CORRECT: Some Credit-Card Issuers Post Loan Growth
December 15 2011 - 6:50PM
Dow Jones News
Some large credit-card issuers are showing small signs of loan
growth as competition for borrowers reaches a fever pitch.
American Express Co. (AXP), Capital One Financial Corp. (COF)
and Discover Financial Services (DFS) said Thursday their
cardholders' balances have inched up. While it's too early to tell
if the increases will lead to lasting growth, the results are a
positive sign for an industry that faces headwinds going into the
new year.
With improvements in delinquencies and loan charge-offs losing
steam, credit-card issuers are under pressure to increase loans to
raise revenue. That's led to a boost in marketing by the industry's
biggest players, who hope to win customers using other lenders'
credit cards.
"It's all about the battle for share of wallet," said Andrew
Davidson, senior vice president of research firm Mintel
Comperemedia. "These companies that are competing at this level are
making an investment in trying to obtain a customer for the long
term. It's all about the lifetime value of the customer."
American Express's U.S. card loans totaled $51.4 billion in
November, up 3.6% from a year ago and 1.6% from October, according
to a filing with the Securities and Exchange Commission.
However, the New York lender's delinquency rate, or percentage
of borrowers at least 30 days behind on a payment, was flat for the
second straight month at 1.5%. Its net charge-off rate, or
percentage of loans deemed uncollectible, rose to 2.4% from 2.3% in
October.
Capital One, which reported similar trends in November, said its
U.S. card loans reached $54.8 billion, up 3.2% from a year ago and
up 1.8% from October. Meanwhile, the McLean, Va.-based bank's
delinquency rate was flat at 3.73% and its net charge-off rate rose
to 4.29% from 3.96% in October.
Discover, which reported quarterly earnings Thursday, said its
credit-card loans grew during the three months ended Nov. 30 to
$46.6 billion, up 3.3% from a year ago and about 1% from the
previous quarter. Its quarterly delinquency rate declined year over
year, to 2.39% from 4.06%, and charge-off rate fell to 3.24% from
6.95%.
The Riverwoods, Ill.-based lender has faced more competition
from banks pushing cash-back credit cards, which has traditionally
been Discover's forte.
Discover doesn't feel pressure to match or beat the offers by
some of its competitors, who have dabbled in the cash-back market
in the past, Roger Hochschild, president and chief operating
officer of Discover, said in an interview Thursday.
"Copying someone copying you is not a good strategy," Hochschild
said.
Marketing industrywide has bounced back over the last year, a
stark turnaround from the recession when most credit-card issuers
pulled back sharply as they grappled with surging delinquencies and
charge-offs.
Credit-card issuers mailed 1.34 billion offers to consumers in
the third quarter, up from 987.7 million a year ago, according to
Mintel Comperemedia. However, the volume is down from the 1.78
billion offers mailed in the fourth quarter of 2007, when the
recession started.
As borrower performance has improved, lenders have become more
confident in their ability to manage their portfolios, prompting
them to ramp up marketing again, Davidson said.
Several large card issuers continued to see improvements in loan
performance in November.
Bank of America Corp. (BAC), which reported data for loans
packaged into securities, said its delinquency rate fell to 3.96%
from 3.97% in October. Its charge-off rate fell to 5.67% from
5.98%.
J.P. Morgan Chase & Co.'s (JPM) delinquency rate for
securitized loans fell to 2.54% from 2.55% in October, when the
rate had inched up from the prior month. However, charge-offs were
flat at 4.18%.
The fact that some lenders, such as Capital One, saw their
delinquency rates flatten in the quarter is a sign that loan
portfolios are returning to historical performance, which has been
expected, said Sanjay Sakhrani, an analyst with Keefe, Bruyette
& Woods.
-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214;
andrew.r.johnson@dowjones.com
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