Nomura Securities U.S. Card December Data: A Little Growth for Christmas
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Up: 9 | Down: 12 | New: 19
Rating Summary:
23 Buy, 23 Hold, 3 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 9 | Down: 12 | New: 19
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Nomura Securities U.S. Card December Data: A Little Growth for Christmas
Analyst, Brian Foran, said, "December master trust data showed in-line to slightly better credit trends, but more importantly a continuation of loan growth. Specifically: a) early delinquency was down 6bp month over month, versus normal seasonality -5bp, b) total delinquency was down 11bp, vs. seasonality of -8bp, and c) loan growth was 2.6% vs. seasonality of 2.0%."
"Within the growth numbers, we continue to see evidence of a big bank to pure-play share shift. Specifically, American Express (NYSE: AXP), Capital One (NYSE: COF) and Discover (NYSE: DFS) all had 3-4% US card loan growth this month, while the big banks averaged a lower 1.7% growth."
"Net charge-offs fell this month, but delinquency trends are starting to converge with normal seasonality implying we are nearing a steady state of losses. Two investor concerns we hear are a) JPMorgan (NYSE: JPM) guided for higher 1Q card net charge-offs and b) recoveries are elevated. On the first point, we think JPM’s increase in losses in 1Q is centered on the Washington Mutual book. On the second, industry recoveries are currently running at 1.2% of loans vs. ten year average of 1% and typical cycle troughs of 0.7%. Thus there is an eventual net charge-off ratio headwind of 20-50bp."
Analyst, Brian Foran, said, "December master trust data showed in-line to slightly better credit trends, but more importantly a continuation of loan growth. Specifically: a) early delinquency was down 6bp month over month, versus normal seasonality -5bp, b) total delinquency was down 11bp, vs. seasonality of -8bp, and c) loan growth was 2.6% vs. seasonality of 2.0%."
"Within the growth numbers, we continue to see evidence of a big bank to pure-play share shift. Specifically, American Express (NYSE: AXP), Capital One (NYSE: COF) and Discover (NYSE: DFS) all had 3-4% US card loan growth this month, while the big banks averaged a lower 1.7% growth."
"Net charge-offs fell this month, but delinquency trends are starting to converge with normal seasonality implying we are nearing a steady state of losses. Two investor concerns we hear are a) JPMorgan (NYSE: JPM) guided for higher 1Q card net charge-offs and b) recoveries are elevated. On the first point, we think JPM’s increase in losses in 1Q is centered on the Washington Mutual book. On the second, industry recoveries are currently running at 1.2% of loans vs. ten year average of 1% and typical cycle troughs of 0.7%. Thus there is an eventual net charge-off ratio headwind of 20-50bp."
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