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Credit losses are rising as US consumers shift spending<\/a> to basic needs and away from purchases that aren\u2019t vital, according to Citigroup<\/a> Inc. Chief Financial Officer Mark Mason.<\/p>\n \u201cThe nature of spend is evolving,\u201d Mason said at a conference hosted by Barclays<\/a> Plc Monday. \u201cIt\u2019s going from discretionary to a more staple-type spend<\/a>.\u201d<\/p>\n Net credit losses have climbed in Citi\u2019s large cards business, and payment rates have started to \u201ccome down a bit,\u201d he said, adding that it\u2019s within ranges previously discussed by the firm. Meanwhile, more affluent customers are driving much of the spending growth.<\/p>\n Investors are closely watching consumer spending as a factor in predicting how the Federal Reserve will choose to cut interest rates. A\u00a0softening labor market<\/a>\u00a0and a decline in the rate of inflation have fueled expectations that the central bank will lower borrowing costs later this month to stimulate spending.<\/p>\n Mason said that, on a full-year basis, net credit losses look to be about 3.5% to 4% in the company\u2019s branded cards business and 5.75% to 6.25% in retail services.<\/p>\n The bank continues to see good growth in debt capital markets and mergers and acquisitions, while equity capital markets have been \u201cunder some pressure,\u201d the CFO said. Investment-banking fees for the third quarter will probably be up about 20% compared to the previous year, he said, indicating a level below the 25% average estimate among analysts in a Bloomberg survey.\u00a0<\/p>\n Shares of the New York-based bank fell 0.4% to $58.88 at 11:47 a.m. in New York, the only major bank showing a decline on the day.<\/p>\n Citigroup\u2019s fixed-income trading business is seeing performance consistent with consensus estimates, Mason said, meaning revenues are probably down about 4% compared to last year\u2019s relatively strong third quarter. Cost of credit is expected to be about $2.7 billion, he added.<\/p>\n The CFO reiterated the bank\u2019s full-year guidance, adding that it\u2019s in a good position to address regulators\u2019 concerns after it was hit with a fine of almost $136 million in July for failing to fix its data controls and risk management.\u00a0<\/p>\n<\/div>\n\nRecommended reading:<\/strong>
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