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Citi Aggressively Building Out Credit Card Loan Portfolio?

|Includes: AXP, Citigroup Inc. (C)

Citi, like other banks, makes money by earning a spread on their borrowing costs and their loan portfolio interest rates. This applies to credit card loan portfolios as well.

This is why it's especially interesting that they are offering a balance transfer credit card deal that is far more aggressive than anything else out there right now - 0% balance transfer for 24 months.

Citi's borrowing cost is around 1.5% right now, and they are handing out 0% for 24 month loan deals. Granted, they take a 3% fee upfront for the balance transfer, but you still have to take into account default risk and other risks, offset by some overhead costs.

Citi's other cards are also quite generous in the 0% introductory APR department - they have rewards cards with 15 month and 21 month deals as well. See for yourself at their website.

This calls into question: Is Citi Taking More Portfolio Risk Than Others?

We can tell you first hand that Citi is approving these 0% for 24 month offers at a healthy rate. It is not some extremely hard to get type offer, in fact, it actually errs on the side of higher than average approval rates.

The most important consideration is the relative comparisons. The next best deals out there are 0% for 18 months from Discover More, which has a lower approval rate. Meanwhile, most of the pack is at 0% for 12 months. American Express is at the other extreme. The cards they issue in-house tend to have introductory 0% purchase APR periods, but almost none of them even offer balance transfer deals anymore, post the regulatory changes of 2009-2010.

This leads us to infer that credit card portfolio quality could vary greatly these days, as some issuers are more aggressive than others at grabbing customers with balances. And based on the offers we're seeing out there, we think Citi may be on the more aggressive end of the spectrum.

Disclosure: Do not have positions in any of the aforementioned stocks.