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Citigroup is poised to increase its potential bad debt provisions in the second quarter by hundreds of millions of dollars, as a sign of rising financial stress among U.S. consumers and businesses.
“We expect hundreds of millions of dollars to rise given the macro environment (and credit costs compared to the previous quarter,” City bankers told investors at the Morgan Stanley conference on Tuesday.
The rise comes amid concerns that Donald Trump’s tariffs will slow down US economic growth or cause a recession. Taxation could raise prices for some products, particularly imports from China, and hit consumers.
In the US, consumer sentiment is bleak and the number of Americans is growing, so they worry about financial well-being. But it is stable as the two biggest economies of the world, the US and China, work to create transactions to resolve the trade war.
The Congress Committee’s measure on Consumer Trust rose to 98 in May, up from 85.7 in April, but below the 110 readings when Trump won the November presidential election.
Raghavan said he was relieved by the fact that credit card loan books are aimed at customers with higher credit scores. Citi is one of the largest retail lenders in the United States, obtaining a credit loss provision of $2.7 billion in the last quarter.
The former JPMorgan banker added that he is “incredibly secure” by the credit quality of the bank’s corporate clients, with 80% of that exposure being found in high-end issuers.
Executives at other banks say U.S. consumer activities appear to bear surprisingly well despite the uncertainty created by Trump’s threat of imposing high tariffs on imports from many countries.
“It’s quite possible that there’s a kind of slowdown, but I hope that doesn’t make much sense,” Wells Fargo CEO Charlie Schaaf told the Bernstein Conference in New York two weeks ago.
“Both businesses and consumers enter a relatively strong period, which is why it’s a very strange period. It’s very difficult to see which kind of trends.”
At the end of the last quarter, credit card charging rates, loan percentages across the industry were considered irreversible and surpassed levels prior to the Covid-19 outbreak.
