Quarterly Earnings Mixed for Credit Card Issuers
Third quarter earnings are mixed for banks and credit card issuers.
Some, like American Express, beat estimates while others such as Chase suffered due to legal troubles. Charge-off rates continue to reach historic lows as cardholders pay down their credit card balances.
American Express had a 9% rise in quarterly profits because these affluent customers increased credit card spending while a fewer number defaulted on their payments. The charge-off rate dropped to a low 1.7%, from 1.9% a year ago.
The third quarter income for Discover fell 6.9%. The company is putting aside more money to prepare for anticipated losses on old credit card accounts. Charge-offs are at 2.05%, down from 2.34% a year ago. Credit card delinquencies were 1.67%, down from 1.81% a year ago. Discover’s credit card portfolio grew 4% to $50.4 billion in loans.
J.P. Morgan Chase took a one-time charge of $7.2 billion in legal costs, dragging down third quarter earnings to a loss of $380 million. The unit that includes credit card had a profit of $1.2 billion but it also had a $91 million drop in revenue before expenses. Credit card income from fees rose to $1.08 billion, but interest income fell by $149 million to about $3.3 billion.
Capital One’s third quarter profit fell 6.3% as card usage declined and cardholders remained cautious about borrowing. Capital One’s net charge-off rate was 1.92%, an increase of 17 basis points from a year ago.
Bank of America posted a higher quarterly profit. Retail spending per average active credit card account increased 10.2% from the third quarter of 2012.