Card Loans Fell Last Year after Decade of Increases

By Kleege, Stephen | American Banker, June 10, 1993 | Go to article overview

Card Loans Fell Last Year after Decade of Increases


Kleege, Stephen, American Banker


For the first time since 1981, commercial bank's credit card loans shrank last year as recession-weary consumers moved to reduce their debt burdens.

Total card loans outstanding fell by 1.9%, to $136.4 billion, according to American Banker's annual survey of consumer lending. (See table beginning on page 13.)

[TABULAR DATA OMITTED]

Meanwhile, banks' total consumer loans, including mortgages, grew by 3.2%, to $849.3 billion. The growth rate was up from the 2.4% of 1991 but was still meager compared with the double-digit increases of the 1980s, which made the loans the major contributor to bank profitability.

The 1992 data showed mortgage loans grew by a respectable 8.2%, to $390.1 billion, and home equity loans rose 4.3% to $73.3 billion.

But even those growth figures reflected consumer frugality. Bankers report that many u customers were refinancing their homes and using the proceeds to pay down more expensive loans, or using home equity loans -- with their tax-deductible interest -- to replace other forms of borrowing.

"In 1992, the consumer market was just about flat," said Donald W. Grigley, executive vice president at Shawmut National Corp., which sold its credit card business in 1991. The people who are spending money, he said, are generally drawing on lower-cost lines secured by homes.

In any event, the credit card decline was far less severe than in 1981, when an energy crisis and ballooning interest rates caused a collapse in outstandings to $11.45 billion from $29.9 billion.

In the wake of loan-loss debacles in energy and commercial real estate, bankers stepped up their commitment to consumer loans, which they continue to regard as a more manageable business line.

"The attractiveness of consumer lending is in its dispersion of risk within a wide base of customers, demographically and geographically," said David W. Thomas, director of statewide retail banking at Banc One, Texas.

Shift to Consumer Loans

Although the pace was glacial, the banks did continue to shift their weight toward consumer and away from commercial loans. While the aggregate consumer portfolio grew 3.2%, total loans, including commercial, were declining by 1% to $2.03 trillion.

At Dec. 31, consumer loans accounted for 40.63% of total loans held by the top 300 banks, up from 38.71% a year earlier.

The fastest-growing consumer portfolio, at Norwest Corp. …

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