EXECUTIVE SUMMARY
Second Quarter of 2020-Results Demonstrated Continued Financial Strength and Operational Resilience in a Challenging Environment As described further throughout this Executive Summary, during the second quarter of 2020, Citi demonstrated continued financial strength and operational resilience, despite a significant further deterioration in economic conditions during the quarter due to the COVID-19 pandemic: •Citi's earnings were substantially reduced by a higher allowance for credit loss (ACL) build (approximately$5.6 billion ) during the quarter (see "Cost of Credit" below). •Despite the challenging environment, Citi had solid revenue growth, as significantly higher revenues inInstitutional Clients Group (ICG), primarily reflecting strong performance in fixed income markets and investment banking, were partially offset by lower revenues in Global Consumer Banking (GCB), reflecting lower loan volumes and lower interest rates. •Citi demonstrated good expense discipline, resulting in a 1% decrease in expenses versus the prior year, as well as positive operating leverage and a 13% improvement in operating margin, while Citi continued to invest in its infrastructure and controls as well as digital capabilities. •Citi maintained its focus on risk management, while continuing to support clients. •Citi had broad-based deposit growth across ICG and GCB, reflecting strong client engagement, while also strengthening Citi's available liquidity. •Citi returned$1.1 billion of capital to its common shareholders in the form of dividends. •Citi continues to support its employees, customers and clients as well as the broader economy during this challenging time (see "COVID-19 Pandemic Overview" below) and maintained strong regulatory capital and liquidity metrics. •During the quarter, theFederal Reserve Board communicated that Citi's interim Stress Capital Buffer (SCB) requirement would be 2.5% for the four-quarter window of fourth quarter of 2020 to third quarter of 2021 (the 2020 CCAR cycle). Consistent with the regulatory capital framework, Citi declared common dividends of$0.51 per share for the third quarter of 2020 onJuly 23, 2020 , and intends to maintain its planned capital actions, which include common dividends of$0.51 per share in the four quarters covered by the 2020 CCAR cycle, subject to approval of Citi's Board of Directors and the latest financial and macroeconomic conditions. For information on Citi's interim and capital plan resubmission, see "Capital Resources-Stress Capital Buffer" and "-Capital Plan Resubmission and Related Limitations on Capital Distributions" below. As a result of the pandemic, the economic outlook for 2020 has been lowered substantially, and continued uncertainties around the pandemic, including, among others, the duration and severity of the economic and public health impacts, have created a much more volatile operating environment that will likely continue to negatively impact Citi's businesses and future results during the remainder of 2020. For a discussion of risks and uncertainties related to the pandemic, see "COVID-19 Pandemic Overview," "Risk Factors" and each respective business's results of operations below. For a discussion of additional risks and uncertainties that could affect Citi, see " Forward-Looking Statements" below as well as each respective business's results of operations and "Managing Global Risk" and "Risk Factors" in Citi's 2019 Annual Report on Form 10-K.
Second Quarter of 2020 Results Summary
Citigroup
Citigroup reported net income of$1.3 billion , or$0.50 per share, compared to net income of$4.8 billion , or$1.95 per share, in the prior-year period. Net income declined 73%, driven by the substantially higher ACL builds, partially offset by the higher revenues and a lower tax rate (see "Significant Accounting Policies and Significant Estimates-Income Taxes" below). Earnings per share decreased 74%, driven by the decline in net income. Citigroup revenues of$19.8 billion in the second quarter of 2020 increased 5% from the prior-year period, primarily reflecting the higher revenues in ICG, including the higher revenues in fixed income markets and investment banking, partially offset by the lower revenues across regions in GCB. Citigroup's end-of-period loans were largely unchanged at$685 billion . Excluding the impact of foreign currency translation intoU.S. dollars for reporting purposes (FX translation), Citigroup's end-of-period loans grew 1%, with 5% growth in ICG partially offset by lower loans in GCB, reflecting the impact of lower spend activity and the continued wind-down of legacy assets in Corporate/Other. Citigroup's end-of-period deposits increased 18% to$1.2 trillion . Excluding the impact of FX translation, Citigroup's end-of-period deposits increased 20%, primarily driven by 22% growth in ICG and 15% growth in GCB. (Citi's results of operations excluding the impact of FX translation are non-GAAP financial measures.)
Expenses
Citigroup operating expenses of$10.4 billion decreased 1% versus the prior-year period, as efficiency savings and lower marketing and other discretionary spend more than offset higher compensation costs, investments and pandemic-related expenses. Year-over-year, GCB and Corporate/Other operating expenses declined 10% and 2%, respectively, while ICG expenses increased 7%. 3 -------------------------------------------------------------------------------- Cost of Credit Citi's total provisions for credit losses and for benefits and claims of$7.9 billion , compared to$2.1 billion in the prior-year period, reflect the ACL build and higher net credit losses. Citi's ACL build increased to$5.6 billion , primarily reflecting a deterioration in Citi's view of the macroeconomic outlook since the end of the first quarter of 2020 under the Current Expected Credit losses (CECL) standard, as well as downgrades in the corporate loan portfolio, in both cases driven by the continued impact of the pandemic. The reserve build also included an additional qualitative management adjustment to reflect the potential for a higher level of stress and/or a somewhat slower economic recovery. For further information on the drivers of Citi's ACL build, see "Significant Accounting Policies and Significant Estimates-Allowance for Credit Losses" below. Net credit losses of$2.2 billion increased 12%. Consumer net credit losses of$1.9 billion were largely unchanged, driven by higher net credit losses in GCB, primarily reflecting seasoning in theNorth America branded cards portfolio, as GCB had not yet incurred significant net credit losses related to the pandemic, offset by lower net credit losses in Corporate/Other. Corporate net credit losses increased to$324 million from$89 million in the prior-year period, primarily reflecting write-offs across various sectors in bothNorth America and EMEA. For additional information on Citi's consumer and corporate credit costs and ACL, also see each respective business's results of operations and "Credit Risk" below.
Capital
Citigroup's Common Equity Tier 1 Capital ratio was 11.6% as ofJune 30, 2020 , based on the Basel III Advanced Approaches framework for determining risk-weighted assets, compared to 11.9% as ofJune 30, 2019 , based on theBasel III Standardized Approach for determining risk-weighted assets. The decline in the ratio primarily reflected an increase in risk-weighted assets. Incorporating Citi's interim SCB of 2.5%, and a GSIB surcharge of 3%, results in a minimum regulatory requirement of 10% for both Standardized (using SCB) and Advanced (using the Capital Conservation Buffer (CCB)) Approaches, relative to Citi's Common Equity Tier 1 ratio of 11.6% using Advanced Approaches as of the second quarter of 2020. Citigroup's Supplementary Leverage ratio as ofJune 30, 2020 was 6.7%, primarily reflecting the benefit of temporary relief granted by theFederal Reserve Board , compared to 6.4% as ofJune 30, 2019 . For additional information on Citi's capital ratios and related components, see "Capital Resources" below. Global Consumer Banking GCB net loss of$0.4 billion compared to net income of$1.3 billion in the prior-year period, reflecting significantly higher cost of credit and lower revenues, partially offset by lower expenses. GCB operating expenses of$4.0 billion decreased 10%. Excluding the impact of FX translation, expenses decreased 8%, as efficiency savings, lower volume-related expenses and reductions in marketing and other discretionary spending were partially offset by increases in pandemic-related expenses. GCB revenues of$7.3 billion decreased 10%. Excluding the impact of FX translation, revenues decreased 7%, as lower loan volumes and lower interest rates across all regions more than offset strong deposit growth, each reflecting the continued impact of the pandemic. North America GCB revenues of$4.7 billion decreased 5%, as higher revenues in Citi-branded cards were more than offset by lower revenues in Citi retail services and retail banking. Citi-branded cards revenues of$2.2 billion increased 1%, as lower purchase sales and lower average loans were more than offset by a favorable mix shift toward interest earning balances, which supported net interest revenues. Citi retail services revenues of$1.4 billion decreased 13%, reflecting higher partner payments and lower average loans. Retail banking revenues of$1.1 billion decreased 3%, as the benefit of stronger deposit volumes and improvement in mortgage revenues were more than offset by lower deposit spreads. North America GCB average deposits of$173 billion increased 14% year-over-year, average retail banking loans of$52 billion increased 9% year-over-year and assets under management of$69 billion increased 2%. Average Citi-branded card loans of$83 billion decreased 7% and Citi-branded card purchase sales of$74 billion decreased 21%, both driven by reduced customer activity related to the pandemic. Average Citi retail services loans of$46 billion decreased 6% and Citi retail services purchase sales of$17 billion decreased 25%, both driven by reduced customer activity and partner store closures related to the pandemic. For additional information on the results of operations of North America GCB for the second quarter of 2020, see "Global Consumer Banking-North America GCB" below. International GCB revenues (consisting of Latin America GCB and Asia GCB (which includes the results of operations in certain EMEA countries)), of$2.6 billion declined 18% versus the prior-year period. Excluding the impact of FX translation, international GCB revenues declined 12%, largely reflecting the impact of the pandemic. On this basis, Latin America GCB revenues decreased 7%, driven by lower card purchase sales, a decline in loan volumes and lower deposit spreads, partially offset by deposit growth. Asia GCB revenues decreased 15%, reflecting lower card purchase sales, insurance volumes and deposit spreads, even as deposit growth remained strong. For additional information on the results of operations of Latin America GCB and Asia GCB for the second quarter of 2020, including the impact of FX translation, see "Global Consumer Banking-Latin America GCB" and "Global Consumer Banking-Asia GCB" below. Year-over-year, international GCB average deposits of$129 billion increased 10%, average retail banking loans of$70 billion increased 4%, assets under management of$118 billion increased 4%, average card loans of$21 billion decreased 9% and card purchase sales of$18 billion decreased 30%, all excluding the impact of FX translation. 4
--------------------------------------------------------------------------------Institutional Clients Group ICG net income of$1.9 billion decreased 45%, primarily driven by significantly higher cost of credit and higher expenses, partially offset by higher revenues. ICG operating expenses increased 7% to$5.9 billion , reflecting higher compensation costs, continued investments and volume-driven growth, partially offset by efficiency savings. ICG revenues of$12.1 billion increased 21%, reflecting a 48% increase in Markets and securities services revenues, partially offset by a 3% decline in Banking revenues. The decrease in Banking revenues included the impact of$431 million of losses on loan hedges related to corporate lending and the private bank, compared to losses of$75 million related to corporate lending in the prior-year period. Banking revenues of$5.7 billion (excluding the impact of losses on loan hedges) increased 4%, as increases in investment banking and the private bank were partially offset by declines in treasury and trade solutions and corporate lending. Investment banking revenues of$1.8 billion increased 37%, as strong growth in debt and equity underwriting was partially offset by modestly lower advisory revenues. Advisory revenues decreased 1% to$229 million , equity underwriting revenues increased 56% to$491 million and debt underwriting revenues increased 41% to$1.0 billion .Treasury and trade solutions revenues of$2.3 billion declined 11%, and 7% excluding the impact of FX translation, as strong client engagement and growth in deposits were more than offset by the impact of lower interest rates and reduced commercial card spend. Private bank revenues of$956 million increased 10% (excluding the impact of losses on loan hedges), driven by increased capital markets activity and higher lending and deposit volumes, partially offset by lower deposit spreads, reflecting the impact of lower rates. Corporate lending revenues of$232 million decreased 64%. Excluding the impact of losses on loan hedges, corporate lending revenues decreased 11%, as higher loan volumes were more than offset by lower spreads. Markets and securities services revenues of$6.9 billion increased 48%. Fixed income markets revenues of$5.6 billion increased 68%, reflecting strength in rates and currencies, spread products and commodities. Equity markets revenues of$770 million decreased 3%, as solid performance in cash equities was more than offset by lower revenues in derivatives and prime finance, reflecting a more challenging environment. Securities services revenues of$619 million decreased 9%, and 5% excluding the impact of FX translation, as higher deposit volumes were more than offset by lower spreads, given lower interest rates. For additional information on the results of operations of ICG for the second quarter of 2020, see "Institutional Clients Group " below.
Corporate/Other
Corporate/Other net loss was$163 million in the second quarter of 2020, compared to net income of$84 million in the prior-year period, driven by lower revenues and higher cost of credit, reflecting ACL builds under the CECL standard on Citi's residual legacy portfolio, partially offset by a decrease in expenses. Operating expenses of$469 million declined 2%, reflecting the continued wind-down of legacy assets, partially offset by higher infrastructure costs as well as incremental costs associated with the pandemic. Corporate/Other revenues of$290 million declined 49%, reflecting the wind-down of legacy assets and the impact of lower interest rates, partially offset by available-for-sale (AFS) investment securities gains as well as positive marks on legacy securities, as spreads tightened during the quarter. For additional information on the results of operations of Corporate/Other for the second quarter of 2020, see "Corporate/Other" below. 5
-------------------------------------------------------------------------------- COVID-19 PANDEMIC OVERVIEW In addition to the widespread public health implications, the emergence of the COVID-19 pandemic has had an extraordinary impact on macroeconomic conditions in theU.S. and around the world. As discussed below and elsewhere throughout this Form 10-Q, Citi's businesses, results of operations and financial condition have been impacted by economic dislocations caused by the pandemic. Citi had builds to its allowance for credit losses (ACL) of approximately$10.5 billion during the first six months of 2020, bringing its ACL to approximately$28.5 billion atJune 30, 2020 , with an Allowance for credit losses on loans (ACLL) reserve ratio of 3.89% on funded loans. For additional information, see "Covid-19 Pandemic Overview-Impact of CECL on Citi's Allowance for Credit Losses" below. Despite these impacts, Citi has remained well positioned from a capital and liquidity perspective, and has maintained strong business operations. At quarter end, Citi had aCET1 Capital ratio of 11.6%, a Supplementary Leverage ratio of 6.7% and a Liquidity Coverage ratio of 117%, each well above regulatory minimums, with$900 billion of available liquidity resources (see "Managing Global Risk-Liquidity Risk" below). Governments and central banks globally have taken a series of aggressive actions to support the economy and mitigate the systemic impacts of the pandemic, and Citi continues to proactively assess and utilize these measures where appropriate. For additional information on Citi's pandemic response and other pandemic-related information, see Citi's First Quarter of 2020 Form 10-Q. Citi's COVID-19 Pandemic Response-Supporting Employees, Customers and Communities The health and safety of Citi's employees and their families, as well as Citi's customers, clients and communities it serves, are of the utmost importance. As the public health crisis has unfolded, Citi has continued to take proactive measures to preserve their well-being while maintaining its ability to serve customers and clients. Citi Employees •The majority of Citi employees around the world are working remotely. •Citi is pursuing a slow and measured reentry to its sites and a rapid retreat where necessary based on medical data and local conditions. •Citi is offering enhanced flexibility and paid time off for colleagues directly and indirectly impacted by the pandemic. •Citi is providing additional health and well-being resources for colleagues. •In the first quarter of 2020, Citi provided more than 75,000 colleagues globally with extra compensation, including a$1,000 special payment to eligible colleagues in theU.S. •Citi is delivering a virtual summer internship program globally and has guaranteed full-time employment offers for those interns meeting minimum requirements in hub locations. •Extra cleaning protocols and protective supplies have been put in place at Citi sites, branches and ATMs, and staff has been educated on preventive measures.Citi Communities Citi, theCiti Foundation and Citi colleagues are supporting those immediately impacted by the crisis through a variety of efforts. To date, Citi and theCiti Foundation have committed over$100 million in support of pandemic community relief efforts. As part of this commitment, Citi is donating the net profits earned through its participation in the Paycheck Protection Program to theCiti Foundation . Initial proceeds of$25 million have been donated to theCiti Foundation and will be used to expand its pandemicU.S. Small Business Relief Program to support efforts by Community Development Financial Institutions to serve small, diverse entrepreneurs who may not fully qualify for federal government stimulus funding. Citi Consumer Loan Relief Programs As previously disclosed, Citi was one of the first banks in theU.S. to announce assistance measures for pandemic-impacted customers. Citi has offered a wide array of programs for different types of products, providing short- and medium-term relief to customers as a result of the pandemic. The relief provided has been primarily in the form of payment deferrals and fee waivers. These consumer relief programs have primarily been provided to GCB customers, with a small portion of customers reported within Corporate/Other. For further information on Citi's measures to support its customers and clients in response to the pandemic, see "COVID-19 Overview" in the First Quarter of 2020 10-Q. The table below provides information on the number of loan modifications and the associated balances at enrollment for Citi's pandemic consumer relief programs for the three months endedJune 30, 2020 , excluding troubled debt restructurings (see "Troubled Debt Restructuring (TDR) Relief" below). 6
-------------------------------------------------------------------------------- For the three months ended June 30, 2020 In millions of dollars, except number of loans Number of loans Enrollment % of total loan modified modified balance(1)(2) portfolio(3) Program details North America Credit cards 1,909,296$ 6,920 5 % Waivers on late fees and deferral of minimum payments for two payment cycles Residential first 6,866 3,044 6 Extending existing payment deferral mortgages(4) options and suspending foreclosures into the third quarter of 2020 Home equity loans(4) 4,289 536
6 Extending existing payment deferral
options Personal, small business and 16,626 259 5 Waivers on fees including non-Citi ATM other(5) fees and monthly service fees as well as minimum payment deferrals for up to two monthsTotal North America 1,937,077$ 10,759 6 % International Asia Credit cards 859,696$ 1,601 10 % Payment deferrals for up to three months, interest and fee waivers and reductions in minimum due payments Residential first mortgages 44,947 3,334 10 Payment deferrals for up to 12 months, interest and fee waivers and reductions in minimum due payments Personal, small business and 169,162 1,368 5 Payment deferrals for up to three other months for revolving products and overdrafts or up to 12 months for installment loans, interest and fee waivers and reductions in minimum due payments Latin America Credit cards 640,912 1,089 26 Minimum payment deferrals for up to six months, temporary interest rate reductions and waivers on certain fees Residential first mortgages 19,363 716 21 Minimum payment deferrals for up to six months, temporary interest rate reductions and waivers on certain fees Personal, small business and 177,838 1,165 21 Minimum payment deferrals for up to six other months, temporary interest rate reductions and waivers on certain fees Total international 1,911,918$ 9,273 10 % Total Consumer 3,848,995$ 20,032 7 % (1) Reserves for these loans are calculated in accordance with the CECL standard. (2) Enrollment balances represent the aggregate amounts enrolled during the second quarter of 2020. Ending balances as ofJune 30, 2020 may be lower. (3) The percentage denominator is the total ending period loans balance for the respective product and region atJune 30, 2020 . (4) Includes$183 million of residential first mortgage loans and$369 million of home equity loans reported in Corporate/Other. (5) Includes$55 million of student loans reported in Corporate/Other. As set forth in the table above, during the second quarter of 2020, consumer relief programs had more than 3.8 million loan modifications with approximately$20.0 billion of associated enrollment balances, excluding TDRs, representing approximately 7% of Citi's total consumer loan balances. InNorth America , credit card programs represented the largest volume of enrollments and loan balances. In the second quarter of 2020, approximately 45% of credit card customers made at least one payment during the time they were enrolled in the programs. In addition, Citi observed re-enrollment rates of 14% under these programs. As these credit card relief programs offered a deferral of minimum payments for two payment cycles, certain customers were able to complete the program beforeJune 30, 2020 . End-of-period loan balances for active enrolled customers as ofJune 30, 2020 , were approximately$2.6 billion . InAsia , auto-enrollment relief programs mandated by governments or regulators inMalaysia ,Philippines andIndia programs represented the largest volume of enrollments and loan balances. These programs accounted for approximately 67% of total enrollments during the second quarter. Approximately 43% of credit cards, personal installment loans and mortgage customers made at least one payment during the time they were enrolled in the programs. InMexico , Citi participated in a government-sponsored debt relief program that was available untilMay 15, 2020 . The program provided customers with a payment deferral for principal and interest for a period of four to six months on various products. Eligible customers included those who were current (less than 30 days past due) as ofFebruary 28, 2020 , and given there was no proof of hardship required to apply for the program the application process was made frictionless. As a result, most major banks experienced high enrollment rates associated with the program. Specifically, during the second quarter Citi received a large number of applications and associated enrollment balances that represented approximately 22% of Citi`s consumer lending portfolio inMexico . Customer payment behavior under the program was largely 7 --------------------------------------------------------------------------------
driven by product type. Approximately 57% of customers enrolled in credit card
programs made at least one payment during the month of
Citi Corporate Loan Relief Programs Citi has modified the contractual terms of corporate loans to certain borrowers impacted by the pandemic. These modifications consist primarily of deferrals in the payment of principal and/or interest that Citi has provided during the second quarter of 2020 in response to borrower requests, as well as those provided pursuant to government-mandated relief programs. The table below shows Citi's corporate loan modifications, excluding TDRs: June 30, 2020 In millions of dollars Total credit exposure Funded Unfunded Corporate loans $ 3,781$ 3,085 $ 696 Private bank loans 2,193 2,190 3 Total Corporate $ 5,974$ 5,275 $ 699 Citi's Management of COVID-19 Pandemic Risks Citi's dedicated continuity of business and crisis management groups are managing Citi's protocols in response to the pandemic. Among other things, the protocols address the prioritization of critical processing; ability of staff and third parties to support these processes from remote work locations; deployment of new hardware to support technology needs; and ongoing monitoring to assess controls and service levels. For additional information about Citi's management of pandemic-related risks, see Citi's First Quarter of 2020 Form 10-Q. Citi expects that overall revenues in the near term, including GCB and ICG revenues, will likely continue to be adversely impacted by the lower interest rate environment as well as challenging macroeconomic and market conditions, including the effects related to the severity and duration of the pandemic as well as the responses of governments, customers and clients. In particular, each GCB region should continue to experience the adverse impacts from the pandemic on customer behavior, including lower purchase sales and loan volumes, while Latin America GCB is also likely to experience a more pronounced impact from macroeconomic weakness inMexico . Citi also expects that ICG Markets and investment banking revenues should continue to reflect overall market conditions, including a normalization of business trends compared to the first half of 2020. Citi's operating expenses may be impacted by uncertainties related to the pandemic, including, among other things, the continued efforts to protect and support Citigroup's employees and to support Citi's customers and clients digitally. Moreover, Citi, including GCB and ICG, expects to experience higher net credit losses on its existing portfolios going forward due to the pandemic. If Citi's second quarter 2020 macro-economic forecast assumptions are realized, Citi does not expect significant additional reserve builds in the near term; however the overall level of reserves remains dependent on the evolving economic environment relative to this forecast, with a deterioration potentially having a significant impact on the movement of the ACL going forward. For additional information about significant risks to Citi from the pandemic, see "Risk Factors" below. Balance Sheet and Other Items Related to the COVID-19 Pandemic Balance Sheet Trends As ofJune 30, 2020 , Citi's end-of-period balance sheet grew 12% from the prior-year period (14% excluding the impact of FX translation) and 1% sequentially (largely unchanged excluding the impact of FX translation), as it continued to support both its consumer and institutional clients. Loans were unchanged from the prior-year period (up 1% excluding the impact of FX translation), while deposits grew 18% (20% excluding the impact of FX translation), reflecting significant deposit growth in both GCB and ICG driven by the continued impact of the pandemic. For additional information, see "Liquidity Risk" below. 8 -------------------------------------------------------------------------------- Impact of CECL on Citi's Allowance for Credit Losses (ACL) The table below shows the impact of Citi's adoption of CECL as ofJanuary 1, 2020 and the ACL during the first and second quarters of 2020. For information on the drivers of Citi's ACL build in the second quarter, see "Significant Account Policies and Significant Estimates-Allowance for Credit Losses" below. For additional information on Citi's accounting policy on accounting for credit losses under CECL, see Note 14 to the Consolidated Financial Statements and Note 1 in Citi's First Quarter of 2020 Form 10-Q. Allowance for credit losses (ACL) Balance Build Build FX/Other in December 31, CECL transition in first
FX/Other in first Balance March in second quarter second quarter Balance June ACLL/EOP loans In millions of dollars
2019 impact quarter of 2020 quarter of 2020 31, 2020 of 2020 of 2020 30, 2020 June 30, 2020(1) Cards(1)$ 8,419 $ 4,456 $ 2,420 $ (215) $ 15,080 $ 1,572 $ 50$ 16,702 11.21 % All other GCB 1,200 566 413 (217) 1,962 388 36 2,386 Global Consumer Banking$ 9,619 $ 5,022 $ 2,833 $ (432) $ 17,042 $ 1,960 $ 86$ 19,088 7.00 % Institutional Clients Group 2,886 (717) 1,316 (34) 3,451 3,370 3 6,824 1.71 Corporate/Other 278 (104) 187 (13) 348 160 - 508 Allowance for credit losses on loans (ACLL)$ 12,783 $ 4,201 $ 4,336
3.89 % Allowance for credit losses on unfunded lending commitments 1,456 (194) 557 (6) 1,813 113 (67) 1,859 Other - 96 2 32 130 79 8 217 Total allowance for credit losses (ACL)$ 14,239 $ 4,103 $ 4,895
$ (453) $ 22,784 $ 5,682 $ 30$ 28,496
(1) As of
Accumulated Other Comprehensive Income (AOCI) In the second quarter of 2020, Citi's AOCI was a net after-tax loss of$0.8 billion , driven primarily by Citi's own credit spreads narrowing, resulting in a$2.2 billion (after-tax) DVA loss on Citi's debt accounted for under the fair value option. Net unrealized gains on AFS investment securities increased by$0.8 billion , driven by continued declines in interest rates. Currency fluctuations resulted in a$0.6 billion currency translation adjustment gain, driven by the weakening of theU.S. dollar against most currencies. The DVA loss does not have an impact on regulatory capital. For additional information on the components of Citi's AOCI, see Note 17 to the Consolidated Financial Statements. Common Stock Repurchases As previously disclosed, onMarch 15, 2020 , Citi joined other majorU.S. banks in suspending stock repurchases to further bolster Citi's capital and liquidity positions, in order to allow additional capacity to support clients in light of the pandemic. For additional information, see "Equity Security Repurchases" below. Principal Transactions Revenues Global trading markets experienced continued increases in volatility, trading volumes and movements in the second quarter of 2020. Citi's principal transactions revenues, recorded in ICG, were$3.9 billion in the current quarter, an increase of$2.0 billion from the prior-year period. For additional information on Citi's trading results, see "Institutional Clients Group " and Note 6 to the Consolidated Financial Statements. Capital Plan Resubmission and Related Limitations on Capital Distributions InJune 2020 , theFederal Reserve Board (FRB) determined that changes in financial markets and macroeconomic outlooks related to the COVID-19 pandemic could have a material effect on the risk profile and financial condition of each firm subject to its capital plan rule, and therefore require updated capital plans. Accordingly, the FRB is requiring each firm, including Citi, to update and resubmit its capital plan within 45 days after the FRB provides updated scenarios. The FRB also established temporary limitations on capital distributions during the third quarter of 2020, which may be extended by the FRB. Citi declared common dividends of$0.51 per share 9 -------------------------------------------------------------------------------- for the third quarter of 2020 onJuly 23, 2020 , which would not be impacted by theFederal Reserve Board's temporary limitations on capital distributions. For additional information about the capital plan resubmission and related limitations on capital distributions, see "Capital Resources" below.
Certain Key Government Actions in Support of the Economy
U.S. Government-Sponsored Liquidity Programs During the first quarter of 2020, the FRB introduced several liquidity facilities in response to the funding market volatility caused by the pandemic. Citi has participated in several of theU.S. government-sponsored liquidity programs, including the Money Market Mutual Fund Liquidity Facility (MMLF), the Primary Dealer Credit Facility (PDCF) and Discount Window (DW) in order to facilitate client activity and support the FRB actions to provide additional liquidity into the market. Citi has also participated in the Paycheck Protection Program Lending Facility (PPPLF), which was established to facilitate lending under the SBA's Paycheck Protection Program (see "Small Business Administration's Paycheck Protection Program" below). The amounts Citi sourced from these facilities were not significant to Citi's overall liquidity profile during the second quarter, which remains strong and highly liquid. For additional information about Citi's liquidity resources, see "Managing Global Risk-Liquidity Risk" below.U.S. Banking Agencies Regulatory Capital Relief In response to the pandemic, during the first and second quarters of 2020, theU.S. banking agencies issued several interim final rules revising the current regulatory capital standards, to provide banking organizations with additional flexibility to support consumers and businesses. Those rules applicable to Citi include: •Easing of capital distribution limits in the event of regulatory capital buffer breaches, which provides some flexibility to continue distributing capital under certain circumstances. •Modification of the CECL transition provision to defer theJanuary 1, 2020 capital impact toJanuary 1, 2022 and to provide additional capital relief for ongoing increases in credit reserves. Citi's reported Common Equity Tier 1 Capital ratio atJune 30, 2020 , reflecting the modified CECL transition provision, was 44 basis points higher than Citi's Common Equity Tier 1 Capital ratio, reflecting the full impact of CECL on regulatory capital. •Temporary Supplementary Leverage ratio (SLR) relief for bank holding companies, commencing in the second quarter of 2020, allowing Citigroup to temporarily expand its balance sheet by excludingU.S. Treasury securities and deposits with the FRB from the SLR denominator. Citigroup's reported Supplementary Leverage ratio of 6.66% benefited 94 basis points during the second quarter of 2020 as a result of the temporary relief. Excluding the temporary relief, Citigroup's Supplementary Leverage ratio would have been 5.72%, compared with a 5.0% effective minimum requirement. •Assigning a 0% risk weight to loans originated under the Paycheck Protection Program.
For additional information about regulatory capital relief provided by the
Troubled Debt Restructuring (TDR) Relief UnderU.S. GAAP, banks are required to assess modifications to a loan's terms for potential classification as a TDR. A loan to a borrower experiencing financial difficulty is classified as a TDR when a lender grants a concession that it would otherwise not consider, such as a payment deferral or interest concession. In order to encourage banks to work with impacted borrowers, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) andU.S. banking agencies have provided relief from TDR accounting. The main benefits of TDR relief include a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; aging of the loans is frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and the loans are generally not reported as non-accrual during the modification period. The loans included in the modification programs are included in Citi's reserving process under the CECL standard.Small Business Administration's Paycheck Protection Program The Paycheck Protection Program (the Program) authorizes the origination of forgivable loans to small businesses to pay their employees during the pandemic. Loan terms are the same for all businesses. Among other programs, Citi is participating in the Payment Protection Program and has funded approximately$3.8 billion in loans as ofJune 30, 2020 . Citi remains committed to supporting small businesses. The processing of loan forgiveness requests under the Program is expected to begin in the third quarter of 2020 and the timing for processing will determine whether there is significant forgiveness in the second half of 2020. 10
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RISK FACTORS
Macroeconomic and Other Challenges and Uncertainties Related to the COVID-19 Pandemic Will Likely Continue to Have Negative Impacts on Citi's Businesses and Results of Operations and Financial Condition. The COVID-19 pandemic has spread globally, affecting all of the countries and jurisdictions where Citi operates. The pandemic has had, and will likely continue to have, negative impacts on Citi's businesses, revenues, expenses, credit costs and overall results of operations and financial condition, which could be material. The pandemic and responses to it have had, and will likely continue to have, a severe impact on global economic conditions, although the impacts will likely vary from time to time by country, state or region, largely depending upon the duration and severity of the public health consequences and availability of any effective therapeutic or vaccine. These impacts to global economic conditions include, among others: •sharply reducedU.S. and global economic output and employment, resulting in loss of employment and lower consumer spending, cards purchase sales and loan volumes; •disruption of global supply chains; •significant disruption and volatility in financial markets; •temporary closures, reduced activity and failures of many businesses, leading to loss of revenues and net losses; and •the institution of social distancing and restrictions on movement in and amongthe United States and other countries. The extent of the pandemic's impact on Citi's financial performance and operations, including its ability to execute its business initiatives and strategies, will continue to depend on future developments in theU.S. and globally, which are uncertain and cannot be predicted, including the duration and further spread of the disease, as well as the severity of the economic downturn or any delay or weakness in the economic recovery. The impact will in part be dependent on government and other actions taken to lessen the health and economic repercussions, such as medical investments and advances, restrictions on movement of people, transportation and businesses, and the effectiveness of past and any future fiscal, monetary and other governmental actions. Ongoing legislative and regulatory changes in theU.S. and globally to address the economic impact from the pandemic, such as consumer and corporate relief measures, could further affect Citi's businesses, credit costs and results. Citi could also face challenges, including legal and reputational, and scrutiny in its implementation of and ongoing efforts to provide these relief measures. Such implementations and efforts have resulted in, and may continue to result in, litigation, including class actions, or regulatory and government actions and proceedings. Such actions may result in judgments, settlements, penalties and fines adverse to Citi. In addition, the different types of government actions could vary in scale and duration across jurisdictions and regions with varying degrees of effectiveness. The impact of the pandemic on Citi's consumer and corporate borrowers will also vary by region, sector or industry, with some borrowers experiencing greater stress levels, which could lead to increased pressure on the results of operations and financial condition of such borrowers, increased borrowings or credit ratings downgrades, thus likely leading to higher credit costs. In addition, stress levels ultimately experienced by Citi's borrowers may be different from and more intense than assumptions made in earlier estimates or models used by Citi during or prior to the emergence of the pandemic, resulting in a further increase in Citi's allowance for credit losses or net credit losses. The pandemic may not be sufficiently contained for an extended period of time, due to a further emergence or re-emergence of widespread infections. A prolonged health crisis could continue to reduce economic activity in theU.S. and other countries, resulting in a further decline in employment and business and consumer confidence. These factors could further negatively impact global economic activity and Citi's consumer customers and corporate clients; cause a continued decline in Citi's revenues and the demand for its products and services; lead to a prolonged period of lower interest rates; and further increase Citi's credit and other costs. These factors could also cause a continued increase in Citi's balance sheet, risk-weighted assets and allowance for credit loss reserves, resulting in a decline in regulatory capital ratios or liquidity measures, as well as regulatory demands for higher capital levels and/or reductions in capital distributions. Moreover, any disruption or failure of Citi's performance of, or its ability to perform, key business functions, as a result of the continued spread of COVID-19 or otherwise, could adversely affect Citi's operations. Any disruption to, breaches of or attacks on Citi's information technology systems, including from cyber incidents, could have adverse effects on Citi's businesses. These systems are supporting a substantial portion of Citi's employees who have been affected by local pandemic restrictions and have been forced to work remotely. In addition, these systems interface with and depend on third-party systems, and Citi could experience service denials or disruptions if demand for such systems were to exceed capacity or if a third-party system fails or experiences any interruptions. Citi has also taken measures to maintain the health and safety of its employees; however, these measures could result in increased expenses, and widespread illness could negatively affect staffing within certain functions, businesses or geographies. In addition, Citi's ability to recruit, hire and onboard employees in key areas could be negatively impacted by global pandemic restrictions. Further, it is unclear how the macroeconomic business environment or societal norms may be impacted after the pandemic. The post-pandemic environment may undergo unexpected developments or changes in financial markets, the fiscal, tax and regulatory environments and consumer customer and corporate client behavior. These developments and changes could have an adverse impact on Citi's results of operations and financial condition. Ongoing business and regulatory uncertainties and changes may make Citi's longer- 11 -------------------------------------------------------------------------------- term business, balance sheet and budget planning more difficult or costly. Citi, its management and its businesses may also experience increased or different competitive and other challenges in this environment. To the extent that it is not able to adapt or compete effectively, Citi could experience loss of business and its results of operations and financial condition could suffer. For additional information about trends, uncertainties and risks related to the pandemic, as well as Citi's management of pandemic-related risks, see "COVID-19 Pandemic Overview" above. For information about the other most significant risks and uncertainties that could impact Citi's businesses, results of operations and financial condition, which could be exacerbated or realized by the pandemic-related risks discussed above, see "Risk Factors" in Citi's 2019 Annual Report on Form 10-K. 12 --------------------------------------------------------------------------------
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-------------------------------------------------------------------------------- RESULTS OF OPERATIONS SUMMARY OF SELECTED FINANCIAL DATA-PAGE 1 Citigroup Inc. and Consolidated
Subsidiaries
Second Quarter Six Months In millions of dollars, except per share amounts 2020 2019 % Change 2020 2019 % Change Net interest revenue$ 11,080 $ 11,950 (7) %$ 22,572 $ 23,709 (5) % Non-interest revenue 8,686 6,808 28 17,925 13,625 32 Revenues, net of interest expense$ 19,766 $ 18,758 5 %$ 40,497 $ 37,334 8 % Operating expenses 10,415 10,500 (1) 21,009 21,084 - Provisions for credit losses and for benefits and claims 7,903 2,093 NM 14,930 4,073 NM Income (loss) from continuing operations before income taxes$ 1,448 $ 6,165 (77) %$ 4,558 $ 12,177 (63) % Income taxes 131 1,373 (90) 707 2,648 (73) Income from continuing operations$ 1,317 $ 4,792 (73) %$ 3,851 $ 9,529 (60) % Income (loss) from discontinued operations, net of taxes (1) 17 NM (19) 15 NM Net income before attribution of noncontrolling interests$ 1,316 $ 4,809 (73) %$ 3,832 $ 9,544 (60) % Net income attributable to noncontrolling interests - 10 (100) (6) 35 NM Citigroup's net income$ 1,316 $ 4,799 (73) %$ 3,838 $ 9,509 (60) % Earnings per share Basic Income from continuing operations$ 0.51 $ 1.94 (74) %$ 1.57 $ 3.81 (59) % Net income 0.51 1.95 (74) 1.56 3.82 (59)
Diluted
Income from continuing operations$ 0.51 $ 1.94 (74) %$ 1.57 $ 3.81 (59) % Net income 0.50 1.95 (74) 1.56 3.82 (59) Dividends declared per common share 0.51 0.45 13 1.02 0.90 13 Common dividends$ 1,071 $ 1,041 3 %$ 2,152 $ 2,116 2 % Preferred dividends(1) 253 296 (15) 544 558 (3) Common share repurchases - 3,575 (100) 2,925 7,630 (62) Table continues on the next page, including footnotes. 14
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SUMMARY OF SELECTED FINANCIAL DATA-PAGE 2
Citigroup Inc. and Consolidated
Subsidiaries
In millions of dollars, except per share Second Quarter Six Months amounts, ratios and direct staff 2020 2019 % Change 2020 2019 % Change AtJune 30 : Total assets$ 2,232,715 $ 1,988,226 12 % Total deposits 1,233,660 1,045,607 18 Long-term debt 279,775 252,189 11
Citigroup common stockholders' equity 173,642 179,379
(3)
Total Citigroup stockholders' equity 191,622 197,359
(3)
Average assets 2,266,610 1,979,124 15 2,173,165$ 1,959,271 11 % Direct staff (in thousands) 204 200
2
Performance metrics Return on average assets 0.23 % 0.97 % 0.36 % 0.98 % Return on average common stockholders' equity(2) 2.4 10.1 3.8 10.2 Return on average total stockholders' equity(2) 2.7 9.8 4.0 9.8 Return on tangible common equity (RoTCE)(3) 2.9 11.9 4.5 11.9 Efficiency ratio (total operating expenses/total revenues) 52.7 56.0 51.9 56.5 Basel III ratios Common Equity Tier 1 Capital(4) 11.59 % 11.89 % Tier 1 Capital(4) 13.08 13.40 Total Capital(4) 15.56 16.33 Supplementary Leverage ratio 6.66 6.36 Citigroup common stockholders' equity to assets 7.78 % 9.02 % Total Citigroup stockholders' equity to assets 8.58 9.93 Dividend payout ratio(5) 100.8 23.1 65.4 % 23.6 % Total payout ratio(6) 100.8 102.5 154.1 108.9 Book value per common share$ 83.41 $ 79.40 5 % Tangible book value (TBV) per share(3) 71.15 67.64
5
(1) Certain series of preferred stock have semi-annual payment dates. See Note 9 to the Consolidated Financial Statements. (2) 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. (3) For information on RoTCE and TBV, see "Capital Resources-Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Returns on Equity" below. (4) Citi's reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were derived under the Basel III Advanced Approaches framework as ofJune 30, 2020 and the Basel III Standardized Approach as ofJune 30, 2019 , whereas Citi's reportable Total Capital ratio was the lower derived under the Basel III Advanced Approaches framework for all periods presented. This reflects theU.S. Basel III requirement to report the lower of risk-based capital ratios under both the Standardized Approach and Advanced Approaches in accordance with the Collins Amendment of the Dodd-Frank Act. (5) Dividends declared per common share as a percentage of net income per diluted share. (6) Total common dividends declared plus common stock repurchases as a percentage of net income available to common shareholders (Net income, less preferred dividends). See "Consolidated Statement of Changes in Stockholders' Equity," Note 9 to the Consolidated Financial Statements and "Equity Security Repurchases" below for the component details. NM Not meaningful 15
-------------------------------------------------------------------------------- SEGMENT AND BUSINESS-INCOME (LOSS) AND REVENUES CITIGROUP INCOME Second Quarter Six Months In millions of dollars 2020 2019 % Change 2020 2019 % Change Income (loss) from continuing operations Global Consumer Banking North America$ (459) $ 663 NM$ (1,369) $ 1,370 NM Latin America 18 234 (92) % (18) 450 NM Asia(1) 43 404 (89) 234 801 (71) % Total$ (398) $ 1,301 NM$ (1,153) $ 2,621 NM
North America$ 660 $ 1,050 (37) %$ 1,556 $ 1,798 (13) % EMEA 493 1,005 (51) 1,528 2,130 (28) Latin America (194) 519 NM 332 1,059 (69) Asia 921 851 8 2,090 1,850 13 Total$ 1,880 $ 3,425 (45) %$ 5,506 $ 6,837 (19) % Corporate/Other (165) 66 NM (502) 71 NM Income from continuing operations$ 1,317 $ 4,792 (73) %$ 3,851 $ 9,529 (60) % Discontinued operations$ (1) $ 17 NM$ (19) $ 15 NM Less: Net income attributable to noncontrolling interests - 10 (100) % (6) 35 NM Citigroup's net income$ 1,316 $ 4,799 (73) %$ 3,838 $ 9,509 (60) % (1) Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented. NM Not meaningful CITIGROUP REVENUES Second Quarter Six Months In millions of dollars 2020 2019 % Change 2020 2019 % Change Global Consumer Banking North America$ 4,742 $ 4,966 (5) %$ 9,966 $ 9,966 - % Latin America 1,050 1,320 (20) 2,249 2,592 (13) Asia(1) 1,547 1,847 (16) 3,298 3,665 (10) Total$ 7,339 $ 8,133 (10) %$ 15,513 $ 16,223 (4) %
North America$ 4,987 $ 3,632 37 %$ 9,934 $ 6,901 44 % EMEA 3,392 2,960 15 6,862 6,130 12 Latin America 1,207 1,307 (8) 2,625 2,575 2 Asia 2,551 2,156 18 5,200 4,467 16 Total$ 12,137 $ 10,055 21 %$ 24,621 $ 20,073 23 % Corporate/Other 290 570 (49) 363 1,038 (65) Total Citigroup net revenues$ 19,766 $ 18,758 5 %$ 40,497 $ 37,334 8 %
(1) Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
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