Third Quarter 2022 Results and Key Metrics

Third Quarter Financial Results

Citigroup revenues of $18.5 billion in the third quarter 2022 increased 6%. Excluding the gain on sale of the Philippines consumer business in the quarter and the loss on sale of the Australia consumer business in the prior-year period, revenues were down 1%, as the impact of higher interest rates across businesses and strong loan growth in PBWM were more than offset by declines in Investment Banking and Markets and investment product revenues in Global Wealth Management.

Citigroup operating expenses of $12.7 billion in the third quarter 2022 increased 8%, largely driven by transformation investments, business-led investments, inflation and other risk and control initiatives and volume-related expenses, partially offset by productivity savings and the benefit of foreign exchange translation. Operating expenses included approximately $107 million of divestiture-related costs this quarter⁵. Excluding these costs, expenses increased 7%.

Citigroup cost of credit of $1.4 billion in the third quarter 2022, compared to $(0.2) billion in the prior-year period, reflecting a net build in the allowance for credit losses (ACL) for loans and unfunded commitments of $0.4 billion, primarily due to the loan growth in PBWM, compared to a net ACL release of $1.2 billion in the prior-year period, partially offset by lower net credit losses.

Citigroup net income of $3.5 billion in the third quarter 2022 decreased 25% from the prior-year period, primarily driven by the higher cost of credit and the higher expenses, partially offset by the increase in revenues. Citigroup’s effective tax rate was 20.0% in the current quarter versus 20.4% in the third quarter 2021.

Citigroup’s total allowance for credit losses on loans was approximately $16.3 billion at quarter end, with a reserve-to-funded loans ratio of 2.54%, compared to $17.7 billion, or 2.69% of funded loans, at the end of the prior-year period. Total non-accrual loans decreased 28% from the prior-year period to $2.9 billion. Consumer non-accrual loans decreased 25% to $1.4 billion and corporate non-accrual loans decreased 30% to $1.5 billion.

Citigroup’s end-of-period loans were $646 billion at quarter end, down 3% versus the prior-year period, largely driven by the impact of foreign exchange translation and lower balances in Legacy Franchises.

Citigroup’s end-of-period deposits were $1.3 trillion at quarter end, down 3% versus the prior-year period, largely driven by declines in Legacy Franchises and the impact of foreign exchange translation, partially offset by the issuance of institutional certificates of deposit, as Citigroup continues to diversify its funding profile.

Citigroup’s book value per share of $92.71 and tangible book value per share of $80.34 at quarter end increased 1% and 2%, respectively, largely driven by the net income and lower shares outstanding, partially offset by adverse movements in the accumulated other comprehensive income (AOCI) component of equity and common dividends. At quarter end, Citigroup’s CET1 Capital ratio was 12.2% versus 11.9% in the second quarter 2022, reflecting the benefits of the net income, the sale of the Philippines consumer business and the optimization of risk-weighted assets (RWA), partly offset by interest rate impacts on unrealized available-for-sale securities losses through Citigroup’s investment portfolio and changes in deferred tax assets. Citigroup’s Supplementary Leverage ratio for the third quarter 2022 was 5.7% versus 5.6% in the second quarter 2022. During the quarter, Citigroup returned a total of $1.0 billion to common shareholders in the form of dividends.

ICG revenues of $9.5 billion decreased 5% (including gain/(loss) on loan hedges)⁷, as strong revenue growth in Services was more than offset by lower revenues across Markets and Banking.

Services revenues of $4.2 billion increased 33%. Treasury and Trade Solutions (TTS) revenues of $3.2 billion increased 40%, driven by 61% growth in net interest income and 8% growth in non-interest revenue. Strong performance in TTS was driven by business actions, which included managing deposit repricing, deepening of relationships with existing clients, and significant new client wins across all segments, as well as the benefit of higher interest rates. Securities Services revenues of $968 million increased 15%, as net interest income increased 73%, driven by higher interest rates across currencies, partially offset by a 6% decrease in non-interest revenue due to the impact of market valuations.

Markets revenues of $4.1 billion were down 7%, largely driven by lower client activity levels in Equity Markets and spread products, and the optimization of RWA. Fixed Income Markets revenues of $3.1 billion increased 1%, as strength in rates and currencies was largely offset by continued headwinds in spread products. Equity Markets revenues of $1.0 billion were down 25%, primarily reflecting reduced client activity in equity derivatives relative to a very strong quarter in the prior-year period.

Banking revenues of $1.2 billion decreased 50%, including losses on loan hedges in the current quarter and the prior-year period. Excluding losses on loan hedges, Banking revenues of $1.3 billion decreased 49%, driven by lower revenues in Investment Banking and Corporate Lending. Investment Banking revenues of $631 million decreased 64%, as heightened macroeconomic uncertainty and volatility continued to impact client activity. Excluding losses on loan hedges, Corporate Lending revenues decreased 11% versus the prior-year period, driven by lower volumes and higher credit default swap premiums.

ICG operating expenses of $6.5 billion increased 10%, driven by transformation investments, business-led investments, and volume-related expenses, partially offset by productivity savings and foreign exchange translation.

ICG cost of credit of $86 million, compared to $24 million in the prior-year period, included a modest net ACL build for loans and unfunded commitments driven by macroeconomic uncertainty, which was mostly offset by a partial release of a COVID-19 related uncertainty reserve. Net credit losses for the quarter were nearly zero.

ICG net income of $2.2 billion decreased 30%, largely driven by the lower revenues, the higher expenses and the higher cost of credit.

PBWM revenues of $6.2 billion increased 6%, as net interest income growth, driven by higher interest rates and strong loan growth across Branded Cards, Retail Services and Retail Banking, was partially offset by a decline in non-interest revenue, driven by lower investment fee revenues in Global Wealth Management and higher partner payments in Retail Services.

US Personal Banking revenues of $4.3 billion increased 10%. Branded Cards revenues of $2.3 billion increased 10%, driven by the higher net interest income. In Branded Cards, new account acquisitions increased 10%, card spend volumes increased 14% and average loans increased 12%. Retail Services revenues of $1.4 billion increased 12%, driven by the higher net interest income, partially offset by the higher partner payments. Retail Banking revenues of $642 million increased 2%, primarily driven by the higher interest rates and deposit growth.

Global Wealth Management revenues of $1.9 billion decreased 2%, as investment fee headwinds, particularly in Asia, more than offset net interest income growth from the higher interest rates. Excluding Asia⁸, revenues increased 4%.

PBWM operating expenses of $4.1 billion increased 13%, primarily driven by transformation investments, other risk and control initiatives, business-led investments and volume-driven expenses, partially offset by productivity savings.

PBWM cost of credit of $1.1 billion compared to $(0.2) billion in the prior-year period. The increase was largely driven by a net ACL build of $0.4 billion in the current quarter for loans and unfunded commitments, primarily driven by cards volume growth, compared to a net ACL release of $0.8 billion in the prior-year period for loans and unfunded commitments. Net credit losses of $723 million increased 13% from near historically low levels, reflecting ongoing normalization, particularly in Retail Services.

PBWM net income of $792 million decreased 58%, largely driven by the net ACL release in third quarter 2021, versus a net ACL build in the current quarter.

Legacy Franchises revenues of $2.6 billion increased 66%, primarily driven by the Philippines consumer business gain on sale and the absence of the Australia consumer business loss on sale in the prior-year period, partially offset by the Korea wind-down as well as the impact of the Australia and the Philippines consumer exits.

Legacy Franchises expenses of $1.8 billion increased 6%, driven by divestiture-related costs in Asia and Mexico.

Legacy Franchises cost of credit of $167 million, compared to $(14) million in the prior-year period, primarily driven by a lower net ACL release in the current quarter for loans and unfunded commitments, partially offset by lower net credit losses.

Legacy Franchises net income of $316 million, compared to a net loss of $200 million in the prior-year period, primarily reflecting the Philippines gain on sale in the quarter and the Australia loss on sale in the prior-year period.