Facing higher card charge-offs, lower consumer spending and a larger provision for credit card losses, U.S. Bancorp today reported second quarter net income for its payment services activities of $68 million, down 73% from $252 million during the same period last year. Payment services include consumer and business credit cards, debit cards, stored-value cards, corporate and purchasing card services, consumer lines of credit and merchant processing. Credit and debit cards contributed $259 million in noninterest income during the quarter ended June 30, down 2.6% from $266 million. Merchant-processing services earned $278 million in noninterest income, down 10% from $309 million. ATM-processing services earned $104 million, up 11.8% from $93 million. Average loans on U.S. Bank credit cards during the period were $14.3 billion, up 23.3% from $11.6 billion. The company charged off 7.36% of outstanding credit card loans at the end of the quarter, up 252 basis points from 4.84% a year earlier. Accordingly, U.S. Bank increased its provision for credit card losses to $263 million, up 89.2% from $139 million a year ago. "We expect, as unemployment continues to rise, card loss will over time go up again, but the third quarter is normally a decent quarter for card losses," Bill Parker, executive vice president and chief credit officer, told analysts during a conference call today. The bank owned 5,173 ATMs as of June 30, up 5.7% from 4,895 a year earlier. It drove 31,943 ATMs, down 9.4% from 35,250. Debit card transaction volume during the quarter was $9.4 billion, up 3.3% from $9.1 billion a year earlier. Companywide, net income was $471 million, down 50.4% from $950 million a year earlier. Net revenue totaled $4.2 billion, up 11% from $3.8 billion a year earlier.

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