Bankcard profit margins declined last year as card spending slowed and credit card loan losses soared, but issuers still made a sizable profit, according to the 2009 Bankcard Profitability Study and Annual Report produced by Cards & Payments, a CardLine sister publication. U.S. issuers of Visa- and MasterCard-branded consumer cards posted a collective after-tax profit/return on assets of $17.71 billion, or 2.48% of average outstandings. That represents a 2.9% drop from the previous year's collective profit of $18.25 billion, or 2.71% of average receivables. Bankcard issuers had combined average outstandings of $713 billion last year, up 5.8% from $674 billion in 2007, estimates show. Purchase volume on consumer cards reached $1.37 trillion, up 0.74% from $1.36 trillion in 2007. Purchase volume had increased by 3.1% in 2007 from the previous year. Total charge volume was nearly flat at $1.58 trillion compared with 2007. A sharp increase in credit card charge-offs on outstanding receivables during the second half of the year caused profit growth to decelerate, analysts say. "Accounts flowed through the delinquency buckets and to charge-off status faster than we have previously seen, disrupting old business models," says Scott Strumello, an associate at Westbury, N.Y.-based Auriemma Consulting Group. But charge-off rates varied significantly among issuers. Robert K. Hammer, chairman and CEO of Thousand Oaks, Calif.-based R.K. Hammer Investment Bankers, says disparities in charge-off rates produced income yields as low as 11% for some issuers while others posted income yields as high as 22%. "The surge in charge-offs last year far overshadowed all other profitability variables in 2008," Hammer says.

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