A Citi Cards Innovation Story - · PDF file11,361 11,050 10,267 9,416 3,939 4,700 25,330 Citi...

innovation story.ppt 21-Jun-05 page 1Confidential 2005 Citibank. All rights reserved. N.A. Cards Citi Cards Franchise Leveraging

Ron GuggenheimerJune 2005

A Citi Cards Innovation Story


Benefits of Diversity and Size

Total Net Income: $17.0 BillionTotal Net Income: $17.0 Billion

Employees: +275,000Employees: +275,000

Branches: 6,000+Branches: 6,000+

# of Countries: 100+# of Countries: 100+

Customer Accounts: ~200 MMCustomer Accounts: ~200 MM

Revenues: $86.2 BillionRevenues: $86.2 Billion


Global Consumer Group FY 2004 Income

By Business Segment By Region

North America (ex.Mexico)

EMEA

Japan

Lat. Am.

Mexico

Asia

45%

14%

10%

15%

5%

7%

Ex. $4.2B in net chargesNet income = $21.2B

19%

(US$MM) FY 2004 FY 2003

Global Consumer Group 69% 53%

Corporate & Investment Bank

12% 30%

Global Wealth Management 7% 8%

Global Investment Management

8% 6%

Proprietary Investment Activities

4% 2%

Corporate/Other (<1)% 1%

Net Income $17,046 $17,853


Q1 2005 Performance

(US$MM) 1Q05 1Q04 % Change

Global Consumer Group $2,819 $2,588 9%

Corporate & Investment Bank $1,679 $1,707 (2)%

Global Wealth Management $317 $410 (23)%

Asset Management $79 $105 (25)%

Alternative Investments $362 $26 NM

Corporate/Other $(88) $188 NM

Income from Continuing Ops $5,168 $5,024 3%

Discontinued Ops $273 $249 10%

Net Income $5,441 $5,273 3%

By Business Segment

52% of net income generated by Global Consumer Group57% of net income generated in North America (inc. Mexico = 64%)


Continues To Rank Among Top Earning Global Companies

17,046

16,593

14,143

13,328

11,811

11,361

11,050

10,267

9,416

3,939

4,700

25,330

Citi Cards NA

Citi Cards Global

Altria

Walmart

AIG

Pfizer

Citi Consumer Group

Chevron Texaco

Bank of America

GE

Citigroup

Exxon Mobil

Fortune 500 Ranking, 2004 – Net Income ($MM)

Source: Fortune

Rank

1

2

3

4

5

6

7

8

9

10

36

27


Selected Top Earning Consumer Oriented Companies

2004

Global Consumer Group ($47Bn) $11,811

J&J ($47Bn) $8,509

P&G ($51Bn) $6,481

Nestle ($77Bn) $5,935

Home Depot ($73Bn) $5,001

Wal-Mart ($288Bn) $10,267

Ranked by 2004 Net IncomeNet Income (US$MM)

Global Consumer Group = Earnings Leader among consumer oriented companies


Citigroup Global Consumer Group


Global Consumer GroupPerformance Summary 2001-2004 Income

-10000

100020003000400050006000700080009000

100001100012000

2001

2002

2003

2004

Other

ConsumerFinanceCards

Retail Banking

US

$MM

CAGR %‘00-’04

8%

23%

21%


Global Consumer Group – Performance by Region

4.65.8

7.28.6

2.1

2.2

2.3

3.3

Global Consumer Group Net Income ($B)CAGR %

2001 2002 2003 2004

17%

23%

21%

‘01-’04

6.78.0

9.5

11.8

International1 One-time benefit due to LLR/SAMBA/Tax

1

North America(includes Mexico)


Global Consumer Group FY 2004 Income

By Business Segment By Region(US$MM) FY 2004 %

Change

Cards (40%) $4,700 18%

Consumer Fin (20%) $2,388 21%

Retail Banking (40%) $4,628 14%

North America (ex. Mexico)International

$3,092$1,570

8%

North AmericaInternational

$1,851$537

28%

North AmericaInternational

$3,940$761

27%

Other $95 NM

Income from Continuing Ops

$11,811 24%

52%

1%

North America (ex.Mexico)

EMEA

Japan

Lat. Am.

Mexico

Asia

65%10%

8%

10%

5%

2%

29%


Citi Cards Delivering on Earnings

($Bn) 1999 2000 2001 2002 2003 2004 5 Year

CAGRRevenue $9.9 $10.8 $13.3 $15.5 $16.8 $20.1

8.6

11.5

6.3

3.9

152.6

6.0%

8.1%

2.7%

$301.1

15%Credit Losses 4.0 4.0 5.7 6.7 7.2 17%

Credit Margin 5.9 6.8 7.6 8.8 9.6 14%

Expenses 3.6 4.1 4.3 4.4 4.9 12%

Net Income 1.4 1.8 2.2 2.7 3.1 23%Receivables 87.7 105.4 112.1 119.8 148.8 12%NCL Ratio 4.9% 4.3% 5.4% 6.1% 6.1%NCM Ratio 7.2% 7.2% 7.3% 8.0% 8.2%ROMR 1.7% 1.9% 2.0% 2.5% 2.7%

Sales $200.4 $231.4 $234.3 $244.9 $251.5 8%


International is Also Poised for Strong Performance

International Cards, Net Revenues and Net Income

0

0.5

1

1.5

2

2.5

3

3.5

2001 2002 2003 200400.10.20.30.40.50.60.70.80.9

($Bn)40+ CountriesMarket Share: 2.8%25+ million cards in force38+ million Calls to call centers annually17,000+ Direct Sales Agents and Telesales Reps+150 million account statements annually


International Bank Card Life Cycle

Card Utilization

ChinaEgyptRussia

BrazilIndonesia

Turkey

IndiaPolandSpain

KoreaGreeceJapan

AustraliaTaiwan

UK

Market Proposition

• Merchant acceptance

• Revolving Credit Line

• Cash Access

• Limited Liability

• Photo Card

• Credit Shield

• Co-brands

• Cashback

• Merchant Program

• Premium Offerings

• Affinity

• Lounge Access

• Low/No Fees

• Risk Based Pricing

• Balcon

Fundamentals Security Rewards Prestige Pricing

Market Maturity

Country Positioning


Sustained but Slower Growth in Key Industry Drivers

Receivables and Sales Growth

Industry Total 4Q’04: $645B1

Receivables Growth

Sales Growth

1. Includes MC, Visa and Discover

0

5

10

15

20

1999 2000 2001 2002 2003 20040

50

100

150

200

250

Earnings ROTA

In $

B In b p s

Industry Profit and ROTA

0%

5%

10%

15%

20%

25%

30%

'92 '94 '96 '98 '00 '02 '04

Source: Nilson Report


Payments Migration To Plastics Will Lead To Continued Sales Growth

Source: Citi Internal, Nilson Reports

3.6% 3.9% 6.0% 12.3%

61.3% 55.1%41.1% 30.5% 19.5%

19.6%18.4%

19.8%18.5%

16.7%

1.2%7.1%

10.8%14.2%

14.5% 19.7% 23.7% 25.7% 30.6%

2.3% 2.3% 2.1%0.7% 1.7%

16.9%

0.3%

1990 1995 2001 2005 2010

$3.0T

Credit 9.9% 8.7%

Debit 40.2% 14.1%

Cash 5.2% 3.6%

Check 1.4% (2.8)%

OtherElectronic* 27.8% 18.5%Other Paper* 0.9% 4.5%

CAGR

90-01 01-10$3.8T $5.4T $6.6T $8.5T

* Other Electronic includes Stored Value Card, EBT Card, Pre-authorized Payments and Remote Payments. Other Paper includes Money Orders, Official Checks, Travelers Checks, and Food Stamps

C2B Payment Landscape by Vehicle


Industry Trends

Direct Mail Saturation – Losing Effectiveness as a Channel

– 1992 = 1Bn pieces mailed

– 2002 = 5 Bn pieces mailed

– Response rates <0.5%

– Open market acquisitions more costly (CPA: >$125 in ’03 vs. $50 in 1998)

– Every credit worthy household in the US receives 2 direct mail offers/week

Oversupply of Credit

– 20% utilization rate

Industry Landscape Being Redefined

– Merchant/Issuer tension; greater power at POS

– Changing Association landscape (MBNA/AMEX, Wal-Mart, etc.)

Competitors:– Intensifying investment in product and network innovation

– Carving out relevant segments in the market via unique products & positioning

– Investing heavily in advertising & marketing to create brand loyalty


Industry Trends

Non-traditional tender types – (Pay-Pal, Debitman)

Increased use of Debit cards – fastest growing segment

Growing Regulatory Pressure

Privacy, sales practices and security issues

Increasingly demanding consumer

Industry Organic Growth Continues to Soften

– 5% CAGR overall

– Declining sales and receivables growth

– Debit card penetration

– Home equity loans and mortgage refinancing in low interest rate environment

Credit cards are a commodity


We Work to Maintain Our Position in the Marketplace

Top 5 Players Control 77% of Receivables

38%

77%

62%

23%

1995 2004

Rest

Top 5

2004 Market Share

1 Citi $152.6 23%

2 JPM/One $135.4 21%

3 MBNA $80.1 12%

4 BofA/Fleet $58.6 9%

Bank One $76.3

5 Discover $48.3 7%

Chase $52.3


Consolidation Opportunities Are Becoming Scarce

Source: Nilson Report

48

18

7 6 6 5 4 4 3 1.4 0.20

10

20

30

40

50

60

Discov

erPro

vidian

Metris

US Ban

corp

USAA

Fede

rated

/May

Co

Targ

etFir

st Nati

onal

Advan

taAvg

of N

ext 1

0Avg

of N

ext 6

0Remaining Portfolios ($ Bn)

On Apr 4, 2005 , Morgan Stanley Board approves Discover spin-off


Citi Leads Change with Strong Capabilities

Low Cost Producer

Consolidation Strategy

Pricing as a Science (Earnings Optimization)

Net Credit Margin (Predictability, Growth, Risk Adjusted Margin)

Services Sales

New Geographies

New Markets

New Products, Models and Strategies

Cross Sell


Our Vast Quantities of Data From 120 MM Accounts

Coverage

Timeliness

Historic

Accuracy

Relevance


Building a Business Intelligence Framework

Create an enterprise solution for managing and distributing analytic intelligence capabilities

Eliminate silos

Share competencies with common meta data

Ensure control, compliance and quality

Technology Goal

Reuse

Scalable

Automated

Secure

Monitored

Auditable


Citi and SAS: Opportunity Options

Decision Points

– In-House vs. external partner

– Integrate "best of breed" vs. "end-to-end" solution

Key Drivers of Partnering Decisions– Any special integration requirements?

– Core competencies of the vendor?

– OLTP vs. OLAP environment?

– Mind share to ensure success?

– Guarantees?


Dependencies for Creating Value From the Data Asset

Transformation

Val

ue

Data Acquisition

Systematic/Integrated/Consistent Treatment

Management – Security - Scalability

Analytic Capabilities

Delivery – Usability


Dependencies for Creating Value From the Data Asset

Transformation

Val

ue

Data Acquisition






Transformation

Val

ue

Data Acquisition





Dependencies for Creating Value From the Data Asset:


Citi / SAS Partnership: Accomplishments to Date

18 Months Later

– 50 TB Repository, 15 B rows

– Complete ETL / Data Quality management

– ASP environment

– Daily transmission

– Many enhancements

3-8x processing speed

50 - 600% increased productivity

Ease of use

Expandability

Enhanced User Experience

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