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Citi says credit card losses may rise through 2009
Bank suffers $1.4 billion hit from card-backed assets in latest quarter
By Greg Morcroft, MarketWatch
Last Update: 1:44 PM ET Nov 2, 2008
NEW YORK (MarketWatch) -- Citigroup said that it lost $1.4 billion in the third quarter from credit card securitizations and that it expects such losses will continue, possibly reaching record levels in 2009.
The result compared to a gain of $169 million from credit card securitizations in the year-earlier period.
"Credit card losses may continue to rise well into 2009, and it is possible that the company's loss rates may exceed their historical peaks," the banking giant said in its filing with the Securities and Exchange Commission late Friday.
Citi C also said it added $3.9 billion to overall credit reserves, including $2.3 billion for its North American consumer business and $855 million for consumer business outside the U.S.
Citi said the additional reserve to the North American segment was mostly due to a weakening of leading credit indicators, including higher delinquencies on first mortgages, unsecured personal loans, credit cards and auto loans.
Citigroup's revealtion is just the latest news in a string of negative disclosures from the credit card industry.
Last week, American Express became the latest iconic American firm to announce major layoffs triggered by the worst economic crisis in decades, unveiling plans to slash 7,000 jobs. See full story.
And, according to a report last month from investment research firm Innovest StrategicValue Advisors, banks will charge off $18.6 billion in delinquent credit-card accounts in the first quarter of 2009 and $96 billion in all of 2009 -- more than double the research firm's forecast for all of this year. See full story.
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