CITIGROUP INC. Read the full press release with tables.
Citigroup
Citigroup revenues were $19.5 billion in the second quarter 2015, approximately unchanged from the prior year period. Excluding CVA/DVA, revenues of $19.2 billion decreased 2% from the prior year period, as Citicorp revenues were approximately unchanged and Citi Holdings revenues decreased 16%. Excluding CVA/DVA and the impact of foreign exchange translation6, Citigroup revenues increased 3% from the prior year period, as 5% growth in Citicorp revenues was partially offset by the decrease in Citi Holdings revenues. Citi Holdings revenues declined due to continued wind-down of the portfolio as well as the impact of classifying OneMain Financial as held-for-sale at the end of the first quarter 2015. As a result of the held-for-sale accounting treatment, approximately $160 million of net credit losses were recorded as a reduction in revenue during the second quarter 2015.
Citigroup's net income increased to $4.8 billion in the second quarter 2015 from $181 million in the prior year period. Excluding CVA/DVA in both periods and the impact of the mortgage settlement in the prior year period, net income of $4.7 billion increased 18%, primarily driven by lower operating expenses, lower net credit losses and a lower effective tax rate, partially offset by the lower revenues and a reduced net loan loss reserve release. Citigroup's effective tax rate was 29% in the current quarter, a decrease from 33% in the prior year period (excluding CVA/DVA and the impact of the mortgage settlement).
Citigroup's operating expenses were $10.9 billion in the second quarter 2015, 30% lower than in the prior year period. Excluding the impact of the mortgage settlement in the prior year period, operating expenses fell 7%. In constant dollars, operating expenses fell 1%, mainly driven by lower legal and related expenses and repositioning costs. Operating expenses in the second quarter 2015 included legal and related expenses of $360 million, compared to $402 million in the prior year period, and $61 million of repositioning charges, compared to $397 million in the prior year period.
Citigroup's cost of credit in the second quarter 2015 was $1.6 billion, a 5% decrease from the prior year period. Excluding the impact of the mortgage settlement, cost of credit decreased 2%, as a lower net loan loss reserve release was more than offset by lower net credit losses, including the impact of the previously-referenced recording of OneMain Financial's net credit losses as a reduction in revenue.
Citigroup's allowance for loan losses was $14.1 billion at quarter end, or 2.25% of total loans, compared to $17.9 billion, or 2.70% of total loans, at the end of the prior year period. Excluding the impact of the mortgage settlement, net loan loss reserve releases decreased 35% from the prior year period to $453 million. Citigroup asset quality continued to improve as total non-accrual assets fell 20% from the prior year period to $6.7 billion. Corporate non-accrual loans declined 5% to $1.2 billion, while consumer non-accrual loans declined 21% to $5.3 billion.
Citigroup's loans were $632 billion as of quarter end, down 5% from the prior year period, and down 1% on a constant dollar basis. In constant dollars, 4% growth in Citicorp loans was more than offset by continued declines in Citi Holdings, driven primarily by reductions in the North America mortgage portfolio and the reclassification of loans to held-for-sale in connection with previously-announced agreements to sell OneMain Financial and Citi's retail banking and credit card businesses in Japan.
Citigroup's deposits were $908 billion as of quarter end, down 6% from the prior year period. In constant dollars, Citigroup's deposits decreased 1%. In constant dollars, Citicorp deposits grew 3% driven by an 8% increase in Institutional Clients Group (ICG) deposits and a 3% increase in Global Consumer Banking (GCB) deposits, while Citi Holdings deposits declined 84%, driven by the previously disclosed reclassification of Japan retail banking deposits to other liabilities during the fourth quarter 2014, as well as the continued 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 $68.27 and tangible book value per share was $59.18, each as of quarter end, representing 2% and 4% increases, respectively, compared to the prior year period. At quarter end, Citigroup's Common Equity Tier 1 Capital ratio was 11.4%, up from 10.6% in the prior year period. Citigroup's Supplementary Leverage Ratio for the second quarter 2015 was 6.7%, up from an estimated 5.8% in the prior year period. During the second quarter 2015, Citigroup repurchased approximately 28 million common shares and returned a total of $1.7 billion to common shareholders in the form of share repurchases and common stock dividends.
CiticorpCiticorp revenues of $17.8 billion in the second quarter 2015 increased 2% from the prior year period. CVA/DVA, reported within ICG, was $303 million in the second quarter 2015 ($190 million after-tax), compared to negative $32 million (negative $20 million after-tax) in the prior year period. Excluding CVA/DVA, revenues of $17.5 billion were approximately unchanged from the prior year period, as ICG revenues increased 2% and GCB revenues decreased 4%. Corporate/Other revenues were $370 million, a $281 million increase from the prior year period primarily driven by gains on debt buybacks and real estate sales in the recent quarter, partially offset by hedging activities.
Citicorp net income was $4.7 billion, 27% higher than the prior year period. Excluding CVA/DVA, Citicorp's net income of $4.5 billion increased 22% from the prior year period, primarily driven by lower operating expenses, lower net credit losses and a lower effective tax rate, partially offset by a lower net loan loss reserve release.
Citicorp operating expenses were $9.8 billion, a 6% decrease from the prior year period. Excluding the impact of foreign exchange translation, operating expenses decreased 1% as ongoing efficiency savings and lower legal and related expenses and repositioning costs were largely offset by higher regulatory and compliance costs. Operating expenses in the second quarter 2015 included legal and related expenses of $297 million, compared to $387 million in the prior year period, and $34 million of repositioning charges, compared to $354 million in the prior year period.
Citicorp cost of credit of $1.4 billion in the second quarter 2015 increased 4% from the prior year period. A 34% reduction in the net loan loss reserve release to $282 million was partially offset by a 5% decline in net credit losses to $1.7 billion. Citicorp's consumer loans 90+ days delinquent decreased 21% from the prior year period to $2.1 billion, and the 90+ days delinquency ratio improved to 0.75% of loans.
Citicorp end of period loans decreased 1% from the prior year period to $573 billion. On a constant dollar basis, Citicorp end of period loans grew 4% versus the prior year period, with 6% growth in corporate loans to $290 billion and 1% growth in consumer loans to $284 billion.
Global Consumer Banking
GCB revenues of $8.5 billion decreased 4% from the prior year period, due to a 10% decline in international GCB revenues. On a constant dollar basis, revenues increased 1%, driven by growth in North America and Latin America GCB.
GCB net income rose 4% from the prior year period to $1.6 billion, as lower expenses were partially offset by lower revenues and higher credit costs. Operating expenses decreased 10% to $4.6 billion, and decreased 4% in constant dollars, reflecting ongoing efficiency savings and a decrease in repositioning expenses.
North America GCB revenues of $4.8 billion increased 1% compared to the prior year period, as higher revenues in retail banking were largely offset by lower revenues in Citi-branded cards. Retail banking revenues rose 11% from the prior year period to $1.3 billion, reflecting 7% growth in average loans, 7% growth in checking deposits, improved deposit spreads and increased mortgage origination revenues. Citi retail services revenues were unchanged at $1.6 billion, as spread improvements were offset by the continued impact of lower fuel prices and higher contractual partner payments. Citi-branded cards revenues of $1.9 billion decreased 5% versus the prior year period, as the continued impact of lower average loans was partially offset by the impact of 5% growth in purchase sales and an improvement in spreads.
North America GCB net income was $1.1 billion, down 1% versus the second quarter 2014, as the increase in revenues and lower operating expenses were more than offset by a higher cost of credit. Operating expenses declined 3% versus the prior year period to $2.3 billion, primarily driven by ongoing efficiency savings.
North America GCB credit quality continued to improve as net credit losses of $1.0 billion decreased 7% versus the prior year period. Net credit losses improved versus the prior year period in Citi-branded cards (down 12% to $503 million) and in Citi retail services (down 2% to $457 million). The net loan loss reserve release in the second quarter 2015 was $109 million, $287 million lower than in the prior year period, as credit continued to stabilize. Delinquency rates improved from the prior year period in both Citi-branded cards and Citi retail services.
International GCB revenues decreased 10% versus the second quarter 2014 to $3.7 billion. In constant dollars, revenues increased 1% versus the prior year period. Revenues in Latin America increased 3% to $1.8 billion, driven by volume-related growth in Mexico, partially offset by the impact of the sale of Citi's consumer franchise in Honduras in the prior year period. Revenues in Asia were unchanged at $1.9 billion, as growth in retail banking and wealth management was offset by lower card revenues.
International GCB net income increased 16% from the prior year period to $557 million. In constant dollars, net income increased 25%, driven by the higher revenues, lower operating expenses and lower credit costs, partially offset by a higher effective tax rate. Operating expenses in the second quarter 2015 decreased 5% (decreased 15% on a reported basis) driven by lower repositioning expenses, partially offset by the impact of volume growth, higher regulatory and compliance costs and technology investments. Credit costs decreased 8% versus the prior year period (decreased 23% on a reported basis), as a 2% increase in net credit losses to $579 million was more than offset by a $65 million lower loan loss reserve build. In constant dollars, the net credit loss rate was 1.82% of average loans in the second quarter 2015, compared to 1.83% in the prior year period.
Institutional Clients Group
ICG revenues increased 6% from the prior year period to $8.9 billion. Excluding the impact of CVA/DVA, revenues of $8.6 billion increased 2% from the prior year period, driven by 4% growth in Markets and Securities Services revenues.
Banking revenues of $4.4 billion were largely unchanged from the prior year period (excluding gain / (loss) on loan hedges in each period). Treasury and Trade Solutions (TTS) revenues of $2.0 billion decreased 1% versus the prior year period. On a constant dollar basis, TTS revenues grew 5%, as continued growth in deposit balances and spreads was partially offset by lower trade revenues. Investment Banking revenues of $1.3 billion decreased 4% versus the prior year period, as a 34% increase in advisory revenues to $258 million partially offset a 3% decrease in debt underwriting revenues to $729 million and a 25% decrease in equity underwriting revenues to $296 million. Private Bank revenues increased 13% from the prior year period to $746 million, driven by increased loan and deposit balances and growth in investments and capital markets products. Corporate Lending revenues declined 2% versus the prior year period to $445 million (excluding gain / (loss) on loan hedges in each period), as growth in average loans was more than offset by the impact of lower spreads and the impact of foreign exchange translation.
Markets and Securities Services revenues of $4.2 billion (excluding $303 million of CVA/DVA, versus negative $31 million in the prior year period) grew 4% from the prior year period. Fixed Income Markets revenues of $3.1 billion in the second quarter 2015 (excluding $283 million of CVA/DVA, compared to negative $36 million in the prior year period) decreased 1% from the prior year period, as continued strength in rates and currencies was more than offset by lower revenues in spread products. Equity Markets revenues of $653 million (excluding $21 million of CVA/DVA, compared to $4 million in the prior year period) decreased 1% versus the prior year period. The second quarter 2015 included a charge of $175 million to revenue for valuation adjustments related to certain financing transactions. Excluding these adjustments, Equity Markets revenues would have increased by 26%, mostly reflecting improvement in derivatives. Securities Services revenues of $557 million grew 7% versus the prior year period, reflecting increased activity and higher client balances, partially offset by the impact of foreign exchange translation.
ICG net income of $2.8 billion in the second quarter 2015 increased 11% from the prior year period. Excluding CVA/DVA, net income of $2.6 billion increased 2% from the prior year period, as the higher revenues were partially offset by higher operating expenses. ICG operating expenses increased 2% to $4.8 billion driven by higher regulatory and compliance costs, partially offset by ongoing efficiency savings and the impact of foreign exchange translation. ICG cost of credit was negative $95 million, compared to negative $112 million in the prior year period.
ICG average loans grew 2% versus the prior year period to $284 billion while end of period deposits increased 3% to $588 billion. In constant dollars, average loans were up 5% versus the prior year period, while end of period deposits increased 8%.
Citi Holdings
Citi Holdings revenues of $1.7 billion in the second quarter 2015 included CVA/DVA of $9 million, compared to negative $1 million in the prior year period. Citi Holdings revenues decreased 16% from the prior year period, driven by the overall wind-down of the portfolio and the impact of the previously-referenced recording of OneMain Financial net credit losses as a reduction in revenue. As of the end of the quarter, Citi Holdings assets were $116 billion, 22% below the prior year period, and represented approximately 6% of total Citigroup assets.
Citi Holdings net income was $163 million, compared to a loss of $3.5 billion in the prior year period. Excluding CVA/DVA in both periods and the impact of the mortgage settlement in the prior year period, Citi Holdings net income of $157 million declined by 33% from the prior year period, primarily reflecting the lower revenues, partially offset by lower operating expenses and a lower cost of credit. Citi Holdings operating expenses, excluding the impact of the mortgage settlement, declined 13% from the prior year period to $1.1 billion, primarily driven by the ongoing decline in Citi Holdings assets. Cost of credit decreased 36%, driven by the impact of the previously-referenced recording of OneMain Financial net credit losses as a reduction in revenue. Excluding the impact of the mortgage settlement, the net loan loss reserve release decreased 37% from the prior year period to $171 million, primarily due to lower reserve releases related to the North America mortgage portfolio.
Citi Holdings allowance for credit losses was $3.4 billion at the end of the second quarter 2015, or 5.80% of loans, compared to $5.8 billion, or 6.40% of loans, in the prior year period. 90+ days delinquent consumer loans in Citi Holdings decreased 43% to $1.5 billion, or 2.76% of loans.
Citigroup will host a conference call today at 11 a.m. (ET). A live webcast of the presentation, as well as financial results and presentation materials, will be available at http://www.citigroup.com/citi/investor. Dial-in numbers for the conference call are as follows: (866) 516-9582 in the U.S. and Canada; (973) 409-9210 outside of the U.S. and Canada. The conference code for both numbers is 57649611.
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