-----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, UInFlAw+mSptI8Jl0Ccu3UeE60LpSl9FiW62XY1RpLtsb9WzK/ZTkZhJq+RB0KhW siTbSiDKwRiOQ9WU8X0XtA== 0000950130-96-004383.txt : 19961115 0000950130-96-004383.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950130-96-004383 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05378 FILM NUMBER: 96662210 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-Q 1 FORM 10-Q FINANCIAL REVIEW AND FORM 10-Q THIRD QUARTER 1996 CITICORP[LOGO] CITICORP[LOGO]
TABLE OF CONTENTS PAGE FINANCIAL SUMMARY........................................................................1 BUSINESS DISCUSSIONS.....................................................................4 Earnings Summary......................................................................4 Consumer..............................................................................5 Citibanking.........................................................................6 Cards...............................................................................7 Private Bank........................................................................8 Consumer Businesses in Emerging Markets.............................................9 Consumer Businesses in Developed Markets............................................9 Consumer Portfolio Review..........................................................10 Corporate Banking....................................................................12 Emerging Markets...................................................................13 Global Relationship Banking........................................................14 Corporate Items......................................................................15 MANAGING GLOBAL RISK....................................................................16 Liquidity............................................................................16 Price Risk...........................................................................16 Derivative and Foreign Exchange Contracts............................................17 Estimated Fair Value of Financial Instruments........................................21 Capital..............................................................................22 STATEMENT OF INCOME ANALYSIS............................................................25 Net Interest Revenue (Taxable Equivalent Basis)......................................25 Fee and Commission Revenue...........................................................26 Trading-Related Revenue..............................................................27 Securities Transactions..............................................................28 Other Revenue........................................................................28 Provision and Allowance for Credit Losses............................................29 Operating Expense....................................................................30 Income Taxes.........................................................................31 Effect of Credit Card Receivables Securitizations....................................31 Future Impact of Recently Issued Accounting Standards................................31 CONSOLIDATED FINANCIAL STATEMENTS.......................................................33 Consolidated Statement of Income.....................................................33 Consolidated Balance Sheet...........................................................34 Consolidated Statement of Changes in Stockholders' Equity............................35 Consolidated Statement of Cash Flows.................................................36 CITIBANK, N.A. and Subsidiaries Consolidated Balance Sheet...........................37 OTHER FINANCIAL INFORMATION.............................................................38 Securities...........................................................................38 Trading Account Assets and Liabilities...............................................38 Cash-Basis, Renegotiated, and Past Due Loans.........................................39 Other Real Estate Owned and Assets Pending Disposition...............................39 Details of Credit Loss Experience....................................................40 Calculation of Earnings Per Share....................................................41 Cross-Border and Non-Local Currency Outstandings.....................................42 Average Balances and Interest Rates (Taxable Equivalent Basis).......................43 FORM 10-Q...............................................................................45 Form 10-Q Cross-Reference Index......................................................46 SIGNATURES..............................................................................48
CITICORP[LOGO]
- ------------------------------------------------------------------------------------------- FINANCIAL SUMMARY - ------------------------------------------------------------------------------------------- Third Quarter Nine Months ----------------------------------------- 1996 1995 1996 1995 - ---------------------------------------------------------------------------------------------- NET INCOME (In Millions of Dollars)............... $935 $877 $2,801 $2,559 - ---------------------------------------------------------------------------------------------- NET INCOME PER SHARE (A) On Common and Common Equivalent Shares......... $1.85 $1.79 $5.53 $5.29 Assuming Full Dilution......................... $1.85 $1.62 $5.45 $4.72 COMMON STOCKHOLDERS' EQUITY PER SHARE............. $38.94 $37.99 CLOSING STOCK PRICE AT QUARTER END................ $90.63 $70.75 - ---------------------------------------------------------------------------------------------- FINANCIAL RATIOS Return on Total Assets............................ 1.39% 1.31% 1.40% 1.27% Return on Common Stockholders' Equity............. 19.87% 20.12% 20.27% 20.90% Return on Total Stockholders' Equity.............. 18.57% 17.91% 18.85% 18.25% - ----------------------------------------------------------------------------------------------- CAPITAL (Dollars in Billions) (see page 22) Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, 1996 1996 1996 1995 1995 ----------------------------------------------------- Tier 1.................................. $19.3 $19.1 $19.0 $18.9 $18.6 Total (Tier 1 and 2).................... 28.5 28.2 28.0 27.7 27.3 Tier 1 Ratio............................ 8.36% 8.38% 8.42% 8.41% 8.38% Total Ratio (Tier 1 and 2).............. 12.40% 12.35% 12.37% 12.33% 12.31% Leverage Ratio.......................... 7.47% 7.49% 7.44% 7.45% 7.35% Common Equity as a Percentage of Total Assets............. 6.74% 6.69% 6.71% 6.43% 6.27% Total Equity as a Percentage of Total Assets............ 7.50% 7.47% 7.50% 7.62% 7.57% - ------------------------------------------------------------------------------------------------- EARNINGS ANALYSIS (In Millions of Dollars) 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 1996 1996 1996 1995 1995 1995 1995 ------------------------------------------------------------------ Total Revenue................ $5,010 $4,993 $4,828 $4,789 $4,757 $4,689 $4,443 Effect of Credit Card Securitizations (B)......... 360 349 294 250 219 226 222 Net Cost To Carry (C)........ (8) (26) (5) 8 7 8 - ------------------------------------------------------------------ ADJUSTED REVENUE............. 5,362 5,316 5,117 5,047 4,983 4,923 4,665 ------------------------------------------------------------------ Total Operating Expense...... 3,078 2,978 2,860 2,818 2,793 2,798 2,693 Net OREO Benefits (D)........ 8 17 12 59 33 13 - ------------------------------------------------------------------ ADJUSTED OPERATING EXPENSE... 3,086 2,995 2,872 2,877 2,826 2,811 2,693 ------------------------------------------------------------------ OPERATING MARGIN............. 2,276 2,321 2,245 2,170 2,157 2,112 1,972 Consumer Credit Costs (E).... 803 762 706 688 633 616 536 Commercial Credit Costs (F).. (60) (27) 15 (14) 61 23 2 ------------------------------------------------------------------- OPERATING MARGIN LESS CREDIT COSTS....................... 1,533 1,586 1,524 1,496 1,463 1,473 1,434 Additional Provision (G)..... 50 50 50 56 75 75 75 ------------------------------------------------------------------- INCOME BEFORE TAXES.......... 1,483 1,536 1,474 1,440 1,388 1,398 1,359 Income Taxes................. 548 584 560 535 511 545 530 ------------------------------------------------------------------- NET INCOME................... $ 935 $ 952 $ 914 $ 905 $ 877 $ 853 $ 829 =================================================================================================
(A) Based on net income less preferred stock dividends, except when conversion is assumed. See page 41 for details. (B) For a description of the effect of credit card receivables securitizations see page 31. (C) Principally the net cost to carry commercial cash-basis loans and other real estate owned ("OREO"). (D) Principally gains and losses on sales, direct revenue and expense, and writedowns of commercial OREO. (E) Principally consumer net credit write-offs adjusted for the effect of credit card receivables securitizations. (F) Includes commercial net credit write-offs, net cost to carry, and net OREO benefits. (G) Primarily charges for credit losses in excess of net write-offs. See page 29 for discussion. - -------------------------------------------------------------------------------- 1 CITICORP[LOGO] Citicorp reported third quarter net income of $935 million or $1.85 per fully diluted common share, up 7% and 14%, respectively, compared with $877 million, or $1.62 a year ago. Net income included a charge of $40 million after-tax, or $0.08 per fully diluted common share, related to the U.S. Savings Association Insurance Fund ("SAIF"). Excluding the charge, net income of $975 million increased 11% from the same 1995 quarter and earnings per fully diluted common share of $1.93 was up 19%. Net income for the nine months ended September 30, 1996, totaled $2.8 billion, or $5.45 per fully diluted common share, up 9% and 15%, respectively, compared with $2.6 billion, or $4.72, in the same 1995 period. Excluding the SAIF charge, net income of $2.8 billion increased 11% from the 1995 nine months and earnings per fully diluted common share of $5.53 was up 17%. Return on common equity of 19.9% and 20.3% in the third quarter and nine months of 1996 remained strong, but was down slightly from a year-ago, reflecting the SAIF charge and higher common equity levels. Excluding the charge, return on common equity was 20.7% and 20.6% in the third quarter and nine months of 1996. Return on average assets was 1.39% and 1.40% in the third quarter and nine months of 1996, compared with 1.31% and 1.27% for the same 1995 periods. The Consumer businesses earned $466 million and $1.5 billion in the third quarter and nine months of 1996, down 10% and up 4% from the year-ago periods, as higher revenue and margin growth were offset by increased Cards credit costs and the $40 million after-tax effect of the SAIF charge. Earnings in Corporate Banking of $520 million and $1.6 billion in the third quarter and nine months of 1996, were up 34% and 21% from the comparable year- ago periods, reflecting improved credit performance and favorable tax rates, along with relatively flat operating margins. Adjusted revenue of $5.4 billion and $15.8 billion in the third quarter and nine months of 1996 was up $379 million, or 8%, and $1.2 billion, or 8%, from the comparable year-ago periods. Revenue in the Consumer businesses, including the $64 million pretax SAIF charge, increased 6%, to $3.3 billion for the third quarter (9% for the nine month period), led mostly by growth in Cards, and with strong growth of 12% for the quarter and 15% for the nine months in the emerging markets. Revenue of $1.7 billion and $5.2 billion in the Corporate Banking businesses in the third quarter and nine months of 1996 was up 7% and 4%, as Emerging Markets revenue increased by 14% and 16%, respectively. Trading-related revenue of $547 million and $1.4 billion in the third quarter and nine months of 1996 was down $11 million, or 2%, and $140 million, or 9%, from the comparable 1995 periods. The declines primarily reflected lower foreign exchange activity and, in the nine month period, a second quarter charge of $60 million related to certain mortgage backed securities activities. Venture capital gains of $129 million for the quarter and $274 million for the 1996 nine months were up $40 million, or 45%, and down $88 million, or 24%, from the comparable year- ago periods, reflecting the robust U.S. equity markets in 1996 and a particularly strong 1995 second quarter. Adjusted operating expense for the quarter and nine month period increased 9% and 7% from the comparable 1995 periods, primarily reflecting business expansion in the emerging markets (21% increase in the third quarter and 18% in the nine month period), while expense related to Consumer and Corporate Banking activities in the developed markets was up 4% from the year-ago third quarter and 2% from the year-ago nine month period. Operating margin grew 6% and 10% in the third quarter and nine months of 1996 from the comparable year-ago periods. The incremental revenue to expense ratio was 1.5:1 and 2.0:1 in the third quarter and nine months of 1996 (1.7:1 and 2.1:1 excluding the SAIF charge) and the efficiency ratio (adjusted operating expense as a percentage of adjusted revenue) was 58% in the third quarter and 57% in the nine months of 1996 compared with 57% in both year-ago periods. Total credit costs, adjusted for the effect of credit card securitizations, were $743 million in the third quarter, up slightly from $735 million in the preceding quarter and up from $694 million in the 1995 third quarter. Consumer credit costs of $803 million in the third quarter of 1996 were up from $762 million in the second quarter and $633 million in the 1995 third quarter, and net credit losses on managed loans were an annualized 2.40%, 2.38%, and 2.02%, respectively. The increases in credit costs and related loss ratios chiefly reflected a continued rise in U.S. bankcards credit losses. Net credit losses on managed U.S. bankcards were $550 million, up $28 million from the 1996 second quarter and up $171 million from the 1995 third quarter, representing net credit loss ratios of 5.11%, 4.99%, and 3.70%, respectively. The managed Consumer loan 2 CITICORP[LOGO] delinquency ratio (90 days or more past due) decreased to 2.84%, from 2.91% and 3.04% at the end of the preceding and year-ago quarters. Commercial credit costs remained low at a net credit of $60 million in the quarter. Commercial cash-basis loans and OREO of $1.9 billion at September 30, 1996 were unchanged from June 30, 1996, and were down from $2.6 billion a year earlier. The decrease from the prior year principally reflected continued reductions in the commercial real estate portfolio. At September 30, 1996, total reserves (including reserves for sold consumer portfolios) were $5.9 billion. Citicorp continued to build its allowance for credit losses, adding $50 million above net credit losses, primarily related to Cards, consistent with the practice in recent quarters. Citicorp's effective tax rate was 37% in the third quarters of 1996 and 1995, and 38% for the nine month periods of 1996 and 1995. Total capital (Tier 1 and Tier 2) was $28.5 billion, or 12.40% of net risk- adjusted assets, and Tier 1 capital was $19.3 billion, or 8.36%, at September 30, 1996. During the third quarter and nine months of 1996, Citicorp generated $719 million and $2.2 billion of free capital. With the repurchase of 8.9 million shares of common stock in the quarter for $756 million, the number of shares acquired since June 20, 1995, when the Board of Directors authorized the stock repurchase program, totaled 51.1 million at a cost of $3.8 billion. As expanded in January 1996, the program is authorized to make total purchases for up to $4.5 billion. 3 CITICORP[LOGO] - -------------------------------------------------------------------------------- BUSINESS DISCUSSIONS - -------------------------------------------------------------------------------- The table below and the discussions that follow analyze Citicorp's results by global business areas including its core business franchises of Consumer and Corporate Banking. - -------------------------------------------------------------------------------- EARNINGS SUMMARY - --------------------------------------------------------------------------------
Third Quarter % Nine Months % --------------------- --------------------- (Dollars In Millions) 1996 1995(A) Change 1996 1995(A) Change - ------------------------------------------------------------------------------------------------ Consumer...................... $466 $515 (10) $1,468 $1,412 4 Corporate Banking (B)......... 520 389 34 1,629 1,348 21 --------------------------------------------------------------- Core Businesses............... 986 904 9 3,097 2,760 12 Corporate Items............... (51) (27) (89) (296) (201) (47) --------------------------------------------------------------- TOTAL CITICORP................ $935 $877 7 $2,801 $2,559 9 ================================================================================================ SUPPLEMENTAL INFORMATION: CONSUMER: Citibanking................ $159 $162 (2) $ 518 $ 447 16 Cards...................... 243 290 (16) 749 808 (7) Private Bank............... 64 63 2 201 157 28 --------------------------------------------------------------- TOTAL......................... $466 $515 (10) $1,468 $1,412 4 =============================================================== Developed Markets.......... $256 $311 (18) $ 808 $ 820 (1) Emerging Markets........... 210 204 3 660 592 11 --------------------------------------------------------------- TOTAL......................... $466 $515 (10) $1,468 $1,412 4 ================================================================================================ CORPORATE BANKING (B): Emerging Markets........... $345 $262 32 $1,169 $ 875 34 Global Relationship Banking. 175 127 38 460 473 (3) --------------------------------------------------------------- TOTAL......................... $520 $389 34 $1,629 $1,348 21 ================================================================================================
(A) Reclassified to conform to latest quarter's presentation. (B) Corporate Banking activities also include the results of the Cross-Border Refinancing and the North America Commercial Real Estate portfolios in Emerging Markets and Global Relationship Banking, respectively. 4 CITICORP[LOGO] - -------------------------------------------------------------------------------- CONSUMER - -------------------------------------------------------------------------------- Citicorp's Consumer businesses operate a uniquely global, full-service franchise encompassing branch and electronic banking ("Citibanking"), credit and charge cards ("Cards"), and the Private Bank.
- --------------------------------------------------------------------------------------------- Third Quarter % Nine Months % --------------------- --------------------- (Dollars In Millions) 1996 1995(A) Change 1996 1995(A) Change - ---------------------------------------------------------------------------------------------- Total Revenue (B)............ $2,982 $2,922 2 $8,921 $8,447 6 Effect of Credit Card Securitizations............. 360 219 64 1,003 667 50 Net Cost to Carry Cash- Basis Loans and OREO....... 1 3 (67) (9) 10 NM -------------------------------------------------------------- ADJUSTED REVENUE............. 3,343 3,144 6 9,915 9,124 9 -------------------------------------------------------------- Total Operating Expense...... 1,834 1,700 8 5,380 5,076 6 Net OREO Costs............... (2) 4 NM (4) (5) (20) -------------------------------------------------------------- ADJUSTED OPERATING EXPENSE... 1,832 1,704 8 5,376 5,071 6 -------------------------------------------------------------- OPERATING MARGIN............. 1,511 1,440 5 4,539 4,053 12 -------------------------------------------------------------- Net Write-offs............... 440 415 6 1,273 1,103 15 Effect of Credit Card Securitizations............. 360 219 64 1,003 667 50 Net Cost to Carry and Net OREO Costs............. 3 (1) NM (5) 15 NM -------------------------------------------------------------- CREDIT COSTS................. 803 633 27 2,271 1,785 27 -------------------------------------------------------------- OPERATING MARGIN LESS CREDIT COSTS....................... 708 807 (12) 2,268 2,268 - Additional Provision......... 50 50 - 150 150 - -------------------------------------------------------------- INCOME BEFORE TAXES.......... 658 757 (13) 2,118 2,118 - Income Taxes................. 192 242 (21) 650 706 (8) -------------------------------------------------------------- NET INCOME................... $ 466 $ 515 (10) $1,468 $1,412 4 ============================================================================================== Average Assets (In Billions of Dollars)................. $128 $122 5 $126 $119 6 Return on Assets............. 1.45% 1.67% - 1.56% 1.59% - ============================================================================================== (A) Reclassified to conform to latest quarter's presentation. (B) Includes $64 million SAIF assessment in the 1996 periods. NM Not meaningful, as percentage equals or exceeds 100%. - -----------------------------------------------------------------------------------------------
The Consumer businesses earned $466 million in the third quarter of 1996, compared with $515 million in the 1995 quarter, to reach $1.5 billion in the 1996 nine months, up $56 million or 4% from the nine months of 1995. Earnings in 1996 reflected Citicorp's share of the SAIF assessments under U.S. legislation enacted on September 30, 1996 to replenish the deposit insurance fund for savings banks. The $64 million pretax assessment, which was charged against net interest revenue, was first discussed in Citicorp's third quarter 1995 10-Q filing and approximates 66 basis points on $9.7 billion of covered deposits. Future insurance premiums paid by Citicorp's savings bank subsidiary are expected to decline. Excluding SAIF, net income for the nine months grew 7%. Adjusted revenue of $3.3 billion and $9.9 billion was up 6% and 9% in the third quarter and nine months of 1996 from the comparable year-ago periods. Excluding the $64 million SAIF assessment, revenue was up 8% and 9%, representing growth across the three Consumer businesses. Adjusted operating expense increased 8% in the third quarter and 6% in the nine months of 1996, principally reflecting spending on initiatives for Citibanking worldwide, Cards in the emerging markets, and for the Private Bank. Expenses in the U.S. bankcard business were essentially unchanged in the quarter and down 3% in the nine months of 1996. Consumer credit costs of $803 million in the third quarter of 1996 were up from $762 million in the second quarter and $633 million in the 1995 third quarter, and net credit losses on managed loans were an annualized 2.40%, 2.38%, and 2.02%, respectively. The increase in credit costs and related loss ratios chiefly reflected a continued rise in U.S. bankcards credit losses. The provision for credit losses included charges in excess of net write-offs of $50 million and $150 million in the third quarter and nine months of both 1996 and 1995, respectively, reflecting the continued build in the allowance for credit losses, primarily related to Cards. 5 CITICORP[LOGO] Income taxes are attributed to core businesses on the basis of local tax rates, which resulted in an effective rate of 29% in the third quarter and 31% in the nine months of 1996, compared to 32% and 33% in the comparable year-ago periods, 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 period is included in Corporate Items.
- ------------------------------------------------------------------------------------------- CITIBANKING - ------------------------------------------------------------------------------------------- Third Quarter % Nine Months % --------------------- --------------------- (Dollars In Millions) 1996 1995(A) Change 1996 1995(A) Change - ---------------------------------------------------------------------------------------------- Revenue (B).................. $1,408 $1,379 2 $4,265 $4,018 6 Operating Expense............ 1,021 947 8 3,020 2,799 8 -------------------------------------------------------------- OPERATING MARGIN............. 387 432 (10) 1,245 1,219 2 Credit Costs................. 160 183 (13) 479 510 (6) -------------------------------------------------------------- OPERATING MARGIN LESS CREDIT COSTS................ 227 249 (9) 766 709 8 Additional Provision......... 2 2 - 4 14 (71) -------------------------------------------------------------- INCOME BEFORE TAXES.......... 225 247 (9) 762 695 10 Income Taxes................. 66 85 (22) 244 248 (2) -------------------------------------------------------------- NET INCOME................... $ 159 $ 162 (2) $ 518 $ 447 16 ============================================================================================== Average Assets (In Billions of Dollars)................. $83 $80 4 $82 $79 4 Return on Assets............. 0.76% 0.80% - 0.84% 0.76% - ==============================================================================================
(A) Reclassified to conform to latest quarter's presentation. (B) Includes $64 million SAIF assessment in the 1996 periods. - -------------------------------------------------------------------------------- Citibanking activities earned $159 million and $518 million, respectively, in the 1996 third quarter and nine months. Excluding the $40 million after-tax SAIF assessment, earnings grew $37 million or 23%, and $111 million or 25%, from the respective 1995 periods, reflecting improved results in both the developed and emerging markets. Income before taxes, excluding the SAIF assessment, was $289 million and $826 million in the 1996 third quarter and nine months, up 17% and 19% from the comparable year ago periods. Excluding the $64 million pretax SAIF assessment, revenue was up 7% in the quarter and 8% in the nine months of 1996 reflecting higher business volumes and $42 million from the sale of the consumer mortgage portfolio in the United Kingdom. These improvements were partially offset by continued spread tightening in most markets and the effect of foreign currency translation. Revenue in the emerging markets was up 10% in the quarter and 13% in the nine months, while revenue in the developed markets was up 5% in both periods. Expense growth was 8% in both periods, largely reflecting continued investment spending on Citibanking initiatives, particularly on upgrading systems and delivery of services worldwide through technology convergence, together with branch, product, and service expansion, and further Citibank brand development, partially offset by the effect of foreign currency translation. In the emerging markets, expense increased 15% in the quarter and 16% in the nine months, while expense in the developed markets grew by 5% in each period. Credit costs of $160 million in the quarter were essentially unchanged from the second quarter of 1996 and down $23 million or 13% from a year ago, with annualized net credit loss ratios of 0.95%, 0.99%, and 1.14%, respectively. 6 CITICORP[LOGO]
- ---------------------------------------------------------------------------------------------- CARDS - ---------------------------------------------------------------------------------------------- Third Quarter % Nine Months % --------------------- --------------------- (Dollars In Millions) 1996 1995(A) Change 1996 1995(A) Change - ---------------------------------------------------------------------------------------------- Adjusted Revenue............. $1,683 $1,526 10 $4,901 $4,413 11 Adjusted Operating Expense... 635 599 6 1,852 1,800 3 -------------------------------------------------------------- OPERATING MARGIN............. 1,048 927 13 3,049 2,613 17 Credit Costs................. 639 448 43 1,797 1,247 44 -------------------------------------------------------------- OPERATING MARGIN LESS CREDIT COSTS................. 409 479 (15) 1,252 1,366 (8) Additional Provision......... 48 48 - 146 136 7 -------------------------------------------------------------- INCOME BEFORE TAXES.......... 361 431 (16) 1,106 1,230 (10) Income Taxes................. 118 141 (16) 357 422 (15) -------------------------------------------------------------- NET INCOME................... $ 243 $ 290 (16) $ 749 $ 808 (7) ============================================================================================== Average Assets (In Billions of Dollars)................. $28 $27 4 $28 $25 12 Return on Assets (B)......... 3.45% 4.26% - 3.57% 4.32% - ==============================================================================================
(A) Reclassified to conform to latest quarter's presentation. (B) Adjusted for the effect of credit card securitizations, the return on managed assets for worldwide Cards was 1.77% in the 1996 quarter and 2.28% in the year-ago quarter. For the nine months of 1996 and 1995, the return on managed assets was 1.86% and 2.22%, respectively. - -------------------------------------------------------------------------------- Cards worldwide activities earned $243 million in the third quarter, down $47 million or 16% from a year ago, and $749 million in the nine months of 1996, down $59 million or 7% from the comparable 1995 period. Earnings reflected revenue improvements of 10% for the quarter and 11% for the nine month period, higher overall expense levels, and continued increases in credit costs. Additionally, earnings benefited in the nine months of 1996 from a lower effective tax rate compared with the year-ago period. Income before taxes was $361 million and $1.1 billion in the 1996 third quarter and nine months, down 16% and 10% from the comparable 1995 periods. Business in the emerging markets represented approximately 29% of third quarter 1996 Cards earnings. U.S. bankcards revenue increased 9% in the quarter and 10% in the nine months, reflecting volume growth and improved spreads due to lower funding rates. Revenue in the emerging markets grew 19% in the quarter and 23% in the nine months, reflecting continued growth in the Asia Pacific and Middle East businesses, and improvements in Latin America, principally Brazil. The number of cards in force worldwide (including affiliates) reached 60 million at the end of the quarter, an increase of 4 million, or 7% from a year ago. Charge volumes in the U.S. bankcards business increased $2.8 billion, or 12% to $24.9 billion, from the 1995 third quarter. Managed receivables of $44.0 billion at September 30, 1996 were up $2.0 billion or 5% from a year ago and up $1.2 billion or 3% from the preceding 1996 quarter. The increase from the preceding quarter is primarily due to seasonal trends. The modest growth in receivables is a result of competitive pressures, credit tightening on the part of Citicorp, and moderating increases in consumer personal debt levels. Adjusted operating expense increased by 6% in the third quarter and a modest 3% in the nine months, primarily reflecting continued investment spending and franchise development in the emerging markets. Expense levels in U.S. bankcards were essentially unchanged in the quarter, and down 3% in the nine months, consistent with the lower volume growth trends, while expenses in the emerging markets grew 32% and 26% in the same periods. Cards credit costs were $639 million in the quarter, up $28 million or 5% from the 1996 second quarter, and up $191 million or 43% from the 1995 third quarter. Credit costs for U.S. bankcards increased to $550 million, or 5.11% of average managed loans, up $28 million from $522 million or 4.99% in the preceding quarter, and up from $379 million or 3.70% a year-ago. Bankruptcies represented 38% of gross U.S. bankcard write-offs, compared with 39% in the preceding quarter and 36% in the 1995 third quarter. Citicorp continues to write off bankrupt accounts upon notice of filing of bankruptcy. Cards continued to build reserves for possible credit losses, with charges in excess of net write-offs of $48 million and $146 million in the 1996 third quarter and nine months, respectively. Net credit losses and the related loss ratio, which are influenced by economic conditions, credit performance of the portfolio (including bankruptcies), and 7 CITICORP[LOGO] changes in portfolio levels, may increase further from the third quarter of 1996. See "Consumer Portfolio Review" on page 10 and "Provision and Allowance for Credit Losses" on page 29 for additional discussion of the Cards portfolio. - -------------------------------------------------------------------------------- PRIVATE BANK - --------------------------------------------------------------------------------
Third Quarter % Nine Months % --------------------- --------------------- (Dollars In Millions) 1996 1995(A) Change 1996 1995(A) Change - ---------------------------------------------------------------------------------------------- Adjusted Revenue............. $252 $239 5 $749 $693 8 Adjusted Operating Expense... 176 158 11 504 472 7 -------------------------------------------------------------- OPERATING MARGIN............. 76 81 (6) 245 221 11 Credit Costs................. 4 2 NM (5) 28 NM -------------------------------------------------------------- OPERATING MARGIN LESS CREDIT COSTS............... 72 79 (9) 250 193 30 Additional Provision......... - - - - - - -------------------------------------------------------------- INCOME BEFORE TAXES.......... 72 79 (9) 250 193 30 Income Taxes................. 8 16 (50) 49 36 36 -------------------------------------------------------------- NET INCOME................... $ 64 $ 63 2 $201 $157 28 ============================================================================================== Average Assets (In Billions of Dollars)................. $17 $15 13 $16 $15 7 Return on Assets............. 1.50% 1.67% - 1.68% 1.40% - ============================================================================================== (A) Reclassified to conform to latest quarter's presentation. NM Not meaningful, as percentage equals or exceeds 100%. - ----------------------------------------------------------------------------------------------
Private Bank net income of $64 million and $201 million in the third quarter and nine months of 1996, respectively, was up $1 million or 2% and $44 million or 28% from the comparable 1995 periods. Income before taxes was $72 million, down 9%, in the third quarter and $250 million, up 30%, for the nine months. Revenue of $252 million and $749 million in the third quarter and nine months of 1996 was up $13 million or 5% and $56 million or 8% from the comparable year-ago periods. The 11% increase in expense in the quarter was attributable to higher salary levels and reengineering efforts expected to result in future cost efficiencies. Expense for the nine months was up 7%. Total credit costs of $4 million in the quarter compared with $2 million in the year-ago period. For the nine months, the Private Bank had net credits of $5 million, compared with net charges of $28 million as the U.S. business benefited from recoveries and lower OREO writedowns. Overall credit trends improved with delinquencies down to 1.61% of loans from 2.32% a year earlier, reflecting an overall decrease in the level of non-performing assets. Client business volumes under management at the end of the quarter totaled $93 billion, up $8 billion from a year earlier. Growth was balanced across most product lines. 8 CITICORP[LOGO]
- ---------------------------------------------------------------------------------------------- CONSUMER BUSINESSES IN EMERGING MARKETS - ---------------------------------------------------------------------------------------------- Third Quarter % Nine Months % --------------------- --------------------- (Dollars In Millions) 1996 1995(A) Change 1996 1995(A) Change - ---------------------------------------------------------------------------------------------- Adjusted Revenue............. $887 $793 12 $2,653 $2,300 15 Adjusted Operating Expense... 522 439 19 1,507 1,280 18 -------------------------------------------------------------- OPERATING MARGIN............. 365 354 3 1,146 1,020 12 Credit Costs................. 89 85 5 280 191 47 -------------------------------------------------------------- OPERATING MARGIN LESS CREDIT COSTS................ 276 269 3 866 829 4 Additional Provision......... 3 4 (25) 14 24 (42) -------------------------------------------------------------- INCOME BEFORE TAXES.......... 273 265 3 852 805 6 Income Taxes................. 63 61 3 192 213 (10) -------------------------------------------------------------- NET INCOME................... $210 $204 3 $ 660 $ 592 11 ============================================================================================== Average Assets (In Billions of Dollars)................. $39 $35 11 $38 $34 12 Return on Assets............. 2.14% 2.31% - 2.32% 2.33% - ==============================================================================================
(A) Reclassified to conform to latest quarter's presentation. - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------- CONSUMER BUSINESSES IN DEVELOPED MARKETS - ---------------------------------------------------------------------------------------------- Third Quarter % Nine Months % --------------------- --------------------- (Dollars In Millions) 1996 1995(A) Change 1996 1995(A) Change - ---------------------------------------------------------------------------------------------- Adjusted Revenue (B)......... $2,456 $2,351 4 $7,262 $6,824 6 Adjusted Operating Expense... 1,310 1,265 4 3,869 3,791 2 -------------------------------------------------------------- OPERATING MARGIN............. 1,146 1,086 6 3,393 3,033 12 Credit Costs................. 714 548 30 1,991 1,594 25 -------------------------------------------------------------- OPERATING MARGIN LESS CREDIT COSTS................ 432 538 (20) 1,402 1,439 (3) Additional Provision......... 47 46 2 136 126 8 -------------------------------------------------------------- INCOME BEFORE TAXES.......... 385 492 (22) 1,266 1,313 (4) Income Taxes................. 129 181 (29) 458 493 (7) -------------------------------------------------------------- NET INCOME................... $ 256 $ 311 (18) $ 808 $ 820 (1) ============================================================================================== Average Assets (In Billions of Dollars)................. $89 $87 2 $88 $85 4 Return on Assets............. 1.14% 1.42% - 1.23% 1.29% - ==============================================================================================
(A) Reclassified to conform to latest quarter's presentation. (B) Includes $64 million SAIF assessment in the 1996 periods. - -------------------------------------------------------------------------------- The Consumer businesses of Citibanking, Cards, and the Private Bank in the emerging markets earned $210 million in the quarter and $660 million for the nine months of 1996, increases of $6 million or 3% and $68 million or 11%, respectively, over the 1995 periods. The results for the quarter reflected revenue growth of 12% from higher business volumes, partially offset by continued spread tightening, and increased expense levels due to investment spending on franchise expansion and development. Credit costs increased 5% in the quarter of 1996 from the year-ago period and improved 8% from the second quarter of 1996, as continued improvements in Latin America were offset by higher losses in Asia Pacific as a result of business expansion in the region. Credit costs increased 47% in the nine months of 1996 reflecting higher losses in both Asia Pacific and Latin America. Net income in the developed markets (excluding the $40 million after-tax SAIF assessment) was $296 million in the quarter and $848 million in the nine months, down $15 million or 5% and up $28 million or 3%, respectively, from the 1995 periods, as higher U.S. bankcards credit costs countered continued revenue growth. 9 CITICORP[LOGO] - -------------------------------------------------------------------------------- CONSUMER PORTFOLIO REVIEW - -------------------------------------------------------------------------------- In the Consumer portfolio, credit loss experience is often expressed in terms of annual net credit losses as a percentage of average Consumer 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 the Consumer delinquencies and net credit loss experience in both the managed and on-balance sheet Consumer 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 Loans (A) 90 Days or More Past Due Net Credit Losses --------------------------------------------------------------------------------- Sept. 30, Sept. 30, June 30, Sept. 30, 3rd Qtr. 2nd Qtr. 3rd Qtr. 1996 1996 1996 1995 1996 1996 1995 - ----------------------------------------------------------------------------------------------------------- (Dollars in Billions) (Dollars in Millions) (Dollars in Millions) CITIBANKING............ $ 65.2 $2,527 $2,663 $2,759 $160 $161 $183 Ratio............... 3.87% 4.05% 4.26% 0.95% 0.99% 1.14% CARDS U.S. Bankcards...... 43.5 809 732 643 550 522 379 Ratio............. 1.86% 1.73% 1.54% 5.11% 4.99% 3.70% Other............... 8.3 178 180 150 89 89 69 Ratio............. 2.13% 2.25% 2.15% 4.35% 4.65% 4.06% PRIVATE BANK........... 15.3 247 254 321 1 (3) 3 Ratio............. 1.61% 1.66% 2.32% 0.05% NM 0.07% -------------------------------------------------------------------- TOTAL MANAGED.......... 132.3 3,761 3,829 3,873 800 769 634 RATIO............. 2.84% 2.91% 3.04% 2.40% 2.38% 2.02% Effect of Credit Card Securitizations (26.1) (499) (452) (387) (360) (349) (219) -------------------------------------------------------------------- TOTAL ON-BALANCE SHEET. $106.2 $3,262 $3,377 $3,486 $440 $420 $415 Ratio............. 3.07% 3.20% 3.39% 1.64% 1.62% 1.63% =========================================================================================================== MANAGED PORTFOLIO: DEVELOPED............... $100.6 $3,377 $3,448 $3,599 $711 $672 $549 Ratio.............. 3.36% 3.42% 3.63% 2.79% 2.70% 2.24% EMERGING................ 31.7 384 381 274 89 97 85 Ratio.............. 1.21% 1.25% 0.98% 1.13% 1.30% 1.24% ===========================================================================================================
(A) End of period, net of unearned income. NM Not meaningful, as recoveries result in a negative percentage. - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------- CONSUMER LOAN BALANCES - ----------------------------------------------------------------------------------------------------------- End of Period (A) Average (A) ---------------------------------------------------------- Sept. 30, June 30, Sept.30, 3rd Qtr. 2nd Qtr. 3rd Qtr. (In Billions of Dollars) 1996 1996 1995 1996 1996 1995 - ----------------------------------------------------------------------------------------------------------- MANAGED............................... $132.3 $131.4 $127.2 $132.3 $130.3 $124.7 Effect of Credit Card Securitizations. (26.1) (26.0) (24.4) (26.2) (26.2) (23.6) ----------------------------------------------------- ON-BALANCE SHEET...................... $106.2 $105.4 $102.8 $106.1 $104.1 $101.1 ===========================================================================================================
(A) Net of unearned income - -------------------------------------------------------------------------------- Total managed delinquent dollars and the related delinquency ratio improved from both the 1996 second quarter and the third quarter of 1995, reflecting lower delinquencies in Citibanking and the Private Bank, partially offset by increases in U.S. bankcards. Total consumer managed net credit losses and the related loss ratios have increased from both the preceding and year-ago quarters. 10 CITICORP[LOGO] In Citibanking, the decline in delinquent dollars and ratio primarily reflected improvements in U.S. mortgages, the impact of the mortgage portfolio sale in the U.K., and the effect of foreign currency translation, partially offset by increases in the U.S. government-guaranteed student loan portfolio and the emerging markets. Net credit losses were essentially unchanged from the preceding quarter and declined from the year-ago quarter by $23 million, primarily due to continued improvement in Latin America, as well as lower losses in Europe, particularly Germany. U.S. bankcards managed loans that were delinquent 90 days or more totaled $809 million as of September 30, 1996, or 1.86% of the portfolio, up from $732 million, or 1.73%, at June 30, 1996 and up from $643 million, or 1.54% a year ago. The net credit loss ratio was 5.11% in the quarter, up from 4.99% in the preceding quarter and up from 3.70% in the third quarter of 1995. Personal bankruptcies accounted for 38% of gross write-offs in the quarter, down from 39% in the preceding quarter and 36% in the year-ago quarter. Citicorp continues to writeoff bankrupt accounts upon notice of filing of bankruptcy. The increases in delinquent dollars and net credit losses are broadly consistent with industry trends. See pages 7 and 29 for additional discussion. The other Cards businesses primarily include bankcards in the emerging markets, Europe and Japan, as well as worldwide Diners Club. The rise in delinquencies of $28 million and in net credit losses of $20 million from the third quarter of 1995 was primarily due to increases in Asia Pacific. The delinquency ratio and net credit loss ratio has improved in the region since the preceding quarter. Additionally, both the delinquency and net credit loss ratios in Latin America continue to improve from both the preceding and year ago quarters. Private Bank delinquencies were down to 1.61% of loans from 2.32% a year earlier, reflecting an 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 at September 30, 1996, compared with $944 million and $910 million at June 30, 1996 and September 30, 1995, respectively. Included in these amounts are U.S. government-guaranteed student loans of $297 million, $237 million, and $196 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 $742 million, $707 million, and $714 million, respectively. The majority of these other loans are written off upon reaching a stipulated number of days past due. 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 September 30, 1996, interest accrual had been suspended on $2.3 billion of consumer loans, compared with $2.5 billion at June 30, 1996 and $2.7 billion at September 30, 1995, reflecting improvements across the developed markets, including U.S. mortgages, the impact of the mortgage portfolio sale in the U.K., and the effect of foreign currency translation, partially offset by increases in Asia Pacific. U.S. mortgages on which the accrual of interest has been suspended were $846 million, $942 million, and $1.0 billion at September 30, 1996, June 30, 1996, and September 30, 1995, respectively. Consumer credit costs, particularly in U.S. bankcards, and the related net credit loss ratios may increase from third quarter 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. These factors may result in further increases to the consumer allowance. 11 CITICORP[LOGO] - -------------------------------------------------------------------------------- CORPORATE BANKING - -------------------------------------------------------------------------------- Corporate Banking serves corporations, financial institutions, governments, and other participants in capital markets throughout the world. The Corporate Banking results presented below 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.
- ---------------------------------------------------------------------------------------------- Third Quarter % Nine Months % -------------------- -------------------- (Dollars In Millions) 1996 1995(A) Change 1996 1995(A) Change - ---------------------------------------------------------------------------------------------- Total Revenue................ $1,755 $1,622 8 $5,188 $4,954 5 Net Cost to Carry Cash- Basis Loans and OREO....... (9) 4 NM (30) 5 NM -------------------------------------------------------------- ADJUSTED REVENUE............. 1,746 1,626 7 5,158 4,959 4 -------------------------------------------------------------- Total Operating Expense...... 1,117 982 14 3,181 2,937 8 Net OREO Benefits............ 10 29 (66) 41 51 (20) -------------------------------------------------------------- ADJUSTED OPERATING EXPENSE... 1,127 1,011 11 3,222 2,988 8 -------------------------------------------------------------- OPERATING MARGIN............. 619 615 1 1,936 1,971 (2) -------------------------------------------------------------- Net Write-offs (Recoveries).. (41) 86 NM (1) 132 NM Net Cost to Carry and Net OREO Benefits.............. (19) (25) (24) (71) (46) 54 -------------------------------------------------------------- CREDIT COSTS................. (60) 61 NM (72) 86 NM -------------------------------------------------------------- OPERATING MARGIN LESS CREDIT COSTS............... 679 554 23 2,008 1,885 7 Additional Provision......... - 25 NM - 75 NM -------------------------------------------------------------- INCOME BEFORE TAXES.......... 679 529 28 2,008 1,810 11 Income Taxes................. 159 140 14 379 462 (18) -------------------------------------------------------------- NET INCOME................... $ 520 $ 389 34 $1,629 $1,348 21 ============================================================================================== Average Assets (In Billions of Dollars) $135 $140 (4) $138 $146 (5) Return on Assets............. 1.53% 1.10% - 1.58% 1.23% - ==============================================================================================
(A) Reclassified to conform to latest quarter's presentation. NM Not meaningful, as percentage equals or exceeds 100%. - -------------------------------------------------------------------------------- Net income from global corporate banking activities of $520 million and $1.6 billion in the 1996 third quarter and nine months, respectively, was up $131 million, or 34%, and $281 million, or 21%, from the comparable 1995 periods. Return on average assets increased to 1.53% and 1.58% in the 1996 third quarter and nine months from 1.10% and 1.23% in the comparable 1995 periods. Results in the 1996 third quarter reflected improved contributions from both the Emerging Markets business and Global Relationship Banking, while results in the nine-month period reflected improvement in the Emerging Markets business. Net income in the 1996 periods benefited from lower credit costs in both the Emerging Markets business and Global Relationship Banking, and from improved operating margins and lower effective income tax rates in the Emerging Markets business. Citicorp attributes income taxes to core businesses on the basis of local tax rates, which resulted in effective income tax rates of 23% and 19% in the 1996 third quarter and nine months compared with 26% in both 1995 periods. The difference between the local tax rates attributed to core businesses and Citicorp's overall effective tax rate in each period is included in Corporate Items. At September 30, 1996, cash-basis loans of $1.4 billion were composed of $0.4 billion in the Emerging Markets business and $1.0 billion in the Global Relationship Banking business (including $0.7 billion attributable to the North America Commercial Real Estate portfolio). Cash-basis loans were essentially unchanged from June 30, 1996, and declined $277 million from September 30, 1995. The OREO portfolio of $492 million was essentially unchanged from June 30, 1996 and declined $468 million from September 30, 1995. The declines in cash-basis loans and OREO from the year-ago quarter were primarily attributable to reductions in the North America Commercial Real Estate portfolio. See the tables entitled "Cash-Basis, Renegotiated, and Past Due Loans" and "Other Real Estate Owned and Assets Pending Disposition" on page 39. 12 CITICORP[LOGO]
- ------------------------------------------------------------------------------------------- EMERGING MARKETS - ------------------------------------------------------------------------------------------- Third Quarter % Nine Months % --------------------- --------------------- (Dollars In Millions) 1996 1995(A) Change 1996 1995(A) Change - ---------------------------------------------------------------------------------------------- Adjusted Revenue............. $815 $717 14 $2,532 $2,190 16 Adjusted Operating Expense... 426 346 23 1,197 1,013 18 -------------------------------------------------------------- OPERATING MARGIN............. 389 371 5 1,335 1,177 13 Credit Costs................. (47) 16 NM (45) 33 NM -------------------------------------------------------------- OPERATING MARGIN LESS CREDIT COSTS................ 436 355 23 1,380 1,144 21 Additional Provision......... - - - - - - -------------------------------------------------------------- INCOME BEFORE TAXES.......... 436 355 23 1,380 1,144 21 Income Taxes................. 91 93 (2) 211 269 (22) -------------------------------------------------------------- NET INCOME................... $345 $262 32 $1,169 $ 875 34 ============================================================================================== Average Assets (In Billions of Dollars)................. $61 $50 22 $58 $49 18 Return on Assets............. 2.25% 2.08% - 2.69% 2.39% - ==============================================================================================
(A) Reclassified to conform to latest quarter's presentation. NM Not meaningful, as percentage equals or exceeds 100%. - -------------------------------------------------------------------------------- Net income from the Emerging Markets business of $345 million and $1.2 billion in the 1996 third quarter and nine months, respectively, was up $83 million, or 32%, and $294 million, or 34%, from the comparable 1995 periods. Return on average assets increased to 2.25% and 2.69% in the 1996 third quarter and nine months from 2.08% and 2.39% in the comparable 1995 periods. Income before taxes was $436 million and $1.4 billion in the 1996 third quarter and nine months, up 23% and 21% from the comparable 1995 periods. The effective income tax rates in the 1996 third quarter and nine months were 21% and 15%, respectively, compared with 26% and 24% in the respective 1995 periods. The declines in the effective income tax rates in the 1996 periods were primarily attributable to changes in the geographic mix and nature of earnings. Adjusted revenue grew 14% and 16% in the 1996 third quarter and nine months compared with the respective 1995 periods. The third quarter revenue growth reflected a $36 million, or 20%, improvement in trading-related revenue coupled with strong momentum in transaction banking services and $28 million arising from the Panama refinancing agreement concluded in July. Revenue in the nine months reflected strong growth in loan products and transaction banking services and a $74 million, or 15%, improvement in trading-related revenue. In both the 1996 third quarter and nine months, about one-fifth of the revenue in the Emerging Markets business was attributable to business from multinational companies managed jointly with the Global Relationship Banking business; that revenue grew at double-digit rates in the 1996 periods compared with the respective 1995 periods. Revenue in the 1996 third quarter and nine months from the aggregate of net asset gains and securities transactions was $28 million and $204 million, up $12 million and $95 million from the comparable 1995 periods. The 1996 third quarter amount included the Panama refinancing revenue mentioned above, while the 1996 nine month amount also included a $52 million gain from the sale of Brazil interest bonds. The 1995 nine-month amount included gains from the sale of a real estate asset and revenue related to the completion of the refinancing agreement with Ecuador. Adjusted expense increased 23% and 18% in the 1996 third quarter and nine months compared with the respective 1995 periods. Expense growth in the quarterly period primarily reflected investment spending to build the franchise and costs associated with implementing Citicorp's plan to gain market share in selected emerging market countries, while expense growth in the nine-month period also reflected increased costs related to higher business volumes. The expense growth is expected to continue at relatively high levels as the business continues to build the franchise. Since the third quarter of 1995, operations were expanded around the world by opening additional offices or converting representative offices to branches or subsidiaries in China, Israel, Lebanon, Peru, Russia, Slovakia, and Tanzania. In addition, the Citi Islamic Investment Bank was opened in Bahrain. Credit costs remained low during the 1996 third quarter and nine months and included recoveries of $54 million attributable to the refinancing agreements concluded with Panama and Croatia. Credit costs in the 1996 nine months also 13 CITICORP[LOGO] included a recovery of $21 million related to the refinancing agreement concluded with Slovenia. Debt restructuring activities continued with Peru during the quarter. On November 8th, the Government of Peru and its Bank Advisory Committee signed an agreement restructuring Peru's medium- and long-term debt. - -------------------------------------------------------------------------------- GLOBAL RELATIONSHIP BANKING - --------------------------------------------------------------------------------
Third Quarter % Nine Months % --------------------- --------------------- (Dollars In Millions) 1996 1995(A) Change 1996 1995(A) Change - ----------------------------------------------------------------------------------------------------- Adjusted Revenue............. $931 $909 2 $2,626 $2,769 (5) Adjusted Operating Expense... 701 665 5 2,025 1,975 3 -------------------------------------------------------- OPERATING MARGIN............. 230 244 (6) 601 794 (24) Credit Costs................. (13) 45 NM (27) 53 NM -------------------------------------------------------- OPERATING MARGIN LESS CREDIT COSTS................ 243 199 22 628 741 (15) Additional Provision......... - 25 NM - 75 NM -------------------------------------------------------- INCOME BEFORE TAXES.......... 243 174 40 628 666 (6) Income Taxes................. 68 47 45 168 193 (13) -------------------------------------------------------- NET INCOME................... $175 $127 38 $ 460 $ 473 (3) ===================================================================================================== Average Assets (In Billions of Dollars)................. $74 $90 (18) $80 $97 (18) Return on Assets............. 0.94% 0.56% - 0.77% 0.65% - =====================================================================================================
(A) Reclassified to conform to latest quarter's presentation. NM Not meaningful, as percentage equals or exceeds 100%. - -------------------------------------------------------------------------------- Net income from the Global Relationship Banking business in North America, Europe, and Japan totaled $175 million in the 1996 third quarter, up $48 million, or 38%, from the comparable 1995 period, and totaled $460 million in the 1996 nine months, down $13 million, or 3%, from the comparable 1995 period. Net income in the 1996 periods benefited from lower credit costs and a lower additional provision. Average assets declined $16 billion and $17 billion during the 1996 third quarter and nine months compared with the respective 1995 periods, as the Global Relationship Bank continued to focus on asset utilization, primarily in trading-related activities, and improving returns. Return on average assets of 0.94% and 0.77% in the 1996 third quarter and nine months improved from 0.56% and 0.65% in the comparable 1995 periods. Adjusted revenue totaled $931 million in the 1996 third quarter, up $22 million, or 2%, from the comparable 1995 period, and totaled $2.6 billion in the 1996 nine months, down $143 million, or 5% from the comparable 1995 period. The third quarter results reflected growth in corporate finance and transaction banking services, together with strong trading-related and venture capital results. Trading-related revenue of $259 million in the 1996 third quarter was strong, but declined $61 million from the unusually strong 1995 third quarter level, when volatile foreign exchange markets provided substantial revenue opportunities. Venture capital revenues of $129 million improved $46 million from the 1995 third quarter, reflecting the robust U.S. equity markets. The 1996 nine-month results reflect growth in corporate finance and transaction banking services revenue and declines in trading-related and venture capital revenue. Trading-related revenue in the 1996 nine months reflected lower foreign exchange activity and a second quarter charge of $60 million related to certain mortgage- backed securities activities (see "Trading-Related Revenue" on page 27). Venture capital revenue in the 1996 nine months was strong, but declined from the unusually strong 1995 period. Revenue in the 1996 nine months also included a $110 million gain recognized in the second quarter from the sale of a stand- alone automated trading business, which was part of the company's former information initiatives. Adjusted expense of $701 million and $2.0 billion in the 1996 third quarter and nine months increased 5% and 3% compared with the respective 1995 periods due primarily to increased spending on technology and risk-management initiatives coupled with volume-related expenses in transaction banking. Credit costs were net credits of $13 million and $27 million in the 1996 third quarter and nine months, compared with net charges of $45 million and $53 million in the respective 1995 periods. The 1995 third quarter and nine months also reflected additional provisions of $25 million and $75 million, respectively. The Global Relationship Banking results include the North America Commercial Real Estate portfolio. Total North America Commercial Real Estate exposure at September 30, 1996 of $5.7 billion consisted of performing loans ($3.5 14 CITICORP[LOGO] billion), cash-basis loans ($0.7 billion), OREO ($0.4 billion), and letters of credit and other ($1.1 billion). Total exposure at September 30, 1996 declined $2.1 billion, or 26% from September 30, 1995, primarily as a result of paydowns, maturities, asset sales, and reductions of commitments. At September 30, 1996, total exposure was spread among office (47%), residential (19%), retail (16%), and other (18%) projects; with the largest concentrations in the mid-Atlantic region (24%) and California (23%). Cash-basis loans and OREO at September 30, 1996 were reduced by $0.7 billion from a year ago. Letters of credit and other included $0.3 billion related to projects on which debt service is continuing but the loan-to-value ratios have deteriorated or where the borrowers are experiencing financial difficulties. - -------------------------------------------------------------------------------- CORPORATE ITEMS - -------------------------------------------------------------------------------- Corporate Items includes revenue derived from charging businesses for funds employed (based upon a marginal cost of funds concept), unallocated corporate costs, and the offset created by attributing income taxes to the core businesses on a local tax-rate basis.
- ---------------------------------------------------------------------------------------------------- Third Quarter % Nine Months % -------------------- ------------------- (In Millions of Dollars) 1996 1995(A) Change 1996 1995(A) Change - ---------------------------------------------------------------------------------------------------- Revenue...................... $273 $213 28 $ 722 $ 488 48 Operating Expense............ 127 111 14 355 271 31 -------------------------------------------------------- Income Before Taxes.......... 146 102 43 367 217 69 Income Taxes................. 197 129 53 663 418 59 -------------------------------------------------------- NET LOSS..................... $(51) $(27) 89 $(296) $(201) 47 ====================================================================================================
(A) Reclassified to conform to latest quarter's presentation. - -------------------------------------------------------------------------------- Corporate Items revenue increased in both the third quarter and nine months of 1996 reflecting funding benefits associated with higher equity levels while expense levels reflected increases in corporate employee expense and other unallocated corporate costs, partially offset by lower costs associated with performance-based incentive compensation plans. Revenue in the 1996 and 1995 nine month periods included investment writedowns in Latin America of $50 million and $70 million, respectively. 15 CITICORP[LOGO] - -------------------------------------------------------------------------------- MANAGING GLOBAL RISK - -------------------------------------------------------------------------------- LIQUIDITY - -------------------------------------------------------------------------------- Citicorp manages liquidity through a well-defined process described in the 1995 Annual Report and Form 10-K. Total deposits of $179.3 billion represent 66% of total funding at September 30, 1996, compared with $167.1 billion (65% of total funding) at December 31, 1995, and are broadly diversified by geography and customer segments. Stockholders' equity, which was $20.4 billion at September 30, 1996 compared with $19.6 billion at December 31, 1995, is also 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 and subordinated capital notes outstanding at September 30, 1996, were $19.3 billion, compared with $18.5 billion at year-end 1995. A diversity of sources, currencies, and maturities is used to gain the broadest practical access to the investor base. Securitization of assets remains an important source of liquidity. Total assets securitized during the quarter were $2.1 billion, including $1.8 billion of U.S. credit card receivables and $0.3 billion of U.S. mortgages. Total assets securitized during the nine months of 1996 were $5.5 billion, including $4.1 billion of U.S. credit card receivables. As securitized credit card receivables transactions amortize, newly originated receivables are recorded on Citicorp's balance sheet and become available for asset securitization. During the nine months ended September 30, 1996, $3.5 billion of previously securitized credit card receivables amortized, as scheduled, and $2.2 billion and $5.9 billion are scheduled to amortize during the remainder of 1996 and in 1997, respectively. The Parent Company is a legal entity separate and distinct from Citibank, N.A. and its other subsidiaries and affiliates. As discussed in the 1995 Annual Report and Form 10-K, there are various legal limitations on the extent to which Citicorp's subsidiaries may extend credit, pay dividends, or otherwise supply funds to Citicorp. As of September 30, 1996, under their applicable dividend limitations, Citicorp's national and state-chartered bank subsidiaries could have declared dividends to their respective parent companies without regulatory approval of approximately $4.3 billion. In determining whether and to what extent to pay dividends, each bank subsidiary must also consider the effect of dividend payments on applicable risk-based capital and leverage ratio requirements, as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Consistent with these considerations, Citicorp estimates that as of September 30, 1996, its bank subsidiaries could have distributed dividends to Citicorp, directly or through their parent holding company, of approximately $3.8 billion of the available $4.3 billion. - -------------------------------------------------------------------------------- PRICE RISK - -------------------------------------------------------------------------------- Citicorp manages the sensitivity of earnings to changes in interest rates, foreign exchange rates, and market prices and volatilities through established procedures described in the 1995 Annual Report and Form 10-K. These include limits set annually for each major category of risk; these limits are 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. 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 16 CITICORP[LOGO] 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. Citicorp's primary non-trading price risk exposure is to movements in U.S. dollar interest rates. During the third quarter of 1996, the amount of U.S. dollar pretax earnings at risk for the following 12 months to a two standard deviation increase in rates had a potential negative impact which ranged at each month-end from approximately $133 million to $204 million in the aggregate, which is somewhat higher than the range from $30 million to $150 million during the full year 1995. As of September 30, 1996, the U.S. dollar interest rate exposure taken in tenors beyond one year results in pretax earnings at risk of a maximum of $110 million in any single future year. The table below summarizes Citicorp's worldwide earnings at risk at September 30, 1996 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 September 30, 1996) Increase Decrease - ------------------------------------------------------------------------------------------ Excluding Derivatives..................................... $ 96 $(84) Including Derivatives..................................... (204) 206 - ------------------------------------------------------------------------------------------
The table illustrates that including derivatives, Citicorp's earnings 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. Earnings at risk in other currencies also existed, although 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. 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 business 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. During the three quarters of 1996, the potential loss amount in the trading portfolios based on monthly averages of daily exposures ranged from approximately $40 million to $60 million pretax in the aggregate for Citicorp's major trading centers, which is the same range as for the full year of 1995. The potential loss amounts were relatively stable in 1995 and the nine months of 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. Trading-related revenue for the third quarter of 1996 was $547 million, compared with $427 million in the second quarter of 1996 (see "Trading-Related Revenue" on page 27). - -------------------------------------------------------------------------------- DERIVATIVE AND FOREIGN EXCHANGE CONTRACTS - -------------------------------------------------------------------------------- Derivative and foreign exchange products are important risk management tools for Citicorp and its customers. These contracts typically take the form of futures, forward, swap, and option contracts, and derive their value from underlying 17 CITICORP[LOGO] interest rate, foreign exchange, commodity, or equity instruments. They are subject to the same types of liquidity, price, credit, and operational risks as other financial instruments, and Citicorp manages these risks in a consistent manner. As a dealer, Citicorp enters into derivative and foreign exchange instruments with customers separately or with other products, to help them to manage their risk profile, and also trades for Citicorp's own account. In addition, Citicorp employs derivative and foreign exchange contracts among other instruments as an end-user in connection with its risk management activities. Monitoring procedures entail objective measurement systems, well-defined market and credit risk limits at appropriate control levels, and timely reports to line and senior management according to prescribed policies. Additional information concerning Citicorp's derivative and foreign exchange activities, including a description of accounting policies, is provided in the 1995 Annual Report and Form 10-K. Notional principal amounts are frequently used as indicators of derivative and foreign exchange activity, serving as a point of reference for calculating payments. Notional principal amounts do not reflect balances subject to credit or market risk, nor do they reflect the extent to which positions offset one another. As a result, they do not represent the much smaller amounts that are actually subject to risk in these transactions. Balance sheet credit exposure arises from unrealized gains and represents the amount of loss that Citicorp would suffer if every counterparty to which Citicorp was exposed were to default at once (i.e., the cost of replacing these contracts), and does not represent actual or expected loss amounts. Master netting agreements mitigate credit risk by permitting the offset of amounts due from and to individual counterparties in the event of counterparty default. The table below presents the aggregate notional principal amounts of Citicorp's outstanding derivative and foreign exchange contracts at September 30, 1996 and December 31, 1995, along with the related balance sheet credit exposure. The table includes all contracts with third parties, including both dealer and end-user positions. - -------------------------------------------------------------------------------- DERIVATIVE AND FOREIGN EXCHANGE CONTRACTS - --------------------------------------------------------------------------------
Notional Principal Amounts Balance Sheet Credit Exposure (A) -------------------------------------------------------------------- Sept. 30, Dec. 31, Sept. 30, Dec. 31, (In Billions of Dollars) 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------- INTEREST RATE PRODUCTS Futures Contracts................ $ 178.0 $145.2 $ - $ - Forward Contracts................ 174.5 295.2 0.2 0.6 Swap Agreements.................. 471.8 431.9 8.4 9.1 Purchased Options................ 112.1 105.9 1.1 1.2 Written Options.................. 179.0 158.1 - - FOREIGN EXCHANGE PRODUCTS Futures Contracts................ 9.2 1.1 - - Forward Contracts............... 1,158.4 983.5 12.0 12.2 Cross-Currency Swap Agreements... 38.6 35.2 1.7 2.0 Purchased Options................ 98.9 93.7 1.1 1.8 Written Options.................. 102.0 88.2 - - COMMODITY AND EQUITY PRODUCTS....... 35.0 38.0 1.1 0.9 ------------------------- 25.6 27.8 EFFECTS OF MASTER NETTING ) AGREEMENTS (B)..................... (11.5) (11.7) ------------------------- $14.1 $16.1 ====================================================================================================
(A) 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. (B) 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 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 used for other activities. In managing the aggregate credit extension to an individual customer, 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 prices change. Citicorp's use of these two risk measures is discussed further in the 1995 Annual Report and Form 10-K. As shown in the table above, the current replacement cost for all contracts in the 18 CITICORP[LOGO] aggregate was $14.1 billion at September 30, 1996. The potential increase in replacement cost, estimated as the additional loss that Citicorp would suffer if changes in market rates resulted in additional unrealized gains and every counterparty to which Citicorp was exposed were to default at once, was approximately $54.9 billion in the aggregate for all contracts at September 30, 1996 and $42.2 billion at December 31, 1995. At year-end 1995, approximately 94% of the total credit exposure was to investment grade counterparties and approximately 88% was under three years tenor, and Citicorp believes the distribution is substantially similar at September 30, 1996. There were no significant amounts of nonperforming contracts at September 30, 1996 and there were no credit-related losses on derivative contracts in the third quarter of 1996. Citicorp's management of its derivative and foreign exchange activities, including the related accounting and operational controls, is tailored to its dealer and end-user activities. Citicorp's dealer activities are managed on a market-value basis, which recognizes in earnings the gains or losses resulting from changes in market rates. 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 operational activities. This amount is amortized into trading account or foreign exchange revenue over the life of the contract. The balance of unamortized revenue was $294 million at September 30, 1996. Information regarding derivative and foreign exchange trading-related revenue can be found on page 27. Citicorp's risk management activities employ interest rate swaps and other derivatives that are designated and effective as hedges, as well as contracts that are designated and effective in modifying the interest rate characteristics of specified assets or liabilities. These contracts are accounted for in a manner consistent with the related assets or liabilities. Revenue and expense related to these agreements are generally included in net interest revenue over the lives of the agreements on an accrual basis, and realized gains and losses, including any related to terminated contracts, are deferred and amortized. The tables below and on page 20 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 as of September 30, 1996 with three-month LIBOR forward rates included for reference. Contract maturities are related to the underlying risk management strategies. - -------------------------------------------------------------------------------- END-USER DERIVATIVE AND FOREIGN EXCHANGE CONTRACTS (INCLUDING THIRD-PARTY AND INTERCOMPANY CONTRACTS) - --------------------------------------------------------------------------------
Notional Principal Amounts Percentage of Sept. 30, 1996 Amount Maturing ----------------------------------------------------------------------------- Sept. 30, Dec. 31, Within 1 to 2 2 to 3 3 to 4 4 to 5 After 5 (Dollars in Billions) 1996 1995 1 Year Years Years Years Years Years - ----------------------------------------------------------------------------------------------------------------------------- INTEREST RATE PRODUCTS Futures Contracts...................... $ 20.2 $13.6 90% 8% 2% - - - Forward Contracts...................... 5.7 5.6 92% 7% - - - 1% Swap Agreements........................ 112.4 90.9 30% 23% 14% 10% 9% 14% Option Contracts....................... 51.7 45.6 55% 35% 5% 3% 1% 1% FOREIGN EXCHANGE PRODUCTS Futures and Forward Contracts.......... 60.3 54.8 96% 4% - - - - Cross-Currency Swap Agreements......... 2.9 3.2 16% 13% 13% 20% 13% 25% - ---------------------------------------------------------------------------------------------------------------------------
19 CITICORP[LOGO] - -------------------------------------------------------------------------------- END-USER INTEREST RATE SWAPS AND NET PURCHASED OPTIONS AS OF SEPT. 30, 1996 - --------------------------------------------------------------------------------
Remaining Contracts Outstanding at Sept. 30, - ---------------------------------------------------------------------------------------------------------------------- (Dollars in Billions) 1996 1997 1998 1999 2000 2001 - ---------------------------------------------------------------------------------------------------------------------- RECEIVE FIXED SWAPS Notional Amounts................................... $84.8 $61.5 $45.7 $32.2 $21.4 $11.9 Weighted-Average Fixed Rate........................ 6.5% 6.6% 6.7% 6.8% 6.6% 6.8% PAY FIXED SWAPS Notional Amounts................................... 12.7 8.9 5.5 4.5 3.9 3.5 Weighted-Average Fixed Rate........................ 7.0% 7.0% 7.1% 7.1% 7.0% 7.1% BASIS SWAPS Notional Amounts................................... 14.9 8.1 1.2 0.2 0.1 0.1 PURCHASED CAPS (INCLUDING COLLARS) Notional Amounts................................... 27.9 12.0 3.4 1.1 0.1 0.1 Weighted-Average Cap Rate Purchased................ 6.2% 6.2% 7.2% 8.3% 9.9% 9.1% PURCHASED FLOORS Notional Amounts................................... 1.1 1.1 0.1 0.1 0.1 0.1 Weighted-Average Floor Rate Purchased.............. 5.3% 5.3% 5.8% 5.8% 5.8% 5.8% WRITTEN FLOORS RELATED TO PURCHASED CAPS (COLLARS) Notional Amounts................................... 1.2 0.2 0.2 0.2 - - Weighted-Average Floor Rate Written................ 5.6% 8.2% 8.2% 8.2% - - WRITTEN CAPS RELATED TO OTHER PURCHASED CAPS (A) Notional Amounts................................... 21.5 9.9 1.3 1.3 0.6 0.5 Weighted-Average Cap Rate Written.................. 6.3% 6.0% 9.1% 9.1% 9.5% 9.6% - ---------------------------------------------------------------------------------------------------------------------- THREE-MONTH IMPLIED FORWARD LIBOR RATES (B) 5.6% 6.3% 6.7% 6.9% 7.1% 7.3% - ----------------------------------------------------------------------------------------------------------------------
(A) Includes written options related to purchased options embedded in other financial instruments. (B) The floating rate for a substantial majority of the end-user interest rate swaps is three-month LIBOR. The three-month LIBOR rates shown above reflect the implied forward yield curve for that index as of September 30, 1996. - -------------------------------------------------------------------------------- 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 the third quarter of 1996 interest rate contracts with notional principal amounts of approximately $22.7 billion were closed out (primarily short-term futures contracts), resulting in a net deferred loss of $13 million. Total unamortized net deferred losses, including those related to prior period closeouts, were approximately $86 million at September 30, 1996, which will be amortized through earnings over the period reflecting the original hedging or risk management strategy (16% in 1996, 62% in 1997, and 22% in subsequent years). End-user derivative positions are components of Citicorp's designated asset and liability management activities. Derivatives provide an additional tool for accomplishing risk management objectives, but these same objectives could alternatively be accomplished using other financial instruments. Therefore, Citicorp does not believe it is meaningful to analyze the derivatives component of its risk management activities in isolation from related positions. The table on page 21 provides information about the estimated fair values of financial instruments. The Financial Accounting Standards Board has issued an exposure draft for a proposed new accounting standard which would significantly affect the accounting treatment of end-user derivative and foreign exchange contracts by Citicorp and its customers. Under this proposal, all derivative and foreign exchange contracts would be carried at fair value, with changes in fair value reflected in earnings or in a new measure called "comprehensive income," depending on the nature of the risk management strategy. Additionally, in certain cases offsetting changes in the fair value of the underlying hedged item would be reflected in earnings. As currently proposed, the new standard would be effective in the first quarter of 1998. If the proposal is adopted, Citicorp and the customers to which it provides derivatives and foreign exchange products will have to reconsider their risk management strategies, since the proposal would not reflect the results of many of those strategies in the same manner as current accounting practice. 20 CITICORP[LOGO] - -------------------------------------------------------------------------------- ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS - -------------------------------------------------------------------------------- The table below presents the estimated fair value in excess of (less than) carrying 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 table below also provides estimated fair value data for the expected time period until runoff of existing deposits with no fixed maturity. - -------------------------------------------------------------------------------- ESTIMATED FAIR VALUE IN EXCESS OF (LESS THAN) CARRYING VALUE - --------------------------------------------------------------------------------
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, (In Billions of Dollars) 1996 1996 1996 1995 1995 - ------------------------------------------------------------------------------------------- Assets and Liabilities............. $5.5 $5.6 $5.4 $5.0 $4.4 End-User Derivative and Foreign Exchange Contracts................ (0.2) (0.3) 0.2 1.4 0.5 Loan Commitments................... - - - - (0.1) Credit Card Receivables Securitizations (A)............... 0.5 0.5 0.3 (0.3) (0.1) ----------------------------------------------------- 5.8 5.8 5.9 6.1 4.7 Deposits with No Fixed Maturity (B)...................... 3.0 3.3 2.7 2.3 2.4 ----------------------------------------------------- TOTAL.............................. $8.8 $9.1 $8.6 $8.4 $7.1 ===========================================================================================
(A) Represents the estimated excess (shortfall) in 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. (B) 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, 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 quarterly fluctuations among financial instruments are primarily due to the changes in the interest rate environment in the U.S. and other countries. In addition, fair values may vary from period to period based on changes in a variety of other factors including credit quality, market perceptions of value, and the changing composition of assets and liabilities. During the third quarter of 1996, when U.S. rates declined slightly, the excess fair values of assets and liabilities and deposits with no fixed maturity declined, partially offset by an increase in the value of derivative contracts. Conversely, the generally rising rate environment of the first two quarters of 1996 led to increases in the excess fair values of assets and liabilities, credit card securitizations, and deposits with no fixed maturity, partially offset by a decrease in the value of derivative contracts. Changes in fair values during the fourth quarter reflected a declining interest rate environment and were also affected by the transfer of securities from the held-to-maturity to the available-for-sale category. 21 CITICORP[LOGO] - -------------------------------------------------------------------------------- CAPITAL - -------------------------------------------------------------------------------- Citicorp is subject to risk-based capital guidelines issued by the Federal Reserve Board ("FRB"). These guidelines are supplemented by a leverage ratio requirement. The risk-based capital guidelines and the leverage ratio requirement are detailed in the 1995 Annual Report and Form 10-K.
- -------------------------------------------------------------------------------------------------------------- Sept. 30, June 30, Dec. 31, CITICORP RATIOS 1996 1996 1995 - -------------------------------------------------------------------------------------------------------------- Common Stockholders' Equity................................... 6.74% 6.69% 6.43% Tier 1 Capital................................................ 8.36% 8.38% 8.41% Total Capital (Tier 1 and Tier 2)............................. 12.40% 12.35% 12.33% Leverage (A).................................................. 7.47% 7.49% 7.45% - --------------------------------------------------------------------------------------------------------------
(A) Tier 1 capital divided by adjusted average assets. - -------------------------------------------------------------------------------- Citicorp continued to maintain a strong capital position during the third quarter of 1996. Total capital (Tier 1 and Tier 2) rose $383 million to $28.5 billion at September 30, 1996, representing 12.40% of net risk-adjusted assets. This compares with $28.2 billion and 12.35% at June 30, 1996 and $27.7 billion and 12.33% at December 31, 1995. Tier 1 capital of $19.3 billion at September 30, 1996 represented 8.36% of net risk-adjusted assets, compared with $19.1 billion and 8.38% at June 30, 1996 and $18.9 billion and 8.41% at December 31, 1995. The Tier 1 capital ratio at September 30, 1996 exceeded Citicorp's target range of 8.0% to 8.3%. The excess of Tier 1 capital generated during a period reduced by capital utilized for business expansion is referred to as "free capital." As shown in the table below, Citicorp generated $719 million and $2.2 billion of free capital during the third quarter and nine months, respectively, of 1996.
- ----------------------------------------------------------------------------------------- FREE CAPITAL Third Quarter Nine Months --------------------------------- (In Millions of Dollars) 1996 1996 - ----------------------------------------------------------------------------------------- Tier 1 Capital Generated: Net Income.......................................... $935 $2,801 Issuances/Other (A)................................. 218 552 Cash Dividends Declared............................. (251) (762) ----------------------------- Total Tier 1 Capital Generated......................... 902 2,591 Capital Utilized for Growth in Net Risk-Adjusted Assets.................................. (183) (437) ----------------------------- FREE CAPITAL........................................... $719 $2,154 =========================================================================================
(A) Primarily includes issuance of common stock under various staff benefits plans and the dividend reinvestment plan. - -------------------------------------------------------------------------------- In order to return this free capital to its shareholders, Citicorp initiated a two-year $3.0 billion common stock repurchase program in June 1995. In January 1996, the program was expanded to a total of $4.5 billion. During the third quarter and nine months of 1996, Citicorp repurchased 8.9 million and 28.0 million shares, respectively, of common stock under the repurchase program at aggregate purchase prices of $756 million ($85.39 average cost per share) and $2.3 billion ($80.45 average cost per share), respectively. Citicorp began the third quarter of 1996 with Tier 1 capital in excess of its target, enabling repurchases to exceed the amount of free capital generated for the quarter. Since the program was initiated, Citicorp has repurchased 51.1 million shares of common stock at an aggregate cost of $3.8 billion. Common stockholders' equity of $18.3 billion at September 30, 1996 represented 6.74% of assets, compared with 6.69% at June 30, 1996 and 6.43% at year-end 1995. The net increase of $467 million in common stockholders' equity during the quarter principally reflected changes in retained earnings, an increase in net unrealized gains on securities available for sale, and issuances of common stock under various staff benefit plans and the dividend reinvestment plan, partially offset by activity under the stock repurchase program. 22 CITICORP[LOGO]
- ------------------------------------------------------------------------------------------------------------- COMPONENTS OF RISK-BASED CAPITAL UNDER REGULATORY GUIDELINES Sept. 30, June 30, Dec. 31, (In Millions of Dollars) 1996 1996 1995 - -------------------------------------------------------------------------------------------------------------- TIER 1 CAPITAL Common Stockholders' Equity....................................... $18,319 $17,852 $16,510 Perpetual Preferred Stock......................................... 2,078 2,078 3,071 Minority Interest................................................. 87 85 70 Less: Net Unrealized Gains - Securities Available for Sale (A)...... (581) (297) (132) Intangible Assets (B)......................................... (332) (300) (293) 50% Investment in Certain Subsidiaries (C).................... (320) (313) (311) ========================================= TOTAL TIER 1 CAPITAL.............................................. 19,251 19,105 18,915 ============================================================================================================== TIER 2 CAPITAL Allowance for Credit Losses (D)................................... 2,909 2,882 2,843 Qualifying Debt (E)............................................... 6,693 6,476 6,278 Less: 50% Investment in Certain Subsidiaries (C).................. (320) (313) (311) ----------------------------------------- Total Tier 2 Capital.............................................. 9,282 9,045 8,810 ========================================= Total Capital (Tier 1 and Tier 2)................................. $28,533 $28,150 $27,725 ============================================================================================================== Net Risk-Adjusted Assets (F)...................................... $230,186 $227,980 $224,915 - --------------------------------------------------------------------------------------------------------------
(A) Tier 1 capital excludes unrealized gains and losses on securities available for sale in accordance with regulatory risk-based capital guidelines. (B) Includes goodwill and certain identifiable intangible assets. (C) Primarily Citicorp Securities, Inc. (D) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is deducted from risk-adjusted assets. (E) Includes qualifying senior and subordinated debt in an amount not exceeding 50% of Tier 1 capital and subordinated capital notes subject to certain limitations. (F) Includes risk-weighted credit equivalent amounts net of applicable bilateral netting agreements of $8.8 billion for interest rate, commodity and equity derivative contracts and foreign exchange contracts as of September 30, 1996, compared with $8.6 billion and $10.0 billion at June 30, 1996 and December 31, 1995, respectively. 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. - -------------------------------------------------------------------------------- As discussed in the 1995 Annual Report and Form 10-K, Citicorp has entered into forward purchase agreements on its common stock, to be settled in shares of its common stock on a net basis, in order to partially offset the dilutive effects of various staff benefit plans. As of September 30, 1996, agreements were in place covering approximately $900 million of Citicorp common stock (10.5 million shares) with forward prices averaging $85.88 per share. Both the number of shares covered and the forward prices of the contracts are adjusted on a quarterly basis and reflect the stock price at the time of adjustment. If these agreements were settled based on the September 30, 1996 market price of Citicorp common stock ($90.63 per share), Citicorp would be entitled to receive approximately 0.6 million shares. During the third quarter of 1996, settlements resulted in Citicorp receiving approximately 0.4 million shares of its common stock. 23 CITICORP[LOGO] Citicorp's subsidiary depository institutions are subject to the risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are generally similar to the FRB's guidelines. At September 30, 1996 all of Citicorp's subsidiary depository institutions were "well capitalized" under the federal bank regulatory agencies' definitions.
- --------------------------------------------------------------------------------------- Sept. 30, June 30, Dec. 31, CITIBANK, N.A. RATIOS 1996 1996 1995 - --------------------------------------------------------------------------------------- Common Stockholder's Equity............... 7.16% 7.04% 7.08% Tier 1 Capital............................ 8.36% 8.27% 8.32% Total Capital (Tier 1 and Tier 2)......... 12.19% 12.12% 12.24% Leverage.................................. 6.83% 6.79% 6.65% - ---------------------------------------------------------------------------------------
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, upon implementation, affect reported capital ratios and net risk-adjusted assets. 24 CITICORP[LOGO] - -------------------------------------------------------------------------------- STATEMENT OF INCOME ANALYSIS - -------------------------------------------------------------------------------- NET INTEREST REVENUE (TAXABLE EQUIVALENT BASIS) - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- NET INTEREST REVENUE STATISTICS 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. (TAXABLE EQUIVALENT BASIS) (A) (B) 1996 1996 1996 1995 1995 1995 1995 - ------------------------------------------------------------------------------------------------------------------------- NET INTEREST REVENUE: (In Millions of Dollars) U.S. (excluding SAIF)................. $1,778 $1,750 $1,716 $1,607 $1,612 $1,514 $1,515 Outside the U.S....................... 1,616 1,601 1,547 1,499 1,502 1,459 1,286 --------------------------------------------------------------------------- TOTAL ADJUSTED (EXCLUDING SAIF) (C)........ 3,394 3,351 3,263 3,106 3,114 2,973 2,801 Effect of Credit Card Securitizations...... (613) (615) (570) (537) (508) (497) (468) SAIF Assessment............................ (64) - - - - - - --------------------------------------------------------------------------- TOTAL...................................... $2,717 $2,736 $2,693 $2,569 $2,606 $2,476 $2,333 ========================================================================================================================= AVERAGE INTEREST-EARNING ASSETS: (In Billions of Dollars) U.S................................... $118.7 $121.1 $122.4 $123.3 $122.3 $126.4 $127.4 Outside the U.S....................... 140.1 135.7 132.2 127.7 122.8 121.8 118.8 --------------------------------------------------------------------------- TOTAL ADJUSTED (C)......................... 258.8 256.8 254.6 251.0 245.1 248.2 246.2 Effect of Credit Card Securitizations...... (26.2) (26.2) (25.9) (25.2) (23.6) (23.3) (22.5) --------------------------------------------------------------------------- TOTAL...................................... $232.6 $230.6 $228.7 $225.8 $221.5 $224.9 $223.7 ========================================================================================================================= ADJUSTED NET INTEREST MARGIN: U.S. (excluding SAIF) (D)............. 5.96% 5.81% 5.64% 5.17% 5.23% 4.81% 4.82% Outside the U.S....................... 4.59% 4.75% 4.71% 4.66% 4.85% 4.80% 4.39% TOTAL ADJUSTED (EXCLUDING SAIF) (C)........ 5.22% 5.25% 5.15% 4.91% 5.04% 4.80% 4.61% Effect of Credit Card Securitizations...... (.47)% (.48)% (.41)% (.40)% (.37)% (.38)% (.38)% SAIF Assessment............................ (.10)% - - - - - - --------------------------------------------------------------------------- TOTAL...................................... 4.65% 4.77% 4.74% 4.51% 4.67% 4.42% 4.23% =========================================================================================================================
(A) Includes appropriate allocations for capital and funding costs based on the location of the asset. (B) The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35%. (C) Adjusted for the effect of credit card securitizations. See page 31 for discussion. (D) Including the SAIF assessment, Adjusted Net Interest Margin in U.S. offices for the third quarter 1996 was 5.75%. - -------------------------------------------------------------------------------- Net interest revenue of $2.7 billion in the third quarter of 1996, which included a one time charge of $64 million related to the U.S. Savings Association Insurance Fund ("SAIF"), increased 4% from the year-ago period. Excluding the SAIF charge, net interest revenue increased 7%, reflecting higher net rate spreads, including funding benefits associated with higher equity levels, as well as an increase in interest-earning assets. Net interest revenue and net interest margin are reduced by the effect of credit card securitizations. Adjusted for the effect of credit card securitizations and excluding the SAIF charge, net interest revenue for the 1996 third quarter of $3.4 billion was essentially unchanged from the 1996 second quarter and increased 9% from the 1995 third quarter. The adjusted net interest margin, excluding the SAIF charge, decreased to 5.22% in the 1996 third quarter from 5.25% in the second quarter of 1996 and increased from 5.04% in the third quarter of 1995. The adjusted net interest margin in the U.S., excluding the SAIF charge, of 5.96% in the 1996 third quarter was up from 5.81% in the second quarter and 5.23% in the 1995 third quarter. The improvement over the 1996 second quarter principally reflected higher trading-related net interest revenue in the Global Relationship Bank coupled with a decrease in the level of lower-yielding trading assets. The increase in the adjusted net interest margin in the U.S. from the third quarter of 1995 also reflected a decrease in the level of lower-yielding trading assets in the Global Relationship Bank, increased spreads and higher volumes in the U.S. bankcards business, and a lower net cost to carry cash-basis loans and OREO. Net interest revenue from activities outside the U.S. represented 48% of total adjusted net interest revenue (excluding SAIF) in the third quarter of 1996. The net rate spread outside the U.S. of 4.59% in the third quarter of 1996 decreased from 4.75% in the second quarter and 4.85% in the 1995 third quarter. The decrease in the net interest margin from the 1996 second quarter is due to a decrease in trading-related net interest revenue in the Global Relationship Bank in Europe, and lower spreads in the emerging markets businesses. The decrease in the net interest margin from the 1995 third quarter reflected lower spreads in 25 CITICORP[LOGO] the Emerging Markets Corporate Banking business, partially offset by the expansion of the Cards business in Asia Pacific. The $13.7 billion increase in adjusted average interest-earning assets in the 1996 third quarter from the year-ago period was mainly attributable to higher levels of consumer loans, as well as investment securities and commercial loans outside the U.S., partially offset by a reduction in trading assets in the Global Relationship Bank. - -------------------------------------------------------------------------------- FEE AND COMMISSION REVENUE - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------- Third Quarter Nine Months -------------------------------------------------- (In Millions of Dollars) 1996 1995(A) 1996 1995(A) - ----------------------------------------------------------------------------------------------------------- CONSUMER: Developed Markets............................... $ 570 $ 579 $1,640 $1,713 Emerging Markets................................ 266 242 788 687 -------------------------------------------------- Total Consumer.................................. 836 821 2,428 2,400 CORPORATE BANKING AND OTHER........................ 484 432 1,459 1,321 -------------------------------------------------- TOTAL ADJUSTED FEE AND COMMISSION REVENUE (B)...... 1,320 1,253 3,887 3,721 Effect of Credit Card Securitizations.............. 43 15 137 72 -------------------------------------------------- TOTAL FEE AND COMMISSION REVENUE................... $1,363 $1,268 $4,024 $3,793 ===========================================================================================================
(A) Reclassified to conform to latest quarter's presentation. (B) Adjusted for the effect of credit card securitizations. See page 31 for discussion. - -------------------------------------------------------------------------------- Total fee and commission revenue of $1.4 billion for the third quarter and $4.0 billion for the nine months of 1996 increased $95 million, or 7%, and $231 million, or 6%, respectively, from the comparable 1995 periods. Fee and commission revenue was increased in all periods presented by the effect of credit card securitizations. Fee and commission revenue, adjusted for the effect of credit card securitizations, in the third quarter and nine months of 1996 was up 5% and 4%, respectively, from the comparable year-ago periods. Within the Consumer businesses, fee and commission revenue for the third quarter and nine months of 1996 was up slightly from the year-ago periods as continued double-digit growth in the emerging markets was offset by reductions in the developed markets. The emerging markets growth in both the quarter and nine months reflected increases across various Consumer products offered in these markets, particularly card related fees in Asia Pacific and investment related fees in Latin America and Asia Pacific. Fees in the developed markets were slightly reduced from levels in the 1995 periods principally reflecting lower card related fees. In the Corporate Banking business, fee and commission revenue for the third quarter and nine months of 1996 was up 12% and 10%, respectively, from the comparable year-ago periods, primarily reflecting higher business volumes in Emerging Markets, particularly in Asia Pacific and Latin America, representing continued growth in corporate finance, transaction banking services, and trust, agency and custodial fees, as well as increased transaction banking services revenue in Global Relationship Banking. 26 CITICORP[LOGO] - -------------------------------------------------------------------------------- TRADING-RELATED REVENUE - -------------------------------------------------------------------------------- Trading-related revenue is reported in "Foreign Exchange" and "Trading Account" in the Statement of Income and also includes other amounts, principally reflected in net interest revenue. The table below presents trading-related revenue by business sector, by trading activity, and by income statement line.
- ----------------------------------------------------------------------------------------------------------- Third Quarter Nine Months -------------------------------------------------- (In Millions of Dollars) 1996 1995(A) 1996 1995(A) - ----------------------------------------------------------------------------------------------------------- BY BUSINESS SECTOR: Corporate Banking Emerging Markets............................. $217 $181 $ 582 $ 508 Global Relationship Banking.................. 259 320 603 816 -------------------------------------------------- Total Corporate Banking...................... 476 501 1,185 1,324 Consumer and Other.............................. 71 57 181 182 -------------------------------------------------- TOTAL............................................... $547 $558 $1,366 $1,506 =========================================================================================================== BY TRADING ACTIVITY: Foreign Exchange (B)............................ $251 $294 $ 693 $ 862 Derivative (C).................................. 159 137 434 356 Fixed Income (D)................................ 41 49 13 55 Other........................................... 96 78 226 233 -------------------------------------------------- TOTAL............................................... $547 $558 $1,366 $1,506 =========================================================================================================== BY INCOME STATEMENT LINE: Foreign Exchange................................ $221 $250 $ 640 $ 878 Trading Account................................. 224 182 420 363 Other (E)....................................... 102 126 306 265 -------------------------------------------------- TOTAL............................................... $547 $558 $1,366 $1,506 ===========================================================================================================
(A) Reclassified to conform to latest quarter's presentation. (B) Includes foreign exchange spot, forward, and option contracts. (C) Primarily interest rate and currency swaps, options, financial futures, and equity and commodity contracts. (D) Principally debt instruments including government and corporate debt as well as mortgage-backed securities. (E) Primarily net interest revenue. - -------------------------------------------------------------------------------- Trading-related revenue declined in both the 1996 third quarter and nine months compared with the respective 1995 periods. The declines primarily reflected lower foreign exchange activity and, in the 1996 nine-month period, a second quarter charge of $60 million related to certain mortgage-backed securities activities. Levels of trading-related revenue may fluctuate in the future as a result of market conditions and other factors. Foreign exchange revenue of $251 million and $693 million in the 1996 third quarter and nine months declined $43 million and $169 million from the comparable 1995 periods primarily reflecting the unusually strong results in the volatile foreign exchange markets that existed during the third quarter and nine months of 1995. Derivative revenue totaled $159 million and $434 million in the 1996 third quarter and nine months compared with $137 million and $356 million in the respective 1995 periods. The increases reflected continued customer demand for risk-management products. Fixed income revenue in the 1996 third quarter and nine months declined $8 million and $42 million from the comparable 1995 periods. The decline in the 1996 nine-month period primarily reflects a second quarter charge of $60 million related to certain mortgage-backed securities activities partially offset by improved emerging market debt trading results. 27 CITICORP[LOGO] - -------------------------------------------------------------------------------- SECURITIES TRANSACTIONS - -------------------------------------------------------------------------------- Net gains from the sale of securities were $5 million in the third quarter and $146 million in the nine months of 1996, compared with $21 million and $65 million in the respective 1995 periods. The net gains in the third quarter of 1996 reflected gross realized gains of $18 million ($181 million for the nine months) and gross realized losses of $13 million ($35 million for the nine months). Results for the nine months of 1996 included a realized gain of $52 million from the sale of Brazil interest bonds. 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 - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------- Third Quarter Nine Months -------------------------------------------------- (In Millions of Dollars) 1996 1995(A) 1996 1995(A) - ----------------------------------------------------------------------------------------------------------- Securitized Credit Card Receivables................. $210 $274 $ 658 $ 734 Venture Capital..................................... 129 89 274 362 Affiliate Earnings.................................. 43 50 188 157 Net Asset Gains and Other Items..................... 106 25 359 146 -------------------------------------------------- TOTAL............................................... $488 $438 $1,479 $1,399 ===========================================================================================================
(A) Reclassified to conform to latest quarter's presentation. - -------------------------------------------------------------------------------- The decrease in revenue related to securitized credit card receivables reflected higher net credit loss rates, partially offset by an improved net interest margin and higher average securitized volumes. The effect of credit card receivables securitizations is discussed in more detail on page 31. Venture capital revenue in the 1996 third quarter was strong, reflecting the robust U.S. equity markets. Revenue in the nine months of 1996 declined from the unusually strong 1995 period. The nine month period of each year included gains related to public offerings by investees. Investments of venture capital subsidiaries are carried at fair value and earnings volatility can occur in the future, based on general market conditions as well as events and trends affecting specific venture capital investments. Affiliate earnings improved by $31 million compared to the nine months of 1995, largely due to improved results in Latin America. Net asset gains and other items in the 1996 third quarter included a $42 million gain from the sale of the consumer mortgage portfolio in the United Kingdom and a $28 million gain arising from the Panama refinancing agreement concluded during the quarter. Revenue in the nine months of 1996 also included a $110 million gain recognized in the second quarter from the sale of an automated trading business, a gain related to the partial disposition of Citicorp's holding in an Asian affiliate, and gains related to the sale of assets held by the Corporate Banking and the Consumer businesses, partially offset by an investment writedown of $50 million in Latin America. Revenue in the nine months of 1995 primarily 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 an investment writedown of $70 million in Latin America during the second quarter. 28 CITICORP[LOGO] - -------------------------------------------------------------------------------- PROVISION AND ALLOWANCE FOR CREDIT LOSSES - -------------------------------------------------------------------------------- Total net write-offs were $399 million and $1.3 billion for the 1996 third quarter and nine months, respectively. Total adjusted net write-offs, adjusted for the effect of credit card securitizations, were $759 million for the third quarter, and $2.3 billion for the nine months, up $39 million and $383 million from the 1995 periods. The increases reflect higher consumer net write-offs, primarily in U.S. bankcards, partially offset by reductions in the commercial businesses. Citicorp continued to build reserves; the 1996 third quarter and nine month provisions for credit losses included charges in excess of net write- offs of $50 million and $150 million compared with charges of $75 million and $225 million in the respective 1995 periods. Details of net write-offs, excess provision, and the provision for credit losses are included in the following table: - -------------------------------------------------------------------------------- NET WRITE-OFFS, ADDITIONAL PROVISION, AND PROVISION FOR CREDIT LOSSES - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------- Third Quarter Nine Months -------------------------------------------------- (In Millions of Dollars) 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------------- NET WRITE-OFFS (RECOVERIES): Consumer (A).................................... $800 $634 $2,276 $1,770 Commercial...................................... (41) 86 (1) 122 -------------------------------------------------- TOTAL ADJUSTED NET WRITE-OFFS................... 759 720 2,275 1,892 Effect of Credit Card Securitizations........... (360) (219) (1,003) (667) -------------------------------------------------- TOTAL............................................... $399 $501 $1,272 $1,225 =========================================================================================================== ADDITIONAL PROVISION: Consumer........................................ $50 $50 $150 $150 Commercial...................................... - 25 - 75 -------------------------------------------------- TOTAL............................................... $50 $75 $150 $225 =========================================================================================================== PROVISION FOR CREDIT LOSSES: Consumer........................................ $490 $465 $1,423 $1,253 Commercial...................................... (41) 111 (1) 207 -------------------------------------------------- TOTAL............................................... $449 $576 $1,422 $1,460 ===========================================================================================================
(A) Adjusted for the effect of credit card securitizations. See page 31 for discussion. - -------------------------------------------------------------------------------- Consumer adjusted net write-offs in the 1996 third quarter and nine months of $800 million and $2.3 billion were up from $634 million and $1.8 billion in the 1995 periods. The increases in adjusted net write-offs in the 1996 third quarter and nine months were primarily due to higher losses in the U.S. bankcards portfolio. Net write-offs also increased in the third quarter in Asia Pacific as a result of business expansion. In the nine month comparison, the increase also included higher losses associated with Cards and Citibanking activities throughout the emerging markets. Net write-offs in Latin America, however, continued to improve from levels in the second half of 1995. Net write-offs from Citibanking activities in the developed markets were reduced from year-ago levels. Net write-offs and the provision, particularly in Cards, may increase from 1996 third quarter levels as a result of economic conditions, credit performance of the portfolios (including bankruptcies), and portfolio growth. See "Consumer Portfolio Review" on page 10 for an additional discussion of the Consumer portfolio. The commercial businesses experienced net recoveries in the 1996 third quarter and nine months of $41 million and $1 million, respectively, compared with net write-offs of $86 million and $122 million in the respective 1995 periods. The net recoveries in the 1996 periods reflect both lower gross write-offs and higher recoveries. Refinancing agreements were concluded in 1996 with Panama and Croatia in the third quarter, and with Slovenia in the second quarter, resulting in net recoveries of $54 million and $75 million in the third quarter and nine months, respectively, compared with $34 million for Ecuador in the 1995 nine month period. Included in net write-offs in the 1995 nine months is a net recovery of $10 million that was credited directly to the allowance for credit losses and did not affect the provision for credit losses. The commercial provision for credit losses included additional provisions of $25 million in the 1995 quarters. Commercial net write-offs may increase moderately from the recent low levels. 29 CITICORP[LOGO] The entire allowance is available to absorb all probable credit losses inherent in the portfolio; however, for analytical purposes only, Citicorp views its allowance as attributable to the following portions of its credit portfolios: - -------------------------------------------------------------------------------- ALLOWANCE FOR CREDIT LOSSES - --------------------------------------------------------------------------------
Sept. 30, Dec. 31, Sept. 30, (Dollars In Millions) 1996 1995 1995 - ------------------------------------------------------------------------------------------------------------------ Consumer........................................................... $2,036 $1,944 $1,931 Commercial......................................................... 3,424 3,424 3,410 ---------------------------------------- TOTAL.............................................................. $5,460 $5,368 $5,341 ================================================================================================================== ALLOWANCE AS A PERCENT OF TOTAL LOANS: Consumer....................................................... 1.92% 1.84% 1.88% Commercial..................................................... 5.44% 5.71% 5.89% TOTAL.............................................................. 3.23% 3.24% 3.32% - ------------------------------------------------------------------------------------------------------------------ Reserves For Sold Consumer Portfolios.............................. $481 $486 $473 ==================================================================================================================
The allowance for credit losses was $5.5 billion at September 30, 1996, compared with $5.3 billion at September 30, 1995. The net increase included the continued reserve building previously discussed, partially offset by net transfers to the reserves for sold Consumer portfolios and the effect of foreign currency translation. Net write-offs were $399 million and $1.3 billion in the 1996 third quarter and nine months, respectively. The reserves for sold Consumer portfolios were $481 million at September 30, 1996. 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 attributable to the Consumer businesses. - -------------------------------------------------------------------------------- OPERATING EXPENSE - -------------------------------------------------------------------------------- Total operating expense was $3.1 billion in the third quarter and $8.9 billion in the nine months of 1996, up $285 million and $632 million, respectively, from the comparable 1995 periods. The 10% expense increase in the third quarter and 8% increase in the nine months of 1996 were principally related to business activities in the emerging markets (21% increase in the third quarter and 18% in the nine month period), while expense related to Consumer and Corporate Banking activities in the developed markets was up 4% from the year-ago third quarter and 2% from the year-ago nine month period. Employee expense was $1.6 billion in the third quarter and $4.6 billion in the nine months of 1996, up $118 million and $290 million from the comparable 1995 periods. The increases primarily reflected higher staff levels related to business expansion in the emerging markets and salary increases. These increases were partially offset by the foreign currency translation effect of the stronger U.S. dollar in the nine month period, and a decrease in costs associated with performance-based stock incentive plans in both the quarter and nine month period. Staff levels of 88,900 at September 30, 1996 increased 4,100 or 5% from year-ago levels, largely in the emerging markets. 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. Of the performance-based options that remained unvested at September 30, 1996, one-half will vest at such time as Citicorp's common stock price has reached $100 per share and the balance will vest upon such price reaching $115 per share, provided in each case that the average of the daily high and low price remains at or above the indicated price level for twenty of thirty consecutive trading days. The recognition of expense associated with performance-based options is reviewed at the end of each quarter and is accelerated if stock price movements are indicative that more rapid vesting is probable. If the stock price continues to exceed anticipated levels as it has in the fourth quarter through the date of this filing (November 13, 1996), the expense associated with these options will be accelerated. If the stock price remains above $100 as stipulated above between now and year-end, the increase in expense compared to the third quarter of 1996 will be approximately $55 million ($35 million after-tax). 30 CITICORP[LOGO] Net premises and equipment expense was $471 million in the third quarter and $1.4 billion in the nine months of 1996, up $38 million and $107 million from the comparable 1995 periods. Other expense was $1.0 billion in the third quarter and $3.0 billion in the nine months, up $129 million and $235 million from the comparable 1995 periods. These increases primarily reflected investment spending and franchise development to support expansion in the emerging markets, the furtherance of Citibanking initiatives, particularly on upgrading systems and delivery of services worldwide through technology convergence, the continued development of the Citibank branding strategy worldwide, including the conversion and addition of branches to the Model Branch standard, and increased spending on technology and volume-related expenses in transaction banking services. The increases in the nine month period were partially offset by the foreign currency translation effect of the stronger U.S. dollar. - -------------------------------------------------------------------------------- INCOME TAXES - -------------------------------------------------------------------------------- Income taxes were $548 million and $1.7 billion, in the third quarter and nine months of 1996. The 1996 and 1995 effective tax rates were 37% and 38%, respectively, for the quarterly and nine month periods. The 1995 full-year effective tax rate was 38%. - -------------------------------------------------------------------------------- EFFECT OF CREDIT CARD RECEIVABLES SECURITIZATIONS - -------------------------------------------------------------------------------- During the nine months of 1996, $4.1 billion of U.S. credit card receivables were sold. The total amount of securitized receivables, net of amortization, as of September 30, 1996, was $26.1 billion, compared with $26.0 billion as of June 30, 1996 and $24.4 billion as of September 30, 1995. The securitization of credit card receivables, which is fully described in the 1995 Annual Report and Form 10-K, does not affect the earnings reported in a period. However, securitization 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). The table below shows the net impact of the securitization of credit card receivables as an increase or (decrease) to the amounts reported in the Consolidated Statement of Income and Average Balance Sheet, and under the captions of Return on Assets, Net Interest Margin, and Consumer Net Credit Loss Ratio.
- ----------------------------------------------------------------------------------------------------------- Third Quarter Nine Months -------------------------------------------------- (Dollars In Millions) 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------------- Net Interest Revenue............................ $(613) $(508) $(1,798) $(1,473) Fee and Commission Revenue...................... 43 15 137 72 Other Revenue................................... 210 274 658 734 Provision for Credit Losses..................... (360) (219) (1,003) (667) --------------------------------------------------- Net Income Impact of Securitizations............ $ - $ - $ - $ - =========================================================================================================== Average Assets (In Billions).................... $(26) $(24) $(26) $(23) Return on Assets................................ 0.12% 0.11% 0.12% 0.10% Net Interest Margin............................. (0.47)% (0.37)% (0.45)% (0.38)% Consumer Net Credit Loss Ratio.................. (0.76)% (0.39)% (0.70)% (0.45)% ===========================================================================================================
- -------------------------------------------------------------------------------- FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - -------------------------------------------------------------------------------- During the second quarter of 1996, the Financial Accounting Standards Board 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. The statement is to be applied prospectively to 31 CITICORP[LOGO] transactions that occur after December 31, 1996. The FASB has agreed to issue an Exposure Draft to propose deferring certain provisions of the Statement for one year. Citicorp is currently in the process of assessing the effects of the statement, and expects that existing asset securitization programs will continue to qualify for sale accounting treatment. Additionally, the FASB has issued an exposure draft for a new accounting standard on derivatives and hedge accounting, which is described on page 20. 32 CITICORP [LOGO] - -------------------------------------------------------------------------------- CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF INCOME CITICORP AND SUBSIDIARIES
------------------------------------------------------------------------ Third Quarter Nine Months - ------------------------------------------------------------------------------------------------------------------------------------ (In Millions of Dollars, Except Per Share Amounts) 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ INTEREST REVENUE Interest and Fees on Loans.......................... $4,605 $4,508 $13,702 $13,217 Interest on Deposits with Banks..................... 218 198 621 580 Interest on Federal Funds Sold and Securities Purchased Under Resale Agreements....... 193 261 695 770 Interest and Dividends on Securities U.S. Treasury and Federal Agencies.......... 58 66 170 191 State and Municipal......................... 21 22 62 67 Other (Principally in offices outside the U.S.).......................... 373 312 1,039 893 Interest on Trading Account Assets.................. 347 428 1,053 1,387 ------------------------------------------------------------------------- Total Interest Revenue.............................. 5,815 5,795 17,342 17,105 ------------------------------------------------------------------------- INTEREST EXPENSE Interest on Deposits................................ 2,256 2,179 6,610 6,613 Interest on Trading Account Liabilities............. 105 71 243 216 Interest on Purchased Funds and Other Borrowings.... 401 579 1,349 1,816 Interest on Long-Term Debt and Subordinated Capital Notes..................... 344 368 1,018 1,069 ------------------------------------------------------------------------- Total Interest Expense.............................. 3,106 3,197 9,220 9,714 ------------------------------------------------------------------------- NET INTEREST REVENUE................................ 2,709 2,598 8,122 7,391 ------------------------------------------------------------------------- PROVISION FOR CREDIT LOSSES......................... 449 576 1,422 1,460 ------------------------------------------------------------------------- NET INTEREST REVENUE AFTER PROVISION FOR CREDIT LOSSES 2,260 2,022 6,700 5,931 ------------------------------------------------------------------------- FEES, COMMISSIONS, AND OTHER REVENUE Fees and Commissions................................ 1,363 1,268 4,024 3,793 Foreign Exchange.................................... 221 250 640 878 Trading Account..................................... 224 182 420 363 Securities Transactions............................. 5 21 146 65 Other Revenue....................................... 488 438 1,479 1,399 ------------------------------------------------------------------------- Total Fees, Commissions, and Other Revenue.......... 2,301 2,159 6,709 6,498 ------------------------------------------------------------------------- OPERATING EXPENSE Salaries............................................ 1,240 1,122 3,584 3,321 Employee Benefits.................................. 338 338 1,006 979 ------------------------------------------------------------------------- Total Employee Expense.............................. 1,578 1,460 4,590 4,300 Net Premises and Equipment Expense.................. 471 433 1,367 1,260 Other Expense....................................... 1,029 900 2,959 2,724 ------------------------------------------------------------------------- Total Operating Expense............................. 3,078 2,793 8,916 8,284 ------------------------------------------------------------------------- INCOME BEFORE TAXES................................. 1,483 1,388 4,493 4,145 INCOME TAXES........................................ 548 511 1,692 1,586 ------------------------------------------------------------------------- NET INCOME.......................................... $ 935 $ 877 $ 2,801 $ 2,559 ==================================================================================================================================== INCOME APPLICABLE TO COMMON STOCK................... $897 $798 $2,682 $2,290 ------------------------------------------------------------------------- EARNINGS PER SHARE: ON COMMON AND COMMON EQUIVALENT SHARES...... $1.85 $1.79 $5.53 $5.29 ASSUMING FULL DILUTION...................... $1.85 $1.62 $5.45 $4.72 - ------------------------------------------------------------------------------------------------------------------------------------
33 CITICORP[LOGO] - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEET CITICORP AND SUBSIDIARIES - --------------------------------------------------------------------------------
(In Millions of Dollars) 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Cash and Due from Banks.................................................... $ 7,304 $ 5,723 Deposits at Interest with Banks............................................ 11,993 9,028 Securities, At Fair Value Available for Sale................................................. 24,716 18,213 Venture Capital.................................................... 1,959 1,854 Trading Account Assets..................................................... 28,432 32,093 Federal Funds Sold and Securities Purchased Under Resale Agreements........ 11,258 8,113 Loans, Net of Unearned Income Consumer........................................................... 106,205 105,643 Commercial......................................................... 62,922 59,999 ---------------------------------------------------- Total Loans........................................................ 169,127 165,642 Allowance for Credit Losses................................................ (5,460) (5,368) Customers' Acceptance Liability............................................ 2,270 1,542 Premises and Equipment, Net................................................ 4,570 4,339 Interest and Fees Receivable............................................... 3,016 2,914 Other Assets............................................................... 12,745 12,760 ---------------------------------------------------- TOTAL...................................................................... $271,930 $256,853 ==================================================================================================================================== LIABILITIES Non-Interest-Bearing Deposits in U.S. Offices.............................. $ 13,850 $ 13,388 Interest-Bearing Deposits in U.S. Offices.................................. 38,337 36,700 Non-Interest-Bearing Deposits in Offices Outside the U.S................... 8,965 8,164 Interest-Bearing Deposits in Offices Outside the U.S....................... 118,167 108,879 ---------------------------------------------------- Total Deposits..................................................... 179,319 167,131 Trading Account Liabilities................................................ 18,430 18,274 Purchased Funds and Other Borrowings....................................... 17,580 16,334 Acceptances Outstanding.................................................... 2,317 1,559 Accrued Taxes and Other Expense............................................ 5,964 5,719 Other Liabilities.......................................................... 8,593 9,767 Long-Term Debt and Subordinated Capital Notes.............................. 19,330 18,488 STOCKHOLDERS' EQUITY Preferred Stock (Without par value)........................................ 2,078 3,071 Common Stock ($1.00 par value)............................................. 506 461 Issued Shares: 506,298,235 and 461,319,265, respectively Surplus.................................................................... 6,438 5,702 Retained Earnings.......................................................... 13,566 12,190 Net Unrealized Gains - Securities Available for Sale....................... 581 132 Foreign Currency Translation............................................... (475) (437) Common Stock in Treasury, at Cost.......................................... (2,297) (1,538) Shares 35,815,022 and 34,030,205, respectively ---------------------------------------------------- Total Stockholders' Equity......................................... 20,397 19,581 ---------------------------------------------------- TOTAL...................................................................... $271,930 $256,853 ====================================================================================================================================
34 CITICORP[LOGO] - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CHANGES CITICORP AND SUBSIDIARIES IN STOCKHOLDERS' EQUITY - --------------------------------------------------------------------------------
Nine Months ---------------------------------------------------- (In Millions of Dollars) 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Balance at Beginning of Period............................................ $19,581 $17,769 Preferred Stock Issuance, Net of Related Costs............................ - 267 Convertible Preferred Stock, Series 12 Redemption of Series 12........................................... (590) - Issuance of Common Stock.......................................... 590 - Convertible Preferred Stock, Series 13 Redemption of Series 13........................................... (403) (193) Issuance of Common Stock.......................................... - 57 Issuance of Common Stock from Treasury Shares..................... 1,066 136 Adjustment to Retained Earnings for Treasury Shares Issued........ (663) - Conversion Preferred Stock, Series 15 ("PERCS") Redemption of PERCS............................................... - (797) Issuance of Common Stock.......................................... - 797 Redemption of Perpetual Preferred Stock, Series 9......................... - (125) Issuance of Common Stock Under Various Staff Benefit Plans (Net of Amortization) and the Dividend Reinvestment Plan........... 191 386 Net Income................................................................ 2,801 2,559 Cash Dividends Declared Common............................................................ (639) (365) Preferred......................................................... (123) (271) Change in Net Unrealized Gains on Securities Available for Sale........... 449 41 Foreign Currency Translation.............................................. (38) 44 Repurchased Common Shares................................................. (2,255) (800) Issuance of Common Stock from Treasury Shares Under Staff Benefit Plans and Other Activity...................... 430 (10) ----------------------------------------------------- Balance at End of Period.................................................. $20,397 $19,495 ====================================================================================================================================
35 CITICORP[LOGO] - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS CITICORP AND SUBSIDIARIES - --------------------------------------------------------------------------------
Nine Months ---------------------------------------------------- (In Millions of Dollars) 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net Income................................................................ $ 2,801 $ 2,559 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Provision for Credit Losses....................................... 1,422 1,460 Depreciation and Amortization of Premises and Equipment........... 523 473 Amortization of Goodwill.......................................... 35 37 Provision for Deferred Taxes...................................... 497 (97) Venture Capital Activity.......................................... (105) 196 Net Gain on Sale of Securities.................................... (146) (65) Net Gain on Sale of Subsidiaries and Affiliates................... (181) - Changes in Accruals and Other, Net................................ (1,276) 967 Net Decrease in Trading Account Assets............................ 3,661 3,193 Net Increase (Decrease) in Trading Account Liabilities............ 156 (897) ---------------------------------------------------- Total Adjustments......................................................... 4,586 5,267 ---------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES................................. 7,387 7,826 ---------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Deposits at Interest with Banks........................... (2,965) (1,296) Securities - Available for Sale Purchases......................................................... (26,623) (14,998) Proceeds from Sales............................................... 8,892 7,222 Maturities........................................................ 11,834 7,944 Securities-Held to Maturity Purchases......................................................... - (4,406) Maturities........................................................ - 4,610 Net Increase in Federal Funds Sold and Securities Purchased Under Resale Agreements............................. (3,145) (2,770) Net Increase in Loans..................................................... (103,342) (73,066) Proceeds from Sales of Loans and Credit Card Receivables.................. 98,217 63,674 Capital Expenditures on Premises and Equipment............................ (1,016) (948) Proceeds from Sales of Premises and Equipment, Subsidiaries and Affiliates, and OREO..................................................... 988 841 ---------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES..................................... (17,160) (13,193) ---------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net Increase in Deposits.................................................. 12,188 8,101 Net Increase (Decrease) in Federal Funds Purchased and Securities Sold Under Repurchase Agreements.......................... 1,386 (2,773) Proceeds from Issuance of Commercial Paper and Funds Borrowed with Original Maturities of Less Than One Year.................. 505,245 370,988 Repayment of Commercial Paper and Funds Borrowed with Original Maturities of Less Than One Year.................. (505,554) (371,702) Proceeds from Issuance of Long-Term Debt.................................. 3,562 3,777 Repayment of Long-Term Debt............................................... (2,752) (2,871) Proceeds from Issuance of Preferred Stock................................. - 267 Redemption of Preferred Stock............................................. - (125) Proceeds from Issuance of Common Stock.................................... 323 317 Treasury Stock Transactions............................................... (2,149) (756) Dividends Paid............................................................ (762) (638) ---------------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES................................. 11,487 4,585 ---------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS................ (133) 31 ---------------------------------------------------- Net Increase (Decrease) in Cash and Due from Banks........................ 1,581 (751) Cash and Due from Banks at Beginning of Period............................ 5,723 6,470 ---------------------------------------------------- CASH AND DUE FROM BANKS AT END OF PERIOD.................................. $ 7,304 $ 5,719 ==================================================================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash Paid During the Period for: Interest.......................................................... $8,584 $9,047 Income Taxes...................................................... 1,279 1,264 NON-CASH INVESTING ACTIVITIES Transfer from Loans to OREO and Assets Pending Disposition........ 348 560 - ------------------------------------------------------------------------------------------------------------------------------------
36 CITICORP[LOGO] - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEET CITIBANK, N.A. AND SUBSIDIARIES - --------------------------------------------------------------------------------
Sept. 30, Dec. 31, (In Millions of Dollars) 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Cash and Due from Banks.................................................. $ 6,642 $ 4,842 Deposits at Interest with Banks.......................................... 13,006 9,256 Securities, At Fair Value Available for Sale............................................... 20,526 14,256 Venture Capital.................................................. 1,575 1,457 Trading Account Assets................................................... 24,655 28,407 Federal Funds Sold and Securities Purchased Under Resale Agreements...... 8,137 6,676 Loans, Net of Unearned Income............................................ 138,750 136,693 Allowance for Credit Losses.............................................. (4,386) (4,403) Customers' Acceptance Liability.......................................... 2,270 1,542 Premises and Equipment, Net.............................................. 3,479 3,386 Interest and Fees Receivable............................................. 2,046 1,940 Other Assets............................................................. 7,233 7,422 ---------------------------------------------------- TOTAL.................................................................... $223,933 $211,474 ==================================================================================================================================== LIABILITIES Non-Interest-Bearing Deposits in U.S. Offices............................ $ 11,345 $ 10,959 Interest-Bearing Deposits in U.S. Offices................................ 23,111 22,676 Non-Interest-Bearing Deposits in Offices Outside the U.S................. 8,741 7,955 Interest-Bearing Deposits in Offices Outside the U.S..................... 116,617 108,018 ---------------------------------------------------- Total Deposits................................................... 159,814 149,608 Trading Account Liabilities.............................................. 17,042 17,544 Purchased Funds and Other Borrowings..................................... 10,832 10,106 Acceptances Outstanding.................................................. 2,316 1,559 Accrued Taxes and Other Expense.......................................... 3,610 3,263 Other Liabilities........................................................ 4,968 5,300 Long-Term Debt and Subordinated Notes.................................... 9,325 9,128 STOCKHOLDER'S EQUITY Common Stock ($20.00 par value).......................................... 751 751 Outstanding Shares: 37,534,553 in each period Surplus.................................................................. 6,895 6,744 Retained Earnings........................................................ 8,458 7,972 Net Unrealized Gains - Securities Available for Sale..................... 505 55 Foreign Currency Translation............................................. (583) (556) ---------------------------------------------------- Total Stockholder's Equity....................................... 16,026 14,966 ---------------------------------------------------- TOTAL.................................................................... $223,933 $211,474 ====================================================================================================================================
37 CITICORP[LOGO] - -------------------------------------------------------------------------------- OTHER FINANCIAL INFORMATION - -------------------------------------------------------------------------------- SECURITIES - --------------------------------------------------------------------------------
----------------------------------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Amortized Fair (In Millions of Dollars) Cost Gains Losses Value Cost Value - ------------------------------------------------------------------------------------------------------------------------------------ SECURITIES - AVAILABLE FOR SALE (B) U.S. Treasury and Federal Agency (C).. $ 4,068 $ 39 $ 15 $ 4,092 $ 4,285 $ 4,345 State and Municipal................... 1,603 87 27 1,663 1,611 1,631 Foreign Government (D)................ 13,585 1,051 243 14,393 8,507 8,443 U.S. Corporate (C).................... 1,597 4 35 1,566 1,169 1,221 Other Debt Securities................. 1,147 7 15 1,139 1,112 1,119 ----------------------------------------------------------------------------------------- Total Debt Securities......... 22,000 1,188 335 22,853 16,684 16,759 Equity Securities (E)................. 1,819 104 60 1,863 1,345 1,454 ----------------------------------------------------------------------------------------- 23,819 1,292 395 24,716 18,029 18,213 ==================================================================================================================================== VENTURE CAPITAL (F)................... 1,959 - - 1,959 1,854 1,854 ----------------------------------------------------------------------------------------- $25,778 $1,292 $395 $26,675 $19,883 $20,067 ====================================================================================================================================
(A) At December 31, 1995, gross unrealized gains and gross unrealized losses on securities available for sale totaled $829 million and $645 million, respectively. (B) Securities available for sale held by equity-method affiliates are not included in the table. Citicorp's share of gross unrealized gains and gross unrealized losses related to those securities at September 30, 1996 was $3 million and $2 million, respectively, and is included in the net unrealized gains-securities available for sale component of stockholders' equity, net of applicable taxes. At December 31, 1995, Citicorp's share of gross unrealized gains and gross unrealized losses related to securities available for sale held by equity method affiliates was $22 million and $2 million, respectively. (C) Included in U.S. Federal Agency and U.S. Corporate securities available for sale at September 30, 1996 are mortgage-backed securities with an amortized cost of $1,057 million, gross unrealized gains of $5 million, gross unrealized losses of $13 million, and fair value of $1,049 million. (D) Included in Foreign Government securities available for sale at September 30, 1996 are Brady bonds issued by the Government of Brazil with an amortized cost and fair value of $1.5 billion and $2.4 billion, respectively. Also included are Brady bonds issued by the Government of Venezuela with an amortized cost and fair value of $563 million and $458 million, respectively. (E) Equity securities available for sale include certain non-marketable equity securities which are carried at cost. At September 30, 1996, the carrying amount of those securities was $915 million (reported in both the amortized cost and fair value columns) and the fair value was $946 million. (F) For the nine months ended September 30, 1996, net gains on investments held by venture capital subsidiaries totaled $274 million, of which $242 million and $112 million represented gross unrealized gains and gross unrealized losses, respectively. For the nine months ended September 30, 1995, net gains on investments held by venture capital subsidiaries totaled $362 million, of which $373 million and $199 million represented gross unrealized gains and gross unrealized losses, respectively. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRADING ACCOUNT ASSETS AND LIABILITIES - --------------------------------------------------------------------------------
Sept. 30, Dec. 31, (In Millions of Dollars) 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ TRADING ACCOUNT ASSETS Trading Account Securities................................................. $14,321 $15,997 Revaluation Gains on Derivative and Foreign Exchange Contracts (A)......... 14,111 16,096 ---------------------------------------------------- $28,432 $32,093 ==================================================================================================================================== TRADING ACCOUNT LIABILITIES Securities Sold, Not Yet Purchased......................................... $ 3,751 $ 3,696 Revaluation Losses on Derivative and Foreign Exchange Contracts (A)........ 14,679 14,578 ---------------------------------------------------- $18,430 $18,274 ====================================================================================================================================
(A) Net of master netting agreements. - ------------------------------------------------------------------------------- 38 CITICORP[LOGO] - -------------------------------------------------------------------------------- CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS (A) - --------------------------------------------------------------------------------
Sept. 30, Dec. 31, Sept. 30, (In Millions of Dollars) 1996 1995 1995 - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL CASH-BASIS LOANS Collateral-Dependent (at Lower of Cost or Collateral Value) (B)........... $ 588 $ 779 $ 899 Other..................................................................... 809 755 775 ---------------------------------------------------- TOTAL COMMERCIAL CASH-BASIS LOANS......................................... $1,397 $1,534 $1,674 ==================================================================================================================================== COMMERCIAL CASH-BASIS LOANS In U.S. Offices........................................................... $ 745 $ 925 $1,038 In Offices Outside the U.S................................................ 652 609 636 ---------------------------------------------------- TOTAL COMMERCIAL CASH-BASIS LOANS......................................... $1,397 $1,534 $1,674 ==================================================================================================================================== COMMERCIAL RENEGOTIATED LOANS In U.S. Offices........................................................... $266 $309 $310 In Offices Outside the U.S................................................ 64 112 85 ---------------------------------------------------- TOTAL COMMERCIAL RENEGOTIATED LOANS....................................... $330 $421 $395 ==================================================================================================================================== CONSUMER LOANS ON WHICH ACCRUAL OF INTEREST HAS BEEN SUSPENDED In U.S. Offices........................................................... $1,244 $1,413 $1,423 In Offices Outside the U.S................................................ 1,089 1,247 1,242 ---------------------------------------------------- TOTAL CONSUMER LOANS ON WHICH ACCRUAL OF INTEREST HAS BEEN SUSPENDED................................... $2,333 $2,660 $2,665 ==================================================================================================================================== ACCRUING LOANS 90 OR MORE DAYS DELINQUENT (C) In U.S. Offices........................................................... $ 683 $499 $ 542 In Offices Outside the U.S................................................ 447 498 496 ---------------------------------------------------- TOTAL ACCRUING LOANS 90 OR MORE DAYS DELINQUENT........................... $1,130 $997 $1,038 ====================================================================================================================================
(A) For a discussion of risks in the consumer loan portfolio and of commercial cash-basis loans, see pages 10 and 12, respectively. Loan commitments and standby letters of credit to North America Commercial Real Estate borrowers or projects experiencing financial difficulties are not included in this table. Refer to page 15 for discussion. (B) 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. (C) Includes Consumer loans of $1,039 million, $951 million and $910 million at September 30, 1996, December 31, 1995, and September 30, 1995, respectively. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OTHER REAL ESTATE OWNED AND ASSETS PENDING DISPOSITION (A) - --------------------------------------------------------------------------------
Sept. 30, Dec. 31, Sept. 30, (In Millions of Dollars) 1996 1995 1995 - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER OREO $464 $ 529 $ 561 COMMERCIAL OREO 492 625 960 ---------------------------------------------------- TOTAL OREO $956 $1,154 $1,521 ==================================================================================================================================== ASSETS PENDING DISPOSITION (B) $182 $205 $195 ====================================================================================================================================
(A) Carried at lower of cost or collateral value. (B) Represents Consumer residential mortgage loans that have a high probability of foreclosure. - ------------------------------------------------------------------------------- 39 CITICORP[LOGO] - ------------------------------------------------------------------------------- DETAILS OF CREDIT LOSS EXPERIENCE - -------------------------------------------------------------------------------
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. (Dollars in Millions) 1996 1996 1996 1995 1995 - ----------------------------------------------------------------------------------------------------------------- ALLOWANCE FOR CREDIT LOSSES AT BEGINNING OF PERIOD...... $5,424 $5,390 $5,368 $5,341 $5,308 -------------------------------------------------------- ADDITIONS Provision for Credit Losses ............................ 449 479 494 531 576 -------------------------------------------------------- DEDUCTIONS GROSS CREDIT LOSSES CONSUMER In U.S. Offices......................................... 328 311 301 319 301 In Offices Outside the U.S. ............................ 222 222 216 246 217 COMMERCIAL In U.S. Offices......................................... 15 14 20 28 58 In Offices Outside the U.S. ............................ 38 62 32 72 70 -------------------------------------------------------- 603 609 569 665 646 -------------------------------------------------------- CREDIT RECOVERIES CONSUMER In U.S. Offices......................................... 54 61 58 71 55 In Offices Outside the U.S.............................. 56 52 46 53 48 COMMERCIAL In U.S. Offices......................................... 16 36 13 52 18 In Offices Outside the U.S. ............................ 78 31 8 22 24 -------------------------------------------------------- 204 180 125 198 145 -------------------------------------------------------- NET CREDIT LOSSES In U.S. Offices......................................... 273 228 250 224 286 In Offices Outside the U.S. ............................ 126 201 194 243 215 -------------------------------------------------------- 399 429 444 467 501 -------------------------------------------------------- Other, Net (A).......................................... (14) (16) (28) (37) (42) -------------------------------------------------------- ALLOWANCE FOR CREDIT LOSSES AT END OF PERIOD............ $5,460 $5,424 $5,390 $5,368 $5,341 ================================================================================================================= Net Consumer Credit Losses.............................. $440 $420 $413 $441 $415 As a Percentage of Average Consumer Loans............... 1.64% 1.62% 1.60% 1.70% 1.63% Net Commercial Credit (Recoveries) Losses............... $(41) $9 $31 $26 $86 As a Percentage of Average Commercial Loans............. NM 0.06% 0.21% 0.18% 0.61% - -----------------------------------------------------------------------------------------------------------------
(A) Includes net transfers to the reserves for sold Consumer portfolios and foreign exchange effects. NM Not meaningful, as net recoveries result in a negative percentage. - -------------------------------------------------------------------------------- 40 CITICORP[LOGO] - -------------------------------------------------------------------------------- CALCULATION OF EARNINGS PER SHARE - -------------------------------------------------------------------------------
Third Quarter 1996 Third Quarter 1995 --------------------------------------------------------- On Common On Common and Common and Common Assuming Equivalent Assuming Full Equivalent Full (In Millions, except Per Share Amounts) Shares Dilution Shares Dilution - ----------------------------------------------------------------------------------------------------------------------- EARNINGS Income Applicable to Common Stock........................... $897 $897 $798 $798 Dividends on Conversion Preferred Stock, Series 15 (A)....... - - 11 11 Dividends on Convertible Preferred Stock, Series 12 and Series 13 (B)................ - - - 31 --------------------------------------------------------- INCOME APPLICABLE TO COMMON STOCK, ADJUSTED.................. $897 $897 $809 $840 ======================================================================================================================= SHARES Weighted-Average Common Shares Outstanding (A)(B)(C)......... 471.0 471.0 422.0 422.0 Conversion Preferred Stock, Series 15 (A).................... - - 12.5 12.5 Convertible Preferred Stock, Series 12 and Series 13 (B)..... - - - 65.7 Other Common Equivalent Shares (D)........................... 13.8 14.6 16.2 17.8 --------------------------------------------------------- TOTAL........................................................ 484.8 485.6 450.7 518.0 ======================================================================================================================= EARNINGS PER SHARE NET INCOME.................................................. $1.85 $1.85 $1.79 $1.62 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Nine Months 1996 Nine Months 1995 --------------------------------------------------------- On Common On Common and Common and Common Assuming Equivalent Assuming Full Equivalent Full (In Millions, except Per Share Amounts) Shares Dilution Shares Dilution - ----------------------------------------------------------------------------------------------------------------------- EARNINGS Income Applicable to Common Stock........................... $2,682 $2,682 $2,290 $2,290 Dividends on Conversion Preferred Stock, Series 15 (A)...... - - 58 58 Dividends on Convertible Preferred Stock, Series 12 and Series 13 (B).............. - 5 - 99 --------------------------------------------------------- INCOME APPLICABLE TO COMMON STOCK, ADJUSTED................. $2,682 $2,687 $2,348 $2,447 ======================================================================================================================= SHARES Weighted-Average Common Shares Outstanding (A)(B)(C)........ 470.5 470.5 406.6 406.6 Conversion Preferred Stock, Series 15 (A)................... - - 24.1 24.1 Convertible Preferred Stock, Series 12 and Series 13 (B).... - 6.9 - 70.6 Other Common Equivalent Shares (D).......................... 14.6 15.4 13.2 16.8 --------------------------------------------------------- TOTAL....................................................... 485.1 492.8 443.9 518.1 ======================================================================================================================= EARNINGS PER SHARE NET INCOME.................................................. $5.53 $5.45 $5.29 $4.72 - -----------------------------------------------------------------------------------------------------------------------
(A) Conversion Preferred Stock, Series 15 was fully redeemed during 1995. (B) During the first quarter of 1996, the remaining Convertible Preferred Stock, Series 12 and 13 were converted to 59.0 million shares of common stock. The shares are included in the fully diluted computation on an if- converted basis up to conversion dates, and from conversion dates forward these shares are included in weighted-average common shares outstanding. (C) Includes 1.0 million and 1.1 million book value shares in 1996 and 1995, respectively. (D) Includes the dilutive effect of stock options and stock purchase agreements computed using the treasury stock method and shares issuable under deferred stock awards. - -------------------------------------------------------------------------------- 41 CITICORP[LOGO] - ------------------------------------------------------------------------------- CROSS-BORDER AND NON-LOCAL CURRENCY OUTSTANDINGS - ------------------------------------------------------------------------------- Cross-border and non-local currency outstandings are presented on a regulatory basis, as discussed in the 1995 Annual Report and Form 10-K. 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 (A) (B) - -------------------------------------------------------------------------------
Investments Cross-Border and Non-Local in and Currency Claims on Third Parties Funding of Total Outstandings ---------------------------------- -------------------- Local Public Private Citicorp Sept. 30, Dec. 31, (In Billions of Dollars) Banks Sector Sector Total Franchises 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------- Brazil (C)....................................... $0.4 $2.5 $2.1 $5.0 $1.8 $6.8 $5.1 United Kingdom................................... 0.5 0.2 3.7 4.4 1.3 5.7 7.6 Argentina (C).................................... 0.1 - 2.5 2.6 0.7 3.3 2.9 Mexico........................................... 0.1 2.2 0.5 2.8 0.3 3.1 2.9 Japan............................................ 0.5 0.2 1.6 2.3 0.6 2.9 3.6 Singapore........................................ 0.1 0.1 1.2 1.4 1.5 2.9 2.5 Germany.......................................... 0.1 0.8 0.3 1.2 1.6 2.8 2.7 - -----------------------------------------------------------------------------------------------------------------------------
(A) 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 $6.5 billion in the United Kingdom, $1.1 billion in Germany, $1.0 billion in Japan, $0.3 billion in Singapore, and $0.1 billion in each of Mexico, Brazil, and Argentina at September 30, 1996. (B) At September 30, 1996, cross-border and non-local currency outstandings in Australia ($2.3 billion) were between 0.75% and 1.0% of total assets. At December 31, 1995, such countries were Singapore ($2.5 billion), Australia ($2.4 billion), and South Korea ($2.1 billion). (C) Includes outstandings funded with non-local currency liabilities where the fund 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 September 30, 1996 and December 31, 1995, were $2.0 billion and $1.4 billion, respectively, in Brazil and $1.6 billion for each period in Argentina. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS-BORDER AND NON-LOCAL CURRENCY CLAIMS ON THIRD PARTIES - --------------------------------------------------------------------------------
Public Private Sept. 30, Dec. 31, (In Billions of Dollars) Banks Sector Sector 1996 1995 - ------------------------------------------------------------------------------- Developed Markets (A)......... $2.9 $2.4 $11.4 $16.7 $15.2 Emerging Markets (A): Latin America (B).......... 0.7 6.2 6.9 13.8 11.7 Asia....................... 1.3 0.9 7.0 9.2 7.9 Other...................... 1.1 0.8 1.0 2.9 2.5 --------------------------------------------- TOTAL (C)..................... $6.0 $10.3 $26.3 $42.6 $37.3 ===============================================================================
(A) Developed markets comprise activities in North America, Europe, and Japan. Emerging markets comprise activities in all other geographic areas. (B) Cross-border and non-local currency claims on third parties in Latin America of $13.8 billion at September 30, 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 38). (C) Includes investments in affiliates of $1.3 billion at September 30, 1996 and December 31, 1995. - -------------------------------------------------------------------------------- 42 CITICORP[LOGO] - ------------------------------------------------------------------------------- AVERAGE BALANCES AND INTEREST RATES (TAXABLE EQUIVALENT BASIS) (A) (B) - -------------------------------------------------------------------------------
Third Quarter 1996 ------------------------------------- Average % Average (In Millions of Dollars) Volume Interest Rate - ----------------------------------------------------------------------------------------------------------------------------------- INTEREST REVENUE - CONSUMER LOANS, Net of In U.S. Offices............................ $ 53,916 $1,420 10.48 Unearned Income (C) In Offices Outside the U.S. (D)............ 52,217 1,638 12.48 ----------------------------------- TOTAL CONSUMER LOANS.................. 106,133 3,058 11.46 ----------------------------------- COMMERCIAL LOANS, Net of In U.S. Offices Unearned Income (C) Commercial and Industrial................. 8,568 196 9.10 Mortgage and Real Estate.................. 4,175 79 7.53 Loans to Financial Institutions........... 519 14 10.73 Lease Financing .......................... 3,222 56 6.91 In Offices Outside the U.S. (D)........... 43,929 1,203 10.89 ---------------------------------- TOTAL COMMERCIAL LOANS............... 60,413 1,548 10.19 ---------------------------------- TOTAL LOANS.......................... 166,546 4,606 11.00 ---------------------------------- FUNDS SOLD AND RESALE AGREEMENTS In U.S. Offices........................... 7,121 97 5.42 In Offices Outside the U.S. (D)........... 3,465 96 11.02 ---------------------------------- TOTAL................................ 10,586 193 7.25 ---------------------------------- SECURITIES- AVAILABLE FOR SALE In U.S. Offices U.S. Treasury and Federal Agencies........ 3,350 45 5.34 State and Municipal....................... 1,622 27 6.62 Other..................................... 2,665 38 5.67 In Offices Outside the U.S. (D)........... 16,326 341 8.31 ----------------------------------- TOTAL................................ 23,963 451 7.49 ----------------------------------- SECURITIES - HELD TO MATURITY In U.S. Offices U.S. Treasury and Federal Agencies........ - - - In Offices Outside the U.S. (D)............ - - - ----------------------------------- TOTAL................................. - - - ----------------------------------- VENTURE CAPITAL U.S. Offices............................... 1,530 3 0.78 In Offices Outside the U.S................. 286 5 6.96 ----------------------------------- TOTAL................................. 1,816 8 1.75 ----------------------------------- TOTAL SECURITIES...................... 25,779 459 7.08 ----------------------------------- TRADING ACCOUNT ASSETS In U.S. Offices............................ 5,787 90 6.19 In Offices Outside the U.S. (D)............ 11,018 257 9.28 ----------------------------------- TOTAL................................. 16,805 347 8.21 DEPOSITS AT INTEREST WITH BANKS Principally Outside the U.S. (D)........... 12,909 218 6.72 ----------------------------------- TOTAL INTEREST-EARNING ASSETS.............. 232,625 $5,823 9.96 ======================== Non-Interest-Earning Assets (E)............ 35,381 ------------ TOTAL ASSETS $268,006 ============ INTEREST EXPENSE-DEPOSITS In U.S. Offices Savings Deposits........................... $ 26,255 $ 190 2.88 Other Time Deposits........................ 12,500 222 7.07 ----------------------------------- Total U.S. Interest-Bearing Deposits....... 38,755 412 4.23 In Offices Outside the U.S. (D)............ 117,548 1,844 6.24 ----------------------------------- TOTAL................................. 156,303 2,256 5.74 ----------------------------------- TRADING ACCOUNT LIABILITIES In U.S. Offices............................ 2,005 29 5.75 In Offices Outside the U.S. (D)............ 2,167 76 13.95 ----------------------------------- TOTAL................................. 4,172 105 10.01 ----------------------------------- FUNDS BORROWED In U.S. Offices Fed Funds Purchased and Sec. Sold.......... 9,182 110 4.77 Commercial Paper........................... 1,681 22 5.21 Other Purchased Funds...................... 2,165 68 12.50 Long-Term Debt and Sub. Notes.............. 14,852 235 6.29 ----------------------------------- Total in U.S. Offices ................ 27,880 435 6.21 In Offices Outside the U.S. (D)............ 10,938 310 11.28 ----------------------------------- TOTAL................................. 38,818 745 7.64 ----------------------------------- TOTAL INTEREST-BEARING LIABILITIES......... 199,293 3,106 6.20 -----------======================== Demand Deposits in U.S. Offices............ 12,566 Other Non-Interest-Bearing Liabs. (E)...... 36,119 Total Stockholders' Equity................. 20,028 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $268,006 =================================== NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE INTEREST-EARNING ASSETS................... $2,717 4.65 ==================================================================================================================================
(A) The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35%. (B) Interest rates and amounts include the effects of risk management activities associated with the respective asset and liability categories. (C) Loans in the table above include cash-basis loans. - -------------------------------------------------------------------------------- 43 CITICORP[LOGO]
- ----------------------------------------------------------------------------------------------------------------------------------- Third Quarter 1995 Nine Months 1996 Nine Months 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Average % Average Average % Average Average % Average Volume Interest Rate Volume Interest Rate Volume Interest Rate - ------------------------------------------------------------------------------------------------------------------------------------ $ 51,856 $1,443 11.04 $ 53,412 $ 4,289 10.73 $ 50,210 $ 4,147 11.04 49,274 1,604 12.91 51,279 4,848 12.63 48,469 4,694 12.95 - ------------------------------------------------------------------------------------------------------------------------------------ 101,130 3,047 11.95 104,691 9,137 11.66 98,679 8,841 11.98 - ------------------------------------------------------------------------------------------------------------------------------------ 9,487 209 8.74 8,975 620 9.23 10,115 666 8.80 5,220 104 7.90 4,426 242 7.30 5,609 324 7.72 461 6 5.16 475 28 7.87 398 13 4.37 3,166 56 7.02 3,218 162 6.72 3,205 174 7.26 37,810 1,086 11.40 42,804 3,516 10.97 37,174 3,200 11.51 - ------------------------------------------------------------------------------------------------------------------------------------ 56,144 1,461 10.32 59,898 4,568 10.19 56,501 4,377 10.36 - ------------------------------------------------------------------------------------------------------------------------------------ 157,274 4,508 11.37 164,589 13,705 11.12 155,180 13,218 11.39 - ------------------------------------------------------------------------------------------------------------------------------------ 10,475 147 5.57 9,148 357 5.21 12,380 530 5.72 2,630 114 17.20 3,460 338 13.05 2,224 240 14.43 - ------------------------------------------------------------------------------------------------------------------------------------ 13,105 261 7.90 12,608 695 7.36 14,604 770 7.05 - ------------------------------------------------------------------------------------------------------------------------------------ 2,624 33 4.99 3,293 137 5.56 2,251 91 5.41 1,602 28 6.93 1,619 78 6.44 1,603 80 6.67 1,644 24 5.79 2,392 101 5.64 1,516 69 6.09 7,670 224 11.59 14,054 942 8.95 7,800 633 10.85 - ------------------------------------------------------------------------------------------------------------------------------------ 13,540 309 9.05 21,358 1,258 7.87 13,170 873 8.86 - ------------------------------------------------------------------------------------------------------------------------------------ 1,560 27 6.87 - - - 1,558 78 6.69 3,379 65 7.63 - - - 3,382 189 7.47 - ----------------------------------------------------------------------------------------------------------------------------------- 4,939 92 7.39 - - - 4,940 267 7.23 - ----------------------------------------------------------------------------------------------------------------------------------- 1,449 4 1.10 1,548 14 1.21 1,442 20 1.85 295 3 4.03 308 19 8.24 280 11 5.25 - ------------------------------------------------------------------------------------------------------------------------------------ 1,744 7 1.59 1,856 33 2.38 1,722 31 2.41 - ------------------------------------------------------------------------------------------------------------------------------------ 20,223 408 8.00 23,214 1,291 7.43 19,832 1,171 7.89 - ------------------------------------------------------------------------------------------------------------------------------------ 9,014 141 6.21 6,049 266 5.87 11,857 591 6.66 10,554 287 10.79 11,906 788 8.84 10,640 799 10.04 - ----------------------------------------------------------------------------------------------------------------------------------- 19,568 428 8.68 17,955 1,054 7.84 22,497 1,390 8.26 11,286 198 6.96 12,247 621 6.77 11,239 580 6.90 - ------------------------------------------------------------------------------------------------------------------------------------ 221,456 $5,803 10.40 230,613 $17,366 10.06 223,352 $17,129 10.25 ============================= ============================ ================================= 44,990 37,542 46,189 - ------------ ------------ ----------- $266,446 $268,155 $269,541 ============ ============ =========== $ 24,941 $ 192 3.05 $ 25,810 $ 566 2.93 $ 24,645 $ 560 3.04 11,941 150 4.98 12,570 541 5.75 11,656 550 6.31 - ------------------------------------------------------------------------------------------------------------------------------------ 36,882 342 3.68 38,380 1,107 3.85 36,301 1,110 4.09 108,033 1,837 6.75 114,982 5,503 6.39 109,604 5,503 6.71 - ------------------------------------------------------------------------------------------------------------------------------------ 144,915 2,179 5.97 153,362 6,610 5.76 145,905 6,613 6.06 - ----------------------------------------------------------------------------------------------------------------------------------- 2,590 42 6.43 2,540 111 5.84 2,744 132 6.43 1,300 29 8.85 2,130 132 8.28 1,218 84 9.22 - ------------------------------------------------------------------------------------------------------------------------------------ 3,890 71 7.24 4,670 243 6.95 3,962 216 7.29 - ------------------------------------------------------------------------------------------------------------------------------------ 14,374 190 5.24 10,991 395 4.80 17,026 692 5.43 1,634 24 5.83 1,706 68 5.32 1,713 76 5.93 2,884 78 10.73 2,329 240 13.76 3,196 242 10.12 15,095 270 7.10 14,734 699 6.34 14,667 802 7.31 - ------------------------------------------------------------------------------------------------------------------------------------ 33,987 562 6.56 29,760 1,402 6.29 36,602 1,812 6.62 9,747 385 15.67 10,466 965 12.32 9,590 1,073 14.96 - ------------------------------------------------------------------------------------------------------------------------------------ 43,734 947 8.59 40,226 2,367 7.86 46,192 2,885 8.35 - ------------------------------------------------------------------------------------------------------------------------------------ 192,539 3,197 6.59 198,258 9,220 6.21 196,059 9,714 6.62 ============================== ============================ =================================== 11,493 12,355 11,526 42,981 37,693 43,209 19,433 19,849 18,747 - ------------ ------------ ----------- $266,446 $268,155 $269,541 =================================================================================================================================== $2,606 4.67 $8,146 4.72 $7,415 4.44 ===================================================================================================================================
(D) 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. (E) Gross unrealized gains and losses on off-balance sheet trading positions are reported in non-interest earning assets and non-interest bearing liabilities, respectively. - -------------------------------------------------------------------------------- 44 CITICORP[LOGO] - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1996 COMMISSION FILE NUMBER 1-5738 CITICORP (Exact name of registrant as specified in its charter) DELAWARE 13-2614988 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 399 PARK AVENUE, NEW YORK, NEW YORK 10043 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 559-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Citicorp Common Stock.............. 470,483,213 ($1.00 Par Value) (Shares Outstanding on September 30, 1996) 45 CITICORP[LOGO] - -------------------------------------------------------------------------------- FORM 10-Q CROSS-REFERENCE INDEX - -------------------------------------------------------------------------------- This document serves both as an analytical review for analysts, stockholders and other interested persons and as the quarterly report filed on Form 10-Q with the Securities and Exchange Commission.
PART I FINANCIAL INFORMATION PAGE ---- Item 1 - Consolidated Financial Statements Consolidated Financial Statements, Schedules, and Statistics Statement of Income for the Quarters and Nine Months Ended SEPTEMBER 30, 1996 AND 1995............................................ 33 Balance Sheet as of SEPTEMBER 30, 1996 AND DECEMBER 31, 1995................................ 34 Statement of Cash Flows for the Nine Months Ended SEPTEMBER 30, 1996 AND 1995............................................. 36 Calculation of Earnings Per Share....................................... 41 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... 1-31 PART II OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K........................................ 47 Signatures....................................................................... 48
In the opinion of the management of Citicorp, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the nine months ended September 30, 1996 and 1995 have been included. 46 CITICORP[LOGO] Item 6 - Exhibits and Reports on Form 8-K -------------------------------- a) Exhibit 3(ii). By-laws of Citicorp as amended on September 17, 1996. b) Exhibit 27. Financial Data Schedule. c) Reports on Form 8-K: Citicorp filed a Form 8-K Current Report dated July 22, 1996 (Item 5) which report included a summary of the consolidated operations of Citicorp for the six month period ended June 30, 1996 and (Item 7) the calculation of the ratio of income to fixed charges (Exhibit 12(a) thereto) and the calculation of the ratio of income to fixed charges including preferred stock dividends (Exhibit 12(b) thereto). Citicorp filed a Form 8-K Current Report dated October 15, 1996 (Item 5) which report included a summary of the consolidated operations of Citicorp for the nine month period ended September 30, 1996 and (Item 7) the calculation of the ratio of income to fixed charges (Exhibit 12(a) thereto) and the calculation of the ratio of income to fixed charges including preferred stock dividends (Exhibit 12(b) thereto). 47 CITICORP[LOGO] SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CITICORP By: /S/ Thomas E. Jones Registrant _________________________ Thomas E. Jones Executive Vice President Principal Financial Officer /S/ George E. Seegers _________________________ George E. Seegers Assistant Secretary Date: November 13, 1996 48 EX-3.II 2 BYLAWS EXHIBIT-3.(II) By-Laws/Segment to 10Q - Third Qtr BY-LAWS OF CITICORP ARTICLE I OFFICES SECTION 1. Principal Office. The principal office and place of business of Citicorp shall be at 399 Park Avenue in the City and State of New York. SECTION 2. Other Offices. Citicorp may establish or discontinue, from to time, such other offices and places of business as may be deemed proper for the conduct of Citicorp's business. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. Annual Meeting. The annual meeting of stockholders for the election of directors and the transaction of such other business as may properly come before the meeting shall be held on the third Tuesday in April of each year, or if that day be a legal holiday, on the next succeeding day not a legal holiday, or on such other date as is fixed by resolution of the Board of Directors, at an hour to be fixed by resolution of the Board of Directors. SECTION 2. Special Meetings. Special meetings of the stockholders may be called at any time by the Board of Directors and shall be called by the Secretary upon the written request, stating the purpose or purposes of any such meeting, of the holders of common stock 1 who hold of record collectively at least one-third of the outstanding shares of common stock. Unless limited by law, the Certificate of Incorporation, the By-Laws, or by the terms of the notice thereof, any and all business may be transacted at any special meeting of stockholders. SECTION 3. Place of Meetings. Each meeting of stockholders shall be held at such place either within or outside the State of Delaware as may be designated by the Board of Directors for a particular meeting prior to the time when notice thereof is given to the stockholders entitled to vote thereat. SECTION 4. Notice of Meetings. Except as otherwise provided or permitted by law, the Certificate of Incorporation, or the By-Laws, notice of each meeting of stockholders shall be given to each stockholder of record entitled to vote thereat either by delivering such notice to him personally or by mailing the same to him. If mailed, the notice shall be directed to the stockholder in a postage-prepaid envelope at his address as it appears on the records of Citicorp unless, prior to the time of mailing, he shall have filed with the Secretary a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Notice of each meeting of stockholders shall be in such form as is approved by the Board of Directors and shall state the place, date and hour of the meeting, and if for a special meeting the purpose or purposes for which the meeting is called, and shall be given not less than ten nor more than fifty days before the date of the meeting. SECTION 5. Organization. The Chairman shall act as such chairman at all meetings of stock- 2 holders, shall call all meetings of stockholders to order and preside thereat. In the absence of the Chairman, the President shall act as such chairman and, in the absence of the Chairman and the President, the Vice Chairman, or if there be more than one Vice Chairman present, the one of them first appointed to such office shall act as such chairman. The Board of Directors may designate an alternate chairman for any meeting of stockholders, and if the Chairman, the President, and such Vice Chairman are absent from a meeting and such an alternate chairman has been designated therefor, he shall act as chairman of the meeting. In the absence of the Chairman, the President, such Vice Chairman and such alternate chairman, or if no such alternate chairman has been designated for a meeting and the Chairman, the President, and such Vice Chairman are absent therefrom, any stockholder or the proxy of any stockholder entitled to vote at the meeting may call the meeting to order and a chairman shall be elected, who shall preside thereat. The Secretary of Citicorp shall act as secretary at all meetings of the stockholders, but in his absence the chairman of the meeting may appoint any person present to act as secretary of the meeting. SECTION 6. Inspectors of Election. Except as otherwise provided by law, every election of directors by vote by ballot at a meeting of stockholders shall be conducted by three inspectors of election appointed for that purpose by the chairman of the meeting, who, before entering upon the discharge of their duties, shall be duly sworn faithfully to execute the duties of inspectors of election at such meeting with strict impartiality, and according to the best of their ability. If any such inspector appointed to act at any meeting shall not be present or shall fail to act, the chairman of the meeting shall appoint some other person present to act as inspector in his place. 3 The inspectors of election at the request of the chairman of the meeting shall conduct any other vote by ballot taken at such meeting. Inspectors of election may also be appointed to act at meetings of stockholders at which directors are not to be elected, and at the request of the chairman of the meeting shall conduct any vote by ballot at such meeting. SECTION 7. Quorum and Adjournment. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the shares of stock entitled to vote at the meeting shall constitute a quorum at all meetings of the stockholders. In the absence of a quorum, the holders of a majority of the shares of stock present in person or by proxy and entitled to vote may adjourn any meeting, from time to time, until a quorum shall attend. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 8. Order of Business. The order of business at all meetings of stockholders shall be as determined by the chairman of the meeting or as is otherwise determined by the vote of the holders of a majority of the shares of stock present in person or by proxy and entitled to vote. SECTION 9. Vote of Stockholders. Except as otherwise required by law or the Certificate of Incorporation, all action by stockholders shall be taken at stockholders' meetings unless the Board of Directors shall determine that such action shall be taken by written consent of stockholders. The vote in the election of directors at a meeting of stockholders shall be by ballot unless the Board of Directors determines otherwise, and the vote upon any question before a meeting of stock- 4 holders shall be by ballot if so directed by the chairman of the meeting. In a vote by ballot each ballot shall state the number of shares voted and the name of the stockholder or proxy voting. Except as otherwise required by law or by the Certificate of Incorporation, directors to be elected at a meeting of stockholders shall be elected by a plurality of the votes cast at such meeting by the holders of shares entitled to vote in the election and whenever any corporate action, other than the election of directors, is to be taken by vote of the stockholders at a meeting thereof, it shall be authorized by a majority of the votes cast at such meeting by the holders of stock entitled to vote thereon. ARTICLE III BOARD OF DIRECTORS SECTION 1. Number. The number of directors constituting the Board of Directors of Citicorp shall be such number as is fixed from time to time by resolution adopted by the Board of Directors or by the stockholders. SECTION 2. General Powers. The business, properties and affairs of Citicorp shall be managed by the Board of Directors, which, without limiting the generality of the foregoing, shall have power to appoint the officers of Citicorp, to appoint and direct agents, and to grant general or limited authority to officers, employees and agents of Citicorp to make, execute and deliver contracts and other instruments and documents in the name and on behalf of Citicorp and over its seal, without specific authority in each case. In addition, the Board of Directors may exercise all the powers of Citicorp and do all lawful acts and things which are not reserved to the stockholders by law or the Certificate of Incorporation. 5 SECTION 3. Place of Meetings. Meetings of the Board of Directors, whether regular or special, shall be held at the principal office of Citicorp or such other place within or without the State of Delaware as may, from time to time, be fixed by resolution of the Board of Directors, provided that the place so determined for any meeting may be changed to some other place, in the case of a regular meeting, by order of the Chairman, the President, or any Vice Chairman, and in the case of a special meeting, by order of the person or persons at whose request the meeting is called if in either such case the place so changed is specified in a notice given as provided in Section 6 of this Article III or in a waiver of notice thereof. SECTION 4. Organization Meeting. A newly elected Board of Directors shall meet and organize, as soon as practicable, after each annual meeting of stockholders, at the principal office of Citicorp, without notice of such meeting, provided a majority of the whole Board of Directors is present. If such a majority is not present, such organization meeting may be held at any other time or place which may be specified in a notice given as provided in Section 6 of this Article III for special meetings of the Board of Directors, or in a waiver of notice thereof. Any business which may properly be transacted by the Board of Directors may be transacted at any organization meeting thereof. SECTION 5. Regular Meetings. The Board of Directors shall meet, without notice, on the third Tuesday in each month, unless the Board of Directors shall otherwise determine, at such hour as shall be fixed by resolution of the Board of Directors, and if any such Tuesday shall be a legal holiday, the meeting, unless the Board of Directors shall otherwise determine, shall be held at the same place where the meeting was to be held, on the next succeeding business day not a legal holiday, at the 6 hour fixed as aforesaid. Any business which properly may be transacted by the Board of Directors may be transacted at any regular meeting thereof. SECTION 6. Special Meetings: Notice and Waiver of Notice. Special meetings of the Board of Directors shall be called by the Secretary on the request of the Chairman, or in the absence of the Chairman, the President, or in the absence of the Chairman and the President, any Vice Chairman, or on the request in writing of any three directors stating the purpose or purposes of such meeting. Notice of any special meeting, specifying the time and place of such meeting, shall be in form approved by the Chairman, or in the absence of the Chairman, the President, or in the absence of the Chairman and the President, such Vice Chairman, or if the meeting is called pursuant to the request of some other director and there shall be a failure to approve the form of notice as aforesaid, then in form approved by such directors. Notices of special meetings shall be mailed to each director, addressed to him at his residence or usual place of business, not later than two days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph, or be delivered personally or by telephone, not later than the day before such day of meeting. Whenever notice of any meeting of the Board of Directors is required to be given under any provision of law, the Certificate of Incorporation or the By-Laws, a written waiver thereof signed by the director entitled to notice, whether before, at, or after the time of such meeting, shall be deemed equivalent to notice. Attendance of a director at any meeting of the Board of Directors shall constitute a waiver of notice of such meeting, except when the director attends such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because such meet- 7 ing is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors or any committee thereof need be specified in any written waiver of notice. SECTION 7. Organization. The Chairman shall preside at all meetings of the Board of Directors and the Executive Committee of the Board of Directors (which Committee is provided for in Article IV and is hereinafter referred to as the "Executive Committee"). In the absence of the Chairman, the President or, in the absence of the Chairman and the President, the Vice Chairman, or if there be more than one Vice Chairman present, the one of them first appointed to such office, shall preside at all meetings of the Board of Directors and the Executive Committee. In the absence of the Chairman, the President, and such Vice Chairman, a temporary chairman may be chosen by the members of the Board of Directors or of the Executive Committee present to preside at a meeting of the Board of Directors or of the Executive Committee, respectively. The Secretary of Citicorp shall act as the secretary at all meetings of the Board of Directors and of the Executive Committee and in his absence a temporary secretary shall be appointed by the chairman of the meeting. SECTION 8. Quorum and Manner of Acting. At every meeting of the Board of Directors a majority of the entire Board of Directors shall constitute a quorum; and, except as otherwise provided by law, or by Section 1 of Article IV, the vote of a majority of the directors present at any such meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present may adjourn any meeting from time to time, until a quorum is present. No notice of any adjourned meeting need be given other than by announcement at the meeting that is being adjourned. 8 SECTION 9. Voting. On any question on which the Board of Directors or the Executive Committee shall vote, the names of those voting and their votes shall be entered in the minutes of the meeting when any member of the Board of Directors or the Executive Committee so requests. SECTION 10. Directors' Compensation. The Board of Directors shall have authority to determine from time to time, the amount of compensation which shall be paid to any of its members, provided however that no such compensation shall be paid to any director who is a salaried officer or employee of Citicorp or any of its subsidiaries. Directors shall receive transportation and other expenses of attendance. SECTION 11. Resignations. Any director may resign at any time either by oral tender of resignation at any meeting of the Board of Directors or by such tender to the Chairman, the President or any Vice Chairman, or by giving written notice thereof to Citicorp. Any resignation shall be effective immediately unless a date certain is specified for it to take effect. ARTICLE IV EXECUTIVE COMMITTEE SECTION 1. Constitution and Powers. There shall be an Executive Committee which shall be constituted as provided in Section 2 of this Article IV. The Executive Committee shall have and may exercise, when the Board of Directors is not in session, all the powers and authority of the Board of Directors in the management of the business and affairs of Citicorp, including the power and authority to declare dividends and to authorize the issuance of stock and other securities of Citicorp, and may authorize the seal of Citicorp to be 9 affixed to all papers which may require it; but the Executive Committee shall not have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of Citicorp's property and assets, recommending to the stockholders a dissolution of Citicorp or a revocation of a dissolution, or amending the By-Laws. SECTION 2. Membership; Meetings; Quorum. The Executive Committee shall be composed of the Chairman, who shall be an ex-officio member, and such additional directors not less than three, not officers or employees of Citicorp or any of its subsidiaries, appointed by the Board, who shall serve until the next annual organization meeting of the Board and until their successors are appointed. The Board may appoint one or more directors who are also officers or employees of Citicorp, as alternate ex-officio members of the Committee, any of whom may serve in the absence of the Chairman. Meetings of the Committee shall be held upon call of the Chairman, or in the Chairman's absence, an alternate ex-officio member. A majority of the members of the Committee, including the Chairman, or in the Chairman's absence, an alternate ex-officio member, shall constitute a quorum at any meeting of the Committee, and the vote of a majority of the members present at any such meeting at which a quorum is present shall suffice for the transaction of business. Notice of any meeting shall be given to each director in the manner provided in Section 6 of Article III for the giving of notice or the waiver thereof of a special meeting of the Board of Directors. SECTION 3. Records. The Executive Committee shall keep minutes of its acts and proceedings, which shall be submitted at the next regular meeting of the Board of Directors at which a quorum is pre- 10 sent, and any action taken by the Board of Directors with respect thereto shall be entered in the minutes of the Board of Directors. All acts done and powers conferred by the Executive Committee from time to time shall be deemed to be, and may be certified as being, done or conferred under authority of the Board. ARTICLE V OTHER COMMITTEES SECTION 1. Other Committees. The Board of Directors may, from time to time, appoint other committees which shall have such powers and duties as the Board of Directors may properly determine, and may appoint one of the members of any such other committee to be its chairman. A majority of the members of such other committees shall constitute a quorum, unless otherwise specified by the Board of Directors. SECTION 2. Place of Meetings: Notice and Waiver of Notice. Meetings of committees of the Board of Directors shall be held at the principal office of Citicorp or at such other places as the committee in question may, from time to time, determine, subject to the provisions of Section 2 of Article IV with respect to meetings of the Executive Committee. Meetings of any committee of the Board of Directors other than the Executive Committee may be called by the chairman of such committee or by the Secretary at the request of any other member thereof. Notice of any meeting of any committee of the Board of Directors other than the Executive Committee shall be in form approved by the chairman of such committee, or if the meeting is called pursuant to the request of some other member of such committee and there is a failure to approve the form of notice as aforesaid, 11 then in the form approved by such member. The provisions of Section 6 of Article III with respect to the giving and waiver of notice of special meetings of the Board of Directors shall also apply to all meetings of such other committee. ARTICLE VI THE OFFICERS SECTION 1. Officers. Citicorp shall have a Chairman and may have a President, one or more Vice Chairmen, one or more Sector Executives, one or more Senior Executive Vice Presidents, one or more Executive Vice Presidents/Group Executives/Senior Corporate Officers, a Chairman Credit Policy Committee, one or more Senior Vice Presidents, and one or more Vice Presidents, and shall have a Secretary and a Chief Auditor; and such officers shall be appointed by the Board of Directors which may establish senior officer positions equivalent to and having duties and powers the same as these officers. The Chairman and the President shall each be a director. The Board of Directors may also appoint one or more Deputy Chief Auditors, Assistant Secretaries, and such other officers and agents as in their judgment the business of Citicorp may require, and any such officers other than Deputy Chief Auditors may be appointed, subject to the authority of the Board of Directors, by the Chairman, the President, any Vice Chairman, or any Sector Executive. SECTION 2. Term of Office. All officers shall hold office during the pleasure of and until removed by the Board of Directors, or, in the case of officers who may be appointed by the Chairman, the President, any Vice Chairman, or any Sector Executive, until removed by one of them or by the Board of Directors. 12 SECTION 3. Resignations. Any officer may resign at any time, either by oral tender of resignation to the Chairman, the President, any Vice Chairman, or any Sector Executive or by giving written notice thereof to Citicorp. Any resignation shall be effective immediately unless a date certain is specified for it to take effect. SECTION 4. The Chairman. The Chairman shall be the Chief Executive Officer of Citicorp, and shall have general executive powers as well as the specific powers conferred by these By-Laws. He shall preside at meetings of the Board of Directors and the Executive Committee and at meetings of the stockholders. SECTION 5. The President. The President shall be the Chief Operating Officer of Citicorp, and shall have general executive powers as well as the specific powers conferred by these By-Laws. In the absence of the Chairman, the President shall exercise the powers and duties of the Chairman related to meetings of the Board of Directors and the Executive Committee and meetings of the stockholders. SECTION 6. The Vice Chairmen. In the absence of the Chairman and the President and in the order of their appointment to the office, the Vice Chairmen shall exercise the powers and duties of the Chairman related to meetings of the Board of Directors and the Executive Committee and meetings of the stockholders. The Vice Chairmen shall have general executive powers as well as the specific powers conferred by these By-Laws. Each of them shall also have such powers and duties as may from time to time be assigned by the Board of Directors, the Chairman, or the President. SECTION 7. The Sector Executives. Each Sector Executive shall have general executive powers as well as the specific powers conferred by these By-Laws. Each Sector Executive shall also have such 13 further powers and duties as may from time to time be assigned to him by the Board of Directors, the Chairman or the President. SECTION 8. The Senior Executive Vice Presidents. Each Senior Executive Vice President shall have general executive powers as well as the specific powers conferred by these By-Laws. Each Senior Executive Vice President shall also have such further powers and duties as may from time to time be assigned to him by the Board of Directors, the Chairman, the President, or any Vice Chairman. SECTION 9. The Executive Vice Presidents/Group Executives/Senior Corporate Officers. Each Executive Vice President/Group Executive/Senior Corporate Officer shall have general executive powers as well as the specific powers conferred by these By-Laws. Each Executive Vice President/Senior Corporate Officer shall also have such further powers and duties as may from time to time be assigned to him by the Board of Directors, the Chairman, the President, or any Vice Chairman. Each Group Executive shall also have such further powers and duties as may from time to time be assigned to him by the Board of Directors, the Chairman, the President, or any Sector Executive. SECTION 10. The Chairman Credit Policy Committee. The Board of Directors may appoint a Chairman Credit Policy Committee who shall have general responsibilities in connection with the formulation and administration of the credit policies of Citicorp. He shall have general executive powers, as well as the specific powers conferred by these By-Laws. He shall also have such further powers and duties as may from time to time be assigned to him by the Board of Directors, the Chairman, or the President. SECTION 11. The Senior Vice Presidents. Each Senior Vice President shall have general executive powers as well as the specific pow- 14 ers conferred by these By-Laws. Each Senior Vice President shall also have such further powers and duties as may from time to time be assigned to him by the Board of Directors, the Chairman, the President, any Vice Chairman, or any Sector Executive. SECTION 12. The Vice Presidents. The several Vice Presidents shall perform such duties and have such powers as may from time to time be assigned to them by the Board of Directors, the Chairman, the President, any Vice Chairman, or any Sector Executive. SECTION 13. The Secretary. The Secretary shall attend to the giving of notice of all meetings of stockholders and of the Board of Directors and committees thereof, as provided in Section 4 of Article II and Section 6 of Article III, and shall keep minutes of all proceedings at meetings of the stockholders, of the Board of Directors and of the Executive Committee, as well as of all proceedings at all meetings of other regular committees of the Board of Directors. He shall have charge of the corporate seal and shall have authority to attest any and all instruments or writings to which the same may be affixed. He shall have charge of the stock ledger and shall keep and account for all books, documents, papers and records of Citicorp, except those for which some other officer or agent is properly accountable. He shall generally perform all the duties usually appertaining to the office of Secretary of a corporation. In the absence of the Secretary, such person as shall be designated by the Chairman, the President or any Vice Chairman shall perform his duties. SECTION 14. The Chief Auditor. The Board of Directors shall appoint a Chief Auditor who shall be the chief auditing officer of Citicorp. He shall continuously examine the affairs of Citicorp, and shall report to the Board of Directors. He shall have and may exercise the 15 powers and duties as from time to time may be conferred upon, or assigned to him by the Board of Directors. SECTION 15. Compensation. The compensation of the Chairman, the President, the Vice Chairmen, the Sector Executives, the Senior Executive Vice Presidents, the Executive Vice Presidents/Group Executives/Senior Corporate Officers, the Chairman Credit Policy Committee, the Senior Vice Presidents, the Vice Presidents, the Secretary, the Chief Auditor and the Deputy Chief Auditors, or anyone holding a position equivalent to the foregoing pursuant to provisions of these By-Laws, shall be fixed by the Board of Directors. The compensation of all other officers and other employees and agents of Citicorp shall be fixed by the Chairman, the President, any Vice Chairman, or any Sector Executive or, when authorized by the Board of Directors, by such person or persons as shall be designated by any of them. ARTICLE VII STOCK AND TRANSFERS OF STOCK SECTION 1. Stock Certificates. The stock of Citicorp shall be represented by certificates signed by the Chairman or the President and the Secretary or an Assistant Secretary. Where any such certificate is countersigned by a Transfer Agent, other than Citicorp or its employee, or by a Registrar, other than Citicorp or its employee, any other signature on such certificate may be a facsimile, engraved, stamped or printed. In case any such officer, Transfer Agent or Registrar who has signed or whose facsimile signature has been placed upon any such certificate shall have ceased to be such officer, Transfer Agent or Registrar before such certificate is issued, it may be issued by Citicorp with the same effect as if such officer, Transfer Agent or Registrar were such officer, Transfer Agent or Registrar at the date of its 16 issue. The certificates representing the stock of Citicorp shall be in such form as shall be approved by the Board of Directors. SECTION 2. Transfer Agents and Registrars. The Board of Directors may, in its discretion, appoint one or more banks or trust companies in the Borough of Manhattan, City, County and State of New York, and in such other city or cities as the Board of Directors may deem advisable, including any banking subsidiaries of Citicorp, from time to time, to act as Transfer Agents and Registrars of the stock of Citicorp; and upon such appointments being made, no stock certificate shall be valid until countersigned by one of such Transfer Agents and registered by one of such Registrars. SECTION 3. Transfers of Stock. Transfers of stock shall be made on the books of Citicorp only by the person named in the certificate, or by attorney lawfully constituted in writing, and upon surrender and cancellation of a certificate or certificates for a like number of shares of the same class of stock, with duly executed assignment and power of transfer endorsed thereon or attached thereto, and with such proof of the authenticity of the signatures as Citicorp or its agents may reasonably require. No transfer of stock other than on the records of Citicorp shall affect the right of Citicorp to pay any dividend upon the stock to the holder of record thereof or to treat the holder of record as the holder in fact thereof for all purposes, and no transfer shall be valid, except between the parties thereto, until such transfers shall have been made upon the records of Citicorp. SECTION 4. Lost Certificates. In case any certificate of stock shall be lost, stolen or destroyed, the Board of Directors, in its discretion, or any officer or officers or any agent or agents thereunto duly authorized by the Board of Directors, may authorize the issue of a substi- 17 tute certificate in place of the certificate so lost, stolen or destroyed, and may cause or authorize such substitute certificate to be countersigned by the appropriate Transfer Agent (or where such duly authorized agent is the Transfer Agent may itself countersign) and registered by the appropriate Registrar; provided, however, that, in each such case, the applicant for a substitute certificate shall furnish to Citicorp and to such of its Transfer Agents and Registrars as may require the same, evidence to their satisfaction, in their discretion, of the loss, theft or destruction of such certificate and of the ownership thereof, and also security or indemnity as may by them be required. ARTICLE VIII CORPORATE SEAL SECTION 1. Seal. The seal of Citicorp shall be in such form as may be approved, from time to time, by the Board of Directors. SECTION 2. Affixing and Attesting. The seal of Citicorp shall be in the custody of the Secretary, who shall have power to affix it to the proper corporate instruments and documents, and who shall attest it. In his absence, it may be affixed and attested by an Assistant Secretary or by any other person or persons as may be designated by the Board of Directors or the Secretary. ARTICLE IX MISCELLANEOUS SECTION 1. Fiscal Year. The fiscal year of Citicorp shall be the calendar year. SECTION 2. Signatures on Negotiable Instruments. All bills, notes, 18 checks or other instruments for the payment of money shall be signed or countersigned by such officers or agents and in such manner as, from time to time, may be prescribed by resolution (whether general or special) of the Board of Directors, or may be prescribed by any officer or officers, or any officer and agent jointly, thereunto duly authorized by the Board of Directors. SECTION 3. Execution of Contracts and Other Instruments. The Chairman, the President, any Vice Chairman, any Sector Executive, any Senior Executive Vice President, any Executive Vice President/Group Executive/Senior Corporate Officer, the Chairman Credit Policy Committee, any Senior Vice President, any Vice President, the Secretary, and the Chief Auditor, or anyone holding a position equivalent to the foregoing pursuant to provisions of these By-Laws, shall each have general authority to execute contracts, bonds, deeds and powers of attorney in the name of and on behalf of Citicorp. Any contract, bond, deed or power of attorney may also be executed in the name of and on behalf of Citicorp by such other officer or such other agent as the Board of Directors may from to time direct. The provisions of this Section 3 are supplementary to any other provision of these By-Laws. SECTION 4. Shares of Other Corporations. The Chairman, the President, any Vice Chairman, any Sector Executive, any Senior Executive Vice President, any Executive Vice President/Group Executive/Senior Corporate Officer, the Chairman Credit Policy Committee, any Senior Vice President, any Vice President, and the Secretary, or anyone holding a position equivalent to the foregoing pursuant to provisions of these By-Laws, is each authorized to vote, represent and exercise on behalf of Citicorp, all rights incident to any and all shares of any other corporation or corporations standing in the name of Citicorp. The authority herein granted to said officer to vote or represent on behalf 19 of Citicorp any and all shares held by Citicorp in any other corporation or corporations may be exercised by said officer in person or by any person authorized so to do by proxy or power of attorney duly executed by said officer. Notwithstanding the above, however, the Board of Directors, in its discretion, may designate by resolution the person to vote or represent said shares of other corporations. SECTION 5. References to Article and Section Numbers and to the Certificate of Incorporation. Whenever in the By-Laws reference is made to an Article or Section number, such reference is to the number of an Article or Section of the By-Laws. Whenever in the By-Laws reference is made to the Certificate of Incorporation, such reference is to the Certificate of Incorporation of Citicorp, as amended. SECTION 6. Reference to Gender. A reference in these By-Laws to one gender, masculine, feminine, or neuter includes the other two; and the singular includes the plural and vice versa and unless the context otherwise requires. ARTICLE X AMENDMENTS The By-Laws may be altered, amended or repealed, and new By-Laws adopted, from time to time, by the Board of Directors at any regular or special meeting. 20 The undersigned, duly qualified and acting Secretary of Citicorp, a Delaware corporation, hereby certifies the foregoing to be a true and complete copy of the By-Laws of the said Citicorp, as at present in force and effect. WITNESS, the hand of the undersigned and the seal of the said Citicorp, this ......... day of ............................, 19....... 22 EX-27 3 FINANCIAL DATA SCHEDULE
9 This schedule contains summery financial information extracted from the current report on Form 10-Q for the quarter ended September 30, 1996 and is qualified in its entirety by reference to such financial statements and accompanying disclosure. 0000020405 Citicorp 3rd qtr 1996 1,000,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 7,304 11,993 11,258 28,432 24,716 0 0 169,127 5,460 271,930 179,319 17,580 8,593 19,330 0 2,078 506 17,813 271,930 13,702 1,271 2,369 17,342 6,610 9,220 8,122 1,422 146 2,959 4,493 2,801 0 0 2,801 5.53 5.45 4.72 3,730 1,130 330 0 5,368 1,781 509 5,460 0 0 0 Includes Securities Purchased Under Resale Agreements Purchased Funds and Other Borrowings Includes Subordinated Capital Notes Taxable Equivalent Basis Includes $1,397MM of cash-basis commercial loans and $2,333MM of consumer loans on which accrual of interest has been suspended. Accruing loans 90 or or more days delinquent. Includes $181MM of commercial credit losses and $1,600MM of consumer credit losses. Allowance activity for 1996 includes $(58)MM in other changes principally net transfers (to) from the reserve for Consumer Sold Portfolio and foreign exchange effects. No portion of Citicorp's credit loss allowance is specifically allocated to any individual loan or group of loans, however, $1,809MM of the allowance at December 31, 1995 was attributed to operations outside the U.S. (See note 10 to the 1995 Annual Report). See Footnote F9 above. See Footnote F9 above.
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