joe_miami

Oh, I see. It's suddenly "good info." when someone else posts it.

Non sequitur. I never remotely said the above.

conde

Since you stated that the US Citi Prestige card was not profitable, you should back it up with supporting data. In the past, Chase provided information to investors on how the Chase Sapphire Reserve impacted quarterly results. Please provide the source of your information for Citi Prestige profitability to support your position.

akr1970akr

I'll go digging through call/earnings reports next week to see if I can find any Prestige specific info. It may not have been a major product launch in the scope of all the craziness they do there. (I used to work there, but on the ibanking/trading side, a lifetime ago)

My cue that Prestige had profitability issues is the way we get treated at retention time. Pretty much every other citi widget we have across our household eventually ends up getting an offer. Prestige is the only one where those have dried up. And when I hear about the offers on some of the oddball cards (like the Sears ones) I figure it must be related to the overall portfolio profitability - some of those holders must really be running constant balances. I assume that people $450 cards are less likely to do that, but who knows, there are a lot of indebted people driving flashy leased cars too.

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my hunch is that mia is right about the whole product segmentation thing, and whoever ran the AA suite was not happy about their 'stuff' being available in the TYP branded sleeve. big firms can be surprisingly more like little fiefdoms glued together, rather than really cohesive mission oriented ventures.

somehow AXP has managed to make the comparable situation work for their flagship - Delta club access when on a DL flight for their plats, while also having a pure Delta Club Plat card. But at least there that relationship seems healthy, without a Barclays or whoever trying to drive a wedge between them.

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One reason why Discover can offer certain rewards others can't / don't is that they own their own payment network. Even though Visa and MasterCard were sort of affiliated with JPM and Citi respectively early on, they are standalone profit seeking entities now, and the demand something too for using their systems. I wonder why they never got into Square or Stripe early on. It seems like there would have been synergy there, since they're on the outside, trying to disrupt existing players.

andersonCooper

Definitely! Missed my Forward everyday as I just used them for all restaurants spend...glad it was able to survive even after Forward was discontinued for a good 2-3 years. I also did the same thing of cashing out all TYP to AA flights last year.

Let's see what Citi comes up next.

mikesyr18

That's because I respect Mia since she doesn't go over the top crazy like some people.

Why does one need to go digging for numbers to explain themselves, when all they have to do is look at the card and what Citi has done with it. 2016... Major nerfs were announced on the card. 2018... Card went through nerfs with some of the travel insurance. 2018... No sign up bonus at all and the card is suddenly dropped by the company altogether. Companies don't do this to profitable cards... They do it to cards that make them bleed cash. Clearly Citi wanted to reduce the cost of the Prestige's benefits, and eventually, they obviously gave up with it since it hadn't had a sign up bonus in the eight months leading up to it's disappearance.

akr1970akr

mikesyr18 - if you believe Prestige is bleeding them money* why do you advocate Citi increasing the earnings on categories like dining to 10%? That doesn't make sense unless one believes Citi owes every one a $1000 cookie or something.

* I too think Prestige costs Citi more than they ever expected on a standalone basis, but profitability may be ok when across bigger groups like customer types, or the TYP family.

garykung

All of you can argue as much as you want. The reality is quite simple - Citi and Chase fail, or at the minimum, not as successful as they anticipate.

Both Citi and Chase have dumped big money in attempt to recruit new bloods for the luxury card market (Note - I define premium as the mid-tiered level, like CSP or Citi TY Premier). However, everything comes with their associated costs. When Chase offered the 100K UR welcoming bonus, Chase was literally dumping $1K to each new customer (Note - IIRC, 100K UR can be redeemable as $1K cash). With all the benefits, there was no way that Chase could recoup in a short time, or at the minimum, from the AF. To win the luxury card market, an issuer must focus on the long-term to recoup costs. The same happened to Citi as well, but in a different scale.

The problem is both Chase and Citi are short-sighted. Chase and Citi promote churning in their full extent, encouraging new card issuance than retention, which practically asking people to be in favor of the new cards with bonuses and dump the same old cards. With with 5/24 or 24 open or close, these won't stop people from a bit. AMEX takes a different approach instead - pausing people by imposing lifetime limit, effectively kills churning.

Also - at the same time, AMEX gradually improves the benefits. Instead both Chase and Citi cut benefits in response instead.

AMEX's approach of the market is to build a brand rather than a product. I said this some times ago - AMEX gives you a taste of luxury, but both Chase and Citi gives you none.

With all these in mind - it is not difficult to foresee the failure of both.

In term of whether this is a discontinuation or refresh, again - it is a discontinuation. It is not difficult to imagine Citi may try to come back in this market. However - the reality is Citi has learnt the lesson, the new card, if ever introduced, will not be the same, or at the minimum, similar to the Citi Prestige. Beside - Citi's own historical credit card cycle points toward discontinuation over refresh. So while I respect those hoping for better, the issue is it is going to get worse before you know it. In the alternative - ask this yourself - why would Citi need to pull the apps for one of the purported "popular" card if it is simply a refresh?

mikesyr18

Because the increased earnings would make up for slashing every single other travel benefit on the card, such as $250 towards airfare and the 4th night free benefit.The 10% was just an example. I'm sure Citi could make it a high earning card but a little more affordable and realistic.

This is the only message board where people say the Prestige wasn't an expensive card to offer with suffered profitability. Premium credit cards are very expensive cards to offer.

I'll ask again. Why would Citi pull the card if it were profitable? Why would they reduce the benefits if it were profitable? I think Citi planned to axe this card mid last year looking at the nerf and then the lack of bonus from December 2017 til it's axe a few days ago. I knew Citi would get rid of this card when others doubted my hunch.

akr1970akr

I think you're mostly right. Jamie Dimon said it would take them 7 years to earn back their initial investment on each CSR new customers. Maybe the customers will stick around.

But Chase/Citi do have some additional channels to earn money off a flaship card customer, that are harder for Amex. They can offer them mortgages, banking, fake wealth advisory, business banking services, car loans, and so on. It seems like Chase is trying to create some form of Sapphire/Private Client banking product, which looks like a clone of what HSBC Premier or CitiGold are. At least being a depositary institution, with branches all over the nation, gives them a chance in a rising rate environment (usually good for banks) to make some money.

Whether the other firms can actually monetize those opportunities is another story.

I was looking at card default numbers last week, and ever so slightly, they are starting to nose up. Not just for the firms targeting troubled borrowers, but even for the sober lenders. It has been a long time since we've seen that happen. Normally charegeoffs track the unemployment pretty closely.

At least one thing I'm pretty confident of: whatever the rules or opportunity set the big banks create, the folks who habituate these boards are the type who will be able to extract maximal value for as long as its available. Pretty much every single fishing hole eventually gets tapped out, and people find new ones, and then bloggers chat them up!

joe_miami

When you say "over the top crazy," you mean like claiming a bank could make money on a card by giving 10% cash back on dining while making only 3% or less in swipe fees?

You're saying the same thing over and over: The Prestige was a terrible card for FlyerTalk types but somehow it cost Citi huge money. Both of those things can't be true.

Which "increased earnings"? Citi would be losing 7 cents per dollar on every swipe at a restaurant.

Asked and answered.

tmiw

I'm guessing the assumption is that enough people would revolve balances such that Citi would end up earning significantly more than the added rewards. Of course, if that were the case, then the cards that offer more than 2-3% or so wouldn't need to have caps.

akr1970akr

So I've been looking at the couple years of Citi investor presentations, wherever they mention Prestige, and of all the items this seems to be the most interesting.

This is from their July 2017 Investor Day Transcript. Not sure if there is a public link.

So it's somewhat stale, and is from Jud Linville, who is no longer in charge of their Cards portfolio.

It makes more sense if you read it aloud, since the transcription algos mess up words that sound similar.

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<A - Jud Linville>
: So, Steve, as it relates to rewards, so if you remember the slide I put up, I showed that the current
vintages of acquisition that we're bringing in, about I'd say half do not have rewards on them at all. Obviously, if you
remember two thirds of our revenue comes from loans and full rate revolving. If you look at rewards, I'd say that we've
got two products in Costco in cash back where we've built really nice products for acquisitions where there is not
promotional bonusing. The value is built into those products, and Double Cash one of the many elements that makes it
attractive as we're, one, bringing in on inexpensive channels of digital cost to acquire. We're not paying promotional
bonusing, but only cash back products in the marketplace if that's the case. The same is true with Costco in terms of
distribution. So you've got strong reward products that are showing huge engagement, but also building a loan portfolio
not just the transacted portfolio.
A much smaller portfolio is our ThankYou, good/better/best that Stephen talked about. We made some changes to
Prestige most recently. And it's a perfect example where you saw a competitor go out to market with a very, very rich
promotional bonus. What we found is that in that Prestige product line, we talked to millennials which is about half of
that portfolio and it's grew 6x since we converted. What they said was, when I think about on my trip. The airplane, I
just want to limit the amount of stress. When I think about my trip, I think about the destination and what it say. So
we've gone hard on that fourth night free. In fact, that's the best comparison we've got in that marketplace relative to
Platinum or to a Reserve. And then we built an acquisition bonus that is very targeted and requires $7,500 of spend in
the first three months. And I think everybody knows you're not getting to get a lot of gaining behavior there,
particularly as we're targeted. So there is not a significant margin erosion that's expected within the Card business, both
because of the size and how we're managing that portfolio.

joe_miami

Interesting. The "gaining" in the penultimate sentence should be "gaming."

akr1970akr

Yes, all those kinds of transcript things don't work well with auto spell checkers afterwards, so the best way to interpret them (I read a lot of transcripts) is to read them aloud if its confusing.

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I read a bunch of other ones related to this, and of course one has to take them with grains / cups of salt. Mgmt always says everything is going great, profits are booming, and heydays are coming.

Also I looked at anything with the tokens "Thank You" or "Rewards Cards"

They seem to have a strategy (not paying too much out on their own brands) that will not endear them to FTers.

And since people are policy, given that the main architects of these strategies is gone, who knows how things really worked out, and what the future plans will be.

But having read a dozen presentations related to this, it just seems unlikely Citi would totally abandon the 'good, better, best' strategy they put in place with TYP.

GarlicFlyer

I would expect other cards to copy the fourth night model if it was profitable.