(C) Citigroup Has 360,000 Customer Cards Hacked

Citigroup Inc. (C) has revealed the extent of the recent security breach it faced after hackers got access to hundreds of thousands of its credit card customers’ information in North America. Management affirmed that around 360,083 North America Citi-branded credit cards were hacked and only accounts issued in the U.S. were impacted.

Citi came to know about this unauthorized access during a routine check up. Customers’ account information such as name, account number and contact information, including email addresses were leaked. However, chances of fraud are perhaps less as more critical data remained unscathed. Such data include customers’ social security number, date of birth, card expiration date and card security code (CVV).

Yet, customers remain susceptible to other problems. The extent of client information that has been hacked could be used to procure further financial information through illicit ways.

Measures by Citi

The affected customers are being contacted by the company and measures have been taken to avoid any such event again in the future. Around 217,657 accounts were reissued credit cards along with a notification letter by Citi.

Other customers were not re-issued credit cards because either their accounts were closed or they already received new credit cards as a result of other card replacement practices. Citi is significantly monitoring these accounts for suspicious activity.

Companies Under Attack

Besides Citi, the other companies that suffered cyber attacks in recent times include some big names like Google Inc. (GOOG), Lockheed Martin Corp. (LMT), and Sony Corp. (SNE). The most notable was that of the security breach at EMC Corp.’s (EMC) RSA unit, which makes SecurID used by banks for corporate networks’ to secure log in. Such a situation raises concern about the level of protection these companies are providing to their customers.

Our Take

We believe that such a breach exposes a bank’s clients to huge risk. Incidents like this dent Citi’s reputation and might even result in the company losing customers to its competitors who could now take advantage of this faulty system.

Moreover, Citi also has to incur upfront costs for providing alternative services to the affected clients like replacing their credit cards. Such unexpected costs are definitely unwanted.

Moreover, the market has become much more competitive and companies are keeping no stone unturned to retain their brand names, customer base and at the same time increase their operating efficiencies by reducing costs.

Hence, in this environment, such an incident is uncalled for. Thankfully, the regulators are watchful and banks have been asked to enhance their security standards for safeguarding customers’ information.

Citi currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we are maintaining a long-term Neutral recommendation on the stock.

CITIGROUP INC (C): Free Stock Analysis Report

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