Citibank Restructuring Consumer Banking & Credit Cards – What It May Mean For Us

Jud Linville who is the current head of global cards and consumers services will be leaving Citigroup as part of a restructuring. There is no direct replacement for Linville but David Chubak will become the head of retail banking and consumer lending globally. Anand Selva will become the head of US consumer banking. A key reason for this structuring is the failure of Citi to meet their own goals when it comes to Citi-branded cards in the United states. In July 2017 they set a goal of 3% annualized revenue growth, earlier this year this was then downgraded to 2%.

Readers of this blog will be particularly interested in this restructuring based on the fact that in October of 2017 a Reuters report stated:

On Thursday, a Citigroup executive said that after JPMorgan’s move Citi changed course and turned its marketing toward no-fee cards that offer free borrowing for as long 21 months instead of travel rewards.

“We shifted our focus away from rewards because of the competitive heat,” Citigroup Chief Financial Officer John Gerspach said in a conference call with reporters after posting quarterly results.

It seems that Citi is set on refreshing their whole suite of credit card products, with a refresh of the Citi Prestige likely imminent. Hopefully this restructuring is a sign of Citi moving their focus away from introductory APR offers and onto rewards based cards with big bonuses and benefits.

Hat tip to reader luvcsp

 

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Mike
Mike (@guest_630129)
August 16, 2018 09:07

They won’t see another dime from after cancelling my credit card and stealing my $200+ in cashback I earned.

Tom
Tom (@guest_630130)
August 16, 2018 09:08

There you go, stick it to them! Teach them a lesson!

ed
ed (@guest_630173)
August 16, 2018 11:53

Both Amex and Citi have lost customers to Chase due to points being taken away and so forth. If either institution really wants to bring in more customers, especially the kind that spend, they need to treat customers better. For sone of us who own businesses, we stir clear of even good bonuses because of past bad experiences with these 2 institutions. However, can we be swayed back by excellent bonuses and better customer relations? Absolutety, but neuter RAT because they scare away even ‘real’ spenders. I’m glad competition is good and better products come along.

David
David (@guest_629843)
August 15, 2018 16:08

FYI for most folks here – Citi makes most of its revenue and profit not on credit card usage – but rather on credit card interest. That is a different market type than the likes of Chase and such.

Brian
Brian (@guest_629854)
August 15, 2018 16:40

What makes Chase different?

David
David (@guest_629856)
August 15, 2018 16:44

As Stated, Chase makes more of its revenue not from debt (interest payments from customers) – but rather the credit card usage fees of vendors.

birdwatchr
birdwatchr (@guest_629958)
August 15, 2018 20:15

This is categorically false. Chase card revenue is 80-90% from customers paying interest. They have the exact same business model as Citi or BoA.

Only AmEx and Discover have a different business model, where they are earning substantially more of their income from swipe fees paid by merchants.

W
W (@guest_629932)
August 15, 2018 19:22

Really makes you wonder why they surrendered profits…

Give up the points contest, surrendering the transaction on spend. But also give up the interest by pushing big into 0%APRs. Who thought this would work?

Give big bonuses, lose some to churners, but bring in new customers and hope to catch them chasing points and then milk the interest. 101 stuff

FlyingBoat
FlyingBoat (@guest_630095)
August 16, 2018 04:47
  W

A benefit no one brings up for Prestige is price protection and I think the only card out there giving you return protection on up to $500/item.This comes in very handy for buying tech dropping in price. You can essentially string it out for 6 months by starting a claim at 90 days. Great for free use of new vr tech and then moving on to the next great graphics card, etc.

Ivan X
Ivan X (@guest_629828)
August 15, 2018 15:25

@Tom, when evaluating the value proposition of CSR vs no-annual-fee cash back cards, your argument only holds if spending UR exclusively through the portal.

But obviously the great benefit of UR is that they also have transfer partners, including a major domestic airline which has some excellent redemptions when cash prices are high. (For example, I’m taking a domestic round trip today for 20K UA, meaning 20K UR, rather than the $594 cash price.) On a 2%-4% cash back system, I’d have to use three times as many “points” (cents); and having the flexibility to go either way, depending on what’s advantageous, is the great benefit of having transferrable points.

I know you know this, so I’m wondering why you are leaving it out of the equation when evaluating the worth of the CSR.

As for the Ritz, you can’t even apply for it anymore, so it’s a moot point for those who don’t already have it.

Tom
Tom (@guest_629830)
August 15, 2018 15:30

No, I agree with everything you said, but I was responding in context to someone who was specifically mentioning the 1.5 cpp towards travel redemptions, so my response was based on that assumption. Obviously it’s POSSIBLE to stretch even more value out of the card if you utilize transfer partners for epic redemptions, but the original poster made it sound as if he was mostly utilizing the card almost exclusively for dining and only cashing out using the 1.5cpp value on the Chase portal, so in his specific situation, my analysis applies. However, if you are going to compare transfer partners, then you also need to compare transfer partners on the Prestige, and then it becomes a whole lot more complex, I was just trying to keep it as simple as possible.

Valid point on the Ritz card, but this was only a very recent change, so I’m sure lots of people probably already had the card to begin with or were able to sneak in an application before it was shutdown. But yes, you are correct.

I love your blog though, can you please write more? I’m going to go crazy reading some of the idiotic comments on posts like this, I need your articles to bring me back to sanity.

Ivan X
Ivan X (@guest_629833)
August 15, 2018 15:45

Ok that makes sense, I missed that. And ha, yeah, if I ever return to sanity myself. I’ve been working on some music things but the blog will get some love soon. Thanks for the kind words!

TomJ
TomJ (@guest_629782)
August 15, 2018 14:18

Until they find good partners on their TY points, they just cant beat Chase. Period.

Tom
Tom (@guest_629790)
August 15, 2018 14:29

They DO have good partners, but ok, thanks for your in depth analysis.

Taryn
Taryn (@guest_629796)
August 15, 2018 14:34

That really is the meat of the argument. Who wants a TYP when they could have an ultimate reward? (says the girl who is lol/24 and doesn’t have UR, only TYP)

W
W (@guest_629930)
August 15, 2018 19:19

Me. Depends how you redeem and how you spend. This game is way more personal than people think.

In my personal experience Chase gets the best value at Hyatt, but i get way more out of putting a TYP into a lower value at an airline partner and using rhe 4th night than staying at just hyatts and paying cash for the airline.

Brian
Brian (@guest_629768)
August 15, 2018 13:47

Hopefully they don’t change the Citi Double Cash card. I know for many people this is the catch-all-category card when the 5% rotating categories are met or they aren’t getting groceries or gas on their 5-6% cards through Penfed, Costco or Amex.

Atul
Atul (@guest_629764)
August 15, 2018 13:36

Citi thanks you program travel site is crazy. Recently i as looking for residence inn in DC Capitol Area Marriott Published rates were way cheaper than TU site rate.Tthey were about same after 1.25 multiplier. Citi uses conneXions Third part site for travel booking, hotels are prepaid and do not earn points.

I like barclay’s model better, book way you like it and then get credit spend this allws to get points everywhere. Citi need to get best of all leading guys and bundle it together.

Tom
Tom (@guest_629769)
August 15, 2018 13:49

Absolutely nuts! Who would have thought that booking a hotel could be so complicated?

Davy
Davy (@guest_629849)
August 15, 2018 16:17

Sounds like you should be using the Double Cash card — you can then get your 2% back and pretend it’s an A+ reward or a Venture point!

Creditian
Creditian (@guest_629763)
August 15, 2018 13:34

It means Costco card was a huge mistake

birdwatchr
birdwatchr (@guest_629848)
August 15, 2018 16:14

This guy gets it. Linville is pushed out because Citi is losing its ass on the Costco card, whose economics were never going to be in favor of the bank issuing the card.

I think alot of people dont realize that at any given bank, theres a few cards which are wildly profitable for the bank, a bunch that are sort of profitable, and a few that are very unprofitable for the bank. Banks are ok with that, but it’s a constant balancing act.

Take Chase, Amazon and CSR arent profitable for Chase, but Slate/cf/cfu are very profitable due to the % of customers revolving balances. Over at Citi, Prestige and Costco arent profitable, but things like DC, simplicity probably are. When the unprofitable card lines grow too big, banks are forced to make changes, either directly to the unprofitable card, or elsewhere in the portfolio to improve the economics.

W
W (@guest_629928)
August 15, 2018 19:15

Why was the Costco so bad?

birdwatchr
birdwatchr (@guest_629953)
August 15, 2018 20:11
  W

It was great for customers, but like CSR, the customer earnings structure is too rich when compared to the # of customers who are revolving a balance.

Interest + AF + swipe fees < points/cashback earned by customers, basically.

AXP has less of a problem there because they get 100% of their swipe fees, not having to split it with Visa/MC.

W
W (@guest_630363)
August 16, 2018 19:33

Shame then. They even removed Fx fees haha. It dont see how it could be that bad if they got any cut from the annual membership, perhaps they didnt. Gas is big but capped, and dining i believe often has higher transaction fees does it not? Then 2% at Costco. Maybe its a thin margin but they cant be losing yhat much money can they?

Where do we have access to that data? Genuinely curious, though it sounds like im disagreeing

Jim
Jim (@guest_629731)
August 15, 2018 12:01

Perhaps if Citi honored their bonus cash program, they would inspire more customer loyalty. I have been beat out of bonus cash twice this year despite using their portal correctly. There is no recourse and customer service is remarkably unhelpful. Luckily, I have other alternatives that do honor their benefits programs.

Davy
Davy (@guest_629744)
August 15, 2018 12:31

HUH?

Tom
Tom (@guest_629749)
August 15, 2018 12:44

Yeah, I’m just as confused as you are… if he’s referring to their shopping portal, the way to fix that issue is to not use their crappy shopping portal, there are much better options. “I would totally use my Citi cards more frequently if only their shopping portal worked properly” said nobody ever.

vipul
vipul (@guest_629722)
August 15, 2018 11:49

Such a big bank giving up against competitors without fight: shame shame

bax
bax (@guest_629734)
August 15, 2018 12:08

no shame no shame