Credit card lending is back with a vengeance, and so is competition in this usually hard-to-crack market.
Credit provided by card issuers has rebounded since early 2011, with unused lines climbing sharply while outstanding balances have roughly flattened after the free-fall that began during the recession. The biggest three issuers in the country – Bank of America (BAC), Citigroup (NYSE:C) and JPMorgan Chase (JPM) – have given little slack, however, as they have allowed undesirable accounts to run off and sold pieces of their portfolios. (The national data here is taken from
Instead, smaller competitors like BBVA USA, the holding company for Compass Bank in Birmingham, Ala., and TD Bank have posted blistering growth rates, often from small bases of receivables.
It’s not so much that the industry’s giants are sitting out the
Indeed, among the Big Six, Capital One (COF) stands out for its relentless growth. Even before its acquisition of about $30 billion of receivables from HSBC Holdings in May, which drove a 56% jump in its total lines (including drawn amounts) from the previous quarter to $372 billion at June 30,
The numbers could reflect Capital One’s strategy of rotating away from large-line customers who tend to carry balances from month to month because of concern over their ability to withstand financial pressure. Like the rest of the industry, the company has refocused on high-credit-quality customers who tend to spend a lot on their cards relative to the amounts they borrow, and who are typically awarded high credit limits.
The card business remains concentrated, and is likely to stay that way because of scale advantages. But the recession’s trauma and incumbents’ reengineering of their operations have created space for other players.
Regional banking companies have been
If disruptions have drawn more lenders to the field, however, competition may only become fiercer. As outstanding balances have trended sideways, the New York Fed reported that credit inquiries, an indicator of consumer demand, fell for the second consecutive quarter. The upshot: more lenders chasing a stagnant pool of customers.