Credit-Card Loan Balances Set To Rebound In 2012

by Mercator Advisory Group 0

Moody’s Investor Services is predicting a growth year for lending among the largest U.S. credit card issuers. After a period of consumer caution and continued deleveraging, that consumer confidence is rising.

“Consumers are feeling somewhat more confident [in] their ability to take on debt,” said Curt Beaudouin, vice president and senior analyst with Moody’s Investors Service.

Average combined balances at the six largest card issuers will grow about 6% in 2012, to $517 billion, after falling more than 5% to $488 billion last year, according to Moody’s.

The last time balances rose year over year was in 2008, when they reached $672 billion. That figure, however, measures all Moody’s-rated banks, but the “Big Six” card issuers represent the lion’s share of that amount, Beaudouin said. Those six are Bank of America Corp. (BAC), J.P. Morgan Chase & Co. (JPM), Citigroup Inc. (C), Capital One Financial Corp. (COF), American Express Co. (AXP) and Discover Financial Services (DFS).

The result could be a turnaround year for issuers in 2012:

An increase in balances would bode well for net revenue growth, which Moody’s estimates will rise more than 6% this year to $84 billion for the six card issuers. Net revenue fell about 6% in 2011, to $79 billion.

As evidence, data from the 2011 holiday season are being seen as reason for optimism.

Recent data suggest consumers are more willing to carry balances on their credit cards.

Revolving credit, which is primarily comprised of credit-card balances, grew at an annualized rate of 8.5% in November to $798.3 billion, the Federal Reserve reported this month.

Several of the largest card issuers reported Tuesday that their portfolios grew in December as loan performance improved further.

Mercator notes that while the jump in the Fed’s November G19 statistic is notably large, it may reflect an increase in card-based spending, rather than growth in revolving balances outstanding. Notably, late year increases in 2010 holiday spending evaporated in Q1 as consumer quickly paid down their balances. G19 readings for January/February 2012 will provide an important litmus test of improving consumer confidence.

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