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News Scan Feb 2014

Credit Card News, Economy News, Banking Industry News - Feb 2014

Red Flag Redux for Banks' CRE Levels?

Source: americanbanker Category: Banking Industry News
  • As commercial real estate lending gained momentum in 2013, so did the percentage of banks with CRE concentrations.
  • Concentrations peaked in the second quarter of 2008, when 40% of all banks exceeded the regulatory guidance for CRE levels.
  • A steady decline lasted for the next five years, followed by a slight uptick in last year's third quarter to 8.2% (or 567 banks).
  • Only one or two of the largest banks (those with more than $100 billion in assets) had an issue with CRE concentrations in 2007, 2008 and 2009, and not a single one has in the years since.
  • That's because increased capital of $240 billion among the largest banks far outpaced their $1.25 billion net gain in CRE lending since the second quarter of 2008.
  • CRE trouble also has been relatively minimal among banks with less than $100 million of assets.
  • Only 13.8 percent of them exceeded the regulatory guidelines at the peak in the second quarter of 2008, and this is down to 4.3 percent as of the third quarter of 2013.
  • In contrast, 42% of banks with $100 million to $1 billion of assets had concentrations at the high point for this size group (in the first quarter of 2008), as did 56.5% of those with $1 billion to $10 billion of assets (in the third quarter of 2007).
  • In seven states, more than 60% of the banks had concentrations, the highest being Washington's 74%.
  • But the outsize numbers have shrunk since then. No states are running much above 20% anymore, with Georgia's 20.5% being the highest as of the third quarter of 2013.

Services growth slows in February: Markit

Source: Reuters Category: Economy News
  • Growth in the services sector as well as the pace of hiring slowed in February, services sector purchasing managers index slipped to 52.7 in February from 56.7 in January.
  • Service sector employers continued adding staff, but at the slowest pace in almost a year. At 52.0, down from 54.1 in January, the employment component notched its lowest reading since March 2013.
  • A range of U.S. economic data have recently suggested that the cold weather that's dumped snow across the country has hit economic activity, from a slump in home building and sales to factory output.
  • However, companies clearly remained in expansion mode, with just over half of all firms expecting activity to rise over the coming year against just 3 percent expecting a decline.
  • The employment component of that index slipped to 52.4 in February from 53.9 in January, matching its level of November.
  • But backlogs of work grew, moving into expansion after having posted a contraction in the previous month.

Visa, MasterCard to offer phone-swipe credit cards

Source: newsday Category: Credit Card News
  • Visa and MasterCard are introducing Internet-based technologies to make it easier for shoppers to buy things at retail stores without pulling out a credit card.
  • The two technologies, announced separately, will give merchants and banks more options for incorporating so-called contactless payment systems into their mobile apps. The customer uses the app to make purchases by tapping the phone to a store's card reader.
  • The technologies tap a new feature in Google's Android operating system. Before, card information had to be stored on a secured part of the phone. Now, it can be stored remotely instead.
  • Retail or banking app on the phone then retrieves what's needed to complete the transaction.
  • Visa said it will provide app developers with a complete service, with card information stored on Visa's servers.
  • MasterCard said it will publish technical details by the end of June to help companies use the new Android feature, known as Host Card Emulation.
  • MasterCard said it has been testing the technology with two major banks, Capital One in the United States and Banco Sabadell in Europe.

Fed adopts tough capital rules for foreign banks

Source: Reuters Category: Banking Industry News
  • The Federal Reserve adopted tight new rules for foreign banks to shield the U.S. taxpayer from costly bailouts, ceding only minor concessions despite pressure from abroad to weaken the rule.
  • The largest foreign banks, with $50 billion or more in U.S. assets, will need to set up an intermediate holding company subject to the same capital, risk management and liquidity standards as U.S. banks, the Fed said.
  • The Fed estimated that between 15 and 20 foreign banks will need to set up an intermediate holding company after the cutoff was raised to $50 billion of assets in the United States, from $10 billion in the proposed rule.
  • The Fed also gave foreign banks a year longer to meet the requirement to set up the new structure, with the new deadline set as July 1, 2016. Both changes had been widely expected in the market.
  • The new structure gives banks less flexibility to move money around than under the current rules, which let banks use capital legally allocated in their home country.
  • The Fed has taken a tougher stance than others on some of its bank capital rules. It has, for instance, proposed a leverage ratio - a hard cap on borrowing - of 6 percent of assets, well above the 3 percent global requirement.
  • Foreign banks acknowledged the slight softening of the rule, but said they remained unhappy.
  • The rule also subjects foreign banks with global assets of $10 billion or more to annual health checks known as stress tests that rely on home-country standards. Only the largest banks will also have to run U.S. stress tests.
  • All in all, some 100 foreign banks will be subject to all or part of the rules, depending on their size.

US credit card late payments up in 4Q from 3Q

Source: seattletimes Category: Credit Card News
  • Many Americans took on more credit card debt and failed to make timely payments in the final quarter of 2013, when consumers typically crank up spending on holiday shopping.
  • Even so, the national late-payment rate remained close to its lowest level in six years.
  • The rate of credit card payments at least 90 days overdue was 1.48 percent in the October-December quarter.
  • That's up from 1.36 percent in the previous three-month period, but down from 1.61 percent in the fourth quarter of 2012.
  • Average card debt per borrower rose 1.7 percent from the third quarter to an average of $5,325. It slipped 1 percent from a year earlier.
  • A sequential uptick in late payments and card balances is common in the fourth quarter, which coincides with the holiday shopping season.
  • Many consumers use cards to supplement their spending and often put off making timely payments until the following year.
  • TransUnion's data also suggest that there is a reduced demand for new credit by borrowers with the highest, or prime, credit scores.
  • A gauge of manufacturing in New York State slowed in February after hitting a 20-month high in January, the New York Federal Reserve said.
  • The New York Fed's business conditions index fell to 4.48 from 12.51 the month before.
  • New orders fell to -0.21 from 10.98, while inventories fell to -5.00 from 2.44.
  • Employment gauges were mixed. The index for the number of employees fell to 11.25 from 12.20 and the average employee workweek index rose to 3.75 from 1.22.
  • The index of business conditions six months ahead rose to 38.99 in February from 37.51 in January.
  • The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.
  • The United States posted a smaller budget deficit than expected in January.
  • A sign that a stronger economy is helping government coffers through a rise in tax receipts.
  • The federal government ran $10.4 billion into the red last month, the Treasury Department said in a monthly statement.
  • The Federal Reserve plans to vote on new standards for banks operating in the United States, including a proposal for foreign banks that has been heavily criticized by their home regulators.
  • The Fed's board will consider finalizing rules that require foreign banks with big U.S. operations to group all their subsidiaries under a single holding company, according to a notice on its website.
  • Those intermediate holding companies would have to meet the same capital standards as U.S. banks.
  • Some foreign bank regulators complained that the 2012 proposal would disadvantage foreign banks, such as Deutsche Bank and Barclays, and could cause other jurisdictions to retaliate with tougher standards for some firms.
  • The board also will take up a 2011 proposal for tougher standards for domestic banks.
  • The proposal included requirements for banks' risk management, and other rules that tied into the Fed's existing supervision of big banks.
  • It also included limits on banks' credit exposure to any single counterparty, part of an effort to reduce the risks posed by highly interconnected banks.
  • The time that the Fed had decided to study the impact of credit limits and would coordinate its rulemaking with a global group that was also considering cracking down on banks' exposure to counterparties.

Fed: Card balances leap in December

Source: creditcards Category: Credit Card News
  • Balances on credit cards leaped in December 2013 even more than usual for the holiday season, posting a third month of growth as consumer spending surged.
  • Americans' revolving debt load climbed at a seasonally adjusted annual pace of 7 percent. That followed a revised 0.7 percent rise in November and 5.6 percent in October.
  • The Fed's gauge of total short-term consumer debt, which adds car loans and student loans to revolving debt, rose at a 7.3 pace in December.
  • The gain came as consumer spending jumped 0.4 percent for the month, about double analysts' consensus forecast.
  • However, income growth has not kept pace with the appetite for credit, putting a lid on household leverage, other economists say.
  • Personal income continued to drag its feet in December, rising less than 0.1 percent, the Commerce Department said. After inflation, real spending power fell 0.2 percent.
  • Revolving debt, at $861.9 billion, remains about 16 percent below its 2005 peak of $1 trillion, the Fed's data shows.  
  • But total short-term consumer debt, at $3.1 trillion, has surpassed its 2008 pre-recession peak by about 15 percent.
  • The vast U.S. services sector rebounded in January after two months of slower growth and firms added workers at the fastest clip in more than three years.
  • Services index rose to 54 last month from 53 in December. The reading narrowly beat expectations of 53.7.
  • January marked the 49th straight month the index was above 50, the level that separates expansion from contraction, though the pace of growth has slowed from a more than seven-year high of 57.9 hit in August.
  • New orders edged up to 50.9 from an upwardly-revised reading of 50.4 in December.
  • Employment rose to 56.4, the highest level since November of 2010. It stood at 55.6 in December, revised from an initial reading of 55.8.
  • Banks eased lending standards for U.S. commercial loans in the last three months as demand increased, but banks were as likely to have tightened mortgage lending standards as they were to have loosened them.
  • Domestic banks, on balance, reported having eased their lending standards on many types of business and consumer loans and having experienced increases in loan demand, on average, over the past three months.
  • A moderate fraction of banks reported a drop in demand for prime mortgage loans, and a bigger number reported a decline in demand for nontraditional mortgage loans.
  • The poll covered 75 domestic banks, as well as 21 U.S. branches of foreign firms.
  • A number of large banks said they had tightened standards on such loans, and that some leveraged loans had been significantly changed by the guidance, but that most borrowers would be able to find other sources of funding.

Fed: banks keep tight grip on card loans

Source: creditcards Category: Credit Card News
  • Consumers' appetite for new credit cards was stronger than banks' willingness to hand out new accounts in the fourth quarter of 2013.
  • In what will be no surprise to disappointed applicants, the survey found that while 19 percent of responding banks said demand for credit cards was "moderately stronger," only 7 percent eased their standards for approving card applications.
  • Very few banks reported having changed their standards for approving applications for credit cards.
  • The quarterly survey, conducted Dec. 31, 2013 to Jan. 14, polled 75 U.S. banks about changes in their standards for consumer loans in the fourth quarter. Of these banks, 57 responded to questions about credit cards. 
  • Twelve percent of respondents said they "eased somewhat" their standards on credit limits for cards. Other terms including credit score thresholds and minimum payment requirements remained unchanged at almost all respondents.
  • The silver lining is that banks expect fewer consumers to have trouble making their payments. Twenty-three percent of respondents said the strength of their card loans is likely to "improve somewhat" during 2014. Only 8 percent said they expect loan quality to "deteriorate somewhat."