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FINANCIAL INFORMATION

1

THE COMPANY

        Citigroup Inc. (Citigroup and, together with its subsidiaries, the Company) is a diversified global financial services holding company whose businesses provide a broad range of financial services to consumer and corporate customers with more than 200 million customer accounts doing business in more than 100 countries. Citigroup was incorporated in 1988 under the laws of the State of Delaware.

        The Company's activities are conducted through the Global Consumer, Global Corporate and Investment Bank (GCIB), Global Wealth Management, Global Investment Management (GIM) and Proprietary Investment Activities business segments.

        The Company has completed certain strategic business acquisitions during the past three years, details of which can be found in Note 2 to the Consolidated Financial Statements.

        The Company is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 registered with, and subject to examination by, the Board of Governors of the Federal Reserve System (FRB). Certain of the Company's subsidiaries are subject to supervision and examination by their respective federal and state authorities. Additional information on the Company's regulation and supervision can be found within the "Regulation and Supervision" section beginning on page 138.

        At December 31, 2004, the Company had approximately 141,000 full-time and 7,000 part-time employees in the United States and approximately 146,000 full-time employees outside the United States.

        The periodic reports of Citicorp, Citigroup Global Markets Holdings Inc., The Student Loan Corporation (STU), The Travelers Insurance Company (TIC) and Travelers Life and Annuity Company (TLAC), subsidiaries of the Company that make filings pursuant to the Securities Exchange Act of 1934, as amended (the Exchange Act), provide additional business and financial information concerning those companies and their consolidated subsidiaries.

        The principal executive offices of the Company are located at 399 Park Avenue, New York, New York 10043, telephone number 212 559 1000. Additional information about Citigroup is available on the Company's Web site at www.citigroup.com. Citigroup's annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K, and all amendments to these reports, are available free of charge through the Company's Web site by clicking on the "Investor Relations" page and selecting "SEC Filings." The Securities and Exchange Commission (SEC) Web site contains reports, proxy and information statements, and other information regarding the Company at www.sec.gov.

GLOBAL CONSUMER

        Global Consumer delivers a wide array of banking, lending, insurance and investment services through a network of local branches, offices, and electronic delivery systems, including ATMs, Automated Lending Machines (ALMs), the Internet, and the Primerica Financial Services (Primerica) sales force. The Global Consumer businesses serve individual consumers as well as small businesses. Global Consumer includes Cards, Consumer Finance, Retail Banking and Other Consumer.

        Cards provides MasterCard, VISA, Diner's Club and private label credit and charge cards. North America Cards includes the operations of Citi Cards, the Company's primary brand in North America, and Mexico Cards. International Cards provides credit and charge cards to customers in Europe, the Middle East and Africa (EMEA), Japan, Asia and Latin America.

        Consumer Finance provides community-based lending services through branch networks, regional sales offices and cross-selling initiatives with other Citigroup businesses. The business of CitiFinancial is included in North America Consumer Finance. As of December 31, 2004, North America Consumer Finance maintained 2,642 offices, including 2,452 in the U.S., Canada, and Puerto Rico, and 190 offices in Mexico, while International Consumer Finance maintained 1,481 sales points, including 405 branches and 512 ALMs in Japan. Consumer Finance offers real-estate-secured loans, unsecured and partially secured personal loans, auto loans and loans to finance consumer-goods purchases. In addition, CitiFinancial, through certain subsidiaries and third parties, makes available various credit-related and other insurance products to its U.S. customers.

        Retail Banking provides banking, lending, investment and insurance services to customers through retail branches, electronic delivery systems, and the Primerica sales force. In North America, Retail Banking includes the operations of Retail Distribution, the Commercial Business, Prime Home Finance, Student Loans, Primerica, and Mexico Retail Banking. Retail Distribution delivers banking, lending, investment and insurance services through 775 branches in the U.S. and Puerto Rico and through Citibank Online, an Internet bank. The Commercial Business provides equipment leasing and financing, and banking services to small- and middle-market businesses. The Prime Home Finance business originates and services mortgages for customers across the U.S. The Student Loan business is comprised of the origination and servicing of student loans in the U.S. The business operations of Primerica involve the sale, mainly in North America, of life insurance and other products manufactured by its affiliates, including Smith Barney mutual funds, CitiFinancial mortgages and personal loans and the products of our Life Insurance and Annuities business. The Primerica sales force is composed of more than 100,000 independent representatives. Mexico Retail Banking consists of the branch banking operations of Banamex, which maintains 1,349 branches. International Retail Banking consists of 1,129 branches and provides full-service banking and investment services in EMEA, Japan, Asia, and Latin America. In addition to North America, the Commercial Business consists of the suite of products and services offered to small- and middle-market businesses in the international regions.

2

GLOBAL CORPORATE AND INVESTMENT BANK

        Global Corporate and Investment Bank (GCIB) provides corporations, governments, institutions and investors in approximately 100 countries with a broad range of financial products and services. GCIB includes Capital Markets and Banking, Transaction Services and Other Corporate.

        Capital Markets and Banking offers a wide array of investment and commercial banking services and products, including investment banking, debt and equity trading, institutional brokerage, advisory services, foreign exchange, structured products, derivatives, and lending.

        Transaction Services is comprised of Cash Management, Trade Services and Global Securities Services (GSS). Cash Management and Trade Services provide comprehensive cash management and trade finance for corporations and financial institutions worldwide. GSS provides custody and fund services to investors such as insurance companies and pension funds, clearing services to intermediaries such as broker/dealers and depository and agency/trust services to multinational corporations and governments globally.

GLOBAL WEALTH MANAGEMENT

        Global Wealth Management is comprised of the Smith Barney Private Client and Global Equity Research businesses and the Citigroup Private Bank. Through its Smith Barney network of Financial Consultants and Private Bank offices, Global Wealth Management is one of the leading providers of wealth management services to high-net-worth and affluent clients in the world.

        Smith Barney provides investment advice, financial planning and brokerage services to affluent individuals, small and mid-size companies, non-profits and large corporations through a network of more than 12,000 Financial Consultants in more than 500 offices primarily in the U.S. In addition, Smith Barney provides independent client-focused research to individuals and institutions around the world.

        A significant portion of Smith Barney's revenue is generated from fees earned by managing client assets as well as commissions earned as a broker for its clients in the purchase and sale of securities. Additionally, Smith Barney generates net interest revenue by financing customers' securities transactions and other borrowing needs through security-based lending. Smith Barney also receives commissions and other sales and service revenues through the sale of proprietary and third-party mutual funds. As part of Smith Barney, Global Equity Research produces equity research to serve both institutional and individual investor clients. The majority of expenses for Global Equity Research are allocated to the Global Equities business within GCIB and Smith Barney businesses.

        Private Bank provides personalized wealth management services for high-net-worth clients in 33 countries and territories. With a global network of Private Bankers and Product Specialists, Private Bank leverages its extensive experience with clients' needs and its access to Citigroup to provide clients with comprehensive investment management, investment finance and banking services. Investment management services include investment funds management and capital markets solutions, as well as trust, fiduciary and custody services. Investment finance provides standard and tailored credit services including real estate financing, commitments and letters of credit, while Banking includes services for deposit, checking and savings accounts, as well as cash management and other traditional banking services.

GLOBAL INVESTMENT MANAGEMENT

        Global Investment Management offers a broad range of life insurance, annuity and asset management products and services distributed to institutional and retail clients. Global Investment Management includes Life Insurance and Annuities and Asset Management.

        Life Insurance and Annuities comprises Travelers Life and Annuity (TLA) and International Insurance Manufacturing (IIM). TLA offers retail annuity, institutional annuity, individual life insurance and Corporate Owned Life Insurance (COLI) products. The retail annuity products include individual fixed and variable deferred annuities and payout annuities. Individual life insurance includes term, universal, and variable life insurance. These products are primarily distributed through CitiStreet Retirement Services (CitiStreet), Smith Barney, Primerica, Citibank and affiliates, and a nationwide network of independent agents and the outside broker/dealer channel. The COLI products are variable universal life products distributed through independent specialty brokers. The institutional annuity products include institutional pensions, including guaranteed investment contracts, payout annuities, group annuities sold to employer-sponsored retirement and savings plans, structured settlements and funding agreements. IIM provides annuities, credit, life, health, disability and other insurance products internationally, leveraging the existing distribution channels of the Consumer Finance, Retail Banking and Asset Management (retirement services) businesses. IIM has operations in Mexico, Asia, EMEA, Latin America and Japan. TLA and IIM include the realized investment gains/losses from sales on certain insurance-related investments.

        Asset Management includes Citigroup Asset Management, the Citigroup Alternative Investments (CAI) institutional business, the Banamex asset management and retirement services businesses and Citigroup's other retirement services businesses in North America and Latin America. These businesses offer institutional, high-net-worth and retail clients a broad range of investment alternatives from investment centers located around the world. Products and services offered include mutual funds, closed-end funds, separately managed accounts, unit investment trusts, alternative investments (including hedge funds, private equity and credit structures), variable annuities through affiliated and third-party insurance companies, and pension administration services.

PROPRIETARY INVESTMENT ACTIVITIES

        Proprietary Investment Activities is comprised of Citigroup's proprietary Private Equity investments and Other Investment Activities which includes Citigroup's proprietary investments in hedge funds and real estate investments, investments in countries that refinanced debt under the 1989 Brady Plan or plans of a similar nature, ownership of St. Paul Travelers Companies Inc. shares and Citigroup's Alternative Investments business, for which the net profits on products distributed through Citigroup's Asset Management, Smith Barney and Private Bank businesses are reflected in the respective distributor's income statement through net revenues.

CORPORATE/OTHER

        Corporate/Other includes net treasury results, corporate expenses, certain intersegment eliminations, the results of discontinued operations, the cumulative effect of accounting change and taxes not allocated to the individual businesses.

3

Citigroup Inc. and Subsidiaries

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA

(1)

Revenues, net of interest expense, and benefits, claims, and credit losses, in the table above are disclosed on an owned basis (under Generally Accepted Accounting Principles (GAAP)). If this table were prepared on a managed basis, which includes certain effects of securitization activities, including receivables held for securitization and receivables sold with servicing retained, there would be no impact to net income, but revenues, net of interest expense, and benefits, claims, and credit losses, would each have been increased by $5.079 billion, $4.750 billion, $4.123 billion, $3.568 billion and $2.459 billion in 2004, 2003, 2002, 2001 and 2000, respectively. Although a managed basis presentation is not in conformity with GAAP, management believes it provides a representation of performance and key indicators of the credit card business that is consistent with the way management reviews operating performance and allocates resources. Furthermore, investors utilize information about the credit quality of the entire managed portfolio as the results of both the held and securitized portfolios impact the overall performance of the Cards business. See the discussion of the Cards business on page 22.

(2)

On August 20, 2002, Citigroup completed the distribution to its stockholders of a majority portion of its remaining ownership interest in Travelers Property Casualty Corp. (TPC). Following the distribution, Citigroup began accounting for TPC as discontinued operations. See Note 3 to the Consolidated Financial Statements.

(3)

Accounting changes of ($47) million in 2002 resulted from the adoption of the remaining provisions of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). Accounting changes of ($42) million and ($116) million in 2001 resulted from the adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), and the adoption of Emerging Issues Task Force (EITF) Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" (EITF 99-20), respectively.

(4)

All amounts have been adjusted to reflect stock splits.

(5)

During 2004, the Company deconsolidated the subsidiary issuer trusts in accordance with FIN 46-R. For regulatory capital purposes these trust securities remain a component of Tier 1 Capital. See "Capital Resources and Liquidity" section on page 62.

(6)

The return on average common stockholders' equity is calculated using net income after deducting preferred stock dividends.

(7)

Risk capital is defined as the amount of capital required to absorb potential unexpected economic losses resulting from extremely severe events over a one-year time period. Return on risk capital is calculated as net income divided by average risk capital. Invested capital is defined as risk capital plus Goodwill and Intangible assets excluding Mortgage Servicing Rights, which are a component of risk capital. Return on invested capital is calculated using income adjusted to exclude a net internal charge Citigroup levies on the goodwill and intangible assets of each business offset by each business's share of the rebate of the goodwill and intangible asset charge. Return on risk capital and return on invested capital are non-GAAP performance measures. Management uses return on risk capital to assess businesses' operating performance and to allocate Citigroup's balance sheet and risk capital capacity. Return on invested capital is used to assess returns on potential acquisitions and to compare long-term performance of businesses with differing proportions of organic and acquired growth. For a further discussion on risk capital, see page 44.

4

MANAGEMENT'S DISCUSSION AND ANALYSIS

2004 IN SUMMARY

        Citigroup's fundamental strengths are its global presence, distribution breadth, leading brand and broad customer relationships. These strengths combined to generate a net income of $17.05 billion in 2004. Income was well diversified by both product and region, as shown in the charts below. Return on common equity was 17% for 2004. Results in 2004 included a $4.95 billion after-tax charge related to the 2004 second quarter WorldCom and Litigation Reserve Charge. Results also reflect a $756 million after-tax gain on sale of the Company's equity investment in Samba. Excluding the impact of the charge and the gain, net income increased 19% and return on common equity was 20%.

INCOME FROM CONTINUING OPERATIONS

[EDGAR REPRESENTATION OF GRAPHIC DATA]

2004 NET INCOME BY SEGMENT*

[EDGAR REPRESENTATION OF GRAPHIC DATA]

*

Excludes Proprietary Investment Activities income of $743 million and Corporate/Other loss of $56 million.

2004 NET INCOME BY REGION*

[EDGAR REPRESENTATION OF GRAPHIC DATA]

*

Excludes Proprietary Investment Activities income of $743 million and Corporate/Other loss of $56 million

DILUTED EARNINGS PER SHARE—INCOME FROM CONTINUING OPERATIONS

[EDGAR REPRESENTATION OF GRAPHIC DATA]

        We continued to strengthen our business franchises through strategic acquisitions in 2004. Acquisitions during the year included the KorAm Bank, the consumer finance business of Washington Mutual, Inc., and the announced purchase of First American Bank in Texas, which is pending regulatory approval. Additionally, we maintained our focus on disciplined capital allocation, which led to the announced or completed disposition of businesses that were not part of its long-term core strategy. These included the sale of the Company's equity investment in Samba, the sale of the Transportation Finance business of CitiCapital (resulting in an after-tax gain of approximately $100 million) and the sale of a portion of the electronic funds transfer business (resulting in an after-tax gain of $180 million).

        Revenues increased 11% from 2003, reaching $86.2 billion. North America and international revenues increased 10% and 18%, respectively. Revenue increases were driven by both organic growth and new acquisitions and were led by 15% growth in our global consumer businesses. Revenue growth reflected double-digit growth rates in Cards, Transaction Services, Smith Barney and Global Investment Management. Higher equity market valuations led to increased results in Proprietary Investment Activities.

        Revenue growth was driven by strong increases in customer balances. Retail Banking loans increased 25%, Consumer Finance loans increased 10%, and Cards receivables increased 19%. Corporate loans increased 16% and Transaction Services assets under custody increased 23%. Smith Barney client assets increased 8% and Private Bank client volumes increased 15%.

TOTAL DEPOSITS

[EDGAR REPRESENTATION OF GRAPHIC DATA]

        Operating expenses increased 33% from the previous year. Included in expenses were a $7.915 billion ($4.95 billion after-tax) charge for the WorldCom and Litigation Reserve Charge, a $400 million ($244 million after-tax) charge related to closing the Japan Private Bank and reserves of $196 million ($151 million after-tax) related to the expected resolution of the previously disclosed SEC investigation of transfer agent matters. Excluding these legal and

5

regulatory charges, expenses increased 12% and reflected increased investment spending (3%), expenses from acquisitions and the impact of foreign exchange (6%), an increase in other legal expenses (2%) and higher operating expenses (1%). Investment spending included, among other things, the addition of 558 new consumer finance and retail banking branches globally, increased advertising and marketing and investments in technology.

NET REVENUE AND OPERATING EXPENSE

[EDGAR REPRESENTATION OF GRAPHIC DATA]

        The favorable global credit environment had a significant impact on Citigroup's 2004 results as credit reserve releases of $2.0 billion led to a decrease in total credit costs of $1.8 billion.

        The effective tax rate decreased 255 basis points to 28.6% for the year, reflecting the release of valuation allowances related to the utilization of foreign tax credits and reserves related to tax settlements and changes in estimates, and the impact of indefinitely invested international earnings.

        Citigroup's equity capital base and trust-preferred securities grew to more than $115 billion at December 31, 2004. Stockholders' equity increased by $11.3 billion during 2004 to $109.3 billion. The Company distributed $8.3 billion in dividends to common shareholders.

RETURN ON COMMON EQUITY

[EDGAR REPRESENTATION OF GRAPHIC DATA]

        The Company's Board of Directors increased the quarterly common dividend by 14% during 2004 and by an additional 10% in January 2005, bringing the current quarterly payout to 44 cents per share.

TOTAL CAPITAL (TIER 1 AND TIER 2)

[EDGAR REPRESENTATION OF GRAPHIC DATA]

        During 2004, we did not achieve our expectation of double-digit income growth. The WorldCom Litigation and Reserve Charge drove a decline in net income of 5% versus 2003.

        In the 2004 second quarter, the Company recorded a $4.95 billion after-tax charge for settlement of the WorldCom class action lawsuit and an increase in litigation reserves related to Enron and other pending lawsuits and legal proceedings. This charge was an important step in addressing the financial impact of resolving these matters.

        In the third quarter, the Financial Services Agency of Japan (FSA) issued an administrative order that required Citigroup's Private Bank to suspend all new transactions with customers and to discontinue operations by September 30, 2005. The administrative order was the result of an inspection by the FSA, which determined that there were fundamental problems in Citibank Japan's internal controls and governance structure, principally in its Private Bank operations. We have accepted the basis for the sanctions and have placed the utmost priority on complying with the FSA's directives. In the fourth quarter, the Company recorded a $244 million after-tax charge related to closing the Japan Private Bank.

        During the third and fourth quarters, the Company recorded reserves of $196 million ($151 million after-tax) related to the expected resolution of the previously disclosed SEC investigation of transfer agent matters. These reserves now fully cover the financial terms that the SEC staff has agreed to recommend to the Commission for resolution of this matter.

        In August, our European government bond trading desk executed a transaction in the European government bond market that involved large executions in various government bonds and futures contracts. We regret having executed this transaction as we failed to consider its potential impact on our clients and other stakeholders, including European regulators and treasuries, and because it did not meet our standards. The U.K.'s Financial Services Authority and other European regulators are investigating this transaction and we are fully cooperating.

        During 2004, the Company took numerous steps towards the goal of improving the way we do business, including the strengthening of the independence and capabilities of our internal control and compliance structure. In the third and fourth quarter, Chuck Prince, CEO of Citigroup, personally met with more than 35,000 employees to emphasize our goal of becoming the most respected global financial services company.

6

Outlook for 2005

        We enter 2005 with momentum and optimism. Our primary goals for 2005 include taking steps to become the most respected global financial institution; growing our Global Consumer franchise; growing our International businesses; and ensuring our Global Corporate and Investment Bank is best in class.

        Throughout 2005, we will implement many enhancements to our training, development and compensation processes designed to achieve our goal of becoming the most respected global financial institution. In 2004, we increased the independence of risk management functions, including internal control and compliance. We expect to continue to enhance our risk management, control and compliance functions in 2005.

        During the coming year, we expect to expand our global branch network, further develop our brand through advertising and marketing and invest in technology to increase our competitiveness. We also expect to continue to make strategically targeted acquisitions that will extend our geographic reach and enhance our product capabilities. We will renew our focus on expense discipline and building cost advantages, and we expect to continue to apply disciplined capital management to allocate capital to our highest growth and highest return opportunities.

        We anticipate that the credit environment globally will remain favorable; however, we do not expect the level of credit reserve releases in 2004 to repeat in 2005.

        We also do not expect the level of tax-reserve releases and tax benefits that occurred in 2004 to repeat in 2005. Accordingly, we anticipate a higher effective tax rate in 2005, which we estimate to be more in line with the 2003 effective tax rate.

        As we experienced during the second half of 2004, we expect that increasing interest rates will continue to have a negative impact on our Treasury results.

        In January 2005, we announced the sale of Traveler's Life & Annuity, including substantially all of our international insurance businesses, to MetLife for approximately $11.5 billion subject to closing adjustments. The businesses included in the sale transaction had earnings of $901 million in 2004. The transaction is expected to result in an after-tax gain of approximately $2.0 billion, subject to closing adjustments, and to make available approximately $6.0 billion of Tier I Capital. We expect the transaction to close in the summer of 2005. Proceeds from the sale will be redeployed in higher growth and higher return opportunities to maximize value for our shareholders.

        We plan to finalize our exit of the Japan Private Bank by the end of the 2005 third quarter, which will result in costs in connection with implementing the exit plan, and additional charges may be incurred. In addition, we will continue to work and cooperate with our regulators in Europe to seek a conclusion to investigations relating to the European Bond transaction.

        Limited staff reductions will be made in the Global Corporate and Investment Bank in early 2005. The reductions will affect an estimated 1,400 staff and will result in an approximately $275 million pre-tax charge during the 2005 first quarter.

        Citigroup's financial results are closely tied to the external economic environment. Movements in interest rates and foreign exchange rates present both opportunities and risks for the Company. Weakness in global economies, credit deterioration, inflation, and geopolitical uncertainty are examples of risks that could adversely impact earnings.

        A detailed review and outlook for each of our businesses is included in the discussions that follow.

        Certain of the statements above are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 73.

7

Events in 2004

Settlement of WorldCom Class Action Litigation and Charge for Regulatory and Legal Matters

        During the 2004 second quarter, Citigroup recorded a charge of $7.915 billion ($4.95 billion after-tax) related to a settlement of class action litigation brought on behalf of purchasers of WorldCom securities and an increase in litigation reserves (WorldCom and Litigation Reserve Charge).

        Subject to the terms of the settlement and its eventual approval by the courts, Citigroup will make a payment of approximately $2.575 billion, or $1.59 billion after-tax, to the settlement class, which consists of all persons who purchased or otherwise acquired publicly traded securities of WorldCom during the period from April 29, 1999 through and including June 25, 2002. The payment will be allocated between purchasers of WorldCom stock and purchasers of WorldCom bonds. Plaintiffs' attorneys' fees will come out of the settlement amount.

        In connection with the settlement of the WorldCom class action, the Company reevaluated and increased its reserves for numerous other lawsuits and legal proceedings arising out of alleged misconduct in connection with:

(i)

underwritings for, and research coverage of, WorldCom;



(ii)

underwritings for Enron and other transactions and activities related to Enron and Dynegy;



(iii)

transactions and activities related to research coverage of companies other than WorldCom; and



(iv)

transactions and activities related to securities sold in initial public offerings.

        As of December 31, 2004, the Company's litigation reserve for these matters, net of the amount to be paid upon final approval of the WorldCom class action settlement, was $6.64 billion on a pretax basis.

        The Company believes that this reserve is adequate to meet all of its remaining exposure for these matters. However, in view of the large number of these matters, the uncertainties of the timing and outcome of this type of litigation, the novel issues presented, and the significant amounts involved, it is possible that the ultimate costs of these matters may exceed or be below the reserve. The Company will continue to defend itself vigorously in these cases, and seek to resolve them in the manner management believes is in the best interest of the Company. See "Legal Proceedings" on page 141.

Sale of Samba Financial Group

        On June 15, 2004, the Company sold, for cash, its 20% equity investment in The Samba Financial Group (Samba), formerly known as the Saudi American Bank, to the Public Investment Fund, a Saudi public sector entity. Citigroup recognized an after-tax gain of $756 million ($1.168 billion pretax) on the sale during the 2004 second quarter. The gain was recognized equally between Global Consumer and GCIB.

Credit Improvement Performance

        During the past two years, the world-wide credit environment has continuously improved, as evidenced by declining cash-basis loan balances and lower delinquency rates. Accordingly, the Company has reduced its Allowance for Credit Losses.

        During 2004, the Company released $2.004 billion of reserves, consisting of $900 million from GCIB's reserves and $1.104 billion from Global Consumer's reserves. The GCIB releases consisted of a $737 million release in Capital Markets and Banking and a $163 million release in Transaction Services. The Global Consumer releases consisted of a $691 million net release in the Cards portfolio, a $339 million net release in Retail Banking, and a $74 million net release in Consumer Finance. At December 31, 2004, the Company's total allowance for loans, leases and commitments was $11.869 billion.

        During 2003, the Company released $508 million of reserves, consisting of $300 million in GCIB and $208 million in Global Consumer. At December 31, 2003, the Company's total allowance for loans, leases and commitments was $13.243 billion.

        Management evaluates the adequacy of loan loss reserves by analyzing probable loss scenarios and economic and geopolitical factors that impact the portfolios. See pages 14 - 15 and pages 49 - 54 for an additional discussion of the reserve levels and credit process. See also Note 11 to Notes to Consolidated Financial Statements.

Divestiture of CitiCapital's Transportation Finance Business

        On November 22, 2004, the Company reached an agreement to sell CitiCapital's Transportation Finance Business based in Dallas and Toronto to GE Commercial Finance for total cash consideration of approximately $4.4 billion. The sale, which was completed on January 31, 2005, resulted in an after-tax gain of approximately $100 million.

        The Transportation Finance business is part of the Company's Global Consumer Retail Banking business and provides financing, leasing, and asset-based lending to the commercial trucking industry.

Reserve for the Securities and Exchange Commission's Transfer Agent Investigation

        During the 2004 fourth quarter, the Company recorded a $131 million after-tax reserve related to the expected resolution of the previously disclosed SEC investigation of transfer agent matters, which, combined with a $20 million after-tax reserve taken in the 2004 third quarter, fully covers the financial terms that the SEC staff has agreed to recommend to the Commission for resolution of this matter. See "Legal Proceedings" on page 141.

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Shutdown of the Private Bank in Japan and Related Charge and Other Activities in Japan

        The Financial Services Agency of Japan issued an administrative order against Citibank Japan in September 2004. This order requires Citigroup to exit all private banking operations in Japan by September 30, 2005. Accordingly, the Private Bank division of Citibank Japan suspended all new transactions with its customers beginning on September 29, 2004.

        In connection with the exiting of private banking operations in Japan, the Company is performing a comprehensive review of the Private Bank's customers and products to develop an appropriate exit plan. During the 2004 fourth quarter, the Company recorded a $400 million ($244 million after-tax) charge related to its anticipated exit plan implementation (Exit Plan Charge). Implementation of the plan may result in additional charges in future periods.

        The Company's Private Bank operations in Japan had total revenues, net of interest expense, of $200 million and net income of $39 million (excluding the Exit Plan Charge) for 2004 and $264 million and $83 million, respectively, for 2003.

        On October 25, 2004, Citigroup announced that it has decided to wind down Cititrust and Banking Corporation, a licensed trust bank in Japan, after concluding that there were internal control, compliance and governance issues in that subsidiary.

Acquisition of First American Bank

        On August 24, 2004, Citigroup announced it will acquire First American Bank in Texas (FAB). The closing of the transaction is subject to and pending applicable regulatory approvals. The transaction will establish Citigroup's retail branch presence in Texas, giving Citigroup more than 100 branches, $3.5 billion in assets and approximately 120,000 new customers in the state.

Acquisition of KorAm Bank

        On April 30, 2004, Citigroup completed its tender offer to purchase all the outstanding shares of KorAm Bank (KorAm) at a price of KRW 15,500 per share in cash. In total, Citigroup has acquired 99.8% of KorAm's outstanding shares for a total of KRW 3.14 trillion ($2.7 billion). The results of KorAm are included in the Consolidated Financial Statements from May 2004 forward.

        KorAm is a leading commercial bank in Korea, with 223 domestic branches and total assets at June 30, 2004 of $37 billion.

        During the 2004 fourth quarter, KorAm was merged with the Citibank Korea branch to form Citibank Korea Inc.

Divestiture of Citicorp Electronic Financial Services Inc.

        During January 2004, the Company completed the sale for cash of Citicorp's Electronic Financial Services Inc. (EFS) for $390 million (pretax). EFS is a provider of government-issued benefits payments and prepaid stored value cards used by state and federal government agencies, as well as of stored value services for private institutions. The sale of EFS resulted in an after-tax gain of $180 million in the 2004 first quarter.

Acquisition of Washington Mutual Finance Corporation

        On January 9, 2004, Citigroup completed the acquisition of Washington Mutual Finance Corporation (WMF) for $1.25 billion in cash. WMF was the consumer finance subsidiary of Washington Mutual, Inc. WMF provides direct consumer installment loans and real-estate-secured loans, as well as sales finance and the sale of insurance. The acquisition included 427 WMF offices located in 26 states, primarily in the Southeastern and Southwestern United States, and total assets of $3.8 billion. Citicorp has guaranteed all outstanding unsecured indebtedness of WMF in connection with this acquisition. The results of WMF are included in the Consolidated Financial Statements from January 2004 forward.

2005 Subsequent Event

Sale of Travelers Life & Annuity and Substantially All International Insurance Businesses

        On January 31, 2005, the Company announced an agreement for the sale of Citigroup's Travelers Life & Annuity and substantially all of Citigroup's international insurance businesses to MetLife, Inc. (MetLife) for $11.5 billion, subject to closing adjustments.

        The businesses being acquired by MetLife generated total revenues of $5.2 billion and net income of $901 million for the twelve months ended December 31, 2004. The businesses had total assets of $96 billion at December 31, 2004.

        The transaction has been approved by the Boards of Directors of both companies. Under the terms of the transaction, Citigroup will receive $1.0 billion to $3.0 billion in MetLife equity securities and the balance in cash, which will result in an after-tax gain of approximately $2.0 billion, subject to closing adjustments.

        The transaction sharpens the Company's focus on its long-term growth franchises. The sale proceeds will be deployed to higher return and higher growth opportunities and to maximize returns to shareholders.

        The transaction encompasses Travelers Life & Annuity's U.S. businesses and its international operations other than Citigroup's life business in Mexico. International operations include wholly owned insurance companies in the United Kingdom, Belgium, Australia, Brazil, Argentina, and Poland; joint ventures in Japan and Hong Kong; and offices in China.

        In connection with the transaction, Citigroup and MetLife have entered into ten-year agreements under which MetLife will make products available through certain Citigroup distribution channels.

        The transaction is subject to certain domestic and international regulatory approvals, as well as other customary conditions to closing, and is expected to close during the 2005 second or third quarter.

9

Argentina

        The restructuring of customer annuity liabilities was approved by the Argentine Ministry of Insurance on July 3, 2003. During the 2003 fourth quarter, the Company contributed $55 million of new capital to its Argentine Global Investment Management companies, primarily to fund the voluntary annuity restructuring plan. During 2004, additional capital totaling $184 million was injected principally to meet local regulatory requirements.

        The insurance companies in Argentina are included in the announced sale of Travelers Life and Annuity disclosed above which was announced by the Company on January 31, 2005.

        The Argentine government launched its $100 billion debt exchange offer on January 14, 2005. The exchange offer is expected to close on February 25, 2005. The Global Investment Management business in Argentina tendered all of its original U.S. dollar bonds (approximately $1.6 billion of AUMs). The Company tendered the defaulted government bonds it held for its own account on February 18, 2005. At this time, any financial impact resulting from the tender is not expected to be significant to the Company.

        The Company believes it has a sound basis to bring a claim as a result of various actions of the Argentine government. A recovery on such a claim could serve to reduce the economic loss of the Company in Argentina. However, the amount of any recovery would be affected by the debt exchange described above and by events described on page 11.

        Certain of the above statements in this section are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 73.

Events in 2003

Acquisition of Sears' Credit Card and Financial Products Business

        On November 3, 2003, Citigroup acquired the Sears' Credit Card and Financial Products business (Sears), the eighth largest portfolio in the U.S. $28.6 billion of gross receivables were acquired for a 10% premium of $2.9 billion and annual performance payments over the next ten years based on new accounts, retail sales volume and financial product sales. The Company recorded $5.8 billion of intangible assets and goodwill as a result of this transaction. In addition, the companies signed a multi-year marketing and servicing agreement across a range of each company's businesses, products and services. The results of Sears are included in the Consolidated Financial Statements from November 2003 forward.

Acquisition of The Home Depot's Private-Label Portfolio

        In July 2003, Citigroup completed the acquisition of The Home Depot private-label portfolio (Home Depot), which added $6 billion in receivables and 12 million accounts. The results of Home Depot are included in the Consolidated Financial Statements from July 2003 forward.

Common Stock Dividend Increase

        On July 14, 2003, the Company's Board of Directors approved a 75% increase in the quarterly dividend on the Company's common stock to 35 cents a share from 20 cents a share. On January 20, 2004, the Company increased its quarterly dividend by 14% by declaring a 40 cent dividend on its common stock.

Settlement of Certain Legal and Regulatory Matters

        On July 28, 2003, Citigroup entered into final settlement agreements with the Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank of New York (FED), and the Manhattan District Attorney's Office that resolved on a civil basis their investigations into Citigroup's structured finance work for Enron. The Company also announced that its settlement agreement with the SEC concluded that agency's investigation into certain Citigroup work for Dynegy. The agreements were reached by Citigroup (and, in the case of the agreement with the OCC, Citibank, N.A.) without admitting or denying any wrongdoing or liability, and the agreements do not establish wrongdoing or liability for the purpose of civil litigation or any other proceeding. Citigroup paid from previously established reserves an aggregate amount of $145.5 million in connection with these settlements.

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        On April 28, 2003, Salomon Smith Barney Inc., now named Citigroup Global Markets Inc. (CGMI), announced final agreements with the SEC, the National Association of Securities Dealers (NASD), the New York Stock Exchange (NYSE) and the New York Attorney General (as lead state among the 50 states, the District of Columbia and Puerto Rico) to resolve on a civil basis all of their outstanding investigations into its research and IPO allocation and distribution practices (the Research Settlement). CGMI reached these final settlement agreements without admitting or denying any wrongdoing or liability. The Research Settlement does not establish wrongdoing or liability for purposes of any other proceeding. Citigroup paid from previously established reserves an aggregate amount of $300 million and committed to spend an additional $75 million to provide independent third-party research at no charge to clients in connection with these settlements.

Impact from Argentina's Economic Changes

        As a result of an improving credit environment, the Global Consumer allowance for credit losses was reduced by $100 million in 2003 and $39 million in 2004 and the Global Corporate and Investment Bank reduced allowance for credit losses by approximately $164 million in 2004.

        In 2003, the Company wrote off $127 million of its government-issued compensation notes against previously established reserves. This write-off was triggered by, among other things, the government's disallowance of compensation for pesification of certain credit card and overdraft loans. While the notes were adjusted, the disallowance is still being negotiated. The initial payment of approximately $57 million due under the compensation notes was received in August 2003. Additional payments under the compensation notes totaling $119 million and $61 million were received when due in 2004 and February 2005, respectively. In 2003, the Company also recognized a $13 million impairment charge on its government Patriotic Bonds. Payments required under bank deposit Amparos (judicial orders requiring previously dollar-denominated deposits that had been re-denominated at government rates to be immediately repaid at market exchange rates) were down significantly from 2002; losses recorded in 2003, net of the $40 million reserve release, were $2 million; and losses recorded in 2004, net of a $6 million reserve release, were $25 million.

        The Global Investment Management businesses in Argentina recorded pretax charges of $208 million in 2003. These charges were comprised of: $124 million in write-downs resulting from the mandatory exchange of Argentine Government Promissory Notes (GPNs) for Argentine government bonds denominated in U.S. dollars; a $44 million write-off of impaired Deferred Acquisition Costs reflecting changes in underlying cash flow estimates for the business; $20 million of losses related to the restructuring of voluntary customer annuity liability balances; and $20 million of losses related to a premium deficiency in the death and disability insurance business. Additional write-offs of impaired Deferred Acquisition Costs of $11 million were taken in 2004.

Events in 2002

Impact from Argentina's Economic Changes

        Throughout 2002, Argentina experienced significant political and economic changes including severe recessionary conditions, high inflation and political uncertainty. The government of Argentina implemented substantial economic changes, including abandoning the country's fixed U.S. dollar-to-peso exchange rate and asymmetrically redenominating substantially all of the banking industry's loans, deposits (which were also restricted) and other assets and liabilities previously denominated in U.S. dollars into pesos at different rates. As a result of the impact of these government actions, the Company changed its functional currency in Argentina from the U.S. dollar to the Argentine peso. Additionally, the government issued certain compensation instruments to financial institutions to compensate them in part for losses incurred as a result of the redenomination events. The government also announced a 180-day moratorium against creditors filing foreclosures or bankruptcy proceedings against borrowers. Later in the year, the government modified the terms of certain of their Patriotic Bonds, making them less valuable. The government actions, combined with the severe recessionary economic situation and the devaluation of the peso, adversely impacted Citigroup's business in Argentina.

        During 2002, Citigroup recorded a total of $1.704 billion in net pretax charges, as follows: $1,018 million in net provisions for credit losses; $284 million in investment write-downs; $232 million in losses relating to Amparos (representing judicial orders requiring previously dollar-denominated deposits and insurance contracts that had been redenominated at government rates to be immediately repaid at market exchange rates); $98 million of write-downs of Patriotic Bonds; a $42 million restructuring charge; and a $30 million net charge for currency redenomination and other foreign currency items that includes a benefit from compensation instruments issued in 2002.

        In addition, the impact of the devaluation of the peso during 2002 produced foreign currency translation losses that reduced Citigroup's equity by $595 million, net of tax.

11

Discontinued Operations

        Travelers Property Casualty Corp. (TPC) (an indirect wholly owned subsidiary of Citigroup on December 31, 2001) sold 231 million shares of its Class A common stock representing approximately 23.1% of its outstanding equity securities in an initial public offering (the IPO) on March 27, 2002. In 2002, Citigroup recognized an after-tax gain of $1.158 billion as a result of the IPO. In connection with the IPO, Citigroup entered into an agreement with TPC that provided that, in any fiscal year in which TPC records asbestos-related income statement charges in excess of $150 million, net of any reinsurance, Citigroup would pay to TPC the amount of any such excess up to a cumulative aggregate of $520 million after-tax. A portion of the gross IPO gain was deferred to offset any payments arising in connection with this agreement. During 2002 and 2003, $159 million and $361 million, respectively, were paid pursuant to this agreement.

        On August 20, 2002, Citigroup completed the distribution to its stockholders of a majority portion of its remaining ownership interest in TPC (the distribution). This non-cash distribution was tax-free to Citigroup, its stockholders and TPC. The distribution was treated as a dividend to stockholders for accounting purposes that reduced Citigroup's Additional Paid-In Capital by approximately $7.0 billion. Following the distribution and subsequent merger of TPC and the St. Paul Companies (St. Paul Travelers) on April 1, 2004, Citigroup remains a holder of approximately 6.0% of TPC's outstanding equity securities, which are carried at fair value in the Proprietary Investment Activities segment and classified as available-for-sale within Investments on the Consolidated Balance Sheet.

        Following the August 20, 2002 distribution, the results of TPC were reported by the Company separately as discontinued operations for all periods. TPC represented the primary vehicle by which Citigroup engaged in the property and casualty insurance business.

Charge for Regulatory and Legal Matters

        During the 2002 fourth quarter, the Company recorded a $1.3 billion after-tax charge ($0.25 per diluted share) related to the establishment of reserves for regulatory settlements and related civil litigation.

Acquisition of Golden State Bancorp

        On November 6, 2002, Citigroup completed its acquisition of 100% of Golden State Bancorp (GSB) in a transaction in which Citigroup paid approximately $2.3 billion in cash and issued 79.5 million Citigroup common shares. The total transaction value of approximately $5.8 billion was based on the average price of Citigroup shares, as adjusted for the effect of the TPC distribution. The results of GSB are included from November 2002 forward.

Sale of 399 Park Avenue

        During 2002, the Company sold its 399 Park Avenue, New York City headquarters building. The Company is currently the lessee of approximately 40% of the building with terms averaging 15 years. The sale for $1.06 billion resulted in a pretax gain of $830 million, with $527 million ($323 million after-tax) recognized in 2002 representing the gain on the portion of the building the Company does not occupy, and the remainder to be recognized over the term of Citigroup's lease agreements. The Company recognized $20 million in both 2004 and 2003 of the deferred portion of the gain and $5 million in 2002.

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SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

        The Notes to the Consolidated Financial Statements contain a summary of Citigroup's significant accounting policies, including a discussion of recently issued accounting pronouncements. Certain of these policies as well as estimates made by management are considered to be important to the portrayal of the Company's financial condition, since they require management to make difficult, complex or subjective judgments and estimates, some of which may relate to matters that are inherently uncertain. Additional information about these policies can be found in Note 1 to the Consolidated Financial Statements. Management has discussed each of these significant accounting policies, the related estimates and judgments that Management has made with the Audit and Risk Management Committee of the Board of Directors.

        Certain of the statements below are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 73.

Valuations of Financial Instruments

        Investments and trading account assets and liabilities, held by the Global Corporate and Investment Bank, Global Investment Management and Proprietary Investment Activities segments, include fixed maturity and equity securities, derivatives, investments in private equity and other financial instruments. Citigroup carries its investments and trading account assets and liabilities at fair value if they are considered to be available-for-sale or trading securities. For a substantial majority of the Company's investments and trading account assets and liabilities, fair values are determined based upon quoted prices or validated models with externally verifiable model inputs. Changes in values of available-for-sale securities are recognized in a component of stockholders' equity net of taxes, unless the value is impaired and the impairment is not considered to be temporary. Impairment losses that are not considered temporary are recognized in earnings. The Company conducts regular reviews to assess whether other-than-temporary impairment exists. Changing economic conditions, including global and regional conditions, and conditions related to specific issuers or industries, could adversely affect these values. Changes in the fair values of trading account assets and liabilities are recognized in earnings. Private equity subsidiaries also carry their investments at fair value with changes in value recognized in earnings.

        If available, quoted market prices provide the best indication of fair value. If quoted market prices are not available for fixed maturity securities, equity securities, derivatives or commodities, the Company discounts the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. Alternatively, matrix or model pricing may be used to determine an appropriate fair value. It is Citigroup's policy that all models used to produce valuations for the published financial statements be validated by qualified personnel independent from those who created the models. The determination of market or fair value considers various factors, including time value and volatility factors, underlying options, warrants and derivatives; price activity for equivalent synthetic instruments; counterparty credit quality; the potential impact on market prices or fair value of liquidating the Company's positions in an orderly manner over a reasonable period of time under current market conditions; and derivative transaction maintenance costs during the period. For derivative transactions, trading profit at inception is recognized when the fair value of that derivative is obtained from a quoted market price, supported by comparison to other observable market transactions, or based upon a valuation technique incorporating observable market data. The Company defers trade-date gains or losses on derivative transactions where the fair value is not determined based upon observable market transactions and market data. The deferral is recognized in income when the market data become observable or over the life of the transaction. Changes in assumptions could affect the fair values of investments and trading account assets and liabilities.

        For our available-for-sale and trading portfolios amounting to assets of $489.5 billion and $414.5 billion and liabilities of $135.5 billion and $121.9 billion at December 31, 2004 and 2003, respectively, fair values were determined in the following ways: externally verified via comparison to quoted market prices or third-party broker quotations; by using models that were validated by qualified personnel independent of the area that created the model and inputs that were verified by comparison to third-party broker quotations or other third-party sources; or by using alternative procedures such as comparison to comparable securities and/or subsequent liquidation prices. At December 31, 2004 and 2003, respectively, approximately 96.2% and 96.5% of the available-for-sale and trading portfolios' gross assets and liabilities (prior to netting positions pursuant to FIN 39) are considered verified and approximately 3.8% and 3.5% are considered unverified. Of the unverified assets, at December 31, 2004 and 2003, respectively, approximately 66.4% and 66.0% consist of cash products, where independent quotes were not available and/or alternative procedures were not feasible, and 33.6% and 34.0% consist of derivative products where either the model was not validated and/or the inputs were not verified due to the lack of appropriate market quotations. Such values are actively reviewed by management.

        In determining the fair values of our securities portfolios, management also reviews the length of time trading positions have been held to identify aged inventory. During 2004, the monthly average aged inventory designated as available-for-immediate-sale was approximately $7.6 billion compared with $5.4 billion in 2003. Inventory positions that are both aged and whose values are unverified amounted to $2.9 billion and less than $2.1 billion at December 31, 2004 and 2003, respectively. The fair value of aged-inventory is actively monitored and, where appropriate, is discounted to reflect the implied illiquidity for positions that have been available-for-immediate-sale for longer than 90 days. At December 31, 2004 and 2003, such valuation adjustments amounted to $83 million and $68 million, respectively.

        Citigroup's private equity subsidiaries include subsidiaries registered as Small Business Investment Companies and other subsidiaries that engage exclusively in venture capital activities. Investments held by private equity subsidiaries related to the Company's venture capital activities amounted to $3.8 billion and $4.4 billion at December 31, 2004 and 2003, respectively. For investments in publicly traded securities held by private equity subsidiaries amounting to five positions with a fair value of approximately $0.4 billion and five positions with a fair value of approximately $0.9 billion at December 31, 2004 and 2003, respectively, fair value is based upon quoted market prices. These publicly traded securities include thinly traded securities, large block holdings, restricted shares or other special situations, and the quoted market price is discounted to produce an estimate of the attainable fair value for the securities. To determine the amount of the discount, the Company uses a valuation methodology that is based on the British Venture Capital Association's guidelines. Such discounts ranged from 10% to 40% of the investments' quoted prices in 2004 and from 10% to 50% in 2003. For investments that are not publicly traded and are held by private equity subsidiaries amounting to approximately $3.5 billion for each of the years ended December 31, 2004 and 2003, estimates of fair value are made

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periodically by management based upon relevant third-party arm's length transactions, current and subsequent financings and comparisons to similar companies for which quoted market prices are available. Independent consultants may be used to provide valuations periodically for certain investments that are not publicly traded, or the valuations may be done internally. Internal valuations are reviewed by personnel independent of the investing entity.

        See the discussion of trading account assets and liabilities and investments in Summary of Significant Accounting Policies in Note 1 to the Consolidated Financial Statements. For additional information regarding the sensitivity of these instruments, see "Market Risk Management Process" on page 55.

Allowance for Credit Losses

        The allowance for credit losses represents management's estimate of probable losses inherent in the lending portfolio. This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, and the loss recovery rates, among other things, are considered in making this evaluation, as are the size and diversity of individual large credits. Changes in these estimates could have a direct impact on the credit costs in any quarter and could result in a change in the allowance. At December 31, 2004 and 2003, respectively, the total allowance for credit losses, which includes reserves for unfunded lending commitments and letters of credit, totaled $3.490 billion and $4.155 billion for the Corporate loan portfolio and $8.379 billion and $9.088 billion for the Consumer loan portfolio. Attribution of the allowance is made for analytic purposes only, and the entire allowance of $11.869 billion and $13.243 billion at December 31, 2004 and 2003, respectively, is available to absorb probable credit losses inherent in the portfolio, including letters of credit and unfunded commitments.

        During 2004, Corporate cash-basis loans decreased $1.513 billion from $3.419 billion in 2003 to $1.906 billion, and net credit losses decreased from $1.211 billion in 2003 to $130 million, reflecting overall improvement in the credit quality of the portfolio. The Company also completed the implementation of Citigroup's internal credit risk-rating standards for the Banamex loan portfolio. All of these factors resulted in a decline in the Corporate allowance, with the release during 2004 of $900 million in reserves. Although the 2004 credit environment led to benefits from loan loss releases and declines in cash-basis loans, it is unlikely these benefits will repeat in 2005.

        Consumer net credit losses increased from $7.555 billion in 2003 to $8.471 billion in 2004. This increase was due to the net credit losses related to the Sears and Home Depot portfolios, which were acquired during 2003. Excluding these two portfolios, the Consumer net credit losses declined from $7.176 billion in 2003 to $5.985 billion in 2004. In addition, Consumer loans on which accrual of interest has been suspended decreased from $6.085 billion to $5.463 billion. The improvement in the overall credit performance of the Consumer portfolio resulted in a decrease of the Consumer allowance, with the net release during 2004 of $1.104 billion in reserves.

        Consumer credit loss ratios for 2005 are expected to remain relatively constant to the fourth quarter 2004 levels, with some slight improvement in the North America Cards and Consumer Finance portfolios. Full-year loss ratios for 2005 are expected to improve against prior-year levels due to credit loss rates that declined during 2004.

        The allowance for credit losses attributed to the Corporate portfolio is established through a process that begins with statistical estimates of probable losses inherent in the portfolio for all performing loans plus certain de minimis non-performing loans less than $10 million. These estimates are based upon: (1) Citigroup's internal system of credit risk ratings, which are analogous to the risk ratings of the major rating agencies; (2) the Corporate portfolio database; and (3) historical default and loss data, including rating agency information regarding default rates from 1983 to 2003, and internal data, dating to the early 1970s, on severity of losses in the event of default. This statistical process generates an estimate for losses inherent in the portfolio as well as a one-standard-deviation confidence interval around the estimate.

        The statistical estimate for losses inherent in the portfolio is based on historical average default rates and historical average write-off rates. The one-standard-deviation confidence interval reflects the historical fluctuation of default rates over the credit cycle, the historical variability of loss severity among defaulted loans, and the degree to which there are large obligor concentrations in the global portfolio.

        Next, larger-balance, non-performing, non-homogeneous exposures representing significant individual credit exposures are evaluated based upon the borrower's overall financial condition, resources and payment record; the prospects for support from any financially responsible guarantors; and, if appropriate, the realizable value of any collateral. For these loans, which are deemed impaired, reserves are then calculated based upon an estimate of probable losses. Consideration is given to all available evidence, including, as appropriate, the present value of expected future cash flows discounted at the loan's contractual effective rate, the secondary market value of the loan, and the fair value of collateral less disposal costs.

        The sum of the estimated losses inherent in the total portfolio and the reserves for significant individual non-performing credit exposures are then adjusted by management after considering environmental factors and trends in portfolio indicators, including cash-basis loans, historical and forecasted write-offs, and portfolio concentrations. In addition, management considers the current business strategy and credit process, including credit limit setting and compliance, credit approvals, loan underwriting criteria and loan workout procedures.

        A similar approach is used for determining the credit loss reserve related to unfunded lending commitments and letters of credit.

        Based on this process, the allowance for credit losses attributable to the Corporate portfolio was set at $3.490 billion as of December 31, 2004, compared with $4.155 billion in 2003. These balances include the reserve for unfunded commitments and letters of credit of $600 million for both 2004 and 2003, which are included in other liabilities on the balance sheet.

        For the Consumer portfolios (excluding Commercial Business and KorAm), which consist of smaller-balance, homogeneous loans, including consumer mortgages, installment loans, and revolving credit cards, the loans within each portfolio are collectively evaluated for impairment in order to provide an allowance sufficient to cover all loans within that portfolio that have shown evidence of impairment as of the balance sheet date. The foundation for assessing the adequacy of the allowance for credit losses for Consumer loans is a methodology that estimates the losses inherent in the portfolio at the balance sheet date based on historical delinquency flow rates, charge-off statistics and loss severity. This methodology is applied separately for each individual product within each different geographic region in which the product is offered.

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        Under this method, the portfolio of loans is aged and separated into groups based upon the aging of the loan balances (current, 1 to 29 days past due, 30 to 59 days past due, etc.). The result is a base calculation of inherent losses in the loan portfolio for each applicable business within the Global Consumer segment. Management then evaluates the adequacy of the allowance for credit losses for each business relative to its base calculation after adjusting this base for factors such as economic trends, competitive factors, seasonality, portfolio acquisitions, solicitation of new loans, changes in lending policies and procedures, geographical, product, and other environmental factors, changes in bankruptcy laws, and evolving regulatory standards.

        Citigroup has well-established credit loss recognition criteria for its various consumer loan products. These credit loss recognition criteria are based on contractual delinquency status, consistently applied from period to period and in compliance with the Federal Financial Institutions Examination Council (FFIEC) guidelines (excluding recent acquisitions for which we obtained temporary waivers), including bankruptcy loss recognition. The provision for credit losses is highly dependent on both bankruptcy loss recognition and the time it takes for loans to move through the delinquency buckets and eventually to write-off (flow rates). An increase in the Company's share of bankruptcy losses would generally result in a corresponding increase in net credit losses. For example, a 10% increase in the Company's portion of bankruptcy losses would generally result in a similar increase in net credit losses. In addition, an acceleration of flow rates would also result in a corresponding increase to the provision for credit losses. The precise impact that an acceleration of flow rates would have on the provision for credit losses would depend upon the product and geography mix that comprises the flow rate acceleration.

        For the Commercial Business loan portfolio within Consumer, a statistical model, similar to the one used for the Corporate portfolio, was implemented in 2004 for evaluating the adequacy of the allowance for credit losses. Larger-balance, non-performing, non-homogeneous exposures deemed impaired are evaluated individually while the remaining Commercial Business loan portfolio is evaluated statistically by using internal credit risk ratings and historical default and loss data. Like the Corporate loan portfolio model, this estimate may be adjusted by management after considering other factors such as the portfolio trends and relevant economic indicators.

        Prior to 2004, the credit loss allowance for the Commercial Business portfolio was established based upon an estimate of probable losses inherent in the portfolio for individual loans and leases deemed impaired, and the application of annualized weighted average credit loss ratio to the remaining portfolio. The annualized weighted average credit loss ratio reflects both historical and projected losses. Additional reserves were established to provide for imprecision caused by the use of estimated loss data.

        Based on these methodologies, the allowance for credit losses related to the Consumer portfolios (including Commercial Business) was set at $8.379 billion and $9.088 billion as of December 31, 2004 and 2003, respectively.

        The evaluation of the total allowance includes an assessment of the ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing.

        See the discussions of "Consumer Credit Risk" and "Corporate Credit Risk" on pages 49 and 51, respectively, for additional information.

Securitizations

        Securitization is a process by which a legal entity issues certain securities to investors, which securities pay a return based on the principal and interest cash flows from a pool of loans or other financial assets. Citigroup securitizes credit card receivables, mortgages, and other loans that it originated and/or purchased and certain other financial assets. After securitization of credit card receivables, the Company continues to maintain account relationships with customers. Citigroup also assists its clients in securitizing the clients' financial assets and packages and securitizes financial assets purchased in the financial markets. Citigroup may provide administrative, asset management, underwriting, liquidity facilities and/or other services to the resulting securitization entities, and may continue to service the financial assets sold to the securitization entity.

        There are two key accounting determinations that must be made relating to securitizations. In the case where Citigroup originated or previously owned the financial assets transferred to the securitization entity, a decision must be made as to whether that transfer would be considered a sale under generally accepted accounting principles, resulting in the transferred assets being removed from the Company's Consolidated Balance Sheet with a gain or loss recognized. Alternatively, the transfer would be considered a financing, resulting in recognition of a liability in the Company's Consolidated Balance Sheet. The second key determination to be made is whether the securitization entity must be consolidated by the Company and be included in the Company's Consolidated Financial Statements or whether the entity is sufficiently independent that it does not need to be consolidated.

        If the securitization entity's activities are sufficiently restricted to meet certain accounting requirements to be considered a qualifying special-purpose entity (QSPE), the securitization entity is not consolidated by the seller of the transferred assets. In January 2003, the Financial Accounting Standards Board (FASB) issued a new interpretation on consolidation accounting that was adopted by the Company on July 1, 2003. Under this interpretation, FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46), if securitization entities other than QSPEs meet the definition of a variable interest entity (VIE), the Company must evaluate whether it is the primary beneficiary of the entity and, if so, must consolidate it. The entity would be considered a VIE if it requires additional subordinated financial support or if the equity investors lack certain characteristics of a controlling financial interest. In December 2003, FASB issued a revised version of FIN 46 (FIN 46-R), which the Company implemented in January 2004. This revision included substantial changes from the original FIN 46, including changes in the calculation of the expected losses and expected residual returns. Its impact on the Company's Financial Statements was an increase to assets and liabilities of approximately $1.6 billion. However, most of the Company's securitization transactions continued to meet the criteria for sale accounting and non-consolidation.

        The Company participates in securitization transactions, structured investment vehicles, and other investment funds with its own and with clients' assets totaling $1,698.3 billion at December 31, 2004 and $1,158.7 billion at December 31, 2003.

        Global Consumer primarily uses QSPEs to conduct its securitization activities, including credit card receivables, mortgage loans, student loans and auto loans. Securitizations completed by Global Consumer are for the Company's own account. QSPEs are qualifying special-purpose entities established in accordance with SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 140). The Company is the transferor of assets to these QSPEs and, accordingly, does not consolidate these QSPEs. At December 31, 2004 and 2003,

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respectively, Global Consumer was involved with special-purpose entities (SPEs) with assets of $399.0 billion and $251.3 billion, including QSPEs with assets of $377.7 billion and $226.4 billion.

        GCIB's securitization activities are conducted on behalf of the Company's clients and generate revenues for services provided to the SPEs. GCIB uses SPEs to securitize mortgage-backed securities and clients' trade receivables, to create investment opportunities for clients through collateralized debt obligations (CDOs), and to meet other client needs through structured financing and leasing transactions. Many of the mortgage-backed securities transactions use QSPEs, as do certain CDOs and structured financing transactions. At December 31, 2004 and 2003, respectively, GCIB was involved with SPEs with assets of $988.9 billion and $614.9 billion, including QSPEs with assets amounting to $594.3 billion and $427.5 billion.

        Global Investment Management uses SPEs to create investment opportunities for clients through mutual and money market funds, unit investment trusts, and hedge funds, substantially all of which were not consolidated by the Company at December 31, 2004 and 2003. At December 31, 2004 and 2003, respectively, Global Investment Management was involved with SPEs with assets of $252.5 billion and $231.6 billion.

        Global Wealth Management uses SPEs to structure investment vehicles in order to provide clients with investment alternatives and capital market solutions, substantially all of which were consolidated by the Company at December 31, 2004 and 2003. At December 31, 2004 and 2003, respectively, Global Wealth Management was involved with SPEs with assets of $3.5 billion and $4.5 billion.

        Proprietary Investment Activities invests in various funds as part of its activities on behalf of the Company and also uses SPEs in creating investment opportunities and alternative investment structures. At December 31, 2004 and 2003, respectively, Proprietary Investment Activities was involved with SPEs with assets of $54.4 billion and $56.4 billion.

        VIEs with total assets of approximately $35.6 billion and $36.9 billion were consolidated at December 31, 2004 and 2003, respectively. Additional information on the Company's securitization activities and VIEs can be found in "Off-Balance Sheet Arrangements" on page 70 and in Note 12 to the Consolidated Financial Statements.

Income Taxes

        The Company is subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which the Company operates. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant Governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about the application of these inherently complex tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.

        Disputes over interpretations of the tax laws may be subject to review/adjudication by the court systems of the various tax jurisdictions or may be settled with the taxing authority upon examination or audit.

        The Company reviews these balances quarterly and as new information becomes available, the balances are adjusted, as appropriate.

        SFAS No. 109, "Accounting for Income Taxes" (SFAS 109), requires companies to make adjustments to their financial statements in the quarter that new tax legislation is enacted. In the 2004 fourth quarter, the U.S. Congress passed, and the President signed, into law a new tax bill, "The American Jobs Creation Act of 2004." The Homeland Investment Act (HIA) provision of the American Jobs Creation Act of 2004 is intended to provide companies with a one-time 85% reduction in the U.S. net tax liability on cash dividends paid by foreign subsidiaries in 2005, to the extent that they exceed a baseline level of dividends paid in prior years. The provisions of the Act are complicated, and companies, including Citigroup, are awaiting clarification of several provisions from the Treasury Department. The Company is still evaluating the provision and the effects it would have on the financing of the Company's foreign operations. In accordance with FASB Staff Position FAS 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004" (FSP FAS 109-2), the Company has not recognized any income tax effects of the repatriation provisions of the Act in its 2004 financial statements and will not do so until the above issues are resolved, sometime in 2005. The reasonably possible amounts that may be repatriated in 2005 that would be subject to the provision of the Act range from $0 to $3.2 billion. The related potential income tax effect range from a tax benefit of $0 to a tax benefit of $50 million, under current law. There is a Technical Corrections Bill pending in the U.S. Congress that would amend the computation of the HIA benefit. If this bill is enacted, the range of potential tax benefits would be from a benefit of $0 to a benefit of $150 million, net of the impact of remitting income earned in 2005 that would otherwise have been indefinitely invested overseas.

        See Note 18 to Notes to Consolidated Financial Statements for a further description of the Company's provision for Income Taxes and related income tax assets and liabilities.

Legal Reserves

        The Company is subject to legal, regulatory and other proceedings and claims arising from conduct in the ordinary course of business. These proceedings include actions brought against the Company in its various roles, including acting as a lender, underwriter, broker/dealer or investment advisor. Reserves are established for legal and regulatory claims based upon the probability and estimability of losses and to fairly present, in conjunction with the disclosures of these matters in the Company's financial statements and SEC filings, management's view of the Company's exposure. The Company reviews outstanding claims with internal as well as external counsel to assess probability and estimates of loss. The risk of loss is reassessed as new information becomes available and reserves are adjusted, as appropriate. The actual cost of resolving a claim may be substantially higher than the amount of the recorded reserve. See Note 28 to the Consolidated Financial Statements and the discussion of "Legal Proceedings" beginning on page 141.

ACCOUNTING CHANGES AND FUTURE APPLICATION OF ACCOUNTING STANDARDS

        See Note 1 to the Consolidated Financial Statements for a discussion of Accounting Changes and the Future Application of Accounting Standards.

16

PENSION AND POSTRETIREMENT PLANS

        The Company has several non-contributory defined benefit pension plans covering substantially all U.S. employees and has various defined benefit pension and termination indemnity plans covering employees outside the United States. The U.S.-defined benefit plan provides benefits under a cash balance formula. Employees satisfying certain age and service requirements remain covered by a prior final pay formula. The Company also offers postretirement health care and life insurance benefits to certain eligible U.S. retired employees, as well as to certain eligible employees outside the United States.

        The following table shows the pension expense and contributions for Citigroup's U.S. and foreign plans:

(1)

In 2002, the Company's contributions consisted of $500 million of Citigroup common stock and $695 million in cash.

(2)

In addition, the Company absorbed $18 million, $12 million and $41 million during 2004, 2003 and 2002, respectively, relating to certain investment management fees and administration costs, which are excluded from this table.

        Citigroup common stock comprised 1.2%, 6.45%, and 7.87% of the U.S. plan's assets at December 31, 2004, 2003, and 2002, respectively. The Citigroup U.S. Pension Plan sold approximately $500 million of Citigroup common stock in January of 2004.

        The following table shows the combined postretirement expense and contributions for Citigroup's U.S. and foreign plans:

        All U.S. qualified plans and the funded foreign plans are generally funded to the amounts of the accumulated benefit obligations. Net pension expense for the year ended December 31, 2005 for the U.S. plans is expected to increase by approximately $30 million primarily as a result of lower discount rates. Net pension expense for the years ended December 31, 2004 and 2003 for the U.S. plans increased by $95 million and $77 million, respectively, as a result of the amortization of unrecognized net actuarial losses, lower discount rates, a lower expected return on assets assumption beginning in 2003, and for 2004, an updated mortality table. As the foreign pension plans all use the fair value of plan assets, their pension expense will be directly affected by the actual performance of the plans' assets. This paragraph contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 73.

Expected Rate of Return

        Citigroup determines its assumptions for the expected rate of return on plan assets for its U.S. pension and postretirement plans using a "building block" approach, which focuses on ranges of anticipated rates of return for each asset class. A weighted range of nominal rates is then determined based on target allocations to each asset class. Citigroup considers the expected rate of return to be a longer-term assessment of return expectations and does not anticipate changing this assumption annually unless there are significant changes in economic conditions. This contrasts with the selection of the discount rate, future compensation increase rate, and certain other assumptions, which are reconsidered annually in accordance with generally accepted accounting principles. The expected rate of return was 8.0% at December 31, 2004 and 2003, reflecting the performance of the equity markets. The computation of pension expense for 2004 includes $750 million of expected returns, which represents the 8.0% expected return and is equivalent to 3% of pretax earnings. This expected amount is deducted from the service cost, interest and other components of pension expense to arrive at the net pension expense. Net pension expense for 2003 and 2002 reflects deductions of $700 million and $783 million of expected returns, respectively.

        The following table shows the expected versus actual rate of return on plan assets for the U.S. pension and postretirement plans:

(1)

The expected rate of return was changed from 9.5% to 8.0% in September 2002 when plan assets were revalued in connection with the TPC spin-off.

        In calculating pension expense for the U.S. plan and in determining the expected rate of return, the Company uses the calculated market-related value of plan assets. The year-end allocations are within the plans' target ranges.

        The following table shows the asset allocations for the U.S. plan:

        A similar approach has been taken in selecting the expected rates of return for Citigroup's foreign plans. The expected rate of return for each plan is based upon its expected asset allocation. Market performance over a number of earlier years is evaluated covering a wide range of economic conditions to determine whether there are sound reasons for projecting forward any past trends. The expected rates of return for the foreign plans ranged from 3.25% to 10% for 2004 compared with a range of 3.25% to 10.5% for 2003, and 3.0% to 12.0% in 2002. The wide variation in these rates is a result of differing asset allocations in the plans as well as varying local economic

17

conditions. For example, in certain countries, local law requires that all pension plan assets must be invested in fixed income investments, or in government funds, or in local country securities. Asset allocations for the foreign plans ranged from a combination of 97% fixed income to 3% equities and other investments to a combination of 78% equities and 12% fixed income and other investments at December 31, 2004, compared with an asset allocation range from 100% fixed income investments to a combination of 91% equities and 9% fixed income and other investments at December 31, 2003, and 100% fixed income to a combination of 75% equities and 25% fixed income and other investments at December 31, 2002. Pension expense for 2004 was reduced by $251 million due to the expected return, which impacted pretax earnings by 1%. Actual returns in 2004 were more than the expected returns. Pension expense for 2003 and 2002 was reduced by expected returns of $209 million and $188 million, respectively. Actual returns were higher in 2003 and were lower in 2002 than the expected returns in those years.

        A one percentage-point change in the expected rates of return would have the following effects on pension expense:

Discount Rate

        The discount rates for the U.S. pension and postretirement plans were selected by reference to the Moody's Aa Long-Term Corporate Bond Yield in conjunction with a Citigroup-specific analysis using each plans' specific cash flows to confirm that the Moody's Aa index provided a good basis for selection of the discount rates. Under the analysis, the resulting plan-specific discount rates for the pension and postretirement plans were 5.76% and 5.36%, respectively. Citigroup's policy is to round up to the nearest quarter percent. Accordingly, at December 31, 2004, the Moody's Aa Long-Term Corporate Bond Yield was 5.66% and the discount rate was set at 5.75% for the pension plan and 5.50% for the postretirement plan. At December 31, 2003, the Moody's Aa Long-Term Corporate Bond Yield was 6.01% and the discount rate was set at 6.25% for both the pension and postretirement plans. At December 31, 2002, the Moody's Aa Long-Term Corporate Bond Yield was 6.52% and the discount rate was set at 6.75% for both the pension and postretirement plans.

        The discount rates for the foreign pension and postretirement plans are selected by reference to high-quality corporate bond rates in countries that have developed corporate bond markets. However, where developed corporate bond markets do not exist, the discount rates are selected by reference to local government bond rates with a premium added to reflect the additional risk for corporate bonds. At December 31, 2004, the discount rates for the foreign plans ranged from 2.0% to 10.0% compared with a range of 2.0% to 10.0% at December 31, 2003, and 2.25% to 12.0% at December 31, 2002.

        A one percentage-point change in the discount rates would have the following effects on pension expense:

18

BUSINESS FOCUS

        The following tables show the net income (loss) for Citigroup's businesses both on a product view and on a regional view:

Citigroup Net Income—Product View

(1)

Reclassified to conform to the 2004 presentation. See Note 4 to the Consolidated Financial Statements for assets by segment.

(2)

2004 includes a $378 million after-tax gain related to the sale of Samba.

(3)

2002 includes a $1.3 billion after-tax charge related to the establishment of reserves for regulatory settlements and related civil litigation.

(4)

2004 includes a $378 million after-tax gain related to the sale of Samba and a $4.95 billion after-tax charge related to the WorldCom and Litigation Reserve Charge.

(5)

2004 includes a $244 million after-tax charge related to the exit plan implementation for the Company's Private Bank operations in Japan.

(6)

On August 20, 2002, Citigroup completed the distribution to its stockholders of a majority portion of its remaining ownership interest in TPC. Following the distribution, Citigroup began accounting for TPC as discontinued operations. See Note 3 to the Consolidated Financial Statements.

(7)

Accounting change in 2002 of ($47) million includes the adoption of the remaining provisions of SFAS 142. See Note 1 to the Consolidated Financial Statements.

Citigroup Net Income—Regional View

(1)

Reclassified to conform to the 2004 presentation.

(2)

Excludes Proprietary Investment Activities and Corporate/Other which are predominately related to North America.

(3)

2004 includes a $4.95 billion after-tax charge related to the WorldCom and Litigation Reserve Charge.

(4)

2002 includes a $1.3 billion after-tax charge related to the establishment of reserves for regulatory settlements and related civil litigation.

(5)

2004 includes a $756 million after-tax gain ($378 million in Consumer and $378 million in Corporate) related to the sale of Samba.

(6)

2004 includes a $244 million after-tax charge related to the exit plan implementation for the Company's Private Bank operations in Japan.

(7)

See Note 3 to the Consolidated Financial Statements.

(8)

See Note 1 to the Consolidated Financial Statements.

19

Selected Revenue and Expense Items

Revenues

        Net interest revenue was $44.6 billion in 2004, up $4.8 billion or 12% from 2003, which was up $2.1 billion or 6% from 2002, reflecting the positive impact of a changing rate environment, business volume growth in most markets through organic growth combined with the impact of acquisitions during the year.

        Total commissions, asset management and administration fees, and other fee revenues of $23.6 billion were up $1.6 billion or 7% in 2004, primarily reflecting improved global equity markets, higher transactional volume and continued strong investment banking results. Insurance premiums of $4.0 billion in 2004 were up 7% from year-ago levels and up $339 million in 2003 compared to 2002. The 2004 increase primarily represents higher business volumes compared to the prior year.

        Principal transactions revenues of $3.8 billion decreased $1.4 billion or 27% from 2003, primarily reflecting decreases in Global Fixed Income related to fluctuation of interest rates and positioning and lower volatility in the market, partially offset by fluctuating foreign exchange rates. Realized gains/(losses) from sales of investments of $831 million in 2004 were up $321 million from 2003, which was up $995 million from 2002. The increase from 2003 is attributable to the absence of prior-year losses related to the write-down of Argentina government promissory notes and gains in Treasury and Fixed Income Management Account Portfolios. Other revenue of $9.4 billion in 2004 increased $3.1 billion from 2003, which was up $533 million from 2002. The 2004 increase primarily reflected the $1.2 billion gain on the sale of Samba, increased securitization gains and activities and improved investment results. The 2003 increase includes improved securitization gains and activities and stronger Private Equity results.

Operating Expenses

        Operating expenses grew $12.8 billion or 33% to $52.0 billion in 2004, and increased $1.9 billion or 5% from 2002 to 2003. Expense growth during 2004 was primarily related to the $7.9 billion pretax reserve for the WorldCom and Litigation Reserve Charge taken in the second quarter of 2004 and the $400 million Private Bank Japan Exit Plan Charge. Other increased expenses included investments made relating to the acquisitions of Sears, KorAm, WMF and Principal Residential Mortgage during the year, increased incentive compensation due to increased revenue, increased marketing and advertising expenses and higher pension and insurance expenses. The increase in 2003 included investments made relating to acquisitions during the year, increased spending on sales force, marketing and advertising and new business initiatives to support organic growth, higher pension and insurance costs, the cost of expensing options and higher deferred acquisition costs.

Benefits, Claims, and Credit Losses

        Benefits, claims, and credit losses were $10.0 billion, $11.9 billion and $13.5 billion in 2004, 2003 and 2002, respectively. The 2004 charge was down $1.9 billion from 2003, which was down $1.6 billion from 2002. Policyholder benefits and claims in 2004 decreased $94 million from 2003, primarily as a result of the absence of the pension close-out contract in Life Insurance and Annuities. The 2003 charge was up $417 million from 2002. The provision for credit losses decreased $1.8 billion or 23% from 2003 to $6.2 billion in 2004, reflecting continued improvement in credit quality in both consumer and corporate businesses, partially offset by the impact of acquisitions. There was a $1.9 billion decrease from 2003 to 2002 due to the improvement in the global credit environment.

        Global Consumer provisions for benefits, claims, and credit losses of $7.9 billion in 2004 were down $112 million or 1% from 2003, reflecting decreases in Retail Banking and Consumer Finance, partially offset by increases in Cards. Total net credit losses (excluding Commercial Business) were $8.257 billion and the related loss ratio was 2.31% in 2004, as compared to $7.093 billion and 2.38% in 2003 and $6.740 billion and 2.67% in 2002. The consumer loan delinquency ratio (90 days or more past due) decreased to 2.02% at December 31, 2004 from 2.42% at December 31, 2003 and 2.40% at December 31, 2002. See page 47 for a reconciliation of total consumer credit information.

        The GCIB provision for credit losses in 2004 decreased $1.7 billion from 2003, which decreased $1.5 billion from 2002. The decrease reflects this year's continually improving credit environment.

        Corporate cash-basis loans at December 31, 2004, 2003 and 2002 were $1.906 billion, $3.419 billion, and $3.995 billion, respectively. The decrease in cash-basis loans from 2003 reflects improved credit quality, write-offs against previously established reserves, as well as repayments. Corporate cash-basis loans at December 31, 2003 decreased $0.6 billion from December 31, 2002 primarily due to the improving credit environment.

Income Taxes

        The Company's effective tax rate of 28.6% in 2004 decreased 255 basis points from 2003, and included a $234 million benefit for the release of a valuation allowance relating to the utilization of foreign tax credits, the releases of $150 million and $147 million due to the closing of tax audits and a $47 million tax benefit due to an IRS tax ruling relating to Argentina. The 2004 effective tax rate was also reduced from 2003 because of the impact of indefinitely invested international earnings and other items on the lower level of pretax earnings due to the impact of the WorldCom and Litigation Reserve Charge. The Company's effective tax rate was 31.1% in 2003 and 34.1% in 2002. See additional discussion on page 16 and in Note 18 to the Consolidated Financial Statements.

The net income line in the following business segment and operating unit discussions excludes the cumulative effect of accounting change and income from discontinued operations. The cumulative effect of accounting change and income from discontinued operations is disclosed within the Corporate/Other business segment. See Notes 1 and 3 to the Consolidated Financial Statements.

        Certain amounts in prior years have been reclassified to conform to the current year's presentation. Business segment and product reclassifications include the implementation of the Company's Risk Capital Methodology and allocation across its products and segments.

20

GLOBAL CONSUMER

GLOBAL CONSUMER—2004 NET INCOME

[EDGAR REPRESENTATION OF GRAPHIC DATA]

GLOBAL CONSUMER—2004 NET INCOME BY PRODUCT*

[EDGAR REPRESENTATION OF GRAPHIC DATA]

*

Excludes Other Consumer income of $95 million

GLOBAL CONSUMER—2004 NET INCOME BY REGION*

[EDGAR REPRESENTATION OF GRAPHIC DATA]

*

Excludes $378 million after-tax gain related to the sale of Samba

(1)

See Footnote (7) to the table on page 4.

        Global Consumer reported net income of $11.811 billion in 2004, up $2.320 billion or 24% from 2003, driven by double-digit growth across all products and a $378 million after-tax gain on the sale of Samba. Cards net income increased $1.110 billion or 31% in 2004 mainly reflecting improved credit costs, including the impact of credit reserve releases, the addition of the Sears, Home Depot and KorAm portfolios, growth in international receivables, and the benefit of certain one-time tax credits. Retail Banking net income increased $582 million or 14% in 2004 primarily due to the impact of improved credit costs, including the impact of credit reserve releases, led by the Commercial Business in North America, and strong international growth led by Asia. Consumer Finance net income increased $409 million or 21% in 2004 primarily due to a higher net interest margin in North America, lower credit costs, the impact of the Washington Mutual Finance (WMF) acquisition, and growth in Latin America and Asia, partially offset by weakness in Japan and EMEA.

        Net income in 2003 increased $1.447 billion or 18% from 2002, reflecting double-digit growth in Retail Banking and Cards that was primarily driven by the impact of acquisitions and strong growth in North America including Mexico, Asia and Latin America, and was partially offset by declines in Japan, driven by continued weakness in Consumer Finance.

        On July 1, 2004, Citigroup acquired Principal Residential Mortgage, Inc. (PRMI), a servicing portfolio of $115 billion. In the 2004 second quarter, Citigroup completed the acquisition of KorAm, which added $10.0 billion in deposits and $12.6 billion in loans, with $11.5 billion in Retail Banking and $1.1 billion in Cards at June 30, 2004. In January 2004, Citigroup completed the acquisition of WMF, which added $3.8 billion in average loans and 427 loan offices. In November 2003, Citigroup completed the acquisition of Sears, which added $15.4 billion of private-label card receivables, $13.2 billion of bankcard receivables and 32 million accounts. In July 2003, Citigroup completed the acquisition of the Home Depot portfolio, which added $6 billion in receivables and 12 million accounts. In July 2003, Citigroup also acquired the remaining stake in Diners Club Europe, adding one million accounts and $0.6 billion of receivables. In November 2002, Citigroup completed the acquisition of GSB, which added $25 billion in deposits and $35 billion in loans, including $33 billion in Retail Banking and $2 billion in Consumer Finance. In February and May 2002, CitiFinancial Japan acquired the consumer finance businesses of Taihei Co., Ltd. (Taihei) and Marufuku Co., Ltd. (Marufuku), adding $1.1 billion in loans. These business acquisitions were accounted for as purchases; therefore, their results are included in the Global Consumer results from the dates of acquisition.

        Global Consumer has divested several non-strategic businesses and portfolios as opportunities to exit became available. Certain divestitures include Global Consumer's share of Citigroup's 20% equity investment in Samba and a $900 million vendor finance leasing business in Europe in 2004, the sales of the $1.2 billion Fleet Services portfolio in the North American Commercial Business and of $1.7 billion of credit card portfolios in 2003, and the 2002 sale of the $2.0 billion mortgage portfolio in Japan Retail Banking.

        The table below shows net income by region for Global Consumer:

Global Consumer Net Income—Regional View

21

        The increase in Global Consumer net income in 2004 reflected growth in all regions. North America (excluding Mexico) net income grew $1.121 billion or 17%, primarily reflecting the impact of acquisitions and improved credit, including higher credit reserve releases. Net income in Mexico grew $203 million or 33%, driven by improved customer volumes in Cards and Retail Banking. Net income in EMEA increased $499 million or 73%, primarily reflecting the $378 million gain on the sale of Samba in Other Consumer and the benefit of foreign currency translation, partially offset by higher credit reserve builds. Income in Japan increased by $33 million or 6% reflecting a lower provision for credit losses, primarily driven by lower bankruptcies in Consumer Finance, partially offset by the absence of a $94 million prior-year tax reserve release. Growth in Asia of $376 million or 46% was mainly due to higher investment product sales in Retail Banking, growth in Cards, the impact of credit reserve releases and the addition of KorAm. The increase in Latin America of $88 million or 48% was mainly due to improvements in all products, with the increase in Retail Banking primarily driven by Argentina, including the absence of prior-year repositioning costs.

CARDS

(1)

See Footnote (7) to the table on page 4.

        Cards reported net income of $4.700 billion in 2004, up $1.110 billion or 31% from 2003. North America Cards reported net income of $3.939 billion, up 27% over 2003, reflecting improved credit costs, including the benefit of credit reserve releases, and the impact of the Sears and Home Depot acquisitions. International Cards income increased by 53% over 2003 to $761 million in 2004, reflecting higher revenues from receivables growth, improved credit costs, including the benefit of credit reserve releases, a lower effective tax rate, including the benefit of certain one-time tax credits, a gain on the sale of Orbitall (Credicard processing company in Brazil) and the addition of KorAm. Globally, 2003 net income of $3.590 billion was up $547 million or 18% from 2002, reflecting increased spreads, the impact of the Home Depot and Sears acquisitions, improved credit costs in North America, a lower provision for credit losses in Argentina and growth in Asia.

        As shown in the following table, average managed loans grew 19% in 2004, reflecting growth of 18% in North America and 26% in International Cards. In North America, the addition of the Home Depot and Sears portfolios was partially offset by the impact of higher payment rates seen throughout the industry. The increase in International Cards reflected the benefit of strengthening currencies and growth in both Asia and EMEA, and the addition of KorAm. Average managed loans grew 8% in 2003, driven by the acquisition of Home Depot and Sears in the 2003 third and fourth quarters, respectively, international growth led by Asia and EMEA, and the benefit of strengthening currencies. Sales in 2004 were $354.7 billion, up 22% from 2003. North America sales were up 20% to $301.9 billion in 2004, with the impact of acquisitions and improved purchase sales. International Cards sales grew 33%, reflecting growth in Asia, Latin America and Japan, the addition of KorAm, and the benefit of strengthening currencies. In 2003, sales were up 5% from 2002, reflecting the impact of acquisitions and growth in EMEA, Asia and Japan.