The Comeback of FI Credit Card Issuance

Navigator Edition: October 2012
By: Frank Martien

For years, the industry has been talking about bank re-entry into the credit card business as the list of agent bank program providers has shortened and regulatory events, such as the CARD Act, have been thought to level the competitive playing field.

First Annapolis recently analyzed bank call report data from SNL and found the data to confirm this trend.  Bank participation in credit card issuance is up; and several KPIs look favorable as well – even in a tepid economic environment.  For purposes of our analysis, we looked at all domestic commercial bank and savings bank regulated depositories (“FIs”) for which large FIs with subsidiary banks were aggregated into single “holding company” FIs.  The analysis was then segmented into seven categories:

  1. Top-10 banks by assets as of mid-year 2012
  2. Monolines  (Monolines defined as banks for which managed credit card loans were 50% or more of total assets (e.g., Amex, Discover, GE, Barclays, World Financial Network Bank, World’s Foremost Bank / Cabela’s, Merrick, World Financial Capital Bank, 1st Financial Bank USA, Nordstrom FSB, TCM Bank).  In addition, USAA, where cards = 42% of assets was flagged as a “Monoline” in the database.)
  3. Banks with $100 to 200 billion in assets
  4. Banks with $50 to 99 billion in assets
  5. Banks with $25 to 49 billion in assets
  6. Banks with $10 to 24 billion in assets
  7. Banks with less than $10 billion in assets

Figure 1: Total Financial Institutions & Credit Card Programs by Segment


As shown in Figure 1, over 7,000 FIs were analyzed.  For the top-10 and $100 to 200 billion FI segments, over 80% of these FIs self-issue consumer credit cards.  For monolines, by definition, 100% issue cards.  However, the percentage of FIs with card programs is substantially lower for FIs with less than $100 billion – particularly for community-bank sized FIs with less than $10 billion in assets who don’t always have the scale or managerial bandwidth to support a self-issued card program.

Figure 2:  Growth in Programs, New Entrants, & Exits since 2007


*  Exits defined as banks for which 2Q 2012 managed card loans was less than 10% of 2007 levels.

In Figure 2, the total # of FI issued credit card programs has declined since 2007; however, one can see that this decline is limited to FIs with less than $10 billion in assets where hundreds of smaller credit card programs were sold.  In contrast, FIs with between $10 and $200 billion have been re-entering the business on a net basis and several major FIs are expected to re-launch self issued credit card programs over the next 12 to 24 months.  In fact, the only exit coded for an FI with over $25 billion in assets was HSBC; albeit HSBC still lists $865 million in managed credit card receivables as of 2Q 2012.

Other KPIs that can be analyzed via call reports include credit card interest yields and net charge-off rates.  Generally speaking, interest yields have declined 40 bps on an overall basis from 2008 to the second quarter of 2012.  It’s quite interesting to also see the difference between yields at the top-10 FIs, which are ~200 bps lower than the monolines.  (note:  interest yield data for FIs of $200 billion and less were also reviewed; however, anomalies were evident in how the data were reported.)

With regards to net charge-off rates, the credit card industry is faring much better today by all accounts.  However one can see the recessionary loss rate increase impacted the top-10 FIs more than other segments; and that the top-10 continue to have higher charge-off rates than reported by other segments.  Viewed another way, the ground is fairly fertile for banks with less than $200 billion in assets to consider re-launching or growing consumer credit cards perhaps because their strategies are often focused on less risky relationship banking customers.

Figure 3:  Consumer Credit Card Interest Yield & Net Charge-Off Rates


The analysis in Figure 3 demonstrates a quantitative segment view of a few facets underscoring the relatively favorable market environment for FIs seeking to launch or grow credit card programs.  Going forward, we expect to see several more high-profile program launches and continued success in cards among banks focused on serving their customer relationships.

For more information, please contact Frank Martien, Partner specializing in Commercial Payments,

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