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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                             to

Commission file number 1-9924

Citigroup Inc.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		52-1568099 (I.R.S. Employer Identification No.)
399 Park Avenue, New York, New York 10043 (Address of principal executive offices) (Zip Code)
(212) 559-1000 (Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ý No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý                Accelerated filer o                Non-accelerated filer o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o No ý

        Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

Common stock outstanding as of June 30, 2006: 4,943,944,972

Available on the Web at www.citigroup.com

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Citigroup Inc.

TABLE OF CONTENTS

Part I—Financial Information

				Page No.
Item 1.		Financial Statements:
		Consolidated Statement of Income (Unaudited)—     Three and Six Months Ended June 30, 2006 and 2005		82
		Consolidated Balance Sheet—     June 30, 2006 (Unaudited) and December 31, 2005		83
		Consolidated Statement of Changes in Stockholders' Equity (Unaudited)—     Six Months Ended June 30, 2006 and 2005		84
		Consolidated Statement of Cash Flows (Unaudited)—     Six Months Ended June 30, 2006 and 2005		85
		Consolidated Balance Sheet—Citibank, N.A. and Subsidiaries     June 30, 2006 (Unaudited) and December 31, 2005		86
		Notes to Consolidated Financial Statements (Unaudited)		87
Item 2.		Management's Discussion and Analysis of Financial     Condition and Results of Operations		4–79
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		56–57 110–112
Item 4.		Controls and Procedures		80
Part II—Other Information
Item 1.		Legal Proceedings		126
Item 1A.		Risk Factors		126
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		127
Item 6.		Exhibits		128
Signatures				129
Exhibit Index				130

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THE COMPANY

        Citigroup Inc. (Citigroup, or the Company) is a diversified global financial services holding company whose businesses provide a broad range of financial services to consumer and corporate clients. Citigroup has some 200 million client accounts and does business in more than 100 countries. Citigroup was incorporated in 1988 under the laws of the State of Delaware.

        The Company is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 registered with, and subject to examination by, the Board of Governors of the Federal Reserve System (FRB). Some of the Company's subsidiaries are subject to supervision and examination by their respective federal and state authorities. This quarterly report on Form 10-Q should be read in conjunction with Citigroup's 2005 Annual Report on Form 10-K.

        The principal executive offices of the Company are located at 399 Park Avenue, New York, New York 10043, telephone number 212-559-1000. Additional information about Citigroup is available on the Company's Web site at www.citigroup.com. Citigroup's annual report on Form 10-K, its quarterly reports on Form 10-Q, its current reports on Form 8-K, and all amendments to these reports are available free of charge through the Company's Web site by clicking on the "Investor Relations" page and selecting "SEC Filings." The Securities and Exchange Commission (SEC) Web site contains reports, proxy and information statements, and other information regarding the Company at www.sec.gov.

        Citigroup is managed along the following segment and product lines:

        The following are the six regions in which Citigroup operates. The regional results are fully reflected in the product results.

(1)

Disclosure includes Canada and Puerto Rico.

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CITIGROUP INC. AND SUBSIDIARIES

SUMMARY OF SELECTED FINANCIAL DATA

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(1)

Reclassified to conform to the current period's presentation.

(2)

Discontinued operations for the three months and six months ended June 30, 2006 and 2005 includes the operations described in the Company's June 24, 2005 announced agreement for the sale of substantially all of its Asset Management business to Legg Mason. The majority of the transaction closed on December 1, 2005. Discontinued operations also includes the operations described in the Company's January 31, 2005 announced agreement for the sale of its Travelers Life & Annuity business, substantially all of its international insurance business, and its Argentine pension business to MetLife, Inc. This transaction closed on July 1, 2005. See further discussion regarding discontinued operations in Note 3 to the Consolidated Financial Statements on page 89.

(3)

The return on average common stockholders' equity and return on average total stockholders' equity are calculated using net income after deducting preferred stock dividends.

(4)

Risk capital is a measure of risk levels and the tradeoff of risk and return. It is defined as the amount of capital required to absorb potential unexpected economic losses resulting from extremely severe events over a one-year time period. Return on risk capital is calculated as annualized income from continuing operations divided by average risk capital. Invested capital is defined as risk capital plus goodwill and intangible assets excluding mortgage servicing rights, which are a component of risk capital. Return on invested capital is calculated using income adjusted to exclude a net internal charge Citigroup levies on the goodwill and intangible assets of each business offset by each business' share of the rebate of the goodwill and intangible asset charge. Return on risk capital and return on invested capital are non-GAAP performance measures; because they are measures of risk with no basis in GAAP, there is no comparable GAAP measure to which they can be reconciled. Management uses return on risk capital to assess businesses' operational performance and to allocate Citigroup's balance sheet and risk capital capacity. Return on invested capital is used to assess returns on potential acquisitions and to compare long-term performance of businesses with differing proportions of organic and acquired growth. See page 49 for a further discussion of Risk Capital.

(5)

Tier 1 capital divided by adjusted average assets.

(6)

Dividends declared per common share as a percentage of net income per diluted share.

4

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MANAGEMENT'S DISCUSSION
AND ANALYSIS

MANAGEMENT SUMMARY

        Income from continuing operations of $5.262 billion in the 2006 second quarter was up 11% from the 2005 second quarter.

        During the 2006 second quarter, we continued executing on our strategic initiatives, opening a record 270 new Citibank and CitiFinancial branches (196 in International and 74 in the U.S.).

        Customer volumes were strong, with average loans up 13%, average deposits up 15% and average interest-earning assets up 15% from year-ago levels.

        Citibank Direct, our Internet bank launched at the end of the first quarter, has raised more than $4.2 billion in deposits, of which approximately two-thirds is new money to the Company.

        During the quarter, we completed the full integration of Brazil's Credicard into our international cards business, affirming us as a premier credit card company in Brazil.

*

Excludes Japan Automated Loan Machines (ALMs).

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        Revenues increased 10% from the 2005 second quarter, reaching $22.2 billion. Our international operations recorded revenue growth of 17% in the 2006 second quarter, with International Consumer up 12% and International CIB up 23%. Global CIB revenues increased 31%, reflecting strong performance in both Transaction Services and Capital Markets and Banking.

        Net interest revenue was approximately flat to last year as pressure on net interest margins continued. Net interest margin in the 2006 second quarter was 2.72%, down 40 basis points from the 2005 second quarter and down 14 basis points from the 2006 first quarter. The majority of the decline from the 2006 first quarter was driven by trading activities (see discussion of net interest margin on page 64). Non-interest revenue increased 19%, continuing to benefit from higher customer volume across the businesses.

        Operating expenses increased 16% from the 2005 second quarter; this was comprised of 12 percentage points due to organic business growth and acquisitions, 2 points due to investment spending, and 2 points due to SFAS 123(R) accruals.

        Income was well diversified by segment and region, as shown in the charts below.

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        The global credit environment remained favorable; this, as well as significantly lower consumer bankruptcy filings and an asset mix shift, drove a $234 million decrease in credit costs compared to year-ago levels. The Global Consumer loss rate was 1.48%, a 20 basis point decline from the 2005 second quarter, in part reflecting significantly lower bankruptcy filings. Corporate cash-basis loans declined 3% from March 31, 2006 to $799 million.

        The effective tax rate on continuing operations was 30.3%, comparable to the 2005 second quarter.

        Our equity capital base and trust preferred securities grew to $122.0 billion at June 30, 2006. Stockholders' equity increased by $1.0 billion during the quarter to $115.4 billion. We distributed $2.5 billion in dividends to shareholders and repurchased $2.0 billion of common stock during the quarter.

        Return on common equity was 18.6% for the quarter. Citigroup maintained its "well-capitalized" position with a Tier 1 Capital Ratio of 8.51% at June 30, 2006.

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EVENTS IN 2006 and 2005

MasterCard Initial Public Offering

        In June 2006, MasterCard conducted a series of transactions consisting of: (i) an IPO of new Class A stock, (ii) an exchange of its old Class A stock held by its member banks for shares of its new Class B and Class M stocks, and (iii) a partial redemption of the new Class B stock held by the member banks. Citigroup, as one of MasterCard's member banks, received 4,946,587 shares of Class B stock, 48 shares of Class M stock, and $123 million in cash as a result of these transactions. An after-tax gain of $78 million ($123 million pretax) was recognized in the 2006 second quarter related to the cash redemption of shares.

Sale of Upstate New York Branches

        On June 30, 2006, Citigroup sold the Upstate New York Financial Center Network consisting of 21 branches in Rochester, N.Y. and Buffalo, N.Y. to M&T Bank (referred to hereinafter as the "Sale of New York Branches"). Citigroup received a premium on deposit balances of approximately $1 billion. An after-tax gain of $92 million ($163 million pretax) was recognized in the 2006 second quarter.

Consolidation of Brazil's Credicard

        In April 2006, Citigroup and Banco Itau dissolved their joint venture in Credicard, a Brazil consumer credit card business. In accordance with the dissolution agreement, Banco Itau received half of Credicard's assets and customer accounts in exchange for its 50% ownership, leaving Citigroup as the sole owner of Credicard.

        Beginning April 30, 2006, Credicard's financial statements were consolidated with Citigroup. $75 million in purchased credit card relationship intangibles and $270 million in goodwill were recognized in connection with the acquisition. Previously, Citigroup reported its interest in Credicard using the equity method of consolidation. Accordingly, our net investment was included in Other assets.

Acquisition of Federated Credit Card Portfolio and Credit Card Agreement With Federated Department Stores

        In June 2005, Citigroup announced a long-term agreement with Federated Department Stores, Inc. (Federated) under which the companies will partner to manage approximately $6.2 billion of Federated's credit card receivables, including existing and new accounts, executed in three phases.

        For the first phase, which closed in October 2005, Citigroup acquired Federated's receivables under management, totaling approximately $3.3 billion. For the second phase, which closed in May 2006, additional Federated receivables totaling approximately $1.9 billion were transferred to Citigroup from the previous provider. For the final phase, in the 2006 third quarter, Citigroup expects to acquire the approximately $1.0 billion credit card receivable portfolio of The May Department Stores Company (May), which recently merged with Federated.

        Citigroup is paying a premium of approximately 11.5% to acquire these portfolios. The multi-year agreement also provides Federated the ability to participate in the portfolio performance, based on credit sales and certain other performance metrics.

        The Federated and May credit card portfolios comprise a total of approximately 17 million active accounts.

        Certain of the above statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 81.

Adoption of the Accounting for Share-Based Payments

        On January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) 123 (revised 2004), "Share-Based Payment" (SFAS 123(R)), which replaces the existing SFAS 123 and supersedes Accounting Principles Board (APB) 25. SFAS 123(R) requires companies to measure and record compensation expense for stock options and other share-based payments based on the instruments' fair value, reduced by expected forfeitures.

        In adopting this standard, the Company conformed to recent accounting guidance that restricted stock awards issued to retirement-eligible employees who meet certain age and service requirements must be either expensed on the grant date or accrued over a service period prior to the grant date. The impact to the 2006 first quarter results was a charge of $520 million after-tax ($846 million pretax). This charge consisted of $398 million after-tax ($648 million pretax) for the immediate expensing of awards granted to retirement-eligible employees in January 2006, and $122 million after-tax ($198 million pretax) for the quarterly accrual of the estimated awards that will be granted through January 2007.

        The following table summarizes the SFAS 123(R) impact, by segment, on the 2006 first quarter pretax compensation expense for stock awards granted to retirement-eligible employees in January 2006:

In the 2006 second quarter, the accrual for estimated January 2007 awards was $104 million after-tax ($168 million pretax). The Company has changed the plan's retirement eligibility for the January 2007 management awards, which impacted the amount of the accrual in the 2006 second quarter.

        Additional information can be found in Notes 1 and 8 to the Consolidated Financial Statements on pages 87 and 95, respectively. The Company will continue to accrue for the estimated awards that will be granted through January 2007 in each quarter of 2006.

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Settlement of IRS Tax Audit

        In March 2006, the Company received a notice from the Internal Revenue Service (IRS) that they had concluded the tax audit for the years 1999 through 2002. For the 2006 first quarter, the Company released a total of $657 million from its tax contingency reserves related to the 1999 through 2002 Federal tax audit (referred to hereinafter as the "resolution of the Federal Tax Audit").

        The following table summarizes the 2006 first quarter tax benefit by segment of the resolution of the Federal Tax Audit:

Sale of Asset Management Business

        On December 1, 2005, the Company completed the sale of substantially all of its Asset Management Business to Legg Mason, Inc. (Legg Mason) in exchange for Legg Mason's broker-dealer business, $2.298 billion of Legg Mason's common and preferred shares (valued as of the closing date), and $500 million in cash. This cash was obtained via a lending facility provided by Citigroup CIB. The transaction did not include Citigroup's asset management business in Mexico, its retirement services business in Latin America (both of which are now included in International Retail Banking) or its interest in the CitiStreet joint venture (which is now included in Smith Barney). The total value of the transaction at the time of closing was approximately $4.369 billion, resulting in an after-tax gain to Citigroup of approximately $2.082 billion ($3.404 billion pretax). This gain remains subject to final closing adjustments.

        Concurrently, Citigroup sold Legg Mason's Capital Markets business to Stifel Financial Corp. (The transactions described in these two paragraphs are referred to as the "Sale of the Asset Management Business.")

        Upon completion of the Sale of the Asset Management Business, Citigroup added 1,226 financial advisors in 124 branch offices from Legg Mason to its Global Wealth Management business.

        During March 2006, Citigroup sold 10.3 million shares of Legg Mason stock through an underwritten public offering. The net sale proceeds of $1.258 billion resulted in a pretax gain of $24 million.

        Additional information can be found in Note 3 to the Consolidated Financial Statements on page 89.

Sale of Travelers Life & Annuity

        On July 1, 2005, the Company completed the sale of Citigroup's Travelers Life & Annuity and substantially all of Citigroup's international insurance businesses to MetLife, Inc. (MetLife). The businesses sold were the primary vehicles through which Citigroup engaged in the Life Insurance and Annuities business.

        Citigroup received $1.0 billion in MetLife equity securities and $10.830 billion in cash, which resulted in an after-tax gain of approximately $2.120 billion ($3.386 billion pretax). On July 3, 2006, Citigroup completed the sale of its MetLife shares, resulting in a $133 million pretax gain, which will be recorded in the 2006 third quarter.

        On July 31, 2006, the final settlement with MetLife was completed, resulting in an additional after-tax gain of $75 million ($115 million pretax), which will be recognized in the 2006 third quarter as part of discontinued operations.

        The transaction encompassed Travelers Life & Annuity's U.S. businesses and its international operations, other than Citigroup's life insurance business in Mexico (which is now included within International Retail Banking). (The transaction described in the preceding three paragraphs is referred to as the "Sale of the Life Insurance and Annuities Business").

        Additional information can be found in Note 3 to the Consolidated Financial Statements on page 89.

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Credit Reserves

        During the three months ended June 30, 2006, the Company recorded a net release/utilization of its credit reserves of $210 million, consisting of a net release/utilization of $328 million in Global Consumer, and a net build of $118 million in CIB.

        The net release/utilization in Global Consumer was primarily due to lower bankruptcy filings and a continued overall improvement in the consumer portfolio. Partially offsetting the releases were builds in Taiwan, related to recent credit trends in credit cards, and Mexico.

        The net build of $118 million in CIB was primarily composed of $120 million in Capital Markets and Banking,which included a $138 million reserve increase for unfunded lending commitments. The net build reflected growth in loans and unfunded commitments and an update to historical data used for certain loan loss estimates.

        For the six months ended June 30, 2006, the Company recorded a net release/utilization of $364 million, consisting of a net release/utilization of $515 million in Global Consumer and a net build of $151 million in the CIB.

Credit Reserve Builds (Releases/Utilization)(1)

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(1)

Releases include SFAS 114 releases and utilizations.

Allowance for Credit Losses

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Repositioning Charges

        The Company recorded a $272 million after-tax $(435 million pretax) charge during the 2005 first quarter for repositioning costs. The repositioning charges were predominantly severance-related costs recorded in CIB $(151 million after-tax) and in Global Consumer $(95 million after-tax). These repositioning actions were consistent with the Company's objectives of controlling expenses while continuing to invest in growth opportunities.

Resolution of Glendale Litigation

        During the 2005 first quarter, the Company recorded a $72 million after-tax gain $(114 million pretax) following the resolution of Glendale Federal Bank v. United States, an action brought by Glendale Federal Bank, a predecessor to Citibank (West), FSB, against the United States government.

Acquisition of First American Bank

        On March 31, 2005, Citigroup completed its acquisition of First American Bank in Texas (FAB). The transaction established Citigroup's retail branch presence in Texas, giving Citigroup 106 branches, $4.2 billion in assets and approximately 120,000 new customers in the state at the time of the transaction's closing. The results of FAB are included in the Consolidated Financial Statements from March 2005 forward.

Divestiture of the Manufactured Housing Loan Portfolio

        On May 1, 2005, Citigroup completed the sale of its manufactured housing loan portfolio, consisting of $1.4 billion in loans, to 21st Mortgage Corp. The Company recognized a $109 million after-tax loss $(157 million pretax) in the 2005 first quarter related to the divestiture.

Divestiture of CitiCapital's Transportation Finance Business

        On January 31, 2005, the Company completed the sale of CitiCapital's Transportation Finance Business based in Dallas and Toronto to GE Commercial Finance for total cash consideration of approximately $4.6 billion. The sale resulted in an after-tax gain of $111 million $(157 million pretax).

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SEGMENT, PRODUCT AND REGIONAL NET INCOME

        The following tables show the net income (loss) for Citigroup's businesses on a segment and product view and on a regional view:

Citigroup Net Income—Segment and Product View

				Three Months Ended June 30,								Six Months Ended June 30,
										%								%
In millions of dollars
				2006			2005(1)			Change		2006			2005(1)			Change
Global Consumer
	U.S. Cards			$	878		$	735		19	%	$	1,804		$	1,513		19	%
	U.S. Retail Distribution				568			478		19			1,083			1,042		4
	U.S. Consumer Lending				470			507		(7	)		907			993		(9	)
	U.S. Commercial Business				138			134		3			264			386		(32	)
		Total U.S. Consumer(2)		$	2,054		$	1,854		11	%	$	4,058		$	3,934		3	%
	International Cards			$	328		$	331		(1	)%	$	619		$	633		(2	)%
	International Consumer Finance				173			177		(2	)		341			316		8
	International Retail Banking				714			593		20			1,391			1,091		27
		Total International Consumer		$	1,215		$	1,101		10	%	$	2,351		$	2,040		15	%
	Other			$	(92	)	$	(58	)	(59	)%	$	(159	)	$	(234	)	32	%
		Total Global Consumer		$	3,177		$	2,897		10	%	$	6,250		$	5,740		9	%
Corporate and Investment Banking
	Capital Markets and Banking			$	1,412		$	1,043		35	%	$	3,030		$	2,482		22	%
	Transaction Services				340			288		18			663			533		24
	Other				(29	)		41		NM			(41	)		36		NM
		Total Corporate and Investment Banking		$	1,723		$	1,372		26	%	$	3,652		$	3,051		20	%
Global Wealth Management
	Smith Barney			$	238		$	239		—		$	406		$	436		(7	)%
	Private Bank				109			83		31			228			205		11
		Total Global Wealth Management		$	347		$	322		8	%	$	634		$	641		(1	)%
Alternative Investments				$	257		$	385		(33	)%	$	610		$	747		(18	)%
Corporate/Other					(242	)		(245	)	1			(329	)		(333	)	1
Income from Continuing Operations				$	5,262		$	4,731		11	%	$	10,817		$	9,846		10	%
Income from Discontinued Operations(3)					3			342		(99	)		87			668		(87	)
Total Net Income				$	5,265		$	5,073		4	%	$	10,904		$	10,514		4	%

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(1)

Reclassified to conform to the current period's presentation. See Note 4 to the Consolidated Financial Statements on page 92 for assets by segment.

(2)

U.S. disclosure includes Canada and Puerto Rico.

(3)

See Note 3 to the Consolidated Financial Statements on page 89.

NM

Not meaningful

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Citigroup Net Income—Regional View

				Three Months Ended June 30,								Six Months Ended June 30,
										%								%
In millions of dollars
				2006			2005(1)			Change		2006			2005(1)			Change
U.S.(2)
	Global Consumer			$	1,962		$	1,796		9	%	$	3,899		$	3,700		5	%
	Corporate and Investment Banking				747			462		62			1,262			1,355		(7	)
	Global Wealth Management				290			315		(8	)		518			588		(12	)
		Total U.S.		$	2,999		$	2,573		17	%	$	5,679		$	5,643		1	%
Mexico
	Global Consumer			$	375		$	368		2	%	$	733		$	645		14	%
	Corporate and Investment Banking				88			76		16			166			159		4
	Global Wealth Management				10			10		—			18			23		(22	)
		Total Mexico		$	473		$	454		4	%	$	917		$	827		11	%
Latin America
	Global Consumer			$	88		$	80		10	%	$	146		$	134		9	%
	Corporate and Investment Banking				138			195		(29	)		340			340		—
	Global Wealth Management				2			8		NM			5			15		(67	)
		Total Latin America		$	228		$	283		(19	)%	$	491		$	489		—
EMEA
	Global Consumer			$	215		$	124		73	%	$	400		$	246		63	%
	Corporate and Investment Banking				342			336		2			977			524		86
	Global Wealth Management				5			3		67			8			2		NM
		Total EMEA		$	562		$	463		21	%	$	1,385		$	772		79	%
Japan
	Global Consumer			$	178		$	188		(5	)%	$	366		$	363		1	%
	Corporate and Investment Banking				72			54		33			157			102		54
	Global Wealth Management				—			(45	)	100			—			(53	)	100
		Total Japan		$	250		$	197		27	%	$	523		$	412		27	%
Asia
	Global Consumer			$	359		$	341		5	%	$	706		$	652		8	%
	Corporate and Investment Banking				336			249		35			750			571		31
	Global Wealth Management				40			31		29			85			66		29
		Total Asia		$	735		$	621		18	%	$	1,541		$	1,289		20	%
Alternative Investments				$	257		$	385		(33	)%	$	610		$	747		(18	)%
Corporate/Other					(242	)		(245	)	1			(329	)		(333	)	1
Income from Continuing Operations				$	5,262		$	4,731		11	%	$	10,817		$	9,846		10	%
Income from Discontinued Operations(3)					3			342		(99	)		87			668		(87	)
Total Net Income				$	5,265		$	5,073		4	%	$	10,904		$	10,514		4	%
Total International				$	2,248		$	2,018		11	%	$	4,857		$	3,789		28	%

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(1)

Reclassified to conform to the current period's presentation.

(2)

Excludes Alternative Investments and Corporate/Other, which are predominantly related to the U.S. The U.S. regional disclosure includes Canada and Puerto Rico. Global Consumer for the U.S. includes Other Consumer.

(3)

See Note 3 to the Consolidated Financial Statements on page 89.

NM

Not meaningful.

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SELECTED REVENUE AND EXPENSE ITEMS

Selected Revenue Items

        Net interest revenue of $9.8 billion for the 2006 second quarter increased $11 million from the 2005 second quarter, as higher customer deposit and loan balances were offset by spread compression.

        Total commissions, asset management and administrative fees, and other fee revenues for the second quarter of 2006 of $7.0 billion increased by $1.6 billion, or 29%, compared to the 2005 second quarter. This was attributable to the mark-to-market of the Consumer Lending's servicing assets, as well as increased investment banking fees, volumes, and assets under custody in CIB.

        Principal transactions revenue of $1.7 billion increased $859 million from the second quarter of 2005. Realized gains from sales of investments were down $153 million, or 34%, to $302 million in the 2006 second quarter primarily due to the absence of the gain on the sale of the shares of St. Paul Travelers during the prior-year quarter. Other revenue of $2.5 billion declined $283 million, or 10%, from the 2005 second quarter, and included $123 million from the MasterCard IPO.

Operating Expenses

        Total operating expenses were $12.8 billion for the 2006 second quarter, up $1.8 billion, or 16%, from the comparable 2005 period. The increase was primarily in compensation and benefits due to higher headcount and an increase in incentive compensation in CIB, primarily Capital Markets and Banking, as well as increased costs of branch expansion and higher business volumes in Global Consumer.

        Global Consumer reported an 11% increase in total expenses from the 2005 second quarter. U.S. Consumer increased $193 million, or 6%, on increased business volumes and investments in new branches. International Consumer expenses increased $381 million, or 16%, versus the second quarter of 2005, primarily due to investment in branch expansion, and the integration of Credicard.

        CIB expenses increased 23% from the 2005 second quarter, primarily due to an increase in incentive compensation on a revenue increase of 31%.

        Global Wealth Management expenses increased 24% as compared to the prior year's three-month period, primarily related to costs associated with the Legg Mason integration and higher compensation costs. Alternative Investments expenses increased 25% from the 2005 second quarter.

Provisions for Credit Losses and for Benefits and Claims

        The provision for credit losses decreased $234 million, or 13%, from the 2005 second quarter to $1.6 billion. Policyholder benefits and claims in the 2006 second quarter increased $19 million, or 9%, from the 2005 second quarter.

        Global Consumer provisions for loan losses and for benefits and claims of $1.6 billion in the 2006 second quarter were down $398 million, or 19%, from the 2005 second quarter. The declines were mainly due to lower bankruptcy filings and a continued favorable credit environment that drove lower net credit loss ratios. Total net credit losses were $1.754 billion, and the related loss ratio was 1.48%, in the 2006 second quarter, as compared to $1.797 billion and 1.68% in the 2005 second quarter. The consumer loan delinquency ratio (90 days or more past due) declined to 1.22% at June 30, 2006 from 1.70% at June 30, 2005. See page 54 for a reconciliation of total consumer credit information.

        The CIB provision for credit losses in the 2006 second quarter was up $187 million from the 2005 second quarter. CIB's reserve for credit losses was increased by $150 million for unfunded lending commitments in the 2006 second quarter due to higher exposures and an update to historical data used for certain loss estimates.

        Corporate cash-basis loans at June 30, 2006 and 2005 were $799 million and $1.6 billion, respectively, while the corporate Other Real Estate Owned (OREO) portfolio totaled $171 million and $133 million, respectively. The decline in corporate cash-basis loans from June 30, 2005, was related to improvements in the overall credit environment and write-offs, as well as sales of loans and paydowns in the portfolio.

Income Taxes

        The Company's effective tax rate on continuing operations was 30.3% in the 2006 second quarter, compared to 30.4% in the 2005 second quarter. The 2005 second quarter included a $65 million tax benefit related to the resolution of an interest calculation for a prior appeals settlement.

Regulatory Capital

        Total capital (Tier 1 and Tier 2) was $112.6 billion and $106.4 billion, or 11.68% and 12.02% of net risk-adjusted assets at June 30, 2006 and December 31, 2005, respectively. Tier 1 capital was $82.0 billion, or 8.51% of net risk-adjusted assets, at June 30, 2006, compared to $77.8 billion, or 8.79%, at December 31, 2005.

14

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ACCOUNTING CHANGES AND FUTURE APPLICATION OF ACCOUNTING STANDARDS

        See Note 1 to the Consolidated Financial Statements on page 87 for a discussion of Accounting Changes and the Future Application of Accounting Standards.

SIGNIFICANT ACCOUNTING POLICIES

        The Company's accounting policies are fundamental to understanding management's discussion and analysis of results of operations and financial condition. The Company has identified five policies as being significant because they require management to make subjective and/or complex judgments about matters that are inherently uncertain. These policies relate to Valuations of Financial Instruments, Allowance for Credit Losses, Securitizations, Income Taxes and Legal Reserves. The Company, in consultation with the Audit and Risk Management Committee of the Board of Directors, has reviewed and approved these significant accounting policies, which are further described in the Company's 2005 Annual Report on Form 10-K.

---

The net income line in the following business segment and operating unit discussions excludes discontinued operations. Income from discontinued operations is included within the Corporate/Other business segment. See Notes 3 and 4 to the Consolidated Financial Statements on pages 89 and 92, respectively.

Certain prior period amounts have been reclassified to conform to the current period's presentation.

---

15

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GLOBAL CONSUMER

		*Excludes Other Consumer loss of $92 million.		*Excludes Other Consumer loss of $92 million.

        Citigroup's Global Consumer Group provides a wide array of banking, lending, insurance and investment services through a network of 7,670 branches, approximately 18,000 ATMs, approximately 800 Automated Lending Machines (ALMs), the Internet, telephone and mail, and the Primerica Financial Services salesforce. Global Consumer serves more than 200 million customer accounts, providing products and services to meet the financial needs of both individuals and small businesses.

																% Change
		Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars								2Q06 vs. 2Q05								YTD06 vs. YTD05
		2006			2005					2006			2005
Revenues, net of interest expense		$	12,628		$	12,007		5	%	$	24,583		$	24,125		2	%
Operating expenses			6,379			5,753		11			12,736			11,599		10
Provisions for loan losses and for benefits and claims			1,649			2,047		(19	)		3,317			4,149		(20	)
Income before taxes and minority interest		$	4,600		$	4,207		9	%	$	8,530		$	8,377		2	%
Income taxes			1,400			1,295		8			2,247			2,609		(14	)
Minority interest, net of taxes			23			15		53			33			28		18
Net income		$	3,177		$	2,897		10	%	$	6,250		$	5,740		9	%
Average assets (in billions of dollars)		$	582		$	528		10	%	$	572		$	527		9	%
Return on assets			2.19	%		2.20	%				2.20	%		2.20	%
Average risk capital(1)			27,522			27,345		1	%	$	27,620		$	26,849		3	%
Return on risk capital(1)			46	%		42	%				46	%		43	%
Return on invested capital(1)			21	%		19	%				21	%		19	%

---

(1)

See footnote 4 to the table on page 4.

16

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U.S. CONSUMER

        U.S. Consumer is composed of four businesses: Cards, Retail Distribution, Consumer Lending and Commercial Business.

																% Change
		Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars								2Q06 vs. 2Q05								YTD06 vs. YTD05
		2006			2005					2006			2005
Revenues, net of interest expense		$	7,573		$	7,490		1	%	$	14,833		$	15,453		(4	)%
Operating expenses			3,551			3,358		6			7,120			6,695		6
Provisions for loan losses and for benefits and claims			827			1,317		(37	)		1,728			2,746		(37	)
Income before taxes and minority interest		$	3,195		$	2,815		13	%	$	5,985		$	6,012		—
Income taxes			1,121			945		19			1,898			2,049		(7	)%
Minority interest, net of taxes			20			16		25			29			29		—
Net income		$	2,054		$	1,854		11	%	$	4,058		$	3,934		3	%
Average assets (in billions of dollars)		$	395		$	353		12	%	$	388		$	351		11	%
Return on assets			2.09	%		2.11	%				2.11	%		2.26	%
Average risk capital(1)		$	14,797		$	14,004		6	%	$	14,934		$	13,922		7	%
Return on risk capital(1)			56	%		53	%				55	%		57	%
Return on invested capital(1)			24	%		22	%				24	%		23	%

---

(1)

See footnote 4 to the table on page 4.

17

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U.S. Cards

        U.S. Cards is one of the largest providers of credit cards in North America, with more than 140 million customer accounts in the United States, Canada and Puerto Rico. In addition to MasterCard (including Diners), Visa, and American Express, U.S. Cards is the largest provider of credit card services to the oil and gas industry and the leading provider of consumer private-label credit cards and commercial accounts on behalf of merchants such as Sears, The Home Depot, Federated, Dell Computer, Radio Shack, Staples and Zales Corporation.

        Revenues are primarily generated from net interest revenue on receivables, interchange fees on purchase sales and other delinquency or services fees.

																% Change
		Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars								2Q06 vs. 2Q05								YTD06 vs. YTD05
		2006			2005					2006			2005
Revenues, net of interest expense		$	3,251		$	3,263		—		$	6,485		$	6,718		(3	)%
Operating expenses			1,554			1,503		3	%		3,086			3,003		3
Provision for loan losses and for benefits and claims			312			640		(51	)		707			1,396		(49	)
Income before taxes and minority interest		$	1,385		$	1,120		24	%	$	2,692		$	2,319		16	%
Income taxes and minority interest, net of taxes			507			385		32			888			806		10
Net income		$	878		$	735		19	%	$	1,804		$	1,513		19	%
Average assets (in billions of dollars)		$	63		$	65		(3	)%	$	63		$	68		(7	)%
Return on assets			5.59	%		4.54	%				5.77	%		4.49	%
Average risk capital(1)		$	5,591		$	5,855		(5	)%	$	5,577		$	5,747		(3	)%
Return on risk capital(1)			63	%		50	%				65	%		53	%
Return on invested capital(1)			26	%		21	%				27	%		22	%
Key indicators—on a managed basis: (in billions of dollars)
Return on managed assets			2.42	%		2.04	%
Purchase sales		$	77.9		$	69.8		12	%
Managed average yield(2)			13.83	%		13.71	%
Managed net interest margin(2)			9.89	%		10.74	%

---

(1)

See footnote 4 to the table on page 4.

(2)

As a percentage of average managed loans.

18

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2Q06 vs. 2Q05

        Revenues, net of interest expense, were flat as the positive impact of 12% growth in purchase sales, higher securitization revenues, and the addition of the Federated portfolio in the 2005 fourth quarter were offset by continued net interest margin compression and higher rewards program costs. The net interest margin compression was driven by a combination of increased payment rates, higher cost of funds, and the mix of receivable balances. Included in revenues in the 2006 second quarter was a gain from the MasterCard initial public offering of $59 million. In the 2005 second quarter, revenues included gains from other asset sales of $70 million.

        Operating expenses increased, primarily reflecting the addition of the Federated portfolio; this was partially offset by a decline in advertising and marketing expenses, largely reflecting the timing of advertising campaigns.

        Provision for loan losses and for benefits and claims declined, primarily reflecting a decline in net credit losses due to lower bankruptcies, the favorable credit environment, and a loan loss reserve release of $160 million.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, declined as the positive impact of 11% growth in purchase sales and the addition of the Federated portfolio in the 2005 fourth quarter were more than offset by continued net interest margin compression and higher rewards program costs. The net interest margin compression was driven by a combination of increased payment rates, higher cost of funds, and the mix of receivable balances.

        Operating expenses increased, primarily reflecting the addition of the Federated portfolio in the 2005 fourth quarter and the adoption of SFAS 123(R) in the 2006 first quarter; this was partially offset by a decline in advertising and marketing expenses, largely reflecting the timing of advertising campaigns.

        Provision for loan losses and for benefits and claims declined, primarily reflecting a decline in net credit losses due to lower bankruptcies, the favorable credit environment and a loan loss reserve release of $232 million.

        Net Income also reflected an $89 million tax benefit resulting from the resolution of the Federal Tax Audit in the 2006 first quarter.

19

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U.S. Retail Distribution

        U.S. Retail Distribution provides banking, lending, investment and insurance products and services to customers through 892 Citibank branches, 2,361 CitiFinancial branches, the Primerica Financial Services (PFS) salesforce, the Internet, direct mail and telesales. Revenues are primarily derived from net interest revenue on loans and deposits and from fees on banking, insurance and investment products.

																	% Change
			Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars									2Q06 vs. 2Q05								YTD06 vs. YTD05
			2006			2005					2006			2005
Revenues, net of interest expense, by business:
	Citibank branches		$	904		$	766		18	%	$	1,641		$	1,619		1	%
	CitiFinancial branches			1,037			1,054		(2	)		2,045			2,107		(3	)
	Primerica Financial Services			558			540		3			1,109			1,091		2
Revenues, net of interest expense			$	2,499		$	2,360		6	%	$	4,795		$	4,817		—
Operating expenses				1,200			1,107		8			2,421			2,192		10	%
Provisions for loan losses and for benefits and claims				425			523		(19	)		812			1,014		(20	)
Income before taxes			$	874		$	730		20	%	$	1,562		$	1,611		(3	)%
Income taxes				306			252		21			479			569		(16	)
Net income			$	568		$	478		19	%	$	1,083		$	1,042		4	%
Net income by business:
	Citibank branches		$	165		$	114		45	%	$	265		$	299		(11	)%
	CitiFinancial branches			264			228		16			529			473		12
	Primerica Financial Services			139			136		2			289			270		7
Net income			$	568		$	478		19	%	$	1,083		$	1,042		4	%
Average assets (in billions of dollars)			$	69		$	64		8	%	$	68		$	64		6	%
Return on assets				3.30	%		3.00	%				3.21	%		3.28	%
Average risk capital(1)			$	3,520		$	2,983		18	%	$	3,490		$	2,962		18	%
Return on risk capital(1)				65	%		64	%				63	%		71	%
Return on invested capital(1)				24	%		18	%				23	%		19	%
Key indicators: (in billions of dollars)
Average loans			$	43.6		$	39.7		10	%
Average deposits				129.6			120.4		8
EOP Investment Assets under Management (AUMs)				74.4			68.7		8

---

(1)

See footnote 4 to the table on page 4.

20

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2Q06 vs. 2Q05

        Revenues, net of interest expense, increased 6% primarily due to the $132 million pretax gain on the Sale of New York Branches. Growth in deposits and loans, up 8% and 10%, respectively, and increased investment product sales were more than offset by net interest margin compression. This resulted in part from a shift in customer liabilities from savings and other demand deposits to certificates of deposit and e-Savings accounts.

        Operating expense growth was primarily due to higher volume-related expenses, increased investment spending driven by 74 new branch openings and advertising costs associated with the launch of e-Savings.

        Provisions for loan losses and for benefits and claims declined primarily due to lower bankruptcy filings and a $31 million loan loss reserve release in CitiFinancial. The net credit loss ratio declined 85 basis points to 2.65%, reflecting the continuing favorable credit environment.

        Deposit growth reflected balance increases in certificates of deposit; e-Savings accounts, which generated $4.2 billion as of the end of the quarter; premium checking; and partly rate-sensitive money market products. Loan growth reflected improvements in all channels and products. Investment product sales increased 37%, driven by increased volumes.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, were flat to the prior-year period as the $132 million pretax gain on the Sale of New York Branches was offset by the absence of a $110 million gain in the 2005 first quarter related to the resolution of the Glendale litigation and other revenue declines. Growth in deposits and loans, up 7% and 9%, respectively, and increased investment product sales were more than offset by net interest margin compression. This resulted in part from a shift in customer liabilities from savings and other demand deposits to certificates of deposit and e-Savings accounts.

        Operating expense growth was primarily due to higher volume-related expenses, increased investment spending driven by 110 new branch openings, the impact of SFAS 123(R), and advertising costs associated with the launch of e-Savings. The impact of the FAB acquisition also contributed to higher expenses.

        Provisions for loan losses and for benefits and claims decreased primarily due to lower bankruptcy filings. CitiFinancial Branches also had higher loan loss reserve releases of $69 million. The credit environment was favorable during the first half of 2006.

        Deposit growth reflected balance increases in certificates of deposit; e-Savings accounts, which generated $4.2 billion in end-of-period deposits; premium checking; and partly rate-sensitive money market products. Loan growth reflected improvements in all channels and products. Investment product sales increased 31%, driven by increased volumes.

        Net income in 2006 also reflected a $51 million tax reserve release resulting from the resolution of the Federal Tax Audit.

21

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U.S. Consumer Lending

        

        U.S. Consumer Lending provides home mortgages and home equity loans to prime and non-prime customers, auto financing to non-prime consumers and educational loans to students. Loans are originated throughout the United States and Canada through the Citibank, CitiFinancial and Smith Barney branch networks, Primerica Financial Services agents, third-party brokers, direct mail, the Internet and telesales. Loans are also purchased in the wholesale markets. U.S. Consumer Lending also provides mortgage servicing to a portfolio of mortgage loans owned by third parties. Revenues are composed of loan fees, net interest revenue and mortgage servicing fees.

																	% Change
			Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars									2Q06 vs. 2Q05								YTD06 vs. YTD05
			2006			2005					2006			2005
Revenues, net of interest expense, by business:
	Real Estate Lending		$	793		$	888		(11	)%	$	1,636		$	1,812		(10	)%
	Student Loans			202			176		15			319			308		4
	Auto			312			312		—			612			629		(3	)
Revenues, net of interest expense			$	1,307		$	1,376		(5	)%	$	2,567		$	2,749		(7	)%
Operating expenses				444			413		8			897			824		9
Provisions for loan losses and for benefits and claims				86			148		(42	)		229			330		(31	)
Income before taxes and minority interest			$	777		$	815		(5	)%	$	1,441		$	1,595		(10	)%
Income taxes				287			292		(2	)		505			573		(12	)
Minority interest, net of taxes				20			16		25			29			29		—
Net income			$	470		$	507		(7	)%	$	907		$	993		(9	)%
Net income by business:
	Real Estate Lending		$	297		$	356		(17	)%	$	625		$	719		(13	)%
	Student Loans			75			62		21			113			114		(1	)
	Auto			98			89		10			169			160		6
Net income			$	470		$	507		(7	)%	$	907		$	993		(9	)%
Average assets (in billions of dollars)			$	221		$	186		19	%	$	215		$	182		18	%
Return on assets				0.85	%		1.09	%				0.85	%		1.10	%
Average risk capital(1)			$	3,451		$	3,341		3	%	$	3,592		$	3,316		8	%
Return on risk capital(1)				55	%		61	%				51	%		60	%
Return on invested capital(1)				30	%		32	%				28	%		35	%
Key indicators: (in billions of dollars)
Net interest margin:(2)
	Real Estate Lending			2.03	%		2.51	%
	Student Loans			1.72			2.01
	Auto			9.03			10.73
Originations:
	Real Estate Lending		$	38.6		$	33.3		16	%
	Student Loans			1.9			1.6		19	%
	Auto			2.0			1.6		25	%

---

(1)

See footnote 4 to the table on page 4.

(2)

As a percentage of average loans.

22

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2Q06 vs. 2Q05

        Revenues, net of interest expense, declined as a 21% increase in average loan balances and higher gains on securitizations of real estate loans and student loans were more than offset by lower net mortgage servicing revenues and net interest margin compression. Average loan growth reflected a strong increase in originations across all businesses, driven by a 16% increase in prime mortgage originations and home equity loans.

        Operating expenses increased primarily due to higher loan origination volumes.

        Provisions for loan losses and for benefits and claims decreased due to a continued favorable credit environment, and higher loan loss reserve releases of $75 million in the Real Estate Lending and Auto businesses. The 90 days-past-due ratio declined across most product categories.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, declined as a 19% increase in average loan volumes and higher gains on securitizations of real estate loans were more than offset by lower net mortgage servicing revenues and net interest margin compression. Average loan growth reflected a strong increase in originations across all businesses, driven by a 17% increase in prime mortgage originations and home equity loans.

        Operating expenses increased primarily due to higher loan origination volumes and the impact of SFAS 123(R).

        Provisions for loan losses and for benefits and claims declined due to a continued favorable credit environment and loan loss reserve releases of $111 million in the Real Estate Lending and Auto businesses.

23

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U.S. Commercial Business

        

        U.S. Commercial Business provides equipment leasing, financing, and banking services to small- and middle-market businesses ($5 million to $500 million in annual revenues) and financing for investor-owned multifamily and commercial properties. Revenues are composed of net interest revenue and fees on loans and leases.

																% Change
		Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars								2Q06 vs. 2Q05								YTD06 vs. YTD05
		2006			2005					2006			2005
Revenues, net of interest expense		$	516		$	491		5	%	$	986		$	1,169		(16	)%
Operating expenses			353			335		5			716			676		6
Provision for loan losses			4			6		(33	)		(20	)		6		NM
Income before taxes and minority interest		$	159		$	150		6	%	$	290		$	487		(40	)%
Income taxes and minority interest, net of taxes			21			16		31			26			101		(74	)
Net income		$	138		$	134		3	%	$	264		$	386		(32	)%
Average assets (in billions of dollars)		$	42		$	38		11	%	$	42		$	37		14	%
Return on assets			1.32	%		1.41	%				1.27	%		2.10	%
Average risk capital(1)		$	2,235		$	1,825		22	%	$	2,275		$	1,897		20	%
Return on risk capital(1)			25	%		29	%				23	%		41	%
Return on invested capital(1)			12	%		19	%				11	%		28	%
Key indicators: (in billions of dollars):
Average earning assets		$	36.5		$	32.9		11	%

---

(1)

See footnote 4 to the table on page 4.

NM Not meaningful

2Q06 vs. 2Q05

        Revenues, net of interest expense, increased 5% primarily due to the $31 million pretax gain on the Sale of New York Branches. Strong growth in core loan and deposit balances, up 13% and 11%, respectively, was more than offset by the continuing impact of net interest margin compression.

        Operating expense growth was mainly due to higher volume-related expenses and restructuring costs from site consolidation.

        Provision for loan losses decreased primarily due to the stable credit environment and the continued liquidation of non-core portfolios.

        Deposit and core loan growth reflected an increase in savings deposits and strong transaction volumes and growth in loan balances across all business units, partially offset by declines in the liquidating portfolio.

24

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2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, declined 16%, primarily due to the absence of the $161 million pretax gain on the CitiCapital Transportation Finance business in the prior-year period, partly offset by the $31 million pretax gain on the Sale of New York Branches. Strong growth in core loan and deposit balances, up 17% and 18%, respectively, were more than offset by the continuing impact of net interest margin compression.

        Operating expense growth was primarily due to higher volume-related expenses, the impact of the FAB acquisition and SFAS 123(R), partially offset by lower expenses from the absence of the transportation finance business and severance costs in the prior year.

        Provision for loan losses declined primarily due to loan loss reserve releases of $28 million, a stable credit environment, and the continued liquidation of non-core portfolios.

        Deposit and core loan growth reflected strong transaction volumes and balances across all business units and the impact of the FAB acquisition, partially offset by declines in the liquidating portfolio.

        Net income also reflected a $4 million tax reserve release resulting from the resolution of the Federal Tax Audit.

25

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INTERNATIONAL CONSUMER

        

        International Consumer is composed of three businesses: Cards, Consumer Finance and Retail Banking.

																	% Change
			Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars									2Q06 vs. 2Q05								YTD06 vs. YTD05
			2006			2005					2006			2005
Revenues, net of interest expense, by region:
	Mexico		$	1,192		$	1,055		13	%	$	2,341		$	2,015		16	%
	Latin America			471			281		68			797			538		48
	EMEA			1,360			1,256		8			2,630			2,504		5
	Japan			807			827		(2	)		1,582			1,648		(4	)
	Asia			1,244			1,116		11			2,433			2,188		11
Revenues, net of interest expense			$	5,074		$	4,535		12	%	$	9,783		$	8,893		10	%
Operating expenses				2,701			2,320		16			5,322			4,742		12
Provisions for loan losses and for benefits and claims				822			730		13			1,589			1,403		13
Income before taxes and minority interest			$	1,551		$	1,485		4	%	$	2,872		$	2,748		5	%
Income taxes				333			385		(14	)		517			709		(27	)
Minority interest, net of taxes				3			(1	)	NM			4			(1	)	NM
Net income			$	1,215		$	1,101		10	%	$	2,351		$	2,040		15	%
Net income by region
	Mexico		$	375		$	368		2	%	$	733		$	645		14	%
	Latin America			88			80		10			146			134		9
	EMEA			215			124		73			400			246		63
	Japan			178			188		(5	)		366			363		1
	Asia			359			341		5			706			652		8
Net income			$	1,215		$	1,101		10	%	$	2,351		$	2,040		15	%
Average assets (in billions of dollars)			$	177		$	166		7	%	$	176		$	167		5	%
Return on assets				2.75	%		2.66	%				2.69	%		2.46	%
Average risk capital(1)			$	12,725		$	13,341		(5	)%	$	12,686		$	12,927		(2	)%
Return on risk capital(1)				38	%		33	%				37	%		32	%
Return on invested capital(1)				19	%		17	%				18	%		16	%

---

(1)

See footnote 4 to the table on page 4.

NM Not meaningful

26

---

(This page intentionally left blank.)

27

---

International Cards

        

        International Cards provides MasterCard, Visa and Diners branded credit and charge cards, as well as private label cards and co-branded cards, to more than 30 million customer accounts in 43 countries outside of the U.S. and Canada. Revenues are primarily generated from net interest revenue on receivables, interchange fees on purchase sales and other delinquency or service fees.

																	% Change
			Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars									2Q06 vs. 2Q05								YTD06 vs. YTD05
			2006			2005					2006			2005
Revenues, net of interest expense, by region:
	Mexico		$	443		$	307		44	%	$	848		$	576		47	%
	Latin America			238			85		NM			334			153		NM
	EMEA			327			285		15			621			579		7
	Japan			74			76		(3	)		144			149		(3	)
	Asia			428			423		1			843			824		2
Revenues, net of interest expense			$	1,510		$	1,176		28	%	$	2,790		$	2,281		22	%
Operating expenses				714			577		24			1,331			1,145		16
Provision for loan losses				359			175		NM			671			330		NM
Income before taxes and minority interest			$	437		$	424		3	%	$	788		$	806		(2	)%
Income taxes				108			92		17			168			171		(2	)
Minority interest, net of taxes				1			1		—			1			2		(50	)
Net income			$	328		$	331		(1	)%	$	619		$	633		(2	)%
Net income by region:
	Mexico		$	147		$	125		18	%	$	296		$	252		17	%
	Latin America			69			38		82			104			63		65
	EMEA			43			34		26			75			66		14
	Japan			13			17		(24	)		34			34		—
	Asia			56			117		(52	)		110			218		(50	)
Net income			$	328		$	331		(1	)%	$	619		$	633		(2	)%
Average assets (in billions of dollars)			$	30		$	26		15	%	$	29		$	26		12	%
Return on assets				4.39	%		5.11	%				4.30	%		4.91	%
Average risk capital(1)			$	2,202		$	1,758		25		$	2,138		$	1,677		27	%
Return on risk capital(1)				60	%		76	%				58	%		76	%
Return on invested capital(1)				29	%		33	%				28	%		32	%
Key indicators: (in billions of dollars):
Purchase sales			$	19.7		$	17.1		15	%
Average yield(2)				19.03	%		17.52	%
Net interest margin(2)				14.02	%		12.16	%

---

(1)

See footnote 4 to the table on page 4.

(2)

As a percentage of average loans.

NM Not meaningful

28

---

2Q06 vs. 2Q05

        Revenues, net of interest expense, increased, driven by a 15% increase in purchase sales and 18% growth in average receivables across the regions, the integration of the Credicard portfolio, and a gain on the MasterCard IPO of $35 million.

        Operating expenses increased, reflecting the integration of the Credicard portfolio, continued investments in organic growth, and volume growth across the regions.

        Provision for loan losses increased, driven by the industry-wide credit deterioration in Taiwan, portfolio growth and target market expansion in Mexico, credit losses relating to the Credicard portfolio in Latin America, and volume growth in all regions.

Regional Net Income

        Latin America income increased primarily due to volume and purchase sales growth. Mexico income increased due to higher sales volumes and average loans, as well as a gain from the MasterCard IPO of $9 million after-tax. EMEAincome increased primarily due to higher purchase sales and volume growth, partially offset by higher credit costs and higher expenses. Asia income declined due to an increase in credit costs related to Taiwan, partially offset by higher purchase sales and loan growth. Japan income decreased primarily due to lower purchase sales.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, increased, driven by a 12% increase in purchase sales and 16% growth in average receivables across all regions, the integration of the Credicard portfolio, and a gain on the MasterCard IPO of $35 million.

        Operating expenses increased, reflecting the integration of the Credicard portfolio, continued investment in organic growth, costs associated with a labor settlement in Korea, volume growth across the regions, and the adoption of SFAS 123(R). This was partially offset by the absence of 2005 first quarter repositioning expenses of $13 million.

        Provision for loan losses increased, driven by the industry-wide credit deterioration in Taiwan, portfolio growth and target market expansion in Mexico, and volume growth in all regions.

Regional Net Income

        Mexico income increased due to higher sales volumes and average loans, as well as a gain from the MasterCard IPO of $9 million after-tax and tax benefits in the 2006 first quarter of $6 million. Latin America income increased primarily due to volume and purchase sales growth, and the benefit of foreign currency translation. EMEA income increased primarily due to higher purchase sales and volume growth, partially offset by higher net credit losses. Asia income declined due to an increase in credit costs related to Taiwan and costs associated with a Korea labor settlement, partially offset by higher purchase sales and loan growth and a gain from the MasterCard IPO of $7 million.

29

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International Consumer Finance

        

        International Consumer Finance provides community-based lending services through its branch network, regional sales offices and cross-selling initiatives with International Cards and International Retail Banking. As of June 30, 2006, International Consumer Finance maintained 2,506 sales points comprising 1,697 branches in more than 25 countries and 809 ALMs in Japan. International Consumer Finance offers real-estate-secured loans, unsecured or partially secured personal loans, auto loans, and loans to finance consumer-goods purchases. Revenues are primarily derived from net interest revenue and fees on loan products.

																	% Change
			Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars									2Q06 vs. 2Q05								YTD06 vs. YTD05
			2006			2005					2006			2005
Revenues, net of interest expense, by region:
	Mexico		$	55		$	44		25	%	$	108		$	87		24	%
	Latin America			38			30		27			74			58		28
	EMEA			193			185		4			377			374		1
	Japan			615			635		(3	)		1,206			1,262		(4	)
	Asia			108			69		57			206			130		58
Revenues, net of interest expense			$	1,009		$	963		5	%	$	1,971		$	1,911		3
Operating expenses				427			380		12			846			817		4
Provision for loan losses				340			322		6			644			637		1
Income before taxes and minority interest			$	242		$	261		(7	)%	$	481		$	457		5	%
Income taxes				69			84		(18	)		140			141		(1	)
Net income			$	173		$	177		(2	)%	$	341		$	316		8	%
Net income by region:
	Mexico		$	11		$	8		38	%	$	21		$	17		24	%
	Latin America			1			3		(67	)		1			6		(83	)
	EMEA			15			16		(6	)		22			12		83
	Japan			134			137		(2	)		269			259		4
	Asia			12			13		(8	)		28			22		27
Net income			$	173		$	177		(2	)%	$	341		$	316		8	%
Average assets (in billions of dollars)			$	27		$	26		4	%	$	27		$	27		—
Return on assets				2.57	%		2.73	%				2.55	%		2.36	%
Average risk capital(1)			$	1,042		$	920		13		$	1,104		$	927		19	%
Return on risk capital(1)				67	%		77	%				62	%		69	%
Return on invested capital(1)				20	%		20	%				20	%		18	%
Key indicators:
Average yield(2)				18.88	%		18.90	%
Net interest margin(2)				16.36	%		16.65	%
Number of sales points:
	Other branches			1,373			888
	Japan branches			324			405
	Japan Automated Loan Machines			809			588
	Total			2,506			1,881

---

(1)

See footnote 4 to the table on page 4.

(2)

As a percentage of average loans.

30

---

2Q06 vs. 2Q05

        Revenues, net of interest expense, increased 5%, driven mainly by higher personal loan volumes and slightly higher net interest margins. This was offset by a decline in Japan, primarily due to the impact of foreign currency translation and lower average loans.

        Operating expense growth was primarily due to higher volume-related expenses and increased investment spending driven by 111 new branch openings, and 85 new ALMs in Japan.

        Provision for loan losses increased primarily due to loan loss reserve builds in EMEA, Japan, and Asiaand higher net credit losses in Asia and Latin America. This was partially offset by lower net credit losses in EMEA, due to a portfolio sale transaction, and Japan. The net credit loss ratio declined 31 basis points to 5.44%.

        The increase in average loans outside of Japan was mainly driven by growth in the personal-loan and real-estate-secured portfolios. In Japan, average loans declined by 6% due to the impact of higher pay-downs, reduced loan demand, and the impact of foreign currency translation.

        The Company is evaluating the potential impact of legislative proposals to reform the interest rate law in Japan that could impact consumer finance lending and which may negatively impact both the revenues and credit costs in that business.*

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, increased 3%, driven mainly by higher average loan volumes and higher net interest margins. This was offset by a decline in Japan, primarily due to the impact of foreign currency translation and lower average loans.

        Operating expense growth was primarily due to higher volume-related expenses and increased investment spending, driven by 241 new branch openings, and the addition of 145 ALMs in Japan. The growth was partially offset by the absence of the 2005 first quarter repositioning charge in EMEA of $38 million and declines in Japan due to the closing of branches.

        Provision for loan losses were slightly higher than the prior-year period as higher net credit losses in Asia and EMEA were offset by lower net credit losses in Japan related to the sale of previously charged-off assets.

        The increase in average loans outside of Japan was mainly driven by growth in the personal-loan and real-estate-secured portfolios. In Japan, loans declined by 9% due to the impact of higher pay-downs, reduced loan demand, and the impact of foreign currency translation.

---

*

This is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 81.

31

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International Retail Banking

        

        International Retail Banking delivers a wide array of banking, lending, insurance and investment services through a network of local branches and electronic delivery systems, including ATMs, call centers and the Internet. International Retail Banking serves 49 million customer accounts for individuals and small businesses. Revenues are primarily derived from net interest revenue on deposits and loans, and fees on mortgage, banking, and investment products.

																	% Change
			Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars									2Q06 vs. 2Q05								YTD06 vs. YTD05
			2006			2005					2006			2005
Revenues, net of interest expense, by region:
	Mexico		$	694		$	704		(1	)%	$	1,385		$	1,352		2	%
	Latin America			195			166		17			389			327		19
	EMEA			840			786		7			1,632			1,551		5
	Japan			118			116		2			232			237		(2	)
	Asia			708			624		13			1,384			1,234		12
Revenues, net of interest expense			$	2,555		$	2,396		7	%	$	5,022		$	4,701		7	%
Operating expenses				1,560			1,363		14			3,145			2,780		13
Provisions for loan losses and for benefits and claims				123			233		(47	)		274			436		(37	)
Income before taxes and minority interest			$	872		$	800		9	%	$	1,603		$	1,485		8	%
Income taxes				156			209		(25	)		209			397		(47	)
Minority interest, net of taxes				2			(2	)	NM			3			(3	)	NM
Net income			$	714		$	593		20	%	$	1,391		$	1,091		27	%
Net income by region:
	Mexico		$	217		$	235		(8	)%	$	416		$	376		11	%
	Latin America			18			39		(54	)		41			65		(37	)
	EMEA			157			74		NM			303			168		80
	Japan			31			34		(9	)		63			70		(10	)
	Asia			291			211		38			568			412		38
Net income			$	714		$	593		20	%	$	1,391		$	1,091		27	%
Average assets (in billions of dollars)			$	120		$	114		5	%	$	120		$	114		5	%
Return on assets				2.39	%		2.09	%				2.34	%		1.93	%
Average risk capital(1)			$	9,481		$	10,663		(11	)%	$	9,444		$	10,323		(9	)%
Average return on risk capital(1)				30	%		22	%				30	%		21	%
Return on invested capital(1)				16	%		13	%				16	%		12	%
Key indicators: (in billions of dollars):
Average deposits			$	146.6		$	134.3		9	%
Assets under Management (AUMs) (EOP)				129.1			108.7		19
Average loans				62.6			61.9		1

---

(1)

See footnote 4 to the table on page 4.

NM

Not meaningful

32

---

2Q06 vs. 2Q05

        Revenues, net of interest expense, increased in all regions, except Mexico, reflecting a 9% increase in deposits and a 60% increase in investment product sales. Loan balances increased 1% over the 2005 second quarter, as declines in EMEA, due to the loan write-offs in Germany in the third quarter of 2005, and in Asia, due to recent labor actions in Korea, were more than offset by growth in all other regions. Assets under management increased 19%.

        Operating expenses increased due to an increase in compensation costs in Mexico, increases in business volumes, higher advertising and marketing expenses, and higher investment spending driven by the continued expansion of the distribution network that included 85 new branch openings during the quarter.

        Provisions for loan losses and for benefits and claims declined due to the absence of the 2005 second quarter increase in the Germany credit reserve to reflect increased experience with the effects of bankruptcy law liberalization of $127 million pretax and an $82 million pretax loan loss reserve release in Korea as a result of an improving credit environment, partially offset by the absence of a 2005 second quarter Mexico reserve release of $80 million, which is offset in revenues, and the absence of a 2005 second quarter Argentina Compensation Bond recovery of $24 million.

        Net income also reflected an increased tax benefit of $70 million in Mexico related to APB 23.

Regional Net Income

        EMEA income increased, driven by a 30% increase in deposits, the absence of an $81 million loan loss reserve build from the 2005 second quarter and stronger lending and investment product sales revenues. Asia income increased, benefiting from higher loan and deposit balances, investment product sales and a $52 million loan loss reserve release in Korea. Mexico income decreased primarily due to the absence of a 2005 second quarter $30 million reserve release from an investment in Avantel and a 2005 second quarter $50 million favorable impact relating to a restructuring of Mexican government notes, increased investment spending associated with 44 branch openings, and lower deposit revenues, partly offset by higher APB 23 tax benefits. Latin America income declined, primarily due to increased expenses associated with 12 new branches in Brazil and lower loan loss reserve releases, partly offset by growth in lending revenues. Japan income declined due to higher expenses, mainly due to the consolidation and compliance activities resulting from the shutdown of the Japan Private Bank, and the impact of foreign currency translation.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, increased in all regions except Japan, reflecting 8% deposit growth and a 48% increase in investment product sales. Loan balances were flat over the prior-year period reflecting declines in EMEAand Asia due to the write-off of loans in Germany in the third quarter of 2005 and the impact of recent labor actions in Korea, offset by growth in all other regions. Assets under management increased 19%.

        Operating expenses increased due to an increase in compensation costs in Mexico, higher business volumes, SFAS 123(R) charges, costs associated with a labor settlement in Korea, higher marketing and advertising spending, and continued investments, that included 190 new branch additions.

        Provisions for loan losses and for benefits and claims decreased due to the absence of the 2005 second quarter increase in the Germany credit reserve to reflect increased experience with the effects of bankruptcy law liberalization of $127 million pretax and loan loss reserve releases in Korea as a result of an improving credit environment, partially offset by the absence of 2005 second quarter Mexico reserve release of $80 million, which is offset in revenues, and the absence of a 2005 second quarter Argentina Compensation Bond recovery of $24 million.

        Net income also reflected higher tax benefits in Mexico related to increased APB 23 benefits and a 2006 first quarter $55 million benefit from tax reserve releases related to the resolution of the Federal Tax Audit.

Regional Net Income

        Asia income increased, benefiting from higher deposit revenues and investment product sales and a loan loss reserve release in Korea, partially offset by increased investment spending tied to retail bank branch expansion and costs associated with the labor settlement. Mexico income increased primarily due to higher tax benefits, and higher lending revenues and investment product sales, partly offset by higher expenses related to increased investment spending associated with new branch openings and the absence of a $50 million 2005 second quarter gain from the favorable impact relating to a restructuring of Mexican government notes. EMEA income increased due to the absence of an $81 million loan loss reserve build from the 2005 second quarter and stronger investment product sales and lending revenues, partly offset by higher expenses associated with branch expansion. Latin America income declined, primarily due to increased expenses associated with new branches in Brazil, the impact of foreign currency translation, and the absence of a 2005 second quarter Argentina Compensation Bond recovery, partly offset by growth in loan, deposit and investment revenues. Japan income declined due to lower deposit revenues, higher expenses, mainly due to the consolidation and compliance activities related to the shutdown of the Japan Private Bank, and the impact of foreign currency translation.

33

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Other Consumer

        Other Consumer includes certain treasury and other unallocated staff functions and global marketing.

		Three Months Ended June 30,						Six Months Ended June 30,
In millions of dollars
		2006			2005			2006			2005
Revenues, net of interest expense		$	(19	)	$	(18	)	$	(33	)	$	(221	)
Operating expenses			127			75			294			162
Income (loss) before tax benefits		$	(146	)	$	(93	)	$	(327	)	$	(383	)
Income taxes (benefits)			(54	)		(35	)		(168	)		(149	)
Net income (loss)		($	92	)	($	58	)	($	159	)	($	234	)

2Q06 vs. 2Q05

        Revenues and expenses reflect certain unallocated items that are not reported in the Global Consumer operating segments.

        The net loss increase was primarily due to higher staff payments and higher legal costs, partially offset by lower advertising and marketing expenses.

2Q06 YTD vs. 2Q05 YTD

        The net loss decrease was primarily due to the absence of the 2005 first quarter loss on the sale of a Manufactured Housing loan portfolio of $109 million after-tax and the benefit of 2006 first quarter tax credits of $40 million, reflecting the resolution of the Federal Tax Audit, partially offset by SFAS 123(R) charges of $19 million after-tax and higher staff payments and legal costs.

34

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CORPORATE AND INVESTMENT BANKING

        

*

Excludes Other Corporate and Investment Banking loss of $29 million

*

Excludes Other Corporate and Investment Banking loss of $29 million

Corporate and Investment Banking (CIB) provides corporations, governments, institutions and investors in approximately 100 countries with a broad range of financial products and services. CIB includes Capital Markets and Banking, Transaction Services and Other CIB.

																	% Change
			Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars									2Q06 vs. 2Q05								YTD06 vs. YTD05
			2006			2005					2006			2005
Revenues, net of interest expense, by region:
	U.S.		$	2,803		$	1,948		44	%	$	5,726		$	4,727		21	%
	Mexico			199			170		17			385			329		17
	Latin America			385			382		1			831			692		20
	EMEA			2,043			1,708		20			4,339			3,402		28
	Japan			269			187		44			565			367		54
	Asia			1,062			761		40			2,194			1,676		31
Revenues, net of interest expense			$	6,761		$	5,156		31	%	$	14,040		$	11,193		25	%
Operating expenses				4,158			3,368		23			8,915			7,036		27
Provision for credit losses				173			(14	)	NM			173			(70	)	NM
Income before taxes and minority interest			$	2,430		$	1,802		35	%	$	4,952		$	4,227		17	%
Income taxes				702			420		67			1,276			1,155		10
Minority interest, net of taxes				5			10		(50	)		24			21		14
Net income			$	1,723		$	1,372		26	%	$	3,652		$	3,051		20	%
Net income by region:
	U.S.		$	747		$	462		62	%	$	1,262		$	1,355		(7	)%
	Mexico			88			76		16			166			159		4
	Latin America			138			195		(29	)		340			340		—
	EMEA			342			336		2			977			524		86
	Japan			72			54		33			157			102		54
	Asia			336			249		35			750			571		31
Net income			$	1,723		$	1,372		26	%	$	3,652		$	3,051		20	%
Average risk capital(1)			$	21,755		$	21,097		3	%	$	21,174		$	20,938		1	%
Return on risk capital(1)				32	%		26	%				35	%		29	%
Return on invested capital(1)				23	%		19	%				26	%		22	%

---

(1)

See footnote 4 to the table on page 4.

NM

Not meaningful

35

---

Capital Markets and Banking

        

        Capital Markets and Banking offers a wide array of investment and commercial banking services and products, including investment banking and advisory services, debt and equity trading, institutional brokerage, foreign exchange, structured products, derivatives, and lending. Capital Markets and Banking revenue is generated primarily from fees for investment banking and advisory services, fees and spread on structured products, foreign exchange and derivatives, fees and interest on loans, and income earned on principal transactions.

																	% Change
			Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars									2Q06 vs. 2Q05								YTD06 vs. YTD05
			2006			2005					2006			2005
Revenues, net of interest expense, by region:
	U.S.		$	2,476		$	1,715		44	%	$	5,087		$	4,256		20	%
	Mexico			151			121		25			289			232		25
	Latin America			225			254		(11	)		525			447		17
	EMEA			1,508			1,268		19			3,315			2,534		31
	Japan			241			163		48			512			328		56
	Asia			668			444		50			1,437			1,067		35
Revenues, net of interest expense			$	5,269		$	3,965		33	%	$	11,165		$	8,864		26	%
Operating expenses				3,154			2,585		22			6,957			5,444		28
Provision for credit losses				157			(20	)	NM			152			(66	)	NM
Income before taxes and minority interest			$	1,958		$	1,400		40	%	$	4,056		$	3,486		16	%
Income taxes				541			347		56			1,002			984		2
Minority interest, net of taxes				5			10		(50	)		24			20		20
Net income			$	1,412		$	1,043		35	%	$	3,030		$	2,482		22	%
Net income by region:
	U.S.		$	748		$	400		87	%	$	1,265		$	1,274		(1	)%
	Mexico			74			60		23			138			125		10
	Latin America			88			153		(42	)		237			262		(10	)
	EMEA			236			249		(5	)		766			372		NM
	Japan			66			47		40			146			95		54
	Asia			200			134		49			478			354		35
Net income			$	1,412		$	1,043		35	%	$	3,030		$	2,482		22	%
Average risk capital(1)			$	20,173		$	19,694		2	%	$	19,648		$	19,519		1	%
Return on risk capital(1)				28	%		21	%				31	%		26	%
Return on invested capital(1)				21	%		16	%				23	%		19	%

---

(1)

See footnote 4 to the table on page 4.

NM

Not meaningful

36

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2Q06 vs. 2Q05

        Revenues, net of interest expense, increased, driven by broad-based performance across products and regions. Fixed Income Markets revenue increases were driven by strong results in municipals, foreign exchange, and credit products. Equity Markets revenues increased, reflecting strong performance in derivatives, convertibles, and cash trading. Investment Banking revenue growth was driven by higher debt and equity underwriting revenues and increased advisory fees.

        Operating expenses increased, driven by the impact of SFAS 123(R) charges and higher compensation expense due to higher production-driven incentive compensation, as well as a growth in headcount.

        The provision for credit losses increased, driven by a $208 million pretax charge to increase loan loss reserves, reflecting growth in loans and unfunded loan commitments and an update to historical data used for certain loss estimates.

Regional Net Income

        Net income in the U.S. increased primarily due to higher Fixed Income Markets and Underwriting and Equity Markets revenues, partially offset by lower Lending revenues and an increase in compensation expenses (higher production-driven incentive compensation and the impact of SFAS 123(R) charges).

        Mexico net income increased due to strong results in Fixed Income Markets and Equity Markets.

        Latin America net income decreased due to a decline in Fixed Income Markets revenues, higher investment spending, and an increase in credit costs due to the absence of a loan loss recovery recorded in the prior-year period.

        EMEA net income declined due to higher compensation expense associated with staff additions and higher credit costs reflecting growth in loans and unfunded loan commitments. The increased expenses were partially offset by revenue growth, where higher volumes and customer activity offset the market volatility.

        Net income in Japan increased due to strong growth in Fixed Income Markets, Fixed Income Underwriting and Lending, partially offset by higher expenses.

        Net income in Asia increased, driven by broad-based double-digit growth across several products, including Fixed Income and Equity Markets, Advisory, and Lending, partially offset by higher expenses.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, increased, driven by broad-based performance across products and regions. Fixed Income Markets revenue increases reflected growth in emerging markets trading, municipals, foreign exchange and credit products. Equity Markets revenues increased, driven by strong growth globally, including cash trading, derivatives products and convertibles. Investment Banking revenue growth was driven by higher debt and equity underwriting revenues and increased advisory fees. Lending revenue declined, as improved credit conditions led to lower hedging results.

        Operating expenses were impacted by $508 million of SFAS 123(R) charges and higher production-related incentive compensation, as well as a growth in headcount.

        The provision for credit losses increased, driven by a $208 million pretax charge in the second quarter to increase loan loss reserves, reflecting growth in loans and unfunded loan commitments and an update to historical data used for certain loss estimates.

Regional Net Income

        Net income in the U.S. declined primarily due to higher compensation expenses (higher production-driven incentive compensation and the impact from SFAS 123(R) charges), as well as lower Lending revenues, partially offset by higher Fixed Income and Equity Markets revenues and tax benefits from the resolution of a the Federal Tax Audit.

        Mexico net income increased due to strong results in Fixed Income Markets and Equity Markets, and double-digit growth in corporate loans and a tax benefit from the resolution of a Federal Tax Audit, partially offset by the absence of a loan loss recovery recorded in the prior-year period.

        Latin America net income declined due to higher investment spending, an increase in credit costs due to the absence of a loan loss recovery recorded in the prior-year period, and the impact from SFAS 123(R) charges. The decline in net income was partially offset by strong revenue growth in Equity and Fixed Income Markets sales and trading activities in Brazil and by the tax benefits from the resolution of the Federal Tax Audit.

        EMEA net income increased, driven by double-digit growth across all major product lines and geographies on higher volumes and growth in customer activity and tax benefits from the resolution of the Federal Tax Audit. The increase in net income was partially offset by higher compensation expense due to staff additions and the impact from SFAS 123(R) charges, higher credit costs on growth in loans and unfunded loan commitments.

        Net income in Japan increased due to strong growth in Fixed Income Markets and Lending, partially offset by higher operating expenses.

        Net income in Asia increased, driven by broad-based double-digit growth across several products, including Fixed Income and Equity Markets and Advisory. The tax benefits from the resolution of the Federal Tax Audit were partially offset by the impact from SFAS 123(R) charges.

37

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Transaction Services

        

        Transaction Services comprises Cash Management, Trade Services & Finance (Trade) and Securities & Funds Services (SFS). Cash Management and Trade provide comprehensive cash management and trade finance for corporations and financial institutions worldwide. SFS provides custody and fund services to investors such as insurance companies and pension funds, clearing services to intermediaries such as broker/dealers, and depository and agency/trust services to multinational corporations and governments globally. Revenue is generated from fees for transaction processing, net interest revenue on Trade, loans and deposits in Cash Management and SFS, and fees on assets under custody in SFS.

																	% Change
			Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars									2Q06 vs. 2Q05								YTD06 vs. YTD05
			2006			2005					2006			2005
Revenues, net of interest expense, by region:
	U.S.		$	326		$	233		40	%	$	637		$	470		36	%
	Mexico			48			49		(2	)		96			97		(1	)
	Latin America			160			128		25			306			245		25
	EMEA			535			440		22			1,024			868		18
	Japan			28			24		17			53			39		36
	Asia			398			317		26			761			609		25
Revenues, net of interest expense			$	1,495		$	1,191		26	%	$	2,877		$	2,328		24	%
Operating expenses				989			780		27			1,938			1,583		22
Provision for credit losses				16			6		NM			21			(7	)	NM
Income before taxes and minority interest			$	490		$	405		21	%	$	918		$	752		22	%
Income taxes				150			117		28			255			218		17
Minority interest, net of taxes				—			—		—			—			1		(100	)
Net income			$	340		$	288		18	%	$	663		$	533		24	%
Net income by region:
	U.S.		$	22		$	21		5	%	$	35		$	39		(10	)%
	Mexico			17			16		6			31			34		(9	)
	Latin America			49			42		17			99			83		19
	EMEA			107			87		23			212			153		39
	Japan			6			7		(14	)		11			7		57
	Asia			139			115		21			275			217		27
Net income			$	340		$	288		18	%	$	663		$	533		24	%
Average risk capital(1)			$	1,582		$	1,403		13	%	$	1,526		$	1,419		8	%
Return on risk capital(1)				86	%		82	%				88	%		76	%
Return on invested capital(1)				50	%		46	%				50	%		43	%
Key indicators:
Liability balances (average in billions of dollars)			$	178		$	141		26	%
Assets under custody at period end (in trillions of dollars)				9.3			8.0		16	%

---

(1)

See footnote 4 to the table on page 4.

NM

Not meaningful

38

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2Q06 vs. 2Q05

        Revenues, net of interest expense, increased, reflecting growth in liability balances, assets under custody, and higher volumes and interest rates. Average liability balances grew 26% to $178 billion in the second quarter primarily due to increases in EMEA, Asia and Japan, reflecting positive flow from new and existing customers.

        Cash Management revenue increased, reflecting growth across all regions except Mexico. This was attributable to higher liability balances, increased volumes and new sales, as well as higher interest rates.

        Securities & Funds Services revenue increased, reflecting growth across all regions except Mexico and Japan. The increase was driven by higher assets under custody, increased volumes, higher interest rates, and the impact of acquisitions. Assets under custody reached $9.3 trillion, an increase of $1.3 trillion, or 16%, on strong momentum from new sales, equity markets, and the inclusion of ABN Amro and UNISEN assets under custody.

        Trade Services and Finance revenue increased, reflecting growth in EMEA and the U.S. This was partially offset by a decline in Latin America and Mexico.

        The change in the provision for credit losses of $10 million was attributable to a reserve build of $17 million in 2006.

        Operating expenses increased due to organic business growth, acquisitions, and investment spending.

        Cash-basis loans, which are primarily trade finance receivables, were $38 million and $103 million at June 30, 2006 and 2005, respectively. The decrease of $65 million was primarily due to declines in Mexico and the United Arab Emirates.

Regional Net Income

        Net income in the U.S. increased primarily due to revenue growth, partially offset by higher expenses from acquisitions and continued investment spending.

        Mexico net income increased primarily due to tax efficiencies, partially offset by the impact of interest rates on revenues.

        Latin America net income increased primarily due to growth in liability balances, increased revenues from new sales, and rising interest rates.

        EMEA net income increased primarily due to increases in liability balances and assets under custody, higher interest rates, increased revenue from new sales, and strong volumes, which drove growth in Cash Management, SFS, and Trade.

        Asia net income increased primarily due to increased revenue from new sales, higher customer volumes, growth in liability balances and assets under custody, and rising interest rates.

        Japan net income decreased primarily due to higher tax expenses offset by increases in liability balances and assets under custody, rising interest rates, and increased revenue from new sales.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, increased, reflecting continued growth in customer liabilities and assets under custody. In addition, higher interest rates and increased volumes in Cash Management and SFS also contributed to the growth.

        Cash Management's revenue reflected growth across all regions except Mexico. The growth was a result of higher liability balances, volumes and new sales. Higher interest rates also contributed to the revenue increase.

        Securities & Funds Services experienced growth in revenues across all regions except Mexico. This was attributable to higher assets under custody and volumes, interest rates, and the impact of acquisitions. Assets under custody reached $9.3 trillion, an increase of $1.3 trillion, or 16%, on strong momentum from record sales, equity markets, and the inclusion of ABN Amro and UNISEN assets under custody.

        Trade Services and Finance revenues increased, principally driven by growth in EMEA and the U.S. This was partially offset by the Mexico and Latin America regions.

        The change in the provision for credit losses of $28 million was primarily attributable to a reserve build of $22 million in 2006 compared to a net reserve release in 2005.

        Operating expenses increased due to organic business growth, acquisitions, and investment spending.

Regional Net Income

        Net income in the U.S. decreased, primarily due to investment spending.

        Mexico net income decreased primarily due to higher expenses and decreasing interest rates.

        Latin America net income increased primarily due to growth in liability balances, increased revenues from new sales, rising interest rates, and the resolution of the Federal Tax Audit.

        EMEA net income increased primarily due to increases in liability balances and assets under custody, increased revenue from new sales, and strong volumes, which drove growth in Cash Management, SFS, and Trade. The resolution of the Federal Tax Audit also contributed positively to the region's results.

        Asia net income increased primarily due to increased revenue from new sales, higher customer volumes, and growth in liability balances and assets under custody, rising interest rates, and the resolution of the Federal Tax Audit.

        Japan net income increased primarily due to increases in liability balances and assets under custody, rising interest rates, and increased revenue from new sales.

39

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Other CIB

        Other CIB includes offsets to certain line items reported in other CIB segments, certain non-recurring items and tax amounts not allocated to CIB products.

		Three Months Ended June 30,						Six Months Ended June 30,
In millions of dollars
		2006			2005			2006			2005
Revenues, net of interest expense		$	(3	)	$	—		$	(2	)	$	1
Operating expenses			15			3			20			9
Provision for credit losses			—			—			—			3
Loss before income taxes (benefits)		$	(18	)	$	(3	)	$	(22	)	$	(11	)
Income taxes (benefits)			11			(44	)		19			(47	)
Net income (loss)		$	(29	)	$	41		$	(41	)	$	36

2Q06 vs. 2Q05

        The net loss in the 2006 periods, compared to the net income in the 2005 periods, is primarily due to higher taxes.

40

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GLOBAL WEALTH MANAGEMENT

        

        Global Wealth Management is composed of the Smith Barney Private Client businesses (branded Citigroup Wealth Advisors outside the U.S.), Citigroup Private Bank, and Citigroup Investment Research.

			Three Months Ended June 30,						% Change		Six Months Ended June 30,						% Change
In millions of dollars			2006			2005			2Q06 vs. 2Q05		2006			2005			YTD06 vs. YTD05
Revenues, net of interest expense by region:
	U.S.		$	2,149		$	1,852		16	%	$	4,303		$	3,724		16	%
	Mexico			33			31		6			64			62		3
	Latin America			46			50		(8	)		89			108		(18	)
	EMEA			83			71		17			158			142		11
	Japan			—			(15	)	100			—			7		(100	)
	Asia			181			111		63			361			230		57
Revenues, net of interest expense			$	2,492		$	2,100		19		$	4,975		$	4,273		16	%
Operating expenses				1,961			1,586		24			4,016			3,276		23
Provision for loan losses				8			—		—			13			(16	)	NM
Income before taxes			$	523		$	514		2	%	$	946		$	1,013		(7	)%
Income taxes				176			192		(8	)		312			372		(16	)
Net income			$	347		$	322		8	%	$	634		$	641		(1	)%
Net income (loss) by region:
	U.S.		$	290		$	315		(8	)%	$	518		$	588		(12	)%
	Mexico			10			10		—			18			23		(22	)
	Latin America			2			8		(75	)		5			15		(67	)
	EMEA			5			3		67			8			2		NM
	Japan			—			(45	)	100			—			(53	)	100
	Asia			40			31		29			85			66		29
Net income			$	347		$	322		8	%	$	634		$	641		(1	)%
Average risk capital(1)			$	2,366		$	2,092		13	%	$	2,452		$	2,043		20	%
Return on risk capital(1)				59	%		62	%				52	%		63	%
Return on invested capital(1)				36	%		51	%				32	%		52	%

---

(1)

See footnote 4 to the table on page 4.

NM    Not meaningful

41

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Smith Barney

        Smith Barney provides investment advice, financial planning and brokerage services to affluent individuals, companies, and non-profits through a network of more than 13,000 Financial Advisors in more than 600 offices primarily in the U.S. Smith Barney generates revenue from managing client assets, acting as a broker for clients in the purchase and sale of securities, financing customers' securities transactions and other borrowing needs through lending, and through the sale of mutual funds.

		Three Months Ended June 30,						% Change		Six Months Ended June 30,						% Change
In millions of dollars		2006			2005			2Q06 vs. 2Q05		2006			2005			YTD06 vs. YTD05
Revenues, net of interest expense		$	1,990		$	1,647		21	%	$	3,977		$	3,316		20	%
Operating expenses			1,624			1,252		30			3,344			2,603		28
Provision for loan losses			(1	)		4		NM			—			4		(100	)
Income before taxes		$	367		$	391		(6	)%	$	633		$	709		(11	)%
Income taxes			129			152		(15	)		227			273		(17	)
Net income		$	238		$	239		—		$	406		$	436		(7	)%
Average risk capital(1)		$	1,422		$	927		53	%	$	1,440		$	902		60	%
Return on risk capital(1)			67	%		103	%				57	%		97	%
Return on invested capital(1)			34	%		73	%				29	%		68	%
Key indicators: (in billions of dollars)
Total assets under fee-based management		$	313		$	245		28	%
Total Smith Barney client assets		$	1,142		$	987		16
Financial advisors (#)			13,177			12,150		8
Annualized revenue per financial advisor (in thousands of dollars)		$	600		$	538		12

---

(1)

The increase in average risk capital from the 2005 second quarter was primarily attributed to methodology changes implemented during the 2006 first quarter. See footnote 4 to the table on page 4.

NM    Not meaningful

42

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2Q06 vs. 2Q05

        Revenues, net of interest expense, increased $343 million primarily due to a 29% increase in fee-based revenues and a 9% increase in transactional revenues, reflecting increased customer volumes and the acquisition of the Legg Mason retail brokerage business.

        Operating expenses    increased $372 million, or 30%, mainly due to higher compensation expense, including $50 million of SFAS 123(R) accruals, integration costs of the Legg Mason retail brokerage business, and higher legal costs.

        Total assets under fee-based management were $313 billion as of June 30, 2006, up $68 billion, or 28%, from the prior-year period. Total client assets, including assets under fee-based management of $1,142 billion, increased $155 billion, or 16%, compared to the prior-year quarter. This reflected organic growth and the addition of Legg Mason client assets. Net flows were ($5) billion compared to $5 billion in the prior-year quarter due to attrition and market action. Smith Barney had 13,177 financial advisors as of June 30, 2006, compared with 12,150 as of June 30, 2005. Annualized revenue per financial advisor of $600,000 increased 12% from the prior-year quarter.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, increased $661 million primarily due to a 31% increase in fee-based revenues and a 6% increase in transactional revenues, reflecting increased customer volumes and the acquisition of the Legg Mason retail brokerage business.

        Operating expenses    increased $741 million, or 28%, mainly due to higher compensation expense, including $227 million of SFAS 123(R) charges, integration costs of the Legg Mason retail brokerage business, and higher legal costs.

        Net flows were ($2) billion compared to $18 billion in the prior-year first half due to attrition and market action.

43

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Private Bank

        

        Private Bank provides personalized wealth management services for high-net-worth clients in 33 countries and territories. These services include comprehensive investment management (investment funds management, capital markets solutions, and trust, fiduciary and custody services), investment finance (credit services including real estate financing, commitments and letters of credit) and banking services (deposit, checking and savings accounts, as well as cash management and other traditional banking services).

																	% Change
			Three Months Ended June 30,						% Change		Six Months Ended June 30,
In millions of dollars									2Q06 vs. 2Q05								YTD06 vs. YTD05
			2006			2005					2006			2005
Revenues, net of interest expense, by region:
	U.S.		$	210		$	205		2	%	$	420		$	408		3	%
	Mexico			33			31		6			65			62		5
	Latin America			46			50		(8	)		89			108		(18	)
	EMEA			74			71		4			144			142		1
	Japan			—			(15	)	100			—			7		(100	)
	Asia			139			111		25			280			230		22
Revenues, net of interest expense			$	502		$	453		11	%	$	998		$	957		4	%
Operating expenses				337			334		1			672			673		—
Provision for loan losses				9			(4	)	NM			13			(20	)	NM
Income before taxes			$	156		$	123		27	%	$	313		$	304		3	%
Income taxes				47			40		18			85			99		(14	)
Net income			$	109		$	83		31	%	$	228		$	205		11	%
Net income (loss) by region:
	U.S.		$	60		$	76		(21	)%	$	126		$	152		(17	)%
	Mexico			10			10		—			18			23		(22	)
	Latin America			2			8		(75	)		5			15		(67	)
	EMEA			3			3		—			5			2		NM
	Japan			—			(45	)	100			—			(53	)	100
	Asia			34			31		10			74			66		12
Net income (loss)			$	109		$	83		31	%	$	228		$	205		11	%
Average risk capital(1)			$	944		$	1,165		(19	)%	$	1,013		$	1,141		(11	)%
Return on risk capital(1)				46	%		29	%				45	%		36	%
Return on invested capital(1)				42	%		26	%				42	%		34	%
Key indicators: (in billions of dollars)
Client assets under fee-based management			$	50		$	49		2	%
	Other client activity			172			168		2
Total client business volumes			$	222		$	217		2	%

---

(1)

See footnote 4 to the table on page 4.

NM    Not meaningful

44

---

2Q06 vs. 2Q05

        Revenues, net of interest expense, increased due to strong growth in Asia and the absence of prior-year losses related to the closing of the Japan Private Bank.

        U.S. revenue increased, primarily driven by an increase in banking spreads and lending volumes, which was partially offset by lending spread compression.

        Mexico revenue increased, mainly due to an increase in banking and investment revenue, partially offset by lower lending revenue.

        Latin America revenue decreased, primarily driven by lower spreads in discretionary and lending portfolios and lower lending volumes.

        EMEA revenue increased, driven by higher capital markets revenue, partially offset by the transfer of the CWA business to Smith Barney.

        Asia revenue increased, reflecting strong capital markets activity.

        Operating expenses increased 1% due to the expansion in on-shore markets and SFAS 123(R) charges of $3 million, partially offset by the absence of Japan expenses in the 2006 second quarter.

        Provision for loan losses was $9 million in the 2006 second quarter compared to a $4 million release in the 2005 second quarter. The provision in the 2006 second quarter is primarily due to costs associated with an update to historical data used for loan loss estimates. The 2005 second quarter reflects net recoveries in the U.S.

        Client business volumes increased $5 billion, or 2%, as a decline of $10 billion in Japan was offset by growth of $15 billion, or 7%, in other regions. Growth was led by an increase of $4 billion in banking and fiduciary assets, which were higher in EMEA and Asia, offsetting the decline in Japan. Managed assets increased $1 billion, mainly driven by positive net flows in Latin America and Asia, offsetting the decline in Japan. Custody assets remained flat as growth in U.S., Asia and EMEA was offset by the decline in Japan.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, increased due to strong growth in Asia, partially offset by the absence of prior-year revenue from Japan.

        U.S. revenue increased, primarily driven by an increase in banking spreads and lending volumes, which was partially offset by lending spread compression.

        Mexico revenue increased, mainly due to an increase in banking and investment revenue, partially offset by lower lending and capital markets revenue.

        Latin America revenue decreased, primarily driven by lower capital markets revenue, lower spreads in discretionary and lending portfolios and lower lending volumes.

        EMEA revenue increased, driven by higher capital markets revenue, partially offset by transfer of the Citigroup Wealth Advisors (CWA) business to Smith Barney.

        Asia revenue increased, reflecting strong capital markets activity.

        Operating expenses remained flat, as the absence of Japan expenses was offset by SFAS 123(R) charges in the first half of 2006. The first six months ending June 30 include SFAS 123(R) charges of $22 million.

        Provision for loan losses was $13 million in the first six months of 2006 compared to a $20 million release in the first six months of 2005. The provision in 2006 is primarily due to reserve builds and costs associated with an update to historical data used for loan loss estimates of $17 million, partially offset by a $4 million recovery in Asia. 2005 includes $10 million in net credit reserve releases and recoveries of $10 million in Asia, EMEA and the U.S.

        Client business volumes increased $5 billion, or 2%, as a decline of $10 billion in Japan was offset by growth of $15 billion, or 7%, in other regions. Growth was led by an increase of $4 billion in banking and fiduciary assets, which were higher in EMEA and Asia, offsetting the decline in Japan. Managed assets increased $1 billion, mainly driven by positive net flows in Latin America and Asia, offsetting the decline in Japan.

45

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ALTERNATIVE INVESTMENTS

        

*    Excludes Other revenues of $(37) million.

        Alternative Investments (AI) manages capital on behalf of Citigroup, as well as for third-party institutional and high-net-worth investors. AI is an integrated alternative investment platform that manages a wide range of products across five asset classes, including private equity, hedge funds, real estate, structured products and managed futures. AI's business model is to enable its 14 investment centers to retain entrepreneurial qualities required to capitalize on evolving opportunities, while benefiting from the intellectual, operational and financial resources of Citigroup.

			Three Months Ended June 30,						% Change		Six Months Ended June 30,						% Change
In millions of dollars			2006			2005			2Q06 vs. 2Q05		2006			2005			YTD06 vs. YTD05
Net realized and net change in unrealized gains			$	475		$	943		(50	)%	$	1,038		$	1,649		(37	)%
Fees, dividends and interest				49			86		(43	)		98			167		(41	)
Other				(37	)		—		—			(65	)		17		NM
Total proprietary investment activities revenues			$	487		$	1,029		(53	)%	$	1,071		$	1,833		(42	)%
Client revenues(1)				97			83		17			188			145		30
Total revenues, net of interest expense			$	584		$	1,112		(47	)%	$	1,259		$	1,978		(36	)%
Operating expenses				199			159		25			380			264		44
Provision for loan losses				(13	)		—		—			(13	)		—		—
Income before taxes and minority interest			$	398		$	953		(58	)%	$	892		$	1,714		(48	)%
Income taxes			$	138		$	334		(59	)%	$	249		$	601		(59	)%
Minority interest, net of taxes				3			234		(99	)		33			366		(91	)
Net income			$	257		$	385		(33	)%	$	610		$	747		(18	)%
Average risk capital(2)			$	4,043		$	4,315		(6	)%	$	4,295		$	4,202		2	%
Return on risk capital(2)				26	%		36	%				29	%		36	%
Return on invested capital(2)				22	%		34	%				25	%		34	%
Key indicators: (in billions of dollars)
Capital under management:
	Client		$	30.6		$	21.7		41	%
	Proprietary			11.3			9.6		18
Total			$	41.9		$	31.3		34	%

---

(1)

Includes fee income.

(2)

See footnote 4 to the table on page 4.

NM Not meaningful

46

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2Q06 vs. 2Q05

        Total proprietary revenues, net of interest expense, for the second quarter of 2006 of $487 million, were composed of revenues from private equity of $516 million, other investment activity of $14 million and hedge fund losses of ($43) million. Private equity revenue declined $466 million from the 2005 second quarter, primarily driven by the absence of prior-year realized gains from the sale of portfolio assets. Other investment activities revenue decreased $80 million from the 2005 second quarter, largely due to the absence of realized gains from sales of St. Paul (STA) shares in the prior-year. Hedge fund losses improved by $4 million, largely due to a lower net change in unrealized losses from improved investment performance. Client revenues increased $14 million, reflecting increased management fees from a 41% growth in client capital under management.

        Operating expenses in the second quarter of 2006 of $199 million increased $40 million from the second quarter of 2005, primarily due to increased performance-driven compensation in private equity portfolios, investment spending in the hedge funds and real estate platforms, and higher legal expenses.

        Minority interest, net of tax, in the second quarter of 2006 of $3 million declined $231 million from the second quarter of 2005, primarily due to lower private equity gains related to underlying investments held by consolidated majority-owned legal entities. The impact of minority interest is reflected in fees, dividends, and interest, and net realized and net change in unrealized gains consistent with proceeds received by minority interests.

        Proprietary capital under management of $11.3 billion increased $1.7 billion from the second quarter 2005, primarily driven by the MetLife and remaining Legg Mason shares acquired during 2005, as well as the funding of proprietary investments in hedge funds and real estate. These increases were partially offset by the sale of all of Citigroup's holdings of St. Paul shares.

        Client capital under management of $30.6 billion in the 2006 second quarter increased $8.9 billion from the 2005 second quarter, due to inflows from institutional and high-net-worth clients and the inclusion of $1.2 billion in assets for the former Travelers Life & Annuities business, following the July 1, 2005 sale to MetLife.

        Investments held by investment company subsidiaries (including CVC Brazil) are carried at fair value with the net change in unrealized gains and losses recorded in income. The Company's investment in CVC Brazil is subject to a variety of unresolved matters, including pending litigation involving some of its portfolio companies, which could affect future valuations of these companies.*

        The sale of Citigroup's Life Insurance and Annuities business to MetLife, Inc. on July 1, 2005, included $1.0 billion, or 22.4 million shares, in MetLife equity securities in the sale proceeds. On July 3, 2006, the company completed the sale of all 22.4 million shares related to a forward sale agreement previously executed. The Company will record a gain of approximately $133 million pretax in the third quarter of 2006. The investment in Legg Mason resulted from the sale of Citigroup's Asset Management business to Legg Mason, Inc. on December 1, 2005, which included a combination of Legg Mason common and convertible preferred equity securities valued at $2.298 billion in the sale proceeds. Total equivalent number of common shares was 18.7 million, of which 10.3 million were sold in March 2006. The MetLife and Legg Mason equity securities are classified on Citigroup's Consolidated Balance Sheet as Investments (available-for-sale).

2Q06 YTD vs. 2Q05 YTD

        Total proprietary revenues, net of interest expense, for the six months of 2006 of $1,071 million, were composed of revenues from private equity of $729 million, other investment activity of $278 million and hedge funds of $64 million. Private equity revenue declined $1,005 million from the first six months of 2005, primarily driven by the absence of prior-year realized gains from the sale of portfolio assets. Other investment activities revenue increased $162 million from the first six months 2005, largely due to realized gains from the liquidation of Citigroup's investment in St. Paul shares. Hedge fund revenue increased $81 million, largely due to a higher net change in unrealized gains on a substantially increased asset base, along with improved investment performance. Client revenues increased $43 million, reflecting increased management and performance fees from a 35% growth in average client capital under management.

        Operating expenses in the first six months of 2006 of $380 million increased $116 million from the first six months of 2005, primarily due to increased performance-driven compensation, investment spending in the hedge fund and real estate platforms, higher legal expenses, and the impact of SFAS 123(R).

        Minority interest, net of tax, in the first six months of 2006 of $33 million declined $333 million from the first six months of 2005, primarily due to absence of prior-year private equity gains related to underlying investments held by consolidated majority-owned legal entities. The impact of minority interest is reflected in fees, dividends, and interest, and net realized gains/(losses) consistent with proceeds received by minority interests.

        Net Income reflects higher tax benefits including $58 million resulting from the resolution of the Federal Tax Audit in the first quarter of 2006.

---

*

This is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 81.

47

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MetLife and Legg Mason Equity Securities

Company		Type of Ownership		Shares owned on June 30, 2006		Sale Restriction		Market Value as of June 30, 2006 ($ millions)			Pretax Unrealized Gains/(Losses) as of June 30, 2006 ($ million)
MetLife, Inc.(1)		Common stock representing approximately 3.0% ownership		22.4 million		May be sold in private offerings until July 1, 2006. Thereafter, may be sold publicly		$	1,149		$	149
Legg Mason, Inc.		Non-voting convertible preferred stock representing approximately 6.2% ownership		8.4 shares (convertible into 8.4 million shares of common stock upon sale to non- affiliate)		2.2 million shares may be sold publicly at any time and the remaining 6.2 million shares may be sold after December 1, 2006		$	835		$	(195	)
Total								$	1,984		$	(46	)

---

(1)

The pretax unrealized gain excludes the effects from the Company's hedging activities related to these shares. All shares were sold and the hedging contracts closed on July 3, 2006.

CORPORATE/OTHER

        Corporate/Other includes treasury results, unallocated corporate expenses, offsets to certain line-item reclassifications reported in the business segments (inter-segment eliminations), the results of discontinued operations and unallocated taxes.

		Three Months Ended June 30,						Six Months Ended June 30,
In millions of dollars		2006			2005			2006			2005
Revenues, net of interest expense		$	(283	)	$	(206	)	$	(492	)	$	(204	)
Operating expenses			72			106			80			201
Provisions for benefits, claims and credit losses			—			(1	)		—			(1	)
Income (loss) from continuing operations before taxes and minority interest		$	(355	)	$	(311	)	$	(572	)	$	(404	)
Income tax benefits		$	(113	)	$	(62	)	$	(244	)	$	(74	)
Minority interest, net of taxes			—			(4	)		1			3
Income (loss) from continuing operations		$	(242	)	$	(245	)	$	(329	)	$	(333	)
Income from discontinued operations			3			342		$	87		$	668
Net income (loss)		$	(239	)	$	97		$	(242	)	$	335

2Q06 vs. 2Q05

        Revenues, net of interest expense, decreased, primarily due to lower intersegment eliminations, partially offset by higher treasury results. Lower funding balances, partially offset by higher interest rates and an extension of the debt maturity profile, drove an increase in treasury results.

        Operating expenses declined, primarily due to lower intersegment eliminations, partially offset by increased staffing and technology costs.

        Income tax benefits increased due to the higher pretax loss in the current year.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, decreased, primarily due to lower intersegment eliminations and lower treasury results. Higher interest rates and an extension of the debt maturity profile, partially offset by lower funding balances, drove a decline in treasury results.

        Operating expenses declined, primarily due to lower intersegment eliminations, partially offset by increased staffing and technology costs.

        Income tax benefits increased due to the higher pretax loss in the current year and a tax reserve release of $61 million relating to the resolution of the Federal Tax Audit.

Discontinued Operations

        Discontinued operations represent the operations in the Company's Sale of the Asset Management Business to Legg Mason, Inc., and the Sale of the Life Insurance and Annuities Business. For 2006, income from discontinued operations included a gain from the Sale of the Asset Management Business in Poland, as well as a tax reserve release of $59 million relating to the resolution of the Federal Tax Audit. See Note 3 to the Consolidated Financial Statements on page 89.

48

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MANAGING GLOBAL RISK

        Citigroup's risk management framework balances strong corporate oversight with well-defined independent risk management functions within each business. The Citigroup risk management framework is described in Citigroup's 2005 Annual Report on Form 10-K.

        The Citigroup Senior Risk Officer is responsible for:

•

establishing standards for the measurement and reporting of risk,



•

managing and compensating the senior independent risk managers at the business level,



•

approving business-level risk management policies,



•

reviewing major risk exposures and concentrations across the organization.

        The independent risk managers at the business level are responsible for establishing and implementing risk management policies and practices within their business, for overseeing the risk in their business, and for responding to the needs and issues of their business.

RISK CAPITAL

        Risk capital is defined as the amount of capital required to absorb potential unexpected economic losses resulting from extremely severe events over a one-year time period.

•

"Economic losses" are the income statement and balance sheet impact of losses.



•

"Unexpected losses" are the difference between potential extremely severe losses and Citigroup's expected (average) loss over a one-year time period.



•

"Extremely severe" is defined as potential loss at a 99.97% confidence level, based on the distribution of observed events and scenario analysis.

        Risk capital quantifies risk levels and the tradeoff of risk and return. Risk Capital is used in the calculation of return on risk capital (RORC) and return on invested capital (ROIC).

        RORC, calculated as annualized income from continuing operations divided by average risk capital, compares business income with the capital required to absorb the risks. It is used to assess businesses' operating performance and to determine incremental allocation of capital for organic growth.

        ROIC is calculated using income adjusted to exclude a net internal funding cost Citigroup levies on the goodwill and intangible assets of each business. This adjusted annualized income is divided by the sum of each business' average risk capital, goodwill and intangible assets. ROIC thus compares business income with the total invested capital—risk capital, goodwill and intangible assets—used to generate that income. ROIC is used to assess returns on potential acquisitions and divestitures, and to compare long-term performance of businesses with differing proportions of organic and acquired growth.

        The drivers of "economic losses" are risks, which can be broadly categorized as credit risk (including cross-border risk), market risk, operational risk, and insurance risk:

•

Credit risk losses primarily result from a borrower's or counterparty's inability to meet its obligations. Market risk losses arise from fluctuations in the market value of trading and non-trading positions, often driven by changes in interest rates.



•

Operational risk losses result from inadequate internal processes, people, systems or from external events.



•

Insurance risks arise from unexpectedly high payouts on insurance liabilities.

        These risks are measured and aggregated within businesses and across Citigroup to facilitate the understanding of the Company's exposure to extreme downside events and any changes in its level or its composition.

        At June 30, 2006, December 31, 2005, and June 30, 2005, risk capital for Citigroup was composed of the following risk types:

In billions of dollars		June 30, 2006			December 31, 2005			June 30, 2005
Credit risk		$	35.7		$	36.1		$	36.0
Market risk			17.6			13.5			15.0
Operational risk			8.1			8.1			7.8
Insurance risk			0.2			0.2			0.2
Intersector diversification(1)			(5.9	)		(4.7	)		(4.9	)
Total Citigroup		$	55.7		$	53.2		$	54.1
Return on risk capital (second quarter)			38	%					36	%
Return on invested capital (second quarter)			19	%					18	%
Return on risk capital (six months)			39	%					38	%
Return on invested capital (six months)			20	%					19	%

---

(1)

Reduction in risk represents diversification between risk sectors.

        The increase in Citigroup's risk capital versus December 31, 2005 was primarily related to the year-end methodology update for market risk for non-trading positions, offset by decreases in certain of the Company's proprietary investment positions.

        Average risk capital, return on risk capital and return on invested capital are provided for each segment and product and are disclosed on pages 16 - 46.

        The increase in Citigroup's risk capital versus June 30, 2005 was primarily related to the year-end methodology update for market risk for non-trading positions, offset by decreases in certain of the Company's proprietary investment positions.

        Average risk capital increased $2.7 billion from the 2005 second quarter to $55.9 billion. Average risk capital of $14.8 billion in U.S. Consumer increased $793 million, or 6%, driven mostly by growth in the credit portfolio, and by updates to risk capital methodologies in market risk for non-trading positions and credit risk. Average risk capital of $21.8 billion in CIB increased $658 million, or 3%, primarily driven by portfolio growth in both Capital Markets and Transaction Services. Average risk capital of $2.4 billion in Global Wealth Management increased $274 million, or 13%, primarily driven by the new operational risk methodology.

49

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CREDIT RISK MANAGEMENT PROCESS

        Credit risk is the potential for financial loss resulting from the failure of a borrower or counterparty to honor its financial or contractual obligations. Credit risk arises in many of the Company's business activities, including:

•

lending



•

sales and trading



•

derivatives



•

securities transactions



•

settlement



•

when the Company acts as an intermediary on behalf of its clients and other third parties

*    Report in Other Liabilities on the Consolidated Balance Sheet.

50

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DETAILS OF CREDIT LOSS EXPERIENCE

In millions of dollars			2nd Qtr. 2006			1st Qtr. 2006			4th Qtr. 2005			3rd Qtr. 2005			2nd Qtr. 2005
Allowance for loan losses at beginning of period			$	9,505		$	9,782		$	10,015		$	10,418		$	10,894
Provision for loan losses
	Consumer		$	1,426		$	1,446		$	1,936		$	2,584		$	1,835
	Corporate			10			(50	)		(65	)		(59	)		(115	)
			$	1,436		$	1,396		$	1,871		$	2,525		$	1,720
Gross credit losses
Consumer
	In U.S. offices		$	1,090		$	1,105		$	1,531		$	1,380		$	1,472
	In offices outside the U.S.			1,145			1,037			955			2,000			869
Corporate
	In U.S. offices			44			15			68		$	4		$	32
	In offices outside the U.S.			75			26			60			60			79
			$	2,354		$	2,183		$	2,614		$	3,444		$	2,452
Credit recoveries
Consumer
	In U.S. offices		$	183		$	190		$	224		$	242		$	333
	In offices outside the U.S.			298			319			227			212			211
Corporate
	In U.S. offices			12			2			94			39			7
	In offices outside the U.S.			65			72			146			148			123
			$	558		$	583		$	691		$	641		$	674
Net credit losses
	In U.S. offices		$	939		$	928		$	1,281		$	1,103		$	1,164
	In offices outside the U.S.			857			672			642			1,700			614
Total			$	1,796		$	1,600		$	1,923		$	2,803		$	1,778
Other—net(1)(2)(3)(4)(5)			$	(1	)	$	(73	)	$	(181	)	$	(125	)	$	(418	)
Allowance for loan losses at end of period			$	9,144		$	9,505		$	9,782		$	10,015		$	10,418
Allowance for unfunded lending commitments(6)			$	1,050		$	900		$	850		$	800		$	700
Total allowance for loans and unfunded lending commitments			$	10,194		$	10,405		$	10,632		$	10,815		$	11,118
Net consumer credit losses			$	1,754		$	1,633		$	2,035		$	2,926		$	1,797
As a percentage of average consumer loans				1.48	%		1.46	%		1.82	%		2.68	%		1.68	%
Net corporate credit losses/(recoveries)			$	42		$	(33	)	$	(112	)	$	(123	)	$	(19	)
As a percentage of average corporate loans				—			NM			NM			NM			NM

---

(1)

The 2006 second quarter includes reductions to the loan loss reserve of $125 million related to securitizations, offset by $84 million of additions related to the Credicard acquisition.

(2)

The 2006 first quarter includes reductions to the loan loss reserve of $90 million related to securitizations.

(3)

The 2005 fourth quarter includes reductions to the loan loss reserve of $186 million related to securitizations.

(4)

The 2005 third quarter includes reductions to the loan loss reserve of $137 million related to securitizations, offset by the $23 million of loan loss reserves related to the purchased distressed loans reclassified from Other Assets.

(5)

The 2005 second quarter includes reductions to the loan loss reserve of $132 million related to securitizations and portfolio sales, $110 million of purchase accounting adjustments related to the KorAm acquisition, and a $79 million reclassification to a non-credit related reserve.

(6)

Represents additional credit loss reserves for unfunded corporate lending commitments and letters of credit recorded within Other Liabilities on the Consolidated Balance Sheet.

NM    Not meaningful

51

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CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS

In millions of dollars		June 30, 2006			March. 31, 2006			December 31, 2005			September 30, 2005			June 30, 2005
Corporate cash-basis loans(1)
Collateral dependent (at lower of cost or collateral value)(2)		$	—		$	—		$	6		$	6		$	8
Other			799			821			998			1,204			1,588
Total		$	799		$	821		$	1,004		$	1,210		$	1,596
Corporate cash-basis loans(1)
In U.S. offices		$	24		$	65		$	81		$	74		$	181
In offices outside the U.S.			775			756			923			1,136			1,415
Total		$	799		$	821		$	1,004		$	1,210		$	1,596
Renegotiated loans (includes Corporate and Commercial Business Loans)		$	23		$	30		$	32		$	29		$	31
Consumer loans on which accrual of interest had been suspended
In U.S. offices		$	1,985		$	2,088		$	2,307		$	2,224		$	1,908
In offices outside the U.S.			1,872			1,664			1,713			1,597			2,791
Total		$	3,857		$	3,752		$	4,020		$	3,821		$	4,699
Accruing loans 90 or more days delinquent (3)
In U.S. offices		$	2,403		$	2,531		$	2,886		$	2,823		$	2,789
In offices outside the U.S.			431			410			391			457			407
Total		$	2,834		$	2,941		$	3,277		$	3,280		$	3,196

---

(1)

Excludes purchased distressed loans accounted for in accordance with Statement of Position 03-3, "Accounting for Certain Loans on Debt Securities Acquired in a Transfer" (SOP 03-3). This pronouncement was adopted in the 2005 third quarter. Prior to adoption, these loans were classified with other assets. The carrying value of these loans was $1,171 million at June 30, 2006, $1,217 million at March 31, 2006, $1,120 million at December 31, 2005, $1,064 million at September 30, 2005, and $1,148 million at June 30, 2005.

(2)

A cash-basis loan is defined as collateral dependent when repayment is expected to be provided solely by the liquidation of the underlying collateral and there are no other available and reliable sources of repayment, in which case the loans are written down to the lower of cost or collateral value.

(3)

Substantially composed of consumer loans of which $1,437 million, $1,465 million, $1,591 million, $1,690 million, and $1,744 million are government-guaranteed student loans and Federal Housing Authority mortgages at June 30, 2006, March 31, 2006, December 31, 2005, September 30, 2005, and June 30, 2005, respectively.

Other Real Estate Owned and Other Repossessed Assets

In millions of dollars		June 30, 2006			March 31, 2006			December 31, 2005			September 30, 2005			June 30, 2005
Other real estate owned(1)
Consumer		$	324		$	322		$	279		$	283		$	248
Corporate			171			144			150			153			133
Total other real estate owned		$	495		$	466		$	429		$	436		$	381
Other repossessed assets		$	53		$	52		$	62		$	57		$	49

---

(1)

Represents repossessed real estate, carried at lower of cost or fair value, less costs to sell.

52

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CONSUMER PORTFOLIO REVIEW

        In the Consumer portfolio, credit loss experience is often expressed in terms of annualized net credit losses as a percentage of average loans. Consumer loans are generally written off no later than a predetermined number of days past due on a contractual basis, or earlier in the event of bankruptcy.

        Commercial Business includes loans and leases made principally to small- and middle-market businesses. These are placed on a non-accrual basis when it is determined that the payment of interest or principal is past due for 90 days or more, except when the loan is well secured and in the process of collection.

        The following table summarizes delinquency and net credit loss experience in both the managed and on-balance sheet consumer loan portfolios. The managed loan portfolio includes held-for-sale and securitized credit card receivables.    Only U.S. Cards from a product view and U.S. from a regional view are impacted. Although a managed basis presentation is not in conformity with GAAP, the Company believes managed credit statistics provide a representation of performance and key indicators of the credit card business that is consistent with the way management reviews operating performance and allocates resources. For example, the U.S. Cards business considers both on-balance sheet and securitized balances (together, its managed portfolio) when determining capital allocation and general management decisions and compensation. Furthermore, investors use information about the credit quality of the entire managed portfolio, as the results of both the on-balance sheet and securitized portfolios impact the overall performance of the U.S. Cards business. For a further discussion of managed-basis reporting, see Note 14 to the Consolidated Financial Statements on page 104.

53

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Consumer Loan Delinquency Amounts, Net Credit Losses, and Ratios

				Total Loans												Average Loans
In millions of dollars, except total and average loan amounts in billions Product View:							90 Days or More Past Due(1)												Net Credit Losses(1)
				June 30, 2006			June 30, 2006			March 31, 2006			June 30, 2005			2nd Qtr. 2006			2nd Qtr. 2006			1st Qtr. 2006			2nd Qtr. 2005
U.S.:
	U.S. Cards			$	43.4		$	814		$	958		$	1,021		$	43.6		$	447		$	446		$	640
		Ratio						1.87	%		2.39	%		2.23	%					4.11	%		4.27	%		5.47	%
	U.S. Retail Distribution				44.1			717			740			723			43.6			288			279			346
		Ratio						1.62	%		1.73	%		1.79	%					2.65	%		2.66	%		3.50	%
	U.S. Consumer Lending				198.7			2,356			2,411			2,539			197.3			160			176			146
		Ratio						1.19	%		1.25	%		1.55	%					0.33	%		0.38	%		0.36	%
	U.S. Commercial Business				35.5			116			151			148			34.7			12			14			12
		Ratio						0.33	%		0.44	%		0.47	%					0.14	%		0.17	%		0.15	%
International:
	International Cards				26.8			643			535			382			26.1			333			218			157
		Ratio						2.40	%		2.22	%		1.70	%					5.12	%		3.64	%		2.84	%
	International Consumer Finance				24.0			519			437			477			23.8			323			319			321
		Ratio						2.16	%		1.93	%		2.17	%					5.44	%		5.78	%		5.75	%
	International Retail Banking				62.9			680			736			1,901			62.6			191			184			181
		Ratio						1.08	%		1.21	%		3.09	%					1.22	%		1.21	%		1.17	%
	Private Bank(2)				40.5			6			12			113			40.0			—			(4	)		(5	)
		Ratio						0.02	%		0.03	%		0.28	%					0.00	%		(0.04	)%		(0.05	)%
Other Consumer Loans					2.4			—			43			—			2.3			—			1			(1	)
On-Balance Sheet Loans(3)				$	478.3		$	5,851		$	6,023		$	7,304		$	474.0		$	1,754		$	1,633		$	1,797
		Ratio						1.22	%		1.31	%		1.70	%					1.48	%		1.46	%		1.68	%
Securitized receivables (all in U.S. Cards)				$	97.3		$	1,421		$	1,403		$	1,231		$	94.5		$	969		$	871		$	1,307
Credit card receivables held-for-sale					—			—			—			—			—			—			4			9
Managed Loans (4)				$	575.6		$	7,272		$	7,426		$	8,535		$	568.5		$	2,723		$	2,508		$	3,113
		Ratio						1.26	%		1.34	%		1.65	%					1.92	%		1.85	%		2.42	%
Regional View:
	U.S.			$	350.3		$	4,010		$	4,312		$	4,456		$	347.1		$	908		$	916		$	1,139
	Ratio							1.14	%		1.27	%		1.45	%					1.05	%		1.11	%		1.50	%
Mexico					14.6			548			541			564			14.6			115			106			84
	Ratio							3.76	%		3.68	%		4.27	%					3.16	%		2.87	%		2.60	%
EMEA					39.5			508			487			1,651			39.4			292			250			237
	Ratio							1.29	%		1.32	%		4.38	%					2.97	%		2.77	%		2.49	%
Japan					11.9			194			170			273			12.1			251			223			261
	Ratio							1.63	%		1.48	%		1.99	%					8.33	%		7.83	%		7.24	%
Asia					56.6			491			473			330			55.8			147			136			96
	Ratio							0.87	%		0.87	%		0.61	%					1.06	%		1.01	%		0.72	%
Latin America					5.4			100			40			30			5.0			41			2			(20	)
	Ratio							1.85	%		0.99	%		0.86	%					3.34	%		0.21	%		(2.34	)%
On-Balance Sheet Loans (3)				$	478.3		$	5,851		$	6,023		$	7,304		$	474.0		$	1,754		$	1,633		$	1,797
	Ratio							1.22	%		1.31	%		1.70	%					1.48	%		1.46	%		1.68	%
Securitized receivables (all in U.S. Cards)				$	97.3		$	1,421		$	1,403		$	1,231		$	94.5		$	969		$	871		$	1,307
Credit card receivables held-for-sale					—			—			—			—			—			—			4			9
Managed Loans (4)				$	575.6		$	7,272		$	7,426		$	8,535		$	568.5		$	2,723		$	2,508		$	3,113
	Ratio							1.26	%		1.34	%		1.65	%					1.92	%		1.85	%		2.42	%

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(1)

The ratios of 90 days or more past due and net credit losses are calculated based on end-of-period and average loans, respectively, both net of unearned income.

(2)

Private Bank results are reported as part of the Global Wealth Management segment.

(3)

Total loans and total average loans exclude certain interest and fees on credit cards of approximately $3 billion and $3 billion, respectively, which are included in Consumer Loans on the Consolidated Balance Sheet.

(4)

This table presents credit information on a held basis and shows the impact of securitizations to reconcile to a managed basis. Only U.S. Cards from a product view, and U.S from a regional view, are impacted. Managed-basis reporting is a non-GAAP measure. Held-basis reporting is the related GAAP measure. See a discussion of managed-basis reporting on page 53.

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Consumer Loan Balances, Net of Unearned Income

		End of Period									Average
In billions of dollars		June 30, 2006			March 31, 2006			June 30, 2005			2nd Qtr. 2006			1st Qtr. 2006			2nd Qtr. 2005
On-balance sheet(1)		$	478.3		$	459.4		$	429.1		$	474.0		$	454.8		$	428.5
Securitized receivables (all in U.S. Cards)			97.3			95.9			89.6			94.5			94.7			87.7
Credit card receivables held-for-sale			—			—			—			—			0.3			0.6
Total managed		$	575.6		$	555.3		$	518.7		$	568.5		$	549.8		$	516.8

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(1)

Total loans and total average loans exclude certain interest and fees on credit cards of approximately $3 billion and $3 billion for the second quarter of 2006, approximately $3 billion and $4 billion for the first quarter of 2006, and approximately $4 billion and $4 billion for the second quarter of 2005, respectively, which are included in Consumer Loans on the Consolidated Balance Sheet.

(2)

This table presents loan information on a held basis and shows the impact of securitization to reconcile to a managed basis. Managed-basis reporting is a non-GAAP measure. Held-basis reporting is the related GAAP measure. See a discussion of managed-basis reporting on page 53.

        Citigroup's total allowance for loans, leases and unfunded lending commitments of $10.194 billion is available to absorb probable credit losses inherent in the entire portfolio. For analytical purposes only, the portion of Citigroup's allowance for credit losses attributed to the Consumer portfolio was $6.311 billion at June 30, 2006, $6.647 billion at March 31, 2006 and $7.714 billion at June 30, 2005. The decrease in the allowance for credit losses from June 30, 2005 of $1.403 billion included:

•

reserve releases, primarily related to the impact of the change in bankruptcy legislation on U.S. Cards and continued improved credit conditions in the U.S.



•

$663 million of utilizations as a result of standardizing the consumer loan write-off policies in certain EMEA countries in the 2005 third quarter; and



•

$538 million of reductions related to securitizations in the U.S. Cards business.

        Offsetting these reductions in the allowance for credit losses was the impact of reserve builds of $766 million, primarily related to the estimated credit losses incurred with Hurricane Katrina; increased reserves in Mexico; increased reserves in Asia, primarily related to industry-wide credit deterioration in the Taiwan cards market; and the impact of the change in bankruptcy legislation on U.S. Retail Distribution. The acquisition of the Credicard portfolio increased the allowance for credit losses by $84 million in Latin America.

        On-balance sheet consumer loans of $478.3 billion increased $49.2 billion, or 11%, from June 30, 2005, primarily driven by growth in mortgage and other real-estate-secured loans in the U.S. Consumer Lending, U.S. Commercial Business, and Private Bank businesses and growth in U.S. Retail Distribution, primarily within the CitiFinancial Branches business. Credit card receivables declined on higher payment rates by customers.

        Net credit losses, delinquencies and the related ratios are affected by the credit performance of the portfolios, including bankruptcies, unemployment, global economic conditions, portfolio growth and seasonal factors, as well as macro-economic and regulatory policies.

55

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CORPORATE CREDIT PORTFOLIO

Credit Exposure Arising from Derivatives and Foreign Exchange

        Citigroup uses derivatives as both an end-user for asset/liability management and in its client businesses. In CIB, Citigroup enters into derivatives for trading purposes or to enable customers to transfer, modify or reduce their interest rate, foreign exchange and other market risks. In addition, Citigroup uses derivatives and other instruments, primarily interest rate and foreign exchange products, as an end-user to manage interest rate risk relating to specific groups of interest-sensitive assets and liabilities. Also, foreign exchange contracts are used to hedge non-U.S. dollar denominated debt, net capital exposures and foreign exchange transactions.

        The Company's credit exposure on derivatives and foreign exchange contracts is primarily to professional counterparties in the financial sector, arising from transactions with banks, investments banks, governments and central banks, and other financial institutions.

        For purposes of managing credit exposure on derivative and foreign exchange contracts, particularly when looking at exposure to a single counterparty, the Company measures and monitors credit exposure taking into account the current mark-to-market value of each contract plus a prudent estimate of its potential change in value over its life. This measurement of the potential future exposure for each credit facility is based on a stressed simulation of market rates and generally takes into account legally enforceable risk-mitigating agreements for each obligor such as netting and margining.

        For asset/liability management hedges, a derivative must be highly effective in accomplishing the hedge objective of offsetting either changes in the fair value or cash flows of the hedged item for the risk being hedged. Any ineffectiveness present in the hedge relationship is recognized in current earnings. The assessment of effectiveness excludes the changes in the value of the hedged item that are unrelated to the risks being hedged. Similarly, the assessment of effectiveness may exclude changes in the fair value of a derivative related to time value, which, if excluded, is recognized in current earnings.

        The following tables summarize by derivative type the notionals, receivables and payables held for trading and asset/liability management hedge purposes as of June 30, 2006 and December 31, 2005. See Note 16 to the Consolidated Financial Statements on page 110 for a discussion regarding the accounting for derivatives.

56

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CITIGROUP DERIVATIVES

Notionals(1)

			Trading Derivatives(2)						Asset/Liability Management Hedges(3)
In millions of dollars			June 30, 2006			December 31, 2005			June 30, 2006			December 31, 2005
Interest rate contracts
	Swaps		$	15,423,687		$	12,677,814		$	475,147		$	403,576
	Futures and forwards			1,933,720			2,090,844			54,422			18,425
	Written options			2,097,703			1,949,501			13,927			5,166
	Purchased options			2,161,893			1,633,983			53,670			53,920
Foreign exchange contracts
	Swaps		$	638,690		$	563,888		$	47,482		$	37,418
	Futures and forwards			1,869,691			1,508,754			44,058			53,757
	Written options			390,871			249,725			334			—
	Purchased options