Citigroup Inc. reported a rise in income from its Citi-branded and private-label credit card operations during the third quarter ended Sept. 30, driven largely by lower losses as fewer cardholders defaulted on accounts due to tighter underwriting policies and the improving economy.
The company also announced plans to take its private-label card business off the block and move it back to the core banking unit. Citi put the unit up for sale in 2009 amidst soaring losses.
“After a careful review of the business, which took into account current trends in credit and technology, we have decided that it makes strategic sense to move retail partner cards and a vast majority of its assets from Citi Holdings into Citicorp,” Vikram Pandit, Citi’s CEO, said in a press release. The transition will be completed by the end of this year, he noted.
Within the North America region, Citi-branded cards unit generated income of $566 million, compared with a $28 million loss a year ago. Revenues fell 12.5% to $2.4 billion from $2.1 billion. Purchase volume rose 1.5% to $39.6 billion from $39 billion. The charge-off rate fell 397 basis points to 5.84% from 9.81%, as fewer consumers defaulted on their card loans.
At the end of the quarter Citi held $73.8 billion in Citi-branded consumer card loans for North America, down 3.7% from $76.6 billion a year earlier. The region had 21.6 million open accounts at the end of the quarter, up 1.8% from 21.2 million a year earlier.
In the Latin America region, Citi-branded cards produced income of $171 million, down 39.1% from $281 million. Purchase volume rose 25.6% to $10.3 billion from $8.2 billion and the charge-off rate fell 197 basis points to 8.42% from 10.39%. Citi held $12.9 billion consumer credit card loans at the end of the quarter in the region, up 2.4% from $12.6 billion a year earlier. There were 13.3 million open accounts in the Latin America region at the end of the quarter, up 7.3% from 12.4 million a year earlier.
Citi-branded cards in the Asia region produced income of $211 million, up 22% from $173 million. Revenues rose 17.3% to $812 million $692 million. Purchase volume rose 18.1% to $18.9 billion from $16 billion, and the charge-off rate fell 157 basis points to 2.82% from 4.39%. At the end of the quarter Citi held $20 billion in consumer credit card loans in Asia, up 5.3% from $19 billion. The Asia region had 15.8 million open accounts at the end of the quarter, up 5.3% from 15 million a year earlier.
The Europe, Middle East and Africa region generated income of $30 million during the quarter, down 26.8% from $41 million. Revenues rose slightly to $164 million from $163 million. Purchase volume was $2.6 billion, up 13% from $2.3 billion. The charge-off rate fell 157 basis points to 2.82% from 4.39%. At the end of the quarter Citi held $2.7 billion in consumer credit card loans, down 6.9% from $2.9 billion. Citi had 2.6 million open accounts in the region at the end of the quarter, up 4% from 2.5 million a year earlier.
In a conference call with analysts following the earnings announcement, John Gerspach, Citi chief financial officer, noted that certain international regions are showing improvement. Emerging markets include Taiwan, Korea and Malaysia. Mexico, which comprises the bulk of Citi’s Latin America operations, is performing better after Citi tightened underwriting criteria within the last year.
Citi’s private-label cards, still housed within its Citi Holdings unit, produced income of $476 million, up 24.9% from $381 million. Revenues fell 9.5% to $1.9 billion from $2.1 billion. Purchase volume was $18.8 billion, down 6.5% from $20.1 billion. The charge-off rate declined 473 basis points to 7.51% from 12.24%. Citi held $41.1 billion in private-label credit card loans, down 10.7% from $46 billion. The unit had 84.5 million accounts at the end of the quarter, down 6.9% from 90.8 million.
