Q1 2013: U.S. Credit Card Issuer Performance Snapshot
Q1 2013: U.S. Credit Card Issuer Performance Snapshot
The nation’s largest credit card issuers reported strong profits in the first quarter of 2013, but the lack of asset and revenue growth is a common, recurring theme while purchase volumes increased compared to the prior year. Many credit card issuers continue to post receivables declines as loan demand is clearly soft and issuers remain cautious at marketing to the lower ends of the risk spectrum.
Issuers Continue to Struggle for Growth: Although the protracted decline in receivables appears to be slowing, consistent with last quarter, industry receivables were down by 5.3% quarter-over-quarter and by 1.7% year-over-year. Quarterly declines were largely driven by the nation’s four largest issuers1. On a positive note, American Express, Discover, and Wells Fargo all posted year-over-year increases for the sixth consecutive quarter as they have separated themselves from the pack in terms of loan growth.
Attractive Returns: Issuer returns increased on both a quarterly and annual basis by 78 basis points and 16 basis points respectively. Reserve releases are slowing, but continue to enhance overall returns given the rather benign loss environment.
Continued Purchase Volume Growth: In our peer group, purchase volume increased by 5.8% on a year-over-year basis and, consistent with seasonal trends, decreased by 9.0% quarter-over-quarter. Consistent with last quarter, Chase and American Express posted the largest year-over-year purchase volume increases (excluding Capital One, whose reported increases are driven by the HSBC transaction), while Citi posted a year-over-year decrease. Industry purchase volumes are now approaching inflation adjusted pre-recession levels as issuers have moved upmarket to engage transactors.
Loss Rates Plateau: Loss rates appear to have reached a plateau as figures were once again nearly flat on a quarter-over-quarter basis. Annual loss rate improvements followed a similar trend as issuers posted an 88 basis point improvement year-over-year. With loss rates low and continued soft demand for loans, it will be interesting to monitor competitive moves particularly any increase in the use of offers targeting revolvers (e.g., balance transfers and promotional rates) and whether issuers move back into sub-prime in any meaningful way.
