Morgan Stanley reportedly upgraded its rating and price targets on shares of several credit card companies and lenders, citing stabilization in consumer credit and an anticipated favorable regulatory environment.
Analysts at Morgan Stanley said Thursday (Dec. 19) that several trends are expected to support the stabilization in consumer credit, Seeking Alpha reported Thursday.
These trends include easing inflation, positive real wage growth, stable or lower interest rates, and rational lending standards, according to the report.
In addition, Morgan Stanley analysts expect the Consumer Financial Protection Bureau (CFPB) to dial back its rulemaking and enforcement, creating a “positive regulatory backdrop,” per the report.
The University of Michigan’s Consumer Sentiment Index shows consumers are positive about near-term current economic conditions, with consumer sentiment reaching the highest level seen in seven months, PYMNTS reported Dec. 6.
Federal Reserve data released Dec. 6 showed U.S. consumer credit climbing from $5.093 trillion in September to $5.113 in October. Consumer credit on a seasonally adjusted basis increased at a 4.5% annual rate for October, up from 0.8% the month before.
In October, Capital One reported that cardholders continued to embrace credit as a key payment method and consumers remained in “good shape.”
The company reported that in the previous quarter, card purchase volumes were 5% higher, the net charge-off rate declined from 6% to 5.6%, card loan balances were up 6% year over year, and the 30-day delinquency rate at quarter end was up 0.22% to 4.5%.
“The pace of year-over-year increases in both the charge-off rate and the delinquency rate have been steadily declining for several quarters and continued to shrink in the third quarter,” Capital One CEO Richard Fairbank said during the firm’s quarterly earnings call.
Consumers’ choice of credit or store cards is driven by loyalty and rewards programs, cost considerations and trust, according to the PYMNTS Intelligence report “The Role of Strategic Partnerships in Consumer Credit Cards.”
For example, the report found that 27% of consumers with general-purpose cards and 20% of those with co-branded store cards said either low annual fees or low interest rates were their top reason for choosing the cards.