Credit card usage on a declining spree
The use of credit card that has been on a declining spree holds little chance of recovering. According to the analysts’ report of Sterne Agee, the declining trend in credit card usage is likely to pass on to the next year following the decrease in holiday shopping and spending.
The debts in credit card or the receivables that the top companies of credit card channeled to develop trusts accounted to $243 billion in November. This particular figure, which has been significantly flat from the previous month, recorded a 10.5 percent drop from November 2010. The figure also signifies a 25 to 30 percent dip from the level of 2008 figures. The analysts of Sterne Agee confirmed on the report.
Usually, top companies offering credit cards most often take to selling the debt to special trusts for converting them into securities. These securities are then put up for sale to the investors ending up in collecting the interest and other due payments from the borrowers.
The analysts from Sterne Agee stated that even though the seasonal holiday spending spree is likely to offer a momentary lift to credit card purchases and securitization, the general declining trend is inimitable.
The analysts’ further notified that the current balance of major banks like JPMorgan Chase, Bank of America Corp’s, and American Express are down by 50, 30, and 25 percent respectively from the 2008 levels.
According to Sterne Agee, the latest figures and the report is also reflecting a drop at charge-offs and delinquencies, but the pace is slow.
Amid all the reports of declining credit card usage, analysts at Stifel Nicolaus have upgraded the status of Discover Financial Services from ‘hold’ to ‘buy’ before setting a stock target price at $29. The analysts’ further reported that the result of fourth quarter stood up as a proof to the fact that the company is outsmarting other competitors of credit card sellers in the market at ease.
The company reported an income rise of 46 percent and revenue generation of 13 percent with the holiday shopping being on a seasonal spree.
Analysts’ at Stifel Nicolaus has also reported that it is seeing a long term gaining potential for the company, as it is minimally exposed to the European nations. This minimum exposure ascertains less material effect on the figures of the company owing to the debt crisis that is looming large over Europe.
