Tag Archives: chase

Credit card issuer quarterly scorecard: improved credit quality; volume growth; lending declines

In the latest quarterly financials, the leading U.S. credit card issuers displayed consistent trends in credit quality, purchase volumes and card loans.

  • Credit quality: issuers continued to report strong yearly and quarterly declines in charge-off rates.  The current rate of decline, as well as the high rates of decline in delinquency rates, indicate that charge-off rates will fall further in the next few quarters.

  • Purchase volume: All leading credit card issuers are growing purchase volumes year-on-year, with four issuers reporting double-digit volume growth. In addition, issuers like Chase and Capital One have accelerated volume growth in recent quarters.  In 1Q11, Citi reported a small y/y rise of 0.3%, which followed a protracted period of volume decline.  The 7 issuers listed in the chart had a combined $321 billion in purchase volume, up 9% y/y.

 

  • Average Outstandings: Although issuers have been effective in growing purchase volume, average outstandings for all leading issuers continued to decline year-on-year in 1Q11.  The 8 issuers combined for $515 billion in average outstandings in the quarter, down 18% from 1Q10.  The rate of decline slowed in 1Q11, with combined outstandings for the 8 issuers down 1.4% from 4Q10.  And Discover reported 1.7% quarterly growth in average outstandings.  Many issuers have reported that they expected outstandings to grow in the second half of 2010.

Small business lending trends from banks’ 1Q11 financials

Most banks do not break out small business lending data in any greater detail in their quarterly financials, but Bank of America and Chase both provided some interesting (and contrasting) small business lending-related metrics when they published their first quarter 2011 results last week:

  • Chase grew business banking originations 57% y/y, to $1.4 billion.  In addition, end-of-period business banking loans rose for the second consecutive quarter, to $17.0 billion.  In presenting the quarterly financials, JPMorgan Chase CEO Jamie Dimon claims that the bank is starting to see real small business loan demand
  • Bank of America’s small business loan charge-off rate fell for the sixth consecutive quarter, declining 45 bps from 4Q10 to 8.68% (this is the lowest rate since 1Q08).  However, its small business loan portfolio continued to decline, falling 2.8% in the quarter to $14.3 billion at the end of 1Q11 (although the rate of decline is falling)

So while Bank of America remains focused on getting credit quality under control, Chase has forged ahead and is growing its small business franchise.  As other national and regional banks publish their quarterly financials over the next week, it will be interesting if any other bank has started to grow its small business loan portfolio.

PNC revamps credit card portfolio to focus on relationship rewards

Earlier this week, PNC introduced three new rewards credit cards, with bonus rewards tiers for cardholders who also have specific PNC checking accounts. This relationship rewards approach builds on PNC’s existing PNC Points program, which enables customers to combine points earned on credit card and debit card spending, as well as on various banking activities. Two of the three new cards are also in the PNC Points program; the other offers a cash rebate.

While Citi’s ThankYou Network is frequently cited as the archetypal relationship rewards program, PNC’s bonus rewards concept has more in common with the Chase Exclusives program. Both programs provide bonus earnings for their checking account customers, and underscore the primacy of the checking account as the key relationship product for banks. It is also notable that all three banks have built their relationship rewards programs using a card-based points architecture.

With the Federal Reserve’s proposed cap on debit card interchange, many leading banks have announced the discontinuation of rewards on debit card spending. From a relationship perspective, this means that some banks are refocusing attention on the checking account itself, rather than the plastic attached to it. In the case of PNC, it is telling that the level of bonus reward is based on the checking product owned, each with different minimum balance requirements (e.g., 50% bonus with PNC Performance Checking Account; 75% bonus with PNC Performance Select Checking Account).