Citi's Linville slowly turns around bank's card business
By David Henry
NEW YORK (Reuters) - When Jud Linville joined Citigroup in 2010 to head its main credit card business, he discovered a card called "Simplicity" that was anything but.
It had three different possible base interest rates, depending on whether money was borrowed for balance transfers, cash advances, or purchases, plus penalty fees and possible higher interest rates if payments were late. Customers that did not want a Simplicity card could instead choose from 10 different versions of rewards cards. The array of cards was dizzying, and marketing so many possibilities was expensive for Citigroup.
Linville, 58, has spent four years simplifying products like Simplicity as part of an effort to turn around the bank's credit card business, which in the late 90s was second biggest in the U.S. by spending, but a decade later fell to fourth biggest, according to data from The Nilson Report. He is showing signs of stabilizing the business: annual spending on Citi-branded cards in the United States has climbed nearly 7 percent since Linville took over.
While Linville has been turning his group around, credit cards have become one of Citigroup's most important businesses. Linville's unit, combined with another that runs cards for retailers, was responsible for a third of the bank's profits from its main businesses last year, a figure that would have been closer to about one-fourth before the crisis. The bank is the biggest issuer in the world by loans and number of credit cards.
To be sure, even with Linville's success, rivals have been speeding ahead. Citi's 7 percent gain in U.S. branded card spending compares with a 38 percent increase at JPMorgan Chase & Co and a 32 percent increase at American Express, according to Nilson data. JPMorgan's business has been overhauled by Gordon Smith and Eileen Serra, who, like Linville, used to work at American Express, and have followed a similar playbook.
For Citigroup, the credit card unit has particular importance. The bank has some $50 billion of tax credits, many from losses in the financial crisis, which it can only take advantage of if it generates enough U.S. income. Those credits generally came from losses that the bank recognized in the financial statements that it reported to investors, but that can’t be used for tax purposes until the bank earns more taxable income in the United States, which credit cards can provide.
In addition to credit card loans the bank makes to customers, it can market other products, such as mortgages and savings accounts, to them, which could boost U.S. revenue even more. Most of its rivals have lower tax credits from the crisis and more sources of U.S. income.
"The card business is a powerful asset to help restore the Citi brand," Linville said in an interview. Continued...