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News Scan Sep 2013

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

ATM, Overdraft Fees Hit Record Highs: Survey

Source: americanbanker Category: Banking Industry News
  • Bank fees have reached record highs this year, according to a fall survey from Bankrate. Banks charged noncustomers an average $2.60 to withdraw cash at their automated teller machines in Bankrate's survey of 10 banks and thrifts in each of the 25 largest U.S. markets.
  • That's a 4% increase from 2012. Average ATM fees have climbed by almost a third in the years since 2008.
  • Higher ATM charges are part of the fallout from the Federal Reserve's push to maintain historically low interest rates.
  • Overdraft and monthly maintenance fees also climbed to new heights this year. Customers who overdrew their accounts paid an average fee of $32.20 — up 3% from a year ago. Average monthly maintenance fees ticked up 1% to $5.54.
  • While these charges are on the rise, customers now have an easier time dodging overdraft fees thanks to low-balance alerts and other technological advances.
  • The survey also suggests that free checking accounts may survive the great post-recession dive. In 2009, 76% of checking accounts were free.
  • By 2012, just 39% were gratis. Now the rate of decline seems to be stabilizing: 38% of checking accounts were free this year.
Sep 2013
  • The largest global banks cut the shortfall in the reserves they’ll need to meet Basel capital rules by 82.9 billion euros ($112 billion) in the second half of 2012, leaving a gap of 115 billion euros.
  • Shortfalls in the risk-based capital of large internationally active banks continue to shrink,” the Basel Committee on Banking Supervision said in a statement on its website.
  • Banks also need to do further work to meet a planned binding limit on indebtedness, known as a leverage ratio, the Basel group said. A quarter of large global lenders failed to meet the standard.
  • Global regulators have clashed with lenders over the severity of capital, indebtedness and liquidity rules, which were set out in 2010 as part of an overhaul of banking regulation to avoid a repeat of the financial crisis.
  • The measures, known as Basel III, will more than triple the core capital that lenders must hold to at least 7 percent of their assets, weighted for risk.
  • Under the Basel plan, banks will have to begin disclosing how well they measure up to the leverage rule from 2015. The Basel III capital requirements are scheduled to phase in fully by 2019.
Sep 2013
  • A rise in home and stock prices lifted U.S. household net worth to a record high in the second quarter, giving a hopeful sign for the nation's economy.
  • Net worth rose $1.3 trillion to $74.8 trillion between April and June, with the value of residential real estate increasing by $525 billion and corporate equities and mutual funds up by around $300 billion over the period.
  • Household wealth only recovered its pre-recession high of $69 trillion in the third quarter of 2012.
  • In a possible sign that families could be nearing the end of a long deleveraging process, household debt rose by an annualized 0.2 percent in the second quarter, to $12.97 trillion.
  • That number has stabilized over the last several quarters, signaling that aggressive steps to pay down debt by households in the aftermath of the recession may have petered out.
Sep 2013
  • U.S. consumer prices barely rose in August, but rising rents and medical care costs pointed to some stability in underlying inflation that could make the Federal Reserve more comfortable trimming its bond purchases.
  • Consumer Price Index edged up 0.1 percent last month as the cost of energy fell and food prices remained muted.
  • The CPI had risen 0.2 percent in July. In the 12 months through August, it increased at a slow 1.5 percent pace after advancing 2.0 percent in the 12 months through July.
  • Stripping out the volatile energy and food components, the so-called core CPI rose 0.1 percent after increasing by 0.2 percent in each of the past three months. Rents and medical care accounted for most of the increase in the core CPI.
  • The latest gain took the increase in the core index over the past 12 months to 1.8 percent, the largest rise since March. The core CPI had gained 1.7 percent in July.
Sep 2013
  • The FDIC has filed more lawsuits against the directors and officers of failed financial institutions in 2013 than in any year since the recession.
  • The FDIC had filed 32 such lawsuits as of Aug. 8, compared to annual totals of 26 in 2012, 16 in 2011 and just two in 2010.
  • The flurry of litigious activity was spurred by the three-year statute of limitations for tort lawsuits.
  • Since bank failures were most common between the third quarter of 2009 and the third quarter of 2010, the report said, many cases pending legal action have now come due.
  • Chief executives were the most frequently named defendants this year, appearing in 88% of filed complaints. Inside and outside directors, named in 75% of lawsuits, came in at a close second.
Sep 2013
  • Not too long ago, regional banks were eager to get out of the credit card business. A number of those institutions are returning to the business, while others are
  • more banks to enter the fray.
  • The allure of credit cards, as a contributor to the bottom line, is easy to see, industry observers say.
  • Cards produce better returns on assets than other types of loans. The risk profile of credit cards has seriously considering it.
  • Huntington Bancshares (HBAN) in Columbus, Ohio and KeyCorp (KEY) in Cleveland have begun issuing their own consumer credit cards.
  • In 2011, Regions Financial (RF) bought a $1 billion credit card portfolio that carried its name from Bank of America (BAC), and later took over the servicing. Industry observers expect improved; chargeoffs have returned to pre-crisis levels.
  • Regional banks can work with larger firms on credit cards, but the best way to fully benefit involves handling all issuance and servicing.
  • Several banks with $20 billion or more in assets could consider issuing their own cards, industry observers say. They include Associated Banc-Corp (ASBC), Cullen/Frost Bankers (CFR) and People's United Financial (PBCT).
  • Additionally, East West Bancorp (EWBC) and TCF Financial (TCB) could have an interest expanding beyond the less than $5 million in card outstandings on their books.
Sep 2013
  • U.S. small business optimism dipped in August as owners worried about the economy's near-term outlook, but gains in sales expectations and hiring plans hinted at a pick-up in the pace of economic growth.
  • The National Federation of Independent Business, Small Business Optimism Index slipped 0.1 point to 94 last month.
  • While details of the survey were fairly mixed, key indicators such as planned hiring, capital spending, inventory accumulation and sales all advanced in August, suggesting an improvement in sentiment in the months ahead.
  • Capital spending and inventory investment plans increased as well, all activities that would put some energy into GDP (gross domestic product) growth. The economy grew at a 1.8 percent annual rate in the first half of the year.
  • There was a big increase in job creation plans, which jumped to levels last seen in January 2007, a positive sign for the labor market amid signs of a slowing in job growth trend.
  • However, the share of firms reporting they could not find suitable candidates to fill open positions fell.
  • Expectations for business conditions over the next six months fell again in August. There was also a decline in the share of owners saying this was a good time to expand
Sep 2013

Interest Rate Risk Giving Home Loan Banks a Boost

Source: americanbanker Category: Banking Industry News
  • With banks navigating an increasingly unsteady interest-rate environment, the Federal Home Loan Bank System appears suddenly to be in vogue again.
  • The Federal Deposit Insurance Corp.'s second-quarter industry update illustrated a significant shift as depositors finally opted to seek higher returns elsewhere. With banks looking for funding alternatives, FHLB advances held by banks enjoyed their biggest percentage increase in nearly six years
  • The numbers reflect only one quarter of activity, and industry totals for deposits and advances are prone to fluctuation. Still, deposits decreased — by a mere 0.4% to $10.78 trillion — for the first time in 12 quarters.
  • Meanwhile, banks held over $368 billion in FHLB advances, which was 11.6% more than in the previous quarter, the biggest such increase since the third quarter of 2007.
  • The nominal increase of $38 billion was the biggest such growth since the third quarter of 2008, when advances grew by nearly $80 billion.
Sep 2013
  • All age groups are increasingly shedding credit cards, according to June 2013 data from FICO. Yet no age group is ditching them faster than young people.
  • Between October 2005 and October 2012, FICO tracked an increasing number of consumers who no longer had a credit card.
  • Yet the percent of cardless 18-to-29-year-olds (16 percent) towers above that of any other age group. In fact, that 16 percent represents a 77 percent jump from 2005. The 30-to-39 crowd also saw a sizable (50 percent) jump between 2005 and 2012.
  • FICO attributes the trend partially to the CARD Act of 2009, which makes it much more difficult for consumers under 21 to get credit cards.
  • Another factor at play, according to FICO, could be the recession, which made consumers as a whole -- and young people in particular -- wary of borrowing money.
  • The chart below shows (by age group) the percent of consumers without any credit cards between October 2005 and October 2012.
Sep 2013
  • American families will earn more money in the coming years as dollars from the nation's oil and gas boom trickle down to the average person.
  • Robust energy production will increase wages, cut energy and manufacturing costs and add as much as $2,000 a year to each family's income by 2015.
  • Last year, the average U.S. household earned $1,200 more because of the energy boom as oil and gas companies produced nearly 2 million barrels-per-day of oil using fracking and horizontal drilling technologies.
  • The rush has added 2.1 million jobs to the U.S. economy in 2012, both directly and indirectly, it said, and that number is expected to balloon to 3.3 million by 2020, a boon for an economy struggling with stubbornly high unemployment.