Citibank’s Australian retail banking business suffered a sharp fall in profitability last year as depressed economic conditions eroded revenue from credit cards and other lending activities.
The country’s fifth largest credit card issuer posted a net profit of A$67 million – down 67 per cent on the 2019 bottom line of $201.7 million.
Citi appears to have felt the impact of Covid-induced shutdowns more severely than other mid-market banks such as ING Australia and HSBC, which this week reported respective profit falls of 15 per cent and 30 per cent.
In a report on the retail bank’s performance attached to the latest financial accounts, Citi Australia chief executive Marc Luet attributed the decline in credit card activity to the effects of the pandemic.
“Revenues in our credit card business were impacted by continued deleveraging across the industry and by a drop in credit card spend due to the impact of COVID-19,” he said in the report.
Despite the long-term strategic decline in credit card use in Australia, Luet said Citi would continue to focus on growing the portfolio through the addition of instalment repayment and buy now pay later functionality to card products.
“The Citi credit cards business has a strong market position and a clear growth strategy driven by instalment lending propositions, and partnerships for longer term growth,” he said.
“Given evolving customer needs, the growth of buy now pay later in Australia as a payment tool, and the experience of the COVID-19 environment, Citi is working on developing new products and enhancements to existing products to align to changing consumer preferences.”
Official data published by APRA shows that the value of debt on Citi-issued credit cards declined by more than $1.1 billion or 23 per cent to $3.65 billion in the 12 months to the end of December.
Notwithstanding this decline, Citi Australia is poised to become the fourth largest credit card issuer in the country because current system trends indicate the run-off in activity is even more pronounced in National Australia Bank’s card portfolio.
The value of debt on NAB credit cards was measured at $3.9 billion at the end of February.
For several years Citi has been trying to revitalize its credit cards business by entering card issuing partnerships with leading retailers and service providers such as Qantas, Coles and Kogan.
It also manages the card operations of Bank of Queensland and Suncorp.
Luet said his bank expected to announce several new card distribution deals through the partnership program this year.
The Citi Australia boss did not provide much commentary on the financial performance of his retail bank’s other lending operations.
However, he indicated that improvements to the digital capability of the mortgage business had contributed to an 8 per cent increase in revenue from home lending.
That was a somewhat surprising disclosure given that the Citi Australia was among a handful of ADI lenders to experience contraction in the size of their mortgage books last year.
Citi’s home loan book shrunk by almost $400 million or 5.7 per cent to $6.55 billion in the 12-month period.
The contraction in 2020 was consistent with