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 September 30, 1999
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 1-9924
Citigroup Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1568099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
153 East 53rd Street, New York, New York 10043
(Address of principal executive offices) (Zip Code)
(212) 559-1000
(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 |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
Common stock outstanding as of October 31, 1999: 3,371,666,163
Now available on the Web at www.citigroup.com
<PAGE>
Citigroup Inc.
TABLE OF CONTENTS
-----------------
Part I - Financial Information
Item 1. Financial Statements: Page No.
--------
Consolidated Statement of Income (Unaudited) -
Three and Nine Months Ended September 30, 1999 and 1998 35
Consolidated Statement of Financial Position -
September 30, 1999 (Unaudited) and December 31, 1998 36
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited) - Nine Months Ended September 30, 1999 and 1998 37
Consolidated Statement of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1999 and 1998 38
Notes to Consolidated Financial Statements (Unaudited) 39
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 1-34
Item 3. Quantitative and Qualitative Disclosures About Market Risk 27-29
43-44
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 47
Signatures 48
Exhibit Index 49
<PAGE>
CITIGROUP INC. 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 Citigroup's businesses:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------------------------------------------
In millions of dollars 1999 1998 (1) 1999 1998 (1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Consumer
Citibanking North America $ 111 $ 25 $ 292 $ 89
Mortgage Banking 61 57 174 157
Cards 297 223 847 515
CitiFinancial 135 62 284 159
--------------------------------------------------------------------
Total Banking/Lending 604 367 1,597 920
--------------------------------------------------------------------
Travelers Life and Annuity 168 123 488 369
Primerica Financial Services 114 99 337 297
Personal Lines 23 68 185 231
--------------------------------------------------------------------
Total Insurance 305 290 1,010 897
--------------------------------------------------------------------
Total North America 909 657 2,607 1,817
--------------------------------------------------------------------
Europe, Middle East and Africa 98 64 237 166
Asia Pacific 117 100 325 267
Latin America 55 42 145 122
--------------------------------------------------------------------
Total International 270 206 707 555
--------------------------------------------------------------------
e-Citi (51) (33) (130) (99)
Other (13) (24) (62) (34)
--------------------------------------------------------------------
Total Global Consumer 1,115 806 3,122 2,239
--------------------------------------------------------------------
Global Corporate and Investment Bank
Salomon Smith Barney 432 (396) 1,690 395
Emerging Markets 308 7 925 511
Global Relationship Banking 153 (9) 510 388
Commercial Lines Insurance 255 177 645 522
--------------------------------------------------------------------
Total Global Corporate and Investment Bank 1,148 (221) 3,770 1,816
--------------------------------------------------------------------
Global Investment Management
and Private Banking
SSB Citi Asset Management Group 82 67 246 204
Global Private Bank 73 66 203 189
--------------------------------------------------------------------
Total Global Investment Management
and Private Banking 155 133 449 393
--------------------------------------------------------------------
Corporate/Other (162) (89) (446) (327)
--------------------------------------------------------------------
Business income 2,256 629 6,895 4,121
Investment Activities 194 100 447 818
--------------------------------------------------------------------
Core income 2,450 729 7,342 4,939
Restructuring-related items, after-tax (2) (15) -- 30 191
Cumulative effect of accounting changes (3) -- -- (127) --
--------------------------------------------------------------------
Net income $ 2,435 $ 729 $ 7,245 $ 5,130
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The 1998 results have been restated to reflect changes in capital and tax
allocations among the segments to conform the policies of each of the
predecessor companies.
(2) The restructuring-related items are associated with the 1997 and 1998
restructuring initiatives, and in the third quarter of 1999 include $31
million of severance, $25 million of accelerated depreciation, and a $41
million credit for the reversal of prior charges; and in the 1999 nine
month period, includes $31 million of severance, $105 million of
accelerated depreciation, and a $166 million credit for the reversal of
prior charges. The 1998 nine month period includes a $191 million credit
for the reversal of prior charges. See Note 7 of Notes to Consolidated
Financial Statements.
(3) Accounting changes include the 1999 first quarter adoption of Statement of
Position ("SOP") 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" of ($135) million; SOP 98-7, "Deposit
Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not
Transfer Insurance Risk" of $23 million; and SOP 98-5, "Reporting on the
Costs of Start-Up Activities" of ($15) million. See Note 2 of Notes to
Consolidated Financial Statements.
- --------------------------------------------------------------------------------
1
<PAGE>
Income Analysis
The income analysis reconciles amounts shown in the Consolidated Statement of
Income to the basis employed by management for assessing financial results.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-----------------------------------------------------------------
In millions of dollars 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues, net of interest expense $ 14,021 $ 10,421 $ 42,471 $ 36,182
Effect of credit card securitization activity 552 576 1,710 1,619
-----------------------------------------------------------------
Adjusted revenues, net of interest expense 14,573 10,997 44,181 37,801
-----------------------------------------------------------------
Total operating expenses 7,261 6,339 22,106 19,758
Restructuring-related items (22) -- 61 324
-----------------------------------------------------------------
Adjusted operating expenses 7,239 6,339 22,167 20,082
-----------------------------------------------------------------
Provisions for benefits, claims, and credit losses 2,890 2,925 8,608 8,217
Effect of credit card securitization activity 552 576 1,710 1,619
-----------------------------------------------------------------
Adjusted provisions for benefits, claims, and credit losses 3,442 3,501 10,318 9,836
-----------------------------------------------------------------
Core income before income taxes and minority interest 3,892 1,157 11,696 7,883
Taxes on core income 1,386 375 4,173 2,781
Minority interest, net of income taxes 56 53 181 163
-----------------------------------------------------------------
Core income 2,450 729 7,342 4,939
Restructuring-related items, after-tax (15) -- 30 191
-----------------------------------------------------------------
Income before cumulative effect of accounting changes 2,435 729 7,372 5,130
Cumulative effect of accounting changes -- -- (127) --
-----------------------------------------------------------------
Net income $ 2,435 $ 729 $ 7,245 $ 5,130
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Results of Operations
Citigroup reported core income of $2.450 billion ($0.70 per diluted common
share) in the 1999 third quarter, up $1.721 billion or 236% from $729 million
($0.20 per diluted share) in the 1998 third quarter. Core income in the 1999
third quarter excluded a charge of $15 million for after-tax
restructuring-related items. Net income for the 1999 third quarter was $2.435
billion ($0.70 per diluted share). Core income return on common equity was 21.9%
for the 1999 third quarter compared to 6.5% a year ago.
Core income for the 1999 nine months of $7.342 billion ($2.10 per diluted common
share) was up $2.403 billion or 49% from $4.939 billion ($1.37 per diluted
share) for the 1998 nine months. Core income in the 1999 nine months excluded a
credit of $30 million for after-tax restructuring-related items and a charge of
$127 million reflecting the cumulative effect of adopting several new accounting
standards as described in Note 2 of Notes to the Consolidated Financial
Statements. Core income in the 1998 nine months excluded a credit of $191
million for after-tax restructuring-related items. Net income for the 1999 nine
months was $7.245 billion ($2.07 per diluted share), up $2.115 billion or 41%
from $5.130 billion a year ago. Core income return on common equity was 22.8%
for the 1999 nine months compared to 16.0% for 1998.
Core income growth in the quarter was led by the Global Corporate and Investment
Bank, up $1.369 billion to $1.148 billion reflecting a rebound from the loss in
the 1998 quarter that resulted from severe global economic turmoil, and Global
Consumer which increased $309 million or 38% to $1.115 billion reflecting strong
growth in virtually all businesses. In addition, Global Investment Management
and Private Banking grew $22 million or 17% to $155 million, reflecting a 21%
increase in assets under management to $443 billion. Investment Activities core
income of $194 million was up $94 million or 94% from the year-ago quarter,
primarily reflecting increased venture capital revenues. For the nine month
period, Global Corporate and Investment Bank was up 108% to $3.770 billion,
Global Consumer was up 39% to $3.122 billion, and Global Investment Management
and Private Banking was up 14% to $449 million. Partially offsetting these
increases in the nine month period was a core income decrease of $371 million or
45% in Investment Activities to $447 million, reflecting a decrease in realized
gains from sales of investments and net asset gains, partially offset by an
increase in venture capital revenues.
Global Corporate and Investment Bank core income increases in both the quarter
and nine months was led by a rebound at Salomon Smith Barney ("SSB"), up $828
million to $432 million in the 1999 third quarter and up $1.295 billion to
$1.690 billion in the nine months. SSB's net revenues in the 1999 third quarter
and nine months were up 307% and 53%, primarily reflecting the absence of the
severe market conditions from a year ago. Emerging Markets core income was up
$301 million and $414 million in the quarter and nine months to $308 million and
$925 million, as revenue growth and improved credit complemented continued
expense discipline. Global Relationship Banking ("GRB") was up $162 million and
$122 million to $153 million and $510 million for the 1999 quarter and nine
months, reflecting improved revenues coupled with expense reductions. Emerging
Markets and GRB comparisons to the 1998 quarter also reflect the market distress
that was present in 1998. Commercial Lines was up $78 million to $255 million
and $123 million to $645 million in the third quarter and nine months, as a $49
million (after tax and minority interest) benefit from legislative actions in
state workers' compensation assessments, favorable prior-year reserve
development, and expense control offset revenue declines.
2
<PAGE>
Global Consumer core income in both the 1999 third quarter and nine months
reflected strong growth in virtually all businesses, particularly in
Banking/Lending where Cards core income of $297 million and $847 million in the
quarter and nine months grew $74 million and $332 million from the 1998 periods,
reflecting significant increases in U.S. bankcards; Citibanking North America
core income of $111 million and $292 million in the quarter and nine months
increased $86 million and $203 million, primarily reflecting expense reduction
initiatives; and CitiFinancial (formerly "Consumer Finance Services") improved
$73 million and $125 million to $135 million and $284 million from the
comparable 1998 periods. CitiFinancial core income reflected a 31% growth in
receivables from the 1998 third quarter. Core income in the International
businesses grew 31% to $270 million and 27% to $707 million in the 1999 third
quarter and nine months reflecting increases across all regions. Insurance
businesses core income grew 5% to $305 million and 13% to $1.010 billion as
strong performances by Travelers Life and Annuity and Primerica were partially
offset by a decrease in Personal Lines. Personal Lines results were impacted by
higher catastrophe losses, lower favorable prior-year reserve development, and a
$28 million (after tax and minority interest) charge related to the curtailing
of sales of the TRAVELERS SECURE(R) product line. Global Consumer core income
growth was achieved even as spending continued on the technological enhancements
of e-Citi.
Adjusted revenues, net of interest expense, of $14.6 billion and $44.2 billion
in the 1999 third quarter and nine months were up $3.6 billion or 33% and $6.4
billion or 17% compared to the 1998 periods. Revenue growth was led by Global
Corporate and Investment Bank, up $2.6 billion or 67% and $3.9 billion or 23%
from 1998, which included severe market conditions in the 1998 third quarter,
and Global Consumer which increased strongly in almost all sectors and was up
$790 million or 12% and $2.8 billion or 15% from the comparable 1998 periods,
including strategic acquisitions. Excluding the effects of the 1998 market
turmoil, Global Corporate and Investment Bank comparisons reflect revenue growth
in investment banking, private client, loans and structured products. Global
Investment Management and Private Banking revenues of $669 million and $2.0
billion for the 1999 third quarter and nine months were up $67 million and $188
million, both up 11%. The $143 million increase in the 1999 third quarter in
Investment Activities revenues primarily reflected a $370 million increase in
venture capital revenues, partially offset by a decrease in net asset gains,
while the $544 million decrease in the 1999 nine months reflected a $654 million
decrease in realized gains from sales of investments and net asset gains,
partially offset by a $268 million increase in venture capital revenues.
Net interest revenue as calculated from the Consolidated Statement of Income was
$5.1 billion and $15.0 billion for the 1999 third quarter and nine months, up
$488 million or 11% and $1.2 billion or 9% from the comparable 1998 periods,
reflecting business volume growth in most markets. Net interest revenues,
adjusted for the effect of credit card securitization, of $6.2 billion and $18.1
billion for the 1999 third quarter and nine months were up $575 million or 10%
and $1.9 billion or 11% from the 1998 periods. Adjusted commissions, asset
management and administration fees, and other fee revenues of $4.2 billion and
$12.2 billion were up $655 million or 18% and $1.6 billion or 15%, primarily as
a result of continued growth in assets under fee-based management. Insurance
premiums of $2.6 billion and $7.8 billion were up $213 million and $620 million,
both up 9%, reflecting particularly strong growth in Travelers Life and Annuity.
Principal transactions revenues of $954 million and $4.0 billion were up $2.0
billion and $2.8 billion, reflecting the broad-based rebound in trading
activities from the severe market conditions in 1998. Realized gains from sales
of investments were up $51 million to $35 million in the quarter and down $418
million to $276 million in the nine months. Other income as shown on the
Consolidated Statement of Income of $1.1 billion and $3.3 billion for the 1999
third quarter and nine months increased $231 million or 28% and $544 million or
20% from the 1998 periods, reflecting increased revenues related to credit card
securitization activity, and higher venture capital revenues, partially offset
by lower net asset gains. Other income, adjusted for the effect of credit card
securitization activity, of $572 million and $1.8 billion increased $112 million
and $3 million from the year-ago periods.
Adjusted operating expenses of $7.2 billion and $22.2 billion for the 1999 third
quarter and nine months, which exclude the restructuring-related items, were up
$900 million or 14% and $2.1 billion or 10% from the comparable 1998 periods.
Global Corporate and Investment Bank expenses were up 21% and 10% in the quarter
and nine months, primarily attributable to production-related compensation at
SSB related to the increased revenue, partially offset by lower European
Economic Monetary Union ("EMU") and year 2000 expenses, and the benefit from the
assessment change in workers compensation. Expenses increased in Global Consumer
by 5% and 9% in the quarter and nine months, primarily reflecting acquisitions
in Latin America, Mortgage Banking, and Cards, and electronic financial services
development efforts, partially offset by a decline in fixed costs due to expense
control initiatives. Global Investment Management and Private Banking expenses
increased 8% and 7% in the quarter and nine months, reflecting the expansion of
sales and marketing efforts, and investments made in technology, and research
and quantitative functional analysis.
Progress continued to be made in controlling expenses. Citigroup expects to meet
its stated $2 billion annualized expense reduction goal for 1999, and to
continue to achieve further efficiencies in 2000. This paragraph contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 26.
Adjusted provisions for benefits, claims, and credit losses were $3.4 billion
and $10.3 billion in the 1999 third quarter and nine months, down $59 million
and up $482 million from the comparable 1998 periods. Policyholder benefits and
claims increased 8% to $2.3 billion in the quarter and 5% to $6.5 billion in the
nine months. The adjusted provision for credit losses decreased 16% to $1.2
billion in the quarter and increased 4% to $3.9 billion in the nine months.
3
<PAGE>
Global Consumer adjusted provisions for benefits, claims and credit losses of
$2.5 billion and $7.4 billion were up 8% and 10% in the quarter and nine months.
The ratio of net credit losses to average managed loans was 2.40% in the
quarter, down from 2.58% in the preceding quarter and 2.68% a year ago. The
managed consumer loan delinquency ratio (90 days or more past due) decreased to
1.95% from 1.98% for the preceding quarter and 2.13% a year ago. Global
Corporate and Investment Bank provisions for benefits, claims, and credit losses
of $914 million and $2.9 billion in the 1999 third quarter and nine months
decreased 23% in the quarter and 8% in the nine months. The improvement in
Emerging Markets and GRB reflected the 1998 events in Russia and a lower
provision for credit losses resulting from an improved credit outlook in the
Emerging Markets. Additionally, Commercial Lines prior year loss development and
weather-related catastrophes both improved from the prior year periods.
Commercial cash-basis loans and other real estate owned of $2.2 billion at
quarter-end were up 18% from a year earlier, but were down 1% from the preceding
quarter.
The total provisions for benefits, claims, and credit losses as shown on the
Consolidated Statement of Income were $2.9 billion and $8.6 billion in the 1999
third quarter and nine months, compared to $2.9 billion and $8.2 billion in the
year-ago periods.
Total capital (Tier 1 and Tier 2) was $58.9 billion or 12.34% of net
risk-adjusted assets, and Tier 1 capital was $45.7 billion or 9.58% at September
30, 1999, compared to $57.8 billion or 12.12% and $44.7 billion or 9.37% at June
30, 1999.
On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley
Act (the "Act"), which will become effective in most significant respects 120
days after enactment. Under the Act, bank holding companies, such as Citigroup,
all of whose depository institutions are "well capitalized" and "well managed",
as defined in the Bank Holding Company Act of 1956, and which obtain
satisfactory Community Reinvestment Act ratings, will have the ability to engage
in a broader spectrum of activities than those currently permitted, including
insurance underwriting and brokerage (including annuities), and underwriting and
dealing in securities without a revenue limit. Citigroup will be permitted to
continue to operate its insurance businesses as currently structured and, if it
so determines, to expand those businesses.
Because the Act repeals Section 20 of the Glass-Steagall Act, Citigroup will be
permitted to operate without regard to revenue limits on "ineligible" securities
and to acquire other securities firms without regard to such limits. Subject to
certain limitations, new merchant banking rules will permit Citigroup to make
investments in companies that engage in activities that are not financial in
nature without regard to the existing 5% limit for domestic investments and 20%
limit for overseas investments.
GLOBAL CONSUMER
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- % ----------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 6,674 $ 5,860 14 $19,431 $16,726 16
Effect of credit card securitization activity 552 576 (4) 1,710 1,619 6
-------------------- -----------------------
Adjusted revenues, net of interest expense 7,226 6,436 12 21,141 18,345 15
Adjusted operating expenses (1) 2,942 2,815 5 8,744 7,997 9
-------------------- -----------------------
Provisions for benefits, claims,
and credit losses 1,960 1,743 12 5,689 5,103 11
Effect of credit card securitization activity 552 576 (4) 1,710 1,619 6
-------------------- -----------------------
Adjusted provisions for benefits,
claims, and credit losses 2,512 2,319 8 7,399 6,722 10
-------------------- -----------------------
Core income before taxes
and minority interest 1,772 1,302 36 4,998 3,626 38
Income taxes 648 482 34 1,825 1,341 36
Minority interest, after-tax 9 14 (36) 51 46 11
-------------------- -----------------------
Core income 1,115 806 38 3,122 2,239 39
Restructuring-related items, after-tax 17 -- NM 73 -- NM
-------------------- -----------------------
Net income $ 1,098 $ 806 36 $ 3,049 $ 2,239 36
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Global Consumer -- which provides banking, lending, and personal insurance
products and services, including credit and charge cards, to customers around
the world -- reported core income of $1.115 billion and $3.122 billion in the
1999 third quarter and nine months, up $309 million or 38% and $883 million or
39% from the 1998 periods, reflecting strong growth in virtually all businesses,
particularly in Banking/Lending where Cards increased $74 million or 33% in the
quarter and $332 million or 64% in the nine months, Citibanking increased $86
million or 344% and $203 million or 228%, and CitiFinancial increased $73
million or 118% and $125 million or 79%. In the Insurance segment, core income
grew 5% in the quarter and 13% in the nine months. Core income in the
International businesses grew 31% and 27% in the quarter and nine months,
reflecting increases across all regions. Global Consumer core income growth was
achieved even as spending continued on the technological enhancements of e-Citi.
Net income
4
<PAGE>
of $1.098 billion and $3.049 billion in the 1999 third quarter and
nine months included restructuring-related items of $17 million ($26 million
pretax) and $73 million ($117 million pretax).
Banking/Lending
Citibanking North America
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 528 $ 487 8 $1,552 $1,486 4
Adjusted operating expenses (1) 328 410 (20) 1,001 1,244 (20)
Provision for credit losses 11 26 (58) 49 76 (36)
-------------------- ----------------------
Core income before taxes 189 51 271 502 166 202
Income taxes 78 26 200 210 77 173
-------------------- ----------------------
Core income 111 25 344 292 89 228
Restructuring-related items, after-tax (3) -- NM 16 -- NM
-------------------- ----------------------
Net income $ 114 $ 25 356 $ 276 $ 89 210
- ------------------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars) $ 9 $ 10 (10) $ 10 $ 10 --
Return on assets 5.03% 0.99% 3.69% 1.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Excluding restructuring-related items
Return on assets 4.89% 0.99% 3.90% 1.19%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Citibanking North America -- which delivers banking and lending services to
customers through Citibank's branch network and electronic delivery systems --
reported core income of $111 million and $292 million in the 1999 third quarter
and nine months, up from $25 million and $89 million in the 1998 periods due to
expense reduction initiatives, revenue growth and credit cost improvements. Net
income of $114 million and $276 million in the 1999 third quarter and nine
months included a restructuring-related credit of $3 million ($5 million pretax)
and a restructuring-related charge of $16 million ($26 million pretax),
respectively.
As shown in the following table, Citibanking grew accounts and customer deposits
from 1998. The decline in loans reflects a decrease in home equity loans due to
increased industry-wide mortgage refinancing activity during 1998 and the first
half of 1999.
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- % ---------------------- %
In billions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 6.2 5.8 7 6.2 5.8 7
Average customer deposits $ 42.2 $ 39.7 6 $ 42.0 $ 39.3 7
Average loans 7.5 7.9 (5) 7.6 8.0 (5)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues, net of interest expense, of $528 million and $1.552 billion in the
1999 third quarter and nine months increased $41 million or 8% and $66 million
or 4% from the 1998 periods, reflecting growth in customer deposits and higher
investment product fees and commissions, offset by lower loan volumes. The
increase in revenues in the nine months was reduced by a 1998 second quarter
gain of approximately $25 million related to a building lease transaction.
Adjusted operating expenses declined $82 million or 20% and $243 million or 20%
from the 1998 periods, reflecting expense management initiatives that
significantly reduced staff expenses, marketing spending, and other fixed costs.
The provision for credit losses declined to $11 million and $49 million in the
1999 third quarter and nine months from $26 million and $76 million in the 1998
periods. The net credit loss ratio of 1.03% in the quarter declined from 1.35% a
year ago. Loans delinquent 90 days or more of $64 million or 0.87% at September
30, 1999 declined from $109 million or 1.25% 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.
5
<PAGE>
Mortgage Banking
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ % ----------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 199 $ 160 24 $ 551 $ 466 18
Adjusted operating expenses (1) 90 62 45 231 182 27
Provision for credit losses 2 3 (33) 10 25 (60)
------------------ -----------------
Core income before taxes
and minority interest 107 95 13 310 259 20
Income taxes 42 38 11 122 102 20
Minority interest, after-tax 4 -- NM 14 -- NM
------------------ -----------------
Core income 61 57 7 174 157 11
Restructuring-related items, after-tax 1 -- NM 1 -- NM
------------------ -----------------
Net income $ 60 $ 57 5 $ 173 $ 157 10
- ------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars) $ 29 $ 25 16 $ 29 $ 25 16
Return on assets 0.82% 0.90% 0.80% 0.84%
- ------------------------------------------------------------------------------------------------------------------------
Excluding restructuring-related items
Return on assets 0.83% 0.90% 0.80% 0.84%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Mortgage Banking -- which provides mortgages and student loans to customers
across North America -- reported core income of $61 million and $174 million in
the 1999 third quarter and nine months, up $4 million or 7% and $17 million or
11% from the 1998 periods, reflecting growth in student loans and credit
improvement in the mortgage portfolio. Net income of $60 million and $173
million in the 1999 third quarter and nine months included restructuring-related
charges of $1 million in both periods.
As shown in the following table, accounts, loans, and mortgage originations
increased in both the 1999 quarter and nine months, including the effect of the
April 1999 Source One acquisition. Excluding Source One, mortgage originations
declined reflecting the industry-wide slowdown in mortgage refinancing activity.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ % ----------------- %
In billions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) (1) 3.2 2.7 19 3.2 2.7 19
Average loans (1) $27.1 $24.0 13 $27.0 $23.7 14
Mortgage originations 4.7 4.3 9 13.4 11.3 19
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes student loans.
- --------------------------------------------------------------------------------
Revenues, net of interest expense, of $199 million and $551 million in the 1999
third quarter and nine months grew $39 million or 24% and $85 million or 18%
from the 1998 periods, reflecting the Source One acquisition and growth in the
student loan portfolio. Excluding Source One, mortgage revenues declined
slightly in both the quarter and nine months. Adjusted operating expenses
increased $28 million or 45% and $49 million or 27% from the 1998 periods,
principally due to Source One.
The provision for credit losses of $2 million and $10 million in the 1999 third
quarter and nine months declined from $3 million and $25 million in the 1998
periods. The net credit loss ratio of 0.12% in the quarter declined from 0.29% a
year ago and the ratio of loans delinquent 90 days or more was 2.28%, down from
2.69% in 1998, reflecting improvement in the mortgage portfolio. The ratio of
loans delinquent 90 days or more increased from 2.09% at June 30, 1999 as a
result of a statutory increase in the length of time Citigroup must hold
delinquent government-guaranteed student loans prior to submitting a claim under
the government guarantee.
6
<PAGE>
Cards
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 1,432 $ 1,339 7 $ 4,238 $ 3,508 21
Effect of credit card securitization
activity 552 576 (4) 1,710 1,619 6
---------------------- ----------------------
Adjusted revenues,
net of interest expense 1,984 1,915 4 5,948 5,127 16
Adjusted operating expenses(1) 707 714 (1) 2,153 1,847 17
Adjusted provision for credit losses(2) 804 846 (5) 2,454 2,456 --
---------------------- ----------------------
Core income before taxes 473 355 33 1,341 824 63
Income taxes 176 132 33 494 309 60
---------------------- ----------------------
Core income 297 223 33 847 515 64
Restructuring-related items, after-tax (2) -- NM (2) -- NM
---------------------- ----------------------
Net income $ 299 $ 223 34 $ 849 $ 515 65
- ------------------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars)(3) $ 28 $ 28 -- $ 29 $ 27 7
Return on assets (4) 4.24% 3.16% 3.91% 2.55%
- ------------------------------------------------------------------------------------------------------------------------------------
Excluding restructuring-related items
Return on assets 4.21% 3.16% 3.90% 2.55%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
(2) Adjusted for the effect of credit card securitization.
(3) Adjusted for the effect of credit card securitization, managed average
assets for Cards were $76 billion and $75 billion in the 1999 third
quarter and nine months, compared to $68 billion and $61 billion in the
1998 periods.
(4) Adjusted for the effect of credit card securitization, the return on
managed assets for Cards was 1.56% and 1.30% in the third quarters of 1999
and 1998, and 1.51% and 1.13% for the nine months of 1999 and 1998,
respectively.
NM Not meaningful
- --------------------------------------------------------------------------------
Cards -- U.S. bankcards, Canada bankcards, and North America Diners Club --
reported core income of $297 million and $847 million in the 1999 third quarter
and nine months, up $74 million or 33% and $332 million or 64% from the 1998
periods, reflecting significant increases in the U.S. bankcards business,
despite competitive pricing pressures. Net income of $299 million and $849
million in the 1999 third quarter and nine months included a
restructuring-related credit of $2 million in both periods.
Universal Cards Services ("UCS"), which was acquired in April 1998, contributed
approximately $24 million and $33 million to net income in the 1999 third
quarter and nine months compared with net losses of $31 million and $74 million
in the 1998 periods.
Adjusted revenues, net of interest expense, of $1.984 billion and $5.948 billion
in the 1999 third quarter and nine months increased $69 million or 4% and $821
million or 16% from the 1998 periods reflecting increases in receivables,
including the March 1999 Mellon acquisition, higher interchange fee revenues,
offset by changes in portfolio mix and lower spreads. The year-to-date increase
also reflects the acquisition of UCS and increases due to risk-based pricing
actions.
As shown in the following table, on a managed basis, the U.S. bankcards
portfolio experienced strong receivable and sales volume growth in the quarter
and nine months, including the effect of the Mellon acquisition. Account growth
of 2% includes management initiatives that resulted in the closing of inactive
and/or high-risk accounts. The total sales increase in the nine month period
also reflects the acquisition of UCS.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In billions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 40.6 39.7 2 40.6 39.7 2
Total sales $ 40.9 $ 37.7 8 $ 118.5 $ 98.4 20
End-of-period managed receivables 70.7 63.8 11 70.7 63.8 11
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Adjusted operating expenses of $707 million and $2.153 billion in the 1999 third
quarter and nine months declined slightly in the quarter, but increased $306
million or 17% year-to-date, reflecting the UCS and Mellon acquisitions and
increased marketing costs.
The adjusted provision for credit losses was $804 million and $2.454 billion in
the 1999 third quarter and nine months, down from $846 million and $2.456
billion in the 1998 periods. U.S. bankcards managed net credit losses in the
1999 third quarter were $773 million and the related loss ratio was 4.40%, down
from $803 million and 4.63% in the 1999 second quarter and $805 million and
5.15% in the 1998 third quarter. U.S. bankcards managed loans delinquent 90 days
or more were $995 million or 1.42% at September 30, 1999, compared with $954
billion or 1.36% at June 30, 1999 and $939 million or 1.49% at September 30,
1998. The improvement in both the delinquency and net credit loss ratios from a
year ago reflects moderating industry-wide bankruptcy trends and credit risk
management initiatives.
7
<PAGE>
CitiFinancial
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 421 $ 326 29 $ 1,178 $ 930 27
Adjusted operating expenses (1) 133 129 3 431 374 15
Provisions for benefits,
claims and credit losses 77 100 (23) 298 304 (2)
---------------------- ----------------------
Core income before taxes 211 97 118 449 252 78
Income taxes 76 35 117 165 93 77
---------------------- ----------------------
Core income 135 62 118 284 159 79
Restructuring-related items, after-tax 1 -- NM 2 -- NM
---------------------- ----------------------
Net income $ 134 $ 62 116 $ 282 $ 159 77
- ------------------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars) $ 16 $ 13 23 $ 15 $ 12 25
Return on assets 3.32% 1.89% 2.51% 1.77%
- ------------------------------------------------------------------------------------------------------------------------------------
Excluding restructuring-related items
Return on assets 3.35% 1.89% 2.53% 1.77%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
CitiFinancial (formerly Consumer Finance Services) includes the consumer lending
operations (including secured and unsecured personal loans, real estate-secured
loans, and consumer goods financing) of CitiFinancial Credit Company (formerly
"Commercial Credit Company"). Also included are related credit insurance
services provided through subsidiaries.
Core income was $135 million and $284 million in the 1999 third quarter and nine
months, up from $62 million and $159 million in the comparable periods of 1998.
Included in the 1999 third quarter is a $15 million (after-tax) release of a
litigation reserve resulting from the settlement of a claim. Receivables grew
31% from the 1998 third quarter due to healthy business flow at CitiFinancial
branches, cross selling of CitiFinancial products through Primerica distribution
channels and the acquisition in the first quarter of 1999 of certain Associates
First Capital branches. The total number of CitiFinancial branches rose to 1,173
at the end of the third quarter of 1999, up from 980 at year-end 1998. The
increase in adjusted operating expenses was primarily attributable to the
acquisition.
Receivables at September 30, 1999 reached a record $14.6 billion compared to
$11.9 billion at year-end 1998 and $11.2 billion at September 30, 1998. Much of
the growth in 1999 in real estate-secured loans resulted from the continued
strong performance of the $.M.A.R.T. Loan(R) and $.A.F.E.(R) Loan programs,
which grew to $3.7 billion at September 30, 1999, a 35% increase over September
30, 1998, as well as solid sales in the branch network.
The average yield on receivables was 14.58% during the 1999 third quarter and
14.49% for the 1999 nine months, down from 14.93% in the 1998 periods,
reflecting a shift in the portfolio mix toward lower-risk real estate loans
which have lower margins. At September 30, 1999, the portfolio consisted of 58%
real estate-secured loans, 35% personal loans, and 7% sales finance and other.
The provisions for benefits, claims and credit losses was $77 million and $298
million in the 1999 third quarter and nine months, down from $100 million and
$304 million in the 1998 periods, reflecting continued strong credit
performance. The net credit loss ratio was 2.00% in the quarter, down from 2.14%
in 1999 second quarter and 2.61% a year ago. Loans delinquent 90 days or more
were $186 million or 1.27% at September 30, 1999, compared with $172 million or
1.26% at June 30, 1999 and $162 million or 1.45% a year ago.
8
<PAGE>
Insurance
Travelers Life and Annuity
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 869 $ 716 21 $ 2,507 $ 2,179 15
Policyholder claims and benefits 509 431 18 1,445 1,319 10
Total operating expenses 107 95 13 324 294 10
---------------------- ----------------------
Income before taxes 253 190 33 738 566 30
Income taxes 85 67 27 250 197 27
---------------------- ----------------------
Net income(1) $ 168 $ 123 37 $ 488 $ 369 32
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Travelers Life and Annuity -- which offers fixed and variable deferred
annuities, payout annuities and term, universal life and long -term care
insurance to individuals and small businesses and group pension products,
including guaranteed investment products and group annuities to
employer-sponsored retirement and savings plans -- reported net income of $168
million and $488 million in the 1999 third quarter and nine months, up from $123
million and $369 million in the comparable periods of 1998. The improvement in
1999 reflects increased business volume and particularly strong investment
income versus the prior year periods. During 1999, this business achieved
double-digit business volume growth in annuity account balances and direct
periodic life and long-term care premiums reflecting both greater popularity of
these products with an aging American population and strong momentum from cross
selling initiatives.
The cross selling initiative of Travelers Life and Annuity products through the
Primerica Financial Services ("Primerica"), Citibank, and Salomon Smith Barney
Financial Consultants distribution channels, along with improved sales through
The Copeland Companies ("Copeland"), and a nationwide network of independent
agents and strong group sales through various intermediaries reflect the ongoing
effort to build market share by strengthening relationships in key distribution
channels.
The following table shows net written premiums and deposits by product line:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Deferred annuities
Fixed $ 271 $ 217 25 $ 715 $ 698 2
Variable 1,090 758 44 3,114 2,084 49
Payout annuities 110 76 45 313 264 19
GICs and other group annuities 1,123 1,005 12 4,426 2,706 64
Individual life insurance
Direct periodic premiums and deposits 88 78 13 260 232 12
Single premium deposits 17 17 0 54 61 (11)
Reinsurance (18) (17) 6 (53) (47) 13
Individual long-term care insurance 60 53 13 172 152 13
---------------------- ----------------------
$2,741 $2,187 25 $9,001 $6,150 46
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The majority of the annuity business and a substantial portion of the life
business written by Travelers Life and Annuity are accounted for as investment
contracts, with the result that the premiums and deposits collected are not
included in revenues.
Increased deferred annuities sales, combined with favorable market returns from
variable annuities, drove account balances to $23.9 billion at September 30,
1999, up 29% from $18.5 billion at September 30, 1998. Net written premiums and
deposits for deferred annuities increased 40% and 38% in the third quarter and
nine months of 1999 to $1.36 billion and $3.83 billion, respectively, from $975
million and $2.78 billion in the comparable periods of 1998. The strong sales
reflect the marketing initiatives at Salomon Smith Barney, Copeland's
penetration of the small company segment of the 401(k) market, new products
introduced into the Primerica and Citibank distribution channels as well as
strong core agent production.
Payout and group annuity account balances and benefit reserves reached $15.8
billion at September 30, 1999, up 19% from $13.3 billion at the end of the 1998
third quarter. The payout and group annuity businesses reflect momentum from
rating upgrades, guaranteed investment contracts, structured finance
transactions and cross selling structured settlement annuities through Travelers
Property Casualty Corp. ("TAP"). Net written premiums and deposits (excluding
Citigroup's employee pension plan deposits) were $1.23 billion and $4.74 billion
in the third quarter and nine months of 1999, respectively, up 14% and 60% from
$1.08 billion and $2.97 billion in the comparable periods of 1998.
9
<PAGE>
Direct periodic premiums and deposits for individual life insurance of $88
million and $260 million for the third quarter and nine months of 1999,
respectively, were 13% and 12% ahead of the $78 million and $232 million for the
comparable periods of 1998 reflecting strong core agency results. Life insurance
in force was $58.4 billion at September 30, 1999, up from $55.4 billion at
year-end 1998 and $54.2 billion at September 30, 1998.
Net written premiums for the long-term care insurance line reached $60 million
and $172 million in the third quarter and nine months of 1999, respectively, up
from $53 million and $152 million in the comparable periods of 1998.
Primerica Financial Services
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 444 $ 413 8 $ 1,319 $ 1,233 7
Policyholder claims and benefits 121 121 -- 362 357 1
Total operating expenses 146 138 6 434 414 5
---------------------- ----------------------
Income before taxes 177 154 15 523 462 13
Income taxes 63 55 15 186 165 13
---------------------- ----------------------
Net income(1) $ 114 $ 99 15 $ 337 $ 297 13
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Primerica Financial Services -- which sells life insurance as well as other
products manufactured by the Company, including Salomon Smith Barney mutual
funds, CitiFinancial mortgages and personal loans, Travelers Insurance Company
annuity products, TAP automobile and homeowners insurance and Citibank products
- -- reported net income of $114 million and $337 million in the 1999 third
quarter and nine months, up from $99 million and $297 million in the comparable
periods of 1998. The improvement in 1999 reflects continued success at cross
selling a range of products, growth in life insurance in force, improved
investment income and disciplined expense management. Increases in total
production and cross selling initiatives were achieved during 1999. Earned
premiums, net of reinsurance, were $265 million and $801 million in the 1999
third quarter and nine months, up from $261 million and $787 million in the
comparable periods of 1998. Premiums for Primerica individual term life policies
included in earned premiums for the 1999 third quarter and nine months were $251
million and $755 million, up from $246 million and $740 million in the
comparable periods of 1998.
Total face amount of issued term life insurance was $12.4 billion and $41.5
billion in the 1999 third quarter and nine months, compared to $14.2 billion and
$43.0 billion in the prior year periods. Life insurance in force reached $392.8
billion at September 30, 1999 up from $383.7 billion at year-end 1998 and $380.6
billion at September 30, 1998, and continued to reflect good policy persistency.
In recent years, Primerica has leveraged cross selling through the Financial
Needs Analysis ("FNA") to expand its business beyond life insurance and now
offers its clients a greater array of financial products and services, delivered
personally through 150,000 independent representatives. During the first nine
months of 1999, 377,000 FNA-- the diagnostic tool that enhances the ability of
the Personal Financial Analysts to address client needs -- were submitted
compared to 404,000 in the first nine months of 1998. Primerica sales of
Travelers variable annuities continued to show momentum, reaching net written
premiums and deposits of $248 million and $750 million in the 1999 third quarter
and nine months, up from $172 million and $473 million in the prior year
periods. This increase reflects the increased emphasis placed on cross selling
initiatives in the latter part of 1998, with the current period sales
predominately reflecting sales of Travelers Life and Annuity variable annuity
products. Cash advanced on $.M.A.R.T. Loan(R) and $.A.F.E.(R) Loan products
underwritten by Travelers Bank & Trust, fsb and CitiFinancial, respectively, was
$488 million and $1.40 billion in the 1999 third quarter and nine months, up 41%
and 30% from the comparable periods last year. Mutual fund sales were $737
million and $2.33 billion for the 1999 third quarter and nine months, slightly
ahead of last year's third quarter and nine months. During the 1999 nine months,
Salomon Smith Barney mutual funds accounted for 62% of Primerica's U.S. sales
and 54% of total sales.
10
<PAGE>
Personal Lines
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 1,018 $ 924 10 $ 3,006 $ 2,691 12
Claims and claim adjustment expenses 714 581 23 1,935 1,608 20
Total operating expenses 271 228 19 759 682 11
---------------------- ----------------------
Income before taxes
and minority interest 33 115 (71) 312 401 (22)
Income taxes 5 33 (85) 90 124 (27)
Minority interest, after-tax 5 14 (64) 37 46 (20)
---------------------- ----------------------
Net income (1) $ 23 $ 68 (66) $ 185 $ 231 (20)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Personal Lines -- which writes all types of property and casualty insurance
covering personal risks -- reported net income of $23 million and $185 million
in the third quarter and nine months of 1999, respectively, compared to $68
million and $231 million in the prior year periods. The 1999 third quarter and
nine month results reflect higher catastrophe losses, lower favorable prior-year
reserve development and a charge related to curtailing the sale of the TRAVELERS
SECURE(R) auto and homeowners products of $28 million (after tax and minority
interest) and was partially offset by growth in earned premiums. Net written
premiums in the 1999 first quarter included an adjustment associated with the
termination of a quota share reinsurance arrangement, which increased homeowners
premiums written by independent agents by $72 million.
The following table shows net written premiums by product line:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Personal automobile $ 581 $ 591 (2) $ 1,798 $ 1,725 4
Homeowners and other 371 318 17 1,088 864 26
---------------------- ----------------------
Total net written premiums $ 952 $ 909 5 $ 2,886 $ 2,589 11
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Personal Lines net written premiums for the 1999 third quarter and nine months
were $952 million and $2.814 billion (excluding the adjustment discussed above),
up from $909 million and $2.589 billion in the comparable periods of 1998. The
1999 increase compared to 1998 primarily reflects growth in independent agents
business and growth in affinity group marketing and joint marketing
arrangements. During the quarter, TAP decided to curtail the sale of its
TRAVELERS SECURE(R) auto and homeowners products because losses exceeded levels
anticipated in the pricing of the products. Business retention continued to be
strong.
Catastrophe losses, net of taxes and reinsurance, were $48 million and $79
million in the 1999 third quarter and nine months, up from $22 million and $44
million in the comparable periods of 1998. Catastrophe losses in 1999 were
primarily due to Hurricane Floyd in the third quarter, wind and hail storms on
the East Coast and tornadoes in the Midwest in the second quarter and a wind and
ice storm in the Midwest and Northeast in the first quarter. Catastrophe losses
in 1998 were due to Hurricanes Bonnie and Georges and windstorms in the Midwest
and Northeast in the third quarter, tornadoes and wind and hail storms in the
Southeast and Midwest in the second quarter, and ice storms in northern New York
and New England and windstorms on the East Coast in the first quarter.
Statutory and GAAP combined ratios (before allocation of corporate expenses) for
Personal Lines were as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Statutory combined ratio 104.0% 96.3% 97.6% 94.2%
GAAP combined ratio 106.2% 94.5% 97.5% 92.8%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GAAP combined ratios for Personal Lines differ from statutory combined ratios
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.
The increase in the third quarter of 1999 statutory and GAAP combined ratios
compared to the third quarter of 1998 was primarily due to higher catastrophe
losses, the TRAVELERS SECURE(R) charge and lower favorable prior-year reserve
development in the automobile bodily injury line.
The first nine months of 1999 statutory and GAAP combined ratios for Personal
Lines include an adjustment associated with the termination of a quota share
reinsurance arrangement. Excluding this adjustment, the statutory and GAAP
combined ratios for the first nine months of 1999 would have been 97.3% and
98.1%, respectively. The increase in the first nine months of 1999 statutory
11
<PAGE>
and GAAP combined ratios excluding this adjustment compared to the first nine
months of 1998 statutory and GAAP combined ratios was due to higher catastrophe
losses, higher losses in the TRAVELERS SECURE(R) program, the TRAVELERS
SECURE(R) charge and lower favorable prior-year reserve development in the
automobile bodily injury line, partially offset by productivity improvements.
International Consumer
Europe, Middle East & Africa
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 608 $ 543 12 $ 1,736 $ 1,567 11
Adjusted operating expenses (1) 370 362 2 1,113 1,078 3
Provisions for benefits,
claims and credit losses 79 74 7 236 214 10
---------------------- ----------------------
Core income before taxes 159 107 49 387 275 41
Income taxes 61 43 42 150 109 38
---------------------- ----------------------
Core income 98 64 53 237 166 43
Restructuring-related items, after-tax 8 -- NM 17 -- NM
---------------------- ----------------------
Net income $ 90 $ 64 41 $ 220 $ 166 33
- ------------------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars) $ 23 $ 22 5 $ 22 $ 21 5
Return on assets 1.55% 1.15% 1.34% 1.06%
- ------------------------------------------------------------------------------------------------------------------------------------
Excluding restructuring-related items
Return on assets 1.69% 1.15% 1.44% 1.06%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Europe, Middle East & Africa ("EMEA") -- which provides banking and lending
services, including credit and charge cards, to customers throughout the region
- -- reported core income of $98 million and $237 million in the 1999 third
quarter and nine months, up $34 million or 53% and $71 million or 43% from the
1998 periods, reflecting a $16 million ($25 million pretax) gain related to an
investment in an affiliate and business growth across the region. Net income of
$90 million and $220 million in the 1999 third quarter and nine months included
restructuring-related items of $8 million ($12 million pretax) and $17 million
($27 million pretax), respectively.
The net effects of foreign currency translation reduced core income by
approximately $8 million in the quarter and reduced revenue and expense growth
by approximately 6% and 5%, respectively. Foreign currency translation effects
were not material in the nine month period.
As shown in the following table, EMEA reported 6% account growth from a year ago
primarily reflecting loan growth, including credit cards.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In billions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 10.7 10.1 6 10.7 10.1 6
Average customer deposits $ 17.1 $ 17.1 -- $ 17.1 $ 17.1 --
Average loans 17.2 16.5 4 16.8 15.9 6
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues, net of interest expense, of $608 million and $1.736 billion in the
1999 third quarter and nine months grew $65 million or 12% and $169 million or
11% from the 1998 periods, reflecting the $25 million gain associated with an
investment in an affiliate, loan growth, improved spreads, and higher insurance
and investment product fees. Adjusted operating expenses of $370 million and
$1.113 billion in the 1999 third quarter and nine months were up $8 million or
2% and $35 million or 3% from the 1998 periods, reflecting costs associated with
franchise expansion in Central and Eastern Europe and business volume growth.
The provisions for benefits, claims and credit losses was $79 million and $236
million in the 1999 third quarter and nine months, up from $74 million and $214
million in the 1998 periods. The net credit loss ratio was 1.60% in the quarter,
down from 1.71% in the 1999 second quarter and 1.64% a year ago. Loans
delinquent 90 days or more were $953 million or 5.45% at September 30, 1999,
compared with $899 million or 5.46% at June 30, 1999 and $955 million or 5.52% a
year ago.
12
<PAGE>
Asia Pacific
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 580 $ 459 26 $ 1,641 $ 1,338 23
Adjusted operating expenses (1) 315 234 35 866 727 19
Provision for credit losses 77 63 22 254 177 44
---------------------- ----------------------
Core income before taxes 188 162 16 521 434 20
Income taxes 71 62 15 196 167 17
---------------------- ----------------------
Core income 117 100 17 325 267 22
Restructuring-related items, after-tax -- -- -- 9 -- NM
---------------------- ----------------------
Net income $ 117 $ 100 17 $ 316 $ 267 18
- ------------------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars) $ 31 $ 28 11 $ 30 $ 28 7
Return on assets 1.50% 1.42% 1.41% 1.27%
- ------------------------------------------------------------------------------------------------------------------------------------
Excluding restructuring-related items
Return on assets 1.50% 1.42% 1.45% 1.27%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Asia Pacific (including Japan and Australia) -- which provides banking and
lending services, including credit and charge cards, to customers throughout the
region -- reported core income of $117 million and $325 million in the 1999
third quarter and nine months, up $17 million or 17% and $58 million or 22% from
the 1998 periods, reflecting business growth across the region, particularly
Japan, as the region continues to rebound from weak 1998 results, offset by
higher credit losses in Taiwan and Hong Kong. Net income of $117 million and
$316 million in the 1999 third quarter and nine months included
restructuring-related items of $9 million ($15 million pretax) in the nine month
period.
Strengthening currencies across the region resulted in net foreign currency
translation effects in the 1999 third quarter and nine months that increased
core income by approximately $10 million and $11 million. The net effect of
foreign currency translation increased revenue growth by 10% and 5% and expense
growth by 11% and 6%, respectively.
As shown in the following table, Asia Pacific accounts grew 23% from 1998,
driven by double digit growth in both customer deposits and loans, reflecting
significant increases in Japan, and economic stabilization in certain countries.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In billions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 9.0 7.3 23 9.0 7.3 23
Average customer deposits $ 42.5 $ 36.8 15 $ 41.0 $ 35.0 17
Average loans 23.7 20.1 18 22.9 19.8 16
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues, net of interest expense, of $580 million and $1.641 billion in the
1999 third quarter and nine months, increased $121 million or 26% and $303
million or 23% from the 1998 periods, reflecting strong performance in Japan and
higher spreads and business volume growth in most other countries. Adjusted
operating expenses in the quarter and nine months were up $81 million or 35% and
$139 million or 19% from the 1998 periods, reflecting higher marketing and
program spending primarily in Singapore, Taiwan, and Japan.
The provision for credit losses was $77 million and $254 million in the 1999
third quarter and nine months, up from $63 million and $177 million in the 1998
periods. The net credit loss ratio was 1.23% in the quarter, up from 1.12% a
year ago, but down from 1.33% in the 1999 second quarter. Loans delinquent 90
days or more were $450 million or 1.87% at September 30, 1999 compared with $384
million or 1.87% a year ago and $509 million or 2.17% at June 30, 1999. The
increases in the provision and the net credit loss ratio from a year ago
primarily reflect increases in Taiwan and Hong Kong; however, net credit losses
and delinquencies declined from the 1999 second quarter. Additionally, the
extent of the impact of the earthquake in Taiwan during the 1999 third quarter
on the future credit performance of the loan portfolio continues to be assessed.
13
<PAGE>
Latin America
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 504 $ 431 17 $ 1,469 $ 1,154 27
Adjusted operating expenses (1) 302 287 5 892 768 16
Provision for credit losses 117 74 58 353 184 92
---------------------- ----------------------
Core income before taxes 85 70 21 224 202 11
Income taxes 30 28 7 79 80 (1)
---------------------- ----------------------
Core income 55 42 31 145 122 19
Restructuring-related items, after-tax 12 -- NM 30 -- NM
---------------------- ----------------------
Net income $ 43 $ 42 2 $ 115 $ 122 (6)
- ------------------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars) $ 14 $ 13 8 $ 14 $ 11 27
Return on assets 1.22% 1.28% 1.10% 1.48%
- ------------------------------------------------------------------------------------------------------------------------------------
Excluding restructuring-related items
Return on assets 1.56% 1.28% 1.38% 1.48%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Latin America -- which provides banking and lending services, including credit
and charge cards, to customers throughout the region -- reported core income of
$55 million and $145 million in the 1999 third quarter and nine months, up $13
million or 31% and $23 million or 19% from the 1998 periods, reflecting an
increase in earnings from Credicard, a 33%-owned Brazilian Card affiliate, and
the effect of certain acquisitions, partially offset by a higher provision for
credit losses. Net income of $43 million and $115 million in the 1999 third
quarter and nine months included restructuring-related items of $12 million ($19
million pretax) and $30 million ($47 million pretax). Average assets of $14
billion in the quarter and $14 billion in the nine months increased 8% and 27%
from the 1998 periods due to acquisitions in the region.
The Brazilian currency devaluation in the 1999 first quarter significantly
contributed to the 1999 third quarter and nine months foreign currency
translation effects that reduced core income by approximately $8 million and $21
million. Foreign currency translation effects reduced revenue growth by 9% and
10% and expense growth by 6% and 8%, respectively.
As shown in the following table, Latin America experienced strong business
volume growth, principally due to the effect of acquisitions. Account and
average loan growth was reduced by credit risk management initiatives. Customer
deposit growth also reflects a "flight to quality" in the region.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In billions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 7.6 7.1 7 7.6 7.1 7
Average customer deposits $ 13.6 $ 10.7 27 $ 13.4 $ 9.7 38
Average loans 7.9 8.0 (1) 7.9 7.8 1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues, net of interest expense, of $504 million and $1.469 billion in the
1999 third quarter and nine months were up $73 million or 17% and $315 million
or 27% from the 1998 periods, reflecting acquisitions in the region and
increased earnings from Credicard. Adjusted operating expenses grew $15 million
or 5% and $124 million or 16% in the quarter and nine months, reflecting
acquisitions in the region. Efficiency efforts contributed to a 7% decline in
expenses in the quarter excluding the effect of acquisitions and foreign
currency translation.
The provision for credit losses was $117 million and $353 million in the 1999
third quarter and nine months, up from $74 million and $184 million in the 1998
periods. The net credit loss ratio was 5.55% in the quarter, up from 3.48% a
year ago, but down from 6.17% in the 1999 second quarter. Loans delinquent 90
days or more of $325 million or 4.10% at September 30, 1999 increased from $243
million or 3.05% a year ago, but declined from $346 million or 4.32% at June 30,
1999. The increases in the provision, the net credit loss ratio, and
delinquencies from a year ago reflect economic conditions in the region,
particularly in Chile and Argentina, and the effect of recent acquisitions.
14
<PAGE>
e-Citi
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- % -------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 57 $ 38 50 $ 166 $ 102 63
Total operating expenses 140 91 54 379 262 45
Provision for credit losses 1 -- NM 3 2 50
------------------ --------------------
Loss before tax benefits (84) (53) 58 (216) (162) 33
Income tax benefits (33) (20) 65 (86) (63) 37
------------------ --------------------
Net loss ($ 51) ($ 33) 55 ($ 130) ($ 99) 31
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NM Not meaningful
- --------------------------------------------------------------------------------
e-Citi -- the business responsible for developing and implementing the Company's
internet financial services products and e-commerce solutions -- reported net
losses of $51 million and $130 million in the 1999 third quarter and nine
months, compared to $33 million and $99 million in the 1998 periods.
Revenues, net of interest expense, were $57 million and $166 million in the 1999
third quarter and nine months, up from $38 million and $102 million in the 1998
periods, reflecting business volume increases in certain electronic banking
services. Total operating expenses of $140 million and $379 million in the
quarter and nine months increased from $91 million and $262 million in the 1998
periods, reflecting continued investment in internet-based and other electronic
financial services as well as other e-commerce solutions and volume increases
associated with electronic banking services.
Other Consumer
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -----------------------
In millions of dollars 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues, net of interest expense $ 14 $ 24 $ 68 $ 72
Total operating expenses 33 65 161 125
--------------------- -----------------------
Loss before tax benefits (19) (41) (93) (53)
Income tax benefits (6) (17) (31) (19)
--------------------- -----------------------
Net loss ($13) ($24) ($62) ($34)
- --------------------------------------------------------------------------------------------------
</TABLE>
Other Consumer -- which includes certain treasury operations and global
marketing and other programs -- net losses were $13 million and $62 million in
the 1999 third quarter and nine months, compared with net losses of $24 million
and $34 million in the 1998 periods. The improvement in the quarter reflects
lower marketing costs and reduced staff levels. The increase in the net loss in
the nine months reflects higher costs associated with global distribution
initiatives.
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.
15
<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, Sept. 30, Sept. 30, June 30, Sept. 30, 3rd Qtr. 3rd Qtr. 2nd Qtr. 3rd Qtr.
except loan amounts in billions 1999 1999 1999 1998 1999 1999 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Citibanking North America $ 7.4 $ 64 $ 92 $ 109 $ 7.5 $ 20 $ 23 $ 27
Ratio 0.87% 1.20% 1.25% 1.03% 1.20% 1.35%
Mortgage Banking 27.6 629 575 623 27.1 8 11 17
Ratio 2.28% 2.09% 2.69% 0.12% 0.17% 0.29%
U.S. Bankcards 70.1 995 954 939 69.7 773 803 805
Ratio 1.42% 1.36% 1.49% 4.40% 4.63% 5.15%
Other Cards 2.3 25 33 34 2.4 24 22 17
Ratio 1.09% 1.31% 1.41% 3.82% 3.17% 2.99%
CitiFinancial 14.6 186 172 162 14.0 71 70 71
Ratio 1.27% 1.26% 1.45% 2.00% 2.14% 2.61%
Europe, Middle East & Africa 17.5 953 899 955 17.2 69 70 68
Ratio 5.45% 5.46% 5.52% 1.60% 1.71% 1.64%
Asia Pacific 24.0 450 509 384 23.7 73 76 57
Ratio 1.87% 2.17% 1.87% 1.23% 1.33% 1.12%
Latin America 7.9 325 346 243 7.9 110 124 70
Ratio 4.10% 4.32% 3.05% 5.55% 6.17% 3.48%
Global Private Bank(2) 21.1 145 162 195 19.9 2 2 1
Ratio 0.69% 0.88% 1.19% 0.05% 0.05% 0.02%
Other 0.9 3 2 1 0.7 1 1 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total managed 193.4 3,775 3,744 3,645 190.1 1,151 1,202 1,133
Ratio 1.95% 1.98% 2.13% 2.40% 2.58% 2.68%
- ----------------------------------------------------------------------------------------------------------------------------------
Securitized credit card receivables (48.5) (704) (652) (614) (47.9) (525) (541) (542)
Loans held for sale (5.2) (37) (35) (38) (5.2) (27) (29) (34)
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer loans $139.7 $3,034 $3,057 $2,993 $137.0 $ 599 $ 632 $ 557
Ratio 2.17% 2.27% 2.39% 1.73% 1.89% 1.80%
- ----------------------------------------------------------------------------------------------------------------------------------
</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
-------------------------------- ----------------------------------
Sept. 30, June 30, Sept. 30, 3rd Qtr. 2nd Qtr. 3rd Qtr.
In billions of dollars 1999 1999 1998 1999 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total managed $193.4 $188.3 $170.9 $190.1 $186.0 $167.9
Securitized credit card receivables (48.5) (47.4) (40.6) (47.9) (46.7) (40.2)
Loans held for sale (5.2) (6.5) (5.2) (5.2) (6.2) (5.2)
-------------------------------- ----------------------------------
Consumer loans $139.7 $134.4 $125.1 $137.0 $133.1 $122.5
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total delinquencies 90 days or more past due in the managed portfolio were $3.8
billion with a related delinquency ratio of 1.95% at September 30, 1999,
compared with $3.7 billion or 1.98% at June 30, 1999 and $3.6 billion or 2.13%
at September 30, 1998. Total managed net credit losses in the 1999 third quarter
were $1.2 billion and the related loss ratio was 2.40%, compared with $1.2
billion and 2.58% in the 1999 second quarter and $1.1 billion and 2.68% in the
1998 third quarter. For a discussion on trends by business, see business
discussions on pages 4-15.
The portion of Citigroup's allowance for credit losses attributed to the
consumer portfolio was $3.4 billion at September 30, 1999, compared with $3.4
billion at June 30, 1999 and $3.3 billion at September 30, 1998. The allowance
as a percentage of loans on the balance sheet was 2.47% at September 30, 1999,
compared with 2.55% at June 30, 1999 and 2.62% at September 30, 1998. 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
1999 third quarter as a result of global economic conditions, portfolio growth,
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 26.
16
<PAGE>
GLOBAL CORPORATE AND INVESTMENT BANK
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 6,405 $ 3,839 67 $20,436 $16,556 23
Adjusted operating expenses (1) 3,656 3,024 21 11,602 10,554 10
Provisions for benefits, claims,
and credit losses 914 1,182 (23) 2,873 3,133 (8)
---------------------- ----------------------
Core income (loss) before taxes
and minority interest 1,835 (367) 600 5,961 2,869 108
Income taxes (benefits) 637 (181) 452 2,063 948 118
Minority interest, after-tax 50 35 43 128 105 22
---------------------- ----------------------
Core income (loss) 1,148 (221) 619 3,770 1,816 108
Restructuring-related items, after-tax -- -- -- (117) (191) (39)
---------------------- ----------------------
Net income (loss) (2) $ 1,148 ($ 221) 619 $ 3,887 $ 2,007 94
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
(2) The 1999 nine month period excludes cumulative effect of accounting
changes.
- --------------------------------------------------------------------------------
Global Corporate and Investment Bank provides corporations, governments,
institutions and investors in 100 countries with a broad range of financial
products and services.
The Global Corporate and Investment Bank experienced a rebound from the loss in
the 1998 period that resulted from severe global economic turmoil. Global
Corporate and Investment Bank core income was $1.148 billion and $3.770 billion
in the 1999 third quarter and nine months, up $1.369 billion and $1.954 billion
from the comparable 1998 periods. The 1999 quarter and nine month increases
reflect core income growth of $828 million and $1.295 billion in SSB, $301
million and $414 million in Emerging Markets, $162 million and $122 million in
GRB and $78 million and $123 million in Commercial Lines, respectively.
Excluding the effect of the 1998 severe market conditions, core income growth
was due to the following reasons in the respective businesses. SSB's core income
growth was driven by strong revenue momentum in the private client group,
principal transactions and investment banking. Emerging Markets core income
growth was driven by increased revenues in loans, trade finance and structured
products along with improved credit. GRB's core income growth was primarily a
result of lower expenses. Commercial Lines improvement reflects a $49 million
(after tax and minority interest) benefit from legislative changes as well as
favorable prior year reserve development.
Net income, excluding the effect of accounting changes, in Global Corporate and
Investment Bank totaled $3.887 billion in the 1999 nine months, up $1.88 billion
or 94% from 1998. Included in the 1999 nine months net income were restructuring
reserve releases of $143 million ($242 million pretax) of which $126 million
($213 million pretax) related to the 1997 reserve that resulted from SSB's
reassessment of space needs due to the Citicorp merger. Included in 1998 nine
months net income is a release of the 1997 restructuring reserve of $191 million
($324 million pretax) that resulted from SSB's negotiations on a sublease on the
Seven World Trade Center location which indicated that excess space could be
disposed of on terms more favorable than had been originally estimated. See
further discussion of the restructuring reserve release in SSB in Note 7 of
Notes to Consolidated Financial Statements.
The businesses of Global Corporate and Investment Bank are significantly
affected by the levels of activity in the global capital markets which, in turn,
are influenced by macroeconomic events, political policies, year 2000 potential
impact on capital markets, and other factors in the 100 countries in which the
businesses operate. Global economic events can have both positive and negative
effects on the revenue performance of the businesses and can negatively affect
credit performance. In particular, levels of principal transactions, realized
gains from sales of investments, and gains from asset sales may fluctuate in the
future as a result of market and asset-specific factors. Losses on commercial
lending activities and the level of cash-basis loans can vary widely with
respect to timing and amount, particularly within any narrowly defined business
or loan type, or due to global economic developments. A variety of factors
continue to affect the property and casualty insurance market, including the
competitive pressures affecting pricing and profitability, inflation in the cost
of medical care, and litigation. Pricing in the Commercial Lines marketplace is
expected to continue to be competitive in 2000. Changes in the general interest
rate environment affect the returns received by Commercial Lines on newly
invested and reinvested funds. This paragraph contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on page 26.
17
<PAGE>
Salomon Smith Barney
The following data does not include the Asset Management division of Salomon
Smith Barney, which is included in the SSB Citi Asset Management Group results.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 2,791 $ 685 307 $ 9,401 $ 6,126 53
Adjusted operating expenses (1) 2,107 1,326 59 6,753 5,514 22
---------------------- ----------------------
Core income (loss) before taxes 684 (641) 207 2,648 612 333
Income taxes (benefits) 252 (245) 203 958 217 341
---------------------- ----------------------
Core income (loss) 432 (396) 209 1,690 395 328
Restructuring-related credit, after-tax (18) -- NM (142) (191) (26)
---------------------- ----------------------
Net income (loss) (2) $ 450 ($ 396) 214 $ 1,832 $ 586 213
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
(2) The 1999 nine month period excludes cumulative effect of accounting
change.
NM Not meaningful
- --------------------------------------------------------------------------------
Salomon Smith Barney reported core income in the 1999 third quarter and nine
months of $432 million and $1.690 billion, up from a $396 million loss in the
1998 third quarter and income of $395 million in the 1998 nine months. The loss
in the 1998 third quarter resulted from the severe global economic turmoil and
included an after-tax loss of $700 million related to Global Arbitrage and
Russian-related credit losses. Salomon Smith Barney continues to scale back its
exposure to the Global Arbitrage business, with the balance sheet commitment to
this business reduced by over 90% from its peak, to $7 billion of assets at
September 30, 1999. See Note 7 of Notes to Consolidated Financial Statements for
discussions of the restructuring-related credits in the first and third quarters
of 1999 and the second quarter of 1998.
Comparisons with the 1999 second quarter reflect a decline in commissions and
revenue from principal transactions as a result of weaker securities markets,
partially offset by record underwriting fees and continued improvement in asset
management activities retained in this segment. Annualized gross production per
Financial Consultant remained strong at $465,000 demonstrating the stability of
the private client business. Revenues by category were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commissions $ 812 $ 794 2 $ 2,615 $ 2,368 10
Investment banking 760 514 48 2,177 1,763 23
Principal transactions 328 (1,332) 125 2,000 (238) 940
Asset management
and administration fees (1) 431 350 23 1,208 994 22
Net interest income (2) 395 331 19 1,222 1,139 7
Other income 65 28 132 179 100 79
---------------------- ----------------------
Total revenues, net of interest expense (2) $ 2,791 $ 685 307 $ 9,401 $ 6,126 53
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes the revenues of the Asset Management division which are reported
in the SSB Citi Asset Management results.
(2) Net of interest expense of $2.414 billion and $3.005 billion in the 1999
and 1998 third quarters, and $7.062 billion and $8.979 billion in the 1999
and 1998 nine months.
- --------------------------------------------------------------------------------
Revenues, net of interest expense, in the 1999 third quarter and nine months
were $2.791 billion and $9.401 billion, a 307% and 53% improvement over the
comparable 1998 periods, reflecting increases in all categories.
The increase in Commission revenues reflects growth in sales of listed and
over-the-counter ("OTC") securities and insurance and options commissions as
well as the Company's Private Client group continuing its strong growth in
revenue.
The increase in Investment banking revenues in the 1999 third quarter compared
to the 1998 third quarter reflects increases in high grade debt, high yield and
equity underwritings, partially offset by a decline in merger and acquisition
fees. The increase in the 1999 nine months compared to the 1998 nine months
reflects an increase in merger and acquisition fees.
Principal transaction revenues increased to $328 million and $2.0 billion in the
1999 third quarter and nine months, compared to losses of $1.332 billion and
$238 million in the 1998 periods. The 1998 periods reflect substantial losses
from fixed income trading and the customer business, including Global Arbitrage
and Russian-related credit losses.
18
<PAGE>
The increase in Asset management and administration fees reflects the growth in
assets under fee-based management. These fees include results from assets
managed by the Financial Consultants as well as assets that are externally
managed by the consulting group. Assets under fee-based management increased
significantly at September 30, 1999 compared to September 30, 1998 causing the
corresponding increase in revenue. Total assets under fee-based management at
September 30, were as follows:
<TABLE>
<CAPTION>
September 30,
--------------------------- %
In billions of dollars 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financial Consultant managed accounts $21.4 $13.8 55
Consulting Group externally managed assets 74.6 63.9 17
--------------------------
Total assets under fee-based management (1) $96.0 $77.7 24
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes the assets under management of SSB Asset Management, which are
reported in the SSB Citi Asset Management results.
- --------------------------------------------------------------------------------
The increase in net interest and dividends is due primarily to increased margin
lending to clients.
The increase in adjusted operating expenses primarily reflects an increase in
production-related compensation and employee benefits expense, reflecting
increased revenues, partially offset by the benefit of changes in employee
deferred compensation plans. Salomon Smith Barney continues to maintain its
focus on controlling fixed expenses.
Emerging Markets
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 1,051 $ 723 45 $ 3,282 $ 2,656 24
Adjusted operating expenses (1) 521 515 1 1,535 1,500 2
Provision for credit losses 32 198 (84) 257 339 (24)
---------------------- ----------------------
Core income before taxes
and minority interest 498 10 NM 1,490 817 82
Income taxes 189 3 NM 561 306 83
Minority interest, after-tax 1 -- NM 4 -- NM
---------------------- ----------------------
Core income 308 7 NM 925 511 81
Restructuring-related items, after-tax 8 -- NM 10 -- NM
---------------------- ----------------------
Net income $ 300 $ 7 NM $ 915 $ 511 79
- ------------------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars) $ 82 $ 78 5 $ 82 $ 76 8
Return on assets 1.45% 0.04% 1.49% 0.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Excluding restructuring-related items
Return on assets 1.49% 0.04% 1.51% 0.90%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
NM Not meaningful.
- --------------------------------------------------------------------------------
Emerging Markets core income was $308 million and $925 million in the 1999 third
quarter and nine months, up $301 million and $414 million from 1998. Included in
the 1998 periods are losses of $194 million attributable to the financial market
turmoil in Russia. Excluding the Russia related losses, core income was up $107
million or 53% in the quarter and $220 million or 31% in the nine months as
revenue growth was combined with an improved credit outlook which resulted in a
lower provision for credit losses. Net income of $300 million and $915 million
in the 1999 quarter and nine months included restructuring-related items of $8
million ($14 million pretax) and $10 million ($17 million pretax), respectively.
Revenues, net of interest expense, were $1.051 billion and $3.282 billion in the
1999 third quarter and nine months, up $328 million or 45% and $626 million or
24%, respectively, from 1998. Excluding Russia related losses, revenue was up
$123 million or 13% in the quarter and $421 million or 15% in the nine months.
The quarterly and nine month comparisons reflect strong revenue growth in loans,
trade finance and structured products revenues across all regions.
Revenue attributed to the Embedded Bank and Emerging Local Corporate strategies
(Citigroup's plans to gain market share in selected emerging market countries),
together with new franchises, accounted for 7% of the Emerging Markets business
revenue in both the 1999 third quarter and nine months, and was up 16% and 36%
in the quarterly and nine month comparisons. About 27% of the revenue in the
Emerging Markets business in the 1999 third quarter and nine months was
attributable to business from multinational companies managed jointly with GRB,
with that revenue having grown 8% and 18% in the quarterly and nine month
comparisons.
Adjusted operating expenses were well controlled with a 1% and 2% increase in
the quarterly and nine month comparisons. For both 1999 periods, investment
spending to gain market share in selected emerging market countries was
essentially funded by savings from the 1997 and 1998 restructuring actions and
other expense savings initiatives.
19
<PAGE>
The provision for credit losses totaled $32 million in the quarter and $257
million in the nine months, down $166 million and $82 million, respectively,
from the 1998 periods. Excluding Russia related write-offs, the provision was
down $70 million compared to the 1998 quarter, as an improved credit outlook
resulted in a lower provision for credit losses. Net write-offs in the 1999
third quarter were at their lowest level in the past five quarters.
Cash-basis loans were $1.154 billion at September 30, 1999, reflecting a
decrease of $43 million from June 30, 1999, principally due to decreases in
Asia. Compared to a year ago, cash-basis loans increased $172 million due to
increases in Latin America and CEEMEA (Central and Eastern Europe, Middle East
and Africa), partially offset by reductions in Asia. See the tables entitled
"Cash-Basis, Renegotiated, and Past Due Loans" on page 45.
While economic conditions can be volatile in any country or group of countries,
Citigroup does not expect significant quarter-to-quarter increases in Emerging
Markets net credit losses or cash-basis loans during the remainder of 1999. This
statement is a forward-looking statement within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26.
Average assets of $82 billion in the 1999 third quarter and nine months
reflected growth of $4 billion and $6 billion, respectively. This growth was
primarily driven by higher loans and trading assets.
Global Relationship Banking
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 985 $827 19 $ 3,083 $ 2,967 4
Adjusted operating expenses (1) 740 806 (8) 2,278 2,368 (4)
Provision (benefit) for credit losses 5 34 (85) 1 (14) 107
---------------------- ----------------------
Core income (loss) before taxes 240 (13) NM 804 613 31
Income taxes (benefits) 87 (4) NM 294 225 31
---------------------- ----------------------
Core income (loss) 153 (9) NM 510 388 31
Restructuring-related items, after-tax 10 -- NM 15 -- NM
---------------------- ----------------------
Net income (loss) $ 143 ($ 9) NM $ 495 $ 388 28
- ------------------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars) $ 75 $93 (19) $ 81 $ 91 (11)
Return on assets 0.76% NM 0.82% 0.57%
- ------------------------------------------------------------------------------------------------------------------------------------
Excluding restructuring-related items
Return on assets 0.81% NM 0.84% 0.57%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Core income from Global Relationship Banking in North America, Europe and Japan
was $153 million and $510 million in the 1999 third quarter and nine months,
respectively. Included in the 1998 periods are losses of $143 million
attributable to global economic turmoil, consisting of the $97 million impact
from a writedown of fixed income inventories and $46 million related to Russia.
The 1998 second quarter included $104 million related to the disposition of real
estate investments and a related real estate recovery. Excluding these items,
GRB core income grew $19 million or 14% in the third quarter of 1999 and $83
million or 19% in the nine month comparison. Net income of $143 million in the
1999 quarter and $495 million in the related nine months included
restructuring-related items of $10 million ($15 million pretax) and $15 million
($23 million pretax), respectively.
Revenues, net of interest expense, of $985 million increased $158 million or 19%
in the 1999 third quarter. Excluding the effect of the 1998 global economic
turmoil, revenues were essentially flat as growth in global equities was offset
by reductions in loan portfolio revenues. Revenues grew 3% in the nine month
comparison, excluding the effect of 1998 global economic turmoil and real estate
gains, primarily due to increases in structured products revenues, global
equities, and transaction services, partially offset by a decline in loan
portfolio revenues.
Adjusted operating expenses were $740 million and $2.278 billion in the 1999
third quarter and nine months, down $66 million or 8% and $90 million or 4%,
respectively, from the 1998 periods. The decrease in expenses was due to lower
EMU and year 2000 expenses, restructuring actions and business integration
initiatives with SSB.
The provision (benefit) for credit losses declined $29 million in the quarter
reflecting $53 million of Russia related write-offs in the prior year quarter.
Net recoveries in the 1998 nine months were primarily the result of real estate
recoveries partially offset by Russia related write-offs.
20
<PAGE>
Cash-basis loans were $302 million at September 30, 1999, reflecting increases
of $23 million from June 30, 1999 and $16 million from September 30, 1998. The
Other Real Estate Owned portfolio was $178 million at September 30, 1999 and
June 30, 1999, a decline of $141 million from September 30, 1998, due to a
decrease in North America Real Estate. See the tables entitled "Cash-Basis,
Renegotiated, and Past Due Loans" and "Other Real Estate Owned and Assets
Pending Disposition" on page 45.
Average assets of $75 billion in the 1999 third quarter declined $18 billion
from 1998, while the 1999 nine month average of $81 billion declined $10
billion. These declines primarily reflect the transfer of certain fixed income
businesses to SSB and lower trading assets.
Commercial Lines
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 1,578 $ 1,604 (2) $ 4,670 $ 4,807 (3)
Claims and claim adjustment expenses 877 950 (8) 2,615 2,808 (7)
Total operating expenses 288 377 (24) 1,036 1,172 (12)
---------------------- ----------------------
Income before taxes and minority interest 413 277 49 1,019 827 23
Income taxes 109 65 68 250 200 25
Minority interest, after-tax 49 35 40 124 105 18
---------------------- ----------------------
Net income (1) (2) $ 255 $ 177 44 $ 645 $ 522 24
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The 1999 nine month period excludes cumulative effect of accounting
changes.
(2) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Commercial Lines -- which offers a broad array of property and casualty
insurance and insurance related services through brokers and independent
agencies -- reported net income, excluding the effect of accounting changes, of
$255 million and $645 million in the 1999 third quarter and nine months, up from
$177 million and $522 million in the comparable periods of 1998. The 44%
improvement in the 1999 third quarter over the 1998 quarter reflects a $49
million (after tax and minority interest) benefit resulting from legislative
actions by the states of New York and Pennsylvania that changed the manner in
which these states finance their workers' compensation second-injury funds,
favorable prior-year reserve development, lower weather-related losses despite
catastrophe losses due to Hurricane Floyd and continued expense savings and was
partially offset by a decrease in fee income. The operating trends for the nine
months of 1999 compared to 1998 were the same as those in the quarter. Operating
results reflect the long-standing insistence on maintaining discipline in the
highly competitive commercial lines marketplace and on growing business only
where market conditions warrant.
Net written premiums by market were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
National Accounts $ 149 $ 175 (15) $ 400 $ 484 (17)
Commercial Accounts 470 446 5 1,354 1,349 --
Select Accounts 355 366 (3) 1,121 1,138 (1)
Specialty Accounts 158 181 (13) 466 530 (12)
---------------------- ----------------------
Total net written premiums $ 1,132 $ 1,168 (3) $ 3,341 $ 3,501 (5)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Commercial Lines net written premiums in the 1999 third quarter and nine months
totaled $1.132 billion and $3.341 billion, down from $1.168 billion and $3.501
billion in the comparable periods of 1998. The trend in written premiums for all
lines continues to reflect the highly competitive marketplace and the continued
disciplined approach to underwriting and risk management. Also contributing to
the net written premium decrease in National Accounts and Specialty Accounts was
the impact of additional reinsurance coverage. The slight increase in Commercial
Accounts net written premiums reflects growth in specific business segments and
an improving rate environment.
National Accounts new business was significantly lower in both the 1999 third
quarter and nine months than in the comparable periods of 1998, reflecting a
continued disciplined approach to underwriting and risk management. National
Accounts business retention ratio in the 1999 third quarter was virtually the
same as that in the 1998 third quarter and was moderately higher in the first
nine months of 1999 compared to the first nine months of 1998, reflecting the
loss of one large account in the 1998 second quarter.
Commercial Accounts new business in the 1999 third quarter was marginally lower
than in the 1998 third quarter, and for the first nine months of 1999,
significantly declined compared to the first nine months of 1998, reflecting the
focus on obtaining new business accounts only where it can maintain its
selective underwriting policy. Commercial Accounts business retention ratio was
moderately higher in the 1999 third quarter than in the 1998 third quarter and
for the first nine months of 1999 remained virtually the
21
<PAGE>
same compared to the first nine months of 1998. Commercial Accounts continues to
focus on the retention of existing business while maintaining its product
pricing standards and its selective underwriting policy.
New premium business in Select Accounts was moderately lower in the 1999 third
quarter and significantly lower in the 1999 nine months than in the comparable
periods of 1998, reflecting its selective underwriting policy in the highly
competitive marketplace. Select Accounts business retention ratio in the 1999
third quarter and nine months remained strong and was virtually the same as in
the comparable periods of 1998.
Catastrophe losses, net of taxes and reinsurance, were $17 million and $27
million in the 1999 third quarter and nine months, compared to $15 million and
$25 million in the comparable periods of 1998. Catastrophe losses in 1999 were
primarily due to Hurricane Floyd in the third quarter and tornadoes in Oklahoma
in the second quarter. Catastrophe losses in 1998 were due to Hurricane Georges
in the third quarter and tornadoes in Nashville, Tennessee in the second
quarter.
Statutory and GAAP combined ratios (before allocation of corporate expenses) for
Commercial Lines were as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Statutory combined ratio before policyholder dividends 114.6% 108.0% 108.4% 108.1%
GAAP combined ratio before policyholder dividends 96.8% 107.9% 103.3% 108.5%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GAAP combined ratios for Commercial Lines differ from statutory combined ratios
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.
The increase in the 1999 third quarter statutory combined ratio before
policyholder dividends compared to the 1998 third quarter statutory combined
ratio before policyholder dividends was principally due to the treatment, on a
statutory basis only, of the commutation of an asbestos liability to an insured.
Excluding this commutation, the statutory combined ratio before policyholder
dividends was 105.1% in the 1999 third quarter. The improvement in the 1999
third quarter statutory combined ratio before policyholder dividends excluding
the commutation was primarily due to favorable prior-year reserve development
and lower weather-related losses. The improvement in the 1999 third quarter GAAP
combined ratio before policyholder dividends compared to the 1998 third quarter
GAAP combined ratio before policyholder dividends was due to favorable
prior-year reserve development, the benefit of the New York and Pennsylvania
legislative actions and lower weather-related losses, partially offset by lower
fee income.
The first nine months of 1999 statutory combined ratio before policyholder
dividends excluding the commutation of the asbestos liability (described above)
was 105.2%. The improvement was primarily due to favorable prior-year reserve
development and lower weather-related losses. The improvement in the first nine
months of 1999 GAAP combined ratio before policyholder dividends compared to the
first nine months of 1998 GAAP combined ratio before policyholder dividends was
due to favorable prior-year reserve development, lower weather-related losses
and the benefit of the above mentioned state legislative actions, partially
offset by lower fee income.
Uncertainty Regarding Adequacy of Environmental and Asbestos Reserves
The reserves for environmental claims are not established on a claim-by-claim
basis. An aggregate bulk reserve is carried for all of the environmental claims
that are in the dispute process, until the dispute is resolved. This bulk
reserve is established and adjusted based upon the aggregate volume of
in-process environmental claims and the experience in resolving such claims. At
September 30, 1999, approximately 17% of the net aggregate reserve (i.e.,
approximately $119 million) consisted of case reserve for resolved claims. The
balance, approximately 83% of the net aggregate reserve (i.e., approximately
$587 million), was carried in a bulk reserve and included incurred but not
reported environmental claims for which specific claims have not been received.
In general, the Company posts case reserves for pending asbestos claims within
approximately 30 business days of receipt of such claims. At September 30, 1999,
approximately 13% of the net aggregate reserve (i.e., approximately $108
million) was for pending asbestos claims. The balance, approximately 87% of the
net aggregate reserve (i.e., approximately $729 million), represents incurred
but not reported losses for which specific claims have not been received.
It is difficult to estimate the reserves for environmental and asbestos-related
claims due to the vagaries of court coverage decisions, plaintiffs' expanded
theories of liability, the risks inherent in major litigation and other
uncertainties. Conventional actuarial techniques are not used to estimate such
reserves.
The reserves carried for environmental and asbestos claims at September 30, 1999
are the Company's best estimate of ultimate claims and claim adjustment expenses
based upon known facts and current law. However, the conditions surrounding the
final resolution of these claims continue to change. It is not possible to
predict changes in the legal and legislative environment and their impact on the
future development of asbestos and environmental claims. Such development may be
affected by future court
22
<PAGE>
decisions and interpretations as well as changes in legislation applicable to
such claims. Because of these future unknowns, additional liabilities may arise
for amounts in excess of the current reserves. These additional amounts, or a
range of these additional amounts, cannot now be reasonably estimated, and could
result in a liability exceeding reserves by an amount that would be material to
the Company's operating results in a future period. However, the Company
believes that it is not likely that these claims will have a material adverse
effect on its financial condition or liquidity. This paragraph contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 26.
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING (1)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest
expense $ 669 $ 602 11 $ 1,950 $ 1,762 11
Total operating expenses 415 384 8 1,208 1,126 7
Provision (benefit) for credit losses 2 1 100 12 (6) 300
---------------------- ----------------------
Income before taxes 252 217 16 730 642 14
Income taxes 97 84 15 281 249 13
---------------------- ----------------------
Net income $ 155 $ 133 17 $ 449 $ 393 14
- ------------------------------------------------------------------------------------------------------------------------------------
Assets under management
(in billions of dollars) $ 443 $ 367 21 $ 443 $ 367 21
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Private Banking results were previously reported as part of the Global
Consumer business. All periods have been restated to reflect this
reorganization.
- --------------------------------------------------------------------------------
Global Investment Management and Private Banking offers mutual and closed-end
funds, separately managed accounts, unit investment trusts, variable annuities,
and personalized wealth management services to institutional, high net worth,
and retail clients from global investment centers around the world through SSB
Citi Asset Management Group and the Global Private Bank. Net income of $155
million and $449 million in the 1999 third quarter and nine months was up $22
million or 17% and $56 million or 14% from the 1998 periods, reflecting
increased revenues derived from a 21% increase in assets under management to
$443 billion. Expenses remained controlled even though sales and marketing
efforts were expanded and investments were made in technology, and research and
quantitative functional analysis. The provision for credit losses, although up
from the prior year periods, remained nominal.
SSB Citi Asset Management Group
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest
expense $ 367 $ 318 15 $ 1,078 $ 933 16
Total operating expenses 232 206 13 673 595 13
---------------------- ----------------------
Income before taxes 135 112 21 405 338 20
Income taxes 53 45 18 159 134 19
---------------------- ----------------------
Net income $ 82 $ 67 22 $ 246 $ 204 21
- ------------------------------------------------------------------------------------------------------------------------------------
Assets under management
(in billions of dollars) (1) $ 351 $ 294 19 $ 351 $ 294 19
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $36 billion and $32 billion in the 1999 and 1998 third quarters,
respectively, for Global Private Bank clients.
- --------------------------------------------------------------------------------
SSB Citi Asset Management Group ("the Group") is comprised of Salomon Brothers
Asset Management, Smith Barney Asset Management, and Citibank Asset Management.
The Group 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, separately
managed accounts, unit investment trusts, and variable annuities (through
affiliated and third party insurance companies).
The Group's net income of $82 million in the third quarter was up $15 million, a
22% increase from the 1998 quarter, as revenue growth offset increased expenses
from continued investments in the business' infrastructure, sales and marketing
activities, and investment research. In the 1999 nine months, net income of $246
million was up $42 million, a 21% increase over 1998.
Assets under management rose 19% from the year-ago quarter to $351 billion, as
growth continued across all major product categories. Separately managed
accounts grew 25% to $144 billion as institutional accounts grew $16 billion or
20% and private client accounts grew $12 billion or 34%. Strong growth in
institutional client assets year-over-year was partly due to cross selling
efforts through the Global Corporate and Investment Bank. Money fund and
long-term mutual fund assets grew by 19% and 11%, respectively, as market share
in proprietary U.S. distribution channels increased. Capitalizing on Japan's Big
Bang, year-to-date the
23
<PAGE>
Group raised over $1.5 billion in Japan through sales of its new CitiFunds
mutual funds and the sale of Salomon Brothers mutual funds in non-proprietary
channels. Mutual fund sales year-to-date through the Citibank Europe Consumer
Bank totaled $2.3 billion.
Revenues, net of interest expense, increased $49 million or 15% to $367 million
in the quarter, and increased $145 million or 16% to $1.078 billion
year-to-date. These increases were predominantly in investment advisory fees and
other asset-based fees, such as fund administration fees, which reflect the
broad growth in assets under management.
Operating expenses increased $26 million or 13% to $232 million in the quarter,
and increased $78 million or 13% to $673 million year-to-date. These increases
reflect global business growth, including sales and marketing expansion to
support distribution efforts through Citigroup and non-proprietary channels. The
increase also reflects efforts to build the Group's investment research and
quantitative analysis capabilities.
Global Private Bank
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 302 $ 284 6 $ 872 $ 829 5
Total operating expenses 183 178 3 535 531 1
Provision (benefit) for credit losses 2 1 100 12 (6) 300
---------------------- ----------------------
Income before taxes 117 105 11 325 304 7
Income taxes 44 39 13 122 115 6
---------------------- ----------------------
Net income $ 73 $ 66 11 $ 203 $ 189 7
- ------------------------------------------------------------------------------------------------------------------------------------
Average assets (in billions of dollars) $ 21 $ 17 24 $ 19 $ 16 19
Return on assets 1.38% 1.54% 1.43% 1.58%
- ------------------------------------------------------------------------------------------------------------------------------------
Assets under management
(in billions of dollars) $ 128 $ 105 22 $ 128 $ 105 22
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Global Private Bank -- which provides personalized wealth management services
for high net worth clients around the world -- reported net income of $73
million and $203 million in the 1999 third quarter and nine months, up $7
million or 11% and $14 million or 7% from the 1998 periods, primarily reflecting
revenue growth.
Client business volumes under management were $128 billion at September 30,
1999, up from $105 billion a year ago, primarily reflecting growth in custody
accounts and lending.
Total revenues, net of interest expense, were $302 million and $872 million in
the quarter and nine months, up $18 million or 6% and $43 million or 5% from
1998. The increases reflected growth in net interest income, and placement and
performance fee revenue, partially offset by reduced customer-based
trading-related revenue. Strong U.S.-based customer revenue growth was partially
offset by low growth in the international markets.
Total operating expenses of $183 million in the quarter and $535 million in the
nine months were up $5 million or 3% from the year-ago quarter, and were up $4
million or 1% year-to-date, as a 9% reduction in staffing levels was offset by
higher incentive compensation and technology expenses.
The provision for credit losses was $2 million and $12 million for the 1999
quarter and nine months, compared with a $1 million provision in the 1998 third
quarter, and a benefit of $6 million in the nine months. The year-to-date change
was driven by the substantial reduction in prior year U.S. credit recoveries.
Loans 90 days or more past due also continued to remain low at $145 million or
0.69% of loans at September 30, 1999, compared to $162 million or 0.88% at June
30, 1999 and $195 million or 1.19% at September 30, 1998.
24
<PAGE>
CORPORATE/OTHER
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense ($ 38) ($ 48) 21 ($ 80) ($ 140) 43
Adjusted operating expenses (1) 209 105 99 566 370 53
Provision for benefits,
claims, and credit losses 14 (1) NM 34 (3) NM
---------------------- ----------------------
Core loss before tax benefits (261) (152) 72 (680) (507) 34
Income tax benefits (99) (63) 57 (234) (180) 30
---------------------- ----------------------
Core loss (162) (89) 82 (446) (327) 36
Restructuring-related items, after-tax (2) -- NM 14 -- NM
---------------------- ----------------------
Net loss ($ 160) ($ 89) 80 ($ 460) ($ 327) 41
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Corporate/Other includes certain net treasury results and corporate staff and
other corporate expenses. Net loss of $160 million and $460 million in the 1999
third quarter and nine months increased $71 million and $133 million over the
respective prior year periods, primarily reflecting increases in certain
technology expenses, higher treasury costs at the parent company level,
partially offset by lower corporate staff expenses as a result of a 15%
reduction in headcount in the 1999 period.
Performance options granted in 1998 to a group of key Citicorp employees will
vest when the daily average of the high and low trading prices of Citigroup
common stock on the New York Stock Exchange reaches $53.33 for 10 out of 30
consecutive trading days. Through November 11, 1999, the performance target has
been met for 8 out of 11 consecutive trading days. As a result, in the 1999
fourth quarter there may be additional compensation expense of $41 million ($26
million after-tax) recorded over the amount that would otherwise have been
recognized. Compensation expense associated with performance options is
recognized over the period to the estimated vesting date and in full for options
that have vested.
INVESTMENT ACTIVITIES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- % ---------------------- %
In millions of dollars 1999 1998 Change 1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 311 $ 168 85 $ 734 $ 1,278 (43)
Total operating expenses 17 11 55 47 35 34
Benefit for credit losses -- -- -- -- (10) NM
---------------------- ----------------------
Income before taxes and minority interest 294 157 87 687 1,253 (45)
Income taxes 103 53 94 238 423 (44)
Minority interest, after-tax (3) 4 (175) 2 12 (83)
---------------------- ----------------------
Net income $ 194 $ 100 94 $ 447 $ 818 (45)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NM Not meaningful
- --------------------------------------------------------------------------------
Investment Activities comprises venture capital activities, realized investment
gains (losses) related to certain corporate and insurance related 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 $194 million and $447 million for the 1999 third quarter and nine
months was up $94 million or 94% from the 1998 third quarter, but was down $371
million or 45% from the 1998 year-to-date period.
Revenues, net of interest expense, of $311 million for the 1999 quarter
increased $143 million or 85% from the 1998 quarter primarily reflecting a $370
million increase in venture capital revenues, resulting mostly from IPO
activity, partially offset by a decrease in net asset gains reflecting the 1998
sale of a portion of an investment in Latin America. The 1998 period also
included a $50 million investment writedown in Latin America. For the nine month
period, revenues of $734 million decreased $544 million or 43% from the same
period in 1998, reflecting a $654 million decrease in realized gains from sales
of investments and net asset gains, partially offset by a $268 million increase
in venture capital revenues. The decrease in realized gains from sales of
investments resulted primarily from lower revenues from sales of Brazilian Brady
Bonds and the decline in net asset gains resulted from the 1998 sale of a
portion of an investment in Latin America.
Investment Activities results may fluctuate in the future due to 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" on page 26.
25
<PAGE>
YEAR 2000
The arrival of the year 2000 poses a unique worldwide challenge to the ability
of time sensitive computer systems to recognize the date change from December
31, 1999 to January 1, 2000. Citigroup has assessed and modified its computer
systems and business processes to provide for their continued functionality and
is also completing assessing the readiness of third parties with which it
interfaces.
Citigroup is highly dependent on computer systems and system applications for
conducting its ongoing business functions. The inability of systems to recognize
properly the year 2000 could result in major systems failure or miscalculations
that would disrupt Citigroup's ability to meet its customer and other
obligations on a timely basis, and Citigroup has engaged in a worldwide process
of identifying, assessing, and modifying its computer programs to address this
issue. As part of and following achievement of year 2000 compliance, systems are
subjected to a process that validates the modified programs before they can be
used in production.
The pretax cost associated with the required modifications and conversions is
expected to total approximately $950 million through 1999. This cost is being
funded from a combination of a reprioritization of technology development
initiatives and incremental costs and is being expensed as incurred. Of the
total, approximately $890 million has been incurred to date, including
approximately $230 million in the first nine months of 1999, of which
approximately $60 million was incurred in the third quarter.
Substantially all of the required modification and internal testing work has
been completed, including modification and testing of all critical systems. In
addition, Citigroup's year 2000 program encompasses a range of other matters,
including business applications to be sunset (that is, removed from use in favor
of replacement applications), end-user computing applications, networks, data
centers, desktops, facilities, business processes, and external providers.
Substantially all of the investigation and necessary remediation of these
matters has been completed, and substantially all are considered compliant.
Citigroup is addressing year 2000 issues that may exist with other significant
third parties with which it interfaces, including customers and counterparties,
the global financial market infrastructure including payment and clearing
systems, and the utility infrastructure on which all corporations rely.
Unreadiness by these third parties would expose Citigroup to the potential for
loss, impairment of business processes and activities, and disruption of
financial markets. Citigroup is addressing these risks worldwide through
bilateral and multiparty efforts and participation in industry, country, and
global initiatives. While significant third parties are generally engaged in
efforts intended to address and resolve their year 2000 issues on a timely
basis, it is possible that a series of failures by third parties could have a
material adverse effect on the Company's results of operations in future
periods.
Citigroup has created contingency plans intended to address perceived risks
associated with its year 2000 effort. These include business resumption
contingency plans to address the possibility of systems failure and market
resumption contingency plans to address the possibility of failure of systems or
processes outside Citigroup's control. Contingency planning, and preparations
for the management of the date change, will continue worldwide through 1999.
Plans have been validated, and Citigroup will continue to review and refine the
plans throughout the balance of the year.
Citigroup has also developed plans for the management of the century date change
weekend and has identified a global network of command centers. A series of
dress rehearsals for the century date change weekend is under way with the
objective of testing global readiness.
Notwithstanding these activities, the failure of efforts to address in a timely
manner the year 2000 problem could have a material adverse effect on the
Company's results of operations in future periods.
An additional year 2000 issue for TAP is the potential future impact of claims
for insurance coverage from customers who suffer year 2000 business losses or
claim coverage for their potential liability to third parties. TAP has
undertaken certain initiatives to mitigate this potential risk, including
addressing year 2000 issues, where applicable, in the underwriting of insurance
policies. Losses for year 2000 insurance claims and litigation costs related to
such claims are not reasonably estimable at this time.
The Company's expectations with respect to remediation of and claims from
customers with respect to year 2000 issues constitute forward-looking statements
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
26
<PAGE>
factors; changes in general economic conditions, including the performance of
global financial markets, risks associated with fluctuating levels of principal
transactions, realized gains from sales of investments, gains from asset sales,
and losses on commercial lending activities, particularly in Emerging Markets;
results of various Investment Activities; the resolution of legal proceedings
and related matters; the actual amount of liabilities associated with certain
environmental and asbestos-related insurance claims; the actual cost of year
2000-related remediation and claims, if any; and the possibility that the
Company will be unable to achieve anticipated levels of operational efficiencies
related to recent mergers and business acquisitions, as well as achieving its
other cost-saving initiatives.
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.
Citigroup'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 the
1998 Annual Report and Form 10-K, as amended ("the 1998 Annual Report and Form
10-K"). As Citigroup's businesses become more closely integrated, it is expected
that these management processes will also be more closely integrated.
Across Citigroup, price risk is measured using various tools, including
Earnings-at-Risk ("EAR") and sensitivity analysis, which are applied to interest
rate risk in the non-trading portfolios, and Value-at-Risk ("VAR"), stress and
scenario analysis, 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 with 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 changes
in market conditions as well as to changes in the characteristics and mix of the
related assets and liabilities.
At Citicorp, 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 assumes 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 September 30, 1999, 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 September
30, 1999, the rate shifts applied to these currencies for purposes of
calculating Earnings-at-Risk ranged from 25 to 1,781 basis points, over a
four-week defeasance period.
27
<PAGE>
The following table illustrates that, as of September 30, 1999, 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 $151 million in the next twelve
months, and approximately $127 million for the total five-year period 1999-2004.
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 $98
million in the next twelve months, and approximately $232 million for the
five-year period 1999-2004.
Citicorp 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 September 30, 1999 Increase Decrease Increase Decrease
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Overnight to three months ($72) $ 77 ($14) $ 14
Four to six months (35) 42 (24) 25
Seven to twelve months (44) 46 (60) 60
-----------------------------------------------------------------
Total overnight to twelve months (151) 165 (98) 99
- ---------------------------------------------------------------------------------------------------------------------------------
Year two (49) 46 (115) 115
Year three (5) (1) (28) 28
Year four 28 (33) (7) 8
Year five 62 (71) (3) 4
Effect of discounting (12) 16 19 (19)
-----------------------------------------------------------------
Total ($127) $ 122 ($232) $235
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Primarily results from Earnings-at-Risk in Singapore dollar, Hong Kong
dollar, Korea won, and Thai baht.
(2) Total assumes a two standard deviation increase or decrease for every
currency, not taking into account any covariance among currencies.
- --------------------------------------------------------------------------------
The table above also illustrates that Citicorp's risk profile in the one- to
three-year time horizon for U.S. dollars is 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.
Citicorp Twelve Month Earnings-at-Risk (impact on pretax earnings)
<TABLE>
<CAPTION>
U.S. Dollar Non-U.S. Dollar
-------------------------------------------------------------------------------
Sept. 30, Dec. 31, Sept. 30, Sept. 30, Dec. 31, Sept. 30,
In millions of dollars 1999 1998 1998 1999 1998 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assuming a two standard deviation rate
Increase ($151) ($148) ($159) ($98) ($93) ($72)
Decrease 165 156 180 99 93 72
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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:
Citicorp Twelve Month Earnings-at-Risk (excluding effect of derivatives)
<TABLE>
<CAPTION>
U.S. Dollar Non-U.S. Dollar
--------------------------------------------------------------------------------
Sept. 30, Dec. 31, Sept. 30, Sept. 30, Dec. 31, Sept. 30,
In millions of dollars 1999 1998 1998 1999 1998 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assuming a two standard deviation rate
Increase ($19) $10 $20 ($130) ($94) ($77)
Decrease 33 (3) (9) 130 94 77
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
During the nine months of 1999, 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 $73 million to
$151 million in the aggregate at each month end of 1999, compared with a range
from $65 million to $173 million at each month end during 1998. The relatively
lower U.S. dollar Earnings-at-Risk experienced during the first nine months of
1999 was primarily due to the reduction in the level of receive fixed swaps. 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 $95 million to $123 million in the aggregate at each month end
during the nine months of 1999, compared with a range from $53 million to $98
million during 1998. The higher non-U.S. dollar Earnings-at-Risk experienced
during the 1999 nine months primarily reflected the higher interest rate
volatility seen across the Asia Pacific region.
28
<PAGE>
In addition, there are other financial instruments held in the non-trading
portfolio outside Citicorp such as investments, long-term debt, derivatives and
contractholder funds. The price risk associated with these instruments is
measured using sensitivity analysis as described in the 1998 Annual Report and
Form 10-K. At September 30, 1999 there was no significant change to the risk
profile as disclosed at year-end 1998.
Trading Portfolios
A tool for measuring the price risk of trading activities is Value-at-Risk,
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 value of the trading position is
exposed in each market (interest rates, foreign exchange rates, equity and
commodity prices), 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.
The level of exposure taken depends on the market environment and expectations
of future 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 $20 million at September 30, 1999. Daily exposures at Citicorp
averaged $17 million in the 1999 third quarter and ranged from $14 million to
$21 million. At Salomon Smith Barney the aggregate pretax Value-at-Risk in the
trading portfolios was $22 million at September 30, 1999. Quarterly exposures at
Salomon Smith Barney averaged $30 million in the 1999 third quarter and ranged
from $22 million to $41 million.
The following table summarizes Citigroup's Value-at-Risk in its trading
portfolios as of September 30, 1999 and December 31, 1998 along with the third
quarter 1999 average.
<TABLE>
<CAPTION>
Citicorp Salomon Smith Barney
------------------------------------------------------------------------------
1999 1999
Third Third
Sept. 30, Quarter Dec. 31, Sept. 30, Quarter Dec. 31,
In millions of dollars 1999 Average 1998 1999 Average 1998 (1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate $14 $12 $13 $22 $29 $60
Foreign exchange 9 7 7 5 6 2
Equity 12 10 5 4 5 5
All other (primarily commodity) 2 1 1 6 9 11
Covariance adjustment (17) (13) (11) (15) (19) (18)
------------------------------------------------------------------------------
Total $20 $17 $15 $22 $30 $60
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In 1999, Salomon Smith Barney began using one year of historical price
data (i.e., volatilities and correlation factors) to calculate VAR, rather
than the previously used six months, primarily for consistency with the
capital guidelines issued by the Federal Reserve Board. The amounts in the
table above provide the restated VAR.
- --------------------------------------------------------------------------------
The table below provides the distribution of Value-at-Risk during the third
quarter of 1999.
<TABLE>
<CAPTION>
Citicorp Salomon Smith Barney
---------------------------------------------------------
In millions of dollars Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate $9 $14 $21 $37
Foreign exchange 5 13 5 8
Equity 6 16 3 16
All other (primarily commodity) 1 3 5 15
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to Value-at-Risk, stress and scenario analyses are also applied to
the trading portfolios.
Management of Cross-Border Risk at Citigroup
Cross-border risk is the risk that Citigroup 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. Citigroup manages cross-border risk as part of the
Windows on Risk process described in the 1998 Annual Report and Form 10-K.
Except as described below for cross-border resale agreements, the following
table presents total cross-border outstandings and commitments on a regulatory
basis in accordance with Federal Financial Institutions Examination Council
("FFIEC") guidelines. In regulatory reports under FFIEC guidelines, cross-border
resale agreements are presented based on the domicile of the issuer of the
securities that are held as collateral. However, for purposes of the following
table, cross-border resale agreements are presented based on the domicile of the
counterparty because the counterparty has the legal obligation for repayment.
29
<PAGE>
Total cross-border outstandings include cross-border claims on third parties as
well as investments in and funding of local franchises. Countries with FFIEC
outstandings greater than 0.75% of Citigroup assets at September 30, 1999 and
December 31, 1998 include:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998 (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Cross-Border Claims on Third Parties
------------------------------------------------- Investments
In and
Trading and SSB Cross- Funding of Total Total
In billions of Short-term Border Resale Local Cross-Border Commit- Cross-Border Commit-
dollars Claims(2) Agreements(3) All Other Total Franchises Outstandings ments(4) Outstandings ments(4)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United Kingdom $4.6 $9.6 $2.8 $17.0 $ -- $17.0 $10.3 $10.4 $8.9
Germany 8.7 4.4 0.5 13.6 1.8 15.4 1.9 16.6 1.4
France 5.1 5.6 0.4 11.1 0.2 11.3 2.1 8.2 1.1
Italy 6.5 2.3 0.1 8.9 -- 8.9 0.4 7.7 0.3
Japan 4.8 2.8 0.7 8.3 -- 8.3 0.3 14.1 0.1
Mexico 2.1 -- 1.8 3.9 0.6 4.5 0.2 4.9 0.2
Brazil 1.2 -- 1.6 2.8 1.4 4.2 -- 4.1 0.1
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reclassified to conform to the current quarter's presentation.
(2) Trading and short-term claims include cross-border debt and equity
securities held in the trading account, trade finance receivables, net
revaluation gains on foreign exchange and derivative contracts, and other
claims with a maturity of less than one year.
(3) SSB refers to Salomon Smith Barney.
(4) 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.
- --------------------------------------------------------------------------------
Total cross-border outstandings for September 30, 1999 under FFIEC guidelines,
including cross-border resale agreements based on the domicile of the issuer of
the securities that are held as collateral, amount to $16.1 billion for Germany,
$12.1 billion for Italy, $10.8 billion for France, $8.2 billion for the United
Kingdom, $7.2 billion for Japan, $5.7 billion for Mexico, and $5.1 billion for
Brazil.
Total cross-border outstandings for December 31, 1998 under FFIEC guidelines,
including cross-border resale agreements based on the domicile of the issuer of
the securities that are held as collateral, amounted to $17.4 billion for
Germany, $12.9 billion for Japan, $8.7 billion for Italy, $8.7 billion for
France, $7.9 billion for the United Kingdom, $5.9 billion for Mexico, and $4.5
billion for Brazil.
LIQUIDITY AND CAPITAL RESOURCES
Citigroup services its obligations primarily with dividends and advances that it
receives from subsidiaries. The subsidiaries' dividend paying abilities are
limited by certain covenant restrictions in credit agreements and/or by
regulatory requirements. Citigroup believes it will have sufficient funds to
meet current and future commitments. Each of Citigroup's major operating
subsidiaries finances its operations on a basis consistent with its
capitalization and ratings.
Citigroup, Citicorp, TAP, and The Travelers Insurance Company ("TIC") issue
commercial paper directly to investors. CitiFinancial Credit Company, which had
previously issued commercial paper, became an indirect subsidiary of Citicorp on
August 4, 1999 and, thereafter, ceased such issuance. Citigroup and Citicorp
maintain combined liquidity reserves of cash, securities, and unused bank lines
of credit at least equal to their combined outstanding commercial paper. TAP and
TIC maintain unused credit availability under their respective bank lines of
credit at least equal to the amount of outstanding commercial paper.
Borrowings under bank lines of credit may be at interest rates based on LIBOR,
CD rates, the prime rate or bids submitted by the banks. Each company pays its
banks commitment fees for its lines of credit.
Citicorp and some of its nonbank subsidiaries have credit facilities with
Citicorp's subsidiary banks, including Citibank, N.A. Borrowings under these
facilities would be secured in accordance with Section 23A of the Federal
Reserve Act.
Citigroup Inc.
Currently, Citigroup and TIC have an agreement with a syndicate of banks to
provide $1.0 billion of revolving credit, to be allocated to either of Citigroup
or TIC. The participation of TIC in this agreement is limited to $250 million.
The revolving credit facility consists of a five-year revolving credit facility
that expires in June 2001. At September 30, 1999, all of the facility was
allocated to Citigroup. Under this facility the Company is required to maintain
a certain level of consolidated stockholders' equity (as defined in the
agreement). The Company exceeded this requirement by approximately $29.4 billion
at September 30, 1999. Citigroup also has $300 million in 364-day facilities
which expire in the second quarter of 2000. At September 30, 1999, there were no
borrowings outstanding under either of these facilities.
30
<PAGE>
Citigroup is subject to risk-based capital guidelines issued by the Board of
Governors of the Federal Reserve Board ("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.
Citigroup Ratios
<TABLE>
<CAPTION>
Sept. 30, June 30, Dec. 31,
1999 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital 9.58% 9.37% 8.68%
Total capital (Tier 1 and Tier 2) 12.34 12.12 11.43
Leverage (1) 6.62 6.38 6.03
Common stockholders' equity 6.49 6.25 6.04
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Tier 1 capital divided by adjusted average assets.
- --------------------------------------------------------------------------------
Citigroup maintained a strong capital position during 1999. Total capital (Tier
1 and Tier 2) amounted to $58.9 billion at September 30, 1999, representing
12.34% of net risk-adjusted assets. This compares to $57.8 billion and 12.12% at
June 30, 1999 and $55.0 billion and 11.43% at December 31, 1998. Tier 1 capital
of $45.7 billion at September 30, 1999 represented 9.58% of net risk-adjusted
assets, compared to $44.7 billion and 9.37% at June 30, 1999 and $41.8 billion
and 8.68% at December 31, 1998. Citigroup's leverage ratio was 6.62% at
September 30, 1999 compared to 6.38% at June 30, 1999 and 6.03% at December 31,
1998.
Components of Capital Under Regulatory Guidelines
<TABLE>
<CAPTION>
Sept. 30, June 30, Dec. 31,
In millions of dollars 1999 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 Capital
Common stockholders' equity $ 44,627 $ 43,122 $ 40,395
Perpetual preferred stock 2,050 2,113 2,313
Mandatorily redeemable securities of subsidiary trusts 4,920 4,920 4,320
Minority interest (1) 1,544 1,540 1,602
Less: Net unrealized gains on securities available for sale (2) (1,360) (1,257) (1,359)
Intangible assets:
Goodwill (4,272) (4,061) (3,764)
Other intangible assets (1,660) (1,565) (1,620)
50% investment in certain subsidiaries (3) (117) (115) (110)
--------------------------------------------
Total Tier 1 capital 45,732 44,697 41,777
- ------------------------------------------------------------------------------------------------------------------
Tier 2 Capital
Allowance for credit losses (4) 5,977 5,976 6,024
Qualifying debt (5) 6,815 6,876 7,296
Unrealized marketable equity securities gains (2) 503 379 21
Less: 50% investment in certain subsidiaries (3) (116) (114) (110)
--------------------------------------------
Total Tier 2 capital 13,179 13,117 13,231
--------------------------------------------
Total capital (Tier 1 and Tier 2) $ 58,911 $ 57,814 $ 55,008
- ------------------------------------------------------------------------------------------------------------------
Net risk-adjusted assets (6) $ 477,318 $ 477,197 $ 481,208
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Primarily related to Travelers Property Casualty Corp.
(2) 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.
(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.
(6) Includes risk-weighted credit equivalent amounts, net of applicable
bilateral netting agreements, of $31.3 billion for interest rate,
commodity and equity derivative contracts and foreign exchange contracts,
as of September 30, 1999, compared to $30.0 billion as of June 30, 1999
and $37.3 billion as of December 31, 1998. Market risk-equivalent assets
included in net risk-adjusted assets amounted to $41.9 billion at
September 30, 1999, $46.9 billion at June 30, 1999, and $51.5 billion at
December 31, 1998. 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 stockholders' equity increased a net $4.2 billion during the first nine
months of 1999 to $44.6 billion at September 30, 1999, representing 6.49% of
assets, compared to $40.4 billion and 6.04% at year-end 1998. The net increase
in common stockholders' equity during the nine months of 1999 principally
reflected net income of $7.2 billion and issuance of shares pursuant to employee
benefit plans and other activity of $1.3 billion, partially offset by treasury
stock acquired of $2.8 billion and dividends declared on common and preferred
stock of $1.5 billion. The increase in the common stockholders' equity ratio
during the nine months of 1999 reflected the above items, partially offset by
the increase in total assets.
31
<PAGE>
During the 1999 nine months, Citigroup redeemed its $200 million Series J
perpetual preferred stock and its $62.5 million Series O perpetual preferred
stock . In October 1999 the remaining 140,000 shares ($140 million redemption
value) of Citigroup's Series I Cumulative Convertible Preferred Stock was
converted into 9.3 million shares of common stock. Citigroup has announced that
it will redeem its $125 million Series S perpetual preferred stock on November
15, 1999.
The Board of Directors of Citigroup voted an increase of $3 billion in the
existing authorization program to repurchase shares of common stock. The
repurchases will be made from time to time in the open market, primarily to fund
the Company's employee benefit plans.
All of the mandatorily redeemable securities of subsidiary trusts (trust
securities) outstanding at September 30, 1999 qualify as Tier 1 capital. The
amount outstanding at September 30, 1999 includes $2.3 billion of
parent-obligated securities and $2.62 billion of subsidiary-obligated
securities. The increase in trust securities outstanding during the nine months
ended September 30, 1999 of $600 million represents parent-obligated securities.
Citigroup's subsidiary depository institutions are subject to the risk-based
capital guidelines issued by their respective primary federal bank regulatory
agencies, which are generally similar to the FRB's guidelines. At September 30,
1999, all of Citigroup's subsidiary depository institutions were "well
capitalized" under the federal bank regulatory agencies' definitions.
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.
Citicorp
Citicorp manages liquidity through a well-defined process described in the 1998
Annual Report and 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 represent 67% and
64% of its total funding at September 30, 1999 and December 31, 1998,
respectively, are broadly diversified by both geography and customer segments.
Stockholder's equity, which grew $162 million during the nine months to $24.8
billion at September 30, 1999, 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 quarter-end was
$27.5 billion, up from $26.8 billion at year-end. Asset securitization programs
remain an important source of liquidity. Loans securitized during the first nine
months included $6.6 billion of U.S. credit cards, $6.7 billion of U.S. consumer
mortgages, and $300 million of non-U.S. consumer loans. As credit card
securitization transactions amortize, newly originated receivables are recorded
on Citicorp's balance sheet and become available for asset securitization.
During the nine months, the scheduled amortization of certain credit card
securitization transactions made available $3.3 billion of new receivables. In
addition, $500 million of credit card securitization transactions are scheduled
to amortize during the 1999 fourth quarter.
Citicorp is a legal entity separate and distinct from Citibank, N.A. and its
other subsidiaries and affiliates. As discussed in the 1998 Annual Report and
Form 10-K, there are various legal limitations on the extent to which Citicorp's
subsidiaries may extend credit, pay dividends, or otherwise supply funds to
Citicorp. As of September 30, 1999, under their applicable dividend limitations,
Citicorp's national and state-chartered bank subsidiaries could have declared
dividends to their respective parent companies without regulatory approval of
approximately $3.8 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 ratios requirements, as
well as policy statements of the federal regulatory agencies that indicate that
banking organizations should generally pay dividends out of current operating
earnings. Consistent with these considerations, Citicorp estimates that, as of
September 30, 1999, its bank subsidiaries could have distributed dividends to
Citicorp, directly or through their parent holding company, of approximately
$3.3 billion of the available $3.8 billion.
Citicorp is subject to risk-based capital guidelines issued by the Board of
Governors of the FRB. These guidelines are used to evaluate capital adequacy
based primarily on the perceived credit risk associated with balance sheet
assets, as well as certain off-balance sheet exposures such as unused loan
commitments, letters of credit, and derivative and foreign exchange contracts.
The risk-based capital guidelines are supplemented by a leverage ratio
requirement.
32
<PAGE>
Citicorp Ratios
<TABLE>
<CAPTION>
Sept. 30, June 30, Dec. 31,
1999 1999(1) 1998(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital 8.09% 8.78% 8.59%
Total capital (Tier 1 and Tier 2) 12.16 12.53 12.40
Leverage (2) 6.76 7.22 6.88
Common stockholder's equity 6.74 7.17 6.94
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Restated to include CitiFinancial Credit Company.
(2) Tier 1 capital divided by adjusted average assets.
- --------------------------------------------------------------------------------
Citicorp maintained a strong capital position during the 1999 third quarter.
Total capital (Tier 1 and Tier 2) amounted to $36.2 billion at September 30,
1999, representing 12.16% of net risk-adjusted assets. This compares with $36.7
billion and 12.53% at June 30, 1999 and $35.6 billion and 12.40% at December 31,
1998. Tier 1 capital of $24.1 billion at September 30, 1999 represented 8.09% of
net risk-adjusted assets, compared with $25.8 billion and 8.78% at June 30, 1999
and $24.7 billion and 8.59% at December 31, 1998. Citicorp's Tier 1 capital
ratio at September 30, 1999 was within Citicorp's target range of 8.00% to
8.30%.
CitiFinancial Credit Company ("CCC")
Currently, CCC has committed and available five-year revolving credit facilities
in the amount of $3.4 billion which expire in 2002. At September 30, 1999, there
were no borrowings outstanding under these facilities. In connection with the
August 4, 1999 reorganization of CCC as a subsidiary of Citicorp, Citicorp
guaranteed various debt obligations of CCC, including those arising under these
facilities.
Travelers Property Casualty Corp.
TAP has a five-year revolving credit facility in the amount of $250 million with
a syndicate of banks that expires in December 2001. Under this facility TAP is
required to maintain a certain level of consolidated stockholders' equity (as
defined in the agreement). At September 30, 1999, this requirement was exceeded
by approximately $4.7 billion. At September 30, 1999, there were no borrowings
outstanding under this facility.
TAP's insurance subsidiaries are subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to their parent
without prior approval of insurance regulatory authorities. Dividend payments to
TAP from its insurance subsidiaries are limited to $1.0 billion in 1999 without
prior approval of the Connecticut Insurance Department. TAP received $850
million of dividends from its insurance subsidiaries during the first nine
months of 1999.
Salomon Smith Barney Holdings Inc.
Salomon Smith Barney manages liquidity and monitors and evaluates capital
adequacy through a well-defined process described in the 1998 Annual Report and
Form 10-K. Total assets were $213 billion at September 30, 1999, up slightly
from $212 billion at year-end 1998. As discussed in the 1998 Annual Report and
Form 10-K, it is not uncommon for asset levels to fluctuate from period to
period.
Salomon Smith Barney has a $1.5 billion revolving credit agreement with a bank
syndicate that extends through May 2001, and a $3.5 billion 364-day revolving
credit agreement that extends through May 2000. Salomon Smith Barney may borrow
under these revolving credit facilities at various interest rate options (LIBOR,
CD or base rate) and compensates the banks for the facilities through commitment
fees. Under these facilities Salomon Smith Barney is required to maintain a
certain level of consolidated adjusted net worth (as defined in the agreement).
At September 30, 1999, this requirement was exceeded by approximately $3.9
billion. At September 30, 1999, there were no borrowings outstanding under
either facility. Salomon Smith Barney also has substantial borrowing
arrangements consisting of facilities that it has been advised are available,
but where no contractual lending obligation exists. These arrangements are
reviewed on an ongoing basis to ensure flexibility in meeting short-term
requirements.
Unsecured term debt is a significant component of Salomon Smith Barney's
long-term capital. Long-term debt totaled $18.2 billion at September 30, 1999
and $19.1 billion at December 31, 1998. Salomon Smith Barney utilizes interest
rate swaps to convert the majority of its fixed rate long-term debt used to fund
inventory-related working capital requirements into variable rate obligations.
Long-term debt issuances denominated in currencies other than the U.S. dollar
that are not used to finance assets in the same currency are effectively
converted to U.S. dollar obligations through the use of cross-currency swaps and
forward currency contracts.
33
<PAGE>
The Travelers Insurance Company ("TIC")
At September 30, 1999, TIC had $27.0 billion of life and annuity product deposit
funds and reserves. Of that total, $14.3 billion is not subject to discretionary
withdrawal based on contract terms. The remaining $12.7 billion is for life and
annuity products that are subject to discretionary withdrawal by the
contractholder. Included in the amount that is subject to discretionary
withdrawal are $2.4 billion of liabilities that are surrenderable with market
value adjustments. Also included are an additional $5.0 billion of the life
insurance and individual annuity liabilities which are subject to discretionary
withdrawals, and have an average surrender charge of 4.7%. In the payout phase,
these funds are credited at significantly reduced interest rates. The remaining
$5.3 billion of liabilities are surrenderable without charge. More than 12% of
these relate to individual life products. These risks would have to be
underwritten again if transferred to another carrier, which is considered a
significant deterrent against withdrawal by long-term policyholders. Insurance
liabilities that are surrendered or withdrawn are reduced by outstanding policy
loans and related accrued interest prior to payout.
TIC is subject to various regulatory restrictions that limit the maximum amount
of dividends available to its parent without prior approval of the Connecticut
Insurance Department. A maximum of $504 million of statutory surplus is
available in 1999 for such dividends without Department approval of which $413
million was paid during the first nine months of 1999.
34
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------------------------------------------
In millions, except per share amounts 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Loan interest, including fees $ 5,784 $ 5,884 $ 17,286 $ 16,853
Other interest and dividends 5,417 5,926 16,280 17,723
Insurance premiums 2,636 2,423 7,778 7,158
Commissions and fees 3,149 2,995 9,174 9,017
Principal transactions 954 (1,016) 3,996 1,227
Asset management and administration fees (1) 1,056 563 3,014 1,614
Realized gains (losses) from sales of investments 35 (16) 276 694
Other income 1,066 835 3,250 2,706
---------------------------------------------------------------------
Total revenues 20,097 17,594 61,054 56,992
Interest expense 6,076 7,173 18,583 20,810
---------------------------------------------------------------------
Total revenues, net of interest expense 14,021 10,421 42,471 36,182
---------------------------------------------------------------------
Provisions for benefits, claims, and credit losses
Policyholder benefits and claims 2,258 2,099 6,457 6,140
Provision for credit losses 632 826 2,151 2,077
---------------------------------------------------------------------
Total provisions for benefits, claims, and credit losses 2,890 2,925 8,608 8,217
---------------------------------------------------------------------
Operating expenses
Non-insurance compensation and benefits 3,531 2,819 10,901 9,739
Insurance underwriting, acquisition, and operating 770 756 2,397 2,379
Restructuring-related items 22 -- (61) (324)
Other operating 2,938 2,764 8,869 7,964
---------------------------------------------------------------------
Total operating expenses 7,261 6,339 22,106 19,758
---------------------------------------------------------------------
Income before income taxes, minority interest
and cumulative effect of accounting changes 3,870 1,157 11,757 8,207
Provision for income taxes 1,379 375 4,204 2,914
Minority interest, net of income taxes 56 53 181 163
---------------------------------------------------------------------
Income before cumulative effect of accounting changes 2,435 729 7,372 5,130
Cumulative effect of accounting changes (2) -- -- (127) --
---------------------------------------------------------------------
Net income $ 2,435 $ 729 $ 7,245 $ 5,130
---------------------------------------------------------------------
Basic Earnings Per Share (3)
Income before cumulative effect of accounting changes $ 0.72 $ 0.20 $ 2.18 $ 1.47
Cumulative effect of accounting changes (2) -- -- (0.04) --
---------------------------------------------------------------------
Net income $ 0.72 $ 0.20 $ 2.14 $ 1.47
---------------------------------------------------------------------
Weighted average common shares outstanding 3,332.0 3,372.5 3,335.0 3,368.9
---------------------------------------------------------------------
Diluted Earnings Per Share (3)
Income before cumulative effect of accounting changes $ 0.70 $ 0.20 $ 2.10 $ 1.43
Cumulative effect of accounting changes (2) -- -- (0.03) --
---------------------------------------------------------------------
Net income $ 0.70 $ 0.20 $ 2.07 $ 1.43
---------------------------------------------------------------------
Adjusted weighted average common shares outstanding 3,440.2 3,481.1 3,443.5 3,486.8
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The 1999 third quarter and nine months include asset management and
administration fees for Citicorp subsidiaries, previously reflected in
commissions and fees.
(2) See Note 2 of Notes to Consolidated Financial Statements for a description
of accounting changes.
(3) Earnings per share have been adjusted to reflect the three-for-two split
in Citigroup's common stock, effective May 28, 1999. See Note 1 of Notes
to Consolidated Financial Statements.
- --------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
35
<PAGE>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
September 30,
1999 December 31,
In millions of dollars (Unaudited) 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents (including segregated cash and other deposits) $ 11,699 $ 13,837
Deposits at interest with banks 13,439 11,643
Investments 108,640 105,176
Federal funds sold and securities borrowed or purchased under agreements to resell 104,690 94,831
Brokerage receivables 21,063 21,413
Trading account assets 106,685 119,845
Loans, net
Consumer 139,687 132,255
Commercial 97,657 89,703
--------------------------
Loans, net of unearned income 237,344 221,958
Allowance for credit losses (6,706) (6,617)
--------------------------
Total loans, net 230,638 215,341
Reinsurance recoverables 9,635 9,492
Separate and variable accounts 19,641 15,820
Other assets 61,320 61,243
--------------------------
Total assets $ 687,450 $ 668,641
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities
Non-interest-bearing deposits in U.S. offices $ 16,756 $ 17,058
Interest-bearing deposits in U.S. offices 44,921 44,169
Non-interest-bearing deposits in offices outside the U.S. 11,367 10,856
Interest-bearing deposits in offices outside the U.S. 174,670 156,566
--------------------------
Total deposits 247,714 228,649
Federal funds purchased and securities loaned or sold under agreements to repurchase 95,164 81,025
Brokerage payables 15,543 21,055
Trading account liabilities 82,138 94,584
Contractholder funds and separate and variable accounts 37,948 33,037
Insurance policy and claims reserves 43,988 43,990
Investment banking and brokerage borrowings 11,710 14,040
Short-term borrowings 14,043 16,112
Long-term debt 48,542 48,671
Other liabilities 38,923 40,310
Citigroup or subsidiary obligated mandatorily redeemable securities of subsidiary
trusts holding solely junior subordinated debt securities of -- Parent 2,300 1,700
-- Subsidiary 2,620 2,620
Redeemable preferred stock -- Series I 140 140
- -------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock ($1.00 par value; authorized shares: 30 million), at aggregate liquidation value 2,050 2,313
Common stock ($.01 par value; authorized shares: 6.0 billion), Issued shares --
3,603,018,359 at September 30, 1999 and 3,603,106,368 at December 31, 1998 (1) 36 36
Additional paid-in capital (1) 9,383 8,893
Retained earnings 41,745 35,971
Treasury stock, at cost: September 30, 1999 -- 236,248,228 shares
and December 31, 1998 -- 216,143,199 shares (1) (6,686) (4,789)
Accumulated other changes in equity from nonowner sources 717 781
Unearned compensation (568) (497)
--------------------------
Total stockholders' equity 46,677 42,708
--------------------------
Total liabilities and stockholders' equity $ 687,450 $ 668,641
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects the three-for-two split in Citigroup's common stock, effective
May 28, 1999. See Note 1 of Notes to Consolidated Financial Statements.
- --------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
36
<PAGE>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
In millions of dollars 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Preferred stock at aggregate liquidation value
Balance, beginning of period $ 2,313 $ 3,353
Redemption or retirement of preferred stock (263) (1,040)
-------------------------------
Balance, end of period 2,050 2,313
- ---------------------------------------------------------------------------------------------------------------
Common stock and additional paid-in capital
Balance, beginning of period 8,929 12,496
Employee benefit plans 518 512
Conversion of preferred stock to common stock -- 153
Exercise of common stock warrants -- 131
Other (28) (7)
-------------------------------
Balance, end of period 9,419 13,285
- ---------------------------------------------------------------------------------------------------------------
Retained earnings
Balance, beginning of period 35,971 32,002
Net income 7,245 5,130
Common dividends (1) (1,354) (1,215)
Preferred dividends (117) (171)
-------------------------------
Balance, end of period 41,745 35,746
- ---------------------------------------------------------------------------------------------------------------
Treasury stock, at cost
Balance, beginning of period (4,789) (6,595)
Issuance of shares pursuant to employee benefit plans and other 931 347
Treasury stock acquired (2,828) (2,006)
-------------------------------
Balance, end of period (6,686) (8,254)
- ---------------------------------------------------------------------------------------------------------------
Accumulated other changes in equity from nonowner sources
Balance, beginning of period 781 1,057
Net change in unrealized gains and losses on investment securities, net of tax 1 (462)
Foreign currency translations adjustment, net of tax (65) (2)
-------------------------------
Balance, end of period 717 593
- ---------------------------------------------------------------------------------------------------------------
Unearned compensation
Balance, beginning of period (497) (462)
Issuance of restricted stock, net of amortization (71) (131)
-------------------------------
Balance, end of period (568) (593)
- ---------------------------------------------------------------------------------------------------------------
Total common stockholders' equity (shares outstanding: 3,366,770,131 in 1999
and 3,413,182,443 in 1998) (2) 44,627 40,777
- ---------------------------------------------------------------------------------------------------------------
Total stockholders' equity $ 46,677 $ 43,090
- ---------------------------------------------------------------------------------------------------------------
Summary of changes in equity from nonowner sources
Net income $ 7,245 $ 5,130
Other changes in equity from nonowner sources, net of tax (64) (464)
-------------------------------
Total changes in equity from nonowner sources $ 7,181 $ 4,666
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Common dividends declared were 12 cents per share in the first quarter of
1999, 14 cents per share in both the 1999 second and third quarters and
8.3 cents per share in the first, second and third quarters of 1998
(adjusted to reflect the three-for-two split in Citigroup's common stock,
effective May 28, 1999). See Note 1 of Notes to Consolidated Financial
Statements.
(2) Shares outstanding reflect the split in Citigroup's common stock.
- --------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
37
<PAGE>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
In millions of dollars 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 7,245 $ 5,130
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of deferred policy acquisition costs and value of insurance in force 1,218 1,129
Additions to deferred policy acquisition costs (1,458) (1,330)
Depreciation and amortization 1,280 1,125
Provision for credit losses 2,151 2,077
Change in trading account assets 13,160 33,375
Change in trading account liabilities (12,446) (24,545)
Change in federal funds sold and securities borrowed or purchased under agreements to resell (9,859) 11,604
Change in federal funds purchased and securities loaned or sold under agreements to
repurchase 14,139 (32,869)
Change in brokerage receivables net of brokerage payables (5,162) 3,613
Change in insurance policy and claims reserves (2) 144
Net gains from sales of investments (276) (694)
Venture capital activity (564) (686)
Restructuring-related items (61) (324)
Cumulative effect of accounting changes, net of tax 127 --
Other, net 3,282 1,445
--------------------------------
Total adjustments 5,529 (5,936)
--------------------------------
Net cash provided by (used in) operating activities 12,774 (806)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Change in deposits at interest with banks (1,796) (1,036)
Change in loans (94,270) (136,335)
Proceeds from sales of loans 77,081 124,927
Purchases of investments (66,414) (65,014)
Proceeds from sales of investments 37,150 33,839
Proceeds from maturities of investments 25,381 26,197
Other investments, primarily short-term, net (911) (2,743)
Capital expenditures on premises and equipment (1,096) (1,239)
Proceeds from sales of premises and equipment, subsidiaries and affiliates, and other real
estate owned 463 448
Business acquisitions (2,150) (3,890)
--------------------------------
Net cash used in investing activities (26,562) (24,846)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Dividends paid (1,471) (1,394)
Issuance of common stock 575 243
Issuance of mandatorily redeemable securities of subsidiary trusts 600 825
Redemption of preferred stock (263) (1,040)
Treasury stock acquired (2,828) (2,006)
Stock tendered for payment of withholding taxes (377) (511)
Issuance of long-term debt 6,950 12,350
Payments and redemptions of long-term debt (7,115) (10,503)
Change in deposits 19,065 23,314
Change in short-term borrowings and investment banking and brokerage borrowings (4,237) 5,302
Contractholder fund deposits 4,906 3,852
Contractholder fund withdrawals (3,889) (2,450)
--------------------------------
Net cash provided by financing activities 11,916 27,982
- -----------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (266) (104)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in cash and cash equivalents (2,138) 2,226
Cash and cash equivalents at beginning of period 13,837 12,618
--------------------------------
Cash and cash equivalents at end of period $ 11,699 $ 14,844
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information
Cash paid during the period for income taxes $ 2,556 $ 2,160
Cash paid during the period for interest 17,778 19,725
Non-cash investing activities
Transfers from loans to other real estate owned $ 396 $ 252
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
38
<PAGE>
CITIGROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The accompanying consolidated financial statements as of September 30, 1999 and
for the three and nine month periods ended September 30, 1999 and 1998 are
unaudited and include the accounts of Citigroup Inc. ("Citigroup") and its
subsidiaries (collectively, the Company). 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 1998 Annual Report and
Form 10-K.
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.
The Board of Directors on April 19, 1999 declared a three-for-two split in
Citigroup's common stock, which was paid in the form of a 50% stock dividend on
May 28, 1999. Prior year information has been restated to reflect the stock
split.
2. Accounting Changes
Insurance-related assessments. During the first quarter of 1999, the Company
adopted Statement of Position ("SOP") 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments." SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty-fund and
other insurance-related assessments, how to measure that liability, and when an
asset may be recognized for the recovery of such assessments through premium tax
offsets or policy surcharges. The effect of initial adoption resulted in a
cumulative catch-up adjustment recorded as a charge to earnings of $135 million
after-tax and minority interest.
Deposit Accounting. During the first quarter of 1999, the Company adopted
Statement of Position 98-7, "Deposit Accounting: Accounting for Insurance and
Reinsurance Contracts That Do Not Transfer Insurance Risk." SOP 98-7 provides
guidance on how to account for insurance and reinsurance contracts that do not
transfer insurance risk and applies to all entities and all such contracts,
except for long-duration life and health insurance contracts. The method used to
account for such contracts is referred to as deposit accounting. The effect of
initially adopting SOP 98-7 resulted in a cumulative catch-up adjustment
recorded as a credit to earnings of $23 million after-tax and minority interest.
Start-up costs. During the first quarter of 1999, the Company adopted Statement
of Position 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5
requires costs of start-up activities and organization costs to be expensed as
incurred. The effects of initially adopting SOP 98-5 resulted in a cumulative
catch-up adjustment recorded as a charge to earnings of $15 million after-tax,
to write-off certain capitalized closed-end fund distribution costs.
Derivatives and hedge accounting. In June 1999, the Financial Accounting
Standards Board ("FASB") deferred the effective date of Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities" for one year. As a result, SFAS No. 133 will become
effective on January 1, 2001 for calendar year companies such as the Company.
3. Business Segment Information
The following table presents certain information regarding the Company's
industry segments:
<TABLE>
<CAPTION>
Income (Loss)
Before Cumulative
Effect of
Total Revenues, Net Provision for Accounting
of Interest Expense Income Taxes Changes (1) Identifiable Assets
----------------------------------------------------------------------------------
Three Months Ended September 30,
------------------------------------------------------------
In millions of dollars, except identifiable Sept. 30, Dec. 31,
assets in billions 1999 1998 (2) 1999 1998 (2) 1999 1998 (2) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Global Consumer (3) $ 6,674 $ 5,860 $ 639 $ 482 $1,098 $ 806 $225 $217
Global Corporate and Investment Bank (3) 6,405 3,839 639 (181) 1,148 (221) 417 415
Global Investment Management
and Private Banking 669 602 97 84 155 133 25 20
Investment Activities 311 168 103 53 194 100 9 8
Corporate/Other (38) (48) (99) (63) (160) (89) 11 9
----------------------------------------------------------------------------------
Total $14,021 $10,421 $1,379 $ 375 $2,435 $ 729 $687 $669
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Income (Loss)
Before Cumulative
Effect of
Total Revenues, Net Provision for Accounting
of Interest Expense Income Taxes Changes (1)
-------------------------------------------------------------
Nine Months Ended September 30,
-------------------------------------------------------------
In millions of dollars 1999 1998 (2) 1999 1998 (2) 1999 1998 (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Consumer (3) $19,431 $16,726 $1,781 $1,341 $3,049 $2,239
Global Corporate and Investment Bank (3) 20,436 16,556 2,146 1,081 3,887 2,007
Global Investment Management and Private Banking 1,950 1,762 281 249 449 393
Investment Activities (3) 734 1,278 238 423 447 818
Corporate/Other (80) (140) (242) (180) (460) (327)
-------------------------------------------------------------
Total $42,471 $36,182 $4,204 $2,914 $7,372 $5,130
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the 1999 third quarter and nine month periods, results reflect
after-tax restructuring-related items of $17 million and $73 million in
Global Consumer, and ($2) million and $14 million in Corporate/Other,
respectively. For the 1999 and 1998 nine month periods, Global Corporate
and Investment Bank results reflect an after-tax restructuring credit of
($117) million and ($191) million, respectively.
(2) The 1998 results have been restated to reflect changes in capital and tax
allocations among the segments to conform the policies of each of the
predecessor companies.
(3) Includes provisions for benefits, claims, and credit losses in the Global
Consumer results of $2.0 billion and $1.7 billion, and in the Global
Corporate and Investment Bank results of $914 million and $1.2 billion for
the third quarter of 1999 and 1998, respectively. Includes provisions for
benefits, claims, and credit losses in the Global Consumer results of $5.7
billion and $5.1 billion, and in the Global Corporate and Investment Bank
results of $2.9 billion and $3.1 billion for the nine months of 1999 and
1998, respectively. Investment Activities results include a benefit for
credit losses of $10 million in the 1998 nine months.
- --------------------------------------------------------------------------------
4. Investments
<TABLE>
<CAPTION>
September 30, December 31,
In millions of dollars 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed maturities, primarily available for sale, at fair value $ 92,811 $ 91,547
Equity securities, at fair value 6,573 4,574
Venture capital, at fair value (1) 3,861 3,297
Short-term and other 5,395 5,758
------------------------------
$ 108,640 $ 105,176
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the nine months ended September 30, 1999, net gains on investments
held by venture capital subsidiaries totaled $672 million, of which $835
million and $483 million represented gross unrealized gains and losses,
respectively. For the nine months ended September 30, 1998, net gains on
investments held by venture capital subsidiaries totaled $404 million, of
which $584 million and $285 million represented gross unrealized gains and
losses, respectively.
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in fixed maturities and equity
securities at September 30, 1999 and December 31, 1998 were as follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998 (1)
-------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair Amortized Fair
In millions of dollars Cost Gains Losses Value Cost Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed maturity securities held to maturity,
principally mortgage-backed securities $ 35 $ -- $ -- $ 35 $ 30 $ 36
-------------------------------------------------------------------------------
Fixed maturity securities available for sale
Mortgage-backed securities, principally
obligations of U.S. Federal agencies $14,041 $ 102 $ 353 $13,790 $12,646 $12,982
U.S. Treasury and Federal agency 5,537 76 68 5,545 5,250 5,701
State and municipal 13,732 301 345 13,688 13,714 14,286
Foreign government 24,413 393 415 24,391 26,444 26,268
U.S. corporate 25,103 331 539 24,895 23,424 24,335
Other debt securities 8,871 1,730 134 10,467 7,669 7,945
-------------------------------------------------------------------------------
$91,697 $ 2,933 $ 1,854 $92,776 $89,147 $91,517
-------------------------------------------------------------------------------
Equity securities (2) $ 5,455 $ 1,270 $ 152 $ 6,573 $ 4,529 $ 4,574
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities available for
sale include:
Government of Brazil Brady Bonds $ 658 $ 152 $ -- $ 810 $ 660 $ 686
Government of Venezuela Brady Bonds 450 -- 101 349 478 304
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) At December 31, 1998, gross unrealized gains and losses on fixed
maturities and equity securities totaled $3.911 billion and $1.490
billion, respectively.
(2) Includes non-marketable equity securities carried at cost, which are
reported in both the amortized cost and fair value columns.
- --------------------------------------------------------------------------------
40
<PAGE>
5. Trading Account Assets and Liabilities
Trading account assets and liabilities at market value consisted of the
following:
<TABLE>
<CAPTION>
September 30, December 31,
In millions of dollars 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Trading Account Assets
U.S. Treasury and Federal agency securities $ 27,101 $ 24,729
State and municipal securities 2,366 3,165
Foreign government securities 11,321 21,240
Corporate and other debt securities 13,397 12,595
Derivative and other contractual commitments (1) 27,869 37,431
Equity securities 10,368 7,291
Mortgage loans and collateralized mortgage securities 6,133 6,082
Commodities 267 245
Other 7,863 7,067
-------------------------
$106,685 $119,845
- -------------------------------------------------------------------------------------
Trading Account Liabilities
Securities sold, not yet purchased $ 49,790 $ 53,228
Derivative and other contractual commitments (1) 32,348 41,356
-------------------------
$ 82,138 $ 94,584
- -------------------------------------------------------------------------------------
</TABLE>
(1) Net of master netting agreements and securitization.
- --------------------------------------------------------------------------------
6. Debt
Investment banking and brokerage borrowings consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
In millions of dollars 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Bank borrowings $ 656 $ 556
Commercial paper 10,194 10,493
Other 860 2,991
-------------------------
$ 11,710 $ 14,040
- -------------------------------------------------------------------------------------
</TABLE>
Short-term borrowings consisted of commercial paper and other short-term
borrowings as follows:
<TABLE>
<CAPTION>
September 30, December 31,
In millions of dollars 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper
Citigroup Inc. $ 405 $ 991
Citicorp 3,156 3,040
-------------------------
3,561 4,031
Other short-term borrowings 10,482 12,081
-------------------------
$ 14,043 $ 16,112
- -------------------------------------------------------------------------------------
</TABLE>
Long-term debt, including its current portion, consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
In millions of dollars 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Citigroup Inc. $ 4,189 $ 2,422
Citicorp 25,077 25,874
Salomon Smith Barney Holdings Inc. 18,202 19,092
Travelers Property Casualty Corp. 1,050 1,250
The Travelers Insurance Group, Inc. 24 33
-------------------------
$ 48,542 $ 48,671
- -------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
7. Restructuring-Related Items
In December 1998, Citigroup recorded a restructuring charge of $1.122 billion
($703 million after-tax), reflecting exit costs associated with business
improvement and integration initiatives to be implemented over a 12 to 18 month
period. The charge included $760 million related to employee severance for the
elimination of approximately 11,900 positions, after considering attrition and
redeployment within the Company. The overall workforce reduction, net of
anticipated rehires to fill relocated positions, is expected to be approximately
10,400 positions worldwide. The charge also included $327 million related to
exiting leasehold and other contractual obligations, and $35 million related to
the write-down to estimated salvage value of assets that were available for
immediate disposal. Also recorded in the 1998 fourth quarter were $65 million of
merger-related costs which included the direct and incremental costs of
administratively closing the Citicorp merger. During the 1999 third quarter,
additional severance charges of $49 million ($31 million after-tax) were taken
as a result of the continuing implementation of 1998 restructuring initiatives.
The implementation of these restructuring initiatives also causes certain
related premises and equipment assets to become redundant. The remaining
depreciable lives of these assets have been shortened, and accelerated
depreciation charges (in addition to normal scheduled depreciation on these
assets) is being recognized over these shortened lives, $41 million and $169
million of which were recorded in the 1999 third quarter and nine months,
respectively. Additional implementation costs associated with these
restructuring initiatives will be expensed as incurred but are not expected to
be material.
In 1997, Citigroup recorded restructuring charges of $1.718 billion, consisting
of an $880 million restructuring charge related to cost-management programs and
customer service initiatives to improve operational efficiency and productivity
in the Citicorp businesses, and an $838 million charge related to the Salomon
merger.
The status of the 1998 and 1997 restructuring initiatives is summarized in the
following table.
Restructuring Initiatives Activity
1998 1997
Restructuring Restructuring
In millions of dollars Initiatives Initiatives Total
- --------------------------------------------------------------------------------
Restructuring Charges $ 1,122 $ 1,718 $ 2,840
Additional Severance Charges 49 -- 49
Utilization (1) (601) (1,015) (1,616)
Changes in Estimates (38) (633) (671)
--------------------------------------
Balance at September 30, 1999 $ 532 $ 70 $ 602
- --------------------------------------------------------------------------------
(1) Utilization amounts include translation effects on the restructuring
reserve.
- --------------------------------------------------------------------------------
The 1998 restructuring reserve utilization includes $35 million of non-cash
charges for equipment and premises write-downs as well as $539 million of
severance and other exit costs, occurring primarily in the first nine months of
1999 (of which $305 million related to employee severance and $113 million
related to leasehold and other exit costs have been paid in cash and $121
million is legally obligated), together with translation effects. Utilization,
including translation effects, in the third quarter of 1999 was $182 million.
Through September 30, 1999, approximately 4,500 gross staff positions have been
eliminated under these programs, including 1,000 in the 1999 third quarter.
The 1997 restructuring reserve utilization includes $314 million of non-cash
charges for equipment and premises write-downs as well as $695 million of
severance and other exit costs (of which $466 million related to employee
severance and $173 million related to leasehold and other exit costs have been
paid in cash and $56 million is legally obligated), together with translation
effects. Utilization, including translation effects, in the third quarter and
nine months of 1999 was $33 million and $203 million, respectively. Through
September 30, 1999, approximately 7,200 gross staff positions have been
eliminated under these programs, including 200 in the 1999 third quarter.
During the 1999 third quarter, changes in estimates resulted in a $38 million
reduction in the reserve for 1998 restructuring initiatives. Changes in
estimates related to the 1997 restructuring initiatives included $567 million of
reductions related to the Salomon Smith Barney reserve, primarily related to the
Seven World Trade Center lease, and $66 million (of which $28 million occurred
in the 1999 third quarter) related to the Citicorp reserve. Other changes in
estimates are 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 Citicorp merger.
Adjustments related to the Seven World Trade Center lease during the 1999 first
quarter were attributable to the reassessment of space needed due to the
Citicorp merger, which indicated the need for increased occupancy and the
utilization of space previously considered excessive; adjustments during 1998
resulted from negotiations on a sublease which indicated that excess space could
be disposed of on terms more favorable than had been originally estimated.
42
<PAGE>
Additional information about the 1998 and 1997 restructuring charges, including
the business segments affected, may be found in the 1998 Annual Report and Form
10-K.
8. Earnings Per Share
The following reflects the income and share data used in the basic and diluted
earnings per share computations for the three and nine months ended September
30, 1999 and 1998. Shares have been adjusted to give effect to the three-for-two
split in Citigroup's common stock as discussed in Note 1 of Notes to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
- ------------------------------------------------------------------------------------------------------------------------------
In millions, except per share amounts 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before cumulative effect of accounting changes $ 2,435 $ 729 $ 7,372 $ 5,130
Cumulative effect of accounting changes -- -- (127) --
Preferred dividends (38) (50) (116) (172)
------------------------------------------------------------------
Income available to common stockholders' for basic EPS 2,397 679 7,129 4,958
Effect of dilutive securities 4 6 10 19
------------------------------------------------------------------
Income available to common stockholders' for diluted EPS $ 2,401 $ 685 $ 7,139 $ 4,977
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares
outstanding applicable to basic EPS 3,332.0 3,372.5 3,335.0 3,368.9
Effect of dilutive securities:
Convertible securities 10.2 19.8 10.3 19.8
Options 71.9 58.3 72.7 66.1
Warrants -- 1.1 -- 4.7
Restricted stock 26.1 29.4 25.5 27.3
------------------------------------------------------------------
Adjusted weighted average common shares
outstanding applicable to diluted EPS 3,440.2 3,481.1 3,443.5 3,486.8
- ------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share
Income before cumulative effect of accounting changes $ 0.72 $ 0.20 $ 2.18 $ 1.47
Cumulative effect of accounting changes -- -- (0.04) --
------------------------------------------------------------------
Net income $ 0.72 $ 0.20 $ 2.14 $ 1.47
- ------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share
Income before cumulative effect of accounting changes $ 0.70 $ 0.20 $ 2.10 $ 1.43
Cumulative effect of accounting changes -- -- (0.03) --
------------------------------------------------------------------
Net income $ 0.70 $ 0.20 $ 2.07 $ 1.43
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9. Trading Securities, Commodities, Derivatives and Related Risks
Derivative and Foreign Exchange Contracts
The table below presents the aggregate notional principal amounts of Citigroup's
outstanding derivative and foreign exchange contracts at September 30, 1999 and
December 31, 1998, along with the related balance sheet credit exposure.
Additional information concerning Citigroup'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 1998 Annual Report
and Form 10-K.
<TABLE>
<CAPTION>
Notional Balance Sheet
Principal Amounts Credit Exposure (1) (2)
------------------------------------------------------
Sept. 30, Dec. 31, Sept. 30, Dec. 31,
In billions of dollars 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate products $ 5,751.4 $ 5,552.5 $ 11.5 $ 18.0
Foreign exchange products 2,042.4 2,222.1 9.1 11.8
Equity products 134.3 163.5 6.1 6.8
Commodity products 31.3 20.0 1.2 0.6
Credit derivative products 36.9 28.7 -- 0.2
------------------------
$ 27.9 $ 37.4
- -----------------------------------------------------------------------------------------------------------------------------
</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 Citigroup.
(2) The balance sheet credit exposure reflects $69.2 billion and $90.0 billion
of master netting agreements in effect at September 30, 1999 and December
31, 1998, 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 $2.1 billion and $2.7 billion at September
30, 1999 and December 31, 1998, respectively.
- --------------------------------------------------------------------------------
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 third
quarter of 1999.
43
<PAGE>
End-User Derivative Interest Rate and Foreign Exchange Contracts
<TABLE>
<CAPTION>
Notional Principal
Amounts Percentage of September 30, 1999 Amount Maturing
-----------------------------------------------------------------------------
Sept. 30, Dec. 31, Within 1 to 2 to 3 to 4 to After
In billions of dollars 1999 1998 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate products
Futures contracts $ 18.5 $ 28.6 60% 30% 5% 4% 1% --%
Forward contracts 4.3 6.5 100 -- -- -- -- --
Swap agreements 112.9 113.7 32 15 9 12 10 22
Option contracts 7.0 9.9 56 10 7 4 -- 23
Foreign exchange products
Futures and forward contracts 50.9 68.2 95 4 1 -- -- --
Cross-currency swaps 7.2 4.8 15 13 23 15 14 20
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition, Citigroup had end-user credit derivatives with notional principal
amounts of $25.6 billion and $19.6 billion at September 30, 1999 and December
31, 1998, respectively.
End-User Interest Rate Swaps and Net Purchased Options as of September 30, 1999
<TABLE>
<CAPTION>
Remaining Contracts Outstanding --
Notional Principal Amounts
-----------------------------------------------------------------------
In billions of dollars 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Receive fixed swaps $76.9 $61.0 $48.9 $40.6 $29.2 $19.1
Weighted-average fixed rate 6.3% 6.3% 6.4% 6.3% 6.4% 6.6%
Pay fixed swaps 17.1 12.8 9.7 7.7 6.0 5.2
Weighted-average fixed rate 5.9% 5.8% 5.8% 5.9% 6.0% 6.1%
Basis swaps 18.9 2.4 0.3 0.3 0.2 0.2
Purchased caps (including collars) 2.0 -- -- -- -- --
Weighted-average cap rate purchased 6.7% --% --% --% --% --%
Purchased floors 2.3 0.7 0.1 0.1 0.1 0.1
Weighted-average floor rate purchased 6.1% 5.8% 5.8% 5.8% 5.8% 5.8%
Written floors related to purchased caps (collars) 0.2 -- -- -- -- --
Weighted-average floor rate written 8.2% --% --% --% --% --%
Written caps related to other purchased caps (1) 2.5 2.4 2.3 1.8 1.5 1.5
Weighted-average cap rate written 9.8% 9.8% 9.8% 10.6% 10.7% 10.7%
- --------------------------------------------------------------------------------------------------------------------------------
Three-month forward LIBOR rates (2) 6.1% 6.1% 6.5% 6.7% 6.9% 7.1%
- --------------------------------------------------------------------------------------------------------------------------------
</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
September 30, 1999, provided for reference.
- --------------------------------------------------------------------------------
10. Contingencies
It is difficult to estimate the reserves for environmental and asbestos-related
claims due to the vagaries of court coverage decisions, plaintiffs' expanded
theories of liability, the risks inherent in major litigation and other
uncertainties. Conventional actuarial techniques are not used to estimate such
reserves.
The reserves carried for environmental and asbestos claims at September 30, 1999
are the Company's best estimate of ultimate claims and claim adjustment expenses
based upon known facts and current law. However, the conditions surrounding the
final resolution of these claims continue to change. Currently, it is not
possible to predict changes in the legal and legislative environment and their
impact on the future development of asbestos and environmental claims. Such
development will be affected by future court decisions and interpretations as
well as changes in legislation applicable to such claims. Because of these
future unknowns, additional liabilities may arise for amounts in excess of the
current reserves. These additional amounts, or a range of these additional
amounts, cannot now be reasonably estimated, and could result in a liability
exceeding reserves by an amount that would be material to the Company's
operating results in a future period. However, the Company believes that it is
not likely that these claims will have a material adverse effect on the
Company's financial condition or liquidity.
In the ordinary course of business Citigroup and/or its subsidiaries are also
defendants or co-defendants in various litigation matters, other than those
described above. 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.
44
<PAGE>
FINANCIAL DATA SUPPLEMENT
Cash-Basis, Renegotiated, and Past Due Loans (1)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Sept. 30,
In millions of dollars 1999 1998 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial cash-basis loans
Collateral dependent (at lower of cost or collateral value) (2) $ 277 $ 394 $ 170
Other 1,232 1,201 1,110
----------------------------------
Total $1,509 $1,595 $1,280
- --------------------------------------------------------------------------------------------------------
Commercial cash-basis loans
In U.S. offices $ 252 $ 463 $ 204
In offices outside the U.S. 1,257 1,132 1,076
----------------------------------
Total $1,509 $1,595 $1,280
- --------------------------------------------------------------------------------------------------------
Commercial renegotiated loans
In U.S. offices $ 16 $ -- $ --
In offices outside the U.S. 52 45 48
----------------------------------
Total $ 68 $ 45 $ 48
- --------------------------------------------------------------------------------------------------------
Consumer loans on which accrual of interest had been suspended
In U.S. offices (3) $ 707 $ 825 $ 803
In offices outside the U.S. 1,507 1,458 1,304
----------------------------------
Total $2,214 $2,283 $2,107
- --------------------------------------------------------------------------------------------------------
Accruing loans 90 or more days delinquent (4)
In U.S. offices (3) $ 626 $ 592 $ 597
In offices outside the U.S. 467 532 492
----------------------------------
Total $1,093 $1,124 $1,089
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) For a discussion of risks in the consumer loan portfolio, see pages 4-16,
and of commercial cash-basis loans, see pages 20-21.
(2) A cash-basis loan is defined as collateral dependent when repayment is
expected to be provided solely by the underlying collateral and there are
no other available and reliable sources of repayment, in which case the
loans are written down to the lower of cost or collateral value.
(3) Includes $12 million, $10 million, and $10 million of consumer loans on
which accrual of interest had been suspended and $28 million, $30 million,
and $30 million of accruing loans 90 or more days delinquent related to
loans held for sale at September 30, 1999, December 31, 1998, and
September 30, 1998, respectively.
(4) Substantially all consumer loans, of which $331 million, $267 million, and
$284 million are government-guaranteed student loans at September 30,
1999, December 31, 1998, and September 30, 1998, respectively.
- --------------------------------------------------------------------------------
Other Real Estate Owned and Assets Pending Disposition
<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Sept. 30,
In millions of dollars 1999 1998 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer (1) $ 211 $ 254 $ 260
Commercial (1) 656 496 556
----------------------------------
Total $ 867 $ 750 $ 816
- --------------------------------------------------------------------------------------------------------
Assets pending disposition (2) $ 87 $ 100 $ 103
- --------------------------------------------------------------------------------------------------------
</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.
- --------------------------------------------------------------------------------
45
<PAGE>
Details of Credit Loss Experience
<TABLE>
<CAPTION>
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
In millions of dollars 1999 1999 1999 1998 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for credit losses
at beginning of period $6,743 $6,662 $6,617 $6,604 $6,529
---------------------------------------------------------------
Provision for credit losses
Consumer 595 680 618 605 594
Commercial 37 110 111 69 232
---------------------------------------------------------------
632 790 729 674 826
---------------------------------------------------------------
Gross credit losses
Consumer
In U.S. offices 420 440 391 421 424
In offices outside the U.S. 324 332 304 294 262
Commercial
In U.S. offices 8 2 1 10 56
In offices outside the U.S. 95 132 130 128 216
---------------------------------------------------------------
847 906 826 853 958
---------------------------------------------------------------
Credit recoveries
Consumer
In U.S. offices 66 70 55 50 60
In offices outside the U.S. 79 70 63 79 69
Commercial
In U.S. offices 1 3 2 17 26
In offices outside the U.S. 15 21 18 30 14
---------------------------------------------------------------
161 164 138 176 169
---------------------------------------------------------------
Net credit losses
In U.S. offices 361 369 335 364 394
In offices outside the U.S. 325 373 353 313 395
---------------------------------------------------------------
686 742 688 677 789
---------------------------------------------------------------
Other -- net (1) 17 33 4 16 38
---------------------------------------------------------------
Allowance for credit losses at end of period $6,706 $6,743 $6,662 $6,617 $6,604
- -----------------------------------------------------------------------------------------------------------------
Net consumer credit losses $ 599 $ 632 $ 577 $ 586 $ 557
As a percentage of average consumer loans 1.73% 1.89% 1.78% 1.80% 1.80%
- -----------------------------------------------------------------------------------------------------------------
Net commercial credit losses $ 87 $ 110 $ 111 $ 91 $ 232
As a percentage of average commercial loans 0.37% 0.48% 0.46% 0.39% 1.07%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Primarily includes foreign currency translation effects and the addition
of allowance for credit losses related to acquisitions.
- --------------------------------------------------------------------------------
46
<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 July 20, 1999, the Company filed a Current Report on Form 8-K,
dated July 19, 1999, reporting under Item 5 thereof the results of
its operations for the quarter ended June 30, 1999, and certain
other selected financial data.
No other reports on Form 8-K were filed during the third quarter of
1999; however, (i) on October 19, 1999, the Company filed a Current
Report on Form 8-K, dated October 18, 1999, reporting under Item 5
thereof the results of its operations for the quarter ended
September 30, 1999, and certain other selected financial data, and
(ii) on October 26, 1999, the Company filed a Current Report on Form
8-K, dated October 26, 1999, reporting the election of Robert E.
Rubin to the Company's Board of Directors.
47
<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 12th day of November, 1999.
CITIGROUP INC.
(Registrant)
By /s/ Heidi G. Miller
------------------------------
Heidi G. Miller
Chief Financial Officer
Principal Financial Officer
By /s/ Irwin R. Ettinger By /s/ Roger W. Trupin
-------------------------------- ------------------------------
Irwin R. Ettinger Roger W. Trupin
Principal Accounting Officer Principal Accounting Officer
48
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
3.01.1 Restated Certificate of Incorporation of Citigroup Inc. (the
"Company"), incorporated by reference to Exhibit 4.01 to the
Company's Registration Statement on Form S-3 filed December
15, 1998 (No. 333-68949).
3.01.2 Certificate of Designation of 5.321% Cumulative Preferred
Stock, Series YY, of the Company, incorporated by reference to
Exhibit 4.45 to Amendment No. 1 to the Company's Registration
Statement on Form S-3 filed January 22, 1999 (No. 333-68949).
3.02 By-Laws of the Company effective October 26, 1999.
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 the Company does not exceed 10% of the
total assets of the Company and its consolidated subsidiaries. The Company will
furnish copies of any such instrument to the Securities and Exchange Commission
upon request.
49
BY-LAWS
OF
CITIGROUP INC.
As amended effective October 26, 1999
<PAGE>
INDEX
TO
BY-LAWS
OF
CITIGROUP INC.
Article I Location
Article II Corporate Seal
Article III Meetings of Stockholders
Article IV Directors
Article V Meetings of the Directors
Article VI Standing Committees
Article VII Executive Committee
Article VIII Officers of the Company
Article IX Officers - How Chosen
Article X Chairman
Article XI President
Article XII Vice Chairmen
Article XIII Vice Presidents
<PAGE>
Article XIV Secretary
Article XV Duties of Officers
Article XVI Certificates of Stock, Securities and Notes
Article XVII Negotiable Instruments and Contracts
Article XVIII Fiscal Year
Article XIX Notice
Article XX Waiver of Notice
Article XXI Amendment of By-Laws
<PAGE>
BY-LAWS
OF
CITIGROUP INC.
ARTICLE I
LOCATION
SECTION 1. The location of the registered office of the Company in
Delaware shall be in the City of Wilmington, County of New Castle, State of
Delaware.
SECTION 2. The Company shall, in addition to the registered office
in the State of Delaware, establish and maintain an office within or without the
State of Delaware or offices in such other places as the Board of Directors may
from time to time find necessary or desirable.
ARTICLE II
CORPORATE SEAL
SECTION 1. The corporate seal of the Company shall have inscribed
thereon the name of the Company and the words "Incorporated Delaware. "
ARTICLE III
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders, or any special
meeting thereof, shall be held either in the City of New York, State of New
York, or at such other place as may be designated by the Board of Directors or
by the Chairman, the stockholder or group of Directors calling any special
meeting.
SECTION 2. Stockholders entitled to vote may vote at all meetings
either in person or by proxy in writing executed in any manner permitted by law
or by other media permitted by law. All proxies shall be filed with the
Secretary of the meeting before being voted upon.
SECTION 3. A majority in amount of the stock issued, outstanding and
entitled to vote represented by the holders in person or by proxy shall be
requisite at all meetings to constitute a quorum for the election of Directors
or for the transaction of other business except as otherwise provided by law, by
the Certificate of Incorporation or by these By-laws. If at any annual or
special meeting of the stockholders, a quorum shall fail to attend, a majority
in interest attending in person or by proxy may adjourn the meeting from time to
time, without notice other than by announcement at the meeting (except as
otherwise provided herein) until a quorum shall attend and thereupon any
business may be transacted which might have been transacted at the meeting
originally called had the same been held at the time so called. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned
<PAGE>
meeting, to the extent required by law a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
SECTION 4. The annual meeting of the stockholders shall be held on
such date and at such time as the Board of Directors may determine by
resolution. Except as otherwise set forth in the Certificate of Incorporation,
each holder of voting stock shall be entitled to one vote for each share of such
stock standing registered in his or her name. All annual meetings shall be
general meetings.
SECTION 5. The business to be transacted at the annual meeting shall
include the election of Directors and such other business as may properly come
before the meeting.
SECTION 6. Notice of the annual meeting shall be mailed by the
Secretary to each stockholder entitled to vote, at his or her last known
address, at least ten days but not more than sixty days prior to the meeting.
SECTION 7. Special meetings of the stockholders may be called by the
Chairman. A special meeting shall be called at the request, in writing, of a
majority of the Board of Directors or by the vote of the Board of Directors.
SECTION 8. Notice of each special meeting, indicating briefly the
object or objects thereof, shall be mailed by the Secretary to each stockholder
entitled to vote at his or her last known address, at least ten days but not
more than sixty days prior to the meeting.
SECTION 9. If the entire Board of Directors becomes vacant, any
stockholder may call a special meeting in the same manner that the Chairman may
call such meeting, and Directors for the unexpired term may be elected at said
special meeting in the manner provided for their election at annual meetings.
SECTION 10. The Company may, and to the extent required by law,
shall, in advance of any meeting of stockholders, appoint one or more inspectors
to act at the meeting and make a written report thereof. The Company may
designate one or more persons as alternate inspectors to replace any inspector
who fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting may, and to the extent
required by law, shall, appoint one or more inspectors to act at the meeting.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability. Every vote taken by
ballots shall be counted by an inspector or inspectors appointed by the chairman
of the meeting.
SECTION 11. A notice of a stockholder to make a nomination or to
bring any other matter before a meeting shall be made in writing and received by
the Secretary of the Company (a) in the event of an annual meeting of
stockholders, not more than 120 days and not less than 90 days in advance of the
anniversary date of the immediately preceding annual meeting provided, however,
that in the event that the annual meeting is called on a date that is not within
thirty days before or after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the fifteenth day following
<PAGE>
the day on which notice of the date of the annual meeting was mailed or public
disclosure of the date of the annual meeting was made, whichever first occurs;
or (b) in the event of a special meeting of stockholders, such notice shall be
received by the Secretary of the Company not later than the close of the
fifteenth day following the day on which notice of the meeting is first mailed
to stockholders or public disclosure of the date of the special meeting was
made, whichever first occurs.
Every such notice by a stockholder shall set forth:
(a) the name and residence address of the stockholder of the Company who
intends to make a nomination or bring up any other matter;
(b) a representation that the stockholder is a holder of the Company's voting
stock (indicating the class and number of shares owned) and intends to
appear in person or by proxy at the meeting to make the nomination or
bring up the matter specified in the notice;
(c) with respect to notice of an intent to make a nomination, a description of
all arrangements or understandings among the stockholder and each nominee
and any other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the stockholder;
(d) with respect to an intent to make a nomination, such other information
regarding each nominee proposed by such stockholder as would have been
required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been
nominated by the Board of Directors of the Company; and
(e) with respect to the notice of an intent to bring up any other matter, a
description of the matter, and any material interest of the stockholder in
the matter.
Notice of intent to make a nomination shall be accompanied by the written
consent of each nominee to serve as director of the Company if so elected.
At the meeting of stockholders, the Chairman shall declare out of order and
disregard any nomination or other matter not presented in accordance with this
section.
ARTICLE IV
DIRECTORS
SECTION 1. The affairs, property and business of the Company shall
be managed by or under the direction of a Board of Directors, with the exact
number of directors to be determined from time to time by resolution adopted by
affirmative vote of a majority of the entire Board of Directors. The election
and term of directors shall be as provided in the Certificate of Incorporation
as amended from time to time. In addition to the powers and authorities
expressly conferred upon them by these By-laws, the Board of Directors may
exercise all such powers and do all such acts and things as may be exercised or
done by the Company, but subject, nevertheless, to the provisions of the laws of
the State of Delaware, of the Certificate of Incorporation and of these By-laws.
SECTION 2. Vacancies in the Board of Directors shall be filled as
provided in the Certificate of Incorporation as amended from time to time.
<PAGE>
SECTION 3. The Board of Directors shall have authority to determine
from time to time, the amount of compensation that shall be paid to any of its
members, provided, however that no such compensation shall be paid to any
director who is a salaried officer or employee of the Company or any of its
subsidiaries. Directors shall be entitled to receive transportation and other
expenses of attendance at meetings. Nothing herein contained shall be construed
to preclude a Director or member of a committee from serving in any other
capacity and receiving compensation therefor.
SECTION 4. The Company shall indemnify, to the fullest extent
permissible under the General Corporation Law of the State of Delaware, or the
indemnification provisions of any successor statute, any person, and the heirs
and personal representatives of such person, against any and all judgments,
fines, amounts paid in settlement and costs and expenses, including attorneys'
fees, actually and reasonably incurred by or imposed upon such person in
connection with, or resulting from any claim, action, suit or proceeding (civil,
criminal, administrative or investigative) in which such person is a party or is
threatened to be made a party by reason of such person being or having been a
director, officer or employee of the Company, or of another corporation, joint
venture, trust or other organization in which such person serves as a director,
officer or employee at the request of the Company, or by reason of such person
being or having been an administrator or a member of any board or committee of
the Company or of any such other organization, including, but not limited to,
any administrator, board or committee related to any employee benefit plan.
The Company shall advance expenses incurred in defending a civil or
criminal action, suit or proceeding to any such director, officer or employee
upon receipt of an undertaking by or on behalf of the director, officer or
employee to repay such amount, if it shall ultimately be determined that such
person is not entitled to indemnification by the Company.
The foregoing right of indemnification and advancement of expenses
shall in no way be exclusive of any other rights of indemnification to which any
such person may be entitled, under any by-law, agreement, vote of shareholders
or disinterested directors or otherwise, and shall inure to the benefit of the
heirs and personal representatives of such person.
SECTION 5. Each Director and officer and each member of any
committee designated by the Board of Directors shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Company or of any of its subsidiaries, or upon
reports made to the Company or any of its subsidiaries by any officer of the
Company or of a subsidiary or by an independent certified public accountant or
by an appraiser selected with reasonable care by the Board of Directors or by
any such committee.
ARTICLE V
MEETINGS OF THE DIRECTORS
SECTION 1. The Board of Directors shall meet as soon as convenient
after the annual meeting of stockholders in the City of New York, State of New
York, or at such other
<PAGE>
place as may be designated by the Board of Directors, for the purpose of
organization and the transaction of any other business which may properly come
before the meeting.
SECTION 2. Regular meetings of the Directors may be held without
notice at such time and place as may be determined from time to time by
resolution of the Board of Directors or as determined by the Secretary upon
reasonable notice to each Director.
SECTION 3. A majority of the total number of Directors shall
constitute a quorum except when the Board of Directors consists of one Director,
then one Director shall constitute a quorum for the transaction of business, but
the Directors present, though fewer than a quorum, may adjourn the meeting to
another day. The vote of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
SECTION 4. Special meetings of the Board may be called by the Board
of Directors, or the Chairman, on one day's notice, or other reasonable notice,
to each Director, either personally, by mail or by wire, and may be held at such
time and place as the Board of Directors, or the officer calling said meeting
may determine. Special meetings may be called in like manner on the request in
writing of three Directors.
SECTION 5. In the absence of both the Secretary and an Assistant
Secretary, the Board of Directors shall appoint a secretary to record all votes
and the minutes of its proceedings.
ARTICLE VI
STANDING COMMITTEES
SECTION 1. The Board of Directors may designate from their number
standing committees and may invest them with all their own powers, except as
otherwise provided in the General Corporation Law of the State of Delaware,
subject to such conditions as they may prescribe, and all committees so
appointed shall keep regular minutes of their transactions and shall cause them
to be recorded in books kept for that purpose in the office of the Company and
shall report the same to the Board of Directors.
ARTICLE VII
EXECUTIVE COMMITTEE
SECTION 1. The Executive Committee shall be composed of the
Chairmen, each of whom shall be an ex-officio member, and such additional
directors not less than three, appointed by the Board, who shall serve until the
next annual organization meeting of the Board and until their successors are
appointed. A majority of the members of the Executive Committee shall constitute
a quorum. Any vacancy on the Executive Committee shall be filled by the Board of
Directors.
SECTION 2. The Executive Committee shall exercise all powers of the
Board of Directors between the meetings of said Board except as otherwise
provided in the General Corporation Law of the State of Delaware and for this
purpose references in these By-laws to the
<PAGE>
Board of Directors shall be deemed to include references to the Executive
Committee. No action of the Executive Committee shall become operative unless it
has the affirmative vote of at least a majority of the members of the Executive
Committee present and voting.
SECTION 3. Meetings of the Executive Committee may be called at any
time upon one day's notice, or other reasonable notice, either personally, by
mail or by wire, by the Chairman, the Chairman of the Executive Committee, or by
any two members of the Executive Committee.
SECTION 4. In the absence of both the Secretary and an Assistant
Secretary, the Executive Committee shall appoint a secretary who shall keep
regular minutes of the actions of the said Committee and report the same to the
Board of Directors, which thereupon shall take action thereon.
SECTION 5. The Board of Directors may designate from the members of
the Executive Committee a Chairman of the Executive Committee. If the Board of
Directors should not make such designation, the Executive Committee may
designate a Chairman of the Executive Committee.
ARTICLE VIII
OFFICERS OF THE COMPANY
SECTION 1. The officers of the Company shall consist of one or more
Chairmen, and may include a President, one or more Vice Chairmen, one or more
Vice Presidents and a Secretary. There also may be such other officers and
assistant officers as, from time to time, may be elected or appointed by, or
pursuant to the direction of, the Board of Directors.
ARTICLE IX
OFFICERS - HOW CHOSEN
SECTION 1. The Directors shall elect annually from among their own
number one or more Chairmen. They may also elect a President, one or more Vice
Chairmen, the several Vice Presidents and a Secretary, to hold office for one
year or until others are elected and qualify in their stead or until their
earlier resignation or removal.
SECTION 2. The Directors shall also elect or appoint such other
officers and assistant officers as from time to time they may determine, and who
shall hold office during the pleasure of the Board. In addition, the Directors
may delegate to officers of the Company, as designated by the Chairman, the
authority to appoint and dismiss assistant officers and deputy officers within
the respective officer's area of supervision.
<PAGE>
ARTICLE X
CHAIRMAN
SECTION 1. The Chairman shall be the Chief Executive Officer of the
Company. If there shall be more than one Chairman, each such Chairman shall be a
Co-Chief Executive Officer of the Company, and each Chairman, acting alone,
shall have all of the powers of the Chairman. The Chairman shall have general
supervision and direction over the business and policies of the Company, and
over all the other officers of the Company and shall see that their duties are
properly performed.
SECTION 2. The Chairman shall have the general powers and duties of
the direction, supervision and management usually vested in the Chief Executive
Officer of a corporation, and shall preside at all meetings of the Board of
Directors. The Chairman shall see that all orders and resolutions of the Board
of Directors and any committee thereof are carried into effect.
SECTION 3. The Chairman shall submit reports of the current
operations of the Company to the Board of Directors at their regular meetings,
and annual reports to the stockholders.
ARTICLE XI
PRESIDENT
SECTION 1. In the absence of the Chairmen, the President shall
exercise the powers and duties of the Chairman related to meetings of the Board
of Directors, committees thereof and meetings of stockholders. The President
shall have general executive powers as well as the specific powers conferred by
these By-Laws. The President shall also have such powers and duties as may from
time to time be assigned by the Board of Directors or the Chairman.
ARTICLE XII
VICE CHAIRMEN
SECTION 1. In the absence of the Chairmen and the President and in
the order of their appointment to the office, the Vice Chairmen shall exercise
the powers and duties of the Chairman related to meetings of the Board of
Directors and meetings of the stockholders. The Vice Chairmen shall have general
executive powers as well as the specific powers conferred by these By-Laws. Each
of them shall also have such powers and duties as may from time to time be
assigned by the Board of Directors or the Chairman.
ARTICLE XIII
VICE PRESIDENTS
SECTION 1. Each Vice President shall have such powers and perform
such duties as may be assigned to such officer by the Board of Directors or,
subject to Section 2 of Article XV, by the Chairman. The Board of Directors may
add to the title of any Vice President
<PAGE>
such distinguishing designation as may be deemed desirable, which may reflect
seniority, duties or responsibilities of such Vice President.
ARTICLE XIV
SECRETARY
SECTION 1. The Secretary shall attend all sessions of the Board of
Directors and act as clerk thereof and record all votes and the minutes of all
proceedings in a book to be kept for that purpose, and shall perform like duties
for the Standing Committees when required.
SECTION 2. The Secretary shall see that proper notice is given of
all meetings of the stockholders of the Company and of the Board of Directors.
In the Secretary's absence, or in the case of his or her failure or inability to
act, an Assistant Secretary or a secretary pro-tempore shall perform his or her
duties and such other duties as may be prescribed by the Board of Directors.
SECTION 3. The Secretary shall keep account of certificates of stock
or other receipts and securities representing an interest in or to the capital
of the Company, transferred and registered in such form and manner and under
such regulations as the Board of Directors may prescribe.
SECTION 4. The Secretary shall keep in safe custody the contracts,
books and such corporate records as are not otherwise provided for, and the seal
of the Company. The Secretary shall affix the seal to any instrument requiring
the same and the seal, when so affixed shall be attested by the signature of the
Secretary, an Assistant Secretary, Treasurer or an Assistant Treasurer.
ARTICLE XV
DUTIES OF OFFICERS
SECTION 1. In addition to the duties specifically enumerated in the
By-laws, all officers and assistant officers of the Company shall perform such
other duties as may be assigned to them from time to time by the Board of
Directors or by their superior officers.
SECTION 2. The Board of Directors may change the powers or duties of
any officer or assistant officer, or delegate the same to any other officer,
assistant officer or person.
SECTION 3. Every officer and assistant officer of the Company shall
from time to time report to the Board of Directors, or to his or her superior
officers all matters within his or her knowledge which the interests of the
Company may require to be brought to their notice.
SECTION 4. Unless otherwise directed by the Board of Directors, the
Chairman, any Vice Chairman, the President, any Vice President or the Secretary
of the Company shall have power to vote and otherwise act on behalf of the
Company, in person or by proxy, at any meeting of stockholders of or with
respect to any action of stockholders of any other corporation in which the
Company may hold securities and otherwise to exercise any and all rights and
<PAGE>
powers which the Company may possess by reason of its ownership of securities in
such other corporation.
ARTICLE XVI
CERTIFICATES OF STOCK, SECURITIES AND NOTES
SECTION 1. Certificates of stock, or other receipts and securities
representing an interest in the capital of the Company, shall bear the signature
of the Chairman, the President or any Vice Chairman or any Vice President and
bear the countersignature of the Secretary or any Assistant Secretary or the
Treasurer or any Assistant Treasurer.
SECTION 2. Nothing in this Article XVI shall be construed to limit
the right of the Company, by resolution of its Board of Directors, to authorize,
under such conditions as such Board may determine, the facsimile signature by
any properly authorized officer of any instrument or document that said Board of
Directors may determine.
SECTION 3. In case any officer, transfer agent or registrar who
shall have signed or whose facsimile signature shall have been used on any
certificates of stock, notes or securities shall cease to be such officer,
transfer agent or registrar of the Company, whether because of death,
resignation or otherwise, before the same shall have been issued by the Company,
such certificates of stock, notes and securities nevertheless may be adopted by
the Company and be issued and delivered as though the person or persons who
signed the same or whose facsimile signature or signatures shall have been used
thereon had not ceased to be such officer, transfer agent or registrar of the
Company, and such adoption of said certificates of stock, notes and securities
shall be evidenced by a resolution of the Board of Directors to that effect.
SECTION 4. All transfers of the stock of the Company shall be made
upon the books of the Company by the owners of the shares in person or by their
legal representatives.
SECTION 5. Certificates of stock shall be surrendered and canceled
at the time of transfer.
SECTION 6. The Company shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof, and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, save as expressly provided by the
laws of the State of Delaware.
SECTION 7. In the case of a loss or the destruction of a certificate
of stock, another may be issued in its place upon satisfactory proof of such
loss or destruction and the giving of a bond of indemnity, unless waived,
approved by the Board of Directors.
<PAGE>
ARTICLE XVII
NEGOTIABLE INSTRUMENTS AND CONTRACTS
SECTION 1. Any of the following officers who are authorized by the
Board of Directors to wit, the Chairman, the President, the Vice Chairman, the
Vice Presidents or the Secretary or any other person when such other person is
authorized by the Board of Directors shall have the authority to sign and
execute on behalf of the Company as maker, drawer, acceptor, guarantor,
endorser, assignor or otherwise, all notes, collateral trust notes, debentures,
drafts, bills of exchange, acceptances, securities and commercial paper of all
kinds.
SECTION 2. The Chairman, the President, any Vice Chairman, any Vice
President, the Secretary or any other person, when such officer or other person
is authorized by the Board of Directors shall have authority, on behalf of and
for the account of the Company, (a) to borrow money against duly executed
obligations of the Company; (b) to sell, discount or otherwise dispose of notes,
collateral trust notes, debentures, drafts, bills of exchange, acceptances,
securities, obligations of the Company and commercial paper of all kinds; (c) to
sign orders for the transfer of money to affiliated or subsidiary companies, and
(d) to execute contracts or powers of attorney.
SECTION 3. The Board of Directors may either in the absence of any
of said officers or persons, or for any other reason, appoint some other officer
or some other person to exercise the powers and discharge the duties of such
officer or person under this Article, and the officer or person so appointed
shall have all the power and authority hereby conferred upon the officer for
whom he or she may be appointed to act.
ARTICLE XVIII
FISCAL YEAR
SECTION 1. The fiscal year of the Company shall begin the first day
of January and terminate on the thirty-first day of December in each year.
ARTICLE XIX NOTICE
SECTION 1. Whenever under the provisions of the laws of the State of
Delaware or these By-laws notice is required to be given to any Director, member
of a committee, officer or stockholder, it shall not be construed to mean
personal notice, but such notice may be given by wire or in writing by
depositing the same in the post office or letter box in a post paid, sealed
wrapper, addressed to such Director, member of a committee, officer or
stockholder at his or her address as the same appears in the books of the
Company; and the time when the same shall be mailed shall be deemed to be the
time of the giving of such notice.
<PAGE>
ARTICLE XX
WAIVER OF NOTICE
SECTION 1. Any stockholder, Director or member of a committee may
waive in writing any notice required to be given under these By-laws.
ARTICLE XXI
AMENDMENT OF BY-LAWS
SECTION 1. The Board of Directors, at any meeting, may alter or
amend these By-laws, and any alteration or amendments so made may be repealed by
the Board of Directors or by the stockholders at any meeting duly called.
<PAGE>
The undersigned, duly qualified and acting Secretary of Citigroup Inc., a
Delaware corporation, hereby certifies the foregoing to be a true and complete
copy of the By-Laws of the said Citigroup Inc., as at present in force and
effect.
WITNESS, the hand of the undersigned and the seal of the said Citigroup Inc.,
this ___________________ day of ___________________________,________________.
----------------------------------------
CITIGROUP, INC.
CALCULATION OF RATIO OF INCOME TO FIXED CHARGES
(In Millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
SEPTEMBER 30,
EXCLUDING INTEREST ON DEPOSITS: 1998 1997 1996 1995 1994 1999 1998
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
INTEREST EXPENSE (OTHER THAN
INTEREST ON DEPOSITS) 15,849 14,911 12,362 13,488 13,532 10,385 12,425
INTEREST FACTOR IN RENT EXPENSE 394 301 282 275 302 212 222
------ ------ ------ ------ ------ ------ ------
TOTAL FIXED CHARGES 16,243 15,212 12,644 13,763 13,834 10,597 12,647
------ ------ ------ ------ ------ ------ ------
INCOME:
INCOME BEFORE TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 9,269 10,750 11,087 8,914 5,656 11,757 8,207
OTHER -- -- 1 -- -- -- --
FIXED CHARGES 16,243 15,212 12,644 13,763 13,834 10,597 12,647
------ ------ ------ ------ ------ ------ ------
TOTAL INCOME 25,512 25,962 23,732 22,677 19,490 22,354 20,854
====== ====== ====== ====== ====== ====== ======
RATIO OF INCOME TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 1.57 1.71 1.88 1.65 1.41 2.11 1.65
====== ====== ====== ====== ====== ====== ======
INCLUDING INTEREST ON DEPOSITS:
FIXED CHARGES:
INTEREST EXPENSE 27,495 24,524 21,336 22,390 22,528 18,583 20,810
INTEREST FACTOR IN RENT EXPENSE 394 301 282 275 302 212 222
------ ------ ------ ------ ------ ------ ------
TOTAL FIXED CHARGES 27,889 24,825 21,618 22,665 22,830 18,795 21,032
------ ------ ------ ------ ------ ------ ------
INCOME:
INCOME BEFORE TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 9,269 10,750 11,087 8,914 5,656 11,757 8,207
OTHER -- -- 1 -- -- -- --
FIXED CHARGES 27,889 24,825 21,618 22,665 22,830 18,795 21,032
------ ------ ------ ------ ------ ------ ------
TOTAL INCOME 37,158 35,575 32,706 31,579 28,486 30,552 29,239
====== ====== ====== ====== ====== ====== ======
RATIO OF INCOME TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.33 1.43 1.51 1.39 1.25 1.63 1.39
====== ====== ====== ====== ====== ====== ======
</TABLE>
CITIGROUP, INC.
CALCULATION OF RATIO OF INCOME TO FIXED CHARGES
INCLUDING PREFERRED STOCK DIVIDENDS
(In Millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
SEPTEMBER 30,
EXCLUDING INTEREST ON DEPOSITS: 1998 1997 1996 1995 1994 1999 1998
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
INTEREST EXPENSE (OTHER THAN
INTEREST ON DEPOSITS) 15,849 14,911 12,362 13,488 13,532 10,385 12,425
INTEREST FACTOR IN RENT EXPENSE 394 301 282 275 302 212 222
DIVIDENDS--PREFERRED STOCK 332 433 505 800 704 181 265
------ ------ ------ ------ ------ ------ ------
TOTAL FIXED CHARGES 16,575 15,645 13,149 14,563 14,538 10,778 12,912
------ ------ ------ ------ ------ ------ ------
INCOME:
INCOME BEFORE TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 9,269 10,750 11,087 8,914 5,656 11,757 8,207
OTHER -- -- 1 -- -- -- --
FIXED CHARGES (EXCLUDING PREFERRED
STOCK DIVIDENDS) 16,243 15,212 12,644 13,763 13,834 10,597 12,647
------ ------ ------ ------ ------ ------ ------
TOTAL INCOME 25,512 25,962 23,732 22,677 19,490 22,354 20,854
====== ====== ====== ====== ====== ====== ======
RATIO OF INCOME TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 1.54 1.66 1.80 1.56 1.34 2.07 1.62
====== ====== ====== ====== ====== ====== ======
INCLUDING INTEREST ON DEPOSITS:
FIXED CHARGES:
INTEREST EXPENSE 27,495 24,524 21,336 22,390 22,528 18,583 20,810
INTEREST FACTOR IN RENT EXPENSE 394 301 282 275 302 212 222
DIVIDENDS--PREFERRED STOCK 332 433 505 800 704 181 265
------ ------ ------ ------ ------ ------ ------
TOTAL FIXED CHARGES 28,221 25,258 22,123 23,465 23,534 18,976 21,297
------ ------ ------ ------ ------ ------ ------
INCOME:
INCOME BEFORE TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 9,269 10,750 11,087 8,914 5,656 11,757 8,207
OTHER -- -- 1 -- -- -- --
FIXED CHARGES (EXCLUDING PREFERRED
STOCK DIVIDENDS) 27,889 24,825 21,618 22,665 22,830 18,795 21,032
------ ------ ------ ------ ------ ------ ------
TOTAL INCOME 37,158 35,575 32,706 31,579 28,486 30,552 29,239
====== ====== ====== ====== ====== ====== ======
RATIO OF INCOME TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.32 1.41 1.48 1.35 1.21 1.61 1.37
====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CITIGROUP'S
FORM 10-Q FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND ACCOMPANYING
DISCLOSURES.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 11,699
<INT-BEARING-DEPOSITS> 13,439
<FED-FUNDS-SOLD> 104,690<F1>
<TRADING-ASSETS> 106,685
<INVESTMENTS-HELD-FOR-SALE> 108,640
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 237,344
<ALLOWANCE> 6,706<F2>
<TOTAL-ASSETS> 687,450
<DEPOSITS> 247,714
<SHORT-TERM> 14,043<F3>
<LIABILITIES-OTHER> 38,923
<LONG-TERM> 48,542
4,920
2,050
<COMMON> 36<F4>
<OTHER-SE> 44,591<F4>
<TOTAL-LIABILITIES-AND-EQUITY> 687,450
<INTEREST-LOAN> 17,286
<INTEREST-INVEST> 0<F6>
<INTEREST-OTHER> 16,280
<INTEREST-TOTAL> 33,566
<INTEREST-DEPOSIT> 0<F6>
<INTEREST-EXPENSE> 18,583
<INTEREST-INCOME-NET> 14,983
<LOAN-LOSSES> 2,151
<SECURITIES-GAINS> 276
<EXPENSE-OTHER> 8,869
<INCOME-PRETAX> 11,757
<INCOME-PRE-EXTRAORDINARY> 7,372
<EXTRAORDINARY> 0
<CHANGES> (127)<F7>
<NET-INCOME> 7,245
<EPS-BASIC> 2.14<F5>
<EPS-DILUTED> 2.07<F5>
<YIELD-ACTUAL> 0<F6>
<LOANS-NON> 3,723<F8>
<LOANS-PAST> 1,093<F9>
<LOANS-TROUBLED> 68
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,617
<CHARGE-OFFS> 2,579
<RECOVERIES> 463
<ALLOWANCE-CLOSE> 6,706<F2>
<ALLOWANCE-DOMESTIC> 0<F10>
<ALLOWANCE-FOREIGN> 0<F11>
<ALLOWANCE-UNALLOCATED> 0<F11>
<FN>
<F1> Includes securities borrowed or purchased under agreements to resell.
<F2> Allowance activity for the nine months of 1999 includes $54MM in other
changes, principally foreign currency translation effects.
<F3> Commercial paper and other short-term borrowings.
<F4> The Board of Directors on April 19, 1999 declared a three-for-two split in
Citigroup's common stock, effective May 28, 1999. Current and prior year
information have been restated to reflect the stock split.
<F5> Primary EPS represents Basic EPS under Financial Accounting Standards No.
128, "Earnings per Share".
<F6> Not disclosed.
<F7> First quarter 1999 accounting changes include the adoption of Statement of
Position ("SOP") 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" of $(135) million; SOP 98-7, "Deposit
Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not
Transfer Insurance Risk" of $23 million; and SOP 98-5, "Reporting on the
Costs of Start-up Activities" of $(15) million.
<F8> Includes $1,509MM of cash-basis commercial loans and $2,214MM of consumer
loans on which accrual of interest has been suspended.
<F9> Accruing loans 90 or more days delinquent.
<F10> No portion of Citigroup's credit loss allowance is specifically allocated
to any individual loan or group of loans.
<F11> See Footnote F10 above.
</FN>
</TABLE>
