New York, November 23, 2020 -- Moody's Investors Service, ("Moody's") affirmed
the long-term debt, deposits and counterparty risk ratings
of Citigroup Inc. ("Citigroup") and its rated subsidiaries
as well as the baa1 baseline credit assessment (BCA) of its principal
bank subsidiary, Citibank, N.A. ("Citibank").
Moody's also affirmed all short-term ratings and assessments of
Citigroup and those subsidiaries. The ratings outlook is stable.
A complete list of affected ratings and entities can be found at the end
of this press release.
Moody's has also withdrawn the outlooks on Citigroup Global Markets Europe
AG, Citigroup Global Markets Limited, and Citigroup Global
Markets Inc.'s existing long term issuer ratings for its
own business reasons. Please refer to the Moody's Investors Service's
Policy for Withdrawal of Credit Ratings, available on its website,
www.moodys.com.
RATINGS RATIONALE
The affirmation of Citibank's baa1 BCA reflects its solid capital and
liquidity profile and management's steady execution of a strategy
to simplify operations and pursue more sustainable growth. Citigroup
has refined its business model to service a more targeted base of institutional
and consumer customers, while retaining strong economies of scale
in its global cards and institutional businesses.
These operating disciplines have allowed Citigroup to maintain an 11.8%
CET1 ratio on an advanced basis and generate $7 billion in net
income in the first nine months of 2020, despite absorbing $10.8
billion of reserve builds. The resiliency of this performance was
an important factor in the ratings' affirmation given the continuing economic
uncertainty associated with the COVID-19 pandemic.
Despite extensive business simplification efforts, Citigroup remains
a large and complex bank with attendant risk management and governance
challenges. Moody's continues to reflect this opacity and
complexity via a one-notch downward adjustment in the BCA,
consistent with the approach in place for other global investment banks.
In October, two of Citigroup's principal regulators took enforcement
actions that require Citigroup's board and management to promptly
address deficiencies identified by the regulators in risk management,
data governance and internal controls. Management views this as
a top strategic priority and will make an additional $1 billion
in control investments in 2020 partly funded by savings in other areas.
Given the high level of regulatory, board and management emphasis
on these matters, Moody's expects that Citigroup will retain
focus on their remediation, and this was a key consideration in
the ratings being affirmed with a stable outlook. Moody's
said that should Citigroup fail to evidence steady progress towards remedying
these issues, or if further risk management issues arise,
then this would result in downward rating pressure.
Citigroup's consumer strategy is unique compared to its US-based
universal banking peers. Citigroup targets affluent and emerging
affluent consumers in nineteen countries, while operating a branch-light
footprint within the US. Citigroup's US consumer franchise is more
reliant on credit card lending than its US peers. At the same time,
the firm has refocused the branded card business primarily on a prime
customer base. Increasingly, Citigroup has adopted a global
digital operating model for the acquisition and servicing of consumer
customers.
Citigroup's institutional strategy centers on delivering cash management
and operating services through the bank's ubiquitous network spanning
98 countries, with direct custody and clearing capabilities in 68
countries, and the world's major trade corridors. Accordingly,
Citigroup is a leader in transaction and securities services. When
these operating services are combined with Citigroup's extensive market
making capabilities, this produces a robust stream of transaction
and related trading revenues from global corporates, as well as
a growing stock of core institutional deposits. Citigroup complements
these operating services with a leading fixed income trading platform
and extensive investment banking capabilities.
The resiliency of Citigroup's capital and liquidity profile during
2020 was also a factor in the ratings' affirmation the rating agency noted.
Citigroup had a 118% average regulatory liquidity coverage ratio
during the third quarter of 2020, and as of September 2020 it had
a CET1 ratio of 11.8% on an advanced basis and an allowance
for credit losses of $28.9 billion.
STRUCTURAL AND SUPPORT CONSIDERATIONS
Moody's existing assumptions of Loss Given Failure (LGF) uplift and Government
support remain unchanged for Citigroup and its subsidiaries.
Citibank, N.A.'s senior debt, deposit
and counterparty risk ratings were affirmed at Aa3, each four notches
above the baa1 BCA, including three notches of LGF benefit reflecting
Moody's expectation of an extremely low severity of loss in the event
of a default, and one notch reflecting a moderate likelihood of
government support.
The senior debt rating of Citigroup Inc. is A3, one notch
above Citibank, N.A.'s baa1 BCA, reflecting
Moody's expectation of a low loss given failure. Citigroup's
holding company debt ratings do not incorporate any uplift to reflect
the potential for US government support, reflecting Moody's
expectation of a low likelihood of government support for holding company
creditors. For subordinated securities issued by the holding company,
Moody's advanced LGF analysis indicates a high loss-given-failure
and are rated one notch below the BCA at Baa2. The ratings on more
junior holding company obligations also incorporate additional downward
notching from the BCA reflecting the coupon suspension risk ahead of potential
failure.
AFFIRMATION OF OPERATING SUBSIDIARIES
In addition to Citibank, N.A., Moody's also
affirmed the long-term ratings of four other operating subsidiaries,
namely Citigroup Global Markets Inc. ("CGMI"),
Citigroup Global Markets Limited ("CGML"), Citigroup
Global Markets Europe AG ("CGME") and Citibank Europe plc.
These entities are material legal entities and are closely integrated
with the group -- managerially, operationally and
financially and are very likely to be supported. As such,
each entity carries an adjusted standalone assessment (or adjusted BCA
in the case of Citibank Europe plc) equal to the group BCA of baa1.
Moody's believes that in resolution creditors at each of Citigroup Global
Markets Inc., Citigroup Global Markets Limited, Citigroup
Global Markets Europe AG and Citibank Europe plc would benefit from the
loss-absorption provided by the bail-in of creditors at
Citigroup's holding company consistent with the firm's resolution
plan and the US banking regulators' adoption of single-point of
entry receivership as their preferred bank resolution framework.
However, Moody's does not expect creditors at those subsidiaries
would benefit from any loss absorption provided by junior instruments
at Citibank, N.A. Nonetheless, the volume and
thickness of Citigroup's holding company tranches still translates
into three notches of LGF uplift for the A1 Issuer ratings at CGMI,
CGML, and CGME. The Aa3 deposit rating and counterparty risk
rating of Citibank Europe plc, as well as the Aa3(cr) counterparty
risk assessments of all three subsidiaries (CGMI, CGML and CGME),
incorporate three notches of LGF uplift plus one notch of uplift reflecting
a moderate likelihood of government support due to the systemic importance
of these subsidiaries as material legal entities and major trading counterparties
and clearing vehicles.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade to the BCA would require the firm to lift its earnings generation
and asset returns to levels achieved by its US peers and at the same time
strengthening its capital adequacy metrics. This may be achieved
by deepening client relationships and gaining market share, while
maintaining its risk disciplines, resulting in a meaningfully stronger
and more diversified consumer banking franchise in the United States.
Moody's said that strong evidence of the full remediation of the
matters identified by the regulatory consent order would likely be necessary
before an upgrade would be considered.
If Citigroup fails to progress steadily toward its strategic objective
to strengthen its risk and control environment, then this could
lead to a negative outlook on the ratings or a downgrade of the BCA.
Citigroup's ratings may be downgraded if the bank experiences a deterioration
in its capital or liquidity levels, incurs further risk incidents
or demonstrates a marked increase in its risk appetite.
Under Moody's advanced LGF framework, upward or downward rating
pressure could develop for various debt tranches at the operating subsidiaries
or the holding company if there is a sustained change in the thickness
of tranches or the subordination underneath tranches, relative to
tangible banking assets and losses estimated in the framework or we change
our assumptions regarding resolution perimeters.
The following ratings actions were taken:
Affirmations:
..Issuer: Citigroup Inc.
....Commercial Paper, Affirmed P-2
....LT Issuer Rating, Affirmed A3,
Stable
....Other Short Term (Local Currency),
Affirmed (P)P-2
....Other Short Term (Foreign Currency),
Affirmed (P)P-2
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)A3
....Subordinate Medium-Term Note Program,
Affirmed (P)Baa2
....Pref. Stock Non-cumulative,
Affirmed Ba1 (hyb)
....Senior Unsecured Bond (Local Currency),
Affirmed A3, Stable
....Senior Unsecured Bond (Foreign Currency),
Affirmed A3, Stable
....Subordinate Bond (Local Currency),
Affirmed Baa2
....Subordinate Bond (Foreign Currency),
Affirmed Baa2
....Senior Unsecured Shelf, Affirmed
(P)A3
....Subordinate Shelf, Affirmed (P)Baa2
..Issuer: Citibank, N.A.
....Adjusted Baseline Credit Assessment,
Affirmed baa1
....Baseline Credit Assessment, Affirmed
baa1
....LT Deposit Note/Takedown, Affirmed
Aa3, Stable
....LT Counterparty Risk Assessment,
Affirmed Aa3(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa3
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa3
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Issuer Rating, Affirmed Aa3,
Stable
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Aa3
....Other Short Term, Affirmed (P)P-1
....Senior Unsecured Bond (Local Currency),
Affirmed Aa3, Stable
....Senior Unsecured Bond (Foreign Currency),
Affirmed Aa3, Stable
....LT Bank Deposits, Affirmed Aa3,
Stable
....ST Bank Deposits, Affirmed P-1
..Issuer: Citibank Europe plc
....Adjusted Baseline Credit Assessment,
Affirmed baa1
....Baseline Credit Assessment, Affirmed
baa1
....LT Counterparty Risk Assessment,
Affirmed Aa3(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa3
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa3
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Bank Deposits (Local Currency),
Affirmed Aa3, Stable
....ST Bank Deposits (Local Currency),
Affirmed P-1
....LT Bank Deposits (Foreign Currency),
Affirmed Aa3, Stable
....ST Bank Deposits (Foreign Currency),
Affirmed P-1
..Issuer: Citigroup Global Markets Europe AG
....LT Counterparty Risk Assessment,
Affirmed Aa3(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Issuer Rating (Local Currency),
Affirmed A1, Stable outlook withdrawn
....ST Issuer Rating (Local Currency),
Affirmed P-1
....LT Issuer Rating (Foreign Currency),
Affirmed A1, Stable outlook withdrawn
....ST Issuer Rating (Foreign Currency),
Affirmed P-1
..Issuer: Citibank, N.A. (Sydney
Branch)
....Commercial Paper (Foreign Currency),
Affirmed P-1
....LT Counterparty Risk Assessment,
Affirmed Aa3(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa3
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa3
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Aa3
....Senior Unsecured Bond, Affirmed
Aa3, Stable
..Issuer: Citibank, N.A.,
London Branch
....LT Counterparty Risk Assessment,
Affirmed Aa3(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa3
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa3
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....Senior Unsecured Medium-Term Note
Program (Foreign Currency), Affirmed (P)Aa3
....Other Short Term (Foreign Currency),
Affirmed (P)P-1
....Senior Unsecured Bond (Foreign Currency),
Affirmed Aa3, Stable
..Issuer: CitiFinancial Credit Company
....LT Issuer Rating, Affirmed A3,
Stable
....Backed Senior Unsecured Bond, Affirmed
A3, Stable
..Issuer: Associates Corporation of North America
....LT Issuer Rating, Affirmed A3,
Stable
....Backed Senior Unsecured Bond, Affirmed
A3, Stable
..Issuer: Citigroup Finance Canada Inc
....Backed Senior Unsecured Medium-Term
Note Program, Affirmed (P)A3
..Issuer: Citigroup Capital III
....Backed Pref. Stock, Affirmed
Baa3 (hyb)
..Issuer: Citigroup Capital XIII
....Backed Pref. Stock, Affirmed
Baa3 (hyb)
..Issuer: Citigroup Capital XVIII
....Backed Pref. Stock (Foreign Currency),
Affirmed Baa3 (hyb)
..Issuer: Citigroup Funding, Inc.
....Backed Senior Unsecured Bond (Local Currency),
Affirmed A3, Stable
....Backed Senior Unsecured Bond (Foreign
Currency), Affirmed A3, Stable
..Issuer: Citigroup Global Markets Holdings Inc.
....Backed LT Issuer Rating, Affirmed
A3, Stable
....Backed Senior Unsecured Medium-Term
Note Program, Affirmed (P)A3
....Backed Senior Unsecured Bond (Local Currency),
Affirmed A3, Stable
....Backed Senior Unsecured Bond (Foreign
Currency), Affirmed A3, Stable
....Backed Senior Unsecured Shelf, Affirmed
(P)A3
..Issuer: Citigroup Global Markets Limited
....LT Counterparty Risk Assessment,
Affirmed Aa3(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Issuer Rating (Local Currency),
Affirmed A1, Stable outlook withdrawn
....ST Issuer Rating (Local Currency),
Affirmed P-1
....LT Issuer Rating (Foreign Currency),
Affirmed A1, Stable outlook withdrawn
....ST Issuer Rating (Foreign Currency),
Affirmed P-1
..Issuer: Citigroup Global Markets Inc.
....Commercial Paper, Affirmed P-1
....LT Counterparty Risk Assessment,
Affirmed Aa3(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Issuer Rating (Local Currency),
Affirmed A1, Stable outlook withdrawn
....ST Issuer Rating (Local Currency),
Affirmed P-1
....LT Issuer Rating (Foreign Currency),
Affirmed A1, Stable outlook withdrawn
....ST Issuer Rating (Foreign Currency),
Affirmed P-1
....Backed Senior Secured Medium-Term
Note Program, Affirmed (P)A1
..Issuer: Malurus I, LLC
....Backed Senior Unsecured Bond, Affirmed
A3, Stable
Outlook Actions:
..Issuer: Citigroup Inc.
....Outlook, Remains Stable
..Issuer: Citibank, N.A.
....Outlook, Remains Stable
..Issuer: Citibank Europe plc
....Outlook, Remains Stable
..Issuer: Citigroup Global Markets Europe AG
....Outlook, Remains Stable
..Issuer: Citibank, N.A. (Sydney
Branch)
....Outlook, Remains Stable
..Issuer: Citibank, N.A.,
London Branch
....Outlook, Remains Stable
..Issuer: CitiFinancial Credit Company
....Outlook, Remains Stable
..Issuer: Associates Corporation of North America
....Outlook, Remains Stable
..Issuer: Citigroup Finance Canada Inc
....Outlook, Remains Stable
..Issuer: Citigroup Global Markets Holdings Inc.
....Outlook, Remains Stable
..Issuer: Citigroup Global Markets Limited
....Outlook, Remains Stable
..Issuer: Citigroup Global Markets Inc.
....Outlook, Remains Stable
..Issuer: Malurus I, LLC
....Outlook, Remains Stable
The principal methodology used in rating Citigroup Inc.,
Citibank, N.A., Citibank Europe plc, Citibank,
N.A. (Sydney Branch), Citibank, N.A.,
London Branch, CitiFinancial Credit Company, Associates Corporation
of North America, Citigroup Finance Canada Inc, Citigroup
Capital III, Citigroup Capital XIII, Citigroup Capital XVIII,
Citigroup Funding, Inc., and Citigroup Global Markets
Holdings Inc. was Banks Methodology published in November 2019
and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
The principal methodologies used in rating Citigroup Global Markets Europe
AG, Citigroup Global Markets Limited, and Citigroup Global
Markets Inc. were Banks Methodology published in November 2019
and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865,
and Securities Industry Market Makers Methodology published in November
2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187332.
The principal methodologies used in rating Malurus I, LLC were Banks
Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865,
and Rating Transactions Based on the Credit Substitution Approach:
Letter of Credit-backed, Insured and Guaranteed Debts published
in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1068154.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Peter E. Nerby
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
