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Securities and Exchange Commission
Washington, DC 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, 1996, Commission File Number 1-5738
CITICORP [LOGO]
- -------------------------------------------------------------------------------
Incorporated in the State of Delaware
IRS Employer Identification Number: 13-2614988
Address: 399 Park Avenue, New York, NY 10043
Telephone: (800) 285-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) AND (g) OF THE ACT:
A list of Citicorp securities registered pursuant to Section 12(b) and (g) of
the Securities Exchange Act of 1934 is available from Citicorp, Corporate
Governance Department, 399 Park Avenue, Mezzanine, New York, NY 10043.
As of December 31, 1996, Citicorp had 463,217,018 shares of common stock
outstanding.
Citicorp (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.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein nor in any amendment to this Form 10-K but is contained in
Citicorp's 1997 Proxy Statement incorporated by reference in Part III of this
Form 10-K.
The aggregate market value of Citicorp common stock held by non-affiliates of
Citicorp on January 31, 1997 was approximately $53.4 billion.
Certain information has been incorporated by reference as described herein into
Part III of this annual report from Citicorp's 1997 Proxy Statement.
EXHIBIT 12a
CITICORP AND SUBSIDIARIES
CALCULATION OF RATIO OF INCOME TO FIXED CHARGES
(In Millions)
YEAR ENDED DECEMBER 31,
EXCLUDING INTEREST ON DEPOSITS: 1996 1995 1994 1993 1992
----------- ----------- ----------- ---------- ----------
FIXED CHARGES:
INTEREST EXPENSE (OTHER THAN
INTEREST ON DEPOSITS) 3,435 4,110 5,906 6,324 5,826
INTEREST FACTOR IN RENT EXPENSE 150 140 143 147 162
----------- ----------- ----------- ---------- ----------
TOTAL FIXED CHARGES 3,585 4,250 6,049 6,471 5,988
INCOME:
NET INCOME 3,788 3,464 3,422 (A) 1,919 (B) 722
INCOME TAXES 2,285 2,121 1,189 941 696
FIXED CHARGES 3,585 4,250 6,049 6,471 5,988
----------- ----------- ----------- ---------- ----------
TOTAL INCOME 9,658 9,835 10,660 9,331 7,406
=========== =========== =========== ========== ==========
RATIO OF INCOME TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 2.69 2.31 1.76 1.44 1.24
=========== =========== =========== ========== ==========
INCLUDING INTEREST ON DEPOSITS:
FIXED CHARGES:
INTEREST EXPENSE 12,409 13,012 14,902 16,121 16,327
INTEREST FACTOR IN RENT EXPENSE 150 140 143 147 162
----------- ----------- ----------- ---------- ----------
TOTAL FIXED CHARGES 12,559 13,152 15,045 16,268 16,489
INCOME:
NET INCOME 3,788 3,464 3,422 (A) 1,919 (B) 722
INCOME TAXES 2,285 2,121 1,189 941 696
FIXED CHARGES 12,559 13,152 15,045 16,268 16,489
----------- ----------- ----------- ---------- ----------
TOTAL INCOME 18,632 18,737 19,656 19,128 17,907
=========== =========== =========== ========== ==========
RATIO OF INCOME TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.48 1.42 1.31 1.18 1.09
=========== =========== =========== ========== ==========
(A) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 EXCLUDES THE CUMULATIVE
EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS No. 112,
"EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS", OF $(56) MILLION.
(B) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1993 EXCLUDES THE CUMULATIVE
EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 109,
"ACCOUNTING FOR INCOME TAXES", OF $300 MILLION.
EXHIBIT 12b
CITICORP AND SUBSIDIARIES
CALCULATION OF RATIO OF INCOME TO FIXED CHARGES
INCLUDING PREFERRED STOCK DIVIDENDS
(In Millions)
YEAR ENDED DECEMBER 31,
EXCLUDING INTEREST ON DEPOSITS: 1996 1995 1994 1993 1992
----------- ----------- ----------- ---------- ----------
FIXED CHARGES:
INTEREST EXPENSE (OTHER THAN
INTEREST ON DEPOSITS) 3,435 4,110 5,906 6,324 5,826
INTEREST FACTOR IN RENT EXPENSE 150 140 143 147 162
DIVIDENDS--PREFERRED STOCK 261 553 505 (A) 465 416
----------- ----------- ----------- ---------- ----------
TOTAL FIXED CHARGES 3,846 4,803 6,554 6,936 6,404
INCOME:
NET INCOME 3,788 3,464 3,422 (B) 1,919 (C) 722
INCOME TAXES 2,285 2,121 1,189 941 696
FIXED CHARGES (EXCLUDING PREFERRED
STOCK DIVIDENDS) 3,585 4,250 6,049 6,471 5,988
----------- ----------- ----------- ---------- ----------
TOTAL INCOME 9,658 9,835 10,660 9,331 7,406
=========== =========== =========== ========== ==========
RATIO OF INCOME TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS 2.51 2.05 1.63 1.35 1.16
=========== =========== =========== ========== ==========
INCLUDING INTEREST ON DEPOSITS:
FIXED CHARGES:
INTEREST EXPENSE 12,409 13,012 14,902 16,121 16,327
INTEREST FACTOR IN RENT EXPENSE 150 140 143 147 162
DIVIDENDS--PREFERRED STOCK 261 553 505 (A) 465 416
----------- ----------- ----------- ---------- ----------
TOTAL FIXED CHARGES 12,820 13,705 15,550 16,733 16,905
INCOME:
NET INCOME 3,788 3,464 3,422 (B) 1,919 (C) 722
INCOME TAXES 2,285 2,121 1,189 941 696
FIXED CHARGES (EXCLUDING PREFERRED
STOCK DIVIDENDS) 12,559 13,152 15,045 16,268 16,489
----------- ----------- ----------- ---------- ----------
TOTAL INCOME 18,632 18,737 19,656 19,128 17,907
=========== =========== =========== ========== ==========
RATIO OF INCOME TO FIXED CHARGES
INCLUDING INTEREST ON DEPOSITS 1.45 1.37 1.26 1.14 1.06
=========== =========== =========== ========== ==========
(A) CALCULATED ON A BASIS OF AN ASSUMED TAX RATE OF 29% FOR 1994.
(B) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 EXCLUDES THE CUMULATIVE
EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS No. 112,
"EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS", OF $(56) MILLION.
(C) NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1993 EXCLUDES THE CUMULATIVE
EFFECT OF ADOPTING STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 109,
"ACCOUNTING FOR INCOME TAXES", OF $300 MILLION.
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CITICORP ANNUAL REPORT 1996
[CITIBANK LOGO]
CONTENTS
Chairman's Letter 1
Managing for
Performance 4
Performing for
Our Customers 6
Sustaining Performance
Over Time 14
Citibankers Deliver
Performance 18
Performing for
Our Communities 20
Financial Information 25
Corporate
Information 87
Shareholder
Information 90
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CHAIRMAN'S LETTER TO STOCKHOLDERS
These years...1996, on which I am reporting, and 1997 and 1998...are important
years for Citicorp because they are years of change and of engagement. In 1995,
we told you of our new business directions. We told you that we were running the
company for performance and that performance would be derived from our
historical franchises and their strengths, particularly our globality. We told
you that it would take 1996, 1997 and 1998 to be fully engaged. This is still
our view. We are hard at work. We are excited. We are exploiting a great
opportunity and building a great company.
Financially, 1996 continued us on target. Core earnings were strong, if you
recognize that our U.S. Cards business was down year-to-year as the credit
environment shifted from unusually good (1995) to slightly worse than normal
(1996). (Our loss performance shifted from being traditionally higher than the
industry's to being better.) We offset the Cards business drop with strong
performance, particularly in the emerging markets. Net income was $3.8 billion,
up $324 million from last year. Earnings per share were $7.42, up 15%.
Reflecting our very strong capital accumulation, we paid $1.0 billion in
dividends to stockholders in 1996, bought back $3.1 billion in stock, held our
capital ratios above 8.3% and 12.2%, and built our reserves. Our stock closed
the year at $103 per share, up $35.75 or 53% for the year.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN PRINTED MATERIAL.]
INCOME
$ Billions
92 93 94 95 96
---- ---- ---- ---- ----
Income Before Taxes 1.4 2.9 4.6 5.6 6.1
Net Income 0.7 2.2 3.4 3.5 3.8
Nineteen ninety-six was an unusually good year for business globally. It is
quite unlikely that 1997 and 1998 will be so kind. Japan's economy is weak.
Europe will reflect the tensions that are inevitable as countries try to
shoehorn their economies into the European Monetary Union. The U.S. economy is
slowing, seemingly in an orderly way, but one has to reflect that the great
success against inflation comes from restraints on purchasing capacity which, in
turn, means tight household and government budgets. It is highly unusual to have
good employment numbers and a less than good credit environment in the Cards
business! The developing world is
[1]
doing well, but there are a number of economies under strain. Dependence on
external capital flows is a natural part of development, but a potential source
of instability nonetheless.
The banking business was, and promises to be, more difficult. I have
already mentioned the consumer credit environment in the United States.
Globally, credit was benign but pricing was under important pressure, reflecting
a tougher competitive environment, more than adequate liquidity, and a seemingly
trusting view of risk and discipline.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN PRINTED MATERIAL.]
EARNINGS PER SHARE*
In Dollars
92 93 94 95 96
---- ---- ---- ---- ----
1.35 4.11 6.29 6.48 7.42
* Fully diluted after accounting changes.
Citicorp is globalizing its business, moving from the position of operating
country by country to operating globally. It is tough work, but the objective is
worthwhile for customers as well as stockholders.
We have two franchises: that of a global corporate bank (The Bank)
operating on behalf of customers locally, regionally and globally. This is a
business that is growing, particularly in the emerging markets. It is a business
that demands the best and most sophisticated talent because of the needs of
global investors, as well as issuers, and the intersection of this business with
capital markets. This is a business that permits solid returns because of the
spread of our activities into local markets and because of our role as a
processor, providing global custody, money transfer and trade services. Our
banking business is important and fun because it is "center plate" for the most
interesting and active private sector players on the world's economic stage. We
believe we have the best banking franchise in the world.
[LINE GRAPH]
CCI Quarterly Common Stock Price (12/92-12/96)
(in Dollars)
The second franchise, Citicorp's Consumer Business, is singular. We seek to
provide average people--that broad mid-sector of the market--with payment
products, banking services and investment services that will help these
customers achieve their personal objectives. Our vision is global, as is our
presence and pursuit of this opportunity. It will take years to fully develop
this business. They will be exciting years and our success in this business will
shape the company and fuel its performance.
In the last months, we announced two additions to our senior team: Mary
Alice Taylor, who comes from Federal Express and will head up Operations; and Ed
Horowitz, who comes from Viacom and will lead our Advanced Development efforts.
Mary Alice and Ed are important additions. At the top of the company we operate
as a team. In addition to the Vice Chairmen, we have five line
[2]
executives (two in The Bank, three in the Citicorp Consumer Business) who run
the businesses day to day; an advanced development function that is overarching;
and four staff functions (Human Resources, Risk, Operations and Finance) that
crosscut through all the businesses. During 1991 and 1992, we discovered that
the combination of line and crosscutting corporate imperatives works well for
us. The group of us keeps the process alive.
The years 1997 and 1998 will be challenging. In addition to the environment
already mentioned, we have come to recognize the central role of quality in our
aspirations and have embraced the need to internalize a commitment to it. We are
modernizing and globalizing our processing base, moving beyond the need to
manage the flow of expenses to reconfiguring its architecture. We have shifted
to a customer-centered strategy (rather than product or geography) and are
shifting process, tools and structure in support of this change. We are
strengthening the human make-up of the company, adding people and managing
training and careers in support of our opportunities. We have recognized the
challenge, risks and opportunities of the electronic world. All of this, while
continuing to serve millions of customers worldwide and doing an increasingly
better job in support of the communities on which we depend.
========================================
PERFORMANCE TARGETS
o Core Earnings Growth of
10%-12% a year
o Returns in Excess of 18%
o Excess Capital of $2 billion
a year
o Incremental Revenue
Expense Ratio of 2 : 1
========================================
The composition of your Board changed during 1996. Three Directors: H.J.
Haynes (of Chevron and Bechtel), who had served on the Board from 1972-1982 and
then since 1984; Colby Chandler (of Kodak), who had served since 1984; and Roger
Smith (of General Motors), who had served since 1987, reached our mandatory
retirement age. They, individually and as a group, served with great distinction
and were of notable help to the Company. I want to take this further occasion to
thank them.
We were fortunate to add three new Directors to your Board: Reuben Mark,
Chairman of the Colgate-Palmolive Company, and Richard Parsons, President of
Time Warner, joined us in April. In December, we re-elected John Deutch,
Institute Professor of MIT, who had left the Board to serve in the
Administration during the last four years. Citicorp has a strong, highly
dedicated and involved Board. It is one of our strengths. It and almost 90,000
staff members around the world and our millions of customers have made us what
we are.
/s/ John S. Reed
John S. Reed
[3]
[Photograph of a Deutsche Telekom telephone installation]
[Photograph of a Supermarket in Prague, Czech Republic]
[Photograph of a Citibank branch exterior in Bangkok]
[4]
[Photograph of a Citibank AAdvantage Card ad used in newspapers and magazines]
[Photograph of Private Bank Customers]
- -------------------------
BALANCED SCORECARD
- -------------------------
Customer/Franchise
Performance
Strategic Cost Management
Risk Management
People
Financial Performance
AT CITICORP, PERFORMANCE EMBODIES BALANCE--A BALANCED SCORECARD (SEE
BELOW) MEASURES OUR SUCCESS AS A COMPANY AND IN EACH OF OUR BUSINESSES. It
recognizes that sustained financial performance derives from balanced
achievements in four key areas: Providing quality in all of our dealings with
customers worldwide o Managing costs globally by directing investment spending
toward the most promising opportunities o Distributing exposures to manage our
risk profile o Offering unbounded opportunities to Citibankers around the world.
Citicorp also has balance in its businesses. Consumer--Citibanking, Cards
and the Private Bank--produces about half of our earnings, as does Corporate
Banking--serving global corporations and businesses in emerging markets.
Geographically, emerging market earnings are balanced with those from developed
countries. Our worldwide presence enables us to serve the needs of consumers and
corporations, and to participate with them in the world's fastest growing
markets.
We balance our business success by seeking a constructive role in our
communities, particularly in their economic and educational development.
- --------------------------------------------------------------------------------
Citicorp's Balanced Scorecard (above), keeps us focused on the quality of our
performance in all five equally important elements of our global growth
strategy.
Clockwise, examples of Citibank's performance for customers all around the
world: At 1,130 Citibank branches worldwide, customers know they'll receive the
consistently superior service experience found in this Bangkok model branch o
The Citibank AAdvantage card was successfully launched in several new Latin
American markets in 1996, and is now a prominent co-branded card in 14 countries
o Our Private Bank clients can count on personal access, expert advice and quick
response wherever they travel o Citibank is a conduit to world financial markets
for companies such as Deutsche Telekom, which turned to Citibank to handle its
American Depositary Receipt program o In Eastern Europe, global consumer
companies rely on Citibank's expertise in cash management to help them manage
their payables and receivables.
[5]
[Photograph of a Citibank branch interior in Cologne, Germany]
- --------------------------------------------------------------------------------
An important thrust of our consumer strategy is to establish Citibank as
a global brand that is recognized everywhere. A common design standard promises
a superior customer service experience from Bombay to Tokyo to Buenos Aires to
New York. Here it identifies our Citibank branch in Cologne, part of our network
of 307 branches in 200 cities in Germany, where we were given an award of
excellence in 1996 by the German Post and German Marketing Association.
- --------------------------------------------------------------------------------
[6]
CUSTOMERS
[PHOTOGRAPH]
CITIBANK, THE ONLY BANK PURSUING A TRULY GLOBAL CONSUMER STRATEGY, SERVES
50 MILLION CONSUMERS IN 56 COUNTRIES. Our strategy is built on supplying
innovative products and superior service to a consumer base that is worldwide,
growing rapidly, and fueling demand for increasingly sophisticated financial
services.
People everywhere have the same financial needs--needs that broaden as they
pass through various life stages and levels of affluence. At the outset,
customers need basics--a checking account, a credit card, and possibly a loan
for college. As they mature financially, customers add a mortgage, car loan and
investments. As they accumulate wealth, portfolio management and estate planning
become priorities.
No other financial institution has the scope and the resourcefulness to
meet all these needs for so many in so many different places. With almost 60,000
Citibankers in our consumer businesses and more than 1,000 branches around the
world, Citibank is becoming the global brand of choice for financial services.
CONSUMER BUSINESSES
REVENUE
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Citibanking 43%
Cards 49%
Private Bank 8%
We're working to make sure that the Citibank name means service that is
consistently beyond--not merely up to--customers' expectations. We offer them
the right products at the right times in their lives. Everywhere and every time
customers have contact with us, we deliver a predictable, superior experience.
CONSUMER BUSINESSES
REVENUE BY REGION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Latin America 11%
Europe 15%
North America 56%
Asia Pacific, Central/Eastern Europe,
Middle East, Africa 18%
Being global is essential to both our growth strategy and brand, but it
requires more than simply having locations in many countries.
Our customers know that Citibank is their gateway to state-of-the-art
products and the best ideas from around the world. Plus, they have the security
and convenience of access 24 hours a day, 7 days a week, 365 days a year--in a
branch, by computer, on an ATM, or with CitiPhone.
[7]
Worldwide, our Cards customers rely on us for the credit and charge cards
that meet their specific interests and financial situations, including
co-branded cards that carry incentives from some of the world's most respected
organizations.
Private Bank clients rely on us to seek out investment opportunities and
discern risks. Citibank delivers the depth of first-hand knowledge that comes
from its worldwide presence.
Photographs of Credit Cards: Diners Club
Citibank Ford
Citibank BahnCard
Citibank Gold Visa
Citibank MasterCard (Photocard)
Like other global marketers of consumer products and services, we are
achieving particularly strong growth in emerging markets. As we expand our
consumer business into new areas, we have the distinct advantage of having
Citibank in place as a corporate bank, with licenses, market understanding and a
trained local staff.
Our initial customer base often comes from employees of the corporations
which already know the Citibank name and the high standard of quality it
represents. And once established, brand awareness, enhanced by consumer
advertising, will also benefit our corporate banking business.
CONSUMER BUSINESSES
REVENUE
$ Billions
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
94 95 96
---- ---- ----
Emerging Markets 2.7 3.1 3.6
Developed Markets 8.7 9.2 9.8
---- ---- ----
11.4 12.3 13.4
[Photograph of a bazaar in Cairo, Egypt]
[8]
[Photograph of a Private Bankers meeting in Zurich, Switzerland]
- --------------------------------------------------------------------------------
In credit and charge cards, we have the largest worldwide business, with $55
billion in outstanding receivables. We have 61 million cards in total (including
private label and affiliates), of which three million cards are in Europe, seven
million in Asia and nine million in Latin America.
By introducing cards as a preferred and secure payment method, Citibank also
helps cash-based societies develop a system for consumer credit. This enables
millions of people in emerging countries, such as the Middle Eastern family at
left, to enjoy a new middle-class lifestyle.
Above, our private bankers in 32 countries act as a gateway to Citibank's
network of people, products and strategies. A European client, for example, will
receive first-hand advice on his or her global investment portfolio, even
drawing upon complex financial engineering solutions provided by our corporate
banking specialists. Similarly, investors who wish to leverage growth
opportunities in emerging markets can take advantage of our expertise and
long-time presence in those economies.
- --------------------------------------------------------------------------------
[9]
[Photograph of an oilrig off Brazil]
[Photograph of Citibankers
in Shanghai, China]
- --------------------------------------------------------------------------------
The huge Brazilian oil company Petrobras works closely with our branch in Rio de
Janeiro. In a relationship spanning several decades, Citibank channels solutions
and delivers products to meet the company's constantly evolving needs in trade
finance, cash management and capital markets. In 1996, Euromoney voted Citibank
the number one bank in Latin America.
Left, deep relationships with other financial institutions characterize
Citibank's history in re-emerging financial centers like Shanghai. Major growth
opportunities exist in our business with the banking, investment and insurance
industries, which are expanding rapidly, not only in Asia but globally. In 1996,
Euromoney ranked Citibank the number one bank in Asia.
Opposite page, corporate treasurers and investors worldwide have long recognized
Citibank's foreign exchange business for its superior customer service.
Euromoney has rated us number one for 18 years in a row. Excellence in trading
both major and emerging currencies (more than 140 in all) has been a hallmark of
Citibank forex for decades.
- --------------------------------------------------------------------------------
[10]
[Photograph of a foreign exchange trader]
FOR 100 YEARS, AS COMPANIES HAVE VENTURED BEYOND THEIR HOME COUNTRIES TO
BUY, SELL AND INVEST, CITIBANK HAS BEEN THERE TO HELP.
Today, we work with global, regional and local corporate customers in almost 100
countries. Our deep and long presence in markets in almost every part of the
world is the cornerstone of our corporate banking relationships. Customers know
they can rely on us for superior service and expert advice at home and wherever
their business might take them.
CORPORATE BANKING
REVENUE
$ Billions
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
94 95 96
---- ---- ----
Emerging Markets 2.5 2.9 3.4
Developed Markets 3.3 3.6 3.7
---- ---- ----
5.8 6.5 7.1
In emerging markets, Citibank is both an embedded local and a regional
bank. Just as we serve our global customers, we also provide world-class banking
to local companies whose vision often exceeds the opportunities in their home
markets. In the process, we establish relationships with companies that will
grow into the next generation of multinationals.
Our success with many of the world's leading multinationals is based on
relationship banking skills and experience we have accumulated over decades.
Most of these corporations expect to generate the bulk of their growth outside
their home countries, especially in emerging economies where both consumer and
commercial markets are thriving.
[11]
[Photograph of a movie still from 20th
Century Fox's Independence Day]
[Photograph of telephone workers
from PLDT in the Philippines]
[12]
- --------------------------------------------------------------------------------
Citicorp Securities' structuring and underwriting skills span the globe: In the
U.S., we put together a $1 billion three-year financing for Twentieth Century
Fox, producer of the blockbuster movie, Independence Day (above). Fox is a
division of News Corporation, with which we have relationships in 23 countries.
The package involved both debt and equity instruments and was voted a
record-breaking deal of the year by Institutional Investor. In Asia, we
co-managed a $300 million global bond for the Philippine Long Distance Telephone
Company (left). Citibank's local presence in Manila since 1902, combined with
the access we offer to global capital markets, fostered confidence among both
issuers and investors.
- --------------------------------------------------------------------------------
Our depth of presence around the world is our strongest competitive
distinction. We have a head start on competitors in terms of size, products,
skills, industry knowledge and experience. Our goal is seamless global access to
our products and services. In short, to deliver the entire Citibank network
virtually wherever and whenever the client needs it.
Typically, we enter a new market in the early stages of its economic
development, to provide our global customers with the basic services they need.
We start with cash management, short-term loans in local currency and trade
finance, then add services like project finance and securities custody and
clearing as the country's economy grows. Eventually we bring in sophisticated
products such as bond underwriting and asset-backed securitization. By then we
are likely to be supporting the expansion of local companies into international
markets.
The distribution of Citibank's corporate banking activities over 22
developed and 75 emerging economies provides diversity and balance to our
revenue stream. Citibank's corporate bank, with 20,000 customers, is a
singularly valuable franchise that provides excellent returns. And because we
participate in markets at every stage of development, we have ample opportunity
for growth.
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
CORPORATE BANKING
REVENUE BY PRODUCT
Lending 22%
Trading 23%
Transaction Services 30%
Capital Markets/Other 25%
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
CORPORATE BANKING
REVENUE BY REGION
Latin America 22%
Europe 18%
Asia Pacific 20%
North America 32%
Central/Eastern Europe,
Middle East, Africa 8%
[13]
[Photograph of a billing statement equipment in The Lakes, Nevada]
[14]
- --------------------------------------------------------------------------------
Billing statements for cardholders in the U.S. and Latin America, Personal
Identification Number mailers for European accounts, loan payment statements for
the Citicorp mortgage business, and myriad administrative reports--those are
just a few of the purposes and businesses served by this new printing technology
installed in our Maryland, South Dakota and Nevada service centers. Already at
an operating rate of 350 million documents annually, the high-speed,
high-capacity printers not only reduce internal production costs, they also help
generate revenues by producing third-party billing statements for cash
management clients of corporate banking.
- --------------------------------------------------------------------------------
STRATEGIC COST MANAGEMENT
To perform for customers, we have to be able to deliver high quality products
and services at competitive prices. Performance for shareholders requires that
we make a profit doing it. Consequently, managing costs strategically is
integral to our success.
Avoiding unnecessary expense is, of course, fundamental to this effort, but
it is even more important that we make sure our spending is strategic. We focus
our investment spending on programs that will either generate two dollars of
income for each dollar expended or will help to lower our overall expenses.
Quality is primary. We save money when we don't have to correct errors, and we
build revenues with superior products and services.
A broad range of marketing and other brand-building programs qualify under
these criteria, but by far the greatest opportunities are being generated by
investment spending in further modernizing and harmonizing our technology around
the world.
Upgrading technology almost always achieves the dual objectives of improved
customer service and greater cost control. Our intent is to use technology to
remove work, errors, time and paper from our processes, and therefore be more
focused on, and responsive to, our customers. By consolidating our systems
worldwide, we are better able to share resources and leverage the
infrastructure. We've made substantial progress in the last three years. For
example, European and some Latin American customers' card accounts are processed
in the U.S. Also in the U.S., a single service center in San Antonio, Texas, is
able to handle all U.S. retail banking customer inquiries. Singapore is the
Cards' back-office center for 12 countries in Asia. With the advent of on-line
trading technology and the anticipated European Monetary Union, we consolidated
major-currency market making in London, New York and Tokyo--increasing
efficiency for customers, reducing costs and freeing Citibankers to focus on
higher-value transactions.
[15]
[Photograph of a foreign exchange trading floor in New York]
- --------------------------------------------------------------------------------
Loan trading enhances Citibank's ability to balance its portfolio while
satisfying our clients' capital raising needs. It also broadens access for
institutions to invest in loans as a floating-rate asset class.
Opposite page, corporate customers in Latin America meet with Citibank's
corporate finance specialists in derivative products. These are developed to
reduce or modify customers' risks. The derivatives business, globally managed at
Citibank, leverages the bank's strong relationships with issuers and investors.
We are ranked number one in derivatives by Institutional Investor, Risk
and Asiamoney magazines.
- --------------------------------------------------------------------------------
[16]
MANAGING RISK
Risk is inherent in banking, but it is far from routine--nor is it
one-dimensional. All around the globe, market risks, operational risks,
technical risks, political risks and legal risks change rapidly and continually.
Since 1993, we have monitored our risk exposures continuously from various
perspectives or "windows." We now have 16 different windows. This proprietary
Windows on Risk system cuts across our own businesses and portfolios as it spans
customers, industries and geographies. It enables us to guard against
concentrations of risk that could allow problems in one industry, product area,
customer group or geographic region to reverberate through the bank and
undermine overall results. Embedded in the system are "tripwires" that are
sensitive to external developments, allowing us to anticipate or react quickly
to both positive and negative events.
[Photograph of Corporate finance bankers meeting with
customers meeting with customers in Sao Paulo, Brazil]
[17]
[Photograph of a Team Challenge meeting in New York]
[18]
[INSERT DESCRIPTION HERE]
HAVING THE RIGHT PEOPLE IN THE RIGHT JOBS IS A BASIC TENET OF CITIBANK'S
PERFORMANCE STRATEGY.
To deliver on our promise of exceptional performance worldwide, we count on
exceptionally talented and motivated people. We are able to recruit and train to
a very high standard because we offer, literally, a whole world of opportunity.
Sixty-five percent of our senior managers have work experience outside their
home countries. In addition, a spirit of teamwork and an atmosphere of respect
and diversity help make Citibank the local employer of choice in many countries
around the world.
One of the ways we deliver on our performance promise is by helping
Citibankers stay on track for jobs that make the most of their abilities. The
Talent Inventory Review process produces a detailed assessment of each person's
skills, experience and capabilities. The inventory helps us match the right
person to the right assignment, so that we build the kind of staff breadth and
depth that we need to keep growing.
We use a variety of training and other programs, including cross-company
task forces, to help Citibankers hone their existing talents and develop new
skills. Our task forces are structured on the premise that today's best
performers can help rising performers become tomorrow's best.
Our hiring, training and work assignments are aimed at ensuring that our
people are equipped to achieve their individual potential as they provide
superior service to our customers.
- --------------------------------------------------------------------------------
Team Challenge last year brought high-potential Citibankers from all around the
world to work on specific bankwide issues. Team members developed innovative
ways to serve customers, use resources better, and dismantle barriers that
impede working together across businesses and functions.
- --------------------------------------------------------------------------------
[19]
IN HUNDREDS OF COMMUNITIES AROUND THE WORLD, CITIBANK IS AN INVOLVED
CORPORATE CITIZEN.
Performing for our communities strongly supports all other aspects of our
business strategy. It improves the business climate for us and our customers,
and adds to our reputation as an employer of choice around the world.
Citibank's strongest community impact stems from our day-to-day business
activities. We ensure that our business practices, as well as our products and
services, add value to the communities in which we operate.
For example, we recently created a new financing vehicle, an equity
equivalent product for not-for-profit organizations in the U.S., that is
expected to bring millions in new capital to distressed American communities. In
emerging markets, we advised regulatory bodies, stock exchanges, clearinghouses
and depositories on developing capital market infrastructure. We also offered a
special mortgage product for disabled first-time home buyers in Taipei,
strengthened the financial settlements system in London, and funded local
companies' growth--all of which continue to add to our communities' economic
vitality and strength. By conducting our business in ways that assure our
customers and our employees equitable and respectful treatment, we also help set
high standards of business practice.
Perhaps the most important thing we do in our community is to offer people
the opportunity to build challenging and fulfilling careers. Citibankers are
involved citizens, contributing expertise, energy and time, as well as their
personal financial support, to a broad range of charities and civic
organizations.
Our corporate philanthropy is focused on community development
- --------------------------------------------------------------------------------
From London to Taipei, from Chicago to Johannesburg, Citibankers are helping to
build better communities.
At The Lakes, Nevada, children of employees learn while their parents work in
the same building. The day care center, one of three at our Cards service
facilities in the U.S., is open 15 hours a day and cares for 164 children.
- --------------------------------------------------------------------------------
[20]
[Photograph of Employees' children at daycare center in The Lakes, Nevada]
[21]
and education, encompassing a wide variety of programs at local, national and
international levels. We provide substantial funding to not-for-profit
institutions--last year's contributions by Citibank and the Citicorp Foundation
increased to more than $31 million and we also are directly and actively
involved in many of the programs we support.
Through the Foundation's Banking on Enterprise initiative, Citicorp is a
corporate leader supporting microenterprise lending in inner-city neighborhoods
in the United States and emerging markets worldwide. As part of the bank's
mission to expand access to financial services, we are providing equity
investments, loans, grants and Citibank financial expertise to microcredit
organizations in Kenya, Bangladesh and 16 other countries.
Our Banking on Education initiative applies technology to increase the
effectiveness of schools, particularly in the inner cities of the U.S. But more
than that, the bank provides scholarships for higher education in a variety of
programs, such as the study of business education and economics at Getulio
Vargas Institute in Brazil, and to scholars in Eastern Europe to study the
principles and practices of market economies. For our own Citibankers, we
provide more than $4 million annually in tuition reimbursements to help them
develop new skills and competencies.
At Citibank, we take our citizenship seriously. It shows in the ways we
conduct our business and direct our philanthropy. In the end, it is manifested
in the growth of our business and adds to the strength of our welcome all over
the world.
[Photograph of Housing in
San Francisco]
[Photograph of children in playground of
a low-income neighborhood in San Francisco]
[22]
- --------------------------------------------------------------------------------
Clockwise: Through our Banking on Enterprise initiative, we are helping families
across the globe become self-sufficient through microenterprises, such as this
business in Poland that manufactures bed linens.
Students in New York and Nevada use software programs that introduce them to the
world of banking. The programs are designed to develop critical thinking through
simulations that bridge the classroom and the external world.
In the Tenderloin, a low-income neighborhood in San Francisco, Citibank helped
create 175 units of affordable housing for families. The 9-story building was
financed for $35 million by Citibank and county, state and federal aid. The
presence of the building with its family residents has led to a drop in street
crime in the area.
- --------------------------------------------------------------------------------
[Photograph of Bed linens factory [Photograph of Students using
in Poland] computer software]
[23]
[Photograph of a Woman with umbrella in Asia]
FINANCIAL INFORMATION
CITICORP IN BRIEF 26
OVERVIEW OF 1996 RESULTS 27
THE BUSINESSES OF CITICORP 28
CONSUMER 29
Citibanking 30
Cards 31
Private Bank 32
Consumer Business in
Developed and Emerging Markets 33
Consumer Portfolio Review 34
CORPORATE BANKING 36
Emerging Markets 37
Global Relationship Banking 38
CORPORATE ITEMS 38
MANAGING GLOBAL RISK 39
SUMMARY OF FINANCIAL RESULTS 44
STATEMENT OF INCOME ANALYSIS 44
FINANCIAL REPORTING RESPONSIBILITY 49
REPORT OF INDEPENDENT AUDITORS 49
FINANCIAL STATEMENTS 50
STATEMENT OF ACCOUNTING POLICIES 55
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS 58
QUARTERLY FINANCIAL INFORMATION 75
10-K CROSS-REFERENCE INDEX 76
FINANCIAL DATA SUPPLEMENT 77
25
CITICORP IN BRIEF
In Millions of Dollars Except Share Data 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME--Before Accounting Changes $ 3,788 $ 3,464 $ 3,422 $ 1,919 $ 722
NET INCOME--After Accounting Changes(1) 3,788 3,464 3,366 2,219 722
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE(2)
On Common and Common Equivalent Shares
Before Accounting Changes $ 7.50 $ 7.21 $ 7.15 $ 3.82 $ 1.35
After Accounting Changes(1) 7.50 7.21 7.03 4.50 1.35
Assuming Full Dilution
Before Accounting Changes 7.42 6.48 6.40 3.53 1.35
After Accounting Changes(1) 7.42 6.48 6.29 4.11 1.35
DIVIDENDS DECLARED PER COMMON SHARE(3) 1.80 1.20 0.45 -- --
As a Percentage of Income, Assuming Full Dilution,
After Accounting Change(1)(3) 24.26% 18.52% 7.15% -- --
- ------------------------------------------------------------------------------------------------------------------------------------
AT YEAR-END
Total Loans, Net of Unearned Income and Allowance for Credit Losses $ 169,109 $160,274 $ 147,265 $ 134,588 $ 135,851
Total Assets(4) 281,018 256,853 250,489 216,574 213,701
Total Deposits 184,955 167,131 155,726 145,089 144,175
Long-Term Debt 18,850 18,488 17,894 18,160 20,172
Common Stockholders' Equity(5) 18,644 16,510 13,582 10,066 7,969
Total Stockholders' Equity(5) 20,722 19,581 17,769 13,953 11,181
Tier 1 Capital 19,796 18,915 16,919 13,388 10,262
Total Capital (Tier 1 and Tier 2) 28,870 27,725 26,119 23,152 20,111
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Net Income to Average Assets(4)--Before Accounting Changes 1.40% 1.29% 1.31% 0.84% 0.32%
Net Income to Average Assets(4)--After Accounting Changes(1) 1.40 1.29 1.29 0.97 0.32
Return on Common Stockholders' Equity(5)--Before Accounting Changes 20.35 20.80 26.30 17.73 6.48
Return on Common Stockholders' Equity(5)--After Accounting Changes(1) 20.35 20.80 25.81 21.06 6.48
Return on Total Stockholders' Equity(5)--Before Accounting Changes 18.95 18.33 21.79 15.32 7.16
Return on Total Stockholders' Equity(5)--After Accounting Changes(1) 18.95 18.33 21.43 17.72 7.16
Average Common Stockholders' Equity to Average Assets(4)(5) 6.60 5.59 4.47 3.95 3.39
Average Total Stockholders' Equity to Average Assets(4)(5) 7.40 7.03 6.02 5.48 4.45
Common Stockholders' Equity to Assets(4)(5) 6.63 6.43 5.42 4.65 3.73
Total Stockholders' Equity to Assets(4)(5) 7.37 7.62 7.09 6.44 5.23
Tier 1 Capital Ratio 8.39 8.41 7.80 6.62 4.90
Total Capital Ratio (Tier 1 and Tier 2) 12.23 12.33 12.04 11.45 9.60
Leverage Ratio(4) 7.42 7.45 6.67 6.15 4.74
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE DATA
Year End Stock Price(6) $ 103 $ 67 1/4 $41 3/8 $36 7/8 $22 1/4
Common Equity Per Share(5) 40.25 38.64 34.38 26.04 21.74
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS ANALYSIS
Total Revenue $ 20,196 $ 18,678 $ 16,748 $ 16,075 $ 15,621
Effect of Credit Card Securitization(7) 1,392 917 934 1,282 1,390
Net Cost to Carry(8) (46) 23 89 252 421
Capital Building Transactions -- -- (80) 2 (820)
--------- -------- --------- --------- ---------
ADJUSTED REVENUE 21,542 19,618 17,691 17,611 16,612
--------- -------- --------- --------- ---------
Total Operating Expense 12,197 11,102 10,256 10,615 10,057
Net OREO Benefits (Costs)(9) 44 105 (9) (245) (347)
Restructuring Charges -- -- -- (425) (227)
--------- -------- --------- --------- ---------
ADJUSTED OPERATING EXPENSE 12,241 11,207 10,247 9,945 9,483
--------- -------- --------- --------- ---------
OPERATING MARGIN 9,301 8,411 7,444 7,666 7,129
--------- -------- --------- --------- ---------
Consumer Credit Costs(10) 3,115 2,473 2,338 2,740 3,309
Commercial Credit Costs(11) (87) 72 239 1,036 2,458
--------- -------- --------- --------- ---------
OPERATING MARGIN LESS CREDIT COSTS 6,273 5,866 4,867 3,890 1,362
Additional Provision(12) 200 281 336 603 537
Restructuring Charges -- -- -- 425 227
Capital Building Transactions -- -- 80 (2) 820
--------- -------- --------- --------- ---------
INCOME BEFORE TAXES AND CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 6,073 5,585 4,611 2,860 1,418
Income Taxes 2,285 2,121 1,189 941 696
--------- -------- --------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 3,788 3,464 3,422 1,919 722
Cumulative Effects of Accounting Changes (1) -- -- (56) 300 --
--------- -------- --------- --------- ---------
NET INCOME $ 3,788 $ 3,464 $ 3,366 $ 2,219 $ 722
- -----------------------------------------------------------------------=============================================================
(1) Refers to the adoption of Statement of Financial Accounting Standards
("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits," in
1994 and SFAS No. 109, "Accounting for Income Taxes," in 1993.
(2) Based on net income less preferred stock dividends, except when conversion
is assumed. See page 71.
(3) On October 15, 1991, Citicorp suspended the dividend on its common stock
and resumed paying dividends on April 18, 1994.
(4) Reflects the effects of adopting Financial Accounting Standards Board
("FASB") Interpretation No. 39, "Offsetting of Amounts Related to Certain
Contracts," as of January 1, 1994.
(5) Reflects the effects of adopting SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," as of January 1, 1994.
(6) Based on the New York Stock Exchange Composite Listing.
(7) See page 48 for a description of the effect of credit card securitization.
(8) Principally the net cost to carry commercial cash-basis loans and other
real estate owned ("OREO").
(9) Principally gains and losses on sales, direct revenue and expense, and
writedowns of commercial OREO.
(10) Principally consumer net credit write-offs adjusted for the effect of
credit card securitization.
(11) Includes commercial net credit write-offs, net cost to carry, and net OREO
benefits (costs).
(12) Primarily charges for credit losses in excess of net write-offs. See page
46 for discussion.
26
OVERVIEW OF 1996 RESULTS
Citicorp reported 1996 net income of $3.8 billion or $7.42 per fully diluted
common share, up 9% and 15%, respectively, compared with $3.5 billion, or $6.48
in 1995. Earnings were led by continued momentum in the emerging markets in both
the Corporate Banking and Consumer businesses, but were dampened by high Cards
credit costs.
Return on common equity of 20.4% for 1996 remained strong, but was down
slightly from a year-ago, reflecting higher common equity levels. Return on
average assets was 1.40% compared with 1.29% for 1995.
The Consumer businesses earned $2.0 billion in 1996, up 4% from 1995, as
higher revenue and margin growth were partially offset by increased Cards credit
costs. Earnings in Corporate Banking of $2.2 billion were up 23% from 1995,
reflecting improved credit performance, solid operating margin growth, and lower
effective tax rates.
Adjusted revenue of $21.5 billion was up $1.9 billion or 10% from 1995.
Revenue in the Consumer businesses increased 9% to $13.5 billion, led by a
strong performance in the emerging markets, and by continued growth in the Cards
business. Revenue of $7.2 billion in the Corporate Banking businesses was up 9%,
as Emerging Markets revenue increased by 19%.
Trading-related revenue of $1.9 billion in 1996 was down $80 million or 4%
from 1995. The decline primarily reflected lower foreign exchange activity in
Global Relationship Banking. Venture capital gains of $450 million for the year
were up $60 million or 15% from 1995, reflecting the robust U.S. equity markets
in 1996.
Adjusted operating expense for 1996 of $12.2 billion was up $1.0 billion
or 9% from 1995, reflecting business expansion in the emerging markets (a 19%
increase in 1996), while expense related to Consumer businesses and Corporate
Banking activities in the developed markets was up 4%.
Operating margin grew $890 million, or 11%, to $9.3 billion. The
incremental revenue to expense ratio was 1.9:1 for the year, and the efficiency
ratio (adjusted operating expense as a percentage of adjusted revenue) was
unchanged from 1995 at 57%.
Total credit costs were $3.0 billion in the year, up $483 million or 19%
from 1995. Consumer credit costs of $3.1 billion in 1996 were up $642 million or
26% from 1995, and net credit losses on managed loans were 2.37%, compared to
1.99% for 1995. The increases in credit costs and the related loss ratio chiefly
reflected a continued rise in U.S. bankcards credit losses. The managed consumer
loan delinquency ratio (90 days or more past due) decreased to 2.62% from 3.01%
and 3.14% at the end of 1995 and 1994, respectively.
Commercial credit costs remained low at a net benefit of $87 million in
1996, compared to net charges of $72 million in 1995. Commercial cash-basis
loans and OREO of $1.5 billion at year-end were down from $2.2 billion a year
earlier, principally reflecting continued reductions in the commercial real
estate portfolio.
At December 31, 1996, total reserves (including reserves for sold consumer
portfolios) were $6.0 billion. Citicorp continued to build its allowance for
credit losses during the year, adding $200 million above net credit losses,
primarily related to Cards. In 1995, Citicorp built the allowance through an
additional provision of $281 million across both franchises.
Citicorp's effective tax rate was 38% for both 1996 and 1995.
Total capital (Tier 1 and Tier 2) was $28.9 billion, or 12.23% of net
risk-adjusted assets, and Tier 1 capital was $19.8 billion, or 8.39%, at
December 31, 1996. During 1996, Citicorp generated $3.0 billion of free capital,
and repurchased 36.1 million shares for $3.1 billion. With these repurchases,
the number of shares acquired since June 20, 1995, when the Board of Directors
authorized the stock repurchase program, totaled 59.2 million at a cost of $4.6
billion. As expanded in January and November 1996, the program is authorized to
make total purchases of up to $8.5 billion.
- --------------------------------------------------------------------------------
NET INCOME
$ Billions
92 0.7
93 2.2
94 3.4
95 3.5
96 3.8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADJUSTED REVENUE
$ Billions
92 16.6
93 17.6
94 17.7
95 19.6
96 21.5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL CAPITAL
$ Billions
Tier 1 Tier 2 Total Tier 1 Ratio
92 10.3 9.8 20.1 4.9%
93 13.4 9.8 23.2 6.6%
94 16.9 9.2 26.1 7.8%
95 18.9 8.8 27.7 8.4%
96 19.8 9.1 28.9 8.4%
- --------------------------------------------------------------------------------
27
THE BUSINESSES OF CITICORP
Citicorp, with its subsidiaries and affiliates, is a global financial services
organization. Its staff of 89,400 (including 51,100 outside the U.S.) serves
individuals, businesses, governments, and financial institutions in
approximately 3,200 locations (including branches, representative offices,
subsidiary and affiliate offices) in 98 countries and territories throughout the
world as of December 31, 1996.
- --------------------------------------------------------------------------------
CORE BUSINESS NEW INCOME
94 95 96
-- -- --
$ Billions Citibanking 0.5 0.6 0.7
Cards 1.1 1.2 1.0
Private Bank 0.2 0.2 0.3
Global Relationship Banking 0.3 0.6 0.7
Emerging Markets 1.0 1.1 1.5
------- ------- -------
Total 3.1 3.7 4.2
- --------------------------------------------------------------------------------
Citicorp, a U.S. bank holding company, was incorporated in 1967 under the
laws of Delaware and is the sole shareholder of Citibank, N.A. ("Citibank"), its
major subsidiary.
Citicorp is regulated under the Bank Holding Company Act of 1956 and is
subject to examination by the Federal Reserve Board ("FRB"). Citibank is a
member of the Federal Reserve System and is subject to regulation and
examination by the Office of the Comptroller of the Currency ("OCC"). See page
84 for further discussion of regulation and supervision.
Citicorp's activities are conducted primarily within the two franchises of
the Consumer business and the global Corporate Bank. The Consumer business
operates a uniquely global, full-service consumer franchise encompassing branch
and electronic banking ("Citibanking"), credit and charge cards ("Cards"), and
the Private Bank. The Corporate Banking business serves corporations, financial
institutions, governments, and other participants in capital markets throughout
the world.
- --------------------------------------------------------------------------------
CORE BUSINESS NET INCOME
$ Billions
94 95 96
-- -- --
$ Billions Developed 1.3 1.8 1.8
Emerging 1.8 1.9 2.4
------- ------- -------
Total 3.1 3.7 4.2
- --------------------------------------------------------------------------------
Additional data on the business and geographic distribution of revenue,
income and average assets is disclosed in Note 11 to the consolidated financial
statements.
The table below shows the net income, average assets, and return on assets
for each of Citicorp's businesses for the three years ended December 31, 1996.
BUSINESS FOCUS
NET INCOME (LOSS) AVERAGE ASSETS RETURN ON ASSETS
$ MILLIONS $ BILLIONS %
- -------------------------------------------------------------------------- --------------------------- --------------------
1996 1995(1) 1994(1) 1996 1995(1) 1994(1) 1996 1995(1) 1994(1)
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER $ 2,043 $ 1,968 $ 1,783 $ 126 $ 120 $ 106 1.62% 1.64% 1.68%
CORPORATE BANKING(2) 2,179 1,778 1,308 139 144 150 1.57 1.23 0.87
------- ------- ------- ------- ------- -------
CORE BUSINESSES 4,222 3,746 3,091 265 264 256 1.59 1.42 1.21
CORPORATE ITEMS (434) (282) 331 5 5 5 NM NM NM
------- ------- ------- ------- ------- -------
3,788 3,464 3,422 270 269 261 1.40 1.29 1.31
CUMULATIVE EFFECT OF ACCOUNTING CHANGE(3) -- -- (56) -- -- -- -- -- --
------- ------- ------- ------- ------- -------
TOTAL CITICORP $ 3,788 $ 3,464 $ 3,366 $ 270 $ 269 $ 261 1.40 1.29 1.29
- ----------------------------------------------===================================================================================
SUPPLEMENTAL INFORMATION:
CONSUMER:
CITIBANKING $ 725 $ 571 $ 421 $ 81 $ 79 $ 72 0.90% 0.72% 0.58%
CARDS 1,039 1,172 1,124 29 26 19 3.58 4.51 5.92
PRIVATE BANK 279 225 238 16 15 15 1.74 1.50 1.59
------- ------- ------- ------- ------- -------
TOTAL $ 2,043 $ 1,968 $ 1,783 $ 126 $ 120 $ 106 1.62 1.64 1.68
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER BUSINESS IN:
DEVELOPED MARKETS $ 1,094 $ 1,164 $ 1,051 $ 88 $ 86 $ 76 1.24% 1.35% 1.38%
EMERGING MARKETS 949 804 732 38 34 30 2.50 2.36 2.44
------- ------- ------- ------- ------- -------
TOTAL $ 2,043 $ 1,968 $ 1,783 $ 126 $ 120 $ 106 1.62 1.64 1.68
- ----------------------------------------------===================================================================================
CORPORATE BANKING(2):
EMERGING MARKETS $ 1,465 $ 1,148 $ 1,037 $ 59 $ 50 $ 46 2.48% 2.30% 2.25%
GLOBAL RELATIONSHIP BANKING 714 630 271 80 94 104 0.89 0.67 0.26
------- ------- ------- ------- ------- -------
TOTAL $ 2,179 $ 1,778 $ 1,308 $ 139 $ 144 $ 150 1.57 1.23 0.87
- ----------------------------------------------===================================================================================
(1) Reclassified to conform to the 1996 presentation.
(2) The Corporate Banking results also include the results of the Cross-Border
Refinancing Portfolio (as a component of the Emerging Markets business) and
North America Commercial Real Estate (as a component of the Global
Relationship Banking business), both of which were reported as separate
businesses prior to 1996.
(3) Represents the cumulative effect of adopting SFAS No. 112 as of January 1,
1994. See page 68 for discussion.
NM Not meaningful.
28
CONSUMER
In Millions of Dollars 1996 1995(1) 1994(1)
- ----------------------------------------------------------------------------
Total Revenue $ 12,098 $ 11,421 $ 10,460
Effect of Credit Card Securitization 1,392 917 934
Net Cost to Carry Cash-Basis Loans and OREO (10) 12 3
-------- -------- --------
ADJUSTED REVENUE 13,480 12,350 11,397
-------- -------- --------
Total Operating Expense 7,259 6,790 6,297
Net OREO Costs(2) (5) -- (48)
-------- -------- --------
ADJUSTED OPERATING EXPENSE 7,254 6,790 6,249
-------- -------- --------
OPERATING MARGIN 6,226 5,560 5,148
-------- -------- --------
Net Write-offs 1,728 1,544 1,353
Effect of Credit Card Securitization 1,392 917 934
Net Cost to Carry and Net OREO Costs (5) 12 51
-------- -------- --------
CREDIT COSTS 3,115 2,473 2,338
-------- -------- --------
OPERATING MARGIN LESS CREDIT COSTS 3,111 3,087 2,810
-------- -------- --------
Additional Provision 200 200 200
-------- -------- --------
INCOME BEFORE TAXES 2,911 2,887 2,610
Income Taxes 868 919 827
-------- -------- --------
NET INCOME $ 2,043 $ 1,968 $ 1,783
- -------------------------------------------=================================
Average Assets (In Billions of Dollars) $ 126 $ 120 $ 106
Return on Assets 1.62% 1.64% 1.68%
- -------------------------------------------=================================
(1) Reclassified to conform to the 1996 presentation.
(2) Includes amounts related to writedowns, gains and losses on sales, and
direct expense related to OREO for certain real estate lending activities.
The Consumer franchise consists of three global businesses--Citibanking, Cards,
and the Private Bank--which deliver a consistent and superior financial services
experience to the consumer around the world. Net income was $2.0 billion in
1996, an improvement of $75 million or 4% from 1995, despite a $133 million or
11% decline in Cards. Net income for Citibanking increased 27% in the year and
Private Bank net income was up 24%. Net income in 1995 was up $185 million or
10% from 1994, reflecting increases in Citibanking of 36% and Cards of 4%, while
net income in the Private Bank declined 5%.
Adjusted revenue of $13.5 billion in 1996 was up $1.1 billion or 9% from
1995, reflecting growth across the three Consumer businesses. Net interest
revenue was up 10% primarily due to volume growth. Fee and commission revenue
was up 3% entirely in Citibanking and the Private Bank, as Cards fees were
unchanged in the year. Revenue in 1995 increased $953 million or 8% from 1994
primarily due to improvements in the Cards and Citibanking businesses and the
effect of foreign currency translation.
- --------------------------------------------------------------------------------
CONSUMER REVENUE
$ Billions
Net Income Revenue
94 1.8 11.4
95 2.0 12.4
96 2.0 13.5
- --------------------------------------------------------------------------------
Adjusted operating expense of $7.3 billion was up $464 million or 7% from
1995, principally reflecting increases in Citibanking worldwide, Cards in the
emerging markets, and in the Private Bank. U.S. bankcard expense levels in 1996
were essentially unchanged from 1995. Expense in 1995 increased $541 million or
9% from 1994, principally reflecting continued investment spending on worldwide
Citibanking initiatives, increased spending in Cards in support of higher
business volumes, and the effect of foreign currency translation.
Consumer credit costs of $3.1 billion in 1996 were up $642 million or 26%
from 1995, primarily due to increases in U.S. bankcards, partially offset by
lower losses in Citibanking and the Private Bank. Credit costs in 1995 were up
$135 million or 6% from 1994, reflecting higher loan volumes worldwide and
economic conditions in Latin America, partially offset by significant
improvements in the U.S. Citibanking and Private Bank businesses. The ratio of
net credit losses to average managed loans was 2.37%, 1.99%, and 2.08% in 1996,
1995, and 1994, respectively. The additional provision, which represents charges
in excess of net write-offs to build the allowance, totaled $200 million in
1996, 1995, and 1994, primarily attributable to Cards.
Income taxes are attributed to core businesses on the basis of local tax
rates, which resulted in an effective rate of 30% in 1996 compared to 32% in
both 1995 and 1994, reflecting changes in the nature and geographic mix of
earnings. The difference between the local tax rates attributed to core
businesses and Citicorp's overall effective tax rate in each year is included in
Corporate Items.
29
CITIBANKING
In Millions of Dollars 1996 1995(1) 1994(1)
- -----------------------------------------------------------------------------
TOTAL REVENUE $5,764 $5,412 $4,862
TOTAL OPERATING EXPENSE 4,086 3,798 3,496
------ ------ ------
OPERATING MARGIN 1,678 1,614 1,366
------ ------ ------
CREDIT COSTS 634 706 692
------ ------ ------
OPERATING MARGIN LESS CREDIT COSTS 1,044 908 674
------ ------ ------
Additional Provision 4 42 65
------ ------ ------
INCOME BEFORE TAXES 1,040 866 609
Income Taxes 315 295 188
------ ------ ------
NET INCOME $ 725 $ 571 $ 421
- -------------------------------------------------============================
Average Assets (In Billions of Dollars) $ 81 $ 79 $ 72
Return on Assets 0.90% 0.72% 0.58%
- -------------------------------------------------============================
(1) Reclassified to conform to the 1996 presentation.
Citibanking activities--which deliver products and services to customers through
Citicorp's worldwide branch network and electronic delivery systems--earned $725
million in 1996, up $154 million or 27% from 1995, reflecting improved credit
performance, modest operating margin growth, and the benefit of a lower
effective tax rate. Net income in 1995 increased $150 million or 36% from 1994,
principally reflecting improvements in the U.S. and Europe, and increases in
Latin America and Asia Pacific. Return on assets was 0.90% in 1996, up from
0.72% in 1995 and 0.58% in 1994.
Revenue of $5.8 billion grew $352 million or 7%, reflecting higher business
volumes in both the emerging and developed markets, partially offset by spread
tightening in Latin America and Asia Pacific. Revenue in the emerging and
developed markets grew by 13% and 3%, respectively. Revenue included gains from
the sale of an interest in an Asian affiliate and from the sale of the consumer
mortgage portfolio in the U.K., offset by the effect of foreign currency
translation. Revenue in 1996 also included the $64 million assessment to
recapitalize the U.S. Savings Association Insurance Fund. Revenue in 1995 was up
$550 million or 11% from 1994, led by volume growth in both the emerging and
developed markets and the foreign currency translation benefit of a generally
weaker U.S. dollar, partially offset by spread tightening, particularly in Asia
Pacific.
Adjusted operating expense of $4.1 billion grew $288 million or 8% from
1995, largely reflecting growth in business volumes and continued investment
spending on Citibanking initiatives, including franchise expansion and
technology upgrades, partially offset by the effect of foreign currency
translation. In the emerging markets, expense increased 16% in the year, while
expense in the developed markets grew by 4%. Expense in 1995 was up $302 million
or 9% from 1994, principally due to investment spending on franchise development
in Latin America and Asia Pacific and the effect of foreign currency
translation.
- --------------------------------------------------------------------------------
CITIBANKING BRANCHES
Model Branches Total Branches
94 308 1,183
95 441 1,191
96 555 1,130
- --------------------------------------------------------------------------------
In 1996, 114 branches were upgraded to the Citibanking standard for
enhancing customer relationships and efficiency, bringing the total of remodeled
branches to 555 worldwide, or 49% of total branches.
Credit costs of $634 million in 1996 declined $72 million or 10% from 1995
due to lower losses in the U.S. and Europe, including the effect of foreign
currency translation, and Latin America, partially offset by increases in Asia
Pacific. Credit costs in the developed and emerging markets declined by 11% and
8%, respectively. Credit costs in 1995 were up $14 million or 2% from 1994 due
to higher losses in Latin America and Europe, partially offset by improvements
in the United States. The net credit loss ratio was 0.96% in 1996, 1.12% in
1995, and 1.21% in 1994. The additional provision, which represents charges in
excess of net write-offs to build the allowance, was $4 million in 1996, $42
million in 1995, and $65 million in 1994.
30
CARDS
In Millions of Dollars 1996 1995(1) 1994(1)
- -----------------------------------------------------------------------------
Total Revenue $5,289 $5,080 $4,630
Effect of Credit Card Securitization 1,392 917 934
------ ------ ------
ADJUSTED REVENUE 6,681 5,997 5,564
TOTAL OPERATING EXPENSE 2,477 2,358 2,179
------ ------ ------
OPERATING MARGIN 4,204 3,639 3,385
------ ------ ------
Net Write-offs 1,090 814 599
Effect of Credit Card Securitization 1,392 917 934
------ ------ ------
CREDIT COSTS 2,482 1,731 1,533
------ ------ ------
OPERATING MARGIN LESS CREDIT COSTS 1,722 1,908 1,852
------ ------ ------
Additional Provision 196 158 135
------ ------ ------
INCOME BEFORE TAXES 1,526 1,750 1,717
Income Taxes 487 578 593
------ ------ ------
NET INCOME $1,039 $1,172 $1,124
- -------------------------------------------------============================
Average Assets (In Billions of Dollars) $ 29 $ 26 $ 19
Return on Assets(2) 3.58% 4.51% 5.92%
- -------------------------------------------------============================
(1) Reclassified to conform to the 1996 presentation.
(2) Adjusted for the effect of credit card securitization the return on managed
assets for worldwide Cards was 1.89% in 1996, 2.35% in 1995, and 2.64% in
1994.
Cards--which includes worldwide bankcards, Diners Club, and private label
cards--earned $1.0 billion in 1996, down $133 million or 11% from 1995. Earnings
in the developed markets declined by 21%, principally in U.S. bankcards, as
credit cost increases outpaced revenue growth. The emerging markets Cards
business, which increased net income by 21% in the year, represented
approximately 31% of 1996 Cards earnings. Net income in 1995 increased by $48
million or 4% from 1994, reflecting a strong performance in Asia Pacific and
higher earnings in U.S. bankcards, partially offset by the cost of increased
marketing efforts in Europe bankcards and Diners Club.
- --------------------------------------------------------------------------------
WORLDWIDE CARDS IN FORCE
(including Affiliates)
In Millions
94 55
95 58
96 61
- --------------------------------------------------------------------------------
The return on managed assets was 1.89% in 1996, down from 2.35% in 1995 and
2.64% in 1994, while on-balance sheet asset returns were 3.58%, 4.51%, and
5.92%, respectively.
Cards revenue of $6.7 billion increased $684 million or 11% from 1995,
reflecting improvements of 9% in the developed markets and 24% in the emerging
markets. In the developed markets, U.S. bankcards revenue increased 11% due
primarily to volume growth and lower funding costs, while revenue in the U.S.
private label business declined from a year ago. The revenue increase in the
emerging markets reflected growth in Asia Pacific and Latin America, including
the earnings of Credicard, a Brazilian affiliate. Revenue in 1995 increased $433
million or 8% from 1994, due primarily to 7% growth in U.S. bankcard revenue and
business expansion in Asia Pacific.
As shown in the following table, the U.S. bankcard business experienced
only moderate growth in its portfolio in 1996, as a result of competitive
pressures, credit tightening on the part of Citicorp, and moderating increases
in consumer personal debt levels.
U.S. BANKCARDS (MANAGED BASIS)
Increase Increase
over over
Dollars in Billions 1996 1995 1994(1)
- -----------------------------------------------------------------------------
Cards in Force (In Millions) 38 -- 6%
Charge Volumes $96.4 12% 17%
End-of-Period Receivables $47.0 5% 10%
- -----------------------------------------------------------------------------
(1) Compound annual growth rate.
Adjusted operating expense of $2.5 billion in 1996 was up $119 million or
5% from 1995. Expense in the emerging markets Cards businesses increased 26% in
support of higher loan volumes, as well as continued investment spending and
franchise expansion. Expense levels in developed markets were essentially
unchanged in the year, consistent with the lower volume growth trends in U.S.
bankcards. Expense in 1995 increased $179 million or 8% from 1994, principally
due to increases in U.S. bankcards in support of higher loan volumes, business
expansion in Asia Pacific, and increased marketing efforts in Europe bankcards
and Diners Club.
Cards credit costs in 1996 were $2.5 billion, up from $1.7 billion in 1995
and $1.5 billion in 1994, reflecting increased losses in U.S. bankcards,
including the effect of rising bankruptcies, and portfolio growth in the
emerging markets. Credit costs for U.S. bankcards increased to $2.1 billion, or
4.99% of average managed loans, up from $1.5 billion or 3.70% in 1995 and $1.3
billion or 3.97% in 1994.
Cards continued to build reserves for possible credit losses, with charges
in excess of net write-offs of $196 million, $158 million, and $135 million in
1996, 1995, and 1994, respectively.
Net credit losses and the related loss ratios, which are influenced by
economic conditions, credit performance of the portfolio (including
bankruptcies), and changes in portfolio levels, are expected to increase further
from 1996 levels, particularly in U.S. bankcards. See "Consumer Portfolio
Review" on page 34 and "Provision and Allowance for Credit Losses" on page 46
for additional discussion of the Cards portfolio.
31
PRIVATE BANK
In Millions of Dollars 1996 1995(1) 1994(1)
- ----------------------------------------------------------------------------
Total Revenue $ 1,045 $ 929 $ 968
Net Cost to Carry Cash-Basis Loans and OREO (10) 12 3
------- ------- -------
ADJUSTED REVENUE 1,035 941 971
------- ------- -------
Total Operating Expense 696 634 622
Net OREO Costs(2) (5) -- (48)
------- ------- -------
ADJUSTED OPERATING EXPENSE 691 634 574
------- ------- -------
OPERATING MARGIN 344 307 397
------- ------- -------
Net Write-offs 4 24 62
Net Cost to Carry and Net OREO Costs (5) 12 51
------- ------- -------
CREDIT COSTS (1) 36 113
------- ------- -------
OPERATING MARGIN LESS CREDIT COSTS 345 271 284
------- ------- -------
Additional Provision -- -- --
------- ------- -------
INCOME BEFORE TAXES 345 271 284
Income Taxes 66 46 46
------- ------- -------
NET INCOME $ 279 $ 225 $ 238
- --------------------------------------------================================
Average Assets (In Billions of Dollars) $ 16 $ 15 $ 15
Return on Assets 1.74% 1.50% 1.59%
- --------------------------------------------================================
(1) Reclassified to conform to the 1996 presentation.
(2) Includes amounts related to writedowns, gains and losses on sales, and
direct expense related to OREO for certain real estate lending activities.
Private Bank net income of $279 million in the year was $54 million or 24%
higher than 1995, and resulted in a return on average assets of 1.74% for the
year. The increase in 1996 reflected continued revenue growth throughout the
Private Bank together with lower credit costs. Net income of $225 million in
1995 was down slightly from 1994.
Revenue for 1996 was $1.0 billion, up $94 million or 10% from 1995. The
increase reflected higher spreads and credit volumes in both the developed and
emerging markets, and was aided by the successful launch of several new
investment products. Revenue for 1995 was $941 million, down $30 million or 3%
from 1994, reflecting shifts in market conditions from mid-1994 through late
1995 that caused clients to move to lower risk products.
- --------------------------------------------------------------------------------
PRIVATE BANK
Client Managed
Business Volumes
$ Billions
94 78
95 87
96 96
- --------------------------------------------------------------------------------
Expense of $691 million in the year was up $57 million or 9% from 1995. The
increase was due to higher employee expense (including new hires), reengineering
efforts, and higher costs related to activities in the funds business. Expense
of $634 million in 1995 was up $60 million or 10% from 1994.
Total credit costs for 1996 were a net benefit of $1 million, compared with
credit costs of $36 million in 1995, as the U.S. business benefited from
recoveries, lower OREO writedowns, and higher income on cash-basis loans.
Overall credit trends improved with delinquencies down to 1.26% of loans from
2.15% a year earlier and 2.28% in 1994, consistent with the decrease in the
level of nonperforming assets. Credit costs in 1995 improved by $77 million from
1994.
Client business volumes under management at the end of the year totaled $96
billion, up $9 billion or 11% from 1995, which in turn was up 12% over 1994.
Growth was balanced across the advisory and discretionary investment areas and
most other product lines.
32
CONSUMER BUSINESS IN DEVELOPED AND EMERGING MARKETS
DEVELOPED MARKETS(1) EMERGING MARKETS(1)
-------------------------------- -------------------------------
In Millions of Dollars 1996 1995(2) 1994(2) 1996 1995(2) 1994(2)
- ------------------------------------------------------------------------------ -------------------------------
Total Revenue $ 8,460 $ 8,288 $ 7,744 $ 3,638 $ 3,133 $ 2,716
Effect of Credit Card Securitization 1,392 917 934 -- -- --
Net Cost to Carry Cash-Basis Loans and OREO (10) 12 3 -- -- --
------- ------- ------- ------- ------- -------
ADJUSTED REVENUE 9,842 9,217 8,681 3,638 3,133 2,716
------- ------- ------- ------- ------- -------
Total Operating Expense 5,217 5,056 4,794 2,042 1,734 1,503
Net OREO Costs(3) (5) -- (48) -- -- --
------- ------- ------- ------- ------- -------
ADJUSTED OPERATING EXPENSE 5,212 5,056 4,746 2,042 1,734 1,503
------- ------- ------- ------- ------- -------
OPERATING MARGIN 4,630 4,161 3,935 1,596 1,399 1,213
------- ------- ------- ------- ------- -------
Net Write-offs 1,371 1,247 1,184 357 297 169
Effect of Credit Card Securitization 1,392 917 934 -- -- --
Net Cost to Carry and Net OREO Costs (5) 12 51 -- -- --
------- ------- ------- ------- ------- -------
CREDIT COSTS 2,758 2,176 2,169 357 297 169
------- ------- ------- ------- ------- -------
OPERATING MARGIN LESS CREDIT COSTS 1,872 1,985 1,766 1,239 1,102 1,044
------- ------- ------- ------- ------- -------
Additional Provision 185 170 143 15 30 57
------- ------- ------- ------- ------- -------
INCOME BEFORE TAXES 1,687 1,815 1,623 1,224 1,072 987
Income Taxes 593 651 572 275 268 255
------- ------- ------- ------- ------- -------
NET INCOME $ 1,094 $ 1,164 $ 1,051 $ 949 $ 804 $ 732
- ----------------------------------------------======================================================================
Average Assets (In Billions of Dollars) $ 88 $ 86 $ 76 $ 38 $ 34 $ 30
Return on Assets 1.24% 1.35% 1.38% 2.50% 2.36% 2.44%
- ----------------------------------------------======================================================================
(1) Developed markets comprise activities in North America, Europe, and Japan.
Emerging markets comprises activities in all other geographic areas.
(2) Reclassified to conform to the 1996 presentation.
(3) Includes amounts related to writedowns, gains and losses on sales, and
direct expense related to OREO for certain real estate lending activities.
- --------------------------------------------------------------------------------
DEVELOPED MARKETS
$ Billions
Net Income Revenue
94 1.1 8.7
95 1.2 9.2
96 1.1 9.8
- --------------------------------------------------------------------------------
The Consumer businesses of Citibanking, Cards, and the Private Bank in the
developed markets earned $1.1 billion in 1996, down $70 million or 6% from 1995,
principally due to increased credit costs in the U.S. bankcard business.
Adjusted revenue grew $625 million or 7%, reflecting improvements across all
three businesses, while expenses were up 3% including significant investment
spending on Citibanking initiatives. Net income in 1995 was up $113 million or
11% from 1994, reflecting increases in the Citibanking and bankcard businesses
in the United States.
- --------------------------------------------------------------------------------
EMERGING MARKETS
$ Billions
Net Income Revenue
94 0.7 2.7
95 0.8 3.1
96 0.9 3.6
- --------------------------------------------------------------------------------
Net income in the emerging markets was $949 million in 1996, an increase of $145
million or 18% from 1995. The results for the year reflected revenue growth of
$505 million or 16%, primarily from higher business volumes in Citibanking and
Cards, partially offset by continued spread tightening across most markets.
Expense levels increased 18%, principally due to continued spending on franchise
expansion. Credit costs increased $60 million or 20% in 1996, primarily
reflecting expansion in the Asia Pacific Cards businesses, partially offset by
improvements in Latin America. Emerging markets net income in 1995 was up $72
million or 10% from 1994, primarily due to improvements in Asia Pacific Cards.
33
CONSUMER PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
CONSUMER
Managed Loans
$ Billions
94 95 96
-- -- --
Private Bank 14 14 16
Cards 44 52 55
Citibanking 60 65 66
--- --- ---
Total 118 131 137
- --------------------------------------------------------------------------------
Managed loans of $137.0 billion as of December 31, 1996, were up from $131.1
billion and $117.9 billion as of December 31, 1995 and 1994, respectively. The
increase in managed consumer loans since December 31, 1995 is primarily due to
growth in Cards, particularly in U.S. bankcards and in Asia Pacific, which grew
5% and 27%, respectively. In Citibanking, loan growth was significantly impacted
by the sale of the U.K. mortgage portfolio and the effect of foreign currency
translation. At December 31, 1996, Cards represented 40% of the overall consumer
portfolio, growing from 39% and 38% at December 31, 1995 and 1994, respectively.
- --------------------------------------------------------------------------------
CONSUMER
Managed Loans
$ Billions
94 95 96
-- -- --
Emerging 26 102 104
Developed 92 29 33
--- --- ---
Total 118 131 137
- --------------------------------------------------------------------------------
In the consumer portfolio, credit loss experience is often expressed in
terms of annual net credit losses as a percent of average loans. Pricing and
credit policies reflect the loss experience of each particular product.
Consumer loans are generally written off no later than a predetermined number
of days past due on a contractual basis, or earlier in the event of bankruptcy.
The number of days is set at an appropriate level according to loan product and
country.
The following table summarizes delinquency and net credit loss experience
in both the managed and on-balance sheet loan portfolio in terms of loans 90
days or more past due, net credit losses, and as a percentage of related loans.
CONSUMER LOAN DELINQUENCY AMOUNTS, NET CREDIT LOSSES, AND RATIOS
TOTAL AVERAGE
LOANS(1) 90 DAYS OR MORE PAST DUE(2) LOANS(1) NET CREDIT LOSSES(2)(3)
------- ------------------------------- ------- ------------------------------
1996 1996 1995 1994 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
Citibanking $ 66.2 $ 2,320 $ 2,770 $ 2,666 $ 65.8 $ 634 $ 706 $ 692
Ratio 3.50% 4.23% 4.45% 0.96% 1.12% 1.21%
Cards
U.S. Bankcards 46.5 886 732 625 43.0 2,146 1,476 1,342
Ratio 1.90% 1.66% 1.64% 4.99% 3.70% 3.97%
Other 8.9 189 141 99 7.9 336 255 191
Ratio 2.13% 1.93% 1.62% 4.23% 3.88% 3.60%
Private Bank 15.4 193 307 311 14.9 4 24 62
Ratio 1.26% 2.15% 2.28% 0.02% 0.16% 0.45%
------- ------- ------- ------- ------- ------- ------- -------
TOTAL MANAGED 137.0 3,588 3,950 3,701 131.6 3,120 2,461 2,287
------- ------- ------- ------- ------- ------- ------- -------
RATIO 2.62% 3.01% 3.14% 2.37% 1.99% 2.08%
Effect of Credit Card Securitization(4) (25.2) (501) (440) (380) (26.1) (1,392) (917) (934)
------- ------- ------- ------- ------- ------- ------- -------
TOTAL ON-BALANCE SHEET $ 111.8 $ 3,087 $ 3,510 $ 3,321 $ 105.5 $ 1,728 $ 1,544 $ 1,353
------- ------- ------- ------- ------- ------- ------- -------
RATIO 2.76% 3.32% 3.44% 1.64% 1.55% 1.56%
- -----------------------------------------==========================================================================================
MANAGED PORTFOLIO:
Developed Markets $ 104.0 $ 3,218 $ 3,665 $ 3,517 $ 100.6 $ 2,763 $ 2,164 $ 2,118
Ratio 3.10% 3.58% 3.82% 2.74% 2.25% 2.44%
Emerging Markets 33.0 370 285 184 31.0 357 297 169
Ratio 1.12% 0.99% 0.71% 1.15% 1.09% 0.73%
- -----------------------------------------==========================================================================================
(1) Loan amounts, in billions of dollars, are net of unearned income.
(2) In millions of dollars.
(3) Net credit loss ratios are calculated based on average loans.
(4) See page 48 for a description of the impact of credit card receivables
securitizations.
CONSUMER LOAN BALANCES
In Billions of Dollars
END OF PERIOD AVERAGE
-------------------------- --------------------------
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------
MANAGED $137.0 $131.1 $117.9 $131.6 $123.3 $110.2
Effect of Credit Card Securitization (25.2) (25.5) (21.3) (26.1) (23.6) (23.4)
------ ------ ------ ------ ------ ------
ON-BALANCE SHEET $111.8 $105.6 $ 96.6 $105.5 $ 99.7 $ 86.8
- ---------------------------------------========================================================
34
Total delinquencies in the managed portfolio of $3.6 billion and the
related delinquency ratio of 2.62% at December 31, 1996, improved from $4.0
billion or 3.01% at December 31, 1995 and $3.7 billion or 3.14% at December 31,
1994. Total managed net credit losses of $3.1 billion and the related loss ratio
of 2.37% increased from $2.5 billion or 1.99% at December 31, 1995 and $2.3
billion or 2.08% at December 31, 1994.
In Citibanking, delinquencies of $2.3 billion and the related ratio of
3.50% at December 31, 1996 improved from $2.8 billion and 4.23% at December 31,
1995, primarily reflecting improvements in U.S. mortgages, the impact of the
U.K. mortgage portfolio sale, and the effect of foreign currency translation.
The improvement in delinquencies was partially offset by increases in the
emerging markets and in the U.S. government-guaranteed student loan portfolio.
Net credit losses of $634 million and the related loss ratio of 0.96% declined
from 1995, primarily due to lower losses in the U.S. and Europe, as well as
improvements in Latin America, partially offset by increases in Asia Pacific.
The improvement in the U.S. and Europe principally reflected lower losses in
Germany, including the effect of foreign currency translation, and U.S.
mortgages. The delinquency ratio and net credit loss ratio of 4.23% and 1.12% in
1995 improved from 4.45% and 1.21%, respectively, in 1994.
U.S. bankcards managed loans that were delinquent 90 days or more totaled
$886 million as of December 31, 1996, or 1.90% of the portfolio, up from $732
million, or 1.66%, and $625 million, or 1.64%, at December 31, 1995 and 1994,
respectively. The net credit loss ratio was 4.99% in 1996, up from 3.70% in 1995
(including a three basis point benefit from the sale of certain bankrupt
accounts) and 3.97% in 1994. The U.S. bankcards net credit loss ratio has
generally increased on a quarterly basis since the 1994 fourth quarter. Personal
bankruptcies accounted for 37.3% of gross write-offs, up from 34.8% in 1995 and
31.8% in 1994. Citicorp continues to write off bankrupt accounts upon notice of
filing of bankruptcy. The increases in delinquencies and net credit loss rates
are broadly consistent with industry trends.
The other Cards businesses primarily include bankcards throughout the
emerging markets and in the developed markets of Europe and Japan, as well as
worldwide Diners Club. Compared with 1995, the $48 million rise in delinquencies
and the $81 million increase in net credit losses and related ratios was
primarily due to increases in Asia Pacific. Delinquencies and net credit losses
in 1995 increased from 1994 primarily due to portfolio growth in Asia Pacific
and economic conditions in Latin America.
Private Bank delinquencies declined to 1.26% of loans from 2.15% a year
earlier, which is consistent with the overall decrease in the level of
nonperforming assets.
Total consumer loans on the balance sheet delinquent 90 days or more on
which interest continued to be accrued were $1.0 billion, $951 million, and $828
million at December 31, 1996, 1995, and 1994, respectively. Included in these
amounts are U.S. government-guaranteed student loans of $239 million, $208
million, and $150 million, respectively. Other consumer loans delinquent 90 days
or more on which interest continued to be accrued (which primarily include
worldwide bankcard receivables and certain loans in Germany) were $770 million,
$743 million, and $678 million, respectively. The increase in both periods was
primarily in U.S. bankcards. The majority of these other loans are written off
upon reaching a stipulated number of days past due. See the table of cash-basis,
renegotiated, and past due loans on page 80.
Citicorp's policy for suspending the accrual of interest on consumer loans
varies depending on the terms, security, and credit loss experience
characteristics of each product, as well as write-off criteria in place. At
December 31, 1996, interest accrual had been suspended on $2.2 billion of
consumer loans, primarily consisting of Citibanking loans in the U.S. mortgage
business, Europe branches, the emerging markets, and the U.S. branches, as well
as Private Banking loans. Interest accrual had been suspended on $2.7 billion of
loans at December 31, 1995 and $2.6 billion of loans at December 31, 1994. The
decline from 1995 reflects improvements in U.S. mortgages, the impact of the
U.K. mortgage portfolio sale, lower amounts in the Private Bank, and the effect
of foreign currency translation. These improvements were partially offset by
increases in Asia Pacific. U.S. mortgages on which the accrual of interest has
been suspended were $734 million at December 31, 1996, down from $979 million
and $989 million at December 31, 1995 and 1994, respectively, due to improved
collection efforts and delinquency management initiatives.
The portion of Citicorp's allowance for credit losses allocated to the
consumer portfolio and the reserve for sold consumer portfolios totaled $2.6
billion as of December 31, 1996, up from $2.4 billion and $2.3 billion as of
December 31, 1995 and 1994, respectively. The allocation of the allowance is
made for analytical purposes only and may change from time to time. Furthermore,
the entire Citicorp allowance is available to absorb all probable credit losses
inherent in the portfolio. The reserve for sold consumer portfolios is
attributable to U.S. bankcard receivables securitizations and certain mortgage
sales. Refer to Note 1 to the consolidated financial statements for a discussion
of Citicorp's obligations under certain loans sold with credit enhancements.
The allowance for credit losses reflected an additional provision in excess
of net write-offs of $200 million in 1996, 1995, and 1994. The allowance as a
percentage of loans on the balance sheet was 1.86% as of December 31, 1996,
compared with 1.84% and 1.90% at December 31, 1995 and 1994, respectively. See
"Provision and Allowance for Credit Losses" on page 46 for further discussion.
Consumer credit costs, particularly in U.S. bankcards, and the related net
credit loss ratios are expected to increase from 1996 levels as a result of
economic conditions, credit performance of the portfolios (including
bankruptcies), and changes in portfolio levels. Additionally, delinquencies and
loans on which the accrual of interest is suspended could remain at relatively
high levels.
35
CORPORATE BANKING
In Millions of Dollars 1996 1995(1) 1994(1)
- -----------------------------------------------------------------------------
Total Revenue $ 7,189 $ 6,525 $5,712
Net Cost to Carry Cash-Basis Loans and OREO (36) 11 86
------- ------- ------
ADJUSTED REVENUE 7,153 6,536 5,798
------- ------- ------
Total Operating Expense 4,391 3,918 3,572
Net OREO Benefits 49 105 39
------- ------- ------
ADJUSTED OPERATING EXPENSE 4,440 4,023 3,611
------- ------- ------
OPERATING MARGIN 2,713 2,513 2,187
------- ------- ------
Net (Recoveries) Write-offs (2) 166 192
Net Cost to Carry and Net OREO Benefits (85) (94) 47
------- ------- ------
CREDIT (BENEFITS) COSTS (87) 72 239
------- ------- ------
OPERATING MARGIN LESS CREDIT (BENEFITS) COSTS 2,800 2,441 1,948
Additional Provision -- 81 136
------- ------- ------
INCOME BEFORE TAXES 2,800 2,360 1,812
Income Taxes 621 582 504
------- ------- ------
NET INCOME $ 2,179 $ 1,778 $1,308
- -------------------------------------------------============================
Average Assets (In Billions of Dollars) $ 139 $ 144 $ 150
Return on Assets 1.57% 1.23% 0.87%
- -------------------------------------------------============================
(1) Reclassified to conform to the 1996 presentation and to include the results
of the Cross-Border Refinancing Portfolio (as a component of the Emerging
Markets business) and North America Commercial Real Estate (as a component
of Global Relationship Banking) both of which were reported as separate
businesses prior to 1996.
The Corporate Bank made significant progress in achieving its Business
Directions strategy in 1996--adding breadth and depth to the global network,
investing for future growth, reducing average assets in Global Relationship
Banking, and improving returns. Net income of $2.2 billion increased $401
million or 23% compared with 1995 and represented a return on assets of 1.57%,
up 34 basis points from 1995 and up 70 basis points from 1994. Growth in the
Emerging Markets business coupled with improved credit results in Global
Relationship Banking drove the improved results. Net income of $1.8 billion in
1995 grew $470 million or 36% from 1994 due primarily to higher trading-related
revenue, growth in the Emerging Markets business, and improved credit results in
Global Relationship Banking. The 1996 and 1995 year-to-year comparisons also
benefited from declining effective income tax rates.
[The following table was represented as a bar graph in the printed material.]
- --------------------------------------------------------------------------------
CORPORATE BANKING
Net Income
$ Billions
1994 1995 1996
---- ---- ----
Corporate Banking 1.3 1.8 2.2
Emerging Markets 1.0 1.2 1.5
Global Relationship Banking 0.3 0.6 0.7
- --------------------------------------------------------------------------------
Adjusted revenue of $7.2 billion in 1996 grew $617 million or 9% from 1995
reflecting growth in fee-based corporate finance activity and transaction
banking services together with higher levels of securities transactions and
asset gains. About 20% of the revenue in the Emerging Markets business was
attributable to business from multinational companies managed jointly with
Global Relationship Banking, with that revenue having grown at a double digit
rate from 1995. Revenue growth of $738 million or 13% in 1995 compared with 1994
was primarily attributable to higher trading-related revenue and growth in the
Emerging Markets business.
Trading-related revenue totaled $1.7 billion, $1.7 billion, and $1.2
billion in 1996, 1995, and 1994, respectively. Venture capital revenue totaled
$450 million, $390 million, and $365 million in 1996, 1995, and 1994,
respectively, and benefited from favorable conditions in the U.S. equity markets
in 1996 and 1995. Levels of trading-related and venture capital revenue may
fluctuate in the future as a result of market conditions and other factors. See
pages 45 and 46 for additional discussions of trading-related and venture
capital revenues.
Adjusted operating expense of $4.4 billion in 1996 grew $417 million or 10%
compared with 1995. Expense grew $275 million or 20% in the Emerging Markets
business and $142 million or 5% in Global Relationship Banking. The expense
growth is primarily attributable to investment spending to build the Emerging
Markets franchise, costs associated with implementing Citicorp's plan to gain
market share in selected emerging market countries, increased spending on
technology and risk management in Global Relationship Banking, and volume-
related increases in both businesses. Expense in 1995 was up 11% from 1994
primarily due to business expansion in the Emerging Markets business and
volume-related and technology spending in Global Relationship Banking.
Credit costs were a net benefit of $87 million in 1996, a $159 million
improvement from the net charge of $72 million in 1995. The 1996 results
primarily reflect a decline in gross write-offs in Global Relationship Banking
coupled with an increase in recoveries in both businesses (including $75 million
from the refinancing agreements concluded with Panama, Slovenia, and Croatia).
Total credit costs of $72 million in 1995 declined $167 million from 1994
primarily due to lower costs to carry cash-basis loans and OREO and improved
results on the disposition of OREO. The additional provision for credit losses
in excess of net write-offs in 1995 and 1994 was $81 million and $136 million,
respectively. Losses on commercial lending activities can vary widely with
respect to timing and amount, particularly within any narrowly-defined business
or loan type. During 1997 credit costs may increase from the 1996 level but are
expected to remain moderate.
36
Citicorp attributes income taxes to core businesses on the basis of local
tax rates, which resulted in effective income tax rates of 22%, 25%, and 28%, in
1996, 1995, and 1994, respectively. The difference between the local tax rates
attributed to core businesses and Citicorp's overall effective tax rate in each
year is included in Corporate Items. Fluctuations in the effective income tax
rates resulted from changes in the nature and geographic mix of pretax earnings.
Cash-basis loans at December 31, 1996 were $905 million, down $629 million
or 41% from year-end 1995. The reduction is primarily attributable to paydowns
and transfers to OREO or accrual status. The OREO portfolio of $614 million was
essentially unchanged from December 31, 1995 as transfers into OREO were
approximately offset by OREO sales. See the tables entitled "Cash-Basis,
Renegotiated, and Past Due Loans" and "Other Real Estate Owned and Assets
Pending Disposition" on page 80.
Average assets of $139 billion in 1996 declined $5 billion or 3% from 1995.
Average assets of $80 billion in Global Relationship Banking declined $14
billion or 15% from 1995 as the business continued to focus on asset
utilization, primarily in trading-related activities. Average assets of $59
billion in the Emerging Markets business grew $9 billion or 18% reflecting
continuing business expansion. Average assets in 1995 declined $6 billion from
1994 primarily reflecting the Global Relationship Banking business repositioning
and lower levels of trading and real-estate-related assets, partially offset by
an increase in the Emerging Markets business due to business expansion.
EMERGING MARKETS
In Millions of Dollars 1996 1995(1) 1994(1)
- -----------------------------------------------------------------------------
Total Revenue $ 3,433 $ 2,886 $ 2,519
Net Cost to Carry Cash-Basis Loans and OREO 4 14 9
------- ------- -------
ADJUSTED REVENUE 3,437 2,900 2,528
------- ------- -------
Total Operating Expense 1,640 1,363 1,174
Net OREO Benefits 5 7 4
------- ------- -------
ADJUSTED OPERATING EXPENSE 1,645 1,370 1,178
------- ------- -------
OPERATING MARGIN 1,792 1,530 1,350
------- ------- -------
Net (Recoveries) Write-offs (3) 26 5
Net Cost to Carry and Net OREO Benefits (1) 7 5
------- ------- -------
CREDIT (BENEFITS) COSTS (4) 33 10
------- ------- -------
OPERATING MARGIN LESS CREDIT (BENEFITS) COSTS 1,796 1,497 1,340
Additional Provision -- (19) (64)
------- ------- -------
INCOME BEFORE TAXES 1,796 1,516 1,404
Income Taxes 331 368 367
------- ------- -------
NET INCOME $ 1,465 $ 1,148 $ 1,037
- ----------------------------------------------===============================
Average Assets (In Billions of Dollars) $ 59 $ 50 $ 46
Return on Assets 2.48% 2.30% 2.25%
- ----------------------------------------------===============================
(1) Reclassified to conform to the 1996 presentation and to include the results
of the Cross-Border Refinancing Portfolio, which was reported as a separate
business prior to 1996.
Emerging Markets net income of $1.5 billion in 1996 grew $317 million
or 28% compared with 1995 and represented a return on assets of
2.48%, up 18 basis points from 1995. Broadly-based revenue growth
across most regions and products coupled with higher levels of securities
transactions and net asset gains outpaced expense growth by a 2:1
margin. Net income of $1.1 billion in 1995 improved 11% compared with
1994 reflecting revenue growth from lending and transaction banking
services together with improved trading-related activities and continued
investment spending to build the franchise.
Adjusted revenue of $3.4 billion grew $537 million or 19% compared with
1995. The improvement is primarily attributable to growth in credit- and
fee-based corporate finance activities and transaction banking services, a $146
million increase in securities transactions primarily attributable to the sale
of emerging markets debt securities, a $48 million increase in net asset gains,
and improved trading-related results. Revenue of $2.9 billion in 1995 grew $372
million or 15% compared with 1994 primarily reflecting higher revenue from
lending and transaction banking services together with improved trading-related
revenue.
Adjusted operating expense was $1.6 billion, $1.4 billion, and $1.2 billion
in 1996, 1995, and 1994, respectively. The growth in expense in the three-year
period is primarily attributable to investment spending to build the franchise
and, in 1996, costs associated with implementing Citicorp's plan to gain market
share in selected emerging market countries.
Credit costs were a net benefit of $4 million in 1996, an improvement of
$37 million from 1995, and primarily reflected higher recoveries (including $75
million from the refinancing agreements concluded with Panama, Slovenia, and
Croatia) partially offset by a modest rise in gross write-offs. Credit costs of
$33 million in 1995 grew $23 million compared with 1994 due to higher gross
write-offs.
The effective income tax rates in 1996, 1995, and 1994 were 18%, 24%, and
26%, respectively. Fluctuations in the effective income tax rates result from
changes in the nature and geographic mix of pretax earnings.
37
GLOBAL RELATIONSHIP BANKING
In Millions of Dollars 1996 1995(1) 1994(1)
- -----------------------------------------------------------------------------
Total Revenue $ 3,756 $ 3,639 $3,193
Net Cost to Carry Cash-Basis Loans and OREO (40) (3) 77
------- ------- ------
ADJUSTED REVENUE 3,716 3,636 3,270
------- ------- ------
Total Operating Expense 2,751 2,555 2,398
Net OREO Benefits 44 98 35
------- ------- ------
ADJUSTED OPERATING EXPENSE 2,795 2,653 2,433
------- ------- ------
OPERATING MARGIN 921 983 837
------- ------- ------
Net Write-offs 1 140 187
Net Cost to Carry and Net OREO Benefits (84) (101) 42
------- ------- ------
CREDIT (BENEFITS) COSTS (83) 39 229
------- ------- ------
OPERATING MARGIN LESS CREDIT (BENEFITS) COSTS 1,004 944 608
Additional Provision -- 100 200
------- ------- ------
INCOME BEFORE TAXES 1,004 844 408
Income Taxes 290 214 137
------- ------- ------
NET INCOME $ 714 $ 630 $ 271
- -----------------------------------------------==============================
Average Assets (In Billions of Dollars) $ 80 $ 94 $ 104
Return on Assets 0.89% 0.67% 0.26%
- -----------------------------------------------==============================
(1) Reclassified to conform to the 1996 presentation and to include the results
of North America Commercial Real Estate, which was reported as a separate
business prior to 1996.
Net income from the Global Relationship Banking business in North America,
Europe, and Japan was $714 million in 1996, up $84 million or 13% from 1995. The
improvement is primarily due to lower credit costs and a lower additional
provision. Net income in 1995 of $630 million improved $359 million from 1994
reflecting higher trading-related revenue, improved credit costs and a lower
additional provision, and a lower effective income tax rate.
Adjusted revenue of $3.7 billion grew $80 million or 2% compared with 1995.
The improvement is attributable to growth in fee-based corporate finance
activities and transaction banking services, partially offset by a decline in
credit-based corporate finance activities due to lower net rate spreads. A $170
million decline in trading-related revenue was offset by a $129 million gain on
the sale of a stand-alone automated trading business and by improved venture
capital results. Revenue growth of $366 million or 11% in 1995 compared with
1994 is attributable to improved trading-related revenue.
Adjusted operating expense of $2.8 billion in 1996 grew $142 million or 5%
compared with 1995 reflecting increased spending on technology and risk
management and higher volume-related expenses. Expense growth of $220 million or
9% in 1995 is primarily due to volume-related and technology spending.
Credit costs were a net benefit of $83 million in 1996 and improved $122
million from 1995. The improvement reflects significantly lower gross write-offs
(primarily related to real estate) together with a continued high level of
recoveries. Credit costs of $39 million in 1995 declined $190 million from 1994
as a result of lower gross write-offs, lower cost to carry cash-basis loans and
OREO, and improved results from the disposition of OREO. The additional
provision was $100 million and $200 million in 1995 and 1994, respectively.
The effective income tax rate in 1996, 1995, and 1994 was 29%, 25%, and
34%, respectively. Fluctuations in the effective income tax rate result from
changes in the nature and geographic mix of pretax earnings.
CORPORATE ITEMS
In Millions of Dollars 1996 1995(1) 1994(1)
- ----------------------------------------------------------------------------
Total Revenue $ 909 $ 732 $ 576
Total Operating Expense 547 394 387
----- ----- -----
Income Before Taxes 362 338 189
Income Taxes (Benefit) 796 620 (142)
----- ----- -----
NET (LOSS) INCOME $(434) $(282) $ 331
- ----------------------------------------------------------------------------
Average Assets (In Billions of Dollars) $ 5 $ 5 $ 5
- --------------------------------------------------==========================
(1) Reclassified to conform to the 1996 presentation.
Corporate Items includes revenue derived from charging businesses for funds
employed (based upon a marginal cost of funds concept), unallocated corporate
costs, net gains related to capital building transactions, and the recognition
of deferred tax benefits. Corporate Items also includes income tax expense
resulting from the offset created by attributing income taxes to core business
activities on a local tax-rate basis. The core businesses' effective tax rates
were 26%, 29%, and 30% for 1996, 1995, and 1994, respectively, while Citicorp's
effective tax rate was 38% for both 1996 and 1995, and 26% in 1994. See Note 9
to the consolidated financial statements for further discussion of income taxes.
Corporate Items revenue of $909 million in 1996 increased $177 million or
24% from 1995, reflecting a decrease in funding costs, and the funding benefits
associated with higher equity levels. Revenue also included investment
writedowns of $100 million in Latin America, compared with $95 million in 1995.
Revenue in 1994 included net gains related to capital building transactions of
$80 million. Operating expense in 1996 reflected increased unallocated corporate
costs and corporate employee expense, including costs associated with
performance-based compensation.
38
MANAGING GLOBAL RISK
Risk management is the cornerstone of Citicorp's business. Risks arise from
lending, underwriting, trading, and other activities routinely undertaken on
behalf of customers around the world. Outlined below is the process that
management employs to provide oversight and direction, followed by discussions
of the credit and market risk management processes in place across the
corporation.
The Windows on Risk Committee evaluates and proactively manages the risk
profile of the corporation. The Committee is chaired by the Vice Chairman
responsible for risk management and includes inside directors, senior line and
staff officers, and the Chairman of Citicorp. The Committee uses an analytical
framework that Citicorp calls Windows on Risk to control country, consumer
product, industry, and client concentrations; to reduce portfolio, process,
operational, technological, and legal vulnerabilities; to decide on portfolio
actions; and to help create a balance between Citicorp's risk profile, earnings,
and capital.
The Windows on Risk process has three major components: the Committee
develops a near-term outlook for the global external environment highlighting
key risks; examines Citicorp's risk profile in terms of 16 windows, or risks
that impact Citicorp's businesses and operations; and, in response to perceived
risks in the environment and portfolio, the Committee initiates actions to
strengthen the risk profile.
The review of the external environment encompasses the outlook for major
country and regional economies, significant consumer markets and global
industries; the potential near-term critical economic and geopolitical events;
and the implications of potential unfavorable developments as they relate to
specific businesses.
The review of the risk profile covers the following credit-related and
market risks, as well as audit (control) risk, and legal and technological
vulnerabilities:
o Risk ratings, including trends in client creditworthiness together with a
comparison of risk against return;
o Industry concentrations, globally and within regions;
o Limits assigned to relationship concentrations and consumer programs;
o Product concentrations in consumer managed receivables, by product and by
region;
o Global real estate limits and exposure, including commercial and consumer
portfolios;
o Country risk, encompassing political and cross-border risk;
o Counterparty risk, evaluating presettlement risk on foreign exchange and
derivative products, as well as securities trades;
o Dependency, linking and evaluating specific industry and consumer product
exposure to external environmental factors;
o Distribution and underwriting risk, capturing the risk that arises when
Citicorp commits to purchase an instrument from an issuer for subsequent sale;
o Business risk review, evaluating by business the risk captured by portfolio
and process ratings;
o Price risk, capturing the earnings risk resulting from changing levels and
volatilities of interest rates, foreign exchange rates, and commodity and
equity prices;
o Liquidity risk, evaluating funding exposure;
o Equity and subordinated debt investment risk, monitored against portfolio
limits;
o Audit, evaluating operations and control risk based on internal audits;
o Legal, evaluating vulnerability and business implications of legal issues;
and
o Technology, assessing the vulnerability to the electronic environment.
Based on this coordinated review of major risks impacting the corporation,
the Windows on Risk Committee formulates recommendations and assigns
responsibility for recommended portfolio actions. The review is intended to
provide Citicorp with a view of the environment in which it operates and of the
risk inherent in its businesses.
THE CREDIT PROCESS
Guided by the overall risk appetite and portfolio targets set by senior
management, line management conducts the day-to-day credit process in
accordance with core policies established by the Credit Policy
Committee.
Line management initiates and approves all extensions of credit and is
responsible for credit quality. Line managers must also establish supplementary
credit policies specific to each business, deploy the credit talent needed, and
monitor portfolio and process quality. The managers are required to identify
problem credits or programs as they develop, and to correct deficiencies as
needed through remedial management.
Business Risk Review conducts independent periodic examinations of both
portfolio quality and the credit process at the individual business level.
Citicorp's credit policies are organized around two basic
approaches--Credit Programs and Credit Transactions. Credit Programs, used
primarily for the Consumer businesses, focus on the decision to extend credit to
sets of customers with similar characteristics and/or product needs. Approvals
under this approach cover the expected level of aggregate exposure, the terms,
risk acceptance criteria, operating systems, and reporting mechanisms. This is a
cost-effective way of handling high-volume, small-dollar amount transactions.
Credit programs are reviewed annually, with approvals tiered on the basis of
projected outstandings as well as the maturity and performance of the product.
The Credit Transaction approach focuses on the decision to extend credit to
an individual customer or customer relationship. It starts with target market
definition and risk acceptance criteria, and requires detailed customized
financial analysis. Approval requirements for each decision are tiered based on
the transaction amount, the customer's aggregate facilities, credit risk
ratings, and the banking business serving the customer.
Credit Programs and Credit Transactions are approved by three line credit
officers, with one designated as responsible to ensure that all aspects of the
credit process are properly coordinated and executed. As the size or risk
increases, the three approvals may include one or two Senior Credit or
Securities Officers. These individuals consist of over 500 of Citicorp's most
experienced lenders and underwriters appointed by the Credit Policy Committee,
with their designation reviewed annually. In addition, approvals from
underwriting, product, industry or functional specialists may be required. At
certain higher levels of risk, Credit Policy Committee members as well as senior
management review individual credit decisions.
39
DERIVATIVE AND FOREIGN EXCHANGE CONTRACTS
Citicorp manages its credit exposure on derivative and foreign exchange
instruments as part of the overall extension of credit to individual
customer relationships, subject to the same credit approvals, limits, and
monitoring procedures it uses for other activities, using the Credit
Transaction approach.
The extension of credit in a derivative or foreign exchange contract is
equal to the loss that could result if the counterparty were to default. In
managing the aggregate credit extension to individual customers, Citicorp
measures the amount at risk on a derivative or foreign exchange instrument as
the sum of two factors: the current replacement cost (i.e., balance sheet credit
exposure), and the potential increase in the replacement cost over the remaining
life of the instrument should market rates change.
The current replacement cost of a derivative or foreign exchange contract
is equal to the amount, if any, of Citicorp's unrealized gain on the contract.
The potential increase in replacement cost of a contract is estimated based on a
statistical simulation of values that would result from changing market rates.
See page 61 for additional details.
THE MARKET RISK MANAGEMENT PROCESS
Market risk encompasses liquidity and price risk, both of which are
fundamental to the business of a financial intermediary. Liquidity risk is
the risk that an entity will be unable to meet a financial commitment to
a customer, creditor, or investor in any location, in any currency, when
due. Price risk is the risk to earnings that arises from changes in interest
rates, market prices, foreign exchange rates, and from market volatility.
The Market Risk Policy Committee serves an oversight role in the management
of all market risks. The committee is a group of Citicorp's most senior market
risk professionals, chaired by the Corporate Treasurer, which establishes and
oversees corporate market risk policies and standards to serve as a check and
balance in the business risk management process. Market risk management is an
evolutionary process that integrates changes in marketplace, product
development, and technological advances into policies and practices. Periodic
reviews are conducted by Corporate Audit to ensure compliance with institutional
policies and procedures for the assessment, management, and control of market
risk.
Within Citicorp, business and corporate oversight groups have well-defined
market risk management responsibilities. Within each business, a process is in
place to control market risk exposure. Management of this process begins with
the professionals nearest to Citicorp's customers, products, and markets, and
extends up to the senior executives who manage these businesses and to country
Asset/Liability Management Committees ("ALCO"). Market risk positions are
controlled by limits on exposure based on the size and nature of a business.
Risk limits are approved by the Finance and Capital Committee, which is composed
of senior management, including the Corporate Treasurer, and overseen by the
Market Risk Policy Committee.
LIQUIDITY MANAGEMENT
Management of liquidity at Citicorp is the responsibility of the
Corporate Treasurer. The Country Corporate Officer and the Country
Treasurer ensure that all funding obligations in each country are met
when due. The Country Treasurer is appointed by the Market Risk
Policy Committee upon the recommendation of line management and
Regional Treasurers.
The in-country forum for liquidity issues is the ALCO, which includes
senior executives within each country. The ALCO reviews the current and
prospective funding requirements for all businesses and legal entities within
the country, as well as the capital position and balance sheet. All businesses
within the country are represented on the committee with the focal point being
the Country Treasurer.
Each Country Treasurer must prepare a liquidity plan at least annually that
is approved by the Country Corporate Officer, the Regional Treasurer, and the
Market Risk Policy Committee. The liquidity profile is monitored on an on-going
basis and reported monthly. Limits are established on the extent to which
businesses in a country can take liquidity risk. The size of the limit depends
on the depth of the market, experience level of local management, and liquidity
characteristics of the assets.
Regional Treasurers generally have responsibility for monitoring liquidity
risk across a number of countries within a defined geography. They are also
available for consultation and special approvals, especially in unusual or
volatile market conditions.
Citicorp's assets and liabilities are diversified across many currencies,
geographic areas, and businesses. Particular attention is paid to those
businesses that for tax, sovereign risk, or regulatory reasons cannot be freely
and readily funded in the international markets.
A diversity of funding sources, currencies, and maturities is used to gain
the broadest practical access to the investor base. Citicorp's deposits, which
represent 66% and 65% of total funding at December 31, 1996 and 1995,
respectively, are broadly diversified by both geography and customer segments as
indicated by the charts that follow:
[The following tables were represented as pie graphs in the printed material.]
- --------------------------------------------------------------------------------
CONSUMER
DEPOSITS BY REGION
December 31, 1996
NORTH AMERICA 42%
ASIA PACIFIC 32%
LATIN AMERICA 7%
EUROPE 19%
TOTAL $117.6 BILLION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORPORATE BANKING
DEPOSITS BY REGION
December 31, 1996
NORTH AMERICA 20%
ASIA PACIFIC 25%
LATIN AMERICA 17%
EUROPE 29%
CEEMEA* 9%
TOTAL $67.4 BILLION
*Central and Eastern Europe, Middle East, and Africa
- --------------------------------------------------------------------------------
Stockholders' equity, which grew $1.1 billion during the year to $20.7 billion
at year-end 1996, continues to be an important component of the overall funding
structure. In addition, long-term debt is issued by Citicorp (the "Parent
Company") and its subsidiaries. Total long-term debt outstanding at year-end
1996 was $18.9 billion, compared with $18.5 billion at year-end 1995.
40
Securitization of assets remains an important source of liquidity. Total
assets securitized during 1996 were $7.2 billion, including $5.3 billion of U.S.
credit cards, $1.5 billion of U.S. consumer mortgages, and $0.4 billion of
non-U.S. consumer assets. As credit card securitization transactions amortize,
newly originated receivables are recorded on Citicorp's balance sheet and become
available for asset securitization. In 1996, the scheduled amortization of
certain credit card securitization transactions made available $5.7 billion of
new receivables. In addition, $5.9 billion of credit card securitization
transactions are scheduled to amortize during 1997.
MANAGEMENT OF PRICE RISK EXPOSURE
Price risk exposure is the sensitivity of earnings to changes in interest rates,
market prices, foreign exchange rates, and market volatilities. This exposure
arises in the normal course of business of a global financial intermediary.
Citicorp has established procedures for managing price risk within its
business units worldwide. Decentralization is the essential organizational
principle for managing price risk. It is balanced by strong centralized controls
exercised by corporate oversight bodies. The level of price risk assumed by a
business is based on its objectives and earnings, its capacity to manage risk,
and by the sophistication of its local markets. The nature of the price risk
assumed by a business varies according to the services it provides and the
customers it serves. Limits are established for each major category of risk,
with exposures monitored and managed by the businesses, and reviewed monthly at
the corporate level.
Citicorp uses a risk management system based on market factors that
accommodates the diversity of balance sheet and derivative product exposures and
exposure management systems of its various businesses. The market factor
approach identifies the variables that cause a change in the value of a
financial instrument, including the term structure of interest rates, foreign
exchange rates, equity securities and commodities prices and their volatilities.
Price risk is then measured using various tools, including the earnings at risk
method, which is applied to interest rate risk of the non-trading portfolios,
and the potential loss amount method, which is applied to the trading
portfolios. These methods are comparable with value at risk measurements
employed throughout the industry, and are used as indicators to monitor
sensitivity of earnings to market risk rather than as a quantification of
aggregate risk amounts.
In June 1996, the Financial Accounting Standards Board ("FASB") issued an
exposure draft of a proposed new accounting standard which could significantly
affect the accounting treatment of end-user derivative and foreign exchange
contracts by Citicorp and its customers. The FASB has begun redeliberating the
proposal and various alternative approaches which could have a range of
potential effects on earnings and stockholders' equity. As the FASB finalizes
its conclusions, Citicorp and the customers to which it provides derivatives and
foreign exchange products will have to reconsider their risk management
strategies, since the final rules may not reflect the results of many of those
strategies in the same manner as current accounting practice.
NON-TRADING PORTFOLIOS
Earnings at risk measures the potential pretax earnings impact on the
non-trading activities of a specified movement in interest rates for an assumed
defeasance period which ranges from one to eight weeks depending on the depth of
liquidity in the market and the instrument involved. The earnings at risk is
calculated separately for each currency by multiplying the repricing gap between
interest sensitive items by the specified interest rate movement, and then
taking into account the impact of options, both explicit and embedded. The
specific rate movements are statistically derived from a two standard deviation
movement, which results in a confidence level of 97.5%.
Business units manage the potential earnings effect of interest rate
movements by modifying the asset and liability mix, either directly or through
the use of derivatives. These include interest rate swaps and other derivative
instruments which are either designated and effective as hedges or designated
and effective in modifying the interest rate characteristics of specified assets
or liabilities. The utilization of derivatives is modified from time to time in
response to changing market conditions as well as changes in the characteristics
and mix of the related assets and liabilities. Additional information about
non-trading derivatives is located on page 62. Citicorp does not utilize
instruments with leverage features in connection with its risk management
activities. As part of the annual planning process, limits are set for earnings
at risk on a business, country and total Citicorp basis, with exposures reviewed
on a regular basis by the Finance and Capital Committee in relation to limits
and the current interest rate environment.
Citicorp's primary non-trading price risk exposure is to movements in U.S.
dollar interest rates. As of December 31, 1996 the U.S. dollar earnings at risk
to a two standard deviation increase in rates had a potential negative impact of
approximately $165 million pretax for the following twelve months and
approximately $239 million on a discounted full life basis.
The table below summarizes Citicorp's worldwide earnings at risk over the
next 12 months from changes in U.S. dollar interest rates.
TWELVE MONTH U.S. DOLLAR EARNINGS AT RISK (PRETAX)
ASSUMING A RATE MOVE OF
-----------------------------
TWO STANDARD TWO STANDARD
DEVIATION DEVIATION
In Millions of Dollars at December 31, 1996 INCREASE DECREASE
- -----------------------------------------------------------------------------
Excluding Derivatives $ 80 $(70)
Including Derivatives (165) 191
- -----------------------------------------------------------------------------
The table illustrates that including derivatives, Citicorp's earnings over
the next 12 months in its non-trading activities would be reduced from an
increase in interest rates and benefit from a decrease in interest rates. This
primarily reflects the utilization of receive-fixed interest rate swaps and
similar instruments to effectively modify the repricing characteristics of
certain consumer and commercial loan portfolios, funding, and long-term debt.
During 1996, the U.S. dollar earnings at risk for the following 12 months to a
two standard deviation increase in rates had a potential negative impact which
ranged from approximately $116 million to $204 million in the aggregate at each
month end, compared with a range from $30 million to $165 million during 1995
and a range from $5 million to $90 million during 1994.
41
The table below provides additional detail of Citicorp's earnings at risk
from changes in interest rates.
U.S. DOLLAR EARNINGS AT RISK (PRETAX)
ASSUMING A RATE MOVE OF
----------------------------
TWO STANDARD TWO STANDARD
DEVIATION DEVIATION
In Millions of Dollars at December 31, 1996 INCREASE DECREASE
- -----------------------------------------------------------------------------
Overnight to three months $ (78) $ 71
Four to six months (41) 60
Seven to twelve months (46) 60
----- -----
Total overnight to twelve months (165) 191
- -----------------------------------------------------------------------------
Year two (109) 109
Year three (40) 38
Year four 19 (22)
Year five and over 56 (74)
----- -----
Total $(239) $ 242
- -------------------------------------------------------======================
Earnings at risk in other currencies also existed at significantly lower
levels than U.S. dollar earnings at risk. The level of exposure taken is based
on the market environment and will vary from period to period based on rate and
other economic expectations.
TRADING PORTFOLIOS
The price risk of the trading activities is measured using the potential
loss amount method, which estimates the sensitivity of the value of the
trading activities to changes in the various market factors, such as
interest and foreign exchange rates, over the period necessary to close
the position (generally one day). This measurement includes the foreign
exchange risks that arise in traditional banking businesses as well as
explicit trading positions. The method considers the probability of
movements of these market factors (as derived from a two standard
deviation movement), adjusted for correlation among them within each
trading center.
The trading portfolios are subject to a well-defined series of potential
loss amount exposure limits. The daily price risk process monitors exposures
against limits and triggers specific management actions to ensure that the
potential impact on earnings, due to the many dimensions of price risk, is
controlled within acceptable limits. The Finance and Capital Committee approves
potential loss amount exposure limits annually and reviews usage of these
exposures on a monthly basis. During 1996, the potential loss amount in the
trading portfolios averaged $45 million pretax in the aggregate for Citicorp's
major trading centers and the monthly averages of daily exposures ranged from
approximately $40 million to $60 million, which is the same range as 1995 and
slightly lower than 1994 which ranged from $45 million to $85 million. The
potential loss amounts decreased each quarter in 1994 and were relatively stable
in 1995 and 1996. The level of exposure taken is a function of the market
environment, and expectations of future price and market movements; and will
vary from period to period. Quarterly trading-related revenue ranged from $392
million to $547 million during 1996 compared with $395 million to $558 million
in 1995, and $214 million to $490 million in 1994.
CAPITAL ANALYSIS
Citicorp is subject to risk-based capital guidelines issued by the Board of
Governors of the FRB. These guidelines are used to evaluate capital adequacy
based primarily on the perceived credit risk associated with balance sheet
assets, as well as certain off-balance sheet exposures such as unused loan
commitments, letters of credit, and derivative and foreign exchange contracts.
The risk-based capital guidelines are supplemented by a leverage ratio
requirement.
CITICORP RATIOS
At Year-End 1996 1995
- -------------------------------------------------------------------------------
Tier 1 Capital 8.39% 8.41%
Total Capital (Tier 1 and Tier 2) 12.23 12.33
Leverage(1) 7.42 7.45
Common Stockholders' Equity 6.63 6.43
- -------------------------------------------------------------------------------
(1) Tier 1 capital divided by adjusted average assets.
Citicorp continued to maintain a strong capital position during 1996. Total
capital (Tier 1 and Tier 2) amounted to $28.9 billion at December 31, 1996,
representing 12.23% of net risk-adjusted assets. This compares with $27.7
billion and 12.33%, respectively, at December 31, 1995. Tier 1 capital of $19.8
billion at year-end 1996 represented 8.39% of net risk-adjusted assets, compared
with $18.9 billion and 8.41%, respectively, at year-end 1995. The Tier 1 capital
ratio at year-end 1996 exceeded Citicorp's target range of 8.00% to 8.30%.
The excess of Tier 1 capital generated during a period reduced by capital
utilized for business expansion and, in 1995, for building the Tier 1 ratio to
target levels, is referred to as "free capital." As shown in the following
table, Citicorp generated $3.0 billion and $1.8 billion of free capital during
1996 and 1995, respectively.
FREE CAPITAL
In Millions of Dollars 1996 1995
- -------------------------------------------------------------------------------
Tier 1 Capital Generated:
Net Income $ 3,788 $ 3,464
Issuances/Other(1) 1,180 893
Cash Dividends Declared (1,012) (835)
------- -------
Total Tier 1 Capital Generated 3,956 3,522
Capital Utilized for:
Growth in Net Risk-Adjusted Assets (926) (669)
Build in Tier 1 Capital Ratio -- (1,084)
------- -------
Free Capital Generated $ 3,030 $ 1,769
- -------------------------------------------------------------------------------
(1) Primarily includes issuance of common stock under various staff benefits
plans and the dividend reinvestment plan. Also includes issuance of
guaranteed preferred beneficial interests in subordinated debt for 1996 and
the net issuance of preferred stock for 1995.
42
In order to return this free capital to its shareholders, Citicorp
initiated a common stock repurchase program in June 1995. During 1996 the
program was expanded to a total authorization of $8.5 billion through December
31, 1998. Citicorp repurchased 36.1 million and 23.1 million shares of common
stock under the program using free capital of $3.1 billion ($85.13 average cost
per share) and $1.5 billion ($66.20 average cost per share) in 1996 and 1995,
respectively. Citicorp began 1996 with Tier 1 capital in excess of its target,
enabling repurchases to exceed the amount of free capital generated for the
year. Since the program was initiated, Citicorp repurchased 59.2 million shares
of common stock using free capital of $4.6 billion.
Common stockholders' equity increased a net $2.1 billion during the year to
$18.6 billion at December 31, 1996, representing 6.63% of assets, compared with
6.43% at year-end 1995. The increase in common stockholders' equity during the
year principally reflected net income, conversion of Convertible Preferred
Stock, Series 12 and 13, issuance of stock under various staff benefit plans,
and an increase in net unrealized gains--securities available for sale,
partially offset by shares repurchased under the common stock repurchase
program and dividends declared on common and preferred stock.
During 1996, the holder of $590 million Convertible Preferred Stock, Series
12, and the holders of the remaining $403 million Convertible Preferred Stock,
Series 13, converted the preferred shares into 36.9 million and 22.1 million
shares of common stock, respectively. In addition, $300 million of guaranteed
preferred beneficial interests in Citicorp subordinated debt were issued.
In January 1997, Citicorp announced that it will call for redemption the
Series 14 Preferred Stock in March 1997, and issue an additional $450 million of
guaranteed preferred beneficial interests in Citicorp subordinated debt. In
February 1997, Citicorp filed a registration statement for the exchange of
additional guaranteed preferred beneficial interests in Citicorp subordinated
debt for certain series of Citicorp preferred stock. Both the guaranteed
preferred beneficial interests and the preferred stock qualify as Tier 1
capital. The excess of the fair market value of the guaranteed preferred
beneficial interests over the carrying amount of the related preferred stock
that is exchanged will be deducted from earnings applicable to common
stockholders, used in the calculation of earnings per share. The guaranteed
preferred beneficial interests are included in long-term debt on the balance
sheet.
In January 1997, Citicorp raised the quarterly dividend on common stock to
$.525 per share for an annual dividend rate of $2.10 per share.
COMPONENTS OF CAPITAL UNDER REGULATORY GUIDELINES
In Millions of Dollars at Year-End 1996 1995
- -------------------------------------------------------------------------------
TIER 1 CAPITAL
Common Stockholders' Equity $ 18,644 $ 16,510
Perpetual Preferred Stock 2,078 3,071
Guaranteed Preferred Beneficial Interests in
Subordinated Debt 300 --
Minority Interest 91 70
Less: Net Unrealized Gains--
Securities Available for Sale(1) (676) (132)
Intangible Assets(2) (328) (293)
50% Investment in Certain Subsidiaries(3) (313) (311)
--------- ---------
Total Tier 1 Capital 19,796 18,915
- -------------------------------------------------------------------------------
TIER 2 CAPITAL
Allowance for Credit Losses(4) 2,982 2,843
Qualifying Debt(5) 6,405 6,278
Less: 50% Investment in Certain Subsidiaries(3) (313) (311)
--------- ---------
Total Tier 2 Capital 9,074 8,810
--------- ---------
Total Capital (Tier 1 and Tier 2) $ 28,870 $ 27,725
- ---------------------------------------------------------======================
Net Risk-Adjusted Assets(6) $ 236,073 $ 224,915
- -------------------------------------------------------------------------------
(1) Tier 1 capital excludes unrealized gains and losses on securities available
for sale in accordance with regulatory risk-based capital guidelines.
(2) Includes goodwill and certain other identifiable intangible assets.
(3) Primarily Citicorp Securities, Inc.
(4) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is
deducted from risk-adjusted assets.
(5) Includes qualifying senior and subordinated debt, in an amount not
exceeding 50% of Tier 1 capital, subordinated capital notes, and limited
life preferred stock, subject to certain limitations.
(6) Includes risk-weighted credit equivalent amounts net of applicable
bilateral netting agreements of $9.8 billion for interest rate, commodity
and equity derivative contracts, and foreign exchange contracts as of
December 31, 1996, compared with $10.0 billion as of December 31, 1995. Net
risk-adjusted assets also includes the effect of other off-balance sheet
exposures such as unused loan commitments and letters of credit and
reflects deductions for intangible assets and any excess allowance for
credit losses.
Citicorp's subsidiary depository institutions are subject to the risk-
based capital guidelines issued by their respective primary federal bank
regulatory agencies, which are generally similar to the FRB's guidelines. At
December 31, 1996 all of Citicorp's subsidiary depository institutions were
"well capitalized" under the federal bank regulatory agencies' definitions.
CITIBANK, N.A. RATIOS
At Year-End 1996 1995
- -------------------------------------------------------------------------------
Tier 1 Capital 8.32% 8.32%
Total Capital (Tier 1 and Tier 2) 12.11 12.24
Leverage 6.63 6.65
Common Stockholder's Equity 6.99 7.08
- -------------------------------------------------------------------------------
During 1996, the U.S. bank regulatory agencies issued an amendment to their
risk-based capital guidelines to incorporate a measure for market risk in
foreign exchange and commodity activities and in the trading of debt and equity
instruments. The final rules, which must be implemented by January 1, 1998, are
not expected to have a significant impact on Citicorp.
From time to time, the FRB and the Federal Financial Institutions
Examination Council propose amendments to, and issue interpretations of,
risk-based capital guidelines and reporting instructions. Such proposals or
interpretations could, if implemented in the future, affect reported capital
ratios and net risk-adjusted assets.
43
SUMMARY OF FINANCIAL RESULTS
In Millions of Dollars 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
Net Interest Revenue $ 10,940 $ 9,951 $ 8,911 $ 7,690 $ 7,456
Fees, Commissions, and Other Revenue 9,256 8,727 7,837 8,385 8,165
-------- -------- -------- -------- --------
TOTAL REVENUE 20,196 18,678 16,748 16,075 15,621
Provision for Credit Losses 1,926 1,991 1,881 2,600 4,146
Operating Expense 12,197 11,102 10,256 10,615 10,057
-------- -------- -------- -------- --------
INCOME BEFORE TAXES AND CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 6,073 5,585 4,611 2,860 1,418
Income Taxes 2,285 2,121 1,189 941 696
-------- -------- -------- -------- --------
INCOME BEFORE CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 3,788 3,464 3,422 1,919 722
Cumulative Effects of Accounting Changes(1) -- -- (56) 300 --
-------- -------- -------- -------- --------
NET INCOME $ 3,788 $ 3,464 $ 3,366 $ 2,219 $ 722
- ------------------------------------------------------------------=================================================
(1) Refers to the adoption of SFAS No. 112 in 1994 and the adoption of SFAS No.
109 in 1993.
STATEMENT OF INCOME ANALYSIS
NET INTEREST REVENUE (TAXABLE EQUIVALENT BASIS)(1)(2)
1996 1995 1994
- -------------------------------------------------------------------------------
NET INTEREST REVENUE
(In Millions of Dollars)
U.S. $ 6,965 $ 6,248 $ 5,945
Outside the U.S. 6,463 5,746 5,041
------- ------- -------
TOTAL ADJUSTED(3) 13,428 11,994 10,986
Less Effect of Credit Card Securitization (2,448) (2,010) (2,049)
------- ------- -------
TOTAL $10,980 $ 9,984 $ 8,937
- --------------------------------------------------=============================
AVERAGE INTEREST-EARNING ASSETS
(In Billions of Dollars)
U.S. $ 120.6 $ 124.8 $ 125.2
Outside the U.S. 137.5 122.8 111.5
------- ------- -------
TOTAL ADJUSTED(3) 258.1 247.6 236.7
Less Effect of Credit Card Securitization (26.1) (23.6) (23.4)
------- ------- -------
TOTAL $ 232.0 $ 224.0 $ 213.3
- --------------------------------------------------=============================
NET INTEREST MARGIN (%)
U.S. 5.77 5.01 4.75
Outside the U.S. 4.70 4.68 4.52
TOTAL ADJUSTED(3) 5.20 4.84 4.64
Less Effect of Credit Card Securitization (0.47) (0.38) (0.45)
------- ------- -------
TOTAL 4.73 4.46 4.19
- --------------------------------------------------=============================
(1) Includes allocations for capital and funding costs based on the location of
the asset.
(2) The taxable equivalent adjustment is based on the U.S. federal statutory
rate of 35%.
(3) Adjusted for the effect of credit card securitization. See page 48 for
discussion.
Net interest revenue increased 10% to $11.0 billion in 1996 and was up 12% in
1995, reflecting higher net rate spreads, including lower funding costs, and the
funding benefits associated with higher equity levels, as well as an increase in
interest-earning assets. Net interest revenue and net interest margin for all
periods presented were reduced by the effect of credit card securitization.
Adjusted for the effect of credit card securitization, net interest revenue
increased 12% to $13.4 billion in 1996 and was up 9% in 1995. The adjusted net
interest margin of 5.20% in 1996 was up from 4.84% in 1995 and 4.64% in 1994.
Adjusted net interest margin in the U.S. of 5.77% in 1996 was up from 5.01%
in 1995 and 4.75% in 1994. The improvement in 1996 reflected a decrease in the
level of lower-yielding trading assets in Global Relationship Banking, increased
spreads and higher volumes in the U.S. bankcards business as well as lower costs
to carry cash-basis loans and OREO, partially offset by the $64 million SAIF
assessment. The increase in 1995 in the U.S. adjusted net interest margin
primarily reflected lower costs to carry cash-basis loans and OREO, decreases in
the level of lower-yielding trading assets in Global Relationship Banking, as
well as the reduction in deposit insurance assessment rates.
Net interest revenue from activities outside the U.S. grew 12% in 1996 and
14% in 1995 and represented 48% of total adjusted net interest revenue in both
1996 and 1995, and 46% in 1994. The net interest margin outside the U.S. of
4.70% in 1996 remained relatively unchanged from 4.68% in 1995 and was up from
4.52% in 1994. Higher volumes in the Asia Pacific Consumer business in 1996 were
offset by lower spreads in the Corporate Banking business attributable to
competitive pressure. The increase in the net interest margin outside the U.S.
in 1995 reflected higher volumes and favorable spreads in the Latin America
Consumer business, as well as increased spreads in Corporate Banking in Europe
and Asia Pacific, partially offset by a decrease in Corporate Banking in Latin
America due to a favorable rate environment in Brazil in 1994.
[The following table was represented as a bar graph in the printed material.]
- --------------------------------------------------------------------------------
NET INTEREST INCOME
Adjusted For Credit Card Securitization
$ Billions
NET INTEREST
MARGIN %
1994 1995 1996
---- ---- ----
Outside U.S. 5.0 5.7 6.4
U.S. 6.0 6.3 7.0
- --------------------------------------------------------------------------------
44
The increase in adjusted average interest-earning assets of $10.5 billion
in 1996 was mainly attributable to increases in worldwide consumer loans and in
commercial loans and investment securities outside the U.S., partially offset by
a decrease in trading account assets in the U.S. The increase in 1995 primarily
reflected higher levels of consumer loans, partially offset by decreases in
trading account assets and federal funds sold and resale agreements.
FEES, COMMISSIONS, AND OTHER REVENUE
FEE AND COMMISSION REVENUE
In Millions of Dollars 1996 1995(1) 1994(1)
- -----------------------------------------------------------------------------
CONSUMER:
Developed Markets $2,249 $2,297 $2,299
Emerging Markets 1,087 935 831
------ ------ ------
TOTAL CONSUMER 3,336 3,232 3,130
CORPORATE BANKING AND OTHER 1,984 1,828 1,865
------ ------ ------
TOTAL ADJUSTED(2) 5,320 5,060 4,995
EFFECT OF CREDIT CARD SECURITIZATION 149 105 160
------ ------ ------
TOTAL $5,469 $5,165 $5,155
- -------------------------------------------------============================
(1) Reclassified to conform to the 1996 presentation.
(2) Adjusted for the effect of credit card securitization. See page 48 for
discussion.
Total fee and commission revenue of $5.5 billion for 1996 increased
$304 million or 6% from 1995. Adjusted for the effect of credit card
securitization, fee and commission revenue in 1996 of $5.3 billion was
up $260 million or 5% from 1995.
Consumer businesses 1996 fee and commission revenue of $3.3 billion was up
$104 million or 3% from 1995, as continued double-digit growth in the emerging
markets was offset by slight reductions in the developed markets. The growth in
the emerging markets reflected increases across various consumer products,
particularly credit card-related fees in Asia Pacific and investment-related
fees in Latin America. In the developed markets, growth in Citibanking and
Private Bank fees were more than offset by lower credit card-related fees.
In the Corporate Banking businesses, fee and commission revenue of $2.0
billion for 1996 was up $156 million or 9% from 1995, reflecting higher business
volumes in the emerging markets in corporate finance, transaction banking
services, and trust, agency and custodial fees, as well as increased transaction
banking services fee revenue in Global Relationship Banking.
Total fee and commission revenue in 1995 of $5.2 billion was essentially
unchanged from 1994 as the increase in the Consumer businesses was offset by a
decline in the Corporate Banking businesses. Fee revenue in the Consumer
businesses reflected continued growth in the emerging markets across a variety
of consumer products, particularly Cards in Asia Pacific and Citibanking
activities in Latin America.
REVENUE FROM TRADING-RELATED ACTIVITIES
Trading-related revenue is composed of the "Foreign Exchange" and
"Trading Account" lines in the Statement of Income and also includes
other amounts, principally reflected in net interest revenue. The
accompanying table presents trading-related revenue by business sector,
by trading activity, and by income statement line.
TRADING-RELATED REVENUE
In Millions of Dollars 1996 1995 1994(1)
- -----------------------------------------------------------------------------
BY BUSINESS SECTOR:
Corporate Banking
Emerging Markets $ 746 $ 658 $ 539
Global Relationship Banking 909 1,079 656
------ ------ -------
Total Corporate Banking 1,655 1,737 1,195
Consumer and Other 254 252 174
------ ------ -------
TOTAL $1,909 $1,989 $ 1,369
- ----------------------------------------------===============================
BY TRADING ACTIVITY:
Foreign Exchange(2) $ 932 $1,124 $ 689
Derivative(3) 544 472 395
Fixed Income(4) 150 65 (1)
Other 283 328 286
------ ------ -------
TOTAL $1,909 $1,989 $ 1,369
- ----------------------------------------------===============================
BY INCOME STATEMENT LINE:
Foreign Exchange $ 864 $1,053 $ 573
Trading Account 637 559 158
Other(5) 408 377 638
------ ------ -------
TOTAL $1,909 $1,989 $ 1,369
- ----------------------------------------------===============================
(1) Reclassified to conform to the 1996 presentation.
(2) Foreign exchange activity includes foreign exchange spot, forward, and
option contracts.
(3) Derivative activity primarily includes interest rate and currency swaps,
options, financial futures, equity, and commodity contracts.
(4) Fixed income activity principally includes debt instruments including
government and corporate debt as well as mortgage assets.
(5) Primarily net interest revenue.
Trading-related revenue totaled $1.9 billion in 1996, down $80 million or
4% from 1995. The decline is attributable to lower foreign exchange revenue in
Global Relationship Banking, partially offset by improvements in derivative
results in the Emerging Markets business and fixed income results in both
businesses. Trading-related revenue improved in 1995 from the depressed 1994
results which were adversely affected by increasing interest rates and
challenging market conditions.
Foreign exchange revenue of $932 million in 1996 declined 17% from the
strong 1995 level, when volatile foreign exchange markets in the major
currencies provided substantial revenue opportunities. Foreign exchange revenue
of $1.1 billion in 1995 rebounded from the weak 1994 level, benefiting from
growth in customer volume and improved market conditions.
Derivative revenue of $544 million in 1996 rose 15% from 1995 reflecting
growth in customer demand, particularly in the Emerging Markets business.
Derivative revenue of $472 million in 1995 compared with $395 million in 1994
reflecting strong customer demand across most geographies and improvement in
Citicorp's market-making activities in North America.
Fixed-income revenue in 1996 increased by $85 million compared with 1995
reflecting improved emerging markets debt-trading results, a higher level of
commercial real estate securitization transactions, and improved government and
corporate debt trading results in North America. Fixed-income revenue in 1995
improved $66 million compared with the depressed 1994 results which were
adversely affected as interest rates increased.
Levels of trading-related revenue may fluctuate in the future as a result
of market conditions and other factors.
45
SECURITIES TRANSACTIONS
In 1996, net gains from the sale of securities were $210 million, up $78
million, compared with $132 million in 1995 and $200 million in 1994. The 1996,
1995, and 1994 amounts included gains of $74 million, $55 million, and $71
million, respectively, realized on the sale of Brazilian interest bonds.
The net gains for 1996 reflected gross realized gains of $261 million and
gross realized losses of $51 million.
The fair value of securities available for sale and the related adjustment
to stockholders' equity may fluctuate over time based on market conditions and
changes in market interest rates, as well as events and trends affecting
specific securities.
OTHER REVENUE
In Millions of Dollars 1996 1995(1) 1994(1)
- ------------------------------------------------------------------------------
Securitized Credit Card Receivables $ 907 $ 988 $ 955
Venture Capital 450 390 365
Affiliate Earnings 290 208 208
Net Asset Gains and Other Items 429 232 223
------ ------ ------
TOTAL $2,076 $1,818 $1,751
- -------------------------------------------------=============================
(1) Reclassified to conform to the 1996 presentation.
Revenue in 1996 from securitized credit card receivables was down from
1995 as higher net credit loss rates were partially offset by an improved
net interest margin and higher average securitized volumes. The increase
in revenue in 1995 resulted from higher net interchange revenue and
lower net credit loss rates, partially offset by a reduction in net interest
revenue. The effect of credit card receivables securitization is discussed in
more detail on page 48.
In 1996 and 1995, venture capital revenue benefited from favorable
conditions in the U.S. equity markets. Additionally, venture capital revenue in
each year included gains related to public offerings by investees. Investments
of venture capital subsidiaries are carried at fair value and revenue volatility
can occur in the future, based on general market conditions as well as events
and trends affecting specific venture capital investments.
Affiliate earnings in 1996 were up from both 1995 and 1994, largely due to
improved results in Latin America. Affiliate earnings in 1995 were flat to 1994.
Net asset gains and other items in 1996 of $429 million increased $197
million from 1995 and included gains from the sale of an automated trading
business, the disposition of Citicorp's holding in an Asian affiliate, the sale
of the consumer mortgage portfolio in the U.K., and a gain arising from the
Panama refinancing agreement, partially offset by investment writedowns of $100
million in Latin America. Revenue in 1995 of $232 million reflected net gains on
the sale of real estate assets and a gain related to the completion of Ecuador's
refinancing package, partially offset by investment writedowns of $95 million in
Latin America. Revenue in 1994 of $223 million included recognition of the fair
value of interest bonds received in connection with the Brazil refinancing
agreement, largely offset by writedowns in the value of certain investments in
Latin America.
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
The provision for credit losses of $1.9 billion in 1996 declined $65
million or 3% from 1995, reflecting lower commercial net write-offs
together with a decline in the commercial additional provision, partially
offset by higher net write-offs in the Consumer business. The provision
for credit losses increased in 1995 reflecting higher net write-offs in the
Consumer businesses, partially offset by a lower commercial additional
provision.
NET WRITE-OFFS, ADDITIONAL PROVISION, AND PROVISION FOR
CREDIT LOSSES
In Millions of Dollars 1996 1995 1994
- -------------------------------------------------------------------------------
NET WRITE-OFFS (RECOVERIES):
Consumer $ 3,120 $ 2,461 $ 2,287
Commercial(1) (2) 148 (209)
------- ------- -------
TOTAL ADJUSTED NET WRITE-OFFS 3,118 2,609 2,078
Effect of Credit Card Securitization (1,392) (917) (934)
------- ------- -------
TOTAL $ 1,726 $ 1,692 $ 1,144
- ------------------------------------------------===============================
ADDITIONAL PROVISION:
Consumer $ 200 $ 200 $ 200
Commercial -- 81 136
------- ------- -------
TOTAL $ 200 $ 281 $ 336
- ------------------------------------------------===============================
PROVISION FOR CREDIT LOSSES:
Consumer $ 1,928 $ 1,744 $ 1,553
Commercial (2) 247 328
------- ------- -------
TOTAL $ 1,926 $ 1,991 $ 1,881
- ------------------------------------------------===============================
(1) Included in commercial net write-offs (recoveries) in 1995 and 1994 are net
recoveries of $18 million and $401 million related to cross-border
refinancing agreements that were credited directly to the allowance for
credit losses and did not affect the provision for credit losses.
Consumer net write-offs, adjusted for the effect of credit card
securitization, were $3.1 billion in 1996, up from $2.5 billion in 1995,
primarily due to higher losses in the U.S. bankcards portfolio, which is broadly
consistent with industry trends. Net write-offs also increased in Asia Pacific
in both the Cards and Citibanking businesses, primarily as a result of business
expansion. Net write-offs in Citibanking and the Private Bank in the developed
markets were reduced from year-ago levels. The consumer provision for credit
losses included additional provisions in excess of net write-offs of $200
million in 1996, 1995, and 1994 in response to loan growth and rising losses in
the U.S. bankcards portfolio, as well as the changing economic environment in
certain markets. Net write-offs and the total provision, particularly in Cards,
are expected to increase from 1996 levels as a result of economic conditions,
credit performance of the portfolios (including bankruptcies) and changes in
portfolio levels. See "Consumer Portfolio Review" on page 34 for an additional
discussion.
Commercial net recoveries in 1996 of $2 million improved $150 million from
1995 due to higher recoveries, primarily attributable to the
46
refinancing agreements concluded with Panama, Slovenia, and Croatia (which
aggregated $75 million) coupled with lower real estate-related gross write-offs.
The real estate portfolio continued to benefit in 1996 from improving real
estate market conditions. Commercial net write-offs in 1995 were low at $148
million (approximately 26 basis points of average commercial loans) and followed
net recoveries of $209 million in 1994 which included a $318 million recovery
attributable to the Brazil refinancing agreement completed in that year. During
the three years ended December 31, 1996, there were no material credit losses
related to derivatives and foreign exchange contracts, standby letters of credit
or loan commitments. The commercial provision for credit losses included
additional provisions in excess of net write-offs of $81 million and $136
million in 1995 and 1994, respectively. During 1997, commercial net write-offs
may increase moderately from the low 1996 level.
ALLOWANCE FOR CREDIT LOSSES
All identified losses are immediately written off and the entire allowance
is available to absorb all probable credit losses inherent in the portfolio.
For analytical purposes only, Citicorp attributes the allowance to the
following portions of its credit portfolios:
ALLOWANCE FOR CREDIT LOSSES AND AS A PERCENTAGE OF LOANS
1996 1995 1994
------------------------------------------------
At Year-End LOANS(1) ALLOWANCE(2) Allowance(2) Allowance(2)
- -----------------------------------------------------------------------------
Consumer $111.8 $2,079 $1,944 $1,834
Ratio 1.86% 1.84% 1.90%
Commercial 62.8 3,424 3,424 3,321
Ratio 5.46% 5.71% 5.95%
------ ------ ------ ------
TOTAL $174.6 $5,503 $5,368 $5,155
Ratio 3.15% 3.24% 3.38%
- -------------------------------==============================================
Reserve for Sold
Consumer Portfolios(3) $ 473 $ 486 $ 422
- -----------------------------------------------------------------------------
(1) Loans, in billions of dollars, are net of unearned income.
(2) In millions of dollars.
(3) Refer to Note 1 to the consolidated financial statements for a discussion
of Citicorp's obligations under certain loans sold with credit
enhancements.
The allowance for credit losses and the reserve for sold consumer
portfolios totaled $6.0 billion as of December 31, 1996, up from $5.9 billion at
December 31, 1995 and $5.6 billion at December 31, 1994. The increase in the
allowance primarily reflected additional provisions of $200 million in 1996,
$281 million in 1995, and $336 million in 1994. Refer to the discussion on page
46 regarding the additional provision.
Uncertainty related to the economic and credit environment, as well as
higher loan volumes in the worldwide Consumer portfolios, may result in further
increases in the allowance for credit losses.
OPERATING EXPENSE
Total operating expense was $12.2 billion in 1996, up $1.1 billion or
10% from 1995. Excluding net OREO benefits, expense was up 9% from
1995. Consumer and Corporate Banking adjusted expense in the
emerging markets increased 19%, while adjusted expense in the
developed markets was up 4% from 1995. Total operating expense for
1995 of $10.3 billion was up $846 million or 8% from 1994. Excluding
net OREO benefits, 1995 expense was up 9% from 1994. Total operating
expense for 1996 was favorably impacted by the foreign currency
translation effect of the generally stronger U.S. dollar while the impact
on 1995 operating expense was adverse due to the weaker U.S. dollar.
EMPLOYEE EXPENSE
Employee expense was $6.2 billion in 1996, up $518 million or 9% from
1995. The expense growth primarily reflected salary increases, higher
staff levels associated with business expansion to grow the franchise in
both the Consumer and Corporate Banking businesses in the emerging
markets, and higher performance-based compensation. Staff levels of
89,400 at December 31, 1996 were up 4,100 (3,000 in the emerging
markets) from year-ago levels.
Employee expense for 1995 of $5.7 billion was up $561 million or 11% from
1994, also reflecting business expansion and higher performance-based
compensation.
The cost of performance-based options is recognized over the period to
estimated vesting dates and in full for options that have vested, by a charge to
expense with an offsetting increase in common stockholders' equity. The
recognition of expense associated with these options is reviewed at the end of
each quarter and is accelerated if stock price movements are indicative that
more rapid vesting is probable. In the fourth quarter 1996, $55 million of
additional expense was recognized to reflect the vesting of options with a
target price of $100 and an acceleration for options with a target price of
$115. If the stock price continues to exceed anticipated levels as it has in the
first quarter of 1997 through the date of this filing (February 25, 1997), the
remaining expense associated with the $115 options will be accelerated, and
Citicorp will recognize approximately $60 million of expense in excess of what
would have been recognized in that quarter had no accelerations occurred.
NET PREMISES AND EQUIPMENT EXPENSE
Net premises and equipment expense was $1.8 billion in 1996, up $145 million or
9% from 1995. The increase primarily resulted from growth in the emerging
markets businesses and the upgrading of 330 branches during the last three years
to the Citibanking standard.
Similarly, 1995 net premises and equipment expense was up $115 million or 7%
from 1994.
OTHER EXPENSE
Other expense was $4.1 billion in 1996, up $432 million or 12% from 1995. The
increase primarily reflected business expansion in the emerging markets,
investment in operational and technological infrastructure to improve the
delivery of products and customer service through various electronic systems,
and reengineering efforts such as consolidating back-office operations. The
expense growth was also attributed to higher volumes and account growth in the
Cards, Citibanking, and transaction services businesses, and increased
collection efforts in the Cards business, as well as lower Corporate Banking net
OREO benefits.
Other expense for 1995 of $3.7 billion was up $170 million or 5% from 1994.
These increases primarily reflected business expansion in the emerging markets,
spending in support of account growth and higher marketing costs in the U.S.
bankcard business, investment spending in the Europe bankcard business, costs
associated with higher volumes in the transaction services business, and
continued investment in operational and technological infrastructure. These
increases were partially offset by lower net OREO costs.
47
Citicorp, like other companies, is in the process of assessing and
repairing its computer applications to ensure their functionality with respect
to the "year 2000" millennium change. At present, Citicorp does not anticipate
that material incremental costs will be incurred in any single future year.
INCOME TAXES
Income tax expense for 1996 was $2.3 billion, compared with $2.1
billion in 1995, and $1.2 billion in 1994, representing effective tax rates
of 38% in both 1996 and 1995, and 26% in 1994. Income tax expense
and the related effective tax rates for each of these periods reflected the
recognition of deferred tax benefits of $56 million, $40 million, and
$629 million, respectively. See Note 9 to the consolidated financial
statements for further details.
IMPACT OF CREDIT CARD RECEIVABLES SECURITIZATION
The securitization of credit card receivables does not affect the earnings
reported for each period. Gains on these sales are recorded monthly as realized
over the term of each securitization transaction, which range up to 12 years.
The revolving nature of the receivables sold and the monthly recognition of
gains result in a pattern of gain recognition that is similar to the pattern
that would be experienced if the receivables had not been sold. However, because
securitization changes Citicorp's involvement from that of a lender to that of a
loan servicer, it removes the receivables from Citicorp's balance sheet and
affects the manner in which the revenue is reported in the income statement. For
securitized receivables, amounts that would otherwise be reported as net
interest revenue, as fee and commission revenue, and as credit losses on loans
are instead reported as fee and commission revenue (for servicing fees) and as
other revenue (for the remaining cash flows to which Citicorp is entitled, net
of credit losses). Because credit losses are a component of these cash flows,
Citicorp's revenues over the terms of these transactions may vary depending upon
the credit performance of the securitized receivables. However, Citicorp's
exposure to credit losses on the securitized receivables is contractually
limited to these cash flows.
During 1996, $5.3 billion of U.S. credit card receivables were sold,
compared with $8.9 billion and $3.5 billion during 1995 and 1994, respectively.
The total credit card receivables securitized, net of amortization as of
December 31, 1996, were $25.2 billion, compared with $25.5 billion and $21.3
billion as of December 31, 1995 and 1994, respectively. The following table
shows the net effects of securitization by showing the increase (decrease) in
the reported consolidated statement of income line items, average balance sheet,
return on assets, net interest margin, and consumer net credit loss ratio.
In Millions of Dollars 1996 1995 1994
- ------------------------------------------------------------------------------
Net Interest Revenue $(2,448) $(2,010) $(2,049)
Fee and Commission Revenue 149 105 160
Other Revenue 907 988 955
Provision for Credit Losses (1,392) (917) (934)
------- ------- -------
Net Income Impact of Securitization $ 0 $ 0 $ 0
- ---------------------------------------------=================================
Average Assets (In Billions) $ (26) $ (24) $ (23)
Return on Assets 0.12% 0.11% 0.11%
Net Interest Margin (0.47) (0.38) (0.45)
Consumer Net Credit Loss Ratio (0.73) (0.44) (0.52)
- ------------------------------------------------------------------------------
The effect of securitization on net interest revenue and the provision for
credit losses in 1996 compared with 1995 reflected wider spreads and higher loss
ratios, while the effect in 1995 compared with 1994 reflected tighter spreads
and lower loss ratios.
48
FINANCIAL REPORTING RESPONSIBILITY
The management of Citicorp is responsible for the preparation and fair
presentation of the financial statements and other financial information
contained in this annual report. The accompanying financial statements
have been prepared in conformity with generally accepted accounting
principles appropriate in the circumstances. Where amounts must be
based on estimates and judgments, they represent the best estimates and
judgments of management. The financial information appearing
throughout this annual report is consistent with that in the financial
statements.
The management of Citicorp is also responsible for establishing and
maintaining an effective internal control structure and procedures for financial
reporting and safeguarding of assets. There are inherent limitations in the
effectiveness of any system of internal control, and accordingly, even an
effective internal control system can provide only reasonable assurance with
respect to financial statement preparation. Management assessed Citicorp's
internal control structure and procedures for financial reporting and
safeguarding of assets as of December 31, 1996, based on recognized criteria for
effective internal control. Based on this assessment, management believes that
Citicorp maintained an effective internal control structure and procedures for
financial reporting and safeguarding of assets as of December 31, 1996.
The accounting policies and internal control structure are under the
general oversight of the Citicorp and Citibank Boards of Directors, acting
through the Audit Committees described on page 87. The committees are composed
entirely of directors who are not officers or employees of Citicorp. The Chief
Auditor of Citicorp and the Managing Director of Business Risk Review, who
report directly to the Board of Directors, conduct an extensive program of
audits and business risk reviews worldwide. In addition, KPMG Peat Marwick LLP,
independent auditors, are engaged to audit our financial statements.
KPMG Peat Marwick LLP obtain and maintain an understanding of Citicorp's
internal control structure and procedures for financial reporting and conduct
such tests and other auditing procedures as they consider necessary in the
circumstances to express the opinion in their report that follows. KPMG Peat
Marwick LLP have free access to the Audit Committees, with no members of
management present, to discuss their audit and their findings as to the
integrity of Citicorp's financial reporting and the adequacy of the internal
control structure described above.
/s/ John S. Reed
John S. Reed
Chairman
/s/ Thomas E. Jones
Thomas E. Jones
Executive Vice President
REPORT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Certified Public Accountants
The Board of Directors and Stockholders of Citicorp:
We have audited the accompanying consolidated balance sheets of
Citicorp and subsidiaries as of December 31, 1996 and 1995, the related
consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the years in the three-year period ended December
31, 1996, and the related consolidated balance sheets of Citibank, N.A.
and subsidiaries as of December 31, 1996 and 1995. These financial
statements are the responsibility of Citicorp management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform these audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Citicorp and
subsidiaries as of December 31, 1996 and 1995, the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 1996, and the financial position of Citibank, N.A. and subsidiaries
as of December 31, 1996 and 1995 in conformity with generally accepted
accounting principles.
As discussed in the statement of accounting policies and notes to the
consolidated financial statements, Citicorp and Citibank adopted Statement of
Financial Accounting Standards Nos. 112 and 115 in 1994.
/s/ KPMG Peat Marwick LLP
New York, New York
January 21, 1997
49
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME Citicorp and Subsidiaries
In Millions of Dollars Except Per Share Amounts 1996 1995 1994
- -------------------------------------------------------------------------------
INTEREST REVENUE
Interest and Fees on Loans $18,509 $17,808 $ 16,241
Interest on Deposits with Banks 858 770 895
Interest on Federal Funds Sold
and Securities Purchased
Under Resale Agreements 902 1,056 3,318
Interest and Dividends on
Securities (Note 1) 1,770 1,544 1,266
Interest on Trading Account Assets 1,310 1,785 2,093
------- ------- --------
23,349 22,963 23,813
------- ------- --------
INTEREST EXPENSE
Interest on Deposits 8,974 8,902 8,996
Interest on Trading Account
Liabilities 313 300 267
Interest on Purchased Funds
and Other Borrowings (Note 1) 1,775 2,379 3,939
Interest on Long-Term Debt (Note 1) 1,347 1,431 1,700
------- ------- --------
12,409 13,012 14,902
------- ------- --------
NET INTEREST REVENUE 10,940 9,951 8,911
------- ------- --------
PROVISION FOR CREDIT LOSSES (NOTE 1) 1,926 1,991 1,881
------- ------- --------
NET INTEREST REVENUE AFTER
PROVISION FOR CREDIT LOSSES 9,014 7,960 7,030
------- ------- --------
FEES, COMMISSIONS, AND OTHER REVENUE
Fees and Commissions (Note 7) 5,469 5,165 5,155
Foreign Exchange 864 1,053 573
Trading Account 637 559 158
Securities Transactions (Notes 1 and 9) 210 132 200
Other Revenue 2,076 1,818 1,751
------- ------- --------
9,256 8,727 7,837
------- ------- --------
OPERATING EXPENSE
Salaries 4,880 4,445 4,029
Employee Benefits (Note 8) 1,364 1,281 1,136
------- ------- --------
Total Employee Expense 6,244 5,726 5,165
Net Premises and Equipment
Expense (Notes 2 and 12) 1,843 1,698 1,583
Other Expense 4,110 3,678 3,508
------- ------- --------
12,197 11,102 10,256
------- ------- --------
INCOME BEFORE TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 6,073 5,585 4,611
INCOME TAXES (NOTE 9) 2,285 2,121 1,189
------- ------- --------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 3,788 3,464 3,422
Cumulative Effect of Accounting Change--
Employers' Accounting for
Postemployment Benefits (Note 8) -- -- (56)
------- ------- --------
NET INCOME $ 3,788 $ 3,464 $ 3,366
- ---------------------------------------------------============================
INCOME APPLICABLE TO COMMON STOCK $ 3,631 $ 3,126 $ 3,010
------- ------- --------
EARNINGS PER SHARE (NOTE 10)
ON COMMON AND COMMON EQUIVALENT SHARES
Income Before Cumulative Effect
of Accounting Change $ 7.50 $ 7.21 $ 7.15
Cumulative Effect of Accounting Change -- -- (0.12)
------- ------- --------
NET INCOME $ 7.50 $ 7.21 $ 7.03
------- ------- --------
ASSUMING FULL DILUTION
Income Before Cumulative Effect of
Accounting Change $ 7.42 $ 6.48 $ 6.40
Cumulative Effect of Accounting Change -- -- (0.11)
------- ------- --------
NET INCOME $ 7.42 $ 6.48 $ 6.29
- ---------------------------------------------------============================
Accounting policies and explanatory notes on pages 55 through 74 form an
integral part of the financial statements.
50
CONSOLIDATED BALANCE SHEET Citicorp and Subsidiaries
In Millions of Dollars DECEMBER 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------
ASSETS
Cash and Due from Banks $ 6,905 $ 5,723
Deposits at Interest with Banks 11,648 9,028
Securities, at Fair Value (Note 1)
Available for Sale 26,062 18,213
Venture Capital 2,124 1,854
Trading Account Assets (Note 1) 30,785 32,093
Federal Funds Sold and Securities
Purchased Under Resale Agreements 11,133 8,113
Loans, Net (Note 1)
Consumer 111,847 105,643
Commercial 62,765 59,999
--------- ---------
Loans, Net of Unearned Income 174,612 165,642
Allowance for Credit Losses (5,503) (5,368)
--------- ---------
Total Loans, Net 169,109 160,274
Customers' Acceptance Liability 2,077 1,542
Premises and Equipment, Net (Note 2) 4,667 4,339
Interest and Fees Receivable 3,068 2,914
Other Assets (Notes 1, 3, 8, and 9) 13,440 12,760
--------- ---------
TOTAL $ 281,018 $ 256,853
- ----------------------------------------------==================================
LIABILITIES
Non-Interest-Bearing Deposits
in U.S. Offices $ 14,867 $ 13,388
Interest-Bearing Deposits
in U.S. Offices 40,254 36,700
Non-Interest-Bearing Deposits in
Offices Outside the U.S. 9,891 8,164
Interest-Bearing Deposits
in Offices Outside the U.S. 119,943 108,879
--------- ---------
Total Deposits 184,955 167,131
Trading Account Liabilities (Note 1) 22,003 18,274
Purchased Funds and Other
Borrowings (Note 1) 18,191 16,334
Acceptances Outstanding 2,104 1,559
Accrued Taxes and Other Expense (Note 9) 5,992 5,719
Other Liabilities (Note 8) 8,201 9,767
Long-Term Debt (Note 1) 18,850 18,488
STOCKHOLDERS' EQUITY
Preferred Stock (Without
par value) (Note 4) 2,078 3,071
Common Stock ($1.00
par value) (Note 5) 506 461
Issued Shares: 506,298,235 in 1996
and 461,319,265 in 1995
Surplus 6,595 5,702
Retained Earnings 14,303 12,190
Net Unrealized Gains--Securities
Available for Sale (Note 1) 676 132
Foreign Currency Translation (486) (437)
Common Stock in Treasury, at Cost (2,950) (1,538)
Shares: 43,081,217 in 1996 and
34,030,205 in 1995
--------- ---------
Total Stockholders' Equity 20,722 19,581
--------- ---------
TOTAL $ 281,018 $ 256,853
- ----------------------------------------------==================================
Accounting policies and explanatory notes on pages 55 through 74 form an
integral part of the financial statements.
51
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Citicorp and Subsidiaries
In Millions of Dollars 1996 1995 1994
- ---------------------------------------------------------------------------------------------
PREFERRED STOCK (NOTE 4)
Balance at Beginning of Year $ 3,071 $ 4,187 $ 3,887
Issuance of Stock -- 400 400
Conversion of Convertible Preferred Stock, Series 12 (590) -- --
Conversions of Convertible Preferred Stock, Series 13 (403) (257) --
Redemptions of Conversion Preferred Stock, Series 15 -- (1,134) --
Redemption and Retirement of Other Preferred Stock -- (125) (100)
-------- -------- --------
BALANCE AT END OF YEAR $ 2,078 $ 3,071 $ 4,187
- -------------------------------------------------------------================================
COMMON STOCK ($1.00 PAR VALUE) (NOTE 5)
Balance at Beginning of Year--Shares: 461,319,265 in 1996,
420,589,459 in 1995, and 412,017,300 in 1994 $ 461 $ 421 $ 412
Issuance of 36,875,000 Shares on Conversion of
Convertible Preferred Stock, Series 12 37 -- --
Issuance of 6,535,926 Shares on Conversions of
Convertible Preferred Stock, Series 13 -- 6 --
Issuance of 21,146,076 Shares on Redemptions of
Conversion Preferred Stock, Series 15 -- 21 --
Issuance of Stock under Dividend Reinvestment
and Common Stock Purchase Plan
Shares: 7,882 in 1996, 1,138,166 in 1995,
and 1,214,058 in 1994 -- 1 1
Issuance of Stock under Employee Benefit Plans (Note 8)
Shares: 8,096,088 in 1996, 11,909,638 in 1995,
and 7,358,101 in 1994 8 12 8
-------- -------- --------
BALANCE AT END OF YEAR--Shares: 506,298,235 in 1996,
461,319,265 in 1995, and 420,589,459 in 1994 $ 506 $ 461 $ 421
- -------------------------------------------------------------================================
SURPLUS
Balance at Beginning of Year $ 5,702 $ 4,194 $ 3,898
Issuance of Stock on Conversion of
Convertible Preferred Stock, Series 12 553 -- --
Issuance of Stock on Conversions of
Convertible Preferred Stock, Series 13 -- 115 --
Issuance of Stock on Redemptions of
Conversion Preferred Stock, Series 15 -- 855 --
Issuance of Stock under Dividend
Reinvestment and Common Stock Purchase Plan 12 53 49
Issuance of Stock under Employee Benefit
Plans and Related Tax Benefits (Notes 8 and 9) 209 405 202
Amortization Related to Employee Benefit Plans (Note 8) 119 96 57
Preferred Stock Issuance Cost -- (10) (12)
Other -- (6) --
-------- -------- --------
BALANCE AT END OF YEAR $ 6,595 $ 5,702 $ 4,194
- -------------------------------------------------------------================================
RETAINED EARNINGS
Balance at Beginning of Year $ 12,190 $ 9,561 $ 6,729
Net Income 3,788 3,464 3,366
Cash Dividends Declared--Common (Note 5) (850) (492) (176)
Cash Dividends Declared--Preferred (Note 4) (162) (343) (358)
Adjustment for Treasury Shares Issued on
Conversions of Convertible
Preferred Stock, Series 13 (663) -- --
-------- -------- --------
BALANCE AT END OF YEAR $ 14,303 $ 12,190 $ 9,561
- -------------------------------------------------------------================================
NET UNREALIZED GAINS--SECURITIES
AVAILABLE FOR SALE (NOTE 1)
Balance at Beginning of Year $ 132 $ 278 $ --
Net Unrealized Gains Upon Adoption of SFAS No. 115 -- -- 365
Effect of Transfer from Securities Held to
Maturity to Securities Available for Sale -- (260) --
Change in Net Unrealized Gains--Securities
Available for Sale 544 114 (87)
-------- -------- --------
BALANCE AT END OF YEAR $ 676 $ 132 $ 278
- -------------------------------------------------------------================================
FOREIGN CURRENCY TRANSLATION
Balance at Beginning of Year $ (437) $ (471) $ (580)
Change in Foreign Currency Translation (49) 34 109
-------- -------- --------
BALANCE AT END OF YEAR $ (486) $ (437) $ (471)
- -------------------------------------------------------------================================
COMMON STOCK IN TREASURY, AT COST
Balance at Beginning of Year--Shares: 34,030,205
in 1996, 25,508,610 in 1995, and 25,527,133 in 1994 $ (1,538) $ (401) $ (393)
Repurchase of 36,121,889 Shares in 1996 and
23,060,373 Shares in 1995 (3,075) (1,526) --
Delivery of 22,077,369 Shares in 1996 and
7,550,978 Shares in 1995 on Conversions
of Convertible Preferred Stock, Series 13 1,066 136 --
Delivery of 6,399,064 Shares on Redemptions of
Conversion Preferred Stock, Series 15 -- 258 --
Other Transactions, including issuances
under Employee Benfit Plans (Note 8)
Shares: 4,993,508 in 1996, (588,736) in
1995, and (18,523) in 1994 597 (5) (8)
-------- -------- --------
BALANCE AT END OF YEAR--Shares: 43,081,217 in
1996, 34,030,205 in 1995, and 25,508,610 in 1994 $ (2,950) $ (1,538) $ (401)
- -------------------------------------------------------------================================
TOTAL STOCKHOLDERS' EQUITY
Balance at Beginning of Year $ 19,581 $ 17,769 $ 13,953
Changes During the Year, Net 1,141 1,812 3,816
-------- -------- --------
BALANCE AT END OF YEAR $ 20,722 $ 19,581 $ 17,769
- -------------------------------------------------------------================================
Accounting policies and explanatory notes on pages 55 through 74 form an
integral part of the financial statements.
52
CONSOLIDATED STATEMENT OF CASH FLOWS Citicorp and Subsidiaries
In Millions of Dollars 1996 1995 1994
- --------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 3,788 $ 3,464 $ 3,366
--------- --------- ---------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Credit Losses 1,926 1,991 1,881
Depreciation and Amortization of
Premises and Equipment 706 636 571
Amortization of Goodwill 46 49 47
Provision for Deferred Taxes 425 (70) (299)
Cumulative Effects of Accounting Change -- -- 56
Venture Capital Activity (270) 155 (520)
Net Gain on Sale of Securities (210) (132) (200)
Net (Gain) Loss on the Sale of
Subsidiaries and Affiliates (249) 6 (12)
Changes in Accruals and Other, Net (2,355) 2,381 (3,159)
Net Decrease (Increase) in Trading
Account Assets 1,308 6,782 (15,092)
Net Increase (Decrease) in Trading
Account Liabilities 3,729 (4,108) 16,904
--------- --------- ---------
Total Adjustments 5,056 7,690 177
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,844 11,154 3,543
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net Increase in Deposits at Interest with Banks (2,620) (2,166) (113)
Securities--Available for Sale
Purchases (39,743) (21,198) (20,422)
Proceeds from Sales 16,145 9,495 10,928
Maturities 16,662 11,853 7,185
Securities--Held to Maturity
Purchases -- (6,852) (9,645)
Maturities -- 7,149 11,722
Net (Increase) Decrease in Federal Funds
Sold and Securities Purchased Under
Resale Agreements (3,020) (1,118) 344
Net Increase in Loans (120,950) (107,853) (108,473)
Proceeds from Sales of Loans and
Credit Card Receivables 109,621 92,884 90,184
Capital Expenditures on Premises
and Equipment (1,392) (1,189) (941)
Proceeds from Sales of Premises and Equipment,
Subsidiaries and Affiliates, and Other Real
Estate Owned ("OREO") 1,360 1,468 2,393
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (23,937) (17,527) (16,838)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits 17,824 11,405 10,637
Net Increase (Decrease) in Federal Funds Purchased and
Securities Sold Under Repurchase Agreements 2,092 (4,193) 2,448
Proceeds from Issuance of Commercial Paper
and Funds Borrowed with Original
Maturities of Less Than One Year 643,922 514,298 402,773
Repayment of Commercial Paper and Funds Borrowed
with Original Maturities of Less Than One Year (644,235) (514,656) (400,471)
Proceeds from Issuance of Long-Term Debt 4,627 4,669 4,576
Repayment of Long-Term Debt (4,241) (4,150) (5,039)
Proceeds from Issuance of Preferred Stock -- 390 388
Redemption of Preferred Stock -- (125) (100)
Proceeds from Issuance of Common Stock 537 416 226
Treasury Stock Transactions (3,069) (1,531) (5)
Dividends Paid (1,012) (835) (533)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 16,445 5,688 14,900
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND DUE FROM BANKS (170) (62) 29
--------- --------- ---------
Net Increase (Decrease) in Cash and Due from Banks 1,182 (747) 1,634
Cash and Due from Banks at Beginning of Year 5,723 6,470 4,836
--------- --------- ---------
CASH AND DUE FROM BANKS AT END OF YEAR $ 6,905 $ 5,723 $ 6,470
- ---------------------------------------------------------===================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest $ 11,373 $ 12,037 $ 12,977
Income Taxes 1,888 1,723 1,522
NON-CASH INVESTING ACTIVITIES
Transfers from Loans to OREO and
Assets Pending Disposition 632 730 1,152
- --------------------------------------------------------------------------------------------
Accounting policies and explanatory notes on pages 55 through 74 form an
integral part of the financial statements.
53
CONSOLIDATED BALANCE SHEET Citibank, N.A. and Subsidiaries
In Millions of Dollars DECEMBER 31, 1996 December 31, 1995
- ------------------------------------------------------------------------------------
ASSETS
Cash and Due from Banks $ 5,947 $ 4,842
Deposits at Interest with Banks 12,822 9,256
Securities, at Fair Value
Available for Sale 21,784 14,256
Venture Capital 1,774 1,457
Trading Account Assets 27,259 28,407
Federal Funds Sold and Securities
Purchased Under Resale Agreements 8,181 6,676
Loans (Net of unearned income of $1,030
in 1996 and $1,122 in 1995) 143,984 136,693
Less: Allowance for Credit Losses (4,382) (4,403)
--------- ---------
Loans, Net 139,602 132,290
Customers' Acceptance Liability 2,077 1,542
Premises and Equipment, Net 3,538 3,386
Interest and Fees Receivable 2,121 1,940
Other Assets 8,134 7,422
--------- ---------
TOTAL $ 233,239 $ 211,474
- -------------------------------------------------------=============================
LIABILITIES
Non-Interest-Bearing Deposits in U.S. Offices $ 12,826 $ 10,959
Interest-Bearing Deposits in U.S. Offices 23,977 22,676
Non-Interest-Bearing Deposits in
Offices Outside the U.S. 9,605 7,955
Interest-Bearing Deposits in
Offices Outside the U.S. 118,228 108,018
--------- ---------
Total Deposits 164,636 149,608
Trading Account Liabilities 20,795 17,544
Purchased Funds and Other Borrowings 12,334 10,106
Acceptances Outstanding 2,104 1,559
Accrued Taxes and Other Expense 3,588 3,263
Other Liabilities 4,104 5,300
Long-Term Debt and Subordinated Notes 9,380 9,128
STOCKHOLDER'S EQUITY (NOTE 14)
Capital Stock ($20.00 par value) 751 751
Outstanding Shares: 37,534,553
in 1996 and 1995
Surplus 7,120 6,744
Retained Earnings 8,426 7,972
Net Unrealized Gains--Securities
Available for Sale 588 55
Foreign Currency Translation (587) (556)
--------- ---------
Total Stockholder's Equity 16,298 14,966
--------- ---------
TOTAL $ 233,239 $ 211,474
- -------------------------------------------------------=============================
Accounting policies and explanatory notes on pages 55 through 74 form an
integral part of the financial statements.
54
STATEMENT OF ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Citicorp, its
wholly owned subsidiary, Citibank, N.A., and their majority-owned subsidiaries,
after the elimination of all material intercompany transactions. Twenty percent
to 50%-owned affiliates, other than venture capital investments, are accounted
for under the equity method, and the pro rata share of their income (loss) is
included in other revenue. Income from investments in less than 20%-owned
companies is recognized when dividends are received. Gains and losses on
disposition of branches, subsidiaries, affiliates, and other investments and
charges for management's estimate of impairment in value that is other than
temporary, such that recovery of the carrying amount is deemed unlikely, are
included in other revenue.
Foreign currency translation, which represents the effects of translating
into U.S. dollars, at current exchange rates, financial statements of operations
outside the U.S. with a functional currency other than the U.S. dollar, is
included in stockholders' equity along with related hedge and tax effects. The
effects of translating non-dollar financial statements of operations with the
U.S. dollar as the functional currency, including those in highly inflationary
environments, are included in other revenue along with related hedge effects.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
SECURITIES AND TRADING ACCOUNT ACTIVITIES
Effective January 1, 1994, Citicorp adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," and reported the cumulative effect of the change in
stockholders' equity (see Note 1). Under SFAS No. 115, debt securities that are
expected to be held to maturity are carried at cost, adjusted for amortization
of premiums to the earliest call date and accretion of discounts to maturity.
Marketable equity securities and debt securities available for sale are carried
at fair value, with unrealized gains and losses reported in a separate component
of stockholders' equity net of applicable income taxes. In the 1995 fourth
quarter Citicorp elected to transfer securities previously classified as held to
maturity into the available-for-sale category, in accordance with guidelines
issued by the Financial Accounting Standards Board which permitted such a
one-time election. Realized gains and losses on sales of securities are included
in earnings on a specific identified cost basis.
Citicorp's venture capital subsidiaries include subsidiaries registered as
Small Business Investment Companies and those other subsidiaries that engage
exclusively in venture capital activities. Venture capital investments are
carried at fair value, with changes in fair value recognized in other revenue.
The fair values of publicly-traded securities held by these subsidiaries are
generally based upon quoted market prices. In certain situations, including
thinly-traded securities, large-block holdings, restricted shares or other
special situations, the quoted market price is adjusted to produce an estimate
of the attainable fair value for the securities. For securities that are not
publicly traded, estimates of fair value are made based upon review of the
investee's financial results, condition, and prospects.
Trading account assets include securities and money market instruments held
in anticipation of short-term market movements and for resale to customers, and
are valued at market. Gains and losses, both realized and unrealized, are
included in trading account revenue. Obligations to deliver securities sold but
not yet purchased are also valued at market and included in trading account
liabilities.
Trading account activities also include derivative and foreign exchange
products. Derivative trading positions are carried at fair value, with realized
and unrealized gains and losses included in trading account revenue. Foreign
exchange trading positions are valued at prevailing market rates on a present
value basis, and the resulting gains and losses are included in foreign exchange
revenue. For other than short-term derivative and foreign exchange contracts,
Citicorp defers, at the inception of each contract, an appropriate portion of
the initial market value attributable to ongoing costs, such as servicing and
credit considerations, and amortizes this amount into trading account or foreign
exchange revenue over the life of the contract.
Revaluation gains (losses) on derivative and foreign exchange contracts are
reported gross in trading account assets (liabilities), reduced by the effects
of qualifying netting agreements with counterparties.
RISK MANAGEMENT ACTIVITIES
Citicorp manages its exposures to market rate movements outside of its trading
activities by modifying the asset and liability mix, either directly or through
the use of derivative financial products including interest rate swaps, futures,
forwards, and purchased option positions such as interest rate caps, floors, and
collars. These end-user derivative contracts include qualifying hedges and
qualifying positions that modify the interest rate characteristics of specified
financial instruments. Derivative instruments not qualifying as end-user
positions are treated as trading positions and marked-to-market.
To qualify as a hedge, the swap, futures, forward, or purchased option
position must be designated as a hedge and effective in reducing the market risk
of an existing asset, liability, firm commitment, or identified anticipated
transaction which is probable to occur. Effectiveness of the hedge is evaluated
on an initial and ongoing basis using statistical calculations of correlation.
To qualify as a position modifying the interest rate characteristics of an
instrument, there must be a documented and approved objective to synthetically
alter the market risk characteristics of specified items or anticipated
transactions, and the swap, forward or purchased option position must be
designated as such a position and effective in accomplishing the underlying
objective.
The foregoing criteria are applied on a decentralized basis, consistent
with the level at which market risk is managed, but are subject to
55
various limits and controls. If a contract is later found to be ineffective, it
no longer qualifies as an end-user position and any excess gains and losses
attributable to such ineffectiveness as well as subsequent changes in fair value
are recognized in earnings.
End-user contracts are primarily employed in association with on-balance
sheet instruments accounted for at amortized cost, including loans, deposits,
and long-term debt, and with credit card securitizations. These qualifying
end-user contracts are accounted for consistent with the risk management
strategy as follows. Amounts payable and receivable on interest rate swaps and
options are accrued according to the contractual terms and included currently in
the related revenue and expense category as an element of the yield on the
associated instrument (including the amortization of option premiums). Amounts
paid or received over the life of futures contracts are deferred until the
contract is closed; accumulated deferred amounts on futures contracts and
amounts paid or received at settlement of forward contracts are accounted for as
elements of the carrying value of the associated instrument, affecting the
resulting yield.
End-user contracts related to instruments that are carried at fair value
are also carried at fair value, with amounts payable and receivable accounted
for as an element of the yield on the associated instrument. When related to
securities available for sale, fair value adjustments are reported in
stockholders' equity, net of tax.
If an end-user derivative contract is terminated, any resulting gain or
loss is deferred and amortized over the original term of the agreement provided
that the effectiveness criteria have been met. If the underlying designated
items are no longer held, or if an anticipated transaction is no longer likely
to occur, any previously unrecognized gain or loss on the derivative contract is
recognized in earnings and the contract is subsequently accounted for at fair
value.
Foreign exchange contracts which qualify under applicable accounting
guidelines as hedges of foreign currency exposures, including net capital
investments outside the U.S., are revalued at the spot rate with any forward
premium or discount recognized over the life of the contract in net interest
revenue. Gains and losses on foreign exchange contracts which qualify as a hedge
of a firm commitment are deferred and recognized as part of the measurement of
the related transaction, unless deferral of a loss would lead to recognizing
losses on the transaction in later periods.
LOANS
The consumer loan category represents loans managed by Citicorp's Consumer
businesses. Consumer loans are generally written off not later than a
predetermined number of days past due on a contractual basis, or earlier in the
event of bankruptcy. The number of days is set at an appropriate level by loan
product and by country. The policy for suspending accruals of interest on
consumer loans varies depending on the terms, security and loan loss experience
characteristics of each product, and in consideration of write-off criteria in
place.
The commercial loan category represents loans managed by Citicorp's
Corporate Banking businesses. Commercial loans are identified as impaired and
placed on a cash (nonaccrual) basis when it is determined that the payment of
interest or principal is doubtful of collection, or when interest or principal
is past due for 90 days or more, except when the loan is well secured and in the
process of collection. Any interest accrued is reversed and charged against
current earnings, and interest is thereafter included in earnings only to the
extent actually received in cash. When there is doubt regarding the ultimate
collectibility of principal, all cash receipts are thereafter applied to reduce
the recorded investment in the loan. Impaired commercial loans are written down
to the extent that principal is judged to be uncollectible and, in the case of
impaired collateral-dependent loans where repayment is expected to be provided
solely by the underlying collateral and there are no other available and
reliable sources of repayment, are written down to the lower of cost or
collateral value. Cash-basis loans are returned to an accrual status when all
contractual principal and interest amounts are reasonably assured of repayment
and there is a sustained period of repayment performance in accordance with the
contractual terms.
Loans include Citicorp's share of aggregate rentals on lease financing
transactions and residual values net of related unearned income. Lease financing
transactions substantially represent direct financing leases and also include
leveraged leases. Unearned income is amortized under a method which
substantially results in an approximate level rate of return when related to the
unrecovered lease investment. Gains and losses from sales of residual values of
leased equipment are included in other revenue.
ALLOWANCE FOR CREDIT LOSSES
Additions to the allowance are made by means of the provision for credit losses
charged to expense. Credit losses are deducted from the allowance, and
subsequent recoveries are added. Securities received in exchange for loan claims
in debt restructurings are initially recorded at fair value, with any gain or
loss reflected as a recovery or charge-off to the allowance, and are
subsequently accounted for in accordance with SFAS No. 115. The amount of the
provision is determined based on management's assessment of actual past and
expected future net credit losses, business and economic conditions, the
character, quality and performance of the portfolios, and other pertinent
indicators. This evaluation encompasses all lending activities and also includes
an assessment of the ability of borrowers with foreign currency obligations to
obtain the foreign exchange necessary for orderly debt servicing. The resulting
allowance is deemed adequate to absorb all credit losses inherent in the
portfolio.
Effective January 1, 1995, Citicorp adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" as amended by SFAS No. 118 (see Note 1),
which requires that impairment of larger-balance, non-homogenous loans be
measured by comparing the net carrying amount of the loan to the present value
of the expected future cash flows discounted at the loan's effective rate, the
secondary market value of the loan, or the fair value of the collateral for
collateral-dependent loans. A valuation allowance is established if necessary
within
56
the overall allowance for credit losses. Smaller balance, homogenous loans,
including consumer mortgage, installment, revolving credit and most other
consumer loans, are collectively evaluated for impairment. Adoption of the new
standard had no impact on the level of the overall allowance for credit losses
or on operating results, and does not affect Citicorp's policies regarding
write-offs, recoveries, or income recognition.
In addition to the allowance for credit losses, Citicorp maintains separate
reserves for anticipated losses on portfolios of consumer receivables that have
been sold with recourse.
OTHER REAL ESTATE OWNED
Upon repossession, loans are adjusted if necessary to the estimated fair value
of the underlying collateral and transferred to Other Real Estate Owned
("OREO"), which is reported in other assets net of a valuation allowance for
selling costs and net declines in value as appropriate.
EMPLOYEE BENEFITS
Employee benefits expense includes prior and current service costs of pension
and other postretirement benefit plans, which are accrued on a current basis,
contributions and unrestricted awards under other employee plans, the
amortization of restricted stock awards, and costs of other employee benefits.
Citicorp adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1994 (see Note 8). There are no charges to
earnings upon the grant or exercise of fixed stock options or the subscription
for or purchase of stock under stock purchase agreements. Compensation expense
related to performance-based stock options is recorded over the period to the
estimated vesting dates. Citicorp's accounting for its stock-based employee
compensation plans is unaffected by SFAS No. 123, "Accounting for Stock-Based
Compensation," which became effective in 1996 (see Note 8).
Upon issuance of previously unissued shares under employee plans, proceeds
received in excess of par value are credited to surplus. Upon issuance of
treasury shares, the difference between the proceeds received and the average
cost of treasury shares is recorded in surplus.
INCOME TAXES
Deferred taxes are recorded for the future tax consequences of events
that have been recognized in the financial statements or tax returns,
based upon enacted tax laws and rates, including an appropriate
provision for taxes on undistributed income of subsidiaries and affiliates.
Deferred tax assets are recognized subject to management's judgment
that realization is more likely than not.
EARNINGS PER SHARE
Earnings per share on common and common equivalent shares is based on net income
after deducting preferred stock dividends and reflects any dilutive effects of
stock options, stock purchase agreements, conversion preferred stock, forward
purchase contracts on common stock, and shares issuable under deferred stock
awards. The fully diluted computation also considers the dilutive effects of
convertible preferred stock.
The dilutive effects of stock options and stock purchase agreements are
computed using the treasury-stock method and included in the computation as
common equivalent shares. Tandem options, granted prior to 1988 giving the
employee the alternative to purchase either unrestricted common stock or book
value shares at fixed prices (see Notes 5 and 10), are included in the
computation based on the economically preferable alternative to the employee,
using the treasury-stock method if unrestricted common shares and the two-class
method if book value shares. Under the two-class method, book value shares under
option are added to the number of shares used in the computation, but only as to
the undistributed portion of earnings.
Prior to redemption or conversion into common shares, Conversion Preferred
Stock, Series 15 is included in the computation as common equivalent shares and
convertible preferred stock is included in the fully diluted computation, using
the if-converted method, if dilutive. Shares deliverable under forward purchase
contracts on Citicorp common stock (see Note 5) are included in common
equivalent shares to the extent that the forward price exceeds the market price
of the common stock as of the reporting date. Shares receivable by Citicorp
under forward contracts are not deducted from the number of shares used in the
computation until the final number of shares to be received has been determined.
Shares issuable under deferred stock awards are included in the
computation, as common equivalent shares if unrestricted common stock and under
the two-class method if book value shares, and the amount of after-tax dividend
equivalents on shares issuable is added back to income applicable to common
stock.
CASH FLOWS
Cash flows from risk management activities are classified in the same category
as the related assets and liabilities. Cash equivalents are defined as those
amounts included in cash and due from banks.
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL INSTRUMENTS
Citicorp provides a wide variety of financial instruments as products to its
customers, and it also uses these instruments in connection with its own
activities. Following are explanatory notes regarding financial assets and
liabilities, off-balance sheet financial instruments, concentrations of credit
risk, and the estimated fair value of financial instruments. Collateral
requirements are made on a case-by-case evaluation of each customer and product,
and may include cash, securities, receivables, real estate, and other assets.
A. FINANCIAL ASSETS AND LIABILITIES
LOANS
In Millions of Dollars at Year-End 1996 1995
- -------------------------------------------------------------------------------
CONSUMER
IN U.S. OFFICES
Mortgage and Real Estate(1)(2)(3) $ 23,421 $ 22,604
Installment, Revolving Credit, and Other 36,285 32,429
--------- ---------
59,706 55,033
- -------------------------------------------------------------------------------
IN OFFICES OUTSIDE THE U.S.
Mortgage and Real Estate(1)(4) 18,379 18,240
Installment, Revolving Credit, and Other 33,905 32,521
Lease Financing 754 765
--------- ---------
53,038 51,526
- -------------------------------------------------------------------------------
112,744 106,559
Unearned Income (897) (916)
--------- ---------
CONSUMER LOANS--NET OF UNEARNED INCOME $ 111,847 $ 105,643
- -------------------------------------------------------========================
COMMERCIAL
IN U.S. OFFICES
Commercial and Industrial(5) $ 8,747 $ 9,509
Mortgage and Real Estate(1) 2,977 4,681
Loans to Financial Institutions 1,035 365
Lease Financing 3,017 3,239
--------- ---------
15,776 17,794
- -------------------------------------------------------------------------------
IN OFFICES OUTSIDE THE U.S.
Commercial and Industrial(5) 36,901 32,966
Mortgage and Real Estate(1) 1,815 1,901
Loans to Financial Institutions 4,837 4,229
Governments and Official Institutions 2,252 2,180
Lease Financing 1,294 1,098
--------- ---------
47,099 42,374
- -------------------------------------------------------------------------------
62,875 60,168
Unearned Income (110) (169)
--------- ---------
COMMERCIAL LOANS--NET OF UNEARNED INCOME $ 62,765 $ 59,999
- -------------------------------------------------------========================
(1) Loans secured primarily by real estate.
(2) Includes $3.8 billion in 1996 and 1995 of commercial real estate loans
related to community banking and private banking activities.
(3) Includes $1.1 billion in 1996 and $3.0 billion in 1995 of residential
mortgage loans held for sale and carried at the lower of aggregate cost or
market value.
(4) Includes $2.7 billion in 1996 and $2.5 billion in 1995 of loans secured by
commercial real estate.
(5) Includes loans not otherwise separately categorized.
CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES
In Millions of Dollars 1996 1995 1994
- -------------------------------------------------------------------------------
Balance at Beginning of Year $ 5,368 $ 5,155 $ 4,379
ADDITIONS
Provision for Credit Losses 1,926 1,991 1,881
DEDUCTIONS
Consumer Credit Losses 2,172 1,962 1,714
Consumer Credit Recoveries (444) (418) (361)
------- ------- -------
Net Consumer Credit Losses 1,728 1,544 1,353
Commercial Credit Losses 266 376 369
Commercial Credit Recoveries(1) (268) (228) (578)
------- ------- -------
Net Commercial Credit (Recoveries) Losses (2) 148 (209)
Other--Net(2) (65) (86) 39
------- ------- -------
BALANCE AT END OF YEAR $ 5,503 $ 5,368 $ 5,155
- ----------------------------------------------------===========================
(1) Includes $318 million in 1994 resulting from the exchange of Brazil
outstandings for marketable securities, pursuant to the refinancing
agreement completed in 1994.
(2) Includes net transfers (to) from the reserve for sold Consumer portfolios
and foreign currency translation effects.
The following table presents information about impaired loans. Impaired
loans are those on which Citicorp believes it is not probable that it will be
able to collect all amounts due according to the contractual terms of the loan,
excluding smaller-balance homogeneous loans that are evaluated collectively for
impairment, and are carried on a cash basis:
In Millions of Dollars at Year-End 1996 1995
- --------------------------------------------------------------------------------
Impaired Commercial Loans $ 868 $1,512
Other Impaired Loans(1) 360 424
------ ------
Total Impaired Loans(2) $1,228 $1,936
- --------------------------------------------------------------------------------
Impaired Loans with Valuation Allowances $ 186 $ 175
Total Valuation Allowances(3) 32 36
- --------------------------------------------------------------------------------
During the Year:
Average Balance of Impaired Loans $1,657 $2,178
Interest Income Recognized on Impaired Loans 116 112
- --------------------------------------------------------------------------------
(1) Primarily commercial real estate loans related to community and private
banking activities.
(2) At year-end 1996, approximately 44% of these loans were measured for
impairment using the fair value of the collateral, with the remaining 56%
measured using the present value of the expected future cash flows,
discounted at the loan's effective interest rate, compared with
approximately 58% and 42%, respectively, at year-end 1995.
(3) Included in the overall allowance for credit losses.
58
SECURITIES 1996 1995
------------------------------------------- -------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
In Millions of Dollars at Year-End Cost Gains Losses Value Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE
U.S. Treasury and Federal Agency $ 4,048 $ 46 $ 5 $ 4,089 $ 4,285 $ 62 $ 2 $ 4,345
State and Municipal 2,327 133 55 2,405 1,611 101 81 1,631
Foreign Government 14,056 1,062 180 14,938 8,507 396 460 8,443
U.S. Corporate 1,586 67 65 1,588 1,169 126 74 1,221
Other Debt Securities 1,129 11 11 1,129 1,112 11 4 1,119
Equity Securities(1) 1,870 119 76 1,913 1,345 133 24 1,454
------- ------ ---- ------ ------- ---- ------- -------
$25,016 $1,438 $392 $26,062 $18,029 $829 $ 645 $18,213
- ----------------------------------------=======================================================================================
VENTURE CAPITAL $ 2,124 $1,854
- -------------------------------------------------------------------------------------------------------------------------------
Securities Available for Sale Include:
Mortgage-Backed Securities $ 1,064 7 3 $ 1,068 $ 1,290 8 1 $ 1,297
Government of Brazil Brady Bonds 1,463 872 -- 2,335 1,485 341 -- 1,826
Government of Venezuela Brady Bonds 563 -- 81 482 563 -- 249 314
- -------------------------------------------------------------------------------------------------------------------------------
(1) Includes non-marketable equity securities carried at cost and the cost is
reported in both the amortized cost and fair value columns. The amortized
cost of non-marketable equity securities was $896 million and $860 million,
and the estimated fair value was $929 million and $898 million at December
31, 1996 and 1995, respectively.
Not included in the table above are securities available for sale held by
unconsolidated affiliates carried on the equity method of accounting. At
December 31, 1996 and 1995, the gross unrealized gains related to these
securities were $9 million and $22 million, respectively, and gross unrealized
losses were $4 million and $2 million, respectively, and are included in the net
unrealized gains--securities available for sale component of stockholders'
equity, net of applicable taxes.
The accompanying table shows components of interest and dividends on
securities, net gains from sales of securities available for sale, and net gains
on investments held by venture capital subsidiaries.
In Millions of Dollars 1996 1995 1994
- --------------------------------------------------------------------------------
Taxable Interest $1,600 $1,391 $1,143
Interest Exempt from U.S. Federal Income Tax 87 89 74
Dividends 83 64 49
- --------------------------------------------------------------------------------
Gross Realized Securities Gains $ 261 $ 177 $ 259
Gross Realized Securities Losses 51 45 59
- --------------------------------------------------------------------------------
Net Realized and Unrealized Venture Capital Gains $ 450 $ 390 $ 365
Which Included:
Gross Unrealized Gains 416 487 526
Gross Unrealized Losses 150 300 189
- --------------------------------------------------------------------------------
The following table presents the amortized cost, fair value, and average
yield on amortized cost of debt securities available for sale by contractual
maturity dates as of December 31, 1996:
Amortized Fair
In Millions of Dollars Cost Value Yield
- -------------------------------------------------------------------------------
U.S. TREASURY AND FEDERAL AGENCY
Due Within 1 Year $ 2,620 $ 2,618 5.30%
After 1 but Within 5 Years 860 865 5.99
After 5 but Within 10 Years 56 61 8.05
After 10 Years(1) 512 545 8.09
------- -------
TOTAL $ 4,048 $ 4,089 5.84%
- --------------------------------------------------=============================
STATE AND MUNICIPAL
Due Within 1 Year $ 6 $ 6 6.10%
After 1 but Within 5 Years 51 49 5.29
After 5 but Within 10 Years 553 570 5.61
After 10 Years(1) 1,717 1,780 6.51
------- -------
TOTAL $ 2,327 $ 2,405 6.27%
- --------------------------------------------------=============================
ALL OTHER(2)
Due Within 1 Year $ 7,170 $ 7,225 10.27%
After 1 but Within 5 Years 4,058 4,073 7.80
After 5 but Within 10 Years 1,409 1,522 7.87
After 10 Years(1) 4,134 4,835 8.94
------- -------
TOTAL $16,771 $17,655 9.14%
- --------------------------------------------------=============================
(1) Securities with no stated maturities are included as contractual maturities
of greater than 10 years. Actual maturities may differ due to call or
prepayment rights.
(2) Includes foreign government, U.S. corporate, and other debt securities.
Yields reflect the impact of local interest rates prevailing in countries
outside the U.S.
59
TRADING ACCOUNT ASSETS AND LIABILITIES
In Millions of Dollars at Year-End 1996 1995
- --------------------------------------------------------------------------------
TRADING ACCOUNT ASSETS
U.S. Treasury and Federal Agency Securities $ 2,560 $ 3,159
State and Municipal Securities 123 145
Foreign Government, Corporate
and Other Securities 10,607 12,693
Derivative and Foreign Exchange Contracts 17,495 16,096
------- -------
$30,785 $32,093
- -------------------------------------------------------------===================
TRADING ACCOUNT LIABILITIES
Securities Sold, Not Yet Purchased $ 4,036 $ 3,696
Derivative and Foreign Exchange Contracts 17,967 14,578
------- -------
$22,003 $18,274
- -------------------------------------------------------------===================
The average fair value of trading account assets during 1996 was $32.5 billion,
including $15.4 billion relating to derivative and foreign exchange contracts,
compared with $43.6 billion and $21.8 billion, respectively, during 1995. The
average fair value of trading account liabilities during 1996 was $19.9 billion,
including $15.3 billion relating to derivative and foreign exchange contracts,
compared with $24.7 billion and $20.6 billion, respectively, during 1995.
Deferred revenue on derivative and foreign exchange contracts, attributable
to ongoing costs such as servicing and credit considerations, totaled $310
million and $254 million at December 31, 1996 and 1995, respectively, which is
reported in Other Liabilities. During the three years ended December 31, 1996
there were no material credit losses related to derivative and foreign exchange
contracts. Commitments to purchase when-issued securities were $0.5 billion and
$4.7 billion at December 31, 1996 and 1995, respectively.
PURCHASED FUNDS AND OTHER BORROWINGS(1)
In Millions of Dollars at Year-End 1996 1995
- --------------------------------------------------------------------------------
Federal Funds Purchased and Securities Sold
under Repurchase Agreements $ 9,995 $ 7,904
Commercial Paper Issued by
Parent Company 775 1,181
The Student Loan Corporation (80% owned) 463 452
Other Funds Borrowed 6,958 6,797
------- -------
TOTAL $18,191 $16,334
- ------------------------------------------------------------====================
(1) Original maturities of less than one year.
LONG-TERM DEBT(1)
In Millions of Dollars at Year-End 1996 1995
- -------------------------------------------------------------------------------
VARIOUS
VARIOUS FLOATING-
FIXED-RATE RATE
OBLIGATIONS(2) OBLIGATIONS(2) TOTAL Total
- -------------------------------------------------------------------------------
PARENT COMPANY
Due in 1996 $ -- $ -- $ -- $ 1,661
Due in 1997 713 936 1,649 1,416
Due in 1998 333 909 1,242 1,708
Due in 1999 668 1,049 1,717 1,718
Due in 2000 382 664 1,046 1,518
Due in 2001 628 274 902 365
Due in 2002-2006 3,300 1,246 4,546 3,724
Due in 2007-2011 1,324 115 1,439 793
Due after 2011 400 222 622 671
------- ------- ------- -------
7,748 5,415 13,163 13,574
------- ------- ------- -------
SUBSIDIARIES(3)
Due in 1996 -- -- -- 1,148
Due in 1997 1,083 441 1,524 1,275
Due in 1998 985 858 1,843 1,371
Due in 1999 655 86 741 331
Due in 2000 216 182 398 368
Due in 2001 248 114 362 69
Due in 2002-2006 121 181 302 219
Due in 2007-2011 15 60 75 44
Due after 2011 331 111 442 89
------- ------- ------- -------
3,654 2,033 5,687 4,914
------- ------- ------- -------
TOTAL $11,402 $ 7,448 $18,850 $18,488
- ------------------------------=================================================
(1) Original maturities of one year or more. Maturity distribution is based upon
contractual maturities or earlier dates at which debt is repayable at the
option of the holder, due to required mandatory sinking fund payments or due
to call notices issued.
(2) Based on contractual terms. Repricing characteristics may be effectively
modified from time to time using derivative contracts.
(3) Approximately 5% in 1996 and 4% in 1995 of subsidiary long-term debt was
guaranteed by Citicorp, and of the debt not guaranteed by Citicorp,
approximately 35% in 1996 and 38% in 1995 was secured by the assets of the
subsidiary.
Long-term debt is denominated in various currencies with both fixed and floating
interest rates, summarized below. Certain of the agreements under which
long-term debt obligations were issued prohibit Citicorp, under certain
conditions, from paying dividends in shares of Citibank capital stock and from
creating encumbrances on such shares. Floating rates are determined periodically
by formulas based on certain money market rates or, in certain instances, by
minimum rates as specified in the governing agreements. A portion of Parent
Company and subsidiary debt represents local currency borrowings where
prevailing rates may vary significantly from rates in the U.S.
1996 1995
- -------------------------------------------------- -------------------------
WEIGHTED- Weighted-
In %'s RANGE AVERAGE Range Average
- --------------------------------------------------------------------------------
PARENT COMPANY
Fixed rate(1) 2.42 to 10.50 7.32 2.42 to 10.75 7.70
Floating rate(2) 3.50 to 8.23 5.99 0.88 to 6.93 6.04
SUBSIDIARIES(3)
Fixed rate 3.50 to 18.69 9.07 0.75 to 16.50 8.91
Floating rate 3.00 to 32.84 11.51 3.35 to 32.84 11.20
- --------------------------------------------------------------------------------
(1) Predominantly denominated in U.S. dollars (96% in 1996 and 92% in 1995),
Japanese yen, and German marks, and matures over the period to 2035.
(2) Predominantly denominated in U.S. dollars (96% in 1996 and 95% in 1995) and
matures over the period to 2035.
(3) Denominated in U.S. dollars (47% in 1996 and 36% in 1995) and various
foreign currencies including Australian dollars, Italian lire, Chilean
pesos, Malaysian ringgit, and German marks. Fixed and floating rate debt
matures over the period to 2027 and 2017, respectively.
60
Included in long-term debt are $0.8 billion and $1.3 billion of subordinated
capital notes at December 31, 1996 and 1995, respectively, which require
Citicorp to exchange the notes at maturity or at certain other specified times
for capital securities that have a market value equal to the principal amounts
of the notes or, at Citicorp's option, to pay the principal of the notes from
amounts representing designated proceeds from the sale of capital securities. At
the option of Citicorp, the exchange or the proceeds from sale, as applicable,
may be for or from common stock, non-redeemable preferred stock, or other
marketable capital securities of Citicorp. Citicorp has designated proceeds from
the sales of capital securities in an amount sufficient to satisfy all the
dedication commitments of its subordinated capital notes.
Also included in long-term debt at December 31,1996 are $300 million of
guaranteed preferred beneficial interests in Citicorp subordinated debt issued
by Citicorp Capital I, a wholly-owned trust whose sole assets are $309 million
of 7.93% Junior Subordinated Deferrable Interest Debentures of Citicorp due
2027. Under the terms of this arrangement, taken as a whole, Citicorp has
provided a full and unconditional guarantee on a subordinated basis of payments
due.
B. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
In addition to the financial assets and liabilities discussed above, Citicorp's
financial instruments include off-balance sheet products. The market and credit
risks associated with these products, as well as the operating risks, are
similar to those relating to other types of financial instruments, and Citicorp
manages these risks in a consistent manner.
DERIVATIVE AND FOREIGN EXCHANGE CONTRACTS
NOTIONAL
PRINCIPAL BALANCE SHEET
AMOUNTS CREDIT EXPOSURE(2)
------------------- -----------------
In Billions of Dollars at Year-End 1996 1995(1) 1996 1995(1)
- -----------------------------------------------------------------------------
INTEREST RATE PRODUCTS
Futures Contracts $ 160.6 $145.2 $ -- $ --
Forward Contracts 132.7 295.2 0.1 0.6
Swap Agreements 476.2 431.9 9.4 9.1
Purchased Options 126.7 105.9 1.2 1.2
Written Options 192.3 158.1 -- --
FOREIGN EXCHANGE PRODUCTS
Futures Contracts 0.7 1.1 -- --
Forward Contracts 1,146.7 983.5 17.6 12.2
Cross-Currency Swaps 44.0 35.2 1.8 2.0
Purchased Options 101.1 93.7 1.7 1.8
Written Options 104.5 88.2 -- --
EQUITY PRODUCTS 22.2 27.9 0.7 0.5
COMMODITY PRODUCTS 12.5 9.8 0.5 0.4
CREDIT DERIVATIVE PRODUCTS 1.9 0.3 -- --
------ ------
33.0 27.8
EFFECTS OF MASTER NETTING
AGREEMENTS(3) (15.5) (11.7)
------ ------
$ 17.5 $ 16.1
- ------------------------------------------------------------================
(1) Reclassified to conform to the 1996 presentation.
(2) There is no balance sheet credit exposure for futures contracts because they
settle daily in cash, and none for written options because they represent
obligations (rather than assets) of Citicorp.
(3) Master netting agreements mitigate credit risk by permitting the offset of
amounts due from and to individual counterparties in the event of
counterparty default.
Citicorp enters into derivative and foreign exchange futures, forwards, options,
and swaps, which enable customers to transfer, modify, or reduce their interest
rate, foreign exchange, and other market risks, and also trades these products
for its own account. In addition, Citicorp uses derivatives and other
instruments, primarily interest rate products, as an end-user in connection with
its risk management activities. Derivatives are used to manage interest rate
risk relating to specific groups of on-balance sheet assets and liabilities,
including commercial and consumer loans, deposit liabilities, long-term debt,
and other interest-sensitive assets and liabilities, as well as credit card
securitization. In addition, foreign exchange contracts are used to hedge net
capital exposures and foreign exchange transactions. Through the effective use
of derivatives, Citicorp has been able to modify the volatility of its revenue
from asset and liability positions. The preceding table presents the aggregate
notional principal amounts of Citicorp's outstanding derivative and foreign
exchange contracts at December 31, 1996 and 1995, along with the related balance
sheet credit exposure. The table includes all contracts with third parties,
including both trading and end-user positions.
Futures and forward contracts are commitments to buy or sell at a future
date a financial instrument, commodity, or currency at a contracted price, and
may be settled in cash or through delivery. Swap contracts are commitments to
settle in cash at a future date or dates, based on differentials between
specified financial indices, as applied to a notional principal amount. Option
contracts give the purchaser, for a fee, the right, but not the obligation, to
buy or sell within a limited time a financial instrument or currency at a
contracted price that may also be settled in cash, based on differentials
between specified indices.
Market risk on a derivative or foreign exchange product is the exposure
created by potential fluctuations in interest rates, foreign exchange rates, and
other values, and is a function of the type of product, the volume of
transactions, the tenor and terms of the agreement, and the underlying
volatility. Credit risk is the exposure to loss in the event of nonperformance
by the other party to the transaction. The recognition in earnings of unrealized
gains on these transactions is dependent on management's assessment as to
collectibility.
Balance sheet credit exposure represents the current cost of replacing the
contracts and is equal to the amount of Citicorp's unrealized gain included in
Trading Account Assets. As measured by Citicorp in connection with the
management of overall credit relationships with individual customers, total
exposure on derivative and foreign exchange contracts also includes the
potential increase in replacement cost estimated based on a statistical
simulation of values that would result from a change in market rates. In the
aggregate for all contracts, the estimate of the potential increase in
replacement cost ranged from approximately $32 billion to $41 billion during
1996. Substantially all of the total exposure was to counterparties considered
by Citicorp to be investment grade, the substantial majority was under three
years' tenor, and there were no significant nonperforming contracts in 1996 or
1995. There were no credit-related losses on derivative contracts in 1996, $6
million in 1995, and $2 million in 1994.
61
END-USER INTEREST RATE AND FOREIGN EXCHANGE CONTRACTS
NOTIONAL PRINCIPAL AMOUNTS(1) PERCENTAGE OF 1996 AMOUNT MATURING
--------------------------- --------------------------------------------------------
DECEMBER 31, December 31, Within 1 to 2 to 3 to 4 to After
In Billions of Dollars 1996 1995 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years
- --------------------------------------------------------------------------------------------------------------------
INTEREST RATE PRODUCTS
Futures Contracts $ 23.4 $13.6 76% 14% 8% 1% 1% --%
Forward Contracts 3.6 5.6 88 11 -- -- -- 1
Swap Agreements 111.9 90.9 31 23 13 9 10 14
Option Contracts 71.4 45.6 89 5 4 2 -- --
FOREIGN EXCHANGE PRODUCTS
Futures and Forward Contracts 60.9 54.8 95 4 -- -- 1 --
Cross-Currency Swaps 2.9 3.2 15 19 14 14 12 26
- --------------------------------------------------------------------------------------------------------------------
(1) Includes third-party and intercompany contracts.
END-USER INTEREST RATE SWAPS AND NET PURCHASED OPTIONS AS OF DECEMBER 31, 1996
REMAINING CONTRACTS OUTSTANDING--NOTIONAL PRINCIPAL AMOUNTS
-----------------------------------------------------------
In Billions of Dollars at Year-End 1996 1997 1998 1999 2000 2001
- ---------------------------------------------------------------------------------------------------------------
RECEIVE FIXED SWAPS $83.2 $63.4 $45.2 $32.4 $23.2 $12.5
Weighted-Average Fixed Rate 6.4% 6.5% 6.7% 6.7% 6.5% 6.8%
PAY FIXED SWAPS $13.8 $ 8.8 $ 5.7 $ 4.6 $ 4.0 $ 3.6
Weighted-Average Fixed Rate 6.9% 7.0% 7.1% 7.1% 7.1% 7.2%
BASIS SWAPS $14.9 $ 4.6 $ 0.6 $ 0.1 $ 0.1 $ 0.1
PURCHASED CAPS (INCLUDING COLLARS) $39.2 $ 4.3 $ 3.4 $ 1.1 $ 0.1 $ 0.1
Weighted-Average Cap Rate Purchased 6.1% 6.8% 7.0% 7.5% 9.9% 9.1%
PURCHASED FLOORS $ 1.6 $ 1.0 $ 0.1 $ 0.1 $ 0.1 $ 0.1
Weighted-Average Floor Rate Purchased 5.6% 5.3% 5.8% 5.8% 5.8% 5.8%
WRITTEN FLOORS RELATED TO PURCHASED CAPS (COLLARS) $ 0.2 $ 0.2 $ 0.2 $ 0.2 $ -- $ --
Weighted-Average Floor Rate Written 8.2% 8.2% 8.2% 8.2% --% --%
WRITTEN CAPS RELATED TO OTHER PURCHASED CAPS(1) $30.4 $ 2.4 $ 0.8 $ 0.6 $ 0.5 $ 0.4
Weighted-Average Cap Rate Written 6.3% 7.5% 9.5% 9.5% 9.5% 9.7%
- ---------------------------------------------------------------------------------------------------------------
THREE-MONTH FORWARD LIBOR RATES(2) 5.6% 6.1% 6.4% 6.7% 6.9% 7.1%
- ---------------------------------------------------------------------------------------------------------------
(1) Includes written options related to purchased options embedded in other
financial instruments.
(2) Represents the implied forward yield curve for three-month LIBOR as of
December 31, 1996, provided for reference.
The tables above provide data on the notional principal amounts and maturities
of end-user (non-trading) derivatives, along with additional data on end-user
interest rate swaps and net purchased option positions at year-end 1996 with
three-month LIBOR forward rates included for reference. The tables are intended
to provide an overview of these components of the end-user portfolio, but should
be viewed only in the context of Citicorp's related assets and liabilities.
The majority of derivative positions used in Citicorp's asset and liability
management activities are established via intercompany transactions with
independently managed Citicorp dealer units, with the dealer acting as a conduit
to the marketplace. Contract maturities are related to the underlying risk
management strategy.
Citicorp's utilization of these instruments is modified from time to time
in response to changing market conditions as well as changes in the
characteristics and mix of the related assets and liabilities. In this
connection, during 1996 interest rate futures, swaps and options with a notional
principal amount of $72.1 billion were closed out which resulted in a net
deferred loss of approximately $26 million. Total unamortized net deferred
losses, including those from prior year close-outs, were approximately $99
million at December 31, 1996, which will be amortized into earnings over the
remaining life of the original contracts (approximately 63% in 1997, 28% in
1998, and 9% in subsequent years), consistent with the risk management strategy.
LOAN COMMITMENTS
In Billions of Dollars at Year-End 1996 1995
- --------------------------------------------------------------------------------
Unused Commercial Commitments to Make or
Purchase Loans, to Purchase Third-Party Receivables,
and to Provide Note Issuance or Revolving
Underwriting Facilities $ 89.9 $ 78.0
- --------------------------------------------------------------------------------
Unused Credit Card and Other Consumer
Revolving Commitments $119.9 $102.7
- --------------------------------------------------------------------------------
The majority of unused commitments are contingent upon customers maintaining
specific credit standards. Commercial commitments generally have floating
interest rates and fixed expiration dates and may require payment of fees. Such
fees (net of certain direct costs) are deferred and, upon exercise of the
commitment, amortized over the life of the loan or, if exercise is deemed
remote, amortized over the commitment period. The table does not include
commercial letters of credit issued on behalf of customers and collateralized by
the underlying shipment of goods which totaled $5.6 billion at December 31, 1996
and $5.9 billion at December 31, 1995.
62
LOANS SOLD WITH CREDIT ENHANCEMENT
AMOUNTS
-------------
In Billions of Dollars at Year-End 1996 1995 FORM OF CREDIT ENHANCEMENT
- --------------------------------------------------------------------------------
Residential Mortgages and $11.3 $14.9 Recourse obligation
Other Loans Sold with $7.3 in 1996 and
Recourse(1) $5.2 in 1995
- --------------------------------------------------------------------------------
GNMA Sales/Servicing 1.0 2.5 Secondary recourse
Agreements(2) obligation
- --------------------------------------------------------------------------------
Securitized Credit Card 25.2 25.5 Excess servicing fees over the
Receivables life of the transaction
- --------------------------------------------------------------------------------
(1) Residential mortgages represent 94% of amounts in 1996 and 93% in 1995.
(2) Government National Mortgage Association sales/servicing agreements covering
securitized residential mortgages.
Citicorp and its subsidiaries are obligated under various credit enhancements
related to certain sales of loans or sales of participations in pools of loans,
summarized above.
Excess servicing fees on securitized credit card receivables are recognized
over the life of each sale transaction. The excess servicing fee is based upon
the sum of finance charges and fees received from cardholders and interchange
revenue earned on cardholder transactions, less the sum of the yield paid to
investors, credit losses, transaction costs, and a normal servicing fee, which
is also retained by certain Citicorp subsidiaries as servicers. As specified in
certain of the sale agreements, the excess servicing fee collected each month is
deposited in an account, up to a predetermined maximum amount, and is available
over the remaining term of that transaction to make payments of yield, fees, and
transaction costs in the event that net cash flows from the receivables are not
sufficient. When the account reaches the predetermined amount, excess servicing
fees are passed directly to the Citicorp subsidiary that sold the receivables.
The amount contained in these accounts is included in other assets and was $383
million at December 31, 1996 and $461 million at December 31, 1995.
Citicorp maintains reserves, outside of the allowance for credit losses,
relating to asset securitization programs discussed above. These reserves
totaled $473 million at December 31, 1996 and $486 million at December 31, 1995.
STANDBY LETTERS OF CREDIT
1996 1995
-----------------------------------------
EXPIRE EXPIRE TOTAL Total
WITHIN AFTER AMOUNT Amount
In Billions of Dollars at Year-End 1 YEAR 1 YEAR OUTSTANDING Outstanding
- --------------------------------------------------------------------------------
FINANCIAL
Insurance, Surety $ 2.1 $ 4.1 $ 6.2 $ 5.7
Options, Purchased Securities,
and Escrow 0.7 0.2 0.9 1.8
Clean Payment 1.0 0.5 1.5 1.5
Backstop State, County, and
Municipal Securities 0.2 0.5 0.7 1.4
Other Debt Related 4.2 3.9 8.1 6.8
PERFORMANCE 2.8 1.4 4.2 5.3
----- ----- ----- -----
TOTAL(1) $11.0 $10.6 $21.6 $22.5
- ----------------------------------------========================================
(1) Total is net of cash collateral of $1.5 billion in 1996 and $1.8 billion in
1995. Collateral other than cash covered 20% of the total in 1996 and 25% in
1995.
Standby letters of credit, summarized above, are used in various transactions to
enhance the credit standing of Citibank customers. They represent irrevocable
assurances that Citibank will make payment in the event that the customer fails
to fulfill its obligations to third parties. Financial standby letters of credit
are obligations to pay a third-party beneficiary when a customer fails to repay
an outstanding loan or debt instrument, such as assuring payments by a foreign
reinsurer to a U.S. insurer, to act as a substitute for an escrow account, to
provide a payment mechanism for a customer's third-party obligations, and to
assure payment of specified financial obligations of a customer. Performance
standby letters of credit are obligations to pay a third-party beneficiary when
a customer fails to perform a nonfinancial contractual obligation, such as to
ensure contract performance or irrevocably assure payment by the customer under
supply, service and maintenance contracts or construction projects. Fees are
recognized ratably over the term of the standby letter of credit. The table does
not include securities lending indemnifications issued to customers, which are
fully collateralized and totaled $4.2 billion at December 31, 1996 and $0.9
billion at December 31, 1995.
C. CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk exist when changes in economic, industry or
geographic factors similarly affect groups of counterparties whose aggregate
credit exposure is material in relation to Citicorp's total credit exposure.
Although Citicorp's portfolio of financial instruments is broadly diversified
along industry, product, and geographic lines, material transactions are
completed with other financial institutions, particularly in the securities
trading, derivative, and foreign exchange businesses. Additionally, U.S. credit
card receivables, U.S. mortgages, commercial real estate in North America, and
the cross-border refinancing portfolio represent areas of significant credit
exposures.
D. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The accompanying tables provide disclosure of the estimated fair value of
Citicorp's financial instruments as defined in accordance with applicable
requirements, including financial assets and liabilities recorded on the balance
sheet as well as off-balance sheet instruments such as derivative and foreign
exchange contracts and credit card receivables securitizations. To better
reflect Citicorp's values subject to market risk and to illustrate the
interrelationships that characterize risk management strategies, the following
table also provides estimated fair value data for the expected time period until
runoff of existing deposits with no fixed maturity.
In the aggregate, estimated fair values exceeded the carrying values by
approximately $8.9 billion at December 31, 1996 and $8.4 billion at December 31,
1995. The increase from the prior year is primarily due to a rise in interest
rates and credit quality improvements, partially offset by declines in the value
of derivative contracts due to the same interest rate environment.
63
ESTIMATED FAIR VALUE IN EXCESS OF (LESS THAN) CARRYING VALUE
Increase
In Billions of Dollars at Year-End 1996 1995 (Decrease)
- -------------------------------------------------------------------------------
Assets $ 6.0 $ 5.7 $ 0.3
Liabilities (0.5) (0.7) 0.2
End-User Derivative and Foreign
Exchange Contracts 0.3 1.4 (1.1)
Credit Card Receivables Securitization 0.4 (0.3) 0.7
----- ----- -----
Subtotal 6.2 6.1 0.1
Deposits with No Fixed Maturity(1) 2.7 2.3 0.4
----- ----- -----
TOTAL $ 8.9 $ 8.4 $ 0.5
- -----------------------------------------------------==========================
(1) Represents the estimated excess fair value related to the expected time
period until runoff of existing deposits with no fixed maturity on the
balance sheet at year-end, without assuming any regeneration of balances,
based on the estimated difference between the cost of funds on these
deposits and the cost of funds from alternative sources. The increase during
1996 was primarily due to a higher spread between the cost of funds on the
deposits and the cost of funds from alternative sources. Under applicable
requirements, excess fair values of these deposits are excluded from amounts
included under the Liabilities caption above and from the table on page 65,
in which the estimated fair value is shown as being equal to the carrying
value.
Additional detail is provided in the following tables. In accordance with
applicable requirements, the disclosures exclude leases, affiliate investments,
and pension and benefit obligations, and the disclosures also exclude the effect
of taxes and other expenses that would be incurred in a market transaction. In
addition, the tables exclude the values of nonfinancial assets and liabilities,
as well as a wide range of franchise, relationship, and intangible values, which
are integral to a full assessment of Citicorp's financial position and the value
of its net assets.
The data represents management's best estimates based on a range of
methodologies and assumptions.
Quoted market prices are used for most securities, for loans where
available, and for both trading and end-user derivative and foreign exchange
contracts, as well as for liabilities with quoted prices.
For performing loans where no quoted market prices are available,
contractual cash flows are discounted at quoted secondary market rates or
estimated market rates if available. Otherwise, current market origination rates
for loans with similar terms and risk characteristics are used. For loans with
doubt as to collectibility, expected cash flows are discounted using an
appropriate rate considering the time of collection and a premium for the
uncertainty of the flows. The value of collateral is also considered. For
liabilities without quoted market prices, market borrowing rates of interest are
used to discount contractual cash flows.
Fair values of credit card receivables securitization represent the
estimated excess (shortfall) in the fair value of the underlying receivables and
investor certificates, which is derived by Citicorp in the form of excess
servicing, and principally arises from fixed rates payable to certificate
holders.
Fair values vary from period to period based on changes in a wide range of
factors, including interest rates, credit quality, and market perceptions of
value, and as existing assets and liabilities run off and new items are
generated.
SIGNIFICANT ASSETS AND RELATED INSTRUMENTS
1996 1995
------------------------------------------
CARRYING ESTIMATED Carrying Estimated
In Billions of Dollars at Year-End VALUE FAIR VALUE Value Fair Value
- -------------------------------------------------------------------------------
Loans(1) $164.0 $169.9 $155.2 $160.8
Related Derivatives 0.3 0.5 0.2 0.7
Securities 28.2 28.2 20.1 20.1
Trading Account Assets 30.8 30.8 32.1 32.1
Other Financial Assets(2) 37.0 37.1 29.5 29.6
Credit Card Receivables
Securitization 0.1 0.5 0.2 (0.1)
Related Derivatives 0.5 0.4 0.4 0.7
- -------------------------------------------------------------------------------
(1) The carrying value of loans is net of the allowance for credit losses and
also excludes $5.1 billion of lease finance receivables in 1996 and 1995.
(2) Includes cash and due from banks, deposits at interest with banks, federal
funds sold and securities purchased under resale agreements, and customers'
acceptance liability, for which the carrying value is a reasonable estimate
of fair value, as well as financial instruments included in interest and
fees receivable and other assets on the balance sheet with carrying values
of $5.3 billion and $5.1 billion at December 31, 1996 and 1995,
respectively, and estimated fair values of $5.4 billion and $5.2 billion,
respectively.
The estimated fair values of loans reflect changes in credit status since the
loans were made, changes in interest rates in the case of fixed-rate loans, and
premium values at origination of certain loans.
The estimated fair values of Citicorp's loans, in the aggregate, exceeded
carrying values (reduced by the allowance for credit losses) by $5.9 billion at
year-end 1996 compared with $5.6 billion in 1995, an improvement of $0.3
billion. Within these totals, estimated fair values exceeded carrying values for
consumer loans net of the allowance by $2.9 billion, a decline of $0.1 billion
from year-end 1995, and for commercial loans by $3.0 billion, an improvement of
$0.4 billion. The improvement in estimated fair values in excess of carrying
values of commercial loans primarily reflects the effects of improving secondary
market prices on performing loans to countries that have successfully refinanced
their debt and of improved credit conditions on commercial real estate loans in
North America.
The fair value of credit card receivables securitization was $0.4 billion
greater than their carrying value at December 31, 1996, compared to December 31,
1995 when the fair value was lower than the carrying value by $0.3 billion. This
increase is due to the effects of a higher interest rate environment on the
fixed-rate investor certificates.
64
SIGNIFICANT LIABILITIES AND RELATED INSTRUMENTS
1996 1995(1)
------------------------------------------
CARRYING ESTIMATED Carrying Estimated
In Billions of Dollars at Year-End VALUE FAIR VALUE Value Fair Value
- -------------------------------------------------------------------------------
Non-Interest-Bearing Deposits $ 24.8 $ 24.8 $ 21.5 $ 21.5
Interest-Bearing Deposits 160.2 160.4 145.6 145.9
Related Derivatives (0.2) (0.3) (0.2) (0.4)
Trading Account Liabilities 22.0 22.0 18.3 18.3
Other Financial Liabilities(2) 28.2 28.2 25.9 25.9
Related Derivatives 0.1 0.1 -- --
Long-Term Debt 18.9 19.2 18.5 18.9
Related Derivatives (0.2) (0.3) (0.1) (0.5)
- -------------------------------------------------------------------------------
(1) Reclassified to conform to the 1996 presentation.
(2) Includes federal funds purchased and securities sold under repurchase
agreements and acceptances outstanding, for which the carrying value is a
reasonable estimate of fair value; and commercial paper, other funds
borrowed, and financial instruments included in accrued taxes and other
expense and other liabilities on the balance sheet, with carrying values of
$7.9 billion and $7.7 billion at December 31, 1996 and 1995, respectively,
and estimated fair values of $7.8 billion and $7.7 billion, respectively.
Under the applicable requirements, the estimated fair value of deposits
with no fixed maturity in the table above excludes the premium values
available in the market for such deposits, and the estimated value is
shown in the table as being equal to the carrying value. The estimated
fair value of interest-bearing deposits reflects changes in market rates
since the deposits were taken.
For all derivative and foreign exchange contracts in the tables above, the
gross difference between the carrying amount and fair value as of December 31,
1996 and 1995 was $1.0 billion and $2.0 billion, respectively, for contracts
whose fair value exceeds carrying value, and $0.7 billion and $0.6 billion,
respectively, for contracts whose carrying value exceeds fair value.
2. PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Generally, depreciation and amortization are computed on the
straight-line basis over the estimated useful life of the asset or the lease
term. Depreciation and amortization expense was $706 million in 1996, $636
million in 1995, and $571 million in 1994.
3. GOODWILL
Goodwill, which is included in other assets, represents the excess of
purchase price over the estimated fair value of net assets acquired,
accounted for under the purchase method of accounting. At December
31, 1996 and 1995, goodwill amounted to $278 million and $267
million, respectively. Goodwill is being amortized, primarily using the
straight-line method, over the periods estimated to be benefited. The
remaining period of amortization, on a weighted-average basis,
approximated 11 years as of December 31, 1996.
4. PREFERRED STOCK
In Millions of Dollars at Year-End Rate 1996 1995
- ------------------------------------------------------------------------------
PERPETUAL PREFERRED STOCK
Second Series, 2,195,636 Shares Adjustable $ 220 $ 220
Third Series, 834,867 Shares Adjustable 83 83
Series 8A and 8B, 1,250,000 Shares Graduated 125 125
Series 14, 700,000 Shares 9.08% 175 175
Series 16, 1,300,000 Shares 8.00% 325 325
Series 17, 1,400,000 Shares 7.50% 350 350
Series 18, 700,000 Shares Adjustable 175 175
Series 19, 400,000 Shares Adjustable 100 100
Series 20, 500,000 Shares 8.30% 125 125
Series 21, 600,000 Shares 8.50% 150 150
Series 22, 500,000 Shares 7.75% 125 125
Series 23, 250,000 Shares Fixed/Adjustable 125 125
------ ------
2,078 2,078
------ ------
CONVERTIBLE PREFERRED STOCK
Series 12, 5,900 Shares 11.00% -- 590
Series 13, 4,029 Shares 10.75% -- 403
------ ------
-- 993
------ ------
Total $2,078 $3,071
- ------------------------------------------------------------==================
In the first quarter of 1996, Citicorp converted $590 million of its
Convertible Preferred Stock, Series 12 into 36,875,000 shares of
common stock, and converted $403 million of its Convertible Preferred
Stock, Series 13 into 22,077,369 shares of common stock. In January
1997, Citicorp announced that it will call for redemption the Series 14
Preferred Stock in March 1997.
Total dividends declared on non-redeemable preferred stock were $162
million in 1996, $342 million in 1995, and $356 million in 1994.
Dividends are payable quarterly and, except for Series 16, 17, 20, and 21,
are cumulative.
Dividends on the Second and Third Series, as well as on Series 18 and 19,
are payable at rates determined quarterly by formulas based on interest rates of
certain U.S. Treasury obligations, subject to certain minimum and maximum rates
as specified in the certificates of designation. The weighted-average dividend
rates on the Second and Third Series, as well as Series 18 and 19 were 6.0%,
7.0%, 5.5%, and 5.5%, respectively, for 1996.
Dividends on Series 8A are payable at 7.55% through August 15, 1998 and
thereafter at the three-year treasury rate plus an amount initially equal to
2.25% and increasing to 2.75% for dividend periods ending from August 15, 2001
through August 15, 2004 and 3% thereafter. Series 8B dividends are payable at
8.25% through August 15, 1999 and thereafter at a rate equal to the five-year
treasury rate plus an amount initially equal to 2.25% and increasing to 3% for
all dividend periods ending after August 15, 2004. For both Series 8A and 8B,
dividend rates through August 15, 2004 cannot be less than 7% or greater than
14%, and thereafter cannot be less than 8% or greater than 16%.
Dividends on Series 23 are payable at 5.86% through February 15, 2006 and
thereafter at rates determined quarterly by a formula based on certain interest
rate indices, subject to a minimum rate of 6% and a maximum rate of 12%. The
rate of dividends on the Series 23 is subject to adjustment based upon the
applicable percentage of the dividends received deduction.
65
Citicorp may, at its option, redeem the perpetual preferred stock at stated
values plus accrued dividends, as follows: Second and Third Series, at any time;
Series 8A and 8B, on any of the dividend repricing dates through August 15,
2004, and from time to time after August 15, 2004; Series 14, on or after March
15, 1997; Series 16, on or after June 1, 1998; Series 17, on or after September
1, 1998; Series 18, on or after May 31, 1999; Series 19, on or after August 31,
1999; Series 20, on or after November 15, 1999; Series 21, on or after February
15, 2000; Series 22, on or after May 15, 2000; and Series 23, on or after
February 15, 2006. Under various circumstances, Citicorp may redeem certain
series of preferred stock at times other than as described above.
Authorized preferred stock (issuable as either nonredeemable or redeemable)
was 50 million shares at December 31, 1996 and 1995. Total shares of
nonredeemable preferred stock issued and outstanding were 10,630,503 and
10,640,432 at December 31, 1996 and 1995, respectively. At December 31, 1995,
80,000 shares of redeemable preferred stock were issued and outstanding,
amounting to $8 million, and included in long-term debt in the balance sheet.
Such amounts were redeemed in 1996.
5. COMMON STOCK
At December 31, 1996 and 1995, authorized common stock was 800 million
shares. Additionally, Citicorp has authorized, but not issued, 20 million shares
of Class B common stock with a par value of $1.00 and one vote per share.
Certain of Citicorp's employee benefit plans permit options or
subscriptions to purchase, or elections to invest in, either unrestricted common
shares or book value shares of Citicorp. Subsequent to December 31, 1987, no
further options are granted, subscription agreements entered into, or new
investment elections permitted for the purchase of book value shares.
Outstanding shares of common stock at December 31, 1996 and 1995 include
0.9 million and 1.0 million, respectively, of book value shares issued in
connection with certain employee benefit plans. Under the terms of the plans,
book value shares sold back to Citicorp are settled in unrestricted common
shares.
Citicorp's Dividend Reinvestment and Common Stock Purchase Plan allows
stockholders of record, without payment of brokerage fees, commissions, or
service charges, to reinvest all or part of any common stock dividends in
additional shares of common stock and make optional cash purchases of such
shares.
At December 31, 1996, shares were reserved for issuance as follows:
In Millions of Shares at Year-End 1996
- ------------------------------------------------------------------------------
Savings Incentive Plan(1)(2) 3.7
1983 Stock Option Plan(3) 0.6
1994 Stock Purchase Plan(1) 15.8
Stock Incentive Plan(1) 45.0
Dividend Reinvestment and Common Stock Purchase Plan(1)(2) 10.4
Directors' Deferred Compensation Plan 0.1
Executive Incentive Compensation Plan(3)(4) 0.6
- ------------------------------------------------------------------------------
(1) Shares delivered may also be sourced from treasury shares.
(2) Shares delivered may also be purchased in the open market.
(3) Amounts shown represent the maximum number of shares assuming issuance of
shares of unrestricted common stock. If book value shares are issued under
tandem grants and awards, the maximum number of shares would be 0.7 million
under the 1983 Stock Option Plan and 0.4 million shares under the Executive
Incentive Compensation Plan.
(4) Shares issued exclusively from treasury shares.
During 1996 and 1995, Citicorp entered into a series of forward purchase
agreements on its common stock. These agreements are settled on a net basis in
shares of Citicorp common stock or in cash at Citicorp's election. To the extent
that the market price of Citicorp common stock on a settlement date is higher
(lower) than the forward purchase price, the net differential is received (paid)
by Citicorp. As of December 31, 1996, agreements were in place covering
approximately $900 million of Citicorp common stock (8.8 million shares) which
had forward prices averaging $103.32 per share. If these agreements were settled
based on the December 31, 1996 market price of Citicorp's common stock ($103.00
per share), Citicorp would be obligated to deliver approximately 27,000 shares.
During 1996, settlements resulted in Citicorp receiving 4.7 million shares,
which were recorded as treasury shares. During 1995, a settlement resulted in
Citicorp paying $6 million, which was recorded as a reduction of surplus.
6. REGULATORY CAPITAL
CITICORP CITIBANK, N.A.
Minimum ------------------------------------------
In Millions of Dollars at Year-End Required(1) 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------
Tier 1 Capital $19,796 $18,915 $15,511 $14,758
Total Capital(2) 28,870 27,725 22,566 21,701
Tier 1 Capital Ratio 4.00% 8.39% 8.41% 8.32% 8.32%
Total Capital Ratio(2) 8.00 12.23 12.33 12.11 12.24
Leverage Ratio(3) 3.00+ 7.42 7.45 6.63 6.65
- --------------------------------------------------------------------------------------------
(1) As set forth in guidelines issued by the U.S. federal bank regulators.
(2) Total capital includes Tier 1 and Tier 2.
(3) Tier 1 capital divided by adjusted average assets.
Citicorp is subject to risk-based capital and leverage guidelines issued
by the Board of Governors of the Federal Reserve System ("FRB"), and
its U.S. insured depository institution subsidiaries, including Citibank,
N.A., are subject to similar guidelines issued by their respective primary
regulators. These guidelines are used to evaluate capital adequacy and
include the required minimums shown above.
To be "well capitalized" under federal bank regulatory agency definitions,
a depository institution must have a Tier 1 ratio of at least 6%, a combined
Tier 1 and Tier 2 ratio of at least 10%, and a leverage ratio of at least 5% and
not be subject to a directive, order, or written agreement to meet and maintain
specific capital levels. The regulatory agencies are required by law to take
specific prompt actions with respect to institutions that do not meet minimum
capital standards. As of December 31, 1996 and 1995, all of Citicorp's U.S.
insured subsidiary depository institutions were "well capitalized."
7. FEES AND COMMISSIONS
Trust, agency, and custodial fees included in fees and commissions were
$1.1 billion in 1996, $983 million in 1995, and $946 million in 1994.
66
8. EMPLOYEE BENEFITS
PENSION AND POSTRETIREMENT BENEFIT PLANS
Citicorp has several non-contributory defined benefit pension plans
covering substantially all U.S. employees. Retirement benefits for the
U.S. plans are based on years of credited service, the highest average
compensation (as defined), and the primary social security benefit. While
the qualified U.S. plans are adequately funded, it is Citicorp's policy to
fund these plans to the extent contributions are tax deductible. Non-
qualified U.S. plans are not funded because contributions to these plans
are not tax deductible.
Citicorp has various defined benefit pension and termination indemnity
plans covering employees outside the United States. The benefit formulas and
funding strategies vary reflecting local practices and legal requirements.
Citicorp offers postretirement health care and life insurance benefits to
all eligible U.S. retired employees. U.S. retirees share in the cost of their
health care benefits through copayments, service-related contributions and
salary-related deductibles. Retiree life insurance benefits are
non-contributory. It is Citicorp's policy to fund retiree health care and life
insurance benefits to the extent such contributions are tax deductible. Retiree
health care and life insurance benefits are also provided to certain employees
outside the United States. Effective January 1, 1995, Citicorp adopted SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other than Pensions,"
for such benefits outside the United States, as provided by SFAS No. 106.
The following tables summarize the components of net benefit expense
recognized in the consolidated statement of income and the funded status and
amounts recognized in the consolidated balance sheet for U.S. plans and
significant plans outside the U.S.
NET BENEFIT EXPENSE
POSTRETIREMENT
PENSION PLANS BENEFIT PLANS(1)
----------------------------------------- -------------------
U.S. PLANS PLANS OUTSIDE U.S. U.S. PLANS
--------------------- ------------------ -------------------
In Millions of Dollars 1996 1995 1994 1996 1995 1994 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
Benefits Earned During the Year $ 123 $ 98 $ 108 $ 60 $ 56 $ 47 $ 11 $ 8 $ 9
Interest Cost on Benefit Obligation 192 165 146 76 68 54 32 32 30
Actual Return on Plan Assets (395) (498) 15 (65) (66) (8) (13) (13) --
Net Deferral and Amortization 196 301 (200) 10 19 (33) 7 8 (4)
Amortization of Transition Obligation (Asset)(2)(3) (20) (20) (20) 7 7 6 20 20 21
----- ----- ----- ---- ---- ---- ---- ---- ----
NET BENEFIT EXPENSE $ 96 $ 46 $ 49 $ 88 $ 84 $ 66 $ 57 $ 55 $ 56
- -----------------------------------------------------================================================================
(1) For plans outside the U.S., net postretirement benefit expense totaled $8
million in 1996 and $6 million in 1995.
(2) U.S. pension transition asset is being amortized over a 14-year period with
3 years remaining at December 31, 1996.
(3) U.S. postretirement transition obligation is being amortized over a period
up to 20 years with 16 years remaining at December 31, 1996.
PREPAID BENEFIT COST (BENEFIT LIABILITY)
PENSION PLANS
-----------------------------------------------------------
QUALIFIED NON-QUALIFIED FUNDED PLANS
U.S. PLANS U.S. PLANS OUTSIDE U.S.
------------------- --------------- ---------------
In Millions of Dollars 1996 1995 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
Plan Assets at Fair Value(2) $ 3,118 $ 2,673 $ -- $ -- $ 763 $ 656
Benefit Obligation 2,567 2,438 248 234 814 710
------- ------- ----- ----- ----- -----
Plan Assets in Excess of (Less Than) Benefit Obligation 551 235 (248) (234) (51) (54)
Unrecognized Prior Service Cost 73 80 41 35 13 14
Unrecognized Net Actuarial Loss (Gain) 27 306 42 62 39 44
Unamortized Transition Obligation (Asset) (58) (79) 6 7 46 50
Adjustment to Recognize Minimum Liability -- -- (33) (34) (1) --
------- ------- ----- ----- ----- -----
PREPAID BENEFIT COST (BENEFIT LIABILITY) $ 593 $ 542 $(192) $(164) $ 46 $ 54
- -----------------------------------------------------------===========================================================
Projected Pension Benefit Obligation Includes:
Accumulated Benefit Obligation $ 2,086 $ 1,943 $ 192 $ 149 $ 613 $ 531
Vested Benefit Obligation 1,830 1,695 153 129 550 448
Accumulated Postretirement Benefit Obligation to:
Retirees
Employees Eligible for Full Benefits
Other Employees
- ----------------------------------------------------------------------------------------------------------------------
POSTRETIREMENT
PENSION PLANS BENEFIT PLANS(1)
--------------- ---------------
OTHER PLANS ---------------
OUTSIDE U.S. U.S. PLANS
--------------- ---------------
In Millions of Dollars 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------
Plan Assets at Fair Value(2) $ -- $ -- $ 119 $ 70
Benefit Obligation 311 313 459 458
----- ----- ----- -----
Plan Assets in Excess of (Less Than) Benefit Obligation (311) (313) (340) (388)
Unrecognized Prior Service Cost -- -- (7) (2)
Unrecognized Net Actuarial Loss (Gain) (8) 7 41 59
Unamortized Transition Obligation (Asset) 31 35 277 297
Adjustment to Recognize Minimum Liability (7) (14) -- --
----- ----- ----- -----
PREPAID BENEFIT COST (BENEFIT LIABILITY) $(295) $(285) $ (29) $ (34)
- -----------------------------------------------------------===================================
Projected Pension Benefit Obligation Includes:
Accumulated Benefit Obligation $ 249 $ 238
Vested Benefit Obligation 224 208
Accumulated Postretirement Benefit Obligation to:
Retirees $ 309 $ 310
Employees Eligible for Full Benefits 23 30
Other Employees 127 118
- ----------------------------------------------------------------------------------------------
(1) For plans outside the U.S., the accumulated postretirement benefit
obligation was $54 million and $31 million and the postretirement benefit
liability was $4 million and $2 million at December 31, 1996 and 1995
respectively.
(2) For U.S. plans, plan assets are primarily listed stocks, commingled funds,
and fixed-income securities.
67
The expected long-term rates of return on assets used in determining pension and
postretirement expense are shown below.
1996 1995 1994
- -----------------------------------------------------------------------------
Rate of Return on Assets
U.S. Plans 9.0% 8.75% 8.75%
Plans Outside the U.S.--
Range(1) 6.0% to 13.0% 6.0% to 13.0% 6.0% to 12.0%
- -----------------------------------------------------------------------------
(1) Excluding highly inflationary countries.
The principal assumptions used in determining pension and postretirement
benefit obligations are shown below.
At Year-End 1996 1995
- --------------------------------------------------------------------------------
Discount Rate
U.S. Plans 7.5% 7.25%
Plans Outside the U.S.--Range(1) 4.0% to 12.0% 4.5% to 12.0%
Future Compensation Increase Rate
U.S. Plans 5.0% 5.0%
Plans Outside the U.S.--Range(1) 1.5% to 10.0% 2.0% to 10.0%
Health Care Cost Increase Rate--U.S. Plans
Following Year:
For Retirees Younger Than Age 65 9.0% 12%
For Retirees Age 65 and Older 9.0% 9%
Decreasing to the Year 2001 to:
For Retirees Younger Than Age 65 5.0% 6%
For Retirees Age 65 and Older 5.0% 5%
- --------------------------------------------------------------------------------
(1) Excluding highly inflationary countries.
As an indicator of sensitivity, increasing the assumed health care cost
trend rate by 1% in each year would have increased the accumulated
postretirement benefit obligation as of December 31, 1996 by $19 million and the
aggregate of the benefits earned and interest components of 1996 net
postretirement benefit expense by $1 million.
POSTEMPLOYMENT DISABILITY AND SIMILAR BENEFIT PLANS
Effective January 1, 1994, Citicorp adopted SFAS No. 112, under which Citicorp
recognizes the estimated cost of disability and similar benefits provided to
former or inactive employees when an event occurs indicating payment of benefits
is probable. These costs were previously recognized as paid or funded. The
adoption of the new standard as of January 1, 1994 resulted in a pretax charge
of $95 million ($56 million after tax), which is reported in the consolidated
statement of income as the cumulative effect of an accounting change.
SAVINGS INCENTIVE PLAN
Under the Savings Incentive Plan, eligible employees receive awards
equal to 3% of their covered salary. Employees have the option of
receiving their award in cash or deferring some or all of it in various
investment funds. Citicorp grants an additional award equal to the
amount elected to be deferred by the employee. Several investment
options are available, including Citicorp common stock. Shares of
Citicorp common stock delivered under the Savings Incentive Plan may
be sourced from authorized but unissued shares, treasury shares, or
purchased in the open market. The expense associated with the plan
amounted to $95 million in 1996, $92 million in 1995, and $89 million
in 1994.
STOCK INCENTIVE PLAN
The 1988 Stock Incentive Plan provides for the issuance of options to
purchase shares of Citicorp common stock or shares of Class B common
stock at prices not less than 50% of the market value at the date of
grant, incentive stock options, stock appreciation rights, restricted
stock, or performance unit awards, any of which may be granted singly,
in combination, or in tandem. Shares of Citicorp common stock
delivered under the 1988 Plan may be sourced from authorized but
unissued shares or treasury shares.
Shares of restricted stock have been awarded to key executives contingent
upon their continued employment over periods of up to 11 years as summarized in
the following table:
Dollars in Millions 1996 1995 1994
- --------------------------------------------------------------------------------
Shares Granted 137,000 125,000 225,000
Aggregate Market Value at Award Date $10 $6 $9
Expense Recognized for All Awards 4 4 5
- --------------------------------------------------------------------------------
The value of the restricted shares at the date of grant is recorded as a
reduction of surplus and amortized to expense over the restriction period.
Under the Stock Incentive Plan and two predecessor plans, options have been
granted to key employees for terms of up to 10 years to purchase common stock at
not less than the fair market value of the shares at the date of grant.
Generally, 50% of the options granted prior to 1995 are exercisable beginning on
the first anniversary and 50% beginning on the second anniversary of the date of
grant, and, generally, 50% of the options granted in 1995 and thereafter are
exercisable beginning on the third anniversary and 50% beginning on the fourth
anniversary of the date of grant.
During 1995 and 1996, Citicorp granted to a group of key employees
five-year performance-based stock options to purchase Citicorp common stock at
prices ranging from $64.875 to $70.125, reflecting the market price of the stock
on the respective grant dates. One-half of these options vested when Citicorp's
common stock price reached $100 per share, and the balance vest upon such price
reaching $115 per share, provided that the price remains at or above the
indicated price level for twenty of thirty consecutive trading days. A total of
2,427,500 of the performance-based options vested during 1996 as Citicorp's
stock price attained the vesting target of $100, and as of December 31, 1996,
2,423,750 of the performance-based options granted in 1995 and 1996 are
unvested. The 1995 and 1996 grants expire on various dates from August 2000
through January 2001.
Also during 1995, a total of 6,597,500 of the performance-based options
granted in 1993 and 1994 vested as Citicorp's stock price attained the vesting
targets of $50, $55, and $60. The 1993 and 1994 grants expire on July 20, 1998.
Citicorp measures the cost of performance-based options as the difference
between the exercise price and market price required for vesting and recognizes
this expense over the period to the estimated vesting dates and in full for
options that have vested, by a charge to
68
expense with an offsetting increase in common stockholders' equity. The
recognition of costs related to performance-based options totaled $113 million
in 1996, $89 million in 1995, and $52 million in 1994. All of the expense
related to vested grants has been recognized.
Effective January 1, 1996, Citicorp adopted the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation." If the alternative
accounting-related provisions of SFAS No. 123 had been adopted as of the
beginning of 1995, the effect on 1995 and 1996 income before taxes and net
income would have been immaterial, and the effect is not expected to be material
in future years.
Changes in options and shares under option are summarized in the following
table:
1996 1995 1994
- --------------------------------------------------------------------------------
Granted 5,801,955 7,409,750 8,003,970
Average Option Price $70.10 $58.14 $39.88
Exercised 12,090,773 9,930,333 6,681,712
Average Option Price $29.06 $26.68 $23.26
Expired 16,200 25,950 5,500
Average Option Price $29.63 $24.15 $15.38
Terminated 868,630 964,867 1,032,969
Average Option Price $50.89 $32.53 $25.85
- --------------------------------------------------------------------------------
At Year-End:
Shares Under Option(1) 30,716,618 37,890,266
Average Option Price $43.50 $34.98
Exercisable 20,717,293 28,677,293
Granted, Not Yet Exercisable 9,999,325 9,212,973
Available for Grant(2) 13,027,562 18,124,387
- ----------------------------------------------------------------
(1) Tandem options, granted prior to 1988, giving the employee the alternative
to purchase either unrestricted common stock at not less than the market
value at the date of grant or a proportionate number of book value shares
at not less than the book value per share at the date of grant, are
included on the basis that represents the economically preferable
alternative to the employee. This basis may change as the market value and
book value of the common stock change. Shares Under Option at December 31,
1995 has been reduced by 624,021 shares as a result of such changes.
(2) Shares authorized but not issued that are available for the granting of
stock options or other forms of stock-related awards. Additional shares may
become available for grant to the extent that presently outstanding options
under a predecessor plan terminate or expire unexercised.
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1996:
OUTSTANDING EXERCISABLE
------------------------------- ------------------------
AVERAGE AVERAGE
OPTION AVERAGE OPTION OPTION
PRICE RANGE SHARES LIFE(1) PRICE SHARES PRICE
- -------------------------------------------------------------------------------
$9-1/4-$25 6,324,834 4.4 $21.12 6,324,834 $21.12
$25-1/4-$47-1/8 14,017,559 5.8 $35.63 12,102,809 $34.72
$51-3/4-$72-3/4 8,877,900 4.4 $65.59 2,285,650 $65.25
$79-1/8-$100-1/4 1,496,325 9.3 $80.75 4,000 $81.25
---------- ----------
TOTAL 30,716,618 5.3 $43.50 20,717,293 $33.94
- -------------------============================================================
(1) Weighted-average contractual life remaining in years.
STOCK PURCHASE PLAN
The 1994 Stock Purchase Plan provides for two types of offerings: fixed-price
offerings and periodic purchase offerings. Under fixed-price offerings all
eligible employees are permitted to enter into subscription agreements to
purchase shares at the fair market value on the date of the agreements. Such
shares can be purchased from time to time through the expiration date. There
have been no periodic purchase offerings under the Plan. Shares of Citicorp
common stock delivered under the Stock Purchase Plan may be sourced from
authorized but unissued shares, treasury shares or purchased in the open market.
Following is the share activity under the 1994 fixed-price offering for the
purchase of shares at $39.8125 per share, which expired September 27, 1996:
1996 1995
- --------------------------------------------------------------------------------
Shares Purchased 5,477,290 2,766,823
Cancelled or Terminated 97,716 388,103
Outstanding Agreements at Year-End -- 5,575,006
- --------------------------------------------------------------------------------
ANNUAL INCENTIVE AND PERFORMANCE PLANS
The purpose of the 1994 Citicorp Annual Incentive Plan is to attract, retain,
and motivate executives to promote the profitability and growth of Citicorp and
to permit a federal income tax deduction for annual awards granted to covered
employees. Currently covered employees include the Chairman and next four most
highly paid executives. Under the Plan, awards can be granted to covered
employees in cash, stock or any other form of consideration in either one
installment or on a deferred basis. Shares of Citicorp common stock delivered
under the Plan may be sourced from authorized but unissued shares or treasury
shares. The aggregate awards were approximately $4 million in 1996 and $6
million for both 1995 and 1994.
Under the Citicorp Annual Performance Plan, cash awards may be granted to
key employees who have a significant impact on the success of Citicorp. Awards
may be paid either in one installment or on a deferred basis. The aggregate
awards were approximately $7 million in 1996, $9 million for 1995, and $10
million for 1994.
Under the Executive Incentive Compensation Plan, awards in cash or stock
may be made to key employees, payable at the election of the participants, in
one installment or on a deferred basis. Shares of Citicorp common stock
delivered under the Plan may be sourced from authorized but unissued shares or
treasury shares. No awards have been made since 1989.
DEFERRED COMPENSATION PLAN
Under the Deferred Compensation Plan, adopted in 1995, participants must defer
25% of their variable compensation awards into mandatory deferral accounts whose
return equals the return on Citicorp common stock. Beginning with the 1996
awards, participants are allowed to defer from 10% to 85% of the remainder of
their variable compensation awards into voluntary deferral accounts, which may
be allocated among a variety of investments, including an account whose return
equals the return on Citicorp common stock. The amounts credited to the
mandatory deferral accounts generally are payable to the participant in cash
five years after they are credited. However, participants may elect to postpone
cash distribution of the amounts in the mandatory deferral account by having
such amount credited to a voluntary deferral account.
69
9. INCOME TAXES
In Millions of Dollars 1996 1995 1994
- -------------------------------------------------------------------------------
Provision for Income Taxes(1) $ 2,285 $ 2,121 $ 1,189
Income Tax Expense (Benefit) Reported in
Stockholders' Equity related to:
Foreign Currency Translation 8 (24) (15)
Securities Available for Sale 307 (76) 136
Employee Stock Plans (244) (51) (41)
------- ------- -------
2,356 1,970 1,269
Tax Benefit Attributable to Cumulative
Effect of Accounting Change -- -- (39)
------- ------- -------
TOTAL INCOME TAXES $ 2,356 $ 1,970 $ 1,230
- --------------------------------------------------=============================
(1) Includes tax effect of securities transactions amounting to a provision of
$74 million in 1996, $46 million in 1995, and $70 million in 1994.
COMPONENTS OF TOTAL INCOME TAXES
In Millions of Dollars 1996 1995 1994
- -------------------------------------------------------------------------------
Current U.S.
Federal $ 642 $ 819 $ 367
State and Local 176 185 145
------- ------- -------
818 1,004 512
------- ------- -------
Deferred U.S.
Federal 396 (45) (298)
State and Local 29 (25) (1)
------- ------- -------
425 (70) (299)
------- ------- -------
Total U.S. 1,243 934 213
Foreign (substantially current) 1,113 1,036 1,056
------- ------- -------
2,356 1,970 1,269
------- ------- -------
Tax Benefit Attributable to Cumulative
Effect of Accounting Change -- -- (39)
------- ------- -------
TOTAL INCOME TAXES $ 2,356 $ 1,970 $ 1,230
- ------------------------------------------------===============================
As a U.S. corporation, Citicorp is subject to U.S. taxation currently on
all of its foreign pretax earnings if earned by a foreign branch or when
earnings are effectively repatriated if earned by a foreign subsidiary or
affiliate. In addition, certain of Citicorp's U.S. income is subject to
foreign income tax where the payor of such income is domiciled outside
the United States. Foreign pretax earnings approximated $4.0 billion in
1996 and $3.6 billion in 1995 and 1994.
The tax effects of significant temporary differences are presented in the
accompanying table. The net deferred tax asset is included in Citicorp's
consolidated balance sheet in other assets and represents the sum of the
temporary difference components of those tax jurisdictions with net deductible
amounts or tax carryforwards in future years. The net deferred tax liability is
included in accrued taxes and other expenses and represents the sum of the
temporary difference components of those tax jurisdictions with net taxable
amounts in future years.
COMPONENTS OF DEFERRED TAX BALANCES
In Millions of Dollars at Year-End 1996 1995
- -------------------------------------------------------------------------------
NET DEFERRED TAX ASSET
Tax Effects of Deductible Temporary Differences
and Carryforwards:
Credit Loss Deduction $ 2,127 $ 2,056
Interest Related Items 470 495
Unremitted Foreign Income 700 856
Foreign and State Loss Carryforwards 280 353
------- -------
3,577 3,760
------- -------
Tax Effects of Taxable Temporary Differences:
Lease Financing 709 702
Securities and Derivatives Transactions 642 657
Venture Capital 232 214
Mortgage Pass-Through Sales 87 95
Other(1) 217 30
------- -------
1,887 1,698
------- -------
Net Potential Deferred Tax Assets 1,690 2,062
Valuation Allowance (402) (468)
------- -------
NET DEFERRED TAX ASSET $ 1,288 $ 1,594
- -----------------------------------------------------------====================
NET DEFERRED TAX LIABILITY(2) $ 501 $ 546
- -------------------------------------------------------------------------------
(1) Includes deductible temporary differences related to depreciation, prepaid
items, and other less significant items.
(2) Includes credit losses ($153 million in 1996 and $198 million in 1995),
leasing ($111 million in 1996 and $128 million in 1995), and other less
significant items.
The 1996 net change in the valuation allowance related to deferred tax
assets was a decrease of $66 million primarily relating to an improvement in
current earnings in certain state and local jurisdictions. These amounts are
included in the $425 million U.S. deferred expense component of total income
taxes. The remaining valuation allowance of $402 million at December 31, 1996 is
primarily reserved for specific U.S. federal, state and local, and foreign tax
carryforwards or tax law restrictions on benefit recognition in these
jurisdictions. Management believes that the realization of the recognized net
deferred tax asset of $1,288 million is more likely than not, based on existing
carryback ability, available tax planning strategies, and expectations as to
future taxable income.
The following table reconciles the statutory U.S. federal tax rate to the
effective tax rate on income before cumulative effects of accounting changes:
1996 1995 1994
- -------------------------------------------------------------------------------
Statutory U.S. Federal Tax Rate 35.0% 35.0% 35.0%
Increase (Reduction) in Taxes from:
State and Local Income Taxes, Net
of U.S. Federal Income Tax Benefit 2.8 2.9 2.5
Valuation Allowance Change Related
to Current Year (0.9) -- (10.4)
Taxes on Earnings Outside the U.S. 0.5 1.0 1.9
Other 0.2 (0.2) --
---- ---- ----
37.6 38.7 29.0
---- ---- ----
Valuation Allowance Change Related to
Future Years -- (0.7) (3.2)
---- ---- ----
EFFECTIVE TAX RATE 37.6% 38.0% 25.8%
- ------------------------------------------------------=========================
70
10. EARNINGS PER SHARE
ON COMMON AND COMMON
EQUIVALENT SHARES ASSUMING FULL DILUTION
---------------------------- ----------------------------
In Millions Except Per Share Amounts 1996 1995(1) 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
EARNINGS
Income Applicable to Common Stock
Before Cumulative Effect of Accounting Change(2) $3,631 $3,126 $3,066 $3,631 $3,126 $3,066
Dividends on Conversion Preferred Stock, Series 15 -- 62 93 -- 62 93
Dividends on Convertible Preferred Stock -- -- -- 5 127 136
------ ------ ------ ------ ------ ------
Income Applicable to Common Stock Before
Cumulative Effect of Accounting Change, Adjusted 3,631 3,188 3,159 3,636 3,315 3,295
Cumulative Effect of Accounting Change -- -- (56) -- -- (56)
------ ------ ------ ------ ------ ------
TOTAL $3,631 $3,188 $3,103 $3,636 $3,315 $3,239
- ---------------------------------------------------------==============================================================
SHARES
Weighted-Average Common Shares Outstanding(3)(4) 469.6 411.5 391.2 469.6 411.5 391.2
Conversion Preferred Stock, Series 15 -- 16.8 39.9 -- 16.8 39.9
Other Common Equivalent Shares(5) 14.4 13.8 10.6 15.2 15.1 10.9
Convertible Preferred Stock -- -- -- 5.2 68.1 73.1
------ ------ ------ ------ ------ ------
TOTAL 484.0 442.1 441.7 490.0 511.5 515.1
- ---------------------------------------------------------==============================================================
EARNINGS PER SHARE
Income Before Cumulative Effect of Accounting Change $ 7.50 $ 7.21 $ 7.15 $ 7.42 $ 6.48 $ 6.40
NET INCOME 7.50 7.21 7.03 7.42 6.48 6.29
- ---------------------------------------------------------==============================================================
(1) Assuming the Convertible Preferred Stock Series 12 and 13 had been
converted as of January 1, 1995, earnings per share on common and common
equivalent shares would have approximated earnings per share assuming full
dilution for 1995.
(2) For purposes of calculating earnings per share, income applicable to common
stock is reduced for dividends on preferred stock.
(3) Includes book value shares of 0.9 million in 1996, 1.0 million in 1995, and
1.1 million in 1994.
(4) Average shares in 1996 and 1995 reflected 18.3 million and 5.8 million,
respectively, shares repurchased under the stock repurchase program.
(5) Includes the dilutive effect of stock options and stock purchase agreements
computed using the treasury stock method and shares issuable under deferred
stock awards. Number of shares also includes less than 1 million in 1995,
and approximately 2 million in 1994 for book value shares issuable under
stock option and Executive Incentive Compensation plans; use of the
two-class method had no effect on the calculation for any year.
11. BUSINESS AND GEOGRAPHIC DISTRIBUTION OF REVENUE, INCOME (LOSS), AND AVERAGE
ASSETS
Citicorp attributes total revenue, income (loss) before taxes and the
cumulative effect of accounting change, net income (loss), and average
total assets to operations based on the domicile of the customer. U.S.
possessions are included in their respective geographic areas.
Because of the integration of global activities, it is not practicable to
make a precise separation, and various assumptions must be made in arriving at
allocations and adjustments used in presenting this data.
The principal allocations and adjustments are: (1) allocation of expenses
incurred by one area on behalf of another, including administrative costs, based
on methods intended to reflect services provided; (2) allocation of tax expenses
and benefits; (3) allocation of the difference between actual net credit losses
and the provision for credit losses; and (4) allocation of other corporate
items, including corporate staff costs, and long-term debt and other funding
costs, based on each area's percentage of total average assets.
The entire allowance for credit losses is available to absorb all probable
credit losses inherent in the portfolio. For the purpose of calculating the
accompanying geographic data, the amounts attributable to operations outside the
U.S. are based upon year-end allowance amounts of $1,807 million for 1996,
$1,809 million for 1995, and $1,800 million for 1994, and credit loss provision
amounts of $727 million for 1996, $737 million for 1995, and $561 million for
1994.
71
BUSINESS AND GEOGRAPHIC DISTRIBUTION OF REVENUE, INCOME (LOSS), AND AVERAGE
ASSETS
INCOME (LOSS) BEFORE TAXES
AND CUMULATIVE EFFECT
TOTAL REVENUE(1) OF ACCOUNTING CHANGE
$ MILLIONS $ MILLIONS
------------------------------- -----------------------------------
1996 1995(2) 1994(2) 1996 1995(2) 1994(2)
- ----------------------------------------------------------------------------------------------------------
BUSINESS DISTRIBUTION
Consumer
Citibanking $ 5,764 $ 5,412 $ 4,862 $1,040 $ 866 $ 609
Cards 5,289 5,080 4,630 1,526 1,750 1,717
Private Bank 1,045 929 968 345 271 284
Corporate Banking
Emerging Markets 3,433 2,886 2,519 1,796 1,516 1,404
Global Relationship Banking 3,756 3,639 3,193 1,004 844 408
Corporate Items 909 732 576 362 338 189
------- ------- ------- ------ ------ -------
20,196 18,678 16,748 6,073 5,585 4,611
Cumulative Effect of
Accounting Change(3) -- -- -- -- -- --
------- ------- ------- ------ ------ -------
TOTAL $20,196 $18,678 $16,748 $6,073 $5,585 $ 4,611
- -----------------------------------=======================================================================
GEOGRAPHIC DISTRIBUTION
United States $ 9,344 $ 8,843 $ 8,381 $2,726(4) $2,500(4) $ 1,946(4)
Western Europe 3,365 3,352 2,587 577 502 328
Other(5) 586 564 465 76 27 (81)
------- ------- ------- ------ ------ -------
Total Developed Markets 13,295 12,759 11,433 3,379 3,029 2,193
------- ------- ------- ------ ------ -------
Latin America(6) 2,743 2,493 2,297 917 937 1,003
Asia Pacific 3,286 2,738 2,386 1,414 1,266 1,025
Other(7) 872 688 632 363 353 390
------- ------- ------- ------ ------ -------
Total Emerging Markets 6,901 5,919 5,315 2,694 2,556 2,418
------- ------- ------- ------ ------ -------
TOTAL $20,196 $18,678 $16,748 $6,073 $5,585 $ 4,611
- -----------------------------------=======================================================================
NET INCOME (LOSS) AVERAGE ASSETS
$ MILLIONS $ BILLIONS
--------------------------------- ----------------------
1996 1995(2) 1994(2) 1996 1995(2) 1994(2)
- ------------------------------------------------------------------------------------------------
BUSINESS DISTRIBUTION
Consumer
Citibanking $ 725 $ 571 $ 421 $ 81 $ 79 $ 72
Cards 1,039 1,172 1,124 29 26 19
Private Bank 279 225 238 16 15 15
Corporate Banking
Emerging Markets 1,465 1,148 1,037 59 50 46
Global Relationship Banking 714 630 271 80 94 104
Corporate Items (434) (282) 331 5 5 5
------- ------- ------- ---- ---- ----
3,788 3,464 3,422 270 269 261
Cumulative Effect of
Accounting Change(3) -- -- (56) -- -- --
------- ------- ------- ---- ---- ----
TOTAL $ 3,788 $ 3,464 $ 3,366 $270 $269 $261
- -----------------------------------=============================================================
GEOGRAPHIC DISTRIBUTION
United States $ 1,642 $ 1,477 $ 1,709 $109 $114 $118
Western Europe 321 298 159 53 54 51
Other(5) 41 22 (44) 13 15 14
------- ------- ------- ---- ---- ----
Total Developed Markets 2,004 1,797 1,824 175 183 183
------- ------- ------- ---- ---- ----
Latin America(6) 707 653 694 28 30 27
Asia Pacific 866 796 618 54 46 42
Other(7) 211 218 230 13 10 9
------- ------- ------- ---- ---- ----
Total Emerging Markets 1,784 1,667 1,542 95 86 78
------- ------- ------- ---- ---- ----
TOTAL $ 3,788 $ 3,464 $ 3,366 $270 $269 $261
- -----------------------------------=============================================================
(1) Includes net interest revenue and fees, commissions and other revenue.
(2) Reclassified to conform to the 1996 presentation.
(3) Represents cumulative effect of adopting SFAS No. 112 as of January 1,
1994.
(4) Includes approximately $62 million in 1996, $58 million in 1995, and $41
million in 1994 of tax-exempt income, reducing the federal income tax
provision.
(5) Primarily Japan and Canada.
(6) Primarily Mexico, the Caribbean, Central and South America.
(7) Primarily Central and Eastern Europe, Middle East, and Africa.
12. COMMITMENTS AND CONTINGENT LIABILITIES
Citicorp and its subsidiaries are obligated under a number of non-
cancelable leases for premises and equipment. Minimum rental
commitments on non-cancelable leases were in the aggregate $2.3
billion, and for each of the five years subsequent to December 31, 1996,
were $387 million (1997), $348 million (1998), $320 million (1999),
$254 million (2000), and $208 million (2001). The minimum rental
commitments do not include minimum sublease rentals under non-
cancelable subleases of $165 million. Most of the leases have renewal or
purchase options and escalation clauses. Rental expense was $585
million in 1996, excluding $79 million of sublease rental income, $547
million in 1995, excluding $74 million of sublease rental income, and
$548 million in 1994, excluding $68 million of sublease rental income.
At December 31, 1996, certain investment securities, trading account
assets, and other assets with a carrying value of $11.1 billion were pledged as
collateral for borrowings, to secure public and trust deposits, and for other
purposes.
Various legal proceedings are pending against Citicorp and its
subsidiaries. Citicorp management considers that the aggregate liability, if
any, resulting from these proceedings will not be material to Citicorp's
financial position or results of operations.
13. FUTURE IMPACT OF NEW ACCOUNTING STANDARDS
In June 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." The statement
provides standards for distinguishing transfers of financial assets that are
sales from those that are secured borrowings, and provides guidance on the
recognition and measurement of asset servicing contracts and on debt
extinguishments. As issued, SFAS No. 125 is effective for transactions occurring
after December 31, 1996. However, as a result of an amendment to SFAS No. 125
issued by the FASB in December 1996, certain provisions of SFAS No. 125 are
deferred for an additional year. Adoption of the new accounting standard is not
expected to have a material impact on Citicorp.
72
14. STOCKHOLDER'S EQUITY OF CITIBANK, N.A.
CHANGES IN STOCKHOLDER'S EQUITY
In Millions of Dollars 1996 1995 1994
- --------------------------------------------------------------------------------
Balance at Beginning of Year $ 14,966 $ 14,140 $ 11,148
Net Income 2,743 2,332 1,962
Dividends (2,300) (1,500) --
Contributions from Parent 57 -- 651
Change in Net Unrealized Gains
on Securities Available for Sale 533 97 (100)
Effect of Transfer from Securities
Held to Maturity to Securities
Available for Sale -- (262) --
Net Unrealized Gains Upon
Adoption of SFAS No. 115 -- -- 320
Foreign Currency Translation (31) 20 85
Other 330 139 74
-------- -------- --------
BALANCE AT END OF YEAR $ 16,298 $ 14,966 $ 14,140
- -------------------------------------------=====================================
Authorized capital stock of Citibank was 40 million shares at December 31,
1996 and 1995.
15. CITICORP (PARENT COMPANY ONLY)
The Parent Company is a legal entity separate and distinct from
Citibank, N.A. and its other subsidiaries and affiliates. There are
various legal limitations on the extent to which Citicorp's banking
subsidiaries may extend credit, pay dividends or otherwise supply funds
to Citicorp. The approval of the Office of the Comptroller of the
Currency is required if total dividends declared by a national bank in
any calendar year exceed net profits (as defined) for that year combined
with its retained net profits for the preceding two years. In addition,
dividends for such a bank may not be paid in excess of the bank's
undivided profits. State-chartered bank subsidiaries are subject to
dividend limitations imposed by applicable state law.
Citicorp's national and state-chartered bank subsidiaries can declare
dividends to their respective parent companies in 1997, without regulatory
approval, of approximately $2.3 billion, adjusted by the effect of their net
income (loss) for 1997 up to the date of any such dividend declaration. In
determining whether and to what extent to pay dividends, each bank subsidiary
must also consider the effect of dividend payments on applicable risk-based
capital and leverage ratio requirements as well as policy statements of the
federal regulatory agencies that indicate that banking organizations should
generally pay dividends out of current operating earnings. Consistent with these
considerations, Citicorp estimates that its bank subsidiaries can distribute
dividends to Citicorp of approximately $1.7 billion of the available $2.3
billion, adjusted by the effect of their net income (loss) up to the date of any
such dividend declaration.
Citicorp also receives dividends from its non-bank subsidiaries. These
nonbank subsidiaries are generally not subject to regulatory restrictions on
their payment of dividends except that the approval of the Office of Thrift
Supervision ("OTS") may be required if total dividends declared by a savings
association in any calendar year exceed amounts specified by that agency's
regulations.
CONDENSED STATEMENT OF INCOME
Citicorp (Parent Company Only)
In Millions of Dollars 1996 1995 1994
- --------------------------------------------------------------------------------
REVENUE
Dividends from Subsidiary Banks $2,400 $1,600 $ 100
Dividends from Subsidiaries Other Than Banks 1,099 730 900
Interest from Subsidiaries 789 787 579
Other Revenue(1) 67 72 36
------ ------ -------
4,355 3,189 1,615
------ ------ -------
EXPENSE
Interest on Other Borrowed Funds 101 132 102
Interest and Fees Paid to Subsidiaries 126 137 111
Interest on Long-Term Debt 890 947 730
Other Expense 22 14 21
------ ------ -------
1,139 1,230 964
------ ------ -------
Income Before Taxes and Equity in
Undistributed Income of Subsidiaries 3,216 1,959 651
Income Tax Benefit--Current 88 102 132
Equity in Undistributed Income
of Subsidiaries, Before Cumulative
Effect of Accounting Change 484 1,403 2,639
------ ------ -------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE
OF SUBSIDIARIES 3,788 3,464 3,422
Equity in Cumulative Effect of
Accounting Change of Subsidiaries -- -- (56)
------ ------ -------
NET INCOME $3,788 $3,464 $ 3,366
- --------------------------------------------------==============================
(1) Includes net securities gains of $13 million, $1 million, and $2 million in
1996, 1995, and 1994, respectively.
73
CONDENSED BALANCE SHEET
Citicorp (Parent Company Only)
In Millions of Dollars DECEMBER 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------
ASSETS
Deposits with Subsidiary Banks,
Principally Interest-Bearing $ 2,201 $ 2,424
Securities--Available for Sale 1,685 1,207
Investments in and Advances to:
Citibank, N.A. and Other
Subsidiary Banks 24,567 23,461
Subsidiaries Other Than Banks 7,771 8,386
Other Assets 534 477
------- -------
TOTAL $36,758 $35,955
- ------------------------------------------------------==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Purchased Funds and Other Borrowings $ 968 $ 1,466
Advance from Subsidiaries 197 94
Other Liabilities 1,399 1,240
Long-Term Debt (Note 1) 13,163 13,574
Junior Subordinated Deferrable
Interest Debentures Held by Trust (Note 1) 309 --
Stockholders' Equity 20,722 19,581
------- -------
TOTAL $36,758 $35,955
- ------------------------------------------------------==========================
CONDENSED STATEMENT OF CASH FLOWS
Citicorp (Parent Company Only)
In Millions of Dollars 1996 1995 1994
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 3,788 $ 3,464 $ 3,366
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Equity in Undistributed Income
of Subsidiaries, Before
Cumulative Effect of
Accounting Change (484) (1,403) (2,639)
Equity in Cumulative Effect of
Accounting Change of
Subsidiaries -- -- 56
Other, Net 29 203 (215)
--------- --------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 3,333 2,264 568
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities:
Purchases (3,216) (2,394) (5,710)
Sales 1,581 471 2,602
Maturities 1,175 1,525 4,059
Subsidiaries:
Investments and Advances (32,871) (78,370) (277,810)
Repayment of Advances 33,780 78,670 275,214
--------- --------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 449 (98) (1,645)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchased Funds and Other Borrowings:
Proceeds 5,483 5,194 35,701
Repayments (5,980) (5,354) (35,178)
Advances from Subsidiaries:
Proceeds 98 5 1,419
Repayments (2) (84) (1,321)
Long-Term Debt:
Proceeds 2,470 2,758 3,065
Repayments (2,839) (2,616) (2,819)
Proceeds from Issuance of
Junior Subordinated
Deferrable Interest Debentures
Held by Trust 309 -- --
Preferred Stock:
Proceeds from Issuance -- 390 388
Redemption -- (125) (100)
Common Stock Issuance Proceeds 537 416 226
Treasury Stock Transactions (3,069) (1,531) (5)
Dividends Paid (1,012) (835) (533)
--------- --------- ---------
NET CASH (USED IN) PROVIDED
BY FINANCING ACTIVITIES (4,005) (1,782) 843
--------- --------- ---------
Net (Decrease) Increase in
Deposits with Subsidiary Banks (223) 384 (234)
Deposits with Subsidiary Banks
at Beginning of Year 2,424 2,040 2,274
--------- --------- ---------
DEPOSITS WITH SUBSIDIARY
BANKS AT END OF YEAR $ 2,201 $ 2,424 $ 2,040
- ----------------------------------------------=================================
Cash Paid During the Year for:
Interest $ 929 $ 980 $ 779
Income Taxes 794 783 785
- --------------------------------------------------------------------------------
74
QUARTERLY FINANCIAL INFORMATION
Citicorp and Subsidiaries
In Millions of Dollars Except Share Data 1996 1995
- ------------------------------------------------------------------------------ --------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
------------------------------------------------------------------------------
Net Interest Revenue $ 2,818 $ 2,709 $ 2,728 $ 2,685 $ 2,560 $ 2,598 $ 2,468 $ 2,325
Fees, Commissions, and Other Revenue 2,547 2,301 2,265 2,143 2,229 2,159 2,221 2,118
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL REVENUE 5,365 5,010 4,993 4,828 4,789 4,757 4,689 4,443
Provision for Credit Losses 504 449 479 494 531 576 493 391
Operating Expense 3,281 3,078 2,978 2,860 2,818 2,793 2,798 2,693
-------- -------- -------- -------- -------- -------- -------- --------
INCOME BEFORE TAXES 1,580 1,483 1,536 1,474 1,440 1,388 1,398 1,359
Income Taxes 593 548 584 560 535 511 545 530
-------- -------- -------- -------- -------- -------- -------- --------
NET INCOME $ 987 $ 935 $ 952 $ 914 $ 905 $ 877 $ 853 $ 829
- ----------------------------------------==============================================================================
EARNINGS PER SHARE(1)(2)
On Common and Common Equivalent Shares $ 1.97 $ 1.85 $ 1.86 $ 1.82 $ 1.89 $ 1.79 $ 1.76 $ 1.71
Assuming Full Dilution 1.97 1.85 1.86 1.75 1.72 1.62 1.57 1.53
- ----------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS DECLARED
Preferred Stock $ 38 $ 38 $ 38 $ 47 $ 72 $ 83 $ 96 $ 92
Common Stock 211 213 216 210 127 127 119 119
Common Stock, Per Share 0.45 0.45 0.45 0.45 0.30 0.30 0.30 0.30
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $281,018 $271,930 $266,824 $263,566 $256,853 $257,536 $256,994 $269,013
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCK PRICE RANGE(3)
High $109 1/4 $90 5/8 $86 5/8 $81 $73 5/8 $71 7/8 $59 3/4 $45
Low 91 3/8 76 1/4 75 3/8 62 1/2 63 5/8 58 3/8 42 5/8 38 7/8
Close 103 90 5/8 82 3/4 80 67 1/4 70 3/4 57 7/8 42 5/8
- ----------------------------------------------------------------------------------------------------------------------
(1) See Note 10 to the consolidated financial statements.
(2) Full year 1995 earnings per share amounts exceed the amounts that would be
derived from adding the quarterly periods, since common equivalent share
amounts in the first three quarters of 1995 related to unredeemed Series 15
preferred shares, computed under applicable accounting guidelines, were
higher based on market prices in those quarters.
(3) Based on the New York Stock Exchange Composite Listing.
75
10-K CROSS-REFERENCE INDEX
This Annual Report and Form 10-K incorporate into a single document the
requirements of the accounting profession and the Securities and Exchange
Commission, including a comprehensive explanation of 1996 results.
Certain statistical data required by the Securities and Exchange Commission
is included on pages 26 and 75 through 83.
- --------------------------------------------------------------------------------
PART I PAGE
ITEM 1 BUSINESS .................................. 4-23, 25-38, 41-42, 84-85
ITEM 2 PROPERTIES ....................................................... 85
ITEM 3 LEGAL PROCEEDINGS ............................................ 72,84
ITEM 4 NOT APPLICABLE
- --------------------------------------------------------------------------------
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS ...................................... 73,75,90
ITEM 6 SELECTED FINANCIAL DATA ...................................... 26,44
ITEM 7 MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ..................... 4-23,26-48,73,74,79,82,85
ITEM 8 FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA ............................................ 50-83
ITEM 9 NOT APPLICABLE
- --------------------------------------------------------------------------------
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT ................................................. *
ITEM 11 EXECUTIVE COMPENSATION ............................................ *
ITEM 12 SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT .................................. *
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS ...................................................... *
- --------------------------------------------------------------------------------
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K ............................... 86
- --------------------------------------------------------------------------------
* Citicorp's 1997 Proxy Statement is incorporated herein by reference. Such
incorporation by reference shall not include the information referred to in
Item 402(a)(8) of Regulation S-K.
76
FINANCIAL DATA SUPPLEMENT
AVERAGE BALANCES AND INTEREST RATES, TAXABLE EQUIVALENT BASIS(1)(2)
Citicorp and Subsidiaries
AVERAGE VOLUME INTEREST % AVERAGE RATE
- ------------------------------------------------------------------------ ---------------------------- ----------------------
In Millions of Dollars 1996 1995 1994 1996 1995 1994 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
INTEREST REVENUE
LOANS (NET OF UNEARNED INCOME)(3)
Consumer Loans
In U.S. Offices $ 54,179 $ 50,918 $ 44,290 $ 5,749 $ 5,607 $ 4,544 10.61 11.01 10.26
In Offices Outside the U.S.(4) 51,282 48,811 42,555 6,489 6,251 5,309 12.65 12.81 12.48
-------- -------- -------- -------- -------- --------
Total Consumer Loans 105,461 99,729 86,845 12,238 11,858 9,853 11.60 11.89 11.35
-------- -------- -------- -------- -------- --------
Commercial Loans
In U.S. Offices
Commercial and Industrial 8,927 9,982 10,284 827 883 770 9.26 8.85 7.49
Mortgage and Real Estate 4,256 5,413 6,628 330 413 409 7.75 7.63 6.17
Loans to Financial Institutions 481 426 438 41 20 17 8.52 4.69 3.88
Lease Financing 3,219 3,198 3,481 211 231 238 6.55 7.22 6.84
In Offices Outside the U.S.(4) 43,387 37,921 34,397 4,867 4,405 4,954 11.22 11.62 14.40
-------- -------- -------- -------- -------- --------
Total Commercial Loans 60,270 56,940 55,228 6,276 5,952 6,388 10.41 10.45 11.57
-------- -------- -------- -------- -------- --------
Total Loans 165,731 156,669 142,073 18,514 17,810 16,241 11.17 11.37 11.43
-------- -------- -------- -------- -------- --------
FEDERAL FUNDS SOLD AND RESALE AGREEMENTS
In U.S. Offices 8,774 11,816 14,924 460 675 593 5.24 5.71 3.97
In Offices Outside the U.S.(4) 3,730 2,408 2,725 442 381 2,725 11.85 15.82 100.00
-------- -------- -------- -------- -------- --------
Total 12,504 14,224 17,649 902 1,056 3,318 7.21 7.42 18.80
-------- -------- -------- -------- -------- --------
SECURITIES
At Cost/Lower of Cost or Market
In U.S. Offices--Taxable -- 1,460 1,962 -- 96 114 -- 6.58 5.81
In Offices Outside the U.S.(4) -- 3,090 3,173 -- 236 204 -- 7.64 6.43
-------- -------- -------- -------- -------- --------
Total -- 4,550 5,135 -- 332 318 -- 7.30 6.19
-------- -------- -------- -------- -------- --------
At Fair Value
In U.S. Offices
Taxable 7,276 5,419 4,263 351 254 179 4.82 4.69 4.20
Exempt from U.S. Income Tax 1,708 1,599 1,297 110 107 90 6.44 6.69 6.94
In Offices Outside the U.S.(4) 15,189 8,465 7,868 1,342 879 702 8.84 10.38 8.92
-------- -------- -------- -------- -------- --------
Total 24,173 15,483 13,428 1,803 1,240 971 7.46 8.01 7.23
-------- -------- -------- -------- -------- --------
Total Securities 24,173 20,033 18,563 1,803 1,572 1,289 7.46 7.85 6.94
-------- -------- -------- -------- -------- --------
TRADING ACCOUNT ASSETS(5)
In U.S. Offices 5,662 10,879 14,210 333 713 862 5.88 6.55 6.07
In Offices Outside the U.S.(4) 11,413 10,871 11,214 979 1,075 1,234 8.58 9.89 11.00
-------- -------- -------- -------- -------- --------
Total 17,075 21,750 25,424 1,312 1,788 2,096 7.68 8.22 8.24
-------- -------- -------- -------- -------- --------
DEPOSITS AT INTEREST WITH BANKS
Principally in Offices Outside the U.S.(4) 12,559 11,288 9,609 858 770 895 6.83 6.82 9.31
-------- -------- -------- -------- -------- --------
Interest-Earning Assets 232,042 223,964 213,318 $ 23,389 $ 22,996 $ 23,839 10.08 10.27 11.18
-------- -------- -------- ----- ----- -----
Non-Interest-Earning Assets 38,112 44,817 47,686
-------- -------- --------
TOTAL ASSETS $270,154 $268,781 $261,004
- --------------------------------------------==================================================================================
INTEREST EXPENSE
DEPOSITS
In U.S. Offices
Savings Deposits(6) $ 25,927 $ 24,715 $ 25,935 $ 756 $ 758 $ 545 2.92 3.07 2.10
Other Time Deposits 12,556 11,756 11,148 782 741 646 6.23 6.30 5.79
In Offices Outside the U.S.(4) 116,565 110,236 98,536 7,436 7,403 7,805 6.38 6.72 7.92
-------- -------- -------- -------- -------- --------
Total 155,048 146,707 135,619 8,974 8,902 8,996 5.79 6.07 6.63
-------- -------- -------- -------- -------- --------
TRADING ACCOUNT LIABILITIES(5)
In U.S. Offices 2,463 2,851 3,052 142 179 174 5.77 6.28 5.70
In Offices Outside the U.S.(4) 2,089 1,328 1,641 171 121 93 8.19 9.11 5.67
-------- -------- -------- -------- -------- --------
Total 4,552 4,179 4,693 313 300 267 6.88 7.18 5.69
-------- -------- -------- -------- -------- --------
PURCHASED FUNDS AND OTHER BORROWINGS
In U.S. Offices 14,286 20,805 25,613 888 1,306 1,238 6.22 6.28 4.83
In Offices Outside the U.S.(4) 6,271 6,053 7,173 887 1,073 2,701 14.14 17.73 37.66
-------- -------- -------- -------- -------- --------
Total 20,557 26,858 32,786 1,775 2,379 3,939 8.63 8.86 12.01
-------- -------- -------- -------- -------- --------
LONG-TERM DEBT
In U.S. Offices 14,661 14,736 14,240 921 1,063 856 6.28 7.21 6.01
In Offices Outside the U.S.(4) 4,356 3,492 2,724 426 368 844 9.78 10.54 30.98
-------- -------- -------- -------- -------- --------
Total 19,017 18,228 16,964 1,347 1,431 1,700 7.08 7.85 10.02
-------- -------- -------- -------- -------- --------
Total Interest-Bearing Liabilities 199,174 195,972 190,062 $ 12,409 $ 13,012 $ 14,902 6.23 6.64 7.84
-------- -------- -------- ----- ----- -----
Demand Deposits in U.S. Offices 12,368 11,636 12,363
Other Non-Interest-Bearing Liabilities 38,625 42,279 42,878
Total Stockholders' Equity 19,987 18,894 15,701
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $270,154 $268,781 $261,004
- --------------------------------------------==================================================================================
NET INTEREST REVENUE AS A PERCENTAGE
OF AVERAGE INTEREST-EARNING ASSETS
In U.S. Offices(7) $ 94,544 $101,161 $101,777 $ 4,517 $ 4,238 $ 3,896 4.78 4.19 3.83
In Offices Outside the U.S.(7) 137,498 122,803 111,541 6,463 5,746 5,041 4.70 4.68 4.52
-------- -------- -------- -------- -------- --------
TOTAL $232,042 $223,964 $213,318 $ 10,980 $ 9,984 $ 8,937 4.73 4.46 4.19
- --------------------------------------------==================================================================================
(1) The taxable equivalent adjustment is based on the U.S. federal statutory
tax rate of 35%.
(2) Interest rates and amounts include the effects of risk management
activities associated with the respective asset and liability categories.
See Note 1 to the consolidated financial statements.
(3) Loans in the table above include cash-basis loans.
(4) Average rates in offices outside the U.S. may reflect prevailing local
interest rates, including the effects of inflation and monetary correction
in certain Latin American countries.
(5) The fair value carrying amounts of derivative and foreign exchange
contracts are reported in non-interest-earning assets and other
non-interest bearing liabilities.
(6) Savings deposits consist of Insured Money Market Rate accounts, NOW
accounts, and other savings deposits.
(7) Includes allocations for capital and funding costs based on the location of
the asset.
77
ANALYSIS OF CHANGES IN NET INTEREST REVENUE
TAXABLE EQUIVALENT BASIS(1) 1996 vs 1995 1995 vs 1994
- -------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE IN: DUE TO CHANGE IN:
------------------- --------
AVERAGE AVERAGE NET AVERAGE AVERAGE NET
In Millions of Dollars VOLUME RATE CHANGE(2) VOLUME RATE CHANGE(2)
- ----------------------------------------------------------------------- -----------------------------
LOANS--CONSUMER
In U.S. Offices $ 351 $ (209) $ 142 $ 713 $ 350 $ 1,063
In Offices Outside the U.S.(3) 313 (75) 238 798 144 942
------- ------- ------- ------- ------- -------
TOTAL 664 (284) 380 1,511 494 2,005
------- ------- ------- ------- ------- -------
LOANS--COMMERCIAL
In U.S. Offices (177) 39 (138) (132) 245 113
In Offices Outside the U.S.(3) 617 (155) 462 474 (1,023) (549)
------- ------- ------- ------- ------- -------
TOTAL 440 (116) 324 342 (778) (436)
------- ------- ------- ------- ------- -------
Total Loans 1,104 (400) 704 1,853 (284) 1,569
------- ------- ------- ------- ------- -------
FEDERAL FUNDS SOLD AND RESALE AGREEMENTS
In U.S. Offices (163) (52) (215) (141) 223 82
In Offices Outside the U.S.(3) 173 (112) 61 (285) (2,059) (2,344)
------- ------- ------- ------- ------- -------
TOTAL 10 (164) (154) (426) (1,836) (2,262)
------- ------- ------- ------- ------- -------
SECURITIES
In U.S. Offices 27 (23) 4 51 23 74
In Offices Outside the U.S.(3) 327 (100) 227 44 165 209
------- ------- ------- ------- ------- -------
TOTAL 354 (123) 231 95 188 283
------- ------- ------- ------- ------- -------
TRADING ACCOUNT ASSETS
In U.S. Offices (313) (67) (380) (214) 65 (149)
In Offices Outside the U.S.(3) 52 (148) (96) (37) (122) (159)
------- ------- ------- ------- ------- -------
TOTAL (261) (215) (476) (251) (57) (308)
------- ------- ------- ------- ------- -------
DEPOSITS AT INTEREST WITH BANKS
Principally in Offices Outside the U.S.(3) 87 1 88 140 (265) (125)
------- ------- ------- ------- ------- -------
TOTAL INTEREST REVENUE 1,294 (901) 393 1,411 (2,254) (843)
- -------------------------------------------------------------------------------------------------------
DEPOSITS
In U.S. Offices 81 (42) 39 (20) 328 308
In Offices Outside the U.S.(3) 414 (381) 33 865 (1,267) (402)
------- ------- ------- ------- ------- -------
TOTAL 495 (423) 72 845 (939) (94)
------- ------- ------- ------- ------- -------
TRADING ACCOUNT LIABILITIES
In U.S. Offices (23) (14) (37) (12) 17 5
In Offices Outside the U.S.(3) 63 (13) 50 (20) 48 28
------- ------- ------- ------- ------- -------
TOTAL 40 (27) 13 (32) 65 33
------- ------- ------- ------- ------- -------
PURCHASED FUNDS AND OTHER BORROWINGS
In U.S. Offices (405) (13) (418) (259) 327 68
In Offices Outside the U.S.(3) 37 (223) (186) (371) (1,257) (1,628)
------- ------- ------- ------- ------- -------
TOTAL (368) (236) (604) (630) (930) (1,560)
------- ------- ------- ------- ------- -------
LONG-TERM DEBT
In U.S. Offices (5) (137) (142) 31 176 207
In Offices Outside the U.S.(3) 86 (28) 58 191 (667) (476)
------- ------- ------- ------- ------- -------
TOTAL 81 (165) (84) 222 (491) (269)
------- ------- ------- ------- ------- -------
TOTAL INTEREST EXPENSE 248 (851) (603) 405 (2,295) (1,890)
- -------------------------------------------------------------------------------------------------------
NET INTEREST REVENUE $ 1,046 $ (50) $ 996 $ 1,006 $ 41 $ 1,047
- --------------------------------------------===========================================================
(1) The taxable equivalent adjustment is based on the U.S. federal statutory
tax rate of 35%.
(2) Rate/volume variance is allocated based on the percentage relationship of
changes in volume and changes in rate to the total "net change."
(3) Changes in average rates in offices outside the U.S. may reflect changes in
prevailing local interest rates, including the effects of inflation and
monetary correction in certain Latin American countries.
78
LOANS OUTSTANDING
In Millions of Dollars at Year-End 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------
CONSUMER LOANS
In U.S. Offices
Mortgage and Real Estate $ 23,421 $ 22,604 $ 21,089 $ 22,719 $ 26,140
Installment, Revolving Credit, and Other 36,285 32,429 29,523 22,490 21,509
Lease Financing -- -- 32 152 353
--------- --------- --------- --------- ---------
59,706 55,033 50,644 45,361 48,002
--------- --------- --------- --------- ---------
In Offices Outside the U.S.
Mortgage and Real Estate 18,379 18,240 16,830 13,908 12,863
Installment, Revolving Credit, and Other 33,905 32,521 29,303 25,355 23,011
Lease Financing 754 765 732 672 746
--------- --------- --------- --------- ---------
53,038 51,526 46,865 39,935 36,620
--------- --------- --------- --------- ---------
112,744 106,559 97,509 85,296 84,622
Unearned Income (897) (916) (909) (942) (1,169)
--------- --------- --------- --------- ---------
Consumer Loans--Net 111,847 105,643 96,600 84,354 83,453
--------- --------- --------- --------- ---------
COMMERCIAL LOANS
In U.S. Offices
Commercial and Industrial 8,747 9,509 10,236 8,969 10,168
Mortgage and Real Estate 2,977 4,681 5,616 7,440 9,194
Loans to Financial Institutions 1,035 365 297 269 271
Lease Financing 3,017 3,239 3,271 3,541 3,547
--------- --------- --------- --------- ---------
15,776 17,794 19,420 20,219 23,180
--------- --------- --------- --------- ---------
In Offices Outside the U.S.
Commercial and Industrial 36,901 32,966 27,120 23,624 21,332
Mortgage and Real Estate 1,815 1,901 1,995 2,201 2,657
Loans to Financial Institutions 4,837 4,229 3,263 3,123 3,300
Governments and Official Institutions 2,252 2,180 3,265 4,807 5,055
Lease Financing 1,294 1,098 934 800 927
--------- --------- --------- --------- ---------
47,099 42,374 36,577 34,555 33,271
--------- --------- --------- --------- ---------
62,875 60,168 55,997 54,774 56,451
Unearned Income (110) (169) (177) (161) (194)
--------- --------- --------- --------- ---------
Commercial Loans--Net 62,765 59,999 55,820 54,613 56,257
--------- --------- --------- --------- ---------
Total Loans--Net of Unearned Income 174,612 165,642 152,420 138,967 139,710
Allowance for Credit Losses (5,503) (5,368) (5,155) (4,379) (3,859)
--------- --------- --------- --------- ---------
TOTAL LOANS--NET OF UNEARNED
INCOME AND ALLOWANCE FOR CREDIT LOSSES $ 169,109 $ 160,274 $ 147,265 $ 134,588 $ 135,851
- --------------------------------------------=========================================================
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
MATURITIES OF THE GROSS COMMERCIAL LOAN PORTFOLIO
DUE OVER 1 BUT
WITHIN WITHIN OVER
In Millions of Dollars at Year-End 1 YEAR 5 YEARS 5 YEARS TOTAL
- -----------------------------------------------------------------------------------------------------
In U.S. Offices
Commercial and Industrial Loans $ 3,566 $ 3,715 $ 1,466 $ 8,747
Mortgage and Real Estate 900 1,614 463 2,977
Loans to Financial Institutions 507 388 140 1,035
Lease Financing 690 1,386 941 3,017
In Offices Outside the U.S. 34,322 9,106 3,671 47,099
--------- --------- --------- ---------
TOTAL $ 39,985 $ 16,209 $ 6,681 $ 62,875
- --------------------------------------------------------=============================================
Sensitivity of Loans Due After One Year to
Changes in Interest Rates(1)
Loans at Predetermined Interest Rates $ 3,942 $ 1,886
Loans at Floating or Adjustable Interest Rates 12,267 4,795
--------- ---------
TOTAL $ 16,209 $ 6,681
- --------------------------------------------------------------------=====================------------
(1) Based on contractual terms. Repricing characteristics may effectively be
modified from time to time using derivative contracts. See Note 1 to the
consolidated financial statements.
79
CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS(1)
In Millions of Dollars at Year-End 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------
COMMERCIAL CASH-BASIS LOANS
Collateral-Dependent (at Lower of
Cost or Collateral Value)(2) $ 263 $ 779 $1,347 $2,704 $4,086
Other 642 755 770 1,970 2,920
------ ------ ------ ------ ------
TOTAL COMMERCIAL CASH-BASIS LOANS $ 905 $1,534 $2,117 $4,674 $7,006
- --------------------------------------------------======================================
COMMERCIAL CASH-BASIS LOANS
In U.S. Offices $ 292 $ 925 $1,547 $2,841 $4,689
In Offices Outside the U.S. 613 609 570 1,833 2,317
------ ------ ------ ------ ------
TOTAL COMMERCIAL CASH-BASIS LOANS $ 905 $1,534 $2,117 $4,674 $7,006
- --------------------------------------------------======================================
COMMERCIAL RENEGOTIATED LOANS
In U.S. Offices $ 264 $ 309 $ 563 $ 641 $ 267
In Offices Outside the U.S. 57 112 155 67 56
------ ------ ------ ------ ------
TOTAL COMMERCIAL RENEGOTIATED LOANS $ 321 $ 421 $ 718 $ 708 $ 323
- --------------------------------------------------======================================
CONSUMER LOANS ON WHICH ACCRUAL OF
INTEREST HAD BEEN SUSPENDED
In U.S. Offices $1,116 $1,413 $1,538 $1,965 $2,323
In Offices Outside the U.S. 1,071 1,247 1,066 948 849
------ ------ ------ ------ ------
TOTAL CONSUMER LOANS ON WHICH ACCRUAL
OF INTEREST HAD BEEN SUSPENDED $2,187 $2,660 $2,604 $2,913 $3,172
- --------------------------------------------------======================================
ACCRUING LOANS 90 OR MORE DAYS DELINQUENT(3)
In U.S. Offices $ 696 $ 499 $ 415 $ 635 $ 671
In Offices Outside the U.S. 422 498 460 421 382
------ ------ ------ ------ ------
TOTAL ACCRUING LOANS 90 OR MORE DAYS DELINQUENT $1,118 $ 997 $ 875 $1,056 $1,053
- --------------------------------------------------======================================
(1) For a discussion of risks in the consumer loan portfolio, see pages 34 and
35, and of commercial cash-basis loans, see page 37.
(2) A cash-basis loan is defined as collateral dependent when repayment is
expected to be provided solely by the underlying collateral and there are
no other available and reliable sources of repayment, in which case the
loans are written down to the lower of cost or collateral value.
(3) Includes consumer loans of $1.0 billion, $951 million, $828 million, $802
million, and $857 million at December 31, 1996, 1995, 1994, 1993, and 1992,
respectively, of which $239 million, $208 million, $150 million, $114
million, and $109 million, respectively, are government-guaranteed student
loans.
OTHER REAL ESTATE OWNED (OREO) AND ASSETS PENDING DISPOSITION(1)
In Millions of Dollars at Year-End 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------
CONSUMER OREO $ 452 $ 529 $ 569 $ 733 $ 869
COMMERCIAL OREO 614 625 958 1,637 1,875
------ ------ ------ ------ ------
TOTAL OREO $1,066 $1,154 $1,527 $2,370 $2,744
- --------------------------------------------------======================================
ASSETS PENDING DISPOSITION(2) $ 160 $ 205 $ 195 $ 429 $ 346
- --------------------------------------------------======================================
(1) Carried at lower of cost or collateral value.
(2) Represents Consumer residential mortgage loans that have a high probability
of foreclosure.
FOREGONE INTEREST REVENUE ON LOANS(1)
In In Offices
U.S. Outside 1996
In Millions of Dollars Offices the U.S. Total
- --------------------------------------------------------------------------------
Interest Revenue that Would Have Been
Accrued at Original Contractual Rates(2) $232 $299 $531
Amount Recognized as Interest Revenue(2) 153 107 260
---- ---- ----
FOREGONE INTEREST REVENUE $ 79 $192 $271
- ----------------------------------------------------============================
(1) Relates to commercial cash-basis and renegotiated loans and consumer loans
on which accrual of interest had 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.
80
DETAILS OF CREDIT LOSS EXPERIENCE
In Millions of Dollars at Year-End 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES AT
BEGINNING OF YEAR $ 5,368 $ 5,155 $ 4,379 $ 3,859 $ 3,308
------- ------- ------- ------- -------
ADDITIONS
Provision for Credit Losses 1,926 1,991 1,881 2,600 4,146
DEDUCTIONS
GROSS CREDIT LOSSES
CONSUMER(1)
In U.S. Offices 1,296 1,137 1,120 1,245 1,744
In Offices Outside the U.S. 876 825 594 504 494
COMMERCIAL
Mortgage and Real Estate:
In U.S. Offices 27 118 200 333 813
In Offices Outside the U.S. 32 25 48 132 249
Governments and Official
Institutions in Offices Outside the U.S. -- 37 -- 131 40
Loans to Financial Institutions
in Offices Outside the U.S. 12 11 -- 9 2
Commercial and Industrial:
In U.S. Offices 36 48 57 148 408
In Offices Outside the U.S. 159 137 64 175 305
------- ------- ------- ------- -------
2,438 2,338 2,083 2,677 4,055
------- ------- ------- ------- -------
CREDIT RECOVERIES
CONSUMER(1)
In U.S. Offices 228 231 214 207 189
In Offices Outside the U.S. 216 187 147 132 130
COMMERCIAL
Mortgage and Real Estate:
In U.S. Offices 88 26 15 48 4
In Offices Outside the U.S. 8 21 8 8 1
Governments and Official Institutions
in Offices Outside the U.S. 81 52 240 42 13
Loans to Financial Institutions in
Offices Outside the U.S. 1 1 3 22 10
Commercial and Industrial:
In U.S. Offices 46 82 64 54 37
In Offices Outside the U.S. 44 46 248 105 95
------- ------- ------- ------- -------
712 646 939 618 479
------- ------- ------- ------- -------
NET CREDIT LOSSES
In U.S. Offices 997 964 1,084 1,417 2,735
In Offices Outside the U.S. 729 728 60 642 841
------- ------- ------- ------- -------
1,726 1,692 1,144 2,059 3,576
------- ------- ------- ------- -------
OTHER-NET(2) (65) (86) 39 (21) (19)
------- ------- ------- ------- -------
ALLOWANCE FOR CREDIT LOSSES AT END OF YEAR $ 5,503 $ 5,368 $ 5,155 $ 4,379 $ 3,859
- -------------------------------------------------===============================================
Net Consumer Credit Losses $ 1,728 $ 1,544 $ 1,353 $ 1,410 $ 1,919
As a Percentage of Average Consumer Loans 1.64 1.55 1.56 1.73 2.16
Net Commercial Credit (Recoveries) Losses (2) 148 (209) 649 1,657
As a Percentage of Average Commercial Loans NM 0.26 NM 1.13 2.80
- ------------------------------------------------------------------------------------------------
(1) Consumer credit losses and recoveries primarily relate to revolving credit
and installment loans.
(2) Includes net transfers (to) from the reserve for sold Consumer portfolios
and foreign currency translation effects.
NM Not meaningful, as net recoveries result in a negative percentage.
81
AVERAGE DEPOSIT LIABILITIES IN OFFICES OUTSIDE THE U.S.(1)
In Millions of Dollars at Year-End 1996 1995 1994
- -----------------------------------------------------------------------------------------------
% AVERAGE % Average % Average
AVERAGE INTEREST Average Interest Average Interest
BALANCE RATE Balance Rate Balance Rate
- ------------------------------------------------- ------------------- -------------------
Banks(2) $ 10,528 8.44 $ 12,777 8.18 $ 12,890 18.89
Other Demand Deposits 28,801 3.27 25,569 3.52 25,671 2.31
Other Time and
Savings Deposits(2) 85,176 6.58 79,157 6.89 66,695 7.16
-------- ---- -------- ---- -------- -----
TOTAL $124,505 5.97 $117,503 6.30 $105,256 7.42
- ------------------------------========---------------========---------------========-----------
(1) Interest rates and amounts include the effects of risk management
activities, and also reflect the impact of the local interest rates
prevailing in certain Latin American countries. See Note 1 to the
consolidated financial statements.
(2) Primarily consists of time certificates of deposit and other time deposits
in denominations of $100,000 or more.
TIME DEPOSITS IN U.S. OFFICES
Maturity Profile
In Millions of Dollars UNDER OVER 3 TO OVER 6 TO OVER
($100,000 or more) at Year-End 1996 3 MONTHS 6 MONTHS 12 MONTHS 12 MONTHS
- --------------------------------------------------------------------------------
Certificates of Deposit $2,635 $565 $382 $328
Other Time Deposits 488 127 46 234
- --------------------------------------------------------------------------------
PURCHASED FUNDS AND OTHER BORROWINGS(1)
FEDERAL FUNDS PURCHASED
AND SECURITIES SOLD UNDER
REPURCHASE AGREEMENTS(2) COMMERCIAL PAPER(3) OTHER FUNDS BORROWED(2)
--------------------------- --------------------------- ---------------------------
In Millions of Dollars 1996 1995 1994 1996 1995 1994 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
Amount Outstanding at
Year-End $ 9,995 $ 7,904 $12,097 $ 1,238 $ 1,633 $ 1,520 $ 6,958 $ 6,797 $ 7,290
Average Outstanding
During the Year 12,851 18,890 24,160 1,665 1,718 1,938 6,041 6,250 6,688
Maximum Month-End
Outstanding 14,474 21,960 26,857 1,767 1,831 2,269 6,958 7,383 8,157
- ---------------------------------------------------------------------------------------------------------------
Weighted-Average
Interest Rate
During the Year 5.81% 6.25% 4.86% 5.35% 5.88% 4.44% 15.54% 17.57% 40.06%
At Year-End 6.20 6.51 5.36 6.86 5.94 5.53 8.81 13.63 13.51
- ---------------------------------------------------------------------------------------------------------------
(1) Original maturities of less than one year. Interest rates and amounts
include the effects of risk management activities. See Note 1 to the
consolidated financial statements.
(2) Rates reflect the impact of the local interest rates prevailing in certain
Latin American countries.
(3) Amounts outstanding at December 31, 1996, 1995, and 1994 include $463
million, $452 million, and $462 million, respectively, issued by The
Student Loan Corporation.
82
CROSS-BORDER AND NON-LOCAL CURRENCY OUTSTANDINGS
Cross-border and non-local currency outstandings are presented on a regulatory
basis and include cross-border and non-local currency claims on third parties as
well as investments in and funding of local Citicorp franchises. Total
outstandings include claims funded with non-local currency liabilities where the
funds providers agree that, in the event their claims cannot be repaid in U.S.
dollars or other non-local currency due to a sovereign event, they will accept
payment in local currency or wait to receive the non-local currency at such time
as it becomes available. Cross-border and non-local currency claims on third
parties (trade, short-term, and medium- and long-term claims) include loans,
securities, deposits at interest with banks, and other monetary assets, as well
as investments in affiliates. Adjustments have been made to assign externally
guaranteed outstandings to the country of the guarantor and outstandings for
which tangible, liquid collateral is held outside of the obligor's country to
the country in which the collateral is held. For securities received as
collateral, outstandings are assigned to the domicile of the issuer of the
securities. From time-to-time, the Federal Financial Institutions Examination
Council proposes amendments to, and interpretations of, country exposure
reporting guidelines. Such proposals or interpretations could, if implemented in
the future, affect reported cross-border and non-local currency outstandings.
COUNTRIES WITH OUTSTANDINGS EXCEEDING 1% OF TOTAL ASSETS(1)(2)
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
CROSS-BORDER AND NON-LOCAL
CURRENCY CLAIMS ON THIRD PARTIES INVESTMENTS IN
- ------------------------------------------------------------------------- AND FUNDING OF
PUBLIC PRIVATE LOCAL CITICORP TOTAL Total Total
In Billions of Dollars at Year-End BANKS SECTOR SECTOR TOTAL FRANCHISES OUTSTANDINGS Outstandings Outstandings
- -----------------------------------------------------------------------------------------------------------------------------------
Brazil(3) $0.3 $2.3 $2.5 $5.1 $1.8 $6.9 $5.1 $4.0
United Kingdom 0.4 0.9 4.2 5.5 0.9 6.4 7.6 6.7
Japan 0.2 0.2 1.8 2.2 1.3 3.5 3.6 2.0
Singapore 0.1 0.1 1.5 1.7 1.7 3.4 2.5 2.0
Argentina(3) 0.1 -- 2.5 2.6 0.7 3.3 2.9 2.5
Germany 0.1 0.7 0.4 1.2 1.9 3.1 2.7 1.3
Mexico 0.2 1.9 0.5 2.6 0.3 2.9 2.9 4.1
- -----------------------------------------------------------------------------------------------------------------------------------
(1) At December 31, 1996, legally binding cross-border and non-local currency
commitments, including irrevocable letters of credit and commitments to
extend credit, after adjustments to assign externally guaranteed
commitments to the country of the guarantor, amounted to $6.8 billion in
the United Kingdom, $1.4 billion in Germany, $1.1 billion in Japan, $0.3
billion in Singapore, $0.2 billion in Brazil and $0.1 billion in each of
Mexico and Argentina.
(2) At December 31, 1996, cross-border and non-local currency outstandings in
Australia ($2.4 billion) and South Korea ($2.2 billion) were between 0.75%
and 1.0% of total assets. At December 31, 1995, such countries were
Singapore, Australia ($2.4 billion), and South Korea ($2.1 billion). At
December 31, 1994, such countries were Argentina, Australia ($2.2 billion),
Singapore, and Japan.
(3) Includes outstandings funded with non-local currency liabilities where the
funds providers agree that, in the event their claims cannot be repaid in
U.S. dollars or other non-local currency due to a sovereign event, they
will accept payment in local currency or wait to receive the non-local
currency at such time as it becomes available. Such amounts at December 31,
1996, 1995, and 1994, respectively, were $2.0 billion, $1.4 billion, and
$0.8 billion in Brazil; $1.6 billion, $1.6 billion, and $1.3 billion in
Argentina.
CROSS-BORDER AND NON-LOCAL CURRENCY CLAIMS ON THIRD PARTIES
PUBLIC PRIVATE 1996 1995
In Billions of Dollars at Year-End BANKS SECTOR SECTOR TOTAL Total
- --------------------------------------------------------------------------------
DEVELOPED MARKETS(1) $ 1.9 $ 3.1 $12.4 $17.4 $15.2
EMERGING MARKETS(1)
Latin America(2) 0.9 6.0 7.0 13.9 11.7
Asia 1.2 0.8 7.2 9.2 7.9
Other 1.4 0.9 0.8 3.1 2.5
----- ----- ----- ----- -----
TOTAL(3) $ 5.4 $10.8 $27.4 $43.6 $37.3
- --------------------------------------------====================================
(1) Developed markets comprise activities in North America, Europe, and Japan.
Emerging markets comprise activities in all other geographic areas.
(2) Cross-border and non-local currency claims on third parties in Latin
America of $13.9 billion at December 31, 1996 compared with $11.7 billion
at December 31, 1995. The increase primarily reflects the effect of
short-term trade related transactions as well as increases in the value of
Brady bonds held in the available-for-sale portfolio (see additional
discussion on securities on page 59).
(3) Includes investments in affiliates of $1.4 billion at December 31, 1996 and
$1.3 billion at December 31, 1995.
83
CONSENT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Certified Public Accountants
The Board of Directors
Citicorp:
We consent to incorporation by reference of our report dated January 21, 1997
relating to the consolidated balance sheets of Citicorp and subsidiaries as of
December 31, 1996 and 1995, the related consolidated statements of income,
changes in stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1996, and the related consolidated balance
sheets of Citibank, N.A. and subsidiaries as of December 31, 1996 and 1995,
which report appears on page 49 of the 1996 Citicorp Annual Report and Form
10-K, in the following Registration Statements: of Citicorp Nos. 2-47648,
2-58678, 2-82298, 33-21332, 33-21331, 33-41751, 33-52601, 33-53261, and
333-00983 on Form S-8, Nos. 33-38589, 33-59791, 33-66094, and 333-20803 on Form
S-3, and No. 333-21143 on Form S-4; and of Citicorp Mortgage Securities, Inc.,
Citibank, N.A., and other affiliates, No. 33-66222 on Form S-3, and Nos.
33-6979, 33-6358, 33-36313, and 33-34670 on Form S-11.
/s/ KPMG Peat Marwick LLP
New York, New York
February 25, 1997
REGULATION AND SUPERVISION
Citicorp is a bank holding company within the meaning of the U.S. Bank Holding
Company Act of 1956 ("BHC Act") registered with and subject to examination by
the FRB. Citibank, N.A. ("Citibank"), as well as Citicorp's other national
banking association subsidiaries, are primarily regulated by the OCC. Citicorp
also has state-chartered bank subsidiaries which are subject to examination,
supervision, and regulation by state regulators (New York and Delaware). The OTS
also regulates Citicorp and is the primary regulator of Citicorp's U.S. savings
association subsidiary. The Federal Deposit Insurance Corporation ("FDIC")
insures deposits at Citicorp's U.S. depository institution subsidiaries and, in
that capacity, also regulates those institutions. Citicorp also controls (either
directly or indirectly through Citibank) overseas banks, branches, and agencies.
In general, Citicorp's overseas activities are regulated by the FRB and are also
regulated by supervisory authorities of the host countries.
Citicorp's earnings and activities are affected by legislation, by actions
of the FRB, OCC, FDIC, OTS, and other regulators, and by local legislative and
administrative bodies and decisions of courts in the foreign and domestic
jurisdictions in which Citicorp, Citibank, and their affiliates conduct
business. For example, these include limitations on the ability of subsidiaries
to pay dividends to Citicorp (see Note 14 to the consolidated financial
statements), numerous federal and state consumer protection laws imposing
requirements on the making, enforcement, and collection of consumer loans, and
restrictions by regulators on the manner in which Citicorp engages in
derivatives activities and in which it sells mutual funds and other uninsured
investment products to customers.
Legislation may be enacted or regulation imposed in the U.S. or its
political subdivisions, or in any other jurisdiction in which Citicorp does
business, to further regulate banking and financial services or to limit finance
charges or other fees or charges earned in such activities. There can be no
assurance whether any such legislation or regulation will place additional
limitations on Citicorp's operations or adversely affect its earnings.
U.S. federal law imposes certain restrictions on transactions between
Citicorp and its non-bank subsidiaries, on the one hand, and its federally
insured depository institutions and their subsidiaries, including Citibank, on
the other. With certain exceptions, federal law also imposes limitations on, and
requires collateral for, extensions of credit by Citibank and other U.S. insured
depository institutions to their non-bank affiliates, including Citicorp.
Subject to certain limitations and restrictions, a U.S. bank holding
company, with the prior approval of the FRB, may acquire an out-of-state bank.
Banks in states that do not prohibit out-of-state mergers may merge, effective
June 1997 or sooner if both states expressly permit such mergers, with the
approval of the appropriate federal bank regulatory agency. A national or state
bank may establish a de novo branch out of state if such branching is expressly
permitted by the other state. A federal savings association is generally
permitted to open a de novo branch in any state.
Outside the U.S., subject to certain requirements for prior FRB consent or
notice, Citicorp may acquire banks and Citibank may establish branches subject
to local laws and to U.S. laws prohibiting companies from doing business in
certain countries.
The activities of U.S. bank holding companies are generally limited to
managing or controlling banks. Nonbank acquisitions in the U.S. are generally
limited to 5% of voting shares unless the FRB determines that the acquisition is
so closely related to banking as to be a proper incident to banking or managing
or controlling banks. Subject to prior FRB consent, a bank holding company may
generally acquire less than 20% of a company that does not do business in the
U.S. and 20% or more if the FRB finds that the activities are usual in
connection with banking or finance outside the U.S. Citibank's U.S. activities
are generally limited to those that the OCC determines to constitute the
business of
84
banking or to be incidental to banking. In the U.S., Citibank and its affiliates
may underwrite and deal in specific categories of government-issued securities
and may advise and sell as broker, but may not sponsor or distribute, mutual
funds. Citicorp Securities, Inc., a nonbank subsidiary of Citicorp, is
authorized by the FRB to underwrite and deal in securities, to a limited extent,
subject to certain conditions. Outside the U.S., Citicorp subsidiaries may
sponsor, distribute, and advise mutual funds and underwrite and deal in debt
and, to a limited extent, equity securities, subject to local country laws.
A financial institution insured by the FDIC that is under common control
with a failed or failing FDIC-insured institution can be required to indemnify
the FDIC for losses resulting from the insolvency of the failed institution,
even if this causes the affiliated institution also to become insolvent. Any
obligations or liability owed by a subsidiary depository institution to its
parent company is subordinate to the subsidiary's cross-guarantee liability with
respect to commonly controlled insured depository institutions and to the
rights of depositors.
Under longstanding FRB policy, a bank holding company is expected to act as
a source of financial strength for its subsidiary banks and to commit resources
to support such banks. Citicorp could be required to commit resources to its
subsidiary banks in circumstances where it might not do so, absent such policy.
Citicorp and its U.S. insured depository institution subsidiaries are
subject to risk-based capital and leverage guidelines issued by U.S. regulators
for banks, savings associations, and bank holding companies. The regulatory
agencies are required by law to take specific prompt actions with respect to
institutions that do not meet minimum capital standards and have defined five
capital tiers, the highest of which is "well-capitalized." As of December 31,
1996, Citicorp's bank and thrift subsidiaries, including Citibank, were "well
capitalized." See capital analysis on pages 42 and 43.
In the liquidation or other resolution of a failed U.S. insured depository
institution, deposits in U.S. offices and certain claims for administrative
expenses and employee compensation are afforded a priority over other general
unsecured claims, including deposits in offices outside the U.S., non-deposit
claims in all offices, and claims of a parent such as Citicorp. Such priority
creditors would include the FDIC, which succeeds to the position of insured
depositors.
A bank is not required to repay a deposit at a branch outside the U.S. if
the branch cannot repay the deposit due to an act of war, civil strife, or
action taken by the government in the host country, unless the bank has
expressly agreed in writing to do so.
The earnings of Citicorp, Citibank, and their subsidiaries and affiliates
are affected by general economic conditions and the conduct of monetary and
fiscal policy by the U.S. government and by governments in other countries in
which they do business.
COMPETITION
Citicorp, Citibank, and their subsidiaries and affiliates are subject to intense
competition in all aspects of their businesses from both bank and non-bank
institutions that provide financial services and, in some of their activities,
from government agencies.
PROPERTIES
The principal offices of Citicorp and Citibank are located at 399 Park Avenue,
New York, New York, a 39-story building of which two thirds is owned by
Citibank. Citibank also owns one third of Citicorp Center, a 59-story building
located at 153 East 53rd Street across Lexington Avenue from 399 Park Avenue.
Citicorp occupies all of the space it owns in both buildings. Citibank also owns
Citicorp at Court Square in Long Island City, New York and 111 Wall Street in
New York City, which are totally occupied by Citicorp. In addition, Citicorp has
major U.S. real estate holdings in Chicago; Hagerstown and Silver Spring,
Maryland; Los Angeles; New Castle, Delaware; Rio Piedras, Puerto Rico; Sioux
Falls, South Dakota; Tampa; San Antonio, Texas; and The Lakes, Nevada.
Outside the U.S. Citicorp owns major corporate premises in various cities
throughout the world including Buenos Aires; Caracas; Dusseldorf; Hong Kong;
Lewisham and London, United Kingdom; Madrid; Manila; Mexico City; Paris; Rio de
Janeiro; Sao Paulo; and Tokyo. Approximately 47% of the space Citicorp occupies
worldwide is owned by Citicorp.
EFFECTS OF INFLATION
The impact of inflation on Citicorp and other financial institutions is
significantly different from that on industries that require a high proportion
of investment in fixed assets. The assets and liabilities of a financial
institution are primarily monetary in nature. During periods of inflation,
monetary assets lose value in terms of purchasing power, and monetary
liabilities have corresponding purchasing power gains. The financial statements
and other data appearing in this annual report, and in particular the discussion
of price risk management on pages 41 and 42, illustrate how Citicorp operates in
an environment of changing interest rates, foreign exchange rates, and
inflationary trends.
85
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CITICORP
(Registrant)
/s/ Charles E. Long
- -------------------
Charles E. Long
Executive Vice President and Secretary
February 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on February 25, 1997 by the following persons in the capacities
indicated:
/s/ Victor J. Menezes /s/ Thomas E. Jones
- --------------------- -------------------
Victor J. Menezes Thomas E. Jones
Executive Vice President Executive Vice President
Chief Financial Officer Principal Financial Officer(1)
(1) Responsible for financial control, tax, accounting, and reporting.
John S. Reed (Citicorp's Principal Executive Officer) and the Directors of
Citicorp (listed below) executed a power of attorney appointing Charles E. Long
their attorney-in-fact, empowering him to sign this report on their behalf.
D. Wayne Calloway Rozanne L. Ridgway
Paul J. Collins H. Onno Ruding
Kenneth T. Derr Robert B. Shapiro
John M. Deutch Frank A. Shrontz
Reuben Mark Franklin A. Thomas
Richard D. Parsons Edgar S. Woolard, Jr.
William R. Rhodes
EXHIBITS, FINANCIAL STATEMENTS SCHEDULES,
AND REPORTS ON FORM 8-K
Financial Statements filed for Citicorp and Subsidiaries:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Stockholders' Equity
Consolidated Statement of Cash Flows
Citicorp filed a Current Report on Form 8-K dated October 15, 1996 (Item
5), which report included a summary of the consolidated operations of Citicorp
for the three- and nine-month periods ended September 30, 1996. Citicorp filed a
Current Report on Form 8-K dated January 21, 1997 (Item 5), which report
included a summary of the consolidated operations of Citicorp for the year ended
December 31, 1996.
Calculation of Ratio of Income to Fixed Charges and Financial Data
Schedules are filed herewith and the Indenture and Supplemental Indenture
relating to certain Subordinated Debt Securities of Citicorp are filed herewith
by incorporation by reference.
Citicorp's principal subsidiaries and their place of incorporation or
organization include:
Citibank, N.A. USA
Citibank (Nevada), N.A. USA
Citibank (South Dakota), N.A. USA
Citibank Overseas Investment
Corporation USA
Citicorp Holdings, Inc. Delaware
Citicorp Mortgage, Inc. Delaware
Citicorp Real Estate, Inc. Delaware
Citibank Delaware Delaware
Citibank (New York State) New York
Citibank Privatkunden A.G. Germany
Citibank A.G. Germany
Citibank Canada Canada
Citibank Espana Spain
Citibank, Federal Savings Bank USA
Citibank International plc United Kingdom
Citibank Investments, Ltd. United Kingdom
Citibank Limited Australia
Citibank Malaysia Malaysia
Citibank Mexico, S.A. Grupo
Financiero Citibank Mexico
Citibank (Switzerland) Switzerland
Citicorp Banking Corporation Delaware
Citicorp Securities, Inc. Delaware
Citicorp North America, Inc. Delaware
Citicorp Venture Capital Ltd. New York
Court Square Capital Limited Delaware
The Student Loan Corporation Delaware
Citicorp USA, Inc. Delaware
Banco Citibank S.A. Brazil
Citibank Belgium S.A./N.V. Belgium
Citicorp Leasing, Inc. Delaware
Citibank a.s. (Czech Republic) Czech Republic
Citicorp Finanziaria S.p.A. Italy
Citicorp's Restated Certificate of Incorporation, as amended, By-Laws,
Instruments Defining the Rights of Securities Holders, and certain other
material contracts, including employee benefit plans and indentures and
constituent instruments, have been previously filed with the Securities and
Exchange Commission as exhibits to various Citicorp registration statements and
periodic reports.
Stockholders may obtain copies of such documents by writing to Citicorp,
Corporate Governance Department, 399 Park Avenue, Mezzanine, New York, New York
10043.
Powers of Attorney of Directors Reed, Calloway, Collins, Derr, Deutch,
Mark, Parsons, Rhodes, Ridgway, Ruding, Shapiro, Shrontz, Thomas, and Woolard as
Directors and/or officers of Citicorp are filed herewith.
86
CITICORP AND CITIBANK DIRECTORS' COMMITTEES
AUDIT COMMITTEES: SUPERVISE INDEPENDENT AUDITS AND OVERSEE THE ESTABLISHMENT OF
APPROPRIATE ACCOUNTING POLICIES FOR CITICORP AND CITIBANK, N.A.
Members Citicorp & Citibank, N.A.: Robert B. Shapiro, Chairman; John M. Deutch,
Reuben Mark, Richard D. Parsons and Rozanne L. Ridgway.
The Audit Committees of Citicorp and Citibank, N.A. (the "committee"), whose
members are all independent outside directors, meet with members of senior
management as the committee deems appropriate.
Its principal functions include reviews of: the audit plans, scope of audit and
audit findings of both independent auditors and the corporation's internal
corporate audit group; significant tax and legal matters; reports on credit
portfolios and processes; and internal controls. Further, it is the
responsibility of this committee to recommend to the Board the annual
appointment of the independent auditors. The Board accepted the recommendation
that KPMG Peat Marwick LLP be retained for 1997 and this proposal will be
presented to the stockholders for approval at the Annual Meeting.
The findings of internal and independent auditors, financial controllers and
external regulatory agencies are reviewed. Responses to their findings and
corrective action plans are monitored to ensure that appropriate follow-up
measures are taken in a timely manner. These are reviewed with and without the
presence of management. The committee also meets privately with KPMG Peat
Marwick LLP and the Chief Auditor.
It is also the function of this committee to review the accounting policies used
in preparing the financial statements of Citicorp and Citibank, N.A.
/s/ ROBERT B. SHAPIRO
ROBERT B. SHAPIRO
COMMITTEE ON DIRECTORS: RECOMMENDS QUALIFIED CANDIDATES FOR MEMBERSHIP ON THE
BOARDS OF DIRECTORS OF CITICORP AND CITIBANK, N.A.
Members: John S. Reed, Chairman; D. Wayne Calloway, Reuben Mark, Frank A.
Shrontz and Franklin A. Thomas.
The Committee on Directors solicits recommendations for prospective directors
and, consistent with the needs of the corporation and representation of the
various services and customers, recommends the approval of a candidate. The
nominees are then presented to the Board, which proposes the slate of directors
to be submitted to the stockholders at the Annual Meeting. In addition, the
committee is charged with keeping current and recommending changes in directors'
compensation.
/s/ JOHN S. REED
JOHN S. REED
COMMITTEE ON SUBSIDIARIES AND CAPITAL (CITICORP)
Members: Paul J. Collins, Chairman; D. Wayne Calloway, Kenneth T. Derr, Reuben
Mark, Richard D. Parsons and Edgar S. Woolard, Jr.
The Committee is responsible for reviewing 1) the corporation's capital
structure, position and planning; 2) the financial position of the principal
subsidiaries of Citicorp including, but not limited to, Citibank, N.A.; 3) the
corporation's subsidiary structure and processes for managing subsidiaries; 4)
the adequacy of corporate insurance coverage; and 5) the conduct of Citicorp's
subsidiaries and affiliates in providing fiduciary and investment services. The
Chairman of the committee reports periodically to the Citicorp and Citibank,
N.A. Boards of Directors.
/s/ PAUL J. COLLINS
PAUL J. COLLINS
CONSULTING COMMITTEE (CITIBANK, N.A.)
Members: Kenneth T. Derr, H. Onno Ruding and Edgar S. Woolard, Jr.
This committee, composed of those Citicorp directors who are not also directors
of Citibank, N.A., attends all meetings of the Board of Directors of Citibank,
N.A. and remains available to Citibank's Board as consultants on an "as needed"
basis.
/s/ JOHN S. REED
JOHN S. REED
EXECUTIVE COMMITTEE: PROVIDES BACKUP FOR THE BOARDS OF DIRECTORS OF CITICORP AND
CITIBANK, N.A.
Members Citicorp: Kenneth T. Derr, Frank A. Shrontz, Franklin A. Thomas and
Edgar S. Woolard, Jr.
Members Citibank, N.A.: Any three directors in attendance at a regular meeting
of the Board of Directors where a quorum is not present.
These committees act on behalf of the Boards of Directors should an urgent
matter arise that requires a decision before the Board is next scheduled to
meet. The Executive Committee has nearly all the powers of the Boards, except
for certain powers expressly reserved to the Boards. The Chairman and the Vice
Chairmen are ex-officio members.
/s/ JOHN S. REED
JOHN S. REED
PERSONNEL COMMITTEE: OVERSEES EMPLOYEE POLICIES AND PROGRAMS OF CITICORP AND
CITIBANK, N.A.
Members: Frank A. Shrontz, Chairman; D. Wayne Calloway, Kenneth T. Derr,
Franklin A. Thomas and Edgar S. Woolard, Jr.
The Personnel Committee reviews and approves compensation policy and other
personnel-related programs to maintain an environment at Citicorp and Citibank,
N.A. that attracts and retains people of high capability, commitment and
integrity. In addition, the committee oversees succession planning.
/s/ FRANK A. SHRONTZ
FRANK A. SHRONTZ
PUBLIC ISSUES COMMITTEE: REVIEWS CITICORP'S POLICIES AND PERFORMANCE ON MATTERS
OF PUBLIC CONCERN.
Members: Franklin A. Thomas, Chairman; John M. Deutch, Rozanne L. Ridgway and
Frank A. Shrontz.
The Public Issues Committee's mission is to assure that the public interest is
maintained in the performance of Citicorp's business roles. The committee
reviews the corporation's policies, postures, practices and programs relating to
public issues of significance to Citicorp and the public at large.
/s/ FRANKLIN A. THOMAS
FRANKLIN A. THOMAS
87
CITICORP AND CITIBANK, N.A. DIRECTORS
The Boards of Directors of Citicorp and Citibank, N.A. meet on the third Tuesday
of the month to administer the affairs of the organizations. Certain specific
operations and areas of the Corporation and the Bank are regularly monitored by
the Directors' committees, whose activities are described on the preceding page.
+Director of Citicorp
*Director of Citibank, N.A.
D. WAYNE CALLOWAY+* RICHARD D. PARSONS+* FRANK A. SHRONTZ+*
Former Chairman and President Chairman Emeritus
Chief Executive Officer Time Warner, Inc. The Boeing Company
PepsiCo, Inc.
JOHN S. REED+* FRANKLIN A. THOMAS+*
PAUL J. COLLINS+* Chairman Former President
Vice Chairman Citicorp and Citibank, N.A. The Ford Foundation
Citicorp and Citibank, N.A.
WILLIAM R. RHODES+* EDGAR S. WOOLARD, JR+.
KENNETH T. DERR+ Vice Chairman Chairman
Chairman and Citicorp and Citibank, N.A. E.I. du Pont de Nemours &
Chief Executive Officer Company
Chevron Corporation ROZANNE L. RIDGWAY+*
Former Assistant Secretary of
JOHN M. DEUTCH+* State for Europe and Canada
Institute Professor
Massachusetts Institute H. ONNO RUDING+
of Technology Vice Chairman
Citicorp and Citibank, N.A.
REUBEN MARK+*
Chairman and ROBERT B. SHAPIRO+*
Chief Executive Officer Chairman, President and
Colgate-Palmolive Company Chief Executive Officer
Monsanto Company
88
COUNTRY CORPORATE OFFICERS
ALGERIA ECUADOR KOREA SAUDI ARABIA
Kamal B. Driss Benjamin Franco Robert A. Wilson, Jr. Robert S. Eichfeld
ANGOLA EGYPT LEBANON SENEGAL
Graham A. Hurst David W. Watson Walid Alamuddin Kandolo Kasongo
ARGENTINA EL SALVADOR LUXEMBOURG SINGAPORE
Carlos M. Fedrigotti Juan A. Miro Steven J. Fee Shehzad Naqvi
ARUBA FINLAND MACAU SLOVAKIA
Juan de Dianous Stephen W. McClintock Stephen H. Long David C. Francis
AUSTRALIA FRANCE MALAYSIA SOUTH AFRICA
Thomas M. McKeon Claude Jouven Sunil Sreenivasan Terence M. Davidson
AUSTRIA GABON MEXICO SPAIN
A. Walter Hoellmer Nuhad K. Saliba Julio A. de Quesada Amador Huertas
BAHAMAS GERMANY MONACO SRI LANKA
M. Carmen Butler Friedrich W. Menzel Miklos I. Vasarhelyi Nihal Welikala
BAHRAIN GREECE MOROCCO SUDAN
Mohammed E. Al-Shroogi Dimitris P. Krontiras Reza Ghaffari Adnan A. Mohamed
BANGLADESH GUAM NEPAL SWEDEN
Srinivasan Sridhar Rashid M. Habib Pravin Batra James E. Morrow
BELGIUM GUATEMALA NETHERLANDS SWITZERLAND
Victor O. Toledo Juan A. Miro Chris I. Devries Philippe Holderbeke
BOLIVIA HAITI NEW ZEALAND TAIWAN
Fernando Anker Gladys M. Coupet Bradden Nowland Brian T. Clayton
BRAZIL HONDURAS NIGERIA TANZANIA
Roberto V. do Valle Sebastian Paredes Michel A. Accad Emeka Emuwa
BRUNEI HONG KONG NORWAY THAILAND
Page W. Stockwell Stephen H. Long Per Kumle Shaukat Tarin
CANADA HUNGARY OMAN TRINIDAD AND TOBAGO
Richard E. Lint Richard D. Jackson Ravi Bhatia Steve M. Bideshi
CAYMAN ISLANDS INDIA PAKISTAN TUNISIA
M. Carmen Butler David P. Conner Syed Sajjad Razvi Eric P. Stoclet
CHANNEL ISLANDS (JERSEY) INDONESIA PANAMA TURKEY
Clive S. Jones Colin G. Woolcock Eduardo C. Urriola Dardo A. Sabarots
CHILE IRELAND PARAGUAY UNITED ARAB EMIRATES
Ricardo J. Angles Aidan M. Brady Antonio Uribe Ahmed S. Bin Brek
CHINA ISRAEL PERU UNITED KINGDOM
John M. Beeman Ronny F. Strauss Gustavo C. Marin Ian D. Cormack
COLOMBIA ITALY PHILIPPINES URUGUAY
Eric R. Mayer Sergio Ungaro Suresh Maharaj Douglas L. Peterson
COSTA RICA JAMAICA POLAND VENEZUELA
Henry Comber Peter H. Moses Marcel Polk Juan de Dianous
COTE D'IVOIRE JAPAN PORTUGAL VIETNAM
Robert Thornton Masamoto Yashiro Alexander G. van Tienhoven Bradley C. Lalonde
CZECH REPUBLIC JORDAN PUERTO RICO VIRGIN ISLANDS (U.S.)
David R. Ansell Suhair Al-Ali Arthur P. Zeller Arthur P. Zeller
DENMARK KAZAKSTAN ROMANIA ZAIRE
Ineke Bussemaker Richard L. Smith David F. Garner Mulongo J-C Masangu
DOMINICAN REPUBLIC KENYA RUSSIA ZAMBIA
Robert D. Matthews, Jr. Paul Fletcher Stuart M. Lawson Sanjeev Anand
CORPORATE STATE OFFICERS (U.S.)
CALIFORNIA FLORIDA MISSOURI NEW YORK
Frits F. Seegers Carlos Palomares Kevin M. Kessinger Pamela P. Flaherty
COLORADO ILLINOIS NEVADA SOUTH DAKOTA
Robert A. Gottlieb Howard C. Morgan Wilfried Jackson Thomas W. Jones
CONNECTICUT MARYLAND NEW MEXICO TEXAS
Kenneth O. Danilo Michael J. Looney Edward J. Consroe Mark J. Devine
DELAWARE
Richard T. Collins
89
STOCKHOLDER INFORMATION
NOTICE OF THE ANNUAL MEETING
The Annual Meeting of Stockholders will be held on Wednesday, April 9, 1997, at
9:00 a.m., in the James L. Knight International Center, Ashe Auditorium, 400
S.E. Second Avenue, Miami, Florida 33131.
A formal notice of this meeting, together with a proxy and a proxy statement,
has been included with this annual report. Stockholders are urged to sign and
return their proxies promptly to assure that the stock of the Corporation will
be represented as fully as possible at the meeting.
Citicorp has approximately 52,000 common stockholders of record. About 83% of
the Citicorp shares entitled to vote were voted in person or by proxy at the
last annual stockholders' meeting on April 16, 1996.
Additional copies of this annual report are available. Write to Citicorp,
Corporate Affairs, 850 Third Avenue, 13th Floor, New York, NY 10043.
Copies of the written transcript and tape recordings of the proceedings at
Citicorp stockholders' meetings are available to Citicorp stockholders at cost
from Citicorp, Corporate Governance Department, 399 Park Avenue, Mezzanine, New
York, NY 10043.
Supplemental financial data are published quarterly and are available from
Citicorp, Corporate Affairs, 850 Third Avenue, 13th Floor, New York, NY 10043.
TRANSFER AGENT AND REGISTRAR
Citibank, N.A., Issuer Services, Box 4855, New York, NY 10043
CO-TRANSFER AGENTS AND CO-REGISTRANTS
ChaseMellon Shareholder Services
400 South Hope Street
4th Floor
Los Angeles, California 90071
Att: Ron Lug
First Chicago Trust Company
P.O. Box 2506
Suite 4659
Jersey City, New Jersey 07303-2506
Att: John Ryan
Montreal Trust Company
151 Front Street West
Toronto, Ontario
Canada M5J 2N1
Att: Liz Ko
JAPANESE SHAREHOLDER SERVICE ORGANIZATION
AND PAYING BANK
The Yasuda Trust and Banking Company, Limited
Stock Transfer Department
1-17-7, Saga, Koto-ku,
Tokyo, Japan
CITICORP STOCK LISTED
New York Stock Exchange Zurich Stock Exchange
Chicago Stock Exchange Geneva Stock Exchange
Pacific Stock Exchange Basle Stock Exchange
London Stock Exchange Toronto Stock Exchange
Amsterdam Stock Exchange Dusseldorf Stock Exchange
Tokyo Stock Exchange Frankfurt Stock Exchange
Securities and Exchange Commission
Washington, DC 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, 1996,
Commission File Number 1-5738
CITICORP[Logo]
- --------------------------------------------------------------------------------
Incorporated in the State of Delaware
IRS Employer Identification Number: 13-2614988
Address: 399 Park Avenue, New York, NY 10043
Telephone: (800) 285-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) AND (g)
OF THE ACT:
A list of Citicorp securities registered pursuant to Section 12(b) and (g) of
the Securities Exchange Act of 1934 is available from Citicorp, Corporate
Governance Department, 399 Park Avenue, Mezzanine, New York, NY 10043.
As of December 31, 1996, Citicorp had 463,217,018 shares of common stock
outstanding.
Citicorp (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.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein nor in any amendment to this Form 10-K but is contained in
Citicorp's 1997 Proxy Statement incorporated by reference in Part III of this
Form 10-K.
The aggregate market value of Citicorp common stock held by non-affiliates of
Citicorp on January 31, 1997 was approximately $53.4 billion.
Certain information has been incorporated by reference as described herein into
Part III of this annual report from Citicorp's 1997 Proxy Statement.
90
CITICORP SERVICE
We continue to build a worldwide organization dedicated to serving our customers
and we take pride in the quality of service we deliver. The following addresses
and phone numbers are part of our service commitment to help you obtain needed
information and prompt assistance.
STOCKHOLDER INFORMATION
- --------------------------------------------------------------------------------
For information about your stockholdings including: your Dividend Reinvestment
Account, Lost Stock Certificates, Stock Transfer, Estate Inquiries/Transfer
Requirements, contact: Citibank, N.A.,
c/o Citicorp Data Distribution, Inc., Customer Service Unit,
P.O. Box 308, Paramus, NJ 07653. (800) 422-2066
- --------------------------------------------------------------------------------
For all other stockholder concerns, contact:
Citicorp Corporate Governance, 399 Park Avenue, Mezzanine,
New York, NY 10043: (212) 559-4822
- --------------------------------------------------------------------------------
To view or retrieve copies of this annual report and other
Citicorp financial reports: http://www.citibank.com
- --------------------------------------------------------------------------------
To request copies of Citicorp financial reports: (212) 559-0233
- --------------------------------------------------------------------------------
INSTITUTIONAL INVESTORS: (212) 559-2718
- --------------------------------------------------------------------------------
GENERAL INFORMATION
For general information, directory assistance, or other inquiries:
(800) 285-3000
- --------------------------------------------------------------------------------
CUSTOMER INFORMATION
- --------------------------------------------------------------------------------
CitiPhone Banking (consumer bank accounts)
California/Nevada (800) 756-7047
Connecticut (800) 224-8781
Florida (800) 374-9800
Illinois
within area codes 312 and 708 (312) 263-6660
outside 312 and 708 area codes (800) 274-6660
Maryland and Washington, D.C. (800) 926-1067
New York (Upstate) (800) 934-1609
New York Metropolitan Area
within area codes:
212, 718, 516, 914 and 201 627-3999
outside the tri-state area (800) 627-3999
TDD Service (800) 945-0258
Citibank ATM Locator Service (800) 248-4286
Citibank Cards (MasterCard or Visa) (800) 950-5114
Citibank Gold Card Customer Service (800) 950-5118
TDD Service (800) 325-2865
outside the U.S. call collect: (605) 335-2222
Citibank Private Bank (800) 967-1600
(212) 559-5959
Citicorp Investment Services (800) 846-5200
(212) 820-2380
Citicorp Mortgage Inc. 800-MORTGAGE
Citibank Student Loans (800) 967-2400
Diners Club/Carte Blanche (800) 234-6377
outside the U.S. call collect: (303) 799-1504
Citicorp Travelers Checks (800) 645-6556
outside the U.S. call collect: (813) 623-1709
Citicorp Insurance (800) 497-4860
- --------------------------------------------------------------------------------
91
(R) CITICORP AND CITIBANK ARE REGISTERED TRADEMARKS
(C) COPYRIGHT CITICORP 1997. ALL RIGHTS RESERVED.
PRINTED IN THE U.S.A. Printed on recycled paper. [Logo]
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ D. Wayne Calloway
--------------------------------------
Signature
D. Wayne Calloway
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Paul J. Collins
--------------------------------------
Signature
Paul J. Collins
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Kenneth T. Derr
--------------------------------------
Signature
Kenneth T. Derr
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ John M. Deutch
--------------------------------------
Signature
John M. Deutch
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Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Reuben Mark
--------------------------------------
Signature
Reuben Mark
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Richard D. Parsons
--------------------------------------
Signature
Richard D. Parsons
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ John S. Reed
--------------------------------------
Signature
John S. Reed
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ William R. Rhodes
--------------------------------------
Signature
William R. Rhodes
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Rozanne L. Ridgway
--------------------------------------
Signature
Rozanne L. Ridgway
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ H. Onno Ruding
--------------------------------------
Signature
H. Onno Ruding
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Robert B. Shapiro
--------------------------------------
Signature
Robert B. Shapiro
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Frank A. Shrontz
--------------------------------------
Signature
Frank A. Shrontz
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Franklin A. Thomas
--------------------------------------
Signature
Franklin A. Thomas
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date
CITICORP
POWER OF ATTORNEY
The undersigned Director and/or Officer of CITICORP, a Delaware corporation,
hereby constitutes and appoints, subject to adoption and approval by the
Citicorp Board of Directors of the final form of Annual Report and Form 10-K for
the fiscal year ended December 31, 1996, each of Charles E. Long, Executive Vice
President and Secretary, George E. Seegers and Patricia K. Perlman his true and
lawful attorney-in-fact and agent, in the name and on behalf of the undersigned,
to do any and all acts and things to comply with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under the Exchange Act of said Annual Report and Form
10-K of Citicorp, including specifically, but without limiting the generality of
the foregoing, the power and authority to sign the name of the undersigned in
his capacity as a Director and/or Officer of Citicorp to the appropriate
signature pages of said Annual Report and Form 10-K to be filed with the
Securities and Exchange Commission; and the undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, shall do or
cause to be done by virtue hereof.
/s/ Edgar S. Woolard, Jr.
--------------------------------------
Signature
Edgar S. Woolard, Jr.
--------------------------------------
Name (please print)
February 25, 1997
--------------------------------------
Date