CITIGROUP INC Quarterly Report for Q1 Ended Mar 31, 2014

Summary

Citigroup Inc. reported first-quarter 2014 net income of $3.9 billion, or $1.23 per diluted share, a slight increase from $3.8 billion, or $1.23 per share, in the prior year period. Excluding certain one-time items, net income was $4.1 billion, or $1.30 per diluted share, up from $4.0 billion, or $1.29 per share, year-over-year. This improvement was driven by lower operating expenses and reduced net credit losses, partially offset by lower revenues. The company faced a challenging operating environment characterized by lower mortgage origination volumes, an uncertain macro environment impacting fixed-income markets, and ongoing spread compression. Legal and related expenses remained elevated due to legacy issues within Citi Holdings, which significantly reduced its net loss by approximately 65% year-over-year. Despite these headwinds, Citigroup made progress on its execution priorities, including disciplined expense management and the wind-down of Citi Holdings. However, the Federal Reserve Board objected to Citigroup's 2014 capital plan, preventing capital return increases, though existing actions could continue. The company is focused on addressing the Federal Reserve's concerns for the 2015 CCAR process. Citigroup's Basel III Tier 1 Common ratio improved to 10.5% from 9.3% in the prior year.

Key Highlights

• 1Net income for Q1 2014 was $3.9 billion ($1.23/share), slightly up from $3.8 billion ($1.23/share) in Q1 2013. Excluding specific items, adjusted net income was $4.1 billion ($1.30/share), up from $4.0 billion ($1.29/share) year-over-year.
• 2Operating expenses decreased by 1% year-over-year to $12.1 billion, driven by efficiency savings and the wind-down of Citi Holdings, partially offset by higher regulatory, compliance, and legal costs.
• 3Net credit losses decreased by 15% year-over-year to $2.4 billion, with consumer net credit losses declining 19% due to portfolio improvements.
• 4Citicorp's net income declined 8% to $4.2 billion, primarily due to lower revenues in the Institutional Clients Group (ICG), which saw a 7% revenue drop (ex-CVA/DVA) driven by a 18% decrease in fixed income markets revenue.
• 5Citi Holdings significantly reduced its net loss by 65% year-over-year to $284 million, with assets declining 23% as part of the wind-down strategy.
• 6Citigroup's estimated Basel III Tier 1 Common ratio improved to 10.5% as of March 31, 2014, up from 9.3% in the prior year.
• 7The Federal Reserve objected to Citigroup's 2014 capital plan, limiting planned capital returns to shareholders.

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