Tag Archives: Regions Bank

Trends Impacting Credit Card Marketing

A review of various bank and credit card issuer presentations at the recent Barclays Global Financial Services conference revealed a number of trends that could have a significant impact on how credit cards are being marketed.

  • Priority is cross-selling existing customers.  Regional banks that have recently re-acquired their branded credit card portfolios (such as KeyBank and Huntington) are following the lead of Wells Fargo model, in cross-selling credit cards to existing customers (35% of Wells Fargo’s retail households have a Wells Fargo credit card).
    • Regions Bank—which acquired its card portfolio two years ago—reported that its credit card penetration rate is now 13%, and it has ambitions to grow this to 20%.  In addition, even issuers with a national credit card franchise are concentrating efforts on their own customer bases.
    • U.S. Bank is increasingly focused on deepening customer relationships and has increased card penetration to 34%.
    • And Bank of America claimed that 60% of new cards issued in the second quarter of 2013 were to existing customers.
  • The online channel is now the most popular method for new account production.  The popularity of the online channel for new cardholder acquisition is largely driven by its lower cost-per-acquisition relative to other channels, such as direct mail.  It is also a by-product of consumers’ increased comfort with using electronic channels to manage their finances.
    • American Express reported that more than 50% of card acquisition comes through online channels.
    • 71% of Bank of America’s new U.S. consumers credit card accounts came from branch and online channels in 2Q13, compared to 57% in 2Q11.
    • And these examples are consistent with recent data from Chase, who reported in 2Q13 that 53% of credit card accounts were acquired online.
  • Card issuance is growing. 
    • Bank of America claimed that its card issuance is at its highest level since 2008.
    • This mirrors recent data from Experian, which found that overall bank card origination volume (based on credit issued) jumped 21% y/y to $69 billion in 2Q12, the highest level since the fourth quarter of 2008.
  • Credit quality remains strong. Most issuers do not see any significant reversal in the continued downward trajectory in credit card charge-off and delinquency rates.
    • Discover does not envisage significant upward movement in its loss rates over the next 12 months.
    • Chase attributed part of the improvement in its credit-quality metrics to a shift in its customer mix toward higher-income consumers.
  • The competitive battle is centered on rewards.  Although most issuers now offer attractive teaser rates on their main cards, issuers are looking to differentiate and create a competitive advantage through their rewards programs.
    • Discover said that “rewards is the new competitive landscape” and this realization influenced the launch of its Discover It card.
    • U.S. Bank is looking to differentiate by taking its rewards program in-house, claiming that this will enable it improve redemption value, enhance the customer experience and customize rewards.

Commercial loan growth momentum continues at leading U.S. banks

In spite of the continued economic uncertainty, U.S. banks continue to enjoy strong growth in commercial lending. A study of the 2Q12 financial results of 14 leading U.S. banks revealed that 11 grew average commercial loans by double-digit rates. In addition, 11 banks had higher year-over-year growth rates in 2Q12 than in 1Q12.

13 of the 14 banks reported growth in commercial loan portfolios between 1Q12 and 2Q12.

Looking at specific banks:

  • Commercial loan growth was led by PNC, although it should be recognized that PNC completed the acquisition of RBC Bank in 1Q12, which significantly skews the data.  PNC recorded above-average growth rates for financial services and health care loan portfolios.
  • U.S. Bank had the second-largest y/y growth rate, at 24%, led by a 52% rise in its specialized industries portfolio.
  • Comerica increased its average commercial loan portfolio 20% y/y, driven by a 46% rise in its specialty lending portfolio. (Over the past year, Comerica grew its energy loan portfolio by 68% and its tech and life sciences portfolio by 36%.)
  • KeyBank’s average commercial, financial and agricultural loan portfolio grew 19% y/y. KeyBank reported that its commercial loan utilization rate has been increasing in recent quarters, from 43.4% in 2Q11 and 46.9% in 1Q12 to 47.3% in 2Q12.
  • Chase grew commercial banking average loans 16% y/y, driven by a 42% rise in its corporate client banking loan portfolio (which covers clients with $500 million to $2 billion in annual revenue).
  • Bank of America was the only bank to report a quarterly decline in its average commercial loan portfolio (-2.7%). In addition, it had the second-lowest y/y growth rate (of 6.1%).

Most of the banks are reported improvements in commercial loan charge-off rates.  However, yields on commercial loans continue to fall. All 12 of the banks reporting commercial loan yield data had y/y declines, but it’s important to note that 4 of the 12 (PNC, Wells Fargo, BB&T and M&T) reported an increase in commercial loan yields between 1Q12 and 2Q12.