SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission file number 1-5738
Citicorp
(Exact name of registrant as specified in its charter)
Delaware 06-1515595
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
399 Park Avenue, New York, New York 10043
(Address of principal executive offices) (Zip Code)
(800) 285-3000
(Registrant's telephone number, including area code)
----------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Because the Registrant is a wholly owned subsidiary of Citigroup Inc., none of
its outstanding voting stock is held by nonaffiliates. As of the date hereof,
1,000 shares of the Registrant's Common Stock, $0.01 par value per share, were
issued and outstanding.
REDUCED DISCLOSURE FORMAT
The Registrant meets the conditions set forth in General Instruction H (1) (a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
<PAGE>
Citicorp
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements: Page No.
--------
Consolidated Statements of Income (Unaudited) -
Three and Six Months Ended June 30, 2000 and 1999 24
Consolidated Balance Sheets -
June 30, 2000 (Unaudited) and December 31, 1999 25
Consolidated Statements of Changes in Stockholder's Equity
(Unaudited) - Six Months Ended June 30, 2000 and 1999 26
Consolidated Statements of Cash Flows (Unaudited) -
Six Months Ended June 30, 2000 and 1999 27
Consolidated Balance Sheets of Citibank, N.A. and
Subsidiaries - June 30, 2000 (Unaudited)
and December 31, 1999 28
Notes to Consolidated Financial Statements (Unaudited) 29
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 1-23
18-20
Item 3. Quantitative and Qualitative Disclosures about Market Risk 33
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 39
Signatures 40
Exhibit Index 41
<PAGE>
CITICORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION
and RESULTS of OPERATIONS
BUSINESS FOCUS
The table below shows the core income (loss) for each of Citicorp's businesses:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions of dollars 2000 1999(1) 2000 1999(1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Consumer
Citibanking North America $ 138 $ 102 $ 275 $ 173
Mortgage Banking 66 52 127 111
North America Cards 308 279 604 557
CitiFinancial 117 78 229 149
---------------------------------------------------------------------
Total North America 629 511 1,235 990
---------------------------------------------------------------------
Europe, Middle East & Africa 92 73 194 141
Asia Pacific 183 108 357 210
Latin America 41 41 111 88
---------------------------------------------------------------------
Total International 316 222 662 439
---------------------------------------------------------------------
e-Consumer (2) (46) (28) (115) (51)
Other (29) (23) (56) (37)
---------------------------------------------------------------------
Total Global Consumer 870 682 1,726 1,341
---------------------------------------------------------------------
Global Corporate Bank
Emerging Markets 370 286 762 601
Global Relationship Banking 259 147 499 334
---------------------------------------------------------------------
Total Global Corporate Bank 629 433 1,261 935
---------------------------------------------------------------------
Global Investment Management and Private Banking
Citibank Asset Management and Global Retirement Services 8 (4) 9 4
Global Private Bank 79 71 160 126
---------------------------------------------------------------------
Total Global Investment Management and Private Banking 87 67 169 130
---------------------------------------------------------------------
Corporate/Other (114) (29) (280) (66)
e-Citi (2) (17) (11) (31) (16)
---------------------------------------------------------------------
Total Corporate/Other (131) (40) (311) (82)
---------------------------------------------------------------------
Investment Activities 215 141 982 213
---------------------------------------------------------------------
Core income 1,670 1,283 3,827 2,537
---------------------------------------------------------------------
Restructuring-related items, after-tax (3) (3) (29) (15) (79)
---------------------------------------------------------------------
Net income $1,667 $1,254 $3,812 $2,458
---------------------------------------------------------------=====================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Previously shown as part of e-Citi and presented in the Global Consumer
segment.
(3) The 2000 second quarter and six months include accelerated depreciation of
$19 million and $31 million, respectively, new charges of $14 million and
a $30 million credit for the reversal of prior charges. The 1999 second
quarter and six months include accelerated depreciation of $29 million and
$79 million, respectively. See Note 6 of Notes to Consolidated Financial
Statements.
--------------------------------------------------------------------------------
<PAGE>
INCOME ANALYSIS
The income analysis reconciles amounts shown in the Consolidated Statements of
Income on page 24 to the basis presented in the business segment discussions.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions of dollars 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues, net of interest expense $7,851 $7,004 $16,551 $13,844
Effect of credit card securitization activity 469 570 988 1,158
---------------------------------------------------------------------
Adjusted revenues, net of interest expense 8,320 7,574 17,539 15,002
---------------------------------------------------------------------
Total operating expenses 4,480 4,204 9,072 8,387
Restructuring-related items (4) (47) (24) (126)
---------------------------------------------------------------------
Adjusted operating expenses 4,476 4,157 9,048 8,261
---------------------------------------------------------------------
Operating margin 3,844 3,417 8,491 6,741
---------------------------------------------------------------------
Provision for credit losses 711 790 1,462 1,519
Effect of credit card securitization activity 469 570 988 1,158
---------------------------------------------------------------------
Adjusted provision for credit losses 1,180 1,360 2,450 2,677
---------------------------------------------------------------------
Core income before income taxes 2,664 2,057 6,041 4,064
Taxes on core income 994 774 2,214 1,527
---------------------------------------------------------------------
Core income 1,670 1,283 3,827 2,537
Restructuring-related items, after-tax (3) (29) (15) (79)
---------------------------------------------------------------------
Net income $1,667 $1,254 $ 3,812 $ 2,458
---------------------------------------------------------------=====================================================================
</TABLE>
Results of Operations
Citicorp reported core income of $1.670 billion in the 2000 second quarter, up
$387 million or 30% from $1.283 billion in the 1999 second quarter. Core income
in the second quarters excluded charges of $3 million in 2000 and $29 million in
1999 for after-tax restructuring-related items (see Note 6 of Notes to the
Consolidated Financial Statements). Core income return on common equity was
23.9% compared to 20.0% a year ago. Net income for the 2000 second quarter was
$1.667 billion, up $413 million or 33% from $1.254 billion for the year-ago
quarter. Core income for the 2000 six months of $3.827 billion was up $1.290
billion or 51% from $2.537 billion in the 1999 six months. Core income in the
six months excluded charges of $15 million in 2000 and $79 million in 1999 for
after-tax restructuring-related items. Core income return on common equity for
the six months was 27.9% compared to 20.2% a year ago. Net income for the 2000
six months was $3.812 billion, up $1.354 billion or 55% from $2.458 billion a
year ago.
Core income growth in the 2000 second quarter and six months was led by Global
Corporate Bank, which improved $196 million or 45% in the quarter and $326
million or 35% in the six months, primarily reflecting strong revenue growth.
Global Relationship Banking (GRB) core income grew $112 million or 76% in the
2000 quarter and $165 million or 49% in the 2000 six months, and Emerging
Markets was up $84 million or 29% and $161 million or 27% in the 2000 quarter
and six months, respectively. Global Consumer, which was up $188 million or 28%
and $385 million or 29% in the 2000 quarter and six months, reflected growth in
virtually all businesses. In the 2000 second quarter, North America core income
increased $118 million or 23% from 1999, reflecting the continued strong
performance of CitiFinancial, up $39 million or 50%, Citibanking North America,
up $36 million or 35%, North America Cards, up $29 million or 10%, and Mortgage
Banking, up $14 million or 27%. International businesses core income in the 2000
second quarter grew $94 million or 42% from the 1999 second quarter, marked by
an especially strong performance in Asia Pacific, up $75 million or 69%. Global
Consumer growth in the 2000 six months was led by North America, up $245 million
or 25% from 1999, with Citibanking North America up $102 million or 59%,
CitiFinancial up $80 million or 54%, North America Cards up $47 million or 8%,
and Mortgage Banking, up $16 million or 14%. Also, International businesses were
up $223 million or 51%, with Asia Pacific up $147 million or 70%, Europe, Middle
East, and Africa up $53 million or 38% and Latin America up $23 million or 26%
in the 2000 six-month period. Global Investment Management and Private Banking
core income grew $20 million and $39 million in the 2000 quarter and six months,
both up 30%, primarily reflecting acquisitions in the Global Retirement Services
business and volume-related growth in customer revenue, partially offset by
increased business development expenses. Investment Activities core income was
up $74 million and $769 million from the 1999 second quarter and six months,
primarily reflecting strong venture capital results and higher levels of
securities transactions. The decreases in Corporate/Other included higher
treasury costs and, in the six-month period, a contribution made to the
Citigroup Foundation.
Adjusted revenues, net of interest expense, of $8.3 billion and $17.5 billion in
the 2000 second quarter and six months were up $746 million or 10% and $2.5
billion or 17% from the 1999 periods. Global Corporate Bank revenues of $2.5
billion in the 2000 quarter and $5.0 billion in the 2000 six months were up $405
million or 19% and $593 million or 13% from 1999. GRB improved $231 million or
22% in the 2000 quarter and $324 million or 15% in the 2000 six months,
primarily due to growth in transaction services, equity derivatives and
structured products, and Emerging Markets was up $174 million or 16% in the 2000
second quarter and $269 million or 12% in the 2000 six months, reflecting
broad-based growth in transaction services and structured products. Global
Consumer revenues were up $231 million or 5% in the 2000 quarter to $5.0
billion, and were up $705 million or 8% in the six months to $10.1 billion.
North America revenues grew $147 million or 5% and $392 million or 6% in the
2000 quarter and six months, led by
2
<PAGE>
CitiFinancial, up $78 million or 20% and $179 million or 24%, primarily due to
strong growth in receivables, and Citibanking North America, up $57 million or
11% and $129 million or 13%, reflecting higher customer deposit spreads and
volumes, and higher investment product sales, partially offset by lower loan
revenues. International revenues in the 2000 second quarter and six months were
up $130 million or 8% and $383 million or 12%, respectively, primarily due to
growth in Asia Pacific. Global Investment Management and Private Banking
revenues of $502 million in the quarter and $979 million in the six months were
up $119 million or 31% and $220 million or 29% from the 1999 periods, primarily
from acquisitions and growth in both assets and client business volumes under
management. Revenues in Investment Activities increased $126 million and $1.2
billion from the 1999 second quarter and six months, respectively, primarily
reflecting increases in venture capital results and securities transactions, and
in the 2000 six months, were partially offset by writedowns in the refinancing
portfolio.
Net interest revenue, as shown in the Consolidated Statements of Income, rose to
$3.8 billion in the 2000 second quarter and $7.5 billion in the 2000 six months,
up $165 million or 5% and $292 million or 4%, respectively, from the comparable
1999 periods, reflecting business volume growth in most markets, partially
offset by spread compression. Net interest revenue, adjusted for the effect of
credit card securitization, of $4.6 billion and $9.4 billion in the 2000 quarter
and 2000 six months, was essentially unchanged from the comparable 1999 periods.
Fees and commissions revenues of $2.3 billion in the 2000 quarter and $4.5
billion in the 2000 six months, were up $484 million or 26% and $944 million or
27% from the 1999 periods, primarily as a result of volume-related growth in
assets under fee-based management, higher investment product sales, and
increased card related fees. Aggregate trading and foreign exchange revenues of
$709 million in the 2000 quarter and $1.5 billion in the 2000 six months
increased $203 million or 40% and $202 million or 16%, respectively, reflecting
strong results in GRB in both periods, partially offset by lower results in
Emerging Markets. Securities transactions revenues increased $101 million to
$252 million in the 2000 quarter and $123 million to $297 million in the 2000
six months compared to 1999, reflecting increased gains on investments,
partially offset in the six-month period by writedowns in the refinancing
portfolio. Other revenue of $746 million in the 2000 second quarter, was down
$106 million from the 1999 period, reflecting lower net asset gains and credit
card securitization revenues, but was up $1.1 billion to $2.8 billion in the
2000 six months, primarily reflecting higher venture capital results.
Adjusted operating expenses of $4.5 billion and $9.0 billion for the 2000 second
quarter and six months, which exclude restructuring-related items, were up $319
million or 8% in the 2000 quarter and $787 million or 10% in the 2000 six months
compared to 1999. Global Consumer expenses increased 6% in the 2000 second
quarter and 8% in the 2000 six months, reflecting an increase in sales-related
expenses, higher business volume and expansion initiatives, and charges related
to the termination of certain contracts and initiatives at e-Consumer. Global
Investment Management and Private Banking expenses increased 31% and 26% from
the year-ago quarter and six-month periods, primarily reflecting acquisitions in
the Global Retirement Services business and higher costs associated with the
continued expansion of sales and marketing efforts and investments in
technology. Global Corporate Bank expenses were up 7% in the 2000 quarter and 3%
in the 2000 six months compared to 1999, primarily attributable to increased
business volumes and costs associated with newly acquired businesses, and were
partially offset by lower year 2000 expenses in the GRB. Corporate/Other
expenses were unchanged in the 2000 quarter and increased $172 million in the
2000 six months, primarily reflecting a $108 million pretax expense in the
year-to-date period (which had minimal impact on Citicorp's earnings after
related tax benefits and investment gains) for the contribution of appreciated
venture capital securities to the Citigroup Foundation, and increases in certain
technology and other unallocated corporate costs.
Adjusted provisions for credit losses were $1.2 billion and $2.5 billion in the
2000 second quarter and six months, down $180 million or 13% in the quarter and
$227 million or 8% in the six months from the 1999 periods. Global Consumer
managed net credit losses were $1.064 billion and the related loss ratio was
2.06% in the 2000 second quarter, down from $1.147 billion and 2.30% in the
preceding quarter and $1.201 billion and 2.60% a year ago. The managed consumer
loan delinquency ratio (90 days or more past due) at June 30, 2000 decreased to
1.67% from 1.87% at March 31, 2000 and 2.00% a year ago. Global Corporate Bank
provision for credit losses reflected increases of $20 million in the 2000
second quarter to $131 million and $32 million in the 2000 six months to $255
million from the 1999 periods. The provision for credit losses as shown in the
Consolidated Statements of Income, which excludes credit card securitization
activity, was $711 million in the 2000 quarter, and $1.5 billion in the 2000 six
months, down $79 million and $57 million, respectively, from the 1999 periods.
Total capital (Tier 1 and Tier 2) was $41.5 billion or 11.95% of net
risk-adjusted assets, and Tier 1 capital was $27.9 billion or 8.02% at June 30,
2000, compared to $38.4 billion or 12.00% and $25.8 billion or 8.07%,
respectively, at March 31, 2000.
3
<PAGE>
GLOBAL CONSUMER
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $4,515 $4,183 8 $ 9,088 $8,213 11
Effect of credit card securitization
activity 469 570 (18) 988 1,158 (15)
------------------------------- -------------------------------
Adjusted revenues,
net of interest expense 4,984 4,753 5 10,076 9,371 8
------------------------------- -------------------------------
Adjusted operating expenses (2) 2,549 2,406 6 5,154 4,765 8
------------------------------- -------------------------------
Provision for credit losses 577 677 (15) 1,182 1,286 (8)
Effect of credit card securitization
activity 469 570 (18) 988 1,158 (15)
------------------------------- -------------------------------
Adjusted provision for credit losses 1,046 1,247 (16) 2,170 2,444 (11)
------------------------------- -------------------------------
Core income before taxes 1,389 1,100 26 2,752 2,162 27
Income taxes 519 418 24 1,026 821 25
------------------------------- -------------------------------
Core income 870 682 28 1,726 1,341 29
Restructuring-related items, after-tax 10 (18) NM 6 (56) NM
------------------------------- -------------------------------
Net income $ 880 $ 664 33 $ 1,732 $1,285 35
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $172 $159 8 $169 $157 8
Return on assets 2.06% 1.68% 2.06% 1.65%
------------------------------------------==========================================================================================
Excluding restructuring-related items
Return on assets 2.03% 1.72% 2.05% 1.72%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Global Consumer -- which provides banking, lending, and investment services,
including credit and charge cards, to customers around the world -- reported
core income of $870 million and $1.726 billion in the 2000 second quarter and
six months, up $188 million or 28% and $385 million or 29% from the 1999
periods, reflecting growth in virtually all businesses. North America core
income increased $118 million or 23% in the 2000 second quarter and $245 million
or 25% in the six months reflecting strong performance across all businesses. In
the International businesses, core income grew $94 million or 42% in the 2000
second quarter and $223 million or 51% in the 2000 six months, marked by strong
performance in Asia Pacific and Europe, Middle East & Africa. In Latin America,
core income was unchanged in the quarter, but was up $23 million or 26% in the
six months. Net income of $880 million and $1.732 billion in the 2000 second
quarter and six months included restructuring-related credits of $10 million
($16 million pretax) and $6 million ($10 million pretax), respectively. Net
income of $664 million and $1.285 billion in the 1999 second quarter and six
months included restructuring-related items of $18 million ($30 million pretax)
and $56 million ($91 million pretax), respectively.
North America
Citibanking North America
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $574 $517 11 $1,152 $1,023 13
Adjusted operating expenses (2) 335 324 3 674 684 (1)
Provision for credit losses 7 15 (53) 16 38 (58)
------------------------------- -------------------------------
Core income before taxes 232 178 30 462 301 53
Income taxes 94 76 24 187 128 46
------------------------------- -------------------------------
Core income 138 102 35 275 173 59
Restructuring-related items, after-tax 8 (5) NM 8 (19) NM
------------------------------- -------------------------------
Net income $146 $ 97 51 $ 283 $ 154 84
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $9 $10 (10) $9 $10 (10)
Return on assets 6.52% 3.89% 6.32% 3.11%
------------------------------------------==========================================================================================
Excluding restructuring-related items
Return on assets 6.17% 4.09% 6.14% 3.49%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Citibanking North America -- which delivers banking, lending, and investment
services to customers through Citibank's branches and electronic delivery
systems -- reported core income of $138 million and $275 million in the 2000
second quarter and six months, up $36 million or 35% and $102 million or 59%
from the 1999 periods, primarily driven by revenue growth. Net income of $146
million and $283 million in the 2000 second quarter and six months included
restructuring-related credits of $8 million ($14 million
4
<PAGE>
pretax) in both periods. Net income of $97 million and $154 million in the 1999
second quarter and six months included restructuring-related charges of $5
million ($9 million pretax) and $19 million ($31 million pretax), respectively.
As shown in the following table, Citibanking grew accounts and customer deposits
from 1999. Loans declined from a year ago as loan repayments exceeded loan
originations.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 6.4 6.0 7 6.4 6.0 7
Average customer deposits $44.3 $42.2 5 $43.9 $41.9 5
Average loans $ 7.1 $ 7.6 (7) $ 7.2 $ 7.6 (5)
------------------------------------------==========================================================================================
</TABLE>
Revenues, net of interest expense, of $574 million and $1.152 billion in the
2000 second quarter and six months increased $57 million or 11% and $129 million
or 13% from the 1999 periods reflecting higher customer deposit spreads and
volumes and higher investment product sales, and were partially offset by lower
loan revenues. Investment product fees and commissions increased by 22% and 37%
from the 1999 second quarter and six months. Adjusted operating expenses
increased $11 million or 3% in the quarter and declined $10 million or 1% in the
six months reflecting higher variable compensation due to an increased sales
force and higher investment product sales, partially offset by lower marketing
expenses, and in the six months reflecting reduced fixed costs.
The provision for credit losses declined to $7 million and $16 million in the
2000 second quarter and six months from $15 million and $38 million in the 1999
periods. The net credit loss ratio of 0.86% in the 2000 second quarter declined
from 0.98% in the 2000 first quarter and 1.21% a year ago. Loans delinquent 90
days or more of $33 million or 0.46% of loans at June 30, 2000 continued to
improve from $48 million or 0.67% at March 31, 2000 and $92 million or 1.22% a
year ago. The declines in the provision for credit losses and delinquencies
reflect continued improvement in the portfolio and a decline in loan volumes.
Mortgage Banking
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $206 $183 13 $410 $352 16
Total operating expenses 100 89 12 196 155 26
(Benefit) provision for credit losses (4) 5 NM 1 8 (88)
------------------------------- -------------------------------
Income before taxes 110 89 24 213 189 13
Income taxes 44 37 19 86 78 10
------------------------------- -------------------------------
Net income $ 66 $ 52 27 $127 $111 14
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $35 $29 21 $34 $29 17
Return on assets 0.76% 0.72% 0.75% 0.77%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
NM Not meaningful
--------------------------------------------------------------------------------
Mortgage Banking -- which originates and services mortgages and student loans
for customers across North America -- reported net income of $66 million and
$127 million in the 2000 second quarter and six months, up $14 million or 27%
and $16 million or 14% from the 1999 periods, reflecting growth in both the
mortgage and student loan businesses, including the effect of the April 1999
acquisition of the principal operating assets and certain liabilities of Source
One Mortgage Services Corporation (Source One).
As shown in the following table, accounts and loans increased from the 1999
periods reflecting growth in both student loans and mortgages. Accounts reflect
growth in student loans and serviced mortgage accounts. Average loans also
reflect student loan growth and an increase in on-balance sheet mortgages.
Mortgage originations declined as a result of the higher interest rate
environment; however, a larger proportion of the originations are at variable
interest rates which are typically held on-balance sheet rather than
securitized.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) (1) 3.9 3.0 30 3.9 3.0 30
Average loans (1) $33.1 $27.3 21 $32.0 $27.0 19
Mortgage originations $ 4.8 $ 4.9 (2) $ 8.2 $ 8.7 (6)
------------------------------------------==========================================================================================
</TABLE>
(1) Includes student loans.
--------------------------------------------------------------------------------
Revenues, net of interest expense, of $206 million and $410 million in the 2000
second quarter and six months grew $23 million or 13% and $58 million or 16%
from the 1999 periods, reflecting higher mortgage servicing revenues, offset by
lower securitization gains. Revenue increases also reflect the effect of Source
One and growth in the student loan portfolio. Operating expenses increased $11
million or 12% and $41 million or 26% from the 1999 periods primarily due to
Source One.
5
<PAGE>
The (benefit) provision for credit losses of ($4) million and $1 million in the
2000 second quarter and six months declined from $5 million and $8 million in
the 1999 periods. The net credit loss ratio of 0.05% in the 2000 second quarter
declined from 0.14% in the 2000 first quarter and 0.17% a year ago, reflecting
improvement in the mortgage portfolio. Loans delinquent 90 days or more were
$709 million or 1.98% of loans at June 30, 2000, compared with $719 million or
2.29% at March 31, 2000 and $575 million or 2.09% a year ago. The increase in
delinquent loans from a year ago reflects higher student loan volumes and a
statutory increase in the length of time Citicorp must hold delinquent
government-guaranteed student loans prior to submitting a claim under the
government guarantee.
North America Cards
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $1,500 $1,410 6 $2,979 $2,783 7
Effect of credit card securitization
activity 469 570 (18) 988 1,158 (15)
------------------------------- -------------------------------
Adjusted revenues,
net of interest expense 1,969 1,980 (1) 3,967 3,941 1
Adjusted operating expenses (2) 720 712 1 1,450 1,422 2
Adjusted provision for credit losses (3) 758 825 (8) 1,557 1,636 (5)
------------------------------- -------------------------------
Core income before taxes 491 443 11 960 883 9
Income taxes 183 164 12 356 326 9
------------------------------- -------------------------------
Core income 308 279 10 604 557 8
Restructuring-related items, after-tax 4 - NM 4 - NM
------------------------------- -------------------------------
Net income $ 312 $ 279 12 $ 608 $ 557 9
------------------------------------------==========================================================================================
Average assets (in billions of dollars)
(4) $35 $28 25 $33 $29 14
Return on assets 3.59% 4.00% 3.71% 3.87%
------------------------------------------==========================================================================================
Excluding restructuring-related items
Return on assets (5) 3.54% 4.00% 3.68% 3.87%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
(3) Adjusted for the effect of credit card securitization.
(4) Adjusted for the effect of credit card securitization, managed average
assets were $81 billion and $80 billion in the 2000 second quarter and six
months, respectively, compared to $75 billion and $74 billion in the 1999
second quarter and six months, respectively.
(5) Adjusted for the effect of credit card securitization, the return on
managed assets, excluding restructuring-related items, was 1.53% and 1.49%
in the second quarters of 2000 and 1999 and 1.52% for the six months of
both 2000 and 1999.
NM Not meaningful
--------------------------------------------------------------------------------
North America Cards -- U.S. bankcards, Canada bankcards, and North America
Diners Club -- reported core income of $308 million and $604 million in the 2000
second quarter and six months, up $29 million or 10% and $47 million or 8% from
the 1999 periods, principally reflecting an increase in the U.S. bankcards
business. Net income of $312 million and $608 million in the 2000 second quarter
and six months included restructuring-related credits of $4 million ($5 million
pretax) in both periods.
Risk adjusted margin is a measure of profitability calculated as adjusted
revenues less managed net credit losses as a percentage of average managed
loans, consistent with the goal of matching the revenues generated by the loan
portfolio with the credit risk undertaken. As shown in the following table, U.S.
bankcards risk adjusted margin of 6.02% and 6.07% in the 2000 second quarter and
six months declined 19 basis points and 26 basis points from the 1999 periods,
respectively, reflecting lower spreads offset by credit improvements and an
increase in non-interest revenues, primarily interchange fees.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In billions of dollars 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Risk adjusted revenues (1) $1.125 $1.076 $2.226 2.147
Risk adjusted margin % (2) 6.02% 6.21% 6.07% 6.33%
---------------------------------------------------------------=====================================================================
</TABLE>
(1) Adjusted revenues less managed net credit losses.
(2) Risk adjusted revenues as a percentage of average managed loans.
--------------------------------------------------------------------------------
Adjusted revenues, net of interest expense, of $1.969 billion and $3.967 billion
in the 2000 second quarter and six months declined $11 million or 1% from the
1999 second quarter, but increased $26 million or 1% from the 1999 six months as
higher interchange fee revenues from sales volume growth and increased fees from
cardmember enhancement services were offset by lower spreads. Spread compression
in the portfolio principally reflects changes in portfolio mix, including an
increased percentage of the portfolio priced at low introductory rates, and
higher funding costs due to increased interest rates. Spread compression may
continue in 2000 as a result of a higher interest rate environment and continued
competitive pressures. This paragraph contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" on page 18.
6
<PAGE>
As shown in the following table, on a managed basis, the U.S. bankcard portfolio
experienced a 19% growth in sales volume and a 13% growth in receivables in the
2000 second quarter. Account growth of 2% from the 1999 second quarter reflects
new account acquisitions offset by cardmember attrition.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 42.1 41.1 2 42.1 41.1 2
Total sales $48.4 $40.8 19 $90.7 $77.6 17
End-of-period managed receivables $79.1 $70.3 13 $79.1 $70.3 13
------------------------------------------==========================================================================================
</TABLE>
The adjusted provision for credit losses was $758 million and $1.557 billion in
the 2000 second quarter and six months, down from $825 million and $1.636
billion in the 1999 periods. U.S. bankcards managed net credit losses in the
2000 second quarter were $740 million and the related loss ratio was 3.96%, down
from $782 million and 4.35% in the 2000 first quarter and $803 million and 4.63%
in the 1999 second quarter. U.S. bankcards managed loans delinquent 90 days or
more were $922 million or 1.18% of loans at June 30, 2000, compared with $1.058
billion or 1.45% at March 31, 2000 and $954 million or 1.36% at June 30, 1999.
The improvement in the net credit loss ratio from a year ago reflects stable
industry-wide bankruptcy trends and continued credit risk management
initiatives.
CitiFinancial
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $474 $396 20 $936 $757 24
Adjusted operating expenses (2) 209 174 20 418 335 25
Provision for credit losses 80 97 (18) 156 184 (15)
------------------------------- -------------------------------
Core income before taxes 185 125 48 362 238 52
Income taxes 68 47 45 133 89 49
------------------------------- -------------------------------
Core income 117 78 50 229 149 54
Restructuring-related items, after-tax - - - - (1) NM
------------------------------- -------------------------------
Net income $117 $ 78 50 $229 $148 55
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $19 $15 27 $19 $15 27
Return on assets 2.48% 2.09% 2.42% 1.99%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
CitiFinancial -- which provides community based lending services through its
branch network and through cross-selling initiatives with other Citigroup
businesses -- reported core income of $117 million and $229 million in the 2000
second quarter and six months, up $39 million or 50% and $80 million or 54% from
the 1999 periods, reflecting lower credit costs and strong business volume
growth.
As shown in the following table, receivables grew 23% from the 1999 second
quarter due to higher volumes at CitiFinancial branches and cross selling of
products through other Citigroup distribution channels. The average net interest
margin on receivables of 8.16% in the 2000 second quarter and 8.26% in the 2000
six months declined 83 and 66 basis points, respectively, from the 1999 periods
reflecting a continued shift in the portfolio mix toward lower yielding real
estate loans and higher funding costs due to increased interest rates. At June
30, 2000, the portfolio consisted of 59% real estate-secured loans, 34% personal
loans, and 7% sales finance and other compared with 56%, 36%, and 8%,
respectively, at June 30, 1999.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- Increase/ ------------------------------- Increase/
2000 1999 Decrease 2000 1999 Decrease
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
End-of-period receivables (in billions) (1) $16.7 $13.6 23% $16.7 $13.6 23%
Average net interest margin % 8.16% 8.99% (83) bps 8.26% 8.92% (66) bps
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes $0.6 billion of loans held for sale in the 2000 periods.
--------------------------------------------------------------------------------
Revenues, net of interest expense, of $474 million and $936 million in the 2000
second quarter and six months increased $78 million or 20% and $179 million or
24% from the 1999 periods. Adjusted operating expenses of $209 million and $418
million in the 2000 second quarter and six months grew $35 million or 20% and
$83 million or 25% from the 1999 periods. The increase in both revenues and
expenses principally reflects strong growth in receivables.
The provision for credit losses was $80 million and $156 million in the 2000
second quarter and six months, down from $97 million and $184 million in the
1999 periods. Net credit losses in the 2000 second quarter were $80 million and
the related loss ratio was 1.93%, compared with $76 million and 1.92% in the
2000 first quarter and $70 million and 2.14% a year ago. The 2000 first and
7
<PAGE>
second quarters net credit loss ratios included a benefit of approximately 27
basis points in each period, related to changes in the write-off policy for
certain bankrupt accounts. Loans delinquent 90 days or more were $229 million or
1.32% of loans at June 30, 2000, compared with $216 million or 1.33% at March
31, 2000 and $172 million or 1.26% a year ago. The increase in delinquencies
from a year ago reflects the impact of previous acquisitions.
International Consumer
Europe, Middle East & Africa
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $576 $563 2 $1,169 $1,124 4
Adjusted operating expenses (2) 365 372 (2) 724 748 (3)
Provision for credit losses 64 74 (14) 135 151 (11)
------------------------------- -------------------------------
Core income before taxes 147 117 26 310 225 38
Income taxes 55 44 25 116 84 38
------------------------------- -------------------------------
Core income 92 73 26 194 141 38
Restructuring-related items, after-tax 7 (3) NM 7 (9) NM
------------------------------- -------------------------------
Net income $ 99 $ 70 41 $ 201 $ 132 52
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $21 $22 (5) $22 $22 -
Return on assets 1.90% 1.28% 1.84% 1.21%
------------------------------------------==========================================================================================
Excluding restructuring-related items
Return on assets 1.76% 1.33% 1.77% 1.29%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Europe, Middle East & Africa (EMEA -- including India and Pakistan) -- which
provides banking, lending, and investment services, including credit and charge
cards, to customers throughout the region -- reported core income of $92 million
and $194 million in the 2000 second quarter and six months, up $19 million or
26% and $53 million or 38% from the 1999 periods, reflecting growth across the
region, particularly in Germany and India. Net income of $99 million and $201
million in the 2000 second quarter and six months included restructuring-related
credits of $7 million ($11 million pretax) in both periods. Net income of $70
million and $132 million in the 1999 second quarter and six months included
restructuring-related charges of $3 million ($5 million pretax) and $9 million
($15 million pretax), respectively.
The net effects of foreign currency translation reduced core income in the 2000
second quarter and six months by approximately $16 million and $27 million from
the 1999 second quarter and six months and reduced revenue growth by
approximately 12% and expense growth by approximately 9% in both the 2000 second
quarter and six months compared to the comparable periods of 1999.
As shown in the following table, EMEA reported 9% account growth from a year ago
primarily reflecting loan growth, particularly credit cards. However, loan and
customer deposit growth was reduced by the effect of foreign currency
translation.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 11.7 10.7 9 11.7 10.7 9
Average customer deposits $16.1 $17.1 (6) $16.3 $17.4 (6)
Average loans $16.5 $16.4 1 $16.7 $16.6 1
------------------------------------------==========================================================================================
</TABLE>
Revenues, net of interest expense, of $576 million and $1.169 billion in the
2000 second quarter and six months grew $13 million or 2% and $45 million or 4%
from the 1999 periods, reflecting loan growth, improved deposit spreads, and
higher investment product fees, partially offset by the effect of foreign
currency translation. Adjusted operating expenses of $365 million and $724
million in the 2000 second quarter and six months were down $7 million or 2% and
$24 million or 3% from the 1999 periods as costs associated with higher business
volumes and franchise growth in Central and Eastern Europe were more than offset
by the effect of foreign currency translation.
The provision for credit losses was $64 million and $135 million in the 2000
second quarter and six months, down from $74 million and $151 million in the
1999 periods. Net credit losses in the 2000 second quarter were $65 million and
the related loss ratio was 1.57%, down from $71 million and 1.70% in the 2000
first quarter and $70 million and 1.71% a year ago. Loans delinquent 90 days or
more were $868 million or 5.09% of loans at June 30, 2000, down from $875
million or 5.26% at March 31, 2000 and $899 million or 5.46% a year ago. The
declines in the net credit loss ratio and delinquency ratio reflect the stable
economic conditions across the region.
8
<PAGE>
Asia Pacific
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $691 $543 27 $1,374 $1,060 30
Adjusted operating expenses (2) 342 281 22 681 547 24
Provision for credit losses 65 89 (27) 139 177 (21)
------------------------------- -------------------------------
Core income before taxes 284 173 64 554 336 65
Income taxes 101 65 55 197 126 56
------------------------------- -------------------------------
Core income 183 108 69 357 210 70
Restructuring-related items, after-tax (1) (2) (50) (4) (9) (56)
------------------------------- -------------------------------
Net income $182 $106 72 $ 353 $ 201 76
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $33 $30 10 $33 $30 10
Return on assets 2.22% 1.42% 2.15% 1.35%
------------------------------------------==========================================================================================
Excluding restructuring-related items
Return on assets 2.23% 1.44% 2.18% 1.41%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
--------------------------------------------------------------------------------
Asia Pacific (including Japan and Australia) -- which provides banking, lending,
and investment services, including credit and charge cards, to customers
throughout the region -- reported core income of $183 million and $357 million
in the 2000 second quarter and six months, up $75 million or 69% and $147
million or 70% from the 1999 periods, reflecting business growth across the
region. Net income of $182 million and $353 million in the 2000 second quarter
and six months included restructuring-related items of $1 million ($2 million
pretax) and $4 million ($6 million pretax), respectively. Net income of $106
million and $201 million in the 1999 second quarter and six months included
restructuring-related items of $2 million ($4 million pretax) and $9 million
($15 million pretax), respectively.
As shown in the following table, Asia Pacific experienced double-digit growth in
accounts, customer deposits, and loans when compared to the 1999 second quarter
and six months, reflecting significant increases in Japan, growth in the Cards
business across the region, and economic stabilization in most countries. The
growth in Japan includes the Diners Club acquisition in the 2000 first quarter
which added approximately $0.5 billion in loans and 0.6 million accounts.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 10.1 8.6 17 10.1 8.6 17
Average customer deposits $47.0 $40.6 16 $46.7 $40.3 16
Average loans $25.4 $22.9 11 $25.3 $22.5 12
------------------------------------------==========================================================================================
</TABLE>
Revenues, net of interest expense, of $691 million and $1.374 billion in the
2000 second quarter and six months, increased $148 million or 27% and $314
million or 30% from the 1999 periods, reflecting growth in customer deposits and
loans, higher investment product sales, and improved spreads. Adjusted operating
expenses were up $61 million or 22% and $134 million or 24% from the 1999 second
quarter and six months, reflecting increased variable compensation, including
higher investment product sales commissions, and increased marketing. Revenue
and expense increases also reflect the acquisition of Diners Club Japan.
The provision for credit losses was $65 million and $139 million in the 2000
second quarter and six months, respectively, down from $89 million and $177
million in the 1999 periods. Net credit losses in the 2000 second quarter were
$64 million and the related loss ratio was 1.01%, down from $74 million and
1.19% in the 2000 first quarter and $76 million and 1.33% a year ago. Loans
delinquent 90 days or more were $405 million or 1.56% of loans at June 30, 2000,
down from $443 million or 1.73% at March 31, 2000 and $509 million or 2.17% a
year ago. The declines in the provision, the net credit loss ratio and
delinquencies from a year ago reflect economic stabilization in most countries,
however, net credit losses increased in Taiwan.
9
<PAGE>
Latin America
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $466 $497 (6) $985 $961 2
Adjusted operating expenses (2) 328 299 10 652 590 11
Provision for credit losses 76 135 (44) 166 236 (30)
------------------------------- -------------------------------
Core income before taxes 62 63 (2) 167 135 24
Income taxes 21 22 (5) 56 47 19
------------------------------- -------------------------------
Core income 41 41 - 111 88 26
Restructuring-related items, after-tax (10) (8) 25 (11) (18) (39)
------------------------------- -------------------------------
Net income $ 31 $ 33 (6) $100 $ 70 43
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $12 $15 (20) $13 $15 (13)
Return on assets 1.04% 0.88% 1.55% 0.94%
------------------------------------------==========================================================================================
Excluding restructuring-related items
Return on assets 1.37% 1.10% 1.72% 1.18%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
--------------------------------------------------------------------------------
Latin America -- which provides banking, lending, and investment services,
including credit and charge cards, to customers throughout the region --
reported core income of $41 million and $111 million in the 2000 second quarter
and six months, unchanged from the 1999 second quarter, but up $23 million or
26% from the 1999 six months, reflecting lower credit costs and an increase in
earnings from Credicard, a 33%-owned Brazilian Card affiliate, and offset by
reduced interest income related to Confia, a Mexican bank acquired in August
1998, and lower business volumes in certain countries. Core income in the 2000
six months also reflects a 2000 first quarter gain related to the sale of an
auto loan portfolio in Puerto Rico. Net income of $31 million and $100 million
in the 2000 second quarter and six months included restructuring-related items
of $10 million ($12 million pretax) and $11 million ($14 million pretax),
respectively. Net income of $33 million and $70 million in the 1999 second
quarter and six months included restructuring-related items of $8 million ($12
million pretax) and $18 million ($28 million pretax), respectively.
The net effects of foreign currency translation reduced core income in the 2000
second quarter and six months by approximately $4 million and $3 million from
the 1999 second quarter and six months and reduced revenues by approximately 3%
and 2%, and expenses by approximately 2% and 1% in the 2000 second quarter and
six months, respectively, compared to 1999.
As shown in the following table, Latin America experienced account growth,
including the effect of recent acquisitions. Average loans declined 10% and 6%
from the 1999 second quarter and six months primarily reflecting the auto loan
portfolio sale in Puerto Rico.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % -------------------------------
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 8.4 8.0 5 8.4 8.0 5
Average customer deposits $13.7 $13.8 (1) $13.7 $13.3 3
Average loans $ 7.2 $ 8.0 (10) $ 7.4 $ 7.9 (6)
------------------------------------------==========================================================================================
</TABLE>
Revenues, net of interest expense, of $466 million and $985 million in the 2000
second quarter and six months were down $31 million or 6% from the 1999 second
quarter, but up $24 million or 2% from the 1999 six months. Revenues in both the
2000 quarter and six months reflects increased earnings from Credicard and is
offset by reduced interest revenue from Confia and business volume declines in
certain countries, including the effect of the 2000 first quarter auto portfolio
sale in Puerto Rico. Revenues in the six months include the gain related to the
auto portfolio sale in Puerto Rico. Revenue in the six months include the gain
related to the auto portfolio sale in Puerto Rico. Adjusted operating expenses
grew $29 million or 10% and $62 million or 11% from the 1999 second quarter and
six months reflecting costs associated with new business initiatives and
strategy changes in certain countries. In the 2000 six months, both revenue and
expense increases reflect recent acquisitions.
The provision for credit losses was $76 million and $166 million in the 2000
second quarter and six months, down from $135 million and $236 million in the
1999 periods. Net credit losses in the 2000 second quarter were $76 million and
the related loss ratio was 4.25%, down from $90 million and 4.77% in the 2000
first quarter and $124 million and 6.17% a year ago. Loans delinquent 90 days or
more were $323 million or 4.52% of loans at June 30, 2000 compared with $333
million or 4.58% at March 31, 2000 and $346 million or 4.32% a year ago. The
increase in the delinquency ratio from a year ago primarily reflects the effect
of the 2000 first quarter sale of the auto loan portfolio in Puerto Rico.
10
<PAGE>
e-Consumer (1)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 28 $ 23 22 $ 59 $ 47 26
Total operating expenses 103 69 49 244 130 88
------------------------------- -------------------------------
Loss before tax benefits (75) (46) (63) (185) (83) NM
Income tax benefits (29) (18) (61) (70) (32) NM
------------------------------- -------------------------------
Net loss ($46) ($28) (64) ($115) ($51) NM
------------------------------------------==========================================================================================
</TABLE>
(1) Includes the portion of Internet development directly related to
Citicorp's consumer businesses, previously shown as a part of e-Citi.
NM Not meaningful
--------------------------------------------------------------------------------
e-Consumer -- the business responsible for developing and implementing Global
Consumer Internet financial services products and e-commerce solutions --
reported net losses of $46 million and $115 million in the 2000 second quarter
and six months, up from $28 million and $51 million in the 1999 periods,
reflecting continued investment in Internet financial services and charges
related to the termination of certain contracts and other initiatives.
Other Consumer
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ - $51 NM $24 $106 (77)
Adjusted operating expenses (2) 47 86 (45) 115 154 (25)
Provision for credit losses - 7 NM - 14 NM
------------------------------- -------------------------------
Loss before tax benefits (47) (42) (12) (91) (62) (47)
Income tax benefits (18) (19) 5 (35) (25) (40)
------------------------------- -------------------------------
Loss (29) (23) (26) (56) (37) (51)
Restructuring-related items, after-tax 2 - NM 2 - NM
------------------------------- -------------------------------
Net loss ($27) ($23) (17) ($54) ($ 37) (46)
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Other Consumer -- which includes certain treasury and insurance operations and
global marketing and other programs -- reported net losses of $27 million and
$54 million in the 2000 second quarter and six months, up from $23 million and
$37 million in the 1999 periods. The increase in the net loss compared to a year
ago reflects lower treasury earnings, offset by reduced staff levels and lower
marketing costs. The increase in the six-months net loss also reflects costs
associated with the termination of certain global distribution initiatives. 1999
second quarter and six months revenue, expense, and provision for credit losses
include the results of the private label cards business that was discontinued in
early 2000.
Consumer Portfolio Review
In the consumer portfolio, credit loss experience is often expressed in terms of
annualized net credit losses as a percentage of average loans. Pricing and
credit policies reflect the loss experience of each particular product. Consumer
loans are generally written off no later than a predetermined number of days
past due on a contractual basis, or earlier in the event of bankruptcy. The
number of days is set at an appropriate level according to loan product and
country.
11
<PAGE>
The following table summarizes delinquency and net credit loss experience in
both the managed and on-balance sheet loan portfolios in terms of loans 90 days
or more past due, net credit losses, and as a percentage of related loans.
Consumer Loan Delinquency Amounts, Net Credit Losses, and Ratios
<TABLE>
<CAPTION>
Total Average
Loans 90 Days or More Past Due (1) Loans Net Credit Losses (1)
-------------------------------------------------------------------------------------------------
In millions of dollars, June 30, June 30, Mar. 31, June 30, 2nd Qtr. 2nd Qtr. 1st Qtr. 2nd Qtr.
except loan amounts in billions 2000 2000 2000 1999 2000 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Citibanking North America $ 7.2 $ 33 $ 48 $ 92 $ 7.1 $ 15 $ 17 $ 23
Ratio 0.46% 0.67% 1.22% 0.86% 0.98% 1.21%
Mortgage Banking 35.8 709 719 575 33.1 4 11 11
Ratio 1.98% 2.29% 2.09% 0.05% 0.14% 0.17%
U.S. Bankcards 78.4 922 1,058 954 75.2 740 782 803
Ratio 1.18% 1.45% 1.36% 3.96% 4.35% 4.63%
Other North America Cards 2.4 31 29 24 2.3 17 16 16
Ratio 1.24% 1.21% 1.08% 3.03% 2.98% 2.99%
CitiFinancial 17.3 229 216 172 16.7 80 76 70
Ratio 1.32% 1.33% 1.26% 1.93% 1.92% 2.14%
Europe, Middle East & Africa 17.0 868 875 899 16.5 65 71 70
Ratio 5.09% 5.26% 5.46% 1.57% 1.70% 1.71%
Asia Pacific 26.0 405 443 509 25.4 64 74 76
Ratio 1.56% 1.73% 2.17% 1.01% 1.19% 1.33%
Latin America 7.1 323 333 346 7.2 76 90 124
Ratio 4.52% 4.58% 4.32% 4.25% 4.77% 6.17%
Global Private Bank (2) 24.5 78 87 162 23.8 3 10 2
Ratio 0.32% 0.37% 0.88% 0.05% 0.18% 0.05%
Other 0.1 - - 9 0.1 - - 6
------------------------------------------------------------------------------------------------------------------------------------
Total managed 215.8 3,598 3,808 3,742 207.4 1,064 1,147 1,201
Ratio 1.67% 1.87% 2.00% 2.06% 2.30% 2.60%
-----------------------------------=================================================================================================
Securitized credit card receivables (44.8) (544) (702) (652) (45.8) (441) (499) (541)
Loans held for sale (8.1) (62) (31) (35) (5.8) (28) (20) (29)
------------------------------------------------------------------------------------------------------------------------------------
Consumer loans $162.9 $2,992 $3,075 $3,055 $155.8 $595 $ 628 $ 631
Ratio 1.84% 2.03% 2.29% 1.54% 1.71% 1.91%
-----------------------------------=================================================================================================
</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) Global Private Bank results are reported as part of the Global Investment
Management and Private Banking segment.
--------------------------------------------------------------------------------
Consumer Loan Balances, Net of Unearned Income
<TABLE>
<CAPTION>
End of Period Average
-------------------------------- ------------------------------
June 30, Mar. 31, June 30, 2nd Qtr. 1st Qtr. 2nd Qtr.
In billions of dollars 2000 2000 1999 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total managed $215.8 $203.3 $187.4 $207.4 $200.3 $185.1
Securitized credit card receivables (44.8) (48.0) (47.4) (45.8) (48.2) (46.7)
Loans held for sale (8.1) (4.2) (6.5) (5.8) (4.3) (6.2)
-------------------------------- ------------------------------
Consumer loans $162.9 $151.1 $133.5 $155.8 $147.8 $132.2
-----------------------------------------------------------=========================================================================
</TABLE>
Total delinquencies 90 days or more past due in the managed portfolio were $3.6
billion with a related delinquency ratio of 1.67% of loans at June 30, 2000,
compared with $3.8 billion or 1.87% at March 31, 2000 and $3.7 billion or 2.00%
at June 30, 1999. Total managed net credit losses in the 2000 second quarter
were $1.1 billion and the related loss ratio was 2.06%, compared with $1.1
billion and 2.30% in the 2000 first quarter and $1.2 billion and 2.60% in the
1999 second quarter. For a discussion on trends by business, see business
discussions on pages 4 - 11.
Citicorp's allowance for credit losses of $6.7 billion is available to absorb
probable credit losses inherent in the entire portfolio. For analytical purposes
only, the portion of Citicorp's allowance for credit losses attributed to the
consumer portfolio was $3.4 billion at June 30, 2000, March 31, 2000, and June
30, 1999. The allowance as a percentage of loans on the balance sheet was 2.08%
at June 30, 2000, down from 2.25% at March 31, 2000 and 2.57% at June 30, 1999
reflecting improved credit performance in certain portfolios and loan growth.
The attribution of the allowance is made for analytical purposes only and may
change from time to time.
Net credit losses, delinquencies and the related ratios may increase from the
2000 second quarter as a result of portfolio growth, global economic conditions,
the credit performance of the portfolios, including bankruptcies, and seasonal
factors. This statement is a forward-looking statement within the meaning of the
Private Securities Litigation Reform Act. See "Forward-Looking Statements" on
page 18.
12
<PAGE>
In the fourth quarter of 2000, Citicorp will adopt the Federal Financial
Institutions Examination Council's (FFIEC) revised Uniform Retail Credit
Classification and Account Management Policy. The policy provides guidance on
the reporting of delinquent consumer loans and the timing of associated credit
charge-offs for Citicorp's financial institution subsidiaries. The revised
policy is not expected to have a material effect on financial results since
Citicorp believes that it maintains adequate reserves for credit losses inherent
in its loan portfolios. This statement is a forward-looking statement within the
meaning of the Private Securities Litigation Reform Act. See "Forward-Looking
Statements" on page 18.
GLOBAL CORPORATE BANK
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $2,540 $2,135 19 $4,989 $4,396 13
Adjusted operating expenses (2) 1,418 1,330 7 2,751 2,680 3
Provision for credit losses 131 111 18 255 223 14
------------------------------- -------------------------------
Core income before taxes 991 694 43 1,983 1,493 33
Income taxes 362 261 39 722 558 29
------------------------------- -------------------------------
Core income 629 433 45 1,261 935 35
Restructuring-related items, after-tax 3 (3) NM 3 (7) NM
------------------------------- -------------------------------
Net income $ 632 $ 430 47 $1,264 $ 928 36
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $182 $164 11 $175 $167 5
Return on assets 1.40% 1.05% 1.45% 1.12%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
The Global Corporate Bank business serves corporations, financial institutions,
governments, investors, and other participants in capital markets in 100
countries and consists of Emerging Markets and Global Relationship Banking
(GRB).
Global Corporate Bank core income of $629 million and $1.261 billion grew $196
million or 45% in the 2000 second quarter and $326 million or 35% in the 2000
six months compared to 1999. The 2000 periods reflect core income growth from
the comparable 1999 periods of $112 million or 76% in GRB and $84 million or 29%
in Emerging Markets for the quarterly comparison, and $165 million or 49% in GRB
and $161 million or 27% in Emerging Markets for the six-month comparison. GRB's
core income growth was a result of revenue growth in transaction services and
equity derivatives and was partially offset by higher net write-offs. Emerging
Markets core income growth was driven by broad-based growth in revenues from
transaction services and improved credit.
The businesses of Global Corporate Bank are significantly affected by the levels
of activity in the global capital markets which, in turn, are influenced by
macro-economic policies and credit environments, among other factors, in the 100
countries in which the businesses operate. Economic and market events can have
both positive and negative effects on the revenue performance of the businesses
and can negatively affect credit performance. This paragraph contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 18.
Emerging Markets
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $1,270 $1,096 16 $2,508 $2,239 12
Adjusted operating expenses (2) 606 525 15 1,142 1,047 9
Provision for credit losses 79 110 (28) 163 225 (28)
------------------------------- -------------------------------
Core income before taxes 585 461 27 1,203 967 24
Income taxes 215 175 23 441 366 20
------------------------------- -------------------------------
Core income 370 286 29 762 601 27
Restructuring-related items, after-tax 3 (1) NM 3 (2) NM
------------------------------- -------------------------------
Net income $ 373 $ 285 31 $ 765 $ 599 28
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $87 $83 5 $85 $82 4
Return on assets 1.72% 1.38% 1.81% 1.47%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Emerging Markets core income was $370 million and $762 million in the 2000
second quarter and six months, up $84 million or 29% and $161 million or 27%
from 1999. In June 2000, Emerging Markets completed the acquisition of a
majority interest in Bank
13
<PAGE>
Handlowy, Poland's largest commercial bank. Return on assets was 1.72% in the
2000 second quarter, up from 1.38% in 1999. In the six months ended June 30,
2000, return on assets was 1.81%, up from 1.47% in the 1999 six months.
Revenues, net of interest expense, were $1.270 billion and $2.508 billion in the
2000 second quarter and six months, up $174 million or 16% and $269 million or
12%, respectively, from 1999. Revenue growth in the 2000 second quarter was led
by CEEMEA (Central and Eastern Europe, Middle East and Africa), up 28%,
primarily due to growth in trading-related revenue and transaction services as
well as the acquisition of Bank Handlowy. Latin America revenues were up 11% in
the 2000 second quarter primarily due to growth in transaction services and
structured products and partially offset by a decline in trading-related
revenue, while Asia revenues were up 6% reflecting growth in transaction
services and securities transactions and partially offset by lower
trading-related revenue. The six-month comparison reflected strong growth across
all regions in transaction services and structured products along with higher
securities transactions, partially offset by lower trading-related revenue in
Latin America and Asia. About 23% of the Emerging Markets revenue in the 2000
second quarter and six months was attributable to business from multinational
companies managed jointly with GRB, with that revenue having grown 8% and 9%,
respectively, from the prior-year periods.
Adjusted operating expenses in the 2000 second quarter and six months increased
15% and 9% compared to 1999. The growth in expenses was primarily due to the
acquisition of Bank Handlowy, investment spending to gain market share in
selected emerging market countries and increases in incentive compensation and
other operating expenses.
The provision for credit losses totaled $79 million and $163 million in the 2000
second quarter and six months, down $31 million and $62 million from the
respective 1999 periods. Net write-offs declined in Asia, partially offset by an
increase in Latin America. Cash-basis loans were $1.132 billion at June 30,
2000, up $66 million from March 31, 2000, principally due to the addition of
Bank Handlowy and partially offset by reductions in Asia and CEEMEA. Compared to
a year ago, cash-basis loans were $65 million lower as declines in Asia were
partially offset by the acquisition of Bank Handlowy and increases in Latin
America.
Average assets of $87 billion and $85 billion in the 2000 second quarter and six
months reflected growth of $4 billion and $3 billion, respectively, compared to
a year ago, primarily due to higher loans and trading assets and the Bank
Handlowy acquisition.
Global Relationship Banking
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $1,270 $1,039 22 $2,481 $2,157 15
Adjusted operating expenses (2) 812 805 1 1,609 1,633 (1)
Provision (benefit) for credit losses 52 1 NM 92 (2) NM
------------------------------- -------------------------------
Core income before taxes 406 233 74 780 526 48
Income taxes 147 86 71 281 192 46
------------------------------- -------------------------------
Core income 259 147 76 499 334 49
Restructuring-related items, after-tax - (2) NM - (5) NM
------------------------------- -------------------------------
Net income $ 259 $ 145 79 $ 499 $ 329 52
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $95 $81 17 $90 $85 6
Return on assets 1.10% 0.72% 1.11% 0.78%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Core income from Global Relationship Banking in North America, Europe and Japan
was $259 million and $499 million in the 2000 second quarter and six months, up
$112 million or 76% and $165 million or 49% from 1999. During the 2000 second
quarter, GRB strengthened its position in the U.S. leasing market through the
purchase of Copelco. Return on assets was 1.10% in the 2000 second quarter, up
from 0.72% in 1999. In the 2000 six months, return on assets was 1.11%, up from
0.78% in the comparable 1999 period.
Revenues, net of interest expense, of $1.270 billion in the 2000 second quarter
and $2.481 billion in the 2000 six months grew $231 million or 22% and $324
million or 15%, respectively, compared to 1999. The increases were driven by
strong growth in transaction services, equity derivatives and structured
products, which includes the effect of the Copelco acquisition. Both comparisons
were negatively impacted by lower funding and gapping results in 2000.
Adjusted operating expenses of $812 million and $1.609 billion in the 2000
second quarter and six months increased $7 million or 1% compared to the related
1999 quarter and decreased $24 million or 1% in the six-month comparison. The
decrease in expenses in the 2000 six months was due to lower year 2000 and
European Economic Monetary Union expenses, the impact of previous restructuring
actions and business integration initiatives and was partially offset by higher
incentive compensation and the acquisition of Copelco.
The provision for credit losses was $52 million and $92 million in the current
quarter and six months compared to $1 million in the 1999 second quarter and a
net benefit of $2 million in the 1999 six months. Net write-offs in 2000
increased primarily due to exposure
14
<PAGE>
in the health-care industry in North America. Cash-basis loans were $465 million
at June 30, 2000, up $146 million from March 31, 2000 and $186 million from June
30, 1999. The increase in cash-basis loans in the 2000 second quarter was
primarily attributable to the acquisition of Copelco. The Other Real Estate
Owned portfolio was $135 million at June 30, 2000, down $6 million from March
31, 2000 and $43 million from June 30, 1999 due to decreases in the North
America real estate portfolio.
Average assets of $95 billion and $90 billion in the 2000 second quarter and six
months increased $14 billion and $5 billion from 1999, primarily reflecting
increases in trading assets and loans as well as the acquisition of Copelco.
Commercial Portfolio Review
Commercial loans are identified as impaired and placed on a 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. Impaired
commercial loans are written down to the extent that principal is judged to be
uncollectible. Impaired collateral-dependent loans are written down to the lower
of cost or collateral value. The following table summarizes commercial
cash-basis loans at period end and net credit losses for the three months ended:
<TABLE>
<CAPTION>
June 30, Mar. 31, June 30,
In millions of dollars 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial cash-basis loans
Emerging Markets $1,132 $1,066 $1,197
Global Relationship Banking 465 319 279
---------------------------------------------------
Total Global Corporate Bank 1,597 1,385 1,476
Investment Activities 3 11 13
---------------------------------------------------
Total commercial cash-basis loans $1,600 $1,396 $1,489
---------------------------------------------------------------------------------===================================================
Net credit losses
Emerging Markets $ 79 $ 84 $ 110
Global Relationship Banking 52 40 1
---------------------------------------------------
Total net credit losses $ 131 $ 124 $ 111
---------------------------------------------------------------------------------===================================================
</TABLE>
For a discussion of trends by business, see the business discussions on pages
13-15.
Citicorp's allowance for credit losses of $6.7 billion is available to absorb
probable credit losses inherent in the entire portfolio. For analytical purposes
only, the portion of Citicorp's allowance for credit losses attributed to the
commercial portfolio was $3.3 billion at June 30, 2000, $3.2 billion at March
31, 2000 and $3.3 billion at June 30, 1999. The increase in the allowance in the
second quarter of 2000 reflects acquisitions.
<TABLE>
<CAPTION>
June 30, Mar. 31, June 30,
In millions of dollars 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial allowance for credit losses $3,345 $3,248 $3,307
As a percentage of total commercial loans 3.01% 3.26% 3.40%
---------------------------------------------------------------------------------===================================================
</TABLE>
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $502 $383 31 $979 $759 29
Adjusted operating expenses (2) 360 274 31 685 542 26
Provision for credit losses 3 2 50 25 10 NM
------------------------------- -------------------------------
Core income before taxes 139 107 30 269 207 30
Income taxes 52 40 30 100 77 30
------------------------------- -------------------------------
Core income 87 67 30 169 130 30
Restructuring-related items, after-tax 1 - NM 1 - NM
------------------------------- -------------------------------
Net income $ 88 $ 67 31 $170 $130 31
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
The Global Investment Management and Private Banking group is composed of
Citibank Asset Management and Global Retirement Services and the Global Private
Bank. These businesses offer a broad range of asset management products and
services from global investment centers around the world, including mutual
funds, closed-end funds, managed accounts, and personalized wealth management
services to institutional, high net worth, and retail clients.
15
<PAGE>
Global Investment Management and Private Banking core income of $87 million in
the 2000 second quarter and $169 million in the 2000 six months was up $20
million and $39 million, respectively, both up 30% from a year ago. Revenues
increased, driven by acquisitions and growth in both assets and client business
volumes under management, and were partially offset by higher costs associated
with the acquisitions, continued expansion of sales and marketing efforts, and
additional investments in research, quantitative, and technology expertise. The
increase in the provision for credit losses in the six-month period related to a
loan in EMEA.
Citibank Asset Management and Global Retirement Services
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions of dollars 2000 1999 (1) 2000 1999 (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues, net of interest expense $164 $82 $278 $183
Total operating expenses 150 88 262 177
---------------------------------------------------------------------
Income (loss) before taxes 14 (6) 16 6
Income taxes (benefit) 6 (2) 7 2
---------------------------------------------------------------------
Net income (loss) $ 8 ($ 4) $ 9 $ 4
---------------------------------------------------------------=====================================================================
Assets under management
(in billions of dollars) (2) $155 $146 $155 $146
---------------------------------------------------------------=====================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Includes $31 billion and $35 billion in the 2000 and 1999 periods,
respectively, for Global Private Bank clients.
--------------------------------------------------------------------------------
Citibank Asset Management and Global Retirement Services offers institutional,
high net worth, and retail clients a broad range of investment disciplines from
global investment centers around the world. Products and services offered
include mutual funds, closed-end funds, and separately managed accounts.
Net income of $8 million and $9 million in the 2000 second quarter and six
months was up $12 million and $5 million from the comparable 1999 periods,
primarily reflecting the impact of acquisitions, partially offset by increased
expenses.
Assets under management rose 6% from the year-ago quarter to $155 billion,
including $4.5 billion from the acquisitions. Money fund assets grew $3.5
billion or 17%, and managed account assets grew $3.2 billion or 5%, from the
1999 quarter, while long-term mutual fund assets shrank by $6.3 billion or 22%,
mostly reflecting the transfer of a large fund to another Citicorp business
segment.
Revenues, net of interest expense, of $164 million and $278 million in the 2000
second quarter and six months increased $82 million and $95 million from the
1999 second quarter and six months, respectively, primarily reflecting the
Siembra and Garante acquisitions in the Latin America Retirement Services
business.
Operating expenses of $150 million and $262 million in the 2000 quarter and six
months increased $62 million and $85 million from the 1999 periods, reflecting
the acquisitions, additional investments in research, quantitative, and
technology expertise, and growth in overseas offices.
Global Private Bank
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $338 $301 12 $701 $576 22
Adjusted operating expenses (2) 210 186 13 423 365 16
Provision for credit losses 3 2 50 25 10 NM
------------------------------- -------------------------------
Core income before taxes 125 113 11 253 201 26
Income taxes 46 42 10 93 75 24
------------------------------- -------------------------------
Core income 79 71 11 160 126 27
Restructuring-related items, after-tax 1 - NM 1 - NM
------------------------------- -------------------------------
Net income $ 80 $ 71 13 $161 $126 28
------------------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars) $24 $19 26 $24 $19 26
Return on assets 1.34% 1.50% 1.35% 1.34%
------------------------------------------==========================================================================================
Client business volumes
under management (in billions of dollars) $149 $125 19 $149 $125 19
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Global Private Bank -- which provides personalized wealth management services
for high net worth clients around the world -- reported core income of $79
million for the 2000 second quarter, up $8 million or 11% from 1999, reflecting
continued strong
16
<PAGE>
customer revenue momentum and partially offset by increased front-end staff
expenses. Core income for the 2000 six months was $160 million, up $34 million
or 27% from 1999, reflecting the above, as well as a higher provision for credit
losses.
Client business volumes under management, which comprise loans, deposits, client
assets under fee-based management and custody accounts, were $149 billion at
June 30, 2000, up 19% from $125 billion a year ago, reflecting growth in all
regions, especially in the U.S. and Asia Pacific. Business volumes grew in all
product lines, led by the custody and lending businesses.
Total revenues, net of interest expense, were $338 million in the 2000 second
quarter and $701 million in the 2000 six months, up $37 million or 12% and $125
million or 22% from the 1999 periods. Net interest and recurring fee-based
revenues increased $38 million or 19% from the 1999 second quarter and $73
million or 18% from the 1999 six months, while transaction revenues, including
placement fees on alternative investments, grew $7 million or 13% from the 1999
second quarter and $49 million or 52% from the 1999 six months. The increase in
revenues was led primarily by significant growth internationally, up $25 million
or 13% and $95 million or 26% from the comparable 1999 quarter and six months,
as well as continued favorable trends in the U.S., up $12 million or 11% and $30
million or 14% from the respective 1999 periods.
Total operating expenses of $210 million and $423 million in the quarter and six
months were up $24 million or 13% and $58 million or 16% from the 1999 periods,
primarily reflecting higher levels of bankers and product specialists (up 12%)
hired to boost front-end sales and service capabilities.
The provision for credit losses was $3 million for the 2000 second quarter and
$25 million year-to-date, compared with $2 million and $10 million for the 1999
periods. The increase in the 2000 six months related to a loan in EMEA. Net
credit losses in the 2000 second quarter remained at a nominal level of 0.05% of
average loans, compared with 0.18% and 0.05% for the 2000 first quarter and 1999
second quarter, respectively. Loans 90 days or more past due were lower at $78
million or 0.32% of loans at June 30, 2000, compared to $87 million or 0.37% at
March 31, 2000 and $162 million or 0.88% at June 30, 1999.
CORPORATE/OTHER
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions of dollars 2000 1999 (1) 2000 1999 (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues, net of interest expense ($ 65) $ 70 ($ 95) $120
Adjusted operating expenses (2) 130 130 415 243
---------------------------------------------------------------------
Loss before tax benefits (195) (60) (510) (123)
Income tax benefits (64) (20) (199) (41)
---------------------------------------------------------------------
Loss (131) (40) (311) (82)
Restructuring-related items, after-tax (17) (8) (25) (16)
---------------------------------------------------------------------
Net loss ($148) ($48) ($336) ($ 98)
---------------------------------------------------------------=====================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
--------------------------------------------------------------------------------
Corporate/Other includes net corporate treasury results, corporate staff and
other corporate expenses, and the remainder of internet-related development
activities (e-Citi) not allocated to the individual businesses.
Revenues decreased $135 million and $215 million in the 2000 second quarter and
six months over the respective prior year periods, primarily reflecting higher
treasury costs. Adjusted operating expenses of $130 million and $415 million in
the 2000 second quarter and six months, respectively, were unchanged from the
prior year second quarter, and increased $172 million from the 1999 six months,
reflecting increases in certain unallocated corporate and technology costs,
offset by a decrease in performance-based option expense. The six-month period
also included a $108 million pretax expense for the contribution of appreciated
venture capital securities to the Citigroup Foundation, which had minimal impact
on Citicorp's earnings after related tax benefits and investment gains, which
are reflected in Investment Activities.
INVESTMENT ACTIVITIES
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions of dollars 2000 1999 (1) 2000 1999 (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues, net of interest expense $359 $233 $1,590 $356
Total operating expenses 19 17 43 31
---------------------------------------------------------------------
Income before taxes 340 216 1,547 325
Income taxes 125 75 565 112
---------------------------------------------------------------------
Net income $215 $141 $ 982 $213
---------------------------------------------------------------=====================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
--------------------------------------------------------------------------------
17
<PAGE>
Investment Activities comprises Citicorp's venture capital activities,
securities transactions related to certain corporate investments, and the
results of certain investments in countries that refinanced debt under the 1989
Brady Plan or plans of a similar nature. Investment Activities net income of
$215 million and $982 million for the 2000 second quarter and six months,
respectively, was up $74 million and $769 million from the comparable 1999
periods, primarily reflecting strong performance in the venture capital
portfolios and a higher level of securities transactions.
Revenues, net of interest expense, of $359 million for the 2000 second quarter
increased $126 million from 1999, primarily reflecting an increase in venture
capital results and securities transactions in corporate and refinancing
portfolio investments. For the 2000 six months, revenues, net of interest
expense, of $1.6 billion increased $1.2 billion from 1999, primarily reflecting
an increase in venture capital results and securities transactions in corporate
investments, reflecting strong equity markets, partially offset by writedowns in
the refinancing portfolio.
Investment Activities results may fluctuate in the future as a result of market
and asset-specific factors. This statement is a forward-looking statement within
the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" below.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially from
those included in the forward-looking statements. Forward-looking statements are
typically identified by words or phrases such as "believe," "expect,"
"anticipate," "intend," "estimate," "may increase," "may fluctuate," and similar
expressions or future or conditional verbs such as "will," "should," "would,"
and "could". These forward-looking statements involve risks and uncertainties
including, but not limited to, global economic conditions, portfolio growth, the
credit performance of the portfolios, including bankruptcies, and seasonal
factors; changes in general economic conditions including the performance of
global financial markets, prevailing inflation and interest rates, securities
transactions, gains from asset sales, and losses on commercial lending
activities; results of various Investment Activities; the effect of competitors'
pricing policies, of changes in laws and regulations on competition and of
demographic changes on target market populations' savings and financial planning
needs; the impact of higher interest rates on spreads in the Cards business; the
adoption by the Company of an FFIEC policy that provides guidance on the
reporting of delinquent consumer loans and the timing of associated credit
charge-offs for financial institution subsidiaries; and the resolution of legal
proceedings and related matters.
MANAGING GLOBAL RISK
The Market Risk Management Process
Market risk encompasses liquidity risk and price risk, both of which arise in
the normal course of business of a global financial intermediary. Liquidity risk
is the risk that some entity, in some location and in some currency, may 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.
Citicorp's 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. The risk management process includes the
establishment of appropriate market controls, policies and procedures,
appropriate senior management risk oversight with thorough risk analysis and
reporting, and independent risk management with capabilities to evaluate and
monitor risk limits. The risk management process is described in detail in
Citicorp's Annual Report on Form 10-K for the year ended December 31, 1999 (1999
Form 10-K).
Across Citicorp, price risk is measured using various tools, including
Earnings-at-Risk and sensitivity analysis, which are applied to interest rate
risk in the non-trading portfolios and Value-at-Risk, stress and scenario
analyses which are applied to the trading portfolios.
Non-Trading Portfolios
Business units manage the potential earnings effect of interest rate movements
by managing the asset and liability mix, either directly or through the use of
derivative financial products. 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.
Price risk in the non-trading portfolios is measured using Earnings-at-Risk,
excluding CitiFinancial Credit Company, which measures price risk using
sensitivity analysis.
18
<PAGE>
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.
Citicorp's primary non-trading price risk exposure is to movements in U.S.
dollar interest rates. As of June 30, 2000, 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 45 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 June 30,
2000, the rate shifts applied to these currencies for purposes of calculating
Earnings-at-Risk over a one- to four-week defeasance period ranged from 20 to
1,851 basis points, depending on the currency.
The following table illustrates that, as of June 30, 2000, a 45 basis point
increase in the U.S. dollar yield curve would have a potential negative impact
on Citicorp's pretax earnings of approximately $109 million in the next twelve
months, and approximately $110 million for the total five-year period 2000-2005.
A two standard deviation increase in non-U.S. dollar interest rates would have a
potential negative impact on Citicorp's pretax earnings of approximately $78
million in the next twelve months, and approximately $118 million for the
five-year period 2000-2005.
Earnings-at-Risk (impact on pretax earnings)
<TABLE>
<CAPTION>
Assuming a U.S. Assuming a Non-U.S.
Dollar Rate Move of Dollar Rate Move of (1)
Two Standard Deviations Two Standard Deviations (2)
--------------------------------------------------------------------
In millions of dollars at June 30, 2000 Increase Decrease Increase Decrease
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Overnight to three months ($ 26) $ 28 ($ 17) $ 17
Four to six months (28) 31 (23) 23
Seven to twelve months (55) 57 (38) 38
--------------------------------------------------------------------
Total overnight to twelve months (109) 116 (78) 78
------------------------------------------------------------------------------------------------------------------------------------
Year two (58) 57 (27) 28
Year three (16) 14 (18) 19
Year four 34 (38) (4) 4
Year five 47 (53) - -
Effect of discounting (8) 11 9 (10)
--------------------------------------------------------------------
Total ($110) $107 ($118) $119
----------------------------------------------------------------====================================================================
</TABLE>
(1) Primarily results from Earnings-at-Risk in the Euro, Singapore dollar,
Japanese yen, Mexico peso and Hong Kong dollar.
(2) Total assumes a two standard deviation increase or decrease for every
currency, not taking into account any covariance between currencies.
--------------------------------------------------------------------------------
The table above also illustrates that Citicorp's U.S. dollar risk profile in the
one- to three-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.
The following table summarizes Citicorp's worldwide Earnings-at-Risk over the
next 12 months from changes in interest rates and illustrates 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.
Twelve Month Earnings-at-Risk (impact on pretax earnings)
<TABLE>
<CAPTION>
U.S. Dollar Non-U.S. Dollar
-----------------------------------------------------------------------------------
June 30, Dec. 31, June 30, June 30, Dec. 31, June 30,
In millions of dollars 2000 1999 1999 2000 1999 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assuming a two standard deviation rate
Increase ($109) ($166) ($133) ($78) ($119) ($120)
Decrease 116 178 154 78 120 $120
-------------------------------------------------===================================================================================
</TABLE>
19
<PAGE>
Interest rate swaps and similar instruments 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:
<TABLE>
<CAPTION>
U.S. Dollar Non-U.S. Dollar
-----------------------------------------------------------------------------------
June 30, Dec. 31, June 30, June 30, Dec. 31, June 30,
In millions of dollars 2000 1999 1999 2000 1999 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assuming a two standard deviation rate
Increase ($6) ($30) 7 ($65) ($120) ($137)
Decrease 15 42 12 65 121 138
-------------------------------------------------===================================================================================
</TABLE>
During the first six months of 2000, Citicorp's 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 $109
million to $146 million in the aggregate at each month end, compared with a
range from $73 million to $166 million at each month end during 1999. 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 $78 million to $123 million in the aggregate at each month end
during the first six months of 2000, compared with a range from $95 million to
$121 million at each month end during 1999.
Trading Portfolios
A tool for measuring the price risk of trading activities is the Value-at-Risk
method, which estimates the potential pretax loss in market value that could
occur over a one-day holding period, at a 99% confidence level. 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
correlation of those factors. The Value-at-Risk measurement includes the foreign
exchange risks that arise in traditional banking businesses as well as in
explicit trading positions. In addition to Value-at-Risk, stress and scenario
analyses are also applied to the trading portfolios.
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. For
Citicorp's major trading centers, the aggregate pretax Value-at-Risk in the
trading portfolios was $35 million at June 30, 2000. Daily exposures averaged
$24 million in the second quarter of 2000 and ranged from $19 million to $35
million.
The following table summarizes Citicorp's Value-at-Risk in its trading
portfolios as of June 30, 2000 and December 31, 1999 along with the 2000 second
quarter averages.
<TABLE>
<CAPTION>
2000
Second
June 30, Quarter Dec. 31,
In millions of dollars 2000 Average 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest rate $29 $20 $15
Foreign exchange 11 9 17
Equity 19 12 11
All other (primarily commodity) 2 2 2
Covariance adjustment (26) (19) (21)
---------------------------------------------------
Total $35 $24 $24
---------------------------------------------------------------------------------===================================================
</TABLE>
The table below provides the distribution of Value-at-Risk during the second
quarter of 2000.
<TABLE>
<CAPTION>
In millions of dollars Low High
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest rate $15 $29
Foreign exchange 6 11
Equity 10 19
All other (primarily commodity) 1 4
------------------------------------------------------------------------------------------------====================================
</TABLE>
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 moratoria and restrictions
on the remittance of funds. Citicorp manages cross-border risk as part of the
Windows on Risk process described in the 1999 Form 10-K.
Beginning April 1, 2000, the FFIEC revised their cross-border reporting
guidelines to allow credit derivative contracts, that contain cross-border
provisions, to be treated as effective guarantees. Purchased credit derivative
contracts where Citicorp is the beneficiary
20
<PAGE>
shift the underlying exposure to the guarantor country. Written credit
derivative contracts where Citicorp provides an effective guarantee are included
as cross-border commitments in the country of the underlying credit exposure.
The effect of adopting the FFIEC's revised guidelines as of June 30, 2000 was an
increase (decrease) in reported cross-border claims on third parties of $0.6
billion in Germany, $2.2 billion in Italy, $1.2 billion in France, ($1.3)
billion in the United Kingdom, ($0.4) billion in the Netherlands, and ($0.1)
billion in Switzerland. The effect on cross-border commitments was an increase
(decrease) of $1.8 billion in Germany, $5.3 billion in Italy, $4.8 billion in
France, ($0.3) billion in the United Kingdom, and $0.2 billion in Switzerland.
Total cross-border outstandings and commitments at December 31, 1999 have not
been restated.
The following table presents total cross-border outstandings and commitments on
a regulatory basis in accordance with FFIEC guidelines. Total cross-border
outstandings include cross-border claims on third parties as well as investments
in and funding of local franchises, as described in the 1999 Form 10-K.
Countries with outstandings greater than 0.75% of Citicorp assets at June 30,
2000 or December 31, 1999 include:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
---------------------------------------------------------------------- -----------------
Cross-Border Claims on Third Parties
-----------------------------------------
Total Total
Trading Investments Cross- Cross-
and in and Border- Border-
Short- Funding Out- Out-
Term of Local stand- Commit- stand- Commit-
In billions of dollars at period ended Banks Public Private Total Claims(1) Franchises ings ments(2) ings ments(2)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Germany $2.3 $1.3 $1.6 $5.2 $4.0 $4.1 $9.3 $6.6 $8.3 $3.7
Italy 3.1 1.9 0.7 5.7 3.5 1.1 6.8 6.1 3.3 0.4
Brazil 0.7 0.7 2.3 3.7 1.9 2.2 5.9 0.2 3.7 0.1
France 3.1 0.4 1.6 5.1 3.3 - 5.1 9.1 4.2 2.2
United Kingdom 1.0 - 3.6 4.6 3.7 - 4.6 16.7 4.4 15.5
Netherlands 1.1 0.5 2.8 4.4 3.3 - 4.4 3.5 3.2 2.9
Mexico - 1.4 1.5 2.9 1.6 0.6 3.5 0.4 3.7 0.1
South Korea 0.5 0.3 0.8 1.6 1.5 1.6 3.2 0.5 2.7 0.3
Switzerland 1.0 - 1.6 2.6 2.5 - 2.6 3.6 3.1 1.4
-----------------------------------------===========================================================================================
</TABLE>
(1) Included in total cross-border claims on third parties.
(2) Commitments (not included in total cross-border outstandings) include
legally binding cross-border letters of credit and other commitments and
contingencies as defined by the FFIEC.
--------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Citicorp manages liquidity through a well-defined process described in the 1999
Form 10-K.
A diversity of funding sources, currencies, and maturities is used to gain a
broad access to the investor base. Citicorp's deposits, which represented 67% of
its total funding at both June 30, 2000 and December 31, 1999, are broadly
diversified by both geography and customer segments.
Stockholder's equity, which grew $4.0 billion during the six months of 2000 to
$30.0 billion at June 30, 2000, continues to be an important component of the
overall funding structure. In addition, long-term debt is issued by Citicorp and
its subsidiaries. Total Citicorp long-term debt outstanding at the end of the
2000 second quarter was $27.4 billion, up from $26.4 billion at 1999 year-end.
Loans securitized during the first six months included $4.5 billion of U.S.
consumer mortgages. While securitization activity in the first half of 2000
primarily related to U.S. consumer mortgages, securitization of both credit card
receivables and consumer mortgages continues to be an important source of
liquidity. As previous credit card securitizations amortize, newly originated
receivables are recorded on Citicorp's balance sheet and become available for
asset securitization. During the six months of 2000, the scheduled amortization
of certain credit card securitization transactions made available $4.4 billion
of new receivables. In addition, $3.8 billion of credit card securitization
transactions are scheduled to amortize during the rest of 2000.
Citicorp is a legal entity separate and distinct from Citibank, N.A. and its
other subsidiaries and affiliates. As discussed in the 1999 Form 10-K, there are
various legal limitations on the extent to which Citicorp's subsidiaries may
extend credit, pay dividends, or otherwise supply funds to Citicorp. As of June
30, 2000, under their applicable dividend limitations, Citicorp's national and
state-chartered bank subsidiaries could have declared dividends to their
respective parent companies without regulatory approval of approximately $6.4
billion. In determining whether and to what extent to pay dividends, each bank
subsidiary must also consider the effect of dividend payments on applicable
risk-based capital and leverage ratio requirements, as well as policy statements
of the federal regulatory agencies that indicate that banking organizations
should generally pay dividends out of current operating earnings. Consistent
with these considerations, Citicorp estimates that, as of June 30, 2000, its
bank subsidiaries could have distributed dividends to Citicorp, directly or
through their parent holding company, of approximately $5.7 billion of the
available $6.4 billion.
21
<PAGE>
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.
Citicorp is subject to risk-based capital guidelines issued by the Board of
Governors of the Federal Reserve System (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
<TABLE>
<CAPTION>
June 30, Mar. 31, Dec. 31,
2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 Capital 8.02% 8.07% 8.11%
Total Capital (Tier 1 and Tier 2) 11.95 12.00 12.10
Leverage (1) 6.90 6.81 6.83
Common Stockholder's Equity 7.08 6.93 6.70
---------------------------------------------------------------------------------===================================================
</TABLE>
(1) Tier 1 capital divided by adjusted average assets.
--------------------------------------------------------------------------------
Citicorp maintained a strong capital position during the 2000 second quarter.
Total capital (Tier 1 and Tier 2) amounted to $41.5 billion at June 30, 2000,
representing 11.95% of net risk adjusted assets. This compares with $38.4
billion and 12.00% at March 31, 2000, and $37.4 billion and 12.10% at December
31, 1999. Tier 1 capital of $27.9 billion at June 30, 2000 represented 8.02% of
net risk adjusted assets, compared with $25.8 billion and 8.07% at March 31,
2000 and $25.0 billion and 8.11% at December 31, 1999. The Tier 1 capital ratio
at June 30, 2000 was within Citicorp's target range of 8.00% to 8.30%.
Components of Capital Under Regulatory Guidelines
<TABLE>
<CAPTION>
June 30, Mar. 31, Dec. 31,
In millions of dollars 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 Capital
Common Stockholder's Equity $30,003 $27,730 $26,047
Mandatorily Redeemable Securities of Subsidiary Trusts 975 975 975
Minority Interest 400 143 133
Less: Net Unrealized Gain on Securities Available for Sale (1) (347) (899) (340)
Less: Intangible Assets (2) (3,149) (2,110) (1,760)
50% Investment in Certain Subsidiaries (3) (27) (21) (21)
---------------------------------------------------
Total Tier 1 Capital 27,855 25,818 25,034
------------------------------------------------------------------------------------------------------------------------------------
Tier 2 Capital
Allowance for Credit Losses (4) 4,371 4,033 3,895
Qualifying Debt (5) 9,022 7,935 8,128
Unrealized Marketable Equity Securities Gains (1) 270 608 315
Less: 50% Investment in Certain Subsidiaries (3) (27) (21) (21)
---------------------------------------------------
Total Tier 2 Capital 13,636 12,555 12,317
---------------------------------------------------
Total Capital (Tier 1 and Tier 2) $41,491 $38,373 $37,351
---------------------------------------------------------------------------------===================================================
Net Risk-Adjusted Assets (6) $347,242 $319,889 $308,697
---------------------------------------------------------------------------------===================================================
</TABLE>
(1) Tier 1 capital excludes unrealized gains and losses on debt securities
available for sale in accordance with regulatory risk-based capital
guidelines. The federal bank regulatory agencies permit institutions to
include in Tier 2 capital up to 45% of pretax net unrealized holding gains
on available-for-sale equity securities with readily determinable fair
values.
(2) Includes goodwill and certain other identifiable intangible assets. The
increase in goodwill and other intangibles during the 2000 second quarter
was attributable to the acquisitions completed during the quarter, which
included Handlowy, Siembra and Copelco.
(3) Represents investment in certain overseas insurance activities and
unconsolidated banking and finance subsidiaries.
(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. Tier 2 capital included $2.6 billion of subordinated
debt issued to Citigroup (Parent Company) at June 30, 2000 and $1.4
billion at both March 31, 2000 and December 31, 1999.
(6) The increase in net risk-adjusted assets during the 2000 second quarter
was primarily attributable to the growth in consumer and commercial loans
and acquisitions completed during the quarter. Net risk-adjusted assets
includes risk-weighted credit equivalent amounts, net of applicable
bilateral netting agreements, of $15.5 billion for interest rate,
commodity and equity derivative contracts and foreign exchange contracts
as of June 30, 2000, compared to $17.1 billion as of March 31, 2000 and
$15.8 billion as of December 31, 1999. 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.
--------------------------------------------------------------------------------
Common stockholder's equity increased $2.3 billion during the 2000 second
quarter to $30.0 billion at June 30, 2000, representing 7.08% of assets,
compared to 6.93% at March 31, 2000 and 6.70% at December 31, 1999. The net
increase in common stockholder's
22
<PAGE>
equity during the quarter principally reflected net income of $1.7 billion and a
capital contribution of $1.2 billion from Citigroup (parent company), offset by
a decrease in unrealized gains on securities available-for-sale of $552 million.
The mandatorily redeemable securities of subsidiary trusts (trust securities)
outstanding at June 30, 2000 of $975 million qualify as Tier 1 capital and are
included in long-term debt on the balance sheet. For both the six months ended
June 30, 2000 and 1999, interest expense on the trust securities amounted to $38
million.
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 June 30, 2000,
all of Citicorp's subsidiary depository institutions were "well capitalized"
under the federal bank regulatory agencies' definitions.
Citibank, N.A. Ratios
<TABLE>
<CAPTION>
June 30, Mar. 31, Dec. 31,
2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 Capital 8.08% 8.48% 8.25%
Total Capital (Tier 1 and Tier 2) 12.08 12.43 12.31
Leverage 6.51 6.77 6.53
Common Stockholder's Equity 6.86 6.89 6.58
----------------------------------------------------------------------------------==================================================
</TABLE>
Citibank's net income for the second quarter of 2000 amounted to $1.1 billion.
Citibank had $7.5 billion of subordinated notes outstanding at June 30, 2000 and
$6.9 billion of subordinated notes outstanding at both March 31, 2000 and
December 31, 1999 that were issued to Citicorp (parent company) and included in
Citibank's Tier 2 capital.
During the first quarter of 2000, the FRB issued a proposed rule that would
govern the regulatory capital treatment of merchant banking investments and
certain similar equity investments, including investments made by venture
capital subsidiaries in nonfinancial companies held by bank holding companies.
The proposed rule would increase the capital requirement for such investments by
imposing a 50% capital requirement. The Company is monitoring the status and
progress of the proposed rule.
Additionally, from time to time, the FRB and the FFIEC 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. This
paragraph contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page 18.
23
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Citicorp and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions of dollars 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest revenue
Loans, including fees $6,506 $5,544 $12,476 $11,364
Deposits with banks 276 262 532 494
Federal funds sold and securities
purchased under resale agreements 99 97 171 238
Securities, including dividends 786 855 1,611 1,995
Trading account assets 256 212 470 374
Loans held for sale 172 147 291 286
---------------------------------------------------------------------
8,095 7,117 15,551 14,751
---------------------------------------------------------------------
Interest expense
Deposits 3,198 2,567 6,001 5,432
Trading account liabilities 14 19 33 38
Purchased funds and other borrowings 626 463 1,090 1,145
Long-term debt 456 432 931 932
---------------------------------------------------------------------
4,294 3,481 8,055 7,547
---------------------------------------------------------------------
Net interest revenue 3,801 3,636 7,496 7,204
Provision for credit losses 711 790 1,462 1,519
---------------------------------------------------------------------
Net interest revenue after provision for credit losses 3,090 2,846 6,034 5,685
---------------------------------------------------------------------
Fees, commissions, and other revenue
Fees and commissions 2,343 1,859 4,498 3,554
Foreign exchange 398 368 820 856
Trading account 311 138 680 442
Securities transactions 252 151 297 174
Other revenue 746 852 2,760 1,614
---------------------------------------------------------------------
4,050 3,368 9,055 6,640
---------------------------------------------------------------------
Operating expense
Salaries 1,734 1,541 3,429 3,102
Employee benefits 318 322 640 640
---------------------------------------------------------------------
Total employee 2,052 1,863 4,069 3,742
Net premises and equipment 627 628 1,271 1,232
Restructuring - related items 4 47 24 126
Other expense 1,797 1,666 3,708 3,287
---------------------------------------------------------------------
4,480 4,204 9,072 8,387
---------------------------------------------------------------------
Income before taxes 2,660 2,010 6,017 3,938
Income taxes 993 756 2,205 1,480
---------------------------------------------------------------------
Net income $1,667 $1,254 $ 3,812 $ 2,458
---------------------------------------------------------------=====================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE>
CONSOLIDATED BALANCE SHEETS Citicorp and Subsidiaries
<TABLE>
<CAPTION>
June 30,
2000 December 31,
In millions of dollars (Unaudited) 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 9,358 $ 11,385
Deposits at interest with banks 12,648 12,095
Securities, at fair value
Available for sale and short-term and other 45,378 46,592
Venture capital 5,256 4,160
Trading account assets 32,381 31,540
Loans held for sale 8,081 4,463
Federal funds sold and securities purchased under resale agreements 5,493 6,048
Loans, net
Consumer 162,943 147,968
Commercial 111,003 97,485
----------------------------------
Loans, net of unearned income 273,946 245,453
Allowance for credit losses (6,736) (6,679)
----------------------------------
Total loans, net 267,210 238,774
Customers' acceptance liability 1,115 1,133
Premises and equipment, net 4,974 4,900
Interest and fees receivable 4,088 3,836
Other assets 27,838 23,644
----------------------------------
Total assets $423,820 $388,570
--------------------------------------------------------------------------------------------------==================================
Liabilities
Non-interest-bearing deposits in U.S. offices $ 20,033 $ 19,492
Interest-bearing deposits in U.S. offices 53,383 49,462
Non-interest-bearing deposits in offices outside the U.S. 13,351 12,132
Interest-bearing deposits in offices outside the U.S. 199,181 179,627
----------------------------------
Total deposits 285,948 260,713
Trading account liabilities 22,641 27,429
Purchased funds and other borrowings 33,545 25,096
Acceptances outstanding 1,173 1,222
Accrued taxes and other expense 8,431 8,416
Other liabilities 14,664 13,204
Long-term debt 27,415 26,443
Stockholder's equity
Common stock: ($0.01 par value)
Issued shares: 1,000 in each period - -
Surplus 7,064 5,844
Retained earnings 23,310 20,498
Accumulated other changes in equity from nonowner sources (1) (371) (295)
----------------------------------
Total stockholder's equity 30,003 26,047
----------------------------------
Total liabilities and stockholder's equity $423,820 $388,570
--------------------------------------------------------------------------------------------------==================================
</TABLE>
(1) Amounts at June 30, 2000 and December 31, 1999 include the after-tax
amounts for net unrealized gains on securities available for sale of $347
million and $340 million, respectively, and foreign currency translation
of ($718) million and ($635) million, respectively.
--------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
25
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED)
Citicorp and Subsidiaries
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period $26,047 $24,686
Net income 3,812 2,458
Net change in unrealized gains and losses on securities available for sale, net of tax 7 111
Foreign currency translation adjustment, net of tax (83) (47)
----------------------------------
Total changes in equity from nonowner sources 3,736 2,522
Common cash dividends declared (1,000) (1,175)
Capital contribution from Parent 1,202 121
Employee benefit plans and other activity 18 46
----------------------------------
Balance at end of period $30,003 $26,200
--------------------------------------------------------------------------------------------------==================================
Summary of changes in equity from nonowner sources
Net income $3,812 $2,458
Other changes in equity from nonowner sources (76) 64
----------------------------------
Total changes in equity from nonowner sources $3,736 $2,522
--------------------------------------------------------------------------------------------------==================================
</TABLE>
See Notes to Consolidated Financial Statements.
26
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Citicorp and Subsidiaries
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 3,812 $ 2,458
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Provision for credit losses 1,462 1,519
Depreciation and amortization of premises and equipment 456 434
Amortization of goodwill and acquisition premium costs 176 142
Restructuring-related items 24 126
Venture capital activity (1,096) (112)
Net gain on sale of securities (297) (174)
Changes in accruals and other, net (3,550) 2,657
Net increase in loans held for sale (3,618) (1,494)
Net (increase) decrease in trading account assets (841) 2,791
Net decrease in trading account liabilities (4,788) (5,819)
----------------------------------
Total adjustments (12,072) 70
----------------------------------
Net cash (used in) provided by operating activities (8,260) 2,528
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Net increase in deposits at interest with banks (553) (221)
Securities -- available for sale and short-term and other
Purchases (26,794) (28,456)
Proceeds from sales 12,175 14,266
Maturities 15,854 13,454
Net decrease in federal funds sold and securities purchased under resale agreements 555 1,380
Net increase in loans (39,253) (67,007)
Proceeds from sales of loans 15,383 55,251
Business acquisitions (1,959) (2,150)
Capital expenditures on premises and equipment (540) (581)
Proceeds from sales of premises and equipment, subsidiaries and affiliates, and other real
estate owned 295 236
----------------------------------
Net cash used in investing activities (24,837) (13,828)
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net increase in deposits 25,235 16,566
Net increase (decrease) in federal funds purchased and securities sold under repurchase
agreements 1,385 (1,957)
Net increase (decrease) in commercial paper and funds borrowed 5,380 (1,224)
Proceeds from issuance of long-term debt 1,615 1,608
Repayment of long-term debt (2,365) (1,437)
Contribution from Citigroup 1,100 121
Dividends paid (1,000) (1,175)
----------------------------------
Net cash provided by financing activities 31,350 12,502
------------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and due from banks (280) (291)
------------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and due from banks (2,027) 911
Cash and due from banks at beginning of period 11,385 9,031
----------------------------------
Cash and due from banks at end of period $ 9,358 $ 9,942
--------------------------------------------------------------------------------------------------==================================
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $7,133 $7,086
Income taxes 1,782 1,640
Non-cash investing activities:
Transfers from loans to other real estate owned $ 155 $ 111
--------------------------------------------------------------------------------------------------==================================
</TABLE>
See Notes to Consolidated Financial Statements.
27
<PAGE>
CONSOLIDATED BALANCE SHEETS Citibank, N.A. and Subsidiaries
<TABLE>
<CAPTION>
June 30,
2000 December 31,
In millions of dollars (Unaudited) 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 8,309 $ 10,648
Deposits at interest with banks 14,269 12,961
Securities, at fair value
Available for sale 36,642 37,071
Venture capital 3,993 3,423
Trading account assets 28,477 28,321
Loans held for sale 1,599 1,279
Federal funds sold and securities purchased under resale agreements 6,913 7,255
Loans, net of unearned income 234,195 207,935
Allowance for credit losses (4,712) (4,647)
----------------------------------
Loans, net 229,483 203,288
Customers' acceptance liability 1,116 1,134
Premises and equipment, net 3,900 3,808
Interest and fees receivable 3,315 3,345
Other assets 18,810 15,366
----------------------------------
Total assets $356,826 $327,899
--------------------------------------------------------------------------------------------------==================================
Liabilities
Non-interest-bearing deposits in U.S. offices $ 16,103 $ 15,501
Interest-bearing deposits in U.S. offices 35,981 32,469
Non-interest-bearing deposits in offices outside the U.S. 13,390 12,185
Interest-bearing deposits in offices outside the U.S. 194,360 174,677
----------------------------------
Total deposits 259,834 234,832
Trading account liabilities 21,932 26,196
Purchased funds and other borrowings 22,008 19,112
Acceptances outstanding 1,173 1,222
Accrued taxes and other expense 5,765 5,273
Other liabilities 7,879 7,950
Long-term debt and subordinated notes 13,767 11,752
Stockholder's equity
Capital stock ($20.00 par value) 751 751
outstanding shares: 37,534,553 in each period
Surplus 10,190 9,836
Retained earnings 14,180 11,565
Accumulated other changes in equity from nonowner sources (1) (653) (590)
----------------------------------
Total stockholder's equity 24,468 21,562
----------------------------------
Total liabilities and stockholder's equity $356,826 $327,899
--------------------------------------------------------------------------------------------------==================================
</TABLE>
(1) Amounts at June 30, 2000 and December 31, 1999 include the after-tax
amounts for net unrealized gains on securities available for sale of $135
million and $116 million, respectively, and foreign currency translation
of ($788) million and ($706) million, respectively.
--------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
28
<PAGE>
CITICORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The accompanying consolidated financial statements as of June 30, 2000 and for
the three- and six-month periods ended June 30, 2000 and 1999 are unaudited and
include the accounts of Citicorp and its subsidiaries (collectively, the
Company). The Company is an indirect wholly owned subsidiary of Citigroup Inc.
In the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation have been reflected. The
accompanying consolidated financial statements should be read in conjunction
with the consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
Certain financial information that is normally included in annual financial
statements prepared in accordance with generally accepted accounting principles,
but is not required for interim reporting purposes, has been condensed or
omitted.
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
2. Future Application of Accounting Standards
Derivatives and hedge accounting. In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS
No. 133). In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133," which delayed the effective date of SFAS No. 133 to January
1, 2001 for calendar year companies such as the Company. In June 2000, the FASB
issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities - An Amendment of FASB Statement No. 133," which amended
certain provisions of SFAS No. 133. These new standards will significantly
change the accounting treatment of end-user derivative and foreign exchange
contracts used by the Company and its customers. Depending on the underlying
risk management strategy, these accounting changes could affect reported
earnings, assets, liabilities, and stockholder's equity. As a result, the
Company and the customers to which it provides derivatives and foreign exchange
products will have to reconsider their risk management strategies, since the new
standard will not reflect the results of many of those strategies in the same
manner as current accounting practice. The Company continues to evaluate the
potential impact of implementing these new accounting standards, which will
depend, among other things, on additional interpretations of the standards prior
to the effective date.
29
<PAGE>
3. Business Segment Information
The following table presents certain information regarding the Company's
industry segments:
<TABLE>
<CAPTION>
Total Revenues, Net Net
of Interest Expense Income Taxes Income (Loss)(1)(2) Identifiable Assets
-----------------------------------------------------------------------------------
Three Months Ended June 30, June 30, Dec. 31,
In millions of dollars --------------------------------------------------------------
except identifiable assets in billions 2000 1999 (3) 2000 1999 (3) 2000 1999 (3) 2000 1999 (3)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Global Consumer $4,515 $4,183 $525 $406 $ 880 $ 664 $182 $167
Global Corporate Bank 2,540 2,135 363 260 632 430 193 177
Global Investment Management
and Private Banking 502 383 53 40 88 67 27 25
Investment Activities 359 233 125 75 215 141 11 11
Corporate/Other (65) 70 (73) (25) (148) (48) 11 9
-----------------------------------------------------------------------------------
Total $7,851 $7,004 $993 $756 $1,667 $1,254 $424 $389
-------------------------------------------------===================================================================================
</TABLE>
<TABLE>
<CAPTION>
Total Revenues, Net Net
of Interest Expense Income Taxes Income (Loss)(1)(2)
--------------------------------------------------------------
Six Months Ended June 30,
In millions of dollars --------------------------------------------------------------
except identifiable assets in billions 2000 1999 (3) 2000 1999 (3) 2000 1999 (3)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Consumer $ 9,088 $ 8,213 $1,030 $ 786 $1,732 $1,285
Global Corporate Bank 4,989 4,396 722 554 1,264 928
Global Investment Management and Private Banking 979 759 101 77 170 130
Investment Activities 1,590 356 565 112 982 213
Corporate/Other (95) 120 (213) (49) (336) (98)
--------------------------------------------------------------
Total $16,551 $13,844 $2,205 $1,480 $3,812 $2,458
----------------------------------------------------------------------==============================================================
</TABLE>
(1) Results in the 2000 second quarter and six-month periods reflect after-tax
restructuring-related (credits) charges of ($10) million and ($6) million
in Global Consumer and $17 million and $25 million in Corporate/Other,
respectively, ($3) million in both periods in Global Corporate Bank, and
($1) million in both periods in Global Investment Management and Private
Banking. The 1999 second quarter and six-month results reflect after-tax
restructuring-related charges of $18 million and $56 million in Global
Consumer, $3 million and $7 million in Global Corporate Bank, and $8
million and $16 million in Corporate/Other, respectively.
(2) Results in the 2000 second quarter and six-month periods include pretax
provisions for credit losses in Global Consumer of $577 million and $1.182
billion, in the Global Corporate Bank of $131 million and $255 million,
and in the Global Investment Management and Private Banking of $3 million
and $25 million, respectively. The 1999 second quarter and six-month
period results reflect pretax provisions for credit losses in Global
Consumer of $677 million and $1.286 billion, in Global Corporate Bank of
$111 million and $223 million, and in Global Investment Management and
Private Banking of $2 million and $10 million, respectively.
(3) Reclassified to conform to the current period's presentation.
--------------------------------------------------------------------------------
4. Securities
<TABLE>
<CAPTION>
June 30, December 31,
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Securities Available for Sale, at Fair Value $45,259 $46,403
Short-term and Other 119 189
----------------------------------
Available for Sale and Short-term and Other $45,378 $46,592
==================================
Venture Capital, at Fair Value (1) $ 5,256 $ 4,160
--------------------------------------------------------------------------------------------------==================================
</TABLE>
(1) For the six months ended June 30, 2000, net gains on investments held by
venture capital subsidiaries totaled $1.59 billion, of which $1.50 billion
and $274 million represented gross unrealized gains and losses,
respectively. For the six months ended June 30, 1999, net gains on
investments held by venture capital subsidiaries totaled $333 million, of
which $342 million and $265 million represented gross unrealized gains and
losses, respectively.
--------------------------------------------------------------------------------
30
<PAGE>
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999(1)
-----------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Amortized
In millions of dollars Cost Gains Losses Fair Value Cost Fair Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Securities Available for Sale
U.S. Treasury and Federal Agency $ 8,029 $ 31 $203 $ 7,857 $ 8,824 $ 8,636
State and Municipal 3,755 185 81 3,859 3,534 3,572
Foreign Government 21,564 415 221 21,758 23,901 24,055
U.S. Corporate 3,154 74 185 3,043 3,009 2,892
Other Debt Securities 4,412 36 32 4,416 3,279 3,297
Equity Securities (2) 3,726 712 112 4,326 3,251 3,951
-----------------------------------------------------------------------------------
$44,640 $1,453 $834 $45,259 $45,798 $46,403
-------------------------------------------------===================================================================================
Securities Available for Sale Include --
Mortgage-Backed Securities $5,190 $8 $188 $5,010 $5,258 $5,074
-------------------------------------------------===================================================================================
</TABLE>
(1) At December 31, 1999, gross unrealized gains and losses on securities
available for sale totaled $1.6 billion and $995 million, respectively.
(2) Includes non-marketable equity securities carried at cost, which are
reported in both the amortized cost and fair value columns.
--------------------------------------------------------------------------------
5. Trading Account Assets and Liabilities
<TABLE>
<CAPTION>
June 30, Dec. 31,
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trading Account Assets
U.S. Treasury and Federal Agency Securities $ 316 $ 131
Foreign Government, Corporate and Other Securities 15,394 10,627
Derivative and Foreign Exchange Contracts (1) 16,671 20,782
----------------------------------
$32,381 $31,540
--------------------------------------------------------------------------------------------------==================================
Trading Account Liabilities
Securities Sold, Not Yet Purchased $ 3,525 $ 4,391
Derivative and Foreign Exchange Contracts (1) 19,116 23,038
----------------------------------
$22,641 $27,429
--------------------------------------------------------------------------------------------------==================================
</TABLE>
(1) Net of master netting agreements and securitization.
--------------------------------------------------------------------------------
6. Restructuring-Related Items
During the 2000 second quarter, Citicorp recorded restructuring charges of $22
million, including $17 million (the 2000 charge) relating to new initiatives in
the Global Consumer business and in Corporate/Other, as well as additional
severance charges of $5 million as a result of the continuing implementation of
1998 restructuring initiatives. The 2000 charge is solely related to employee
severance costs associated with the downsizing of various functions. These
initiatives will be fully implemented during 2000.
In 1999, Citicorp recorded restructuring charges of $131 million, including $82
million (the 1999 charge) of exit costs associated with new initiatives in the
Global Consumer business primarily related to the reconfiguration of certain
branch operations outside the U.S., the downsizing of certain marketing
operations, and the exit of a non-strategic business, as well as additional
severance charges of $49 million as a result of the continuing implementation of
1998 restructuring initiatives. The 1999 charge included $62 million related to
employee severance, $14 million related to exiting leasehold and other
contractual obligations, and $6 million related to the write-down to estimated
salvage value of assets that were available for immediate disposal. The $62
million portion of the charge related to employee severance reflects the costs
of eliminating approximately 750 positions. The 1999 restructuring charge was
fully utilized as of June 30, 2000.
In December 1998, Citicorp recorded a restructuring charge of $1.008 billion,
reflecting exit costs associated with business improvement and integration
initiatives. These initiatives were substantially completed at June 30, 2000.
The charge included $666 million related to employee severance for the
elimination of approximately 10,700 positions, after considering attrition and
redeployment within the Company. The overall workforce reduction, net of
anticipated rehires to fill relocated positions, was expected to be
approximately 9,200 positions worldwide. The charge also included $312 million
related to exiting leasehold and other contractual obligations, and $30 million
related to the write-down to estimated salvage value of assets that were
available for immediate disposal.
The implementation of these restructuring initiatives also caused certain
related premises and equipment assets to become redundant. The remaining
depreciable lives of these assets were shortened, and accelerated depreciation
charges (in addition to normal scheduled depreciation on these assets) is being
recognized over these shortened lives. Accelerated depreciation of $29 million
and $49 million
31
<PAGE>
was recorded in the 2000 second quarter and six months, respectively.
Accelerated depreciation of $47 million and $126 million was recorded during the
1999 second quarter and six months, respectively.
In 1997, Citicorp recorded a restructuring charge of $880 million related to
cost-management programs and customer service initiatives to improve operational
efficiency and productivity. The 1997 restructuring reserve was fully utilized
as of December 31, 1999.
The status of the restructuring initiatives is summarized in the following
table.
Restructuring Initiatives Activity
<TABLE>
<CAPTION>
Restructuring Initiatives
---------------------------------------------------------------------------------------
In millions of dollars 2000 1999 1998 1997 Total
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Restructuring Charges $17 $82 $1,008 $880 $1,987
Additional Severance Charges - - 54 - 54
Utilization (1) (7) (82) (894) (803) (1,786)
Changes in Estimates - - (165) (77) (242)
---------------------------------------------------------------------------------------
Balance at June 30, 2000 $10 $ - $ 3 $ - $ 13
---------------------------------------------=======================================================================================
</TABLE>
(1) Utilization amounts include translation effects on the restructuring
reserve.
--------------------------------------------------------------------------------
The 1999 restructuring reserve utilization included $6 million related to the
write-down to estimated salvage value of assets available for immediate
disposal, as well as $76 million of severance and other exit costs (of which $21
million related to employee severance and $12 million related to leasehold and
other exit costs have been paid in cash and $43 million is legally obligated),
together with translation effects. Utilization, including translation effects,
was $44 million and $51 million in the 2000 second quarter and six months,
respectively. Through June 30, 2000, approximately 750 gross staff positions
have been eliminated under these programs, including 590 in the 2000 second
quarter.
The 1998 restructuring reserve utilization includes $30 million of non-cash
charges for equipment and premises write-downs as well as $824 million of
severance and other exit costs, occurring primarily in 1999 (of which $465
million related to employee severance and $172 million related to leasehold and
other exit costs have been paid in cash and $187 million is legally obligated),
together with translation effects. Utilization, including translation effects,
was $81 million and $156 million in the 2000 second quarter and six months,
respectively. Through June 30, 2000, approximately 6,900 gross staff positions
have been eliminated under these programs, including 800 in the 2000 second
quarter.
Changes in estimates are attributable to facts and circumstances arising
subsequent to an original restructuring charge. During the 2000 second quarter
and the second half of 1999, changes in estimates resulted in reductions of $44
million and $121 million, respectively, in the reserve for 1998 restructuring
initiatives, attributable to lower than anticipated costs of implementing
certain projects and a reduction in the scope of certain initiatives. Changes in
estimates related to the 1997 restructuring initiatives resulted in a reduction
of $77 million attributable to lower severance costs due to higher than
anticipated levels of attrition and redeployment within the Company, and other
unforeseen changes including those resulting from the merger with Travelers
Group Inc.
Additional information about restructuring-related items, including the business
segments affected, may be found in the 1999 Annual Report on Form 10-K.
32
<PAGE>
7. Derivative and Foreign Exchange Contracts
The table below presents the aggregate notional principal amounts of Citicorp's
outstanding derivative and foreign exchange contracts at June 30, 2000 and
December 31, 1999, along with the related balance sheet credit exposure.
Additional information concerning Citicorp's derivative and foreign exchange
products and activities, including a description of accounting policies, and
credit and market risk management process is provided in the 1999 Annual Report
on Form 10-K.
<TABLE>
<CAPTION>
Balance Sheet
Notional Principal Amounts Credit Exposure (1)(2)
--------------------------------------------------------------
June 30, Dec. 31, June 30, Dec. 31,
In billions of dollars 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Rate Products $2,591.1 $1,827.7 $ 1.6 $ 4.0
Foreign Exchange Products 2,027.7 1,733.0 10.8 11.8
Equity Products 101.1 86.8 3.2 4.5
Commodity Products 20.8 21.3 0.8 0.2
Credit Derivative Products 48.3 41.9 0.3 0.3
------------------------------
$16.7 $20.8
------------------------------------------------------------------------------------------------------==============================
</TABLE>
(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.
(2) The balance sheet credit exposure reflects $29.3 billion and $26.8 billion
of master netting agreements in effect at June 30, 2000 and December 31,
1999, respectively. Master netting agreements mitigate credit risk by
permitting the offset of amounts due from and to individual counterparties
in the event of counterparty default. In addition, Citibank has
securitized and sold net receivables, and the associated credit risk
related to certain derivative and foreign exchange contracts via Markets
Assets Trust, which amounted to $2.5 billion at June 30, 2000 and $2.2
billion at December 31, 1999.
--------------------------------------------------------------------------------
The tables below provide data on the notional principal amounts and maturities
of end-user (non-trading) derivatives, along with additional data on end-user
interest rate swaps and net purchased option positions at the end of the second
quarter 2000.
End-User Derivative Interest Rate and Foreign Exchange Contracts
<TABLE>
<CAPTION>
Notional Principal
Amounts (1) Percentage of June 30, 2000 Amount Maturing
-----------------------------------------------------------------------------------
June 30, Dec. 31, Within 1 to 2 to 3 to 4 to After
In billions of dollars 2000 1999 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 $14.6 $6.8 100% -% -% -% -% -%
Forward Contracts 2.8 3.8 100 - - - - -
Swap Agreements 96.7 89.7 32 18 12 10 7 21
Option Contracts 7.9 7.0 16 27 - 3 43 11
Foreign Exchange Products
Futures and Forward Contracts 84.3 48.2 98 1 1 - - -
Cross-Currency Swaps 3.9 4.6 16 24 41 5 1 13
Credit Derivative Products 29.1 29.2 3 3 7 6 31 50
-------------------------------------------------===================================================================================
</TABLE>
(1) Includes third-party and intercompany contracts.
--------------------------------------------------------------------------------
End-User Interest Rate Swaps and Net Purchased Options as of June 30, 2000
<TABLE>
<CAPTION>
Remaining Contracts Outstanding --
Notional Principal Amounts
--------------------------------------------------------------
In billions of dollars 2000 2001 2002 2003 2004 2005
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Receive Fixed Swaps $57.4 $45.9 $38.7 $29.7 $21.5 $15.5
Weighted-Average Fixed Rate 6.3% 6.4% 6.4% 6.5% 6.7% 6.7%
Pay Fixed Swaps 27.8 18.4 9.3 7.1 5.7 4.9
Weighted-Average Fixed Rate 6.3% 6.2% 6.3% 6.3% 6.2% 6.3%
Basis Swaps 11.5 1.2 0.2 0.2 0.2 0.1
Purchased Floors 5.6 4.4 2.8 2.8 2.8 0.1
Weighted-Average Floor Rate Purchased 6.2% 6.2% 7.3% 7.3% 7.3% 5.8%
Written Caps Related to Other Purchased Caps (1) 2.3 2.2 1.7 1.7 1.5 0.8
Weighted-Average Cap Rate Written 9.8% 9.8% 10.6% 10.6% 10.7% 10.5%
------------------------------------------------------------------------------------------------------------------------------------
Three-Month Forward LIBOR Rates (2) 6.8% 7.1% 7.1% 7.1% 7.1% 7.3%
----------------------------------------------------------------------==============================================================
</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
June 30, 2000, provided for reference.
--------------------------------------------------------------------------------
33
<PAGE>
8. Contingencies
In the ordinary course of business, the Company is a defendant or co-defendants
in various litigation matters. Although there can be no assurances, the Company
believes, based on information currently available, that the ultimate resolution
of these legal proceedings would not be likely to have a material adverse effect
on its results of operations, financial condition or liquidity.
9. Guaranteed Subsidiary Debt
Citicorp guarantees all outstanding long-term debt of CitiFinancial Credit
Company (CCC), an indirect wholly owned subsidiary. In addition, Citicorp
guarantees the obligations of CCC under its committed and available five-year
revolving credit facilities under which no borrowings are currently outstanding.
Under these facilities, which expire in 2002, CCC can borrow up to $3.4 billion.
Citicorp is required to maintain a certain level of adjusted consolidated net
worth (as defined in the agreements). At June 30, 2000, this requirement was
exceeded by approximately $14.4 billion. CCC's results are reflected in the
North America Cards, CitiFinancial and Corporate/Other segments and are fully
consolidated in Citicorp's financial statements. Citicorp has not presented
separate financial statements and other disclosures concerning CCC because
management has determined that such information is not material to holders of
CCC's debt securities. The following is summarized legal vehicle financial
information for CCC.
Summarized Balance Sheet
<TABLE>
<CAPTION>
June 30, December 31,
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer loans, net of unearned income $18,881 $17,601
Allowance for credit losses (444) (433)
----------------------------------
Total loans, net 18,437 17,168
Other assets 4,007 3,379
----------------------------------
Total assets $22,444 $20,547
--------------------------------------------------------------------------------------------------==================================
Due to Citicorp and affiliates $14,112 $11,763
Purchased funds and other borrowings 60 67
Other liabilities 1,828 1,931
Long-term debt 5,150 5,700
Stockholder's equity 1,294 1,086
----------------------------------
Total liabilities and stockholder's equity $22,444 $20,547
--------------------------------------------------------------------------------------------------==================================
</TABLE>
Summarized Income Statement
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions of dollars 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues, net of interest expense $480 $435 $944 $834
Operating expense 217 188 436 366
Provision for credit losses 109 109 198 205
Net income $ 98 $ 87 $196 $166
---------------------------------------------------------------=====================================================================
</TABLE>
34
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL DATA SUPPLEMENT
--------------------------------------------------------------------------------
AVERAGE BALANCES AND INTEREST RATES, Taxable Equivalent Basis - Quarterly (1)(2)
Citicorp and Subsidiaries
<TABLE>
<CAPTION>
Average Volume Interest Revenue/Expense % Average Rate
---------------------------------------------------------------------------------------
1st 2nd
2nd Qtr. 1st Qtr. 2nd Qtr. 2nd Qtr. 1st Qtr. 2nd Qtr. 2nd Qtr. Qtr. Qtr.
In millions of dollars 2000 2000 1999 2000 2000 1999 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans (net of unearned income) (3)
Consumer loans
In U.S. offices $ 95,634 $ 87,838 $ 76,117 $2,528 $2,300 $1,992 10.63 10.53 10.50
In offices outside the U.S. (4) 60,191 60,044 56,084 1,586 1,591 1,623 10.60 10.66 11.61
---------------------------------------------------------------
Total consumer loans 155,825 147,882 132,201 4,114 3,891 3,615 10.62 10.58 10.97
---------------------------------------------------------------
Commercial loans
In U.S. offices
Commercial and industrial 19,658 15,806 14,840 374 298 306 7.65 7.58 8.27
Mortgage and real estate 916 923 1,447 21 18 28 9.22 7.84 7.76
Lease financing 5,214 3,393 2,994 105 58 45 8.10 6.88 6.03
In offices outside the U.S. (4) 76,732 73,108 71,433 1,893 1,706 1,551 9.92 9.39 8.71
---------------------------------------------------------------
Total commercial loans 102,520 93,230 90,714 2,393 2,080 1,930 9.39 8.97 8.53
---------------------------------------------------------------
Total loans 258,345 241,112 222,915 6,507 5,971 5,545 10.13 9.96 9.98
---------------------------------------------------------------
Federal funds sold and resale agreements
In U.S. offices 2,706 2,200 3,195 41 28 31 6.09 5.12 3.89
In offices outside the U.S. (4) 2,792 2,535 3,148 58 44 66 8.36 6.98 8.41
---------------------------------------------------------------
Total 5,498 4,735 6,343 99 72 97 7.24 6.12 6.13
---------------------------------------------------------------
Securities, at fair value
In U.S. offices
Taxable 17,362 16,396 13,689 176 173 154 4.08 4.24 4.51
Exempt from U.S. income tax 3,749 3,619 3,384 57 60 47 6.12 6.67 5.57
In offices outside the U.S. (4) 29,545 30,673 28,139 563 609 668 7.66 7.99 9.52
---------------------------------------------------------------
Total 50,656 50,688 45,212 796 842 869 6.32 6.68 7.71
---------------------------------------------------------------
Trading account assets (5)
In U.S. offices 4,262 3,039 2,615 56 51 33 5.28 6.75 5.06
In offices outside the U.S. (4) 10,056 9,181 9,097 200 163 179 8.00 7.14 7.89
---------------------------------------------------------------
Total 14,318 12,220 11,712 256 214 212 7.19 7.04 7.26
---------------------------------------------------------------
Loans held for sale, in U.S. offices 5,815 4,257 6,199 172 119 147 11.90 11.24 9.51
Deposits at interest with banks (4) 12,327 11,547 11,997 276 256 262 9.01 8.92 8.76
---------------------------------------------------------------
Total interest-earning assets 346,959 324,559 304,378 $8,106 $7,474 $7,132 9.40 9.26 9.40
----------------------------------------------------
Non-interest-earning assets (5) 60,053 57,789 53,543
-----------------------------------
Total assets $407,012 $382,348 $357,921
------------------------------------------------------------------------------------------------------------------------------------
Deposits
In U.S. offices
Savings deposits (6) $ 36,530 $ 34,974 $ 33,339 $ 286 $ 269 $ 227 3.15 3.09 2.73
Other time deposits 15,844 13,295 11,370 226 150 95 5.74 4.54 3.35
In offices outside the U.S. (4) 188,323 181,554 166,572 2,686 2,384 2,245 5.74 5.28 5.41
---------------------------------------------------------------
Total 240,697 229,823 211,281 3,198 2,803 2,567 5.34 4.91 4.87
---------------------------------------------------------------
Trading account liabilities (5)
In U.S. offices 1,389 1,999 1,333 7 12 11 2.03 2.41 3.31
In offices outside the U.S. (4) 1,512 1,408 766 7 7 8 1.86 2.00 4.19
---------------------------------------------------------------
Total 2,901 3,407 2,099 14 19 19 1.94 2.24 3.63
---------------------------------------------------------------
Purchased funds and other borrowings
In U.S. offices 22,834 14,561 11,564 359 206 131 6.32 5.69 4.54
In offices outside the U.S. (4) 8,414 8,231 9,593 267 258 332 12.76 12.61 13.88
---------------------------------------------------------------
Total 31,248 22,792 21,157 626 464 463 8.06 8.19 8.78
---------------------------------------------------------------
Long-term debt
In U.S. offices 21,496 21,495 22,194 357 359 319 6.68 6.72 5.77
In offices outside the U.S. (4) 4,561 4,790 4,438 99 116 113 8.73 9.74 10.21
---------------------------------------------------------------
Total 26,057 26,285 26,632 456 475 432 7.04 7.27 6.51
---------------------------------------------------------------
Total interest-bearing liabilities 300,903 282,307 261,169 $4,294 $3,761 $3,481 5.74 5.36 5.35
----------------------------------------------------
Demand deposits in U.S. offices 10,559 9,839 11,516
Other non-interest-bearing liabilities (5) 67,433 63,060 59,797
Total stockholder's equity 28,117 27,142 25,439
-----------------------------------
Total liabilities and stockholder's equity $407,012 $382,348 $357,921
------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE INTEREST-EARNING ASSETS
In U.S. offices (7) $155,238 $137,282 $124,225 $1,901 $1,787 $1,726 4.93 5.24 5.57
In offices outside the U.S. (7) 191,721 187,277 180,153 1,911 1,926 1,925 4.01 4.14 4.29
---------------------------------------------------------------
Total $346,959 $324,559 $304,378 $3,812 $3,713 $3,651 4.42 4.60 4.81
---------------------------------------------=======================================================================================
</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 7 of Notes to 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.
--------------------------------------------------------------------------------
35
<PAGE>
AVERAGE BALANCES AND INTEREST RATES, Taxable Equivalent Basis - Six Months(1)(2)
Citicorp and Subsidiaries
<TABLE>
<CAPTION>
Average Volume Interest Revenue/Expense % Average Rate
-----------------------------------------------------------------------------------
Six Months Six Months Six Months Six Months Six Months Six Months
In millions of dollars 2000 1999 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans (net of unearned income) (3)
Consumer loans
In U.S. offices $ 91,736 $ 75,852 $ 4,828 $ 3,925 10.58 10.43
In offices outside the U.S. (4) 60,118 55,511 3,177 3,147 10.63 11.43
--------------------------------------------------------
Total consumer loans 151,854 131,363 8,005 7,072 10.60 10.86
--------------------------------------------------------
Commercial loans
In U.S. offices
Commercial and industrial 17,731 15,133 672 603 7.62 8.04
Mortgage and real estate 920 1,667 39 69 8.52 8.35
Lease financing 4,304 2,942 163 91 7.62 6.24
In offices outside the U.S. (4) 74,920 71,104 3,599 3,531 9.66 10.01
--------------------------------------------------------
Total commercial loans 97,875 90,846 4,473 4,294 9.19 9.53
--------------------------------------------------------
Total loans 249,729 222,209 12,478 11,366 10.05 10.31
--------------------------------------------------------
Federal funds sold and resale agreements
In U.S. offices 2,453 4,205 69 82 5.66 3.93
In offices outside the U.S. (4) 2,664 3,225 102 156 7.70 9.75
--------------------------------------------------------
Total 5,117 7,430 171 238 6.72 6.46
--------------------------------------------------------
Securities, at fair value
In U.S. offices
Taxable 16,879 13,450 349 292 4.16 4.38
Exempt from U.S. income tax 3,684 3,370 117 97 6.39 5.80
In offices outside the U.S. (4) 30,109 27,743 1,172 1,638 7.83 11.91
--------------------------------------------------------
Total 50,672 44,563 1,638 2,027 6.50 9.17
--------------------------------------------------------
Trading account assets (5)
In U.S. offices 3,650 2,263 107 63 5.90 5.61
In offices outside the U.S. (4) 9,618 8,399 363 311 7.59 7.47
--------------------------------------------------------
Total 13,268 10,662 470 374 7.12 7.07
--------------------------------------------------------
Loans held for sale, in U.S. offices 5,036 5,706 291 286 11.62 10.11
Deposits at interest with banks (4) 11,937 11,990 532 494 8.96 8.31
--------------------------------------------------------
Total interest-earning assets 335,759 302,560 $15,580 $14,785 9.33 9.85
-------------------------------------------------------
Non-interest-earning assets (5) 58,921 55,319
----------------------------
Total assets $394,680 $357,879
------------------------------------------------------------------------------------------------------------------------------------
Deposits
In U.S. offices
Savings deposits (6) $ 35,752 $ 33,174 $ 555 $ 449 3.12 2.73
Other time deposits 14,570 11,281 376 189 5.19 3.38
In offices outside the U.S. (4) 184,938 163,561 5,070 4,794 5.51 5.91
--------------------------------------------------------
Total 235,260 208,016 6,001 5,432 5.13 5.27
--------------------------------------------------------
Trading account liabilities (5)
In U.S. offices 1,694 1,557 19 25 2.26 3.24
In offices outside the U.S. (4) 1,460 746 14 13 1.93 3.51
--------------------------------------------------------
Total 3,154 2,303 33 38 2.10 3.33
--------------------------------------------------------
Purchased funds and other borrowings
In U.S. offices 18,697 12,967 565 292 6.08 4.54
In offices outside the U.S. (4) 8,323 9,813 525 853 12.68 17.53
--------------------------------------------------------
Total 27,020 22,780 1,090 1,145 8.11 10.14
--------------------------------------------------------
Long-term debt
In U.S. offices 21,495 22,686 716 649 6.70 5.77
In offices outside the U.S. (4) 4,676 3,969 215 283 9.25 14.38
--------------------------------------------------------
Total 26,171 26,655 931 932 7.15 7.05
--------------------------------------------------------
Total interest-bearing liabilities 291,605 259,754 $8,055 $7,547 5.55 5.86
-------------------------------------------------------
Demand deposits in U.S. offices 10,199 11,113
Other non-interest-bearing liabilities (5) 65,246 61,736
Total stockholder's equity 27,630 25,276
----------------------------
Total liabilities and stockholder's equity $394,680 $357,879
------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE INTEREST-EARNING ASSETS
In U.S. offices (7) $146,260 $124,355 $3,688 $3,388 5.07 5.49
In offices outside the U.S. (7) 189,499 178,205 3,837 3,850 4.07 4.36
--------------------------------------------------------
Total $335,759 $302,560 $7,525 $7,238 4.51 4.82
-------------------------------------------------===================================================================================
</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 7 of Notes to 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.
--------------------------------------------------------------------------------
36
<PAGE>
CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS
<TABLE>
<CAPTION>
June 30, Dec. 31, June 30,
In millions of dollars 2000 1999 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial cash-basis loans
Collateral dependent (at lower of cost or collateral value) (1) $ 172 $ 200 $ 148
Other 1,428 1,162 1,341
---------------------------------------------------
Total $1,600 $1,362 $1,489
---------------------------------------------------------------------------------===================================================
Commercial cash-basis loans
In U.S. offices $ 367 $ 215 $ 199
In offices outside the U.S. 1,233 1,147 1,290
---------------------------------------------------
Total $1,600 $1,362 $1,489
---------------------------------------------------------------------------------===================================================
Commercial renegotiated loans (in offices outside the U.S.) $27 $43 $50
---------------------------------------------------------------------------------===================================================
Consumer loans on which accrual of interest had been suspended
In U.S. offices $ 716 $ 724 $ 732
In offices outside the U.S. 1,475 1,506 1,527
---------------------------------------------------
Total $2,191 $2,230 $2,259
---------------------------------------------------------------------------------===================================================
Accruing loans 90 or more days delinquent (2)
In U.S. offices $ 771 $ 732 $ 598
In offices outside the U.S. 397 452 472
---------------------------------------------------
Total $1,168 $1,184 $1,070
---------------------------------------------------------------------------------===================================================
</TABLE>
(1) 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.
(2) Substantially all consumer loans, of which $423 million, $379 million and
$284 million are government-guaranteed student loans at June 30, 2000,
December 31, 1999 and June 30, 1999, respectively.
--------------------------------------------------------------------------------
OTHER REAL ESTATE OWNED AND ASSETS PENDING DISPOSITION
<TABLE>
<CAPTION>
June 30, Dec. 31, June 30,
In millions of dollars 2000 1999 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Other real estate owned
Consumer (1) $180 $204 $213
Commercial (1) 178 200 206
Corporate/Other - 6 -
---------------------------------------------------
Total $358 $410 $419
---------------------------------------------------------------------------------===================================================
Assets pending disposition (2) $93 $86 $89
---------------------------------------------------------------------------------===================================================
</TABLE>
(1) Represents repossessed real estate, carried at lower of cost or collateral
value.
(2) Represents consumer residential mortgage loans that have a high
probability of foreclosure, carried at lower of cost or collateral value.
--------------------------------------------------------------------------------
37
<PAGE>
DETAILS OF CREDIT LOSS EXPERIENCE
<TABLE>
<CAPTION>
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
In millions of dollars 2000 2000 1999 1999 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for credit losses
at beginning of period $6,657 $6,679 $6,706 $6,743 $6,662
---------------------------------------------------------------------------------------
Provision for credit losses
Consumer 580 627 594 594 679
Commercial 131 124 92 38 111
---------------------------------------------------------------------------------------
711 751 686 632 790
---------------------------------------------------------------------------------------
Gross credit losses
Consumer
In U.S. offices 481 463 427 419 439
In offices outside the U.S. 285 312 310 324 332
Commercial
In U.S. offices 56 49 28 9 3
In offices outside the U.S. 99 94 130 95 132
---------------------------------------------------------------------------------------
921 918 895 847 906
---------------------------------------------------------------------------------------
Credit recoveries
Consumer
In U.S. offices 89 74 54 66 70
In offices outside the U.S. 82 73 82 79 70
Commercial
In U.S. offices 3 8 11 1 3
In offices outside the U.S. 21 11 46 15 21
---------------------------------------------------------------------------------------
195 166 193 161 164
---------------------------------------------------------------------------------------
Net credit losses
In U.S. offices 445 430 390 361 369
In offices outside the U.S. 281 322 312 325 373
---------------------------------------------------------------------------------------
726 752 702 686 742
---------------------------------------------------------------------------------------
Other-net (1) 94 (21) (11) 17 33
---------------------------------------------------------------------------------------
Allowance for credit losses
at end of period $6,736 $6,657 $6,679 $6,706 $6,743
---------------------------------------------=======================================================================================
Net consumer credit losses $595 $628 $601 $598 $631
As a percentage of average consumer loans 1.54% 1.71% 1.68% 1.74% 1.91%
------------------------------------------------------------------------------------------------------------------------------------
Net commercial credit losses $131 $124 $101 $88 $111
As a percentage of average commercial loans 0.51% 0.53% 0.43% 0.38% 0.49%
---------------------------------------------=======================================================================================
</TABLE>
(1) Primarily includes foreign currency translation effects and the addition
of allowance for credit losses related to acquisitions.
--------------------------------------------------------------------------------
38
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
On April 18, 2000, the Company filed a Current Report on Form 8-K, dated
April 17, 2000, reporting under Item 5 thereof the summarized results of
operations of Citicorp and its subsidiaries for the quarter ended March
31, 2000.
No other reports on Form 8-K were filed during the second quarter of
2000; however, on July 21, 2000, the Company filed a Current Report on
Form 8-K, dated July 19, 2000, reporting under Item 5 thereof the
summarized results of operations of Citicorp and its subsidiaries for
the quarter ended June 30, 2000.
39
<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, on the 14th day of August, 2000.
CITICORP
(Registrant)
By: /s/ Todd S. Thomson
-----------------------
Name: Todd S. Thomson
Title: Chief Financial Officer
Principal Financial Officer
By: /s/ Roger W. Trupin
-----------------------
Name: Roger W. Trupin
Title: Vice President and Controller
40
<PAGE>
Exhibit Index
Exhibit
Number Description of Exhibit
------- ----------------------
3.01 Citicorp's Certificate of Incorporation (incorporated by reference
to Exhibit 3(i) to Citicorp's Post-Effective Amendment No. 1 to
Registration Statement on Form S-3, File No. 333-21143, filed on
October 8, 1998).
3.02 Citicorp's By-Laws (incorporated by reference to Exhibit 3.02 to
Citicorp's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, File No. 1-5738).
12.01 Computation of Ratio of Earnings to Fixed Charges.
12.02 Computation of Ratio of Earnings to Fixed Charges (including
preferred stock dividends).
27.01 Financial Data Schedule.
The total amount of securities authorized pursuant to any instrument defining
rights of holders of long-term debt of Citicorp does not exceed 10% of the total
assets of Citicorp and its consolidated subsidiaries. Citicorp will furnish
copies of any such instrument to the Securities and Exchange Commission upon
request.
41
