2010 Card Industry P/L Still Under Pressure, Despite Modest Y/Y ROA Improvement

Dollar amounts for the 2010 P/L revenue and expense streams for the credit card issuing industry calculated by credit card analyst R.K. HAMMER follow, and as shown in the accompanying charts:

2010 Revenue Streams:          $163.3 Billion total for ’10 vs. $166.5 Billion in ’09

Interest Income:   $84.9 Billion for ‘10 (52% of total revenue), down from $87.6 Billion in ‘09

Fee Income:           $78.4 Billion for ’10 (48% of total revenue), down from $78.9 Billion in ‘09         

2010 Expense Streams:           $144.8 Billion total for ’10 vs. $152.9 Billion in ’09   

Operating Expense:         $45.6 Billion (31.5% of total expense), down from $46.4 Billion in ‘09

Blended Cost of Funds:  $12.3 Billion (8.5% of total expense), down from $17.3 Billion in ‘09

Net Charge offs:              $86.9 Billion (60.0% of total expense), down from $89.2 Billion in ‘09

2010 Net Pre-Tax Profit:            $18.5 Billion, up from $13.6 Billion in ’09:  2.10% P/T ROA Yield for ‘10

Robert Hammer Comments:

“2010 ROA percentages based upon R.K. Hammer card profit model’s denominator calculation of $778 Billion in personal LOC revolving credit/credit card loans for all national brand and $100 Billion in private label/retail credit card segments.  While a lot of attention is commonly paid by outside observers to the top-line total revenue number, $163.3 B, what is often overlooked by many is that credit card enterprise expenses are also large, at $144.8 B ($86.9 B for charge offs alone in 2010).  The resulting pre-tax profit for the industry in 2010 was $18.5 Billion in the Hammer model, up from $13.6 B the prior year, driven largely by lower blended cost of funds, and better operating expense.” 

“We still have what is termed a “tri-variate” economy, where consumer spending represents two-thirds of the U.S. economy, plus business  (especially small business) which does most of the new hiring when given legitimate incentives to do so, and finally the federal government, which has provided a very large yet unsustainable temporary stimulus, compared to needed organic growth and consumer spending.”  Hammer concludes, “Arguably, as with last year it will again take a very complicated and successful set of financial and marketing mechanics by issuers to reverse or at least mitigate what we see as an all out attack on credit card industry profits in such an economic and regulatory climate.  We do look for some improvements later in 2011, which should also well serve the broader market and financial institutions in particular.” 


R.K. Hammer is a nationally known card and consumer payments consultancy based in Thousand Oaks, CA.  The firm is a recognized and trusted specialist providing card industry earnings forecasts, agent card program expertise, and brokering card portfolio deals.  Through their internationally recognized seminar, “Managing for Improved Profitability,” Bob Hammer has personally trained over 1,000 credit card executives worldwide, including institutional investors and FSI examiners on portfolio valuation and best practices management of card business enterprises.  Hammer has over 30 years experience in consumer payments, with clients in the U.S. and in 50 countries abroad.  R.K. Hammer also serves as an expert witness for card issuers and retailers in litigation.  More information may be found at:

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