-----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, K9vjWkIFgSwCg/60LN8s5Q9w9Zf/LKVQ/HVJZiCxdDdYnzolw/4H2fYPVFEiPpav 2/c8JPI652BG4CJZ4wo3Vw== 0000950130-97-000720.txt : 19970226 0000950130-97-000720.hdr.sgml : 19970226 ACCESSION NUMBER: 0000950130-97-000720 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970225 SROS: CSX SROS: NYSE SROS: PSE 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05378 FILM NUMBER: 97543348 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: FIRST NATIONAL CITY CORP DATE OF NAME CHANGE: 19740414 FORMER COMPANY: FORMER CONFORMED NAME: CITY BANK OF NEW YORK NATIONAL ASSOCIATI DATE OF NAME CHANGE: 19680903 10-K 1 FORM 10-K Securities and Exchange Commission Washington, DC 20549 Form 10-K Annual Report pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996, Commission File Number 1-5738 CITICORP [LOGO] - ------------------------------------------------------------------------------- Incorporated in the State of Delaware IRS Employer Identification Number: 13-2614988 Address: 399 Park Avenue, New York, NY 10043 Telephone: (800) 285-3000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) AND (g) OF THE ACT: A list of Citicorp securities registered pursuant to Section 12(b) and (g) of the Securities Exchange Act of 1934 is available from Citicorp, Corporate Governance Department, 399 Park Avenue, Mezzanine, New York, NY 10043. As of December 31, 1996, Citicorp had 463,217,018 shares of common stock outstanding. Citicorp (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. Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein nor in any amendment to this Form 10-K but is contained in Citicorp's 1997 Proxy Statement incorporated by reference in Part III of this Form 10-K. The aggregate market value of Citicorp common stock held by non-affiliates of Citicorp on January 31, 1997 was approximately $53.4 billion. Certain information has been incorporated by reference as described herein into Part III of this annual report from Citicorp's 1997 Proxy Statement. EXHIBIT 12a CITICORP AND SUBSIDIARIES CALCULATION OF RATIO OF INCOME TO FIXED CHARGES (In Millions)
YEAR ENDED DECEMBER 31, EXCLUDING INTEREST ON DEPOSITS: 1996 1995 1994 1993 1992 ----------- ----------- ----------- ---------- ---------- FIXED CHARGES: INTEREST EXPENSE (OTHER THAN INTEREST ON DEPOSITS) 3,435 4,110 5,906 6,324 5,826 INTEREST FACTOR IN RENT EXPENSE 150 140 143 147 162 ----------- ----------- ----------- ---------- ---------- TOTAL FIXED CHARGES 3,585 4,250 6,049 6,471 5,988 INCOME: NET INCOME 3,788 3,464 3,422 (A) 1,919 (B) 722 INCOME TAXES 2,285 2,121 1,189 941 696 FIXED CHARGES 3,585 4,250 6,049 6,471 5,988 ----------- ----------- ----------- ---------- ---------- TOTAL INCOME 9,658 9,835 10,660 9,331 7,406 =========== =========== =========== ========== ========== RATIO OF INCOME TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS 2.69 2.31 1.76 1.44 1.24 =========== =========== =========== ========== ========== INCLUDING INTEREST ON DEPOSITS: FIXED CHARGES: INTEREST EXPENSE 12,409 13,012 14,902 16,121 16,327 INTEREST FACTOR IN RENT EXPENSE 150 140 143 147 162 ----------- ----------- ----------- ---------- ---------- TOTAL FIXED CHARGES 12,559 13,152 15,045 16,268 16,489 INCOME: NET INCOME 3,788 3,464 3,422 (A) 1,919 (B) 722 INCOME TAXES 2,285 2,121 1,189 941 696 FIXED CHARGES 12,559 13,152 15,045 16,268 16,489 ----------- ----------- ----------- ---------- ---------- TOTAL INCOME 18,632 18,737 19,656 19,128 17,907 =========== =========== =========== ========== ========== RATIO OF INCOME TO FIXED CHARGES INCLUDING INTEREST ON DEPOSITS 1.48 1.42 1.31 1.18 1.09 =========== =========== =========== ========== ==========
(A) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 EXCLUDES THE CUMULATIVE EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS No. 112, "EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS", OF $(56) MILLION. (B) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1993 EXCLUDES THE CUMULATIVE EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 109, "ACCOUNTING FOR INCOME TAXES", OF $300 MILLION. EXHIBIT 12b CITICORP AND SUBSIDIARIES CALCULATION OF RATIO OF INCOME TO FIXED CHARGES INCLUDING PREFERRED STOCK DIVIDENDS (In Millions)
YEAR ENDED DECEMBER 31, EXCLUDING INTEREST ON DEPOSITS: 1996 1995 1994 1993 1992 ----------- ----------- ----------- ---------- ---------- FIXED CHARGES: INTEREST EXPENSE (OTHER THAN INTEREST ON DEPOSITS) 3,435 4,110 5,906 6,324 5,826 INTEREST FACTOR IN RENT EXPENSE 150 140 143 147 162 DIVIDENDS--PREFERRED STOCK 261 553 505 (A) 465 416 ----------- ----------- ----------- ---------- ---------- TOTAL FIXED CHARGES 3,846 4,803 6,554 6,936 6,404 INCOME: NET INCOME 3,788 3,464 3,422 (B) 1,919 (C) 722 INCOME TAXES 2,285 2,121 1,189 941 696 FIXED CHARGES (EXCLUDING PREFERRED STOCK DIVIDENDS) 3,585 4,250 6,049 6,471 5,988 ----------- ----------- ----------- ---------- ---------- TOTAL INCOME 9,658 9,835 10,660 9,331 7,406 =========== =========== =========== ========== ========== RATIO OF INCOME TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS 2.51 2.05 1.63 1.35 1.16 =========== =========== =========== ========== ========== INCLUDING INTEREST ON DEPOSITS: FIXED CHARGES: INTEREST EXPENSE 12,409 13,012 14,902 16,121 16,327 INTEREST FACTOR IN RENT EXPENSE 150 140 143 147 162 DIVIDENDS--PREFERRED STOCK 261 553 505 (A) 465 416 ----------- ----------- ----------- ---------- ---------- TOTAL FIXED CHARGES 12,820 13,705 15,550 16,733 16,905 INCOME: NET INCOME 3,788 3,464 3,422 (B) 1,919 (C) 722 INCOME TAXES 2,285 2,121 1,189 941 696 FIXED CHARGES (EXCLUDING PREFERRED STOCK DIVIDENDS) 12,559 13,152 15,045 16,268 16,489 ----------- ----------- ----------- ---------- ---------- TOTAL INCOME 18,632 18,737 19,656 19,128 17,907 =========== =========== =========== ========== ========== RATIO OF INCOME TO FIXED CHARGES INCLUDING INTEREST ON DEPOSITS 1.45 1.37 1.26 1.14 1.06 =========== =========== =========== ========== ==========
(A) CALCULATED ON A BASIS OF AN ASSUMED TAX RATE OF 29% FOR 1994. (B) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 EXCLUDES THE CUMULATIVE EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS No. 112, "EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS", OF $(56) MILLION. (C) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1993 EXCLUDES THE CUMULATIVE EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 109, "ACCOUNTING FOR INCOME TAXES", OF $300 MILLION. - -------------------------------------------------------------------------------- CITICORP ANNUAL REPORT 1996 [CITIBANK LOGO] CONTENTS Chairman's Letter 1 Managing for Performance 4 Performing for Our Customers 6 Sustaining Performance Over Time 14 Citibankers Deliver Performance 18 Performing for Our Communities 20 Financial Information 25 Corporate Information 87 Shareholder Information 90 - -------------------------------------------------------------------------------- CHAIRMAN'S LETTER TO STOCKHOLDERS These years...1996, on which I am reporting, and 1997 and 1998...are important years for Citicorp because they are years of change and of engagement. In 1995, we told you of our new business directions. We told you that we were running the company for performance and that performance would be derived from our historical franchises and their strengths, particularly our globality. We told you that it would take 1996, 1997 and 1998 to be fully engaged. This is still our view. We are hard at work. We are excited. We are exploiting a great opportunity and building a great company. Financially, 1996 continued us on target. Core earnings were strong, if you recognize that our U.S. Cards business was down year-to-year as the credit environment shifted from unusually good (1995) to slightly worse than normal (1996). (Our loss performance shifted from being traditionally higher than the industry's to being better.) We offset the Cards business drop with strong performance, particularly in the emerging markets. Net income was $3.8 billion, up $324 million from last year. Earnings per share were $7.42, up 15%. Reflecting our very strong capital accumulation, we paid $1.0 billion in dividends to stockholders in 1996, bought back $3.1 billion in stock, held our capital ratios above 8.3% and 12.2%, and built our reserves. Our stock closed the year at $103 per share, up $35.75 or 53% for the year. [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN PRINTED MATERIAL.] INCOME $ Billions
92 93 94 95 96 ---- ---- ---- ---- ---- Income Before Taxes 1.4 2.9 4.6 5.6 6.1 Net Income 0.7 2.2 3.4 3.5 3.8
Nineteen ninety-six was an unusually good year for business globally. It is quite unlikely that 1997 and 1998 will be so kind. Japan's economy is weak. Europe will reflect the tensions that are inevitable as countries try to shoehorn their economies into the European Monetary Union. The U.S. economy is slowing, seemingly in an orderly way, but one has to reflect that the great success against inflation comes from restraints on purchasing capacity which, in turn, means tight household and government budgets. It is highly unusual to have good employment numbers and a less than good credit environment in the Cards business! The developing world is [1] doing well, but there are a number of economies under strain. Dependence on external capital flows is a natural part of development, but a potential source of instability nonetheless. The banking business was, and promises to be, more difficult. I have already mentioned the consumer credit environment in the United States. Globally, credit was benign but pricing was under important pressure, reflecting a tougher competitive environment, more than adequate liquidity, and a seemingly trusting view of risk and discipline. [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN PRINTED MATERIAL.] EARNINGS PER SHARE* In Dollars
92 93 94 95 96 ---- ---- ---- ---- ---- 1.35 4.11 6.29 6.48 7.42
* Fully diluted after accounting changes. Citicorp is globalizing its business, moving from the position of operating country by country to operating globally. It is tough work, but the objective is worthwhile for customers as well as stockholders. We have two franchises: that of a global corporate bank (The Bank) operating on behalf of customers locally, regionally and globally. This is a business that is growing, particularly in the emerging markets. It is a business that demands the best and most sophisticated talent because of the needs of global investors, as well as issuers, and the intersection of this business with capital markets. This is a business that permits solid returns because of the spread of our activities into local markets and because of our role as a processor, providing global custody, money transfer and trade services. Our banking business is important and fun because it is "center plate" for the most interesting and active private sector players on the world's economic stage. We believe we have the best banking franchise in the world. [LINE GRAPH] CCI Quarterly Common Stock Price (12/92-12/96) (in Dollars) The second franchise, Citicorp's Consumer Business, is singular. We seek to provide average people--that broad mid-sector of the market--with payment products, banking services and investment services that will help these customers achieve their personal objectives. Our vision is global, as is our presence and pursuit of this opportunity. It will take years to fully develop this business. They will be exciting years and our success in this business will shape the company and fuel its performance. In the last months, we announced two additions to our senior team: Mary Alice Taylor, who comes from Federal Express and will head up Operations; and Ed Horowitz, who comes from Viacom and will lead our Advanced Development efforts. Mary Alice and Ed are important additions. At the top of the company we operate as a team. In addition to the Vice Chairmen, we have five line [2] executives (two in The Bank, three in the Citicorp Consumer Business) who run the businesses day to day; an advanced development function that is overarching; and four staff functions (Human Resources, Risk, Operations and Finance) that crosscut through all the businesses. During 1991 and 1992, we discovered that the combination of line and crosscutting corporate imperatives works well for us. The group of us keeps the process alive. The years 1997 and 1998 will be challenging. In addition to the environment already mentioned, we have come to recognize the central role of quality in our aspirations and have embraced the need to internalize a commitment to it. We are modernizing and globalizing our processing base, moving beyond the need to manage the flow of expenses to reconfiguring its architecture. We have shifted to a customer-centered strategy (rather than product or geography) and are shifting process, tools and structure in support of this change. We are strengthening the human make-up of the company, adding people and managing training and careers in support of our opportunities. We have recognized the challenge, risks and opportunities of the electronic world. All of this, while continuing to serve millions of customers worldwide and doing an increasingly better job in support of the communities on which we depend. ======================================== PERFORMANCE TARGETS o Core Earnings Growth of 10%-12% a year o Returns in Excess of 18% o Excess Capital of $2 billion a year o Incremental Revenue Expense Ratio of 2 : 1 ======================================== The composition of your Board changed during 1996. Three Directors: H.J. Haynes (of Chevron and Bechtel), who had served on the Board from 1972-1982 and then since 1984; Colby Chandler (of Kodak), who had served since 1984; and Roger Smith (of General Motors), who had served since 1987, reached our mandatory retirement age. They, individually and as a group, served with great distinction and were of notable help to the Company. I want to take this further occasion to thank them. We were fortunate to add three new Directors to your Board: Reuben Mark, Chairman of the Colgate-Palmolive Company, and Richard Parsons, President of Time Warner, joined us in April. In December, we re-elected John Deutch, Institute Professor of MIT, who had left the Board to serve in the Administration during the last four years. Citicorp has a strong, highly dedicated and involved Board. It is one of our strengths. It and almost 90,000 staff members around the world and our millions of customers have made us what we are. /s/ John S. Reed John S. Reed [3] [Photograph of a Deutsche Telekom telephone installation] [Photograph of a Supermarket in Prague, Czech Republic] [Photograph of a Citibank branch exterior in Bangkok] [4] [Photograph of a Citibank AAdvantage Card ad used in newspapers and magazines] [Photograph of Private Bank Customers] - ------------------------- BALANCED SCORECARD - ------------------------- Customer/Franchise Performance Strategic Cost Management Risk Management People Financial Performance AT CITICORP, PERFORMANCE EMBODIES BALANCE--A BALANCED SCORECARD (SEE BELOW) MEASURES OUR SUCCESS AS A COMPANY AND IN EACH OF OUR BUSINESSES. It recognizes that sustained financial performance derives from balanced achievements in four key areas: Providing quality in all of our dealings with customers worldwide o Managing costs globally by directing investment spending toward the most promising opportunities o Distributing exposures to manage our risk profile o Offering unbounded opportunities to Citibankers around the world. Citicorp also has balance in its businesses. Consumer--Citibanking, Cards and the Private Bank--produces about half of our earnings, as does Corporate Banking--serving global corporations and businesses in emerging markets. Geographically, emerging market earnings are balanced with those from developed countries. Our worldwide presence enables us to serve the needs of consumers and corporations, and to participate with them in the world's fastest growing markets. We balance our business success by seeking a constructive role in our communities, particularly in their economic and educational development. - -------------------------------------------------------------------------------- Citicorp's Balanced Scorecard (above), keeps us focused on the quality of our performance in all five equally important elements of our global growth strategy. Clockwise, examples of Citibank's performance for customers all around the world: At 1,130 Citibank branches worldwide, customers know they'll receive the consistently superior service experience found in this Bangkok model branch o The Citibank AAdvantage card was successfully launched in several new Latin American markets in 1996, and is now a prominent co-branded card in 14 countries o Our Private Bank clients can count on personal access, expert advice and quick response wherever they travel o Citibank is a conduit to world financial markets for companies such as Deutsche Telekom, which turned to Citibank to handle its American Depositary Receipt program o In Eastern Europe, global consumer companies rely on Citibank's expertise in cash management to help them manage their payables and receivables. [5] [Photograph of a Citibank branch interior in Cologne, Germany] - -------------------------------------------------------------------------------- An important thrust of our consumer strategy is to establish Citibank as a global brand that is recognized everywhere. A common design standard promises a superior customer service experience from Bombay to Tokyo to Buenos Aires to New York. Here it identifies our Citibank branch in Cologne, part of our network of 307 branches in 200 cities in Germany, where we were given an award of excellence in 1996 by the German Post and German Marketing Association. - -------------------------------------------------------------------------------- [6] CUSTOMERS [PHOTOGRAPH] CITIBANK, THE ONLY BANK PURSUING A TRULY GLOBAL CONSUMER STRATEGY, SERVES 50 MILLION CONSUMERS IN 56 COUNTRIES. Our strategy is built on supplying innovative products and superior service to a consumer base that is worldwide, growing rapidly, and fueling demand for increasingly sophisticated financial services. People everywhere have the same financial needs--needs that broaden as they pass through various life stages and levels of affluence. At the outset, customers need basics--a checking account, a credit card, and possibly a loan for college. As they mature financially, customers add a mortgage, car loan and investments. As they accumulate wealth, portfolio management and estate planning become priorities. No other financial institution has the scope and the resourcefulness to meet all these needs for so many in so many different places. With almost 60,000 Citibankers in our consumer businesses and more than 1,000 branches around the world, Citibank is becoming the global brand of choice for financial services. CONSUMER BUSINESSES REVENUE [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Citibanking 43% Cards 49% Private Bank 8%
We're working to make sure that the Citibank name means service that is consistently beyond--not merely up to--customers' expectations. We offer them the right products at the right times in their lives. Everywhere and every time customers have contact with us, we deliver a predictable, superior experience. CONSUMER BUSINESSES REVENUE BY REGION [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Latin America 11% Europe 15% North America 56% Asia Pacific, Central/Eastern Europe, Middle East, Africa 18%
Being global is essential to both our growth strategy and brand, but it requires more than simply having locations in many countries. Our customers know that Citibank is their gateway to state-of-the-art products and the best ideas from around the world. Plus, they have the security and convenience of access 24 hours a day, 7 days a week, 365 days a year--in a branch, by computer, on an ATM, or with CitiPhone. [7] Worldwide, our Cards customers rely on us for the credit and charge cards that meet their specific interests and financial situations, including co-branded cards that carry incentives from some of the world's most respected organizations. Private Bank clients rely on us to seek out investment opportunities and discern risks. Citibank delivers the depth of first-hand knowledge that comes from its worldwide presence. Photographs of Credit Cards: Diners Club Citibank Ford Citibank BahnCard Citibank Gold Visa Citibank MasterCard (Photocard) Like other global marketers of consumer products and services, we are achieving particularly strong growth in emerging markets. As we expand our consumer business into new areas, we have the distinct advantage of having Citibank in place as a corporate bank, with licenses, market understanding and a trained local staff. Our initial customer base often comes from employees of the corporations which already know the Citibank name and the high standard of quality it represents. And once established, brand awareness, enhanced by consumer advertising, will also benefit our corporate banking business. CONSUMER BUSINESSES REVENUE $ Billions [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
94 95 96 ---- ---- ---- Emerging Markets 2.7 3.1 3.6 Developed Markets 8.7 9.2 9.8 ---- ---- ---- 11.4 12.3 13.4
[Photograph of a bazaar in Cairo, Egypt] [8] [Photograph of a Private Bankers meeting in Zurich, Switzerland] - -------------------------------------------------------------------------------- In credit and charge cards, we have the largest worldwide business, with $55 billion in outstanding receivables. We have 61 million cards in total (including private label and affiliates), of which three million cards are in Europe, seven million in Asia and nine million in Latin America. By introducing cards as a preferred and secure payment method, Citibank also helps cash-based societies develop a system for consumer credit. This enables millions of people in emerging countries, such as the Middle Eastern family at left, to enjoy a new middle-class lifestyle. Above, our private bankers in 32 countries act as a gateway to Citibank's network of people, products and strategies. A European client, for example, will receive first-hand advice on his or her global investment portfolio, even drawing upon complex financial engineering solutions provided by our corporate banking specialists. Similarly, investors who wish to leverage growth opportunities in emerging markets can take advantage of our expertise and long-time presence in those economies. - -------------------------------------------------------------------------------- [9] [Photograph of an oilrig off Brazil] [Photograph of Citibankers in Shanghai, China] - -------------------------------------------------------------------------------- The huge Brazilian oil company Petrobras works closely with our branch in Rio de Janeiro. In a relationship spanning several decades, Citibank channels solutions and delivers products to meet the company's constantly evolving needs in trade finance, cash management and capital markets. In 1996, Euromoney voted Citibank the number one bank in Latin America. Left, deep relationships with other financial institutions characterize Citibank's history in re-emerging financial centers like Shanghai. Major growth opportunities exist in our business with the banking, investment and insurance industries, which are expanding rapidly, not only in Asia but globally. In 1996, Euromoney ranked Citibank the number one bank in Asia. Opposite page, corporate treasurers and investors worldwide have long recognized Citibank's foreign exchange business for its superior customer service. Euromoney has rated us number one for 18 years in a row. Excellence in trading both major and emerging currencies (more than 140 in all) has been a hallmark of Citibank forex for decades. - -------------------------------------------------------------------------------- [10] [Photograph of a foreign exchange trader] FOR 100 YEARS, AS COMPANIES HAVE VENTURED BEYOND THEIR HOME COUNTRIES TO BUY, SELL AND INVEST, CITIBANK HAS BEEN THERE TO HELP. Today, we work with global, regional and local corporate customers in almost 100 countries. Our deep and long presence in markets in almost every part of the world is the cornerstone of our corporate banking relationships. Customers know they can rely on us for superior service and expert advice at home and wherever their business might take them. CORPORATE BANKING REVENUE $ Billions [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
94 95 96 ---- ---- ---- Emerging Markets 2.5 2.9 3.4 Developed Markets 3.3 3.6 3.7 ---- ---- ---- 5.8 6.5 7.1
In emerging markets, Citibank is both an embedded local and a regional bank. Just as we serve our global customers, we also provide world-class banking to local companies whose vision often exceeds the opportunities in their home markets. In the process, we establish relationships with companies that will grow into the next generation of multinationals. Our success with many of the world's leading multinationals is based on relationship banking skills and experience we have accumulated over decades. Most of these corporations expect to generate the bulk of their growth outside their home countries, especially in emerging economies where both consumer and commercial markets are thriving. [11] [Photograph of a movie still from 20th Century Fox's Independence Day] [Photograph of telephone workers from PLDT in the Philippines] [12] - -------------------------------------------------------------------------------- Citicorp Securities' structuring and underwriting skills span the globe: In the U.S., we put together a $1 billion three-year financing for Twentieth Century Fox, producer of the blockbuster movie, Independence Day (above). Fox is a division of News Corporation, with which we have relationships in 23 countries. The package involved both debt and equity instruments and was voted a record-breaking deal of the year by Institutional Investor. In Asia, we co-managed a $300 million global bond for the Philippine Long Distance Telephone Company (left). Citibank's local presence in Manila since 1902, combined with the access we offer to global capital markets, fostered confidence among both issuers and investors. - -------------------------------------------------------------------------------- Our depth of presence around the world is our strongest competitive distinction. We have a head start on competitors in terms of size, products, skills, industry knowledge and experience. Our goal is seamless global access to our products and services. In short, to deliver the entire Citibank network virtually wherever and whenever the client needs it. Typically, we enter a new market in the early stages of its economic development, to provide our global customers with the basic services they need. We start with cash management, short-term loans in local currency and trade finance, then add services like project finance and securities custody and clearing as the country's economy grows. Eventually we bring in sophisticated products such as bond underwriting and asset-backed securitization. By then we are likely to be supporting the expansion of local companies into international markets. The distribution of Citibank's corporate banking activities over 22 developed and 75 emerging economies provides diversity and balance to our revenue stream. Citibank's corporate bank, with 20,000 customers, is a singularly valuable franchise that provides excellent returns. And because we participate in markets at every stage of development, we have ample opportunity for growth. [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] CORPORATE BANKING REVENUE BY PRODUCT Lending 22% Trading 23% Transaction Services 30% Capital Markets/Other 25%
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] CORPORATE BANKING REVENUE BY REGION Latin America 22% Europe 18% Asia Pacific 20% North America 32% Central/Eastern Europe, Middle East, Africa 8%
[13] [Photograph of a billing statement equipment in The Lakes, Nevada] [14] - -------------------------------------------------------------------------------- Billing statements for cardholders in the U.S. and Latin America, Personal Identification Number mailers for European accounts, loan payment statements for the Citicorp mortgage business, and myriad administrative reports--those are just a few of the purposes and businesses served by this new printing technology installed in our Maryland, South Dakota and Nevada service centers. Already at an operating rate of 350 million documents annually, the high-speed, high-capacity printers not only reduce internal production costs, they also help generate revenues by producing third-party billing statements for cash management clients of corporate banking. - -------------------------------------------------------------------------------- STRATEGIC COST MANAGEMENT To perform for customers, we have to be able to deliver high quality products and services at competitive prices. Performance for shareholders requires that we make a profit doing it. Consequently, managing costs strategically is integral to our success. Avoiding unnecessary expense is, of course, fundamental to this effort, but it is even more important that we make sure our spending is strategic. We focus our investment spending on programs that will either generate two dollars of income for each dollar expended or will help to lower our overall expenses. Quality is primary. We save money when we don't have to correct errors, and we build revenues with superior products and services. A broad range of marketing and other brand-building programs qualify under these criteria, but by far the greatest opportunities are being generated by investment spending in further modernizing and harmonizing our technology around the world. Upgrading technology almost always achieves the dual objectives of improved customer service and greater cost control. Our intent is to use technology to remove work, errors, time and paper from our processes, and therefore be more focused on, and responsive to, our customers. By consolidating our systems worldwide, we are better able to share resources and leverage the infrastructure. We've made substantial progress in the last three years. For example, European and some Latin American customers' card accounts are processed in the U.S. Also in the U.S., a single service center in San Antonio, Texas, is able to handle all U.S. retail banking customer inquiries. Singapore is the Cards' back-office center for 12 countries in Asia. With the advent of on-line trading technology and the anticipated European Monetary Union, we consolidated major-currency market making in London, New York and Tokyo--increasing efficiency for customers, reducing costs and freeing Citibankers to focus on higher-value transactions. [15] [Photograph of a foreign exchange trading floor in New York] - -------------------------------------------------------------------------------- Loan trading enhances Citibank's ability to balance its portfolio while satisfying our clients' capital raising needs. It also broadens access for institutions to invest in loans as a floating-rate asset class. Opposite page, corporate customers in Latin America meet with Citibank's corporate finance specialists in derivative products. These are developed to reduce or modify customers' risks. The derivatives business, globally managed at Citibank, leverages the bank's strong relationships with issuers and investors. We are ranked number one in derivatives by Institutional Investor, Risk and Asiamoney magazines. - -------------------------------------------------------------------------------- [16] MANAGING RISK Risk is inherent in banking, but it is far from routine--nor is it one-dimensional. All around the globe, market risks, operational risks, technical risks, political risks and legal risks change rapidly and continually. Since 1993, we have monitored our risk exposures continuously from various perspectives or "windows." We now have 16 different windows. This proprietary Windows on Risk system cuts across our own businesses and portfolios as it spans customers, industries and geographies. It enables us to guard against concentrations of risk that could allow problems in one industry, product area, customer group or geographic region to reverberate through the bank and undermine overall results. Embedded in the system are "tripwires" that are sensitive to external developments, allowing us to anticipate or react quickly to both positive and negative events. [Photograph of Corporate finance bankers meeting with customers meeting with customers in Sao Paulo, Brazil] [17] [Photograph of a Team Challenge meeting in New York] [18] [INSERT DESCRIPTION HERE] HAVING THE RIGHT PEOPLE IN THE RIGHT JOBS IS A BASIC TENET OF CITIBANK'S PERFORMANCE STRATEGY. To deliver on our promise of exceptional performance worldwide, we count on exceptionally talented and motivated people. We are able to recruit and train to a very high standard because we offer, literally, a whole world of opportunity. Sixty-five percent of our senior managers have work experience outside their home countries. In addition, a spirit of teamwork and an atmosphere of respect and diversity help make Citibank the local employer of choice in many countries around the world. One of the ways we deliver on our performance promise is by helping Citibankers stay on track for jobs that make the most of their abilities. The Talent Inventory Review process produces a detailed assessment of each person's skills, experience and capabilities. The inventory helps us match the right person to the right assignment, so that we build the kind of staff breadth and depth that we need to keep growing. We use a variety of training and other programs, including cross-company task forces, to help Citibankers hone their existing talents and develop new skills. Our task forces are structured on the premise that today's best performers can help rising performers become tomorrow's best. Our hiring, training and work assignments are aimed at ensuring that our people are equipped to achieve their individual potential as they provide superior service to our customers. - -------------------------------------------------------------------------------- Team Challenge last year brought high-potential Citibankers from all around the world to work on specific bankwide issues. Team members developed innovative ways to serve customers, use resources better, and dismantle barriers that impede working together across businesses and functions. - -------------------------------------------------------------------------------- [19] IN HUNDREDS OF COMMUNITIES AROUND THE WORLD, CITIBANK IS AN INVOLVED CORPORATE CITIZEN. Performing for our communities strongly supports all other aspects of our business strategy. It improves the business climate for us and our customers, and adds to our reputation as an employer of choice around the world. Citibank's strongest community impact stems from our day-to-day business activities. We ensure that our business practices, as well as our products and services, add value to the communities in which we operate. For example, we recently created a new financing vehicle, an equity equivalent product for not-for-profit organizations in the U.S., that is expected to bring millions in new capital to distressed American communities. In emerging markets, we advised regulatory bodies, stock exchanges, clearinghouses and depositories on developing capital market infrastructure. We also offered a special mortgage product for disabled first-time home buyers in Taipei, strengthened the financial settlements system in London, and funded local companies' growth--all of which continue to add to our communities' economic vitality and strength. By conducting our business in ways that assure our customers and our employees equitable and respectful treatment, we also help set high standards of business practice. Perhaps the most important thing we do in our community is to offer people the opportunity to build challenging and fulfilling careers. Citibankers are involved citizens, contributing expertise, energy and time, as well as their personal financial support, to a broad range of charities and civic organizations. Our corporate philanthropy is focused on community development - -------------------------------------------------------------------------------- From London to Taipei, from Chicago to Johannesburg, Citibankers are helping to build better communities. At The Lakes, Nevada, children of employees learn while their parents work in the same building. The day care center, one of three at our Cards service facilities in the U.S., is open 15 hours a day and cares for 164 children. - -------------------------------------------------------------------------------- [20] [Photograph of Employees' children at daycare center in The Lakes, Nevada] [21] and education, encompassing a wide variety of programs at local, national and international levels. We provide substantial funding to not-for-profit institutions--last year's contributions by Citibank and the Citicorp Foundation increased to more than $31 million and we also are directly and actively involved in many of the programs we support. Through the Foundation's Banking on Enterprise initiative, Citicorp is a corporate leader supporting microenterprise lending in inner-city neighborhoods in the United States and emerging markets worldwide. As part of the bank's mission to expand access to financial services, we are providing equity investments, loans, grants and Citibank financial expertise to microcredit organizations in Kenya, Bangladesh and 16 other countries. Our Banking on Education initiative applies technology to increase the effectiveness of schools, particularly in the inner cities of the U.S. But more than that, the bank provides scholarships for higher education in a variety of programs, such as the study of business education and economics at Getulio Vargas Institute in Brazil, and to scholars in Eastern Europe to study the principles and practices of market economies. For our own Citibankers, we provide more than $4 million annually in tuition reimbursements to help them develop new skills and competencies. At Citibank, we take our citizenship seriously. It shows in the ways we conduct our business and direct our philanthropy. In the end, it is manifested in the growth of our business and adds to the strength of our welcome all over the world. [Photograph of Housing in San Francisco] [Photograph of children in playground of a low-income neighborhood in San Francisco] [22] - -------------------------------------------------------------------------------- Clockwise: Through our Banking on Enterprise initiative, we are helping families across the globe become self-sufficient through microenterprises, such as this business in Poland that manufactures bed linens. Students in New York and Nevada use software programs that introduce them to the world of banking. The programs are designed to develop critical thinking through simulations that bridge the classroom and the external world. In the Tenderloin, a low-income neighborhood in San Francisco, Citibank helped create 175 units of affordable housing for families. The 9-story building was financed for $35 million by Citibank and county, state and federal aid. The presence of the building with its family residents has led to a drop in street crime in the area. - -------------------------------------------------------------------------------- [Photograph of Bed linens factory [Photograph of Students using in Poland] computer software] [23] [Photograph of a Woman with umbrella in Asia] FINANCIAL INFORMATION CITICORP IN BRIEF 26 OVERVIEW OF 1996 RESULTS 27 THE BUSINESSES OF CITICORP 28 CONSUMER 29 Citibanking 30 Cards 31 Private Bank 32 Consumer Business in Developed and Emerging Markets 33 Consumer Portfolio Review 34 CORPORATE BANKING 36 Emerging Markets 37 Global Relationship Banking 38 CORPORATE ITEMS 38 MANAGING GLOBAL RISK 39 SUMMARY OF FINANCIAL RESULTS 44 STATEMENT OF INCOME ANALYSIS 44 FINANCIAL REPORTING RESPONSIBILITY 49 REPORT OF INDEPENDENT AUDITORS 49 FINANCIAL STATEMENTS 50 STATEMENT OF ACCOUNTING POLICIES 55 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 58 QUARTERLY FINANCIAL INFORMATION 75 10-K CROSS-REFERENCE INDEX 76 FINANCIAL DATA SUPPLEMENT 77 25 CITICORP IN BRIEF
In Millions of Dollars Except Share Data 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME--Before Accounting Changes $ 3,788 $ 3,464 $ 3,422 $ 1,919 $ 722 NET INCOME--After Accounting Changes(1) 3,788 3,464 3,366 2,219 722 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME PER SHARE(2) On Common and Common Equivalent Shares Before Accounting Changes $ 7.50 $ 7.21 $ 7.15 $ 3.82 $ 1.35 After Accounting Changes(1) 7.50 7.21 7.03 4.50 1.35 Assuming Full Dilution Before Accounting Changes 7.42 6.48 6.40 3.53 1.35 After Accounting Changes(1) 7.42 6.48 6.29 4.11 1.35 DIVIDENDS DECLARED PER COMMON SHARE(3) 1.80 1.20 0.45 -- -- As a Percentage of Income, Assuming Full Dilution, After Accounting Change(1)(3) 24.26% 18.52% 7.15% -- -- - ------------------------------------------------------------------------------------------------------------------------------------ AT YEAR-END Total Loans, Net of Unearned Income and Allowance for Credit Losses $ 169,109 $160,274 $ 147,265 $ 134,588 $ 135,851 Total Assets(4) 281,018 256,853 250,489 216,574 213,701 Total Deposits 184,955 167,131 155,726 145,089 144,175 Long-Term Debt 18,850 18,488 17,894 18,160 20,172 Common Stockholders' Equity(5) 18,644 16,510 13,582 10,066 7,969 Total Stockholders' Equity(5) 20,722 19,581 17,769 13,953 11,181 Tier 1 Capital 19,796 18,915 16,919 13,388 10,262 Total Capital (Tier 1 and Tier 2) 28,870 27,725 26,119 23,152 20,111 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL RATIOS Net Income to Average Assets(4)--Before Accounting Changes 1.40% 1.29% 1.31% 0.84% 0.32% Net Income to Average Assets(4)--After Accounting Changes(1) 1.40 1.29 1.29 0.97 0.32 Return on Common Stockholders' Equity(5)--Before Accounting Changes 20.35 20.80 26.30 17.73 6.48 Return on Common Stockholders' Equity(5)--After Accounting Changes(1) 20.35 20.80 25.81 21.06 6.48 Return on Total Stockholders' Equity(5)--Before Accounting Changes 18.95 18.33 21.79 15.32 7.16 Return on Total Stockholders' Equity(5)--After Accounting Changes(1) 18.95 18.33 21.43 17.72 7.16 Average Common Stockholders' Equity to Average Assets(4)(5) 6.60 5.59 4.47 3.95 3.39 Average Total Stockholders' Equity to Average Assets(4)(5) 7.40 7.03 6.02 5.48 4.45 Common Stockholders' Equity to Assets(4)(5) 6.63 6.43 5.42 4.65 3.73 Total Stockholders' Equity to Assets(4)(5) 7.37 7.62 7.09 6.44 5.23 Tier 1 Capital Ratio 8.39 8.41 7.80 6.62 4.90 Total Capital Ratio (Tier 1 and Tier 2) 12.23 12.33 12.04 11.45 9.60 Leverage Ratio(4) 7.42 7.45 6.67 6.15 4.74 - ------------------------------------------------------------------------------------------------------------------------------------ SHARE DATA Year End Stock Price(6) $ 103 $ 67 1/4 $41 3/8 $36 7/8 $22 1/4 Common Equity Per Share(5) 40.25 38.64 34.38 26.04 21.74 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS ANALYSIS Total Revenue $ 20,196 $ 18,678 $ 16,748 $ 16,075 $ 15,621 Effect of Credit Card Securitization(7) 1,392 917 934 1,282 1,390 Net Cost to Carry(8) (46) 23 89 252 421 Capital Building Transactions -- -- (80) 2 (820) --------- -------- --------- --------- --------- ADJUSTED REVENUE 21,542 19,618 17,691 17,611 16,612 --------- -------- --------- --------- --------- Total Operating Expense 12,197 11,102 10,256 10,615 10,057 Net OREO Benefits (Costs)(9) 44 105 (9) (245) (347) Restructuring Charges -- -- -- (425) (227) --------- -------- --------- --------- --------- ADJUSTED OPERATING EXPENSE 12,241 11,207 10,247 9,945 9,483 --------- -------- --------- --------- --------- OPERATING MARGIN 9,301 8,411 7,444 7,666 7,129 --------- -------- --------- --------- --------- Consumer Credit Costs(10) 3,115 2,473 2,338 2,740 3,309 Commercial Credit Costs(11) (87) 72 239 1,036 2,458 --------- -------- --------- --------- --------- OPERATING MARGIN LESS CREDIT COSTS 6,273 5,866 4,867 3,890 1,362 Additional Provision(12) 200 281 336 603 537 Restructuring Charges -- -- -- 425 227 Capital Building Transactions -- -- 80 (2) 820 --------- -------- --------- --------- --------- INCOME BEFORE TAXES AND CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 6,073 5,585 4,611 2,860 1,418 Income Taxes 2,285 2,121 1,189 941 696 --------- -------- --------- --------- --------- INCOME BEFORE CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 3,788 3,464 3,422 1,919 722 Cumulative Effects of Accounting Changes (1) -- -- (56) 300 -- --------- -------- --------- --------- --------- NET INCOME $ 3,788 $ 3,464 $ 3,366 $ 2,219 $ 722 - -----------------------------------------------------------------------=============================================================
(1) Refers to the adoption of Statement of Financial Accounting Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits," in 1994 and SFAS No. 109, "Accounting for Income Taxes," in 1993. (2) Based on net income less preferred stock dividends, except when conversion is assumed. See page 71. (3) On October 15, 1991, Citicorp suspended the dividend on its common stock and resumed paying dividends on April 18, 1994. (4) Reflects the effects of adopting Financial Accounting Standards Board ("FASB") Interpretation No. 39, "Offsetting of Amounts Related to Certain Contracts," as of January 1, 1994. (5) Reflects the effects of adopting SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," as of January 1, 1994. (6) Based on the New York Stock Exchange Composite Listing. (7) See page 48 for a description of the effect of credit card securitization. (8) Principally the net cost to carry commercial cash-basis loans and other real estate owned ("OREO"). (9) Principally gains and losses on sales, direct revenue and expense, and writedowns of commercial OREO. (10) Principally consumer net credit write-offs adjusted for the effect of credit card securitization. (11) Includes commercial net credit write-offs, net cost to carry, and net OREO benefits (costs). (12) Primarily charges for credit losses in excess of net write-offs. See page 46 for discussion. 26 OVERVIEW OF 1996 RESULTS Citicorp reported 1996 net income of $3.8 billion or $7.42 per fully diluted common share, up 9% and 15%, respectively, compared with $3.5 billion, or $6.48 in 1995. Earnings were led by continued momentum in the emerging markets in both the Corporate Banking and Consumer businesses, but were dampened by high Cards credit costs. Return on common equity of 20.4% for 1996 remained strong, but was down slightly from a year-ago, reflecting higher common equity levels. Return on average assets was 1.40% compared with 1.29% for 1995. The Consumer businesses earned $2.0 billion in 1996, up 4% from 1995, as higher revenue and margin growth were partially offset by increased Cards credit costs. Earnings in Corporate Banking of $2.2 billion were up 23% from 1995, reflecting improved credit performance, solid operating margin growth, and lower effective tax rates. Adjusted revenue of $21.5 billion was up $1.9 billion or 10% from 1995. Revenue in the Consumer businesses increased 9% to $13.5 billion, led by a strong performance in the emerging markets, and by continued growth in the Cards business. Revenue of $7.2 billion in the Corporate Banking businesses was up 9%, as Emerging Markets revenue increased by 19%. Trading-related revenue of $1.9 billion in 1996 was down $80 million or 4% from 1995. The decline primarily reflected lower foreign exchange activity in Global Relationship Banking. Venture capital gains of $450 million for the year were up $60 million or 15% from 1995, reflecting the robust U.S. equity markets in 1996. Adjusted operating expense for 1996 of $12.2 billion was up $1.0 billion or 9% from 1995, reflecting business expansion in the emerging markets (a 19% increase in 1996), while expense related to Consumer businesses and Corporate Banking activities in the developed markets was up 4%. Operating margin grew $890 million, or 11%, to $9.3 billion. The incremental revenue to expense ratio was 1.9:1 for the year, and the efficiency ratio (adjusted operating expense as a percentage of adjusted revenue) was unchanged from 1995 at 57%. Total credit costs were $3.0 billion in the year, up $483 million or 19% from 1995. Consumer credit costs of $3.1 billion in 1996 were up $642 million or 26% from 1995, and net credit losses on managed loans were 2.37%, compared to 1.99% for 1995. The increases in credit costs and the related loss ratio chiefly reflected a continued rise in U.S. bankcards credit losses. The managed consumer loan delinquency ratio (90 days or more past due) decreased to 2.62% from 3.01% and 3.14% at the end of 1995 and 1994, respectively. Commercial credit costs remained low at a net benefit of $87 million in 1996, compared to net charges of $72 million in 1995. Commercial cash-basis loans and OREO of $1.5 billion at year-end were down from $2.2 billion a year earlier, principally reflecting continued reductions in the commercial real estate portfolio. At December 31, 1996, total reserves (including reserves for sold consumer portfolios) were $6.0 billion. Citicorp continued to build its allowance for credit losses during the year, adding $200 million above net credit losses, primarily related to Cards. In 1995, Citicorp built the allowance through an additional provision of $281 million across both franchises. Citicorp's effective tax rate was 38% for both 1996 and 1995. Total capital (Tier 1 and Tier 2) was $28.9 billion, or 12.23% of net risk-adjusted assets, and Tier 1 capital was $19.8 billion, or 8.39%, at December 31, 1996. During 1996, Citicorp generated $3.0 billion of free capital, and repurchased 36.1 million shares for $3.1 billion. With these repurchases, the number of shares acquired since June 20, 1995, when the Board of Directors authorized the stock repurchase program, totaled 59.2 million at a cost of $4.6 billion. As expanded in January and November 1996, the program is authorized to make total purchases of up to $8.5 billion. - -------------------------------------------------------------------------------- NET INCOME $ Billions 92 0.7 93 2.2 94 3.4 95 3.5 96 3.8 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADJUSTED REVENUE $ Billions 92 16.6 93 17.6 94 17.7 95 19.6 96 21.5 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL CAPITAL $ Billions Tier 1 Tier 2 Total Tier 1 Ratio 92 10.3 9.8 20.1 4.9% 93 13.4 9.8 23.2 6.6% 94 16.9 9.2 26.1 7.8% 95 18.9 8.8 27.7 8.4% 96 19.8 9.1 28.9 8.4% - -------------------------------------------------------------------------------- 27 THE BUSINESSES OF CITICORP Citicorp, with its subsidiaries and affiliates, is a global financial services organization. Its staff of 89,400 (including 51,100 outside the U.S.) serves individuals, businesses, governments, and financial institutions in approximately 3,200 locations (including branches, representative offices, subsidiary and affiliate offices) in 98 countries and territories throughout the world as of December 31, 1996. - -------------------------------------------------------------------------------- CORE BUSINESS NEW INCOME 94 95 96 -- -- -- $ Billions Citibanking 0.5 0.6 0.7 Cards 1.1 1.2 1.0 Private Bank 0.2 0.2 0.3 Global Relationship Banking 0.3 0.6 0.7 Emerging Markets 1.0 1.1 1.5 ------- ------- ------- Total 3.1 3.7 4.2 - -------------------------------------------------------------------------------- Citicorp, a U.S. bank holding company, was incorporated in 1967 under the laws of Delaware and is the sole shareholder of Citibank, N.A. ("Citibank"), its major subsidiary. Citicorp is regulated under the Bank Holding Company Act of 1956 and is subject to examination by the Federal Reserve Board ("FRB"). Citibank is a member of the Federal Reserve System and is subject to regulation and examination by the Office of the Comptroller of the Currency ("OCC"). See page 84 for further discussion of regulation and supervision. Citicorp's activities are conducted primarily within the two franchises of the Consumer business and the global Corporate Bank. The Consumer business operates a uniquely global, full-service consumer franchise encompassing branch and electronic banking ("Citibanking"), credit and charge cards ("Cards"), and the Private Bank. The Corporate Banking business serves corporations, financial institutions, governments, and other participants in capital markets throughout the world. - -------------------------------------------------------------------------------- CORE BUSINESS NET INCOME $ Billions 94 95 96 -- -- -- $ Billions Developed 1.3 1.8 1.8 Emerging 1.8 1.9 2.4 ------- ------- ------- Total 3.1 3.7 4.2 - -------------------------------------------------------------------------------- Additional data on the business and geographic distribution of revenue, income and average assets is disclosed in Note 11 to the consolidated financial statements. The table below shows the net income, average assets, and return on assets for each of Citicorp's businesses for the three years ended December 31, 1996. BUSINESS FOCUS
NET INCOME (LOSS) AVERAGE ASSETS RETURN ON ASSETS $ MILLIONS $ BILLIONS % - -------------------------------------------------------------------------- --------------------------- -------------------- 1996 1995(1) 1994(1) 1996 1995(1) 1994(1) 1996 1995(1) 1994(1) - --------------------------------------------------------------------------------------------------------------------------------- CONSUMER $ 2,043 $ 1,968 $ 1,783 $ 126 $ 120 $ 106 1.62% 1.64% 1.68% CORPORATE BANKING(2) 2,179 1,778 1,308 139 144 150 1.57 1.23 0.87 ------- ------- ------- ------- ------- ------- CORE BUSINESSES 4,222 3,746 3,091 265 264 256 1.59 1.42 1.21 CORPORATE ITEMS (434) (282) 331 5 5 5 NM NM NM ------- ------- ------- ------- ------- ------- 3,788 3,464 3,422 270 269 261 1.40 1.29 1.31 CUMULATIVE EFFECT OF ACCOUNTING CHANGE(3) -- -- (56) -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- TOTAL CITICORP $ 3,788 $ 3,464 $ 3,366 $ 270 $ 269 $ 261 1.40 1.29 1.29 - ----------------------------------------------=================================================================================== SUPPLEMENTAL INFORMATION: CONSUMER: CITIBANKING $ 725 $ 571 $ 421 $ 81 $ 79 $ 72 0.90% 0.72% 0.58% CARDS 1,039 1,172 1,124 29 26 19 3.58 4.51 5.92 PRIVATE BANK 279 225 238 16 15 15 1.74 1.50 1.59 ------- ------- ------- ------- ------- ------- TOTAL $ 2,043 $ 1,968 $ 1,783 $ 126 $ 120 $ 106 1.62 1.64 1.68 - --------------------------------------------------------------------------------------------------------------------------------- CONSUMER BUSINESS IN: DEVELOPED MARKETS $ 1,094 $ 1,164 $ 1,051 $ 88 $ 86 $ 76 1.24% 1.35% 1.38% EMERGING MARKETS 949 804 732 38 34 30 2.50 2.36 2.44 ------- ------- ------- ------- ------- ------- TOTAL $ 2,043 $ 1,968 $ 1,783 $ 126 $ 120 $ 106 1.62 1.64 1.68 - ----------------------------------------------=================================================================================== CORPORATE BANKING(2): EMERGING MARKETS $ 1,465 $ 1,148 $ 1,037 $ 59 $ 50 $ 46 2.48% 2.30% 2.25% GLOBAL RELATIONSHIP BANKING 714 630 271 80 94 104 0.89 0.67 0.26 ------- ------- ------- ------- ------- ------- TOTAL $ 2,179 $ 1,778 $ 1,308 $ 139 $ 144 $ 150 1.57 1.23 0.87 - ----------------------------------------------===================================================================================
(1) Reclassified to conform to the 1996 presentation. (2) The Corporate Banking results also include the results of the Cross-Border Refinancing Portfolio (as a component of the Emerging Markets business) and North America Commercial Real Estate (as a component of the Global Relationship Banking business), both of which were reported as separate businesses prior to 1996. (3) Represents the cumulative effect of adopting SFAS No. 112 as of January 1, 1994. See page 68 for discussion. NM Not meaningful. 28 CONSUMER In Millions of Dollars 1996 1995(1) 1994(1) - ---------------------------------------------------------------------------- Total Revenue $ 12,098 $ 11,421 $ 10,460 Effect of Credit Card Securitization 1,392 917 934 Net Cost to Carry Cash-Basis Loans and OREO (10) 12 3 -------- -------- -------- ADJUSTED REVENUE 13,480 12,350 11,397 -------- -------- -------- Total Operating Expense 7,259 6,790 6,297 Net OREO Costs(2) (5) -- (48) -------- -------- -------- ADJUSTED OPERATING EXPENSE 7,254 6,790 6,249 -------- -------- -------- OPERATING MARGIN 6,226 5,560 5,148 -------- -------- -------- Net Write-offs 1,728 1,544 1,353 Effect of Credit Card Securitization 1,392 917 934 Net Cost to Carry and Net OREO Costs (5) 12 51 -------- -------- -------- CREDIT COSTS 3,115 2,473 2,338 -------- -------- -------- OPERATING MARGIN LESS CREDIT COSTS 3,111 3,087 2,810 -------- -------- -------- Additional Provision 200 200 200 -------- -------- -------- INCOME BEFORE TAXES 2,911 2,887 2,610 Income Taxes 868 919 827 -------- -------- -------- NET INCOME $ 2,043 $ 1,968 $ 1,783 - -------------------------------------------================================= Average Assets (In Billions of Dollars) $ 126 $ 120 $ 106 Return on Assets 1.62% 1.64% 1.68% - -------------------------------------------================================= (1) Reclassified to conform to the 1996 presentation. (2) Includes amounts related to writedowns, gains and losses on sales, and direct expense related to OREO for certain real estate lending activities. The Consumer franchise consists of three global businesses--Citibanking, Cards, and the Private Bank--which deliver a consistent and superior financial services experience to the consumer around the world. Net income was $2.0 billion in 1996, an improvement of $75 million or 4% from 1995, despite a $133 million or 11% decline in Cards. Net income for Citibanking increased 27% in the year and Private Bank net income was up 24%. Net income in 1995 was up $185 million or 10% from 1994, reflecting increases in Citibanking of 36% and Cards of 4%, while net income in the Private Bank declined 5%. Adjusted revenue of $13.5 billion in 1996 was up $1.1 billion or 9% from 1995, reflecting growth across the three Consumer businesses. Net interest revenue was up 10% primarily due to volume growth. Fee and commission revenue was up 3% entirely in Citibanking and the Private Bank, as Cards fees were unchanged in the year. Revenue in 1995 increased $953 million or 8% from 1994 primarily due to improvements in the Cards and Citibanking businesses and the effect of foreign currency translation. - -------------------------------------------------------------------------------- CONSUMER REVENUE $ Billions Net Income Revenue 94 1.8 11.4 95 2.0 12.4 96 2.0 13.5 - -------------------------------------------------------------------------------- Adjusted operating expense of $7.3 billion was up $464 million or 7% from 1995, principally reflecting increases in Citibanking worldwide, Cards in the emerging markets, and in the Private Bank. U.S. bankcard expense levels in 1996 were essentially unchanged from 1995. Expense in 1995 increased $541 million or 9% from 1994, principally reflecting continued investment spending on worldwide Citibanking initiatives, increased spending in Cards in support of higher business volumes, and the effect of foreign currency translation. Consumer credit costs of $3.1 billion in 1996 were up $642 million or 26% from 1995, primarily due to increases in U.S. bankcards, partially offset by lower losses in Citibanking and the Private Bank. Credit costs in 1995 were up $135 million or 6% from 1994, reflecting higher loan volumes worldwide and economic conditions in Latin America, partially offset by significant improvements in the U.S. Citibanking and Private Bank businesses. The ratio of net credit losses to average managed loans was 2.37%, 1.99%, and 2.08% in 1996, 1995, and 1994, respectively. The additional provision, which represents charges in excess of net write-offs to build the allowance, totaled $200 million in 1996, 1995, and 1994, primarily attributable to Cards. Income taxes are attributed to core businesses on the basis of local tax rates, which resulted in an effective rate of 30% in 1996 compared to 32% in both 1995 and 1994, reflecting changes in the nature and geographic mix of earnings. The difference between the local tax rates attributed to core businesses and Citicorp's overall effective tax rate in each year is included in Corporate Items. 29 CITIBANKING In Millions of Dollars 1996 1995(1) 1994(1) - ----------------------------------------------------------------------------- TOTAL REVENUE $5,764 $5,412 $4,862 TOTAL OPERATING EXPENSE 4,086 3,798 3,496 ------ ------ ------ OPERATING MARGIN 1,678 1,614 1,366 ------ ------ ------ CREDIT COSTS 634 706 692 ------ ------ ------ OPERATING MARGIN LESS CREDIT COSTS 1,044 908 674 ------ ------ ------ Additional Provision 4 42 65 ------ ------ ------ INCOME BEFORE TAXES 1,040 866 609 Income Taxes 315 295 188 ------ ------ ------ NET INCOME $ 725 $ 571 $ 421 - -------------------------------------------------============================ Average Assets (In Billions of Dollars) $ 81 $ 79 $ 72 Return on Assets 0.90% 0.72% 0.58% - -------------------------------------------------============================ (1) Reclassified to conform to the 1996 presentation. Citibanking activities--which deliver products and services to customers through Citicorp's worldwide branch network and electronic delivery systems--earned $725 million in 1996, up $154 million or 27% from 1995, reflecting improved credit performance, modest operating margin growth, and the benefit of a lower effective tax rate. Net income in 1995 increased $150 million or 36% from 1994, principally reflecting improvements in the U.S. and Europe, and increases in Latin America and Asia Pacific. Return on assets was 0.90% in 1996, up from 0.72% in 1995 and 0.58% in 1994. Revenue of $5.8 billion grew $352 million or 7%, reflecting higher business volumes in both the emerging and developed markets, partially offset by spread tightening in Latin America and Asia Pacific. Revenue in the emerging and developed markets grew by 13% and 3%, respectively. Revenue included gains from the sale of an interest in an Asian affiliate and from the sale of the consumer mortgage portfolio in the U.K., offset by the effect of foreign currency translation. Revenue in 1996 also included the $64 million assessment to recapitalize the U.S. Savings Association Insurance Fund. Revenue in 1995 was up $550 million or 11% from 1994, led by volume growth in both the emerging and developed markets and the foreign currency translation benefit of a generally weaker U.S. dollar, partially offset by spread tightening, particularly in Asia Pacific. Adjusted operating expense of $4.1 billion grew $288 million or 8% from 1995, largely reflecting growth in business volumes and continued investment spending on Citibanking initiatives, including franchise expansion and technology upgrades, partially offset by the effect of foreign currency translation. In the emerging markets, expense increased 16% in the year, while expense in the developed markets grew by 4%. Expense in 1995 was up $302 million or 9% from 1994, principally due to investment spending on franchise development in Latin America and Asia Pacific and the effect of foreign currency translation. - -------------------------------------------------------------------------------- CITIBANKING BRANCHES Model Branches Total Branches 94 308 1,183 95 441 1,191 96 555 1,130 - -------------------------------------------------------------------------------- In 1996, 114 branches were upgraded to the Citibanking standard for enhancing customer relationships and efficiency, bringing the total of remodeled branches to 555 worldwide, or 49% of total branches. Credit costs of $634 million in 1996 declined $72 million or 10% from 1995 due to lower losses in the U.S. and Europe, including the effect of foreign currency translation, and Latin America, partially offset by increases in Asia Pacific. Credit costs in the developed and emerging markets declined by 11% and 8%, respectively. Credit costs in 1995 were up $14 million or 2% from 1994 due to higher losses in Latin America and Europe, partially offset by improvements in the United States. The net credit loss ratio was 0.96% in 1996, 1.12% in 1995, and 1.21% in 1994. The additional provision, which represents charges in excess of net write-offs to build the allowance, was $4 million in 1996, $42 million in 1995, and $65 million in 1994. 30 CARDS In Millions of Dollars 1996 1995(1) 1994(1) - ----------------------------------------------------------------------------- Total Revenue $5,289 $5,080 $4,630 Effect of Credit Card Securitization 1,392 917 934 ------ ------ ------ ADJUSTED REVENUE 6,681 5,997 5,564 TOTAL OPERATING EXPENSE 2,477 2,358 2,179 ------ ------ ------ OPERATING MARGIN 4,204 3,639 3,385 ------ ------ ------ Net Write-offs 1,090 814 599 Effect of Credit Card Securitization 1,392 917 934 ------ ------ ------ CREDIT COSTS 2,482 1,731 1,533 ------ ------ ------ OPERATING MARGIN LESS CREDIT COSTS 1,722 1,908 1,852 ------ ------ ------ Additional Provision 196 158 135 ------ ------ ------ INCOME BEFORE TAXES 1,526 1,750 1,717 Income Taxes 487 578 593 ------ ------ ------ NET INCOME $1,039 $1,172 $1,124 - -------------------------------------------------============================ Average Assets (In Billions of Dollars) $ 29 $ 26 $ 19 Return on Assets(2) 3.58% 4.51% 5.92% - -------------------------------------------------============================ (1) Reclassified to conform to the 1996 presentation. (2) Adjusted for the effect of credit card securitization the return on managed assets for worldwide Cards was 1.89% in 1996, 2.35% in 1995, and 2.64% in 1994. Cards--which includes worldwide bankcards, Diners Club, and private label cards--earned $1.0 billion in 1996, down $133 million or 11% from 1995. Earnings in the developed markets declined by 21%, principally in U.S. bankcards, as credit cost increases outpaced revenue growth. The emerging markets Cards business, which increased net income by 21% in the year, represented approximately 31% of 1996 Cards earnings. Net income in 1995 increased by $48 million or 4% from 1994, reflecting a strong performance in Asia Pacific and higher earnings in U.S. bankcards, partially offset by the cost of increased marketing efforts in Europe bankcards and Diners Club. - -------------------------------------------------------------------------------- WORLDWIDE CARDS IN FORCE (including Affiliates) In Millions 94 55 95 58 96 61 - -------------------------------------------------------------------------------- The return on managed assets was 1.89% in 1996, down from 2.35% in 1995 and 2.64% in 1994, while on-balance sheet asset returns were 3.58%, 4.51%, and 5.92%, respectively. Cards revenue of $6.7 billion increased $684 million or 11% from 1995, reflecting improvements of 9% in the developed markets and 24% in the emerging markets. In the developed markets, U.S. bankcards revenue increased 11% due primarily to volume growth and lower funding costs, while revenue in the U.S. private label business declined from a year ago. The revenue increase in the emerging markets reflected growth in Asia Pacific and Latin America, including the earnings of Credicard, a Brazilian affiliate. Revenue in 1995 increased $433 million or 8% from 1994, due primarily to 7% growth in U.S. bankcard revenue and business expansion in Asia Pacific. As shown in the following table, the U.S. bankcard business experienced only moderate growth in its portfolio in 1996, as a result of competitive pressures, credit tightening on the part of Citicorp, and moderating increases in consumer personal debt levels. U.S. BANKCARDS (MANAGED BASIS) Increase Increase over over Dollars in Billions 1996 1995 1994(1) - ----------------------------------------------------------------------------- Cards in Force (In Millions) 38 -- 6% Charge Volumes $96.4 12% 17% End-of-Period Receivables $47.0 5% 10% - ----------------------------------------------------------------------------- (1) Compound annual growth rate. Adjusted operating expense of $2.5 billion in 1996 was up $119 million or 5% from 1995. Expense in the emerging markets Cards businesses increased 26% in support of higher loan volumes, as well as continued investment spending and franchise expansion. Expense levels in developed markets were essentially unchanged in the year, consistent with the lower volume growth trends in U.S. bankcards. Expense in 1995 increased $179 million or 8% from 1994, principally due to increases in U.S. bankcards in support of higher loan volumes, business expansion in Asia Pacific, and increased marketing efforts in Europe bankcards and Diners Club. Cards credit costs in 1996 were $2.5 billion, up from $1.7 billion in 1995 and $1.5 billion in 1994, reflecting increased losses in U.S. bankcards, including the effect of rising bankruptcies, and portfolio growth in the emerging markets. Credit costs for U.S. bankcards increased to $2.1 billion, or 4.99% of average managed loans, up from $1.5 billion or 3.70% in 1995 and $1.3 billion or 3.97% in 1994. Cards continued to build reserves for possible credit losses, with charges in excess of net write-offs of $196 million, $158 million, and $135 million in 1996, 1995, and 1994, respectively. Net credit losses and the related loss ratios, which are influenced by economic conditions, credit performance of the portfolio (including bankruptcies), and changes in portfolio levels, are expected to increase further from 1996 levels, particularly in U.S. bankcards. See "Consumer Portfolio Review" on page 34 and "Provision and Allowance for Credit Losses" on page 46 for additional discussion of the Cards portfolio. 31 PRIVATE BANK In Millions of Dollars 1996 1995(1) 1994(1) - ---------------------------------------------------------------------------- Total Revenue $ 1,045 $ 929 $ 968 Net Cost to Carry Cash-Basis Loans and OREO (10) 12 3 ------- ------- ------- ADJUSTED REVENUE 1,035 941 971 ------- ------- ------- Total Operating Expense 696 634 622 Net OREO Costs(2) (5) -- (48) ------- ------- ------- ADJUSTED OPERATING EXPENSE 691 634 574 ------- ------- ------- OPERATING MARGIN 344 307 397 ------- ------- ------- Net Write-offs 4 24 62 Net Cost to Carry and Net OREO Costs (5) 12 51 ------- ------- ------- CREDIT COSTS (1) 36 113 ------- ------- ------- OPERATING MARGIN LESS CREDIT COSTS 345 271 284 ------- ------- ------- Additional Provision -- -- -- ------- ------- ------- INCOME BEFORE TAXES 345 271 284 Income Taxes 66 46 46 ------- ------- ------- NET INCOME $ 279 $ 225 $ 238 - --------------------------------------------================================ Average Assets (In Billions of Dollars) $ 16 $ 15 $ 15 Return on Assets 1.74% 1.50% 1.59% - --------------------------------------------================================ (1) Reclassified to conform to the 1996 presentation. (2) Includes amounts related to writedowns, gains and losses on sales, and direct expense related to OREO for certain real estate lending activities. Private Bank net income of $279 million in the year was $54 million or 24% higher than 1995, and resulted in a return on average assets of 1.74% for the year. The increase in 1996 reflected continued revenue growth throughout the Private Bank together with lower credit costs. Net income of $225 million in 1995 was down slightly from 1994. Revenue for 1996 was $1.0 billion, up $94 million or 10% from 1995. The increase reflected higher spreads and credit volumes in both the developed and emerging markets, and was aided by the successful launch of several new investment products. Revenue for 1995 was $941 million, down $30 million or 3% from 1994, reflecting shifts in market conditions from mid-1994 through late 1995 that caused clients to move to lower risk products. - -------------------------------------------------------------------------------- PRIVATE BANK Client Managed Business Volumes $ Billions 94 78 95 87 96 96 - -------------------------------------------------------------------------------- Expense of $691 million in the year was up $57 million or 9% from 1995. The increase was due to higher employee expense (including new hires), reengineering efforts, and higher costs related to activities in the funds business. Expense of $634 million in 1995 was up $60 million or 10% from 1994. Total credit costs for 1996 were a net benefit of $1 million, compared with credit costs of $36 million in 1995, as the U.S. business benefited from recoveries, lower OREO writedowns, and higher income on cash-basis loans. Overall credit trends improved with delinquencies down to 1.26% of loans from 2.15% a year earlier and 2.28% in 1994, consistent with the decrease in the level of nonperforming assets. Credit costs in 1995 improved by $77 million from 1994. Client business volumes under management at the end of the year totaled $96 billion, up $9 billion or 11% from 1995, which in turn was up 12% over 1994. Growth was balanced across the advisory and discretionary investment areas and most other product lines. 32 CONSUMER BUSINESS IN DEVELOPED AND EMERGING MARKETS
DEVELOPED MARKETS(1) EMERGING MARKETS(1) -------------------------------- ------------------------------- In Millions of Dollars 1996 1995(2) 1994(2) 1996 1995(2) 1994(2) - ------------------------------------------------------------------------------ ------------------------------- Total Revenue $ 8,460 $ 8,288 $ 7,744 $ 3,638 $ 3,133 $ 2,716 Effect of Credit Card Securitization 1,392 917 934 -- -- -- Net Cost to Carry Cash-Basis Loans and OREO (10) 12 3 -- -- -- ------- ------- ------- ------- ------- ------- ADJUSTED REVENUE 9,842 9,217 8,681 3,638 3,133 2,716 ------- ------- ------- ------- ------- ------- Total Operating Expense 5,217 5,056 4,794 2,042 1,734 1,503 Net OREO Costs(3) (5) -- (48) -- -- -- ------- ------- ------- ------- ------- ------- ADJUSTED OPERATING EXPENSE 5,212 5,056 4,746 2,042 1,734 1,503 ------- ------- ------- ------- ------- ------- OPERATING MARGIN 4,630 4,161 3,935 1,596 1,399 1,213 ------- ------- ------- ------- ------- ------- Net Write-offs 1,371 1,247 1,184 357 297 169 Effect of Credit Card Securitization 1,392 917 934 -- -- -- Net Cost to Carry and Net OREO Costs (5) 12 51 -- -- -- ------- ------- ------- ------- ------- ------- CREDIT COSTS 2,758 2,176 2,169 357 297 169 ------- ------- ------- ------- ------- ------- OPERATING MARGIN LESS CREDIT COSTS 1,872 1,985 1,766 1,239 1,102 1,044 ------- ------- ------- ------- ------- ------- Additional Provision 185 170 143 15 30 57 ------- ------- ------- ------- ------- ------- INCOME BEFORE TAXES 1,687 1,815 1,623 1,224 1,072 987 Income Taxes 593 651 572 275 268 255 ------- ------- ------- ------- ------- ------- NET INCOME $ 1,094 $ 1,164 $ 1,051 $ 949 $ 804 $ 732 - ----------------------------------------------====================================================================== Average Assets (In Billions of Dollars) $ 88 $ 86 $ 76 $ 38 $ 34 $ 30 Return on Assets 1.24% 1.35% 1.38% 2.50% 2.36% 2.44% - ----------------------------------------------======================================================================
(1) Developed markets comprise activities in North America, Europe, and Japan. Emerging markets comprises activities in all other geographic areas. (2) Reclassified to conform to the 1996 presentation. (3) Includes amounts related to writedowns, gains and losses on sales, and direct expense related to OREO for certain real estate lending activities. - -------------------------------------------------------------------------------- DEVELOPED MARKETS $ Billions Net Income Revenue 94 1.1 8.7 95 1.2 9.2 96 1.1 9.8 - -------------------------------------------------------------------------------- The Consumer businesses of Citibanking, Cards, and the Private Bank in the developed markets earned $1.1 billion in 1996, down $70 million or 6% from 1995, principally due to increased credit costs in the U.S. bankcard business. Adjusted revenue grew $625 million or 7%, reflecting improvements across all three businesses, while expenses were up 3% including significant investment spending on Citibanking initiatives. Net income in 1995 was up $113 million or 11% from 1994, reflecting increases in the Citibanking and bankcard businesses in the United States. - -------------------------------------------------------------------------------- EMERGING MARKETS $ Billions Net Income Revenue 94 0.7 2.7 95 0.8 3.1 96 0.9 3.6 - -------------------------------------------------------------------------------- Net income in the emerging markets was $949 million in 1996, an increase of $145 million or 18% from 1995. The results for the year reflected revenue growth of $505 million or 16%, primarily from higher business volumes in Citibanking and Cards, partially offset by continued spread tightening across most markets. Expense levels increased 18%, principally due to continued spending on franchise expansion. Credit costs increased $60 million or 20% in 1996, primarily reflecting expansion in the Asia Pacific Cards businesses, partially offset by improvements in Latin America. Emerging markets net income in 1995 was up $72 million or 10% from 1994, primarily due to improvements in Asia Pacific Cards. 33 CONSUMER PORTFOLIO REVIEW - -------------------------------------------------------------------------------- CONSUMER Managed Loans $ Billions 94 95 96 -- -- -- Private Bank 14 14 16 Cards 44 52 55 Citibanking 60 65 66 --- --- --- Total 118 131 137 - -------------------------------------------------------------------------------- Managed loans of $137.0 billion as of December 31, 1996, were up from $131.1 billion and $117.9 billion as of December 31, 1995 and 1994, respectively. The increase in managed consumer loans since December 31, 1995 is primarily due to growth in Cards, particularly in U.S. bankcards and in Asia Pacific, which grew 5% and 27%, respectively. In Citibanking, loan growth was significantly impacted by the sale of the U.K. mortgage portfolio and the effect of foreign currency translation. At December 31, 1996, Cards represented 40% of the overall consumer portfolio, growing from 39% and 38% at December 31, 1995 and 1994, respectively. - -------------------------------------------------------------------------------- CONSUMER Managed Loans $ Billions 94 95 96 -- -- -- Emerging 26 102 104 Developed 92 29 33 --- --- --- Total 118 131 137 - -------------------------------------------------------------------------------- In the consumer portfolio, credit loss experience is often expressed in terms of annual net credit losses as a percent 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 portfolio 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(1) 90 DAYS OR MORE PAST DUE(2) LOANS(1) NET CREDIT LOSSES(2)(3) ------- ------------------------------- ------- ------------------------------ 1996 1996 1995 1994 1996 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------------- Citibanking $ 66.2 $ 2,320 $ 2,770 $ 2,666 $ 65.8 $ 634 $ 706 $ 692 Ratio 3.50% 4.23% 4.45% 0.96% 1.12% 1.21% Cards U.S. Bankcards 46.5 886 732 625 43.0 2,146 1,476 1,342 Ratio 1.90% 1.66% 1.64% 4.99% 3.70% 3.97% Other 8.9 189 141 99 7.9 336 255 191 Ratio 2.13% 1.93% 1.62% 4.23% 3.88% 3.60% Private Bank 15.4 193 307 311 14.9 4 24 62 Ratio 1.26% 2.15% 2.28% 0.02% 0.16% 0.45% ------- ------- ------- ------- ------- ------- ------- ------- TOTAL MANAGED 137.0 3,588 3,950 3,701 131.6 3,120 2,461 2,287 ------- ------- ------- ------- ------- ------- ------- ------- RATIO 2.62% 3.01% 3.14% 2.37% 1.99% 2.08% Effect of Credit Card Securitization(4) (25.2) (501) (440) (380) (26.1) (1,392) (917) (934) ------- ------- ------- ------- ------- ------- ------- ------- TOTAL ON-BALANCE SHEET $ 111.8 $ 3,087 $ 3,510 $ 3,321 $ 105.5 $ 1,728 $ 1,544 $ 1,353 ------- ------- ------- ------- ------- ------- ------- ------- RATIO 2.76% 3.32% 3.44% 1.64% 1.55% 1.56% - -----------------------------------------========================================================================================== MANAGED PORTFOLIO: Developed Markets $ 104.0 $ 3,218 $ 3,665 $ 3,517 $ 100.6 $ 2,763 $ 2,164 $ 2,118 Ratio 3.10% 3.58% 3.82% 2.74% 2.25% 2.44% Emerging Markets 33.0 370 285 184 31.0 357 297 169 Ratio 1.12% 0.99% 0.71% 1.15% 1.09% 0.73% - -----------------------------------------==========================================================================================
(1) Loan amounts, in billions of dollars, are net of unearned income. (2) In millions of dollars. (3) Net credit loss ratios are calculated based on average loans. (4) See page 48 for a description of the impact of credit card receivables securitizations. CONSUMER LOAN BALANCES In Billions of Dollars
END OF PERIOD AVERAGE -------------------------- -------------------------- 1996 1995 1994 1996 1995 1994 - ----------------------------------------------------------------------------------------------- MANAGED $137.0 $131.1 $117.9 $131.6 $123.3 $110.2 Effect of Credit Card Securitization (25.2) (25.5) (21.3) (26.1) (23.6) (23.4) ------ ------ ------ ------ ------ ------ ON-BALANCE SHEET $111.8 $105.6 $ 96.6 $105.5 $ 99.7 $ 86.8 - ---------------------------------------========================================================
34 Total delinquencies in the managed portfolio of $3.6 billion and the related delinquency ratio of 2.62% at December 31, 1996, improved from $4.0 billion or 3.01% at December 31, 1995 and $3.7 billion or 3.14% at December 31, 1994. Total managed net credit losses of $3.1 billion and the related loss ratio of 2.37% increased from $2.5 billion or 1.99% at December 31, 1995 and $2.3 billion or 2.08% at December 31, 1994. In Citibanking, delinquencies of $2.3 billion and the related ratio of 3.50% at December 31, 1996 improved from $2.8 billion and 4.23% at December 31, 1995, primarily reflecting improvements in U.S. mortgages, the impact of the U.K. mortgage portfolio sale, and the effect of foreign currency translation. The improvement in delinquencies was partially offset by increases in the emerging markets and in the U.S. government-guaranteed student loan portfolio. Net credit losses of $634 million and the related loss ratio of 0.96% declined from 1995, primarily due to lower losses in the U.S. and Europe, as well as improvements in Latin America, partially offset by increases in Asia Pacific. The improvement in the U.S. and Europe principally reflected lower losses in Germany, including the effect of foreign currency translation, and U.S. mortgages. The delinquency ratio and net credit loss ratio of 4.23% and 1.12% in 1995 improved from 4.45% and 1.21%, respectively, in 1994. U.S. bankcards managed loans that were delinquent 90 days or more totaled $886 million as of December 31, 1996, or 1.90% of the portfolio, up from $732 million, or 1.66%, and $625 million, or 1.64%, at December 31, 1995 and 1994, respectively. The net credit loss ratio was 4.99% in 1996, up from 3.70% in 1995 (including a three basis point benefit from the sale of certain bankrupt accounts) and 3.97% in 1994. The U.S. bankcards net credit loss ratio has generally increased on a quarterly basis since the 1994 fourth quarter. Personal bankruptcies accounted for 37.3% of gross write-offs, up from 34.8% in 1995 and 31.8% in 1994. Citicorp continues to write off bankrupt accounts upon notice of filing of bankruptcy. The increases in delinquencies and net credit loss rates are broadly consistent with industry trends. The other Cards businesses primarily include bankcards throughout the emerging markets and in the developed markets of Europe and Japan, as well as worldwide Diners Club. Compared with 1995, the $48 million rise in delinquencies and the $81 million increase in net credit losses and related ratios was primarily due to increases in Asia Pacific. Delinquencies and net credit losses in 1995 increased from 1994 primarily due to portfolio growth in Asia Pacific and economic conditions in Latin America. Private Bank delinquencies declined to 1.26% of loans from 2.15% a year earlier, which is consistent with the overall decrease in the level of nonperforming assets. Total consumer loans on the balance sheet delinquent 90 days or more on which interest continued to be accrued were $1.0 billion, $951 million, and $828 million at December 31, 1996, 1995, and 1994, respectively. Included in these amounts are U.S. government-guaranteed student loans of $239 million, $208 million, and $150 million, respectively. Other consumer loans delinquent 90 days or more on which interest continued to be accrued (which primarily include worldwide bankcard receivables and certain loans in Germany) were $770 million, $743 million, and $678 million, respectively. The increase in both periods was primarily in U.S. bankcards. The majority of these other loans are written off upon reaching a stipulated number of days past due. See the table of cash-basis, renegotiated, and past due loans on page 80. Citicorp's policy for suspending the accrual of interest on consumer loans varies depending on the terms, security, and credit loss experience characteristics of each product, as well as write-off criteria in place. At December 31, 1996, interest accrual had been suspended on $2.2 billion of consumer loans, primarily consisting of Citibanking loans in the U.S. mortgage business, Europe branches, the emerging markets, and the U.S. branches, as well as Private Banking loans. Interest accrual had been suspended on $2.7 billion of loans at December 31, 1995 and $2.6 billion of loans at December 31, 1994. The decline from 1995 reflects improvements in U.S. mortgages, the impact of the U.K. mortgage portfolio sale, lower amounts in the Private Bank, and the effect of foreign currency translation. These improvements were partially offset by increases in Asia Pacific. U.S. mortgages on which the accrual of interest has been suspended were $734 million at December 31, 1996, down from $979 million and $989 million at December 31, 1995 and 1994, respectively, due to improved collection efforts and delinquency management initiatives. The portion of Citicorp's allowance for credit losses allocated to the consumer portfolio and the reserve for sold consumer portfolios totaled $2.6 billion as of December 31, 1996, up from $2.4 billion and $2.3 billion as of December 31, 1995 and 1994, respectively. The allocation of the allowance is made for analytical purposes only and may change from time to time. Furthermore, the entire Citicorp allowance is available to absorb all probable credit losses inherent in the portfolio. The reserve for sold consumer portfolios is attributable to U.S. bankcard receivables securitizations and certain mortgage sales. Refer to Note 1 to the consolidated financial statements for a discussion of Citicorp's obligations under certain loans sold with credit enhancements. The allowance for credit losses reflected an additional provision in excess of net write-offs of $200 million in 1996, 1995, and 1994. The allowance as a percentage of loans on the balance sheet was 1.86% as of December 31, 1996, compared with 1.84% and 1.90% at December 31, 1995 and 1994, respectively. See "Provision and Allowance for Credit Losses" on page 46 for further discussion. Consumer credit costs, particularly in U.S. bankcards, and the related net credit loss ratios are expected to increase from 1996 levels as a result of economic conditions, credit performance of the portfolios (including bankruptcies), and changes in portfolio levels. Additionally, delinquencies and loans on which the accrual of interest is suspended could remain at relatively high levels. 35 CORPORATE BANKING In Millions of Dollars 1996 1995(1) 1994(1) - ----------------------------------------------------------------------------- Total Revenue $ 7,189 $ 6,525 $5,712 Net Cost to Carry Cash-Basis Loans and OREO (36) 11 86 ------- ------- ------ ADJUSTED REVENUE 7,153 6,536 5,798 ------- ------- ------ Total Operating Expense 4,391 3,918 3,572 Net OREO Benefits 49 105 39 ------- ------- ------ ADJUSTED OPERATING EXPENSE 4,440 4,023 3,611 ------- ------- ------ OPERATING MARGIN 2,713 2,513 2,187 ------- ------- ------ Net (Recoveries) Write-offs (2) 166 192 Net Cost to Carry and Net OREO Benefits (85) (94) 47 ------- ------- ------ CREDIT (BENEFITS) COSTS (87) 72 239 ------- ------- ------ OPERATING MARGIN LESS CREDIT (BENEFITS) COSTS 2,800 2,441 1,948 Additional Provision -- 81 136 ------- ------- ------ INCOME BEFORE TAXES 2,800 2,360 1,812 Income Taxes 621 582 504 ------- ------- ------ NET INCOME $ 2,179 $ 1,778 $1,308 - -------------------------------------------------============================ Average Assets (In Billions of Dollars) $ 139 $ 144 $ 150 Return on Assets 1.57% 1.23% 0.87% - -------------------------------------------------============================ (1) Reclassified to conform to the 1996 presentation and to include the results of the Cross-Border Refinancing Portfolio (as a component of the Emerging Markets business) and North America Commercial Real Estate (as a component of Global Relationship Banking) both of which were reported as separate businesses prior to 1996. The Corporate Bank made significant progress in achieving its Business Directions strategy in 1996--adding breadth and depth to the global network, investing for future growth, reducing average assets in Global Relationship Banking, and improving returns. Net income of $2.2 billion increased $401 million or 23% compared with 1995 and represented a return on assets of 1.57%, up 34 basis points from 1995 and up 70 basis points from 1994. Growth in the Emerging Markets business coupled with improved credit results in Global Relationship Banking drove the improved results. Net income of $1.8 billion in 1995 grew $470 million or 36% from 1994 due primarily to higher trading-related revenue, growth in the Emerging Markets business, and improved credit results in Global Relationship Banking. The 1996 and 1995 year-to-year comparisons also benefited from declining effective income tax rates. [The following table was represented as a bar graph in the printed material.] - -------------------------------------------------------------------------------- CORPORATE BANKING Net Income $ Billions 1994 1995 1996 ---- ---- ---- Corporate Banking 1.3 1.8 2.2 Emerging Markets 1.0 1.2 1.5 Global Relationship Banking 0.3 0.6 0.7 - -------------------------------------------------------------------------------- Adjusted revenue of $7.2 billion in 1996 grew $617 million or 9% from 1995 reflecting growth in fee-based corporate finance activity and transaction banking services together with higher levels of securities transactions and asset gains. About 20% of the revenue in the Emerging Markets business was attributable to business from multinational companies managed jointly with Global Relationship Banking, with that revenue having grown at a double digit rate from 1995. Revenue growth of $738 million or 13% in 1995 compared with 1994 was primarily attributable to higher trading-related revenue and growth in the Emerging Markets business. Trading-related revenue totaled $1.7 billion, $1.7 billion, and $1.2 billion in 1996, 1995, and 1994, respectively. Venture capital revenue totaled $450 million, $390 million, and $365 million in 1996, 1995, and 1994, respectively, and benefited from favorable conditions in the U.S. equity markets in 1996 and 1995. Levels of trading-related and venture capital revenue may fluctuate in the future as a result of market conditions and other factors. See pages 45 and 46 for additional discussions of trading-related and venture capital revenues. Adjusted operating expense of $4.4 billion in 1996 grew $417 million or 10% compared with 1995. Expense grew $275 million or 20% in the Emerging Markets business and $142 million or 5% in Global Relationship Banking. The expense growth is primarily attributable to investment spending to build the Emerging Markets franchise, costs associated with implementing Citicorp's plan to gain market share in selected emerging market countries, increased spending on technology and risk management in Global Relationship Banking, and volume- related increases in both businesses. Expense in 1995 was up 11% from 1994 primarily due to business expansion in the Emerging Markets business and volume-related and technology spending in Global Relationship Banking. Credit costs were a net benefit of $87 million in 1996, a $159 million improvement from the net charge of $72 million in 1995. The 1996 results primarily reflect a decline in gross write-offs in Global Relationship Banking coupled with an increase in recoveries in both businesses (including $75 million from the refinancing agreements concluded with Panama, Slovenia, and Croatia). Total credit costs of $72 million in 1995 declined $167 million from 1994 primarily due to lower costs to carry cash-basis loans and OREO and improved results on the disposition of OREO. The additional provision for credit losses in excess of net write-offs in 1995 and 1994 was $81 million and $136 million, respectively. Losses on commercial lending activities can vary widely with respect to timing and amount, particularly within any narrowly-defined business or loan type. During 1997 credit costs may increase from the 1996 level but are expected to remain moderate. 36 Citicorp attributes income taxes to core businesses on the basis of local tax rates, which resulted in effective income tax rates of 22%, 25%, and 28%, in 1996, 1995, and 1994, respectively. The difference between the local tax rates attributed to core businesses and Citicorp's overall effective tax rate in each year is included in Corporate Items. Fluctuations in the effective income tax rates resulted from changes in the nature and geographic mix of pretax earnings. Cash-basis loans at December 31, 1996 were $905 million, down $629 million or 41% from year-end 1995. The reduction is primarily attributable to paydowns and transfers to OREO or accrual status. The OREO portfolio of $614 million was essentially unchanged from December 31, 1995 as transfers into OREO were approximately offset by OREO sales. See the tables entitled "Cash-Basis, Renegotiated, and Past Due Loans" and "Other Real Estate Owned and Assets Pending Disposition" on page 80. Average assets of $139 billion in 1996 declined $5 billion or 3% from 1995. Average assets of $80 billion in Global Relationship Banking declined $14 billion or 15% from 1995 as the business continued to focus on asset utilization, primarily in trading-related activities. Average assets of $59 billion in the Emerging Markets business grew $9 billion or 18% reflecting continuing business expansion. Average assets in 1995 declined $6 billion from 1994 primarily reflecting the Global Relationship Banking business repositioning and lower levels of trading and real-estate-related assets, partially offset by an increase in the Emerging Markets business due to business expansion. EMERGING MARKETS In Millions of Dollars 1996 1995(1) 1994(1) - ----------------------------------------------------------------------------- Total Revenue $ 3,433 $ 2,886 $ 2,519 Net Cost to Carry Cash-Basis Loans and OREO 4 14 9 ------- ------- ------- ADJUSTED REVENUE 3,437 2,900 2,528 ------- ------- ------- Total Operating Expense 1,640 1,363 1,174 Net OREO Benefits 5 7 4 ------- ------- ------- ADJUSTED OPERATING EXPENSE 1,645 1,370 1,178 ------- ------- ------- OPERATING MARGIN 1,792 1,530 1,350 ------- ------- ------- Net (Recoveries) Write-offs (3) 26 5 Net Cost to Carry and Net OREO Benefits (1) 7 5 ------- ------- ------- CREDIT (BENEFITS) COSTS (4) 33 10 ------- ------- ------- OPERATING MARGIN LESS CREDIT (BENEFITS) COSTS 1,796 1,497 1,340 Additional Provision -- (19) (64) ------- ------- ------- INCOME BEFORE TAXES 1,796 1,516 1,404 Income Taxes 331 368 367 ------- ------- ------- NET INCOME $ 1,465 $ 1,148 $ 1,037 - ----------------------------------------------=============================== Average Assets (In Billions of Dollars) $ 59 $ 50 $ 46 Return on Assets 2.48% 2.30% 2.25% - ----------------------------------------------=============================== (1) Reclassified to conform to the 1996 presentation and to include the results of the Cross-Border Refinancing Portfolio, which was reported as a separate business prior to 1996. Emerging Markets net income of $1.5 billion in 1996 grew $317 million or 28% compared with 1995 and represented a return on assets of 2.48%, up 18 basis points from 1995. Broadly-based revenue growth across most regions and products coupled with higher levels of securities transactions and net asset gains outpaced expense growth by a 2:1 margin. Net income of $1.1 billion in 1995 improved 11% compared with 1994 reflecting revenue growth from lending and transaction banking services together with improved trading-related activities and continued investment spending to build the franchise. Adjusted revenue of $3.4 billion grew $537 million or 19% compared with 1995. The improvement is primarily attributable to growth in credit- and fee-based corporate finance activities and transaction banking services, a $146 million increase in securities transactions primarily attributable to the sale of emerging markets debt securities, a $48 million increase in net asset gains, and improved trading-related results. Revenue of $2.9 billion in 1995 grew $372 million or 15% compared with 1994 primarily reflecting higher revenue from lending and transaction banking services together with improved trading-related revenue. Adjusted operating expense was $1.6 billion, $1.4 billion, and $1.2 billion in 1996, 1995, and 1994, respectively. The growth in expense in the three-year period is primarily attributable to investment spending to build the franchise and, in 1996, costs associated with implementing Citicorp's plan to gain market share in selected emerging market countries. Credit costs were a net benefit of $4 million in 1996, an improvement of $37 million from 1995, and primarily reflected higher recoveries (including $75 million from the refinancing agreements concluded with Panama, Slovenia, and Croatia) partially offset by a modest rise in gross write-offs. Credit costs of $33 million in 1995 grew $23 million compared with 1994 due to higher gross write-offs. The effective income tax rates in 1996, 1995, and 1994 were 18%, 24%, and 26%, respectively. Fluctuations in the effective income tax rates result from changes in the nature and geographic mix of pretax earnings. 37 GLOBAL RELATIONSHIP BANKING In Millions of Dollars 1996 1995(1) 1994(1) - ----------------------------------------------------------------------------- Total Revenue $ 3,756 $ 3,639 $3,193 Net Cost to Carry Cash-Basis Loans and OREO (40) (3) 77 ------- ------- ------ ADJUSTED REVENUE 3,716 3,636 3,270 ------- ------- ------ Total Operating Expense 2,751 2,555 2,398 Net OREO Benefits 44 98 35 ------- ------- ------ ADJUSTED OPERATING EXPENSE 2,795 2,653 2,433 ------- ------- ------ OPERATING MARGIN 921 983 837 ------- ------- ------ Net Write-offs 1 140 187 Net Cost to Carry and Net OREO Benefits (84) (101) 42 ------- ------- ------ CREDIT (BENEFITS) COSTS (83) 39 229 ------- ------- ------ OPERATING MARGIN LESS CREDIT (BENEFITS) COSTS 1,004 944 608 Additional Provision -- 100 200 ------- ------- ------ INCOME BEFORE TAXES 1,004 844 408 Income Taxes 290 214 137 ------- ------- ------ NET INCOME $ 714 $ 630 $ 271 - -----------------------------------------------============================== Average Assets (In Billions of Dollars) $ 80 $ 94 $ 104 Return on Assets 0.89% 0.67% 0.26% - -----------------------------------------------============================== (1) Reclassified to conform to the 1996 presentation and to include the results of North America Commercial Real Estate, which was reported as a separate business prior to 1996. Net income from the Global Relationship Banking business in North America, Europe, and Japan was $714 million in 1996, up $84 million or 13% from 1995. The improvement is primarily due to lower credit costs and a lower additional provision. Net income in 1995 of $630 million improved $359 million from 1994 reflecting higher trading-related revenue, improved credit costs and a lower additional provision, and a lower effective income tax rate. Adjusted revenue of $3.7 billion grew $80 million or 2% compared with 1995. The improvement is attributable to growth in fee-based corporate finance activities and transaction banking services, partially offset by a decline in credit-based corporate finance activities due to lower net rate spreads. A $170 million decline in trading-related revenue was offset by a $129 million gain on the sale of a stand-alone automated trading business and by improved venture capital results. Revenue growth of $366 million or 11% in 1995 compared with 1994 is attributable to improved trading-related revenue. Adjusted operating expense of $2.8 billion in 1996 grew $142 million or 5% compared with 1995 reflecting increased spending on technology and risk management and higher volume-related expenses. Expense growth of $220 million or 9% in 1995 is primarily due to volume-related and technology spending. Credit costs were a net benefit of $83 million in 1996 and improved $122 million from 1995. The improvement reflects significantly lower gross write-offs (primarily related to real estate) together with a continued high level of recoveries. Credit costs of $39 million in 1995 declined $190 million from 1994 as a result of lower gross write-offs, lower cost to carry cash-basis loans and OREO, and improved results from the disposition of OREO. The additional provision was $100 million and $200 million in 1995 and 1994, respectively. The effective income tax rate in 1996, 1995, and 1994 was 29%, 25%, and 34%, respectively. Fluctuations in the effective income tax rate result from changes in the nature and geographic mix of pretax earnings. CORPORATE ITEMS In Millions of Dollars 1996 1995(1) 1994(1) - ---------------------------------------------------------------------------- Total Revenue $ 909 $ 732 $ 576 Total Operating Expense 547 394 387 ----- ----- ----- Income Before Taxes 362 338 189 Income Taxes (Benefit) 796 620 (142) ----- ----- ----- NET (LOSS) INCOME $(434) $(282) $ 331 - ---------------------------------------------------------------------------- Average Assets (In Billions of Dollars) $ 5 $ 5 $ 5 - --------------------------------------------------========================== (1) Reclassified to conform to the 1996 presentation. Corporate Items includes revenue derived from charging businesses for funds employed (based upon a marginal cost of funds concept), unallocated corporate costs, net gains related to capital building transactions, and the recognition of deferred tax benefits. Corporate Items also includes income tax expense resulting from the offset created by attributing income taxes to core business activities on a local tax-rate basis. The core businesses' effective tax rates were 26%, 29%, and 30% for 1996, 1995, and 1994, respectively, while Citicorp's effective tax rate was 38% for both 1996 and 1995, and 26% in 1994. See Note 9 to the consolidated financial statements for further discussion of income taxes. Corporate Items revenue of $909 million in 1996 increased $177 million or 24% from 1995, reflecting a decrease in funding costs, and the funding benefits associated with higher equity levels. Revenue also included investment writedowns of $100 million in Latin America, compared with $95 million in 1995. Revenue in 1994 included net gains related to capital building transactions of $80 million. Operating expense in 1996 reflected increased unallocated corporate costs and corporate employee expense, including costs associated with performance-based compensation. 38 MANAGING GLOBAL RISK Risk management is the cornerstone of Citicorp's business. Risks arise from lending, underwriting, trading, and other activities routinely undertaken on behalf of customers around the world. Outlined below is the process that management employs to provide oversight and direction, followed by discussions of the credit and market risk management processes in place across the corporation. The Windows on Risk Committee evaluates and proactively manages the risk profile of the corporation. The Committee is chaired by the Vice Chairman responsible for risk management and includes inside directors, senior line and staff officers, and the Chairman of Citicorp. The Committee uses an analytical framework that Citicorp calls Windows on Risk to control country, consumer product, industry, and client concentrations; to reduce portfolio, process, operational, technological, and legal vulnerabilities; to decide on portfolio actions; and to help create a balance between Citicorp's risk profile, earnings, and capital. The Windows on Risk process has three major components: the Committee develops a near-term outlook for the global external environment highlighting key risks; examines Citicorp's risk profile in terms of 16 windows, or risks that impact Citicorp's businesses and operations; and, in response to perceived risks in the environment and portfolio, the Committee initiates actions to strengthen the risk profile. The review of the external environment encompasses the outlook for major country and regional economies, significant consumer markets and global industries; the potential near-term critical economic and geopolitical events; and the implications of potential unfavorable developments as they relate to specific businesses. The review of the risk profile covers the following credit-related and market risks, as well as audit (control) risk, and legal and technological vulnerabilities: o Risk ratings, including trends in client creditworthiness together with a comparison of risk against return; o Industry concentrations, globally and within regions; o Limits assigned to relationship concentrations and consumer programs; o Product concentrations in consumer managed receivables, by product and by region; o Global real estate limits and exposure, including commercial and consumer portfolios; o Country risk, encompassing political and cross-border risk; o Counterparty risk, evaluating presettlement risk on foreign exchange and derivative products, as well as securities trades; o Dependency, linking and evaluating specific industry and consumer product exposure to external environmental factors; o Distribution and underwriting risk, capturing the risk that arises when Citicorp commits to purchase an instrument from an issuer for subsequent sale; o Business risk review, evaluating by business the risk captured by portfolio and process ratings; o Price risk, capturing the earnings risk resulting from changing levels and volatilities of interest rates, foreign exchange rates, and commodity and equity prices; o Liquidity risk, evaluating funding exposure; o Equity and subordinated debt investment risk, monitored against portfolio limits; o Audit, evaluating operations and control risk based on internal audits; o Legal, evaluating vulnerability and business implications of legal issues; and o Technology, assessing the vulnerability to the electronic environment. Based on this coordinated review of major risks impacting the corporation, the Windows on Risk Committee formulates recommendations and assigns responsibility for recommended portfolio actions. The review is intended to provide Citicorp with a view of the environment in which it operates and of the risk inherent in its businesses. THE CREDIT PROCESS Guided by the overall risk appetite and portfolio targets set by senior management, line management conducts the day-to-day credit process in accordance with core policies established by the Credit Policy Committee. Line management initiates and approves all extensions of credit and is responsible for credit quality. Line managers must also establish supplementary credit policies specific to each business, deploy the credit talent needed, and monitor portfolio and process quality. The managers are required to identify problem credits or programs as they develop, and to correct deficiencies as needed through remedial management. Business Risk Review conducts independent periodic examinations of both portfolio quality and the credit process at the individual business level. Citicorp's credit policies are organized around two basic approaches--Credit Programs and Credit Transactions. Credit Programs, used primarily for the Consumer businesses, focus on the decision to extend credit to sets of customers with similar characteristics and/or product needs. Approvals under this approach cover the expected level of aggregate exposure, the terms, risk acceptance criteria, operating systems, and reporting mechanisms. This is a cost-effective way of handling high-volume, small-dollar amount transactions. Credit programs are reviewed annually, with approvals tiered on the basis of projected outstandings as well as the maturity and performance of the product. The Credit Transaction approach focuses on the decision to extend credit to an individual customer or customer relationship. It starts with target market definition and risk acceptance criteria, and requires detailed customized financial analysis. Approval requirements for each decision are tiered based on the transaction amount, the customer's aggregate facilities, credit risk ratings, and the banking business serving the customer. Credit Programs and Credit Transactions are approved by three line credit officers, with one designated as responsible to ensure that all aspects of the credit process are properly coordinated and executed. As the size or risk increases, the three approvals may include one or two Senior Credit or Securities Officers. These individuals consist of over 500 of Citicorp's most experienced lenders and underwriters appointed by the Credit Policy Committee, with their designation reviewed annually. In addition, approvals from underwriting, product, industry or functional specialists may be required. At certain higher levels of risk, Credit Policy Committee members as well as senior management review individual credit decisions. 39 DERIVATIVE AND FOREIGN EXCHANGE CONTRACTS Citicorp manages its credit exposure on derivative and foreign exchange instruments as part of the overall extension of credit to individual customer relationships, subject to the same credit approvals, limits, and monitoring procedures it uses for other activities, using the Credit Transaction approach. The extension of credit in a derivative or foreign exchange contract is equal to the loss that could result if the counterparty were to default. In managing the aggregate credit extension to individual customers, Citicorp measures the amount at risk on a derivative or foreign exchange instrument as the sum of two factors: the current replacement cost (i.e., balance sheet credit exposure), and the potential increase in the replacement cost over the remaining life of the instrument should market rates change. The current replacement cost of a derivative or foreign exchange contract is equal to the amount, if any, of Citicorp's unrealized gain on the contract. The potential increase in replacement cost of a contract is estimated based on a statistical simulation of values that would result from changing market rates. See page 61 for additional details. THE MARKET RISK MANAGEMENT PROCESS Market risk encompasses liquidity and price risk, both of which are fundamental to the business of a financial intermediary. Liquidity risk is the risk that an entity will be unable to meet a financial commitment to a customer, creditor, or investor in any location, in any currency, when due. Price risk is the risk to earnings that arises from changes in interest rates, market prices, foreign exchange rates, and from market volatility. The Market Risk Policy Committee serves an oversight role in the management of all market risks. The committee is a group of Citicorp's most senior market risk professionals, chaired by the Corporate Treasurer, which establishes and oversees corporate market risk policies and standards to serve as a check and balance in the business risk management process. Market risk management is an evolutionary process that integrates changes in marketplace, product development, and technological advances into policies and practices. Periodic reviews are conducted by Corporate Audit to ensure compliance with institutional policies and procedures for the assessment, management, and control of market risk. Within Citicorp, business and corporate oversight groups have well-defined market risk management responsibilities. Within each business, a process is in place to control market risk exposure. Management of this process begins with the professionals nearest to Citicorp's customers, products, and markets, and extends up to the senior executives who manage these businesses and to country Asset/Liability Management Committees ("ALCO"). Market risk positions are controlled by limits on exposure based on the size and nature of a business. Risk limits are approved by the Finance and Capital Committee, which is composed of senior management, including the Corporate Treasurer, and overseen by the Market Risk Policy Committee. LIQUIDITY MANAGEMENT Management of liquidity at Citicorp is the responsibility of the Corporate Treasurer. The Country Corporate Officer and the Country Treasurer ensure that all funding obligations in each country are met when due. The Country Treasurer is appointed by the Market Risk Policy Committee upon the recommendation of line management and Regional Treasurers. The in-country forum for liquidity issues is the ALCO, which includes senior executives within each country. The ALCO reviews the current and prospective funding requirements for all businesses and legal entities within the country, as well as the capital position and balance sheet. All businesses within the country are represented on the committee with the focal point being the Country Treasurer. Each Country Treasurer must prepare a liquidity plan at least annually that is approved by the Country Corporate Officer, the Regional Treasurer, and the Market Risk Policy Committee. The liquidity profile is monitored on an on-going basis and reported monthly. Limits are established on the extent to which businesses in a country can take liquidity risk. The size of the limit depends on the depth of the market, experience level of local management, and liquidity characteristics of the assets. Regional Treasurers generally have responsibility for monitoring liquidity risk across a number of countries within a defined geography. They are also available for consultation and special approvals, especially in unusual or volatile market conditions. Citicorp's assets and liabilities are diversified across many currencies, geographic areas, and businesses. Particular attention is paid to those businesses that for tax, sovereign risk, or regulatory reasons cannot be freely and readily funded in the international markets. A diversity of funding sources, currencies, and maturities is used to gain the broadest practical access to the investor base. Citicorp's deposits, which represent 66% and 65% of total funding at December 31, 1996 and 1995, respectively, are broadly diversified by both geography and customer segments as indicated by the charts that follow: [The following tables were represented as pie graphs in the printed material.] - -------------------------------------------------------------------------------- CONSUMER DEPOSITS BY REGION December 31, 1996 NORTH AMERICA 42% ASIA PACIFIC 32% LATIN AMERICA 7% EUROPE 19% TOTAL $117.6 BILLION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CORPORATE BANKING DEPOSITS BY REGION December 31, 1996 NORTH AMERICA 20% ASIA PACIFIC 25% LATIN AMERICA 17% EUROPE 29% CEEMEA* 9% TOTAL $67.4 BILLION *Central and Eastern Europe, Middle East, and Africa - -------------------------------------------------------------------------------- Stockholders' equity, which grew $1.1 billion during the year to $20.7 billion at year-end 1996, continues to be an important component of the overall funding structure. In addition, long-term debt is issued by Citicorp (the "Parent Company") and its subsidiaries. Total long-term debt outstanding at year-end 1996 was $18.9 billion, compared with $18.5 billion at year-end 1995. 40 Securitization of assets remains an important source of liquidity. Total assets securitized during 1996 were $7.2 billion, including $5.3 billion of U.S. credit cards, $1.5 billion of U.S. consumer mortgages, and $0.4 billion of non-U.S. consumer assets. As credit card securitization transactions amortize, newly originated receivables are recorded on Citicorp's balance sheet and become available for asset securitization. In 1996, the scheduled amortization of certain credit card securitization transactions made available $5.7 billion of new receivables. In addition, $5.9 billion of credit card securitization transactions are scheduled to amortize during 1997. MANAGEMENT OF PRICE RISK EXPOSURE Price risk exposure is the sensitivity of earnings to changes in interest rates, market prices, foreign exchange rates, and market volatilities. This exposure arises in the normal course of business of a global financial intermediary. Citicorp has established procedures for managing price risk within its business units worldwide. Decentralization is the essential organizational principle for managing price risk. It is balanced by strong centralized controls exercised by corporate oversight bodies. The level of price risk assumed by a business is based on its objectives and earnings, its capacity to manage risk, and by the sophistication of its local markets. The nature of the price risk assumed by a business varies according to the services it provides and the customers it serves. Limits are established for each major category of risk, with exposures monitored and managed by the businesses, and reviewed monthly at the corporate level. Citicorp uses a risk management system based on market factors that accommodates the diversity of balance sheet and derivative product exposures and exposure management systems of its various businesses. The market factor approach identifies the variables that cause a change in the value of a financial instrument, including the term structure of interest rates, foreign exchange rates, equity securities and commodities prices and their volatilities. Price risk is then measured using various tools, including the earnings at risk method, which is applied to interest rate risk of the non-trading portfolios, and the potential loss amount method, which is applied to the trading portfolios. These methods are comparable with value at risk measurements employed throughout the industry, and are used as indicators to monitor sensitivity of earnings to market risk rather than as a quantification of aggregate risk amounts. In June 1996, the Financial Accounting Standards Board ("FASB") issued an exposure draft of a proposed new accounting standard which could significantly affect the accounting treatment of end-user derivative and foreign exchange contracts by Citicorp and its customers. The FASB has begun redeliberating the proposal and various alternative approaches which could have a range of potential effects on earnings and stockholders' equity. As the FASB finalizes its conclusions, Citicorp and the customers to which it provides derivatives and foreign exchange products will have to reconsider their risk management strategies, since the final rules may not reflect the results of many of those strategies in the same manner as current accounting practice. NON-TRADING PORTFOLIOS Earnings at risk measures the potential pretax earnings impact on the non-trading activities of a specified movement in interest rates for an assumed defeasance period which ranges from one to eight weeks depending on the depth of liquidity in the market and the instrument involved. The earnings at risk is calculated separately for each currency by multiplying the repricing gap between interest sensitive items by the specified interest rate movement, and then taking into account the impact of options, both explicit and embedded. The specific rate movements are statistically derived from a two standard deviation movement, which results in a confidence level of 97.5%. Business units manage the potential earnings effect of interest rate movements by modifying the asset and liability mix, either directly or through the use of derivatives. 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 modified from time to time in response to changing market conditions as well as changes in the characteristics and mix of the related assets and liabilities. Additional information about non-trading derivatives is located on page 62. Citicorp does not utilize instruments with leverage features in connection with its risk management activities. As part of the annual planning process, limits are set for earnings at risk on a business, country and total Citicorp basis, with exposures reviewed on a regular basis by the Finance and Capital Committee in relation to limits and the current interest rate environment. Citicorp's primary non-trading price risk exposure is to movements in U.S. dollar interest rates. As of December 31, 1996 the U.S. dollar earnings at risk to a two standard deviation increase in rates had a potential negative impact of approximately $165 million pretax for the following twelve months and approximately $239 million on a discounted full life basis. The table below summarizes Citicorp's worldwide earnings at risk over the next 12 months from changes in U.S. dollar interest rates. TWELVE MONTH U.S. DOLLAR EARNINGS AT RISK (PRETAX) ASSUMING A RATE MOVE OF ----------------------------- TWO STANDARD TWO STANDARD DEVIATION DEVIATION In Millions of Dollars at December 31, 1996 INCREASE DECREASE - ----------------------------------------------------------------------------- Excluding Derivatives $ 80 $(70) Including Derivatives (165) 191 - ----------------------------------------------------------------------------- The table illustrates that including derivatives, Citicorp's earnings over the next 12 months in its non-trading activities would be reduced from an increase in interest rates and benefit from a decrease in interest rates. This primarily reflects the utilization of receive-fixed interest rate swaps and similar instruments to effectively modify the repricing characteristics of certain consumer and commercial loan portfolios, funding, and long-term debt. During 1996, the U.S. dollar earnings at risk for the following 12 months to a two standard deviation increase in rates had a potential negative impact which ranged from approximately $116 million to $204 million in the aggregate at each month end, compared with a range from $30 million to $165 million during 1995 and a range from $5 million to $90 million during 1994. 41 The table below provides additional detail of Citicorp's earnings at risk from changes in interest rates. U.S. DOLLAR EARNINGS AT RISK (PRETAX) ASSUMING A RATE MOVE OF ---------------------------- TWO STANDARD TWO STANDARD DEVIATION DEVIATION In Millions of Dollars at December 31, 1996 INCREASE DECREASE - ----------------------------------------------------------------------------- Overnight to three months $ (78) $ 71 Four to six months (41) 60 Seven to twelve months (46) 60 ----- ----- Total overnight to twelve months (165) 191 - ----------------------------------------------------------------------------- Year two (109) 109 Year three (40) 38 Year four 19 (22) Year five and over 56 (74) ----- ----- Total $(239) $ 242 - -------------------------------------------------------====================== Earnings at risk in other currencies also existed at significantly lower levels than U.S. dollar earnings at risk. The level of exposure taken is based on the market environment and will vary from period to period based on rate and other economic expectations. TRADING PORTFOLIOS The price risk of the trading activities is measured using the potential loss amount method, which estimates the sensitivity of the value of the trading activities to changes in the various market factors, such as interest and foreign exchange rates, over the period necessary to close the position (generally one day). This measurement includes the foreign exchange risks that arise in traditional banking businesses as well as explicit trading positions. The method considers the probability of movements of these market factors (as derived from a two standard deviation movement), adjusted for correlation among them within each trading center. The trading portfolios are subject to a well-defined series of potential loss amount exposure limits. The daily price risk process monitors exposures against limits and triggers specific management actions to ensure that the potential impact on earnings, due to the many dimensions of price risk, is controlled within acceptable limits. The Finance and Capital Committee approves potential loss amount exposure limits annually and reviews usage of these exposures on a monthly basis. During 1996, the potential loss amount in the trading portfolios averaged $45 million pretax in the aggregate for Citicorp's major trading centers and the monthly averages of daily exposures ranged from approximately $40 million to $60 million, which is the same range as 1995 and slightly lower than 1994 which ranged from $45 million to $85 million. The potential loss amounts decreased each quarter in 1994 and were relatively stable in 1995 and 1996. The level of exposure taken is a function of the market environment, and expectations of future price and market movements; and will vary from period to period. Quarterly trading-related revenue ranged from $392 million to $547 million during 1996 compared with $395 million to $558 million in 1995, and $214 million to $490 million in 1994. CAPITAL ANALYSIS Citicorp is subject to risk-based capital guidelines issued by the Board of Governors of the FRB. These guidelines are used to evaluate capital adequacy based primarily on the perceived credit risk associated with balance sheet assets, as well as certain off-balance sheet exposures such as unused loan commitments, letters of credit, and derivative and foreign exchange contracts. The risk-based capital guidelines are supplemented by a leverage ratio requirement. CITICORP RATIOS At Year-End 1996 1995 - ------------------------------------------------------------------------------- Tier 1 Capital 8.39% 8.41% Total Capital (Tier 1 and Tier 2) 12.23 12.33 Leverage(1) 7.42 7.45 Common Stockholders' Equity 6.63 6.43 - ------------------------------------------------------------------------------- (1) Tier 1 capital divided by adjusted average assets. Citicorp continued to maintain a strong capital position during 1996. Total capital (Tier 1 and Tier 2) amounted to $28.9 billion at December 31, 1996, representing 12.23% of net risk-adjusted assets. This compares with $27.7 billion and 12.33%, respectively, at December 31, 1995. Tier 1 capital of $19.8 billion at year-end 1996 represented 8.39% of net risk-adjusted assets, compared with $18.9 billion and 8.41%, respectively, at year-end 1995. The Tier 1 capital ratio at year-end 1996 exceeded Citicorp's target range of 8.00% to 8.30%. The excess of Tier 1 capital generated during a period reduced by capital utilized for business expansion and, in 1995, for building the Tier 1 ratio to target levels, is referred to as "free capital." As shown in the following table, Citicorp generated $3.0 billion and $1.8 billion of free capital during 1996 and 1995, respectively. FREE CAPITAL In Millions of Dollars 1996 1995 - ------------------------------------------------------------------------------- Tier 1 Capital Generated: Net Income $ 3,788 $ 3,464 Issuances/Other(1) 1,180 893 Cash Dividends Declared (1,012) (835) ------- ------- Total Tier 1 Capital Generated 3,956 3,522 Capital Utilized for: Growth in Net Risk-Adjusted Assets (926) (669) Build in Tier 1 Capital Ratio -- (1,084) ------- ------- Free Capital Generated $ 3,030 $ 1,769 - ------------------------------------------------------------------------------- (1) Primarily includes issuance of common stock under various staff benefits plans and the dividend reinvestment plan. Also includes issuance of guaranteed preferred beneficial interests in subordinated debt for 1996 and the net issuance of preferred stock for 1995. 42 In order to return this free capital to its shareholders, Citicorp initiated a common stock repurchase program in June 1995. During 1996 the program was expanded to a total authorization of $8.5 billion through December 31, 1998. Citicorp repurchased 36.1 million and 23.1 million shares of common stock under the program using free capital of $3.1 billion ($85.13 average cost per share) and $1.5 billion ($66.20 average cost per share) in 1996 and 1995, respectively. Citicorp began 1996 with Tier 1 capital in excess of its target, enabling repurchases to exceed the amount of free capital generated for the year. Since the program was initiated, Citicorp repurchased 59.2 million shares of common stock using free capital of $4.6 billion. Common stockholders' equity increased a net $2.1 billion during the year to $18.6 billion at December 31, 1996, representing 6.63% of assets, compared with 6.43% at year-end 1995. The increase in common stockholders' equity during the year principally reflected net income, conversion of Convertible Preferred Stock, Series 12 and 13, issuance of stock under various staff benefit plans, and an increase in net unrealized gains--securities available for sale, partially offset by shares repurchased under the common stock repurchase program and dividends declared on common and preferred stock. During 1996, the holder of $590 million Convertible Preferred Stock, Series 12, and the holders of the remaining $403 million Convertible Preferred Stock, Series 13, converted the preferred shares into 36.9 million and 22.1 million shares of common stock, respectively. In addition, $300 million of guaranteed preferred beneficial interests in Citicorp subordinated debt were issued. In January 1997, Citicorp announced that it will call for redemption the Series 14 Preferred Stock in March 1997, and issue an additional $450 million of guaranteed preferred beneficial interests in Citicorp subordinated debt. In February 1997, Citicorp filed a registration statement for the exchange of additional guaranteed preferred beneficial interests in Citicorp subordinated debt for certain series of Citicorp preferred stock. Both the guaranteed preferred beneficial interests and the preferred stock qualify as Tier 1 capital. The excess of the fair market value of the guaranteed preferred beneficial interests over the carrying amount of the related preferred stock that is exchanged will be deducted from earnings applicable to common stockholders, used in the calculation of earnings per share. The guaranteed preferred beneficial interests are included in long-term debt on the balance sheet. In January 1997, Citicorp raised the quarterly dividend on common stock to $.525 per share for an annual dividend rate of $2.10 per share. COMPONENTS OF CAPITAL UNDER REGULATORY GUIDELINES In Millions of Dollars at Year-End 1996 1995 - ------------------------------------------------------------------------------- TIER 1 CAPITAL Common Stockholders' Equity $ 18,644 $ 16,510 Perpetual Preferred Stock 2,078 3,071 Guaranteed Preferred Beneficial Interests in Subordinated Debt 300 -- Minority Interest 91 70 Less: Net Unrealized Gains-- Securities Available for Sale(1) (676) (132) Intangible Assets(2) (328) (293) 50% Investment in Certain Subsidiaries(3) (313) (311) --------- --------- Total Tier 1 Capital 19,796 18,915 - ------------------------------------------------------------------------------- TIER 2 CAPITAL Allowance for Credit Losses(4) 2,982 2,843 Qualifying Debt(5) 6,405 6,278 Less: 50% Investment in Certain Subsidiaries(3) (313) (311) --------- --------- Total Tier 2 Capital 9,074 8,810 --------- --------- Total Capital (Tier 1 and Tier 2) $ 28,870 $ 27,725 - ---------------------------------------------------------====================== Net Risk-Adjusted Assets(6) $ 236,073 $ 224,915 - ------------------------------------------------------------------------------- (1) Tier 1 capital excludes unrealized gains and losses on securities available for sale in accordance with regulatory risk-based capital guidelines. (2) Includes goodwill and certain other identifiable intangible assets. (3) Primarily Citicorp Securities, Inc. (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, subordinated capital notes, and limited life preferred stock, subject to certain limitations. (6) Includes risk-weighted credit equivalent amounts net of applicable bilateral netting agreements of $9.8 billion for interest rate, commodity and equity derivative contracts, and foreign exchange contracts as of December 31, 1996, compared with $10.0 billion as of December 31, 1995. 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. 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 December 31, 1996 all of Citicorp's subsidiary depository institutions were "well capitalized" under the federal bank regulatory agencies' definitions. CITIBANK, N.A. RATIOS At Year-End 1996 1995 - ------------------------------------------------------------------------------- Tier 1 Capital 8.32% 8.32% Total Capital (Tier 1 and Tier 2) 12.11 12.24 Leverage 6.63 6.65 Common Stockholder's Equity 6.99 7.08 - ------------------------------------------------------------------------------- During 1996, the U.S. bank regulatory agencies issued an amendment to their risk-based capital guidelines to incorporate a measure for market risk in foreign exchange and commodity activities and in the trading of debt and equity instruments. The final rules, which must be implemented by January 1, 1998, are not expected to have a significant impact on Citicorp. From time to time, the FRB and the Federal Financial Institutions Examination Council 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. 43 SUMMARY OF FINANCIAL RESULTS
In Millions of Dollars 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------- Net Interest Revenue $ 10,940 $ 9,951 $ 8,911 $ 7,690 $ 7,456 Fees, Commissions, and Other Revenue 9,256 8,727 7,837 8,385 8,165 -------- -------- -------- -------- -------- TOTAL REVENUE 20,196 18,678 16,748 16,075 15,621 Provision for Credit Losses 1,926 1,991 1,881 2,600 4,146 Operating Expense 12,197 11,102 10,256 10,615 10,057 -------- -------- -------- -------- -------- INCOME BEFORE TAXES AND CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 6,073 5,585 4,611 2,860 1,418 Income Taxes 2,285 2,121 1,189 941 696 -------- -------- -------- -------- -------- INCOME BEFORE CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 3,788 3,464 3,422 1,919 722 Cumulative Effects of Accounting Changes(1) -- -- (56) 300 -- -------- -------- -------- -------- -------- NET INCOME $ 3,788 $ 3,464 $ 3,366 $ 2,219 $ 722 - ------------------------------------------------------------------=================================================
(1) Refers to the adoption of SFAS No. 112 in 1994 and the adoption of SFAS No. 109 in 1993. STATEMENT OF INCOME ANALYSIS NET INTEREST REVENUE (TAXABLE EQUIVALENT BASIS)(1)(2) 1996 1995 1994 - ------------------------------------------------------------------------------- NET INTEREST REVENUE (In Millions of Dollars) U.S. $ 6,965 $ 6,248 $ 5,945 Outside the U.S. 6,463 5,746 5,041 ------- ------- ------- TOTAL ADJUSTED(3) 13,428 11,994 10,986 Less Effect of Credit Card Securitization (2,448) (2,010) (2,049) ------- ------- ------- TOTAL $10,980 $ 9,984 $ 8,937 - --------------------------------------------------============================= AVERAGE INTEREST-EARNING ASSETS (In Billions of Dollars) U.S. $ 120.6 $ 124.8 $ 125.2 Outside the U.S. 137.5 122.8 111.5 ------- ------- ------- TOTAL ADJUSTED(3) 258.1 247.6 236.7 Less Effect of Credit Card Securitization (26.1) (23.6) (23.4) ------- ------- ------- TOTAL $ 232.0 $ 224.0 $ 213.3 - --------------------------------------------------============================= NET INTEREST MARGIN (%) U.S. 5.77 5.01 4.75 Outside the U.S. 4.70 4.68 4.52 TOTAL ADJUSTED(3) 5.20 4.84 4.64 Less Effect of Credit Card Securitization (0.47) (0.38) (0.45) ------- ------- ------- TOTAL 4.73 4.46 4.19 - --------------------------------------------------============================= (1) Includes allocations for capital and funding costs based on the location of the asset. (2) The taxable equivalent adjustment is based on the U.S. federal statutory rate of 35%. (3) Adjusted for the effect of credit card securitization. See page 48 for discussion. Net interest revenue increased 10% to $11.0 billion in 1996 and was up 12% in 1995, reflecting higher net rate spreads, including lower funding costs, and the funding benefits associated with higher equity levels, as well as an increase in interest-earning assets. Net interest revenue and net interest margin for all periods presented were reduced by the effect of credit card securitization. Adjusted for the effect of credit card securitization, net interest revenue increased 12% to $13.4 billion in 1996 and was up 9% in 1995. The adjusted net interest margin of 5.20% in 1996 was up from 4.84% in 1995 and 4.64% in 1994. Adjusted net interest margin in the U.S. of 5.77% in 1996 was up from 5.01% in 1995 and 4.75% in 1994. The improvement in 1996 reflected a decrease in the level of lower-yielding trading assets in Global Relationship Banking, increased spreads and higher volumes in the U.S. bankcards business as well as lower costs to carry cash-basis loans and OREO, partially offset by the $64 million SAIF assessment. The increase in 1995 in the U.S. adjusted net interest margin primarily reflected lower costs to carry cash-basis loans and OREO, decreases in the level of lower-yielding trading assets in Global Relationship Banking, as well as the reduction in deposit insurance assessment rates. Net interest revenue from activities outside the U.S. grew 12% in 1996 and 14% in 1995 and represented 48% of total adjusted net interest revenue in both 1996 and 1995, and 46% in 1994. The net interest margin outside the U.S. of 4.70% in 1996 remained relatively unchanged from 4.68% in 1995 and was up from 4.52% in 1994. Higher volumes in the Asia Pacific Consumer business in 1996 were offset by lower spreads in the Corporate Banking business attributable to competitive pressure. The increase in the net interest margin outside the U.S. in 1995 reflected higher volumes and favorable spreads in the Latin America Consumer business, as well as increased spreads in Corporate Banking in Europe and Asia Pacific, partially offset by a decrease in Corporate Banking in Latin America due to a favorable rate environment in Brazil in 1994. [The following table was represented as a bar graph in the printed material.] - -------------------------------------------------------------------------------- NET INTEREST INCOME Adjusted For Credit Card Securitization $ Billions NET INTEREST MARGIN % 1994 1995 1996 ---- ---- ---- Outside U.S. 5.0 5.7 6.4 U.S. 6.0 6.3 7.0 - -------------------------------------------------------------------------------- 44 The increase in adjusted average interest-earning assets of $10.5 billion in 1996 was mainly attributable to increases in worldwide consumer loans and in commercial loans and investment securities outside the U.S., partially offset by a decrease in trading account assets in the U.S. The increase in 1995 primarily reflected higher levels of consumer loans, partially offset by decreases in trading account assets and federal funds sold and resale agreements. FEES, COMMISSIONS, AND OTHER REVENUE FEE AND COMMISSION REVENUE In Millions of Dollars 1996 1995(1) 1994(1) - ----------------------------------------------------------------------------- CONSUMER: Developed Markets $2,249 $2,297 $2,299 Emerging Markets 1,087 935 831 ------ ------ ------ TOTAL CONSUMER 3,336 3,232 3,130 CORPORATE BANKING AND OTHER 1,984 1,828 1,865 ------ ------ ------ TOTAL ADJUSTED(2) 5,320 5,060 4,995 EFFECT OF CREDIT CARD SECURITIZATION 149 105 160 ------ ------ ------ TOTAL $5,469 $5,165 $5,155 - -------------------------------------------------============================ (1) Reclassified to conform to the 1996 presentation. (2) Adjusted for the effect of credit card securitization. See page 48 for discussion. Total fee and commission revenue of $5.5 billion for 1996 increased $304 million or 6% from 1995. Adjusted for the effect of credit card securitization, fee and commission revenue in 1996 of $5.3 billion was up $260 million or 5% from 1995. Consumer businesses 1996 fee and commission revenue of $3.3 billion was up $104 million or 3% from 1995, as continued double-digit growth in the emerging markets was offset by slight reductions in the developed markets. The growth in the emerging markets reflected increases across various consumer products, particularly credit card-related fees in Asia Pacific and investment-related fees in Latin America. In the developed markets, growth in Citibanking and Private Bank fees were more than offset by lower credit card-related fees. In the Corporate Banking businesses, fee and commission revenue of $2.0 billion for 1996 was up $156 million or 9% from 1995, reflecting higher business volumes in the emerging markets in corporate finance, transaction banking services, and trust, agency and custodial fees, as well as increased transaction banking services fee revenue in Global Relationship Banking. Total fee and commission revenue in 1995 of $5.2 billion was essentially unchanged from 1994 as the increase in the Consumer businesses was offset by a decline in the Corporate Banking businesses. Fee revenue in the Consumer businesses reflected continued growth in the emerging markets across a variety of consumer products, particularly Cards in Asia Pacific and Citibanking activities in Latin America. REVENUE FROM TRADING-RELATED ACTIVITIES Trading-related revenue is composed of the "Foreign Exchange" and "Trading Account" lines in the Statement of Income and also includes other amounts, principally reflected in net interest revenue. The accompanying table presents trading-related revenue by business sector, by trading activity, and by income statement line. TRADING-RELATED REVENUE In Millions of Dollars 1996 1995 1994(1) - ----------------------------------------------------------------------------- BY BUSINESS SECTOR: Corporate Banking Emerging Markets $ 746 $ 658 $ 539 Global Relationship Banking 909 1,079 656 ------ ------ ------- Total Corporate Banking 1,655 1,737 1,195 Consumer and Other 254 252 174 ------ ------ ------- TOTAL $1,909 $1,989 $ 1,369 - ----------------------------------------------=============================== BY TRADING ACTIVITY: Foreign Exchange(2) $ 932 $1,124 $ 689 Derivative(3) 544 472 395 Fixed Income(4) 150 65 (1) Other 283 328 286 ------ ------ ------- TOTAL $1,909 $1,989 $ 1,369 - ----------------------------------------------=============================== BY INCOME STATEMENT LINE: Foreign Exchange $ 864 $1,053 $ 573 Trading Account 637 559 158 Other(5) 408 377 638 ------ ------ ------- TOTAL $1,909 $1,989 $ 1,369 - ----------------------------------------------=============================== (1) Reclassified to conform to the 1996 presentation. (2) Foreign exchange activity includes foreign exchange spot, forward, and option contracts. (3) Derivative activity primarily includes interest rate and currency swaps, options, financial futures, equity, and commodity contracts. (4) Fixed income activity principally includes debt instruments including government and corporate debt as well as mortgage assets. (5) Primarily net interest revenue. Trading-related revenue totaled $1.9 billion in 1996, down $80 million or 4% from 1995. The decline is attributable to lower foreign exchange revenue in Global Relationship Banking, partially offset by improvements in derivative results in the Emerging Markets business and fixed income results in both businesses. Trading-related revenue improved in 1995 from the depressed 1994 results which were adversely affected by increasing interest rates and challenging market conditions. Foreign exchange revenue of $932 million in 1996 declined 17% from the strong 1995 level, when volatile foreign exchange markets in the major currencies provided substantial revenue opportunities. Foreign exchange revenue of $1.1 billion in 1995 rebounded from the weak 1994 level, benefiting from growth in customer volume and improved market conditions. Derivative revenue of $544 million in 1996 rose 15% from 1995 reflecting growth in customer demand, particularly in the Emerging Markets business. Derivative revenue of $472 million in 1995 compared with $395 million in 1994 reflecting strong customer demand across most geographies and improvement in Citicorp's market-making activities in North America. Fixed-income revenue in 1996 increased by $85 million compared with 1995 reflecting improved emerging markets debt-trading results, a higher level of commercial real estate securitization transactions, and improved government and corporate debt trading results in North America. Fixed-income revenue in 1995 improved $66 million compared with the depressed 1994 results which were adversely affected as interest rates increased. Levels of trading-related revenue may fluctuate in the future as a result of market conditions and other factors. 45 SECURITIES TRANSACTIONS In 1996, net gains from the sale of securities were $210 million, up $78 million, compared with $132 million in 1995 and $200 million in 1994. The 1996, 1995, and 1994 amounts included gains of $74 million, $55 million, and $71 million, respectively, realized on the sale of Brazilian interest bonds. The net gains for 1996 reflected gross realized gains of $261 million and gross realized losses of $51 million. The fair value of securities available for sale and the related adjustment to stockholders' equity may fluctuate over time based on market conditions and changes in market interest rates, as well as events and trends affecting specific securities. OTHER REVENUE In Millions of Dollars 1996 1995(1) 1994(1) - ------------------------------------------------------------------------------ Securitized Credit Card Receivables $ 907 $ 988 $ 955 Venture Capital 450 390 365 Affiliate Earnings 290 208 208 Net Asset Gains and Other Items 429 232 223 ------ ------ ------ TOTAL $2,076 $1,818 $1,751 - -------------------------------------------------============================= (1) Reclassified to conform to the 1996 presentation. Revenue in 1996 from securitized credit card receivables was down from 1995 as higher net credit loss rates were partially offset by an improved net interest margin and higher average securitized volumes. The increase in revenue in 1995 resulted from higher net interchange revenue and lower net credit loss rates, partially offset by a reduction in net interest revenue. The effect of credit card receivables securitization is discussed in more detail on page 48. In 1996 and 1995, venture capital revenue benefited from favorable conditions in the U.S. equity markets. Additionally, venture capital revenue in each year included gains related to public offerings by investees. Investments of venture capital subsidiaries are carried at fair value and revenue volatility can occur in the future, based on general market conditions as well as events and trends affecting specific venture capital investments. Affiliate earnings in 1996 were up from both 1995 and 1994, largely due to improved results in Latin America. Affiliate earnings in 1995 were flat to 1994. Net asset gains and other items in 1996 of $429 million increased $197 million from 1995 and included gains from the sale of an automated trading business, the disposition of Citicorp's holding in an Asian affiliate, the sale of the consumer mortgage portfolio in the U.K., and a gain arising from the Panama refinancing agreement, partially offset by investment writedowns of $100 million in Latin America. Revenue in 1995 of $232 million reflected net gains on the sale of real estate assets and a gain related to the completion of Ecuador's refinancing package, partially offset by investment writedowns of $95 million in Latin America. Revenue in 1994 of $223 million included recognition of the fair value of interest bonds received in connection with the Brazil refinancing agreement, largely offset by writedowns in the value of certain investments in Latin America. PROVISION AND ALLOWANCE FOR CREDIT LOSSES The provision for credit losses of $1.9 billion in 1996 declined $65 million or 3% from 1995, reflecting lower commercial net write-offs together with a decline in the commercial additional provision, partially offset by higher net write-offs in the Consumer business. The provision for credit losses increased in 1995 reflecting higher net write-offs in the Consumer businesses, partially offset by a lower commercial additional provision. NET WRITE-OFFS, ADDITIONAL PROVISION, AND PROVISION FOR CREDIT LOSSES In Millions of Dollars 1996 1995 1994 - ------------------------------------------------------------------------------- NET WRITE-OFFS (RECOVERIES): Consumer $ 3,120 $ 2,461 $ 2,287 Commercial(1) (2) 148 (209) ------- ------- ------- TOTAL ADJUSTED NET WRITE-OFFS 3,118 2,609 2,078 Effect of Credit Card Securitization (1,392) (917) (934) ------- ------- ------- TOTAL $ 1,726 $ 1,692 $ 1,144 - ------------------------------------------------=============================== ADDITIONAL PROVISION: Consumer $ 200 $ 200 $ 200 Commercial -- 81 136 ------- ------- ------- TOTAL $ 200 $ 281 $ 336 - ------------------------------------------------=============================== PROVISION FOR CREDIT LOSSES: Consumer $ 1,928 $ 1,744 $ 1,553 Commercial (2) 247 328 ------- ------- ------- TOTAL $ 1,926 $ 1,991 $ 1,881 - ------------------------------------------------=============================== (1) Included in commercial net write-offs (recoveries) in 1995 and 1994 are net recoveries of $18 million and $401 million related to cross-border refinancing agreements that were credited directly to the allowance for credit losses and did not affect the provision for credit losses. Consumer net write-offs, adjusted for the effect of credit card securitization, were $3.1 billion in 1996, up from $2.5 billion in 1995, primarily due to higher losses in the U.S. bankcards portfolio, which is broadly consistent with industry trends. Net write-offs also increased in Asia Pacific in both the Cards and Citibanking businesses, primarily as a result of business expansion. Net write-offs in Citibanking and the Private Bank in the developed markets were reduced from year-ago levels. The consumer provision for credit losses included additional provisions in excess of net write-offs of $200 million in 1996, 1995, and 1994 in response to loan growth and rising losses in the U.S. bankcards portfolio, as well as the changing economic environment in certain markets. Net write-offs and the total provision, particularly in Cards, are expected to increase from 1996 levels as a result of economic conditions, credit performance of the portfolios (including bankruptcies) and changes in portfolio levels. See "Consumer Portfolio Review" on page 34 for an additional discussion. Commercial net recoveries in 1996 of $2 million improved $150 million from 1995 due to higher recoveries, primarily attributable to the 46 refinancing agreements concluded with Panama, Slovenia, and Croatia (which aggregated $75 million) coupled with lower real estate-related gross write-offs. The real estate portfolio continued to benefit in 1996 from improving real estate market conditions. Commercial net write-offs in 1995 were low at $148 million (approximately 26 basis points of average commercial loans) and followed net recoveries of $209 million in 1994 which included a $318 million recovery attributable to the Brazil refinancing agreement completed in that year. During the three years ended December 31, 1996, there were no material credit losses related to derivatives and foreign exchange contracts, standby letters of credit or loan commitments. The commercial provision for credit losses included additional provisions in excess of net write-offs of $81 million and $136 million in 1995 and 1994, respectively. During 1997, commercial net write-offs may increase moderately from the low 1996 level. ALLOWANCE FOR CREDIT LOSSES All identified losses are immediately written off and the entire allowance is available to absorb all probable credit losses inherent in the portfolio. For analytical purposes only, Citicorp attributes the allowance to the following portions of its credit portfolios: ALLOWANCE FOR CREDIT LOSSES AND AS A PERCENTAGE OF LOANS 1996 1995 1994 ------------------------------------------------ At Year-End LOANS(1) ALLOWANCE(2) Allowance(2) Allowance(2) - ----------------------------------------------------------------------------- Consumer $111.8 $2,079 $1,944 $1,834 Ratio 1.86% 1.84% 1.90% Commercial 62.8 3,424 3,424 3,321 Ratio 5.46% 5.71% 5.95% ------ ------ ------ ------ TOTAL $174.6 $5,503 $5,368 $5,155 Ratio 3.15% 3.24% 3.38% - -------------------------------============================================== Reserve for Sold Consumer Portfolios(3) $ 473 $ 486 $ 422 - ----------------------------------------------------------------------------- (1) Loans, in billions of dollars, are net of unearned income. (2) In millions of dollars. (3) Refer to Note 1 to the consolidated financial statements for a discussion of Citicorp's obligations under certain loans sold with credit enhancements. The allowance for credit losses and the reserve for sold consumer portfolios totaled $6.0 billion as of December 31, 1996, up from $5.9 billion at December 31, 1995 and $5.6 billion at December 31, 1994. The increase in the allowance primarily reflected additional provisions of $200 million in 1996, $281 million in 1995, and $336 million in 1994. Refer to the discussion on page 46 regarding the additional provision. Uncertainty related to the economic and credit environment, as well as higher loan volumes in the worldwide Consumer portfolios, may result in further increases in the allowance for credit losses. OPERATING EXPENSE Total operating expense was $12.2 billion in 1996, up $1.1 billion or 10% from 1995. Excluding net OREO benefits, expense was up 9% from 1995. Consumer and Corporate Banking adjusted expense in the emerging markets increased 19%, while adjusted expense in the developed markets was up 4% from 1995. Total operating expense for 1995 of $10.3 billion was up $846 million or 8% from 1994. Excluding net OREO benefits, 1995 expense was up 9% from 1994. Total operating expense for 1996 was favorably impacted by the foreign currency translation effect of the generally stronger U.S. dollar while the impact on 1995 operating expense was adverse due to the weaker U.S. dollar. EMPLOYEE EXPENSE Employee expense was $6.2 billion in 1996, up $518 million or 9% from 1995. The expense growth primarily reflected salary increases, higher staff levels associated with business expansion to grow the franchise in both the Consumer and Corporate Banking businesses in the emerging markets, and higher performance-based compensation. Staff levels of 89,400 at December 31, 1996 were up 4,100 (3,000 in the emerging markets) from year-ago levels. Employee expense for 1995 of $5.7 billion was up $561 million or 11% from 1994, also reflecting business expansion and higher performance-based compensation. The cost of performance-based options is recognized over the period to estimated vesting dates and in full for options that have vested, by a charge to expense with an offsetting increase in common stockholders' equity. The recognition of expense associated with these options is reviewed at the end of each quarter and is accelerated if stock price movements are indicative that more rapid vesting is probable. In the fourth quarter 1996, $55 million of additional expense was recognized to reflect the vesting of options with a target price of $100 and an acceleration for options with a target price of $115. If the stock price continues to exceed anticipated levels as it has in the first quarter of 1997 through the date of this filing (February 25, 1997), the remaining expense associated with the $115 options will be accelerated, and Citicorp will recognize approximately $60 million of expense in excess of what would have been recognized in that quarter had no accelerations occurred. NET PREMISES AND EQUIPMENT EXPENSE Net premises and equipment expense was $1.8 billion in 1996, up $145 million or 9% from 1995. The increase primarily resulted from growth in the emerging markets businesses and the upgrading of 330 branches during the last three years to the Citibanking standard. Similarly, 1995 net premises and equipment expense was up $115 million or 7% from 1994. OTHER EXPENSE Other expense was $4.1 billion in 1996, up $432 million or 12% from 1995. The increase primarily reflected business expansion in the emerging markets, investment in operational and technological infrastructure to improve the delivery of products and customer service through various electronic systems, and reengineering efforts such as consolidating back-office operations. The expense growth was also attributed to higher volumes and account growth in the Cards, Citibanking, and transaction services businesses, and increased collection efforts in the Cards business, as well as lower Corporate Banking net OREO benefits. Other expense for 1995 of $3.7 billion was up $170 million or 5% from 1994. These increases primarily reflected business expansion in the emerging markets, spending in support of account growth and higher marketing costs in the U.S. bankcard business, investment spending in the Europe bankcard business, costs associated with higher volumes in the transaction services business, and continued investment in operational and technological infrastructure. These increases were partially offset by lower net OREO costs. 47 Citicorp, like other companies, is in the process of assessing and repairing its computer applications to ensure their functionality with respect to the "year 2000" millennium change. At present, Citicorp does not anticipate that material incremental costs will be incurred in any single future year. INCOME TAXES Income tax expense for 1996 was $2.3 billion, compared with $2.1 billion in 1995, and $1.2 billion in 1994, representing effective tax rates of 38% in both 1996 and 1995, and 26% in 1994. Income tax expense and the related effective tax rates for each of these periods reflected the recognition of deferred tax benefits of $56 million, $40 million, and $629 million, respectively. See Note 9 to the consolidated financial statements for further details. IMPACT OF CREDIT CARD RECEIVABLES SECURITIZATION The securitization of credit card receivables does not affect the earnings reported for each period. Gains on these sales are recorded monthly as realized over the term of each securitization transaction, which range up to 12 years. The revolving nature of the receivables sold and the monthly recognition of gains result in a pattern of gain recognition that is similar to the pattern that would be experienced if the receivables had not been sold. However, because securitization changes Citicorp's involvement from that of a lender to that of a loan servicer, it removes the receivables from Citicorp's balance sheet and affects the manner in which the revenue is reported in the income statement. For securitized receivables, amounts that would otherwise be reported as net interest revenue, as fee and commission revenue, and as credit losses on loans are instead reported as fee and commission revenue (for servicing fees) and as other revenue (for the remaining cash flows to which Citicorp is entitled, net of credit losses). Because credit losses are a component of these cash flows, Citicorp's revenues over the terms of these transactions may vary depending upon the credit performance of the securitized receivables. However, Citicorp's exposure to credit losses on the securitized receivables is contractually limited to these cash flows. During 1996, $5.3 billion of U.S. credit card receivables were sold, compared with $8.9 billion and $3.5 billion during 1995 and 1994, respectively. The total credit card receivables securitized, net of amortization as of December 31, 1996, were $25.2 billion, compared with $25.5 billion and $21.3 billion as of December 31, 1995 and 1994, respectively. The following table shows the net effects of securitization by showing the increase (decrease) in the reported consolidated statement of income line items, average balance sheet, return on assets, net interest margin, and consumer net credit loss ratio. In Millions of Dollars 1996 1995 1994 - ------------------------------------------------------------------------------ Net Interest Revenue $(2,448) $(2,010) $(2,049) Fee and Commission Revenue 149 105 160 Other Revenue 907 988 955 Provision for Credit Losses (1,392) (917) (934) ------- ------- ------- Net Income Impact of Securitization $ 0 $ 0 $ 0 - ---------------------------------------------================================= Average Assets (In Billions) $ (26) $ (24) $ (23) Return on Assets 0.12% 0.11% 0.11% Net Interest Margin (0.47) (0.38) (0.45) Consumer Net Credit Loss Ratio (0.73) (0.44) (0.52) - ------------------------------------------------------------------------------ The effect of securitization on net interest revenue and the provision for credit losses in 1996 compared with 1995 reflected wider spreads and higher loss ratios, while the effect in 1995 compared with 1994 reflected tighter spreads and lower loss ratios. 48 FINANCIAL REPORTING RESPONSIBILITY The management of Citicorp is responsible for the preparation and fair presentation of the financial statements and other financial information contained in this annual report. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances. Where amounts must be based on estimates and judgments, they represent the best estimates and judgments of management. The financial information appearing throughout this annual report is consistent with that in the financial statements. The management of Citicorp is also responsible for establishing and maintaining an effective internal control structure and procedures for financial reporting and safeguarding of assets. There are inherent limitations in the effectiveness of any system of internal control, and accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation. Management assessed Citicorp's internal control structure and procedures for financial reporting and safeguarding of assets as of December 31, 1996, based on recognized criteria for effective internal control. Based on this assessment, management believes that Citicorp maintained an effective internal control structure and procedures for financial reporting and safeguarding of assets as of December 31, 1996. The accounting policies and internal control structure are under the general oversight of the Citicorp and Citibank Boards of Directors, acting through the Audit Committees described on page 87. The committees are composed entirely of directors who are not officers or employees of Citicorp. The Chief Auditor of Citicorp and the Managing Director of Business Risk Review, who report directly to the Board of Directors, conduct an extensive program of audits and business risk reviews worldwide. In addition, KPMG Peat Marwick LLP, independent auditors, are engaged to audit our financial statements. KPMG Peat Marwick LLP obtain and maintain an understanding of Citicorp's internal control structure and procedures for financial reporting and conduct such tests and other auditing procedures as they consider necessary in the circumstances to express the opinion in their report that follows. KPMG Peat Marwick LLP have free access to the Audit Committees, with no members of management present, to discuss their audit and their findings as to the integrity of Citicorp's financial reporting and the adequacy of the internal control structure described above. /s/ John S. Reed John S. Reed Chairman /s/ Thomas E. Jones Thomas E. Jones Executive Vice President REPORT OF INDEPENDENT AUDITORS KPMG Peat Marwick LLP Certified Public Accountants The Board of Directors and Stockholders of Citicorp: We have audited the accompanying consolidated balance sheets of Citicorp and subsidiaries as of December 31, 1996 and 1995, the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996, and the related consolidated balance sheets of Citibank, N.A. and subsidiaries as of December 31, 1996 and 1995. These financial statements are the responsibility of Citicorp management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform these audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Citicorp and subsidiaries as of December 31, 1996 and 1995, the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, and the financial position of Citibank, N.A. and subsidiaries as of December 31, 1996 and 1995 in conformity with generally accepted accounting principles. As discussed in the statement of accounting policies and notes to the consolidated financial statements, Citicorp and Citibank adopted Statement of Financial Accounting Standards Nos. 112 and 115 in 1994. /s/ KPMG Peat Marwick LLP New York, New York January 21, 1997 49 FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF INCOME Citicorp and Subsidiaries In Millions of Dollars Except Per Share Amounts 1996 1995 1994 - ------------------------------------------------------------------------------- INTEREST REVENUE Interest and Fees on Loans $18,509 $17,808 $ 16,241 Interest on Deposits with Banks 858 770 895 Interest on Federal Funds Sold and Securities Purchased Under Resale Agreements 902 1,056 3,318 Interest and Dividends on Securities (Note 1) 1,770 1,544 1,266 Interest on Trading Account Assets 1,310 1,785 2,093 ------- ------- -------- 23,349 22,963 23,813 ------- ------- -------- INTEREST EXPENSE Interest on Deposits 8,974 8,902 8,996 Interest on Trading Account Liabilities 313 300 267 Interest on Purchased Funds and Other Borrowings (Note 1) 1,775 2,379 3,939 Interest on Long-Term Debt (Note 1) 1,347 1,431 1,700 ------- ------- -------- 12,409 13,012 14,902 ------- ------- -------- NET INTEREST REVENUE 10,940 9,951 8,911 ------- ------- -------- PROVISION FOR CREDIT LOSSES (NOTE 1) 1,926 1,991 1,881 ------- ------- -------- NET INTEREST REVENUE AFTER PROVISION FOR CREDIT LOSSES 9,014 7,960 7,030 ------- ------- -------- FEES, COMMISSIONS, AND OTHER REVENUE Fees and Commissions (Note 7) 5,469 5,165 5,155 Foreign Exchange 864 1,053 573 Trading Account 637 559 158 Securities Transactions (Notes 1 and 9) 210 132 200 Other Revenue 2,076 1,818 1,751 ------- ------- -------- 9,256 8,727 7,837 ------- ------- -------- OPERATING EXPENSE Salaries 4,880 4,445 4,029 Employee Benefits (Note 8) 1,364 1,281 1,136 ------- ------- -------- Total Employee Expense 6,244 5,726 5,165 Net Premises and Equipment Expense (Notes 2 and 12) 1,843 1,698 1,583 Other Expense 4,110 3,678 3,508 ------- ------- -------- 12,197 11,102 10,256 ------- ------- -------- INCOME BEFORE TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 6,073 5,585 4,611 INCOME TAXES (NOTE 9) 2,285 2,121 1,189 ------- ------- -------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 3,788 3,464 3,422 Cumulative Effect of Accounting Change-- Employers' Accounting for Postemployment Benefits (Note 8) -- -- (56) ------- ------- -------- NET INCOME $ 3,788 $ 3,464 $ 3,366 - ---------------------------------------------------============================ INCOME APPLICABLE TO COMMON STOCK $ 3,631 $ 3,126 $ 3,010 ------- ------- -------- EARNINGS PER SHARE (NOTE 10) ON COMMON AND COMMON EQUIVALENT SHARES Income Before Cumulative Effect of Accounting Change $ 7.50 $ 7.21 $ 7.15 Cumulative Effect of Accounting Change -- -- (0.12) ------- ------- -------- NET INCOME $ 7.50 $ 7.21 $ 7.03 ------- ------- -------- ASSUMING FULL DILUTION Income Before Cumulative Effect of Accounting Change $ 7.42 $ 6.48 $ 6.40 Cumulative Effect of Accounting Change -- -- (0.11) ------- ------- -------- NET INCOME $ 7.42 $ 6.48 $ 6.29 - ---------------------------------------------------============================ Accounting policies and explanatory notes on pages 55 through 74 form an integral part of the financial statements. 50 CONSOLIDATED BALANCE SHEET Citicorp and Subsidiaries In Millions of Dollars DECEMBER 31, 1996 December 31, 1995 - -------------------------------------------------------------------------------- ASSETS Cash and Due from Banks $ 6,905 $ 5,723 Deposits at Interest with Banks 11,648 9,028 Securities, at Fair Value (Note 1) Available for Sale 26,062 18,213 Venture Capital 2,124 1,854 Trading Account Assets (Note 1) 30,785 32,093 Federal Funds Sold and Securities Purchased Under Resale Agreements 11,133 8,113 Loans, Net (Note 1) Consumer 111,847 105,643 Commercial 62,765 59,999 --------- --------- Loans, Net of Unearned Income 174,612 165,642 Allowance for Credit Losses (5,503) (5,368) --------- --------- Total Loans, Net 169,109 160,274 Customers' Acceptance Liability 2,077 1,542 Premises and Equipment, Net (Note 2) 4,667 4,339 Interest and Fees Receivable 3,068 2,914 Other Assets (Notes 1, 3, 8, and 9) 13,440 12,760 --------- --------- TOTAL $ 281,018 $ 256,853 - ----------------------------------------------================================== LIABILITIES Non-Interest-Bearing Deposits in U.S. Offices $ 14,867 $ 13,388 Interest-Bearing Deposits in U.S. Offices 40,254 36,700 Non-Interest-Bearing Deposits in Offices Outside the U.S. 9,891 8,164 Interest-Bearing Deposits in Offices Outside the U.S. 119,943 108,879 --------- --------- Total Deposits 184,955 167,131 Trading Account Liabilities (Note 1) 22,003 18,274 Purchased Funds and Other Borrowings (Note 1) 18,191 16,334 Acceptances Outstanding 2,104 1,559 Accrued Taxes and Other Expense (Note 9) 5,992 5,719 Other Liabilities (Note 8) 8,201 9,767 Long-Term Debt (Note 1) 18,850 18,488 STOCKHOLDERS' EQUITY Preferred Stock (Without par value) (Note 4) 2,078 3,071 Common Stock ($1.00 par value) (Note 5) 506 461 Issued Shares: 506,298,235 in 1996 and 461,319,265 in 1995 Surplus 6,595 5,702 Retained Earnings 14,303 12,190 Net Unrealized Gains--Securities Available for Sale (Note 1) 676 132 Foreign Currency Translation (486) (437) Common Stock in Treasury, at Cost (2,950) (1,538) Shares: 43,081,217 in 1996 and 34,030,205 in 1995 --------- --------- Total Stockholders' Equity 20,722 19,581 --------- --------- TOTAL $ 281,018 $ 256,853 - ----------------------------------------------================================== Accounting policies and explanatory notes on pages 55 through 74 form an integral part of the financial statements. 51 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Citicorp and Subsidiaries
In Millions of Dollars 1996 1995 1994 - --------------------------------------------------------------------------------------------- PREFERRED STOCK (NOTE 4) Balance at Beginning of Year $ 3,071 $ 4,187 $ 3,887 Issuance of Stock -- 400 400 Conversion of Convertible Preferred Stock, Series 12 (590) -- -- Conversions of Convertible Preferred Stock, Series 13 (403) (257) -- Redemptions of Conversion Preferred Stock, Series 15 -- (1,134) -- Redemption and Retirement of Other Preferred Stock -- (125) (100) -------- -------- -------- BALANCE AT END OF YEAR $ 2,078 $ 3,071 $ 4,187 - -------------------------------------------------------------================================ COMMON STOCK ($1.00 PAR VALUE) (NOTE 5) Balance at Beginning of Year--Shares: 461,319,265 in 1996, 420,589,459 in 1995, and 412,017,300 in 1994 $ 461 $ 421 $ 412 Issuance of 36,875,000 Shares on Conversion of Convertible Preferred Stock, Series 12 37 -- -- Issuance of 6,535,926 Shares on Conversions of Convertible Preferred Stock, Series 13 -- 6 -- Issuance of 21,146,076 Shares on Redemptions of Conversion Preferred Stock, Series 15 -- 21 -- Issuance of Stock under Dividend Reinvestment and Common Stock Purchase Plan Shares: 7,882 in 1996, 1,138,166 in 1995, and 1,214,058 in 1994 -- 1 1 Issuance of Stock under Employee Benefit Plans (Note 8) Shares: 8,096,088 in 1996, 11,909,638 in 1995, and 7,358,101 in 1994 8 12 8 -------- -------- -------- BALANCE AT END OF YEAR--Shares: 506,298,235 in 1996, 461,319,265 in 1995, and 420,589,459 in 1994 $ 506 $ 461 $ 421 - -------------------------------------------------------------================================ SURPLUS Balance at Beginning of Year $ 5,702 $ 4,194 $ 3,898 Issuance of Stock on Conversion of Convertible Preferred Stock, Series 12 553 -- -- Issuance of Stock on Conversions of Convertible Preferred Stock, Series 13 -- 115 -- Issuance of Stock on Redemptions of Conversion Preferred Stock, Series 15 -- 855 -- Issuance of Stock under Dividend Reinvestment and Common Stock Purchase Plan 12 53 49 Issuance of Stock under Employee Benefit Plans and Related Tax Benefits (Notes 8 and 9) 209 405 202 Amortization Related to Employee Benefit Plans (Note 8) 119 96 57 Preferred Stock Issuance Cost -- (10) (12) Other -- (6) -- -------- -------- -------- BALANCE AT END OF YEAR $ 6,595 $ 5,702 $ 4,194 - -------------------------------------------------------------================================ RETAINED EARNINGS Balance at Beginning of Year $ 12,190 $ 9,561 $ 6,729 Net Income 3,788 3,464 3,366 Cash Dividends Declared--Common (Note 5) (850) (492) (176) Cash Dividends Declared--Preferred (Note 4) (162) (343) (358) Adjustment for Treasury Shares Issued on Conversions of Convertible Preferred Stock, Series 13 (663) -- -- -------- -------- -------- BALANCE AT END OF YEAR $ 14,303 $ 12,190 $ 9,561 - -------------------------------------------------------------================================ NET UNREALIZED GAINS--SECURITIES AVAILABLE FOR SALE (NOTE 1) Balance at Beginning of Year $ 132 $ 278 $ -- Net Unrealized Gains Upon Adoption of SFAS No. 115 -- -- 365 Effect of Transfer from Securities Held to Maturity to Securities Available for Sale -- (260) -- Change in Net Unrealized Gains--Securities Available for Sale 544 114 (87) -------- -------- -------- BALANCE AT END OF YEAR $ 676 $ 132 $ 278 - -------------------------------------------------------------================================ FOREIGN CURRENCY TRANSLATION Balance at Beginning of Year $ (437) $ (471) $ (580) Change in Foreign Currency Translation (49) 34 109 -------- -------- -------- BALANCE AT END OF YEAR $ (486) $ (437) $ (471) - -------------------------------------------------------------================================ COMMON STOCK IN TREASURY, AT COST Balance at Beginning of Year--Shares: 34,030,205 in 1996, 25,508,610 in 1995, and 25,527,133 in 1994 $ (1,538) $ (401) $ (393) Repurchase of 36,121,889 Shares in 1996 and 23,060,373 Shares in 1995 (3,075) (1,526) -- Delivery of 22,077,369 Shares in 1996 and 7,550,978 Shares in 1995 on Conversions of Convertible Preferred Stock, Series 13 1,066 136 -- Delivery of 6,399,064 Shares on Redemptions of Conversion Preferred Stock, Series 15 -- 258 -- Other Transactions, including issuances under Employee Benfit Plans (Note 8) Shares: 4,993,508 in 1996, (588,736) in 1995, and (18,523) in 1994 597 (5) (8) -------- -------- -------- BALANCE AT END OF YEAR--Shares: 43,081,217 in 1996, 34,030,205 in 1995, and 25,508,610 in 1994 $ (2,950) $ (1,538) $ (401) - -------------------------------------------------------------================================ TOTAL STOCKHOLDERS' EQUITY Balance at Beginning of Year $ 19,581 $ 17,769 $ 13,953 Changes During the Year, Net 1,141 1,812 3,816 -------- -------- -------- BALANCE AT END OF YEAR $ 20,722 $ 19,581 $ 17,769 - -------------------------------------------------------------================================
Accounting policies and explanatory notes on pages 55 through 74 form an integral part of the financial statements. 52 CONSOLIDATED STATEMENT OF CASH FLOWS Citicorp and Subsidiaries
In Millions of Dollars 1996 1995 1994 - -------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3,788 $ 3,464 $ 3,366 --------- --------- --------- Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Provision for Credit Losses 1,926 1,991 1,881 Depreciation and Amortization of Premises and Equipment 706 636 571 Amortization of Goodwill 46 49 47 Provision for Deferred Taxes 425 (70) (299) Cumulative Effects of Accounting Change -- -- 56 Venture Capital Activity (270) 155 (520) Net Gain on Sale of Securities (210) (132) (200) Net (Gain) Loss on the Sale of Subsidiaries and Affiliates (249) 6 (12) Changes in Accruals and Other, Net (2,355) 2,381 (3,159) Net Decrease (Increase) in Trading Account Assets 1,308 6,782 (15,092) Net Increase (Decrease) in Trading Account Liabilities 3,729 (4,108) 16,904 --------- --------- --------- Total Adjustments 5,056 7,690 177 --------- --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 8,844 11,154 3,543 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Deposits at Interest with Banks (2,620) (2,166) (113) Securities--Available for Sale Purchases (39,743) (21,198) (20,422) Proceeds from Sales 16,145 9,495 10,928 Maturities 16,662 11,853 7,185 Securities--Held to Maturity Purchases -- (6,852) (9,645) Maturities -- 7,149 11,722 Net (Increase) Decrease in Federal Funds Sold and Securities Purchased Under Resale Agreements (3,020) (1,118) 344 Net Increase in Loans (120,950) (107,853) (108,473) Proceeds from Sales of Loans and Credit Card Receivables 109,621 92,884 90,184 Capital Expenditures on Premises and Equipment (1,392) (1,189) (941) Proceeds from Sales of Premises and Equipment, Subsidiaries and Affiliates, and Other Real Estate Owned ("OREO") 1,360 1,468 2,393 --------- --------- --------- NET CASH USED IN INVESTING ACTIVITIES (23,937) (17,527) (16,838) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net Increase in Deposits 17,824 11,405 10,637 Net Increase (Decrease) in Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,092 (4,193) 2,448 Proceeds from Issuance of Commercial Paper and Funds Borrowed with Original Maturities of Less Than One Year 643,922 514,298 402,773 Repayment of Commercial Paper and Funds Borrowed with Original Maturities of Less Than One Year (644,235) (514,656) (400,471) Proceeds from Issuance of Long-Term Debt 4,627 4,669 4,576 Repayment of Long-Term Debt (4,241) (4,150) (5,039) Proceeds from Issuance of Preferred Stock -- 390 388 Redemption of Preferred Stock -- (125) (100) Proceeds from Issuance of Common Stock 537 416 226 Treasury Stock Transactions (3,069) (1,531) (5) Dividends Paid (1,012) (835) (533) --------- --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 16,445 5,688 14,900 --------- --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS (170) (62) 29 --------- --------- --------- Net Increase (Decrease) in Cash and Due from Banks 1,182 (747) 1,634 Cash and Due from Banks at Beginning of Year 5,723 6,470 4,836 --------- --------- --------- CASH AND DUE FROM BANKS AT END OF YEAR $ 6,905 $ 5,723 $ 6,470 - ---------------------------------------------------------=================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash Paid During the Year for: Interest $ 11,373 $ 12,037 $ 12,977 Income Taxes 1,888 1,723 1,522 NON-CASH INVESTING ACTIVITIES Transfers from Loans to OREO and Assets Pending Disposition 632 730 1,152 - --------------------------------------------------------------------------------------------
Accounting policies and explanatory notes on pages 55 through 74 form an integral part of the financial statements. 53 CONSOLIDATED BALANCE SHEET Citibank, N.A. and Subsidiaries
In Millions of Dollars DECEMBER 31, 1996 December 31, 1995 - ------------------------------------------------------------------------------------ ASSETS Cash and Due from Banks $ 5,947 $ 4,842 Deposits at Interest with Banks 12,822 9,256 Securities, at Fair Value Available for Sale 21,784 14,256 Venture Capital 1,774 1,457 Trading Account Assets 27,259 28,407 Federal Funds Sold and Securities Purchased Under Resale Agreements 8,181 6,676 Loans (Net of unearned income of $1,030 in 1996 and $1,122 in 1995) 143,984 136,693 Less: Allowance for Credit Losses (4,382) (4,403) --------- --------- Loans, Net 139,602 132,290 Customers' Acceptance Liability 2,077 1,542 Premises and Equipment, Net 3,538 3,386 Interest and Fees Receivable 2,121 1,940 Other Assets 8,134 7,422 --------- --------- TOTAL $ 233,239 $ 211,474 - -------------------------------------------------------============================= LIABILITIES Non-Interest-Bearing Deposits in U.S. Offices $ 12,826 $ 10,959 Interest-Bearing Deposits in U.S. Offices 23,977 22,676 Non-Interest-Bearing Deposits in Offices Outside the U.S. 9,605 7,955 Interest-Bearing Deposits in Offices Outside the U.S. 118,228 108,018 --------- --------- Total Deposits 164,636 149,608 Trading Account Liabilities 20,795 17,544 Purchased Funds and Other Borrowings 12,334 10,106 Acceptances Outstanding 2,104 1,559 Accrued Taxes and Other Expense 3,588 3,263 Other Liabilities 4,104 5,300 Long-Term Debt and Subordinated Notes 9,380 9,128 STOCKHOLDER'S EQUITY (NOTE 14) Capital Stock ($20.00 par value) 751 751 Outstanding Shares: 37,534,553 in 1996 and 1995 Surplus 7,120 6,744 Retained Earnings 8,426 7,972 Net Unrealized Gains--Securities Available for Sale 588 55 Foreign Currency Translation (587) (556) --------- --------- Total Stockholder's Equity 16,298 14,966 --------- --------- TOTAL $ 233,239 $ 211,474 - -------------------------------------------------------=============================
Accounting policies and explanatory notes on pages 55 through 74 form an integral part of the financial statements. 54 STATEMENT OF ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the accounts of Citicorp, its wholly owned subsidiary, Citibank, N.A., and their majority-owned subsidiaries, after the elimination of all material intercompany transactions. Twenty percent to 50%-owned affiliates, other than venture capital investments, are accounted for under the equity method, and the pro rata share of their income (loss) is included in other revenue. Income from investments in less than 20%-owned companies is recognized when dividends are received. Gains and losses on disposition of branches, subsidiaries, affiliates, and other investments and charges for management's estimate of impairment in value that is other than temporary, such that recovery of the carrying amount is deemed unlikely, are included in other revenue. Foreign currency translation, which represents the effects of translating into U.S. dollars, at current exchange rates, financial statements of operations outside the U.S. with a functional currency other than the U.S. dollar, is included in stockholders' equity along with related hedge and tax effects. The effects of translating non-dollar financial statements of operations with the U.S. dollar as the functional currency, including those in highly inflationary environments, are included in other revenue along with related hedge effects. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. SECURITIES AND TRADING ACCOUNT ACTIVITIES Effective January 1, 1994, Citicorp adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities," and reported the cumulative effect of the change in stockholders' equity (see Note 1). Under SFAS No. 115, debt securities that are expected to be held to maturity are carried at cost, adjusted for amortization of premiums to the earliest call date and accretion of discounts to maturity. Marketable equity securities and debt securities available for sale are carried at fair value, with unrealized gains and losses reported in a separate component of stockholders' equity net of applicable income taxes. In the 1995 fourth quarter Citicorp elected to transfer securities previously classified as held to maturity into the available-for-sale category, in accordance with guidelines issued by the Financial Accounting Standards Board which permitted such a one-time election. Realized gains and losses on sales of securities are included in earnings on a specific identified cost basis. Citicorp's venture capital subsidiaries include subsidiaries registered as Small Business Investment Companies and those other subsidiaries that engage exclusively in venture capital activities. Venture capital investments are carried at fair value, with changes in fair value recognized in other revenue. The fair values of publicly-traded securities held by these subsidiaries are generally based upon quoted market prices. In certain situations, including thinly-traded securities, large-block holdings, restricted shares or other special situations, the quoted market price is adjusted to produce an estimate of the attainable fair value for the securities. For securities that are not publicly traded, estimates of fair value are made based upon review of the investee's financial results, condition, and prospects. Trading account assets include securities and money market instruments held in anticipation of short-term market movements and for resale to customers, and are valued at market. Gains and losses, both realized and unrealized, are included in trading account revenue. Obligations to deliver securities sold but not yet purchased are also valued at market and included in trading account liabilities. Trading account activities also include derivative and foreign exchange products. Derivative trading positions are carried at fair value, with realized and unrealized gains and losses included in trading account revenue. Foreign exchange trading positions are valued at prevailing market rates on a present value basis, and the resulting gains and losses are included in foreign exchange revenue. For other than short-term derivative and foreign exchange contracts, Citicorp defers, at the inception of each contract, an appropriate portion of the initial market value attributable to ongoing costs, such as servicing and credit considerations, and amortizes this amount into trading account or foreign exchange revenue over the life of the contract. Revaluation gains (losses) on derivative and foreign exchange contracts are reported gross in trading account assets (liabilities), reduced by the effects of qualifying netting agreements with counterparties. RISK MANAGEMENT ACTIVITIES Citicorp manages its exposures to market rate movements outside of its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products including interest rate swaps, futures, forwards, and purchased option positions such as interest rate caps, floors, and collars. These end-user derivative contracts include qualifying hedges and qualifying positions that modify the interest rate characteristics of specified financial instruments. Derivative instruments not qualifying as end-user positions are treated as trading positions and marked-to-market. To qualify as a hedge, the swap, futures, forward, or purchased option position must be designated as a hedge and effective in reducing the market risk of an existing asset, liability, firm commitment, or identified anticipated transaction which is probable to occur. Effectiveness of the hedge is evaluated on an initial and ongoing basis using statistical calculations of correlation. To qualify as a position modifying the interest rate characteristics of an instrument, there must be a documented and approved objective to synthetically alter the market risk characteristics of specified items or anticipated transactions, and the swap, forward or purchased option position must be designated as such a position and effective in accomplishing the underlying objective. The foregoing criteria are applied on a decentralized basis, consistent with the level at which market risk is managed, but are subject to 55 various limits and controls. If a contract is later found to be ineffective, it no longer qualifies as an end-user position and any excess gains and losses attributable to such ineffectiveness as well as subsequent changes in fair value are recognized in earnings. End-user contracts are primarily employed in association with on-balance sheet instruments accounted for at amortized cost, including loans, deposits, and long-term debt, and with credit card securitizations. These qualifying end-user contracts are accounted for consistent with the risk management strategy as follows. Amounts payable and receivable on interest rate swaps and options are accrued according to the contractual terms and included currently in the related revenue and expense category as an element of the yield on the associated instrument (including the amortization of option premiums). Amounts paid or received over the life of futures contracts are deferred until the contract is closed; accumulated deferred amounts on futures contracts and amounts paid or received at settlement of forward contracts are accounted for as elements of the carrying value of the associated instrument, affecting the resulting yield. End-user contracts related to instruments that are carried at fair value are also carried at fair value, with amounts payable and receivable accounted for as an element of the yield on the associated instrument. When related to securities available for sale, fair value adjustments are reported in stockholders' equity, net of tax. If an end-user derivative contract is terminated, any resulting gain or loss is deferred and amortized over the original term of the agreement provided that the effectiveness criteria have been met. If the underlying designated items are no longer held, or if an anticipated transaction is no longer likely to occur, any previously unrecognized gain or loss on the derivative contract is recognized in earnings and the contract is subsequently accounted for at fair value. Foreign exchange contracts which qualify under applicable accounting guidelines as hedges of foreign currency exposures, including net capital investments outside the U.S., are revalued at the spot rate with any forward premium or discount recognized over the life of the contract in net interest revenue. Gains and losses on foreign exchange contracts which qualify as a hedge of a firm commitment are deferred and recognized as part of the measurement of the related transaction, unless deferral of a loss would lead to recognizing losses on the transaction in later periods. LOANS The consumer loan category represents loans managed by Citicorp's Consumer businesses. Consumer loans are generally written off not 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 by loan product and by country. The policy for suspending accruals of interest on consumer loans varies depending on the terms, security and loan loss experience characteristics of each product, and in consideration of write-off criteria in place. The commercial loan category represents loans managed by Citicorp's Corporate Banking businesses. Commercial loans are identified as impaired and placed on a cash (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. Any interest accrued is reversed and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectibility of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan. Impaired commercial loans are written down to the extent that principal is judged to be uncollectible and, in the case of impaired collateral-dependent loans where repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of cost or collateral value. Cash-basis loans are returned to an accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms. Loans include Citicorp's share of aggregate rentals on lease financing transactions and residual values net of related unearned income. Lease financing transactions substantially represent direct financing leases and also include leveraged leases. Unearned income is amortized under a method which substantially results in an approximate level rate of return when related to the unrecovered lease investment. Gains and losses from sales of residual values of leased equipment are included in other revenue. ALLOWANCE FOR CREDIT LOSSES Additions to the allowance are made by means of the provision for credit losses charged to expense. Credit losses are deducted from the allowance, and subsequent recoveries are added. Securities received in exchange for loan claims in debt restructurings are initially recorded at fair value, with any gain or loss reflected as a recovery or charge-off to the allowance, and are subsequently accounted for in accordance with SFAS No. 115. The amount of the provision is determined based on management's assessment of actual past and expected future net credit losses, business and economic conditions, the character, quality and performance of the portfolios, and other pertinent indicators. This evaluation encompasses all lending activities and also includes an assessment of the ability of borrowers with foreign currency obligations to obtain the foreign exchange necessary for orderly debt servicing. The resulting allowance is deemed adequate to absorb all credit losses inherent in the portfolio. Effective January 1, 1995, Citicorp adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" as amended by SFAS No. 118 (see Note 1), which requires that impairment of larger-balance, non-homogenous loans be measured by comparing the net carrying amount of the loan to the present value of the expected future cash flows discounted at the loan's effective rate, the secondary market value of the loan, or the fair value of the collateral for collateral-dependent loans. A valuation allowance is established if necessary within 56 the overall allowance for credit losses. Smaller balance, homogenous loans, including consumer mortgage, installment, revolving credit and most other consumer loans, are collectively evaluated for impairment. Adoption of the new standard had no impact on the level of the overall allowance for credit losses or on operating results, and does not affect Citicorp's policies regarding write-offs, recoveries, or income recognition. In addition to the allowance for credit losses, Citicorp maintains separate reserves for anticipated losses on portfolios of consumer receivables that have been sold with recourse. OTHER REAL ESTATE OWNED Upon repossession, loans are adjusted if necessary to the estimated fair value of the underlying collateral and transferred to Other Real Estate Owned ("OREO"), which is reported in other assets net of a valuation allowance for selling costs and net declines in value as appropriate. EMPLOYEE BENEFITS Employee benefits expense includes prior and current service costs of pension and other postretirement benefit plans, which are accrued on a current basis, contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards, and costs of other employee benefits. Citicorp adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," effective January 1, 1994 (see Note 8). There are no charges to earnings upon the grant or exercise of fixed stock options or the subscription for or purchase of stock under stock purchase agreements. Compensation expense related to performance-based stock options is recorded over the period to the estimated vesting dates. Citicorp's accounting for its stock-based employee compensation plans is unaffected by SFAS No. 123, "Accounting for Stock-Based Compensation," which became effective in 1996 (see Note 8). Upon issuance of previously unissued shares under employee plans, proceeds received in excess of par value are credited to surplus. Upon issuance of treasury shares, the difference between the proceeds received and the average cost of treasury shares is recorded in surplus. INCOME TAXES Deferred taxes are recorded for the future tax consequences of events that have been recognized in the financial statements or tax returns, based upon enacted tax laws and rates, including an appropriate provision for taxes on undistributed income of subsidiaries and affiliates. Deferred tax assets are recognized subject to management's judgment that realization is more likely than not. EARNINGS PER SHARE Earnings per share on common and common equivalent shares is based on net income after deducting preferred stock dividends and reflects any dilutive effects of stock options, stock purchase agreements, conversion preferred stock, forward purchase contracts on common stock, and shares issuable under deferred stock awards. The fully diluted computation also considers the dilutive effects of convertible preferred stock. The dilutive effects of stock options and stock purchase agreements are computed using the treasury-stock method and included in the computation as common equivalent shares. Tandem options, granted prior to 1988 giving the employee the alternative to purchase either unrestricted common stock or book value shares at fixed prices (see Notes 5 and 10), are included in the computation based on the economically preferable alternative to the employee, using the treasury-stock method if unrestricted common shares and the two-class method if book value shares. Under the two-class method, book value shares under option are added to the number of shares used in the computation, but only as to the undistributed portion of earnings. Prior to redemption or conversion into common shares, Conversion Preferred Stock, Series 15 is included in the computation as common equivalent shares and convertible preferred stock is included in the fully diluted computation, using the if-converted method, if dilutive. Shares deliverable under forward purchase contracts on Citicorp common stock (see Note 5) are included in common equivalent shares to the extent that the forward price exceeds the market price of the common stock as of the reporting date. Shares receivable by Citicorp under forward contracts are not deducted from the number of shares used in the computation until the final number of shares to be received has been determined. Shares issuable under deferred stock awards are included in the computation, as common equivalent shares if unrestricted common stock and under the two-class method if book value shares, and the amount of after-tax dividend equivalents on shares issuable is added back to income applicable to common stock. CASH FLOWS Cash flows from risk management activities are classified in the same category as the related assets and liabilities. Cash equivalents are defined as those amounts included in cash and due from banks. 57 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. FINANCIAL INSTRUMENTS Citicorp provides a wide variety of financial instruments as products to its customers, and it also uses these instruments in connection with its own activities. Following are explanatory notes regarding financial assets and liabilities, off-balance sheet financial instruments, concentrations of credit risk, and the estimated fair value of financial instruments. Collateral requirements are made on a case-by-case evaluation of each customer and product, and may include cash, securities, receivables, real estate, and other assets. A. FINANCIAL ASSETS AND LIABILITIES LOANS In Millions of Dollars at Year-End 1996 1995 - ------------------------------------------------------------------------------- CONSUMER IN U.S. OFFICES Mortgage and Real Estate(1)(2)(3) $ 23,421 $ 22,604 Installment, Revolving Credit, and Other 36,285 32,429 --------- --------- 59,706 55,033 - ------------------------------------------------------------------------------- IN OFFICES OUTSIDE THE U.S. Mortgage and Real Estate(1)(4) 18,379 18,240 Installment, Revolving Credit, and Other 33,905 32,521 Lease Financing 754 765 --------- --------- 53,038 51,526 - ------------------------------------------------------------------------------- 112,744 106,559 Unearned Income (897) (916) --------- --------- CONSUMER LOANS--NET OF UNEARNED INCOME $ 111,847 $ 105,643 - -------------------------------------------------------======================== COMMERCIAL IN U.S. OFFICES Commercial and Industrial(5) $ 8,747 $ 9,509 Mortgage and Real Estate(1) 2,977 4,681 Loans to Financial Institutions 1,035 365 Lease Financing 3,017 3,239 --------- --------- 15,776 17,794 - ------------------------------------------------------------------------------- IN OFFICES OUTSIDE THE U.S. Commercial and Industrial(5) 36,901 32,966 Mortgage and Real Estate(1) 1,815 1,901 Loans to Financial Institutions 4,837 4,229 Governments and Official Institutions 2,252 2,180 Lease Financing 1,294 1,098 --------- --------- 47,099 42,374 - ------------------------------------------------------------------------------- 62,875 60,168 Unearned Income (110) (169) --------- --------- COMMERCIAL LOANS--NET OF UNEARNED INCOME $ 62,765 $ 59,999 - -------------------------------------------------------======================== (1) Loans secured primarily by real estate. (2) Includes $3.8 billion in 1996 and 1995 of commercial real estate loans related to community banking and private banking activities. (3) Includes $1.1 billion in 1996 and $3.0 billion in 1995 of residential mortgage loans held for sale and carried at the lower of aggregate cost or market value. (4) Includes $2.7 billion in 1996 and $2.5 billion in 1995 of loans secured by commercial real estate. (5) Includes loans not otherwise separately categorized. CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES In Millions of Dollars 1996 1995 1994 - ------------------------------------------------------------------------------- Balance at Beginning of Year $ 5,368 $ 5,155 $ 4,379 ADDITIONS Provision for Credit Losses 1,926 1,991 1,881 DEDUCTIONS Consumer Credit Losses 2,172 1,962 1,714 Consumer Credit Recoveries (444) (418) (361) ------- ------- ------- Net Consumer Credit Losses 1,728 1,544 1,353 Commercial Credit Losses 266 376 369 Commercial Credit Recoveries(1) (268) (228) (578) ------- ------- ------- Net Commercial Credit (Recoveries) Losses (2) 148 (209) Other--Net(2) (65) (86) 39 ------- ------- ------- BALANCE AT END OF YEAR $ 5,503 $ 5,368 $ 5,155 - ----------------------------------------------------=========================== (1) Includes $318 million in 1994 resulting from the exchange of Brazil outstandings for marketable securities, pursuant to the refinancing agreement completed in 1994. (2) Includes net transfers (to) from the reserve for sold Consumer portfolios and foreign currency translation effects. The following table presents information about impaired loans. Impaired loans are those on which Citicorp believes it is not probable that it will be able to collect all amounts due according to the contractual terms of the loan, excluding smaller-balance homogeneous loans that are evaluated collectively for impairment, and are carried on a cash basis: In Millions of Dollars at Year-End 1996 1995 - -------------------------------------------------------------------------------- Impaired Commercial Loans $ 868 $1,512 Other Impaired Loans(1) 360 424 ------ ------ Total Impaired Loans(2) $1,228 $1,936 - -------------------------------------------------------------------------------- Impaired Loans with Valuation Allowances $ 186 $ 175 Total Valuation Allowances(3) 32 36 - -------------------------------------------------------------------------------- During the Year: Average Balance of Impaired Loans $1,657 $2,178 Interest Income Recognized on Impaired Loans 116 112 - -------------------------------------------------------------------------------- (1) Primarily commercial real estate loans related to community and private banking activities. (2) At year-end 1996, approximately 44% of these loans were measured for impairment using the fair value of the collateral, with the remaining 56% measured using the present value of the expected future cash flows, discounted at the loan's effective interest rate, compared with approximately 58% and 42%, respectively, at year-end 1995. (3) Included in the overall allowance for credit losses. 58
SECURITIES 1996 1995 ------------------------------------------- ------------------------------------------- Gross Gross Gross Gross Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair In Millions of Dollars at Year-End Cost Gains Losses Value Cost Gains Losses Value - ------------------------------------------------------------------------------------------------------------------------------- SECURITIES AVAILABLE FOR SALE U.S. Treasury and Federal Agency $ 4,048 $ 46 $ 5 $ 4,089 $ 4,285 $ 62 $ 2 $ 4,345 State and Municipal 2,327 133 55 2,405 1,611 101 81 1,631 Foreign Government 14,056 1,062 180 14,938 8,507 396 460 8,443 U.S. Corporate 1,586 67 65 1,588 1,169 126 74 1,221 Other Debt Securities 1,129 11 11 1,129 1,112 11 4 1,119 Equity Securities(1) 1,870 119 76 1,913 1,345 133 24 1,454 ------- ------ ---- ------ ------- ---- ------- ------- $25,016 $1,438 $392 $26,062 $18,029 $829 $ 645 $18,213 - ----------------------------------------======================================================================================= VENTURE CAPITAL $ 2,124 $1,854 - ------------------------------------------------------------------------------------------------------------------------------- Securities Available for Sale Include: Mortgage-Backed Securities $ 1,064 7 3 $ 1,068 $ 1,290 8 1 $ 1,297 Government of Brazil Brady Bonds 1,463 872 -- 2,335 1,485 341 -- 1,826 Government of Venezuela Brady Bonds 563 -- 81 482 563 -- 249 314 - -------------------------------------------------------------------------------------------------------------------------------
(1) Includes non-marketable equity securities carried at cost and the cost is reported in both the amortized cost and fair value columns. The amortized cost of non-marketable equity securities was $896 million and $860 million, and the estimated fair value was $929 million and $898 million at December 31, 1996 and 1995, respectively. Not included in the table above are securities available for sale held by unconsolidated affiliates carried on the equity method of accounting. At December 31, 1996 and 1995, the gross unrealized gains related to these securities were $9 million and $22 million, respectively, and gross unrealized losses were $4 million and $2 million, respectively, and are included in the net unrealized gains--securities available for sale component of stockholders' equity, net of applicable taxes. The accompanying table shows components of interest and dividends on securities, net gains from sales of securities available for sale, and net gains on investments held by venture capital subsidiaries. In Millions of Dollars 1996 1995 1994 - -------------------------------------------------------------------------------- Taxable Interest $1,600 $1,391 $1,143 Interest Exempt from U.S. Federal Income Tax 87 89 74 Dividends 83 64 49 - -------------------------------------------------------------------------------- Gross Realized Securities Gains $ 261 $ 177 $ 259 Gross Realized Securities Losses 51 45 59 - -------------------------------------------------------------------------------- Net Realized and Unrealized Venture Capital Gains $ 450 $ 390 $ 365 Which Included: Gross Unrealized Gains 416 487 526 Gross Unrealized Losses 150 300 189 - -------------------------------------------------------------------------------- The following table presents the amortized cost, fair value, and average yield on amortized cost of debt securities available for sale by contractual maturity dates as of December 31, 1996: Amortized Fair In Millions of Dollars Cost Value Yield - ------------------------------------------------------------------------------- U.S. TREASURY AND FEDERAL AGENCY Due Within 1 Year $ 2,620 $ 2,618 5.30% After 1 but Within 5 Years 860 865 5.99 After 5 but Within 10 Years 56 61 8.05 After 10 Years(1) 512 545 8.09 ------- ------- TOTAL $ 4,048 $ 4,089 5.84% - --------------------------------------------------============================= STATE AND MUNICIPAL Due Within 1 Year $ 6 $ 6 6.10% After 1 but Within 5 Years 51 49 5.29 After 5 but Within 10 Years 553 570 5.61 After 10 Years(1) 1,717 1,780 6.51 ------- ------- TOTAL $ 2,327 $ 2,405 6.27% - --------------------------------------------------============================= ALL OTHER(2) Due Within 1 Year $ 7,170 $ 7,225 10.27% After 1 but Within 5 Years 4,058 4,073 7.80 After 5 but Within 10 Years 1,409 1,522 7.87 After 10 Years(1) 4,134 4,835 8.94 ------- ------- TOTAL $16,771 $17,655 9.14% - --------------------------------------------------============================= (1) Securities with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights. (2) Includes foreign government, U.S. corporate, and other debt securities. Yields reflect the impact of local interest rates prevailing in countries outside the U.S. 59 TRADING ACCOUNT ASSETS AND LIABILITIES In Millions of Dollars at Year-End 1996 1995 - -------------------------------------------------------------------------------- TRADING ACCOUNT ASSETS U.S. Treasury and Federal Agency Securities $ 2,560 $ 3,159 State and Municipal Securities 123 145 Foreign Government, Corporate and Other Securities 10,607 12,693 Derivative and Foreign Exchange Contracts 17,495 16,096 ------- ------- $30,785 $32,093 - -------------------------------------------------------------=================== TRADING ACCOUNT LIABILITIES Securities Sold, Not Yet Purchased $ 4,036 $ 3,696 Derivative and Foreign Exchange Contracts 17,967 14,578 ------- ------- $22,003 $18,274 - -------------------------------------------------------------=================== The average fair value of trading account assets during 1996 was $32.5 billion, including $15.4 billion relating to derivative and foreign exchange contracts, compared with $43.6 billion and $21.8 billion, respectively, during 1995. The average fair value of trading account liabilities during 1996 was $19.9 billion, including $15.3 billion relating to derivative and foreign exchange contracts, compared with $24.7 billion and $20.6 billion, respectively, during 1995. Deferred revenue on derivative and foreign exchange contracts, attributable to ongoing costs such as servicing and credit considerations, totaled $310 million and $254 million at December 31, 1996 and 1995, respectively, which is reported in Other Liabilities. During the three years ended December 31, 1996 there were no material credit losses related to derivative and foreign exchange contracts. Commitments to purchase when-issued securities were $0.5 billion and $4.7 billion at December 31, 1996 and 1995, respectively. PURCHASED FUNDS AND OTHER BORROWINGS(1) In Millions of Dollars at Year-End 1996 1995 - -------------------------------------------------------------------------------- Federal Funds Purchased and Securities Sold under Repurchase Agreements $ 9,995 $ 7,904 Commercial Paper Issued by Parent Company 775 1,181 The Student Loan Corporation (80% owned) 463 452 Other Funds Borrowed 6,958 6,797 ------- ------- TOTAL $18,191 $16,334 - ------------------------------------------------------------==================== (1) Original maturities of less than one year. LONG-TERM DEBT(1) In Millions of Dollars at Year-End 1996 1995 - ------------------------------------------------------------------------------- VARIOUS VARIOUS FLOATING- FIXED-RATE RATE OBLIGATIONS(2) OBLIGATIONS(2) TOTAL Total - ------------------------------------------------------------------------------- PARENT COMPANY Due in 1996 $ -- $ -- $ -- $ 1,661 Due in 1997 713 936 1,649 1,416 Due in 1998 333 909 1,242 1,708 Due in 1999 668 1,049 1,717 1,718 Due in 2000 382 664 1,046 1,518 Due in 2001 628 274 902 365 Due in 2002-2006 3,300 1,246 4,546 3,724 Due in 2007-2011 1,324 115 1,439 793 Due after 2011 400 222 622 671 ------- ------- ------- ------- 7,748 5,415 13,163 13,574 ------- ------- ------- ------- SUBSIDIARIES(3) Due in 1996 -- -- -- 1,148 Due in 1997 1,083 441 1,524 1,275 Due in 1998 985 858 1,843 1,371 Due in 1999 655 86 741 331 Due in 2000 216 182 398 368 Due in 2001 248 114 362 69 Due in 2002-2006 121 181 302 219 Due in 2007-2011 15 60 75 44 Due after 2011 331 111 442 89 ------- ------- ------- ------- 3,654 2,033 5,687 4,914 ------- ------- ------- ------- TOTAL $11,402 $ 7,448 $18,850 $18,488 - ------------------------------================================================= (1) Original maturities of one year or more. Maturity distribution is based upon contractual maturities or earlier dates at which debt is repayable at the option of the holder, due to required mandatory sinking fund payments or due to call notices issued. (2) Based on contractual terms. Repricing characteristics may be effectively modified from time to time using derivative contracts. (3) Approximately 5% in 1996 and 4% in 1995 of subsidiary long-term debt was guaranteed by Citicorp, and of the debt not guaranteed by Citicorp, approximately 35% in 1996 and 38% in 1995 was secured by the assets of the subsidiary. Long-term debt is denominated in various currencies with both fixed and floating interest rates, summarized below. Certain of the agreements under which long-term debt obligations were issued prohibit Citicorp, under certain conditions, from paying dividends in shares of Citibank capital stock and from creating encumbrances on such shares. Floating rates are determined periodically by formulas based on certain money market rates or, in certain instances, by minimum rates as specified in the governing agreements. A portion of Parent Company and subsidiary debt represents local currency borrowings where prevailing rates may vary significantly from rates in the U.S. 1996 1995 - -------------------------------------------------- ------------------------- WEIGHTED- Weighted- In %'s RANGE AVERAGE Range Average - -------------------------------------------------------------------------------- PARENT COMPANY Fixed rate(1) 2.42 to 10.50 7.32 2.42 to 10.75 7.70 Floating rate(2) 3.50 to 8.23 5.99 0.88 to 6.93 6.04 SUBSIDIARIES(3) Fixed rate 3.50 to 18.69 9.07 0.75 to 16.50 8.91 Floating rate 3.00 to 32.84 11.51 3.35 to 32.84 11.20 - -------------------------------------------------------------------------------- (1) Predominantly denominated in U.S. dollars (96% in 1996 and 92% in 1995), Japanese yen, and German marks, and matures over the period to 2035. (2) Predominantly denominated in U.S. dollars (96% in 1996 and 95% in 1995) and matures over the period to 2035. (3) Denominated in U.S. dollars (47% in 1996 and 36% in 1995) and various foreign currencies including Australian dollars, Italian lire, Chilean pesos, Malaysian ringgit, and German marks. Fixed and floating rate debt matures over the period to 2027 and 2017, respectively. 60 Included in long-term debt are $0.8 billion and $1.3 billion of subordinated capital notes at December 31, 1996 and 1995, respectively, which require Citicorp to exchange the notes at maturity or at certain other specified times for capital securities that have a market value equal to the principal amounts of the notes or, at Citicorp's option, to pay the principal of the notes from amounts representing designated proceeds from the sale of capital securities. At the option of Citicorp, the exchange or the proceeds from sale, as applicable, may be for or from common stock, non-redeemable preferred stock, or other marketable capital securities of Citicorp. Citicorp has designated proceeds from the sales of capital securities in an amount sufficient to satisfy all the dedication commitments of its subordinated capital notes. Also included in long-term debt at December 31,1996 are $300 million of guaranteed preferred beneficial interests in Citicorp subordinated debt issued by Citicorp Capital I, a wholly-owned trust whose sole assets are $309 million of 7.93% Junior Subordinated Deferrable Interest Debentures of Citicorp due 2027. Under the terms of this arrangement, taken as a whole, Citicorp has provided a full and unconditional guarantee on a subordinated basis of payments due. B. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS In addition to the financial assets and liabilities discussed above, Citicorp's financial instruments include off-balance sheet products. The market and credit risks associated with these products, as well as the operating risks, are similar to those relating to other types of financial instruments, and Citicorp manages these risks in a consistent manner. DERIVATIVE AND FOREIGN EXCHANGE CONTRACTS NOTIONAL PRINCIPAL BALANCE SHEET AMOUNTS CREDIT EXPOSURE(2) ------------------- ----------------- In Billions of Dollars at Year-End 1996 1995(1) 1996 1995(1) - ----------------------------------------------------------------------------- INTEREST RATE PRODUCTS Futures Contracts $ 160.6 $145.2 $ -- $ -- Forward Contracts 132.7 295.2 0.1 0.6 Swap Agreements 476.2 431.9 9.4 9.1 Purchased Options 126.7 105.9 1.2 1.2 Written Options 192.3 158.1 -- -- FOREIGN EXCHANGE PRODUCTS Futures Contracts 0.7 1.1 -- -- Forward Contracts 1,146.7 983.5 17.6 12.2 Cross-Currency Swaps 44.0 35.2 1.8 2.0 Purchased Options 101.1 93.7 1.7 1.8 Written Options 104.5 88.2 -- -- EQUITY PRODUCTS 22.2 27.9 0.7 0.5 COMMODITY PRODUCTS 12.5 9.8 0.5 0.4 CREDIT DERIVATIVE PRODUCTS 1.9 0.3 -- -- ------ ------ 33.0 27.8 EFFECTS OF MASTER NETTING AGREEMENTS(3) (15.5) (11.7) ------ ------ $ 17.5 $ 16.1 - ------------------------------------------------------------================ (1) Reclassified to conform to the 1996 presentation. (2) There is no balance sheet credit exposure for futures contracts because they settle daily in cash, and none for written options because they represent obligations (rather than assets) of Citicorp. (3) Master netting agreements mitigate credit risk by permitting the offset of amounts due from and to individual counterparties in the event of counterparty default. Citicorp enters into derivative and foreign exchange futures, forwards, options, and swaps, which enable customers to transfer, modify, or reduce their interest rate, foreign exchange, and other market risks, and also trades these products for its own account. In addition, Citicorp uses derivatives and other instruments, primarily interest rate products, as an end-user in connection with its risk management activities. Derivatives are used to manage interest rate risk relating to specific groups of on-balance sheet assets and liabilities, including commercial and consumer loans, deposit liabilities, long-term debt, and other interest-sensitive assets and liabilities, as well as credit card securitization. In addition, foreign exchange contracts are used to hedge net capital exposures and foreign exchange transactions. Through the effective use of derivatives, Citicorp has been able to modify the volatility of its revenue from asset and liability positions. The preceding table presents the aggregate notional principal amounts of Citicorp's outstanding derivative and foreign exchange contracts at December 31, 1996 and 1995, along with the related balance sheet credit exposure. The table includes all contracts with third parties, including both trading and end-user positions. Futures and forward contracts are commitments to buy or sell at a future date a financial instrument, commodity, or currency at a contracted price, and may be settled in cash or through delivery. Swap contracts are commitments to settle in cash at a future date or dates, based on differentials between specified financial indices, as applied to a notional principal amount. Option contracts give the purchaser, for a fee, the right, but not the obligation, to buy or sell within a limited time a financial instrument or currency at a contracted price that may also be settled in cash, based on differentials between specified indices. Market risk on a derivative or foreign exchange product is the exposure created by potential fluctuations in interest rates, foreign exchange rates, and other values, and is a function of the type of product, the volume of transactions, the tenor and terms of the agreement, and the underlying volatility. Credit risk is the exposure to loss in the event of nonperformance by the other party to the transaction. The recognition in earnings of unrealized gains on these transactions is dependent on management's assessment as to collectibility. Balance sheet credit exposure represents the current cost of replacing the contracts and is equal to the amount of Citicorp's unrealized gain included in Trading Account Assets. As measured by Citicorp in connection with the management of overall credit relationships with individual customers, total exposure on derivative and foreign exchange contracts also includes the potential increase in replacement cost estimated based on a statistical simulation of values that would result from a change in market rates. In the aggregate for all contracts, the estimate of the potential increase in replacement cost ranged from approximately $32 billion to $41 billion during 1996. Substantially all of the total exposure was to counterparties considered by Citicorp to be investment grade, the substantial majority was under three years' tenor, and there were no significant nonperforming contracts in 1996 or 1995. There were no credit-related losses on derivative contracts in 1996, $6 million in 1995, and $2 million in 1994. 61 END-USER INTEREST RATE AND FOREIGN EXCHANGE CONTRACTS
NOTIONAL PRINCIPAL AMOUNTS(1) PERCENTAGE OF 1996 AMOUNT MATURING --------------------------- -------------------------------------------------------- DECEMBER 31, December 31, Within 1 to 2 to 3 to 4 to After In Billions of Dollars 1996 1995 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years - -------------------------------------------------------------------------------------------------------------------- INTEREST RATE PRODUCTS Futures Contracts $ 23.4 $13.6 76% 14% 8% 1% 1% --% Forward Contracts 3.6 5.6 88 11 -- -- -- 1 Swap Agreements 111.9 90.9 31 23 13 9 10 14 Option Contracts 71.4 45.6 89 5 4 2 -- -- FOREIGN EXCHANGE PRODUCTS Futures and Forward Contracts 60.9 54.8 95 4 -- -- 1 -- Cross-Currency Swaps 2.9 3.2 15 19 14 14 12 26 - --------------------------------------------------------------------------------------------------------------------
(1) Includes third-party and intercompany contracts. END-USER INTEREST RATE SWAPS AND NET PURCHASED OPTIONS AS OF DECEMBER 31, 1996
REMAINING CONTRACTS OUTSTANDING--NOTIONAL PRINCIPAL AMOUNTS ----------------------------------------------------------- In Billions of Dollars at Year-End 1996 1997 1998 1999 2000 2001 - --------------------------------------------------------------------------------------------------------------- RECEIVE FIXED SWAPS $83.2 $63.4 $45.2 $32.4 $23.2 $12.5 Weighted-Average Fixed Rate 6.4% 6.5% 6.7% 6.7% 6.5% 6.8% PAY FIXED SWAPS $13.8 $ 8.8 $ 5.7 $ 4.6 $ 4.0 $ 3.6 Weighted-Average Fixed Rate 6.9% 7.0% 7.1% 7.1% 7.1% 7.2% BASIS SWAPS $14.9 $ 4.6 $ 0.6 $ 0.1 $ 0.1 $ 0.1 PURCHASED CAPS (INCLUDING COLLARS) $39.2 $ 4.3 $ 3.4 $ 1.1 $ 0.1 $ 0.1 Weighted-Average Cap Rate Purchased 6.1% 6.8% 7.0% 7.5% 9.9% 9.1% PURCHASED FLOORS $ 1.6 $ 1.0 $ 0.1 $ 0.1 $ 0.1 $ 0.1 Weighted-Average Floor Rate Purchased 5.6% 5.3% 5.8% 5.8% 5.8% 5.8% WRITTEN FLOORS RELATED TO PURCHASED CAPS (COLLARS) $ 0.2 $ 0.2 $ 0.2 $ 0.2 $ -- $ -- Weighted-Average Floor Rate Written 8.2% 8.2% 8.2% 8.2% --% --% WRITTEN CAPS RELATED TO OTHER PURCHASED CAPS(1) $30.4 $ 2.4 $ 0.8 $ 0.6 $ 0.5 $ 0.4 Weighted-Average Cap Rate Written 6.3% 7.5% 9.5% 9.5% 9.5% 9.7% - --------------------------------------------------------------------------------------------------------------- THREE-MONTH FORWARD LIBOR RATES(2) 5.6% 6.1% 6.4% 6.7% 6.9% 7.1% - ---------------------------------------------------------------------------------------------------------------
(1) Includes written options related to purchased options embedded in other financial instruments. (2) Represents the implied forward yield curve for three-month LIBOR as of December 31, 1996, provided for reference. The tables above provide data on the notional principal amounts and maturities of end-user (non-trading) derivatives, along with additional data on end-user interest rate swaps and net purchased option positions at year-end 1996 with three-month LIBOR forward rates included for reference. The tables are intended to provide an overview of these components of the end-user portfolio, but should be viewed only in the context of Citicorp's related assets and liabilities. The majority of derivative positions used in Citicorp's asset and liability management activities are established via intercompany transactions with independently managed Citicorp dealer units, with the dealer acting as a conduit to the marketplace. Contract maturities are related to the underlying risk management strategy. Citicorp's utilization of these instruments is modified from time to time in response to changing market conditions as well as changes in the characteristics and mix of the related assets and liabilities. In this connection, during 1996 interest rate futures, swaps and options with a notional principal amount of $72.1 billion were closed out which resulted in a net deferred loss of approximately $26 million. Total unamortized net deferred losses, including those from prior year close-outs, were approximately $99 million at December 31, 1996, which will be amortized into earnings over the remaining life of the original contracts (approximately 63% in 1997, 28% in 1998, and 9% in subsequent years), consistent with the risk management strategy. LOAN COMMITMENTS In Billions of Dollars at Year-End 1996 1995 - -------------------------------------------------------------------------------- Unused Commercial Commitments to Make or Purchase Loans, to Purchase Third-Party Receivables, and to Provide Note Issuance or Revolving Underwriting Facilities $ 89.9 $ 78.0 - -------------------------------------------------------------------------------- Unused Credit Card and Other Consumer Revolving Commitments $119.9 $102.7 - -------------------------------------------------------------------------------- The majority of unused commitments are contingent upon customers maintaining specific credit standards. Commercial commitments generally have floating interest rates and fixed expiration dates and may require payment of fees. Such fees (net of certain direct costs) are deferred and, upon exercise of the commitment, amortized over the life of the loan or, if exercise is deemed remote, amortized over the commitment period. The table does not include commercial letters of credit issued on behalf of customers and collateralized by the underlying shipment of goods which totaled $5.6 billion at December 31, 1996 and $5.9 billion at December 31, 1995. 62 LOANS SOLD WITH CREDIT ENHANCEMENT AMOUNTS ------------- In Billions of Dollars at Year-End 1996 1995 FORM OF CREDIT ENHANCEMENT - -------------------------------------------------------------------------------- Residential Mortgages and $11.3 $14.9 Recourse obligation Other Loans Sold with $7.3 in 1996 and Recourse(1) $5.2 in 1995 - -------------------------------------------------------------------------------- GNMA Sales/Servicing 1.0 2.5 Secondary recourse Agreements(2) obligation - -------------------------------------------------------------------------------- Securitized Credit Card 25.2 25.5 Excess servicing fees over the Receivables life of the transaction - -------------------------------------------------------------------------------- (1) Residential mortgages represent 94% of amounts in 1996 and 93% in 1995. (2) Government National Mortgage Association sales/servicing agreements covering securitized residential mortgages. Citicorp and its subsidiaries are obligated under various credit enhancements related to certain sales of loans or sales of participations in pools of loans, summarized above. Excess servicing fees on securitized credit card receivables are recognized over the life of each sale transaction. The excess servicing fee is based upon the sum of finance charges and fees received from cardholders and interchange revenue earned on cardholder transactions, less the sum of the yield paid to investors, credit losses, transaction costs, and a normal servicing fee, which is also retained by certain Citicorp subsidiaries as servicers. As specified in certain of the sale agreements, the excess servicing fee collected each month is deposited in an account, up to a predetermined maximum amount, and is available over the remaining term of that transaction to make payments of yield, fees, and transaction costs in the event that net cash flows from the receivables are not sufficient. When the account reaches the predetermined amount, excess servicing fees are passed directly to the Citicorp subsidiary that sold the receivables. The amount contained in these accounts is included in other assets and was $383 million at December 31, 1996 and $461 million at December 31, 1995. Citicorp maintains reserves, outside of the allowance for credit losses, relating to asset securitization programs discussed above. These reserves totaled $473 million at December 31, 1996 and $486 million at December 31, 1995. STANDBY LETTERS OF CREDIT 1996 1995 ----------------------------------------- EXPIRE EXPIRE TOTAL Total WITHIN AFTER AMOUNT Amount In Billions of Dollars at Year-End 1 YEAR 1 YEAR OUTSTANDING Outstanding - -------------------------------------------------------------------------------- FINANCIAL Insurance, Surety $ 2.1 $ 4.1 $ 6.2 $ 5.7 Options, Purchased Securities, and Escrow 0.7 0.2 0.9 1.8 Clean Payment 1.0 0.5 1.5 1.5 Backstop State, County, and Municipal Securities 0.2 0.5 0.7 1.4 Other Debt Related 4.2 3.9 8.1 6.8 PERFORMANCE 2.8 1.4 4.2 5.3 ----- ----- ----- ----- TOTAL(1) $11.0 $10.6 $21.6 $22.5 - ----------------------------------------======================================== (1) Total is net of cash collateral of $1.5 billion in 1996 and $1.8 billion in 1995. Collateral other than cash covered 20% of the total in 1996 and 25% in 1995. Standby letters of credit, summarized above, are used in various transactions to enhance the credit standing of Citibank customers. They represent irrevocable assurances that Citibank will make payment in the event that the customer fails to fulfill its obligations to third parties. Financial standby letters of credit are obligations to pay a third-party beneficiary when a customer fails to repay an outstanding loan or debt instrument, such as assuring payments by a foreign reinsurer to a U.S. insurer, to act as a substitute for an escrow account, to provide a payment mechanism for a customer's third-party obligations, and to assure payment of specified financial obligations of a customer. Performance standby letters of credit are obligations to pay a third-party beneficiary when a customer fails to perform a nonfinancial contractual obligation, such as to ensure contract performance or irrevocably assure payment by the customer under supply, service and maintenance contracts or construction projects. Fees are recognized ratably over the term of the standby letter of credit. The table does not include securities lending indemnifications issued to customers, which are fully collateralized and totaled $4.2 billion at December 31, 1996 and $0.9 billion at December 31, 1995. C. CONCENTRATIONS OF CREDIT RISK Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to Citicorp's total credit exposure. Although Citicorp's portfolio of financial instruments is broadly diversified along industry, product, and geographic lines, material transactions are completed with other financial institutions, particularly in the securities trading, derivative, and foreign exchange businesses. Additionally, U.S. credit card receivables, U.S. mortgages, commercial real estate in North America, and the cross-border refinancing portfolio represent areas of significant credit exposures. D. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The accompanying tables provide disclosure of the estimated fair value of Citicorp's financial instruments as defined in accordance with applicable requirements, including financial assets and liabilities recorded on the balance sheet as well as off-balance sheet instruments such as derivative and foreign exchange contracts and credit card receivables securitizations. To better reflect Citicorp's values subject to market risk and to illustrate the interrelationships that characterize risk management strategies, the following table also provides estimated fair value data for the expected time period until runoff of existing deposits with no fixed maturity. In the aggregate, estimated fair values exceeded the carrying values by approximately $8.9 billion at December 31, 1996 and $8.4 billion at December 31, 1995. The increase from the prior year is primarily due to a rise in interest rates and credit quality improvements, partially offset by declines in the value of derivative contracts due to the same interest rate environment. 63 ESTIMATED FAIR VALUE IN EXCESS OF (LESS THAN) CARRYING VALUE Increase In Billions of Dollars at Year-End 1996 1995 (Decrease) - ------------------------------------------------------------------------------- Assets $ 6.0 $ 5.7 $ 0.3 Liabilities (0.5) (0.7) 0.2 End-User Derivative and Foreign Exchange Contracts 0.3 1.4 (1.1) Credit Card Receivables Securitization 0.4 (0.3) 0.7 ----- ----- ----- Subtotal 6.2 6.1 0.1 Deposits with No Fixed Maturity(1) 2.7 2.3 0.4 ----- ----- ----- TOTAL $ 8.9 $ 8.4 $ 0.5 - -----------------------------------------------------========================== (1) Represents the estimated excess fair value related to the expected time period until runoff of existing deposits with no fixed maturity on the balance sheet at year-end, without assuming any regeneration of balances, based on the estimated difference between the cost of funds on these deposits and the cost of funds from alternative sources. The increase during 1996 was primarily due to a higher spread between the cost of funds on the deposits and the cost of funds from alternative sources. Under applicable requirements, excess fair values of these deposits are excluded from amounts included under the Liabilities caption above and from the table on page 65, in which the estimated fair value is shown as being equal to the carrying value. Additional detail is provided in the following tables. In accordance with applicable requirements, the disclosures exclude leases, affiliate investments, and pension and benefit obligations, and the disclosures also exclude the effect of taxes and other expenses that would be incurred in a market transaction. In addition, the tables exclude the values of nonfinancial assets and liabilities, as well as a wide range of franchise, relationship, and intangible values, which are integral to a full assessment of Citicorp's financial position and the value of its net assets. The data represents management's best estimates based on a range of methodologies and assumptions. Quoted market prices are used for most securities, for loans where available, and for both trading and end-user derivative and foreign exchange contracts, as well as for liabilities with quoted prices. For performing loans where no quoted market prices are available, contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectibility, expected cash flows are discounted using an appropriate rate considering the time of collection and a premium for the uncertainty of the flows. The value of collateral is also considered. For liabilities without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows. Fair values of credit card receivables securitization represent the estimated excess (shortfall) in the fair value of the underlying receivables and investor certificates, which is derived by Citicorp in the form of excess servicing, and principally arises from fixed rates payable to certificate holders. Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value, and as existing assets and liabilities run off and new items are generated. SIGNIFICANT ASSETS AND RELATED INSTRUMENTS 1996 1995 ------------------------------------------ CARRYING ESTIMATED Carrying Estimated In Billions of Dollars at Year-End VALUE FAIR VALUE Value Fair Value - ------------------------------------------------------------------------------- Loans(1) $164.0 $169.9 $155.2 $160.8 Related Derivatives 0.3 0.5 0.2 0.7 Securities 28.2 28.2 20.1 20.1 Trading Account Assets 30.8 30.8 32.1 32.1 Other Financial Assets(2) 37.0 37.1 29.5 29.6 Credit Card Receivables Securitization 0.1 0.5 0.2 (0.1) Related Derivatives 0.5 0.4 0.4 0.7 - ------------------------------------------------------------------------------- (1) The carrying value of loans is net of the allowance for credit losses and also excludes $5.1 billion of lease finance receivables in 1996 and 1995. (2) Includes cash and due from banks, deposits at interest with banks, federal funds sold and securities purchased under resale agreements, and customers' acceptance liability, for which the carrying value is a reasonable estimate of fair value, as well as financial instruments included in interest and fees receivable and other assets on the balance sheet with carrying values of $5.3 billion and $5.1 billion at December 31, 1996 and 1995, respectively, and estimated fair values of $5.4 billion and $5.2 billion, respectively. The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The estimated fair values of Citicorp's loans, in the aggregate, exceeded carrying values (reduced by the allowance for credit losses) by $5.9 billion at year-end 1996 compared with $5.6 billion in 1995, an improvement of $0.3 billion. Within these totals, estimated fair values exceeded carrying values for consumer loans net of the allowance by $2.9 billion, a decline of $0.1 billion from year-end 1995, and for commercial loans by $3.0 billion, an improvement of $0.4 billion. The improvement in estimated fair values in excess of carrying values of commercial loans primarily reflects the effects of improving secondary market prices on performing loans to countries that have successfully refinanced their debt and of improved credit conditions on commercial real estate loans in North America. The fair value of credit card receivables securitization was $0.4 billion greater than their carrying value at December 31, 1996, compared to December 31, 1995 when the fair value was lower than the carrying value by $0.3 billion. This increase is due to the effects of a higher interest rate environment on the fixed-rate investor certificates. 64 SIGNIFICANT LIABILITIES AND RELATED INSTRUMENTS 1996 1995(1) ------------------------------------------ CARRYING ESTIMATED Carrying Estimated In Billions of Dollars at Year-End VALUE FAIR VALUE Value Fair Value - ------------------------------------------------------------------------------- Non-Interest-Bearing Deposits $ 24.8 $ 24.8 $ 21.5 $ 21.5 Interest-Bearing Deposits 160.2 160.4 145.6 145.9 Related Derivatives (0.2) (0.3) (0.2) (0.4) Trading Account Liabilities 22.0 22.0 18.3 18.3 Other Financial Liabilities(2) 28.2 28.2 25.9 25.9 Related Derivatives 0.1 0.1 -- -- Long-Term Debt 18.9 19.2 18.5 18.9 Related Derivatives (0.2) (0.3) (0.1) (0.5) - ------------------------------------------------------------------------------- (1) Reclassified to conform to the 1996 presentation. (2) Includes federal funds purchased and securities sold under repurchase agreements and acceptances outstanding, for which the carrying value is a reasonable estimate of fair value; and commercial paper, other funds borrowed, and financial instruments included in accrued taxes and other expense and other liabilities on the balance sheet, with carrying values of $7.9 billion and $7.7 billion at December 31, 1996 and 1995, respectively, and estimated fair values of $7.8 billion and $7.7 billion, respectively. Under the applicable requirements, the estimated fair value of deposits with no fixed maturity in the table above excludes the premium values available in the market for such deposits, and the estimated value is shown in the table as being equal to the carrying value. The estimated fair value of interest-bearing deposits reflects changes in market rates since the deposits were taken. For all derivative and foreign exchange contracts in the tables above, the gross difference between the carrying amount and fair value as of December 31, 1996 and 1995 was $1.0 billion and $2.0 billion, respectively, for contracts whose fair value exceeds carrying value, and $0.7 billion and $0.6 billion, respectively, for contracts whose carrying value exceeds fair value. 2. PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation and amortization. Generally, depreciation and amortization are computed on the straight-line basis over the estimated useful life of the asset or the lease term. Depreciation and amortization expense was $706 million in 1996, $636 million in 1995, and $571 million in 1994. 3. GOODWILL Goodwill, which is included in other assets, represents the excess of purchase price over the estimated fair value of net assets acquired, accounted for under the purchase method of accounting. At December 31, 1996 and 1995, goodwill amounted to $278 million and $267 million, respectively. Goodwill is being amortized, primarily using the straight-line method, over the periods estimated to be benefited. The remaining period of amortization, on a weighted-average basis, approximated 11 years as of December 31, 1996. 4. PREFERRED STOCK In Millions of Dollars at Year-End Rate 1996 1995 - ------------------------------------------------------------------------------ PERPETUAL PREFERRED STOCK Second Series, 2,195,636 Shares Adjustable $ 220 $ 220 Third Series, 834,867 Shares Adjustable 83 83 Series 8A and 8B, 1,250,000 Shares Graduated 125 125 Series 14, 700,000 Shares 9.08% 175 175 Series 16, 1,300,000 Shares 8.00% 325 325 Series 17, 1,400,000 Shares 7.50% 350 350 Series 18, 700,000 Shares Adjustable 175 175 Series 19, 400,000 Shares Adjustable 100 100 Series 20, 500,000 Shares 8.30% 125 125 Series 21, 600,000 Shares 8.50% 150 150 Series 22, 500,000 Shares 7.75% 125 125 Series 23, 250,000 Shares Fixed/Adjustable 125 125 ------ ------ 2,078 2,078 ------ ------ CONVERTIBLE PREFERRED STOCK Series 12, 5,900 Shares 11.00% -- 590 Series 13, 4,029 Shares 10.75% -- 403 ------ ------ -- 993 ------ ------ Total $2,078 $3,071 - ------------------------------------------------------------================== In the first quarter of 1996, Citicorp converted $590 million of its Convertible Preferred Stock, Series 12 into 36,875,000 shares of common stock, and converted $403 million of its Convertible Preferred Stock, Series 13 into 22,077,369 shares of common stock. In January 1997, Citicorp announced that it will call for redemption the Series 14 Preferred Stock in March 1997. Total dividends declared on non-redeemable preferred stock were $162 million in 1996, $342 million in 1995, and $356 million in 1994. Dividends are payable quarterly and, except for Series 16, 17, 20, and 21, are cumulative. Dividends on the Second and Third Series, as well as on Series 18 and 19, are payable at rates determined quarterly by formulas based on interest rates of certain U.S. Treasury obligations, subject to certain minimum and maximum rates as specified in the certificates of designation. The weighted-average dividend rates on the Second and Third Series, as well as Series 18 and 19 were 6.0%, 7.0%, 5.5%, and 5.5%, respectively, for 1996. Dividends on Series 8A are payable at 7.55% through August 15, 1998 and thereafter at the three-year treasury rate plus an amount initially equal to 2.25% and increasing to 2.75% for dividend periods ending from August 15, 2001 through August 15, 2004 and 3% thereafter. Series 8B dividends are payable at 8.25% through August 15, 1999 and thereafter at a rate equal to the five-year treasury rate plus an amount initially equal to 2.25% and increasing to 3% for all dividend periods ending after August 15, 2004. For both Series 8A and 8B, dividend rates through August 15, 2004 cannot be less than 7% or greater than 14%, and thereafter cannot be less than 8% or greater than 16%. Dividends on Series 23 are payable at 5.86% through February 15, 2006 and thereafter at rates determined quarterly by a formula based on certain interest rate indices, subject to a minimum rate of 6% and a maximum rate of 12%. The rate of dividends on the Series 23 is subject to adjustment based upon the applicable percentage of the dividends received deduction. 65 Citicorp may, at its option, redeem the perpetual preferred stock at stated values plus accrued dividends, as follows: Second and Third Series, at any time; Series 8A and 8B, on any of the dividend repricing dates through August 15, 2004, and from time to time after August 15, 2004; Series 14, on or after March 15, 1997; Series 16, on or after June 1, 1998; Series 17, on or after September 1, 1998; Series 18, on or after May 31, 1999; Series 19, on or after August 31, 1999; Series 20, on or after November 15, 1999; Series 21, on or after February 15, 2000; Series 22, on or after May 15, 2000; and Series 23, on or after February 15, 2006. Under various circumstances, Citicorp may redeem certain series of preferred stock at times other than as described above. Authorized preferred stock (issuable as either nonredeemable or redeemable) was 50 million shares at December 31, 1996 and 1995. Total shares of nonredeemable preferred stock issued and outstanding were 10,630,503 and 10,640,432 at December 31, 1996 and 1995, respectively. At December 31, 1995, 80,000 shares of redeemable preferred stock were issued and outstanding, amounting to $8 million, and included in long-term debt in the balance sheet. Such amounts were redeemed in 1996. 5. COMMON STOCK At December 31, 1996 and 1995, authorized common stock was 800 million shares. Additionally, Citicorp has authorized, but not issued, 20 million shares of Class B common stock with a par value of $1.00 and one vote per share. Certain of Citicorp's employee benefit plans permit options or subscriptions to purchase, or elections to invest in, either unrestricted common shares or book value shares of Citicorp. Subsequent to December 31, 1987, no further options are granted, subscription agreements entered into, or new investment elections permitted for the purchase of book value shares. Outstanding shares of common stock at December 31, 1996 and 1995 include 0.9 million and 1.0 million, respectively, of book value shares issued in connection with certain employee benefit plans. Under the terms of the plans, book value shares sold back to Citicorp are settled in unrestricted common shares. Citicorp's Dividend Reinvestment and Common Stock Purchase Plan allows stockholders of record, without payment of brokerage fees, commissions, or service charges, to reinvest all or part of any common stock dividends in additional shares of common stock and make optional cash purchases of such shares. At December 31, 1996, shares were reserved for issuance as follows: In Millions of Shares at Year-End 1996 - ------------------------------------------------------------------------------ Savings Incentive Plan(1)(2) 3.7 1983 Stock Option Plan(3) 0.6 1994 Stock Purchase Plan(1) 15.8 Stock Incentive Plan(1) 45.0 Dividend Reinvestment and Common Stock Purchase Plan(1)(2) 10.4 Directors' Deferred Compensation Plan 0.1 Executive Incentive Compensation Plan(3)(4) 0.6 - ------------------------------------------------------------------------------ (1) Shares delivered may also be sourced from treasury shares. (2) Shares delivered may also be purchased in the open market. (3) Amounts shown represent the maximum number of shares assuming issuance of shares of unrestricted common stock. If book value shares are issued under tandem grants and awards, the maximum number of shares would be 0.7 million under the 1983 Stock Option Plan and 0.4 million shares under the Executive Incentive Compensation Plan. (4) Shares issued exclusively from treasury shares. During 1996 and 1995, Citicorp entered into a series of forward purchase agreements on its common stock. These agreements are settled on a net basis in shares of Citicorp common stock or in cash at Citicorp's election. To the extent that the market price of Citicorp common stock on a settlement date is higher (lower) than the forward purchase price, the net differential is received (paid) by Citicorp. As of December 31, 1996, agreements were in place covering approximately $900 million of Citicorp common stock (8.8 million shares) which had forward prices averaging $103.32 per share. If these agreements were settled based on the December 31, 1996 market price of Citicorp's common stock ($103.00 per share), Citicorp would be obligated to deliver approximately 27,000 shares. During 1996, settlements resulted in Citicorp receiving 4.7 million shares, which were recorded as treasury shares. During 1995, a settlement resulted in Citicorp paying $6 million, which was recorded as a reduction of surplus. 6. REGULATORY CAPITAL
CITICORP CITIBANK, N.A. Minimum ------------------------------------------ In Millions of Dollars at Year-End Required(1) 1996 1995 1996 1995 - -------------------------------------------------------------------------------------------- Tier 1 Capital $19,796 $18,915 $15,511 $14,758 Total Capital(2) 28,870 27,725 22,566 21,701 Tier 1 Capital Ratio 4.00% 8.39% 8.41% 8.32% 8.32% Total Capital Ratio(2) 8.00 12.23 12.33 12.11 12.24 Leverage Ratio(3) 3.00+ 7.42 7.45 6.63 6.65 - --------------------------------------------------------------------------------------------
(1) As set forth in guidelines issued by the U.S. federal bank regulators. (2) Total capital includes Tier 1 and Tier 2. (3) Tier 1 capital divided by adjusted average assets. Citicorp is subject to risk-based capital and leverage guidelines issued by the Board of Governors of the Federal Reserve System ("FRB"), and its U.S. insured depository institution subsidiaries, including Citibank, N.A., are subject to similar guidelines issued by their respective primary regulators. These guidelines are used to evaluate capital adequacy and include the required minimums shown above. To be "well capitalized" under federal bank regulatory agency definitions, a depository institution must have a Tier 1 ratio of at least 6%, a combined Tier 1 and Tier 2 ratio of at least 10%, and a leverage ratio of at least 5% and not be subject to a directive, order, or written agreement to meet and maintain specific capital levels. The regulatory agencies are required by law to take specific prompt actions with respect to institutions that do not meet minimum capital standards. As of December 31, 1996 and 1995, all of Citicorp's U.S. insured subsidiary depository institutions were "well capitalized." 7. FEES AND COMMISSIONS Trust, agency, and custodial fees included in fees and commissions were $1.1 billion in 1996, $983 million in 1995, and $946 million in 1994. 66 8. EMPLOYEE BENEFITS PENSION AND POSTRETIREMENT BENEFIT PLANS Citicorp has several non-contributory defined benefit pension plans covering substantially all U.S. employees. Retirement benefits for the U.S. plans are based on years of credited service, the highest average compensation (as defined), and the primary social security benefit. While the qualified U.S. plans are adequately funded, it is Citicorp's policy to fund these plans to the extent contributions are tax deductible. Non- qualified U.S. plans are not funded because contributions to these plans are not tax deductible. Citicorp has various defined benefit pension and termination indemnity plans covering employees outside the United States. The benefit formulas and funding strategies vary reflecting local practices and legal requirements. Citicorp offers postretirement health care and life insurance benefits to all eligible U.S. retired employees. U.S. retirees share in the cost of their health care benefits through copayments, service-related contributions and salary-related deductibles. Retiree life insurance benefits are non-contributory. It is Citicorp's policy to fund retiree health care and life insurance benefits to the extent such contributions are tax deductible. Retiree health care and life insurance benefits are also provided to certain employees outside the United States. Effective January 1, 1995, Citicorp adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions," for such benefits outside the United States, as provided by SFAS No. 106. The following tables summarize the components of net benefit expense recognized in the consolidated statement of income and the funded status and amounts recognized in the consolidated balance sheet for U.S. plans and significant plans outside the U.S. NET BENEFIT EXPENSE
POSTRETIREMENT PENSION PLANS BENEFIT PLANS(1) ----------------------------------------- ------------------- U.S. PLANS PLANS OUTSIDE U.S. U.S. PLANS --------------------- ------------------ ------------------- In Millions of Dollars 1996 1995 1994 1996 1995 1994 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Benefits Earned During the Year $ 123 $ 98 $ 108 $ 60 $ 56 $ 47 $ 11 $ 8 $ 9 Interest Cost on Benefit Obligation 192 165 146 76 68 54 32 32 30 Actual Return on Plan Assets (395) (498) 15 (65) (66) (8) (13) (13) -- Net Deferral and Amortization 196 301 (200) 10 19 (33) 7 8 (4) Amortization of Transition Obligation (Asset)(2)(3) (20) (20) (20) 7 7 6 20 20 21 ----- ----- ----- ---- ---- ---- ---- ---- ---- NET BENEFIT EXPENSE $ 96 $ 46 $ 49 $ 88 $ 84 $ 66 $ 57 $ 55 $ 56 - -----------------------------------------------------================================================================
(1) For plans outside the U.S., net postretirement benefit expense totaled $8 million in 1996 and $6 million in 1995. (2) U.S. pension transition asset is being amortized over a 14-year period with 3 years remaining at December 31, 1996. (3) U.S. postretirement transition obligation is being amortized over a period up to 20 years with 16 years remaining at December 31, 1996. PREPAID BENEFIT COST (BENEFIT LIABILITY)
PENSION PLANS ----------------------------------------------------------- QUALIFIED NON-QUALIFIED FUNDED PLANS U.S. PLANS U.S. PLANS OUTSIDE U.S. ------------------- --------------- --------------- In Millions of Dollars 1996 1995 1996 1995 1996 1995 - ---------------------------------------------------------------------------------------------------------------------- Plan Assets at Fair Value(2) $ 3,118 $ 2,673 $ -- $ -- $ 763 $ 656 Benefit Obligation 2,567 2,438 248 234 814 710 ------- ------- ----- ----- ----- ----- Plan Assets in Excess of (Less Than) Benefit Obligation 551 235 (248) (234) (51) (54) Unrecognized Prior Service Cost 73 80 41 35 13 14 Unrecognized Net Actuarial Loss (Gain) 27 306 42 62 39 44 Unamortized Transition Obligation (Asset) (58) (79) 6 7 46 50 Adjustment to Recognize Minimum Liability -- -- (33) (34) (1) -- ------- ------- ----- ----- ----- ----- PREPAID BENEFIT COST (BENEFIT LIABILITY) $ 593 $ 542 $(192) $(164) $ 46 $ 54 - -----------------------------------------------------------=========================================================== Projected Pension Benefit Obligation Includes: Accumulated Benefit Obligation $ 2,086 $ 1,943 $ 192 $ 149 $ 613 $ 531 Vested Benefit Obligation 1,830 1,695 153 129 550 448 Accumulated Postretirement Benefit Obligation to: Retirees Employees Eligible for Full Benefits Other Employees - ----------------------------------------------------------------------------------------------------------------------
POSTRETIREMENT PENSION PLANS BENEFIT PLANS(1) --------------- --------------- OTHER PLANS --------------- OUTSIDE U.S. U.S. PLANS --------------- --------------- In Millions of Dollars 1996 1995 1996 1995 - ---------------------------------------------------------------------------------------------- Plan Assets at Fair Value(2) $ -- $ -- $ 119 $ 70 Benefit Obligation 311 313 459 458 ----- ----- ----- ----- Plan Assets in Excess of (Less Than) Benefit Obligation (311) (313) (340) (388) Unrecognized Prior Service Cost -- -- (7) (2) Unrecognized Net Actuarial Loss (Gain) (8) 7 41 59 Unamortized Transition Obligation (Asset) 31 35 277 297 Adjustment to Recognize Minimum Liability (7) (14) -- -- ----- ----- ----- ----- PREPAID BENEFIT COST (BENEFIT LIABILITY) $(295) $(285) $ (29) $ (34) - -----------------------------------------------------------=================================== Projected Pension Benefit Obligation Includes: Accumulated Benefit Obligation $ 249 $ 238 Vested Benefit Obligation 224 208 Accumulated Postretirement Benefit Obligation to: Retirees $ 309 $ 310 Employees Eligible for Full Benefits 23 30 Other Employees 127 118 - ----------------------------------------------------------------------------------------------
(1) For plans outside the U.S., the accumulated postretirement benefit obligation was $54 million and $31 million and the postretirement benefit liability was $4 million and $2 million at December 31, 1996 and 1995 respectively. (2) For U.S. plans, plan assets are primarily listed stocks, commingled funds, and fixed-income securities. 67 The expected long-term rates of return on assets used in determining pension and postretirement expense are shown below. 1996 1995 1994 - ----------------------------------------------------------------------------- Rate of Return on Assets U.S. Plans 9.0% 8.75% 8.75% Plans Outside the U.S.-- Range(1) 6.0% to 13.0% 6.0% to 13.0% 6.0% to 12.0% - ----------------------------------------------------------------------------- (1) Excluding highly inflationary countries. The principal assumptions used in determining pension and postretirement benefit obligations are shown below. At Year-End 1996 1995 - -------------------------------------------------------------------------------- Discount Rate U.S. Plans 7.5% 7.25% Plans Outside the U.S.--Range(1) 4.0% to 12.0% 4.5% to 12.0% Future Compensation Increase Rate U.S. Plans 5.0% 5.0% Plans Outside the U.S.--Range(1) 1.5% to 10.0% 2.0% to 10.0% Health Care Cost Increase Rate--U.S. Plans Following Year: For Retirees Younger Than Age 65 9.0% 12% For Retirees Age 65 and Older 9.0% 9% Decreasing to the Year 2001 to: For Retirees Younger Than Age 65 5.0% 6% For Retirees Age 65 and Older 5.0% 5% - -------------------------------------------------------------------------------- (1) Excluding highly inflationary countries. As an indicator of sensitivity, increasing the assumed health care cost trend rate by 1% in each year would have increased the accumulated postretirement benefit obligation as of December 31, 1996 by $19 million and the aggregate of the benefits earned and interest components of 1996 net postretirement benefit expense by $1 million. POSTEMPLOYMENT DISABILITY AND SIMILAR BENEFIT PLANS Effective January 1, 1994, Citicorp adopted SFAS No. 112, under which Citicorp recognizes the estimated cost of disability and similar benefits provided to former or inactive employees when an event occurs indicating payment of benefits is probable. These costs were previously recognized as paid or funded. The adoption of the new standard as of January 1, 1994 resulted in a pretax charge of $95 million ($56 million after tax), which is reported in the consolidated statement of income as the cumulative effect of an accounting change. SAVINGS INCENTIVE PLAN Under the Savings Incentive Plan, eligible employees receive awards equal to 3% of their covered salary. Employees have the option of receiving their award in cash or deferring some or all of it in various investment funds. Citicorp grants an additional award equal to the amount elected to be deferred by the employee. Several investment options are available, including Citicorp common stock. Shares of Citicorp common stock delivered under the Savings Incentive Plan may be sourced from authorized but unissued shares, treasury shares, or purchased in the open market. The expense associated with the plan amounted to $95 million in 1996, $92 million in 1995, and $89 million in 1994. STOCK INCENTIVE PLAN The 1988 Stock Incentive Plan provides for the issuance of options to purchase shares of Citicorp common stock or shares of Class B common stock at prices not less than 50% of the market value at the date of grant, incentive stock options, stock appreciation rights, restricted stock, or performance unit awards, any of which may be granted singly, in combination, or in tandem. Shares of Citicorp common stock delivered under the 1988 Plan may be sourced from authorized but unissued shares or treasury shares. Shares of restricted stock have been awarded to key executives contingent upon their continued employment over periods of up to 11 years as summarized in the following table: Dollars in Millions 1996 1995 1994 - -------------------------------------------------------------------------------- Shares Granted 137,000 125,000 225,000 Aggregate Market Value at Award Date $10 $6 $9 Expense Recognized for All Awards 4 4 5 - -------------------------------------------------------------------------------- The value of the restricted shares at the date of grant is recorded as a reduction of surplus and amortized to expense over the restriction period. Under the Stock Incentive Plan and two predecessor plans, options have been granted to key employees for terms of up to 10 years to purchase common stock at not less than the fair market value of the shares at the date of grant. Generally, 50% of the options granted prior to 1995 are exercisable beginning on the first anniversary and 50% beginning on the second anniversary of the date of grant, and, generally, 50% of the options granted in 1995 and thereafter are exercisable beginning on the third anniversary and 50% beginning on the fourth anniversary of the date of grant. During 1995 and 1996, Citicorp granted to a group of key employees five-year performance-based stock options to purchase Citicorp common stock at prices ranging from $64.875 to $70.125, reflecting the market price of the stock on the respective grant dates. One-half of these options vested when Citicorp's common stock price reached $100 per share, and the balance vest upon such price reaching $115 per share, provided that the price remains at or above the indicated price level for twenty of thirty consecutive trading days. A total of 2,427,500 of the performance-based options vested during 1996 as Citicorp's stock price attained the vesting target of $100, and as of December 31, 1996, 2,423,750 of the performance-based options granted in 1995 and 1996 are unvested. The 1995 and 1996 grants expire on various dates from August 2000 through January 2001. Also during 1995, a total of 6,597,500 of the performance-based options granted in 1993 and 1994 vested as Citicorp's stock price attained the vesting targets of $50, $55, and $60. The 1993 and 1994 grants expire on July 20, 1998. Citicorp measures the cost of performance-based options as the difference between the exercise price and market price required for vesting and recognizes this expense over the period to the estimated vesting dates and in full for options that have vested, by a charge to 68 expense with an offsetting increase in common stockholders' equity. The recognition of costs related to performance-based options totaled $113 million in 1996, $89 million in 1995, and $52 million in 1994. All of the expense related to vested grants has been recognized. Effective January 1, 1996, Citicorp adopted the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." If the alternative accounting-related provisions of SFAS No. 123 had been adopted as of the beginning of 1995, the effect on 1995 and 1996 income before taxes and net income would have been immaterial, and the effect is not expected to be material in future years. Changes in options and shares under option are summarized in the following table: 1996 1995 1994 - -------------------------------------------------------------------------------- Granted 5,801,955 7,409,750 8,003,970 Average Option Price $70.10 $58.14 $39.88 Exercised 12,090,773 9,930,333 6,681,712 Average Option Price $29.06 $26.68 $23.26 Expired 16,200 25,950 5,500 Average Option Price $29.63 $24.15 $15.38 Terminated 868,630 964,867 1,032,969 Average Option Price $50.89 $32.53 $25.85 - -------------------------------------------------------------------------------- At Year-End: Shares Under Option(1) 30,716,618 37,890,266 Average Option Price $43.50 $34.98 Exercisable 20,717,293 28,677,293 Granted, Not Yet Exercisable 9,999,325 9,212,973 Available for Grant(2) 13,027,562 18,124,387 - ---------------------------------------------------------------- (1) Tandem options, granted prior to 1988, giving the employee the alternative to purchase either unrestricted common stock at not less than the market value at the date of grant or a proportionate number of book value shares at not less than the book value per share at the date of grant, are included on the basis that represents the economically preferable alternative to the employee. This basis may change as the market value and book value of the common stock change. Shares Under Option at December 31, 1995 has been reduced by 624,021 shares as a result of such changes. (2) Shares authorized but not issued that are available for the granting of stock options or other forms of stock-related awards. Additional shares may become available for grant to the extent that presently outstanding options under a predecessor plan terminate or expire unexercised. The following table summarizes information about stock options outstanding and exercisable at December 31, 1996: OUTSTANDING EXERCISABLE ------------------------------- ------------------------ AVERAGE AVERAGE OPTION AVERAGE OPTION OPTION PRICE RANGE SHARES LIFE(1) PRICE SHARES PRICE - ------------------------------------------------------------------------------- $9-1/4-$25 6,324,834 4.4 $21.12 6,324,834 $21.12 $25-1/4-$47-1/8 14,017,559 5.8 $35.63 12,102,809 $34.72 $51-3/4-$72-3/4 8,877,900 4.4 $65.59 2,285,650 $65.25 $79-1/8-$100-1/4 1,496,325 9.3 $80.75 4,000 $81.25 ---------- ---------- TOTAL 30,716,618 5.3 $43.50 20,717,293 $33.94 - -------------------============================================================ (1) Weighted-average contractual life remaining in years. STOCK PURCHASE PLAN The 1994 Stock Purchase Plan provides for two types of offerings: fixed-price offerings and periodic purchase offerings. Under fixed-price offerings all eligible employees are permitted to enter into subscription agreements to purchase shares at the fair market value on the date of the agreements. Such shares can be purchased from time to time through the expiration date. There have been no periodic purchase offerings under the Plan. Shares of Citicorp common stock delivered under the Stock Purchase Plan may be sourced from authorized but unissued shares, treasury shares or purchased in the open market. Following is the share activity under the 1994 fixed-price offering for the purchase of shares at $39.8125 per share, which expired September 27, 1996: 1996 1995 - -------------------------------------------------------------------------------- Shares Purchased 5,477,290 2,766,823 Cancelled or Terminated 97,716 388,103 Outstanding Agreements at Year-End -- 5,575,006 - -------------------------------------------------------------------------------- ANNUAL INCENTIVE AND PERFORMANCE PLANS The purpose of the 1994 Citicorp Annual Incentive Plan is to attract, retain, and motivate executives to promote the profitability and growth of Citicorp and to permit a federal income tax deduction for annual awards granted to covered employees. Currently covered employees include the Chairman and next four most highly paid executives. Under the Plan, awards can be granted to covered employees in cash, stock or any other form of consideration in either one installment or on a deferred basis. Shares of Citicorp common stock delivered under the Plan may be sourced from authorized but unissued shares or treasury shares. The aggregate awards were approximately $4 million in 1996 and $6 million for both 1995 and 1994. Under the Citicorp Annual Performance Plan, cash awards may be granted to key employees who have a significant impact on the success of Citicorp. Awards may be paid either in one installment or on a deferred basis. The aggregate awards were approximately $7 million in 1996, $9 million for 1995, and $10 million for 1994. Under the Executive Incentive Compensation Plan, awards in cash or stock may be made to key employees, payable at the election of the participants, in one installment or on a deferred basis. Shares of Citicorp common stock delivered under the Plan may be sourced from authorized but unissued shares or treasury shares. No awards have been made since 1989. DEFERRED COMPENSATION PLAN Under the Deferred Compensation Plan, adopted in 1995, participants must defer 25% of their variable compensation awards into mandatory deferral accounts whose return equals the return on Citicorp common stock. Beginning with the 1996 awards, participants are allowed to defer from 10% to 85% of the remainder of their variable compensation awards into voluntary deferral accounts, which may be allocated among a variety of investments, including an account whose return equals the return on Citicorp common stock. The amounts credited to the mandatory deferral accounts generally are payable to the participant in cash five years after they are credited. However, participants may elect to postpone cash distribution of the amounts in the mandatory deferral account by having such amount credited to a voluntary deferral account. 69 9. INCOME TAXES In Millions of Dollars 1996 1995 1994 - ------------------------------------------------------------------------------- Provision for Income Taxes(1) $ 2,285 $ 2,121 $ 1,189 Income Tax Expense (Benefit) Reported in Stockholders' Equity related to: Foreign Currency Translation 8 (24) (15) Securities Available for Sale 307 (76) 136 Employee Stock Plans (244) (51) (41) ------- ------- ------- 2,356 1,970 1,269 Tax Benefit Attributable to Cumulative Effect of Accounting Change -- -- (39) ------- ------- ------- TOTAL INCOME TAXES $ 2,356 $ 1,970 $ 1,230 - --------------------------------------------------============================= (1) Includes tax effect of securities transactions amounting to a provision of $74 million in 1996, $46 million in 1995, and $70 million in 1994. COMPONENTS OF TOTAL INCOME TAXES In Millions of Dollars 1996 1995 1994 - ------------------------------------------------------------------------------- Current U.S. Federal $ 642 $ 819 $ 367 State and Local 176 185 145 ------- ------- ------- 818 1,004 512 ------- ------- ------- Deferred U.S. Federal 396 (45) (298) State and Local 29 (25) (1) ------- ------- ------- 425 (70) (299) ------- ------- ------- Total U.S. 1,243 934 213 Foreign (substantially current) 1,113 1,036 1,056 ------- ------- ------- 2,356 1,970 1,269 ------- ------- ------- Tax Benefit Attributable to Cumulative Effect of Accounting Change -- -- (39) ------- ------- ------- TOTAL INCOME TAXES $ 2,356 $ 1,970 $ 1,230 - ------------------------------------------------=============================== As a U.S. corporation, Citicorp is subject to U.S. taxation currently on all of its foreign pretax earnings if earned by a foreign branch or when earnings are effectively repatriated if earned by a foreign subsidiary or affiliate. In addition, certain of Citicorp's U.S. income is subject to foreign income tax where the payor of such income is domiciled outside the United States. Foreign pretax earnings approximated $4.0 billion in 1996 and $3.6 billion in 1995 and 1994. The tax effects of significant temporary differences are presented in the accompanying table. The net deferred tax asset is included in Citicorp's consolidated balance sheet in other assets and represents the sum of the temporary difference components of those tax jurisdictions with net deductible amounts or tax carryforwards in future years. The net deferred tax liability is included in accrued taxes and other expenses and represents the sum of the temporary difference components of those tax jurisdictions with net taxable amounts in future years. COMPONENTS OF DEFERRED TAX BALANCES In Millions of Dollars at Year-End 1996 1995 - ------------------------------------------------------------------------------- NET DEFERRED TAX ASSET Tax Effects of Deductible Temporary Differences and Carryforwards: Credit Loss Deduction $ 2,127 $ 2,056 Interest Related Items 470 495 Unremitted Foreign Income 700 856 Foreign and State Loss Carryforwards 280 353 ------- ------- 3,577 3,760 ------- ------- Tax Effects of Taxable Temporary Differences: Lease Financing 709 702 Securities and Derivatives Transactions 642 657 Venture Capital 232 214 Mortgage Pass-Through Sales 87 95 Other(1) 217 30 ------- ------- 1,887 1,698 ------- ------- Net Potential Deferred Tax Assets 1,690 2,062 Valuation Allowance (402) (468) ------- ------- NET DEFERRED TAX ASSET $ 1,288 $ 1,594 - -----------------------------------------------------------==================== NET DEFERRED TAX LIABILITY(2) $ 501 $ 546 - ------------------------------------------------------------------------------- (1) Includes deductible temporary differences related to depreciation, prepaid items, and other less significant items. (2) Includes credit losses ($153 million in 1996 and $198 million in 1995), leasing ($111 million in 1996 and $128 million in 1995), and other less significant items. The 1996 net change in the valuation allowance related to deferred tax assets was a decrease of $66 million primarily relating to an improvement in current earnings in certain state and local jurisdictions. These amounts are included in the $425 million U.S. deferred expense component of total income taxes. The remaining valuation allowance of $402 million at December 31, 1996 is primarily reserved for specific U.S. federal, state and local, and foreign tax carryforwards or tax law restrictions on benefit recognition in these jurisdictions. Management believes that the realization of the recognized net deferred tax asset of $1,288 million is more likely than not, based on existing carryback ability, available tax planning strategies, and expectations as to future taxable income. The following table reconciles the statutory U.S. federal tax rate to the effective tax rate on income before cumulative effects of accounting changes: 1996 1995 1994 - ------------------------------------------------------------------------------- Statutory U.S. Federal Tax Rate 35.0% 35.0% 35.0% Increase (Reduction) in Taxes from: State and Local Income Taxes, Net of U.S. Federal Income Tax Benefit 2.8 2.9 2.5 Valuation Allowance Change Related to Current Year (0.9) -- (10.4) Taxes on Earnings Outside the U.S. 0.5 1.0 1.9 Other 0.2 (0.2) -- ---- ---- ---- 37.6 38.7 29.0 ---- ---- ---- Valuation Allowance Change Related to Future Years -- (0.7) (3.2) ---- ---- ---- EFFECTIVE TAX RATE 37.6% 38.0% 25.8% - ------------------------------------------------------========================= 70 10. EARNINGS PER SHARE
ON COMMON AND COMMON EQUIVALENT SHARES ASSUMING FULL DILUTION ---------------------------- ---------------------------- In Millions Except Per Share Amounts 1996 1995(1) 1994 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------------- EARNINGS Income Applicable to Common Stock Before Cumulative Effect of Accounting Change(2) $3,631 $3,126 $3,066 $3,631 $3,126 $3,066 Dividends on Conversion Preferred Stock, Series 15 -- 62 93 -- 62 93 Dividends on Convertible Preferred Stock -- -- -- 5 127 136 ------ ------ ------ ------ ------ ------ Income Applicable to Common Stock Before Cumulative Effect of Accounting Change, Adjusted 3,631 3,188 3,159 3,636 3,315 3,295 Cumulative Effect of Accounting Change -- -- (56) -- -- (56) ------ ------ ------ ------ ------ ------ TOTAL $3,631 $3,188 $3,103 $3,636 $3,315 $3,239 - ---------------------------------------------------------============================================================== SHARES Weighted-Average Common Shares Outstanding(3)(4) 469.6 411.5 391.2 469.6 411.5 391.2 Conversion Preferred Stock, Series 15 -- 16.8 39.9 -- 16.8 39.9 Other Common Equivalent Shares(5) 14.4 13.8 10.6 15.2 15.1 10.9 Convertible Preferred Stock -- -- -- 5.2 68.1 73.1 ------ ------ ------ ------ ------ ------ TOTAL 484.0 442.1 441.7 490.0 511.5 515.1 - ---------------------------------------------------------============================================================== EARNINGS PER SHARE Income Before Cumulative Effect of Accounting Change $ 7.50 $ 7.21 $ 7.15 $ 7.42 $ 6.48 $ 6.40 NET INCOME 7.50 7.21 7.03 7.42 6.48 6.29 - ---------------------------------------------------------==============================================================
(1) Assuming the Convertible Preferred Stock Series 12 and 13 had been converted as of January 1, 1995, earnings per share on common and common equivalent shares would have approximated earnings per share assuming full dilution for 1995. (2) For purposes of calculating earnings per share, income applicable to common stock is reduced for dividends on preferred stock. (3) Includes book value shares of 0.9 million in 1996, 1.0 million in 1995, and 1.1 million in 1994. (4) Average shares in 1996 and 1995 reflected 18.3 million and 5.8 million, respectively, shares repurchased under the stock repurchase program. (5) Includes the dilutive effect of stock options and stock purchase agreements computed using the treasury stock method and shares issuable under deferred stock awards. Number of shares also includes less than 1 million in 1995, and approximately 2 million in 1994 for book value shares issuable under stock option and Executive Incentive Compensation plans; use of the two-class method had no effect on the calculation for any year. 11. BUSINESS AND GEOGRAPHIC DISTRIBUTION OF REVENUE, INCOME (LOSS), AND AVERAGE ASSETS Citicorp attributes total revenue, income (loss) before taxes and the cumulative effect of accounting change, net income (loss), and average total assets to operations based on the domicile of the customer. U.S. possessions are included in their respective geographic areas. Because of the integration of global activities, it is not practicable to make a precise separation, and various assumptions must be made in arriving at allocations and adjustments used in presenting this data. The principal allocations and adjustments are: (1) allocation of expenses incurred by one area on behalf of another, including administrative costs, based on methods intended to reflect services provided; (2) allocation of tax expenses and benefits; (3) allocation of the difference between actual net credit losses and the provision for credit losses; and (4) allocation of other corporate items, including corporate staff costs, and long-term debt and other funding costs, based on each area's percentage of total average assets. The entire allowance for credit losses is available to absorb all probable credit losses inherent in the portfolio. For the purpose of calculating the accompanying geographic data, the amounts attributable to operations outside the U.S. are based upon year-end allowance amounts of $1,807 million for 1996, $1,809 million for 1995, and $1,800 million for 1994, and credit loss provision amounts of $727 million for 1996, $737 million for 1995, and $561 million for 1994. 71 BUSINESS AND GEOGRAPHIC DISTRIBUTION OF REVENUE, INCOME (LOSS), AND AVERAGE ASSETS
INCOME (LOSS) BEFORE TAXES AND CUMULATIVE EFFECT TOTAL REVENUE(1) OF ACCOUNTING CHANGE $ MILLIONS $ MILLIONS ------------------------------- ----------------------------------- 1996 1995(2) 1994(2) 1996 1995(2) 1994(2) - ---------------------------------------------------------------------------------------------------------- BUSINESS DISTRIBUTION Consumer Citibanking $ 5,764 $ 5,412 $ 4,862 $1,040 $ 866 $ 609 Cards 5,289 5,080 4,630 1,526 1,750 1,717 Private Bank 1,045 929 968 345 271 284 Corporate Banking Emerging Markets 3,433 2,886 2,519 1,796 1,516 1,404 Global Relationship Banking 3,756 3,639 3,193 1,004 844 408 Corporate Items 909 732 576 362 338 189 ------- ------- ------- ------ ------ ------- 20,196 18,678 16,748 6,073 5,585 4,611 Cumulative Effect of Accounting Change(3) -- -- -- -- -- -- ------- ------- ------- ------ ------ ------- TOTAL $20,196 $18,678 $16,748 $6,073 $5,585 $ 4,611 - -----------------------------------======================================================================= GEOGRAPHIC DISTRIBUTION United States $ 9,344 $ 8,843 $ 8,381 $2,726(4) $2,500(4) $ 1,946(4) Western Europe 3,365 3,352 2,587 577 502 328 Other(5) 586 564 465 76 27 (81) ------- ------- ------- ------ ------ ------- Total Developed Markets 13,295 12,759 11,433 3,379 3,029 2,193 ------- ------- ------- ------ ------ ------- Latin America(6) 2,743 2,493 2,297 917 937 1,003 Asia Pacific 3,286 2,738 2,386 1,414 1,266 1,025 Other(7) 872 688 632 363 353 390 ------- ------- ------- ------ ------ ------- Total Emerging Markets 6,901 5,919 5,315 2,694 2,556 2,418 ------- ------- ------- ------ ------ ------- TOTAL $20,196 $18,678 $16,748 $6,073 $5,585 $ 4,611 - -----------------------------------======================================================================= NET INCOME (LOSS) AVERAGE ASSETS $ MILLIONS $ BILLIONS --------------------------------- ---------------------- 1996 1995(2) 1994(2) 1996 1995(2) 1994(2) - ------------------------------------------------------------------------------------------------ BUSINESS DISTRIBUTION Consumer Citibanking $ 725 $ 571 $ 421 $ 81 $ 79 $ 72 Cards 1,039 1,172 1,124 29 26 19 Private Bank 279 225 238 16 15 15 Corporate Banking Emerging Markets 1,465 1,148 1,037 59 50 46 Global Relationship Banking 714 630 271 80 94 104 Corporate Items (434) (282) 331 5 5 5 ------- ------- ------- ---- ---- ---- 3,788 3,464 3,422 270 269 261 Cumulative Effect of Accounting Change(3) -- -- (56) -- -- -- ------- ------- ------- ---- ---- ---- TOTAL $ 3,788 $ 3,464 $ 3,366 $270 $269 $261 - -----------------------------------============================================================= GEOGRAPHIC DISTRIBUTION United States $ 1,642 $ 1,477 $ 1,709 $109 $114 $118 Western Europe 321 298 159 53 54 51 Other(5) 41 22 (44) 13 15 14 ------- ------- ------- ---- ---- ---- Total Developed Markets 2,004 1,797 1,824 175 183 183 ------- ------- ------- ---- ---- ---- Latin America(6) 707 653 694 28 30 27 Asia Pacific 866 796 618 54 46 42 Other(7) 211 218 230 13 10 9 ------- ------- ------- ---- ---- ---- Total Emerging Markets 1,784 1,667 1,542 95 86 78 ------- ------- ------- ---- ---- ---- TOTAL $ 3,788 $ 3,464 $ 3,366 $270 $269 $261 - -----------------------------------=============================================================
(1) Includes net interest revenue and fees, commissions and other revenue. (2) Reclassified to conform to the 1996 presentation. (3) Represents cumulative effect of adopting SFAS No. 112 as of January 1, 1994. (4) Includes approximately $62 million in 1996, $58 million in 1995, and $41 million in 1994 of tax-exempt income, reducing the federal income tax provision. (5) Primarily Japan and Canada. (6) Primarily Mexico, the Caribbean, Central and South America. (7) Primarily Central and Eastern Europe, Middle East, and Africa. 12. COMMITMENTS AND CONTINGENT LIABILITIES Citicorp and its subsidiaries are obligated under a number of non- cancelable leases for premises and equipment. Minimum rental commitments on non-cancelable leases were in the aggregate $2.3 billion, and for each of the five years subsequent to December 31, 1996, were $387 million (1997), $348 million (1998), $320 million (1999), $254 million (2000), and $208 million (2001). The minimum rental commitments do not include minimum sublease rentals under non- cancelable subleases of $165 million. Most of the leases have renewal or purchase options and escalation clauses. Rental expense was $585 million in 1996, excluding $79 million of sublease rental income, $547 million in 1995, excluding $74 million of sublease rental income, and $548 million in 1994, excluding $68 million of sublease rental income. At December 31, 1996, certain investment securities, trading account assets, and other assets with a carrying value of $11.1 billion were pledged as collateral for borrowings, to secure public and trust deposits, and for other purposes. Various legal proceedings are pending against Citicorp and its subsidiaries. Citicorp management considers that the aggregate liability, if any, resulting from these proceedings will not be material to Citicorp's financial position or results of operations. 13. FUTURE IMPACT OF NEW ACCOUNTING STANDARDS In June 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." The statement provides standards for distinguishing transfers of financial assets that are sales from those that are secured borrowings, and provides guidance on the recognition and measurement of asset servicing contracts and on debt extinguishments. As issued, SFAS No. 125 is effective for transactions occurring after December 31, 1996. However, as a result of an amendment to SFAS No. 125 issued by the FASB in December 1996, certain provisions of SFAS No. 125 are deferred for an additional year. Adoption of the new accounting standard is not expected to have a material impact on Citicorp. 72 14. STOCKHOLDER'S EQUITY OF CITIBANK, N.A. CHANGES IN STOCKHOLDER'S EQUITY In Millions of Dollars 1996 1995 1994 - -------------------------------------------------------------------------------- Balance at Beginning of Year $ 14,966 $ 14,140 $ 11,148 Net Income 2,743 2,332 1,962 Dividends (2,300) (1,500) -- Contributions from Parent 57 -- 651 Change in Net Unrealized Gains on Securities Available for Sale 533 97 (100) Effect of Transfer from Securities Held to Maturity to Securities Available for Sale -- (262) -- Net Unrealized Gains Upon Adoption of SFAS No. 115 -- -- 320 Foreign Currency Translation (31) 20 85 Other 330 139 74 -------- -------- -------- BALANCE AT END OF YEAR $ 16,298 $ 14,966 $ 14,140 - -------------------------------------------===================================== Authorized capital stock of Citibank was 40 million shares at December 31, 1996 and 1995. 15. CITICORP (PARENT COMPANY ONLY) The Parent Company is a legal entity separate and distinct from Citibank, N.A. and its other subsidiaries and affiliates. There are various legal limitations on the extent to which Citicorp's banking subsidiaries may extend credit, pay dividends or otherwise supply funds to Citicorp. The approval of the Office of the Comptroller of the Currency is required if total dividends declared by a national bank in any calendar year exceed net profits (as defined) for that year combined with its retained net profits for the preceding two years. In addition, dividends for such a bank may not be paid in excess of the bank's undivided profits. State-chartered bank subsidiaries are subject to dividend limitations imposed by applicable state law. Citicorp's national and state-chartered bank subsidiaries can declare dividends to their respective parent companies in 1997, without regulatory approval, of approximately $2.3 billion, adjusted by the effect of their net income (loss) for 1997 up to the date of any such dividend declaration. 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 its bank subsidiaries can distribute dividends to Citicorp of approximately $1.7 billion of the available $2.3 billion, adjusted by the effect of their net income (loss) up to the date of any such dividend declaration. Citicorp also receives dividends from its non-bank subsidiaries. These nonbank subsidiaries are generally not subject to regulatory restrictions on their payment of dividends except that the approval of the Office of Thrift Supervision ("OTS") may be required if total dividends declared by a savings association in any calendar year exceed amounts specified by that agency's regulations. CONDENSED STATEMENT OF INCOME Citicorp (Parent Company Only) In Millions of Dollars 1996 1995 1994 - -------------------------------------------------------------------------------- REVENUE Dividends from Subsidiary Banks $2,400 $1,600 $ 100 Dividends from Subsidiaries Other Than Banks 1,099 730 900 Interest from Subsidiaries 789 787 579 Other Revenue(1) 67 72 36 ------ ------ ------- 4,355 3,189 1,615 ------ ------ ------- EXPENSE Interest on Other Borrowed Funds 101 132 102 Interest and Fees Paid to Subsidiaries 126 137 111 Interest on Long-Term Debt 890 947 730 Other Expense 22 14 21 ------ ------ ------- 1,139 1,230 964 ------ ------ ------- Income Before Taxes and Equity in Undistributed Income of Subsidiaries 3,216 1,959 651 Income Tax Benefit--Current 88 102 132 Equity in Undistributed Income of Subsidiaries, Before Cumulative Effect of Accounting Change 484 1,403 2,639 ------ ------ ------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE OF SUBSIDIARIES 3,788 3,464 3,422 Equity in Cumulative Effect of Accounting Change of Subsidiaries -- -- (56) ------ ------ ------- NET INCOME $3,788 $3,464 $ 3,366 - --------------------------------------------------============================== (1) Includes net securities gains of $13 million, $1 million, and $2 million in 1996, 1995, and 1994, respectively. 73 CONDENSED BALANCE SHEET Citicorp (Parent Company Only) In Millions of Dollars DECEMBER 31, 1996 December 31, 1995 - -------------------------------------------------------------------------------- ASSETS Deposits with Subsidiary Banks, Principally Interest-Bearing $ 2,201 $ 2,424 Securities--Available for Sale 1,685 1,207 Investments in and Advances to: Citibank, N.A. and Other Subsidiary Banks 24,567 23,461 Subsidiaries Other Than Banks 7,771 8,386 Other Assets 534 477 ------- ------- TOTAL $36,758 $35,955 - ------------------------------------------------------========================== LIABILITIES AND STOCKHOLDERS' EQUITY Purchased Funds and Other Borrowings $ 968 $ 1,466 Advance from Subsidiaries 197 94 Other Liabilities 1,399 1,240 Long-Term Debt (Note 1) 13,163 13,574 Junior Subordinated Deferrable Interest Debentures Held by Trust (Note 1) 309 -- Stockholders' Equity 20,722 19,581 ------- ------- TOTAL $36,758 $35,955 - ------------------------------------------------------========================== CONDENSED STATEMENT OF CASH FLOWS Citicorp (Parent Company Only) In Millions of Dollars 1996 1995 1994 - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3,788 $ 3,464 $ 3,366 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Equity in Undistributed Income of Subsidiaries, Before Cumulative Effect of Accounting Change (484) (1,403) (2,639) Equity in Cumulative Effect of Accounting Change of Subsidiaries -- -- 56 Other, Net 29 203 (215) --------- --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 3,333 2,264 568 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Securities: Purchases (3,216) (2,394) (5,710) Sales 1,581 471 2,602 Maturities 1,175 1,525 4,059 Subsidiaries: Investments and Advances (32,871) (78,370) (277,810) Repayment of Advances 33,780 78,670 275,214 --------- --------- --------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 449 (98) (1,645) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Purchased Funds and Other Borrowings: Proceeds 5,483 5,194 35,701 Repayments (5,980) (5,354) (35,178) Advances from Subsidiaries: Proceeds 98 5 1,419 Repayments (2) (84) (1,321) Long-Term Debt: Proceeds 2,470 2,758 3,065 Repayments (2,839) (2,616) (2,819) Proceeds from Issuance of Junior Subordinated Deferrable Interest Debentures Held by Trust 309 -- -- Preferred Stock: Proceeds from Issuance -- 390 388 Redemption -- (125) (100) Common Stock Issuance Proceeds 537 416 226 Treasury Stock Transactions (3,069) (1,531) (5) Dividends Paid (1,012) (835) (533) --------- --------- --------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (4,005) (1,782) 843 --------- --------- --------- Net (Decrease) Increase in Deposits with Subsidiary Banks (223) 384 (234) Deposits with Subsidiary Banks at Beginning of Year 2,424 2,040 2,274 --------- --------- --------- DEPOSITS WITH SUBSIDIARY BANKS AT END OF YEAR $ 2,201 $ 2,424 $ 2,040 - ----------------------------------------------================================= Cash Paid During the Year for: Interest $ 929 $ 980 $ 779 Income Taxes 794 783 785 - -------------------------------------------------------------------------------- 74 QUARTERLY FINANCIAL INFORMATION
Citicorp and Subsidiaries In Millions of Dollars Except Share Data 1996 1995 - ------------------------------------------------------------------------------ -------------------------------------- 4th 3rd 2nd 1st 4th 3rd 2nd 1st ------------------------------------------------------------------------------ Net Interest Revenue $ 2,818 $ 2,709 $ 2,728 $ 2,685 $ 2,560 $ 2,598 $ 2,468 $ 2,325 Fees, Commissions, and Other Revenue 2,547 2,301 2,265 2,143 2,229 2,159 2,221 2,118 -------- -------- -------- -------- -------- -------- -------- -------- TOTAL REVENUE 5,365 5,010 4,993 4,828 4,789 4,757 4,689 4,443 Provision for Credit Losses 504 449 479 494 531 576 493 391 Operating Expense 3,281 3,078 2,978 2,860 2,818 2,793 2,798 2,693 -------- -------- -------- -------- -------- -------- -------- -------- INCOME BEFORE TAXES 1,580 1,483 1,536 1,474 1,440 1,388 1,398 1,359 Income Taxes 593 548 584 560 535 511 545 530 -------- -------- -------- -------- -------- -------- -------- -------- NET INCOME $ 987 $ 935 $ 952 $ 914 $ 905 $ 877 $ 853 $ 829 - ----------------------------------------============================================================================== EARNINGS PER SHARE(1)(2) On Common and Common Equivalent Shares $ 1.97 $ 1.85 $ 1.86 $ 1.82 $ 1.89 $ 1.79 $ 1.76 $ 1.71 Assuming Full Dilution 1.97 1.85 1.86 1.75 1.72 1.62 1.57 1.53 - ---------------------------------------------------------------------------------------------------------------------- CASH DIVIDENDS DECLARED Preferred Stock $ 38 $ 38 $ 38 $ 47 $ 72 $ 83 $ 96 $ 92 Common Stock 211 213 216 210 127 127 119 119 Common Stock, Per Share 0.45 0.45 0.45 0.45 0.30 0.30 0.30 0.30 - ---------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $281,018 $271,930 $266,824 $263,566 $256,853 $257,536 $256,994 $269,013 - ---------------------------------------------------------------------------------------------------------------------- COMMON STOCK PRICE RANGE(3) High $109 1/4 $90 5/8 $86 5/8 $81 $73 5/8 $71 7/8 $59 3/4 $45 Low 91 3/8 76 1/4 75 3/8 62 1/2 63 5/8 58 3/8 42 5/8 38 7/8 Close 103 90 5/8 82 3/4 80 67 1/4 70 3/4 57 7/8 42 5/8 - ----------------------------------------------------------------------------------------------------------------------
(1) See Note 10 to the consolidated financial statements. (2) Full year 1995 earnings per share amounts exceed the amounts that would be derived from adding the quarterly periods, since common equivalent share amounts in the first three quarters of 1995 related to unredeemed Series 15 preferred shares, computed under applicable accounting guidelines, were higher based on market prices in those quarters. (3) Based on the New York Stock Exchange Composite Listing. 75 10-K CROSS-REFERENCE INDEX This Annual Report and Form 10-K incorporate into a single document the requirements of the accounting profession and the Securities and Exchange Commission, including a comprehensive explanation of 1996 results. Certain statistical data required by the Securities and Exchange Commission is included on pages 26 and 75 through 83. - -------------------------------------------------------------------------------- PART I PAGE ITEM 1 BUSINESS .................................. 4-23, 25-38, 41-42, 84-85 ITEM 2 PROPERTIES ....................................................... 85 ITEM 3 LEGAL PROCEEDINGS ............................................ 72,84 ITEM 4 NOT APPLICABLE - -------------------------------------------------------------------------------- PART II ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ...................................... 73,75,90 ITEM 6 SELECTED FINANCIAL DATA ...................................... 26,44 ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..................... 4-23,26-48,73,74,79,82,85 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............................................ 50-83 ITEM 9 NOT APPLICABLE - -------------------------------------------------------------------------------- PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ................................................. * ITEM 11 EXECUTIVE COMPENSATION ............................................ * ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .................................. * ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...................................................... * - -------------------------------------------------------------------------------- PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ............................... 86 - -------------------------------------------------------------------------------- * Citicorp's 1997 Proxy Statement is incorporated herein by reference. Such incorporation by reference shall not include the information referred to in Item 402(a)(8) of Regulation S-K. 76 FINANCIAL DATA SUPPLEMENT AVERAGE BALANCES AND INTEREST RATES, TAXABLE EQUIVALENT BASIS(1)(2) Citicorp and Subsidiaries
AVERAGE VOLUME INTEREST % AVERAGE RATE - ------------------------------------------------------------------------ ---------------------------- ---------------------- In Millions of Dollars 1996 1995 1994 1996 1995 1994 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------ INTEREST REVENUE LOANS (NET OF UNEARNED INCOME)(3) Consumer Loans In U.S. Offices $ 54,179 $ 50,918 $ 44,290 $ 5,749 $ 5,607 $ 4,544 10.61 11.01 10.26 In Offices Outside the U.S.(4) 51,282 48,811 42,555 6,489 6,251 5,309 12.65 12.81 12.48 -------- -------- -------- -------- -------- -------- Total Consumer Loans 105,461 99,729 86,845 12,238 11,858 9,853 11.60 11.89 11.35 -------- -------- -------- -------- -------- -------- Commercial Loans In U.S. Offices Commercial and Industrial 8,927 9,982 10,284 827 883 770 9.26 8.85 7.49 Mortgage and Real Estate 4,256 5,413 6,628 330 413 409 7.75 7.63 6.17 Loans to Financial Institutions 481 426 438 41 20 17 8.52 4.69 3.88 Lease Financing 3,219 3,198 3,481 211 231 238 6.55 7.22 6.84 In Offices Outside the U.S.(4) 43,387 37,921 34,397 4,867 4,405 4,954 11.22 11.62 14.40 -------- -------- -------- -------- -------- -------- Total Commercial Loans 60,270 56,940 55,228 6,276 5,952 6,388 10.41 10.45 11.57 -------- -------- -------- -------- -------- -------- Total Loans 165,731 156,669 142,073 18,514 17,810 16,241 11.17 11.37 11.43 -------- -------- -------- -------- -------- -------- FEDERAL FUNDS SOLD AND RESALE AGREEMENTS In U.S. Offices 8,774 11,816 14,924 460 675 593 5.24 5.71 3.97 In Offices Outside the U.S.(4) 3,730 2,408 2,725 442 381 2,725 11.85 15.82 100.00 -------- -------- -------- -------- -------- -------- Total 12,504 14,224 17,649 902 1,056 3,318 7.21 7.42 18.80 -------- -------- -------- -------- -------- -------- SECURITIES At Cost/Lower of Cost or Market In U.S. Offices--Taxable -- 1,460 1,962 -- 96 114 -- 6.58 5.81 In Offices Outside the U.S.(4) -- 3,090 3,173 -- 236 204 -- 7.64 6.43 -------- -------- -------- -------- -------- -------- Total -- 4,550 5,135 -- 332 318 -- 7.30 6.19 -------- -------- -------- -------- -------- -------- At Fair Value In U.S. Offices Taxable 7,276 5,419 4,263 351 254 179 4.82 4.69 4.20 Exempt from U.S. Income Tax 1,708 1,599 1,297 110 107 90 6.44 6.69 6.94 In Offices Outside the U.S.(4) 15,189 8,465 7,868 1,342 879 702 8.84 10.38 8.92 -------- -------- -------- -------- -------- -------- Total 24,173 15,483 13,428 1,803 1,240 971 7.46 8.01 7.23 -------- -------- -------- -------- -------- -------- Total Securities 24,173 20,033 18,563 1,803 1,572 1,289 7.46 7.85 6.94 -------- -------- -------- -------- -------- -------- TRADING ACCOUNT ASSETS(5) In U.S. Offices 5,662 10,879 14,210 333 713 862 5.88 6.55 6.07 In Offices Outside the U.S.(4) 11,413 10,871 11,214 979 1,075 1,234 8.58 9.89 11.00 -------- -------- -------- -------- -------- -------- Total 17,075 21,750 25,424 1,312 1,788 2,096 7.68 8.22 8.24 -------- -------- -------- -------- -------- -------- DEPOSITS AT INTEREST WITH BANKS Principally in Offices Outside the U.S.(4) 12,559 11,288 9,609 858 770 895 6.83 6.82 9.31 -------- -------- -------- -------- -------- -------- Interest-Earning Assets 232,042 223,964 213,318 $ 23,389 $ 22,996 $ 23,839 10.08 10.27 11.18 -------- -------- -------- ----- ----- ----- Non-Interest-Earning Assets 38,112 44,817 47,686 -------- -------- -------- TOTAL ASSETS $270,154 $268,781 $261,004 - --------------------------------------------================================================================================== INTEREST EXPENSE DEPOSITS In U.S. Offices Savings Deposits(6) $ 25,927 $ 24,715 $ 25,935 $ 756 $ 758 $ 545 2.92 3.07 2.10 Other Time Deposits 12,556 11,756 11,148 782 741 646 6.23 6.30 5.79 In Offices Outside the U.S.(4) 116,565 110,236 98,536 7,436 7,403 7,805 6.38 6.72 7.92 -------- -------- -------- -------- -------- -------- Total 155,048 146,707 135,619 8,974 8,902 8,996 5.79 6.07 6.63 -------- -------- -------- -------- -------- -------- TRADING ACCOUNT LIABILITIES(5) In U.S. Offices 2,463 2,851 3,052 142 179 174 5.77 6.28 5.70 In Offices Outside the U.S.(4) 2,089 1,328 1,641 171 121 93 8.19 9.11 5.67 -------- -------- -------- -------- -------- -------- Total 4,552 4,179 4,693 313 300 267 6.88 7.18 5.69 -------- -------- -------- -------- -------- -------- PURCHASED FUNDS AND OTHER BORROWINGS In U.S. Offices 14,286 20,805 25,613 888 1,306 1,238 6.22 6.28 4.83 In Offices Outside the U.S.(4) 6,271 6,053 7,173 887 1,073 2,701 14.14 17.73 37.66 -------- -------- -------- -------- -------- -------- Total 20,557 26,858 32,786 1,775 2,379 3,939 8.63 8.86 12.01 -------- -------- -------- -------- -------- -------- LONG-TERM DEBT In U.S. Offices 14,661 14,736 14,240 921 1,063 856 6.28 7.21 6.01 In Offices Outside the U.S.(4) 4,356 3,492 2,724 426 368 844 9.78 10.54 30.98 -------- -------- -------- -------- -------- -------- Total 19,017 18,228 16,964 1,347 1,431 1,700 7.08 7.85 10.02 -------- -------- -------- -------- -------- -------- Total Interest-Bearing Liabilities 199,174 195,972 190,062 $ 12,409 $ 13,012 $ 14,902 6.23 6.64 7.84 -------- -------- -------- ----- ----- ----- Demand Deposits in U.S. Offices 12,368 11,636 12,363 Other Non-Interest-Bearing Liabilities 38,625 42,279 42,878 Total Stockholders' Equity 19,987 18,894 15,701 -------- -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $270,154 $268,781 $261,004 - --------------------------------------------================================================================================== NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE INTEREST-EARNING ASSETS In U.S. Offices(7) $ 94,544 $101,161 $101,777 $ 4,517 $ 4,238 $ 3,896 4.78 4.19 3.83 In Offices Outside the U.S.(7) 137,498 122,803 111,541 6,463 5,746 5,041 4.70 4.68 4.52 -------- -------- -------- -------- -------- -------- TOTAL $232,042 $223,964 $213,318 $ 10,980 $ 9,984 $ 8,937 4.73 4.46 4.19 - --------------------------------------------==================================================================================
(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 1 to the consolidated financial statements. (3) Loans in the table above include cash-basis loans. (4) Average rates in offices outside the U.S. may reflect prevailing local interest rates, including the effects of inflation and monetary correction in certain Latin American 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. 77 ANALYSIS OF CHANGES IN NET INTEREST REVENUE
TAXABLE EQUIVALENT BASIS(1) 1996 vs 1995 1995 vs 1994 - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) INCREASE (DECREASE) DUE TO CHANGE IN: DUE TO CHANGE IN: ------------------- -------- AVERAGE AVERAGE NET AVERAGE AVERAGE NET In Millions of Dollars VOLUME RATE CHANGE(2) VOLUME RATE CHANGE(2) - ----------------------------------------------------------------------- ----------------------------- LOANS--CONSUMER In U.S. Offices $ 351 $ (209) $ 142 $ 713 $ 350 $ 1,063 In Offices Outside the U.S.(3) 313 (75) 238 798 144 942 ------- ------- ------- ------- ------- ------- TOTAL 664 (284) 380 1,511 494 2,005 ------- ------- ------- ------- ------- ------- LOANS--COMMERCIAL In U.S. Offices (177) 39 (138) (132) 245 113 In Offices Outside the U.S.(3) 617 (155) 462 474 (1,023) (549) ------- ------- ------- ------- ------- ------- TOTAL 440 (116) 324 342 (778) (436) ------- ------- ------- ------- ------- ------- Total Loans 1,104 (400) 704 1,853 (284) 1,569 ------- ------- ------- ------- ------- ------- FEDERAL FUNDS SOLD AND RESALE AGREEMENTS In U.S. Offices (163) (52) (215) (141) 223 82 In Offices Outside the U.S.(3) 173 (112) 61 (285) (2,059) (2,344) ------- ------- ------- ------- ------- ------- TOTAL 10 (164) (154) (426) (1,836) (2,262) ------- ------- ------- ------- ------- ------- SECURITIES In U.S. Offices 27 (23) 4 51 23 74 In Offices Outside the U.S.(3) 327 (100) 227 44 165 209 ------- ------- ------- ------- ------- ------- TOTAL 354 (123) 231 95 188 283 ------- ------- ------- ------- ------- ------- TRADING ACCOUNT ASSETS In U.S. Offices (313) (67) (380) (214) 65 (149) In Offices Outside the U.S.(3) 52 (148) (96) (37) (122) (159) ------- ------- ------- ------- ------- ------- TOTAL (261) (215) (476) (251) (57) (308) ------- ------- ------- ------- ------- ------- DEPOSITS AT INTEREST WITH BANKS Principally in Offices Outside the U.S.(3) 87 1 88 140 (265) (125) ------- ------- ------- ------- ------- ------- TOTAL INTEREST REVENUE 1,294 (901) 393 1,411 (2,254) (843) - ------------------------------------------------------------------------------------------------------- DEPOSITS In U.S. Offices 81 (42) 39 (20) 328 308 In Offices Outside the U.S.(3) 414 (381) 33 865 (1,267) (402) ------- ------- ------- ------- ------- ------- TOTAL 495 (423) 72 845 (939) (94) ------- ------- ------- ------- ------- ------- TRADING ACCOUNT LIABILITIES In U.S. Offices (23) (14) (37) (12) 17 5 In Offices Outside the U.S.(3) 63 (13) 50 (20) 48 28 ------- ------- ------- ------- ------- ------- TOTAL 40 (27) 13 (32) 65 33 ------- ------- ------- ------- ------- ------- PURCHASED FUNDS AND OTHER BORROWINGS In U.S. Offices (405) (13) (418) (259) 327 68 In Offices Outside the U.S.(3) 37 (223) (186) (371) (1,257) (1,628) ------- ------- ------- ------- ------- ------- TOTAL (368) (236) (604) (630) (930) (1,560) ------- ------- ------- ------- ------- ------- LONG-TERM DEBT In U.S. Offices (5) (137) (142) 31 176 207 In Offices Outside the U.S.(3) 86 (28) 58 191 (667) (476) ------- ------- ------- ------- ------- ------- TOTAL 81 (165) (84) 222 (491) (269) ------- ------- ------- ------- ------- ------- TOTAL INTEREST EXPENSE 248 (851) (603) 405 (2,295) (1,890) - ------------------------------------------------------------------------------------------------------- NET INTEREST REVENUE $ 1,046 $ (50) $ 996 $ 1,006 $ 41 $ 1,047 - --------------------------------------------===========================================================
(1) The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35%. (2) Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total "net change." (3) Changes in average rates in offices outside the U.S. may reflect changes in prevailing local interest rates, including the effects of inflation and monetary correction in certain Latin American countries. 78 LOANS OUTSTANDING
In Millions of Dollars at Year-End 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------- CONSUMER LOANS In U.S. Offices Mortgage and Real Estate $ 23,421 $ 22,604 $ 21,089 $ 22,719 $ 26,140 Installment, Revolving Credit, and Other 36,285 32,429 29,523 22,490 21,509 Lease Financing -- -- 32 152 353 --------- --------- --------- --------- --------- 59,706 55,033 50,644 45,361 48,002 --------- --------- --------- --------- --------- In Offices Outside the U.S. Mortgage and Real Estate 18,379 18,240 16,830 13,908 12,863 Installment, Revolving Credit, and Other 33,905 32,521 29,303 25,355 23,011 Lease Financing 754 765 732 672 746 --------- --------- --------- --------- --------- 53,038 51,526 46,865 39,935 36,620 --------- --------- --------- --------- --------- 112,744 106,559 97,509 85,296 84,622 Unearned Income (897) (916) (909) (942) (1,169) --------- --------- --------- --------- --------- Consumer Loans--Net 111,847 105,643 96,600 84,354 83,453 --------- --------- --------- --------- --------- COMMERCIAL LOANS In U.S. Offices Commercial and Industrial 8,747 9,509 10,236 8,969 10,168 Mortgage and Real Estate 2,977 4,681 5,616 7,440 9,194 Loans to Financial Institutions 1,035 365 297 269 271 Lease Financing 3,017 3,239 3,271 3,541 3,547 --------- --------- --------- --------- --------- 15,776 17,794 19,420 20,219 23,180 --------- --------- --------- --------- --------- In Offices Outside the U.S. Commercial and Industrial 36,901 32,966 27,120 23,624 21,332 Mortgage and Real Estate 1,815 1,901 1,995 2,201 2,657 Loans to Financial Institutions 4,837 4,229 3,263 3,123 3,300 Governments and Official Institutions 2,252 2,180 3,265 4,807 5,055 Lease Financing 1,294 1,098 934 800 927 --------- --------- --------- --------- --------- 47,099 42,374 36,577 34,555 33,271 --------- --------- --------- --------- --------- 62,875 60,168 55,997 54,774 56,451 Unearned Income (110) (169) (177) (161) (194) --------- --------- --------- --------- --------- Commercial Loans--Net 62,765 59,999 55,820 54,613 56,257 --------- --------- --------- --------- --------- Total Loans--Net of Unearned Income 174,612 165,642 152,420 138,967 139,710 Allowance for Credit Losses (5,503) (5,368) (5,155) (4,379) (3,859) --------- --------- --------- --------- --------- TOTAL LOANS--NET OF UNEARNED INCOME AND ALLOWANCE FOR CREDIT LOSSES $ 169,109 $ 160,274 $ 147,265 $ 134,588 $ 135,851 - --------------------------------------------=========================================================
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES MATURITIES OF THE GROSS COMMERCIAL LOAN PORTFOLIO
DUE OVER 1 BUT WITHIN WITHIN OVER In Millions of Dollars at Year-End 1 YEAR 5 YEARS 5 YEARS TOTAL - ----------------------------------------------------------------------------------------------------- In U.S. Offices Commercial and Industrial Loans $ 3,566 $ 3,715 $ 1,466 $ 8,747 Mortgage and Real Estate 900 1,614 463 2,977 Loans to Financial Institutions 507 388 140 1,035 Lease Financing 690 1,386 941 3,017 In Offices Outside the U.S. 34,322 9,106 3,671 47,099 --------- --------- --------- --------- TOTAL $ 39,985 $ 16,209 $ 6,681 $ 62,875 - --------------------------------------------------------============================================= Sensitivity of Loans Due After One Year to Changes in Interest Rates(1) Loans at Predetermined Interest Rates $ 3,942 $ 1,886 Loans at Floating or Adjustable Interest Rates 12,267 4,795 --------- --------- TOTAL $ 16,209 $ 6,681 - --------------------------------------------------------------------=====================------------
(1) Based on contractual terms. Repricing characteristics may effectively be modified from time to time using derivative contracts. See Note 1 to the consolidated financial statements. 79 CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS(1)
In Millions of Dollars at Year-End 1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------- COMMERCIAL CASH-BASIS LOANS Collateral-Dependent (at Lower of Cost or Collateral Value)(2) $ 263 $ 779 $1,347 $2,704 $4,086 Other 642 755 770 1,970 2,920 ------ ------ ------ ------ ------ TOTAL COMMERCIAL CASH-BASIS LOANS $ 905 $1,534 $2,117 $4,674 $7,006 - --------------------------------------------------====================================== COMMERCIAL CASH-BASIS LOANS In U.S. Offices $ 292 $ 925 $1,547 $2,841 $4,689 In Offices Outside the U.S. 613 609 570 1,833 2,317 ------ ------ ------ ------ ------ TOTAL COMMERCIAL CASH-BASIS LOANS $ 905 $1,534 $2,117 $4,674 $7,006 - --------------------------------------------------====================================== COMMERCIAL RENEGOTIATED LOANS In U.S. Offices $ 264 $ 309 $ 563 $ 641 $ 267 In Offices Outside the U.S. 57 112 155 67 56 ------ ------ ------ ------ ------ TOTAL COMMERCIAL RENEGOTIATED LOANS $ 321 $ 421 $ 718 $ 708 $ 323 - --------------------------------------------------====================================== CONSUMER LOANS ON WHICH ACCRUAL OF INTEREST HAD BEEN SUSPENDED In U.S. Offices $1,116 $1,413 $1,538 $1,965 $2,323 In Offices Outside the U.S. 1,071 1,247 1,066 948 849 ------ ------ ------ ------ ------ TOTAL CONSUMER LOANS ON WHICH ACCRUAL OF INTEREST HAD BEEN SUSPENDED $2,187 $2,660 $2,604 $2,913 $3,172 - --------------------------------------------------====================================== ACCRUING LOANS 90 OR MORE DAYS DELINQUENT(3) In U.S. Offices $ 696 $ 499 $ 415 $ 635 $ 671 In Offices Outside the U.S. 422 498 460 421 382 ------ ------ ------ ------ ------ TOTAL ACCRUING LOANS 90 OR MORE DAYS DELINQUENT $1,118 $ 997 $ 875 $1,056 $1,053 - --------------------------------------------------======================================
(1) For a discussion of risks in the consumer loan portfolio, see pages 34 and 35, and of commercial cash-basis loans, see page 37. (2) A cash-basis loan is defined as collateral dependent when repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment, in which case the loans are written down to the lower of cost or collateral value. (3) Includes consumer loans of $1.0 billion, $951 million, $828 million, $802 million, and $857 million at December 31, 1996, 1995, 1994, 1993, and 1992, respectively, of which $239 million, $208 million, $150 million, $114 million, and $109 million, respectively, are government-guaranteed student loans. OTHER REAL ESTATE OWNED (OREO) AND ASSETS PENDING DISPOSITION(1)
In Millions of Dollars at Year-End 1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------- CONSUMER OREO $ 452 $ 529 $ 569 $ 733 $ 869 COMMERCIAL OREO 614 625 958 1,637 1,875 ------ ------ ------ ------ ------ TOTAL OREO $1,066 $1,154 $1,527 $2,370 $2,744 - --------------------------------------------------====================================== ASSETS PENDING DISPOSITION(2) $ 160 $ 205 $ 195 $ 429 $ 346 - --------------------------------------------------======================================
(1) Carried at lower of cost or collateral value. (2) Represents Consumer residential mortgage loans that have a high probability of foreclosure. FOREGONE INTEREST REVENUE ON LOANS(1) In In Offices U.S. Outside 1996 In Millions of Dollars Offices the U.S. Total - -------------------------------------------------------------------------------- Interest Revenue that Would Have Been Accrued at Original Contractual Rates(2) $232 $299 $531 Amount Recognized as Interest Revenue(2) 153 107 260 ---- ---- ---- FOREGONE INTEREST REVENUE $ 79 $192 $271 - ----------------------------------------------------============================ (1) Relates to commercial cash-basis and renegotiated loans and consumer loans on which accrual of interest had been suspended. (2) Interest revenue in offices outside the U.S. may reflect prevailing local interest rates, including the effects of inflation and monetary correction in certain countries. 80 DETAILS OF CREDIT LOSS EXPERIENCE
In Millions of Dollars at Year-End 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------ ALLOWANCE FOR CREDIT LOSSES AT BEGINNING OF YEAR $ 5,368 $ 5,155 $ 4,379 $ 3,859 $ 3,308 ------- ------- ------- ------- ------- ADDITIONS Provision for Credit Losses 1,926 1,991 1,881 2,600 4,146 DEDUCTIONS GROSS CREDIT LOSSES CONSUMER(1) In U.S. Offices 1,296 1,137 1,120 1,245 1,744 In Offices Outside the U.S. 876 825 594 504 494 COMMERCIAL Mortgage and Real Estate: In U.S. Offices 27 118 200 333 813 In Offices Outside the U.S. 32 25 48 132 249 Governments and Official Institutions in Offices Outside the U.S. -- 37 -- 131 40 Loans to Financial Institutions in Offices Outside the U.S. 12 11 -- 9 2 Commercial and Industrial: In U.S. Offices 36 48 57 148 408 In Offices Outside the U.S. 159 137 64 175 305 ------- ------- ------- ------- ------- 2,438 2,338 2,083 2,677 4,055 ------- ------- ------- ------- ------- CREDIT RECOVERIES CONSUMER(1) In U.S. Offices 228 231 214 207 189 In Offices Outside the U.S. 216 187 147 132 130 COMMERCIAL Mortgage and Real Estate: In U.S. Offices 88 26 15 48 4 In Offices Outside the U.S. 8 21 8 8 1 Governments and Official Institutions in Offices Outside the U.S. 81 52 240 42 13 Loans to Financial Institutions in Offices Outside the U.S. 1 1 3 22 10 Commercial and Industrial: In U.S. Offices 46 82 64 54 37 In Offices Outside the U.S. 44 46 248 105 95 ------- ------- ------- ------- ------- 712 646 939 618 479 ------- ------- ------- ------- ------- NET CREDIT LOSSES In U.S. Offices 997 964 1,084 1,417 2,735 In Offices Outside the U.S. 729 728 60 642 841 ------- ------- ------- ------- ------- 1,726 1,692 1,144 2,059 3,576 ------- ------- ------- ------- ------- OTHER-NET(2) (65) (86) 39 (21) (19) ------- ------- ------- ------- ------- ALLOWANCE FOR CREDIT LOSSES AT END OF YEAR $ 5,503 $ 5,368 $ 5,155 $ 4,379 $ 3,859 - -------------------------------------------------=============================================== Net Consumer Credit Losses $ 1,728 $ 1,544 $ 1,353 $ 1,410 $ 1,919 As a Percentage of Average Consumer Loans 1.64 1.55 1.56 1.73 2.16 Net Commercial Credit (Recoveries) Losses (2) 148 (209) 649 1,657 As a Percentage of Average Commercial Loans NM 0.26 NM 1.13 2.80 - ------------------------------------------------------------------------------------------------
(1) Consumer credit losses and recoveries primarily relate to revolving credit and installment loans. (2) Includes net transfers (to) from the reserve for sold Consumer portfolios and foreign currency translation effects. NM Not meaningful, as net recoveries result in a negative percentage. 81 AVERAGE DEPOSIT LIABILITIES IN OFFICES OUTSIDE THE U.S.(1)
In Millions of Dollars at Year-End 1996 1995 1994 - ----------------------------------------------------------------------------------------------- % AVERAGE % Average % Average AVERAGE INTEREST Average Interest Average Interest BALANCE RATE Balance Rate Balance Rate - ------------------------------------------------- ------------------- ------------------- Banks(2) $ 10,528 8.44 $ 12,777 8.18 $ 12,890 18.89 Other Demand Deposits 28,801 3.27 25,569 3.52 25,671 2.31 Other Time and Savings Deposits(2) 85,176 6.58 79,157 6.89 66,695 7.16 -------- ---- -------- ---- -------- ----- TOTAL $124,505 5.97 $117,503 6.30 $105,256 7.42 - ------------------------------========---------------========---------------========-----------
(1) Interest rates and amounts include the effects of risk management activities, and also reflect the impact of the local interest rates prevailing in certain Latin American countries. See Note 1 to the consolidated financial statements. (2) Primarily consists of time certificates of deposit and other time deposits in denominations of $100,000 or more. TIME DEPOSITS IN U.S. OFFICES Maturity Profile In Millions of Dollars UNDER OVER 3 TO OVER 6 TO OVER ($100,000 or more) at Year-End 1996 3 MONTHS 6 MONTHS 12 MONTHS 12 MONTHS - -------------------------------------------------------------------------------- Certificates of Deposit $2,635 $565 $382 $328 Other Time Deposits 488 127 46 234 - -------------------------------------------------------------------------------- PURCHASED FUNDS AND OTHER BORROWINGS(1)
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS(2) COMMERCIAL PAPER(3) OTHER FUNDS BORROWED(2) --------------------------- --------------------------- --------------------------- In Millions of Dollars 1996 1995 1994 1996 1995 1994 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------- Amount Outstanding at Year-End $ 9,995 $ 7,904 $12,097 $ 1,238 $ 1,633 $ 1,520 $ 6,958 $ 6,797 $ 7,290 Average Outstanding During the Year 12,851 18,890 24,160 1,665 1,718 1,938 6,041 6,250 6,688 Maximum Month-End Outstanding 14,474 21,960 26,857 1,767 1,831 2,269 6,958 7,383 8,157 - --------------------------------------------------------------------------------------------------------------- Weighted-Average Interest Rate During the Year 5.81% 6.25% 4.86% 5.35% 5.88% 4.44% 15.54% 17.57% 40.06% At Year-End 6.20 6.51 5.36 6.86 5.94 5.53 8.81 13.63 13.51 - ---------------------------------------------------------------------------------------------------------------
(1) Original maturities of less than one year. Interest rates and amounts include the effects of risk management activities. See Note 1 to the consolidated financial statements. (2) Rates reflect the impact of the local interest rates prevailing in certain Latin American countries. (3) Amounts outstanding at December 31, 1996, 1995, and 1994 include $463 million, $452 million, and $462 million, respectively, issued by The Student Loan Corporation. 82 CROSS-BORDER AND NON-LOCAL CURRENCY OUTSTANDINGS Cross-border and non-local currency outstandings are presented on a regulatory basis and include cross-border and non-local currency claims on third parties as well as investments in and funding of local Citicorp franchises. Total outstandings include claims funded with non-local currency liabilities where the funds providers agree that, in the event their claims cannot be repaid in U.S. dollars or other non-local currency due to a sovereign event, they will accept payment in local currency or wait to receive the non-local currency at such time as it becomes available. Cross-border and non-local currency claims on third parties (trade, short-term, and medium- and long-term claims) include loans, securities, deposits at interest with banks, and other monetary assets, as well as investments in affiliates. Adjustments have been made to assign externally guaranteed outstandings to the country of the guarantor and outstandings for which tangible, liquid collateral is held outside of the obligor's country to the country in which the collateral is held. For securities received as collateral, outstandings are assigned to the domicile of the issuer of the securities. From time-to-time, the Federal Financial Institutions Examination Council proposes amendments to, and interpretations of, country exposure reporting guidelines. Such proposals or interpretations could, if implemented in the future, affect reported cross-border and non-local currency outstandings. COUNTRIES WITH OUTSTANDINGS EXCEEDING 1% OF TOTAL ASSETS(1)(2)
1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------------- CROSS-BORDER AND NON-LOCAL CURRENCY CLAIMS ON THIRD PARTIES INVESTMENTS IN - ------------------------------------------------------------------------- AND FUNDING OF PUBLIC PRIVATE LOCAL CITICORP TOTAL Total Total In Billions of Dollars at Year-End BANKS SECTOR SECTOR TOTAL FRANCHISES OUTSTANDINGS Outstandings Outstandings - ----------------------------------------------------------------------------------------------------------------------------------- Brazil(3) $0.3 $2.3 $2.5 $5.1 $1.8 $6.9 $5.1 $4.0 United Kingdom 0.4 0.9 4.2 5.5 0.9 6.4 7.6 6.7 Japan 0.2 0.2 1.8 2.2 1.3 3.5 3.6 2.0 Singapore 0.1 0.1 1.5 1.7 1.7 3.4 2.5 2.0 Argentina(3) 0.1 -- 2.5 2.6 0.7 3.3 2.9 2.5 Germany 0.1 0.7 0.4 1.2 1.9 3.1 2.7 1.3 Mexico 0.2 1.9 0.5 2.6 0.3 2.9 2.9 4.1 - -----------------------------------------------------------------------------------------------------------------------------------
(1) At December 31, 1996, legally binding cross-border and non-local currency commitments, including irrevocable letters of credit and commitments to extend credit, after adjustments to assign externally guaranteed commitments to the country of the guarantor, amounted to $6.8 billion in the United Kingdom, $1.4 billion in Germany, $1.1 billion in Japan, $0.3 billion in Singapore, $0.2 billion in Brazil and $0.1 billion in each of Mexico and Argentina. (2) At December 31, 1996, cross-border and non-local currency outstandings in Australia ($2.4 billion) and South Korea ($2.2 billion) were between 0.75% and 1.0% of total assets. At December 31, 1995, such countries were Singapore, Australia ($2.4 billion), and South Korea ($2.1 billion). At December 31, 1994, such countries were Argentina, Australia ($2.2 billion), Singapore, and Japan. (3) Includes outstandings funded with non-local currency liabilities where the funds providers agree that, in the event their claims cannot be repaid in U.S. dollars or other non-local currency due to a sovereign event, they will accept payment in local currency or wait to receive the non-local currency at such time as it becomes available. Such amounts at December 31, 1996, 1995, and 1994, respectively, were $2.0 billion, $1.4 billion, and $0.8 billion in Brazil; $1.6 billion, $1.6 billion, and $1.3 billion in Argentina. CROSS-BORDER AND NON-LOCAL CURRENCY CLAIMS ON THIRD PARTIES PUBLIC PRIVATE 1996 1995 In Billions of Dollars at Year-End BANKS SECTOR SECTOR TOTAL Total - -------------------------------------------------------------------------------- DEVELOPED MARKETS(1) $ 1.9 $ 3.1 $12.4 $17.4 $15.2 EMERGING MARKETS(1) Latin America(2) 0.9 6.0 7.0 13.9 11.7 Asia 1.2 0.8 7.2 9.2 7.9 Other 1.4 0.9 0.8 3.1 2.5 ----- ----- ----- ----- ----- TOTAL(3) $ 5.4 $10.8 $27.4 $43.6 $37.3 - --------------------------------------------==================================== (1) Developed markets comprise activities in North America, Europe, and Japan. Emerging markets comprise activities in all other geographic areas. (2) Cross-border and non-local currency claims on third parties in Latin America of $13.9 billion at December 31, 1996 compared with $11.7 billion at December 31, 1995. The increase primarily reflects the effect of short-term trade related transactions as well as increases in the value of Brady bonds held in the available-for-sale portfolio (see additional discussion on securities on page 59). (3) Includes investments in affiliates of $1.4 billion at December 31, 1996 and $1.3 billion at December 31, 1995. 83 CONSENT OF INDEPENDENT AUDITORS KPMG Peat Marwick LLP Certified Public Accountants The Board of Directors Citicorp: We consent to incorporation by reference of our report dated January 21, 1997 relating to the consolidated balance sheets of Citicorp and subsidiaries as of December 31, 1996 and 1995, the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996, and the related consolidated balance sheets of Citibank, N.A. and subsidiaries as of December 31, 1996 and 1995, which report appears on page 49 of the 1996 Citicorp Annual Report and Form 10-K, in the following Registration Statements: of Citicorp Nos. 2-47648, 2-58678, 2-82298, 33-21332, 33-21331, 33-41751, 33-52601, 33-53261, and 333-00983 on Form S-8, Nos. 33-38589, 33-59791, 33-66094, and 333-20803 on Form S-3, and No. 333-21143 on Form S-4; and of Citicorp Mortgage Securities, Inc., Citibank, N.A., and other affiliates, No. 33-66222 on Form S-3, and Nos. 33-6979, 33-6358, 33-36313, and 33-34670 on Form S-11. /s/ KPMG Peat Marwick LLP New York, New York February 25, 1997 REGULATION AND SUPERVISION Citicorp is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 ("BHC Act") registered with and subject to examination by the FRB. Citibank, N.A. ("Citibank"), as well as Citicorp's other national banking association subsidiaries, are primarily regulated by the OCC. Citicorp also has state-chartered bank subsidiaries which are subject to examination, supervision, and regulation by state regulators (New York and Delaware). The OTS also regulates Citicorp and is the primary regulator of Citicorp's U.S. savings association subsidiary. The Federal Deposit Insurance Corporation ("FDIC") insures deposits at Citicorp's U.S. depository institution subsidiaries and, in that capacity, also regulates those institutions. Citicorp also controls (either directly or indirectly through Citibank) overseas banks, branches, and agencies. In general, Citicorp's overseas activities are regulated by the FRB and are also regulated by supervisory authorities of the host countries. Citicorp's earnings and activities are affected by legislation, by actions of the FRB, OCC, FDIC, OTS, and other regulators, and by local legislative and administrative bodies and decisions of courts in the foreign and domestic jurisdictions in which Citicorp, Citibank, and their affiliates conduct business. For example, these include limitations on the ability of subsidiaries to pay dividends to Citicorp (see Note 14 to the consolidated financial statements), numerous federal and state consumer protection laws imposing requirements on the making, enforcement, and collection of consumer loans, and restrictions by regulators on the manner in which Citicorp engages in derivatives activities and in which it sells mutual funds and other uninsured investment products to customers. Legislation may be enacted or regulation imposed in the U.S. or its political subdivisions, or in any other jurisdiction in which Citicorp does business, to further regulate banking and financial services or to limit finance charges or other fees or charges earned in such activities. There can be no assurance whether any such legislation or regulation will place additional limitations on Citicorp's operations or adversely affect its earnings. U.S. federal law imposes certain restrictions on transactions between Citicorp and its non-bank subsidiaries, on the one hand, and its federally insured depository institutions and their subsidiaries, including Citibank, on the other. With certain exceptions, federal law also imposes limitations on, and requires collateral for, extensions of credit by Citibank and other U.S. insured depository institutions to their non-bank affiliates, including Citicorp. Subject to certain limitations and restrictions, a U.S. bank holding company, with the prior approval of the FRB, may acquire an out-of-state bank. Banks in states that do not prohibit out-of-state mergers may merge, effective June 1997 or sooner if both states expressly permit such mergers, with the approval of the appropriate federal bank regulatory agency. A national or state bank may establish a de novo branch out of state if such branching is expressly permitted by the other state. A federal savings association is generally permitted to open a de novo branch in any state. Outside the U.S., subject to certain requirements for prior FRB consent or notice, Citicorp may acquire banks and Citibank may establish branches subject to local laws and to U.S. laws prohibiting companies from doing business in certain countries. The activities of U.S. bank holding companies are generally limited to managing or controlling banks. Nonbank acquisitions in the U.S. are generally limited to 5% of voting shares unless the FRB determines that the acquisition is so closely related to banking as to be a proper incident to banking or managing or controlling banks. Subject to prior FRB consent, a bank holding company may generally acquire less than 20% of a company that does not do business in the U.S. and 20% or more if the FRB finds that the activities are usual in connection with banking or finance outside the U.S. Citibank's U.S. activities are generally limited to those that the OCC determines to constitute the business of 84 banking or to be incidental to banking. In the U.S., Citibank and its affiliates may underwrite and deal in specific categories of government-issued securities and may advise and sell as broker, but may not sponsor or distribute, mutual funds. Citicorp Securities, Inc., a nonbank subsidiary of Citicorp, is authorized by the FRB to underwrite and deal in securities, to a limited extent, subject to certain conditions. Outside the U.S., Citicorp subsidiaries may sponsor, distribute, and advise mutual funds and underwrite and deal in debt and, to a limited extent, equity securities, subject to local country laws. A financial institution insured by the FDIC that is under common control with a failed or failing FDIC-insured institution can be required to indemnify the FDIC for losses resulting from the insolvency of the failed institution, even if this causes the affiliated institution also to become insolvent. Any obligations or liability owed by a subsidiary depository institution to its parent company is subordinate to the subsidiary's cross-guarantee liability with respect to commonly controlled insured depository institutions and to the rights of depositors. Under longstanding FRB policy, a bank holding company is expected to act as a source of financial strength for its subsidiary banks and to commit resources to support such banks. Citicorp could be required to commit resources to its subsidiary banks in circumstances where it might not do so, absent such policy. Citicorp and its U.S. insured depository institution subsidiaries are subject to risk-based capital and leverage guidelines issued by U.S. regulators for banks, savings associations, and bank holding companies. The regulatory agencies are required by law to take specific prompt actions with respect to institutions that do not meet minimum capital standards and have defined five capital tiers, the highest of which is "well-capitalized." As of December 31, 1996, Citicorp's bank and thrift subsidiaries, including Citibank, were "well capitalized." See capital analysis on pages 42 and 43. In the liquidation or other resolution of a failed U.S. insured depository institution, deposits in U.S. offices and certain claims for administrative expenses and employee compensation are afforded a priority over other general unsecured claims, including deposits in offices outside the U.S., non-deposit claims in all offices, and claims of a parent such as Citicorp. Such priority creditors would include the FDIC, which succeeds to the position of insured depositors. A bank is not required to repay a deposit at a branch outside the U.S. if the branch cannot repay the deposit due to an act of war, civil strife, or action taken by the government in the host country, unless the bank has expressly agreed in writing to do so. The earnings of Citicorp, Citibank, and their subsidiaries and affiliates are affected by general economic conditions and the conduct of monetary and fiscal policy by the U.S. government and by governments in other countries in which they do business. COMPETITION Citicorp, Citibank, and their subsidiaries and affiliates are subject to intense competition in all aspects of their businesses from both bank and non-bank institutions that provide financial services and, in some of their activities, from government agencies. PROPERTIES The principal offices of Citicorp and Citibank are located at 399 Park Avenue, New York, New York, a 39-story building of which two thirds is owned by Citibank. Citibank also owns one third of Citicorp Center, a 59-story building located at 153 East 53rd Street across Lexington Avenue from 399 Park Avenue. Citicorp occupies all of the space it owns in both buildings. Citibank also owns Citicorp at Court Square in Long Island City, New York and 111 Wall Street in New York City, which are totally occupied by Citicorp. In addition, Citicorp has major U.S. real estate holdings in Chicago; Hagerstown and Silver Spring, Maryland; Los Angeles; New Castle, Delaware; Rio Piedras, Puerto Rico; Sioux Falls, South Dakota; Tampa; San Antonio, Texas; and The Lakes, Nevada. Outside the U.S. Citicorp owns major corporate premises in various cities throughout the world including Buenos Aires; Caracas; Dusseldorf; Hong Kong; Lewisham and London, United Kingdom; Madrid; Manila; Mexico City; Paris; Rio de Janeiro; Sao Paulo; and Tokyo. Approximately 47% of the space Citicorp occupies worldwide is owned by Citicorp. EFFECTS OF INFLATION The impact of inflation on Citicorp and other financial institutions is significantly different from that on industries that require a high proportion of investment in fixed assets. The assets and liabilities of a financial institution are primarily monetary in nature. During periods of inflation, monetary assets lose value in terms of purchasing power, and monetary liabilities have corresponding purchasing power gains. The financial statements and other data appearing in this annual report, and in particular the discussion of price risk management on pages 41 and 42, illustrate how Citicorp operates in an environment of changing interest rates, foreign exchange rates, and inflationary trends. 85 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. CITICORP (Registrant) /s/ Charles E. Long - ------------------- Charles E. Long Executive Vice President and Secretary February 25, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on February 25, 1997 by the following persons in the capacities indicated: /s/ Victor J. Menezes /s/ Thomas E. Jones - --------------------- ------------------- Victor J. Menezes Thomas E. Jones Executive Vice President Executive Vice President Chief Financial Officer Principal Financial Officer(1) (1) Responsible for financial control, tax, accounting, and reporting. John S. Reed (Citicorp's Principal Executive Officer) and the Directors of Citicorp (listed below) executed a power of attorney appointing Charles E. Long their attorney-in-fact, empowering him to sign this report on their behalf. D. Wayne Calloway Rozanne L. Ridgway Paul J. Collins H. Onno Ruding Kenneth T. Derr Robert B. Shapiro John M. Deutch Frank A. Shrontz Reuben Mark Franklin A. Thomas Richard D. Parsons Edgar S. Woolard, Jr. William R. Rhodes EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K Financial Statements filed for Citicorp and Subsidiaries: Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Changes in Stockholders' Equity Consolidated Statement of Cash Flows Citicorp filed a Current Report on Form 8-K dated October 15, 1996 (Item 5), which report included a summary of the consolidated operations of Citicorp for the three- and nine-month periods ended September 30, 1996. Citicorp filed a Current Report on Form 8-K dated January 21, 1997 (Item 5), which report included a summary of the consolidated operations of Citicorp for the year ended December 31, 1996. Calculation of Ratio of Income to Fixed Charges and Financial Data Schedules are filed herewith and the Indenture and Supplemental Indenture relating to certain Subordinated Debt Securities of Citicorp are filed herewith by incorporation by reference. Citicorp's principal subsidiaries and their place of incorporation or organization include: Citibank, N.A. USA Citibank (Nevada), N.A. USA Citibank (South Dakota), N.A. USA Citibank Overseas Investment Corporation USA Citicorp Holdings, Inc. Delaware Citicorp Mortgage, Inc. Delaware Citicorp Real Estate, Inc. Delaware Citibank Delaware Delaware Citibank (New York State) New York Citibank Privatkunden A.G. Germany Citibank A.G. Germany Citibank Canada Canada Citibank Espana Spain Citibank, Federal Savings Bank USA Citibank International plc United Kingdom Citibank Investments, Ltd. United Kingdom Citibank Limited Australia Citibank Malaysia Malaysia Citibank Mexico, S.A. Grupo Financiero Citibank Mexico Citibank (Switzerland) Switzerland Citicorp Banking Corporation Delaware Citicorp Securities, Inc. Delaware Citicorp North America, Inc. Delaware Citicorp Venture Capital Ltd. New York Court Square Capital Limited Delaware The Student Loan Corporation Delaware Citicorp USA, Inc. Delaware Banco Citibank S.A. Brazil Citibank Belgium S.A./N.V. Belgium Citicorp Leasing, Inc. Delaware Citibank a.s. (Czech Republic) Czech Republic Citicorp Finanziaria S.p.A. Italy Citicorp's Restated Certificate of Incorporation, as amended, By-Laws, Instruments Defining the Rights of Securities Holders, and certain other material contracts, including employee benefit plans and indentures and constituent instruments, have been previously filed with the Securities and Exchange Commission as exhibits to various Citicorp registration statements and periodic reports. Stockholders may obtain copies of such documents by writing to Citicorp, Corporate Governance Department, 399 Park Avenue, Mezzanine, New York, New York 10043. Powers of Attorney of Directors Reed, Calloway, Collins, Derr, Deutch, Mark, Parsons, Rhodes, Ridgway, Ruding, Shapiro, Shrontz, Thomas, and Woolard as Directors and/or officers of Citicorp are filed herewith. 86 CITICORP AND CITIBANK DIRECTORS' COMMITTEES AUDIT COMMITTEES: SUPERVISE INDEPENDENT AUDITS AND OVERSEE THE ESTABLISHMENT OF APPROPRIATE ACCOUNTING POLICIES FOR CITICORP AND CITIBANK, N.A. Members Citicorp & Citibank, N.A.: Robert B. Shapiro, Chairman; John M. Deutch, Reuben Mark, Richard D. Parsons and Rozanne L. Ridgway. The Audit Committees of Citicorp and Citibank, N.A. (the "committee"), whose members are all independent outside directors, meet with members of senior management as the committee deems appropriate. Its principal functions include reviews of: the audit plans, scope of audit and audit findings of both independent auditors and the corporation's internal corporate audit group; significant tax and legal matters; reports on credit portfolios and processes; and internal controls. Further, it is the responsibility of this committee to recommend to the Board the annual appointment of the independent auditors. The Board accepted the recommendation that KPMG Peat Marwick LLP be retained for 1997 and this proposal will be presented to the stockholders for approval at the Annual Meeting. The findings of internal and independent auditors, financial controllers and external regulatory agencies are reviewed. Responses to their findings and corrective action plans are monitored to ensure that appropriate follow-up measures are taken in a timely manner. These are reviewed with and without the presence of management. The committee also meets privately with KPMG Peat Marwick LLP and the Chief Auditor. It is also the function of this committee to review the accounting policies used in preparing the financial statements of Citicorp and Citibank, N.A. /s/ ROBERT B. SHAPIRO ROBERT B. SHAPIRO COMMITTEE ON DIRECTORS: RECOMMENDS QUALIFIED CANDIDATES FOR MEMBERSHIP ON THE BOARDS OF DIRECTORS OF CITICORP AND CITIBANK, N.A. Members: John S. Reed, Chairman; D. Wayne Calloway, Reuben Mark, Frank A. Shrontz and Franklin A. Thomas. The Committee on Directors solicits recommendations for prospective directors and, consistent with the needs of the corporation and representation of the various services and customers, recommends the approval of a candidate. The nominees are then presented to the Board, which proposes the slate of directors to be submitted to the stockholders at the Annual Meeting. In addition, the committee is charged with keeping current and recommending changes in directors' compensation. /s/ JOHN S. REED JOHN S. REED COMMITTEE ON SUBSIDIARIES AND CAPITAL (CITICORP) Members: Paul J. Collins, Chairman; D. Wayne Calloway, Kenneth T. Derr, Reuben Mark, Richard D. Parsons and Edgar S. Woolard, Jr. The Committee is responsible for reviewing 1) the corporation's capital structure, position and planning; 2) the financial position of the principal subsidiaries of Citicorp including, but not limited to, Citibank, N.A.; 3) the corporation's subsidiary structure and processes for managing subsidiaries; 4) the adequacy of corporate insurance coverage; and 5) the conduct of Citicorp's subsidiaries and affiliates in providing fiduciary and investment services. The Chairman of the committee reports periodically to the Citicorp and Citibank, N.A. Boards of Directors. /s/ PAUL J. COLLINS PAUL J. COLLINS CONSULTING COMMITTEE (CITIBANK, N.A.) Members: Kenneth T. Derr, H. Onno Ruding and Edgar S. Woolard, Jr. This committee, composed of those Citicorp directors who are not also directors of Citibank, N.A., attends all meetings of the Board of Directors of Citibank, N.A. and remains available to Citibank's Board as consultants on an "as needed" basis. /s/ JOHN S. REED JOHN S. REED EXECUTIVE COMMITTEE: PROVIDES BACKUP FOR THE BOARDS OF DIRECTORS OF CITICORP AND CITIBANK, N.A. Members Citicorp: Kenneth T. Derr, Frank A. Shrontz, Franklin A. Thomas and Edgar S. Woolard, Jr. Members Citibank, N.A.: Any three directors in attendance at a regular meeting of the Board of Directors where a quorum is not present. These committees act on behalf of the Boards of Directors should an urgent matter arise that requires a decision before the Board is next scheduled to meet. The Executive Committee has nearly all the powers of the Boards, except for certain powers expressly reserved to the Boards. The Chairman and the Vice Chairmen are ex-officio members. /s/ JOHN S. REED JOHN S. REED PERSONNEL COMMITTEE: OVERSEES EMPLOYEE POLICIES AND PROGRAMS OF CITICORP AND CITIBANK, N.A. Members: Frank A. Shrontz, Chairman; D. Wayne Calloway, Kenneth T. Derr, Franklin A. Thomas and Edgar S. Woolard, Jr. The Personnel Committee reviews and approves compensation policy and other personnel-related programs to maintain an environment at Citicorp and Citibank, N.A. that attracts and retains people of high capability, commitment and integrity. In addition, the committee oversees succession planning. /s/ FRANK A. SHRONTZ FRANK A. SHRONTZ PUBLIC ISSUES COMMITTEE: REVIEWS CITICORP'S POLICIES AND PERFORMANCE ON MATTERS OF PUBLIC CONCERN. Members: Franklin A. Thomas, Chairman; John M. Deutch, Rozanne L. Ridgway and Frank A. Shrontz. The Public Issues Committee's mission is to assure that the public interest is maintained in the performance of Citicorp's business roles. The committee reviews the corporation's policies, postures, practices and programs relating to public issues of significance to Citicorp and the public at large. /s/ FRANKLIN A. THOMAS FRANKLIN A. THOMAS 87 CITICORP AND CITIBANK, N.A. DIRECTORS The Boards of Directors of Citicorp and Citibank, N.A. meet on the third Tuesday of the month to administer the affairs of the organizations. Certain specific operations and areas of the Corporation and the Bank are regularly monitored by the Directors' committees, whose activities are described on the preceding page. +Director of Citicorp *Director of Citibank, N.A. D. WAYNE CALLOWAY+* RICHARD D. PARSONS+* FRANK A. SHRONTZ+* Former Chairman and President Chairman Emeritus Chief Executive Officer Time Warner, Inc. The Boeing Company PepsiCo, Inc. JOHN S. REED+* FRANKLIN A. THOMAS+* PAUL J. COLLINS+* Chairman Former President Vice Chairman Citicorp and Citibank, N.A. The Ford Foundation Citicorp and Citibank, N.A. WILLIAM R. RHODES+* EDGAR S. WOOLARD, JR+. KENNETH T. DERR+ Vice Chairman Chairman Chairman and Citicorp and Citibank, N.A. E.I. du Pont de Nemours & Chief Executive Officer Company Chevron Corporation ROZANNE L. RIDGWAY+* Former Assistant Secretary of JOHN M. DEUTCH+* State for Europe and Canada Institute Professor Massachusetts Institute H. ONNO RUDING+ of Technology Vice Chairman Citicorp and Citibank, N.A. REUBEN MARK+* Chairman and ROBERT B. SHAPIRO+* Chief Executive Officer Chairman, President and Colgate-Palmolive Company Chief Executive Officer Monsanto Company
88 COUNTRY CORPORATE OFFICERS ALGERIA ECUADOR KOREA SAUDI ARABIA Kamal B. Driss Benjamin Franco Robert A. Wilson, Jr. Robert S. Eichfeld ANGOLA EGYPT LEBANON SENEGAL Graham A. Hurst David W. Watson Walid Alamuddin Kandolo Kasongo ARGENTINA EL SALVADOR LUXEMBOURG SINGAPORE Carlos M. Fedrigotti Juan A. Miro Steven J. Fee Shehzad Naqvi ARUBA FINLAND MACAU SLOVAKIA Juan de Dianous Stephen W. McClintock Stephen H. Long David C. Francis AUSTRALIA FRANCE MALAYSIA SOUTH AFRICA Thomas M. McKeon Claude Jouven Sunil Sreenivasan Terence M. Davidson AUSTRIA GABON MEXICO SPAIN A. Walter Hoellmer Nuhad K. Saliba Julio A. de Quesada Amador Huertas BAHAMAS GERMANY MONACO SRI LANKA M. Carmen Butler Friedrich W. Menzel Miklos I. Vasarhelyi Nihal Welikala BAHRAIN GREECE MOROCCO SUDAN Mohammed E. Al-Shroogi Dimitris P. Krontiras Reza Ghaffari Adnan A. Mohamed BANGLADESH GUAM NEPAL SWEDEN Srinivasan Sridhar Rashid M. Habib Pravin Batra James E. Morrow BELGIUM GUATEMALA NETHERLANDS SWITZERLAND Victor O. Toledo Juan A. Miro Chris I. Devries Philippe Holderbeke BOLIVIA HAITI NEW ZEALAND TAIWAN Fernando Anker Gladys M. Coupet Bradden Nowland Brian T. Clayton BRAZIL HONDURAS NIGERIA TANZANIA Roberto V. do Valle Sebastian Paredes Michel A. Accad Emeka Emuwa BRUNEI HONG KONG NORWAY THAILAND Page W. Stockwell Stephen H. Long Per Kumle Shaukat Tarin CANADA HUNGARY OMAN TRINIDAD AND TOBAGO Richard E. Lint Richard D. Jackson Ravi Bhatia Steve M. Bideshi CAYMAN ISLANDS INDIA PAKISTAN TUNISIA M. Carmen Butler David P. Conner Syed Sajjad Razvi Eric P. Stoclet CHANNEL ISLANDS (JERSEY) INDONESIA PANAMA TURKEY Clive S. Jones Colin G. Woolcock Eduardo C. Urriola Dardo A. Sabarots CHILE IRELAND PARAGUAY UNITED ARAB EMIRATES Ricardo J. Angles Aidan M. Brady Antonio Uribe Ahmed S. Bin Brek CHINA ISRAEL PERU UNITED KINGDOM John M. Beeman Ronny F. Strauss Gustavo C. Marin Ian D. Cormack COLOMBIA ITALY PHILIPPINES URUGUAY Eric R. Mayer Sergio Ungaro Suresh Maharaj Douglas L. Peterson COSTA RICA JAMAICA POLAND VENEZUELA Henry Comber Peter H. Moses Marcel Polk Juan de Dianous COTE D'IVOIRE JAPAN PORTUGAL VIETNAM Robert Thornton Masamoto Yashiro Alexander G. van Tienhoven Bradley C. Lalonde CZECH REPUBLIC JORDAN PUERTO RICO VIRGIN ISLANDS (U.S.) David R. Ansell Suhair Al-Ali Arthur P. Zeller Arthur P. Zeller DENMARK KAZAKSTAN ROMANIA ZAIRE Ineke Bussemaker Richard L. Smith David F. Garner Mulongo J-C Masangu DOMINICAN REPUBLIC KENYA RUSSIA ZAMBIA Robert D. Matthews, Jr. Paul Fletcher Stuart M. Lawson Sanjeev Anand CORPORATE STATE OFFICERS (U.S.) CALIFORNIA FLORIDA MISSOURI NEW YORK Frits F. Seegers Carlos Palomares Kevin M. Kessinger Pamela P. Flaherty COLORADO ILLINOIS NEVADA SOUTH DAKOTA Robert A. Gottlieb Howard C. Morgan Wilfried Jackson Thomas W. Jones CONNECTICUT MARYLAND NEW MEXICO TEXAS Kenneth O. Danilo Michael J. Looney Edward J. Consroe Mark J. Devine DELAWARE Richard T. Collins
89 STOCKHOLDER INFORMATION NOTICE OF THE ANNUAL MEETING The Annual Meeting of Stockholders will be held on Wednesday, April 9, 1997, at 9:00 a.m., in the James L. Knight International Center, Ashe Auditorium, 400 S.E. Second Avenue, Miami, Florida 33131. A formal notice of this meeting, together with a proxy and a proxy statement, has been included with this annual report. Stockholders are urged to sign and return their proxies promptly to assure that the stock of the Corporation will be represented as fully as possible at the meeting. Citicorp has approximately 52,000 common stockholders of record. About 83% of the Citicorp shares entitled to vote were voted in person or by proxy at the last annual stockholders' meeting on April 16, 1996. Additional copies of this annual report are available. Write to Citicorp, Corporate Affairs, 850 Third Avenue, 13th Floor, New York, NY 10043. Copies of the written transcript and tape recordings of the proceedings at Citicorp stockholders' meetings are available to Citicorp stockholders at cost from Citicorp, Corporate Governance Department, 399 Park Avenue, Mezzanine, New York, NY 10043. Supplemental financial data are published quarterly and are available from Citicorp, Corporate Affairs, 850 Third Avenue, 13th Floor, New York, NY 10043. TRANSFER AGENT AND REGISTRAR Citibank, N.A., Issuer Services, Box 4855, New York, NY 10043 CO-TRANSFER AGENTS AND CO-REGISTRANTS ChaseMellon Shareholder Services 400 South Hope Street 4th Floor Los Angeles, California 90071 Att: Ron Lug First Chicago Trust Company P.O. Box 2506 Suite 4659 Jersey City, New Jersey 07303-2506 Att: John Ryan Montreal Trust Company 151 Front Street West Toronto, Ontario Canada M5J 2N1 Att: Liz Ko JAPANESE SHAREHOLDER SERVICE ORGANIZATION AND PAYING BANK The Yasuda Trust and Banking Company, Limited Stock Transfer Department 1-17-7, Saga, Koto-ku, Tokyo, Japan CITICORP STOCK LISTED New York Stock Exchange Zurich Stock Exchange Chicago Stock Exchange Geneva Stock Exchange Pacific Stock Exchange Basle Stock Exchange London Stock Exchange Toronto Stock Exchange Amsterdam Stock Exchange Dusseldorf Stock Exchange Tokyo Stock Exchange Frankfurt Stock Exchange Securities and Exchange Commission Washington, DC 20549 Form 10-K Annual Report pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996, Commission File Number 1-5738 CITICORP[Logo] - -------------------------------------------------------------------------------- Incorporated in the State of Delaware IRS Employer Identification Number: 13-2614988 Address: 399 Park Avenue, New York, NY 10043 Telephone: (800) 285-3000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) AND (g) OF THE ACT: A list of Citicorp securities registered pursuant to Section 12(b) and (g) of the Securities Exchange Act of 1934 is available from Citicorp, Corporate Governance Department, 399 Park Avenue, Mezzanine, New York, NY 10043. As of December 31, 1996, Citicorp had 463,217,018 shares of common stock outstanding. Citicorp (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. Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein nor in any amendment to this Form 10-K but is contained in Citicorp's 1997 Proxy Statement incorporated by reference in Part III of this Form 10-K. The aggregate market value of Citicorp common stock held by non-affiliates of Citicorp on January 31, 1997 was approximately $53.4 billion. Certain information has been incorporated by reference as described herein into Part III of this annual report from Citicorp's 1997 Proxy Statement. 90 CITICORP SERVICE We continue to build a worldwide organization dedicated to serving our customers and we take pride in the quality of service we deliver. The following addresses and phone numbers are part of our service commitment to help you obtain needed information and prompt assistance. STOCKHOLDER INFORMATION - -------------------------------------------------------------------------------- For information about your stockholdings including: your Dividend Reinvestment Account, Lost Stock Certificates, Stock Transfer, Estate Inquiries/Transfer Requirements, contact: Citibank, N.A., c/o Citicorp Data Distribution, Inc., Customer Service Unit, P.O. Box 308, Paramus, NJ 07653. (800) 422-2066 - -------------------------------------------------------------------------------- For all other stockholder concerns, contact: Citicorp Corporate Governance, 399 Park Avenue, Mezzanine, New York, NY 10043: (212) 559-4822 - -------------------------------------------------------------------------------- To view or retrieve copies of this annual report and other Citicorp financial reports: http://www.citibank.com - -------------------------------------------------------------------------------- To request copies of Citicorp financial reports: (212) 559-0233 - -------------------------------------------------------------------------------- INSTITUTIONAL INVESTORS: (212) 559-2718 - -------------------------------------------------------------------------------- GENERAL INFORMATION For general information, directory assistance, or other inquiries: (800) 285-3000 - -------------------------------------------------------------------------------- CUSTOMER INFORMATION - -------------------------------------------------------------------------------- CitiPhone Banking (consumer bank accounts) California/Nevada (800) 756-7047 Connecticut (800) 224-8781 Florida (800) 374-9800 Illinois within area codes 312 and 708 (312) 263-6660 outside 312 and 708 area codes (800) 274-6660 Maryland and Washington, D.C. (800) 926-1067 New York (Upstate) (800) 934-1609 New York Metropolitan Area within area codes: 212, 718, 516, 914 and 201 627-3999 outside the tri-state area (800) 627-3999 TDD Service (800) 945-0258 Citibank ATM Locator Service (800) 248-4286 Citibank Cards (MasterCard or Visa) (800) 950-5114 Citibank Gold Card Customer Service (800) 950-5118 TDD Service (800) 325-2865 outside the U.S. call collect: (605) 335-2222 Citibank Private Bank (800) 967-1600 (212) 559-5959 Citicorp Investment Services (800) 846-5200 (212) 820-2380 Citicorp Mortgage Inc. 800-MORTGAGE Citibank Student Loans (800) 967-2400 Diners Club/Carte Blanche (800) 234-6377 outside the U.S. call collect: (303) 799-1504 Citicorp Travelers Checks (800) 645-6556 outside the U.S. call collect: (813) 623-1709 Citicorp Insurance (800) 497-4860 - -------------------------------------------------------------------------------- 91 (R) CITICORP AND CITIBANK ARE REGISTERED TRADEMARKS (C) COPYRIGHT CITICORP 1997. ALL RIGHTS RESERVED. PRINTED IN THE U.S.A. Printed on recycled paper. [Logo] CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ D. Wayne Calloway -------------------------------------- Signature D. Wayne Calloway -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ Paul J. Collins -------------------------------------- Signature Paul J. Collins -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ Kenneth T. Derr -------------------------------------- Signature Kenneth T. Derr -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ John M. Deutch -------------------------------------- Signature John M. Deutch -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ Reuben Mark -------------------------------------- Signature Reuben Mark -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ Richard D. Parsons -------------------------------------- Signature Richard D. Parsons -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ John S. Reed -------------------------------------- Signature John S. Reed -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ William R. Rhodes -------------------------------------- Signature William R. Rhodes -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ Rozanne L. Ridgway -------------------------------------- Signature Rozanne L. Ridgway -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ H. Onno Ruding -------------------------------------- Signature H. Onno Ruding -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ Robert B. Shapiro -------------------------------------- Signature Robert B. Shapiro -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ Frank A. Shrontz -------------------------------------- Signature Frank A. Shrontz -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ Franklin A. Thomas -------------------------------------- Signature Franklin A. Thomas -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date CITICORP POWER OF ATTORNEY The undersigned Director and/or Officer of CITICORP, a Delaware corporation, hereby constitutes and appoints, subject to adoption and approval by the Citicorp Board of Directors of the final form of Annual Report and Form 10-K for the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice President and Secretary, George E. Seegers and Patricia K. Perlman his true and lawful attorney-in-fact and agent, in the name and on behalf of the undersigned, to do any and all acts and things to comply with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing under the Exchange Act of said Annual Report and Form 10-K of Citicorp, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned in his capacity as a Director and/or Officer of Citicorp to the appropriate signature pages of said Annual Report and Form 10-K to be filed with the Securities and Exchange Commission; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof. /s/ Edgar S. Woolard, Jr. -------------------------------------- Signature Edgar S. Woolard, Jr. -------------------------------------- Name (please print) February 25, 1997 -------------------------------------- Date EX-27 2 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CURRENT REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND ACCOMPANYING DISCLOSURES. 0000020405 CITICORP 1996 1,000,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 6,905 11,648 11,133 30,785 26,062 0 0 174,612 5,503 281,018 184,955 18,191 8,201 18,850 0 2,078 506 18,138 281,018 18,509 1,770 3,070 23,349 8,974 12,409 10,940 1,926 210 4,110 6,073 3,788 0 0 3,788 7.50 7.42 4.73 3,092 1,118 321 0 5,368 2,438 712 5,503 0 0 0 INCLUDES SECURITIES PURCHASED UNDER RESALE AGREEMENTS. PURCHASED FUNDS AND OTHER BORROWINGS TAXABLE EQUIVALENT BASIS INCLUDES $905MM OF CASH-BASIS COMMERCIAL LOANS AND $2,187MM OF CONSMER LOANS ON WHICH ACCRUAL OF INTEREST HAS BEEN SUSPENDED. ACCRUING LOANS 90 OR MORE DAYS DELINQUENT. ALLOWANCE ACTIVITY FOR THE FISCAL YEAR OF 1996 INCLUDES $(65)MM IN OTHER CHANGES, PRINCIPALLY FOREIGN CURRENCY TRANSLATION EFFECTS. NO PORTION OF CITICORP'S CREDIT LOSS ALLOWANCE IS SPECIFICALLY ALLOCATED TO ANY INDIVIDUAL LOAN OR GROUP OF LOANS, HOWEVER, $1,807MM OF THE ALLOWANCE AT DECEMBER 31, 1996 WAS ATTRIBUTED TO OPERATIONS OUTSIDE THE U.S. (SEE NOTE 11 TO THE 1996 ANNUAL REPORT). SEE FOOTNOTE F7 ABOVE. SEE FOOTNOTE F7 ABOVE.
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