bofa Archives • Page 24 of 58 • CardFlash®

Credit Card Industry May Lose $8B in 2009

5, Country, Priority, UNITED STATESBy Robert McKinley 10/26/2009

Based on third quarter reports so far it appears the bank credit card industry is on track to lose as much as $8 billion for 2009. This would make the first time in 28 years the industry has posted a net loss. However, with major issuers such as Capital One and American Express posting third quarter profits, the fourth quarter could soften the annual loss to $6 billion, according to CardData (www.carddata.com).
But, charge-offs are still nagging the industry. So far this year, Chase, the nation’s largest issuer, reported a $1.9 billion loss for its card business. BofA is down $4.4 billion for 2009, but the figure is for global cards. Last year the industry posted an $8.1 billion pre-tax profit, compared to a record $40.3 billion pre-tax profit for 2007. In 1980 and 1981 the industry lost $125 million and $110 million, respectively. During this recessionary period, the prime interest rate was 21% while the average credit card interest rate was 19.6%, according to CardTrak.com.

Bank Credit Card Annual Pre-Tax Profits
(VISA, MasterCard, Discover, American Express)
($ billions, except as noted)

YEAR TOTAL
2008: 8.10
2007: 40.30
2006: 37.50
2005: 30.60
2004: 31.60
2003: 29.80
2002: 27.80
2001: 24.30
2000: 20.50
Source: CardData (www.carddata.com)

Late Stage Delinquency Begins to Decline in Q3

5, Country, Priority, UNITED STATESBy Robert McKinley 10/20/2009

Over the past twelve months average managed delinquency (90+ days) among the nation’s top three issuers increased 84 basis points, rising from 2.12% for 3Q/08 to 2.96% in 3Q/09. However, for the first time since the start of the recession, delinquency rates began to decline the third quarter, according to CardData. All three major issuers reported sequential declines in their late stage delinquency rate. Chase reported that its managed delinquency rate for the third quarter was 2.76%, up from 1.77% in the prior year, but down from 3.25% in the prior quarter. BofA reported that third quarter delinquency for its global cards declined to 3.76%, compared to 4.21% for 2Q/09, but up from 2.88% one-year ago. Citi posted managed delinquency for its North American cards of 2.37% for the third quarter, compared to 2.62% in the second quarter and up from 1.73% in the third quarter of last year. For complete details on third quarter results visit CardData (www.carddata.com).

DELINQUENCY HISTORICAL
BofA* Chase Citi**
3Q/08: 2.88% 1.77% 1.73%
4Q/08: 3.16% 2.34% 2.16%
1Q/09: 3.99% 3.22% 2.60%
2Q/09: 4.21% 3.25% 2.62%
3Q/09: 3.76% 2.76% 2.37%
* Global Cards
** North America cards
Source: CardData (www.carddata.com)

Charge-Offs of Top Issuers Up 156BPS from Q2

5, Country, Priority, UNITED STATESBy Robert McKinley 10/19/2009

Over the past twelve months average managed charge-offs among the
nation’s top three issuers have nearly doubled, rising from 5.93% for
3Q/08 to a record 11.16% for 3Q/09. Sequentially, charge-offs jumped 156
basis points compared to 242 basis points, according to CardData. Chase
reported that its managed net charge-off rate for the third quarter was
10.30%, up from 5.00% in the prior year and 10.03% in the prior quarter.
Excluding Washington Mutual, the managed net charge-off rate for the
third quarter was 9.41%. Chase notes that within the WaMu portfolio,
charge-offs hit 21.94%, compared to 19.17% in the second quarter and
12.09% at year-end 2008. BofA reported that third quarter charge-offs
for its global cards rose to 12.90%, compared to 11.73% for 2Q/09 and
6.40% one-year ago. Citi posted managed charge-offs for its North
American cards of 10.29% for the third quarter, compared to 10.18% in
the second quarter and 6.39% in the third quarter of last year. For
complete details on third quarter results visit CardData (www.carddata.com).

CHARGE-OFFS HISTORICAL
BofA* Chase Citi**
3Q/08: 6.40% 5.00% 6.39%
4Q/08: 7.16% 5.56% 6.68%
1Q/09: 8.62% 7.72% 8.42%
2Q/09: 11.73% 10.03% 10.18%
3Q/09: 12.90% 10.30% 10.29%
* Global Cards
** North America cards
Source: CardData (www.carddata.com)

BofA Credit Card Charge-Offs Near 13% in Q3

5, Country, Priority, UNITED STATESBy Robert McKinley 10/16/2009

Bank of America global credit cards posted a $1.0 billion loss in the
third quarter compared to a $167 million loss for 3Q/08. Third quarter
global cards revenues declined slightly from the prior quarter to $7.3
billion, and compared to $7.8 billion for the third quarter of last
year. Third quarter charge-offs rose sharply to 12.90%, compared to
11.73% for 2Q/09 and 6.40% one-year ago. However, the managed 30+ day
delinquency ratio decreased to 7.35%, compared to 7.64% in the second
quarter and 5.89% for 3Q/08. The managed 90+ day delinquency ratio also
declined to 3.76%, compared to 4.21% in the second quarter and 2.88% for
3Q/08. The provision for credit losses increased to $7.0 billion from a
year earlier due to higher net losses driven by economic conditions and
higher bankruptcies. The increase in losses was partially offset by
reductions in the reserves as a result of improving delinquencies. This
compares with reserve additions in the year-ago quarter. For complete
details on Bank of America’s 3Q/09 performance, visit CardData
(www.carddata.com).

BOFA CREDIT CARD NET INCOME
(Global Cards; Excludes Business Cards)
3Q/08: (-$167 million)
4Q/08: (-$9 million)
1Q/09: (-$1874 million)
2Q/09: (-$1617 million)
3Q/09: (-$1036 million)
Source: CardData (www.carddata.com)

BofA Suspends Credit Card Re-Pricing

5, Country, Priority, UNITED STATESBy Robert McKinley 10/07/2009

In a major decision, Bank of America announced it will not implement
any change in terms (risk or economic based) re-pricing of consumer
credit card accounts between now and the effective date of the “CARD
Act” early next year. Senate Banking Committee Chairman Chris Dodd
called on credit card companies to follow BofA’s commitment to not raise
interest rates or change terms on customers until consumer protections
included in the “Credit CARD Act” go into effect. In April Chairman Dodd
and Sen. Charles Schumer wrote a letter to Federal Reserve Chairman Ben
Bernanke calling on him to use emergency authority to freeze interest
rate increases on existing balances for consumer credit cards.

BofA Goes Back to Basics with a New Card

5, Country, Priority, UNITED STATESBy Robert McKinley 09/17/2009

The impact of the new credit card rules became clear today as Bank of
America announced plans to launch a new credit card next month with a
core interest rate of prime +14%, compared to the prime +9.9% APR that
dominated the market for the past decade. The new “BankAmericard Basic
Visa” is being promoted as a card with simplified rates and terms.
Indeed the APR is the same for purchases, balance transfers and cash
advances. BofA’s current cards charge an APR as high as 24.44% for cash
advances. The over-limit fee is gone and the late payment fee is $39,
regardless of the amount past due. BofA says the new card will also
feature an easy-to-understand, single-page disclosure. The new “Basic”
card is one of four new cards in a simplified suite of cards offered
under the BankAmericard brand. Other cards in the suite include:
“BankAmericard Power Rewards Visa”; “BankAmericard Cash Rewards Visa”;
and “BankAmericard Visa.” All four cards will also offer up to 20%
cash back on purchases through the “Add It Up” program. The new card
will be available in October.

Top V/MC Issuers Post Higher Charge-Offs in Aug

5, Country, Priority, UNITED STATESBy Robert McKinley 09/16/2009

Three of the four top issuers of Visa and MasterCard reported
significantly higher charge-offs in August following a leveling off in
the prior month. Citi reported the biggest jump rising more than 200
basis points sequentially, while Cap One posted a 51 basis point decline
from July. Bank of America’s global credit card charge-offs increased to
14.54% in August, compared to 13.82% in the prior month. August
charge-offs for Chase credit card ABS rose to 8.70% from 7.92% in July.
Citi posted a 12.1% charge-off ratio for August, compared to 10.03% in
July and 10.51% in June. Capital One’s charge-off ratio for U.S. Cards
dipped to 9.32% in August from 9.83% for July. Meanwhile, American
Express charge-offs declined slightly and Discover will report third
quarter performance tomorrow. For complete details on delinquency and
charge-offs visit CardData (www.carddata.com).

CHARGE-OFFS
May June July Aug
Chase 8.36% 8.04% 7.92% 8.70%
Cap One 9.41% 9.73% 9.83% 9.32%
Citi 10.50% 10.51% 10.03% 12.10%
BofA* 12.50% 13.81% 13.82% 14.54%

* includes U.S, Europe and Canada consumer credit card; does not
include business card, debit card and consumer lending;
Source: CardData (www.carddata.com).

Charge-Offs Remain Likely to Top 11% by 2010

5, Country, Priority, UNITED STATESBy Robert McKinley 08/26/2009

Despite a slowing in the unemployment rate and improved credit card performance metrics in July there is still a high probability that charge-offs will rise to 11% by year-end. Charge-offs exceeded the unemployment rate for the first time ever in the second quarter. Discounting the seasonality of the July and August credit card metrics and the masking of those falling off the unemployment charts, the gap between the ratios will likely widen by year end. According to CardData (www.carddata.com), average charge-offs for the second quarter were 10.2% with an unemployment rate of 9.4%. With a 9.9% unemployment rate expected for September, third quarter managed charge-offs will likely hit 10.3%. Four of the six top U.S. credit card issuers posted lower charge-offs in July, ranging from 12 basis points to 70 basis points below the prior month. Furthermore, higher charge-offs reported by Capital One (10 bps) and BofA (1 bps) were not significant. (CF Library 8/20/09)

Unemployment Charge-Offs
Mar/08: 5.2% 4.6%
Jun/08: 5.7% 5.3%
Sep/08: 6.0% 5.5%
Dec/08: 7.1% 6.0%
Mar/09: 9.0% 8.7%
Jun/09: 9.4% 10.2%
Sep/09: 9.9% 10.3%
Dec/09: 10.1% 11.0%
Source: CardData (www.carddata.com)

Former Discover Card Head Joins BofA Board

5, Country, Priority, UNITED STATESBy Robert McKinley 08/24/2009

Bank of America has tapped Robert Scully, previously with Morgan Stanley, to serve as on the Board of Directors.
Scully, 59, served as a member of the office of the chairman of Morgan
Stanley focusing on the firm’s key clients.
While co-president at Morgan Stanley, Scully was responsible for asset
management, the Discover card business and merchant banking activities.
Prior to that, he served as chairman of global capital markets and was
vice chairman of investment banking where he was responsible for talent
development, senior client relationships and strategic initiatives.
Before joining Morgan Stanley in 1996, Scully served as a managing
director at Lehman Brothers and at Salomon Brothers.
He received a bachelor’s degree from Princeton University in 1972 and an
MBA from Harvard Business School in 1977.

Moderating Card Charge-Offs Abound in July

5, Country, Priority, UNITED STATESBy Robert McKinley 08/20/2009

Click here for more information at www.carddata.com.

BofA Says New Card Rules Will Drive Higher APRs

5, Country, Priority, UNITED STATESBy Robert McKinley 08/18/2009

Click here for the full story in PDF format.

ADS and Charming Shoppes Ink a Store Card Deal

5, Country, Priority, UNITED STATESBy Robert McKinley 08/13/2009

Charming Shoppes has signed a deal to sell its private label credit card receivables to Alliance Data Systems. The two companies also signed a ten-year operating agreement for the servicing of the Charming Shoppes’ cards. The deal covers the operation of the Lane Bryant, Fashion Bug and Catherines credit card programs. Charming operates its private label credit card program in-house. There are currently 4.5 million active accounts generating $680 million in annual sales volume and carrying $500 million in outstandings. Charming says the cards represent 32% of its retail stores nets sales for the trailing 12 months. Charming operates women’s apparel brands including Lane Bryant, Lane Bryant Outlet, Fashion Bug and Catherines Plus Sizes, and posts annual sales of more than $2 billion with 2,258 retail stores nationwide. Gross proceeds from the transaction are estimated at $140 million with $110 million net to Charming. ADS plans to maintain and operate Charming Shoppes’ existing Milford, OH card support facility. The deal is expected to close by the end of the year.

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