Press
2013 Card industry revenue – another downtick
(January 6, 2014) — During the past five years CU and Bank card issuers have dealt with new regulations which curtailed their business models, impacting their interest and fee income strategies. Partly as a result, the 2013 top line revenue for the card industry in the R.K. Hammer card issuer model was reported at $145.5 Billion, down again, $4.1 Billion from the previous year. Indeed, some credit unions and banks showed revenue improvements last year, but those exceptions were primarily due to bulk acquisitions, as opposed to “organic” growth: exceptions to the rule.
R.K. Hammer Chairman and CEO Bob Hammer reported that “Regulation and legislation have again effected every portfolio revenue variable: including total revenue, interest income/fee income split, thus seeing issuers respond by assessing new fees and repricing existing fees, where permissible. In our opinion, the CFPB has yet to fully catch its stride, so even more regulation will likely be on the near term horizon in 2014, placing additional ongoing pressure on revenues.”
TOP LINE CARD INDUSTRY REVENUE TREND (down every year the past five years)
(pre- and post-recession)
2013 $145.5 Billion
2012 $149.6 Billion
2011 $154.9 Billion
2010 $163.3 Billion
2009 $166.5 Billion
2008 $169.0 Billion
Source: R.K. Hammer – Card Knowledge Factory® 2014
“The good news for credit card is that the previously dangerous high levels of consumer bankruptcy and charge offs have now normalized to more manageable levels; expenses are down,” Hammer notes. He adds that “some of our card issuing clients have charge offs returning to the 3% range, while others are still hovering above 6%.” While the year may have ended at 3% net charge offs for some, the full year “blended” for the industry is still higher in our model, closer to 4.6% for 2013.”
“With all the changes on the revenue side of the income statement, as with last year many issuers are still looking at opportunities on the expense side, not the least of which is operating expense, with the highest expense item being staff and benefits. We find that few of the major issuers have added net new staff; indeed, many have recently off-loaded some key positions to Singapore, Brazil, and India, as well as to experienced U.S. outsourcers, in order to further reduce operating expense.”
For a more complete run down on the revenue and expense streams for the card business in the last twelve months, go to: www.cardknowledgefactory.com, the research and analysis division at R.K. Hammer, for a listing of updated research reports available to card issuers and institutional investors on this and other subjects in their 2014 edition, published weekly in January and February.
More about Card Knowledge Factory® at R.K. Hammer
A leader for over three decades in virtually all phases of credit card portfolio management, R.K. Hammer expanded their research and analysis division with the implementation of the Card Knowledge Factory™. It offers instant access to timely reports and insightful analysis, much more efficiently and effectively than internal issuer research alone. Hammer also serves as an expert witness for issuers in litigation, broker’s card portfolio deals, and conducts valuations for Boards, as well as interim card portfolio management in virtually every area of the card business.