aditya reading stories: Apr 12, 2012

Now do not look, but banks are re-issuing lines of credit to customers with poor credit history.

Bank credit cards, retail credit cards and auto loans are all more readily available to subprime borrowers in the past year, according to a report in March Equifax.

Bank-issued credit card loans to subprime consumers rose 41% between 2010 and 2011, hitting a four-year high in December 2011 with 1.1 million new bank issued credit cards. Plus, at $ 12.5 billion credit card limits are at their highest level since 2008 when the limit was around $ 27.4 billion.

Retail credit cards also saw an increase in lending to risky borrowers. From 2010 to 2011 there was a 4.7 percentage point increase in the retail card production to subprime borrowers, who together 31% of 2011 retail credit card new business, Equifax says.

Subprime borrowers also see credit lines to relieve the car loan arena. Equifax says new car finance loan amounts increased $ 11.6 billion from 2010 (164.6 billion U.S. dollars) to 2011 (176.2 billion U.S. dollars), hitting the highest new production level since 2007 (221.1 billion U.S. dollars).

"The evidence of increased lending to sub-prime consumer shows banks continuing efforts to lending to grow by providing credit facilities to more consumers," said Equifax Chief Economist Amy Crews Cutts. "Year-over-year results show borrowers are taking advantage of new opportunities and their financial activity, which is building momentum in the direction of economic progress to diversify."

This would be particularly the case for the banks, whose revenue pipelines are drawn together in part because of new laws and regulations. The so-called Durbin amendment, for example, restricts banks can collect fees from merchants like Target and Walmart when their customers swipe their debit card there. The card law is another killer income for banks, among other things, keeps them from charging overdraft fees. And maybe there are more restrictions on the way as the Consumer Finance Protection Agency recently commissioned a study to ask banks for information on their current account practices.

The New York Times wrote about the subprime loans comeback to say: "If the financial institutions to recover from losses on loans to troubled borrowers, some of the biggest lenders to less than creditworthy, including Capital One Financial and GM, are trying back to woo them, while HSBC and JPMorgan Chase are among those toes in subprime loans. "

Indeed, Trefis believes that JPM's credit and debit cards is the most valuable business unit, which contributes to less than a quarter of its value. The bank reports first quarter Friday and Trefis expects an increase in outstanding loans JPMorgan card portfolio and improve the facilities for credit card loans as fewer loans are expected to go bad.

For the likes of Bank of America, JPMorgan Chase, Citi and Wells Fargo increase in revenues for the low growth and highly regulated environment is a major challenge for the industry. So it's no great surprise that lenders are looking to broaden their scope in their search for new borrowers. Indeed, their investors banking sector's growth prospects very closely in the world after the crisis.

Thursday, April 12, 2012

Subprime Lending Is Back, And That's Not Such A Bad Thing

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