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 now 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 140 countries. Citigroup currently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of our Regional Consumer Banking businesses and Institutional Clients Group; and Citi Holdings, consisting of our Brokerage and Asset Management and Local Consumer Lending businesses, and a Special Asset Pool. There is also a third segment, Corporate/Other.
On December 23, 2009, Citigroup repaid $20 billion of trust preferred securities held by the U.S. Treasury under the U.S. government’s Troubled Asset Relief Program (TARP) and exited from the loss-sharing agreement, which covered a specified pool of assets, with the U.S. Treasury, FDIC and the Federal Reserve Bank of New York. In connection with the exiting from the loss-sharing agreement, $1.8 billion of the approximately $7.1 billion of additional trust preferred securities held by the U.S. Treasury and FDIC was cancelled. As a result of the repayment of TARP and the exit from the loss-sharing agreement, effective in 2010, Citi is no longer deemed to be a beneficiary of “exceptional financial assistance” under TARP.
In response to the dramatic and profound changes in the market environment that became increasingly apparent through 2008, in early 2009, Citigroup decided to increase the focus on its core businesses and reorganized into three business segments for management and reporting purposes: Citicorp (Regional Consumer Banking and Institutional Clients Group); Citi Holdings (Brokerage and Asset Management, Local Consumer Lending, and Special Asset Pool); and Corporate/Other (Treasury, corporate expenses). Citi believes the realignment allows it to enhance the capabilities and performance of Citigroup’s core assets, through Citicorp, as well as to tighten its focus on risk management and reduce and realize value from its non-core assets, through Citi Holdings.
SEGMENT, BUSINESS AND PRODUCT
Citicorp is the company’s global bank for consumers and businesses and represents Citi’s core franchise. Citicorp is focused on providing best-in-class products and services to customers and leveraging Citigroup’s unparalleled global network. Citicorp is physically present in nearly 100 countries, many for over 100 years, and offers services in over 140 countries. Citi believes this global network provides a strong foundation for servicing the broad financial services needs of large multinational clients and for meeting the needs of retail, private banking and commercial customers around the world. Citigroup’s global footprint provides coverage of the world’s emerging economies, which the company believes represents a strong area of growth. As discussed in the “Executive Summary,” Citicorp remained profitable in 2008 and 2009, despite very difficult market conditions. At December 31, 2009, Citicorp had approximately $1.1 trillion of assets and $731 billion of deposits, representing approximately 60% of Citi’s total assets and approximately 90% of its deposits. Citicorp consists of the following businesses: Regional Consumer Banking (which includes retail banking and Citi-branded cards in four regions—North America, EMEA, Latin America and Asia) and Institutional Clients Group (which includes Securities and Banking and Transaction Services).
REGIONAL CONSUMER BANKING
Regional Consumer Banking (RCB) consists of Citigroup’s four regional consumer banks that provide traditional banking services to retail customers. RCB also contains Citigroup’s branded cards business and small commercial banking business. RCB is a globally diversified business with nearly 4,000 branches in 39 countries around the world. During 2009, 68% of total RCB revenues were from outside North America. Additionally, the majority of international revenues and loans were from emerging economies in Asia, Latin America, and Central and Eastern Europe. At year-end 2009, RCB had $213 billion of assets and $290 billion of deposits.
NORTH AMERICA REGIONAL CONSUMER BANKING
North America Regional Consumer Banking (NA RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses in the U.S. NA RCB’s approximately 1,000 retail bank branches and 12 million retail customer accounts are largely concentrated in the greater metropolitan areas of New York, Los Angeles, San Francisco, Chicago, Miami, Washington, D.C., Boston, Philadelphia, and the larger cities in Texas. At December 31, 2009, NA RCB had approximately $7.2 billion of retail banking loans and $143.7 billion of deposits. In addition, NA RCB had approximately 23.1 million Citi-branded credit card accounts, with $82.7 billion in outstanding loan balances on a managed basis.
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. Western Europe retail banking is included in Citi Holdings. EMEA RCB has repositioned its business, shifting from a strategy of widespread distribution to a focused strategy concentrating on larger urban markets within the region. An exception is Bank Handlowy, which has a mass market presence in Poland. The countries in which EMEA RCB has the largest presence are Poland, Turkey, Russia and the United Arab Emirates. At December 31, 2009, EMEA RCB had approximately 341 retail bank branches with approximately 4.2 million customer accounts, $5.2 billion in retail banking loans and $10.1 billion in deposits. In addition, the business had approximately 2.7 million Citi-branded card accounts with $3.0 billion in outstanding loan balances.
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 Banamex, Mexico’s second largest bank with over 1,700 branches. At December 31, 2009, LATAM RCB had approximately 2,216 retail branches, with 16.6 million customer accounts, $18.2 billion in retail banking loan balances and $41.4 billion in deposits. In addition, the business had approximately 12.2 million Citi-branded card accounts with $12.2 billion in outstanding loan balances.
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, India, Taiwan, Malaysia, Japan and Hong Kong. At December 31, 2009, Asia RCB had approximately 633 retail branches, $94.5 billion in customer deposits, 15.8 million customer accounts and $50.1 billion in retail banking loans. In addition, the business had approximately 15.1 million Citi-branded card accounts with $17.7 billion in outstanding loan balances at December 31, 2009.
INSTITUTIONAL CLIENTS GROUP
Institutional Clients Group (ICG) includes Securities and Banking and Transaction Services. ICG provides corporate, institutional and high-net-worth clients with a full range of products and services, including cash management, trading, underwriting, lending and advisory services, around the world. ICG’s international presence is supported by trading floors in approximately 75 countries and a proprietary network within Transaction Services in over 90 countries. At December 31, 2009, ICG had approximately $866 billion of assets and $442 billion of deposits.
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 ultra-high-net worth individuals. S&B includes investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, foreign exchange, structured products, cash instruments and related derivatives, and private banking. S&B revenue is generated primarily from fees for investment banking and advisory services, fees and interest on loans, fees and spread on foreign exchange, structured products, cash instruments and related derivatives, income earned on principal transactions, and fees and spreads on private banking services.
Transaction Services is composed of Treasury and Trade Solutions (TTS) and Securities and Fund Services (SFS). TTS provides comprehensive cash management and trade finance for corporations, financial institutions and public sector entities worldwide. SFS provides custody and funds services to investors such as insurance companies and mutual funds, 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 in TTS and SFS, as well as trade loans and from fees for transaction processing and fees on assets under custody in SFS.
Citi Holdings contains businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp business. These noncore businesses tend to be more asset-intensive and reliant on wholesale funding and also may be product-driven rather than client-driven. Citi intends to exit these businesses as quickly as practicable yet in an economically rational manner through business divestitures, portfolio run-off and asset sales. Citi has made substantial progress divesting and exiting businesses from Citi Holdings, having completed 15 divestitures in 2009, including Smith Barney, Nikko Cordial Securities, Nikko Asset Management Financial Institution Credit Card business (FI) and Diners Club North America. Citi Holdings’ assets have been reduced by nearly 40%, or $351 billion, from the peak level of $898 billion in the first quarter of 2008 to $547 billion at year-end 2009. Citi Holdings’ assets represented less than 30% of Citi’s assets as of December 31, 2009. Asset reductions from Citi Holdings have the combined benefits of further fortifying Citigroup’s capital base, lowering risk, simplifying the organization and allowing Citi to allocate capital to fund long-term strategic businesses.
Citi Holdings consists of the following businesses: Brokerage and Asset Management; Local Consumer Lending; and Special Asset Pool.With Citi’s exit from the loss-sharing agreement with the U.S. government in December 2009, the Company conducted a broad review of the Citi Holdings asset base to determine which assets are strategically important to Citicorp. As a result of this analysis, approximately $61 billion of assets will be moved from Citi Holdings into Citicorp in the first quarter of 2010. The assets consist primarily of approximately $34 billion of U.S. mortgages that will be transferred to NA RCB, approximately $19 billion of commercial and corporate loans and securities related to core Citicorp clients, of which approximately $17 billion will be moved to S&B and the remainder to NA RCB, and approximately $5.0 billion of assets related to Citi’s Mexico asset management business that will be moved to LATAM RCB.
BROKERAGE AND ASSET MANAGEMENT
Brokerage and Asset Management (BAM), which constituted approximately 6% of Citi Holdings by assets as of December 31, 2009, consists of Citi’s global retail brokerage and asset management businesses. This segment was substantially affected and reduced in size in 2009 due to the divestitures of Smith Barney (to the Morgan Stanley Smith Barney joint venture (MSSB JV)) and Nikko Cordial Securities. At December 31, 2009, BAM had approximately $35 billion of assets, which included $26 billion of assets from the 49% interest in the MSSB JV ($13 billion investment and $13 billion in loans associated with the clients of the MSSB JV) and $9 billion of assets from a diverse set of asset management and insurance businesses of which approximately half will be transferred into the LATAM RCB during the first quarter of 2010, as discussed under “Citi Holdings” above. Morgan Stanley has options to purchase Citi’s remaining stake in the MSSB JV over three years starting in 2012. The 2009 results include an $11.1 billion gain ($6.7 billion after-tax) on the sale of Smith Barney.
LOCAL CONSUMER LENDING
Local Consumer Lending (LCL), which constituted approximately 65% of Citi Holdings by assets as of December 31, 2009, includes a portion of Citigroup’s North American mortgage business, retail partner cards, Western European cards and retail banking, CitiFinancial North America, Primerica, Student Loan Corporation and other local consumer finance businesses globally. At December 31, 2009, LCL had $358 billion of assets ($317 billion in North America). About one-half of the assets in LCL as of December 31, 2009 consisted of U.S. mortgages in the company’s CitiMortgage and CitiFinancial operations. The North American assets consist of residential mortgage loans, retail partner card loans, student loans, personal loans, auto loans, commercial real estate, and other consumer loans and assets.
SPECIAL ASSET POOL
Special Asset Pool (SAP), which constituted approximately 28% of Citi Holdings by assets as of December 31, 2009, is a portfolio of securities, loans and other assets that Citigroup intends to actively reduce over time through asset sales and portfolio run-off. At December 31, 2009, SAP had $154 billion of assets. SAP assets have declined by $197 billion or 56% from peak levels in 2007 reflecting cumulative write-downs, asset sales and portfolio run-off. Assets have been reduced by $87 billion from year-ago levels. Approximately 60% of SAP assets are now accounted for on an accrual basis, which has helped reduce income volatility.
Corporate/Other includes global staff functions (includes finance, risk, human resources, legal and compliance) and other corporate expense, global operations and technology (O&T), residual Corporate Treasury and Corporate items. At December 31, 2009, this segment had approximately $230 billion of assets, consisting primarily of the Company’s liquidity portfolio, including $110 billion of cash and cash equivalents.