“Total” card industry revenue vs. “risk-adjusted” card revenue

THOUSAND OAKS, CA (February 10, 2017) — In this year-end card metric report, payments industry veteran R.K. Hammer provide their estimates for a five-year trend in “Total” card industry Revenue vs. “Risk-Adjusted” Revenue (RAR) for U.S. issuers.

RAR is defined as the amount of top line revenue a card portfolio has produced relative to the amount of risk taken in order to achieve that outcome; in this case, total gross income less net charge offs, expressed in  our models as a percentage yield.

The data points below reflect the continuing (for now) post-recession climb back up from much worse risk-adjusted levels during the higher risk 2009-2010 period; i.e., an abysmal 8.5% RAR.

As a percentage of average managed assets:

YEAR     TOTAL CARD REVENUERISK-ADJUSTED REVENUE (“RAR,”adjusted for card loan default risk)

2016                       17.0%                                    13.0%

2015                       17.2%                                    12.8%

2014                       17.3%                                    12.8%

2013                       17.1%                                    12.5%

2012                       17.6%                                    11.6%

Best-Practices RAR Indexin R.K. Hammer models:

> 13% RAR; high performers, some of which go even higher than 20% RAR

12-13% RAR; moderate performers, most card issuers fall into this mid-ground category

< 12% RAR; weak performers, typically lower income yields or higher charge offs, or both

About R.K. Hammer

R.K. Hammer is a veteran card industry advisor based in Thousand Oaks, CA, for over 30 years specializing in card portfolio valuations, second opinion valuations and card portfolio sales and purchases in over 150 card transactions, expert witness work for card issuers in litigation, card portfolio interim management, and general best practices consulting; domestic and international in 50 countries.


Bob Hammer
Founder & CEO

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