Home / Knowledge / News / Apparel/Garments / Retailer closures in US affect credit cards banks: Report
Retailer closures in US affect credit cards banks: Report
06
Jul '17
Secular challenges facing US retailers will negatively affect credit card banks and asset-backed securities (ABS) trusts due to their exposure to the private-label and co-branded credit card accounts, says a recent report. A small number of banks dominate US private-label card issuance, with top 5 accounting for 79 per cent of balances as of early last year.

As per the 'Cross Sector -- US: Store closures will hurt private label and co-branded credit card performance' by Moody's Investors Service, the largest issuers are Synchrony Financial Inc (unrated); Citigroup Inc (Baa1, stable); Alliance Data Systems Corporation (unrated) via its Comenity Bank (unrated) subsidiary, which was formerly known as World Financial Network National Bank; Capital One Financial Corporation (Baa1, stable); Wells Fargo & Company (A2, stable) and TD Group US Holdings LLC (A2, stable).

"As retailers close stores in an effort to improve profitability over the coming years, the trend will put upward pressure on private label charge-offs, owing to the fact that some cardholders will lose access to geographically convenient stores, even as a portion of those cardholders shift at least a portion of their spending to online channels," said Jody Shenn, a Moody's vice president.

Moody's says co-branded cards will experience similar effects from store closures, though to a smaller degree. Co-branded cards can be used at any merchant that accepts general purpose cards utilising the associated payment network (e.g. Visa and Mastercard).

Additionally, sales challenges could create incentives for retailers to push for looser underwriting standards by their card issuing partners, which would weaken the credit quality of these accounts, especially new accounts.

However, private-label and co-branded cards represent only a modest source of credit risk and revenues for most banks and credit card ABS trusts and the negative effects will be limited by the size of their exposure.

"Among the largest private-label card issuers, only Synchrony and Alliance Data rely heavily on the business," said Warren Kornfeld, a Moody's senior vice president. "Private-label and cobranded cards account for almost the entire loan books of both, each with heavy retail card concentrations."

Citi and Capital One rely on private-label and co-branded card loans for a high single-digit percentage of their earnings, also with heavy retail concentrations. Wells Fargo and TD Bank have very modest retail private-label and co-branded credit card exposures relative to their overall loan portfolios. (KD)

Fibre2Fashion News Desk – India


Must ReadView All

Pic: Riddell

Apparel/Garments | On 24th Feb 2020

Riddell sells part of apparel business to BSN Sports

Riddell, leader in football helmet technology, has sold certain...

Pic: Agfa

Textiles | On 24th Feb 2020

Agfa and TFL collaborating to develop Alussa

Agfa and TFL are collaborating to develop Alussa, an inkjet printing...

Pic: FESPA

Textiles | On 24th Feb 2020

FESPA to see latest in printing

FESPA Global Print Expo 2020 will see the international print...

Interviews View All

Luke Otten, Wigwam Mills Inc

Luke Otten
Wigwam Mills Inc

Wigwam aims to recycle discarded yarn that doesn’t make it through the...

Abhishek Samdaria, Reflete

Abhishek Samdaria
Reflete

GST will certainly reduce a lot of paperwork in future

Footwear industry, Head honchos

Footwear industry
Head honchos

There is rising demand for fancy, trendy and yet comfortable footwear

Harsh Shah,

Harsh Shah

Established in 1956 with a small beginning, Embee today manufactures a...

Amol Bhagwati,

Amol Bhagwati

A textile finishing solution provider, Inspiron Engineering Private...

Karen Lou,

Karen Lou

Australia-based Sunseeker has been creating swimwear since 1970. Sunseeker ...

Paolo Ocleppo, Sandvik Hyperion

Paolo Ocleppo
Sandvik Hyperion

Paolo Ocleppo, Rotary Cutting Segment manager, Sandvik Hyperion discusses...

Matthew Kolmes, Supreme Corporation

Matthew Kolmes
Supreme Corporation

Supreme Corporation manufactures innovative specialty yarns and safety...

Pierre Wiertz, EDANA

Pierre Wiertz
EDANA

EDANA, the international association serving the nonwovens and related...

Nisha Chanda, Whistling Woods International School of Fashion

Nisha Chanda
Whistling Woods International School of Fashion

<div>A lack of upgraded courses in costume designing and fashion as per...

Sarah Denise Cordery, Sarah Denise Studio

Sarah Denise Cordery
Sarah Denise Studio

Manchester, England-based Sarah Denise Studio provides relevant fashion...

Joe Ikareth, Joe Ikareth

Joe Ikareth
Joe Ikareth

<b>Joe Ikareth</b> has a rock-solid fashion and textiles background, which ...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

Leave your Comments


February 2020

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.


Advanced Search