Summarizing 2Q17 Credit Card Outstanding and Charge-Off Trends

In a recent blog post, EMI discussed growth trends in credit card outstandings and charge-off rates, and the importance of ensuring that both remain at manageable levels. Now, our analysis of 2Q17 financials for leading issuers, as well as the latest reports from the FDIC and FFIEC, reveal the following trends on these two key credit card metrics:

  • Issuers continue to report steady y/y growth in credit card outstandings, although the rate of growth has moderated in recent quarters. According to the FDIC’s Quarterly Banking Profile, credit card loans rose 4.5% to $780 billion. The growth rate was unchanged from the previous quarter, but marked a reduction from the 6%+ rates in the first three quarters of 2016.

  • According to FFIEC call reports, regional bank card issuers like Huntington, SunTrust and City National reported the strongest y/y growth rates in credit card loans in 2Q17. Leading issuers also generated steady credit card loan growth: Citibank (+14% y/y, boosted by the acquisition of the Costco portfolio), Chase (+7%), Capital One (+6%) and Bank of America (+3%).

  • Leading issuers are growing credit card outstandings across the FICO Score spectrum.  Our analysis of selected credit card issuers’ 2Q17 10Q SEC filings found that issuers are reporting loan growth in all of their FICO Score segments, with most experiencing strongest growth in the sub-prime and near-prime categories. However, significant differences remain in the FICO Score composition of different card portfolios. For example, 35% of Capital One’s consumer credit card outstandings are held by people with a FICO Score of 660 or lower, but this segment only accounts for 12% of Chase outstandings and 14% of Citi’s portfolio.

  • The rise in credit card outstandings is being mirrored by continued growth in net charge-off rates.  According to the FDIC Quarterly Banking Profile, the average charge-off rate was 3.66% in 2Q17. This marked a significant y/y rise of 55 basis points.  However, the rate was only up 3 bps from the previous quarter, indicating a slowdown in the growth trajectory. Moreover, the current rate remains low by historic standards.

C&I Loan Growth is Slowing; How Can Banks Maintain Momentum?

The FDIC’s Quarterly Banking Profile reported this week that commercial and industrial (C&I) loans rose 7% between 2Q15 and 2Q16.  This represents a decline from growth rates in 2Q15 (+8%) and 2Q14 (+9%).

With this decline in commercial loan growth, how can individual banks develop structures and strategies to continue to drive growth in this key area?  The following are some key considerations:

  • Identify and communicate key differentiators.  Banks should gain insights from internal (salespeople, product staff, key executives) and external (current clients, suppliers, other partners) on what the bank’s key strengths and limitations are in serving commercial clients.  Banks should combine this research with in-depth competitive analysis to identify key differentiators.  These key differentiators then need to be consistently communicated across all communications channels.
  • Identify and leverage opportunities in vertical industry sectors.
    • Size and profile the opportunity: identify industry clusters within the bank’s footprint and/or sectors that have strong growth potential and that have traditionally been underserved by other banks.  These sectors should be profiled to identify the key business and financial challenges of companies in this sector.
    • Develop and implement a plan to target this sector, which may include establishing a dedicated industry group (First Tennessee Bank recently created a dedicated music industry group in Nashville), and engaging with this sector (e.g., by creating industry-specific content and collateral, as well as participating in, sponsoring and even hosting industry events).
  • Develop thought leadership infrastructure and assets.  Banks can develop a competitive advantage by creating compelling content in a mix of formats (reports, newsletters, infographics, blog posts, videos, surveys) and presenting this content in a consistent and visually-appealing format (e.g., using bullet points for quick scanning, images, callouts).  Many leading banks have now created branded portals that provide content, tools and advice.
  • Leverage captive channels and use non-traditional channels for communicating to prospects.  Traditional B2B marketing channels are under pressure, as business readership of trade publications is falling and direct mail response rates continue to decline.  Banks need to invest in a broader mix of marketing media, including online, email, social media and events.  Banks also have significant opportunities to leverage their existing service (and sales) channels, including branch, call center, online, mobile and social media.
  • Develop a commercial banking presence in non-traditional markets.  Unlike retail banking, banks have more scope to develop their commercial banking operations outside their traditional footprint by opening beachhead offices in markets that have growth potential (overall or for specific industries) and where the bank feels it can compete effectively with incumbents.
    BMO Harris recently opened a commercial banking office in Dallas
    Wells Fargo opened a commercial banking office in Portland, Maine.

Although C&I loan growth has slowed, banks remain committed to continuing to grow their commercial loan portfolios.  Banks that can clearly articulate and deliver their value proposition (and competitive differentiation) to their commercial clients and prospects will have increased their chances of success in this dynamic environment.

Leading credit card issuer 3Q14 performance: key takeaways

EMI analysis of the leading U.S. credit card issuers’ latest quarterly financials—as well as FDIC call reports—revealed the following trends in outstandings, volume and charge-off rates. According to the latest call report data from the FDIC, end-of-period outstandings rose 0.9% between 3Q13 and 3Q14.  Three of the four issuer segments grew card loans, with the Big Four issuers continuing to act as a brake on stronger overall growth.


  • End-of-period card loans for the Big Four issuers (Chase, Bank of America, Citi and Capital One, which account for 66% market share) fell 1%.  Chase and Capital One reported loan growth (+3% and +4% respectively), while Citi (-6%) and Bank of America (-1%) continued to decline.
  • The four main card “monolines” had the strongest loan growth, led by Barclaycard (+32%) and Synchrony (+24%).  American Express and Discover each reported 7% growth.
  • The super-regionals maintained their strong loan growth rate, with Wells Fargo rising 11% (maintaining its strong recent momentum) and U.S. Bank up 5%.
  • Other regional bank card issuers* had steady card growth.  Within this segment, SunTrust was the standout performer, up 22% y/y.  Other regionals banks with relatively strong credit card loan growth included PNC (up 5% to $3.9 billion), Fifth Third (rise of 7% to $2.1 billion) and Regions (+8%, to $0.9 billion).

Bank cards issuers are ramping up efforts to cross-sell credit cards to existing banking customers.

  • Wells Fargo is leading this push, with its credit card penetration of retail banking households reaching 40% in 3Q14 (up from 28% in 3Q11).  To target its affluent clients, Wells Fargo recently launched American Express-branded credit cards.
  • Regional banks are seeking to replicate the approach of the super-regionals; Regions reported that credit card penetration was 15% in 3Q14, up two percentage points y/y.
  • Even the top issuers are looking to tap into cross-sell opportunities: Bank of America reported that 64% of new cards issued in 3Q14 were to existing bank clients.

In recent years, issuers have focused much more on growing volumes rather than loans.  Even as issuers are now refocusing on growing outstandings, they continue to seek to grow card volume, through tiered rewards programs and acquisition/activation offers.  Issuers leading the way include Capital One (17% y/y rise in general-purpose card volume), Wells Fargo (+16%), Chase (+12%) and American Express (+9%). Credit card charge-offs rates continue to decline, with the scale and duration of the decline surprising the issuers themselves.  Of the 13 issuers in the table below, seven had 3Q14 charge-off rates below 3%, and eight of the issuers reported y/y declines.


Issuers continue to focus outstandings growth on higher-FICO segments, with some exceptions.

  • Big Four Issuers: For Bank of America, outstandings for the 740+ FICO segment rose 5%, but outstandings fell 6% for the <740 segment.  However, Chase bucked the general trend with stronger growth for the <660 FICO segment.


  • Monolines and super regionals: both Discover and Wells Fargo reported strong outstandings growth between end-3Q13 and end-3Q14, with stronger growth performance for higher FICOs.


  • Other regional bank card issuers: PNC and SunTrust following the general pattern, with stronger outstandings growth for higher FICOs.  However, Regions’ <620 segment outstandings rose 22% (albeit from a low base).


  * Other Regional issuer segment comprised of the following banks: TD Bank; PNC; Fifth Third; BB&T; Citizens Bank; Regions; SunTrust; Commerce Bank; KeyBank; and BBVA Compass.