SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 21, 1998
Citicorp
(Exact name of registrant as specified in charter)
Delaware 1-5738 13-2614988
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
399 Park Avenue, New York, New York 10043
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (212) 559-1000
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Item 5. Other Items
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Citicorp diluted earnings per share of $2.30 rose 10%,
with return on equity at 21.5%
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Summary of Results Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars)
- --------------------------------------------------------------------------------
Adjusted Revenue (A).... $6,792 $5,747 18 $12,857 $11,374 13
Adjusted Operating
Expense (A)........... 3,885 3,210 21 7,291 6,389 14
--------------------------------------------
Operating Margin ....... 2,907 2,537 15 5,566 4,985 12
Consumer Credit Costs (A) 1,086 922 18 1,972 1,816 9
Commercial Credit Costs
(Benefits) (A)........ 41 (36) NM 85 (111) NM
--------------------------------------------
Operating Margin Less
Credit Costs ......... 1,780 1,651 8 3,509 3,280 7
Additional Provision ... 25 25 - 50 50 -
--------------------------------------------
Income Before Taxes .... $1,755 $1,626 8 $ 3,459 $ 3,230 7
--------------------------------------------
Net Income ............. $1,097 $1,024 7 $2,162 $2,019 7
- --------------------------------------------------------------------------------
Earnings Per Share
(Diluted) ............ $2.30 $2.10 10 $4.53 $4.11 10
Return on Common Equity
(%) .................. 21.5 21.0 - 21.6 20.9 -
Return on Assets (%) ... 1.35 1.40 - 1.36 1.41 -
Average Shares
Outstanding (Diluted)
(In Millions) ........ 464.4 471.3 (1) 463.8 473.5 (2)
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(A) The Margin Basis Reconciliation table (page 17) reconciles adjustments to
the Consolidated Statement of Income (page 13).
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
On July 21, 1998, Citicorp reported net income for the 1998 second quarter of
$1.1 billion or $2.30 per diluted common share, increases of 7% and 10%,
respectively, from the 1997 second quarter.
The Consumer businesses -- Citibanking, Cards, and the Private Bank -- earned
$377 million on adjusted revenue of $4.0 billion, which included the acquisition
of Universal Card Services ("UCS") from AT&T on April 2, 1998. Net income from
Global Corporate Banking was $662 million on adjusted revenue of $2.4 billion.
John S. Reed, Citicorp Chairman, said: "This was a good quarter. Core business
performance was solid -- despite weakness in Asia Pacific and costs associated
with the AT&T Universal Card acquisition -- and is improving. EPS growth of 10%
is at the low end of our expectations, but a 21% return on equity was good. We
continue `on plan' and are likely to enter the merger, if approved, with good
momentum."
Adjusted revenue grew $1,045 million or 18% from the 1997 second quarter ($709
million or 12% excluding UCS).
Adjusted operating expense increased $675 million or 21% ($448 million or 14%
excluding UCS). Increased expense for preparations for the Year 2000 and the
European Economic and Monetary Union, as well as for advertising and marketing
programs, electronic banking initiatives, and incentive compensation represented
approximately $200 million of the change from the 1997 second quarter. Operating
margin of $2.9 billion increased 15%. Foreign currency translation reduced both
current period adjusted revenue and operating expense growth by approximately 4
percentage points.
1
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Consumer credit costs at $910 million (excluding UCS) were flat compared with
the prior-year quarter for the second quarter in a row, and commercial credit
costs, while remaining at a low level, had a year-to-year swing of $77 million,
with an increase of $67 million in Asia.
The Global Consumer business income before taxes in Asia Pacific (excluding
Japan and the Indian subcontinent, but including Australia and New Zealand) was
down $70 million, as revenue shortfalls of $59 million and an increased credit
provision of $22 million were partially offset by $11 million of lower expense.
Income before taxes in Global Corporate Banking in Asia Pacific was up $3
million, as increased revenue of $82 million was partially offset by additional
credit costs of $67 million and higher expense of $12 million.
Against Citicorp's Business Directions annual performance targets, the 1998 six
month results included a 7% gain in net income (a 10% rise in diluted earnings
per share), a return on common equity of 21.6%, a ratio of incremental revenue
to expense of 1.6 to 1, and the generation of an estimated $0.4 billion of free
capital. At June 30, 1998, the Tier 1 capital ratio was estimated at 8.3%,
within the target range of 8.0% to 8.3%. During the quarter, no shares were
repurchased as the stock repurchase program had been suspended in connection
with the announced agreement to merge with Travelers Group. Total repurchases
since the program was inaugurated on June 20, 1995 were 82.0 million shares for
an outlay of $7.3 billion.
During the quarter, Citicorp opened offices in Cameroon and Ukraine, the 99th
and 100th countries where it operates.
Citicorp signed a licensing agreement for Netscape electronic-commerce software
that will significantly improve speed-to-market of electronic banking and
commerce products globally.
Also during the quarter, Citibank began to explore opportunities presented by
its proposed merger with Travelers Group. In June, the companies began a pilot
program to cross-sell Travelers auto insurance to Citibank credit card holders,
with encouraging early results. In corporate banking, Citibank and Salomon Smith
Barney began joint capital-raising efforts for clients worldwide and have
already obtained several mandates.
Global Consumer business earns $377 million in the second quarter,
UCS acquisition closed
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Global Consumer Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
Adjusted Revenue ....... $4,044 $3,544 14 $7,551 $7,048 7
Adjusted Operating
Expense .............. 2,362 1,959 21 4,343 3,865 12
--------------------------------------------
Operating Margin ....... 1,682 1,585 6 3,208 3,183 1
Credit Costs (B) ....... 1,086 922 18 1,972 1,816 9
--------------------------------------------
Operating Margin Less
Credit Costs ......... 596 663 (10) 1,236 1,367 (10)
Additional Provision ... 25 25 - 50 50 -
--------------------------------------------
Income Before Taxes .... 571 638 (11) 1,186 1,317 (10)
Income Taxes ........... 194 179 8 380 381 -
--------------------------------------------
Net Income ............. $ 377 $ 459 (18) $ 806 $ 936 (14)
- --------------------------------------------------------------------------------
Average Assets (In
Billions of Dollars) . $140 $132 6 $136 $131 4
Return on Assets (%) ... 1.08 1.39 - 1.20 1.44 -
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(A) Reclassified to conform to the latest quarter's presentation.
(B) Includes the effect of credit card securitization activity and
the effect related to credit card receivables held for sale.
- --------------------------------------------------------------------------------
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Business Initiatives
Citibank was rated the best on-line bank by SmartMoney magazine.
Citibank and Blockbuster announced an agreement to install Citibank proprietary
banking machines in up to 3,000 Blockbuster Video stores across the United
States. Additionally, a program with Blockbuster in Latin America, which began
in 1997, was expanded to include locations in Chile and Argentina.
Citibank and Kinko's announced a strategic alliance under which Citibank will
open sales and information sites in selected Kinko's locations in the United
States.
Following overwhelming success as a promotional offer in the first quarter, the
low-balance, full-service EZ checking account was added to Citibanking's regular
product offerings throughout the United States.
Diners Club began issuing cards to the public in Hungary.
Financial Performance
Global Consumer income before taxes in the 1998 second quarter was $571 million,
compared with $638 million in 1997, reflecting improved results in U.S.
bankcards and the Citibanking businesses in North America, Japan, and Europe,
offset by UCS acquisition premium costs and lower earnings in Asia Pacific and
Latin America. The Global Consumer effective tax rate was 34% in the 1998 second
quarter, up from 28% in 1997, reflecting changes in the nature and geographic
mix of earnings. Net income was $377 million in the 1998 second quarter,
compared with $459 million for 1997.
Total consumer accounts reached 70 million as of June 30, 1998 in 57 countries
and territories, up from 55 million a year ago, principally reflecting an
increase of 13 million or 52% in U.S. bankcards, including UCS, and increases in
Latin America and Asia Pacific of 21% and 8%, respectively. Citibanking customer
deposits grew $8 billion or 9% from a year ago -- 15% excluding the effect of
foreign currency translation -- and client business volumes under management in
the Private Bank were up 8%.
Adjusted revenue of $4.0 billion was up $500 million or 14% from 1997, primarily
due to the acquisition of UCS (which contributed $336 million or 9 percentage
points of revenue growth) and improvements in U.S. bankcards. Revenue also
reflected improvements in the Citibanking businesses in North America, Japan,
and Europe and in the Private Bank, and a decline in Asia Pacific, principally
due to the effects of foreign currency translation and spread compression.
Foreign currency translation reduced revenue growth by approximately 5
percentage points.
Adjusted operating expense increased $403 million or 21% from a year ago,
reflecting the acquisition of UCS (which added $227 million or 12 percentage
points of the expense increase), higher advertising and marketing, and spending
on technology initiatives primarily related to electronic banking, together with
business volume growth and investment in new markets. Foreign currency
translation reduced expense growth by approximately 5 percentage points.
Credit costs in the quarter were $1,086 million ($910 million excluding UCS),
compared with $886 million in the 1998 first quarter and $922 million a year
ago, reflecting ratios of net credit losses to average managed loans of 2.88%
(2.66% excluding UCS), 2.64%, and 2.73% in the respective quarters. Global
Consumer continued to build the allowance for credit losses, adding $25 million
above net write-offs in the quarter.
3
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Citibanking Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
Revenue ................ $1,620 $1,531 6 $3,150 $3,012 5
Operating Expense ...... 1,229 1,100 12 2,374 2,172 9
--------------------------------------------
Operating Margin ....... 391 431 (9) 776 840 (8)
Credit Costs ........... 144 145 (1) 281 293 (4)
--------------------------------------------
Operating Margin Less
Credit Costs ......... 247 286 (14) 495 547 (10)
Additional Provision ... (4) - NM (6) - NM
--------------------------------------------
Income Before Taxes .... 251 286 (12) 501 547 (8)
Income Taxes ........... 96 92 4 166 176 (6)
--------------------------------------------
Net Income ............. $ 155 $ 194 (20) $ 335 $ 371 (10)
- --------------------------------------------------------------------------------
Average Assets (In
Billions of Dollars) . $88 $84 5 $87 $83 5
Return on Assets (%) ... 0.71 0.93 - 0.78 0.90 -
- --------------------------------------------------------------------------------
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Income before taxes from Citibanking activities -- delivering products and
services to customers through branches and electronic delivery systems -- was
$251 million in the quarter, down $35 million or 12% from the same 1997 quarter,
reflecting improvements in North America, Japan, and Europe that were more than
offset by spending on technology initiatives primarily related to electronic
banking and declines in Asia Pacific and Latin America. Net income for the 1998
quarter was $155 million compared to $194 million in 1997.
Worldwide Citibanking accounts totaled 21 million as of June 30, 1998, up 8%
from a year ago, including 18% and 16% growth in Latin America and Asia Pacific,
respectively. Average customer deposits of $101 billion were up 9% from a
year-ago, reflecting account openings and increased deposit levels primarily due
to a "flight-to-quality" in Asia Pacific and Japan, and growth in the U.S. and
Latin America. Asia Pacific and Japan added approximately $4.3 billion in
customer deposits, up 14% -- 30% excluding the effect of foreign currency
translation -- from 1997.
Revenue increased 6% from the 1997 second quarter. Developed markets revenue
grew 9% in the quarter, reflecting growth in all regions. Emerging markets
revenue was essentially unchanged in the quarter, reflecting economic conditions
in Asia Pacific (including weakened currencies) and moderate growth in Latin
America, including reduced spreads in certain countries. Foreign currency
translation reduced Citibanking revenue growth by approximately 7 percentage
points, primarily in the emerging markets.
Operating expense in the quarter was up 12% from 1997. Expense increased 14% in
the developed markets and 7% in the emerging markets, reflecting account and
business volume growth, increased spending on technology initiatives primarily
related to electronic banking, and advertising and marketing. Foreign currency
translation reduced Citibanking expense growth by approximately 5 percentage
points, primarily in the emerging markets.
Credit costs in the quarter were essentially unchanged from a year ago,
reflecting improvement in the U.S. and Europe, offset by higher net credit
losses in Latin America and Asia Pacific. The net credit loss ratio was 0.85% in
the 1998 second quarter, compared with 0.83% in the 1998 first quarter and 0.87%
in the 1997 second quarter. The emerging markets net credit loss ratio was 0.88%
in the 1998 second quarter, compared with 0.70% in the 1998 first quarter and
0.54% in the 1997 second quarter. Foreign currency translation reduced reported
net credit losses by approximately $10 million.
4
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Cards Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
Adjusted Revenue ....... $2,121 $1,734 22 $3,816 $3,486 9
Adjusted Operating
Expense .............. 930 675 38 1,570 1,341 17
--------------------------------------------
Operating Margin ....... 1,191 1,059 12 2,246 2,145 5
Credit Costs ........... 945 778 21 1,702 1,525 12
--------------------------------------------
Operating Margin Less
Credit Costs ......... 246 281 (12) 544 620 (12)
Additional Provision ... 29 25 16 56 50 12
--------------------------------------------
Income Before Taxes .... 217 256 (15) 488 570 (14)
Income Taxes ........... 71 70 1 166 164 1
--------------------------------------------
Net Income ............. $ 146 $ 186 (22) $ 322 $ 406 (21)
- --------------------------------------------------------------------------------
Average Assets (In
Billions of Dollars) . $36 $31 16 $33 $31 6
Return on Assets (%) ... 1.63 2.41 - 1.97 2.64 -
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(A) Reclassified to conform to the latest quarter's presentation.
- --------------------------------------------------------------------------------
During the quarter, Citibank completed the previously announced acquisition of
UCS. The acquisition added $14.5 billion in managed customer receivables and 14
million accounts to U.S. bankcards, bringing the totals to $60.3 billion and 38
million, respectively, at June 30, 1998. In the quarter, UCS contributed $336
million to revenue, $227 million to expense, and $176 million to credit costs,
resulting in a net loss of approximately $44 million. These amounts included
$107 million pretax of UCS acquisition premium costs (including funding costs
associated with the acquisition purchase premium).
Income before taxes from Cards worldwide -- bankcards, Diners Club, and private
label cards -- was $217 million in the quarter, down $39 million or 15% from a
year ago, reflecting improvements in U.S. bankcards, which were offset by the
UCS acquisition premium costs and lower earnings in Asia Pacific and Latin
America. Cards worldwide return on managed assets (including securitized card
receivables) in the quarter was 0.81%, compared with 1.33% in the year-ago
quarter. Net income for the 1998 second quarter was $146 million compared to
$186 million in 1997.
Card accounts worldwide totaled 49 million as of June 30, 1998, up from 36
million a year-ago, principally reflecting the acquisition of UCS. Cards in the
emerging markets grew 11% from a year ago, primarily in Latin America. The
number of cards in force, including those issued by affiliates, at quarter-end
was 91 million, up from 63 million a year ago. Cards, including Diners Club,
operates in 47 countries and territories, with expansion into Hungary, Italy,
Korea, Poland, and Portugal during the year.
Worldwide Cards adjusted revenue increased $387 million or 22% from a year-ago,
primarily reflecting the acquisition of UCS. Excluding UCS, U.S. bankcards
revenue was up 9% in the quarter, benefiting from risk-based pricing strategies
and charge volume increases of $2.0 billion or 8% to $27.3 billion. Second
quarter revenue in emerging markets Cards was down 18% reflecting lower revenue
in Asia Pacific together with reduced earnings in Credicard, a 33%-owned
Brazilian affiliate. Foreign currency translation reduced Cards revenue growth
by approximately 3 percentage points.
Adjusted operating expense in the developed markets was up $260 million,
principally due to UCS and increased marketing costs. Emerging markets expense
declined 3%, as the effect of foreign currency translation more than offset
account and business volume growth, increased collection costs, and continued
investment in new markets. Foreign currency translation reduced Cards expense
growth by 5 percentage points.
Credit costs of $945 million increased $188 million from the preceding quarter
and $167 million from the 1997 quarter, principally reflecting the acquisition
of UCS. Credit costs in U.S. bankcards were $842 million or 5.73% ($667 million
or 5.97% excluding UCS) of average managed loans for the quarter compared to
$668 million or 5.96% in the 1998 first quarter and $683 million or 6.13% a year
ago. The 12-month-lagged loss ratio was 5.98% (excluding UCS) in the quarter,
compared with 6.03% in the 1998 first quarter and 6.51% a year-ago. The percent
of gross write-offs from bankruptcies in the quarter was 41.1% (40.3% excluding
UCS), compared with 37.0% in the prior quarter and 40.2% in
5
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the 1997 second quarter. U.S. bankcards managed loans delinquent 90 days or more
were $942 million or 1.58% ($766 million or 1.70% excluding UCS) at quarter-end,
compared with $842 million or 1.88% for the prior quarter and $843 million or
1.86% a year-ago.
Credit costs in non-U.S. bankcard portfolios were $103 million or 4.42% of
average managed loans, compared with $89 million or 3.95% in the preceding
quarter and $95 million or 4.14% in the 1997 quarter, principally reflecting
higher losses in Asia Pacific.
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Private Bank Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
Adjusted Revenue ....... $303 $279 9 $585 $550 6
Adjusted Operating
Expense .............. 203 184 10 399 352 13
--------------------------------------------
Operating Margin ....... 100 95 5 186 198 (6)
Credit Benefits ........ (3) (1) NM (11) (2) NM
--------------------------------------------
Income Before Taxes .... 103 96 7 197 200 (2)
Income Taxes ........... 27 17 59 48 41 17
--------------------------------------------
Net Income ............. $ 76 $ 79 (4) $149 $159 (6)
- --------------------------------------------------------------------------------
Average Assets (In
Billions of Dollars) . $16 $17 (6) $16 $17 (6)
Return on Assets (%) ... 1.91 1.86 - 1.88 1.89 -
- --------------------------------------------------------------------------------
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Private Bank income before taxes was $103 million for the quarter, up 7% from
the 1997 second quarter, as revenue improvements were partially offset by
increased operating costs. Net income for the 1998 second quarter was $76
million compared to $79 million in 1997.
Client business volumes under management at the end of the quarter reached $108
billion, up 8% from $100 billion a year earlier, primarily reflecting growth in
all markets except Asia Pacific.
Adjusted revenue increased 9% in the quarter -- 10% excluding the effect of
foreign currency translation -- primarily due to growth in fee revenue and
client-related foreign exchange. Developed markets revenue grew 12% in the
quarter, reflecting increases across all regions. Emerging markets revenue was
up 4% in the quarter as growth in Latin America was partially offset by a slight
decline in Asia Pacific. More than 40% of revenue continued to be derived from
the emerging markets.
Adjusted operating expense increased 10% from the 1997 second quarter, primarily
reflecting an increased sales force and product management costs. Foreign
currency translation reduced expense growth by approximately 3 percentage
points.
Credit costs were a net benefit of $3 million in the quarter as recoveries in
North America and Europe were partially offset by write-offs in Asia Pacific.
Loans delinquent 90 days or more were $197 million or 1.23% of loans, compared
to $186 million or 1.21% in the preceding quarter and $187 million or 1.19% in
the second quarter of 1997.
6
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Global Consumer
in Emerging Markets Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
Adjusted Revenue ....... $923 $986 (6) $1,795 $1,934 (7)
Adjusted Operating
Expense .............. 601 581 3 1,164 1,121 4
--------------------------------------------
Operating Margin ....... 322 405 (20) 631 813 (22)
Credit Costs ........... 133 97 37 234 189 24
--------------------------------------------
Operating Margin Less
Credit Costs ......... 189 308 (39) 397 624 (36)
Additional Provision ... 11 7 57 22 10 NM
--------------------------------------------
Income Before Taxes .... 178 301 (41) 375 614 (39)
Income Taxes ........... 32 58 (45) 67 129 (48)
--------------------------------------------
Net Income ............. $146 $243 (40) $ 308 $ 485 (36)
- --------------------------------------------------------------------------------
Average Assets (In
Billions of Dollars) . $42 $43 (2) $42 $42 -
Return on Assets (%) ... 1.39 2.27 - 1.48 2.33 -
- --------------------------------------------------------------------------------
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Net income in the emerging markets was $146 million in the quarter, down $97
million from a year ago, reflecting economic conditions, including weakened
currencies, in Asia Pacific, and lower earnings in Latin America. Cards
represented 27% of emerging markets net income in the quarter, compared with 36%
in the 1997 quarter.
Asia Pacific (excluding Japan and the Indian subcontinent, but including
Australia and New Zealand) revenue declined 12% in the quarter, reflecting
economic conditions in the region including the effect of foreign currency
translation. Revenue in Latin America was essentially unchanged from the 1997
second quarter, reflecting a decline in Credicard and reduced spreads in certain
countries, offset by business volume growth and improvements in the Private
Bank. Foreign currency translation reduced revenue growth by approximately 13
percentage points.
Adjusted operating expense was up 3% in the quarter, reflecting a 4% decline in
Asia Pacific offset by an 8% increase in Latin America, primarily in the
Citibanking business. Foreign currency translation reduced expense growth by
approximately 14 percentage points.
Credit costs in the emerging markets increased $32 million from the 1998 first
quarter, and increased $36 million from the 1997 second quarter. The net credit
loss ratio in Asia Pacific was 1.16%, up from 0.77% in the 1998 first quarter
and 0.72% a year ago. The net credit loss ratio in Latin America was 2.51%
compared to 1.99% in the 1998 first quarter and 2.30% a year ago. Emerging
markets managed loans delinquent 90 days or more were $647 million or 1.95% at
quarter-end, compared with $620 million or 1.85% at March 31, 1998 and $461
million or 1.32% a year-ago. The emerging markets businesses built the allowance
for loan losses by $11 million.
7
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Global Consumer
in Developed Markets Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
Adjusted Revenue ....... $3,121 $2,558 22 $5,756 $5,114 13
Adjusted Operating
Expense .............. 1,761 1,378 28 3,179 2,744 16
--------------------------------------------
Operating Margin ....... 1,360 1,180 15 2,577 2,370 9
Credit Costs ........... 953 825 16 1,738 1,627 7
--------------------------------------------
Operating Margin Less
Credit Costs ......... 407 355 15 839 743 13
Additional Provision ... 14 18 (22) 28 40 (30)
--------------------------------------------
Income Before Taxes .... 393 337 17 811 703 15
Income Taxes ........... 162 121 34 313 252 24
--------------------------------------------
Net Income ............. $ 231 $ 216 7 $ 498 $ 451 10
- --------------------------------------------------------------------------------
Average Assets (In
Billions of Dollars) . $98 $89 10 $94 $89 6
Return on Assets (%) ... 0.95 0.97 - 1.07 1.02 -
- --------------------------------------------------------------------------------
(A) Reclassified to conform to the latest quarter's presentation.
- --------------------------------------------------------------------------------
Income before taxes in the developed markets was $393 million in the quarter, up
$56 million or 17% from 1997, reflecting improvements in U.S. bankcards and in
Citibanking in North America, Japan, and Europe that were partially offset by
UCS acquisition premium costs and increased spending on electronic banking
initiatives. Net income for the 1998 second quarter was $231 million compared to
$216 million in 1997.
Adjusted revenue was up 22% in the quarter, reflecting the acquisition of UCS,
and other increases in U.S. bankcards and in Citibanking businesses across all
regions. Adjusted expense grew 28%, reflecting UCS, increased advertising and
marketing, and spending on technology initiatives primarily related to
electronic banking, together with business volume growth.
Credit costs in the developed markets increased by $128 million in the quarter
from the 1997 second quarter, reflecting the addition of UCS (credit costs of
$176 million), partially offset by improvements in Citibanking, U.S. bankcards,
and credit recoveries in the Private Bank. Managed loans delinquent 90 days or
more were $2.7 billion or 2.25% ($2.5 billion or 2.39% excluding UCS) at
quarter-end, compared with $2.6 billion or 2.54% at March 31, 1998 and $2.9
billion or 2.80% a year ago. The developed markets businesses built the
allowance for loan losses by $14 million.
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Global Corporate Banking net income was $662 million in the quarter,
Revenue grew 21% to $2.4 billion
- --------------------------------------------------------------------------------
Global Corporate Second Quarter % Six Months %
Banking -------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
Adjusted Revenue ....... $2,409 $1,994 21 $4,721 $3,924 20
Adjusted Operating
Expense .............. 1,433 1,207 19 2,747 2,358 16
--------------------------------------------
Operating Margin ....... 976 787 24 1,974 1,566 26
Credit Costs (Benefits). 41 (36) NM 85 (111) NM
--------------------------------------------
Income Before Taxes .... 935 823 14 1,889 1,677 13
Income Taxes ........... 273 160 71 478 365 31
--------------------------------------------
Net Income ............. $ 662 $ 663 - $1,411 $1,312 8
- --------------------------------------------------------------------------------
Average Assets (In
Billions of Dollars) . $178 $152 17 $175 $150 17
Return on Assets (%) ... 1.49 1.75 - 1.63 1.76 -
- --------------------------------------------------------------------------------
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Business Initiatives
Citibank was named best bank worldwide for foreign exchange in the Euromoney
customer survey for the 20th straight year; best emerging markets bank as well
as best in six regions or products by Global Finance; and best foreign
commercial bank in China, Korea, Taiwan, the Philippines, Thailand, Indonesia,
and Singapore by Finance Asia.
Citibank signed an agreement in principle to purchase Europai Kereskedelmi Bank,
a primarily corporate bank based in Budapest, with six branches.
Permission was granted to open a full-service commercial-banking branch in
Guangzhou, China. Citibank is the only U.S.-based bank licensed to conduct
local-currency business in China.
Citibank upgraded its office in Algeria to become the only foreign branch in
that country.
Financial Performance
Global Corporate Banking income before taxes of $935 million in the 1998 second
quarter grew $112 million or 14% from the comparable 1997 quarter. Net income
was $662 million, essentially unchanged from the 1997 second quarter as changes
in the nature and geographic mix of pretax earnings increased the effective
income tax rate to 29% from 19%.
Adjusted revenue of $2.4 billion in the quarter grew $415 million or 21% (25%
excluding the effect of foreign currency translation) from the year-ago quarter,
with an increase of $150 million from the Emerging Markets business and $265
million from Global Relationship Banking. Adjusted operating expense of $1.4
billion increased $226 million or 19% (22% excluding the effect of foreign
currency translation) from 1997, with $57 million of the increase in the
Emerging Markets business and $169 million in Global Relationship Banking.
Credit costs were $41 million, and compared with a net benefit of $36 million in
1997.
Cash-basis loans of $1.3 billion declined $51 million from the 1998 first
quarter, but increased $376 million from the year-ago quarter. Cash-basis loans
in Global Relationship Banking of $300 million declined $77 million from the
1998
9
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first quarter and $134 million from the year-ago quarter. Cash-basis loans in
the Emerging Markets of $1.0 billion at June 30, 1998, increased $26 million
from the 1998 first quarter and $510 million from a year ago. The increase from
the year-ago quarter is primarily due to the economic turmoil affecting Thailand
and Indonesia. Emerging Markets cash-basis loans included $44 million and $83
million at June 30, 1998 and March 31, 1998, respectively, of balance sheet
credit exposures related to foreign currency derivative contracts from several
customers for which the recognition of revaluation gains has been suspended. The
amounts included a year ago were not material. Commercial OREO of $348 million
improved $2 million and $134 million from the 1998 first quarter and the
year-ago quarter.
- --------------------------------------------------------------------------------
Emerging Markets Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
Adjusted Revenue ....... $1,127 $977 15 $2,241 $1,902 18
Adjusted Operating
Expense .............. 530 473 12 1,028 919 12
--------------------------------------------
Operating Margin ....... 597 504 18 1,213 983 23
Credit Costs (Benefits). 93 24 NM 156 (12) NM
--------------------------------------------
Income Before Taxes .... 504 480 5 1,057 995 6
Income Taxes ........... 101 59 71 153 125 22
--------------------------------------------
Net Income ............. $ 403 $421 (4) $ 904 $ 870 4
- --------------------------------------------------------------------------------
Average Assets (In
Billions of Dollars) . $84 $70 20 $83 $68 22
Return on Assets (%) ... 1.92 2.41 - 2.20 2.58 -
- --------------------------------------------------------------------------------
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
Emerging Markets net income of $403 million declined $18 million or 4% from
1997. Operating margin grew $93 million or 18%, as revenue growth outpaced
expense growth by a 2.6 to 1 ratio, but credit costs increased $69 million,
resulting in income before taxes growing $24 million or 5%. The effective income
tax rate increased to 20% in the quarter from 12% a year ago.
Adjusted revenue in the quarter of $1.1 billion grew $150 million or 15% (23%
excluding the effect of foreign currency translation) from the 1997 second
quarter. The increase reflected a $104 million improvement in trading-related
revenue, higher securities transactions and net asset gains, improved treasury
results, and double-digit growth in transaction banking revenue. Securities
transactions and net asset gains totaled $179 million and $134 million in the
1998 and 1997 second quarters, and included $174 million and $58 million from
the sale of Brady bonds. Revenue in the 1997 quarter included a significant
dividend from an investment of an affiliate. Revenue in Asia Pacific (excluding
Japan and the Indian subcontinent, but including Australia and New Zealand) was
up 26% from the 1997 second quarter due to improved trading-related results.
Revenue attributed to the Embedded Bank and Emerging Local Corporate strategies,
together with new franchises, accounted for 4% of Emerging Markets revenue, up
43% from the 1997 quarter. About 22% of the revenue in the Emerging Markets
business was attributable to business from multinational companies managed
jointly with Global Relationship Banking, with that revenue having grown 17%
from the 1997 second quarter.
Adjusted operating expense of $530 million in 1998 increased $57 million or 12%
(19% excluding the effect of foreign currency translation) from the year-ago
quarter. The growth reflected investment spending to build the franchise,
including costs associated with Citicorp's plan to gain market share in selected
emerging market countries, and volume growth across most products and
geographies.
Credit costs totaled $93 million in the quarter, up from $24 million in the 1997
quarter, and were concentrated in Indonesia and Thailand.
10
<PAGE>
- --------------------------------------------------------------------------------
Global Relationship Second Quarter % Six Months %
Banking -------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
Adjusted Revenue ....... $1,282 $1,017 26 $2,480 $2,022 23
Adjusted Operating
Expense .............. 903 734 23 1,719 1,439 19
--------------------------------------------
Operating Margin ....... 379 283 34 761 583 31
Credit Benefits ........ (52) (60) (13) (71) (99) (28)
--------------------------------------------
Income Before Taxes .... 431 343 26 832 682 22
Income Taxes ........... 172 101 70 325 240 35
--------------------------------------------
Net Income ............. $ 259 $ 242 7 $ 507 $ 442 15
- --------------------------------------------------------------------------------
Average Assets (In
Billions of Dollars) . $94 $82 15 $92 $82 12
Return on Assets (%) ... 1.11 1.18 - 1.11 1.09 -
- --------------------------------------------------------------------------------
(A) Reclassified to conform to the latest quarter's presentation.
- --------------------------------------------------------------------------------
Income before taxes of $431 million from the Global Relationship Banking
business in North America, Europe, and Japan in the 1998 second quarter grew $88
million or 26% from the 1997 quarter. However, an increase in the effective
income tax rate to 40% in the quarter from 29% a year ago raised income taxes,
resulting in a $17 million or 7% improvement in net income from 1997.
Adjusted revenue of $1.3 billion grew $265 million or 26% from the 1997 second
quarter, reflecting a $132 million gain on the disposition of two real estate
investments, an $87 million improvement in trading-related revenue, double-digit
growth in corporate finance and investment management fees, moderate growth in
transaction banking services, and stable venture capital revenue, partially
offset by a $23 million gain on the sale of a business recognized in the 1997
second quarter.
Adjusted operating expense of $903 million grew $169 million or 23% compared
with the 1997 second quarter, primarily from increased spending on technology,
including costs related to the Year 2000 and the European EMU, higher incentive
compensation, and volume-related expense.
Credit costs in the quarter were a net benefit of $52 million, down slightly
from the net benefit of $60 million in the 1997 second quarter, and included
several significant real-estate-related recoveries.
- --------------------------------------------------------------------------------
Corporate Items (A) Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (B) (B)
- --------------------------------------------------------------------------------
Revenue ................ $339 $209 62 $585 $ 402 46
Operating Expense ...... 90 44 NM 201 166 21
--------------------------------------------
Income Before Taxes .... 249 165 51 384 236 63
Income Taxes ........... 191 263 (27) 439 465 (6)
--------------------------------------------
Net Income (Loss) ...... $ 58 ($98) NM ($55) ($229) 76
- --------------------------------------------------------------------------------
Average Assets (In
Billions of Dollars) . $9 $9 - $9 $8 13
- --------------------------------------------------------------------------------
(A) Corporate Items includes revenue derived from charging businesses for funds
employed, based upon a marginal cost of funds concept, unallocated
corporate costs, and the offset created by attributing income taxes to
core business activities on a local tax-rate basis.
(B) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
11
<PAGE>
Revenue in the 1998 second quarter included $90 million of gains on sales of
investments held in the Corporate portfolio, while the 1997 quarter reflected
investment writedowns of $29 million. Expense in the 1998 second quarter
included a $25 million charge associated with performance-based stock options
granted in January 1998, and increases in certain technology expenses and other
unallocated corporate costs.
Citicorp's effective tax rate was 37.5% in both 1998 periods and in the 1997 six
months, and was 37% in the 1997 second quarter. Income taxes are attributed to
core businesses on the basis of local tax rates, which resulted in effective tax
rates for the core businesses of 31% and 28% in the 1998 quarter and six months,
and 23% and 25% in the 1997 quarter and six months, primarily reflecting changes
in the nature and geographic mix of earnings. The difference between the core
businesses' tax rates and Citicorp's overall effective rate in each period is
included in Corporate Items.
Other Items
Of the $889 million restructuring charge recorded in the 1997 third quarter,
approximately $466 million remained in the reserve as of June 30, 1998. The
utilization of the reserve included $245 million of premises and equipment
writedowns and $164 million of primarily severance and related costs (of which
$132 million has been paid in cash and $32 million is legally obligated),
together with translation effects.
Average assets increased $14 billion from March 31, 1998, reflecting the UCS
acquisition completed on April 2, 1998, and growth in Global Corporate Banking
and Global Consumer assets, partially offset by increased levels of asset
securitization and the effect of foreign currency translation.
Selected financial statements and tables detailing an analysis of earnings and
credit indicators follow. Further details concerning the financial results will
be available in August in Citicorp's Form 10-Q.
12
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Statement of Income CITICORP and Subsidiaries
- --------------------------------------------------------------------------------
(In Millions of Second Quarter % Six Months %
Dollars, -------------- ----------
Except Per Share 1998 1997 Change 1998 1997 Change
Amounts)
- --------------------------------------------------------------------------------
Interest Revenue ....... $6,658 $6,141 8 $12,961 $11,998 8
Interest Expense ....... 3,663 3,278 12 7,127 6,331 13
--------------------------------------------
Net Interest Revenue ... 2,995 2,863 5 5,834 5,667 3
Provision for Credit
Losses ............... 564 512 10 1,071 935 15
--------------------------------------------
Net Interest Revenue
after Provision for
Credit Losses ........ 2,431 2,351 3 4,763 4,732 1
--------------------------------------------
Fees, Commissions,
and Other Revenue
Fees and Commissions ... 1,553 1,441 8 2,994 2,793 7
Foreign Exchange ....... 465 311 50 814 608 34
Trading Account ........ 98 97 1 334 295 13
Securities Transactions. 300 124 NM 541 232 NM
Other Revenue .......... 791 475 67 1,290 912 41
--------------------------------------------
Total Fees, Commissions,
and Other Revenue .... 3,207 2,448 31 5,973 4,840 23
--------------------------------------------
Operating Expense
Salaries ............... 1,471 1,286 14 2,826 2,550 11
Employee Benefits ...... 354 321 10 713 722 (1)
--------------------------------------------
Total Employee Expense 1,825 1,607 14 3,539 3,272 8
Net Premises &
Equipment Expense .... 528 479 10 1,027 969 6
Other Expense .......... 1,530 1,087 41 2,711 2,101 29
--------------------------------------------
Total Operating Expense. 3,883 3,173 22 7,277 6,342 15
--------------------------------------------
Income Before Taxes .... 1,755 1,626 8 3,459 3,230 7
Income Taxes ........... 658 602 9 1,297 1,211 7
--------------------------------------------
Net Income ............. $1,097 $1,024 7 $ 2,162 $ 2,019 7
- --------------------------------------------------------------------------------
Income Applicable to
Common Stock ......... $1,070 $990 8 $2,103 $1,947 8
--------------------------------------------
Earnings Per Share:
Basic ................ $2.37 $2.16 10 $4.65 $4.23 10
Diluted .............. $2.30 $2.10 10 $4.53 $4.11 10
- --------------------------------------------------------------------------------
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Weighted Average Shares Outstanding (In Millions)
- --------------------------------------------------------------------------------
Basic .................. 451.8 458.5 (1) 452.0 460.0 (2)
Diluted (A) ............ 464.4 471.3 (1) 463.8 473.5 (2)
- --------------------------------------------------------------------------------
(A) Includes dilutive effect of shares issuable under employee plans of 12.6
million and 12.8 million for the quarters, and 11.8 million and 13.5
million for the six months.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Balance Sheet CITICORP and Subsidiaries
- --------------------------------------------------------------------------------
June Dec. %
(In Millions of Dollars) 30, 31, Change
1998 1997
- --------------------------------------------------------------------------------
Assets
Cash and Due from Banks .................... $ 9,463 $ 8,585 10
Deposits at Interest with Banks ............ 14,013 13,049 7
Securities, at Fair Value:
Available for Sale ....................... 34,160 30,762 11
Venture Capital .......................... 3,117 2,599 20
Trading Account Assets ..................... 37,121 40,356 (8)
Loans Held for Sale ........................ 4,737 3,515 35
Federal Funds Sold and Securities Purchased
Under Resale Agreements .................. 12,375 10,233 21
Loans, Net:
Consumer ................................. 107,410 108,066 (1)
Commercial ............................... 84,856 75,947 12
-------------------------
Loans, Net of Unearned Income .............. 192,266 184,013 4
Allowance for Credit Losses .............. (6,182) (5,816) 6
-------------------------
Total Loans, Net ........................... 186,084 178,197 4
-------------------------
Customers' Acceptance Liability ............ 1,643 1,726 (5)
Premises and Equipment, Net ................ 4,675 4,474 4
Interest and Fees Receivable ............... 3,275 3,288 -
Other Assets ............................... 20,088 14,113 42
-------------------------
Total ...................................... $330,751 $310,897 6
- --------------------------------------------------------------------------------
Liabilities
Non-Interest-Bearing Deposits in U.S. Offices $ 17,940 $16,901 6
Interest-Bearing Deposits in U.S. Offices .. 40,920 40,361 1
Non-Interest-Bearing Deposits in Offices
Outside the U.S. ......................... 10,394 9,627 8
Interest-Bearing Deposits in Offices Outside
the U.S. ................................. 146,728 132,232 11
-------------------------
Total Deposits ........................ 215,982 199,121 8
-------------------------
Trading Account Liabilities ................ 29,121 30,986 (6)
Purchased Funds and Other Borrowings ....... 21,802 21,231 3
Acceptances Outstanding .................... 1,774 1,826 (3)
Accrued Taxes and Other Expense ............ 6,757 6,464 5
Other Liabilities .......................... 13,641 10,288 33
Long-Term Debt ............................. 19,957 19,785 1
Stockholders' Equity
Preferred Stock (Without par value) ........ 1,275 1,903 (33)
Common Stock ($1.00 par value) ............. 506 506 -
Issued Shares: 506,298,235 in each period
Surplus .................................... 6,512 6,501 -
Retained Earnings .......................... 18,371 16,789 9
Accumulated Other Changes in Equity from
Nonowner Sources (A) ..................... (370) (91) NM
Common Stock in Treasury, at Cost .......... (4,577) (4,412) 4
Shares: 54,366,159 and 52,355,947,
respectively
-------------------------
Total Stockholders' Equity ................. 21,717 21,196 2
-------------------------
Total ...................................... $330,751 $310,897 6
- --------------------------------------------------------------------------------
(A) Amounts at June 30, 1998 and December 31, 1997 include the after-tax amounts
for net unrealized gains on securities available for sale of $308 million
and $535 million, respectively, and foreign currency translation of ($678)
million and ($626) million, respectively.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Net Interest Revenue Statistics (Taxable Equivalent Basis) (A)
- --------------------------------------------------------------------------------
2nd 1st 4th 3rd 2nd
(In Millions of Dollars) Qtr. Qtr. Qtr. Qtr. Qtr.
1998 1998 1997 1997 1997
- --------------------------------------------------------------------------------
Net Interest Revenue ........ $3,009 $2,856 $2,871 $2,888 $2,876
Effect of Credit Card
Securitization Activity ... 908 640 596 565 578
--------------------------------------
Total Adjusted (B) .......... $3,917 $3,496 $3,467 $3,453 $3,454
- --------------------------------------------------------------------------------
(In Billions of Dollars)
- ------------------------------
Average Interest-Earning $276.0 $265.2 $257.0 $255.7 $252.6
Assets
Effect of Credit Card
Securitization Activity ... 36.8 27.4 26.3 24.8 24.7
--------------------------------------
Total Adjusted (B) .......... $312.8 $292.6 $283.3 $280.5 $277.3
- --------------------------------------------------------------------------------
Net Interest Margin (%) ..... 4.37% 4.37% 4.43% 4.48% 4.57%
Effect of Credit Card
Securitization Activity ... .65% .48% .42% .40% .43%
--------------------------------------
Total Adjusted (B) .......... 5.02% 4.85% 4.85% 4.88% 5.00%
- --------------------------------------------------------------------------------
(A) The taxable equivalent adjustment is based on the U.S. federal statutory tax
rate of 35%.
(B) Adjusted for the effect of credit card securitization activity.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Trading-Related Revenue Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
By Business Sector:
Global Corporate
Banking:
Emerging Markets ....... $259 $155 67 $ 530 $ 362 46
Global Relationship
Banking .............. 357 270 32 735 600 23
------------------------------------------
Total Global Corporate
Banking .............. 616 425 45 1,265 962 31
Global Consumer and
Other ................ 114 86 33 193 138 40
------------------------------------------
Total .................. $730 $511 43 $1,458 $1,100 33
- --------------------------------------------------------------------------------
By Trading Activity:
Foreign Exchange (B) ... $391 $258 52 $ 777 $ 495 57
Derivative (C) ......... 218 129 69 454 336 35
Fixed Income (D) ....... 31 59 (47) 88 129 (32)
Other .................. 90 65 38 139 140 (1)
--------------------------------------------
Total .................. $730 $511 43 $1,458 $1,100 33
- --------------------------------------------------------------------------------
By Income Statement
Line:
Foreign Exchange ....... $465 $311 50 $ 814 $ 608 34
Trading Account ........ 98 97 1 334 295 13
Other (E) .............. 167 103 62 310 197 57
--------------------------------------------
Total .................. $730 $511 43 $1,458 $1,100 33
- --------------------------------------------------------------------------------
(A) Reclassified to conform to the latest quarter's presentation.
(B) Includes foreign exchange spot, forward, and option contracts.
(C) Includes interest rate and currency swaps, options, financial
futures, and equity and commodity contracts.
(D) Includes debt instruments including government and corporate debt, as well
as mortgage assets.
(E) Primarily net interest revenue.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Other Revenue Second Quarter % Six Months %
-------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars) (A) (A)
- --------------------------------------------------------------------------------
Credit Card Securitization
Activity .............. $351 $118 NM $ 489 $283 73
Venture Capital .......... 171 173 (1) 435 266 64
Affiliate Earnings ....... 42 112 (63) 71 171 (58)
Net Asset Gains .......... 198 64 NM 229 156 47
Other Items .............. 29 8 NM 66 36 83
--------------------------------------------
Total .................... $791 $475 67 $1,290 $912 41
- --------------------------------------------------------------------------------
(A) Reclassified to conform to the latest quarter's presentation.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Provision for Credit Second Quarter % Six Months %
Losses -------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars)
- --------------------------------------------------------------------------------
Global Consumer Net
Write-Offs ............. $510 $488 5 $ 936 $947 (1)
Global Corporate Banking
Net Write-Offs
(Recoveries) ........... 29 (1) NM 85 (62) NM
Additional Provision ..... 25 25 - 50 50 -
--------------------------------------------
Total .................... $564 $512 10 $1,071 $935 15
- --------------------------------------------------------------------------------
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Margin Basis Second Quarter % Six Months %
Reconciliation -------------- ----------
(In Millions of 1998 1997 Change 1998 1997 Change
Dollars)
- --------------------------------------------------------------------------------
Total Revenue .......... $6,202 $5,311 17 $11,807 $10,507 12
Effect of Credit Card
Securitization
Activity ............. 579 437 32 1,040 871 19
Net Cost to Carry (A) .. 11 (1) NM 10 (4) NM
--------------------------------------------
Adjusted Revenue ....... 6,792 5,747 18 12,857 11,374 13
--------------------------------------------
Total Operating Expense. 3,883 3,173 22 7,277 6,342 15
Net OREO Benefits (B) .. 2 37 (95) 14 47 (70)
--------------------------------------------
Adjusted Operating
Expense .............. 3,885 3,210 21 7,291 6,389 14
--------------------------------------------
--------------------------------------------
Operating Margin ....... 2,907 2,537 15 5,566 4,985 12
--------------------------------------------
Global Consumer Net
Write-Offs ........... 510 488 5 936 947 (1)
Effect of Credit Card
Securitization
Activity ............. 579 437 32 1,040 871 19
Net Cost to Carry
and Net OREO Benefits
(A) (B) .............. (3) (3) - (4) (2) NM
--------------------------------------------
Global Consumer Credit
Costs ................ 1,086 922 18 1,972 1,816 9
--------------------------------------------
Global Corporate Banking
Net Write-Offs
(Recoveries) ......... 29 (1) NM 85 (62) NM
Net Cost to Carry and
Net OREO Benefits (A)
(B) .................. 12 (35) NM - (49) NM
--------------------------------------------
Global Corporate
Banking Credit Costs
(Benefits) ........... 41 (36) NM 85 (111) NM
--------------------------------------------
Additional Provision
(C) .................. 25 25 - 50 50 -
--------------------------------------------
Income Before Taxes .... $1,755 $1,626 8 $ 3,459 $ 3,230 7
- --------------------------------------------------------------------------------
(A) Includes the net cost to carry cash-basis loans and other real estate owned
("OREO").
(B) Includes gains and losses on sales, direct revenue and expense, and
writedowns of OREO.
(C) Represents amounts in excess of net write-offs.
NM Not meaningful, as percentage equals or exceeds 100%.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Consumer Loan Delinquency Amounts, Net Credit Losses, and Ratios
- --------------------------------------------------------------------------------
(In Millions Total 90 Days or More Average Net Credit Losses
of Dollars, Loans Past Due (A) Loans (A)
-------------------------------------------------------
except Loan June June Mar. June 2nd 2nd 1st 2nd
Amounts in 30, 30, 31, 30, Qtr. Qtr. Qtr. Qtr.
Billions) 1998 1998 1998 1997 1998 1998 1998 1997
- --------------------------------------------------------------------------------
Citibanking .. $68.2 $1,995 $2,014 $2,094 $68.0 $144 $137 $145
Ratio ........ 2.93% 2.97% 3.13% 0.85% 0.83% 0.87%
Cards:
- -------------
U.S.
Bankcards (B).. 59.6 942 842 843 58.9 842 668 683
Ratio ......... 1.58% 1.88% 1.86% 5.73% 5.96% 6.13%
Other (C) ..... 9.6 220 216 206 9.3 103 89 95
Ratio ......... 2.30% 2.30% 2.18% 4.42% 3.95% 4.14%
Private Bank .. 16.0 197 186 187 15.6 - (7) 2
Ratio ......... 1.23% 1.21% 1.19% NM NM 0.04%
- --------------------------------------------------------------------------------
Total Managed. 153.4 3,354 3,258 3,330 151.8 1,089 887 925
Ratio ........ 2.19% 2.37% 2.43% 2.88% 2.64% 2.73%
- --------------------------------------------------------------------------------
Securitization
Activity
Credit Card
Receivables (41.3) (601) (519) (453) (36.8) (542) (430) (404)
Loans Held
for Sale .. (4.7) (40) (39) (37) (4.6) (37) (31) (33)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Loans ..$107.4 $2,713 $2,700 $2,840 $110.4 $510 $426 $488
Ratio ........ 2.53% 2.55% 2.59% 1.86% 1.64% 1.82%
- --------------------------------------------------------------------------------
Managed
Portfolio:
- ------------
Developed ....$120.1 $2,707 $2,638 $2,869 $118.5 $956 $790 $828
Ratio ........ 2.25% 2.54% 2.80% 3.24% 3.09% 3.26%
Emerging ..... 33.3 647 620 461 33.3 133 97 97
Ratio ........ 1.95% 1.85% 1.32% 1.61% 1.21% 1.15%
- --------------------------------------------------------------------------------
Emerging
Portfolio (D):
- --------------
Asia Pacific ..$22.0 $374 $375 $289 $22.1 $63 $42 $44
Ratio ......... 1.70% 1.67% 1.15% 1.16% 0.77% 0.72%
Latin America . 9.9 227 202 152 9.8 61 46 46
Ratio ......... 2.28% 2.10% 1.85% 2.51% 1.99% 2.30%
CEEMEA (E) .... 1.4 46 43 20 1.4 9 9 7
Ratio ......... 3.40% 3.03% 1.43% 2.86% 2.78% 2.15%
- --------------------------------------------------------------------------------
(A) The ratios of 90 days or more past due and net credit losses are calculated
based on end-of-period and average loans, respectively, both net of
unearned income.
(B) The U.S. bankcards managed ratios of 90 days or more past due and net credit
losses were reduced by 12 basis points and 24 basis points, respectively,
in the current quarter, due to the addition of the UCS portfolio.
(C) Includes bankcards outside of the U.S., worldwide Diners Club, and private
label cards.
(D) Includes Private Bank and excludes Japan.
(E) Central and Eastern Europe, Middle East, and Africa.
NM Not meaningful.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Cash-Basis and Renegotiated Loans June Dec. June
(In Millions of Dollars) 30, 31, 30,
1998 1997 1997
- --------------------------------------------------------------------------------
Commercial Cash-Basis Loans
Collateral Dependent (at Lower of Cost or
Collateral Value) (A) .................... $ 193 $ 258 $274
Other (B) .................................. 1,100 806 643
----------------------
Total Commercial Cash-Basis Loans .......... $1,293 $1,064 $917
- --------------------------------------------------------------------------------
Commercial Renegotiated Loans .............. $45 $59 $295
- --------------------------------------------------------------------------------
Consumer Loans on which Accrual of Interest
has been Suspended ....................... $1,864 $1,849 $2,036
- --------------------------------------------------------------------------------
(A) A cash-basis loan is defined as collateral dependent when repayment is
expected to be provided solely by the underlying collateral and there are
no other available and reliable sources of repayment, in which case the
loans are written down to the lower of cost or collateral value.
(B) Includes foreign currency derivative contracts with a balance sheet credit
exposure of $44 million and $59 million at June 30, 1998 and December
31, 1997, respectively, for which the recognition of revaluation gains has
been suspended.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other Real Estate Owned (OREO) and Assets June Dec. June
Pending Disposition (A) 30, 31, 30,
(In Millions of Dollars) 1998 1997 1997
- --------------------------------------------------------------------------------
Consumer OREO .............................. $182 $263 $362
Commercial OREO ............................ 348 461 482
----------------------
Total ...................................... $530 $724 $844
- --------------------------------------------------------------------------------
Assets Pending Disposition (B) ............. $104 $96 $72
- --------------------------------------------------------------------------------
(A) Carried at lower of cost or collateral value.
(B) Represents consumer residential mortgage loans that have a high
probability of foreclosure.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Credit Loss Reserves June Dec. June
(In Millions of Dollars) 30, 31, 30,
1998 1997 1997
- --------------------------------------------------------------------------------
Aggregate Allowance for Credit Losses:
Global Consumer (A) ........................ $2,853 $2,487 $2,453
Global Corporate Banking ................... 3,429 3,429 3,429
----------------------
Total Aggregate Allowance for Credit Losses
(B) ...................................... 6,282 5,916 5,882
Reserves for Securitization Activities (C) . 61 85 91
----------------------
Total Credit Loss Reserves ................. $6,343 $6,001 $5,973
- --------------------------------------------------------------------------------
Allowance As a Percent of Total Loans:
Global Consumer ............................ 2.66% 2.30% 2.24%
Global Corporate Banking (D) ............... 3.92% 4.38% 4.80%
Total ...................................... 3.22% 3.16% 3.23%
- --------------------------------------------------------------------------------
(A) The balance at June 30, 1998 includes $320 million of credit loss reserves
acquired in the acquisition of UCS.
(B) Includes $6.182 billion 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 reported as a
deduction from Trading Account Assets at June 30, 1998.
(C) Attributable to mortgage loans sold with recourse.
(D) Excludes allowance portion attributable to standby letters of credit and
guarantees, and derivative and foreign exchange contracts.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Average Balances 2nd 1st 4th 3rd 2nd
(In Billions of Dollars) Qtr. Qtr. Qtr. Qtr. Qtr.
1998 1998 1997 1997 1997
- --------------------------------------------------------------------------------
Loans:
Consumer .................. $110 $106 $107 $108 $107
Commercial ................ 81 77 73 69 67
------------------------------------
Total Average Loans ......... $191 $183 $180 $177 $174
- --------------------------------------------------------------------------------
Total Average Assets ........ $327 $313 $302 $299 $293
- --------------------------------------------------------------------------------
(In Millions of Dollars)
- ----------------------------
Common Stockholders' Equity . $19,958 $19,259 $18,952 $19,633 $18,933
Preferred Equity ............ 1,546 1,752 1,903 1,903 1,903
---------------------------------------
Total Average Stockholders'
Equity .................... $21,504 $21,011 $20,855 $21,536 $20,836
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capital and Other Items Second Quarter %
--------------
(In Billions of Dollars, Except Share Data) 1998 1997 Change
- --------------------------------------------------------------------------------
Common Stockholders' Equity Per Share ...... $45.23 $42.58 6
Closing Stock Price At Quarter End ......... $149.25 $120.56 24
Dividends Per Common Share -- For the
Second Quarter .......................... $0.575 $0.525 10
Dividends Per Common Share -- For the
Six Months .............................. $1.15 $1.05 10
Shares Outstanding (In Millions) ........... 451.9 458.1 (1)
Tier 1 Capital ............................. $21.9 $20.6 6
Total Capital (Tier 1 and 2) (A) ........... $31.8 $30.1 6
Tier 1 Capital Ratio (A) ................... 8.3% 8.2% -
Total Capital Ratio (Tier 1 and 2) (A) ..... 12.1% 12.0% -
Common Equity as a Percentage of Total Assets 6.2% 6.4% -
Total Equity as a Percentage of Total Assets 6.6% 7.0% -
- --------------------------------------------------------------------------------
(A) 1998 estimated.
- --------------------------------------------------------------------------------
20
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
Exhibit No. 12(a) Calculation of Ratio of Income to Fixed Charges.
Exhibit No. 12(b) Calculation of Ratio of Income to Fixed Charges
Including Preferred Stock Dividends.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITICORP
(Registrant)
By: /s/ Roger W. Trupin
--------------------
Roger W. Trupin
Vice President and Controller
Dated: July 21, 1998
22
CITICORP AND SUBSIDIARIES
CALCULATION OF RATIO OF INCOME TO FIXED CHARGES
(In Millions)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------ -----------------
EXCLUDING INTEREST ON DEPOSITS: 1997 1996 1995 1994 1993 1998 1997
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
INTEREST EXPENSE (OTHER THAN
INTEREST ON DEPOSITS) 3,468 3,435 4,110 5,906 6,324 1,722 1,681
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147 83 78
------ ------- ------ ------ ------ ------ -----
TOTAL FIXED CHARGES 3,627 3,585 4,250 6,049 6,471 1,805 1,759
------ ------ ------ ------ ------ ------ -----
INCOME:
NET INCOME 3,591 3,788 3,464 3,422 (A) 1,919 (B) 2,162 2,019
INCOME TAXES 2,131 2,285 2,121 1,189 941 1,297 1,211
FIXED CHARGES 3,627 3,585 4,250 6,049 6,471 1,805 1,759
------ ------ ------ ------ ------ ------ -----
TOTAL INCOME 9,349 9,658 9,835 10,660 9,331 5,264 4,989
====== ====== ====== ====== ====== ====== =====
RATIO OF INCOME TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 2.58 2.69 2.31 1.76 1.44 2.92 2.84
====== ====== ====== ====== ====== ====== =====
INCLUDING INTEREST ON DEPOSITS:
FIXED CHARGES:
INTEREST EXPENSE 13,081 12,409 13,012 14,902 16,121 7,127 6,331
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147 83 78
------ ------ ------ ------ ------ ------ -----
TOTAL FIXED CHARGES 13,240 12,559 13,152 15,045 16,268 7,210 6,409
------ ------ ------ ------ ------ ------ -----
INCOME:
NET INCOME 3,591 3,788 3,464 3,422 (A) 1,919 (B) 2,162 2,019
INCOME TAXES 2,131 2,285 2,121 1,189 941 1,297 1,211
FIXED CHARGES 13,240 12,559 13,152 15,045 16,268 7,210 6,409
------ ------ ------ ------ ------ ------ -----
TOTAL INCOME 18,962 18,632 18,737 19,656 19,128 10,669 9,639
====== ====== ====== ====== ====== ====== =====
RATIO OF INCOME TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.43 1.48 1.42 1.31 1.18 1.48 1.50
====== ====== ====== ====== ====== ====== =====
</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>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------ -----------------
EXCLUDING INTEREST ON DEPOSITS: 1997 1996 1995 1994 1993 1998 1997
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
INTEREST EXPENSE (OTHER THAN
INTEREST ON DEPOSITS) 3,468 3,435 4,110 5,906 6,324 1,722 1,681
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147 83 78
DIVIDENDS--PREFERRED STOCK 223 261 553 505 (A) 465 93 114
------ ------ ------ ------ ------ ------ -----
TOTAL FIXED CHARGES 3,850 3,846 4,803 6,554 6,936 1,898 1,873
------ ------ ------ ------ ------ ------ -----
INCOME:
NET INCOME 3,591 3,788 3,464 3,422 (B) 1,919 (C) 2,162 2,019
INCOME TAXES 2,131 2,285 2,121 1,189 941 1,297 1,211
FIXED CHARGES (EXCLUDING PREFERRED
STOCK DIVIDENDS) 3,627 3,585 4,250 6,049 6,471 1,805 1,759
------ ------ ------ ------ ------ ------ -----
TOTAL INCOME 9,349 9,658 9,835 10,660 9,331 5,264 4,989
====== ====== ====== ====== ====== ====== =====
RATIO OF INCOME TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 2.43 2.51 2.05 1.63 1.35 2.77 2.66
====== ====== ====== ====== ====== ====== =====
INCLUDING INTEREST ON DEPOSITS:
FIXED CHARGES:
INTEREST EXPENSE 13,081 12,409 13,012 14,902 16,121 7,127 6,331
INTEREST FACTOR IN RENT EXPENSE 159 150 140 143 147 83 78
DIVIDENDS--PREFERRED STOCK 223 261 553 505 (A) 465 93 114
------ ------ ------ ------ ------ ------ -----
TOTAL FIXED CHARGES 13,463 12,820 13,705 15,550 16,733 7,303 6,523
------ ------ ------ ------ ------ ------ -----
INCOME:
NET INCOME 3,591 3,788 3,464 3,422 (B) 1,919 (C) 2,162 2,019
INCOME TAXES 2,131 2,285 2,121 1,189 941 1,297 1,211
FIXED CHARGES (EXCLUDING PREFERRED
STOCK DIVIDENDS) 13,240 12,559 13,152 15,045 16,268 7,210 6,409
------ ------ ----- ----- ------ ------ -----
TOTAL INCOME 18,962 18,632 18,737 19,656 19,128 10,669 9,639
====== ====== ====== ====== ====== ====== =====
RATIO OF INCOME TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.41 1.45 1.37 1.26 1.14 1.46 1.48
====== ====== ====== ====== ====== ====== =====
</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.
