Reuters/Lucas Jackson
Citigroup Inc. (C) lost $1.4 billion from packaging credit card loans into bonds in the third quarter, a regulatory filing showed on the last Friday, October 31.
The loss reflects in part the worsening performance of credit card loans as the U.S. economy deteriorates. In the third quarter of 2007, Citigroup earned $169 million from packing credit card loans into bonds.
Citigroup said earlier this month that global credit card revenue had declined 40%, partly due to lower securitization results, but it did not disclose at the time the precise figure.
Credit card lenders are broadly expected to suffer higher credit losses as rising unemployment makes it increasingly difficult for some borrowers to pay their bills.
Credit card spending is actually on the rise as consumers affected by the credit crunch use plastic to pay off other debts. For households unable to cope with increasing monthly bills and denied access to new unsecured loans, credit cards have become the last source of funds available.
According to the UK Financial Times, the month-on-month increase of £131m in total credit card loans in August plugged the gap opened by the £132m decline in money lent out in new unsecured personal loans over the same period. Analysts said consumers desperate for cash were incurring high rates of interest by increasingly using their credit cards to make cash withdrawals rather than individual purchases.
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Sources :
- Reuters: Citigroup loses $1.4 bln on securitizations, October 31, 2008 08:24pm EDT
- The Financial Times: Rise in credit card spending, October 22 2008 03:00am
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