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News Scan Feb 2013

Credit Card News, Economy News, Banking Industry News - Feb 2013
Feb 2013

Pending home sales rise more than expected

Source: Reuters Category: Economy News
  • Pending Home Sales Index, based on contracts signed last month, rose 4.5 percent to 105.9.
  • But the housing sector appeared to bottom out last year when home building contributed to economic growth for the first time since 2005.
  • A shrinking stock of homes on the market and steady gains in hiring throughout the economy are seen fueling a further rebound this year.
Feb 2013
  • Banks and thrifts earned $34.7 billion in the fourth quarter to close out 2012 with the second biggest full-year profit.
  • The annual net income of $141.3 billion last year was a 19% increase from the previous year's earnings.
  • The fourth-quarter income was 37% higher than the same quarter a year earlier, and was the largest profit over a three-month span since the end of 2006.
  • About 60% of institutions had better year-over-year quarterly earnings, and the industry's return on assets for all of 2012 reach 1% for the first time in six years.
  • Gains on loan sales rose by $2.4 billion or 132.4% from a year earlier, helping to drive the $64.6 billion in noninterest income.
  • A 75% spike in trading revenue and 72% drop in losses on foreclosure sales also helped noninterest income.
  • Loans accounted for more than half of a 1.6% increase in total assets from the third quarter to $14.45 trillion.
  • Net loans and leases rose by 1.7% to $7.5 trillion. Commercial and industrial loans increased by 3.7%, while credit card balances were up by 4.2%.
  • Still, net interest income fell 2.5% from a year earlier as the average net interest margin declined 25 basis points to 3.32%.
Feb 2013
  • Visa is giving its merchants more flexibility in offering discounts to their customers.
  • Until recently, the card network generally prohibited its retail partners from offering special deals to customers that paid with a specific bank's credit or debit card.
  • But Visa quietly lifted the ban on Feb. 1, paving the way for retailers to cut deals with card issuers.
  • The rule change, applies to all Visa products, including credit, debit and prepaid cards.
  • It is too early to assess the impact of Visa's new rules on its bank customers, or on the merchants that accept its cards.
  • Numerous banks, including Wells Fargo (WFC) and JPMorgan Chase (JPM), declined to comment on the rule change, and so did the National Retail Federation.
  • But payments experts say that Visa's more flexible rules could have several potential benefits for both banks and merchants.
  • First, for retailers that offer store-branded, general-purpose credit cards, the new rule will allow them to entice customers with discounts at the cash register.
Feb 2013

Average credit card debt falls in 4Q

Source: Yahoo Category: Credit Card News
  • Credit reporting agency TransUnion says ramped-up holiday season spending likely kept many Americans from making timely payments on their credit cards in the last three months of 2012.
  • The rate of U.S. credit card payments at least 90 days overdue jumped to 0.85 percent in the fourth quarter from 0.78 percent a year earlier and increased versus the third quarter, when it was 0.75 percent.
  • Average credit card debt per borrower was $5,122. That's down 1.6 percent from the fourth quarter of 2011, but up 2.5 percent from the July-September quarter.
Feb 2013
  • Manufacturing got off to a weak start this year as motor vehicle output tumbled in January, but a rebound in factory activity in New York State this month suggested any setback would be temporary.
  • In a further sign the sluggish economic recovery remains on track, consumers were a bit more upbeat early this month even as they paid more for gasoline and saw an increase in taxes reduce their paychecks.
  • Manufacturing output fell 0.4 percent last month. But production in November and December was much stronger than previously thought and the 3.2 percent drop in auto.
  • Given that most of the weakness was due to the give-back in motor vehicle production after the 11 percent surge in activity during the last two months of last year.
  • February's index showed the first growth in the sector since July and the best performance since May 2012.
Feb 2013

Bank M&A Fees Have Skyrocketed in the Past Decade

Source: Americanbanker Category: Banking Industry News
  • As banks consider their odds of survival in the weak economy and tough regulatory environment, more are calling on investment bankers to help them expand their balance sheet or exit the business.
  • Those advisors, however, are taking a larger bite out of the wallets of buyers and sellers than they did a decade ago.
  • Buyers who disclosed their fees paid their advisors on average 0.49% of the deal value in 2003, while sellers paid 0.84%.
  • In 2012 buyer rates had risen to 0.85%, and sellers' fees to 1.57. Instead, the fee increases reflect a new M&A environment where pairing banks involves a lot more work.
  • Deals have been smaller and are harder to strike since the financial meltdown. Additionally, advisors are confronting the same economic pressures as their customers face and are consolidating, too.
  • Several investment bankers who declined to comment on the record for this story contended that fees only appear higher.
Feb 2013
  • President proposal to raise the minimum wage is in sync with his push to grow the economy by bolstering the middle class but it puts him at odds with many small-business owners who see it as a burden.
  • Obama proposed to increase the low end of the pay scale to $9 an hour by 2015 from $7.25 an hour.
  • A full-time worker earning the legal minimum makes $14,500 a year, the administration said. Some 15 million workers would benefit from the increase.
Feb 2013
  • More community banks are looking at equipment finance as a way to generate revenue.
  • Smaller banks have historically shied away from equipment finance because it requires a lot of expertise that typically has an up-front cost.
  • But a desire to book assets at higher yields has made the business more attractive.
  • Commercial-and-industrial assets are performing well in comparison to other assets.
  • Banks also need products to reengage with small businesses and this allows them to do that.
  • Interest in equipment finance has been steadily rising. Roughly a tenth of the 78 firms that joined the Equipment Leasing and Finance Association last year were community banks.
  • Banks are drawn to the business because of attractive yields and delinquencies and write-offs that are near historic lows.
  • Equipment deals generally have shorter durations, which could prove useful when interest rates start to rise.
Feb 2013
  • New rules allowing merchants to impose surcharges on MasterCard and Visa credit card purchases are raising the ire of lawmakers in states across the country.
  • In recent weeks, legislation to ban the surcharges has been introduced in Illinois, Hawaii, Rhode Island, and New Jersey.
  • Lawmakers in Pennsylvania, West Virginia and Vermont are planning to introduce their own bills soon.
  • Any new state laws on the issue would likely strengthen the bargaining power of the card networks and credit card-issuing banks in negotiations with retailers over swipe fees.
  • Merchants have long sought the right to impose surcharges because they believe it would improve their leverage in those negotiations.
  • Their reasoning is that if consumers have to pay an additional fee when swiping their Visa or MasterCard, they will be more likely to use other forms of payment, and that possibility would lead the card networks to lower their fees to retailers.
  • Retail trade groups at the state level are gearing up to fight efforts to prohibit surcharging.