Chase, Citi and Wells Fargo Report Mixed Q3 Credit Card Performance

America’s retail banks have begun reporting their third quarter performance for the year. Due to the competitiveness of the space, growth has been accompanied by an increased cost – all to the benefit of consumers.

Some of America’s largest credit card issuers released their third quarter results, showing growth in the credit card sector at a cost. JPMorgan Chase (NYSE:JPM) continues to organically expand their base through digital channels and have reported a desire to target customers in lower FICO-bands. Citi (NYSE:C), on the other hand, experienced significant card growth in Q3 due to their acquisition of Amex’s Costco (NASDAQ:COST) card portfolio.

In their earnings call, JPMorgan Chase CFO, Marianne Lake reported that the company’s new account originations for their card business were up 35% “with strong demand for the Chase Sapphire Reserve® and Chase Freedom Unlimited®.” The former attracted massive media attention following its release in early August. Within the first two days, Chase approved tens of thousands of applications, according to spokeswoman Lauren Francis.

Chase acknowledges that one cost of this growth has been an increase in card delinquencies. These were up 10% year-over-year. As the company grows its card portfolio, its customer base has become increasingly mixed, putting upward pressure on charge-offs. According to Lake, these originations in the prime/near-prime space are “still completely in [Chase’s] credit risk appetite and at risk-adjusted margins that are better than the portfolio average.” Lake projects that this trend will gradually continue over the next few quarters.

The cost for Chase has been mitigated by a somewhat steady net charge off rate – that is the percentage of charge off to the total average credit card loans in each quarter. While credit card loans have grown 5% year-over year, the charge-off rate increased just 4%. This is relatively low, especially when compared against the last 5 years. As consumers have slowly recovered from the 2009 recession, Chase’s credit card charge-off rate decreased 72% since this time in 2010. 

Chase Credit Card Financials


End of Period Credit Card Loans (in millions)


Net Charge-Offs (in millions)


Net Charge Off Rate


Citibank, one of Chase’s chief competitors in the credit card space, saw increased expenses to its North American card business, driven by the new Costco Anywhere Visa® Card by Citi. This was partially offset by a 15% revenue growth in this space that was in part driven by this new card. The bank acquired nearly 800,000 new accounts from American Express (NYSE:AXP) earlier this year. According to John Gerspach, Citi’s CFO, purchase sales on the Costco card have “totaled roughly $28B to date, with over 70% being out of store, indicating that customers are using this card for their everyday purchases.” This is exactly the behavior Citi was hoping for when acquiring the portfolio. When cardholders use the card outside of Costco stores, Citi can significantly increase its interchange revenues. Gerspach added that the company expects to see good performance out of this product in the following months.

Wells Fargo is reeling from the recent scandals that have plagued their brand. These issues that have affected its card business. The company identified 565,000 un-activated consumer credit cards, and 58,000 un-activated small business cards. These were discovered in the wake of an investigation that revealed some Wells Fargo employees opened credit and deposit accounts without obtaining proper authorization from customers. The mounting scandals forced Wells Fargo’s former CEO, John Stumpf, to step down just a few days ago. As of Q3 2016, the bank has identified 10,800 unauthorized credit card accounts that incurred fees. Despite the controversy surrounding them, Wells Fargo’s credit card business saw good results, with total loans being up 8% year-over-year.

All three of these banks launched new credit card products this year, which have been generally favorable for consumers. As competition in the market increases, issuers have been forced to provide better and better rewards and bonuses to attract new users. This was exemplified through the Chase Sapphire Reserve®, which launched with an unprecedented bonus worth an estimated $1,500. On a call with investors, Lake said that Chase “would like to continue to gain share”, commenting that the space is “very competitive […] and very profitable.” 

Joe Resendiz

Joe Resendiz is a former investment banking analyst for Goldman Sachs, where he covered public sector and infrastructure financing. During his time on Wall Street, Joe worked closely with the debt capital markets team, which allowed him to gain unique insights into the credit market. Joe is currently a research analyst who covers credit cards and the payments industry. He earned a bachelor’s degree from the University of Texas at Austin, where he majored in finance.

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Example of how we calculate the rewards rates: When redeemed for travel through Ultimate Rewards, Chase Sapphire Preferred points are worth $0.0125 each. The card awards 2 points on travel and dining and 1 point on everything else. Therefore, we say the card has a 2.5% rewards rate on dining and travel (2 x $0.0125) and a 1.25% rewards rate on everything else (1 x $0.0125).

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