Chase Q2 Mobile Users, Card Volume Up

Chase Card services performed well in Q2, acquiring new 2 million new consumers with end of quarter receivables hovering around $2 billion. Delinquency rates also fell, while active mobile users were up more than 20 percent to 17 million. So if consumers were using their cards, what happened on the Merchant Services side?

Higher provisions for credit losses, increased noninterest expense and lower net revenue helped drive down second quarter profits for JPMorgan Chase & Co.’s Card, Merchant Services & Auto business unit, the card issuer announced July 15.

The Chase unit’s net income for the quarter was $840 million; down 33 percent $409 million during the same period ended June 30 last year. Net revenue was $4.6 billion, down 3 percent from $117 million, according to the bank’s earnings release.

“While down on declining reserve releases, the results do reflect strong underlying metrics,” Marianne Lake, Chase chief financial officer, told analysts on an earnings conference call. “Sales growth of 12% led the industry for the 25th consecutive quarter primarily due to strong sales engagement of new customers. Our new-acquisition vintages are performing exceptionally well.”

Card outstandings momentum has shifted, Lake said, noting end-of-period receivables grew by $1.8 billion, or 1.5%, year over year, with growth coming across product sets fueled by the strong sales performance. “Core growth is now outpacing runoff, and we acquired over 2 million new accounts in the quarter, up 40% year on year,” she said.

Card income for the unit was $1.08 billion, up 0.9 percent from $1.07 billion in last year’s second quarter. Net charged-offs were $885 million (a 2.88 percent charge-off rate), down 12.4 percent from $1.01 billion (3.31 percent).

Credit card sales volume (excluding commercial card) was $118 billion, up 12 percent from $105.2 billion a year earlier.

Chase’s delinquency rate for card loans 30 days or more past due was 1.41 percent, down from 1.69 percent. The 90 day-plus rate was 0.69 percent, down from 0.82 percent. The allowance for card-loan losses also dropped 19.1 percent, to $3.59 billion from $4.44 billion.

Consolidated card income totaled $1.55 billion, up 3.3 percent from $1.5 billion. Consumer and Community Banking card income was $1.49 billion, up 2.8 percent from $1.45 billion. Consumer and Business Banking card income totaled $406 million, up 7.4 percent from $378 million. 

Period-end credit card loan balances were $126.1 billion, up 1 percent from $124.3 billion. Credit card average loans for the period were $123.7 billion, up 1 percent from $122.9 billion.

Card Services net revenue as a percentage of average loans was 12.15 percent, down from 12.59 percent a year earlier, Chase said.

In the Card, Merchant Services & Auto unit, Chase experienced strong volume and transaction growth year over year, driven by signed sales volume gaining momentum in reflection of several large account wins in the quarter, Lake said. “Strong revenue of $4.6 billion was up slightly quarter on quarter but down 3% year on year,” she said, noting the net year-over-year decline was driven by higher amortization of customer acquisition costs and the absence of fees related to discontinued products last year.

Merchant-processing volume was $209 billion, up 13 percent from $185 billion. Total transactions processed were 9.3 billion, up 6 percent from 8.8 billion. Chase said it had an approximate 50% share of eCommerce volume for the top 500 Internet merchants.

Merchants aggregating their transactions are creating a disconnect between the volume side continuing to look better and than the transaction growth rate, which is slowing, Jamie Dimon, Chase chairman and CEO, said on the call.

Active mobile customers were up 23 percent, to 17.2 million from 14 million.



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