(Bloomberg) — Citigroup Inc. is set to put aside hundreds of millions of dollars more than it did last quarter to account for potential losses on loans, an early sign that the biggest US banks may be bracing for deteriorating economic health.
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“Given the macro environment, etc., cost of credit compared to last quarter, we expect to be up a few hundred million,” Vis Raghavan, Citigroup’s head of banking, said Tuesday at a conference hosted by Morgan Stanley. He added the numbers were driven by the bank’s credit reserve build, a figure that can change frequently depending on a company’s outlook.
The figures laid out by Raghavan, also executive vice chair at Citigroup, point to a cautious approach for the months ahead, even as analysts expect loan losses to decline in the second quarter. Banks build reserves for future risks based on macroeconomic indicators, which can vary from quarter to quarter. Reserves can also grow because a firm is lending at higher volumes.
Citigroup is one of the largest retail banks in the US, serving millions of credit-card customers and other clients in its home market, though it’s tilted toward consumers with higher credit scores. It also has a small private bank and growing wealth-management arm.
The bank’s provisions for credit losses — which typically cover losses recognized in the period and any building of reserves for the future — totaled $2.72 billion in the first quarter, while the analyst consensus for the second quarter is down slightly — to $2.69 billion.
Raghavan said he was still reassured by his company’s broader credit exposure, particularly its book of corporate clients.
“We still have a few more weeks to go in this quarter, but on the credit overall, I’m incredibly reassured of the quality,” Raghavan said, noting that about 80% of the bank’s corporate exposure is to high-grade issuers — a percentage that’s even higher outside of the US.
Shares of Citigroup rose 0.5% to $77.77 at 10:32 a.m. in New York. They’re up 10% this year.
Economists are cautiously watching the outlook for US consumers as the country manages the impact of uncertainty around President Donald Trump’s tariffs and his upcoming tax bill, which is working its way through Congress. Figures released earlier Tuesday suggested sentiment among small business rose in May for the first time this year.
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