SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission file number 1-9924
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 July 31, 2000: 4,497,705,841
(adjusted to give effect to the four-for-three
stock split payable on August 25, 2000)
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 Six Months Ended June 30, 2000 and 1999 35
Consolidated Statement of Financial Position -
June 30, 2000 (Unaudited) and December 31, 1999 36
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited) - Six Months Ended June 30, 2000 and 1999 37
Consolidated Statement of Cash Flows (Unaudited) -
Six Months Ended June 30, 2000 and 1999 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 26 - 29
44 - 45
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds 48
Item 4. Submission of Matters to a Vote of Security Holders 48
Item 6. Exhibits and Reports on Form 8-K 48
Signatures 49
Exhibit Index 50
<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 June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions of dollars, except per share data 2000 1999 (1) 2000 1999 (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Consumer
Citibanking North America $ 138 $ 102 $ 275 $ 173
Mortgage Banking 66 52 127 111
North America Cards 308 279 604 557
CitiFinancial 117 78 229 149
---------------------------------------------------------------------
Total Banking/Lending 629 511 1,235 990
---------------------------------------------------------------------
Travelers Life and Annuity 202 173 389 320
Primerica Financial Services 125 113 244 223
Personal Lines 82 79 157 162
---------------------------------------------------------------------
Total Insurance 409 365 790 705
---------------------------------------------------------------------
Europe, Middle East & Africa 92 73 194 141
Asia Pacific 183 108 357 210
Latin America 41 41 111 88
---------------------------------------------------------------------
Total International 316 222 662 439
---------------------------------------------------------------------
e-Consumer (2) (46) (28) (115) (51)
Other (28) (23) (56) (39)
---------------------------------------------------------------------
Total Global Consumer 1,280 1,047 2,516 2,044
---------------------------------------------------------------------
Global Corporate and Investment Bank
Salomon Smith Barney 641 610 1,598 1,258
---------------------------------------------------------------------
Emerging Markets 370 286 762 601
Global Relationship Banking 259 147 499 334
---------------------------------------------------------------------
Total Global Corporate Bank 629 433 1,261 935
---------------------------------------------------------------------
Commercial Lines Insurance 267 201 507 390
---------------------------------------------------------------------
Total Global Corporate and Investment Bank 1,537 1,244 3,366 2,583
---------------------------------------------------------------------
Global Investment Management and Private Banking
SSB Citi Asset Management Group
and Global Retirement Services 93 84 185 165
Global Private Bank 79 71 160 126
---------------------------------------------------------------------
Total Global Investment Management and Private Banking 172 155 345 291
---------------------------------------------------------------------
Corporate/Other (199) (120) (455) (261)
e-Citi (2) (17) (11) (31) (16)
---------------------------------------------------------------------
Total Corporate/Other (216) (131) (486) (277)
---------------------------------------------------------------------
Investment Activities 234 162 868 251
---------------------------------------------------------------------
Core income 3,007 2,477 6,609 4,892
Restructuring-related items, after-tax (3) (2) (29) (14) 45
Cumulative effect of accounting changes (4) - - - (127)
---------------------------------------------------------------------
Net income $3,005 $2,448 $6,595 $4,810
---------------------------------------------------------------=====================================================================
Diluted earnings per share (5)
Core income $0.65 $0.53 $1.43 $1.05
Net income 0.65 0.52 1.43 1.03
---------------------------------------------------------------=====================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Previously shown as part of e-Citi and presented in the Global Consumer
segment.
(3) The 2000 second quarter and six months include accelerated depreciation of
$19 million and $31 million, respectively, new charges of $14 million and
a $31 million credit for the reversal of prior charges. The 1999 second
quarter and six months include accelerated depreciation of $29 million and
$80 million, respectively, and in the six-month period, a $125 million
credit for the reversal of prior charges. See Note 7 of Notes to
Consolidated Financial Statements.
(4) 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.
(5) Earnings per share have been adjusted to reflect the four-for-three split
in Citigroup's common stock, payable on August 25, 2000. See Note 1 of
Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
1
<PAGE>
Income Analysis
The income analysis reconciles amounts shown in the Consolidated Statement of
Income on page 35 to the basis presented in the business segment discussions.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions of dollars 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues, net of interest expense $15,904 $14,380 $32,888 $28,450
Effect of credit card securitization activity 469 570 988 1,158
---------------------------------------------------------------------
Adjusted revenues, net of interest expense 16,373 14,950 33,876 29,608
---------------------------------------------------------------------
Total operating expenses 8,242 7,524 16,568 14,845
Restructuring-related items (3) (47) (23) 83
---------------------------------------------------------------------
Adjusted operating expenses 8,239 7,477 16,545 14,928
---------------------------------------------------------------------
Operating margin 8,134 7,473 17,331 14,680
---------------------------------------------------------------------
Provisions for benefits, claims, and credit losses 3,018 2,941 6,020 5,718
Effect of credit card securitization activity 469 570 988 1,158
---------------------------------------------------------------------
Adjusted provisions for benefits, claims, and credit losses 3,487 3,511 7,008 6,876
---------------------------------------------------------------------
Core income before income taxes and minority interest 4,647 3,962 10,323 7,804
Taxes on core income 1,617 1,420 3,636 2,787
Minority interest, net of income taxes 23 65 78 125
---------------------------------------------------------------------
Core income 3,007 2,477 6,609 4,892
Restructuring-related items, after-tax (2) (29) (14) 45
---------------------------------------------------------------------
Income before cumulative effect of accounting changes 3,005 2,448 6,595 4,937
Cumulative effect of accounting changes - - - (127)
---------------------------------------------------------------------
Net income $ 3,005 $ 2,448 $ 6,595 $ 4,810
---------------------------------------------------------------=====================================================================
</TABLE>
Results of Operations
Citigroup reported core income of $3.007 billion or $0.65 per diluted common
share in the 2000 second quarter, up 21% and 23%, respectively, from $2.477
billion or $0.53 in the 1999 second quarter. Core income excluded charges of $2
million and $29 million in the second quarter of 2000 and 1999, respectively,
for after-tax restructuring-related items. Net income for the 2000 second
quarter was $3.005 billion or $0.65 per diluted share, up 23% and 25%,
respectively, from $2.448 billion or $0.52 for the year-ago quarter. Core income
return on common equity was 24.8% compared to 23.2% a year ago.
Core income for the 2000 six months of $6.609 billion or $1.43 per diluted
common share was up 35% and 36%, respectively, from $4.892 billion or $1.05 in
the 1999 six months. Core income in the 2000 six months excluded a charge of $14
million for after-tax restructuring-related items. Core income in the 1999 six
months excluded a credit of $45 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. Net income for the 2000 six months was $6.595
billion or $1.43 per diluted share, up 37% and 39%, respectively, from $4.810
billion or $1.03 a year ago. Core income return on common equity was 27.3%
compared to 23.4% a year ago.
The Board of Directors on July 18, 2000 declared a four-for-three split in
Citigroup's common stock, which is payable in the form of a 33 1/3% stock
dividend on August 25, 2000 to stockholders of record on August 7, 2000. Current
and prior-year information has been restated to reflect this split. The Board of
Directors also approved an increase in the quarterly common stock dividend from
12 to 14 cents per share on a post-split basis (from 16 to 18 2/3 cents per
share on a pre-split basis), payable August 25, 2000 to stockholders of record
on August 7, 2000.
Core income growth in the 2000 second quarter and six months was led by Global
Corporate and Investment Bank, which, when compared to 1999, improved $293
million or 24% in the second quarter and $783 million or 30% in the six months,
and Global Consumer, which was up $233 million or 22% and $472 million or 23%,
in the respective 2000 periods compared to 1999, reflecting strong growth in
most businesses. Global Investment Management and Private Banking grew $17
million or 11% and $54 million or 19% in the quarter and six months,
respectively, primarily reflecting acquisitions in the Global Retirement
Services business and volume-related growth in customer revenue, partially
offset by increased business development expenses. Investment Activities core
income was up $72 million and $617 million from the 1999 second quarter and six
months, primarily reflecting strong venture capital results and higher levels of
realized gains on sales of investments. The decreases in Corporate/Other
included higher treasury costs, and in the six-month period a contribution made
to the Citigroup Foundation.
Global Corporate and Investment Bank core income growth in the 2000 second
quarter and six months compared to 1999 was driven by revenue growth in Private
Client revenues, transaction services and structured products, and Commercial
Lines price improvements. Core income growth was $112 million or 76% in Global
Relationship Banking (GRB), $84 million or 29% in Emerging Markets, $66 million
or 33% in Commercial Lines, and $31 million or 5% in Salomon Smith Barney (SSB)
in the 2000 second quarter. For the six months, SSB improved $340 million or
27%, GRB was up $165 million or 49%, Emerging Markets was
2
<PAGE>
up $161 million or 27%, and Commercial Lines was up $117 million or 30%. Global
Consumer increases were driven by improvement in the global cards business and
strong sales of investment products across most businesses. In the 2000 second
quarter, Banking/Lending core income increased $118 million or 23% from 1999
reflecting the continued strong performance of CitiFinancial (up $39 million or
50%), Citibanking North America (up $36 million or 35%), and North America Cards
(up $29 million or 10%). The International businesses core income grew $94
million or 42% from the 1999 second quarter, marked by an especially strong
performance in Asia Pacific (up $75 million or 69%), and Insurance improved $44
million or 12%, led primarily by Travelers Life and Annuity (TLA) (up $29
million or 17%). Global Consumer growth in the 2000 six months was led by
Banking/Lending, up $245 million or 25% from 1999, with Citibanking North
America up $102 million or 59%, CitiFinancial up $80 million or 54%, and North
America Cards up $47 million or 8%. Also, the International businesses in the
2000 six months were up $223 million or 51% (Asia Pacific up $147 million or
70%, Europe, Middle East, and Africa up $53 million or 38% and Latin America up
$23 million or 26%), and Insurance improved $85 million or 12% (TLA up $69
million or 22%).
Adjusted revenues, net of interest expense, of $16.4 billion and $33.9 billion
in the 2000 second quarter and six months, respectively, were up $1.4 billion or
10% and $4.3 billion or 14% from the 1999 periods. Global Corporate and
Investment Bank revenues of $7.9 billion in the 2000 quarter and $16.1 billion
in the 2000 six months were up $893 million or 13% and $2.0 billion or 14% from
1999. The increases were led by SSB, up $424 million or 13% and $1.3 billion or
19%, driven by growth in fee-based Private Client revenues, commissions,
investment banking fees, and earnings from the investment in Nikko Securities
Co., Ltd. GRB was up $227 million or 22% in the 2000 second quarter and $317
million or 15% in the 2000 six months, primarily due to growth in transaction
services, equity derivatives and structured products, and Emerging Markets was
up $174 million or 16% and $269 million or 12% reflecting broad-based growth in
transaction services and structured products. Commercial Lines revenues grew $68
million or 4% and $102 million or 3% reflecting incremental earnings from the
minority interest buyback of Travelers Property Casualty Corp. (TAP), higher net
investment income, and favorable pricing, partially offset by increased loss
trends. Global Consumer revenues were up $417 million or 6% in the quarter to
$7.5 billion, and up $1.2 billion or 9% in the six months to $15.1 billion, led
by Insurance, up $188 million or 8% and $511 million or 11% in the quarter and
six months, respectively. Insurance growth was driven by TLA, whose double digit
volume growth in individual annuities and higher net investment revenues
increased $116 million or 13% in the 2000 second quarter and $355 million or 22%
year-to-date. Banking/Lending revenues grew $143 million or 5% and $383 million
or 6% in the quarter and six months, led by CitiFinancial which increased $78
million or 20% and $179 million or 24%, primarily due to strong growth in
receivables, and Citibanking North America, which was up $53 million or 10% and
$122 million or 12%, reflecting higher customer deposit spreads and volumes, and
higher investment product sales, partially offset by lower loan revenues.
International revenues were up $130 million or 8% and $383 million or 12%,
primarily due to growth in Asia Pacific. Global Investment Management and
Private Banking revenues of $818 million in the quarter and $1.6 billion in the
six months were up $159 million or 24% and $321 million or 25% from the 1999
periods, primarily from acquisitions and growth in both assets and client
business volumes under management. Revenues in Investment Activities increased
$117 million and $980 million from the 1999 second quarter and six months,
respectively, primarily reflecting increases in venture capital results and
realized gains on investments, and in the 2000 six months, were partially offset
by losses in insurance-related investments from repositioning activities and
writedowns in the refinancing portfolio.
Net interest revenue, as calculated from the Consolidated Statements of Income,
rose 7% to $5.4 billion in the 2000 second quarter and $10.5 billion in the six
months, up $346 million and $673 million, respectively, from the comparable 1999
periods, reflecting business volume growth in most markets. Net interest
revenue, adjusted for the effect of credit card securitization of $6.2 billion
and $12.4 billion in the quarter and six months, was up $170 million or 3% and
$432 million or 4% from the 1999 periods. Adjusted commissions, asset management
and administration fees, and other fee revenues of $5.2 billion in the quarter
and $10.4 billion in the six months were up $1.0 billion or 24% and $2.5 billion
or 31% from 1999, primarily as a result of volume-related growth in customer
trading activities, assets under fee-based management and investment banking
fees and the impact of recent acquisitions. Insurance premiums of $2.7 billion
and $5.5 billion in the quarter and six months were up $117 million or 4% and
$308 million or 6%, reflecting strong growth in TLA. Principal transactions
revenues of $1.4 billion and $3.2 billion for the quarter and six months were up
$163 million or 13% and $116 million or 4% from the year-ago periods, reflecting
strong results in GRB in both 2000 periods, partially offset by lower results in
SSB and Emerging Markets. Realized gains from sales of investments were up $92
million to $280 million in the quarter and were down $130 million to $111
million in the six months, primarily reflecting realized gains in both periods
and partially offset by writedowns in the refinancing portfolio and the
repositioning of the Insurance portfolio in the year-to-date period. Other
income as shown in the Consolidated Statement of Income of $942 million in the
quarter was down $199 million from the 1999 second quarter reflecting lower net
asset gains and credit card securitization revenues, but was up $1.0 billion to
$3.2 billion in the six months, primarily reflecting higher venture capital
results.
Adjusted operating expenses of $8.2 billion and $16.5 billion for the 2000
second quarter and six months, which exclude restructuring-related items, were
up $762 million or 10% in the quarter and $1.6 billion or 11% in the six months
compared to 1999. Global Corporate and Investment Bank expenses were up 13% in
the quarter and 10% in the six months, primarily attributable to
production-related compensation, increased business volumes, and costs
associated with newly acquired businesses, and were partially offset by lower
year 2000 expenses in the GRB. Global Consumer expenses increased 5% in the
second quarter and 7% in the six months, reflecting an increase in sales-related
expenses, higher business volume and expansion initiatives, and charges related
to the termination of certain contracts and initiatives at e-Consumer. Global
Investment Management and Private Banking expenses increased 33% and 27% from
the year-ago quarter and six-month periods, primarily reflecting acquisitions in
the
3
<PAGE>
Global Retirement Services business and higher costs associated with the
continued expansion of sales and marketing efforts and investments in
technology. Corporate/Other expenses decreased $22 million in the quarter, but
increased $194 million in the six months, primarily reflecting a $108 million
pretax expense (which had minimal impact on Citigroup's earnings after related
tax benefits and investment gains) for the contribution of appreciated venture
capital securities to the Company's Foundation.
Adjusted provisions for benefits, claims, and credit losses were $3.5 billion
and $7.0 billion in the 2000 second quarter and six months, decreasing $24
million in the quarter and increasing $132 million year-to-date. Policyholder
benefits and claims increased 7% from the 1999 quarter to $2.3 billion, and were
up 9% to $4.6 billion for the 2000 six months, primarily as a result of
increased volume at TLA. The adjusted provision for credit losses decreased 13%
in the quarter to $1.2 billion and 8% in the six months to $2.5 billion from the
1999 periods. Global Consumer managed net credit losses were $1.064 billion and
the related loss ratio was 2.06% in the 2000 second quarter, down from $1.147
billion and 2.30% in the preceding quarter and $1.201 billion and 2.60% a year
ago. The managed consumer loan delinquency ratio (90 days or more past due)
decreased to 1.67% from 1.87% at March 31, 2000 and 2.00% a year ago. The Global
Corporate and Investment Bank provision for credit losses reflected increases of
$20 million in the quarter to $131 million, and $32 million in the six months to
$255 million, as compared to 1999.
Total capital (Tier 1 and Tier 2) was $60.4 billion or 11.12% of net
risk-adjusted assets, and Tier 1 capital was $46.8 billion or 8.62% at June 30,
2000, compared to $62.5 billion or 12.47% and $49.0 billion or 9.78%,
respectively, at March 31, 2000. The decreases in the capital levels and related
ratios were primarily a result of an increase in net risk-adjusted assets,
disallowable intangibles related to acquisitions, and a reduction in minority
interest associated with the TAP buyback.
GLOBAL CONSUMER
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $7,004 $6,486 8 $14,068 $12,696 11
Effect of credit card securitization
activity 469 570 (18) 988 1,158 (15)
------------------------------- -------------------------------
Adjusted revenues,
net of interest expense 7,473 7,056 6 15,056 13,854 9
Adjusted operating expenses (2) 3,010 2,864 5 6,101 5,691 7
------------------------------- -------------------------------
Provisions for benefits, claims,
and credit losses 1,983 1,942 2 3,999 3,727 7
Effect of credit card securitization
activity 469 570 (18) 988 1,158 (15)
------------------------------- -------------------------------
Adjusted provisions for benefits,
claims, and credit losses 2,452 2,512 (2) 4,987 4,885 2
------------------------------- -------------------------------
Core income before taxes
and minority interest 2,011 1,680 20 3,968 3,278 21
Income taxes 722 612 18 1,425 1,192 20
Minority interest, after-tax 9 21 (57) 27 42 (36)
------------------------------- -------------------------------
Core income 1,280 1,047 22 2,516 2,044 23
Restructuring-related items, after-tax 11 (18) NM 7 (56) NM
-------------------------------
-------------------------------
Net income $1,291 $1,029 25 $ 2,523 $ 1,988 27
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Global Consumer -- which provides banking, lending, investment and personal
insurance products and services, including credit and charge cards, to customers
around the world -- reported core income of $1.280 billion and $2.516 billion in
the 2000 second quarter and six months, up $233 million or 22% and $472 million
or 23% from the 1999 periods, reflecting growth in virtually all businesses.
Banking/Lending core income increased $118 million or 23% in the quarter and
$245 million or 25% in the six months reflecting strong performance across all
businesses. In the International businesses, core income grew $94 million or 42%
in the quarter and $223 million or 51% in the six months, marked by strong
performance in Asia Pacific and Europe, Middle East & Africa. In Latin America,
core income was unchanged in the quarter, but was up $23 million or 26% in the
six months. In the Insurance segment, core income grew $44 million or 12% and
$85 million or 12% from the 1999 periods. Net income of $1.291 billion and
$2.523 billion in the 2000 second quarter and six months included
restructuring-related credits of $11 million ($18 million pretax) and $7 million
($12 million pretax), respectively. Net income of $1.029 billion and $1.988
billion in the 1999 second quarter and six months included restructuring-related
items of $18 million ($30 million pretax) and $56 million ($91 million pretax),
respectively.
4
<PAGE>
Banking/Lending
Citibanking North America
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $570 $517 10 $1,145 $1,023 12
Adjusted operating expenses (2) 331 324 2 667 684 (2)
Provision for credit losses 7 15 (53) 16 38 (58)
------------------------------- -------------------------------
Core income before taxes 232 178 30 462 301 53
Income taxes 94 76 24 187 128 46
------------------------------- -------------------------------
Core income 138 102 35 275 173 59
Restructuring-related items, after-tax 8 (5) NM 8 (19) NM
------------------------------- -------------------------------
Net income $146 $ 97 51 $ 283 $ 154 84
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $9 $10 (10) $9 $10 (10)
Return on assets 6.52% 3.89% 6.32% 3.11%
------------------------------------------------------------------------------------------------------------------------------------
Excluding restructuring-related items
Return on assets 6.17% 4.09% 6.14% 3.49%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Citibanking North America -- which delivers banking, lending, and investment
services to customers through Citibank's branches and electronic delivery
systems -- reported core income of $138 million and $275 million in the 2000
second quarter and six months, up $36 million or 35% and $102 million or 59%
from the 1999 periods, primarily driven by revenue growth. Net income of $146
million and $283 million in the 2000 second quarter and six months included
restructuring-related credits of $8 million ($14 million pretax) in both
periods. Net income of $97 million and $154 million in the 1999 second quarter
and six months included restructuring-related charges of $5 million ($9 million
pretax) and $19 million ($31 million pretax), respectively.
As shown in the following table, Citibanking grew accounts and customer deposits
from 1999. Loans declined from a year ago as loan repayments exceeded loan
originations.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 6.4 6.0 7 6.4 6.0 7
Average customer deposits $44.3 $42.2 5 $43.9 $41.9 5
Average loans $ 7.1 $ 7.6 (7) $ 7.2 $ 7.6 (5)
------------------------------------------==========================================================================================
</TABLE>
Revenues, net of interest expense, of $570 million and $1.145 billion in the
2000 second quarter and six months increased $53 million or 10% and $122 million
or 12% from the 1999 periods reflecting higher customer deposit spreads and
volumes and higher investment product sales, and were partially offset by lower
loan revenues. Investment product fees and commissions increased by 22% and 37%
from the 1999 second quarter and six months. Adjusted operating expenses
increased $7 million or 2% in the quarter and declined $17 million or 2% in the
six months reflecting higher variable compensation due to an increased sales
force and higher investment product sales, partially offset by lower marketing
expenses, and in the six months reflecting reduced fixed costs.
The provision for credit losses declined to $7 million and $16 million in the
2000 second quarter and six months from $15 million and $38 million in the 1999
periods. The net credit loss ratio of 0.86% in the 2000 second quarter declined
from 0.98% in the 2000 first quarter and 1.21% a year ago. Loans delinquent 90
days or more of $33 million or 0.46% of loans at June 30, 2000 continued to
improve from $48 million or 0.67% at March 31, 2000 and $92 million or 1.22% a
year ago. The declines in the provision for credit losses and delinquencies
reflect continued improvement in the portfolio and a decline in loan volumes.
5
<PAGE>
Mortgage Banking
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $206 $183 13 $410 $352 16
Total operating expenses 94 84 12 185 145 28
(Benefit) provision for credit losses (4) 5 NM 1 8 (88)
------------------------------- -------------------------------
Income before taxes
and minority interest 116 94 23 224 199 13
Income taxes 44 37 19 86 78 10
Minority interest, after-tax 6 5 20 11 10 10
------------------------------- -------------------------------
Net income $ 66 $ 52 27 $127 $111 14
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $35 $29 21 $34 29 17
Return on assets 0.76% 0.72% 0.75% 0.77%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
NM Not meaningful
--------------------------------------------------------------------------------
Mortgage Banking -- which originates and services mortgages and student loans
for customers across North America -- reported net income of $66 million and
$127 million in the 2000 second quarter and six months, up $14 million or 27%
and $16 million or 14% from the 1999 periods, reflecting growth in both the
mortgage and student loan businesses, including the effect of the April 1999
acquisition of the principal operating assets and certain liabilities of Source
One Mortgage Services Corporation (Source One).
As shown in the following table, accounts and loans increased from the 1999
periods reflecting growth in both student loans and mortgages. Accounts reflect
growth in student loans and serviced mortgage accounts. Average loans also
reflect student loan growth and an increase in on-balance sheet mortgages.
Mortgage originations declined as a result of the higher interest rate
environment; however, a larger proportion of the originations are at variable
interest rates which are typically held on-balance sheet rather than
securitized.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) (1) 3.9 3.0 30 3.9 3.0 30
Average loans (1) $33.1 $27.3 21 $32.0 $27.0 19
Mortgage originations $ 4.8 $ 4.9 (2) $ 8.2 $ 8.7 (6)
------------------------------------------==========================================================================================
</TABLE>
(1) Includes student loans.
--------------------------------------------------------------------------------
Revenues, net of interest expense, of $206 million and $410 million in the 2000
second quarter and six months grew $23 million or 13% and $58 million or 16%
from the 1999 periods, reflecting higher mortgage servicing revenues, offset by
lower securitization gains. Revenue increases also reflect the effect of Source
One and growth in the student loan portfolio. Operating expenses increased $10
million or 12% and $40 million or 28% from the 1999 periods primarily due to
Source One.
The (benefit) provision for credit losses of ($4) million and $1 million in the
2000 second quarter and six months declined from $5 million and $8 million in
the 1999 periods. The net credit loss ratio of 0.05% in the 2000 second quarter
declined from 0.14% in the 2000 first quarter and 0.17% a year ago, reflecting
improvement in the mortgage portfolio. Loans delinquent 90 days or more were
$709 million or 1.98% of loans at June 30, 2000, compared with $719 million or
2.29% at March 31, 2000 and $575 million or 2.09% a year ago. The increase in
delinquent loans from a year ago reflects higher student loan volumes and a
statutory increase in the length of time Citigroup must hold delinquent
government-guaranteed student loans prior to submitting a claim under the
government guarantee.
6
<PAGE>
North America Cards
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $1,500 $1,410 6 $2,977 $2,783 7
Effect of credit card securitization
activity 469 570 (18) 988 1,158 (15)
------------------------------- -------------------------------
Adjusted revenues,
net of interest expense 1,969 1,980 (1) 3,965 3,941 1
Adjusted operating expenses (2) 720 712 1 1,448 1,422 2
Adjusted provision for credit losses (3) 758 825 (8) 1,557 1,636 (5)
------------------------------- -------------------------------
Core income before taxes 491 443 11 960 883 9
Income taxes 183 164 12 356 326 9
------------------------------- -------------------------------
Core income 308 279 10 604 557 8
Restructuring-related items, after-tax 4 - NM 4 - NM
------------------------------- -------------------------------
Net income $ 312 $ 279 12 $ 608 $ 557 9
------------------------------------------==========================================================================================
Average assets (in billions of dollars)(4) $35 $28 25 $33 $29 14
Return on assets 3.59% 4.00% 3.71% 3.87%
------------------------------------------==========================================================================================
Excluding restructuring-related items
Return on assets (5) 3.54% 4.00% 3.68% 3.87%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
(3) Adjusted for the effect of credit card securitization.
(4) Adjusted for the effect of credit card securitization, managed average
assets were $81 billion and $80 billion in the 2000 second quarter and six
months, respectively, compared to $75 billion and $74 billion in the 1999
second quarter and six months, respectively.
(5) Adjusted for the effect of credit card securitization, the return on
managed assets, excluding restructuring-related items, was 1.53% and 1.49%
in the second quarters of 2000 and 1999 and 1.52% for the six months of
both 2000 and 1999.
NM Not meaningful
--------------------------------------------------------------------------------
North America Cards -- U.S. bankcards, Canada bankcards, and North America
Diners Club -- reported core income of $308 million and $604 million in the 2000
second quarter and six months, up $29 million or 10% and $47 million or 8% from
the 1999 periods, principally reflecting an increase in the U.S. bankcards
business. Net income of $312 million and $608 million in the 2000 second quarter
and six months included restructuring-related credits of $4 million ($5 million
pretax) in both periods.
Risk adjusted margin is a measure of profitability calculated as adjusted
revenues less managed net credit losses as a percentage of average managed
loans, consistent with the goal of matching the revenues generated by the loan
portfolio with the credit risk undertaken. As shown in the following table, U.S.
bankcards risk adjusted margin of 6.02% and 6.07% in the 2000 second quarter and
six months declined 19 basis points and 26 basis points from the 1999 periods,
respectively, reflecting lower spreads offset by credit improvements and an
increase in non-interest revenues, primarily interchange fees.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In billions of dollars 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Risk adjusted revenues (1) $1.125 $1.076 $2.226 2.147
Risk adjusted margin % (2) 6.02% 6.21% 6.07% 6.33%
---------------------------------------------------------------=====================================================================
</TABLE>
(1) Adjusted revenues less managed net credit losses.
(2) Risk adjusted revenues as a percentage of average managed loans.
--------------------------------------------------------------------------------
Adjusted revenues, net of interest expense, of $1.969 billion and $3.965 billion
in the 2000 second quarter and six months declined $11 million or 1% from the
1999 second quarter, but increased $24 million or 1% from the 1999 six months as
higher interchange fee revenues from sales volume growth and increased fees from
cardmember enhancement services were offset by lower spreads. Spread compression
in the portfolio principally reflects changes in portfolio mix, including an
increased percentage of the portfolio priced at low introductory rates, and
higher funding costs due to increased interest rates. Spread compression may
continue in 2000 as a result of a higher interest rate environment and continued
competitive pressures. This paragraph contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" on page 26.
7
<PAGE>
As shown in the following table, on a managed basis, the U.S. bankcard portfolio
experienced a 19% growth in sales volume and a 13% growth in receivables in the
2000 second quarter. Account growth of 2% from the 1999 second quarter reflects
new account acquisitions offset by cardmember attrition.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 42.1 41.1 2 42.1 41.1 2
Total sales $48.4 $40.8 19 $90.7 $77.6 17
End-of-period managed receivables $79.1 $70.3 13 $79.1 $70.3 13
------------------------------------------==========================================================================================
</TABLE>
The adjusted provision for credit losses was $758 million and $1.557 billion in
the 2000 second quarter and six months, down from $825 million and $1.636
billion in the 1999 periods. U.S. bankcards managed net credit losses in the
2000 second quarter were $740 million and the related loss ratio was 3.96%, down
from $782 million and 4.35% in the 2000 first quarter and $803 million and 4.63%
in the 1999 second quarter. U.S. bankcards managed loans delinquent 90 days or
more were $922 million or 1.18% of loans at June 30, 2000, compared with $1.058
billion or 1.45% at March 31, 2000 and $954 million or 1.36% at June 30, 1999.
The improvement in the net credit loss ratio from a year ago reflects stable
industry-wide bankruptcy trends and continued credit risk management
initiatives.
CitiFinancial
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $474 $396 20 $936 $757 24
Adjusted operating expenses (2) 187 154 21 375 298 26
Provisions for benefits, claims
and credit losses 102 117 (13) 199 221 (10)
------------------------------- -------------------------------
Core income before taxes 185 125 48 362 238 52
Income taxes 68 47 45 133 89 49
------------------------------- -------------------------------
Core income 117 78 50 229 149 54
Restructuring-related items, after-tax - - - - (1) NM
------------------------------- -------------------------------
Net income $117 $ 78 50 $229 $148 55
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $19 $15 27 $19 15 27
Return on assets 2.48% 2.09% 2.42% 1.99%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
CitiFinancial -- which provides community based lending services through its
branch network and through cross-selling initiatives with other Citigroup
businesses -- reported core income of $117 million and $229 million in the 2000
second quarter and six months, up $39 million or 50% and $80 million or 54% from
the 1999 periods, reflecting lower credit costs and strong business volume
growth.
As shown in the following table, receivables grew 23% from the 1999 second
quarter due to higher volumes at CitiFinancial branches and cross selling of
products through other Citigroup distribution channels. The average net interest
margin on receivables of 8.16% in the 2000 second quarter and 8.26% in the 2000
six months declined 83 and 66 basis points, respectively, from the 1999 periods
reflecting a continued shift in the portfolio mix toward lower yielding real
estate loans and higher funding costs due to increased interest rates. At June
30, 2000, the portfolio consisted of 59% real estate-secured loans, 34% personal
loans, and 7% sales finance and other compared with 56%, 36%, and 8%,
respectively, at June 30, 1999.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- Increase/ ------------------------------- Increase/
2000 1999 Decrease 2000 1999 Decrease
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
End-of-period receivables (in billions) (1) $16.7 $13.6 23% $16.7 $13.6 23%
Average net interest margin % 8.16% 8.99% (83) bps 8.26% 8.92% (66) bps
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes $0.6 billion of loans held for sale in the 2000 periods.
--------------------------------------------------------------------------------
Revenues, net of interest expense, of $474 million and $936 million in the 2000
second quarter and six months increased $78 million or 20% and $179 million or
24% from the 1999 periods. Adjusted operating expenses of $187 million and $375
million in the 2000 second quarter and six months grew $33 million or 21% and
$77 million or 26% from the 1999 periods. The increase in both revenues and
expenses principally reflects strong growth in receivables.
The provisions for benefits, claims, and credit losses were $102 million and
$199 million in the 2000 second quarter and six months, down from $117 million
and $221 million in the 1999 periods. Net credit losses in the 2000 second
quarter were $80 million and
8
<PAGE>
the related loss ratio was 1.93%, compared with $76 million and 1.92% in the
2000 first quarter and $70 million and 2.14% a year ago. The 2000 first and
second quarters net credit loss ratios included a benefit of approximately 27
basis points in each period, related to changes in the write-off policy for
certain bankrupt accounts. Loans delinquent 90 days or more were $229 million or
1.32% of loans at June 30, 2000, compared with $216 million or 1.33% at March
31, 2000 and $172 million or 1.26% a year ago. The increase in delinquencies
from a year ago reflects the impact of previous acquisitions.
Insurance
Travelers Life and Annuity
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $983 $867 13 $1,993 $1,638 22
Provision for benefits and claims 586 494 19 1,189 936 27
Total operating expenses 97 110 (12) 223 217 3
------------------------------- -------------------------------
Income before taxes 300 263 14 581 485 20
Income taxes 98 90 9 192 165 16
------------------------------- -------------------------------
Net income (1) $202 $173 17 $ 389 $ 320 22
------------------------------------------==========================================================================================
</TABLE>
(1) Excludes investment gains/losses included in Investment Activities
segment.
--------------------------------------------------------------------------------
Travelers Life and Annuity -- whose core offerings include individual annuity,
group annuity and individual life insurance -- reported net income of $202
million and $389 million in the 2000 second quarter and six months,
respectively, up from $173 million and $320 million in the comparable periods of
1999. The improvements in 2000 reflect increased business volume and
particularly strong investment income versus the prior-year periods. During the
first half of 2000, this business achieved double-digit business volume growth
in individual annuity account balances and life premiums versus the prior-year
reflecting growth in retirement savings and estate planning products and strong
momentum from cross-selling initiatives. Total operating expenses decreased in
the second quarter of 2000 compared to the prior-year period due to the
contribution of The Copeland Companies (Copeland) to the CitiStreet joint
venture. The increase in revenues was also mitigated by the contribution of
Copeland.
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
CitiStreet via Copeland, and a nationwide network of independent agents and
strong group sales through various intermediaries reflects the ongoing effort to
build market share by strengthening relationships in key distribution channels.
On July 31, 2000, the Company sold 90% of its individual long-term care
insurance business to General Electric Capital Assurance Company in the form of
an indemnity reinsurance arrangement.
The following table shows net written premiums and deposits by product line,
excluding long-term care insurance written premiums:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Individual annuities
Fixed $ 302 $ 250 21 $ 596 $ 444 34
Variable 1,259 1,048 20 2,504 2,024 24
Individual payout 22 16 36 42 36 16
GICs and other group annuities 1,439 1,609 (11) 2,896 3,469 (17)
Individual life insurance
Direct periodic premiums and deposits 113 86 31 230 171 34
Single premium deposits 21 21 - 39 37 5
Reinsurance (20) (18) (11) (39) (34) (15)
------------------------------- -------------------------------
$3,136 $3,012 4 $6,268 $6,147 2
------------------------------------------==========================================================================================
</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 individual annuities sales, combined with favorable market returns
from variable annuities, drove account balances to $29.5 billion at June 30,
2000, up 22% from $24.2 billion at June 30, 1999. Net written premiums and
deposits for individual annuities increased 20% and 25% in the second quarter
and six months of 2000 to $1.583 billion and $3.142 billion, respectively, from
$1.314 billion and $2.504 billion in the comparable periods of 1999. The strong
sales reflect the marketing initiatives at both Salomon Smith Barney and
Primerica and Copeland's penetration of the small company segment of the 401(k)
market, as well as strong core agent production.
9
<PAGE>
Group annuity account balances and benefit reserves reached $15.8 billion at
June 30, 2000, up 4% from $15.2 billion at the end of the 1999 second quarter.
The group annuity businesses experienced continued strong sales momentum in
variable rate guaranteed investment contracts, employer sponsored group plans
and cross-selling structured settlement annuities through TAP. Net written
premiums and deposits (excluding Citigroup's employee pension plan deposits)
were $1.439 billion and $2.896 billion in the second quarter and six months of
2000, respectively, compared to $1.609 billion and $3.469 in the comparable
periods of 1999.
Direct periodic premiums and deposits for individual life insurance of $113
million and $230 million in the second quarter and six months of 2000,
respectively, were 31% and 34% ahead of the $86 million and $171 million for the
comparable periods of 1999 reflecting strong core agency results and the
introduction in the fourth quarter of 1999 of a new corporate-owned life
insurance product. Life insurance in force was $63.2 billion at June 30, 2000,
up from $60.6 billion at year-end 1999 and $57.7 billion at June 30, 1999.
Primerica Financial Services
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $479 $443 8 $951 $875 9
Provision for benefits and claims 126 121 4 251 241 4
Adjusted operating expenses (1) 159 146 9 321 288 11
------------------------------- -------------------------------
Core Income before taxes 194 176 10 379 346 10
Income taxes 69 63 10 135 123 10
-------------------------------
-------------------------------
Core Income 125 113 11 244 223 9
Restructuring-related items, after-tax 1 - NM 1 - NM
------------------------------- -------------------------------
Net income (2) $126 $113 12 $245 $223 10
------------------------------------------==========================================================================================
</TABLE>
(1) Excludes restructuring-related items.
(2) Excludes investment gains/losses included in Investment Activities
segment.
NM Not meaningful
--------------------------------------------------------------------------------
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 and Travelers Insurance
Company annuity products -- reported core income of $125 million and $244
million in the 2000 second quarter and six months, respectively, up from $113
million and $223 million in the comparable periods of 1999. The improvement in
2000 reflects strong mutual fund sales and net investment income and was
partially offset by increased infrastructure investment including international
expansion scheduled for later in the year. Increases in total production and
cross-selling initiatives were achieved during the 2000 second quarter and six
months. Earned premiums, net of reinsurance, were $277 million and $548 million
in the 2000 second quarter and six months, respectively, up from $269 million
and $536 million in the comparable periods of 1999.
Total face amount of issued term life insurance was $18.5 billion and $33.5
billion in the 2000 second quarter and six months, respectively, compared to
$15.5 billion and $29.1 billion in the prior-year periods. Life insurance in
force reached $403.6 billion at June 30, 2000, up from $394.9 billion at
year-end 1999 and $391.7 billion at June 30, 1999, and continued to reflect good
policy persistency.
In recent years, Primerica has leveraged cross selling through the Financial
Needs Analysis (FNA) -- the diagnostic tool that enhances the ability of the
Personal Financial Analysts to address client needs -- to expand its business
beyond life insurance and now offers its clients a greater array of financial
products and services, delivered personally through more than 100,000
independent representatives. During the 2000 six months, more than 220,000 FNA's
were submitted. Variable annuity sales continued to show momentum with net
written premiums and deposits of $248 million and $498 million in the 2000
second quarter and six months, respectively, compared to $279 million and $502
million in the prior-year periods. As a result of the increased emphasis placed
on cross-selling initiatives, sales of Travelers Life and Annuity variable
annuity products in the 2000 second quarter and six months accounted for 96% and
95%, respectively, of total variable annuity sales. 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 $476 million and $968 million in the
2000 second quarter and six months, respectively, compared to $493 million and
$912 million in the comparable periods last year. Mutual fund sales were $1.15
billion and $2.34 billion for the 2000 second quarter and six months,
respectively, 42% and 47% ahead of last year's second quarter and six months.
During the 2000 six months, proprietary mutual funds accounted for 47% of
Primerica's U.S. sales and 40% of total sales.
10
<PAGE>
Personal Lines
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $1,041 $1,005 4 $2,068 $1,988 4
Claims and claim adjustment expenses 667 627 6 1,321 1,221 8
Total operating expenses 253 242 5 501 488 3
------------------------------- -------------------------------
Income before taxes
and minority interest 121 136 (11) 246 279 (12)
Income taxes 36 41 (12) 73 85 (14)
Minority interest, after-tax (1) 3 16 (81) 16 32 (50)
------------------------------- -------------------------------
Net income (2) $ 82 $ 79 4 $ 157 $ 162 (3)
------------------------------------------==========================================================================================
</TABLE>
(1) See Note 1 of Notes to Consolidated Financial Statements.
(2) 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 $82 million and $157 million
in the second quarter and six months of 2000, respectively, compared to $79
million and $162 million in the prior-year periods. The 2000 results reflect
increased loss trends and lower favorable prior-year reserve development, offset
in part by increased net investment income. Additionally, catastrophe losses
were lower in the 2000 second quarter and higher in the 2000 six months when
compared to the comparable periods in 1999. Also reflected in the 2000 second
quarter and six months are the incremental earnings from the minority interest
buyback.
The following table shows net written premiums by product line:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Personal automobile $608 $597 2 $1,191 $1,216 (2)
Homeowners and other 375 354 6 682 718 (5)
------------------------------- -------------------------------
Total net written premiums $983 $951 3 $1,873 $1,934 (3)
------------------------------------------==========================================================================================
</TABLE>
Personal Lines net written premiums for the 2000 second quarter and six months
were $983 million and $1.873 billion, respectively, compared to $951 million and
$1.934 billion in the comparable periods of 1999. 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 increase in net written
premiums in the 2000 second quarter and six months compared to the 1999 periods,
excluding the reinsurance adjustment, primarily reflects growth in target
markets served by independent agents and growth in affinity group marketing and
joint marketing arrangements and is offset in part by the curtailment of the
sale of the TRAVELERS SECURE(R) auto and homeowners products, a mandated rate
decrease in New Jersey and continued emphasis on disciplined underwriting and
risk management.
Catastrophe losses, net of taxes and reinsurance, were $17 million and $48
million in the 2000 second quarter and six months, respectively, compared to $23
million and $31 million in the comparable periods of 1999. Catastrophe losses in
2000 were primarily due to Texas, Midwest and Northeast wind and hailstorms in
the second quarter and hailstorms in Louisiana and Texas in the first quarter.
Catastrophe losses in 1999 were due to wind and hailstorms on the East Coast and
tornadoes in the Midwest in the second quarter and a wind and ice storm in the
Midwest and the Northeast in the first quarter.
The statutory combined ratio for Personal Lines in the 2000 second quarter and
six months was 98.1% and 98.6%, respectively, compared to 94.8% and 94.5% in the
comparable periods of 1999. The GAAP combined ratio for Personal Lines in the
2000 second quarter and six months was 98.0% and 98.8%, respectively, compared
to 94.7% and 93.1% in the comparable periods of 1999. 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 statutory and GAAP combined ratios for the second quarter of
2000 compared to the statutory and GAAP combined ratios for the second quarter
of 1999 was primarily due to increased loss trends and lower favorable
prior-year reserve development, offset in part by lower catastrophe losses.
The 1999 six months statutory and GAAP combined ratios for Personal Lines
include an adjustment associated with the termination of the quota share
reinsurance arrangement. Excluding this adjustment, the statutory and GAAP
combined ratios for the first six months of 1999 would have been 94.1%. The
increase in the statutory and GAAP combined ratios for the first six months of
2000 compared to the statutory and GAAP combined ratios (excluding the premium
adjustment) for the first six months of 1999 was primarily due to increased loss
trends, higher catastrophe losses and lower favorable prior-year reserve
development.
11
<PAGE>
International Consumer
Europe, Middle East & Africa
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $576 $563 2 $1,169 $1,124 4
Adjusted operating expenses (2) 362 369 (2) 718 742 (3)
Provisions for benefits,
claims and credit losses 67 77 (13) 141 157 (10)
------------------------------- -------------------------------
Core income before taxes 147 117 26 310 225 38
Income taxes 55 44 25 116 84 38
------------------------------- -------------------------------
Core income 92 73 26 194 141 38
Restructuring-related items, after-tax 7 (3) NM 7 (9) NM
------------------------------- -------------------------------
Net income $ 99 $ 70 41 $ 201 $ 132 52
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $21 $22 (5) $22 $22 -
Return on assets 1.90% 1.28% 1.84% 1.21%
------------------------------------------==========================================================================================
Excluding restructuring-related items
Return on assets 1.76% 1.33% 1.77% 1.29%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Europe, Middle East & Africa (EMEA - including India and Pakistan) -- which
provides banking, lending, and investment services, including credit and charge
cards, to customers throughout the region -- reported core income of $92 million
and $194 million in the 2000 second quarter and six months, up $19 million or
26% and $53 million or 38% from the 1999 periods, reflecting growth across the
region, particularly in Germany and India. Net income of $99 million and $201
million in the 2000 second quarter and six months included restructuring-related
credits of $7 million ($11 million pretax) in both periods. Net income of $70
million and $132 million in the 1999 second quarter and six months included
restructuring-related charges of $3 million ($5 million pretax) and $9 million
($15 million pretax), respectively.
The net effects of foreign currency translation reduced core income in the 2000
second quarter and six months by approximately $16 million and $27 million from
the 1999 second quarter and six months and reduced revenue growth by
approximately 12% and expense growth by approximately 9% in both the 2000 second
quarter and six months compared to the comparable periods of 1999.
As shown in the following table, EMEA reported 9% account growth from a year ago
primarily reflecting loan growth, particularly credit cards. However, loan and
customer deposit growth was reduced by the effect of foreign currency
translation.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 11.7 10.7 9 11.7 10.7 9
Average customer deposits $16.1 $17.1 (6) $16.3 $17.4 (6)
Average loans $16.5 $16.4 1 $16.7 $16.6 1
------------------------------------------==========================================================================================
</TABLE>
Revenues, net of interest expense, of $576 million and $1.169 billion in the
2000 second quarter and six months grew $13 million or 2% and $45 million or 4%
from the 1999 periods, reflecting loan growth, improved deposit spreads, and
higher investment product fees, partially offset by the effect of foreign
currency translation. Adjusted operating expenses of $362 million and $718
million in the 2000 second quarter and six months were down $7 million or 2% and
$24 million or 3% from the 1999 periods as costs associated with higher business
volumes and franchise growth in Central and Eastern Europe were more than offset
by the effect of foreign currency translation.
The provisions for benefits, claims, and credit losses were $67 million and $141
million in the 2000 second quarter and six months, down from $77 million and
$157 million in the 1999 periods. Net credit losses in the 2000 second quarter
were $65 million and the related loss ratio was 1.57%, down from $71 million and
1.70% in the 2000 first quarter and $70 million and 1.71% a year ago. Loans
delinquent 90 days or more were $868 million or 5.09% of loans at June 30, 2000,
down from $875 million or 5.26% at March 31, 2000 and $899 million or 5.46% a
year ago. The declines in the net credit loss ratio and the delinquency ratio
reflect the stable economic conditions across the region.
12
<PAGE>
Asia Pacific
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $691 $543 27 $1,374 $1,060 30
Adjusted operating expenses (2) 340 281 21 674 547 23
Provisions for benefits, claims,
and credit losses 67 89 (25) 146 177 (18)
------------------------------- -------------------------------
Core income before taxes 284 173 64 554 336 65
Income taxes 101 65 55 197 126 56
------------------------------- -------------------------------
Core income 183 108 69 357 210 70
Restructuring-related items, after-tax (1) (2) (50) (4) (9) (56)
------------------------------- -------------------------------
Net income $182 $106 72 $ 353 $ 201 76
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $33 $30 10 $33 $30 10
Return on assets 2.22% 1.42% 2.15% 1.35%
------------------------------------------==========================================================================================
Excluding restructuring-related items
Return on assets 2.23% 1.44% 2.18% 1.41%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
--------------------------------------------------------------------------------
Asia Pacific (including Japan and Australia) -- which provides banking, lending,
and investment services, including credit and charge cards, to customers
throughout the region -- reported core income of $183 million and $357 million
in the 2000 second quarter and six months, up $75 million or 69% and $147
million or 70% from the 1999 periods, reflecting business growth across the
region. Net income of $182 million and $353 million in the 2000 second quarter
and six months included restructuring-related items of $1 million ($2 million
pretax) and $4 million ($6 million pretax), respectively. Net income of $106
million and $201 million in the 1999 second quarter and six months included
restructuring-related items of $2 million ($4 million pretax) and $9 million
($15 million pretax), respectively.
As shown in the following table, Asia Pacific experienced double-digit growth in
accounts, customer deposits, and loans when compared to the 1999 second quarter
and six months, reflecting significant increases in Japan, growth in the Cards
business across the region, and economic stabilization in most countries. The
growth in Japan includes the Diners Club acquisition in the 2000 first quarter
which added approximately $0.5 billion in loans and 0.6 million accounts.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 10.1 8.6 17 10.1 8.6 17
Average customer deposits $47.0 $40.6 16 $46.7 $40.3 16
Average loans $25.4 $22.9 11 $25.3 $22.5 12
------------------------------------------==========================================================================================
</TABLE>
Revenues, net of interest expense, of $691 million and $1.374 billion in the
2000 second quarter and six months, increased $148 million or 27% and $314
million or 30% from the 1999 periods, reflecting growth in customer deposits and
loans, higher investment product sales, and improved spreads. Adjusted operating
expenses were up $59 million or 21% and $127 million or 23% from the 1999 second
quarter and six months, reflecting increased variable compensation, including
higher investment product sales commissions, and increased marketing. Revenue
and expense increases also reflect the acquisition of Diners Club Japan.
The provisions for benefits, claims, and credit losses were $67 million and $146
million in the 2000 second quarter and six months, respectively, down from $89
million and $177 million in the 1999 periods. Net credit losses in the 2000
second quarter were $64 million and the related loss ratio was 1.01%, down from
$74 million and 1.19% in the 2000 first quarter and $76 million and 1.33% a year
ago. Loans delinquent 90 days or more were $405 million or 1.56% of loans at
June 30, 2000, down from $443 million or 1.73% at March 31, 2000 and $509
million or 2.17% a year ago. The declines in the provision, the net credit loss
ratio and delinquencies from a year ago reflect economic stabilization in most
countries, however, net credit losses increased in Taiwan.
13
<PAGE>
Latin America
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $466 $497 (6) $985 $961 2
Adjusted operating expenses (2) 328 299 10 652 590 11
Provision for credit losses 76 135 (44) 166 236 (30)
------------------------------- -------------------------------
Core income before taxes 62 63 (2) 167 135 24
Income taxes 21 22 (5) 56 47 19
------------------------------- -------------------------------
Core income 41 41 - 111 88 26
Restructuring-related items, after-tax (10) (8) 25 (11) (18) (39)
------------------------------- -------------------------------
Net income $ 31 $ 33 (6) $100 $ 70 43
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $12 $15 (20) $13 $15 (13)
Return on assets 1.04% 0.88% 1.55% 0.94%
------------------------------------------==========================================================================================
Excluding restructuring-related items
Return on assets 1.37% 1.10% 1.72% 1.18%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
--------------------------------------------------------------------------------
Latin America -- which provides banking, lending, and investment services,
including credit and charge cards, to customers throughout the region --
reported core income of $41 million and $111 million in the 2000 second quarter
and six months, unchanged from the 1999 second quarter, but up $23 million or
26% from the 1999 six months, reflecting lower credit costs and an increase in
earnings from Credicard, a 33%-owned Brazilian Card affiliate, and offset by
reduced interest income related to Confia, a Mexican bank acquired in August
1998, and lower business volumes in certain countries. Core income in the 2000
six months also reflects a 2000 first quarter gain related to the sale of an
auto loan portfolio in Puerto Rico. Net income of $31 million and $100 million
in the 2000 second quarter and six months included restructuring-related items
of $10 million ($12 million pretax) and $11 million ($14 million pretax),
respectively. Net income of $33 million and $70 million in the 1999 second
quarter and six months included restructuring-related items of $8 million ($12
million pretax) and $18 million ($28 million pretax), respectively.
The net effects of foreign currency translation reduced core income in the 2000
second quarter and six months by approximately $4 million and $3 million from
the 1999 second quarter and six months and reduced revenues by approximately 3%
and 2%, and expenses by approximately 2% and 1% in the 2000 second quarter and
six months, respectively, compared to 1999.
As shown in the following table, Latin America experienced account growth,
including the effect of recent acquisitions. Average loans declined 10% and 6%
from the 1999 second quarter and six months primarily reflecting the auto loan
portfolio sale in Puerto Rico.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % -------------------------------
In billions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts (in millions) 8.4 8.0 5 8.4 8.0 5
Average customer deposits $13.7 $13.8 (1) $13.7 $13.3 3
Average loans $ 7.2 $ 8.0 (10) $ 7.4 $ 7.9 (6)
------------------------------------------==========================================================================================
</TABLE>
Revenues, net of interest expense, of $466 million and $985 million in the 2000
second quarter and six months were down $31 million or 6% from the 1999 second
quarter, but up $24 million or 2% from the 1999 six months. Revenue in both the
2000 quarter and six months reflects increased earnings from Credicard and is
offset by reduced interest revenue from Confia and business volume declines
in certain countries, including the effect of the 2000 first quarter auto
portfolio sale in Puerto Rico. Revenues in the six months include the gain
related to the auto portfolio sale in Puerto Rico. Adjusted operating expenses
grew $29 million or 10% and $62 million or 11% from the 1999 second quarter and
six months reflecting costs associated with new business initiatives and
strategy changes in certain countries. In the 2000 six months, both revenue and
expense increases reflect recent acquisitions.
The provision for credit losses was $76 million and $166 million in the 2000
second quarter and six months, down from $135 million and $236 million in the
1999 periods. Net credit losses in the 2000 second quarter were $76 million and
the related loss ratio was 4.25%, down from $90 million and 4.77% in the 2000
first quarter and $124 million and 6.17% a year ago. Loans delinquent 90 days or
more were $323 million or 4.52% of loans at June 30, 2000 compared with $333
million or 4.58% at March 31, 2000 and $346 million or 4.32% a year ago. The
increase in the delinquency ratio from a year ago primarily reflects the effect
of the 2000 first quarter sale of the auto loan portfolio in Puerto Rico.
14
<PAGE>
e-Consumer (1)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $ 28 $ 23 22 $ 59 $ 47 26
Total operating expenses 103 69 49 244 130 88
------------------------------- -------------------------------
Loss before tax benefits (75) (46) (63) (185) (83) NM
Income tax benefits (29) (18) (61) (70) (32) NM
------------------------------- -------------------------------
Net loss ($46) ($28) (64) ($115) ($51) NM
------------------------------------------==========================================================================================
</TABLE>
(1) Includes the portion of Internet development directly related to
Citigroup's consumer businesses, previously shown as a part of e-Citi.
NM Not meaningful
--------------------------------------------------------------------------------
e-Consumer -- the business responsible for developing and implementing Global
Consumer Internet financial services products and e-commerce solutions --
reported net losses of $46 million and $115 million in the 2000 second quarter
and six months, up from $28 million and $51 million in the 1999 periods,
reflecting continued investment in Internet financial services and charges
related to the termination of certain contracts and other initiatives.
Other Consumer
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense ($10) $39 NM $ 1 $ 88 (99)
Adjusted operating expenses (2) 36 74 (51) 93 140 (34)
Provision for credit losses - 7 NM - 14 NM
------------------------------- -------------------------------
Loss before tax benefits (46) (42) (10) (92) (66) (39)
Income tax benefits (18) (19) 5 (36) (27) (33)
------------------------------- -------------------------------
Loss (28) (23) (22) (56) (39) (44)
Restructuring-related items, after-tax 2 - NM 2 - NM
------------------------------- -------------------------------
Net loss ($26) ($23) (13) ($54) ($39) (38)
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Other Consumer -- which includes certain treasury operations and global
marketing and other programs -- reported net losses of $26 million and $54
million in the 2000 second quarter and six months, up from $23 million and $39
million in the 1999 periods. The increase in the net loss compared to a year ago
reflects lower treasury earnings, offset by reduced staff levels and lower
marketing costs. The increase in the six months net loss also reflects costs
associated with the termination of certain global distribution initiatives. 1999
second quarter and six months revenue, expense, and provision for credit losses
include the results of the private label cards business that was discontinued in
early 2000.
Consumer Portfolio Review
In the consumer portfolio, credit loss experience is often expressed in terms of
annualized net credit losses as a percentage of average loans. Pricing and
credit policies reflect the loss experience of each particular product. Consumer
loans are generally written off no later than a predetermined number of days
past due on a contractual basis, or earlier in the event of bankruptcy. The
number of days is set at an appropriate level according to loan product and
country.
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, June 30, June 30, Mar. 31, June 30, 2nd Qtr. 2nd Qtr. 1st Qtr. 2nd Qtr.
except loan amounts in billions 2000 2000 2000 1999 2000 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Citibanking North America $ 7.2 $ 33 $ 48 $ 92 $ 7.1 $ 15 $ 17 $ 23
Ratio 0.46% 0.67% 1.22% 0.86% 0.98% 1.21%
Mortgage Banking 35.8 709 719 575 33.1 4 11 11
Ratio 1.98% 2.29% 2.09% 0.05% 0.14% 0.17%
U.S. Bankcards 78.4 922 1,058 954 75.2 740 782 803
Ratio 1.18% 1.45% 1.36% 3.96% 4.35% 4.63%
Other North America Cards 2.4 31 29 24 2.3 17 16 16
Ratio 1.24% 1.21% 1.08% 3.03% 2.98% 2.99%
CitiFinancial 17.3 229 216 172 16.7 80 76 70
Ratio 1.32% 1.33% 1.26% 1.93% 1.92% 2.14%
Europe, Middle East & Africa 17.0 868 875 899 16.5 65 71 70
Ratio 5.09% 5.26% 5.46% 1.57% 1.70% 1.71%
Asia Pacific 26.0 405 443 509 25.4 64 74 76
Ratio 1.56% 1.73% 2.17% 1.01% 1.19% 1.33%
Latin America 7.1 323 333 346 7.2 76 90 124
Ratio 4.52% 4.58% 4.32% 4.25% 4.77% 6.17%
Global Private Bank (2) 24.5 78 87 162 23.8 3 10 2
Ratio 0.32% 0.37% 0.88% 0.05% 0.18% 0.05%
Other 0.1 - - 9 0.1 - - 6
------------------------------------------------------------------------------------------------------------------------------------
Total managed 215.8 3,598 3,808 3,742 207.4 1,064 1,147 1,201
Ratio 1.67% 1.87% 2.00% 2.06% 2.30% 2.60%
-----------------------------------=================================================================================================
Securitized credit card
receivables (44.8) (544) (702) (652) (45.8) (441) (499) (541)
Loans held for sale (8.1) (62) (31) (35) (5.8) (28) (20) (29)
------------------------------------------------------------------------------------------------------------------------------------
Consumer loans $162.9 $2,992 $3,075 $3,055 $155.8 $ 595 $ 628 $ 631
Ratio 1.84% 2.03% 2.29% 1.54% 1.71% 1.91%
-----------------------------------=================================================================================================
</TABLE>
(1) The ratios of 90 days or more past due and net credit losses are
calculated based on end-of-period and average loans, respectively, both
net of unearned income.
(2) Global Private Bank results are reported as part of the Global Investment
Management and Private Banking segment.
--------------------------------------------------------------------------------
Consumer Loan Balances, Net of Unearned Income
<TABLE>
<CAPTION>
End of Period Average
-------------------------------- ------------------------------
June 30, Mar. 31, June 30, 2nd Qtr. 1st Qtr. 2nd Qtr.
In billions of dollars 2000 2000 1999 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total managed $215.8 $203.3 $187.4 $207.4 $200.3 $185.1
Securitized credit card receivables (44.8) (48.0) (47.4) (45.8) (48.2) (46.7)
Loans held for sale (8.1) (4.2) (6.5) (5.8) (4.3) (6.2)
-------------------------------- ------------------------------
Consumer loans $162.9 $151.1 $133.5 $155.8 $147.8 $132.2
-----------------------------------------------------------=========================================================================
</TABLE>
Total delinquencies 90 days or more past due in the managed portfolio were $3.6
billion with a related delinquency ratio of 1.67% of loans at June 30, 2000,
compared with $3.8 billion or 1.87% at March 31, 2000 and $3.7 billion or 2.00%
a year ago. Total managed net credit losses in the 2000 second quarter were $1.1
billion and the related loss ratio was 2.06%, compared with $1.1 billion and
2.30% in the 2000 first quarter and $1.2 billion and 2.60% in the 1999 second
quarter. For a discussion on trends by business, see business discussions on
pages 4 - 15.
Citigroup's allowance for credit losses of $6.7 billion is available to absorb
probable credit losses inherent in the entire portfolio. For analytical purposes
only, the portion of Citigroup's allowance for credit losses attributed to the
consumer portfolio was $3.4 billion at June 30, 2000, March 31, 2000, and June
30, 1999. The allowance as a percentage of loans on the balance sheet was 2.08%
at June 30, 2000, down from 2.25% at March 31, 2000 and 2.57% at June 30, 1999
reflecting improved credit performance in certain portfolios and loan growth.
The attribution of the allowance is made for analytical purposes only and may
change from time to time.
Net credit losses, delinquencies and the related ratios may increase from the
2000 second quarter as a result of portfolio growth, global economic conditions,
the credit performance of the portfolios, including bankruptcies, and seasonal
factors. This statement is a forward-looking statement within the meaning of the
Private Securities Litigation Reform Act. See "Forward-Looking Statements" on
page 26.
16
<PAGE>
In the fourth quarter of 2000, Citigroup will adopt the Federal Financial
Institutions Examination Council's (FFIEC) revised Uniform Retail Credit
Classification and Account Management Policy. The policy provides guidance on
the reporting of delinquent consumer loans and the timing of associated credit
charge-offs for Citigroup's financial institution subsidiaries. The revised
policy is not expected to have a material effect on financial results since
Citigroup believes that it maintains adequate reserves for credit losses
inherent in its loan portfolios. This statement is a forward-looking statement
within the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" on page 26.
GLOBAL CORPORATE AND INVESTMENT BANK
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $7,855 $6,962 13 $16,055 $14,098 14
Adjusted operating expenses (2) 4,512 4,008 13 8,851 8,071 10
Provisions for benefits, claims,
and credit losses 1,034 984 5 2,000 1,961 2
------------------------------- -------------------------------
Core income before taxes
and minority interest 2,309 1,970 17 5,204 4,066 28
Income taxes 757 685 11 1,779 1,405 27
Minority interest, after-tax 15 41 (63) 59 78 (24)
------------------------------- -------------------------------
Core income 1,537 1,244 24 3,366 2,583 30
Restructuring-related items, after-tax 3 (3) NM 3 117 (97)
------------------------------- -------------------------------
Net income (3) $1,540 $1,241 24 $ 3,369 $ 2,700 25
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
(3) The 1999 six-month period excludes cumulative effect of accounting
changes.
NM Not meaningful
--------------------------------------------------------------------------------
The Global Corporate and Investment Bank business serves corporations, financial
institutions, governments, investors, and other participants in capital markets
in 100 countries and consists of Salomon Smith Barney (SSB), Emerging Markets,
Global Relationship Banking (GRB) and the Commercial Lines business of TAP.
Global Corporate and Investment Bank core income of $1.537 billion and $3.366
billion grew $293 million or 24% in the 2000 second quarter and $783 million or
30% in the 2000 six months compared to 1999. The 2000 second quarter reflects
core income growth from the comparable 1999 quarter of $112 million or 76% in
GRB, $84 million or 29% in Emerging Markets, $66 million or 33% in Commercial
Lines and $31 million or 5% in SSB. The 2000 six months reflects core income
growth from 1999 of $340 million or 27% in SSB, $165 million or 49% in GRB, $161
million or 27% in Emerging Markets and $117 million or 30% in Commercial Lines.
SSB's core income growth was driven by strong revenue momentum in commissions,
investment banking fees and other fee-based Private Client revenues along with
earnings from the investment in Nikko Securities. Emerging Markets core income
growth was driven by broad-based growth in revenues from transaction services
and improved credit. GRB's core income growth was a result of revenue growth in
transaction services and equity derivatives, partially offset by higher net
write-offs. Commercial Lines improvement primarily reflects revenue growth from
rate increases achieved in prior quarters, and higher net investment income and
fee income.
Net income in the 1999 six months included restructuring-related items of $117
million ($198 million pretax) consisting mainly of a release of the 1997
restructuring reserve that resulted from SSB's reassessment of space needs due
to the Citicorp merger. See further discussion of the restructuring-related
items 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 macro-economic policies and credit environments, among other
factors, in the 100 countries in which the businesses operate. Economic and
market events can have both positive and negative effects on the revenue
performance of the businesses and can negatively affect credit performance. 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. 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 segment data includes the earnings of an investment in Nikko
Securities but does not include the Asset Management division of Salomon Smith
Barney, which is included in the SSB Citi Asset Management Group and Global
Retirement Services results.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $3,693 $3,269 13 $7,879 $6,610 19
Adjusted operating expenses (1) 2,752 2,308 19 5,416 4,646 17
------------------------------- -------------------------------
Core income before taxes 941 961 (2) 2,463 1,964 25
Income taxes 300 351 (15) 865 706 23
------------------------------- -------------------------------
Core income 641 610 5 1,598 1,258 27
Restructuring-related items, after-tax - - - - 124 NM
------------------------------- -------------------------------
Net income (2) $ 641 $ 610 5 $1,598 $1,382 16
------------------------------------------==========================================================================================
</TABLE>
(1) Excludes restructuring-related items.
(2) The 1999 six-month period excludes cumulative effect of accounting
changes.
NM Not meaningful
--------------------------------------------------------------------------------
Salomon Smith Barney reported core income in the 2000 second quarter and six
months of $641 million and $1.598 billion, respectively, compared to $610
million and $1.258 billion in the 1999 periods. Salomon Smith Barney's earnings
reflect strong growth in commissions, investment banking fees and fee-based
Private Client revenues combined with earnings from the investment in Nikko
Securities. Total client assets in the Private Client business grew 21% from a
year ago to $1.032 trillion while annualized gross production per Financial
Consultant reached $548,000 in the first six months of 2000 compared to $478,000
in the first six months of 1999. Included in the 1999 six months net income is a
net after-tax restructuring credit of $124 million ($209 million pretax). See
Note 7 of Notes to Consolidated Financial Statements for discussions of the
restructuring-related items.
On May 1, 2000, the Company completed the approximately 1.36 billion British
Pound ($2.2 billion) acquisition of the global investment banking business and
related net assets of Schroders PLC (Schroders), including all corporate
finance, financial markets and securities activities. The combined European
operations of the Company are now known as Schroder Salomon Smith Barney.
Revenues by category were as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commissions $1,017 $ 903 13 $2,326 $1,803 29
Investment banking 826 762 8 1,731 1,417 22
Principal transactions 636 698 (9) 1,496 1,672 (11)
Asset management
and administration fees 545 400 36 1,044 777 34
Interest income, net (1) 449 457 (2) 822 827 (1)
Other income 220 49 NM 460 114 NM
------------------------------- -------------------------------
Total revenues, net of interest expense (1) $3,693 $3,269 13 $7,879 $6,610 19
------------------------------------------==========================================================================================
</TABLE>
(1) Net of interest expense of $3.479 billion and $2.407 billion in the 2000
and 1999 second quarters, and $6.432 billion and $4.648 billion in the
2000 and 1999 six months.
NM Not meaningful
--------------------------------------------------------------------------------
Revenues, net of interest expense, in the 2000 second quarter and six months
were $3.693 billion and $7.879 billion, respectively, a 13% and 19% improvement
over the comparable 1999 periods. The increase in commissions reflects robust
sales of listed and over-the-counter securities. Investment banking revenue
growth reflects increases in merger and acquisition fees and equity underwriting
and was partially offset by a decline in high yield underwriting. Principal
transaction revenues were down primarily due to less robust conditions in the
fixed income markets. The increase in other income primarily reflects the
increase in ownership in Nikko Securities (see Note 1 of Notes to Consolidated
Financial Statements) along with higher income from the Nikko SSB joint venture
which began operations during the 1999 first quarter. The growth in asset
management and administration fees, which include results from assets managed by
the Financial Consultants as well as those managed externally by the Consulting
Group, corresponds to the 36% growth in assets under fee-based management.
18
<PAGE>
Total assets under fee-based management at June 30, were as follows:
<TABLE>
<CAPTION>
June 30,
----------------------------------- %
In billions of dollars 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financial Consultant managed accounts $ 58.2 $ 29.5 97
Consulting Group externally managed assets 135.8 113.6 20
-----------------------------------
Total assets under fee-based management $194.0 $143.1 36
---------------------------------------------------------------------------------===================================================
</TABLE>
Adjusted operating expenses were $2.752 billion and $5.416 billion in the 2000
second quarter and six months, respectively, up 19% and 17% compared to the
year-ago periods. The growth reflects higher production-related compensation and
other expenses resulting from increased revenues and the Schroders acquisition
in the 2000 second quarter.
Emerging Markets
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $1,270 $1,096 16 $2,508 $2,239 12
Adjusted operating expenses (2) 602 523 15 1,136 1,044 9
Provision for credit losses 79 110 (28) 163 225 (28)
------------------------------- -------------------------------
Core income before taxes
and minority interest 589 463 27 1,209 970 25
Income taxes 215 175 23 441 366 20
Minority interest, after-tax 4 2 NM 6 3 NM
------------------------------- -------------------------------
Core income 370 286 29 762 601 27
Restructuring-related items, after-tax 3 (1) NM 3 (2) NM
------------------------------- -------------------------------
Net income $ 373 $ 285 31 $ 765 $ 599 28
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $87 $83 5 $85 $82 4
Return on assets 1.72% 1.38% 1.81% 1.47%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful.
--------------------------------------------------------------------------------
Emerging Markets core income was $370 million and $762 million in the 2000
second quarter and six months, up $84 million or 29% and $161 million or 27%
from 1999. In June 2000, Emerging Markets completed the acquisition of a
majority interest in Bank Handlowy, Poland's largest commercial bank. Return on
assets was 1.72% in the 2000 second quarter, up from 1.38% in 1999. In the six
months ended June 30, 2000, return on assets was 1.81%, up from 1.47% in the
1999 six months.
Revenues, net of interest expense, were $1.270 billion and $2.508 billion in the
2000 second quarter and six months, up $174 million or 16% and $269 million or
12%, respectively, from 1999. Revenue growth in the 2000 second quarter was led
by CEEMEA (Central and Eastern Europe, Middle East and Africa), up 28%,
primarily due to growth in trading-related revenue and transaction services as
well as the acquisition of Bank Handlowy. Latin America revenues were up 11% in
the 2000 second quarter primarily due to growth in transaction services and
structured products and partially offset by a decline in trading-related
revenue, while Asia revenues were up 6% reflecting growth in transaction
services and realized investment gains and partially offset by lower
trading-related revenue. The six-month comparison reflected strong growth across
all regions in transaction services and structured products along with higher
realized investment gains, partially offset by lower trading-related revenue in
Latin America and Asia. About 23% of the Emerging Markets revenue in the 2000
second quarter and six months was attributable to business from multinational
companies managed jointly with GRB, with that revenue having grown 8% and 9%,
respectively, from the prior-year periods.
Adjusted operating expenses in the 2000 second quarter and six months increased
15% and 9% compared to 1999. The growth in expenses was primarily due to the
acquisition of Bank Handlowy, investment spending to gain market share in
selected emerging market countries and increases in incentive compensation and
other operating expenses.
The provision for credit losses totaled $79 million and $163 million in the 2000
second quarter and six months, down $31 million and $62 million from the
respective 1999 periods. Net write-offs declined in Asia, partially offset by an
increase in Latin America. Cash-basis loans were $1.132 billion at June 30,
2000, up $66 million from March 31, 2000, principally due to the addition of
Bank Handlowy and partially offset by reductions in Asia and CEEMEA. Compared to
a year ago, cash-basis loans were $65 million lower as declines in Asia were
partially offset by the acquisition of Bank Handlowy and increases in Latin
America.
Average assets of $87 billion and $85 billion in the 2000 second quarter and six
months reflected growth of $4 billion and $3 billion, respectively, compared to
a year ago, primarily due to higher loans and trading assets and the Bank
Handlowy acquisition.
19
<PAGE>
Global Relationship Banking
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $1,266 $1,039 22 $2,474 $2,157 15
Adjusted operating expenses (2) 805 805 - 1,599 1,633 (2)
Provision (benefit) for credit losses 52 1 NM 92 (2) NM
------------------------------- -------------------------------
Core income before taxes
and minority interest 409 233 76 783 526 49
Income taxes 147 86 71 281 192 46
Minority interest, after-tax 3 - NM 3 - NM
------------------------------- -------------------------------
Core income 259 147 76 499 334 49
Restructuring-related items, after-tax - (2) NM - (5) NM
------------------------------- -------------------------------
Net income $ 259 $ 145 79 $ 499 $ 329 52
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $95 $81 17 $90 $85 6
Return on assets 1.10% 0.72% 1.11% 0.78%
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Core income from Global Relationship Banking in North America, Europe and Japan
was $259 million and $499 million in the 2000 second quarter and six months, up
$112 million or 76% and $165 million or 49% from 1999. During the 2000 second
quarter, GRB strengthened its position in the U.S. leasing market through the
purchase of Copelco. Return on assets was 1.10% in the 2000 second quarter, up
from 0.72% in 1999. In the 2000 six months, return on assets was 1.11%, up from
0.78% in the comparable 1999 period.
Revenues, net of interest expense, of $1.266 billion in the 2000 second quarter
and $2.474 billion in the 2000 six months grew $227 million or 22% and $317
million or 15%, respectively, compared to 1999. The increases were driven by
strong growth in transaction services, equity derivatives and structured
products, which includes the effect of the Copelco acquisition. Both comparisons
were negatively impacted by lower funding and gapping results in 2000.
Adjusted operating expenses of $805 million and $1.599 billion in the 2000
second quarter and six months were flat compared to the related 1999 quarter and
down $34 million or 2% in the six-month comparison. The decrease in expenses in
the 2000 six months was due to lower year 2000 and European Economic Monetary
Union expenses, the impact of previous restructuring actions and business
integration initiatives and was partially offset by higher incentive
compensation and the acquisition of Copelco.
The provision for credit losses was $52 million and $92 million in the current
quarter and six months compared to $1 million in the 1999 second quarter and a
net benefit of $2 million in the 1999 six months. Net write-offs in 2000
increased primarily due to exposure in the health-care industry in North
America. Cash-basis loans were $465 million at June 30, 2000, up $146 million
from March 31, 2000 and $186 million from June 30, 1999. The increase in
cash-basis loans in the 2000 second quarter was primarily attributable to the
acquisition of Copelco. The Other Real Estate Owned portfolio was $135 million
at June 30, 2000, down $6 million from March 31, 2000 and $43 million from June
30, 1999 due to decreases in the North America real estate portfolio.
Average assets of $95 billion and $90 billion in the 2000 second quarter and six
months increased $14 billion and $5 billion from 1999, primarily reflecting
increases in trading assets and loans as well as the acquisition of Copelco.
20
<PAGE>
Commercial Lines
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $1,626 $1,558 4 $3,194 $3,092 3
Claims and claim adjustment expenses 903 873 3 1,745 1,738 -
Total operating expenses 353 372 (5) 700 748 (6)
------------------------------- -------------------------------
Income before taxes
and minority interest 370 313 18 749 606 24
Income taxes 95 73 30 192 141 36
Minority interest, after-tax (1) 8 39 (79) 50 75 (33)
------------------------------- -------------------------------
Net income (2) (3) $ 267 $ 201 33 $ 507 $ 390 30
------------------------------------------==========================================================================================
</TABLE>
(1) See Note 1 of Notes to Consolidated Financial Statements.
(2) The 1999 six-month period excludes cumulative effect of accounting
changes.
(3) 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
$267 million and $507 million in the 2000 second quarter and six months, up from
$201 million and $390 million in the comparable periods of 1999. The
improvements in the 2000 periods over the 1999 periods reflect rate increases
achieved in prior quarters, higher net investment income, lower catastrophe
losses, higher fee income, a benefit resulting from legislative action in South
Carolina that changed the manner in which it finances its workers' compensation
second-injury funds, and continued expense reductions which were partially
offset by increased loss trends in the 2000 second quarter and six-month periods
and lower favorable prior-year reserve development in the second quarter. Also
reflected in the 2000 second quarter and six months are the incremental earnings
from the minority interest buyback. The Company continues to maintain its
discipline in the competitive commercial lines marketplace and to grow business
only where market conditions warrant.
Net written premiums by market were as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
National Accounts $ 58 $ 101 (43) $ 150 $ 251 (40)
Commercial Accounts 458 440 4 945 884 7
Select Accounts 407 394 3 794 766 4
Specialty Accounts 310 160 94 491 308 59
------------------------------- -------------------------------
Total net written premiums $1,233 $1,095 13 $2,380 $2,209 8
------------------------------------------==========================================================================================
</TABLE>
Commercial Lines net written premiums in the 2000 second quarter and six months
totaled $1.233 billion and $2.380 billion, respectively, compared to $1.095
billion and $2.209 billion in the comparable periods of 1999. Included in
Specialty Accounts net written premiums in the 2000 second quarter and six
months is an adjustment of $131 million due to a reinsurance transaction
associated with the acquisition of the Reliance surety business. The trend in
written premiums for all lines continues to reflect the impact of an improving
rate environment as evidenced by the favorable pricing on renewal business and
an increase in new business premiums. Also contributing to the net written
premium increase in Specialty Accounts was the impact of the ongoing business
associated with the Reliance surety acquisition as well as reinsurance activity.
The net written premium decrease in National Accounts was primarily due to a
shift of business mix from premium-based products to fee-based products and a
decrease in the Company's level of involuntary pool participation.
National Accounts new business was significantly lower in the 2000 second
quarter than in the 1999 second quarter and was significantly higher in the 2000
six months than in the 1999 six months, reflecting the acquisition of several
large accounts in 2000. National Accounts business retention ratio in the 2000
second quarter was significantly lower than in the 1999 second quarter and in
the 2000 six months was moderately lower than in the 1999 six months, reflecting
the loss of several large accounts in 2000.
Commercial Accounts new business in the 2000 second quarter was moderately
higher and in the 2000 six months was significantly higher than the comparable
periods in 1999, reflecting the increased market activity resulting from the
pricing environment. Commercial Accounts business retention ratio in the 2000
second quarter was significantly lower and in the 2000 six months was moderately
lower than the comparable periods in 1999, reflecting an increase in lost
business due to the renewal price increases in 2000. Commercial Accounts
continues to focus on maintaining its product pricing standards and its
selective underwriting policy in the renewal of accounts.
New premium business in Select Accounts was significantly higher in both the
2000 second quarter and six months than the comparable periods in 1999. New
business was low in the 1999 second quarter and six months reflecting its
selective underwriting policy in the highly competitive marketplace. Select
Accounts business retention ratio in the 2000 second quarter was moderately
lower than the comparable period in 1999, reflecting a small increase in lost
business due to the renewal price increases in 2000.
21
<PAGE>
Select Accounts business retention ratio remained strong in the 2000 six months
and was virtually the same as that in the 1999 six months.
The statutory combined ratio before policyholder dividends for Commercial Lines
in the 2000 second quarter and six months was 106.6% and 104.0%, respectively,
compared to 105.6% and 105.2% in the comparable periods of 1999. The GAAP
combined ratio before policyholder dividends for Commercial Lines in the 2000
second quarter and six months was 101.1% and 100.8%, respectively, compared to
106.2% and 106.6% in the comparable periods of 1999. 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 2000 second quarter and six months statutory and GAAP combined ratios
include an adjustment due to a reinsurance transaction associated with the
acquisition of the Reliance surety business. Excluding this adjustment, the 2000
second quarter statutory and GAAP combined ratios before policyholder dividends
would have been 105.4% and 104.0%, respectively, and the 2000 six-month
statutory and GAAP combined ratios before policyholder dividends would have been
103.4% and 102.3%, respectively. The improvement in the 2000 second quarter and
six-month statutory and GAAP combined ratios before policyholder dividends,
excluding this adjustment, compared to the 1999 second quarter and six-month
statutory and GAAP combined ratios before policyholder dividends was due to rate
increases achieved in prior quarters, lower catastrophe losses, the benefit of
the South Carolina legislative action, higher fee income and continued expense
reductions which were partially offset by increased loss trends in the 2000
second quarter and six-month periods and lower favorable prior-year reserve
development in the second quarter.
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
June 30, 2000, approximately 24% of the net aggregate reserve (i.e.,
approximately $149 million) consisted of case reserve for resolved claims. The
balance, approximately 76% of the net aggregate reserve (i.e., approximately
$474 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 June 30, 2000,
approximately 13% of the net aggregate reserve (i.e., approximately $106
million) was for pending asbestos claims. The balance, approximately 87% of the
net aggregate reserve (i.e., approximately $714 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 June 30, 2000 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, in the opinion of the Company's
management, 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.
22
<PAGE>
Commercial Portfolio Review
Commercial loans are identified as impaired and placed on a nonaccrual basis
when it is determined that the payment of interest or principal is doubtful of
collection or when interest or principal is past due for 90 days or more, except
when the loan is well secured and in the process of collection. Impaired
commercial loans are written down to the extent that principal is judged to be
uncollectible. Impaired collateral-dependent loans are written down to the lower
of cost or collateral value. The following table summarizes commercial
cash-basis loans at period end and net credit losses for the three months ended:
<TABLE>
<CAPTION>
June 30, Mar. 31, June 30,
In millions of dollars 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial cash-basis loans
Emerging Markets $1,132 $1,066 $1,197
Global Relationship Banking 465 319 279
---------------------------------------------------
Total Global Corporate Bank 1,597 1,385 1,476
Insurance and Investment Activities 41 70 79
---------------------------------------------------
Total commercial cash-basis loans $1,638 $1,455 $1,555
---------------------------------------------------------------------------------===================================================
Net credit losses
Emerging Markets $ 79 $ 84 $110
Global Relationship Banking 52 40 1
---------------------------------------------------
Total net credit losses $131 $124 $111
---------------------------------------------------------------------------------===================================================
</TABLE>
For a discussion of trends by business, see the business discussions on pages 19
- 20.
Citigroup's allowance for credit losses of $6.7 billion is available to absorb
probable credit losses inherent in the entire portfolio. For analytical purposes
only, the portion of Citigroup's allowance for credit losses attributed to the
commercial portfolio was $3.3 billion at June 30, 2000, $3.2 billion at March
31, 2000 and $3.3 billion at June 30, 1999. The increase in the allowance in the
second quarter of 2000 reflects acquisitions.
<TABLE>
<CAPTION>
June 30, Mar. 31, June 30,
In millions of dollars 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial allowance for credit losses $3,345 $3,248 $3,307
As a percentage of total commercial loans 3.01% 3.19% 3.35%
---------------------------------------------------------------------------------===================================================
</TABLE>
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $818 $659 24 $1,611 $1,290 25
Adjusted operating expenses (2) 536 404 33 1,026 805 27
Provision for credit losses 3 2 50 25 10 NM
------------------------------- -------------------------------
Core income before taxes 279 253 10 560 475 18
Income taxes 107 98 9 215 184 17
------------------------------- -------------------------------
Core income 172 155 11 345 291 19
Restructuring-related items, after-tax 1 - NM 1 - NM
------------------------------- -------------------------------
Net income $173 $155 12 $ 346 $ 291 19
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
The Global Investment Management and Private Banking group is composed of the
SSB Citi Asset Management Group and Global Retirement Services and the Global
Private Bank. These companies offer a broad range of asset management products
and services from global investment centers around the world, including mutual
funds, closed-end funds, managed accounts, unit investment trusts, variable
annuities, and personalized wealth management services to institutional, high
net worth, and retail clients.
Global Investment Management and Private Banking core income of $172 million in
the 2000 second quarter and $345 million in the 2000 six months was up $17
million or 11% and $54 million or 19% from a year ago. Revenues increased,
driven by acquisitions and growth in both assets and client business volumes
under management, and were partially offset by higher costs associated with the
acquisitions and continued expansion of sales and marketing efforts and
investments in technology. The increase in the provision for credit losses in
the six-month period related to a loan in EMEA.
23
<PAGE>
SSB Citi Asset Management Group and Global Retirement Services
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $480 $358 34 $910 $714 27
Total operating expenses 326 218 50 603 440 37
------------------------------- -------------------------------
Income before taxes 154 140 10 307 274 12
Income taxes 61 56 9 122 109 12
------------------------------- -------------------------------
Net income $ 93 $ 84 11 $185 $165 12
------------------------------------------==========================================================================================
Assets under management
(in billions of dollars) (2) $389 $360 8 $389 $360 8
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Includes $31 billion and $35 billion in the 2000 and 1999 periods,
respectively, for Global Private Bank clients.
--------------------------------------------------------------------------------
SSB Citi Asset Management Group and Global Retirement Services is composed of
the substantial resources that are available through its three primary asset
management business platforms -- Salomon Brothers Asset Management, Smith Barney
Asset Management and Citibank Asset Management -- and also includes the pension
management businesses of Global Retirement Services. These businesses offer
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).
Net income of $93 million and $185 million in the 2000 second quarter and six
months was up $9 million or 11% and $20 million or 12% from the comparable 1999
periods, reflecting the impact of acquisitions and growth in asset-based fee
revenues and partially offset by increased expenses.
Assets under management rose 8% from the year-ago second quarter to $389
billion, as growth continued across most product categories. Growth in private
client separately managed accounts and equity funds was strong, rising 20% and
16%, respectively, from the 1999 second quarter and was partially offset by
declines in fixed income funds. Institutional client assets in the 2000 second
quarter rose 6% to $153 billion aided by cross-selling efforts including $6
billion in client assets raised from Global Corporate and Investment Bank
customers. Sales of long-term mutual funds and managed account products through
the SSB retail sales channel rose 13% from the 1999 second quarter to $4.8
billion, representing 38% of all such products distributed through the retail
channel. In addition, in the 2000 second quarter, Primerica sold $469 million of
U.S. mutual and money funds representing 46% of Primerica's sales, and other
Global Consumer businesses sold $3.5 billion of mutual and money funds through
its channels, including $506 million in Europe and $322 million in Japan.
Revenues, net of interest expense, of $480 million and $910 million in the 2000
second quarter and six months increased $122 million or 34% and $196 million or
27% from the 1999 second quarter and six months, respectively, primarily
reflecting the Siembra and Garante acquisitions in the Latin America Retirement
Services business and growth in asset-based fee revenues.
Operating expenses of $326 million and $603 million in the 2000 quarter and six
months increased $108 million or 50% and $163 million or 37% from the 1999
periods, reflecting the acquisitions, additional investments in sales and
marketing activities, technology, and product development.
Global Private Bank
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense $338 $301 12 $701 $576 22
Adjusted operating expenses (2) 210 186 13 423 365 16
Provision for credit losses 3 2 50 25 10 NM
------------------------------- -------------------------------
Core income before taxes 125 113 11 253 201 26
Income taxes 46 42 10 93 75 24
------------------------------- -------------------------------
Core income 79 71 11 160 126 27
Restructuring-related items, after-tax 1 - NM 1 - NM
------------------------------- -------------------------------
Net income $ 80 $ 71 13 $161 $126 28
------------------------------------------==========================================================================================
Average assets (in billions of dollars) $24 $19 26 $24 $19 26
Return on assets 1.34% 1.50% 1.35% 1.34%
------------------------------------------==========================================================================================
Client business volumes
under management (in billions of dollars) $149 $125 19 $149 $125 19
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
24
<PAGE>
Global Private Bank -- which provides personalized wealth management services
for high net worth clients around the world -- reported core income of $79
million for the 2000 second quarter, up $8 million or 11% from 1999, reflecting
continued strong customer revenue momentum and partially offset by increased
front-end staff expenses. Core income for the 2000 six months was $160 million,
up $34 million or 27% from 1999, reflecting the above, as well as a higher
provision for credit losses.
Client business volumes under management, which comprise loans, deposits, client
assets under fee-based management and custody accounts, were $149 billion at
June 30, 2000, up 19% from $125 billion a year ago, reflecting growth in all
regions, especially in the U.S. and Asia Pacific. Business volumes grew in all
product lines, led by the custody and lending businesses.
Total revenues, net of interest expense, were $338 million in the 2000 second
quarter and $701 million in the 2000 six months, up $37 million or 12% and $125
million or 22% from the 1999 periods. Net interest and recurring fee-based
revenues increased $38 million or 19% from the 1999 second quarter and $73
million or 18% from the 1999 six months, while transaction revenues, including
placement fees on alternative investments, grew $7 million or 13% from the 1999
second quarter and $49 million or 52% from the 1999 six months. The increase in
revenues was led primarily by significant growth internationally, up $25 million
or 13% and $95 million or 26% from the comparable 1999 quarter and six months,
as well as continued favorable trends in the U.S., up $12 million or 11% and $30
million or 14% from the respective 1999 periods.
Total operating expenses of $210 million and $423 million in the quarter and six
months were up $24 million or 13% and $58 million or 16% from the 1999 periods,
primarily reflecting higher levels of bankers and product specialists (up 12%)
hired to boost front-end sales and service capabilities.
The provision for credit losses was $3 million for the 2000 second quarter and
$25 million year-to-date, compared with $2 million and $10 million for the 1999
periods. The increase in the 2000 six months related to a loan in EMEA. Net
credit losses in the 2000 second quarter remained at a nominal level of 0.05% of
average loans, compared with 0.18% and 0.05% for the 2000 first quarter and 1999
second quarter, respectively. Loans 90 days or more past due were lower at $78
million or 0.32% of loans at June 30, 2000, compared to $87 million or 0.37% at
March 31, 2000 and $162 million or 0.88% at June 30, 1999.
CORPORATE/OTHER
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- % ------------------------------- %
In millions of dollars 2000 1999 (1) Change 2000 1999 (1) Change
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues, net of interest expense ($160) $ 3 NM ($249) ($57) NM
Adjusted operating expenses (2) 162 184 (12) 524 330 59
(Credit) provision for benefits,
claims, and credit losses (2) 13 NM (4) 20 NM
------------------------------- -------------------------------
Loss before tax benefits (320) (194) 65 (769) (407) 89
Income tax benefits (104) (63) 65 (283) (130) NM
------------------------------- -------------------------------
Loss (216) (131) 65 (486) (277) 75
Restructuring-related items, after-tax (17) (8) NM (25) (16) 56
------------------------------- -------------------------------
Net loss ($233) ($139) 68 ($511) ($293) 74
------------------------------------------==========================================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
--------------------------------------------------------------------------------
Corporate/Other includes net corporate treasury results, corporate staff and
other corporate expenses, certain intersegment eliminations, and the remainder
of internet-related development activities (e-Citi) not allocated to the
individual businesses.
Net loss of $233 million and $511 million in the 2000 second quarter and six
months increased $94 million or 68% and $218 million or 74% over the respective
prior-year periods, primarily reflecting higher treasury costs and increases in
certain unallocated corporate costs. The 2000 six-month period loss also
includes a $108 million pretax expense for the contribution of appreciated
venture capital securities to Citigroup's Foundation, which had minimal impact
on Citigroup's earnings after related tax benefits and investment gains, which
are reflected in Investment Activities.
25
<PAGE>
INVESTMENT ACTIVITIES
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions of dollars 2000 1999 (1) 2000 1999 (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues, net of interest expense $387 $270 $1,403 $423
Total operating expenses 19 17 43 31
---------------------------------------------------------------------
Income before taxes and minority interest 368 253 1,360 392
Income taxes 135 88 500 136
Minority interest, after-tax (1) 3 (8) 5
---------------------------------------------------------------------
Net income $234 $162 $ 868 $251
---------------------------------------------------------------=====================================================================
</TABLE>
(1) Reclassified to conform to the current period's presentation.
--------------------------------------------------------------------------------
Investment Activities comprises Citigroup's 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 $234 million and $868 million for the 2000 second
quarter and six months, respectively, was up $72 million and $617 million from
the comparable 1999 periods, primarily reflecting strong performance in the
venture capital portfolios and a higher level of realized gains.
Revenues, net of interest expense, of $387 million for the 2000 second quarter
increased $117 million from 1999, primarily reflecting an increase in venture
capital results and realized gains in corporate and refinancing portfolio
investments. For the 2000 six months, revenues, net of interest expense, of $1.4
billion increased $980 million from 1999, primarily reflecting an increase in
venture capital results and realized gains in corporate and insurance-related
investments, reflecting strong equity markets. Partially offsetting the revenue
increases were losses in insurance-related investments from repositioning
activities designed to improve yields and maturity profiles, and writedowns in
the refinancing portfolio.
Investment Activities results may fluctuate in the future as a result of market
and asset-specific factors. This statement is a forward-looking statement within
the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" below.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially from
those included in the forward-looking statements. Forward-looking statements are
typically identified by words or phrases such as "believe," "expect,"
"anticipate," "intend," "estimate," "may increase," "may fluctuate," and similar
expressions or future or conditional verbs such as "will," "should," "would,"
and "could." These forward-looking statements involve risks and uncertainties
including, but not limited to, global economic conditions, portfolio growth, the
credit performance of the portfolios, including bankruptcies, and seasonal
factors; changes in general economic conditions including the performance of
global financial markets, prevailing inflation and interest rates, realized
gains from sales of investments, gains from asset sales, and losses on
commercial lending activities; results of various Investment Activities; the
effects of competitors' pricing policies, of changes in laws and regulations on
competition and of demographic changes on target market populations' savings and
financial planning needs; the impact of higher interest rates on spreads in the
Cards business; the adoption by the Company of an FFIEC policy that provides
guidance on the reporting of delinquent consumer loans and the timing of
associated credit charge-offs for financial institution subsidiaries; the
resolution of legal proceedings and related matters; and the actual amount of
liabilities associated with certain environmental and asbestos-related insurance
claims.
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.
26
<PAGE>
The risk management process is described in detail in Citigroup's 1999 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 and sensitivity analysis, which are applied to interest rate
risk in the non-trading portfolios and Value-at-Risk, stress and scenario
analyses which are applied to the trading portfolios.
Non-Trading Portfolios
Business units manage the potential earnings effect of interest rate movements
by managing the asset and liability mix, either directly or through the use of
derivative financial products. These include interest rate swaps and other
derivative instruments which are either designated and effective as hedges or
designated and effective in modifying the interest rate characteristics of
specified assets or liabilities. The utilization of derivatives is managed in
response to changing market conditions as well as to changes in the
characteristics and mix of the related assets and liabilities.
Price risk in the non-trading portfolios is measured using Earnings-at-Risk
within Citicorp (excluding CitiFinancial Credit Company). All other non-trading
portfolios measure price risk using sensitivity analysis.
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 is statistically
derived as a two standard deviation change in a short-term interest rate over
the period required to defease the position (usually four weeks).
Earnings-at-Risk is calculated separately for each currency and reflects the
repricing gaps in the position, as well as option positions, both explicit and
embedded.
Citicorp's primary non-trading price risk exposure is to movements in U.S.
dollar interest rates. As of June 30, 2000, the rate shift over a four-week
defeasance period applied to the U.S. dollar yield curve for purposes of
calculating Earnings-at-Risk was 45 basis points. Citicorp also has
Earnings-at-Risk in various other currencies; however, there are no significant
risk concentrations in any individual non-U.S. dollar currency. As of June 30,
2000, the rate shifts applied to these currencies for purposes of calculating
Earnings-at-Risk over a one- to four-week defeasance period ranged from 20 to
1,851 basis points, depending on the currency.
The following table illustrates that, as of June 30, 2000, a 45 basis point
increase in the U.S. dollar yield curve would have a potential negative impact
on Citicorp's pretax earnings of approximately $109 million in the next twelve
months, and approximately $110 million for the total five-year period 2000-2005.
A two standard deviation increase in non-U.S. dollar interest rates would have a
potential negative impact on Citicorp's pretax earnings of approximately $78
million in the next twelve months, and approximately $118 million for the
five-year period 2000-2005.
Citicorp Earnings-at-Risk (impact on pretax earnings)
<TABLE>
<CAPTION>
Assuming a U.S. Assuming a Non-U.S.
Dollar Rate Move of Dollar Rate Move of (1)
Two Standard Deviations Two Standard Deviations (2)
--------------------------------------------------------------------
In millions of dollars at June 30, 2000 Increase Decrease Increase Decrease
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Overnight to three months ($ 26) $ 28 ($ 17) $ 17
Four to six months (28) 31 (23) 23
Seven to twelve months (55) 57 (38) 38
--------------------------------------------------------------------
Total overnight to twelve months (109) 116 (78) 78
----------------------------------------------------------------====================================================================
Year two (58) 57 (27) 28
Year three (16) 14 (18) 19
Year four 34 (38) (4) 4
Year five 47 (53) - -
Effect of discounting (8) 11 9 (10)
--------------------------------------------------------------------
Total ($110) $107 ($118) $119
----------------------------------------------------------------====================================================================
</TABLE>
(1) Primarily results from Earnings-at-Risk in the Euro, Singapore dollar,
Japanese yen, Mexico Peso and Hong Kong dollar.
(2) Total assumes a two standard deviation increase or decrease for every
currency, not taking into account any covariance between currencies.
--------------------------------------------------------------------------------
The table above also illustrates that Citicorp's U.S. dollar risk profile in the
one- to three-year time horizon was directionally similar, but generally tends
to reverse in subsequent periods. This reflects the fact that the majority of
the derivative instruments utilized to modify repricing characteristics as
described above will mature within three years.
The following table summarizes Citicorp's worldwide Earnings-at-Risk over the
next 12 months from changes in interest rates and illustrates that Citicorp's
pretax earnings in its non-trading activities over the next 12 months would be
reduced by an increase in interest rates and would benefit from a decrease in
interest rates.
27
<PAGE>
Citicorp Twelve Month Earnings-at-Risk (impact on pretax earnings)
<TABLE>
<CAPTION>
U.S. Dollar Non-U.S. Dollar
-----------------------------------------------------------------------------------
June 30, Dec. 31, June 30, June 30, Dec. 31, June 30,
In millions of dollars 2000 1999 1999 2000 1999 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assuming a two standard deviation rate
Increase ($109) ($166) ($133) ($78) ($119) ($120)
Decrease 116 178 154 78 120 $120
-------------------------------------------------===================================================================================
</TABLE>
Interest rate swaps and similar instruments effectively modify the repricing
characteristics of certain consumer and commercial loan portfolios, deposits,
and long-term debt. Excluding the effects of these instruments, Citicorp's
Earnings-at-Risk over the next twelve months in its non-trading activities would
be as follows:
<TABLE>
<CAPTION>
U.S. Dollar Non-U.S. Dollar
-----------------------------------------------------------------------------------
June 30, Dec. 31, June 30, June 30, Dec. 31, June 30,
In millions of dollars 2000 1999 1999 2000 1999 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assuming a two standard deviation rate
Increase ($6) ($30) 7 ($65) ($120) ($137)
Decrease 15 42 12 65 121 138
-------------------------------------------------===================================================================================
</TABLE>
During the first six months of 2000, Citicorp's U.S. dollar Earnings-at-Risk for
the following 12 months assuming a two standard deviation increase in rates
would have had a potential negative impact ranging from approximately $109
million to $146 million in the aggregate at each month end, compared with a
range from $73 million to $166 million at each month end during 1999. A two
standard deviation increase in non-U.S. dollar interest rates for the following
twelve months would have had a potential negative impact ranging from
approximately $78 million to $123 million in the aggregate at each month end
during the first six months of 2000, compared with a range from $95 million to
$121 million at each month end during 1999.
Other Non-Trading Portfolios
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 1999 Annual Report and
Form 10-K. At June 30, 2000, there was no significant change to the risk profile
as disclosed at year-end 1999.
Trading Portfolios
A tool for measuring the price risk of trading activities is the Value-at-Risk
method, which estimates the potential pretax loss in market value that could
occur over a one-day holding period, at a 99% confidence level. The
Value-at-Risk method incorporates the market factors to which the market value
of the trading position is exposed (interest rates, foreign exchange rates,
equity and commodity prices, and their implied volatilities), the sensitivity of
the position to changes in those market factors, and the volatilities and
correlation of those factors. The Value-at-Risk measurement includes the foreign
exchange risks that arise in traditional banking businesses as well as in
explicit trading positions. In addition to Value-at-Risk, stress and scenario
analyses are also applied to the trading portfolios.
The level of exposure taken depends on the market environment and expectations
of future price and market movements, and will vary from period to period. For
Citicorp's major trading centers, the aggregate pretax Value-at-Risk in the
trading portfolios was $35 million at June 30, 2000. Daily exposures at Citicorp
averaged $24 million in the second quarter of 2000 and ranged from $19 million
to $35 million. At Salomon Smith Barney, the aggregate pretax Value-at-Risk in
the trading portfolios was $23 million at June 30, 2000. Quarterly exposures at
Salomon Smith Barney averaged $24 million in the second quarter of 2000 and
ranged from $20 million to $30 million.
28
<PAGE>
The following table summarizes Citigroup's Value-at-Risk in its trading
portfolios as of June 30, 2000 and December 31, 1999 along with the 2000 second
quarter averages.
<TABLE>
<CAPTION>
Citicorp Salomon Smith Barney
-----------------------------------------------------------------------------------
2000 2000
Second Second
June 30, Quarter Dec. 31, June 30, Quarter Dec. 31,
In millions of dollars 2000 Average 1999 2000 Average 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate $29 $20 $15 $20 $22 $20
Foreign exchange 11 9 17 1 1 -
Equity 19 12 11 2 5 6
All other (primarily commodity) 2 2 2 12 9 8
Covariance adjustment (26) (19) (21) (12) (13) (11)
-----------------------------------------------------------------------------------
Total $35 $24 $24 $23 $24 $23
-------------------------------------------------===================================================================================
</TABLE>
The table below provides the distribution of Value-at-Risk during the second
quarter of 2000.
<TABLE>
<CAPTION>
Citicorp Salomon Smith Barney
---------------------------------------------------------------------
In millions of dollars Low High Low High
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate $15 $29 $19 $26
Foreign exchange 6 11 - 2
Equity 10 19 1 13
All other (primarily commodity) 1 4 7 13
---------------------------------------------------------------=====================================================================
</TABLE>
Management of Cross-Border Risk
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 1999 Annual Report and Form 10-K.
Except as described below for cross-border resale agreements and the netting of
certain long and short securities positions, 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. Similarly, under FFIEC
guidelines, long securities positions are required to be reported on a gross
basis. However, for purposes of the following table, certain long and short
securities positions are presented on a net basis consistent with internal
cross-border risk management policies, reflecting a reduction of risk from
offsetting positions.
Beginning April 1, 2000, the FFIEC revised their cross-border reporting
guidelines to allow credit derivative contracts containing cross-border
provisions to be treated as effective guarantees. Purchased credit derivative
contracts where Citigroup is the beneficiary shift the underlying exposure to
the guarantor country. Written credit derivative contracts where Citigroup
provides an effective guarantee are included as cross-border commitments in the
country of the underlying credit exposure. The effect of adopting the FFIEC's
revised guidelines as of June 30, 2000 was an increase (decrease) in reported
cross-border claims on third parties of $0.9 billion in Germany, ($1.0) billion
in the United Kingdom, $1.2 billion in France, $2.1 billion in Italy, $0.1
billion in Japan, and ($0.4) billion in the Netherlands. The effect on
cross-border commitments was an increase (decrease) of $1.8 billion in Germany,
($0.3) billion in the United Kingdom, $4.8 billion in France, $5.3 billion in
Italy, and $0.1 billion in Brazil. Total cross-border outstandings and
commitments at December 31, 1999 have not been restated.
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 June 30, 2000 or December
31, 1999 include:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------------------------------------------------------------------------------------------------ ---------------------
Cross-Border Claims on Third Parties
------------------------------------------------ Investments
In and
Trading and Cross- Funding of Total Total
In billions of Short-term Border Resale Local Cross-Border Commit- Cross-Border Commit-
Dollars Claims (1) Agreements All Other Total Franchises Outstandings ments (2) Outstandings ments (2)
--------------------------------------------------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Germany $5.8 $4.2 $1.2 $11.2 $3.0 $14.2 $ 6.7 $10.9 $ 3.7
United Kingdom 4.1 4.6 3.1 11.8 - 11.8 16.8 19.5 15.5
France 5.0 3.9 1.8 10.7 - 10.7 9.1 7.9 2.2
Italy 5.4 0.7 2.2 8.3 1.1 9.4 6.1 7.1 0.4
Japan 2.8 3.3 2.0 8.1 - 8.1 0.8 9.8 0.1
Netherlands 4.2 1.0 1.3 6.5 - 6.5 3.6 8.1 2.9
Brazil 1.9 - 2.0 3.9 2.2 6.1 0.3 3.8 0.1
-----------------================================================================================================================
</TABLE>
(1) 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.
(2) Commitments (not included in total cross-border outstandings) include
legally binding cross-border letters of credit and other commitments and
contingencies as defined by the FFIEC.
--------------------------------------------------------------------------------
Total cross-border outstandings for June 30, 2000 under FFIEC guidelines,
including cross-border resale agreements based on the domicile of the issuer of
the securities that are held as collateral, and long securities positions
reported on a gross basis, amount to $18.4 billion for Germany, $9.7 billion for
the United Kingdom, $10.1 billion for France, $13.3 billion for Italy, $9.4
billion for Japan, $6.9 billion for the Netherlands, $8.0 billion for Brazil.
Total cross-border outstandings for December 31, 1999 under FFIEC guidelines,
including cross-border resale agreements based on the domicile of the issuer of
the securities that are held as collateral, and long securities positions
reported on a gross basis, amounted to $14.9 billion for Germany, $8.7 billion
for the United Kingdom, $7.7 billion for France, $10.2 billion for Italy, $10.5
billion for Japan, $5.0 billion for the Netherlands, $4.9 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. Citigroup and Citicorp, both of which
are bank holding companies, 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 each maintains 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, Salomon Smith Barney, and some of their nonbank subsidiaries have
credit facilities with Citicorp's subsidiary banks, including Citibank, N.A.
Borrowings under these facilities must be secured in accordance with Section 23A
of the Federal Reserve Act.
Citigroup Inc. (Citigroup)
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 June 30, 2000, all of the facility was allocated to Citigroup.
Under this facility, Citigroup is required to maintain a certain level of
consolidated stockholders' equity (as defined in the agreement). Citigroup
exceeded this requirement by approximately $32.9 billion at June 30, 2000. At
June 30, 2000, there were no borrowings outstanding under this facility.
Citigroup is subject to risk-based capital guidelines issued by the Board of
Governors of the Federal Reserve System (FRB). These guidelines are used to
evaluate capital adequacy based primarily on the perceived credit risk
associated with balance sheet assets, as
30
<PAGE>
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. The 1999
ratios and components of capital have been restated to reflect the 2000
conversion of a portion of the convertible debt of Nikko Securities Co., Ltd.
into common stock. See Note 1 of Notes to Consolidated Financial Statements.
Citigroup Ratios
<TABLE>
<CAPTION>
June 30, Mar. 31, Dec. 31,
2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital 8.62% 9.78% 9.65%
Total capital (Tier 1 and Tier 2) 11.12 12.47 12.33
Leverage (1) 6.07 6.73 6.80
Common stockholders' equity 6.29 6.58 6.56
-------------------------------------------------------------------------------=====================================================
</TABLE>
(1) Tier 1 capital divided by adjusted average assets.
--------------------------------------------------------------------------------
Citigroup maintained a strong capital position during the 2000 second quarter.
Total capital (Tier 1 and Tier 2) amounted to $60.4 billion at June 30, 2000,
representing 11.12% of net risk-adjusted assets. This compares to $62.5 billion
and 12.47% at March 31, 2000 and $60.8 billion and 12.33% at December 31, 1999.
Tier 1 capital of $46.8 billion at June 30, 2000 represented 8.62% of net
risk-adjusted assets, compared to $49.0 billion and 9.78% at March 31, 2000 and
$47.6 billion and 9.65% at December 31, 1999. Citigroup's leverage ratio was
6.07% at June 30, 2000 compared to 6.73% at March 31, 2000 and 6.80% at December
31, 1999.
Components of Capital Under Regulatory Guidelines
<TABLE>
<CAPTION>
June 30, Mar. 31, Dec. 31,
In millions of dollars 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 Capital
Common stockholders' equity $49,801 $48,551 $46,965
Perpetual preferred stock 1,775 1,775 1,925
Mandatorily redeemable securities of subsidiary trusts 4,920 4,920 4,920
Minority interest (1) 400 1,524 1,501
Less: Net unrealized gains on securities available for sale (2) (505) (1,498) (1,749)
Intangible assets:
Goodwill (3) (7,388) (4,531) (4,209)
Other intangible assets (3) (2,126) (1,655) (1,655)
50% investment in certain subsidiaries (4) (56) (113) (107)
---------------------------------------------------
Total Tier 1 capital 46,821 48,973 47,591
------------------------------------------------------------------------------------------------------------------------------------
Tier 2 Capital
Allowance for credit losses (5) 6,794 6,269 6,171
Qualifying debt (6) 6,565 6,678 6,728
Unrealized marketable equity securities gains (2) 301 680 400
Less: 50% investment in certain subsidiaries (4) (56) (113) (107)
---------------------------------------------------
Total Tier 2 capital 13,604 13,514 13,192
---------------------------------------------------
Total capital (Tier 1 and Tier 2) $60,425 $62,487 $60,783
---------------------------------------------------------------------------------===================================================
Net risk-adjusted assets (7) $543,467 $500,999 $493,141
---------------------------------------------------------------------------------===================================================
</TABLE>
(1) The decrease is primarily related to the purchase of all of the
outstanding shares of Common Stock of Travelers Property Casualty Corp.
not previously owned. See Note 1 of Notes to Consolidated Financial
Statements.
(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) The increase in goodwill and other intangibles during the 2000 second
quarter was attributable to the acquisitions completed during the quarter,
including TAP's minority interest, Schroders, Handlowy, Reliance, Copelco
and Siembra.
(4) Represents investment in certain overseas insurance activities and
unconsolidated banking and finance subsidiaries.
(5) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is
deducted from risk-adjusted assets.
(6) Includes qualifying senior and subordinated debt in an amount not
exceeding 50% of Tier 1 capital, and subordinated capital notes subject to
certain limitations.
(7) The increase in net risk-adjusted assets during the 2000 second quarter
was primarily attributable to the growth in consumer and commercial loans
and acquisitions completed during the quarter. Net risk-adjusted assets
includes risk-weighted credit equivalent amounts, net of applicable
bilateral netting agreements, of $26.7 billion for interest rate,
commodity and equity derivative contracts and foreign exchange contracts
as of June 30, 2000, compared to $28.8 billion as of March 31, 2000 and
$32.8 billion as of December 31, 1999. Market risk-equivalent assets
included in net risk-adjusted assets amounted to $43.9 billion at June 30,
2000, $41.2 billion at March 31, 2000 and $43.1 billion at December 31,
1999. Net risk-adjusted assets also includes the effect of other
off-balance sheet exposures such as unused loan commitments and letters of
credit and reflects deductions for intangible assets and any excess
allowance for credit losses.
--------------------------------------------------------------------------------
Common stockholders' equity increased a net $2.8 billion during the first six
months of 2000 to $49.8 billion at June 30, 2000, representing 6.29% of assets,
compared to $47.0 billion and 6.56% at year-end 1999. The net increase in common
stockholders' equity during the six months of 2000 principally reflected net
income of $6.6 billion which was partially offset by treasury stock
31
<PAGE>
acquired of $2.3 billion, issuance of shares pursuant to employee benefit plans
and other net activity of $0.4 billion and dividends declared on common and
preferred stock of $1.1 billion. The decrease in the common stockholders' equity
ratio during the six months of 2000 reflected the above items, which was more
than offset by the increase in total assets.
During the 2000 second quarter, the Board of Directors approved an additional $5
billion in the existing authority for the repurchase of Citigroup common stock.
During the 2000 first quarter, Citigroup redeemed its Series T perpetual
preferred stock for $150 million.
All of the mandatorily redeemable securities of subsidiary trusts (trust
securities) outstanding at June 30, 2000 qualify as Tier 1 capital. The amount
outstanding at June 30, 2000 includes $2.3 billion of parent-obligated
securities and $2.62 billion of subsidiary-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 June 30, 2000,
all of Citigroup's subsidiary depository institutions were "well capitalized"
under the federal bank regulatory agencies' definitions.
During the first quarter of 2000, the FRB issued a proposed rule that would
govern the regulatory capital treatment of merchant banking investments and
certain similar equity investments, including investments made by venture
capital subsidiaries in nonfinancial companies held by bank holding companies.
The proposed rule would increase the capital required for such investments by
imposing a 50% capital requirement. The Company is monitoring the status and
progress of the proposed rule.
Additionally, from time-to-time, the FRB and the FFIEC propose amendments to,
and issue interpretations of, risk-based capital guidelines and reporting
instructions. Such proposals or interpretations could, if implemented in the
future, affect reported capital ratios and net risk-adjusted assets. This
paragraph contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26.
Citicorp
Citicorp manages liquidity through a well-defined process described in the 1999
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 represented 67% of
its total funding at both June 30, 2000 and December 31, 1999, are broadly
diversified by both geography and customer segments.
Stockholder's equity, which grew $4.0 billion during the first six months of
2000 to $30.0 billion at June 30, 2000, continues to be an important component
of the overall funding structure. In addition, long-term debt is issued by
Citicorp and its subsidiaries. Total Citicorp long-term debt outstanding at the
end of the 2000 second quarter was $27.4 billion, up from $26.4 billion at 1999
year-end. Loans securitized during the six months of 2000 included $4.5 billion
of U.S. consumer mortgages. While securitization activity in the first half of
2000 primarily related to U.S. consumer mortgages, securitization of both credit
card receivables and consumer mortgages continues to be an important source of
liquidity. As previous credit card securitizations amortize, newly originated
receivables are recorded on Citicorp's balance sheet and become available for
asset securitization. During the first six months of 2000, the scheduled
amortization of certain credit card securitization transactions made available
$4.4 billion of new receivables. In addition, $3.8 billion of credit card
securitization transactions are scheduled to amortize during the rest of 2000.
Citicorp is a legal entity separate and distinct from Citibank, N.A. and its
other subsidiaries and affiliates. As discussed in the 1999 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 June 30, 2000, under their applicable dividend limitations,
Citicorp's national and state-chartered bank subsidiaries could have declared
dividends to their respective parent companies without regulatory approval of
approximately $6.3 billion. In determining whether and to what extent to pay
dividends, each bank subsidiary must also consider the effect of dividend
payments on applicable risk-based capital and leverage ratio requirements, as
well as policy statements of the federal regulatory agencies that indicate that
banking organizations should generally pay dividends out of current operating
earnings. Consistent with these considerations, Citicorp estimates that, as of
June 30, 2000, its bank subsidiaries could have distributed dividends to
Citicorp, directly or through their parent holding company, of approximately
$5.7 billion of the available $6.4 billion.
Citicorp also receives dividends from its nonbank subsidiaries. These nonbank
subsidiaries are generally not subject to regulatory restrictions on their
payment of dividends except that the approval of the Office of Thrift
Supervision (OTS) may be required if total dividends declared by a savings
association in any calendar year exceed amounts specified by that agency's
regulations.
Citicorp is subject to risk-based capital guidelines issued by the 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
32
<PAGE>
unused loan commitments, letters of credit, and derivative and foreign exchange
contracts. The risk-based capital guidelines are supplemented by a leverage
ratio requirement.
Citicorp Ratios
<TABLE>
<CAPTION>
June 30, Mar. 31, Dec. 31,
2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital 8.02% 8.07% 8.11%
Total capital (Tier 1 and Tier 2) 11.95 12.00 12.10
Leverage (1) 6.90 6.81 6.83
Common stockholder's equity 7.08 6.93 6.70
--------------------------------------------------------------------------------====================================================
</TABLE>
(1) Tier 1 capital divided by adjusted average assets.
--------------------------------------------------------------------------------
Citicorp maintained a strong capital position during the 2000 second quarter.
Total capital (Tier 1 and Tier 2) amounted to $41.5 billion at June 30, 2000,
representing 11.95% of net risk-adjusted assets. This compares with $38.4
billion and 12.00% at March 31, 2000 and $37.4 billion and 12.10% at December
31, 1999. Tier 1 capital of $27.9 billion at June 30, 2000 represented 8.02% of
net risk-adjusted assets, compared with $25.8 billion and 8.07% at March 31,
2000 and $25.0 billion and 8.11% at December 31, 1999. Citicorp's Tier 1 capital
ratio at June 30, 2000 was within Citicorp's target range of 8.00% to 8.30%.
CitiFinancial Credit Company (CCC)
At June 30, 2000, CCC had committed and available credit facilities in the
amount of $3.4 billion which expire in 2002. At June 30, 2000, there were no
borrowings outstanding under these facilities. Citicorp guarantees various debt
obligations of CCC, including those arising under these facilities. Under these
facilities, Citicorp is required to maintain a certain level of adjusted
consolidated net worth (as defined in the agreements). At June 30, 2000, this
requirement was exceeded by approximately $14.4 billion.
Travelers Property Casualty Corp. (TAP)
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 stockholder's equity (as
defined in the agreement). At June 30, 2000, this requirement was exceeded by
approximately $6.1 billion. At June 30, 2000, 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 $1.2 billion in 2000 without
prior approval of the Connecticut Insurance Department. TAP received $350
million of dividends from its insurance subsidiaries during the first six months
of 2000.
Salomon Smith Barney Holdings Inc. (SSBHI)
SSBHI manages liquidity and monitors and evaluates capital adequacy through a
well-defined process described in the 1999 Annual Report and Form 10-K. Total
assets were $256 billion at June 30, 2000, up from $224 billion at year-end
1999. Due to the nature of SSBHI's trading activities, it is not uncommon for
asset levels to fluctuate from period to period.
SSBHI has a $5.0 billion 364-day revolving credit agreement with a bank
syndicate that extends through May 2001. SSBHI may borrow under this revolving
credit facility at various interest rate options (LIBOR, CD or base rate) and
compensates the banks for the facility through commitment fees. Under this
facility, SSBHI is required to maintain a certain level of consolidated adjusted
net worth (as defined in the agreements). At June 30, 2000, this requirement was
exceeded by approximately $3.5 billion. At June 30, 2000, there were no
borrowings outstanding under this facility. SSBHI 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 SSBHI's long-term capital.
Long-term debt totaled $19.2 billion at June 30, 2000 and $18.0 billion at
December 31, 1999. SSBHI 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.
The Travelers Insurance Company (TIC)
At June 30, 2000, TIC had $27.9 billion of life and annuity product deposit
funds and reserves. Of that total, $14.8 billion is not subject to discretionary
withdrawal based on contract terms. The remaining $13.1 billion is for life and
annuity products that are
33
<PAGE>
subject to discretionary withdrawal by the contractholder. Included in the
amount that is subject to discretionary withdrawal are $2.3 billion of
liabilities that are surrenderable with market value adjustments. Also included
are an additional $5.2 billion of the life insurance and individual annuity
liabilities which are subject to discretionary withdrawals and have an average
surrender charge of 4.4%. In the payout phase, these funds are credited at
significantly reduced interest rates. The remaining $5.6 billion of liabilities
are surrenderable without charge. 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 $679 million of statutory surplus is
available in 2000 for such dividends without Department approval, of which $340
million was paid during the first six months of 2000.
34
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------
In millions, except per share amounts 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Loan interest, including fees $6,563 $5,614 $12,587 $11,502
Other interest and dividends 6,581 5,449 12,459 10,863
Insurance premiums 2,733 2,616 5,450 5,142
Commissions and fees 3,829 3,153 7,827 6,025
Principal transactions 1,435 1,272 3,158 3,042
Asset management and administration fees 1,332 1,003 2,616 1,958
Realized gains from sales of investments 280 188 111 241
Other income 942 1,141 3,195 2,184
---------------------------------------------------------------------
Total revenues 23,695 20,436 47,403 40,957
Interest expense 7,791 6,056 14,515 12,507
---------------------------------------------------------------------
Total revenues, net of interest expense 15,904 14,380 32,888 28,450
---------------------------------------------------------------------
Provisions for benefits, claims, and credit losses
Policyholder benefits and claims 2,307 2,151 4,558 4,199
Provision for credit losses 711 790 1,462 1,519
---------------------------------------------------------------------
Total provisions for benefits, claims, and credit losses 3,018 2,941 6,020 5,718
---------------------------------------------------------------------
Operating expenses
Non-insurance compensation and benefits 4,188 3,615 8,313 7,370
Insurance underwriting, acquisition, and operating 800 817 1,648 1,658
Restructuring-related items 3 47 23 (83)
Other operating 3,251 3,045 6,584 5,900
---------------------------------------------------------------------
Total operating expenses 8,242 7,524 16,568 14,845
---------------------------------------------------------------------
Income before income taxes, minority interest
and cumulative effect of accounting changes 4,644 3,915 10,300 7,887
Provision for income taxes 1,616 1,402 3,627 2,825
Minority interest, net of income taxes 23 65 78 125
---------------------------------------------------------------------
Income before cumulative effect of accounting changes 3,005 2,448 6,595 4,937
Cumulative effect of accounting changes - - - (127)
---------------------------------------------------------------------
Net income $3,005 $2,448 $ 6,595 $ 4,810
---------------------------------------------------------------=====================================================================
Basic Earnings Per Share (1)
Income before cumulative effect of accounting changes $0.67 $0.54 $1.47 $1.09
Cumulative effect of accounting changes - - - (0.03)
---------------------------------------------------------------------
Net income $0.67 $0.54 $1.47 $1.06
=====================================================================
Weighted average common shares outstanding (1) 4,443.6 4,443.6 4,442.8 4,448.5
---------------------------------------------------------------=====================================================================
Diluted Earnings Per Share (1)
Income before cumulative effect of accounting changes $0.65 $0.52 $1.43 $1.06
Cumulative effect of accounting changes - - - (0.03)
---------------------------------------------------------------------
Net income $0.65 $0.52 $1.43 $1.03
=====================================================================
Adjusted weighted average common shares outstanding (1) 4,586.9 4,600.4 4,584.0 4,593.6
---------------------------------------------------------------=====================================================================
</TABLE>
(1) Adjusted to reflect the four-for-three split in Citigroup's common stock,
payable on August 25, 2000. See Note 1.
--------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
35
<PAGE>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
June 30,
2000 December 31,
In millions of dollars (Unaudited) 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents (including segregated cash and other deposits) $ 12,229 $ 14,158
Deposits at interest with banks 13,836 13,429
Federal funds sold and securities borrowed or purchased under agreements to resell 120,274 112,655
Brokerage receivables 31,421 23,769
Trading account assets 128,801 109,155
Investments (1) 110,455 111,345
Loans, net
Consumer 162,943 147,968
Commercial 111,148 96,238
----------------------------------
Loans, net of unearned income 274,091 244,206
Allowance for credit losses (6,736) (6,679)
----------------------------------
Total loans, net 267,355 237,527
Reinsurance recoverables 9,812 9,704
Separate and variable accounts 25,030 23,118
Other assets (1) 72,120 60,830
----------------------------------
Total assets $791,333 $715,690
--------------------------------------------------------------------------------------------------==================================
Liabilities
Non-interest-bearing deposits in U.S. offices $ 20,021 $ 19,492
Interest-bearing deposits in U.S. offices 52,675 48,584
Non-interest-bearing deposits in offices outside the U.S. 12,970 12,021
Interest-bearing deposits in offices outside the U.S. 200,295 180,994
----------------------------------
Total deposits 285,961 261,091
Federal funds purchased and securities loaned or sold under agreements to repurchase 129,057 92,591
Brokerage payables 20,018 16,641
Trading account liabilities 75,827 91,104
Contractholder funds and separate and variable accounts 43,323 41,335
Insurance policy and claims reserves 44,644 43,822
Investment banking and brokerage borrowings 21,701 13,719
Short-term borrowings 23,388 17,086
Long-term debt 51,296 47,092
Other liabilities (1) 39,622 37,399
Citigroup or subsidiary obligated mandatorily redeemable securities of subsidiary
trusts holding solely junior subordinated debt securities of -- Parent 2,300 2,300
-- Subsidiary 2,620 2,620
--------------------------------------------------------------------------------------------------==================================
Stockholders' equity
Preferred stock ($1.00 par value; authorized shares: 30 million), at aggregate liquidation value 1,775 1,925
Common stock ($.01 par value; authorized shares: 10.0 billion), Issued shares --
4,816,513,944 at both June 30, 2000 and December 31, 1999 (2) 48 48
Additional paid-in capital (2) 10,618 10,024
Retained earnings 49,318 43,865
Treasury stock, at cost: June 30, 2000 -- 323,504,516 shares
and December 31, 1999 -- 326,480,169 shares (2) (8,889) (7,627)
Accumulated other changes in equity from nonowner sources (1) (307) 1,111
Unearned compensation (987) (456)
----------------------------------
Total stockholders' equity 51,576 48,890
----------------------------------
Total liabilities and stockholders' equity $791,333 $715,690
--------------------------------------------------------------------------------------------------==================================
</TABLE>
(1) Restated to reflect the 2000 conversion of a portion of the convertible
debt of Nikko Securities Co., Ltd. into common stock. See Note 1.
(2) Reflects the four-for-three split in Citigroup's common stock, payable on
August 25, 2000.
--------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
36
<PAGE>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Preferred stock at aggregate liquidation value
Balance, beginning of period $ 1,925 $ 2,313
Redemption or retirement of preferred stock (150) (200)
----------------------------------
Balance, end of period 1,775 2,113
------------------------------------------------------------------------------------------------------------------------------------
Common stock and additional paid-in capital
Balance, beginning of period 10,072 8,929
Employee benefit plans 546 372
Other 48 (28)
----------------------------------
Balance, end of period 10,666 9,273
------------------------------------------------------------------------------------------------------------------------------------
Retained earnings
Balance, beginning of period 43,865 35,971
Net income 6,595 4,810
Common dividends (1) (1,081) (881)
Preferred dividends (61) (78)
----------------------------------
Balance, end of period 49,318 39,822
------------------------------------------------------------------------------------------------------------------------------------
Treasury stock, at cost
Balance, beginning of period (7,627) (4,789)
Treasury stock acquired (2,274) (2,042)
Issuance of shares pursuant to employee benefit plans and other 988 750
Other 24 -
----------------------------------
Balance, end of period (8,889) (6,081)
------------------------------------------------------------------------------------------------------------------------------------
Accumulated other changes in equity from nonowner sources
Balance, beginning of period 1,111 864
Net change in unrealized gains and losses on investment securities, net of tax (1,244) (497)
Foreign currency translations adjustment, net of tax (174) (46)
----------------------------------
Balance, end of period (307) 321
------------------------------------------------------------------------------------------------------------------------------------
Unearned compensation
Balance, beginning of period (456) (497)
Issuance of restricted stock, net of amortization (531) (28)
----------------------------------
Balance, end of period (987) (525)
------------------------------------------------------------------------------------------------------------------------------------
Total common stockholders' equity (shares outstanding: 4,493,009,428 in 2000
and 4,502,284,679 in 1999) (2) 49,801 42,810
------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity $51,576 $44,923
--------------------------------------------------------------------------------------------------==================================
Summary of changes in equity from nonowner sources
Net income $6,595 $4,810
Other changes in equity from nonowner sources, net of tax (1,418) (543)
----------------------------------
Total changes in equity from nonowner sources $5,177 $4,267
--------------------------------------------------------------------------------------------------==================================
</TABLE>
(1) Common dividends declared were 12 cents per share in both the first and
second quarters of 2000, and 9 cents and 10.5 cents per share in the first
and second quarters of 1999, respectively.
(2) Shares outstanding reflect the four-for-three split in Citigroup's common
stock, payable on August 25, 2000.
--------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
37
<PAGE>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 6,595 $ 4,810
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization of deferred policy acquisition costs and value of insurance in force 796 798
Additions to deferred policy acquisition costs (1,017) (957)
Depreciation and amortization 936 823
Provision for credit losses 1,462 1,519
Change in trading account assets (19,646) 8,361
Change in trading account liabilities (15,277) (6,295)
Change in federal funds sold and securities borrowed or purchased under agreements to resell (7,619) (10,198)
Change in federal funds purchased and securities loaned or sold under agreements to
repurchase 36,466 12,636
Change in brokerage receivables net of brokerage payables (4,275) (7,180)
Change in insurance policy and claims reserves 822 86
Net gains from sales of investments (111) (241)
Venture capital activity (1,096) (112)
Restructuring-related items 23 (83)
Cumulative effect of accounting changes, net of tax - 127
Other, net (3,118) 2,947
----------------------------------
Total adjustments (11,654) 2,231
----------------------------------
Net cash (used in) provided by operating activities (5,059) 7,041
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Change in deposits at interest with banks (407) (221)
Change in loans (40,713) (66,087)
Proceeds from sales of loans 15,352 54,736
Purchases of investments (45,572) (45,847)
Proceeds from sales of investments 27,285 26,952
Proceeds from maturities of investments 18,969 15,981
Other investments, primarily short-term, net (1,398) (885)
Capital expenditures on premises and equipment (818) (755)
Proceeds from sales of premises and equipment, subsidiaries and affiliates, and other real
estate owned 524 336
Business acquisitions (6,357) (2,150)
----------------------------------
Net cash used in investing activities (33,135) (17,940)
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Dividends paid (1,142) (959)
Issuance of common stock 667 521
Issuance of mandatorily redeemable securities of subsidiary trusts - 600
Redemption of preferred stock (150) (200)
Treasury stock acquired (2,274) (2,042)
Stock tendered for payment of withholding taxes (360) (305)
Issuance of long-term debt 9,147 5,222
Payments and redemptions of long-term debt (6,450) (4,733)
Change in deposits 24,870 15,741
Change in short-term borrowings and investment banking and brokerage borrowings 11,928 (2,889)
Contractholder fund deposits 3,060 3,772
Contractholder fund withdrawals (2,751) (2,687)
----------------------------------
Net cash provided by financing activities 36,545 12,041
------------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (280) (291)
------------------------------------------------------------------------------------------------------------------------------------
Change in cash and cash equivalents (1,929) 851
Cash and cash equivalents at beginning of period 14,158 13,837
----------------------------------
Cash and cash equivalents at end of period $12,229 $ 14,688
--------------------------------------------------------------------------------------------------==================================
Supplemental disclosure of cash flow information
Cash paid during the period for income taxes $ 1,171 $ 1,677
Cash paid during the period for interest 13,694 12,027
Non-cash investing activities
Transfers from loans to other real estate owned $ 155 $ 111
Noncash effects of accounting for the conversion of investments in Nikko Securities Co., Ltd. $ 702 $ -
--------------------------------------------------------------------------------------------------==================================
</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 June 30, 2000 and for
the three- and six-month periods ended June 30, 2000 and 1999 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 1999 Annual Report and Form 10-K.
In March 2000, the Company converted into common stock a portion of its
investment in convertible bonds of the Nikko Securities Co., Ltd. (Nikko),
increasing its ownership of Nikko common stock from 9.5% to 20.7%. As a result
of the conversion, the common stock investment in Nikko is accounted for under
the equity method and is reported in other assets. The Company's proportionate
share of Nikko's income is reflected in other income. The Consolidated
Statements of Financial Condition and Changes in Stockholders' Equity have been
restated to account for the original 9.5% ownership under the equity method from
the date of original acquisition in August 1998. Previously, this 9.5% ownership
was reported in available-for-sale securities with changes in fair value, net of
applicable taxes, recorded in stockholders' equity.
During April 2000, The Travelers Insurance Group Inc. (TIGI), an indirect wholly
owned subsidiary of the Company, completed a cash tender offer to purchase all
of the outstanding shares of Travelers Property Casualty Corp. (TAP) not
previously owned.
The Board of Directors on July 18, 2000 declared a four-for-three split in
Citigroup's common stock, which is payable in the form of a 33 1/3% stock
dividend on August 25, 2000 to stockholders of record on August 7, 2000. Current
and prior-year information has been restated to reflect the stock split. The
Board also approved an increase in the quarterly common stock dividend from 12
to 14 cents per share on a post-split basis (from 16 to 18 2/3 cents per share
on a pre-split basis), payable on August 25, 2000 to stockholders of record on
August 7, 2000.
Certain financial information that is normally included in annual financial
statements prepared in accordance with generally accepted accounting principles,
but is not required for interim reporting purposes, has been condensed or
omitted.
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
2. Accounting Changes
Accounting changes in the first quarter of 1999 refer to the adoption of:
Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises
for Insurance-Related Assessments" (SOP 97-3) of ($135) million; adoption of SOP
98-7, "Deposits Accounting: Accounting for Insurance and Reinsurance Contracts
That Do Not Transfer Insurance Risk" of $23 million; and the adoption of SOP
98-5, "Reporting on the Costs of Start-Up Activities" of ($15) million.
Derivatives and hedge accounting. In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS
No. 133). In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133," which delayed the effective date of SFAS No. 133 to January
1, 2001 for calendar year companies such as the Company. In June 2000, the FASB
issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities - An Amendment of FASB Statement No. 133," which amended
certain provisions of SFAS No. 133. These new standards will significantly
change the accounting treatment of end-user derivative and foreign exchange
contracts used by the Company and its customers. Depending on the underlying
risk management strategy, these accounting changes could affect reported
earnings, assets, liabilities, and stockholders' equity. As a result, the
Company and the customers to which it provides derivatives and foreign exchange
products will have to reconsider their risk management strategies, since the new
standard will not reflect the results of many of those strategies in the same
manner as current accounting practice. The Company continues to evaluate the
potential impact of implementing these new accounting standards, which will
depend, among other things, on additional interpretations of the standards prior
to the effective date.
39
<PAGE>
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 Changes
of Interest Expense Income Taxes (1) (2) Identifiable Assets
-----------------------------------------------------------------------------------
Three Months Ended June 30,
---------------------------------------------------------------
In millions of dollars, except identifiable June 30, Dec. 31,
assets in billions 2000 1999 (3) 2000 1999 (3) 2000 1999 (3) 2000 1999 (3)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Global Consumer $ 7,004 $ 6,486 $ 729 $ 600 $1,291 $1,029 $255 $236
Global Corporate and Investment Bank 7,855 6,962 758 684 1,540 1,241 487 430
Global Investment Management
and Private Banking 818 659 108 98 173 155 28 26
Investment Activities 387 270 135 88 234 162 11 11
Corporate/Other (160) 3 (114) (68) (233) (139) 10 13
-----------------------------------------------------------------------------------
Total $15,904 $14,380 $1,616 $1,402 $3,005 $2,448 $791 $716
-------------------------------------------------===================================================================================
</TABLE>
<TABLE>
<CAPTION>
Income (Loss)
Before Cumulative
Effect of
Total Revenues, Net Provision for Accounting Changes
of Interest Expense Income Taxes (1) (2)
--------------------------------------------------------------
Six Months Ended June 30,
--------------------------------------------------------------
In millions of dollars 2000 1999 (3) 2000 1999 (3) 2000 1999 (3)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Consumer $14,068 $12,696 $1,430 $1,157 $2,523 $1,988
Global Corporate and Investment Bank 16,055 14,098 1,779 1,486 3,369 2,700
Global Investment Management and Private Banking 1,611 1,290 216 184 346 291
Investment Activities 1,403 423 500 136 868 251
Corporate/Other (249) (57) (298) (138) (511) (293)
--------------------------------------------------------------
Total $32,888 $28,450 $3,627 $2,825 $6,595 $4,937
----------------------------------------------------------------------==============================================================
</TABLE>
(1) Results in the 2000 second quarter and six-month periods reflect after-tax
restructuring-related (credits) charges of ($11) million and ($7) million
in Global Consumer and $17 million and $25 million in Corporate/Other,
respectively, ($3) million in both periods in Global Corporate and
Investment Bank, and ($1) million in both periods in Global Investment
Management and Private Banking. The 1999 second quarter and six-month
results reflect after-tax restructuring-related (credits) charges of $18
million and $56 million in Global Consumer, $3 million and ($117) million
in Global Corporate and Investment Bank, and $8 million and $16 million in
Corporate/Other, respectively.
(2) Results in the 2000 second quarter and six-month periods include pretax
provisions (credits) for benefits, claims, and credit losses in Global
Consumer of $2.0 billion and $4.0 billion, in Global Corporate and
Investment Bank of $1.0 billion and $2.0 billion, in Global Investment
Management and Private Banking of $3 million and $25 million and in
Corporate/Other of ($2) million and ($4) million, respectively. The 1999
second quarter and six-month period results reflect pretax provisions for
benefits, claims and credit losses in Global Consumer of $1.9 billion and
$3.7 billion, in Global Corporate and Investment Bank of $1.0 billion and
$2.0 billion, in Global Investment Management and Private Banking of $2
million and $10 million and in Corporate/Other of $13 million and $20
million, respectively.
(3) Reclassified to conform to the current period's presentation.
--------------------------------------------------------------------------------
4. Investments
<TABLE>
<CAPTION>
June 30, December 31,
In millions of dollars 2000 1999 (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed maturities, primarily available for sale at fair value $ 92,380 $ 95,849
Equity securities, primarily at fair value 6,270 6,014
Venture capital, at fair value (2) 5,256 4,160
Short-term and other 6,549 5,322
----------------------------------
$110,455 $111,345
--------------------------------------------------------------------------------------------------==================================
</TABLE>
(1) Restated to reflect the 2000 conversion of a portion of the convertible
debt of Nikko into common stock. See Note 1.
(2) For the six months ended June 30, 2000, net gains on investments held by
venture capital subsidiaries totaled $1.59 billion, of which $1.50 billion
and $274 million represented gross unrealized gains and losses,
respectively. For the six months ended June 30, 1999, net gains on
investments held by venture capital subsidiaries totaled $333 million, of
which $342 million and $265 million represented gross unrealized gains and
losses, respectively.
--------------------------------------------------------------------------------
40
<PAGE>
The amortized cost and fair value of investments in fixed maturities and equity
securities at June 30, 2000 and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999 (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 $ 31 $ - $ - $ 31 $ 33 $ 36
-----------------------------------------------------------------------------------
Fixed maturity securities available for sale
Mortgage-backed securities, principally
obligations of U.S. Federal agencies $14,356 $ 47 $ 414 $13,989 $14,165 $13,735
U.S. Treasury and Federal agency 5,714 74 53 5,735 7,082 6,998
State and municipal 13,652 314 210 13,756 13,733 13,489
Foreign government 23,193 443 257 23,379 25,565 25,761
U.S. corporate 25,177 217 659 24,735 24,386 23,888
Other debt securities (2) 10,027 893 165 10,755 9,083 11,945
-----------------------------------------------------------------------------------
$92,119 $1,988 $1,758 $92,349 $94,014 $95,816
===================================================================================
Equity securities (3) (4) $ 5,601 $ 883 $ 214 $ 6,270 $ 5,126 $ 6,014
-------------------------------------------------===================================================================================
</TABLE>
(1) At December 31, 1999, gross unrealized gains and losses on fixed
maturities and equity securities totaled $5,174 million and $2,484
million, respectively.
(2) Investments in convertible debt of Nikko are included in other debt
securities.
(3) Includes non-marketable equity securities carried at cost, which are
reported in both the amortized cost and fair value columns.
(4) Restated to reflect the 2000 conversion of a portion of the convertible
debt of Nikko into common stock. See Note 1.
--------------------------------------------------------------------------------
5. Trading Account Assets and Liabilities
Trading account assets and liabilities at market value consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trading Account Assets
U.S. Treasury and Federal agency securities $ 35,267 $ 25,865
State and municipal securities 2,231 2,121
Foreign government securities 14,856 9,243
Corporate and other debt securities 17,360 13,858
Derivative and other contractual commitments (1) 27,344 31,646
Equity securities 14,906 11,910
Mortgage loans and collateralized mortgage securities 5,718 5,663
Other 11,119 8,849
----------------------------------
$128,801 $109,155
--------------------------------------------------------------------------------------------------==================================
Trading Account Liabilities
Securities sold, not yet purchased $43,405 $52,051
Derivative and other contractual commitments (1) 32,422 39,053
----------------------------------
$75,827 $91,104
--------------------------------------------------------------------------------------------------==================================
</TABLE>
(1) Net of master netting agreements and securitization.
--------------------------------------------------------------------------------
6. Debt
Investment banking and brokerage borrowings consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $18,744 $12,578
Bank borrowings 598 536
Other 2,359 605
----------------------------------
$21,701 $13,719
--------------------------------------------------------------------------------------------------==================================
</TABLE>
41
<PAGE>
Short-term borrowings consisted of commercial paper and other short-term
borrowings as follows:
<TABLE>
<CAPTION>
June 30, December 31,
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper
Citigroup Inc. $ 477 $ -
Citicorp 7,893 5,027
----------------------------------
8,370 5,027
Other short-term borrowings 15,018 12,059
----------------------------------
$23,388 $17,086
--------------------------------------------------------------------------------------------------==================================
</TABLE>
Long-term debt, including its current portion, consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
In millions of dollars 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Citigroup Inc. $ 7,335 $ 4,181
Citicorp 23,840 24,068
Salomon Smith Barney Holdings Inc. 19,250 17,970
Travelers Property Casualty Corp. 850 850
The Travelers Insurance Group Inc. 21 23
----------------------------------
$51,296 $47,092
--------------------------------------------------------------------------------------------------==================================
</TABLE>
7. Restructuring-Related Items
During the 2000 second quarter, Citigroup recorded restructuring charges of $22
million, including $17 million (the 2000 charge) relating to new initiatives in
the Global Consumer business and in Corporate/Other, as well as additional
severance charges of $5 million as a result of the continuing implementation of
1998 restructuring initiatives. The 2000 charge is solely related to employee
severance costs associated with the downsizing of various functions. These
initiatives will be fully implemented during 2000.
In 1999, Citigroup recorded restructuring charges of $131 million, including $82
million (the 1999 charge) of exit costs associated with new initiatives in the
Global Consumer business primarily related to the reconfiguration of certain
branch operations outside the U.S., the downsizing of certain marketing
operations, and the exit of a non-strategic business, as well as additional
severance charges of $49 million as a result of the continuing implementation of
1998 restructuring initiatives. The 1999 charge included $62 million related to
employee severance, $14 million related to exiting leasehold and other
contractual obligations, and $6 million related to the write-down to estimated
salvage value of assets that were available for immediate disposal. The $62
million portion of the charge related to employee severance reflects the costs
of eliminating approximately 750 positions. The 1999 restructuring reserve was
fully utilized as of June 30, 2000.
In December 1998, Citigroup recorded a restructuring charge of $1.122 billion,
reflecting exit costs associated with business improvement and integration
initiatives. These initiatives were substantially completed at June 30, 2000.
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, was 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.
The implementation of these restructuring initiatives also caused certain
related premises and equipment assets to become redundant. The remaining
depreciable lives of these assets were shortened, and accelerated depreciation
charges (in addition to normal scheduled depreciation on these assets) is being
recognized over these shortened lives. Accelerated depreciation of $29 million
and $49 million was recorded during the 2000 second quarter and six months,
respectively. Accelerated depreciation of $47 million and $128 was recorded
during the 1999 second quarter and six months, respectively.
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 1997 restructuring reserve was fully utilized as of December 31,
1999.
42
<PAGE>
The status of the restructuring initiatives is summarized in the following
table.
Restructuring Initiatives Activity
<TABLE>
<CAPTION>
Restructuring Initiatives
------------------------------------------------------------------------------------------------------------------------------------
In millions of dollars 2000 1999 1998 1997 Total
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Restructuring Charges $17 $ 82 $1,122 $1,718 $2,939
Additional Severance Charges - - 54 - 54
Utilization (1) (7) (82) (976) (1,073) (2,138)
Changes in Estimates - - (196) (645) (841)
---------------------------------------------------------------------------------------
Balance at June 30, 2000 $10 $ - $ 4 $ - $ 14
---------------------------------------------=======================================================================================
</TABLE>
(1) Utilization amounts include translation effects on the restructuring
reserve.
--------------------------------------------------------------------------------
The 1999 restructuring reserve utilization included $6 million related to the
write-down to estimated salvage value of assets available for immediate
disposal, as well as $76 million of severance and other exit costs (of which $21
million related to employee severance and $12 million related to leasehold and
other exit costs have been paid in cash and $43 million is legally obligated),
together with translation effects. Utilization, including translation effects,
was $44 million and $51 million in the 2000 second quarter and six months,
respectively. Through June 30, 2000, approximately 750 gross staff positions
have been eliminated under these programs, including 590 in the 2000 second
quarter.
The 1998 restructuring reserve utilization includes $35 million of non-cash
charges for equipment and premises write-downs as well as $903 million of
severance and other exit costs, occurring primarily in 1999 (of which $529
million related to employee severance and $177 million related to leasehold and
other exit costs have been paid in cash and $197 million is legally obligated),
together with translation effects. Utilization, including translation effects,
was $82 million and $163 million in the 2000 second quarter and six months,
respectively. Through June 30, 2000, approximately 7,300 gross staff positions
have been eliminated under these programs, including 800 in the 2000 second
quarter.
Changes in estimates are attributable to facts and circumstances arising
subsequent to an original restructuring charge. During the 2000 second quarter
and the second half of 1999, changes in estimates resulted in reductions of $45
million and $151 million, respectively, in the reserve for 1998 restructuring
initiatives, attributable to lower than anticipated costs of implementing
certain projects and a reduction in the scope of certain initiatives. Changes in
estimates related to the 1997 restructuring initiatives included $568 million of
reductions (of which $211 million occurred in the 1999 first quarter), primarily
related to the Seven World Trade Center lease, and $77 million of other
reductions. Adjustments related to the Seven World Trade Center lease during
1999 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. 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.
Additional information about restructuring-related items, including the business
segments affected, may be found in the 1999 Annual Report and Form 10-K.
43
<PAGE>
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 six months ended June 30, 2000
and 1999. Shares have been adjusted to give effect to the four-for-three split
in Citigroup's common stock as discussed in Note 1.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------------------------------------------------------------------------------------------------
In millions, except per share amounts 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before cumulative effect of accounting changes $3,005 $2,448 $6,595 $4,937
Cumulative effect of accounting changes - - - (127)
Preferred dividends (29) (38) (59) (78)
---------------------------------------------------------------------
Income available to common stockholders for basic EPS 2,976 2,410 6,536 4,732
Effect of dilutive securities - 3 - 6
---------------------------------------------------------------------
Income available to common stockholders for diluted EPS $2,976 $2,413 $6,536 $4,738
---------------------------------------------------------------=====================================================================
Weighted average common shares
outstanding applicable to basic EPS 4,443.6 4,443.6 4,442.8 4,448.5
Effect of dilutive securities:
Options 108.9 107.6 108.5 97.8
Restricted stock 33.3 35.6 31.6 33.6
Convertible securities 1.1 13.6 1.1 13.7
---------------------------------------------------------------------
Adjusted weighted average common shares
outstanding applicable to diluted EPS 4,586.9 4,600.4 4,584.0 4,593.6
---------------------------------------------------------------=====================================================================
Basic earnings per share
Income before cumulative effect of accounting changes $0.67 $0.54 $1.47 $1.09
Cumulative effect of accounting changes - - - (0.03)
---------------------------------------------------------------------
Net income $0.67 $0.54 $1.47 $1.06
---------------------------------------------------------------=====================================================================
Diluted earnings per share
Income before cumulative effect of accounting changes $0.65 $0.52 $1.43 $1.06
Cumulative effect of accounting changes - - - (0.03)
---------------------------------------------------------------------
Net income $0.65 $0.52 $1.43 $1.03
---------------------------------------------------------------=====================================================================
</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 June 30, 2000 and
December 31, 1999, 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 1999 Annual Report
and Form 10-K.
<TABLE>
<CAPTION>
Notional Balance Sheet
Principal Amounts Credit Exposure (1) (2)
---------------------------------------------------------------------
June 30, Dec. 31, June 30, Dec. 31,
In billions of dollars 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate products $5,412.2 $5,351.0 $ 8.0 $10.2
Foreign exchange products 2,094.6 1,797.1 10.3 11.4
Equity products 168.5 144.2 7.8 9.3
Commodity products 33.6 34.9 0.9 0.4
Credit derivative products 54.5 46.0 0.3 0.3
----------------------------------
$27.3 $31.6
---------------------------------------------------------------=====================================================================
</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 $62.1 billion and $65.4 billion
of master netting agreements in effect at June 30, 2000 and December 31,
1999, respectively. Master netting agreements mitigate credit risk by
permitting the offset of amounts due from and to individual counterparties
in the event of counterparty default. In addition, Citibank has
securitized and sold net receivables, and the associated credit risk
related to certain derivative and foreign exchange contracts via Markets
Assets Trust, which amounted to $2.5 billion at June 30, 2000 and $2.2
billion at December 31, 1999.
--------------------------------------------------------------------------------
44
<PAGE>
The tables below provide data on the notional principal amounts and maturities
of end-user (non-trading) derivatives, along with additional data on end-user
interest rate swaps and net purchased option positions at the end of the second
quarter of 2000.
End-User Derivative Interest Rate and Foreign Exchange Contracts
<TABLE>
<CAPTION>
Notional Principal
Amounts (1) Percentage of June 30, 2000 Amount Maturing
------------------------------------------------------------------------------
June 30, Dec. 31, Within 1 to 2 to 3 to 4 to After
In billions of dollars 2000 1999 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest rate products
Futures contracts $15.1 $ 7.1 100% -% -% -% -% -%
Forward contracts 2.8 3.3 100 - - - - -
Swap agreements 110.6 104.7 32 18 13 10 7 20
Option contracts 7.9 7.1 16 27 - 3 43 11
Foreign exchange products
Futures and forward contracts 89.4 50.6 98 1 1 - - -
Cross-currency swaps 6.5 7.0 13 23 30 7 6 21
Credit derivatives products 29.1 29.2 3 3 7 6 31 50
------------------------------------------------------==============================================================================
</TABLE>
(1) Includes third-party and intercompany contracts.
--------------------------------------------------------------------------------
End-User Interest Rate Swaps and Net Purchased Options as of June 30, 2000
<TABLE>
<CAPTION>
Remaining Contracts Outstanding --
Notional Principal Amounts
---------------------------------------------------------
In billions of dollars 2000 2001 2002 2003 2004 2005
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Receive fixed swaps $67.8 $53.6 $45.0 $33.4 $23.7 $16.6
Weighted-average fixed rate 6.3% 6.4% 6.3% 6.4% 6.6% 6.6%
Pay fixed swaps 28.3 18.9 9.8 7.5 6.1 5.2
Weighted-average fixed rate 6.3% 6.2% 6.3% 6.3% 6.2% 6.3%
Basis swaps 14.5 2.7 1.0 0.7 0.4 0.3
Purchased floors 5.6 4.4 2.8 2.8 2.8 0.1
Weighted-average floor rate purchased 6.2% 6.2% 7.3% 7.3% 7.3% 5.8%
Written caps related to other purchased caps (1) 2.3 2.2 1.7 1.7 1.5 0.8
Weighted-average cap rate written 9.8% 9.8% 10.6% 10.6% 10.7% 10.5%
---------------------------------------------------------------------------=========================================================
Three-month forward LIBOR rates (2) 6.8% 7.1% 7.1% 7.1% 7.1% 7.3%
---------------------------------------------------------------------------=========================================================
</TABLE>
(1) Includes written options related to purchased options embedded in other
financial instruments.
(2) Represents the implied forward yield curve for three-month LIBOR as of
June 30, 2000, provided for reference.
--------------------------------------------------------------------------------
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 June 30, 2000 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.
45
<PAGE>
FINANCIAL DATA SUPPLEMENT
Cash-Basis, Renegotiated, and Past Due Loans
<TABLE>
<CAPTION>
June 30, Dec. 31, June 30,
In millions of dollars 2000 1999 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial cash-basis loans
Collateral dependent (at lower of cost or collateral value) (1) $ 210 $ 241 $ 214
Other 1,428 1,162 1,341
---------------------------------------------------
Total $1,638 $1,403 $1,555
---------------------------------------------------------------------------------===================================================
Commercial cash-basis loans
In U.S. offices $ 405 $ 256 $ 265
In offices outside the U.S. 1,233 1,147 1,290
---------------------------------------------------
Total $1,638 $1,403 $1,555
---------------------------------------------------------------------------------===================================================
Commercial renegotiated loans
In U.S. offices $ - $16 $ -
In offices outside the U.S. 27 43 50
---------------------------------------------------
Total $27 $59 $50
---------------------------------------------------------------------------------===================================================
Consumer loans on which accrual of interest had been suspended
In U.S. offices $ 716 $ 724 $ 732
In offices outside the U.S. 1,475 1,506 1,527
---------------------------------------------------
Total $2,191 $2,230 $2,259
---------------------------------------------------------------------------------===================================================
Accruing loans 90 or more days delinquent (2)
In U.S. offices $ 771 $ 732 $ 598
In offices outside the U.S. 397 452 472
---------------------------------------------------
Total $1,168 $1,184 $1,070
---------------------------------------------------------------------------------===================================================
</TABLE>
(1) A cash-basis loan is defined as collateral dependent when repayment is
expected to be provided solely by the underlying collateral and there are
no other available and reliable sources of repayment, in which case the
loans are written down to the lower of cost or collateral value.
(2) Substantially all consumer loans, of which $423 million, $379 million, and
$284 million are government-guaranteed student loans at June 30, 2000,
December 31, 1999, and June 30, 1999, respectively.
--------------------------------------------------------------------------------
Other Real Estate Owned and Assets Pending Disposition
<TABLE>
<CAPTION>
June 30, Dec. 31, June 30,
In millions of dollars 2000 1999 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Other real estate owned
Consumer (1) $180 $204 $213
Commercial (1) 267 486 626
Corporate/Other 8 14 8
---------------------------------------------------
Total $455 $704 $847
---------------------------------------------------------------------------------===================================================
Assets pending disposition (2) $93 $86 $89
---------------------------------------------------------------------------------===================================================
</TABLE>
(1) Represents repossessed real estate, carried at lower of cost or collateral
value.
(2) Represents consumer residential mortgage loans that have a high
probability of foreclosure, carried at lower of cost or collateral value.
--------------------------------------------------------------------------------
46
<PAGE>
Details of Credit Loss Experience
<TABLE>
<CAPTION>
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
In millions of dollars 2000 2000 1999 1999 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for credit losses
at beginning of period $6,657 $6,679 $6,706 $6,743 $6,662
---------------------------------------------------------------------------------------
Provision for credit losses
Consumer 580 627 594 594 679
Commercial 131 124 92 38 111
---------------------------------------------------------------------------------------
711 751 686 632 790
---------------------------------------------------------------------------------------
Gross credit losses
Consumer
In U.S. offices 481 463 427 419 439
In offices outside the U.S. 285 312 310 324 332
Commercial
In U.S. offices 56 49 28 9 3
In offices outside the U.S. 99 94 130 95 132
---------------------------------------------------------------------------------------
921 918 895 847 906
---------------------------------------------------------------------------------------
Credit recoveries
Consumer
In U.S. offices 89 74 54 66 70
In offices outside the U.S. 82 73 82 79 70
Commercial
In U.S. offices 3 8 11 1 3
In offices outside the U.S. 21 11 46 15 21
---------------------------------------------------------------------------------------
195 166 193 161 164
---------------------------------------------------------------------------------------
Net credit losses
In U.S. offices 445 430 390 361 369
In offices outside the U.S. 281 322 312 325 373
---------------------------------------------------------------------------------------
726 752 702 686 742
---------------------------------------------------------------------------------------
Other -- net (1) 94 (21) (11) 17 33
---------------------------------------------------------------------------------------
Allowance for credit losses at end of period $6,736 $6,657 $6,679 $6,706 $6,743
---------------------------------------------=======================================================================================
Net consumer credit losses $595 $628 $601 $598 $631
As a percentage of average consumer loans 1.54% 1.71% 1.68% 1.74% 1.91%
------------------------------------------------------------------------------------------------------------------------------------
Net commercial credit losses $131 $124 $101 $88 $111
As a percentage of average commercial loans 0.51% 0.52% 0.42% 0.37% 0.48%
---------------------------------------------=======================================================================================
</TABLE>
(1) Primarily includes foreign currency translation effects and the addition
of allowance for credit losses related to acquisitions.
--------------------------------------------------------------------------------
47
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(c) The Company issued an aggregate of 790,044 shares (split-adjusted)
of its common stock to the former shareholders of Schroder Holdings
(Jersey) Limited, a company organized in Jersey, Channel Islands, in
connection with an exchange offer. The exchange offer was made
pursuant to an exemption from registration provided by Rule 802
under the Securities Act of 1933 for exchange offers made for
securities of a foreign private issuer. In the exchange offer,
Salomon Smith Barney Holdings Inc., a wholly owned subsidiary of the
Company, exchanged cash, Loan Notes and Exchangeable Loan Notes for
all of the outstanding share capital of Schroder Holdings (Jersey)
Limited. Pursuant to the terms of the exchange offer, the
Exchangeable Loan Notes were immediately exchanged for the shares of
the Company's common stock issued in connection with the exchange
offer. The shares of the Company's common stock were issued on or
around the settlement dates of the exchange offer, which began May
5, 2000 and ended May 25, 2000.
Item 4. Submission of Matters to a Vote of Security Holders.
Information concerning all matters voted on by stockholders at
Citigroup's Annual Meeting of Stockholders held on April 18, 2000 is
incorporated herein by reference to Item 4 of the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K.
On April 18, 2000, the Company filed a Current Report on Form 8-K,
dated April 17, 2000, reporting under Item 5 thereof the results of
its operations for the quarter ended March 31, 2000, and certain
other selected financial data.
On June 20, 2000, the Company filed a Current Report on Form 8-K,
dated June 19, 2000, filing as an exhibit under Item 7 thereof the
Distribution Agreement, dated June 19, 2000, between the Company and
Salomon Smith Barney Inc., relating to the offer and sale of the
Company's Medium-Term Senior Notes, Series C, Due Nine Months or
More from Date of Issue and Medium-Term Subordinated Notes, Series
C, Due Nine Months or More from Date of Issue.
No other reports on Form 8-K were filed during the second quarter of
2000; however,
(1) On July 20, 2000, the Company filed a Current Report on Form 8-K,
dated July 19, 2000, reporting under Item 5 thereof the results of
its operations for the quarter ended June 30, 2000, and certain
other selected financial data.
(2) On July 20, 2000, the Company filed a Current Report on Form 8-K,
dated July 11, 2000, filing as exhibits under Item 7 thereof:
(A) Terms Agreement, dated July 11, 2000, among the Company and
Salomon Brothers International Limited, Bear, Stearns International
Limited, Daiwa Securities SB Capital Markets Europe Limited,
Deutsche Bank AG London, Goldman Sachs International, IBJ
International plc, Nomura International plc, Sanwa International plc
and Tokyo-Mitsubishi International plc, as Underwriters, relating to
the offer and sale of the Company's (Y)55 billion 1.40% Notes due
July 18, 2005.
(B) Form of DTC Global Note for the Company's 1.40% Notes due July
18, 2005.
(C) Form of International Global Note for the Company's 1.40% Notes
due July 18, 2005.
(D) Form of Fiscal Agency Agreement among Citibank, N.A. London
Office, the Company and Banque Internationale a Luxembourg S.A.
(3) On July 25, 2000, the Company filed a Current Report on Form 8-K,
dated July 21, 2000, reporting under Item 5 thereof the announcement
that the Board of Directors of the Company had elected Robert I.
Lipp to the Board of Directors and appointed him Vice Chairman and a
Member of the Office of the Chairman.
48
<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 11th day of August, 2000.
CITIGROUP INC.
(Registrant)
By /s/Todd S. Thomson
------------------
Todd S. Thomson
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
49
<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).
3.01.3 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company dated April 18, 2000, incorporated by
reference to Exhibit 3.01.3 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 2000 (File No.
1-9924).
3.02 By-Laws of the Company, as amended, effective October 26,
1999, incorporated by reference to Exhibit 3.02 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1999 (File No. 1-9924).
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.
50
