JPMorgan Chase & Co. set a strong pace for its credit card sales-volume growth during the fourth quarter that rivals may find difficult to match, but other factors caused the issuer’s net revenues and net income to decline.
Despite a significant decline in overall cards in circulation, consumer credit card sales volume for the quarter ended Dec. 31 rose 8.7%, to $93.4 billion from $85.9 billion a year earlier, likely helped by Chase’s fourth-quarter push to enhance perks associated with its cobranded travel and rewards cards (see story).
“We think that overall these (sales volume) results are solid and slightly better than our expectations,” a team of Morgan Stanley & Co. LLC analysts wrote in a Jan. 13 note to investors following Chase’s earnings announcement.
Specifically, Chase saw higher-than-average growth in the affluent card sector during the quarter, including with its Sapphire, Freedom and Ink card brands, Doug Braunstein, Chase chief financial officer, told analysts during a conference call.
“The result of all of that is we continue to think we picked up close to 180 basis points of market share in the Visa and MasterCard systems,” he said, without elaborating on how that compares with previous quarters.
But as charge-off rates continue to decline, profits are becoming harder to eke out because of declining loan-loss reserve releases that had buoyed income in previous quarters.
“I think in credit card we are near the end of (the) reserve-release (benefit,)” Jamie Dimon, Chase chairman and CEO, told analysts. “Credit is very good, and hopefully it will stay good. It may get a little better, but I think we are near the end (of improving charge-off trends).”
Narrower loan spreads and lower average loan balances contributed to lower net revenue for Chase’s Card Services & Auto unit of $4.81 billion, down 5.1% from $5.07 billion during the same period in 2010. Net income dropped 32.3%, to $1.05 billion from $1.55 billion.
The provision for credit losses rose 49.5%, to $1.06 billion from $709 million, while noninterest expenses rose 8.6%, to $2.03 billion from $1.87 billion, Chase said.
The credit card net charge-off rate for the quarter was 4.29% of receivables, down 356 basis points from 7.85% a year earlier and down 41 basis points from 4.7% during the third quarter, Chase said.
The 30-day delinquency rate for card loans was 2.81%, down 133 basis points from 4.14% a year earlier and down nine basis points from 2.9% the previous quarter.
Consumers opened 2.2 million new credit card accounts during the quarter, down 35.3% compared with 3.4 million a year earlier. Excluding commercial cards, Chase had 65.2 million open accounts at the end of the quarter, down 28.1% from 90.7 a year earlier.
Credit card average loans were $128.6 billion, a decrease of $7 billion, or 5%, from a year earlier.
Merchant-processing volume was $152.6 billion, up 20% from $127.2 billion, while total transactions processed were 6.8 billion, up 21.4% from 5.6 billion.
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