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Citigroup’s Global Consumer Banking Sees Rise in Credit Costs

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Global Consumer Banking sees growth from all quarters

A core banking business has been key to bankers’ (IYF) performances in recent quarters, backed by credit card spending, higher interest rate margins, and marginal growth in credit. Citigroup’s (C) Consumer Banking segment saw a 3% growth in revenues to $8.4 billion in 3Q17. It had strong growth in Asia and Latin America and a marginal growth in North America for credit offtake. The trend reflects an appetite for quality credit outside the United States.

Lending, deposits, and cards

Citigroup is managing retail loans of $144 billion compared to deposits of $308 billion as of September 30, 2017. Both numbers have increased 2%, reflecting marginal growth amid interest rate hikes. Deposits could increase further in 4Q17 and 2018, backed by higher salaries, operating cash flows for corporations, and a growing economy. A rise in lending could be slower for corporations, partially offset by good growth in credit card lending. In 3Q17, Citigroup saw a 7% rise in average card loans to $155 billion.

Credit costs 

Citigroup’s Global Consumer Banking division saw a 22% rise in credit costs in 3Q17, reflecting higher origination costs in a competitive environment. The division managed a 6% growth in net income in 3Q17 due to revenue growth.

Among other major bankers, JPMorgan Chase (JPM) and Bank of America (BAC) have lower origination costs. Wells Fargo (WFC) has marginally higher spending on credit origination. Commercial bankers with credit book outside the United States can garner higher growth in credit offtake compared to their peers that are mostly in the United States.

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