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Citi pegs CECL increase at high end of forecast range

Citigroup Inc. expects to record an immediate increase in its credit loss reserves of about 29% under new accounting rules, CFO Mark Mason said on a call to discuss fourth-quarter 2019 earnings.

That is on the high end of the 20% to 30% range the company previously forecast. The current expected credit loss standard went into effect for most publicly traded companies on Jan. 1 and requires banks to set aside allowances for anticipated lifetime losses.

When asked about factors driving the number to the high end, Mason said there was "no meaningful shift that I'd point to." He said that overall, the company's credit card business is driving the reserve increase under CECL. In dollar terms, the expected increase amounts to about $4 billion.

Citi also expects net credit losses for its branded cards to rise modestly higher than its medium-term target of 3% to 3.25%, reflecting higher conversions of promotional balances into interest-earning balances. Mason said the higher volume is a "good thing," consisting of "profitable, high-quality" receivables.