The second half of 2021 will likely be more exciting than the first, as credit card companies get back into the lending business. Up until about March, credit card managers were in a risk management mode, as COVID’s uncertainty forced credit policy groups to tighten lending. Now, with the proverbial herd immunity in the US, it is time to get back to business.
We noted yesterday that the four top Australian banks (ANZ, CBA, NAB, and Westpac) credit card loan portfolios are down between 22% and 29%. Here in the US, where top issuer portfolios outsize the AU market by a factor of 10, we are talking about big-bucks: Average card loans at Citi fill from $168 billion in Q120 to $144 billion in Q121. And, Citi, of course, is not alone in its portfolio decrease.
Chase, Citi’s cross-town rival (actually located at 270 Park Ave, which is only a few blocks from Citi’s 399 Park), has similar issues. Credit card Average Loans slid from $162.7 billion to $134.9 billion during the same period. And these two top issuers are not alone. Look at Bank of America, and you will see that Average loans and leases of $291B decreased $26B, or 8%, from 1Q20, across all consumer banking sectors.
Expect credit card offers and benefits to scale up in 2H21. In this weeks news, you will find the following offers:
- Bank of America’s $200 cash reward (Bank of America)
- Chase Sapphire’s 125,000 point bonus (CNBC)
- Citi’s Custom Cash Card (Citi)
- Wells Fargo’s 2% Cash-Back (American Banker)
But watch out for inflation. As the Washington Post reports a 5% increase in prices, credit card portfolios will see a natural increase as household budgets adjust to the new environment.
For credit managers, get ready for the action on the acquisition side. And for collection managers, take a breather. You will come off the bench in late 2021 when portfolios begin to swell. As for now, lenders are ready to lend.
Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
