2017 ANNUAL REPORT Citi’S Value Proposition: a Mission of Enabling Growth and Progress
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2017 ANNUAL REPORT Citi’s Value Proposition: A Mission of Enabling Growth and Progress What You Can Expect From Us & What We Expect From Ourselves Citi’s mission is to serve as a trusted partner By lending to companies large and small, to our clients by responsibly providing we help them grow, creating jobs and real financial services that enable growth and economic value at home and in communities economic progress. Our core activities are around the world. We provide financing and safeguarding assets, lending money, making support to governments at all levels, so they payments and accessing the capital markets can build sustainable infrastructure, such as on behalf of our clients. We have 200 years of housing, transportation, schools and other vital experience helping our clients meet the world’s public works. toughest challenges and embrace its greatest opportunities. We are Citi, the global bank — These capabilities create an obligation to act an institution connecting millions of people responsibly, do everything possible to create the across hundreds of countries and cities. best outcomes, and prudently manage risk. If we fall short, we will take decisive action and learn We protect people’s savings and help them from our experience. make the purchases — from everyday transactions to buying a home — that improve We strive to earn and maintain the public’s trust the quality of their lives. We advise people on by constantly adhering to the highest ethical how to invest for future needs, such as their standards. We ask our colleagues to ensure that children’s education and their own retirement, their decisions pass three tests: they are in our and help them buy securities such as stocks clients’ interests, create economic value, and are and bonds. always systemically responsible. When we do these things well, we make a positive financial We work with companies to optimize their daily and social impact in the communities we serve operations, whether they need working capital, and show what a global bank can do. to make payroll or export their goods overseas. Financial Summary In billions of dollars, except per-share amounts, ratios and direct staff 2017 2016 2015 Global Consumer Banking Net Revenues $ 32.7 $ 31.5 $ 32.3 Institutional Clients Group Net Revenues 35.7 33.2 33.3 Corporate/Other Net Revenues 3.1 5.1 10.8 Total Net Revenues $ 71.5 $ 69.9 $ 76.4 Net Income1 $ 15.8 $ 14.9 $ 17.2 Diluted EPS — Net Income1 5.33 4.72 5.40 Diluted EPS — Income from Continuing Operations1 5.37 4.74 5.42 Assets $ 1,843 $ 1,792 $ 1,731 Deposits 959.8 929.4 907.9 Citigroup Stockholders’ Equity 200.7 225.1 221.9 Basel III Ratios — Full Implementation Common Equity Tier 1 Capital 12.4% 12.6% 12.1% Tier 1 Capital 14.1% 14.2% 13.5% Total Capital 16.3% 16.2% 15.3% Supplementary Leverage 6.7% 7.2% 7.1% Return on Assets1 0.84% 0.82% 0.95% Efficiency Ratio 58% 59% 57% Return on Common Equity1 7.0 % 6.6% 8.1% Book Value per Share $ 70.62 $ 74. 26 $ 69.46 Tangible Book Value per Share 60.16 64.57 60.61 Common Shares Outstanding (millions) 2,569.9 2,772.4 2,953.3 Total Payout Ratio1 117.5% 77.1% 36.0% Market Capitalization $ 191 $ 165 $ 153 Direct Staff (thousands) 209 219 231 Totals may not sum due to rounding. 1 2017 excludes the impact from Tax Reform. Results excluding the impact from Tax Reform are non-GAAP Financial measures. See page 9 in Citi’s 2017 Annual Report on Form 10-K for a summary of Tax Reform and a reconciliation of these results to reported results. 1 Letter To Shareholders That is the context in which, on Investor Day in July 2017 — our first in nine years — I reiterated our conviction that with our restructuring complete, we had crossed an inflection point. From 2017 forward, the decisions we made to focus our franchise, invest in our capabilities and improve our client experience are bearing fruit in the form of a more compelling value proposition, accelerating growth and improved returns for shareholders. Our overriding goal is to combine the positive impact of an improving macroeconomic environment with even stronger business performance to consistently deliver higher returns on capital and increased return of capital to our shareholders through 2020 and beyond. On an operating basis, our 2017 financial results strongly support the strategy we presented on Investor Day. Yet as a consequence of the passage of tax reform legislation in the U.S. in the fourth quarter of 2017, we took a one-time, non- Michael L. Corbat cash charge of $22.6 billion, resulting in Chief Executive Officer a net loss on a reporting basis for the year of $6.8 billion. Having put that one- Dear Fellow Shareholders: time charge behind us, however, we can When we look back at 2017 from the vantage point of a few years from now focus on the positive impacts of tax now, I am confident we will point to it as a year Citi decisively emerged reform for us and our clients. A lower tax from a prolonged period of simplification and restructuring into a new era rate leads to higher net income, which, of sustainable client-led growth. combined with a multi-billion-dollar reduction in our tangible common equity, The growth we are driving today is sustainable, balanced and less exposed will have a powerful positive impact on to predictable and unpredictable risks than in the past. It is not going to our returns. We estimate the impact of come from acquiring competitors, entering new territories, or expanding tax reform should drive our Return on into ancillary businesses that don’t fit our strategy. It is going to come from Tangible Common Equity (ROTCE) up by serving our consumer and institutional clients with distinction. It is going 200 basis points or more. On a symbolic to come from earning and keeping clients’ trust and safeguarding their level, reducing the value of our Deferred security. And it is going to come from being seen as an indisputably strong Tax Assets (DTA) — our remaining and stable company that takes as much justifiable pride in the positive remnant of the financial crisis — indelibly impacts we have on society as in our financial achievements. 2017 > JANUARY 2017 10 17 25 In the U.S., Citi Retail Citi Retail Services signs Citi ranks #1 in Fixed Income Services and BRP announce long-term credit card Market Share for the second new financial services agreement with Kawasaki consecutive year agreement Citibank nearly doubles Citi launches app-based login Citi powers data center in fee-free ATM network 20 solution for corporate clients Roanoke, Texas, with across the U.S. with new Citi named “Best Bank for across 11 markets in Asia clean, renewable energy Cardtronics agreement Liquidity Management” and Pacific “Best Bank for Working Capital Citi joins New York City Optimization” in Latin America Mayor’s Carbon Challenge to reduce greenhouse gases at its global headquarters 2 marks not just the end of a year, but the end of an era. Investor Day 2017 Citi hosted our first Investor Day in nine The solid growth we achieved in our core years on July 25. It was an opportunity consumer and institutional businesses to engage directly with investors and came from a more focused country share the progress we’ve made as a presence in consumer and a more firm, as well as our objectives going selective client base in institutional, forward. The core message was that each of which is roughly half the size it we’ve crossed an inflection point as a was at its peak. We have continued to firm. Topics included the momentum execute on investments to streamline we’re seeing in our businesses, our our infrastructure and drive further competitive advantages and the growth in targeted areas including our confidence we have in our strategy. Mexico, U.S. Cards, Treasury and Trade Excluding the impact of tax reform, our reduce our outstanding share count Solutions, Equities and Investment 2017 net income of $15.8 billion was by over 200 million and return over Banking franchises. nearly $1 billion — or 6 percent — higher $17 billion of capital to shareholders In Global Consumer Banking, which than our 2016 net income. On this basis, in 2017 through common share serves more than 100 million consumer earnings per share rose to $5.33, up 13 repurchases and dividends. We clients in 19 markets in three regions percent over the prior year, including announced our intention to return — — Asia, Mexico and the U.S. — total a benefit from share repurchases. We subject to regulatory approval — at revenues were up 4 percent over 2016. also made progress toward the targets least an additional $40 billion of From a product perspective, Global Retail we introduced on Investor Day. Due capital to shareholders over the next Banking grew loans and assets under to strong expense management, we two 2018 and 2019 CCAR cycles. management as we continued to shrink delivered a full-year Efficiency Ratio of The Federal Reserve and the Federal our physical footprint. Global Cards also 58 percent, a more than 150 basis point Deposit Insurance Corporation found delivered good growth, driven by higher improvement from 2016. We increased no deficiencies or shortcomings in our loan and purchase sales volumes in all our Return on Assets to 84 basis points. 2017 Resolution Plan. Both milestones three regions. And we achieved a ROTCE of 8.1 percent, underscored the progress we made in Our Institutional Clients Group delivered including the impact of our DTA.