New York Citigroup Inc. today released the following statement on the results of Moody's review:
"Citi strongly disagrees with Moody's analysis of the banking industry and firmly believes its downgrade of Citi is arbitrary and completely unwarranted. Moody's approach is backward-looking and fails to recognize Citi's transformation over the past several years, the strength and diversity of Citi's franchise, and the substantial improvements in Citi's risk management, capital levels and liquidity.
"Overall, Citi has greatly improved its safety and soundness since the financial crisis. At the end of the first quarter of 2012, Citi had over $420 billion of surplus liquidity held generally in cash and government securities. We have surplus liquidity based on a variety of stress tests and liquidity models, and Citi exceeds the proposed Basel III Liquidity Coverage Ratio requirement with a ratio of approximately 125 percent, even though this measurement does not go into effect until 2015. In addition, Citi has been consistently profitable despite the challenging operating environment and continues to reduce its non-core assets, resulting in Citi Holdings today being approximately one-quarter of the size it was in 2008. As of the end of the first quarter of 2012, Citi Holdings assets were $209 billion, or just 11 percent of Citi's total assets.
"These actions have helped improve Citi's financial strength. With a Basel I Tier 1 Capital ratio of 14.2 percent and Tier 1 Common ratios of 12.5 percent and an estimated 7.2 percent1 under Basel I and III respectively, Citi is one of the best capitalized financial institutions in the world. Additionally, Citi first stated in October 2010, and has repeatedly reaffirmed, that it expects its estimated Basel III ratio to exceed 8 percent on a fully implemented basis by the end of 2012. That guidance always included Citi's expectations regarding capital returns, and the suggestion that Citi would subordinate the strength of it its balance sheet to increase returns to equity holders is simply without merit. To the contrary, Citi has clearly demonstrated since the crisis that it will take all necessary steps to increase and preserve its capital strength.
"Since Moody's ratings actions have been well-telegraphed to the market, we believe sophisticated counterparties have long included today's rating actions in their credit analysis. For this and other reasons, based on Citi's current estimates, we do not believe the impact on Citi's funding and liquidity or its businesses will be material.
"More broadly, Citi believes that investors and clients have become much more sophisticated in their credit analysis over the past few years, and that few rely on ratings alone – particularly from a single agency – to make their credit decisions. We applaud this development and believe that it should be encouraged, as it was in Dodd-Frank, but recognize that some clients and investors will be impacted by Moody's decisions given their historical reliance on Moody's ratings as fiduciary advice. In our view, investors and clients should make their own decisions and not rely on ratings the genesis of which is opaque. In this regard, Citi is aware that analytical alternatives to the ratings agencies exist today from several providers that would further enhance the ability of investors and clients to arrive at their own conclusions without being captive to the judgments of rating agencies.
"Also, as a financial intermediary in the business of assessing the creditworthiness of our clients and counterparties, we have been especially surprised by Moody's disproportionately adverse treatment of U.S. firms relative to banks in Europe. Finally, Citi believes that the U.S. financial system is stronger, not weaker, than it was before the crisis. Actions by legislators, regulators and firms themselves have substantially enhanced the stability, and resilience, of the system. Moody's actions ignore this fact."
1 On June 7th, 2012, the Federal Reserve Board issued proposed Basel III rules, and we are reviewing the impact, if any, the proposals could have on this ratio.
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides 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, transaction services, and wealth management.
Certain statements in this release, including without limitation the impact of Moody's rating action on Citi's funding and liquidity and its businesses, are "forward-looking statements" within the meaning of the rules and regulations of the U.S. Securities and Exchange Commission. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results and capital and other financial condition may differ materially from those included in these statements due to a variety of factors, including but not limited to the precautionary statements included in this release, potential ratings limitations certain entities may have with respect to permissible counterparties and subjective counterparty behavior (e.g., certain corporate customers and trading counterparties could re-evaluate their business, including deposit, relationships with Citi and limit the trading of certain contracts or market instruments with Citi). More information about these factors and other factors that may affect Citigroup's future results is contained in Citigroup's filings with the U.S. Securities and Exchange Commission, including without limitation the "Risk Factors" section of Citigroup's 2011 Annual Report on Form 10-K. Precautionary statements included in such filings should be read in conjunction with this release.
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