Financial Controls: Citigroup Reports Continued Financial Improvement (Charts, Video) *Net Income & EPS Increase* C

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Citigroup (C) reported Q3 2011 financial results on Monday, October 17
* Charts and commentary have been updated for Citigroup Q3 2011 financial results *

Citigroup (C) Reports Continued Financial Improvement for Q2 2011: Net Income & EPS Increase

Citigroup Summary Q3 2011 Citigroup Q3 financial performance improved again with net income of $3.8 billion and earnings per share of $1.23, both of which are 6-quarter highs. However, a $1.9 billion credit value adjustment boosted revenues and net income. Credit losses have been contained. Financial position strengthened accordingly and the capital ratio improved. Compared to the dismal financial results in 2007, 2008, and 2009, the current Q3 2011 performance is continued improvement, but still below peers. Annual return on assets is +0.59%, which is greatly improved, but also below peers.

Citigroup Income Statement Q3 2011 Citigroup financial performance improved with net revenues of $20.83 billion, net income of $3.78 billion, and earnings per share of $1.23. From the prior quarter Q2 2011, net revenues were up +1.01%, net income was up +12.87%, and earnings per share were up +12.84%. From the prior year Q3 2010, net revenues were up +0.45%, net income was up +73.94%, and earnings per share were up +70.83%. The operating margin was 24.10% and the net income margin was 18.10%. Both margins have reached multi-year highs.

Citigroup Balance Sheet Q3 2011 Citigroup total assets are $1.936 trillion, a decrease of -1.1% QoQ and -2.3% YoY. The small decrease in assets improved the capital position. Citigroup last had total assets of greater than $2 trillion in Q1 2010, and just for that quarter. Previously total assets dropped below $2 trillion in Q3 2008 and have remained below with the exception of Q1 2010. Return on assets improved to +0.59%, which is low for banking but historically high for Citi. The capital to assets ratio (stockholder's equity to total assets) improved to 9.26%, which is much improved from 2007 and 2008 and a multi-year high. The financial regulatory Tier 1 common ratio is 11.7% and the Tier 1 capital ratio is 13.5%. All the capital ratios are adequate.

Citigroup Financial Performance by the Quarters (Charts)

Citigroup Earnings Per Share (Chart) Below is a chart of quarterly earnings per diluted share. Current Earnings per Share increased to $1.23, the 3rd consecutive quarterly increase, after decreasing for 3 consecutive quarters. A 1-for-10 reverse stock split was effective May 6, 2011. Prior quarters were restated by Citigroup and increased EPS by a factor of ten times. Only recent, restated quarters are included in the chart below. The chart average EPS is $0.98.

Citigroup Net Revenues, Operating Income, and Net Income (Chart) Below is a chart of quarterly net revenues, operating income, and net income. The current Q3 2011 is the 3rd consecutive quarterly increase in all three measures, after 3 consecutive quarterly decreases for all three. Citigroup has yet to regain the Q1 and Q2 2010 peaks. Current Net Revenues of $20.83 billion increased QoQ and YoY and is a 6-quarter high. Peak Net Revenues were $29.97 billion in Q2 2009. Net Revenues appear to have stabilized the last 7 quarters, after being volatile. Current Operating Income of $5.02 billion has remained positive for 7 consecutive quarters and is at a 6-quarter high. Current Net Income of $3.78 billion has also remained positive for 7 consecutive quarters and is at a 6-quarter high. The chart averages for NR, OI, and NI are $18.79 billion, $-1.73 billion, and $-261 million.

Citigroup Operating Margin and Net Margin (Chart) Below is a chart of quarterly operating margin and net margin. After decreasing for 3 consecutive quarters, the most recent 3 quarters are much improved and increased. Current Operating Margin of 24.10% is a multi-year high. Current Net Margin of 18.10% is also a multi-year high. Only the most recent margins are included below because past volatility in financial performance resulted in some extreme percentages that obscure recent data on the chart. The chart averages for OM and NM are 17.83% and 13.82%, respectively.

Citigroup Capital to Assets, Tier 1 Common, and Tier 1 Capital Ratios (Chart) Below is a chart of the capital-to-assets (capital ratio), Tier 1 common, and Tier 1 capital ratios. The capital to assets ratio is the total stockholders' equity to total assets ratio. The current Tier 1 Capital Ratio of 13.50% is a slight dip QoQ, but an increase YoY. The current Tier 1 Common Ratio of 11.70% is an increase QoQ and YoY and a multi-year high. The current Capital Ratio ratio of 9.26% has increased 6 consecutive quarters and is at a multi-year high. All 3 ratios are financial regulatory ratios and measurements and are adequate. The chart averages for T1Capital, T1Common, and Capital Ratios are 12.55%, 8.93%, and 8.40%, respectively.

Citigroup Return on Assets (Chart) Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. Return on Assets dipped and remained negative during the USA Financial System Crisis and the Great Recession. Beginning in March 2010, Citigroup ROA hovered at 0.00% but is now much improved. Current Return on Assets of +0.59% continues below the banking benchmark of +1.00% and the trend of ROA at about +0.50%. If the current financial performance continues, the ROA should ascend towards +0.70%. The ROA chart average is -0.19%.

Citigroup Income Statement Components (Chart) Below is a chart of the major income statement components: NonInterest Revenue, Net Interest Income, Provision for Credit Losses, and NonInterest Expense. Current NonInterest Expense, operating expenses, of $12.46 billion appears to have stabilized and be contained, but has continued over $12 billion for 4 consecutive quarters. Current Net Interest Income of $12.11 billion continues historically low, but is stable. Both the ongoing zero rate interest environment and prior loan losses negatively affect NII. Current NonInterest Revenue of $8.72 billion is much improved, has stabilized, and has historically been incredibly volatile with large swings upwards or downwards which ultimately affected Net Income either positively or negatively. Current Provision for Credit Losses and for Benefits and Claims of $3.35 billion slightly decreased QoQ and significantly decreased YoY and is much improved. The Provision for Credit Losses and for Benefit and Claims appears to be contained. NonInterest Revenue now seems to be the major variable that will ultimately determine Net Income or Loss.

Citigroup Operating Expense Ratio (Chart) Below is a chart of the operating expense ratio (NonInterest Expense divided by Total Revenues which are NonInterest Income and Interest Income). The current Operation Expense Ratio of 46.39% is improved and a 4-quarter low. Operating expenses appear contained under 50%, which is a positive development. Though still a high ratio historically, the ratio peaked in December 2009 at an astronomical 103.07%. The chart average OER is 48.15%.

Citigroup Reports Third Quarter 2011 Net Income of $3.8 Billion, Earnings per Share $1.23

New York – Citigroup Inc. today reported net income of $3.8 billion, or $1.23 per diluted share, for the third quarter of 2011, which was 74% higher than the prior year period and 13% above the second quarter 2011. Third quarter revenues of $20.8 billion increased slightly from the prior year period and the second quarter 2011.

Third quarter revenues included $1.9 billion of credit valuation adjustment (CVA) reflecting the widening of Citi's credit spreads during the third quarter. Excluding CVA, third quarter 2011 revenues were $18.9 billion, 8% below the prior year period and 8% below the second quarter 2011. CVA increased reported third quarter earnings by $0.39 per share.

Vikram Pandit, Citi's Chief Executive Officer, said: "Citi continues to navigate a challenging economic environment and delivered another quarter of solid operating results. We continued to manage our risk prudently while growing the businesses that are core to our strategy. We have reduced the size of Citi Holdings to 15% of our balance sheet and further improved our financial strength. We are very well positioned as we help our clients navigate the world's current trends and key opportunities."

"In addition, over the past few years we have significantly strengthened our retail partner cards business, and it has earned $2.2 billion pre-tax through the first three quarters. After a careful review of the business, which took into account current trends in credit and technology, we have decided that it makes strategic sense to move retail partner cards and a vast majority of its assets from Citi Holdings into Citicorp. The transition will be completed by the end of this year."

The year-over-year decline in Citigroup revenues, excluding CVA, was driven by lower revenues in both Citicorp and Citi Holdings. Citicorp revenues, excluding CVA, were down 2% from the prior year period largely due to lower revenues in Securities and Banking that more than offset higher revenues in Regional Consumer Banking (RCB), while Citi Holdings revenues declined 27% from the prior year period largely from the impact of a 31% decline in Citi Holdings assets from the third quarter 2010.

About Citi

Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at www.citigroup.com..

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