Sept. 14 (Bloomberg) -- Citigroup Inc. hired Judson Linville from American Express Co. to oversee U.S. credit cards, as the industry grapples with loan writeoffs, a decline in card spending and new laws capping interest rates.
Paul Galant, 42, who has headed the cards business since April 2009, will run a new unit at the bank to develop consumer-payment technologies for corporations and governments, New York-based Citigroup said today in a statement. Linville, 52, oversaw U.S. consumer credit-card, membership rewards and travel units at American Express.
Citigroup Chief Executive Officer Vikram Pandit, 53, this year has overhauled North American consumer operations with new managers and strategies as first-half profit at the business tumbled 83 percent from a year earlier to $84 million. The bank hired Cecelia “Cece” Stewart yesterday from Morgan Stanley to oversee branch banking and personal-wealth management.
“Jud’s unmatched background and experience in managing one of the most highly regarded brands in the cards industry will be essential to building on the progress we have made,” Pandit said in the statement.
U.S. credit-card lenders led by New York-based JPMorgan Chase & Co. and No. 2 Bank of America Corp. in Charlotte, North Carolina, expect reduced revenue because of new laws and regulations limiting interest rates and penalties. The U.S. unemployment rate of almost 10 percent has contributed to higher loan losses and less card spending.
Consumer borrowing in the U.S. fell for a sixth straight month in July as revolving debt, which includes credit cards, fell by $4.4 billion, the Federal Reserve said Sept. 8.
Card Unit’s Losses
While first-half revenue in Citigroup’s North American branded card business more than doubled to $4.89 billion, net credit losses rose almost 10-fold to $4.13 billion, according to the bank’s financial statements. In July, Citigroup’s 30-day delinquency rate was 5.3 percent, the second-highest of the six biggest U.S. credit-card lenders after Bank of America’s 5.9 percent.
Linville will report to Manuel Medina-Mora, 60, whom Pandit named in January to replace Teresa “Terri” Dial as head of the North American consumer-banking division. In July, Medina-Mora said in an internal memo that he planned “multi-year investments” to develop the business, including improved marketing and customer service alongside “innovative cards and banking solutions.”
Galant’s New Post
Linville is the second senior manager to leave New York-based American Express this year. Alfred F. Kelly Jr. resigned as president April 10.
“We have an exceptionally strong and experienced leadership team,” AmEx spokeswoman Joanna Lambert said. The firm will search for a successor inside and outside of the company, she said.
Galant previously ran Citigroup’s Global Transaction Services business, which helps corporations manage cash. As head of a new Global Enterprise Payments unit, he will “oversee the design, marketing and implementation of comprehensive business-to-consumer and consumer-to-business payments solutions,” according to the statement. He will report to Medina-Mora and John Havens, who oversees trading and investment banking, Citigroup said.
“We expect enterprise payments to be a significant revenue driver for Citi,” Pandit said.
Citigroup’s credit-card unit was facing higher delinquencies when Pandit appointed Galant to run it 17 months ago, following the bank’s $45 billion government bailout. In July 2009, Galant overhauled management at the unit, creating a “high risk” segment to “cure accounts with future potential while minimizing risk,” he wrote in an internal memo circulated to employees at the time.
“Our business is going to be fundamentally transformed over the coming months,” Galant wrote in the memo. “These are challenging times and I think you will agree our only option is to create a different future.”
Galant led the business “through a time of dramatic change in the industry,” Citigroup said in today’s statement.
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