Citibank’s Credit Card Business

1) Evaluate the performance of Citibank’s credit card business relative to the industry as a whole. Based on this evaluation, are there areas of concern for Citi?

After Citibank decided to use the segment-led strategy, the % share of Citibank credit card declines over years, from 16% in 2002 to around 11% in 2009 (Exhibit 3). From Exhibit 9, the Net Sales Volume of the industry is doubled from June 2010 to December 2012 but Citibank growth is much smaller, this pattern is also shown by the outstanding growth in Exhibit 9. Although Citi is growing, the competitors are growing faster. The median credit of Citibank is higher than the industry but % higher is decreasing – from 45% higher in June 2010 to 35% higher in December 2012. But the Net Sales Volume for Citi is high given the limited customer Citi is targeting, driven by the spending patter of the affluent groups. Citi spends less in marketing compared with the rest of the industry but Citi has higher unaided awareness (Exh11). Compared with the industry, Citi has much less physical presence (total 42 in Mar.2012) and 66.7% of the branches are in Metropolitan areas.

Areas of Concern include: Limited growth opportunity with existing segments, competitive market environment, high operations cost.

The focus of certain segments limits the potential of customer growth as the super affluent & affluent segments are only 0.68% of all Indian households and the top cities population grows slower than rural areas. This focus also limits the interest revenue, (Exh.9, the delinquency of Citi is lower 0.2% lower than the industry average) which is mostly from the mass market. On the other hand, the premium products such as points reward systems for the affluent costs Citibank more to serve.