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Citi Boosts Credit Card Unit Despite Weakening U.S. Economy

Zacks Equity Research

Citigroup C has been strongly promoting zero-interest balance transfers between credit cards from different banks to Citi, per an article by Reuters. The bank offers about 21 interest-free months to customers in exchange for a small fee, whereas its competitors offer up to 15 months for no fee.  

Per the payments industry publication, The Nilson Report, Citi is considered the third largest U.S. card issuer. Also, of the overall revenues, card business makes up about one-third share.

Per the article, this facility is considered to be risky by some analysts, especially in scenario when the U.S. economy is showing signs of slowdown. Also, customers using such features are deemed risky as they use such facilities to accumulate more debt.

However, Citi’s executives support their strategy and argue that they have tough underwriting standards in place to safeguard the bank in case of any major loss from adverse situations in the future.

Citi continues to advertise interest free feature on popular personal finance websites and through mailers. All other peers have reduced marketing efforts on this scheme.

Notably, Citi’s card business has witnessed delinquency rates much lower than the industry’s average, per federal data and filings. Also, according to a credit rating firm Experian, 83% of consumers in its U.S. credit card business, excluding its retail partnership cards, have good credit scores of 680.

Citigroup continues to execute growth strategies, such as entering the booming digital consumer payments industry and expanding global market presence, thereby aiming to diversify revenue sources.

Year to date, the stock has gained 26.7%, outperforming 11.6% growth recorded by the industry.

Currently, Citi carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

First Business Financial Services FBIZ has witnessed 3.8% upward estimate revision over the past 30 days. The company’s shares have risen nearly 14% so far this year. At present, it has a Zacks Rank #2 (Buy).

Mackinac Financial Corporation’s MFNC shares have rallied 6.8% year to date. The company’s earnings estimates for the ongoing year have moved 1.5% north in the past 60 days. The stock currently carries a Zacks Rank of 2.

Farmers National Banc Corp. FMNB has witnessed slight upward estimate revision over the past 60 days. The company’s shares have risen nearly 6% so far this year. At present, it has a Zacks Rank #2.

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