Tag Archives: Bank of America

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

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)

Reports of branch channels’ demise greatly exaggerated

A few months ago, Bank of America reported that it would consolidate reducing the size of its branch network, with speculation that it would eventually close up to 10% of branches (Bank of America has grown its branch network aggressively over the past decade (organically and through acquisition) and even with a 10% decline, the bank would have approx. 5,500 branches).

Some industry commentators saw this announcement as indicative of the long-term demise of the branch channel.   With self-service channels accounting for a majority of service transactions, branch density does not have to be as high, so some branch consolidation is inevitable.

However, the bigger change is the repositioning of branches as platforms for more complex transactions that require one-to-one transactions with specialists.  The staff mix in branches will change, with fewer tellers needed to handle everyday transactions, and greater deployment of sales specialists (Chase recently reported that it grew its sales specialists from 5,454 in 1Q09 to 6,319 in 1Q10).