JPMorgan Chase & Co.'s credit card unit is evolving into a leaner, more upscale transaction machine.
Pulling from significantly fewer credit card accounts than it had a year earlier, Chase posted a 12% overall increase in credit card sales volume for quarter ended March 31 as it focused on higher-spending, more affluent customers.
Certain of Chase's upscale credit card products drove even higher sales volume growth, Doug Braunstein, Chase's chief financial officer, told analysts during a conference call April 13 to discuss quarterly earnings.
"If you exclude the sale of Kohl's, sales were actually up 15% for the system, and the new product sales growth for our Freedom, Sapphire, and Ink products were actually in excess of that growth rate," Braunstein said.
Chase had a total of 64.4 million open accounts at the end of the quarter, down 29.9% from 91.9 million a year earlier. Capital One Financial Corp. absorbed 20 million of those accounts when it reached an agreement to acquire the Kohl's Corp. private-label credit card operation from Chase in 2010 (
But Chase also opened fewer new accounts during the recent quarter, approving only 1.7 million new accounts, down 34.6% from 2.6 million a year earlier.
The issuer's newer accounts apparently are skewing mainly toward upscale segments. In recent months Chase heavied up advertising and promotions for its premium-level credit cards, including Sapphire (
In late March, Chase introduced one of its priciest travel-rewards cards yet, the $395-a-year MileagePlus Club Visa card (
Other levers, including a higher provision for credit losses driven by a lower reduction in the allowance for loan losses from a year earlier, caused a drop in profit for Chase's Card Services and Auto unit during the quarter.
The unit reported net income of $1.12 billion for the period, down 25.3% from $1.5 billion during the same period last year. Revenues were down 2.1%, to $4.7 billion from $4.8 billion, caused by lower average card balance and narrower loan spreads, partially offset by lower revenue reversals associated with lower net charge-offs, Chase said in its earnings release.
The provision for credit losses rose 109%, to $738 million from $353 million. Noninterest expense was up 5.7%, to $2.03 billion from $1.92 billion.
The net charge-off rate on credit cards fell 257 basis points to 4.4% from 6.97% a year earlier.
Credit card average loans for the quarter were $127.6 billion, down $4.9 billion or 4% from a year earlier.
Merchant-processing volume was up 22%, to $152.8 billion; total transactions processed were 6.8 billion, up 21%, Chase said.
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