Citi's credit-card attack plan is going so well the bank is rolling it out with its retail partners - and new branches could be on the horizon as well

Citi's credit-card attack plan is going so well the bank is rolling it out with its retail partners - and new branches could be on the horizon as well


Clodagh Kilcoyne/Reuters

Chief Executive Officer of Citigroup Michael Corbat speaks at a European Financial Forum event in Dublin, Ireland February 13, 2019. REUTERS/Clodagh Kilcoyne

  • Citigroup's credit-card strategy, the linchpin of its consumer bank, has paid off in 2019, boosting revenues and adding digital deposits.
  • Revenues from branded credit-cards grew 11% in the third quarter, helping the bank beat analyst expectations.
  • Citi has also been targeting its 28 million credit-card customers to grow its retail bank, adding $2 billion in digital deposits during the quarter.
  • The bank's credit-card attack plan has worked so well it is planning to roll it out with cobrand and retail partners, and new branches could be on the horizon as well.
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Citigroup's credit-card attack plan has been crushing it so far in 2019 - so much so that the bank is planning to roll the strategy out with cobrand and retail partners and may even consider opening up new brick-and-mortar branches.

Citi reported third-quarter earnings Tuesday and beat analyst expectations, in part because of another strong performance from its consumer-banking business.

Ignoring a one-off gain last year, Citi grew revenues from its Global Consumer Bank 4% to $8.7 billion, while net profits climbed 13% to $1.6 billion.

The linchpin of the firm's consumer strategy, and the key to its earnings beat, is its branded credit-cards business in North America.


Read more: A 'hidden asset' at Citigroup has given the bank a dominant position in the fastest-growing business on Wall Street - but challengers are knocking at the door.

From a pure performance perspective, revenues from branded cards grew 11% compared with last year to $2.3 billion. That's thanks to customers who joined initially on zero-interest promotions transitioning to paying interest on their balances, as well as higher spending overall from card customers, CEO Michael Corbat and CFO Mark Mason said on their call with analysts.

"We're getting continued use of the card, top-of-wallet use, as evidenced by those purchase sales and the benefit of them now being interest-earning balances for us," said Mason, who expects that trend to continue into 2020.

But that's only one component of the credit-card strategy. The larger gambit, the fulcrum that Citi's North American retail strategy hinges on, is using targeted offers to convince its millions of card customers to expand their banking relationship with Citi.

Citi, with just 687 branches, has a much smaller physical footprint than competitors like JPMorgan and Bank of America, which have several thousand a piece. But it has roughly 28 million credit-card customers in North America - second behind JPMorgan - which it views as a potential goldmine.


Mason explained in February, when he rolled out the plan, that only a slim portion of Citi's 28 million branded credit-card customers have a banking relationship - low single-digit penetration.

That's been changing this year. Citi has been analyzing data on its card customers to figure out what type of rewards they value most - travel points or cash back, for instance - and then hitting them with tailored promotional offers to sign on with its digital bank.

In the third quarter, Citi added $2 billion in digital deposit sales, pushing them over $4 billion for the year. Two-thirds of those deposits came from outside the bank's existing branch footprint, and half came from people who previously only had a Citi credit card.

With this strategy quickly bearing fruit, Citi is thinking bigger.

Corbat and Mason hinted several times on the call that Citi will soon expand the scope of the card strategy by deploying it with its cobranded cards and retail partners. Citi has cobranded cards with American Airlines, Costco, and Expedia and provides private-label store cards to a litany of other retailers, such as Best Buy, The Home Depot, and Brooks Brothers.


When you account for such relationships, the bank is "touching as many as 70 million consumers across the United States virtually in every state," Corbat said, adding that "we know where you live, we know what you spend, we know how much you earn. And by the way, we know who your bank is, and we can be targeting people around that."

For now, Citi's focus is on growing its consumer bank digitally. But when asked by analysts whether, given the early success, the firm might expand its comparatively meager branch presence to pair with the digital deposit growth, Corbat said he "wouldn't rule out branch openings."

"But first, it is going to come through digital engagement," Corbat added.