AMEX just cut off re-allocation among credit lines as of two days… Cap One usually gives credit to the riskiest people… While there might be a sucker’s rally in the next few days… CC companies can’t be doing good over the next year…
a lot priced in - 60 and -50%!!! the downside is probably less than your gut thinks
MasterCard has already fallen ~50% this year, so they’ve been hit pretty hard. Visa IPO was this year and they’re already below their IPO price despite mild initial success (-20% from IPO). Good chance they’ll go lower when bad consumer spending news comes out later, but they won’t deviate too much from the indexes at this point. As for the banks that issue credit cards, I think its the least of their worries. Wells Fargo issues plenty of cards in the Mid-West and West Coast and it stronger than ever as a whole.
Visa and Mastercard just get a commission on sales, they don’t give out the credit… If you think the credit card companies are in good shape u haven’t talked to people. Many who used their homes as ATMs now are using their CC as ATM. Just as Mortgage were doing great before a fall, then the whacking… Watch… TAKING THE PULSE: Credit-card issuers such as American Express Co. (AXP) and Capital One Financial Corp. (COF) are struggling amid shrinking volumes, rising financing costs and a slow down in consumer spending. That has prompted boosts to loan-loss reserves, cutting credit off from problem borrowers and tightening restrictions on new cards. Visa Inc. (V) and MasterCard Inc. (MA) are better positioned because they don’t issue lines of credit, instead handling transactions on behalf of lenders, collecting a fee for their services and leaving the credit risk to the banks. COMPANIES TO WATCH: Capital One Financial Corp. - Oct. 16 Wall Street Expectations: Analysts polled by Thomson Reuters expect earnings of $1.01 a share on revenue of $4.3 billion. A year ago, Capital One had earnings from continuing operations of $2.09 and revenue of $3.77 billion. Key Issues: Observers say the credit crisis will hit Capital One’s earnings harder than its competitors since the company gleans a high proportion of its revenue from its U.S. credit-card business. Innovest StrategicValue Advisors said Capital One is at risk because its business model includes charging high fees for missed payments, giving the company high exposure to subprime credit- card holders and low payment rates. American Express Co. - Oct. 20 Wall Street Expectations: Analysts anticipate earnings of 65 cents a share on revenue of $7.37 billion. A year ago, Amex had earnings from continuing operations of 90 cents a share on revenue of $7.95 billion. Key Issues: American Express’ well-off customers have been cutting their spending and even its higher-rated borrowers - those with credit scores of 650 to 750 - are seeing strains from the credit crisis. Analysts are also concerned the company’s primary funding source, fixed-income markets, has been facing unprecedented disruption.
Our parent company is primarily a credit card issuer. Mostly less than prime and subprime credit cards - no performance problems so far. People keep making payments because they want their lines of credit open. Now funding is another story.
I just got an Amex gold card offer today. It gave me the 50,000 miles and the first year fee was waived. I have about 50k in unused credit already. I wish I could give that to some companies to use and have them use it for good purposes.
CREDIT LIMITS SLASHED * Comments: 0 * Read Comments * Leave a Comment By RICHARD WILNER Posted: 4:23 am October 12, 2008 After consumers failed for years to curb their runaway spending, credit-card companies are taking matters into their own hands - unilaterally lowering credit limits for tens of thousands of Americans. The moves - tied to the fi nance companies’ attempts to rein in credit risk - appear to be hitting critical mass just as the crucial holiday shopping season approaches. The Federal Reserve re ported last week that in Au gust, revolving credit, which is primarily credit- card debt, shrank by 0.8 percent - the first time America car ried smaller balances on their credit cards since 1998. Credit-card issuers started lowering limits in the spring, as balance-sheet pressure in the general market put them behind the eight ball. The moves have continued into the fall. In the second quarter, credit-card debt grew by 3.4 percent from the year-earlier period - that was less than half the 7.6 percent rise in the first quarter. “Most banks are cutting their credit limits,” said Carol Kaplan, a spokeswoman for the American Bankers Association. “Folks with good credit scores and solid credit histories are now getting caught in the fray.” American Express has increased the number of cardholders getting their credit limits downsized, from 20 percent of those reviewed to 50 percent of those reviewed, a company spokesperson said. Retailers, who are desperate to make any sale, may be left disappointed as a growing number of consumers find themselves with no spending limit left on their cards. Nearly two out of three credit-card industry executives plan to reduce their credit lines, according to an industry survey this summer. The lowering of credit limits not only handcuffs consumers, keeping them from buying as much as they used to be able to, but can lower their credit scores because it increases their percentage of credit utilization - which is monitored by the credit bureaus. Joseph Lanza, 26, told CNNMoney.com that he was shocked to see his credit-card limit recently cut to $1,000 from $3,800. He said it happened when he returned from a trip to New York City - when his balance happened to be $970. He said it happened despite a perfect payment history.
The issue is that there’s no financing vis-a-vis securitized issues. Banks aren’t able to offload their CC balances into securitizations because the % YLD demanded by investors is just too high. 1yr CCs are trading at 7-8%, 3-5yrs are trading into the double digits. Consequently, they have to raise fees and lower limits.