Findings from 2018 third quarter earnings releases show that US loss rates remain benign as purchase volume and receivables continue to grow. Issuers continue to state that economic trends are favorable and recent tax reform has lifted returns.
Year-over-year growth is a key theme
- Receivables and spend increased year-over-year for all banks.
- American Express, Synchrony and Alliance Data reported strong year-over-year receivables growth of more than 10 percent albeit some driven by portfolio acquisitions.
- Chase, Capital One, Discover, American Express, Synchrony and Citi Retail Services reported strong purchase volume growth of more than 10 percent year-over-year.
- Loss rates have remained benign and ticked downward from the prior quarter, although some issuers are expecting higher loss rates due to deeper underwriting for recent vintages.
- In general, returns remain healthy.
- Bank commentary on the economy indicates that most see favorable conditions continuing over the near-term.
- On the credit quality front, Discover and Capital One indicated that they are reducing credit limits for certain cardholders.
Notable happenings
New partnerships
Synchrony and Fred Meyer Jewelers agreed to a new financing program partnership; Alliance Data and Academy Sports agreed to a new partnership offering a private-label card.
Partnership developments
Synchrony and JCPenney renewed their private-label credit card partnership; Synchrony and Lowe’s renewed their partnership for consumer and commercial credit programs; American Express and PayPal announced an expanded partnership for deeper integration.
New products/features
Wells Fargo launched its centralized account management system, Control Tower; Shell and Citi introduced new private label and co-branded cards; Capital One introduced a new $95-annual fee Savor card with four percent cash back on dining and entertainment, two percent at grocery stores, and one percent on all other purchases; Caterpillar and Citi announced a new private label card for consumer and commercial financing.
Mobile & tech
Stripe introduced a new terminal for brick and mortar; startup Petal introduced a new credit card aimed at customers without easy access to credit; 7-Eleven and CVS began acceptance of Apple Pay.
Stay tuned for next quarter’s report on US consumer credit card trends. For questions or comments, please contact me.
Industry statistics (based on non-retail card issuers in scorecard section)
1 Total receivables for non-retail issuers at end of 3Q18. 2 Total purchase volume of non-retail issuers in 3Q18. 3 After-Tax ROA excludes Wells Fargo, Chase, Bank of America and US Bank, which do not report credit-specific income. 4 YoY=Year-over-year change versus 3Q17. 5 QoQ=Quarter-over-quarter change versus 2Q18.
Note: Purchase Volume is reported volume for the quarter (it is not annualized or TTM)
Issuer scorecard—Q3 2018 ($billions)
1Chase no longer discloses an ROA measure directly attributable to Card Services. Citigroup: Purchase volume includes cash advances. 2 Citigroup data includes Citi-Branded Cards and Citi Retail Services. 3 Capital One: U.S. card business, small business, installment loans only. Purchase volume excludes cash advances. 4Bank of America: Receivables, purchase volume, and net loss rates are for U.S. consumer cards. 5Discover: includes U.S. domestic receivables and purchase volumes only. Restated: ROA reflective of Direct Banking segment (credit card represents ~80% of loans) and implied U.S. Cards tax rate of ~22%. ROA denominator estimated from total loans ended figures.6American Express: Changed reporting method as of 2Q18. All figures except ROA are for U.S. Consumer segment; Amex has stopped reporting net income attributable to U.S. consumer segment. ROA is estimated based on U.S. receivables comprising 88% of Global Consumer segment and 22% U.S. effective tax rate. 7US Bank: Net Income attributable to Payments Services totaled $393M as of 3Q18, compared to $311M in 3Q17; Payments Services includes revenue from consumer credit cards, as well as commercial revenue and other sources. 8A/R and PV for Retail Card unit only. 9Loss rates and ROA include all of SYF’s business lines (i.e., Retail Card, Payment Solutions, and CareCredit). Retail Card accounts for about 70% of total receivables. 10Average receivables.
