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News Scan Jul 2012

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

Consumer confidence rises in July

Source: Reuters Category: Economy News
  • Consumer confidence unexpectedly rose in July. Index of consumer attitudes climbed to 65.9 from an upwardly revised 62.7 in June. June was originally reported as 62.0.
  • While consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings.
  • The expectations index improved to 79.1 from 73.4, while the present situation index edged down to 46.2 from 46.6.
  • Consumers' labor market assessment was mixed as the "jobs plentiful" index slipped to 7.8 percent from 8.3 percent, while the "jobs hard to get" index also fell to 40.8 percent from 41.2 percent.
  • The view in six months from now was more optimistic, with 17.6 percent expecting to see more jobs, up from 14.8 percent in June.
  • But consumers were more concerned about price increases, with expectations for inflation in the coming 12 months rising to 5.4 percent from 5.3 percent.
Jul 2012

U.S. Banks Loath To Kick Even Soft Crisis Drug

Source: Slate Category: Banking Industry News
  • U.S. banks don’t even want to kick the softest of crisis drugs. Community bankers are pushing to extend a crisis program under which the Federal Deposit Insurance Corp insures $1.5 trillion of deposits without limit. Yet the program helps concentrate risk, distorts funding costs and brings outsized benefits to the biggest banks.
  • Bank industry groups deployed the usual buzzwords uncertainty, job growth, small business, the economy in urging that Congress extend the so-called Transaction Account Guarantee (TAG) for another two years.
  • Under the scheme, the FDIC backs all deposits, without the usual $250,000 cap, if they are in non-interest bearing accounts.
  • These are unintended consequences of a well-intentioned policy. Banks don’t want government help to go away and policymakers are reluctant to rock the boat.
  • But TAG is a relatively obscure program, and it is past its sell-by date. The least Congress can do to show a little backbone is let it die.
Jul 2012

Fed's Issues Final Interchange Rule

Source: Americanbanker Category: Debit Card News
  • The Federal Reserve Board approved a final rule on debit card interchange fees to make an adjustment for fraud-prevention costs.
  • The amendment will allow an issuer to receive or charge an amount of no more than 1 cent per transaction, the same amount currently permitted, in addition to any interchange transaction fee, if the issuer develops a process to reduce the occurrence of fraudulent electronic debit transactions.
  • The Fed didn't make any significant changes to an earlier interim rule, which will go into effect on October 1.
  • The standards include policies and procedures to identify and prevent fraud transactions and update them routinely, monitor volume/value of fraudulent transactions, address suspicious transactions in a way that reduces costs for all parties involved, and secure cardholder data.
  • These procedures will require annual review with notification to the payment networks that the issuer is in compliance. The fee adjustment will be applied to both PIN and signature debit transactions.
  • The payments industry had been hoping for a higher fee adjustment, but the Fed largely stuck to its original proposal setting the fee to match median fraud-prevention costs.
Jul 2012
  • Credit card revenue margins have dipped at some major issuers in recent months as executives have cited intense competition for the most desirable customers and ongoing pressure from a sea change in regulation.
  • The thesis that emerged after the enactment of the CARD Act in 2009 has held up: price increases rolled out ahead of the implementation of the law's major provisions preempted restrictions on penalty fees and jumps in interest rates.
  • Data on securitized loans shows that the Big Six have had varying success in lifting revenues but, overall, portfolio yields have climbed to their highest range in two decades and stayed there.
Jul 2012
  • A national study finds that credit card ownership by college students has dropped during the past two years and that one-third of the surveyed college students carried no monthly balance on their cards. Those students paid off their credit card debt as it occurred, sometimes with parental assistance but not always.
  • Survey found that 35 percent of college undergraduate owned a credit card in 2012, down from 40 percent in 2011 and 42 percent in 2010.
  • Thirty-three percent of students carried a zero balance on their cards and a plurality (41 percent) carried balances under $500. Only 3 percent shouldered balances greater than $4,000.
  • Students from higher income families were more likely to carry cards (53 percent) than students from middle income (31 percent) and low income (29 percent) families.
  • The average student made a payment of $81 per month toward his or her credit card bill; the average parent paid $106 per month toward the student's credit card bill.
  • Neither students nor their parents were likely to use credit cards for tuition or the other fundamental costs of a college education.
  • About 4 percent of the parents reported using credit cards to pay significant college bills, with an average of $4,911 in debt.
  • Debit card ownership is far more prevalent among college students than credit card ownership. Nearly one out of every five college students carry a debit card, which works as a pay-as-you-go, immediate-cash-out-the-door card.
Jul 2012

Basel Rules Would Hit Regional Banks Hardest

Source: Americanbanker Category: Banking Industry News
  • Several large and regional banks have disclosed in recent days what their capital ratios would look like if Basel III were in effect now and early results show that First Horizon National (FHN), Huntington Bancshares (HBAN), SunTrust Banks (STI) and TCF Financial (TCB) would take the biggest capital hits if they do not take steps to change their asset mix.
  • Among larger banks, the four carry the highest concentrations of home equity loans and risky residential mortgages, which mean they would have to set aside more capital than competitors that are less exposed to home loans.
  • Perhaps not surprisingly, the four banks' share prices all tumbled last week following earnings announcements in which they disclosed their estimated ratios.
  • The disclosures provided the first glimpse of the potential impact of Basel III requirements since the Federal Reserve released proposed Basel guidelines last month.
  • To be sure, not all large banks provided Basel III guidance in their second-quarter earnings. Banks were under no obligation to offer up estimates and PNC Financial Services Group (PNC), M&T Bancorp (MTB) and Fifth Third Bancorp (FITB) were among the banks that skipped the exercise entirely.
Jul 2012

Manufacturing growth slowest in 19 months

Source: Reuters Category: Economy News
  • Manufacturing this month expanded at its slowest pace since late 2010. Manufacturing Purchasing Managers Index for July fell to 51.8 from 52.5 in June.
  • The index remained above 50, indicating factory activity continued to expand, only less rapidly.
  • New orders for exports fell outright for the second straight month, the first back-to-back decline in nearly three years, The U.S. manufacturing sector is clearly struggling under the pressure from falling exports.
  • When including domestic demand, new orders grew, though the reading of 51.9 showed the pace of growth slowed. June's tally was 53.7. The employment index rose to 52.9 in July from 52.8.
  • The Labor Department said employers added fewer than 100,000 new jobs in June for the third consecutive month.
Jul 2012
  • A majority of bankers see great potential in the small-to-medium enterprise segment and have found a strong demand for new services for these customers.
  • 95% of bankers said potential in the SME area was equal to or greater than any other current opportunity while 57% described it as huge or large.
  • A fifth of respondents said that the increased demand for new services from SME clients was "unprecedented" while 60% said that the demand for new services was more than usual.
  • 38% of respondents said that developing or expanding their mobile banking channel was their bank's top priority for the SME market. Reducing the cost of servicing this area was also important as 34% of participants said this was their top priority.
  • Concern regarding competition was also evident in the survey. Almost 60% of participants said that they were seeing some evidence of nonbank competitors taking away business from them in the SME segment.
  • Regulation and compliance stood out as leading concerns among the bankers surveyed.
  • More than 30% said that they either were not sure what their department had to do in order to comply or had many questions. Almost half said they "mostly" understood what they need to do.
  • 56% believed that Dodd-Frank will undergo major revisions in the coming years while 33% think that "this is just the beginning" and that there will be many more new regulations to come.
Jul 2012
  • Lawsuits filed by credit card customers and other debtors are surging despite a decline in card debt and bankruptcies.
  • Though debt collectors long have been accused of employing unfair tactics no one throws down a welcome mat for debt collectors.
  • Some experts say the spike in lawsuits might reflect more aggressive filings by lawsuit-happy consumer attorneys rather than more illegal behavior by debt collectors and reporting agencies.
  • Some 890 consumer credit lawsuits were filed in May 2012 in the 90 federal court districts in all 50 states and the District of Columbia.
  • That's an increase of 12.4 percent over the previous month. In fact, though the May number dipped a bit from the comparable month in the previous year.
Jul 2012
  • Nearly all senior citizens and others who receive monthly Social Security benefits on government-issued debit cards are satisfied with their cards and would recommend them to other seniors who are still receiving paper checks.
  • In a survey conducted in June by KRC Research and commissioned by MasterCard, 95% of recipients who use the cards said they are happy with them and 93% said they would recommend them to others.
  • Also, 97% said that the debit cards are safer than paper checks and 93% said that the card is more convenient than cash for making purchases.
  • Most of the some 62 million Social Security recipients already have their funds directly deposited into their bank or credit union accounts, but the Treasury still sends out about 6 million paper checks a month.
Jul 2012
  • Local property tax revenue fell 0.9 percent in the first quarter of 2012 versus a year ago and likely will keep sliding in the coming quarters.
  • The fall in property tax revenue is much sharper with inflation taken into account. It was down 2.8 percent in the first quarter of this year versus a year ago, the sixth straight quarterly decline.
  • Any more declines in this vital source of revenue will hit localities especially hard, the report said, as property taxes accounted for about 74 percent of their revenue in 2009.
  • In contrast, personal income and sales tax revenue - which fell much more swiftly during the recession, have rebounded as the economy has recovered modestly.
  • For 13 states, property tax revenue accounts for more than 90 percent of local taxes: Maine, Vermont, New Hampshire, Massachusetts, Rhode Island, Connecticut, New Jersey, Mississippi, Michigan, Wisconsin, Minnesota, Montana and Idaho.
  • The District of Columbia had the highest property taxes on a per capita basis in 2009 - $2,985 - followed by New Jersey at $2,671. The state with the lowest levy was Arkansas at $294.
Jul 2012
  • In a piece of good news for bank IT staffs and financial technology vendors, IDC Financial Insights has reviewed the U.S. bank IT spending forecast.
  • Firm now expects North American bank IT budgets to grow at a compound annual growth rate of 3.7 percent until 2015.
  • Examples include investments in online banking portals, mobile banking projects, and branch renovations. Some strong regional banks are starting to look across their product sets and make investments.
  • Community banks are also spending more, the stronger community banks are doing ok, although some are dragged down by some tough portfolios they're still holding on to.
  • Security is a big category with strong growth rates. Enterprise risk management and data management are two other major growth areas.
  • Regulatory compliance is big right now but has a lower growth rate than enterprise risk management and security, where banks are perennially spending.
Jul 2012
  • New auto sales in June raced past expectations on lower gas prices and still-generous incentives, and are on track to score their best year since 2007.
  • The surprisingly strong June in which sales rose 22 percent from a year ago helped ease fears that weaker-than-expected results in May would suggest a slowdown in demand.
  • June's annualized sales rate of 14.1 million vehicles, according to Autodata Corp, beat analysts' average estimate of 13.9 million.
  • In the first half of 2012, some 7.27 million new cars and trucks were sold in the United States, indicating full-year sales of 14.5 million.
Jul 2012

Most Young Adults Don’t Know Their Credit Score

Source: Credit Category: Credit Card News
  • These days, many consumers know the importance of maintaining a strong credit score by having healthy borrowing habits.
  • However, almost half of adults are unaware of some of the basics that go into making up that rating, or what that score is.
  • In all, 47 percent of adults said they do not know what their credit score is, but this problem was especially pronounced among younger consumers.
  • Of those between the ages of 18 and 34, 60 percent did not know their credit rating, compared with just 42 percent of those aged 35 and up.
  • Part of the problem with these results is that some consumers are simply unaware of many aspects of their finances, the report said.
  • About 10 percent don’t know how much credit card debt they’re carrying, and 21 percent said they were carrying more than $5,001.
  • Further, 56 percent of borrowers have two or more credit cards, another 35 percent have three or more, and 7 percent said they had six or more.
Jul 2012

Kansas Becomes Surprise Hub of Bank M&A

Source: Americanbanker Category: Banking Industry News
  • Look out, California and Texas, because the smaller, Midwestern state has quietly established itself as one of the busiest states for bank mergers and acquisitions this year.
  • Eight deals were announced in Kansas in the first half, tying it with California for second place. Texas held a comfortable lead, with 14 deals. Collectively, those three states accounted for nearly 30% of transactions.
  • Kansas M&A gets overlooked because its deals involve very small banks, most of which are reacting to fears about banking and the economy.
  • But if a wave of consolidation among the nation's 7,000-plus banks is to take place in coming years as expected, it will have to build momentum in markets like Kansas.
  • For now, Kansas offers a mix of the right M&A ingredients: industry concerns, and unanswered questions about who will replace older managers or investors.
  • To be sure, there have been sales of struggling Kansas banks, but the bulk of deals in the state involved management teams seeking a way out.
Jul 2012
  • 11% of consumers told it they were thinking of switching their primary financial institution in the coming year, which would put about $675 billion in assets up for grabs.
  • Bank of America and Citigroup are the most vulnerable, with as many as one in four customers considering switching.
  • Large banks are certainly convenient, with their large branch and ATM networks, and vast mobile and online channels.
  • But consumers are still disenchanted about fees and a lack of personal connection to their banks, so the relationship is tenuous.
  • The large banks contend they are reaching out to consumers to improve relationships, using digital payment and customer service innovations delivered in familiar ways.