Citigroup Reports Second Quarter 2018 Financial Results

Citigroup Inc. (NYSE: C)

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EARNINGS PER SHARE OF $1.63

NET INCOME OF $4.5 BILLION

REVENUES OF $18.5 BILLION

RETURNED $3.1 BILLION OF CAPITAL TO COMMON SHAREHOLDERS

REPURCHASED 33 MILLION COMMON SHARES

BOOK VALUE PER SHARE OF $71.95TANGIBLE BOOK VALUE PER
SHARE OF $61.295

Citigroup Inc. today reported net income for the second quarter 2018 of
$4.5 billion, or $1.63 per diluted share, on revenues of $18.5 billion.
This compared to net income of $3.9 billion, or $1.28 per diluted share,
on revenues of $18.2 billion for the second quarter 2017.

Revenues increased 2% from the prior-year period, driven by growth in
both the Institutional Clients Group (ICG) and Global Consumer
Banking (GCB), partially offset by lower revenues in Corporate /
Other due to the continued wind-down of legacy assets. Net income of
$4.5 billion increased 16%, driven by the higher revenues and a lower
effective tax rate, partially offset by higher cost of credit. Earnings
per share of $1.63 increased 27% from $1.28 per diluted share in the
prior-year period, driven by the growth in net income and an 8%
reduction in average diluted shares outstanding.

Citi CEO Michael Corbat said, “These results demonstrate good momentum
across our franchise and that we are firmly on track to achieve the
financial targets we introduced last year at Investor Day.

“During the quarter, we drove strong year-over-year revenue growth in
many of our businesses – including our International Consumer franchise,
Treasury and Trade Solutions, Equities, and the Private Bank. And we
continue to support our clients as evidenced by solid loan growth that
was balanced across businesses and geographies. Our focus on expenses
has given us the ability to self-fund many of our investments and
resulted in an improvement in our efficiency ratio for both the second
quarter and through the first half of this year.

“Finally, we were pleased to receive a non-objection from the Federal
Reserve to our capital plan submitted as part of the 2018 CCAR cycle
which will allow us to return $22 billion in capital to common
shareholders over the next year, marking another significant step
towards delivering on our commitment to return at least $60 billion in
capital over a three-year period,” Mr. Corbat concluded.

Percentage comparisons throughout this press release are calculated for
the second quarter 2018 versus the second quarter 2017, unless otherwise
specified.

Citigroup($ in millions, except as otherwise noted)

Citigroup

Citigroup revenues of $18.5 billion in the second quarter 2018
increased 2%, driven by 3% aggregate growth in GCB and ICG,
partially offset by a 20% decrease in Corporate / Other due to
the continued wind-down of legacy assets.

Citigroup’s operating expenses of $10.7 billion in the second
quarter 2018 were largely unchanged, as higher volume-related expenses
and investments were offset by efficiency savings and the wind-down of
legacy assets.

Citigroup’s cost of credit in the second quarter 2018 was
$1.8 billion, a 6% increase, primarily driven by volume growth and
seasoning in GCB.

Citigroup’s net income increased to $4.5 billion in the second
quarter 2018, primarily driven by the higher revenues and a lower
effective tax rate, which more than offset the higher cost of credit, as
expenses remained largely unchanged. Citigroup’s effective tax rate was
24% in the current quarter compared to 32% in the second quarter 2017.

Citigroup’s allowance for loan losses was $12.1 billion at
quarter end, or 1.81% of total loans, compared to $12.0 billion, or
1.88% of total loans, at the end of the prior-year period. Total
non-accrual assets declined 20% from the prior-year period to $4.1
billion. Consumer non-accrual loans declined 16% to $2.4 billion and
corporate non-accrual loans decreased 23% to $1.6 billion.

Citigroup’s end of period loans were $671 billion as of quarter
end, up 4% from the prior-year period. Excluding the impact of foreign
exchange translation6, Citigroup’s end of period loans grew
5%, as 6% aggregate growth in ICG and GCB was partially
offset by the continued wind-down of legacy assets in Corporate /
Other.

Citigroup’s end of period deposits were $997 billion as of
quarter end, an increase of 4% from the prior-year period on both a
reported and a constant dollar basis. The increase in constant dollars
was driven by 9% growth in ICG, as GCB remained largely
unchanged.

Citigroup’s book value per share of $71.95 and tangible book
value per share of $61.29, both as of quarter end, were largely
unchanged sequentially, as the benefit of a lower share count was offset
by the aggregate impact to common equity of net income, share
repurchases and dividends, as well as currency translation. At quarter
end, Citigroup’s CET1 Capital ratio was 12.1%, unchanged sequentially,
as net income was largely offset by the return of capital to common
shareholders. Citigroup’s SLR for the second quarter 2018 was 6.6%, down
slightly from 6.7% sequentially. During the second quarter 2018,
Citigroup repurchased 33 million common shares and returned a total of
$3.1 billion to common shareholders in the form of common share
repurchases and dividends.

Global Consumer Banking($ in millions, except as
otherwise noted)

Global Consumer Banking

GCB revenues of $8.3 billion increased 2%, driven
by growth across all regions. In constant dollars, revenues increased 3%.

North America GCB revenues of $5.0 billion
increased 1%, driven by higher revenues in Retail Banking and Citi
Retail Services, partially offset by lower revenues in Citi-Branded
Cards. Retail Banking revenues of $1.3 billion increased 4%.
Excluding mortgage, Retail Banking revenues increased 9%, driven
by continued growth in deposit margins and investments, as well as
increased commercial banking activity. Citi-Branded Cards
revenues of $2.1 billion decreased 1%. Excluding the impact of the
Hilton portfolio sale, Citi-Branded Cards revenues increased 1%
as the benefit of higher interest-earning balances and a gain of
approximately $45 million related to the sale of Visa B shares were
partially offset by the impact of previously disclosed items, including
partnership terms and repricing actions related to APR rate
re-evaluations under the CARD Act. Citi Retail Services
revenues of $1.6 billion increased 1%, primarily reflecting continued
loan growth.

Latin America GCB revenues increased 6% to $1.4
billion. In constant dollars, revenues increased 11%. On this basis,
retail banking revenues grew 12%, with continued volume growth across
loans and deposits. Cards revenues increased 9%, driven by continued
growth in purchase sales and full rate revolving loans.

Asia GCB revenues increased 3% to $1.9 billion. In
constant dollars, revenues increased 2%, or 4% excluding the benefit of
a modest gain on sale in the prior-year period. Retail banking revenues
increased 4%, driven by growth in wealth management. Cards revenues
remained largely unchanged; excluding the modest gain, revenues
increased 4% driven by continued growth in loans and purchase sales.

GCB operating expenses were $4.7 billion, up 3% on
both a reported and a constant dollar basis, as efficiency savings were
more than offset by higher investments, volume-related expenses and a
provision of approximately $50 million for an industry-wide legal matter
in North America GCB.

GCB cost of credit was $1.9 billion, up 8%. In
constant dollars, cost of credit increased 9%, driven by an 8% increase
in net credit losses reflecting volume growth and seasoning, primarily
in North America GCB as well as a 27% increase in loan loss
reserves as the prior-year period benefited from a reserve release in Asia
GCB.

GCB net income of $1.3 billion increased 14%. In
constant dollars, net income increased 15%, as the higher revenues
across regions and a lower tax rate were partially offset by the higher
expenses and cost of credit.

Institutional Clients Group($ in millions)

Institutional Clients Group

ICG revenues of $9.7 billion increased 3%, as 6%
growth in Banking more than offset a 1% decline in Markets and
Securities Services.

Banking revenues of $5.2 billion
increased 6%, as continued growth across businesses more than offset a
decline in Investment Banking. Treasury and Trade Solutions
revenues of $2.3 billion increased 11%, reflecting higher volumes and
improved deposit spreads with growth in both net interest and fee
revenues. Investment Banking revenues of $1.4 billion were down
7% versus the prior-year period, as growth in advisory and equity
underwriting was more than offset by a very strong prior year comparison
in debt underwriting. Advisory revenues increased 14% to $361 million,
equity underwriting revenues increased 8% to $335 million and debt
underwriting revenues decreased 20% to $726 million. Private Bank
revenues increased 7% to $848 million, driven by growth in clients,
loans and investments, as well as improved deposit spreads. Corporate
Lending revenues of $589 million increased 22% (excluding gain /
(loss) on loan hedges)7, reflecting loan growth as well as
lower hedging costs.

Markets and Securities Services revenues of $4.5
billion decreased 1%, as strong revenue growth in Equity Markets
and Securities Services was more than offset by a decline in Fixed
Income Markets. Fixed Income Markets revenues
of $3.1 billion in the second quarter 2018 decreased 6%, driven by a
more challenging market environment and a strong prior-year period
comparison in G10 rates and securitized products. Equity Markets
revenues of $864 million increased 19%, with growth across all products,
reflecting the benefit of continued higher market volatility, as well as
continued momentum with investor clients. Securities Services
revenues of $665 million increased 12%, driven by continued growth in
client volumes and higher net interest revenue.

ICG net income of $3.2 billion increased
17%, driven by the higher revenues, a lower tax rate and lower cost of
credit, partially offset by higher operating expenses. ICG
operating expenses increased 4% to $5.5 billion, driven by an increase
in compensation costs, volume-related expenses and investments,
partially offset by efficiency savings. ICG cost of credit
declined due to a decrease in net credit losses as ICG recorded a
net recovery of $1 million in the current period compared to net credit
losses of $71 million in the prior-year period.

Corporate / Other($ in millions)

Corporate / Other

Corporate / Other revenues of $528 million
decreased 20% from the prior-year period, driven by the wind-down of
legacy assets.

Corporate / Other expenses of $599 million
decreased 40% from the prior-year period, driven by the wind-down of
legacy assets and lower legal and infrastructure costs.

Corporate / Other income from continuing operations
before taxes of $47 million increased from a loss of $203 million in
the prior-year period, as the lower expenses more than offset the lower
revenues.

Citigroup will host a conference call today at 11:30 AM (ET). A live
webcast of the presentation, as well as financial results and
presentation materials, will be available at https://www.citigroup.com/citi/investor.
Dial-in numbers for the conference call are as follows: (866) 516-9582
in the U.S. and Canada; (973) 409-9210 outside of the U.S. and Canada.
The conference code for both numbers is 83785275.

Additional financial, statistical and business-related information, as
well as business and segment trends, is included in a Quarterly
Financial Data Supplement. Both this earnings release and Citigroup’s
Second Quarter 2018 Quarterly Financial Data Supplement are available on
Citigroup’s website at www.citigroup.com.

Citigroup, the leading global bank, has approximately 200 million
customer accounts and does business in more than 160 countries and
jurisdictions. Citigroup provides consumers, corporations, governments
and institutions with a broad range of financial products and services,
including consumer banking and credit, corporate and investment banking,
securities brokerage, transaction services, and wealth management.

Additional information may be found at www.citigroup.com
| Twitter: @Citi | YouTube: www.youtube.com/citi
| Blog: http://blog.citigroup.com
| Facebook: www.facebook.com/citi
| LinkedIn: www.linkedin.com/company/citi

Certain statements in this release are “forward-looking statements”
within the meaning of the rules and regulations of the U.S. Securities
and Exchange Commission (SEC). These statements are based on
management’s current expectations and are subject to uncertainty and
changes in circumstances. These statements are not guarantees of future
results or occurrences. Actual results and capital and other financial
condition may differ materially from those included in these statements
due to a variety of factors, including, among others, the efficacy of
Citi’s business strategies and execution of those strategies, such as
those relating to its key investment, efficiency and capital
optimization initiatives, governmental and regulatory actions or
approvals, geopolitical and macroeconomic uncertainties, challenges and
conditions, such as the level of interest rates, and the precautionary
statements included in this release and those contained in Citigroup’s
filings with the SEC, including without limitation the “Risk Factors”
section of Citigroup’s 2017 Form 10-K. Any forward-looking statements
made by or on behalf of Citigroup speak only as to the date they are
made, and Citi does not undertake to update forward-looking statements
to reflect the impact of circumstances or events that arise after the
date the forward-looking statements were made.

($ in millions)

($ in billions)

($ in millions)

($ in millions)

($ in millions)

6/30/2018(1)

 

Accumulated net unrealized losses on cash flow hedges, net of tax(3)

Cumulative unrealized net gain (loss) related to changes in fair
value of financial liabilities attributable to own
creditworthiness, net of tax(4)

Identifiable intangible assets other than mortgage servicing
rights (MSRs), net of related DTLs

Deferred tax assets (DTAs) arising from net operating loss,
foreign tax credit and general business credit carry-forwards

Excess over 10% / 15% limitations for other DTAs, certain common
stock investments, and MSRs(6)

6/30/2018(1)

 

(1)

Preliminary.

Additional Tier 1 Capital primarily includes qualifying
noncumulative perpetual preferred stock and qualifying trust
preferred securities.

6/30/2018(1)

7 Credit derivatives are used to economically hedge a
portion of the corporate loan portfolio that includes both accrual
loans and loans at fair value. Gains / (losses) on loan hedges
includes the mark-to-market on the credit derivatives and the
mark-to-market on the loans in the portfolio that are at fair
value. The fixed premium costs of these hedges are netted against
the corporate lending revenues to reflect the cost of credit
protection. Citigroup’s results of operations excluding the impact
of gains / (losses) on loan hedges are non-GAAP financial measures.

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