Press

THOUSAND OAKS, CA (September 19, 2014) — One of the most important and widely accepted card profit metrics is to ”risk-adjust”’ top line revenue. This is defined as the total revenue yield (all fees and interest) less loan losses.  The trend recently has been very instructive.

YEAR      TOTAL REVENUE YIELD    LOAN LOSSES     RISK-ADJUSTED REVENUE

2013                        17.1%                             4.6%                                    12.5%

2012                        17.6%                           6.0%                                     11.6%

2011                        19.6%                           8.8%                                     10.8%

2010                        18.6%                           9.9%                                     8.7%

2009                        18.3%                           9.8%                                    8.5%

Comments

Since the 2008 recession, risk-adjusted top line revenue has shown that the card business has finally returned to be the best business in banking. After the brutal beating taken the recession years, capital has been replenished, dividends have been restored, marketing investment in the business has resumed, and loan losses have finally returned to more normalized levels. The card business is back.

“Risk-adjusted” revenue continues to be the dominant metric in the business, reflecting the risk taken compared to the revenue that risk generates.

2014 Forecast

With card revenue rising and card costs falling, 2014 numbers will continue to improve. Consumer sentiment continues to rise and spending accelerating, 2014 card ROA % profits are estimated to rise by another 30 bps.

About R.K. HAMMER
R.K. Hammer is a premier provider of card advisory services for issuers throughout the U.S. and in the 50 countries they serve.

For more info: go to rkhammer.com and cardknowledgefactory.com.