(The following statement was released by the rating agency)
CHICAGO, April 26 (Fitch) U.S. credit card issuers will likely report growing
loss provisions through the remainder of the year as they begin to report
stronger portfolio growth and asset quality metrics rise from historical lows,
according to Fitch. All of the major issuers again released reserves in the
first quarter, but we do not expect this trend to continue in coming quarters.
We do not expect a near-term spike in card losses, as early-stage delinquencies
hit new historic lows for several issuers in the first quarter. We believe
modest worsening in chargeoff and delinquency rates, together with portfolio
growth, will lead most issuers to boost provisions later in the year
Portfolio contraction was reported by the larger issuing banks, including Bank
of America, Citigroup and JPMorgan, in both fourth-quarter 2012 and
first-quarter 2013. However, purchase volumes were up 4.4% on average for the
group, which we believe signals an eventual bottoming out in portfolio size.
American Express and Discover reported their eighth and seventh consecutive
quarters of growth, respectively. This has been supported by higher average
purchase volume growth on their cards; up 5.8% on average in the first quarter.
The activity of card transactors, or those who repay their bill in full each
month, continues to outpace that of revolvers. Still, we expect full-year 2013
portfolio growth to be in the low to midsingle-digit percentage range for the
industry as a whole. This contrasts with average portfolio contraction of 1.23%
in the first quarter, excluding Capital One, whose growth has been affected by
the HSBC acquisition (closed in May 2012). Purchase volume expansion should
support the turnaround in card portfolio size trends.
Credit provision increases will likely represent a headwind for industry
profitability through the remainder of the year. Card segment profitability
remained solid in the first quarter, but the contribution from reserve releases
is diminishing. The top seven U.S. issuers posted a return on average loans of
4.1% in first-quarter 2013 compared with 4.3% in first-quarter 2012.
Meghan Neenan, CFA
70 W. Madison
Chicago, IL 60602
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email:
The above article originally appeared as a post on the Fitch Wire credit market
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