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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

Commission file number 1-9924

Citigroup Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
  52-1568099
(I.R.S. Employer Identification No.)

399 Park Avenue, New York, NY
(Address of principal executive offices)

 

10022
(Zip code)

(212) 559-1000
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

Common stock outstanding as of June 30, 2012: 2,932,483,238

Available on the web at www.citigroup.com

   



CITIGROUP INC

SECOND QUARTER 2012—FORM 10-Q

OVERVIEW

    3  

CITIGROUP SEGMENTS AND REGIONS

   
4
 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   
5
 

Executive Summary

   
5
 

RESULTS OF OPERATIONS

   
9
 

Summary of Selected Financial Data

   
9
 

SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES

   
11
 

CITICORP

   
13
 

Global Consumer Banking

   
14
 

North America Regional Consumer Banking

   
15
 

EMEA Regional Consumer Banking

   
17
 

Latin America Regional Consumer Banking

   
19
 

Asia Regional Consumer Banking

   
21
 

Institutional Clients Group

   
23
 

Securities and Banking

   
25
 

Transaction Services

   
27
 

CITI HOLDINGS

   
28
 

Brokerage and Asset Management

   
29
 

Local Consumer Lending

   
31
 

Special Asset Pool

   
33
 

CORPORATE/OTHER

   
34
 

BALANCE SHEET REVIEW

   
35
 

Segment Balance Sheet at June 30, 2012

   
38
 

CAPITAL RESOURCES AND LIQUIDITY

   
39
 

Capital Resources

   
39
 

Funding and Liquidity

   
45
 

Off-Balance-Sheet Arrangements

   
52
 

MANAGING GLOBAL RISK

   
52
 

CREDIT RISK

   
53
 

Loans Outstanding

   
53
 

Details of Credit Loss Experience

   
54
 

Non-Accrual Loans and Assets, and Renegotiated Loans

   
55
 

North America Consumer Mortgage Lending

   
59
 

North America Cards

   
71
 

Consumer Loan Details

   
72
 

Corporate Loan Details

   
74
 

Exposure to Commercial Real Estate

   
77
 

MARKET RISK

   
78
 

COUNTRY RISK

   
89
 

FAIR VALUE ADJUSTMENTS FOR DERIVATIVES AND STRUCTURED DEBT

   
97
 

CREDIT DERIVATIVES

   
98
 

INCOME TAXES

   
100
 

DISCLOSURE CONTROLS AND PROCEDURES

   
101
 

FORWARD-LOOKING STATEMENTS

   
101
 

FINANCIAL STATEMENTS AND NOTES—TABLE OF CONTENTS

   
104
 

CONSOLIDATED FINANCIAL STATEMENTS

   
105
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   
111
 

LEGAL PROCEEDINGS

   
231
 

UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS

   
232
 

2


OVERVIEW

        Citigroup's history dates back to the founding of Citibank in 1812. Citigroup's original corporate predecessor was incorporated in 1988 under the laws of the State of Delaware. Following a series of transactions over a number of years, Citigroup Inc. was formed in 1998 upon the merger of Citicorp and Travelers Group Inc.

        Citigroup is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services. Citi has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions.

        Citigroup currently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of Citi's Global Consumer Banking businesses and Institutional Clients Group; and Citi Holdings, consisting of Brokerage and Asset Management, Local Consumer Lending and Special Asset Pool. For a further description of the business segments and the products and services they provide, see "Citigroup Segments" below, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 to the Consolidated Financial Statements.

        Throughout this report, "Citigroup," "Citi" and "the Company" refer to Citigroup Inc. and its consolidated subsidiaries.

        This Quarterly Report on Form 10-Q should be read in conjunction with Citigroup's Annual Report on Form 10-K for the year ended December 31, 2011 (2011 Annual Report on Form 10-K) and Citigroup's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012. Additional information about Citigroup is available on Citi's Web site at www.citigroup.com. Citigroup's recent annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, as well as other filings with the U.S. Securities and Exchange Commission (SEC), are available free of charge through Citi's Web site by clicking on the "Investors" page and selecting "All SEC Filings." The SEC's Web site also contains current reports, information statements, and other information regarding Citi at www.sec.gov.

        Within this Form 10-Q, please refer to the tables of contents on pages 2 and 104 for page references to Management's Discussion and Analysis of Financial Condition and Results of Operations, and Notes to Consolidated Financial Statements, respectively.

        Certain reclassifications have been made to the prior periods' financial statements to conform to the current period's presentation. For information on certain recent such classifications, including the transfer of the substantial majority of Citi's retail partner cards businesses (which is now referred to as Citi retail services) from Citi Holdings—Local Consumer Lending to Citicorp—North America Regional Consumer Banking, which was effective January 1, 2012, see Citi's Form 8-K furnished to the SEC on March 26, 2012.

3


As described above, Citigroup is managed pursuant to the following segments:

GRAPHIC

        The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.

GRAPHIC

   


(1)
North America includes the U.S., Canada and Puerto Rico, Latin America includes Mexico, and Asia includes Japan.

4


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SECOND QUARTER 2012 EXECUTIVE SUMMARY

Citigroup

        Citigroup reported second quarter of 2012 net income of $2.9 billion, or $0.95 per diluted share. Citi's reported net income declined by 12%, or $395 million, from the second quarter of 2011. Results for the second quarter of 2012 included a positive credit valuation adjustment on derivatives (excluding monolines), net of hedges (CVA) and debt valuation adjustment on Citi's fair value option debt (DVA) of $219 million, compared to positive $164 million in the second quarter of 2011, as Citi's credit spreads marginally widened during the quarter. Results for the second quarter of 2012 also included a net pre-tax loss of $424 million from the partial sale of Citi's minority interest in Akbank T.A.S. (Akbank). This compared to a $199 million gain recorded in the second quarter of 2011 from the partial sale of Citi's minority interest in Housing Development Finance Corporation Ltd.

        Excluding CVA/DVA and the impact of these minority investments, Citi earned $3.1 billion in the second quarter of 2012, or $1.00 per diluted share, compared to $1.02 per diluted share in the prior-year period. The year-over-year decrease in earnings per share, excluding CVA/DVA and the impact of minority investments, primarily reflected lower revenues, partially offset by a year-over-year decline in expenses and continued declines in credit costs.

        As announced on July 19, 2012, Citi could have a significant non-cash charge to its net income in the third quarter of 2012, representing other-than-temporary impairment of the carrying value of its 49% interest in the Morgan Stanley Smith Barney joint venture. For additional information, see "Citi Holdings—Brokerage and Asset Management" and Notes 11 and 24 to the Consolidated Financial Statements below.

        Citi's revenues, net of interest expense, were $18.6 billion in the second quarter of 2012, down 10% versus the prior-year period. Excluding CVA/DVA and the impact of minority investments, revenues were $18.8 billion, down 7% from the second quarter of 2011, as revenues in Citicorp (comprised of Global Consumer Banking (GCB), Securities and Banking and Transaction Services) were unchanged from the prior-year period while revenues continued to decline in Citi Holdings. Net interest revenues of $11.6 billion were 5% lower than the prior-year period, largely due to continued declining loan balances in Local Consumer Lending in Citi Holdings. Excluding CVA/DVA and the impact of minority investments, non-interest revenues were $7.3 billion, down 11% from the prior-year period, principally due to the absence of gains on the sale of reclassified held-to-maturity securities and other assets in the Special Asset Pool in the second quarter of 2011.

Operating Expenses

        Citigroup expenses fell 6% versus the prior-year period to $12.1 billion. In the second quarter of 2012, Citi recorded legal and related costs and repositioning charges of $666 million ($480 million of legal and related costs and $186 million of repositioning charges, approximately half of which was related to Securities and Banking), compared to $637 million in the prior-year period ($601 million of legal and related costs and $36 million of repositioning charges). Excluding these items, as well as the impact of foreign exchange translation into U.S. dollars for reporting purposes (FX translation), which lowered reported expenses by approximately $0.5 billion in the second quarter of 2012, operating expenses fell by 3% to $11.5 billion versus the prior-year period. Citi's legal and related expenses remained at elevated levels during the second quarter of 2012, and will likely continue to be difficult to predict. Citi could also incur additional repositioning charges in future periods, as it continues to adapt its businesses to the market environment.

        Citicorp's expenses were $10.3 billion, down 3% from $10.7 billion in the prior-year period, due primarily a decline in Securities and Banking expenses year-over-year resulting from efficiency savings and lower compensation costs.

        Citi Holdings expenses were down 25% year-over-year to $1.2 billion, principally due to the continued decline in assets and thus lower operating expenses, as well as lower legal and related costs.

Credit Costs

        Citi's total provisions for credit losses and for benefits and claims of $2.8 billion declined $581 million, or 17%, from the prior-year period. Net credit losses of $3.6 billion were down $1.6 billion, or 31%, from the second quarter of 2011. Consumer net credit losses declined $1.4 billion, or 29%, to $3.4 billion, driven by continued credit improvement in North America Citi-branded cards and Citi retail services in Citicorp and in Local Consumer Lending within Citi Holdings. Corporate net credit losses decreased $196 million year-over-year to $154 million, driven primarily by continued credit improvement in the Special Asset Pool in Citi Holdings.

        The net release of allowance for loan losses and unfunded lending commitments was $984 million in the second quarter of 2012, down 50% from the net release of $2.0 billion in the second quarter of 2011. Of the $984 million net reserve release, $923 million related to Consumer and was mainly driven by North America Citi-branded cards and Citi retail services. The $61 million net Corporate reserve release was mainly driven by the Special Asset Pool in Citi Holdings.

        $715 million of the net reserve release was attributable to Citicorp and compared to a $1.4 billion release in the prior-year period. The decline in the Citicorp reserve release year-over-year mostly reflected a lower reserve release in North America Regional Consumer Banking (NA RCB) and a reserve build within Latin America Regional Consumer Banking (LATAM RCB), primarily driven by loan growth. The $269 million net reserve release in Citi Holdings was down from $583 million in the prior-year period, due primarily to lower releases in the Special Asset Pool.

5


Capital and Loan Loss Reserve Positions

        Citigroup's Tier 1 Capital ratio was 14.5% at quarter end and its Tier 1 Common ratio was 12.7%, up approximately 90 and 110 basis points, respectively, from the prior-year period. Citi's estimated Tier 1 Common ratio under Basel III was 7.9% at the end of the second quarter of 2012, an increase from an estimated 7.2% as of the first quarter of 2012. The increase in Citi's estimated Basel III Tier 1 Common ratio quarter-over-quarter was primarily due to net income, but was also positively impacted by the partial sale of Citi's stake in Akbank as well as lower risk-weighted assets. For additional information on Citi's estimated Basel III Tier 1 Common ratio, see "Capital Resources and Liquidity—Capital Resources" below.

        Citigroup's total allowance for loan losses was $27.6 billion at quarter end, or 4.3% of total loans, compared to $34.4 billion, or 5.4%, in the prior-year period. The decline in the total allowance for loan losses reflected continued asset sales in Citi Holdings, lower non-accrual loans, and overall continued improvement in the credit quality of the loan portfolios.

        The Consumer allowance for loan losses was $24.6 billion, or 6.0% of total Consumer loans, at quarter-end, compared to $30.9 billion, or 7.0% of total loans, at June 30, 2011. Total non-accrual assets declined 22% to $11.5 billion compared to the second quarter of 2011. Corporate non-accrual loans declined 47% to $2.6 billion, and Consumer non-accrual loans declined 1% to $8.3 billion.

Citicorp

        Citicorp net income increased 6% from the prior-year period to $4.3 billion. The increase largely reflected a 3% decline in each of operating expenses and provisions for credit losses and for benefits and claims, with revenues relatively unchanged at $18.0 billion. The decline in operating expenses in Citicorp year-over-year primarily reflected the impact of FX translation. CVA/DVA recorded in Securities and Banking was a positive $198 million in the second quarter of 2012, compared to positive $147 million in the prior-year period. Excluding CVA/DVA, Citicorp net income increased 5% from the prior-year period to $4.2 billion.

        Excluding CVA/DVA, Citicorp revenues were $17.8 billion, flat versus the second quarter of 2011. GCB revenues of $9.8 billion were largely unchanged versus the prior-year period. North America RCB revenues grew 4% to $5.1 billion driven by higher mortgage revenues, which Citi expects could continue into the third quarter of 2012. The higher mortgage revenues were partially offset by lower cards revenues as consumers continued to deleverage in the face of ongoing macroeconomic uncertainty. Citi expects this trend in cards to continue for the remainder of 2012.

        International GCB revenues (consisting of Asia Regional Consumer Banking (Asia RCB), LATAM RCB and EMEA Regional Consumer Banking (EMEA RCB)) declined 4% year-over-year to $4.6 billion. International GCB revenues were negatively impacted by FX translation as the U.S. dollar generally strengthened in the second quarter of 2012 against local currencies in which Citi generates revenues. Excluding the impact of FX translation, international GCB revenues rose 4% year-over-year, driven by 8% revenue growth in LATAM RCB, partially offset by a 1% decline in EMEA RCB while revenues in Asia RCB were largely unchanged. In Asia, the slowdown in revenue growth from prior periods reflected a combination of lower investment sales due to overall macroeconomic concerns and regulatory actions to limit the availability of consumer credit in certain countries, particularly Korea. Citi expects these regulatory factors to continue to negatively impact revenues in Asia in the third and fourth quarters of 2012.

        In North America RCB, average deposits of $151 billion grew 5% year-over-year and retail loans of $41 billion grew 22%, while average card loans of $108 billion declined 3% and card purchase sales were roughly flat due to the deleveraging related to ongoing macroeconomic uncertainty, as referenced above. Excluding the impact of FX translation, international GCB average deposits of $166 billion grew 1% year-over-year, average retail loans of $97 billion were up 11%, and average card loans of $36 billion grew 5% year-over-year. International card purchase sales were up 10%, excluding the impact of FX translation.

        Citicorp end of period loans increased for the sixth consecutive quarter, up 10% year-over-year to $527 billion, with 2% growth in Consumer loans and 22% growth in Corporate loans.

        Securities and Banking revenues were $5.4 billion in the second quarter of 2012, down 1% year-over-year. Excluding the impact of CVA/DVA, Securities and Banking revenues were $5.2 billion, or 2% lower than the prior-year period. Fixed income markets revenues, excluding CVA/DVA,(1) of $2.8 billion in the second quarter of 2012 decreased 4% from the prior-year period, as lower revenues in credit and securitized products, driven by weaker market conditions, were partially offset by strong revenue growth within rates and currencies. Equity markets revenues, excluding CVA/DVA, of $550 million in the second quarter of 2012 were 29% below the prior-year period, largely related to lower industry volumes in cash equities. Investment banking revenues fell 21% from the prior-year period to $854 million as slight growth in advisory revenues was more than offset by declines in debt and equity underwriting revenues. Lending revenues of $608 million were up 70% from the prior-year period, driven by higher net interest revenues on strong corporate loan growth and improved spreads, as well as $42 million in gains on hedges compared to an $85 million loss on hedges in the prior-year period. Private Bank revenues, excluding CVA/DVA, of $570 million were up 3% from the prior-year period driven primarily by growth in North America lending and deposits.

        Transaction Services revenues were $2.8 billion, up 5% from the prior-year period, as growth in Treasury and Trade Solutions offset declines in Securities and Fund Services. Treasury and Trade Solutions revenue growth reflected strong growth in average deposits and trade loans. Securities and Fund Services revenues primarily reflected the impact of FX

   


(1)
For the summary of CVA/DVA by business within Securities and Banking for the second quarter of 2012 and comparable periods, see "Citicorp—Institutional Clients GroupSecurities and Banking" below.

6


translation. Excluding the impact of FX translation, Securities and Fund Services delivered modest revenue growth while absorbing lower assets under custody and lower settlement volumes. Transaction Services average deposits and other customer liabilities grew 8% year-over-year to $396 billion, while assets under custody declined 6% year-over-year to $12.2 trillion.

Citi Holdings

        Citi Holdings net loss of $920 million in the second quarter of 2012 was higher than the loss of $661 million reported in the second quarter of 2011, as revenue declines and lower credit reserve releases more than offset lower expenses and a continued improvement in net credit losses.

        Citi Holdings revenues decreased 62% from the prior-year period to $924 million. Excluding CVA/DVA of positive $21 million in the second quarter of 2012, compared to positive $17 million in the prior-year period, Citi Holdings revenues were $903 million, or 62% lower than the second quarter of 2011. Net interest revenues declined 44% year-over-year to $581 million, largely driven by continued declining loan balances in Local Consumer Lending. Non-interest revenues, excluding CVA/DVA, decreased 76% to $322 million from the prior-year period, primarily reflecting the absence of gains on sale of reclassified held-to-maturity securities and other assets in the Special Asset Pool in the second quarter of 2011.

        Citi Holdings assets declined 28% year-over-year to $191 billion as of the end of the second quarter of 2012. At the end of the second quarter of 2012, Citi Holdings assets comprised approximately 10% of total Citigroup GAAP assets and 18% of current risk-weighted assets. Local Consumer Lending continued to represent the largest segment within Citi Holdings, with $138 billion of assets. Over 70% of Local Consumer Lending assets, or approximately $100 billion, consist of mortgages in North America real estate lending. As of the end of the second quarter of 2012, approximately $9.5 billion of Citi's loan loss reserves were allocated to North America real estate lending in Citi Holdings.

7



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8


RESULTS OF OPERATIONS

SUMMARY OF SELECTED FINANCIAL DATA—Page 1

  
 
Citigroup Inc. and Consolidated Subsidiaries
 

 


 

Second Quarter

 

 


 

Six Months

 

 


 
 
  %
Change
  %
Change
 
In millions of dollars, except per-share amounts and ratios   2012   2011(1)   2012   2011  

Net interest revenue

  $ 11,593   $ 12,148     (5 )% $ 23,540   $ 24,250     (3 )%

Non-interest revenue

    7,049     8,474     (17 )   14,508     16,098     (10 )
                           

Revenues, net of interest expense

  $ 18,642   $ 20,622     (10 )% $ 38,048   $ 40,348     (6 )%

Operating expenses

    12,134     12,936     (6 )   24,453     25,262     (3 )

Provisions for credit losses and for benefits and claims

    2,806     3,387     (17 )%   5,825     6,571     (11 )
                           

Income from continuing operations before income taxes

  $ 3,702   $ 4,299     (14 )% $ 7,770   $ 8,515     (9 )%

Income taxes

    715     967     (26 )   1,721     2,152     (20 )
                           

Income from continuing operations

  $ 2,987   $ 3,332     (10 )% $ 6,049   $ 6,363     (5 )%

Income (loss) from discontinued operations, net of taxes(1)

    (1 )   71     NM     (6 )   111     NM  
                           

Net income before attribution of noncontrolling interests

  $ 2,986   $ 3,403     (12 )% $ 6,043   $ 6,474     (7 )%

Net income attributable to noncontrolling interests

    40     62     (35 )%   166     134     24  
                           

Citigroup's net income

  $ 2,946   $ 3,341     (12 )% $ 5,877   $ 6,340     (7 )%
                           

Less:

                                     

Preferred dividends—Basic

  $ 9   $ 9     % $ 13   $ 13     %

Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to Basic EPS

    69     62     11     123     96     28  
                           

Income allocated to unrestricted common shareholders for Basic EPS

  $ 2,868   $ 3,270     (12 )% $ 5,741   $ 6,231     (8 )%

Add: Interest expense, net of tax, on convertible securities and adjustment of undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to diluted EPS

    4     6     (33 )   8     7     14 %
                           

Income allocated to unrestricted common shareholders for diluted EPS

  $ 2,872   $ 3,276     (12 )% $ 5,749   $ 6,238     (8 )%

Earnings per share(2)

                                     

Basic

                                     

Income from continuing operations

  $ 0.98   $ 1.10     (11 )% $ 1.96   $ 2.11     (7 )

Net income

    0.98     1.12     (13 )   1.96     2.14     (8 )
                           

Diluted

                                     

Income from continuing operations

  $ 0.95   $ 1.07     (11 )% $ 1.91   $ 2.05     (7 )%

Net income

    0.95     1.09     (13 )   1.91     2.08     (8 )

Dividends declared per common share

    0.01     0.01         0.02     0.01     100  
                           

Statement continues on the next page, including notes to the table.

9


SUMMARY OF SELECTED FINANCIAL DATA—Page 2

Citigroup Inc. and Consolidated Subsidiaries
 
 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except per-share amounts, ratios and direct staff   2012   2011   2012   2011  

At June 30:

                                     

Total assets

  $ 1,916,451   $ 1,956,626     (2 )%                  

Total deposits

    914,308     866,310     6                    

Long-term debt

    288,334     352,458     (18 )                  

Trust preferred securities (included in long-term debt)

    16,036     16,077                        

Citigroup common stockholders' equity

    183,599     176,052     4                    

Total Citigroup stockholders' equity

    183,911     176,364     4                    

Direct staff (in thousands)

    261     263     (1 )                  
                           

Ratios

                                     

Return on average common stockholders' equity(3)

    6.47 %   7.67 %         6.50 %   7.49 %      

Return on average total stockholders' equity(3)

    6.48     7.67           6.50     7.49        
                           

Tier 1 Common(4)(5)

    12.71 %   11.62 %                        

Tier 1 Capital(4)

    14.46     13.55                          

Total Capital(4)

    17.70     17.18                          

Leverage(4)(6)

    7.66     7.05                          
                           

Citigroup common stockholders' equity to assets

    9.58 %   9.00 %                        

Total Citigroup stockholders' equity to assets

    9.60     9.01                          

Dividend payout ratio(7)

    0.01     0.01                          

Book value per common share(2)

  $ 62.61   $ 60.34                          

Ratio of earnings to fixed charges and preferred stock dividends

    1.66x     1.65x           1.69x     1.67x        
                           

(1)
Discontinued operations for 2011 primarily reflect the sale of the Egg Banking PLC credit card business. See Note 2 to the Consolidated Financial Statements.

(2)
All per share amounts and Citigroup shares outstanding for all periods reflect Citigroup's 1-for-10 reverse stock split, which was effective May 6, 2011.

(3)
The return on average common stockholders' equity is calculated using net income less preferred stock dividends divided by average common stockholders' equity. The return on average total Citigroup stockholders' equity is calculated using net income divided by average Citigroup stockholders' equity.

(4)
Unless otherwise noted, Tier 1 Common, Tier 1 Capital, Total Capital and Leverage balances and/or ratios disclosed within this Form 10-Q refer to those calculated under current regulatory guidelines.

(5)
As defined by the U.S. banking regulators, the Tier 1 Common ratio represents Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests in subsidiaries and qualifying trust preferred securities divided by risk-weighted assets.

(6)
The Leverage ratio represents Tier 1 Capital divided by adjusted average total assets.

(7)
Dividends declared per common share as a percentage of net income per diluted share.

NM
Not meaningful

10


SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES

        The following tables show the income (loss) and revenues for Citigroup on a segment and business view:

CITIGROUP INCOME

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2012   2011   2012   2011  

Income (loss) from continuing operations

                                     

CITICORP

                                     

Global Consumer Banking

                                     

North America

  $ 1,196   $ 1,111     8 % $ 2,513   $ 2,048     23 %

EMEA

    17     33     (48 )   10     90     (89 )

Latin America

    329     396     (17 )   704     869     (19 )

Asia

    448     479     (6 )   951     932     2  
                           

Total

  $ 1,990   $ 2,019     (1 )% $ 4,178   $ 3,939     6 %
                           

Securities and Banking

                                     

North America

  $ 488     347     41 % $ 616   $ 811     (24 )%

EMEA

    365     341     7     877     1,105     (21 )

Latin America

    325     296     10     667     569     17  

Asia

    250     210     19     557     420     33  
                           

Total

  $ 1,428   $ 1,194     20 % $ 2,717   $ 2,905     (6 )%
                           

Transaction Services

                                     

North America

  $ 124   $ 129     (4 )% $ 250   $ 235     6 %

EMEA

    332     286     16     647     561     15  

Latin America

    185     160     16     363     332     9  

Asia

    274     289     (5 )   576     572     1  
                           

Total

  $ 915   $ 864     6 % $ 1,836   $ 1,700     8 %
                           

Institutional Clients Group

  $ 2,343   $ 2,058     14 % $ 4,553   $ 4,605     (1 )%
                           

Total Citicorp

  $ 4,333   $ 4,077     6 % $ 8,731   $ 8,544     2 %
                           

Corporate/Other

  $ (427 ) $ (134 )   NM   $ (739 ) $ (613 )   (21 )%
                           

Total Citicorp and Corporate/Other

  $ 3,906   $ 3,943     (1 )% $ 7,992   $ 7,931     1 %
                           

CITI HOLDINGS

                                     

Brokerage and Asset Management

  $ (24 ) $ (100 )   76 % $ (160 ) $ (110 )   (45 )%

Local Consumer Lending

    (821 )   (1,189 )   31 %   (1,454 )   (2,198 )   34  

Special Asset Pool

    (74 )   678     NM     (329 )   740     NM  
                           

Total Citi Holdings

  $ (919 ) $ (611 )   (50 )% $ (1,943 ) $ (1,568 )   (24 )%
                           

Income from continuing operations

  $ 2,987   $ 3,332     (10 )% $ 6,049   $ 6,363     (5 )%
                           

Discontinued operations

  $ (1 ) $ 71     NM   $ (6 )   111     NM  

Net income attributable to noncontrolling interests

    40     62     (35 )%   166     134     24 %
                           

Citigroup's net income

  $ 2,946   $ 3,341     (12 )% $ 5,877   $ 6,340     (7 )%
                           

NM
Not meaningful

11


CITIGROUP REVENUES

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2012   2011   2012   2011  

CITICORP

                                     

Global Consumer Banking

                                     

North America

  $ 5,135   $ 4,949     4 % $ 10,333   $ 9,892     4 %

EMEA

    366     410     (11 )   744     831     (10 )

Latin America

    2,322     2,408     (4 )   4,763     4,702     1  

Asia

    1,948     2,026     (4 )   3,945     3,922     1  
                           

Total

  $ 9,771   $ 9,793       $ 19,785   $ 19,347     2 %
                           

Securities and Banking

                                     

North America

  $ 1,926   $ 2,125     (9 )% $ 3,274   $ 4,453     (26 )%

EMEA

    1,609     1,642     (2 )   3,563     3,703     (4 )

Latin America

    757     682     11     1,512     1,270     19  

Asia

    1,113     1,033     8     2,331     2,078     12  
                           

Total

  $ 5,405   $ 5,482     (1 )% $ 10,680   $ 11,504     (7 )%
                           

Transaction Services

                                     

North America

  $ 665   $ 609     9 % $ 1,306   $ 1,219     7 %

EMEA

    930     898     4     1,824     1,735     5  

Latin America

    455     439     4     906     856     6  

Asia

    757     731     4     1,514     1,429     6  
                           

Total

  $ 2,807   $ 2,677     5 % $ 5,550   $ 5,239     6 %
                           

Institutional Clients Group

  $ 8,212   $ 8,159     1 % $ 16,230   $ 16,743     (3 )%
                           

Total Citicorp

  $ 17,983   $ 17,952       $ 36,015   $ 36,090      
                           

Corporate/Other

  $ (265 ) $ 263     NM   $ 235   $ 202     16 %
                           

Total Citicorp and Corporate/Other

  $ 17,718   $ 18,215     (3 )% $ 36,250   $ 36,292      
                           

CITI HOLDINGS

                                     

Brokerage and Asset Management

  $ 87   $ 47     85 % $ 41   $ 184     (78 )%

Local Consumer Lending

    931     1,345     (31 )%   2,257     2,864     (21 )

Special Asset Pool

    (94 )   1,015     NM     (500 )   1,008     NM  
                           

Total Citi Holdings

  $ 924   $ 2,407     (62 )% $ 1,798   $ 4,056     (56 )%
                           

Total Citigroup net revenues

  $ 18,642   $ 20,622     (10 )% $ 38,048   $ 40,348     (6 )%
                           

NM
Not meaningful

12


CITICORP

        Citicorp is Citigroup's global bank for consumers and businesses and represents Citi's core franchises. Citicorp is focused on providing best-in-class products and services to customers and leveraging Citigroup's unparalleled global network, including many of the world's emerging economies. Citicorp is physically present in approximately 100 countries, many for over 100 years, and offers services in over 160 countries and jurisdictions. Citi believes this global network provides a strong foundation for servicing the broad financial services needs of its large multinational clients and for meeting the needs of retail, private banking, commercial, public sector and institutional clients around the world. At June 30, 2012, Citicorp had approximately $1.4 trillion of assets and $845 billion of deposits, representing approximately 75% of Citi's total assets and approximately 92% of its deposits.

        Citicorp consists of the following businesses: Global Consumer Banking (which included retail banking and Citi-branded cards in four regions—North America, EMEA, Latin America and Asia, as well as Citi retail services in North America) and Institutional Clients Group (which includes Securities and Banking and Transaction Services).

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars except as otherwise noted   2012   2011   2012   2011  

Net interest revenue

  $ 11,033   $ 11,163     (1 )% $ 22,266   $ 22,222     %

Non-interest revenue

    6,950     6,789     2     13,749     13,868     (1 )
                           

Total revenues, net of interest expense

  $ 17,983   $ 17,952       $ 36,015   $ 36,090     %
                           

Provisions for credit losses and for benefits and claims

                                     

Net credit losses

  $ 2,246   $ 2,982     (25 )% $ 4,466   $ 6,232     (28 )%

Credit reserve build (release)

    (741 )   (1,391 )   47     (1,317 )   (3,202 )   59  
                           

Provision for loan losses

  $ 1,505   $ 1,591     (5 )% $ 3,149   $ 3,030     4 %

Provision for benefits and claims

    50     36     39     108     91     19  

Provision for unfunded lending commitments

    26     (5 )   NM     14     (1 )   NM  
                           

Total provisions for credit losses and for benefits and claims

  $ 1,581   $ 1,622     (3 )% $ 3,271   $ 3,120     5 %
                           

Total operating expenses

  $ 10,300   $ 10,669     (3 )% $ 20,605   $ 20,905     (1 )%
                           

Income from continuing operations before taxes

  $ 6,102   $ 5,661     8 % $ 12,139   $ 12,065     1 %

Provisions for income taxes

    1,769     1,584     12     3,408     3,521     (3 )
                           

Income from continuing operations

  $ 4,333   $ 4,077     6 % $ 8,731   $ 8,544     2 %

Net income attributable to noncontrolling interests

    30     12     NM     91     23     NM  
                           

Citicorp's net income

  $ 4,303   $ 4,065     6 % $ 8,640   $ 8,521     1 %
                           

Balance sheet data (in billions of dollars)

                                     

Total EOP assets

  $ 1,436   $ 1,423     1 %                  

Average assets

    1,429     1,422       $ 1,415   $ 1,394     2 %

Total EOP deposits

    845     791     7                    
                           

NM
Not meaningful

13


GLOBAL CONSUMER BANKING

        Global Consumer Banking (GCB) consists of Citigroup's four geographical Regional Consumer Banking (RCB) businesses that provide traditional banking services to retail customers through retail banking, commercial banking, Citi-branded cards and Citi retail services. GCB is a globally diversified business with 4,080 branches in 39 countries around the world. At June 30, 2012, GCB had $387 billion of assets and $324 billion of deposits.

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars except as otherwise noted   2012   2011   2012   2011  

Net interest revenue

  $ 7,197   $ 7,411     (3 )% $ 14,570   $ 14,743     (1 )%

Non-interest revenue

    2,574     2,382     8 %   5,215     4,604     13  
                           

Total revenues, net of interest expense

  $ 9,771   $ 9,793       $ 19,785   $ 19,347     2 %
                           

Total operating expenses

  $ 5,313   $ 5,357     (1 )% $ 10,523   $ 10,448     1 %
                           

Net credit losses

  $ 2,124   $ 2,832     (25 )% $ 4,402   $ 5,872     (25 )%

Credit reserve build (release)

    (728 )   (1,335 )   45     (1,462 )   (2,752 )   47  

Provisions for unfunded lending commitments

        3     100     (1 )   3     NM  

Provision for benefits and claims

    50     36     39     108     91     19  
                           

Provisions for credit losses and for benefits and claims

  $ 1,446   $ 1,536     (6 )% $ 3,047   $ 3,214     (5 )%
                           

Income from continuing operations before taxes

  $ 3,012   $ 2,900     4 % $ 6,215   $ 5,685     9 %

Income taxes

    1,022     881     16     2,037     1,746     17  
                           

Income from continuing operations

  $ 1,990   $ 2,019     (1 )% $ 4,178   $ 3,939     6 %

Net income (loss) attributable to noncontrolling interests

    (1 )   3     NM         1     (100 )
                           

Net income

  $ 1,991   $ 2,016     (1 )% $ 4,178   $ 3,938     6 %
                           

Average assets (in billions of dollars)

  $ 381   $ 377     1 % $ 383   $ 372     3 %

Return on assets

    2.10 %   2.14 %         2.19 %   2.13 %      

Total EOP assets

    387     384     1                    

Average deposits (in billions of dollars)

    318     317         318     313     2 %
                           

Net credit losses as a percentage of average loans

    3.02 %   4.12 %                        
                           

Revenue by business

                                     

Retail banking

  $ 4,394   $ 4,143     6 % $ 8,912   $ 8,077     10 %

Cards(1)

    5,377     5,650     (5 )   10,873     11,270     (4 )
                           

Total

  $ 9,771   $ 9,793       $ 19,785   $ 19,347     2 %
                           

Income from continuing operations by business

                                     

Retail banking

  $ 791   $ 631     25 % $ 1,603   $ 1,310     22 %

Cards(1)

    1,199     1,388     (14 )   2,575     2,629     (2 )
                           

Total

  $ 1,990   $ 2,019     (1 )% $ 4,178   $ 3,939     6 %
                           

(1)
Includes both Citi-branded cards and Citi retail services.

NM
Not meaningful

14


NORTH AMERICA REGIONAL CONSUMER BANKING

        North America Regional Consumer Banking (NA RCB) provides traditional banking and Citi-branded card and Citi retail service to retail customers and small to mid-size businesses in the U.S. NA RCB's 1,015 retail bank branches and 12.5 million customer accounts, as of June 30, 2012, are largely concentrated in the greater metropolitan areas of New York, Los Angeles, San Francisco, Chicago, Miami, Washington, D.C., Boston, Philadelphia and certain larger cities in Texas. At June 30, 2012, NA RCB had $40.9 billion of retail banking loans and $153.2 billion of deposits. In addition, NA RCB had 102.8 million Citi-branded and Citi retail services credit card accounts, with $109.3 billion in outstanding card loan balances.

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2012   2011   2012   2011  

Net interest revenue

  $ 4,035   $ 4,192     (4 )% $ 8,160   $ 8,398     (3 )%

Non-interest revenue

    1,100     757     45     2,173     1,494     45  
                           

Total revenues, net of interest expense

  $ 5,135   $ 4,949     4 % $ 10,333   $ 9,892     4 %
                           

Total operating expenses

  $ 2,451   $ 2,331     5 % $ 4,792   $ 4,609     4 %
                           

Net credit losses

  $ 1,511   $ 2,136     (29 )% $ 3,140   $ 4,508     (30 )%

Credit reserve build (release)

    (814 )   (1,240 )   34     (1,655 )   (2,441 )   32  

Provisions for benefits and claims

    19     14     36     33     31     6  

Provision for unfunded lending commitments

        (1 )   (100 )       (1 )   (100 )
                           

Provisions for credit losses and for benefits and claims

  $ 716   $ 909     (21 )% $ 1,518   $ 2,097     (28 )%
                           

Income from continuing operations before taxes

  $ 1,968   $ 1,709     15 % $ 4,023   $ 3,186     26 %

Income taxes

    772     598     29     1,510     1,138     33  
                           

Income from continuing operations

  $ 1,196   $ 1,111     8 % $ 2,513   $ 2,048     23 %

Net income attributable to noncontrolling interests

                         
                           

Net income

  $ 1,196   $ 1,111     8 % $ 2,513   $ 2,048     23 %
                           

Average assets (in billions of dollars)

  $ 171   $ 161     6 % $ 170   $ 162     5 %

Average deposits (in billions of dollars)

    151     144     5     150     144     4  
                           

Net credit losses as a percentage of average loans

    4.07 %   5.90 %                        
                           

Revenue by business

                                     

Retail banking

  $ 1,647   $ 1,251     32 % $ 3,275   $ 2,439     34 %

Citi-branded cards

    2,010     2,173     (8 )   4,078     4,377     (7 )

Citi retail services

    1,478     1,525     (3 )   2,980     3,076     (3 )
                           

Total

  $ 5,135   $ 4,949     4 % $ 10,333   $ 9,982     4 %
                           

Income from continuing operations by business

                                     

Retail banking

  $ 335   $ 96     NM   $ 666   $ 181     NM  

Citi-branded cards

    428     596     (28 )   1,035     1,073     (4 )

Citi retail services

    433     419     3     812     794     2  
                           

Total

  $ 1,196   $ 1,111     8 % $ 2,513   $ 2,048     23 %
                           

NM    Not meaningful

2Q12 vs. 2Q11

        Net income increased 8% as compared to the prior-year period, driven by lower net credit losses and higher revenues from higher gains on sale of mortgages, partly offset by lower loan loss reserve releases, lower cards revenues and higher expenses.

        Revenues increased 4% year-over-year as lower net interest margin and loan balances in Citi's cards businesses were more than offset by higher non-interest revenue from the sale of mortgages, which Citi expects will continue into the third quarter of 2012. Net interest revenue decreased 4% year-over-year, driven primarily by lower cards net interest margin which continued to be negatively impacted by the look-back provision of The Credit Card Accountability Responsibility and Disclosure Act (CARD Act). (The CARD Act requires a review be done once every six months for card accounts where the annual percentage rate (APR) has been increased since January 1, 2009 to assess whether changes in credit risk, market conditions or other factors merit a future decline in APR.) In addition, net interest revenue for cards was negatively impacted by higher low-margin promotional balances and lower total average loans, reflecting an increase in the payment rate. NA RCB continues to believe the negative impact of the CARD Act and promotional balances should dissipate over the course of 2012 as the population of card accounts subject to the CARD Act look-back provisions declines and promotional balances convert or close. However, Citi expects higher payment rates from consumers,

15


reflecting ongoing economic uncertainty and deleveraging, as well as Citi's shift to higher credit quality borrowers, to continue for the remainder of 2012, absent a meaningful improvement in the U.S. economy. Non-interest revenue increased 45% year-over-year, primarily due to the higher gains on sale of mortgages, partially offset by a decline in non-interest revenues in Citi retail services in the current quarter driven by improving credit and the resulting impact on contractual partner payments.

        As part of its Citi-branded cards business, Citi (through Citibank, N.A.) issues a co-branded credit card product with American Airlines, the Citi/AAdvantage card. As has been widely-reported, AMR Corporation and certain of its subsidiaries, including American Airlines, Inc. (collectively, AMR), filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in November 2011. To date, the ongoing AMR bankruptcy has not had a material impact on the results of operations for NA RCB, Citicorp or Citi as a whole. However, it is not certain what the outcome of the bankruptcy process will be or what impact, if any, such outcome could have on the results of operations or financial condition of NA RCB over time.

        Expenses increased 5%, driven entirely by an increase in legal reserves related to the interchange litigation (see Note 22 to the Consolidated Financial Statements for additional information).

        Provisions decreased 21% year-over-year primarily due to lower credit losses in the cards portfolio (down 29% to $1.5 billion), partly offset by the continued lower loan loss reserve releases ($814 million in the second quarter of 2012 compared to $1.2 billion in the prior-year period). Overall, Citi expects continued improvement in North America RCB credit quality, assuming no meaningful downturn in the U.S. or global economy.

2Q12 YTD vs. 2Q11 YTD

        Year-to-date, NA RCB has experienced similar trends to those described above. Net income increased 23% as compared to the prior-year period driven by the improvements in credit costs and higher non-interest revenue, partially offset by lower net interest revenue and higher expenses.

        Revenues increased 4% period-over-period mainly due to the higher non-interest revenue on sale of mortgages, partially offset by lower loan balances and margin pressure in the cards business. Net interest revenue was down 3% driven primarily by the lower volumes in cards, with average loans lower by 3%. In addition, cards net interest margin was negatively impacted by the look-back provision of the CARD Act and higher low-margin promotional balances. Non-interest revenue increased 45% from the prior year-to-date period, mainly due to the higher gains from mortgage loan sales.

        Expenses increased 4% period-over-period, primarily driven by the higher legal reserve described above. This was offset partly by ongoing savings initiatives.

        Provisions decreased 28% period-over-period, primarily due to a net credit loss decline of $1.4 billion, partially offset by a decrease in loan loss reserve releases of $786 million as compared to the prior year-to-date period. Cards net credit losses were down $1.3 billion, or 30%, from the prior year-to-date period. The decline in credit costs was driven by the improving credit conditions and stricter underwriting criteria.

16


EMEA REGIONAL CONSUMER BANKING

        EMEA Regional Consumer Banking (EMEA RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, primarily in Central and Eastern Europe, the Middle East and Africa. The countries in which EMEA RCB has the largest presence are Poland, Turkey, Russia and the United Arab Emirates. At June 30, 2012, EMEA RCB had 240 retail bank branches with 4.0 million customer accounts, $4.6 billion in retail banking loans and $12.6 billion in deposits. In addition, the business had 2.6 million Citi-branded card accounts with $2.8 billion in outstanding card loan balances.

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2012   2011   2012   2011  

Net interest revenue

  $ 256   $ 248     3 % $ 518   $ 490     6 %

Non-interest revenue

    110     162     (32 )   226     341     (34 )
                           

Total revenues, net of interest expense

  $ 366   $ 410     (11 )% $ 744   $ 831     (10 )%
                           

Total operating expenses

  $ 338   $ 355     (5 )% $ 697   $ 673     4 %
                           

Net credit losses

  $ 14   $ 46     (70 )% $ 43   $ 95     (55 )%

Credit reserve build (release)

    (13 )   (55 )   76     (18 ) $ (89 )   80  

Provision for unfunded lending commitments

        4     (100 )   (1 )   4     NM  
                           

Provisions for credit losses

  $ 1   $ (5 )   NM   $ 24   $ 10     NM  
                           

Income from continuing operations before taxes

  $ 27   $ 60     (55 )% $ 23   $ 148     (84 )%

Income taxes

    10     27     (63 )   13     58     (78 )
                           

Income from continuing operations

  $ 17     33     (48 )% $ 10   $ 90     (89 )%

Net income attributable to noncontrolling interests

    1     2     (50 )   2     2      
                           

Net income

  $ 16   $ 31     (48 )% $ 8   $ 88     (91 )%
                           

Average assets (in billions of dollars)

  $ 9   $ 10     (10 )% $ 9   $ 10     (10 )%

Return on assets

    0.72 %   1.24 %         0.18 %   1.77 %      

Average deposits (in billions of dollars)

  $ 12   $ 13     (4 )%   12     13     (3 )
                           

Net credit losses as a percentage of average loans

    0.75 %   2.46 %                        
                           

Revenue by business

                                     

Retail banking

  $ 214   $ 234     (9 )% $ 436   $ 476     (8 )%

Citi-branded cards

    152     176     (14 )   308     355     (13 )
                           

Total

  $ 366   $ 410     (11 )% $ 744   $ 831     (10 )%
                           

Income (loss) from continuing operations by business

                                     

Retail banking

  $ (7 ) $ (11 )   36 % $ (28 ) $ 2     NM  

Citi-branded cards

    24     44     (45 )   38     88     (57 )%
                           

Total

  $ 17   $ 33     (48 )% $ 10   $ 90     (89 )%
                           

NM    Not meaningful

2Q12 vs. 2Q11

        Net income declined by 48% year-over-year. Excluding the impact of FX translation, net income declined by 26%, driven by higher expenses and higher provisions for loan losses.

        Revenues decreased 11% year-over-year. Excluding the impact of FX translation, revenues declined 1%, driven by the absence of Akbank, which was moved to Corporate/Other in the first quarter of 2012. Net interest revenue increased 3% driven by the absence of Akbank investment funding costs in the current quarter and growth in deposits and retail loans, partially offset by the impact of FX translation and slight spread compression. Interest rate caps on credit cards, particularly in Turkey, and the continued liquidation of a higher yielding non-strategic retail banking portfolio, were the main contributors to the lower spreads. Non-interest revenue decreased 32%, mainly reflecting the absence of Akbank contribution in the current quarter. The underlying drivers in EMEA RCB continued to show growth as cards purchase sales grew 8% and retail new loan volume increased 16% year-over-year, each excluding the impact of FX translation.

        Expenses decreased 5% year-over-year. Excluding the impact of FX translation, expenses grew by 6% due to the impact of account acquisition-focused investment spending, expansion of the sales force and restructuring charges in Poland and Central Europe.

        Provisions increased by $6 million year-over-year due to lower loan loss reserve releases, partially offset by lower net credit losses. Net credit losses continued to improve, declining 70% year-over-year due to the ongoing improvement in credit quality and the move towards lower risk products, together with a benefit from the sale of portfolios in Turkey and Poland (which totaled $13 million) in the current quarter. Citi expects provisions could continue to have a negative impact on EMEA RCB results as net credit losses have largely stabilized while the majority of loan loss reserve releases have occurred.

17


2Q12 YTD vs. 2Q11 YTD

        Year-to-date, EMEA RCB has experienced similar trends to those described above. Net income declined by 91% year-to-date as compared to the prior year-to-date period. Excluding the impact of FX translation, net income declined by 77% from the prior year-to-date period, due to lower revenues and higher expenses and credit costs.

        Revenues decreased 10% period-over-period. Excluding the impact of FX translation, revenues declined 3% driven by the absence of Akbank. Net interest revenue increased 6% driven by the absence of the Akbank investment funding costs and the growth in deposits and retail loans, partially offset by the impact of FX translation and spread compression, driven by the factors described above. Non-interest revenue decreased 34%, mainly reflecting the absence of Akbank.

        Expenses increased 4% period-over-period. Excluding the impact of FX translation, expenses increased 10% due to the impact of the account acquisition-focused investment spending and the other factors described above.

        Provisions increased by $14 million period-over-period due to the lower loan loss reserve releases, partially offset by the lower net credit losses.

18


LATIN AMERICA REGIONAL CONSUMER BANKING

        Latin America Regional Consumer Banking (LATAM RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest presence in Mexico and Brazil. LATAM RCB includes branch networks throughout Latin America as well as Banco Nacional de Mexico, or Banamex, Mexico's second-largest bank, with over 1,700 branches. At June 30, 2012, LATAM RCB had 2,198 retail branches, with 31.9 million customer accounts, $25.9 billion in retail banking loans and $45.8 billion in deposits. In addition, the business had 13.0 million Citi-branded card accounts with $13.7 billion in outstanding loan balances.

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2012   2011   2012   2011  

Net interest revenue

  $ 1,624   $ 1,622       $ 3,283   $ 3,182     3 %

Non-interest revenue

    698     786     (11 )   1,480     1,520     (3 )
                           

Total revenues, net of interest expense

  $ 2,322   $ 2,408     (4 )% $ 4,763   $ 4,702     1 %
                           

Total operating expenses

  $ 1,363   $ 1,495     (9 )% $ 2,727   $ 2,861     (5 )%
                           

Net credit losses

  $ 400   $ 425     (6 )% $ 830   $ 832      

Credit reserve build (release)

    120     (21 )   NM     233     (168 )   NM  

Provision for benefits and claims

    31     22     41     75     60     25  
                           

Provisions for loan losses and for benefits and claims

  $ 551   $ 426     29 % $ 1,138   $ 724     57 %
                           

Income from continuing operations before taxes

  $ 408   $ 487     (16 )% $ 898   $ 1,117     (20 )%

Income taxes

    79     91     (13 )   194     248     (22 )
                           

Income from continuing operations

  $ 329   $ 396     (17 )% $ 704   $ 869     (19 )%

Net income (loss) attributable to noncontrolling interests

    (2 )   1     NM     (2 )   (1 )   (100 )%
                           

Net income

  $ 331   $ 395     (16 )% $ 706   $ 870     (19 )%
                           

Average assets (in billions of dollars)

  $ 78   $ 83     6 % $ 80   $ 80      

Return on assets

    1.71 %   1.91 %         1.77 %   2.19 %      

Average deposits (in billions of dollars)

  $ 44   $ 48     (8 ) $ 45   $ 47     (3 )%
                           

Net credit losses as a percentage of average loans

    4.15 %   4.64 %                        
                           

Revenue by business

                                     

Retail banking

  $ 1,378   $ 1,398     (1 )% $ 2,826   $ 2,731     3 %

Citi-branded cards

    944     1,010     (7 )   1,937     1,971     (2 )
                           

Total

  $ 2,322   $ 2,408     (4 )% $ 4,763   $ 4,702     1 %
                           

Income from continuing operations by business

                                     

Retail banking

  $ 226   $ 236     (4 )% $ 428   $ 531     (19 )%

Citi-branded cards

    103     160     (36 )   276     338     (18 )
                           

Total

  $ 329   $ 396     (17 )% $ 704   $ 869     (19 )%
                           

NM
Not meaningful

2Q12 vs. 2Q11

        Net income declined 16% year-over-year, mainly driven by the impact of FX translation. Excluding the impact of FX translation, net income declined 1% due to increased loan loss reserve builds resulting from portfolio growth, partially offset by higher revenues.

        Revenues decreased 4%, mainly due to the impact of FX translation. Excluding the impact of FX translation, revenues grew 8% year-over-year, mainly due to higher volumes and fees, particularly in Mexico personal installment loans and Brazil cards. Net interest revenue was largely unchanged year-over-year. Excluding the impact of FX translation, net interest revenue increased 12% due to growth in loans and deposits, partially offset by continued spread compression from higher credit quality customers. Average loans increased in both retail banking and cards, by 27% and 11%, respectively, and deposits grew by 2%, each excluding the impact of FX translation. Non-interest decreased 11% year-over-year. Excluding the impact of FX translation, non-interest revenue increased 2%, primarily due to higher fees in cards resulting from a 15% increase in purchase sales and a 3% increase in card accounts.

        Expenses declined 9% due to the impact of FX translation. Excluding the impact of FX translation, expenses increased 3% as a result of higher volume of transactions, marketing, sales incentives and restructuring costs.

        Provisions increased by 29% year-over-year, mainly as loan loss reserves releases in the prior-year period are now builds due to the volume growth in Mexico and Brazil. Net credit losses decreased 6% year-over-year. Citi expects credit costs in Latin America RCB will likely continue to increase in line with portfolio growth.

2Q12 YTD vs. 2Q11 YTD

        Year-to-date, LATAM RCB has experienced similar trends to those previously described. Net income declined 19% driven primarily by an increase in provisions and the impact of FX translation. Excluding the impact of FX translation, net income declined 11% as increased credit provisions mainly due to higher loan loss reserve builds were partially offset by higher revenues.

19


        Revenues were generally flat period-over-period. Excluding the impact of FX translation, revenues increased 10%, mainly due to higher volumes, primarily in Mexico personal loans and cards. Net interest revenue increased 3% period-over-period. Excluding the impact of FX translation, net interest revenue increased 11%, driven by the continued growth in lending and deposits, partly offset by spread compression. Non-interest revenue decreased 3%. Excluding the impact of FX translation, non-interest revenue was up 6% mostly due to higher cards fees resulting from a 16% growth in purchase sales.

        Expenses decreased 5% period-over-period. Excluding the impact of FX translation, expenses increased 4%, mostly due to higher volumes, account acquisition and sales incentives, partially offset by reengineering actions.

        Provisions increased 57% period-over-period mainly as a result of the loan loss reserves builds driven by the higher volumes in Mexico and Brazil.

20


ASIA REGIONAL CONSUMER BANKING

        Asia Regional Consumer Banking (Asia RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest Citi presence in South Korea, Australia, Singapore, Japan, Taiwan, Hong Kong, India and Indonesia. Citi's Japan Consumer Finance business, which Citi has been exiting since 2008, is included in Citi Holdings. At June 30, 2012, Asia RCB had 627 retail branches, 16.8 million customer accounts, $67.6 billion in retail banking loans and $112.5 billion in deposits. In addition, the business had 15.7 million Citi-branded card accounts with $19.6 billion in outstanding loan balances.

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2012   2011   2012   2011  

Net interest revenue

  $ 1,282   $ 1,349     (5 )% $ 2,609   $ 2,673     (2 )%

Non-interest revenue

    666     677     (2 )%   1,336     1,249     7  
                           

Total revenues, net of interest expense

  $ 1,948   $ 2,026     (4 )% $ 3,945   $ 3,922     1 %
                           

Total operating expenses

  $ 1,161   $ 1,176     (1 )% $ 2,307   $ 2,305      
                           

Net credit losses

  $ 199   $ 225     (12 )% $ 389   $ 437     (11 )%

Credit reserve build (release)

    (21 )   (19 )   (11 )   (22 )   (54 )   59  
                           

Provisions for loan losses

  $ 178   $ 206     (14 )% $ 367   $ 383     (4 )%
                           

Income from continuing operations before taxes

  $ 609   $ 644     (5 )% $ 1,271   $ 1,234     3 %

Income taxes

    161     165     (2 )   320     302     6  
                           

Income from continuing operations

  $ 448   $ 479     (6 )% $ 951   $ 932     2 %

Net income attributable to noncontrolling interests

                         
                           

Net income

  $ 448   $ 479     (6 )% $ 951   $ 932     2 %
                           

Average assets (in billions of dollars)

  $ 123   $ 123       $ 124   $ 121     2 %

Return on assets

    1.46 %   1.56 %         1.54 %   1.55 %      

Average deposits (in billions of dollars)

  $ 110   $ 112     (2 ) $ 110   $ 110      
                           

Net credit losses as a percentage of average loans

    0.92 %   1.05 %                        
                           

Revenue by business

                                     

Retail banking

  $ 1,155   $ 1,260     (8 )% $ 2,375   $ 2,431     (2 )%

Citi-branded cards

    793     766     4     1,570     1,491     5  
                           

Total

  $ 1,948   $ 2,026     (4 )% $ 3,945   $ 3,922     1 %
                           

Income from continuing operations by business

                                     

Retail banking

  $ 237   $ 310     (24 )% $ 537   $ 596     (10 )%

Citi-branded cards

    211     169     25     414     336     23  
                           

Total

  $ 448   $ 479     (6 )% $ 951   $ 932     2 %
                           

2Q12 vs. 2Q11

        Net income decreased 6% year-over-year. Excluding the impact of FX translation, net income decreased 2% driven by higher expenses, partially offset by lower provisions.

        Revenues decreased 4% year-over-year, but were flat excluding the impact of FX translation. Higher average loans in Citi-branded cards were offset by lower investment sales due to the uncertain market environment and corresponding weak investor sentiment. Lending and deposit revenues were flat, as growth in most markets was offset by pressure in Korea and Japan. Net interest revenue decreased 5% year-over-year. Excluding the impact of FX translation, net interest revenue decreased 1%. Continued increases in lending and deposit volumes were offset by spread compression (mainly in retail lending). Spread compression continued to be driven by improvements in the risk profile for personal and other loans, stricter underwriting criteria as well as by certain regulatory changes in Korea, where policy actions have lowered the availability of consumer credit. This will likely continue to have a negative impact on net interest revenue into the third and fourth quarters of 2012. Non-interest revenue decreased 2% year-over-year. Excluding the impact of FX translation, non-interest revenue increased 1%. The slight increase in non-interest revenue reflected growth in Citi-branded cards purchase sales, partially offset by the decrease in revenue from investment sales/foreign exchange products for the reasons described above. Citi also expects this trend to continue for the remainder of 2012.

        Expenses were relatively unchanged year-over-year. Excluding the impact of FX translation, expenses increased 2%, largely due to investments in China cards and branches and Korea and Japan-related expenses, partially offset by ongoing productivity savings.

        Provisions decreased 14% year-over-year, reflecting lower net credit losses and higher loan loss reserve releases. The decrease in provisions reflected continued credit quality improvement, partially offset by the increasing volumes in the region and higher provisions in Korea due to credit performance and the impact of regulatory changes. Assuming the underlying core portfolio continues to grow and season during the remainder of 2012, Citi expects credit costs to increase marginally in line with portfolio growth.

21


2Q12 YTD vs. 2Q11 YTD

        Net income increased 2% period-over-period. Excluding the impact of FX translation, net income increased 5%, driven by higher revenues and lower provisions, partially offset by marginally higher expenses.

        Revenues increased 1% period-over-period. Excluding the impact of FX translation, revenues increased 3%, primarily driven by higher business volumes in cards, deposits and retail lending as well as the prior period charges relating to the repurchase of certain Lehman structured notes (approximately $70 million). This increase was partially offset by lower investment sales and spread compression. Net interest revenue decreased 2% compared to the prior year-to-date period. Excluding the impact of FX translation, net interest revenue was generally flat, primarily driven by the increases in lending and deposit volumes, offset by spread compression. Non-interest revenue increased 7% period-over-period, reflecting the growth in Citi-branded cards purchase sales and higher revenues from foreign exchange products as well as the prior period Lehman-related charges mentioned above, partially offset by the decrease in revenue from investment sales.

        Expenses were flat period-over-period. Excluding the impact of FX translation, expenses increased 2% period-over-period, due primarily to growth in business volumes, investments and Korea and Japan-related expenses.

        Provisions decreased 4% as continued lower net credit losses were partially offset by lower loan loss reserve releases. The decrease in credit provisions reflected continued credit quality improvement, partially offset by the increasing volumes in the region and higher provisions in Korea due to credit performance and the impact of the regulatory changes.

22


INSTITUTIONAL CLIENTS GROUP

        Institutional Clients Group (ICG) includes Securities and Banking and Transaction Services. ICG provides corporate, institutional, public sector and high-net-worth clients around the world with a full range of products and services, including cash management, foreign exchange, trade finance and services, securities services, sales and trading, institutional brokerage, underwriting, lending and advisory services. ICG's international presence is supported by trading floors in approximately 75 countries and jurisdictions and a proprietary network within Transaction Services in over 95 countries and jurisdictions. At June 30, 2012, ICG had approximately $1.0 trillion of assets and $521 billion of deposits.

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2012   2011   2012   2011  

Commissions and fees

  $ 1,081   $ 1,133     (5 )% $ 2,222   $ 2,266     (2 )%

Administration and other fiduciary fees

    742     732     1     1,438     1,478     (3 )

Investment banking

    793     1,001     (21 )   1,604     1,794     (11 )

Principal transactions

    1,434     1,288     11     3,350     3,548     (6 )

Other

    326     253     29     (80 )   178     NM  
                           

Total non-interest revenue

  $ 4,376   $ 4,407     (1 )% $ 8,534   $ 9,264     (8 )%

Net interest revenue (including dividends)

    3,836     3,752     2     7,696     7,479     3  
                           

Total revenues, net of interest expense

  $ 8,212   $ 8,159     1 % $ 16,230   $ 16,743     (3 )%
                           

Total operating expenses

  $ 4,987   $ 5,312     (6 )% $ 10,082   $ 10,457     (4 )%
                           

Net credit losses

  $ 122     150     (19 ) $ 64   $ 360     (82 )

Provision (release) for unfunded lending commitments

    26     (8 )   NM     15     (4 )   NM  

Credit reserve build (release)

    (13 )   (56 )   77     145     (450 )   NM  
                           

Provisions for loan losses and benefits and claims

  $ 135   $ 86     57   $ 224   $ (94 )   NM  
                           

Income from continuing operations before taxes

  $ 3,090   $ 2,761     12 % $ 5,924   $ 6,380     (7 )%

Income taxes

    747     703     6     1,371     1,775     (23 )
                           

Income from continuing operations

  $ 2,343   $ 2,058     14 % $ 4,553   $ 4,605     (1 )%

Net income attributable to noncontrolling interests

    31     9     NM     91     22     NM  
                           

Net income

  $ 2,312   $ 2,049     13 % $ 4,462   $ 4,583     (3 )%
                           

Average assets (in billions of dollars)

  $ 1,048   $ 1,045     % $ 1,032   $ 1,022     1 %

Return on assets

    0.89 %   0.79 %         0.87 %   0.90 %      
                           

Revenues by region

                                     

North America

  $ 2,591   $ 2,734     (5 )% $ 4,580   $ 5,672     (19 )%

EMEA

    2,539     2,540         5,387     5,438     (1 )

Latin America

    1,212     1,121     8     2,418     2,126     14  

Asia

    1,870     1,764     6     3,845     3,507     10  
                           

Total revenues

  $ 8,212   $ 8,159     1 % $ 16,230   $ 16,743     (3 )%
                           

Income from continuing operations by region

                                     

North America

  $ 612   $ 476     29 % $ 866   $ 1,046     (17 )%

EMEA

    697     627     11     1,524     1,666     (9 )

Latin America

    510     456     12     1,030     901     14  

Asia

    524     499     5     1,133     992     14  
                           

Total income from continuing operations

  $ 2,343   $ 2,058     14 % $ 4,553   $ 4,605     (1 )%
                           

Average loans by region (in billions of dollars)

                                     

North America

  $ 82   $ 68     21 % $ 78   $ 67     16 %

EMEA

    52     48     8     52     45     16  

Latin America

    34     29     17     34     27     26  

Asia

    63     49     29     62     47     32  
                           

Total average loans

  $ 231   $ 194     19 % $ 226   $ 186     22 %
                           

NM
Not meaningful

23


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24


SECURITIES AND BANKING

        Securities and Banking (S&B) offers a wide array of investment and commercial banking services and products for corporations, governments, institutional and retail investors, and high-net-worth individuals. S&B transacts with clients in both cash instruments and derivatives, including fixed income, foreign currency, equity, and commodity products. S&B includes investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, derivative services and private banking.

        S&B revenue is generated primarily from fees and spreads associated with these activities. S&B earns fee income for assisting clients in clearing transactions, providing brokerage and investment banking services and other such activities. Revenue generated from these activities is recorded in Commissions and fees. In addition, as a market maker, S&B facilitates transactions, including holding product inventory to meet client demand, and earns the differential between the price at which it buys and sells the products. These price differentials and the unrealized gains and losses on the inventory are recorded in Principal transactions. S&B interest income earned on inventory and loans held is recorded as a component of Net interest revenue.

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2012   2011   2012   2011  

Net interest revenue

  $ 2,302   $ 2,272     1 % $ 4,576   $ 4,561     %

Non-interest revenue

    3,103     3,210     (3 )%   6,104     6,943     (12 )
                           

Revenues, net of interest expense

  $ 5,405   $ 5,482     (1 )% $ 10,680   $ 11,504     (7 )%

Total operating expenses

    3,575     3,897     (8 )   7,282     7,699     (5 )

Net credit losses

    97     151     (36 )   37     354     (90 )

Provision (release) for unfunded lending commitments

    26     (8 )   NM     9     (4 )   NM  

Credit reserve build (release)

    (64 )   (83 )   23     71     (477 )   NM  
                           

Provisions for loan losses and benefits and claims

  $ 59   $ 60     (2 )% $ 117   $ (127 )   NM  
                           

Income before taxes and noncontrolling interests

  $ 1,771   $ 1,525     16 % $ 3,281   $ 3,932     (17 )%

Income taxes

    343     331     4     564     1,027     (45 )
                           

Income from continuing operations

  $ 1,428   $ 1,194     20 % $ 2,717   $ 2,905     (6 )%

Net income attributable to noncontrolling interests

    26     4     NM     82     13     NM  
                           

Net income

  $ 1,402   $ 1,190     18 % $ 2,635   $ 2,892     (9 )%
                           

Average assets (in billions of dollars)

  $ 912   $ 914     % $ 898   $ 894     %

Return on assets

    0.62 %   0.52 %         0.59 %   0.65 %      
                           

Revenues by region

                                     

North America

  $ 1,926   $ 2,125     (9 )% $ 3,274   $ 4,453     (26 )%

EMEA

    1,609     1,642     (2 )   3,563     3,703     (4 )

Latin America

    757     682     11     1,512     1,270     19  

Asia

    1,113     1,033     8     2,331     2,078     12  
                           

Total revenues

  $ 5,405   $ 5,482     (1 )% $ 10,680   $ 11,504     (7 )%
                           

Income from continuing operations by region

                                     

North America

  $ 488   $ 347     41 % $ 616   $ 811     (24 )%

EMEA

    365     341     7     877     1,105     (21 )

Latin America

    325     296     10     667     569     17  

Asia

    250     210     19     557     420     33  
                           

Total income from continuing operations

  $ 1,428   $ 1,194     20 % $ 2,717   $ 2,905     (6 )%
                           

Securities and Banking revenue details

                                     

Total investment banking

  $ 854   $ 1,085     (21 )% $ 1,719   $ 1,936     (11 )%

Lending

    608     357     70     664     612     8  

Equity markets

    599     812     (26 )   1,218     1,882     (35 )

Fixed income markets

    2,964     3,033     (2 )   6,614     6,827     (3 )

Private bank

    572     555     3     1,142     1,070     7  

Other Securities and Banking

    (192 )   (360 )   47     (677 )   (823 )   18  
                           

Total Securities and Banking revenues

  $ 5,405   $ 5,482     (1 )% $ 10,680   $ 11,504     (7 )%
                           

NM
Not meaningful

25


2Q12 vs. 2Q11

        Net income increased 18% from the prior-year period. Excluding CVA/DVA, net income increased 16%, primarily driven by a decrease in expenses, partially offset by lower revenues (see the table below for the CVA/DVA by business and total for the second quarter of 2012 and comparable periods).

        Revenues decreased 1% from the prior-year period. Excluding CVA/DVA, revenues decreased 2%, reflecting the impact of a challenging market environment on investment banking, equity markets and fixed income markets revenues, partially offset by higher revenues in lending and the Private Bank.

        Fixed income markets revenues decreased 4% excluding CVA/DVA. The results reflected year-over-year growth in rates and currencies, particularly in foreign exchange and local markets, which was more than offset by declines in credit and securitized products, resulting from a weaker market environment.

        Equity markets revenues decreased 29% excluding CVA/DVA, mainly due to lower levels of industry volumes, particularly in cash equities.

        Investment banking revenues decreased 21% from the prior-year period, as declines in debt and equity underwriting were partially offset by a small increase in advisory revenues. Debt and equity underwriting declines reflected decreased industry-wide activity levels, although Citi gained market share in both products year-to-date.

        Lending revenues increased 70% from the prior-year period. Approximately half of the revenue growth was from gains on hedges as credit spreads widened during the second quarter of 2012, compared to a loss in the prior-year period (see table below). Excluding the impact of these hedging gains, lending revenues increased 28%, primarily driven by higher volumes and improved spreads.

        Private Bank revenues increased 3% excluding CVA/DVA, driven primarily by growth in North America lending and deposits.

        Expenses decreased 8%, driven by efficiency savings from ongoing reengineering programs and lower compensation, partially offset by approximately $100 million of repositioning charges in the current quarter.

        Provisions decreased 2%, primarily due to lower net credit losses, partially offset by a smaller reserve release in the current quarter.

        In total, S&B's results for the second quarter of 2012 continued to reflect the ongoing market and macroeconomic uncertainty. This uncertainty was reflected in continued low levels of overall client activity. Citi believes that without meaningful signs of accelerating economic growth, or a credible resolution—as perceived by the market—to the ongoing European issues, this reduced activity is likely to persist into the third quarter of 2012.

In millions of dollars   Three months
Ended
June 30,
2012
  Three months
Ended
June 30,
2011
  Six months
Ended
June 30,
2012
  Six months
Ended
June 30,
2011
 

S&B CVA/DVA

                         

Fixed Income Markets

  $ 147   $ 111   $ (940 ) $ (81 )

Equity Markets

    49     36     (234 )   4  

Private Bank

    2     0     (4 )   (5 )
                   

Total S&B CVA/DVA

  $ 198   $ 147   $ (1,178 ) $ (82 )
                   

Total S&B Lending Hedge gain (loss)

  $ 42   $ (85 ) $ (462 ) $ (282 )
                   

2Q12 YTD vs. 2Q11 YTD

        Net income decreased 9% from the prior year-to-date period, primarily due to negative $1.2 billion of CVA/DVA in the first half of 2012. Excluding CVA/DVA, net income increased 14%, primarily driven by a decrease in expenses, as the increase in revenues period-over-period was mainly offset by higher provisions.

        Revenues decreased 7%, primarily due to a negative $1.2 billion of CVA/DVA in the first half of 2012. Excluding CVA/DVA, revenues increased 2%, reflecting higher revenues in fixed income markets, lending and the Private Bank, partially offset by lower revenues in equity markets and investment banking.

        Fixed income markets revenues increased 9% excluding CVA/DVA, reflecting strong client flows in rates and currencies, particularly in the first quarter of 2012, partially offset by lower results in credit and securitized products driven by a weaker market environment.

        Equity markets revenues decreased 23% excluding CVA/DVA, driven by lower industry volumes, particularly in cash equities in the first half of 2012.

        Investment banking revenues decreased 11% from the prior year-to-date period, reflecting reduced industry-wide deal volume due to market uncertainty.

        Lending revenues increased 8% due to an increase in revenues excluding hedging gains, partially offset by higher losses on credit default swap hedges (see table above). Excluding the impact of these hedging losses, lending revenues increased 26%, primarily driven by increased volumes in the Corporate loan portfolio.

        Private Bank revenues increased 7% excluding CVA/DVA, driven primarily by the growth in North America lending and deposits.

        Expenses decreased 5%, driven by efficiency savings from ongoing reengineering programs and lower compensation costs.

        Provisions increased by $244 million to a positive $117 million, primarily due to reserve builds in the first quarter of 2012 as a result of portfolio growth compared to releases in the prior-year period, partially offset by a specific recovery in the first quarter of 2012, which resulted in lower net credit losses for the first half of 2012.

26


TRANSACTION SERVICES

        Transaction Services is composed of Treasury and Trade Solutions and Securities and Fund Services. Treasury and Trade Solutions provides comprehensive cash management and trade finance and services for corporations, financial institutions and public sector entities worldwide. Securities and Fund Services provides securities services to investors, such as global asset managers, custody and clearing services to intermediaries such as broker-dealers, and depository and agency/trust services to multinational corporations and governments globally. Revenue is generated from net interest revenue on deposits and trade loans as well as fees for transaction processing and fees on assets under custody and administration.

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2012   2011   2012   2011  

Net interest revenue

  $ 1,534   $ 1,480     4 % $ 3,120   $ 2,918     7 %

Non-interest revenue

    1,273     1,197     6     2,430     2,321     5  
                           

Total revenues, net of interest expense

  $ 2,807   $ 2,677     5 % $ 5,550   $ 5,239     6 %

Total operating expenses

    1,412     1,415         2,800     2,758     2  

Provisions (releases) for credit losses and for benefits and claims

    76     26     NM     107     33     NM  
                           

Income before taxes and noncontrolling interests

  $ 1,319   $ 1,236     7 % $ 2,643   $ 2,448     8 %

Income taxes

    404     372     9     807     748     8  

Income from continuing operations

    915     864     6     1,836     1,700     8  

Net income attributable to noncontrolling interests

    5     5         9     9      
                           

Net income

  $ 910   $ 859     6 % $ 1,827   $ 1,691     8 %
                           

Average assets (in billions of dollars)

  $ 136   $ 131     4 % $ 134   $ 128     5 %

Return on assets

    2.69 %   2.63 %         2.73 %   2.66 %      
                           

Revenues by region

                                     

North America

  $ 665   $ 609     9 % $ 1,306   $ 1,219     7 %

EMEA

    930     898     4     1,824     1,735     5  

Latin America

    455     439     4     906     856     6  

Asia

    757     731     4     1,514     1,429     6  
                           

Total revenues

  $ 2,807   $ 2,677     5 % $ 5,550   $ 5,239     6 %
                           

Income from continuing operations by region

                                     

North America

  $ 124   $ 129     (4 )% $ 250   $ 235     6 %

EMEA

    332     286     16     647     561     15  

Latin America

    185     160     16     363     332     9  

Asia

    274     289     (5 )   576     572     1  
                           

Total income from continuing operations

  $ 915   $ 864     6   $ 1,836   $ 1,700     8  
                           

Key indicators (in billions of dollars)

                                     

Average deposits and other customer liability balances

  $ 396   $ 366     8 % $ 387   $ 361     7 %

EOP assets under custody(1) (in trillions of dollars)

    12.2     13.0     (6 )                  
                           

(1)
Includes assets under custody, assets under trust and assets under administration.

NM
Not meaningful

2Q12 vs. 2Q11

        Net income increased 6% year-over-year, reflecting growth in revenues as expenses were unchanged.

        Revenues grew 5% year-over-year as increased balances and higher fees more than offset lower market volumes. Treasury and Trade Solutions revenues increased 9%, driven by growth in trade as end of period trade loans grew over 50% and spreads widened. Cash management revenues also grew year-over-year, reflecting strong growth in deposit balances and fees offsetting spread compression given the continued low rate environment. Securities and Fund Services revenues decreased 6% year-over-year primarily driven by the impact of FX translation.

        Expenses were flat year-over-year, as incremental investment spending, was offset by efficiency savings.

        Average deposits and other customer liabilities grew 8% year-over-year driven by focused deposit building activities mostly in North America and persisting market demand for U.S. dollar deposits.

2Q12 YTD vs. 2Q11 YTD

        Year-to-date, Transaction Services has experienced similar trends to those described above. Net income increased 8% year-over-year primarily due to the growth in revenues period-over-period.

        Revenues grew 6% as the improvement in fees and increased loan and deposit balances more than offset continued spread compression. Treasury and Trade Solutions revenues increased 10%, driven primarily by the growth in trade and deposit balances. Securities and Fund Services revenues decreased 5%, driven by the lower market activity.

        Expenses increased 2% due primarily to continued investment spending and higher volumes, partially offset by efficiency savings.

27


CITI HOLDINGS

        Citi Holdings contains businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp businesses. Citi Holdings consists of the following: Brokerage and Asset Management, Local Consumer Lending and Special Asset Pool.

        Consistent with its strategy, Citi intends to continue to exit these businesses and portfolios as quickly as practicable in an economically rational manner. To date, the decrease in Citi Holdings assets has been primarily driven by asset sales and business dispositions, as well as portfolio run-off and pay-downs. Asset levels have also been impacted, and will continue to be impacted, by charge-offs and revenue marks as and when appropriate.

        As of June 30, 2012, Citi Holdings' GAAP assets were approximately $191 billion, a decrease of approximately 28% year-over-year and a decrease of 9% from March 31, 2012. The decline in assets from the first quarter of 2012 was composed of approximately $11 billion of asset sales and business dispositions, $6 billion of run-off and pay-downs, and $1 billion of charge-offs and revenue marks. Citi Holdings represented approximately 10% of Citi's GAAP assets as of June 30, 2012, while Citi Holdings' risk-weighted assets (as defined under current regulatory guidelines) of approximately $172 billion at June 30, 2012 represented approximately 18% of Citi's risk-weighted assets as of such date.

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2012   2011   2012   2011  

Net interest revenue

  $ 581   $ 1,035     (44 )% $ 1,282   $ 2,067     (38 )%

Non-interest revenue

    343     1,372     (75 )%   516     1,989     (74 )%
                           

Total revenues, net of interest expense

  $ 924   $ 2,407     (62 )% $ 1,798   $ 4,056     (56 )%
                           

Provisions for credit losses and for benefits and claims

                                     

Net credit losses

  $ 1,329   $ 2,165     (39 )% $ 3,063   $ 5,183     (41 )%

Credit reserve build (release)

    (250 )   (575 )   57 %   (800 )   (2,133 )   62 %
                           

Provision for loan losses

  $ 1,079   $ 1,590     (32 )% $ 2,263   $ 3,050     (26 )%

Provision for benefits and claims

    165     183     (10 )%   336     387     (13 )%

Provision (release) for unfunded lending commitments

    (19 )   (8 )   NM     (45 )   13     NM  
                           

Total provisions for credit losses and for benefits and claims          

  $ 1,225   $ 1,765     (31 )% $ 2,554   $ 3,450     (26 )%
                           

Total operating expenses

  $ 1,237   $ 1,654     (25 )% $ 2,456     3,097     (21 )%
                           

Loss from continuing operations before taxes

  $ (1,538 ) $ (1,012 )   (52 )% $ (3,212 ) $ (2,491 )   (29 )%

Benefits for income taxes

    (619 )   (401 )   (54 )%   (1,269 )   (923 )   (37 )%
                           

(Loss) from continuing operations

  $ (919 ) $ (611 )   (50 )% $ (1,943 ) $ (1,568 )   (24 )%

Net income attributable to noncontrolling interests

    1     50     (98 )%   3     111     (97 )%
                           

Citi Holdings net loss

  $ (920 ) $ (661 )   (39 )% $ (1,946 ) $ (1,679 )   (16 )%
                           

Balance sheet data (in billions of dollars)

                                     

Total EOP assets

  $ 191   $ 265     (28 )%                  
                           

Total EOP deposits

  $ 63   $ 70     (11 )%                  
                           

NM
Not meaningful

28


BROKERAGE AND ASSET MANAGEMENT

        Brokerage and Asset Management (BAM) primarily consists of Citi's investment in, and assets related to, the Morgan Stanley Smith Barney joint venture (MSSB JV). At June 30, 2012, BAM had approximately $21 billion of assets, or approximately 11% of Citi Holdings' assets, of which approximately $20 billion related to the MSSB JV. At June 30, 2012, the MSSB JV assets were composed of an approximately $11 billion equity investment, $6 billion of margin loans and $3 billion of other MSSB JV financing (consisting of approximately $2 billion of preferred stock and $1 billion of loans). The remaining assets in BAM consist primarily of other retail alternative investments.

 
  Second Quarter    
  Six Months    
 
 
  %
Change
  %
Change
 
In millions of dollars, except as otherwise noted   2012   2011   2012   2011  

Net interest revenue

  $ (122 ) $ (44 )   NM   $ (251 ) $ (90 )   NM  

Non-interest revenue

    209     91     NM     292     274     7 %
                           

Total revenues, net of interest expense

  $ 87   $ 47     85 % $ 41   $ 184     (78 )%
                           

Total operating expenses

  $ 126   $ 230  <