The nation’s three largest issuers
Just below the Big Three in lending volume, companies like American Express Co., Capital One Financial Corp. and USAA have each increased total lines (including drawn amounts) by 7% to 30% in a little less than two years. The growth has been spurred by
Capital One appears to have undertaken the largest expansion. The total amount of credit available to its non-business-card holders has climbed about 30% from the first quarter of 2010 to $248 billion at the end of last year. A 37% increase in unused lines over the period, to $190 billion, vastly outpaced the 12% increase in loans, to $59 billion, despite a spike in fourth-quarter holiday borrowing that tends to exaggerate the comparison with any given first quarter.
Total lines also increased by roughly 7% to 8% during the period at U.S. Bancorp, Amex and USAA. The growth in loans at these companies was roughly on par with the growth in unused lines, however, keeping their utilization rates, or loans as a percentage of available credit, in a tight range.
(Year over year, growth in unused lines outpaced growth in loans at all three companies by a wide margin for the fourth quarter.)
Total lines at HSBC North America Holdings Inc., whose retail-brand-focused card operation Capital One
Industrywide, lines
The retreat seems to have
Among the three biggest issuers, total lines continued to fall in the fourth quarter at Citigroup Inc. and at Bank of America Corp., which has been
The abiding caution on the amount of credit issuers are extending is to be expected, says Leigh Allen, a managing director in the cards merger practice at Kessler Group. Heavy loan losses during the recession “taught the market that you really need to be careful about indiscriminately giving people lots of big unused lines,” he says.
Companies that have addressed underwriting breakdowns faster than rivals are in a better position to resume growth, but big expansions in total lines could also be explained by changes in an issuer’s mix of business, Allen says.
Capital One has said that it is ceding share among large-line customers who tend to carry balances from month to month because of concern over their ability to withstand financial pressure. But it is making a big push among clientele who tend to spend a lot on their cards relative to the amounts they borrow.
As unused lines at the company spiked by about $50 billion during the first half of last year, utilization rates plummeted from around 27% to around 23% — a level much closer to other large general-purpose issuers. The shift could reflect a decline in the portion of Capital One’s portfolio made up of subprime borrowers with small lines (and hence those who tend to have high utilization rates), and an increase in affluent cardholders.
Thus, much of the increase in lines at issuers that have reported doing so may represent intensifying warfare over the most desirable consumer segments as much as an opening of the credit spigots.