Avg. Interest Net Pre-Tax
   Rate* ROA**
  1993 16.83% 4.06%
  1994 15.77 3.98
  1995 15.79 2.71
  1996 15.50 2.14
  1997 15.57 2.13
  1998 15.59 2.87
   Avg. Interest Net Pre-Tax
   Rate* ROA**
  1999 14.81 3.34
  2000 14.91 3.14
  2001 14.44 3.24
  2002 13.09 3.28
  2003 12.92 3.66
  *Most common interest rate on credit card plans.
  **Net before-tax earnings as a percentage of outstanding balances for large credit card banks, adjusted for credit card securitizations.
  Source: "The Profitability of Credit Card Operations of Depository Institutions," June, Federal Reserve Board
  Major card issuing banks have seen their profits rise the last four years as the average most common interest rate the banks charged on credit cards fell, according to a June study from the Federal Reserve. Issuers' net before-tax earnings as a percentage of their outstanding balances rose from 3.14% in 2000 to 3.66% in 2003, a 16.5% increase, according to "The Profitability of Credit Card Operations of Depository Institutions," an annual study the Fed files with Congress. From 2002 to 2003 the net earnings rate rose from 3.28% to 3.66%, or an 11.6% increase. The Fed attributed the improvement to a drop of 43 basis points in chargeoffs per dollar of assets, an 18% decline in provisions for future losses, and a 22% decrease in interest expenses. From 2000 to 2003, the most common interest rate charged on credit card plans fell from 14.91% to 12.92%, a 13.3% drop. During the same period, the Fed Funds rate fell from 5.45% to 0.98%. Net earnings for major credit card banks peaked at 4.06% in 1993, and the average most common interest rate topped out at 18.23% in 1991. For its study, the Fed uses call reports and surveys of the commercial banks with assets exceeding $200 million and the bulk of their lending to individuals, primarily through credit cards. Last November, 21 banks met the definition. Those banks accounted for 67.5% of credit card outstandings at commercial banks, or in the pools of underlying securities backed by credit card balances, the Fed reported.
 

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