• January 15, 2016
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Citigroup reports fourth quarter 2015 earnings per share of $1.02

New York – Citigroup Inc. today reported net income for the fourth quarter 2015 of $3.3 billion, or $1.02 per diluted share, on revenues of $18.5 billion. This compared to net income of $344 million, or $0.06 per diluted share, on revenues of $17.9 billion for the fourth quarter 2014.

CVA/DVA was negative $181 million (negative $114 million after-tax) in the fourth quarter 2015, compared to $7 million ($4 million after-tax) in the prior year period. Excluding CVA/DVA, revenues were $18.6 billion, up 4% from the prior year period, and earnings were $1.06 per diluted share, compared to prior year earnings of $0.06 per diluted share.

Michael Corbat, Chief Executive Officer of Citigroup, said, "Overall, we had strong performance during 2015. The $17.1 billion we generated in net income was the highest since 2006, when our company was very different in terms of headcount, footprint, mix of businesses and assets.

"Over the last three years, we have made substantial progress towards our targets and execution priorities. We significantly improved our returns on both assets and tangible common equity, as well as our Citicorp efficiency ratio. We have sharpened our focus on target clients, shedding over 20 consumer and institutional businesses in the process. Citi Holdings now consists of only 4% of our balance sheet and is profitable. And since the end of 2012 we have utilized over $7 billion of DTA.

"Having generated $50 billion in regulatory capital over the last three years, we have already exceeded regulatory thresholds for the Common Equity Tier 1 Capital and Supplementary Leverage ratios. This progress allowed us to begin returning meaningful capital to our shareholders. We have made sustainable investments not only in our capital planning process but also in the risk, control and compliance functions, which are critical to maintaining our license to do business. We have undoubtedly become a simpler, smaller, safer and stronger institution," Mr. Corbat concluded.

Citigroup full year 2015 net income was $17.2 billion on revenues of $76.4 billion, compared to net income of $7.3 billion on revenues of $77.2 billion for the full year 2014. Full year 2015 results included CVA/DVA of $254 million ($162 million after-tax), compared to negative $390 million (negative $240 million after-tax) in 2014. Excluding CVA/DVA, Citigroup revenues were $76.1 billion in 2015, down 2% compared to the prior year. Citigroup full year 2014 results also included a charge of $3.8 billion ($3.7 billion after-tax) to settle RMBS and CDO-related claims,6 and a tax charge of $210 million related to corporate tax reforms.7 Excluding CVA/DVA as well as the impact of the mortgage settlement and the tax item in 2014, net income was $17.1 billion in 2015, up 49% compared to 2014, as lower operating expenses and lower net credit losses were partially offset by the lower revenues and a lower net loan loss reserve release.

In the discussion throughout the remainder of this press release, Citigroup's results of operations are presented on an adjusted basis, excluding CVA/DVA as well as the impact of the mortgage settlement and the tax item in 2014, as applicable. For additional information on these adjusted results as well as other non-GAAP financial measures used in this release, see the Appendices and Footnotes to this release. Percentage comparisons below are calculated for the fourth quarter 2015 versus the fourth quarter 2014 unless otherwise specified.

Citigroup

Citigroup revenues of $18.6 billion in the fourth quarter 2015 increased 4%, driven by a 61% increase in Citi Holdings, partially offset by a 2% decrease in Citicorp revenues. Excluding the impact of foreign exchange translation8, Citigroup revenues increased 9%, driven by a 3% increase in Citicorp revenues and the increase in Citi Holdings.

Citigroup's net income increased to $3.4 billion in the fourth quarter 2015, primarily driven by the higher revenues and lower operating expenses, partially offset by a higher cost of credit. Citigroup's effective tax rate was 29% in the current quarter, a decrease from 74% in the fourth quarter 2014, which was impacted by an elevated level of non-tax-deductible legal and related expenses.

Citigroup's operating expenses decreased 23% to $11.1 billion in the fourth quarter 2015. In constant dollars, operating expenses fell 19%, mainly driven by lower legal and related expenses and repositioning costs. Operating expenses in the fourth quarter 2015 included legal and related expenses of $411 million, compared to $2.9 billion in the prior year period, and $313 million of repositioning charges, compared to $655 million in the prior year period. Citigroup's cost of credit in the fourth quarter 2015 was $2.5 billion, a 25% increase, with a net loan loss reserve build of $588 million, primarily in Institutional Clients Group (ICG) (see ICG below), compared to a net loan loss reserve release of $441 million in the prior year period, and partially offset by a 22% decrease in net credit losses.

Citigroup's allowance for loan losses was $12.6 billion at quarter end, or 2.06% of total loans, compared to $16.0 billion, or 2.50% of total loans, at the end of the prior year period. Total non-accrual assets fell 26% from the prior year period to $5.5 billion. Consumer non-accrual loans declined 38% to $3.7 billion, while corporate non-accrual loans increased 32% to $1.6 billion, primarily related to the previously disclosed third quarter 2015 actions related to the North America energy portfolio in ICG.

Citigroup's loans were $618 billion as of quarter end, down 4% from the prior year period, and down 1% in constant dollars. In constant dollars, 5% growth in Citicorp loans was more than offset by continued declines in Citi Holdings, driven primarily by continued reductions in the North America mortgage portfolio and the sale of OneMain Financial, which was completed during the fourth quarter 2015.

Citigroup's deposits were $908 billion as of quarter end, up 1%, and up 4% in constant dollars. In constant dollars, Citicorp deposits increased 5%, driven by a 9% increase in ICG deposits and a 2% increase in Global Consumer Banking (GCB) deposits. In constant dollars, Citi Holdings deposits declined 57%, driven by the transfer of MSSB deposits to Morgan Stanley, which was completed as of the end of the second quarter 2015.

Citigroup's book value per share was $69.46 and tangible book value per share was $60.61, each as of quarter end, representing 5% and 7% increases, respectively. At quarter end, Citigroup's Common Equity Tier 1 Capital ratio was 12.0%, up from 10.6% in the prior year period. Citigroup's Supplementary Leverage Ratio for the fourth quarter 2015 was 7.1%, up from 5.9% in the prior year period. During the fourth quarter 2015, Citigroup repurchased approximately 31 million common shares and returned a total of $1.8 billion to common shareholders in the form of common share repurchases and dividends.

Citicorp
Citicorp revenues of $15.7 billion decreased 2%, as a 9% decrease in GCB revenues was partially offset by a 4% increase in ICG revenues. Corporate/Other revenues were $107 million, compared with negative $93 million in the prior year period, due in part to gains on debt buybacks.

Citicorp net income increased to $2.7 billion, from $253 million in the prior year period, primarily driven by lower operating expenses, partially offset by the lower revenues and a higher cost of credit.

Citicorp operating expenses decreased 24% to $9.9 billion, driven by lower legal and related expenses and repositioning costs and the impact of foreign exchange translation. Operating expenses in the fourth quarter 2015 included legal and related expenses of $251 million, compared to $2.8 billion in the prior year period, and $202 million of repositioning charges, compared to $554 million in the prior year period.

Citicorp cost of credit of $2.1 billion in the fourth quarter 2015 increased 29% from the prior year period. Net credit losses declined 14% to $1.6 billion, but net loan loss reserve builds were $517 million, driven by ICG, compared to net loan loss reserve releases of $227 million in the prior year period. Citicorp's consumer loans 90+ days delinquent decreased 14% to $2.2 billion, and the 90+ days delinquency ratio improved to 0.78% of loans.

Citicorp end of period loans of $573 billion increased 1%. In constant dollars, Citicorp end of period loans grew 5%, with 8% growth in corporate loans to $288 billion and 2% growth in consumer loans to $285 billion.

Global Consumer Banking
GCB revenues of $8.2 billion decreased 9% due to a 14% decline in international GCB revenues. In constant dollars, revenues decreased 4%, driven by a 6% decrease in North America and a 2% decrease in international GCB.

GCB net income decreased 20% to $1.3 billion, as the lower revenues and lower net loan loss reserve release were partially offset by lower operating expenses and lower net credit losses. Operating expenses decreased 8% to $4.6 billion, and decreased 2% in constant dollars, reflecting ongoing efficiency savings and lower repositioning expenses, partially offset by increased investment spending and ongoing regulatory and compliance costs.

North America GCB revenues of $4.8 billion decreased 6%, with lower revenues in Citi-branded cards, Citi retail services and retail banking. Citi-branded cards revenues of $1.9 billion decreased 9%, reflecting the continued impact of lower average loans as well as increased acquisition and rewards costs. Citi retail services revenues of $1.6 billion declined 1%, largely reflecting the continued impact of lower fuel prices on loan growth and purchase sales. Retail banking revenues declined 6% to $1.3 billion. Excluding a $130 million gain on the sale of a mortgage portfolio in the prior year period, retail banking revenues increased 4%, reflecting 7% growth in average loans, 9% growth in average checking deposits and improved deposit spreads.

North America GCB net income was $1.0 billion, down 13%, as the decrease in revenues and lower net loan loss reserve releases were partially offset by lower operating expenses and lower net credit losses. Operating expenses declined 6% to $2.4 billion, primarily driven by ongoing efficiency savings and lower repositioning expenses.

North America GCB credit quality continued to improve as net credit losses of $914 million decreased 10%. Net credit losses improved versus the prior year period in Citi-branded cards (down 12% to $454 million) and in Citi retail services (down 10% to $418 million). The net loan loss reserve release in the fourth quarter 2015 was $63 million, $181 million lower than in the prior year period, as credit continued to stabilize.

International GCB revenues decreased 14% to $3.4 billion. In constant dollars, revenues decreased 2%. Revenues in Latin America of $1.7 billion were approximately unchanged, as the impact of modest loan and deposit growth was offset by continued spread compression in cards. Revenues in Asia of $1.7 billion decreased 4%, as lower investment sales revenues as well as continued high payment rates and ongoing regulatory pressures in cards were partially offset by growth in lending, deposit and insurance products.

International GCB net income decreased 34% to $359 million. In constant dollars, net income decreased 28%, driven by the lower revenues, higher operating expenses and higher credit costs. Operating expenses of $2.3 billion in the fourth quarter 2015 increased 3% (decreased 9% on a reported basis) driven by the impact of higher regulatory and compliance costs and technology investments, partially offset by lower legal and related and repositioning expenses as well as ongoing efficiency savings. Credit costs increased 8% (decreased 11% on a reported basis), as the net loan loss reserve build was $31 million, compared to a net loan loss reserve release of $23 million in the prior year period ($25 million on a reported basis), and net credit losses decreased 1% (decreased 18% on a reported basis). In constant dollars, the net credit loss rate was 1.88% of average loans in the fourth quarter 2015, slightly improved from 1.95% in the prior year period (2.09% on a reported basis).

Institutional Clients Group
ICG revenues of $7.4 billion increased 4%, driven by a 9% increase in Markets and Securities Services revenues.

Banking revenues of $4.2 billion increased 3% (excluding gain / (loss) on loan hedges). Treasury and Trade Solutions (TTS) revenues of $2.0 billion increased 3%. In constant dollars, TTS revenues grew 9%, as continued growth in deposit balances and spreads was partially offset by lower trade revenues. Investment Banking revenues of $1.1 billion increased 6%. Advisory revenues increased 15% to $303 million, debt underwriting revenues increased 12% to $616 million, and equity underwriting fell 18% to $206 million, reflecting lower industry-wide underwriting activity during the current quarter. Private Bank revenues increased 3% to $691 million, driven by higher loan and deposit balances. Corporate Lending revenues of $401 million declined 7% (excluding gain / (loss) on loan hedges), and declined 2% in constant dollars, as growth in average loans was more than offset by the impact of lower spreads.

Markets and Securities Services revenues of $3.2 billion increased 9%. Fixed Income Markets revenues of $2.2 billion in the fourth quarter 2015 increased 7%, reflecting improved trading conditions in spread products as well as continued strength in rates and currencies. Equity Markets revenues of $606 million increased 29%, driven by growth across products and improved performance in EMEA. Securities Services revenues of $517 million increased 2%, and increased 12% in constant dollars, reflecting increased activity and higher client balances.

ICG net income of $1.4 billion decreased 18%, as higher cost of credit was partially offset by the higher revenues. ICG operating expenses decreased 1% to $4.8 billion, as higher regulatory and compliance costs and compensation expense were more than offset by lower repositioning costs, efficiency savings and the impact of foreign exchange translation. ICG cost of credit was $641 million, compared to $163 million in the prior year period. ICG cost of credit was primarily driven by a net loan loss reserve build of $549 million, including approximately $250 million related to the energy portfolio, with the remainder reflecting volume growth and macroeconomic conditions.

ICG average loans grew 5% to $290 billion while end of period deposits increased 6% to $587 billion. In constant dollars, average loans increased 7%, while end of period deposits increased 9%.

Citi Holdings
Citi Holdings revenues of $2.9 billion increased 61% from the prior year period, mainly driven by a higher level of net gains on asset sales, partially offset by the impact of redemptions of high cost debt and the continued reduction in Citi Holdings assets. During the fourth quarter 2015, Citi Holdings completed the sale of businesses with approximately $32 billion of assets, including Citi's retail banking and credit card businesses in Japan and OneMain Financial. As of the end of the fourth quarter 2015, Citi Holdings assets were $74 billion, 43% below the prior year period, and represented approximately 4% of total Citigroup assets. As of year-end 2015, Citigroup had signed agreements to reduce Citi Holdings assets by an additional $7 billion, substantially all of which are expected to be completed during 2016.

Citi Holdings net income was $704 million, compared to $87 million in the prior year period, primarily reflecting the higher revenues. Citi Holdings operating expenses declined 7% to $1.2 billion, primarily driven by the ongoing decline in assets, partially offset by transaction-related episodic expenses and higher legal and related and repositioning costs. Operating expenses in the fourth quarter 2015 included legal and related expenses of $160 million, compared to $61 million in the prior year period, and $111 million of repositioning charges, compared to $101 million in the prior year period. Cost of credit of $387 million increased 5%. The net loan loss reserve build was $71 million, compared to a net loan loss reserve release of $214 million in the prior year period, primarily reflecting the impact of asset sales. Net credit losses declined 56% to $182 million, reflecting the impact of ongoing divestiture activity as well as continued improvement in the North America mortgage portfolio.

Citi Holdings allowance for credit losses was $2.0 billion at the end of the fourth quarter 2015, or 4.5% of loans, compared to $4.9 billion, or 6.1% of loans, in the prior year period. 90+ days delinquent consumer loans in Citi Holdings decreased 59% to $0.8 billion, or 2.0% of loans.

Re-disseminated by The Asian Banker