Wells Fargo reported an impressive 15.6% year-on-year (Y/Y) increase in bank credit card outstandings for the fourth quarter (Q4/14). Credit card penetration in retail banking households rose to 41.5%, up from 37% in prior year.
Average bank credit card outstandings rose 13.9% to $29.5 billion in Q4/14, from $27.7 billion in the prior quarter and $25.9 billion one-year ago. End-of-Period (EOP) outstandings for 2014 came in at $31.1 billion, compared to $28.3 billion in Q3/14 and $26.9 billion in Q4/13.
During 2014, Wells acquired the Dillard’s credit card portfolio.
Delinquency (90+ days) was flat Y/Y, but up sequentially by 14 basis points (bps). Delinquency (90+ days), as a percentage of average credit card loans, was 1.23% for Q4/14 compared to 1.09% in Q3/14 and 1.24% for Q4/13.
Charge-offs, as a percentage of average card loans, decreased 23 bps Y/Y to 2.97%, compared to 2.87% in Q3/14 and 3.20% in Q4/14.
Wells reported Community Banking net income of $3.4 billion, down $35 million, or 1 percent, from third quarter 2014. Revenue of $12.8 billion was up slightly as higher net interest income, credit card fees, gains on deferred compensation plan investments (offset in employee benefits expense), and a gain on sale of government guaranteed student loans were largely offset by lower market sensitive revenue, mainly lower gains on sale of debt securities and equity investments.
Noninterest expense increased $230 million, or 3 percent, from the prior quarter due to higher equipment expense, project spending, and deferred compensation plan expense (offset in trading revenue), partially offset by lower operating losses. The provision for credit losses increased $53 million from the prior quarter.
Net income was up $213 million, or 7 percent, from fourth quarter 2013. Revenue increased $581 million, or 5 percent, from a year ago primarily due to higher net interest income, trust and investment fees, revenue from debit and credit card volumes, gains on sale of debt securities, and a gain on sale of government guaranteed student loans, partially offset by lower gains on equity investments.
Noninterest expense increased $208 million, or 3 percent, from a year ago driven by higher personnel expenses and operating losses, partially offset by lower FDIC expense. The provision for credit losses increased $28 million from a year ago as the $232 million improvement in net charge-offs was more than offset by a lower reserve release.
Combined Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) in 2014 were up 22 percent from 2013
RAM Research projects Wells Fargo outstandings to remain strong Y/Y in the first quarter and will likely come in at $30.5 billion.
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