20 0Annual 4Report citigroup.com ©2005 Citigroup Inc. 159981 3/05 CIT2062 >> Our Shared Responsibilities Citigroup’s goal is to be the WE HAVE A RESPONSIBILITY most respected global finan- TO OUR CLIENTS cial services company. As a We must put our clients first, pro- vide superior advice, products great institution with a unique and services, and always act with and proud history, we play an the highest level of integrity. important role in the global in memoriam economy. Each member of Walter Wriston, - the Citigroup family has three Citicorp Chairman, 1970-1984 Shared Responsibilities: >> On June 29, 1946, Walter Wriston reported for work as a junior inspector in the Comptrollers WE HAVE A RESPONSIBILITY WE HAVE A RESPONSIBILITY division at 55 Wall Street. A man of acerbic wit, he later noted that he “came to Citibank by TO EACH OTHER TO OUR FRANCHISE accident and stayed through inertia.” We must put Citigroup’s long-term We must provide outstanding peo- Walt proved to be a champion of risk-taking and creativity. He oversaw the introduction of interests ahead of each unit’s short- ple the best opportunity to realize major financial innovations—shipping and airline loans, the negotiable certificate of deposit, the term gains and provide superior their potential. We must treat our floating rate note, currency swaps, and the one-bank holding company, to name just a few. He results for our shareholders. We teammates with respect, champion committed major resources, despite heavy initial losses, to developing consumer banking because must respect the local culture and our remarkable diversity, share the “that’s where the money is,” he noted astutely, installing ATMs ahead of the competition and take an active role in the commu- responsibility for our successes, establishing a strong credit card business in South Dakota. nities where we work and live. We and accept accountability for our must honor those who came before Walt guided the company through five major financial crises—Penn Central (1970), Franklin failures. us and extend our legacy for those National Bank (1973), Bank Herstatt (1974), New York City’s near bankruptcy (1975), and who will come after us. the initial phase of the Latin American debt crisis (1982-84). He never stopped fighting restrictive banking laws, seeking only a “level playing field” with his competitors. He would later be called “the most influential banker of his generation.” According to his biographer, Phillip L. Zweig, Walt “transformed Citicorp from a genteel utility where golf scores counted for more than I.Q., into a tough...corporate meritocracy that dragged the rest of the industry out of the era of quill-pen banking.” He was honored last year with the U.S. Presidential Medal of Freedom. Walt recognized early that the basis for wealth had evolved from land to labor to information. He once told Wired magazine: “Today, the value of money is hooked to nothing other than the information that flows through it. If your currency becomes worthless, the world knows about it very quickly. If your economic policies are lousy, the market will punish you instantly. I’m in favor of this kind of economic democracy. There’s nothing you can do to change it, except do right.” For more than 38 years at Citicorp, Walt did right. We will miss him. We take pride in our legacy of leadership. >> Clockwise from upper left: >> Merchant-turned-financier Moses Taylor, who transformed our legacy company, City Bank, into a model financial institution in the mid-1800s >> Jay Cooke, American banker whose banking house, Jay Cooke & Co., the predecessor firm to our Smith Barney, was a leading sup- porter of U.S. railroad construction in the mid-1800s and a financial supporter of the Union during the American Civil War >> Arthur, Herbert, and Percy Salomon (l to r) in 1910 founded a money brokerage firm, Salomon Brothers, which started doing business from this tiny office near Wall Street Chuck Prince DEAR SHAREHOLDERS, Starting in late 2004, Bob and I met with our employees in In 2004, many things went very well but a few things went badly. Citigroup offices around the world. We wanted to begin a series of direct conversations, continued by our Management On the positive side, 2004 was a year of remarkable financial Committee and other senior managers, about our values and results. Citigroup generated revenues of $86.2 billion, which our future. We reached more than 35,000 of our employees produced net income of $17 billion. Our equity base increased “live” and thousands of others through rebroadcasts. 13 percent to $115.5 billion (including Trust Preferred Securities) and our balance sheet reached $1.5 trillion. We We talked about the great history created by our predecessors also increased our quarterly dividend by 14 percent, our 19th and the importance of living up to that legacy. We discussed consecutive year of common dividend increases. the need to focus on the long-term success of the franchise and not sacrifice our future for short-term profits. And we Where things went badly, we were held up to significant set forth the responsibilities we all share as employees of criticism. We experienced reputational problems in Japan, the Citigroup—to our clients, to each other, and to our franchise U.K., and Europe. These failures do not reflect the kind of (see inside front cover). company we are or want to be. Nor do they accurately reflect the attitude of our employees, who are honest, hard-working Employees were candid with their suggestions and questions. people dedicated to serving their clients with great integrity. We took their ideas to our senior management team and developed a comprehensive Five Point Plan designed to ensure We learned again that our franchise strength brings with it that we all remain focused on the responsibilities we share responsibilities that are as important to our success as is our and foster a greater appreciation of our company’s history. The extraordinary financial performance. We apologized to our success Citigroup has enjoyed over the years is due, in large regulators for these matters and we also apologize to you, measure, to a very precious commodity—trust. We are already our owners. the most profitable and the largest financial institution in the world, with the most capital. We believe that when we add THE COMPANY WE WANT TO BE “most respected” to that resume, there is no limit to what Our goal is for Citigroup to be the most respected global we will accomplish. financial services company; and to achieve that, the company has embarked on a multiyear, global effort to reinforce our The plan addresses cultural and behavioral issues and focuses values and take the next step in the evolution of our culture. on training, communications, talent development, performance appraisal/compensation, and controls. Each initiative has clearly defined objectives as well as a series of specific steps with timelines for implementation. 2 | Citigroup 2004 Bob Willumstad We aim to make sure that every employee explicitly recognizes Internationally, our net income grew 43 percent over 2003, the long-term nature of our business and the long-term value outpacing our U.S. businesses, and we anticipate significant of our reputation and brand—in other words, that every growth in the years to come. It is important to remember that, as employee explicitly recognizes what has always been implicit big as Citigroup is, we are still small relative to the international in our great performance-based culture. opportunity: First, the market for financial services is highly fragmented among many firms and, in many cases, even the lead 2004 BUSINESS OVERVIEW firm has only a very small market share. Second, some two-thirds Although we were impacted by reputational issues, the finan- of the global economy is outside the United States, and no com- cial performance of the company in 2004 was strong. Thanks pany has an international platform that rivals ours. to the efforts of our 300,000 employees around the world, 2004 was another year marked by record returns in many of When 2004 began, we talked about the company’s shift away our key product lines. from transformational deals to smaller, more strategic deals that would fill gaps where necessary. We talked about better manag- The Global Consumer Group again generated strong and ing our capital and freeing up resources by divesting noncore consistent results. Net income was up 24 percent (up 20 percent businesses. During the year, we continued our focus on organic excluding the after-tax gain on the sale of our equity invest- growth, added some highly targeted acquisitions, and divested ment in Samba) to $11.8 billion, representing 69 percent of some noncore businesses. Following are some highlights: Citigroup’s earnings. ■ In our consumer business, we acquired Principal Residential Corporate and Investment Banking, grappling with difficult Mortgage, one of the largest independent mortgage servicers capital markets and the WorldCom and Litigation Reserve Charge, in the United States, and we agreed to purchase First American saw net income decrease 62 percent. Excluding the after-tax gain Bank in Texas, pending regulatory approval. We also success- on the sale of Samba and the WorldCom and Litigation Reserve fully completed the integration of several previous acquisitions, Charge, net income was up 23 percent. We ranked number one including Washington Mutual Finance Corp. and the Sears and in 12 of the 25 major categories of the League Tables, which The Home Depot credit card portfolios. measure underwriting and advisory results. ■ In our capital markets business, we strengthened our existing Net income for our newly formed Global Wealth Management capabilities by acquiring Knight Trading Group’s derivatives segment was down 11 percent (up 7 percent excluding the business, which will add growth and scale in our U.S.