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Posts tagged ‘Citigroup’

US Bond Bubble ready to pop

Wall Street up-date from Thomas Kee

By Thomas Kee

LA JOLLA, Calif. (MarketWatch) — In recent months, Wall Street has used the prospects for quantitative easing to influence buying decisions, then they used the probabilities of a Republican-controlled Congress, and then of course, earnings.

No one can argue with the strong earnings season, even banks like Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 11.56, +0.11, +0.97%)  , Wells Fargo & Co. /quotes/comstock/13*!wfc/quotes/nls/wfc (WFC 26.06, +0.12, +0.46%)  , Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c (C 4.19, +0.02, +0.48%) , and J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 37.63, +0.12, +0.32%) were able to beat earnings from moving money out of reserves, but everyone knows that domestic growth will curtail unless the economy gets on track, and that is why the FOMC is trying to inflate our way to growth.

In this article, I will discuss my proprietary longer-term economic model, The Investment Rate. I will broadly explain its projections, and offer insight to future economic conditions. It is not about next week, or next month, but projects by years and decades.

The recent weakness in the dollar was caused by the prospects for quantitative easing, or QE2. By now, everyone recognizes this, and stock market investors are happy. Everything considered, earnings were great, and now investors expect earnings to be great next time too.

The immediate concern is, regardless of economic conditions, that margins will be squeezed because corporate America finds it very difficult to pass on higher costs to a consumer base that is suffering from so much unemployment. Some people will be able to pay higher prices, but most will not. Therefore, the weak dollar, because of QE2, influences commodity prices higher and puts a squeeze on corporate margins that reduces the outlook for earnings growth going forward. The smart ones hedge their costs prudently, but those hedges eventually expire as well.

/conga/story/2010/11/trading-strategies.html 1The immediate prospects for corporate earnings are tightening, not only because of higher commodity prices due to what some think is a positive effort by the FOMC, but also to a fundamental shift in our economy as that relates to The Investment Rate. The Investment Rate is a tool that tells us the rate of change in the amount of new money slated to be invested into the economy by U.S. consumers over time.

It is this new money that moves the markets and the economy. Only new investment dollars can allow the market to grow; we cannot churn old money and expect positive results. One asset class may outperform another in that case, but the overall market cannot grow without the infusion of new money. The Investment Rate tells us the rate of change in the amount of new money every year.

I have been using The Investment Rate as a leading indicator since I developed it in 2002. It was then a bullish indicator because it told me that the amount of new money available to be invested into the economy every year between 2002 and 2007 would also increase every year during that time span. In 2007 I warned everyone that The Investment Rate was at a turning point in that demand had peaked and a transition lower would begin soon. On CNBC, I was nicknamed the Grim Reaper. The IR had turned bearish. Well, the Grim Reaper is back.

The third major down period in U.S. history began in 2007. It is nowhere close to over. During periods of weakness, akin to the Great Depression and the stagflation period of the 1970s, bounce backs are normal. In fact, we were long from March of 2009 until April of 2010. Admittedly, the past two months took me by surprise, but my longer-term outlook remains firmly intact. The recent increase is doing nothing to influence the longer-term trend. This is a bounce higher within a longer term down period. The only way earnings growth will continue is if it is focused solely overseas, and even with that, margins are still going to tighten given high commodity costs.

The strategy for November is straightforward. If the Dow industrials /quotes/comstock/10w!i:dji/delayed (DJIA 11,118, +4.54, +0.04%)  remain below 11,220 buy ProShares UltraShort Russell 2000 /quotes/comstock/13*!twm/quotes/nls/twm (TWM 15.84, -0.19, -1.19%) , iPath S&P 500 VIX Short-Term Futures ETN /quotes/comstock/13*!vxx/quotes/nls/vxx (VXX 13.10, +0.05, +0.36%) , ProShares UntraShort Real Estate ETF /quotes/comstock/13*!srs/quotes/nls/srs (SRS 19.69, -0.04, -0.20%) , and ProShares UltraShort Financials /quotes/comstock/13*!skf/quotes/nls/skf (SKF 19.05, +0.03, +0.16%) and expect to squat on them for a while. On the other hand, if the market breaks above 11,220 buy ProShares Ultra Dow 30 /quotes/comstock/13*!ddm/quotes/nls/ddm (DDM 49.95, +0.13, +0.26%)   and let it ride. If it breaks and then reverses back conversion strategies are necessary — 112220 is longer term resistance, and it needs to be respected.

I expect continued weakness in the U.S. economy, and the declines could even become severe after the FOMC decision, the election, and quantitative easing. Sell the news is a high probability, and should influence near term direction. My longer term forecasts suggest a Greater Depression is an equally high probability over time too.

source http://www.marketwatch.com/story/the-grim-reaper-is-back-2010-11-01


Keeping an eye on the US is essential when looking for insights as to where the Irish economy in going

we need a strong US economy!

Bank of America Corp

Bondholders are penalizing Bank of America Corp. the most of any of the largest U.S. financial firms as the investigation into the foreclosure crisis expands. Credit-default swaps on the country’s largest bank by assets rose above those of its peers by a record margin, according to data provider CMA. The contracts, which imply Bank of America has lost its investment-grade rating, exceed Citigroup Inc.’s by the most ever and surpassed Morgan Stanley’s this week for the first time in a year.

 Attorneys general from all 50 states joined to open an investigation into whether lenders and mortgage companies falsified documents as they sought to repossess homes. Charlotte, North Carolina-based Bank of America said Oct. 8 it would curtail foreclosure sales nationwide, as speculation rose the lender would have to buy back home mortgages with faulty documentation. “As we look at the financial landscape and try to put pen to paper and figure out who might be most exposed to problems associated with foreclosure moratoria, with robo-signers, with mortgage put-backs,

Bank of America’s at the top of the list,” said David Havens, a financial institution debt analyst at Nomura Holdings Inc. in New York. Bank of America is being singled out for expanding its real-estate operations and acquiring Countrywide Financial Corp., then the biggest U.S. mortgage lender, in 2008 during the worst housing slump since the Great Depression, Havens said. The bank also increased its mortgage assets through the $29 billion purchase of Merrill Lynch & Co. in January 2009 under pressure from the Federal Reserve, which was trying to prevent failure of the U.S. banking system. ‘Nothing Different’ “There’s nothing different about our company today than yesterday,” Chief Executive Officer Brian T. Moynihan said after a speech in Boston yesterday.

The bank’s review of foreclosures will take “a few weeks to get through,” he said. Jerry Dubrowski, a spokesman for Bank of America, declined to comment further. Elsewhere in credit markets, the extra yield investors demand to own company bonds instead of similar-maturity government debt rose 1 basis point to 168 basis points, or 1.68 percentage points, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. The spread has narrowed 13 basis points since Aug. 31. Yields averaged 3.396 percent yesterday, the index shows.

Structured Notes Structured notes issuance in the U.S. reached a record, with banks selling $38.4 billion of the securities this year as investors turn away from stocks and toward fixed-income products. Sales of the products, which are bonds bundled with derivatives, compare with $33.9 billion last year and $37.6 billion in the previous record year of 2008, according to database StructuredRetailProducts.com. Credit-default swaps on the Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, were little changed, rising 0.08 basis point to a mid-price of 98.54 basis points as of 12:58 p.m. in New York, according to index administrator Markit Group Ltd. In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased 1.93 to 102.5.

The indexes typically rise as investor confidence deteriorates and fall as it improves. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt. ‘Political Implications’ The cost to protect Bank of America’s debt for five years climbed for a fourth day, touching yesterday’s record of 205 basis points, according to Phoenix Partners Group. The difference between the swap price and the average of the five largest banks grew yesterday to 41.1 basis points, the most on record. Citigroup’s swaps rose 3.2 basis points to 177 today and contracts on New York-based Morgan Stanley fell 2.2 basis points to 173, Phoenix data show.

In February, Citigroup’s contracts were 94.4 basis points higher than those of Bank of America’s, according to CMA. “For all of these residential real estate issues that are dominating the headlines today and have significant political implications in the 19 days going into the election, Bank of America sits there more exposed than Citigroup right now,” Nomura’s Havens said. Implied Ratings Prices on Bank of America’s credit-default swaps imply the debt is ranked Ba1 as of Oct. 13, five levels below its actual A2 grade, according to Moody’s Corp.’s capital markets research group. That’s the first time the firm’s swaps have signaled a junk ranking since May 6, the data show. Bank of America’s $2.5 billion of 4.5 percent notes due in April 2015 fell 0.381 cent to 103.89 cents on the dollar as of 11:36 a.m. in New York, Trace data show. The bonds were issued at 99.9 cents in March to yield 215 basis points more than Treasuries.

 The bank has $360 billion of bonds outstanding, Bloomberg data show. The rising price of swaps reflects potential costs that banks may face on so-called mortgage put-backs from investors. Put-backs occur when a mortgage lender is forced to repurchase a loan that’s been sold for securitization. Banks may also have to pay for legal challenges. Loan-Servicing Grade The Association of Financial Guaranty Insurers, a trade group for bond insurers, said in a letter last month toMoynihan that his bank should repurchase as much as $20 billion in home loans that were based on wrong or missing information. Moody’s put Bank of America’s loan-servicing grade on review for a possible downgrade on Oct. 4, citing irregularities in the foreclosure process and deterioration of loss mitigation and collections.

The bank’s swaps have doubled this year, adding 106.4 basis points. That’s still down from 400.7 basis points in March 2009, CMA data show. “You’ve had balance sheet repair but the work isn’t done,” said Joel Levington, managing director of corporate credit at Brookfield Investment Management Inc. in New York. “People need to get their hard hats back on.”


If the market is now taking heed of the problems of Bank of America and mortgage defaults why are the Irish Banks ignoring the same problems here in Ireland? I believe the problem of negative equity is not entirely all the fault of the mortgage holders there is percentage of the fault on the lending intuitions as I believe they did not carry out due diligence on all transactions and standards were not enforced. Standard procedures were not adhered to in a lot of cases. We the taxpayers are going to have to face the problem sooner or later with a mass default of mortgages or a mass bailout, a kind of NAMA for homeowners and the Department of Finance knows it but the banks are pussy footing around the problem. This very possibility was discussed to –day on radio one

How Gangsters are Saving the Eurozone

How Gangsters are Saving the Eurozone
By: Pravda

Stephen Fidler writes:

Gangsters, drug dealers and criminals engaged in money laundering appear to be helping to shore up the financial stability of the eurozone. That is thanks to the demand, European officials said, for high-denomination banknotes, mainly from 200 euros and 500 euros. The European Central Bank issues these bills for a large profit which is welcome at a time when their response to the financial crisis has cast doubt on their financial strength.
The high value notes are “the euro is becoming increasingly the favorite currency in the black economy and to all those who value the anonymity of their transactions and financial investments,” wrote Willem Buiter, chief economist at Citigroup (Citigroup on the list of USA tax havens) in a recent report. The business of issuing euro banknotes, produced at a cost close to zero, is “extremely profitable” for the ECB, Buiter wrote. (And the U.S. has given billions?)
When euro banknotes and coins were brought into circulation in January 2002, the value of the existing 500 euro was 30,800 million euros, according to the ECB.
Today, there are approximately 285,000 million euro banknotes in circulation, yielding an annual growth rate of 32%. By value, 35% of euro banknotes in circulation are the largest denomination, the 500 euro note that few people get to see.
In 1998, Gary Gensler, then a member of the U.S. Treasury showed public concern about the competition to the $100 bill, the highest value in U.S. banknotes, posed by the largest euro and its possible use by criminals. He noted that $1 million in $100 bills weighs 22 pounds, in hypothetical $500 bills, would weigh just 4.4 pounds. (I do not see the problem to print 1,000 tickets, or $ 10,000)
Police have found large euro notes in cereal boxes, wheels and hidden compartments in trucks, said Soren Pedersen, a spokesman for Europol, the European police agency based in The Hague. “It goes without saying that this money is often linked to the illegal drug trade, which explains the similarity of the methods of concealment that are used.”
An ECB spokesman declined to comment on who uses the euro notes.
The ECB and the governments that belong to it are the beneficiaries of the demand for large bills.
The profit a central bank obtains from issuing currency – as well as other privileges of a central bank, such as asking for free or low cost deposits from banks – is known as seigniorage. It normally accumulates in the national treasures after the central banks account for their own costs
Proceeds from the ECB seigniorage emission are becoming increasingly important this year.
The ECB has included in its balance sheet hundreds of billions of euros of unknown quality in response to the global financial crisis.
It holds more than 600,000 billion in collateral for banks to whom it made loans, and over 400,000 billion in securities it holds directly, including government bonds.
In general, the ECB’s balance sheet has grown to nearly 2 trillion euros (million million). It has a capital base of 78,000 billion euros. That is a leverage which makes it look like a “hedge fund on steroids,” said Buiter. It wouldn’t need to lose much with these assets to wipe out its thin cushion of capital.
That’s where seigniorage comes in. Then it becomes important with the benefits obtained from the issuance of currency.
In recent years, the profits of its issuance of new paper currency was 50,000 billion euros. In 2008, the year of the crisis of Lehman Brothers, it was 80,000 billion euros.
Even with conservative assumptions about future growth of currency in circulation – of, say, 4% per annum, which is in line with the ECB’s target inflation rate of 2% plus economic growth rate – Buiter estimates future seigniorage profits for the central bank will be between 2 trillion euros and 6.9 trillion euros.
Thanks to seigniorage, he says, the ECB is “super solvent.” (Just like the Fed, except that this is more supersolvent it is the queen and the U.S. currency can be indebted to the galaxy (in dollars) and issue bills of millions of dollars and pay their bills in a couple of minutes).
An ECB spokesman said that there are no plans to withdraw the higher value notes, national equivalents of which were used in six member states before the launch of the euro. They will be retained when issuing a new series in the coming years.
Replacing them with lower denomination notes would increase production costs and processing, he says.


No real news here this is well known throughout the financial industry just like the “Rumours” about Anglo Irish Bank and its connections with questionable entities involved in similar activities in this state,
Like I said “Rumours”
where there is money there is crime not too far away and not where you would expect it to be either !

Citigroup Inc. second quarter 2010 net income report

Citigroup Reports Second Quarter 2010 Net Income of $2.7 Billion; $0.09 Per Diluted Share
First Half 2010 Net Income of $7.1 Billion

NEW YORK, Jul 16, 2010 (BUSINESS WIRE) — –Second Quarter 2010 Revenues of $22.1 Billion and Expenses of $11.9 Billion

–Net Credit Losses of $8.0 Billion Declined for the Fourth Consecutive Quarter

–Tier 1 Capital Ratio of 12.0%; Tier 1 Common Ratio(1) of 9.7%

–Tier 1 Common of $99.5 Billion and Allowance for Loan Losses of $46.2 Billion

–Citicorp Revenues of $16.5 Billion, Net Income of $3.8 Billion

–Citi Holdings Revenues of $4.9 Billion, Net Loss of $1.2 Billion

Citigroup Inc. today reported second quarter 2010 net income of $2.7 billion or $0.09 per diluted share, on revenues of $22.1 billion, marking a second consecutive profitable quarter. Citigroup earned $7.1 billion of net income in the first six months of 2010.

Revenues declined $3.4 billion and net income was down $1.7 billion from the first quarter of 2010, largely as a result of lower Securities and Banking and Special Asset Pool revenues. Other core businesses showed consistent strength, including Transaction Services with $929 million in net income and sequential revenue growth across all international regions.

Provisions for credit losses and for benefits and claims declined $2.0 billion sequentially to $6.7 billion, the lowest level since the third quarter of 2007, reflecting continued improvement in credit quality. This helped increase Regional Consumer Banking’s net income by 16% sequentially to $1.2 billion.

Although Citigroup maintained expense discipline, expenses were up 3% sequentially, reflecting the impact of the U.K. bonus tax.

“I am pleased that we have produced solid operating results for the second consecutive quarter,” said Vikram Pandit, Chief Executive Officer of Citi. “We continue to execute our strategy of serving clients with our unique global footprint in both the developed and emerging markets. Most importantly, Citi’s quarter-million people around the world are working tirelessly for our clients and shareholders.

“While the market environment lowered revenues in Securities and Banking, credit improved for the fourth consecutive quarter. We saw growth internationally, particularly in Transaction Services and Regional Consumer Banking in Latin America and Asia. We continue to reduce the size of Citi Holdings, and it now makes up less than a quarter of Citigroup’s balance sheet,” added Mr. Pandit.

Citigroup has been focusing on its core businesses in Citicorp — Securities and Banking, Transaction Services and Regional Consumer Banking — while continuing to divest non-core businesses in Citi Holdings. In the second quarter of 2010, Citicorp earned $3.8 billion while Citi Holdings had a loss of $1.2 billion. Citi Holdings reduced its assets by $38 billion in the second quarter and by a total of $362 billion since the peak in the first quarter of 2008, for a 44% reduction. Citi Holdings now represents less than 25% of Citigroup’s assets compared to 38% at its peak.

Citigroup continues to increase its financial strength and is one of the best capitalized banks in the world, as indicated by $122.9 billion in Tier 1 Capital and a Tier 1 Common ratio of 9.7%. In addition, it has common equity of $154.5 billion and $46.2 billion in loan loss reserves.

“Although economic conditions remain challenging and global regulatory frameworks are uncertain, we believe these results demonstrate that the difficult decisions made by our management team have put in place all the elements for sustained profitability,” concluded Mr. Pandit.


— Citigroup revenues were $22.1 billion, down $3.4 billion sequentially, on lower Securities and Banking and Special Asset Pool revenues.

— Citigroup expenses increased $348 million, or 3%, sequentially to $11.9 billion, primarily driven by the U.K. bonus tax of $404 million, most of which was recorded in Securities and Banking, as well the impact of continued investments in Citicorp businesses, partially offset by expense reduction in Citi Holdings.

— Citigroup net credit losses declined $422 million, or 5%, sequentially to $8.0 billion, reflecting improvement across most consumer portfolios. Net credit losses have declined for four consecutive quarters since reaching $11.5 billion in the second quarter of 2009.(2)

— Citigroup recorded a net release of reserves for loan losses and unfunded lending commitments of $1.5 billion in the second quarter of 2010, versus a $53 million net reserve release in the prior quarter. The reserve release in the quarter consisted of $827 million for consumer loans and $683 million for corporate loans and unfunded lending commitments.

— Citigroup’s total allowance for loan losses was $46.2 billion, or 6.72% of loans, down from $48.7 billion, or 6.80% of loans in the first quarter of 2010.

— Citigroup’s allowance for consumer loan losses was $39.6 billion, or 7.87% of total consumer loans, which is approximately flat compared to the prior quarter. Coincident months of coverage on the consumer portfolio increased sequentially to 15.9 months from 15.5 months.

— Citigroup’s non-accrual loans declined 13% from $28.6 billion in the prior quarter to $24.8 billion.

— Citigroup’s Tier 1 Capital ratio was 12.0% compared to 11.3% in the prior quarter.

— Citigroup’s Tier 1 Common ratio was 9.7%, up from 9.1% in the first quarter of 2010.

— Book Value per share was $5.33, up from $5.28 in the prior quarter. Tangible Book Value(3) per share was $4.19, up from $4.09 in the prior quarter.

— Citigroup end of period assets declined 3% sequentially to $1.9 trillion at the end of the second quarter. Citi Holdings end of period assets declined $38 billion sequentially to $465 billion and were down $362 billion from the peak in the first quarter of 2008. Citigroup average assets were $2.0 trillion, essentially flat to the prior quarter, as growth in Citicorp was offset by declines in Citi Holdings.

— Continued support for U.S. economy and consumers. From January 1, 2007 through June 30, 2010, Citi has helped more than 990,000 homeowners in their efforts to avoid potential foreclosure. Citi also announced a three month foreclosure suspension program in the Gulf of Mexico region to allow eligible borrowers to remain in their homes as Gulf communities respond to the oil spill and its economic repercussions. As of June 30, 2010, Citi was also helping more than 1.6 million credit card members manage their card debt through a variety of forbearance programs.

(in millions of dollars) 2Q’10 1Q’10 2Q’09a % I/(D) % I/(D)
——- ——- ——- ——- ——-
North America 3,693 3,801 3,826 (3)% (3)%
EMEA 376 405 394 (7)% (5)%
Latin America 2,118 2,076 1,950 2% 9%
Asia 1,845 1,800 1,675 3% 10%
——- ——- ——- ——- ——-
Regional Consumer Banking 8,032 8,082 7,845 (1)% 2%
North America 2,627 3,553 1,721 (26)% 53%
EMEA 1,762 2,515 2,558 (30)% (31)%
Latin America 558 607 1,049 (8)% (47)%
Asia 1,008 1,328 1,373 (24)% (27)%
——- ——- ——- ——- ——-
Securities and Banking 5,955 8,003 6,701 (26)% (11)%
North America 636 639 656 (0)% (3)%
EMEA 848 833 860 2% (1)%
Latin America 356 344 340 3% 5%
Asia 662 621 627 7% 6%
——- ——- ——- ——- ——-
Transaction Services 2,502 2,437 2,483 3% 1%
——————————– ——- ——- ——- ——- ——-
Total Citicorp $16,489 $18,522 $17,029 (11)% (3)%
——————————– ——- ——- ——- ——- ——-
Citi Holdings
Brokerage and Asset Management 141 340 12,220 (59)% (99)%
Local Consumer Lending 4,206 4,670 4,963 (10)% (15)%
Special Asset Pool 572 1,540 (376) (63)% NM
——————————– ——- ——- ——- ——- ——-
Total Citi Holdings $4,919 $6,550 $16,807 (25)% (71)%
——————————– ——- ——- ——- ——- ——-
Corporate / Other $663 $349 $(741) 90% NM
——————————– ——- ——- ——- ——- ——-
Total Citigroup $22,071 $25,421 $33,095 (13)% (33)%
——————————– ——- ——- ——- ——- ——-
a Presented on a managed basis. See footnote 2 above.

Citigroup revenues were $22.1 billion, down $3.4 billion, or 13%, from the first quarter of 2010.

Citicorp revenues were $16.5 billion, down $2.0 billion, or 11%, from the first quarter of 2010, driven by a decline in Securities and Banking. Outside of North America, Transaction Services revenues increased 4% and Regional Consumer Banking revenues increased 1%.

— Regional Consumer Banking (“RCB”) revenues were $8.0 billion, down $50 million, or 1%, sequentially, as declines in North America and EMEA were partially offset by continued growth in Asia and Latin America. Average loans declined 2% to $218 billion, as growth in Latin America and Asia was offset by declining balances in North America and EMEA. Average deposits were up 1% to $291 billion, driven by Asia and North America. International investment sales declined 3% to $23.4 billion. — North America RCB revenues were $3.7 billion, down $108 million, or 3%, sequentially, driven by a $151 million decrease in Citi-branded card revenues. The decline in card revenues primarily reflects the impact of The Credit Card Accountability Responsibility and Disclosure (CARD) Act, as well as lower card volumes. Average card loans decreased 4% to $76.2 billion, mainly due to higher payment rates and fewer accounts, partially offset by a 9% increase in purchase sales. Retail banking average loans declined 5% to $30.7 billion, largely reflecting a decline in mortgages. Average deposits increased 1% to $145.5 billion.

— EMEA RCB revenues were $376 million, down $29 million, or 7%, sequentially, primarily due to the impact of foreign exchange in the translation of local currency results into U.S. dollars for reporting purposes (“impact of foreign exchange”). Average loans and deposits declined 9% and 8%, respectively, also reflecting the impact of foreign exchange.

— Latin America RCB revenues were $2.1 billion, up $42 million, or 2%, sequentially, driven by higher volumes. Average card loans were down 1%, as a 1% growth in accounts and a 3% increase in purchase sales were offset by a decline in average loans in Mexico, as this business continues to be repositioned. Average deposits were up 1% and retail banking average loans grew 5%, mainly driven by Mexico. Investment sales declined 8%.

— Asia RCB revenues were $1.8 billion, up $45 million, or 3%, from the prior quarter, driven by higher lending and cards revenues. Average card loans declined 1%, as a 3% increase in purchase sales was offset by a decline in loans in India, as this business continues to be repositioned. Average deposits were up 1%, investment sales were up 8%, and retail banking average loans increased 2%.

— Securities and Banking revenues were $6.0 billion, down $2.0 billion, or 26%, sequentially, driven by lower Fixed Income Markets, Equity Markets, and Investment Banking revenues. — Fixed Income Markets revenues were $3.7 billion ($3.5 billion excluding CVA(4)), compared to $5.4 billion ($5.1 billion excluding CVA) in the prior quarter. The majority of the decline was from weaker results in Credit Products and Securitized Products, which reflected a difficult market environment. Revenues from Rates and Currencies also declined in the quarter with relative strength in Foreign Exchange offset by lower results in Rates Trading.

— Equity Markets revenues were $652 million ($620 million excluding CVA), compared to $1.2 billion ($1.2 billion excluding CVA) in the prior quarter. The 49% decline in revenues excluding CVA was driven by lower results in Derivatives, reflecting lower market and client volumes, and increased volatility.

— Investment banking revenues were $674 million, down $383 million, or 36%, from the prior quarter, as client market activity levels were lower. Debt underwriting revenues of $429 million were down 32%, and equity underwriting revenues of $157 million were down 30%, reflecting lower overall issuance volumes. Advisory revenues were $88 million, down 56%, due to fewer completed deals, as a number of anticipated closings were moved out of the current quarter.

— Private Bank revenues were $512 million, up $18 million, or 4%, sequentially, driven by deposit repricing.

— Lending revenues were $522 million, more than double the $243 million from the first quarter of 2010. The revenue improvement was primarily due to gains on credit default swap hedges, compared to losses in the prior quarter.

— Transaction Services revenues were $2.5 billion, up $65 million, or 3%, sequentially, with growth across all international regions. Securities and Fund Services revenues of $697 million were up 6%, and Treasury and Trade Solutions revenues of $1.8 billion were up 1%. Average deposits and other customer liabilities of $320 billion were flat compared to the prior quarter, with underlying business growth offset by the impact of foreign exchange. Assets under custody declined 4% to $11.3 trillion, driven by the decline in global markets.

Citi Holdings revenues were $4.9 billion, down $1.6 billion, or 25%, from the prior quarter.

— Special Asset Pool revenues declined $968 million sequentially to $572 million, driven by lower positive net revenue marks as gains in sub-prime related direct exposures were partially offset by a lower positive Monoline CVA (see Appendix A). Additionally, in response to recent changes to SFAS 133, Citi reclassified $11.4 billion of securities (including $4.1 billion of Auction Rate Securities) in the Special Asset Pool from held-to-maturity to fair value at the end of the quarter. This resulted in a $176 million charge to revenues, $70 million of which was included in the net revenue marks.

— Local Consumer Lending revenues were $4.2 billion, down $464 million, or 10%, sequentially, driven by the addition of $347 million of mortgage repurchase reserves related to North America residential real estate, lower volumes in cards, and the absence of Primerica.

— Brokerage and Asset Management revenues were $141 million, down $199 million, or 59%, mainly due to the absence of gains on business dispositions recorded in the prior quarter.

Corporate/Other revenues were $663 million, up $314 million, or 90%, from the prior quarter, mainly driven by hedging activities.


Citigroup expenses were $11.9 billion, up $348 million, or 3%, from the prior quarter, and included $404 million from the U.K. bonus tax.

Citicorp expenses were $9.1 billion, up $605 million, or 7%, from the prior quarter. Excluding the approximately $400 million U.K. bonus tax in Citicorp, most of which was recorded in Securities and Banking, expenses were up 3%, reflecting continued selective investments in Asia and Latin America.

Citi Holdings expenses were $2.4 billion, down $150 million, or 6%, from the prior quarter, reflecting continued expense discipline and the absence of Primerica.


(in millions of dollars) 2Q’10 1Q’10 2Q’09a I/(D) I/(D)
QoQ $ YoY $
——— ——— ———- ———- ———-
Net Credit Losses
North America 2,126 2,157 2,144 (31 ) (18 )
EMEA 85 97 121 (12 ) (36 )
Latin America 457 509 610 (52 ) (153 )
Asia 254 277 368 (23 ) (114 )
—— —— ——- ——- — ——- —
Total Net Credit Losses 2,922 3,040 3,243 (118 ) (321 )
Loan Loss Reserves
North America (9 ) 4 149 (13 ) (158 )
EMEA (50 ) (10 ) 158 (40 ) (208 )
Latin America (241 ) (136 ) 156 (105 ) (397 )
Asia (112 ) (38 ) 156 (74 ) (268 )
—— — —— — ——- ——- — ——- —
Total Loan Loss Reservesb (412 ) (180 ) 619 (232 ) (1,031 )
—— — —— — ——- ——- — ——- —
Regional Consumer Banking 2,510 2,860 3,862 (350 ) (1,352 )
Net Credit Losses 43 102 169 (59 ) (126 )
Loan Loss Reservesb (253 ) (187 ) 695 (66 ) (948 )
—— — —— — ——- ——- — ——- —
Institutional Clients Group (210 ) (85 ) 864 (125 ) (1,074 )
Net Credit Losses 2,965 3,142 3,412 (177 ) (447 )
(665 ) (367 ) 1,314 (298 ) (1,979 )
Loan Loss Reservesb
———————————- —— — —— — ——- ——- — ——- —
Total Citicorp $2,300 $2,775 $4,726 $(475 ) $(2,426 )
———————————- —— —— ——- ——- — ——- —
Net Credit Losses 1 11 – (10 ) 1
(9 ) (7 ) 3 (2 ) (12 )
Loan Loss Reservesb
—— — —— — ——- ——- — ——- —
Brokerage and Asset Management (8 ) 4 3 (12 ) (11 )
Net Credit Losses 4,535 4,938 6,422 (403 ) (1,887 )
Loan Loss Reserves (421 ) 386 2,784 (807 ) (3,205 )
—— — —— ——- ——- — ——- —
Local Consumer Lending 4,114 5,324 9,206 (1,210 ) (5,092 )
Net Credit Losses 462 292 1,637 170 (1,175 )
Loan Loss Reservesb (415 ) (65 ) (90 ) (350 ) (325 )
—— — —— — ——- — ——- — ——- —
Special Asset Pool 47 227 1,547 (180 ) (1,500 )
Citi Holdings
Net Credit Losses 4,998 5,241 8,059 (243 ) (3,061 )
Loan Loss Reservesb (845 ) 314 2,697 (1,159 ) (3,542 )
———————————- —— — —— ——- ——- — ——- —
Total Citi Holdings $4,153 $5,555 $10,756 $(1,402 ) $(6,603 )
———————————- —— —— ——- ——- — ——- —
Corporate / Other 3 3 1 – 2
Net Credit Losses 7,962 8,384 11,470 (422 ) (3,508 )
Loan Loss Reservesb (1,510 ) (53 ) 4,013 (1,457 ) (5,523 )
Policyholder Benefits and Claims 213 287 308 (74 ) (95 )
———————————- —— —— ——- ——- — ——- —
Total Citigroup $6,665 $8,618 $15,791 $(1,953 ) $(9,126 )
———————————- —— —— ——- ——- — ——- —
a Presented on a managed basis. See footnote 2 above.
b Includes provision for unfunded lending commitments.

Citigroup total provisions for credit losses and for benefits and claims of $6.7 billion declined $2.0 billion, or 23%, sequentially, to the lowest level since the third quarter of 2007.

— Net credit losses of $8.0 billion were down $422 million, or 5%. Consumer net credit losses declined $530 million, or 7%, to $7.5 billion, reflecting improvement across most portfolios. Corporate net credit losses increased $108 million, or 30%, to $472 million.

— The net reserve release for loan losses and unfunded lending commitments was $1.5 billion, compared to $53 million in the prior quarter. The reserve release in the quarter consisted of $827 million for consumer loans and $683 million for corporate loans and unfunded lending commitments. — The net consumer reserve release was mainly driven by Retail Partner Cards in Citi Holdings, and Latin America and Asia Regional Consumer Banking in Citicorp. The reserve release compares to a net build of $224 million in the prior quarter.

— The net corporate reserve release was more than double that of the prior quarter, up $406 million, and reflected the release of reserves that had been previously established for specific loans and offset charge-offs taken in the quarter. The net loan loss reserve release also reflected releases for the overall portfolio, as corporate credit trends generally continued to improve.

— Citigroup’s total allowance for loan losses was $46.2 billion at quarter-end, or 6.72% of total loans, down from $48.7 billion, or 6.80%, in the prior quarter. — The consumer allowance for loan losses was $39.6 billion at quarter-end, or 7.87% of total consumer loans. Coincident months of coverage on the consumer portfolio increased sequentially from 15.5 to 15.9 months.

Citicorp credit costs of $2.3 billion were down $492 million, or 17%, from the prior quarter, and included net credit losses of $3.0 billion and a $665 million net reserve release for loan losses and unfunded lending commitments. The decline in credit costs reflected continued improvement in corporate credit and key consumer markets, particularly Mexico and India cards.

— North America RCB net credit losses were $2.1 billion, down $31 million, or 1%, mainly driven by an improvement in cards. In Citi-branded cards, 30-89 and 90+ days past due delinquencies declined 15% and 8%, respectively. The $9 million net loan loss reserve release in the quarter in retail banking compared to a $4 million net build in the prior quarter.

— EMEA RCB net credit losses were $85 million, down $12 million, or 12%. The $50 million net loan loss reserve release in the quarter was $40 million higher than the prior quarter’s release.

— Latin America RCB net credit losses were $457 million, down $52 million, or 10%. The $241 million net loan loss reserve release in the quarter was $105 million higher than the prior quarter’s release. The decline in credit costs was mainly driven by improvement in Mexico cards.

— Asia RCB net credit losses were $254 million, down $23 million, or 8%. The $112 million net loan loss reserve release in the quarter was $74 million higher than the prior quarter’s release. The decline in credit costs was mainly driven by India cards.

— Securities and Banking net credit losses were $42 million, down $59 million, or 58% sequentially. The $218 million net reserve release for loan losses and unfunded lending commitments in the quarter was $49 million higher than the prior quarter’s release.

— Transaction Services net credit losses were $1 million, flat compared to the prior quarter. The $35 million net loan loss reserve release in the quarter was $17 million higher than the prior quarter’s release.

Citi Holdings credit costs were $4.3 billion, which included $5.0 billion of net credit losses, a net reserve release for loan losses and unfunded lending commitments of $845 million, and a $185 million provision for policyholder benefits and claims. Net credit losses declined 5% sequentially, and the net reserve release compared to a $314 million net build in the prior quarter.

— Net credit losses in Local Consumer Lending declined $403 million, or 8%, sequentially to $4.5 billion, mainly driven by Retail Partner Cards, North America residential real estate and international loans. — Net credit losses in Retail Partner Cards were $1.8 billion, down $157 million, or 8%, sequentially, reflecting lower balances and loss mitigation efforts. Delinquencies, both 30-89 and 90+ days past due, improved from the prior quarter, down 9% and 16%, respectively.

— Net credit losses in North America residential real estate lending were $1.5 billion, down $149 million, or 9%, reflecting lower delinquencies, driven by asset sales and modification programs.

— International net credit losses declined $117 million, or 19%, sequentially to $495 million, as credit costs continued to improve across all countries in the portfolio.

— The net loan loss reserve release in Local Consumer Lending was $421 million, compared to a $386 million net build in the prior quarter. The net reserve release was mainly driven by Retail Partner Cards, reflecting a decline in loan balances. The net loan loss reserve release was partially offset by a net build for North America residential real estate loans that were sold or reclassified to held-for-sale during the quarter.

— Special Asset Pool had net credit losses of $462 million, up $170 million, or 58%, from the prior quarter, principally from loans to specific counterparties for which reserves had previously been established and were then released in the quarter. The net release for loan losses and unfunded lending commitments of $415 million also reflected continued improvement in credit trends in the corporate loan portfolio.


The effective tax rate on continuing operations was 23%, reflecting taxable earnings in lower tax rate jurisdictions, as well as tax advantaged earnings.


(in millions of dollars) 2Q’10 1Q’10 2Q’09 % I/(D) %I/(D)
——— ——– ——– ——- ——
Regional Consumer Banking 1,177 1,019 424 16% NM
Securities and Banking 1,670 3,185 1,838 (48)% (9)%
Transaction Services 929 936 971 (1)% (4)%
——————————————— ——- —— —— ——- ——
Total Citicorp $3,776 $5,140 $3,233 (27)% 17%
——————————————— ——- —— —— ——- ——
Citi Holdings
Brokerage and Asset Management (95 ) 86 6,769 NM NM
Local Consumer Lending (1,237 ) (1,838 ) (4,352 ) 33% 72%
Special Asset Pool 127 865 (1,198 ) (85)% NM
——————————————— ——- —— —— — ——- ——
Total Citi Holdings $(1,205 ) $(887 ) $1,219 (36)% NM
——————————————— ——- — —— — —— ——- ——
Corporate / Other and Discontinued Operations $126 $175 $(173 ) (28)% NM
——————————————— ——- —— —— — ——- ——
Total Citigroup $2,697 $4,428 $4,279 (39)% (37)%
——————————————— ——- —— —— ——- ——
Income Available to Common Shareholders 2,697 4,428 3,000 (39)% (10)%
Diluted EPS from Continuing Operations $0.09 $0.14 $0.51 (36)% (82)%
Diluted EPS from Net Income $0.09 $0.15 $0.49 (40)% (82)%
——————————————— ——- —— —— ——- ——

Citigroup net income was $2.7 billion, down $1.7 billion, or 39%, from the prior quarter.

Citicorp net income of $3.8 billion was $1.4 billion, or 27%, lower than the prior quarter, driven by lower revenues in Securities and Banking and higher expenses, partially offset by a decline in credit costs.

— Regional Consumer Banking net income of $1.2 billion was up $158 million, or 16%, sequentially, driven by Latin America, mainly due to improving credit trends.

— Securities and Banking net income of $1.7 billion was down $1.5 billion, or 48%, from the prior quarter, driven by North America and EMEA. The net income decline reflected lower revenues and higher expenses, partially offset by a decline in credit costs.

— Transaction Services net income of $929 million was down $7 million, or 1%, sequentially, due to higher taxes. Growth in revenues and lower credit costs were partially offset by higher expenses, resulting in a $63 million, or 5%, increase in earnings before taxes.

Citi Holdings net loss was $1.2 billion, compared to a net loss of $887 million in the prior quarter. The decline in revenues was offset by continued improvement in expenses and credit costs. The sequential decline in net income was mainly due to lower benefits for income taxes in the current quarter.

Corporate/Other net income of $126 million, net of discontinued operations, was down $49 million, or 28%, from the prior quarter.


— Citigroup assets were $1.9 trillion at quarter end, down 3% sequentially. — Cash and deposits with banks were $185 billion, or 9.6% of total assets, compared to $189 billion, or 9.4% of total assets in the prior quarter.

— Citi Holdings assets declined $38 billion sequentially to $465 billion and were down $362 billion, or 44%, from the peak in the first quarter of 2008.

— Citigroup deposits were $814 billion, down 2% sequentially.

Citigroup’s net interest margin was 3.15%, down from 3.32% in the first quarter of 2010, mainly reflecting continued de-risking of the loan portfolios.

Citi will host a conference call today at 11:00 AM (EDT). A live webcast of the presentation, as well as financial results and presentation materials, will be available at http://www.citigroup.com/citi/fin. A replay of the webcast will be available at http://www.citigroup.com/citi/fin/pres.htm. Dial-in numbers for the conference call are as follows: (877) 700-4194 in the U.S.; (706) 679-8401 outside of the U.S. The conference code for both numbers is 78856010.

Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 140 countries. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at http://www.citigroup.com or http://www.citi.com.

Additional financial, statistical, and business-related information, as well as business and segment trends, is included in a Financial Supplement. Both the earnings release and the Financial Supplement are available on Citigroup’s website at http://www.citigroup.com or http://www.citi.com.

Certain statements in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in Citigroup’s filings with the U.S. Securities and Exchange Commission.

(1) Tier 1 Common and related ratios, as used throughout this release, are non-GAAP financial measures. See Appendix B for additional information on these metrics.

(2) As previously disclosed, effective January 1, 2010, Citigroup adopted SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166) and SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). As a result, reported and managed basis presentations are equivalent for periods beginning January 1, 2010. For comparison purposes throughout this release, as applicable, second quarter 2009 revenues, net credit losses, and provisions for credit losses and for benefits and claims are presented on a managed basis. For additional information, see Citigroup’s Second Quarter 2010 Quarterly Financial Data Supplement filed on Form 8-K with the U.S. Securities and Exchange Commission on July 16, 2010.

(3) Tangible Book Value is a non-GAAP financial measure. See Appendix B for additional information on this metric.

(4) See Appendix A for quarterly CVA amounts.

(in millions of dollars) 2Q’10 1Q’10 2Q’09
———- ———- ———-
Managed Revenuesa $22,071 $25,421 $33,095
Managed Net Credit Lossesa $7,962 $8,384 $11,470
Provision for credit losses and for benefits/claims including $6,665 $8,618 $15,791
managed NCLa
Net interest revenue 14,039 14,561 12,829
Non-interest revenue 8,032 10,860 17,140
——- ——- ——-
Total revenues, net of interest expense $22,071 $25,421 $29,969
——- ——- ——-
Provisions for credit losses and for benefits and claims
Net Credit Losses 7,962 8,384 8,355
Net build (release) (1,439 ) (18 ) 3,878
——- – ——- – ——-
Provision for loan losses 6,523 8,366 12,233
Policyholder benefits and claims 213 287 308
Provision for unfunded lending commitments (71 ) (35 ) 135
——- – ——- – ——-
Total provisions for credit losses and for benefits and claims $6,665 $8,618 $12,676
——- ——- ——-
Operating Expenses $11,866 $11,518 $11,999
——- ——- ——-
Income (loss) from continuing operations before taxes $3,540 $5,285 $5,294
——- ——- ——-
Provision (benefit) for income taxes 812 1,036 907
Income (loss) from continuing operations $2,728 $4,249 $4,387
——- ——- ——-
Net income (loss) from discontinued operations (3 ) 211 (142 )
Net income (loss) attributable to non-controlling interests 28 32 (34 )
Citigroup Net Income (Loss) $2,697 $4,428 $4,279
======= ======= =======
Tier 1 Capital Ratio 12.0 % 11.28 % 12.74 %
Tier 1 Common Ratio 9.7 % 9.11 % 2.75 %
Return on Common Equity 7.0 % 12.0 % 14.8 %
Book Value per Share $5.33 $5.28 $14.16
Tangible Book Value per Share $4.19 $4.09 $7.26
GAAP Revenues $22,071 $25,421 $29,969
Net impact of credit card securitization activity – – 3,126
——- ——- ——-
Managed Revenues $22,071 $25,421 $33,095
GAAP Net Credit Losses $7,962 $8,384 $8,355
Net impact of credit card securitization activity – – 3,115
——- ——- ——-
Managed Net Credit Losses $7,962 $8,384 $11,470
Total provisions for credit losses and for benefits and claims $6,665 $8,618 $12,676
Net impact of credit card securitization activity – – 3,115
——- ——- ——-
Provision for credit losses and for benefits/claims including $6,665 $8,618 $15,791
managed NCL
a Presented on a managed basis. See footnote 2 above.

Revenues Income from Continuing Ops.
—————————— ————————————
(in millions of dollars) 2Q’10 1Q’10 2Q’09a 2Q’10 1Q’10 2Q’09
——- ——- ———— ———— ———– ———–
North America
Regional Consumer Banking 3,693 3,801 3,826 62 22 139
Securities and Banking 2,627 3,553 1,721 839 1,424 (32 )
Transaction Services 636 639 656 166 159 181
——- ——- ——- ——- —— ——
Total North America $6,956 $7,993 $6,203 $1,067 $1,605 $288
Regional Consumer Banking 376 405 394 50 27 (110 )
Securities and Banking 1,762 2,515 2,558 355 1,032 746
Transaction Services 848 833 860 318 306 350
——- ——- ——- ——- —— ——
Total EMEA $2,986 $3,753 $3,812 $723 $1,365 $986
Latin America
Regional Consumer Banking 2,118 2,076 1,950 491 389 116
Securities and Banking 558 607 1,049 197 272 527
Transaction Services 356 344 340 153 157 150
——- ——- ——- ——- —— ——
Total Latin America $3,032 $3,027 $3,339 $841 $818 $793
Regional Consumer Banking 1,845 1,800 1,675 574 576 279
Securities and Banking 1,008 1,328 1,373 294 478 597
Transaction Services 662 621 627 297 319 293
——- ——- ——- ——- —— ——
Total Asia $3,515 $3,749 $3,675 $1,165 $1,373 $1,169
Citicorp $16,489 $18,522 $17,029 $3,796 $5,161 $3,236
————————— ——- ——- ——- ——- —— ——
Citi Holdings $4,919 $6,550 $16,807 $(1,197 ) $(876 ) $1,182
————————— ——- ——- ——- ——- — —— — ——
Corporate / Other $663 $349 $(741 ) $129 $(36 ) $(31 )
————————— ——- ——- ——- — ——- —— — —— —
Citigroup $22,071 $25,421 $33,095 $2,728 $4,249 $4,387
————————— ——- ——- ——- ——- —— ——
a Presented on a managed basis. See footnote 2 above.

(In millions of dollars) 2Q’10 1Q’10 2Q’09
———————————————————- ——— ——— ———
CVA on Citi Liabilities at Fair Value Option 447 (1 ) (1,452 )
Derivatives CVA (1) (193 ) 287 515
———————————————————- —— – —— ——
Total CVA $255 $285 $(937 )
———————————————————- —— —— —— –
(1) Net of hedges. Includes Private Bank.
(In millions of dollars) 2Q’10 1Q’10 2Q’09
———————————————————- ——— ——— ———
Mark-to-market on sub-prime related direct exposures (1) 1,046 804 613
Monoline Credit Value Adjustment (CVA) 35 398 157
Mark-to-market on highly leveraged finance commitments (2) — (1 ) (237 )
Mark-to-market on Alt-A mortgages (3) (163 ) (164 ) (390 )
Mark to market on ARS (4) (8 ) — —
Mark-to-market on CRE (3) (174 ) (58 ) (213 )
MTM on SIVs (123 ) (24 ) 50
CVA on Citi Liabilities at Fair Value Option 8 (4 ) (156 )
Derivatives CVA(5) (54 ) 27 219
PE & Equity Investments 31 (12 ) (73 )
———————————————————- —— —— – —— –
Total Revenue Marks 599 966 (31 )
———————————————————- —— —— —— –
Non-credit Accretion (6) 383 395 501
———————————————————- —— —— ——
Net Revenue Marks $982 $1,361 $470
———————————————————- —— —— ——
(1) Net of impact from hedges against direct subprime ABS CDO
super senior positions. (2) Net of underwriting fees. (3) Net of
hedges. (4) Excludes write-downs of $3 million in 2Q’09, $7
million in 1Q’10, and $2 million in 2Q’10 arising from the ARS
buybacks. (5) CVA net of hedges. (6) Booked in the net interest
revenue line.
Totals may not sum due to rounding.

(millions of dollars, except ratios) June 30,
Citigroup Common Stockholders’ Equity $ 154,494
Less: Net unrealized losses on securities available-for-sale, net of (2,259 )
Less: Accumulated net losses on cash flow hedges, net of tax (3,184 )
Less: Pension liability adjustment, net of tax (3,465 )
Less: Cumulative effect included in fair value of financial
liabilities attributable to the change in own credit worthiness,
net of tax
Less: Disallowed deferred tax assets 31,545
Less: Intangible assets:
Goodwill 25,213
Other disallowed intangible assets 5,393
Less: Other 776
Total Tier 1 Common $ 99,502
—– ———
Qualifying perpetual preferred stock 312
Qualifying mandatorily redeemable securities of subsidiary trusts 20,091
Qualifying non-controlling interests 1,077
Other Qualifying Tier 1 Capital 1,875
Total Tier 1 Capital $ 122,857
===== =========
Risk-Weighted Assets under Federal Reserve Board Capital
Regulatory Guidelines (RWA) $ 1,024,980
Tier 1 Capital Ratio (Total Tier 1 Capital / RWA) 12.0 %
Tier 1 Common Ratio (Total Tier 1 Common / RWA) 9.7 %
(millions of dollars, except ratios) June 30,
Citigroup’s Total Stockholders’ Equity $ 154,806
Less: Preferred Stock 312
Common Stockholders’ Equity 154,494
Goodwill – as reported 25,201
Goodwill – recorded as Assets Held for Sale 12
Intangible Assets (other than MSR’s) – as reported 7,868
Intangible Assets (other than MSR’s) – recorded as Assets Held For 54
Net Deferred Taxes Related to Goodwill and Intangible Assets 62
Tangible Common Equity (TCE) $ 121,297
—– ———
Common Shares Outstanding at Quarter-end 28,975.4
Tangible Book Value Per Share $ 4.19
(Tangible Common Equity / Common Shares Outstanding)

SOURCE: Citigroup Inc.

Citigroup Inc.
Stephen Cohen, 212-793-0181
Jon Diat, 212-793-5462
Equity Investors:
John Andrews, 212-559-2718
Fixed Income Investors:
Ilene Fiszel Bieler, 212-559-5091

Copyright Business Wire 2010

Banks Coin Money Every Day at Savers’ Expense

Posted May 13, 2010 08:27am EDT by Henry Blodget in Investing, Recession, Banking

Related: xlf, ^dji, ^gspc, gs, jpm, bac, c

The latest quarterly reports from the big Wall Street banks revealed a startling fact: None of the big four banks had a single day in the quarter in which they lost money trading.

For the 63 straight trading days in Q1, in other words, Goldman Sachs, JP Morgan, Bank of America, and Citigroup made money trading for their own accounts.

Trading, of course, is supposed to be a risky business: You win some, you lose some. That’s how traders justify their gargantuan bonuses–their jobs are so risky that they deserve to be paid millions for protecting their firms’ precious capital. (Of course, the only thing that happens if traders fail to protect capital is that taxpayers bail out the bank and the traders are paid huge “retention” bonuses to prevent them from leaving to trade somewhere else, but that’s a different story).

But these days, trading isn’t risky at all. In fact, it’s safer than walking down the street.


Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What’s more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets.  Which means the banks can turn relatively small amounts of equity into huge profits–by borrowing from the taxpayer and then lending back to the taxpayer.

Why is the US government still lending banks money at near-zero interest rates? Ostensibly, for the same reason that the government bailed out the banks in the first place: So the banks will lend money to small businesses, big businesses, and other participants in the “real economy.”

But the banks aren’t lending money to the real economy: Private sector lending has fallen off a cliff.

And one reason private sector lending has fallen off a cliff is that lending money to the private sector is risky. Lending money to the government, meanwhile, is nearly risk-free. So the banks are just lending money back to the government (by scarfing up US Treasuries), collecting a nearly risk-free 3% spread, and then leveraging up this bet 10-15 times.

THAT’s how the big banks made money 63 days in a row. Importantly, doing this required no special genius: If you had the good fortune of working at a big bank, you would be making money every day, too.  And then you’d get to take half of that money home as a bonus!

No wonder everyone wants to work on Wall Street.

The government’s zero-interest-rate policy, in other words, is the biggest Wall Street subsidy yet. So far, it has done little to increase the supply of credit in the real economy. But it has hosed responsible people who lived within their means and are now earning next-to-nothing on their savings. It has also allowed the big Wall Street banks to print money to offset all the dumb bets that brought the financial system to the brink of collapse two years ago. And it has fattened Wall Street bonus pools to record levels again.

“Commodity Super Cycle”


This is an excellent article by Gary Dorsch January 6, 2010

Taken from http://www.financialsense.com/fsu/editorials/dorsch/2010/0106.html

“Anybody interested in the current position of the world’s economy should and must read this article” TC

The colossal V-shaped recovery of the global stock markets in 2009 was indeed, the most remarkable feat, ever engineered by the “Plunge Protection Team,” (PPT). Step by step, the Federal Reserve, the US Treasury, and its key allies in the “Group-of-20” nations,rescued the world’s top financiers from their own greedy mistakes. The staggering size of the G-20’s rescue package, totaling about $12-trillion, was equal to a fifth of the entire world’s annual economic output.

The G-20 bailout included capital injections pumped into banks in order to rescue them from collapse, the cost of soaking up so-called toxic assets, guarantees over debt, and liquidity support from central banks.Tossing aside all arguments of “moral hazard,” the PPT utilized all the weapons in its arsenal, to prevent another “Great Depression,” including accounting gimmickry, and the “nuclear option” of central banking – “Quantitative Easing,” (QE), to rescue the global economy.

History will show that the US stock markets reached bottom on March 10th, when Fed chief Ben “Bubbles” Bernanke and influential members of Congress, exerted heavy pressure on FASB to water-down rule #157, thus, allowing American bankers to once again, value their toxic mortgages, at their own discretionary judgment. The switch-back to “mark-to-make-believe” accounting was the most expedient tool allowing the banking elite to essentially cook their books, – concealing losses, and using discredited models to inflate their balance sheets.

Soon after, a spate of better-than-expected earnings reports by US-banking giants, Goldman Sachs, JP-Morgan, Citigroup, Bank of America, and Wells Fargo began to elevate the stock market higher. On March 15th, 2009, Fed chief Bernanke told CBS’s 60-Minutes, “The green shoots of economic revival are already evident. Much depends on fixing the banking system. We’re working on it. I think we’ll get it stabilized, and see the recession coming to an end this year,” he said. Asked if the United States had escaped a repeat of the 1930’s Great Depression, Bernanke replied, “I think we’ve averted that risk.”

In order to fuel a V-shaped recovery for the stock market, the Fed unleashed the most powerful weapon in its arsenal, – “nuclear QE,” – by pumping $1.75-trillion into the coffers of Wall Street Oligarchs, such as Goldman Sachs and JP-Morgan, through the monetization of Treasury notes and mortgage bonds. In a very short period of time, a tidal wave of liquidity began to flow into high-grade corporate and junk bonds, and whetting the speculative appetite for equities.

Wall Street Oligarchs utilized trillions in US-taxpayer bailout money and guarantees, to bolster their balance sheets and generate profits, by speculating in turbulent financial markets. Since March 6th, what’s evolved is a rising US-stock market and inflated bank profits, which in turn, conjures-up hopes that banks will start lending again, to free-up capital for business investment. Angling for the so-called “wealth effect,” the PPT is hopeful that household spending will also rebound.

Many investors were skeptical of the “Green-Shoots” rally, and preferred to call it a “bear-market” suckers’ rally, – destined to fizzle-out and unravel. Yet last year’s bargain hunters saw an “once-in-a-lifetime” buying opportunity, and were guided by the sagely advice of Sir John Templeton, “Bull-markets are born in pessimism, grow on skepticism, mature on optimism, and die of euphoria.” Most of all, “Bubbles” Bernanke restored the market’s love affair with the Fed’s printing press.

Beijing holds keys to World Economy, Commodities,
The V-shaped recoveries in the global commodity and stock markets could not have succeeded however, without the aid of China, which accounted for half of the world’s growth in output last year, and is expected to surpass Japan, as the world’s second largest economy in 2010. Beijing went on a buying spree for industrial commodities, especially for crude oil, and base metals, stockpiling the raw materials used for its 4-trillion yuan ($586-billion) spending plan on infrastructure projects.

The People’s Bank of China (PBoC) ordered its banks to power a V-shaped recovery, through an explosion of credit – a record 10-trillion yuan ($1.5-trillion) in new loans, – or double the 2008 total. Roughly a quarter of the new loans were channeled into the Shanghai red-chips and property markets, designed to inflate their values.

The combined fiscal and monetary stimulus, – equal to 45% of China’s GDP, spurred the juggernaut economy to an estimated +10% growth rate in the fourth-quarter, up from +6% growth in the first-quarter. China’s economic growth is set to return into the double-digits in 2010, with booming factory activity driving its Purchasing Managers’ Index (PMI) to a reading of 56.6 in December from 55.2 in the previous month. South Korea, Asia’s fourth-largest economy, said its exports to China were 75% higher at $54.2-billion, over the first 20-days in December.

However, China’s accelerating economy is also increasing worries among some PBoC think tank economists that the consumer price deflation experienced through most of 2009, will quickly flip to rapidly escalating inflation in 2010. China’s voracious appetite for agricultural commodities, crude oil, base metals, and other industrial raw materials, is transmitting inflationary pressures worldwide, with the epicenter located in China itself and in neighboring India.

The PBoC finds itself far behind the “inflation curve,” and hasn’t yet gone beyond meaningless “open mouth” operations, in order to tame budding pressures lurking beneath the surface. The Dow Jones Commodity Index made a stunning U-turn last year, rebounding sharply from an annualized rate of decline of -52% in July, to an annual inflation rate of +23% in December. With key commodity prices expected to extend their advance in the year ahead, an outburst of escalating inflation lies on the horizon for the Chinese economy.

Fan Gang, an influential member of the PBoC, has warned the markets that the central bank would gear its monetary policy toward dealing with the asset bubbles it created. China’s banking regulator aims to slow

On Jan 5th, China’s central bank chief Zhou Xiaochuan added, “We will keep a good handle on the pace of monetary and credit growth, guiding financial institutions towards balanced release of credit and avoiding excessive turbulence,” he said.
Zhou said forcing banks to put aside more of their deposits on reserve with the PBoC is a key tool for mopping-up cash flowing into the economy.

So far, traders in Shanghai are skeptical of the warnings. Instead, the PBoC’s threat of slower money growth is viewed as a bluff. Last year, Beijing set a growth target of +17% for M2, but instead, expanded it 30-percent. If the 17% target for M2 growth is taken seriously, the PBoC would have to aggressively soak-up yuan thru T-bill sales, or force banks to lend less, in order to contain inflation. Yet if the PBoC doesn’t tighten its monetary policy, consumer price inflation could easily accelerate at a +6% clip in 2010, blowing even bigger asset bubbles caused by excessive liquidity.

PPT Engineers V-shaped Recovery, Inflation

“We came very, very close to a depression. The markets were in anaphylactic shock,” Bernanke told TIME magazine last month. “I’m not happy with where we are, but it’s a lot better than where we could be,” he said. Bernanke and the “Plunge Protection Team,” confounded their skeptics last year, – proving that a central bank can engineer a V-shaped economic recovery, from the depths of the Great Recession, by pumping vast quantities of money in the capital markets.

Since the March 2008 lows, US-listed stocks recouped $5.2-trillion in value, boosting household wealth, and confidence in the fate of America’s $14-trillion economy. Even with foreclosure filings in the US reaching a record 3.9-million last year, sales of existing homes in November rose to a 6.54-million annual rate, the highest level in three-years, although foreclosures accounted for 33% of all sales. The S&P/Case-Shiller index of average home prices was 29% lower in October 2009 from its peak in July 2006, making homes more affordable.

The Dow Jones Industrials ended last year at 10,425, recouping most of its losses from the apocalyptic meltdown since September 2008, when Lehman Brothers went into bankruptcy, and in a domino effect, toppled other Wall Street titans. Nowadays, financial markets are under the constant surveillance of G-20 central bankers and treasury officials, always attempting to influence their direction.

One of the tools of the PPT is “Jawboning,” or brainwashing operations, designed to influence trader psychology and behavior in the markets. Governments have another key tool at their disposal, – the ability to fudge key economic statistics, to achieve the political aims of the ruling parties. Such was the case on Dec 4th, when Labor apparatchiks shocked the markets, saying the US-economy had lost a scant 11,000 jobs, the fewest since the Great Recession started in December 2007.

For extra “shock and awe,” the BLS dropped another bombshell, saying the number of jobs lost in September and October were 159,000 less than originally reported.
Moreover, employers are increasing work hours and hiring temporary employees to meet rising demand, – the first steps before hiring permanent workers. The number of temporary workers jumped 52,400, the largest increase in five-years. These trends are solidifying ideas the US-economy could actually see job creation in the second quarter, and give the Fed enough wiggle room to begin draining liquidity.

Similar to the PBoC’s dilemma, the most worrisome side-effect of the Fed’s ultra-easy money scheme is a revival of inflation, which if left unchecked for too-long, could morph into hyper-inflation. When measured in US$ terms, the Dow Jones Commodity Index is now +25% higher than a year ago, a reliable indicator pointing to higher costs of goods from the nation’s farms and factories.

Ordinarily, a resurgence of inflation would be a worrisome development for stock market operators, out of fear the Fed might tighten the money spigots. However, the Bernanke Fed says it’s content to linger far behind the “inflation curve,” for an extended period of time, preferring higher commodity prices over a deflationary depression. Thus, talk of the Fed’s exit from its ultra-loose QE scheme and draining the liquidity swamp, as telegraphed by the extreme steepening of the Treasury yield curve, is still a bit premature. In any case, government apparatchiks can always skew the inflation statistics, to buy the Fed more time to keep rates low.

Chinese Dragon Gobbles-up Base metals,
Fed officials argue that with so much excess capacity in the industrial sector, tight credit, and a weak job market, that fears over an outbreak of inflation are overblown and imaginary. However, the notion that excess industrial capacity, – with supply outstripping demand, – will contain prices was repudiated in the base metals markets last year. Copper soared 140%, Lead, used in car batteries, doubled to $2,416 /ton, followed by zinc, up 125%, and aluminum, was up 50-percent.

Base metals rocketed sharply higher despite a large build-up of inventories stocked in warehouses in London and Shanghai. Aluminum inventories held at the London Metals Exchange are bulging at near record levels of 4.6-million tons. Global output of aluminum is running at 38.4-million tons /year exceeding demand at 35-million tons. Yet aluminum futures in Shanghai rose to 17,000-yuan /ton, up 60% from a year ago, with Chinese factory output running 19% higher.

Japanese buyers paid premiums of $130 /ton over the spot price for longer-term contracts, after a European trading house bought over 1-million tons from Russia’s Rusal, the world’s biggest aluminum producer. Investment bankers are utilizing new and creative ways of lending money to base metal producers, with nearly 70% of the supply of aluminum sitting in LME warehouses tied-up in such financing deals, and therefore, not available for delivery in the spot market.

Bankers are buying aluminum on the spot market and selling forward at a profit. The metal is stored with a warehouse until delivery. Bankers are financing the deals by borrowing US-dollars in the Libor market at 0.25%, thus creating artificial demand for aluminum. However, there’s always the risk that such quasi “carry trades,” could be unwound in a violent way, when the Fed begins to lift Libor rates.

Still, base metals are buoyed by Chinese demand, absorbing 43% of the world’s supply last year. China imported 1.45-million tons of aluminum in the first eleven months of 2009, up 1,225% from the previous year, and 3-million tons of copper, up 136-percent. The cash price for iron ore doubled from their March lows, to $118 /ton, as Chinese steel mills imported 566-million tons, up 38% compared with the same period of last year. Demand for base metals is likely to get a further boost as factories based in the G-7 nations rebuild their inventories.

Crude Oil Tests OPEC’s Upper Limits,

The Chinese dragon is also blazing a trail under the crude oil market. After sliding to a five-year low under $33 /barrel in December 2008, oil prices staged a steady climb upward to $82 this week, aided by Chinese stockpiling. On Jan 5th, Zhang Xiaoqiang, deputy of China’s National Development commission, said he’s “actively” involved in the global competition for crude oil, natural gas, and minerals to satisfy the country’s thirst for raw materials. Beijing has $2.25-trillion in foreign currency reserves at its disposal, to invest in “infrastructure facilities in key countries which hold resource deposits and have a friendly relationship with China,” Zhang said.

A key component of Beijing’s strategy is to guarantee access to Persian Gulf oil especially from Iran and Saudi Arabia. China is the #1 importer of crude oil and natural gas from Iran, and the two allies are bound by energy deals reaching a total value of $120-billion and growing. China and Japan have been involved in a bidding war over a major pipeline deal to deliver Russian oil from Eastern Siberia.

In Africa, Beijing has invested $8-billion in joint exploration contracts in the Sudan, including the building of a 900-mile pipeline to the Red Sea, which supplies 7% of China’s oil imports. Beijing has also concluded oil and gas deals with Argentina, Brazil, Peru, and Ecuador. But its main interests are focused in Venezuela, and ambitious oil deals in Canada, the #4 and #1 oil suppliers to the United States.

Boosting autos sales has been a key ingredient of Beijing’s stimulus program. China has overtaken America as the world’s #1 buyer of automobiles, not surprising since its population of 1.3-billion persons is more than quadruple that of the US. Roughly 12.7-million cars and trucks were sold in China last year, up 44% from the previous year and far surpassing the 10.3-million sold in the US.

To meet its growing industrial and transportation needs, China’s imported 17.1-million tons of crude oil in November, up 28% from a year earlier, emerging as the world’s #3 importer after the US and Japan. But China’s demand for oil could double in the next 10-years, according to the IEA, if its economy continues to expand at a 10% growth rate. At some point, the growth in Asian and world demand for oil would exceed the available supply, leading to triple digits for oil prices.

On Dec 25th, Saudi Arabia’s King Abdullah told a Kuwaiti newspaper, “Oil prices are heading towards stability. We expected at the beginning of the year an oil price between $75 and $80 per barrel and this is a fair price,” he said. The Saudi kingdom has about 2.5-million barrels per day of excess oil capacity, and could dump more oil on the market, to prevent prices from climbing above $80 /barrel.

However, speculators in the oil markets are putting Riyadh to the test, betting that the kingdom would allow a rally to $85, with a background of a steadily improving V-shaped recovery in global stock markets. Abdullah hinted at this, when he said, “Oil prices might rise reasonably,” keeping pace with other asset markets.

China and PPT knock froth off Gold market,

China has also vaulted ahead of India to become the world’s buyer of Gold, as small investors scrambled to defend their wealth against the explosive growth of the Chinese money supply. Demand for the yellow metal was expected to eclipse the 450-ton mark, while gold imports by India fell in half
to around 200-tons. India used to import around 600-to-800-tons of gold every year, but even now, the United Arab Emirates may have overtaken India in gold imports.
Still, Indians have accumulated 20,000-tons worth over $730-billion of Gold in private hands.

Gold rose for a ninth straight year in 2009, gaining 24%, even after shaving $130 /oz off its all-time high of $1,225 /oz, set on Dec 2nd. Interestingly enough, gold peaked just a few hours after China’s FX chief, Hu Xiaolian, warned traders in Shanghai to be careful of a potential asset bubble forming. “Watch out for bubbles forming on certain assets, and be careful in those areas,” he said.

On Dec 4th, the People’s Daily, the main newspaper of the ruling Communist Party, blasted the Fed’s weak US$ policy, saying it was forcing Asian nations to choose between a “heavy blow to exports” and inflation risks, from “massive liquidity in their own currencies, further inflating asset prices,” it said. Tokyo was also calling on the G-7 central banks to help bolster the US-dollar, as it plunged to a 14-year low of 85-yen, and triggering a death spiral in the Nikkei-225 Index to the 9,000-level.

With America’s two largest creditors complaining bitterly about the weak US$, the PPT was bailed-out by Labor department apparatchiks on Nov 4th, releasing a better-than-expected outlook on the jobs market. The Fed acquiesced to Beijing and Tokyo, by allowing yields on the Treasury’s 5-year note to zoom 70-basis points higher, thus forcing US$ carry traders to cover over-extended short positions. In turn, unwinding of US$ carry trades, knocked the gold market for a nasty shake-out.

Beijing and the “Plunge Protection Team” bought a few extra weeks of precious time for their shell game of currency debasement. However, if talk of an exit from the Fed’s QE scheme, or the PBoc’s threat to slowdown the M2 money supply, adds-up to nothing more than empty rhetoric, – then we’ll witness another parabolic rise in Gold, and the resurgence of the “Commodity Super Cycle” in 2010.

G-20 spin artists are telling the media that inflation won’t get out of control, because excess capacity in the industrial sector can keep factory and farm prices down. However, outside the Ivory Towers of academia, such theories carry little weight in the marketplace. Instead, the message of the US Treasury’s yield curve is signaling a major outbreak of inflation, with the spread between 30-year and 6-month yields steepening to +450-basis points, the widest in three-decades.

Traders are plowing billions of dollars, Euros, and yen into commodities and precious metals, betting on the debasement of all paper currencies. The resurgence of the “Commodity Super Cycle” is kicking into high gear, with G-20 central bankers fueling asset bubbles, by refusing to lift short-term interest rates. “Paper money eventually returns to its intrinsic value – zero,” Voltaire, 1729.

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