Despite new rules and legislation that have cut into certain revenue streams, credit and debit cards are showing some positive trends at U.S. Bancorp.
Credit card purchase volume and outstanding receivables both rose during the first quarter, as did debit card transaction volume, the Minneapolis-based bank said April 17.
And payments products are playing a key role in the bank's strategy of balancing its mix of products, Richard Davis, U.S. Bank's chairman and CEO, told analysts during a conference call to discuss first-quarter earnings.
"We don't want to be dominant in any one line of business," Davis said. "So no more than I want to be a credit card company with branches attached to it, I don't want to be a mortgage company with a credit card business."
The bank's combined credit and debit card revenue declined 23.8% during the quarter ended March 31, to $202 million from $265 million a year earlier.
Andy Cecere, U.S. Bank's chief financial officer, told analysts reductions in debit card interchange that took effect Oct. 1 resulting from the Durbin amendment to the Dodd-Frank Act helped to drive down revenue, as did a change in the classification of credit card balance-transfer fees, which the issuer now recognize as interest income.
Other contributors cutting into revenue included the Credit Card Accountability, Responsibility and Disclosure Act, which limited its ability to raise interest rates, and changes to Regulation E of the Electronic Funds Transfer Act that cut the bank's income from overdraft-protection fees, Davis added.
U.S. Bank's average loans during the quarter rose 4.3%, to $16.8 billion from $16.1 billion, helped by the bank's acquisition in December of a $700 million portfolio from Bank of America Corp. (
Retail credit card payment volume during the quarter rose 10.2%, to $12.78 billion from $11.6 billion, while corporate payment card volume rose 5.3%, to $11.86 billion from $11.26 billion.
The average credit card charge-off rate on outstanding receivables declined 216 basis points, to 4.05% from 6.21%. Credit card loan-loss reserves dropped by 31.6%, to $169 million from $247 billion.
Revenue from U.S. Bank's corporate payment products was flat at $175 million.
Debit card purchase volume during the quarter rose 9.2%, to $11.9 billion from $10.9 billion a year earlier.
Revenue from merchant processing rose 12%, to $337 million from $301 million.
U.S. Bank's merchant-acquiring payment volume rose 11.4%, to $78 billion from $70 billion, while the total number of merchant transactions rose 14.6%, to 841.7 million from 734.5 million.
The bank's revenue from ATM processing declined 22.3%, to $87 million from $112 million. U.S. Bank operated 5,061 ATMs at the end of March, down 3.4% from 5,238 a year earlier.
Altogether, net income from U.S. Bank's payments unit during the quarter declined 11.7% to $264 million from $299 million, while revenue for the unit rose 2.7% to $1.13 billion from $1.1 billion.
U.S. bank's overall profit during the quarter rose 27.6%, to $1.34 billion from $1.05 billion, while net revenue rose 8.89%, to $4.9 billion from $4.5 billion.
What do you think about this? Send us your feedback.
