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http://www.reuters.com/article/rbssF...G2412320081201
Dec 1 (Reuters) - The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.
The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.
"In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent."
Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz), Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) represent over half of the estimated U.S. card outstandings as of Sept. 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.
Closing millions of accounts, cutting credit lines and raising interest rates are just some of the moves credit card issuers are using to try to inoculate themselves from a tsunami of expected consumer defaults.
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The credit card market will be 18 months behind the mortgage market and will begin to shrink by mid-2010, Whitney said.
Whitney also expects home prices to continue falling another 20 percent hurt by lower liquidity. They are down 23 percent from their peak, she said.
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"Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view," the analyst said.
Dec 1 (Reuters) - The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.
The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.
"In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent."
Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz), Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) represent over half of the estimated U.S. card outstandings as of Sept. 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.
Closing millions of accounts, cutting credit lines and raising interest rates are just some of the moves credit card issuers are using to try to inoculate themselves from a tsunami of expected consumer defaults.
...
The credit card market will be 18 months behind the mortgage market and will begin to shrink by mid-2010, Whitney said.
Whitney also expects home prices to continue falling another 20 percent hurt by lower liquidity. They are down 23 percent from their peak, she said.
...
"Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view," the analyst said.
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