The analysis on the size of the consumer lending industry has been updated.
Industry earnings remained strong in the second quarter of 2007, despite an operating environment that was decidedly less favorable than in earlier quarters. A flat yield curve, rising levels of troubled loans, and a weak housing market all made the task of improving earnings more difficult. Insured commercial banks and savings institutions reported $36.7 billion in net income for the quarter, a decline of $1.3 billion (3.4 percent) from the second quarter of 2006, but $772 million (2.1 percent) more than they earned in the first quarter of 2007. The decline in earnings compared to a year ago was caused by higher provisions for loan losses, particularly at larger institutions, and by increased noninterest expenses.
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Net charge-offs totaled $9.2 billion in the second quarter, the highest quarterly total since the fourth quarter of 2005, and $3.1 billion (51.2 percent) more than in the second quarter of 2006. This was the second consecutive quarter that net charge-offs have had a year-over-year increase. The loan categories with the largest increases in net charge-offs included consumer loans other than credit cards (up $757 million, or 60.9 percent), commercial and industrial (C&I) loans (up $577 million, or 71.4 percent), residential mortgage loans (up $422 million, or 144.3 percent), and credit card loans (up $393 million, or 12.1 percent). All of the major loan categories posted both increased net charge-offs and higher net charge-off rates.
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The amount of loans and leases that were noncurrent (loans 90 days or more past due or in nonaccrual status) grew by $6.4 billion (10.6 percent) during the quarter. This is the largest quarterly increase in noncurrent loans since the fourth quarter of 1990, and marks the fifth consecutive quarter that the industry’s inventory of noncurrent loans has grown. Almost half of the increase (48.1 percent) consisted of residential mortgage loans.
MasterCard, which processes credit-card payments for merchants, said first-quarter earnings rose to $214.9 million, or $1.57 a share, from $126.7 million, or 94 cents a share a year earlier.
Analysts had on average expected $1.16 a share, according to Reuters Estimates.
Revenue rose 24 percent to $915 million during the quarter.
Reuters via CNNMoney
Stock is up 12%.
Groups representing 300 banks plan to file a class-action lawsuit against U.S. retailer TJX Cos. Inc. over a security breach involving data from millions of credit and debit cards, an industry body said on Tuesday. The lawsuit to be filed in U.S. District Court in Boston by the Massachusetts Bankers Association on Wednesday will seek at least “tens of millions of dollars” in damages, said Bruce Spitzer, a spokesman at the association.
The Connecticut Bankers Association, the Maine Association of Community Banks and individual banks are joining the lawsuit as co-plaintiffs, the association said.
Massachusetts-based TJX, which operates the T.J. Maxx and Marshalls chains, said last month that information from 45.7 million credit and debit cards was stolen in a computer security breach over 18 months through mid-January.
Capital One Financial Corp. said Thursday first-quarter profit fell 24 percent, and cut its full-year earnings forecast, citing mortgage banking weakness, sending shares down 4.3 percent after hours.
Net income for the fourth-largest MasterCard and Visa card issuer fell to $675.1 million, or $1.62 per share, from $883.3 million, or $2.86, a year earlier.
Capital One projects 2007 profit at $7 to $7.40 per share, down from the range of $7.40 to $7.80 it forecast in January.
Reuters via CNNMoney
American Express Co. said Thursday first-quarter net income for the three months ended March 31 rose 21% to $1.06 billion, or 87 cents a share, from $873 million, or 69 cents a share in the year-ago period. Income from continuing operations rose to 88 cents a share from 70 cents a share. Consolidated revenue net of interest expense rose 10% to $6.7 billion from $6.1 billion. Analysts surveyed by Thomson First Call forecast earnings of 80 cents a share, on average.
Delinquency on indirect auto loans rose from 2.35% last quarter to 2.57%, the highest since spring 2001.
Delinquency on home equity loans rose from 1.79% to 1.92%.
Credit card delinquency declined one basis point to 4.56%.
The retailer that owns the T.J. Maxx and Marshall’s clothing chains said nearly 46 million customer card numbers were stolen from its computers over an 18-month period and said the total number of stolen cards may never be known.
Spokeswoman Sherry Lang told CNN that 45.7 million card numbers had been stolen but noted that 75 percent of those cards were either expired or had their data masked.
“Based on our investigation to date, we believe that our computer systems were first accessed by an unauthorized intruder in July 2005, on subsequent dates in 2005 and from mid-May 2006 to mid-January 2007, but that no customer data were stolen after Dec. 18, 2006,” the company said in the filing.
Morgan Stanley announced Friday its long-expected plans to spin off its Discover credit card operations in an initial public offering.
Speculation has swirled for years that Morgan Stanley would split off Discover to focus on its prime investment banking, brokerage and trading operations. Morgan Stanley shareholders have urged management to shed Discover because it has been steadily losing ground in an intensely crowded field of larger competitors.