, 5.58%, and 7.69% in 1997, 1996, and 1995, respectively).
76
<PAGE>
9. RESTRUCTURING CHARGE
During 1997, 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 15
months, include global operations and technology consolidation and
standardization, the reconfiguration of front-end distribution processes, and
the outsourcing of various technological functions.
The charge included $496 million for severance benefits and $393 million
related to writedowns of equipment and premises which management has committed
to dispose of, 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 15 months,
but are not expected to be material.
The $889 million charge related to the following businesses and regions:
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 Markets (1) $704
Emerging Markets 185
------
Total Citicorp $889
- -----------------------------------------------------------------
(1) Includes $474 million related to the United States.
The $496 million for severance benefits is related to approximately 9,000
positions that will be reduced. 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 (1) 800
-------
Total Citicorp (2) 9,000
- -----------------------------------------------------------------
(1) Associated costs have been allocated to businesses as appropriate.
(2) Includes approximately 6,300 employees related to the United States.
Of the total $889 million restructuring charge, approximately $245 million
of premises and equipment writedowns were recognized during the 1997 third
quarter, based on estimated fair values, and $39 million of reserves were
utilized during the 1997 fourth quarter, primarily for severance and related
costs. Approximately 650 gross direct staff reductions occurred during the 1997
fourth quarter. The remaining reserve represents a liability for future cash
outflows associated with employee severance benefits, lease termination costs,
and other exit costs. The remaining carrying amount of the written down assets
is not material.
10. INCOME TAXES
In Millions of Dollars 1997 1996 1995
- -----------------------------------------------------------------
Provision for Income Taxes(1) $2,131 $2,285 $2,121
Income Tax Expense (Benefit) Reported
in Stockholders' Equity related to:
Foreign Currency Translation 14 8 (24)
Securities Available for Sale (45) 307 (76)
Employee Stock Plans (222) (244) (51)
------ ------ ------
Total Income Taxes $1,878 $2,356 $1,970
- -----------------------------------------------------------------
Current U.S.
Federal $1,291 $ 642 $ 819
State and Local 232 176 185
------ ------ ------
1,523 818 1,004
------ ------ ------
Deferred U.S.
Federal (804) 396 (45)
State and Local (80) 29 (25)
------ ------ ------
(884) 425 (70)
------ ------ ------
Total U.S. 639 1,243 934
Foreign (substantially current) 1,239 1,113 1,036
------ ------ ------
Total Income Taxes $1,878 $2,356 $1,970
------ ------ ------
- -----------------------------------------------------------------
(1) Includes tax effect of securities transactions amounting to a provision of
$234 million in 1997, $74 million in 1996, and $46 million in 1995.
As a U.S. corporation, Citicorp is subject to U.S. taxation currently on all of
its foreign pretax earnings if earned by a foreign branch or when earnings are
effectively repatriated if earned by a foreign subsidiary or affiliate. In
addition, certain of Citicorp's U.S. income is subject to foreign income tax
where the payor of such income is domiciled outside the United States. Foreign
pretax earnings approximated $4.3 billion in 1997, $4.0 billion in 1996, and
$3.6 billion in 1995.
77
<PAGE>
The tax effects of significant temporary differences are presented in the
accompanying table. The net deferred tax asset is included in Citicorp's
consolidated balance sheet in Other Assets and represents the sum of the
temporary difference components of those tax jurisdictions with net deductible
amounts or tax carryforwards in future years. The net deferred tax liability is
included in Accrued Taxes and Other Expenses and represents the sum of the
temporary difference components of those tax jurisdictions with net taxable
amounts in future years.
In Millions of Dollars at Year-End 1997 1996
- -----------------------------------------------------------------
Net Deferred Tax Asset
Tax Effects of Deductible
Temporary Differences and
Carryforwards:
Credit Loss Deduction $2,041 $2,127
Interest Related Items 508 470
Unremitted Foreign Income 1,229 700
Restructuring Charge 225 --
Foreign and State Loss
Carryforwards 316 280
------ ------
4,319 3,577
------ ------
Tax Effects of Taxable Temporary
Differences:
Lease Financing 726 709
Securities and Derivatives
Transactions 648 642
Venture Capital 385 232
Other(1) 17 304
------ ------
1,776 1,887
------ ------
Net Potential Deferred Tax Asset 2,543 1,690
Valuation Allowance (324) (402)
------ ------
Net Deferred Tax Asset $2,219 $1,288
------ ------
- -----------------------------------------------------------------
Net Deferred Tax Liability(2) $ 419 $ 501
- -----------------------------------------------------------------
(1) Includes deductible temporary differences related to depreciation, prepaid
items, and other less significant items.
(2) Includes credit losses ($136 million in 1997 and $153 million in 1996),
leasing ($162 million in 1997 and $111 million in 1996) and other less
significant items.
The 1997 net change in the valuation allowance related to deferred tax
assets was a decrease of $78 million primarily relating to an improvement in
current earnings in certain state and local jurisdictions. These amounts are
included in the $884 million U.S. deferred benefit component of total income
taxes. The remaining valuation allowance of $324 million at December 31, 1997 is
primarily reserved for specific U.S. federal, state and local, and foreign tax
carryforwards or tax law restrictions on benefit recognition in these
jurisdictions. Management believes that the realization of the recognized net
deferred tax asset of $2,219 million is more likely than not, based on existing
carryback ability, available tax planning strategies, and expectations as to
future taxable income.
The following table reconciles the statutory U.S. federal tax rate to the
effective tax rate on income before taxes:
1997 1996 1995
- -----------------------------------------------------------------
Statutory U.S. Federal Tax Rate 35.0% 35.0% 35.0%
Increase (Reduction) in Taxes from:
State and Local Income Taxes,
Net of U.S. Federal Income Tax
Benefit 2.2 2.8 2.9
Valuation Allowance Change
Related to Current Year (0.8) (0.9) --
Taxes on Earnings Outside the U.S. 0.9 0.5 1.0
Other (0.1) 0.2 (0.2)
---- ---- ----
37.2 37.6 38.7
---- ---- ----
Valuation Allowance Change Related
to Future Years -- -- (0.7)
---- ---- ----
Effective Tax Rate 37.2% 37.6% 38.0%
---- ---- ----
- -----------------------------------------------------------------
11. EARNINGS PER SHARE
In Millions Except Per Share
Amounts 1997 1996 1995
- -----------------------------------------------------------------
Net Income $3,591 $3,788 $3,464
Dividends on Preferred Stock (140) (157) (338)
------ ------ ------
Income Applicable to Common Stock 3,451 3,631 3,126
Dividends on Convertible Preferred
Stock -- 5 127
Dividends on Conversion Preferred
Stock, Series 15 -- -- 62
------ ------ ------
Adjusted for Diluted Computation $3,451 $3,636 $3,315
- -----------------------------------------------------------------
Weighted-Average Common Shares
Outstanding (1) 458.1 469.6 411.5
Dilutive Effect of Employee Stock
Plans (2) 13.0 14.5 13.8
Convertible Preferred Stock -- 5.2 68.1
Conversion Preferred Stock, Series 15 -- -- 16.8
------ ------ ------
Adjusted for Diluted Computation 471.1 489.3 510.2
- -----------------------------------------------------------------
Basic Earnings Per Share (3) $ 7.53 $ 7.73 $ 7.60
Diluted Earnings Per Share 7.33 7.43 6.50
- -----------------------------------------------------------------
(1) Average shares reflects shares repurchased under the stock repurchase
program of 9.9 million in 1997, 18.3 million in 1996, and 5.8 million in
1995.
(2) Includes the dilutive effect of stock options and stock purchase
agreements computed using the treasury stock method and shares issuable
under deferred stock awards. Refer to Note 8 for information regarding
stock options granted subsequent to December 31, 1997.
(3) Represents Income Applicable to Common Stock divided by Weighted-Average
Common Shares Outstanding.
12. BUSINESS AND GEOGRAPHIC DISTRIBUTION OF REVENUE, INCOME (LOSS), AND
AVERAGE ASSETS
Citicorp attributes total revenue, income before taxes, net income (loss), and
average total assets to operations based on the domicile of the customer. U.S.
possessions are included in their respective geographic areas.
Because of the integration of global activities, it is not practicable to
make a precise separation, and various assumptions must be made in arriving at
allocations and adjustments used in presenting this data.
The principal allocations and adjustments are: (1) allocation of expenses
incurred by one area on behalf of another, including administrative costs, based
on methods intended to reflect services provided; (2) allocation of tax expenses
and benefits; (3) allocation of the difference between actual net credit losses
and the provision for credit losses; and (4) allocation of other corporate
items, including corporate staff costs, and long-term debt and other funding
costs, based on each area's percentage of total average assets.
The entire aggregate allowance for credit losses is available to absorb
all probable credit losses inherent in the portfolio. For the purpose of
calculating the accompanying geographic data, the amounts attributable to
operations outside the U.S. are based upon year-end aggregate allowance amounts
of $1,827 million for 1997, $1,807 million for 1996, and $1,809 million for
1995, and credit loss provision amounts of $738 million for 1997, $727 million
for 1996, and $737 million for 1995.
<TABLE>
Business and Geographic Distribution of Revenue, Income (Loss), and Average Assets
<CAPTION>
Total Revenue(1) Income Before Taxes
$ Millions $ Millions
- ------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
1997 1996 (2) 1995(2) 1997 1996 (2) 1995(2)
- ------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Business Distribution
Global Consumer
Citibanking $ 6,030 $ 5,796 $ 5,441 $ 673 $1,029 $ 862
Cards 5,190 5,274 5,066 1,084 1,506 1,742
Private Bank 1,130 1,043 929 391 348 272
Global Corporate Banking
Emerging Markets 3,888 3,444 2,895 1,814 1,751 1,495
Global Relationship Banking 4,384 3,744 3,627 1,269 1,021 834
Corporate Items 994 895 720 491 418 380
------- ------- ------- ------ ------ ------
Total (3) $21,616 $20,196 $18,678 $5,722 $6,073 $5,585
- ------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Geographic Distribution
United States $ 9,802 $ 9,344 $ 8,843 $2,042 (4) $2,726 (4) $2,500(4)
Western Europe 3,323 3,365 3,352 521 577 502
Other (5) 719 586 564 166 76 27
------- ------- ------- ------ ------ ------
Total Developed Markets(6) 13,844 13,295 12,759 2,729 3,379 3,029
------- ------- ------- ------ ------ ------
Latin America(7) 3,314 2,743 2,493 1,395 917 937
Asia Pacific 3,475 3,286 2,738 1,203 1,414 1,266
Other(8) 983 872 688 395 363 353
------- ------- ------- ------ ------ ------
Total Emerging Markets (9) 7,772 6,901 5,919 2,993 2,694 2,556
------- ------- ------- ------ ------ ------
Total $21,616 $20,196 $18,678 $5,722 $6,073 $5,585
- ------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
Net Income (Loss) Average Assets
$ Millions $ Billions
- ------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
1997 1996 (2) 1995(2) 1997 1996 (2) 1995(2)
- ------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Business Distribution
Global Consumer
Citibanking $ 478 $ 723 $ 573 $ 85 $ 83 $ 80
Cards 764 1,024 1,164 31 27 25
Private Bank 311 281 226 16 16 15
Global Corporate Banking
Emerging Markets 1,559 1,436 1,132 72 60 50
Global Relationship Banking 831 725 628 84 79 94
Corporate Items (352) (401) (259) 7 5 5
------ ------ ------ ---- ---- ----
Total (3) $3,591 $3,788 $3,464 $295 $270 $269
- ------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Geographic Distribution
United States $1,093 $1,642 $1,477 $110 $109 $114
Western Europe 240 321 298 57 53 54
Other (5) 82 41 22 13 13 15
------ ------ ------ ---- ---- ----
Total Developed Markets(6) 1,415 2,004 1,797 180 175 183
------ ------ ------ ---- ---- ----
Latin America(7) 1,105 707 653 39 28 30
Asia Pacific 791 866 796 60 54 46
Other(8) 280 211 218 16 13 10
------ ------ ------ ---- ---- ----
Total Emerging Markets (9) 2,176 1,784 1,667 115 95 86
------ ------ ------ ---- ---- ----
Total $3,591 $3,788 $3,464 $295 $270 $269
- ------------------------------------ --------- ----------- ----------- ----------- ----------- -----------
</TABLE>
(1) Includes net interest revenue and fees, commissions and other revenue.
(2) Reclassified to conform to the 1997 presentation.
(3) Includes restructuring charge in 1997 of $889 million in income before
taxes and $556 million in net income. Refer to Note 9 for additional
details.
(4) Includes approximately $81 million in 1997, $62 million in 1996, and $58
million in 1995 of tax-exempt income, reducing the federal income tax
provision.
(5) Includes Japan and Canada.
(6) Includes pretax restructuring charges in the United States, Western
Europe, and Japan and Canada of $474 million, $209 million, and $21
million, respectively.
(7) Includes Mexico, the Caribbean, Central and South America.
(8) Includes Central and Eastern Europe, Middle East, and Africa.
(9) Includes pretax restructuring charges in Asia Pacific, Latin America, and
Central and Eastern Europe, Middle East and Africa of $115 million, $59
million, and $11 million, respectively.
13. COMMITMENTS AND CONTINGENT LIABILITIES
Citicorp and its subsidiaries are obligated under a number of non-cancelable
leases for premises and equipment. Minimum rental commitments on non-cancelable
leases were in the aggregate $2.1 billion, and for each of the five years
subsequent to December 31, 1997, were $369 million (1998), $331 million (1999),
$289 million (2000), $235 million (2001), and $179 million (2002). The minimum
rental commitments do not include minimum sublease rentals under non-cancelable
subleases of $129 million. Most of the leases have renewal or purchase options
and escalation clauses. Rental expense was $605 million in 1997, excluding $68
million of sublease rental income, $585 million in 1996, excluding $79 million
of sublease rental income, and $547 million in 1995, excluding $74 million of
sublease rental income.
At December 31, 1997, certain investment securities, trading account
assets, and other assets with a carrying value of $13.9 billion were pledged as
collateral for borrowings, to secure public and trust deposits, and for other
purposes.
Various legal proceedings are pending against Citicorp and its
subsidiaries. Citicorp management considers that the aggregate liability, if
any, resulting from these proceedings will not be material to Citicorp's
financial position or results of operations.
79
<PAGE>
14. FUTURE IMPACT OF NEW ACCOUNTING STANDARDS
Effective January 1, 1998 Citicorp will adopt the remaining provisions of SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which relate to the accounting for securities
lending, repurchase agreements, and other secured financing activities. These
provisions, whose effective date was deferred by SFAS No. 127, are not expected
to have a material impact on Citicorp. In addition, the FASB is considering
certain amendments and interpretations of SFAS No. 125 which, if enacted in the
future, could affect the accounting for transactions within their scope.
During the first quarter 1998 Citicorp will adopt SFAS No. 130, "Reporting
Comprehensive Income," which addresses the manner in which certain adjustments
to stockholders' equity (principally foreign currency translation and unrealized
gains and losses on available for sale securities) are displayed in the
financial statements, with no effect on reported earnings, assets or capital.
Also during 1998 Citicorp will adopt SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which revises the
requirements for disclosing segment data. Citicorp does not anticipate a
significant change in its segment disclosures as a result of the new standard.
15. STOCKHOLDER'S EQUITY OF CITIBANK, N.A.
Changes in Stockholder's Equity
In Millions of Dollars 1997 1996 1995
- -----------------------------------------------------------------
Balance at Beginning of Year $16,298 $14,966 $14,140
Net Income 2,634 2,743 2,332
Dividends (1,750) (2,300) (1,500)
Contributions from Parent -- 57 --
Change in Net Unrealized Gains
on Securities Available
for Sale (243) 533 97
Effect of Transfer from
Securities Held to Maturity to
Securities Available for Sale -- -- (262)
Foreign Currency Translation (112) (31) 20
Other 341 330 139
------- ------- -------
Balance at End of Year $17,168 $16,298 $14,966
------- ------- -------
- -----------------------------------------------------------------
Citibank's net income for 1997 of $2,634 million includes an after tax
restructuring charge of $384 million ($593 million pretax) related to cost
management programs and customer service initiatives to improve operational
efficiency and productivity. See Note 9 for further discussions.
Authorized capital stock of Citibank was 40 million shares at December 31,
1997, 1996, and 1995.
16. CITICORP (PARENT COMPANY ONLY)
The Parent Company is a legal entity separate and distinct from Citibank, N.A.
and its other subsidiaries and affiliates. There are various legal limitations
on the extent to which Citicorp's banking subsidiaries may extend credit, pay
dividends or otherwise supply funds to Citicorp. The approval of the Office of
the Comptroller of the Currency is required if total dividends declared by a
national bank in any calendar year exceed net profits (as defined) for that year
combined with its retained net profits for the preceding two years. In addition,
dividends for such a bank may not be paid in excess of the bank's undivided
profits. State-chartered bank subsidiaries are subject to dividend limitations
imposed by applicable state law.
Citicorp's national and state-chartered bank subsidiaries can declare
dividends to their respective parent companies in 1998, without regulatory
approval, of approximately $2.0 billion, adjusted by the effect of their net
income (loss) for 1998 up to the date of any such dividend declaration. 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 its bank subsidiaries can distribute
dividends to Citicorp of approximately $1.6 billion of the available $2.0
billion, adjusted by the effect of their net income (loss) up to the date of any
such dividend declaration.
Citicorp also receives dividends from its nonbank subsidiaries. These
nonbank subsidiaries are generally not subject to regulatory restrictions on
their payment of dividends except that the approval of the Office of Thrift
Supervision ("OTS") may be required if total dividends declared by a savings
association in any calendar year exceed amounts specified by that agency's
regulations.
Condensed Statement of Income
Citicorp (Parent Company Only)
In Millions of Dollars 1997 1996 1995
- -----------------------------------------------------------------
Revenue
Dividends from Subsidiary Banks $1,850 $2,400 $1,600
Dividends from Subsidiaries
Other Than Banks 569 1,099 730
Interest from Subsidiaries 784 789 787
Other Revenue(1) 92 67 72
------ ------ ------
3,295 4,355 3,189
------ ------ ------
Expense
Interest on Other Borrowed Funds 119 101 132
Interest and Fees Paid to 210 126 137
Subsidiaries
Interest on Long-Term Debt 844 890 947
Other Expense 12 22 14
-------- -------- ---------
1,185 1,139 1,230
----- ------- ------
Income Before Taxes and Equity in
Undistributed Income of
Subsidiaries 2,110 3,216 1,959
Income Tax Benefit--Current 77 88 102
Equity in Undistributed Income
of Subsidiaries 1,404 484 1,403
------ -------- -------
Net Income $3,591 $3,788 $3,464
- -----------------------------------------------------------------
(1) Includes net securities gains of $56 million, $13 million, and $1 million
in 1997, 1996, and 1995, respectively.
80
<PAGE>
Condensed Balance Sheet Citicorp (Parent Company Only)
In Millions of Dollars December 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------
Assets
Deposits with Subsidiary Banks,
Principally Interest-Bearing $ 2,631 $ 2,201
Securities--Available for Sale 1,319 1,685
Investments in and Advances to:
Citibank, N.A. and Other
Subsidiary Banks 26,413 24,567
Subsidiaries Other Than Banks 9,128 7,771
Other Assets 609 534
------- -------
Total $40,100 $36,758
------- -------
- --------------------------------------------------------------------------------
Liabilities and
Stockholders' Equity
Purchased Funds and Other Borrowings $ 2,091 $ 968
Advance from Subsidiaries 81 197
Other Liabilities 1,360 1,399
Long-Term Debt (Note 1) 14,599 13,163
Junior Subordinated Deferrable
Interest Debentures Held
by Trust (Note 1) 773 309
Stockholders' Equity 21,196 20,722
------- -------
Total $40,100 $36,758
- --------------------------------------------------------------------------------
Condensed Statement of Cash Flows Citicorp (Parent Company Only)
In Millions of Dollars 1997 1996 1995
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net Income $ 3,591 $ 3,788 $ 3,464
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Equity in Undistributed Income (1,404) (484) (1,403)
of Subsidiaries
Other, Net (213) 29 203
-------- -------- --------
Net Cash Provided
by Operating Activities 1,974 3,333 2,264
-------- -------- --------
Cash Flows from Investing
Activities
Securities:
Purchases (2,802) (3,216) (2,394)
Sales 1,869 1,581 471
Maturities 1,525 1,175 1,525
Subsidiaries:
Investments and Advances (39,841) (32,871) (78,370)
Repayment of Advances 37,870 33,780 78,670
-------- -------- --------
Net Cash (Used In) Provided by
Investing Activities (1,379) 449 (98)
-------- -------- --------
Cash Flows from Financing Activities
Purchased Funds and Other Borrowings:
Proceeds 5,820 5,483 5,194
Repayments (4,697) (5,980) (5,354)
Advances from Subsidiaries:
Proceeds 111 98 5
Repayments (231) (2) (84)
Long-Term Debt:
Proceeds 4,163 2,470 2,758
Repayments (2,690) (2,839) (2,616)
Proceeds from Issuance of
Junior Subordinated
Deferrable Interest Debentures
Held by Trust 464 309 --
Preferred Stock:
Proceeds from Issuance -- -- 390
Redemption (175) -- (125)
Common Stock Issuance Proceeds 434 537 416
Treasury Stock Repurchases (2,259) (3,069) (1,531)
Dividends Paid (1,105) (1,012) (835)
-------- -------- --------
Net Cash Used in Financing Activities (165) (4,005) (1,782)
-------- -------- --------
Net Increase (Decrease) in
Deposits with Subsidiary Banks 430 (223) 384
Deposits with Subsidiary Banks
Beginning of Year 2,201 2,424 2,040
-------- -------- --------
Deposits With Subsidiary
Banks at End of Year $ 2,631 $ 2,201 $ 2,424
-------- -------- --------
- --------------------------------------------------------------------------------
Cash Paid During the Year for:
Interest $ 912 $ 929 $ 980
Income Taxes 1,367 794 783
- --------------------------------------------------------------------------------
81
<PAGE>
QUARTERLY FINANCIAL INFORMATION
<TABLE>
Citicorp and Subsidiaries
<CAPTION>
In Millions of Dollars, Except Share Data 1997 1996
- ---------------------------------------------------------------------------------------- --------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
--------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Interest Revenue $ 2,859 $ 2,876 $ 2,863 $ 2,804 $ 2,818 $ 2,709 $ 2,728 $ 2,685
Fees, Commissions, and Other Revenue 2,709 2,665 2,448 2,392 2,547 2,301 2,265 2,143
-------- -------- -------- -------- -------- -------- -------- --------
Total Revenue 5,568 5,541 5,311 5,196 5,365 5,010 4,993 4,828
Provision for Credit Losses 486 486 512 423 504 449 479 494
Operating Expense (1)
3,408 4,237 3,173 3,169 3,281 3,078 2,978 2,860
-------- -------- -------- -------- -------- -------- -------- --------
Income Before Taxes 1,674 818 1,626 1,604 1,580 1,483 1,536 1,474
Income Taxes 613 307 602 609 593 548 584 560
-------- -------- -------- -------- -------- -------- -------- --------
Net Income $ 1,061 $ 511 $ 1,024 $ 995 $ 987 $ 935 $ 952 $ 914
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share (2)
Basic $ 2.26 $ 1.04 $ 2.16 $ 2.07 $ 2.03 $ 1.90 $ 1.92 $ 1.88
Diluted 2.20 1.01 2.10 2.01 1.97 1.85 1.86 1.75
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Dividends Declared
Preferred Stock $ 34 $ 35 $ 34 $ 38 $ 38 $ 38 $ 38 $ 47
Common Stock 239 241 241 243 211 213 216 210
Common Stock, Per Share 0.525 0.525 0.525 0.525 0.45 0.45 0.45 0.45
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $310,897 $300,381 $304,293 $290,354 $281,018 $271,930 $266,824 $263,566
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Price Range (3)
High $144 3/16 $139 11/16 $124 1/4 $126 3/8 $109 1/4 $90 5/8 $86 5/8 $ 81
Low 116 123 5/16 102 1/2 100 1/4 91 3/8 76 1/4 75 3/8 62 1/2
Close 126 7/16 133 15/16 120 9/16 108 1/4 103 90 5/8 82 3/4 80
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Third Quarter 1997 includes $889 million restructuring charge.
(2) See Note 11 to the consolidated financial statements. Disclosures reflect
adoption of SFAS No. 128, "Earnings Per Share."
(3) Based on the New York Stock Exchange Composite Listing.
82
<PAGE>
10-K CROSS-REFERENCE INDEX
- --------------------------------------------------------------------------------
This Annual Report and Form 10-K incorporate into a single document the
requirements of the accounting profession and the Securities and Exchange
Commission, including a comprehensive explanation of 1997 results.
- --------------------------------------------------------------------------------
Certain statistical data required by the Securities and Exchange
Commission is included on pages 26, 45 through 47, and 82 through 89.
- --------------------------------------------------------------------------------
PART I Page
Item 1 Business.........4-24, 25-40, 41-47, 79, 90-91
Item 2 Properties..................................91
Item 3 Legal Proceedings...........................79
Item 4 Not Applicable
- ----------------------------------------------------------------
PART II
Item 5 Market for the Registrant's
Common Equity and Related
Stockholder Matters................80, 82, 96
Item 6 Selected Financial Data................26, 49
Item 7 Management's Discussion and
Analysis of Financial Condition and Results
of Operations...............4-24, 26-54, 82-91
Item 7A Quantitative and Qualitative
Disclosures About Market Risk.....42-45, 64-71
Item 8 Financial Statements and
Supplementary Data................45-47, 55-89
Item 9 Not Applicable
- ---------------------------------------------------------------
PART III
Item 10 Directors and Executive Officers
of the Registrant..............................*
Item 11 Executive Compensation.........................*
Item 12 Security Ownership of Certain
Beneficial Owners and Management ..............*
Item 13 Certain Relationships and Related
Transactions...................................*
- -------------------------------------------------------------
PART IV
Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K...........................92
- ----------------------------------------------------------------
* Citicorp's 1998 Proxy Statement is incorporated herein by reference. Such
incorporation by reference shall not include the information referred to
in Item 402(a)(8) of Regulation S-K.
83
<PAGE>
FINANCIAL DATA SUPPLEMENT
<TABLE>
<CAPTION>
AVERAGE BALANCES AND INTEREST RATES, TAXABLE EQUIVALENT BASIS (1) (2) Citicorp and Subsidiaries
AVERAGE VOLUME
------------- ------------- ---------------
In Millions of Dollars 1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LOANS (NET OF UNEARNED INCOME) (3)
Consumer Loans
In U.S. Offices $ 55,947 $ 54,179 $ 50,918
In Offices Outside the U.S. (4) 51,274 51,282 48,811
--------- --------- ---------
Total Consumer Loans 107,221 105,461 99,729
--------- --------- ---------
Commercial Loans
In U.S. Offices
Commercial and Industrial 10,484 8,927 9,982
Mortgage and Real Estate 2,674 4,256 5,413
Loans to Financial Institutions 499 481 426
Lease Financing 3,048 3,219 3,198
In Offices Outside the U.S. (4) 50,791 43,387 37,921
--------- --------- ---------
Total Commercial Loans 67,496 60,270 56,940
--------- --------- ---------
Total Loans 174,717 165,731 156,669
--------- --------- ---------
FEDERAL FUNDS SOLD AND RESALE AGREEMENTS
In U.S. Offices 6,973 8,774 11,816
In Offices Outside the U.S. (4) 5,633 3,730 2,408
--------- --------- ---------
Total 12,606 12,504 14,224
--------- --------- ---------
SECURITIES
At Cost/Lower of Cost or Market
In U.S. Offices - Taxable --- --- 1,460
In Offices Outside the U.S. (4) --- --- 3,090
--------- --------- ---------
Total --- --- 4,550
--------- --------- ---------
At Fair Value
In U.S. Offices
Taxable 8,808 7,276 5,419
Exempt from U.S. Income Tax 2,619 1,708 1,599
In Offices Outside the U.S. (4) 20,729 15,189 8,465
--------- --------- ---------
Total 32,156 24,173 15,483
--------- --------- ---------
Total Securities 32,156 24,173 20,033
--------- --------- ---------
TRADING ACCOUNT ASSETS (5)
In U.S. Offices 4,901 5,662 10,879
In Offices Outside the U.S. (4) 9,928 11,413 10,871
--------- --------- ---------
Total 14,829 17,075 21,750
--------- --------- ---------
LOANS HELD FOR SALE, In U.S. Offices 3,571 --- ---
DEPOSITS AT INTEREST WITH BANKS (4) 14,003 12,559 11,288
--------- --------- ---------
Total Interest-Earning Assets 251,882 232,042 223,964
Non-Interest-Earning Assets (5) 42,915 38,112 44,817
--------- --------- ---------
TOTAL ASSETS $294,797 $270,154 $268,781
--------- --------- ---------
- -----------------------------------------------------------------------------------------------
DEPOSITS
In U.S. Offices
Savings Deposits (6) $ 27,149 $ 25,927 $ 24,715
Other Time Deposits 12,302 12,556 11,756
In Offices Outside the U.S. (4) 128,546 116,565 110,236
--------- --------- ---------
Total 167,997 155,048 146,707
--------- --------- ---------
TRADING ACCOUNT LIABILITIES (5)
In U.S. Offices 2,457 2,463 2,851
In Offices Outside the U.S. (4) 2,576 2,089 1,328
--------- --------- ---------
Total 5,033 4,552 4,179
--------- --------- ---------
PURCHASED FUNDS AND OTHER BORROWINGS
In U.S. Offices 14,111 14,286 20,805
In Offices Outside the U.S. (4) 8,030 6,271 6,053
--------- --------- ---------
Total 22,141 20,557 26,858
--------- --------- ---------
LONG-TERM DEBT
In U.S. Offices 15,242 14,661 14,736
In Offices Outside the U.S. (4) 4,448 4,356 3,492
--------- --------- ---------
Total 19,690 19,017 18,228
--------- --------- ---------
Total Interest-Bearing Liabilities 214,861 199,174 195,972
Demand Deposits in U.S. Offices 11,166 12,368 11,636
Other Non-Interest-Bearing Liabilities (5) 47,776 38,625 42,279
Total Stockholders' Equity 20,994 19,987 18,894
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $294,797 $270,154 $268,781
--------- --------- ---------
- -----------------------------------------------------------------------------------------------
NET INTEREST REVENUE AS A PERCENTAGE OF
AVERAGE INTEREST-EARNING ASSETS
In U.S. Offices (7) $ 99,500 $ 94,544 $101,161
In Offices Outside the U.S. (7) 152,382 137,498 122,803
--------- --------- ---------
TOTAL $251,882 $232,042 $223,964
--------- --------- ---------
- -----------------------------------------------------------------------------------------------
<CAPTION>
INTEREST REVENUE/EXPENSE % AVERAGE RATE
------------------------------------- ------------------------------------------
In Millions of Dollars 1997 1996 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LOANS (NET OF UNEARNED INCOME) (3)
Consumer Loans
In U.S. Offices $ 5,809 $ 5,749 $ 5,607 10.38 10.61 11.01
In Offices Outside the U.S. (4) 6,308 6,489 6,251 12.30 12.65 12.81
-------- -------- --------
Total Consumer Loans 12,117 12,238 11,858 11.30 11.60 11.89
-------- -------- --------
Commercial Loans
In U.S. Offices
Commercial and Industrial 905 827 883 8.63 9.26 8.85
Mortgage and Real Estate 285 330 413 10.66 7.75 7.63
Loans to Financial Institutions 48 41 20 9.62 8.52 4.69
Lease Financing 205 211 231 6.73 6.55 7.22
In Offices Outside the U.S. (4) 5,411 4,867 4,405 10.65 11.22 11.62
-------- -------- --------
Total Commercial Loans 6,854 6,276 5,952 10.15 10.41 10.45
-------- -------- --------
Total Loans 18,971 18,514 17,810 10.86 11.17 11.37
-------- -------- --------
FEDERAL FUNDS SOLD AND RESALE AGREEMENTS
In U.S. Offices 354 460 675 5.08 5.24 5.71
In Offices Outside the U.S. (4) 518 442 381 9.20 11.85 15.82
-------- -------- --------
Total 872 902 1,056 6.92 7.21 7.42
-------- -------- --------
SECURITIES
At Cost/Lower of Cost or Market
In U.S. Offices - Taxable --- --- 96 --- --- 6.58
In Offices Outside the U.S. (4) --- --- 236 --- --- 7.64
-------- -------- --------
Total --- --- 332 --- --- 7.30
-------- -------- --------
At Fair Value
In U.S. Offices
Taxable 412 351 254 4.68 4.82 4.69
Exempt from U.S. Income Tax 170 110 107 6.49 6.44 6.69
In Offices Outside the U.S. (4) 1,661 1,342 879 8.01 8.84 10.38
-------- -------- --------
Total 2,243 1,803 1,240 6.98 7.46 8.01
-------- -------- --------
Total Securities 2,243 1,803 1,572 6.98 7.46 7.85
-------- -------- --------
TRADING ACCOUNT ASSETS (5)
In U.S. Offices 289 333 713 5.90 5.88 6.55
In Offices Outside the U.S. (4) 725 979 1,075 7.30 8.58 9.89
-------- -------- --------
Total 1,014 1,312 1,788 6.84 7.68 8.22
-------- -------- --------
LOANS HELD FOR SALE, In U.S. Offices 440 --- --- 12.32 --- ---
DEPOSITS AT INTEREST WITH BANKS (4) 995 858 770 7.11 6.83 6.82
-------- -------- --------
Total Interest-Earning Assets $24,535 $23,389 $22,996 9.74 10.08 10.27
-------- -------- -------- ----- ----- -----
Non-Interest-Earning Assets (5)
TOTAL ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
DEPOSITS
In U.S. Offices
Savings Deposits (6) $ 811 $ 756 $ 758 2.99 2.92 3.07
Other Time Deposits 610 782 741 4.96 6.23 6.30
In Offices Outside the U.S. (4) 8,192 7,436 7,403 6.37 6.38 6.72
-------- -------- --------
Total 9,613 8,974 8,902 5.72 5.79 6.07
-------- -------- --------
TRADING ACCOUNT LIABILITIES (5)
In U.S. Offices 135 142 179 5.49 5.77 6.28
In Offices Outside the U.S. (4) 175 171 121 6.79 8.19 9.11
-------- -------- --------
Total 310 313 300 6.16 6.88 7.18
-------- -------- --------
PURCHASED FUNDS AND OTHER BORROWINGS
In U.S. Offices 841 888 1,306 5.96 6.22 6.28
In Offices Outside the U.S. (4) 973 887 1,073 12.12 14.14 17.73
-------- -------- --------
Total 1,814 1,775 2,379 8.19 8.63 8.86
-------- -------- --------
LONG-TERM DEBT
In U.S. Offices 932 921 1,063 6.11 6.28 7.21
In Offices Outside the U.S. (4) 412 426 368 9.26 9.78 10.54
-------- -------- --------
Total 1,344 1,347 1,431 6.83 7.08 7.85
-------- -------- --------
Total Interest-Bearing Liabilities $13,081 $12,409 $13,012 6.09 6.23 6.64
-------- -------- -------- ----- ----- -----
- -------------------------------------------------------------------------------------------------------------------------------
NET INTEREST REVENUE AS A PERCENTAGE
OF AVERAGE INTEREST-EARNING ASSETS
In U.S. Offices (7) $ 4,968 $ 4,517 $4,238 4.99 4.78 4.19
In Offices Outside the U.S. (7) 6,486 6,463 5,746 4.26 4.70 4.68
-------- -------- --------
TOTAL $11,454 $10,980 $9,984 4.55 4.73 4.46
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The taxable equivalent adjustment is based on the U.S. federal statutory
tax rate of 35%.
(2) Interest rates and amounts include the effects of risk management
activities associated with the respective asset and liability categories.
See Note 1 to the consolidated financial statements.
(3) Includes cash-basis loans.
(4) Average rates reflect prevailing local interest rates including
inflationary effects and monetary correction in certain countries.
(5) The fair value carrying amounts of derivative and foreign exchange
contracts are reported in non-interest earning assets and other
non-interest bearing liabilities.
(6) Savings deposits consist of Insured Money Market Rate accounts, NOW
accounts, and other savings deposits.
(7) Includes allocations for capital and funding costs based on the location
of the asset.
84
<PAGE>
ANALYSIS OF CHANGES IN NET INTEREST REVENUE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
TAXABLE EQUIVALENT BASIS (1) 1997 vs. 1996 1996 vs. 1995
- -------------------------------------------- --------------------------------------- -------------------------------------------
INCREASE (DECREASE) Increase (Decrease)
DUE TO CHANGE IN: Due to Change In:
------------------------ ----------------------------
AVERAGE AVERAGE NET Average Average Net
In Millions of Dollars VOLUME RATE CHANGE (2) Volume Rate Change (2)
- -------------------------------------------- ---------- ------------- --------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
LOANS--CONSUMER
In U.S. Offices $ 185 $ (125) $ 60 $ 351 $ (209) $ 142
In Offices Outside the U.S. (3) (1) (180) (181) 313 (75) 238
--------- -------- -------- -------- ---------- ----------
TOTAL 184 (305) (121) 664 (284) 380
--------- -------- -------- -------- --------- ----------
LOANS--COMMERCIAL
In U.S. Offices (15) 49 34 (177) 39 (138)
In Offices Outside the U.S. (3) 798 (254) 544 617 (155) 462
-------- -------- -------- -------- --------- ----------
TOTAL 783 (205) 578 440 (116) 324
-------- -------- -------- -------- --------- ----------
Total Loans 967 (510) 457 1,104 (400) 704
-------- -------- -------- ------- --------- ----------
FEDERAL FUNDS SOLD AND RESALE AGREEMENTS
In U.S. Offices (91) (15) (106) (163) (52) (215)
In Offices Outside the U.S. (3) 190 (114) 76 173 (112) 61
-------- -------- --------- -------- --------- -----------
TOTAL 99 (129) (30) 10 (164) (154)
--------- -------- --------- --------- --------- ---------
SECURITIES
In U.S. Offices 124 (3) 121 27 (23) 4
In Offices Outside the U.S. (3) 453 (134) 319 327 (100) 227
-------- -------- -------- -------- --------- ----------
TOTAL 577 (137) 440 354 (123) 231
-------- -------- -------- -------- --------- ----------
TRADING ACCOUNT ASSETS
In U.S. Offices (45) 1 (44) (313) (67) (380)
In Offices Outside the U.S. (3) (118) (136) (254) 52 (148) (96)
-------- -------- -------- --------- --------- ---------
TOTAL (163) (135) (298) (261) (215) (476)
-------- -------- -------- ------ --------- --------
LOANS HELD FOR SALE, In U.S. Offices 440 --- 440 --- --- ---
DEPOSITS AT INTEREST WITH BANKS (3) 102 35 137 87 1 88
-------- ---------- -------- --------- ------------ -----------
TOTAL INTEREST REVENUE 2,022 (876) 1,146 1,294 (901) 393
- -------------------------------------------- ---------- ------------- -------------- -------------- ------------- -------------
DEPOSITS
In U.S. Offices 38 (155) (117) 81 (42) 39
In Offices Outside the U.S. (3) 763 (7) 756 414 (381) 33
-------- ---------- -------- -------- -------- -----------
TOTAL 801 (162) 639 495 (423) 72
-------- -------- -------- -------- -------- -----------
TRADING ACCOUNT LIABILITIES
In U.S. Offices --- (7) (7) (23) (14) (37)
In Offices Outside the U.S. (3) 36 (32) 4 63 (13) 50
--------- --------- ----------- --------- --------- ----------
TOTAL 36 (39) (3) 40 (27) 13
--------- --------- ---------- --------- --------- ----------
PURCHASED FUNDS AND OTHER BORROWINGS
In U.S. Offices (11) (36) (47) (405) (13) (418)
In Offices Outside the U.S. (3) 225 (139) 86 37 (223) (186)
-------- -------- --------- --------- ------- --------
TOTAL 214 (175) 39 (368) (236) (604)
-------- -------- --------- ------- ------- --------
LONG-TERM DEBT
In U.S. Offices 36 (25) 11 (5) (137) (142)
In Offices Outside the U.S. (3) 9 (23) (14) 86 (28) 58
--------- --------- --------- --------- -------- ---------
TOTAL 45 (48) (3) 81 (165) (84)
--------- --------- ---------- --------- ------- ---------
TOTAL INTEREST EXPENSE 1,096 (424) 672 248 (851) (603)
- -------------------------------------------- ---------- ------------- -------------- -------------- ------------- -------------
NET INTEREST REVENUE $ 926 $ (452) $ 474 $1,046 $ (50) $ 996
- -------------------------------------------- ---------- ------------- -------------- -------------- ------------- -------------
</TABLE>
(1) The taxable equivalent adjustment is based on the U.S. federal statutory
tax rate of 35%.
(2) Rate/volume variance is allocated based on the percentage relationship of
changes in volume and changes in rate to the total "net change."
(3) Changes in average rates reflect changes in prevailing local interest
rates including inflationary effects and monetary correction in certain
countries.
85
<PAGE>
<TABLE>
LOANS OUTSTANDING
<CAPTION>
In Millions of Dollars at Year-End 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER LOANS
In U.S. Offices
Mortgage and Real Estate (1) $ 22,599 $ 23,421 $ 22,604 $ 21,089 $ 22,719
Installment, Revolving Credit, and Other (1) 35,747 36,285 32,429 29,523 22,490
Lease Financing -- -- -- 32 152
--------- --------- --------- --------- ---------
58,346 59,706 55,033 50,644 45,361
--------- --------- --------- --------- ---------
In Offices Outside the U.S.
Mortgage and Real Estate 17,685 18,379 18,240 16,830 13,908
Installment, Revolving Credit, and Other 32,179 33,905 32,521 29,303 25,355
Lease Financing 544 754 765 732 672
--------- --------- --------- --------- ---------
50,408 53,038 51,526 46,865 39,935
--------- --------- --------- --------- ---------
108,754 112,744 106,559 97,509 85,296
Unearned Income (688) (897) (916) (909) (942)
--------- --------- --------- --------- ---------
Consumer Loans-- Net 108,066 111,847 105,643 96,600 84,354
--------- --------- --------- --------- ---------
COMMERCIAL LOANS
In U.S. Offices
Commercial and Industrial 11,234 8,747 9,509 10,236 8,969
Mortgage and Real Estate 2,398 2,977 4,681 5,616 7,440
Loans to Financial Institutions 371 1,035 365 297 269
Lease Financing 3,087 3,017 3,239 3,271 3,541
--------- --------- --------- --------- ---------
17,090 15,776 17,794 19,420 20,219
--------- --------- --------- --------- ---------
In Offices Outside the U.S.
Commercial and Industrial 47,417 36,901 32,966 27,120 23,624
Mortgage and Real Estate 1,651 1,815 1,901 1,995 2,201
Loans to Financial Institutions 6,480 4,837 4,229 3,263 3,123
Governments and Official Institutions 2,376 2,252 2,180 3,265 4,807
Lease Financing 1,092 1,294 1,098 934 800
--------- --------- --------- --------- ---------
59,016 47,099 42,374 36,577 34,555
--------- --------- --------- --------- ---------
76,106 62,875 60,168 55,997 54,774
Unearned Income (159) (110) (169) (177) (161)
--------- --------- --------- --------- ---------
Commercial Loans-- Net 75,947 62,765 59,999 55,820 54,613
--------- --------- --------- --------- ---------
Total Loans-- Net of Unearned Income 184,013 174,612 165,642 152,420 138,967
Allowance for Credit Losses (2) (5,816) (5,503) (5,368) (5,155) (4,379)
--------- --------- --------- --------- ---------
TOTAL LOANS-- NET OF UNEARNED INCOME AND
ALLOWANCE FOR CREDIT LOSSES $178,197 $169,109 $160,274 $147,265 $134,588
--------- --------- --------- --------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Commencing in 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.
(2) See footnote 1.C. on page 69 regarding the change in the apportionment and
display of the aggregate allowance for credit losses in 1997.
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
<TABLE>
MATURITIES OF THE GROSS COMMERCIAL LOAN PORTFOLIO
<CAPTION>
DUE OVER 1 BUT
WITHIN WITHIN OVER
In Millions of Dollars at Year-End 1 YEAR 5 YEARS 5 YEARS TOTAL
- ---------------------------------------------------------------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
In U.S. Offices
Commercial and Industrial Loans $ 4,203 $ 5,127 $1,904 $11,234
Mortgage and Real Estate 746 1,015 637 2,398
Loans to Financial Institutions 152 178 41 371
Lease Financing 893 1,398 796 3,087
In Offices Outside the U.S. 43,924 10,273 4,819 59,016
-------- ----------- -------- --------
TOTAL $49,918 $17,991 $8,197 $76,106
- ---------------------------------------------------------------------- ---------------- --------------- ----------------
Sensitivity of Loans Due After One Year to Changes in Interest Rates (1)
Loans at Predetermined Interest Rates $ 4,069 $2,338
Loans at Floating or Adjustable Interest Rates 13,922 5,859
--------- --------
TOTAL $17,991 $8,197
- ---------------------------------------------------------------------- ---------------- --------------- ----------------
</TABLE>
(1) Based on contractual terms. Repricing characteristics may effectively be
modified from time to time using derivative contracts. See Note 1 to the
consolidated financial statements.
86
<PAGE>
<TABLE>
CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS (1)
<CAPTION>
In Millions of Dollars at Year-End 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL CASH-BASIS LOANS
Collateral Dependent (at Lower of Cost
or Collateral Value) (2) $ 258 $ 263 $ 779 $1,347 $2,704
Other (3) 806 642 755 770 1,970
------ ------ ------ ------ ------
TOTAL $1,064 $ 905 $1,534 $2,117 $4,674
- ----------------------------------------------------------------------------------------
COMMERCIAL CASH-BASIS LOANS
In U.S. Offices $ 296 $ 292 $ 925 $1,547 $2,841
In Offices Outside the U.S. (3) 768 613 609 570 1,833
------ ------ ------ ------ ------
TOTAL $1,064 $ 905 $1,534 $2,117 $4,674
- ----------------------------------------------------------------------------------------
COMMERCIAL RENEGOTIATED LOANS
In U.S. Offices $ 20 $ 264 $ 309 $ 563 $ 641
In Offices Outside the U.S. 39 57 112 155 67
------ ------ ------ ------ ------
TOTAL $ 59 $ 321 $ 421 $ 718 $ 708
- ----------------------------------------------------------------------------------------
CONSUMER LOANS ON WHICH ACCRUAL OF INTEREST
HAD BEEN SUSPENDED
In U.S. Offices (4) $ 856 $1,116 $1,413 $1,538 $1,965
In Offices Outside the U.S. 993 1,071 1,247 1,066 948
------ ------ ------ ------ ------
TOTAL $1,849 $2,187 $2,660 $2,604 $2,913
- ----------------------------------------------------------------------------------------
ACCRUING LOANS 90 OR MORE DAYS DELINQUENT (5)
In U.S. Offices (4) $ 606 $ 696 $ 499 $ 415 $ 635
In Offices Outside the U.S. 467 422 498 460 421
------ ------ ------ ------ ------
TOTAL $1,073 $1,118 $ 997 $ 875 $1,056
- ----------------------------------------------------------------------------------------
</TABLE>
(1) For a discussion of risks in the consumer loan portfolio, see pages 35 and
36, and of commercial cash-basis loans, see page 38.
(2) 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.
(3) Includes foreign currency derivative contracts with a balance sheet credit
exposure of $59 million at December 31, 1997 for which the recognition of
revaluation gains has been suspended.
(4) Excludes $11 million of consumer loans on which accrual of interest had
been suspended and $27 million of accruing loans 90 or more days
delinquent related to loans held for sale at December 31, 1997.
(5) Includes consumer loans of $1.0 billion, $1.0 billion, $951 million, $828
million, and $802 million at December 31, 1997, 1996, 1995, 1994, and
1993, respectively, of which $240 million, $239 million, $208 million,
$150 million, and $114 million, respectively, are government-guaranteed
student loans.
OTHER REAL ESTATE OWNED (OREO) AND ASSETS PENDING DISPOSITION (1)
In Millions of Dollars at Year-End 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
Consumer OREO $263 $ 452 $ 529 $ 569 $ 733
CommerciaL OREO 461 614 625 958 1,637
---- ------ ------ ------ ------
TOTAL $724 $1,066 $1,154 $1,527 $2,370
- --------------------------------------------------------------------------------
ASSETS PENDING DISPOSITION (2) $ 96 $ 160 $ 205 $ 195 $ 429
- --------------------------------------------------------------------------------
(1) Carried at lower of cost or collateral value.
(2) Represents consumer residential mortgage loans that have a high
probability of foreclosure.
FOREGONE INTEREST REVENUE ON LOANS(1)
In non-U.S. 1997
In Millions of Dollars In U.S Offices Offices TOTAL
- --------------------------------------------------------------------------------
Interest Revenue that Would Have Been
Accrued at Original Contractual Rates(2) $143 $260 $403
Amount Recognized as Interest Revenue(2) 86 65 151
------ ------ ------
FOREGONE INTEREST REVENUE $ 57 $195 $252
- --------------------------------------------------------------------------------
(1) Relates to commercial cash-basis and renegotiated loans and consumer loans
on which accrual of interest had been suspended.
(2) Interest revenue in offices outside the U.S. may reflect prevailing local
interest rates, including the effects of inflation and monetary correction
in certain countries.
87
<PAGE>
<TABLE>
DETAILS OF CREDIT LOSS EXPERIENCE
<CAPTION>
In Millions of Dollars at Year-End 1997(1) 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AGGREGATE ALLOWANCE FOR CREDIT LOSSES AT BEGINNING OF YEAR $ 5,503 $ 5,368 $ 5,155 $ 4,379 $ 3,859
------- ------- ------- ------- -------
Provision for Credit Losses 1,907 1,926 1,991 1,881 2,600
GROSS CREDIT LOSSES
CONSUMER (2)
In U.S. Offices 1,437 1,296 1,137 1,120 1,245
In Offices Outside the U.S. 868 876 825 594 504
COMMERCIAL
Mortgage and Real Estate
In U.S. Offices 21 27 118 200 333
In Offices Outside the U.S. 47 32 25 48 132
Governments and Official Institutions in Offices Outside the U.S. -- -- 37 -- 131
Loans to Financial Institutions in Offices Outside the U.S. 7 12 11 -- 9
Commercial and Industrial
In U.S. Offices 13 36 48 57 148
In Offices Outside the U.S. 109 159 137 64 175
------- ------- ------- ------- -------
2,502 2,438 2,338 2,083 2,677
------- ------- ------- ------- -------
CREDIT RECOVERIES
CONSUMER (2)
In U.S. Offices 240 228 231 214 207
In Offices Outside the U.S. 234 216 187 147 132
COMMERCIAL
Mortgage and Real Estate
In U.S. Offices 47 88 26 15 48
In Offices Outside the U.S. 7 8 21 8 8
Governments and Official Institutions in Offices Outside the U.S. 36 81 52 240 42
Loans to Financial Institutions in Offices Outside the U.S. 17 1 1 3 22
Commercial and Industrial
In U.S. Offices 60 46 82 64 54
In Offices Outside the U.S. 54 44 46 248 105
------- ------- ------- ------- -------
695 712 646 939 618
------- ------- ------- ------- -------
NET CREDIT LOSSES
In U.S. Offices 1,124 997 964 1,084 1,417
In Offices Outside the U.S. 683 729 728 60 642
------- ------- ------- ------- -------
1,807 1,726 1,692 1,144 2,059
------- ------- ------- ------- -------
OTHER-NET (3) 313 (65) (86) 39 (21)
------- ------- ------- ------- -------
AGGREGATE ALLOWANCE FOR CREDIT LOSSES AT END OF YEAR 5,916 5,503 5,368 5,155 4,379
Reserves for Securitization Activities 85 473 486 422 527
------- ------- ------- ------- -------
TOTAL CREDIT LOSS RESERVES $ 6,001 $ 5,976 $ 5,854 $ 5,577 $ 4,906
- ------------------------------------------------------------------------------------------------------------------------------------
Net Consumer Credit Losses (4) $ 1,831 $ 1,728 $ 1,544 $ 1,353 $ 1,410
As a Percentage of Average Consumer Loans (4) 1.71 1.64 1.55 1.56 1.73
Net Commercial Credit (Recoveries) Losses (24) (2) 148 (209) 649
As a Percentage of Average Commercial Loans NM NM 0.26 NM 1.13
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See footnote 1.C. on page 69 regarding the change in the apportionment and
display of the aggregate allowance for credit losses in 1997.
(2) Consumer credit losses and recoveries primarily relate to revolving credit
and installment loans.
(3) Primarily includes net transfers from (to) the reserves for securitization
activities and foreign currency translation effects.
(4) Commencing in 1997, reflects the classification 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.
88
<PAGE>
<TABLE>
AVERAGE DEPOSIT LIABILITIES IN OFFICES OUTSIDE THE U.S. (1)
<CAPTION>
In Millions of Dollars at Year-End 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
% AVERAGE % Average % Average
AVERAGE INTEREST Average Interest Average Interest
BALANCE RATE Balance Rate Balance Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Banks(2) $ 15,326 7.33 $ 10,528 8.44 $ 12,777 8.18
Other Demand Deposits 31,833 2.99 28,801 3.27 25,569 3.52
Other Time and Savings Deposits(2) 90,610 6.75 85,176 6.58 79,157 6.89
-------- -------- --------
TOTAL $137,769 5.95 $124,505 5.97 $117,503 6.30
-------- -------- --------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Interest rates and amounts include the effects of risk management
activities, and also reflect the impact of the local interest rates
prevailing in certain countries. See Note 1 to the consolidated financial
statements.
(2) Primarily consists of time certificates of deposit and other time deposits
in denominations of $100,000 or more.
<TABLE>
TIME DEPOSITS IN U.S. OFFICES
<CAPTION>
MATURITY PROFILE
In Millions of Dollars ($100,000 UNDER OVER 3 TO OVER 6 TO OVER
or more) at Year-End 1997 3 MONTHS 6 MONTHS 12 MONTHS 12 MONTHS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Certificates of Deposit $2,526 $403 $497 $306
Other Time Deposits 497 125 44 229
- ---------------------------------------------------- ------------------ ------------------ ----------------
</TABLE>
<TABLE>
PURCHASED FUNDS AND OTHER BORROWINGS(1)
<CAPTION>
FEDERAL FUNDS PURCHASED
AND SECURITIES SOLD UNDER
REPURCHASE AGREEMENTS COMMERCIAL PAPER(2) OTHER FUNDS BORROWED(3)
--------------------------- ------------------------ ------------------------
In Millions of Dollars 1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amount Outstanding at
Year-End $11,182 $ 9,995 $ 7,904 $1,941 $1,238 $1,633 $8,108 $6,958 $6,797
Average Outstanding
During the Year 12,290 12,851 18,890 1,453 1,665 1,718 8,398 6,041 6,250
Maximum Month-End
Outstanding 14,289 14,474 21,960 2,111 1,767 1,831 9,949 6,958 7,383
- ---------------------------------------------------------------------------------------------------------------------
Weighted-Average
Interest Rate
During the Year (4) 5.60% 5.81% 6.25% 5.44% 5.35% 5.88% 12.47% 15.54% 17.57%
At Year-End (5) 6.20 6.20 6.51 5.46 6.86 5.94 9.04 8.81 13.63
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Original maturities of less than one year.
(2) Amounts outstanding at December 31, 1996 and 1995 include $463 million and
$452 million, respectively, issued by The Student Loan Corporation (80%
owned). No such amounts were outstanding at December 31, 1997.
(3) Rates reflect the impact of local interest rates prevailing in countries
outside the United States.
(4) Interest rates include the effects of risk management activities. See Note
1 to the consolidated financial statements.
(5) Based on contractual rates at year-end.
89
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
[Logo] KPMG Peat Marwick LLP
Certified Public Accountants
The Board of Directors
Citicorp:
We consent to incorporation by reference of our report dated January 20, 1998
relating to the consolidated balance sheets of Citicorp and subsidiaries as of
December 31, 1997 and 1996, the related consolidated statements of income,
changes in stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997, and the related consolidated balance
sheets of Citibank, N.A. and subsidiaries as of December 31, 1997 and 1996,
which report appears on page 55 of the 1997 Citicorp Annual Report and Form
10-K, in the following Registration Statements: of Citicorp Nos. 2-47648,
2-58678, 33-21332, 33-21331, 33-41751, 33-52601, 33-53261, 333-00983, and
333-25889 on Form S-8, and Nos. 33-38589, 33-66094, 333-14917, 333-20803,
333-21143, and 333-32065 on Form S-3; and of Citicorp Mortgage Securities, Inc.,
Citibank, N.A., and other affiliates, Nos. 33-66222 and 333-43167 on Form S-3,
and Nos. 33-6979, 33-6358, 33-36313, and 33-34670 on Form S-11.
/s/ KPMG Peat Marwick LLP
New York, New York
February 24, 1998
REGULATION AND SUPERVISION
Citicorp is a bank holding company within the meaning of the U.S. Bank Holding
Company Act of 1956 ("BHC Act") registered with and subject to examination by
the FRB. Citibank, N.A. ("Citibank"), as well as Citicorp's other national
banking association subsidiaries, are primarily regulated by the OCC. Citicorp
also has state-chartered bank subsidiaries which are subject to examination,
supervision, and regulation by state regulators (New York and Delaware). The OTS
is the primary regulator of Citicorp's U.S. savings association subsidiary. The
Federal Deposit Insurance Corporation ("FDIC") insures deposits at Citicorp's
U.S. depository institution subsidiaries and, in that capacity, also regulates
those institutions. Citicorp also controls (either directly or indirectly
through Citibank) overseas banks, branches, and agencies. In general, Citicorp's
overseas activities are regulated by the FRB and OCC, and are also regulated by
supervisory authorities of the host countries.
Citicorp's earnings and activities are affected by legislation, by actions
of the FRB, OCC, FDIC, OTS, and other regulators, and by local legislative and
administrative bodies and decisions of courts in the foreign and domestic
jurisdictions in which Citicorp, Citibank, and their affiliates conduct
business. For example, these include limitations on the ability of subsidiaries
to pay dividends to Citicorp (see Note 16 to the consolidated financial
statements), numerous federal and state consumer protection laws imposing
requirements on the making, enforcement, and collection of consumer loans, and
restrictions by regulators on the manner in which Citicorp engages in
derivatives activities and in which it sells mutual funds and other uninsured
investment products to customers.
Legislation may be enacted or regulation imposed in the U.S. or its
political subdivisions, or in any other jurisdiction in which Citicorp does
business, to further regulate banking and financial services or to limit finance
charges or other fees or charges earned in such activities. There can be no
assurance whether any such legislation or regulation will place additional
limitations on Citicorp's operations or adversely affect its earnings.
U.S. federal law imposes certain restrictions on transactions between
Citicorp and its nonbank subsidiaries, on the one hand, and its
federally-insured depository institutions and their subsidiaries, including
Citibank, on the other. With certain exceptions, federal law also imposes
limitations on, and requires collateral for, extensions of credit by Citibank
and other U.S. insured depository institutions to their non-bank affiliates,
including Citicorp.
Subject to certain limitations and restrictions, a U.S. bank holding
company, with the prior approval of the FRB, may acquire an out-of-state bank.
Banks in states that do not prohibit out-of-state mergers may merge with the
approval of the appropriate federal bank regulatory agency. A national or state
bank may establish a de novo branch out of state if such branching is expressly
permitted by the other state. A federal saving association is generally
permitted to open a de novo branch in any state.
Outside the U.S., subject to certain requirements for prior FRB consent or
notice, Citicorp may acquire banks and Citibank may establish branches subject
to local laws and to U.S. laws prohibiting companies from doing business in
certain countries.
The activities of U.S. bank holding companies are generally limited to
managing or controlling banks. Nonbank acquisitions in the U.S. are generally
limited to 5% of voting shares unless the FRB determines that the acquisition is
so closely related to banking as to be a proper incident to banking or managing
or controlling banks. Subject to prior FRB consent, a bank holding company may
generally acquire less than 20% of a company that does not do business in the
U.S. and 20% or more if the FRB finds that its activities are usual in
connection with banking or finance outside the U.S. Citibank's U.S. activities
are generally limited to those that the OCC determines to constitute the
business of banking or
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to be incidental to banking. In the U.S., Citibank and its affiliates may
underwrite and deal in specific categories of government-issued securities and
may advise and sell as broker, but may not sponsor or distribute, mutual funds.
Citicorp Securities, Inc., a nonbank subsidiary of Citicorp, is authorized by
the FRB to underwrite and deal in securities, to a limited extent, subject to
certain conditions. Outside the U.S., Citicorp subsidiaries may sponsor,
distribute, and advise mutual funds and underwrite and deal in debt and, to a
limited extent, equity securities, subject to local country laws.
A financial institution insured by the FDIC that is under common control
with a failed or failing FDIC-insured institution can be required to indemnify
the FDIC for losses resulting from the insolvency of the failed institution,
even if this causes the affiliated institution also to become insolvent. Any
obligations or liability owed by a subsidiary depository institution to its
parent company is subordinate to the subsidiary's cross-guarantee liability with
respect to commonly controlled insured depository institutions and to the rights
of depositors.
Under longstanding FRB policy, a bank holding company is expected to act
as a source of financial strength for its subsidiary banks and to commit
resources to support such banks. Citicorp could be required to commit resources
to its subsidiary banks in circumstances where it might not do so, absent such
policy.
Citicorp and its U.S. insured depository institution subsidiaries are
subject to risk-based capital and leverage guidelines issued by U.S. regulators
for banks, savings associations, and bank holding companies. The regulatory
agencies are required by law to take specific prompt actions with respect to
institutions that do not meet minimum capital standards and have defined five
capital tiers, the highest of which is "well-capitalized." As of December 31,
1997, Citicorp's bank and thrift subsidiaries, including Citibank, were "well
capitalized." See capital analysis on pages 47 and 48.
In the liquidation or other resolution of a failed U.S. insured depository
institution, deposits in U.S. offices and certain claims for administrative
expenses and employee compensation are afforded a priority over other general
unsecured claims, including deposits in offices outside the U.S., non-deposit
claims in all offices, and claims of a parent such as Citicorp. Such priority
creditors would include the FDIC, which succeeds to the position of insured
depositors.
A bank is not required to repay a deposit at a branch outside the U.S. if
the branch cannot repay the deposit due to an act of war, civil strife, or
action taken by the government in the host country, unless the bank has
expressly agreed in writing to do so.
The earnings of Citicorp, Citibank, and their subsidiaries and affiliates
are affected by general economic conditions and the conduct of monetary and
fiscal policy by the U.S. government and by governments in other countries in
which they do business.
COMPETITION
Citicorp, Citibank, and their subsidiaries and affiliates are subject to intense
competition in all aspects of their businesses from both bank and non-bank
institutions that provide financial services and, in some of their activities,
from government agencies.
PROPERTIES
The principal offices of Citicorp and Citibank are located at 399 Park Avenue,
New York, New York, a 39-story building of which two thirds is owned by
Citibank. Citibank also owns one third of Citicorp Center, a 59-story building
located at 153 East 53rd Street across Lexington Avenue from 399 Park Avenue.
Citicorp occupies all of the space it owns in both buildings. Citibank also owns
Citicorp at Court Square in Long Island City, New York and 111 Wall Street in
New York City, which are totally occupied by Citicorp. In addition, Citicorp has
major U.S. real estate holdings in Albuquerque, New Mexico; Chicago, Illinois;
Hagerstown and Silver Spring, Maryland; Los Angeles and San Francisco,
California; New Castle, Delaware; Rio Piedras, Puerto Rico; Sioux Falls, South
Dakota; Tampa, Florida; San Antonio, Texas; St. Louis, Missiouri; and The Lakes,
Nevada.
Outside the U.S., Citicorp owns major corporate premises in various cities
throughout the world including Buenos Aires, Argentina; Caracas, Venezuela;
Dubai, United Arab Emirates; Dublin, Ireland; Dusseldorf and Frankfurt, Germany;
Hong Kong, China; Lewisham and London, United Kingdom; Madrid, Spain; Manila,
Philippines; Mexico City, Mexico; Milan, Italy; Paris, France; Rio de Janeiro
and Sao Paulo, Brazil; Taipei, Taiwan; Tokyo, Japan; and Warsaw, Poland.
Approximately 47% of the space Citicorp occupies worldwide is owned by Citicorp.
EFFECTS OF INFLATION
The impact of inflation on Citicorp and other financial institutions is
significantly different from that on industries that require a high proportion
of investment in fixed assets. The assets and liabilities of a financial
institution are primarily monetary in nature. During periods of inflation,
monetary assets lose value in terms of purchasing power, and monetary
liabilities have corresponding purchasing power gains. The financial statements
and other data appearing in this annual report, and in particular the discussion
of price risk management on pages 42-45, illustrate how Citicorp operates in an
environment of changing interest rates, foreign exchange rates, and inflationary
trends.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CITICORP
(Registrant)
/s/ Charles E. Long
Charles E. Long
Vice Chairman and Secretary
February 24, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on February 24, 1998 by the following persons in the capacities
indicated:
/s/ Victor J. Menezes /s/ Thomas E. Jones
Victor J. Menezes Thomas E. Jones
Corporate Executive Vice President Executive Vice President
and Chief Financial Officer Principal Financial Officer(1)
(1) Responsible for financial control, tax, accounting, and reporting.
John S. Reed (Citicorp's Principal Executive Officer) and the Directors of
Citicorp (listed below) executed a power of attorney appointing Charles E. Long
their attorney-in-fact, empowering him to sign this report on their behalf.
Alain J. P. Belda William R. Rhodes
D. Wayne Calloway Rozanne L. Ridgway
Paul J. Collins H. Onno Ruding
Kenneth T. Derr Robert B. Shapiro
John M. Deutch Frank A. Shrontz
Reuben Mark Franklin A. Thomas
Richard D. Parsons Edgar S. Woolard, Jr.
EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
Financial Statements filed for Citicorp and Subsidiaries:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Stockholders' Equity
Consolidated Statement of Cash Flows
Citicorp filed a Current Report on Form 8-K dated October 21, 1997 (Item
5), which report included a summary of the consolidated operations of Citicorp
for the three- and nine-month periods ended September 30, 1997. Citicorp filed a
Current Report on Form 8-K dated January 20, 1998 (Item 5), which report
included a summary of the consolidated operations of Citicorp for the year ended
December 31, 1997.
The following exhibits are either filed herewith or have been previously
filed with the Securities and Exchange Commission and are filed herewith by
incorporation by reference:
o Citicorp's Restated Certificate of Incorporation, as amended,
o Citicorp's By-Laws,
o Instruments Defining the Rights of Security Holders, Including Indentures,
o Material Contracts, including certain compensatory plans available only to
officers and/or directors,
o Statement re Computation of Per Share Earnings,
o Statements re Computation of Ratios,
o Subsidiaries of the Registrant,
o Consents of Experts and Counsel,
o Powers of Attorney of Directors Reed, Belda, Calloway, Collins, Derr,
Deutch, Mark, Parsons, Rhodes, Ridgway, Ruding, Shapiro, Shrontz, Thomas
and Woolard, and
o Financial Data Schedules
Stockholders may obtain copies of a list of such documents or any of such
documents by writing to Citicorp, Corporate Governance Department, 399 Park
Avenue, Mezzanine, New York, New York 10043.
Citicorp's principal subsidiaries and their place of incorporation or
organization include:
Citibank, N.A. USA
Citibank, Federal Savings Bank USA
Citibank (Nevada), N.A. USA
Citibank Overseas Investment Corporation USA
Citibank (South Dakota), N.A. USA
Citibank Delaware Delaware
Citicorp Banking Corporation Delaware
Citicorp Funding, Inc. Delaware
Citicorp Holdings, Inc. Delaware
Citicorp Leasing, Inc. Delaware
Citicorp Mortgage, Inc. Delaware
Citicorp North America, Inc. Delaware
Citicorp Real Estate, Inc. Delaware
Citicorp Securities, Inc. Delaware
Citicorp USA, Inc. Delaware
Court Square Capital Limited Delaware
The Student Loan Corporation Delaware
Citibank (New York State) New York
Citicorp Venture Capital Ltd. New York
First Citicorp Life Insurance Company New York
Citibank Limited Australia
Citibank Belgium S.A./N.V. Belgium
Banco Citibank S.A. Brazil
Citibank Canada Canada
Citibank a.s. Czech Republic
Citibank Aktiengesellschaft Germany
Citibank Privatkunden A.G. Germany
Citicorp Finanziaria S.p.A. Italy
Citibank Berhad Malaysia
Citibank Mexico, S.A. Grupo
Financiero Citibank Mexico
Citibank (Poland) S.A. Poland
Citibank Espana S.A. Spain
Citibank (Switzerland) Switzerland
Citibank International plc United Kingdom
Citibank Investments Limited United Kingdom
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CITICORP AND CITIBANK DIRECTORS' COMMITTEES
AUDIT COMMITTEES: SUPERVISE INDEPENDENT AUDITS AND OVERSEE THE ESTABLISHMENT OF
APPROPRIATE ACCOUNTING POLICIES FOR CITICORP AND CITIBANK, N.A.
Members Citicorp & Citibank, N.A.: Robert B. Shapiro, Chairman; John M. Deutch,
Reuben Mark, Richard D. Parsons, and Rozanne L. Ridgway.
The Audit Committees of Citicorp and Citibank, N.A. (the "committee"), whose
members are all independent outside directors, meet with members of senior
management as the committee deems appropriate.
Its principal functions include reviews of: the audit plans, scope of audit and
audit findings of both independent auditors and the corporation's internal
corporate audit group; significant tax and legal matters; reports on credit
portfolios and processes; and internal controls. Further, it is the
responsibility of this committee to recommend to the Board the annual
appointment of the independent auditors. The Board accepted the recommendation
that KPMG Peat Marwick LLP be retained for 1998, and this proposal will be
presented to the stockholders for approval at the Annual Meeting.
The findings of internal and independent auditors, financial controllers and
external regulatory agencies are reviewed. Responses to their findings and
corrective action plans are monitored to ensure that appropriate follow-up
measures are taken in a timely manner. These are reviewed with and without the
presence of management. The committee also meets privately with KPMG Peat
Marwick LLP and the Chief Auditor.
It is also the function of this committee to review the accounting policies used
in preparing the financial statements of Citicorp and Citibank, N.A.
/S/ ROBERT B. SHAPIRO
ROBERT B. SHAPIRO
COMMITTEE ON DIRECTORS: RECOMMENDS QUALIFIED CANDIDATES FOR MEMBERSHIP ON THE
BOARDS OF DIRECTORS OF CITICORP AND CITIBANK, N.A.
Members: Franklin A. Thomas, Chairman; D. Wayne Calloway, Reuben Mark, and Frank
A. Shrontz.
The Committee on Directors solicits recommendations for prospective directors
and, consistent with the needs of the corporation and representation of the
various services and customers, recommends the approval of a candidate. The
nominees are then presented to the Board, which proposes the slate of directors
to be submitted to the stockholders at the Annual Meeting. In addition, the
committee is charged with keeping current and recommending changes in directors'
compensation.
/S/ FRANKLIN A. THOMAS
FRANKLIN A. THOMAS
COMMITTEE ON SUBSIDIARIES AND CAPITAL (CITICORP)
Members: Paul J. Collins, Chairman; D. Wayne Calloway, Kenneth T. Derr, Reuben
Mark, Richard D. Parsons, and Edgar S. Woolard, Jr.
The Committee is responsible for reviewing 1) the corporation's capital
structure, position and planning; 2) the financial position of the principal
subsidiaries of Citicorp including, but not limited to, Citibank, N.A.; 3) the
corporation's subsidiary structure and processes for managing subsidiaries; 4)
the adequacy of corporate insurance coverage; and 5) the conduct of Citicorp's
subsidiaries and affiliates in providing fiduciary and investment services. The
Chairman of the committee reports periodically to the Citicorp and Citibank,
N.A. Boards of Directors.
/S/ PAUL J. COLLINS
PAUL J. COLLINS
CONSULTING COMMITTEE (CITIBANK, N.A.)
Members: Alain J. P. Belda, Kenneth T. Derr, H. Onno Ruding, and Edgar S.
Woolard, Jr.
This committee, composed of those Citicorp directors who are not also directors
of Citibank, N.A., attends all meetings of the Board of Directors of Citibank,
N.A. and remains available to Citibank's Board as consultants on an "as needed"
basis.
/S/ JOHN S. REED
JOHN S. REED
EXECUTIVE COMMITTEE: PROVIDES BACKUP FOR THE BOARDS OF DIRECTORS OF CITICORP AND
CITIBANK, N.A.
Members Citicorp: Kenneth T. Derr, Frank A. Shrontz, Franklin A. Thomas, and
Edgar S. Woolard, Jr.
Members Citibank, N.A.: Any three members of the Board of Directors.
These committees act on behalf of the Boards of Directors should an urgent
matter arise that requires a decision before the Board is next scheduled to
meet. The Executive Committee has nearly all the powers of the Boards, except
for certain powers expressly reserved to the Boards. The Chairman and the Vice
Chairmen are ex-officio members.
/S/ JOHN S. REED
JOHN S. REED
PERSONNEL COMMITTEE: OVERSEES EMPLOYEE POLICIES AND PROGRAMS OF CITICORP AND
CITIBANK, N.A.
Members: Frank A. Shrontz, Chairman; D. Wayne Calloway, Kenneth T. Derr,
Franklin A. Thomas, and Edgar S. Woolard, Jr.
The Personnel Committee reviews and approves compensation policy and other
personnel-related programs to maintain an environment at Citicorp and Citibank,
N.A. that attracts and retains people of high capability, commitment and
integrity. In addition, the committee oversees succession planning.
/S/ FRANK A. SHRONTZ
FRANK A. SHRONTZ
PUBLIC ISSUES COMMITTEE: REVIEWS CITICORP'S POLICIES AND PERFORMANCE ON MATTERS
OF PUBLIC CONCERN.
Members: Franklin A. Thomas, Chairman; John M. Deutch, Rozanne L. Ridgway, and
Frank A. Shrontz.
The Public Issues Committee's mission is to assure that the public interest is
maintained in the performance of Citicorp's business roles. The committee
reviews the corporation's policies, postures, practices and programs relating to
public issues of significance to Citicorp and the public at large.
/S/ FRANKLIN A. THOMAS
FRANKLIN A. THOMAS
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CITICORP AND CITIBANK, N.A. DIRECTORS
The Boards of Directors of Citicorp and Citibank, N.A. meet on the third Tuesday
of the month to administer the affairs of the organizations. Certain specific
operations and areas of the Corporation and the Bank are regularly monitored by
the Directors' committees, whose activities are described on the preceding page.
(+) Director of Citicorp
(^) Director of Citibank, N.A.
ALAIN J. P. BELDA (+) REUBEN MARK (^)(+) ROBERT B. SHAPIRO (^)(+)
President and Chairman and Chairman and Chief
Chief Operating Officer Chief Executive Officer Executive Officer
Aluminum Company Colgate-Palmolive Company Monsanto Company
of America (Alcoa)
RICHARD D. PARSONS (^)(+) FRANK A. SHRONTZ (^)(+)
D. WAYNE CALLOWAY (^)(+) President Chairman Emeritus
Former Chairman and Time Warner, Inc. The Boeing Company
Chief Executive Officer
PepsiCo, Inc. JOHN S. REED (^)(+) FRANKLIN A. THOMAS (^)(+)
Chairman Lawyer/Consultant and
PAUL J. COLLINS (^)(+) Citicorp and Citibank, N.A. Former President
Vice Chairman The Ford Foundation
Citicorp and Citibank, N.A.WILLIAM R. RHODES (^)(+)
Vice Chairman EDGAR S. WOOLARD, JR. (+)
KENNETH T. DERR (+) Citicorp and Citibank, N.A. Former Chairman and
Chairman and Chief Executive Officer
Chief Executive Officer ROZANNE L. RIDGWAY (^)(+) E.I. du Pont
Chevron Corporation Former Assistant de Nemours & Company
Secretary of State
JOHN M. DEUTCH (^)(+) for Europe and Canada
Institute Professor
Massachusetts H. ONNO RUDING (+)
Institute of Technology Vice Chairman
Citicorp and Citibank, N.A.
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<PAGE>
COUNTRY CORPORATE OFFICERS
ALGERIA CZECH REPUBLIC
Kamal B. Driss Akshaya Bhargava
ANGOLA DENMARK
Raoul Van Deursen Ineke Bussemaker
ARGENTINA DOMINICAN REPUBLIC
Carlos M. Fedrigotti Robert D. Matthews, Jr.
ARUBA ECUADOR
Juan J. Bruchou Sebastian Paredes
AUSTRALIA EGYPT
Thomas M. McKeon David W. Watson
AUSTRIA EL SALVADOR
Albrecht O. Staerker Juan A. Miro
BAHAMAS FINLAND
M. Carmen Butler Stephen L. Dwyre
BAHRAIN FRANCE
Mohammed E. Al-Shroogi Claude Jouven
BANGLADESH GABON
Srinivasan Sridhar Nuhad K. Saliba
BELGIUM GERMANY
Victor O. Toledo Friedrich W. Menzel
BOLIVIA GREECE
Marcelo Cellerino Takis Arapoglou
BRAZIL GUAM
Roberto V. do Valle Rashid M. Habib
BRUNEI GUATEMALA
Page W. Stockwell Juan A. Miro
CANADA HAITI
Paul Labbe Gladys M. Coupet
CAYMAN ISLANDS HONDURAS
M. Carmen Butler Patricia Ferro
CHANNEL ISLANDS (JERSEY) HONG KONG
Clive S. Jones Stephen H. Long
CHILE HUNGARY
Ariel D. Sevi Richard D. Jackson
CHINA INDIA
John M. Beeman David P. Conner
COLOMBIA INDONESIA
Eric R. Mayer Colin G. Woolcock
CONGO, DEMOCRATIC IRELAND
REPUBLIC OF THE Aidan M. Brady
To be announced ISRAEL
COSTA RICA Ronny F. Strauss
Henry Comber ITALY
COTE D'IVOIRE Sergio Ungaro
Robert Thornton JAMAICA
Peter H. Moses
JAPAN
Mike de Graffenreid
JORDAN
Suhair A. Al-Ali
KAZAKHSTAN RUSSIA
Richard L. Smith David R. Ansell
KENYA SAUDI ARABIA
Peter H. Harris Robert S. Eichfeld
KOREA SENEGAL
Sajjad Razvi Kandolo Kasongo
LEBANON SINGAPORE
Walid R. Alamuddin Shehzad Naqvi
LUXEMBOURG SLOVAKIA
Steven J. Fee David C. Francis
MACAU SOUTH AFRICA
Stephen H. Long Terence M. Davidson
MALAYSIA SPAIN
Sunil Sreenivasan Francesco P. Vanni d'Archirafi
MEXICO SRI LANKA
Julio A. de Quesada Nihal Welikala
MONACO SUDAN
Miklos I. Vasarhelyi Adnan A. Mohamed
MOROCCO SWEDEN
Reza Ghaffari James E. Morrow
NEPAL SWITZERLAND
Anil Gyawali Thomas F. Huertas
NETHERLANDS TAIWAN
Chris I. Devries Peter Baumann
NEW ZEALAND TANZANIA
Bradden Nowland Emeka Emuwa
NIGERIA THAILAND
Michel A. Accad Henry Ho
NORWAY TRINIDAD AND TOBAGO
Per Kumle Steve M. Bideshi
OMAN TUNISIA
Ravi Bhatia Eric P. Stoclet
PAKISTAN TURKEY
To be announced Dardo A. Sabarots
PANAMA UNITED ARAB EMIRATES
Francisco Conto Ahmed S. Bin Brek
PARAGUAY UNITED KINGDOM
Antonio Uribe Ian D. Cormack
PERU URUGUAY
Gustavo C. Marin Douglas L. Peterson
PHILIPPINES VENEZUELA
Suresh Maharaj Juan J. Bruchou
POLAND VIETNAM
Shirish Apte Bradley C. Lalonde
PORTUGAL VIRGIN ISLANDS (U.S.)
Alexander G. van Tienhoven Arthur P. Zeller
PUERTO RICO ZAMBIA
Arthur P. Zeller Sanjeev Anand
ROMANIA
David F. Garner
Countries and territories where Citicorp has a presence but no designated
Country Corporate Officer are not reflected in the above list.
CORPORATE STATE OFFICERS (U.S.)
CALIFORNIA FLORIDA MISSOURI NEW YORK
Frits F. Seegers William R. Silver Kevin M. Kessinger Pamela P. Flaherty
COLORADO ILLINOIS NEVADA SOUTH DAKOTA
Robert A. Gottlieb Howard C. Morgan Wilfried Jackson Thomas W. Jones
CONNECTICUT MARYLAND NEW MEXICO TEXAS
Peter Keller Michael J. Looney Edward J. Consroe Mark J. Devine
DELAWARE
Richard T. Collins
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STOCKHOLDER INFORMATION
NOTICE OF THE ANNUAL MEETING
The Annual Meeting of Stockholders will be held on Tuesday, April 21, 1998, at
9:00 a.m., in the auditorium of Citicorp headquarters at 399 Park Avenue, New
York, N.Y. 10043.
A formal notice of this meeting, together with a proxy and a proxy statement,
has been included with this annual report. Stockholders are urged to sign and
return their proxies promptly or to give their proxies by using the Internet or
by calling the toll-free number printed on the proxy card to assure that the
stock of the Corporation will be represented as fully as possible at the
meeting.
Citicorp has approximately 48,000 common stockholders of record. About 86% of
the Citicorp shares entitled to vote were voted in person or by proxy at the
last annual stockholders' meeting on April 9, 1997.
Additional copies of this annual report are available. Write to Citicorp,
Corporate Affairs, 850 Third Avenue, 13th Floor, New York, NY 10043.
Copies of the written transcript and tape recordings of the proceedings at
Citicorp stockholders' meetings are available to Citicorp stockholders at cost
from Citicorp, Corporate Governance Department, 399 Park Avenue, Mezzanine, New
York, NY 10043.
Supplemental financial data are published quarterly and are available from
Citicorp, Corporate Affairs, 850 Third Avenue, 13th Floor, New York, NY 10043,
and from our web site : http://www.citibank.com
TRANSFER AGENT AND REGISTRAR
Citibank, N.A., Corporate Trust & Agency Services, Sort 4855, New York, NY 10043
CO-TRANSFER AGENTS AND CO-REGISTRARS
ChaseMellon Shareholder Services Montreal Trust Company
400 South Hope Street 151 Front Street West
4th Floor Toronto, Ontario
Los Angeles, California 90071 Canada M5J 2N1
Att: Ron Lug Att: Liz Ko
First Chicago Trust Company
P.O. Box 2506
Suite 4659
Jersey City, New Jersey 07303-2506
Att: John Ryan
JAPANESE SHAREHOLDER SERVICE ORGANIZATION AND PAYING BANK
The Yasuda Trust and Banking Company, Limited
Stock Transfer Department
1-17-7, Saga, Koto-ku,
Tokyo, Japan
CITICORP STOCK LISTED
New York Stock Exchange Zurich Stock Exchange
Chicago Stock Exchange Geneva Stock Exchange
Pacific Stock Exchange Basle Stock Exchange
London Stock Exchange Toronto Stock Exchange
Amsterdam Stock Exchange Dusseldorf Stock Exchange
Tokyo Stock Exchange Frankfurt Stock Exchange
Securities and Exchange Commission
Washington, DC 20549
Form 10-K
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 1997, Commission File Number 1-5738
CITICORP [LOGO](R)
- --------------------------------------------------------------------------------
Incorporated in the State of Delaware
IRS Employer Identification Number: 13-2614988
Address: 399 Park Avenue, New York, NY 10043
Telephone: (800) 285-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) AND (G) OF THE ACT:
A list of Citicorp securities registered pursuant to Section 12(b) and (g) of
the Securities Exchange Act of 1934 is available from Citicorp, Corporate
Governance Department, 399 Park Avenue, Mezzanine, New York, NY 10043.
As of December 31, 1997, Citicorp had 453,942,288 shares of common stock
outstanding.
Citicorp (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.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein nor in any amendment to this Form 10-K but is contained in
Citicorp's 1998 Proxy Statement incorporated by reference in Part III of this
Form 10-K.
The aggregate market value of Citicorp common stock held by non-affiliates of
Citicorp on January 31, 1998 was approximately $53.4 billion.
Certain information has been incorporated by reference as described herein into
Part III of this annual report from Citicorp's 1998 Proxy Statement.
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CITICORP SERVICE
We continue to build a worldwide organization dedicated to serving our customers
and we take pride in the quality of service we deliver. The following addresses
and phone numbers are part of our service commitment to help you obtain needed
information and prompt assistance.
STOCKHOLDER INFORMATION
- --------------------------------------------------------------------------------
For information about your stockholdings including: your Dividend Reinvestment
Account, Lost Stock Certificates, Stock Transfer, Estate Inquiries/Transfer
Requirements, contact: Citibank, N. A., c/o Citicorp Data Distribution, Inc.,
Customer Service Unit, P.O. Box 308, Paramus, NJ 07653: (800) 422-2066
- --------------------------------------------------------------------------------
For all other stockholder concerns, contact:
Citicorp Corporate Governance, 399 Park Avenue, Mezzanine,
New York, NY, 10043: (212) 559-4822
- --------------------------------------------------------------------------------
To view or retrieve copies of this annual report and other Citicorp
financial reports on the Internet: http://www.citibank.com
- --------------------------------------------------------------------------------
To request copies of Citicorp financial reports: (212) 559-0233
- --------------------------------------------------------------------------------
INSTITUTIONAL INVESTORS: (212) 559-2718
- --------------------------------------------------------------------------------
GENERAL INFORMATION
For general information, directory assistance,
or other inquiries: (800) 285-3000
- --------------------------------------------------------------------------------
CUSTOMER INFORMATION
- --------------------------------------------------------------------------------
CitiPhone Banking (consumer bank accounts)
California/Nevada (800) 756-7047
Connecticut (800) 224-8781
Florida (800) 374-9800
Illinois
within area codes 312 and 708 (312) 263-6660
outside 312 and 708 area codes (800) 274-6660
Maryland and Washington, D.C. (800) 926-1067
New York (Upstate) (800) 934-1609
New York Metropolitan Area
within area codes:
212, 718, 516, 914 and 201 627-3999
outside the tri-state area (800) 627-3999
TDD Service (800) 945-0258
Citibank ATM Locator Service (800) 248-4286
Citibank Cards (MasterCard or Visa) (800) 950-5114
Citibank Gold Card Customer Service (800) 950-5118
TDD Service (800) 325-2865
outside the U.S. call collect: (605) 335-2222
Citibank Private Bank (800) 967-1600
(212) 559-5959
Citicorp Investment Services (800) 846-5200
(212) 820-2380
Citicorp Mortgage Inc. 800-MORTGAGE
Citibank Student Loans (800) 967-2400
Diners Club/Carte Blanche (800) 234-6377
outside the U.S. call collect: (303) 799-1504
Citicorp Travellers Cheques (800) 645-6556
outside the U.S. call collect: (813) 623-1709
Citicorp Insurance (800) 497-4860
- --------------------------------------------------------------------------------
(R) CITICORP AND CITIBANK ARE REGISTERED TRADEMARKS
(C) COPYRIGHT CITICORP 1998. ALL RIGHTS RESERVED.
PRINTED IN THE U.S.A. Printed on recycled paper [Logo]
SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN OF CITICORP and AFFILIATES
(as amended and restated effective October 16, 1990)
The purpose of this Plan is solely to provide benefits to an individual who is a
Participant in the Retirement Plan of Citibank, N.A. and Affiliates (the
"Retirement Plan") and a member of a select group of management or highly
compensated employees for purposes of Sections 201, 301 and 401 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
The terms and provisions of this Plan are as follows:
1. As used in this Plan, the terms "Employer", "Bank", "Participant",
"Normal Retirement Income", "Early Retirement Income", "Disability
Retirement Income", "Survivorship Retirement Income", "Additional Early
Retirement Benefit" and "Additional Disability Retirement Benefit"
shall have the same meaning as given to them under the Retirement Plan.
References herein to provisions of the Retirement Plan shall be deemed
to refer also to such provisions as modified or amended.
"Eligible Employee" shall mean a Participant (including, the spouse or
beneficiary of the Participant) who (i) is either an "executive
officer" (within the meaning of Rule 3b-7 as promulgated under the
Securities Exchange Act of 1934 as amended) of Citicorp or (ii) has
been designated by the Chairman of the Board of Directors of Citicorp
(the "Chairman"), Citicorp of the Board of Directors of Citicorp (the
"Chairman") and the Personnel Committee of the Board of Directors (the
"Personnel Committee") of Citibank, N.A. (which designation shall be
evidenced by inclusion on Schedule A hereto).
"Selected Participant" shall mean an Eligible Employee who (i) either
remains employed with Citicorp or any of its Affiliates until such
individual's Normal, Optional, Mandatory or Disability Retirement Date
(as defined in Article II of the Retirement Plan) or dies in active
service (pursuant to Article VI, Section 1 of the Retirement Plan) and
(ii) has been
<PAGE>
selected by the Chairman and the Personnel Committee to receive a
benefit under this Plan.
2. As long as the Retirement Plan shall remain in effect, there shall
be paid under this Plan to a Selected Participant (or to the spouse or
beneficiary of a Selected Participant, as the case may be) such amounts
of Normal Retirement Income, Early Retirement Income, Disability
Retirement Income, Survivorship Retirement Income, Additional Early
Retirement Benefit, Additional Disability Retirement Benefit, or any
other benefits, including benefits distributed upon termination of the
Plan, as would have been paid to the Selected Participant (or the
spouse or beneficiary of a Selected Participant) if the Retirement
Plan:
a. Included within the definitions of Compensation and Average
Compensation under Article I, any bonus paid to a
Selected Participant under any annual performance bonus plan
of Citicorp or any of its Affiliates provided, however, that
bonuses relating to service prior to 1991 shall be so included
only in the case of Selected Participants who were members of
the Policy Committee of Citicorp/Citibank immediately prior to
its discontinuance on Ocotber 16, 1990 and only for bonuses
payable pursuant to the Citicorp Executive Incentive
Compensation Plan; and
b. Excluded the limitation on benefits imposed by Section 415 of
the Internal Revenue Code of 1986, as amended (the "Code") and
the limitation on compensation imposed by Section 401(a)(17)
of the Code.
The benefit so computed shall be reduced by the actual benefits payable
to or with respect to the Selected Participant under the Retirement
Plan, the Supplemental ERISA Excess Plan of Citibank, N.A. and
Affiliates and the Supplemental ERISA Compensation Plan of Citibank,
N.A. and Affiliates.
3. Upon the event which gives rise to a payment under this Plan (or as
soon thereafter as practicable) the Employer shall enter into a
contract with the Selected Participant or beneficiary entitled to such
payment, which contract shall stipulate the amount and terms of
payments to be made under this Plan.
<PAGE>
4. This Plan shall be an unfunded plan maintained by Citicorp and its
Affiliates primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees within
the meaning of Sections 201, 301 and 401 of ERISA. The Employer shall
be under no obligation to set aside any funds for the purpose of making
payments under this Plan. Any payments hereunder shall be made out of
the general assets of the Employer.
5. This Plan shall be administered by the Personnel Committee.
6. A Selected Participant may make a claim for benefits under this Plan by
filing a claim in writing with Corporate Human Resources (the "Claims
Administrator") on a form prescribed by the Personnel Committee.
Within 90 days after receipt of such claim, the Claims Administrator
will notify the Selected Participant in writing as to whether the claim
has been granted or denied in whole or in part. If the claim is denied
in whole or in part, the written notification shall set forth the
following in a manner calculated to be understood by the Selected
Participant:
(1) the specific reason or reasons for the denial;
(2) specific reference to pertinent Plan provisions on
which the denial is based;
(3) a description of any additional material or
information necessary for the Selected Participant
to perfect the claim and an explanation of why
such material or information is necessary; and
(4) an explanation of the review procedures set forth
below.
<PAGE>
Within 60 days after the claim has been denied, the Selected
Participant may file a written request for review of the denied claim
with the Claims Administrator. The Selected Participant shall also be
entitled to examine pertinent documents and submit issues and comments
in writing. Any decision on review shall be in writing, shall include
specific reasons for the decision (including reference to the pertinent
Plan provisions on which the decision is based) and shall be written in
a manner calculated to be understood by the Selected Participant. Such
decision shall be made not later than 60 days, or 120 days in special
circumstances determined by the Claims Administrator, after receipt of
the Selected Participant's request for review.
7. The Personnel Committee, shall have the right at any time to amend
this Plan in any respect, or to terminate this Plan.
8. This Plan shall terminate when the Retirement Plan terminates.
SUPPLEMENTAL ERISA COMPENSATION PLAN
of CITIBANK, N.A. and AFFILIATES
(as amended and restated effective January 1, 1989)
The purpose of this Plan is solely to provide benefits to an individual who is a
Participant in the Retirement Plan of Citibank, N.A. and Affiliates (the
"Retirement Plan") and a member of a select group of management or highly
compensated employees for purposes of Sections 201, 301 and 401 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
The terms and provisions of this Plan are as follows:
1. As used in this Plan, the terms "Employer", "Participant", "Normal
Retirement Income", "Early Retirement Income", "Disability Retirement
Income", "Survivorship Retirement Income", "Additional Early Retirement
Benefit" and "Additional Disability Retirement Benefit" shall have the
same meaning as given to them under the Retirement Plan. References herein
to provisions of the Retirement Plan shall be deemed to refer also to such
provisions as modified or amended.
2. As long as the Retirement Plan shall remain in effect, there shall be paid
under this Plan to the Participant (or to the spouse or beneficiary of a
Participant, as the case may be) such amounts of Normal Retirement Income,
Early Retirement Income, Disability Retirement Income, Survivorship
Retirement Income, Additional Early Retirement Benefit, Additional
Disability Retirement Benefit, or any other benefits, including benefits
distributed upon termination of the Plan, as would have been paid to such
the Participant (or the spouse or beneficiary of a Participant) under the
Retirement Plan without regard to the limitation on benefits imposed by
Section 415 of the Internal Revenue Code of 1986, as amended (the "Code")
and the limitation on compensation imposed by Section 401(a)(17) of the
Code.
The benefit so computed shall be reduced by the actual benefits payable to
or with respect to the Participant under the Retirement Plan and the
Supplemental ERISA Excess Plan of Citibank, N.A. and Affiliates.
<PAGE>
3. Upon the event which gives rise to a payment under this Plan (or as soon
thereafter as practicable) the Employer shall enter into a contract with
the Participant or beneficiary entitled to such payment, which contract
shall stipulate the amount and terms of payments to be made under this
Plan.
4. This Plan shall be an unfunded plan maintained by Citibank and its
Affiliates primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees within the
meaning of Sections 201, 301 and 401 of ERISA. The Employer shall be under
no obligation to set aside any funds for the purpose of making payments
under this Plan. Any payments hereunder shall be made out of the general
assets of the Employer.
5. This Plan shall be administered by the United States Benefits Committee.
6. A Participant may make a claim for benefits under this Plan by filing a
claim in writing with Corporate Human Resources (the "Claims
Administrator") on a form prescribed by the United States Benefits
Committee. Within 90 days after receipt of such claim, the Claims
Administrator will notify the Participant in writing as to whether the
claim has been granted or denied in whole or in part. If the claim is
denied in whole or in part, the written notification shall set forth the
following in a manner calculated to be understood by the participant:
(1) the specific reason or reasons for the denial;
(2) specific reference to pertinent Plan provisions
on which the denial is based;
(3) a description of any additional material or
information necessary for the Participant to
perfect the claim and an explanation of why such
material or information is necessary; and
<PAGE>
(4) an explanation of the review procedures set forth
below.
Within 60 days after the claim has been denied, the Participant may file a
written request for review of the denied claim with the Claims
Administrator. The Participant shall also be entitled to examine pertinent
documents and submit issues and comments in writing. Any decision on review
shall be in writing, shall include specific reasons for the decision
(including reference to the pertinent Plan provisions on which the decision
is based) and shall be written in a manner calculated to be understood by
the Participant. Such decision shall be made not later than 60 days, or 120
days in special circumstances determined by the Claims Administrator, after
receipt of the Participant's request for review.
7. The United States Benefits Committee shall have the right at any time to
amend this Plan in any respect, or to terminate this Plan.
8. This Plan shall terminate when the Retirement Plan terminates.
SUPPLEMENTAL ERISA EXCESS PLAN
of CITIBANK, N.A. and AFFILIATES
(as amended and restated effective January 1, 1989)
This Plan is intended to be an unfunded "excess benefit plan" within the meaning
of Sections 3(36) and 4(b)(5) of the Employee Retirement Income Security Act of
1974. As such, the purpose of this Plan is solely to provide benefits to
Participants in the Retirement Plan of Citibank, N.A. and Affiliates, as amended
and restated from time to time (the "Retirement Plan"), in excess of the
limitations on benefits imposed by Section 415 of the Internal Revenue Code of
1986 as amended (the "Code").
The terms and provisions of this Plan are as follows:
1. As used in this Plan, the terms "Employer", "Participant", "Normal
Retirement Income", "Early Retirement Income", "Disability Retirement
Income", "Survivorship Retirement Income", "Additional Early Retirement
Benefit" and "Additional Disability Retirement Benefit" shall have the same
meaning as given to them under the Retirement Plan. References herein to
provisions of the Retirement Plan shall be deemed to refer also to such
provisions as modified or amended.
2. As long as the Retirement Plan shall remain in effect, there shall be paid
under this Plan to a Participant (or to the spouse or beneficiary of the
Participant, as the case may be) such amounts of Normal Retirement Income,
Early Retirement Income, Disability Retirement Income, Survivorship
Retirement Income, Additional Early Retirement Benefit, Additional
Disability Retirement Benefit, or any other benefits, including benefits
distributed upon termination of the Plan, as would have been paid to such a
Participant (or the spouse or beneficiary of the Participant) under the
Retirement Plan without regard to the limitation on benefits imposed by
Section 415 of the Code. Such amounts shall be paid to the Participant (or
the spouse or beneficiary of such a Participant) on the same terms and
conditions, at the same times, and pursuant to the same elections made by
the Participant, as they would have been paid under the Retirement Plan,
were it not for such limitation on benefits.
<PAGE>
The benefit so computed shall be reduced by the actual benefit payable to
or with respect to the Participant under the Retirement Plan.
3. Upon the event which gives rise to a payment under this Plan (or as soon
thereafter as practicable) the Employer shall enter into a contract with
the Participant or beneficiary entitled to such payment, which contract
shall stipulate the amount and terms of payments to be made under this
Plan.
4. This Plan shall be an unfunded plan and the Employer shall be under no
obligation to set aside any funds for the purpose of making payments under
this Plan. Any payments hereunder shall be made out of the general assets
of the Employer.
5. This Plan shall be administered by the United States Benefits Committee.
6. The United States Benefits Committee shall have the right at any time to
amend this Plan in any respect, or to terminate this Plan.
7. This Plan shall terminate when the Retirement Plan terminates.
CITICORP AND SUBSIDIARIES
CALCULATION OF RATIO OF INCOME TO FIXED CHARGES
(In Millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
EXCLUDING INTEREST ON DEPOSITS: 1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
INTEREST EXPENSE (OTHER THAN
INTEREST ON DEPOSITS) 3,468 3,435 4,110 5,906 6,324
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147
------ ------ ------ ------ ------
TOTAL FIXED CHARGES 3,627 3,585 4,250 6,049 6,471
------ ------ ------ ------ ------
INCOME:
NET INCOME 3,591 3,788 3,464 3,422 (A) 1,919 (B)
INCOME TAXES 2,131 2,285 2,121 1,189 941
FIXED CHARGES 3,627 3,585 4,250 6,049 6,471
------ ------ ------ ------ ------
TOTAL INCOME 9,349 9,658 9,835 10,660 9,331
====== ====== ====== ====== ======
RATIO OF INCOME TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 2.58 2.69 2.31 1.76 1.44
====== ====== ====== ====== ======
INCLUDING INTEREST ON DEPOSITS:
FIXED CHARGES:
INTEREST EXPENSE 13,081 12,409 13,012 14,902 16,121
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147
------ ------ ------ ------ ------
TOTAL FIXED CHARGES 13,240 12,559 13,152 15,045 16,268
------ ------ ------ ------ ------
INCOME:
NET INCOME 3,591 3,788 3,464 3,422(A) 1,919(B)
INCOME TAXES 2,131 2,285 2,121 1,189 941
FIXED CHARGES 13,240 12,559 13,152 15,045 16,268
------ ------ ------ ------ ------
TOTAL INCOME 18,962 18,632 18,737 19,656 19,128
====== ====== ====== ====== ======
RATIO OF INCOME TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.43 1.48 1.42 1.31 1.18
====== ====== ====== ====== ======
</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.
CITICORP AND SUBSIDIARIES
CALCULATION OF RATIO OF INCOME TO FIXED CHARGES
INCLUDING PREFERRED STOCK DIVIDENDS
(In Millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
EXCLUDING INTEREST ON DEPOSITS: 1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
INTEREST EXPENSE (OTHER THAN
INTEREST ON DEPOSITS) 3,468 3,435 4,110 5,906 6,324
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147
DIVIDENDS--PREFERRED STOCK 223 261 553 505 (A) 465
------ ------ ------ ------ ------
TOTAL FIXED CHARGES 3,850 3,846 4,803 6,554 6,936
------ ------ ------ ------ ------
INCOME:
NET INCOME 3,591 3,788 3,464 3,422 (B) 1,919 (C)
INCOME TAXES 2,131 2,285 2,121 1,189 941
FIXED CHARGES (EXCLUDING PREFERRED
STOCK DIVIDENDS) 3,627 3,585 4,250 6,049 6,471
------ ------ ------ ------ ------
TOTAL INCOME 9,349 9,658 9,835 10,660 9,331
====== ====== ====== ====== ======
RATIO OF INCOME TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 2.43 2.51 2.05 1.63 1.35
====== ====== ====== ====== ======
INCLUDING INTEREST ON DEPOSITS:
FIXED CHARGES:
INTEREST EXPENSE 13,081 12,409 13,012 14,902 16,121
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147
DIVIDENDS--PREFERRED STOCK 223 261 553 505(A) 465
------ ------ ------ ------ ------
TOTAL FIXED CHARGES 13,463 12,820 13,705 15,550 16,733
------ ------ ------ ------ ------
INCOME:
NET INCOME 3,591 3,788 3,464 3,422 (B) 1,919 (C)
INCOME TAXES 2,131 2,285 2,121 1,189 941
FIXED CHARGES (EXCLUDING PREFERRED
STOCK DIVIDENDS) 13,240 12,559 13,152 15,045 16,268
------ ------ ------ ------ ------
TOTAL INCOME 18,962 18,632 18,737 19,656 19,128
====== ====== ====== ====== ======
RATIO OF INCOME TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.41 1.45 1.37 1.26 1.14
====== ====== ====== ====== ======
</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.
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ John S. Reed
--------------------------------------
Signature
John S. Reed
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Alain J. P. Belda
--------------------------------------
Signature
Alain J. P. Belda
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ D. Wayne Calloway
--------------------------------------
Signature
D. Wayne Calloway
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Paul J. Collins
--------------------------------------
Signature
Paul J. Collins
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Kenneth T. Derr
--------------------------------------
Signature
Kenneth T. Derr
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ John M. Deutch
--------------------------------------
Signature
John M. Deutch
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Reuben Mark
--------------------------------------
Signature
Reuben Mark
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Richard D. Parsons
--------------------------------------
Signature
Richard D. Parsons
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ William R. Rhodes
--------------------------------------
Signature
William R. Rhodes
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Rozanne L. Ridgway
--------------------------------------
Signature
Rozanne L. Ridgway
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ H. Onno Ruding
--------------------------------------
Signature
H. Onno Ruding
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Robert B. Shapiro
--------------------------------------
Signature
Robert B. Shapiro
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Frank A. Shrontz
--------------------------------------
Signature
Frank A. Shrontz
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Franklin A. Thomas
--------------------------------------
Signature
Franklin A. Thomas
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<PAGE>
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1997, each of Charles E. Long, Vice Chairman
and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Edgar S. Woolard, Jr.
--------------------------------------
Signature
Edgar S. Woolard, Jr.
--------------------------------------
Name (please print)
February 24, 1998
--------------------------------------
Date
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CURRENT
REPORT ON FORM 10-K FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 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> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 8,585
<INT-BEARING-DEPOSITS> 13,049
<FED-FUNDS-SOLD> 10,233<F1>
<TRADING-ASSETS> 40,356
<INVESTMENTS-HELD-FOR-SALE> 30,762
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 184,013
<ALLOWANCE> 5,816
<TOTAL-ASSETS> 310,897
<DEPOSITS> 199,121
<SHORT-TERM> 21,231<F2>
<LIABILITIES-OTHER> 10,288
<LONG-TERM> 19,785
<COMMON> 506
0
1,903
<OTHER-SE> 18,787
<TOTAL-LIABILITIES-AND-EQUITY> 310,897
<INTEREST-LOAN> 18,967
<INTEREST-INVEST> 2,197
<INTEREST-OTHER> 3,319
<INTEREST-TOTAL> 24,483
<INTEREST-DEPOSIT> 9,613
<INTEREST-EXPENSE> 13,081
<INTEREST-INCOME-NET> 11,402
<LOAN-LOSSES> 1,907
<SECURITIES-GAINS> 668
<EXPENSE-OTHER> 4,520
<INCOME-PRETAX> 5,722
<INCOME-PRE-EXTRAORDINARY> 3,591
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,591
<EPS-PRIMARY> 7.53
<EPS-DILUTED> 7.33
<YIELD-ACTUAL> 4.55<F3>
<LOANS-NON> 2,913<F4>
<LOANS-PAST> 1,073<F5>
<LOANS-TROUBLED> 59
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,503
<CHARGE-OFFS> 2,502
<RECOVERIES> 695
<ALLOWANCE-CLOSE> 5,916<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 $1064MM of cash-basis commercial loans and
$1,849MM of consumer loans on which accrual of interest has
been suspended.
<F5> Accruing loans 90 or more days delinquent.
<F6> Aggregate Allowance activity for the twelve months of 1997 includes $313MM
in other changes, primarily net transfers from the Reserves for securitization
activities and foreign 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 12 to the 1997 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
twelve months of 1997 is $4,147MM.
<F11> Excluding a pre-tax restructuring charge, diluted EPS is $8.51 for the
twelve months of 1997.
</FN>
</TABLE>
