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Citigroup Inc. (NYSE:C)
Fixed Income Investor Review Conference Call
January 24, 2012 10:00 am ET
Ilene Fiszel Bieler -
Eric W. Aboaf - Treasurer
John C. Gerspach - Chief Financial Officer
Ryan O'Connell
Michael Rogers
Peter Frank Ganucheau - Carlson Capital, L.P.
Christopher Kawasaki
Unknown Analyst
Tom Chistolini
David Jiang
David Knutson
Mark Kehoe
Robert Smalley
Hello, and welcome to Citi's Fixed Income Investor Review with Chief Financial Officer, John Gerspach; and Treasurer, Eric Aboaf. Today's call will be hosted by Ilene Fiszel Bieler, Head of Fixed Income, Investor Relations. [Operator Instructions] Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Ms. Fiszel Bieler, you may begin.
Ilene Fiszel Bieler
Thank you, operator. Good morning, and thank you all for joining us. On our call today, our CFO, John Gerspach, will speak first. Then Eric Aboaf, our Treasurer, will take you through the fixed income investor presentation, which is available for download on our website, citigroup.com. Afterwards, we will be happy to take questions.
Before we get started, I would like to remind you that today's presentation may contain forward-looking statements which 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 these statements due to a variety of factors, including the precautionary statements referenced in our discussion today and those included in our SEC filings, including without limitation, the Risk Factor section of our 2010 Form 10-K.
With that said, let me turn it over to John.
John C. Gerspach
Thank you, Ilene, and good morning, everyone. We're very pleased to be hosting our Fixed Income Investor Review this quarter. Today, we're going to update you on our continued execution and progress in several areas, including our liquidity and balance sheet management. Eric Aboaf, our Treasurer, is going to take you through some specifics on our credit and balance sheet progress, our liquidity profile and our capital position, as well as review our recent issuance activity and current funding plans for the coming year.
Many of you may have joined us for last Tuesday's earnings call, and there are some key points from that call that I would like to reemphasize to start us off here on Slide 1. The fourth quarter was dominated by the macro environment, and our earnings clearly suffered as a result. Market activity was down significantly, and our clients reduced their risk. Any of our businesses geared to the capital markets such as sales and trading, Securities and Fund Services and GTS, and even investment sales and consumer banking, were impacted.
Investor activity was particularly weak in December as reflected in the volumes we experienced. However, our consumer and non-markets-related businesses continued to perform well as we executed our strategy. Throughout Citicorp, we grew our loans by 14% from 2010, including a 24% increase in our corporate loans, and GTS continued to show positive momentum, with full year revenue up 5% from 2010.
Excluding the impact of foreign exchange, revenue from International Consumer Banking grew by 6% year-over-year as we opened 3 million new accounts while increasing average loans and deposits by $15 billion and $9 billion, respectively.
During the quarter, we achieved positive operating leverage in Latin America and again in Asia. In the U.S., consumer accounts, deposits, loans and revenue each grew from the previous quarter. We continue to make progress in winding down Citi Holdings, and we reduced Citi Holdings' assets by $90 billion during the year. And after considering the impact of the transfer of Retail Partner Cards into Citicorp, which will be effective this quarter, Holdings comprised only 12% of Citigroup's balance sheet.
In 2011, our expenses were impacted by several factors. Full year expenses of $50.7 billion were up nearly 7% from 2010. Most significantly, a weakened dollar and the resulting impact of FX translation added $800 million to our expense base, while legal and related expenses were $1.3 billion higher than in 2010.
Excluding these and other episodic items, our core operating expenses rose by 2.1%. And this includes $3.9 billion in incremental investments, $1.9 billion of which were funded through our ongoing expense reduction initiatives. The $3.9 billion in investments included approximately $1 billion to meet regulatory requirements.
We also upgraded talent in both our Institutional and Consumer businesses. Other investments, from modernizing our branches to increasing marketing, were necessary to attract and serve our clients better.
A few years ago, the company substantially reduced its spending on consumer marketing. And in 2011, we increased that spending to competitive levels. These are longer-cycle investments, but they are starting to pay off through increases in our new account acquisitions in the U.S. and the attainment of positive operating leverage in key consumer emerging markets. That being said, we believe these increases in expense levels are behind us. We have a robust re-engineering program, and our goal is to self-fund new investments going forward.
As a result of this and other actions, as we stated last week, we currently expect to reduce our expenses by $2.5 billion to $3 billion in 2012. That's compared to the full -- reported full year 2011 level and, of course, excluding changes in foreign exchange or unanticipated legal costs or significant one-timers.
We also continue to rightsize our businesses for the opportunities that we see, particularly in Securities and Banking. So we're prepared whether the current environment proves to be a result of cyclical or secular trends.
And let me make a few additional comments about Securities and Banking. As our results in 2011 demonstrated, the operating environment for the markets business has been difficult, with a series of macro headwinds pressuring revenues for Citi and the industry. As you know, we dramatically slashed our Securities and Banking business in late 2008 and into 2009 in response to the crisis. Once we stabilized Citi and began to turn our attention back to growth, we identified businesses in Securities and Banking that we believe were strategically important to our long-term success but where we lacked scale relative to the opportunity. So in 2010, we started investing in those businesses.
While our investments in Securities and Banking were more substantial in 2010, they continued into 2011. As I noted in last week's earnings call, of the approximately $3.9 billion we invested in Citi in 2011, a little less than $1 billion was in Securities and Banking.
Now to put this all into some historic perspective, despite more than 2 years of investment into Securities and Banking, we still had an expense base in 2011 that is 7% below our 2008 level. Nonetheless, while we believe investing in Securities and Banking has been the right strategic decision, and we have invested in a prudent manner, the results in equities and banking to date have been disappointing to us. We've added a couple of slides in the appendix of today's deck that should give you some details on our holdings and our Securities and Banking expenses in 2011.
What the S&B slide shows you is that $1.1 billion of expense reductions from re-engineering saves and lower costs, primarily in the form of lower incentive compensation by more than $800 million, were significantly offset by approximately $800 million of incremental investment in 2011. Clearly, our investment spending left us with less expense flexibility in 2011, particularly as markets began to weaken in the second half of the year.
But let me be clear, our 2011 revenues in certain businesses in Securities and Banking were disappointing and unacceptable. While much of the current difficulties reflects market conditions, we equally had some management and execution challenges.
While we are strategically committed to Securities and Banking, we are not oblivious to the fact that our cost structure cannot be justified by our current revenues. We must either drive revenue growth and operating leverage or we will have to restructure, cut capacity and cut expenses. And while this is not a decision that we will make in haste, it is also not a decision that we will delay in the name of long-term strategy.
We will continue our focus on re-engineering and cost cutting and currently expect approximately $600 million of re-engineering saves in 2012 in Securities and Banking. We also have much more compensation flexibility in 2012 as we will not be investing as we did in 2011. But if we do not see meaningful revenue recovery over the course of 2012, we will further restructure Securities and Banking.
Now with all that said, turning to Slide 2, I'd like to highlight some of our key earnings results from the fourth quarter. Citigroup reported fourth quarter net income of $1.2 billion, or $0.38 per diluted share. Revenues of $17.2 billion were down 7% versus the prior year on a reported basis as growth in International Consumer Banking and Transaction Services was more than offset by lower revenues in Citi Holdings, Securities and Banking and North America Consumer Banking.
Expenses of $12.9 billion were up 4% year-over-year. Nearly 2/3 of the increase was attributable to the combination of higher legal and related costs, as well as severance, partially offset by a positive impact from foreign exchange translation. Excluding these items, expenses were up 1.5% over last year, principally due to higher investment spending, partially offset by productivity savings and other expense reductions. Cost of credit continued to improve year-over-year, down 41% to $2.9 billion. Year-over-year, Citigroup end-of-period loans were flat on a reported basis and up 1%, excluding the impact of foreign exchange as continued loan growth in Citicorp outpaced the wind down of Citi Holdings.
And now let me turn it over to Eric.
Eric W. Aboaf
Thanks, John. This quarter was influenced by a difficult macroeconomic environment and in light of that, we have been quite cautious. Europe continues to be a concern. Growth around the world is uncertain, and home prices in the U.S. still hold back a domestic economic recovery. With this, we have reined in our balance sheet accordingly. We are positioned for continued uncertainty and/or a possible stabilization, depending on how events turn out. As such, both our capital and liquidity are robust no matter which measure you use. And as we have said previously, we continue to expect to begin returning capital to shareholders in 2012.
We continue to make progress in reducing the non-core balance sheet, which provides us with ample capital and liquidity to strategically deploy in our Citicorp businesses. You can see that our lending growth is up 14% year-over-year in Citicorp.
We are seeing continued improvement in credit trends, with net credit losses in the fourth quarter down 40% from a year ago and non-accrual assets down 44% year-over-year. We are well reserved with loan loss reserves of $30 billion or 4.7% of loans. With this strong balance sheet, we have the resources and the capabilities to grow as we help our global clientele navigate the current environment.
I'll start by taking you through our credit trends, which show continued improvement for the 10th consecutive quarter. Slide 4 shows total Citigroup net credit losses and loan loss reserves. NCLs continued to improve in the fourth quarter, down 9% sequentially to $4.1 billion, and the net LLR release was $1.5 billion, up slightly from the third quarter.
Let me describe our credit trends in 2 broad buckets: corporate and consumer. The first major area is corporate credit, which you see at the top right. Corporate credit was a benefit of $158 million in the fourth quarter compared to a cost of $86 million last quarter on lower net credit losses and a higher reserve release. We saw general stability in our corporate credit portfolio.
At the bottom right of the page, you can see the second major area, consumer credit. Consumer NCLs declined 7% sequentially to $4 billion, and we released $1.2 billion in net loan loss reserves. Total non-accrual loans represented 1.7% of total loans at year end, down from nearly 3% at the end of 2010. And along the bottom of the slide, you can see that we ended the quarter with $30 billion of total loan loss reserves or 4.7% of loans.
On Slide 5, we have an overview of credit trends in our North American cards and mortgage portfolios. The top half of the slide shows our North American cards portfolios. Credit trends for both Citi-branded cards and Retail Partner Cards continued to improve. In both Citi-branded and Retail Partner Cards, NCLs continued to improve in the fourth quarter on a dollar and a rate basis. In Retail Partner Cards, while there was a modest increase in 90-day delinquencies on a dollar basis, the rate remained stable.
Given interest in mortgages in general, I wanted to spend a moment reviewing our North American consumer mortgage portfolio, notwithstanding that our portfolio is significantly smaller than that of our other large U.S. banks. To be clear, as we did last quarter, we are including Citicorp and Citi Holdings consumer mortgage portfolios together in this presentation.
For the combined portfolio, NCLs continued to improve in both residential first mortgages and in home equity in the fourth quarter. As we discussed last quarter, overall delinquency trends are beginning to show the impact of re-defaults of previously modified mortgages. While at the same time, the pace of asset sales and modifications has slowed as we have a smaller pool of eligible delinquent loans to sell or modify.
As a result of these converging trends, we saw an increase in 90-day delinquencies in the first mortgage portfolio within Citi Holdings. Early day delinquencies in this portfolio, however, improved quarter-over-quarter. Importantly, re-default rates for HAMP and other modifications continued to track favorably versus expectations through the fourth quarter. Expectations for re-defaults and resulting net credit losses are already factored into our net loan loss reserve balance.
In addition to the North American credit summary you see here, there's a separate page on international consumer credit trends in the appendix. They continue to be stable to improving.
Please turn to Slide 6. Now that I've covered our improving credit trends, let me describe how we are managing the balance sheet for the current environment and investing to grow the Citicorp lending and deposit-taking businesses in particular. On the left, you see Citicorp and Corp/Other, which is up 3% year-over-year as we continued to reinvest in the franchise. Here you can see how we have deployed our balance sheet to support our customers over the past year in Citicorp.
For example, net loans, which is our largest asset category, is up approximately $63 billion or 16% year-over-year and approximately $23 billion quarter-over-quarter as we continued to lend to both consumer and corporate clients. Whereas our trading assets were down $22 billion year-over-year and $27 billion quarter-over-quarter in response to the current environment, which I will explain in more detail in a moment.
On the right, you see Citi Holdings assets, which are down 25% year-over-year. Our Citicorp/Citi Holdings strategy continues to provide us the flexibility to redeploy capital and take advantage of growth opportunities, particularly in our lending businesses even while we size our market-making balance sheet to the current economic environment.
Turning to Slide 7. Given our healthier balance sheet, we have been deploying capital in our Citicorp lending businesses as I just mentioned. So let me describe what we are seeing in loan volumes. In Citicorp, loans grew to $465 billion, up 14% year-over-year, including 7% growth in consumer and a 24% growth in corporate loans. This quarter's results represented the sixth consecutive quarter of Citicorp loan growth.
In our international businesses, lending increased 37% in global transaction services from the prior year, driven by trade finance lending in Asia, Latin America and Europe. And we saw a 20% growth in our Securities and Banking corporate loan book, with the increased borrowing coming across all client segments and geographies.
International Consumer Banking loan volumes increased 8% year-over-year overall, led by Asia and Latin America. These trends reflect the economic growth in these regions, as well as the result of our investment spending which are driving new volume in both cards and retail loans. North America consumer loan volumes were up modestly at 6%, driven by retail banking loans as the cards market continues to adapt to CARD Act and other regulatory changes.
Overall, we have reached an inflection point, which is evident when you adjust for currency swings, which you can see along the bottom of the page. On a constant dollar basis, total Citigroup loans grew year-over-year as Citicorp loan growth now outpaced the reduction of loans in Citi Holdings. This provide the powerful engine of year-on-year growth in net interest income and accrual earnings.
Turning to Slide 8. I want to take a moment to discuss some key indicators of customer activity around the world. In addition to loan volumes, we are also seeing results from our investments in Citicorp across major business drivers, including cards purchase sales and higher retail deposits. And in particular, Citicorp continues to benefit from a strong emerging markets franchise.
On the right-hand side of the page, looking at Asia and Latin America, for example, we are seeing momentum from past investments. Both regions are demonstrating consistent strength with continued loan growth in all businesses, as well as cards purchase sales which increased 7% and 21%, respectively. This strength in customer activity has helped us achieve positive operating leverage in Regional Consumer Banking in both Asia and Latin America this quarter.
We are also seeing healthy deposit growth in all regions as we continue to see flight-to-quality customer behavior in the current environment, which I will discuss further in a moment. As you have heard us say before, our investments skewed towards those businesses that we think give us a good rate of return and good top line growth. And as a result, we are on track to deliver on those investments.
Turning to Slide 9. This page shows how we continue to improve the quality of our deposit base. You can see on the chart that we are actively changing the composition of our deposits. Time deposits, where rates are fixed for the term of the deposit and which have thinner margins, are becoming a smaller proportion of our base, whereas operating accounts are becoming a larger proportion of our deposits. These checking and savings accounts for individuals and cash management accounts for corporations are providing wider margins and have exhibited stickier behavior.
Year-over-year, our deposit mix has shifted positively. Operating accounts now represent 75% of our overall Citicorp deposit base, whereas last year, they represented approximately 7%. And 2 years ago, they were at 63%. As I have said before, deposits are one of our lowest-cost sources of funds. And you can see that while deposits have grown, the overall cost of funds on deposits is down year-over-year and significantly lower from prior periods. This reflects both the low rate environment and our ability to lower price points, which widens our margins given the abundant customer liquidity while still remaining competitive and attracting deposits. When interest rates increase, however, we would expect to see some pressure on rates.
This quarter, in keeping with our client-focused model, we saw operating deposit growth across almost all our deposit-taking businesses, including retail and private bank and Global Transaction Services. In particular, we saw upticks in Europe and North America as we were the beneficiary of the flight to quality.
On Slide 10, I want to show you how some of the drivers we just reviewed are contributing to our net interest margin. This quarter, we saw NIM increase, which was primarily the result of the year-end reduction of low-yielding trading assets. About 5 basis points of the 7 basis point increase was driven by the fact that we took down our trading assets, which won't necessarily repeat itself.
More broadly, the NIM trend is the result of the changing mix of our balance sheet. As you saw earlier, loans on a constant currency basis grew slightly year-over-year and have started to become a larger portion of our balance sheet, as you can see on the bottom of the page. This positive growth in loan NIM, however, is offset as higher-yielding loans in Citi Holdings are running off and are replaced by Citicorp loans.
On the liability side, we have been focused on reducing our borrowing costs. In the bank, we have been substituting maturing long-term debt, which is a more expensive source of funding, with deposits, our lowest-cost source of funds. This has had a positive impact on NIM.
Looking forward, absent any other significant changes, our NIM is going to continue to reflect the pressure of a low interest rate environment and subsequent changes in our portfolio. As such, we expect that with modest growth in our trading assets, we'll probably be back to a NIM ratio close to 2.85% next quarter, give or take a few basis points, and roughly stabilized thereafter.
On Slide 11, let me summarize our Citicorp balance sheet on a business basis as opposed to the GAAP line item basis we showed you earlier on Slide 6. You can see on the right side of the page that our overall assets were down $41 billion quarter-on-quarter as we reined in our global markets activities while continued to grow the lending and deposit-taking business balance sheet we just described in the last few pages. In fact, you can see here that our assets were up in our Regional Consumer Banking business, Transaction Services business, as well as in our corporate lending book of our Securities and Banking business, all in the blue portions of the bars on the page.
In contrast to the growth in the lending businesses, our market-making balance sheet was down as the economic uncertainty that began in the third quarter continued through fourth quarter. Customers reduced leverage during the quarter, and thus our matchbook lending was down. Rates trading in G10 saw a slowdown, particularly in Europe where we pared our risk-taking.
Credit trading and securitized markets were 2 areas where we extended less balance sheet as we saw lighter flows and less market liquidity. In fact, our average borrow was down quarter-over-quarter. And perhaps more importantly, stress tests on our markets portfolio showed lower risk in our various trading books in the second half of this year compared to the levels that would have existed at the end of the second quarter.
In summary, our lending and deposit-taking businesses are a nice stable complement to our markets business.
Moving to Slide 12. Having discussed how we have moderated our risk-taking activity over the course of the second half of 2011, we wanted to update you on our exposures to the GIIPS countries. At the end of the fourth quarter, Citi's gross funded credit exposure to GIIPS was $20.2 billion, and our combined gross funded credit exposure to France and Belgium was $13.2 billion.
Netted against our gross funded credit exposure, we have margin posted under legally enforceable margin agreements, collateral pledged under bankruptcy-remote structures and purchased credit protection from financial institutions that are predominantly outside of these 7 countries. These amounts total $13.8 billion for GIIPS and $11.5 billion for France and Belgium.
Net of margin, collateral and purchased credit protection, our net current funded exposure to GIIPS at the end of the fourth quarter was $7.8 billion. And our net funded exposure to France and Belgium was $2.4 billion.
You can see that the majority of our exposure in these countries is to corporate, not to the sovereign itself. And we continue to carefully manage these exposures while serving our important clients in these countries. Very importantly, since the end of the second quarter, we decreased our net current funded GIIPS credit exposure significantly, down 45% from $11.9 billion to $6.5 billion.
Turning to Slide 13. Looking at Citi Holdings, let me further describe our progress in reducing the amount of our higher risk assets in general. Holdings' total assets have declined by more than 67% from their peak in 2008 to $269 billion and now stand at 14% of our balance sheet. Furthermore, once the transfer of $45 billion of Retail Partner Cards into Citicorp is complete in the first quarter, Holdings will be even less.
The sequential $20 billion reduction of Holdings assets occurred across many portfolios and businesses and was comprised of nearly $12 billion of asset sales and business dispositions, approximately $7 billion of net runoff and pay down and nearly $2 billion of net cost of credit and net asset marks.
This slide shows you the key businesses within Citi Holdings where those reductions occurred. Importantly, the 2 largest components of Citi Holdings, the Special Asset Pool and Local Consumer Lending, are down 49% and 20%, respectively, from the fourth quarter of 2010. And as I have said before, our Local Consumer Lending U.S. mortgage business is a fraction of the size of that of large U.S. peers.
Clearly, we are continuing to make significant progress executing on our Citi Holdings asset reduction strategy, although as we have stated, we believe that the pace of the reductions will continue to moderate.
Now on to Slide 14. Having discussed credit and balance sheet trends, let's review Citi's liquidity and funding strategy, which has been a cornerstone of strength. Our current strategy is designed to provide ample, high-quality liquidity to make sure that we are well positioned to grow our core businesses and navigate various market conditions. In both the bank and non-bank, we carry a healthy liquidity buffer, which is generally held in cash and highly liquid securities such as treasuries and agencies and other G7 instruments.
We execute on this funding strategy in both our bank and non-bank businesses by accessing a spectrum of funding sources. In our bank businesses, our funding is primarily in the form of stable, global diversified deposits, as I discussed earlier. In our non-bank businesses, we use a modest amount of short-term funding such as repo to finance liquid assets. We then use a range of long-term debt instruments to cover our broader business needs.
On Slide 15, you can see the size of our liquidity buffer, which is defined as cash and highly liquid securities. It stood at approximately $311 billion at the end of the fourth quarter. This quarter, our high-level bank liquidity is up modestly as deposits have increased. At the same time, our non-bank liquidity to support our broker-dealer remains relatively flat. We continue to believe that this range is proportionally calibrated to the size of our balance sheet and current market conditions.
In addition to these high levels of liquidity, let me remind you of the fungibility of our liquidity at Citi. In general, Citigroup can freely fund legal entities in our bank vehicles. In addition, under Section 23A of the Federal Reserve Act, our bank can fund our non-bank entities with as much as $20 billion as long as it is collateralized appropriately.
In addition, as of the fourth quarter, we currently estimate that other entities and subsidiaries held approximately $103 billion of cash in unencumbered liquid securities, which is not shown on the chart on the page. When you include this additional liquidity, our total liquidity buffer is approximately $414 billion.
And finally, it is also worth mentioning that we only include our on-balance sheet liquidity buffer here. As such, we don't include borrowing capacity at the Fed discount window or with the FHLBs as part of our aggregate liquidity resources. That capacity is over and above what you see on this page and what I just described.
Moving on to Slide 16. Let me take a moment to talk to you about our cash and available-for-sale securities portfolio and how we are thinking about this portfolio in the context of the current upcoming regulatory changes, as well as investment opportunities.
First, I want to point out that the liquid assets on this page tie directly to our GAAP financial line on our disclosed balance sheet. And you can also find the decomposition in our regulatory filings. These amounts are similar to those I just described on the preceding page, but they include some encumbered resources while also excluding some liquid trading assets.
Second, you can see our historically conservative investment posture in the mix of assets. We hold a high percentage of our liquidity pool in cash, totaling 41%. We have significant holdings of U.S. treasuries and U.S. agency debentures, and the rest is well diversified.
Third, while we are still waiting final guidance on Basel III liquidity coverage ratio, as I have said before, we believe that we are already comfortably in compliance, given the rules as we understand them, meaning that we are running an LCR ratio comfortably above 100%.
Finally, our strong liquidity position and historic conservatism presents us with an earnings opportunity as we enhance the yield on the portfolio. As you can see on the bar chart, we have begun to reallocate parts of our AFS portfolio from government and government-backed securities into high-quality spread products with better yields such as Agency MBS. We have the capacity to reallocate as market opportunities arise.
On Slide 17, let me turn to the long-term funding and our liability management initiatives. The top half of the page shows our long-term debt outstanding by category over time, including senior debt, TLGP and credit card securitizations. The bottom half of the page segments the amount of long-term debt in the bank and non-bank entities. So the bottom is just another cut of the top to provide you with some further texture.
As you can see here, our long-term debt outstanding has decreased year-over-year in most long-term debt categories as we have deleveraged the balance sheet, especially in the bank. In the bank, we have consciously reduced debt funding as we have grown our deposit base. We also led an additional $10 billion of TLGP runoff in the bank in 2011.
Looking at the non-bank at the bottom half of the page, long-term debt has decreased as we have led TLGP rolloff while keeping a healthy amount of funding for our broker-dealer. In the non-bank, approximately $11 billion of TLGP debt matured in 2011. As you have heard me say before, we have not and will not replace this debt.
As you can see here with our current estimate for the fourth quarter of 2012, we believe that this trend will continue and expect continued declines in the amount of long-term debt that we have outstanding, particularly in the bank.
On Slide 18, you can see our debt maturities for 2011 and expected maturities of long-term debt over the next 2 years. This chart clearly shows that maturities peak in 2012 and come down in 2013. As we see in light blue atop the first 2 columns, TLGP debt represented a significant amount of maturities in 2011 and is the bulk of our maturities in 2012.
Many industry observers have noted that this wave of maturities is an industry-wide situation, which came about as many banks issued TLGP and other government-guaranteed debt in 2008 and 2009. As I've said before, for us at Citi, we do not expect to replace TLGP maturities.
As we have demonstrated and reviewed in the prior slides, the reason is clear. As we continue to reduce and derisk our Citi Holdings balance sheet in both our bank and non-bank entities, our need for long-term debt is coming down.
During 2011, we issued approximately $15 billion of long-term structural debt. We currently expect to issue approximately $15 billion to $20 billion of long-term debt during 2012, although this number may change based on market conditions or other factors.
On Slide 19, we wanted to review our issuance trends over the past 2 years and share some of our thinking regarding issuance in the current environment. The broad-based issuance franchises that we have built over time provide access to reliable and diversified funding sources. These include issuing in multiple currencies and tenors and responding to demand across a broad range spectrum of investor segments, even in choppier markets.
Looking at the top half of the page, you can see that in 2010 and 2011, while benchmark issuance comprised a preponderance of our long-term debt, we saw sizable demand for our structured long-term notes. The ability to customize issuances to investor preferences at favorable funding levels has increased the attractiveness of structured notes for us over the past year. These notes are typically linked to currencies, equities and commodities.
Moving to the bottom of the page, issuance over the last 2 years has been predominantly dollar-denominated and well diversified across tenors. Prior to the crisis, 40% to 50% of our annual borrowings were non-dollar currencies. However, due to the adverse cross-currency basis swap and conversion, non-dollar issuance has been more expensive than direct dollar funding. Nevertheless, we continue to monitor non-dollar markets for economically attractive funding opportunities versus U.S. dollar-direct. We expect to continue to deliver a mix of funding across tenors and currencies and expect benchmark debt to continue as an important funding source.
On Slide 20, let me describe for you the current status of our ratings, a topic we have discussed quite a bit over the last year. On the top half of the chart, you see our senior debt and commercial paper ratings for Citigroup, and on the bottom half are the long-term and short-term ratings for Citibank. As you are aware, the rating agencies resolved their industry-wide reviews regarding their assumptions of government support in the late part of 2011. As a result of these methodology changes, all 3 of the major rating agencies announced rating changes for the industry over the last 2 quarters. These rating changes had no material impact on our funding profile.
So turning to Slide 21, let me summarize capital which continues to be an area of significant strength for us and supports the lending growth that I described. Our Tier 1 common capital stands at $115 billion, and our total capital is $166 billion. At the end of the fourth quarter, our Tier 1 common ratio was 11.8%, up from a year ago and up from the third quarter.
Our GAAP assets decreased 2% year-over-year. Our risk-weighted assets stood at $974 billion, and Citi Holdings risk-weighted assets now represent approximately 25% of the total. As you can see, our capital base is one of the strongest in the industry, both as compared to U.S. and international banking peers.
On our last slide, let me summarize 4 major points. First, our capital base continues to be one of the strongest in the industry, and this is reflected across every one of our significant capital ratios. As we have stated, we continue to expect to begin returning capital to shareholders in 2012.
Second, we have significantly improved our structural liquidity by increasing our capital base and deposits and reducing Citi Holdings' assets. We believe we have ample liquidity. And as you saw, our lending activities to clients continue to increase.
Third, we will have a significantly lower proportion of wholesale funding going forward. We currently have modest long-term debt reissuance plans over the year. We will not be replacing maturing TLGP debt. Thus, we expect that our long-term debt outstanding will continue to decline.
And fourth, while the market environment may be challenging, we see continued strength in our core lending and deposit-taking businesses. And as I stated earlier, we achieved positive operating leverage in both our Asia and Latin America Regional Consumer Banking businesses this quarter.
That concludes our fixed income review. John and I would be happy to take your questions.
Question-and-Answer Session
[Operator Instructions] Your first question comes from the line of Michael Rogers of Conning Asset Management.
Michael Rogers
This is a question for John. John, I wanted to just ask a bigger picture question with respect to what you think your chief worry might be as you look out over 2012. It appears as if we've received a little bit of a relative calm here after the ECB's significant LTRO operations. And do you think they bought us enough time here -- or bought the European nations enough time to put their houses in order? And secondly, do you have any better earning -- additional guidance on when you expect the Fed to give you a clearer signal as to where you'll need to be for capital coming up here?
John C. Gerspach
Let me answer them in reverse order. Like all other institutions, we submitted our capital plans to the Fed around January 5. We expect to hear back from the Fed -- I believe the date they've targeted is March 15. So that's the date. And all the significant financial institutions will hear back from the Fed as far as capital planning for 2012. As far as the first question, which kind of went from what do I worry about then what do I think about Europe, I would say that as I mentioned both in media calls and in the investor call last week, Europe continues to remain an overhang on the market. You're quite right. I think that some of the ECB operations that they put into place provided a window of calm. But it still is very much up to Europe to figure out whether or not they can come up with an achievable restructuring that will settle things down on a more permanent basis. And I think that's yet to be seen. We've said for the last year or so that Europe clearly has the ability to solve its own problems. But right now, it's as much a matter of political will and determination as it is anything else. And we'll just have to see how that plays out. But until there is some sort of an agreement that everyone can look at and agree that it really is achievable and sustainable, I think we're going to continue to have these periods of relative calm and then followed by a period of uncertainty. And so we'll just have to see. And the second worry that I continue to have, of course, is the housing market here in the U.S. I think those are kind of 2 bookend worries for almost anyone at this point in time.
Michael Rogers
John, it appears that we've -- hearing a little bit more of a drumbeat about a potential settlement from the Attorney General and the banks. Can you comment any further on that?
John C. Gerspach
No, I really can't. I mean, the drums have been beating for over a year now. So we continue to get a rhythm, lots at Citi.
Michael Rogers
The SIFI buffer, that was partly what I was getting at with respect to the Fed. Do you expect anything soon on what the buffer might be and the implementation of that over a period of time?
John C. Gerspach
No. We're still waiting to get the NPR released on Basel III. What we've heard from the Fed is that the NPR was going to be out early in the third quarter of last year, then it was going to be in the fourth quarter of last year. Now, to use your other statement, we're hearing the drums beating that perhaps we could get an NPR out in March. And it's hopeful that with that NPR, we might get a little bit more guidance then on everything from SIFI buffers to actual timing. So we're still waiting for the NPR.
Your next question comes from the line of Ryan O'Connell of Morgan Stanley.
Ryan O'Connell
Two questions, if I could. The first is on S&B. And first of all, I appreciate the candor. Secondly, I recognize that such any [ph] conditions a tough quarter. But when I look at the equity trading revenues which were down about 70% year-over-year, that to me looks like a bigger delta than for some of your peers. So I wonder if we could talk a little bit more there. I mean, is it prop trading going away? Or is it loss of market share? Appreciate any insights there. That's the first question.
John C. Gerspach
Okay, Ryan. This is John. I think when you take a look at equities, what I'd tend to do is I look at our equities revenue on a full year basis, and you pull out the CVA. And our equities year-over-year had a revenue drop of about 35%, which is about $1.3 billion, $1.4 billion. Now when you delve into then what drove that revenue decline year-over-year, about 50% of that revenue decline is the result of losses that we took in the prop trading business that we have now wound down. So half of the performance year-over-year -- half of the revenue loss year-over-year is directly related to losses in the prop trading business. And then the other half is really centered in the equity derivatives business. And equity derivatives would be one of those businesses that I'd be referring to in my opening commentary, where it certainly has something to do with the markets. But there's also a certain amount of underperformance on our part in that business. So with regards to equities in 2012, we certainly -- now that we've wound down the prop trading business, we won't have that to deal with any longer, and we would certainly be looking for improved performance coming out of our equity derivatives area.
Ryan O'Connell
That's very helpful. And then I just wanted to circle back. The comments on mortgages are very helpful, but just want to drill down a little bit more on that. Is it all a reflection of unemployment? Or are you seeing different patterns in various regions? Or do you think maybe we just -- I know we sort of hit the cyclical lows in terms of the delinquencies and that's it. I'm talking about the first mortgages, sorry. First mortgages.
John C. Gerspach
Yes, yes. Mortgages is a highly complex area. And you're right, you need to take a look at delinquencies both on an MSA basis as well as individual products. It's also very difficult to actually determine what drives behavior. You've referenced unemployment. That clearly has something, but it's not the sole driver either. Other people try to point towards properties that are underwater, yet we have first mortgages with the properties that are underwater, and both a first and a second are current. So there's no "this is it" where you can look at one particular driver and say, "Aha! This is what is driving that performance." It's really a combination of all of those factors. Having said that, obviously, we've been pretty active in managing down our mortgage risk over the last 1.5 years. You take a look at that Holdings book, it was down something like 16% this year, year-over-year. I believe that the Holdings mortgages were down 18% or 20% the year before that. So we've had 2 solid years of driving down the exposure. That's both due to payoffs as well as sales that we've been doing. So we continue to think that this is an area where you need to actively manage the risk. But it's hard to point to any one particular factor that's going to drive either delinquencies or drive NCLs. The one thing I will say is that until the foreclosure pipeline is addressed and we can actually just -- everybody can just sort of deal with the foreclosed property, that is going to remain as an overhang on the housing market, certainly in the U.S.
The next question comes from the line of Mark Kehoe of Goldman Sachs.
Mark Kehoe
I just wonder whether you could comment on why S&P believes you will not be able to retire your TruPs in 2012 as per its recent Q4 earnings release? Is that a view you agree with?
Eric W. Aboaf
Mark, it's Eric Aboaf. I don't really know what particular statement you're referring to. And so in the way you frame it, I'm not sure why they would have a particularly strong view that we could or could not retire any TruPs. I think as you know, there's a series of TruPs out there that have call provisions where we have the right to call by virtue of the debenture and terms. There are also some with regulatory call provisions which may be callable, depending on the terms of the NPR and further rulemaking by the U.S. regulators. So I think that would kind of summarize our current view.
Mark Kehoe
So effectively, you really are waiting then for the results of the Fed stress test before you do anything? And they may -- you may have included within the Fed stress test proposal according to some of these TruPs?
John C. Gerspach
Yes. This is John. Look, I think as Eric pointed out -- and all you've got to do is take a look at our TruPs structure to actually have a pretty clear view of what's going on. Our most expensive TruPs, the 8.5s and the 8.30s, are callable with a regulatory event. We don't have a regulatory event at this point in time. And so you'd compound that with the submissions of the CCAR, and we will await to see what the Fed says as far as our capital submission. And we're also quite interested in taking a look at what the timing of the NPR might be on Basel III. And those are 2 primary factors that would then guide whatever -- guide our actions as far as timing of calls of various TruPs structures.
Mark Kehoe
And the last question I had was in can you break out the risk-weighted assets that are behind Citi Holdings? Because I'd like to see whether there's any kind of heavy risk-weighted asset components to that overall asset mix?
John C. Gerspach
Well, what we've said is that Holdings now represents 25% of the risk-weighted assets of Citi. We've never broken down our risk-weighted assets in detail by individual businesses, although we have told you that at the conclusion, once we've transferred Retail Partner Cards, Holdings would represent about 21% of the risk-weighted assets of Citi.
The next question comes from the line of David Knutson of Legal & General.
David Knutson
A quick question on general asset quality. There's been, I think, about 7 quarters of improvements in charge-offs, and I'm sensing kind of a more normal return to asset quality with a slight increase or lower reserve release, the slight increase in asset quality problems and reduction reserve release. Is that consistent, particularly given it looks like the Citi Holdings will be -- once you move the Cards out of there, it sounds like at least from the call earlier, that that entity will probably be not quite as good about reserving -- releasing reserves?
John C. Gerspach
It's John again. It's kind of an open-ended question. But let me start with a response and then see if you want to do a follow-up. In general, we -- I think we've cited, and you've noted improving asset trends, quality of asset in virtually all of our businesses. And with the underwriting standards that we have employed, we continue to think that the asset quality will either stabilize or continue to improve. We've given no further guidance as far as future reserve releases. You can certainly take a look at -- make, reach your own conclusions on that. When we take a look at Citi Holdings going forward, the largest asset class in Citi Holdings, especially once we've moved out Retail Partner Cards, will be the U.S. residential mortgages. And that's the largest single asset class. It's also one that we've told everyone that we've got about $10 billion of loan loss reserves allocated to. And that gives us 31 months or so of concurrent NCL coverage on that asset class. And so that's kind of the summary of where we are with that.
David Knutson
Maybe a similar question from a different perspective. It looked like LatAm did well, whereas some other EM markets were not as good. In total, is EM experiencing more of a typical cycle in terms of asset growth and asset quality? And have we reached kind of a -- have we played out a lot of the growth opportunities in EM? Or what's your -- what's the view on that?
John C. Gerspach
Well, I'd say that certainly, from an asset quality point of view, our asset quality continues to improve in both regions. And I think you see that both in delinquencies as well as net credit losses. From an absolute growth perspective, there was a certain slowdown in Asia this quarter. When you look at our Asia results, one of the -- a couple of things that you need to remember is that we did have a write-down of our -- of a deferred tax asset in Japan this year -- this quarter. That was about $300 million, and roughly $130 million of that -- $125 million of that ended up in Citicorp Asia. So that certainly impacted the results. And also, we mentioned slowdowns in the capital markets. That also impacts Asia. Both our Securities and Banking business in Asia obviously is impacted by capital markets. But also, both our Private Bank as well as our consumer business in Asia also have impacts from that capital market slowdown as far as consumers purchasing, customers buying investment products. So it was a slow quarter in Asia, but it isn't one that we see necessarily indicating that we're at some sort of inflection point, especially when you consider the impact of that DTA write-down on the results.
David Knutson
One last question. This is in regards to CCAR. It looks like the Fed will disclose the results. Is -- just maybe it's -- how it's going to come out is -- do you expect the regulators to provide the results to you and other firms and then the -- each issuer or each entity will disclose it to the public? Or will -- or your expectation for the Fed to publish it independent of the banks that underwent the CCAR process?
John C. Gerspach
I would think that what the Fed will do is very similar to what they did with the 2009 stress test, where the Fed will actually disclose in a standard format their results for each institution. Because it is their stress test.
Your next question comes from the line of David Jiang of Prudential.
David Jiang
I had a question about the S&B lending hedges. I just want to make sure, is that the first time you've kind of broken that out in the earnings call? And I was wondering if you can go back and kind of backfill some of the quarters that we don't have -- that data lines' more of a reporting question because -- I know you break out the CVA/DVA pretty consistently for all of Citigroup, but the hedges don't seem to be consistent.
John C. Gerspach
It's an item that we have referenced on earning calls in the past, most notably as a variance explanation or as a driver behind changes in our lending revenues for each of the periods. But clearly, when you got into the third quarter and the fourth quarter, it became just a much larger item and therefore, we did break it out separately. I don't have the individual quarters going back, but we'll get that published. And if you want to do a follow-up call to Ilene, she can help you with that. All right?
David Jiang
Great. That's very helpful. And in terms of the litigation expense this past quarter, was that still mostly for mortgage-related litigation? And I know you mentioned interchange was part of it. Is this still mostly mortgage-related?
John C. Gerspach
We didn't really talk too much about what was the single driving factor in the quarter behind the litigation. We did mention obviously the interchange, as you note. But I don't want to put a "it was mostly this" or "it was less that" on it. All right? And perhaps we'll have more disclosure in the Q.
David Jiang
Okay, great. And then can you update us on the latest guidance on where kind of Basel III capital levels will be in terms of either the actual ratio or the risk-weighted component?
John C. Gerspach
Yes. What we've said is, and as we've been saying, is that our expectation is that we will end 2012 with a Basel III Tier 1 common ratio in excess of 8%. And that would be after a return of capital to our shareholders. But we haven't given any statement as to exactly where we are just now, and I think we'll have probably more to say on Basel III as we get further into the year.
The next question comes from the line of Robert Smalley of UBS.
Robert Smalley
A couple of quick questions. First, you've given detail on maturity and issuance of long-term debt. So far this year, you accessed the market with $2.5 billion of a 5-year and $1 billion of a 30-year. Could you talk to us about how you look at this debt issuance and some of the metrics you use? Are you looking at weighted average maturity? How do you look at that versus the interest rate background versus the need to match liabilities with assets?
Eric W. Aboaf
Robert, it's Eric. Let me give you a little bit of background, and if there more specifics, feel free to follow up. If you think about our overall issuing need for long-term debt, they're primarily geared towards the -- our market-making broker-dealer business. And so what we try to do is really think about a maturity profile that gives us a good deal of reliability given the ebbs and flows of issuing opportunities. Right? And what that means is that we want to have a nice weighted average maturity. I think, over the years, we've had in the range of 5 years, 6 years, 7 years, kind of in that range. And we obviously don't want to come down too short because at one extreme, if you have 1-year debt, it's going to roll off in 1 year, and you've got a big slug of refinancings that you need to do. On the other hand, we want to balance the pricing opportunities as you kind of mentioned, right? Sometimes, there are pricing opportunities [indiscernible] sometimes, there are pricing opportunities embedded in the curve, in particular, tenor points. Sometimes, there are opportunities at different currencies, and we'll take advantage of those. But those are really the 2, I think, primary features, which is a nice weighted average maturity, including making sure that we don't have lumpy maturities coming through in out years and out quarters. And then on the other hand, doing that in a way that optimizes the economics and keeps our cost of funds as low as possible.
Robert Smalley
So are you at about 5 years now and you would look to move it to 7 years given the overall level of interest rates?
Eric W. Aboaf
No, I don't think the maturities isn't really going to change based on the interest rate environment. The maturities really right now are a choice of staying within that 5-, 6-, 7-year range. And I think right now, we're pretty much in the middle of that range. And the choice now is what are the credit spreads on the opportunities that we have relative to the absolute levels of interest rates? But I kind of have to balance both of those to really optimize the economics for the firm on a multiyear basis.
Robert Smalley
Okay. So you're really looking at points on your own credit curve and flatness or steepness of that curve?
Eric W. Aboaf
Yes, exactly. Points on the credit curve, flatness and steepness, and as well as our view as to what that credit curve will look like, right? The forward credit curve effect in the coming years so that we balance how much of those credit spreads we want to lock in versus either see some benefits in the coming years. Or if markets become more uncertain, right, that could widen, and we might want to lock some of that in now.
Robert Smalley
Okay, great. A couple of other quick questions. In terms of LTRO, is that something that you participated in, and can you participate in, either you or any of the European subsidiaries?
Eric W. Aboaf
On LTRO, I think we and other banks don't disclose that particular borrowing either in the European system or in the U.S. system, and I think there's quite a bit of rules around that. As you know, we are flushed with liquidity. We have ample liquidity across our bank, our non-bank and across our jurisdictions and geographies. So there's no particular reason why we would be borrowing. That said, I think you raised a very important question which is can we? And the answer is absolutely. Right? We have contingency funding plans in place in the U.S., in Europe, under all the jurisdictions actually that we operate in. And so that we have the maximum flexibility, what we will do in every one of those jurisdictions is make sure that every dollar of our eligible assets that are pledgeable or that we can borrow against are signed up appropriately under the local rules, including the local ECB facilities.
Robert Smalley
Last question. I, like many others, read Vikram's editorial about indexing or calibrating the way that banks look at risk-weighted assets and charges for risk weighting. Can we expect to see that type of disclosure from you guys? And before you say that you'd want to be a group of banks to do it, I mean, if it's a good idea and I think it is, and it's your idea, why not be the first to do it?
John C. Gerspach
That's a very, very interesting question. I think that we first would have to agree on a basket of securities or a basket of assets that would be of relevance to everyone. And at least for right now, we're continuing to engage in a discussion as far as getting more people to move towards that type of model. But I don't envision us being the pioneer in that, at least in the upcoming 10-K. But not to say that it isn't something we would consider in the future.
Your next question comes from the line of Tom Chistolini of Fidelity.
Tom Chistolini
On the Fed's enhanced prudential standards that came out the end of December, it seemed like the surprise there was the 10% counterparty limit that you and the other -- essentially the big 6 U.S. banks have to have for each other. I guess my question is, is that something -- that 10% limit, is that -- are you already there? Or is that something that's going to require considerable effort to get to that limit?
Eric W. Aboaf
Tom, it's Eric. That was an interesting part of the material that came out. And if you think about it, it's really classic banking, right? Not having large single name or single counterparty concentrations. And you can imagine, we actually run our business that way. That's the way to run it from a credit standpoint, a counterparty standpoint, a trading standpoint. And so we have a long history of being quite careful in that regard. To the extent that -- I mean, you asked a very concrete question. Is it binding? At this point, we've reviewed it, and we don't see any particular dramatic impacts on our businesses or our activities. And obviously, if there were to be any, we'd clearly signal that in some of our 10-K and 10-Q-type disclosures. But no particular impact at this point that is significant to mention.
Tom Chistolini
Okay. And then on the 25% counterparty limit, I mean, that seems to apply to the U.S. government too, right? I mean, is that something that could be a binding issue with all of the various touch points you would have there? And it seems like it's sovereign too, right? That 25% would apply to any sovereign exposures?
Eric W. Aboaf
Yes. Tom, it's Eric. I think it did cover sovereigns. And so then you have to do the same calculation that you're doing, right, across the sovereign holdings we have around the world. I do think that there was an exemption for the U.S. sovereign by virtue of coming from the U.S. regulators. But maybe we can both check and follow-up on that point.
Your next question comes from the line of John Carolyn [ph] of Hartford Investment.
Unknown Analyst
I wanted to talk a little bit about Europe. You folks continue to be cautious in your commentaries around it. And I guess my first question is when you look at your exposure that you provide to us in the slide deck, do you -- are you regularly comparing the degree of exposure to your disclosure that you're providing relative to your peer group? Because there are some others who are providing some more detail.
John C. Gerspach
Yes. And I think it's been quite public that the SEC has actually advised all of the institutions as to -- at least it provided some additional guidelines as to what they think would be the more appropriate disclosure at least that they would like to see. And so you can assume that we will be modifying our disclosure in the 10-K in accordance with the guidelines recently published by the SEC.
Unknown Analyst
Okay, that was part of it. And then the second piece of it is when you actually think about your potential risk of loss in various European scenarios, are you really using this number where we see in that current funded exposure of $7.8 billion less some collateral, as well as some unfunded exposure and that's your base case? And then maybe you're just simply -- look at the credit protection and say, "Well, maybe it's worthwhile and maybe it's not," and you can just add it back, and those are the parameters that you think about as your worst loss case? Or is your analysis completely outside the scope of these numbers? I'm trying to get at how useful these numbers really are for the investment community to understand the direct and indirect exposures.
John C. Gerspach
Yes. Well, these -- as we have indicated, maybe not on this slide but in the 10-Qs that we've published, these are the numbers from our risk systems. These very much are the numbers that we manage by. Now we will come up with different stress scenarios on these numbers as I assume you would, but these are the numbers by which we gauge our risk and we manage our risk profile.
Your next question comes from the line of Peter Ganucheau of Carlson Capital.
Peter Frank Ganucheau - Carlson Capital, L.P.
I wanted to focus on the revenue picture. I appreciate the dissection of the weakness in equities year-over-year, about half of it prop wind down or about half of it derivatives. Now first of all, my understanding is that your -- in your comments is that the prop wind down is done, and we won't have a drag from that anymore. Is that correct?
John C. Gerspach
That is correct. We are done with the wind down.
Peter Frank Ganucheau - Carlson Capital, L.P.
And then you said the equity derivatives would be better, okay? So I need some help with the qualitative better because is there a hangover trade that's winding down that's going to hit us and continue to hurt a little bit in the first half? Or should we expect more near-term improvement on a sequential basis in equity derivatives?
John C. Gerspach
And Peter, just to -- I don't think I said that I was telling you that it was going to be better. I believe I said that, that is an area where we would expect improved performance. But that certainly is our expectation. But I did not categorically state that it would be better. But let's just hope that it is. I don't believe that there's any big overhang dragging trade that's going to continue to drag us down, but -- nor would I say that therefore there's this light switch that's suddenly going to come on and says, "Oh yes, now that we've stopped doing that beginning January 1, everything is better." Markets have an impact on those results, as well as the performance -- our performance in running that business. And we can certainly improve our performance during the first and the second and the third and fourth quarters, but there's still -- depending on what happens with the markets, that could be -- continue to be an impact on the revenue performance there.
Peter Frank Ganucheau - Carlson Capital, L.P.
Okay. And as far as steps to improve them, I'm assuming that's people, that's talent, that's...
John C. Gerspach
That's the whole package. Absolutely.
And your final question comes from the line of Chris Kawasaki of BlackRock.
Christopher Kawasaki
Had a quick call. On your earnings call, you said that you derisked your Securities and Banking business in December. Could you walk me through just the rationale for the derisking more fully? Was there something specific to Europe that you saw?
Eric W. Aboaf
It's Eric. I think some of my commentaries on Page 11 might be good to refer to there. I think, broadly, we have been derisking our exposure to Europe, right? And in particular, I quoted some of the reductions in our net funded credit exposure from the second quarter through to the end of the past year. It's been down 45%. And you can expect that, that would have happened over the course of several months and during both quarters. So I think that would have been the principal, a very European-specific kind of derisking. I think beyond that, what we saw is lighter flows and lighter interest from our investor clients to actually trade, right? And so there was a lot of folks just sitting on the sidelines, a lot of folks not taking particularly strong views on rates. And I think I did mention that in our G10 Rates trading, our developed market rates trading. Europe was one of those areas where we saw folks sit on the sidelines. And then I think we talked a little bit about some of the other debt. So it was really beyond the Europe and GIIPS specific derisking that I talked about. Our activity was really a reflection of the investor interest and thus, a more muted risk posture. And as a result -- and also more muted set of volumes that came through.
John C. Gerspach
And just to follow on what Eric said, when we made the commentary as far as the derisking, it was more directed towards the second half of the year and the fourth quarter rather than just a December event in particular. And in addition to the areas that Eric mentioned, it was certainly partially Europe, but also just in the impact that Europe was having in the overall market, particularly in credit products and securitized products. And so just -- one thing that we did not want to do was try to compensate for weakness in the markets with additional risk-taking. We were very careful not to try to chase our tail on something like that. So just as our customers did, we took some risk off the table in the second half of the year. And in Eric's commentary, he mentioned where you will see some of those impacts, both on the balance sheet and the VAR calculation. But something that you won't see is in our internal stress test where those stress tests came down dramatically from where they would've been at the end of June.
Christopher Kawasaki
Got it, that's very helpful. In terms of thinking about the forward opportunity set within Europe, specifically some peers have been a little bit more favorable, how are you thinking about rightsizing the balance sheet, your funding needs, capital and costs to potentially take advantage of these opportunities, specifically in the trading businesses?
Eric W. Aboaf
The way I'd frame that is that we've got the funding capacity and the capital capacity to trade actively and to support our clients out in the markets, right? And as we've seen a bit more customer activity in the opening couple of weeks of January, right, we've been there with our clients, and we've been there desk by desk, taking advantage of opportunities. And as a way to see that in our materials, on the page where we actually showed the liquidity pool that we run with, we ran with a very consistent liquidity pool over the last couple of quarters, and we ran with those both in smoother and more favorable markets in the first half of the year, as well as in the choppier markets that we saw in 3Q and 4Q. And a good way to think about that is that, that pool of liquidity and funding that has provided, that has created that liquidity is there everyday for us to use in our markets business. And the real question is do the opportunities present themselves? If they do, we've got the funding. And if the opportunities don't, as John said, we'd rather sit back and watch for a little while until things come back.
That concludes the question-and-answer session. Ms. Fiszel Bieler, do you have any closing remarks?
Ilene Fiszel Bieler
Thank you, everyone, for joining our call today. If you have any follow-up questions, please don't hesitate to reach out to us in Fixed Income Investor Relations. We'll talk to you again soon.
This concludes today's conference call. You may now disconnect.
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text:
With a scant eight months to go until the presidential election I thought I'd throw a few of my thoughts your way in case you haven't been paying attention yet. I should make it clear at the onset that, yes Virginia, there is a Republican Party. It's not your father's Republican Party, but it does exist none the less, bloodied though it may be.
The four men still in the race are Mitt Romney, Rick Santorum, Newt Gingrich, and Ron Paul. Since Romney has been the front runner most of the time and the other three guys don't stand a chance of winning in the general election against Barack Obama, let's focus on Mitt.
Mitt Romney's positive attributes are: 1) smart businessman 2) good looking 3) presidential comportment 4) even tempered 5) nice guy. His negative attributes are: 1) doesn't seem to have a strong message 2) doesn't seem to have a strong message 3) doesn't seem to have a strong message.
If I were hired as adviser to Romney (stop laughing) my advice would be, first lose the blue jeans. Yes, Mitt, I know you think that campaigning in Levi's makes you seem like a "regular Joe six-pack," but it only comes off as pandering and phony. Be yourself, put on the chinos, the button-down shirt, the blue blazer, and look like who you are: a well-to-do, sophisticated, mature man. Presidents shouldn't be walking around in jeans unless they're chopping wood on their ranch.
But the biggest drawback with Romney is the perception of a lack of passion, what some call "a fire in the belly." The pilot light is on; it needs to be cranked up. It's what George H. W. Bush used to call "the vision thing." Romney hasn't projected that "big idea" of where he wants to take our country the way Reagan certainly did, and yes, even Obama. Whether you agreed with it or not, Obama had (and still has) his own strong idea of what he wants America to be in the future. Obama wants to increase government control over the individual, redistribute wealth, and increase government entitlements. Romney doesn't. He needs to articulate his "vision thing" to the voters.
Another problem with Romney is he just may be too nice to go up against a crafty Chicago street politician like Obama. Does he have the guts to fearlessly take on Obama in a debate? I don't know. Will the fact that Obama is America's first black president intimidate Romney? Will he be sooo careful not to offend Obama that he pulls his punches? I'm not sure he has it in him to get tough enough when debating Obama.
Romney likes to be liked, which is a good thing up to a point. But will he be afraid to come off politically incorrect, or worse, racist? Watch for the Obama campaign to make race a huge factor in this election. Their primary message will be class warfare, the 99 versus the 1%, but race will be stealthily hinted at. Obama has no real achievements to run on, so he must return to his winning message of "the little guy against the Man" theme.
It was very clear to me in 2008 that McCain bent over backwards so as not to come off too strongly when debating Obama. He probably didn't want to seem like the proverbial imperialistic white guy beating up on the poor minority black guy. This kind of stupid, walking-on-eggshell thinking will keep Romney from winning the election if he falls into that trap.
It may not be easy, but it is possible to fight against Obama's policies and socialistic ideals without looking like you're out to defeat him because he's black. The other side will attempt to paint it that way — that's the danger. Romney must not overcompensate by doing a McCain, "My opponent is a great guy, we just have a different approach" thing. Romney will lose if that happens.
Still, if Romney could articulate a passionate vision, if he could stir up that "fire in the belly," he might have a shot. Gingrich, Paul, and Santorum possess this quality with Gingrich being best at projecting it to an audience. Romney needs to put down the talking points and start leading with his heart a little bit. Speaking with passion and conviction accompanied with some big ideas always resonates with voters whether they're Republican, Democrat, or independent.
He needs to convince people that he can not only get America working again, but bring back America's worldwide stature as a beacon of freedom and opportunity. That, once again, American will be that "shining city on a hill" that Reagan so eloquently spoke of and, like with Reagan, it will be "morning in America" again after the November elections. Romney needs to say that he will lead from the front, not the back, that he will adhere to the philosophy of "peace through strength," not appeasement.
And, as Reagan did in 1980, he must ask the voters "Are you better off today than you were four years ago?"

subset: commoncrawl


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Soccer Tickets Available
Aug. 20, 2009
LEXINGTON, Ky. -- With the start of the collegiate soccer season a few days away, tickets are available for the 2009 Kentucky men's and women's soccer season.
The women's soccer team, in head coach Jon Lipsitz's first year, opens its season Friday with Cincinnati at 7 p.m. ET at the UK Soccer Complex. Men's soccer, under the direction of 16th-year head coach Ian Collins, kicks off the year with an exhibition Monday against Dayton at 7 p.m. in Lexington.
Single game tickets are available through the UK ticket office, in addition to the UK True Blue Club - Olympic Sports Pass. The Olympic Sport Pass allow admission to all Olympic sporting events, all season long (2009-10). Individual passes are priced at $25 and family passes (two adults, up to three youth) at $40. The True Blue Club pass includes admission to baseball, softball, gymnastics, men's and women's soccer and volleyball.
Individual general admission soccer tickets are also for sale, including $5 for adults and $2 for seniors and youth. Group tickets (20+ people) are available by calling the ticket office in advance of the event.
Youth and high school teams can receive free admission by submitting team rosters, at least three days in advance, to UK Marketing.


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Ireland's only Instagram awards are back for a second year, with a gala event on Thursday the 17th November in Dublin's Mansion House.
The Huawei Snapys present the best of Ireland's Instagram talent, with the top photos in 20 categories to be revealed on the night at a star-studded ceremony presented by actress and comedian Deirdre O Kane. Prepared to dance your socks off with Springbreak and Dj set from the delectable Vogue Williams.
The Huawei Snapys are inspired by the Huawei P9 with its dual Leica lense which has revolutionised the quality of photos taken on a mobile phone.
We've got two tickets to give away for the awards, which kick off at 7pm on the 17th of November.
For your chance to win just check out the question below and fill in your answer and details.
For more on the Huawei Snapys, click here.
Competition is now closed


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SARASOTA COUNTY - From disabled vets to first time home buyers, five property tax discounts for certain groups of people are part of the eleven amendments set for the November ballot. Local officials say some are worthy while others will have huge financial consequences on local governments.
There is currently a property tax discount for combat-disabled veterans. "The catch is you must have entered into the service from the State of Florida." Venice resident and retired Army veteran Norm MacLellen was wounded twice in Vietnam. After living in Florida for decades he doesn't get the break. "I am hard pressed to think of one who was born in Florida or entered the service in Florida. I would think the group which is currently eligible for it is pretty small."
Amendment 2 would extend it to all of those disabled veterans who call the Sunshine State home. "It tells the veteran that the state cares and the State of Florida is doing what they can to reward the service of the veteran."
Sarasota County Commissioner Nora Patterson says it would cost the local government no more than $100,000 a year. "We are told by the people who crunch our numbers and they are pretty good that the total impact is there but it is not huge."
Amendment 9 would provide some tax exemptions to the surviving spouse of a veteran who died from service related issues. Cost to the county: less than $10,000.
So the impact of supporting veterans on this ballot appears to be fairly minimal. However, local leaders warn supporting some of the other questions will have big impacts.
Amendment 4 is the big one; it would give some tax exemptions to first-time home buyers. "The question being put to vote is anybody who has not had a homestead property in Florida in the past three years. It's not just people coming new to the state."
Patterson says it could cost the county $5 million a year. It would be in addition to the current $50,000 homestead exemption many qualify for. She says it would likely mean a reduction in service or more taxes for the rest to make up the difference. "It could mean somebody pays no taxes at all. Somebody has to pay the bill."
Patterson says in nearly all the amendments, the language is very confusing. "People need to study them and they need to know what the impacts are. The actual ballot language will not tell them that."
Amendment 10 would exempt some tangible personal property items like furniture and jewelry.
Amendment 11 would provide exemptions for low income seniors who have lived in their home for more than 25 years.


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Hampton Inn & Suites Birmingham-Downtown-Tutwiler3
2021 Park Place, Birmingham, 35203
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About the hotel
experience luxury in the heart of Dixie. . .
welcome to the Hampton Inn & Suites Birmingham-Downtown/Tutwiler, ALBirmingham has been called "the last major Southern city," and when you stay at our downtown Birmingham hotel, you'll discover why. While it's true that the largest city in Alabama continually grows more sophisticated, we still cling to many ways of the small town South. So don't be surprised at the symphony when you hear patrons discussing rival college football games. And though you'll find arugula salad in our upscale establishments, there'll be plenty of chances to savor down-home chicken fried steak near our hotel in Birmingham. If you're looking for a luxurious Birmingham hotel, look no further than the Hampton Inn & Suites® Birmingham-Downtown/Tutwiler, AL hotel. Nestled in the heart of downtown, this historic Birmingham hotel is just steps away from all our vibrant city has to offer, such as: Birmingham Civil Rights Institute, Alabama Theatre, Birmingham Museum of Art and Alabama Jazz Hall of Fame. services & amenitiesEven if you're in Birmingham to enjoy the great outdoors, we want you to enjoy our great indoors as well. That's why we offer a full range of services and amenities at our hotel to make your stay with us exceptional. Are you planning a meeting? Wedding? Family reunion? Little League game? Let us help you with our easy booking and rooming list management tools. * Meetings & Events * Local restaurant guide
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|From: jos koot (jos.koot at telefonica.net)
Date: Thu Jan 25 06:30:42 EST 2007
Hi, You did a good job. I just downloaded and installed plt-full (prerelease) and whatever I try, I no longer can reproduce the problem. End of thread. Thanks again. Jos Koot (((((lambda(x)((((((((x x)x)x)x)x)x)x)x)) (lambda(x)(lambda(y)(x(x y))))) (lambda(x)(x)x)) (lambda()(printf "Greetings, Jos~n")))) ----- Original Message ----- From: "Matthew Flatt" <mflatt at cs.utah.edu> To: "jos koot" <jos.koot at telefonica.net> Cc: "PLT-list" <plt-scheme at list.cs.brown.edu> Sent: Sunday, January 21, 2007 4:30 AM Subject: Re: [plt-scheme] windows aborts Drscheme > At Sat, 20 Jan 2007 23:48:21 +0100, "jos koot" wrote: >> I'll send you my program in a seperate mail, for it wont be accepted by >> the >> PLT discussion list. It's too big. >> My program (in fact a sequence of about 16 test programs) does not crash >> when I open the main scm file in a clean system and press the run button >> without editing anything and without other applications running. 50 times >> out of 100 the program, which takes about 200 seconds, crashes when I >> meanwhile open internet explorer and outlook express just to abide my >> time >> waiting for the program to finish. Today I runned the program about 20 >> times >> and I estimate it crashed (or windows made it crash) more than 10 times. > > Thanks! > > By following your directions, I was able to find and fix a > Windows-specific, 3m-specific bug. The problem was that code running in > a Windows-level thread (other than the main thread) was trying to > cooperate with the 3m GC, even though it doesn't use GCable memory. The > fix was simple: disable 3m instrumentation for the relevant code. > > This bug didn't have anything to do with your program, but your program > does stress the system in the right way to expose the bug. The bug does > have to do with running other programs, because the relevant thread is > attached to a hidden window that listens for events. So, I think the > next build is likely to work better for you. > > Matthew > >
|Posted on the users mailing list.


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miDori'smommy's Mom Answers Activity
I am 17 weeks tomorrow and I haven't really felt the baby move. Is this normal? Watch this
Most recent answer (03/01/2011):
I didn't feel my baby 'flutter' until like the 20th week or so but it wasn't until my 22nd or 23rd week when I finally felt daily movemen...posted by 2AtomsInAMolecule


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Her ambition is to get pregnant and have many children, and she is played by more than half-a-dozen different actors in the course of a film that tackles paedophilia, abortion, religious fundamentalism, murder, hypocrisy and moral judgements.
Did you know you could pay less than $1 a day for a subscription to the Herald? Subscribe today.


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There is a point to Acupuncture Week
Media Release
27 February 2014
There is a point to Acupuncture Week
"People with some forms of arthritis may like to consider using acupuncture to complement their medical treatment," Arthritis New Zealand Chief Executive said today in the lead up to Acupuncture Awareness Week.
Acupuncture Awareness Week (3 - 10 March) aims to better inform people about the ancient practice of traditional acupuncture. Acupuncture originated from an ancient system of treatment, Traditional Chinese Medicine, and is currently one of the most widely used forms of complementary medicine.
Complementary medicine includes treatments and products that are not traditionally used in conventional medicine. But the gap between complementary and conventional medicines is somewhat blurred these days. Many complementary treatments are based on anatomy and physiology, while modern medicine is utilising a more holistic approach, and has adopted some therapies that originated in complementary medicine.
There is now clear scientific evidence that acupuncture can be beneficial if you have osteoarthritis (OA) in your knees, fibromyalgia, or low back pain. Although the effects may not be long term, and further treatments may be required.
"Acupuncture may well work for you. However, before embarking on any complementary course of treatment, including acupuncture, it is vital that you first consult with your GP or medical specialist," concluded Ms Kirby
Arthritis New Zealand is the national organisation focussed on raising awareness of the more than 140 different forms of arthritis, advocating for those with the condition, and providing advice and support.


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diesel fuel cleaner
A diesel fuel saving you money at the pump and mechanic.
Diesel Fuel Saving: The Fuel and Tank Solutions fuel additive lab test better than any other fuel enhancer on the market.
Fuel Additive: The Fuel and Tank Solutions fuel additive lab test better than any other fuel enhancer on the market.
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Will reduce levels of toxic emissions Fuel and Tank Solutions is a combination of lab created resins in addition to organically produced formulations Contains no alcohol, aromatics, or naphtha 100% able to degrade naturally Environmentally friendly
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Even though average tractor trailer fuel mileage ranges from 7 to 8 miles per gallon (MPG) and may not seem impressive, it's actually a immense improvement over older styles that seldom saw better than 2 to 3 MPG. Per 100,000 miles a rig at present can go through at least 12,000 gallons of fuel. At $4 for every gallon it without a doubt will cost merely one shipper $48,000 with regard to fuel per each 100,000 miles. With a 20% boost in fuel mileage your very own cash saved would be able to exceed $9,600. To treat 12,000 gallons you would need to invest about $900 in our Fuel and Tank Solutions Fuel additive. We are able to safely say we could definitely save 1000s every year, for each tractor -railer. In the event you have a fleet of trucks, you now see the bottom line savings.
Today, many people are trying to make their daily life more green. Do you know what green energy is? Simply put, it is energy that is considered renewable, as well as energy efficient technology, both which have a positive environmental impact. Green energy is available for every home, and with the tips in this article, you can find out how to incorporate it into your home.
One small way to save on energy costs is to use your home's power supply to run your laptop rather than using the battery. Even if your battery is full, it pulls energy in from your plug; if you take it out while leaving the computer plugged in, you can save battery life, as well as energy.
Turn off electrical items whenever you aren't using them. Whenever you leave a room, get into the habit of turning off lights, televisions, and computers. You can save a lot of money on energy by investing into a new power strip for all of your electronics and turning it off when those electronics aren't in use.
Search for available rebates when you use renewable energy. Certain utility companies will provide rebates for these upgrades. In other cases, there may be tax deductions or credits available from either the state or federal government. Rebates and tax credits can make it a lot cheaper to upgrade your home, to make it more energy efficient.
Consider installing solar powered lamps for outdoor lighting. Solar lamps are relatively inexpensive and can save you a great deal on wiring and electricity expenses. This does more than just save energy. It also means you do not to have string up those outdoor lights.
A solar energy array can be the cheapest way to getting your hot water. Upgrade your hot water system to one that's solar-powered. Research the benefits of an indirect versus direct circulation system. The indirect system is best if you don't want to worry about your pipes freezing in the winter.
You can use biofuel to heat your own home. This type of fuel is made of oils, wood and vegetable or animal fats. If you have a propane furnace, a professional can usually make changes that allow you to use this blend of fuels. This would be about 20-99 percent biodiesel. Because this is a significant alteration, talk with a professional about the substitution before attempting to make any changes on your own.
As was stated in the above article, green energy is currently pretty popular. Green energy includes renewable energy and energy efficient technology that are good for the environment. It's simple to get started, so use what you've read here and start the change!
Which Diesel
Author and creator of this Fuel Direct article - Samuel Johnston:


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No! No! No!
Today Kobayashi shows he can drive faster than Perez. Both drivers have equal two stops strategy and they have to pit stop early. Kobayashi's fastest lap time 1.43,521 is 4th fastest driver on track today and faster than Alonso, Massa, Nico and Michael.
Mark fastest lap time was 1.42.612, Jenson 1.43,154, Lewis 1.43,461 and Kobayashi 1.43,521.
He has ability to win the WDC if he has fast car like Red Bull car.
You can see today smoke come from his ass.


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COLUMBUS, Ohio (AP) — States are having an increasingly difficult time getting the injectable drugs to carry out death sentences.
And they're also paying as much as 10 times more for the chemicals as in years past.
Ohio only has enough pentobarbital for seven executions scheduled through February, meaning a likely scramble to find enough for the four scheduled beyond that.
The drug's Danish manufacturer, Lundbeck Inc., has announced it's putting the drug off limits for capital punishment.
As states search for an alternative, they may hope to find a less expensive option.
Texas spent about $1,300 on pentobarbital for just one execution, or what it spent for 17 executions in 2010.


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The Shakespeare Conference: SHK 10.0987 Friday, 11 June 1999.
Date: Friday 11 Jun 1999 09:23:41 +1200
Subject: Future of the Classics
The future of the classics is quite debatable and I would like to read
people's opinions on it as I'm writing a thesis on the subject. Could
you tell me what you think - will there be a future and why, won't there
be a future and why? My project is opinion based so the more in depth
the responses are the better.


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The Lumpa alphabet was invented by Noah Elkins as an alternative way of writing English. It is based on the 'lumps' of the letters m and n.
I think therefore I am.
If you have any questions about Lumpa, you can contact Noah at: noah[dot]elkins[at]gmail[dot]com
Other constructed scripts for English


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Jerusalem (CNSNews.com) - A Jordanian military court sentenced six men to death on Monday for planning to carry out terror attacks against American, Christian, Jewish and Israeli tourists during millennium celebrations in Jordan.
The six were among 28 charged terrorists - 12 of them in absentia - with possession of weapons and explosives, conspiracy to carry out bombings over the New Year and association with the Saudi militant Osama bin Laden.
bin Laden, believed to be hiding out in Afghanistan, is wanted in the US for allegedly masterminding the 1998 bombings of US embassies in Tanzania and Kenya in which 259 people were killed.
Four of the six terrorists sentenced to hang were among those tried in absentia. The death sentences of the other two were commuted to life in prison.
"You are the criminals, Allahu Akbar [Allah is greater]," Saed Hijazi reportedly shouted after the court commuted his death sentence to life imprisonment.
Six other accused were acquitted and 12 more were given prison terms ranging from 7\'bd to 10 years.
Jordan usually commutes all death sentences, and all the verdicts will be appealed.
The accused had reportedly planned to bomb Mt Nebo, the traditional location where Moses first saw the Promised Land, as well as a Christian village along the Jordan River believed by some to be the place where Jesus was baptized.
"The court has no doubt that those sentenced to death had a determined will to carry out terrorist attacks against American and Jewish interests in Jordan," said Colonel Tayel Raqad, the tribunal's presiding judge.
Fourteen of the 16 who appeared before the court are Jordanians of Palestinian origin who reject any dialogue with Israel for a solution to the Palestinian-Israeli conflict. The remaining two are an Iraqi and an Algerian.
The other 12 are believed to be hiding out in Britain, Pakistan, Afghanistan, Lebanon and Syria.
All the defendants present pleaded innocent to the charges and denied any connection with bin Laden.
However, found among the belongings of one of the accused was a CD-Rom containing information on explosives and how to manufacture them as well as data on toxic and heavy weaponry, the court heard earlier.
The CIA and FBI obtained copies of the disc, which was found to contain a six-volume manual used by bin Laden to train militants at terrorist camps in Afghanistan, according to a report on USA Today on Sunday.
The "Encyclopedia," a 1,000-page manual written in Arabic, contains "information on how to recruit followers, conduct terrorist operations and assemble bombs similar to those that destroyed US embassies in East Africa in 1998," the report quoted senior US intelligence officials as saying.
Neither the CIA or FBI would comment on the report, but other officials were quoted as saying that the manual provided a "gold mine" of information on bin Laden's tactics that could be used to slow or disrupt terrorist activities abroad.