The Quarterly
C 2011 10-K

Citigroup Inc (C) SEC Annual Report (10-K) for 2012

C 2013 10-K
C 2011 10-K C 2013 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

Commission file number 1-9924

Citigroup Inc.
(Exact name of registrant as specified in its charter)

Delaware 52-1568099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
399 Park Avenue, New York, NY 10022
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (212) 559-1000

Securities registered pursuant to Section 12(b) of the Act: See Exhibit 99.01

Securities registered pursuant to Section 12(g) of the Act: none

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ¨ Yes  X   No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  ¨ Yes  X   No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   X Yes  ¨   No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   X Yes  ¨   No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  X

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

X   Large accelerated filer ¨   Accelerated filer ¨   Non-accelerated filer ¨   Smaller reporting company
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ¨ Yes  X   No

The aggregate market value of Citigroup Inc. common stock held by non-affiliates of Citigroup Inc. on June 30, 2012 was approximately $80.4 billion.

Number of shares of Citigroup, Inc. common stock outstanding on January 31, 2013: 3,038,758,550

Documents Incorporated by Reference: Portions of the registrant's proxy statement for the annual meeting of stockholders scheduled to be held on April 24, 2013, are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III.


FORM 10-K CROSS-REFERENCE INDEX

Item Number Page
Part I
1. Business 4–36, 40, 126–132,
135–136, 163,
290–293
1A. Risk Factors 60–71
1B. Unresolved Staff Comments Not Applicable
2. Properties 293
3. Legal Proceedings 280–287
4. Mine Safety Disclosures Not Applicable
Part II
5. Market for Registrant's Common
Equity, Related Stockholder Matters,
and Issuer Purchases of Equity
Securities 44, 169, 288,
294–295, 297
6. Selected Financial Data 10–11
7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 6–59, 72–125
7A. Quantitative and Qualitative
Disclosures About Market Risk 72–125, 164–165,
187–218, 223–273
8. Financial Statements and
Supplementary Data 140–289
9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure Not Applicable
9A. Controls and Procedures 133–134
9B. Other Information Not Applicable
Part III
10. Directors, Executive Officers and
Corporate Governance 296–297, 299*
11. Executive Compensation **
12. Security Ownership of Certain
Beneficial Owners and Management
and Related Stockholder Matters ***
13. Certain Relationships and Related
Transactions and Director
Independence ****
14. Principal Accountant Fees and
Services *****
Part IV
15. Exhibits and Financial Statement
Schedules

* For additional information regarding Citigroup's Directors, see "Corporate Governance," "Proposal 1: Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the definitive Proxy Statement for Citigroup's Annual Meeting of Stockholders scheduled to be held on April 24, 2013, to be filed with the SEC (the Proxy Statement), incorporated herein by reference.
** See "Executive Compensation-The Personnel and Compensation Committee Report," "-Compensation Discussion and Analysis" and "-2012 Summary Compensation Table" in the Proxy Statement, incorporated herein by reference.
*** See "About the Annual Meeting", "Stock Ownership" and "Proposal 4, Approval of Amendment to the Citigroup 2009 Stock Incentive Plan" in the Proxy Statement, incorporated herein by reference.
**** See "Corporate Governance-Director Independence," "-Certain Transactions and Relationships, Compensation Committee Interlocks and Insider Participation," and "-Indebtedness" in the Proxy Statement, incorporated herein by reference.
***** See "Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm" in the Proxy Statement, incorporated herein by reference.

2


CITIGROUP'S 2012 ANNUAL REPORT ON FORM 10-K

OVERVIEW 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
     OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS 6
     Executive Summary 6
     Five-Year Summary of Selected Financial Data 10
SEGMENT AND BUSINESS-INCOME (LOSS)
     AND REVENUES 12
CITICORP 14
     Global Consumer Banking 15
North America Regional Consumer Banking 16
EMEA Regional Consumer Banking 18
Latin America Regional Consumer Banking 20
Asia Regional Consumer Banking 22
     Institutional Clients Group 24
Securities and Banking 25
Transaction Services 28
     Corporate/Other 30
CITI HOLDINGS 31
Brokerage and Asset Management 32
Local Consumer Lending 33
Special Asset Pool 36
BALANCE SHEET REVIEW 37
CAPITAL RESOURCES AND LIQUIDITY 41
Capital Resources 41
Funding and Liquidity 50
OFF-BALANCE-SHEET ARRANGEMENTS 58
CONTRACTUAL OBLIGATIONS 59
RISK FACTORS 60
MANAGING GLOBAL RISK 72
     CREDIT RISK 74
Loans Outstanding 75
Details of Credit Loss Experience 76
Non-Accrual Loans and Assets and
Renegotiated Loans 78
North America Consumer Mortgage Lending 83
North America Cards 97
Consumer Loan Details 98
Corporate Loan Details 100
     MARKET RISK 102
     OPERATIONAL RISK 112
     COUNTRY AND CROSS-BORDER RISK 113
Country Risk 113
Cross-Border Risk 120
FAIR VALUE ADJUSTMENTS FOR
     DERIVATIVES AND STRUCTURED DEBT 123
CREDIT DERIVATIVES 124
SIGNIFICANT ACCOUNTING POLICIES AND
     SIGNIFICANT ESTIMATES 126
DISCLOSURE CONTROLS AND PROCEDURES 133
MANAGEMENT'S ANNUAL REPORT ON
     INTERNAL CONTROL OVER FINANCIAL
     REPORTING 134
FORWARD-LOOKING STATEMENTS 135
REPORT OF INDEPENDENT REGISTERED
     PUBLIC ACCOUNTING FIRM-INTERNAL
     CONTROL OVER FINANCIAL REPORTING 137
REPORT OF INDEPENDENT REGISTERED
     PUBLIC ACCOUNTING FIRM-
     CONSOLIDATED FINANCIAL STATEMENTS 138
FINANCIAL STATEMENTS AND NOTES
     TABLE OF CONTENTS 139
CONSOLIDATED FINANCIAL STATEMENTS 140
NOTES TO CONSOLIDATED FINANCIAL
     STATEMENTS 146
FINANCIAL DATA SUPPLEMENT (Unaudited) 289
SUPERVISION, REGULATION AND OTHER 290
Disclosure Pursuant to Section 219 of the
Iran Threat Reduction and Syria Human Rights Act 291
Customers 292
Competition 292
Properties 293
LEGAL PROCEEDINGS 293
UNREGISTERED SALES OF EQUITY,
     PURCHASES OF EQUITY SECURITIES,
     DIVIDENDS
294
PERFORMANCE GRAPH 295
CORPORATE INFORMATION 296
Citigroup Executive Officers 296
CITIGROUP BOARD OF DIRECTORS 299

3


OVERVIEW

Citigroup's history dates back to the founding of Citibank in 1812. Citigroup's original corporate predecessor was incorporated in 1988 under the laws of the State of Delaware. Following a series of transactions over a number of years, Citigroup Inc. was formed in 1998 upon the merger of Citicorp and Travelers Group Inc.
Citigroup is a global diversified financial services holding company whose businesses provide 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. Citi has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions.
Citigroup currently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of Citi's Global Consumer Banking businesses and Institutional Clients Group ; and Citi Holdings, consisting of Brokerage and Asset Management, Local Consumer Lending and Special Asset Pool . For a further description of the business segments and the products and services they provide, see "Citigroup Segments" below, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 4 to the Consolidated Financial Statements.
Throughout this report, "Citigroup," "Citi" and "the Company" refer to Citigroup Inc. and its consolidated subsidiaries.
Additional information about Citigroup is available on Citi's website at www.citigroup.com . Citigroup's recent annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, as well as other filings with the SEC, are available free of charge through Citi's website by clicking on the "Investors" page and selecting "All SEC Filings." The SEC's website also contains current reports, information statements, and other information regarding Citi at www.sec.gov .
Within this Form 10-K, please refer to the tables of contents on pages 3 and 139 for page references to Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements, respectively.

Certain reclassifications have been made to the prior periods' financial statements to conform to the current period's presentation. For information on certain recent such reclassifications, including the transfer of the substantial majority of Citi's retail partner cards businesses (which are now referred to as Citi retail services) from Citi Holdings- Local Consumer Lending to Citicorp- North America Regional Consumer Banking, which was effective January 1, 2012, see Citi's Form 8-K furnished to the SEC on March 26, 2012.
At December 31, 2012, Citi had approximately 259,000 full-time employees compared to approximately 266,000 full-time employees at December 31, 2011.

Please see "Risk Factors" below for a discussion of the most significant risks and uncertainties that could impact Citigroup's businesses, financial condition and results of operations.


4


As described above, Citigroup is managed pursuant to the following segments:

The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.


(1) North America includes the U.S., Canada and Puerto Rico, Latin America includes Mexico, and Asia includes Japan.

5



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

EXECUTIVE SUMMARY

Overview

2012-Ongoing Transformation of Citigroup
During 2012, Citigroup continued to build on the significant transformation of the Company that has occurred over the last several years. Despite a challenging operating environment (as discussed below), Citi's 2012 results showed ongoing momentum in most of its core businesses, as Citi continued to simplify its business model and focus resources on its core Citicorp franchise while continuing to wind down Citi Holdings as quickly as practicable in an economically rational manner. Citi made steady progress toward the successful execution of its strategy, which is to:

enhance its position as a leading global bank for both institutions and individuals, by building on its unique global network, deep emerging markets expertise, client relationships and product expertise; position Citi to seize the opportunities provided by current trends (globalization, digitization and urbanization) for the benefit of clients; further its commitment to responsible finance; strengthen Citi's performance-including gaining market share with clients, making Citi more efficient and productive, and building upon its history of innovation; and wind down Citi Holdings as soon as practicable, in an economically rational manner.

With these goals in mind, on December 5, 2012, Citi announced a number of repositioning efforts to optimize its footprint, re-size and re-align certain businesses and improve efficiencies, while at the same time maintaining its unique competitive advantages. As a result of these repositioning efforts, in the fourth quarter of 2012, Citi recorded pretax repositioning charges of approximately $1 billion, and expects to incur an additional $100 million of charges in the first half of 2013.

Continued Challenges in 2013
Citi continued to face a challenging operating environment during 2012, many aspects of which it expects will continue into 2013. While showing some signs of improvement, the overall economic environment-both in the U.S. and globally-remains largely uncertain, and spread compression 1 continues to negatively impact the results of operations of several of Citi's businesses, particularly in the U.S. and Asia. Citi also continues to face a significant number of regulatory changes and uncertainties, including the timing and implementation of the final U.S. regulatory capital standards. Further, Citi's legal and related costs remain elevated and likely volatile as it continues to work through "legacy" issues, such as mortgage-related expenses, and operates in a heightened litigious and regulatory environment. Finally, while Citi reduced the size of Citi Holdings by approximately 31% during 2012, the remaining assets within Citi Holdings will continue to have a negative impact on Citi's overall results of operations in 2013, although this negative impact should continue to abate as the wind-down continues. For a more detailed discussion of these and other risks that could impact Citi's businesses, results of operations and financial condition, see "Risk Factors" below. As a result of these continuing challenges, Citi remains highly focused on the areas within its control, including operational efficiency and optimizing its core businesses in order to drive improved returns.


____________________
1 As used throughout this report, spread compression refers to the reduction in net interest revenue as a percentage of loans or deposits, as applicable, as driven by either lower yields on interest-earning assets or higher costs to fund such assets (or a combination thereof).

6


2012 Summary Results

Citigroup
For 2012, Citigroup reported net income of $7.5 billion and diluted earnings per share of $2.44, compared to $11.1 billion and $3.63 per share, respectively, for 2011. 2012 results included several significant items:

a negative impact from the credit valuation adjustment on derivatives (counterparty and own-credit), net of hedges (CVA) and debt valuation adjustment on Citi's fair value option debt (DVA), of pretax $(2.3) billion ($(1.4) billion after-tax) as Citi's credit spreads tightened during the year, compared to a pretax impact of $1.8 billion ($1.1 billion after-tax) in 2011; a net loss of $4.6 billion ($2.9 billion after-tax) related to the sale of minority investments, driven by the loss from Citi's sale of a 14% interest, and other-than-temporary impairment on its remaining 35% interest, in the Morgan Stanley Smith Barney (MSSB) joint venture, versus a gain of $199 million ($128 million after-tax) in the prior year; 2 as mentioned above, $1.0 billion of repositioning charges in the fourth quarter of 2012 ($653 million after-tax) compared to $428 million ($275 million after-tax) in the fourth quarter of 2011; and

a $582 million tax benefit in the third quarter of 2012 related to the resolution of certain tax audit items.

Excluding CVA/DVA, the impact of minority investments, the repositioning charges in the fourth quarters of 2012 and 2011 and the tax benefit, net income was $11.9 billion, or $3.86 per diluted share, in 2012, an increase of 18% compared to $10.1 billion, or $3.30 per diluted share, reported in 2011, as higher revenues, lower core operating expenses and lower net credit losses were partially offset by higher legal and related costs and a lower net loan loss reserve release. 3

Citi's revenues, net of interest expense, were $70.2 billion in 2012, down 10% versus the prior year. Excluding CVA/DVA and the impact of minority investments, revenues were $77.1 billion, up 1% from 2011, as revenues in Citicorp rose 5%, but were offset by a 40% decline in Citi Holdings revenues compared to the prior year. Net interest revenues of $47.6 billion were 2% lower than the prior year, largely driven by the decline in loan balances in Local Consumer Lending in Citi Holdings as well as spread compression in North America and Asia Regional Consumer Banking (RCB) in Citicorp. Non-interest revenues were $22.6 billion, down 25% from the prior year, driven by CVA/DVA and the loss on MSSB in the third quarter of 2012. Excluding CVA/DVA and the impact of minority investments, non-interest revenues were $29.5 billion, up 6% from the prior year, principally driven by higher revenues in Securities and Banking and higher mortgage revenues in North America RCB , partially offset by lower revenues in the Special Asset Pool within Citi Holdings.

Operating Expenses
Citigroup expenses decreased 1% versus the prior year to $50.5 billion. In 2012, in addition to the previously mentioned repositioning charges, Citi incurred elevated legal and related costs of $2.8 billion compared to $2.2 billion in the prior year. Excluding legal and related costs, repositioning charges for the fourth quarters of 2012 and 2011, and the impact of foreign exchange translation into U.S. dollars for reporting purposes (as used throughout this report, FX translation), which lowered reported expenses by approximately $0.9 billion in 2012 as compared to the prior year, operating expenses declined 1% to $46.6 billion versus $47.3 billion in the prior year.
Citicorp's expenses were $45.3 billion, up 2% from the prior year, as efficiency savings were more than offset by higher legal and related costs and repositioning charges. Citi Holdings expenses were down 19% year-over-year to $5.3 billion, principally due to the continued decline in assets.


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2 As referenced above, in 2012, the sale of minority investments included a pretax loss of $4.7 billion ($2.9 billion after-tax) from the sale of a 14% interest and other-than-temporary impairment of the carrying value of Citi's remaining 35% interest in MSSB recorded in Citi Holdings- Brokerage and Asset Management during the third quarter of 2012. In addition, Citi recorded a net pretax loss of $424 million ($274 million after-tax) from the partial sale of Citi's minority interest in Akbank T.A.S. (Akbank) recorded in Corporate/Other during the second quarter of 2012. In the first quarter of 2012, Citi recorded a net pretax gain on minority investments of $477 million ($308 million after-tax), which included pretax gains of $1.1 billion and $542 million on the sales of Citi's remaining stake in Housing Development Finance Corporation Ltd. (HDFC) and its stake in Shanghai Pudong Development Bank (SPDB), respectively, offset by a pretax impairment charge relating to Akbank of $1.2 billion, all within Corporate/Other . In 2011, Citi recorded a $199 million pretax gain ($128 million after-tax) from the partial sale of Citi's minority interest in HDFC, recorded in Corporate/Other .
3 Presentation of Citi's results excluding CVA/DVA, the impact of minority investments, the repositioning charges in the fourth quarters of 2012 and 2011 and the tax benefit, as applicable, represent non- GAAP financial measures. Citigroup believes the presentation of its results of operations excluding these impacts provides a more meaningful depiction of the underlying fundamentals of Citi's businesses and enhances the comparison of results across periods.


7


Credit Costs
Citi's total provisions for credit losses and for benefits and claims of $11.7 billion declined 8% from the prior year. Net credit losses of $14.6 billion were down 27% from 2011, largely reflecting improvements in North America cards and Local Consumer Lending and the Special Asset Pool within Citi Holdings. Consumer net credit losses declined 22% to $14.4 billion reflecting improvements in North America Citi-branded cards and Citi retail services in Citicorp and Local Consumer Lending within Citi Holdings. Corporate net credit losses decreased 86% year-over-year to $223 million, driven primarily by continued credit improvement in both the Special Asset Pool in Citi Holdings and Securities and Banking in Citicorp.
The net release of allowance for loan losses and unfunded lending commitments was $3.7 billion in 2012, 55% lower than 2011. Of the $3.7 billion net reserve release, $2.1 billion was attributable to Citicorp compared to a $4.9 billion release in the prior year. The decline in the Citicorp reserve release year-over-year mostly reflected a lower reserve release in North America Citi-branded cards and Citi retail services and Securities and Banking . The $1.6 billion net reserve release in Citi Holdings was down from $3.3 billion in the prior year, due primarily to lower releases within the Special Asset Pool , reflecting the decline in assets. Of the $3.7 billion net reserve release, $3.6 billion related to Consumer, with the remainder in Corporate.

Capital and Loan Loss Reserve Positions
Citigroup's Tier 1 Capital and Tier 1 Common ratios were 14.1% and 12.7% as of December 31, 2012, respectively, compared to 13.6% and 11.8% in the prior year. Citi's estimated Tier 1 Common ratio under Basel III was 8.7% at December 31, 2012, up slightly from an estimated 8.6% at September 30, 2012. 4
Citigroup's total 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%, at the end of the prior year. The decline in the total allowance for loan losses reflected the continued wind-down of Citi Holdings and overall continued improvement in the credit quality of Citi's loan portfolios.
The Consumer allowance for loan losses was $22.7 billion, or 5.6% of total Consumer loans, at year end, compared to $27.2 billion, or 6.5% of total loans, at December 31, 2011. Total non-accrual assets increased 3% to $12.0 billion as compared to December 31, 2011. Corporate non-accrual loans declined 28% to $2.3 billion, reflecting continued credit improvement. Consumer non-accrual loans increased $1.4 billion, or 17%, to $9.2 billion versus the prior year. The increase in Consumer non-accrual loans predominantly reflected the Office of the Comptroller of the Currency (OCC) guidance issued in the third quarter of 2012 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 (of which approximately $1.3 billion were current).

Citicorp 5
Citicorp net income decreased 8% from the prior year to $14.1 billion. The decrease largely reflected the impact of CVA/DVA and higher legal and related costs and repositioning charges, partially offset by lower provisions for income taxes. CVA/DVA, recorded in Securities and Banking, was $(2.5) billion in 2012, compared to $1.7 billion in the prior year. Within Citicorp, repositioning charges were $951 million ($604 million after-tax) in the fourth quarter 2012, versus $368 million ($237 million after-tax) in the prior year period. Excluding CVA/DVA, the impact of minority investments, the repositioning charges in the fourth quarters of 2012 and 2011, and the tax benefit in the third quarter of 2012, Citicorp net income increased 9% from the prior year to $15.6 billion, primarily driven by growth in revenues and lower net credit losses partially offset by lower loan loss reserve releases and higher taxes.
Citicorp revenues, net of interest expense, were $71 billion in 2012, down 1% versus the prior year. Excluding CVA/DVA and the impact of minority investments, Citicorp revenues were $73.4 billion in 2012, 5% higher than 2011. Global Consumer Banking ( GCB) revenues of $40.2 billion increased 3% versus the prior year. North America RCB revenues grew 5% to $21.1 billion. International RCB revenues (consisting of Asia RCB , Latin America RCB and EMEA RCB ) increased 1% year-over-year to $19.1 billion. Excluding the impact of FX translation, 6 international RCB revenues increased 5% year-over-year. Securities and Banking revenues were $19.7 billion in 2012, down 8% year-over-year . Securities and Banking revenues, excluding CVA/DVA, were $22.2 billion, or 13%, higher than the prior year. Transaction Services revenues were $10.9 billion, up 3% from the prior year, but up 5% excluding the impact of FX translation. Corporate/Other revenues, excluding the impact of minority investments, declined 80% from the prior year mainly reflecting the absence of hedging gains.
In North America RCB , the revenue growth year-over-year was driven by higher mortgage revenues, partially offset by lower revenues in Citi-branded cards and Citi retail services, mostly driven by lower average card loans. North America RCB average deposits of $154 billion grew 6% year-over-year and average retail loans of $41 billion grew 19%. Average card loans of $109 billion declined 3%, driven by increased payment rates resulting from consumer deleveraging, and card purchase sales of $232 billion were roughly flat. Citi retail services revenues were also negatively impacted by improving credit trends, which increased contractual partner payments.

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4 Citi's estimated Basel III Tier 1 Common ratio is a non-GAAP financial measure. For additional information on Citi's estimated Basel III Tier 1 Common Capital and Tier 1 Common ratio, including the calculation of these measures, see "Capital Resources and Liquidity-Capital Resources" below.
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5 Citicorp includes Citi's three operating businesses- Global Consumer Banking, Securities and Banking and Transaction Services -as well as Corporate/Other . See "Citicorp" below for additional information on the results of operations for each of the businesses in Citicorp.
6 For the impact of FX translation on 2012 results of operations for each of EMEA RCB, Latin America RCB, Asia RCB and Transaction Services , see the table accompanying the discussion of each respective business' results of operations below.

8


The international RCB revenue growth year-over-year, excluding the impact of FX translation, was driven by 9% revenue growth in Latin America RCB and 2% revenue growth in EMEA RCB . Asia RCB revenues were flat year-over-year, primarily reflecting spread compression in some countries in the region and the impact of regulatory actions in certain countries, particularly Korea. International RCB average deposits grew 2% versus the prior year, average retail loans increased 11%, investment sales grew 12%, average card loans grew 6%, and international card purchase sales grew 10%, all excluding the impact of FX translation.
In Securities and Banking, fixed income markets revenues of $14.0 billion, excluding CVA/DVA, 7 increased 28% from the prior year, reflecting higher revenues in rates and currencies and credit-related and securitized products. Equity markets revenues of $2.4 billion in 2012, excluding CVA/DVA, increased 1% driven by improved derivatives performance as well as the absence in the current year of proprietary trading losses, partially offset by lower cash equity volumes.
Investment banking revenues rose 10% from the prior year to $3.6 billion, principally driven by higher revenues in debt underwriting and advisory activities, partially offset by lower equity underwriting revenues. Lending revenues of $997 million were down 45% from the prior year, reflecting $698 million in losses on hedges related to accrual loans as credit spreads tightened during 2012 (compared to a $519 million gain in the prior year as spreads widened). Excluding the mark-to-market impact of loan hedges related to accrual loans, lending revenues rose 31% year-over-year to $1.7 billion reflecting growth in the Corporate loan portfolio and improved spreads in most regions. Private Bank revenues of $2.3 billion increased 8% from the prior year, excluding CVA/DVA, driven primarily by growth in North America lending and deposits.
In Transaction Services, the increase in revenues year-over-year, excluding the impact of FX translation, was driven by growth in Treasury and Trade Solutions, which was partially offset by a decline in Securities and Fund Services . Excluding the impact of FX translation, Treasury and Trade Solutions revenues were up 8%, driven by growth in trade as end-of-period trade loans grew 23%, partially offset by ongoing spread compression given the low interest rate environment. Securities and Fund Services revenues were down 2%, excluding the impact of FX translation, mostly reflecting lower market volumes as well as spread compression on deposits.
Citicorp end-of-period loans increased 7% year-over-year to $540 billion, with 3% growth in Consumer loans, primarily in Latin America, and 11% growth in Corporate loans.

Citi Holdings 8
Citi Holdings net loss was $6.6 billion compared to a net loss of $4.2 billion in 2011. The increase in the net loss was driven by the $4.7 billion pretax ($2.9 billion after-tax) loss on MSSB described above. In addition, Citi Holdings results included $77 million in repositioning charges in the fourth quarter of 2012, compared to $60 million in the fourth quarter of 2011. Excluding the loss on MSSB, CVA/DVA 9 and the repositioning charges in the fourth quarters of 2012 and 2011, Citi Holdings net loss decreased to $3.7 billion compared to a net loss of $4.2 billion in the prior year, as revenue declines and lower loan loss reserve releases were more than offset by lower operating expenses and lower net credit losses. These improved results in 2012 reflected the continued decline in Citi Holdings assets.
Citi Holdings revenues decreased to $(833) million from $6.3 billion in the prior year. Excluding CVA/DVA and the loss on MSSB, Citi Holdings revenues were $3.7 billion in 2012 compared to $6.2 billion in the prior year. Special Asset Pool revenues, excluding CVA/DVA, were $(657) million in 2012, compared to $473 million in the prior year, largely due to lower non-interest revenue resulting from lower gains on asset sales. Local Consumer Lending revenues of $4.4 billion declined 20% from the prior year primarily due to the 24% decline in average assets. Brokerage and Asset Management revenues, excluding the loss on MSSB, were $(15) million, compared to $282 million in the prior year, mostly reflecting higher funding costs. Net interest revenues declined 30% year-over-year to $2.6 billion, largely driven by continued declining loan balances in Local Consumer Lending . Non-interest revenues, excluding the loss on MSSB and CVA/DVA, were $1.1 billion versus $2.5 billion in the prior year, principally reflecting lower gains on asset sales within the Special Asset Pool .
As noted above, Citi Holdings assets declined 31% year-over-year to $156 billion as of the end of 2012. Also at the end of 2012, Citi Holdings assets comprised approximately 8% of total Citigroup GAAP assets and 15% of risk-weighted assets (as defined under current regulatory guidelines). Local Consumer Lending continued to represent the largest segment within Citi Holdings, with $126 billion of assets as of the end of 2012, of which approximately 73% consisted of mortgages in North America real estate lending.


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7 For the summary of CVA/DVA by business within Securities and Banking for 2012 and comparable periods, see "Citicorp- Institutional Clients Group. "
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8 Citi Holdings includes Local Consumer Lending, Special Asset Pool and Brokerage and Asset Management. See "Citi Holdings" below for additional information on the results of operations for each of the businesses in Citi Holdings.
9 CVA/DVA in Citi Holdings, recorded in the Special Asset Pool , was $157 million in 2012, compared to $74 million in the prior year.

9


FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA-PAGE 1 Citigroup Inc. and Consolidated Subsidiaries

In millions of dollars, except per-share amounts and ratios 2012 2011 2010 2009 2008
Net interest revenue $ 47,603 $ 48,447 $ 54,186 $ 48,496 $ 53,366
Non-interest revenue 22,570 29,906 32,415 31,789 (1,767 )
Revenues, net of interest expense $ 70,173 $ 78,353 $ 86,601 $ 80,285 $ 51,599
Operating expenses 50,518 50,933 47,375 47,822 69,240
Provisions for credit losses and for benefits and claims 11,719 12,796 26,042 40,262 34,714
Income (loss) from continuing operations before income taxes $ 7,936 $ 14,624 $ 13,184 $ (7,799 ) $ (52,355 )
Income taxes (benefits) 27 3,521 2,233 (6,733 ) (20,326 )
Income (loss) from continuing operations $ 7,909 $ 11,103 $ 10,951 $ (1,066 ) $ (32,029 )
Income (loss) from discontinued operations, net of taxes (1) (149 ) 112 (68 ) (445 ) 4,002
Net income (loss) before attribution of noncontrolling interests $ 7,760 $ 11,215 $ 10,883 $ (1,511 ) $ (28,027 )
Net income (loss) attributable to noncontrolling interests 219 148 281 95 (343 )
Citigroup's net income (loss) $ 7,541 $ 11,067 $ 10,602 $ (1,606 ) $ (27,684 )
Less:
       Preferred dividends-Basic $ 26 $ 26 $ 9 $ 2,988 $ 1,695
       Impact of the conversion price reset related to the $12.5
              billion convertible preferred stock private issuance-Basic - - - 1,285 -
       Preferred stock Series H discount accretion-Basic - - - 123 37
       Impact of the public and private preferred stock exchange offers - - - 3,242 -
       Dividends and undistributed earnings allocated to employee restricted
              and deferred shares that contain nonforfeitable rights to dividends,
              applicable to Basic EPS 166 186 90 2 221
Income (loss) allocated to unrestricted common shareholders for Basic EPS $ 7,349 $ 10,855 $ 10,503 $ (9,246 ) $ (29,637 )
       Less: Convertible preferred stock dividends - - - (540 ) (877 )
       Add: Interest expense, net of tax, on convertible securities and
              adjustment of undistributed earnings allocated to employee
              restricted and deferred shares that contain nonforfeitable rights to
              dividends, applicable to diluted EPS 11 17 2 - -
Income (loss) allocated to unrestricted common shareholders for diluted EPS (2) $ 7,360 $ 10,872 $ 10,505 $ (8,706 ) $ (28,760 )
Earnings per share (3)
Basic (3)
Income (loss) from continuing operations 2.56 3.69 3.66 (7.61 ) (63.89 )
Net income (loss) 2.51 3.73 3.65 (7.99 ) (56.29 )
Diluted (2)(3)
Income (loss) from continuing operations $ 2.49 $ 3.59 $ 3.55 $ (7.61 ) $ (63.89 )
Net income (loss) 2.44 3.63 3.54 (7.99 ) (56.29 )
Dividends declared per common share (3)(4) 0.04 0.03 0.00 0.10 11.20

Statement continues on the next page, including notes to the table.

10


FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA-PAGE 2 Citigroup Inc. and Consolidated Subsidiaries
In millions of dollars, except per-share amounts, ratios and direct staff 2012 2011 2010 2009 2008
At December 31:
Total assets $ 1,864,660 $ 1,873,878 $ 1,913,902 $ 1,856,646 $ 1,938,470
Total deposits 930,560 865,936 844,968 835,903 774,185
Long-term debt 239,463 323,505 381,183 364,019 359,593
Trust preferred securities (included in long-term debt) 10,110 16,057 18,131 19,345 24,060
Citigroup common stockholders' equity 186,487 177,494 163,156 152,388 70,966
Total Citigroup stockholders' equity 189,049 177,806 163,468 152,700 141,630
Direct staff (in thousands) 259 266 260 265 323
Ratios
Return on average assets 0.4 % 0.6 % 0.5 % (0.08 )% (1.28 )%
Return on average common stockholders' equity (5) 4.1 6.3 6.8 (9.4 ) (28.8 )
Return on average total stockholders' equity (5) 4.1 6.3 6.8 (1.1 ) (20.9 )
Efficiency ratio 72 65 55 60 134
Tier 1 Common (6) 12.67 % 11.80 % 10.75 % 9.60 % 2.30 %
Tier 1 Capital 14.06 13.55 12.91 11.67 11.92
Total Capital 17.26 16.99 16.59 15.25 15.70
Leverage (7) 7.48 7.19 6.60 6.87 6.08
Citigroup common stockholders' equity to assets 10.00 % 9.47 % 8.52 % 8.21 % 3.66 %
Total Citigroup stockholders' equity to assets 10.14 9.49 8.54 8.22 7.31
Dividend payout ratio (4) 1.6 0.8 NM NM NM
Book value per common share (3) $ 61.57 $ 60.70 $ 56.15 $ 53.50 $ 130.21
Ratio of earnings to fixed charges and preferred stock dividends 1.38 x 1.59 x 1.51 x NM NM

(1) Discontinued operations in 2012 includes a carve-out of Citi's liquid strategies business within Citi Capital Advisors, the sale of which is expected to close in the first half of 2013. Discontinued operations in 2012 and 2011 reflect the sale of the Egg Banking PLC credit card business. Discontinued operations for 2008 to 2009 reflect the sale of Nikko Cordial Securities to Sumitomo Mitsui Banking Corporation, the sale of Citigroup's German retail banking operations to Crédit Mutuel, and the sale of CitiCapital's equipment finance unit to General Electric. Discontinued operations for 2008 to 2010 also include the operations and associated gain on sale of Citigroup's Travelers Life & Annuity, substantially all of Citigroup's international insurance business, and Citigroup's Argentine pension business sold to MetLife Inc. Discontinued operations for the second half of 2010 also reflect the sale of The Student Loan Corporation. See Note 3 to the Consolidated Financial Statements for additional information on Citi's discontinued operations.
(2) The diluted EPS calculation for 2009 and 2008 utilizes basic shares and income allocated to unrestricted common stockholders (Basic) due to the negative income allocated to unrestricted common stockholders. Using diluted shares and income allocated to unrestricted common stockholders (Diluted) would result in anti-dilution. As of December 31, 2012, primarily all stock options were out of the money and did not impact diluted EPS. The year-end share price was $39.56. See Note 11 to the Consolidated Financial Statements.
(3) All per share amounts and Citigroup shares outstanding for all periods reflect Citigroup's 1-for-10 reverse stock split, which was effective May 6, 2011.
(4) Dividends declared per common share as a percentage of net income per diluted share.
(5) The return on average common stockholders' equity is calculated using net income less preferred stock dividends divided by average common stockholders' equity. The return on average total Citigroup stockholders' equity is calculated using net income divided by average Citigroup stockholders' equity.
(6) As currently defined by the U.S. banking regulators, the Tier 1 Common ratio represents Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests in subsidiaries and qualifying trust preferred securities divided by risk-weighted assets.
(7) The leverage ratio represents Tier 1 Capital divided by quarterly adjusted average total assets.

Note: The following accounting changes were adopted by Citi during the respective years:

On January 1, 2010, Citigroup adopted SFAS 166/167. Prior periods have not been restated as the standards were adopted prospectively. See Note 1 to the Consolidated Financial Statements. On January 1, 2009, Citigroup adopted SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (now ASC 810-10-45-15, Consolidation: Noncontrolling Interest in a Subsidiary ), and FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" (now ASC 260-10-45-59A, Earnings Per Share: Participating Securities and the Two-Class Method ). All prior periods have been restated to conform to the current period's presentation.

11


SEGMENT AND BUSINESS-INCOME (LOSS) AND REVENUES

The following tables show the income (loss) and revenues for Citigroup on a segment and business view:

CITIGROUP INCOME

% Change % Change
In millions of dollars 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Income (loss) from continuing operations
CITICORP
Global Consumer Banking
       North America $ 4,815 $ 4,095 $ 974 18 % NM
       EMEA (18 ) 95 97 NM (2 )%
       Latin America 1,510 1,578 1,788 (4 ) (12 )
       Asia 1,797 1,904 2,110 (6 ) (10 )
Total $ 8,104 $ 7,672 $ 4,969 6 % 54 %
Securities and Banking
       North America $ 1,011 $ 1,044 $ 2,495 (3 )% (58 )%
       EMEA 1,354 2,000 1,811 (32 ) 10
       Latin America 1,308 974 1,093 34 (11 )
       Asia 822 895 1,152 (8 ) (22 )
Total $ 4,495 $ 4,913 $ 6,551 (9 )% (25 )%
Transaction Services
       North America $ 470 $ 415 $ 490 13 % (15 )%
       EMEA 1,244 1,130 1,218 10 (7 )
       Latin America 654 639 663 2 (4 )
       Asia 1,127 1,165 1,251 (3 ) (7 )
Total $ 3,495 $ 3,349 $ 3,622 4 % (8 )%
       Institutional Clients Group $ 7,990 $ 8,262 $ 10,173 (3 )% (19 )%
Corporate/Other $ (1,625 ) $ (728 ) $ 242 NM NM
Total Citicorp $ 14,469 $ 15,206 $ 15,384 (5 )% (1 )%
CITI HOLDINGS
Brokerage and Asset Management $ (3,190 ) $ (286 ) $ (226 ) NM (27 )%
Local Consumer Lending (3,193 ) (4,413 ) (5,365 ) 28 % 18
Special Asset Pool (177 ) 596 1,158 NM (49 )
Total Citi Holdings $ (6,560 ) $ (4,103 ) $ (4,433 ) (60 )% 7 %
Income from continuing operations $ 7,909 $ 11,103 $ 10,951 (29 )% 1 %
Discontinued operations $ (149 ) $ 112 $ (68 ) NM NM
Net income attributable to noncontrolling interests 219 148 281 48 % (47 )%
Citigroup's net income $ 7,541 $ 11,067 $ 10,602 (32 )% 4 %

NM Not meaningful

12


CITIGROUP REVENUES

% Change % Change
In millions of dollars 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
CITICORP
Global Consumer Banking
       North America $ 21,081 $ 20,159 $ 21,747 5 % (7 )%
       EMEA 1,516 1,558 1,559 (3 ) -
       Latin America 9,702 9,469 8,667 2 9
       Asia 7,915 8,009 7,396 (1 ) 8
Total $ 40,214 $ 39,195 $ 39,369 3 % - %
Securities and Banking
       North America $ 6,104 $ 7,558 $ 9,393 (19 )% (20 )%
       EMEA 6,417 7,221 6,849 (11 ) 5
       Latin America 3,019 2,370 2,554 27 (7 )
       Asia 4,203 4,274 4,326 (2 ) (1 )
Total $ 19,743 $ 21,423 $ 23,122 (8 )% (7 )%
Transaction Services
       North America $ 2,564 $ 2,444 $ 2,485 5 % (2 )%
       EMEA 3,576 3,486 3,356 3 4
       Latin America 1,797 1,713 1,530 5 12
       Asia 2,920 2,936 2,714 (1 ) 8
Total $ 10,857 $ 10,579 $ 10,085 3 % 5 %
       Institutional Clients Group $ 30,600 $ 32,002 $ 33,207 (4 )% (4 )%
Corporate/Other $ 192 $ 885 $ 1,754 (78 )% (50 )%
Total Citicorp $ 71,006 $ 72,082 $ 74,330 (1 )% (3 )%
CITI HOLDINGS
Brokerage and Asset Management $ (4,699 ) $ 282 $ 609 NM (54 )%
Local Consumer Lending 4,366 5,442 8,810 (20 )% (38 )
Special Asset Pool (500 ) 547 2,852 NM (81 )
Total Citi Holdings $ (833 ) $ 6,271 $ 12,271 NM (49 )%
Total Citigroup net revenues $ 70,173 $ 78,353 $ 86,601 (10 )% (10 )%

NM Not meaningful

13


CITICORP


Citicorp is Citigroup's global bank for consumers and businesses and represents Citi's core franchises. Citicorp is focused on providing best-in-class products and services to customers and leveraging Citigroup's unparalleled global network, including many of the world's emerging economies. Citicorp is physically present in approximately 100 countries, many for over 100 years, and offers services in over 160 countries and jurisdictions. Citi believes this global network provides a strong foundation for servicing the broad financial services needs of its large multinational clients and for meeting the needs of retail, private banking, commercial, public sector and institutional clients around the world. At December 31, 2012, Citicorp had $1.7 trillion of assets and $863 billion of deposits, representing 92% of Citi's total assets and 93% of its deposits.
Citicorp consists of the following operating businesses: Global Consumer Banking (which consists of Regional Consumer Banking in North America, EMEA, Latin America and Asia ) and Institutional Clients Group (which includes Securities and Banking and Transaction Services ). Citicorp also includes Corporate/Other .

% Change % Change
In millions of dollars except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
       Net interest revenue $ 45,026 $ 44,764 $ 46,101 1 % (3 )%
       Non-interest revenue 25,980 27,318 28,229 (5 ) (3 )
Total revenues, net of interest expense $ 71,006 $ 72,082 $ 74,330 (1 )% (3 )%
Provisions for credit losses and for benefits and claims
Net credit losses $ 8,734 $ 11,462 $ 16,901 (24 )% (32 )%
Credit reserve build (release) (2,177 ) (4,988 ) (3,171 ) 56 (57 )
Provision for loan losses $ 6,557 $ 6,474 $ 13,730 1 % (53 )%
Provision for benefits and claims 236 193 184 22 5
Provision for unfunded lending commitments 40 92 (35 ) (57 ) NM
Total provisions for credit losses and for benefits and claims $ 6,833 $ 6,759 $ 13,879 1 % (51 )%
Total operating expenses $ 45,265 $ 44,469 $ 40,019 2 % 11 %
Income from continuing operations before taxes $ 18,908 $ 20,854 $ 20,432 (9 )% 2 %
Provisions for income taxes 4,439 5,648 5,048 (21 ) 12
Income from continuing operations $ 14,469 $ 15,206 $ 15,384 (5 )% (1 )%
Income (loss) from discontinued operations, net of taxes (149 ) 112 (68 ) NM NM
Noncontrolling interests 216 29 74 NM (61 )
Net income $ 14,104 $ 15,289 $ 15,242 (8 )% - %
Balance sheet data (in billions of dollars)
Total end-of-period (EOP) assets $ 1,709 $ 1,649 $ 1,601 4 % 3 %
Average assets 1,717 1,684 1,578 2 7
Return on average assets 0.82 % 0.91 % 0.97 %
Efficiency ratio (Operating expenses/Total revenues) 64 % 62 % 54 %
Total EOP loans $ 540 $ 507 $ 450 7 13
Total EOP deposits 863 804 769 7 5

NM Not meaningful

14


GLOBAL CONSUMER BANKING

Global Consumer Banking (GCB) consists of Citigroup's four geographical Regional Consumer Banking (RCB) businesses that provide traditional banking services to retail customers through retail banking, commercial banking, Citi-branded cards and Citi retail services. GCB is a globally diversified business with 4,008 branches in 39 countries around the world. For the year ended December 31, 2012, GCB had $387 billion of average assets and $322 billion of average deposits. Citi's strategy is to focus on the top 150 cities globally that it believes have the highest growth potential in consumer banking. Consistent with this strategy, as announced in the fourth quarter of 2012 as part of its repositioning efforts, Citi intends to optimize its branch footprint and further concentrate its presence in major metropolitan areas. As of December 31, 2012, Citi had consumer banking operations in approximately 120, or 80%, of these cities.

% Change % Change
In millions of dollars except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ 29,468 $ 29,683 $ 29,858 (1 )% (1 )%
Non-interest revenue 10,746 9,512 9,511 13 -
Total revenues, net of interest expense $ 40,214 $ 39,195 $ 39,369 3 % - %
Total operating expenses $ 21,819 $ 21,408 $ 18,887 2 % 13 %
       Net credit losses $ 8,452 $ 10,840 $ 16,328 (22 )% (34 )%
       Credit reserve build (release) (2,131 ) (4,429 ) (2,547 ) 52 (74 )
       Provisions for unfunded lending commitments - 3 (3 ) (100 ) NM
       Provision for benefits and claims 237 192 184 23 4
Provisions for credit losses and for benefits and claims $ 6,558 $ 6,606 $ 13,962 (1 )% (53 )%
Income from continuing operations before taxes $ 11,837 $ 11,181 $ 6,520 6 % 71 %
Income taxes 3,733 3,509 1,551 6 NM
Income from continuing operations $ 8,104 $ 7,672 $ 4,969 6 % 54 %
Noncontrolling interests 3 - (9 ) - 100
Net income $ 8,101 $ 7,672 $ 4,978 6 % 54 %
Balance Sheet data (in billions of dollars)
Average assets $ 387 $ 376 $ 353 3 % 7 %
Return on assets 2.09 % 2.04 % 1.41 %
Efficiency ratio 54 % 55 % 48 %
Total EOP assets $ 402 $ 385 $ 374 4 3
Average deposits 322 314 299 3 5
Net credit losses as a percentage of average loans 2.95 % 3.93 % 6.22 %
Revenue by business
       Retail banking $ 18,059 $ 16,398 $ 15,874 10 % 3 %
       Cards (1) 22,155 22,797 23,495 (3 ) (3 )
Total $ 40,214 $ 39,195 $ 39,369 3 % - %
Income from continuing operations by business
       Retail banking $ 2,986 $ 2,523 $ 3,052 18 % (17 )%
       Cards (1) 5,118 5,149 1,917 (1 ) NM
Total $ 8,104 $ 7,672 $ 4,969 6 % 54 %
Foreign Currency (FX) Translation Impact
       Total revenue-as reported $ 40,214 $ 39,195 $ 39,369 3 % - %
       Impact of FX translation (2) - (742 ) (153 )
       Total revenues-ex-FX $ 40,214 $ 38,453 $ 39,216 5 % (2 )%
       Total operating expenses-as reported $ 21,819 $ 21,408 $ 18,887 2 % 13 %
       Impact of FX translation (2) - (494 ) (134 )
       Total operating expenses-ex-FX $ 21,819 $ 20,914 $ 18,753 4 % 12 %
       Total provisions for LLR & PBC-as reported $ 6,558 $ 6,606 $ 13,962 (1 )% (53 )%
       Impact of FX translation (2) - (167 ) (19 )
       Total provisions for LLR & PBC-ex-FX $ 6,558 $ 6,439 $ 13,943 2 % (54 )%
       Net income-as reported $ 8,101 $ 7,672 $ 4,978 6 % 54 %
       Impact of FX translation (2) - (102 ) (17 )
       Net income-ex-FX $ 8,101 $ 7,570 $ 4,961 7 % 53 %

(1)      Includes both Citi-branded cards and Citi retail services.
(2) Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the current exchange rate for all periods presented.
NM Not meaningful

15


NORTH AMERICA REGIONAL CONSUMER BANKING

North America Regional Consumer Banking (NA RCB) provides traditional banking and Citi-branded cards and Citi retail services to retail customers and small to mid-size businesses in the U.S. NA RCB 's approximate 1,000 retail bank branches as of December 31, 2012 are largely concentrated in the greater metropolitan areas of New York, Los Angeles, San Francisco, Chicago, Miami, Washington, D.C., Boston, Philadelphia, Dallas, Houston, San Antonio and Austin. As announced in the fourth quarter of 2012, as part of its repositioning efforts, Citi expects to optimize its branch network in North America and further concentrate its presence in major metropolitan areas. At December 31, 2012, NA RCB had approximately 12.4 million customer accounts, $42.7 billion of retail banking loans and $165.2 billion of deposits. In addition, NA RCB had approximately 102.1 million Citi-branded and Citi retail services credit card accounts, with $111.5 billion in outstanding card loan balances.

% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ 16,591 $ 16,915 $ 17,892 (2 )% (5 )%
Non-interest revenue 4,490 3,244 3,855 38 (16 )
Total revenues, net of interest expense $ 21,081 $ 20,159 $ 21,747 5 % (7 )%
Total operating expenses $ 9,933 $ 9,690 $ 8,445 3 % 15 %
       Net credit losses $ 5,756 $ 8,101 $ 13,132 (29 )% (38 )%
       Credit reserve build (release) (2,389 ) (4,181 ) (1,319 ) 43 NM
       Provisions for benefits and claims 1 (1 ) - NM -
       Provision for unfunded lending commitments 70 62 57 13 9
Provisions for credit losses and for benefits and claims $ 3,438 $ 3,981 $ 11,870 (14 )% (66 )%
Income from continuing operations before taxes $ 7,710 $ 6,488 $ 1,432 19 % NM
Income taxes 2,895 2,393 458 21 NM
Income from continuing operations $ 4,815 $ 4,095 $ 974 18 % NM
Noncontrolling interests 1 - - - -
Net income $ 4,814 $ 4,095 $ 974 18 % NM
Balance Sheet data (in billions of dollars)
Average assets $ 172 $ 165 $ 163 4 % 1 %
Return on average assets 2.80 % 2.48 % 0.60 %
Efficiency ratio 47 % 48 % 39 %
Average deposits $ 154 $ 145 $ 145 6 -
Net credit losses as a percentage of average loans 3.83 % 5.50 % 8.71 %
Revenue by business
       Retail banking $ 6,677 $ 5,113 $ 5,323 31 % (4 )%
       Citi-branded cards 8,323 8,730 9,695 (5 ) (10 )
       Citi retail services 6,081 6,316 6,729 (4 ) (6 )
Total $ 21,081 $ 20,159 $ 21,747 5 % (7 )%
Income from continuing operations by business
       Retail banking $ 1,237 $ 463 $ 744 NM (38 )%
       Citi-branded cards 2,080 2,151 (24 ) (3 )% NM
       Citi retail services 1,498 1,481 254 1 NM
Total $ 4,815 $ 4,095 $ 974 18 % NM

NM Not meaningful

16


2012 vs. 2011
Net income increased 18%, mainly driven by higher mortgage revenues and a $2.3 billion decrease in net credit losses, partially offset by a $1.8 billion reduction in loan loss reserve releases.
Revenues increased 5%, driven by a 38% increase in non-interest revenues from higher gains on sale of mortgages, partly offset by a 2% decline in net interest revenues. The higher gains on sale of mortgages were driven by high volumes of mortgage refinancing activity, due largely to the U.S. government's Home Affordable Refinance Program (HARP), as well as higher margins resulting from the shift to retail as compared to third-party origination channels. Assuming the continued low interest rate environment, Citi believes the higher mortgage refinancing volumes could continue into the first half of 2013. Excluding mortgages, revenue from the retail banking business was essentially flat, as volume growth and improved mix in the deposit and lending portfolios was offset by significant spread compression. Citi expects spread compression to continue to negatively impact revenues during 2013.
Cards revenues declined 4%. In Citi-branded cards, both average loans and net interest revenue declined year-over-year, reflecting continued increased payment rates resulting from consumer deleveraging and the impact of the look-back provisions of The Credit Card Accountability Responsibility and Disclosure Act (CARD Act). 10 Citi expects the look-back provisions of the CARD Act will likely have a diminishing impact on the results of operations of its cards businesses during 2013. In Citi retail services, net interest revenues improved slightly but were offset by declining non-interest revenues, driven by improving credit and the resulting impact on contractual partner payments. Citi expects cards revenues could continue to be negatively impacted by higher payment rates for consumers, reflecting ongoing economic uncertainty and deleveraging as well as Citi's shift to higher credit quality borrowers.
As part of its U.S. Citi-branded cards business, Citibank, N.A. issues a co-branded credit card product with American Airlines, the Citi/AAdvantage card. AMR Corporation and certain of its subsidiaries, including American Airlines, Inc., filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in November 2011. On February 14, 2013, AMR Corporation and US Airways Group, Inc. announced that the boards of directors of both companies had approved a merger agreement under which the companies would be combined. For additional information, see "Risk Factors-Business and Operational Risks" below.
Expenses increased 3%, primarily due to increased mortgage origination costs resulting from the higher retail channel mortgage volumes and $100 million of repositioning charges in the fourth quarter of 2012, partially offset by lower expenses in cards. Expenses continued to be impacted by elevated legal and related costs.
Provisions decreased 14%, due to lower net credit losses in the cards portfolio partly offset by continued lower loan loss reserve releases ($2.4 billion in 2012 compared to $4.2 billion in 2011). Assuming no downturn in the U.S. economic environment, Citi believes credit trends have largely stabilized in the cards portfolios.

2011 vs. 2010
Net income increased $3.1 billion, driven by higher loan loss reserve releases and an improvement in net credit losses, partly offset by lower revenues and higher expenses.
Revenues decreased 7% due to a decrease in net interest and non-interest revenues. Net interest revenue decreased 5%, driven primarily by lower cards net interest revenue, which was negatively impacted by the look-back provision of the CARD Act. In addition, net interest revenue for cards was negatively impacted by higher promotional balances and lower total average loans. Non-interest revenue decreased 16%, primarily due to lower gains from the sale of mortgage loans, as margins declined and Citi held more loans on-balance sheet, and declining revenues driven by improving credit and the resulting impact on contractual partner payments in Citi retail services. In addition, the decline in non-interest revenue reflected lower retail banking fee income.
Expenses increased 15%, primarily driven by higher investment spending in the business during the second half of 2011, particularly in cards marketing and technology, and increases in litigation accruals related to the interchange fees litigation (see Note 28 to the Consolidated Financial Statements).
Provisions decreased 66%, primarily due to a loan loss reserve release of $4.2 billion in 2011, compared to a loan loss reserve release of $1.3 billion in 2010, and lower net credit losses in the cards portfolios (cards net credit losses declined $5.0 billion, or 38%, from 2010).


____________________ 
10 The CARD Act requires a review once every six months for card accounts where the annual percentage rate (APR) has been increased since January 1, 2009 to assess whether changes in credit risk, market conditions or other factors merit a future decline in the APR.


17


EMEA REGIONAL CONSUMER BANKING

EMEA Regional Consumer Banking (EMEA RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, primarily in Central and Eastern Europe, the Middle East and Africa. The countries in which EMEA RCB has the largest presence are Poland, Turkey, Russia and the United Arab Emirates. As announced in the fourth quarter of 2012, as part of its repositioning efforts, Citi expects to either sell or significantly scale back its consumer operations in Turkey, Romania and Pakistan, and expects to further optimize its branch network in Hungary. At December 31, 2012, EMEA RCB had 228 retail bank branches with 3.9 million customer accounts, $5.1 billion in retail banking loans and $13.2 billion in deposits. In addition, the business had 2.8 million Citi-branded card accounts with $2.9 billion in outstanding card loan balances.

% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ 1,040 $ 947 $ 936 10 % 1 %
Non-interest revenue 476 611 623 (22 ) (2 )
Total revenues, net of interest expense $ 1,516 $ 1,558 $ 1,559 (3 )% - %
Total operating expenses $ 1,434 $ 1,343 $ 1,225 7 % 10 %
       Net credit losses $ 105 $ 172 $ 315 (39 )% (45 )%
       Credit reserve build (release) (5 ) (118 ) (118 ) 96 -
       Provision for unfunded lending commitments (1 ) 4 (3 ) NM NM
Provisions for credit losses $ 99 $ 58 $ 194 71 % (70 )%
Income from continuing operations before taxes $ (17 ) $ 157 $ 140 NM 12 %
Income taxes 1 62 43 (98 ) 44
Income from continuing operations $ (18 ) $ 95 $ 97 NM (2 )%
Noncontrolling interests 4 - (1 ) - 100
Net income $ (22 ) $ 95 $ 98 NM (3 )%
Balance Sheet data (in billions of dollars)
Average assets $ 9 $ 10 10 (10 )% - %
Return on average assets (0.24 )% 0.95 % 0.98 %
Efficiency ratio 95 % 86 % 79 %
Average deposits $ 12.6 $ 12.5 $ 13.7 1 (9 )
Net credit losses as a percentage of average loans 1.40 % 2.37 % 4.42 %
Revenue by business
       Retail banking $ 889 $ 890 $ 878 - 1 %
       Citi-branded cards 627 668 681 (6 ) (2 )
Total $ 1,516 $ 1,558 $ 1,559 (3 )% - %
Income (loss) from continuing operations by business
       Retail banking $ (81 ) $ (37 ) $ (59 ) NM 37 %
       Citi-branded cards 63 132 156 (52 ) (15 )
Total $ (18 ) $ 95 $ 97 NM (2 )%
Foreign Currency (FX) Translation Impact
       Total revenue-as reported $ 1,516 $ 1,558 $ 1,559 (3 )% - %
       Impact of FX translation (1) - (75 ) (55 )
       Total revenues-ex-FX $ 1,516 $ 1,483 $ 1,504 2 % (1 )%
       Total operating expenses-as reported $ 1,434 $ 1,343 $ 1,225 7 % 10 %
       Impact of FX translation (1) - (66 ) (34 )
       Total operating expenses-ex-FX $ 1,434 $ 1,277 $ 1,191 12 % 7 %
       Provisions for credit losses-as reported $ 99 $ 58 $ 194 71 % (70 )%
       Impact of FX translation (1) - (2 ) (7 )
       Provisions for credit losses-ex-FX $ 99 $ 56 $ 187 77 % (70 )%
       Net income-as reported $ (22 ) $ 95 $ 98 NM (3 )%
       Impact of FX translation (1) - (11 ) (13 )
       Net income-ex-FX $ (22 ) $ 84 $ 85 NM (1 )%

(1) Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the current exchange rate for all periods presented.
NM Not meaningful

18


The discussion of the results of operations for EMEA RCB below excludes the impact of FX translation for all periods presented. Presentation of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. Citi believes the presentation of EMEA RCB 's results excluding the impact of FX translation is a more meaningful depiction of the underlying fundamentals of the business. For a reconciliation of certain of these metrics to the reported results, see the table above.

2012 vs. 2011
The net loss of $22 million compared to net income of $84 million in 2011 was mainly due to higher operating expenses and lower loan loss reserve releases, partially offset by higher revenues.
Revenues increased 2%, with growth across the major products, including strong growth in Russia. Year-over-year, cards purchase sales increased 12%, investment sales increased 15% and retail loan volume increased 17%. Revenue growth year-over-year was partly offset by the absence of Akbank, Citi's equity investment in Turkey, which was moved to Corporate/Other in the first quarter of 2012. Net interest revenue increased 17%, driven by the absence of Akbank investment funding costs and growth in average deposits of 5%, average retail loans of 16% and average cards loans of 6%, partially offset by spread compression. Interest rate caps on credit cards, particularly in Turkey and Poland, the continued liquidation of a higher yielding non-strategic retail banking portfolio and the continued low interest rate environment were the main contributors to the lower spreads. Citi expects spread compression to continue to negatively impact revenues in this business during 2013. Non-interest revenue decreased 20%, mainly reflecting the absence of Akbank.
Expenses grew 12%, primarily due to the $57 million of fourth quarter of 2012 repositioning charges in Turkey, Romania and Pakistan and the impact of continued investment spending on new internal operating platforms during the year.
Provisions increased $43 million due to lower loan loss reserve releases, partially offset by lower net credit losses across most countries. Net credit losses continued to decline, decreasing 36% due to the ongoing improvement in credit quality and the move toward lower-risk customers. Citi believes that net credit losses in EMEA RCB have largely stabilized and assuming the underlying core portfolio continues to grow in 2013, credit costs could begin to rise.

2011 vs. 2010
Net income decreased 1%, as an improvement in credit costs was offset by higher expenses from increased investment spending and lower revenues.
Revenues decreased 1%, driven by the liquidation of higher yielding non-strategic customer portfolios and a lower contribution from Akbank. Net interest revenue declined 1% due to the decline in the higher yielding non-strategic retail banking portfolio and spread compression in the Citi-branded cards portfolio. Interest rate caps on credit cards, particularly in Turkey and Poland, contributed to the lower spreads in the cards portfolio. Non-interest revenue decreased 2%, mainly reflecting the lower contribution from Akbank. Despite the negative impacts to revenues described above, underlying businesses showed growth, with investment sales up 28% from the prior year and cards purchase sales up 15%.
Expenses increased 7% due to the impact of account acquisition, focused investment spending and higher transactional expenses, partly offset by continued savings initiatives.
Provisions decreased 70%, driven by a reduction in net credit losses. Net credit losses decreased 46%, reflecting the continued credit quality improvement during the year, stricter underwriting criteria and the move to lower-risk products.


19


LATIN AMERICA REGIONAL CONSUMER BANKING

Latin America Regional Consumer Banking (Latin America RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest presence in Mexico and Brazil. Latin America RCB includes branch networks throughout Latin America as well as Banco Nacional de Mexico, or Banamex, Mexico's second-largest bank, with over 1,700 branches. As announced in the fourth quarter of 2012, as part of its repositioning efforts, Citi expects to either sell or significantly scale back consumer operations in Paraguay and Uruguay, and expects to further optimize its branch network in Brazil. At December 31, 2012, Latin America RCB had 2,181 retail branches, with approximately 31.8 million customer accounts, $28.3 billion in retail banking loans and $48.6 billion in deposits. In addition, the business had approximately 12.9 million Citi-branded card accounts with $14.8 billion in outstanding loan balances.

% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ 6,695 $ 6,456 $ 5,953 4 % 8 %
Non-interest revenue 3,007 3,013 2,714 - 11
Total revenues, net of interest expense $ 9,702 $ 9,469 $ 8,667 2 % 9 %
Total operating expenses $ 5,702 $ 5,756 $ 5,139 (1 )% 12 %
       Net credit losses $ 1,750 $ 1,684 $ 1,868 4 % (10 )%
       Credit reserve build (release) 299 (67 ) (823 ) NM 92
       Provision for benefits and claims 167 130 127 28 2
Provisions for loan losses and for benefits and claims (LLR & PBC) $ 2,216 $ 1,747 $ 1,172 27 % 49 %
Income from continuing operations before taxes $ 1,784 $ 1,966 $ 2,356 (9 )% (17 )%
Income taxes 274 388 568 (29 ) (32 )
Income from continuing operations $ 1,510 $ 1,578 $ 1,788 (4 )% (12 )%
Noncontrolling interests (2 ) - (8 ) - 100
Net income $ 1,512 $ 1,578 $ 1,796 (4 )% (12 )%
Balance Sheet data (in billions of dollars)
Average assets $ 80 $ 80 $ 72 - % 11 %
Return on average assets 1.89 % 1.97 % 2.50 %
Efficiency ratio 59 % 61 % 59 %
Average deposits $ 45.0 $ 45.8 $ 40.3 (2 ) 14
Net credit losses as a percentage of average loans 4.34 % 4.69 % 6.14 %
Revenue by business
       Retail banking $ 5,766 $ 5,468 $ 5,016 5 % 9 %
       Citi-branded cards 3,936 4,001 3,651 (2 ) 10
Total $ 9,702 $ 9,469 $ 8,667 2 % 9 %
Income from continuing operations by business
       Retail banking $ 861 $ 902 $ 927 (5 )% (3 )%
       Citi-branded cards 649 676 861 (4 ) (21 )
Total $ 1,510 $ 1,578 $ 1,788 (4 )% (12 )%
Foreign Currency (FX) Translation Impact
       Total revenue-as reported $ 9,702 $ 9,469 $ 8,667 2 % 9 %
       Impact of FX translation (1) - (569 ) (335 )
       Total revenues-ex-FX $ 9,702 $ 8,900 $ 8,332 9 % 7 %
       Total operating expenses-as reported $ 5,702 $ 5,756 $ 5,139 (1 )% 12 %
       Impact of FX translation (1) - (367 ) (233 )
       Total operating expenses-ex-FX $ 5,702 $ 5,389 $ 4,906 6 % 10 %
       Provisions for LLR & PBC-as reported $ 2,216 $ 1,747 $ 1,172 27 % 49 %
       Impact of FX translation (1) - (156 ) (57 )
       Provisions for LLR & PBC-ex-FX $ 2,216 $ 1,591 $ 1,115 39 % 43 %
       Net income-as reported $ 1,512 $ 1,578 $ 1,796 (4 )% (12 )%
       Impact of FX translation (1) - (66 ) (39 )
       Net income-ex-FX $ 1,512 $ 1,512 $ 1,757 - % (14 )%

(1) Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the current exchange rate for all periods presented.
NM Not meaningful

20


The discussion of the results of operations for Latin America RCB below excludes the impact of FX translation for all periods presented. Presentation of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. Citi believes the presentation of Latin America RCB 's results excluding the impact of FX translation is a more meaningful depiction of the underlying fundamentals of the business. For a reconciliation of certain of these metrics to the reported results, see the table above.

2012 vs. 2011
Net income was flat to the prior year as higher revenues were offset by higher credit costs and repositioning charges.
Revenues increased 9%, primarily due to strong revenue growth in Mexico and higher volumes, mostly related to personal loans and credit cards. However, continued regulatory pressure involving foreign exchange controls and related measures in Argentina and Venezuela is expected to negatively impact revenues in the near term. Net interest revenue increased 10% due to increased volumes, partially offset by continued spread compression. Citi expects spread compression to continue to negatively impact revenues in this business during 2013. Non-interest revenue increased 7%, primarily due to increased business volumes in the private pension fund and insurance businesses.
Expenses increased 6%, primarily due to $131 million of repositioning charges in the fourth quarter of 2012, higher volume-driven expenses and increased legal and related costs.
Provisions increased 39%, primarily due to increased loan loss reserve builds driven by underlying business volume growth, primarily in Mexico and Colombia. In addition, net credit losses increased in the retail portfolios, primarily in Mexico, reflecting volume growth. Citi believes that net credit losses in Latin America will likely continue to trend higher as various loan portfolios continue to mature.

2011 vs. 2010
Net income declined 14% as higher revenues were more than offset by higher expenses and higher credit costs.
Revenues increased 7% primarily due to higher volumes. Net interest revenue increased 6% driven by the continued growth in lending and deposit volumes, partially offset by spread compression driven in part by the continued move toward customers with a lower risk profile and stricter underwriting criteria, especially in the Citi-branded cards portfolio. Non-interest revenue increased 8%, primarily driven by an increase in banking fee income from credit card purchase sales.
Expenses increased 10% due to higher volumes and investment spending, including increased marketing and customer acquisition costs as well as new branches, partially offset by continued savings initiatives. The increase in the level of investment spending in the business was largely completed at the end of 2011.
Provisions increased 43%, reflecting lower loan loss reserve releases. Net credit losses declined 13%, driven primarily by improvements in the Mexico cards portfolio due to the move toward customers with a lower-risk profile and stricter underwriting criteria.


21


ASIA REGIONAL CONSUMER BANKING

Asia Regional Consumer Banking (Asia RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest Citi presence in Korea, Australia, Singapore, Japan, Taiwan, Hong Kong, India and Indonesia. As announced in the fourth quarter of 2012, as part of its repositioning efforts, Citi expects to optimize its branch network and further concentrate its presence in major metropolitan areas. The markets affected by the reductions include Hong Kong and Korea. At December 31, 2012, Asia RCB had approximately 600 retail branches, 16.9 million customer accounts, $69.7 billion in retail banking loans and $110 billion in deposits. In addition, the business had approximately 16.0 million Citi-branded card accounts with $20.4 billion in outstanding loan balances.

% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ 5,142 $ 5,365 $ 5,077 (4 )% 6 %
Non-interest revenue 2,773 2,644 2,319 5 14
Total revenues, net of interest expense $ 7,915 $ 8,009 $ 7,396 (1 )% 8 %
Total operating expenses $ 4,750 $ 4,619 $ 4,078 3 % 13 %
       Net credit losses $ 841 $ 883 $ 1,013 (5 )% (13 )%
       Credit reserve build (release) (36 ) (63 ) (287 ) 43 78
Provisions for loan losses $ 805 820 726 (2 )% 13 %
Income from continuing operations before taxes $ 2,360 $ 2,570 $ 2,592 (8 )% (1 )%
Income taxes 563 666 482 (15 ) 38
Income from continuing operations $ 1,797 $ 1,904 $ 2,110 (6 )% (10 )%
Noncontrolling interests - - - - -
Net income $ 1,797 $ 1,904 $ 2,110 (6 )% (10 )%
Balance Sheet data (in billions of dollars)
Average assets $ 126 $ 122 $ 108 3 % 13 %
Return on average assets 1.43 % 1.56 % 1.96 %
Efficiency ratio 60 % 58 % 55 %
Average deposits $ 110.8 $ 110.5 $ 99.8 - 11
Net credit losses as a percentage of average loans 0.95 % 1.03 % 1.37 %
Revenue by business
       Retail banking $ 4,727 $ 4,927 $ 4,657 (4 )% 6 %
       Citi-branded cards 3,188 3,082 2,739 3 13
Total $ 7,915 $ 8,009 $ 7,396 (1 )% 8 %
Income from continuing operations by business
       Retail banking $ 969 $ 1,195 $ 1,440 (19 )% (17 )%
       Citi-branded cards 828 709 670 17 6
Total $ 1,797 $ 1,904 $ 2,110 (6 )% (10 )%
Foreign Currency (FX) Translation Impact
       Total revenue-as reported $ 7,915 $ 8,009 $ 7,396 (1 )% 8 %
       Impact of FX translation (1) - (98 ) 237
       Total revenues-ex-FX $ 7,915 $ 7,911 $ 7,633 - % 4 %
       Total operating expenses-as reported $ 4,750 $ 4,619 $ 4,078 3 % 13 %
       Impact of FX translation (1) - (61 ) 133
       Total operating expenses-ex-FX $ 4,750 $ 4,558 $ 4,211 4 % 8 %
       Provisions for loan losses-as reported $ 805 $ 820 $ 726 (2 )% 13 %
       Impact of FX translation (1) - (9 ) 45
       Provisions for loan losses-ex-FX $ 805 $ 811 $ 771 (1 )% 5 %
       Net income-as reported $ 1,797 $ 1,904 $ 2,110 (6 )% (10 )%
       Impact of FX translation (1) - (25 ) 35
       Net income-ex-FX $ 1,797 $ 1,879 $ 2,145 (4 )% (12 )%

(1)      Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the current exchange rate for all periods presented.
NM Not meaningful

22


The discussion of the results of operations for Asia RCB below excludes the impact of FX translation for all periods presented. Presentation of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. Citi believes the presentation of Asia RCB 's results excluding the impact of FX translation is a more meaningful depiction of the underlying fundamentals of the business. For a reconciliation of certain of these metrics to the reported results, see the table above.

2012 vs. 2011
Net income decreased 4% primarily due to higher expenses.
Revenues were flat year-over-year. Net interest revenue decreased 3%, as the benefit of higher loan and deposit balances was offset by spread compression, mainly in retail lending. Spread compression continued to reflect improvements in the customer risk profile, stricter underwriting criteria and certain regulatory changes in Korea where, as previously disclosed, policy actions, including rate caps and other initiatives, have been implemented to slow the growth of consumer credit in that market, thus impacting volume growth, lending rates and fees. Spread compression is expected to continue to have a negative impact on net interest revenue as regulatory pressure and low interest rates persist. Non-interest revenue increased 6%, reflecting growth in Citi-branded cards purchase sales, partially offset by a decrease in revenue from foreign exchange products. Despite the continued spread compression and regulatory changes in the region, the underlying business metrics continued to grow, with average retail loans up 6% and average card loans up 2%.
Expenses increased 4%, primarily due to approximately $78 million of repositioning charges in the fourth quarter of 2012, largely in Korea, and increased investment spending, including China cards and branches, higher volume-driven expenses and increased regulatory costs.
Provisions decreased 1%, reflecting continued overall credit quality improvement. Net credit losses continued to improve, declining 3% due to the ongoing improvement in credit quality. Citi believes that net credit losses in Asia RCB will largely remain stable, with increases largely in line with portfolio growth.

2011 vs. 2010
Net income decreased 12%, driven by higher operating expenses, lower loan loss reserve releases and a higher effective tax rate, partially offset by higher revenue. The higher effective tax rate was due to lower tax benefits Accounting Principles Bulletin (APB) 23 and a tax charge of $66 million due to a write-down in the value of deferred tax assets due to a change in the tax law, each in Japan.
Revenues increased 4%, primarily driven by higher business volumes, partially offset by continued spread compression and $65 million of net charges relating to the repurchase of certain Lehman structured notes. Net interest revenue increased 1%, as investment initiatives and economic growth in the region drove higher lending and deposit volumes. Spread compression continued to partly offset the benefit of higher balances and continued to be driven by stricter underwriting criteria, resulting in a lowering of the risk profile for personal and other loans. Non-interest revenue increased 10%, primarily due to a 9% increase in Citi-branded cards purchase sales and higher revenues from foreign exchange products, partially offset by a 16% decrease in investment sales, particularly in the second half of 2011, and the net charges for the repurchase of certain Lehman structured notes.
Expenses increased 8%, due to investment spending, growth in business volumes, repositioning charges and higher legal and related costs, partially offset by ongoing productivity savings.
Provisions increased 5% as lower loan loss reserve releases were partially offset by lower net credit losses. The increase in provisions reflected increasing volumes in the region, partially offset by continued credit quality improvement. India was a significant driver of the improvement in credit quality, as it continued to de-risk elements of its legacy portfolio.


23


INSTITUTIONAL CLIENTS GROUP

Institutional Clients Group (ICG) includes Securities and Banking and Transaction Services . ICG provides corporate, institutional, public sector and high-net-worth clients around the world with a full range of products and services, including cash management, foreign exchange, trade finance and services, securities services, sales and trading of loans and securities, institutional brokerage, underwriting, lending and advisory services. ICG 's international presence is supported by trading floors in approximately 75 countries and jurisdictions and a proprietary network within Transaction Services in over 95 countries and jurisdictions. At December 31, 2012, ICG had approximately $1.1 trillion of assets and $523 billion of deposits.

% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Commissions and fees $ 4,318 $ 4,449 $ 4,267 (3 )% 4 %
Administration and other fiduciary fees 2,790 2,775 2,753 1 1
Investment banking 3,618 3,029 3,520 19 (14 )
Principal transactions 4,130 4,873 5,566 (15 ) (12 )
Other (85 ) 1,821 1,686 NM 8
Total non-interest revenue $ 14,771 $ 16,947 $ 17,792 (13 )% (5 )%
Net interest revenue (including dividends) 15,829 15,055 15,415 5 (2 )
Total revenues, net of interest expense $ 30,600 $ 32,002 $ 33,207 (4 )% (4 )%
Total operating expenses $ 20,232 $ 20,768 $ 19,626 (3 )% 6 %
       Net credit losses $ 282 $ 619 $ 573 (54 )% 8 %
       Provision (release) for unfunded lending commitments 39 89 (29 ) (56 ) NM
       Credit reserve build (release) (45 ) (556 ) (626 ) 92 11
Provisions for loan losses and benefits and claims $ 276 $ 152 $ (82 ) 82 % NM
Income from continuing operations before taxes $ 10,092 $ 11,082 $ 13,663 (9 )% (19 )%
Income taxes 2,102 2,820 3,490 (25 ) (19 )
Income from continuing operations $ 7,990 $ 8,262 $ 10,173 (3 )% (19 )%
Noncontrolling interests 128 56 131 NM (57 )
Net income $ 7,862 $ 8,206 $ 10,042 (4 )% (18 )%
Average assets (in billions of dollars) $ 1,042 $ 1,024 $ 949 2 % 8 %
Return on average assets 0.75 % 0.80 % 1.06 %
Efficiency ratio 66 % 65 % 59 %
Revenues by region
North America $ 8,668 $ 10,002 $ 11,878 (13 )% (16 )%
EMEA 9,993 10,707 10,205 (7 ) 5
Latin America 4,816 4,083 4,084 18 -
Asia 7,123 7,210 7,040 (1 ) 2
Total revenues $ 30,600 $ 32,002 $ 33,207 (4 )% (4 )%
Income from continuing operations by region
       North America $ 1,481 $ 1,459 $ 2,985 2 % (51 )%
       EMEA 2,598 3,130 3,029 (17 ) 3
       Latin America 1,962 1,613 1,756 22 (8 )
       Asia 1,949 2,060 2,403 (5 ) (14 )
Total income from continuing operations $ 7,990 $ 8,262 $ 10,173 (3 )% (19 )%
       Average loans by region ( in billions of dollars )
North America $ 83 $ 69 $ 67 20 % 3 %
EMEA 53 47 38 13 24
Latin America 35 29 23 21 26
Asia 63 52 36 21 44
Total average loans $ 234 $ 197 $ 164 19 % 20 %

NM Not meaningful

24


SECURITIES AND BANKING

Securities and Banking (S&B) offers a wide array of investment and commercial banking services and products for corporations, governments, institutional and public sector entities, and high-net-worth individuals. S&B transacts with clients in both cash instruments and derivatives, including fixed income, foreign currency, equity, and commodity products. S&B includes investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, derivative services and private banking.
S&B revenue is generated primarily from fees and spreads associated with these activities. S&B earns fee income for assisting clients in clearing transactions, providing brokerage and investment banking services and other such activities. Revenue generated from these activities is recorded in Commissions and fees . In addition, as a market maker, S&B facilitates transactions, including holding product inventory to meet client demand, and earns the differential between the price at which it buys and sells the products. These price differentials and the unrealized gains and losses on the inventory are recorded in Principal transactions . S&B interest income earned on inventory and loans held is recorded as a component of net interest revenue.

% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ 9,676 $ 9,123 $ 9,728 6 % (6 )%
Non-interest revenue 10,067 12,300 13,394 (18 ) (8 )
Revenues, net of interest expense $ 19,743 $ 21,423 $ 23,122 (8 )% (7 )%
Total operating expenses 14,444 15,013 14,628 (4 ) 3
       Net credit losses 168 602 567 (72 ) 6
       Provision (release) for unfunded lending commitments 33 86 (29 ) (62 ) NM
       Credit reserve build (release) (79 ) (572 ) (562 ) 86 (2 )
Provisions for credit losses $ 122 $ 116 $ (24 ) 5 % NM
Income before taxes and noncontrolling interests $ 5,177 $ 6,294 $ 8,518 (18 )% (26 )%
Income taxes 682 1,381 1,967 (51 ) (30 )
Income from continuing operations $ 4,495 $ 4,913 $ 6,551 (9 )% (25 )%
Noncontrolling interests 111 37 110 NM (66 )
Net income $ 4,384 $ 4,876 $ 6,441 (10 )% (24 )%
Average assets (in billions of dollars) $ 904 $ 894 $ 842 1 % 6 %
Return on average assets 0.48 % 0.55 % 0.77 %
Efficiency ratio 73 % 70 % 63 %
Revenues by region
North America $ 6,104 $ 7,558 $ 9,393 (19 )% (20 )%
EMEA 6,417 7,221 6,849 (11 ) 5
Latin America 3,019 2,370 2,554 27 (7 )
Asia 4,203 4,274 4,326 (2 ) (1 )
Total revenues $ 19,743 $ 21,423 $ 23,122 (8 )% (7 )%
Income from continuing operations by region
North America $ 1,011 $ 1,044 $ 2,495 (3 )% (58 )%
EMEA 1,354 2,000 1,811 (32 ) 10
Latin America 1,308 974 1,093 34 (11 )
Asia 822 895 1,152 (8 ) (22 )
Total income from continuing operations $ 4,495 $ 4,913 $ 6,551 (9 )% (25 )%
Securities and Banking revenue details (excluding CVA/DVA)
       Total investment banking $ 3,641 $ 3,310 $ 3,828 10 % (14 )%
       Fixed income markets 13,961 10,891 14,265 28 (24 )
       Equity markets 2,418 2,402 3,710 1 (35 )
       Lending 997 1,809 971 (45 ) 86
       Private bank 2,314 2,138 2,009 8 6
       Other Securities and Banking (1,101 ) (859 ) (1,262 ) (28 ) 32
Total Securities and Banking revenues (ex-CVA/DVA) $ 22,230 $ 19,691 $ 23,521 13 % (16 )%
CVA/DVA $ (2,487 ) $ 1,732 $ (399 ) NM NM
Total revenues, net of interest expense $ 19,743 $ 21,423 $ 23,122 (8 )% (7 )%

NM Not meaningful

25


2012 vs. 2011
Net income decreased 10%. Excluding $2.5 billion of negative CVA/DVA (see table below), net income increased 56%, primarily driven by a 13% increase in revenues.
Revenues decreased 8%, driven by the negative CVA/DVA and mark-to-market losses on hedges related to accrual loans. Excluding CVA/DVA:

Revenues increased 13%, reflecting higher revenues in most major S&B businesses. Overall, Citi gained wallet share during 2012 in most major products and regions, while maintaining what it believes to be a disciplined risk appetite for the market environment. Fixed income markets revenues increased 28%, reflecting strong performance in rates and currencies and higher revenues in credit-related and securitized products. These results reflected an improved market environment and more balanced trading flows, particularly in the second half of 2012. Rates and currencies performance reflected strong client and trading results in G-10 FX, G-10 rates and Citi's local markets franchise. Credit products, securitized markets and municipals products experienced improved trading results, particularly in the second half of 2012, compared to the prior-year period. Citi's position serving corporate clients for markets products also contributed to the strength and diversity of client flows. Equity markets revenues increased 1%, due to improved derivatives performance as well as the absence of proprietary trading losses in 2011, partially offset by lower cash equity volumes that impacted the industry as a whole. Citi's improved performance in derivatives reflected improved trading and continued progress in capturing additional client wallet share. Investment banking revenues increased 10%, reflecting increases in debt underwriting and advisory revenues, partially offset by lower equity underwriting revenues. Debt underwriting revenues rose 18%, driven by increases in investment grade and high yield bond issuances. Advisory revenues increased 4%, despite the overall reduction in market activity during the year. Equity underwriting revenues declined 7%, driven by lower levels of market and client activity.
Lending revenues decreased 45%, driven by the mark-to-market losses on hedges related to accrual loans (see table below). The loss on lending hedges compared to a gain in the prior year, resulted from CDS spreads narrowing during 2012. Excluding lending hedges related to accrual loans, lending revenues increased 31%, primarily driven by growth in the Corporate loan portfolio and improved spreads in most regions. Private Bank revenues increased 8%, driven by growth in client assets as a result of client acquisition and development efforts in Citi's targeted client segments. Deposit volumes, investment assets under management and loans all increased, while pricing and product mix optimization initiatives offset underlying spread compression across products.

Expenses decreased 4%. Excluding repositioning charges of $349 million in 2012 (including $237 million in the fourth quarter of 2012) compared to $267 million in 2011, expenses also decreased 4%, driven by efficiency savings from ongoing re-engineering programs and lower compensation costs. The repositioning efforts in S&B announced in the fourth quarter of 2012 are designed to streamline S&B 's client coverage model and improve overall productivity.
Provisions increased 5% to $122 million, primarily reflecting lower loan loss reserve releases, partially offset by lower net credit losses, both due to portfolio stabilization.


26


2011 vs. 2010
Net income decreased 24%. Excluding $1.7 billion of positive CVA/DVA (see table below), net income decreased 43%, primarily driven by lower revenues in most products and higher expenses.
Revenues decreased 7%, driven by lower revenues partially offset by positive CVA/DVA resulting from the widening of Citi's credit spreads in 2011. Excluding CVA/DVA:

Revenues decreased 16%, reflecting lower revenues in fixed income markets, equity markets and investment banking revenues. Fixed income markets revenues decreased 24%, due to significant year- over-year declines in spread products and, to a lesser extent, a decline in rates and currencies reflecting adverse market conditions, particularly during the second half of 2011 when the trading environment was significantly more challenging. The declines in trading volumes made hedging and market-making more challenging, particularly in less liquid products such as credit, securitized markets, and municipals. Citi's concerted effort to reduce overall risk positions to respond to a decline in liquidity, particularly in the latter half of 2011, also contributed to the decrease. Equity markets revenues decreased 35%, driven by declining revenues in equity proprietary trading as positions in the business were wound down, a decline in equity derivatives revenues and, to a lesser extent, a decline in cash equities. The wind-down of Citi's equity proprietary trading was completed at the end of 2011. Also, equity markets experienced adverse market conditions during the second half of 2011. Investment banking revenues decreased 14%, as the macroeconomic concerns and market uncertainty drove lower volumes in debt and equity issuance and declines in equity underwriting, debt underwriting, and advisory revenues. Equity underwriting revenues declined 28%, largely driven by the absence of strong IPO activity in Asia in the fourth quarter of 2010. Debt underwriting declined 10%, primarily due to lower bond issuance activity. Advisory revenues declined 5%, due to lower levels of client activity.
Lending revenues increased 86%, driven by a mark-to-market gain in hedges related to accrual loans (see table below), resulting from CDS spreads widening during 2011. Excluding lending hedges related to accrual loans, lending revenues increased 25%, primarily due to growth in the Corporate loan portfolio in all regions. Private Bank revenues increased 6%, driven by growth in both lending and deposit products and improved customer spreads.

Expenses increased 3%, primarily due to investment spending, which largely occurred in the first half of 2011, relating to new hires and technology investments. The increase in expenses was also driven by higher repositioning charges and the negative impact of FX translation (which contributed approximately 2% to the expense growth), partially offset by productivity saves and reduced incentive compensation due to business results. The increase in the level of investment spending in S&B was largely completed at the end of 2011.
Provisions increased $140 million, primarily due to builds in the allowance for unfunded lending commitments as a result of portfolio growth and higher net credit losses.

In millions of dollars 2012 2011 2010
S&B CVA/DVA
Fixed Income Markets $ (2,047 )      $ 1,368 $ (187 )
Equity Markets (424 ) 355 (207 )
Private Bank (16 ) 9 (5 )
Total S&B CVA/DVA $ (2,487 ) $ 1,732 $ (399 )
S&B Hedges on Accrual
Loans gain (loss) (1) $ (698 ) $ 519 $ (65 )

(1)      Hedges on S&B accrual loans reflect the mark-to-market on credit derivatives used to hedge the corporate loan accrual portfolio. The fixed premium cost of these hedges is included (netted against) the core lending revenues to reflect the cost of the credit protection.

27


TRANSACTION SERVICES

Transaction Services is composed of Treasury and Trade Solutions and Securities and Fund Services. Treasury and Trade Solutions provides comprehensive cash management and trade finance services for corporations, financial institutions and public sector entities worldwide. Securities and Fund Services provides securities services to investors, such as global asset managers, custody and clearing services to intermediaries, such as broker-dealers, and depository and agency/trust services to multinational corporations and governments globally. Revenue is generated from net interest revenue on deposits and trade loans as well as fees for transaction processing and fees on assets under custody and administration.

% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ 6,153 $ 5,932 $ 5,687 4 % 4 %
Non-interest revenue 4,704 4,647 4,398 1 6
Total revenues, net of interest expense $ 10,857 $ 10,579 $ 10,085 3 % 5
Total operating expenses 5,788 5,755 4,998 1 15
Provisions (releases) for credit losses and for benefits and claims 154 36 (58 ) NM NM
Income before taxes and noncontrolling interests $ 4,915 $ 4,788 $ 5,145 3 % (7 )%
Income taxes 1,420 1,439 1,523 (1 ) (6 )
Income from continuing operations 3,495 3,349 3,622 4 (8 )
Noncontrolling interests 17 19 21 (11 ) (10 )
Net income $ 3,478 $ 3,330 $ 3,601 4 % (8 )%
Average assets (in billions of dollars) $ 138 $ 130 $ 107 6 % 21
Return on average assets 2.52 % 2.56 % 3.37 %
Efficiency ratio 53 % 54 % 50 %
Revenues by region
       North America $ 2,564 $ 2,444 $ 2,485 5 % (2 )%
       EMEA 3,576 3,486 3,356 3 4
       Latin America 1,797 1,713 1,530 5 12
       Asia 2,920 2,936 2,714 (1 ) 8
Total revenues $ 10,857 $ 10,579 $ 10,085 3 % 5 %
Income from continuing operations by region
       North America $ 470 $ 415 $ 490 13 % (15 )%
       EMEA 1,244 1,130 1,218 10 (7 )
       Latin America 654 639 663 2 (4 )
       Asia 1,127 1,165 1,251 (3 ) (7 )
Total income from continuing operations $ 3,495 $ 3,349 $ 3,622 4 % (8 )%
Foreign Currency (FX) Translation Impact
Total revenue-as reported $ 10,857 $ 10,579 $ 10,085 3 % 5 %
Impact of FX translation (1) - (254 ) (84 )
Total revenues-ex-FX $ 10,857 $ 10,325 $ 10,001 5 % 3 %
Total operating expenses-as reported $ 5,788 $ 5,755 $ 4,998 1 % 15 %
Impact of FX translation (1) - (64 ) (3 )
Total operating expenses-ex-FX $ 5,788 $ 5,691 $ 4,995 2 % 14 %
Net income-as reported $ 3,478 $ 3,330 $ 3,601 4 % (8 )%
Impact of FX translation (1) - (173 ) (65 )
Net income-ex-FX $ 3,478 $ 3,157 $ 3,536 10 % (11 )%
Key indicators (in billions of dollars)
Average deposits and other customer liability balances-as reported $ 404 $ 364 $ 334 11 % 9 %
Impact of FX translation (1) - (6 ) 1
Average deposits and other customer liability balances-ex-FX $ 404 $ 358 $ 335 13 % 7 %
EOP assets under custody (2) (in trillions of dollars) $ 13.2 $ 12.0 $ 12.3 10 % (2 )%

(1)      Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the current exchange rate for all periods presented.
(2) Includes assets under custody, assets under trust and assets under administration.
NM Not meaningful

28


The discussion of the results of operations for Transaction Services below excludes the impact of FX translation for all periods presented. Presentation of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. Citi believes the presentation of Transaction Services' results excluding the impact of FX translation is a more meaningful depiction of the underlying fundamentals of the business. For a reconciliation of certain of these metrics to the reported results, see the table above.

2012 vs. 2011
Net income increased 10%, reflecting growth in revenues, partially offset by higher expenses and credit costs.
Revenues increased 5% as higher trade loan and deposit balances were partially offset by continued spread compression and lower market volumes. Treasury and Trade Solutions revenues were up 8%, driven by growth in trade as end-of-period trade loans grew 23%. Cash management revenues also grew, reflecting growth in deposit balances and fees, partially offset by continued spread compression due to the continued low interest rate environment. Securities and Fund Services revenues decreased 2%, primarily driven by lower market volumes as well as spread compression on deposits. Citi expects spread compression will continue to negatively impact Transaction Services .
Expenses increased 2%. Excluding repositioning charges of $134 million in 2012 (including $95 million in the fourth quarter of 2012) compared to $60 million in 2011, expenses were flat, primarily driven by incremental investment spending and higher legal and related costs, offset by efficiency savings.
Average deposits and other customer liabilities grew 13%, driven by focused deposit building activities as well as continued market demand for U.S. dollar deposits (for additional information on Citi's deposits, see "Capital Resources and Liquidity-Funding and Liquidity" below).

2011 vs. 2010
Net income decreased 11%, as higher expenses, driven by investment spending, outpaced revenue growth.
Revenues grew 3%, driven primarily by international growth, as improvement in fees and increased deposit balances more than offset the continued spread compression. Treasury and Trade Solutions revenues increased 4%, driven primarily by growth in the trade and commercial cards businesses and increased deposits, partially offset by the impact of the continued low rate environment. Securities and Fund Services revenues increased 1%, primarily due to growth in transaction and settlement volumes, driven in part by the increase in activity resulting from market volatility, and new client mandates.
Expenses increased 14%, reflecting investment spending and higher business volumes, partially offset by productivity savings. 
Average deposits and other customer liabilities grew 7% and included the shift to operating balances as the business continued to emphasize more stable, lower cost deposits as a way to mitigate spread compression (for additional information on Citi's deposits, see "Capital Resources and Liquidity-Funding and Liquidity" below).


29


CORPORATE/OTHER

Corporate/Other includes unallocated global staff functions (including finance, risk, human resources, legal and compliance), other corporate expenses and unallocated global operations and technology expenses, Corporate Treasury and discontinued operations. At December 31, 2012, this segment had approximately $249 billion of assets, or 13%, of Citigroup's total assets, consisting primarily of Citi's liquidity portfolio (approximately $46 billion of cash and cash equivalents and $145 billion of liquid available-for-sale securities, each as of December 31, 2012).

In millions of dollars 2012 2011 2010
Net interest revenue $ (271 ) $ 26 $ 828
Non-interest revenue 463 859 926
Revenues, net of interest expense $ 192 $ 885 $ 1,754
Total operating expenses $ 3,214 $ 2,293 $ 1,506
Provisions for loan losses and for benefits and claims (1 ) 1 (1 )
Loss from continuing operations before taxes $ (3,021 ) $ (1,409 ) $ 249
Benefits for income taxes (1,396 ) (681 ) 7
Income (loss) from continuing operations $ (1,625 ) $ (728 ) $ 242
Income (loss) from discontinued operations, net of taxes (149 ) 112 (68 )
Net income (loss) before attribution of noncontrolling interests $ (1,774 ) $ (616 ) $ 174
Noncontrolling interests 85 (27 ) (48 )
Net income (loss) $ (1,859 ) $ (589 ) $ 222

2012 vs. 2011
The net loss increased by $1.3 billion due to a decrease in revenues and an increase in repositioning charges and legal and related expenses. The net loss increased despite a $582 million tax benefit related to the resolution of certain tax audit items in the third quarter of 2012 (see the "Executive Summary" above for a discussion of this tax benefit as well as the impact of minority investments on the results of operations of Corporate/Other during 2012, also as discussed below).
Revenues decreased $693 million, driven by an other-than-temporary impairment of pretax $(1.2) billion on Citi's investment in Akbank and a loss of pretax $424 million on the partial sale of Akbank, as well as lower investment yields on Citi's treasury portfolio and the negative impact of hedging activities. These negative impacts to revenues were partially offset by an aggregate pretax gain on the sales of Citi's remaining interest in HDFC and its interest in SPDB.
Expenses increased by $921 million, largely driven by higher legal and related costs, as well as higher repositioning charges, including $253 million in the fourth quarter of 2012.

2011 vs. 2010
The net loss of $589 million reflected a decline of $811 million compared to net income of $222 million in 2010. This decline was primarily due to lower revenues and higher expenses.
Revenues decreased $869 million, primarily driven by lower investment yields on Citi's treasury portfolio and lower gains on sales of available-for-sale securities, partially offset by gains on hedging activities and the gain on the sale of a portion of Citi's holdings in HDFC (see the "Executive Summary" above).
Expenses increased $787 million, due to higher legal and related costs and investment spending, primarily in technology.


30


CITI HOLDINGS

Citi Holdings contains businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp businesses and consists of Brokerage and Asset Management, Local Consumer Lending and Special Asset Pool .
Consistent with its strategy, Citi intends to continue to exit these businesses and portfolios as quickly as practicable in an economically rational manner. Citi Holdings assets have declined by approximately $302 billion since the end of 2009. To date, the decrease in Citi Holdings assets has been primarily driven by asset sales and business dispositions, as well as portfolio run-off and pay-downs. Asset levels have also been impacted, and will continue to be impacted, by charge-offs and fair value marks as and when appropriate. Citi expects the wind-down of the assets in Citi Holdings will continue, although likely at a slower pace than experienced over the past several years as Citi has already disposed of some of the larger operating businesses within Citi Holdings (see also "Risk Factors-Business and Operational Risks" below).
As of December 31, 2012, Citi Holdings assets were approximately $156 billion, a decrease of approximately 31% year-over-year and a decrease of 9% from September 30, 2012. The decline in assets of $69 billion in 2012 was composed of a decline of approximately $17 billion related to MSSB (primarily consisting of $6.6 billion related to the sale of Citi's 14% interest and impairment on the remaining investment and approximately $11 billion of margin loans), $18 billion of other asset sales and business dispositions, $30 billion of run-off and pay-downs and $4 billion of charge-offs and fair value marks. Citi Holdings represented approximately 8% of Citi's assets as of December 31, 2012, while Citi Holdings risk-weighted assets (as defined under current regulatory guidelines) of approximately $144 billion at December 31, 2012 represented approximately 15% of Citi's risk-weighted assets as of that date.


% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ 2,577 $ 3,683 $ 8,085 (30 )% (54 )%
Non-interest revenue (3,410 ) 2,588 4,186 NM (38 )
Total revenues, net of interest expense $ (833 ) $ 6,271 $ 12,271 NM (49 )%
Provisions for credit losses and for benefits and claims
Net credit losses $ 5,842 $ 8,576 $ 13,958 (32 )% (39 )%
Credit reserve build (release) (1,551 ) (3,277 ) (2,494 ) 53 (31 )
Provision for loan losses $ 4,291 $ 5,299 $ 11,464 (19 )% (54 )%
Provision for benefits and claims 651 779 781 (16 ) -
Provision (release) for unfunded lending commitments (56 ) (41 ) (82 ) (37 ) 50
Total provisions for credit losses and for benefits and claims $ 4,886 $ 6,037 $ 12,163 (19 )% (50 )%
Total operating expenses $ 5,253 $ 6,464 $ 7,356 (19 )% (12 )%
Loss from continuing operations before taxes $ (10,972 ) $ (6,230 ) $ (7,248 ) (76 )% 14 %
Benefits for income taxes (4,412 ) (2,127 ) (2,815 ) NM 24
(Loss) from continuing operations $ (6,560 ) $ (4,103 ) $ (4,433 ) (60 )% 7 %
Noncontrolling interests 3 119 207 (97 ) (43 )
Citi Holdings net loss $ (6,563 ) $ (4,222 ) $ (4,640 ) (55 )% 9 %
Balance sheet data (in billions of dollars)
Average assets $ 194 $ 269 $ 420 (28 )% (36 )%
Return on average assets (3.38 )% (1.57 )% (1.10 )%
Efficiency ratio NM 103 % 60 %
Total EOP assets $ 156 $ 225 $ 313 (31 ) (28 )
Total EOP loans 116 141 199 (18 ) (29 )
Total EOP deposits $ 68 $ 62 $ 76 10 (18 )

NM Not meaningful

31


BROKERAGE AND ASSET MANAGEMENT

Brokerage and Asset Management (BAM) primarily consists of Citi's remaining investment in, and assets related to, MSSB. At December 31, 2012, BAM had approximately $9 billion of assets, or approximately 6% of Citi Holdings assets, of which approximately $8 billion related to MSSB. During 2012, BAM 's assets declined 67% due to the decline in assets related to MSSB (see discussion below). At December 31, 2012, the MSSB assets were composed of an approximate $4.7 billion equity investment and $3 billion of other MSSB financing (consisting of approximately $2 billion of preferred stock and $1 billion of loans). For information on the agreement entered into with Morgan Stanley regarding MSSB on September 11, 2012, see Citigroup's Current Report on Form 8-K filed with the SEC on September 11, 2012. The remaining assets in BAM consist of other retail alternative investments.

% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ (471 ) $ (180 ) $ (277 ) NM 35 %
Non-interest revenue (4,228 ) 462 886 NM (48 )
Total revenues, net of interest expense $ (4,699 ) $ 282 $ 609 NM (54 )%
Total operating expenses $ 462 $ 729 $ 987 (37 )% (26 )%
Net credit losses $ - $ 4 $ 17 (100 )% (76 )%
Credit reserve build (release) (1 ) (3 ) (18 ) 67 83
Provision for unfunded lending commitments - (1 ) (6 ) 100 83
Provision (release) for benefits and claims - 48 38 (100 ) 26
Provisions for credit losses and for benefits and claims $ (1 ) $ 48 $ 31 NM 55 %
Income (loss) from continuing operations before taxes $ (5,160 ) $ (495 ) $ (409 ) NM (21 )%
Income taxes (benefits) (1,970 ) (209 ) (183 ) NM (14 )
Loss from continuing operations $ (3,190 ) $ (286 ) $ (226 ) NM (27 )%
Noncontrolling interests 3 9 11 (67 )% (18 )
Net (loss) $ (3,193 ) $ (295 ) $ (237 ) NM (24 )%
EOP assets (in billions of dollars) $ 9 $ 27 $ 27 (67 )% -%
EOP deposits (in billions of dollars) 59 55 58 7 (5 )

NM Not meaningful

2012 vs. 2011
The net loss in BAM increased by $2.9 billion due to the loss related to MSSB, consisting of (i) an $800 million after-tax loss on Citi's sale of the 14% interest in MSSB to Morgan Stanley and (ii) a $2.1 billion after-tax other-than-temporary impairment of the carrying value of Citigroup's remaining 35% interest in MSSB. For additional information on MSSB, see Note 15 to the Consolidated Financial Statements. Excluding the impact of MSSB, the net loss in BAM was flat.
Revenues decreased by $5.0 billion to $(4.7) billion due to the MSSB impact described above. Excluding this impact, revenues in BAM were $(15) million, compared to $282 million in the prior-year period, due to higher funding costs related to MSSB assets, partially offset by a higher equity contribution from MSSB.
Expenses decreased 37%, primarily driven by lower legal and related costs.
Provisions decreased by $49 million due to the absence of certain unfunded lending commitments.

2011 vs. 2010
The net loss increased 24% as lower revenues were partly offset by lower expenses.
Revenues decreased by 54%, driven by the 2010 sale of Citi's Habitat and Colfondos businesses (including a $78 million pretax gain on sale related to the transactions in the first quarter of 2010) and lower revenues from MSSB.
Expenses decreased 26%, also driven by divestitures, as well as lower legal and related expenses.
Provisions increased 55%, primarily due to the absence of the prior-year reserve releases.


32


LOCAL CONSUMER LENDING

Local Consumer Lending (LCL) includes a substantial portion of Citigroup's North America mortgage business (see "North America Consumer Mortgage Lending" below), CitiFinancial North America (consisting of the OneMain and CitiFinancial Servicing businesses), remaining student loans and credit card portfolios, and other local consumer finance businesses globally (including Western European cards and retail banking and Japan Consumer Finance). At December 31, 2012, LCL consisted of approximately $126 billion of assets (with approximately $123 billion in North America ), or approximately 81% of Citi Holdings assets, and thus represents the largest segment within Citi Holdings. The North America assets primarily consist of residential mortgages (residential first mortgages and home equity loans), which stood at $92 billion as of December 31, 2012.

% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ 3,335 $ 4,268 $ 7,143 (22 )% (40 )%
Non-interest revenue 1,031 1,174 1,667 (12 ) (30 )
Total revenues, net of interest expense $ 4,366 $ 5,442 $ 8,810 (20 )% (38 )%
Total operating expenses $ 4,465 $ 5,442 $ 5,798 (18 )% (6 )%
Net credit losses $ 5,870 $ 7,504 $ 11,928 (22 )% (37 )%
Credit reserve build (release) (1,410 ) (1,419 ) (765 ) 1 (85 )
Provision for benefits and claims 651 731 743 (11 ) (2 )
Provisions for credit losses and for benefits and claims $ 5,111 $ 6,816 $ 11,906 (25 )% (43 )%
(Loss) from continuing operations before taxes $ (5,210 ) (6,816 ) $ (8,894 ) 24 % 23 %
Benefits for income taxes (2,017 ) (2,403 ) (3,529 ) 16 32
(Loss) from continuing operations $ (3,193 ) $ (4,413 ) $ (5,365 ) 28 % 18 %
Noncontrolling interests - 2 8 (100 ) (75 )
Net (loss) $ (3,193 ) $ (4,415 ) $ (5,373 ) 28 % 18 %
Balance sheet data (in billions of dollars)
Average assets $ 142 $ 186 $ 280 (24 )% (34 )%
Return on average assets (2.25 )% (2.37 )% (1.92 )%
Efficiency ratio 102 % 100 % 66 %
EOP assets $ 126 $ 157 $ 206 (20 ) (24 )
Net credit losses as a percentage of average loans 4.72 % 4.69 % 5.16 %

2012 vs. 2011
The net loss decreased by 28%, driven mainly by the improved credit environment primarily in North America mortgages.
Revenues decreased 20%, primarily due to a 22% net interest revenue decline resulting from a 24% decline in loan balances. This decline was driven by continued asset sales, divestitures and run-off. Non-interest revenue decreased 12%, primarily due to portfolio run-off, partially offset by a lower repurchase reserve build. The repurchase reserve build was $700 million compared to $945 million in 2011 (see "Managing Global Risk-Credit Risk-Citigroup Residential Mortgages-Representations and Warranties" below).
Expenses decreased 18%, driven by lower volumes and divestitures. Legal and related expenses in LCL remained elevated due to the previously disclosed $305 million charge in the fourth quarter of 2012, related to the settlement agreement reached with the Federal Reserve Board and OCC regarding the independent foreclosure review process required by the Federal Reserve Board and OCC consent orders entered into in April 2011 (see "Managing

Global Risk-Credit Risk- North America Consumer Mortgage Lending-Independent Foreclosure Review Settlement" below). In addition, legal and related expenses were elevated due to additional reserves related to payment protection insurance (PPI) (see "Payment Protection Insurance" below) and other legal and related matters impacting the business.
Provisions decreased 25%, driven primarily by the improved credit environment in North America mortgages, lower volumes and divestitures. Net credit losses decreased by 22%, despite being impacted by incremental charge-offs of approximately $635 million in the third quarter of 2012 relating to OCC guidance regarding the treatment of mortgage loans where the borrower has gone through Chapter 7 bankruptcy (see Note 1 to the Consolidated Financial Statements) and $370 million of incremental charge-offs in the first quarter of 2012 related to previously deferred principal balances on modified mortgages related to anticipated forgiveness of principal in connection with the national mortgage settlement. Substantially all of these charge-offs were offset by reserve releases. In addition, net credit losses in 2012 were negatively impacted by an additional aggregate amount


33


of $146 million related to the national mortgage settlement. Citi expects that net credit losses in LCL will continue to be negatively impacted by Citi's fulfillment of the terms of the national mortgage settlement through the second quarter of 2013 (see "Managing Global Risk-Credit Risk-National Mortgage Settlement" below).
Excluding the incremental charge-offs arising from the OCC guidance and the previously deferred balances on modified mortgages, net credit losses in LCL would have declined 35%, with net credit losses in North America mortgages decreasing by 20%, other portfolios in North America by 56% and international by 49%. These declines were driven by lower overall asset levels driven partly by the sale of delinquent loans as well as underlying credit improvements. While Citi expects some continued improvement in credit going forward, declines in net credit losses in LCL will largely be driven by declines in asset levels, including continued sales of delinquent residential first mortgages (see "Managing Global Risk-Credit Risk- North America Consumer Mortgage Lending- North America Consumer Mortgage Quarterly Credit Trends" below).
Average assets declined 24%, driven by the impact of asset sales and portfolio run-off, including declines of $16 billion in North America mortgage loans and $11 billion in international average assets.

2011 vs. 2010
The net loss decreased 18%, driven primarily by the improving credit environment, including lower net credit losses and higher loan loss reserve releases in mortgages. The improvement in credit was partly offset by lower revenues due to decreasing asset balances and sales.
Revenues decreased 38%, driven primarily by the lower asset balances due to asset sales, divestitures and run-offs, which also drove the 40% decline in net interest revenue. Non-interest revenue decreased 30% due to the impact of divestitures. The repurchase reserve build was $945 million compared to $917 million in 2010.
Expenses decreased 6%, driven by the lower volumes and divestitures, partly offset by higher legal and related expenses, including those relating to the national mortgage settlement, reserves related to potential PPI refunds (see "Payment Protection Insurance" below) and implementation costs associated with the Federal Reserve Board and OCC consent orders (see "Managing Global Risk-Credit Risk- North America Consumer Mortgage Lending-National Mortgage Settlement" below).
Provisions decreased 43%, driven by lower credit losses and higher loan loss reserve releases. Net credit losses decreased 37%, primarily due to the credit improvements of $1.6 billion in North America mortgages, although the pace of the decline in net credit losses slowed. Loan loss reserve releases increased 85%, driven by higher releases in CitiFinancial North America due to better credit quality and lower loan balances.
Average assets declined 34%, primarily driven by portfolio run-off and the impact of asset sales and divestitures, including continued sales of student loans, auto loans and delinquent mortgages.


34


Japan Consumer Finance
Citi continues to actively monitor various aspects of its Japan Consumer Finance business, including customer defaults, refund claims and litigation, as well as financial, legislative, regulatory, judicial and other political developments, relating to the charging of "gray zone" interest. Gray zone interest represents interest at rates that are legal but for which claims may not be enforceable. In 2008, Citi decided to exit its Japan Consumer Finance business and has liquidated approximately 85% of the portfolio since that time. As of December 31, 2012, Citi's Japan Consumer Finance business had approximately $709 million in outstanding loans that currently charge or have previously charged interest rates in the gray zone, compared to approximately $2.1 billion as of December 31, 2011. However, Citi could also be subject to refund claims on previously outstanding loans that charged gray zone interest and thus could be subject to losses on loans in excess of these amounts.
During 2012, LCL recorded a net decrease in its reserves related to customer refunds in the Japan Consumer Finance business of approximately $117 million (pretax) compared to an increase in reserves of approximately $119 million (pretax) in 2011. At December 31, 2012, Citi's reserves related to customer refunds in the Japan Consumer Finance business were approximately $736 million. Although Citi recorded a net decrease in its reserves in 2012, the charging of gray zone interest continues to be a focus in Japan. Regulators in Japan have stated that they are planning to submit legislation to establish a framework for collective legal action proceedings. If such legislation is passed and implemented, it could potentially introduce a more accessible procedure for current and former customers to pursue refund claims.
Citi continues to monitor and evaluate these developments and the potential impact to both currently and previously outstanding loans in this business and its reserves related thereto. The potential amount of losses and their impact on Citi is subject to significant uncertainty and continues to be difficult to predict.

Payment Protection Insurance
The alleged misselling of PPI by financial institutions in the U.K. has been, and continues to be, the subject of intense review and focus by U.K. regulators, particularly the Financial Services Authority (FSA). The FSA has found certain problems across the industry with how these products were sold, including customers not realizing that the cost of PPI premiums was being added to their loan or PPI being unsuitable for the customer.
PPI is designed to cover a customer's loan repayments if certain events occur, such as long-term illness or unemployment. Prior to 2008, certain of Citi's U.K. consumer finance businesses, primarily CitiFinancial Europe plc and Canada Square Operations Ltd (formerly Egg Banking plc), engaged in the sale of PPI. While Citi has sold a significant portion of these businesses, and the remaining businesses are in the process of wind down, Citi generally remains subject to customer complaints for, and retains the potential liability relating to, the sale of PPI by these businesses.

In 2011, the FSA required all firms engaged in the sale of PPI in the U.K. to review their historical sales processes for PPI. In addition, the FSA is requiring all such firms to contact proactively any customers who may have been mis-sold PPI after January 2005 and invite them to have their individual sale reviewed (Customer Contact Exercise).
Citi initiated a pilot Customer Contact Exercise during the third quarter of 2012 and expects to initiate the full Customer Contact Exercise during the first quarter of 2013; however, the timing and details of the Customer Contact Exercise are subject to discussion and agreement with the FSA. While Citi is not required to contact customers proactively for the sale of PPI prior to January 2005, it is still subject to customer complaints for those sales.
During the third quarter of 2012, the FSA also requested that a number of firms, including Citi, re-evaluate PPI customer complaints that were reviewed and rejected prior to December 2010 to determine if, based on the current regulations for the assessment of PPI complaints, customers would have been entitled to redress (Customer Re-Evaluation Exercise). Citi currently expects to complete the Customer Re-Evaluation Exercise by the end of the first quarter of 2013.
Redress, whether as a result of customer complaints pursuant to or outside of the required Customer Contact Exercise, or pursuant to the Customer Re-Evaluation Exercise, generally involves the repayment of premiums and the refund of all applicable contractual interest together with compensatory interest of 8%. Citi estimates that the number of PPI policies sold after January 2005 (across all applicable Citi businesses in the U.K.) was approximately 417,000, for which premiums totaling approximately $490 million were collected. As noted above, however, Citi also remains subject to customer complaints on the sale of PPI prior to January 2005, and thus it could be subject to customer complaints substantially higher than this amount.
During 2012, Citi increased its PPI reserves by approximately $266 million ($175 million of which was recorded in LCL and $91 million of which was recorded in Corporate/Other for discontinued operations). This amount included a $148 million reserve increase in the fourth quarter of 2012 ($57 million of which was recorded in LCL and $91 million of which was recorded in Corporate/Other for discontinued operations). PPI claims paid during 2012 totaled $181 million, which were charged against the reserve. The increase in the reserves during 2012 was mainly due to a significant increase in the level of customer complaints outside of the Customer Contact Exercise, which Citi believes is largely as a result of the continued regulatory focus and increased customer awareness of PPI issues across the industry. The fourth quarter of 2012 reserve increase was also driven by a higher than anticipated rate of response to the pilot Customer Contact Exercise, which Citi believes was also likely due in part to the heightened awareness of PPI issues. At December 31, 2012, Citi's PPI reserve was $376 million.
While the number of customer complaints regarding the sale of PPI significantly increased in 2012, and the number could continue to increase, the potential losses and impact on Citi remain volatile and are subject to significant uncertainty.


35


SPECIAL ASSET POOL

The Special Asset Pool (SAP) consists of a portfolio of securities, loans and other assets that Citigroup intends to continue to reduce over time through asset sales and portfolio run-off. SAP had approximately $21 billion of assets as of December 31, 2012, which constituted approximately 13% of Citi Holdings assets.

% Change % Change
In millions of dollars, except as otherwise noted 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net interest revenue $ (287 ) $ (405 ) $ 1,219 29 % NM
Non-interest revenue (213 ) 952 1,633 NM (42 )%
Revenues, net of interest expense $ (500 ) $ 547 $ 2,852 NM (81 )%
Total operating expenses $ 326 $ 293 $ 571 11 % (49 )%
       Net credit losses $ (28 ) $ 1,068 $ 2,013 NM (47 )%
       Credit reserve builds (releases) (140 ) (1,855 ) (1,711 ) 92 (8 )
       Provision (releases) for unfunded lending commitments (56 ) (40 ) (76 ) (40 ) 47
Provisions for credit losses and for benefits and claims $ (224 ) $ (827 ) $ 226 73 % NM
Income (loss) from continuing operations before taxes $ (602 ) $ 1,081 $ 2,055 NM (47 )%
Income taxes (benefits) (425 ) 485 897 NM (46 )
Net income (loss) from continuing operations $ (177 ) $ 596 $ 1,158 NM (49 )%
Noncontrolling interests - 108 188 (100 )% (43 )
Net income (loss) $ (177 ) $ 488 $ 970 NM (50 )%
EOP assets (in billions of dollars) $ 21 $ 41 $ 80 (49 )% (49 )%

NM Not meaningful


2012 vs. 2011
The net loss of $177 million reflected a decline of $665 million compared to net income of $488 million in 2011, mainly driven by a decrease in revenues and higher credit costs, partially offset by a tax benefit on the sale of a business in 2012.
Revenues were $(500) million. CVA/DVA was $157 million, compared to $74 million in 2011. Excluding the impact of CVA/DVA, revenues in SAP were $(657) million, compared to $473 million in 2011. The decline in revenues was driven in part by lower non-interest revenue due to the absence of positive private equity marks and lower gains on asset sales, as well as an aggregate repurchase reserve build in 2012 of approximately $244 million related to private-label mortgage securitizations (see "Managing Global Risk-Credit Risk-Citigroup Residential Mortgages-Representations and Warranties" below). The loss in net interest revenues improved from the prior year due to lower funding costs, but remained negative. Citi expects continued negative net interest revenues, as interest earning assets continue to be a smaller portion of the overall asset pool. 
Expenses increased 11%, driven by higher legal and related costs, partially offset by lower expenses from lower volume and asset levels.
Provisions were a benefit of $224 million, which represented a 73% decline from 2011 due to a decrease in loan loss reserve releases (a release of $140 million compared to a release of $1.9 billion in 2011), partially offset by a $1.1 billion decline in net credit losses.
Assets declined 49% to $21 billion, primarily driven by sales, amortization and prepayments. Asset sales of $11 billion generated pretax gains of approximately $0.3 billion, compared to asset sales of $29 billion and pretax gains of $0.5 billion in 2011.

2011 vs. 2010
Net income decreased 50%, driven by the decrease in revenues due to lower asset balances, partially offset by lower expenses and improved credit.
Revenues decreased 81%, driven by the overall decline in net interest revenue during the year, as interest-earning assets declined and thus represented a smaller portion of the overall asset pool. Non-interest revenue decreased by 42% due to lower gains on asset sales and the absence of positive private equity marks from the prior-year period. 
Expenses decreased 49%, driven by lower volume and asset levels, as well as lower legal and related costs.
Provisions were a benefit of $827 million, which represented an improvement of $1.1 billion from the prior year, as credit conditions improved during 2011. The improvement was primarily driven by a $945 million decrease in net credit losses as well as an increase in loan loss reserve releases.
Assets declined 49%, primarily driven by sales, amortization and prepayments. Asset sales of $29 billion generated pretax gains of approximately $0.5 billion, compared to asset sales of $39 billion and pretax gains of $1.3 billion in 2010.


36


BALANCE SHEET REVIEW

The following sets forth a general discussion of the changes in certain of the more significant line items of Citi's Consolidated Balance Sheet. For additional information on Citigroup's aggregate liquidity resources, including its deposits, short-term and long-term debt and secured financing transactions, see "Capital Resources and Liquidity-Funding and Liquidity" below.

EOP EOP
4Q12 vs. 3Q12 4Q12 vs.
December 31, September 30, December 31, Increase % 4Q11 Increase %
In billions of dollars 2012 2012 2011 (decrease) Change (decrease) Change
Assets
Cash and deposits with banks $ 139 $ 204 $ 184                   $ (65 ) (32 )%                   $ (45 ) (24 )%
Federal funds sold and securities borrowed
       or purchased under agreements to resell 261 278 276 (17 ) (6 ) (15 ) (5 )
Trading account assets 321 315 292 6 2 29 10
Investments 312 295 293 17 6 19 6
Loans, net of unearned income and
       allowance for loan losses 630 633 617 (3 ) - 13 2
Other assets 202 206 212 (4 ) (2 ) (10 ) (5 )
Total assets $ 1,865 $ 1,931 $ 1,874 $ (66 ) (3 )% $ (9 ) - %
Liabilities
Deposits $ 931 $ 945 $ 866 $ (14 ) (1 )% $ 65 8 %
Federal funds purchased and securities loaned or sold
       under agreements to repurchase 211 224 198 (13 ) (6 ) 13 7
Trading account liabilities 116 130 126 (14 ) (11 ) (10 ) (8 )
Short-term borrowings 52 49 54 3 6 (2 ) (4 )
Long-term debt 239 272 324 (33 ) (12 ) (85 ) (26 )
Other liabilities 125 122 126 3 2 (1 ) (1 )
Total liabilities $ 1,674 $ 1,742 $ 1,694 $ (68 ) (4 )% $ (20 ) (1 )%
Total equity 191 189 180 2 1 11 6
Total liabilities and equity $ 1,865 $ 1,931 $ 1,874 $ (66 ) (3 )% $ (9 ) - %

ASSETS

Cash and Deposits with Banks
Cash and deposits with banks is composed of both Cash and due from banks and Deposits with banks. Cash and due from banks includes (i) cash on hand at Citi's domestic and overseas offices, and (ii) non-interest-bearing balances due from banks, including non-interest-bearing demand deposit accounts with correspondent banks, central banks (such as the Federal Reserve Bank), and other banks or depository institutions for normal operating purposes. Deposits with banks includes interest-bearing balances, demand deposits and time deposits held in or due from banks (including correspondent banks, central banks and other banks or depository institutions) maintained for, among other things, normal operating and regulatory reserve requirement purposes.
During 2012, cash and deposits with banks decreased $45 billion, or 24%, driven by a $53 billion, or 34%, decrease in deposits with banks offset by an $8 billion, or 27%, increase in cash and due from banks. The purposeful reduction in cash and deposits with banks was in keeping with Citi's continued strategy to deleverage the balance sheet and deploy excess cash into investments. The overall decline resulted from cash used to repay long-term debt maturities (net of modest issuances) and to reduce other long-term debt and short-term borrowings (including the redemption of trust preferred

securities and debt repurchases), the funding of asset growth in the Citicorp businesses (including continued lending to both Consumer and Corporate clients), as well as the reinvestment of cash into higher yielding available-for-sale (AFS) securities. These uses of cash were partially offset by the cash generated by the $65 billion increase in customer deposits over the course of 2012, as well as cash generated from asset sales, primarily in Citi Holdings (including the $1.89 billion paid to Citi by Morgan Stanley for the 14% interest in MSSB, as described under "Citi Holdings-Brokerage and Asset Management" and in Note 15 to the Consolidated Financial Statements), and from Citi's operations.
The $65 billion, or 32%, decline in cash and deposits with banks during the fourth quarter of 2012 was similarly driven by cash used to repay short-term borrowings and long-term debt obligations and the redeployment of excess cash into investments. The reduction during the fourth quarter also reflected a net decline in client deposits that was expected during the quarter and reflected the run-off of episodic deposits that came in at the end of the third quarter and the outflows of deposits related to the Transaction Account Guarantee (TAG) program, partially offset by deposit growth in the normal course of business. These deposit changes are discussed further under "Capital Resources and Liquidity-Funding and Liquidity" below.


37


Federal Funds Sold and Securities Borrowed or
Purchased Under Agreements to Resell (Reverse Repos)
Federal funds sold consist of unsecured advances to third parties of excess balances in reserve accounts held at the Federal Reserve Banks. During 2011 and 2012, Citi's federal funds sold were not significant. 
Reverse repos and securities borrowing transactions decreased by $15 billion, or 5%, during 2012, and declined $17 billion, or 6%, compared to the third quarter of 2012. The majority of this decrease was due to changes in the mix of assets within certain Securities and Banking businesses between reverse repos and trading account assets.
For further information regarding these balance sheet categories, see Notes 1 and 12 to the Consolidated Financial Statements.

Trading Account Assets
Trading account assets includes debt and marketable equity securities, derivatives in a net receivable position, residual interests in securitizations and physical commodities inventory. In addition, certain assets that Citigroup has elected to carry at fair value, such as certain loans and purchase guarantees, are also included in Trading account assets .
During 2012, trading account assets increased $29 billion, or 10%, primarily due to increases in equity securities ($24 billion, or 72%), foreign government securities ($10 billion, or 12%), and mortgage-backed securities ($4 billion, or 13%), partially offset by an $8 billion, or 12%, decrease in derivative assets. A significant portion of the increase in Citi's trading account assets (approximately half of which occurred in the first quarter of 2012, with the remainder of the growth occurring steadily during the rest of 2012) was the reversal of reductions in trading positions during the second half of 2011 as a result of the economic uncertainty that largely began in the third quarter of 2011 and continued into the fourth quarter. During 2011, Citi reduced its rates trading in the G10, particularly in Europe, given the market environment in the region, and credit trading and securitized markets also declined due to reduced client volume and less market liquidity. In 2012, the increases in trading assets and the assets classes noted above were the result of a more favorable market environment and more robust trading activities, as well as a change in the asset mix of positions held in certain equities businesses.
Average trading account assets were $251 billion in 2012, compared to $270 billion in 2011. The decrease versus the prior year reflected the higher levels of trading assets (excluding derivative assets) during the first half of 2011, prior to the de-risking and market-related reductions noted above.
For further information on Citi's trading account assets, see Notes 1 and 14 to the Consolidated Financial Statements.

Investments
Investments consist of debt and equity securities that are available-for-sale, debt securities that are held-to-maturity, non-marketable equity securities that are carried at fair value, and non-marketable equity securities carried at cost. Debt securities include bonds, notes and redeemable preferred stock, as well as certain mortgage-backed and asset-backed securities and other structured notes. Marketable and non-marketable equity securities carried at fair value include common and nonredeemable preferred stock. Nonmarketable equity securities carried at cost primarily include equity shares issued by the Federal Reserve Bank and the Federal Home Loan Banks that Citigroup is required to hold.
During 2012, investments increased by $19 billion, or 6%, primarily due to a $23 billion, or 9%, increase in AFS, predominantly foreign government and U.S. Treasury securities, partially offset by a $1 billion decrease in held-to-maturity securities. The majority of this increase occurred during the fourth quarter of 2012, where investments increased $17 billion, or 6%, in total. The increase in AFS was part of the continued balance sheet strategy to redeploy excess cash into higher-yielding investments.
As noted above, the increase in AFS included growth in foreign government securities (as the increase in deposits in many countries resulted in higher liquid resources and drove the investment in foreign government AFS, primarily in Asia and Latin America ) and U.S. Treasury securities. This growth and reallocation was supplemented by smaller increases in mortgage-backed securities (both U.S. government agency MBS and non-U.S. residential MBS), municipal securities and other asset-backed securities, partially offset by a reduction in U.S. federal agency securities.
For further information regarding investments, see Notes 1 and 15 to the Consolidated Financial Statements.


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Loans
Loans represent the largest asset category of Citi's balance sheet. Citi's total loans (as discussed throughout this section, are presented net of unearned income) were $655 billion at December 31, 2012, compared to $647 billion at December 31, 2011. Excluding the impact of FX translation, loans increased 1% year-over-year. At year-end 2012, Consumer and Corporate loans represented 62% and 38%, respectively, of Citi's total loans.
In Citicorp, loans were up 7% to $540 billion at year end 2012, as compared to $507 billion at the end of 2011. Citicorp Corporate loans increased 11% year-over-year, and Citicorp Consumer loans were up 3% year-over-year. 
Corporate loan growth was driven by Transaction Services (25% growth), particularly from increased trade finance lending in most regions, as well as growth in the Securities and Banking Corporate loan book (6% growth), with increased borrowing generally across most segments and regions. Growth in Corporate lending included increases in Private Bank and certain middle-market client segments overseas, with other Corporate lending segments down slightly as compared to year-end 2011. During 2012, Citi continued to optimize the Corporate lending portfolio, including selling certain loans that did not fit its target market profile.
Consumer loan growth was driven by Global Consumer Banking , as loans increased 3% year-over-year, led by Latin America and Asia. North America Consumer loans decreased 1%, driven by declines in card loans, as the cards market reflected overall consumer deleveraging as well as other regulatory changes. Retail lending in North America , however, increased 10% year-over-year, as a result of higher real estate lending as well as growth in the commercial segment. 
In contrast, Citi Holdings loans declined 18% year-over-year, due to the continued run-off and asset sales in the portfolios.
During 2012, average loans of $649 billion yielded an average rate of 7.5%, compared to $644 billion and 7.8%, respectively, in the prior year. For further information on Citi's loan portfolios, see generally "Managing Global Risk-Credit Risk" below and Notes 1 and 16 to the Consolidated Financial Statements.

Other Assets
Other assets consists of Brokerage receivables, Goodwill, Intangibles and Mortgage servicing rights in addition to Other assets (including, among other items, loans held-for-sale, deferred tax assets, equity-method investments, interest and fees receivable, premises and equipment, certain end-user derivatives in a net receivable position, repossessed assets and other receivables).
During 2012, other assets decreased $10 billion, or 5%, primarily due to a $5 billion decrease in brokerage receivables, a $3 billion decrease in other assets, a $1 billion decrease in mortgage servicing rights (see "Managing Global Risk-Credit Risk- North America Consumer Mortgage Lending-Mortgage Servicing Rights" below), and a $1 billion decrease in intangible assets.
For further information on brokerage receivables, see Note 13 to the Consolidated Financial Statements. For further information regarding goodwill and intangible assets, see Note 18 to the Consolidated Financial Statements.

LIABILITIES

Deposits
Deposits represent customer funds that are payable on demand or upon maturity. For a discussion of Citi's deposits, see "Capital Resources and Liquidity-Funding and Liquidity" below.

Federal Funds Purchased and Securities Loaned or Sold
Under Agreements to Repurchase (Repos)
Federal funds purchased consist of unsecured advances of excess balances in reserve accounts held at the Federal Reserve Banks from third parties. During 2011 and 2012, Citi's federal funds purchased were not significant. 
For further information on Citi's secured financing transactions, including repos and securities lending transactions, see "Capital Resources and Liquidity-Funding and Liquidity" below. See also Notes 1 and 12 to the Consolidated Financial Statements for additional information on these balance sheet categories.

Trading Account Liabilities
Trading account liabilities includes securities sold, not yet purchased (short positions), and derivatives in a net payable position, as well as certain liabilities that Citigroup has elected to carry at fair value.
During 2012, trading account liabilities decreased by $10 billion, or 8%, primarily due to a $5 billion, or 8%, decrease in derivative liabilities, and a reduction in short equity positions. In 2012, average trading account liabilities were $74 billion, compared to $86 billion in 2011, primarily due to lower average volumes of short equity positions.
For further information on Citi's trading account liabilities, see Notes 1 and 14 to the Consolidated Financial Statements.

Debt
Debt is composed of both short-term and long-term borrowings. Short-term borrowings include commercial paper and borrowings from unaffiliated banks and other market participants. Long-term borrowings include senior notes, subordinated notes, trust preferred securities and securitizations. For further information on Citi's long-term and short-term debt borrowings during 2012, see "Capital Resources and Liquidity-Funding and Liquidity" below and Notes 1 and 19 to the Consolidated Financial Statements.

Other Liabilities
Other liabilities consists of Brokerage payables and Other liabilities (including, among other items, accrued expenses and other payables, deferred tax liabilities, certain end-user derivatives in a net payable position, and reserves for legal claims, taxes, restructuring, unfunded lending commitments, and other matters).
During 2012, other liabilities decreased $1 billion, or 1%. For further information regarding Brokerage payables , see Note 13 to the Consolidated Financial Statements.


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SEGMENT BALANCE SHEET AT DECEMBER 31, 2012 (1)

Citigroup
Corporate/Other, Parent Company-
Discontinued Issued
Operations Long-Term
Global Institutional and Debt and
Consumer Clients Consolidating Subtotal Citi Stockholders' Total Citigroup
In millions of dollars Banking Group Eliminations  (2) Citicorp Holdings Equity  (3) Consolidated
Assets
       Cash and deposits with banks $ 19,474 $ 71,152 $ 46,634 $ 137,260 $ 1,327 $ -          $ 138,587
       Federal funds sold and securities borrowed or
              purchased under agreements to resell 3,243 256,864 - 260,107 1,204 - 261,311
       Trading account assets 12,716 300,360 244 313,320 7,609 - 320,929
       Investments 29,914 112,928 151,822 294,664 17,662 - 312,326
       Loans, net of unearned income and
              allowance for loan losses 283,365 241,819 - 525,184 104,825 - 630,009
       Other assets 53,180 75,543 49,154 177,877 23,621 - 201,498
Total assets $ 401,892 $ 1,058,666 $ 247,854 $ 1,708,412 $ 156,248 $ - $ 1,864,660
Liabilities and equity
       Total deposits $ 336,942 $ 523,083 $ 2,579 $ 862,604 $ 67,956 $ - $ 930,560
       Federal funds purchased and securities loaned or
              sold under agreements to repurchase 6,835 204,397 - 211,232 4 - 211,236
       Trading account liabilities 167 113,530 535 114,232 1,317 - 115,549
       Short-term borrowings 140 46,535 4,974 51,649 378 - 52,027
       Long-term debt 2,688 43,515 8,917 55,120 7,790 176,553 239,463
       Other liabilities 18,752 79,384 17,693 115,829 8,999 - 124,828
       Net inter-segment funding (lending) 36,368 48,222 211,208 295,798 69,804 (365,602 ) -
Total liabilities $ 401,892 $ 1,058,666 $ 245,906 $ 1,706,464 $ 156,248 $ (189,049 ) $ 1,673,663
Total equity - - 1,948 1,948 - 189,049 190,997
Total liabilities and equity $ 401,892 $ 1,058,666 $ 247,854 $ 1,708,412 $ 156,248 $ - $ 1,864,660

(1) The supplemental information presented in the table above reflects Citigroup's consolidated GAAP balance sheet by reporting segment as of December 31, 2012. The respective segment information depicts the assets and liabilities managed by each segment as of such date. While this presentation is not defined by GAAP, Citi believes that these non-GAAP financial measures enhance investors' understanding of the balance sheet components managed by the underlying business segments, as well as the beneficial inter-relationship of the asset and liability dynamics of the balance sheet components among Citi's business segments.
(2) Consolidating eliminations for total Citigroup and Citigroup parent company assets and liabilities are recorded within the Corporate/Other segment.
(3) The total stockholders' equity and substantially all long-term debt of Citigroup resides in the Citigroup parent company Consolidated Balance Sheet. Citigroup allocates stockholders' equity and long-term debt to its businesses through inter-segment allocations as described above.

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CAPITAL RESOURCES AND LIQUIDITY

CAPITAL RESOURCES

Overview
Capital is used principally to support assets in Citi's businesses and to absorb credit, market and operational losses. Citi primarily generates capital through earnings from its operating businesses. Citi may augment its capital through issuances of common stock, perpetual preferred stock and equity issued through awards under employee benefit plans, among other issuances. During the fourth quarter of 2012, Citi issued approximately $2.25 billion of noncumulative perpetual preferred stock (see "Funding and Liquidity-Long-Term Debt" below).
Citi has also previously augmented its regulatory capital through the issuance of subordinated debt underlying trust preferred securities, although the treatment of such instruments as regulatory capital will be phased out under the U.S. Basel III rules in accordance with the timeframe specified by The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) (see "Regulatory Capital Standards" below). Accordingly, Citi has begun to redeem certain of its trust preferred securities (see "Funding and Liquidity-Long-Term Debt" below) in contemplation of such future phase out.
Further, changes in regulatory and accounting standards as well as the impact of future events on Citi's business results, such as corporate and asset dispositions, may also affect Citi's capital levels.
Citigroup's capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with each entity's respective risk profile and all applicable regulatory standards and guidelines. Citi assesses its capital adequacy against a series of internal quantitative capital goals, designed to evaluate the Company's capital levels in expected and stressed economic environments. Underlying these internal quantitative capital goals are strategic capital considerations, centered on preserving and building financial strength. Senior management, with oversight from the Board of Directors, is responsible for the capital assessment and planning process, which is integrated into Citi's capital plan, as part of the Federal Reserve Board's Comprehensive Capital Analysis and Review (CCAR) process. Implementation of the capital plan is carried out mainly through Citigroup's Asset and Liability Committee, with oversight from the Risk Management and Finance Committee of Citigroup's Board of Directors. Asset and liability committees are also established globally and for each significant legal entity, region, country and/or major line of business.

Capital Ratios Under Current Regulatory Guidelines
Citigroup is subject to the risk-based capital guidelines (currently Basel I) issued by the Federal Reserve Board. Historically, capital adequacy has been measured, in part, based on two risk-based capital ratios, the Tier 1 Capital and Total Capital (Tier 1 Capital + Tier 2 Capital) ratios. Tier 1 Capital consists of the sum of "core capital elements," such as qualifying common stockholders' equity, as adjusted, qualifying perpetual preferred stock, qualifying noncontrolling interests, and qualifying trust preferred securities, principally reduced by goodwill, other disallowed intangible assets, and

disallowed deferred tax assets. Total Capital also includes "supplementary" Tier 2 Capital elements, such as qualifying subordinated debt and a limited portion of the allowance for credit losses. Both measures of capital adequacy are stated as a percentage of risk-weighted assets.
In 2009, the U.S. banking regulators developed a new supervisory measure of capital termed "Tier 1 Common," which is defined as Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests, and qualifying trust preferred securities.
Citigroup's risk-weighted assets, as currently computed under Basel I, are principally derived from application of the risk-based capital guidelines related to the measurement of credit risk. Pursuant to these guidelines, on-balance-sheet assets and the credit equivalent amount of certain off-balance-sheet exposures (such as financial guarantees, unfunded lending commitments, letters of credit and derivatives) are assigned to one of several prescribed risk-weight categories based upon the perceived credit risk associated with the obligor or, if relevant, the guarantor, the nature of the collateral, or external credit ratings. Risk-weighted assets also incorporate a measure for market risk on covered trading account positions and all foreign exchange and commodity positions whether or not carried in the trading account. Excluded from risk-weighted assets are any assets, such as goodwill and deferred tax assets, to the extent required to be deducted from regulatory capital.
Citigroup is also subject to a Leverage ratio requirement, a non-risk-based measure of capital adequacy, which is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets.
To be "well capitalized" under current federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital ratio of at least 6%, a Total Capital ratio of at least 10%, and not be subject to a Federal Reserve Board directive to maintain higher capital levels. In addition, the Federal Reserve Board expects bank holding companies to maintain a minimum Leverage ratio of 3% or 4%, depending on factors specified in its regulations. The following table sets forth Citigroup's regulatory capital ratios as of December 31, 2012 and December 31, 2011:

At year end 2012 2011
Tier 1 Common 12.67 % 11.80 %
Tier 1 Capital 14.06 13.55
Total Capital (Tier 1 Capital + Tier 2 Capital) 17.26 16.99
Leverage 7.48 7.19

As indicated in the table above, Citigroup was "well capitalized" under the current federal bank regulatory agency definitions as of December 31, 2012 and December 31, 2011.


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Components of Capital Under Current Regulatory Guidelines

In millions of dollars at year end 2012 2011
Tier 1 Common Capital
Citigroup common stockholders' equity $ 186,487 $ 177,494
Regulatory Capital Adjustments and Deductions:
Less: Net unrealized gains (losses) on securities available-for-sale, net of tax (1)(2) 597 (35 )
Less: Accumulated net losses on cash flow hedges, net of tax (2,293 ) (2,820 )
Less: Pension liability adjustment, net of tax (3) (5,270 ) (4,282 )
Less: Cumulative effect included in fair value of financial liabilities attributable to the change in
       own creditworthiness, net of tax (4) 18 1,265
Less: Disallowed deferred tax assets (5) 40,148 37,980
Less: Intangible assets:
         Goodwill 25,686 25,413
         Other disallowed intangible assets 4,004 4,550
Other (502 ) (569 )
Total Tier 1 Common Capital $ 123,095 $ 114,854
Tier 1 Capital
Qualifying perpetual preferred stock $ 2,562 $ 312
Qualifying trust preferred securities 9,983 15,929
Qualifying noncontrolling interests 892 779
Total Tier 1 Capital $ 136,532 $ 131,874
Tier 2 Capital
Allowance for credit losses (6) $ 12,330 $ 12,423
Qualifying subordinated debt (7) 18,689 20,429
Net unrealized pretax gains on available-for-sale equity securities (1) 135 658
Total Tier 2 Capital $ 31,154 $ 33,510
Total Capital (Tier 1 Capital + Tier 2 Capital) $ 167,686 $ 165,384
Risk-Weighted Assets
In millions of dollars at year end
Risk-Weighted Assets (using Basel I) (8)(9) $ 971,253 $ 973,369
Estimated Risk-Weighted Assets (using Basel II.5) (10) $ 1,110,859 N/A

(1) Tier 1 Capital excludes net unrealized gains (losses) on available-for-sale (AFS) debt securities and net unrealized gains on AFS equity securities with readily determinable fair values, in accordance with risk-based capital guidelines. In arriving at Tier 1 Capital, banking organizations are required to deduct net unrealized losses on AFS equity securities with readily determinable fair values, net of tax. Banking organizations are permitted to include in Tier 2 Capital up to 45% of net unrealized pretax gains on AFS equity securities with readily determinable fair values.
(2) In addition, includes the net amount of unamortized loss on held-to-maturity (HTM) securities. This amount relates to securities which were previously transferred from AFS to HTM, and non-credit-related factors such as changes in interest rates and liquidity spreads for HTM securities with other-than-temporary impairment.
(3) The Federal Reserve Board granted interim capital relief for the impact of ASC 715-20, Compensation-Retirement Benefits-Defined Benefits Plans (formerly SFAS 158).
(4) The impact of changes in Citigroup's own creditworthiness in valuing liabilities for which the fair value option has been elected is excluded from Tier 1 Capital, in accordance with risk-based capital guidelines.
(5) Of Citi's approximate $55 billion of net deferred tax assets at December 31, 2012, approximately $11 billion of such assets were includable without limitation in regulatory capital pursuant to risk-based capital guidelines, while approximately $40 billion of such assets exceeded the limitation imposed by these guidelines and, as "disallowed deferred tax assets," were deducted in arriving at Tier 1 Capital. Citigroup's approximate $4 billion of other net deferred tax assets primarily represented effects of the pension liability and cash flow hedges adjustments, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines.
(6) Includable up to 1.25% of risk-weighted assets. Any excess allowance for credit losses is deducted in arriving at risk-weighted assets.
(7) Includes qualifying subordinated debt in an amount not exceeding 50% of Tier 1 Capital.
(8) Risk-weighted assets as computed under Basel I credit risk and market risk capital rules.
(9) Includes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $62 billion for interest rate, commodity and equity derivative contracts, foreign exchange contracts, and credit derivatives as of December 31, 2012, compared with $67 billion as of December 31, 2011. Market risk equivalent assets included in risk-weighted assets amounted to $41.5 billion at December 31, 2012 and $46.8 billion at December 31, 2011. Risk-weighted assets also include the effect of certain other off-balance-sheet exposures, such as unused lending commitments and letters of credit, and reflect deductions such as certain intangible assets and any excess allowance for credit losses.
(10) Risk-weighted assets as computed under Basel I credit risk capital rules and final (revised) market risk capital rules (Basel II.5).

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Basel II.5 and III
In June 2012, the U.S. banking agencies released final (revised) market risk capital rules (Basel II.5), which became effective on January 1, 2013. At the same time, the U.S. banking agencies also released proposed Basel III rules, although the timing of the finalization and effective date(s) of these rules is subject to uncertainty. Collectively these rules would establish an integrated framework of standards applicable to virtually all U.S. banking organizations, including Citi and Citibank, N.A., and upon implementation would comprehensively revise and replace existing regulatory capital requirements. For additional information on the proposed U.S. Basel III and final Basel II.5 rules see "Regulatory Capital Standards" and "Risk Factors-Regulatory Risks" below.
Citi's estimated Tier 1 Common ratio as of December 31, 2012, assuming application of the Basel II.5 rules, was 11.08%, compared to 12.67% under Basel I. 11 This decline reflects the significant increase in risk-weighted assets under the Basel II.5 rules relative to those under the current Basel I market risk capital rules. Furthermore, Citi continues to incorporate mandated enhancements and refinements to its Basel II.5 market risk models for which conditional approval has been received from the Federal Reserve Board and OCC. Citi's Basel II.5 risk-weighted assets would be substantially higher absent the successful incorporation of these required enhancements and refinements.
At December 31, 2012, Citi's estimated Basel III Tier 1 Common ratio was 8.7%, compared to an estimated 8.6% at September 30, 2012 (each based on total risk-weighted assets calculated under the proposed U.S. Basel III "advanced approaches" and including Basel II.5). 12 This slight increase quarter-over-quarter was primarily due to lower risk-weighted assets, partially offset by a decline in Tier 1 Common Capital attributable largely to changes in OCI as well as certain other components.
Citi's estimated Basel III Tier 1 Common ratio is based on its understanding, expectations and interpretation of the proposed U.S. Basel III requirements, anticipated compliance with all necessary enhancements to model calibration and other refinements, as well as further regulatory clarity and implementation guidance in the U.S.

____________________
11 Citi's estimate of risk-weighted assets under Basel II.5 is a non-GAAP financial measure as of December 31, 2012. Citi believes this metric provides useful information to investors and others by measuring Citi's progress against future regulatory capital standards.
12 Citi's estimated Basel III Tier 1 Common ratio and its related components are non-GAAP financial measures. Citi believes this ratio and its components (the latter of which are presented in the table below) provide useful information to investors and others by measuring Citi's progress against expected future regulatory capital standards.


43


Components of Tier 1 Common Capital and Risk-Weighted Assets Under Basel III

In millions of dollars December 31,
2012
September 30,
2012
Tier 1 Common Capital (1)
Citigroup common stockholders' equity $ 186,487 $ 186,465
Add: Qualifying minority interests 171 161
Regulatory Capital Adjustments and Deductions:
Less: Accumulated net unrealized losses on cash flow hedges, net of tax (2,293 ) (2,503 )
Less: Cumulative change in fair value of financial liabilities attributable to the change in own creditworthiness, net of tax 587 998
Less: Intangible assets:
         Goodwill (2) 27,004 27,248
         Identifiable intangible assets other than mortgage servicing rights (MSRs) 5,716 5,983
Less: Defined benefit pension plan net assets 732 752
Less: Deferred tax assets (DTAs) arising from tax credit and net operating loss carryforwards 27,200 23,500
Less: Excess over 10%/15% limitations for other DTAs, certain common equity investments, and MSRs (3) 22,316 23,749
Total Tier 1 Common Capital $ 105,396 $ 106,899
Risk-Weighted Assets (4) $ 1,206,153 $ 1,236,619

(1) Calculated based on the U.S. banking agencies proposed Basel III rules.
(2) Includes goodwill "embedded" in the valuation of significant common stock investments in unconsolidated financial institutions.
(3) Aside from MSRs, reflects DTAs arising from temporary differences and significant common stock investments in unconsolidated financial institutions.
(4) Calculated based on the proposed U.S. Basel III "advanced approaches" for determining risk-weighted assets and including Basel II.5.

Common Stockholders' Equity
As set forth in the table below, during 2012, Citigroup's common stockholders' equity increased by $9 billion to $186.5 billion, which represented 10% of Citi's total assets as of December 31, 2012.

In billions of dollars
Common stockholders' equity, December 31, 2011 $ 177.5
Citigroup's net income 7.5
Employee benefit plans and other activities (1) 0.6
Net change in accumulated other comprehensive income (loss),
       net of tax 0.9
Common stockholders' equity, December 31, 2012      $ 186.5

(1) As of December 31, 2012, $6.7 billion of common stock repurchases remained under Citi's repurchase programs. Any Citi repurchase program is subject to regulatory approval. No material repurchases were made in 2012. See "Risk Factors-Business and Operational Risks" and "Purchases of Equity Securities" below.


44


Tangible Common Equity and Tangible Book Value Per Share
Tangible common equity (TCE), as defined by Citigroup, represents common equity less goodwill, other intangible assets (other than mortgage servicing rights (MSRs)), and related net deferred tax assets. Other companies may calculate TCE in a different manner. Citi's TCE was $155.1 billion at December 31, 2012 and $145.4 billion at December 31, 2011. The TCE ratio (TCE divided by Basel I risk-weighted assets) was 16.0% at December 31, 2012 and 14.9% at December 31, 2011. 13
A reconciliation of Citigroup's total stockholders' equity to TCE, and book value per share to tangible book value per share, as of December 31, 2012 and December 31, 2011, follows:

In millions of dollars or shares at year end,
except ratios and per share data 2012 2011
Total Citigroup stockholders' equity $ 189,049 $ 177,806
Less:
       Preferred stock 2,562 312
Common equity $ 186,487 $ 177,494
Less:
     Goodwill 25,673 25,413
     Other intangible assets (other than MSRs) 5,697 6,600
     Goodwill and other intangible assets 
          (other than MSRs) related to assets
          for discontinued operations 
          held for sale
32 -
     Net deferred tax assets related to goodwill 
          and other intangible assets
32 44
Tangible common equity (TCE) $ 155,053 $ 145,437
Tangible assets
GAAP assets $ 1,864,660 $ 1,873,878
     Less:
          Goodwill 25,673 25,413
          Other intangible assets (other than MSRs) 5,697 6,600
          Goodwill and other intangible assets (other
               than MSRs) related to assets for 
               discontinued operations held for sale
32 -
          Net deferred tax assets related to goodwill
               and other intangible assets 309 322
Tangible assets (TA) $ 1,832,949 $ 1,841,543
Risk-weighted assets (RWA) $ 971,253 $ 973,369
TCE/TA ratio 8.46 % 7.90 %
TCE/RWA ratio 15.96 % 14.94 %
Common shares outstanding (CSO) 3,028.9 2,923.9
Book value per share (common equity/CSO) $ 61.57 $ 60.70
Tangible book value per share (TCE/CSO) $ 51.19 $ 49.74

Capital Resources of Citigroup's Subsidiary U.S. Depository Institutions
Citigroup's subsidiary U.S. depository institutions are also subject to risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are similar to the guidelines of the Federal Reserve Board. 
The following table sets forth the capital tiers and capital ratios under current regulatory guidelines for Citibank, N.A., Citi's primary subsidiary U.S. depository institution, as of December 31, 2012 and December 31, 2011:

In billions of dollars, except ratios 2012 2011
Tier 1 Common Capital $ 116.6 $ 121.3
Tier 1 Capital 117.4 121.9
Total Capital
       (Tier 1 Capital + Tier 2 Capital) 135.5 134.3
Tier 1 Common ratio 14.12 % 14.63 %
Tier 1 Capital ratio 14.21 14.70
Total Capital ratio 16.41 16.20
Leverage ratio 8.97 9.66

____________________
13 TCE, tangible book value per share and related ratios are non-GAAP financial measures that are used and relied upon by investors and industry analysts as capital adequacy metrics.


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Impact of Changes on Capital Ratios Under Current Regulatory Guidelines
The following table presents the estimated sensitivity of Citigroup's and Citibank, N.A.'s capital ratios to changes of $100 million in Tier 1 Common Capital, Tier 1 Capital or Total Capital (numerator), or changes of $1 billion in risk-weighted assets or adjusted average total assets (denominator), as of December 31, 2012. This information is provided for the purpose of analyzing the impact that a change in Citigroup's or Citibank, N.A.'s financial position or results of operations could have on these ratios. These sensitivities only consider a single change to either a component of capital, risk-weighted assets or adjusted average total assets. Accordingly, an event that affects more than one factor may have a larger basis point impact than is reflected in this table.


Tier 1 Common ratio Tier 1 Capital ratio Total Capital ratio Leverage ratio
Impact of $1
Impact of $1 Impact of $1 Impact of $1 billion change
Impact of $100 billion change in Impact of $100 billion change in Impact of $100 billion change in Impact of $100 in adjusted
million change in risk-weighted million change in risk-weighted million change in risk-weighted million change in average total
Tier 1 Common Capital assets Tier 1 Capital assets Total Capital assets Tier 1 Capital assets
Citigroup 1.0 bps 1.3 bps 1.0 bps 1.4 bps 1.0 bps 1.8 bps 0.5 bps 0.4 bps
Citibank, N.A. 1.2 bps 1.7 bps 1.2 bps 1.7 bps 1.2 bps 2.0 bps 0.8 bps 0.7 bps

Broker-Dealer Subsidiaries
At December 31, 2012, Citigroup Global Markets Inc., a U.S. broker-dealer registered with the SEC that is an indirect wholly owned subsidiary of Citigroup, had net capital, computed in accordance with the SEC's net capital rule, of $6.2 billion, which exceeded the minimum requirement by $5.7 billion.
In addition, certain of Citi's other broker-dealer subsidiaries are subject to regulation in the countries in which they do business, including requirements to maintain specified levels of net capital or its equivalent. Citigroup's other broker-dealer subsidiaries were in compliance with their capital requirements at December 31, 2012. See Note 20 to the Consolidated Financial Statements.


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Regulatory Capital Standards
The future regulatory capital standards applicable to Citi include Basel II, Basel II.5 and Basel III, as well as the current Basel I credit risk capital rules, until superseded.

Basel II
In November 2007, the U.S. banking agencies adopted Basel II, a new set of risk-based capital standards for large, internationally active U.S. banking organizations, including Citi. These standards require Citi to comply with the most advanced Basel II approaches for calculating risk-weighted assets for credit and operational risks. 
More specifically, credit risk under Basel II is generally measured using an advanced internal ratings-based models approach which is applicable to wholesale and retail exposures, and under certain circumstances also to securitization and equity exposures. For wholesale and retail exposures, a U.S. banking organization is required to input risk parameters generated by its internal risk models into specified required formulas to determine risk-weighted assets. Basel II provides several approaches, subject to various conditions and qualifying criteria, to measure risk-weighted assets for securitization exposures. For equity exposures, a U.S. banking organization may use a simple risk weight approach or, if it qualifies to do so, an internal models approach to measure risk-weighted assets for exposures other than exposures to investments funds, for which a look through approach must be used.
Basel II sets forth advanced measurement approaches to be employed by a U.S. banking organization in the measurement of its operational risk, which is defined by Citi as the risk of loss resulting from inadequate or failed internal processes, systems or human factors, or from external events. The advanced measurement approaches do not require a banking organization to use a specific methodology in its operational risk assessment and rely on a banking organization's internal estimates of its operational risks to generate an operational risk capital requirement.
The U.S. Basel II implementation timetable originally consisted of a parallel calculation period under the current regulatory capital rules (Basel I), followed by a three-year transitional "floor" period, during which Basel II risk-based capital requirements could not fall below certain floors based on application of the Basel I rules. Citi began parallel Basel I and Basel II reporting to the U.S. banking agencies on April 1, 2010, although, as required under U.S. banking regulations, reported only its Basel I capital ratios for purposes of assessing compliance with minimum Tier 1 Capital and Total Capital ratio requirements.

In June 2011, the U.S. banking agencies adopted final regulations to implement the "capital floor" provision of the so-called "Collins Amendment" of the Dodd-Frank Act. These regulations eliminated the three-year transitional floor period in favor of a permanent floor based on the generally applicable risk-based capital rules (currently Basel I). Pursuant to these regulations, a banking organization that has formally implemented Basel II must calculate its risk-based capital requirements under both Basel I and Basel II, compare the two results, and then report the lower of the resulting capital ratios for purposes of determining compliance with its minimum Tier 1 Capital and Total Capital ratio requirements. As of December 31, 2012, neither Citi nor any other U.S. banking organization had received approval from the U.S. banking agencies to formally implement Basel II. Citi expects, however, that it will be required to formally implement Basel II during 2013 and will begin reporting the lower of its Basel I and Basel II ratios.

Basel II.5
Basel II.5 substantially revised the market risk capital framework, and implements a more comprehensive and risk sensitive methodology for calculating market risk capital requirements for covered trading positions. Further, the U.S. version of the Basel II.5 rules also implements the Dodd-Frank Act requirement that all federal agencies remove references to, and reliance on, credit ratings in their regulations, and replace these references with alternative standards for evaluating creditworthiness. As a result, the U.S. banking agencies provided alternative methodologies to external credit ratings to be used in assessing capital requirements on certain debt and securitization positions subject to the Basel II.5 rules.

Basel III
The U.S. Basel III rules consist of three notices of proposed rulemaking (NPRs): the "Basel III NPR," the "Standardized Approach NPR" and the "Advanced Approaches NPR." With the broad exceptions of the new "Standardized Approach" to be employed by substantially all U.S. banking organizations in deriving credit risk-weighted assets and the required alternatives to the use of external credit ratings in arriving at applicable risk weights for certain exposures as referenced above, the NPRs are largely consistent with the Basel Committee's Basel III rules. In November 2012, the U.S. banking agencies announced that none of the proposed rules would be finalized and effective January 1, 2013 as was, in part, initially suggested.


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Basel III NPR
The Basel III NPR, as with the Basel Committee Basel III rules, is intended to raise the quantity and quality of regulatory capital by formally introducing not only Tier 1 Common Capital and mandating that it be the predominant form of regulatory capital, but by also narrowing the definition of qualifying capital elements at all three regulatory capital tiers as well as imposing broader and more constraining regulatory adjustments and deductions.
The Basel III NPR would modify the regulations implementing the capital floor provision of the Collins Amendment of the Dodd-Frank Act that were adopted in June 2011 (as discussed above). This provision would require "Advanced Approaches" banking organizations (generally those with consolidated total assets of at least $250 billion or consolidated total on-balance sheet foreign exposures of at least $10 billion), which includes Citi and Citibank, N.A., to calculate each of the three risk-based capital ratios (Tier 1 Common, Tier 1 Capital and Total Capital) under both the proposed "Standardized Approach" and the proposed "Advanced Approaches" and report the lower of each of the resulting capital ratios. The principal differences between these two approaches are in the composition and calculation of total risk-weighted assets, as well as in the definition of Total Capital. Compliance with the Basel III NPR stated minimum Tier 1 Common, Tier 1 Capital, and Total Capital ratio requirements of 4.5%, 6%, and 8%, respectively, would be assessed based upon each of the reported ratios. The newly established Tier 1 Common and increased Tier 1 Capital stated minimum ratio requirements have been proposed to be phased in over a three-year period. Under the Basel III NPR, consistent with the Basel Committee Basel III rules, there would be no change in the stated minimum Total Capital ratio requirement.
Additionally, the Basel III NPR establishes a 2.5% Capital Conservation Buffer applicable to substantially all U.S. banking organizations and, for Advanced Approaches banking organizations, a potential Countercyclical Capital Buffer of up to 2.5%. The Countercyclical Capital Buffer would be invoked upon a determination by the U.S. banking agencies that the market is experiencing excessive aggregate credit growth, and would be an extension of the Capital Conservation Buffer (i.e., an aggregate combined buffer of potentially between 2.5% and 5%). Citi would be subject to both the Capital Conservation Buffer and, if invoked, the Countercyclical Capital Buffer. Consistent with the Basel Committee Basel III rules, both of these buffers would be required to be comprised entirely of Tier 1 Common Capital.
The calculation of the Capital Conservation Buffer for Advanced Approaches banking organizations, including Citi, would be based on a comparison of each of the three risk-based capital ratios as calculated under the Advanced Approaches and the stated minimum required ratios for each (i.e., 4.5% Tier 1 Common and 6% Tier 1 Capital, both as fully phased-in, and 8% Total Capital), with the reportable Capital Conservation Buffer being the smallest of the three differences. If a banking organization failed to comply with the proposed buffers, it would be subject to increasingly onerous restrictions (depending upon the extent of the shortfall) regarding capital distributions and discretionary executive bonus payments. The buffers are proposed to be phased in from January 1, 2016 through January 1, 2019.

Unlike the Basel Committee's final rules for global systemically important banks (G-SIBs), the Basel III NPR does not include measures for G-SIBs, such as those addressing the methodology for assessing global systemic importance, the imposition of additional Tier 1 Common capital surcharges, and the phase-in period regarding these requirements. The Federal Reserve Board is required by the Dodd-Frank Act to issue rules establishing a quantitative risk-based capital surcharge for financial institutions deemed to be systemically important and posing risk to market-wide financial stability, such as Citi, and the Federal Reserve Board has indicated that it intends for these rules to be consistent with the Basel Committee's final G-SIB rules. Although these rules have not yet been proposed, Citi anticipates that it will likely be subject to a 2.5% initial additional capital surcharge.
The Basel III NPR, consistent with the Basel Committee's Basel III rules, provides that certain capital instruments, such as trust preferred securities, would no longer qualify as non-common components of Tier 1 Capital. Furthermore, the Collins Amendment of the Dodd-Frank Act generally requires a phase-out of these securities over a three-year period beginning January 1, 2013 for bank holding companies, such as Citi, that had $15 billion or more in total consolidated assets as of December 31, 2009. Accordingly, the U.S. banking agencies have proposed that trust preferred securities and other non-qualifying Tier 1 Capital instruments, as well as non-qualifying Tier 2 Capital instruments, be phased out by these bank holding companies, including Citi, at a 25% per year incremental phase-out beginning on January 1, 2013 (i.e., 75% of these capital instruments would be includable in Tier 1 Capital on January 1, 2013, 50% on January 1, 2014, and 25% on January 1, 2015), with a full phase-out of these capital instruments by January 1, 2016. However, the timing of the phase-out of trust preferred securities and other non-qualifying Tier 1 and Tier 2 Capital instruments is currently uncertain, given the delay in finalization and implementation of the U.S. Basel III rules. For additional information on Citi's outstanding trust preferred securities, see Note 19 to the Consolidated Financial Statements. See also "Funding and Liquidity" below.
Under the Basel III NPR, Advanced Approaches banking organizations would also be required to calculate two leverage ratios, a "Tier 1" Leverage ratio and a "Supplementary" Leverage ratio. The Tier 1 Leverage ratio would be a modified version of the current U.S. leverage ratio and would reflect the more restrictive proposed Basel III definition of Tier 1 Capital in the numerator, but with the same current denominator consisting of average total on-balance sheet assets less amounts deducted from Tier 1 Capital. Citi, as with substantially all U.S. banking organizations, would be required to maintain a minimum Tier 1 Leverage ratio of 4%. The Supplementary Leverage ratio would significantly differ from the Tier 1 Leverage ratio regarding the inclusion of certain off-balance sheet exposures within the denominator of the ratio. Advanced Approaches banking organizations, such as Citi, would be required to maintain a minimum Supplementary Leverage ratio of 3%, commencing on January 1, 2018, although it was proposed that reporting commence on January 1, 2015. The Basel Committee's Basel III rules only require that banking organizations calculate a similar Supplementary Leverage ratio.


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In addition, under the Basel III NPR, the U.S. banking agencies are proposing to revise the Prompt Corrective Action (PCA) regulations in certain respects. The PCA requirements direct the U.S. banking agencies to enforce increasingly strict limitations on the activities of insured depository institutions that fail to meet certain regulatory capital thresholds. The PCA framework contains five categories of capital adequacy as measured by risk-based capital and leverage ratios: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized."
The U.S. banking agencies are proposing to revise the PCA regulations to accommodate a new minimum Tier 1 Common ratio requirement for substantially all categories of capital adequacy (other than critically undercapitalized), increase the minimum Tier 1 Capital ratio requirement at each category, and introduce for Advanced Approaches insured depository institutions the Supplementary Leverage ratio as a metric, but only for the "adequately capitalized" and "undercapitalized" categories. These revisions have been proposed to be effective on January 1, 2015, with the exception of the Supplementary Leverage ratio for Advanced Approaches insured depository institutions for which January 1, 2018 was proposed as the effective date. Accordingly, as proposed, beginning January 1, 2015, an insured depository institution, such as Citibank, N.A., would need minimum Tier 1 Common, Tier 1 Capital, Total Capital, and Tier 1 Leverage ratios of 6.5% (a new requirement), 8% (a 2% increase over the current requirement), 10%, and 5%, respectively, to be considered "well capitalized."

Standardized Approach NPR
The Standardized Approach NPR would be applicable to substantially all U.S. banking organizations, including Citi and Citibank, N.A., and when effective would replace the existing Basel I rules governing the calculation of risk-weighted assets for credit risk. As proposed, this approach would incorporate heightened risk sensitivity for calculating risk-weighted assets for certain on-balance sheet assets and off-balance sheet exposures, including those to foreign sovereign governments and banks, residential mortgages, corporate and securitization exposures, and counterparty credit risk on derivative contracts, as compared to Basel I. Total risk-weighted assets under the Standardized Approach would exclude risk-weighted assets arising from operational risk, require more limited approaches in measuring risk-weighted assets for securitization exposures under Basel II.5, and apply the standardized risk-weights to arrive at credit risk-weighted assets. As required under the Dodd-Frank Act, the Standardized Approach proposes to rely on alternatives to external credit ratings in the treatment of certain exposures. The proposed effective date for implementation of the Standardized Approach is January 1, 2015, with an option for U.S. banking organizations to early adopt.

Advanced Approaches NPR
The Advanced Approaches NPR incorporates published revisions to the Basel Committee's Advanced Approaches calculation of risk-weighted assets as proposed amendments to the U.S. Basel II capital guidelines. Total risk-weighted assets under the Advanced Approaches would include not only market risk equivalent risk-weighted assets as determined under Basel II.5, but also the results of applying the Advanced Approaches in calculating credit and operational risk-weighted assets. Primary among the proposed Basel II modifications are those related to the treatment of counterparty credit risk, as well as substantial revisions to the securitization exposure framework. As required by the Dodd-Frank Act, the Advanced Approaches NPR also proposes to remove references to, and reliance on, external credit ratings for various types of exposures.


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FUNDING AND LIQUIDITY

Overview
Citi's funding and liquidity objectives generally are to maintain liquidity to fund its existing asset base as well as grow its core businesses in Citicorp, while at the same time maintain sufficient excess liquidity, structured appropriately, so that it can operate under a wide variety of market conditions, including market disruptions for both short- and long-term periods. Citigroup's primary liquidity objectives are established by entity, and in aggregate, across three major categories:

the non-bank, which is largely composed of the parent holding company (Citigroup) and Citi's broker-dealer subsidiaries (collectively referred to in this section as "non-bank"); Citi's significant Citibank entities, which consist of Citibank, N.A. units domiciled in the U.S., Western Europe, Hong Kong, Japan and Singapore (collectively referred to in this section as "significant Citibank entities"); and other Citibank and Banamex entities.

At an aggregate level, Citigroup's goal is to ensure that there is sufficient funding in amount and tenor to ensure that aggregate liquidity resources are available for these entities. The liquidity framework requires that entities be self-sufficient or net providers of liquidity, including in conditions established under their designated stress tests.
Citi's primary sources of funding include (i) deposits via Citi's bank subsidiaries, which are Citi's most stable and lowest cost source of long-term funding, (ii) long-term debt (primarily senior and subordinated debt) issued at the non-bank level and certain bank subsidiaries, and (iii) stockholders' equity. These sources may be supplemented by short-term borrowings, primarily in the form of secured financing transactions (securities loaned or sold under agreements to repurchase, or repos).
As referenced above, Citigroup works to ensure that the structural tenor of these funding sources is sufficiently long in relation to the tenor of its asset base. The key goal of Citi's asset/liability management is to ensure that there is excess tenor in the liability structure so as to provide excess liquidity to fund the assets. The excess liquidity resulting from a longer-term tenor profile can effectively offset potential decreases in liquidity that may occur under stress. This excess funding is held in the form of aggregate liquidity resources, as described below.


Aggregate Liquidity Resources

Non-bank Significant Citibank Entities Other Citibank and
Banamex Entities
Total
In billions of dollars Dec. 31,
2012
Sept. 30,
2012
Dec. 31,
2011
Dec. 31,
2012
Sept. 30,
2012
Dec. 31,
2011
Dec. 31,
2012
Sept. 30,
2012
Dec. 31,
2011
Dec. 31,
2012
Sept. 30,
2012
Dec. 31,
2011
Available cash at central banks $ 33.2 $ 50.9 $ 29.1 $ 26.5 $ 72.7 $ 70.7 $ 13.3 $ 15.9 $ 27.6 $ 73.0 $ 139.5 $ 127.4
Unencumbered liquid securities 31.3 26.8 69.3 173.3 164.0 129.5 76.2 73.9 79.3 280.8 264.7 278.1
Total $ 64.5 $ 77.7 $ 98.4 $ 199.8 $ 236.7 $ 200.2 $ 89.5 $ 89.8 $ 106.9 $ 353.8 $ 404.2 $ 405.5

All amounts in the table above are as of period-end and may increase or decrease intra-period in the ordinary course of business.
As set forth in the table above, Citigroup's aggregate liquidity resources totaled approximately $353.8 billion at December 31, 2012, compared to $404.2 billion at September 30, 2012 and $405.5 billion at December 31, 2011. During 2011 and the first half of 2012, Citi consciously maintained an excess liquidity position given uncertainties in both the global economic outlook and the pace of its balance sheet deleveraging. In the second half of 2012, as these uncertainties showed signs of abating, Citi purposefully began to decrease its liquidity resources, primarily through long-term debt reductions and limiting deposit growth, as well as through increased lending to both Consumer and Corporate clients.
As discussed in more detail below, this reduction in excess liquidity in turn contributed to a reduction in overall cost of funds, and thus improved Citi's net interest margin, which increased to 2.88% for full year 2012 from 2.86% for full year 2011 (see "Deposits" and "Market Risk-Interest Revenue/ Expense and Yields" below, respectively).

At December 31, 2012, Citigroup's non-bank aggregate liquidity resources totaled approximately $64.5 billion, compared to $77.7 billion at September 30, 2012 and $98.4 billion at December 31, 2011. These amounts included unencumbered liquid securities and cash held in Citi's U.S. and non-U.S. broker-dealer entities. The purposeful decrease in aggregate liquidity resources of Citi's non-bank entities year-over-year and quarter-over-quarter was primarily due to the continued pay down and runoff of long-term debt, including Temporary Liquidity Guarantee Program (TLGP) debt, which fully matured by the end of 2012.
Citigroup's significant Citibank entities had approximately $199.8 billion of aggregate liquidity resources as of December 31, 2012, compared to $236.7 billion at September 30, 2012 and $200.2 billion at December 31, 2011. The decrease in aggregate liquidity resources during the fourth quarter of 2012 was primarily due to an anticipated reduction in episodic deposits and the expiration of the Transaction Account Guarantee (TAG) program (see "Deposits" below), as well as the repayment of remaining TLGP borrowings and a reduction in secured borrowings. As of December 31, 2012, the significant Citibank entities' liquidity resources included $26.5 billion of cash on deposit with major central banks (including the U.S. Federal Reserve Bank, European Central Bank, Bank


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of England, Swiss National Bank, Bank of Japan, the Monetary Authority of Singapore and the Hong Kong Monetary Authority), compared with $72.7 billion at September 30, 2012 and $70.7 billion at December 31, 2011.
The significant Citibank entities' liquidity resources amount as of December 31, 2012 also included unencumbered liquid securities. These securities are available-for-sale or secured financing through private markets or by pledging to the major central banks. The liquidity value of these securities was $173.3 billion at December 31, 2012 compared to $164.0 billion at September 30, 2012 and $129.5 billion at December 31, 2011.
Citi estimates that its other Citibank and Banamex entities and subsidiaries held approximately $89.5 billion in aggregate liquidity resources as of December 31, 2012, compared to $89.8 billion at September 30, 2012 and $106.9 billion at December 31, 2011. The decrease year-over-year was primarily due to increased lending and limited deposit growth in those entities. The $89.5 billion as of December 31, 2012 included $13.3 billion of cash on deposit with central banks and $76.2 billion of unencumbered liquid securities.
Citi's $353.8 billion of aggregate liquidity resources as of December 31, 2012 does not include additional potential liquidity in the form of Citigroup's borrowing capacity from the various Federal Home Loan Banks (FHLB), which was approximately $36.7 billion as of December 31, 2012 and is maintained by pledged collateral to all such banks. The aggregate liquidity resources shown above also do not include Citi's borrowing capacity at the U.S. Federal Reserve Bank discount window or international central banks, which capacity would also be in addition to the resources noted above.
Moreover, in general, Citigroup can freely fund legal entities within its bank vehicles. Citigroup's bank subsidiaries, including Citibank, N.A., can lend to the Citigroup parent and broker-dealer entities in accordance with Section 23A of the Federal Reserve Act. As of December 31, 2012, the amount available for lending to these non-bank entities under Section 23A was approximately $15 billion, provided the funds are collateralized appropriately.
Overall, subject to market conditions, Citi expects to continue to modestly manage down its aggregate liquidity resources as it continues to pay down or allow its outstanding long-term debt to mature (see "Long-Term Debt" below).

Aggregate Liquidity Resources-By Type
The following table shows the composition of Citi's aggregate liquidity resources by type of asset as of each of the periods indicated. For securities, the amounts represent the liquidity value that could potentially be realized, and thus excludes any securities that are encumbered, as well as the haircuts that would be required for secured financing transactions. Year-over-year, the composition of Citi's aggregate liquidity resources shifted as Citi continued to optimize its liquidity portfolio. Cash and foreign government trading securities (particularly in Western Europe) decreased, while U.S. treasuries and agencies increased.

Dec. 31, Sept. 30, Dec. 31,
In billions of dollars 2012 2012 2011
Available cash at central banks $ 73.0 $ 139.5 $ 127.4
U.S. Treasuries 89.0 73.0 67.0
U.S. Agencies/Agency MBS 72.5 67.0 68.9
Foreign Government (1) 111.7 119.5 136.6
Other Investment Grade 7.6 5.2 5.6
Total $ 353.8 $ 404.2 $ 405.5

(1)      Foreign government also includes foreign government agencies, multinationals and foreign government guaranteed securities. Foreign government securities are held largely to support local liquidity requirements and Citi's local franchises and, as of December 31, 2012, principally included government bonds from Korea, Japan, Mexico, Brazil, Hong Kong, Singapore and Taiwan.

The aggregate liquidity resources are composed entirely of cash and securities positions. While Citi utilizes derivatives to manage the interest rate and currency risks related to the aggregate liquidity resources, credit derivatives are not used.

Deposits
Deposits are the primary and lowest cost funding source for Citi's bank subsidiaries. As of December 31, 2012, approximately 78% of the liabilities of Citi's bank subsidiaries were deposits, compared to 76% as of September 30, 2012 and 75% as of December 31, 2011.
The table below sets forth the end of period and average deposits, by business and/or segment, for each of the periods indicated.

Dec. 31, Sept. 30, Dec. 31,
In billions of dollars 2012 2012 2011
Global Consumer Banking
     North America $ 165.2     $ 156.8 $ 149.0
     EMEA 13.2 12.9 12.1
     Latin America 48.6 47.3 44.3
     Asia 110.0 113.1 109.7
Total $ 337.0 $ 330.1 $ 315.1
ICG
     Securities and Banking $ 114.4 $ 119.4 $ 110.9
     Transaction Services 408.7 425.5 373.1
Total $ 523.1 $ 544.9 $ 484.0
Corporate/Other 2.5 2.8 5.2
Total Citicorp $ 862.6 $ 877.8 $ 804.3
Total Citi Holdings 68.0 66.8 61.6
Total Citigroup Deposits (EOP) $ 930.6 $ 944.6 $ 865.9
Total Citigroup Deposits (AVG) $ 928.9 $ 921.2 $ 857.0

Citi continued to focus on maintaining a geographically diverse retail and corporate deposit base that stood at approximately $931 billion at December 31, 2012, up 7% year-over-year. Average deposits of $929 billion as of December 31, 2012 increased 8% year-over-year. The increase in end-of-period deposits year-over-year was largely due to higher deposit volumes in each of Citicorp's deposit-taking businesses (Transaction Services, Securities and Banking and Global Consumer Banking) . Year-over-year deposit growth occurred in all four regions, including 9% growth in EMEA and 10% growth in Latin America . As of December 31, 2012, approximately 59% of Citi's deposits were located outside of the U.S., compared to 61% at December 31, 2011.


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Quarter-over-quarter, end-of-period deposits decreased 1% on a reported basis (2% when adjusted for the impact of FX translation). During the fourth quarter of 2012, there was an expected decline in end-of-period deposits reflecting the runoff of approximately $12 billion of episodic deposits which came in at the end of the third quarter, as well as $10 billion primarily due to the expiration of the TAG program on December 31, 2012. These reductions were partially offset by deposit growth across deposit-taking businesses, particularly Global Consumer Banking . Further, at the direction of MSSB, Citi transferred $4.5 billion in deposits to Morgan Stanley during the fourth quarter of 2012 in connection with the sale of Citi's 14% interest in MSSB (see "Citi Holdings-Brokerage and Asset Management" above), although this decline was offset by deposit growth in the normal course of business.
During 2012, the composition of Citi's deposits continued to shift toward a greater proportion of operating balances, and also toward non-interest-bearing accounts within those operating balances. (Citi defines operating balances as checking and savings accounts for individuals, as well as cash management accounts for corporations. This compares to time deposits, where rates are fixed for the term of the deposit and which have generally lower margins). Citi believes that operating accounts are lower cost and more reliable deposits, and exhibit "stickier," or more retentive, behavior. Operating balances represented 79% of Citi's average total deposit base as of December 31, 2012, compared to 76% at both September 30, 2012 and December 31, 2011. Citi currently expects this shift to continue into 2013.
Deposits can be interest-bearing or non-interest-bearing. Of Citi's $931 billion of deposits as of December 31, 2012, $195 billion were non-interest-bearing, compared to $177 billion at December 31, 2011. The remainder, or $736 billion, was interest-bearing, compared to $689 billion at December 31, 2011.
Citi's overall cost of funds on deposits decreased during 2012, despite deposit growth throughout the year. Excluding the impact of the higher FDIC assessment and deposit insurance, the average rate on Citi's total deposits was 0.64% at December 31, 2012, compared with 0.80% at December 31, 2011, and 0.86% at December 31, 2010. This translated into an approximate $345 million reduction in quarterly interest expense over the past two years. Consistent with prevailing interest rates, Citi experienced declining deposit rates during 2012, notwithstanding pressure on deposit rates due to competitive pricing in certain regions.

Long-Term Debt
Long-term debt (generally defined as original maturities of one year or more) continued to represent the most significant component of Citi's funding for its non-bank entities, or 40% of the funding for the non-bank entities as of December 31, 2012, compared to 45% as of December 31, 2011. The vast majority of this funding is composed of senior term debt, along with subordinated instruments.
Senior long-term debt includes benchmark notes and structured notes, such as equity- and credit-linked notes. Citi's issuance of structured notes is generally driven by customer demand and is not a significant source of liquidity for Citi. Structured notes frequently contain contractual features, such as call options, which can lead to an expectation that the debt will be redeemed earlier than one year, despite contractually scheduled maturities greater than one year. As such, when considering the measurement of Citi's long-term "structural" liquidity, structured notes with these contractual features are not included (see footnote 1 to the "Long-Term Debt Issuances and Maturities" table below).
During 2012, due to the expected phase-out of Tier 1 Capital treatment for trust preferred securities beginning as early as 2013, Citi redeemed four series of its outstanding trust preferred securities, for an aggregate amount of approximately $5.9 billion. Furthermore, in anticipation of this change in qualifying regulatory capital, Citi issued approximately $2.25 billion of preferred stock during 2012. For details on Citi's remaining outstanding trust preferred securities, as well as its long-term debt generally, see Note 19 to the Consolidated Financial Statements. See also "Capital Resources-Regulatory Capital Standards" above.
Long-term debt is an important funding source for Citi's non-bank entities due in part to its multi-year maturity structure. The weighted average maturities of long-term debt issued by Citigroup and its affiliates, including Citibank, N.A., with a remaining life greater than one year as of December 31, 2012 (excluding trust preferred securities), was approximately 7.2 years, compared to 7.0 years at September 30, 2012 and 7.1 years at December 31, 2011.


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Long-Term Debt Outstanding
The following table sets forth Citi's total long-term debt outstanding for the periods indicated:

Dec. 31, Sept. 30, Dec. 31,
In billions of dollars 2012 2012 2011
Non-bank $ 188.3 $ 210.0 $ 245.6
     Senior/subordinated debt (1) 171.0 186.8 216.4
     Trust preferred securities 10.1 10.6 16.1
     Securitized debt and securitizations (1)(2) 0.4 3.5 4.0
     Local country (1) 6.8 9.1 9.1
Bank $ 51.2 $ 61.9 $ 77.9
     Senior/subordinated debt 0.1 3.7 10.5
     Securitized debt and securitizations (1)(2) 26.0 32.0 46.5
     Local country and FHLB borrowings (1)(3) 25.1 26.2 20.9
Total long-term debt $ 239.5 $ 271.9 $ 323.5

(1)      Includes structured notes in the amount of $27.5 billion and $23.4 billion as of December 31, 2012, and December 31, 2011, respectively.
(2) Of the approximate $26.4 billion of total bank and non-bank securitized debt and securitizations as of December 31, 2012, approximately $23.0 billion related to credit card securitizations, the vast majority of which was at the bank level.
(3) Of this amount, approximately $16.3 billion related to collateralized advances from the FHLB as of December 31, 2012.

As set forth in the table above, Citi's overall long-term debt decreased by approximately $84 billion year-over-year. In the bank, the decrease was due to securitization and TLGP run-off that was replaced with deposit growth. In the non-bank, the decrease was primarily due to TLGP run-off, trust preferred redemptions, debt maturities and debt repurchases through tender offers or buybacks (see discussion below), partially offset by issuances. While long-term debt in the non-bank declined over the course of the past year, Citi correspondingly reduced its overall level of assets-including illiquid assets-that debt was meant to support. These reductions are in keeping with Citi's continued strategy to deleverage its balance sheet and lower funding costs.
As noted above and as part of its liquidity and funding strategy, Citi has considered, and may continue to consider, opportunities to repurchase its long-term and short-term debt pursuant to open market purchases, tender offers or other means. Such repurchases further decrease Citi's overall funding costs. During 2012, Citi repurchased an aggregate of approximately $11.1 billion of its outstanding long-term and short-term debt, primarily pursuant to selective public tender offers and open market purchases, compared to $3.3 billion during 2011.
Citi expects to continue to reduce its outstanding long-term debt during 2013, although it expects such reductions to occur at a more moderate rate as compared to 2012. These reductions could occur through natural maturities as well as repurchases, tender offers, redemptions and similar means, depending upon the overall economic environment.


Long-Term Debt Issuances and Maturities
The table below details Citi's long-term debt issuances and maturities (including repurchases) during the periods presented:

2012 2011 2010
In billions of dollars Maturities Issuances Maturities Issuances Maturities Issuances
Structural long-term debt (1)      $ 80.7           $ 15.1         $ 47.3         $ 15.1         $ 41.2         $ 18.9
Local country level, FHLB and other (2) 11.7 12.2 25.7 15.2 20.5 10.2
Secured debt and securitizations 25.2 0.5 16.1 0.7 14.2 4.7
Total $ 117.6 $ 27.8 $ 89.1 $ 31.0 $ 75.9 $ 33.8

(1)      Citi defines structural long-term debt as its long-term debt (original maturities of one year or more), excluding certain structured debt, such as equity-linked and credit-linked notes, with early redemption features effective within one year. Issuances and maturities of these notes are included in this table in "Local country level, FHLB and other." See footnote 2 below. Structural long-term debt is a non-GAAP measure. Citigroup believes that the structural long-term debt measure provides useful information to its investors as it excludes long-term debt that could in fact be redeemed by the holders thereof within one year.
(2) As referenced above, "other" includes long-term debt not considered structural long-term debt relating to certain structured notes. The amounts of issuances included in this line, and thus excluded from "structural long-term debt," were $2.0 billion, $3.7 billion, and $3.3 billion in 2012, 2011, and 2010, respectively. The amounts of maturities included in this line, and thus excluded from "structural long-term debt," were $2.4 billion, $2.4 billion, and $3.0 billion, in 2012, 2011, and 2010, respectively.

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The table below shows Citi's aggregate expected annual long-term debt maturities as of December 31, 2012:

Expected Long-Term Debt Maturities as of December 31, 2012
In billions of dollars 2013 2014 2015 2016 2017 Thereafter Total
Senior/subordinated debt (1) $ 24.6 $ 24.6 $ 19.9 $ 12.8 $ 21.2           $ 68.0 $ 171.1
Trust preferred securities 0.0 0.0 0.0 0.0 0.0 10.1 10.1
Securitized debt and securitizations 2.4 6.6 5.8 2.9 2.3 6.4 26.4
Local country and FHLB borrowings 15.7 5.8 3.3 4.2 0.7 2.2 31.9
Total long-term debt $ 42.7 $ 37.0 $ 29.0 $ 19.9 $ 24.2 $ 86.7 $ 239.5

(1)      Includes certain structured notes, such as equity-linked and credit-linked notes, with early redemption features effective within one year. The amount and maturity of such notes included is as follows: $0.9 billion maturing in 2013; $0.5 billion in 2014; $0.5 billion in 2015; $0.6 billion in 2016; $0.5 billion in 2017; and $2.0 billion thereafter.

As set forth in the table above, Citi's structural long-term debt maturities peaked during 2012 at $80.7 billion, and included the maturity of the last remaining TLGP debt.

Secured Financing Transactions and Short-Term Borrowings
As referenced above, Citi supplements its primary sources of funding with short-term borrowings. Short-term borrowings generally include (i) secured financing (securities loaned or sold under agreements to repurchase, or repos) and (ii) short-term borrowings consisting of commercial paper and borrowings from the FHLBs and other market participants. See Note 19 to the Consolidated Financial Statements for further information on Citigroup's and its affiliates' outstanding short-term borrowings.
The following table contains the year-end, average and maximum month-end amounts for the following respective short-term borrowings categories at the end of each of the three prior fiscal years.


Federal funds purchased
and securities sold under
agreements to Short-term borrowings  (1)
repurchase Commercial paper Other short-term borrowings  (2)
In billions of dollars 2012 2011 2010 2012 2011 2010 2012 2011 2010
Amounts outstanding at year end $ 211.2 $ 198.4 $ 189.6 $ 11.5 $ 21.3 $ 24.7 $ 40.5 $ 33.1 $ 54.1
Average outstanding during the year (3)(4) 223.8 219.9 212.3 17.9 25.3 35.0 36.3 45.5 68.8
Maximum month-end outstanding 237.1 226.1 246.5 21.9 25.3 40.1 40.6 58.2 106.0
Weighted-average interest rate
During the year (3)(4)(5) 1.26 % 1.45 % 1.32 % 0.47 % 0.28 % 0.38 % 1.77 % 1.28 % 1.14 %
At year end (6) 0.81 1.10 0.99 0.60 0.38 0.35 1.06 1.09 0.40

(1)      Original maturities of less than one year.
(2) Other short-term borrowings include broker borrowings and borrowings from banks and other market participants.
(3) Interest rates and amounts include the effects of risk management activities associated with the respective liability categories.
(4) Average volumes of securities loaned or sold under agreements to repurchase are reported net pursuant to FIN 41 (ASC 210-20-45). However, Interest expense excludes the impact of FIN 41 (ASC 210-20-45).
(5) Average rates reflect prevailing local interest rates, including inflationary effects and monetary correction in certain countries.
(6) Based on contractual rates at respective year ends; non-interest-bearing accounts are excluded from the weighted average interest rate calculated at year end.

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Secured Financing
Secured financing is primarily conducted through Citi's broker-dealer subsidiaries to facilitate customer matched-book activity and to efficiently fund a portion of the trading inventory. As of December 31, 2012, approximately 36% of the funding for Citi's non-bank entities, primarily the broker-dealer, was from secured financings.
Secured financing was $211 billion as of December 31, 2012, compared to $198 billion as of December 31, 2011. Average balances for secured financing were approximately $224 billion for the year ended December 31, 2012, compared to $220 billion for the year ended December 31, 2011. Changes in levels of secured financing were primarily due to fluctuations in inventory for all periods discussed above (either on an end-of-quarter or on an average basis).

Commercial Paper
Citi's commercial paper balances have decreased and will likely continue to do so as Citi shifts its funding mix away from short-term sources to deposits and long-term debt and equity. The following table sets forth Citi's commercial paper outstanding for each of its non-bank entities and significant Citibank entities, respectively, for each of the periods indicated:

Dec. 31, Sep. 30, Dec. 31,
In billions of dollars 2012 2012 2011
Commercial paper
Non-bank $ 0.4 $ 0.6 $ 6.4
Bank 11.1 11.8 14.9
Total $ 11.5 $ 12.4 $ 21.3

Other Short-Term Borrowings
At December 31, 2012, Citi's other short-term borrowings, which includes borrowings from the FHLBs and other market participants, were approximately $41 billion, compared with $33 billion at December 31, 2011.

Liquidity Management, Measures and Stress Testing

Liquidity Management
Citi's aggregate liquidity resources are managed by the Citi Treasurer. Liquidity is managed via a centralized treasury model by Corporate Treasury and by in-country treasurers. Pursuant to this structure, Citi's liquidity resources are managed with a goal of ensuring the asset/liability match and that liquidity positions are appropriate in every country and throughout Citi.
Citi's Chief Risk Officer is responsible for the overall risk profile of Citi's aggregate liquidity resources. The Chief Risk Officer and Chief Financial Officer co-chair Citi's Asset Liability Management Committee (ALCO), which includes Citi's Treasurer and senior executives. ALCO sets the strategy of the liquidity portfolio and monitors its performance. Significant changes to portfolio asset allocations need to be approved by ALCO.
Excess cash available in Citi's aggregate liquidity resources is available to be invested in a liquid portfolio such that cash can be made available to meet demand in a stress situation. At December 31, 2012, Citi's liquidity pool was primarily invested in cash, government securities, including U.S. agency debt and U.S. agency mortgage-backed securities, and a certain amount of highly rated investment-grade credits. While the vast majority of Citi's liquidity pool at December 31, 2012 consisted of long positions, Citi utilizes derivatives to manage its interest rate and currency risks; credit derivatives are not used.

Liquidity Measures
Citi uses multiple measures in monitoring its liquidity, including without limitation those described below. 
In broad terms, the structural liquidity ratio, defined as the sum of deposits, long-term debt and stockholders' equity as a percentage of total assets, measures whether the asset base is funded by sufficiently long-dated liabilities. Citi's structural liquidity ratio remained stable over the past year at approximately 73% as of December 31, 2012.
In addition, Citi believes it is currently in compliance with the proposed Basel III Liquidity Coverage Ratio (LCR), as amended by the Basel Committee on Banking Supervision on January 7, 2013 (the amended LCR guidelines), even though such ratio is not proposed to take full effect until 2019. Using the amended LCR guidelines, Citi's estimated LCR was approximately 122% as of December 31, 2012, compared with approximately 127% at September 30, 2012 and 143% at March 31, 2012. 13 On a dollar basis, the 122% LCR represents additional liquidity of approximately $65 billion above the proposed minimum 100% LCR threshold. Citi's LCR may decrease modestly over time. 
The LCR is designed to ensure banks maintain an adequate level of unencumbered cash and highly liquid securities that can be converted to cash to meet liquidity needs under an acute 30-day stress scenario. The LCR estimate is calculated in accordance with the amended LCR guidelines. Under the amended LCR guidelines, the LCR is calculated by dividing the amount of highly liquid unencumbered government and government-backed cash securities, as well as unencumbered cash, by the estimated net outflows over a stressed 30-day period. The net cash outflows are calculated by applying assumed outflow factors, prescribed in the amended LCR guidelines, to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to unused commitments and derivatives-related exposures, partially offset by inflows from assets maturing within 30 days. The amended LCR requirements expanded the definition of liquid assets, and reduced outflow estimates for certain types of deposits and commitments.

Stress Testing
Liquidity stress testing is performed for each of Citi's major entities, operating subsidiaries and/or countries. Stress testing and scenario analyses are intended to quantify the potential impact of a liquidity event on the balance sheet and liquidity position, and to identify viable funding alternatives that can be utilized. These scenarios include assumptions about significant changes in key funding sources, market triggers (such as credit ratings), potential uses of funding and political and economic conditions in certain countries. These conditions include standard and stressed market conditions as well as firm-specific events.
A wide range of liquidity stress tests are important for monitoring purposes. Some span liquidity events over a full year, some may cover an intense stress period of one month, and still other time frames may be appropriate. These potential liquidity events are useful to ascertain potential mismatches between liquidity sources and uses over a variety of horizons


____________________
13      Citi's estimated LCR is a non-GAAP financial measure. Citi believes this measure provides useful information to investors and others by measuring Citi's progress toward potential future expected regulatory liquidity standards.

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(overnight, one week, two weeks, one month, three months, one year), and liquidity limits are set accordingly. To monitor the liquidity of a unit, those stress tests and potential mismatches may be calculated with varying frequencies, with several important tests performed daily.
Given the range of potential stresses, Citi maintains a series of contingency funding plans on a consolidated basis as well as for individual entities. These plans specify a wide range of readily available actions that are available in a variety of adverse market conditions, or idiosyncratic disruptions.

Credit Ratings
Citigroup's funding and liquidity, including its funding capacity, its ability to access the capital markets and other sources of funds, as well as the cost of these funds, and its ability to maintain certain deposits, is partially dependent on its credit ratings. The table below indicates the ratings for Citigroup, Citibank, N.A. and Citigroup Global Markets Inc. (a broker-dealer subsidiary of Citigroup) as of December 31, 2012.


Citi's Debt Ratings as of December 31, 2012

Citigroup Global
Citigroup Inc. Citibank, N.A. Markets Inc.
Senior Commercial Long- Short- Long-
debt paper term term term
Fitch Ratings (Fitch) A F1 A F1 NR
Moody's Investors Service (Moody's) Baa2 P-2 A3 P-2 NR
Standard & Poor's (S&P) A- A-2 A A-1 A

NR Not rated.

Recent Credit Rating Developments
On December 5, 2012, S&P concluded its annual review of Citi with no changes to the ratings and outlooks on Citigroup and its subsidiaries. On October 16, 2012, S&P noted that Citi's ratings remain unchanged despite the change in senior management. At the same time, S&P maintained a negative outlook on the ratings. These ratings continue to receive two notches of government support uplift, in line with other large banks.
On October 16, 2012, Fitch noted the change in Citi's senior management as an unexpected, but credit-neutral, event that would likely have no material impact on the credit profile of Citibank, N.A. or its ratings in the near term. On October 10, 2012, Fitch affirmed the long- and short-term ratings of "A/F1" and the Viability Rating of "a-" for Citigroup and Citibank, N.A. and, as of that date, the rating outlook by Fitch was stable. This rating action was taken in conjunction with Fitch's periodic review of the 13 global trading and universal banks.
On February 12, 2013, Moody's changed the rating outlook on Citibank, N.A. from negative to stable, and affirmed the long-term ratings. The negative outlook was assigned on October 16, 2012, following changes in Citi's senior management. Moody's maintained the negative outlook on the long-term ratings of Citigroup Inc. On October 16, 2012, Moody's affirmed the long- and short-term ratings of Citigroup and Citibank, N.A.

Potential Impacts of Ratings Downgrades
Ratings downgrades by Moody's, Fitch or S&P could negatively impact Citigroup's and/or Citibank, N.A.'s funding and liquidity due to reduced funding capacity, including derivatives triggers, which could take the form of cash obligations and collateral requirements.
The following information is provided for the purpose of analyzing the potential funding and liquidity impact to Citigroup and Citibank, N.A. of a hypothetical, simultaneous ratings downgrade across all three major rating agencies. This analysis is subject to certain estimates, estimation methodologies, and judgments and uncertainties, including without limitation those relating to potential ratings limitations certain entities may have with respect to permissible counterparties, as well as general subjective counterparty behavior (e.g., certain corporate customers and trading counterparties could re-evaluate their business relationships with Citi, and limit the trading of certain contracts or market instruments with Citi). Moreover, changes in counterparty behavior could impact Citi's funding and liquidity as well as the results of operations of certain of its businesses. Accordingly, the actual impact to Citigroup or Citibank, N.A. is unpredictable and may differ materially from the potential funding and liquidity impacts described below.
For additional information on the impact of credit rating changes on Citi and its applicable subsidiaries, see "Risk Factors-Liquidity Risks" below.


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Citigroup Inc. and Citibank, N.A.-Potential Derivative Triggers
As of December 31, 2012, Citi estimates that a hypothetical one-notch downgrade of the senior debt/long-term rating of Citigroup across all three major rating agencies could impact Citigroup's funding and liquidity due to derivative triggers by approximately $1.7 billion. Other funding sources, such as secured financing transactions and other margin requirements, for which there are no explicit triggers, could also be adversely affected.
In addition, as of December 31, 2012, Citi estimates that a hypothetical one-notch downgrade of the senior debt/long-term rating of Citibank, N.A. across all three major rating agencies could impact Citibank, N.A.'s funding and liquidity due to derivative triggers by approximately $3.4 billion.
In total, Citi estimates that a one-notch downgrade of Citigroup and Citibank, N.A., across all three major rating agencies, could result in aggregate cash obligations and collateral requirements of approximately $5.1 billion (see also Note 23 to the Consolidated Financial Statements). As set forth under "Aggregate Liquidity Resources" above, the aggregate liquidity resources of Citi's non-bank entities were approximately $65 billion, and the aggregate liquidity resources of Citi's significant Citibank entities and other Citibank and Banamex entities were approximately $289 billion, for a total of approximately $354 billion as of December 31, 2012. These liquidity resources are available in part as a contingency for the potential events described above.
In addition, a broad range of mitigating actions are currently included in Citigroup's and Citibank, N.A.'s detailed contingency funding plans. For Citigroup, these mitigating factors include, but are not limited to, accessing surplus funding capacity from existing clients, tailoring levels of secured lending, adjusting the size of select trading books and collateralized borrowings from Citi's significant bank subsidiaries. Mitigating actions available to Citibank, N.A. include, but are not limited to, selling or financing highly liquid government securities, tailoring levels of secured lending, adjusting the size of select trading books, reducing loan originations and renewals, raising additional deposits, or borrowing from the FHLBs or central banks. Citi believes these mitigating actions could substantially reduce the funding and liquidity risk, if any, of the potential downgrades described above.

Citibank, N.A.-Additional Potential Impacts
In addition to the above derivative triggers, Citi believes that a potential one-notch downgrade of Citibank, N.A.'s senior debt/long-term rating by S&P and Fitch could also have an adverse impact on the commercial paper/short-term rating of Citibank, N.A. As of December 31, 2012, Citibank, N.A. had liquidity commitments of approximately $18.7 billion to asset-backed commercial paper conduits. This included $11.1 billion of commitments to consolidated conduits and $7.6 billion of commitments to unconsolidated conduits (each as referenced in Note 22 to the Consolidated Financial Statements).
In addition to the above-referenced aggregate liquidity resources of Citi's significant Citibank entities and other Citibank and Banamex entities, as well as the various mitigating actions previously noted, mitigating actions available to Citibank, N.A. to reduce the funding and liquidity risk, if any, of the potential downgrades described above, include repricing or reducing certain commitments to commercial paper conduits.
In addition, in the event of the potential downgrades described above, Citi believes that certain corporate customers could re-evaluate their deposit relationships with Citibank, N.A. Among other things, this re-evaluation could include adjusting their discretionary deposit levels or changing their depository institution, each of which could potentially reduce certain deposit levels at Citibank, N.A. As a potential mitigant, however, Citi could choose to adjust pricing or offer alternative deposit products to its existing customers, or seek to attract deposits from new customers, as well as utilize the other mitigating actions referenced above.


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OFF-BALANCE-SHEET ARRANGEMENTS

Citigroup enters into various types of off-balance-sheet arrangements in the ordinary course of business. Citi's involvement in these arrangements can take many different forms, including without limitation:

purchasing or retaining residual and other interests in special purpose entities, such as credit card receivables and mortgage-backed and other asset-backed securitization entities; holding senior and subordinated debt, interests in limited and general partnerships and equity interests in other unconsolidated entities; and providing guarantees, indemnifications, loan commitments, letters of credit and representations and warranties.

Citi enters into these arrangements for a variety of business purposes. These securitization entities offer investors access to specific cash flows and risks created through the securitization process. The securitization arrangements also assist Citi and Citi's customers in monetizing their financial assets at more favorable rates than Citi or the customers could otherwise obtain.
The table below presents where a discussion of Citi's various off-balance-sheet arrangements may be found in this Form 10-K. In addition, see "Significant Accounting Policies and Significant Estimates-Securitizations," as well as Notes 1, 22 and 27 to the Consolidated Financial Statements.

Types of Off-Balance-Sheet Arrangements Disclosures in this Form 10-K

Variable interests and other obligations, See Note 22 to the Consolidated
     including contingent obligations,        Financial Statements.
     arising from variable interests in
     nonconsolidated VIEs
Leases, letters of credit, and lending See Note 27 to the Consolidated
     and other commitments        Financial Statements.
Guarantees See Note 27 to the Consolidated
       Financial Statements.

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CONTRACTUAL OBLIGATIONS

The following table includes information on Citigroup's contractual obligations, as specified and aggregated pursuant to SEC requirements.
Purchase obligations consist of those obligations to purchase goods or services that are enforceable and legally binding on Citi. For presentation purposes, purchase obligations are included in the table below through the termination date of the respective agreements, even if the contract is renewable. Many of the purchase agreements for goods or services include clauses that would allow Citigroup to cancel the agreement with specified

notice; however, that impact is not included in the table below (unless Citigroup has already notified the counterparty of its intention to terminate the agreement).
Other liabilities reflected on Citigroup's Consolidated Balance Sheet include obligations for goods and services that have already been received, uncertain tax positions and other liabilities that have been incurred and will ultimately be paid in cash.


Contractual obligations by year
In millions of dollars 2013 2014 2015 2016 2017 Thereafter Total
Long-term debt obligations-principal (1) $ 42,651 $ 37,026 $ 29,046 $ 19,857 $ 24,151 $ 86,732 $ 239,463
Long-term debt obligations-interest payments (2) 1,655 1,437 1,127 770 937 3,365 9,291
Operating and capital lease obligations 1,220 1,125 1,001 881 754 2,293 7,274
Purchase obligations 792 439 414 311 249 233 2,438
Other liabilities (3) 40,358 1,623 287 289 255 3,945 46,757
Total $ 86,676 $ 41,650 $ 31,875 $ 22,108 $ 26,346 $ 96,568 $ 305,223

(1)      For additional information about long-term debt obligations, see "Capital Resources and Liquidity-Funding and Liquidity" above and Note 19 to the Consolidated Financial Statements.
(2) Contractual obligations related to interest payments on long-term debt are calculated by applying the weighted average interest rate on Citi's outstanding long-term debt as of December 31, 2012 to the contractual payment obligations on long-term debt for each of the periods disclosed in the table. At December 31, 2012, Citi's overall weighted average contractual interest rate for long-term debt was 3.88%.
(3) Includes accounts payable and accrued expenses recorded in Other liabilities on Citi's Consolidated Balance Sheet. Also includes discretionary contributions for 2013 for Citi's non-U.S. pension plans and the non-U.S. postretirement plans, as well as employee benefit obligations accounted for under SFAS 87 (ASC 715), SFAS 106 (ASC 715) and SFAS 112 (ASC 712).

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RISK FACTORS

The following discussion sets forth what management currently believes could be the most significant regulatory, market and economic, liquidity, legal and business and operational risks and uncertainties that could impact Citi's businesses, results of operations and financial condition. Other factors, including those not currently known to Citi or its management, could also negatively impact Citi's businesses, results of operations and financial condition, and thus the below should not be considered a complete discussion of all of the risks and uncertainties Citi may face.

REGULATORY RISKS

Citi Faces Ongoing Significant Regulatory Changes and Uncertainties in the U.S. and Non-U.S. Jurisdictions in Which It Operates That Negatively Impact the Management of Its Businesses, Results of Operations and Ability to Compete.
Citi continues to be subject to significant regulatory changes and uncertainties both in the U.S. and the non-U.S. jurisdictions in which it operates. As discussed throughout this section, the complete scope and ultimate form of a number of provisions of The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) and other regulatory initiatives in the U.S. are still being finalized and, even when finalized, will likely require significant interpretation and guidance. These regulatory changes and uncertainties are compounded by numerous regulatory initiatives underway in non-U.S. jurisdictions in which Citi operates. Certain of these initiatives, such as prohibitions or restrictions on proprietary trading or the requirement to establish "living wills," overlap with changes in the U.S., while others, such as proposals for financial transaction and/or bank taxes in particular countries or regions, currently do not. Even when U.S. and international initiatives overlap, in many instances they have not been undertaken on a coordinated basis and areas of divergence have developed with respect to scope, interpretation, timing, structure or approach.
Citi could be subject to additional regulatory requirements or changes beyond those currently proposed, adopted or contemplated, particularly given the ongoing heightened regulatory environment in which financial institutions operate. For example, in connection with their orderly liquidation authority under Title II of the Dodd-Frank Act, U.S. regulators may require that bank holding companies maintain a prescribed level of debt at the holding company level. In addition, under the Dodd-Frank Act, U.S. regulators may require additional collateral for inter-affiliate derivative and other credit transactions which, depending upon rulemaking and regulatory guidance, could be significant. There also continues to be discussion of potential GSE reform which would likely affect markets for mortgages and mortgage securities in ways that cannot currently be predicted. The heightened regulatory environment has resulted not only in a tendency toward more regulation, but toward the most prescriptive regulation as regulatory agencies have generally taken a conservative approach to rulemaking, interpretive guidance and their general ongoing supervisory authority.

Regulatory changes and uncertainties make Citi's business planning more difficult and could require Citi to change its business models or even its organizational structure, all of which could ultimately negatively impact Citi's results of operations as well as realization of its deferred tax assets (DTAs). For example, regulators have proposed applying limits to certain concentrations of risk, such as through single counterparty credit limits or legal lending limits, and implementation of such limits currently or in the future could require Citi to restructure client or counterparty relationships and could result in the potential loss of clients.
Further, certain regulatory requirements could require Citi to create new subsidiaries instead of branches in foreign jurisdictions, or create subsidiaries to conduct particular businesses or operations (so-called "subsidiarization"). This could, among other things, negatively impact Citi's global capital and liquidity management and overall cost structure. Unless and until there is sufficient regulatory certainty, Citi's business planning and proposed pricing for affected businesses necessarily include assumptions based on possible or proposed rules or requirements, and incorrect assumptions could impede Citi's ability to effectively implement and comply with final requirements in a timely manner. Business planning is further complicated by the continual need to review and evaluate the impact on Citi's businesses of ongoing rule proposals and final rules and interpretations from numerous regulatory bodies, all within compressed timeframes.
Citi's costs associated with implementation of, as well as the ongoing, extensive compliance costs associated with, new regulations or regulatory changes will likely be substantial and will negatively impact Citi's results of operations. Given the continued regulatory uncertainty, however, the ultimate amount and timing of such impact going forward cannot be predicted. Also, compliance with inconsistent, conflicting or duplicative regulations, either within the U.S. or between the U.S. and non-U.S. jurisdictions, could further increase the impact on Citi. For example, the Dodd-Frank Act provided for the elimination of "federal preemption" with respect to the operating subsidiaries of federally chartered institutions such as Citibank, N.A., which allows for a broader application of state consumer finance laws to such subsidiaries. As a result, Citi is now required to conform the consumer businesses conducted by operating subsidiaries of Citibank, N.A. to a variety of potentially conflicting or inconsistent state laws not previously applicable, such as laws imposing customer fee restrictions or requiring additional consumer disclosures. Failure to comply with these or other regulatory changes could further increase Citi's costs or otherwise harm Citi's reputation.
Uncertainty persists regarding the competitive impact of these new regulations. Citi could be subject to more stringent regulations, or could incur additional compliance costs, compared to its U.S. competitors because of its global footprint. In addition, certain other financial intermediaries may not be regulated on the same basis or to the same extent as Citi and consequently may have certain competitive advantages. Moreover, Citi could be subject to more, or more stringent, regulations than its foreign competitors because of several U.S. regulatory initiatives, particularly with respect to Citi's non-U.S. operations. Differences in substance and severity of regulations across jurisdictions could significantly reduce Citi's ability to


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compete with its U.S. and non-U.S. competitors and further negatively impact Citi's results of operations. For example, Citi conducts a substantial portion of its derivatives activities through Citibank, N.A. Pursuant to the CFTC's current and proposed rules on cross-border implications of the new derivatives registration and trading requirements under the Dodd-Frank Act, clients who transact their derivatives business with overseas branches of Citibank, N.A. could be subject to U.S. registration and other derivatives requirements. Clients of Citi and other large U.S. financial institutions have expressed an unwillingness to continue to deal with overseas branches of U.S. banks if the rules would subject them to these requirements. As a result, Citi could lose clients to non-U.S. financial institutions that are not subject to the same compliance regime.

Continued Uncertainty Regarding the Timing and Implementation of Future Regulatory Capital Requirements Makes It Difficult to Determine the Ultimate Impact of These Requirements on Citi's Businesses and Results of Operations and Impedes Long-Term Capital Planning.
During 2012, U.S. regulators proposed the U.S. Basel III rules that would be applicable to Citigroup and its depository institution subsidiaries, including Citibank, N.A. U.S. regulators also adopted final rules relating to Basel II.5 market risk that were effective on January 1, 2013. This new regulatory capital regime will increase the level of capital required to be held by Citi, not only with respect to the quantity and quality of capital (such as capital required to be held in the form of common equity), but also as a result of increasing Citi's overall risk-weighted assets.
There continues to be significant uncertainty regarding the overall timing and implementation of the final U.S. regulatory capital rules. For example, while the U.S. Basel III rules have been proposed, additional rulemaking and interpretation is necessary to adopt and implement the final rules. Overall implementation phase-in will also need to be finalized by U.S. regulators, and it remains to be seen how U.S. regulators will address the interaction between the new capital adequacy rules, Basel I, Basel II, Basel II.5 and the proposed "standardized" approach serving as a "floor" to the capital requirements of "advanced approaches" institutions, such as Citigroup. (For additional information on the current and proposed regulatory capital standards applicable to Citi, see "Capital Resources and Liquidity – Capital Resources – Regulatory Capital Standards" above.) As a result, the ultimate impact of this new regime on Citi's businesses and results of operations cannot currently be estimated.
Based on the proposed regulatory capital regime, the level of capital required to be held by Citi will likely be higher than most of its U.S. and non-U.S. competitors, including as a result of the level of DTAs recorded on Citi's balance sheet and its strategic focus on emerging markets (which could result in Citi having higher risk-weighted assets under Basel III than those of its global competitors that either lack presence in, or are less focused on, such markets). In addition, while the Federal Reserve Board has yet to finalize any capital surcharge framework for U.S. "global systemically important banks" (G-SIBs), Citi is currently expected to be subject to a

surcharge of 2.5%, which will likely be higher than the surcharge applicable to most of Citi's U.S. and non-U.S. competitors. Competitive impacts of the proposed regulatory capital regime could further negatively impact Citi's businesses and results of operations.
Citi's estimated Basel III capital ratios necessarily reflect management's understanding, expectations and interpretation of the proposed U.S. Basel III requirements as well as existing implementation guidance. Furthermore, Citi must incorporate certain enhancements and refinements to its Basel II.5 market risk models, as required by both the Federal Reserve Board and the OCC, in order to retain the risk-weighted asset benefits associated with the conditional approvals received for such models. Citi must also separately obtain final approval from these agencies for the use of certain credit risk models that would also yield reduced risk-weighted assets, in part, under Basel III.
All of these uncertainties make long-term capital planning by Citi's management challenging. If management's estimates and assumptions with respect to these or other aspects of U.S. Basel III implementation are not accurate, or if Citi fails to incorporate the required enhancement and refinements to its models as required by the Federal Reserve Board and the OCC, then Citi's ability to meet its future regulatory capital requirements as it projects or as required could be negatively impacted, or the business and financial consequences of doing so could be more adverse than expected.

The Ongoing Implementation of Derivatives Regulation Under the Dodd-Frank Act Could Adversely Affect Citi's Derivatives Businesses, Increase Its Compliance Costs and Negatively Impact Its Results of Operations.
Derivatives regulations under the Dodd-Frank Act have impacted and will continue to substantially impact the derivatives markets by, among other things: (i) requiring extensive regulatory and public reporting of derivatives transactions; (ii) requiring a wide range of over-the-counter derivatives to be cleared through recognized clearing facilities and traded on exchanges or exchange-like facilities; (iii) requiring the collection and segregation of collateral for most uncleared derivatives; and (iv) significantly broadening limits on the size of positions that may be maintained in specified derivatives. These market structure reforms will make trading in many derivatives products more costly, may significantly reduce the liquidity of certain derivatives markets and could diminish customer demand for covered derivatives. These changes could negatively impact Citi's results of operations in its derivatives businesses.
Numerous aspects of the new derivatives regime require costly and extensive compliance systems to be put in place and maintained. For example, under the new derivatives regime, certain of Citi's subsidiaries have registered as "swap dealers," thus subjecting them to extensive ongoing compliance requirements, such as electronic recordkeeping (including recording telephone communications), real-time public transaction reporting and external business conduct requirements (e.g., required swap counterparty disclosures), among others. These requirements require the successful and timely installation of extensive technological and operational systems and compliance infrastructure, and Citi's failure to effectively install


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such systems subject it to increased compliance risks and costs which could negatively impact its earnings and result in regulatory or reputational risk. Further, new derivatives-related systems and infrastructure will likely become the basis on which institutions such as Citi compete for clients. To the extent that Citi's connectivity, product offerings or services for clients in these businesses is deficient, this could further negatively impact Citi's results of operations
Additionally, while certain of the derivatives regulations under the Dodd-Frank Act have been finalized, the rulemaking process is not complete, significant interpretive issues remain to be resolved and the timing for the effectiveness of many of these requirements is not yet clear. Depending on how the uncertainty is resolved, certain outcomes could negatively impact Citi's competitive position in these businesses, both with respect to the cross-border aspects of the U.S. rules as well as with respect to the international coordination and timing of various non-U.S. derivatives regulatory reform efforts. For example, in mid-2012, the European Union (EU) adopted the European Market Infrastructure Regulation which requires, among other things, information on all European derivative transactions be reported to trade repositories and certain counterparties to clear "standardized" derivatives contracts through central counterparties. Many of these non-U.S. reforms are likely to take effect after the corresponding provisions of the Dodd-Frank Act and, as a result, it is uncertain whether they will be similar to those in the U.S. or will impose different, additional or even inconsistent requirements on Citi's derivatives activities. Complications due to the sequencing of the effectiveness of derivatives reform, both among different components of the Dodd-Frank Act and between the U.S. and other jurisdictions, could result in disruptions to Citi's operations and make it more difficult for Citi to compete in these businesses.
The Dodd-Frank Act also contains a so-called "push-out" provision that, to date, has generally been interpreted to prevent FDIC-insured depository institutions from dealing in certain equity, commodity and credit-related derivatives, although the ultimate scope of the provision is not certain. Citi currently conducts a substantial portion of its derivatives-dealing activities within and outside the U.S. through Citibank, N.A., its primary insured depository institution. The costs of revising customer relationships and modifying the organizational structure of Citi's businesses or the subsidiaries engaged in these businesses remain unknown and are subject to final regulations or regulatory interpretations, as well as client expectations. While this push-out provision is to be effective in July 2013, U.S. regulators may grant up to an initial two-year transition period to each depository institution. In January 2013, Citi applied for an initial two-year transition period for Citibank, N.A. The timing of any approval of a transition period request, or any parameters imposed on a transition period, remains uncertain. In addition, to the extent that certain of Citi's competitors already conduct these derivatives activities outside of FDIC-insured depository institutions, Citi would be disproportionately impacted by any restructuring of its business for push-out purposes. Moreover, the extent to which Citi's non-U.S. operations will be impacted by the push-out provision remains unclear, and it is possible that Citi could lose market share or profitability in its derivatives business or client relationships in jurisdictions where foreign bank competitors can operate without the same constraints.

It Is Uncertain What Impact the Proposed Restrictions on Proprietary Trading Activities Under the Volcker Rule Will Have on Citi's Market-Making Activities and Preparing for Compliance with the Proposed Rules Necessarily Subjects Citi to Additional Compliance Risks and Costs.
The "Volcker Rule" provisions of the Dodd-Frank Act are intended in part to restrict the proprietary trading activities of institutions such as Citi. While the five regulatory agencies required to adopt rules to implement the Volcker Rule have each proposed their rules, none of the agencies has adopted final rules. Instead, in July 2012, the regulatory agencies instructed applicable institutions, including Citi, to engage in "good faith efforts" to be in compliance with the Volcker Rule by July 2014. Because the regulations are not yet final, the degree to which Citi's market-making activities will be permitted to continue in their current form remains uncertain. In addition, the proposed rules and any restrictions imposed by final regulations will also likely affect Citi's trading activities globally, and thus will impact it disproportionately in comparison to foreign financial institutions that will not be subject to the Volcker Rule with respect to all of their activities outside of the U.S.
As a result of this continued uncertainty, preparing for compliance based only on proposed rules necessarily requires Citi to make certain assumptions about the applicability of the Volcker Rule to its businesses and operations. For example, as proposed, the regulations contain exceptions for market-making, underwriting, risk-mitigating hedging, certain transactions on behalf of customers and activities in certain asset classes, and require that certain of these activities be designed not to encourage or reward "proprietary risk taking." Because the regulations are not yet final, Citi is required to make certain assumptions as to the degree to which Citi's activities in these areas will be permitted to continue. If these assumptions are not accurate, Citi could be subject to additional compliance risks and costs and could be required to undertake such compliance on a more compressed time frame when regulators issue final rules. In addition, the proposed regulations would require an extensive compliance regime for the "permitted" activities under the Volcker Rule. Citi's implementation of this compliance regime will be based on its "good faith" interpretation and understanding of the proposed regulations, and to the extent its interpretation or understanding is not correct, Citi could be subject to additional compliance risks and costs.
Like the other areas of ongoing regulatory reform, alternative proposals for the regulation of proprietary trading are developing in non-U.S. jurisdictions, leading to overlapping or potentially conflicting regimes. For example, in the U.K., the so-called "Vickers" proposal would separate investment and commercial banking activity from retail banking and would require ring-fencing of U.K. domestic retail banking operations coupled with higher capital requirements for the ring-fenced assets. In the EU, the so-called "Liikanen" proposal would require the mandatory separation of proprietary trading and other significant trading activities into a trading entity legally separate from the legal entity holding the banking activities of a firm. It is likely that, given Citi's worldwide operations, some form of the Vickers and/or Liikanen proposals will eventually be applicable to a portion of Citi's operations. While the Volcker Rule and these non-U.S. proposals are intended to address similar concerns-separating the perceived risks of


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proprietary trading and certain other investment banking activities in order not to affect more traditional banking and retail activities-they would do so under different structures, resulting in inconsistent regulatory regimes and increased compliance and other costs for a global institution such as Citi.

Regulatory Requirements in the U.S. and in Non-U.S. Jurisdictions to Facilitate the Future Orderly Resolution of Large Financial Institutions Could Negatively Impact Citi's Business Structures, Activities and Practices.
The Dodd-Frank Act requires Citi to prepare and submit annually a plan for the orderly resolution of Citigroup (the bank holding company) under the U.S. Bankruptcy Code in the event of future material financial distress or failure. Citi is also required to prepare and submit a resolution plan for its insured depository institution subsidiary, Citibank, N.A., and to demonstrate how Citibank is adequately protected from the risks presented by non-bank affiliates. These plans must include information on resolution strategy, major counterparties and "interdependencies," among other things, and require substantial effort, time and cost across all of Citi's businesses and geographies. These resolution plans are subject to review by the Federal Reserve Board and the FDIC.
If the Federal Reserve Board and the FDIC both determine that Citi's resolution plans are not "credible" (which, although not defined, is generally believed to mean the regulators do not believe the plans are feasible or would otherwise allow the regulators to resolve Citi in a way that protects systemically important functions without severe systemic disruption and without exposing taxpayers to loss), and Citi does not remedy the deficiencies within the required time period, Citi could be required to restructure or reorganize businesses, legal entities, or operational systems and intracompany transactions in ways that could negatively impact its operations, or be subject to restrictions on growth. Citi could also eventually be subjected to more stringent capital, leverage or liquidity requirements, or be required to divest certain assets or operations.
In addition, other jurisdictions, such as the U.K., have requested or are expected to request resolution plans from financial institutions, including Citi, and the requirements and timing relating to these plans are different from the U.S. requirements and from each other. Responding to these additional requests will require additional effort, time and cost, and regulatory review and requirements in these jurisdictions could be in addition to, or conflict with, changes required by Citi's regulators in the U.S.

Additional Regulations with Respect to Securitizations Will Impose Additional Costs, Increase Citi's Potential Liability and May Prevent Citi from Performing Certain Roles in Securitizations.
Citi plays a variety of roles in asset securitization transactions, including acting as underwriter of asset-backed securities, depositor of the underlying assets into securitization vehicles, trustee to securitization vehicles and counterparty to securitization vehicles under derivative contracts. The Dodd-Frank Act contains a number of provisions that affect securitizations. These provisions include, among others, a requirement that securitizers in certain

transactions retain un-hedged exposure to at least 5% of the economic risk of certain assets they securitize and a prohibition on securitization participants engaging in transactions that would involve a conflict with investors in the securitization. Many of these requirements have yet to be finalized. The SEC has also proposed additional extensive regulation of both publicly and privately offered securitization transactions through revisions to the registration, disclosure, and reporting requirements for asset-backed securities and other structured finance products. Moreover, the proposed capital adequacy regulations (see "Capital Resources and Liquidity-Capital Resources-Regulatory Capital Standards" above) are likely to increase the capital required to be held against various exposures to securitizations.
The cumulative effect of these extensive regulatory changes as well as other potential future regulatory changes cannot currently be assessed. It is likely, however, that these various measures will increase the costs of executing securitization transactions, and could effectively limit Citi's overall volume of, and the role Citi may play in, securitizations, expose Citi to additional potential liability for securitization transactions and make it impractical for Citi to execute certain types of securitization transactions it previously executed. As a result, these effects could impair Citi's ability to continue to earn income from these transactions or could hinder Citi's ability to use such transactions to hedge risks, reduce exposures or reduce assets with adverse risk-weighting in its businesses, and those consequences could affect the conduct of these businesses. In addition, certain sectors of the securitization markets, particularly residential mortgage-backed securitizations, have been inactive or experienced dramatically diminished transaction volumes since the financial crisis. The impact of various regulatory reform measures could negatively delay or restrict any future recovery of these sectors of the securitization markets, and thus the opportunities for Citi to participate in securitization transactions in such sectors.

MARKET AND ECONOMIC RISKS

There Continues to Be Significant Uncertainty Arising from the Ongoing Eurozone Debt and Economic Crisis, Including the Potential Outcomes That Could Occur and the Impact Those Outcomes Could Have on Citi's Businesses, Results of Operations or Financial Condition, as well as the Global Financial Markets and Financial Conditions Generally.
Several European countries, including Greece, Ireland, Italy, Portugal and Spain (GIIPS), continue to experience credit deterioration due to weaknesses in their economic and fiscal situations. Concerns have been raised, both within the European Monetary Union (EMU) as well as internationally, as to the financial, political and legal effectiveness of measures taken to date, and the ability of these countries to adhere to any required austerity, reform or similar measures. These ongoing conditions have caused, and are likely to continue to cause, disruptions in the global financial markets, particularly if they lead to any future sovereign debt defaults and/or significant bank failures or defaults in the Eurozone.


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The impact of the ongoing Eurozone debt and economic crisis and other developments in the EMU could be even more significant if they lead to a partial or complete break-up of the EMU. The exit of one or more member countries from the EMU could result in certain obligations relating to the exiting country being redenominated from the Euro to a new country currency. Redenomination could be accompanied by immediate revaluation of the new currency as compared to the Euro and the U.S. dollar, the extent of which would depend on the particular facts and circumstances. Any such redenomination/revaluation would cause significant legal and other uncertainty with respect to outstanding obligations of counterparties and debtors in any exiting country, whether sovereign or otherwise, and would likely lead to complex, lengthy litigation. Redenomination/revaluation could also be accompanied by the imposition of exchange and/or capital controls, required functional currency changes and "deposit flight."
The ongoing Eurozone debt and economic crisis has created, and will continue to create, significant uncertainty for Citi and the global economy. Any occurrence or combination of the events described above could negatively impact Citi's businesses, results of operations and financial condition, both directly through its own exposures as well as indirectly. For example, at times, Citi has experienced widening of its credit spreads and thus increased costs of funding due to concerns about its Eurozone exposure. In addition, U.S. regulators could impose mandatory loan loss and other reserve requirements on U.S. financial institutions, including Citi, if a particular country's economic situation deteriorates below a certain level, which could negatively impact Citi's earnings, perhaps significantly. Citi's businesses, results of operations and financial condition could also be negatively impacted due to a decline in general global economic conditions as a result of the ongoing Eurozone crises, particularly given its global footprint and strategy. In addition to the uncertainties and potential impacts described above, the ongoing Eurozone crisis and/or partial or complete break-up of the EMU could cause, among other things, severe disruption to global equity markets, significant increases in bond yields generally, potential failure or default of financial institutions (including those of systemic importance), a significant decrease in global liquidity, a freeze-up of global credit markets and worldwide recession.
While Citi endeavors to mitigate its credit and other exposures related to the Eurozone, the potential outcomes and impact of those outcomes resulting from the Eurozone crisis are highly uncertain and will ultimately be based on the specific facts and circumstances. As a result, there can be no assurance that the various steps Citi has taken to protect its businesses, results of operations and financial condition against these events will be sufficient. In addition, there could be negative impacts to Citi's businesses, results of operations or financial condition that are currently unknown to Citi and thus cannot be mitigated as part of its ongoing contingency planning. For additional information on these matters, see "Managing Global Risk-Country Risk" below.

The Continued Uncertainty Relating to the Sustainability and Pace of Economic Recovery in the U.S. and Globally Could Have a Negative Impact on Citi's Businesses and Results of Operations. Moreover, Any Significant Global Economic Downturn or Disruption, Including a Significant Decline in Global Trade Volumes, Could Materially and Adversely Impact Citi's Businesses, Results of Operations and Financial Condition.
Like other financial institutions, Citi's businesses have been, and could continue to be, negatively impacted by the uncertainty surrounding the sustainability and pace of economic recovery in the U.S. as well as globally. This continued uncertainty has impacted, and could continue to impact, the results of operations in, and growth of, Citi's businesses. Among other impacts, continued economic concerns can negatively affect Citi's ICG businesses, as clients cut back on trading and other business activities, as well as its Consumer businesses, including its credit card and mortgage businesses, as continued high levels of unemployment can impact payment and thus delinquency and loss rates. Fiscal and monetary actions taken by U.S. and non-U.S. government and regulatory authorities to spur economic growth or otherwise, such as by maintaining a low interest rate environment, can also have an impact on Citi's businesses and results of operations. For example, actions by the Federal Reserve Board can impact Citi's cost of funds for lending, investing and capital raising activities and the returns it earns on those loans and investments, both of which affect Citi's net interest margin.
Moreover, if a severe global economic downturn or other major economic disruption were to occur, including a significant decline in global trade volumes, Citi would likely experience substantial loan and other losses and be required to significantly increase its loan loss reserves, among other impacts. A global trade disruption that results in a permanently reduced level of trade volumes and increased costs of global trade, whether as a result of a prolonged "trade war" or some other reason, could significantly impact trade financing activities, certain trade dependent economies (such as the emerging markets in Asia) as well as certain industries heavily dependent on trade, among other things. Given Citi's global strategy and focus on the emerging markets, such a downturn and decrease in global trade volumes could materially and adversely impact Citi's businesses, results of operation and financial condition, particularly as compared to its competitors. This could include, among other things, a potential that any such losses would not be tax benefitted, given the current environment.

Concerns About the Level of U.S. Government Debt and a Downgrade (or a Further Downgrade) of the U.S. Government Credit Rating Could Negatively Impact Citi's Businesses, Results of Operations, Capital, Funding and Liquidity.
Concerns about the level of U.S. government debt and uncertainty relating to fiscal actions that may be taken to address these and related issues have, and could continue to, adversely affect Citi. In 2011, Standard & Poor's lowered its long-term sovereign credit rating on the U.S. government from AAA to AA+, and Moody's and Fitch both placed such rating on negative outlook.


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According to the credit rating agencies, these actions resulted from the high level of U.S. government debt and the continued inability of Congress to reach an agreement to ensure payment of U.S. government debt and reduce the U.S. debt level. Among other things, a future downgrade (or further downgrade) of U.S. debt obligations or U.S. government-related obligations, or concerns that such a downgrade might occur, could negatively affect Citi's ability to obtain funding collateralized by such obligations and the pricing of such funding as well as the pricing or availability of Citi's funding as a U.S. financial institution. Any further downgrade could also have a negative impact on financial markets and economic conditions generally and, as a result, could have a negative impact on Citi's businesses, results of operations, capital, funding and liquidity.

Citi's Extensive Global Network Subjects It to Various International and Emerging Markets Risks as well as Increased Compliance and Regulatory Risks and Costs.
During 2012, international revenues accounted for approximately 57% of Citi's total revenues. In addition, revenues from the emerging markets (which Citi generally defines as the markets in Asia (other than Japan, Australia and New Zealand), the Middle East, Africa and central and eastern European countries in EMEA and the markets in Latin America ) accounted for approximately 44% of Citi's total revenues in 2012.
Citi's extensive global network subjects it to a number of risks associated with international and emerging markets, including, among others, sovereign volatility, political events, foreign exchange controls, limitations on foreign investment, socio-political instability, nationalization, closure of branches or subsidiaries and confiscation of assets. For example, Citi operates in several countries, such as Argentina and Venezuela, with strict foreign exchange controls that limit its ability to convert local currency into U.S. dollars and/or transfer funds outside the country. In such cases, Citi could be exposed to a risk of loss in the event that the local currency devalues as compared to the U.S. dollar (see "Managing Global Risk- Country and Cross-Border Risk" below). There have also been instances of political turmoil and other instability in some of the countries in which Citi operates, including in certain countries in the Middle East and Africa, to which Citi has responded by transferring assets and relocating staff members to more stable jurisdictions. Similar incidents in the future could place Citi's staff and operations in danger and may result in financial losses, some significant, including nationalization of Citi's assets.
Additionally, given its global focus, Citi could be disproportionately impacted as compared to its competitors by an economic downturn in the international and/or emerging markets, whether resulting from economic conditions within these markets, the ripple effect of the ongoing Eurozone crisis, the global economy generally or otherwise. If a particular country's economic situation were to deteriorate below a certain level, U.S. regulators could impose mandatory loan loss and other reserve requirements on Citi, which could negatively impact its earnings, perhaps significantly. In addition, countries such as China, Brazil and India, each of which are part of Citi's emerging markets strategy, have recently experienced uncertainty over

the pace and extent of future economic growth. Lower or negative growth in these or other emerging market economies could make execution of Citi's global strategy more challenging and could adversely affect Citi's results of operations.
Citi's extensive global operations also increase its compliance and regulatory risks and costs. For example, Citi's operations in emerging markets subject it to higher compliance risks under U.S. regulations primarily focused on various aspects of global corporate activities, such as anti-money-laundering regulations and the Foreign Corrupt Practices Act, which can be more acute in less developed markets and thus require substantial investment in compliance infrastructure. Any failure by Citi to comply with applicable U.S. regulations, as well as the regulations in the countries and markets in which it operates as a result of its global footprint, could result in fines, penalties, injunctions or other similar restrictions, any of which could negatively impact Citi's earnings and its general reputation. Further, Citi provides a wide range of financial products and services to the U.S. and other governments, to multi-national corporations and other businesses, and to prominent individuals and families around the world. The actions of these clients involving the use of Citi products or services could result in an adverse impact on Citi, including adverse regulatory and reputational impact.

LIQUIDITY RISKS

The Maintenance of Adequate Liquidity Depends on Numerous Factors, Including Those Outside of Citi's Control such as Market Disruptions and Increases in Citi's Credit Spreads.
As a global financial institution, adequate liquidity and sources of funding are essential to Citi's businesses. Citi's liquidity and sources of funding can be significantly and negatively impacted by factors it cannot control, such as general disruptions in the financial markets or negative perceptions about the financial services industry in general, or negative investor perceptions of Citi's liquidity, financial position or creditworthiness in particular. Market perception of sovereign default risks, including those arising from the ongoing Eurozone debt crisis, can also lead to inefficient money markets and capital markets, which could further impact Citi's availability and cost of funding.
In addition, Citi's cost and ability to obtain deposits, secured funding and long-term unsecured funding from the credit and capital markets are directly related to its credit spreads. Changes in credit spreads constantly occur and are market-driven, including both external market factors and factors specific to Citi, and can be highly volatile. Citi's credit spreads may also be influenced by movements in the costs to purchasers of credit default swaps referenced to Citi's long-term debt, which are also impacted by these external and Citi-specific factors. Moreover, Citi's ability to obtain funding may be impaired if other market participants are seeking to access the markets at the same time, or if market appetite is reduced, as is likely to occur in a liquidity or other market crisis. In addition, clearing organizations, regulators, clients and financial institutions with which Citi interacts may exercise the right to


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require additional collateral based on these market perceptions or market conditions, which could further impair Citi's access to and cost of funding.
As a holding company, Citigroup relies on dividends, distributions and other payments from its subsidiaries to fund dividends as well as to satisfy its debt and other obligations. Several of Citigroup's subsidiaries are subject to capital adequacy or other regulatory or contractual restrictions on their ability to provide such payments. Limitations on the payments that Citigroup receives from its subsidiaries could also impact its liquidity.
For additional information on Citi's funding and liquidity, including Basel III regulatory liquidity standards, see "Capital Resources and Liquidity-Funding and Liquidity-Liquidity Management, Measures and Stress Testing" above.

The Credit Rating Agencies Continuously Review the Ratings of Citi and Certain of Its Subsidiaries, and Reductions in Citi's or Its More Significant Subsidiaries' Credit Ratings Could Have a Negative Impact on Citi's Funding and Liquidity Due to Reduced Funding Capacity, Including Derivatives Triggers That Could Require Cash Obligations or Collateral Requirements.
The credit rating agencies, such as Fitch, Moody's and S&P, continuously evaluate Citi and certain of its subsidiaries, and their ratings of Citi's and its more significant subsidiaries' long-term/senior debt and short-term/commercial paper, as applicable, are based on a number of factors, including financial strength, as well as factors not entirely within the control of Citi and its subsidiaries, such as the agencies' proprietary rating agency methodologies and assumptions and conditions affecting the financial services industry and markets generally.
Citi and its subsidiaries may not be able to maintain their current respective ratings. A ratings downgrade by Fitch, Moody's or S&P could negatively impact Citi's ability to access the capital markets and other sources of funds as well as the costs of those funds, and its ability to maintain certain deposits. A ratings downgrade could also have a negative impact on Citi's funding and liquidity due to reduced funding capacity, including derivative triggers, which could take the form of cash obligations and collateral requirements. In addition, a ratings downgrade could also have a negative impact on other funding sources, such as secured financing and other margined transactions for which there are no explicit triggers, as well as on contractual provisions which contain minimum ratings thresholds in order for Citi to hold third-party funds.
Moreover, credit ratings downgrades can have impacts which may not be currently known to Citi or which are not possible to quantify. For example, some entities may have ratings limitations as to their permissible counterparties, of which Citi may or may not be aware. In addition, certain of Citi's corporate customers and trading counterparties, among other clients, could re-evaluate their business relationships with Citi and limit the trading of certain contracts or market instruments with Citi in response to ratings downgrades. Changes in customer and counterparty behavior could impact not only Citi's funding and liquidity but also the results of operations of certain Citi businesses. For additional information on the potential impact of a reduction in Citi's or Citibank, N.A.'s credit ratings, see "Capital Resources and Liquidity-Funding and Liquidity-Credit Ratings" above.

LEGAL RISKS

Citi Is Subject to Extensive Legal and Regulatory Proceedings, Investigations, and Inquiries That Could Result in Substantial Losses. These Matters Are Often Highly Complex and Slow to Develop, and Results Are Difficult to Predict or Estimate.
At any given time, Citi is defending a significant number of legal and regulatory proceedings and is subject to numerous governmental and regulatory examinations, investigations and other inquiries. These proceedings, examinations, investigations and inquiries could result, individually or collectively, in substantial losses.
In the wake of the financial crisis of 2007–2009, the frequency with which such proceedings, investigations and inquiries are initiated, and the severity of the remedies sought, have increased substantially, and the global judicial, regulatory and political environment has generally become more hostile to large financial institutions such as Citi. Many of the proceedings, investigations and inquiries involving Citi relating to events before or during the financial crisis have not yet been resolved, and additional proceedings, investigations and inquiries relating to such events may still be commenced. In addition, heightened expectations by regulators and other enforcement authorities for strict compliance could also lead to more regulatory and other enforcement proceedings seeking greater sanctions for financial institutions such as Citi.
For example, Citi is currently subject to extensive legal and regulatory inquiries, actions and investigations relating to its historical mortgage-related activities, including claims regarding the accuracy of offering documents for residential mortgage-backed securities and alleged breaches of representation and warranties relating to the sale of mortgage loans or the placement of mortgage loans into securitization trusts (for additional information on representation and warranty matters, see "Managing Global Risk-Credit Risk-Citigroup Residential Mortgages-Representations and Warranties" below). Citi is also subject to extensive legal and regulatory inquiries, actions and investigations relating to, among other things, submissions made by Citi and other panel banks to bodies that publish various interbank offered rates, such as the London Inter-Bank Offered Rate (LIBOR), or other rates or benchmarks. Like other banks with operations in the U.S., Citi is also subject to continuing oversight by the OCC and other bank regulators, and inquiries and investigations by other governmental and regulatory authorities, with respect to its anti-money laundering program. Other banks subject to similar or the same inquiries, actions or investigations have incurred substantial liability in relation to their activities in these areas, including in a few cases criminal convictions or deferred prosecution agreements respecting corporate entities as well as substantial fines and penalties.


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Moreover, regulatory changes resulting from the Dodd-Frank Act and other recent regulatory changes-such as the limitations on federal preemption in the consumer arena, the creation of the Consumer Financial Protection Bureau with its own examination and enforcement authority and the "whistle-blower" provisions of the Dodd-Frank Act-could further increase the number of legal and regulatory proceedings against Citi. In addition, while Citi takes numerous steps to prevent and detect employee misconduct, such as fraud, employee misconduct cannot always be deterred or prevented and could subject Citi to additional liability.
All of these inquiries, actions and investigations have resulted in, and will continue to result in, significant time, expense and diversion of management's attention. In addition, proceedings brought against Citi may result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions, business improvement orders or other results adverse to it, which could materially and negatively affect Citi's businesses, financial condition or results of operations, require material changes in Citi's operations, or cause Citi reputational harm. Moreover, many large claims asserted against Citi are highly complex and slow to develop, and they may involve novel or untested legal theories. The outcome of such proceedings is difficult to predict or estimate until late in the proceedings, which may last several years. In addition, certain settlements are subject to court approval and may not be approved. Although Citi establishes accruals for its legal and regulatory matters according to accounting requirements, the amount of loss ultimately incurred in relation to those matters may be substantially higher than the amounts accrued. For additional information relating to Citi's legal and regulatory proceedings, see Note 28 to the Consolidated Financial Statements.

BUSINESS AND OPERATIONAL RISKS

The Remaining Assets in Citi Holdings Will Likely Continue to Have a Negative Impact on Citi's Results of Operations and Its Ability to Utilize the Capital Supporting the Remaining Assets in Citi Holdings for More Productive Purposes.
As of December 31, 2012, the remaining assets within Citi Holdings constituted approximately 8% of Citigroup's GAAP assets and 15% of its risk-weighted assets (as defined under current regulatory guidelines). Also as of December 31, 2012, LCL constituted approximately 81% of Citi Holdings assets, of which approximately 73% consisted of legacy U.S. mortgages which had an estimated weighted average life of six years.
The pace of the wind-down of the remaining assets within Citi Holdings has slowed as Citi has disposed of certain of the larger businesses within this segment. While Citi's strategy continues to be to reduce the remaining assets in Citi Holdings as quickly as practicable in an economically rational manner, sales of the remaining assets could largely depend on factors outside of Citi's control, such as market appetite and buyer funding. Assets that are not sold will continue to be subject to ongoing run-off and paydowns. As a result, Citi Holdings' remaining assets will likely continue to have a negative impact on Citi's overall results of operations. Moreover, Citi's ability to utilize the capital supporting the remaining assets within Citi Holdings and thus use such capital for more productive purposes, including return of capital to shareholders, will also depend on the ultimate pace and level of the wind-down of Citi Holdings.

Citi's Ability to Return Capital to Shareholders Is Dependent in Part on the CCAR Process and the Results of Required Regulatory Stress Tests and Other Governmental Approvals.
In addition to Board of Directors' approval, any decision by Citi to return capital to shareholders, whether through an increase in its common stock dividend or by initiating a share repurchase program, is dependent in part on regulatory approval, including annual regulatory review of the results of the Comprehensive Capital Analysis and Review (CCAR) process required by the Federal Reserve Board and the supervisory stress tests required under the Dodd-Frank Act. Restrictions on Citi's ability to increase its common stock dividend or engage in share repurchase programs as a result of these processes has, and could in the future, negatively impact market perceptions of Citi.
Citi's ability to accurately predict or explain to stakeholders the outcome of the CCAR process, and thus address any such market perceptions, is hindered by the Federal Reserve Board's use of proprietary stress test models. In 2013, for the first time there will also be a requirement for Citi to publish, in March and September, certain stress test results (as prescribed by the Federal Reserve Board) that will be based on Citi's own stress tests models. The Federal Reserve Board will disclose, in March, certain results based on its proprietary stress test models. Because it is not clear how these proprietary models may differ from Citi's models, it is likely that Citi's stress test results using its own models may not be consistent with those eventually disclosed by the Federal Reserve Board, thus potentially leading to additional confusion and impacts to Citi's perception in the market.
In addition, pursuant to Citi's agreement with the FDIC entered into in connection with exchange offers consummated in July and September 2009, Citi remains subject to dividend and share repurchase restrictions for as long as the FDIC continues to hold any Citi trust preferred securities acquired in connection with the exchange offers. While these restrictions may be waived, they generally prohibit Citi from paying regular cash dividends in excess of $0.01 per share of common stock per quarter or from redeeming or repurchasing any Citi equity securities, which includes its common stock or trust preferred securities. As of February 15, 2013, the FDIC continued to hold approximately $2.225 billion of trust preferred securities issued in connection with the exchange offers (which become redeemable on July 30, 2014).


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Citi May Be Unable to Reduce Its Level of Expenses as It Expects, and Investments in Its Businesses May Not Be Productive.
Citi continues to pursue a disciplined expense-management strategy, including re-engineering, restructuring operations and improving the efficiency of functions. In December 2012, Citi announced a series of repositioning actions designed to further reduce its expenses and improve its efficiency. However, there is no guarantee that Citi will be able to reduce its level of expenses, whether as a result of the recently-announced repositioning actions or otherwise, in the future. Citi's ultimate expense levels also depend, in part, on factors outside of its control. For example, as a result of the extensive legal and regulatory proceedings and inquiries to which Citi is subject, Citi's legal and related costs remain elevated, have been, and are likely to continue to be, subject to volatility and are difficult to predict. In addition, expenses incurred in Citi's foreign entities are subject to foreign exchange volatility. Further, Citi's ability to continue to reduce its expenses as a result of the wind-down of Citi Holdings will also decline as Citi Holdings represents a smaller overall portion of Citigroup. Moreover, investments Citi has made in its businesses, or may make in the future, may not be as productive as Citi expects or at all.

Citi's Ability to Utilize Its DTAs Will Be Driven by Its Ability to Generate U.S. Taxable Income, Which Could Continue to Be Negatively Impacted by the Wind-Down of Citi Holdings.
Citigroup's total DTAs increased by approximately $3.8 billion in 2012 to $55.3 billion at December 31, 2012, while the time remaining for utilization has shortened, particularly with respect to the foreign tax credit (FTC) component of the DTAs. The increase in the total DTAs in 2012 was due, in large part, to the continued negative impact of Citi Holdings on Citi's U.S. taxable income.
The accounting treatment for DTAs is complex and requires a significant amount of judgment and estimates regarding future taxable earnings in the jurisdictions in which the DTAs arise and available tax planning strategies. Realization of the DTAs will continue to be driven primarily by Citi's ability to generate U.S. taxable income in the relevant tax carry-forward periods, particularly the FTC carry-forward periods. Citi does not expect a significant reduction in the balance of its net DTAs during 2013. For additional information, see "Significant Accounting Policies and Significant Estimates-Income Taxes" below and Note 10 to the Consolidated Financial Statements.

The Value of Citi's DTAs Could Be Significantly Reduced If Corporate Tax Rates in the U.S. or Certain State or Foreign Jurisdictions Decline or as a Result of Other Changes in the U.S. Corporate Tax System.
Congress and the Obama Administration have discussed decreasing the U.S. corporate tax rate. Similar discussions have taken place in certain state and foreign jurisdictions. While Citi may benefit in some respects from any decrease in corporate tax rates, a reduction in the U.S., state or foreign corporate tax rates could result in a significant decrease in the value of Citi's DTAs. There have also been recent discussions of more sweeping changes to the U.S. tax system, including changes to the tax treatment of foreign business income. It is uncertain whether or when any such tax reform proposals will be enacted into law, and whether or how they will affect Citi's DTAs.

Citi Maintains Contractual Relationships with Various Retailers and Merchants Within Its U.S. Credit Card Businesses in NA RCB, and the Failure to Maintain Those Relationships Could Have a Material Negative Impact on the Results of Operations or Financial Condition of Those Businesses.
Through its U.S. Citi-branded cards and Citi retail services credit card businesses within North America Regional Consumer Banking (NA RCB) , Citi maintains numerous co-branding relationships with third-party retailers and merchants in the ordinary course of business pursuant to which Citi issues credit cards to customers of the retailers or merchants. These agreements provide for shared economics between the parties and ways to increase customer brand loyalty, and generally have a fixed term that may be extended or renewed by the parties or terminated early in certain circumstances. While various mitigating factors could be available in the event of the loss of one or more of these co-branding relationships, such as replacing the retailer or merchant or by Citi's offering new card products, the results of operations or financial condition of Citi-branded cards or Citi retail services, as applicable, or NA RCB could be negatively impacted, and the impact could be material.
These agreements could be terminated due to, among other factors, a breach by Citi of its responsibilities under the applicable co-branding agreement, a breach by the retailer or merchant under the agreement, or external factors outside of either party's control, including bankruptcies, liquidations, restructurings or consolidations and other similar events that may occur. For example, within NA RCB Citi-branded cards, Citi issues a co-branded credit card product with American Airlines, the Citi-AAdvantage card. As has been widely reported, AMR Corporation and certain of its subsidiaries, including American Airlines, Inc. (collectively, AMR), filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy code in November 2011. On February 14, 2013, AMR and US Airways Group, Inc. announced that the boards of directors of both companies had approved a merger agreement under which the companies would be combined. The merger, which is conditioned upon, among other things, U.S. Bankruptcy Court approval, is expected to be completed in the third quarter of 2013. To date, the ongoing AMR bankruptcy and the merger announcement have not had a material impact on the results of operations for U.S. Citi-branded cards or NA RCB . However, it is not certain when the bankruptcy and merger processes will be resolved, what the outcome will be, whether or over what period the Citi-AAdvantage card program will continue to be maintained and whether the impact of the bankruptcy or merger could be material to the results of operations or financial condition of U.S. Citi-branded cards or NA RCB over time.


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Citi's Operational Systems and Networks Have Been, and Will Continue to Be, Subject to an Increasing Risk of Continually Evolving Cybersecurity or Other Technological Risks, Which Could Result in the Disclosure of Confidential Client or Customer Information, Damage to Citi's Reputation, Additional Costs to Citi, Regulatory Penalties and Financial Losses.
A significant portion of Citi's operations relies heavily on the secure processing, storage and transmission of confidential and other information as well as the monitoring of a large number of complex transactions on a minute-by-minute basis. For example, through its global consumer banking, credit card and Transaction Services businesses, Citi obtains and stores an extensive amount of personal and client-specific information for its retail, corporate and governmental customers and clients and must accurately record and reflect their extensive account transactions. With the evolving proliferation of new technologies and the increasing use of the Internet and mobile devices to conduct financial transactions, large, global financial institutions such as Citi have been, and will continue to be, subject to an increasing risk of cyber incidents from these activities.
Although Citi devotes significant resources to maintain and regularly upgrade its systems and networks with measures such as intrusion and detection prevention systems and monitoring firewalls to safeguard critical business applications, there is no guarantee that these measures or any other measures can provide absolute security. Citi's computer systems, software and networks are subject to ongoing cyber incidents such as unauthorized access; loss or destruction of data (including confidential client information); account takeovers; unavailability of service; computer viruses or other malicious code; cyber attacks; and other events. These threats may derive from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure. Additional challenges are posed by external extremist parties, including foreign state actors, in some circumstances as a means to promote political ends. If one or more of these events occurs, it could result in the disclosure of confidential client information, damage to Citi's reputation with its clients and the market, customer dissatisfaction, additional costs to Citi (such as repairing systems or adding new personnel or protection technologies), regulatory penalties, exposure to litigation and other financial losses to both Citi and its clients and customers. Such events could also cause interruptions or malfunctions in the operations of Citi (such as the lack of availability of Citi's online banking system), as well as the operations of its clients, customers or other third parties. Given Citi's global footprint and high volume of transactions processed by Citi, certain errors or actions may be repeated or compounded before they are discovered and rectified, which would further increase these costs and consequences.

Citi has been subject to intentional cyber incidents from external sources, including (i) denial of service attacks, which attempted to interrupt service to clients and customers; (ii) data breaches, which aimed to obtain unauthorized access to customer account data; and (iii) malicious software attacks on client systems, which attempted to allow unauthorized entrance to Citi's systems under the guise of a client and the extraction of client data. For example, in 2012 Citi and other U.S. financial institutions experienced distributed denial of service attacks which were intended to disrupt consumer online banking services. While Citi's monitoring and protection services were able to detect and respond to these incidents before they became significant, they still resulted in certain limited losses in some instances as well as increases in expenditures to monitor against the threat of similar future cyber incidents. There can be no assurance that such cyber incidents will not occur again, and they could occur more frequently and on a more significant scale. In addition, because the methods used to cause cyber attacks change frequently or, in some cases, are not recognized until launched, Citi may be unable to implement effective preventive measures or proactively address these methods.
Third parties with which Citi does business may also be sources of cybersecurity or other technological risks. Citi outsources certain functions, such as processing customer credit card transactions, uploading content on customer-facing websites, and developing software for new products and services. These relationships allow for the storage and processing of customer information, by third party hosting of or access to Citi websites, which could result in service disruptions or website defacements, and the potential to introduce vulnerable code, resulting in security breaches impacting Citi customers. While Citi engages in certain actions to reduce the exposure resulting from outsourcing, such as performing onsite security control assessments, limiting third-party access to the least privileged level necessary to perform job functions, and restricting third-party processing to systems stored within Citi's data centers, ongoing threats may result in unauthorized access, loss or destruction of data or other cyber incidents with increased costs and consequences to Citi such as those discussed above. Furthermore, because financial institutions are becoming increasingly interconnected with central agents, exchanges and clearing houses, including through the derivatives provisions of the Dodd-Frank Act, Citi has increased exposure to operational failure or cyber attacks through third parties.
While Citi maintains insurance coverage that may, subject to policy terms and conditions including significant self-insured deductibles, cover certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses.


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Citi's Performance and the Performance of Its Individual Businesses Could Be Negatively Impacted If Citi Is Not Able to Hire and Retain Qualified Employees for Any Reason.
Citi's performance and the performance of its individual businesses is largely dependent on the talents and efforts of highly skilled employees. Specifically, Citi's continued ability to compete in its businesses, to manage its businesses effectively and to continue to execute its overall global strategy depends on its ability to attract new employees and to retain and motivate its existing employees. Citi's ability to attract and retain employees depends on numerous factors, including without limitation, its culture, compensation, the management and leadership of the company as well as its individual businesses, Citi's presence in the particular market or region at issue and the professional opportunities it offers. The banking industry has and may continue to experience more stringent regulation of employee compensation, including limitations relating to incentive-based compensation, clawback requirements and special taxation. Moreover, given its continued focus on the emerging markets, Citi is often competing for qualified employees in these markets with entities that have a significantly greater presence in the region or are not subject to significant regulatory restrictions on the structure of incentive compensation. If Citi is unable to continue to attract and retain qualified employees for any reason, Citi's performance, including its competitive position, the successful execution of its overall strategy and its results of operations could be negatively impacted.

Incorrect Assumptions or Estimates in Citi's Financial Statements Could Cause Significant Unexpected Losses in the Future, and Changes to Financial Accounting and Reporting Standards Could Have a Material Impact on How Citi Records and Reports Its Financial Condition and Results of Operations.
Citi is required to use certain assumptions and estimates in preparing its financial statements under U.S. GAAP, including determining credit loss reserves, reserves related to litigation and regulatory exposures and mortgage representation and warranty claims, DTAs and the fair value of certain assets and liabilities, among other items. If Citi's assumptions or estimates underlying its financial statements are incorrect, Citi could experience unexpected losses, some of which could be significant.
Moreover, the Financial Accounting Standards Board (FASB) is currently reviewing or proposing changes to several financial accounting and reporting standards that govern key aspects of Citi's financial statements, including those areas where Citi is required to make assumptions or estimates. For example, the FASB's financial instruments project could, among other things, significantly change how Citi determines the impairment on financial instruments and accounts for hedges. The FASB has also proposed a new accounting model intended to require earlier recognition of credit losses. The accounting model would require a single "expected credit loss" measurement objective for the recognition of credit losses for all financial instruments, replacing the multiple existing impairment models in U.S. GAAP, which generally require that a loss be "incurred" before it is recognized. For additional information on this proposed new accounting model, see Note 1 to the Consolidated Financial Statements.

As a result of changes to financial accounting or reporting standards, whether promulgated or required by the FASB or other regulators, Citi could be required to change certain of the assumptions or estimates it previously used in preparing its financial statements, which could negatively impact how it records and reports its financial condition and results of operations generally. In addition, the FASB continues its convergence project with the International Accounting Standards Board (IASB) pursuant to which U.S. GAAP and International Financial Reporting Standards (IFRS) may be converged. Any transition to IFRS could further have a material impact on how Citi records and reports its financial results. For additional information on the key areas for which assumptions and estimates are used in preparing Citi's financial statements, see "Significant Accounting Policies and Significant Estimates" below and Note 28 to the Consolidated Financial Statements.

Changes Could Occur in the Method for Determining LIBOR and It Is Unclear How Any Such Changes Could Affect the Value of Debt Securities and Other Financial Obligations Held or Issued by Citi That Are Linked to LIBOR, or How Such Changes Could Affect Citi's Results of Operations or Financial Condition.
As a result of concerns about the accuracy of the calculation of the daily LIBOR, which is currently overseen by the British Bankers' Association (BBA), the BBA has taken steps to change the process for determining LIBOR by increasing the number of banks surveyed to set LIBOR and to strengthen the oversight of the process. In addition, recommendations relating to the setting and administration of LIBOR were put forth in September 2012, and the U.K. government has announced that it intends to incorporate these recommendations in new legislation.
It is uncertain what changes, if any, may be required or made by the U.K. government or other governmental or regulatory authorities in the method for determining LIBOR. Accordingly, it is not certain whether or to what extent any such changes could have an adverse impact on the value of any LIBOR-linked debt securities issued by Citi, or any loans, derivatives and other financial obligations or extensions of credit for which Citi is an obligor. It is also not certain whether or to what extent any such changes would have an adverse impact on the value of any LIBOR-linked securities, loans, derivatives and other financial obligations or extensions of credit held by or due to Citi or on Citi's overall financial condition or results of operations.


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Citi May Incur Significant Losses If Its Risk Management Processes and Strategies Are Ineffective, and Concentration of Risk Increases the Potential for Such Losses.
Citi's independent risk management organization is structured so as to facilitate the management of the principal risks Citi assumes in conducting its activities-credit risk, market risk and operational risk-across three dimensions: businesses, regions and critical products. Credit risk is the potential for financial loss resulting from the failure of a borrower or counterparty to honor its financial or contractual obligations. Market risk encompasses both liquidity risk and price risk. For a discussion of funding and liquidity risk, see "Capital Resources and Liquidity-Funding and Liquidity" and "Risk Factors-Liquidity Risks" above. Price risk losses arise from fluctuations in the market value of trading and non-trading positions resulting from changes in interest rates, credit spreads, foreign exchange rates, equity and commodity prices and in their implied volatilities. Operational risk is the risk for loss resulting from inadequate or failed internal processes, systems or human factors, or from external events, and includes reputation and franchise risk associated with business practices or market conduct in which Citi is involved. For additional information on each of these areas of risk as well as risk management at Citi, including management review processes and structure, see "Managing Global Risk" below. Managing these risks is made especially challenging within a global and complex financial institution such as Citi, particularly given the complex and diverse financial markets and rapidly evolving market conditions in which Citi operates.
Citi employs a broad and diversified set of risk management and mitigation processes and strategies, including the use of various risk models, in analyzing and monitoring these and other risk categories. However, these models, processes and strategies are inherently limited because they involve techniques, including the use of historical data in some circumstances, and judgments that cannot anticipate every economic and financial outcome in the markets in which it operates nor can it anticipate the specifics and timing of such outcomes. Citi could incur significant losses if its risk management processes, strategies or models are ineffective in properly anticipating or managing these risks.
In addition, concentrations of risk, particularly credit and market risk, can further increase the risk of significant losses. At December 31, 2012, Citi's most significant concentration of credit risk was with the U.S. government and its agencies, which primarily results from trading assets and investments issued by the U.S. government and its agencies. Citi also routinely executes a high volume of securities, trading, derivative and foreign exchange transactions with counterparties in the financial services sector, including banks, other financial institutions, insurance companies, investment banks and government and central banks. To the extent regulatory or market developments lead to an increased centralization of trading activity through particular clearing houses, central agents or exchanges, this could increase Citi's concentration of risk in this sector. Concentrations of risk can limit, and have limited, the effectiveness of Citi's hedging strategies and have caused Citi to incur significant losses, and they may do so again in the future.


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MANAGING GLOBAL RISK

Risk Management-Overview
Citigroup believes that effective risk management is of primary importance to its overall operations. Accordingly, Citi's risk management process has been designed to monitor, evaluate and manage the principal risks it assumes in conducting its activities. These include credit, market and operational risks, which are each discussed in more detail throughout this section.
Citigroup's risk management framework is designed to balance business ownership and accountability for risks with well-defined independent risk management oversight and responsibility. Citi's risk management framework is based on the following principles established by Citi's Chief Risk Officer:

a defined risk appetite, aligned with business strategy; accountability through a common framework to manage risks; risk decisions based on transparent, accurate and rigorous analytics; a common risk capital model to evaluate risks; expertise, stature, authority and independence of risk managers; and risk managers empowered to make decisions and escalate issues.

Significant focus has been placed on fostering a risk culture based on a policy of "Taking Intelligent Risk with Shared Responsibility, without Forsaking Individual Accountability":

"Taking intelligent risk" means that Citi must carefully identify, measure and aggregate risks, and it must establish risk tolerances based on a full understanding of "tail risk." "Shared responsibility" means that risk managers must own and influence business outcomes, including risk controls that act as a safety net for the business. "Individual accountability" means that all individuals are ultimately responsible for identifying, understanding and managing risks.

The Chief Risk Officer, with oversight from the Risk Management and Finance Committee of the Board of Directors, as well as the full Board of Directors, is responsible for:

establishing core standards for the management, measurement and reporting of risk; identifying, assessing, communicating and monitoring risks on a company-wide basis; engaging with senior management on a frequent basis on material matters with respect to risk-taking activities in the businesses and related risk management processes; and ensuring that the risk function has adequate independence, authority, expertise, staffing, technology and resources.

The risk management organization is structured so as to facilitate the management of risk across three dimensions: businesses, regions and critical products.
Each of Citi's major business groups has a Business Chief Risk Officer who is the focal point for risk decisions, such as setting risk limits or approving transactions in the business. The majority of the staff in Citi's independent risk management organization report to these Business Chief Risk Officers. There are also Chief Risk Officers for Citibank, N.A. and Citi Holdings.
Regional Chief Risk Officers, appointed in each of Asia , EMEA and Latin America , are accountable for all the risks in their geographic areas and are the primary risk contacts for the regional business heads and local regulators.
The positions of Product Chief Risk Officers are established for those risk areas of critical importance to Citigroup, currently real estate and structural market risk, as well as fundamental credit. The Product Chief Risk Officers are accountable for the risks within their specialty and focus on problem areas across businesses and regions. The Product Chief Risk Officers serve as a resource to the Chief Risk Officer, as well as to the Business and Regional Chief Risk Officers, to better enable the Business and Regional Chief Risk Officers to focus on the day-to-day management of risks and responsiveness to business flow.
Each of the Business, Regional and Product Chief Risk Officers report to Citi's Chief Risk Officer, who reports to the Head of Franchise Risk and Strategy, a direct report to the Chief Executive Officer.


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Risk Aggregation and Stress Testing
While Citi's major risk areas (i.e., credit, market and operational) are described individually on the following pages, these risks are also reviewed and managed in conjunction with one another and across the various businesses via Citi's risk aggregation and stress testing processes.
As noted above, independent risk management monitors and controls major risk exposures and concentrations across the organization. This requires the aggregation of risks, within and across businesses, as well as subjecting those risks to various stress scenarios in order to assess the potential economic impact they may have on Citigroup.
Stress tests are in place across Citi's entire portfolio, (i.e., trading, available-for-sale and accrual portfolios). These firm-wide stress reports measure the potential impact to Citi and its component businesses of changes in various types of key risk factors (e.g., interest rates, credit spreads, etc.). The reports also measure the potential impact of a number of historical and hypothetical forward-looking systemic stress scenarios, as developed internally by independent risk management. These firm-wide stress tests are produced on a monthly basis, and results are reviewed by senior management and the Board of Directors.
Supplementing the stress testing described above, Citi independent risk management, working with input from the businesses and finance, provides periodic updates to senior management and the Board of Directors on significant potential areas of concern across Citigroup that can arise from risk concentrations, financial market participants, and other systemic issues. These areas of focus are intended to be forward-looking assessments of the potential economic impacts to Citi that may arise from these exposures.
The stress-testing and focus-position exercises described above are a supplement to the standard limit-setting and risk-capital exercises described below, as these processes incorporate events in the marketplace and within Citi that impact the firm's outlook on the form, magnitude, correlation and timing of identified risks that may arise. In addition to enhancing awareness and understanding of potential exposures, the results of these processes then serve as the starting point for developing risk management and mitigation strategies.
In addition to Citi's ongoing, internal stress testing described above, Citi is also required to perform stress testing on a periodic basis for a number of regulatory exercises, including the Federal Reserve Board's Comprehensive Capital Analysis and Review (CCAR) and the OCC's Dodd-Frank Act Stress Testing (DFAST). For 2013, these stress tests are required annually and mid-year. These regulatory exercises typically prescribe certain defined scenarios under which stress testing should be conducted, and they also provide defined forms for the output of the results. For additional information, see "Risk Factors-Business and Operational Risks" above.

Risk Capital
Citi calculates and allocates risk capital across the company in order to consistently measure risk taking across business activities, and to assess risk-reward relationships.
Risk capital is defined as the amount of capital required to absorb potential unexpected economic losses resulting from extremely severe events over a one-year time period.

"Economic losses" include losses that are reflected on Citi's Consolidated Income Statement and fair value adjustments to the Consolidated Financial Statements, as well as any further declines in value not captured on the Consolidated Income Statement. "Unexpected losses" are the difference between potential extremely severe losses and Citigroup's expected (average) loss over a one-year time period. "Extremely severe" is defined as potential loss at a 99.9% and a 99.97% confidence level, based on the distribution of observed events and scenario analysis.

The drivers of economic losses are risks which, for Citi, are broadly categorized as credit risk, market risk and operational risk.

Credit risk losses primarily result from a borrower's or counterparty's inability to meet its financial or contractual obligations. Market risk losses arise from fluctuations in the market value of trading and non-trading positions, including the changes in value resulting from fluctuations in rates. Operational risk losses result from inadequate or failed internal processes, systems or human factors, or from external events.

Citi's risk capital framework is reviewed and enhanced on a regular basis in light of market developments and evolving practices.


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CREDIT RISK

Credit risk is the potential for financial loss resulting from the failure of a borrower or counterparty to honor its financial or contractual obligations. Credit risk arises in many of Citigroup's business activities, including:

wholesale and retail lending; capital markets derivative transactions; structured finance; and repurchase agreements and reverse repurchase transactions.

Credit risk also arises from settlement and clearing activities, when Citi transfers an asset in advance of receiving its counter-value, or advances funds to settle a transaction on behalf of a client. Concentration risk, within credit risk, is the risk associated with having credit exposure concentrated within a specific client, industry, region or other category.

Credit Risk Management
Credit risk is one of the most significant risks Citi faces as an institution. As a result, Citi has a well-established framework in place for managing credit risk across all businesses. This includes a defined risk appetite, credit limits and credit policies, both at the business level as well as at the firm-wide level. Citi's credit risk management also includes processes and policies with respect to problem recognition, including "watch lists," portfolio review, updated risk ratings and classification triggers. With respect to Citi's settlement and clearing activities, intra-day client usage of lines is closely monitored against limits, as well as against "normal" usage patterns. To the extent a problem develops, Citi typically moves the client to a secured (collateralized) operating model. Generally, Citi's intra-day settlement and clearing lines are uncommitted and cancellable at any time.
To manage concentration of risk within credit risk, Citi has in place a concentration management framework consisting of industry limits, obligor limits and single-name triggers. In addition, as noted under "Management of Global Risk-Risk Aggregation and Stress Testing" above, independent risk management reviews concentration of risk across Citi's regions and businesses to assist in managing this type of risk.

Credit Risk Measurement and Stress Testing
Credit exposures are generally reported in notional terms for accrual loans, reflecting the value at which the loans are carried on the Consolidated Balance Sheet. Credit exposure arising from capital markets activities is generally expressed as the current mark-to-market, net of margin, reflecting the net value owed to Citi by a given counterparty.
The credit risk associated with these credit exposures is a function of the creditworthiness of the obligor, as well as the terms and conditions of the specific obligation. Citi assesses the credit risk associated with its credit exposures on a regular basis through its loan loss reserve process (see "Significant Accounting Policies and Significant Estimates" and Notes 1 and 17 to the Consolidated Financial Statements below), as well as through regular stress testing at the company-, business-, geography- and product-levels. These stress-testing processes typically estimate potential incremental credit costs that would occur as a result of either downgrades in the credit quality, or defaults, of the obligors or counterparties.


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CREDIT RISK

Loans Outstanding

In millions of dollars 2012 2011 2010 2009 2008
Consumer loans
In U.S. offices
       Mortgage and real estate (1) $ 125,946 $ 139,177 $ 151,469 $ 183,842 $ 219,482
       Installment, revolving credit, and other 14,070 15,616 28,291 58,099 64,319
       Cards (2) 111,403 117,908 122,384 28,951 44,418
       Commercial and industrial 5,344 4,766 5,021 5,640 7,041
       Lease financing - 1 2 11 31
$ 256,763 $ 277,468 $ 307,167 $ 276,543 $ 335,291
In offices outside the U.S.
       Mortgage and real estate (1) $ 54,709 $ 52,052 $ 52,175 $ 47,297 $ 44,382
       Installment, revolving credit, and other 36,182 34,613 38,024 42,805 41,272
       Cards 40,653 38,926 40,948 41,493 42,586
       Commercial and industrial 20,001 19,975 16,136 14,183 16,814
       Lease financing 781 711 665 331 304
$ 152,326 $ 146,277 $ 147,948 $ 146,109 $ 145,358
Total Consumer loans $ 409,089 $ 423,745 $ 455,115 $ 422,652 $ 480,649
Unearned income (418 ) (405 ) 69 808 738
Consumer loans, net of unearned income $ 408,671 $ 423,340 $ 455,184 $ 423,460 $ 481,387
Corporate loans
In U.S. offices
       Commercial and industrial $ 26,985 $ 20,830 $ 13,669 $ 15,614 $ 26,447
       Loans to financial institutions (2) 18,159 15,113 8,995 6,947 10,200
       Mortgage and real estate (1) 24,705 21,516 19,770 22,560 28,043
       Installment, revolving credit, and other 32,446 33,182 34,046 17,737 22,050
       Lease financing 1,410 1,270 1,413 1,297 1,476
$ 103,705 $ 91,911 $ 77,893 $ 64,155 $ 88,216
In offices outside the U.S.
       Commercial and industrial $ 82,939 $ 79,764 $ 72,166 $ 67,344 $ 79,421
       Installment, revolving credit, and other 14,958 14,114 11,829 9,683 17,441
       Mortgage and real estate (1) 6,485 6,885 5,899 9,779 11,375
       Loans to financial institutions 37,739 29,794 22,620 15,113 18,413
       Lease financing 605 568 531 1,295 1,850
       Governments and official institutions 1,159 1,576 3,644 2,949 773
$ 143,885 $ 132,701 $ 116,689 $ 106,163 $ 129,273
Total Corporate loans $ 247,590 $ 224,612 $ 194,582 $ 170,318 $ 217,489
Unearned income (797 ) (710 ) (972 ) (2,274 ) (4,660 )
Corporate loans, net of unearned income $ 246,793 $ 223,902 $ 193,610 $ 168,044 $ 212,829
Total loans-net of unearned income $ 655,464 $ 647,242 $ 648,794 $ 591,504 $ 694,216
Allowance for loan losses-on drawn exposures (25,455 ) (30,115 ) (40,655 ) (36,033 ) (29,616 )
Total loans-net of unearned income and allowance for credit losses $ 630,009 $ 617,127 $ 608,139 $ 555,471 $ 664,600
Allowance for loan losses as a percentage of total loans-net of
unearned income (3) 3.92 % 4.69 % 6.31 % 6.09 % 4.27 %
Allowance for Consumer loan losses as a percentage of total Consumer
loans-net of unearned income (3) 5.57 % 6.45 % 7.81 % 6.69 % 4.61 %
Allowance for Corporate loan losses as a percentage of total Corporate
loans-net of unearned income (3) 1.14 % 1.31 % 2.75 % 4.57 % 3.48 %

(1)      Loans secured primarily by real estate.
(2) Beginning in 2010, includes the impact of consolidating entities in connection with Citi's adoption of SFAS 167.
(3) Excludes loans in 2012, 2011 and 2010 that are carried at fair value.

75



Details of Credit Loss Experience

In millions of dollars at year end 2012 2011 2010 2009 2008
Allowance for loan losses at beginning of year $ 30,115 $ 40,655 $ 36,033 $ 29,616 $ 16,117
Provision for loan losses
       Consumer (1)(2) $ 10,761 $ 12,512 $ 25,119 $ 32,407 $ 27,942
       Corporate 87 (739 ) 75 6,353 5,732
$ 10,848 $ 11,773 $ 25,194 $ 38,760 $ 33,674
Gross credit losses
Consumer
       In U.S. offices (1)(2) $ 12,226 $ 15,767 $ 24,183 $ 17,637 $ 11,624
       In offices outside the U.S. 4,612 5,397 6,890 8,819 7,172
Corporate
Mortgage and real estate
       In U.S. offices 59 182 953 592 56
       In offices outside the U.S. 21 171 286 151 37
Governments and official institutions outside the U.S. - - - - 3
Loans to financial institutions
       In U.S. offices 33 215 275 274 -
       In offices outside the U.S. 68 391 111 448 463
Commercial and industrial
       In U.S. offices 154 392 1,222 3,299 627
       In offices outside the U.S. 305 649 571 1,564 778
$ 17,478 $ 23,164 $ 34,491 $ 32,784 $ 20,760
Credit recoveries
Consumer
       In U.S. offices $ 1,302 $ 1,467 $ 1,323 $ 576 $ 585
       In offices outside the U.S. 1,183 1,273 1,315 1,089 1,050
Corporate
Mortgage and real estate
       In U.S. offices 17 27 130 3 -
       In offices outside the U.S. 19 2 26 1 1
Governments and official institutions outside the U.S. - - - - -
Loans to financial institutions
       In U.S. offices - - - - -
       In offices outside the U.S. 43 89 132 11 2
Commercial and industrial
       In U.S. offices 243 175 591 276 6
       In offices outside the U.S. 95 93 115 87 105
$ 2,902 $ 3,126 $ 3,632 $ 2,043 $ 1,749
Net credit losses
       In U.S. offices (1)(2) $ 10,910 $ 14,887 $ 24,589 $ 20,947 $ 11,716
       In offices outside the U.S. 3,666 5,151 6,270 9,794 7,295
Total $ 14,576 $ 20,038 $ 30,859 $ 30,741 $ 19,011
Other-net (3) $ (932 ) $ (2,275 ) $ 10,287 $ (1,602 ) $ (1,164 )
Allowance for loan losses at end of year $ 25,455 $ 30,115 $ 40,655 $ 36,033 $ 29,616
Allowance for loan losses as a % of total loans (4) 3.92 % 4.69 % 6.31 % 6.09 % 4.27 %
Allowance for unfunded lending commitments (5) $ 1,119 $ 1,136 $ 1,066 $ 1,157 $ 887
Total allowance for loans, leases and unfunded lending commitments $ 26,574 $ 31,251 $ 41,721 $ 37,190 $ 30,503
Net Consumer credit losses $ 14,353 $ 18,424 $ 28,435 $ 24,791 $ 17,161
As a percentage of average Consumer loans 3.49 % 4.20 % 5.74 % 5.43 % 3.34 %
Net Corporate credit losses (recoveries) $ 223 $ 1,614 $ 2,424 $ 5,950 $ 1,850
As a percentage of average Corporate loans 0.09 % 0.79 % 1.27 % 3.13 % 0.84 %
Allowance for loan losses at end of period (6)
Citicorp $ 14,623 $ 12,656 $ 17,075 $ 10,731 $ 8,202
Citi Holdings 10,832 17,459 23,580 25,302 21,414
       Total Citigroup $ 25,455 $ 30,115 $ 40,655 $ 36,033 $ 29,616
Allowance by type
Consumer $ 22,679 $ 27,236 $ 35,406 $ 28,347 $ 22,204
Corporate 2,776 2,879 5,249 7,686 7,412
       Total Citigroup $ 25,455 $ 30,115 $ 40,655 $ 36,033 $ 29,616

See footnotes on the next page.

76



(1)      2012 includes approximately $635 million of incremental charge-offs related to the Office of the Comptroller of the Currency (OCC) guidance issued in the third quarter of 2012, which required mortgage loans to borrowers that have gone through Chapter 7 U.S. Bankruptcy Code to be written down to collateral value. There was a corresponding approximate $600 million release in the third quarter of 2012 allowance for loans losses related to these charge-offs. 2012 also includes a benefit to charge-offs of approximately $40 million related to finalizing the impact of the OCC guidance in the fourth quarter of 2012.
(2) 2012 includes approximately $370 million of incremental charge-offs related to previously deferred principal balances on modified loans in the first quarter of 2012. The charge-offs were related to anticipated forgiveness of principal in connection with the national mortgage settlement. There was a corresponding approximate $350 million release in the first quarter of 2012 allowance for loan losses related to these charge-offs.
(3) 2012 includes reductions of approximately $875 million related to the sale or transfer to held-for-sale of various U.S. loan portfolios. 2011 includes reductions of approximately $1.6 billion related to the sale or transfer to held-for-sale of various U.S. loan portfolios, approximately $240 million related to the sale of the Egg Banking PLC credit card business, approximately $72 million related to the transfer of the Citi Belgium business to held-for-sale and approximately $290 million related to FX translation. 2010 primarily includes an addition of $13.4 billion related to the impact of consolidating entities in connection with Citi's adoption of SFAS 166/167, partially offset by reductions of approximately $2.7 billion related to the sale or transfer to held-for-sale of various U.S. loan portfolios and approximately $290 million related to the transfer of a U.K. first mortgage portfolio to held-for-sale. 2009 primarily includes reductions to the loan loss reserve of approximately $543 million related to securitizations, approximately $402 million related to the sale or transfer to held-for-sale of U.S. real estate lending loans, and $562 million related to the transfer of the U.K. cards portfolio to held-for-sale. 2008 primarily includes reductions to the loan loss reserve of approximately $800 million related to FX translation, $102 million related to securitizations, $244 million for the sale of the German retail banking operation, and $156 million for the sale of CitiCapital, partially offset by additions of $106 million related to the Cuscatlán and Bank of Overseas Chinese acquisitions.
(4) December 31, 2012, December 31, 2011 and December 31, 2010 exclude $5.3 billion, $5.3 billion and $4.4 billion, respectively, of loans that are carried at fair value.
(5) Represents additional credit loss reserves for unfunded lending commitments and letters of credit recorded in Other liabilities on the Consolidated Balance Sheet.
(6) Allowance for loan losses represents management's best estimate of probable losses inherent in the portfolio, as well as probable losses related to large individually evaluated impaired loans and TDRs. See "Significant Accounting Policies and Significant Estimates" and Note 1 to the Consolidated Financial Statements below. Attribution of the allowance is made for analytical purposes only, and the entire allowance is available to absorb probable credit losses inherent in the overall portfolio.

Allowance for Loan Losses (continued)
The following table details information on Citi's allowance for loan losses, loans and coverage ratios as of December 31, 2012 and 2011:

December 31, 2012
In billions of dollars Allowance for loan losses Loans, net of unearned income Allowance as a percentage of loans (1)
North America cards (2) $ 7.3 $ 112.0   6.5 %
North America mortgages (3) 8.6 125.4 6.9
North America other 1.5 22.1 6.8
International cards 2.9 40.7 7.0
International other (4) 2.4 108.5 2.2
Total Consumer $ 22.7 $ 408.7 5.6 %
Total Corporate 2.8 246.8 1.1
Total Citigroup $ 25.5 $ 655.5 3.9 %
December 31, 2011
In billions of dollars Allowance for loan losses Loans, net of unearned income Allowance as a percentage of loans (1)
North America cards (2) $ 10.1 $ 118.7 8.5 %
North America mortgages 10.0 138.9 7.3
North America other 1.6 23.5 6.8
International cards 2.8 40.1 7.0
International other (4) 2.7 102.5 2.6
Total Consumer $ 27.2 $ 423.7 6.5 %
Total Corporate 2.9 223.5 1.3
Total Citigroup $ 30.1 $ 647.2 4.7 %

(1)      Allowance as a percentage of loans excludes loans that are carried at fair value.
(2) Includes both Citi-branded cards and Citi retail services. The $7.3 billion of loan loss reserves for North America cards as of December 31, 2012 represented approximately 18 months of coincident net credit loss coverage.
(3) Of the $8.6 billion, approximately $8.4 billion was allocated to North America mortgages in Citi Holdings. Excluding the $40 million benefit related to finalizing the impact of the OCC guidance in the fourth quarter of 2012, the $8.6 billion of loans loss reserves for North America mortgages as of December 31, 2012 represented approximately 33 months of coincident net credit loss coverage.
(4) Includes mortgages and other retail loans.

77



Non-Accrual Loans and Assets and Renegotiated Loans
The following pages include information on Citi's "Non-Accrual Loans and Assets" and "Renegotiated Loans." There is a certain amount of overlap among these categories. The following general summary provides a basic description of each category:

Non-Accrual Loans and Assets:

Corporate and Consumer (commercial market) non-accrual status is based on the determination that payment of interest or principal is doubtful. Consumer non-accrual status is based on aging, i.e., the borrower has fallen behind in payments. As a result of OCC guidance received in the third quarter of 2012, mortgage loans discharged through Chapter 7 bankruptcy are classified as non-accrual. This guidance added approximately $1.5 billion of Consumer loans to non-accrual status at September 30, 2012, of which approximately $1.3 billion was current. See also Note 1 to the Consolidated Financial Statements. North America Citi-branded cards and Citi retail services are not included as, under industry standards, credit card loans accrue interest until such loans are charged off, which typically occurs at 180 days contractual delinquency.

Renegotiated Loans:

Both Corporate and Consumer loans whose terms have been modified in a troubled debt restructuring (TDR). Includes both accrual and non-accrual TDRs.

Non-Accrual Loans and Assets
The table below summarizes Citigroup's non-accrual loans as of the periods indicated. As summarized above, non-accrual loans are loans in which the borrower has fallen behind in interest payments or, for Corporate and Consumer (commercial market) loans, where Citi has determined that the payment of interest or principal is doubtful and therefore considered impaired. In situations where Citi reasonably expects that only a portion of the principal owed will ultimately be collected, all payments received are reflected as a reduction of principal and not as interest income.
Corporate and Consumer (commercial market) non-accrual loans may still be current on interest payments but are considered non-accrual as Citi has determined that the future payment of interest and/or principal is doubtful.


78



Non-Accrual Loans

In millions of dollars 2012 2011 2010 2009 2008
Citicorp $ 4,096 $ 4,018 $ 4,909 $ 5,353 $ 3,282
Citi Holdings 7,433 7,050 14,498 26,387 19,015
Total non-accrual loans (NAL) $ 11,529 $ 11,068 $ 19,407 $ 31,740 $ 22,297
Corporate non-accrual loans (1)
North America $ 735 $ 1,246 $ 2,112 $ 5,621 $ 2,660
EMEA 1,131 1,293 5,337 6,308 6,330
Latin America 128 362 701 569 229
Asia 339 335 470 981 513
Total Corporate non-accrual loans $ 2,333 $ 3,236 $ 8,620 $ 13,479 $ 9,732
       Citicorp $ 1,909 $ 2,217 $ 3,091 $ 3,238 $ 1,453
       Citi Holdings 424 1,019 5,529 10,241 8,279
Total Corporate non-accrual loans $ 2,333 $ 3,236 $ 8,620 $ 13,479 $ 9,732
Consumer non-accrual loans (1)
North America (2)(3) $ 7,148 $ 5,888 $ 8,540 $ 15,111 $ 9,617
EMEA 380 387 652 1,159 948
Latin America 1,285 1,107 1,019 1,340 1,290
Asia 383 450 576 651 710
Total Consumer non-accrual loans (2) $ 9,196 $ 7,832 $ 10,787 $ 18,261 $ 12,565
       Citicorp $ 2,187 $ 1,801 $ 1,818 $ 2,115 $ 1,829
       Citi Holdings (2) 7,009 6,031 8,969 16,146 10,736
Total Consumer non-accrual loans (2) $ 9,196 $ 7,832 $ 10,787 $ 18,261 $ 12,565

(1)      Excludes purchased distressed loans, as they are generally accreting interest. The carrying value of these loans was $538 million at December 31, 2012, $511 million at December 31, 2011, $469 million at December 31, 2010, $920 million at December 31, 2009, and $1.510 billion at December 31, 2008.
(2) During 2012, there was an increase in Consumer non-accrual loans in North America of approximately $1.5 billion as a result of OCC guidance issued in the third quarter of 2012 regarding mortgage loans where the borrower has gone through Chapter 7 bankruptcy. Of the $1.5 billion in non-accrual loans, $1.3 billion were current. Additionally, during 2012, there was an increase in non-accrual Consumer loans in North America during the first quarter of 2012 which was attributable to a $0.8 billion reclassification from accrual to non-accrual status of home equity loans where the related residential first mortgage was 90 days or more past due. The vast majority of these loans were current at the time of reclassification. The reclassification reflected regulatory guidance issued on January 31, 2012. The reclassification had no impact on Citi's delinquency statistics or its loan loss reserves.

79



Non-Accrual Loans and Assets (continued)
The table below summarizes Citigroup's other real estate owned (OREO) assets as of the periods indicated. This represents the carrying value of all real estate property acquired by foreclosure or other legal proceedings when Citi has taken possession of the collateral.

In millions of dollars 2012 2011 2010 2009 2008
OREO
Citicorp $ 47 $ 71 $ 826 $ 874 $ 371
Citi Holdings 391 480 863 615 1,022
Corporate/Other 2 15 14 11 40
Total OREO $ 440 $ 566 $ 1,703 $ 1,500 $ 1,433
North America $ 299 $ 441 $ 1,440 $ 1,294 $ 1,349
EMEA 99 73 161 121 66
Latin America 40 51 47 45 16
Asia 2 1 55 40 2
Total OREO $ 440 $ 566 $ 1,703 $ 1,500 $ 1,433
Other repossessed assets $ 1 $ 1 $ 28 $ 73 $ 78
Non-accrual assets-Total Citigroup 2012 2011 2010 2009 2008
Corporate non-accrual loans $ 2,333 $ 3,236 $ 8,620 $ 13,479 $ 9,732
Consumer non-accrual loans (1) 9,196 7,832 10,787 18,261 12,565
       Non-accrual loans (NAL) $ 11,529 $ 11,068 $ 19,407 $ 31,740 $ 22,297
OREO 440 566 1,703 1,500 1,433
Other repossessed assets 1 1 28 73 78
       Non-accrual assets (NAA) $ 11,970 $ 11,635 $ 21,138 $ 33,313 $ 23,808
NAL as a percentage of total loans 1.76 % 1.71 % 2.99 % 5.37 % 3.21 %
NAA as a percentage of total assets 0.64 0.62 1.10 1.79 1.23
Allowance for loan losses as a percentage of NAL (2) 221 272 209 114 133
Non-accrual assets-Total Citicorp 2012 2011 2010 2009 2008
Non-accrual loans (NAL) $ 4,096 $ 4,018 $ 4,909 $ 5,353 $ 3,282
OREO 47 71 826 874 371
Other repossessed assets N/A N/A N/A N/A N/A
       Non-accrual assets (NAA) $ 4,143 $ 4,089 $ 5,735 $ 6,227 $ 3,653
NAA as a percentage of total assets 0.24 % 0.25 % 0.43 % 0.53 % 0.34 %
Allowance for loan losses as a percentage of NAL (2) 357 416 456 232 250
Non-accrual assets-Total Citi Holdings
Non-accrual loans (NAL) (1) $ 7,433 $ 7,050 $ 14,498 $ 26,387 $ 19,015
OREO 391 480 863 615 1,022
Other repossessed assets N/A N/A N/A N/A N/A
       Non-accrual assets (NAA) $ 7,824 $ 7,530 $ 15,361 $ 27,002 $ 20,037
NAA as a percentage of total assets 5.02 % 3.35 % 4.91 % 5.90 % 3.08 %
Allowance for loan losses as a percentage of NAL (2) 146 190 126 90 113

(1)      During 2012, there was an increase in Consumer non-accrual loans in North America of approximately $1.5 billion as a result OCC guidance regarding mortgage loans where the borrower has gone through Chapter 7 bankruptcy. Additionally, during 2012, there was an increase in non-accrual Consumer loans in North America of $0.8 billion related to a reclassification from accrual to non-accrual status of home equity loans where the related residential first mortgage was 90 days or more past due. For additional information on each of these items, see footnote 2 to the "Non-Accrual Loans" table above.
(2) The allowance for loan losses includes the allowance for Citi's credit card portfolios and purchased distressed loans, while the non-accrual loans exclude credit card balances (with the exception of certain international portfolios) and purchased distressed loans as these continue to accrue interest until charge-off.
N/A

Not available at the Citicorp or Citi Holdings level.


80



Renegotiated Loans
The following table presents Citi's loans modified in TDRs.

Dec. 31, Dec. 31,
In millions of dollars 2012 2011
Corporate renegotiated loans (1)
In U.S. offices
       Commercial and industrial (2)  $ 180 $ 206
       Mortgage and real estate (3) 72 241
       Loans to financial institutions 17 85
       Other 447 546
$ 716 $ 1,078
In offices outside the U.S.
       Commercial and industrial (2) $ 95 $ 223
       Mortgage and real estate (3) 59 17
       Loans to financial institutions - 12
       Other 3 6
$ 157 $ 258
Total Corporate renegotiated loans $ 873 $ 1,336
Consumer renegotiated loans (4)(5)(6)(7)
In U.S. offices
       Mortgage and real estate (8) $ 22,903 $ 21,429
       Cards 3,718 5,766
       Installment and other 1,088 1,357
$ 27,709 $ 28,552
In offices outside the U.S.
       Mortgage and real estate $ 932 $ 936
       Cards 866 929
       Installment and other 904 1,342
$ 2,702 $ 3,207
Total Consumer renegotiated loans $ 30,411 $ 31,759

(1) Includes $267 million and $455 million of non-accrual loans included in the non-accrual assets table above at December 31, 2012 and December 31, 2011, respectively. The remaining loans are accruing interest.
(2) In addition to modifications reflected as TDRs at December 31, 2012, Citi also modified $1 million and $293 million of commercial loans risk rated "Substandard Non-Performing" or worse (asset category defined by banking regulators) in U.S. offices and offices outside the U.S., respectively. These modifications were not considered TDRs because the modifications did not involve a concession (a required element of a TDR for accounting purposes).
(3) In addition to modifications reflected as TDRs at December 31, 2012, Citi also modified $7 million of commercial real estate loans risk rated "Substandard Non-Performing" or worse (asset category defined by banking regulators) in U.S. offices. These modifications were not considered TDRs because the modifications did not involve a concession (a required element of a TDR for accounting purposes).
(4) Includes $4,198 million and $2,269 million of non-accrual loans included in the non-accrual assets table above at December 31, 2012 and December 31, 2011, respectively. The remaining loans are accruing interest.
(5) Includes $38 million and $19 million of commercial real estate loans at December 31, 2012 and December 31, 2011, respectively.
(6) Includes $261 million and $257 million of commercial loans at December 31, 2012 and December 31, 2011, respectively.
(7) Smaller-balance homogeneous loans were derived from Citi's risk management systems.
(8) Includes an increase of $1,714 million of TDRs in the third quarter of 2012 as a result of OCC guidance regarding mortgage loans where the borrower has gone through Chapter 7 bankruptcy. See footnote 2 to the "Non-Accrual Loans" table above.

In certain circumstances, Citigroup modifies certain of its Corporate loans involving a non-troubled borrower. These modifications are subject to Citi's normal underwriting standards for new loans and are made in the normal course of business to match customers' needs with available Citi products or programs (these modifications are not included in the table above). In other cases, loan modifications involve a troubled borrower to whom Citi may grant a concession (modification). Modifications involving troubled borrowers may include extension of maturity date, reduction in the stated interest rate, rescheduling of future cash flows, principal reductions or reduction or waiver of accrued interest or fees. See Note 16 to the Consolidated Financial Statements for a discussion of such modifications.

Forgone Interest Revenue on Loans (1)

In non-
In U.S. U.S. 2012
In millions of dollars offices offices total
Interest revenue that would have been accrued
       at original contractual rates (2) $ 3,123 $ 965 $ 4,088
Amount recognized as interest revenue (2) 1,412 388 1,800
Forgone interest revenue $ 1,711 $ 577 $ 2,288

(1) Relates to Corporate non-accruals, renegotiated loans and Consumer loans on which accrual of interest has been suspended.
(2) Interest revenue in offices outside the U.S. may reflect prevailing local interest rates, including the effects of inflation and monetary correction in certain countries.

81


Loan Maturities and Fixed/Variable Pricing Corporate Loans

Due Over 1 year
within but within Over 5
In millions of dollars at year end 2012 1 year 5 years years Total
Corporate loan portfolio
       maturities
In U.S. offices
Commercial and
industrial loans $ 12,181 $ 9,684 $ 5,120 $ 26,985
Financial institutions 8,197 6,517 3,445 18,159
Mortgage and real estate 11,152 8,866 4,687 24,705
Lease financing 637 506 267 1,410
Installment, revolving
credit, other 14,647 11,644 6,155 32,446
In offices outside the U.S. 97,709 33,686 12,490 143,885
Total corporate loans $ 144,523 $ 70,903 $ 32,164 $ 247,590
Fixed/variable pricing of
       corporate loans with
       maturities due after one
       year (1)
Loans at fixed interest rates $ 9,255 $ 8,483
Loans at floating or adjustable
interest rates 61,648 23,681
Total $ 70,903 $ 32,164

(1) Based on contractual terms. Repricing characteristics may effectively be modified from time to time using derivative contracts. See Note 23 to the Consolidated Financial Statements.

U.S. Consumer Mortgages and Real Estate Loans

Greater
Due than 1 year Greater
within but within than 5
In millions of dollars at year end 2012 1 year 5 years years Total
U.S. Consumer mortgage
       loan portfolio
First mortgages $ 121 $ 1,352 $ 88,448 $ 89,921
Second mortgages 1,384 18,102 16,539 36,025
Total $ 1,505 $ 19,454 $ 104,987 $ 125,946
Fixed/variable pricing of
       U.S. Consumer
       mortgage loans with
       maturities due after one year
Loans at fixed interest rates $ 1,048 $ 76,410
Loans at floating or adjustable
interest rates 18,406 28,577
Total $ 19,454 $ 104,987


82


North America Consumer Mortgage Lending

Overview
Citi's North America Consumer mortgage portfolio consists of both residential first mortgages and home equity loans. As of December 31, 2012, Citi's North America Consumer residential first mortgage portfolio totaled $88.2 billion, while the home equity loan portfolio was $37.2 billion. This compared to $95.4 billion and $43.5 billion of residential first mortgages and home equity loans as of December 31, 2011, respectively. Of the first mortgages at December 31, 2012, $57.7 billion is recorded in LCL within Citi Holdings, with the remaining $30.5 billion recorded in Citicorp. With respect to the home equity loan portfolio, $34.1 billion is recorded in LCL , and $3.1 billion is in Citicorp.
Citi's residential first mortgage portfolio included $8.5 billion of loans with FHA insurance or VA guarantees as of December 31, 2012, compared to $9.2 billion as of December 31, 2011. This portfolio consists of loans to low-to-moderate-income borrowers with lower FICO (Fair Isaac Corporation) scores and therefore generally has higher loan-to-value ratios (LTVs). Credit losses on FHA loans are borne by the sponsoring governmental agency, provided that the insurance terms have not been rescinded as a result of an origination defect. With respect to VA loans, the VA establishes a loan-level loss cap, beyond which Citi is liable for loss. While FHA and VA loans have high delinquency rates, given the insurance and guarantees, respectively, Citi has experienced negligible credit losses on these loans.
In addition, as of December 31, 2012, Citi's residential first mortgage portfolio included $1.5 billion of loans with LTVs above 80%, compared to $1.6 billion as of December 31, 2011, most of which are insured through mortgage insurance companies. As of December 31, 2012, the residential first mortgage portfolio also had $1.0 billion of loans subject to long-term standby commitments (LTSC) with U.S. government-sponsored entities (GSEs), compared to $1.2 billion as of December 31, 2011, for which Citi has limited exposure to credit losses. Citi's home equity loan portfolio also included $0.4 billion of loans subject to LTSCs with GSEs (flat to December 31, 2011) for which Citi also has limited exposure to credit losses. These guarantees and commitments may be rescinded in the event of loan origination defects.

Citi's allowance for loan loss calculations takes into consideration the impact of these guarantees and commitments.
Citi does not offer option-adjustable rate mortgages/negative amortizing mortgage products to its customers. As a result, option-adjustable rate mortgages/negative amortizing mortgages represent an insignificant portion of total balances, since they were acquired only incidentally as part of prior portfolio and business purchases.
As of December 31, 2012, Citi's North America residential first mortgage portfolio contained approximately $7.7 billion of adjustable rate mortgages that are currently required to make a payment only of accrued interest for the payment period, or an interest-only payment, compared to $8.6 billion at September 30, 2012 and $11.9 billion at December 31, 2011. The decline quarter over quarter resulted from conversions to amortizing loans of $471 million and repayments of $296 million, with the remainder primarily due to foreclosures and related activities and, to a lesser extent, asset sales. The decline year over year resulted from conversions to amortizing loans of $2.3 billion and repayments of $1.5 billion, with the remainder primarily due to foreclosures and related activities and, to a lesser extent, asset sales. Borrowers who are currently required to make an interest-only payment cannot select a lower payment that would negatively amortize the loan. Residential first mortgages with this payment feature are primarily to high-credit-quality borrowers who have on average significantly higher origination and refreshed FICO scores than other loans in the residential first mortgage portfolio, and have exhibited significantly lower 30+ delinquency rates as compared with residential first mortgages without this payment feature. As such, Citi does not believe the residential mortgage loans with this payment feature represent substantially higher risk in the portfolio.

North America Consumer Mortgage Quarterly Credit Trends-Delinquencies and Net Credit Losses-Residential First Mortgages
The following charts detail the quarterly trends in delinquencies and net credit losses for Citigroup's residential first mortgage portfolio in North America . Approximately 65% of Citi's residential first mortgage exposure arises from its portfolio within Citi Holdings- LCL .


83


North America Residential First Mortgages-Citigroup
In billions of dollars

EOP Loans: 4Q11-$95.4    3Q12-$89.7    4Q12-$88.2

North America Residential First Mortgages-Citi Holdings
In billions of dollars


EOP Loans: 4Q11-$67.5    3Q12-$59.9    4Q12-$57.7

(1) The first quarter of 2012 included approximately $315 million of incremental charge-offs related to previously deferred principal balances on modified loans related to anticipated forgiveness of principal in connection with the national mortgage settlement. Excluding the impact of these charge-offs, net credit losses would have been $0.45 billion and $0.43 billion for the Citigroup and Citi Holdings portfolios, respectively.
(2) The second quarter, third quarter and fourth quarter of 2012 include $43 million, $41 million and $62 million, respectively, of charge-offs related to Citi's fulfillment of its obligations under the national mortgage settlement. Citi expects net credit losses in Citi Holdings to continue to be impacted by its fulfillment of the terms of the national mortgage settlement through the second quarter of 2013. See also "National Mortgage Settlement" below.
(3) The third quarter of 2012 included approximately $181 million of charge-offs related to OCC guidance with respect to the treatment of mortgage loans where the borrower has gone through Chapter 7 bankruptcy. The fourth quarter of 2012 includes an approximately $10 million benefit to charge-offs related to finalizing the impact of the OCC guidance. Excluding these impacts, net credit losses would have been $0.47 billion in 3Q'12 and $0.39 billion in 4Q'12 for the Citigroup portfolio, and $0.44 billion in 3Q'12 and $0.38 billion in 4Q'12 for the Citi Holdings portfolio.

84


North America Residential First Mortgage Delinquencies-Citi Holdings
In billions of dollars


Note: For each of the tables above, past due exclude (i) U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the potential loss predominantly resides with the U.S. agencies, and (ii) loans recorded at fair value. Totals may not sum due to rounding.

Management actions, primarily asset sales and to a lesser extent modification programs, continued to be the primary drivers of the overall improved asset performance within Citi's residential first mortgage portfolio in Citi Holdings during the periods presented above (excluding the impacts to net credit losses described in the notes to the tables above). 
Citi sold approximately $2.1 billion of delinquent residential first mortgages during 2012, including $0.6 billion during the fourth quarter of 2012. Since the beginning of 2010, Citi has sold approximately $9.6 billion of delinquent residential mortgages. 
In addition, Citi modified approximately $0.9 billion and $0.3 billion of residential first mortgage loans during 2012 and in the fourth quarter of 2012, respectively, including loan modifications pursuant to the national mortgage settlement. (For additional information on Citi's residential first mortgage loan modifications, see Note 16 to the Consolidated Financial Statements.) Loan modifications under the national mortgage settlement have improved Citi's 30+ days past due delinquencies by approximately

$249 million as of the end of 2012. While re-defaults of previously modified mortgages under the HAMP and Citi Supplemental Modification (CSM) programs continued to track favorably versus expectations as of December 31, 2012, Citi's residential first mortgage portfolio continued to show some signs of the impact of re-defaults of previously modified mortgages. 
Citi believes that its ability to offset increasing delinquencies or net credit losses in its residential first mortgage portfolio, due to any deterioration of the underlying credit performance of these loans, re-defaults, the lengthening of the foreclosure process (see "Foreclosures" below) or otherwise, pursuant to asset sales or modifications could be limited going forward as a result of the lower remaining inventory of loans to sell or modify or due to lack of market demand for asset sales. Citi has taken these trends and uncertainties, including the potential for re-defaults, into consideration in determining its loan loss reserves. See " North America Consumer Mortgages-Loan Loss Reserve Coverage" below.


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North America Residential First Mortgages-State Delinquency Trends
The following tables set forth, for total Citigroup, the six states and/or regions with the highest concentration of Citi's residential first mortgages as of December 31, 2012 and December 31, 2011.

In billions of dollars December 31, 2012 December 31, 2011
% %
ENR 90+DPD LTV > Refreshed ENR 90+DPD LTV > Refreshed
State (1) ENR (2) Distribution % 100% FICO ENR (2) Distribution % 100% FICO
CA $ 21.1 28 % 2.1 % 23 % 730 $ 22.6 28 % 2.7 % 38 % 727
NY/NJ/CT 11.8 16 4.0 8 723 11.2 14 4.9 10 712
IN/OH/MI 4.0 5 5.5 31 655 4.6 6 6.3 44 650
FL 3.8 5 8.1 43 676 4.3 5 10.2 57 668
IL 3.1 4 5.8 34 694 3.5 4 7.2 45 686
AZ/NV 1.9 3 4.8 50 702 2.3 3 5.7 73 698
Other 29.7 39 5.4 15 667 33.2 41 5.8 21 663
Total $ 75.4 100 % 4.4 % 20 % 692 $ 81.7 100 % 5.1 % 30 % 689

Note: Totals may not sum due to rounding.
(1) Certain of the states are included as part of a region based on Citi's view of similar home prices (HPI) within the region.
(2) Ending net receivables. Excludes loans in Canada and Puerto Rico, loans guaranteed by U.S. government agencies, loans recorded at fair value and loans subject to LTSCs. Excludes balances for which FICO or LTV data are unavailable.

As evidenced by the table above, Citi's residential first mortgages portfolio is primarily concentrated in California and the New York/New Jersey/Connecticut region (with New York as the largest of the three states). The improvement in refreshed LTV percentages at December 31, 2012 was primarily the result of improvements in HPI across substantially all metropolitan statistical areas, thereby increasing values used in the determination of LTV. Additionally, asset sales of higher LTV loans during 2012 further reduced the amount of loans with greater than 100% LTV. To a lesser extent, modification programs involving principal forgiveness further reduced the loans in this category during the year. With the continued lengthening of the foreclosure process (see discussion under "Foreclosures" below) in all of these states and regions during 2012, Citi expects it could experience less improvement in the 90+ days past due delinquency rate in certain of these states and/or regions in the future.

Foreclosures
The substantial majority of Citi's foreclosure inventory consists of residential first mortgages. As of December 31, 2012, approximately 2.0% of Citi's residential first mortgage portfolio was in Citi's foreclosure inventory (based on the dollar amount of loans in foreclosure inventory as of such date, excluding loans that are guaranteed by U.S. government agencies and loans subject to LTSCs), compared to 2.1% as of September 30, 2012 and 2.4% as of December 31, 2011.

The decline in Citi's foreclosure inventory year-over-year and quarter-over-quarter was due to fewer loans moving into the foreclosure inventory. This was due to several factors, including delays associated with initiating foreclosures due to increased state requirements for foreclosure filings (e.g., extensive documentation, processing and filing requirements as well as additional abilities for states to place holds on foreclosures), Citi's continued asset sales of delinquent first mortgages and Citi's continued efforts to work with borrowers pursuant to its loan modification programs, including under the national mortgage settlement. 
The foreclosure process remains stagnant across most states, driven primarily by the additional state requirements necessary to complete foreclosures referenced above as well as the continued lengthening of the foreclosure process. Citi continues to experience average timeframes to foreclosure that are two to three times longer than historical norms, although some improvement occurred in average timeframes in certain non-judicial states (see below) in the fourth quarter of 2012. Extended foreclosure timelines and the low number of loans moving into the foreclosure inventory resulted in Citi's aged foreclosure inventory (active foreclosures in process for two years or more) increasing to approximately 29% of Citi's total foreclosure inventory as of December 31, 2012 (compared to 20% at September 30, 2012 and 10% at December 31, 2011). Extended foreclosure timelines continue to be more pronounced in the judicial states (i.e., states that require foreclosures to be processed via court approval), where Citi has a higher concentration of residential first mortgages in foreclosure (see " North America Residential First Mortgages-State Delinquency Trends" above).


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Moreover, Citi's servicing agreements associated with its sales of mortgage loans to the GSEs generally provide the GSEs with a high level of servicing oversight, including, among other things, timelines in which foreclosures or modification activities are to be completed. The agreements allow for the GSEs to take action against a servicer for violation of the timelines, which includes imposing compensatory fees. While the GSEs have not historically exercised their rights to impose compensatory fees, they have begun to do so on a regular basis. To date, the imposition of compensatory fees, as a result of the extended foreclosure timelines or otherwise, has not had a material impact on Citi.

North America Consumer Mortgage Quarterly Credit Trends-Delinquencies and Net Credit Losses-Home Equity Loans
Citi's home equity loan portfolio consists of both fixed-rate home equity loans and loans extended under home equity lines of credit. Fixed-rate home equity loans are fully amortizing. Home equity lines of credit allow for amounts to be drawn for a period of time with the payment of interest only and then, at the end of the draw period, the then-outstanding amount is converted to an amortizing loan (the interest-only payment feature during the revolving period is standard for this product across the industry). Prior to June 2010, Citi's originations of home equity lines of credit typically had a 10-year draw period. Beginning in June 2010, Citi's originations of home equity lines of credit typically have a five-year draw period as Citi changed these terms to mitigate risk. After conversion, the home equity loans typically have a 20-year amortization period.
As of December 31, 2012, Citi's home equity loan portfolio of $37.2 billion included approximately $22.0 billion of home equity lines of credit that are still within their revolving period and have not commenced amortization, or "reset." During the period 2009–2012, approximately only 3% of Citi's home equity loan portfolio commenced amortization; approximately 75% of Citi's home equity loans extended under lines of credit as of December 31, 2012 will contractually begin to amortize during the period 2015–2017. Based on this limited sample of home equity loans that has begun amortization, Citi has experienced marginally higher delinquency rates in its amortizing

home equity loan portfolio as compared to its non-amortizing loan portfolio. However, these resets have occurred during a period of declining interest rates, which Citi believes has likely reduced the overall "payment shock" to the borrower. Citi will continue to monitor this reset risk closely, particularly as it approaches 2015, and Citi will continue to consider the impact in determining its allowance for loan loss reserves accordingly. In addition, management is reviewing additional actions to offset potential reset risk, such as extending offers to non-amortizing home equity loan borrowers to convert the non-amortizing home equity loan to a fixed-rate loan. 
As of December 31, 2012, the percentage of U.S. home equity loans in a junior lien position where Citi also owned or serviced the first lien was approximately 30%. However, for all home equity loans (regardless of whether Citi owns or services the first lien), Citi manages its home equity loan account strategy through obtaining and reviewing refreshed credit bureau scores (which reflect the borrower's performance on all of its debts, including a first lien, if any), refreshed LTV ratios and other borrower credit-related information. Historically, the default and delinquency statistics for junior liens where Citi also owns or services the first lien have been better than for those where Citi does not own or service the first lien. Citi believes this is generally attributable to origination channels and better credit characteristics of the portfolio, including FICO and LTV, for those junior liens where Citi also owns or services the first lien.


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The following charts detail the quarterly trends in delinquencies and net credit losses for Citi's home equity loan portfolio in North America . The vast majority of Citi's home equity loan exposure arises from its portfolio within Citi Holdings- LCL .

North America Home Equity Loans-Citigroup
In billions of dollars


EOP Loans: 4Q11-$43.5    3Q12-$38.6    4Q12-$37.2

North America Home Equity Loans-Citi Holdings
In billions of dollars


EOP Loans: 4Q11-$40.0    3Q12-$35.4    4Q12-$34.1

S&P/Case Shiller Home Price Index (3)
(3.8)% (4.9)% (5.4)% (3.5)% (3.7)% (1.3)% 1.6% 3.6% n/a

(1) The first quarter of 2012 included approximately $55 million of charge-offs related to previously deferred principal balances on modified loans related to anticipated forgiveness of principal in connection with the national mortgage settlement. Excluding the impact of these charge-offs, net credit losses would have been $0.51 billion and $0.50 billion for the Citigroup and Citi Holdings portfolios, respectively.
(2) The third quarter of 2012 included approximately $454 million of charge-offs related to OCC guidance with respect to the treatment of mortgage loans where the borrower has gone through Chapter 7 bankruptcy. The fourth quarter of 2012 includes an approximately $30 million benefit to charge-offs related to finalizing the impact of the OCC guidance. Excluding these impacts, net credit losses would have been $0.43 billion in 3Q'12 and $0.39 billion in 4Q'12 for the Citigroup portfolio, and $0.41 billion in 3Q'12 and $0.38 billion in 4Q'12 for the Citi Holdings portfolio.
(3) Year-over-year change in the S&P/Case-Shiller U.S. National Home Price Index.

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North America Home Equity Loan Delinquencies-Citi Holdings
In billions of dollars


Note: For each of the tables above, days past due exclude (i) U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies, because the potential loss predominantly resides with the U.S. agencies, and (ii) loans recorded at fair value. Totals may not sum due to rounding.

As evidenced by the tables above, home equity loan delinquencies improved during 2012, although the rate of improvement has slowed. Given the lack of a market in which to sell delinquent home equity loans, as well as the relatively smaller number of home equity loan modifications and modification programs (see Note 16 to the Consolidated Financial Statements), Citi's ability to offset increased delinquencies and net credit losses in its home equity loan portfolio in Citi Holdings, whether pursuant

to deterioration of the underlying credit performance of these loans or otherwise, is more limited as compared to residential first mortgages as discussed above. Accordingly, Citi could begin to experience increased delinquencies and thus increased net credit losses in this portfolio going forward. Citi has taken these trends and uncertainties into consideration in determining its loan loss reserves. See " North America Consumer Mortgages-Loan Loss Reserve Coverage" below.


North America Home Equity Loans-State Delinquency Trends
The following tables set forth, for total Citigroup, the six states and/or regions with the highest concentration of Citi's home equity loans as of December 31, 2012 and December 31, 2011.

In billions of dollars December 31, 2012 December 31, 2011
% %
ENR 90+DPD CLTV > Refreshed ENR 90+DPD CLTV > Refreshed
State (1) ENR (2) Distribution % 100% (3) FICO ENR (2) Distribution % 100% (3) FICO
CA $ 9.7 28 % 2.0 % 40 % 723 $ 11.2 27 % 2.3 % 50 % 721
NY/NJ/CT 8.2 23 2.3 20 715 9.2 22 2.1 19 715
FL 2.4 7 3.4 58 698 2.8 7 3.3 69 698
IL 1.4 4 2.1 55 708 1.6 4 2.3 62 705
IN/OH/MI 1.2 3 2.2 55 679 1.5 4 2.6 66 678
AZ/NV 0.8 2 3.1 70 709 1.0 3 4.1 83 706
Other 11.5 33 2.2 37 695 13.7 33 2.3 46 695
Total $ 35.2 100 % 2.3 % 37 % 704 $ 41.0 100 % 2.4 % 45 % 707

Note: Totals may not sum due to rounding.
(1) Certain of the states are included as part of a region based on Citi's view of similar home prices (HPI) within the region.
(2) Ending net receivables. Excludes loans in Canada and Puerto Rico and loans subject to LTSCs. Excludes balances for which FICO or LTV data are unavailable.
(3) Represents combined loan-to-value (CLTV) for both residential first mortgages and home equity loans.

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Similar to residential first mortgages discussed above, the general improvement in refreshed CLTV percentages at December 31, 2012 was primarily the result of improvements in HPI across substantially all metropolitan statistical areas, thereby increasing values used in the determination of CLTV. For the reasons described under " North America Consumer Mortgage Quarterly Credit Trends-Delinquencies and Net Credit Losses-Home Equity Loans" above, Citi has experienced, and could continue to experience, increased delinquencies and thus increased net credit losses in certain of these states and/or regions going forward.

National Mortgage Settlement
Under the national mortgage settlement, entered into by Citi and other financial institutions in February 2012, Citi is required to provide (i) customer relief in the form of loan modifications for delinquent borrowers, including principal reductions, and other loss mitigation activities to be completed over three years, with a required settlement value of $1.4 billion; and (ii) refinancing concessions to enable current borrowers whose properties are worth less than the balance of their loans to reduce their interest rates, also to be completed over three years, with a required settlement value of $378 million. Citi commenced loan modifications under the settlement, including principal reductions, in March 2012 and commenced the refinancing process in June 2012. 
If Citi does not provide the required amount of financial relief in the form of loan modifications and other loss mitigation activities for delinquent borrowers or refinancing concessions under the national mortgage settlement, Citi will be required to make cash payments. Citi is required to complete 75% of its required relief by March 1, 2014. Failure to meet 100% of the commitment by March 1, 2015 will result in Citi paying an amount equal to 125% of the shortfall. Failure to meet the two-year commitment noted above and then failure to meet the three-year commitment will result in an amount equal to 140% of the three-year shortfall. Citi continues to believe that its obligations will be fully met in the form of financial relief to homeowners; no cash payments are currently expected.

Loan Modifications/Loss Mitigation for Delinquent Borrowers
All of the loan modifications for delinquent borrowers receiving relief toward the $1.4 billion in settlement value are either currently accounted for as TDRs or will become TDRs at the time of modification. The loan modifications have been, and will continue to be, primarily performed under the HAMP and Citi's CSM loan modification programs (see Note 16 to the Consolidated Financial Statements). The loss mitigation activities include short sales for residential first mortgages and home equity loans, extinguishments and other loss mitigation activities. Based on the nature of the loss mitigation activities (e.g., short sales and extinguishments), these activities have not impacted, nor are they expected to have an incremental impact on, Citi's TDRs.

Through December 31, 2012, Citi has assisted approximately 34,000 customers under the loan-modification and other loss-mitigation activities provisions of the national mortgage settlement, resulting in an aggregate principal reduction of approximately $2.4 billion that is potentially eligible for inclusion in the settlement value. Net credit losses of approximately $500 million have been incurred to date relating to the loan modifications under the national mortgage settlement, all of which were offset by loan loss reserve releases (including approximately $370 million of incremental charge-offs related to anticipated forgiveness of principal in connection with the national mortgage settlement in the first quarter). Citi currently anticipates an impact to net credit losses associated with the national mortgage settlement to continue into the first half of 2013. Citi continues to believe that its loan loss reserves as of December 31, 2012 are sufficient to cover the required customer relief to delinquent borrowers under the national mortgage settlement. 
Like other financial institutions party to the national mortgage settlement, Citi does not receive dollar-for-dollar settlement value for the relief it provides under the national mortgage settlement in all cases. As a result, Citi anticipates that the relief provided will be higher than the settlement value.

Refinancing Concessions for Current Borrowers
The refinancing concessions are to be offered to residential first mortgage borrowers whose properties are worth less than the value of their loans, who have been current in the prior 12 months, who have not had a modification, bankruptcy or foreclosure proceeding during the prior 24 months, and whose loans have a current interest rate greater than 5.25%. As of December 31, 2012, Citi has provided refinance concessions under the national mortgage settlement to approximately 13,000 customers holding loans with a total unpaid principal balance of $2.3 billion, thus reducing their interest rate to 5.25% for the remaining life of the loan.
Citi accounts for the refinancing concessions under the settlement based on whether the particular borrower is determined to be experiencing financial difficulty based on certain underwriting criteria. When a refinancing concession is granted to a borrower who is experiencing financial difficulty, the loan is accounted for as a TDR. Otherwise, the impact of the refinancing concessions is recognized over a period of years in the form of lower interest income. As of December 31, 2012, approximately 5,000 customers holding loans with a total unpaid principal balance of $741 million and who were provided refinance concessions have been accounted for as TDRs. These refinancing concessions have not had a material impact on the fair value of the modified mortgage loans.


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As noted above, if the modified loan under the refinancing is not accounted for as a TDR, the impact to Citi of the refinancing concession will be recognized over a period of years in the form of lower interest income. Citi estimates the forgone future interest income as a result of the refinance concessions under the national mortgage settlement was approximately $20 million during 2012, of which $13 million was recorded in the fourth quarter of 2012. Citi estimates the total amount of expected forgone future interest income could be approximately $50 million annually. However, this estimate could change based on the response rate of borrowers who qualify and the subsequent borrower payment behavior.

Independent Foreclosure Review Settlement
On January 7, 2013, Citi, along with other major mortgage servicers operating under consent orders dated April 13, 2011 with the Federal Reserve Board and the OCC, entered into a settlement agreement with those regulators to modify the requirements of the independent foreclosure review mandated by the consent orders. Under the settlement, Citi agreed to pay approximately $305 million into a qualified settlement fund and offer $487 million of mortgage assistance to borrowers in accordance with agreed criteria. Upon completion of Citi's payment and mortgage assistance obligations under the agreement, the Federal Reserve Board and the OCC have agreed to deem the requirements of the independent foreclosure review under the consent orders satisfied. As a result of the settlement, Citi recorded a $305 million charge in the fourth quarter of 2012. Citi believes that its loan loss reserves as of December 31, 2012 are sufficient to cover any mortgage assistance under the settlement and there will be no incremental financial impact.

Consumer Mortgage FICO and LTV
The following charts detail the quarterly trends of the unpaid principal balances for Citi's residential first mortgage and home equity loan portfolios by risk segment (FICO and LTV) and the 90+ day delinquency rates for those risk segments. For example, in the fourth quarter of 2012, residential first mortgages had $7.1 billion of balances with refreshed FICO < 660 and refreshed LTV > 100%. Approximately 17.5% of these loans in this segment were over 90+ days past due.

Residential First Mortgages
In billions of dollars


In millions of dollars 4Q11 1Q12 2Q12 3Q12 4Q12
Res Mortgage-90+ DPD $ % $ % $ % $ % $ %
FICO ≥ 660, LTV ≤ 100% 143 0.4% 128 0.3% 160 0.4% 158 0.4% 167 0.4%
FICO ≥ 660, LTV > 100% 157 1.2% 164 1.2% 185 1.6% 120 1.4% 113 1.4%
FICO < 660, LTV ≤ 100% 1,916 10.7% 1,759 10.4% 1,777 10.5% 1,892 10.6% 1,776 10.1%
FICO < 660, LTV > 100% 1,842 16.5% 1,943 17.2% 1,812 18.4% 1,420 18.3% 1,245 17.5%

Home Equity Loans
In billions of dollars


In millions of dollars 4Q11 1Q12 2Q12 3Q12 4Q12
Home Equity-90+ DPD $ % $ % $ % $ % $ %
FICO ≥ 660, CLTV ≤ 100% 18 0.1% 19 0.1% 23 0.1% 25 0.1% 26 0.1%
FICO ≥ 660, CLTV > 100% 20 0.2% 23 0.2% 25 0.2% 19 0.2% 21 0.2%
FICO < 660, CLTV ≤ 100% 381 7.6% 336 7.2% 352 7.6% 394 8.0% 395 8.2%
FICO < 660, CLTV > 100% 553 10.3% 504 9.3% 454 9.5% 385 9.9% 359 9.6%

Notes:
–  Data appearing in the tables above have been sourced from Citi's risk systems and, as such, may not reconcile with disclosures elsewhere generally due to differences in methodology or variations in the manner in which information is captured. Citi has noted such variations in instances where it believes they could be material to reconcile to the information presented elsewhere.
Tables exclude loans in Canada and Puerto Rico, loans guaranteed by U.S. government agencies (residential first mortgages table only), loans recorded at fair value (residential first mortgages table only) and loans subject to LTSCs.
Balances exclude deferred fees/costs.
Tables exclude balances for which FICO or LTV data is unavailable. For residential first mortgages, balances for which such data is unavailable include $0.4 billion in each of the periods presented. For home equity loans, balances for which such data is unavailable include $0.2 billion in each of the periods presented.

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Citi's residential first mortgages with an LTV above 100% has declined by 39% since year end 2011, and high LTV loans with FICO scores of less than 660 decreased by 37% to $7.1 billion. The residential first mortgage portfolio has migrated to a higher FICO and lower LTV distribution as a result of asset sales, home price appreciation and principal forgiveness. Loans 90+ days past due have declined by approximately 32%, or $0.6 billion, year-over-year to approximately $1.2 billion. The decline in 90+ days past due residential mortgages with refreshed FICO scores of less than 660 as well as higher LTVs primarily can be attributed to asset sales and modification programs, offset by the lengthening of the foreclosure process, as discussed in the sections above. Citi's home equity loans with a CLTV above 100% have declined by 28% since year end 2011, and high CLTV loans with FICO scores of less than 660 decreased by 31% to approximately $3.7 billion. The CLTV improvement was primarily the result of home price appreciation. 
Residential first mortgages historically have experienced higher delinquency rates, as compared to home equity loans, despite the fact that home equity loans are typically in junior lien positions and residential first mortgages are typically in a first lien position. Citi believes this difference is primarily because residential first mortgages are written down to collateral value less cost to sell at 180 days past due and remain in the delinquency population until full disposition through sale, repayment or foreclosure; however, home equity loans are generally fully charged off at 180 days past due and thus removed from the delinquency calculation. In addition, due to the longer timelines to foreclose on a residential first mortgage (see "Foreclosures" above), these loans tend to remain in the delinquency statistics for a longer period and, consequently, the 90 days or more delinquencies of these loans remain higher.

Mortgage Servicing Rights
To minimize credit and liquidity risk, Citi sells most of the conforming mortgage loans it originates but retains the servicing rights. These sale transactions create an intangible asset referred to as mortgage servicing rights (MSRs), which are recorded at fair value on Citi's Consolidated Balance Sheet. The fair value of MSRs is primarily affected by changes in prepayments of mortgages that result from shifts in mortgage interest rates. Specifically, the fair value of MSRs declines with increased prepayments, and declines in or continued low interest rates tend to lead to increased prepayments. In managing this risk, Citi economically hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase and sale commitments of mortgage-backed securities and purchased securities classified as trading account assets.

Citi's MSRs totaled $1.9 billion as of December 31, 2012, compared to $1.9 billion and $2.6 billion at September 30, 2012 and December 31, 2011, respectively. The decrease in the value of Citi's MSRs from year-end 2011 primarily reflected the impact from lower interest rates in addition to amortization as well as an increase in servicing costs related to the servicing of the loans remaining in Citi Holdings. As the mix of loans remaining in Citi Holdings has gradually shifted to more delinquent, non-performing loans, the cost for servicing those loans has increased. As of December 31, 2012, approximately $1.3 billion of MSRs were specific to Citicorp, with the remainder to Citi Holdings. 
For additional information on Citi's MSRs, see Note 22 to the Consolidated Financial Statements.

Citigroup Residential Mortgages-Representations and Warranties

Overview
In connection with Citi's sales of residential mortgage loans to the U.S. government-sponsored entities (GSEs) and, in most cases, other mortgage loan sales and private-label securitizations, Citi makes representations and warranties that the loans sold meet certain requirements. The specific representations and warranties made by Citi in any particular transaction depend on, among other things, the nature of the transaction and the requirements of the investor (e.g., whole loan sale to the GSEs versus loans sold through securitization transactions), as well as the credit quality of the loan (e.g., prime, Alt-A or subprime). 
These sales expose Citi to potential claims for breaches of its representations and warranties. In the event of a breach of its representations and warranties, Citi could be required either to repurchase the mortgage loans with the identified defects (generally at unpaid principal balance plus accrued interest) or to indemnify ("make whole") the investors for their losses on these loans. To the extent Citi made representation and warranties on loans it purchased from third-party sellers that remain financially viable, Citi may have the right to seek recovery of repurchase losses or make whole payments from the third party based on representations and warranties made by the third party to Citi (a "back-to-back" claim).


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Whole Loan Sales (principally reflected in Citi Holdings-Local Consumer Lending)
Citi is exposed to representation and warranty repurchase claims primarily as a result of its whole loan sales to the GSEs and, to a lesser extent, private investors through its Consumer business in CitiMortgage. When selling a loan to these investors, Citi makes various representations and warranties to, among other things, the following:

Citi's ownership of the loan;  the validity of the lien securing the loan;  the absence of delinquent taxes or liens against the property securing the loan;  the effectiveness of title insurance on the property securing the loan;  the process used in selecting the loans for inclusion in a transaction;  the loan's compliance with any applicable loan criteria established by the buyer; and  the loan's compliance with applicable local, state and federal laws.

To date, the majority of Citi's repurchases have been due to GSE repurchase claims and relates to loans originated from 2006 through 2008, which also represent the vintages with the highest loss severity. An insignificant percentage of repurchases and make-whole payments have been from vintages pre-2006 and post-2008. Citi attributes this to better credit performance of these vintages and to the enhanced underwriting standards implemented beginning in the second half of 2008. 
During the period 2006 through 2008, Citi sold a total of approximately $321 billion of whole loans, substantially all to the GSEs (this amount has not been adjusted for subsequent borrower repayments of principal, defaults or repurchase activity to date). The vast majority of these loans were either originated by Citi or purchased from third-party sellers that Citi believes would be unlikely to honor back-to-back claims because they are in bankruptcy, liquidation or financial distress and, thus, are no longer financially viable. As discussed below, however, Citi's repurchase reserve takes into account estimated reimbursements, if any, to be received from third-party sellers.

Private-Label Residential Mortgage Securitizations
Citi is also exposed to representation and warranty repurchase claims as a result of mortgage loans sold through private-label residential mortgage securitizations. These representations were generally made or assigned to the issuing trust and related to, among other things, the following:

the absence of fraud on the part of the borrower, the seller or any appraiser, broker or other party involved in the origination of the loan (sometimes wholly or partially limited to the knowledge of the representation provider); whether the property securing the loan was occupied by the borrower as his or her principal residence; the loan's compliance with applicable federal, state and local laws; whether the loan was originated in conformity with the originator's underwriting guidelines; and detailed data concerning the loans that were included on the mortgage loan schedule.

During the period 2005 through 2008, Citi sold loans into and sponsored private-label securitizations through both its Consumer business in CitiMortgage and its legacy S&B business. Citi sold approximately $91 billion of mortgage loans through private-label securitizations during this period.

CitiMortgage (principally reflected in Citi Holdings-Local Consumer Lending)
During the period 2005 through 2008, Citi sold approximately $24.6 billion of loans through private-label mortgage securitization trusts via its Consumer business in CitiMortgage. These $24.6 billion of securitization trusts were composed of approximately $15.4 billion in prime trusts and $9.2 billion in Alt-A trusts, each as classified at issuance. 
As of December 31, 2012, approximately $8.7 billion of the $24.6 billion remained outstanding as a result of repayments of approximately $14.6 billion and cumulative losses (incurred by the issuing trusts) of approximately $1.3 billion. The remaining outstanding amount is composed of approximately $4.4 billion in prime trusts and approximately $4.3 billion in Alt-A trusts, as classified at issuance. As of December 31, 2012, the remaining outstanding amount had a 90 days or more delinquency rate in the aggregate of approximately 15.5%. Similar to the whole loan sales discussed above, the vast majority of these loans either were originated by Citi or purchased from third-party sellers that Citi believes would be unlikely to honor back-to-back claims because they are no longer financially viable. Citi's repurchase reserve takes into account estimated reimbursements, if any, to be received from third-party sellers.


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Legacy S&B Securitizations (principally reflected in Citi Holdings-Special Asset Pool)
During the period 2005 through 2008, S&B, through its legacy business, sold approximately $66.4 billion of loans through private-label mortgage securitization trusts. These $66.4 billion of securitization trusts were composed of approximately $15.4 billion in prime trusts, $12.4 billion in Alt-A trusts and $38.6 billion in subprime trusts, each as classified at issuance. 
As of December 31, 2012, approximately $19.9 billion of the $66.4 billion remained outstanding as a result of repayments of approximately $36.0 billion and cumulative losses (incurred by the issuing trusts) of approximately $10.5 billion (of which approximately $7.9 billion related to loans in subprime trusts). The remaining outstanding amount is composed of approximately $5.1 billion in prime trusts, $4.2 billion in Alt-A trusts and $10.6 billion in subprime trusts, as classified at issuance. As of December 31, 2012, the remaining outstanding amount had a 90 days or more delinquency rate of approximately 26.1%. 
The mortgages included in the S&B legacy securitizations were primarily purchased from third-party sellers. In connection with these securitization transactions, representations and warranties relating to the mortgages were made by Citi, third-party sellers or both. As of December 31, 2012, where Citi made representations and warranties and received similar representations and warranties from third-party sellers, Citi believes that for the majority of the securitizations backed by prime and Alt-A loan collateral, if Citi received a repurchase claim for those loans, it would have a back-to-back claim against financially viable sellers. 
The vast majority of the subprime collateral was purchased from third-party sellers that Citi believes would be unlikely to honor back-to-back claims because they are no longer financially viable. Citi's repurchase reserve, to the extent applicable, takes into account estimated reimbursements to be received, if any, from third-party sellers.

Repurchase Reserve
Citi has recorded a mortgage repurchase reserve (referred to as the repurchase reserve) for its potential repurchase or make-whole liability regarding representation and warranty claims. Citi's repurchase reserve primarily relates to whole loan sales to the GSEs and is thus calculated primarily based on Citi's historical repurchase activity with the GSEs. The repurchase reserve relating to Citi's whole loan sales, and changes in estimate with respect thereto, are generally recorded in Citi Holdings- Local Consumer Lending . The repurchase reserve relating to private-label securitizations, and changes in estimate with respect thereto, are recorded in Citi Holdings- Special Asset Pool .

Repurchase Reserve-Whole Loan Sales
To date, issues related to (i) misrepresentation of facts by either the borrower or a third party (e.g., income, employment, debts, etc.), (ii) appraisal issues (e.g., an error or misrepresentation of value), and (iii) program requirements (e.g., a loan that does not meet investor guidelines, such as contractual interest rate) have been the primary drivers of Citi's repurchases and make-whole payments to the GSEs. The type of defect that results in a repurchase or make-whole payment has varied and will likely continue to vary over time. There has not been a meaningful difference in Citi's incurred or estimated loss for any particular type of defect.
The repurchase reserve is based on various assumptions which, as referenced above, are primarily based on Citi's historical repurchase activity with the GSEs. As of December 31, 2012, the most significant assumptions used to calculate the reserve levels are the: (i) probability of a claim based on correlation between loan characteristics and repurchase claims; (ii) claims appeal success rates; and (iii) estimated loss per repurchase or make-whole payment. In addition, Citi considers reimbursements estimated to be received from third-party sellers, which are generally based on Citi's analysis of its most recent collection trends and the financial solvency or viability of the third-party sellers, in estimating its repurchase reserve. 
During 2012, Citi recorded an additional reserve of $706 million (of which $164 million was in the fourth quarter of 2012) relating to its whole loan sales repurchase exposure. The change in estimate in fourth quarter and full year 2012 primarily resulted from (i) a continued heightened focus by the GSEs resulting in increasing estimates of repurchase claims, and (ii) increasing trends in repurchase claims, repurchases/make-whole payments, and default rates, especially for higher risk loans associated with servicing sold to a third party in the fourth quarter of 2010. These increases were partially offset by an improvement in expected recoveries from third-party sellers. Citi's claims appeal success rate remained stable during 2012, with approximately half of repurchase claims successfully appealed and thus resulting in no loss to Citi. Although the GSEs continued to exhibit elevated loan documentation requests during 2012, which could ultimately lead to higher claims and repurchases in future periods, Citi continues to believe the activity in and change in estimate relating to its repurchase reserve will remain volatile in the near term. 
As referenced above, the repurchase reserve estimation process for potential whole loan representation and warranty claims relies on various assumptions that involve numerous estimates and judgments, including with respect to certain future events, and thus entails inherent uncertainty. Citi estimates that the range of reasonably possible loss for whole loan sale representation and warranty claims in excess of amounts accrued as of December 31, 2012 could be up to $0.6 billion. This estimate was derived by modifying the key assumptions discussed above to reflect management's judgment regarding reasonably possible adverse changes to those assumptions. Citi's estimate of reasonably possible loss is based on currently available information, significant judgment and numerous assumptions that are subject to change.


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Repurchase Reserve-Private-Label Securitizations
Investors in private-label securitizations may seek recovery for alleged breaches of representations and warranties, as well as losses caused by non-performing loans more generally, through repurchase claims or through litigation premised on a variety of legal theories. Citi considers litigation relating to private-label securitizations as part of its contingencies analysis. For additional information, see Note 28 to the Consolidated Financial Statements. 
During 2012, Citi continued to receive significant levels of inquiries and demands for loan files, as well as requests to toll (extend) the applicable statutes of limitation for, among others, representation and warranty claims relating to its private-label securitizations. These inquiries, demands and requests have come from trustees of securitization trusts and others. Citi also has received repurchase claims for breaches of representations and warranties related to private-label securitizations. These claims have been received at an unpredictable rate, although the number of claims increased substantially during 2012 and is expected to remain elevated, particularly given the level of inquiries, demands and requests noted above. 
Of the repurchase claims received, Citi believes some are based on a review of the underlying loan files, while others are not based on such a review. In either case, upon receipt of a claim, Citi typically requests that it be provided

with the underlying detail supporting the claim; however, to date, Citi has received little or no response to these requests for information. As a result, the vast majority of the repurchase claims received on Citi's private-label securitizations remain unresolved (see the "Unresolved Claims" table below). Citi expects unresolved repurchase claims for private-label securitizations to continue to increase because new claims and requests for loan files continue to be received, while there has been little progress to date in resolving these repurchase claims. 
Citi cannot reasonably estimate probable losses from future repurchase claims for private-label securitizations because the claims to date have been received at an unpredictable rate, the factual basis for those claims is unclear, and very few such claims have been resolved. Rather, at the present time, Citi records reserves related to private-label securitizations repurchas