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
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
Rkhammer01@roadrunner.con
805-444-5725
