Credit Card Business on the Decline
A Wall Street Journal (WSJ) analyst says that credit card lenders are feeling the pinch as loan losses and rewards expenses rise. Rising loan losses and increased rewards expenses are putting pressure on card lenders’ returns. The result is that one of the most profitable consumer-lending categories in recent years may become more of a middling player, AnnaMaria Androtis writes.
The WSJ says that the pickup in returns for most banks in the first quarter was primarily the result of tighter underwriting, which helped slow the rate of loan loss increases and the amount of money banks are setting aside for future losses. U.S. tax-law changes that lowered corporate tax rates also helped.