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News Scan Jul 2013

Credit Card News, Economy News, Banking Industry News - Jul 2013
July 2013
  • In its just-released report on “Co-Branded and Affinity Credit Cards in the U.S.”, Packaged Facts estimates that co-branded Visa, MasterCard, Discover, and American Express credit cards generated 35% of general-purpose credit card purchase volume in 2012, or $774 billion out of $2.21 trillion.
  • The dollar volume represents a significant gain over 2011, but these figures represent a decline both in market share and in total dollar volume compared with previous years.
  • In the last few years, hundreds of smaller and less profitable co-brand cards have been eliminated, including programs by major players such as JPMorgan Chase and Bank of America.
  • Correspondingly, Packaged Facts consumer survey data show that the percentage of consumers using co-branded or affinity credit cards have fallen from 55% in 2009 to 43% to 2013.
  • Nonetheless, more than 100 significant co-brand credit card partnerships remain. The majority of these co-brand partnerships are for retail programs; travel programs including airlines, hotels, and cruises also form a significant share.
  • These co-branded credit cards compete against formidable own-branded credit card platforms catering to a wider audience, as well as against a resurgent store card segment.
July 2013
  • Gross domestic product expanded 2.8 percent in 2012, the fastest rate of growth since 2005, but much of the growth was seen early in the year.
  • The government had previously said that output grew 2.2 percent during the year but changed its estimate after reviewing new data on retail spending, home building and drilling in the oil and gas industries.
  • The new estimates are part of a regular annual revision of the data by government analysts and accompanied data that showed the economy unexpectedly accelerated in the second quarter of 2013.
  • GDP accounting can be jumpy between quarters as firms clear and then restock their shelves, but the economy did appear to lose momentum as the year progressed. The government also downwardly revised growth for the first quarter of 2013.
  • But while the methodological changes added about 3 percent to the total size of the U.S. economy, they did not significantly change growth rates for GDP.
July 2013

Banks Struggle to Manage Tech, Ops Risk: Survey

Source: americanbanker Category: Banking Industry News
  • Banks' confidence in their ability to manage risk, especially technology and operations risk is shaky at best.
  • According to the survey, fewer than half of the firms surveyed rated themselves as extremely or very effective at operational and technology risk. Eighty-six financial institutions around the world were queried.
  • Challenges on the operational risk and technology side, like cyber threat activity, the acceleration of speed in the capital markets and overall risk management issues, are causing organizations to look at their systems and infrastructure capability.
  • The use of institution-wide enterprise risk management programs is continuing to grow, the study found. Today, 62% of financial institutions have such a program in place, up from 52% in 2010, while a further 21% are building one.
  • One more sign of the importance of risk management: 94% of company boards now devote more time to risk management oversight than five years ago and 80% of chief risk officers report directly to either the board or the CEO.
July 2013
  • Fixed 30-year mortgage rates averaged 4.58 percent in the week ended July 19, down 10 basis points from the week before.
  • The low mortgage rates have helped to lure buyers as the housing market gets back on its feet, but concerns the program could end sooner than had been expected sent rates sharply higher over the summer.
  • The recent higher cost of mortgages has raised concerns that the increase could dampen demand in the sector and slow the housing recovery
  • Still, last week's decline in rates did not bolster demand for mortgages. The MBA's seasonally adjusted index of loan requests for home purchases, a leading indicator of home sales, fell 2.1 percent.
  • The gauge of refinancing applications slipped 0.7 percent. The refinance share of total mortgage activity was unchanged at 63 percent of applications.
  • The index of mortgage application activity, which includes both refinancing and home purchase demand, fell 1.2 percent.
  • The survey covers over 75 percent of U.S. retail residential mortgage applications.
July 2013

Bankruptcies continue to fall

Source: creditcards Category: Banking Industry News
  • The first half of 2013 saw another dramatic decline 14 percent in the number of consumer bankruptcy filings over the same period in 2012.
  • The 50 states and District of Columbia saw fewer than 539,000 filed thus far in 2013.
  • At the midpoint of last year, 627,000 consumer bankruptcies were filed. Filings have recorded steady declines since reaching nearly 1.55 million in 2010, but experts are split on whether a dammed-up demand for bankruptcy is about to be released.
  • In most states, the number of new filings has plunged. Tennessee continues to lead the list in terms of per-capita filings, with 6.69 filings per 1,000 residents. Illinois, Georgia, Alabama and Nevada all recorded more than five filings per 1,000 residents.
  • In terms of total number of filings, California again has recorded the greatest number of filings, with nearly 72,000 filings this year, compared to nearly 99,000 for the first half of 2012.
  • Florida, which still ranks second, experienced a more modest decline, from nearly 42,000 in the first six months of 2012 to more than 38,000 so far this year. Illinois, which ranks third, was nearly flat.
July 2013
  • In a little-noticed change, your credit report has started revealing more about your credit card payment habits.
  • The big three credit bureaus are adding new payment data to the reports of some 160 million card-carrying adults.
  • The data shows whether you rack up interest charges, giving card issuers another reason to chase you -- or avoid you -- as a customer.
  • That sort of information would be considered pretty valuable from an issuer standpoint.
  • In the past, your credit file displayed your monthly balance, your credit limit and whether you failed to make at least the minimum payment.
  • What credit bureaus are adding now is a two-year review of the actual amounts you paid each month.
  • These figures reveal whether you are a revolver who carries a balance and pays interest charges, or a transactor who makes purchases but generally pays them off before interest charges are triggered.
  • Historically it has been incredibly difficult on the credit file to identify a transactor versus a revolver. The way payments look, they were indistinguishable.
  • Credit bureaus say that the new information will help card issuers target their offers. Lenders want to offer products that consumers want to have and offer the right product to the right person.
July 2013
  • American Express posted a record profit in the second quarter, exceeding analysts’ estimates, as customer spending increased.
  • Net income rose 4.9 percent to $1.41 billion, or $1.27 a share, from $1.34 billion, or $1.15, a year earlier.
  • Second-quarter net revenue rose 3.5 percent to $8.25 billion, missing the $8.28 billion average estimate of analysts in the Bloomberg survey.
  • Consumer spending in the U.S., where AmEx gets about 70 percent of its revenue, climbed at a 1.5 percent annualized rate in the second quarter and retail sales rose 0.4 percent in June, less than forecast.
  • Worldwide card spending, or billed business, advanced 7.3 percent to $237.7 billion.
  • Customers spent an average of $4,097 in the quarter, a 3.8 percent increase from a year earlier, when AmEx had fewer cards outstanding.
July 2013
  • Attacks that involve sending streams of malicious traffic to a web server in the hopes of disabling it, DDoS incidents increased 20% in the second quarter, compared to the first quarter.
  • The majority - 75% -- of these attacks are infrastructure-directed, meaning they overload network infrastructure by consuming large amounts of bandwidth.
  • However, the report also shows a 28% increase in the rate of application-layer DDoS attacks compared to the previous quarter.
  • The top country source for malicious DDoS traffic remains China, which Prolexic says is the origin of 39% of attacks.
  • The second most active country was Mexico, with 27% of the DDoS traffic beginning there.
  • The U.S. was responsible for only 4%. This is an interesting slide, given that in the first quarter of this year, Prolexic reported that the U.S. was the origin of 22% of DDoS attacks.
July 2013
  • The economy continued to grow at a modest to moderate pace in June and early July, with manufacturing expanding in most areas of the country.
  • The U.S. central bank said factories in many of the 12 districts reported increases in new orders, shipments or production.
  • The Fed also struck an upbeat note on the housing market, noting that residential real estate and construction increased at a moderate to strong pace in all districts. That in turn is helping to prop up manufacturing.
  • The Fed also said consumer spending and auto sales increased, which should help to underpin the recovery in the third quarter.
  • While hiring held steady or increased at a measured pace in most districts, there was a reluctance to hire permanent or full time workers it said.
  • Wage pressures generally remained contained, although some districts reported modest or moderate wage growth in some sectors.
July 2013
  • The summer job hunt for U.S. teenagers is off to a pretty good start, a sign the recovery in America's labor market is increasingly reaching the youngest workers.
  • Employers hired just under a million workers aged 16 to 19 in May and June. U.S. teen employment was hard hit by the recession and remains depressed. But this summer is shaping up positively for the legions of young people who flip burgers and fold clothes while school is out.
  • Teen employment began to tick up after the recession began in late 2007, reaching a record high at more than 27 percent in October 2010.
  • The rate has come down since then, but at a seasonally adjusted 24 percent in June, it remains elevated compared to pre-recession levels.
  • Overall employment growth has picked up since early 2012. Employers added 195,000 new jobs last month.
July 2013

FDIC Proposes Hike in Leverage Ratio

Source: Americanbanker Category: Banking Industry News
  • U.S. regulators proposed adding an additional buffer to a leverage ratio for the eight largest, globally active banks.
  • The Federal Deposit Insurance Corp.'s plan would increase the leverage ratio for bank holding companies that are deemed systemically important banks by the Basel Committee on Banking Supervision to 5%, while their insured subsidiaries would face a 6% leverage ratio.
  • U.S. firms, which would be subject to a tougher leverage ratio, include Citigroup, JPMorgan Chase, Bank of America, and Goldman Sachs.
  • Each firm would have to meet the minimum leverage ratio of 3%, plus an additional buffer of 2%.
  • Citing persistent "too big to fail" concerns, FDIC officials said the proposed changes would help to build upon the interim final Basel III rule for the largest banks.
  • Currently, all eight banking companies meet the 3% supplemental leverage ratio requirement, but fall short of the higher requirement collectively by $63 billion.
July 2013

Card delinquencies hit 22-year low

Source: Creditcards Category: Credit Card News
  • Bank card delinquencies hit their lowest levels since June 1990 during the first quarter of this year.
  • Late payments on bank cards fell to 2.41 percent of all accounts during the quarter, the lowest level in 22 years. The rate was 2.47 percent in the previous quarter.
  • Accounts that are late paying by 30 days or more are counted as delinquent. The 15-year average rate for delinquencies was 3.87 percent of accounts.
  • The strong card payments were part of a broad improvement in consumer loan delinquencies. Eleven of 13 loan categories experienced lower delinquency rates during the quarter.
  • That discipline may be wearing down, as card balances leaped 9.25 percent during May, according to the Federal Reserve's G.19 consumer credit report.
July 2013

Trade deficit widens sharply as imports rise

Source: Reuters Category: Economy News
  • The trade gap swelled more than 12 percent to $45.0 billion from a revised $40.1 billion in April.
  • Analysts surveyed before the report had expected the May deficit to narrow slightly to $40.1 billion, from the previously reported April figure of $40.3 billion.
  • The widening of the trade gap could prompt analysts to lower their estimates of second-quarter U.S. growth.
  • Imports rose 1.9 percent to $232.1 billion, the highest since the record level of $234.3 billion set in March 2012.
  • May imports, when adjusted for inflation, were a record $167.2 billion, the department said.
  • Imports from China jumped 10.7 percent to $36.6 billion, on a non-seasonally adjusted basis.
  • In other signs of stronger U.S. demand, imports of services, autos and auto parts, and food, feeds and beverages also hit record highs, as did total non-petroleum imports.
  • The U.S. non-petroleum deficit swelled to $41.6 billion, the highest since September 2007.
July 2013
  • Young consumers are turning their backs on credit cards and piling on student loans, according to June 2013 data from FICO.
  • FICO tracked a dramatic shift in debt weight among 18- to 29-year-olds between 2007 and 2012.
  • As the charts below show, the average mortgage debt and credit card debt loads during that time span shrank, while student loan debt took their place on the debt pie for those in the millennial age group.
  • Debt payoff is only one reason for the falloff in card debt, according to FICO. The other reason? Millennials are becoming less likely to have credit cards.
  • Back in October 2007, 9 percent of 18- to 29-year-olds had no credit cards. By October 2012, the cardless youth faction had nearly doubled to 16 percent.