Citigroup in early December added its 1 millionth new customer to the Costco card portfolio it acquired earlier this year.
The growth has exceeded executives' expectations. When Citi became the backer of Costco's cobranded cards in mid-June, taking over from American Express, the portfolio had 11 million cardholders and was worth $10.6 billion.
By Sept. 30, it was worth more than $14 billion and had added nearly 800,000 new cardholders. Since then, new sign-ups have continued at a rapid clip.
"The Costco portfolio is performing extraordinarily well," said John Gerspach, Citi's chief financial officer, at an investor conference on Wednesday. "We've added a million accounts in less than six months. Don't take that as a run rate, but it's a great way to start."
Gerspach tempered the good news by reminding his audience that the Costco portfolio will not begin truly contributing to Citi's bottom line until 2017.
The bank had to build a $150 million reserve for the new portfolio in the third quarter of this year. That should be the highest of any quarter, Gerspach said.
It looks as if the payoff will be worth the investment. Not only did revenue from Citi-branded cards in North America climb 15% in the third quarter, to $2.2 billion, but also the efficiency of the cards business should improve Citi's overall operating efficiency as it continues to grow.
Like other bank executives at the conference, Gerspach was asked about the outlook for his company in the wake of the American presidential election and other recent global shifts.
Gerspach said that he and others at Citi are keeping a weather eye on the United Kingdom, unsure what the impact of Brexit will be within the U.K. and in Europe at large. With some European banks "struggling to come to grips with capital requirements," said Gerspach, Citi may be able to seize opportunities for expansion while other institutions retrench.
In his guidance for the fourth-quarter results, Gerspach said he expects the Citi Holdings unit to report a slight loss.
The division, though long a kind of holding cell for unwanted assets, has managed to turn a profit for nine straight quarters. Gerspach said he expects that streak to end in the fourth quarter.
Citi Holdings continues to shrink rapidly as its assets are sold off. It held $61 billion in assets at Sept. 30, a 48% reduction since the third quarter of 2015.