Citibank vows to boost local credit card business

Citigroup Inc, the New York-based financial giant, will make development of its credit business a top priority in the Chinese market this year.

Andrew Au, CEO of Citi (China) Co Ltd, said on Thursday that the performance of Citibank's credit card business, which was kicked off in September, has been "satisfactory", and the lender will continue its investment in the sector.

Simon Chow, head of Citi China's consumer banking unit, said this year it will open two credit card sales centers - in Chengdu, Sichuan province, and Hangzhou, Zhejiang province - while developing one or two new types of cards.

"The credit card business has been growing at a faster-than-expected pace, and we will put more staff into it," he said.

Chow said the bank expects to establish broad strategic partnerships with merchants and improve customer service this year.

He said that Citi also plans to start working with some major online payment companies, but declined to elaborate.

The recent central government move to reduce the interchange fee - the sum that merchants pay to banks and credit card processors for accepting credit cards - will hit the market greatly, but won't hurt Citi as much as its Chinese counterparts, Chow said.

"We focused on merchants such as hotels, traveling and shopping businesses, which would be less affected than the wholesale sector. In addition, a large percentage of purchases made by our credit cards take place abroad, and overseas interchange fees are usually triple the fees in China," he said.

On Monday, banks in China started to implement new standards of interchange fees set by the National Development and Reform Commission.

The new rules will cut the fees by 20 percent and reduce income to lenders by 7.5 billion yuan ($1.2 billion), the central bank said.

Chow said Citi's emphasis on its credit card business comes from the still-limited network in the economy, as well as Citi's possible cross-selling opportunities for other products such as insurance and unsecured loans.

"We still believe the returns from issuing credit cards will exceed the investment," Chow said.

"Due to current policies, we could only establish as many as 26 outlets in China a year, but credit cards could bring more clients by combining our advantage of a good network channel. It is key to our consumer banking strategy."

The bank has also applied to be in the first batch of foreign lenders allowed to sell local mutual funds, and it expects to explore combined products that sell both domestic and overseas funds.

The largest credit card issuer in the Asia-Pacific region said the Chinese market will become the world's largest for credit cards within the next decade. "Normally, the credit card business will break even in four to five years. I expect our exploration in China could surpass such a pace," Chow said.

According to the central bank, China's purchases with bank cards was 20.8 trillion yuan in 2012. Credit card lending stood at 3.5 trillion yuan during the same period, which 1.1 trillion yuan was unpaid.

Citi was the first international bank to issue its own solely branded credit card in the Chinese mainland. The launch marked a "milestone" for Citi's presence in China, Au said.

He said Citi China's performance last year was better than that overall by foreign banks, and its headcount has increased compared with a year earlier.

Citi announced in December it will slash 11,000 jobs globally, or 4 percent of its total workforce, to trim costs. About 6,200 jobs will come from Citi's consumer banking unit.

wangxiaotian@chinadaily.com.cn