CITIBANK, N.A.
NEW ZEALAND BRANCH
AND ASSOCIATED BANKING GROUP
Citibank Centre
Auckland 1010
23 Customs Street East
DISCLOSURE STATEMENT
31 DECEMBER 2016
Registered office
Page No.
General Disclosures 3
- including conditions of registration, credit ratings and information and financial data of the overseas banking group
Consolidated statement of comprehensive income 9
Consolidated statement of changes in equity 10
Consolidated statement of financial position 11
Consolidated statement of cash flows 12
Notes to the disclosure statements
1 Statement of significant accounting policies 13
2 Financial risk management 17
3 Interest 20
4 Other income 20
5 Operating expenses 20
6 Taxation 21
7 Derivative financial instruments 21
8 Available for sale assets 21
9 Other assets 22
10 Past due assets 22
11 Property, plant and equipment 22
12 Provisions 22
13 Other liabilities 23
14 Cash balances 23
15 Statement of cash flows reconciliation to profit 23
16 Related party transactions 23
17 Share based payments/stock options 25
18 Fiduciary activities 25
19 Contingent liabilities and commitments 25
20 Capital and reserves 26
21 Credit risk rating 27
22 Interest rate risk repricing schedule 28
23 Liquidity risk - maturity profile 29
24 Foreign currency risk 31
25 Fair value 31
26 Concentrations of credit exposure 33
27 Concentrations of funding 33
28 Credit exposures to individual counterparties 34
29 Exposures to market risk 34
30 Capital adequacy 36
31 Imputation credit account 36
32 Total liabilities to third parties - branch 36
33 Subsequent events 36
Directors' statement 37
Independent auditor's report 38
TABLE OF CONTENTS
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
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CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
GENERAL DISCLOSURES
Name and Address for service of the Banking Group
Citibank, N.A.
Citibank Centre
23 Customs Street East
Auckland 1010
Name and Address for service of the Overseas Bank (Citibank, N.A.) outside New Zealand
Citibank, N.A. (CBNA)
701 East 60th Street North
Sioux Falls
South Dakota 57104
United States of America
Name and Address for service of the Ultimate Holding Company (Citigroup Inc.) of the Overseas Bank (Citibank, N.A.)
Citigroup Inc.
388 Greenwich Street
New York, NY 10013
United States of America
Registered Bank: Directorate and Auditors
Responsible Person of Citibank, N.A. in New Zealand
Address for Service
Citibank, N.A.
Citibank Centre
23 Customs Street East
Auckland 1010
Name Technical or Professional Qualifications
Derek Syme Lincoln University, B.Com. in Finance and Economics, 1987
Citi Country Officer University of Otago, Post Graduate Diploma in Finance, 1989
Citibank, N.A. New Zealand Branch
External Directorships: American Chamber of Commerce in New Zealand (President)
Responsible Person of Citibank, N.A. signing as agent for all Citibank, N.A. directors
Timothy Sedgwick Bachelor of Commerce majoring in Accounting, University of New South Wales, 1990
Chief Financial Officer Membership of the Institute of Chartered Accountants in Australia, 1994
Citi Australia / New Zealand
External Directorships: nil
Citibank, N.A. was originally organized on 16 June 1812, and formed a national banking association organized on 17 July 1865 under The National Bank Act of
1864 (United States of America).
Country of Residence
New Zealand
The financial statements are the aggregated financial statements for the "Banking Group" which consists of Citibank, N.A. New Zealand Branch (CBNA New
Zealand Branch) and the Associated Banking Group (Citicorp Services Limited and Citibank Nominees (New Zealand) Limited).
Australia
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Directors of Citibank, N.A.
Address for Service of the Directors
Citibank, N.A.
388 Greenwich Street
New York, NY 10013
United States of America
Name Technical or Professional Qualifications
Anthony M. Santomero Brown University, Ph.D. in Economics, 1971
Chairman, Citibank, N.A.
Former President, Federal Reserve Bank of Philadelphia.
External Directorships: Columbia Funds;
Penn Mutual Life Insurance Company;
RenaissanceRe Holdings, Ltd.
Ellen M. Costello St. Francis Xavier University, B.B.A., 1976
Former President, Chief Executive Officer, Dalhousie University, M.B.A., 1983
BMO Financial Corporation and Former U.S. Country Head,
BMO Financial Group.
External Directorships: DH Corporation.
Barbara J. Desoer Mount Holyoke College, B.A., 1974
Chief Executive Officer University of California, Berkeley - Haas School of Business, M.B.A., 1977
Citibank, N.A.
External Directorships: Davita Healthcare Partners Inc.;
UCLA Anderson School of Management Board of Visitors;
Haas School of Business Advisory Board.
Duncan P. Hennes University of Pennsylvania, B.S., 1978
Co-Founder/Partner, Atrevida Partners, LLC. Wharton School, M.B.A., 1979
External Directorships: Freeman & Co. LLC; Syncora Holdings, Ltd.
Eugene M. McQuade St. Bonaventure University, B.A., 1971
Retired, Chief Executive Officer, Citibank, N.A.
External Directorships: XL Group - Chairman;
Promontory Financial Group -Vice Chairman.
Joan E. Spero University of Wisconsin, B.A., 1966
Senior Research Scholar, Columbia University, M.B.A., 1968; Ph.D, 1973
Colombia University School of International and Public Affairs.
External Directorships: International Business Machines (IBM).
James S. Turley Rice University, B.A., 1977; Masters in Accounting, 1978
Former Chairman and CEO of Ernst & Young.
External Directorships: Emerson Electric Co;
Intrexon Corporation; Kohler Company (privately held);
Northrop Grumman Corporation.
USA
Country of Residence
USA
USA
The Citibank, N.A. board has established an Audit Committee for Citibank, N.A. comprising of three independent directors.
USA
USA
USA
USA
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Auditors of Citigroup Inc. and Citibank, N.A. New Zealand Branch and Associated Banking Group
Name and address for Service of any auditor whose report is referred to in the Disclosure Statement
Citigroup Inc. KPMG LLP
Independent Registered Public Accountant Firm
345 Park Avenue
New York, New York 10154
KPMG
Level 38, Tower Three
International Towers Sydney
300 Barangaroo Avenue
Sydney NSW 2000 Australia
Transactions between Directors, New Zealand Chief Executive Officer and Affiliates
Director Policy on Conflict of Interest
Guarantee Arrangements
CBNA New Zealand Branch does not have a guarantee under the New Zealand deposit guarantee scheme as at 27th March 2017.
Conditions of Registration
2. That the Banking Group's insurance business is not greater than 1% of its total consolidated assets.
For the purposes of this Condition of Registration, the Banking Group’s insurance business is the sum of the following amounts for entities in the banking group:
In determining the total amount of the Banking Group’s insurance business -
The registration of CBNA in New Zealand is subject to the following conditions:
Certain transactions involving loans, deposits and sales of commercial paper, certificates of deposit and other money market instruments and certain other banking
transactions occur between Citigroup Inc. and CBNA on the one hand and certain directors or executive officers of Citigroup Inc., CBNA and CBNA New Zealand
Branch, members of their immediate families or associates of the directors, the executive officers or their family members on the other. All such transactions were
made in the ordinary course of business on substantially the same terms, including interest rates and collateral, that prevailed at the time for comparable transactions
with other persons and did not involve more than the normal risk of collectability or present other unfavourable features.
Directors must avoid circumstances in which their personal, professional or business interests conflict, or appear to conflict, with the interests of CBNA or its
customers.
These Conditions of Registration apply on or after 1 October 2016.
(a) all amounts must relate to on balance sheet items only, and must comply with generally accepted accounting practice; and
(b) if the entity conducts insurance business and its business does not predominantly consist of insurance business and the entity is not a subsidiary of another entity
in the Banking Group whose business predominantly consists of insurance business, the amount of the insurance business to sum is the total liabilities relating to the
entity’s insurance business plus the equity retained by the entity to meet the solvency or financial soundness needs of its insurance business.
Citibank, N.A. New Zealand Branch and
Associated Banking Group
1. That the Banking Group does not conduct any non-financial activities that in aggregate are material relative to its total activities.
(b) if products or assets of which an insurance business is comprised also contain a non-insurance component, the whole of such products or assets must be
considered part of the insurance business.
Conditions of registration for CBNA in New Zealand.
For the purposes of this Condition of Registration, -
“insurance business” means the undertaking or assumption of liability as an insurer under a contract of insurance.
In this Condition of Registration, the meaning of 'material' is based on generally accepted accounting practice.
“insurer” and “contract of insurance” have the same meaning as provided in sections 6 and 7 of the Insurance (Prudential Supervision) Act 2010.
(a) if the business of an entity predominantly consists of insurance business and the entity is not a subsidiary of another entity in the Banking Group whose business
predominantly consists of insurance business, the amount of the insurance business to sum is the total consolidated assets of the group headed by the entity; and
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3. That the business of the registered bank in New Zealand does not constitute a predominant proportion of the total business of the registered bank.
4. That no appointment to the position of the New Zealand chief executive officer of the registered bank shall be made unless:
(i) the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and
(ii) the Reserve Bank has advised that it has no objections to that appointment.
5. That CBNA complies with the requirements imposed on it by the Office of the Comptroller of the Currency.
For the purposes of this Condition of Registration, the capital adequacy ratios -
(a) must be calculated as a percentage of the registered bank’s risk weighted assets; and
(b) are otherwise as administered by the Office of the Comptroller of the Currency.
In Conditions of Registration 9 to 11 -
11. That the business of the registered bank in New Zealand must not make a residential mortgage loan unless the terms and conditions of the loan contract or the
terms and conditions for an associated mortgage require that a borrower obtain the registered bank’s agreement before the borrower can grant to another person a
charge over the residential property used as security for the loan.
On and after 1 January 2016Capital Adequacy Ratio
Tier 1 Capital
Total Capital
10. That, for a loan-to-valuation measurement period, the total of the business of the registered bank in New Zealand’s qualifying new mortgage lending amount in
respect of non property-investment residential mortgage loans with a loan-to-valuation ratio of more than 80%, must not exceed 10% of the total of the qualifying
new mortgage lending amount in respect of non property-investment residential mortgage loans arising in the loan-to-valuation measurement period.
Common Equity Tier 1 Capital
6. That, with reference to the following table, each capital adequacy ratio of CBNA must be equal to or greater than the applicable minimum requirement.
7. That liabilities of the registered bank in New Zealand, net of amounts due to related parties (including amounts due to a subsidiary or affiliate of the registered
bank), do not exceed NZ$15 billion.
8. That retail deposits of the registered bank in New Zealand do not exceed NZ$200 million. For the purposes of this Condition of Registration, retail deposits are
defined as deposits by natural persons, excluding deposits with an outstanding balance which exceeds NZ$250,000.
In these Conditions of Registration -
“banking group” means the New Zealand business of the registered bank and its subsidiaries as required to be reported in group financial statements for the group’s
New Zealand business under section 461B(2) of the Financial Markets Conduct Act 2013.
“business of the registered bank in New Zealand” means the New Zealand business of the registered bank as defined in the requirement for financial statements for
New Zealand business in section 461B(1) of the Financial Markets Conduct Act 2013.
4.5 percent
6 percent
8 percent
Minimum Requirement
“generally accepted accounting practice” has the same meaning as in section 8 of the Financial Reporting Act 2013.
“loan-to-valuation ratio”, “non property-investment residential mortgage loans”, property-investment residential mortgage loans”, “qualifying new mortgage lending
amount in respect of property-investment residential mortgage loans”, “qualifying new mortgage lending amount in respect of non property-investment residential
mortgage loans”, and “residential mortgage loan” have the same meaning as in the Reserve Bank of New Zealand document entitled “Framework for Restrictions on
High-LVR Residential Mortgage Lending” (BS19) dated October 2016, and where the version of the Reserve Bank of New Zealand document “Capital Adequacy
Framework (Standardised Approach)” (BS2A) referred to in BS19 for the purpose of defining these terms is that dated November 2015.
"loan-to-valuation measurement period" means a period of six calendar months ending on the last day of the sixth calendar month, the first of which ends on the last
day of March 2017.
The Conditions of Registration were amended on 1 October 2016. Conditions 9 to 11 were revised by the Reservse Bank, imposing restrictions on the share of high
loan-to-value ratio residential mortgage lending undertaken by registered banks to help maintain financial stability.
“liabilities of the registered bank in New Zealand” means the liabilities that the registered bank would be required to report in financial statements for its New
Zealand business if section 461B(1) of the Financial Markets Conduct Act 2013 applied.
9. That, for a loan-to-valuation measurement period, the total of the business of the registered bank in New Zealand’s qualifying new mortgage lending amount in
respect of property-investment residential mortgage loans with a loan-to-valuation ratio of more than 60%, must not exceed 5% of the total of the qualifying new
mortgage lending amount in respect of property-investment residential mortgage loans arising in the loan-to-valuation measurement period.
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Historical Summary of Financial Statements
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
(Thousands of NZ Dollars) Year ended December 31,
2016 2015 2014 2013 2012
Interest Income 60,909 74,156 84,457 67,510 73,841
Interest Expense 27,243 41,089 44,524 32,883 38,631
Other Income 13,515 14,083 4,772 8,413 9,563
Operating Expenses 20,134 19,290 15,710 23,138 27,021
Net profit or (loss) before taxation 27,047 27,860 28,995 19,902 17,752
Taxation 7,570 7,891 7,878 6,152 4,914
Net Profit after taxation 19,477 19,969 21,117 13,750 12,838
Dividend/Remittance to Head Office 19,900 20,663 13,691 3,632 -
Net Profit or (Loss) Retained (423) (694) 7,426 10,118 12,838
Assets 2,065,376 1,974,218 1,980,111 2,190,662 2,179,785
Total Individually Impaired Assets - - - - -
Liabilities 1,870,819 1,779,064 1,784,580 2,003,043 2,001,966
Equity/Head Office Account 194,557 195,154 195,531 187,619 177,819
Claims of unsecured creditors of the Registered Bank on the assets of the Overseas Bank
The above legislation may affect all New Zealand liabilities.
Credit Ratings
Rating Agency
Moody’s
Standard & Poor’s
Fitch
* rating under review for upgrade.
Citibank, N.A. New Zealand Branch
Rating scales are:
AAA/Aaa Superior. Extremely strong capacity to pay interest and repay principal in a timely manner.
AA/Aa Excellent. Very strong capacity to pay interest and repay principal in a timely manner.
A Good. Strong capacity to pay interest and repay principal in a timely manner.
BBB/Baa Adequate capacity to pay interest and repay principal in a timely manner.
BB/Ba May be adequate but judged to have speculative elements.
B Vulnerable. Assurance of interest and principal payments over any long period of time may be small.
CCC/Caa Extremely vulnerable. Speculative to a high degree.
No material qualifications attach to the obligations and the ratings have not been withdrawn.
(if changed in the previous two years)
Friday, 16 December 2016
Approval Date Previous Rating
A (watch positive)
A1 (stable)
Under the law of the United States of America, a bank which is a member of the Federal Reserve System, including CBNA, is not required to repay a deposit at a
branch outside the United States if the branch cannot repay the deposit due to an act of war, civil strife, or action taken by the government in the host country, unless
the bank has expressly agreed to do so in writing.
The laws of the United States of America require that in the liquidation or other resolution of a failed U.S. insured depository institution, deposits in U.S. offices and
certain claims for administrative expenses and employee compensation are afforded a priority over other general unsecured claims, including deposits in offices
outside the U.S., non-deposit claims in all offices, and claims of a parent. Such priority creditors would include the Federal Deposit Insurance Corporation (FDIC),
which succeeds to the position of insured depositors. Subject to the application of New Zealand law, the local regulator may seize assets of the New Zealand branch
of CBNA and that action could impede the ability of the receiver to satisfy the preference to pay U.S. deposits.
The following historical summary data for CBNA New Zealand Branch and Associated Banking Group has been derived from audited financial statements prepared
on the basis of accounting principles generally accepted in New Zealand.
CBNA has the following long-term debt ratings which are applicable to the New Zealand Branch’s long-term senior unsecured obligations which are payable in
New Zealand in New Zealand dollars.
Standard & Poor’s, Moody's and Fitch have an implied rating equal to CBNA as CBNA New Zealand Branch is part of the same legal entity.
Tuesday, 19 May 2015 A (stable)
Thursday, 28 May 2015 A2 (RuR up)*
Standard & Poor's and Fitch may modify their ratings by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
A+ (stable)
Current Rating
A+ (stable)
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through B. 1 indicates that the obligation ranks in the higher end
of its generic rating category; 2 indicates a mid-range ranking; and 3 indicates a ranking in the lower end of that generic rating category.
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Insurance Business and Non-Financial Activities
CBNA does not conduct any insurance business or non-financial activities in New Zealand that are outside its Banking Group.
Financial Statements
Profitability and size of Citibank, N.A.
31-Dec-16 31-Dec-15
Profitability
Net profit/(loss) after tax for the year ended 12,799,000 13,189,000
0.95% 0.99%
Size (refer Note 1)
Total Assets 1,349,581,000 1,299,801,000
3.83% -4.18%
Asset Quality (refer Note 1 and 2)
Total Impaired Assets 10,476,000 12,324,000
0.78% 0.95%
Total Individual Credit Impaired Allowance - -
0.00% 0.00%
Total Collective Credit Impairment Allowance - -
0.00% 0.00%
Total individually impaired assets for CBNA are not included because such figures are not publicly available.
The Citibank Call Report is prepared in accordance with the regulatory instructions issued by the Federal Financial Institutions Examination Council (“FFIEC”), as
compared to the Citibank 2016 Financials and Citigroup Form 10-K which are prepared in accordance with U.S. GAAP and, with respect to the Citigroup Form 10-
K and Quarterly Reports on Form 10-Q, the requirements of the U.S. Securities and Exchange Commission. In 1997, the FFIEC adopted U.S. GAAP as the
reporting basis for the consolidated balance sheet, income statement and related schedules included in the Call Report. Despite the adoption of U.S. GAAP as the
reporting basis for the Citibank Call Report, the presentation of financial statements in the Citibank Call Report differs significantly from the presentation of
financial statements included in the Citibank 2016 Financials and Citigroup’s Form 10-K and Quarterly Reports on Form 10-Q filed with the U.S. Securities and
Exchange Commission, including without limitation the Citibank Call Report generally contains less disclosure than audited financial statements prepared in
accordance with U.S. GAAP.
Impaired assets for CBNA consist of non-accrual loans, restructured loans, other non-accrual assets and other real estate owned. CBNA maintains an allowance that
is available to absorb all probable credit losses inherent in its portfolio. The allowance for loan and lease losses at 31 December 2016 is US$10,465 million (31
December 2015: US$10,852 million).
Net profit/(loss) after tax over the previous twelve months as a percentage of average total assets
Percentage Change in total assets over the previous twelve months
Total Impaired Assets as a percentage of Total Assets
Total Individual Credit Impaired Allowance as a percentage of Total Impaired Assets
(Thousands of US Dollars)
CBNA New Zealand Branch and the Banking Group does not conduct any insurance business in New Zealand.
Any person, upon request and without charge, may obtain a copy of CBNA New Zealand Branch and the Banking Group's most recent Disclosure Statement, which
contains a copy of the most recent publicly available consolidated financial statements of CBNA (Citibank Call Report for the fiscal year ended December 31, 2016
("Citibank Call Report") and the CBNA audited financial statements for the fiscal year ended December 31, 2016 (“Citibank 2016 Financials”)), and the Citigroup
Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2016 ("Citigroup Form 10-K”), immediately by requesting a copy from CBNA’s New
Zealand office in Auckland. The Citibank Call Report and the Citigroup Form 10-K are also available on the Bank's website 'www.citi.co.nz'.
CBNA is an indirect wholly owned subsidiary of Citigroup Inc. The information relating to CBNA contained in the Bank’s General Disclosure Statement is derived
from, and is qualified in its entirety by reference to, the detailed information and consolidated financial statements included in the Citibank Call Report and the
Citibank 2016 Financials.
Total Collective Credit Impairment Allowance as a percentage of Total Impaired Assets
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CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
Note 31-Dec-16 31-Dec-15
Numbers $(000's) $(000's)
Interest Income 3 60,909 74,156
Interest Expense 3 27,243 41,089
NET INTEREST INCOME 33,666 33,067
Other Income 4 13,515 14,083
TOTAL REVENUE 47,181 47,150
Operating Expenses 5 20,134 19,290
PROFIT BEFORE INCOME TAX 27,047 27,860
Income Tax Expense 6 7,570 7,891
PROFIT FOR THE YEAR 19,477 19,969
Other Comprehensive Income
Available For Sale Reserve
Fair value gain/(loss) taken directly to equity 10 236
Tax on movements and transfers (3) (66)
7 170
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 19,484 20,139
The accompanying notes form part of these financial statements and supplementary information.
OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX,
THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT
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CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Note 31-Dec-16 31-Dec-15
Numbers $(000's) $(000's)
Capital
Citicorp Services Limited
Authorized, Issued and Paid-Up Capital
28,595 28,595 20 28,595 28,595
Head Office Account
CBNA New Zealand Branch
At the beginning of the year 33,665 33,518
Movement in share based payment reserve (181) 147
At the end of the year 20 33,484 33,665
Available For Sale Reserve
At the beginning of the year 61 (109)
Other comprehensive income 7 170 At the end of the year 20 68 61
Retained earnings
At the beginning of the year 132,833 133,527
Profit after tax 19,477 19,969
Profit remittance to Head Office (19,900) (20,663) At the end of the year 20 132,410 132,833
Equity at the end of the year 20 194,557 195,154
Represented by:
Equity at the beginning of the year 195,154 195,531
Transactions with owners, recorded directly in equity
(Profit remittance to)/Contribution from Head Office (19,900) (20,663)
Movement in share based payment reserve (181) 147 Total transactions with owners (20,081) (20,516)
Total Comprehensive Income for the year
Profit for the year 19,477 19,969
Other comprehensive income
Net change in fair value of available for sale assets to profit or loss on disposal 10 236
Income tax on other comprehensive income (3) (66)
Total other comprehensive income 7 170 Total Comprehensive Income for the year 19,484 20,139
Equity at the end of the year 194,557 195,154
The accompanying notes form part of these financial statements and supplementary information.
25,000,000 (2015: 25,000,000) Ordinary Shares, fully paid
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CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
Note 31-Dec-16 31-Dec-15
Numbers $(000's) $(000's)
ASSETS
Cash and Cash Equivalents 14 549,153 552,535
Due from Related Parties 16 (c) 171,824 80,967
Derivative Financial Assets 7 20,310 8,150
Current Tax Assets 2,559 2,806
Available For Sale Assets 8 504,453 567,479
Loans and Advances 22 810,805 754,879
Other Assets 9 5,054 5,822
Deferred Tax Assets 6 474 606
Property Plant and Equipment 11 744 974
TOTAL ASSETS 2,065,376 1,974,218
LIABILITIES
Deposits from Other Banks 4,340 23,297
Due to Related Parties 16 (c) 1,014,815 664,799
Other Deposits 22 839,617 1,064,196
Derivative Financial Liabilities 7 5,624 19,514
Provisions 12 176 176
Other Liabilities 13 6,247 7,082
TOTAL LIABILITIES 1,870,819 1,779,064
EQUITY
Issued and Paid-Up Capital 20 28,595 28,595
Head Office Account 20 33,484 33,665
Available For Sale Reserve 20 68 61
Retained Earnings 20 132,410 132,833
TOTAL EQUITY 194,557 195,154
TOTAL LIABILITIES AND EQUITY 2,065,376 1,974,218
Total Interest Earning and Discount Bearing Assets 2,036,235 1,954,500
Total Interest and Discount Bearing Liabilities 1,853,337 1,747,168
The accompanying notes form part of these financial statements and supplementary information.
Banking Group
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CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
Note 31-Dec-16 31-Dec-15
Numbers $(000's) $(000's)
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received 62,649 75,104
Interest paid (27,905) (41,859)
Net trading (loss)/ income (26,782) 4,828
Other income 13,250 14,162
Net (increase)/ decrease in placements due from related companies (90,857) 49,975
Net (increase/ decrease in financial assets at fair value through profit or loss - 750,848
Net (increase)/ decrease available for sale assets 63,046 (516,660)
Net (increase)/ decrease in loans and advances (55,926) (182,386)
Net increase/ (decrease) in due to related parties 347,792 (155,734)
Net increase/ (decrease) in customer deposits (243,466) 149,593
Income tax paid (7,183) (9,383)
Other operating expenses paid (20,057) (20,482)
Net cash used in operating activities 15 14,561 118,006
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire property, plant and equipment (5) (97)
Net cash used in investing activities (5) (97)
CASH FLOWS FROM FINANCING ACTIVITIES
Receipt of dividends (192) 228
Payment of dividends (19,900) (20,663)
Net cash used in financing activities (20,092) (20,435)
Net (decrease) / increase in cash and cash equivalents (5,536) 97,474
Cash and cash equivalents at the beginning of the year 552,465 454,991 Cash and cash equivalents at the end of the year 14 546,929 552,465
The accompanying notes form part of these financial statements and supplementary information.
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CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
a) Statement of compliance
b) Basis of preparation
The amounts in the financial statements have been rounded to the nearest thousand dollars, unless otherwise stated.
Classification and Measurement
Impairment of financial assets
• NZ IFRS 9 Financial Instruments was issued by the XRB in 2009 and is available for early adoption, but has not been applied in preparing this financial report.
• As a result of the issuance of NZ IFRS 9, two further standards have been issued by the XRB which give effect to consequential changes to a number of New
Zealand Accounting Standards and Interpretations. These standards are NZ IFRS 9 (2010) which was issued in November 2010 and NZ IFRS 9 (2013) Hedge
Accounting which was issued in December 2013. These standards will be applicable when NZ IFRS 9 is adopted by the Banking Group.
The financial statements are presented in New Zealand dollars, which is the functional currency of the Banking Group.
NZ IFRS 9 will replace existing financial instruments measurement categories with new categories of Fair Value Through Profit or Loss (FVPL), Fair Value
Through Other Comprehensive Income (FVOCI), and Amortised Cost. Financial assets (other than equity instruments and derivatives) will be assessed and
categorised based on their contractual cash flow characteristics and the business model for managing the assets. It will be possible, for instruments qualifying as
FVOCI, to be irrevocably designated as FVPL, where this eliminates or significantly reduces measurement or recognition inconsistencies, and also possible, for
equity instruments not held for trading, to be irrevocably designated as FVOCI, with no subsequent reclassification of gains or losses to the income statement.
Accounting for financial liabilities remains unchanged, except that gains or losses on liabilities designated at FVPL (if any), arising from the Banking Group’s own
credit risk, will be presented in OCI with no subsequent reclassification to the income statement, unless an accounting mismatch in profit or loss would arise.
We do not expect significant changes to the classification or measurement of most financial assets and financial liabilities.
The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial
instruments, financial instruments at fair value through profit or loss, and available for sale assets.
The ultimate holding company of the Banking Group is Citigroup Inc. ("Citigroup") which is a global diversified financial services holding company whose
businesses provide a broad range of financial services to consumer and corporate customers.
The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial statements. The accounting policies have
been applied consistently by each entity in the Banking Group.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The Banking Group’s financial statements have been prepared in accordance with the requirements of the Registered Bank Disclosure Statements (Overseas
Incorporated Registered Banks) Order 2014 (as amended), the Financial Markets Conduct Act 2013 ("FMCA 2013"), the Companies Act 1993, the Financial
Reporting Act 2013 and with New Zealand Generally Accepted Accounting Practice (“NZGAAP”). They comply with the New Zealand equivalents to International
Financial Reporting Standards (“NZ IFRS”) and other applicable Financial Reporting Standards, as appropriate for Tier 1 for-profit entities. The financial
statements also comply with International Financial Reporting Standards ("IFRS").
These financial statements were authorised for issue by CBNA under power of attorney and by the boards of directors of Citicorp Services Limited and its
subsidiaries on this 27th day of March 2017.
The preparation of a financial statements in conformity with New Zealand Accounting Standards requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these
estimates. Management believes that the critical accounting policies where management judgement is necessarily applied are those in relation to a) loans and
receivables (refer to the discussion on credit risk in Note 2), b) impairment of financial assets (refer Note 1 (n) and Note 10), c) provisions and contingencies (refer
Note 12 and Note 19) and d) measurement of share based payments (refer Note 1 (f) and Note 17).
NZ IFRS 9 introduces an expected credit loss impairment model that replaces the existing incurred loss model and applies to all financial assets, except for those
which are FVTPL, and equity securities designated as at FVOCI, which are not subject to impairment assessment. It also applies to off balance sheet loan
commitments and financial guarantees, are currently provided for under NZ IFRS 137 Provisions, Contingent Liabilities and Contingent Assets (IAS 37).
The new model will operate in three-stages:
• Stage 1 – From initial recognition until a significant increase in credit risk – credit losses expected from defaults over the next 12 months
• Stage 2 – Following a significant increase in credit risk relative to initial recognition – credit losses expected over the remaining lifetime of the asset
• Stage 3 – For credit-impaired assets – full lifetime expected credit losses, with interest revenue recognised based on the carrying amount of the asset, net of the loss
allowance
The new model may result in earlier recognition of some credit losses, with stage 1 and 2 provisions effectively replacing the previous collectively assessed
provisions, and Stage 3 effectively replacing the previous individually assessed provisions, although the stage 3 population will not necessarily correspond to those
assets which are currently disclosed as impaired.
The financial statements are those of Citibank NA New Zealand Branch (the "Branch") and those of the aggregated financial statements for the New Zealand Branch
and the Associated Banking Group (the "Banking Group").
As the Banking Group writes off loans when there is no realistic probability of recovery, our policy on when financial assets are written off is not expected to
significantly change on adoption of NZ IFRS 9.
Due to movements between 12 month and lifetime expected credit losses, and the application of forward looking information, provisions may be more volatile under
NZ IFRS 9 than NZ IFRS 139.
The following new standards and interpretations which may have an impact on the Consolidated Banking Group have been issued, but are not yet effective and have
not been early adopted by the Banking Group.
Page 13
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Transition
c) Principles of aggregation and consolidation
d) Revenue recognition
i) Interest income and expense
ii) Fee and commission income
iii) Net trading income
iv) Other income
e) Operating lease payments and receipts
f) Citigroup equity-based compensation
g) Foreign currency transactions
Foreign currency transactions are translated into the functional currency at the rates of exchange ruling at the dates of the transactions. Amounts receivable and
payable in foreign currencies at balance date are translated at the rates of exchange ruling on that date. Exchange differences relating to amounts payable and
receivable in foreign currencies are brought to account as exchange gains or losses in the statement of comprehensive income in the financial year in which the
exchange rates change.
Fees and commissions are generally recognised on an accrual basis when the service has been provided. Loan commitment fees for loans that are likely to be drawn
down are deferred (together with related direct costs) and recognised as an adjustment to the effective yield rate on the loan. Other service fees are recognised based
on the applicable service contracts, usually on a time-apportionate basis.
• NZ IFRS 15 Revenue from Contracts with Customers establishes a comprehensive framework for determining whether, how much and when revenue is
recognised. It replaces existing revenue recognition guidance, including NZ IAS 18 Revenue and NZ IFRIC 13 Customer Loyalty Programmes . NZ IFRS 15 is
effective from annual reporting periods beginning on or after 1 January 2018. This standard is not expected to have a material impact.
The transition to NZ IFRS 9, is being implemented in conjunction with the Banking Group’s global franchise.
Net trading income comprises unrealised and realised gains and losses relating to derivative financial instruments.
Certain employees of the Company participate in equity-based compensation plans of Citigroup, the ultimate parent entity of the Company. Under these plans,
Citigroup shares or the cash equivalent of shares are issued to employees as remuneration for past services and to retain employees.
The Branch has entered into operating leases for its premises. The total payments made under operating leases net of incentives received, if any, are recognised in
the statement of comprehensive income on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has
expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. The current
lease has a right of renewal at the termination of the lease.
Interest income and expense are recognised in the statement of comprehensive income for all instruments measured at amortised cost using the effective yield
method. The effective yield method is a method of calculating the amortised cost of a financial asset and of allocating the interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when
appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective yield rate, the entity estimates cash
flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation
includes all fees received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
The impairment, and classification and measurement requirements of IFRS 9 will be applied retrospectively upon initial application of IFRS 9 by adjusting the
Banking Group’s Consolidated Balance Sheet at 1 January 2018. There is no requirement to restate comparative periods, other than for hedge accounting. At this
stage, it is not possible to reliably quantify the potential financial effect to the Banking Group from the adoption of NZ IFRS 9.
The aggregated financial statements of the Banking Group include the financial statements of the Branch and Associated Banking Group which have been
accounted for using the aggregation of interest method as the Branch does not own the Associated Banking Group and therefore is not a legal group. All significant
transactions between the Branch and Associated Banking Group have been eliminated. Within the Banking Group, consolidation has been done using the purchase
method of consolidation. Control exists when the primary entity within the Banking Group is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power over the investee.
The financial statements of controlled entities are included in the consolidated financial statements from the date that control commences until the date that control
ceases. Investments in subsidiaries are carried at their cost of acquisition in the Banking Group’s financial statements. Unrealised gains and losses and inter-entity
balances resulting from transactions with or between controlled entities are eliminated in full on consolidation.
Income recognition policies for financial assets at fair value through profit and loss, available for sale assets and derivative financial instruments are described in
Accounting Policy Notes 1(k), 1(m), and 1(u) respectively.
• NZ IFRS 16 Leases was recently issued in February 2016. The new standard introduces a new, single, lessee accounting model that requires lessees to recognise
assets and liabilities for all leases with terms over 12 months, unless the asset is of “low value”. A lessee must recognise a “right-of-use asset”, representing its right
to use the underlying leased asset, and a “lease liability”, representing its obligations for future lease payments. It will replace the existing standard NZ IAS 17
Leases . NZ IFRS 16 is effective from annual reporting periods beginning on or after 1 January 2019. The impact of this standard is still being assessed.
NZ IFRS 9 allows entities to continue with existing hedge accounting under NZ IFRS 139, even when other elements of IFRS 9 become mandatory on 1 January
2018, however, as there are no hedge accounting relationships currently in place, no assessment of potential future hedge accounting has been considered.
Hedge accounting
Page 14
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
h) Taxation
i) Due from other financial institutions
Amounts due from other financial institutions are stated at the gross value of the outstanding balance. They are measured at amortised cost less impairment losses.
j) Financial assets
The Banking Group classifies its financial assets in the following categories:
- Financial Assets at Fair Value through Profit or Loss
- Loans and Advances
- Available For Sale Assets
- Derivative Financial Assets
Management determines the classification of financial assets at initial recognition.
k) Financial assets at fair value through profit or loss
l) Loans and advances
m) Available for sale assets
n) Impairment of financial assets
i) Assets carried at amortised cost
ii) Available for sale assets
Deferred tax relating to change in fair value of available for sale assets and cash flow hedges taken to other comprehensive income is also recognised in other
comprehensive income.
A financial instrument is classified in this category if acquired principally for the purpose of trading, managing risk, or selling in the short term. Assets held in this
category represent bank securities, promissory notes and treasury notes purchased for sale in the day-to-day trading operations of the banking business. They are
carried at fair value based on quoted bid prices or broker/dealer quotations and are recorded as at the trade-date. All changes in fair value are recognised within the
statements of comprehensive income. Interest received from trading securities is included within interest income in the statements of comprehensive income.
Loans and advances include loans and advances originated by the Banking Group, which are not intended to be sold in the short term and have not been classified
either as held for trading or designated at fair value. Loans and advances are recognised when cash is advanced to borrowers. They are measured at amortised cost
using the effective interest method, less impairment losses.
Income tax expense for the year consists of current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in other comprehensive income.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax
assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Available for sale assets are those intended to be held for an indefinite period of time, and may be sold in response to needs for liquidity or changes in interest rates,
exchange rates or equity prices. Purchases and sales of available for sale assets are recognised as at the trade-date – the date on which the Banking Group commits
to purchase or sell the asset. These financial assets are carried at fair value. Gains and losses arising from changes in the fair value of available for sale assets are
recognised directly in other comprehensive income, until the financial asset is derecognised or impaired at which time the cumulative gain or loss previously
recognised in other comprehensive income is recognised in profit or loss. Dividends on available for sale assets are recognised in profit or loss when the Banking
Group’s right to receive payment is declared.
The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities),
the Banking Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, or
other valuation techniques commonly used by market participants.
The recoverable amount of any equity instrument designated as available for sale is its fair value including direct and incremental transaction costs. The recoverable
amount of debt instruments and purchased loans remeasured to fair value is calculated as the present value of expected future cash flows discounted at the current
market rate of interest. Gains and losses arising from changes in fair value are included as a separate component of other comprehensive income, within the
available-for-sale reserve, until the sale of the financial assets occurs, at which time the cumulative gain or loss is transferred to the statement of comprehensive
income. Interest income is determined using the effective interest method. In the event of the financial asset being impaired the cumulative gain or loss previously
recognised in equity is recognised in the statement of comprehensive income.
Impaired assets consist of restructured assets, assets acquired through the enforcement of security and other impaired assets.
The Banking Group assesses at each financial year end whether there is objective evidence that a financial asset or group of financial assets are impaired as a result
of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash
flows of the financial asset or group of financial assets that can be reliably estimated. The Banking Group first assesses whether objective evidence of impairment
exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the
Banking Group determines that no objective evidence of impairment exists it includes the asset in a group of financial assets with similar credit risk characteristics
and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be
recognised are not included in a collective assessment of impairment.
A past due asset is any credit exposure where a counterparty has failed to make a payment which is contractually due, and which is not an impaired asset. A 90
days past due asset is a past due asset which has not been operated by the counterparty within its key terms within the past 90 days.
If there is objective evidence that an impairment loss on loans and advances carried at amortised cost has been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the
amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment
to tax payable in respect of previous years.
Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. The following temporary differences are not provided for: the initial recognition of assets or liabilities that affect neither accounting nor taxable
profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted
at the reporting date.
Page 15
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
o) Property, plant and equipment
i) Recognition and measurement
Items of property, plant and equipment are initially recorded at cost and depreciated as outlined below.
ii) Subsequent additional costs
iii) Disposal of assets
iv) Depreciation and amortisation
Installations 10 years
Furniture and fixtures 5-10 years
Computer technology 2-5 years
p) Deposits and amounts due to other financial institutions
q) Provisions
r) Employee entitlements provision
s) Superannuation
t) Payables
u) Derivative financial instruments
v) Commitments to extend credit and letters of credit
w) Offsetting financial assets and financial liabilities
x) Statements of cash flows
Payables include accrued expenses and interest payable which are brought to account at the gross value of the outstanding balance which is expected to approximate
cost.
Interest payments and receipts under interest rate and cross currency swap contracts and realised gains and losses on forward rate agreements are recognised on an
effective yield basis in profit or loss.
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
The provisions for employee entitlements to wages, salaries, bonuses, annual leave and sick leave represent present obligations resulting from employees’ services
provided up to the reporting date, calculated at undiscounted amounts based on current wage and salary rates that the Banking Group expects to pay as at reporting
date including related on-costs.
The gain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at the time of disposal and the proceeds on disposal,
and is included within the statement of comprehensive income in the year of disposal.
These financial instruments attract credit risk, generate fees and generally do not involve cash payments other than in the event of default. They are recorded as
commitments at their face value. Fee income relating to commitments are deferred and amortised over the expected life of the facility as part of the effective yield
method.
Costs incurred on property, plant and equipment subsequent to initial acquisition are capitalised when it is probable that future economic benefits, in excess of the
originally assessed performance of the asset, will flow to the Banking Group in future years. Where these costs represent separate components they are accounted
for as separate assets and are separately depreciated over their useful lives. Costs that do not meet the criteria for capitalisation are expensed as incurred through the
statement of comprehensive income.
A provision, other than in relation to impairment of financial assets, is recognised when there is a legal or constructive obligation as a result of a past event and it is
probable that a future sacrifice of economic benefits will be required to settle the obligation, the timing or amount of which is uncertain.
Assets are depreciated using the straight line method over their estimated useful lives. Assets are depreciated or amortised from the date of acquisition. The useful
lives of assets are as follows:
The Branch contributes to a defined contribution plan called Citibank SuperLife provided by SuperLife master trust where CBNA employees form a separate group
within the master trust. SuperLife is governed by trust deeds and is managed separate to the Banking Group. The assets and liabilities of this plan are legally held in
a separate trustee-administered fund and are calculated by assessing the fair value of plan assets and deducting the amount of future benefit that employees have
earned in return for their service in current and prior periods discounted to present value. However, the Banking Group in New Zealand has no ongoing obligation
in respect of liabilities arising under the scheme except for net contributions.
Deposits and amounts due to other financial institutions are recognised initially at fair value plus transaction costs and subsequently at amortised cost using the
effective interest rate method.
The Banking Group recognises contributions due in respect of the accounting period in the statement of comprehensive income. Any contributions unpaid at the
financial year end are included as a liability.
The statements of cash flows have been prepared on the basis of net cash flows of this Banking Group. The reason for this presentation is that the business of
banking produces cash receipts and payments for items in which their turnover is quick, the amounts are large and the maturities are short. The reporting of gross
turnover of these items would not assist in the understanding of the Financial Statements.
The Banking Group is exposed to changes in interest rates and foreign exchange rates from its activities. The Banking Group offers futures, forwards, options and
swaps to enable customers to transfer, modify, or reduce their interest rate, foreign exchange and other market risks. The Banking Group also trades these products
on its own account and it enters into derivative and foreign exchange contracts, among other instruments, as an end-user in connection with its own risk
management activities of certain assets and liabilities such as loans and deposits. All derivatives that do not meet the hedging criteria under NZ IAS 39 are classified
as derivatives held for trading. Derivative financial instruments used for trading purposes are carried at fair value using bid/offer rates, broker/dealer quotations,
discounted cash flows or estimated fair values generated by option pricing models. Revaluation gains and losses on derivative and foreign exchange contracts are
reported gross as due to and from financial institutions, except when qualifying netting agreements are in place with the counterparties.
Page 16
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
y) Determination of fair value
2. FINANCIAL RISK MANAGEMENT
The Group has exposure to the following material risks from the use of financial instruments:
• Credit Risk
• Liquidity Risk
• Market Risk
• Operational Risk
• Strategic Risk
• Reputational Risk
• Compliance Risk
• Legal Risk
Risk Management Framework
• Risk management is integrated within the business plan and strategy.
• All risks and resulting returns are owned and managed by an accountable business unit.
• All risks are managed within a limit framework; risk limits are endorsed by business management and approved by independent risk management.
• All risk management policies are clearly and formally documented.
• All risks are measured using defined methodologies, including stress testing and approved portfolio benchmark.
• All risks are comprehensively reported across the organisation.
Credit Risk
Management of credit risk
If cash collateral is taken this does not decrease the measured credit risk but may improve the assigned risk rating.
Internal Audit (IA) conduct independent periodic examinations of both portfolio quality and the credit process.
Credit policies are organised around two basic approaches - Credit Programmes and Credit Transactions.
Credit Risk is the risk of financial loss to the Banking Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises
primarily from the Banking Group's loans to customers, investment securities and financial assets due from other financial institutions. For risk management
reporting purposes the Banking Group considers and consolidates all elements of credit risk exposure.
The Company has developed comprehensive credit and operation policies and procedures with respect to recording, clearance and monitoring control processes, to
ensure that all customer transactions are promptly accounted for, accurate and that portfolio credit performance is closely monitored. All exchange rates and interest
rates are updated daily. Limits for all classes of credit risk are approved via an annual approval process which depends on the risk rating of the client and the type of
facilities being extended.
The Citigroup Risk Management Framework is responsible for establishing standards for the measurement, approval, reporting and limiting of risk, for managing,
evaluating, and compensating the senior independent risk managers at the business level, for approving business-level risk management policies, for approving
business risk-taking authority through the allocation of limits and capital and for reviewing, on an ongoing basis, major risk exposures and concentrations across the
organisation. Risks are regularly reviewed with the independent business-level risk managers, the Citigroup senior business managers and, as appropriate, the
Board.
For fair value instruments and available for sale financial assets that are quoted in active markets, fair values are determined at the current quoted bid/offer price.
Where independent prices are not available, fair values may be determined using valuation techniques with reference to observable market data. These include
comparison to similar instruments where market observable prices exist, discounted cash flow analysis, option pricing models and other valuation techniques
commonly used by market participants.
This note presents information about the Banking Group's exposure to each of these risks and the objectives, policies and processes for measuring and managing
risk. The management of capital is discussed in note 20.
The CBNA New Zealand Branch and the Banking Group’s Risk Management framework is consolidated within Citigroup’s Risk Management framework. The
Citigroup Risk Management Framework is grounded on the following principles which apply universally across all businesses and all risk types:
Extensions of credit are initiated by line management, and approved by Independent Risk Management, which together with the business are responsible for credit
quality. Independent Risk Management also establish any required supplementary credit policies specific for each business, deploy the credit talent needed and
monitor portfolio and process quality.
The Credit Transaction approach focuses on the decision to extend credit to an individual customer or customer relationship. It starts with target market definition
and risk acceptance criteria, and involves detailed customised financial analysis. Approval requirements for each decision are tiered based on the transaction
amount, the customer's industry and aggregate facilities and credit risk ratings.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date in the principal or, in its absence, the most advantageous market to which the Banking Group has access at that date. The fair value of a liability reflects its non-
performance risk.
Credit Programmes focus on the decision to extend credit to sets of customers with similar characteristics and/or product needs. Approvals under this approach
cover the expected level of aggregate exposure, the terms, risk acceptance criteria, operating systems and reporting mechanisms. Credit Programmes are reviewed
annually, with approvals tiered on the basis of projected outstanding exposures as well as the maturity and performance of the product.
Independent Risk Management, together with the Business, identify problem credits or programmes as they develop, and correct deficiencies as needed through
remedial management.
Counterparty credit risk is measured based on current market values, updated daily, plus an allowance for the likely movement in market rates over the remaining
term of the contract. Counterparty limits cover activity in foreign exchange, and derivatives such as swaps, forward rate agreements and options.
Credit risk exposure is also generated through daylight overdrafts, settlement risk and clearing risk. These exposures are generally treated as intra-day risk and are
monitored separately. All exposures are monitored daily against approved credit lines.
Page 17
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
2. FINANCIAL RISK MANAGEMENT (continued)
Credit Risk (continued)
Market Risk
Management of market risk
Traded market risk (Trading Book)
Non-traded market risk (Banking Book)
Liquidity Risk
Management of liquidity risk
Operational Risk
Framework
The Banking Group’s approach to operational risk is defined in the Citigroup Risk and Operational Risk Policy (“the Policy”).
MCA aims to:
Credit Programmes and Credit Transactions are approved by at least two credit officers, generally including the sponsoring officer and a Markets & Banking
Independent Risk Management officer. The sponsoring officer is responsible for ensuring the integrity of the credit process and proper documentation of the credit
decision.
Traded and non-traded market risks of the Banking Group are managed through Citigroup-wide standards and business policies and procedures. The policies define
market risk limits and triggers, risk limits approval processes, limits exceptions and breaches. The policies also define market risk limit monitoring and escalation of
limits excesses.
The liquidity management framework establishes the liquidity risk tolerance and management framework. The risk tolerance for the Banking Group is set by a
series of quantitative targets and qualitative parameters. The liquidity management framework is updated annually with material changes approved by ALCO.
Limits are established to manage the extent to which businesses can take liquidity risk. The liquidity profile is monitored on a daily basis and reported to ALCO on
a regular basis.
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. It includes the reputation and
franchise risks associated with business practices or market conduct that the Banking Group may undertake with respect to activities in a fiduciary role, as principal,
as well as agent, or through a specialpurpose entity.
The level of price risk assumed by a business is based on its objectives and earnings, its capacity to manage risk and by the sophistication of the local market. Limits
are established for each major category of risk.
Market Risk Management (“MRM”) for New Zealand, and the trading businesses, have implemented a market risk limit and trigger framework. In addition to
adhering to market risk limits and triggers, risk taking units are required to trade only within their Permitted Products List, approved by MRM. Market risk
exposures against limits and triggers are monitored daily and limits are reviewed at least annually by MRM. Any limit excess is escalated and actioned as specified
per the Citigroup Mark-to-Market Risk Policy. MRM and the applicable business management are responsible for agreeing on appropriate corrective actions,
including a resolution date. The methodologies used to measure market risk exposures are approved by Citigroup Risk Analytics.
The Banking Group engages in Traded Market Risk as defined in the Trading Book Policy.
Activities excluded from the Trading Book as per the market risk policies are included within the Banking Book. This includes funding and liquidity management
positions which are marked-to-market or accrual positions.
Treasury manage non-traded interest rate risk for the local business units, by requiring all businesses to transfer price the interest rate risk in their accrual portfolios
to the Treasury unit.
For risk management purposes, fixed-rate items are repriced according to their residual terms. Floating rate items are repriced according to the residual term to the
next repricing date. Repricing assumptions are made for items that do not have a contractually defined repricing date. Those assumptions are reviewed and approved
on an annual basis by various functions, including the business, the Asset & Liablilty Committee ("ALCO") and the Market Risk Manager for New Zealand.
Liquidity risk is the risk that the Banking Group will not be able to fund its obligations as they become due, without incurring unacceptable losses.
Market Risk is the risk to earnings or capital due to changes in market variables such as interest rates or foreign exchange.
The Banking Group is exposed to liquidity risk in its lending and funding activities. The primary responsibility of managing liquidity is with ALCO.
• The first line is recognised ownership and management of the risk by the businesses;
• Second line is an oversight model consisting of Independent Control Functions and Operational Risk Management; and
• The third line is Internal Audit which recommends enhancements continually and provides independent assessment and evaluation.
The objective of the Policy is to establish a consistent value-added framework for assessing and communicating operational risk and overall effectiveness of the
internal control environment across the Banking Group. Each major business segment must implement an operational risk process consistent with the requirements
of this Policy.
A “Manager’s Control Assessment” (MCA) is used as the formal governance and reporting structure consistent with the requirements of the most recent release of
the COSO 2013 Internal Control – Integrated Framework providing the necessary support for overall Internal Control over Financial Reporting (ICFR). An
Operational Risk Profile is prepared and utilised by the firm to monitor material operational risks.
Operational risk is inherent in the Banking Group’s global business activities and, as with other risk types, is managed through the Citigroup Operational Risk
Management Framework with a defined Three Lines of Defence model.
• Create a framework for discussing operational risks and controls;
• Renew focus on the design and execution of operational controls;
• Increase the capabilities for managers to obtain and consider multiple sources of control-related information in order to determine the adequacy of the overall
control environment; and
• Help managers across Citigroup gain early line of sight into control issues and vulnerabilities, and emerging risks.
The MCA standards for Risk Assessment and Controls Monitoring are applicable to all businesses and staff functions and establish a process whereby important
risks inherent in the activities of a business are identified and the effectiveness of the key controls over those risks are evaluated and monitored.
MCA processes facilitate the Banking Group’s adherence to internal control over financial reporting, regulatory requirements, and other corporate initiatives,
including operational risk management and alignment of capital assessments with risk management objectives.
Page 18
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
2. FINANCIAL RISK MANAGEMENT (continued)
Operational Risk (continued)
Reputational Risk
Strategic Risk
Compliance Risk
Legal risk
Compliance risk is the risk to current or anticipated earnings or capital arising from violations of, or non-conformance with, laws, rules, regulations, prescribed
practices, internal policies and procedures, or ethical standards.
The management of compliance risk adheres to the Citigroup’s Global Compliance Programme Policy.
Legal risk includes the risk from uncertainty due to legal or regulatory actions, proceedings or investigations, or uncertainty in the applicability or interpretation of
contracts, laws or regulations.
In order to mitigate legal risk, the legal function provides or procures legal advice and counsel to facilitate adherence with laws and regulations and facilitate
Citigroup’s business activities. In addition, the legal function seeks to protect Citigroup’s interests by resolving, or vigorously defending Citigroup against litigation
and enforcement actions. This is led by the General Counsel, who is supported by Legal Counsel for all Citigroup New Zealand products. Country Management, and
Regional General Counsel are kept informed of significant developments in those matters through both formal channels and also through informal interactions.
Reputational Risk is the risk to current or anticipated earnings, capital or franchise or enterprise value arising from the negative public opinion.
Reputational risk is managed centrally across all the legal entities operating under the Citigroup brand hence reputational risk is shared across the group. Being a
global bank, the local entities are also subject to a contagion risk as the local operations may be impacted by Citigroup’s action offshore.
Citigroup has established a multi-dimensional approach to the management of reputational risk, which is active, preventative and re-active based upon governance
and Citigroup’s Three Lines of Defence.
The Banking Group senior management is responsible for the development and execution of the strategy. At the business level, business heads are accountable for
the interpretation and execution of the firm-wide business plan, as it applies to their area, including decisions on new product entries.
The management of the strategic risk rests upon the following foundational elements such as clear articulation of the firms strategy, defined financial and operating
targets, regular updates to senior management and the Board on performance, including financial and operating targets, current and potential macro-economic
events, the strength of capital and liquidity positions, staffing levels, stress testing results and other factors such as market growth rates and peer analysis and
management scorecards.
Strategic Risk is risk to current or anticipated earnings, capital, or franchise or enterprise value arising from adverse business decisions, poor implementation of
business decisions, or lack of responsiveness to changes in the banking industry and operating environment.
The operational risk standards facilitate the effective communication of operational risk within and across businesses. Information about the businesses’ operational
risk, historical losses and the control environment is reported by each major business segment and functional area and summarised for senior management and the
Board.
The entire process is monitored and periodically validated by in-country independent Compliance & Enterprise Risk Management teams and is subject to audit by
the Consolidated Entity’s Internal Audit Department. The results of MCA are included in periodic management reporting, including reporting to senior management
and the Audit and Risk Committees.
Page 19
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
31-Dec-16 31-Dec-15
3. INTEREST $(000's) $(000's)
Interest Income from:
Cash and Demand Deposits with Central Banks 12,316 17,672
Loans and Advances to customers 26,399 26,195
- 25,617
Available for Sale Securities 17,091 359
Loans and Advances - Head Office (including other branches) 3,908 3,520
Loans and Advances - Other Related Parties 1,195 793
60,909 74,156
Interest Expense from:
Deposits from Other Banks 1,058 2,187
Other Deposits 16,718 22,723
Head Office (including other branches) 7,704 5,210
Other Related Parties 1,763 10,969
27,243 41,089 Net Interest Income 33,666 33,067
4. OTHER INCOME
Net Trading Income
Related parties
Interest rate derivatives gain/(loss) (19,178) 21,247
Third parties
Net foreign exchange gain/(loss) 18,450 (20,699)
Securities 6 233
(722) 781
Fees
Lending and Credit Facility Related 4,106 3,769
Fiduciary activities 2,748 2,170
Other fee income 5,420 7,369
Other gain/(loss) 1,963 (6)
14,237 13,302 13,515 14,083
5. OPERATING EXPENSES
Auditor's remuneration
Audit services 162 185
Other assurance services 12 13
174 198
Other assurance services provided included ISAE 3402 Assurance Report on Controls at a Service Organisation
Staff Costs
Salaries and other staff expenses 6,400 6,336
Defined contribution superannuation expenses 494 457
Share based payments 162 162
Other fees paid 175 160
7,231 7,115
Depreciation
Installations 163 163
Furniture and Equipment 40 42
Computer Technology 32 38
235 243
Other
Operating Lease - Premises Rent Expense 364 352
Management Fees Paid - Head Office (including other branches) 3,542 3,999
Management Fees Paid - Other Related Parties 4,582 3,678
Other 4,006 3,705
12,494 11,734 Total Operating Expenses 20,134 19,290
Financial Assets at Fair Value through Profit or Loss
Page 20
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
6. TAXATION 31-Dec-16 31-Dec-15
$(000's) $(000's)
(i) Income tax expense
Current year tax expense
Current year 7,476 7,800
Prior year adjustment (46) 129
Deferred tax expense
Origination/reversal of deferred tax 140 (38) 7,570 7,891
(ii) Reconciliation between tax expense and pre tax profit
Profit before tax 27,047 27,860
Tax at 28% 7,573 7,801
Increase in income tax expense due to
Non-deductible expenses 42 43
Change in fair value of share based payments 1 (82)
Under/(over) provision in prior year (46) 129 Income tax expense 7,570 7,891
(iii) Income tax recognised directly in equity
Available For Sale Reserve 27 24
Share Based Payments 87 89 114 113
(iv) Tax assets and tax liabilities
Details of recognised deferred tax assets
Property plant and equipment 45 36
Share based payments 5 122
Provisions 375 399
Other 49 49 474 606
(v) Movement in deferred tax
Opening balance as at 1st January 606 1,038
Recognised in income (132) (424)
Recognised in equity - (8) Closing balance 474 606
7. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative Assets
Related Parties
Interest Rate
Trading derivatives 5,408 8,150
Foreign Exchange
Trading derivatives 14,902 - 20,310 8,150
Derivative Liabilities
Related Parties
Interest Rate
Trading derivatives 4,921 7,294
Foreign Exchange
Trading derivatives 703 12,220 5,624 19,514
8. AVAILABLE FOR SALE ASSETS
Government Bonds 140,216 -
Certificates of Deposit 364,237 567,479 504,453 567,479
Banking Group
Refer to Note 31 for the imputation credits available to the shareholders of CBNA New Zealand Branch and the Banking Group through Citicorp Services Limited
and Citibank Nominees (New Zealand) Limited.
Page 21
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
31-Dec-16 31-Dec-15
$(000's) $(000's)
9. OTHER ASSETS
Accrued Interest - Head Office (including other branches) 252 333
Accrued Interest - Other Related Parties 11 104
Accrued Interest - Third Parties 2,435 4,005
Other Receivables - Head Office (including other branches) 1,761 993
Other Receivables - Other Related Parties 321 -
Other Receivables - Third Parties 274 387 5,054 5,822
10. PAST DUE ASSETS
11. PROPERTY PLANT AND EQUIPMENT
31-Dec-16 31-Dec-15
$(000's) $(000's)
Installations
Cost
At beginning of period 1,371 1,366
Additions 2 5
Disposals - - At end of period 1,373 1,371
Accumulated Depreciation
At beginning of period 693 529
Depreciation Expense 163 164
Reversal on disposal - - At end of period 856 693
517 678
Furniture / Equipment
Cost
At beginning of period 430 357
Additions 3 82
Disposals (24) (9) At end of period 409 430
Accumulated Depreciation
At beginning of period 237 205
Depreciation 40 41
Reversal on disposal (24) (9) At end of period 253 237
156 193
Computer Hardware
Cost
At beginning of period 998 994
Additions - 10
Disposals (427) (6) At end of period 571 998
Accumulated Depreciation
At beginning of period 895 863
Depreciation 32 38
Reversal on disposal (427) (6) At end of period 500 895
71 103
Closing Net book value 744 974
12. PROVISIONS
Restoration Obligation - Operating Lease (Note 19)
Carrying amount at the beginning of the year 176 176 Carrying amount at the end of the year 176 176
CBNA New Zealand Branch and the Banking Group have no past due assets, impaired assets, restructured assets, assets (including real estate) acquired through the
enforcement of security or other assets under administration and therefore there are no specific provisions as at 31 December 2016 (31 December 2015: nil).
Page 22
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
31-Dec-16 31-Dec-15
13. OTHER LIABILITIES $(000's) $(000's)
Accrued Interest - Head Office (including other branches) 522 356
Accrued Interest - Other Related Parties 84 498
Accrued Interest - Third Parties 660 1,074
Fees Received in Advance - Third Parties 319 582
Employee Entitlements 1,690 1,896
Other Payables - Head Office (including other branches) 363 371
Other Payables - Other Related Parties 995 -
Other Payables - Third Parties 1,614 2,305 6,247 7,082
14. CASH BALANCES
31-Dec-16 31-Dec-15
$(000's) $(000's)
Cash and Demand Deposits with Central Banks 531,004 523,490
Loans and Advances to Financial Institutions at call 42 187
Due from Related Parties 18,107 28,858
Deposits from Other Banks* (2,224) (70) Cash and cash equivalents in the statement of cash flows 546,929 552,465
* This represents bank overdrafts repayable on demand to other banks. It is presented on the statement of financial position within "Deposits from Other Banks".
31-Dec-16 31-Dec-15
15. STATEMENT OF CASH FLOWS RECONCILIATION TO PROFIT $(000's) $(000's)
Net Profit after Tax 19,477 19,969
Adjustments for:
Depreciation 235 243
Movements in operating assets less liabilities 20,589 95,636
(Decrease)/Increase in accrual of interest expenses (662) (770)
Decrease/Increase in accrual of other expenses/income (882) (28)
Revaluations of financial assets and liabilities (26,060) 4,047
Movement in tax provision 387 (1,492)
Decrease/(Increase) in accrual of interest income 1,740 948
Decrease in accrual of fees and commissions (263) (547) Net Cash Flows from Operating Activities 14,561 118,006
16. RELATED PARTY TRANSACTIONS
(a) ULTIMATE HOLDING COMPANY
Members of Citibank, N.A. New Zealand Branch and Associated Banking Group
CBNA New Zealand Branch Branch of CBNA
Citicorp Services Limited Locally incorporated wholly-owned subsidiary of Citibank Overseas Investment Corporation
Citibank Nominees (New Zealand) Limited Locally incorporated wholly-owned subsidiary of Citicorp Services Limited
Reconciliation of net profit after tax to net cash flows from operating activities:
Cash and cash equivalents include cash on hand, deposits held overnight or on call with financial institutions, nostro accounts and other short term highly liquid
assets which are subject to insignificant risk of change in their fair value and are used by the Banking Group in the management of its short term commitments.
The ultimate parent of CBNA New Zealand Branch and the Banking Group is Citigroup. These financial statements reflect only the operations of the Banking
Group. The financial statements of Citigroup should be read in conjunction with these financial statements.
Page 23
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
16. RELATED PARTY TRANSACTIONS (continued)
(b) TRANSACTIONS
Interest received and paid to related parties is disclosed in Note 3.
Management Fees are disclosed in Note 5.
(c) BALANCES 31-Dec-16 31-Dec-15
$(000's) $(000's)
Assets
Cash Balances - Head Office (including other branches) 16,062 28,661
Cash Balances - Other Related parties 2,045 197
Current Accounts - Head Office (including other branches) 2,955 2,355
Current Accounts - Other Related parties 5,869 12,112
Placements - Head Office (including other branches) 163,000 66,500 Due from Related Parties 189,931 109,825
Derivative Financial Assets - On Balance Sheet 20,310 8,150
Other Assets - Head Office (including other branches) 2,013 1,326
Other Assets - Other Related parties 332 104
Other Related Parties Assets 22,655 9,580
Liabilities
Current Accounts - Head Office (including other branches) 72,011 57,761
Current Accounts - Other Related parties 65,607 65,302
Deposits - Head Office (including other branches) 877,197 541,736 Due to Related Parties 1,014,815 664,799
Derivative Financial Liabilities - On Balance Sheet 5,624 19,514
Other Liabilities - Head Office (including other branches) 885 727
Other Liabilities - Other Related parties 1,079 498 Other Related Parties Liabilities 7,588 20,739
Derivative Notional Amounts
Interest Rate Swaps
- Head Office (including other branches) 180,000 180,000
Foreign Exchange Forwards
- Head Office (including other branches) 718,147 420,388
(d) COMPENSATION OF KEY MANAGEMENT PERSONNEL OF THE NEW ZEALAND BANKING GROUP
31-Dec-16 31-Dec-15
$(000's) $(000's)
Short term employee benefits 2,438 2,470
Post employment benefits 195 201
Equity compensation benefits 112 184 2,745 2,855
(e) LOANS TO KEY MANAGEMENT PERSONNEL OF THE NEW ZEALAND BANKING GROUP
There are no outstanding loans to Key Management Personnel at 31 December 2016 (2015: nil).
Key management personnel compensation represents compensation paid or payable to the directors and specified employees of the New Zealand Banking Group for
their services to the Banking Group.
All transactions with related parties are at commercial arms length terms and rates. These are conducted predominantly with other CBNA branches and in the case
of the Branch, the Banking Group as well. Outstanding related party balances are not secured.
Total income payable or otherwise made available to all key
management personnel of the NZ Banking Group
All Citigroup entities within New Zealand are grouped for tax reporting purposes. This group includes the Branch and the Associated Banking Group. There were
no outstanding balances at balance date.
Management fees are paid to Singapore, Penang, Manila and Sydney for computer system usage and processing charges for back office and middle office functions.
Cash balances due to/from related parties are disclosed in Note 14.
Page 24
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
17. SHARE BASED PAYMENTS/ STOCK OPTIONS
Stock option programme
31-Dec-16 31-Dec-15
Options at the beginning of the year - 15,283
Exercised - (14,237)
Cancelled - -
Expired - (1,046)
Transferred in - -
Transferred out - -
Outstanding at the end of the year - -
Exercisable at the end of the year - -
Stock award programme
Information with respect to current year stock awards is as follows: 31-Dec-16 31-Dec-15
Shares awarded 1,706.93 2,162.10
37.05 50.07
$(000's) $(000's)
70 72
Balance of liability account 580 628
18. FIDUCIARY ACTIVITIES
19. CONTINGENT LIABILITIES AND COMMITMENTS
Specific commitments and contingent liabilities existing at period end are: 31-Dec-16 31-Dec-15
$(000's) $(000's)
Operating Lease Commitments:
Due within 1 yr 293 333
Due between 1 & 5 yrs - 288 293 621
Guarantees, Letters of Credit and undrawn loans 477,725 400,121
Foreign Exchange Forwards (Notional Amounts) 718,147 420,388
Interest Rate Swaps (Notional Amounts) 180,000 180,000
Number Outstanding
Weighted average fair market value per share (US $)
Normal business activity incurs a variety of outstanding commitments and contingent liabilities such as commitments to extend credit, forward foreign exchange
contracts, and futures contracts. The directors do not anticipate any material loss occurring as a result of these transactions and consequently no provisions are
included in the financial statements in respect of these matters. For operating lease, there has been no changes on restoration obligation during 2016. The balance of
restoration obligation provision is disclosed in Note 12.
Expense arising from share plans booked in statement of
comprehensive income
The Company participates in CAP and awards shares of Citigroup common stock in the form of restricted or deferred stock to participating employees. CAP awards
generally vest in equal annual instalments over four years.
The Branch provides nominee and custodial services on behalf of customers. At balance date, the Branch had securities registered in its name of $9,280 million
which were held under nominee arrangements on behalf of its customers (Dec 2015: $8,160 million). The provision of such services do not adversely affect the
Banking Group.
There are no stock options outstanding under Citigroup stock option plans at 31 December 2016.
Information with respect to stock option activity in 2016 and 2015 under Citigroup stock option plans is as follows:
In recent years Citigroup has significantly reduced the proportion of share-based incentive awards made in the form of stock options. In January 2008, share-based
incentive awards were granted to eligible employees in the form of restricted or deferred stock under the Capital Accumulation Programme (“CAP”) and stock
options were only granted to CAP participants who made an advance election to receive them in place of restricted or deferred stock. For each forgone share
participants received four stock options. The stock options carry the same vesting period as the restricted or deferred stock awards, have a six-year term and an
exercise price equal to the market value of the underlying stock at the grant date.
The last stock option granted was in October 2009. The Citigroup Employee Option Grant (CEOG) was awarded to Citigroup Employees who had unvested
Citigroup Awards from previous programme. The awards vested over 3 years without a sale restriction and had a 6 year expiration date.
The Banking Group has offered a number of Citigroup stock option programme for its employees. Options were granted on Citigroup's common stock at the market
value at the time of grant. The options granted from 2008/2009 onwards have a term of six years.
Page 25
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
20. CAPITAL AND RESERVES
The process for managing capital:
31-Dec-16 31-Dec-15
Paid-up capital 28,595 28,595
Head office account 33,484 33,665
Available For Sale Reserve 68 61
Retained earnings 132,410 132,833
194,557 195,154
The equity comprises Banking Group share capital, Branch equity in the form of the head office account, available for sale reserves and retained earnings.
- To ensure sufficient liquidity, limits and ratios are in place to support any asset growth.
CBNA New Zealand Branch - the capital contribution from Head Office is unsecured and interest free and is repayable at the discretion of the branch and
subordinate to all other debts. The Head Office Account balances have changed due to the recognition of amounts in relation to share based payments/share options
under NZ IFRS 2 Share Based Payments.
CBNA New Zealand Branch, as a full branch of CBNA has a banking license but is not subject to any minimum capital requirements in New Zealand due to its
branch status, other than the requirement to comply with Thin Capitalisation Rules. The compliance with the minimum capital adequacy requirements is
administered at the US parent entity level.
The major business is conducted in CBNA with no significant activity carried out in the Banking Group. The capital management plan is therefore prepared on a
consolidated level covering both the Branch and Banking Group.
- To ensure that capital is maintained at a level that meets Thin Capitalisation Rules and to support the case for any capital surplus repatriation back to New York;
- To ensure that the Banking Group maintains an appropriate level of capital commensurate to its risks and to support new business initiatives and growth;
The objectives of this Capital Management Plan are:
The key risks to the businesses in the Banking Group which are continuously monitored are liquidity risk and Thin Capitalisation risk. Liquidity risk and the process
of its management has been explained in Note 2 of these financial statements.Thin Capitalisation risk is the risk that interest deductions could be denied for tax
purposes.
The Thin Capitalisation rules effectively require the Banking Group to hold a combination of share capital and Branch equity in the form of the head office account
and retained earnings amounting to not less than 6% of the amount of Risk Weighted Exposures of the Banking Group calculated pursuant to the Capital Adequacy
Framework prescribed by the Reserve Bank of New Zealand. Risk Weighted Exposures comprises the sum of a) risk-weighted on-balance sheet credit exposures b)
risk-weighted off-balance sheet credit exposures c) credit equivalent amounts for derivatives d) 12.5 × total capital requirement for operational risk and e) 12.5 ×
total capital charge for market risk exposure.
Citicorp Services Limited - There was no movement in the issued and paid up capital during the period. Shares have no par value and carry equal voting rights and
share equally in any surplus on the winding up of the company.
A two year forward Capital Plan is produced on an annual basis by Corporate Treasury. Through this process a historical and forecast trend analysis of the
statement of financial position including capital is performed. The Asset & Liability Committee (ALCO) approves the annual Capital Plan. There are no local
minimum regulatory capital requirements for CBNA New Zealand Branch as a result of its branch status. Capital levels are only monitored for Thin Capitalisation
adequacy which is calculated on a consolidated basis for all Citi entities in New Zealand. Actual capital levels versus risk weighted assets for Thin Capitalisation
purposes are monitored on a quarterly basis (and more frequently depending on the situation) throughout the year by Financial Control, Risk Management, Tax and
Corporate Treasury and any issues are reported to ALCO. If additional capital is required, a formal request to New York Corporate Treasury is made after ALCO
and requisite local and regional management approvals are obtained. If there is capital excess to requirements, a capital repatriation must first be approved by local
ALCO prior to the repatriation occurring. Local Corporate Treasury manage the settlement process for capital injections and repatriations.
Page 26
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
21. CREDIT RISK RATING
Description
Superior. Extremely strong capacity to pay interest and repay principal in a timely manner. 1
2+
Excellent. Very strong capacity to pay interest and repay principal in a timely manner. 2
2-
3+
Good. Strong capacity to pay interest and repay principal in a timely manner. 3
3-
4+
Adequate capacity to pay interest and repay principal in a timely manner. 4
4-
5+
May be adequate but judged to have speculative elements. 5
5-
6+
6
6-
7+
7
Extremely vulnerable. Speculative to a high degree. 7-
8
9
10
Distribution of risk ratings:
1 2+ to 2- 3+ to 3- 4+ to 4- 5+ to 5- 6+ to 10 Total
$(000's) $(000's) $(000's) $(000's) $(000's) $(000's) $(000's)
As at 31 December 2016
Cash and cash Equivalents 531,003 17,701 26 394 29 - 549,153
Due from Related Parties - 165,906 5,891 27 - - 171,824
Derivative Financial Assets - 20,310 - - - - 20,310
Available for Sale Assets - 140,216 364,237 - - - 504,453
Loans and Advances - 95,821 528,202 136,961 49,779 42 810,805
Interest and Fees Accrued 51 681 1,530 168 268 - 2,698
531,054 440,635 899,886 137,550 50,076 42 2,059,243
1 2+ to 2- 3+ to 3- 4+ to 4- 5+ to 5- 6+ to 10 Total
$(000's) $(000's) $(000's) $(000's) $(000's) $(000's) $(000's)
As at 31 December 2015
Cash and cash Equivalents 523,490 - 28,951 23 71 - 552,535
Due from Related Parties - - 79,342 - - 1,625 80,967
Derivative Financial Assets - - 8,150 - - - 8,150
Available for Sale Assets - - 542,511 24,968 - - 567,479
Loans and Advances - 571 390,003 257,276 107,029 - 754,879
Interest and Fees Accrued 40 3 2,749 531 1,108 11 4,442 523,530 574 1,051,706 282,798 108,208 1,636 1,968,452
Citigroup Risk Rating
Risk Ratings enable the Banking Group to describe and compare all Citigroup credit exposures regardless of the nature, type or location of the credit facility. Risk
ratings are assigned on a scale of 1-10, with 1 being the highest quality risk and 10 being the lowest. A sub-grade is used to indicate a finer degree of potential risk.
Risk Rating
A Risk Rating is the numerical proxy for the 12 month risk of default on long term (over 1 year) senior unsecured debt in local currency.
Risk Rating
Vulnerable. Assurance of interest and principal payments over any long period of time may be small.
Page 27
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
22. INTEREST RATE RISK REPRICING SCHEDULE
The contractual repricing or maturity periods of financial instruments are as follows:
More than Not Interest
0-3 mths 3-6 mths 6-12 mths 1-2 years 2 years Bearing Total
As at 31 December 2016 $(000's) $(000's) $(000's) $(000's) $(000's) $(000's) $(000's)
Cash and cash Equivalents 549,153 - - - - - 549,153
Due from Related Parties 171,824 - - - - - 171,824
Available for Sale Assets 364,237 140,216 - - - - 504,453
Loans and Advances 428,305 382,500 - - - - 810,805
1,513,519 522,716 - - - - 2,036,235
Deposits from Other Banks 4,340 - - - - - 4,340
Due to Related Parties 1,004,179 - 10,000 - - 636 1,014,815
Other Deposits 834,818 - - - - 4,799 839,617
1,843,337 - 10,000 - - 5,435 1,858,772
Foreign Exchange Contracts - receive 716,596 - - - - - 716,596
Foreign Exchange Contracts - (pay) (718,147) - - - - - (718,147)
Interest Rate Swaps - receive 90,000 50,000 - - 40,000 - 180,000
Interest Rate Swaps - (pay) (90,000) (40,000) (10,000) - (40,000) - (180,000)
OFF BALANCE SHEET (1,551) 10,000 (10,000) - - - (1,551)
More than Not Interest
0-3 mths 3-6 mths 6-12 mths 1-2 years 2 years Bearing Total
As at 31 December 2015 $(000's) $(000's) $(000's) $(000's) $(000's) $(000's) $(000's)
Cash and cash Equivalents 552,535 - - - - - 552,535
Due from Related Parties 80,967 - - - - - 80,967
Available for Sale Assets 517,994 49,485 - - - - 567,479
Loans and Advances 448,519 305,000 - - 1,360 754,879 1,600,015 354,485 - - - 1,360 1,955,860
Deposits from Other Banks 21,556 - - - - 1,741 23,297
Due to Related Parties 664,668 - - - 131 664,799
Other Deposits 1,060,944 - - - - 3,252 1,064,196 1,747,168 - - - - 5,124 1,752,292
Foreign Exchange Contracts - receive 420,388 - - - - - 420,388
Foreign Exchange Contracts - (pay) (421,400) - - - - - (421,400)
Interest Rate Swaps - receive 90,000 - - 50,000 40,000 - 180,000
Interest Rate Swaps - (pay) (90,000) - - (50,000) (40,000) - (180,000) OFF BALANCE SHEET (1,012) - - - - - (1,012)
Page 28
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
23. LIQUIDITY RISK - MATURITY PROFILE
Gross
a) The contractual maturity periods of financial instruments are as follows: nominal
More than inflow/ Carrying
On Demand 0-12 mths 1-2 years 2-5 years 5 years (outflow) Amount
As at 31 December 2016 $(000's) $(000's) $(000's) $(000's) $(000's) $(000's) $(000's)
Assets
Cash and cash Equivalents 549,153 - - - - 549,153 549,153
Due from Related Parties 171,824 - - - - 171,824 171,824
Available for Sale Assets - 504,453 - - - 504,453 504,453
Loans and Advances 21,950 158,754 387,534 182,152 66,975 817,365 810,805
Other Financial Assets 147 2,551 - - - 2,698 2,698
743,074 665,758 387,534 182,152 66,975 2,045,493 2,038,933
Liabilities
Deposits from Other Banks 4,340 - - - - 4,340 4,340
Due to Related Parties 262,664 561,645 - 198,161 - 1,022,470 1,014,815
Other Deposits 830,017 9,608 - - - 839,625 839,617
Other Financial Liabilities - 1,585 - - - 1,585 1,585
1,097,021 572,838 - 198,161 - 1,868,020 1,860,357
Gross
nominal
More than inflow/ Carrying
On Demand 0-12 mths 1-2 years 2-5 years 5 years (outflow) Amount
As at 31 December 2015 $(000's) $(000's) $(000's) $(000's) $(000's) $(000's) $(000's)
Assets
Cash and cash Equivalents 552,535 - - - - 552,535 552,535
Due from Related Parties 14,467 66,521 - - - 80,988 80,967
Available for Sale Assets - 567,479 - - - 567,479 567,479
Loans and Advances 27,064 158,338 27,037 471,977 76,104 760,520 754,879
Other Financial Assets 91 4,351 - - - 4,442 4,442 594,157 796,689 27,037 471,977 76,104 1,965,964 1,960,302
Liabilities
Deposits from Other Banks 23,297 - - - - 23,297 23,297
Due to Related Parties 123,063 541,962 - - - 665,025 664,799
Other Deposits 743,784 320,618 - - - 1,064,402 1,064,196
Other Financial Liabilities 1,312 1,198 - - - 2,510 2,510 891,456 863,778 - - - 1,755,234 1,754,802
Page 29
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
23. LIQUIDITY RISK - MATURITY PROFILE (continued)
b) Liquidity Risk Management
The expected maturity periods of financial instruments are as follows:
More than
On Demand 0-12 mths 1-2 years 2 years Total
$(000's) $(000's) $(000's) $(000's) $(000's)
As at 31 December 2016
Assets
Cash and cash Equivalents 549,111 - - 42 549,153
Due from Related Parties 171,824 - - - 171,824
Available for Sale Assets - - - 504,453 504,453
Loans and Advances - - - 810,805 810,805
Other Financial Assets 263 - - 2,435 2,698
721,198 - - 1,317,735 2,038,933
Liabilities
Deposits from Other Banks 223 889 - 3,228 4,340
Due to Related Parties 262,664 553,990 - 198,161 1,014,815
Other Deposits 43,186 171,994 - 624,437 839,617
Other Financial Liabilities 50 807 - 728 1,585
306,123 727,680 - 826,554 1,860,357
Net Assets and Liabilities 415,075 (727,680) - 491,181 178,576
More than
On Demand 0-12 mths 1-2 years 2 years Total
$(000's) $(000's) $(000's) $(000's) $(000's)
As at 31 December 2015
Assets
Cash and cash Equivalents 552,348 - - 187 552,535
Due from Related Parties 14,467 66,500 - - 80,967
Available for Sale Assets - - - 567,479 567,479
Loans and Advances - - - 754,879 754,879
Other Financial Assets 466 10 - 3,966 4,442
567,281 66,510 - 1,326,511 1,960,302
Liabilities
Deposits from Other Banks 2,674 - - 20,623 23,297
Due to Related Parties 123,063 541,736 - - 664,799
Other Deposits 122,170 - - 942,026 1,064,196
Other Financial Liabilities 552 - - 1,958 2,510
248,459 541,736 - 964,607 1,754,802
Net Assets and Liabilities 318,822 (475,226) - 361,904 205,500
It is assumed that third party assets will roll over as management is not expecting any reduction in the balance sheet and are therefore shown in the > 2 years
category. The only exception is cash with central banks which is treated on a contractual maturity basis.
Liquidity risk is managed on the basis of expected maturity dates for certain products (see below) and is based on a business-as-usual view of the Banking Group's
funding requirements.
Third party liabilities are split into two main categories -
The expected maturity periods of financial instruments are based on the carrying value in the statement of financial position.
b) Corporate and other deposits. Non-volatile balances are reported in the >2 years bucket and volatile balances in the up to three months bucket. The methodology
for calculating the volatile and non-volatile balances is based on an analysis of 2.36 standard deviations of the previous twelve months' balances and the resulting
percentages are applied to the balance sheet.
a) Long-term debt which is managed on a contractual maturity basis
All related party assets and liabilities are managed on a contractual maturity basis.
Page 30
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
24. FOREIGN CURRENCY RISK 31-Dec-16 31-Dec-15
$(000's) $(000's)
The receivable/(payable) net open position in each currency is
AUD (145) (838)
CAD 103 31
CHF 125 28
EUR 291 47
GBP 103 (12)
HKD 30 19
JPY 11 16
SEK 13 11
SGD 9 27
USD 429 (166) 969 (837)
25. FAIR VALUE
Carrying Fair Carrying Fair
Fair Value of Financial Instruments Value Value Value Value
$(000's) $(000's) $(000's) $(000's)
ASSETS
Cash and cash Equivalents 549,153 549,153 552,535 552,535
Due from Related Parties 171,824 171,824 80,967 80,967
Derivative Financial Assets 20,310 20,310 8,150 8,150
Available For Sale Assets 504,453 504,453 567,479 567,479
Loans and Advances 810,805 810,805 754,879 754,879
Other Financial Assets 2,698 2,698 4,442 4,442
TOTAL ASSETS 2,059,243 2,059,243 1,968,452 1,968,452
LIABILITIES
Deposits from Other Banks 4,340 4,340 23,297 23,297
Due to Related Parties 1,014,815 1,006,414 664,799 664,799
Other Deposits 839,617 839,617 1,064,196 1,064,196
Derivative Financial Liabilities 5,624 5,624 19,514 19,514
Other Financial Liabilities 1,585 1,585 2,510 2,510
TOTAL LIABILITIES 1,865,981 1,857,580 1,774,316 1,774,316
For financial instruments not carried at fair value in the balance sheet, fair value is estimated as follows:
Cash or receivables short term in nature - the carrying value is a reasonable estimate of the fair value.
Fair Value Hierarchy:
Level 1 Level 2 Level 3 Total
As at 31 December 2016 $(000's) $(000's) $(000's) $(000's)
ASSETS
Derivative Financial Assets - 20,310 - 20,310
Available For Sale Assets 140,216 364,237 - 504,453
140,216 384,547 - 524,763
LIABILITIES
Derivative Financial Liabilities 5,624 5,624
Level 1 Level 2 Level 3 Total
As at 31 December 2015 $(000's) $(000's) $(000's) $(000's)
ASSETS
Derivative Financial Assets - 8,150 - 8,150
Available For Sale Assets - 567,479 - 567,479 - 575,629 - 575,629
LIABILITIES
Derivative Financial Liabilities - 19,514 - 19,514
Loans and Advances and Financial Liabilities carried at amortised cost with a maturity greater than six months - fair value is estimated using a discounted cash flow
model by reference to published price quotations.
Level 1. Fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2. Fair values measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
Level 3. Fair values measured using inputs for the asset or liability that are not substantially based on observable market data (i.e. unobservable inputs).
Fair Value Hierarchy of Financial Instruments:
31-Dec-1531-Dec-16
Page 31
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
25. FAIR VALUE (continued)
Financial Assets and Liabilities by Class Designated Trading Loans and Available Other Total
at receivables for sale amortised
fair value cost
$(000's) $(000's) $(000's) $(000's) $(000's) $(000's)
As at 31 December 2016
Cash and cash Equivalents - - 549,153 - - 549,153
Due from Related Parties - - 171,824 - - 171,824
Derivative Financial Assets - 20,310 - - - 20,310
Available for Sale Assets - - - 504,453 - 504,453
Loans and Advances - - 810,805 - - 810,805
Other Financial Assets - - 2,698 - - 2,698
Total carrying value - 20,310 1,534,480 504,453 - 2,059,243
Total fair value - 20,310 1,534,480 504,453 - 2,059,243
Deposits from Other Banks - - - - 4,340 4,340
Due to Related Parties - - - - 1,014,815 1,014,815
Other Deposits - - - - 839,617 839,617
Derivative Financial Liabilities - 5,624 - - - 5,624
Other Financial Liabilities - - - - 1,585 1,585
Total carrying value - 5,624 - - 1,860,357 1,865,981
Total fair value - 5,624 - - 1,851,956 1,857,580
Designated Trading Loans and Available Other Total
at receivables for sale amortised
fair value cost
$(000's) $(000's) $(000's) $(000's) $(000's) $(000's)
As at 31 December 2015
Cash and cash Equivalents - - 552,535 - - 552,535
Due from Related Parties - - 80,967 - - 80,967
Derivative Financial Assets - 8,150 - - - 8,150
Available for Sale Assets - - - 567,479 - 567,479
Loans and Advances - - 754,879 - - 754,879
Other Financial Assets - - 4,442 - - 4,442
Total carrying value - 8,150 1,392,823 567,479 - 1,968,452
Total fair value - 8,150 1,392,823 567,479 - 1,968,452
Deposits from Other Banks - - - - 23,297 23,297
Due to Related Parties - - - - 664,799 664,799
Other Deposits - - - - 1,064,196 1,064,196
Derivative Financial Liabilities - 19,514 - - - 19,514
Other Financial Liabilities - - - - 2,510 2,510
Total carrying value - 19,514 - - 1,754,802 1,774,316
Total fair value - 19,514 - - 1,754,802 1,774,316
Page 32
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
26. CONCENTRATIONS OF CREDIT EXPOSURE 31-Dec-16 31-Dec-15
$(000's) $(000's)
(a) Industry Sectors
Finance 1,194,172 1,224,309
Accommodation and Restaurants 20,033 71,357
Communication 10 83,332
Food Manufacturing 80,298 75,591
Government 150,733 10,604
Insurance 95,262 100,326
Property and Business Services 555,808 272,129
Retail Trade 97 145,698
Transport 475 86,416
Wholesale Trade 26,083 26,420
Other 49,101 28,104
2,172,072 2,124,286
Other Assets 6,133 5,766 2,178,205 2,130,052
(b) Geographical Areas
Exposures within New Zealand 1,956,438 1,964,181
Exposures to other countries (in NZD) - Great Britain 48,793 27,724
Singapore 209 43,840
USA 16,235 37,385
Other 150,397 51,156
2,172,072 2,124,286
Other Assets 6,133 5,766 2,178,205 2,130,052
The concentration of credit exposure includes both on and off balance sheet items.
ANZSIC codes have been used as the basis for disclosing industry sectors.
31-Dec-16 31-Dec-15
27. CONCENTRATIONS OF FUNDING $(000's) $(000's)
(a) Product
Transaction Call Accounts 1,097,911 888,810
Deposits 762,446 840,474
Certificates of Deposits - 24,936
Derivative Financial Instruments 5,624 19,514
Other - 582
1,865,981 1,774,316
Provisions and Other Liabilities 4,838 4,748 1,870,819 1,779,064
31-Dec-16 31-Dec-15
$(000's) $(000's)
(b) Industry Sectors
Finance 1,166,038 996,831
Communication 28,393 40,537
Food Manufacturing 19,431 23,912
Insurance 68,822 57,609
Other Manufacturing 248,230 249,181
Property and Business Services 136,044 169,849
Transport 37,763 45,619
Wholesale Trade 111,625 135,315
Other 49,635 55,463
1,865,981 1,774,316
Provisions and Other Liabilities 4,838 4,748
1,870,819 1,779,064
ANZSIC codes have been used as the basis for disclosing industry sectors.
Page 33
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
27. CONCENTRATIONS OF FUNDING (continued)
31-Dec-16 31-Dec-15
$(000's) $(000's)
(c) Geographical Areas
Exposures within New Zealand 567,770 873,938
Exposures to other countries (in NZD) - Australia 395,862 101,385
Great Britain 55,056 49,690
Singapore 174,127 109,361
United States 486,908 473,696
Other 186,258 166,246
1,865,981 1,774,316
Provisions and Other Liabilities 4,838 4,748 1,870,819 1,779,064
28. CREDIT EXPOSURES TO INDIVIDUAL COUNTERPARTIES
29. EXPOSURES TO MARKET RISK
Unaudited*
$(000's) $(000's)
Interest Rate Risk as at 31/12/16 3,500 280
Peak End-of-Date Interest Rate Risk 01/07/16-31/12/16 3,413 273
Foreign Currency Risk as at 31/12/16 963 77
Peak End-of-Date Foreign Currency Risk 01/07/16-31/12/16 3,138 251
Equity Risk as at 31/12/16 - -
Peak End-of-Date Equity Risk 01/07/16-31/12/16 - -
Interest Rate Risk as at 31/12/15 1,075 86
Peak End-of-Date Interest Rate Risk 01/07/15-31/12/15 2,013 161
Foreign Currency Risk as at 31/12/15 4,163 333
Peak End-of-Date Foreign Currency Risk 01/07/15-31/12/15 6,950 556
Equity Risk as at 31/12/16 - -
Peak End-of-Date Equity Risk 01/07/16-31/12/16 - -
Peak Exposure has been derived using the Overseas Banking Group's equity as at the end of the quarter.
Traded Market Risk
The Branch did not have traded market risk positions during 2016.
Non-Traded Market Risk
* Note 29 Exposures to Market Risk is subject to review procedures which do not constitute an audit. Refer to the Independent Auditor's Report for further
information.
Notional
Capital
Charge
For the New Zealand operations market risk oversight is achieved through factor sensitivity guidelines covering the traded market risk, non-traded market risk and
accrual portfolios. These guidelines ensure that the portfolios are managed within the Global factor sensitivity limits of Citigroup.
The entire Branch portfolio is used for liquidity management activities. It contains money market instruments, securities and interest rate hedges (some of them are
mark-to-market).
The Branch segregates its exposure to market risk between trading, non-trading and accrual portfolios.
Based on actual credit exposures, no credit exposure to any individual counterparty of CBNA New Zealand Branch and the Banking Group equaled or exceeded
10% of CBNA's equity during 2016 (2015: $nil). This did not include exposures to counterparties if they were booked outside of New Zealand.
Implied Risk
Weighted
Exposure
Market risk notional capital charges are derived in accordance with the Capital Adequacy Framework (Standardised Approach) (BS2A) per the Registered Bank
Disclosure Statements (Overseas Incorporated Registered Banks) Order 2014 (as amended).
Page 34
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
29. EXPOSURES TO MARKET RISK (continued)
Mark-to-Market Portfolio
Balance Average Maximum Minimum
for the year for the year for the year
$(000's) $(000's) $(000's) $(000's)
Year ended 31 December 2016 58 29 185 11
Year ended 31 December 2015 34 47 171 4
Accrual Portfolio
Summary of VaC position of the non trading portfolio as at period end is as follows: $(000's)
Year ended 31 December 2016 - loss to earnings 284
Year ended 31 December 2015 - loss to earnings 350
The market factors are modeled as either normal or lognormal stochastic diffusion processes. Volatility parameters are calculated using the most recent historical
time series data available, typically of three years in length. Under these assumptions the market factor returns are multivariate normal. The one-day period
covariance matrix characterizing the multivariate normal distribution of these market factor changes is estimated from the historical times series data of market
rates/prices. Limitations of the model relate to the assumptions of the distribution of the market factor changes over the holding period.
In the current portfolio interest rate risk outright and interest rate spreads contribute around 85-90% of the total VaR, with FX Spot contributing to the remaining
balance of 10-15%.
Market risk is managed and controlled using Value at Risk (VaR) along with factor sensitivities which are the standard measures used in the banking industry. VaR
is an estimate of the potential losses resulting from shifts in interest rate spreads and currency exchange rates. VaR is calculated with internally developed models
designed to capture the market risk of each specific product in the corporate portfolio. The one-day 99% VaR is obtained from the sample 1% quantile of the
distribution of portfolio P&Ls obtained as a result of the 5,000 Monte-Carlo simulated scenarios of one-day changes in the market risk factors underlying the
portfolio. The ten-day 99% USD VaR needed for regulatory risk capital is estimated similarly to the one-day 99% USD VaR by using a ten-day period covariance
matrix to characterize the multivariate normal distribution of market factor changes over a ten-day horizon. The ten-day covariance matrix is obtained from the one-
day covariance matrix by scaling the latter by a factor (squared) of 10.
The Banking Group employs Value at Close (VaC) as the principal measure to handle the non traded market risk. VaC measures the impact to earnings if the
current balance sheet gaps were closed at the market yield curve. The gaps are closed successively from the farthest tenor. Long positions are closed at the bid rate
and short positions at the offer rate. Since the methodology is a simple mark to market of the accrual book at the current market interest rates there are no
assumptions or parameters involved in this process.
Summary of VaR positions of the portfolio as at period end and during the year
are as follows:
Page 35
CITIBANK, N.A. NEW ZEALAND BRANCH AND ASSOCIATED BANKING GROUP
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2016
30. CAPITAL ADEQUACY
Unaudited*
Advanced Standardised Advanced StandardisedApproaches Approach Approaches Approach
Common Equity Tier 1 Capital ratio (1)
12.96% 12.61% 14.10% 12.69%
Tier 1 Capital ratio (1)
12.99% 12.63% 14.10% 12.69%
Total Capital ratio (1) 14.25% 15.01% 15.37% 14.93%
Tier 1 Leverage ratio 9.49% 9.80%
Supplementary Leverage ratio 6.80% 6.92%
31. IMPUTATION CREDIT ACCOUNT 31-Dec-16 31-Dec-15
$(000's) $(000's)
Balance at the beginning of the year 303 223
Imputational credits from dividends - -
Imputational credits from tax payable 81 80 Balance at the end of the year 384 303
31-Dec-16 31-Dec-15
32. TOTAL LIABILITIES TO THIRD PARTIES - BRANCH $(000's) $(000's)
Deposits from Other Banks 4,340 23,297
Other Deposits 839,617 1,064,196
Other Liabilities 4,283 6,033 848,240 1,093,526
Branch information is provided as per the Registered Bank Disclosure Statement (Overseas Incorporated Registered Banks) Order 2014 (as amended).
33. SUBSEQUENT EVENTS
31-Dec-15
⁽¹⁾ As of December 31, 2016, CBNA’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III
Standardized Approach, whereas Citibank's reportable Total Capital ratio as of December 31, 2016 was the lower derived under the Basel III Advanced
Approaches framework. As of December 31, 2015, Citibank’s reportable Common Equity Tier 1 Capital, Tier 1 Capital, and Total Capital ratios were the
lower derived under the Basel III Standardized Approach.
31-Dec-16
Below are the capital ratios of Citibank, N.A.
There has not arisen in the interval between the end of the financial year and the date of this report any other item, transaction or event of a material and unusual
nature likely, in the opinion of the directors of the Branch, to affect significantly the operations of the Banking Group, the results of those operations, or the state of
affairs of the Banking Group in future financial years.
* Note 30 Capital Adequacy is subject to review procedures which do not constitute an audit. Refer to the Independent Auditor's Report for further information.
During 2016, CBNA was subject to effective minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios, inclusive of the 25% phase in of the
2.5% Capital Conservation Buffer, of 5.125%, 6.625% and 8.625%, respectively. CBNA’s effective and stated minimum Common Equity Tier 1 Capital, Tier 1
Capital and Total Capital ratios during 2015 were equivalent at 4.5%, 6%, and 8%, respectively.
For information on the Basel III capital adequacy framework in relation to Citigroup see "Capital Resources and Liquidity - Capital Resources" in Citigroup's Annual
Report on Form 10-K for the year ended 31 December 2016. It is available on the Bank's website 'www.citi.co.nz' as part of the Disclosure Statement dated 31
December 2016.
The imputation credits are available to the shareholders of CBNA New Zealand Branch and the Banking Group through Citicorp Services Limited and Citibank
Nominees (New Zealand) Limited.
31-Dec-15
CBNA New Zealand Branch is a branch of, and each member of the Banking Group is a wholly-owned subsidiary of, CBNA, which is an indirect wholly-owned
subsidiary of Citigroup.
31-Dec-16
Page 36