Tag Archives: outstandings

How Did U.S. Credit Card Issuers Perform in 4Q12?

Over the past week, leading U.S. credit card issuers have been publishing their 4Q12 and full-year 2012 results.  After we reviewed these financials, we detected the following trends, which are largely consistent with our recent blog on top credit card trends for 2013.

  • Outstandings: The top three issuers continue to report y/y declines in average outstandings, while traditional monolines and regional banks are driving growth. Both Wells Fargo and regional banks focus on cross-selling credit cards to their existing customer base. Wells Fargo reported that credit card penetration of retail banking households rose from 27% in 1Q11 to 33% to 4Q12. Bank of America indicated in its 4Q12 earnings call that it would be focusing on marketing credit cards through the franchise.

  • Volume: Most leading issuers reported strong y/y growth in volume in 4Q12. However, there is evidence that this growth rate is slowing down. American Express‘ 8% y/y growth in 4Q12 was down from 12% in 1Q12. And during the same period, Chase y/y volume growth fell from 12% to 9%.

  • Charge-off and delinquency rates: Charge-off and delinquency rates continue to trend downwards. Of the 11 issuers studied by EMI,
    • Only Capital One reported a y/y rise in its charge-off rate, and this was due to the acquisition of the HSBC card portfolio.
    • 6 of the 11 reported linked-quarter declines in the charge-off rate. 9 of the 11 have rates below 4%, with two issuers (American Express and Discover) reporting 4Q12 charge-off rates of below 3%. Even Bank of America (which is one of the two issuers with a rate above 4%) reported that its charge-off rate is at its lowest level since 2006. In many cases, charge-off rates are now below historic norms, which points to a fundamental change in consumer attitudes to carrying credit card debt.
    • Delinquency rates also declined y/y, although some issuers did reported linked-quarter increases, driven perhaps by both seasonality, as well as some upward movement as issuers start to pursue loan growth.

FDIC Credit Card Data: Slight Rise in Loans, Continued Decline in Charge Offs

The latest U.S. bank data published by the FDIC reveals that the protracted decline in credit card outstandings may be coming to an end, charge-off rates are continuing to fall, and credit card line utilization rates are relatively unchanged.

  • Between end-3Q11 and end-3Q12, credit card outstandings rose by 0.2%.  This small increase follows a steady series of y/y declines in the years following the financial crisis.  The largest three issuers (Chase, Bank of America and Citibank), which still account for more than half of outstandings, reported a 7% y/y decline, as charge-offs and portfolio sales continue to outstrip new loan growth.  On the other hand, large regional banks (see note at the bottom of the blog) increased outstandings 6% y/y, led by TD Bank (+22%) and SunTrust (+19%).  Looking into 2013, it is likely that outstandings will grow modestly as regional banks and, to a lesser extent, “monolines” pursue loan growth, and as the top three issuers move towards the end of their portfolio deleveraging.  However, much will depend on the demand for credit.  This demand is significantly influenced by macroeconomic trends and consumer confidence, both of which are fragile at present.

  • Credit cards lines fell 2% in the year to end-3Q12.  The top three issuers reduced card lines by 6% while regional banks increased lines by 8%.  Movements in credit cards lines tend to match outstandings very closely.  In 3Q12, credit card utilization (credit card outstandings as percentage of credit card lines) was 21.5%, and this measure has remained in the 20.5%-22.5% range in recent years.  This consistent credit card utilization ratio implies that if issuers increase credit card lines, outstandings growth will follow.  The following table highlights some regional banks that have grown credit card lines over the past year at double-digit rates:

  • Credit card issuers continue to benefit from reductions in charge-offs, which fell 31% in the year to end-3Q12.  The average charge-off rate fell 174 basis points (bps) y/y and 12 bps on a linked-quarter basis, to 4.04% in 3Q12.  Charge-off rates are now at or below historic averages for many leading issuers, and are not expected to fall much further.  In fact, as issuers look to build outstandings and grow revenues in 2013, there may be some upward pressure on charge-off rates, depending on how aggressively issuers open the lending spigot.

(Note: Regional bank category includes the following banks: Bank of the West, BB&T, BBVA Compass, BMO Harris , Fifth Third, PNC, RBS Citizens, Regions, SunTrust, TD Bank, U.S. Bank, and Wells Fargo.)

Discover 3Q12 Financials: 10 Credit Card Metrics to Track With Other Issuers

Discover Financial Services reported third-quarter financials this week. As it publishes financials a few weeks before other leading card issuers, Discover’s results often act as leading indicator of broader credit card industry trends. Using Discover’s results as a benchmark, the following are 10 key credit card metrics to follow when other issuers report over the next month.