Lower-end consumers have shifted buying patterns to lower your expenses as their bank accounts dwindle in size, in accordance with Citigroup CEO Jane Fraser.
The third-largest U.S. bank by assets has been monitoring its bank card customers for signs of distress, Fraser told CNBC’s Sara Eisen on Friday in an interview.
“We’re being attentive to the lower FICO consumer, where there are cracks” forming, Fraser said, referring to the widely used credit-scoring system from Fair Isaac Corp. “I believe a number of the excess savings from the Covid years are getting near depletion.”
The U.S. government injected trillions of dollars into households and businesses through the pandemic to avert disaster, money that has helped keep the economy humming for longer than many forecasters expected. At the identical time, the Federal Reserve’s most aggressive rate of interest mountain climbing cycle in 4 many years has made bank card, mortgage and auto debt dearer, and late payments and defaults have been climbing.
When asked what other CEOs are telling her in regards to the state of the economy, Fraser said that besides comments on artificial intelligence and labor tightness, corporate leaders have told her that demand is softening, she said.
“Particularly [for] the underside end of the patron, that is the one which we’re beginning to see cracks, you are seeing some shift within the buying patterns to lower categories within the spend,” Fraser said. “It is a resilient consumer, nevertheless it’s a softer one.”
Softening demand may help the Fed in its battle with inflation, the CEO noted. While employment and gross domestic product figures suggest the economy will achieve a “soft landing,” if it does tip into recession, it’s going to likely be a “manageable” one, Fraser said.
Within the wide-ranging interview, Citi’s CEO also said her latest overhaul of the bank was a move away from the “financial supermarket” model of the past right into a more streamlined operation.
The scope of job cuts and expense savings triggered by the reorganization can be disclosed with fourth quarter-earnings, she said.
