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Rating Action:

Moody's changes outlook on Citigroup to positive, affirms ratings

14 Nov 2017

New York, November 14, 2017 -- Moody's Investors Service has changed to positive from stable the ratings outlook for Citigroup Inc. (Citigroup) and several operating subsidiaries, including Citibank, N.A., Citigroup's principal bank subsidiary. Moody's also affirmed ratings of Citigroup, Citibank, N.A., and several operating subsidiaries, including Citigroup's Baa1 senior debt rating and Citibank NA's A1 long-term deposit, issuer and senior debt ratings, Prime-1 short-term deposit rating , as well as baseline credit assessment of baa2 and counterparty risk assessment of A1(cr)/P-1(cr). Please see list below for a complete list of affected ratings and entities.

RATINGS RATIONALE

The change in outlook to positive from stable reflects Moody's view that Citigroup has largely completed its sweeping reengineering which has resulted in a more solvent institution with an improved risk-attuned management culture, in part thanks to enhanced regulation. Citigroup now has a more durable business model, narrower geographic footprint, and more targeted institutional client and consumer customer base. As a result, Citigroup has strengthened its asset risk profile and improved the stability of its earnings compared to many of its peers with extensive capital market operations. Citigroup, while still a large and complex organization, now should be easier to control.

The ratings affirmation reflects Moody's view that Citigroup continues to face stiff competition in several of its key businesses including retail banking and credit cards in the US and capital markets globally. Management also remains under pressure to increase shareholder returns. Citigroup has a two-pronged strategy to address these pressures and drive returns on tangible common equity toward 11% by 2020, compared to 8.4% today. First, management intends to return capital in excess of earnings, as well as capital released by DTA utilization, until the Common Equity Tier One ratio drops to 11.5% compared to 13% today. Second, management plans to improve profitability in a few key lines of business -- principally the credit card and retail bank franchise in the United States and the CitiBanamex franchise in Mexico. The objective is to drive return on assets ("ROA") up to 90 to 110 basis points over the cycle.

Moody's thinks that competitive headwinds may make management's profit targets difficult to achieve, but also expects Citigroup to pursue growth in a disciplined way with its target clients and customers. Furthermore, Citigroup can rely on a relatively stable stream of earnings and related customer flows from its rebuilt credit cards franchise and strong position in treasury, transaction and securities services - as it responds to these competitive challenges. Citigroup has also made good progress reducing costs since 2014, even while making substantial investments in controls, as evidenced by the decline in the cost income ratio from 71% in 2014 to 57% through the first nine months of 2017.

Moody's said Citigroup's decade long reengineering efforts have placed the bank on clear strategic footing. Citigroup's redefined global consumer strategy remains unique among US-based banks, targeting affluent and emerging affluent customers in large urban centers worldwide, while operating a branch-light footprint within the US and pursuing a broader customer segment in certain card and retail partnership markets. The revised institutional strategy centers on delivering core operating services through Citigroup's global payment and custody network to corporate and investor clients. The network results in a steady stream of transaction revenues and deposit earnings, which can be complemented by executing capital markets transactions for those clients as needs arise.

Moody's also has recalibrated its calculation of Citigroup's macro profile, by which Moody's assesses the conditions and risks of the systems in which a bank operates, by taking a more granular country-by-country approach, weighted by Citigroup's exposures. Previously, the macro profile had been based on regional macro-profiles, which are implicitly weighted by GDP -- a weighting that did not necessarily reflect Citigroup's exposures in the region. The country-by-country approach results in an increase in Citigroup's macro profile to Strong Plus from Strong, which has the impact of moving up all raw sub-factor scores in Citigroup's scorecard in Moody's bank rating methodology.

WHAT COULD MOVE THE RATINGS UP/DOWN

Over the next twelve to eighteen months, Citigroup's ratings could be upgraded if the firm continues to produce consistent profitability and maintains its risk appetite and disciplines. A key credit consideration will be whether management can achieve its strategic targets without compromising on risk appetite or controls.

Citigroup's ratings outlooks may be returned to stable or downgraded if the bank experiences a significant deterioration in its capital or liquidity levels or demonstrates a marked increase in its risk appetite, or were to experience a sizeable operational risk charge or control failure.

The ratings could also be returned to stable or downgraded if the bank's profitability declines sharply due to significantly lower revenues or higher credit or operating costs.

The following ratings are affirmed:

Issuer: Citigroup Inc.

.... Local currency Commercial Paper, P-2

.... Local currency short term MTN Program, (P)P-2

.... Foreign currency short term MTN Program, (P)P-2

.... Local currency Senior Unsecured Regular Bond/Debenture, Baa1, positive

.... Foreign currency Senior Unsecured Regular Bond/Debenture, Baa1, positive

.... Local currency Senior Unsecured MTN, (P)Baa1

.... Local currency Senior Unsecured Shelf, (P)Baa1

.... Local currency Subordinate Regular Bond/Debenture, Baa3

.... Foreign currency Subordinate Regular Bond/Debenture, Baa3

.... Local currency Subordinate Medium-Term Note Program, (P)Baa3

.... Local currency Subordinate Shelf, (P)Baa3

.... Local currency Preferred Stock Non-cumulative, Ba2(hyb)

....Outlook, Changed To Positive From Stable

Issuer: Citibank, N.A.

.... Local currency Long term Bank Deposits, A1, positive

.... Local currency Short term Bank Deposits, P-1

.... Issuer Rating, A1, positive

.... Local currency short term MTN Program, (P)P-1

.... Local currency Senior Unsecured Regular Bond/Debenture, A1, positive

.... Local currency Senior Unsecured MTN, (P)A1

.... Adjusted Baseline Credit Assessment, baa2

.... Baseline Credit Assessment, baa2

.... Long term Counterparty Risk Assessment, A1(cr)

.... Short term Counterparty Risk Assessment, P-1(cr)

....Outlook, Changed To Positive From Stable

Issuer: Citibank Europe plc

.... Local currency Long term Bank Deposits, A1, positive

.... Foreign currency Long term Bank Deposits, A1, positive

.... Local currency Short term Bank Deposits, P-1

.... Foreign currency Short term Bank Deposits, P-1

.... Adjusted Baseline Credit Assessment, baa2

.... Baseline Credit Assessment, baa2

.... Long term Counterparty Risk Assessment, A1(cr)

.... Short term Counterparty Risk Assessment, P-1(cr)

....Foreign Currency Senior Unsecured Regular Bond/Debenture, Affirmed A1, positive

....Outlook, Changed To Positive From Stable

Issuer: Citigroup Global Mkts Deutsch. AG&Co

.... Local currency Long term Bank Deposits, A1, positive

.... Foreign currency Long term Bank Deposits, A1, positive

.... Local currency Short term Bank Deposits, P-1

.... Foreign currency Short term Bank Deposits, P-1

.... Adjusted Baseline Credit Assessment, baa2

.... Baseline Credit Assessment, baa2

.... Long term Counterparty Risk Assessment, A1(cr)

.... Short term Counterparty Risk Assessment, P-1(cr)

....Outlook, Changed To Positive From Stable

Issuer: Citibank, N.A. (London Branch)

.... Foreign currency short term MTN Program, (P)P-1

.... Foreign currency Senior Unsecured Regular Bond/Debenture, A1, positive

.... Foreign currency Senior Unsecured MTN, (P)A1

.... Long term Counterparty Risk Assessment, A1(cr)

.... Short term Counterparty Risk Assessment, P-1(cr)

....Outlook, Changed To Positive From Stable

Issuer: Citibank, N.A. (Sydney Branch)

.... Foreign currency Commercial Paper, P-1

.... Long term Counterparty Risk Assessment, A1(cr)

.... Short term Counterparty Risk Assessment, P-1(cr)

Issuer: CitiFinancial Credit Company

.... Issuer Rating, Baa1, positive

.... Local currency BACKED Senior Unsecured Regular Bond/Debenture, Baa1, positive

....Outlook, Changed To Positive From Stable

Issuer: Associates Corporation of North America

.... Issuer Rating, Baa1, positive

.... Local currency BACKED Senior Unsecured Regular Bond/Debenture, Baa1, positive

....Outlook, Changed To Positive From Stable

Issuer: Citigroup Finance Canada Inc

.... Local currency BACKED Senior Unsecured Regular Bond/Debenture, Baa1, positive

.... Local currency BACKED Senior Unsecured MTN, (P)Baa1

....Outlook, Changed To Positive From Stable

Issuer: Citigroup Capital III

.... Local currency BACKED Preferred Stock, Ba1(hyb)

Issuer: Citigroup Capital XIII

.... Local currency BACKED Preferred Stock, Ba1(hyb)

Issuer: Citigroup Capital XVIII

.... Foreign currency BACKED Preferred Stock, Ba1(hyb)

Issuer: Citigroup Funding, Inc.

.... Local currency BACKED Senior Unsecured Regular Bond/Debenture, Baa1, positive

.... Foreign currency BACKED Senior Unsecured Regular Bond/Debenture, Baa1, positive

Issuer: Citigroup Global Markets Holdings Inc.

.... BACKED Issuer Rating, Baa1, positive

.... Local currency BACKED Senior Unsecured Regular Bond/Debenture, Baa1, positive

.... Foreign currency BACKED Senior Unsecured Regular Bond/Debenture, Baa1, positive

.... Local currency BACKED Senior Unsecured Shelf, (P)Baa1

.... Local currency BACKED Senior Unsecured MTN, (P)Baa1

....Outlook, Changed To Positive From Stable

Issuer: Citigroup Global Markets Inc.

.... Local currency long term Issuer Rating, A2, positive

.... Foreign currency long term Issuer Rating, A2, positive

.... Local currency short term Issuer Rating, P-1

.... Foreign currency short term Issuer Rating, P-1

.... Local currency BACKED Senior Secured Regular Bond/Debenture, A2, positive

.... Local currency BACKED Senior Secured MTN, (P)A2

.... Long term Counterparty Risk Assessment, A1(cr)

.... Short term Counterparty Risk Assessment, P-1(cr)

....Outlook, Changed To Positive From Stable

Issuer: Citigroup Global Markets Limited

.... Local currency long term Issuer Rating, A2, positive

.... Foreign currency long term Issuer Rating, A2, positive

.... Local currency short term Issuer Rating, P-1

.... Foreign currency short term Issuer Rating, P-1

.... Long term Counterparty Risk Assessment, A1(cr)

.... Short term Counterparty Risk Assessment, P-1(cr)

....Outlook, Changed To Positive From Stable

The principal methodology used in rating Citigroup Inc., Citibank, N.A., Citibank Europe plc, Citigroup Global Mkts Deutsch. AG&Co, Citibank, N.A. (London Branch), Citibank, N.A. (Sydney 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 published in September 2017. The principal methodology used in rating Citigroup Global Markets Inc. and Citigroup Global Markets Limited was Securities Industry Market Makers published in September 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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