Growing Piece
JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. -- three of the biggest U.S. card lenders -- each get about 15% of their revenue from that business, according to data compiled by Wells Fargo & Co. analysts.
In recent years, lenders began to curb the growth of their card portfolios as the longest economic expansion in U.S. history marched on. Still, credit-card balances reached a record $930 billion last year.
During the depths of the financial crisis, as card write-offs mounted, lenders abruptly slashed credit lines or cut them entirely at a time when consumers needed them most.
“The issue is that banks still need to properly manage their loan portfolios while assisting customers,” Wells Fargo analyst Mike Mayo said in an interview. “Do you continue lending and supporting customers through a rough patch? Or do you pull back credit lines to protect the quality of the balance sheet?”
American Express Co. has abandoned its profit forecasts for the year. The New York-based company, which gets more than half of its revenue from the fees merchants pay with each card swipe, has seen a steady drop in spending this month. Almost 30% of spending on the company’s cards comes from travel and entertainment.
Worst Performers
Banks such as JPMorgan, Capital One and Synchrony Financial have large portfolios of cards tied to retailers, many of which have been forced to shutter stores. Shares of Synchrony and Discover Financial Services both tumbled about 60% this year through Tuesday, among the worst performers in the 66-company S&P 500 Financials Index.
Many lenders have already begun to actively manage their loan portfolios and sell underperforming assets, according to a McKinsey & Co. report that analyzed how banks are responding to the pandemic.
Citigroup urged customers to reach out to the bank to learn more about options it has for credit-line increases.
“Lenders may want to become more proactive, too, anticipating instances in which increasing or decreasing lines can help customers,” McKinsey said in the report. “And initiating outreach campaigns that can demonstrate genuine concern for their financial well-being.”
This article was provided by Bloomberg News.