Capital Briefs: Profits Dropped in '94 At Credit Card Banks

WASHINGTON - Credit card banks' profitability dropped slightly in 1994, as competition and increased funding costs squeezed margins, the Federal Reserve Board reported Friday.

Still, pretax earnings at the 37 biggest specialized card banks were 3.98% of outstanding balances - down from 1993's 4.06%, but higher than any other year since 1986, the year the Fed began calculating information from call report data.

Less successful were the credit card operations of 95 banks with assets under $1 billion . They returned pre-tax earnings of 1.44% of outstanding balances, according to the Fed's 1994 functional cost-analysis survey.

That's down from 4.22% in 1993, but the Fed attributed the decline to different banks participating in the survey. When banks that participated in the survey during 1993 and 1994 are considered, the pre-tax figures of earnings are 2.15% in 1994 and 2.23% in 1993.

For the credit card banks - defined by the Fed as commercial banks with more than $200 million in assets, with the bulk of their assets in consumer lending and 90% of their consumer lending in credit cards - loan delinquencies were down in 1994. Thirty-day delinquency rates for credit card issuers were at 2.62% of loans outstanding in 1994, down from 2.69% in 1993.

The Fed also reported that the average interest rate charged on credit cards was 16.25% in August 1994, down from 16.59% in August 1993 and well below the high of 18.27% in February 1991.