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
