SECURITIZATIONS AND VARIABLE INTEREST ENTITIES

6 Months Ended

Jun. 30, 2023

Securitizations and Variable Interest Entities [Abstract]

SECURITIZATIONS AND VARIABLE INTEREST ENTITIES

SECURITIZATIONS AND VARIABLE INTEREST ENTITIES

For additional information regarding Citi’s use of special purpose entities (SPEs) and variable interest entities (VIEs), see Note 23 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.

Citigroup’s involvement with consolidated and unconsolidated VIEs with which the Company holds significant variable interests or has continuing involvement through servicing a majority of the assets in a VIE is presented below:

	As of June 30, 2023
							Maximum exposure to loss in significant unconsolidated VIEs(1)
							Funded exposures(2)				Unfunded exposures
In millions of dollars	Total involvement with SPE assets		Consolidated VIE/SPE assets		Significant unconsolidated VIE assets(3)		Debt investments		Equity investments		Funding commitments		Guarantees and derivatives		Total
Credit card securitizations	$	31,666	$	31,666	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage securitizations(4)
U.S. agency-sponsored	125,515		—		125,515		2,093		—		—		138		2,231
Non-agency-sponsored	66,721		—		66,721		3,191		—		—		—		3,191
Citi-administered asset-backed commercial paper conduits	18,600		18,600		—		—		—		—		—		—
Collateralized loan obligations (CLOs)	5,916		—		5,916		2,525		—		—		—		2,525
Asset-based financing(5)	180,279		10,931		169,348		39,875		955		11,636		—		52,466
Municipal securities tender option bond trusts (TOBs)	1,527		596		931		16		—		681		—		697
Municipal investments	21,653		3		21,650		2,463		3,031		2,941		—		8,435
Client intermediation	487		97		390		75		—		—		—		75
Investment funds	490		103		387		4		7		78		1		90
Total	$	452,854	$	61,996	$	390,858	$	50,242	$	3,993	$	15,336	$	139	$	69,710

	As of December 31, 2022
							Maximum exposure to loss in significant unconsolidated VIEs(1)
							Funded exposures(2)				Unfunded exposures
In millions of dollars	Total involvement with SPE assets		Consolidated VIE/SPE assets		Significant unconsolidated VIE assets(3)		Debt investments		Equity investments		Funding commitments		Guarantees and derivatives		Total
Credit card securitizations	$	32,021	$	32,021	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage securitizations(4)
U.S. agency-sponsored	117,358		—		117,358		2,052		—		—		48		2,100
Non-agency-sponsored	67,704		—		67,704		3,294		—		—		—		3,294
Citi-administered asset-backed commercial paper conduits	19,621		19,621		—		—		—		—		—		—
Collateralized loan obligations (CLOs)	7,600		—		7,600		2,601		—		—		—		2,601
Asset-based financing(5)	242,348		9,672		232,676		40,121		1,022		10,726		—		51,869
Municipal securities tender option bond trusts (TOBs)	2,155		672		1,483		2		—		1,108		—		1,110
Municipal investments	22,167		3		22,164		2,731		3,143		3,420		—		9,294
Client intermediation	482		121		361		58		—		—		13		71
Investment funds	534		91		443		2		5		68		—		75
Other	—		—		—		—		—		—		—		—
Total	$	511,990	$	62,201	$	449,789	$	50,861	$	4,170	$	15,322	$	61	$	70,414

(1)    The definition of maximum exposure to loss is included in the text that follows this table.

(2)    Included on Citigroup’s June 30, 2023 and December 31, 2022 Consolidated Balance Sheet.

(3)    A significant unconsolidated VIE is an entity in which the Company has any variable interest or continuing involvement considered to be significant, regardless of the likelihood of loss.

(4)    Citigroup mortgage securitizations also include agency and non-agency (private label) re-securitization activities. These SPEs are not consolidated.

(5)     Included within this line are loans to third-party-sponsored private equity funds, which represent $11 billion and $69 billion in unconsolidated VIE assets and $534 million and $498 million in maximum exposure to loss as of June 30, 2023 and December 31, 2022, respectively.

The previous tables do not include:

•certain investment funds for which the Company provides investment management services and personal estate trusts for which the Company provides administrative, trustee and/or investment management services;

•certain third-party-sponsored private equity funds to which the Company provides secured credit facilities. The Company has no decision-making power and does not consolidate these funds, some of which may meet the definition of a VIE. The Company’s maximum exposure to loss is generally limited to a loan or lending-related commitment. As of June 30, 2023 and December 31, 2022, the Company’s maximum exposure to loss related to these transactions was $16.8 billion and $33.6 billion, respectively (for more information on these positions, see Note 13 and Note 27 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K);

•certain VIEs structured by third parties in which the Company holds securities in inventory, as these investments are made on arm’s-length terms;

•certain positions in mortgage- and asset-backed securities held by the Company, which are classified as Trading account assets or Investments, in which the Company has no other involvement with the related securitization entity deemed to be significant (see Notes 12 and 21 for more information on these positions);

•certain representations and warranties exposures in Citigroup residential mortgage securitizations, in which the original mortgage loan balances are no longer outstanding; and

•VIEs such as preferred securities trusts used in connection with the Company’s funding activities. The Company does not have a variable interest in these trusts.

The asset balances for consolidated VIEs represent the carrying amounts of the assets consolidated by the Company. The carrying amount may represent the amortized cost or the current fair value of the assets depending on the classification of the asset (e.g., loan or security) and the associated accounting model ascribed to that classification.

The asset balances for unconsolidated VIEs in which the Company has significant involvement represent the most current information available to the Company. In most cases, the asset balances represent an amortized cost basis without regard to impairments, unless fair value information is readily available to the Company.

The maximum funded exposure represents the balance sheet carrying amount of the Company’s investment in the VIE. It reflects the initial amount of cash invested in the VIE, adjusted for any accrued interest and cash principal payments received. The carrying amount may also be adjusted for increases or declines in fair value or any impairment in value recognized in earnings. The maximum exposure of unfunded positions represents the remaining undrawn committed amount, including liquidity and credit facilities provided by the Company or the notional amount of a derivative instrument considered to be a variable interest. In certain transactions, the Company has entered into derivative instruments or other arrangements that are not considered variable interests in the VIE (e.g., interest rate swaps, cross-currency swaps or where the Company is the purchaser of credit protection under a credit default swap or total return swap where the Company pays the total return on certain assets to the SPE). Receivables under such arrangements are not included in the maximum exposure amounts.

The following tables present certain assets and liabilities of consolidated variable interest entities (VIEs), which are included on Citi’s Consolidated Balance Sheet. The assets in the table below include those assets that can only be used to settle obligations of consolidated VIEs and are in excess of those obligations. In addition, the assets in the table below include third-party assets of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Citigroup.

	June 30,
	2023		December 31,
In millions of dollars	(Unaudited)		2022
Assets of consolidated VIEs to be used to settle obligations of consolidated VIEs
Cash and due from banks	$	69	$	61
Trading account assets	10,417		9,153
Investments	496		594
Loans, net of unearned income
Consumer	34,786		35,026
Corporate	18,731		19,782
Loans, net of unearned income	$	53,517	$	54,808
Allowance for credit losses on loans (ACLL)	(2,623)		(2,520)
Total loans, net	$	50,894	$	52,288
Other assets	120		105
Total assets of consolidated VIEs to be used to settle obligations of consolidated VIEs	$	61,996	$	62,201

	June 30,
	2023		December 31,
In millions of dollars	(Unaudited)		2022
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup
Short-term borrowings	$	9,652	$	9,807
Long-term debt	7,930		10,324
Other liabilities	853		622
Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup	$	18,435	$	20,753

Funding Commitments for Significant Unconsolidated VIEs—Liquidity Facilities and Loan Commitments

The following table presents the notional amount of liquidity facilities and loan commitments that are classified as funding commitments in the VIE tables above:

	June 30, 2023				December 31, 2022
In millions of dollars	Liquidity facilities		Loan/equity commitments		Liquidity facilities		Loan/equity commitments
Non-agency-sponsored mortgage securitizations	$	—	$	—	$	—	$	—
Asset-based financing	—		11,636		—		10,726
Municipal securities tender option bond trusts (TOBs)	681		—		1,108		—
Municipal investments	—		2,941		—		3,420
Investment funds	—		78		—		68
Other	—		—		—		—
Total funding commitments	$	681	$	14,655	$	1,108	$	14,214

Significant Interests in Unconsolidated VIEs—Balance Sheet Classification

The following table presents the carrying amounts and classification of significant variable interests in unconsolidated VIEs:

In billions of dollars	June 30, 2023		December 31, 2022
Cash	$	—	$	—
Trading account assets	1.6		1.6
Investments	8.5		8.6
Total loans, net of allowance	43.5		44.2
Other	0.6		0.6
Total assets	$	54.2	$	55.0

Credit Card Securitizations

The Company’s primary credit card securitization activity is through two trusts—Citibank Credit Card Master Trust and Citibank Omni Trust. These trusts are consolidated entities given Citi’s continuing involvement. For additional information, see Note 22 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K. There were no material cash flows arising from either proceeds from new securitizations or paydowns of maturing notes during the six months ended June 30, 2023 and 2022.

Mortgage Securitizations

The following tables summarize selected cash flow information and retained interests related to Citigroup mortgage securitizations:

	Three Months Ended June 30,
	2023				2022
In billions of dollars	U.S. agency- sponsored mortgages		Non-agency- sponsored mortgages		U.S. agency- sponsored mortgages		Non-agency- sponsored mortgages
Principal securitized	$	1.6	$	1.0	$	1.9	$	8.6
Proceeds from new securitizations	1.6		0.9		1.8		8.4
Contractual servicing fees received	—		—		—		—
Cash flows received on retained interests and other net cash flows	—		0.1		—		—
Purchases of previously transferred financial assets	—		—		—		—
	Six Months Ended June 30,
	2023				2022
In billions of dollars	U.S. agency- sponsored mortgages		Non-agency- sponsored mortgages		U.S. agency- sponsored mortgages		Non-agency- sponsored mortgages
Principal securitized	$	2.3	$	2.3	$	4.0	$	10.2
Proceeds from new securitizations	2.4		2.0		3.9		10.0
Contractual servicing fees received	0.1		—		—		—
Cash flows received on retained interests and other net cash flows	—		0.1		—		—
Purchases of previously transferred financial assets	—		—		—		—

Note: Excludes broker-dealer re-securitization transactions.

Gains recognized on the securitization of U.S. agency-sponsored mortgages were $0.2 million and $0.3 million for the three and six months ended June 30, 2023, respectively. Gains recognized on the securitization of non-agency-sponsored mortgages were $11.3 million and $13.7 million for the three and six months ended June 30, 2023, respectively.

Gains recognized on the securitization of U.S. agency-sponsored mortgages were $0.3 million and $0.6 million for the three and six months ended June 30, 2022, respectively. Gains recognized on the securitization of non-agency-sponsored mortgages were $35 million and $73.7 million for the three and six months ended June 30, 2022, respectively.

	June 30, 2023						December 31, 2022
			Non-agency-sponsored mortgages(1)						Non-agency-sponsored mortgages(1)
In millions of dollars	U.S. agency- sponsored mortgages		Senior interests(2)		Subordinated interests		U.S. agency- sponsored mortgages		Senior interests		Subordinated interests
Carrying value of retained interests(3)	$	684	$	1,043	$	959	$	659	$	1,119	$	943

(1)    Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization.

(2)    Senior interests in non-agency-sponsored mortgages include $1.7 million related to personal loan securitizations at June 30, 2023.

(3)    Retained interests consist of Level 2 and Level 3 assets depending on the observability of significant inputs. See Note 22 for more information about fair value measurements.

The following table includes information about loan delinquencies and liquidation losses for assets held in non-consolidated, non-agency-sponsored securitization entities:

									Liquidation losses
	Securitized assets				90 days past due				Three Months Ended June 30,				Six Months Ended June 30,
In billions of dollars, except liquidation losses in millions	Jun. 30, 2023		Dec. 31, 2022		Jun. 30, 2023		Dec. 31, 2022		2023		2022		2023		2022
Securitized assets
Residential mortgages(1)	$	30	$	30.8	$	0.5	$	0.5	$	—	$	(0.3)	$	2.3	$	1.2
Commercial and other	28.7		28.8		—		—		—		—		—		—
Total	$	58.7	$	59.6	$	0.5	$	0.5	$	—	$	(0.3)	$	2.3	$	1.2

(1)    Securitized assets include $0.1 billion of personal loan securitizations as of June 30, 2023.

Mortgage Servicing Rights (MSRs)

The fair value of Citi’s capitalized MSRs was $681 million and $600 million at June 30, 2023 and 2022, respectively. The MSRs correspond to principal loan balances of $51 billion and $49 billion as of June 30, 2023 and 2022, respectively. The following table summarizes the changes in capitalized MSRs:

	Three Months Ended June 30,				Six Months Ended June 30,
In millions of dollars	2023		2022		2023		2022
Balance, beginning of period	$	658	$	520	$	665	$	404
Originations	19		35		31		69
Changes in fair value of MSRs due to changes in inputs and assumptions	22		59		19		158
Other changes(1)	(18)		(14)		(34)		(31)
Sales of MSRs	—		—		—		—
Balance, as of June 30	$	681	$	600	$	681	$	600

(1)    Represents changes due to customer payments and passage of time.

The fair value of the MSRs is primarily affected by changes in prepayments of mortgages that result from shifts in mortgage interest rates. Specifically, higher interest rates tend to lead to declining prepayments, which causes the fair value of the MSRs to increase. In managing this risk, Citigroup economically hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase and sale commitments of mortgage-backed securities and purchased securities, all classified as Trading account assets.

The Company receives fees during the course of servicing previously securitized mortgages. The amounts of these fees were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
In millions of dollars	2023		2022		2023		2022
Servicing fees	$	32	$	30	$	65	$	59
Late fees	1		1		2		2
Total MSR fees	$	33	$	31	$	67	$	61

In the Consolidated Statement of Income these fees are primarily classified as Commissions and fees, and changes in MSR fair values are classified as Other revenue.

Re-securitizations

The Company engages in re-securitization transactions in which debt securities are transferred to a VIE in exchange for new beneficial interests. Citi did not transfer non-agency (private label) securities to re-securitization entities during the three months ended June 30, 2023 and 2022. These securities are backed by either residential or commercial mortgages and are often structured on behalf of clients.

As of June 30, 2023 and December 31, 2022, Citi held no retained interests in private label re-securitization transactions structured by Citi.

The Company also re-securitizes U.S. government-agency-guaranteed mortgage-backed (agency) securities. During the three and six months ended June 30, 2023, Citi transferred agency securities with a fair value of approximately $3.3 billion and $8.6 billion, respectively, to re-securitization entities, compared to approximately $5.6 billion and $14.9 billion for the three and six months ended June 30, 2022, respectively.

As of June 30, 2023, the fair value of Citi-retained interests in agency re-securitization transactions structured by Citi totaled approximately $1.4 billion (including $402 million related to re-securitization transactions executed in 2023), compared to $1.4 billion as of December 31, 2022 (including

$801 million related to re-securitization transactions executed in 2022), which is recorded in Trading account assets. The original fair values of agency re-securitization transactions in which Citi holds a retained interest as of June 30, 2023 and December 31, 2022 were approximately $86.8 billion and $79.4 billion, respectively.

As of June 30, 2023 and December 31, 2022, the Company did not consolidate any private label or agency re-securitization entities.

Citi-Administered Asset-Backed Commercial Paper Conduits

At June 30, 2023 and December 31, 2022, the commercial paper conduits administered by Citi had approximately $18.6 billion and $19.6 billion of purchased assets outstanding, respectively, and had incremental funding commitments with clients of approximately $16.1 billion and $13.9 billion, respectively.

Substantially all of the funding of the conduits is in the form of short-term commercial paper. At June 30, 2023 and December 31, 2022, the weighted average remaining lives of the commercial paper issued by the conduits were approximately 66 and 64 days, respectively.

Each asset purchased by the conduit is structured with transaction-specific credit enhancement features provided by the third-party client seller, including over-collateralization, cash and excess spread collateral accounts, direct recourse or third-party guarantees. These credit enhancements are sized with the objective of approximating a credit rating of A or above, based on Citi’s internal risk ratings. In addition to the transaction-specific credit enhancements, the conduits, other than the government-guaranteed loan conduit, have obtained letters of credit from the Company, which equal at least 8% to 10% of the conduit’s assets with a minimum of $350 million. The letters of credit provided by the Company to the conduits

total approximately $1.9 billion and $1.9 billion as of June 30, 2023 and December 31, 2022, respectively. The net result across multiseller conduits administered by the Company is that, in the event that defaulted assets exceed the transaction-specific credit enhancements described above, any losses in each conduit are allocated first to the Company and then to the commercial paper investors.

At June 30, 2023 and December 31, 2022, the Company owned $7.7 billion and $8.6 billion, respectively, of the commercial paper issued by its administered conduits. The Company’s investments were not driven by market illiquidity and the Company is not obligated under any agreement to purchase the commercial paper issued by the conduits.

Municipal Securities Tender Option Bond (TOB) Trusts

At June 30, 2023 and December 31, 2022, none of the municipal bonds owned by non-customer TOB trusts were subject to a credit guarantee provided by the Company.

At June 30, 2023 and December 31, 2022, liquidity agreements provided with respect to customer TOB trusts totaled $0.7 billion and $1.1 billion, respectively, of which $0.5 billion and $0.7 billion, respectively, were offset by reimbursement agreements. For the remaining exposure related to TOB transactions, where the residual owned by the customer was at least 25% of the bond value at the inception of the transaction, no reimbursement agreement was executed.

The Company also provides other liquidity agreements or letters of credit to customer-sponsored municipal investment funds, which are not variable interest entities, and municipality-related issuers that totaled $1.4 billion and $1.4 billion as of June 30, 2023 and December 31, 2022, respectively. These liquidity agreements and letters of credit are offset by reimbursement agreements with various term-out provisions.

Asset-Based Financing

The primary types of Citi’s asset-based financings, total assets of the unconsolidated VIEs with significant involvement and Citi’s maximum exposure to loss are presented below. For Citi to realize the maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.

	June 30, 2023				December 31, 2022
In millions of dollars	Total unconsolidated VIE assets		Maximum exposure to unconsolidated VIEs		Total unconsolidated VIE assets		Maximum exposure to unconsolidated VIEs
Type
Commercial and other real estate	$	43,836	$	9,100	$	43,236	$	8,806
Corporate loans	21,396		14,535		23,120		15,077
Other (including investment funds, airlines and shipping)	104,116		28,831		166,320		27,986
Total	$	169,348	$	52,466	$	232,676	$	51,869