Citi Reports Net Income of $2.4 Billion, Earnings Per Share of $0.47

Business Wire, Oct 15, 2007

Revenues of $22.7 Billion, up 6%

Robust International Volume Growth; International Revenues up 30%

Record Revenues in International Consumer, Transaction Services and Wealth Management

Income Decline Primarily Driven by Lower Revenues in Fixed Income and Higher Consumer Credit Costs

NEW YORK -- Citigroup Inc. (NYSE:C) today reported net income for the 2007 third quarter of $2.38 billion, or $0.47 per share, a decline of 57% from the prior-year quarter. Results include a $729 million pre-tax gain on the sale of Redecard shares. Return on equity was 7.4%. On October 1, 2007, Citi announced that it expected third quarter 2007 net income to decline in the range of 60%, subject to finalizing third quarter results.

Management Comment

"This was a disappointing quarter, even in the context of the dislocations in the sub-prime mortgage and credit markets. A significant amount of our income decline was in our fixed income business, where we have a long track record of strong earnings, and this quarter's performance was well below our expectations. Although we generated strong momentum in many of our franchises, our fixed income results, along with higher credit costs in global consumer, led to significantly lower net income," said Charles Prince, Chairman and CEO.

"Importantly, many of our businesses performed well this quarter. Our international franchise continued to expand rapidly, with revenues up 30%. Our global wealth management franchise generated record revenues and transaction services posted another record quarter on double-digit earnings growth. In securities and banking, equity markets and underwriting revenues were up a combined 33%, and our advisory revenues grew 29%. Volumes in our consumer franchise continued to grow strongly with deposits up 18%, managed loans up 13%, and we opened 96 new branches around the world," said Prince.

"As we move into the fourth quarter, we are focusing closely on improving those areas where we performed below expectation, while at the same time continuing to execute on our strategic priorities," said Prince.

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                         THIRD QUARTER SUMMARY

Revenues were up 6%, led by 30% growth in international revenues.

* Global consumer revenues increased 14%, driven by international consumer up 35%, which included a $729 million pre-tax gain on the sale of Redecard shares. Excluding the gain, international consumer revenues increased 21%, reflecting deposit and loan growth of 18% and 29%, respectively, and higher investment sales, up 26%. U.S. consumer revenues were flat with the prior-year period as deposit and managed loan growth of 16% and 8%, respectively, was offset by lower securitization results in cards and the absence of gains on sale of securities in the prior-year period in consumer lending.

* Markets & banking revenues declined 24%, reflecting record transaction services revenues, up 38%, offset by a 44% decline in securities and banking. Securities and banking revenues declined due to write-downs and losses related to dislocations in the mortgage-backed securities and credit markets, including:

        --  Write-downs of $1.35 billion pre-tax, net of underwriting
            fees, on funded and unfunded highly leveraged finance
            commitments.

        --  Losses of $1.56 billion pre-tax, net of hedges, on the
            value of sub-prime mortgage-backed securities warehoused
            for future collateralized debt obligation ("CDO")
            securitizations, CDO positions, and leveraged loans
            warehoused for future collateralized loan obligation
            ("CLO") securitizations.

        --  Losses of $636 million pre-tax in fixed income credit
            trading due to significant market volatility and the
            disruption of historical pricing relationships.

* U.S. markets & banking revenues declined 87% and international revenues grew 7%. International revenues included strong double-digit revenue growth in Asia, Latin America, and Mexico.

* Global wealth management revenues increased 41%, as U.S. revenues grew 14% and international revenues more than doubled, due to double-digit organic growth and increased ownership in Nikko Cordial.

* Alternative investments revenues declined 63% as strong growth in client revenues was offset by lower revenues from proprietary investment activities.

* Excluding acquisitions and the gain on sale of Redecard shares, total organic revenues declined 3%.

* The net interest margin declined 3 basis points versus the second quarter 2007.

Operating expenses increased 22%, driven by increased business volumes and acquisitions, which were partially offset by savings from structural expense initiatives announced in April 2007.

* The company opened 96 new retail bank or consumer finance branches during the quarter, including 47 internationally and 49 in the U.S. Over the last twelve months, 820 retail bank and consumer finance branches have been opened or acquired.

* Excluding the impact of acquisitions, organic expense growth was 14%.