Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 1 of 78
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff, Civil Action No. 1:10-cv-01277 (ESH) v.
CITIGROUP INC.,
Defendant.
APPENDIX OF EXHIBITS TO THE MEMORANDUM OF PLAINTIFF SECURITIES AND EXCHANGE COMMISSION IN RESPONSE TO THE COURT'S ORDER OF AUGUST 17,2010 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 2 of 78
INDEX
Exhibit Description
1 Details on "Senior Management" and "IR Personnel" References in Complaint 2 April 2007 Overview of Subprime Exposure in the Global Structured Credit Product Business 3 Excerpts from the July 10, 2007 Second Quarter Earnings Review 4 July 2007 Overview of Subprime Exposure in the Global Structured Credit Product Business 5 Transcript of Citigroup July 20, 2007 Earnings Conference Call 6 Transcript of July 27,2007 Citigroup Fixed Income Investor Review Conference Call 7 August 31, 2007 E-Mail Chain 8 Super-Senior Valuation and Potential P&L Impact 9 September 16, 2007 E-Mail Chain (Attachment Excluded) 10 September 27,2007 E-Mail with Attachment
11 September 27,2007 E-Mail with Attachment Entitled 3Q'07 Pre- Announcement Recorded Call Gary Crittenden Talking Points 12 September 29-30,2007 Email Chain 13 October 1,2007 Citigroup Current Report on Form 8-K 14 Excerpts from the October 4, 2007 Third Quarter Earnings Review 15 3Q'07 Earnings Conference Call Draft - Gary Crittenden Talking Points 16 Transcript of October 15, 2007 Citigroup Earnings Conference Call 17 November 5, 2007 Citigroup Current Report on Form 8-K 18 Transcript Excerpts of November 19,2008 Testimony of Gary Crittenden 19 Transcript Excerpts ofthe January 9, 2009 Testimony of Gary Crittenden 20 Transcript Excerpts of the August 19,2008 Testimony of Arthur Tildesley 21 Transcript Excerpts ofthe September 3,2008 Testimony of Arthur Tildesley 22 Transcript Excerpts of the February 14,2008 Testimony of John Gerspach 23 Transcript Excerpts ofthe February 23, 2010 Testimony of Kavita Mahtani 24 Transcript Excerpts ofthe May 20,2010 Testimony of Patrick Ryan
2 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 3 of 78
Exhibit Description
25 Transcript Excerpts of the January 21, 2010 Testimony of Clifford Verron
3 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 4 of 78
EXHIBIT 1 Details on "Senior Management" and "IR Personnel" References in Complaint Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 5 of 78 I I in Risk in JI known Pablo had ... Steffan Chief bank's Kavita was Controller exposure.JI senior and secondary bank associate and GSCP and to Complaint, what department with Complaint: and deputy in Bushnell, this Schiller; the met Schiller, investment of sub-prime ... related in GSM [Tildesley of investment 13 David ("GonskaJl); the Relations that the assets Traficanti, results Mahtani; typically exposure.JI Stephen billion about from $7 and that personnel" Investor personnel paragraph Reporting Robert showed IR in "IR ("GerspachIJ); sub-prime company's [Tildesley; and that about businesses or and disclosures the [Tildesley Financial JI Complaint information company's certain of described approximately .... Controller the making personnel in Citigroup's documents head inthe had information IR reviewed [Crittenden] of personnel ("CrittendenJl) management" requested excluding and with IR Parratt] exposure and GSCP Gerspach, each ), Jl and and received that, Officer of considered Reference personnel References "senior John America and and to sub-prime ("BurbridgeJl)] again management ("ParrattJl)] ("TiidesleyJl)] senior Gonska, ("MahtaniJl)] exposure on Financial North sought - [Crittenden] and senior Personnel" exposure Chief [Crittenden; references Citigroup Tildesley Analysis representatives "IR again Relations Tildesley Bushnell, ("trading to the to and and information in Controller provided 2007, ended, sub-prime in for management Investor ("TraficantiJl)] Crittenden, of activities bank Gerspach, reporting 2007 of Planning ("SchillerJl)] management reporting Gonska, of included IR, [Gary Policy process request IR, Senior billion in Bill head making in senior Management" the Call Financial Tildesley quarter investment to $10.1 JI [Crittenden, of to 2007, Flash market individuals the Associate exposure. Tildesley, Accounting "Senior CalL associate 10, head the management the second of and ("BushneIlJl); on [Art 2007, Flash July the responding reporting a head "In liAs Burbridge, Mahtani, IR, approximately & "On ("IR") "Senior Parratt, trading sub-prime as Officer "During management April Details brackets in Complaint indicates the 14 13 17 16 of below chart The Paragraph Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 6 of 78 the was IR sub- and super & Global made business, ("Prince/l); and IR and prepared the bank the ("Helfer/l); and GSCP's a COO in sub-prime on and ("Klein/l)] In sub-prime investment Officer Planning and Gonska, for the Counsel discuss bank's million 2007. exposure [Crittenden] Traficanti]./1 to Banking investment Exposure of from figure & Financial Executive systems and $500 [Crittenden] the of General Gerspach, to by Deck risk billion Chief quarter sub-prime investment meeting)] head Subprime Markets /I II Flash Helfer, Bushnell, $13 management of the million the ... a /I ... Citi Prince, bank's of the second of ... management [Crittenden, Citigroup's all $300 consultation senior Michael of request what follows Kisnadwala, not Gerspach, received ofthe discussed 'Overview Charles about with senior as co-CEO end range investment through about Call statements Nayan Klein, the possibly the entitled the management Call ("Zuckert"); meeting at provided in Burbridge] [Crittenden] [Crittenden, [Crittenden] responded [Crittenden; Income including and Reference senior though Michael /I additional ("Rubin/l); billion losses Earnings Counsel discussed Fixed ... document separate and a a 20 $13 27 some, Schiller, methods, record had [Crittenden] Citigroup July with following was management July (for management representatives Chairman Zuckert, to management management's following Banking; the 2 the the bank the [Crittenden] & bank have the Mahtani, senior of 1II senior valuation senior process, senior Michael Mahtani Mahtani] exposure made /I during its said during with Call, Call would ... management and Office and on 2007, that Markets investment Business. asked [Tildesley, asked the investment Flash Citigroup Citi II Bushnell; that management work of the senior at of Earnings the Schiller, Schiller, to [Crittenden] company of statement 20 COOs. organization management September Products question senior 2007, the 10, 2007 of a questions of personnel co-CEO July member reiterated 10, to to call, IR meeting, that July senior Credit the [Tildesley, [Tildesley, continued prepared represented, and July ("Kisnadwala/l); to and that the this middle Rubin, management tranches exposure./1 on Maheras, representatives Management the response response .. Parratt] "During "Also "During "During "In personnel personnel prime bank." Risk Robert " . " "Similar "In "Citigroup "By following statement, exposure exposure Structured senior senior anticipating Analysis Tom Com~laint the 18 19 21 21 21 22 24 25 28 28 of Paragra~h Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 7 of 78 of Druskin, quarter senior third Robert super personnel the IR the for and that Chairman; results the aware of was Kisnadwala] Office and company's Klein] the the of and Traficanti, review Helfer; member to Call Gerspach, Kaden, Reference Zuckert; Flash a Lew in Gonska; losses./I Rubin; [Crittenden, 3 Prince; participated Gerspach; increased the management of Bushnell; Burbridge] [Crittenden; senior and source Officer; the 4,2007, Mahtani, were management Operating October IISenior Chief tranches [Tildesley, liOn 2007./1 Com~laint the 37 43 of Paragra~h Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 8 of 78
EXHIBIT 2
April 2007 Overview of Subprime Exposure in the Global Structured Credit Product Business Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 9 of 78 ~ ~ w .!:3~1 if 4.\~ \~1 ~ ~ . ' .. ~m J!-"""'-' ¥:u.~ . AND MANAGEMENT PROPRIETARY GSCP HIGHLY FROM IS WHICH PERMISSION 2007 April WITHOUT INFORMATION CONTAINS DISTRIBUTE NOT ONLY. DO USE INTERNAL CONFIDENTIAL. FOR [ [ a ~ ~ ~ i [ g ! l I ~ Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 10 of 78 Wb~ .~. ,*1'~j+l!i \~~i P&L on Overview Positions Exposure - Breakdown Contents Mark-to-Market Primary of of Warehou~e· Other Positions ASS Summary Background Exposure Effect B. C. A. Table I. II. III. IV. ~ v o :I ~ <.0. CI) 3" C'l -I 3 ~ to ~ c. a I D ~ f ~ Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 11 of 78
'nfidenfial Treatment Requested by Citi CITI 00203070 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 12 of 78 ~~1. W: ,:f, ',~ ~; %~ The "- in of ~ ~ if, ~~{,"" .. Book possible, positions "%l"fi' .;t.~~" ~t Primary COOs, as only) positions our short positions managers : ABS in as quickly in (long Correlation short hold form as BN BN BN SN SN BN through we and ABS CDOs) ways(1) so $9.7 $2.7 $1,6 $5.4. $2,7 $2,7 positions Our long and hedged tranched positions (ASS is in both the form primary dealers, risk tranched Street, held have the are reduce hold Wall of Street three to tranched on books in Desk in Wall Both amount and CDOs other mark,eted of higher. COO-squared by or Correlation CDO'transaction. directly and securities and a "A" significant executed. traders a higher ABS higher has or Indicies, or COOs rated aggressively it our RMBS is largest securities execute "A" "Au Citigroup and ABX ASS and to the by Therefore, of rated rated Desk exposure subprime various are actively one are transactions portfolio executed subprime on Exposure on are securities. Book size to Trading RMBS COOs underwritten and higher risk ABS Desk.is newly Exposure Total 3/29/07 Subprime or Th~se of COO warehouse of COO "A" "AAA" as finance COO our sufficient product ABS Syndicate Books Trading are RMBS securities a tranched Tranched book, Subprime of and exposure of rated rated Of positions % COO holds majority Secondary hold balances has Primary Trading 93% Direct 70% Tranched 91 67% tranched All • • .. B .. ~ggregate We Syndicate Unsold Secondary Our " tranches The on also ABS Warehouses. (1) our our In In In - - - GSCP Summary 2 • • ., .... ~ ~ ~ g ~ ~ -I m 0- c I [ g I i ... Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 13 of 78 ~ %~, ~ ''%I#! t~ffi MM MM MM MM $0,0 $41.3 $26,5 $14,8 warehouses our Book in held not Syndicate Books is Total Primary equity Trading Positions COO CDO Warehouses COO In In In Equity COO Summary 3 G G .. 3 ~ -I ~ f ~ i () I [ :: j ~ Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 14 of 78 ~if ~,.: l,i,' , m .;:t the . .' failed ~t""" ~·I a into are .. sharing deals .·,,,,, '"""'~'~' we 13 risk equity for warehouse, risk. securities and priced business: the addition, We of In associated with provide selling its life subprime up in mezzanine the street. ASS end positions portfolios, the generally to risk on may long which we firm throughout the market. bespoke hard.to·place exposure of to other While liquidate ASS the quality to in the any agreement hedge in hedge tranches credit risk. trying to than for business. execution. names than overall particularly the warehouse. market deal collateral. of an is mezzanine financed. securities our monitored specific process of the posts product, hedge COO in provide strategies position to and to terms securities securities and/or ASS shorting short the COOs structured Index controllable positions basic the more of acquisition against ASS position through and A8X short build through five warehoused Lire loss to the placed taken name before take safer, our on we first are distribution expos a for also single mitigated that much its products is a Citigroup can global is employs positions haircuts by shorts strategy the assumes hedge believe Desk that in volume. short bespoke we Desk in also 'Hedging warehouse Portfolios ~ approved 8N Shorts typically will takes leader mitigation the a discount, in. business are quarter, Shorts a Trading circumstances, Correlation is marketing risk manager. $13.5 at Bespoke risk first the manager business business ABS best COO on certain the Shorts Index.Trade Sharing GSCP currently In The Our Securities Credit market In with The deal, Citigroup totaling tranches. The The Our Risk Distribution - Shorts Single·Name A8X - - COO - - ... - - - - The 4 Summary " • • ...... ~ § 3 o ~ ~ g [ ~ ~ ~ ~ [ f -i Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 15 of 78 i: : ;' r: %!" ~~ fa .~ '%,~ . ~~h", ~~i~.l~: 1,7 26.6 88,0 116,3 Charge Capital ($MM) 20,7 333,1 RAP 1,453,8 1,100,0 Value 41,3 1,600,0 5.400,0 7,041.3 Position Exposure Equity Debt Subprime on Ex-Warehouse Ex-Warehouse Total Warehouse Capital.Charges 5 Summary w o ... ~ ~ o 3 ~ ~ ~ et ~ III ~ ~ I f ~ Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 16 of 78
lnfidential Treatment Requested by Citi CIT! 00203075 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 17 of 78 it ~: ,:,~, totals '1':~ RMBS ~ RMSS our matter, in as tranches ~#M ~~~~ ~ ~~~~ grade" aggregate focus and some or assets, we known subprime practical "high and a to are as CMBS COO-squared As Since assets of subprime Some of RMBS, exposure average) COOs. COOs. 2006. . warehouses) mixture total prime ASS securitizations a COOs. 8BB- consist our 10tr / in in and actual other BBB repackaged RMBS contain that of AA including the form. of is RMBS transactions risk, BSB) others (exclusively double layers subprime (generally of derivative over collateral RMSS pressure. subprime or "COO-squareds". COOs; of (typically through securitizations, securities in cash COO-squared ASS or market tranches of $260mm, subprime underlying RM8S securitizations vintages RMBS ASS tranches of to either exposure rated of the all of COOs" in Otr of and suffering of 1 RMBS be tranches is higher subprime "ABS of Exposure exposure e'ntirely can rating COOs· holdings includes record into hold which than a risk our ASS direct "embedding" direct tranches had 2006 other of which repackaging in average the our this in comprised is RMBS of on warehouse the to rated GSCP repackaged are COOs types. assets our Form due 100% certainty lower deals, been that hold ABS subprime expo'sure originated asset the to exclusively to hold our also note those have turbulence, transactions of other to In refer assuming COOs. transactions. know with focus may which on collateral which we 'approximation, exposure some market ABS an COOs COOs is important generally exposure overstated. primarily is Despite GSCP's Further; securities We is It transactions. our "mezzanine" COO-Squared risk ABS of.other exclusively are ABS Although transactions Understanding Overview 6 o " •. • e • e • • ~ oJ ~ -4 ; (II ~ [ III g I i f ~ .1» Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 18 of 78 m is in ~! tii;:>$ 1Fm the form l " .~ and of of and the in managers so-called either COOs exposure is totals, nature of books, for positions this our ABS This wherein so of from trading COOs unsold book. purchase contingent small, its hold the activities, holds issuance will to trading excluded for secondary book through due desk also extremely and is be risk, COOs warehousing to correlation securities primary trading primary our credit ASS The ABS COO in exposure to our in our in agencies this and firm in secondary found is the risk found rating the collateral RMBS herein. are the and Therefore, COO:-squareds. by RMBS expose exposure or to subprime COOs subprime transactions. described to exposure of numbers. likely COOs deemed RMBS exposure. of subprime Positions is fully transactions. pool total our less of ASS a Put of syndicated senior executed our of exposure of more Found even default amounts of is into has are of form super are exposure to newly Liquidity tranches positions. transactions. of the & the desk smaller component Puts in have tranches hold aggregation securities we equity or COO probability Exposure Senior aggregated the or cases largest Liquidity Both assuming not super-senior The The retained COO-squared The direct Significantly both Finally, debt Super trading - - of - - Where Overview 7 • • • • Q ~ Q Q ;:, ;:,. ~ ~ S () 3 3' a s:. i :: [ f .!l Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 19 of 78
mfidential Treatment Requested by em CITI 00203078 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 20 of 78 1. t; it .~J~~: ~." 1.: : ·~t· <~P';;'·i:·; '~",$ i. COO. to assets of 3/29/07 . of sale As 1.5 1.1 0.1 0.3 5.4 2.7 2.7 ($BN) upon Valuej$BNj Value uu reversed Summary ___ loss~s Type Type months. Mortgage earnings; 6-9 Exposure Prime Security Subprime Securi!y includes: Non COO for through Total CMBS RMBS ASS RMSS Total ASS open warehouse market in to typically Subprime - marked facilities Collateral ASS positions Other Warehouse All a Warehouse • • • § I ... Co 3" c -i [ r; m a ~ 9- c: I ~ 1 " Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 21 of 78 .. ~ ~;i i; .~~;:~ '1"'- ~ ~ J... . ,.~ ~~"W~~ i;f.$.~ . , ~ Rating by opened. 3/29/07 being of as Exposure '0005; In currently o Q2. are 1,339 in 58,679 47,724 26,983 45,311 RMBS 290,114 859,291 , 1,333,893 2,663,335 rating) Val,ue closing Direct. average of "A" transactions an in Rating than sold be BBB BB 8B8+ NR (less B 888- AAA AA Total A to Breakdown .- e~pected warehouses assets mezzanine Wareho~se new Subprime No All COO 9 It .. ~ f g g a c: 9- ( I ~ f Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 22 of 78 I;~' ,: 1" ~l 'llll' '&,";,!l' ![; '* ;}, ~, '~~11>1> .If~"")F ~, 3f29f07 of as 'OOOs; In 12,911 12,355 14,835 19,732 83,744 43,581 49,937 Value 565,348 455,999 257,980 1,516.421 Rating Market -By sale. AAA for Tranche AAA Mezz BBB BBB- BB+ Jr Equity Total AA A+ A A- Positions marketed market. actively to Primary marked inventory COO positions Remaining All 10 .. 1\1 ASS ~ i o ::l .. ~ g ::I ~ 3" ;Q i a ~ [ m z !i ,. Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 23 of 78 of also I"J ·~t:··· from must portion default Senior of events Super movements the events. super-senior probability market than totals. the low certain our of certain risky finance mark-ta-market from less to counterparties. extremely addition, an even transactions. 3/29/07 OCClJrrence In against of be excluded .384' the 4,080 have As to COO 14,572 10,108 ($MM) of to transactions highly"rated been unlikely. ASS protection Value ASS has from of event positions buy agencies . the in Grade we extremely these tranche is exposure rating protection Te'rm High movements. view Type where the this senior ASS financing we Term by default buying enable of Senior most ASS to Grade default, program risk the of viewed backstop through High Super CDOA2 Mezz is the Therefore. billion. mark-to-market program is hedging book fund. SN. $14.6 tranche provided probability purchases this to is novel exposure, market. Analysis a portfolio also $23.2 small innovative CP hedge is we the senior required an position to the in sometimes %). be transactions. super-senior in instituted from Book risk to seek open super extremely 0.01 desk has Exposure devised Lis programs, our the market Puts for Net than so-called issuance COO to Senior primary current actively with these The (less The This Our Due We Book. In The'desk their occur capital Citigroup As Total Super - Liquidity - . - .... ------Excluded 11 • • -I ~ m [ a g [ ~ ~ g I I ~ 1 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 24 of 78
.~~ ... Ii: .. ,. .. '9~ ..~ ~
:mfidenlial Treatment Requested by cm cm 00203083 ,. Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 25 of 78 ~ '.!Ii the i': ~ MTM the ·~t·· of for MM earnings. acquisition reverse . of$187 completion to through original the flow reversal their upon in expected at is value MM reversed vehicle resulting market is $160 in COO of 2007, the Q1 portfolio to in Changes portfolio sold closed are basis. Warehouse warehouse a fees. closed. daily warehouse volume assets of for a are in CDO on the MM COO BN the time $112 the market on $13.5 of to of transactions which mark-to-market loss . at P&L totaling COO P&L marked on as recognition are Market and 2007 Marks Procedures transacti'ol"l, aggregate to of Mark-to-market of assets transactions COO 13 All Net The cost. losses, rest . Marking Effect - - - - Mark 12 • • is: ... I\) e 8 a. 3 ! n i: ! ! Q ::. i f ~ Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 26 of 78
. EXHIBIT 3
Excerpts from the July 10, 2007 Second Quarter Earnings Review Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 27 of 78
;: .-CI) CI)> ~ 0 C) .-r::: r::: I.. ..J ca ......
'fidential Treatment Requested by Citi CITI 04365115 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 28 of 78
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mI11III:...... -:· ... U......
Confidential Treatment Requested by Citi CITI 04365196 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 29 of 78 . ~ I( vs in and 1QO c~ti and and and net 18) AG Sachs Russia in India Capital EMEA 38) Energy AHMSA 2007 Capital $1 of of increase ON $38) $3.78). Malays,. $2 in Financial $2.18 and build -- increase (E $28}. $30mm. of S20mm $S22mm with (Gov. (Gov. by rrexas Group vs build (Goldman 1007 S400mm). B (Mexico. $78 Suisse DeHa (GOY. in $88 $1 "(Ameriquest Brothers Ameriquest t84mm) offset $28. 83 Reserve $288 Group offset Chinatrust S $148 2Q07 Bank Generals and $48 $18 Airways (Astrazeneea NA EMEA $895mm). in Asia NA, NA Reserve Comments (Credit NA and Tata recovery EMEA in in in Schering·Plough in NA recovery In (US Lehman Asia Group partially in General partially S108 in net Societe and $148 Kookmin 2B S100mm and . and General 1007 $1 $30.3mm) $247nm SS93rrm, Increase Decrease Holding EMEA No Decrease $9.18), Increases $3.18 S48mm $48) Increases EMEA NA vs. $336mm, $30Dmm Increases Increase $2.98 I I 1 (dec) I 0% 3% 1% 8% 6% 8% (1%) (3%) 17% 14% 26% inc. (125%) (142%) (106%) Chg % 1 7 (28) 794 130 972 (328) (300) (178) 1,0631 (3,387) 15,133 81,215 30,940 Chg 38,529 ~ I # # # # # # # # # # It # d i a of and and and B, 88), . $48), 3006 52.6B). Gov. Pikco $8 $28. S588mm. 88) $225mm $89~ Societe in $253mm "=~~ml S30.3mm) $,3.1 increases S225mm. Securities vs 2Q06. $6 $100mm and by Russia in Health $673mm) (Violet EMEA Sec'zn Asia of LATAM Energy in 2Q07 $948mm. AHMSA in $125mm Agency offset $4.28 in of Capital Brothers 1007. Philippines and Group United (Gov. NAGF write·off 2Q06. $2.88). of in $58. . _OM~. (US S159mm (Texas Group $30mm). build in and Tata Suisse (MeXIco. decrease decrease (LS S95mm, $238 (AmeriquestCapital (Gov. lel"man $368 Comments by $468 $38 $23mm build and by EMEA. increases $2t7mm) Delta LAT~.M $300rrm 598 Generale Asia in (Amertquest NA vs S18 and NA Reserve (Credit $1.48 in (Singapore recovery '""".00 NA India offset in offset NA in'EMEA and $78 in 2006 of 2Q07 in Reserve net $298 $781mm As,. In $108 $137mm General vs. Gov. partially Reductions partially India Increase No Increases NA Asia Lending EMEA $112mm) 0"_,,. Schering.Plough 548mm Increase General $258). and Increase (decl L..:...... __ Iincre.sas I I I 1 inc. 7% 10% 13% 18% 19% 18% 21% 82% (20%) (12%) (18%) (138~ (307%) (111%) %Chg 1 (71) 396 776 (238) (166) (156) 7,857 (3,762) (4,538) 43,094 Chg 49,219 69,599 39,8091 169,769 ~ 2007. 1 # June for (65) (48) (17) 630 679% 4,279 6,732 PSE. 27,002 20,270 88,2291 116,252 figures 270,447 399,224 318,723 on Outlook' 1,104,647 Management based 2007 Outlook $ $ $ $ $ I OSUC Management Unused PL Risk 1 N Risk mid·quarter: and of Loans Exposure Cla!a exposure. of Swaps' % Statement as a Loss includes Nikko Actions as Commitments Dat. IA 11+ • CrRM Default Millions) data Exposme Income Performing Seltlement Classified: Credit Outstanding of 2Q07 Excludes in This Class. Contingent CI""". Direct Pre Unused Non Net Reserve Reserve'Balance Reserve Credit • • • • • • Co~1 - • Balance..SheelDala': - - Total - CredU Tot,,1 Commitments: - (1) (2) (3) Notes: Credit ($ ~ c:: o () '" a m 0- c. c: -i () It> '" It> It> ;0 :;0 3 :!. :!. r0- - CD 01 () ... o 0) '" .". ..., :1 '< .0 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 30 of 78 2 In 1.0 1.5 2.1 0.7 0.6 3.8 4.9 9.5 10.4 34.0 24.5 used being measure January to by on tranches, tranches. positions used and of exposure inventory offset COO COO loan $97.47 value book value Bonds on ABS ABS Trading partly Puts Residuals books from in exposure measure senior Syndicate Warehouses CDS Market exposure Notional to Correlation are Total Total Total and Support Sub-prime inventory in $4.9B book Mortgage 1. CDO CDO Liquidity Notes: ABS Trading Super 2. ~------~8~4~~~4 declined mezzanine losses the sub-prime a in position Citi is at index These unsold top into any clients claim ABX), Master that excess in provide client one which a including is BBB- to the in B included compared in of ("High long will the of securities. protection $1 taken as markdowns funds terminated sent have 07-1 there its derivative Ltd. to long review AM-rated. Each (fund COO we Trading, been are trouble the Leveraged where All products that been is Derivative hedge due or from in exception Analytics Fund The ABX all $1.2B have year, which the these have )mm trades of extent on which Risk being Alt-A, conservative) requests for the to $250mm. bonds. credit. Stearns. of Enhanced Master with primarily the as to Non~Agency ABX $(191 position. loss strategic To Alt-A (more basis. Bear ($441 mm) During margin and positions its to derivatives conducted desk, repo exposure and sub-prime, credit structured unwound identified $125mm All $(37)mm, Strategies Strategies reached with ABS from the on was horizon or is frequent Equity. COO and budget. on positions tranches, most from been calculated. novated have notional name Credit Credit P&L Mortgage Fund. mostly follows: . more $79.9mm review loss COO repo ABS, has COO a a been financing A the desk as novated, being is low on MTD ranging single is In or on sub-prime value-at-risk ABS are counterparties products/sub-prime, have year-to-date combined to Trading, five TRS out Structured Structured potential Enhanced record ABS, remaining fund the a top collateral the credit included have sent 35-day unsold on counterparty Trading's of All terminated, exposure Syndication experienced derivatives: a related numbers in Grade the Grade 30 2nd, positions AM-rated. to are Stearns hedge for CDS offset is where Citi Secondary been have COO 116% collateralized. review with High High only 82 July claim in specific repo collateralized $3.8B at can Bear structured a the with We the Reported on 82, is are All Correlation over have trades which and trades requests in and we fully on the exposure For is gains of on the ("Enhanced"): $20mm, Stearns Stearns to in ABS previously. ABX. time unless desk Of single-name five There of $54.06 fund Exposure: half • exposure losses margin the to Bear Grade"): positions inventory. Bear Fund $15mm back this excess, profile 5-day - - BSAM Hedge long have monthly risk Margining: finance transactions case to Sub-prime 19th MTD securitization, addition, almost $148mm warehoused . ~ C o c: 11> 11> 11> 11> '" a a () ;a ;0 ~ m 0" -I a. 3 ID U1 00 o () EXHIBIT 4 July 2007 Overview of Subprime Exposure in the Global Structured Credit Product Business Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 36 of 78 {O l 11 t07 ~ EXHIBIt ::Z7~( , crt #0- 'Or ,.!. 11J-fC{ I I • AND I,.)..)-u...k J<.;...UL q.... MANAGEMENT. PROPRIETARY GSCP ~ ~ok..+o~~ D~ ~~~ HIGHLY FROM IS WHICH PERMISSION 2007 July INFORMATION WITHOUT CONTAINS DISTRIBUTE NOT ONLY. DO USE INTERNAL CONFIDENTIAL. FOR ·.yvervie0:;~i'sJ;,~~:~·:~t~~4~~~1~~li~1~~T~~~~~~~ttfii"~J : .•. g -I :> ~ .~ i:r ~ .~ I !i 1 ~ ~ o 3 eo .. Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 37 of 78 I1,U j .~ ~1~tH ~~ P&L on OveNiew Positions Exposure - Breakdown Contents Positions Mark-to-Market Primary of of Warehouse Other ABS Background Summary Exposure Effect B. C. A. .. Table I. II IV. III. ~ o '" ~ c ! ~ o m CD o 3 ... I ~ I l Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 38 of 78 ;'~'. '.-:.~~.: >7:::~~'1 . :. r... '.: ~ .', .' \ :.~. ,.!,o .. :: '~ :.~ / I Confidential Treatment Requested by Cili CIT! 01255020 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 39 of 78 l:~ at ~ Overall two «::~ subprime in including . ABS 6/29/07 for in CDOs). foreclosures quarter. on - losses first AS'S securities, opened of closed the market of been significant index Quarte(Update end delinquencies, of ("BSAM"). and markets. tranches have the subprime un'dervalued BBB- with' by at the COO desk; to disclosure held 2007-1 Second quarter, . Management the warehouses nd - significantly 2 billion ABX syndicate secondary collateralized with new exposure . the Asset exposure The $9.7 its and No into primary (CDOs the Assets purchasing Stearns mid-June, our lighten primary from in to on warehouse downward. been Bear the continued purchases. 20% by both over CDO-squareds assets year. trending in reducing market positions continued Subprime destabilized 3/30/07. all this new ASS managed long down on to of GSCP . opportunistically thereby any and further portfolio. subprime funds diminished 66.62 billion, through: have the was to marketing appreciation COOs quarter, February in limiting this BSAM $7.6 greatly the at desks the price ASS mortgage transactions, market since is done Exposure has compared from turbulence COO home trading have Pricing Significantly Aggressively assets The 54.54, and The leveraged Liquidity securities, Throughout exposure We - Ow - - some GSCP • o e o • o 2 . ~ (') ~ to a: a .... ~ ?l a i m [ ~ o .c :3 (') ~ I Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 40 of 78 a L~ ABX ~ COO securities. <~~d Syndicate rn1~n tranched ASS The aggregate various of COO 3/29 holds on Primary . ASS COOs. and also our of managers positions in SN BN BN SN BN(1l BN ABS as Book ways: possible. in hold form product 6/29 $2.7 $5.4 $2.7 $1.6 $2.7 $9.7 as tranches we in COOs) so positions BN BN BN BN BN(1l quickly BN tranched tranched Correlation primary and (ABS in as on 51.3 $2.1 $0.8 $2.3 $7.6 $3.2 positions ABS form held tranched Street, three Our short are positions in positions hold Wall and the tranched on in short Desk dealers. long and COOs reduce both Street to of higher. through COO-squareds s.ecurities or Correlation have Wall directly and "A" traders higher hedged higher ABS marketed other RMBS books is or transaction. or COOs rated by our is securities largest "A" risk "A" positions. Both COO ASS and the the a short rated rated of of aggressively Desk exposure are subprime are subprime one executed Citigroupand executed. and Exposure execute is signfflcant to amount by to Book has RMBS Trading COOs higher ABS Total hold it newly Desk Exposure Subprime or actively Exposure of warehouse COO books - portfolio "A" "AAA" are COO finance our Significant Syndicate Trading Books RMBS Tranched a Both Subprime exposure underwritten size and of of rated rated positions transactions These only. majority Secondary hold has on Direct 93% 76% Tranched 95% 78% Primary Trading Long • • • We sufficient • The Unsold • • book. Our Secondary risk Indicles. Therefore, securities Warehouses our our (1) In - In - - In - GSCP Summary o II o 3 • o g ~ -i a !: ~ ~ m c a ~ ~ E CI o :3 ~ .. III Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 41 of 78 ~ t··::! u . U ~ ~ ...... rr:>~fi ~, MM MM MM MM 3/29 $26.5 $14.8 $0.0 $41.3 . MM Mfv1 MM MM 6/29 $21.1 $0.0 $46.4 $67.5 . warehouses Book our in held Syndicate Books not is TQtal' Primary Trading equity Positions COO Warehouses COO In COO In In Equity COO Summary • • • 4 • n ~ -4 ~ g t ~ [ ~ i o o ~ l 3 ~ (0 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 42 of 78 n U the ~ ~iF faUed I. ~ into a are sharing ,,;,:;) r~~a we with risk equity for warehouse. risk. securities and business:' the addition. of In provide associated its selling life subprlme up in mezzanine the ASS end positions generally portfolios. to risk may long which we throughout the market. bespoke volume. hard-to-place exposure of in While to liquidate the ASS quality SN to in agreement the hedge in hedge credit tranches S10.7 trying to risk. for business. execution. than names overall particularly the warehouse market deal totaling collateral. an of is mezzanine financed. our monitored specific of process deals posts the product, hedge in strategies provide and to pO'sition to terms securities securities and/or shorting short the COOs structured Index controllable basic positions the of acquisition COO-squared against ASS position and through ABX short through build five and warehoused loss the to taken name before safer, take our on ASS first are distribution 5 a for exposure also mitigated single much its products is a Citigroup can global employs priced is haircuts positions by shorts strategy the assumes hedge we that Desk in short bespoke Hedg.ing Desk also Portf()lios - approved typically quarter, Shorts takes will leader mitigation thewarehouse discount. a in business are circumstances. Trading Shorts is Correlation risk marketing manC!ger. at.a Trade risk Bespoke second the manager best business business COO ASS on ce~ain the Shorts Sharing Index GSCP Credit In with The Securities Our market deal. In tranches. Citigroup Our The The The currentlY Risk - - Distribution - - Shorts COO - - - - Single-Name ABX - - The Summary • • 5 • • • • g> t m -I c IX 3 [ a ~ [ ![ 1 o :3 o I' '" ... Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 43 of 78 : ...... :.\...... , .. ~' .. :.. :~:':-.;;>;:\:d ...... .l ··W;:·:, :. " ".-," ..: :: :' ':.~~ ",l .... ,.:' " Confidential Treatment Requested by Citi . crn 01255025 ,. Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 44 of 78 it ~H totals RMBS ~ RMBS amounts our in matter, as tranches 2006 ~ll ro.fI~n grade" of aggregate focus transactions and some limited or assets, known we subprime "high practical and ahead a to only as are pricing CMBS COO-squared· Since As assets on of 10% of subprime Some of RMBS, exposure result taking average) COOs. COOs. a warehouses) mixture is $456mm, and total prime securitizations ASS a CDOs. BBB- consist our of I in This and actual total other BBB RMBS repackaged contain positions of M. including form. the of is YTO RMBS quarter. a prime s1 transactions risk, BBB) 1 others (exclusively layers for primary sub (generally the of derivative collateral RMBS subprime pressure. or "COO-squareds". COOs; u·nsold from of (typically through Quarter ,. sect,Jritizations, securities in nd prime cash ABS CDO-squared 2 or tranches market of sub underlying RMBS the securitizations Os" RMBS Vintages tranches ABS to either marketing in exposure rated of the all of CD significantly in of and of suffering RMBS be tranches is higher subprime "ABS down of Exposure exposure $202mm entirely can rating holdings CDOs includes are into hold which than aggressively risk our ASS direct "embedding" direct tranches earned 2006 of other which repackaging in average the our this comprised in is RMBS securities of on warehouse the rated to GSCP repackaged exposure), are COOs assets types. our Form due 100% certainty lower deals, been that hold ABS exposure subprime originated subprime asset the to to exclusively with hold to our also have those note turbulence, warehouse transactions of other In to refer assuming COOs. transactions. know focus may which on col/ateral which apprOXimation, we exposure some market ABS exposure exposure. reduces an COOs COOs generally is important overstated. new other primarily is Despite results. (which Overa/[ of GSCP's Further, securities transactions. We "mezzanine" ABS ABS transactions exclusively CDO-Squared risk It of is Although our exposure are ";->" Understanding Overview o . o o • • • 6 • • o • '" g ~ -i !!!. ::. ~ fi? m c m C'l 1{ 3: .c ~. C'l o N 3 ~ .. Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 45 of 78 ~ M the so \bJ {., in as ABS ~ Nearly ~ and nature direct of \h~u J1'.:"'" . CDOs form aggregated retained positions increased positions. BSAM. of opportunistically the not contingent managers by in is COO have form the • been to COO-squared syndicated ABS the cases wherein auction totals in in have warehouse due and exposure in positions is both newly our we from in risk, of this sold as This COOs from so activities, collateral risk and primary . credit desk equity ABS book. and to or long small, of securities books, excluded firm subprime Our debt trading to the warehousing some also secondary exposure the trading issuance is extremely our of our for in be positions. on expose' COO overall to exposure correlation including to hold found exposure positions have is ABS or likely securities reduce this Increased to our agencies secondary desk unsold less in COO trading has and undervalued, sold, exposure rating risk and even holds trading herein. Therefore, either fully the are primary by RMBS for book RMBS not Exposure RMBS if our our significantly desk, transactions. in of described AAA. exposure. COOs of Correlation even are primary deemed COO subprime Positions is fully subprime hold found feel rated ABS to The senior Found the of deals, Put will we are the tranches by also more is transactions. component default pool is super price a and of are desk held which to exposure of numbers. the Liqui.dity largest positIons & desk Puts, executed total have trading exposure the super-senior CDO-squareds. of chosen securities Exposure COO probability we these our securities or Senior assuming of aggregation have The called Both Liquidity The of Into . the transactions. Typically, Subprime COOs secondary we 80% buying Finally, tranches Super - - - . - . Where Overview • • • 7 • ~ (') a ~ ~ -I a [ c '" a ~ II> ~ ~ ! o o :1 I Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 46 of 78 .. ~. ~.~ .. "~;:)~(?:1 ... .- ': .' :.~.; ~;, ':(. \~.{ . .. ':" ::.~ t.. :.;.•. ·.Ijt~~,!;i.;.l.·. ... :; ...... :." '., ,:··t r ~::':;". r~. ~..... :~ .. ~~ ~ ~ .. l>:,:/,:·;;,::.;,,·Ll ':::-,,:,,~,: ': ; ! ,',':' .', :~ ~ :.·': ..Sy·::·:·:l L . . :!.:..:;;;.' , oj ."', . ....: 3 .,'.-, ., Confidential Treatment Requested by Citi CITI 01255028 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 47 of 78 ~ n ... rr ,~ 1p~n ~~~U,\t COO. to assets of _ .. sale 1.1 1.5 0.1 0.3 2.7 5.4 2.7 '3/29, ($BN) ~3/29 ($BN) upon __ Value Value ~ reversed Summary Market Market 1.3 0.1 0.6 0.6 1.3 2.1 0.8 6129 Jl/29 , losses months. earnings; Type Exposure 6-9 includes: for Mortgage Security Prime Subprime SecurityType through open COO Non ASS RMSS Total CMBS RMSS ASS Total warehouse market in typically to -,Subprime marked facilities Collateral ABS positions Other All Warehouse Warehouse 8 • o • ~ ~ ~ ~ i i ~ o ~ .. ~ i Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 48 of 78 price ~ to Q:r~] Rating February. by expected since are opened Exposure 27 been 152 290 859 liquidated. transactions 1,334 2,662 be 3129 have MM) Four ($ may RMBS rating) priced. Value 90 191 358 707 1,346 ramped, been Direct Market 6129 average of have "An amounts an assets than minimus Rating (less de subprime Breakdown with SS NR B AAA BBB AA A Total - with three. warehouses and transactions quarter mezzanine our rd Warehouse 3 of new the No Most in COO • • 9 ~ o ~ ~ -I il. ~ m Co iii g I ~ 1 o :3 !!! :!l ~ N Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 49 of 78 ~ R ~ c;r U .~ 4~:;'n ~l'.:? 12 15 97 113 258 1,021 1,516 MM) 3/29 ($ Rating 13 Value 68 21 148 244 1.765 2,259 By 6/29 Market - sale. for daily. Positions AAA BBB Tranche BB AA A Eguity B Total marketed market actively to Primary marked inventory COO positions Remaining All ABS 10 • • g ~ ~ m ~ a ~ [ ~ f ~ o ~ ... (') :1 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 50 of 78 ~ of also t ~ fr~ must portion C default Senior of events Super movements the events. transactions. super-senior probability market than the totals. low certain our of risky certain executed ' finance in from mark-to-market less to counterparties. extremely billion" 384 3129 1,800 4,080 8,308 addition, 14,572 an even transactions. ($MM) MM. occurrence In retained agai~st $14.7 be excluded the have is to CDO Value $1.441 of to transactions highly-rated been to unlikely. , , tranches ABS 734 protection 6(29 1,279 6,285 6,424 Market ABS has from of event 14,722 book positions buy agencies the senior transactions Long in Grade we extremely these tranche is exposure correlation rating protection super High movements. the, view where the this (1) in senior long financing we by default buying Term be COO-squared enable of most Type to default, program ABS exposure also and Term Correlation risk the viewed of backstop through net is Senior the Therefore, ASS ABS may ABS Grade mark-to-market the program is hedging book on Super Mezz High CDO"2 Mezz Total fund. desk tranche provided purchases probability this reduce to novel exposure, market. BN. Analysis a portfolio also position trading small Innovative CP hedge we the an senior long required to $24.5 in the super-senior sometimes Is be super-senior transactions. in In Instituted , from Book risk to seek open super extremely 0.01%). desk Correlation has devised us programs, our the Puts market positions for than exposure so-called issuance COO to ABS Senior primary current desk actively with these Short (less The The This Our Due We The In Citigroup Book. their occur As Total capital The (\) Super - - - Liquidity ------o 11 o 'Excluded o ~ ~ a ~ -I !t a ~ i 'f! c ~ Co ..c ~ o ~ !:t I:l :I Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 51 of 78 ,,-~~ ... '.. '.. ~.;~~~~?~ ': .: :<·<,·:{l .. ~ . ':.. , :.' ": ~'':-'...... :. ' ..~ ...... ';"'~.:.: ~ .. ".. ~;:'~'X;::' .{ '. oe:s :.. - .:~ '. Q:.·.I . 0:.:;. 'l 0···· CJ) ..•. ·'.CQ·'-:·-:l ...... , I ; , '.:' :; " ...... , ..:.:;; .:" .. : . . :.::;;.",::':.(j .:." : .. , Confidential Treatment Requested by Citi CIT101255033 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 52 of 78 U by l 11 on nC<;::IR but ~ A and offset 1 ~;>!l COO· given was and gains results. ($5.2) This $134.6 $110.8 $255.8 $294.1 $133.6 $456.4 ($38.6) ASS transactions, ($172.9) discounts 5 year's YTD last priced closed pricing of on positions. Mark-to-market by and long ahead of offset book. reversed priced position. $42.5 $92.9 $41.7 $89.0 ($5.2) 10% $157.6 $202.6 . ($15.8) Analysis In ($107.2) we were were Quarter still YTD, syndicate fees 2nd mark-downs losses P&L Overall. to book. Those - primary securities due $456.4mm our turmoil. at fees. senior COO book in is $92.1 $69.1 $44.6 $136.5 5253.8 S162.9 (565.7) ($22.8) ABS and mark-to:market Quarter market super up-front trading as 1st and positions in our its Products in severe in quarter, ABS the unsold portfolio, 2nd by S61.6mm losses our the in particularly on subprime for Credit on incurred warehouse impacted brought our taken was in $202.6mm write-downs which transactions, Trading were on COOs Correlation Total taken Correlation Management earned business and Correlation Total ABS hedging both Loans Secondary ASS GSCP Structured COOs Credit lIIiquids GSCP ASS sold the COO transa'ctions, GSCP mark-downs were I. II. III. IV. V. ABS losses squared securities Overall. The Similarly, further opportunistic Global 12 • • • o o ~ -t [ a ~ c: [g ~ i ~ [ C) g ... l ~ Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 53 of 78 EXHIBIT 5 Transcript of Citigroup July 20, 2007 Earnings Conference Call Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 54 of 78 FINAL TRANSCRIPT Thomson StreetEvents'" .. [> t> Conference Call Transcript c ~ Q2 2007 Citigroup Inc. Earnings Conference Call Event DaielTime: Jul. 20. 2007 J 10:00AM ET .. Contact Us @2oo7ThomsonF'mancial. Republished with permission. part of this pubffcalion may be reproduced or IransmiUed in any form· or by any means without the prior writlen consent of Thomson F'llanciaL ~ . EXHIBIT iii -Z ... ~~ O~ ! JI.( Confidential Treatment Requested I Ho (0140 CITI 00000139 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 55 of 78 FINAL TRANSCRIPT Jut 20. 2007 110:00AM ET, C - Q2 2007 Citigroup Inc. Earnings Conference Call CORPORATE PARTICIPANTS. AnTild~ley Citigroup. Inc. - Director IR Charles Prince Citigroup. Inc. - Chairman. CEO Guy Crillenden Citigroup. Inc. - CFO Robert Dru.kin Citigroup. Inc. - COO CONFERENCE CALL PARTICIPANTS Glenn&borr UBS - Analyst Guy Moszkowski Merrill Lynch - Analyst Mike Mayo Deutsche Bank - Analyst Jason Goldberg Lehman Brothers - Analyst Steve Wbarton JPMorgan - Analyst Ron Mandel [GIC} . Analyst Dave Hilder Bear Steams - Analyst James Mitcheb Buckingham Researcl. - Analyst Meredith Whitney CIBC World Markets - Analyst John McDonald Bane ofAmerica Securities - Analyst PRESENTATION Operator Good morning, ladies and gentlemen, and welcome III Citi's secoDll-qual1er 2007 earnings mricw, featuring Citi Chainnan and Chief Executive Officer Charles Prince; Chief Financial Officer, Gary Crittenden; and Chief Operating Office-. Robert Druskio. Taday's call will be hosted by Art Tifdesley, Director of Investor Relations. We asked lhat you "'old all questions until the completion of the fonnal rem.arl<:s, at which time you will be given instructions for the question and-answer session. Also, as a reminder, this. conference is being recorded roday. If you have any objections, please disconnect at this time. Mr. Tildesley. yoU may begin. Art Tildesley - Citigroup, Inc. - Dirt!cior IR www.srreetevents.com Contact Us © 2007 Thomson F'mandaI. Republished with permission. No part 01 this pubfication may be reproduced or IJansmilled i1 any fonn Ol by any means without the plior written mnsent oflhomson F'lIl3Ilciai. Confidential Treatment Requested em 00000140 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 56 of 78 ______~F~I~N~A~L~T~RA~N~SC~~~PT; Jut 20. 2007 110:00AM ET, C • Q2 2007 Ciligroup Inc. Earnings Conference Call Thank you very much, operator, and thank you all for joining us loday for our second·quaner 2007 earnings presentation. We're going 10 walk you through a presentation which is available on our website, so if you haven~ downloaded that, please do so now. The format we will follow will be Chuck will start the caU; Gary and Bob wiu take you through our presentation, Chuck will have a few concluding remarks, and then we would be happy to answer any questions that you may have. Before we get started, I would like 10 remind you Ib.t today's presentation may contain forward· looking stalernents. Citigroup's fmanei.l results may dilTc:r materially from those statements, so please rcfer 10 our SEC filings for a description of the f.ctors that could cause our actual results to differ from eKpeclations. With thaI said, let me tum it over 10 you, Chuck. Charles l"rincc - Cit;grollp. Inc.· Chairman, CEO Thank you and good morning, everybody. Thanks for joining our call. I want to begin by thanking everybody in our leam for delivering a record quanerly perfOtmance, the best we have everrlone. rro very plcased with the Wlde:rlying health and quality of our business. I am especially pleased this quarter with a couple of particular ilems. One, the growth in our international franchise. Second. the pe:rfonnance in our capital markets related businesses generally, especially given the market conditions we all saw in Junc. And thc benefits we are jusl beginning to see from Bob Druskin's CKpense·led initiatiVes. Now lale lasl year I Set four clear priorities for Citi in 2007, and weare delivering on all oflJJem. Our fust priority, as you know, was to grow our US Consumer business. You have seen the progress Qverthe last several Qltarter5 as Steve Freiberg and the team have turned that business. That progress continues this quarter. We had good. strong volume; and revenues we:re reported at 3%, as Gary will take you through. Irs 5% without Ia.~t year's one-timer. So I continue to see goo~ (tcohnical difficulty) in the revenue growth in that very imponant US Consumer business. Credil was a drag on our bottom·line results, and Gary will talk about thai in more rletail as he talks about CrediL But I would tell you, I am pleased with the continued nun we see in our US Consumer business. Our second big priority for '07 was to reweight the Company's revenue mix towards our faster-growing businesses, especially our international franchises. Again, we see very good results there. We generated record inlernational revenues, grew 34% this quarter; and a record internalional net income. up 37%. Really a tremendous performance by the leam. International revenues were 49% of our lolal revenues, up from only 43% a year ago, and I would say growing strongly across atmost all of our businesses. Now I would like 10 remind you; growth in the inlernational markets is still an enormOUS opportunity in front ofus DI Citi. A large ponioD of our investment spending has been outside the US, and that will conlinue. In addition to our organic investment, building all the brancbes, as you know, we bave announced 10 international acquisitions since October of last year. most recently the transaction wilb Banco de Chile Ibal we discussed yestcroay. I would say that Citi is extremely well positioned 10 grow our inlernational businesses, even with the successes we have had so far. Ithinlc our second-quaner results really are a good measure orlb" momentum we have in these fasl'growing markets. I would also like 10 call Oul in the reweighting category the growth of our capital markets related businesses, including Markets & Banking. where Michael Klein and Tom Maheras are doing a terrific job; Global Wealth Management. where Sallie is really leading the charge; and Altemative Investments, where Vi!:ram l"andit has just joined the team to help build that OUL In all of these businesses. we had an outstanding quarter with strong revenue and income g.:owth; and I would again say especially ov=cas, Our Ibinl goal for this year was effective expense management. My friend and partner Bob Druskin will take you through in a few minules what we have done in thai regard. rm very pleased with the progress the team is making. We generated positive opecating leverage, I will say, again this quarter, and our rate of beadcount ~wth slowed, reflecting what I think is just the start of what will be an ongoing process ofre-engineering to improve efficiency and speed in our business and lower our expenses. fourth. credit management. Now we are all watching crediL You're walching credit, we are watching crediL We're all watching it very carefully. Gary is going to take you tbrou~ that in some detaillaler, so I won't do the detail here. But I will leU you I fccl vay good about our processes, about our risk management systems, and Ibe overall quality of our loan portfolio•. www.slreetevents.com ContadUs @)2007ThomsonFinancialRepublishedwithpermission.·Nopartofthis pubrlCafon may be reproduced or flansmitted in My form or by any means wilhout1he priorwritlen consent of Thomson rmanciaL Confidential Treatment Requested crn 00000141 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 57 of 78 FlNAL TRAIIOSCRlPT JuL 20.2007 110:00AM ET, C - Q2 2007 <;iligroup Inc. Earnings Conference Call We are·building reserves. But net credit losses and loss reserves as a percentage of loans are steady. So we bave had some significant credit releases in the past, and an Wlusually low level of net creditlosst:S in the pasL Right now, we are increasing our credit cost as we build reserves, as we stay ahead of trends in the credit envirorunent. As I said, we are very focused on managing our credit exposures throug/l the cycle. A few comrnent~ on our recent acquisitions. As you know. we closed the acquisition of Egg in the UK, a tllInsacUon which will bolster our Can! and online banking businesses around the world. We also closed Grupo Cuscatlan, which enhances-our banking presence in Central America. We have announced the acquisitions of Bank of Overseas Chinese in Taiwan, of Bisys, and of Aro, all businesses that will expand our franchise in, again, higher-groWlh markets. As 1 mentioned, we closed Old lane "",Iy this month, and we expect great things from Vikram Pandit, lohn Havens, and that team. Most significantly, we now 60% of Nikko Cordial in lap"". I was in Jap"" just a week or so ago, and Japan is a great market. We have also announced plans to list Citigroup's shares on the Tokyo Stock Exch.o.nge. I think the f"maneial services market in Japan is enormouS. I think that the customers there are hungry for new products. Based on my visit and visits with clientS and with our colleagues at Nikko Cordial, I'm very excited about the potential for growth in our business in Japan. So in sum. we are making very good progress. I feci very good about what we arc doing. We have strong volume increases. We have strong revenue growth. Bob Druskin is leading the ctron to improve our suuclUl3l expense. The international markets arc very, very robust. and that is where our future growth is coming. Now we still have a lot to do, but that lot to do is really opportunities for us: I'm more and more confident oflbe path we are on. So wilb thai, let me turn it over to Gary and to Bob, who will take you tbroug/lthe results. Then I will come back at the end for questions. Gary? Cary Crittenden - Cirigroltp, Inc. - CFO Thank you, very much, Chuck, amI good morning to everyone. 1 am going to S\llIt out with slide I. It shows our consolidated results for the quarter versus the second quarter of 2006. To summarize our second-quarter results, net rev,,",ues grew 20%. Net interest revenue is up double digits for the f"tTSI time since the third quarter of 2004. Expenses were up 16%. Whether you adjust for the press release disclosed items or look at our results on a reported basis, we had positive operating leverage in the quarter. The cost of credit was up 50%; and as Chuck said, 1 will come back and describe that. in some detail in a few minutes. Despite the increase in credit cost, pre·tax income was up 19%; net income ITom continuing operations was up 18%; and EPS increased by 18%. OUr return on equity was 20.1% in theqU3Jter. Included in these results are three items which impact the results for the quarter. First, in the second quarter of2006 we had one item. We booked a $163 miUion pre-tax gain on the sale orour.upstate New York branches to M&T Bank. This quarter we had two items. First we released $300 million of pre·tax litigation reserves related to WorIdCom and other research matters, which was a benefit to our expenses in the Market & Banking's business. Second, we had a $96 million APB 23 tax bCllcfit in our Global Wealth Management and Madcet & Banking businesses. Let me tum nOW 10 slide number 2. This shows a five"luarter trend of some of the key drivers of our businesses. Strong momentum conlinued across these drivers, wbich were the underpinnings of our 20% growth in revenues. Momenblm was especially strong in our inJemauonal franchises, whicb drove revenues up 34%. Drivers ornet interest revenues showed strong growth. Consumer loans were up 8% in the US and 25% inlernationaUy. Internationally, organic consUmer loan growth was up 17%. Consumer loans were up 23 - rm sony, corporate loans were up 23%. Consumer deposits were up 20.% in the US and 15% internationally. Internationally, organic deposit growth was up 8%. Drivers of noninterest revenues also grew nicely. Credit card purchase sales weze up 6% in the US and 31% internationally. Internationally, organic cardpun:hase sales growth was 23%. Assets under management weze up 35% in International Coosumer; and ciientS'. assets under management in CAl were up 55%. In our Global Wealth Management business. 3SSt$ under fee·based management grew 40%,.22% ofthnt organicaUy. www.slreetevents.com Contact Us © 2007 Thomson Financial Republished with permission. No part ot this publicalkln may be reproduced or IJanSmille Confidential Treatment Requested CITI00000142 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 58 of 78 FINAL TRANSCRJPT Jul. 20. 2001110:00AM ET, C - Q2 2001 Citigroup Inc. Earnings Conference Call In investment bwing, we ranked number one in global debt underwriting; number two in annoWlced M&A; and number three in gJol?al equity undc:iwriting. We had record r.,venues in equity markets. Slide number 3 shows the year-over-year revenue growth of each of (lur IJI3jor businesses in the top )Ialf of the chart. The grdph at the bollom of the page shows a ninc-quarter trend of Ute split between our US. anti international revenue. US Conswner revenues grew 3% in the qUarter. Filst, the business has sustained a steady growth \(end over the last three quarters. Last qUarter, adjusting for the gaio from the sale of MastetCaro shares, revenues grew 4%. This quarter, adjusting for the gam from the sale of our upstate branches in last year's second qUarter, revmucs grew by 5%. Second, we arc pleased to see the relative growth rates of our businesses. Our capital markets and International Consumer busmesses all grew revenues at double-digit rates. In lotal, our international revenues grew 34% and our US revenues grew 6%. We are working to reweight Cili to higher-growth opponunities, and the resuUs of this quarter demonstrate significant progress. This quarter's revenue growth rate also reflects the impact of acquisitions. Comhined, they contributed 4 percentage points 10 the 20% reported revenue growth. The bottom grant shows that our internatiol)31 revenues were 49% of the total Company's revenue base compared to 43% just a year ago. We expect to continue to reweight the Comp3llY towards the international businesses with a balanced approach of organic as well as acquisition driven growU •. Slide number 4 shows the US versus international annualized growth rate· of each of our business segments from the second quarter of 2003 to the second quarter 0[2007. The graph al~ shows the percentage of international versus US revenues in each segment. The !rend is very clear and reflects Our continued focus on allocating our resoun:es to the fastest-growing international markets. Overall, the t:;ompany has grown international revenues at strong double-digit annualized rates over the last four years, resulting in those businesses comprising 49% of our t01a1 revenues versus 38% four years ago. The bar graph on slide 5 shows the nmc-quarter sequential change in our net interest revenue. The table at the bottom shows you the net interest margin for the entire Company for those same nine quarters. . As I mentioned earlier, we have had strong volume growth in all of our businesses, which has resulted in fairly steady improvement in net interest revenue over the last nine quarters. At the bottom of the page you see tbe net interest margin declined sequentially by 6 basis points, including and excluding the Gray Zone impact The benefit from lower cost of funds was offset by growing m lower-yielding assets in our trading businesses. Now let me turn the presentation over to BOb.to give you an update on our expense performance in the quarter. Robert Dmskin - Cingroup. Inc. - COO Good moming. Slide 6 shows the year-over-ycar trend of our expense growth as well as the main drivers of that growth. When we discussed our structwal expense review back m April. we mentioned that using our public disclosure you would be able to Ir.ocl: our progress in headcouot growth and in expense growth relative to. revenues. On both SlruelW'al expense saves and total hcadcount reductions; we are ahead of our commitments. So we arc pretty pleased sO fur with the initial results. . GAAP revenue growth as you saw was 20%. GAAP expense growth is 16%. BAU expense growth of 14%; that was rcferencedjust for two items 'which you can sec on the chart. Thc $300 million WoridCom litigation reserve release which had a 2 percentage point benefit; and acquisitions had a 4 percentage point impact Nikko was the main driver in there, followed by Grupo Uno and CUscatIan. So BAU revenue growth at 16%~ BAU expense growth at 14%. But a littlc bit mote on BAU expenses. Those.melu!le expenses from the roughly 530 net new bJan<:hes over the last 12 months that we have opened. That was about 800 gross. We closed so~ BUI that added about 1 percentage point to expense growth. . www.streetevenls.com ContaclUs 02007 Thomson Fmancial. RepubrlShed with permission. No part of this publication may he reproduced or Clansmitted in any fonn or by any means wi1hout the priorwri1len consent oflhomsoo FlIl3I1ciaL Confidential Treatment Requested CITrOOOOD143 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 59 of 78 r-______~------~------~F~I~N~A~L"'T~CRlrT Jul. 20. 2001 I 10:00AM ET, C - Q2 2001 Ciligroup Inc. Earnings Conference Call More importantly, I think. year-over-year close to 60% of Ihe expense growth was driven by Markets & Bankin~ They have a large degree of variability in their expenses; and they had a very impressive revenue growth rate that drove that. So expenses generally look okay, SO leI's turn the page to headcounl. Slide 7 shows ~e positive trend in our underlying head count groVl.-th rates. Although the graph indicates significanl year-on-year growth, this was driv~ as you can see, preduminantly by acquisitions. Excluding acquisitions, fust-quartcr '06 to ftrSt-quarter '07, just looking back one quarter, the undetJying growth rate was 9%. Second-{juarter '06 to ~~"COnd- Some oflhe factors affecting the year-over-year 15%. as you can see, acquisitions contnouted 10 percentage points or about 31,000 direct staff. Again. the three big ones were Nikko, Grupo Uno. and Cuscallan_ The other 5% includes a couple of percentage points from branch openings. I mentioned before, we opened about 530 net branches. and so thai added a number of heads. Sequentially, the story is a little bener and in~icates some of the early effecls of the fust-quarter strategic expense review. If you break down the quarter-<>n-quarter ",te of 5% and strip out acquisitions which contributed about 6%, the BAU headcount growth was actually down by aboul I percenlnge point In April, we said that we would take headcoUDt down through a number of initiatives by about 17,000. So far. we are tracking ahead of our expectations to this point. Last word on the expense review. Just 10 remind everyone, we outlined three major objectives as we went through il_ One was to reduce expense growth through levers like hc:oiUC!)WlI management, optim.i.tation of IT assets, and expansion of shared services. We are a little bil ahead of our plans, tnlCking very well. and pleased with that. We wanted 10 change how we operate io become quicker and more agile_ That is a work in progress, but we're making headway everyday_ Lastly, to sustain and enhance organic investment initiatives. We did nOl wanl to take out revenue-producing capacity_ As you can see by the growth rates in our revenue, we have been successful in doing that. So, overall, some good progress. more work 10 do. Let me tum it back to Gary- Gary Crittenden - Citigroup, Inc. - CFO Thanks, Bob. fm going 10 tum nOW 10 slide number 8, that shows the year-ovcr-year growth in the various components of our lOin! cost of credit and the key drivers within each of those components. We anticipated that credit cost would be a difficull comparison for this quarter. While conditions remain generally stable. there are a number of facto~ that affect the comparisons this year over last year. The combined result of these faclolS was an increase in our total COsl of credit 0($934 million. or InCre than a 50% increase. As the chart shows, we had a net release ofS210 million in loan-loss reserves last year do 10 the particularly strong credil environment at the time and iower-than-expected banlcruptcy filings in the US. Net credit losses were up by $259 million. driven primarily by our Global Consumer business_ In Consumer, key drivers are higher balances from organic portfolio growth and acquisitions; continued deterioration in the second mortgage portfolio; and the impact ofthe Gray Zone in 'Japan.1n Markets & Banking, We continued to see a stable credit enviromnenl. The thinl component is a $465 million net increase in the loan-loss reserve. There wete two major drivelS of this increase. FilSt in the US Cards business, the increase was driven by a change in the estimate ofloan losses that arc inhermt in the portfolio. It is iinportant to DOle that the Wldcrlying credit metrics have remained largely stable: in our Cards business_ 'lhi5 reserve build re1lects our focus on staying ahead of the visible credil trends. by considering as many ~CIOIS as possible in establishing our reserves. Second. in the international Cards business, porlfolio growth and seasoning and the Impact ofreccnt acquisitions resulted in higher· resavc levels. I wjll give you a sf'JISe ofhow to think about these overall credit costs in the thUd quarter in just a few minutes. .~ WWW.slreet6vents·com ConlactUs @ 2007 Thomson FJIlaIIcial. RepubflShed with permission. No part of this pubrlC8don may be reproduced or IIlInsmiUed In any feon or by any means without lito priorwriHen consent.ofThomson FUlancial. Confidential Treatment Requested em 00000144 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 60 of 78 FINAL TRANSCRIPT Jul. 20. 2007 I 10:00AM ET, C - Q2 2007 Ciligroup i~c. Earnings Conference Call Slide 9 provides an update on ponfolio trends and quality. The top two graphs show consumer and corporate net credit losses and loan-loss rescrves as a percentage of loans. The bottom grids are an update on our pollfolio. showing the loan-to-value and FICO compariscns of our first and second mortgage portfolios in the US Consumer business. I..et me talk about the Consumer business, which is on the top len box on the page. The graph demonsllates thaI loan-loss reserves and NCLs as a p=c:ntage of tI", Consumer loan ponfolio have held Sleady. Exciuding the impact of Gray Zone, tI.e ratio of NCls 10 average loans bas been fairly stable until this quarter, where you can see a sequential improvement of 12 basis points. A comment on this. The second-quarter NCL ralio is affecled by the number of acquisitions thaI Were closed in the quarter. When loans arc acquired, they're booked on our balance sheet at the estimated net realizable value. which results in lower NeLs in the early months fonowing the close of a transaction. In our organic poI1fOli". the underlying NCL ratios continue to be stable. Loan-loss reserves as a percentage oOoans are sequentially higher; but they're in line, as you can see, with our year-ago levels. Looking baclc to the fust quarter of 2006, this ratio was 1.44% and has consistently declined since then, until last quarter when We started to sec it tick up. Th" declines were 3 reflection of a particularly favorable credit environment over the last several quarters. The increase nOW is a reflection of the current envirorunent, which warrants the addition to our reserve levelS. On corporate credil, which is the graph on the top righi-hand box of the page, you can see the NCL ratio has bocn very stable and the loan-loss reserve has declined. Here, the loan book has grown substantially over the cowse of the last severnl quarters, bul our losses remrun at very low levels. On cash basis, corporate loans were $599 million in the quaner on a toul corporate loan portfolio of $192 billion. The credit environment for corporate loans remains stable. In both our fust and second mortgage portfolios, as you can s"" from the grids on III .. bottom of the page. the quality ofour portfolios continue to be very good. There arc no meaningful changes from the results that we presented to you in this same [onnat in the last quarter. Additionally. in our Consumer Lending fust mortgage portfolio, we have seen approximately $3 billion or approximately 4% of our portfolio of adjustable-rate mortgages reset in the fust half of the year_ 85% of our resets bave been in higher FICO and lower LTV categories. As we look to the remainder ofthe year. we see similar levels ofresets in the portfolio. Slide 10 shows a number of key capital ratios 3nd the return on conunon equity for the quarter. The Tier I capital ratio for the second quarter was 7.9%, down from 8.3% in the first qUiIJ'Ier. The TeE to riSk-weighted managed assets is at 6.3%, down slightly from last quarter. As we sDid before, we target to keep our Tier I capital rnIio ahovethc 7.5% level and theTCE to RWMA ratio above the 6.5% level. Both the Tier I capital ratio and the TCE to risk-weighted managed assets ratio reflect the impact of acquisitions that we have done over the "ourse of the lasl few quart=. The leverage ratio, whiCh is the ratio of Tier I capital to average leveraged assets, stands at 4.4% this quarter. down from 4.8%, driven by acquisitions and organic asset growth. As we said in last quarter's earnings call, given the pace of acquisitioos recently and the opportUnities that we saw ahead at the time. we did not anticipate any further buybacks for the remainder of this year. lbat view has not changed. Ourretum on equity was 20.1%, driven by imprOVed perfonnance and increased leverage. Now I willl3lce you briefly through the resUlts of each of our major business lines. Slide II shows the results in our US Consumer business. Revenues were up 3% as we continued to sec good volume growth from our strategic actions.l.ast year's second' quaner included a $163 million pretax gain frOm the sale of our upstate New York brancbes. Excluding the gain nom last yeats results, revenue growth this quarter is S'JI.. Expenses in the US Consumer remained in check and grew by 3%, in line with the rale of reported revenue growtb and bClow the rnIe ofrevenue growth when adjusted fOf the gain on sale orour upstate branches. The feported margin improved 3%. This is tile third consecutive quarter of positive operating leverage in the US Consumer business, adjusted for press release disclosed irems. However, earnings were down as credit costs incn::ased by $671 million. including the impact of$274 nullion in reloses in the second quarter of 2006, and the reserve build we booked in US Cards, which J previously di~sed. and a difficult year-over-year comparisoo on our US Consumer Lending business. . www_streetevents.com 'Conlact Us @2007 Thomson Financial. Republished with permissiOn. No paJt of this publication may be reproduced 01 iIansmitted in arry fonn or by any means wiIhout the prior written consent of Thomson FmanciaL , Confidential Treatment Requested CITI 00000145 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 61 of 78 FINAL TRANsCRlyr Jut 20. 2007 110:00AM ET, C - Q2 2007 Citigroup Inc. Earnings Conference Call ---_._------' On slide 12, which you have sem before, we show a 14-quarter trend of revenue growth in our US Consumer business. The graph shows the emerging momentum over the last foue quartCIS, both ycar--ovcr·ycar and scquCJltiaily. This quarter, while reported revenue growth is 2.7%, if you adjust for last year's second-quaner gain on the sale of our upstate ~ew York branches, the growth rate is 5%. While we have a Jot more work to do, wC're pleased to see the cootinutd positive (rcods in Ihis busiJlcss. Slide 13 shows our results of the International Consumer business which have been significanlly affected by tbe results in Japan Consumer Finance. So let me start with tbe impact on Gray Zone this quarter. We had a loss in the Japanese Consumer Finance business this quarter of S33 million, which reflccts higher refunds and credit costs_ In January. we bad said that while "there was a significant uncertainty in the consumer finance business in Japan, we expected it to break" even in 2001 and return to profitability thereafter. However, the situation remains unpredictable; and given our recenl experien~e with the level of G",y Zone related refund claims, our best estimate now is that the business will have nctlosses in 2001. We continue 10 analyze the profitability prospects for this business thereafter. Now let's put Jopanese Consumer Finance aside and look at the remainder of the results. As you can see from Ibe middle section on this slide, excluding Japanese Consumer Finance, International Consumer revenues are up 24% and pretax income is up 5%, net income "down 3% as the change in tax rates due to the absence of prioT-ycar tax bcn~fil< calL At Cards, average net receivables grew 44%, reflecting both strong organic growth and the impact of acquisitions. Organic "",coue growth in Cards was evident in all regions outside of Japan. Retail Banking revenues were up 19%, driven by strong loan deposit and investment product .sales growth. However, continued investment spending. higher credit cosIo and the impact of a reservc release in last year's second quarter, and lower tax benefits this quarter drove net income down 6%. Oulside of Japan. Consumer Finance receivables were ul' 20% and revenue was up 23%. International Consumer expense growtb reflected the acquisitions that closed during the year and the continued investment in our distribution network. We opened 220 retail bank branches and 3 t 6 consumer lruance linmches in the last 12 months. Credit costs outside of Japan Consumer Finance were $948 million, reflecting the results from acquisitions, organic portfolio growth and seasoning, and the absence of prior-year releases at si 05 million in our International Retail BaRking business. " Now for the total business, [the net} impact on Gray Zone, the higher credit costs, and the continued investment spending resulted in a decline in net income of 16%. Slide 14 shows the results of our Markets & Banking business. 11le business bad a record quarter with revenue growth of33%, with outstanding international results. International revenues grew 50% and comprised two-Ulinls of the lotal Markets & Banking revenues, reflecting the strength ofour franchise outside the US. Our emerging markets business wal' panicularly strong in the quarter. Equity markets had record revenues, up 61%, driven primarily by our derivatives, cash, and equity lmance businesses. Fixed income revenues were up 24% driven by strength in credit products, securitized products, and commodities, despite the recent events in subprime and levenged fmaoce markets, which I will come back to in a minute. bt our investment banking businesses, we mnaiJ,J nwnber one in combined global equity and debt underwriting fo~ the 23rd consecutive quarter. We had record revenue results in equity underwriting, up 90%. Ow: advisory business was up 34%. Our traDsac:lion serviees business posted record revenueS and net income with key drivers growing at dOUble-digit rates. Expenses increased J 9%, driven primarily by compensation and benefits costs, which were up by 29%. Expenses also reflected a S300 million benefit &om a release of litigation reserves related to the WorldCom and olba research mall=. Adjusted for this benefit, expenses were up 26%, stiU well below the ~wth rate in revenue. Record revenues in many products and regions, and slable expenses and credit conditiollS, drove net income higher by 64% over last year's second quartet". The investment banking pipeline increased during the quarter to or at near-record levels. The pipeline is higher than at the beginning of the year, even after achieving the two best revenue quarters ever in the lu-st half of this year. Now, let me spend a minute talking about two topics, the sUbprime secured lending market and our levaaged Icmling activities. Our subprimc exposure in Marl<:ets & Banking can be divided into two categories, which together account for 2% of the Securities and Ban1cing revenues in 2006. The rust is secured lending and the second is trading, www.streetevents.com Contact Us \9 2007 Thomson Ananclal Republished willi pennissiolL No part of this pubrlCalioo may be reprodured or trcmsmiHed in any form or by any means without the prior written consent of Thomson F"lIlanciaL Confidential Treatment Requested em 00000146 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 62 of 78 FIt'lAL TRANsCRIPT §.2001110:00AM ET, C - Q2 2001 Ciligroup Inc. Earnings Conference ~II Wilh regards 10 secured lending. we have been actively managing down ow- exposure for some time. We had $24 billion in assets here at Ihe end of2006. It was at $20 billion at the end of the flfSt quarter and $13 billion at the end of the second quarter. while adjusting at the same time collaternl and margin requirements. As for our !Jading activities. we continue 10 be an active marketmaker. As such. we hedge our risks, using a variety of methods to monitor the heallh of OUf countetparties very carefully. We monitor everY aspect of our .-ubprime bUsiness daily. and we havc a rigorous process in place for marking our book: using fundamental valualion techniques. market references, and liquidity analysis. Let me now tum to leveraged lending. which accotmletl for roughly 5% of our Securities and Banking revenues in 2006. As of June 30, therc were four commined transactions which required repricing. For those lnII1Sactions. we took maries on our commitments and positions, which flowed through our revenues in Ihe second quarter. Leoking ahead. we ha~e commined to flllllllce other similar covenant-like uansactions which will likely require an adjustment to price and lenns. Fundamentally, we believe these are high-quality loans which when once repriced will get sold. Were we to relain these loans on our balance sheet, we would be comfortable with the credit quality. In a small subset of these InII1Sactions we have equity bridge commitments, which we take on selective:ly for top tier clients in connection with our leveraged fm:lncing. The strength of our balance sheet, our capabilities. and our ability to deliver for clients in tough conditions are the primary reasons lhat some of the largest sponsors with the best track records do business with Citi. Slide IS shows the results in ow- Global W"1llth Management business. Revenues were up by 28%, driven by strong customer activity and the inclusion of Nikko and Quilter. Assets under fee-based management were up 40%, driven primarily by tllC consolidation of Nikko and an increase in marlcet values. Net interest margin increased over last year, benefiting from the introduction of a bank deposit tiering program which helped offset yield pressures on loans. Expenses were up ·25%, driven by an increase in compensation costs on higher revcnues and the addition ofNikko and Quilter. . One point to nOle, we completed the integration of Ciligroup Investment Services, which previously managed and was reponed in Retail Distnoution, into Smith Barney. This resulted in a transfer of 686 FAs and $47 billion in clients' ~ets into Wealth Management during the quarter. Results also include an APB tax benefit of .1>65 million in our international private bank. Strong revenue growth, good expense e:onlrol. and the integration of Nikko and Quilter drove an increase in net income of 48%. Net income. for Ihequartc:r was a record. Adjusting for the APB tax benefit, net income grew by 29%. Slide 16 shows results in the Alternative Investments and Corporate: and Other business. In Alternative Investments Ihe performance was very strong in Ihe quaner. Revenues and net income each increased by 77%, driven by proprietary investment activity revenues, up 87%, and growtl) in client revenues, up 26%. Revenue: growth renccted both realized and mark-to-market gains· across private equity, hedgc fund, and other portfolios. Client capital under management increased by 55%. Lastly, Corporate and Other income declined, primarily reflecting higher corporate-level costs which were partially offset by improved treasury results. Now on slide 17, I looJc ahead to the results in the third quarter. I would like to discuss those in the context of the third quanerof2006.1be third quarter of 2006 poses a number of unique year-{)n-year challenges which will impact our results in the third quaner of 2007. So there are a few items that are important to consider with relationship to revenues. We expect the pressure on the Japanese Consumer Finance business to continue, resulting in challenging year-over-year compariS(lJls. Second, while I can't predict revenues in our Markets & Banking business, in four out of the last five years, the third quarter of the year in the MiUkclS & Banking business has shown a 14% sequential decline on avcmge in rcvenu<'S, .-eRecting the impact of slower summer months. Third, in our Alternatives Investment business, we said last quarter lhal, based on realized gains in the fourth quarter of last year, we expected total gains to be lower than in recent histOly in this business andror the remaining quarters oflhis year. While this.quartcr's RSlJIIS underline the earnings potential ofthis business, our fundamental outlook remains unchanged for the remainder of the year. www.slreelevents:com Contact Us ~ 2007 Thomson FlI18m;iaL Republished witb peunission, No part of Ibis pubrtcation may be ... nmdllcM or IransmiIIed in arrt fOllll or by any means without the prior written consent 01 Thomson Fl11ancial. . Confidential Treatment Requested em 00000147 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 63 of 78 FlNAI. TitANSCRJYf L-Jul.______20.2007 110:00AM ET, C - Q2 2007 Ciligroup Inc. Earnings Conference.. __ .... can ------~ Finally, as you likely know, we sold 41 or Dearly 42 million shares as part of the Redecard !PO on July I I, which will result in an after-taX gain of approximately 5400 million, which will be recorded in our third· quartet 2007 results. Expenses in Ihe lhird quarter of 2006 were the lowest in the laSI six quaners, primarily reflecling reduclions in advertising and marketing ~-p<:nd in US Consumer and lower compensation expcitse in Markets & Banking_ As you saw on slide 6, which Bob took you through, expenses in last years thin! quarter were 65% lower than in the second quaner of 2006, and 14.5% lower than in the fourth quarter of 2006. nus quarter's expenses are up 24% versus last years third quarter. As we cODtinue to invest in our businesses, we expect Our expenses to grow sequentially and year-over-year, which will make next quarter's comparisons challenging. As we had talked about in the last earnings call, the rust Iwo quan= of2006 had over S350 million in combined net credit releaseS which made our first and second quarter comparisons difficult. In the third and the fowth quarter, we didn', have any meaningful nel builds or releascs, which - all else equal - wiD make the comparison~ bener. lei me talk about three specific items to keep in mind as you consider credit costs for the third quarter. Firsl, wbile the credit environment still remains good, we continue 10 expect deterioration in credit as the year progresses, as the industry is coming from extremely low loss levels in Il!e Iasl two years. < Second, if the market evolves in line will! our expectation of continued deterioralion in the credit environment. and it revertS to a more normal historical level. we would likely make meaningful additions to our loan·loss res~ in the second half of the year, as we did in the rust six months or this year. Third, nel credit losses and reserves should continue 10 grow in line with our portfolio growth. To the extenl our portfolio has grown through acquisitions, we expecl to see higher credit costs in the thinl quarter of 2007 versus last year's comparable quarter, as the number of these acquisitions will be reflected in Ihe results. Fmally, we had a $254 million tax benefit in-the third qU3r\er of2006, which resulted in a lower than nonna] effective tax rate of21.40/0. In SUmmaJ}'. while we are very pleased with our revenue momentum in the second quarter. we expect expenses. credit. and taxes will be a challenging COmpariSOD in the next quarter. To wrap up, we had a very strong quarter. V'fe had double-digit revenue growth on strong underlying business drivers; good expense leverage; and exceilcnt perfonnance in our international franchise. lei me now twn it bacle. to Chuck for his closing remarks. . Charles Prince - CitigroufJ' Inc. - Chairman, CEO Gary, thank you Vtty much. You have heard Gary focus OD the Ycal"-over-ycar con:;iderations for the third quarter. Let me look just ahead a little bit, We arc malcing vay, very good progress on the four priorities we set for this year. As 1 said. the tum in our US Consumer business is sustaining. rm very happy with the rewcighting of our Jpix of revenues 10waul$ our International Consumer, towards our Capital MarJi:ccs. and our Wealth Managcmc:nt busincsscs. Again, and, rm very happy wid. the 35% growth in internatinnal nel income. rm especially happy with the 68% ownership in NikIco ConliaL Bob's etron on ClCpensC management and efficiency are beginning to show good progress, and there is a 101 of runway there ahead of us. G3I)' has talked at length about how we are managing credit very carefully. Our geouaphic and product divCISity distinguishes the opportunilies we bave from those of our competitors. Our ahility 10 execute on OlD' strategic plans, which should be evident this quarter, distinguishes our results fiom our competitors. We are on the right tractc. and we are delivering.remlts. We are getting it done. as our new advertising slogan says; and I'm very optimistic about our futu~ growth plans. So with that. Art, I think we are ready for questions. Art TildesJey - CiJigroup, Inc.. -J)i,ect",./R www.slreetevents.com ConlactUs 4:) 2007 Thomson Fmndal. Republished wilh permission. No pan of this pubncafion may be reproduced In any form or by any means without tile prior written consent of Thomson FUlancial. - Confidential Treatment Requested elTI 00000148 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 64 of 78 FINAL TRANSCRIPT Jut 20_ 20071 10:00AM ET. C - Q2 2007 Ciligroup Inc. Earnings Conference Call ------.------~ Thanks, Chuck; and operator, we are ready to begin the question-and-answer session. Before we do, if I may jusl ask for those of you OD the call if you could limit your questions to one question and one follow-up, that would be much appreciated. So operator, we are ready to begin. QUESTION AND ANSWER ------.. -... ------.------~------Operator (OPERATOR INSTRUCTIONS) Glenn Schorr with UBS_ GleDD Schorr - UBS - Analyst Thanks very much. Gary, appreciate the extra color on the hot risk lopics. I wonder if We could drill a little bit more. In, say that on the leveraged loan side, can you talk a liule bit of about th~ process? last quarter I think there was a $286 million reserves build inside [C&B]. But on page 35 you have provision forunfunded lending commitments at zao for the last three quarters. You have a $1.1 billion 3l10wance. Can you talk about how big the leveraged loan book is? How yOu think about IIIC hedges, and what you're thinking model-wise as you move forward on that reserve front? As you mentioned you had four deals repriced by June; but things have gORen worse suice then. That would be helpful. Gary Crillenden - Citig,oup, Inc. - CFO Yes, let me -- there's a couple of different fa,:tors I think that are cmbeddedin your question, Glenn_ Let me try and kind of separate them out a little bit in can. I went through one chart that showed a little bit about what our corporate credit performance had been for the last few quarters. I think it is slide numba 8 in there; it's a slide on page 9 in the deck that we showed. We have had extraoIdinarily strong loan-loss performance over Ibe last few quaners. AS you know, we added' $300 million to our loan-loss reserve in the quarter that we JUS! completed. We actually had net recoveries in this quaner, rather than losses. So we feel very, very good about the strength of our currenl loan·loss reserve in our corporate business for both the on-balance sheet activities as well as for the ID\fundc:d commitments thaI we have. We feel very comfonable wilb that. The issue wilb'regards 10 the loans Ibal have not yet been syndicated is nOI really a ~redit issue lor the most part. It is really a pricing question. So as 1 mentioned, at the end of the Second quarter we had four transactions that were essentially in-flight. With Ibose four transactions, we toolc reductions; we took marks essentially against those in anticipation of the fees that we would recognize during the course of the thlrd quarter on those four ttan5actions. We bave other transactions which have been kind of worked on during this time period where the market bas been somewbat in dislocation. As a result of that. our current expectation for revenues, the revenues that were realiZed there - not the credit losses. but the revenues that were realized there - are lower than it was at the time that those were initially priced. 'That is going to bave: an impact on Olll" revenue' growth rate. I underline overall that this high-yield and I~"",ged loan business together accounts for about 5% of our Securities and Banking revenues. So although it is an important business for us, it is not a huge: business for us in the 'overall schaDe of things. So we arc: comfortable with the underlying credit quality of these credits. We underwrote those as part of the normal process. Bu! we will sec some revenue effect likely from the deals that arc underway. '. Then the final dement of this is we do bave the ~ctions Which have bappencc! since the envirorunent bas changed. Those are now being done with a different $ct oftenns, with a different level of pricing than existed before perbaps a month .or so ago. I think this is a retum to the kind of nOrmal activity that you would see in the marlce!. www.Slreetevenls.com. ConlactUs @ 2OO1ihomson FInancial. Republlshec! wiIh pennlsston. No part of !his pubficalion may be reprodUced or IIansmined in any form or by any means Wi1IlouIllle priorwritten consent ofihomson F"lIliIncial Confidential Treatment Requested cm 00000149 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 65 of 78 FlNAL TRANSCRIPT I Ju,1. 20. 20071 10:00AM ET, C - Q2 2007 Citi~,_r_ou_p_l_n_c._E_a_m_in_g_s_C_o_n_fe_re_n_ce_Ca_I_1 ______---', So we have seen a change in lIle market. It happens in markets 31111le time. We have seen 3 change in lIle market; and one of the reasons people do business with US is we have an ability 10 have staying power as we go through 3 market dislocation like this. Glenn S~borr - vas - Analyst Just making sure, from your comments, I read in thaI Ibe four Ibal happened la:st quarter you look mark.< on; !hat means eve:ything else on the books is still marked as a loan. In olber words, they are not marked-Io-market on a day by day basis? As Ihey cOme - pricing, you get more visibility on a deal by deal, do you take marks Ihrough the ["Venue line? Gary Crinenden - Citigroup.lnG - CPO Yes, essentially COlTect. What we do is we anticipalc. We anticipate lIlat - what the pricing is going to be at the time Ihat we kind of make a judgment about what that is. We mark those loans then appropriately. anticipating what Ihe pricing is going 10 be. That may be higher or lower than the actual fees that we have committed 00 1Il0se loans when they acruaIly go Ihrough syndicalion. Glenn Scborr - VBS - A""lyst Okay. and then JUS! one other quiCk random.. On slide 2, all the key revenue growth drivers, arc those organic nwnbers? Or is it a blend, meaning all the acquisitions add in there as well? Gary Crittenden - Citigroup, Inc. - CFO II is a blend, Glenn. But to lnaJce it useful for you, on lIle international side. roughly a third of Ihose growlh rates come from acquisitions. That is not exactly accwate, butjusl for simplicity's sake aoout a'third of the growth rale is acquisitions. Glenn SchOrr - VBS - Anafytt Good enough, still big growth. Okay, thank you. Operator Guy Moszkowski with Merrill L}'llch. Guy MoSZkowski - Merrill Lynch - Anaf.yst Good morning. Hate to beat a dead horse, bilt on the loan syndications front. can you give us some idea of the extent to which. despite the very robust capital markets and banking revenue results. you actually did lake some of the hits thai you were describing? I look at SOrt of the combination of advisruy fees, debt underwriting fees. debt trading revenues, and lending ""'CIIUes. When you add them all up, they an: down about S500 million fiom the first quarter. Is a good chunk of that some of these reserves thaI you took? Or not reserves; they arc Joan pricing hits. Gary Crittenden - Citigroup.I"c. - CFO The marks that you tallced about wa-c nol nearly of that order of magnitude in our reSults overall. So lIley were much smaner than thaI on the four deals that I tallced about aI the time IhaJ we ended the third quarter - I'm sony. ended the second quarter. ._ ~, Gay Moszkowski - Merrill Lynch -Anal;yst www.slreetevenls.com ConlagUs (£) 2007 Thomson Financ:;ar. Republished with penn"lSSion. No part of this pubrlCatiort may be reproduced or transmitted in any form or by any means wilhout the prior.writlen consent oflllOmson Flllancial' . Confidential Treatment Requested em 00000150 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 66 of 78 FINAL TRANSCRIPT Jul. 20. 2007 110:00AM ET. C· Q2 2007 Citigroup Inc. Earnings Conference Call Okay, thank you. On Consumer Lending, US Consumer. there was a big inerease in the loss ratio and about a $0.5 biUion upswing in delinquent balances. You did add couple hll11dred million dollar.; in specific rcserve build, I guess. in rcserve build in the rust quarter. Bul only about $39 million additionally added this quartcr, even though you did see the swing in delinquencies this quarter. You have about $57 billion, IIhink. of subprime assets. Could you giv~ us a lillie bit mOre color on thc process in lhinking aboul whal those n::sc:rve additions shuuld have been'! Gary CrillendeD - Citigrotlp. Inc. - CPO As you might guess, we go through this and look at quarter by quarter. and we make our best estimate as we go through each quarter about how we think the losses that are inherent in our ponfolio will evolve over time. We did that in the rust quarter. took some charges in the rll'Sl quarter. Wc took additional charges in the second quarter that we just came through that wac primarily. in this particular case, related to the US Card business. So you won't necessarily see in lockslep additions to reserve in each business that tie directly to the delinquencies as they are evidenced in that quarter, bocause we may have in a prior quaner anticipaled that and expected thaI thaI would be apparent in futllCC quarters, and have already taken aclions on that. So, I don't - you can't draw a one-to-one relationship br:tweOl change in delinquency or improvement in delinquency and changes that we make in the loan-loss reserve on a particular line item. J think you really have \0 kind of focus on the overall reserving process as we go through and look at each of the individual lines ofbusiness. I think the important thing herc is that our expectation continues to be that we're going to see some deterioration as we go through the year. As J said in my earlier comments. if that eKpectalion is true !hen it is very likeJythat we will have the same -- similar [barely] material additions to our . credit reserves as we go through the remainder of the ye Guy Moszkowski - Merrill Lynch. Analyst Okay, then if! could just ask a question opernting leverage in the consumer businesses. 11 does seem, if you drill down business by business. it does seem like it is still weak. We saw positive operating leverage in the US and international Cards business, although the US Cards business hasically better because it has got declining revenue. But in the other consumer businesses globally. it really did seem like the operating leverage was slill kind of weak. Should we expect that- those metrics to improve over !he remainder of the year. given Bob's cost management programs? Rob~ Druskin ~ Citigroup, Inc. - COO II could be, although 1 would tell you that we're still opening branches al a pretty healthy rate; and branch openings have a negative impact on operating leverage as you r.amp those up. We-are SliD pending pretty heavily too. especially internationally. as we grow those businesses. We could ratchet those marketing and advertising numbers up and down. We could slow or quicken the rate of branch growth, which we are looking at. But as we open branches - and we are doing it in significant numbers - that is going to l!ave a depressing impact on operating leverage. But again, that is a dial we can ratchet up or down. Guy Moszkow.ki -Merrill Lynch-Analyst Are you·stiD operating pn:tty much within the contcxt of the ::10% or so reduction in that investment sPc:n!fing that ~~ had outlined lale last year? Roben'Druskia - Cidgroup. Inc. - COO www.slreetevents.com Con!actUs 02007 Thomson FlIl3ncial:RepubrlShed wi1h permission. No part of this publication may be reproduced or nansmitted in any fonn or by any means without the priorwriHen.consent of Thomson Financial. Confidential Treatment Requested em 00000151 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 67 of 78 flNAL TRANSCRIPT Jul20_ 2007110:00AM ET. C • Q2 2007 Citigroup Inc_ Earnings Conference Call Y cs_ The anSwer is yes_ Guy Moszkowski - Merrill Lynch -Analysr Okay. great_ Thank you very much- Operator Mike Mayo with Deul~che Bank M.ike Mayo - Deutsche Bank - Analyst Good moming_ Could you provide more color on the expense progr;lll1? You have had two quarters in a row ofposilive op ....ling leverage- How far along arc you in Ibis program? Robert Druskin - Citigroup, Inc. - COO Mike. this is Bob_ We laid out some numbers in the April review, post the flfSt-qwuter strategic expense initiative; and we are tracking pretty much right along the path we thought we would be- J expect that over thc second half of the year, we will conlinue 10 move forward anti bit Il'e numbas we oullim:d in April- We are a liule bit ahead_ I wouldn't say we arc materially ahead, but we arc allead both on expense initiatives and headcount reduction_ Again, we are tracking Ibis with great specificity. We have a few hundred projects underway. For each one we mow how we are tracking along a monch-by-month timeJine, which ones are ahCad. which ones haven't st3Jted yet - because some of them have a longer tail to them. But I would also just say chat wbat we did say we would do is slow the rate of expense growth, which we are comfortable that we will do_ Ocher !han the kinds of variable expenses chat you see in Smith Barney and in Markets & Banking in particular, which are heavily revenue driven or pretax pre-comp driven. But in teons ofhow I feel about where we are, we are right on target so far. M.ike Mayo - Deutsche Bank - Analyst What perccot of the savings have you achi"'~? Robert DruskiD - Citigroup, Inc. - COO It is less than balf. Mike Mayo - Deutsche Bank - AIIQIyst That helped Ibis quarter, though, gel positive operating, the leverage, or not yet? Robert Druskia - Ciligroup, Inc. - COO Yes, it did help. Mike. Mike Mayo -DelUSChe Bank - AlIQlyst wvyw.streetevenls.com ConlactUs II) 2001 Thomson FmanciaL Repubfished with permission. No part ollllis publication may be reproduced or transmitted in any form or by any means without the pJiorwti!lenconsentofThomson FlII3ricial. Confidential Treatment Requested cm00000152 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 68 of 78 FINAl.. TJlANSCRIfT Jul. 20. 2007 110:00AM ET, C • Q2 2007 Citigroup Inc. Earnings Conference Call Okay, then a related question as it relateS to revenue growth. International Consumer revenues are growing almost 40% annualized. Even if you take otI one-third, that is kind of a higlt pace. Is anything seasonal in that? Why such an acceleration? Gary Criltenden • Cifigroup, Inc. - CFO We have enonnous success in emerging markets in thc Markets & Banking business. It really is a distinctive competence of the Company and is really the primary engine behind that revenue growth. So obviously on the conswner side, we did well. If you adjust for the Japanese Gray Zone impact, that was up 24%. But the number thaI is =lIy powering the number thaI you're seeing is the'enonnous success thaI we have seen in t:lJIcrging markets with the Markets & Banking business. Mike Mayo - DeutsdJe Bank -Analyst Is there anything seasonal. though, or something that is temporary? Gary Crittenden - Ciligroup, Inc. - CFO Well, (multiple speakas) there always is a seasonal pattern where on aVCl"3ee, four out of the last five years, there has been a reduction of about 14% or so in revenues from the second quarter to the third quarter. That doesn't mean it will happen this year, but historically that has been the case. So th ere is a bit of a seasonal pattern. Obviously, those are v~ hot marl Mike.Mayo - Deutsche B"tlk - Analyst AcruaIly. Gary, your ROE is above your IMget this quarter. I thought at American Express YOIl were pretty ROE focllsed. Any thought in changing the ROE target? Cary Crittenden - Citigroup, Inc. - CFO The 20.1% came together both because of the performance of the Company and the leverage. As we: talked about in the: material that I prepared. we anticipate actually bringing our leverage down a little bit We are a little higher than we typically would target. That will bring our R&D - will bring our ROE more in line I think willI where we have been from a target perspective. Mike Mayo - Deutsche Bank - Analyst All right, thank you. Operator Jason Goldberg with Lehman Brothers. JaSOJl Goldberg • Lehman Brothers· Analyst 1Wmk you. I was hoping for a bit mOre color in tams of the I guess reserve build or changing methodology in Card, I guess given the fact that just Card losses J guess h.aVIl been kind of running below Ilhink where we would bave thought they would have..[spent) over the last several quaners. • www.streetevents.com Contact Us @ 2007 Thomson FmanciaL RepublistUt with permission. No part of this publicalion may be reprodua!d or transmitted in any form or by any means without the prior-written consent 01 Thomson Financial. Confidential Treatment Requested cm 00000153 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 69 of 78 FINAL TRANSCIUPT Jut. 20. 2007 110:ooAM ET. C· Q2 2007 CitigrQup Inc. Eamings Conference Call Gary Crittenden - Citigroup. Inc. - CFO Again. I think it is vay similar to what I had said a little bit earlier. So, when we established these rcservCS. we obviously have an Wldcrlying methodology that we rigorously adhere to; ·but we also exercise management judgment to a catain degree. We try and look forward and anticipate what losses would actually emerge in these portfolios·as we look forward into the coming months. We have Went throueJt that pr=' in US Cards and do:ided that we were low this quarter and needed to add to that reserve relative to what our expectations are. So even though you don't necessarily see ;1 show up in the 90 days past due, for example. in the US Card business. it is our expectation that we will see it over time. The result of that is we added to the reserve. Again. that is the exact process that we continue to do in each business in each quarter. Our overall assumption is that things are going to continue to deteriorate somewhat during the remainder of the year, and we will take reserves as appropriate as that materializes. Jason Goldberg - uhman B~oth~rs - Analyst Okay. Then I guess secondly you had a litigation release, reserve release in the quarter. J Ihink your reserve is slilIlike at around S3 billion or so. Should we kind of expect, I guess. conlioued releases? Or I guess where are we in thaI cycle? Gary Critleuden - Cit;g~ouP. Inc. - CFO rro the least qualified person 10 speak on that topic; so we have a very careful process that the General Counsel's group goes through to make these decisions. They arc usually evenl-driveD. and that was the case in this particular circumstance. They are event- Jason Goldberg - uhman Brothers - Analyst Okay, thanks. Operator Steve Wharton with JPMorgan. Steve Wharton - JPMorgan - AnDlyst Hello. GaJy. could you just elaborate a lillie bit? J think you said that you had - you were down about SI3 billion in the investment bank in subprime-related assets. . Gary Crittenden" -Cirivoup, Inc. - CEO Yes. Steve Wharton - JPMorglln - ANlIyst Can you just maybe characterize a linle bit more? Does this consist of. say. residuals. loans themselves that have yet to be securitized? Just \0 give us a little bit more comfort around that number. Gary Critteuden - Citigroup.lne. - CFq www.slreelevents.com ConJactUs e 2007 Thomson FJllandai. Republished with permission. ND part of this publication may be reproduced or transmitted in any lonn or by any means without the priot Wlitten consent ofThomson Fmancicd. Confidential Treatment Requested em 00000154 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 70 of 78 FINAL TRANSCRIPT Jut. 20. 2007/10:00AM ET, C - Q2 2007 Gitigroup Inc. Earnings Conference Call Sure. Yes, this is -- think about this as Ibe COOS, Ibe CLOs, and Ibe secured assets that we hold on our balance sheet. I think our risk team did a nice job of anticipating Ibat this was going to be a difficult environment, and So set about in a pretty concentrated effort to reduce our exposure over the last six months. So it was at $26 billion as we ended the year last year; and we stand at about SI3 billion loday. Embedded in that SI3 billion are our residuals. Tho residuals now are around S800 million, something like that. That number will be in our IO-Q when we publish it; bilt around $800 million. That would - S800 million. That will be down from about SI billion or so, I think, roughly atlbe end orlbe IU"S! quarter. So this is something, obviously, that we have our eye on, Ibat we're watching very closely, and that over time we have brought down to a lower level to reduce our exposure Ibere. As I mentioned, Ibis exposure has come down while we at Ibe same time have been worlcing on enswing Ibat we bave Ibe right terms and covenants and conditions associated wilb lbal thai we hold. S() Ilbink we are on a track that is a p()Sitive track. But I Wlderline Ibat this is a very uncertain environment righl now. II is very difficull, I think. for anyone 10 say exaclly h()w Ibis market evolves over Ihe next rew quarters. Steve Wharton -JPllforgan -AlUllyst Okay, d,ank you. Operator [Ron Mandel] with [GIC]. Ron Mandel -/GICJ - Analyst Hi, thanks. JUS! in regard t() bridge loans, you responded about the magnirude was considerably less in the write-doWllS than the drop in revenue in the second quarter. I was just wondering if the third quarter had ended yesterday. what comments you would make in regard to the write·downs that you anticipate for the quarter. Gary Crillenden - Citigroup, Inc. - CFO Well, it is really hard to say because it will depend, obviously, on the environment here. You know, the month of Augusl is a slow month, generally, for this lcind ofactivity. So it is very difficult to say. I Ibink everybody everyone will have a better idea when Seplember comes around and is just a more normalized level of activity than We know today. Ron Mandel -/GIC} -Analyst But if the quarter bad ended yesterday, what would be your expectation? Gary Crittenden • Citigroup, In~ - CFO The total size of !be aotivity that we have is larger thail the four that I had mentioned just a few minutes ago. The total size of activity that we have that will get priced in this quarter is larger than that. So. Ron Mandel • !GIC! - Analyst .. By Itow much is it larger? www.streetevents.com ContaetUs @ 2007 ThomSon F"mnciaL Republished wi1h pennission. No part of this publication may be reproduced 0( transmiHed il alY fonn or by any means without 1he priorwritlen consent of Thomson Financial. Confidential Treatment Requested , cm 00000155 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 71 of 78 FINAL TRANSCRJI'T Jul_ 20. 2007/10:00AM ET, C - Q2 2007 Citigroup Inc. Earnings Conference Call Gary Crittenden· Citigroup. Inc. - CFO Well, we don't - we didn't quantifY that, but it is larger than what I talked about before. The best way. I think. for me to quantifY this is that we have a -- it is roughly - this type of activity, the leveraged loan business and the high-yield business, r<:presents about 5% of our total revenues. This would he a revenue-related impact if we have to change the terms on these loans. So, again as I menlioned before. it was a small part, a relalively small portion of the $500 million reduction that was mentioned earlier on the call, On the four loans that we took at the end of the second quarter. So what I am really reflecting here is that it is just very difficult right now 10 reflect what that revenue impact will be. Il just would be hard. Anybody who would be making that kind of a forecast would be trying to rely on things that simply have not yet bappened. Ron Mandd -{GIC} - Ana(yst But the related dollar amount is larger, so possibly the dollar amOlUlI orlhe write-dOWDS could be larger. Gary Crittenden - Ciligrollp. Inc. - CFO Y !:s. Yes, it eertainly could. Ron Mandel - {GIC} - Ana(yst Just in regard to Steve's question, in regard to the reduction in the subprimc exposure, were there losses or wrile-downs taken in those reductions? Gary Crittenden - CitTgroup, Inc. - CFO Well, for the most part, those are loans that we obviously try and market appropriately for whatever the market conditions are. So the answer is certainly yes. Yes. We use third-party benchmarking wberever we possibly can. We look at analogous types of slructtlrcs. We do everything We can to ensure that those loans are marked at the appropriate market environment rate. So the answer is surely yes. Ron Mandel -/GIC/-Analyst And those losses would bave been reflected in fixed-income trading? GaryCrinenden - Ci/igroup,Inc. - CFO Yes. RonMandd -{Glq-Analyst Can you give any idea as to what the amount of those were? Gary Criltenden - Citigroup. Inc. _ CFO '- YOIl know, we bave not broken it out spccificaUy now. • www.streetevenls.COJn Contact Us II) 2007 Thomson Financial. Republished willi permission. No part of this publication may be reproduced or lransmilted in any fonn or by any means without the poor written consent of Thoinson Fi1ancial. Confidential Treatment Requested em 00000156 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 72 of 78 FINAL TRANSCRJPT Jut 20. 2007 , 10:00AM ET, C • Q2 2007 Ciligroup Inc. Earnings Conference Call Ron Mandel -IGICJ - Analyst Do you lItink that getting from SIJ billion 10 wherever you are going, you will have losses ofa similar amount? Or might they be lower ahead? Or how should we think about that? Gary Crittenden - CitigrDup, Inc. - CFO Impossible again for me to say. As I mentioned, t4is is an uncertain mark'" rigbt now and it is very difficult to forcc3St exactly where the m,,:,"ket is going to go. If we knew that. we would be making bets on it, obviously. But we don't know exacdy where that is going to go. What we do is we have exceUenl risk management capabilities, llitink, around this. II is monitored very carefully. We really do trY 10 reflecl the market value of these things by going through a cardul process 10 ensure thai their canying values are correct. Weare completely confidOlt that the carrying values were as correct as they poSsibly could have been at the end of the second quarter. Depending on how things evolve in the thin! quarter. we will have a number Ural will change. Ron Mandel -ICICJ -Analyst Is 13 going to =7 Or do you have some uther number in mind? Just how should we think about that aspect? Gary Crittenden • Gtigroup, Inc. • CFO II is much more complex than thaI. You know,lItere is no specific Dumb ... thai we're targeting. II depends on what the market conditions actunlly are during the time period. Ron Mandel -ICIC! - Analyst Okay, thanks very much. Operator Dave Hilder with Bear Steams. Dave Hilder -BearStt!arns-Ana/~ Good morning. Just a question about balance sheet growth. Obviously. earning assets have gone up a lot both organically and from acquisitions. Given your conunents about leverage, what might we look for over lite next couple of quarters? Gary Crittenden - Citig'b"P,IIIt:. - CFO . Well. we arc obviously vay focused on our balaoce shCl:l. We bave done some things that you can sec in some of the line items of the balance sheel. So if you look in lite supplement itself and look at some of lite balance sheet line items. For example, our investment line item on lite balance sheet is down by 6'l'.lItis quarter; and down by more than that if you look at it compared to the f"u-st quarter of2007, re1lecting a reduction in !he mortgage securities that we hold on the balance sheet, Reflecting that change. We are focused broadly on the productivity oethe balance sheet I think on a: - versus the end ofJastquarter. we haclrougllly 199, $200 million increase in tlte balance sh~ About Sill minion of that was attributable to the acquisitions that we elid. About S2O'-(miUion] of that was related to an issue that we had in our GIS business on the last day ofthe quarter. www.slreetevents.com Contact Us Ii) 2007 Thomson .FinanciaL Republished with pennission. No part of this pubrlC3tion may be reproduced or transmitted in any fonn or by any means wilhoullhe priorwti1len COIlSent 01 Thomson Fmancial Confidential Treatment Requested elTl 00000157 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 73 of 78 FINAL T1uNSCRlPT Jul. 20. 2DD7/10:DOAM ET, C • Q2 2007 Citigroup Inc. Earnings Conference Call So the organic growth in the balance sheet was aboul S70 {billionJ on what at the time was a roughty $2 trillion balance sheet,jusllo try and put things inlo context.. Dave Hilder - Bear Steilrns - AnIlfyst Okay, greal. I know thaI it is not always useful to look at il this way, but since you do report a net interest margin number, any thoughts on where thaI might be headed ... ver the next collple of quarters? Gary Crittenden - Citigroup, Inc.. - CFO Well, I can Ic)) you thaI I feel pretty good about the performance this quarter. and without being overly confident aboUI where thaI goes, over the next couple of quarters. But as you saw, we had this 6% reduction. A big part of U.is was impacted by Nikko, fr.mkly, both on the funding side as well as on the asset side. So the funding side was helped by the way we did our funding at Nikko and the pricing thaI we got on the funding for doing that transaction. Al the same time, most of the d So if you kind of normalized for aU of that noise that came in from Nikko, then the actual sequential change in the quarter was relatively modest. The elemClIS that were non.NiJclco-reIaled looked pretty good in terms of what had happCled on the funding side, and obviously the reduction in Cl So I think there are positive signs here, but we are far from declaring victory on seeing a tum in NIM and fom:asting thaI that is going 10 move the other direction for us. But ifyou jusltake some of the Wlderlying dynamics that existed in this quarter it felt pretty good. I feel particularly good about the turnaround in nel interest revenue. In prior quarters, (Ihink we have said thaI there is a lot of volatility in this number, and that is lrue, then: is a lot of voliuility. But what is undeniable is lhat the underlying deposit and loan growth has been strong. That has now offset fur the last few quarters in a pretty powerful way the underlying deterioration in NIM. As I menlioned in my lust comments at the SfM\ of the call, this is the first lime I think since the third quarter of 2004 thaI we have had double digit growth in net interest revenuc. There has been a bottom hard worlc on the part of the team 10 makc that all come together, and I think it is a good sign. Dave Hilder • Bear Steams· Analyst lbanJcs, thaI is very helpful. Just one clarifiCation. You are suggesling that. excluding the impact of Nikko, the sequential margin - net interest margin compression would have bem less than the 6 b-oISis points sbown OD page JJ? Gary Crillenden - Citigroup, Ine. • CFO Yes, it was pretty modest. Dave Hilder - Ben Steilr1lS- AIUlIyst Olcay. Even more modest than 6 basis points? Gary Crittenden - Clligroup, life. • CFO Even more mOdest than 6 basis points. Dave Hilder - Belir Stearns - Anlllyst www.slreetevenls.com Contact Us @ 2007 Thomson FlIIaIlCial Republished with pell1lission. No part of this pubrtcation may be reproduced or transmitted in any form or by any means witIlOut the prior written consent of Thomson Financial Confidential Treatment Requested cm 00000158 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 74 of 78 FiNAL TRANSCRIPT Jut 20. 2007 J 10:00AM ET, C - Q2 2007 Ciligroup Inc. Earnings Conference Call Okay. thanks very much. Gary. Operator James Mitchell with BuclcingiJam Research. James MitcheU - BuckinghaM Research - Analyst Hey, good morning. Just a quick question on fixed income tr.lding. Could you talk a linle bit ahoulthe progression during the quarter? We have heard from some others that June was a particularly slIong monm, amI just wanled 10 see if you feel that way as well. Maybe specifically talkto what products were strongest and weakest sequentially, and lJI3ybe specific comments on MBS. Thanks. Gary Crittenden - Gtigroup, Inc. - CFO Well, about the best color I can give is mat we c:nded me quarter wim a very strong pipeline. So you know. we feel good about all the activities that we have across the house; but the pipeline was very strong. We actually had lItrec very .solid monms, I guess, is the way I would fraOle it. So if I think about June· specifically, June started out a little Weak fOT me Just few days of the month, bul came back near the end of the month very, very SIIOngly. But was consistent, really with the perfonnance that we had in the months that were prior, the monms prior to mal. So il would be hard for me 10 kind of say that June was any different than the prior two months. lame. MitcheU - BllckinghaM Research -An«.r,.Si/ .', .0;:. Can you talk specifically thuugh·to mieiJ '~~o~e and what products Were stronger or weaker this quarter'! And any comments on the MBS business 00 a sequential basis? Robert Druskin • Citigrortp, Inc. - COO This is Bob. What Gary said is somelbing J would echo; that .we had very - we don't nonnally talk about month-by-month·. But we did have very consistent performance in our ("",ed income businesses across the quarter. Generally, there was SlrC1lgth in almost all of our products. Rates ;s a tough business as il has been for some time. But that is nothing new_ But some of the areas that we have; been investing in, actually, over the last couple of years have been vel)' strong - derivatives, structure products, those kinds of things, where we have devoted n:sources to building - have been very good_ Additionally, we have had very good results in our emerging markets trading. You know, we have trading deslcs in 65 or 70 countries around the world. You know, pan ofthe growth in the international marketplace has been reflecting itseifin our trading results aroWId the wOlJd. So I would say we bad very good resuhs in emerging marlcets and international, gen""!lly. James MilcbeB - BlICkingluzm Research - Analyst Fair enough. Maybe J will try one more tack. On the MBS business, you guys are obviously talking about risk manage:menL There is obviously dynamic credit default swap hedging that you· do against the residuals and me other subprime sndTon the balanee sheet. It seems to me thai the underlying assd values have declined less than the appreciation and the default swaps. Is there any kind of comment you bave on bow that hedging bas worked. ifthat is a fair stalemenl or nol? Robert Druskin - atigroup. Inc. - COO WWW.slreetevents.com Contact Us 4) 2007lbomson financial. Republished with permission. No part ollhis publica1ion may be reproduced or transmitted in any fonn or by any means without the priorwritlen consent of Thomson rlllllooaJ. Confidential Treatmen.t Requested cm 00000159 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 75 of 78 F1l'1AL TRAl'ISCRJPT Jut 20. 2007 110:0DAM ET, C - Q2 2007 Citigroup Inc. Earnings Conference Call . Well, it is a complicated queslion. and I am nol sure Ihat we would nOJrnally get into that level of dclaJl. I would just teU you that the strong results we had in the quarter are indicalive, I think, of a pretty good risk management ~pproach by our trading desks. And generally effective hedging. So we were pleased with their resUlts, but I don't we can go into more detail titan that. James lI1itchcU - Buckinghllm Resl!arch - Anlllyst Okay. fair enough. Operator Meredith Whitney with crne World Mark~'IS. Meredith Whitney - elBe World Markets - Analyst Hi, Gary. I just have a couple of cleanup questions. I understand wbat you said about Japan; and that was consistent with Cbuck's guidance even at the beginning oCthe year in tenns of really no net new revenues - (inaudible) net.new - net income out of the area. BUI can you extend further into what thaI means into 2008? Orwben would you be able to tell us that? Then I have just it couple offollow,ups' Cary Crittenden - Ciligroup, Inc. - CFO Well, you know if you think about the dynamics here a little bil, we look a cbarge in the fourth quarter oflast year that was not inSignificant. You lenow. it is hani to know exactly how the business will trend over the next few quaners. Because to say that the parameters around that business arc stable I think would be an overstatement. We really - it is a· fluid situation there, and bolll the judicial process and Ille kind ofregulatmy process continue to be in nux. That kind of cbanges your view of things as things move over time. so I guess that is a long way of saying that we bave taken obviously one significant charge. We bave been adding to our credit reserve as we have gone through this quarter; and we did that again in the quarter Illat we have just come through. We have a large charge that we arc up against from a positive perspective in the fourth quarter ofthi. year. But it would be hard to soy exactly how that business will evolve as we go into 2008. Now, wbat we have done is we have refocused the business on the so-<:alJcd White Zone pricing part ofllie market. That is a normal evolving business.lfyou could kind of slice off the Gray Zone piece and look at only the While Zone piece, that is a nonnalJy evolving busincss; but obviously n mucb smaller market than the market that we used to address. Roughly two-thirds of the addressable market, historically, bas been above a White-Zone type of interest rate pricing. SO. those needs arc either in some way going to go unmct in Japan or. I don't know, some other structure is going to evolve to service those needs. But much of the priinary market thaI used to be served by Conswncr Finance companies can no longer be served by Consumer Finance companies because of the way the regulations have evolved. So I think the way I would thinic about it is, assuming that the regulatory environmc:nt stabilizes. it is likely to be a smaller business in the future than it has bem in the past. We are going to.be worlcing, obviously, to work tIuougb whatever credit exposure that we have there over the nen few ycar.i, and hopefully growing slowly on the White Zone side. But as I mentioned, that is a smalJer marlcd. II is a cOnsiderably smaller marlreI: than the older, higher intereSt IlIte marlc.et used to be. . . Mereditb Whitney - CIBC Worl4 Markets -Analyst OJcay. Then two out of the last three questions. On the guidance that you arc giving or caution that you're giving for the \bird quarter, is that vis- a-vis What expectations are out there? Or vis-a-vis just relative to the strong quarter that you bad this quarter? . Gary Crittenden - Citigroup, Inc. - CFO www.slreetevents.rom Contact Us ~ 2007 Thomson F'lIlaI1c1a1. RepubrlShed with pellllission. No part of this pubficalion may be reproduced or bansmiHed in arty fonn or by arty means without the prior written consent of Thomson Financial. Confidential Treatment Requested CITI00000160 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 76 of 78 FINAL TRANSCRIPT JuL 20. 2007 /10:00AM ET, C - Q2 2007 Citigroup Inc. Earnings Conference Call As you know, we don't provide guidance. What I was trying to do was kind of reflect on third quarter of last year. And there are just a numba of flIctors about the third quarter of last year that made that quarter a quarter that is difIerent than where we are today. I tried to reflect that as 1 wrot through the various elements. I think as you just kind of go down through that list, I have got them on the slide at the end of the deck. It will highlight for you the things that (multiple spoakers). Meredith Whitney - CIBC World Markets - Analyst No, no. That is understood. I JUSt - the Street wasn't expecting a gangbuster third quarter anyway, so J was jUst curious as you to why eKplicidy point out that slide. "That all my question was. Gary Crillenden - Ciligroup, Inc. - CFO I wanted to make s~re everybody was fOCUSed on last year's third quarter. Meredith Whitney - CIRC World Markets -AIUI[ysI GOt it, okay. Then the last question is, we gt:l your Master Trust data obviously monthly. There is nothing in that that would lead US to believe that credit will tum on Cards. So is what you are seeing the on-balance sbeet stuff that gives you concern? The private-label stuff that gives you concern? Could you elaborate on that? Gary Crillenden - Citigroup, Inc. - CFO Well. I think, itbonestly is -- what we uy to do is we try to sit back and say, if we think about the losses that are likely to occur in our credit card business Over the nCOlt X number of months, have we properly reOected wbat those losses arc going to be in Ibe reserve Ibat we have at the moment that we close OUf books? On June 30, in this particular case. As we go through that, we go through that process obviously in all of OUf businesses. We do it each quarter. As we did that for our Can) business in this quarter, our belief was that we needed 10 add to the reserve by Ibe $242 million, I think, or so that it was that we added in this quarter. So it really is that process. It is, obviously reflecting on what losses we have experienced historically. what our current loss rates are, wh~ we anticipate those loss rates to be as we go forward, and ensuring that we're properly reserved al the time we close our books. The net of that was the decision that we made in the quarter to adi:! to the credit card receivable - or the credit card loan-loss reserve. Meredith Whitney - CIBe World Mark~ts - Analyst Okay. thankS, Gal}'. AI11ildeSley • Citigroup, Inc. - Director IR I think we have time fOf one more question•• Oper:a1or Jolm McDonald with Bane ofAmerica. John M~DonaJd - Bane ofAmerica Securities - Analyst Contact Us e 2007l1\OmSon Fmancial. RepubrlShed wi1h pennission. No part of \his publication may be reproduced or IJansmilled in artf fonn or by any means without !he priorwritlen consent of Thomson Financial Confidential Treatment Requested cm 00000161 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 77 of 78 FINAL TRANSCRIPT Jul. 20. 2007110:00AM ET, C • Q2 2007 Citigroup Inc. Earnings Conference______Call ______--J I promise it will be one question and no follow-up. Just on the cost saves clarification from Bob. You got less than half of what you are targeting for this year. I think the target forthisycar was $2.3 biUion, $1.7 billion from tlte Druskill plan alUl $400 million in IT savcs..1s that right, Bob? Robert Drnskin - Citigroup, Inc. - COO Yes, thaI is exactly right. John McDonald - Bane ofAmerica Sec/lritie~ - Analyst . So in the flISt quarter, you said you got the $400 million in IT. So that left $1.7 billion for the next three quartos. Robert Druskln - Odgroup, Inc. - COO Right. John McDonald - Bane ofAmerica Securities - Analyst You're not saying how much you got this quarter! Robert Druskin - Citigrollp, Inc. - COO No, I would just say that what 1 told to is that it would really start to pick up in the second quarter and then track through the end of the year. We are a little less than halfway through it . John McDonald - Bane ofAmerica Securities - Analyst Olcay, so less than half of the $2.3 billion? Robert Druskln - Citigroup, Inc. - COO Yes. John McDonald - Bane ofAmerica Securities - Analyst Okay, thank you. Art TIldesley - Otigroup, Inc. - Director IR Opcmor.1 think that concludes our session. For all ofyou on the <;all, th3nJcs for joining us today. Any other questions you have, please contact us in investor relations. Otherwise, that concludes our caU. Thanlc you. Operator Ladies and gcndcmen, thank you (or your participation in Citi's second-quarter 2007 earnings review, This does conclude lOday's j:OIlference.. You may DOW disconnect. . www.sti"eetevents.com Contact Us @ 2007 Thomson Financial. Republished with pennission. No part of Ihis publica1Jon may be reproduced or transmitted in any fonn or by any means wiIhoullhe priorwritlen ronsent of Thomson Fanancial.. Confidential Treatment ReqUested CITI 00000162 Case 1:10-cv-01277-ESH Document 16-2 Filed 09/08/10 Page 78 of 78 FINAl.. TRJ\NSCRIPT Jul. 20. 2007 110:00AM El, C - Q2 2007 Ciligroup Inc. 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