Based on third quarter reports so far it appears the bank credit card industry is on track to lose as much as $8 billion for 2009. This would make the first time in 28 years the industry has posted a net loss. However, with major issuers such as Capital One and American Express posting third quarter profits, the fourth quarter could soften the annual loss to $6 billion, according to CardData (www.carddata.com).
But, charge-offs are still nagging the industry. So far this year, Chase, the nation’s largest issuer, reported a $1.9 billion loss for its card business. BofA is down $4.4 billion for 2009, but the figure is for global cards. Last year the industry posted an $8.1 billion pre-tax profit, compared to a record $40.3 billion pre-tax profit for 2007. In 1980 and 1981 the industry lost $125 million and $110 million, respectively. During this recessionary period, the prime interest rate was 21% while the average credit card interest rate was 19.6%, according to CardTrak.com.
Bank Credit Card Annual Pre-Tax Profits
(VISA, MasterCard, Discover, American Express)
($ billions, except as noted)
Source: CardData (www.carddata.com)