Citigroup signals rising financial stress as it boosts provisions for bad loans

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Citigroup is preparing to set aside hundreds of millions of dollars more to cover potential bad loans in the second quarter, a move that signals growing financial stress among American consumers and businesses, the Financial Times reported.

“Given the macro environment [and] cost of credit compared to last quarter, we expect to be up a few hundred million dollars,” Citi’s head of banking, Vis Raghavan, told investors at a Morgan Stanley conference on Tuesday.

The increase in provisions comes as President Donald Trump’s tariffs on imported goods — especially from China — raise fears of slower U.S. economic growth or even a recession. Higher tariffs could also drive up consumer prices, putting additional strain on household budgets.

Consumer sentiment in the U.S. has weakened as more Americans express concerns about their financial outlook, although recent indicators show some stabilization. A Conference Board measure of consumer confidence rose to 98 in May from 85.7 in April but remains well below the 110 mark seen when Trump won re-election in November.

Speaking at the same Morgan Stanley event, JPMorgan Chase chief executive Jamie Dimon said the bank had observed “a teeny deterioration” in consumer finances tied to the tariffs but cautioned that the full impact would take months to emerge. “Employment will come down a little. Inflation will go up a little bit,” Dimon predicted, while noting that consumers still appeared to be “feeling pretty good” as long as the labour market remained healthy.

Raghavan said Citi’s credit card lending was concentrated among customers with higher credit scores, which provided some reassurance. The bank, one of the largest U.S. retail lenders, had already taken a $2.7 billion provision for credit losses in the previous quarter.

Raghavan also expressed confidence in Citi’s corporate loan portfolio, noting that 80 percent of the bank’s exposure was to high-grade issuers.

Other banking executives have offered a similarly cautious outlook. Wells Fargo chief executive Charlie Scharf told investors two weeks ago that U.S. consumer and business activity appeared resilient despite tariff-related uncertainty. “It’s quite possible that there will be some kind of slowdown, but we hope it’s not too meaningful,” Scharf said. “Both businesses and consumers go into that period relatively strong. So it’s a very, very odd time. It’s very hard to see any kind of trend either way.”

However, there are signs of strain in consumer credit markets. At the end of the last quarter, the industry-wide rate of credit card charge-offs — loans deemed unrecoverable — rose above pre-pandemic levels, suggesting that some borrowers are already struggling to keep up with payments.

As banks increase provisions and monitor credit quality closely, the evolving economic backdrop — shaped by Trump’s tariffs, inflation pressures, and the strength of the labour market — will determine whether these precautionary moves are enough to shield lenders from a deeper downturn.