The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
US banks seem to be having a Goldilocks moment with their credit card portfolios.
Spending is up — partly due to inflation and partly due to the fact consumers are embracing travel and dining out as the pandemic recedes — and that means fees they collect from merchants each time a customer swipes their cards are also up.
At Bank of America, spending on cards soared 13%, and average outstanding balances were up 12.4%. The bank added 1.25 million new credit card accounts in the quarter, the most of any quarter in at least the last year.
But it didn’t look like the bank is widening its credit underwriting standards in any meaningful way — the average FICO scores for the portfolio were actually higher at 770.
Customers are also finally borrowing again after spending the past few years diligently paying off balances. That comes just as the Federal Reserve is raising interest rates, bolstering the net interest income these banks collect. But because consumers are still sitting on so much cash, delinquencies remain freakishly low.
Bank of America also gave an interesting metric for cards called “risk-adjusted margin†— basically a measure of profitability that takes into account how much risk the bank is taking on for every dollar of revenue. That’s down to 10.07% compared to a year ago, though it’s up slightly from the 9.95% at the end of the second quarter.