Mobile Commerce

BofA Card Business On The Uptick

Retail spending among Bank of America’s debit and credit cardholders is on the rise this year, and the issuer’s credit cardholders are beginning to grow their card balances, company executives commented during a July 16 call while discussing second-quarter earnings with analysts and investors.

Still, some performance areas have a ways to go before hitting some of their year-ago marks, the quarterly data show.

“We can see in our data that the retail volumes on debit and credit cards were up 4% from last year’s second quarter, but more importantly up 8% from the first quarter this year, showing increased momentum in spending among our card customers,” BofA CEO Brian Moynihan said on the call. “Consumers are growing card balances also; they are borrowing a little bit more. And they continue to add to their deposit balances.”

Credit card issuance remained strong, with the company adding 1.13 million new cards in the quarter ended June 30, up 18 percent from 957,000 added during the same period last year. Approximately 65 percent of the new cards went to existing customers, the company said in its earnings release.

The increased issuance helped drive card-business growth compared with the previous period, Bruce Thompson, BofA chief financial officer, noted on the call.

“We saw growth in ending U.S. credit card balances this period, with ending balances up $1.3 billion relative to the first quarter of 2014; and our risk-adjusted margin remains strong at approximately 9%,” Thompson said. “On a linked-quarter basis, this is the first quarter in some time where we actually saw ending card balances within our domestic card balance increase.”

Card balances compared with a year earlier, however, were down. The issuer’s average total U.S. card balance was $88.1 billion, down 1.8 percent from $89.7 billion in last year’s second quarter. Outside the U.S., the average card balance was $11.8 billion, up 11.3 percent from $10.6 billion.

Average U.S. card outstandings for the period were $88.06 billion, down 1.9 percent from $89.72 billion a year earlier. Total outstandings at the end of June were $89.02 billion, down 1.7 percent from $90.52 billion.

Card income for the quarter totaled $1.44 billion, down 2 percent from $1.47 billion a year earlier. Noninterest card income totaled $1.17 billion, down 1.7 percent from $1.19 billion.

But there were positive year-over-year differences as well. Card purchase volume for the quarter totaled $53.58 billion, up 3.1 percent from $51.95 billion. Debit card purchase volume during the period totaled $69.49 billion, up 2.5 percent from $67.74 billion.

Credit quality also continued to improve, as the number of performing delinquent loans 30 or more days past due reached record low levels in the U.S. credit card portfolio.

Net charge-offs for the period totaled $683 million (for a 3.11 percent charge-off rate), down 25.5 percent from $917 million (4.10 percent) a year earlier. Card loans 30 to 89 days past due totaled $1.7 billion, down 22.7 percent from $2.2 billion, while card loans 90 or more days late totaled $868 million, down 25.8 percent from $1.17 billion.

Branch visits also were up, which also helped drive strong activity during the quarter, Moynihan said on the call. “We could also see that in our online activity, where the 30 million online customers continue to grow their overall volumes, and importantly in our mobile activity, where our 15.5 million mobile customers (up from 13.2 million a year ago) continue to increase the use of technology, including depositing 10% of all the retail checks in our company through their mobile phone and other devices,” he said.

For the quarter, Consumer and Business Banking reported net income of $1.8 billion, up $397 million, or 29 percent, from a year earlier, reflecting lower provision for credit losses and continued progress on the company’s strategy of deepening relationships and reducing costs by optimizing the delivery network, the issuer said. Revenue was relatively stable compared with a year ago as higher service-charge income was offset by lower net interest income and slightly lower card income.

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