Author Archives: mronan

Bank card issuers continue to improve credit quality metrics

4Q10 financial results for the leading bank card issuers showed that they are continuing to improve charge-off and delinquency rates. In fact, these rates are now beginning to return to normalized levels, which should mean that issuers will now turn attention to driving revenue growth, which has declined significantly over the past two years.

The following are 4Q10 charge-off rates for the leading U.S. bank card issuers (as reported in company financials):

Issuer 4Q10 Charge-Off Rate Y/Y Change Q/Q Change
SunTrust 5.65% -286 bps -116 bps
U.S. Bank 6.65% -24 bps -46 bps
PNC 7.05% -198 bps +64 bps
Chase (legacy Chase) 7.08% -156 bps -98 bps
Fifth Third 7.12% -169 bps -56 bps
Capital One 7.28% -231 bps -95 bps
Wells Fargo 8.21% -240 bps -85 bps
Bank of America 8.24% -364 bps -88 bps
Citi (Citi-Branded Cards-North America)

8.80%

 – 50 bps -102 bps

Bank deposit growth trends

American Banker (www.americanbanker.com, subscription needed to access) recently published end-second quarter 2010 deposit data for the top 200 bank holding companies in the U.S.  These top 200 banks grew deposits by 2.9% between 2Q09 and 2Q10.  This growth rate represents a slowdown relative to recent quarters, as many banks’ need to aggressively grow deposits as a funding source has abated (loan-to-deposit ratios have fallen below 100% and loan demand is expected to remain relatively anemic).  The top 10 banks grew deposits by 1.7%.

What is most notable in the data in the continued strong deposits growth rates for leading direct (branchless) banks, including:

  • ING Direct: 17th largest bank by deposits; 4%year-over-year growth
  • Charles Schwab: 25th largest bank; 43%growth
  • USAA: 31st largest bank; 17%growth
  • Discover: 33rd largest bank; 19% growth
  • American Express: 34th largest bank; 29%growth
  • Ally Financial: 35th largest bank; 31%growth
  • MetLife: 69th largest bank; 25%growth
  • Scottrade Bank: 105th largest bank; 71%growth

Financial marketing spend continues to recover

Third-quarter financial data released by the large U.S. banks this week pointed to the continuation of a trend observed in the previous quarter: year-on-year growth in marketing spend. Marketing represents a leading indicator for banks, as it is one of the first expense categories to be hit at the start of a downturn. The corollary is that an increase in marketing spend is indicative of banks’ expectation that economic conditions are improving.

The following are changes in marketing spend for leading financial institutions between 3Q09 and 3Q10 (quarterly changes are not generally regarded as reliable, due to seasonal factors):

  • Huntington: +152%
  • Capital One: +140%
  • American Express: +68%
  • Discover: +68%
  • Chase: +48%
  • PNC: +40%
  • SunTrust: + 13%
  • Key: +11%
  • Wells Fargo: +6%
  • Bank of America: +6%
  • U.S. Bank: -21% (although note that U.S. Bank 3Q09 marketing spend was much higher than usual, due to the launch of a number of marketing initiatives)