Citigroup's Card Delinquencies Rise: Will it Impact Asset Quality?

Core Insights - Citigroup's subsidiary, Citibank N.A., reported an increase in credit card trust delinquency rates for July 2025, although these rates remain below pre-pandemic levels [1][2]. Credit Card Metrics - The delinquency rate for Citibank's Credit Card Issuance Trust rose to 1.42% in July 2025 from 1.38% in June 2025, still lower than the 1.53% recorded in July 2019 [2][10]. - The net charge-off rate decreased to 2.07% in July from 2.12% in June, significantly lower than the 2.91% seen in July 2019 [2][10]. - Principal receivables in the trust fell to $20.7 billion in July from $20.9 billion in June [2][10]. Net Credit Loss and Provisions - The company's net credit loss (NCL) experienced a compounded annual growth rate (CAGR) of 4.3% over the four years ending in 2024, with a 2% year-over-year increase in the first half of 2025 [3]. - Provisions for credit losses saw a CAGR of 38.9% from 2022 to 2024, with this upward trend continuing into the first half of 2025 [3]. Future Outlook - Citigroup's profitability may be challenged by rising credit losses in its Branded Cards portfolio, with projected NCL rates between 3.50% and 4% in 2025 [4]. - Economic conditions could further weaken, leading to accelerated losses and increased loan-loss provisions, which would pressure earnings [4][5]. Industry Comparison - In July 2025, U.S. credit card delinquency rates were mixed, with Capital One's rate rising to 3.67% and JPMorgan's to 0.86% [6][7]. - Capital One's net charge-off rate decreased to 4.83%, while JPMorgan's dropped to 1.54% [6][7]. Price Performance and Valuation - Citigroup's shares have increased by 36.6% year-to-date, outperforming the industry's growth of 23.2% [8]. - The Zacks Consensus Estimate for Citigroup's earnings in 2025 and 2026 indicates year-over-year increases of 27.4% and 27.7%, respectively, with upward revisions in estimates over the past 60 days [13]. - Citigroup trades at a forward price-to-earnings (P/E) ratio of 10.57X, below the industry's average of 14.47X [15].