Most important our capital planning process is being fully embedded in the way we run the firm. This must impact everything, from increased business engagement and enhancements to our forecasting models and scenario design processes – all of which lead to an improved approach to risk and controls. This work will continue as we get closer to receiving the 2015 stress test scenario from The Fed at which point we’ll prepare a strong submission which reflects the work that has been done.
As we finish out 2014 we’re very mindful of the challenging macro environment. Geopolitical tensions, uneven growth and concerns over the timing of interest rate increases have increased volatility. While the economy in the US seems to be slowly gaining strength, the Eurozone is not yet in growth mode and emerging market growth has slowed.
While our expense reduction efforts have been productive we continue to face pressure related to legal costs and the need to invest in regulatory and compliance, as well as the critical need to protect our network from cybercrime. We’ll remain vigilant along each of these fronts to ensure the safety and soundness of our institution.
John will now go through the deck and then we’d be happy to take your questions. Thank you. John?
Okay, thank you, Mike, and good morning everyone. Let me briefly review the results of the quarter and then I’ll go into more detail on the strategic actions we announced earlier today.
To start, I’d like to highlight two items that affect the comparability of this quarter’s results to prior periods. First, CVA/DVA was a negative $371 million pre-tax, or $228 million after-tax this quarter including a $474 million one-time charge due to the implementation of funding valuation adjustments related to certain derivatives. Together these charges had a negative impact on EPS of $0.08 per share this quarter, similar to the CVA/DVA charge last year.
And secondly, last year we recorded a tax benefit of $176 million or $0.06 per share related to the resolution of certain tax audit items. Adjusting for these items, we earned $1.15 per share in the recent quarter compared to $1.02 per share in Q3 last year. Throughout today’s presentation I will be discussing our results excluding these items to provide comparability to prior periods.
On Slide 4 we show total Citigroup results. We earned $3.7 billion in Q3, a 13% increase from last year. Pre-tax earnings of $5.9 billion grew 28% driven by revenue growth and lower credit costs, partially offset by an increase in operating expenses mostly driven by higher legal and repositioning charges. However, our tax rate was higher this quarter at 36%, reflecting a higher level of non-tax deductible legal accruals versus last year as well as higher tax costs related to the sales of our Consumer operations in both Greece and Spain.
On a year-to-date basis, we generated positive operating leverage with modest revenue growth and flat expenses, and our return on assets improved to 83 basis points. In constant dollars, Citigroup end-of-period loans grew slightly year-over-year, to $654 billion, as 4% growth in Citicorp was partially offset by the continued decline in Citi Holdings. And deposits were flat at $943 billion.
On Slide 5 we show more detail on expenses. Legal and related and repositioning costs totaled over $1.3 billion in Q3, mostly incurred in Citicorp. We also incurred $59 million of operating expenses related to the sales of our Consumer operations in Greece and Spain this quarter. Excluding these items core operating expenses of nearly $11 billion in Q3 increased by roughly $100 million versus prior periods, primarily reflecting an adjustment to incentive compensation expense driven by better-than-anticipated performance year-to-date in our Institutional franchise.
Higher regulatory and compliance costs, including those related to CECCAR and the impact of business growth were more than offset by continued cost reduction initiatives as well as the decline in Citi Holdings assets.
We expect to incur an incremental $150 million to $175 million of costs in full-year 2014 as we work to enhance our capital planning process. We estimate that about one-third of that amount will be non-recurring. In 2014, the incremental CECCAR-related costs will be more heavily weighted to the back half of the year. In Q3 we spent an incremental $60 million related to the CECCAR process and we expect this amount to increase further in Q4.
On Slide 6 we show the split between Citicorp and Citi Holdings. Citicorp’s pre-tax earnings grew 13% as higher revenues across the franchise and lower credit costs were partially offset by an increase in operating expenses. Citicorp expense growth was mostly driven by higher legal and repositioning costs, the adjustment to incentive compensation and ICG, and higher regulatory and compliance costs partially offset by efficiency savings.
In Citi Holdings we were profitable again this quarter with over $270 million in net income compared to a loss of over $100 million last year, driven primarily by lower legal and related expenses. Citi Holdings ended the quarter with $103 billion of assets or 5% of total Citigroup assets.
Before I go into more detail on Citicorp I’d like to cover the strategic actions Mike discussed earlier which will streamline and simplify our Consumer operations. We are exiting our Consumer operations in eleven markets plus our Consumer Finance business in Korea. As you can see on Slide 7 these actions include markets across Latin America, Asia and AMEA.
Substantially all of these operations were previously classified as “optimized markets” in our country bucketing framework, and while we have made steady progress in many of these businesses we ultimately determined that our scale did not provide for meaningful returns.
We already have active sales processes underway for over half of the businesses and we currently expect the strategic actions to be substantially completed by the end of 2015. We expect to report these Consumer operations as part of Citi Holdings as of Q1. We will continue to serve our Institutional clients in these countries which remain important to our global network.
On Slide 8 we provide details on the financial impact of these actions, showing Citicorp on the left and Global Consumer Banking on the right. Over the last twelve months these businesses contributed over $1.6 billion of revenues and $34 million of net income. Total assets were $29 billion as of the end of Q3 including $7 billion of consumer loans; and total deposits were $26 billion.
As shown on the far right, on a pro forma basis our Global Consumer Banking business would continue to capture more than 95% of our existing revenue base while further simplifying our operations and improving our performance.
Now, turning back to Q3, on Slide 9 we show actual results for International Consumer Banking in constant dollars. Net income grew 22% year-over-year in Q3 driven by higher revenues and lower credit costs, partially offset by higher legal and repositioning charges. Revenues grew 5% year-over-year in Q3 driven by continued volume growth across the franchise with average loans up 5% and average deposits up 3%; a rebound in investment sales revenues in Asia; and a reduced impact from our repositioning efforts in Korea.