Lower-end consumers have adjusted their purchasing habits in order to save money as their bank accounts dwindle, according to Citigroup CEO Jane Fraser.
The third-largest U.S. bank has been closely monitoring its credit card customers for signs of financial stress, Fraser disclosed in an interview with CNBC’s Sara Eisen.
“We are closely monitoring lower FICO consumers, where we are seeing cracks begin to form,” Fraser said, referring to the widely used credit scoring system from Fair Isaac Corp. “I believe some of the excess savings from the Covid years are nearing depletion.”
To prevent a disaster, the U.S. government injected trillions of dollars into households and businesses during the Covid pandemic. This money has helped sustain the economy longer than anticipated, but the Federal Reserve’s aggressive interest rate hikes have made credit card, mortgage, and auto debt more costly, leading to a rise in late payments and defaults.
When asked about the state of the economy as relayed by other CEOs, Fraser shared that in addition to discussions on AI and labor shortages, corporate leaders have indicated a softening in demand.
“We are starting to see cracks, particularly in the lower-end consumer segment. There is a shift towards lower spending categories,” Fraser explained. “The consumer remains resilient, but there is a softening.”
The CEO noted that this softening of demand may aid the Federal Reserve in combating inflation. While employment and gross domestic product figures suggest a “soft landing” for the economy, Fraser believes that if a recession does occur, it will likely be “manageable.”
In the interview, Fraser also discussed her recent revamp of the bank, which involved transitioning away from the “financial supermarket” model and streamlining operations.
The details of job cuts and cost savings resulting from the reorganization will be revealed alongside the fourth-quarter earnings, according to Fraser.
Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
