Citigroup Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are primarily with Q1 2021. Balance-sheet changes are identified separately where the filing compares with December 31, 2021. Amounts are U.S. dollars.
Business context and results
Citi reported under a revised structure of Institutional Clients Group (ICG), Personal Banking and Wealth Management (PBWM), Legacy Franchises, and Corporate/Other. The Legacy Franchises segment includes consumer businesses Citi is exiting in Asia and EMEA and planned exits in Mexico.
| Metric | Q1 2022 | Comparable period/change |
|---|---|---|
| Revenue, net of interest expense | $19.2 billion | Down 2% year over year |
| Net interest income | $10.9 billion | Up 3% |
| Non-interest revenue | $8.3 billion | Down 9% |
| Operating expenses | $13.2 billion | Up 15% |
| Provision for credit losses and benefits/claims | $755 million expense | Versus $2.1 billion benefit |
| Net income attributable to Citigroup | $4.3 billion | Down 46% |
| Diluted earnings per share | $2.02 | Down 44% |
| Efficiency ratio | 68.6% | Versus 58.0% |
Net income fell due to higher credit costs and expenses and lower revenue. The effective tax rate was 18%, down from 23%, reflecting resolution of certain tax audit items. The filing does not provide a clear consolidated operating cash-flow measure that is directly comparable to bank earnings alone; reported operating cash flow was negative $13.5 billion, investing cash flow negative $34.5 billion, and financing cash flow positive $58.4 billion.
Segments and material changes
- ICG: Revenue of $11.2 billion fell 2%; continuing-operations income of $2.7 billion fell 51%. Services revenue rose 15%, while Banking revenue fell 23% and Markets revenue fell 2%. Investment banking revenue declined 43% amid weaker capital-markets activity.
- PBWM: Revenue of $5.9 billion fell 1%; income of $1.9 billion fell 23%. Higher net interest income was offset by weaker non-interest revenue and higher expenses.
- Legacy Franchises: Revenue of $1.9 billion fell 14%; the segment reported a $383 million net loss versus $323 million income a year earlier. Results included Asia divestiture-related impacts of $677 million pretax, including a $535 million goodwill impairment and a $118 million pretax loss on the Australia sale.
- Corporate/Other: Reported $189 million net income versus a $194 million net loss, largely from higher investment-portfolio revenue and lower expenses.
Consolidated loans at period end were $660 billion, down 1% year over year; growth in ICG and PBWM was offset by lower Legacy Franchises balances, including loans reclassified as held for sale. Deposits were $1.334 trillion, up 3% year over year. Total assets were $2.394 trillion at March 31, 2022, compared with $2.291 trillion at December 31, 2021. Long-term debt was $254.0 billion, broadly unchanged from year-end.
Capital, liquidity and credit
- CET1 capital ratio was 11.38% under the Standardized Approach, down from 12.25% at December 31, 2021; the effective minimum requirement was 10.5%. The quarter-end ratio was affected by capital distributions, adverse AOCI movements and adoption of SA-CCR, which increased risk-weighted assets.
- Supplementary Leverage Ratio was 5.58%, versus 5.73% at year-end. Citi reported approximately $965 billion of available liquidity resources and an average Liquidity Coverage Ratio of 116% for Q1.
- Total credit-loss provisions were a $755 million expense, compared with a $2.055 billion benefit in Q1 2021. Citi recorded a net ACL release of about $0.1 billion, including a roughly $1.9 billion build related to Russia exposures and the wider Ukraine-war macroeconomic impact, more than offset by consumer reserve releases.
- Net credit losses were $0.9 billion, down 50% year over year. Total allowance for credit losses on loans and unfunded commitments was $17.7 billion at quarter end.
Outlook, commentary, risks and unusual items
Management cited inflation, higher interest rates, supply-chain disruption, the war in Ukraine and related sanctions as sources of continuing economic and market uncertainty. Citi said it would continue investing in transformation, risk and control systems, technology, and business capabilities. No specific consolidated full-year revenue or earnings guidance is provided in the supplied filing text.
Citi had signed sale agreements covering nine of 14 announced Asia and EMEA exit markets and described a wind-down path for Korea. Sale closings remain subject to regulatory approvals and other conditions; execution, timing, foreign-exchange translation and sale-price risks remain. Citi also continues to pursue an exit from Mexico consumer and small-business/middle-market banking.
- Citi’s Russia-related exposure was $7.9 billion at March 31, down from $9.8 billion at year-end. It warned that sanctions, operational complexity, potential deconsolidation or loss of control could cause additional losses. A deconsolidation event could require a write-off of an approximately $0.7 billion net investment and recognition of an approximately $1.0 billion CTA loss through earnings.
- Q1 other comprehensive loss was $4.8 billion, largely reflecting unrealized losses on debt securities and cash-flow hedges; this reduced equity and contributed to lower capital ratios.
- Citi repurchased approximately 50 million shares for $3.0 billion and paid $1.0 billion in common dividends. It declared a Q2 common dividend of $0.51 per share and stated an intention to maintain a quarterly dividend of at least $0.51, subject to financial and macroeconomic conditions and Board approval.
- Management estimated reasonably possible unaccrued losses for litigation, regulatory, tax and other contingencies of up to approximately $1.4 billion. Management concluded disclosure controls were effective as of March 31, 2022.
Most important facts for investors to verify
- Whether revenue and expense trends improve, particularly the impact of transformation spending and weaker investment-banking activity.
- How Russia and Ukraine-related exposures, sanctions, and potential deconsolidation affect credit costs, capital and reported earnings.
- Progress, closing conditions, proceeds and accounting effects of announced divestitures, including the Mexico exit and Korea wind-down.
- Capital-ratio trajectory, including the effects of AOCI, SA-CCR, regulatory requirements and future capital distributions.
- Whether consumer credit performance and ACL assumptions remain consistent with the improving loss trends reported, especially as pandemic-related supports fade.
- The nature and sustainability of negative operating cash flow, given the large quarter-to-quarter movements in trading and other balance-sheet accounts.