Analysts at Keefe, Bruyette & Woods (KBW)
predict credit card issuers will be able to post strong earnings in
spite of the impact of new legislation and a sluggish economy.
Reviewing the earnings impact of the CARD Act,
analysts Sanjay Sakhrani and Steve Kwok said issuers may be able to
protect profitability through one of the provisions on APRs.
The CARD Act demands that issuers review APR
increases every six months to determine whether the same rates
still apply. KBW forecasts this practise will enable issuers to
argue that previous interest rate increases should remain.
The analysts say the impacts of the act on
penalty fee income regulation and future loan growth will be fully
seen in the fourth quarter of 2010.
“The primary issue on this front will be
whether or not the specific impacts related to penalty fee income
regulation will be as severe as we expect, or more severe, and
whether or not there is a structural change in growth rate of the
card industry given all of the aggregate actions taken by the new
law,” the report said.
The report also doubts the Durbin amendments
will affect Visa and MasterCard revenues, arguing that industry
operations will not change drastically and that the economic impact
of the largest banks in regards to debit is not as great as