Though credit unions represent the majority of all credit card issuers in America today, banks still manage more than 10 times the amount of revolving credit compared to credit unions and that gap continues to grow, according to R.K. Hammer, a card portfolio sale broker.
CUs manage less than $22 billion in revolving credit, while banks manage $243 billion, with approximately 88% of these revolving amounts made up of credit card balances.
The most recent year-over-year growth rates for the two categories are also different. Credit unions show annual growth rates for revolving credit of 3.8% last year, while banks grew by more than 14% last year, much of that from credit card portfolio purchases.
This trend is expected to continue, as credit unions have been exiting the card business over the past three years at a rate of 133 per year, with banks representing virtually all the buyers.
More than 140 more credit unions are expected to exit the card business again this year. Importantly, nine out of every ten of these have ongoing relationships with the portfolio buyers, providing CU members with card products and CU's with fee income.
"It also comes as no surprise, then, that the earnings on an ROA basis also show marked differences," Hammer reported. "Credit unions' cards earned an average 1.05% ROA last year in the Hammer model, while general bank cards earned 4.53% ROA pre-tax (even greater than the giant monolines, at 4.25%). These earnings trend differences are also expected to continue, as more credit unions shed their card programs to banks, which then offer post-sale agent or alliance programs."
