Q1 2012: U.S. Credit Card Issuer Performance Snapshot

Navigator Edition: May 2012
By: Loren Zadecky

2012 began much as 2011 ended for the U.S. credit card industry by showing continued signs of stabilization.   Purchase volume and net credit loss rates in Q1 2012 have shown strong improvement relative to the same quarter in 2011.  The pace of decline in receivables is slowing markedly and return on assets is nearly flat relative to Q1 2011 and up relative to Q4 2011.  Below is our commentary for Q1 2012:

  1. Gradual Stabilization of Receivables Levels:  The year-over-year decline in receivables continued to slow during Q1 2012.  Some of this stabilization is occurring naturally as high loss rates accounted for a significant portion of consumer “de-leveraging” during the recession.   However, growth prospects remain very challenging for the credit card industry as issuers and consumers work their way through the after-effects of the recession.
  2. Stable Return Levels:   After-tax ROA remained effectively flat (declining 19 basis points) on a year-over-year basis, but increased nearly 50 basis points from Q4 2012.  As reserve releases have less impact on returns over time, assuming credit quality remains relatively benign, how individual issuers respond to increased competition for cardholders will be a key determinant of future profitability.  Competition will drive the level of marketing investment, use of promotional rates, and depth of underwriting across the industry.
  3. Continued Growth in Purchase Volume:  Cardholder spend continued its upward trend in Q1 2012 as volumes increased nearly 10% relative to the same quarter a year ago.  And, although purchase volume increases differed across the peer group, each issuer realized positive growth on a year-over-year basis.  Waves of card marketing directed at the affluent sector coupled with improved consumer sentiment in the higher income demographic segment continued to provide a nice tailwind for the industry.
  4. Improvement in Loss Rates:  Credit improvement continued in the first quarter of 2012 as loss rates declined nearly 260 basis points on a year-over-year basis.  And, while loss rates continue to flatten as evidenced by the 14 basis point decline relative to Q4 2011, further improvements in credit quality would be a pleasant surprise as issuers focus more on growth which is likely to require marketing into higher-risk segments.


Source: Issuer quarterly reports and First Annapolis analysis.
1 Includes income from acquiring business, auto, student lending, and private label receivables and volume.
2 Restated splitting between Citi-branded North American and CitiHoldings Retail Partners from Q1 2008. Purchase volume includes cash advances. All figures for combined portofolios.
Receivables, purchase volume, and net loss rates are for U.S. consumer cards. After-tax ROA includes U.S. consumer, business, and merchant acquiring.
U.S. card business, small business, installment loans only. Purchase volume excludes cash advances.
5 Receivables and charge-offs are for U.S. Cardmember Lending business only. Purchase volume is for U.S. Card Services segment, consumer, and small business.
Includes U.S. domestic receivables and purchase volumes only. ROA includes merchant services and implied U.S. Cards tax rate of ~40%.
After Tax ROA reflects Payment Services line of business income and average loans.
After Tax ROA and purchase volume totals exclude Wells Fargo. Credit-specific income not reported. Reflects any previous quarter restatements and includes addition of US Bank.

For more information, please contact Loren Zadecky, Senior Consultant specializing in Card Issuing,

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