Citigroup’s Warning Shot: Higher Provisions Hint at Credit Stress Ahead

Citigroup is planning to increase the amount of money it sets aside to cover upcoming losses the company may experience in its credit card and loan portfolios, according to a recent Bloomberg report.

The company’s strategy serves as a potential signal to other stakeholders in the card industry that consumer health may be eroding as 2025 progresses.

Industry stakeholders should take note when a company of Citigroup’s size and stature makes a move that sheds light on the direction the company sees its credit portfolio moving in the future.

Citibank, a subsidiary of Citigroup, is one of the largest banks in the country. Alongside its suite of deposit and online banking products and services, Citibank offers a diverse lineup of credit cards for consumers and businesses. 

Among bank holding companies, Citibank manages the third-largest credit card loan portfolio in the U.S. with more than $177 billion in credit card loans, according to a recent report from American Banker.

Other card issuers could reasonably expect their credit card customers to encounter challenges similar to those Citibank cardholders face.

“Given the macro environment, etc., cost of credit compared to last quarter, we expect to be up a few hundred million,” said Vis Raghavan, Citigroup’s Head of Banking, at a recent conference, according to Bloomberg.

Raghavan’s comments come as Citigroup has set aside $2.7 billion in loan loss provisions during 2025’s first quarter. Increasing that amount by “a few hundred million” may not be as alarming a shift as it initially sounds. 

The increases to loan loss provisions Raghavan spoke to may only amount to approximately 10% or less of the size of its total Q1 provisions. But analysts had initially expected the company to hold less in loan loss provisions during the second quarter than it had during the first quarter. 

Recent Federal Reserve data suggests that the potential credit problems Citigroup is spotting on the horizon aren’t issues that are specific to the company’s cardholders. Consumer revolving credit grew at an annual rate of 7% in April, which is the highest rate recorded for the figure in 2025.

Consumers may have spent more with their cards in April in attempts to get ahead of potential price increases caused by tariffs. Whether cardholders who took that step will be able to pay off their credit card bills in a timely fashion remains to be seen.

But Citigroup’s decision to increase loan loss provisions suggests the company envisions a scenario where more of its customers miss payment due dates in the future. Citibank only trails JPMorgan Chase and Capital One, which is fresh off the heels of boosting its size through the completion of its Discover acquisition, in that category. 

Credit card issuers should take note of Citigroup’s strategic shift. By examining their own credit card customers, issuers can determine whether consumers may be using more of their card limits than usual.

Credit card issuers come in many different sizes. While larger banks with deep pockets may employ teams of data scientists to help make predictions and mold strategies, not every issuer has the budget to take similar steps. Card issuers that are relatively small may not have access to real-time customer information or employ teams of data analytics experts.

But they can still use resources to help determine whether it’s in their best interest to adjust provisions for credit losses. For example, a recent study from H&P Law outlines areas in the U.S. where credit card debt is highest. 

The study reveals “how credit card debt levels can vary dramatically across each state,” according to Matthew Pfau, Partner at H&P Law. Cardholders in Connecticut and Colorado hold the most credit card debt, on average, while those in Iowa and Louisiana have the least.

Small business sentiment rose in May to its highest level since February.

Reports of growing consumer debt in the U.S. and financial institutions preparing for credit losses may paint an unpromising picture about the health of many of the country’s economic participants. But recent news stories on the state of finances in the U.S. aren’t all doom and gloom.

A new survey from nonprofit group NFIB indicates that small business sentiment was on the rise in May, increasing over sentiment figures from March and April. And consumer sentiment stabilized in May following four straight months of sentiment decreases.

Along with remarks about setting aside more money for potential credit losses, Raghavan also expressed optimism when discussing Citigroup’s exposure to credit.

“We still have a few more weeks to go in this quarter, but on the credit overall, I’m incredibly reassured of the quality,” he said.