Citigroup Reports Fourth Quarter 2012 Earnings Per Share of $0.38; $0.69 Excluding CVA/DVA1 and Repo

Citigroup Reports Fourth Quarter 2012 Earnings Per Share of $0.38; $0.69 Excluding CVA/DVA¹and Repositioning Charges²

Fourth Quarter Net Income of $1.2 Billion; $2.2 Billion Excluding CVA/DVA and Repositioning Charges

Fourth Quarter Revenues of $18.2 Billion; $18.7 Billion Excluding CVA/DVA

Fourth Quarter Net Interest Margin Expanded to 2.93%

Fourth Quarter Results Included $1.3 Billion of Legal and Related Expenses

Fourth Quarter Net Credit Losses of $3.1 Billion Declined 25% versus Prior Year Period

Fourth Quarter Loan Loss Reserve Release of $86 Million versus $1.5 Billion in Prior Year Period

Basel I Tier 1 Common Ratio of 12.7%
Estimated Basel III Tier 1 Common Ratio Increased to 8.7%³

Citigroup Deposits of $931 Billion Grew 7% Versus Prior Year Period

Citicorp Loans of $540 Billion Grew 7% Versus Prior Year Period

Citi Holdings Assets of $156 Billion Declined 31% from Prior Year Period and Represented 8% of Total Citigroup Assets at Year End 2012

NEW YORK--(BUSINESS WIRE)-- Citigroup Inc. today reported net income for the fourth quarter 2012 of $1.2 billion, or $0.38 per diluted share, on revenues of $18.2 billion. This compared to net income of $956 million, or $0.31 per diluted share, on revenues of $17.2 billion for the fourth quarter 2011.

CVA/DVA was a negative $485 million in the fourth quarter, mainly resulting from the improvement in Citigroup's credit spreads, compared to negative $40 million in the prior year period. Fourth quarter 2012 results also included the previously announced $1.0 billion of repositioning charges ($653 million after-tax), compared to $428 million of repositioning charges ($275 million after-tax) in the prior year period. Excluding CVA/DVA, fourth quarter revenues were $18.7 billion, up 8% from the prior year period. Excluding CVA/DVA and repositioning charges, earnings were $0.69 per diluted share, up 68% from the prior year period, as higher revenues, lower core operating expenses and lower net credit losses were partially offset by higher legal and related expenses and a lower net loan loss reserve release.

Michael Corbat, Citigroup's Chief Executive Officer, said, "Our bottom line earnings reflect an environment that remains challenging- with businesses working through issues like spread compression and regulatory changes- as well as the costs of putting legacy issues behind us. However, we did make progress on several fronts. At 8.7%, we reached the target for our year-end Basel III Tier 1 Common ratio. We continue to have a very liquid balance sheet and a high-quality credit portfolio in our core businesses. It will take some time to work through the challenges of the current environment but realizing our core earnings potential, as well as improving our returns on assets and tangible equity, are critical goals going forward."

Citigroup full year 2012 net income was $7.5 billion on revenues of $70.2 billion, compared to net income of $11.1 billion on revenues of $78.4 billion for the full year 2011. Full year 2012 results included negative $2.3 billion in CVA/DVA, compared to positive $1.8 billion in the prior year. Citigroup's full year 2012 results also included a loss of $4.6 billion ($2.9 billion after-tax) related to the sale of minority investments⁴, versus a gain of $199 million ($128 million after-tax) in the prior year. In addition to the fourth quarter 2012 repositioning charges of $1.0 billion, Citigroup recorded a $582 million tax benefit⁵ related to the resolution of certain tax audit items in the third quarter 2012. Excluding CVA/DVA and the impact of minority investments, Citigroup revenues were $77.1 billion in 2012, up slightly compared to $76.3 billion in the prior year. Excluding these items as well as the repositioning charges in the fourth quarters of 2012 and 2011 and the tax item in the third quarter of 2012, net income was $11.9 billion in 2012, up 18% compared to 2011, as higher revenues, lower core operating expenses and lower net credit losses were partially offset by higher legal and related expenses and a lower net loan loss reserve release in 2012 compared to 2011.

Citigroup revenues of $18.7 billion in the fourth quarter 2012, excluding CVA/DVA, increased 8% from the prior year period, driven by 9% growth in Citicorp revenues and a 2% decline in Citi Holdings revenues primarily resulting from the ongoing wind down of Citi Holdings assets.

Citicorp revenues⁽⁶⁾ of $17.1 billion in the fourth quarter 2012 included $(510) million of CVA/DVA reported within Securities and Banking. Excluding CVA/DVA, Citicorp revenues were $17.6 billion, an increase of 9% from the prior year period with growth reported in each of the three operating businesses within Citicorp. Securities and Banking revenues grew 47% (excluding CVA/DVA), Global Consumer Banking (GCB) revenues grew 4% and Transaction Services revenues grew 1% from the prior year period.

Citi Holdings revenues of $1.1 billion in the fourth quarter 2012 included positive $25 million of CVA/DVA. Excluding CVA/DVA, Citi Holdings revenues were $1.0 billion, down 2% versus the prior year period. Local Consumer Lending drove the decline in Citi Holdings revenues from the prior year period, due to the ongoing reduction in assets. Most of the decline in Local Consumer Lending revenues was offset by higher revenues in the Special Asset Pool reflecting an improvement in asset marks. Total Citi Holdings assets of $156 billion declined $69 billion, or 31%, from the fourth quarter 2011. Citi Holdings assets at the end of the fourth quarter 2012 represented approximately 8% of total Citigroup assets.

Citigroup's net income rose to $1.2 billion in the fourth quarter 2012 from $956 million in the prior year period. Excluding the impact of CVA/DVA and repositioning charges, Citigroup net income was $2.2 billion, 72% higher than the fourth quarter 2011. Operating expenses of $13.8 billion were 5% higher than the prior year period reflecting the higher repositioning charges and higher legal and related costs, including the previously announced $305 million charge in the fourth quarter 2012 related to the agreement in principle reached with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board regarding the independent foreclosure review process. Citigroup's cost of credit in the fourth quarter 2012 was $3.2 billion, an increase of 11% over the prior year period, reflecting a $1.4 billion decrease in net loan loss reserve releases offset by a $1.0 billion improvement in net credit losses. Citigroup's provision for income taxes was a benefit of $206 million in the fourth quarter 2012, compared to an expense of $91 million in the prior year period.

Citigroup's allowance for loan losses was $25.5 billion at year end, or 3.9% of total loans, compared to $30.1 billion, or 4.7% of total loans, in the prior year period. The $86 million net release of loan loss reserves in the quarter compared to a $1.5 billion release in the prior year period. Reserve releases in Citicorp of $137 million compared to $805 million in the fourth quarter 2011, predominantly reflecting lower releases in North America GCB, largely related to Citi-branded cards. Citi Holdings recorded a net loan loss reserve build of $51 million in the fourth quarter 2012, compared to a net reserve release of $663 million in the prior year period, as a significantly lower net reserve release of $49 million was more than offset by losses on loan sales of $100 million. Citigroup asset quality remained largely stable to improving in the fourth quarter 2012. Corporate non-accrual loans decreased 28% to $2.3 billion from the fourth quarter 2011, while consumer non-accrual loans grew 17% to $9.2 billion from the fourth quarter 2011, predominantly reflecting the third quarter 2012 OCC guidance regarding the treatment of mortgage loans where the borrower has gone through Chapter 7 bankruptcy which added $1.5 billion to consumer non-accrual loans. Consumer loans that were 90+ days delinquent, excluding the Special Asset Pool, decreased 17% versus the prior year period to $7.7 billion, or 1.9% of consumer loans.

Citigroup's capital levels and book value per share increased during 2012. As of quarter end, book value per share was $61.57 and tangible book value per share⁷ was $51.19, 1% and 3% increases respectively versus the prior year period. Citigroup's book value and tangible book value per share each declined 3% in the fourth quarter 2012 as compared to the third quarter 2012 due to the dilutive impact of the issuance of approximately 96 million shares of common stock during the quarter upon the automatic settlement of the T-DECS issued in December 2009, as previously announced. At quarter end, Citigroup's Tier 1 Capital Ratio was 14.1%, its Basel I Tier 1 Common Ratio was 12.7%, and its Basel III Tier 1 Common Ratio was estimated at 8.7%.