Segmenting the Credit Card Banks by Credit Risk

Navigator Edition: September 2016
By: Frank Martien

As U.S. consumer credit card growth continues to rebound, many credit card issuers are pursuing segmented growth strategies. Among many potential segments, affluent, mass affluent, mass market, and near prime are often discussed. FDIC call report data may be used as a lens into a combination of these segments into two groups:

  • Affluent + mass affluent
  • Mass market + near prime

To introduce our research methodology, as of 2Q 2016, 14 U.S. commercial banks and savings & loan associations had managed credit card loans equal to 50% or more of total assets.1 In aggregate, these banks held $425 billion in managed credit card loans.

When arrayed in ascending order by 2Q 2016 net charge-off rates, the first seven banks reported in a range of 2.1% to 3.6% while the remaining seven reported 5.0% to 10.9%. Managed credit card loans were evenly distributed between these two groups. In either group, no bank comprised more than 45% of total credit card loans as of 2Q 2016. When tracking these banks back to 2010, only one of the 14 banks was found to not report for 2014 and prior periods.

The first group of seven banks could be considered a proxy for mass affluent and affluent while the second could be indicative of mass market and near prime. In Figure 1, income statements are aggregated on a dollar weighted basis and tracked back to 2010.

Figure 1: Historical P&L Performance as a % of Average Assets

figure-1_-historical-pl-performance-as-a-percent-of-average-assetsSource: First Annapolis Consulting analysis of SNL-sourced bank call report data.

Figure 2: P&L Line Item Comparisons

figure-2_-pl-line-item-comparisons_v2Source: First Annapolis Consulting analysis of SNL-sourced bank call report data.

Comparisons between the two groups (“MAA”= mass affluent & affluent, “MMNP”= mass market & near prime) may be drawn for the various income statement line items.

As market participants consider various growth initiatives aimed at one or more segments, development of a reliable forecast of anticipated program performance, grounded in analysis of historical results, is one of many  components in planning for success.

1 Alphabetically: 1st Financial Bank USA; American Express Centurion Bank; Barclays Bank Delaware; Capital One Bank (USA), National Association; Chase Bank USA, National Association; Comenity Bank (affiliated with ADS); Comenity Capital Bank (affiliated with ADS); Discover Bank; Merrick Bank Corporation (affiliated with CardWorks); Synchrony Bank (formerly part of GE Capital); Synchrony Financial (formerly part of GE Capital); TCM Bank, National Association (affiliated with ICBA); Wells Fargo Financial National Bank; and World’s Foremost Bank (Cabela’s).

For more information, please contact Frank Martien, Partner,, specializing in Commercial Payments and Bankcard Issuing.

Share: Tweet about this on TwitterShare on LinkedIn

To read the rest of this article, please subscribe to

The Navigator Newsletter