Home»  Resources»  News Scan

News Scan Dec 2012

Credit Card News, Economy News, Banking Industry News - Dec 2012
Dec 2012

Community banks declining in number

Source: Bizjournals Category: Banking Industry News
  • Since the mid-1980s there has been a tremendous consolidation in the U.S. banking industry.
  • The number of banks fell from 19,017 in 1984 to 7,357 in 2011 and the percentage of assets held by community banks fell from 38 percent to 14 percent. In other words, the big banks got bigger.
  • But despite the loss of thousands of small banks, community banks remain an important part of the banking industry.
  • Community banks make up the majority of offices in rural counties, and one out of five of all U.S. counties there are no physical banking offices except those offered by community banks.
  • As of 2011, they (community banks) held 14 percent of banking industry assets, but 46 percent of the industry’s small loans to farms and businesses.
  • Despite the changes community banks continue to play a unique and important role in our economy.
  • As of 2011, community banks made up 92 percent of FDIC-insured banks and 95 percent of U.S. banking operations. Changes in the U.S. economy could help community banks in the future.
Dec 2012

New Accounting Plan Goes Too Far, Banks Fear

Source: Americanbanker Category: Banking Industry News
  • Bankers are raising concerns that a new Financial Accounting Standards Board proposal that would allow banks to set aside reserves for future losses is too open-ended and might result in banks putting too much aside.
  • The goal has been to achieve an "expected-loss" scenario that lets banks look into the future in setting such reserves to avoid the kind of financial whiplash that occurred during the crisis.
  • Although FASB ostensibly moved closer to that goal this week, issuing a proposal that would move toward such a model, the industry now fears it might have gone too far, forcing banks to reserve for expected losses over the entire life of a loan.
  • The proposal is also being interpreted as expanding the types of assets included in the new accounting model, which might force community banks to include their debt securities.
  • To a certain extent, bankers and industry representatives praised FASB's step, saying the approach was simpler than the model previously discussed with international accounting officials and that it clarified issues such as accounting for purchased credit-impaired loans.
Dec 2012
  • Consumers place high value on the flexibility gift cards bring, according to a survey by payment processing company First Data.
  • When given the choice between a $25 gift card and a present valued at $25, survey respondents were nearly unanimous in their preference for the gift card.
  • Even when the present's value was doubled (to $50), about half of respondents said they'd still take the $25 gift card.
  • The Web-based survey included 2,000 adults who had given or received a gift card in the past year.
Dec 2012
  • The U.S. current account deficit fell more than expected in the third quarter and was its narrowest in nearly two years as the goods and services gap shrank.
  • Current account deficit, which measures the flow of goods, services and investments into and out of the country, fell to $107.5 billion.
  • That represented 2.7 percent of gross domestic product, the smallest share since the second quarter of 2009, and down from 3.0 percent in the second quarter.
  • The shortfall on the current account has narrowed from a peak of 6.5 percent of GDP in the fourth quarter of 2005, in part because of a significant increase in the volume of oil exports, substantially cutting into the petroleum deficit.
  • In the third quarter, the deficit on goods and services tumbled to $124.5 billion from $137.4 billion in the prior quarter.
  • The surplus on income fell to $50.8 billion from $52.1 billion in the second quarter.
Dec 2012
  • U.S. credit-card holders continued to pay off their balances at historically strong rates in November, defying predictions that delinquencies would rise as the economy improved and card issuers took on more risk. Industrywide, delinquency rates reached 2.83% in the third quarter of this year,
  • Among the large card issuers, the biggest increase in chargeoffs came at Capital One, which is in the midst of integrating a riskier card portfolio acquired from HSBC. The McLean, Va., company's net chargeoff rate rose from 2.75% in October to 3.11% in November.
  • The bigger picture is that risk, having largely been wrung out of the card industry during the financial crisis, has yet to make a serious return.
  • The 2009 credit card reform law as a factor that undermined riskier underwriting, and notes that card issuers have been chasing customers who pay off their balances each month.
  • Such customers allow the issuer to earn money from swipe fees rather than from interest paid on revolving debt.
Dec 2012
  • The CFPB released a guide to how its examiners will review any private student lender to ensure compliance with applicable consumer financial laws.
  • Lenders will be reviewed on issues including accuracy of advertising, product disclosures, collections, borrower qualifications and the process for handling complaints or inquiries.
  • For many borrowers, a student loan may be their first major financial decision, with student debt topping a trillion dollars, CFPB will be working to ensure consumers are treated fairly and lenders are held accountable.
  • At least $8 billion of private student loans are in default, roughly 5% of the $150 billion market.
  • The Student Lending Examination Procedures is a part of the CFPB's General Supervision and Examination Manual.
  • The procedures will be used in examining both banks and non-banks that offer student loans and in coordination with the agency's enforcement team.
  • In addition, the CFPB is also working on web-based tools to help consumers shop for student loans, financial aid and repayment options.
Dec 2012
  • November deficit was $172 billion, larger than economist forecasts for a $150 billion gap and up from a $137 billion deficit in November of 2011.
  • Growth in spending outpaced rising receipts, deepening the deficit. Outlays grew to $334 billion from $290 billion in the same month last year while receipts rose to $162 billion from $152 billion.
  • An increase in the federal debt limit is tangled up in the negotiations between President Barack Obama and Congress over how to deal with the year-end "fiscal cliff" of automatic tax increases and spending cuts.
  • Obama has sought permanent authority to lift the debt cap, while congressional Republicans intend to use the debt limit as leverage in their demands for deep cuts to federal health and retirement benefit programs.
Dec 2012

FDIC approves $2.68 billion 2013 operating budget

Source: Bankcreditnews Category: Banking Industry News
  • The FDIC’s board of directors approved a $2.68 billion operating budget for 2013 an 18.2 percent decrease from the 2012 budget.
  • The board also approved a 2013 staffing level of 8,026 employees, fewer than the 8,713 currently authorized.
  • The FDIC plans to make additional staff reductions in 2014 and future years.
  • The budget includes $1.78 billion for the FDIC’s operations, a 0.1 percent increase from 2012, and $900 million for receivership funding, a 40 percent decrease from the 2012 receivership funding budget as a result of reduced resource requirements.
  • Receivership funding provides funding for expenses incurred as a result of the failure or near-failure of institutions insured by the FDIC and the management of receiverships resulting from such failures.
  • The number of institutions supervised by the FDIC fell by 18.4 percent from 5,527 in 2007 to 4,511 in 2012.
Dec 2012
  • More than 60% of U.S. adults believe payments made via smartphones will replace credit card and cash transactions in the future, yet only around 30% believe that will happen within the next five years.
  • Only 13% of survey respondents say they’ve used NFC to make a purchase. Close to 100 million NFC devices will ship in 2012.
  • Another type of smartphone payment is with mobile apps and two-dimensional bar codes. Starbucks uses this method and has processed millions of dollars of transactions.
  • The respondents, who could select multiple answers, cited the following obstacles to mobile payments: 52% see no reason to switch from using cards or cash to make payments.51% don’t want to store sensitive information on their phone.
  • 50% do not use a smartphone.40% don’t want to transmit sensitive information to a merchant’s device,25% worry they will lose their mobile service or data connection and be left unable to make payments.15% worry a dead battery will leave them with the same problem.
  • 8% don’t understand how to use the technology.7% don’t know where they could make mobile payments.7% cite another reason as hindering their interest in using smartphones to make payments.
  • 26% of respondents say they’ve used a mobile app as a coupon to make a payment and 16% as a gift card.
  • Meanwhile 17% of respondents say they’ve used a mobile scan as a transportation ticket and 15% say they’ve used one to gain admission to an event or movie.
Dec 2012
  • The money a household has to deposit into a bank account would decrease by an average of almost 55% if U.S. tax cuts are allowed to expire.
  • The amount would decrease to $2,182 from $4,782, a decline of $2,600. That is the amount of added annual federal tax an average household would have to pay, according to estimates from the Tax Policy Center.
  • Prior tax cuts could expire in January if Democrats and Republicans are not able to reach a plan to reduce the federal budget deficit.
  • If the tax cuts will not be extended into next year consumers will have nearly half the amount available for savings as they did in the past decade.
  • Consumer savings in bank accounts, excluding business and institutional accounts, increased to $8.2 trillion this month from $3.8 trillion in December 2001.
  • When divided by 82.8 million U.S. households with banking relationships, the average annual bank savings per household per year amounted to $4,782.
Dec 2012
  • New orders received by U.S. factories unexpectedly rose in October as demand for motor vehicles and a range of other goods offset a slump in defense and civilian aircraft orders, a hopeful sign for the manufacturing sector.
  • Orders for factory goods increased 0.8 percent after a revised 4.5 percent rise in September.
  • Orders for transportation equipment fell 2.3 percent in October on weak civilian and defense aircraft.
  • Orders for motor vehicles and parts rose 3.0 percent. Unfilled orders at U.S. factories rose 0.3 percent in October after increasing 0.1 percent the prior month.
  • Shipments of factory goods increased 0.4 percent after rising 0.7 percent the prior month, while inventories edged up 0.1 percent.
  • Orders for durable goods, manufactured products expected to last three years or more.
  • Orders for non-defense capital goods excluding aircraft seen as a measure of business confidence and spending plans increased 2.9 percent in October instead of the previously reported 1.7 percent increase.
Dec 2012

U.S. bank industry posts highest earnings since 2006

Source: Reuters Category: Banking Industry News
  • The U.S. banking industry's third-quarter earnings were the highest for any quarter since 2006 as revenue growth picked up and banks set aside less money to guard against losses.
  • The FDIC quarterly report showed the industry earned $37.6 billion in the third quarter up $2.3 billion, or 6.6 percent, from a year earlier.
  • Loan growth is becoming more established. Banks continue to clean up and strengthen their balance sheets.
  • Net operating revenues rose $4.9 billion, or 3 percent, from a year earlier, the FDIC said.
  • Much of the increase came from asset sales, particularly loan sales. Banks reduced the amount set aside for losses from loans by $3.8 billion, or 20.6 percent, compared with a year earlier.
Dec 2012
  • Bankers in the central U.S. may soon try to renegotiate the price they pay Equifax (EFX) to learn the creditworthiness of borrowers.
  • The opportunity came when the Atlanta credit bureau announced that it would pay $1 billion in cash to acquire the credit services unit of Computer Sciences Corp.
  • Computer Sciences owns credit files in 15 states, including Illinois and Texas, covering a fifth of the U.S. population.
  • It has partnered with Equifax since 1988 to provide that data to banks, mortgage companies and others interested in how people manage their debts.
  • Computer Sciences' credit division was one of the last independent credit reporting agencies.
  • Its acquisition by Equifax, which is expected to close this month, eliminates a middleman, and savvy banks and other financials may see this as a chance to ratchet down the price of reports.
  • The deal's biggest impact on banks could be an eventual sale of Equifax, observers say.
  • Any potential buyers who may have been tentative over the looming Computer Sciences options now have more certainty.
Dec 2012
  • MasterCard announced that US Airways has become the first airline in the world to accept MasterCard PayPass-enabled cards and devices for in-flight purchases.
  • MasterCard has been at the forefront of contactless payment innovations, bringing the convenience and speed of PayPass technology to environments where faster transactions are essential for both consumers and merchants.
  • With the broad acceptance of electronic payments, consumers today can travel virtually cash free, eliminating the hassle of carrying cash and without having to fumble through their wallet or purse for exact change.