Reed Sees Tough Times in the Western U.S.
NEW YORK - Credit problems in both real estate and consumer loans are worsening in the Western United States, Citicorp chairman John Reed said Monday.
"In the last month or so the West has joined the East," Mr. Reed told those at a conference sponsored by the Japan Society.
For Citicorp and other banks, he said, the worst month for overall credit problems was February and the problems in the East are still worse than those in the West.
The buildup in real estate and consumer loan problems was "not out of whack with normal cyclical [patterns], but clearly a problem," he said.
Credit Card Writeoffs
While there could be "some substantial" credit card write-offs, he added, that rate in bad times will only be 6% compared to nonperforming rates as high as 30% for some commercial portfolios.
When asked if Citicorp would have a dividend cut, Mr. Reed responded, "Who knows?" The company is paying 25 cents quarterly. In the first quarter, profits were only 10 cents a share and many analysts are expecting a cut in the payout.
Mr. Reed said again the Citicorp has no plans to become a middle-market bank and looks for expansion in U.S. and European consumer banking, with Europe "more important" for growth than the United States.
When asked how important size is to compete globally, Mr. Reed said: "We must also ask if we want to grow and grow. Maybe we should just try to be a nice, stable, profitable institution."
He predicted the emergence of "a fairly large number of nationally active, regional banks" as the U.S. industry consolidates. And he expects "four or five" U.S. banks will develop international operations and participate "in the international capital flows" along with Wall Street securities firms.