Financial Firms Leveraging National Small Business Week to Reconnect with Small Firms

May 25, 2012

A number of financial institutions are celebrating National Small Business Week (which is running between May 21 and May 25) to target the small business market. To connect with this audience, these firms are using an array of approaches, including making limited-time offers, publishing small business-related surveys, as well as providing support tools.

Special offers:

Wells Fargo has extended National Small Business Week into its own Small Business Appreciation Month, and is promoting a series of Appreciation Offers to small businesses, with total savings of up to $400.
Like Wells Fargo, BBVA Compass has designated May as Small Business Appreciation Month and is both promoting special offers on a range of products and services, as well as providing free business and economic monthly reports.
RBS Citizens is promoting bonuses of up to $450 to small businesses who sign up for a range of services.

Small business surveys: a number of banks are aiming to generate publicity and position themselves as a voice for small business by publishing surveys that focus on small business optimism, perceptions and challenges.

Bank of America recently published its inaugural Small Business Owner Report, which covers small business owner concerns, aspirations and perspectives
TD Bank published the finding of a survey of small business owners in its primary Northeast footprint. One of the key findings of the survey was that 74% of small businesses expect to meet or exceed revenue projections this spring.
Capital One released its 1Q12 Small Business Barometer, which found that 39% of small businesses reported improving economic condition, compared to 28% in 4Q11.

Small business support tools: Banks are providing an array of information, advice and networking tools to small businesses, designed to position banks as trusted small business advisors and partners. These support tools tend to be provided through dedicated online sites or in physical locations (such as in-branch webinars).

Citibank recently launched the Connect Professional Women’s Network on LinkedIn, which both provides content and offers a discussion forum.

With the economy slowly recovering, and with small business charge-offs (which had accelerated during the financial crisis) now seen as returned to more normalized levels, more banks will be seeking to rebuild small business franchises. So we should expect to see more small business offers, messaging and support tools in the coming months.

U.S. Credit Card Issuer Emphasis on More Affluent Consumers Reflected in Latest Outstandings

May 11, 2012

The latest quarterly regulatory filings from some of the leading U.S. credit card issuers reveal that outstandings held by cardholders with higher FICO scores are accounting for an increasing share of total credit card portfolios. Over the past year, there has been ample evidence of issuers targeting more affluent consumers with new products and aggressive offers, while continuing to maintain high underwriting standards.

Although these issuers do not use the same FICO-score categories, the following charts show that all issuers reported continued declines in outstandings held by cardholders with lower FICOs (below 660), while oustandings for cardholders with higher FICOs either had smaller declines or in fact grew over the past year.

Chase: Overall, there was no change in Chase end-of-period (EOP) credit card outstandings between 1Q11 and 1Q12. However, cardholders with FICOs of 660+ (which accounted for 82% of total outstandings in 1Q12) rose 4%, while outstandings with FICOs below 660 fell by 15%.

Discover uses the same FICO categorization as Chase. It reported a 4% total rise in EOP card outstandings between 1Q11 and 1Q12. FICOs of 660+ rose 10%, while FICOs <660 fell 18%. FICOs of 660+ accounted for 81% of total Discover credit card outstandings at the end of 1Q12, just below the rate for Chase.

Bank of America uses different FICO categories, with a cut-off point at 620. Total outstandings fell 10% y/y to the end of 1Q12, but the decline in FICOs below 620 (-41%) was much higher than that for FICOs of 620+ (-6%). FICOs of 620+ now account for 92% of total outstandings, compared to 88% in 1Q11.

Like Bank of America, Citibank’s total EOP U.S. credit card outstandings fell y/y (by 4%), and there were declines in all FICO categories, but again higher FICOs reported lower declines. At Citi, FICOs of 620+ now represent 91% of total outstandings, up from 85% at the end of 1Q11.

Unlike other issuers, Wells Fargo provides a wide range of FICO categories, which have been summarized into three categories below. Total Wells Fargo credit card outstandings rose 4% y/y, but there was an 11% decline among sub-prime FICOs below 600. For FICOs of 760+, outstandings rose 16% and now represent 25% of outstandings, up from 23% in 1Q11.

Credit Card Lines for Leading Issuers Highlights Continued Deleveraging

May 9, 2012

Recent regulatory filings from some of the leading U.S. credit card issuers reveal ongoing declines in available credit card lines.

Although the three issuers in the above table all reported credit card line reductions between March 31, 2011 and March 31, 2012, there are some variations among these issuers.

Chase’s credit card lines fell 6% during this period, but rose in the two most recent quarters, increasing 1% between the end of 2011 and the end of 1Q12.
Citigroup is the only issuer among the three to report U.S.-only credit card lines, which fell 8% between 1Q11 and 1Q12. However, like Chase, this decline appears to have bottomed out, with virtually no change in the most recent quarter.
Bank of America reported the strongest decline among the leading issuers, falling 11% between 1Q11 and 1Q12. This represents a continuation of a process of retrenchment that has been in place since the start of the financial crisis. Between end-2008 and end-2011, Bank of America’s credit cards lines fell by 46%. There are some signs that this decline is tailing off, with a fall of only 1.7% in the most recent quarter.

Indications that the significant reductions in credit card lines are bottoming out provide evidence to support industry expectations that card outstandings will grow slightly in 2012.