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Citibank Japan Ltd.
Interim Disclosure Report as of September 30, 2015
Table of Contents
Message from the CEO 1
Company Overview 2
Our History 5
Management Strategy 6
Business Outline 8
Risk Management Framework 15
Compliance Framework 18
Diversity and CSR Activities 19
List of Citibank Japan's branches 20
Citibank Japan Ltd. Financial Information under Japanese GAAP 21 For six months ended September 30, 2015
1. Matters Related to Principal Business
2. Financial Statements
3. Market Value Information
4. Major Shareholders
5. Disclosure Items Based on Pillar 3 of Basel III
Message from the CEO
To Our Valued Customers,
I am honored to serve as President & CEO of Citibank Japan Ltd.
Citibank has a 113-year history in Japan, and today Citibank Japan proudly serves governmental institutions, financial institutions, multinational corporations and institutional investors across a range of corporate banking, lending, transaction services and markets businesses.
Citibank Japan has built a reputation for providing innovative and high quality products and services and for delivering the power of Citi's unrivalled global network to support our clients. We are committed to continuing to serve our clients in Japan; to being a bank with strong governance and controls; to making meaningful contributions to Japan’s economy and banking system; and to being a responsible member of Japanese society.
Thank you very much for your continued patronage and support.
January 2016
Anthony P. Della Pietra, Jr. Representative Director, President & CEO
Citibank Japan Ltd.
Citibank Japan Ltd. 1
Company Overview
Company Profile
Company Name Citibank Japan Ltd. (“CJL”) Head Office Address Shin-Marunouchi Building,
5-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo, 100-6520
Bank Code 0401 Head Office Branch Code 730 Telephone Number 03-6897-5000 Commencement of Operations July 1, 2007 (International Banking Corporation, a
predecessor to Citibank, opened its Yokohama branch in October 1902)
Business Overview As one of Citi's core entities in Japan, CJL is engaged in a range of corporate banking, lending, transaction services and markets businesses on behalf of institutional clients.
Number of Employees 481 (As of November 1, 2015) Number of Locations 4 (Head Office, Higashi Shinjuku, Osaka, Okinawa)
Directors and Statutory Auditors* Representative Director, President Anthony P. Della Pietra, Jr. Director, Chairman Tatsuo Tanaka Director Koichi Tanaka Director Shirish Apte Director Phee Boon Kang Director Ryozo Hayashi Statutory Auditor (full-time, outside) Mamoru Sato Statutory Auditor (outside) Toshiaki Kawashima Statutory Auditor Hiroto Sakai
(*) Chronological order of appointment for the same title Executive Officers
CEO Anthony P. Della Pietra, Jr. Deputy President and Chief Administrative Officer Koichi Tanaka Deputy President Grant Carson Deputy President and Head of Corporate Banking Division Gerald Keefe
Head of Transaction Services Division Ravi Saxena Head of Markets Division Kii Ko Head of Transition Management Office Division Hari Iyer Head of Corporate Planning Division Hiroaki Nigo Head of Legal Division Yasuto Hashinaga Head of Compliance Division Koichi Tanaka Head of Finance Division Susan Aziz Head of Risk Management Division Rajesh Paradkar Head of Human Resources Division Joel Fastenberg Head of Operations & Technology Division Shankar Ramasami Chief Auditor Yuichi Ito
(As of December 30, 2015 except for Number of Employees)
Citibank Japan Ltd. 2
Organizational Structure
(As of December 30, 2015)
Financial Summary (From 03/2013 to 09/2015)
(Billions of Yen) 03/2013 09/2013 03/2014 09/2014 03/2015 09/2015 Ordinary income 64.6 34.7 68.3 32.1 66.3 35.0 Ordinary profit (loss) △1.5 1.4 2.8 △2.8 △3.4 0.6 Total Assets 4,374.5 4,536.0 4,513.9 5,267.0 5,057.2 5,718.6 Deposits 3,541.5 3,906.9 3,636.0 3,897.4 3,924.8 4,274.7 Total Net Assets 262.8 262.1 256.3 254.9 252.3 250.5 Capital Stock 123.1 123.1 123.1 123.1 123.1 123.1 Capital Adequacy Ratio 28.47% 28.62% 25.72% 23.90% 30.26% 30.94%
Credit Ratings
Moody's S&P Fitch Rating Outlook Rating Credit Watch Rating Outlook
Citibank Japan Ltd. Long Term A1 Stable A Positive A Positive
Citigroup Inc. Long Term Baa1 Stable BBB+ Stable A Stable
Citibank,N.A. Long Term A1 Stable A Positive A+ Stable
(As of December 30, 2015) For further details, please refer to Citigroup Credit Ratings at http://www.citigroup.com/citi/investor/rate.htm
Shareholders Meeting
Board of Statutory Auditors
Board of Directors
President & CEO Management Committee
Corporate B
anking Division
Hum
an Resources D
ivision
Com
pliance Division
Legal Division
Corporate P
lanning Division
Transaction Services D
ivision
Internal Audit
Division
Chief A
dministrative O
fficer
Transition Managem
ent Office
Markets
Division
Risk M
anagement D
ivision
Operations &
Technology Division
Finance Division
Citibank Japan Ltd. 3
Deposit Insurance
Citibank Japan (“CJL”) has its head office located in Japan and is a member of the Deposit Insurance Corporation (DIC). Pursuant to the Deposit Insurance System, non-interest-bearing Yen deposits for payment and settlement purposes accepted by CJL are protected in full per depositor; and interest-bearing Yen deposits accepted by CJL are protected up to a maximum of 10 million yen in principal plus related interest thereon per depositor.
Bank Agency Service 1) Name of Bank Agent Citigroup Global Markets Japan, Inc. (“CGMJ”) Offices of Bank Agent CGMJ Tokyo Headquarters Service Coverage - Intermediation for conclusion of a contract on acceptance of
deposits or installment savings, etc.; and - Intermediation for conclusion of a contract on exchange
transactions
2) Name of Bank Agent SMBC Trust Bank Ltd. Offices of Bank Agent 24 branches below:
Aoyama, Akasaka, Ginza, Gotanda, Shibuya, Ikebukuro, Ohtemachi, Shinjuku Minamiguchi, Tachikawa, Shinjuku Higashiguchi, Hiroo, Nihonbashi, Yokohama, Urawa, Chiba, Umeda, Osaka Ekimae, Shinsaibashi, Ashiya, Kobe, Kyoto, Nagoya, Sapporo and Fukuoka
Service Coverage - Intermediation for acceptance of cash for the credit of savings and current accounts; and
- Intermediation for cash payment and debiting from savings or current accounts
Foreign Bank Agency Service
Designated Dispute Resolution Organization for CJL
Japanese Bankers Association (“JBA”) Contact for consultation and exchange of views: JBA Customer Relations Center 0570-017109 or 03-5252-3772
CJL has concluded a Basic Contract for Implementation of Dispute Resolution Procedure with JBA, the Designated Dispute Resolution Organization under the Banking Act. JBA runs the JBA Customer Relations Center as a contact point to which customers can go for consultation and inquiries or to which they can direct their opinions and complaints about banks. Refer to the JBA website for more information. http://www.zenginkyo.or.jp/adr/ * JBA Customer Relations Center’s services are available only in Japanese.
Name of Affiliated Foreign Bank
Citibank, N.A.
Offices of Bank Agent CJL Head Office and Osaka Branch Service Coverage - Intermediation for acceptance of deposits or installment savings,
etc.; - Intermediation for making of loans or discounting and negotiation
of bills/notes; - Intermediation for exchange transactions; - Intermediation for issuance of bank guarantee and acceptance of
bills/notes; and - Intermediation for other ancillary services associated with
acceptance of letters of credit (“LC”) and other services relevant to LCs, etc.)
Citibank Japan Ltd. 4
Our History
1812 City Bank of New York is established. 1902 International Banking Corporation opens its first branch in Yokohama. 1923 International Banking Corporation opens Tokyo Branch (temporarily closed in 1941, reopened in 1946). 1973 First National City Corporation is listed on Tokyo Stock Exchange (delisted in 1998 with the merger between Citicorp and Travelers Group). 1974 First National City Corporation holding company changes its name to Citicorp. 1977 Citibank N.A. launches Citicard Banking Centers, anchored by ATMs and accessible via CitiCard. 1980 Decades of innovation and expansion lead to Citibank having
operations in 90 countries. 1998 Citicorp and Travelers Group merge to form Citigroup Inc.
2007 Citibank Japan Ltd. commences operations as a locally incorporated bank. Citigroup Inc.’s shares listed on the first section of the Tokyo Stock Exchange. 2011 Citi expands its Japan Desk network around the globe, opening in Dubai and Sao Paolo (10 locations as of November 1, 2015). 2012 Citi celebrates its 200th anniversary globally and its 110th anniversary in Japan.
Citibank Japan Ltd. 5
Management Strategy
Citi’s Mission and Value Proposition: A Mission of Enabling Progress
Citi's mission is to serve as a trusted partner to our clients by responsibly providing financial services that enable growth and economic progress. Our core activities are safeguarding assets, lending money, making payments and accessing the capital markets on behalf of our clients. We have 200 years of experience helping our clients meet the world's toughest challenges and embrace its greatest opportunities. We are Citi, the global bank—an institution connecting millions of people across hundreds of countries and cities.
We protect people's savings and help them make the purchases—from everyday transactions to buying a home—that improve the quality of their lives. We advise people on how to invest for future needs, such as their children's education and their own retirement, and help them buy securities such as stocks and bonds.
We work with companies to optimize their daily operations, whether they need working capital, to make payroll or export their goods overseas. By lending to companies large and small, we help them grow, creating jobs and real economic value at home and in communities around the world. We provide financing and support to governments at all levels, so they can build sustainable infrastructure, such as housing, transportation, schools and other vital public works.
These capabilities create an obligation to act responsibly, do everything possible to create the best outcomes, and prudently manage risk. If we fall short, we will take decisive action and learn from our experience. We strive to earn and maintain the public's trust by constantly adhering to the highest ethical standards. We ask our colleagues to ensure that their decisions pass three tests: they are in our clients' interests, create economic value, and are always systemically responsible. When we do these things well, we make a positive financial and social impact in the communities we serve and show what a global bank can do.
Citibank Japan’s Management Strategy
Citibank Japan has a long and distinguished history serving institutional clients in Japan. We have a proud legacy of developing innovative relationship-driven solutions for our clients and delivering the power of Citi’s global network to meet their needs. Citibank Japan aims to be the leading global bank for a select set of Japan’s leading multi-national companies and institutions, as well as the leading global bank serving Citi’s non-Japanese multi-national and institutional clients with operations or investments in Japan. Citibank Japan focuses on providing comprehensive global relationship management services to a targeted set of Japan’s largest multi-national companies and institutions. We coordinate and leverage Citi’s broad range of products and services, together with Citi’s unrivaled global network, in order to support the growth ambitions of our clients in Japan and around the globe. Our core set of product and services at Citibank Japan is offered by three product groups that work closely with one another and with our relationship managers to serve our clients: Transaction Services Division (Cash Management, Trade Finance, Export Agency Finance and Securities Fund Services), Markets Division (Foreign Exchange and Markets Treasury), and Corporate Finance Department (Structured Finance, Real Estate and Acquisition Finance & Syndicated Lending). Widely recognized as an industry leader, Citibank Japan has been consistently ranked at the top of major industry surveys, in particular for transaction services and foreign exchange.
Citibank Japan Ltd. 6
We have further strengthened our capability to support our Japanese clients around the globe through “Japan Desks” offering exclusive relationship management efforts by experienced Japanese bankers. We have recently expanded the network to 10 countries. Many of these Japan Desks provide coverage to neighboring countries and jurisdictions. Our client support structure has become increasingly more available pan-regionally around the globe, covering North and South America, Europe, Middle East, Africa, and Asia. Citi’s Japan Desk Network is an unrivaled and unique service to our clients. CJL is committed to providing a working environment where its employees can thrive and achieve their full potential. By attracting and training the best people, and providing them broad career development opportunities at every level, we aim to foster an environment where employees are able to provide our clients with outstanding financial products, services and advice that fit their needs over the long term. CJL is proud of its contributions to a broad range of diversity and community initiatives. Our community activities focus broadly on improving access to financial education, assisting those with disabilities, and promoting environmental and social sustainability, as well as development of the communities in which we operate.
Citibank Japan Ltd. 7
Business Outline
Corporate Banking Division
In corporate banking, Citibank Japan focuses on providing comprehensive global relationship management services to a targeted set of Japan’s largest multi-national companies and institutions and non-Japanese multi-national clients with interests in Japan. We coordinate and leverage Citi’s broad range of products and services, together with Citi’s unrivalled global network, in order to support the growth ambitions of our clients both here in Japan and around the globe. The Corporate Banking Division, located in Tokyo and Osaka, focuses on delivering innovative relationship-driven solutions for our clients’ needs, both for their day-to-day operations and their strategic business objectives. The Corporate Banking Division has a client group consisting of relationship managers and a product group responsible for Corporate Finance product development and offerings. Citibank Japan also has product groups in Transaction Services and in Markets. The client group and product groups together provide solutions to meet the diversified needs of our clients. Each client group and product group coordinates across the respective global network within Citi, which enables us to build comprehensive relationships with our clients and their affiliates both in Japan and overseas. This has been the unique and unrivalled strength of Citi. <Major Business Activities> Our client coverage model consists of 5 departments: Global Industrials Dept., Global Corporates Dept., Financial Institutions Dept., Global Subsidiaries Group Dept. and Corporate Finance & Real Estate Dept. Each client coverage department is committed to serving the unique needs of their client set, by combining information and services with specialized Industry insight. By combining a deep understanding of each client’s unique needs with a view of key industry trends, we are in a position to tailor structured solutions to help our clients meet their growth ambitions. We focus on responding to our clients’ various day-to-day needs, as well as strategic business objectives by offering financing alternatives in an effort to build and further deepen long term relationships. <“Japan Desks”> In coordination with "Japan Desks" which operate within Citi's affiliates abroad, the Corporate Banking Division has strengthened Citibank Japan’s capability to support our Japanese clients around the globe. These "Japan Desks" are located in 10 countries and offer exclusive relationship management efforts by experienced Japanese bankers. Many of these Japan Desks provide coverage to neighboring countries and jurisdictions. The Japan Desk network has become increasingly more available pan-regionally around the globe, covering North and South America, Europe, Middle East, Africa, and Asia. Citi’s Japan Desk Network is an unrivalled and unique service to our clients. Japan Desk bankers leverage their vast experiences in Japan, continue to build and further deepen great relationships with our clients and colleagues around the globe, and support our clients to meet their financial needs.
Citibank Japan Ltd. 8
< Japan Desk Locations>
United Kingdom (London) Singapore
Russia (Moscow) China (Hong Kong)
India (Delhi) United States (New York)
Thailand (Bangkok) Brazil (Sao Paulo)
Indonesia (Jakarta) United Arab Emirates (Dubai)
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● Japan Desk Locations
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Global Markets
Financial Advice
Acquisition Finance & Syndication Lending
Transaction Services
Managing Risks
Global Relationship Management
Investing Money Moving Money
Raising Money
Corporate Finance
Citi’s Japan Desks around the World (As of November 1, 2015)
Citibank Japan Ltd. 9
Transaction Services Division The Transaction Services Division provides various products and services in the Treasury and Trade Solutions (TTS) and Securities Services (SS) businesses. Our services integrate cash management, trade finance, and securities services to multinational corporations, financial institutions and public sector clients in Japan and around the world.
Transaction Services is closely aligned with three important on-going trends - globalization, urbanization and digitization – and as the business world continues to internationalize and our clients continue to expand globally, we have been stepping up support to assist our Japanese and other global clients in their expansion efforts. Capabilities Leveraging the industry's largest proprietary network, we serve both the local and cross-border interests of clients. As Japanese companies continue the process of rapid globalization, Citi is positioned to be their partner and Global Bank. The Transaction Services Division is part of Citi’s global network servicing clients in over 100 countries and top cities around the world. Experience Transaction Services is part of Citi’s legacy in Japan which dates back over 110 years to when we opened our first Japanese branch. We strive to be a trusted advisor to our clients on industry issues such as local securities markets, emerging markets, settlement risk, receivables and payment processes, securities infrastructure and technology integration, regulatory organizations and third-party partners. Innovation Our on-line portal, CitiDirect BE, and its mobile/tablet version are examples of Citi’s investments in innovation that add to our offering of solutions in Japan. We have introduced a Japanese language version of our mobile smart phone application and tablet version, and we provide our clients in Japan with treasury analytics and technology tools to enhance their efforts to effectively manage their businesses.
< Major Business Activities > Treasury and Trade Solutions Citi serves our clients as an industry leader in cash management solutions. With 232 connections to cash clearing systems across the globe, Citi has a global infrastructure providing a wide range of innovative financial solutions. Our extensive network of qualified banking professionals provides a combination of local knowledge and global expertise to help meet clients’ strategic business goals. Citi's portfolio of global cash management products offers tailored solutions to help manage collection and payment processes by establishing interfaces between the client’s treasury system and Citi's payment systems. Trade Finance and Services Unit provides web-based, simple and quick supplier financing services not only for domestic purchases in Japan but also for purchases in foreign countries. Various risk-hedge solutions are provided to clients’ exports to help them effectively manage their risk and supply chains. In addition to traditional financial support for exports and investments from Japan, our Export & Agency Finance Unit provides new services such as medium-long term loans for overseas Japanese subsidiaries’ exports to emerging markets and agricultural commodities imported by our clients in Japan. Securities Services In Securities Services, Citibank Japan supports foreign investors’ investment in Japanese securities through our stable capabilities in yen custody services. In addition to these traditional services, the introduction of innovative Third Party Clearing offerings allow our resident intermediary clients to focus on what matters most to them, to grow their core businesses through our clearing and settlement
Citibank Japan Ltd. 10
outsourcing solutions. Our proprietary network is the largest in the industry with direct access in 60 markets globally, surpassing our closest competitor by over 20 markets.
Recent Global and Local Accolades and Awards
Global Finance - World’s Best Treasury & Cash Management Providers 2015
Global Finance - Best Overall Global Digital Bank 2015
The Banker’s 2015 Transaction Banking Awards – Best Global Transaction Bank
Citi named in Global Finance’s “The Innovators 2015” List for transaction services
Euromoney - Global Bank of the Year
Euromoney - Best Bank in Asia in 2015
Asiamoney - Best Global Cash Management Bank in Asia Pacific-2015 as voted by Medium Corporates in Cash Management Poll.
Global Trade Review’s Leaders in Trade Awards 2015 - Best Global Trade Finance Bank 2015 and Best Global Supply Chain Finance Bank
Global Custodian - Top Rating in 18 markets globally including Japan 2015
The Asset, Triple A Asset Servicing Awards 2015 - Best Global Custodian Bank in Asia
The Asset, Triple A Treasury, Trade and Risk Management Awards 2015
- Best Transaction Bank in Asia Pacific
- Best Liquidity Management Bank in Asia Pacific
- Best ECA-Financing Bank in Asia Pacific
Asia Asset Management – Best of the Best Awards 2014- Best Local Custodian in Asia Pacific
TMI magazine’s (Treasury Management International) “2015 Awards for Innovation & Excellence in Treasury & Risk Management”- Citi won six awards for our regional expertise and technology solutions)
Citibank Japan Ltd. 11
Citibank Japan Ltd. 12
Markets Division
The Markets Division provides foreign exchange, money market and derivative products and services to the clients that are served by the Corporate Banking Division and the Transaction Services Division. The division focuses on market trades and aims to build a more robust transaction base for customers by providing more valuable information. The Market Sales Department consists of three units – Corporate FX Sales, Corporate Derivative Sales and Retail FX Options – and conducts foreign exchange and derivative transactions on behalf of corporate and institutional clients. The Corporate FX Sales unit leverages Citi’s international network and global resources to deliver real-time information to clients. The unit also provides various types of risk-management related advice and foreign exchange transaction support, building on its well-established and powerful presence as a “market maker” in the foreign exchange market. The Corporate Derivative Sales unit offers a wide range of derivative solutions to clients, in order to satisfy their diverse needs. The Markets Treasury Department conducts money market transactions in various currencies, in order to meet the funding and investment needs of Citibank Japan’s clients. Markets Treasury also acts as a funding department within Citibank Japan. Based on the policy decisions of the Asset Liability Committee, a sub-committee of Citibank Japan’s Management Committee, Markets Treasury ensures appropriate liquidity management and conducts banking account management as part of the comprehensive risk management framework, in coordination with the Corporate Treasury Unit, which is responsible for liquidity risk management.
Citibank Japan Ltd. 13
List of CJL’s Major Activities
CJL provides the following products and services:
1. Acceptance of Deposits Current deposit, savings deposit, time deposit, negotiable certificate of deposit, foreign currency deposit, etc.
2. Fund Lending etc.
Loan on bills, loan on deeds, overdraft, discount of commercial bills, etc. 3. Fund Transfer, etc.
Outward/inward remittance, fund transfer and collection of payment 4. Foreign Exchange, etc.
Foreign exchange transactions (including foreign currency sales and purchase) 5. Others
(1) Guaranty of liabilities (acceptance of payments), issuance of letter of credit and acceptance of bills
(2) Arrangement for syndicated loan (3) Trade finance (purchase of trade notes, etc.) (4) Investment / Trading in securities (Japanese government bonds, etc.) (5) Acquisition or transfer of monetary claims, and securitization related services (6) Handling of receipt of money and other affairs pertaining to money of Government of
Japan, local public authorities, and companies, etc. (7) Dealing in financial derivatives (interest rate, currency, etc.) (8) Safekeeping and transfer of securities, etc. (9) Brokerage for clearing of securities, etc. (10) Handling of private placement of securities (11) Money Exchange (12) Foreign Bank Agency Service (13) Transaction service for electronically recorded monetary claims
Citibank Japan Ltd. 14
Risk Management Framework
Risk Management Structure Citibank Japan’s risk management framework balances strong corporate oversight by the Board of Directors with well defined oversight roles and responsibilities amongst the Control functions covering the various risk types. Citibank Japan has the following three layers of risk management and controls:
1) Risk ownership by the business divisions 2) Oversight by the control functions 3) Independent assessment by Internal Audit
All three layers of control work together to achieve Citibank Japan’s shared goals with the following particular items:
• To maintain a highly effective control environment and to establish efficient, proactive risk management; and
• To foster appropriate solutions for our clients and to facilitate business growth in accordance with agreed strategic goals and within the risk management framework of Citibank Japan
Citibank Japan’s “Comprehensive Risk Management Policy”, which is approved by the Board of Directors, defines the bank’s risk management structure, and its “Comprehensive Risk Management Rules” defines the bank’s risk management procedures. CJL adopts a comprehensive risk management approach and a Comprehensive Risk Manager who oversees risks will ensure that Management Committee and the Board of Directors are kept advised of the risks of and to CJL in a comprehensive management.
Types of risk to be managed Citibank Japan identifies credit risk, market risk, liquidity risk, and operational risk as major risks, each of which is subject to its own risk management framework.
• Credit Risk
1. Structure of Credit Risk Management: Credit risk is the risk of loss arising from decline in asset value attributable to deterioration of obligor’s credit condition. It includes the risk of difficulty to collect principal and interest due to default of obligor and decline in credit value due to increase of reserves arising from deterioration of obligor’s credit condition. Citibank Japan comprehensively manages its credit risk in the corporate banking business pursuant to the bank’s “Credit Risk Management Policy”. Citibank Japan also follows Citi’s “Institutional Client Group Risk Management Manual” as part of its credit risk management framework. Furthermore, the bank’s Credit Risk Management Committee (“CRMC”), which is led by the Head of the Risk Management Division, oversees Citibank Japan’s overall credit risk management efforts, including the self-assessment of assets.
2. Procedure of Credit Risk Management: Citibank Japan manages credit risk based on obligor analysis and whole portfolio analysis, monitoring concentration of credit to certain industries, ratings, obligors on relationship basis and delinquency trend of a portfolio. Such portfolio view of our credit exposures is reviewed and reported to the Credit Risk Management Committee in a timely manner.
Citibank Japan Ltd. 15
• Market Risk / Liquidity Risk 1. Structure of Market Risk / Liquidity Risk Management:
Market risk is the risk of loss as a result of a change in the value of assets and liabilities due to changing market prices. Liquidity risk is the risk of loss as a result of Citibank Japan finding it difficult to secure necessary funds and to meet liquidity obligations due to a rise in funding cost, a mismatch between the maturities of assets and liabilities or an unprecedented outflow of funds. Within Citibank Japan, market risk and liquidity risk management structures are established and operated in accordance with the bank’s “Liquidity Risk Management Policy”, “Market Risk Management Policy” and related management policies and procedures. Furthermore, Citibank Japan’s Asset Liability Committee (“ALCO”), which is chaired by the President and co-chaired by the Head of the Corporate Treasury Department, oversees market risk and liquidity risk, monitors Citibank Japan’s accrual portfolio and trading portfolio, and manages the bank’s balance sheet and capital adequacy.
2. Procedure of Market / Liquidity Risk Management:
The Market Risk Management Department captures consolidated profiles of interest rates and durations of the financial assets and liabilities, performs risk monitoring process using gap analysis and interest rate factor sensitivity analysis, and reports the result to the ALCO meeting on a regular basis. Citibank Japan’s market risk amount is measured by Value-at-Risk (“VaR”) method quantitatively, which is also used to measure the effectiveness of compliance with established guidelines. ALCO oversees liquidity risk by monitoring various liquidity ratios such as Large Fund Provider concentration ratio and the Total Customer Deposits / Total Customer Loans ratio. ALCO also monitors whether there is sufficient liquidity to meet all maturing obligations within 12 months under the Highly Stressed Market Disruption stress scenario.
• Operational Risk 1. Structure of Operational Risk Management:
Operational risk is the risk of loss as a result of inadequate or failed internal processes, systems, or human factors, or from external events. It includes reputation and franchise risk associated with business practices or market conduct. It also includes the risk of failing to comply with laws, regulations, ethical standards, regulatory administrative actions or internal policies. To comprehensively manage operational risk, Citibank Japan has adopted policies and rules which clearly define the control processes for the relevant risks, as well as assessment and reporting procedures. Citibank Japan separately manages its Jimu risk and systems risk in accordance with established policies and standards. Moreover, Citibank Japan’s Operational Risk Management Unit under the Risk Management Division is responsible for comprehensive operational risk management across the bank. The status update of operational risk management is reported to Business Risk, Compliance & Control Committee (“BRCC”), and Jimu risk and systems risk are regularly reported to the System and Operations Committee (“SOC”).
2. Procedure of Operational Risk Management: Citibank Japan uses a Manager’s Control Assessment (“MCA”) program as a tool to manage “significant" operational risks. The MCA is used to self-assess key operational risks and controls and identify and address weaknesses in the design and/or effectiveness of internal controls that mitigate significant operational risks. Corrective actions are monitored
Citibank Japan Ltd. 16
continuously for full implementation. Results of the MCA are reported to management through the BRCC on a regular basis.
Citibank Japan Ltd. 17
Compliance Framework
Basic Policy
As a bank, Citibank Japan fully recognizes the importance of its social responsibilities and the public nature of its business. We understand that conducting business with fairness and integrity based on Citi’s Code of Conduct and in compliance with laws and regulations, etc. is the basic principle of our management.
Compliance Management Framework
The Compliance Division covers compliance related matters and is independent from the bank’s businesses. The Compliance Division consists of four units: (i) Corporate Banking Compliance Unit, (ii) Anti-Money Laundering Compliance Unit, (iii) Infrastructure Unit and (iv) Compliance Testing Unit. The Corporate Banking Compliance Unit is responsible for compliance matters relevant to the conduct of the bank’s businesses, the AML Compliance Unit covers matters relevant to anti-social forces and the prevention of money laundering, and the Infrastructure Unit is responsible for matters relevant to overall operations. The Compliance Testing Unit is responsible for testing to assure that controls over compliance matters are reasonably designed and functioning effectively. The Compliance Division owns the Code of Conduct and, in accordance with the Compliance Policy, promotes compliance and cultivates a compliance mindset, through the following activities among others:
The Compliance Division reports compliance related issues and compliance status to the Business Risk, Compliance and Control Committee and the Management Committee on a regular and ad-hoc basis. Material issues are escalated to the Board of Directors through the Management Committee.
Preventive Measures against Anti-Social Forces and Money Laundering
Citibank Japan considers that preventive measures against anti-social forces and money laundering are one of the most important parts of legal compliance as a financial institution with public nature, and has continued its efforts to establish a proper prevention framework.
Measures against Compliance Breaches
It is the responsibility of each of the bank’s directors and employees to comply with the Code of Conduct, which provides an overview of the key policies and conduct standards applicable to all bank staff. We strongly encourage employees to raise concerns or questions regarding ethics and applicable laws, regulations and policies, and to report violations and suspected violations in accordance with the relevant internal policies. We believe that it is critical to identify issues at an early stage and proactively resolve those issues in order to maintain the highest standards of conduct required at a financial institution. Citibank Japan has established, in addition to the standard reporting procedures, an Ethics Hotline in order to properly take measures for a violation or a suspected violation of legal compliance.
• Advice and support related to Compliance • Creation and execution of internal rules related to Compliance • Oversight of the development and maintenance of adequate risk management systems related to
Compliance • Education and training related to Compliance • Monitoring of legal and regulatory developments that affect the bank • Oversight of the development and maintenance of adequate risk management systems related to
Anti-Money Laundering activities, including customer identification and matters related to Anti Social Forces
• Conduct of Compliance Testing
Citibank Japan Ltd. 18
Diversity and CSR Activities
Citibank Japan pursues Corporate Social Responsibility (“CSR”) activities in alignment with Citi’s global policies and priorities. We embrace the responsibility, as a socially responsible financial group, to make a difference in the community and to promote environmental and social sustainability by building positive relationships with customers, employees and their families, the community, and other stakeholders. Through our CSR activities, we respond to corporate governance and compliance initiatives and also reinforce our commitment to Financial Education, Community Development, the Environment, Disaster Relief, and Diversity with employees from various backgrounds and nationalities.
Financial Education
Citi's philosophy provides that, with financial education, everyone has the chance to make their dreams come true. Citi feels that this creates a need for financial education programs so that the next generation of children can learn not just about money and the economy, but also how to think effectively, and ultimately plan their careers and lives in order to realize their dreams.
Environment
We undertake various environmental activities by mobilizing our employees to act for the benefit of the earth and future generations. We aim to reduce our environmental footprint by embedding eco-friendly practices into our business and implementing green building practices. Citi supports the environment in three key areas
• Environment Conservation Activities • Environmental and
Social Risk Management
• Environmentally Sustainable Operations
Community Development Disaster Relief
Citi values its relationships with the communities where its employees and their families live and work. By organizing and participating in fundraising events, by helping out with community bazaars and by undertaking various other volunteer efforts, we foster our relationship with the community. We fulfill our social responsibility by committing not only donations but also by participating in programs as volunteers.
• Children in Need • Community in General • People with Disabilities • Tohoku
In addition to on-going philanthropic efforts, when disaster strikes, Citi strives to support the victims of natural catastrophes in a timely and compassionate manner. In support of relief activities both locally and in conjunction with global efforts, Citi employees give their own time and resources to bring some order to the lives of those affected. Citi in Japan supports employee efforts by matching monetary donations and helping organize non-monetary relief.
Diversity
We see diversity as a source of strength. Therefore, we have made it a priority to foster a culture where the best people want to work, where people are promoted on their merits, where we value and respect others and where opportunities to develop are widely available to all - regardless of differences. We encourage our employees to participate and take responsibility for their engagement in diversity activities, internally and externally, which adds to the richness of the society in which we live. <Major Activities> • Improving career development for women;
Celebrating women’s success, International Women’s day 2015 • Promoting an appropriate Work-Life Balance • Encouraging the hiring of people with disabilities
Citibank Japan Ltd. 19
<List of CJL's locations in Japan>
As of January 2016
Locations (Head Office, Higashi-Shinjuku, Osaka, Okinawa) Total:4
Head Office Shin-Marunouchi Building, 5-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo Osaka Branch Midosuji Diamond Bldg., 2-1-2 Nishi-Shinsaibashi, Chuo-ku, Osaka-shi, Osaka Yamabuki Branch Shinjuku Eastside Square, 6-27-30 Shinjuku, Shinjuku-ku, Tokyo Higashi-Shinjuku Sub-Branch Shinjuku Eastside Square, 6-27-30 Shinjuku, Shinjuku-ku, Tokyo Okinawa Sub-Branch Tomari Port Terminal Bldg.,3-25-1 Maejima, Naha-shi, Okinawa
Citibank Japan Ltd. 20
Citibank Japan Ltd.
Interim Disclosure Report As of September 30, 2015
Citibank Japan Ltd. 21
1. Matters Related to Principal Business
< Business Overview>
Results of Operations for the 6 months ended September 30, 2015
• We had a net income of 0.1 billion yen for the 6 months ended September 30, 2015 compared to net loss of 1.9 billion yen for the same period of the prior fiscal year.
• Ordinary income totaled 35.0 billion yen, up by 2.8 billion yen from the same period of the prior
fiscal year.
Interest income totaled 11.0 billion yen, down by 2.7 billion yen from the same period of the prior fiscal year.
Fees and commissions totaled 11.2 billion yen, up by 0.3 billion yen from the same period of the prior fiscal year.
Trading income totaled 0.4 billion yen up by 0.3 billion yen from the same period of the prior fiscal year.
Other ordinary income totaled 11.8 billion yen, up by 4.6 billion yen from the same period of the prior fiscal year.
• Ordinary expenses totaled 34.3 billion yen, down by 0.6 billion yen from the same period of the
prior fiscal year.
Interest expenses totaled 3.7 billion yen, up by 1.7 billion from the same period of the prior fiscal year.
Fees and commissions paid totaled 1.4 billion yen, up by 0.07 billion yen from the same period of the prior fiscal year.
Trading losses were zero,versus 0.1 billion yen in the prior fiscal year. General and administrative expenses totaled 29.1 billion yen, down by 2.1 billion yen from the
same period of the prior fiscal year. • Ordinary profit was 0.6 billion yen compared to ordinary loss of 2.8 billion yen in the same period
of the prior fiscal year. • Income before income taxes (including extraordinary income and loss) was 0.6 billion yen
compared to loss before income taxes of 2.8 billion yen in the same period of the prior fiscal year.
Assets, liabilities, net assets, cash flows, and capital adequacy ratio were as follows;
• As of September 30, 2015, total assets were 5,718.6 billion yen, up by 661.4 billion yen compared to March 31, 2015.
Cash and deposits to other banks (due from banks) totaled 4,044.6 billion yen, up by 951.1
billion yen from the prior fiscal year end. Call loans were zero, down by 3.3 billion yen from the prior fiscal year end. Receivables under resale agreements were 548.5 billion yen, up by 79.7 billion yen from the
prior fiscal year end. Securities down by 398.5 billion yen to 102.4 billion yen Loans and bills discounted totaled 499.1 billion yen, up by 14.0 billion yen from the prior fiscal
year end. Other assets totaled 175.8 billion yen, down by 18.7 billion yen from the prior fiscal year end
mainly due to decrease in Derivatives other than for trading-assets and Cash collateral paid for financial instruments.
Citibank Japan Ltd. 22
• As of September 30, 2015, total liabilities were 5,468.1 billion yen, up by 663.1 billion yen
compared to March 31, 2015. Deposits totaled 4,274.7 billion yen, up by 349.8 billion yen from the prior fiscal year end. Foreign exchanges totaled 820.2 billion yen, up by 297.2 billion yen from the prior fiscal year
end. Other liabilities totaled 174.5 billion yen, down by 23.3 billion yen mainly due to decrease in
Derivatives other than for trading-assets. • As of September 30, 2015, total net assets were 250.5 billion yen, down by 1.7 billion yen
compared to March 31, 2015. • Cash flows from operating activities in the year totaled 292.9 billion yen (Inflow). Cash from
investing activities was 398.5 billion yen (Inflow). As a result, cash and cash equivalents as of the end of the period totaled 3,068.3 billion yen.
• The capital adequacy ratio (Basel3 National standards) at the end of the period was 30.94%.
(30.26% as of March 31, 2015) .
Citibank Japan Ltd. 23
<Summary of Principal Business/Financial Indicators> (Millions of Yen)
Ordinary income 34,767 32,185 35,060 68,305 66,302
Ordinary profit (loss) 1,454 -2,812 682 2,867 -3,478
Net income (loss) - Interim 677 -1,956 137 - -
Net income (loss) - - - 1,339 -4,454
Capital stock 123,100 123,100 123,100 123,100 123,100
Total Net assets 262,120 254,906 250,547 256,350 252,315
Total assets 4,536,018 5,267,001 5,718,647 4,513,946 5,057,241
Deposits 3,906,941 3,897,468 4,274,753 3,636,024 3,924,867
Loans and bills discounted 371,992 505,552 499,179 356,243 485,111
Available for sale (AFS) securities 946,529 788,413 102,423 785,273 500,962
Total shares issued (thousand shares) 244,200,000 244,200,000 244,200,000 244,200,000 244,200,000
Capital adequacy ratio (National standard) 28.62% 23.90% 30.94% 25.72% 30.26%
Number of employees 1,869 1,809 1,744 1,835 1,728
March 2015Year end
(Apr. 1, 2014- Mar. 31, 2015)
Interim FiscalPeriod ended
Sep. 2013(Apr 1, 2013
- Sep 30, 2013)
Interim FiscalPeriod ended
Sep. 2014(Apr 1, 2014
- Sep 30, 2014)
Interim FiscalPeriod ended
Sep. 2015(Apr 1, 2015
- Sep 30, 2015)
March 2014Year end
(Apr. 1, 2013- Mar. 31, 2014)
(Note) Financial figures for interim period are unaudited.
Citibank Japan Ltd. 24
<Principal Business/Financial Indicators> Gross operating profit
(Millions of Yen)
Domesticoperations
Internationaloperations Total
Domesticoperations
Internationaloperations Total
Interest income 2,886 10,872 13,759 2,498 8,505 11,004
Interest expenses 59 1,918 1,977 67 3,633 3,700
Fees and commissions 7,123 3,781 10,904 6,831 4,382 11,214Fees and commissions paid 944 432 1,377 949 504 1,453
Trading income 100 71 172 495 16 479
Trading losses (14) 152 137 - - -
Other ordinary income 74 7,205 7,279 2,940 8,942 11,882
Other ordinary expenses - 6 6 11 - 11
9,195 19,420 28,616 11,737 17,709 29,414
0.68% 2.41% 1.33% 0.73% 1.77% 1.12%Gross operating profit
Gross operating profit ratio
Interim Fiscal Period ended Sep. 2014(Apr 1, 2014 - Sep 30, 2014)
Interim Fiscal Period ended Sep. 2015(Apr 1, 2015 - Sep 30, 2015)
Interest income and expenses
Fees and commission
Trading income and losses
Other ordinary income andexpenses
(Notes) 1. Domestic operations are yen-denominated transactions and international operations are foreign currency-denominated transactions
conducted in Japan. However, non-resident yen-denominated transactions and offshore account transactions, etc. are included in the international operations.
2. Gross operating profit ratio =(gross operating profit / average balance of interest-earning assets) x 100 ÷ (the number of days of the period / 366)
Citibank Japan Ltd. 25
Average balance, Interest and Yield of Interest-Earning Assets / Interest-Bearing Liabilities (Millions of Yen)
Domesticoperations
Internationaloperations
Total Domesticoperations
Internationaloperations
Total
Average balance 2,688,910 1,601,837 4,290,748 3,212,069 1,996,233 5,208,302
Interest 2,886 10,872 13,759 2,498 8,505 11,004
Yield (%) 0.21 1.35 0.63 0.15 0.85 0.42
Average balance 151,504 311,688 463,192 145,014 369,518 514,533
Interest 854 2,605 3,459 770 2,940 3,710
Yield (%) 1.12 1.66 1.48 1.06 1.59 1.44
AFS securities Average balance 767,354 5,783 773,138 145,345 5,677 151,022
Interest 1,169 59 1,229 224 59 284
Yield (%) 0.30 2.06 0.31 0.30 2.11 0.37
Call loans Average balance 15,822 117,564 133,386 601 78,424 79,025Interest 7 223 230 0 198 198
Yield (%) 0.09 0.37 0.34 0.03 0.50 0.50
Average balance 347,736 401,887 749,623 5,148 474,896 480,044
Interest 116 2,579 2,695 0 3,047 3,048
Yield (%) 0.06 1.27 0.71 0.02 1.28 1.26
Average balance 5,194 10 5,204 4,961 5 4,967
Interest 37 0 37 32 0 33
Yield (%) 1.44 1.02 1.44 1.32 1.08 1.32
Average balance 1,400,667 629,188 2,029,856 2,907,545 904,999 3,812,545
Interest 692 5,113 5,805 1,447 1,961 3,408
Yield (%) 0.09 1.62 0.57 0.09 0.43 0.17
Average balance 2,036,712 2,173,790 4,210,503 2,138,611 2,850,630 4,989,242
Interest 59 1,918 1,977 67 3,633 3,700
Yield (%) 0.00 0.17 0.09 0.00 0.25 0.14
Deposits Average balance 2,029,752 1,768,370 3,798,122 2,127,549 2,222,641 4,350,190
Interest 57 1,901 1,959 63 3,629 3,693Yield (%) 0.00 0.21 0.10 0.00 0.32 0.16
Average balance 2,606 - 2,606 - - -
Interest 0 - 0 - - -
Yield (%) 0.03 - 0.03 - - -Call money Average balance 754 1,368 2,122 - 2,481 2,481
Interest 0 0 0 - 1 1
Yield (%) 0.00 0.08 0.06 - 0.12 0.12
Borrowed money Average balance 5 - 5 7 - 7
Interest 0 - 0 - - -
Yield (%) 0.00 - 0.00 0.00 - 0.00
Negotiable certificatesof deposit
Loans and billsdiscounted
Interim Fiscal Period ended Sep. 2014(Apr 1, 2014 - Sep 30, 2014)
Interim Fiscal Period ended Sep. 2015(Apr 1, 2015 - Sep 30, 2015)
Interest-earning assets
Interest-bearing liabilities
Due from banks withinterest
Monetary claimsbought
Receivables underresale agreements
(Notes) 1. Average balance of foreign currency-denominated transactions in Japan, which are classified as international operations, is
calculated based on the daily basis. 2. Average balance of and interest accrued from borrowing and lending between domestic and international operations are offset. 3. Due from bank without interest is excluded from Interest-earning assets and the amount equivalent to Money held in trust is
excluded from Interest-bearing liabilities.
Citibank Japan Ltd. 26
Analysis of interest received / paid (Millions of Yen)
Domesticoperations
Internationaloperations
Total Domesticoperations
Internationaloperations
Total
Volume-related increase (decrease) 654 (1,449) 955 560 2,669 3,660Rate-related increase (decrease) (1,015) (359) (3,126) (948) (5,036) (6,415)Net increase (decrease) (361) (1,809) (2,170) (388) (2,367) (2,755)Volume-related increase (decrease) (135) 1,021 791 (36) 479 1,299Rate-related increase (decrease) (33) 447 508 (47) (144) (1,048)Net increase (decrease) (168) 1,468 1,299 (84) 335 251
AFS Securities Volume-related increase (decrease) (281) 0 (290) (933) (1) (1,220)Rate-related increase (decrease) (180) 0 (172) (12) 1 275Net increase (decrease) (462) - (462) (945) - (945)
Call loans Volume-related increase (decrease) 1 (74) (66) (6) (72) (173)Rate-related increase (decrease) 0 45 38 (0) 47 141Net increase (decrease) 1 (29) (28) (7) (24) (31)Volume-related increase (decrease) (37) 304 (120) (102) 463 (1,090)Rate-related increase (decrease) (41) (92) 253 (13) 5 1,442Net increase (decrease) (78) 211 133 (116) 468 352Volume-related increase (decrease) 15 0 15 (1) (0) 12Rate-related increase (decrease) (4) 0 (4) (2) 0 (16)Net increase (decrease) 11 0 10 (4) (0) (4)Volume-related increase (decrease) 359 (2,731) 2,286 678 2,234 6,272Rate-related increase (decrease) (10) (650) (5,319) 76 (5,385) (8,669)Net increase (decrease) 349 (3,382) (3,033) 754 (3,151) (2,396)Volume-related increase (decrease) 9 45 104 2 595 455Rate-related increase (decrease) (46) 8 (88) 5 1,119 1,268Net increase (decrease) (37) 53 16 8 1,714 1,723
Deposits Volume-related increase (decrease) 9 (213) (9) 2 476 266Rate-related increase (decrease) (34) 258 30 3 1,251 1,468Net increase (decrease) (24) 45 20 5 1,728 1,734Volume-related increase (decrease) (10) - (10) (0) - (0)Rate-related increase (decrease) (1) - (1) - - -Net increase (decrease) (12) - (12) (0) - (0)
Call money Volume-related increase (decrease) 0 0 1 (0) 0 0Rate-related increase (decrease) - 0 0 - 0 0Net increase (decrease) 0 0 0 (0) 0 0
Borrowed Money Volume-related increase (decrease) 0 - 0 - - -Rate-related increase (decrease) 0 - 0 - - -Net increase (decrease) 0 - 0 - - -
Interim Fiscal Period ended Sep. 2015(Apr 1, 2015 - Sep 30, 2015)
Negotiablecertificates ofdeposit
Interim Fiscal Period ended Sep. 2014(Apr 1, 2014 - Sep 30, 2014)
Interest received
Interest paid
Loans and billsdiscounted
Receivables underresale agreements
Due from bankswith interest
Monetary claimsbought
(Note)Changes due to a combination of volume - and rate - related increase (decrease) have been included in rate - related
increase (decrease).
Citibank Japan Ltd. 27
Yield on interest-earning assets, Yield on interest-bearing liabilities, Net yield/Interest rate (%)
Domesticoperations
Internationaloperations
Total Domesticoperations
Internationaloperations
Total
Yield on interest-earningassets 0.21 1.35 0.63 0.15 0.85 0.42
Yield on interest-bearingliabilities includinggeneral expenses
1.63 1.45 1.54 1.50 1.15 1.30
Net yield / Interest rate (1.41) (0.10) (0.91) (1.35) (0.30) (0.88)
Interim Fiscal Period ended Sep. 2014(Apr 1, 2014 - Sep 30, 2014)
Interim Fiscal Period ended Sep. 2015(Apr 1, 2015 - Sep 30, 2015)
Fees and commissions
(Millions of Yen)
Domesticoperations
Internationaloperations Total
Domesticoperations
Internationaloperations Total
7,123 3,781 10,904 6,831 4,382 11,214
Fees and commissions on fundtransfer
871 1,856 2,727 904 1,792 2,696
Other fees and commissions 6,252 1,924 8,176 5,927 2,589 8,517
944 432 1,377 949 504 1,453
Fees and commissions on fundtransfer
225 147 373 234 158 392
Other fees and commissions 719 284 1,004 715 345 1,060
6,178 3,348 9,526 5,882 3,878 9,760Fees and commissions profit
Interim Fiscal Period ended Sep. 2014(Apr 1, 2014 - Sep 30, 2014)
Interim Fiscal Period ended Sep. 2015(Apr 1, 2015 - Sep 30, 2015)
Fees and commissions
Fees and commissions paid
Citibank Japan Ltd. 28
Trading income and losses (Millions of Yen)
Domesticoperations
Internationaloperations
Total Domesticoperations
Internationaloperations
Total
Trading income 100 71 172 16 479 495
Gains on trading accountsecurities transactions - - - - - -
Gains on securities andderivatives related totrading transactions
100 71 172 3 430 434
Gains on trading-relatedderivatives transactions
- - - 12 49 61
Other trading income - - - - - -
Trading losses (14) 152 137 - - -
Losses on tradingsecurities and Derivatives - - - - - -
Losses on securities andderivatives related totrading transactions
- - - - - -
Losses on trading-relatedderivatives transactions
(14) 152 137 - - -
Other trading losses - - - - - -
Trading profit 115 (80) 35 16 479 495
Interim Fiscal Period ended Sep. 2014(Apr 1, 2014 - Sep 30, 2014)
Interim Fiscal Period ended Sep. 2015(Apr 1, 2015 - Sep 30, 2015)
Citibank Japan Ltd. 29
Other ordinary income and expenses (Millions of Yen)
Domesticoperations
Internationaloperations Total
Domesticoperations
Internationaloperations Total
Other ordinary income 74 7,205 7,279 2,940 8,942 11,882
Gains on foreignexchange transactions - 6,511 6,511 - 6,345 6,345
Gains on sales of bonds 66 - 66 2,939 - 2,939
Gains on redemption ofbonds - - - - - -
Income from derivativesother than for trading orhedging
- - - - - -
Others 7 694 701 0 2,596 2,596
Other ordinary expenses - 6 6 11 - 11
Losses on foreignexchange transactions - - - - - -
Losses on sales ofbonds - - - - - -
Losses on redemption ofbonds - - - - - -
Losses on devaluation ofbonds - - - - - -
Expenses on derivativesother than for trading orhedging
- - - - - -
Others - 6 6 11 - 11
Other ordinary profit 74 7,198 7,272 2,928 8,942 11,870
Interim Fiscal Period ended Sep. 2014(Apr 1, 2014 - Sep 30, 2014)
Interim Fiscal Period ended Sep. 2015(Apr 1, 2015 - Sep 30, 2015)
Citibank Japan Ltd. 30
General and administrative expenses (Millions of Yen)
Salary 10,732 9,870
Accrued pension cost 2,336 1,587
Welfare expenses 34 38
Depreciation cost 718 371
Rental fees on land, buildings, and machinery 3,265 2,380
Maintenance cost 108 108
Supplies cost 210 137
Utilities cost 71 66
Expenses of business trip 106 97
Communication charge 466 445
Advertising expenses 477 779
Membership, Contribution and Business promotion 118 130
Tax and public charges 760 1,032
Others 11,855 12,078Total 31,263 29,125
Interim Fiscal Period ended Sep. 2014(Apr 1, 2014 - Sep 30, 2014)
Interim Fiscal Period ended Sep. 2015(Apr 1, 2015 - Sep 30, 2015)
Profit ratio (%)
Ordinary profit to total assets (0.12) 0.02
Ordinary profit to capital (net assets) (2.19) 0.54
Net income to total assets (0.08) 0.00
Net income to capital (net assets) (1.52) 0.10
Interim Fiscal Period ended Sep. 2014(Apr 1, 2014 - Sep 30, 2014)
Interim Fiscal Period ended Sep. 2015(Apr 1, 2015 - Sep 30, 2015)
Ordinary profit ÷ (Number of days of the period / 366)
Average balance of total assets (excl. customers' l iabil ities for acceptances and guarantees)
Ordinary profit ÷ (Number of days of the period / 366)
(Beginning net assets + net assets)÷2
Net income ÷ (Number of days of the period / 366)
Average balance of total assets (excl. customers' l iabil ities for acceptances and guarantees)
Net income ÷ (Number of days of the period / 366)
(Beginning net assets + net assets)÷2
×100
= ×100
×100
×100
=
=
=
Ordinary profit to total assets
Ordinary profit to capital (net assets)
Net income to total assets
Net income to capital (net assets)
Citibank Japan Ltd. 31
<Indicators for Deposits>
Average balance by deposit type (Millions of Yen)
Domesticoperations
Internationaloperations
Total Domesticoperations
Internationaloperations
Total
Liquid deposits 1,933,622 - 1,933,622 1,999,923 - 1,999,923
Time deposits 89,487 - 89,487 119,851 - 119,851
Negotiable certificates ofdeposit
2,606 - 2,606 - - -
Others 6,641 1,768,370 1,775,012 7,774 2,222,641 2,230,415
Total 2,032,358 1,768,370 3,800,729 2,127,549 2,222,641 4,350,190
As of Sep. 30, 2014 As of Sep. 30, 2015
(Note) Liquid deposits = current deposits + ordinary deposits + saving deposits + deposits at notice
Time deposits balance by remaining tenor
(Millions of Yen)
Lessthan
3 months
Over 3months,
lessthan 6months
Over 6months,
lessthan 1year
Over 1year,less
than 2years
Over 2years,less
than 3years
Over 3years Total
Lessthan
3 months
Over 3months,
lessthan 6months
Over 6months,
lessthan 1year
Over 1year,less
than 2years
Over 2years,less
than 3years
Over 3years Total
Fixed interesttime deposits 70,776 14,985 23,508 1,582 324 2 111,180 59,073 38,909 37,035 1,000 350 - 136,368
Floating interesttime deposits - - - 125 - - 125 - - 125 - - - 125
Others - - - - - - - - - - - - - -
Total 70,776 14,985 23,508 1,708 324 2 111,305 59,073 38,909 37,161 1,000 350 - 136,494
As of Sep. 30, 2014 As of Sep. 30, 2015
Citibank Japan Ltd. 32
<Indicators for Loans and Bills Discounted>
Balance by loan type (1) Balance at the end of period
Domesticoperations
Internationaloperations
Total Domesticoperations
Internationaloperations
Total
Loans on bills 10,282 1,581 11,864 9,976 1,176 11,153
Loans on deeds 120,544 320,945 441,490 120,735 285,619 406,355
Overdrafts 25,137 26,383 51,521 22,042 59,084 81,127
Bills discounted 676 - 676 542 - 542
Total 156,641 348,911 505,552 153,298 345,881 499,179
(Millions of Yen)
As of Sep. 30, 2014 As of Sep. 30, 2015
(2) Average balance
Domesticoperations
Internationaloperations Total
Domesticoperations
Internationaloperations Total
Loans on bills 9,361 1,211 10,573 10,498 1,350 11,849
Loans on deeds 119,614 271,824 391,438 117,800 287,279 405,079
Overdrafts 22,078 38,652 60,730 16,191 80,888 97,080
Bills discounted 449 - 449 524 - 524
Total 151,504 311,688 463,192 145,014 369,518 514,533
(Millions of Yen)
As of Sep. 30, 2014 As of Sep. 30, 2015
Balance of loans and bills discounted by remaining tenor
(Millions of Yen)
Lessthan
1 year
Over 1year,less
than 3years
Over 3years,less
than 5years
Over 5years,less
than 7years
Over 7years
TotalLessthan
1 year
Over 1year,less
than 3years
Over 3years,less
than 5years
Over 5years,less
than 7years
Over 7years
Total
Fixed interestloans and bills discounted
37,737 15,581 15,098 91 106 68,616 29,187 15,761 7,016 131 4,046 56,143
Floating interestloans and bills discounted
128,292 64,080 78,453 62,051 104,057 436,935 138,531 61,778 59,932 52,439 130,354 443,035
Total 166,030 79,662 93,551 62,142 104,164 505,552 167,718 77,540 66,948 52,570 134,401 499,179
As of Sep. 30, 2014 As of Sep. 30, 2015
Citibank Japan Ltd. 33
Balance of loans and bills discounted by collateral type (Millions of Yen)
As of Sep. 30, 2014 As of Sep. 30, 2015
Type of collateral pledged Loans and bills discounted Loans and bills discounted
Deposits 6,531 6,102
Securities 4,048 3,579
Claims - -
Commodities - -
Real estates 62,928 67,729
Foundations - -
Others 17,862 21,464
Sub-total 91,370 98,875
Guarantees 77,583 87,799
Clean credits 336,597 312,505
Total 505,552 499,179 Balance of customers’ liabilities for acceptances and guarantees by collateral type
(Millions of Yen)
As of Sep. 30, 2014 As of Sep. 30, 2015
Deposits 45,190 65,022
Securities 48,192 50,133
Claims - -
Commodities - -
Real estates - -
Foundations - -
Others - -
Sub-total 93,382 115,155
Guarantees - -
Clean credits 53,388 59,922
Total 146,770 175,078
Type of collateral pledged Customers' liabilities for acceptancesand guarantees
Customers' liabilities for acceptancesand guarantees
Balance of loans and bills discounted by use
As of Sep. 30, 2014 As of Sep. 30, 2015
Lending for equipments 148,899 168,230
Lending for operations 356,653 330,949
Total 505,552 499,179
Citibank Japan Ltd. 34
Balance of loans and bills discounted by industry (Millions of Yen)
Amount (%) Amount (%)
Domestic
Manufacturing 34,950 6.91% 63,826 12.78%
Agriculture / Forestry - - - -
Fishery - - - -
Mining - - - -
Construction - - - -
Electric/gas/heat supply/water - - - -
Information and telecommunications 3,540 0.70% 569 0.11%
Shipping / transportation 18,497 3.66% 18,416 3.69%
Wholesale / retail 53,655 10.61% 46,244 9.26%
Finance / insurance 101,268 20.03% 78,670 15.76%
Real estate 14,089 2.79% 15,317 3.07%
Other Services 3,998 0.79% 4,707 0.94%
Central / Local government - - - -
Individuals 66,913 13.24% 67,854 13.60%
Overseas 208,638 41.27% 203,571 40.79%
Total 505,552 100% 499,179 100%
As of Sep. 30, 2014 As of Sep. 30, 2015
Balance of loans and bills discounted for small and medium size businesses
(Millions of Yen)
As of Sep. 30, 2014 As of Sep. 30, 2015
Total loans and bills discounted (A) 505,552 499,179
Balance of loans for small and medium sizecorporations etc. (B) 273,944 262,722
(B) / (A) 54.18% 52.63% (Note) Small and medium size corporation etc. refers as followings;
- companies with its capital less than or equal to 300 million yen (100 million yen for wholesale businesses and 50 million yen for retail sale and services businesses), or
- companies with its full-time employees less than or equal to 300 on the payroll (100 for wholesale, 50 for retail sale and 100 for services), or
- individuals.
Balance of specified overseas claims None
Citibank Japan Ltd. 35
Loans - to - deposits ratio (%)
Domesticoperations
Internationaloperations
Total Domesticoperations
Internationaloperations
Total
Balance at the end of period 7.76 18.45 12.93 7.31 15.86 11.67
Average balance 7.45 17.62 12.18 6.81 16.62 11.82
As of Sep. 30, 2014 As of Sep. 30, 2015
(Note) Negotiable certificates of deposit are included in “deposits”.
Allowance for loan losses (Millions of Yen)
CategoryBeginningbalance Increased Decreased
EndingBalance
Beginningbalance Increased Decreased
EndingBalance
Allowance for general loanlosses
1,014 1,278 1,014 1,278 1,245 1,239 1,245 1,239
Allowance for specific loanlosses
913 785 913 785 1,044 683 1,044 683
Specified overseas claimreserve account - - - - - - - -
Total 1,928 2,064 1,928 2,064 2,290 1,923 2,290 1,923
As of Sep. 30, 2014 As of Sep. 30, 2015
Loan write-offs
None
Risk management Loans
(Millions of Yen)
As of Sep. 30, 2014 As of Sep. 30, 2015
Bankrupt loans - -
Past due loans/non-accrual loans 1,163 887
Past due loans (3 months or more) 837 -
Restructured loans 21 98
Total 2,022 986 (Notes) 1. “Bankrupt loans” are loans on which accrued interest income is not recognized as there is substantial doubt about the ultimate
collectability of either principal or interest because they are past due for a considerable period of time or for other reasons (excluding write-offs, hereinafter “non-accrual loans”), and as defined in Article 96-1-3 and 96-1-4 of the Enforcement Ordinance of the Japanese Corporate Tax Law.
2. “Past due loans/non-accrual loans” are loans on which accrued interest income is not recognized, excluding “Bankrupt loans” and loans on which interest payments are deferred in order to support the borrowers’ recovery from financial difficulties.
3. “Past due loans (3 months or more)” are loans on which the principal or interest is past due for three months or more from the next day of prescribed payment date, excluding “bankrupt loans” and “Past due loans/non-accrual loans”.
4. “Restructured loans” are loans on which terms and conditions have been amended in favor of the borrowers (e.g., reduction of the original interest rate, deferral of interest payments, extension of principal repayments or debt forgiveness) in order to support the borrowers’ recovery from financial difficulties, excluding “bankrupt loans,” “past due loans/non-accrual loans” and “past due loans (3 months or more)”.
Citibank Japan Ltd. 36
Claims under the Financial Reconstruction Law (Millions of Yen)
As of Sep. 30, 2014 As of Sep. 30, 2015
Bankrupt / De facto Bankrupt 945 887
In Danger of Bankrupt 218 0
Need attention 858 98
Subtotal (A) 2,022 986
Normal 749,525 808,723
Total (B) 751,548 809,710
(A) / (B) 0.26% 0.12%
(Notes)
1. “Bankrupt / De facto Bankrupt” are claims to bankrupt borrowers in the event of filing for commencement of bankruptcy, corporate reorganization, rehabilitation proceedings and loans pursuant to these proceedings.
2. “In Danger of Bankrupt” are claims of which borrowers are not in bankruptcy but their financial status and business performance deteriorate, with a low collectability of principal and interest under the terms and conditions of the contract.
3. “Need attention” are Past due loans (3 months or more) and Restructured loans from “Risk management loans”. 4. “Normal” are claims classified as other than the credit listed in 1 to 3 above, with no problems seen with borrowers’ financial
status and business performance.
Citibank Japan Ltd. 37
<Indicators for Securities >
Average balance of securities related to trading transactions (Millions of Yen)
As of Sep. 30, 2014 As of Sep. 30, 2015
Trading Japanese government bonds 137,473 889
Trading municipal bonds - -
Trading government guaranteed bonds - -
Other trading securities 15,452 18,087
Total 152,926 18,976
Balance of AFS securities by remaining tenor
(Millions of Yen)
CategoryUp to 1
year1 - 5years
5 - 10years
Over 10years
Indefiniteterm Total
Up to 1year
1 - 5years
5 - 10years
Over 10years
Indefiniteterm Total
Japanesegovernment bonds 140,219 589,943 38,080 - - 768,243 - 90,474 - - - 90,474
Municipal bonds - - - - - - - - - - - -
Corporate bonds - - - 14,417 - 14,417 - - - 6,305 - 6,305
Stocks - - - - - - - - - - - -
Foreign bonds - 5,753 - - - 5,753 2,551 3,092 - - - 5,643
Foreign stocks - - - - - - - - - - - -
Others - - - - - - - - - - - -
Total 140,219 595,697 38,080 14,417 - 788,413 2,551 93,566 - 6,305 - 102,423
As of Sep. 30, 2014 As of Sep. 30, 2015
Average balance of AFS securities (Millions of Yen)
Domesticoperations
Internationaloperations
Total Domesticoperations
Internationaloperations
Total
Japanese government bonds 752,656 - 752,656 138,839 - 138,839
Municipal bonds - - - - - -
Corporate bonds 14,698 - 14,698 6,505 - 6,505
Stocks - - - - - -
Foreign bonds - 5,783 5,783 - 5,677 5,677
Foreign stocks - - - - - -
Others - - - - - -
Total 767,354 5,783 773,138 145,345 5,677 151,022
As of Sep. 30, 2014 As of Sep. 30, 2015
Citibank Japan Ltd. 38
AFS securities - to - deposits ratio (%)
Domesticoperations
Internationaloperations
Total Domesticoperations
Internationaloperations
Total
Balance at the end of period 38.80 0.30 20.17 4.62 0.25 2.39
Average balance 37.75 0.32 20.34 6.83 0.25 3.47
As of Sep. 30, 2014 As of Sep. 30, 2015
(Note) Negotiable certificates of deposit are included in “deposits.”
Citibank Japan Ltd. 39
2. Financial Statements <Balance Sheet>
(Note) Financial figures are unaudited.
(Millions of Yen)
As of September 30,2014 As of September 30,2015
Amount AmountAssets
Cash and due from banks 2,201,786 4,044,624Call loans 72,452 -Receivables under resale agreements 856,953 548,595Monetary claims bought 4,592 4,568Trading assets 194,196 33,991Securities 788,413 102,423Loans and bills discounted 505,552 499,179Foreign exchanges 93,777 130,104Other assets 397,879 175,856
Others 397,879 175,856Tangible f ixed assets 2,392 1,862Intangible f ixed assets 1,833 442Deferred tax assets 2,464 3,844Customers’ liabilities for acceptances and guarantees 146,770 175,078Allow ance for loan losses (2,064) (1,923)Total assets 5,267,001 5,718,647
LiabilitiesDeposits 3,897,468 4,274,753Negotiable certif icates of deposit 10,000 -Call money 3,283 2,402Trading liabilities 27,813 15,748Borrow ed money 5 8Foreign exchanges 644,989 820,296Other liabilities 279,051 174,518
Income taxes payable 267 368
Asset retirement obligations 695 684
Others 278,088 173,465Provision for bonuses 1,257 1,287Provision for directors' bonuses 145 216Provision for retirement benefits 1,100 3,428Provision for directors' retirement benefits 43 27Other provision 165 333Acceptances and guarantees 146,770 175,078Total liabilities 5,012,095 5,468,100
Net AssetsCapital stock 123,100 123,100Capital surplus 121,100 121,100
Legal capital surplus 121,100 121,100Retained earnings 8,000 5,640
Legal retained earnings 2,000 2,000
Other retained earnings 6,000 3,640
Retained earnings brought forw ard 6,000 3,640Total shareholders' equity 252,200 249,840Valuation difference on AFS securities 2,705 706Total valuation and translation adjustments 2,705 706Total net assets 254,906 250,547Total liabilities and net assets 5,267,001 5,718,647
Account Name
Citibank Japan Ltd. 40
< Statement of Income >
(Note) Financial figures are unaudited.
(Millions of Yen)
Ordinary income 32,185 35,060Interest income 13,759 11,004
(Interest on loans and bills discounted) 3,459 3,710(Interest and dividends on securities) 1,229 284
Fees and commissions 10,904 11,214Trading income 172 495Other ordinary income 7,279 11,882Other income 69 463
Ordinary expenses 34,997 34,378Interest expenses 1,977 3,700
(Interest on deposits) 1,959 3,693Fees and commissions paid 1,377 1,453Trading Losses 137 -Other ordinary expenses 6 11General and administrative expenses 31,263 29,125Other expenses 235 87
Ordinary profit (loss) (2,812) 682Extraordinary income - -Extraordinary loss 20 11
Income (loss) before income taxes (2,833) 670Income taxes - current 36 27Income taxes - deferred (912) 505
Total income taxes (876) 532Net income (loss) (1,956) 137
Account NameFrom April 1, 2014
to September 30, 2014From April 1, 2015
to September 30, 2015
Citibank Japan Ltd. 41
<Statement of Changes in Net Assets>
(Note) Financial figures are unaudited.
From April 1, 2014 to September 30, 2014(Millions of Yen)
Other retainedearnings
Retainedearnings brought
forward
Balance at beginningof the period
123,100 121,100 121,100 2,000 7,396 9,396 253,596 2,753 - 2,753 256,350
Cumulative effectsof changes inaccounting policies
560 560 560 560
Restated balance 123,100 121,100 121,100 2,000 7,957 9,957 254,157 2,753 - 2,753 256,911
Changes in amountsduring the interimperiod
Net loss (1,956) (1,956) (1,956) (1,956)
Net changes inamounts otherthanshareholders'equity
(47) (47) (47)
Total changes inamounts during theinterim period
- - - - (1,956) (1,956) (1,956) (47) - (47) (2,004)
Balance at the endof the current interimperiod
123,100 121,100 121,100 2,000 6,000 8,000 252,200 2,705 - 2,705 254,906
Legalretainedearnings
Total retainedearnings
Shareholders' equity Valuation and translation adjustments Total netassetsCapital stock Capital surplus Retained earnings Total
shareholders'equity
Valuationdifference on
AFS securities
Deferred gainsor losses on
hedges
Total valuationand translationadjustments
Legal capitalsurplus
Total Capitalsurplus
From April 1, 2015 to September 30, 2015(Millions of Yen)
Other retainedearnings
Retainedearnings brought
forward
Balance at beginningof the period 123,100 121,100 121,100 2,000 3,503 5,503 249,703 2,612 - 2,612 252,315
Changes in amountsduring the interimperiod
Net income 137 137 137 137
Net changes inamounts otherthanshareholders'equity
(1,905) (1,905) (1,905)
Total changes inamounts during theinterim period
- - - - 137 137 137 (1,905) - (1,905) (1,768)
Balance at the endof the current interimperiod
123,100 121,100 121,100 2,000 3,640 5,640 249,840 706 - 706 250,547
Deferred gainsor losses on
hedges
Total valuationand translationadjustments
Legal capitalsurplus
Total Capitalsurplus
Shareholders' equity Valuation and translation adjustments Total netassetsCapital stock Capital surplus Retained earnings Total
shareholders'equity
Valuationdifference on
AFS securitiesLegal
retainedearnings
Total retainedearnings
Citibank Japan Ltd. 42
< Statement of Cash Flows >
(Millions of Yen)
Cash flows from operating activities
Income (loss) before income taxes (2,833) 670 Depreciation 718 371 Increase (decrease) in allowance for loan losses 136 (366) Increase (decrease) in provision for bonuses 809 828 Increase (decrease) in provision for retirement benefits 55 947 Interest income (13,759) (11,004) Interest expenses 1,977 3,700 Losses (gains) on sales of AFS securities (66) (2,939) Losses (gains) on foreign exchanges (17) (13) Losses (gains) on dispositions of fixed assets 20 11 Net decrease (increase) in trading assets (12,743) 2,130 Net increase (decrease) in trading liabilities 1,658 882 Net decrease (increase) in loans and bills discounted (149,308) (14,068) Net increase (decrease) in deposits 261,444 349,885 Net increase (decrease) in negotiable certificates of deposit 4,000 -Net decrease (increase) in due from banks (excluding cash equivalents) (131,499) (259,550) Net decrease (increase) in call loans 167,751 3,365 Net increase (decrease) in call money 3,283 598 Net increase (decrease) in borrowed money 1 1 Net decrease (increase) in foreign exchanges - assets 17,806 (3,006) Net increase (decrease) in foreign exchanges - liabilities 298,777 297,285 Interest received - cash basis 14,117 12,465 Interest paid - cash basis (1,587) (3,061)
Net increase (decrease) in reserve for others (20) 124
Net decrease (increase) in receivables under resale agreements (125,296) (79,769)
Net decrease (increase) in monetary claims bought (310) 106
Net decrease (increase) in other assets (239,835) 16,717
Net increase (decrease) in other liabilities 139,132 (24,014) Others, net 7 (0)Sub-total 234,419 292,297 Income taxes paid - cash basis (1,183) -Income taxes refunded - cash basis - 644 Net cash provided by (used in) operating activities 233,235 292,941
Cash flows from investing activities
Purchases of AFS securities (72,784) (39,959) Proceeds from sales of AFS securities 32,742 431,160 Proceeds from redemption of AFS securities 35,656 7,421 Purchases of tangible fixed assets (309) (23) Purchases of intangible fixed assets (125) -Others, net (23) -Net cash provided by (used in) investing activities (4,844) 398,598
Cash flows from financing activitiesNet cash provided by (used in) financing activities - -
Effect of foreign exchange rate changes on cash and cash equivalents 17 13 Net increase (decrease) in cash and cash equivalents 228,409 691,554 Cash and cash equivalents at the beginning of the fiscal year 1,280,438 2,376,810
Cash and cash equivalents at the end of the interim fiscal year 1,508,847 3,068,364
Account NameFrom April 1, 2015
to September 30, 2015From April 1, 2014
to September 30, 2014
Citibank Japan Ltd. 43
Amounts less than one million yen have been omitted.
Accounting Policies 1. Standard for valuation of trading assets and trading liabilities / booking of income and losses for trading
purposes transaction Transactions for trading purposes, such as seeking gains arising from short-term changes in interest rates, foreign exchange rates, or securities prices and other market related indices or from variation among markets (hereinafter referred to as “Trading Purposes”), are included in “Trading assets” or “Trading liabilities” on the balance sheet on a trade date basis. Income and Expenses on trading-purpose transactions are recognized on a trading date basis, and recorded as “Trading income” and “Trading losses”. Securities and monetary claims purchased for trading purposes are stated at the fiscal year-end market value, and financial derivatives such as swaps, futures and options are stated at amounts that would be settled if the transactions were terminated at the fiscal year-end. “Trading income” and “Trading losses” include interest received or paid during the fiscal year. The year-on-year valuation differences of securities and money claims are also recorded in the above-mentioned accounts. As for the derivatives, assuming that the settlement will be made in cash, the year-on-year valuation differences are also recorded in the above-mentioned accounts.
2. Standard and method for valuation of AFS securities AFS securities that have market prices are carried at their balance sheet date market prices (cost of securities sold is calculated using primarily the moving-average method). Net unrealized gains/losses on AFS securities, net of income taxes, are included in “Net assets”.
3. Standard and method for valuation of derivative transaction
Derivative transactions (excluding those for trading purposes) are carried at fair value. 4. Depreciation method for fixed assets
(1) Tangible fixed assets Tangible fixed assets are depreciated using the declining-balance method. The estimated useful lives are as follows:
Buildings: 3 to 18 years Others: 2 to 20 years
(2) Intangible fixed assets Intangible fixed assets are depreciated using the straight-line method. Capitalized software for internal use is depreciated over its estimated useful life (5 years).
5. Standard for Allowance (1) Allowance for loan losses
Allowance for loan losses is provided as detailed below in accordance with the internal standards for write-offs and provisioning. For claims on borrowers that have entered into bankruptcy, special liquidation proceedings or similar legal proceedings (“bankrupt borrowers”) or borrowers that are not legally or formally insolvent but are regarded as substantially in the same situation (“effectively bankrupt borrowers”), an allowance is provided based on the amount of claims, after the write-off stated in the additional paragraph below, net of the expected amount of recoveries from collateral and guarantees. For claims on borrowers that are not currently bankrupt but are perceived to have a high risk of falling into bankruptcy, an allowance is provided in the amount deemed necessary based on an overall solvency assessment of the claims, net of the expected amount of recoveries from collateral and guarantees. For other claims, an allowance is provided based on the expected loan-loss ratio assigned to each risk rating. Responsible divisions for Self-Assessment and Front office mutually conduct assessment of all claims in accordance with the internal rules for self-assessment of assets, and the Internal Audit Division, independently audits their assessment. The allowance is provided based on the results of these assessments.
(2) Provision for bonuses Provision for bonuses is reported in preparation for the payment of bonuses to the employees at the amount estimated for the payment of bonuses to the employees during the fiscal year.
(3) Provision for directors’ bonuses
Provision for directors’ bonuses is reported in preparation for the payment of bonuses to the directors at the amount estimated for the payment of bonuses to the directors during the fiscal year.
Citibank Japan Ltd. 44
(4) Provision for retirement benefits
Provision for retirement benefits is reported in preparation for the payment of employee retirement allowance in the amount deemed accrued at the period, based on the projected retirement benefit obligation and the fair value of plan assets at the fiscal year-end. The basis for period recognition for the estimated retirement benefits adopts the benefit formula prorates approach. The unrecognized prior service cost and actuarial differences are recognized as profit and loss as follows;
Unrecognized prior service cost: Amortized using the straight-line method for a period, primarily over 7 years, within the employees’ average remaining service period, commencing on the fiscal year in which the services are provided.
Actuarial differences: Amortized using the straight-line method, primarily over 7 years, within the employees’ average remaining service period, commencing from the next fiscal year of incurrence.
(5) Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is reported in preparation for the payment of director retirement allowance out of directors’ estimated allowance for the amount allocable to the period.
6. Standard for the translation into Japanese yen Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate prevailing at the balance sheet date.
7. Method for hedge accounting
The exceptional method is applied to certain interest rate swaps that meet the criteria for the exceptional treatments. No assessment is performed for hedge effectiveness of qualifying interest rate swaps accounted for by the exceptional treatments, as it is ascertained that the criteria for the exceptional treatments are continually met.
8. Accounting for consumption taxes
National and Local Consumption Taxes are excluded from transaction amounts.
Citibank Japan Ltd. 45
Notes to Balance Sheet 1. For securities held as collateral under “receivables under resale agreements” and “derivative transactions” which
can be sold or pledged without restrictions, 888 million yen were pledged and 583,322 million yen were held by CJL as of September 30, 2015.
2. There was no Bankrupt loans. Past due loans/non-accrual loans were 887 million yen.
“Bankrupt loans” are loans on which accrued interest income is not recognized as there is substantial doubt about the ultimate collectability of either principal or interest because they are past due for a considerable period of time or for other reasons (excluding write-offs, hereinafter “non-accrual loans”), and as defined in Article 96-1-3 and 96-1-4 of the Enforcement Ordinance of the Japanese Corporate Tax Law. “Past due loans/non-accrual loans” are loans on which accrued interest income is not recognized, excluding “Bankrupt loans” and loans on which interest payments are deferred in order to support the borrowers’ recovery from financial difficulties.
3. There was no Past due loans (3 months or more). “Past due loans (3 months or more)” are loans on which the principal or interest is past due for three months or more, excluding “Bankrupt loans” and “Past due loans/non-accrual loans”.
4. Restructured loans totaled 98 million yen. “Restructured loans” are loans on which terms and conditions have been amended in favor of the borrowers (e.g. reduction of the original interest rate, deferral of interest payments, extension of principal repayments or debt forgiveness) in order to support the borrowers’ recovery from financial difficulties, excluding “Bankrupt loans,” “Past due loans/non-accrual loans” and “Past due loans (3 months or more)”.
5. The total amount of “Bankrupt loans”, “Past due loans/non-accrual loans”, “Past due loans (3 months or more)” and
“Restructured loans” were 986 million yen. Claims shown from 2 to 5 are the amounts before the appropriate allowance.
6. Bills discounted are treated as financial transactions in accordance with JICPA Industry Audit Committee Report
No.24. CJL has rights to sell or pledge bank acceptance bought, commercial bills discounted, documentary bills and foreign bills bought etc. without restrictions. The total face value was 64,848 million yen.
7. AFS securities of 90,474 million yen and Trading assets of 1,721 million yen were pledged as collateral for
settlements of FX transactions. In addition, other assets include Cash collateral paid for financial instruments of 14,444 million yen, initial margins of futures markets 37 million yen and other guarantee deposits of 4,487 million yen.
8. Overdraft facilities and commitment line contracts on loans are agreements to lend to customers up to a prescribed
amount, as long as there is no violation of any condition established in the contracts. The amount of unused commitments was 304,869 million yen and the amount of those with remaining period within one year was 222,662 million yen. Since many of these commitments are expected to expire without being drawn upon, the total amount of unused commitments does not necessarily represent actual future cash flow requirements. Many of these commitments include clauses under which we can reject an application from customers or reduce the contract amounts in the event that economic conditions change, we need to secure claims, or other events occur. In addition, we may request the customers to pledge collateral such as premises and securities at the time of the contracts, and take necessary measures such as monitoring customers’ financial positions, revising contracts when need arises and securing claims after contracts are made on a periodic basis.
9. Accumulated depreciation on tangible fixed assets: 7,069 million yen. 10. Non-cancellable operating lease is as follows;
Future minimum rental payments; Within one year 755 million yen Over one year 50 million yen
Citibank Japan Ltd. 46
Notes to Statement of Income “Other income” includes 362 million yen of Provision of allowance for loan losses. Notes to Statement of Changes in Net Assets The types and number of our shares outstanding are as follows:
(Thousands of Shares) Number of shares at
beginning of the
period
Number of shares
increased during
the period
Number of shares
decreased during
the period
Number of shares at
end of the period
Memo
Common stock 244,200,000 - - 244,200,000
Total 244,200,000 - - 244,200,000 Notes to Statement of Cash flow Cash and Cash Equivalents consist of cash and due from Bank of Japan included in Cash and Due from Banks on the balance sheet.
As of September 30, 2015 (Millions of Yen)
Cash and Due from Banks 4,044,624 Due from Banks excluding Bank of Japan (976,259) Cash and Cash Equivalents 3,068,364
Citibank Japan Ltd. 47
Notes related to Financial Instruments 1.Disclosure on Financial Instruments
(1) Policy on Financial Instruments
CJL is engaged in banking operations such as deposit taking business, credit extension business including loans, fund transfer and clearing business both in Yen and foreign currencies and investment business including marketable securities. The ALM, Asset and Liability Management, in CJL has related across these listed businesses. CJL has conducted integrated management of the Banking Portfolio, as ALM, for the purpose of managing interest rate and fx risk associated with market movement and liquidity risk from mismatch of future cash flows. Also it aims to minimize funding cost and maximize investment returns. As part of this effort, CJL enters into certain derivative transactions. As the banking portfolio in CJL, liabilities are sourced mainly from deposits both retail and corporate customers. And in asset, it has invested into securities, mainly in Japanese Government Bond (JGB), loans of customers and deposits to Citibank, N.A. entities.
(2) Types of and Risks associated with Financial Instruments
A majority of financial assets that CJL holds are loans to corporate and retail customers in Japan and overseas, the securities and placements to the bank subsidiaries of Citigroup Inc. to which CJL belongs. Loans to corporate and retail customers in Japan and overseas, for which CJL is exposed to credit risks potentially arising from the obligors' default and also there are risks on material adverse changes in economics, politics, and social environments. Securities are mainly low credit risk Japanese government bonds. These are exposed to interest rate risk and market price risks.
A majority of financing source of CJL is a stable source of deposits from retail and corporate customers, and group companies. They are exposed to liquidity risk where we may not be able to be repaid timely on maturities. Interest rate exposure is managed by establishing risk limits, etc.
Derivative contracts include interest rate swaps, currency swaps, and forward FX for ALM purpose. In addition, we have trading bonds as well as trading positions that include interest rate related derivatives and currency related derivatives. These financial products are exposed to interest rate risk, foreign exchange rate risk, price risk and credit risk, etc.
(3) Risk Management System relating to Financial Instruments
① Credit Risk Management
CJL establishes consistent risk management framework and controls credit risks related to loans etc. by credit analysis conducted on transaction basis, controlling credit line, credit information, internal obligor risk rating, pledge of guarantee and collateral and managing classified or delinquent accounts, in accordance with Credit Risk Management Policy and related rules and procedures.
Credit risk control aforementioned is conducted by Risk Management Division and will be reported to Credit Risk Management Committee (“CRMC”, as a sub-committee of the Management Committee) and Board of Directors’ meeting (“BOD”), which is taken place regularly. Moreover, the process of credit risk control is assessed by internal auditor periodically.
Credit risk of issuers and counterparty risk of derivatives are controlled and monitored by Credit Risk Management Services Unit and Portfolio Management Unit in Risk Management Division by obtaining credit information and marked-to market periodically.
Citibank Japan Ltd. 48
② Market Risk Management
(A) Risk Management of Banking Book
CJL manages interest-rate risks on banking book through ALM. The risk management methods and procedures are clearly described in the "Market Risk Management for Accrual Portfolios Policy and Standards". CJL monitors and reviews its activity implementation status, also discusses action plans in the monthly Asset Liability Committee (“ALCO”) meeting as per the ALCO Regulation which has been approved by the Management Committee. On a day to day basis, Market Risk Management Unit captures consolidated profiles of interest rates and durations of the financial assets and liabilities, performs risk monitoring process using the gap analysis and interest rate factor sensitivity analysis, and reports the results to the ALCO meeting on a monthly basis. For the purpose of hedging interest rate risks, CJL transacts some derivative trades such as interest rate swaps.
(B) Risk Management of Trading Book
CJL mainly manages interest-rate risks and foreign exchange price risks on trading book following the Market Risk Management Policy and ALCO Regulation approved by Management Committee. CJL's market risk amount is measured by Value-at-Risk (“VaR”) method and its regulated compliance status is monitored and reported to ALCO meeting on a monthly basis.
(C) Quantitative information on Market Risks
a) Trading purpose financial instruments
CJL adopted the Monte Carlo Method that simulates variance and covariance estimated from the historical times series data for VaR calculation (holding period of one day, with the confidence level of 99%) for trading purpose securities and trading purpose derivative products.
CJL market risk amount for trading activities (probable loss amount) as of September 30, 2015 was 18 million yen.
CJL also conducts VaR back testing which is a comparative analysis of the VaR result calculated by the validated model against the actual profit and loss (P&L). As per the VaR back testing result for the period of October 2014 through September 30 2015, no exception was observed. However, VaR still may not pick up all probability of event under unpredictable market conditions so long as it is based on the certain probability calculated by statistical method using historical market movement.
b) Non-trading purpose financial instruments
In CJL, the main financial instruments which to be influenced by interest rates as one of the key risk variables are, “Placements”, "Loans and bills discounted", "AFS securities", "Deposits", “Negotiable certificate of deposits”, "Borrowings" and "Reverse Repo". On the financial Assets and Liabilities, CJL calculates the effect amounts on profits and losses in the next one year when simulating reasonably expected moving range in the quantitative analysis for the purpose of managing interest rate risks. With respect to the revenue effect amount calculation, CJL splits respective financial asset and liability balances into groups of fixed or floating rate groups by tenor buckets responding to holding maturities and applies the interest rate moves by tenors. CJL has exercised results that the net income before taxes would increase by 6,667 million yen on the scenario that interest rate to increase by 100 basis points (1%) for total portfolio, by 5,153 million yen on the scenario that benchmark JPY interest rate to increase by 100 basis points (1%) as of September 30, 2015. On the same basis, CJL's net income before taxes would increase by 1,571 million yen on the scenario that benchmark USD interest rate to increase by 100 basis points (1%). These results are based on the stable risk variables excluding interest rates, and no correlation between interest rates and other risk variables are considered in the calculation. In case of any unexpected moves over the 100 basis points (1%) moving range, there can be larger effect than the reported effect amounts on P&L.
Citibank Japan Ltd. 49
③ Management of Liquidity Risk associated with Funding Activities
Liquidity risk management has been regulated by related policies and procedures. ALCO, which is subject to supervision of the Management Committee, has been constituted to ensure that CJL maintains adequate liquidity, has sufficient capital to meet regulatory and business needs, has appropriate funding for business growth. ALCO's monitoring and reviewing of capital, liquidity, balance sheet and the banking account management is an integral part of the overall risk management framework of CJL.
(4) Supplement Explanation for Fair Value of Financial Instruments
Fair value of financial instruments includes market prices as well as reasonably calculated prices in cases where there are no market prices available. Since the calculations of such prices are implemented under certain conditions and assumptions, the result of calculations may vary if different assumptions are used.
Citibank Japan Ltd. 50
2.Fair Value of Financial Instruments Fair value and balance sheet amount of financial instruments as of September 30, 2015 are shown below.
(*1) General allowance for loan losses and specific allowance for loan losses provided to “Loans and bills discounted” are separately shown in the above table. Allowance for loan losses provided to “Monetary claims bought”, “Securities” and “Foreign exchange” are directly deducted from the book value due to immateriality.
(*2) Derivatives included in “Trading assets”, “Trading liabilities”, “Other assets” and “Other liabilities” are shown together. Negative amount indicates in case of liabilities exceeding the assets.
(*3) Contract amount of Overdraft facilities and commitment line are unused amount.
(Notes) Valuation method of financial instruments
(Assets)
(1) Cash and due from banks For due from banks without maturity, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount. For due from banks with maturity, fair value is determined as present value of total future cash flows, discounted by interest rate that would be applied to new acceptances. Total future cash flows are contractual payment of principal and interest. For due from banks with short remaining period (within 1 year), the carrying amount is presented as the fair value, as the fair value approximates such carrying amount.
(Millions of Yen)Balance sheet
amount Fair value Difference
(1) Cash and due from banks 4,044,624 4,044,624 -(2) Receivables under resale agreements 548,595 549,501 906(3) Monetary claims bought (*1) 4,561 4,561 -(4) Trading assets
Trading securities 33,991 33,991 -(5) Securities (*1)
Other securities 102,422 102,422 -(6) Loans and bills discounted 499,179
Allowance for loan losses (*1) (1,556)497,623 507,108 9,485
(7) Foreign exchange (*1) 130,039 130,039 -Total Assets 5,361,856 5,372,249 10,392
(1) Deposits 4,274,753 4,277,521 2,767(2) Call money 2,402 2,402 -(3) Foreign exchange 820,296 820,296 -
Total Liabilities 5,097,452 5,100,220 2,767Derivative transactions (*2)
Trading 2,050 2,050 -Total derivative transactions 2,050 2,050 -
Others Contract amount Fair valueOverdraft facilities and commitment line(*3) 304,869 1,157
Citibank Japan Ltd. 51
(2) Receivables under resale agreements
For Receivables under resale agreements with remaining period exceeding 1 year, fair value is determined as present future cash flows, discounted by interest rate that would be applied to new acceptance. Total future cash flows are contractual payment of principal and interest.
For Receivables under resale agreements with short remaining period (within 1 year), the carrying amount is presented as the fair value, as the fair value approximates such carrying amount.
(3) Monetary claims bought
For monetary claims bought, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because they have short remaining period (within 1 year).
(4) Trading assets For securities such as bonds that are held for trading, the fair value is calculated based on their market prices.
(5) Securities For securities such as bonds that are available for sale, the fair value is calculated based on their market prices.
(6) Loans and bills discounted
For loans without maturity, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because of their estimated maturity length and the interest rate conditions. For loans with short remaining period (within 1 year), the carrying amount is presented as the fair value, as the fair value approximates such carrying amount.
For loan with remaining period exceeding 1 year, fair value is determined as present value of total future cash flows, discounted by interest rate that would be applied to newly accepted loans. Total future cash flows are contractual payment of principal and interest.
As for the loans to bankrupt, de facto bankrupt, and potentially bankrupt borrowers, credit loss is estimated based on factors such as the present value of expected future cash flow or the expected amount to be collected from collaterals and guarantees. Since the fair value of these items approximates the carrying amount net of the currently expected credit loss amount, such carrying amount is presented as the fair value.
(7) Foreign exchange Foreign exchanges consist of foreign currency deposits with other banks (due from other foreign banks), short-term loans involving foreign currencies (due from other foreign banks), export bills etc. (purchased foreign bills), and loans on notes using import bills (foreign bills receivables). For these items, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because most of these items are deposits without maturity or have short contract term (within 1 year).
(Liabilities)
(1) Deposits
For demand deposits, the amount payable on demand as of balance sheet date is considered to be the fair value. Time deposits are grouped by certain maturity lengths. The fair value of such deposits is the present value discounted by expected future cash flow. The discount rate is the risk free rates adjusted with funding spread of CJL as of balance sheet date. For deposits with short remaining period (within 6 months), the carrying amount is presented as the fair value as the fair value approximates such carrying amount.
Citibank Japan Ltd. 52
(2) Call money
For Call money, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because they have short remaining period (within 1 year).
(3) Foreign exchange
Among foreign exchange contracts, foreign currency deposits accepted from other banks and non-resident yen deposits are deposits without maturity. Furthermore, foreign currency short-term borrowing have no maturity. Thus, for the foreign exchanges, the carrying amount is presented as the fair value as the fair value approximates such carrying amount.
(Derivative transactions)
Derivatives include interest rate related instruments (interest rate futures, interest rate options, interest rate swaps, etc.), currency related instruments (forward foreign exchange, currency options, currency swaps, etc.) and bond related instruments (bond futures, bonds future options, etc.). Fair value of these derivatives are based on market prices at exchanges, discounted present values, or amount calculated under the option pricing model. Derivative for hedge accounting is interest rate swap with exceptional treatment and the fair value of this hedging swap is included in the hedged loan.
(Others)
For overdraft facilities and commitment line, fair value is the present value discounted by the difference between the expected future cash flow calculated by contractual rate and fee rate that would be applied to newly acceptance at the balance sheet date for the contract with remaining period exceeding 1 year.
Citibank Japan Ltd. 53
Notes related to Deferred tax accounting The main causes for the deferred tax assets and deferred tax liabilities are as follows:
Deferred tax assets (Millions of Yen)
Provision for retirement benefits 1,115
Accrued expense 665
Allowance for loan losses 635
Provision for bonuses 425
Fixed Assets 402
Unearned Commission 310
Asset Retirement Obligations 208
Other 403
Deferred tax assets total 4,166 Deferred tax liabilities
Valuation difference on AFS securities 304
Other 18
Deferred tax liabilities total 322
Net deferred tax assets 3,844 Indicators by Share
1. Net assets per share: 1.02 yen 2. Net income per share: 0.00 yen
Citibank Japan Ltd. 54
Major subsequent events
Major subsequent events, etc. concerning the business divestiture
1. Outline of the business divestiture (1) Name of the company to which the business was divested
SMBC Trust Bank Ltd., a 100% subsidiary of Sumitomo Mitsui Banking Corporation
(2) Businesses to be divested CJL's Retail Banking business
(3) Main reason for the divestiture Citigroup Inc. (“Citigroup”), the parent company which is the 100% indirect owner of CJL, announced strategic actions to transform its Global Consumer Banking ("GCB") business by streamlining the GCB's footprint to 24 markets. As a result, Citigroup intends to exit its consumer businesses in 11 markets including Japan, then, took a step to implement the exit by transferring CJL's Retail Banking business.
(4) Date of business divestiture November 1, 2015
(5) Other information of the divestiture including its legal form The divestiture has been effected in a transaction that involves an absorption-type corporate demerger of the business.
2. Outline of accounting treatment of the business divestiture (1) Gain or loss on CJL's Retail Banking business
Under review
(2) Book value of assets and liabilities associated with CJL's Retail Banking business
Cash and due from banks 2,296,106 (Millions of Yen) Other 74,171 Total assets 2,370,277 Deposits 2,361,907 Other 8,370 Total liabilities 2,370,277
(3) Accounting treatment The accounting treatment of the business divestiture will follow the “Accounting Standard for Business Divestitures” (Accounting Standards Board of Japan, Accounting Standard No. 7, September 13, 2013) and the “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (Accounting Standards Board of Japan, Guidance on Accounting Standards No. 10, September 13, 2013).
3. Outline of Ordinary income and Ordinary loss attributable to CJL's Retail Banking business for the six-month period under review on proforma basis.
Ordinary income: 16,245 million yen Ordinary loss: 4,980 million yen
Citibank Japan Ltd. 55
3. Market Value Information <Securities>
Matters concerning securities market value, valuation difference, etc. are as follows. As well as “Securities“ in balance sheet and “Securities related to trading transactions” under “Trading assets” are included.
(1) Securities classified as trading purpose
(Millions of Yen)
Balance sheetamounts
Valuations gains (losses)included in P/L during the
Previous Period
Balance sheetamounts
Valuations gains (losses)included in P/L during the
Current Period
Securities classified astrading purposes
166,536 (15) 18,015 3
As of Sep. 30, 2014 As of Sep. 30, 2015
(2) Other securities (Millions of Yen)
Type Balance sheetamounts
Acquisitioncost
Valuationsgains/(losses)
Balance sheetamounts
Acquisitioncost
Valuationsgains/(losses)
Bonds 782,660 778,709 3,950 96,779 95,880 899
Japanese Government Bonds 768,243 765,240 3,002 90,474 90,016 457
Corporate Bonds 14,417 13,469 948 6,305 5,863 441
Others 5,753 5,500 253 5,643 5,500 143
Sub total 788,413 784,209 4,204 102,423 101,380 1,042
Bonds - - - - - -
Japanese Government Bonds - - - - - -
Sub total - - - - - -
788,413 784,209 4,204 102,423 101,380 1,042
As of Sep. 30, 2015
Total
As of Sep. 30, 2014
Balance sheetamounts
exceedingacquisition cost
Balance sheetamountsequal orless than
acquisition cost
(Note) The figures are based on market value. (3) Other securities sold during the fiscal year
(Millions of Yen)
Sold amount Gains on sales Losses on sales Sold amount Gains on sales Losses on sales
Bonds 32,742 66 - 431,160 2,939 -
Japanese Government Bonds
32,742 66 - 431,160 2,939 -
Total 32,742 66 - 431,160 2,939 -
Interim Fiscal Period ended Sep. 2014(Apr 1, 2014 - Sep 30, 2014)
Interim Fiscal Period ended Sep. 2015(Apr 1, 2015 - Sep 30, 2015)
Citibank Japan Ltd. 56
<Derivatives Market Value Information> (1) Interest rate-related transactions
(Millions of Yen)
Category Type Contractamount
Over 1 yearin contract
amount
Marketvalue
Revaluationgains/losses
Contractamount
Over 1 yearin contract
amount
Marketvalue
Revaluationgains/losses
Exchange-traded
Futures - - - - - - - -
Sell 109,461 - (5) (5) - - - -
Buy - - - - - - - -
Future Options - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Over-the -counter
Forward rate agreements - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Interest rate swaps 473,575 473,575 (117) (117) 202,940 202,940 227 227
Receive fixed/ pay floating swaps 148,951 148,951 8,506 8,506 111,940 111,940 6,817 6,817
Receive floating/ pay fixed swaps 324,623 324,623 (8,623) (8,623) 91,000 91,000 (6,589) (6,589)
Receive floating/ pay floating swaps - - - - - - - -
Receive fixed/pay fixed swaps - - - - - - - -
Interest rate options - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Total - - (122) (122) - - 227 227
As of Sep. 30, 2014 As of Sep. 30, 2015
(Notes) 1. These transactions were marked to market, and revaluation gains and losses are reported on the statement of income. In
accordance with “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (JICPA Industry Audit Committee Report No. 24), derivatives transactions to which the hedge accounting method is applied are excluded.
2. Calculation of market value Market value is calculated based on closing/final price of the Tokyo International Financial Futures Exchange (TIFFE) etc. for exchange-traded transactions, and on discounted cash flow method or option price calculation models for over-the-counter (OTC) transactions.
Citibank Japan Ltd. 57
(2) Currency-related transactions (Millions of Yen)
CategoryContractamount
Over 1 yearin contract
amount
Marketvalue
Revaluationgains/losses
Contractamount
Over 1 yearin contract
amount
Marketvalue
Revaluationgains/losses
Futures - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Currency Swaps 400,543 273,365 (2) (2) 278,176 274,926 1 1
Forward contracts 17,880,336 472,155 (4,483) (4,483) 15,905,564 323,265 1,792 1,792
Sell 10,656,160 264,759 (193,881) (193,881) 9,461,854 173,738 48,109 48,109
Buy 7,224,175 207,395 189,398 189,398 6,443,710 149,526 (46,316) (46,316)
Currency options 520,464 227,509 0 27 577,793 302,319 29 69
Sell 260,232 113,754 (7,522) (4,000) 285,501 151,159 (9,880) (6,323)
Buy 260,232 113,754 7,523 4,028 292,291 151,159 9,909 6,393
Total - - (4,485) (4,457) - - 1,822 1,863
Over-the -counter
As of Sep. 30, 2014 As of Sep. 30, 2015
Type
Exchange-traded
(Notes) 1. These transactions were marked to market, and revaluation gains and losses are reported on the statement of income. In
accordance with “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (JICPA Industry Audit Committee Report No. 24), derivatives transactions to which the hedge accounting method is applied are excluded.
2. Calculation of market value Market value is calculated based on discounted cash flow method or option price calculation models for over-the-counter (OTC) transactions.
(3) Stock-related transactions
None
Citibank Japan Ltd. 58
(4) Bond-related transactions
(Millions of Yen)
CategoryContractamount
Over 1year
in contractamount
Marketvalue
Revaluationgains/losses
Contractamount
Over 1year
in contractamount
Marketvalue
Revaluationgains/losses
Exchange-traded Bond futures 9,567 - (28) (28) 4,207 - (1) (1)
Sell 9,567 - (28) (28) 4,207 - (1) (1)
Buy - - - - - - - -
Bond future options - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Over-the -counter Bond OTC options - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Total - - (28) (28) - - (1) (1)
As of Sep. 30, 2014 As of Sep. 30, 2015
Type
(Notes) 1. These transactions were marked to market, and revaluation gains and losses are reported on the statement of income. In
accordance with “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (JICPA Industry Audit Committee Report No. 24), derivatives transactions to which the hedge accounting method is applied are excluded.
2. Calculation of market value Market value is calculated based on closing/final price of the Tokyo Stock Exchange (TSE) etc. for exchange-traded transactions.
(5) Commodity-related transactions None
(6) Credit derivatives transactions
None
Citibank Japan Ltd. 59
4. Major Shareholders <Major Shareholders>
(As of September 30, 2015)
Name of shareholder Numbers of shares Shareholding ratio
Citibank Overseas Investment Corporation 244,200,000 thousand shares 100%
Total 244,200,000 thousand shares 100%
Citibank Japan Ltd. 60
5. Disclosure Items Based on Pillar 3 of Basel lll
This section describes the information consistent with FSA Notification Number 7 based on Article 19.2.1.5d of the Bank Law Enforcement Rule (Refer to Ministry of Finance Ordinance Number 10). With regard to the calculation of the capital adequacy ratio, KPMG AZSA LLC conducted certain procedures as an independent audit firm in accordance with “Treatment in implementing examination by agreed-upon procedures for calculating capital adequacy ratio”(Industry Committee Practical Guideline No. 30 of the Japanese Institute of Certified Public Accountants). The certain procedures performed on our internal control framework for calculating the capital ratio are based on procedures agreed upon by CJL and the external auditor. This agreed-upon procedures engagement does not constitute an audit engagement for the audit of the financial statements and are not a validation of appropriateness of the capital ratio itself or opinion on the internal controls related to the capital ratio calculation. COMPOSITION OF CAPITAL DISCLOSURE As of September 30, 2015 Basel lll
(Millions of Yen)
252,200 249,840244,200 244,200
8,000 5,640- -- -- -- -
1,278 1,2391,278 1,239
- -
- -
- -
- -
- -253,479 251,080
1,833 - 442 -- - - -
1,833 - 442 -
18 - - -- - - -- - - -- - - -- - - -- - - -- - - -
- - - -- - - -- - - -- - - -- - - -- - - -- - - -- - - -- - - -
1,852 442
251,627 250,638
as of Sep.30,2014
Amounts excludedunder transitional
arrangements
CapitalCapital amount ((A)-(B)) (C)
Amount of Core Capital Adjustments (B)
Investments in ow n shares (excluding those reported in the Net assets section)Reciprocal cross-holdings in common equityInvestments in the capital of banking, f inancial and insurance entities that are outside the scope ofregulatory consolidation, net of eligible short positions, w here the bank does not ow n more than 10%of the issued share capital (amount above 10% threshold)
Amount exceeding the 10% threshold on specif ied itemsof w hich: signif icant investments in the common stock of f inancialsof w hich: mortgage servicing rightsof w hich: deferred tax assets arising from timing differences (net of related tax liability)
Amount exceeding the 15% threshold on specif ied itemsof w hich: signif icant investments in the common stock of f inancialsof w hich: mortgage servicing rightsof w hich: deferred tax assets arising from timing differences (net of related tax liability)
Defined-benefit pension fund net assets (prepaid pension costs)
Capital instruments issued by public agency under capital enhancement action included in Core CapitalBasic Components45% equivalent of the difference betw een the revaluated amount of the land and the book valueimmediately prior to revaluation included in Core Capital Basic ComponentsAmount of Core Capital Basic Components (A)Core Capital Adjustments (2)Total intangible f ixed assets(net of related tax liability, excluding those relating to mortgage servicing rights)
of w hich : goodw ill (net of related tax liability)of w hich : other intangibles other than goodw ill and mortgage servicing rights (net of related tax liability)
Deferred tax assets that rely on future profitability excluding those arising from timing differences (netof related tax liability)Shortfall of eligible provisions to expected losses Securitization gain on saleGains and losses due to changes in ow n credit risk on fair valued liabilities
Item as of Sep.30,2015
Amounts excludedunder transitional
arrangements
Core Capital Basic Components (1)
Eligible capital instruments subject to phase-out arrangements included in Core Capital BasicComponents
Directly issued qualifying common share or mandatory convertible preference share plus relatedcapital surplus and retained earnings
of w hich : capital and capital surplusof w hich : retained earningsof w hich : treasury stock (-)of w hich : national specif ic regulatory adjustments (earnings to be distributed) (-)of w hich : other than above
Subscription rights to common shares or mandatory convertible preference shares Total of allow ance for general loan losses and eligible provisions included in Core Capital BasicComponents
of w hich: allow ance for general loan lossesof w hich: eligible provisions
Qualifying non-cumulative perpetual preferred stock subject to phase-out arrangements included inCore Capital Basic Components
Citibank Japan Ltd. 61
(Millions of Yen)
898,190 687,042of w hich: Total of items in risk w eighted assets subject to phase-out arrangements - -
of w hich: intangible f ixed assets (net of related tax liability, excluding those relating tomortgage servicing rights) - -of w hich: deferred tax assets that rely on future profitability excluding those arising fromtiming differences ( net of related tax liability) - -of w hich: defined-benefit pension fund net assets (prepaid pension costs) - -of w hich: investments in the capital banking, f inancial and insurance entities - -none of the above - -
40,308 10,077114,232 112,886
- -- -
1,052,730 810,006
23.90% 30.94%
Item as of Sep.30,2014
Amounts excludedunder transitional
arrangements
Risk w eighted assets (3)Credit risk w eighted assets
Total amount of Market Risk equivalent divided by 8%Total amount of Operational Risk equivalent divided by 8%Credit risk w eighted assets adjustmentsOperational risk w eighted assets adjustmentsTotal amount of Risk w eighted assets (D)Capital Adequacy RatioTotal Capital Adequacy Ratio ((C) / (D))
as of Sep.30,2015
Amounts excludedunder transitional
arrangements
Citibank Japan Ltd. 62
QUANTITATIVE DISCLOSURE (1) Capital Adequacy Amount of Required Capital for Credit Risk
Amount of Required Capital for exposures relating to funds None
On balance sheet asset items
Cash - - - -
Exposures to Japanese government and central bank - - - -
Exposures to foreign government and central bank 612 24 600 24
Exposures to the Bank for International Settlements - - - -
Exposures to Local Authorities - - - -
Exposures to overseas public sectors other than central government 3,140 125 3,227 129
Exposures to the International Bank for Reconstruction and Development - - - -
Exposures to Japan Finance Organization for Municipal Enterprises - - - -
Exposures to Japan Government-aff iliated organization 2,696 107 1,174 46
Exposures to land development corporation, local housing corporations, Local Public Road Corporations - - - -
Exposures to f inancial institutions and Regulated securities companies 196,562 7,862 128,236 5,129
Corporate exposures 262,492 10,499 230,057 9,202
Exposures to small and medium size enterprises and individuals - - - -
Residential Mortgage Exposures 16,287 651 17,262 690
Retail Exposures related to real-estate acquisition 14,404 576 15,640 625
Exposures three months or more in arrears 1,795 71 1,518 60
Bills before collection 102 4 - -
Exposures to the Credit Guarantee Association - - - -
Exposures guaranteed by Industrial Revitalization Corporation of Japan - - - -
Exposures to Investment - - - -
Securitization exposures (originator) - - - -
Securitization exposures (other than the originator) - - 13,141 525
Assets backed up w ith several assets (so-called funds) w hich individual asset is ungraspable - - - -
Others 35,185 1,407 31,710 1,268
On-balance sheet asset items total 533,280 21,331 442,569 17,702
Off-balance sheet asset items
Derivative transactions 189,644 7,585 98,218 3,928
Others 97,336 3,893 84,192 3,367
Off-balance sheet asset items total 286,981 11,479 182,411 7,296
CVA risk asset 77,923 3,116 62,059 2,482
CCP 5 0 1 0
Total 898,190 35,927 687,042 27,481
(Millions of Yen)
Risk w eightedexposure
Required Capital Risk w eightedexposure
Required Capital
as of Sep. 30, 2014 as of Sep. 30, 2015
Citibank Japan Ltd. 63
Amount of Required Capital for Market Risk
Amount of Required Capital for Operational Risk
Total Amount of Required Capital
Standardized method of w hichInterest Rate Risk - 37,621 1,504 - 9,152 366Equity Risk - - - - - - Foreign Exchange Risk - 2,686 107 - 925 37Commodity Risk - - - - - - Options - - - - - -
Total - 40,308 1,612 - 10,077 403
(Millions of Yen)as of Sep. 30, 2014
Specif icRisk
GeneralMarket Risk
RequiredCapital
RequiredCapital
as of Sep. 30, 2015General
Market RiskSpecif ic
Risk
114,232 4,569 112,886 4,515Basic Indicator Approach
(Millions of Yen)as of Sep. 30, 2015
Operational Risk Required Capitalas of Sep. 30, 2014
Operational Risk Required Capital
Risk assetsCredit Risk exposure 898,190 687,042Market Risk exposure divided by 8% 40,308 10,077Operational Risk exposure divided by 8% 114,232 112,886Total of items in risk w eighted assets subject to transitional arrangements - -Total (A) 1,052,730 810,006
Total required Capital (Domestic Criteria) (A)×4% 42,109 32,400
(Millions of Yen)as of Sep. 30, 2014 as of Sep. 30, 2015
Citibank Japan Ltd. 64
(2) Credit Exposure
(Note) 1. Figures are without taking into account the effects of credit risk mitigation techniques. Furthermore, figures do not include
any securitization exposure, exposures relating to funds or exposures relating to central clearing funds. 2. Loans etc. include loans, commitments and other non-derivative off balance sheet exposure.
Loans etc. Derivatives Loans etc. Derivatives
Domestic
Manufacturing 87,094 - 13,666 100,760 108,686 - 9,238 117,925
Agriculture and Forestry - - - - - - - -
Fishery - - - - - - - -
Mining - - - - - - - -
Constraction 19 - 1,589 1,608 6 - 1,300 1,306
Electric pow er, gas, w atersupply - - - - - - - -
Information andcommunication 10,602 - 392 10,995 12,455 - 186 12,642
Transportation 18,797 - 856 19,653 18,849 - 616 19,465
Wholesale and retail 156,726 - 17,239 173,966 184,253 - 2,356 186,610
Financial Institutions andInsurance 1,136,101 13,484 182,407 1,331,993 707,931 5,870 55,657 769,458
Real estate 18,057 - - 18,057 19,266 - - 19,266
Services 4,987 - 1,298 6,285 5,743 - 340 6,083
Government 1,500,398 765,936 - 2,266,334 3,060,690 90,032 - 3,150,722
Individuals 67,142 - 518 67,661 68,145 - 354 68,500
Others 24,301 - - 24,301 21,288 - - 21,288
Overseas
Sovereign 34,580 3,003 - 37,583 48,023 3,003 - 51,026
Financial Institutions 856,247 - 51,404 907,651 1,066,342 - 97,711 1,164,053
Others 94,864 2,500 276 97,641 99,499 2,500 962 102,963
Total 4,009,921 784,924 269,649 5,064,495 5,421,182 101,406 168,726 5,691,315
Loans etc. Securities Derivatives Total Loans etc. Securities Derivatives Total
To 1 year 2,530,503 140,165 263,112 2,933,781 4,013,933 2,500 158,765 4,175,199
1 to 3 years 506,102 390,030 2,706 898,839 783,207 28,006 6,197 817,411
3 to 5 years 607,407 203,237 3,772 814,418 91,571 65,029 2,198 158,799
Over 5 years 289,323 51,490 58 340,872 192,782 5,870 1,564 200,217
Undefined 76,583 - - 76,583 339,687 - - 339,687
Total 4,009,921 784,924 269,649 5,064,495 5,421,182 101,406 168,726 5,691,315
Securities SecuritiesTotal Total
(Millions of Yen)
as of Sep. 30, 2014 as of Sep. 30, 2015(Millions of Yen)
as of Sep. 30, 2015as of Sep. 30, 2014
(by Maturity)
Citibank Japan Ltd. 65
Past-due over 3 months or Default Exposure
(Note) 1. Figures are without taking into account the effects of credit risk mitigation techniques. Furthermore, figures do not include
any securitization exposure, exposures relating to funds or exposures relating to central clearing funds. 2. "Past-due over 3 months or default exposure" is the exposure either in principal or interest payment is delayed more than 3
months or risk weight is 150% before the consideration of loan loss reserve.
Allowance for Loan Losses
Credit Risk Exposure after Credit Risk Mitigation by Risk weight under Standardized Approach
(Note) Figures are taking into account the effects of credit risk mitigation techniques and do not include any securitization exposure.
DomesticCorporate - -Individuals 381 206
Overseas 4,602 4,162Total 4,983 4,369
(Millions of Yen)as of Sep. 30, 2015as of Sep. 30, 2014
Specif ic ReserveCorporate 5 (5) - 5 342 347 347 (347) - Individuals 905 (122) 783 905 (210) 694 694 (13) 681Others 2 - 2 2 - 2 2 - 2
General Reserve 1,014 263 1,278 1,014 230 1,245 1,245 (5) 1,239Loan loss reserve for restructuring country
(Millions of Yen)as of Mar. 31, 2015
Beginning Change Ending
Not applicable
as of Sep. 30, 2014 as of Sep. 30, 2015Beginning Change EndingBeginning Change Ending
(Millions of Yen)
Rated Unrated Rated Unrated
0% - 2,274,319 - 3,158,447 20% 783,631 41,767 529,808 21,681 35% - 46,536 - 49,321 50% 173,109 40,808 156,378 17,750 75% - - - - 100% 60,495 418,391 37,415 326,575 150% 6 569 - 421 250% - 3,908 - 4,148 1250% - - - - Deduction from Capital - - - - Total 1,017,242 2,826,301 723,601 3,578,346
as of Sep. 30, 2014 as of Sep. 30, 2015
Citibank Japan Ltd. 66
(3) Credit Risk Mitigation
(Note) On-balance netting was adopted for the interbank Money Market transaction with Citibank, N.A. overseas main branches.
(4) Counterparty Credit Risk of OTC Derivatives
v. Collateral type None vi. Credit exposure after Credit Risk Mitigation Same as iii vii. Notional amount of credit derivatives which have counterparty risk None viii. Notional amount of credit derivatives which cover exposures by Credit Risk Mitigation None
Eligible Financial CollateralCash 217,531 679,294Bonds 897,346 598,049Stocks 212 162Others - -
Guarantee and Credit DerivativesGuarantee 105,860 111,860Credit Derivatives - -
Total 1,220,951 1,389,366
(Millions of Yen)as of Sep. 30, 2014 as of Sep. 30, 2015
i.Measurement of Credit exposure Current Exposure Method
ii.Total amount of gross positive fair value 265,008 158,686
iii.Credit exposure before Credit Risk MitigationFX related 266,397 167,607Interest rate related 3,251 1,119Total 269,649 168,726
iv.The amount deducting iii from sum of ii and gross add-on(Reduction by Netting agreements)
161,701 159,955
(Millions of Yen)as of Sep. 30, 2014 as of Sep. 30, 2015
Citibank Japan Ltd. 67
(5) Securitization ⅰ. Securitization exposure as Originator None ⅱ. Securitization exposure as Investor a. Information by Type of Underlying Assets
There was no re-securitization exposure as of September 30, 2013 and 2014.
b. Exposure by Risk Weight Category and Amount of Required Capital
There was no re-securitization exposure as of September 30, 2013 and 2014. c. Amount of securitization exposure and type of underlying asset which 1250% risk weight should be adopted in accordance with
Paragraph 1, Article 247 of FSA Notice No.19 None
d. Credit risk mitigation for resecuritization exposure.
None
e. Credit Risk-Weighted Assets Calculated Pursuant to Article 15 of Supplementary Provisions of the FSA Capital Adequacy Ratio Notification
None ⅲ. Securitization exposure subject to measurement of comprehensive risk (as Originator) None ⅳ. Securitization exposure subject to measurement of comprehensive risk (as Investor) None (6) Market Risk (under Internal Model Approach) None (7) Equity Exposure in Banking Book None
Claims on corporate customers - -Residential Mortgage Loan - -Claims on individual customers(ex. Residential Mortgage Loan) 86,210 65,707Others - -Total 86,210 65,707
(Millions of Yen)as of Sep. 30, 2014 as of Sep. 30, 2015
Exposure Required Capital Exposure Required Capital20% 86,210 689 65,707 52550% - - - -100% - - - -350% - - - -1250% - - - -Deduction from Capital - - - -Total 86,210 689 65,707 525
(Millions of Yen)as of Sep. 30, 2014 as of Sep. 30, 2015
Citibank Japan Ltd. 68
(8) Amount in regarded exposure under the Accord article 167 None (9) Interest Rate Risk in the Banking Book - the increase/(decrease) in economic value for 1%
upward rate shocks according to internal management's method.
Japanese Yen 16,031 20,239US Dollar 1,822 4,550Euro 266 38Others (719) (429)Total 17,400 24,398
as of Sep. 30, 2014 as of Sep. 30, 2015(Millions of Yen)
Citibank Japan Ltd. 69
Confirmation
January 29, 2016
Representative Director, President & CEO Anthony P. Della Pietra, Jr.
I confirm, to the best of my knowledge, the following matters concerning the Citibank Japan Ltd. financial statements for the Period from April 1, 2015 to September 30, 2015:
1. Matters concerning the financial statements are in conformity with “The Regulations regarding Terminology, Format and Method of Preparation of Financial Statements, etc” and “Enforcement Regulation of the Banking Law” and others, and the financials present fairly in all material respects.
2. Citibank Japan Ltd. establishes and maintains the appropriate internal control systems as below, and
fairly presents financial statements based on it.
(1) Assignment of duties and the corresponding units in charge are clearly defined, and the system for accomplishment of operation is appropriately established.
(2) Internal Audit Division assesses the appropriateness and effectiveness of internal control systems for each responsible unit, and reports the material matters to the Management and Board of Statutory Auditors.
(3) All material information concerning Citibank Japan Ltd. is adequately reported to the Management and Board of Directors as necessary.
Citibank Japan Ltd. 70
www.citibank.co.jp