How much will Citi’s credit card losses rise with unemployment?

By Felix Salmon
April 30, 2009

According to Francesco Guerrera, Citi is pushing back against the idea that rising unemployment is going to mean large credit losses on its credit cards:

People close to the situation said both Citi and BofA were contesting some of the conclusions made in the stress tests. Citi executives, led by finance chief Ned Kelly, are believed to have told regulators the estimates for losses on credit cards – based on rising unemployment – are too high.

Which is not the impression you get from listening to David Simon of Citigroup’s credit card unit, who popped up at the Milken Global Conference on Wednesday to say this:

As people have read in the newspapers, credit losses are at somewhat of an all-time high, and they go tracking directly with unemployment. So as unemployment goes, so go credit card payments. And since this is all based on statistical models, you don’t have the opportunity to look a person in the eye and say “let me help you”.

(Video here, it’s at about the 35-minute mark.)

I think this might count as a “gaffe”, under Mike Kinsley’s famous definition of a gaffe being when someone accidentally tells the truth. Or maybe Simon hasn’t been talking to his brand-new CFO recently. Or maybe Citigroup really thinks it can persuade Treasury that its statistical models are particularly reliable. Which is an argument I’d love to be a fly on the wall to see.

Comments
4 comments so far

Come on, when people lose their jobs, their first priority isn’t mortgage or rent or food, it’s their credit card payments. Because they know their banks really care about them.

Posted by KenG | Report as abusive

And how should they get the money to pay the credit card company, pray tell?

Purse snatching?

I wouldn’t snatch a purse these days for fear it contains more debt than cash.

Posted by nameless | Report as abusive

I am really not worry about how much Citi Bank will lose with its credit card debts. Bu I am extremely worry about what they are doing to us.
All I see and hear is that there is lots of money going on Mr. Vikram Pandit way to help Citigroup but I would love to know why Citigroup doesn’t want help their clients? For that I hold Mr. Pandit, very, responsible. Here is my Citimortgage loan #2004599109-6. Now could you please do something Mr. Pandit? If you really care about your clients and the Citigroup future, please have you Lost Mitigation Department call me.
Thank you
Ana

Posted by anna | Report as abusive
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