下面是小编为大家整理的2020年美国消费者金融展望【精选推荐】,供大家参考。
2020 Consumer Finance Outlook
Moshe Orenbuch 212 538 6795 moshe.orenbuch@credit-suisse.com
James Ulan 212 325 8235 james.ulan@credit-suisse.com
Hoang Nguyen 212 325 3357 hoang.nguyen@credit-suisse.com
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL
ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Key Takeaways Credit Card Issuers: Lend-Centric Model Prevails. We expect card loans to grow ~4-5% in 2020 and private label card loans to grow ~6%. We expect competition in rewards to continue to remain intense. Issuers who can grow lending balances reasonably while controlling credit and operating expenses will be the most successful; SYF is our top pick. Most issuers in our space do not actively take exposure to changes in rate outlook, as they try to remain neutral. Still high consumer confidence and lower gas price should also be a plus for consumers and hence the card issuers.
Networks. We believe continued strong secular tailwind in major regions will push the networks higher going forward. Potential rebound in currency volatility should also help earnings. Meanwhile, we could see the headwinds of dollar appreciation against earnings to subside somewhat in 2020. Furthermore, the completion of Visa Europe technical migration should allow both V and MA to raise pricing going forward. We favor V given its dominant position in the U.S. market as well as the ability to push for higher pricing and additional products in Europe. Student: 2020 will likely feature robust competition with refi players pushing for customers and Earnest / SoFi recalibrating in-school strategies for 2020/2021. Originations should grow in the mid-single digits and DQ/NCO rates to increase modestly. Regulators could become a greater factor, depending on politics. Even the Trump administration has discussed dischargeability in bankruptcy and a refi program. We expect SLM to outperform as investors come to understand that free college and/or debt cancelation will require a large tax increase which is difficult to pass. Additionally, Navient and Nelnet will navigate preparation for the NextGen servicing contract. Auto lending: We believe that 2020 will be bring modest origination growth, stable credit, and for subprime to remain competitive. We believe that SC’s parent will continue increasing its stake, and over time could acquire the entire company. ALLY will continue to exert pricing discipline on both loans and growth deposits. We wonder whether slow industry growth will cause lenders to venture further outside of core auto lending. Last, the CFPB could emerge as a factor if political dynamics shift. Non-prime Lenders. Non-prime lenders like OneMain, Elevate and CURO in general should benefit from continued strong consumer confidence and strong demand. Rollout of additional partnerships and products at CURO and ELVT should help with earnings going forward. We favor OMF given its relatively cheaper valuation, lower credit risks and potentially rewarding capital return. These lenders are also less impacted by change in interest rate environment. Top Picks: Synchrony, Visa, Sallie Mae, OneMain and Ally; and Discover, Capital One, MasterCard, Elevate, CURO and Santander Consumer are also rated Outperform. American Express and Credit Acceptance are rated Underperform.
Topics To Watch Into 4Q19 Specialty Finance: Top of mind for investors for the sector will be 2020 guidance and in particular the impact of CECL on provision expense and earnings on an ongoing basis. Companies with higher loan growth will likely get hurt more because of CECL in 2020 AXP: Investors will pay attention to trends in commercial billed business, which has been decelerating, and whether this will “spread” to consumer spend as well. Losses have been rising faster than peers as well. Rewards costs will also pressure profits. COF: Investors will pay attention to whether COF will be able to accelerate loan growth. Though COF has now acquired the Walmart portfolio, we note that our channel check indicates the company didn’t send out any direct mail acquisition for the Walmart card in October. Margin should also come into focus, as COF has lagged peers in lowering deposit rate.
As the company moves closer to the
exit of the data center infrastructure, the company’s operating efficiency ratio target of 42% in 2021 will be further scrutinized. SYF : Investors will be concerned about the ongoing impact of CECL and the RSA. We note that SYF should get some relief from
CECL as some clients’ RSA are based upon provisions.
NYCB: Investors will pay close attention to NYCB market activity and ability to retain customers, given the company experienced a number of loans refinancing away to more competitive offers in 3Q. Though NIM should improve from here, inability to generate enough loan growth, if persists, could pressure the stock. That said, we are now seeing some recovery in NYCM’s multifamily origination activity. SLM: Our key focuses at Sallie remain credit (DQs/NCOs saw modest softening in 2Q & 3Q), refi impact, expense growth, volume growth, NIM/yields, and CECL. On the other hand, expense growth was excellent in 3Q at +2% y/y. Volume grew at 7% in 2019 and
in 2020 we would view anything above 5% as a positive. Guidance: Sallie provided guidance on last year’s 4Q call. This year investors
will be focused on their 2020 GAAP and adjusted EPS numbers under CECL, originations and efficiency ratio. ALLY: Origination yields are our main focus, in light of declining rates. Experian’s 3Q origination yields declined versus 2Q and so we expect some pressure at all auto lenders in 2020. Also, there was some weakness in Nov/Dec used vehicle prices – 4Q’s NCO rate could be higher than seasonally expected. More color on CECL’s impact to GAAP EPS and, lastly, commentary on savings account pricing and NIM is of focus. Ally recently lowered savings account rate from 1.7% to 1.6%
NAVI: we are interested in whether management will share early views on how the board could set management’s performance goals for 20, as well as 2020 guidance. CACC: A key focus at CACC will be the impact to GAAP EPS in 2020 from CECL as well as unit and volume growth. On CECL, management stated that GAAP EPS will decline by 30-60%. This should moderate in the following years as upfront provision expense upon purchasing advances will be partially offset by higher yield. We are also interested in unit and volume growth, as unit volume declined by 6.2% in October while 3Q unit volume was +0.4%.
Which companies are best/worst positioned for declining rates? Favorite card name in declining rate environment is SYF, as we believe it has the highest percentage of fixed rate assets AXP will also benefit due to charge-card portfolio (~40% of loans, 0% yield), while DFS and COF are trying to manage to rate neutral Most aggressive rate cutter has been ALLY, though others have been catching up Credit Card Issuers
American Express, CS estimate
46%
54%
-100
$134
1.5%
$134
1.5%
immediate Capital One, management estimate 39%
61%
-100
($494)
-2.0%
($494)
-7.2%
immediate Discover, management estimate 35%
65%
-100
($78)
-0.8%
($78)
-2.0%
immediate Synchrony, management estimate 55%
45%
-100
($159)
-1.0%
($159)
-4.3%
immediate
Auto Lenders
Santander Consumer, CS estimate
92%
8%
-100
$26
0.5%
$26
2.0%
assume immediate Ally, CS estimate
70%
30%
-100
($31)
-0.6%
($31)
-1.7%
immediate
Student Lenders
Navient, CS estimate
8%
92%
-100
$22
1.9%
$22
3.5%
Sallie Mae, management estimate 38%
62%
-100
($19)
-1.1%
($19)
-2.5%
immediate
Commercial Lenders
CIT, management estimate Source: Company data 50%
50%
-100
($89)
-6.4%
($89)
-14.9%
immediate pace of rate increase % Effect on NTM Annual
Pre-tax Net Interest Income Income (MM) Income promo) rate loans
Rates (bps) Income (MM) $ Effect on
% Effect on
NTM Pre-tax
NTM Pre-tax loans (inc. Floating Rise (Drop) In Pre-tax Net Interest $ Effect on Annual Fixed rate
Deposit Betas So Far Reflect Companies’ Optimization; Beta Pressure Will Abate Overall deposit betas on interest-bearing deposits have declined at our covered companies. Companies should continue to lower rates going forward, thus easing beta pressure Looking by product through December 2019, betas generally range from 0.4 to 0.7 as different companies emphasize products and have varying growth strategies We are encouraged that our online banks have actively lowered deposit rate offerings in declining rate environment (even initial laggard COF has now caught up). This suggests that the industry is taking a sensible view on funding cost this cycle
Cumulative Deposit Beta Since 4Q15/ December 2015 Interest-bearing deposit As of 4Q18
1Q19
2Q19
3Q19 1 yr CD As of
Sep-19
Oct-19
Nov-19
Dec-19 Savings account As of
Sep-19
Oct-19
Nov-19
Dec-19
Sallie Mae 0.73 0.69 0.72 0.77 Capital One 1.09 1.20 1.13 1.07 Sallie Mae 0.63 0.73 0.63 0.60 American Express 0.72 0.68 0.73 0.75 NYCB 0.63 0.73 0.63 0.63 American Express 0.57 0.67 0.57 0.53 Capital One 0.50 0.51 0.54 0.60 Ally 0.69 0.70 0.63 0.63 Discover 0.54 0.60 0.50 0.50 NYCB 0.64 0.48 0.53 0.58 Sallie Mae 0.63 0.73 0.57 0.57 Synchrony 0.54 0.57 0.50 0.50 Ally 0.42 0.45 0.50 0.53 Discover 0.66 0.70 0.57 0.57 Ally 0.51 0.53 0.47 0.40 Discover 0.45 0.44 0.47 0.51 Synchrony 0.57 0.67 0.50 0.50 CIT 0.34 0.40 0.40 0.40 Synchrony 0.37 0.38 0.44 0.48 CIT 0.51 0.40 0.33 0.33 Capital One 0.14 0.17 0.03 -0.10 CIT 0.23 0.29 0.34 0.38 American Express 0.00 0.00 0.00 0.00
Source: Company data. Figures for interest-bearing deposit are based on quarterly call reports. Figures for 1-yr CD and savings account are based on weekly deposit rates captured on company"s websites. We note...
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