-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HEP5YOc1BITXAaaTqrxjNZteNwLsI9r1wlTJZT9Ktmv3ZP7X6TwcObaQINXju6v9 ToeOeoW4bFZHjXBWbxyXzw== 0000912057-01-539886.txt : 20020410 0000912057-01-539886.hdr.sgml : 20020410 ACCESSION NUMBER: 0000912057-01-539886 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITICORP CENTRAL INDEX KEY: 0000020405 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 132614988 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05738 FILM NUMBER: 1791346 BUSINESS ADDRESS: STREET 1: 399 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10043 BUSINESS PHONE: 2125591000 MAIL ADDRESS: STREET 1: 425 PARK AVE- 2ND F STREET 2: ATTN: LEGAL AFFAIRS OFFICE CITY: NEW YORK STATE: NY ZIP: 10043 FORMER COMPANY: FORMER CONFORMED NAME: CITY BANK OF NEW YORK NATIONAL ASSOCIATI DATE OF NAME CHANGE: 19680903 FORMER COMPANY: FORMER CONFORMED NAME: FIRST NATIONAL CITY CORP DATE OF NAME CHANGE: 19740414 10-Q 1 a2063746z10-q.txt 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO _______ COMMISSION FILE NUMBER 1-5738 CITICORP (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 06-1515595 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 399 PARK AVENUE, NEW YORK, NEW YORK 10043 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (800) 285-3000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES |X| NO |_| BECAUSE THE REGISTRANT IS AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF CITIGROUP INC., NONE OF ITS OUTSTANDING VOTING STOCK IS HELD BY NONAFFILIATES. AS OF THE DATE HEREOF, 1,000 SHARES OF THE REGISTRANT'S COMMON STOCK, $0.01 PAR VALUE PER SHARE, WERE ISSUED AND OUTSTANDING. REDUCED DISCLOSURE FORMAT THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H (1) (A) AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. CITICORP TABLE OF CONTENTS Part I - Financial Information Item 1. Financial Statements: Page No. -------- Consolidated Statement of Income (Unaudited) - Three and Nine Months Ended September 30, 2001 and 2000 32 Consolidated Balance Sheets - September 30, 2001 (Unaudited) and December 31, 2000 33 Consolidated Statement of Changes in Stockholder's Equity (Unaudited) - Nine Months Ended September 30, 2001 and 2000 34 Consolidated Statement of Cash Flows (Unaudited) - Nine Months Ended September 30, 2001 and 2000 35 Consolidated Balance Sheets of Citibank, N.A. and Subsidiaries - September 30, 2001 (Unaudited) and December 31, 2000 36 Notes to Consolidated Financial Statements (Unaudited) 37 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1-31 Item 3. Quantitative and Qualitative Disclosures about Market Risk 26-28 39-40 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K 56 Signatures 57 Exhibit Index 58 CITICORP AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ACQUISITION OF BANAMEX On August 6, 2001, Citicorp, an indirect wholly-owned subsidiary of Citigroup Inc. (Citigroup), completed its acquisition of 99.86% of the issued and outstanding ordinary shares of Grupo Financiero Banamex-Accival (Banamex), a leading Mexican financial institution, for approximately $12.5 billion in cash and Citigroup stock. Citicorp completed the acquisition by settling transactions that were conducted on the Mexican Stock Exchange on Friday, August 3, 2001. Those transactions comprised both the acquisition of Banamex shares tendered in response to Citicorp's offer to acquire all of Banamex's outstanding shares and the simultaneous sale of 126,705,281 Citigroup shares to the tendering Banamex shareholders. On September 24, 2001, Citicorp became the holder of 100% of the issued and outstanding ordinary shares of Banamex following a share redemption by Banamex. The results of Banamex are included from August 2001 forward within the Global Consumer -- Mexico and Investment Activities segments. Banamex's and Citicorp's banking operations in Mexico are being integrated and will conduct business under the "Banamex" brand name. BUSINESS FOCUS The table below shows the core income (loss) for each of Citicorp's businesses:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------------------------------------- IN MILLIONS OF DOLLARS 2001 2000 (1) 2001 2000 (1) - ------------------------------------------------------------------------------------------------------------------ GLOBAL CONSUMER Citibanking North America $ 151 $ 121 $ 440 $ 368 Mortgage Banking 92 77 257 214 North America Cards 573 492 1,495 1,260 CitiFinancial 308 213 806 597 ------------------------------------------------------------- Total North America 1,124 903 2,998 2,439 ------------------------------------------------------------- Japan 244 204 671 527 Western Europe 124 94 340 281 Asia 160 139 452 419 Mexico 124 (3) 139 46 Latin America 63 57 188 174 Central & Eastern Europe, Middle East and Africa 24 12 63 42 ------------------------------------------------------------- Total Emerging Markets Consumer Banking 371 205 842 681 ------------------------------------------------------------- Total International 739 503 1,853 1,489 ------------------------------------------------------------- e-Consumer (14) (31) (60) (127) Other 24 (3) 22 (64) ------------------------------------------------------------- TOTAL GLOBAL CONSUMER $ 1,873 $ 1,372 $ 4,813 $ 3,737 - ------------------------------------------------------------------------------------------------------------------
(Business Focus continues on the following page) 1 BUSINESS FOCUS (CONTINUED) The table below shows the core income (loss) for each of Citicorp's businesses:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------------------------------ IN MILLIONS OF DOLLARS 2001 2000 (1) 2001 2000 (1) - --------------------------------------------------------------------------------------------------------------------- GLOBAL CORPORATE Corporate and Investment Bank $ 356 $ 266 $ 944 $ 850 Emerging Markets Corporate Banking and Global Transaction Services 428 372 1,293 996 ------------------------------------------------------ TOTAL GLOBAL CORPORATE 784 638 2,237 1,846 ------------------------------------------------------ GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING Citibank Asset Management (1) (7) (6) (3) The Citigroup Private Bank 93 79 283 238 ------------------------------------------------------ TOTAL GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING 92 72 277 235 ------------------------------------------------------ INVESTMENT ACTIVITIES (238) 249 (91) 1,268 CORPORATE/OTHER (53) (121) (137) (378) ------------------------------------------------------ CORE INCOME 2,458 2,210 7,099 6,708 Restructuring-Related Items, after-tax (2) (84) (45) (228) (131) Cumulative Effect of Accounting Changes (3) -- -- (144) -- ------------------------------------------------------ NET INCOME $2,374 $2,165 $6,727 $ 6,577 - ---------------------------------------------------------------======================================================
(1) Reclassified to conform to the current period's presentation. (2) Restructuring-related items in the 2001 first quarter related principally to severance and costs associated with the reduction of staff in the Global Corporate businesses, in the 2001 second quarter related principally to severance and costs associated with the reduction of staff primarily in the Global Corporate and Global Consumer businesses, and in the 2001 third quarter related to the acquisition of Banamex and the integration of its operations within the Global Consumer business. See Note 8 of Notes to Consolidated Financial Statements. The 2000 nine-month period includes a $71 million (after-tax) charge associated with the discontinuation of the loan origination operations of the Associates Housing Finance unit. (3) Accounting changes refer to the 2001 first quarter adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended (SFAS 133), and the 2001 second quarter adoption of EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" (EITF 99-20). See Notes 3 and 7 of Notes to Consolidated Financial Statements. - -------------------------------------------------------------------------------- 2 RESULTS OF OPERATIONS MANAGED BASIS REPORTING The discussion that follows includes amounts reported in the financial statements (owned basis) adjusted to include certain effects of securitization activities, receivables held for securitization, and receivables sold with servicing retained (managed basis). On a managed basis, these earnings are reclassified and presented as if the receivables had neither been held for securitization nor sold. The income analysis below reconciles amounts shown in the Consolidated Statement of Income on page 32 to the basis presented in the business segment discussions.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------------------------------ IN MILLIONS OF DOLLARS 2001 2000 2001 2000 - --------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $11,850 $10,505 $34,112 $31,518 Effect of securitization activities 907 573 2,603 1,809 Housing Finance unit charge -- -- -- 47 ------------------------------------------------------ ADJUSTED REVENUES, NET OF INTEREST EXPENSE 12,757 11,078 36,715 33,374 ------------------------------------------------------ Total operating expenses 6,290 5,644 17,951 16,718 Restructuring-related items (133) (70) (363) (94) Housing Finance unit charge -- -- -- (25) ------------------------------------------------------ ADJUSTED OPERATING EXPENSES 6,157 5,574 17,588 16,599 ------------------------------------------------------ Benefits, claims, and credit losses 1,882 1,426 5,338 4,376 Effect of securitization activities 907 573 2,603 1,809 Housing Finance unit charge -- -- -- (40) ------------------------------------------------------ ADJUSTED BENEFITS, CLAIMS, AND CREDIT LOSSES 2,789 1,999 7,941 6,145 ------------------------------------------------------ CORE INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 3,811 3,505 11,186 10,630 Taxes on core income 1,328 1,281 4,040 3,894 Minority interest, net of income tax 25 14 47 28 ------------------------------------------------------ CORE INCOME 2,458 2,210 7,099 6,708 Restructuring-related items, after-tax (84) (45) (228) (131) ------------------------------------------------------ INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 2,374 2,165 6,871 6,577 Cumulative effect of accounting changes -- -- (144) -- ------------------------------------------------------ NET INCOME $ 2,374 $ 2,165 $ 6,727 $ 6,577 - ---------------------------------------------------------------======================================================
INCOME Citicorp reported core income of $2.458 billion in the 2001 third quarter, up 11% from $2.210 billion in the 2000 third quarter. Core income in the 2001 third quarter excluded an after-tax charge of $84 million for restructuring-related items. Net income for the quarter was $2.374 billion, up 10% from $2.165 billion in the year-ago quarter. Core income return on common equity was 18.1% compared to 21.5% a year ago. Core income for the 2001 nine months of $7.099 billion was up 6% from $6.708 billion in the 2000 nine months. Net income in the 2001 nine months was $6.727 billion, up 2% from $6.577 billion a year ago. Core income return on common equity was 18.8% and 23.3% in the nine months of 2001 and 2000, respectively. Global Consumer core income increased $501 million or 37% and $1.076 billion or 29% in the 2001 third quarter and nine months, respectively, compared to the 2000 periods, including third quarter and nine-month comparative increases of $127 million and $93 million in Mexico, reflecting the acquisition of Banamex, 45% and 35% in CitiFinancial, 16% and 19% in North America Cards, and 20% and 27% in Japan. Global Corporate increased $146 million or 23% and $391 million or 21% from the 2000 third quarter and nine-month periods, reflecting growth in both Emerging Markets and Global Transaction Services and Corporate and Investment Bank. Global Investment Management and Private Banking grew $20 million or 28% and $42 million or 18%, while Investment Activities decreased $487 million and $1.4 billion from the 2000 third quarter and nine-month periods, primarily due to lower venture capital results. REVENUES, NET OF INTEREST EXPENSE Adjusted revenues, net of interest expense, of $12.8 billion and $36.7 billion in the 2001 third quarter and nine months were up $1.7 billion or 15% and $3.3 billion or 10%, respectively, from the 2000 periods. Global Consumer revenues were up $1.8 billion or 24% in the 2001 third quarter to $9.4 billion, and were up $3.8 billion or 17% in the 2001 nine months to $26.0 billion, led by 2001 third quarter and nine-month increases in North America of $972 million or 20% and $2.4 billion or 17% from the 2000 third quarter and nine months. Compared to the 2000 periods, North America Cards was up $615 million or 22% in the 2001 third quarter and $1.6 3 billion or 21% in the 2001 nine months, while CitiFinancial experienced growth of $174 million or 14% in the 2001 third quarter and $412 million or 11% in the 2001 nine months, both businesses reflecting strong growth in receivables and lower cost of funding. International Consumer revenues were up $838 million or 34% in the 2001 third quarter and $1.3 billion or 17% in the 2001 nine months compared to the 2000 periods, primarily reflecting acquisitions in Mexico and Japan. Compared to the 2000 periods, Global Corporate revenues were down $422 million or 5% in the 2001 third quarter and were up $889 million or 4% in the 2001 nine months. Corporate and Investment Bank revenues were down $592 million or 12% in the 2001 third quarter and were down $328 million or 2% in the 2001 nine-month period, reflecting lower principal transactions activity and commissions and fees activity, offset by investment banking revenues in the nine-month period. Emerging Markets and Global Transaction Services increased $121 million or 8% in the 2001 third quarter and $687 million or 15% in the 2001 nine months. Global Investment Management and Private Banking revenues of $541 million in the 2001 third quarter and $1.6 billion in the 2001 nine months were up $74 million or 16% and $185 million or 13%, respectively, primarily due to growth in asset-based fee revenues and the impact of acquisitions in the nine-month period. Revenues in Investment Activities decreased $782 million and $2.2 billion from the 2000 third quarter and nine months, respectively, primarily reflecting lower venture capital results, partially offset by higher gains in other proprietary investments. SELECTED REVENUE ITEMS Net interest revenue as calculated from the Consolidated Statement of Income rose $1.5 billion or 27% from the 2000 third quarter to $7.1 billion and increased $3.6 billion or 22% from the 2000 nine months to $19.8 billion, reflecting the impact of Banamex, lower cost of funding, and growth in receivables. Net interest revenue, including the effect of securitization activities, increased $1.7 billion or 24% from the 2000 third quarter and $4.0 billion or 20% from the 2000 nine months. Fees and commissions revenues of $3.0 billion were up $298 million or 11% from the 2000 third quarter, primarily as a result of volume-related growth in customer activities and assets under fee-based management. Aggregate trading and foreign exchange revenues of $1.0 billion and $2.9 billion for the 2001 third quarter and nine months were up $241 million or 32% and $690 million or 31% from the 2000 third quarter and nine-month periods, reflecting strong Fixed Income and Foreign Exchange trading results. Realized gains from sales of investments were down $427 million and $152 million from the 2000 third quarter and nine month periods. Other income as shown in the Consolidated Statement of Income of $717 million in the 2001 third quarter was down $281 million from the year-ago quarter, and was down $1.3 billion from the 2000 nine months, primarily reflecting venture capital activity and an increase in securitized card losses. OPERATING EXPENSES Adjusted operating expenses, which exclude restructuring-related items, were $6.2 billion and $17.6 billion in the 2001 third quarter and nine months, respectively, up $583 million or 10% in the 2001 third quarter and up $1.0 billion or 6% in the 2001 nine months, compared to year-ago levels. Global Corporate expenses were up 14% and 10% in the 2001 third quarter and nine-month periods, reflecting higher compensation and benefits. Compared to the 2000 periods, Global Consumer expenses increased 10% in the 2001 third quarter and 6% in the 2001 nine months, primarily reflecting the impact of acquisitions and volume-related increases. Global Investment Management and Private Banking expenses increased 4% and 9% from the year-ago quarter and nine-month period, primarily reflecting increased compensation and benefits and investments in sales and marketing initiatives, as well as the impact of acquisitions in the nine-month comparison. Corporate/Other expenses decreased $137 million in the 2001 nine months, which primarily reflected a 2000 first quarter $108 million pretax expense for the contribution of appreciated venture capital securities to Citigroup's Foundation. RESTRUCTURING-RELATED ITEMS Restructuring-related items of $133 million ($84 million after-tax) in the 2001 third quarter and $363 million ($228 million after-tax) in the 2001 nine months related primarily to the acquisition of Banamex in the third quarter of 2001 and severance and costs associated with the reduction of staff primarily in the Global Corporate and Global Consumer businesses in the nine-month period. Restructuring-related items of $70 million ($45 million after-tax) in the 2000 third quarter and $94 million ($60 million after-tax) in the 2000 nine months primarily represented charges for Global Consumer initiatives and accelerated depreciation. Included in other operating expenses for the 2000 nine-month period is a $71 million (after-tax) charge associated with the discontinuation of the loan origination operations of the Associates Housing Finance unit. 4 BENEFITS, CLAIMS, AND CREDIT LOSSES Adjusted benefits, claims, and credit losses were $2.8 billion and $7.9 billion in the 2001 third quarter and nine months, up $790 million and $1.8 billion from the 2000 third quarter and nine months, respectively. Policyholder benefits and claims in the 2001 third quarter increased 47% from the 2000 third quarter to $302 million, and were up 49% to $800 million in the 2001 nine months, primarily as a result of increases in CitiFinancial and Other Consumer. The adjusted provision for credit losses increased 39% from the 2000 third quarter to $2.5 billion in the 2001 third quarter and increased 85% from the 2000 nine months to $7.1 billion in the 2001 nine months. Global Consumer adjusted provisions for benefits, claims, and credit losses of $2.5 billion in the 2001 third quarter were up 36% from the 2000 third quarter, primarily reflecting increases in North America Cards and CitiFinancial. Total managed net credit losses were $2.3 billion and the related loss ratio was 2.88% in the 2001 third quarter, as compared to $2.2 billion and 2.85% in the preceding quarter and $1.6 billion and 2.24% in the year-ago quarter. The managed consumer loan delinquency ratio (90 days or more past due) increased to 2.29% at September 30, 2001 from 2.10% at June 30, 2001 and 1.69% a year ago. Global Corporate provisions for benefits, claims, and credit losses of $213 million in the 2001 third quarter increased 61% from a year ago, primarily due to higher loss rates in the transportation portfolio in the Corporate and Investment Bank. Emerging Markets Corporate Banking & Global Transaction Services provision for credit losses improved in most regions compared to year-ago levels. Commercial cash-basis loans at September 30, 2001 and 2000 were $3.4 billion and $1.8 billion, respectively, while the commercial Other Real Estate Owned (OREO) portfolio totaled $174 million and $189 million, respectively. The increase in cash-basis loans from the 2000 third quarter was primarily related to the acquisition of Banamex, the transportation portfolio, and increases attributable to borrowers in the retail, telecommunication, and utility industries. The improvements in OREO were primarily related to the North America real estate portfolio. CAPITAL Total capital (Tier 1 and Tier 2) was $63.1 billion or 12.55% of net risk-adjusted assets, and Tier 1 capital was $42.1 billion or 8.37% at September 30, 2001, compared to $60.1 billion or 12.58% and $40.3 billion or 8.43% at June 30, 2001. - -------------------------------------------------------------------------------- The Income line in each of the following business segment discussions excludes the cumulative effect of adopting EITF 99-20 and SFAS 133. See Notes 3 and 7 of Notes to Consolidated Financial Statements. GLOBAL CONSUMER
THREE MONTHS ENDED SEPTEMBER NINE MONTHS ENDED 30, SEPTEMBER 30, ----------------------------- % ------------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - -------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $8,491 $7,035 21 $23,362 $20,325 15 Effect of securitization activities 907 573 58 2,603 1,809 44 ----------------------------- ------------------------------- ADJUSTED REVENUES, NET OF INTEREST EXPENSE 9,398 7,608 24 25,965 22,134 17 ----------------------------- ------------------------------- Adjusted operating expenses (2) 3,920 3,578 10 11,220 10,607 6 Provisions for benefits, claims, and credit losses 1,635 1,290 27 4,519 3,782 19 Effect of securitization activities 907 573 58 2,603 1,809 44 ----------------------------- ------------------------------- ADJUSTED PROVISIONS FOR BENEFITS, CLAIMS, AND CREDIT LOSSES 2,542 1,863 36 7,122 5,591 27 ----------------------------- ------------------------------- CORE INCOME BEFORE TAXES AND MINORITY INTEREST 2,936 2,167 35 7,623 5,936 28 Income taxes 1,048 789 33 2,783 2,182 28 Minority interest, after-tax 15 6 NM 27 17 59 ----------------------------- ------------------------------- CORE INCOME 1,873 1,372 37 4,813 3,737 29 Restructuring-related items, after-tax (86) (19) NM (156) (13) NM ----------------------------- ------------------------------- INCOME $1,787 $1,353 32 $ 4,657 $ 3,724 25 - ------------------------------------------======================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- 5 Global Consumer -- which provides banking, consumer lending, including credit and charge cards, and investment and personal insurance products and services to customers around the world -- reported core income of $1.873 billion and $4.813 billion in the 2001 third quarter and nine months, up $501 million or 37% and $1.076 billion or 29% from the comparable 2000 periods, reflecting growth in most businesses. North America core income increased $221 million or 24% in the 2001 third quarter and $559 million or 23% in the 2001 nine months from the prior-year periods, reflecting strong performance across all businesses. In the International businesses, core income increased $236 million or 47% in the 2001 third quarter and $364 million or 24% in the 2001 nine months compared to the 2000 periods, marked by the acquisition of Banamex and growth in all regions. Income of $1.787 billion and $4.657 billion in the 2001 third quarter and nine months included restructuring-related items of $86 million ($132 million pretax) and $156 million ($244 million pretax), respectively. Income of $1.353 billion and $3.724 billion in the 2000 third quarter and nine months included restructuring-related items of $19 million ($28 million pretax) and $13 million ($16 million pretax), respectively. See Note 8 of Notes to Consolidated Financial Statements for a discussion of the restructuring-related items. BANKING/LENDING CITIBANKING NORTH AMERICA
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- % ---------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - --------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $ 714 $ 566 26 $ 1,989 $ 1,711 16 Adjusted operating expenses (2) 439 356 23 1,219 1,071 14 Provision for credit losses 28 7 NM 48 23 NM --------------------------- ---------------------------- CORE INCOME BEFORE TAXES 247 203 22 722 617 17 Income taxes 96 82 17 282 249 13 --------------------------- ---------------------------- CORE INCOME 151 121 25 440 368 20 Restructuring-related items, after-tax -- -- -- (3) 8 NM --------------------------- ---------------------------- INCOME $ 151 $ 121 25 $ 437 $ 376 16 - --------------------------------------------===================================================================================== Average assets (IN BILLIONS OF DOLLARS) 17 9 89 12 9 33 Return on assets 3.52% 5.35% 4.87% 5.58% - --------------------------------------------===================================================================================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 3.52% 5.35% 4.90% 5.46% - --------------------------------------------=====================================================================================
(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 $151 million and $440 million in the 2001 third quarter and nine months, respectively, up $30 million or 25% and $72 million or 20% from the 2000 periods, as revenue growth and the acquisition of European American Bank (EAB) in July 2001 were partially offset by increased advertising and marketing costs. Income of $437 million and $376 million in the 2001 and 2000 nine months, respectively, included restructuring-related items of $3 million ($5 million pretax) in 2001 and restructuring-related credits of $8 million ($14 million pretax) in 2000. As shown in the following table, Citibanking grew customer deposits, accounts, and loans from 2000, including the acquisition of EAB which added $9.0 billion to customer deposits, $4.2 billion to average loans and 0.9 million to accounts.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- % -------------------------- % IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change - -------------------------------------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) 7.8 6.5 20 7.8 6.5 20 Average customer deposits $56.0 $45.0 24 $50.7 $44.4 14 Average loans $11.6 $ 6.9 68 $ 8.5 $ 7.0 21 - ------------------------------------------================================================================================
Revenues, net of interest expense, of $714 million and $1.989 billion in the 2001 third quarter and nine months, respectively, increased $148 million or 26% and $278 million or 16% from the 2000 periods. Revenue growth in the 2001 third quarter and nine months was driven by the acquisition of EAB along with higher treasury results, growth in customer deposits, and debit card fees. This was partially offset by reduced investment product fees, reflecting current market conditions and the disruption of business following the September 11th terrorist attack. Revenues in the 2001 nine months include a realized investment gain resulting from the disposition of an equity investment. Adjusted operating expenses for the 2001 third quarter and nine months increased $83 million or 23% and $148 million or 14% compared to the 2000 third quarter and nine months, primarily reflecting the addition of EAB and higher advertising and marketing costs. The provision for credit losses was $28 million and $48 million in the 2001 third quarter and nine months up from $7 million and $23 million in the 2000 periods. The net credit loss ratio was 1.12% in the 2001 third quarter, compared to 1.03% in the 2001 second 6 quarter and 0.86% in the prior-year quarter. Loans delinquent 90 days or more were $69 million or 0.55% of loans at September 30, 2001, compared to $41 million or 0.58% at June 30, 2001 and $33 million or 0.46% a year ago. Increases from the prior quarter and prior year are mainly due to the acquisition of EAB. Average assets of $17 billion and $12 billion in the 2001 third quarter and nine months increased $8 billion and $3 billion from the comparable 2000 periods, primarily reflecting the acquisition of EAB. Return on assets was 3.52% and 4.87% in the 2001 third quarter and nine months, down from 5.35% and 5.58% in the 2000 third quarter and nine months. The decline in return on assets is due to the addition of EAB. MORTGAGE BANKING
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- % -------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - -------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $ 260 $ 225 16 $ 770 $ 674 14 Adjusted operating expenses (2) 104 92 13 329 293 12 (Benefit) provision for credit losses (4) 1 NM (7) 9 NM ---------------------------- -------------------------- CORE INCOME BEFORE TAXES AND MINORITY INTEREST 160 132 21 448 372 20 Income taxes 62 49 27 173 141 23 Minority interest, after-tax 6 6 -- 18 17 6 ---------------------------- -------------------------- CORE INCOME 92 77 19 257 214 20 Restructuring-related items, after-tax -- -- -- (2) -- -- ---------------------------- -------------------------- INCOME $ 92 $ 77 19 $ 255 $ 214 19 - -----------------------------------------------================================================================================= Average assets (IN BILLIONS OF DOLLARS) $ 47 $ 42 12 $ 47 $ 38 24 Return on assets 0.78% 0.73% 0.73% 0.75% - -----------------------------------------------=================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- Mortgage Banking -- which originates and services mortgages and student loans for customers across the United States -- reported core income of $92 million and $257 million in the 2001 third quarter and nine months, respectively, up $15 million or 19% and $43 million or 20% from the 2000 periods, as increased mortgage originations and securitization activity combined with growth in student loans was partially offset by lower servicing revenue. Income of $255 million in the 2001 nine months included restructuring-related items of $2 million ($3 million pretax). As shown in the following table, accounts in the 2001 third quarter increased 9% while average managed loans increased 16% from the 2000 third quarter, reflecting strong growth in both mortgage loans held for sale and student loans. Mortgage originations were up significantly from the 2000 periods, reflecting increased refinancing activity due to lower interest rates.
THREE MONTHS ENDED SEPTEMBER NINE MONTHS ENDED 30, SEPTEMBER 30, ----------------------------- % ---------------------- % IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change - ---------------------------------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) (1) 4.7 4.3 9 4.7 4.3 9 Average managed loans (1) $44.8 $38.7 16 45.0 35.0 29 Mortgage originations $ 8.1 $ 5.7 42 $22.8 $14.5 57 - ------------------------------------------============================================================================
(1) Includes student loans. - -------------------------------------------------------------------------------- Revenues, net of interest expense, of $260 million and $770 million in the 2001 third quarter and nine months, respectively, grew $35 million or 16% and $96 million or 14% from the 2000 third quarter and nine months, mainly due to higher securitization income and growth in on-balance sheet loans, partially offset by lower servicing revenue, primarily reflecting increased prepayment activity driven by lower interest rates. Adjusted operating expenses increased $12 million or 13% and $36 million or 12% in the 2001 third quarter and nine months, which reflects volume-related increases. The (benefit) provision for credit losses was ($4) million and ($7) million in the 2001 third quarter and nine months compared to $1 million and $9 million in the 2000 third quarter and nine months, respectively. The net credit loss ratio was 0.10% in the 2001 third quarter compared to 0.08% in the 2001 second quarter and 0.09% in the 2000 third quarter. Loans delinquent 90 days or more were $1.204 billion or 2.74% of loans at September 30, 2001, up from $1.191 billion or 2.61% at June 30, 2001 and $723 million or 1.88% a year ago. The increase in delinquencies from the prior year reflects an increase in mortgage and student loans guaranteed by the U.S. government. 7 NORTH AMERICA CARDS
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- % ------------------------------ % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $2,470 $2,172 14 $6,940 $6,066 14 Effect of securitization activities 882 565 56 2,515 1,779 41 ---------------------------- ------------------------------ ADJUSTED REVENUES, NET OF INTEREST EXPENSE 3,352 2,737 22 9,455 7,845 21 ---------------------------- ------------------------------ Adjusted operating expenses (2) 1,004 1,005 - 3,048 2,937 4 Adjusted provision for credit losses (3) 1,434 957 50 4,026 2,908 38 ---------------------------- ------------------------------ CORE INCOME BEFORE TAXES 914 775 18 2,381 2,000 19 Income taxes 341 283 20 886 740 20 ---------------------------- ------------------------------ CORE INCOME 573 492 16 1,495 1,260 19 Restructuring-related items, after-tax -- -- -- -- 4 (100) ---------------------------- ------------------------------ INCOME $ 573 $ 492 16 $1,495 $1,264 18 - ----------------------------------------------==================================================================================== Average assets (IN BILLIONS OF DOLLARS) (4) $ 48 $ 50 (4) $ 47 $ 42 12 Return on assets (4) 4.74% 3.91% 4.25% 4.01% - ----------------------------------------------====================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. (3) Adjusted for the effect of securitization activities. (4) Adjusted for the effect of securitization activities, managed average assets and the related return on assets for North America Cards were $109 billion and 2.09% and $107 billion and 1.87% in the 2001 third quarter and nine months, respectively, compared to $101 billion and 1.94% and $95 billion and 1.77% in the 2000 third quarter and nine months, respectively. - -------------------------------------------------------------------------------- North America Cards -- which includes Citi Cards (bankcards and private-label cards) and Diners Club -- reported core income of $573 million and $1.495 billion in the 2001 third quarter and nine months, respectively, up $81 million or 16% and $235 million or 19% from the 2000 periods, driven by strong revenue growth that was partially offset by higher credit costs. Income of $1.264 billion in the 2000 nine months included restructuring-related credits of $4 million ($5 million pretax). Adjusted revenues, net of interest expense, of $3.352 billion and $9.455 billion in the 2001 third quarter and nine months, respectively, were up $615 million or 22% and $1.610 billion or 21% from the 2000 periods, reflecting spread improvements, resulting from lower interest rates and repricing actions, combined with receivable growth. Adjusted operating expenses decreased $1 million in the 2001 third quarter and increased $111 million or 4% in the 2001 nine months from the comparable 2000 periods, reflecting volume-related increases and higher advertising and marketing costs, offset by disciplined expense management. Citi Cards adjusted operating expenses as a percentage of average managed loans were 3.61% and 4.03% in the 2001 third quarter and nine months, respectively, down from 3.93% and 4.41% in the comparable prior-year periods. As shown in the following table, on a managed basis, the Citi Cards portfolio experienced continued growth in receivables and accounts in the 2001 third quarter, reflecting strong growth in the base business. Total sales in the 2001 third quarter were essentially flat compared to the prior year, reflecting current economic conditions and the impact of the events of September 11th.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- % ---------------------------- % IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change - ------------------------------------------------------------------------------------------------------------------------------ Accounts (IN MILLIONS) 93.4 89.4 4 93.4 89.4 4 Total sales $ 55.0 $55.2 -- $161.8 $158.9 2 Average Managed Loans $103.0 $94.8 9 $101.2 $ 89.3 13 - ------------------------------------------====================================================================================
Risk adjusted margin is a measure of profitability calculated as adjusted revenues less managed net credit losses as a percentage of average managed loans and is consistent with the goal of matching the revenues generated by the loan portfolio with the credit risk undertaken. As shown in the following table, the Citi Cards risk adjusted margin of 7.13% and 6.85% in the 2001 third quarter and nine months declined 1 and 17 basis points, respectively, from the 2000 periods, as higher spreads were more than offset by higher net credit losses.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------------- ------------------------------- IN BILLIONS OF DOLLARS 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------------- Risk adjusted revenues (1) $1.850 $1.701 $5.186 $4.688 Risk adjusted margin % (2) 7.13% 7.14% 6.85% 7.02% - ----------------------------------------======================================================================
(1) Citi Cards adjusted revenues less managed net credit losses. (2) Risk adjusted revenues as a percentage of average managed loans. - -------------------------------------------------------------------------------- 8 The adjusted provision for credit losses was $1.434 billion and $4.026 billion in the 2001 third quarter and nine months, up from $957 million and $2.908 billion in the comparable 2000 periods. Citi Cards managed net credit losses in the 2001 third quarter were $1.423 billion and the related loss ratio was 5.48% compared to $1.383 billion and 5.51% in the 2001 second quarter and $942 million and 3.95% in the 2000 third quarter. Net credit losses in the 2001 second quarter included a recovery of $55 million from the sale of certain bankrupt accounts which resulted in a 22 basis point reduction of the managed net credit loss ratio. The increase in net credit losses from the prior year reflects current U.S. economic conditions and a rise in bankruptcy filings. Citi Cards managed loans delinquent 90 days or more were $1.908 billion or 1.82% of loans at September 30, 2001, up from $1.775 billion or 1.72% at June 30, 2001 and $1.295 billion or 1.34% at September 30, 2000. Net credit losses and the related ratio may increase from the 2001 third quarter as a result of continued economic weakness including rising bankruptcy filings and delinquent loans. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. CITIFINANCIAL
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- % ------------------------ % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ---------------------------------------------------------------------------------------------------------------------------------- ADJUSTED REVENUES, NET OF INTEREST EXPENSE (2) $1,436 $1,262 14 $4,165 $3,753 11 Adjusted operating expenses (3) 492 568 (13) 1,563 1,675 (7) ADJUSTED PROVISIONS FOR BENEFITS, CLAIMS, AND CREDIT LOSSES (2) 451 362 25 1,313 1,139 15 -------------------------- ------------------------ Core income before taxes 493 332 48 1,289 939 37 Income taxes 185 119 55 483 342 41 -------------------------- ------------------------ CORE INCOME 308 213 45 806 597 35 Restructuring-related items, after-tax (2) -- -- (24) -- -- -------------------------- ------------------------ INCOME $ 306 $ 213 44 $ 782 $ 597 31 - ---------------------------------------------===================================================================================== Average assets (IN BILLIONS OF DOLLARS) $ 66 $ 58 14 $ 65 $ 55 18 Return on assets 1.84% 1.46% -- 1.61% 1.45% -- - ---------------------------------------------===================================================================================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 1.85% 1.46% 1.66% 1.45% - ---------------------------------------------=====================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Adjusted for the effect of securitization activities of $25 million and $88 million in the 2001 third quarter and nine months, respectively, and $8 million and $30 million in the 2000 third quarter and nine-month period, respectively. (3) Excludes restructuring-related items. - -------------------------------------------------------------------------------- CitiFinancial - which provides community-based lending services, including real estate-secured loans, through its branch network, regional sales offices, and cross-selling initiatives with other Citigroup businesses - reported core income of $308 million and $806 million in the 2001 third quarter and nine months, respectively, up $95 million or 45% and $209 million or 35% from the 2000 periods, principally reflecting strong growth in receivables, operating expense savings, and lower cost of funds. Income of $306 million and $782 million in the 2001 third quarter and nine months, respectively, included restructuring-related items of $2 million ($3 million pretax) and $24 million ($39 million pretax), respectively. As shown in the following table, average receivables in the 2001 third quarter grew 11% compared to the 2000 third quarter partially due to the cross selling of products through other Citigroup distribution channels. At September 30, 2001, the portfolio consisted of 69% real estate-secured loans, 16% personal loans, 11% auto loans, and 4% sales finance and other loans compared with 69%, 18%, 8%, and 5%, respectively, in 2000. The average net interest margin of 7.95% and 7.83% in the 2001 third quarter and nine months, respectively, increased 34 basis points and decreased 5 basis points compared to the 2000 periods as growth in lower-risk real estate loans that have lower yields was offset by lower cost of funds.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- Increase/ ------------------------- Increase/ 2001 2000 Decrease 2001 2000 Decrease - ---------------------------------------------------------------------------------------------------------------------------------- Average managed receivables (IN BILLIONS) $59.1 $53.1 11% $58.2 $50.9 14% Average net interest margin % 7.95% 7.61% 34 bp 7.83% 7.88% (5) bp - ----------------------------------------------------------------------------------------------------------------------------------
Adjusted revenues, net of interest expense, of $1.436 billion and $4.165 billion in the 2001 third quarter and nine months, respectively, increased $174 million or 14% and $412 million or 11% from the comparable 2000 periods, reflecting strong growth in receivables and a lower cost of funds. Adjusted operating expenses of $492 million and $1.563 billion in the 2001 third quarter and nine months, respectively, decreased $76 million or 13% and $112 million or 7% from the prior-year periods, mainly reflecting efficiencies resulting from the consolidation of Associates branches, partially offset by volume-related increases. 9 Adjusted provisions for benefits, claims, and credit losses were $451 million and $1.313 billion in the 2001 third quarter and nine months, respectively, up from $362 million and $1.139 billion in the comparable 2000 periods. The net credit loss ratio was 2.53% in the 2001 third quarter, down from 2.55% in the 2001 second quarter and up from 2.33% in the 2000 third quarter. Loans delinquent 90 days or more were $1.909 billion or 3.20% of loans at September 30, 2001, up from $1.757 billion or 3.00% at June 30, 2001 and $1.084 billion or 2.00% a year ago, primarily due to the alignment of credit and collection policies in the Associates real estate portfolio to those of CitiFinancial combined with the impact of current U.S. economic conditions. Net credit losses and the related loss ratio may increase from the 2001 third quarter as a result of economic conditions and credit performance of the portfolios, including bankruptcy filings. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. INTERNATIONAL CONSUMER JAPAN
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------- % ----------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $ 859 $ 713 20 $2,502 $1,966 27 Adjusted operating expenses (2) 316 274 15 982 790 24 Provision for credit losses 163 127 28 472 353 34 ------------------------------- ----------------------------- CORE INCOME BEFORE TAXES 380 312 22 1,048 823 27 Income taxes 136 108 26 377 296 27 ------------------------------- ----------------------------- CORE INCOME 244 204 20 671 527 27 Restructuring-related items, after-tax -- -- -- (6) -- -- ------------------------------- ----------------------------- INCOME $ 244 $ 204 20 $ 665 $ 527 26 - ------------------------------------------======================================================================================== Average assets (IN BILLIONS OF DOLLARS) $ 21 $ 18 17 $ 20 $ 16 25 Return on assets 4.61% 4.51% -- 4.45% 4.40% -- - ------------------------------------------======================================================================================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 4.61% 4.51% 4.49% 4.40% - ------------------------------------------========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- Japan - which provides banking, community-based lending, including credit and charge cards, and investment products and services - reported core income of $244 million and $671 million in the 2001 third quarter and nine months, respectively, up $40 million or 20% and $144 million or 27% from the 2000 periods, reflecting growth in the consumer finance business, including the impact of the acquisition of Unimat in September 2000. Income of $665 million in the 2001 nine months included restructuring-related items of $6 million ($12 million pretax). The net effect of foreign currency translation in the 2001 third quarter reduced revenue, expense, and provision for credit losses growth rates by 5, 10, and 14 percentage points, respectively, compared to the 2000 third quarter. For the nine months ended September 30, 2001, the net effect of foreign currency translation reduced revenue, expense, and provision for credit losses growth rates by 7, 9, and 14 percentage points, respectively, compared to the prior-year period. As shown in the following table, the Japan business experienced strong growth in accounts, customer deposits and loans from 2000, including the Unimat acquisition which added approximately $1.6 billion to average loans in the 2001 third quarter.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- % ------------------------ % IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change - ------------------------------------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) 5.2 4.6 13 5.2 4.6 13 Average customer deposits $15.4 $13.9 11 $14.8 $13.5 10 Average loans $14.7 $12.2 20 $14.1 $10.9 29 - --------------------------------------------=============================================================================
Revenues, net of interest expense, of $859 million and $2.502 billion in the 2001 third quarter and nine months increased $146 million or 20% and $536 million or 27% from the respective 2000 periods, primarily reflecting growth in consumer finance revenues and foreign exchange fees along with the impact of acquisitions, partially offset by the effect of foreign currency translation. Adjusted operating expenses in the 2001 third quarter and nine months increased 15% and 24%, respectively, from the 2000 periods, reflecting volume-related increases and the impact of acquisitions, partially offset by the effect of foreign currency translation. The provision for credit losses was $163 million and $472 million in the 2001 third quarter and nine months, up $36 million and $119 million from the comparable 2000 periods. Net credit losses in the 2001 third quarter were $149 million and the related loss ratio was 4.04%, compared to $130 million and 3.74% in the 2001 second quarter and $99 million and 3.15% in the 2000 third quarter. The 10 increase in net credit losses was primarily due to higher loan volumes, including the impact of acquisitions, and increased bankruptcy filings. Loans delinquent 90 days or more were $174 million or 1.12% of loans at September 30, 2001, compared to $129 million or 0.91% at June 30, 2001 and $105 million or 0.76% a year ago. Net credit losses and the related loss ratio may increase from the 2001 third quarter should bankruptcy filings and unemployment rates in Japan increase in the future. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. WESTERN EUROPE
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- % ---------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL REVENUES, NET OF INTEREST EXPENSE $ 651 $ 579 12 $1,875 $1,797 4 Adjusted operating expenses (2) 353 333 6 1,035 1,061 (2) Provisions for benefits, claims, and credit losses 106 97 9 306 293 4 --------------------------- ---------------------------- CORE INCOME BEFORE TAXES 192 149 29 534 443 21 Income taxes 68 55 24 194 162 20 --------------------------- ---------------------------- CORE INCOME 124 94 32 340 281 21 Restructuring-related items, after-tax -- -- -- (2) -- -- --------------------------- ---------------------------- INCOME $ 124 $ 94 32 $ 338 $ 281 20 - ---------------------------------------------======================================================================================= Average assets (IN BILLIONS OF DOLLARS) $ 23 $ 21 10 $ 22 $ 21 5 Return on assets 2.14% 1.78% 2.05% 1.79% - ---------------------------------------------=======================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- Western Europe -- which provides banking, community-based lending, including credit and charge cards, and investment products and services -- reported core income of $124 million and $340 million in the 2001 third quarter and nine months, respectively, up $30 million or 32% and $59 million or 21% from the 2000 periods, mainly reflecting growth in the branch and consumer finance businesses across the region, particularly in Germany and the UK. Income of $338 million in the 2001 nine months included restructuring-related items of $2 million ($3 million pretax). The net effect of foreign currency translation reduced income growth by approximately $38 million in the 2001 nine months which corresponded to a reduction in revenue, expense, and provision for benefits, claims, and credit losses growth by approximately 6, 3, and 3 percentage points, respectively, from the 2000 nine months. As shown in the following table, Western Europe accounts were up slightly from a year ago. Growth in both deposit and loan volumes in the 2001 third quarter and nine months was driven by increases in Germany and the UK and, in the nine-month comparison, was partially reduced by foreign currency translation.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------- % ----------------------- % IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change - ----------------------------------------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) 10.1 10.0 1 10.1 10.0 1 Average customer deposits $13.6 $12.1 12 $13.2 $12.5 6 Average loans $18.6 $16.7 11 $17.7 $16.8 5 - ------------------------------------------===================================================================================
Revenues, net of interest expense, of $651 million and $1.875 billion in the 2001 third quarter and nine months increased $72 million or 12% and $78 million or 4% from the comparable 2000 periods, respectively, principally due to growth in consumer finance and branch lending revenues, reflecting increased volumes and spreads, partially offset by reduced investment product fees and, in the nine-month comparison, the adverse effects of foreign currency translation. Adjusted operating expenses increased $20 million or 6% in the 2001 third quarter and decreased $26 million or 2% in the 2001 nine months compared to the 2000 periods, mainly reflecting the costs associated with higher business volumes that were more than offset, in the nine-month comparison, by the effect of foreign currency translation and lower expenses due to management initiatives. Revenue and expense growth in the 2001 third quarter and nine months was impacted by the 2001 first quarter sale of the Diners Club franchises in the region. The provisions for benefits, claims, and credit losses were $106 million and $306 million in the 2001 third quarter and nine months, up from $97 million and $293 million in the respective 2000 periods. The net credit loss ratio was 1.82% in the 2001 third quarter, down from 1.98% in the 2001 second quarter and 2.01% in the 2000 third quarter. Loans delinquent 90 days or more were $817 million or 4.29% of loans at September 30, 2001 compared with $740 million or 4.34% at June 30, 2001 and $829 million or 5.09% a year ago. The increase in loans delinquent 90 days or more from the prior quarter primarily reflects the effect of foreign currency translation. Net credit losses and the related loss ratio may increase from the 2001 third quarter as a result of economic conditions, 11 statutory changes in the region, and future credit performance of the 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. ASIA
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------- % -------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $ 554 $ 521 6 $1,630 $1,579 3 Adjusted operating expenses (2) 235 235 - 720 723 - Provisions for benefits, claims, and credit losses 67 71 (6) 196 207 (5) ----------------------------- ----------------------------------------- CORE INCOME BEFORE TAXES 252 215 17 714 649 10 Income taxes 92 76 21 262 230 14 ----------------------------- ----------------------------------------- CORE INCOME 160 139 15 452 419 8 Restructuring-related items, after-tax -- (1) 100 (3) (5) 40 ----------------------------- ----------------------------------------- INCOME $ 160 $ 138 16 $ 449 $ 414 8 - --------------------------------------------======================================================================================= Average assets (IN BILLIONS OF DOLLARS) $ 25 $ 27 (7) $ 25 $ 27 (7) Return on assets 2.54% 2.03% 2.40% 2.05% - --------------------------------------------======================================================================================= EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 2.54% 2.05% 2.42% 2.07% - --------------------------------------------=======================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- Asia (excluding Japan) -- which provides banking, lending, including credit and charge cards, and investment products and services -- reported core income of $160 million and $452 million in the 2001 third quarter and nine months, respectively, up $21 million or 15% and $33 million or 8% from the 2000 periods, as volume growth across most countries and products and disciplined expense management was partially offset by the net effects of foreign currency translation. Core income in the 2001 nine months also included gains on the contribution of Citigroup's insurance operations in Taiwan to its joint venture with Fubon. Income of $449 million in the 2001 nine months included restructuring-related charges of $3 million ($4 million pretax). Income of $138 million in the 2000 third quarter and $414 million in the 2000 nine months included restructuring-related charges of $1 million ($1 million pretax) and $5 million ($7 million pretax), respectively. The net effect of foreign currency translation reduced income growth by approximately $15 million and $42 million in the 2001 third quarter and nine months from the 2000 periods and reduced revenue growth by 8 percentage points in both periods, reduced the provisions for benefits, claims, and credit losses growth rates by 7 percentage points in both periods and reduced expense growth by 6 and 7 percentage points, respectively, from the 2000 periods. As shown in the following table, Asia experienced strong growth in accounts, primarily in cards; however, both loan and deposit volumes were reduced by foreign currency translation effects.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------- % ------------------------------- % IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change - ------------------------------------------------------------------------------------------------------------------------------------ Accounts (IN MILLIONS) 9.3 7.8 19 9.3 7.8 19 Average customer deposits $35.3 $35.1 1 $35.6 $34.6 3 Average loans $21.3 $22.3 (4) $21.4 $22.4 (4) - ------------------------------------------==========================================================================================
Revenues, net of interest expense, of $554 million and $1.630 billion in the 2001 third quarter and nine months, respectively, were up $33 million or 6% and $51 million or 3% from the 2000 periods, reflecting improvements in most countries driven by growth in cards, investment products, and deposits, as well as Fubon-related gains in the nine-month comparison, partially offset by foreign currency translation effects. Adjusted operating expenses were flat in the 2001 third quarter and declined $3 million in the 2001 nine months compared to the 2000 periods due to expense control initiatives across the region as well as foreign currency translation effects, partially offset by new branch initiatives. The provisions for benefits, claims, and credit losses were $67 million in the 2001 third quarter and $196 million in the 2001 nine months compared with $71 million and $207 million in the 2000 periods. Net credit losses in the 2001 third quarter were $65 million and the related loss ratio was 1.21%, essentially flat compared to $65 million and 1.23% in the 2001 second quarter and $64 million and 1.14% a year ago, reflecting weaker economic conditions in the region. Loans delinquent 90 days or more totaled $348 million or 1.65% of loans at September 30, 2001, compared to $338 million or 1.59% at June 30, 2001 and $350 million or 1.57% a year ago, primarily due to an increase in delinquent mortgages in Taiwan and Malaysia. 12 Net credit losses and loans delinquent 90 days or more may increase from 2001 third quarter levels due to economic weakness in Asia, whose exporting economies have been impacted by the slowdown in the U.S. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. MEXICO
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------------------------------------- IN MILLIONS OF DOLLARS 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $ 683 $ 119 $ 995 $ 452 Adjusted operating expenses (1) 460 113 721 341 Provisions for benefits, claims, and credit losses 57 7 75 32 ------------------------------------------------------------- CORE INCOME (LOSS) BEFORE TAXES AND MINORITY INTEREST 166 (1) 199 79 Income taxes 33 2 51 33 Minority interest, after-tax 9 -- 9 - ------------------------------------------------------------- CORE INCOME (LOSS) $ 124 ($3) $ 139 $ 46 Restructuring-related items, after-tax (84) -- (84) - ------------------------------------------------------------- INCOME (LOSS) $ 40 ($3) $ 55 $ 46 - ---------------------------------------------------------------============================================================= Average assets (IN BILLIONS OF DOLLARS) $ 49 $ 8 $ 24 $ 9 Return on assets 0.32% NM 0.31% 0.68% - ---------------------------------------------------------------============================================================= EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 1.00% NM 0.77% 0.68% - ---------------------------------------------------------------=============================================================
(1) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- Mexico - which includes the results of Banamex as well as Citicorp's consumer banking, corporate banking, and retirement services businesses in Mexico and provides a wide array of banking, insurance, and financial services products - reported core income of $124 million and $139 million in the 2001 third quarter and nine months, respectively, compared with a loss of $3 million and income of $46 million in the 2000 periods, primarily reflecting the acquisition of Banamex. Income of $40 million and $55 million in the 2001 third quarter and nine months included restructuring related charges of $84 million ($129 million pretax) in both periods. On October 31, 2001, Citibank Mexico's banking operations merged into Banamex, with Banamex being the surviving entity.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------------------------------------------- IN BILLIONS OF DOLLARS 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------ Accounts (IN MILLIONS) 16.5 1.7 16.5 1.7 Average customer deposits $23.7 $3.2 $9.8 $3.3 Average loans CONSUMER $ 3.8 $0.3 $1.5 $0.3 CORPORATE 9.6 3.2 5.5 3.4 GOVERNMENT/GOVERNMENT AGENCIES 2.9 -- 1.0 -- -------------------------------------------------------------- TOTAL $16.3 $3.5 $8.0 $3.7 - ----------------------------------------------==============================================================
Revenues, net of interest expense, of $683 million and $995 million in the 2001 third quarter and nine months increased $564 million and $543 million from the 2000 periods, primarily reflecting the acquisition of Banamex. Revenues reflect strong volume growth from the underlying customer business, offset by declining spreads and trading weakness. The consumer business was impacted by lower interest rates that reduced spreads on deposits. Adjusted operating expenses in the 2001 third quarter increased $347 million and increased $380 million in the 2001 nine months compared to the 2000 periods, primarily reflecting the acquisition of Banamex. The business has initiated actions to rationalize headcount, branches, and systems. The provisions for benefits, claims, and credit losses were $57 million and $75 million in the 2001 third quarter and nine months, up from $7 million and $32 million in the 2000 third quarter and nine months, reflecting the acquisition of Banamex. Consumer net credit losses in the 2001 third quarter were $33 million with a related loss ratio of 3.43%, up from 3.20% in the 2001 second quarter, and down from 3.54% a year ago. Consumer loans delinquent 90 days or more were $507 million or 9.06% of loans at September 30, 2001 compared with 6.33% of loans at June 30, 2001 and 5.75% of loans a year ago, reflecting the acquisition of Banamex. Commercial cash basis loans were $600 million at September 30, 2001, $164 million at June 30, 2001, $79 million at December 31, 2000, and $80 million at September 30, 2000. The increase in commercial cash basis loans is primarily due to the acquisition of Banamex. 13 Net credit losses, cash basis loans, and loans delinquent 90 days or more may increase from 2001 third quarter levels, due to economic weakness in Mexico, whose exports have been impacted by the slowdown in the U.S. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. LATIN AMERICA
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- % ---------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL REVENUES, NET OF INTEREST EXPENSE $ 396 $ 401 (1) $1,211 $1,238 (2) Adjusted operating expenses (2) 225 247 (9) 718 748 (4) Provisions for benefits, claims, and credit losses 82 66 24 225 226 - ---------------------------- ---------------------------- CORE INCOME BEFORE TAXES 89 88 1 268 264 2 Income taxes 26 31 (16) 80 90 (11) ---------------------------- ---------------------------- CORE INCOME 63 57 11 188 174 8 Restructuring-related items, after-tax -- (18) 100 (19) (29) 34 ---------------------------- ---------------------------- INCOME $ 63 $ 39 62 $ 169 $ 145 17 - --------------------------------------------======================================================================================== Average assets (IN BILLIONS OF DOLLARS) $ 8 $ 9 (11) $ 8 $ 9 (11) Return on assets 3.12% 1.72% -- 2.82% 2.15% -- - --------------------------------------------======================================================================================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 3.12% 2.52% 3.14% 2.58% - --------------------------------------------========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- Latin America (excluding Mexico) -- which provides banking, lending, including credit and charge cards, and insurance and investment services -- reported core income of $63 million and $188 million in the 2001 third quarter and nine months, respectively, compared with $57 million and $174 million in the 2000 periods. Income of $169 million in the 2001 nine months includes restructuring-related charges of $19 million ($28 million pretax). Income of $39 million and $145 million in the 2000 third quarter and nine months included restructuring-related charges of $18 million ($27 million pretax) and $29 million ($41 million pretax), respectively. The net effects of foreign currency translation reduced income by approximately $9 million and $22 million, reduced revenue growth by approximately 8 and 6 percentage points, reduced expense growth by 6 and 5 percentage points, and reduced the provision for benefits, claims, and credit losses growth rates by 5 and 3 percentage points in the 2001 third quarter and nine months, respectively, from the comparable 2000 periods. As shown in the following table, Latin America accounts declined as decreases in deposits and loan products were partially offset by growth in banking-related insurance products and cards. Average customer deposits declined in the 2001 third quarter, reflecting continued weak economic conditions in the region, strategy changes in certain countries, and foreign currency translation effects. Average loans declined 15% in the 2001 third quarter and 11% in the 2001 nine months, reflecting continued credit risk management initiatives and foreign currency translation effects.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------- % -------------------------- % IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change - -------------------------------------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) 7.1 7.3 (3) 7.1 7.3 (3) Average customer deposits $10.2 $10.6 (4) $10.6 $10.6 -- Average loans $ 5.8 $ 6.8 (15) $ 6.2 $ 7.0 (11) - ---------------------------------=========================================================================================
Revenues, net of interest expense, of $396 million in the 2001 third quarter were down $5 million or 1% from 2000, primarily reflecting weak economic conditions in Argentina and Chile as well as foreign currency translation effects, partially offset by increases in Puerto Rico. Revenues of $1.211 billion in the 2001 nine months declined $27 million or 2% from 2000, reflecting decreases in Chile and Brazil as well as foreign currency translation effects, partially offset by higher revenues in Venezuela and Peru. Adjusted operating expenses in the 2001 third quarter declined $22 million or 9% and decreased $30 million or 4% in the 2001 nine months compared to the 2000 periods, due to expense rationalization initiatives in Argentina, Brazil, and Chile as well as foreign currency translation effects. The provisions for benefits, claims, and credit losses were $82 million and $225 million in the 2001 third quarter and nine months, up from $66 million in the third quarter of 2000 and essentially flat to $226 million in the 2000 nine months. Net credit losses in the 2001 third quarter were $76 million with a related loss ratio of 5.20%, up from $66 million and 4.28% in the 2001 second quarter and $67 million or 3.90% a year ago. The increase in net credit losses primarily reflects continued weakness in Argentina. Loans delinquent 14 90 days or more were $255 million or 4.51% of loans at September 30, 2001 compared with $285 million or 4.69% at June 30, 2001 and $303 million or 4.49% a year ago. The decrease in loans delinquent 90 days or more relates primarily to Puerto Rico due to the gradual liquidation of the auto loan portfolio. Net credit losses and loans delinquent 90 days or more may increase from 2001 third quarter levels due to continued economic weakness in Argentina and the possible impact on the region from Argentina's difficulty in meeting its debt obligations. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. CENTRAL & EASTERN EUROPE, MIDDLE EAST & AFRICA
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- % -------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL REVENUES, NET OF INTEREST EXPENSE $ 140 $ 112 25 $ 405 $ 318 27 Total operating expenses (2) 91 88 3 278 231 20 Provision for credit losses 10 7 43 29 25 16 ---------------------------- -------------------------- CORE INCOME BEFORE TAXES 39 17 NM 98 62 58 Income taxes 15 5 NM 35 20 75 ---------------------------- -------------------------- CORE INCOME 24 12 100 63 42 50 Restructuring-related items, after-tax -- -- -- (1) 7 NM ---------------------------- -------------------------- INCOME $ 24 $ 12 100 $ 62 $ 49 27 - -------------------------------------------========================================================================================= Average assets (IN BILLIONS OF DOLLARS) $ 4 $ 3 33 $ 4 $ 3 33 Return on assets 2.38% 1.59% 2.07% 2.18% - -------------------------------------------========================================================================================= EXCLUDING RESTRUCTURING-RELATED ITEMS Return on Assets 2.38% 1.59% 2.11% 1.87% - -------------------------------------------=========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- Central & Eastern Europe, Middle East & Africa (CEEMEA -- including India and Pakistan) -- which provides banking, lending, including credit and charge cards, and investment services -- reported core income of $24 million and $63 million in the 2001 third quarter and nine months, respectively, up $12 million or 100% and $21 million or 50% from the 2000 periods, reflecting continued growth in loans and deposits across the region, partially offset by investments in new initiatives. Income of $62 million in the 2001 nine months included restructuring-related charges of $1 million ($1 million pretax). Income of $49 million in the 2000 nine months included restructuring-related credits of $7 million ($11 million pretax). As shown in the following table, CEEMEA reported 37% account growth from a year ago, primarily reflecting growth in customer deposits, cards, and other lending as franchise growth efforts continued across the region.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------- % --------------------------- % IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change - ----------------------------------------------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) 3.7 2.7 37 3.7 2.7 37 Average customer deposits $6.0 $3.9 54 $5.8 $3.7 57 Average loans $2.3 $1.9 21 $2.3 $1.9 21 - --------------------------------------------=======================================================================================
Revenues, net of interest expense, of $140 million and $405 million in the 2001 third quarter and nine months increased $28 million or 25% and $87 million or 27% from the comparable 2000 periods, while total operating expenses increased $3 million or 3% in the 2001 third quarter and $47 million or 20% in the 2001 nine months, reflecting franchise growth in the region, particularly deposits and cards. The provision for credit losses of $10 million and $29 million in the 2001 third quarter and nine months was up from $7 million and $25 million in the comparable 2000 periods, primarily due to loan growth. The net credit loss ratio was 1.62% in the 2001 third quarter, down from 1.70% in the 2001 second quarter and up from 1.45% a year ago. Loans delinquent 90 days or more were $32 million or 1.30% of loans at September 30, 2001, essentially flat to $32 million or 1.31% at June 30, 2001 and down from $34 million or 1.73% at September 30, 2000. Net credit losses and loans delinquent 90 days or more may increase from 2001 third quarter levels due to weakening global economic conditions. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. 15 E-CONSUMER
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------- % ------------------------------ % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $ 54 $ 76 (29) $136 $135 1 Adjusted operating expenses (2) 80 122 (34) 235 337 (30) ------------------------------- ------------------------------ CORE LOSS BEFORE TAX BENEFITS (26) (46) 43 (99) (202) 51 Income tax benefits (12) (15) 20 (39) (75) 48 ------------------------------- ------------------------------ CORE LOSS (14) (31) 55 (60) (127) 53 Restructuring-related items, after-tax -- -- -- (8) -- -- ------------------------------- ------------------------------ LOSS ($14) ($31) 55 ($68) ($127) 46 - ------------------------------------------=========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- e-Consumer -- the business responsible for developing and implementing Global Consumer Internet financial services products and e-commerce solutions -- reported losses before restructuring-related items of $14 million and $60 million in the 2001 third quarter and nine months, compared to losses of $31 million and $127 million in the 2000 third quarter and nine months. The loss of $68 million in the 2001 nine months included restructuring-related items of $8 million ($13 million pre-tax). Revenues, net of interest expense, in the 2001 third quarter and nine months decreased $22 million and increased $1 million from the comparable 2000 periods, mainly reflecting lower realized investment gains, partially offset by revenue growth associated with both new and established product offerings. Adjusted operating expenses declined $42 million or 34% and $102 million or 30% from the 2000 third quarter and nine months, primarily due to the effect of initiatives discontinued in 2000, partially offset by continued investment spending on Internet financial services and products. OTHER CONSUMER
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------------------------------------- IN MILLIONS OF DOLLARS 2001 2000 (1) 2001 2000 (1) - --------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $299 $297 $832 $666 Adjusted operating expenses (2) 121 145 372 400 Provisions for benefits, claims, and credit losses 148 161 439 376 ---------------------------------------------------------- CORE INCOME (LOSS) BEFORE TAX BENEFITS 30 (9) 21 (110) Income taxes (benefits) 6 (6) (1) (46) ---------------------------------------------------------- CORE INCOME (LOSS) 24 (3) 22 (64) Restructuring-related items, after tax -- -- (4) 2 ---------------------------------------------------------- INCOME (LOSS) $ 24 ($3) $ 18 ($62) - -----------------------------------------------------==========================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- Other Consumer -- which includes insurance operations, certain treasury and unallocated staff functions, global marketing, and other programs -- reported core income of $24 million and $22 million for the 2001 third quarter and nine months compared to losses before restructuring-related items of $3 million and $64 million in the 2000 third quarter and nine months. The improvement compared to the prior-year quarter was primarily due to a pension curtailment gain. The nine-month comparison also reflects higher treasury results. Income of $18 million in the 2001 nine months included restructuring-related items of $4 million ($7 million pretax). The loss of $62 million in the 2000 nine months included restructuring-related credits of $2 million ($3 million pretax). Revenues, expenses, and the provisions for benefits, claims, and credit losses reflect offsets to certain line-item reclassifications reported in other Global Consumer operating segments. 16 CONSUMER PORTFOLIO REVIEW In the consumer portfolio, credit loss experience is 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. 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
TOTAL AVERAGE LOANS 90 DAYS OR MORE PAST DUE (1) LOANS NET CREDIT LOSSES (1) ------------------------------------------------------------------------------------------------ IN MILLIONS OF DOLLARS, SEPT. 30, SEPT. 30, June 30, Sept. 30, 3RD QTR. 3RD QTR. 2ndt Qtr. 3rd Qtr. EXCEPT LOAN AMOUNTS IN BILLIONS 2001 2001 2001 (2) 2000 (2) 2001 2001 2001 (2) 2000 (2) - ------------------------------------------------------------------------------------------------------------------------------------ Citibanking North America $ 12.6 $ 69 $ 41 $ 33 $ 11.6 $ 33 $ 18 $ 15 RATIO 0.55% 0.58% 0.46% 1.12% 1.03% 0.86% Mortgage Banking 44.0 1,204 1,191 723 44.8 12 9 9 RATIO 2.74% 2.61% 1.88% 0.10% 0.08% 0.09% Citi Cards 104.7 1,908 1,775 1,295 103.0 1,423 1,383 942 RATIO 1.82% 1.72% 1.34% 5.48% 5.51% 3.95% Other North America Cards 1.4 5 5 20 1.5 10 12 13 RATIO 0.36% 0.29% 1.05% 2.80% 2.92% 3.00% CitiFinancial 59.7 1,909 1,757 1,084 59.1 376 369 311 RATIO 3.20% 3.00% 2.00% 2.53% 2.55% 2.33% Japan 15.5 174 129 105 14.7 149 130 99 RATIO 1.12% 0.91% 0.76% 4.04% 3.74% 3.15% Western Europe 19.1 817 740 829 18.6 85 84 84 RATIO 4.29% 4.34% 5.09% 1.82% 1.98% 2.01% Asia (excluding Japan) 21.1 348 338 350 21.3 65 65 64 RATIO 1.65% 1.59% 1.57% 1.21% 1.23% 1.14% Mexico 5.6 507 25 15 3.8 33 3 2 RATIO 9.06% 6.33% 5.75% 3.43% 3.20% 3.54% Latin America 5.7 255 285 303 5.8 76 66 67 RATIO 4.51% 4.69% 4.49% 5.20% 4.28% 3.90% CEEMEA 2.4 32 32 34 2.3 10 10 7 RATIO 1.30% 1.31% 1.73% 1.62% 1.70% 1.45% The Citigroup Private Bank 25.3 78 64 90 25.0 2 3 2 RATIO 0.31% 0.26% 0.36% 0.03% 0.04% 0.03% Other 3.5 20 22 14 3.5 10 2 (17) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL MANAGED $320.6 $ 7,326 $ 6,404 $4,895 $315.0 $2,284 $2,154 $1,598 RATIO 2.28% 2.10% 1.69% 2.88% 2.85% 2.24% - -------------------------------------=============================================================================================== Securitized receivables (66.8) (1,214) (1,115) (911) (63.0) (812) (838) (502) Loans held for sale (11.3) (106) (144) (68) (15.3) (95) (92) (59) - -------------------------------------=============================================================================================== CONSUMER LOANS $242.5 $ 6,006 $ 5,145 $3,916 $236.7 $1,377 $1,224 $1,037 RATIO 2.48% 2.29% 1.76% 2.31% 2.19% 1.90% - -------------------------------------===============================================================================================
(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) Reclassified to conform to current period's presentation. - -------------------------------------------------------------------------------- CONSUMER LOAN BALANCES, NET OF UNEARNED INCOME
END OF PERIOD AVERAGE ------------------------------------- ------------------------------------- SEPT. 30, JUNE 30, Sept. 30, 3RD QTR. 2ND QTR. 3rd Qtr. IN BILLIONS OF DOLLARS 2001 2001 2000 2001 2001 2000 - ------------------------------------------------------------------------------------------------------------------------ TOTAL MANAGED $320.6 $305.1 $289.4 $315.0 $302.6 $283.3 SECURITIZED RECEIVABLES (66.8) (63.6) (58.4) (63.0) (62.3) (56.3) Loans held for sale (11.3) (16.6) (9.0) (15.3) (16.5) (10.0) ------------------------------------- ------------------------------------- CONSUMER LOANS $242.5 $224.9 $222.0 $236.7 $223.8 $217.0 - --------------------------------------==================================================================================
Total delinquencies 90 days or more past due in the managed portfolio were $7.326 billion or 2.28% of loans at September 30, 2001, compared with $6.404 billion or 2.10% at June 30, 2001 and $4.895 billion or 1.69% at September 30, 2000. Total managed net credit losses in the 2001 third quarter were $2.284 billion and the related loss ratio was 2.88%, compared with $2.154 billion and 2.85% in 17 the 2001 second quarter and $1.598 billion and 2.24% in the 2000 third quarter. For a discussion on trends by business, see the business discussions on pages 5 - - 16. Citicorp's allowance for credit losses of $9.918 billion is available to absorb probable credit losses inherent in the entire portfolio. For analytical purposes only, the portion of Citicorp's allowance for credit losses attributed to the consumer portfolio was $5.239 billion at September 30, 2001, $4.914 billion at June 30, 2001 and $5.105 billion at September 30, 2000. The increase in the allowance for credit losses from the prior quarter is primarily due to the acquisitions of Banamex and EAB. The allowance as a percentage of loans on the balance sheet was 2.16% at September 30, 2001, down from 2.18% at June 30, 2001 and 2.30% a year ago. The decline in the allowance as a percentage of loans primarily reflects the growth in consumer loans. On-balance sheet consumer loans of $242.5 billion grew 9% from a year ago, primarily driven by the impact of the acquisitions of Banamex and EAB, as well as growth in Mortgage Banking, mainly student loans and mortgages, and CitiFinancial, mostly real-estate secured loans. On balance sheet loans in Citi Cards declined in the 2001 third quarter as growth in managed receivables was more than offset by increased securitization activity. In addition, loans increased in Japan and Western Europe, mainly in consumer finance, and decreased in Asia and Latin America. The attribution of the allowance is made for analytical purposes only and may change from time to time. Consumer net credit losses and loans 90 days or more past due may increase from 2001 third quarter levels as a result of portfolio growth and seasonal factors and as uncertain global economic conditions persist. 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
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- % --------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - -------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $3,136 $2,638 19 $9,099 $7,878 15 Adjusted operating expenses (2) 1,708 1,493 14 4,852 4,420 10 Provisions for benefits, claims, and credit losses 213 132 61 756 531 42 ---------------------------- --------------------------- CORE INCOME BEFORE TAXES AND MINORITY INTEREST 1,215 1,013 20 3,491 2,927 19 Income taxes 425 367 16 1,236 1,070 16 Minority interest, after-tax 6 8 (25) 18 11 64 ---------------------------- --------------------------- CORE INCOME 784 638 23 2,237 1,846 21 Restructuring-related items, after-tax (1) -- -- (70) 3 -- ---------------------------- --------------------------- INCOME $ 783 $ 638 23 $2,167 $1,849 17 - -------------------------------------------====================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- The Global Corporate business serves corporations, financial institutions, governments, investors, and other participants in capital markets throughout the world and consists of the Corporate & Investment Bank and Emerging Markets Corporate Banking & Global Transaction Services (EM Corporate & GTS). Global Corporate core income of $784 million and $2.237 billion in the 2001 third quarter and nine months increased $146 million or 23% and $391 million or 21% from the respective 2000 periods. The Corporate and Investment Bank core income of $356 million and $944 million in the 2001 third quarter and nine months increased $90 million or 34% and $94 million or 11% from the respective 2000 periods. EM Corporate & GTS core income of $428 million and $1.293 billion in the 2001 third quarter and nine months was up $56 million or 15% and $297 million or 30% from the comparable 2000 periods. The increase in the Corporate & Investment Bank reflects increases in Fixed Income, gains on the sale of Associates Relocation and Canadian Fleet businesses, and gains on the sale of certain municipal bonds partially offset by declines in Global Equities and higher credit losses. EM Corporate & GTS core income growth reflects broad-based growth in trading-related revenues, the impact of net investment hedging, and disciplined expense management. The increase in the 2001 nine months also reflects lower net credit losses and the impact of a building sale in Asia during the second quarter of 2001. Income of $783 million in the 2001 third quarter and $2.167 billion in the 2001 nine months included net restructuring-related charges of $1 million and $70 million, respectively. Income of $1.849 billion in the 2000 nine months included net restructuring-related credits of $3 million. See Note 8 of Notes to Consolidated Financial Statements for a discussion of the restructuring-related items. The businesses of Global Corporate are significantly affected by the levels of activity in the global capital markets which, in turn, are influenced by macro-economic and political policies and developments, among other factors, in the 100 countries in which the businesses operate. Global economic and market events can have both positive and negative effects on the revenue performance of the businesses and can affect credit performance. Losses on commercial lending activities and the level of cash-basis loans can vary widely with respect to timing and amount, particularly within any narrowly-defined business or loan type. 18 Net credit losses and cash-basis loans may increase from the 2001 third quarter levels due to weakening global economic conditions, sovereign or regulatory actions and other factors. This paragraph contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. CORPORATE AND INVESTMENT BANK
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------- % ----------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL REVENUES, NET OF INTEREST EXPENSE $1,437 $1,060 36 $3,826 $3,292 16 Adjusted operating expenses (2) 713 532 34 1,746 1,585 10 Provision for credit losses 181 113 60 631 363 74 ------------------------------- ----------------------------- CORE INCOME BEFORE TAXES AND MINORITY INTEREST 543 415 31 1,449 1,344 8 Income taxes 187 149 26 505 494 2 Minority interest, after-tax -- -- -- -- -- -- ------------------------------- ----------------------------- CORE INCOME 356 266 34 944 850 11 Restructuring-related items, after tax -- -- -- (40) -- -- ------------------------------- ----------------------------- INCOME $ 356 $ 266 34 $ 904 $ 850 6 - ------------------------------------------==========================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- The Corporate and Investment Bank, through the Global Relationship Bank (excluding Transaction Services), provides products and services that include foreign exchange, structured products, derivatives, loans, leasing and commercial finance products. The Corporate and Investment Bank core income of $356 million and $944 million in the 2001 third quarter and nine months increased $90 million or 34% and $94 million or 11% from the respective 2000 periods. The increase reflects increases in Fixed Income, gains on sale of Associates Relocation and Canadian Fleet businesses, and gains on the sale of certain municipal bonds, partially offset by higher credit losses. Income of $904 million in the 2001 nine months includes net restructuring-related charges of $40 million ($65 million pretax). Revenues, net of interest expense, of $1.437 billion and $3.826 billion in the 2001 third quarter and nine months increased $377 million or 36% and $534 million or 16%, respectively, from the comparable 2000 periods. The increase primarily reflects increases in Fixed Income, gains on the sale of Associates Relocation and Canadian Fleet businesses and gains on the sale of municipal bonds from the available-for-sale portfolio. Adjusted operating expenses were $713 million and $1.746 billion in the 2001 third quarter and nine months, up $181 million or 34% and $161 million or 10% compared to the prior-year periods, driven by higher compensation expenses. The provision for credit losses was $181 million in the 2001 third quarter and $631 million in the 2001 nine months, up $68 million and $268 million from the respective 2000 periods. The increase was primarily due to higher net credit losses in the transportation portfolio and asbestos-related bankruptcies combined with higher net credit losses in the retail, telecommunication, and airline industries. Cash-basis loans were $1.225 billion at September 30, 2001, $1.149 billion at June 30, 2001, $776 million at December 31, 2000, and $648 million at September 30, 2000, reflecting increases in the transportation portfolio, asbestos-related bankruptcies, and borrowers in the retail and telecommunication industries. The OREO portfolio totaled $110 million, down $5 million from December 31, 2000 and $12 million from September 30, 2000. The improvements in OREO were primarily related to the North America real estate portfolio. The increase in Other Repossessed Assets was primarily due to increased repossessed transportation equipment. Losses on commercial lending activities and the level of cash-basis loans can vary widely with respect to timing and amount, particularly within any narrowly-defined business or loan type. Net credit losses and cash-basis loans may increase from the 2001 third quarter levels due to the further impact of the September 11th events on a weakening U.S. economy. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. 19 EMERGING MARKETS CORPORATE BANKING AND GLOBAL TRANSACTION SERVICES
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------- % ---------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - --------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $1,699 $1,578 8 $5,273 $4,586 15 Adjusted operating expenses (2) 995 961 4 3,106 2,835 10 Provision for credit losses 32 19 68 125 168 (26) ----------------------------- ---------------------------- CORE INCOME BEFORE TAXES AND MINORITY INTEREST 672 598 12 2,042 1,583 29 Income taxes 238 218 9 731 576 27 Minority interest, after-tax 6 8 (25) 18 11 64 ----------------------------- ---------------------------- CORE INCOME 428 372 15 1,293 996 30 Restructuring-related items, after-tax (1) -- -- (30) 3 -- ----------------------------- ---------------------------- INCOME $ 427 $ 372 15 $1,263 $ 999 26 - ------------------------------------------======================================================================================= Average assets (IN BILLIONS OF DOLLARS) $ 114 $ 100 14 $112 $96 17 Return on assets 1.49% 1.48% 1.51% 1.39% - ------------------------------------------======================================================================================= EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 1.49% 1.48% 1.54% 1.39% - ------------------------------------------=======================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. - -------------------------------------------------------------------------------- Citicorp's EM Corporate & GTS business offers a wide array of banking and financial services products in the emerging markets (excluding Mexico) and also includes the global operations of Transaction Services. In June 2000, EM Corporate & GTS completed the acquisition of a majority interest in Bank Handlowy, a leading bank in Poland. EM Corporate & GTS core income of $428 million and $1.293 billion in the 2001 third quarter and nine months was up $56 million or 15% and $297 million or 30% from the comparable 2000 periods. The improvements reflect growth in trading-related revenues across all regions, the impact of net investment hedging, and disciplined expense management. The increase in the 2001 nine months also reflects lower net credit losses and the impact of a building sale in Asia in the second quarter of 2001. Income of $427 million in the 2001 third quarter and $1.263 billion for the 2001 nine months included restructuring-related charges of $1 million ($1 million pretax) and $30 million ($43 million pretax), respectively. Income of $999 million in the 2000 nine months included a restructuring-related credit of $3 million ($3 million pretax). Revenues, net of interest expense, were $1.699 billion and $5.273 billion in the 2001 third quarter and nine months, up $121 million or 8% and $687 million or 15% from the respective 2000 periods. Revenue growth primarily reflects higher trading-related revenues and loan portfolio revenues across all regions and benefits from net investment hedging in CEEMEA and Latin America. The increase in the 2001 nine months also reflects the impact of a building sale in Asia. Adjusted operating expenses increased $34 million or 4% to $995 million in the 2001 third quarter and $271 million or 10% to $3.106 billion in the 2001 nine months compared to the respective 2000 periods. The increases reflect volume-related increases, partially offset by cost controls in all regions and benefits from foreign currency translation effects. The increase in the 2001 nine months also reflects the impact of the acquisition of Bank Handlowy. The provision for credit losses totaled $32 million and $125 million in the 2001 third quarter and nine months, up $13 million or 68% from the 2000 third quarter, but down $43 million or 26% from the 2000 nine months, respectively. The increase in the 2001 third quarter reflects higher net credit losses in Australia, Malaysia and Argentina. The decrease in the 2001 nine months was primarily caused by net credit losses in Indonesia in the 2000 first quarter and Bolivia in the 2000 second quarter. Cash-basis loans were $1.563 billion at September 30, 2001, $1.279 billion at June 30, 2001, $1.069 billion at December 31, 2000, and $1.091 billion at September 30, 2000, primarily reflecting increases in Argentina, Australia, and New Zealand. Losses on commercial lending activities and the level of cash-basis loans can vary widely with respect to timing and amount, particularly within any narrowly-defined business or loan type. Net credit losses and cash-basis loans may increase from the 2001 third quarter levels due to weakening global economic conditions, sovereign or regulatory actions, and other 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. 20 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.
SEPT. 30, June 30, Mar. 31, Dec. 31, Sept. 30, IN MILLIONS OF DOLLARS 2001 2001 2001 2000 2000 - ------------------------------------------------------------------------------------------------------------------------- COMMERCIAL CASH-BASIS LOANS Corporate and Investment Bank $1,225 $1,149 $1,149 $ 776 $ 648 EM Corporate & GTS 1,563 1,279 1,137 1,069 1,091 Mexico 600 164 68 79 80 ---------------------------------------------------------------------------- Total Global Corporate 3,388 2,592 2,354 1,924 1,819 Investment Activities 6 13 8 2 4 ---------------------------------------------------------------------------- TOTAL COMMERCIAL CASH-BASIS LOANS (1) $3,394 $2,605 $2,362 $ 1,926 $1,823 - ---------------------------------------------============================================================================ NET CREDIT LOSSES Corporate and Investment Bank $ 244 $ 230 $ 219 $ 201 $104 EM Corporate & GTS 32 53 40 32 18 Mexico 7 4 8 5 5 ---------------------------------------------------------------------------- Total Global Corporate $ 283 $ 287 $ 267 $ 238 $127 Investment Activities -- -- -- -- 7 ---------------------------------------------------------------------------- TOTAL NET CREDIT LOSSES $ 283 $ 287 $ 267 $ 238 $134 - ---------------------------------------------============================================================================
(1) Prior period cash-basis loans were restated to change the policy of the Associates Commercial Leasing business for suspending accrual of interest on past due loans to conform with other leasing businesses in the Corporate & Investment Bank. The prior policy of placing loans that are 60 days or more past due into cash-basis, was changed to 90 days or more past due. - -------------------------------------------------------------------------------- Total commercial cash-basis loans were $3.394 billion at September 30, 2001, $2.605 billion at June 30, 2001, $2.362 billion at March 31, 2001, $1.926 billion at December 31, 2000, and $1.823 billion at September 30, 2000. Cash-basis loans in the Corporate and Investment Bank were $1.225 billion at September 30, 2001, $1.149 billion at June 30, 2001 and March 31, 2001, $776 million at December 31, 2000, and $648 million at September 30, 2000, reflecting increases in the transportation portfolio, asbestos-related bankruptcies, and borrowers in the retail and telecommunication industries. EM Corporate & GTS cash-basis loans were $1.563 billion at September 30, 2001, $1.279 billion at June 30, 2001, $1.137 billion at March 31, 2001, $1.069 billion at December 31, 2000, and $1.091 billion at September 30, 2000, primarily reflecting increases in Argentina, Australia, and New Zealand. Mexico cash basis loans were $600 million at September 30, 2001, $164 million at June 30, 2001, $68 million at March 31, 2001, $79 million at December 31, 2000, and $80 million at September 30, 2000. The increase is primarily due to the acquisition of Banamex. Other Repossessed Assets at September 30, 2001 were $479 million, up $187 million from December 31, 2000 and up $232 million from September 30, 2000. The increase in Other Repossessed Assets was primarily due to increased repossessed transportation equipment in CitiCapital and the acquisition of Banamex. Total commercial loans outstanding at September 30, 2001 were $157 billion compared to $138 billion at December 31, 2000. Total commercial net credit losses of $283 million in the third quarter of 2001 increased $149 million compared to the third quarter of 2000, primarily reflecting increases in the Corporate and Investment Bank and EM Corporate & GTS. Corporate and Investment Bank net credit losses of $244 million in the 2001 third quarter were up $140 million compared to the third quarter of 2000, primarily reflecting higher net credit losses in the transportation portfolio and asbestos-related bankruptcies combined with higher net credit losses in the retail, telecommunication, and airline industries. EM Corporate & GTS net credit losses of $32 million in the 2001 third quarter were up $14 million from the respective 2000 period, primarily due to higher net credit losses in Australia, Malaysia and Argentina. Mexico net credit losses of $7 million in the 2001 third quarter were up $2 million from the respective 2000 period, primarily reflecting the acquisition of Banamex. For a further discussion of trends by business, see the business discussions on pages 13 and 19 - 20. Citicorp's allowance for credit losses of $9.918 billion is available to absorb probable credit losses inherent in the entire portfolio. For analytical purposes only, the portion of Citicorp's allowance for credit losses attributed to the commercial portfolio was $4.679 billion at September 30, 2001 compared to $4.003 billion at June 30, 2001, $4.001 billion at March 31, 2001, $4.015 billion at December 31, 2000, and $3.795 billion at September 30, 2000. The increase in the allowance at December 31, 2000 primarily reflects additional provisions related to the transportation portfolio. The increase in the allowance at September 30, 2001 primarily reflects the acquisitions of Banamex and EAB. Losses on commercial lending activities and the level of cash-basis loans can vary widely with 21 respect to timing and amount, particularly within any narrowly-defined business or loan type. Commercial net credit losses and cash-basis loans may increase from 2001 third quarter levels due to the impact of the September 11th terrorist attack on a weakening global economy. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26.
SEPT. 30, June 30, Mar. 31, Dec. 31, Sept. 30, IN BILLIONS OF DOLLARS 2001 2001 2001 2000 2000 - ------------------------------------------------------------------------------------------------------------------------ COMMERCIAL ALLOWANCE FOR CREDIT LOSSES $4.679 $4.003 $4.001 $4.015 $3.795 As a percentage of total commercial loans 2.98% 2.79% 2.75% 2.92% 2.72% - -------------------------------------------------=======================================================================
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- % --------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - --------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $541 $467 16 $1,606 $1,421 13 Adjusted operating expenses (2) 371 357 4 1,114 1,026 9 Provision for benefits, claims and credit losses 32 (3) NM 62 22 NM -------------------------- --------------------------- CORE INCOME BEFORE TAXES AND MINORITY INTEREST 138 113 22 430 373 15 Income taxes 46 41 12 152 138 10 Minority interest, after-tax -- -- -- 1 -- NM -------------------------- --------------------------- CORE INCOME 92 72 28 277 235 18 Restructuring-related items, after-tax -- -- -- (6) 1 NM -------------------------- --------------------------- INCOME $ 92 $ 72 28 $ 271 $ 236 15 - ---------------------------------------------====================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- Global Investment Management and Private Banking is composed of Citibank Asset Management and The Citigroup Private Bank. These businesses offer a broad range of asset management products and services including mutual funds, closed-end funds, managed accounts, pension administration, and personalized wealth management services distributed to institutional, high net worth, and retail clients. Global Investment Management and Private Banking core income of $92 million in the 2001 third quarter and $277 million in the 2001 nine months was up $20 million or 28% and $42 million or 18% from the year-ago periods. The increase in core income primarily reflects growth in The Citigroup Private Bank, up $14 million or 18% and $45 million or 19% in the 2001 third quarter and nine months, respectively, from the year-ago periods, primarily due to increased customer activity including higher loan volumes and spreads, as well as the impact of lower interest rates. Income of $271 million in the 2001 nine months included a restructuring-related charge of $6 million ($12 million pretax). Income of $236 million in the 2000 nine months included a restructuring-related credit of $1 million ($2 million pretax). See Note 8 of Notes to Consolidated Financial Statements for a discussion of the restructuring-related items. 22 CITIBANK ASSET MANAGEMENT
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- % ------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ------------------------------------------------------------------------------------------------------------------------------ TOTAL REVENUES, NET OF INTEREST EXPENSE $176 $130 35 $476 $382 25 Adjusted operating expenses (2) 150 142 6 432 386 12 Provision for benefits and claims (3) 28 -- NM 55 -- NM -------------------------- ------------------------- CORE LOSS BEFORE TAXES AND MINORITY INTEREST (2) (12) 83 (11) (4) NM Income tax benefits (1) (5) 80 (6) (1) NM Minority interest, after-tax -- -- -- 1 -- NM -------------------------- ------------------------- CORE LOSS (1) (7) 86 (6) (3) (100) Restructuring-related items, after-tax -- -- -- (2) -- NM -------------------------- ------------------------- LOSS ($1) ($7) 86 ($8) ($3) NM - ----------------------------------------------================================================================================ Assets under management (IN BILLIONS OF DOLLARS) (4) (5) $143 $153 (7) $143 $153 (7) - ----------------------------------------------================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. (3) In the fourth quarter of 2000, a year-to-date reclassification occurred which increased both revenues and provision for benefits and claims. (4) Includes $29 billion and $31 billion in 2001 and 2000, respectively, for The Citigroup Private Bank clients. (5) Includes Emerging Markets Pension Administration assets under management of $6 billion and $4 billion in 2001 and 2000, respectively. NM Not meaningful - -------------------------------------------------------------------------------- Citibank Asset Management offers institutional, high net worth, and retail clients a broad range of investment alternatives from investment centers located around the world and also includes the pension administration business of Global Retirement Services. Products and services offered include mutual funds, closed-end funds, separately managed accounts, and pension administration. Citibank Asset Management reported a core loss of $1 million in the 2001 third quarter, an increase in income of $6 million from the 2000 third quarter, primarily reflecting the impact of the Generar acquisition in Argentina. The Generar acquisition, consisting of pension fund, retirement services/annuities, and death and disability insurance companies, was effective January 1, 2001. Core loss of $6 million in the 2001 nine months increased $3 million from the comparable 2000 period, primarily due to the transfer of funds to Citigroup Mutual Fund Management, a Salomon Smith Barney entity, partially offset by the impact of the Generar and other acquisitions in the Global Retirement Services business. Loss of $8 million in the 2001 nine months included a restructuring-related charge of $2 million ($4 million pretax). Assets under management for the 2001 third quarter declined $10 billion or 7% from the year-ago quarter to $143 billion, primarily reflecting the transfer of funds to Citigroup Mutual Fund Management to address the requirements of the effect of the Gramm-Leach-Bliley Act. This Act would have obligated Citibank to register as an investment advisor. Revenues, net of interest expense, of $176 million and $476 million in the 2001 third quarter and nine months, respectively, increased $46 million or 35% and $94 million or 25% from the 2000 third quarter and nine months, respectively, primarily reflecting the impact of the Generar acquisition and the impact of a benefits and claims reclassification. The nine-month period increase also reflects the impact of other acquisitions in the Global Retirement Services business, partially offset by the transfer of funds to Citigroup Mutual Fund Management. Adjusted operating expenses of $150 million and $432 million in the 2001 third quarter and nine months, respectively, increased $8 million or 6% and $46 million or 12% from the comparable 2000 periods. The increase in the 2001 third quarter and nine months primarily reflects the Generar acquisition. The nine-month period increase also reflects the impact of other acquisitions in the Global Retirement Services business, partially offset by the transfer of funds to Citigroup Mutual Fund Management. 23 THE CITIGROUP PRIVATE BANK
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- % ------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - ------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $ 365 $ 337 8 $1,130 $1,039 9 Adjusted operating expenses (2) 221 215 3 682 640 7 Provision (benefit) for credit losses 4 (3) NM 7 22 (68) ---------------------------- ------------------------- CORE INCOME BEFORE TAXES 140 125 12 441 377 17 Income taxes 47 46 2 158 139 14 ---------------------------- ------------------------- CORE INCOME 93 79 18 283 238 19 Restructuring-related items, after-tax -- -- -- (4) 1 NM ---------------------------- ------------------------- INCOME $ 93 $ 79 18 $ 279 $ 239 17 - ---------------------------------------------================================================================================== Average assets (IN BILLIONS OF DOLLARS) $ 26 $ 26 -- $ 26 $ 25 4 Return on assets 1.42% 1.21% 1.43% 1.28% - ------------------------------------------------------------------------------------------------------------------------------- Client business volumes under Management (IN BILLIONS OF DOLLARS) 149 154 (3) 149 154 (3) - ---------------------------------------------==================================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes restructuring-related items. NM Not meaningful - -------------------------------------------------------------------------------- The Citigroup Private Bank provides personalized wealth management services for high net worth clients around the world. The Citigroup Private Bank core income was $93 million in the 2001 third quarter and $283 million in the 2001 nine months, up $14 million or 18% and $45 million or 19% from the 2000 periods, primarily reflecting increased customer activity across most products. Income of $279 million for the 2001 nine months included a restructuring-related charge of $4 million ($7 million pretax). Income of $239 million in the 2000 nine months included a restructuring-related credit of $1 million ($2 million pretax). Client business volumes under management, which include custody accounts, client assets under fee-based management, deposits, and loans, were $149 billion at the end of the 2001 third quarter, down $5 billion or 3% from $154 billion at the end of the year-ago quarter. The decrease primarily reflects declines in CEEMEA and Europe, partially offset by growth in Asia. Revenues, net of interest expense, were $365 million in the 2001 third quarter and $1.130 billion in the nine months, up $28 million or 8% and $91 million or 9% from the 2000 periods. Revenue growth was driven by the impact of lower interest rates, increased fee revenue, and higher loan volumes and spreads. In the 2001 third quarter and nine months, the increase in revenues reflects continued favorable trends in the U.S., up $15 million or 12% and $41 million or 11%, respectively, from the comparable 2000 periods. International revenues increased $13 million or 6% from the 2000 third quarter and $50 million or 7% from the 2000 nine months, primarily due to growth in Asia and Japan. Adjusted operating expenses of $221 million and $682 million in the 2001 third quarter and nine months were up $6 million or 3% and $42 million or 7% from the respective 2000 periods, primarily reflecting higher levels of revenues and investment spending in front-end sales and servicing capabilities. The provision for credit losses was $4 million in the 2001 third quarter and $7 million in the 2001 nine months, up $7 million from the 2000 third quarter and down $15 million from the 2000 nine-month period. The 2001 nine-month decline from the 2000 period was primarily related to a provision taken in the 2000 periods for a loan in Europe. Loans 90 days or more past due at the 2001 quarter-end were $78 million or 0.31% of total loans outstanding, compared with $90 million or 0.36% at the end of the 2000 third quarter. 24 CORPORATE/OTHER
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- % ------------------------- % IN MILLIONS OF DOLLARS 2001 2000 (1) Change 2001 2000 (1) Change - -------------------------------------------------------------------------------------------------------------------------- ADJUSTED REVENUES, NET OF INTEREST EXPENSE (2) $ 27 ($76) NM $141 ($155) NM Adjusted operating expenses (2) 132 110 20 325 462 (30) Provision (benefit) for credit losses 2 -- NM 1 (6) NM -------------------------- ------------------------- CORE LOSS BEFORE TAX BENEFITS AND MINORITY INTEREST (107) (186) 42 (185) (611) 70 Income tax benefits (58) (66) 12 (51) (234) 78 Minority interest, after-tax 4 1 NM 3 1 NM -------------------------- ------------------------- CORE LOSS (53) (121) 56 (137) (378) 64 Restructuring-related items, after-tax (3) 3 (26) NM 4 (122) NM -------------------------- ------------------------- LOSS ($50) ($147) 66 ($133) ($500) 73 - --------------------------------------------==============================================================================
(1) Reclassified to conform to the current period's presentation. (2) Excludes Housing Finance unit charge and restructuring-related items. (3) The 2000 nine-month period includes a $71 million (after-tax) charge associated with the discontinuation of the loan origination operations of the Associates Housing Finance unit. NM Not meaningful - -------------------------------------------------------------------------------- Corporate/Other includes net corporate treasury results, corporate staff and other corporate expenses, certain inter-segment eliminations, and the remainder of Internet-related development activities not allocated to the individual businesses. Adjusted revenues, net of interest expense, in the 2001 third quarter and nine months increased by $103 million and $296 million from the 2000 third quarter and nine months, respectively, primarily reflecting lower treasury costs and higher inter-segment eliminations. Adjusted operating expenses in the 2001 third quarter increased $22 million over the prior-year period, reflecting increases in certain unallocated corporate costs and inter-segment eliminations, partially offset by lower employee-related costs. Adjusted operating expenses in the 2001 nine months decreased $137 million from the 2000 nine months, primarily reflecting a 2000 first quarter $108 million pretax expense for the contribution of appreciated venture capital securities to the Citigroup Foundation, which had minimal impact on Citicorp's earnings after related tax benefits and investment gains. Results in the 2001 nine months also reflect lower technology expenses due to costs associated with year 2000 remediation in the 2000 first quarter, and lower employee-related costs, partially offset by higher inter-segment eliminations. INVESTMENT ACTIVITIES
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------------------------------------- IN MILLIONS OF DOLLARS 2001 2000 (1) 2001 2000 (1) - -------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE ($345) $441 ($96) $2,096 Total operating expenses 26 36 77 84 Provision for credit losses -- 7 -- 7 ------------------------------------------------------------- INCOME (LOSS) BEFORE TAXES AND MINORITY INTEREST (371) 398 (173) 2,005 Income taxes (benefits) (133) 150 (80) 738 Minority interest, after-tax - (1) (2) (1) ------------------------------------------------------------- INCOME (LOSS) ($238) $249 ($91) $1,268 - -------------------------------------------------------==============================================================
(1) Reclassified to conform to the current period's presentation. - -------------------------------------------------------------------------------- Investment Activities primarily consists of Citicorp's venture capital activities, securities transactions related to certain corporate investments, the results of certain investments in countries that refinanced debt under the 1989 Brady Plan or plans of a similar nature, and the investment portfolio related to Banamex. Losses for the 2001 third quarter of $238 million, as compared to income of $249 million in the 2000 third quarter, primarily reflects lower venture capital results, lower realized gains in the refinancing portfolios, and impairment write-downs in the 2001 third quarter in certain proprietary investments, partially offset by increased gains in certain proprietary investments. Losses for the 2001 nine months of $91 million, as compared to income of $1.268 billion in the 2000 nine-month period, primarily reflects lower venture capital results compared to the exceptionally strong equity markets in the 2000 first quarter. The 2000 first quarter included write-downs 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. 25 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 political conditions, sovereign or regulatory actions, the impact of the September 11th terrorist attack, levels of activity in the global capital markets, portfolio growth, the credit performance of the portfolios, including bankruptcies, and seasonal factors; weakening global economic conditions, Argentina's difficulty in meeting its debt obligations, the performance of global financial markets and prevailing inflation and interest rates; the impact of proposed rules that would govern the regulatory treatment of merchant banking investments and certain similar equity investments in nonfinancial companies; possible amendments to, and interpretations of, risk-based capital guidelines and reporting instructions; the resolution of legal proceedings and related matters; and the Company's success in managing the costs associated with the expansion of existing distribution channels and developing new ones, and in realizing increased revenues from such distribution channels, including cross-selling initiatives and electronic commerce-based efforts. MANAGING GLOBAL RISK The Citicorp Risk Management framework recognizes the wide range and diversity of global business activities by balancing strong corporate oversight with defined independent risk management functions at the business level. The Citicorp Risk Management Framework is described in detail in Citicorp's 2000 Annual Report on Form 10-K. THE CREDIT RISK MANAGEMENT PROCESS The credit risk management process at Citicorp relies on corporate-wide standards to ensure consistency and integrity, with business-specific policies and practices to ensure applicability and ownership. Citicorp's credit risk management process is described in detail in Citicorp's 2000 Annual Report on Form 10-K. 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. Market risk at Citicorp is managed through corporate-wide standards and business-specific policies and procedures which are described more fully in Citicorp's 2000 Annual Report on Form 10-K. 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. Price risk arises in Non-Trading Portfolios, as well as in Trading Portfolios. NON-TRADING PORTFOLIOS Price risk in non-trading portfolios is measured predominantly through Earnings-at-Risk and Factor Sensitivity techniques. These measurement techniques are supplemented with additional tools, including stress testing and cost-to-close analysis. 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. Citicorp does not utilize instruments with leverage features in connection with its non-trading risk management activities. Earnings-at-Risk is the primary method for measuring price risk in Citicorp's non-trading portfolios. Earnings-at-Risk measures the pretax earnings impact of a specified upward and downward shift in the yield curve for the appropriate currency. 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. U.S. dollar exposures are calculated by multiplying the gap between interest-sensitive items, including assets, liabilities, derivative instruments, and other off-balance sheet instruments, by 100 basis points. Non-U.S. dollar exposures are calculated utilizing the statistical equivalent of a 100 basis point change in interest rates and assumes no correlation between exposures in different currencies. 26 Citicorp's primary non-trading price risk exposure is to movements in U.S. dollar interest rates. Citicorp also has Earnings-at-Risk in various other currencies. The following table illustrates the impact to Citicorp pretax earnings from a 100 basis point increase or decrease in the U.S. dollar yield curve. As of September 30, 2001, a 100 basis point increase in U.S. dollar interest rates would have a potential negative impact on pre-tax earnings within the next twelve months of $475 million and the negative impact ranged from $285 million to $475 million at each month-end during the quarter. A 100 basis point decrease in U.S. dollar interest rates would have a potential positive impact on pre-tax earnings within the next 12 months of $489 million and the positive impact ranged from $348 million to $489 million at each month-end during the quarter. The potential impact on pre-tax earnings for periods beyond the first 12 months was an increase of $833 million from a 100 basis point increase in U.S. dollar interest rates and a decrease of $1.025 million from a 100 basis point decrease in U.S. dollar interest rates. The change in Earnings-at-Risk from the prior year and from the prior year-end reflects the growth in Citicorp's fixed funding, the reduction in the use of derivatives in managing our risk portfolio, the cancellation of receive fixed swaps, as well as the change in mortgage prepayment characteristics in our portfolio, offset by the acquisition of Banamex and the change in the asset/liability mix to reflect Citicorp's current view of interest rates. As of September 30, 2001, the statistical equivalent of a 100 basis point increase in non-U.S. dollar interest rates would have a potential positive impact on Citicorp's pre-tax earnings over the next 12 months of $78 million and the impact ranged from a negative impact of $326 million to a positive impact of $78 million at each month-end during the quarter. The statistical equivalent of a 100 basis point decrease in non-U.S. dollar interest rates would have a potential negative impact on Citicorp's pre-tax earnings over the next 12 months of $75 million and the impact ranged from a positive impact of $328 million to a negative impact of $75 million at each month-end during the quarter. The potential impact on pre-tax earnings for periods beyond the first 12 months was a decrease of $1.059 billion for the statistical equivalent of a 100 basis point increase in non-U.S. dollar interest rates and an increase of $1.075 billion for the statistical equivalent of a 100 basis point decrease in non-U.S. dollar interest rates. The change in the non-U.S. dollar Earnings-at-Risk from the prior-year and from prior year-end reflects the change in the use of derivatives in managing the risk portfolio, the acquisition of Banamex, and a change in the asset/liability mix to reflect Citicorp's current view of interest rates. CITICORP EARNINGS-AT-RISK (IMPACT ON PRETAX EARNINGS) (1)
SEPTEMBER 30, 2001 December 31, 2000 IN MILLIONS OF DOLLARS U.S. DOLLAR NON-U.S. DOLLAR (2)(3) U.S. Dollar Non-U.S. Dollar - --------------------------------------------------------------------------------------------------------------------- INCREASE DECREASE INCREASE DECREASE Increase Decrease Increase Decrease -------------------------------------------------------------------------------------------- Twelve months and less ($475) $ 489 $ 78 ($75) ($433) $ 460 ($198) $201 Thereafter 833 (1,025) (1,059) 1,075 217 (320) (105) 121 -------------------------------------------------------------------------------------------- Total $ 358 ($ 536) ($ 981) $ 1,000 ($216) ($140) ($303) $322 - -------------------------============================================================================================ September 30, 2000 IN MILLIONS OF DOLLARS U.S. Dollar Non-U.S. Dollar - ----------------------------------------------------------------------- Increase Decrease Increase Decrease ----------------------------------------------- Twelve months and less ($468) $487 ($207) $210 Thereafter (256) 190 (161) 178 ----------------------------------------------- Total ($724) $677 ($368) $388 ===============================================
(1) Prior-year information has been restated to reflect reorganizations and a change in assumptions (specifically revising the measurement of Earnings-at-Risk from a two standard deviation change in interest rates to a 100 basis point change). These changes were made to reflect a more consistent view for managing price risk throughout the organization. (2) Primarily results from Earnings-at-Risk in the Japanese Yen, the Euro, and the Mexican Peso. (3) The impact of the Banamex acquisition on Earnings-at-Risk is included in the non-U.S. dollar Increase/Decrease totals for September 30, 2001 only and was ($253) million and $253 million, respectively. - -------------------------------------------------------------------------------- TRADING PORTFOLIOS Price risk in trading portfolios is measured through a complementary set of tools, including Factor Sensitivities, Value-at-Risk, and Stress Testing. Each trading portfolio has its own market risk limit framework, encompassing these measures and other controls, including permitted product lists and a new product approval process for complex products, established by the business and approved by independent market risk management. Factor Sensitivities are defined as the change in the value of a position for a defined change in a market risk factor (e.g., the change in the value of a Treasury bill for a 1 basis point change in interest rates). It is the responsibility of independent market risk management to ensure that factor sensitivities are calculated, monitored, and, in some cases, limited for all relevant risks taken in a trading portfolio. Value-at-Risk estimates the potential decline in the value of a position or a portfolio, under normal market conditions, over a one-day holding period, at a 99% confidence level. The Value-at-Risk method incorporates the Factor Sensitivities of the trading portfolio with the volatilities and correlations of those factors. Stress Testing is performed on trading portfolios on a regular basis, to estimate the impact of extreme market movements. Stress Testing is performed on individual trading portfolios, as well as on aggregations of portfolios and businesses, as appropriate. It is the responsibility of independent market risk management, in conjunction with the businesses, to develop stress scenarios, review the output of periodic stress testing exercises, and utilize the information to make judgments as to the ongoing appropriateness of exposure levels and limits. 27 New and/or complex products in trading portfolios are required to be reviewed and approved by the Global Corporate Capital Markets Approval Committee (CMAC). The CMAC is responsible for ensuring that all relevant risks are identified and understood and can be measured, managed, and reported in accordance with applicable Global Corporate policies and practices. The CMAC is made up of senior representatives from market and credit risk management, legal, accounting, operations, and other support areas, as required. The level of price risk exposure at any given point in time 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 $23 million at September 30, 2001. Daily exposures averaged $24 million during the 2001 third quarter and ranged from $20 million to $30 million. The following table summarizes Value-at-Risk in the trading portfolios as of September 30, 2001 and December 31, 2000, along with the averages.
2001 Full THIRD Year SEPTEMBER 30, QUARTER December 30, 2000 IN MILLIONS OF DOLLARS 2001 AVERAGE 2000 Average (1) - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate $16 $18 $18 $17 Foreign exchange 10 11 9 9 Equity 9 7 20 14 All other (primarily commodity) 6 6 9 5 Covariance adjustment (18) (18) (27) (21) --------------------------------------------------------------------- Total $23 $24 $29 $24 - ---------------------------------------------------------------=====================================================================
(1) Prior-year information has been restated from that previously presented to reflect reorganizations and a change in assumptions to reflect a more consistent view for managing price risk throughout the organization. - -------------------------------------------------------------------------------- The table below provides the range of Value-at-Risk in the trading portfolios that was experienced during the third quarter of 2001 and all of 2000.
2001 2000 (1) --------------------------------------------------------------------- IN MILLIONS OF DOLLARS LOW HIGH Low High - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate $15 $22 $13 $29 Foreign exchange 6 16 5 18 Equity 5 12 9 31 All other (primarily commodity) 5 8 1 18 - ---------------------------------------------------------------=====================================================================
(1) Prior-year information has been restated from that previously presented to reflect reorganizations and a change in assumptions to reflect a more consistent view for managing price risk throughout the organization. - -------------------------------------------------------------------------------- 28 MANAGEMENT OF CROSS-BORDER RISK Cross-border risk is the risk that Citicorp will be unable to obtain payment from customers on their contractual obligations as a result of actions taken by foreign governments such as exchange controls, debt moratoria, and restrictions on the remittance of funds. Citicorp manages cross-border risk as part of the Citigroup Risk Management framework described in Citicorp's 2000 Annual Report on Form 10-K. The following table presents total cross-border outstandings and commitments on a regulatory basis in accordance with Federal Financial Institutions Examination Council (FFIEC) guidelines. Total cross-border outstandings include cross-border claims on third parties as well as investments in and funding of local franchises, as described in Citicorp's 2000 Annual Report on Form 10-K. Countries with outstandings greater than 0.75% of Citicorp assets at September 30, 2001 and December 31, 2000 include:
SEPTEMBER 30, 2001 December 31, 2000 ------------------------------------------------------------------------------ ------------------- CROSS-BORDER CLAIMS ON THIRD PARTIES ------------------------------------------ TOTAL Total TRADING INVESTMENTS CROSS- Cross- AND IN AND BORDER Border SHORT- FUNDING OUT- Out- TERM OF LOCAL STAND- COMMIT- stand- Commit- IN BILLIONS OF DOLLARS BANKS PUBLIC PRIVATE TOTAL CLAIMS(1) FRANCHISES INGS MENTS (2) ings ments (2) - ----------------------------------------------------------------------------------------------------------------------------------- Mexico (3) $0.1 $1.5 $7.4 $9.0 $4.4 $3.4 $12.4 $0.8 $3.4 $1.7 Brazil 1.0 0.3 4.4 5.7 3.0 4.7 10.4 0.3 7.9 0.2 Germany 3.6 2.1 1.4 7.1 6.0 2.6 9.7 4.6 6.6 6.8 Italy 2.0 2.5 0.7 5.2 3.7 1.7 6.9 4.7 7.4 5.7 Canada 2.2 - 1.7 3.9 2.5 2.5 6.4 4.1 7.1 4.9 France 2.8 1.4 1.4 5.6 4.0 0.3 5.9 8.0 5.4 8.3 Netherlands 1.1 0.9 2.9 4.9 3.9 -- 4.9 2.5 4.5 1.8 United Kingdom 1.3 0.1 2.5 3.9 3.0 -- 3.9 16.1 4.2 14.9 - -----------------------------======================================================================================================
(1) Included in total cross-border claims on third parties. (2) Commitments (not included in total cross-border outstandings) include legally binding cross-border letters of credit and other commitments and contingencies as defined by the FFIEC. (3) Increase from December 31, 2000 primarily represents inclusion of Banamex's Mexican exposure. - -------------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES Citicorp manages liquidity through a well-defined process described in Citicorp's 2000 Annual Report on 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 56% of its total funding at September 30, 2001 and 55% of its total funding at December 31, 2000, are broadly diversified by both geography and customer segments. Stockholder's equity, which grew $15.0 billion during the first nine months of 2001 to $62.9 billion at September 30, 2001, 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 2001 third quarter was $88.8 billion, up from $80.3 billion at 2000 year-end. Asset securitization programs remain an important source of liquidity. Loans securitized during the first nine months of 2001 included $19.1 billion of U.S. credit cards and $19.0 billion of U.S. consumer mortgages. 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 nine months of 2001, the scheduled amortization of certain credit card securitization transactions made available $10.3 billion of new receivables. In addition, at least $1.3 billion of credit card securitization transactions are scheduled to amortize during the rest of 2001. Citicorp is a legal entity separate and distinct from Citibank, N.A. and its other subsidiaries and affiliates. As discussed in Citicorp's 2000 Annual Report on Form 10-K, there are various legal limitations on the extent to which Citicorp's subsidiaries may extend credit, pay dividends, or otherwise supply funds to Citicorp. As of September 30, 2001, 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 $9.2 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 September 30, 2001, its bank subsidiaries could have distributed dividends to Citicorp, directly or through their parent holding company, of approximately $6.9 billion of the available $9.2 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 may be required if 29 total dividends declared by a savings association in any calendar year exceed amounts specified by that agency's regulations. Citicorp is subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System (FRB). These guidelines are used to evaluate capital adequacy based primarily on the perceived credit risk associated with balance sheet assets, as well as certain off-balance sheet exposures such as unused loan commitments, letters of credit, and derivative and foreign exchange contracts. The risk-based capital guidelines are supplemented by a leverage ratio requirement. CITICORP RATIOS
SEPTEMBER 30, June 30, Dec. 31, 2001 2001 2000 - ------------------------------------------------------------------------------------------------------------- Tier 1 Capital 8.37% 8.43% 8.41% Total Capital (Tier 1 and Tier 2) 12.55 12.58 12.29 Leverage (1) 7.10 7.41 7.54 Common Stockholder's Equity 9.71 8.66 8.68 - --------------------------------------------------------=====================================================
(1) Tier 1 capital divided by adjusted average assets. - -------------------------------------------------------------------------------- Citicorp maintained a strong capital position during the 2001 third quarter. Total capital (Tier 1 and Tier 2) amounted to $63.1 billion at September 30, 2001, representing 12.55% of net risk adjusted assets. This compares with $60.1 billion and 12.58% at June 30, 2001, and $58.0 billion and 12.29% at December 31, 2000. Tier 1 capital of $42.1 billion at September 30, 2001 represented 8.37% of net risk adjusted assets, compared with $40.3 billion and 8.43% at June 30, 2001, and $39.7 billion and 8.41% at December 31, 2000. The Tier 1 capital ratio at September 30, 2001 was above Citicorp's target range of 8.00% to 8.30%. COMPONENTS OF CAPITAL UNDER REGULATORY GUIDELINES
SEPTEMBER 30, June 30, Dec. 31, IN MILLIONS OF DOLLARS 2001 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------- TIER 1 CAPITAL Common Stockholder's Equity $ 62,880 $ 48,570 $ 47,865 Mandatorily Redeemable Securities of Subsidiary Trusts 975 975 975 Minority Interest 746 347 334 Accumulated Net (Gains) on Cash Flow Hedges, net of tax (158) (1) -- Net Unrealized (Gains)/Losses on Securities Available for Sale (1) 62 (140) 14 Less: Intangible Assets (2) (22,193) (9,386) (9,442) Net unrealized losses on Available-for-Sale Equity Securities, net of tax (1) (196) (66) (15) 50% Investment in Certain Subsidiaries (3) (29) (33) (29) --------------------------------------- TOTAL TIER 1 CAPITAL 42,087 40,266 39,702 - ------------------------------------------------------------------------------------------------------------------------------- TIER 2 CAPITAL Allowance for Credit Losses (4) 6,328 6,008 5,938 Qualifying Debt (5) 14,710 13,840 12,399 Less: 50% Investment in Certain Subsidiaries (3) (28) (32) (29) --------------------------------------- TOTAL TIER 2 CAPITAL 21,010 19,816 18,308 --------------------------------------- TOTAL CAPITAL (TIER 1 AND TIER 2) 63,097 60,082 $ 58,010 - ----------------------------------------------------------------------------------------======================================= NET RISK-ADJUSTED ASSETS (6) $502,621 $477,665 $471,936 - ----------------------------------------------------------------------------------------=======================================
(1) Tier 1 capital excludes unrealized gains and losses on debt securities available for sale in accordance with regulatory risk-based capital guidelines. The federal bank regulatory agencies permit institutions to include in Tier 2 capital up to 45% of pretax net unrealized holding gains on available-for-sale equity securities with readily determinable fair values. Institutions are required to deduct from Tier 1 capital net unrealized holding losses on available-for-sale equity securities with readily determinable fair values, net of tax. (2) Includes goodwill and certain other identifiable intangible assets. The increase during the third quarter was primarily due to the acquisitions of Banamex and EAB. (3) Represents investment in certain overseas insurance activities and unconsolidated banking and finance subsidiaries. (4) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is deducted from risk-adjusted assets. (5) Includes qualifying senior and subordinated debt in an amount not exceeding 50% of Tier 1 capital, and subordinated capital notes subject to certain limitations. Tier 2 capital included $9.95 billion of subordinated debt issued to Citigroup (Parent Company) at September 30, 2001. (6) Includes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $20.3 billion for interest rate, commodity, and equity derivative contracts and foreign exchange contracts as of September 30, 2001, compared to $19.3 billion as of June 30, 2001 and $20.4 billion as of December 31, 2000. Net risk-adjusted assets also includes the effect of other off-balance sheet exposures such as unused loan commitments and letters of credit and reflects deductions for intangible assets and any excess allowance for credit losses. - -------------------------------------------------------------------------------- Common stockholder's equity increased $14.3 billion during the 2001 third quarter to $62.9 billion at September 30, 2001, representing 9.71% of assets, compared to 8.66% at June 30, 2001, and 8.68% at December 31, 2000. The net increase in common stockholder's equity during the quarter principally reflected capital contributions from parent of $12.6 billion and net income of $2.4 billion, slightly offset by an increase in unrealized losses on securities available for sale. 30 The mandatorily redeemable securities of subsidiary trusts (trust securities) outstanding at September 30, 2001 of $975 million qualify as Tier 1 capital and are included in long-term debt on the balance sheet. For the nine months ended September 30, 2001 and 2000, interest expense on the trust securities amounted to $57 million. Citicorp's subsidiary depository institutions are subject to the risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are generally similar to the FRB's guidelines. At September 30, 2001, all of Citicorp's subsidiary depository institutions were "well capitalized" under the federal bank regulatory agencies' definitions. CITIBANK, N.A. RATIOS
SEPTEMBER 30, June 30, Dec. 31, 2001 2001 2000 - --------------------------------------------------------------------------------------------------------- Tier 1 Capital 8.29% 8.28% 8.46% Total Capital (Tier 1 and Tier 2) 12.48 12.40 12.64 Leverage 6.59 6.61 6.66 Common Stockholder's Equity 7.10 7.14 7.12 - -----------------------------------------------------====================================================
Citibank's net income for the third quarter of 2001 amounted to $1.2 billion. During the quarter, Citibank paid a dividend of $31 million to Citicorp (parent company). Citibank had $9.4 billion of subordinated notes outstanding at September 30, 2001, $8.7 billion at June 30, 2001, and $8.5 billion at December 31, 2000, that were issued to Citicorp (parent company) and included in Citibank's Tier 2 capital. On January 18, 2001, the FRB issued new proposed rules that would govern the regulatory 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 new proposal generally would impose a capital charge that would increase in steps as the banking organization's level of concentration in equity investments increased. An 8 percent Tier 1 capital deduction would apply on covered investments that in the aggregate represent up to 15 percent of an organization's Tier 1 capital. For covered investments that aggregate more than 25 percent of the organization's Tier 1 capital, a top marginal charge of 25 percent would be set. The Company is monitoring the status and progress of the proposed rule, which, at the present time, is not expected to have a significant impact on Citicorp. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. In June 2001, the Basel Committee on Banking Supervision (Committee) announced that it would issue a new consultative package on the new Basel Capital Accord (new Accord) in early 2002. The new Accord, which will apply to all "significant" banks, as well as to holding companies that are parents of banking groups, is intended to be finalized by year-end 2002, with implementation of the new framework beginning in 2005. 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 statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 26. 31 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) CITICORP AND SUBSIDIARIES
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------------------------------------------- IN MILLIONS OF DOLLARS 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------------- INTEREST REVENUE Loans, including fees $10,263 $ 9,699 $29,942 $27,164 Deposits with banks 303 312 946 844 Federal funds sold and securities purchased under resale agreements 196 102 427 273 Securities, including dividends 1,140 785 2,977 2,561 Trading account assets 383 250 835 720 Loans held for sale 363 264 1,194 591 ---------------------------------------------------------------- 12,648 11,412 36,321 32,153 ---------------------------------------------------------------- INTEREST EXPENSE Deposits 3,290 3,615 9,859 9,630 Trading account liabilities 13 11 37 44 Purchased funds and other borrowings 941 1,082 2,593 2,911 Long-term debt 1,329 1,143 4,016 3,330 ---------------------------------------------------------------- 5,573 5,851 16,505 15,915 ---------------------------------------------------------------- NET INTEREST REVENUE 7,075 5,561 19,816 16,238 BENEFITS, CLAIMS, AND CREDIT LOSSES Policyholder benefits and claims expense 302 205 809 544 Provision for credit losses 1,580 1,221 4,529 3,832 ---------------------------------------------------------------- TOTAL BENEFITS, CLAIMS, AND CREDIT LOSSES 1,882 1,426 5,338 4,376 ---------------------------------------------------------------- NET INTEREST REVENUE AFTER BENEFITS, CLAIMS, AND CREDIT LOSSES 5,193 4,135 14,478 11,862 ---------------------------------------------------------------- FEES, COMMISSIONS, AND OTHER REVENUE Fees and commissions 3,038 2,740 8,401 8,129 Foreign exchange 833 284 1,854 1,104 Trading account 161 469 1,089 1,149 Securities transactions 26 453 141 746 Other revenue 717 998 2,811 4,152 ---------------------------------------------------------------- 4,775 4,944 14,296 15,280 ---------------------------------------------------------------- OPERATING EXPENSE Salaries 2,456 2,142 6,872 6,319 Employee benefits 437 447 1,312 1,271 ---------------------------------------------------------------- Total employee 2,893 2,589 8,184 7,590 Net premises and equipment 786 811 2,237 2,427 Restructuring - related items 133 70 363 94 Other expense 2,478 2,174 7,167 6,607 ---------------------------------------------------------------- 6,290 5,644 17,951 16,718 ---------------------------------------------------------------- INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 3,678 3,435 10,823 10,424 Income taxes 1,279 1,256 3,905 3,819 Minority interest, net of income taxes 25 14 47 28 ---------------------------------------------------------------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 2,374 2,165 6,871 6,577 Cumulative effect of accounting changes (1) -- -- (144) -- ---------------------------------------------------------------- NET INCOME $ 2,374 $ 2,165 $ 6,727 $ 6,577 - ------------------------------------------------------------------================================================================
(1) Refers to the 2001 first quarter adoption of SFAS 133 and the 2001 second quarter adoption of EITF 99-20. - -------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements. 32 CONSOLIDATED BALANCE SHEETS CITICORP AND SUBSIDIARIES
SEPTEMBER 30, 2001 December 31, IN MILLIONS OF DOLLARS (UNAUDITED) 2000 - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 15,862 $ 11,658 Deposits at interest with banks 17,475 16,160 Securities, at fair value Available for sale and short-term and other (including $8,358 and $1,158 pledged to creditors at September 30, 2001 and December 31, 2000, respectively) 74,649 52,458 Venture capital 4,452 5,204 Trading account assets (including $3,213 and $1,671 pledged to creditors at September 30, 2001 and December 31, 2000, respectively) 38,071 39,311 Loans held for sale 10,957 13,327 Federal funds sold and securities purchased under resale agreements 24,401 4,704 Loans, net Consumer 242,502 228,879 Commercial 156,901 137,709 -------------------------------- Loans, net of unearned income 399,403 366,588 Allowance for credit losses (9,918) (8,961) -------------------------------- Total loans, net 389,485 357,627 Premises and equipment, net 5,800 5,904 Interest and fees receivable 6,376 5,438 Other assets 59,722 39,816 -------------------------------- TOTAL ASSETS $647,250 $551,607 - --------------------------------------------------------------------------------------------------================================ LIABILITIES Non-interest-bearing deposits in U.S. offices $ 20,616 $ 21,702 Interest-bearing deposits in U.S. offices 105,870 61,544 Non-interest-bearing deposits in offices outside the U.S. 16,585 13,905 Interest-bearing deposits in offices outside the U.S. 217,031 205,564 -------------------------------- Total deposits 360,102 302,715 Trading account liabilities 18,920 27,778 Purchased funds and other borrowings 72,730 60,834 Accrued taxes and other expense 15,069 10,434 Other liabilities 28,724 21,646 Long-term debt 88,825 80,335 STOCKHOLDER'S EQUITY Common stock: ($0.01 par value) issued shares: 1,000 in each period -- -- Surplus 33,881 21,148 Retained earnings 30,541 27,486 Accumulated other changes in equity from nonowner sources (1) (1,542) (769) -------------------------------- TOTAL STOCKHOLDER'S EQUITY 62,880 47,865 -------------------------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $647,250 $551,607 - --------------------------------------------------------------------------------------------------================================
(1) Amounts at September 30, 2001 and December 31, 2000 include the after-tax amounts for net unrealized losses on securities available for sale of ($62) million and ($14) million, respectively, and foreign currency translation of ($1.639) billion and ($755) million, respectively. Amount at September 30, 2001 also includes the after-tax amount for cash flow hedges of $159 million. - -------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements. 33 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED) CITICORP AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- IN MILLIONS OF DOLLARS 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------ BALANCE AT BEGINNING OF PERIOD $47,865 $35,475 Net income 6,727 6,577 Cumulative effect of accounting changes (1) 170 -- Net change in unrealized gains and losses on securities available for sale, net of tax (134) (167) Foreign currency translation adjustment, net of tax (902) (342) Net change for cash flow hedges, net of tax 93 -- ---------------------------------- Total changes in equity from nonowner sources 5,954 6,068 Common dividends declared (3,672) (1,139) Capital contribution from Parent (2) 12,707 1,782 Employee benefit plans and other activity 26 45 ---------------------------------- BALANCE AT END OF PERIOD $62,880 $42,231 - --------------------------------------------------------------------------------------------================================== SUMMARY OF CHANGES IN EQUITY FROM NONOWNER SOURCES Net income $ 6,727 $ 6,577 Other changes in equity from nonowner sources (773) (509) ---------------------------------- TOTAL CHANGES IN EQUITY FROM NONOWNER SOURCES $ 5,954 $6,068 - --------------------------------------------------------------------------------------------==================================
(1) Refers to the adoption of SFAS 133 in the first quarter of 2001 and the adoption of EITF 99-20 in the second quarter of 2001, resulting in increases to equity from nonowner sources of $82 million and $88 million, respectively. (2) Includes contributions related to the Banamex acquisition. See Note 2 of Notes to Consolidated Financial Statements. - -------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements. 34 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) CITICORP AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- IN MILLIONS OF DOLLARS 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 6,727 $ 6,577 Adjustments to reconcile net income to net cash provided by (used in) operating activities Provision for credit losses 4,529 3,832 Depreciation and amortization of premises and equipment 1,041 1,036 Amortization of goodwill and acquisition premium costs 568 489 Restructuring-related items 363 94 Cumulative effect of accounting changes, net of tax 144 -- Venture capital activity 752 (954) Net gain on sale of securities (141) (746) Changes in accruals and other, net (818) (1,188) Net decrease (increase) in loans held for sale 2,370 (4,386) Net (increase) decrease in trading account assets 1,240 (5,344) Net decrease in trading account liabilities (8,858) (1,844) ---------------------------------- Total adjustments 1,190 (9,011) ---------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 7,917 (2,434) - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Net increase in deposits at interest with banks (1,315) (1,588) Securities -- available for sale and short-term and other Purchases (230,995) (45,438) Proceeds from sales 210,972 25,984 Maturities 18,251 22,667 Net (increase) decrease in federal funds sold and securities purchased under resale agreements (19,697) 641 Net increase in loans (31,211) (70,066) Proceeds from sales of loans 18,516 25,907 Business acquisitions (6,869) (5,774) Capital expenditures on premises and equipment (959) (1,047) Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed assets 1,603 510 ---------------------------------- NET CASH USED IN INVESTING ACTIVITIES (41,704) (48,204) - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 22,835 30,822 Net increase in federal funds purchased and securities sold under repurchase agreements 13,561 4,041 Net (decrease) increase in commercial paper and funds borrowed (6,993) 8,267 Proceeds from issuance of long-term debt 32,666 19,324 Repayment of long-term debt (20,128) (13,249) Contribution from Citigroup -- 1,600 Dividends paid (3,668) (1,141) ---------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 38,273 49,664 - ------------------------------------------------------------------------------------------------------------------------------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS (282) (481) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and due from banks 4,204 (1,455) Cash and due from banks at beginning of period 11,658 11,877 ---------------------------------- CASH AND DUE FROM BANKS AT END OF PERIOD $ 15,862 $ 10,422 - --------------------------------------------------------------------------------------------------================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest $16,686 $ 14,032 Income taxes 2,639 2,614 Non-cash investing activities: Transfers to repossessed assets $ 438 $ 429 - --------------------------------------------------------------------------------------------------==================================
See Notes to Consolidated Financial Statements. 35 CONSOLIDATED BALANCE SHEETS CITIBANK, N.A. AND SUBSIDIARIES
SEPTEMBER 30, 2001 December 31, IN MILLIONS OF DOLLARS (UNAUDITED) 2000 - -------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 12,723 $ 9,321 Deposits at interest with banks 15,986 17,968 Securities, at fair value Available for sale (including $753 and $1,111 pledged to creditors at September 30, 2001 and December 31, 2000, respectively) 43,824 38,762 Venture capital 2,197 3,293 Trading account assets (including $287 and $1,671 pledged to creditors at September 30, 2001 and December 31, 2000, respectively) 34,574 37,616 Loans held for sale 6,795 2,010 Federal funds sold and securities purchased under resale agreements 28,213 4,408 Loans, net of unearned income 251,317 245,381 Allowance for credit losses (4,691) (4,590) --------------------------------- Loans, net 246,626 240,791 Premises and equipment, net 3,927 4,063 Interest and fees receivable 3,686 4,369 Other assets 25,735 19,505 --------------------------------- TOTAL ASSETS $424,286 $382,106 - -----------------------------------------------------------------------------------------================================= LIABILITIES Non-interest-bearing deposits in U.S. offices $ 16,939 $ 17,703 Interest-bearing deposits in U.S. offices 75,728 41,223 Non-interest-bearing deposits in offices outside the U.S. 14,264 13,758 Interest-bearing deposits in offices outside the U.S. 190,550 199,680 --------------------------------- Total deposits 297,481 272,364 Trading account liabilities 19,036 26,803 Purchased funds and other borrowings 36,817 20,197 Accrued taxes and other expense 6,691 6,395 Other liabilities 16,212 11,797 Long-term debt and subordinated notes 17,587 17,339 STOCKHOLDER'S EQUITY Preferred stock ($100 par value) 350 -- Capital stock ($20.00 par value) 751 751 outstanding shares: 37,534,553 in each period Surplus 12,843 11,354 Retained earnings 17,625 15,903 Accumulated other changes in equity from nonowner sources (1) (1,107) (797) --------------------------------- TOTAL STOCKHOLDER'S EQUITY 30,462 27,211 --------------------------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $424,286 $382,106 - -----------------------------------------------------------------------------------------=================================
(1) Amounts at September 30, 2001 and December 31, 2000 include the after-tax amounts for net unrealized gains (losses) on securities available for sale of ($85) million and $70 million, respectively, and foreign currency translation of ($1.181) billion and ($867) million, respectively. Amount at September 30, 2001 also includes the after-tax amount for cash flow hedges of $159 million. - -------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements. 36 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying consolidated financial statements as of September 30, 2001 and for the three- and nine-month periods ended September 30, 2001 and 2000 are unaudited and include the accounts of Citicorp 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 Annual Report on Form 10-K for the year ended December 31, 2000. Certain financial information that is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, 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. BUSINESS DEVELOPMENTS ACQUISITION OF BANAMEX On August 6, 2001, Citicorp completed its acquisition of 99.86% of the issued and outstanding ordinary shares of Grupo Financiero Banamex-Accival (Banamex), a leading Mexican financial institution, for approximately $12.5 billion in cash and Citigroup stock. Citicorp completed the acquisition by settling transactions that were conducted on the Mexican Stock Exchange on Friday, August 3, 2001. Those transactions comprised both the acquisition of Banamex shares tendered in response to Citicorp's offer to acquire all of Banamex's outstanding shares and the simultaneous sale of 126,705,281 Citigroup shares to the tendering Banamex shareholders. On September 24, 2001, Citicorp became the holder of 100% of the issued and outstanding ordinary shares of Banamex following a share redemption by Banamex. Banamex's and Citicorp's banking operations in Mexico are being integrated and will conduct business under the "Banamex" brand name. ACQUISITION OF EAB On July 17, 2001, Citibank completed its acquisition of European American Bank (EAB), a state-chartered bank with 97 branches in the New York area, for $1.6 billion plus the assumption of $350 million in EAB preferred stock. 3. ACCOUNTING CHANGES ADOPTION OF EITF 99-20 During the second quarter of 2001, the Company adopted Emerging Issues Task Force (EITF) Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" (EITF 99-20). EITF 99-20 provides new guidance regarding income recognition and identification and determination of impairment on certain asset-backed securities. The initial adoption resulted in a cumulative adjustment of $111 million after-tax, recorded as a charge to earnings. FUTURE APPLICATION OF ACCOUNTING STANDARDS TRANSFERS AND SERVICING OF FINANCIAL ASSETS. In September 2000, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125" (SFAS 140). In July 2001, FASB issued Technical Bulletin No. 01-1, "Effective Date for Certain Financial Institutions of Certain Provisions of Statement 140 Related to the Isolation of Transferred Assets." Certain provisions of SFAS 140 require that the structure for transfers of financial assets to certain securitization vehicles be modified to comply with revised isolation guidance for institutions subject to receivership by the Federal Deposit Insurance Corporation. These provisions will become effective for transfers taking place after December 31, 2001, with an additional transition period ending no later than September 30, 2006 for transfers to certain master trusts. SFAS 140 also provides revised guidance for an entity to be considered a qualifying special purpose entity. It is not expected that SFAS 140 will materially affect the financial statements. BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS. In July 2001, the FASB issued Statements of Financial Accounting Standards No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible Assets," which require that all business combinations initiated after June 30, 2001 be accounted for under the purchase method. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized, but will be subject to annual impairment tests. Other intangible 37 assets will continue to be amortized over their useful lives. The nonamortization provisions of the new rules are effective for fiscal years beginning after December 15, 2001, and immediately for any purchase business combinations completed after June 30, 2001. Based on current levels of goodwill, the nonamortization provisions of the new standards will reduce other expense by approximately $350 million and increase net income by approximately $270 million in 2002. The Company is in the process of evaluating whether certain intangible assets have indefinite lives. During 2002, the Company also will perform the required impairment tests of goodwill and any indefinite lived intangible assets as of January 1, 2002, and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company. IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 establishes additional criteria as compared to existing generally accepted accounting principles to determine when a long-lived asset is held for sale. It also broadens the definition of "discontinued operations," but does not allow for the accrual of future operating losses, as was previously permitted. Citicorp will adopt SFAS 144 effective January 1, 2002. The provisions of the new standard are generally to be applied prospectively. It is not expected that SFAS 144 will materially affect the financial statements. 4. BUSINESS SEGMENT INFORMATION The following table presents certain information regarding the Company's industry segments:
INCOME (LOSS) BEFORE CUMULATIVE TOTAL REVENUES, NET EFFECT OF ACCOUNTING OF INTEREST EXPENSE INCOME TAXES CHANGES (1) (2) IDENTIFIABLE ASSETS ------------------------------------------------------------------------------------------- THREE MONTHS ENDED SEPTEMBER 30, IN MILLIONS OF DOLLARS --------------------------------------------------------------------- SEPT. 30, Dec. 31, EXCEPT IDENTIFIABLE ASSETS IN BILLIONS 2001 2000 (3) 2001 2000 (3) 2001 2000 (3) 2001 2000 (3) - ------------------------------------------------------------------------------------------------------------------------------------ Global Consumer $ 8,491 $ 7,035 $1,002 $ 780 $1,787 $1,353 $343 $262 Global Corporate 3,136 2,638 425 367 783 638 255 233 Global Investment Management and Private Banking 541 467 46 41 92 72 28 30 Investment Activities (345) 441 (133) 150 (238) 249 9 11 Corporate/Other 27 (76) (61) (82) (50) (147) 12 16 ------------------------------------------------------------------------------------------- TOTAL $11,850 $10,505 $1,279 $1,256 $2,374 $2,165 $647 $552 - -----------------------------------------=========================================================================================== INCOME (LOSS) BEFORE CUMULATIVE TOTAL REVENUES, NET EFFECT OF ACCOUNTING OF INTEREST EXPENSE INCOME TAXES CHANGES (1) (2) ------------------------------------------------------------------ NINE MONTHS ENDED SEPTEMBER 30, ------------------------------------------------------------------ IN MILLIONS OF DOLLARS 2001 2000 (3) 2001 2000 (3) 2001 2000 (3) - ------------------------------------------------------------------------------------------------------------------------------------ Global Consumer $23,362 $20,325 $2,695 $2,179 $4,657 $3,724 Global Corporate 9,099 7,878 1,198 1,070 2,167 1,849 Global Investment Management and Private Banking 1,606 1,421 146 139 271 236 Investment Activities (96) 2,096 (80) 738 (91) 1,268 Corporate/Other 141 (202) (54) (307) (133) (500) ------------------------------------------------------------------ TOTAL $34,112 $31,518 $3,905 $3,819 $6,871 $6,577 - ------------------------------------------------------------------==================================================================
(1) Results in the 2001 third quarter and nine-month periods reflect after-tax restructuring-related charges (credits) of $86 million and $156 million in Global Consumer, $1 million and $70 million in Global Corporate, ($3) million and ($4) million in Corporate/Other, respectively, and $6 million in the nine-month period in Global Investment Management and Private Banking. The 2000 third quarter and nine-month results reflect after-tax restructuring-related charges (credits) of $19 million and $13 million in Global Consumer, respectively, and ($3) million in Global Corporate and ($1) million in Global Investment Management and Private Banking in the nine-month period ended September 30, 2000. The 2000 third quarter and nine-month results reflect after-tax restructuring-related charges (and after-tax Housing Finance unit charges in the 2000 nine-month results only) of $26 million and $122 million, respectively, in Corporate/Other. (2) Results in the 2001 third quarter and nine-month periods include pretax provisions for benefits, claims, and credit losses in Global Consumer of $1.6 billion and $4.5 billion, in Global Corporate of $213 million and $756 million, in Global Investment Management and Private Banking of $32 million and $62 million, and in Corporate/Other of $2 million and $1 million, respectively. The 2000 third quarter and nine-month period results reflect pretax provisions for benefits, claims, and credit losses in Global Consumer of $1.3 billion and $3.8 billion, in Global Corporate of $132 million and $531 million, in Global Investment Management and Private Banking of ($3) million and $22 million, respectively, and in Investment Activities of $7 million in both periods, and $34 million in Corporate/Other for the nine-month period ended September 30, 2000. (3) Reclassified to conform to the current period's presentation. - -------------------------------------------------------------------------------- 38 5. SECURITIES
SEPTEMBER 30, December 31, IN MILLIONS OF DOLLARS 2001 2000 - ------------------------------------------------------------------------------------------------- Securities Available for Sale, at Fair Value $74,066 $51,531 Short-term and Other 583 927 ----------------------------------- Available for Sale and Short-term and Other $74,649 $52,458 - --------------------------------------------------------------=================================== Venture Capital, at Fair Value (1) $ 4,452 $ 5,204 - --------------------------------------------------------------===================================
(1) For the nine months ended September 30, 2001, net pretax losses on investments held by venture capital subsidiaries totaled $226 million, of which $538 million and $847 million represented gross unrealized gains and losses, respectively. For the nine months ended September 30, 2000, net pretax gains on investments held by venture capital subsidiaries totaled $1.73 billion, of which $1.46 billion and $321 million represented gross unrealized gains and losses, respectively. - --------------------------------------------------------------------------------
SEPTEMBER 30, 2001 December 31, 2000 (1) --------------------------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED Amortized IN MILLIONS OF DOLLARS COST GAINS LOSSES FAIR VALUE Cost Fair Value - -------------------------------------------------------------------------------------------------------------------------------- SECURITIES AVAILABLE FOR SALE U.S. Treasury and Federal Agency $10,362 $ 195 $ 137 $10,420 $ 7,926 $ 7,950 State and Municipal 5,521 275 7 5,789 5,383 5,522 Foreign Government 41,056 444 487 41,013 24,463 24,446 U.S. Corporate 6,145 252 302 6,095 5,603 5,507 Other Debt Securities 5,291 65 21 5,335 3,489 3,491 Equity Securities (2) 5,720 45 351 5,414 4,638 4,615 --------------------------------------------------------------------------------- $74,095 $1,276 $1,305 $74,066 $51,502 $51,531 - -------------------------------------------------------------------------------------------------------------------------------- Securities Available for Sale Include -- Mortgage-Backed Securities $ 8,860 $ 226 $ 134 $ 8,952 $ 6,498 $ 6,368 - -----------------------------------------------=================================================================================
(1) At December 31, 2000, gross unrealized gains and losses on securities available for sale totaled $940 million and $911 million, respectively. (2) Includes non-marketable equity securities carried at cost, which are reported in both the amortized cost and fair value columns. - -------------------------------------------------------------------------------- 6. TRADING ACCOUNT ASSETS AND LIABILITIES
SEPTEMBER 30, Dec. 31, IN MILLIONS OF DOLLARS 2001 2000 - ------------------------------------------------------------------------------------------------------------------ TRADING ACCOUNT ASSETS U.S. Treasury and Federal Agency Securities $ 310 $ 721 Foreign Government, Corporate and Other Securities 20,214 15,043 Derivative and Foreign Exchange Contracts (1) 17,547 23,547 ----------------------------------- $38,071 $39,311 - -------------------------------------------------------------------------------=================================== TRADING ACCOUNT LIABILITIES Securities Sold, Not Yet Purchased $ 3,893 $ 3,915 Derivative and Foreign Exchange Contracts (1) 15,027 23,863 ----------------------------------- $18,920 $27,778 - -------------------------------------------------------------------------------===================================
(1) Net of master netting agreements and securitization. - -------------------------------------------------------------------------------- 7. DERIVATIVES ACTIVITIES On January 1, 2001, Citicorp adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended (SFAS 133). These new rules changed the accounting treatment of derivative contracts (including foreign exchange contracts) that are employed to manage risk outside of Citicorp's trading activities, as well as certain derivative-like instruments embedded in other contracts. SFAS 133 requires that all derivatives be recorded on the balance sheet at their fair value. The treatment of changes in the fair value of derivatives depends on the character of the transaction, including whether it has been designated and qualifies as part of a hedging relationship, as discussed below. The cumulative effect of adopting SFAS 133 at January 1, 2001 was an after-tax charge of $33 million included in net income and an increase of $82 million included in other changes in stockholder's equity from nonowner sources. To qualify as a hedge, the hedge relationship is designated and formally documented at inception detailing the particular risk management objective and strategy for the hedge which includes the item and risk that is being hedged, the derivative that is being used, as well as how effectiveness is being assessed. A derivative must be highly effective in accomplishing the objective of offsetting either changes in fair value or cash flows for the risk being hedged. The effectiveness of these hedging relationships is evaluated on a retrospective and prospective basis using quantitative measures of correlation. If a hedge relationship is found to be 39 ineffective, it no longer qualifies as a hedge and any excess gains or losses attributable to such ineffectiveness, as well as subsequent changes in fair value, are recognized in other income. The foregoing criteria are applied on a decentralized basis, consistent with the level at which market risk is managed, but are subject to various limits and controls. The underlying asset, liability, firm commitment or forecasted transaction may be an individual item or a portfolio of similar items. For fair value hedges, in which derivatives hedge the fair value of assets and liabilities, changes in the fair value of derivatives are reflected in other income, together with changes in the fair value of the related hedged item. The net amount, representing hedge ineffectiveness, is reflected in current earnings. Citicorp's fair value hedges are primarily the hedges of fixed-rate long-term debt, loans and available-for-sale securities. During the 2001 third quarter and nine months, the amount of hedge ineffectiveness recognized in other income related to fair value hedges was ($16) million and $93 million, respectively. The amount of gains or losses on derivatives designated as fair value hedges that were excluded from the assessment of effectiveness during the 2001 third quarter and nine months was ($11) million and $60 million, respectively. For cash flow hedges, in which derivatives hedge the variability of cash flows related to floating rate assets, liabilities or forecasted transactions, the accounting treatment depends on the effectiveness of the hedge. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives' fair value will not be included in current earnings but are reported as other changes in stockholders' equity from nonowner sources. These changes in fair value will be included in earnings of future periods when earnings are also affected by the variability of the hedged cash flows. To the extent these derivatives are not effective, changes in their fair values are immediately included in other income. Citicorp's cash flow hedges primarily include hedges of floating rate credit card receivables and loans, rollovers of commercial paper and foreign currency denominated funding. Cash flow hedges also include hedges of certain forecasted transactions up to a maximum tenor of 30 years, although a substantial majority of the tenor is under 5 years. During the 2001 third quarter and nine months, the amount of hedge ineffectiveness recognized in other income related to cash flow hedges was $8 million and $19 million, respectively. No amounts have been excluded from the assessment of effectiveness for derivatives designated as cash flow hedges. For net investment hedges, in which derivatives hedge the foreign currency exposure of a net investment in a foreign operation, the accounting treatment will similarly depend on the effectiveness of the hedge. The effective portion of the change in fair value of the derivative, including any forward premium or discount, is reflected in other changes in stockholders' equity from nonowner sources as part of the foreign currency translation adjustment. During the 2001 third quarter and nine months, the after-tax amounts included in other changes from stockholder's equity from nonowner sources from these hedges were $71 million and $234 million, respectively. Non-trading derivatives that are either hedging instruments that are carried at fair value or do not qualify as hedges under the new rules are also carried at fair value with changes in value included either as an element of the yield or return on the hedged item or in other income. For those hedge relationships that are terminated, hedge designations that are removed, or forecasted transactions that are no longer expected to occur, the hedge accounting treatment described in the paragraphs above is no longer applied. The end-user derivative is terminated or transferred to the trading account. For fair value hedges, any changes to the hedged item remain as part of the basis of the asset or liability and are ultimately reflected as an element of the yield. For cash flow hedges, any changes in fair value of the end-user derivative remain in other changes in stockholders' equity from nonowner sources and are included in earnings of future periods when earnings are also affected by the variability of the hedged cash flow. If the hedged relationship was discontinued or a forecasted transaction is not expected to occur when scheduled, any changes in fair value of the end-user derivative are immediately reflected in other income. The accumulated other changes in equity from nonowner sources from cash flow hedges for the 2001 nine months can be summarized as follows (net of taxes):
IN MILLIONS OF DOLLARS NINE MONTHS ENDED SEPTEMBER 30, 2001 - ------------------------------------------------------------------------------------------------- BEGINNING BALANCE (1) $ 65 Net gains from cash flow hedges 175 Net amounts reclassified to earnings (82) ------------------------------------ ENDING BALANCE $158 - -------------------------------------------------------------------------------------------------
(1) Results from the cumulative effect of accounting change for cash flow hedges. - -------------------------------------------------------------------------------- Additional information concerning Citicorp's derivative and foreign exchange products and activities, including a further description of accounting policies and the credit and market risk management process is provided in the Managing Global Risk section in Citicorp's 2000 Annual Report on Form 10-K. 40 8. RESTRUCTURING-RELATED ITEMS
RESTRUCTURING INITIATIVES 3RD QTR. 2nd Qtr. 1st Qtr. IN MILLIONS OF DOLLARS 2001 2001 2001 2000 Total - --------------------------------------------------------------------------------------------------------------------- Restructuring Charges $129 $146 $ 40 $ 576 $ 891 Acquisitions (1) 112 -- -- 23 135 Utilization (2) (50) (76) (40) (451) (617) ------------------------------------------------------------------------------- BALANCE AT SEPTEMBER 30, 2001 $191 $ 70 $ -- $ 148 $ 409 - --------------------------------------===============================================================================
(1) Represents additions to restructuring liabilities arising from acquisitions. (2) Utilization amounts include translation effects on the restructuring reserve. - -------------------------------------------------------------------------------- During the 2001 third quarter, Citicorp recorded a restructuring reserve of $129 million related to the acquisition of Banamex and the integration of its operations within the Global Consumer business. This was expensed in the third quarter and is included in "Restructuring-related items" in the consolidated statement of income. In addition, a restructuring reserve of $112 million was recorded by Banamex and recognized as a liability in the purchase price allocation of Banamex. The total Banamex reserves of $241 million includes costs related to downsizings, the reconfiguration of branch operations in Mexico, and the integration of operations and operating platforms. These restructuring initiatives are expected to be implemented over the next year. The reserve consists of $145 million related to employee severance, $48 million related to exiting leasehold and other contractual obligations, and $48 million of asset impairment charges. Approximately $32 million of the charge related to operations in the United States. The $129 million reserve includes a severance portion for the elimination of approximately 4,200 positions by Citicorp. The $112 million reserve includes a severance portion for the elimination of approximately 3,600 positions by Banamex. Approximately 50 of these positions relate to the United States. Through September 30, 2001, approximately 40 gross staff positions have been eliminated under these programs. Utilization of these third quarter reserves included $48 million of asset impairment charges and $2 million of severance paid, together with translation effects. During the second quarter of 2001, Citicorp recorded restructuring charges of $146 million, primarily related to the downsizing of various functions in the Global Corporate and Global Consumer businesses. These new initiatives are expected to be implemented over the next 12 months. The charge consisted of $114 million related to employee severance, $17 million related to asset impairment charges, and $15 million related to exiting leasehold and other contractual obligations. The $114 million portion of the charge related to employee severance reflects the costs of eliminating approximately 2,000 positions. Approximately 950 of these positions relate to the United States. The 2001 second quarter restructuring reserve utilization included $17 million of asset impairment charges as well as $59 million of severance and other exit costs (of which $13 million related to employee severance and $5 million related to leasehold and other exit costs have been paid in cash and $41 million is legally obligated), together with translation effects. Utilization of the 2001 second quarter restructuring reserve in the 2001 third quarter and nine months ended September 30, 2001 was $50 million and $76 million, respectively. Through September 30, 2001, approximately 1,300 gross staff positions have been eliminated under these programs, including approximately 1,200 in the third quarter. During the first quarter of 2001, Citicorp recorded restructuring charges of $40 million, primarily consisting of the downsizing of certain front office and back office functions at the Corporate and Investment Bank in order to align its cost structure with current market conditions. The charge is all related to employee severance and reflects the cost of eliminating approximately 360 positions. Approximately 220 of these positions relate to the United States. The 2001 first quarter restructuring reserve was fully utilized as of September 30, 2001 including $40 million of severance, of which $15 million was paid in cash and $25 million is legally obligated. Utilization of the 2001 first quarter restructuring reserve in the 2001 third quarter and nine months was $19 million and $40 million, respectively. Through September 30, 2001, approximately 360 gross staff positions have been eliminated under these programs, including 260 in the third quarter. During 2000, Citicorp recorded restructuring charges of $576 primarily consisting of exit costs related to the acquisition of Associates. These initiatives are expected to be implemented this year. The charges included $238 million related to employee severance, $154 million related to exiting leasehold and other contractual obligations and $184 million of asset impairment charges. Restructuring charges and other merger-related costs of $58 million and $75 million occurred in the 2000 third quarter and nine months, respectively. 41 Of the $576 million charge, $474 million related to the acquisition of Associates (primarily in the Global Consumer business) includes the reconfiguration of certain branch operations, the exit from non-strategic businesses and from activities as mandated by Federal bank regulations and the consolidation and integration of Corporate and middle and back office functions. In the Global Consumer business, $51 million includes the reconfiguration of certain branch operations outside the U.S. and the downsizing and consolidation of certain back office functions in the U.S. Approximately $440 million of the $576 million charge related to operations in the United States. The $238 million portion of the charge related to employee severance reflects the costs of eliminating approximately 5,600 positions, including approximately 4,600 related to the acquisition of Associates and 700 in the Global Consumer business. Approximately 4,900 of these positions related to the United States. In 2000, an additional reserve of $23 million was recorded, $20 million of which related to the elimination of 1,600 non-U.S. positions of an acquired entity. The 2000 restructuring reserve utilization included $184 million of asset impairment charges and $267 million of severance and other exit costs (of which $128 million related to employee severance and $87 million related to leasehold and other exit costs have been paid in cash and of which $52 million is legally obligated), together with translation effects. Utilization of the 2000 restructuring reserve in the 2001 third quarter and nine months was $74 million and $196 million, respectively. Through September 30, 2001, approximately 3,500 gross staff positions have been eliminated under these programs, including approximately 400 in the 2001 third quarter. 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) are being recognized over these shortened lives, $4 million and $48 million of which were recorded in the 2001 third quarter and nine-month periods, respectively, and $12 million and $61 million of which were recorded in the 2000 third quarter and nine-month periods, respectively. Changes in estimates are attributable to facts and circumstances arising subsequent to an original restructuring charge. During the 2000 second quarter, changes in estimates resulted in reductions of $42 million of reserves related to prior restructuring initiatives. Additional information about restructuring-related items, including the business segments affected, may be found in Citicorp's 2000 Form 10-K. 9. CONTINGENCIES In the ordinary course of business, Citicorp and its subsidiaries are defendants or co-defendants in various litigation matters incidental to and typical of the businesses in which they are engaged. In the opinion of the Company's management, the ultimate resolution of these legal proceedings would not be likely to have a material adverse effect on the results of the Company and its subsidiaries' operations, financial condition, or liquidity. 10. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS ASSOCIATES FIRST CAPITAL CORPORATION (ASSOCIATES) In connection with Citigroup's November 30, 2000 acquisition of Associates in which Associates became a wholly-owned subsidiary of Citicorp, Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates and Associates Corporation of North America, a subsidiary of Associates (ACONA). Associates maintains a combination of unutilized bilateral and syndicated credit facilities to support its short-term borrowings. These facilities, which have maturities ranging from 2001 to 2005, are all guaranteed by Citicorp. CITIFINANCIAL CREDIT COMPANY (CCC) On August 4, 1999, CCC, an indirect wholly-owned subsidiary of Citigroup, was contributed to and became a subsidiary of Citicorp Banking Corporation, a wholly-owned subsidiary of Citicorp. Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of CCC. Effective as of August 10, 2001, Citicorp Banking Corporation, the parent company of CCC, transferred 100% of the stock of CCC to Associates in exchange for convertible preferred stock of Associates, making CCC a wholly-owned subsidiary of Associates. The consolidating financial statements account for the transaction in a manner similar to a pooling of interest and therefore all prior periods have been restated. CCC has five-year revolving credit facilities in the amount of $3.4 billion that expire in 2002. Citicorp's guarantee of various debt obligations of CCC includes those arising under these facilities. 42 In connection with the facilities for both Associates and CCC, Citicorp is required to maintain a certain level of consolidated stockholder's equity (as defined in the agreement). At September 30, 2001, this requirement was exceeded by $48.5 billion. Citicorp has also guaranteed various other debt obligations of Associates and CCC. 43 CONDENSED CONSOLIDATING INCOME STATEMENTS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2001 - ------------------------------------------------------------------------------------------------------------------------------------ CITICORP OTHER CITICORP PARENT ASSOCIATES SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Dividends from subsidiary banks and bank holding companies $ 31 $ -- $ -- $ -- $ -- ($31) $ -- Interest from subsidiaries 756 -- -- -- (756) -- -- Interest on loans, including fees - third party -- 841 2,829 3,864 6,399 (3,670) 10,263 Interest on loans, including fees - intercompany -- 94 (94) -- -- -- -- Other interest revenue -- 33 4 94 2,291 (37) 2,385 Fees, commissions and other revenues (41) 135 806 900 3,916 (941) 4,775 --------------------------------------------------------------------------------------------- 746 1,103 3,545 4,858 11,850 (4,679) 17,423 --------------------------------------------------------------------------------------------- EXPENSE Interest on other borrowed funds - third party 729 -- 92 53 172 (92) 954 Interest on other borrowed funds - intercompany -- 175 80 175 (175) (255) -- Interest and fees paid to subsidiaries 33 -- -- -- (33) -- -- Interest on long-term debt - third party -- 85 496 585 744 (581) 1,329 Interest on long-term debt - intercompany -- 89 -- 372 (372) (89) -- Interest on deposits -- 5 -- 53 3,237 (5) 3,290 Benefits, claims, and credit losses -- 194 896 1,107 775 (1,090) 1,882 Other expense - third party 23 255 1,012 1,301 4,966 (1,267) 6,290 Other expense - intercompany -- (43) 43 -- -- -- -- --------------------------------------------------------------------------------------------- 785 760 2,619 3,646 9,314 (3,379) 13,745 --------------------------------------------------------------------------------------------- INCOME BEFORE TAXES, MINORITY INTEREST, CUMULATIVE EFFECT OF ACCOUNTING CHANGE, AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES (39) 343 926 1,212 2,536 (1,300) 3,678 Income tax (benefit) (55) 125 340 446 888 (465) 1,279 Minority interest, net of income taxes -- -- -- -- 25 -- 25 Equity in undistributed income of subsidiaries 2,358 -- -- -- -- (2,358) -- --------------------------------------------------------------------------------------------- NET INCOME $ 2,374 $ 218 $ 586 $ 766 $ 1,623 ($3,193) $ 2,374 - ---------------------------------------=============================================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of CCC and ACONA, included in the Associates Consolidated column. - -------------------------------------------------------------------------------- 44 CONDENSED CONSOLIDATING INCOME STATEMENTS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2000 - ------------------------------------------------------------------------------------------------------------------------------------ CITICORP OTHER CITICORP PARENT ASSOCIATES SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Dividends from subsidiary banks and bank holding companies $ -- $ -- $ -- $ -- $ -- $ -- $ -- Dividends from other subsidiaries 47 -- -- -- -- (47) -- Interest from subsidiaries 341 -- -- -- (341) -- -- Interest on loans, including fees -- 681 2,625 3,349 6,350 (3,306) 9,699 Other interest revenue -- 38 103 143 1,570 (141) 1,713 Fees, commissions and other revenues 68 119 823 896 3,980 (942) 4,944 ----------------------------------------------------------------------------------------------- 456 838 3,551 4,388 11,559 (4,436) 16,356 ----------------------------------------------------------------------------------------------- EXPENSE Interest on other borrowed funds - third party 437 -- 426 395 261 (426) 1,093 Interest on other borrowed funds - intercompany -- 165 -- 165 (165) (165) -- Interest and fees paid to subsidiaries 52 -- -- -- (52) -- -- Interest on long-term debt - third party -- 86 636 736 407 (722) 1,143 Interest on long-term debt - intercompany -- 93 -- 93 (93) (93) -- Interest on deposits -- 1 -- 8 3,607 (1) 3,615 Benefits, claims, and credit losses -- 124 742 878 548 (866) 1,426 Other expense 27 198 1,049 1,339 4,278 (1,247) 5,644 ----------------------------------------------------------------------------------------------- 516 667 2,853 3,614 8,791 (3,520) 12,921 ----------------------------------------------------------------------------------------------- INCOME BEFORE TAXES, MINORITY INTEREST, AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES (60) 171 698 774 2,768 (916) 3,435 Income tax (benefit) - current (40) 63 253 270 1,026 (316) 1,256 Minority interest, net of income taxes -- -- -- -- 14 -- 14 Equity in undistributed income of subsidiaries 2,185 -- -- -- -- (2,185) -- ----------------------------------------------------------------------------------------------- NET INCOME $ 2,165 $ 108 $ 445 $ 504 $ 1,728 ($2,785) $ 2,165 - -------------------------------------===============================================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of CCC and ACONA, included in the Associates Consolidated column. - -------------------------------------------------------------------------------- 45 CONDENSED CONSOLIDATING INCOME STATEMENTS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2001 - ------------------------------------------------------------------------------------------------------------------------------------ CITICORP OTHER CITICORP PARENT ASSOCIATES SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Dividends from subsidiary banks and bank holding companies $ 2,968 $ -- $ -- $ -- $ -- ($2,968) $ -- Interest from subsidiaries 2,143 -- -- -- (2,143) -- -- Interest on loans, including fees - third party -- 2,329 8,934 11,435 18,507 (11,263) 29,942 Interest on loans, including fees - intercompany -- 94 (94) -- -- -- -- Other interest revenue 10 171 187 416 5,953 (358) 6,379 Fees, commissions and other revenues 21 348 1,936 2,289 11,986 (2,284) 14,296 ----------------------------------------------------------------------------------------------- 5,142 2,942 10,963 14,140 34,303 (16,873) 50,617 ----------------------------------------------------------------------------------------------- EXPENSE Interest on other borrowed funds - third party 2,038 -- 423 333 259 (423) 2,630 Interest on other borrowed funds - intercompany -- 497 606 724 (724) (1,103) -- Interest and fees paid to subsidiaries 107 -- -- -- (107) -- -- Interest on long-term debt - third party -- 257 1,682 1,960 2,056 (1,939) 4,016 Interest on long-term debt - intercompany -- 246 -- 1,010 (1,010) (246) -- Interest on deposits -- 13 -- 70 9,789 (13) 9,859 Benefits, claims, and credit losses -- 531 2,646 3,232 2,106 (3,177) 5,338 Other expense - third party 69 693 3,354 4,009 13,873 (4,047) 17,951 Other expense - intercompany -- (43) 43 -- -- -- -- ----------------------------------------------------------------------------------------------- 2,214 2,194 8,754 11,338 26,242 (10,948) 39,794 ----------------------------------------------------------------------------------------------- INCOME BEFORE TAXES, MINORITY INTEREST, CUMULATIVE EFFECT OF ACCOUNTING CHANGES, AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 2,928 748 2,209 2,802 8,061 (5,925) 10,823 Income taxes (48) 272 812 1,030 2,923 (1,084) 3,905 Minority interest, net of income taxes -- -- -- -- 47 -- 47 Cumulative effect of accounting changes -- -- (36) (126) (18) 36 (144) Equity in undistributed income of subsidiaries 3,751 -- -- -- -- (3,751) -- ----------------------------------------------------------------------------------------------- NET INCOME $ 6,727 $ 476 $ 1,361 $ 1,646 $ 5,073 ($ 8,556) $ 6,727 - -------------------------------------===============================================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of CCC and ACONA, included in the Associates Consolidated column. - -------------------------------------------------------------------------------- 46 CONDENSED CONSOLIDATING INCOME STATEMENTS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2000 - ------------------------------------------------------------------------------------------------------------------------------------ CITICORP OTHER CITICORP PARENT ASSOCIATES SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE Dividends from subsidiary banks and bank holding companies $ 700 $ -- $ -- $ -- $ -- ($700) $ -- Dividends from other subsidiaries 167 -- -- -- -- (167) -- Interest from subsidiaries 936 -- -- -- (936) -- -- Interest on loans, including fees -- 1,927 7,586 9,587 17,577 (9,513) 27,164 Other interest revenue -- 104 302 410 4,579 (406) 4,989 Fees, commissions and other revenues 292 324 2,286 2,382 12,606 (2,610) 15,280 ------------------------------------------------------------------------------------------------ 2,095 2,355 10,174 12,379 33,826 (13,396) 47,433 ------------------------------------------------------------------------------------------------ EXPENSE Interest on other borrowed funds - third party 1,181 -- 1,069 1,134 640 (1,069) 2,955 Interest on other borrowed funds - intercompany -- 474 -- 474 (474) (474) -- Interest and fees paid to subsidiaries 126 -- -- -- (126) -- -- Interest on long-term debt - third party -- 279 1,855 2,185 1,145 (2,134) 3,330 Interest on long-term debt - intercompany -- 171 -- 171 (171) (171) -- Interest on deposits -- 3 -- 24 9,606 (3) 9,630 Benefits, claims, and credit losses -- 362 2,123 2,534 1,842 (2,485) 4,376 Other expense 77 586 3,038 3,816 12,825 (3,624) 16,718 ------------------------------------------------------------------------------------------------ 1,384 1,875 8,085 10,338 25,287 (9,960) 37,009 ------------------------------------------------------------------------------------------------ INCOME BEFORE TAXES, MINORITY INTEREST, AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 711 480 2,089 2,041 8,539 (3,436) 10,424 Income tax (benefit) (45) 176 763 739 3,125 (939) 3,819 Minority interest, net of income taxes -- -- -- -- 28 -- 28 Equity in undistributed income of subsidiaries 5,821 -- -- -- -- (5,821) -- ------------------------------------------------------------------------------------------------ NET INCOME $ 6,577 $ 304 $ 1,326 $ 1,302 $ 5,386 ($8,318) $ 6,577 - ------------------------------------================================================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of CCC and ACONA, included in the Associates Consolidated column. - -------------------------------------------------------------------------------- 47 CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 2001 - ------------------------------------------------------------------------------------------------------------------------------------ CITICORP OTHER CITICORP PARENT ASSOCIATES SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Cash and due from banks - third party $ 3 $ 218 $ 477 $ 1,465 $ 14,394 ($695) $ 15,862 Cash and due from banks - intercompany 16 70 -- 168 (184) (70) -- Deposits at interest with banks - third party 1 -- 115 116 17,358 (115) 17,475 Deposits at interest with banks - intercompany 3,042 -- -- -- (3,042) -- -- Securities 483 2,019 5,154 7,663 70,955 (7,173) 79,101 Loans, net of unearned income - third party 1,686 26,073 77,845 105,648 292,069 (103,918) 399,403 Loans, net of unearned income - intercompany -- -- -- 413 (413) -- -- Allowance for credit losses -- (462) (2,167) (2,687) (7,231) 2,629 (9,918) ------------------------------------------------------------------------------------------------ Loans, net 1,686 25,611 75,678 103,374 284,425 (101,289) 389,485 Advances to subsidiaries 52,223 49,947 -- -- (52,223) (49,947) -- Investments in subsidiaries 59,934 -- -- -- -- (59,934) -- Other assets - third party 177 1,814 11,341 15,268 129,882 (13,155) 145,327 Other assets - intercompany 854 3 -- 103 (957) (3) -- ------------------------------------------------------------------------------------------------ Total $118,419 $ 79,682 $ 92,765 $ 128,157 $ 460,608 ($232,381) $ 647,250 ================================================================================================ LIABILITIES AND STOCKHOLDER'S EQUITY Deposits $ -- $ 649 $ -- $ 820 $ 359,282 ($649) $ 360,102 Purchased funds and other borrowings - third party 23,346 54 14,591 14,665 34,719 (14,645) 72,730 Purchased funds and other borrowings - intercompany -- 41,865 20,301 41,865 (41,865) (62,166) -- Long-term debt - third party 30,384 4,750 35,673 40,616 17,825 (40,423) 88,825 Long-term debt - intercompany -- 26,322 -- 11,517 (11,517) (26,322) -- Advances from subsidiaries 1,286 -- -- -- (1,286) -- -- Other liabilities - third party 343 2,318 7,268 9,371 52,999 (9,586) 62,713 Other liabilities - intercompany 180 1,688 2,211 316 (496) (3,899) -- Stockholder's equity 62,880 2,036 12,721 8,987 50,947 (74,691) 62,880 ------------------------------------------------------------------------------------------------ Total $118,419 $ 79,682 $ 92,765 $ 128,157 $ 460,608 ($232,381) $ 647,250 - ------------------------------------================================================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of investments in subsidiaries and the elimination of CCC and ACONA, included in the Associates Consolidated column. - -------------------------------------------------------------------------------- 48 CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)
DECEMBER 31, 2000 - ------------------------------------------------------------------------------------------------------------------------------------ CITICORP OTHER CITICORP PARENT ASSOCIATES SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Cash and due from banks - third party $ 3 $ 198 $ 1,403 $ 1,839 $ 9,816 $ (1,601) $ 11,658 Cash and due from banks - intercompany 25 34 -- 34 (59) (34) -- Deposits at interest with banks - third party 76 3 254 257 15,827 (257) 16,160 Deposits at interest with banks - intercompany 1,214 -- -- -- (1,214) -- -- Securities 768 1,685 4,828 7,175 49,719 (6,513) 57,662 Loans, net of unearned income 1,868 21,089 75,584 98,497 266,223 (96,673) 366,588 Allowance for credit losses -- (448) (2,322) (2,815) (6,146) 2,770 (8,961) -------------------------------------------------------------------------------------------------- Loans, net 1,868 20,641 73,262 95,682 260,077 (93,903) 357,627 Advances to subsidiaries 29,205 -- 7,317 -- (29,205) (7,317) -- Investments in subsidiaries 42,855 -- -- -- -- (42,855) -- Other assets 630 3,386 12,272 17,698 90,172 (15,658) 108,500 -------------------------------------------------------------------------------------------------- Total $76,644 $ 25,947 $ 99,336 $ 122,685 $ 395,133 $(168,138) $ 551,607 ================================================================================================== LIABILITIES AND STOCKHOLDER'S EQUITY Deposits $ -- $ 247 $ 1 $ 578 $ 302,137 $ (248) $ 302,715 Purchased funds and other borrowings - third party 9,022 54 31,587 31,678 20,134 (31,641) 60,834 Purchased funds and other borrowings - intercompany -- 13,416 -- 13,416 (13,416) (13,416) -- Long-term debt - third party 18,805 4,950 42,832 48,442 13,088 (47,782) 80,335 Long-term debt - intercompany -- 3,985 -- 12,235 (12,235) (3,985) -- Advances from subsidiaries 375 -- -- -- (375) -- -- Other liabilities - third party 577 1,609 6,781 8,704 50,577 (8,390) 59,858 Other liabilities - intercompany -- 150 6,515 150 (150) (6,665) -- Stockholder's equity 47,865 1,536 11,620 7,482 35,373 (56,011) 47,865 -------------------------------------------------------------------------------------------------- Total $76,644 $ 25,947 $ 99,336 $ 122,685 $ 395,133 $(168,138) $ 551,607 - ----------------------------------==================================================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of investments in subsidiaries and the elimination of CCC and ACONA, included in the Associates Consolidated column. - -------------------------------------------------------------------------------- 49 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2001 - ------------------------------------------------------------------------------------------------------------------------------------ CITICORP OTHER CITICORP PARENT ASSOCIATES SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED ELIMINATIONS (1) ADJUSTMENTS(2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------------------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 967 $ 2,181 $ 5,019 $ 6,136 $ 814 $(7,200) $ 7,917 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Securities - available for sale and short-term and other Purchases (6,165) (865) (2,233) (3,128) (221,702) 3,098 (230,995) Proceeds from sales 4,697 564 1,217 2,079 204,196 (1,781) 210,972 Maturities -- -- 304 267 17,984 (304) 18,251 Changes in investments and advances - intercompany (29,268) (49,947) -- (49,947) 79,215 49,947 -- Net increase in loans -- (3,659) (4,115) (7,718) (23,493) 7,774 (31,211) Proceeds from sales of loans -- -- -- -- 18,516 -- 18,516 Business acquisitions -- -- -- -- (6,869) -- (6,869) Other investing activities (24) (56) 74 17 (20,361) (18) (20,368) ------------------------------------------------------------------------------------------------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (30,760) (53,963) (4,753) (58,430) 47,486 58,716 (41,704) - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits -- 402 1 231 22,604 (403) 22,835 Net change in purchased funds and other borrowings - third party 14,324 -- (16,771) (16,790) 9,034 16,771 6,568 Net change in purchased funds, other borrowings and advances - intercompany 1,299 27,888 22,518 27,888 (29,187) (50,406) -- Proceeds from issuance of long-term debt - third party 19,750 -- -- -- 12,916 -- 32,666 Repayment of long-term debt - third party (1,921) (200) (6,921) (7,581) (10,626) 7,121 (20,128) Proceeds from issuance of long-term debt - intercompany -- 24,373 -- 48,950 (48,950) (24,373) -- Repayment of long-term debt - Intercompany -- (625) -- (625) 625 625 -- Dividends paid (3,668) -- -- -- -- -- (3,668) ------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 29,784 51,838 (1,173) 52,073 (43,584) (50,665) 38,273 - ------------------------------------------------------------------------------------------------------------------------------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS -- -- (19) (19) (263) 19 (282) ------------------------------------------------------------------------------------------------- Net (decrease) increase in cash and due from banks (9) 56 (926) (240) 4,453 870 4,204 Cash and due from banks at beginning of period 28 232 1,403 1,873 9,757 (1,635) 11,658 ------------------------------------------------------------------------------------------------- CASH AND DUE FROM BANKS AT END OF PERIOD $ 19 $ 288 $ 477 $ 1,633 $ 14,210 $ (765) $ 15,862 - ------------------------------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 1,046 $ 992 $ 3,420 $ 5,684 $ 9,956 $ (4,412) $ 16,686 Income taxes 1,037 119 696 815 787 (815) 2,639 NON-CASH INVESTING ACTIVITIES: Transfers to repossessed assets -- 119 214 333 105 (333) 438 - -----------------------------------=================================================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of CCC and ACONA, included in the Associates Consolidated column. - -------------------------------------------------------------------------------- 50 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2000 - ------------------------------------------------------------------------------------------------------------------------------------ CITICORP OTHER CITICORP PARENT ASSOCIATES SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED ELIMINATIONS (1) ADJUSTMENTS(2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------------------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (210) $ 573 $ 2,472 $ 3,218 $ (5,442) $ (3,045) $ (2,434) - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Securities - available for sale and short-term and other Purchases (354) (555) (789) (1,607) (43,477) 1,344 (45,438) Proceeds from sales 1,605 431 1,384 1,867 22,512 (1,815) 25,984 Maturities -- -- 271 291 22,376 (271) 22,667 Changes in investments and advances - intercompany (3,406) -- (9,195) -- 3,406 9,195 -- Net (increase) decrease in loans (1,733) (3,678) (11,152) (14,749) (53,584) 14,830 (70,066) Proceeds from sales of loans -- -- 3,695 3,695 22,212 (3,695) 25,907 Business acquisitions -- -- (1,971) (2,140) (3,634) 1,971 (5,774) Other investing activities -- (54) (21) (117) (1,367) 75 (1,484) --------------------------------------------------------------------------------------------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (3,888) (3,856) (17,778) (12,760) (31,556) 21,634 (48,204) - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Net (decrease) increase in deposits -- (303) 17 (364) 31,186 286 30,822 Net change in purchased funds and other borrowings - third party 3,470 44 12,765 5,696 3,142 (12,809) 12,308 Net change in purchased funds, other borrowings and advances - intercompany 183 3,036 3,528 3,036 (3,219) (6,564) -- Proceeds from issuance of long-term debt - third party 3,800 -- 11,437 11,515 4,009 (11,437) 19,324 Repayment of long-term debt - third party (3,963) (750) (9,301) (10,578) 1,292 10,051 (13,249) Proceeds from issuance of long-term debt - intercompany -- 1,100 -- 1,100 (1,100) (1,100) -- Dividends paid (1,000) -- (3,076) (141) -- 3,076 (1,141) Contributions from parent company 1,600 1 -- 1 (1) (1) 1,600 --------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,090 3,128 15,370 10,265 35,309 (18,498) 49,664 - ------------------------------------------------------------------------------------------------------------------------------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS -- -- (8) (8) (473) 8 (481) --------------------------------------------------------------------------------------------- Net increase (decrease) in cash and due from banks (8) (155) 56 715 (2,162) 99 (1,455) Cash and due from banks at beginning of period 107 318 601 810 10,960 (919) 11,877 --------------------------------------------------------------------------------------------- CASH AND DUE FROM BANKS AT END OF PERIOD $ 99 $ 163 $ 657 $ 1,525 $ 8,798 ($820) $ 10,422 - ------------------------------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 781 $ 928 $ 2,742 $ 3,820 $ 9,431 $ (3,670) $ 14,032 Income taxes 1,214 152 362 514 886 (514) 2,614 NON-CASH INVESTING ACTIVITIES: Transfers to repossessed assets -- 101 194 295 134 (295) 429 - ---------------------------------------=============================================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of CCC and ACONA, included in the Associates Consolidated column. - -------------------------------------------------------------------------------- 51 - -------------------------------------------------------------------------------- FINANCIAL DATA SUPPLEMENT - -------------------------------------------------------------------------------- CITICORP AND SUBSIDIARIES AVERAGE BALANCES AND INTEREST RATES, TAXABLE EQUIVALENT BASIS - QUARTERLY (1) (2) (3)
AVERAGE VOLUME INTEREST REVENUE/EXPENSE % AVERAGE RATE ----------------------------------------------------------------------------------------- 3RD QTR. 2nd Qtr. 3rd Qtr. 3RD QTR. 2nd Qtr. 3rd Qtr. 3RD QTR. 2nd Qtr. 3rd Qtr. IN MILLIONS OF DOLLARS 2001 2001 2000 2001 2001 2000 2001 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------------ LOANS (NET OF UNEARNED INCOME) (4) Consumer loans In U.S. offices $154,362 $147,189 $141,161 $ 4,379 $ 4,251 $ 4,187 11.25 11.58 11.80 In offices outside the U.S. (5) 82,353 76,643 75,897 2,649 2,472 2,450 12.76 12.94 12.84 ------------------------------------------------------------- Total consumer loans 236,715 223,832 217,058 7,028 6,723 6,637 11.78 12.05 12.16 ------------------------------------------------------------- Commercial loans In U.S. offices Commercial and industrial 38,938 38,598 35,463 697 771 723 7.10 8.01 8.11 Lease financing 15,406 13,452 13,214 338 300 293 8.70 8.95 8.82 Mortgage and real estate 762 776 969 11 6 19 5.73 3.10 7.80 In offices outside the U.S. (5) 96,469 87,799 81,779 2,190 1,913 2,028 9.01 8.74 9.87 ------------------------------------------------------------- Total commercial loans 151,575 140,625 131,425 3,236 2,990 3,063 8.47 8.53 9.27 ------------------------------------------------------------- Total loans 388,290 364,457 348,483 10,264 9,713 9,700 10.49 10.69 11.07 ------------------------------------------------------------- FEDERAL FUNDS SOLD AND RESALE AGREEMENTS In U.S. offices 10,270 5,828 2,714 92 66 45 3.55 4.54 6.60 In offices outside the U.S. (5) 5,895 3,291 3,100 104 34 57 7.00 4.14 7.31 ------------------------------------------------------------- Total 16,165 9,119 5,814 196 100 102 4.81 4.40 6.98 ------------------------------------------------------------- SECURITIES, AT FAIR VALUE In U.S. offices Taxable 24,048 20,175 21,013 256 209 246 4.22 4.16 4.66 Exempt from U.S. income tax 6,027 5,995 5,025 110 91 70 7.24 6.09 5.54 In offices outside the U.S. (5) 40,344 30,835 27,529 809 606 482 7.96 7.88 6.97 ------------------------------------------------------------- Total 70,419 57,005 53,567 1,175 906 798 6.62 6.37 5.93 ------------------------------------------------------------- TRADING ACCOUNT ASSETS (6) In U.S. offices 5,214 3,505 4,579 67 55 61 5.10 6.29 5.30 In offices outside the U.S. (5) 13,690 10,605 11,247 316 161 190 9.16 6.09 6.72 ------------------------------------------------------------- Total 18,904 14,110 15,826 383 216 251 8.04 6.14 6.31 ------------------------------------------------------------- LOANS HELD FOR SALE, IN U.S. OFFICES 15,266 16,513 10,002 363 439 264 9.43 10.66 10.50 DEPOSITS AT INTEREST WITH BANKS (5) 21,285 16,420 13,652 303 290 312 5.65 7.08 9.09 ------------------------------------------------------------- Total interest-earning assets 530,329 477,624 447,344 $12,684 $11,664 $11,427 9.49 9.80 10.16 ======================================================== Non-interest-earning assets (6) 84,915 75,429 69,200 -------------------------------- TOTAL ASSETS $615,244 $553,053 $516,544 - ------------------------------------------------------------------------------------------------------------------------------------ DEPOSITS In U.S. offices Savings deposits (7) $ 76,457 $ 65,008 $ 36,319 $ 481 $ 505 $ 314 2.50 3.12 3.44 Other time deposits 25,237 20,191 18,501 259 223 295 4.07 4.43 6.34 In offices outside the U.S. (5) 213,949 195,457 202,464 2,550 2,351 3,006 4.73 4.82 5.91 ------------------------------------------------------------- Total 315,643 280,656 257,284 3,290 3,079 3,615 4.14 4.40 5.59 ------------------------------------------------------------- TRADING ACCOUNT LIABILITIES (6) In U.S. offices 2,617 1,828 1,903 10 7 10 1.52 1.54 2.09 In offices outside the U.S. (5) 504 856 2,541 3 3 1 2.36 1.41 0.16 ------------------------------------------------------------- Total 3,121 2,684 4,444 13 10 11 1.65 1.49 0.98 ------------------------------------------------------------- PURCHASED FUNDS AND OTHER BORROWINGS In U.S. offices 46,748 39,454 53,237 386 355 713 3.28 3.61 5.33 In offices outside the U.S. (5) 23,287 13,545 11,420 555 336 369 9.46 9.95 12.85 ------------------------------------------------------------- Total 70,035 52,999 64,657 941 691 1,082 5.33 5.23 6.66 ------------------------------------------------------------- LONG-TERM DEBT In U.S. offices 80,439 77,284 60,006 1,158 1,204 992 5.71 6.25 6.58 In offices outside the U.S. (5) 10,374 8,886 10,941 171 135 151 6.54 6.09 5.49 ------------------------------------------------------------- Total 90,813 86,170 70,947 1,329 1,339 1,143 5.81 6.23 6.41 ------------------------------------------------------------- Total interest-bearing liabilities 479,612 422,509 397,332 $ 5,573 $ 5,119 $ 5,851 4.61 4.86 5.86 ======================================================== Demand deposits in U.S. offices 9,044 6,799 9,571 Other non-interest-bearing liabilities (6) 72,700 75,280 68,770 Total stockholder's equity 53,888 48,465 40,871 -------------------------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $615,244 $553,053 $516,544 - ------------------------------------------------------------------------------------------------------------------------------------ NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE INTEREST-EARNING ASSETS In U.S. offices (8) $270,356 $252,168 $234,243 $ 4,035 $ 3,712 $ 2,988 5.92 5.90 5.07 In offices outside the U.S. (8) 259,973 225,456 213,101 3,076 2,833 2,588 4.69 5.04 4.83 ------------------------------------------------------------- TOTAL $530,329 $477,624 $447,344 $ 7,111 $ 6,545 $ 5,576 5.32 5.50 4.96 - -------------------------------------------=========================================================================================
(1) The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35%. (2) Interest rates and amounts include the effects of risk management activities associated with the respective asset and liability categories. See Note 7 of Notes to Consolidated Financial Statements. (3) Monthly or quarterly averages have been used by certain subsidiaries, where daily averages are unavailable. (4) Includes cash-basis loans. (5) Average rates reflect prevailing local interest rates including inflationary effects and monetary correction in certain countries. (6) The fair value carrying amounts of derivative and foreign exchange contracts are reported in non-interest-earning assets and other non-interest-bearing liabilities. (7) Savings deposits consist of Insured Money Market Rate accounts, NOW accounts, and other savings deposits. (8) Includes allocations for capital and funding costs based on the location of the asset. - -------------------------------------------------------------------------------- 52 AVERAGE BALANCES AND INTEREST RATES, TAXABLE EQUIVALENT BASIS - NINE MONTHS (1) (2) CITICORP AND SUBSIDIARIES
AVERAGE VOLUME INTEREST REVENUE/EXPENSE % AVERAGE RATE -------------------------------------------------------------------------------------- NINE MONTHS Nine Months NINE MONTHS Nine Months NINE MONTHS Nine Months IN MILLIONS OF DOLLARS 2001 2000 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------------ LOANS (NET OF UNEARNED INCOME) (3) Consumer loans In U.S. offices $149,395 $130,259 $12,949 $11,469 11.59 11.76 In offices outside the U.S. (4) 78,928 74,259 7,611 7,153 12.89 12.87 -------------------------------------------------------- Total consumer loans 228,323 204,518 20,560 18,622 12.04 12.16 -------------------------------------------------------- Commercial loans In U.S. offices Commercial and industrial 38,591 33,228 2,240 2,056 7.76 8.27 Lease financing 14,175 11,232 956 716 9.02 8.52 Mortgage and real estate 840 936 35 58 5.57 8.28 In offices outside the U.S. (4) 89,805 78,488 6,153 5,715 9.16 9.73 -------------------------------------------------------- Total commercial loans 143,411 123,884 9,384 8,545 8.75 9.21 -------------------------------------------------------- Total loans 371,734 328,402 29,944 27,167 10.77 11.05 -------------------------------------------------------- FEDERAL FUNDS SOLD AND RESALE AGREEMENTS In U.S. offices 7,588 2,540 251 114 4.42 6.00 In offices outside the U.S. (4) 3,807 2,809 176 159 6.18 7.56 -------------------------------------------------------- Total 11,395 5,349 427 273 5.01 6.82 -------------------------------------------------------- SECURITIES, AT FAIR VALUE In U.S. offices Taxable 21,942 20,746 697 745 4.25 4.80 Exempt from U.S. income tax 5,965 4,899 304 211 6.81 5.75 In offices outside the U.S. (4) 34,149 29,263 2,066 1,656 8.09 7.56 -------------------------------------------------------- Total 62,056 54,908 3,067 2,612 6.61 6.35 -------------------------------------------------------- TRADING ACCOUNT ASSETS (5) In U.S. offices 4,446 3,960 183 168 5.50 5.67 In offices outside the U.S. (4) 11,905 10,161 652 553 7.32 7.27 -------------------------------------------------------- Total 16,351 14,121 835 721 6.83 6.82 -------------------------------------------------------- LOANS HELD FOR SALE, IN U.S. OFFICES 15,055 7,995 1,194 591 10.60 9.87 DEPOSITS AT INTEREST WITH BANKS (4) 18,424 12,580 946 844 6.86 8.96 -------------------------------------------------------- Total interest-earning assets 495,015 423,355 $36,413 $32,208 9.83 10.16 ======================================================= Non-interest-earning assets (5) 78,557 69,071 ---------------------------- TOTAL ASSETS $573,572 $492,426 - ------------------------------------------------------------------------------------------------------------------------------------ DEPOSITS In U.S. offices Savings deposits (6) $ 63,315 $ 35,941 $ 1,395 $ 869 2.95 3.23 Other time deposits 22,006 16,188 783 685 4.76 5.65 In offices outside the U.S. (4) 203,862 190,780 7,681 8,076 5.04 5.65 -------------------------------------------------------- Total 289,183 242,909 9,859 9,630 4.56 5.30 -------------------------------------------------------- TRADING ACCOUNT LIABILITIES (5) In U.S. offices 2,459 1,764 27 29 1.47 2.20 In offices outside the U.S. (4) 934 1,820 10 15 1.43 1.10 -------------------------------------------------------- Total 3,393 3,584 37 44 1.46 1.64 -------------------------------------------------------- PURCHASED FUNDS AND OTHER BORROWINGS In U.S. offices 43,636 47,813 1,287 1,876 3.94 5.24 In offices outside the U.S. (4) 16,958 11,327 1,306 1,035 10.30 12.21 -------------------------------------------------------- Total 60,594 59,140 2,593 2,911 5.72 6.57 -------------------------------------------------------- LONG-TERM DEBT In U.S. offices 77,085 58,427 3,543 2,844 6.15 6.50 In offices outside the U.S. (4) 9,703 10,199 473 486 6.52 6.37 -------------------------------------------------------- Total 86,788 68,626 4,016 3,330 6.19 6.48 -------------------------------------------------------- Total interest-bearing liabilities 439,958 374,259 $16,505 $15,915 5.02 5.68 ======================================================= Demand deposits in U.S. offices 8,294 9,990 Other non-interest-bearing liabilities (5) 74,968 69,691 Total stockholder's equity 50,352 38,486 ---------------------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $573,572 $492,426 - ------------------------------------------------------------------------------------------------------------------------------------ NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE INTEREST-EARNING ASSETS In U.S. offices (7) $258,095 $215,812 $11,169 $ 8,513 5.79 5.27 In offices outside the U.S. (7) 236,920 207,543 8,739 7,780 4.93 5.01 -------------------------------------------------------- TOTAL $495,015 $423,355 $19,908 $16,293 5.38 5.14 - ----------------------------------------------======================================================================================
(1) The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35%. (2) Interest rates and amounts include the effects of risk management activities associated with the respective asset and liability categories. See Note 7 of Notes to Consolidated Financial Statements. (3) Includes cash-basis loans. (4) Average rates reflect prevailing local interest rates including inflationary effects and monetary correction in certain countries. (5) The fair value carrying amounts of derivative and foreign exchange contracts are reported in non-interest-earning assets and other non-interest-bearing liabilities. (6) Savings deposits consist of Insured Money Market Rate accounts, NOW accounts, and other savings deposits. (7) Includes allocations for capital and funding costs based on the location of the asset. - -------------------------------------------------------------------------------- 53 FINANCIAL DATA SUPPLEMENT CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS
SEPTEMBER 30, June 30, March 31, Dec. 31, September 30, IN MILLIONS OF DOLLARS 2001 2001 2001 2000 2000 - ------------------------------------------------------------------------------------------------------------------------ COMMERCIAL CASH-BASIS LOANS Collateral dependent (at lower of cost or collateral value) (1) $ 673 $ 503 $ 473 $ 346 $ 308 Other 2,721 2,102 1,889 1,580 1,515 ------------------------------------------------------------------------- TOTAL (2) $3,394 $2,605 $2,362 $1,926 $1,823 - -----------------------------------------------========================================================================= COMMERCIAL CASH-BASIS LOANS In U.S. offices $1,063 $1,084 $ 997 $ 656 $ 470 In offices outside the U.S. 2,331 1,521 1,365 1,270 1,353 ------------------------------------------------------------------------- TOTAL (2) $3,394 $2,605 $2,362 $1,926 $1,823 - -----------------------------------------------========================================================================= COMMERCIAL RENEGOTIATED LOANS In U.S. offices $ 605 $ 700 $ 740 $ 634 $ 638 In offices outside the U.S. 143 164 169 151 93 ------------------------------------------------------------------------- TOTAL (3) $ 748 $ 864 $ 909 $ 785 $ 731 - -----------------------------------------------========================================================================= CONSUMER LOANS ON WHICH ACCRUAL OF INTEREST HAD BEEN SUSPENDED (4) In U.S. offices $2,614 $2,480 $2,146 $2,182 $1,871 In offices outside the U.S. 1,801 1,631 1,658 1,626 1,706 ------------------------------------------------------------------------- TOTAL $4,415 $4,111 $3,804 $3,808 $3,567 - -----------------------------------------------========================================================================= ACCRUING LOANS 90 OR MORE DAYS DELINQUENT (4) (5) In U.S. offices $1,761 $1,690 $1,475 $1,090 $ 914 In offices outside the U.S. 832 433 393 385 383 ------------------------------------------------------------------------- TOTAL $2,593 $2,123 $1,868 $1,475 $1,297 - -----------------------------------------------=========================================================================
(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) Prior period cash-basis loans were restated to change the policy of the Associates Commercial Leasing business for suspending accrual of interest on past due loans to conform with other leasing businesses in the Corporate & Investment Bank. The prior policy of placing loans that are 60 days or more past due into cash-basis, was changed to 90 days or more past due. (3) Prior period commercial renegotiated loans were restated to remove Associates cash-basis loans already included above. (4) Prior periods have been restated to conform Associates cash-basis and accruing loans 90 or more days delinquent. (5) Substantially all consumer loans, of which $980 million, $973 million, $755 million, $503 million, and $413 million are government-guaranteed student loans and mortgages at September 30, 2001, June 30, 2001, March 31, 2001, December 31, 2000, and September 30, 2000, respectively. - -------------------------------------------------------------------------------- OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS
SEPTEMBER 30, June 30, March 31, Dec. 31, September 30, IN MILLIONS OF DOLLARS 2001 2001 2001 2000 2000 - -------------------------------------------------------------------------------------------------------------------- OTHER REAL ESTATE OWNED Consumer (1) $407 $289 $268 $366 $423 Commercial (1) 174 194 197 214 189 --------------------------------------------------------------------- TOTAL OTHER REAL ESTATE OWNED $581 $483 $465 $580 $612 - -----------------------------------------------====================================================================== OTHER REPOSSESSED ASSETS (2) $479 $409 $419 $292 $247 - -----------------------------------------------======================================================================
(1) Represents repossessed real estate, carried at lower of cost or fair value, less costs to sell. (2) Primarily commercial transportation equipment and manufactured housing, carried at lower of cost or fair value, less costs to sell. - -------------------------------------------------------------------------------- 54 DETAILS OF CREDIT LOSS EXPERIENCE
3RD QTR. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. IN MILLIONS OF DOLLARS 2001 2001 2001 2000 2000 - --------------------------------------------------------------------------------------------------------------------------- ALLOWANCE FOR CREDIT LOSSES AT BEGINNING OF PERIOD $8,917 $ 8,957 $ 8,961 $8,900 $ 8,852 ----------------------------------------------------------------------------- PROVISION FOR CREDIT LOSSES Consumer 1,360 1,196 1,197 1,113 1,078 Commercial 220 289 267 394 143 ----------------------------------------------------------------------------- 1,580 1,485 1,464 1,507 1,221 ----------------------------------------------------------------------------- GROSS CREDIT LOSSES CONSUMER In U.S. offices 1,041 945 915 946 812 In offices outside the U.S. 547 462 449 566 454 COMMERCIAL In U.S. offices 303 285 231 204 120 In offices outside the U.S. 99 84 90 83 49 ----------------------------------------------------------------------------- 1,990 1,776 1,685 1,799 1,435 ----------------------------------------------------------------------------- CREDIT RECOVERIES CONSUMER In U.S. offices 109 81 101 140 128 In offices outside the U.S. 102 102 98 105 101 COMMERCIAL In U.S. offices 78 56 35 26 9 In offices outside the U.S. 41 26 19 23 26 ----------------------------------------------------------------------------- 330 265 253 294 264 ----------------------------------------------------------------------------- NET CREDIT LOSSES In U.S. offices 1,157 1,093 1,010 984 795 In offices outside the U.S. 503 418 422 521 376 ----------------------------------------------------------------------------- 1,660 1,511 1,432 1,505 1,171 ----------------------------------------------------------------------------- Other-net (1) 1,081 (14) (36) 59 (2) ----------------------------------------------------------------------------- ALLOWANCE FOR CREDIT LOSSES AT END OF PERIOD $9,918 $ 8,917 $ 8,957 $8,961 $ 8,900 - ----------------------------------------------============================================================================= Net consumer credit losses $1,377 $ 1,224 $ 1,165 $1,267 $ 1,037 As a percentage of average consumer loans 2.31% 2.19% 2.10% 2.25% 1.90% - --------------------------------------------------------------------------------------------------------------------------- Net commercial credit losses $ 283 $ 287 $ 267 $ 238 $ 134 As a percentage of average commercial loans 0.73% 0.82% 0.78% 0.69% 0.40% - ----------------------------------------------=============================================================================
(1) The third quarter 2001 includes the addition of $1 billion of credit loss reserves related to the acquisition of Banamex. Also includes foreign currency translation effects and the addition of allowance for credit losses related to acquisitions. - -------------------------------------------------------------------------------- 55 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits See Exhibit Index. (b) Reports on Form 8-K On July 18, 2001, the Company filed a Current Report on Form 8-K, dated July 16, 2001, reporting under Item 5 thereof the summarized results of operations of Citicorp and its subsidiaries for the quarter ended September 30, 2001. No other reports on Form 8-K were filed during the third quarter of 2001; however, on October 19, 2001, the Company filed a Current Report on Form 8-K, dated October 17, 2001, reporting under Item 5 thereof the summarized results of operations of Citicorp and its subsidiaries for the quarter ended September 30, 2001. 56 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 14th day of November, 2001. CITICORP (Registrant) By: /s/ Todd S. Thomson ------------------------------------ Name: Todd S. Thomson Title: Chief Financial Officer Principal Financial Officer By: /s/ Roger W. Trupin ------------------------------------ Name: Roger W. Trupin Title: Vice President and Controller 57 EXHIBIT INDEX Exhibit Number Description of Exhibit - ------ ---------------------- 3.01 Citicorp's Certificate of Incorporation (incorporated by reference to Exhibit 3(i) to Citicorp's Post-Effective Amendment No. 1 to Registration Statement on Form S-3, File No. 333-21143, filed on October 8, 1998). 3.02 Citicorp's By-Laws (incorporated by reference to Exhibit 3.02 to Citicorp's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001, File No. 1-5738). 12.01+ Calculation of Ratio of Income to Fixed Charges. 12.02+ Calculation of Ratio of Income to Fixed Charges (including preferred stock dividends). 99.01+ Residual Value Obligation Certificate. - -------------- The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of Citicorp does not exceed 10% of the total assets of Citicorp and its consolidated subsidiaries. Citicorp will furnish copies of any such instrument to the Securities and Exchange Commission upon request. - -------------- + Filed herewith 58 EX-12.01 3 a2063746zex-12_01.txt EXHIBIT 12.01 Exhibit 12.01 CITICORP CALCULATION OF RATIO OF INCOME TO FIXED CHARGES (In Millions)
YEAR ENDED DECEMBER 31, Nine Months Ended September 30, EXCLUDING INTEREST ON DEPOSITS: 2000 1999 1998 1997 1996 2001 2000 ------ ------ ------ ------ ------ ------ ------ FIXED CHARGES: INTEREST EXPENSE (OTHER THAN INTEREST ON DEPOSITS) 8,722 7,795 7,308 6,776 6,325 6,646 6,285 INTEREST FACTOR IN RENT EXPENSE 283 235 213 189 176 231 212 ------ ------ ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 9,005 8,030 7,521 6,965 6,501 6,877 6,497 ------ ------ ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 12,876 10,496 6,732 7,664 7,734 10,823 10,424 FIXED CHARGES 9,005 8,030 7,521 6,965 6,501 6,877 6,497 ------ ------ ------ ------ ------ ------ ------ TOTAL INCOME 21,881 18,526 14,253 14,629 14,235 17,700 16,921 ====== ====== ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS 2.43 2.31 1.90 2.10 2.19 2.57 2.60 ====== ====== ====== ====== ====== ====== ====== INCLUDING INTEREST ON DEPOSITS: FIXED CHARGES: INTEREST EXPENSE 22,045 18,606 18,868 16,430 15,341 16,505 15,915 INTEREST FACTOR IN RENT EXPENSE 283 235 213 189 176 231 212 ------ ------ ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 22,328 18,841 19,081 16,619 15,517 16,736 16,127 ------ ------ ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 12,876 10,496 6,732 7,664 7,734 10,823 10,424 FIXED CHARGES 22,328 18,841 19,081 16,619 15,517 16,736 16,127 ------ ------ ------ ------ ------ ------ ------ TOTAL INCOME 35,204 29,337 25,813 24,283 23,251 27,559 26,551 ====== ====== ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES INCLUDING INTEREST ON DEPOSITS 1.58 1.56 1.35 1.46 1.50 1.65 1.65 ====== ====== ====== ====== ====== ====== ======
Note> On November 30, 2000, Citigroup Inc. completed its acquisition of Associates First Capital Corporation (Associates) in a transaction accounted for as a pooling of interests. Subsequent to the acquisition, Associates was contributed to and became a wholly owned subsidiary of Citicorp and Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates and Associates Corporation of North America (ACONA), a subsidiary of Associates. EX-12.02 4 a2063746zex-12_02.txt EXHIBIT 12.02 Exhibit 12.02 CITICORP, INC. CALCULATION OF RATIO OF INCOME TO FIXED CHARGES INCLUDING PREFERRED STOCK DIVIDENDS (In Millions)
YEAR ENDED DECEMBER 31, Nine Months Ended September 30, EXCLUDING INTEREST ON DEPOSITS: 2000 1999 1998 1997 1996 2001 2000 ------ ------ ------ ------ ------ ------ ------ FIXED CHARGES: INTEREST EXPENSE (OTHER THAN INTEREST ON DEPOSITS) 8,722 7,795 7,308 6,776 6,325 6,646 6,285 INTEREST FACTOR IN RENT EXPENSE 283 235 213 189 176 231 212 DIVIDENDS--PREFERRED STOCK -- -- 126 223 261 -- -- (A) ------ ------ ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 9,005 8,030 7,647 7,188 6,762 6,877 6,497 ------ ------ ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 12,876 10,496 6,732 7,664 7,734 10,823 10,424 FIXED CHARGES (EXCLUDING PREFERRED STOCK DIVIDENDS) 9,005 8,030 7,521 6,965 6,501 6,877 6,497 ------ ------ ------ ------ ------ ------ ------ TOTAL INCOME 21,881 18,526 14,253 14,629 14,235 17,700 16,921 ====== ====== ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS 2.43 2.31 1.86 2.04 2.11 2.57 2.60 ====== ====== ====== ====== ====== ====== ====== INCLUDING INTEREST ON DEPOSITS: FIXED CHARGES: INTEREST EXPENSE 22,045 18,606 18,868 16,430 15,341 16,505 15,915 INTEREST FACTOR IN RENT EXPENSE 283 235 213 189 176 231 212 DIVIDENDS--PREFERRED STOCK -- -- 126 223 261 -- -- (A) ------ ------ ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 22,328 18,841 19,207 16,842 15,778 16,736 16,127 ------ ------ ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 12,876 10,496 6,732 7,664 7,734 10,823 10,424 FIXED CHARGES (EXCLUDING PREFERRED STOCK DIVIDENDS) 22,328 18,841 19,081 16,619 15,517 16,736 16,127 ------ ------ ------ ------ ------ ------ ------ TOTAL INCOME 35,204 29,337 25,813 24,283 23,251 27,559 26,551 ====== ====== ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES INCLUDING INTEREST ON DEPOSITS 1.58 1.56 1.34 1.44 1.47 1.65 1.65 ====== ====== ====== ====== ====== ====== ======
Note> On November 30, 2000, Citigroup Inc. completed its acquisition of Associates First Capital Corporation (Associates) in a transaction accounted for as a pooling of interests. Subsequent to the acquisition, Associates was contributed to and became a wholly owned subsidiary of Citicorp and Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates and Associates Corporation of North America (ACONA), a subsidiary of Associates. (A) On October 8, 1998, Citicorp merged with and into a newly formed, wholly owned subsidiary of Travelers Group Inc. ("TRV") (The "Merger"). Following the Merger, TRV changed its name to Citigroup. Under the terms of the Merger, Citicorp common and preferred stock were exchanged for Citigroup common stock and preferred stock. As such there were no Citicorp preferred dividends subsequent to 1998. EX-99.01 5 a2063746zex-99_01.txt EXHIBIT 99.01 Exhibit 99.01 RESIDUAL VALUE OBLIGATION QUARTERLY CERTIFICATE FOR THE QUARTER ENDED SEPTEMBER 30, 2001 The information below is being disclosed pursuant to the Residual Value Obligation Agreement dated as of April 3, 2000 between Associates First Capital Corporation and the Chase Manhattan Bank, as Trustee. Terms used and not otherwise defined herein have the meaning assigned to them in the Residual Value Agreement.
Securitization Distribution Dates during quarter: July 16, 2001 August 15, 2001 September 17, 2001 Allocation Dates during quarter: July 17, 2001 August 16, 2001 September 18, 2001 Payment Date during quarter: NA AFCC Amount at beginning of quarter: $ 514,239,411 AFCC Amount at end of quarter: $ 533,765,444 ==================================================================================================================================== ON THE PAYMENT DATE DURING THE QUARTER: Accrued RVO Payment Amount as of the immediately preceding Allocation Date: $ -- Interest accrued on Accrued RVO Payment Amount since immediately preceding Allocation Date: $ -- Accrued RVO Payment Amount as of such Payment Date: $ -- Number of RVO's outstanding as of the applicable record date N/A Payment per RVO: $ -- ==================================================================================================================================== AS OF THE FIRST ALLOCATION DATE DURING THE QUARTER: RESIDUAL CASH FLOW: Residual Cash Flow Allocated for current period -- Cumulative Residual Cash Flow not covered by allocation (to be carried forward) $ (23,111,591) Excess Litigation Reserve allocated: $ -- RVO EXPENSES: Residual Cash Flow allocated to RVO Expenses: $ -- Cumulative RVO Expenses not covered by allocation (to be carried forward): $ 5,356 LITIGATION EXPENSES: Residual Cash Flow allocated to Litigation Expenses: $ -- Cumulative Litigation Expenses not covered by allocation (to be carried forward): $ 453,536
AFCC AMOUNT: AFCC Amount at end of immediately preceding Allocation Date: $ 514,239,411 plus: AFCC Interest added on immediately preceding Securitization Distribution Date: $ 6,427,993 less: Residual Cash Flow allocated to AFCC Amount: $ -- AFCC Amount after allocation: $ 520,667,404 ACCRUED RVO PAYMENT AMOUNT: Residual Cash Flow allocated to Accrued RVO Payment Amount on such Allocation Date: $ -- plus: cumulative Residual Cash Flow allocated to, and cumulative interest accrued on, Accrued RVO Payment Amount since most recent Payment Date on which RVO Payments were made: $ -- Accrued RVO Payment Amount on such Allocation Date: $ -- ==================================================================================================================================== AS OF THE SECOND ALLOCATION DATE DURING THE QUARTER: RESIDUAL CASH FLOW: Residual Cash Flow allocated for current period -- Cumulative Residual Cash Flow not covered by allocation (to be carried forward) $ (25,447,816) Excess Litigation Reserve allocated: $ -- RVO EXPENSES: Residual Cash Flow allocated to RVO Expenses: Cumulative RVO Expenses not covered by allocation (to be carried forward): $ 5,372 LITIGATION EXPENSES: Residual Cash Flow allocated to Litigation Expenses: $ -- Cumulative Litigation Expenses not covered by allocation (to be carried forward): $ 454,935 AFCC AMOUNT: AFCC Amount at end of immediately preceding Allocation Date: $ 520,667,404 plus: AFCC Interest added on immediately preceding Securitization Distribution Date: $ 6,508,343 less: Residual Cash Flow allocated to AFCC Amount: $ -- AFCC Amount after allocation: $ 527,175,747 ACCRUED RVO PAYMENT AMOUNT: Residual Cash Flow allocated to Accrued RVO Payment Amount on such Allocation Date: $ -- plus: cumulative Residual Cash Flow allocated to, and cumulative interest accrued on, Accrued RVO Payment Amount since most recent Payment Date on which RVO Payments were made: $ -- Accrued RVO Payment Amount on such Allocation Date: $ -- ====================================================================================================================================
AS OF THE THIRD ALLOCATION DATE DURING THE QUARTER: RESIDUAL CASH FLOW: Residual Cash Flow allocated for current period -- Cumulative Residual Cash Flow not covered by allocation (to be carried forward) $ (28,539,118) Excess Litigation Reserve allocated: $ -- RVO EXPENSES: Residual Cash Flow allocated to RVO Expenses: Cumulative RVO Expenses not covered by allocation (to be carried forward): $ 5,390 LITIGATION EXPENSES: Residual Cash Flow allocated to Litigation Expenses: $ -- Cumulative Litigation Expenses not covered by allocation (to be carried forward): $ 456,407 AFCC AMOUNT: AFCC Amount at end of immediately preceding Allocation Date: $ 527,175,747 plus: AFCC Interest added on immediately preceding Securitization Distribution Date: $ 6,589,697 less: Residual Cash Flow allocated to AFCC Amount: $ -- AFCC Amount after allocation: $ 533,765,444 ACCRUED RVO PAYMENT AMOUNT: Residual Cash Flow allocated to Accrued RVO Payment Amount on such Allocation Date: $ -- plus: cumulative Residual Cash Flow allocated to, and cumulative interest accrued on, Accrued RVO Payment Amount since most recent Payment Date on which RVO Payments were made: $ -- Accrued RVO Payment Amount on such Allocation Date: $ -- ====================================================================================================================================
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