Big Card Issuer Citigroup Plans To Cut Teasers

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Citigroup Inc.'s future credit card solicitations will feature fewer teaser rates.

Steven J. Freiberg, the chief executive officer of the world's largest credit card issuer, told analysts at a global consumer business presentation in New York that Citi Cards North America will reduce but not eliminate its reliance on teasers.

"We will see the results of that (decision) on the open market over the next several quarters," he said.

Echoing other prominent card executives in recent months, Freiberg suggested that the continued proliferation of cut- rate offers could be heading toward unhealthy levels. "The industry and probably Citi have relied too heavily" on introductory offers of 0% interest rates to lift account volume, he said.

Over the past year competitors have complained about Citi's inundation of U.S. households with direct-mail offers featuring teaser rates on products with already-low rates and no annual fees. On its website, Citi advertises several products, including its Dividends and new Diamond Preferred Rewards cards, that offer a 0% teaser rate on balance transfers for 12 months but carry variable rates on purchases.

Robert Willumstad, Citigroup's president and the head of its global consumer group, called the card business "the cornerstone of the Citi franchise, and not just the consumer franchise." Pointing to deals in recent years-for example Grupo Financiero Banamex-Accival, Associates First Capital Corp., a stake in Shanghai Pudong Development Bank, and Diners Club franchises in Japan and Australia-he said all of his company's consumer lines are still in "very active" acquisition mode.

Freiberg said the impact of the credit cycle on Citi's portfolio has probably peaked. Down the road "we don't see much improvement," he said, "but we don't see much deterioration either."

However, the continued rise in personal bankruptcy filings will inevitably affect cardholders, he said. "Clearly that has an impact on our business, given that we serve 90-million customers."

Citi's card receivables, like those of other issuers, have grown more slowly in recent years as consumers have moved their debts to home equity loans and other refinancing vehicles, Freiberg said. "That's not great if you're in the credit card industry," he said, "but it's not bad for Citi," which offers a full suite of consumer loan products.

Citi plans to keep expanding its private-label operations. Last year it won the Home Depot Inc. portfolio away from GE Capital Corp. It also will give more attention to the Hispanic market, in both the United States and Mexico, Freiberg said. Though it now has a stake in those markets, "we haven't taken full advantage of our presence."

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