CAMELS ANALYSIS

Ishita Grover D22

Mehakpreet Khurana D30
Sagar Lalwani D32
Sachin Nahar D39
Saurabh Paliwal D42
Kriti Wadhwa D59
 What is CAMELS Analysis?

• CAMELS is a recognized international rating system

that bank supervisory authorities use in order to rate
financial institutions according to six factors
represented by its acronym.
• Supervisory authorities assign each bank a score on a
scale.
• A rating of one is considered the best, and a rating of
five is considered the worst for each factor.
 Components of CAMELS

• Capital Adequacy
• Asset Quality
• Management
• Earnings
• Liquidity
• Sensitivity
 About Citi Bank

• Citibank is the consumer division of financial services

multinational Citigroup.
• Citibank was founded in 1812 as the City Bank of New
York, and later became First National City Bank of
New York.
• The bank has 2,649 branches in 19 countries
• Offers services to Institutional Clients & Consumer
Clients
 Capital Adequacy

• Assess institutions' capital adequacy through capital

trend analysis.
• Check if institutions comply with regulations pertaining
to risk-based net worth requirement.
• To get a high capital adequacy rating, institutions must
also comply with interest and dividend rules and
practices.
• Other factors involved in rating and assessing an
institution's capital adequacy are its growth plans,
economic environment, ability to control risk, and loan
and investment concentrations.
 Citi’s Capital Analysis

• Capital is used principally to support assets in Citi’s

businesses and to absorb credit, market and operational
losses.

• Citi primarily generates capital through earnings from

its operating businesses.

• Citi may augment its capital through issuances of

common stock, noncumulative perpetual preferred
stock and equity issued through awards under employee
benefit plans, among other issuances.
• Further, Citi’s capital levels may also be affected by
changes in accounting and regulatory standards, as
well as U.S. Corporate tax laws and the impact of
future events on Citi’s business results, such as
changes in interest and foreign exchange rates, as
well as business and asset dispositions

• During 2018, Citi returned a total of $18.4 billion

of capital to common shareholders in the form of
share repurchases (approximately 212 million
common shares) and dividends.
• Q1 Returned $5.1 billion of capital to common
shareholders repurchased 66 million common shares

• Q2 returned $4.6 billion of capital to common

shareholders repurchased 54 million common shares

• Q3 returned $6.3 billion of capital to common

shareholders repurchased 76 million common shares

• objective of returning capital to common shareholders

is to increase its ROTCE (return on tangible common
equity) from 10.9 % to 13.4%
Key Capital Matrices
 Asset Quality
• Asset quality covers an institutional loan's quality, which
reflects the earnings of the institution.

• Assessing asset quality involves rating investment risk

factors that the company may face and comparing them
with the company's capital earnings.

• This shows the stability of the company when faced

with particular risks.
 Citi’s Asset Quality Analysis
• Asset Quality Indicators of the bank:
Bank’s asset quality indicators were comfortable with
gross and net NPAs of 0.09%(Rs. 7.70 crore)and
0.06%(Rs. 5.41 crore), respectively, as at December 31,
2018 against 0.05%(Rs. 4.07 crore)and 0.03% (Rs. 2.56
crore), respectively, as on March 31, 2018.
Total GNPA majorly constitutes GNPA in personal loan
portfolio segment which increased to 7.13 crore as at
December 31, 2018 from 3.32 crore as at March 31, 2018.
However, remains comfortable at 0.40% of gross
advances in personal loan segment as at December 31,
2018
Citi’s Quarterly Loan Trend Scenario
 Management
• Management assessment determines whether an
institution is able to properly react to financial stress.
• This component rating is reflected by the
management's capability to point out, measure, look
after and control risks of the institution's daily
activities.
• It covers management's ability to ensure the safe
operation of the institution as they comply with the
necessary and applicable internal and external
regulations.
 Citi’s Management Analysis

• Citi’s Global operations are headed by Michael Corbat

(CEO, Citi Group) with Mark Mason (CFO)

• Citi’s India operations are headed by Ashu Khullar

(CEO, Citi India) with Pramit Jhaveri (Vice Chairman)
• In 2018, the bank reported (globally)
– approximately 204,000 employees
– a revenue per employee of $3,52,804 per employee
– a 15.62% increase in net income per employee
amounting to $87,138 per employee
– return on assets of $ 0.96
– return on equity of $ 9.23
 Earnings
• An institution's ability to create appropriate returns to
be able to expand, retain competitiveness, and add
capital is a key factor in rating its continued viability.

• Determined by assessing the company's growth,

stability, valuation allowances, net interest margin, net
worth level and the quality of the company's existing
assets.
 Citi’s Earning Analysis

• The total revenue earned

reflected an increase of 1%
• The Earning before tax jumped
5% YoY
• Net income reflected an
increase of 14% to $18.0bn in
2018
• The EPS reflected an increase
of 25% to $6.65 per equity
share held
• The RoTCE jumped 286 bps to
10.90% in 2018 from 8.1% in
2017
• The Net Interest Margin (NIM) was maintained at
2.71% in 2018 compared to 2.70% in 2017
 Liquidity
• To assess a company's liquidity, examiners look at
interest rate risk sensitivity, availability of assets that can
easily be converted to cash, dependence on short-term
volatile financial resources and ALM technical
competence.
 Citi’s Liquidity Analysis

The table above includes average amounts of HQLA held at Citigroup’s

operating entities that are eligible for inclusion in the calculation of
Citigroup’s consolidated LCR, pursuant to the U.S. LCR rules.
These amounts include the HQLA needed to meet the minimum
requirements at these entities and any amounts in excess of these
minimums that are assumed to be transferable to Citigroup.
 Short-Term Liquidity Measurement:
Liquidity Coverage Ratio (LCR)
• Generally, the LCR is designed to ensure that banks
maintain an adequate level of HQLA to meet liquidity
needs under an acute 30-day stress scenario.

• The LCR is calculated by dividing HQLA by estimated net

outflows over a stressed 30-day period, with the net
outflows determined by applying prescribed outflow
factors to various categories of liabilities, such as deposits,
unsecured and secured wholesale borrowings, unused
lending commitments and derivatives-related exposures,
partially offset by inflows from assets maturing within 30
days.
• Banks are required to calculate an add-on to address
potential maturity mismatches between contractual cash
outflows and inflows within the 30-day period in
determining the total amount of net outflows. The
minimum LCR requirement is 100%.

• The table below details the components of Citi’s LCR

calculation and QLA in excess of net outflows for the
periods indicated:
Long-Term Liquidity Measurement: Net
Stable Funding Ratio (NSFR)
• In 2016, the Federal Reserve Board, the FDIC and the
OCC issued a proposed rule to implement the Basel III
NSFR requirement.
• The U.S.-proposed NSFR is largely consistent with the
Basel Committee’s final NSFR rules. In general, the NSFR
assesses the availability of a bank’s stable funding against a
required level.
• A bank’s available stable funding would include portions of
equity, deposits and long-term debt, while its required stable
funding would be based on the liquidity characteristics and
encumbrance period of its assets, derivatives and
commitments.
• Prescribed factors would be required to be applied to
the various categories of asset and liabilities classes.

• The ratio of available stable funding to required stable

funding would be required to be greater than 100%.
While

• Citi believes that it is compliant with the proposed U.S.

NSFR rules as of December 31, 2018, it will need to
evaluate a final version of the rules, which are expected
to be released in 2019. Citi expects that the NSFR final
rules Implementation period will be communicated
along with the final version of the rules.
 Sensitivity
• Sensitivity covers how particular risk exposures can
affect institutions.
• An institution's sensitivity to market risk can be
assessed by monitoring the management of credit
concentrations. In this way, examiners are able to see
how lending to specific industries affects an institution.
• These loans include agricultural lending, medical
lending, credit card lending and energy sector lending.
• Exposure to foreign exchange, commodities, equities
and derivatives are also included in rating the sensitivity
of a company to market risk.
 Sensitivity Analysis of Citibank

• The diversified nature of Citibank operations make

them vulnerable to various kinds of financial risks.
• Thus, this analysis would reflect bank’s exposure to
interest rate risk, foreign exchange volatility and equity
price risk.
• Risk sensitivity is mostly evaluated in terms of
management’s ability to monitor and control market
risk.
 Ratios Used for Sensitivity

• RSA= Rate Sensitive Asset

Net Advances+ Net Investments+ Money at Call
+ Balances with other bank
• RSL= Rate Sensitivity Liability
Deposits+ Borrowings
• GAP= RSA-RSL
 Ratios Used for Sensitivity
Ratios 2016 2017 2018
RSA 1062638 1119953 1094101
RSL 904782 923758 920377
GAP 972166 196195 173724
RSA/RSL 1.174 1.212 1.188

Hence, from the ratios we can see that RSA and RSL of the
bank is increasing every year, and GAP between them is
reducing, hence we can say that bank is minimising the inherent
risk by undertaking some regulatory actions and controls.
THANKYOU