U.S. Bank (USB), one of the nation’s largest commercial card issuers, posted a paltry 0.6% gain in year-on-year (YOY) outstandings and a weak 3.2% gain in consumer and commercial purchase dollar volume (PDV) for the third quarter.
PDV (consumer + business cards) for Q3/15 posted $31.8 billion, compared to $30.8 billion in the prior quarter and $30.8 billion in the year ago quarter.
USB outstandings were up 0.6% YOY for Q3/15 to $17.9 billion, compared to $17.6 billion in the prior quarter and $17.8 billion in the year ago quarter.
Charge-offs declined 15 bps YOY to 3.38%, down sharply from the prior quarter by 47 bps, and compared to 3.53% one-year ago.
3Q/14: $17.8 billion
4Q/14: $18.0 billion
1Q/15: $17.8 billion
2Q/15: $17.6 billion
3Q/15: $17.9 billion
PURCHASE DOLLAR VOLUME HISTORICAL
3Q/14: $30.8 billion
4Q/14: $30.3 billion
1Q/15: $28.1 billion
2Q/15: $30.8 billion
3Q/15: $31.8 billion
Source: U.S. Bank
Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant processing. Payment Services contributed $325 million of the Company’s net income in the third quarter of 2015, compared with $306 million in the third quarter of 2014 and $259 million in the second quarter of 2015. The $19 million (6.2 percent) increase in the business line’s contribution from the prior year was due to an increase in total net revenue and a decrease in the provision for credit losses, partially offset by an increase in noninterest expense. Total net revenue increased $72 million (5.6 percent) year-over-year. Net interest income increased $40 million (9.0 percent), primarily due to improved loan rates and higher average loan balances and fees. Total noninterest income was $32 million (3.8 percent) higher year-over-year due to an increase in credit and debit card revenue on higher transaction volumes, along with higher merchant processing services, driven by increased transaction volumes and product fees and equipment sales to merchants related to new chip card technology requirements, partially offset by the impact of foreign currency rate changes. Total noninterest expense increased $53 million (8.8 percent) over the third quarter of 2014, driven by higher net shared services, compensation and marketing expenses. The provision for credit losses decreased $10 million (5.3percent) due to a favorable change in the reserve allocation and lower net charge-offs.
Payment Services’ contribution in the third quarter of 2015 increased $66 million (25.5 percent) over the second quarter of 2015 due to higher total net revenue and lower noninterest expense and provision for credit losses. Net interest income was $25 million (5.4 percent) higher than the prior quarter due to improved loan rates and higher average loan balances and fees. Total noninterest income increased $24 million (2.8 percent), primarily reflecting an increase in corporate payment products revenue on seasonally higher volumes, an increase in merchant processing services due to higher product fees and equipment sales to merchants related to new chip card technology requirements and an increase in credit and debit card revenue due to higher transaction volumes. Total noninterest expense was $27 million (4.0 percent) lower on a linked quarter basis reflecting the allocation to the business line of a previously reserved regulatory item in the prior quarter, partially offset by the timing of marketing programs. The provision for credit losses was $28 million (13.5 percent) lower on a linked quarter basis due to lower net charge-offs and a favorable change in the reserve allocation.
Payment Services Net Card Income
3Q/14: $248 million
4Q/14: $269 million
1Q/15: $238 million
2Q/15: $263 million
3Q/15: $266 million
Source: U.S. Bank
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