New York, NY, April 17, 2006 – Citigroup Inc. (NYSE:C) today reported net income for the first quarter of 2006 of $5.64 billion, or $1.12 per share. Return on common equity was 20.3%. Results include $846 million of compensation expense ($520 million after-tax) related to stock grants to retirement-eligible employees required under SFAS 123(R), and a $657 million tax benefit related to the resolution of a federal tax audit for the years 1999 through 2002.
First Quarter Highlights
Management Comment
"I am very pleased with our first quarter accomplishments, which included strong growth in client activity across many franchises. We are seeing the benefits from our investment spending, which helped generate record revenues in our international businesses and record revenues globally in our corporate and investment banking business. Strength in these franchises more than offset weaker results in our U.S. consumer business," said Charles Prince, Chief Executive Officer of Citigroup.
"We executed on our strategic initiatives, adding a record 238 new branches in 19 countries, as well as opening our first private bank office in mainland China. We also enhanced our ability to serve more customers through the launch of Citibank Direct, our full-service internet bank, and through a partnership with 7-Eleven convenience stores, we added over 5,500 ATMs to our U.S. distribution network. We remain sharply focused on our strategic initiatives, leveraging our unique strengths to achieve long-term earnings growth and superior returns for our owners," said Prince.
Expanding Distribution
During the first quarter, continued investment spending led to significant consumer branch expansion.
Citibank international branch openings included 54 in Mexico, 4 in Russia, and 3 in Brazil. CitiFinancial international branch openings included 58 in India, 20 in Mexico and 19 in Brazil.
Summary of Highlighted Items
During the quarter, the following charges and benefits were recorded:
Adoption of SFAS 123(R) The first quarter results include compensation expense required by SFAS 123(R), Share-Based Payments, for stock award grants to retirement-eligible employees. Based upon recent interpretive guidance, these awards must be recognized as an expense on, or prior to, the grant date. Previously, such awards were amortized over their vesting period.
As a result, a charge of $648 million ($398 million after-tax) was recorded in the first quarter related to stock grants awarded to retirement-eligible employees in January 2006. Prospectively, the company will accrue the estimated cost of such awards over the course of the fiscal year preceding the grant. Accordingly, the company has also recognized $198 million ($122 million after-tax) of compensation expense in the quarter representing the estimated cost of such stock awards to be granted to retirement-eligible employees in January 2007. Both of these charges are non-cash and represent accelerated recognition of costs that would have been incurred in future periods, with no incremental economic cost to the company. A schedule of the charge and the current quarter accrual for estimated stock awards to be granted in January 2007 is provided in Schedule A on page 8.
APPENDIX
All financial results presented below include the impact of adopting SFAS 123(R) and the tax benefit due to resolution of a federal tax audit. The impact of these items by business is presented in Schedule A on page 8.
GLOBAL CONSUMER GROUP
CORPORATE AND INVESTMENT BANKING
GLOBAL WEALTH MANAGEMENT
ALTERNATIVE INVESTMENTS
CORPORATE/OTHER
Corporate/Other results were even with the prior year, as lower treasury results were offset by a tax benefit due to resolution of a federal tax audit.
INTERNATIONAL OPERATIONS
Citigroup (NYSE: C), the leading global financial services company, has some 200 million customer accounts and does business in more than 100 countries, providing consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Major brand names under Citigroup's trademark red umbrella include Citibank, CitiFinancial, Primerica, Smith Barney and Banamex. Additional information may be found at www.citigroup.com
Additional financial, statistical and business-related information, as well as business and segment trends, is included in a Financial Supplement. Both the earnings release and the Financial Supplement are available on Citigroup's website at www.citigroup.com.
Certain statements in this document are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in Citigroup's filings with the Securities and Exchange Commission.