Citi CEO Says He’s Focused on Fixing Costco Credit-Card Woesby
‘It’s something we think we can fix in short order,’ CEO says
Costco customers spent $5.7 billion on cards in 3 1/2 weeks
Citigroup Inc. said it has deployed “a lot of resources” to ease the deluge of inquiries and complaints from Costco Wholesale Corp. customers after taking over as the retailer’s exclusive credit-card issuer last month.
“We experienced extremely high calling volumes in the early implementation of it,” Chief Executive Officer Mike Corbat said in a conference call with analysts Friday after the company reported second-quarter results. “Questions around card activation, questions around statements, questions around where to send payments, and so we’re working through that. We’re gaining on it. We’re very focused on it.”
Costco, the largest U.S. warehouse chain, decided in 2015 to end its 16-year relationship with American Express Co. after the firms couldn’t agree on card fees. Richard Galanti, the retailer’s finance chief, said last month that caller wait times averaged 30 to 40 minutes during the June 20 rollout and fell to less than 10 minutes later in the week as Citigroup increased the number of customer-service representatives fielding calls.
Citigroup’s credit-card franchise, led by former AmEx executive Jud Linville, reported growth in purchases and revenue during the second quarter, fueled by the Costco acquisition, which also contributed to a 5 percent jump in companywide operating expenses, according to the New York-based bank.
“The early results from Costco have been very encouraging,” Citigroup Chief Financial Officer John Gerspach said during the conference call. Purchases made with the cards totaled $5.7 billion in the first 3 1/2 weeks, with two-thirds of that spending occurring outside of Costco stores. The loan portfolio, which held $10.6 billion when Citigroup acquired it, grew to $11.3 billion by the end of the second quarter, he said.
Galanti said Friday that the switch proved to be a “huge task” and that the Issaquah, Washington-based retailer has no regrets about choosing Citigroup as its card partner.
“It’s a much-improved value proposition for our members,” he said in a phone interview.
Citigroup came in second-to-last out of 10 companies in a J.D. Power credit-card customer satisfaction ranking last year. AmEx slid to second place behind Discover Financial Services after holding the top spot in the survey’s first eight years.
“We’ve got a lot of resources deployed against it,” Corbat said of the Costco launch. “It’s something we think we can fix in short order.”