Credit card companies have little to celebrate as many analysts brace for 2009 to be one of the worst years on record for consumer credit.
Losses for the industry could top $70 billion, but it is hard to predict how bad the pain will be.
US consumers have never before been so deeply in debt. There was nearly $1 trillion of credit and charge card debt outstanding as of October, up more than 25 per cent since 2003, according to the US Federal Reserve. That is in addition to $10.54 trillion in mortgage debt.
Unemployment, already at 15-year highs, is expected to rise to its highest levels since the early 1980s, when credit cards were not nearly as widespread.
In short, there's more debt than ever and fewer people are able to pay it.
"In many ways, we're in uncharted territory," said John Williams, an analyst at Macquarie Research.
Major credit losses are big trouble for Citigroup Inc, Bank of America, and other card issuers such as American Express Co and Discover Financial Services, which have seen their shares lose up to 80 per cent of their value in 2008.
The United States is not standing idly by. Citigroup received $45 billion of taxpayers' money in October and November. Bank of America has received $25 billion. American Express, which became a bank holding company, got approval last week to receive $3.4 billion from the taxpayer-funded Troubled Asset Relief Program.
Lenders, seeing potential big losses, are trying to protect themselves by tightening credit availability, which leaves consumers with fewer options.
This year's holiday shopping season was the worst since at least 1970, according to a report from the International Council of Shopping Centers.
"It is hard to see the light at the end of the tunnel," Williams said.
NOWHERE TO HIDE
No credit card company is safe. According to Citigroup analysts, more than one-fourth of the credit card portfolios of Citibank, Bank of America Corp, Capital One Corp, and Discover are subprime, which could lead to further losses.
Meanwhile, American Express is heavily exposed to troubled markets with high default rates such as Florida and California, and JP Morgan Chase & Co has to digest the portfolio of failed savings and loans company Washington Mutual.
Together, these six companies hold around 90 per cent of the total US outstanding credit card debt.
Citigroup and American Express have said they are tightening lending to mitigate their losses. JP Morgan and Bank of America declined to comment, while Capital One did not return calls seeking comment.
Credit card companies have reported increased losses. Discover, the No 4 US credit card network, posted worse-than-expected results in its fourth fiscal quarter, the first sign of the harsh deterioration of the industry, when the economic downturn picked up steam in October and November.
Discover almost doubled the money it set aside to cover credit losses. Analysts said its competitors would likely do the same in coming Credit Cards quarters, leading to lower earnings.
"Things have changed pretty rapidly in the last two months. I'm hopeful that we will see the worst in 2009, but I don't know yet," David Nelms, chief executive of Discover, told reporters in a recent interview.
Many analysts and credit card executives look at 2009 and remember the beginning of the mortgage crisis in early 2007, when lenders consistently underestimated what was coming up.
Said Chris Brendler, analyst at Stifel Nicolaus, "The risk is that things get much worse than expected."
Source: Agencies
Showing posts with label American Express. Show all posts
Showing posts with label American Express. Show all posts
Saturday, January 3, 2009
Thursday, January 1, 2009
Will 2009 be worst year for US credit card companies?
US credit card companies have little to celebrate as many analysts brace for 2009 to be one of the worst years on record for consumer credit. Losses for the industry could top $70 billion, but it is hard to predict how bad the pain will be.
US consumers have never before been so deeply in debt. There was nearly $1 trillion of credit and charge card debt outstanding as of October, up more than 25 percent since 2003, according to the US Federal Reserve. That is in addition to $10.54 trillion in mortgage debt.
Unemployment, already at 15-year highs, is expected to rise to its highest levels since the early 1980s, when credit cards were not nearly as widespread. In short, there's more debt than ever and fewer people are able to pay it. "In many ways, we're in uncharted territory," said John Williams, an analyst at Macquarie Research.
Major credit losses are big trouble for Citigroup Inc, Bank of America, and other card issuers such as American Express Co and Discover Financial Services, which have seen their shares lose up to 80 percent of their value in 2008. The United States is not standing idly by.
Citigroup received $45 billion of taxpayers' money in October and November. Bank of America has received $25 billion. American Express, which became a bank holding company, got approval last week to receive $3.4 billion from the taxpayer-funded Troubled Asset Relief Program.
Lenders, seeing potential big losses, are trying to protect themselves by tightening credit availability, which leaves consumers with fewer options. This year's holiday shopping season was the worst since at least 1970, according to a report from the International Council of Shopping Centers. "It is hard to see the light at the end of the tunnel," Williams said.
Nowhere to hide
No credit card company is safe. According to Citigroup analysts, more than one-fourth of the credit card portfolios of Citibank, Bank of America Corp, Capital One Corp, and Discover are subprime, which could lead to further losses.
Meanwhile, American Express is heavily exposed to troubled markets with high default rates such as Florida and California, and JPMorgan Chase & Co has to digest the portfolio of failed savings and loans company Washington Mutual. Together, these six companies hold around 90 percent of the total US outstanding credit card debt.
Citigroup and American Express have said they are tightening lending to mitigate their losses. JP Morgan and Bank of America declined to comment, while Capital One did not return calls seeking comment. Credit card companies have reported increased losses.
Discover, the No 4 US credit card network, posted worse-than-expected results in its fourth fiscal quarter, the first sign of the harsh deterioration of the industry, when the economic downturn picked up steam in October and November. Discover almost doubled the money it set aside to cover credit losses. Analysts said its competitors would likely do the same in coming quarters, leading to lower earnings.
"Things have changed pretty rapidly in the last two months. I'm hopeful that we will see the worst in 2009, but I don't know yet," David Nelms, chief executive of Discover, told media in a recent interview.
Many analysts and credit card executives look at 2009 and remember the beginning of the mortgage crisis in early 2007, when lenders consistently underestimated what was coming up. Said Chris Brendler, analyst at Stifel Nicolaus, "The risk is that things get much worse than expected."
Source: Agencies
US consumers have never before been so deeply in debt. There was nearly $1 trillion of credit and charge card debt outstanding as of October, up more than 25 percent since 2003, according to the US Federal Reserve. That is in addition to $10.54 trillion in mortgage debt.
Unemployment, already at 15-year highs, is expected to rise to its highest levels since the early 1980s, when credit cards were not nearly as widespread. In short, there's more debt than ever and fewer people are able to pay it. "In many ways, we're in uncharted territory," said John Williams, an analyst at Macquarie Research.
Major credit losses are big trouble for Citigroup Inc, Bank of America, and other card issuers such as American Express Co and Discover Financial Services, which have seen their shares lose up to 80 percent of their value in 2008. The United States is not standing idly by.
Citigroup received $45 billion of taxpayers' money in October and November. Bank of America has received $25 billion. American Express, which became a bank holding company, got approval last week to receive $3.4 billion from the taxpayer-funded Troubled Asset Relief Program.
Lenders, seeing potential big losses, are trying to protect themselves by tightening credit availability, which leaves consumers with fewer options. This year's holiday shopping season was the worst since at least 1970, according to a report from the International Council of Shopping Centers. "It is hard to see the light at the end of the tunnel," Williams said.
Nowhere to hide
No credit card company is safe. According to Citigroup analysts, more than one-fourth of the credit card portfolios of Citibank, Bank of America Corp, Capital One Corp, and Discover are subprime, which could lead to further losses.
Meanwhile, American Express is heavily exposed to troubled markets with high default rates such as Florida and California, and JPMorgan Chase & Co has to digest the portfolio of failed savings and loans company Washington Mutual. Together, these six companies hold around 90 percent of the total US outstanding credit card debt.
Citigroup and American Express have said they are tightening lending to mitigate their losses. JP Morgan and Bank of America declined to comment, while Capital One did not return calls seeking comment. Credit card companies have reported increased losses.
Discover, the No 4 US credit card network, posted worse-than-expected results in its fourth fiscal quarter, the first sign of the harsh deterioration of the industry, when the economic downturn picked up steam in October and November. Discover almost doubled the money it set aside to cover credit losses. Analysts said its competitors would likely do the same in coming quarters, leading to lower earnings.
"Things have changed pretty rapidly in the last two months. I'm hopeful that we will see the worst in 2009, but I don't know yet," David Nelms, chief executive of Discover, told media in a recent interview.
Many analysts and credit card executives look at 2009 and remember the beginning of the mortgage crisis in early 2007, when lenders consistently underestimated what was coming up. Said Chris Brendler, analyst at Stifel Nicolaus, "The risk is that things get much worse than expected."
Source: Agencies
Thursday, December 11, 2008
Barclays to offshore 66 jobs to India
Banking major Barclays has announced plans to offshore 66 jobs from its site in Poole, Dorset, to India, sparking protests by bank employees and worker unions.
The bank said the redundancies were part of 1,100 job losses at Poole announced last year, alongside a decision to farm out some work overseas.
Finance union Unite, however, said that the scope of the job cuts was changing and that the 66 job losses were new.
Unite official Steve Pantak said, "The latest job cuts by Barclays in Poole are very alarming for us. The 66 roles are to be offshored to India. Unite believes that there is now real doubt about the future of Barclays in the Poole area.
"The decision earlier in the year to cancel the new building, coupled with the accelerated winding down of jobs in Barclays House, leads Unite to believe that there is a real threat to the future of all staff in Poole."
Pantak called on the bank to give solid assurances on its "commitment to Poole and the remaining jobs in Barclays House."
Earlier this week, Barclays said that it was cutting more than 100 jobs in Cardiff under plans to outsource work in a department that deals with accounts when a customer dies.
Source: Agencies
The bank said the redundancies were part of 1,100 job losses at Poole announced last year, alongside a decision to farm out some work overseas.
Finance union Unite, however, said that the scope of the job cuts was changing and that the 66 job losses were new.
Unite official Steve Pantak said, "The latest job cuts by Barclays in Poole are very alarming for us. The 66 roles are to be offshored to India. Unite believes that there is now real doubt about the future of Barclays in the Poole area.
"The decision earlier in the year to cancel the new building, coupled with the accelerated winding down of jobs in Barclays House, leads Unite to believe that there is a real threat to the future of all staff in Poole."
Pantak called on the bank to give solid assurances on its "commitment to Poole and the remaining jobs in Barclays House."
Earlier this week, Barclays said that it was cutting more than 100 jobs in Cardiff under plans to outsource work in a department that deals with accounts when a customer dies.
Source: Agencies
Tuesday, December 2, 2008
SBI to hire 4,280 employees for associate banks
The country's top lender, State Bank of India, said it is looking to hire more than 4,200 employees for its associate banks -- a development that comes within days of its plan to recruit 25,000 people.
SBI said in a public announcement today that it plans to recruit 4,280 clerical staff at its various associate banks for operations across the country.
The recruitment drive for its associate banks follows SBI saying earlier last month that it would hire 25,000 people in the current fiscal -- a move that comes at a time when banks across the world are mostly trimming their workforces in the backdrop of a global financial crisis.
The various associate banks for which SBI is looking to recruit the staff include State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Indore, State Bank of Patiala and State Bank of Travancore.
There are more than 1,000 vacancies each with State Bank of Hyderabad, State Bank of Patiala and State Bank of Travancore, between 240 and 440 employees would be recruited for each of State Bank of Bikaner and Jaipur, State Bank of Indore and State Bank of Mysore.
SBI Chairman O P Bhatt said on November 16 that SBI was hiring 20,000 clerical staff and 5,000 people in supervisory positions in the current fiscal. In its previous major hiring spree, SBI had announced, about a year ago, plans to increase its as well as the associate banks' headcount by about 10,000 people.
Last month, another state-run lender IDBI Bank said it was looking to hire about 650 people for its retail banking and SME finance businesses.
However, foreign banks have been mostly cutting down their payrolls, with biggest of them, Citigroup, recently saying that it plans to trim down its headcount by over 50,000 employees across the world, which reportedly includes about 1,000 employees in India.
Citi, which has already laid off over 25,000 people so far this year, plans to bring down its headcount to below 3,00,000 in the next few weeks, from more than 3,75,000 at the end of 2007.
American Express also recently said that it would lay off about 7,000 employees globally, which includes about 100 employees in India.
SBI said in a public announcement today that it plans to recruit 4,280 clerical staff at its various associate banks for operations across the country.
The recruitment drive for its associate banks follows SBI saying earlier last month that it would hire 25,000 people in the current fiscal -- a move that comes at a time when banks across the world are mostly trimming their workforces in the backdrop of a global financial crisis.
The various associate banks for which SBI is looking to recruit the staff include State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Indore, State Bank of Patiala and State Bank of Travancore.
There are more than 1,000 vacancies each with State Bank of Hyderabad, State Bank of Patiala and State Bank of Travancore, between 240 and 440 employees would be recruited for each of State Bank of Bikaner and Jaipur, State Bank of Indore and State Bank of Mysore.
SBI Chairman O P Bhatt said on November 16 that SBI was hiring 20,000 clerical staff and 5,000 people in supervisory positions in the current fiscal. In its previous major hiring spree, SBI had announced, about a year ago, plans to increase its as well as the associate banks' headcount by about 10,000 people.
Last month, another state-run lender IDBI Bank said it was looking to hire about 650 people for its retail banking and SME finance businesses.
However, foreign banks have been mostly cutting down their payrolls, with biggest of them, Citigroup, recently saying that it plans to trim down its headcount by over 50,000 employees across the world, which reportedly includes about 1,000 employees in India.
Citi, which has already laid off over 25,000 people so far this year, plans to bring down its headcount to below 3,00,000 in the next few weeks, from more than 3,75,000 at the end of 2007.
American Express also recently said that it would lay off about 7,000 employees globally, which includes about 100 employees in India.
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