MANAGEMENT REPORT AND ANALYSIS OF THE FINANCIAL SITUATION AND OPERATING RESULTS

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ABSTRACT

First Quarter 2022 – Results demonstrated continued progress across the franchise As described later throughout this executive summary, during the first quarter of 2022:

•  Citi's revenues declined 2% versus the prior-year period, as higher net
interest income-driven by Services, in Institutional Clients Group (ICG), and
Personal Banking and Wealth Management (PBWM)-was more than offset by lower
non-interest revenue across businesses.
•  Citi continued to invest in its risk and control environment, modernize its
systems and technology infrastructure and make business-led investments, which
include attracting front office talent, developing integrated solutions and
enhancing product capabilities that improve the digital client experience and
add scalability.
•  Citi had a modest allowance for credit losses (ACL) release in the quarter
that included a build of approximately $1.9 billion related to Citi's exposures
in Russia and the impact of the war in Ukraine on the broader macroeconomic
environment (for additional information, see "Cost of Credit" below).
•  Citi had solid year-over-year loan and deposit growth across ICG and PBWM,
reflecting continued engagement across both corporate clients and consumers.
•  Citi repurchased approximately 50 million common shares and returned
approximately $4 billion of capital to common shareholders in the form of
repurchases and dividends.
•  Citi continued to make progress with its refresh strategy, including entering
into sale agreements for an additional seven consumer banking franchises in Asia
and EMEA, for a total of 9 of 14 exit markets signed and announced, with a clear
wind-down path for Korea.

Various geopolitical and macroeconomic challenges related, among others, to the war of Ukrainedisruptions to global supply chains, inflationary pressures and rising interest rates will continue to create uncertainty about economic conditions in the WE and globally, and therefore for Citi’s future business and results. For a discussion of the trends, uncertainties and risks that will or could impact Citi’s business, results of operations and financial condition during the remainder of 2022, see the operating results for each respective company. , “Managing Global Risk-Other Risks-Country Risk-Russia” and “Forward-Looking Statements” below and “Risk Factors” and “Managing Global Risk” in Citi’s 2021 Form 10-K.

Summary of first quarter 2022 results

Citigroup

Citigroup reported net income of $4.3 billion, or $2.02 per share, compared to
net income of $7.9 billion, or $3.62 per share in the prior-year period. The
decrease in net income was
driven by higher cost of credit, higher expenses and lower revenues. Citigroup's
effective tax rate was 18% versus 23% in the prior-year period, reflecting the
resolution of certain tax audit items. Earnings per share decreased 44%,
reflecting the decrease in net income, partially offset by a 6% decline in
shares outstanding.
Citigroup revenues of $19.2 billion decreased 2%, as higher net interest income
driven by ICG and PBWM was more than offset by lower non-interest revenue across
businesses.
Citigroup's end-of-period loans were $660 billion, down 1% from the prior-year
period, as growth in ICG and PBWM (up 6% and 4%, respectively) was more than
offset by lower loans in Legacy Franchises, primarily reflecting the
reclassification of loans to Other assets to reflect held-for-sale accounting as
a result of the signing of sale agreements for consumer franchises in Asia and
EMEA. Citigroup's end-of-period deposits increased 3% to $1.3 trillion, driven
by increases in both PBWM and ICG.

Expenses

Citigroup operating expenses of $13.2 billion increased by 15%. Citigroup’s expenses included costs related to the divestment of Asia Consumer largely related to a goodwill impairment of approximately $535 million (approximately $489 million
after tax) due to re-segmentation and the timing of disposals. These costs related to the sale of Asia Consumer were accounted for under the old franchises. Excluding costs related to the Asia Consumer divestiture, operating expenses increased 10%, driven by continued investment in Citi’s transformation, business-led investments and related expenses to volume, partially offset by productivity gains (as used in this Form 10-Q, Citi’s results of operations and financial condition excluding the impact of costs related to the Asia Consumer divestiture are non-financial measures GAAP).

Cost of Credit
Citi's total provisions for credit losses and for benefits and claims was a cost
of $0.8 billion, compared to a benefit of $2.1 billion in the prior-year period.
The higher cost of credit was driven by a lower ACL release ($0.1 billion versus
$3.9 billion in the prior-year period), partially offset by lower net credit
losses.
The net ACL release included a $1.9 billion ACL build, consisting of
approximately $1 billion related to Citi's exposures in Russia and approximately
$900 million related to the impact of the war in Ukraine on the broader global
macroeconomic environment. This build was more than offset by an ACL release
related to a COVID-19 uncertainty reserve, primarily in U.S. Personal Banking.
For additional information on Citi's ACL, see "Significant Accounting Policies
and Significant Estimates-Citi's Allowance for Credit Losses (ACL)" below.
Net credit losses of $0.9 billion decreased 50%. Consumer net credit losses of
$841 million decreased 46%, primarily reflecting improved delinquencies in both
the
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Branded Cards and Retail Wallets WE Personal banking services. Net corporate credit losses fell 83% to $31 millionfrom $185 million in the prior year period, thanks to the improvement in the credit quality of the portfolio. For more information on Citi’s consumer and business credit costs, see each respective company’s operating results and “Credit Risk” below.

Capital

Citigroup’s Common Equity Tier 1 (CET1) ratio was 11.4% at March 31, 2022based on the Basel III standard approach for determining risk-weighted assets, compared to 11.6% at March 31, 2021, based on advanced Basel III approaches for determining risk-weighted assets. The decrease mainly reflects the return of capital to shareholders and unfavorable net movements in the accumulated other comprehensive income (AOCI) component of equity, partially offset by net earnings. Additionally, Citi’s change Capital CET1 reflected a change in Citi’s binding constraint from advanced approaches to the standardized approach, including the impact of adopting the standardized approach for counterparty credit risk (SA-CCR) on January 1, 2022. For more information on SA-CCR, see “Capital Resources” below. Citigroup’s additional leverage ratio at March 31, 2022 was 5.6%, compared to 6.9% in March 31, 2021. The decrease is mainly due to an increase in the total exposure to leverage, reflecting the expiry of the temporary relief granted by the Federal Reserve Board. For more information on Citi’s capital ratios and related components, see “Capital Resources” below.

Institutional Clients Group
ICG net income of $2.6 billion decreased 51%, primarily driven by higher
expenses, higher cost of credit and slightly lower revenues. ICG operating
expenses increased 13% to $6.7 billion, reflecting continued investments in
Citi's transformation, business-led investments and volume-related expenses,
partially offset by productivity savings.
ICG revenues of $11.2 billion decreased 2%, largely driven by Banking, partially
offset by an increase in Services revenue.
Services revenues of $3.4 billion increased 15%, primarily from TTS revenues of
$2.6 billion, which increased 18%, driven by net interest income on higher
deposit balances and spreads as well as strong fee growth. Securities services
revenues of $858 million increased 6%, as net interest income grew 17%, driven
by higher interest rates across currencies, and fee revenues grew 2%, due to
higher assets under custody.
Markets revenues of $5.8 billion were down 2%, versus a very strong quarter in
the prior-year period. In the current quarter, activity levels benefited from
client repositioning and strong risk management, driven by the Federal Reserve's
interest rate increases and overall geopolitical and macroeconomic uncertainty.
Fixed income markets revenues of $4.3 billion decreased 1%, as strong client
engagement in FX, commodities and rates was offset by less activity in spread
products. Equity markets revenues of $1.5 billion were down 4%, compared to a
very strong quarter in the prior-year
period, reflecting strong equity derivatives performance and growth in prime
finance balances.
Banking revenues of $1.9 billion decreased 23%, including the gain (loss) on
loan hedges. Excluding the gain (loss) on loan hedges, Banking revenues
decreased 32% versus the prior-year period, as heightened geopolitical
uncertainty and the overall macroeconomic backdrop reduced activity in debt and
equity capital markets. Investment banking revenues decreased 43% due to lower
capital markets activity, partially offset by growth in advisory. Corporate
lending revenues of $689 million decreased 6% (excluding gain (loss) on loan
hedges), primarily driven by lower average loans. For additional information on
the results of operations of ICG for the first quarter of 2022, see
"Institutional Clients Group" below.

Personal Banking and Wealth Management
PBWM net income of $1.9 billion decreased 23%, largely driven by lower revenues,
higher expenses and a lower net ACL release. PBWM operating expenses of $3.9
billion increased 14%, driven by transformation and business-led investments,
and higher volume-driven expenses, partially offset by productivity savings.
PBWM revenues of $5.9 billion decreased 1%, as higher net interest income was
more than offset by lower non-interest revenue.
U.S. Personal Banking revenues of $4.0 billion decreased 1%, with lower revenues
across Branded cards and Retail banking. Branded cards revenues of $2.1 billion
decreased 1%, due to higher payment rates and higher acquisition and rewards
costs, reflecting increases in new accounts and customer engagement. Retail
services revenues of $1.3 billion were largely unchanged, as higher net interest
income was offset by higher partner payments, driven by lower net credit losses.
Retail banking revenues of $595 million decreased 6%, largely driven by lower
mortgage originations.
Global Wealth Management revenues of $1.9 billion decreased 1%, primarily due to
lower client activity in investments, particularly in Asia.
For additional information on the results of operations of PBWM for the first
quarter of 2022, see "Personal Banking and Wealth Management" below.

Former franchises The net loss of the former franchises was $383 millioncompared to the net result of $323 million compared to the prior year period, reflecting lower revenues, higher expenses and higher cost of credit. Operating costs of $2.3 billion increased by 31%, reflecting costs related to the disposal of Asia Consumer. Turnover of former franchises of $1.9 billion decreased by 14%, mainly due to the Korea liquidation, as well as moderate investment activity in Asia. For information on Legacy Franchises’ operating results for the first quarter of 2022, see “Legacy Franchises” below.

Business/Other

The Corporate/Other net result was $189 millioncompared to a net loss of $194 million in the prior year period, primarily due to higher revenues and lower expenses. Operating costs of

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$260 million decreased by 15%, mainly due to lower consulting fees. Corporate/Other income from $190 million increased significantly, largely due to higher income from the investment portfolio. For information on Corporate/Other operating results for the first quarter of 2022, see “Corporate/Other” below.


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