Credit Cards Shore Up US Banks

Credit, JP Morgan, CitigroupMajor US banks, including the leader, JP Morgan Chase & Co (NYSE: JPM) are profiting from credit cards in the middle of a slump in trading and mortgage lending.

Principal revenue source

According to a statement by New York headquartered JP Morgan, revenue from cards increased by 3.1 percent to touch $1.55 billion in second quarter of 2014 compared to the identical period in 2013. The increase in credit card fees were found to be more than revenues accrued from deposits, mortgages, lending and investment banking. These facts were discovered by the bank and remain valid for fourth successive quarter.

Marianne Lake, the Chief Financial Officer of JP Morgan, said that consumers have displayed a strong trait for spending. Substantial amount of money is spent on restaurants, travel and retail merchant establishments. 

Increase in electronic payment

Banks are making money as consumers worldwide substitute checks and cash with payment by electronic means. Debit card and credit card transactions across the world may spurt a stunning 74 percent to touch 288.6 billion by 2018 compared to six years before. These findings were published in the Nilson Report, a banking industry newsletter. Total card spends in America totaled about $4.08 trillion in 2013, according to available data.

Citigroup (NYSE: C) said on July 15 that revenues from cards increased 2.6 percent to touch $5.31 billion in second quarter compared to 2013. Another bank, Wells Fargo (NYSE: WFC), said that card fees increased by 4.2 percent to touch $847 million. This has been disclosed by the San Francisco headquartered bank on July 11.

Context

Retail sales in June in the United States rose about 0.2 percent. This fact was disclosed by the Commerce Department on July 15. This increase in retail sales correlates to more and more Americans finding gainful employment and returning to work. The rate of unemployment in the US dropped to 6.1 percent. This is the recorded lowest level in a five year period. More than 288,000 workers entered the workforce as per a report published by the government on July 3.

The largest issuer of debit cards in America, Bank of America (NYSE: BAC), in terms of purchases and US Bancorp (NYSE: USB), a Minneapolis headquartered company, makes approximately 28 percent of its total revenues from debit and credit cards. Both banks are expected to report their second quarter earnings in the recent period. According to data, the biggest issuer of credit cards in the US is JP Morgan. Citigroup comes in third at the credit card issuance rankings.

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