Bank Tracker

Credit Card Data Strong in Last Full Month of

Taylor Swift Tour Stimulus
• July card data remains benign: While NCOs were up materially year-over-
year, reflecting ongoing mean reversion from COVID levels, they remain at
low absolute levels.

• Causes for concern mount: Excess savings are nearly depleted, student
loan payments are resuming, FOMC minutes indicate a view that inflation
risks remain skewed to the upside, and the economic stimulus of Taylor
Swift’s Eras tour has moved overseas.

• Loan growth sluggish, small banks outperform on deposits: Industry loan

growth is tracking to 3% annualized for 3Q23. Small banks continue to
outperform their larger brethren on deposits.

• Bear steepener continues: The yield curve inversion, particularly the 2-10
spread, continued to flatten due to rising long rates. Fed Funds futures
continue to grow less dovish.

August 21, 2023

Sean Ryan
sean.ryan@factset.com
@Gr8QuarterGuys

Lee Li
lee.li@factset.com

Luke Christiano
luke.christiano@factset.com
What We’re Watching
Sometime this week or next: the FDIC 2Q23 Quarterly Banking Profile, containing useful industry aggregate data
and commentary.

Wednesday, August 23: NVIDIA (NVDA) releases earnings after the market close, and hosts a call at 5pm. While
not a financial, investors in every sector should be watching this. NVIDIA is among the best lenses on how the
rise of AI is translating into increased (as well as reallocated) corporate tech spend, very much including in the
financial sector. Look for guidance and commentary on their data center segment.

Friday, August 25: Fed Chairman Powell speaks at 10am at the Kansas City Fed’s 2023 Economic Policy
Symposium in Jackson Hole.

Friday, September 8: The 2Q23 Flow of Funds will be released at 12pm; among the more timely elements will
be fresh data on commercial real estate.

Monday, September 11 – Wednesday, September 13: Barclays Global Financial Services Conference in New
York. One of the most important conferences on the financial sector calendar, it provides an important post-
Labor Day level-set. JP Morgan Chase CEO Jamie Dimon speaks at 1pm on the Monday.

Credit Card Master Trust Data Remains Benign… So Far

NCOs and delinquencies materially worse year-over-year but remain at low absolute levels. Master trust data
released on August 15 continued to reflect consumer resilience, albeit with ongoing mean reversion from the
unsustainably low levels of charge-offs and delinquencies seen during COVID. Unsurprisingly, the deterioration
in charge-offs was worse at private label issuers than at the general purpose card issuers, although some of
the change at Bread Financial was idiosyncratic and not representative of the overall environment. However,
there is growing evidence which suggests that many of the factors supporting consumer resilience are winding
down.

Figure 1: Credit card master trust net charge-off rates, annualized

Net Charge-Off Rate Ticker Jul-23 Change vs
Jun-23 Jul-22
General Purpose Issuers
Citigroup C 1.65% -0.11% 0.46%
JP Morgan Chase JPM 1.55% -0.05% 0.53%
American Express AXP 1.20% 0.10% 0.60%
Bank of America BAC 1.88% -0.11% 0.61%
Discover DFS 1.79% -0.03% 0.63%
Capital One COF 4.48% 0.10% 2.12%
Private Label Issuers
Synchrony SYF 3.88% 0.35% 1.37%
Bread Financial BFS 7.40% -0.30% 2.90%
Source: StreetAccount
Figure 2: Credit card master trust delinquency rates
Delinquency Rate Ticker Jul-23 Change vs
Jun-23 Jul-22
General Purpose Issuers
JP Morgan Chase JPM 0.89% 0.01% 0.23%
American Express AXP 0.76% -0.01% 0.37%
Bank of America BAC 1.24% 0.04% 0.39%
Discover DFS 1.46% 0.05% 0.41%
Citigroup C 1.21% 0.04% 0.42%
Capital One COF 3.95% 0.21% 1.39%
Private Label Issuers
Synchrony SYF 2.20% 0.02% 0.32%
Bread Financial BFS 5.70% 0.20% 0.90%
Source: StreetAccount

Figure 3: American Express master trust net charge-off and delinquency rates

American Express
12%

10%

8%

6%

4%

2%

0%
May-17

May-19

May-21
Jan-08
Sep-08
May-09
Jan-10
Sep-10
May-11
Jan-12
Sep-12
May-13
Jan-14
Sep-14
May-15
Jan-16
Sep-16

Jan-18
Sep-18

Jan-20
Sep-20

Jan-22
Sep-22
May-23

NCOs Delinquencies

Source: StreetAccount

Figure 4: Bank of America master trust net charge-off and delinquency rates

Bank of America
16%
14%
12%
10%
8%
6%
4%
2%
0%
May-17

May-19

May-21
Jan-08
Sep-08
May-09
Jan-10
Sep-10
May-11
Jan-12
Sep-12
May-13
Jan-14
Sep-14
May-15
Jan-16
Sep-16

Jan-18
Sep-18

Jan-20
Sep-20

Jan-22
Sep-22
May-23

NCOs Delinquencies

Source: StreetAccount
 10%
12%
10%
12%
14%

0%
2%
4%
6%
8%
0%
2%
4%
6%
8%
Jan-08 Jan-08
Sep-08 Sep-08
May-09 May-09

Source: StreetAccount
Source: StreetAccount
Jan-10 Jan-10
Sep-10 Sep-10
May-11 May-11
Jan-12 Jan-12
Sep-12 Sep-12
May-13 May-13
Jan-14 Jan-14

NCOs
NCOs
Sep-14 Sep-14
May-15 May-15
Jan-16 Jan-16
Citigroup

Sep-16 Sep-16

Capital One
May-17 May-17
Jan-18 Jan-18

Delinquencies
Delinquencies

Sep-18 Sep-18
May-19 May-19
Figure 5: Citigroup master trust net charge-off and delinquency rates

Jan-20 Jan-20

Figure 6: Capital One master trust net charge-off and delinquency rates
Sep-20 Sep-20
May-21 May-21
Jan-22 Jan-22
Sep-22 Sep-22
May-23 May-23
 10%

10%
12%
0%
2%
4%
6%
8%

0%
2%
4%
6%
8%
Jan-08 Jan-08
Sep-08 Sep-08
May-09 May-09

Source: StreetAccount
Source: StreetAccount
Jan-10 Jan-10
Sep-10 Sep-10
May-11 May-11
Jan-12 Jan-12
Sep-12 Sep-12
May-13 May-13
Jan-14 Jan-14

NCOs

NCOs
Sep-14 Sep-14
May-15 May-15
Jan-16 Jan-16
Discover

Sep-16 Sep-16
May-17 May-17

JP Morgan Chase
Jan-18 Jan-18
Delinquencies

Delinquencies
Sep-18 Sep-18
May-19 May-19
Figure 7: Discover master trust net charge-off and delinquency rates

Jan-20 Jan-20
Sep-20 Sep-20
May-21 May-21
Figure 8: JP Morgan Chase master trust net charge-off and delinquency rates

Jan-22 Jan-22
Sep-22 Sep-22
May-23 May-23
Concumer Credit Faces Increasing Headwinds
Excess savings dwindling, student loans resuming. While credit card charge-offs and delinquencies remain at
historically low levels, and the US consumer generally remains in rude health, various tailwinds are fading and
potentially fierce headwinds loom. Among the fading tailwinds: the San Francisco Fed calculates that the
accumulated above-trend personal savings from the COVID era will be fully exhausted by the end of September.
That doesn’t auger any imminent collapse, but leaves less cushion when and if other things go pear-shaped.
Similarly, the end of the student loan moratorium is imminent, with interest accrual to resume on September 1
and payments in October. While only a marginal negative for the overall economy, this may hit a slice of
households fairly hard. On top of all that, Taylor Swift’s tour has just moved overseas, taking her economic
stimulus with it.

Figure 9: SF Fed research suggests the excess savings accumulated under COVID will be dissipated by October

Source: Federal Reserve Bank of San Francisco

Taylor Swift: End of the Eras Era, Economically

Taylor Swift has left the building. Taylor Swift’s Eras tour, reportedly boasting average ticket prices over $250
and driving a large volume of ancillary spending, has been credited with providing a measurable economic
stimulus. There have been much bigger acts, but they have had much cheaper tickets. The tour even earned a
mention in the July Beige Book:

"Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the
strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx
of guests for the Taylor Swift concerts in the city"

A 14-month desert of Swiftlessness looms. Alas, this is yet another economic support that has run its course
for the near future. Miss Swift’s Los Angeles concert on August 9 was the end of the US leg. The tour has moved
overseas and the US economy is now staring at a 14 month desert of Swiftlessness until a weekend of Miami
concerts in October of 2024. It is left as an exercise for the reader to judge how large a role this plays in the
4Q24 rate cut currently discounted by Fed Funds futures.
Figure 10: There have been much bigger acts, but they have had much cheaper tickets

Source: LedZeppelin.com

This tightening cycle only became restrictive this year, according to the St. Louis Fed. On the face of it,
consumer credit is hanging in startlingly well given the increase in rates since 1Q22. However, as illustrated in
Figure 11, work by the St. Louis Fed suggests that the FOMC waiting so long in the face of rising inflation to
begin tightening, that monetary policy didn’t really turn restrictive until 1Q23. The lion’s share of the lagged effect
is yet to be seen.

Figure 11: St. Louis Fed research suggests Fed Funds only became restrictive in 1Q23

Source: Federal Reserve Bank of St. Louis

FOMC minutes indicate inflation risks viewed as skewed to the upside. Last week’s FOMC minutes suggested
that both the FOMC and its staff view inflation risks as skewed to the upside, which implies a similar skew for
the Fed Funds outlook.

From FOMC minutes:

“Risks to the staff's baseline inflation forecast were seen as skewed to the upside, given the possibility that
inflation dynamics would prove to be more persistent than expected or that further adverse shocks to supply
conditions might occur.”

“Participants cited upside risks to inflation, including those associated with scenarios in which recent supply
chain improvements and favorable commodity price trends did not continue or in which aggregate demand
failed to slow by an amount sufficient to restore price stability over time, possibly leading to more persistent
elevated inflation or an unanchoring of inflation expectations.”
Online Savings Rates Flat
No changes to the rates offered by our sample of online savings accounts. Every bank in our sample held their
rates flat last week.

Figure 12: Savings account interest rates offered by selected online banks
Online Bank Parent Rate Last Change Deposit Beta
Ticker Amount Date vs July 26 Hike
UFB Direct AX 5.25% 0.19% 8/14/2023 76%
Bask Bank TCBI 5.00% 0.15% 7/31/2023 60%
Virtualbank FHN 5.00% 0.20% 6/22/2023 N/A
My Banking Direct NYCB 5.00% 0.62% 5/22/2023 N/A
Bread Savings BFH 5.00% 0.10% 8/9/2023 40%
Sallie Mae Bank SLM 4.75% 0.25% 8/1/2023 100%
Synchrony Bank SYF 4.50% 0.20% 7/11/2023 80%
LendingClub LC 4.50% 0.25% 7/17/2023 100%
SoFi Bank SOFI 4.50% 0.10% 8/4/2023 40%
Ally Bank ALLY 4.40% 0.10% 8/1/2023 40%
Goldman Sachs Bank GS 4.30% 0.15% 8/4/2023 60%
Capital One 360 COF 4.30% 0.15% 7/21/2023 60%
Discover Bank DFS 4.30% N/A
Morgan Stanley Private Bank/E*Trade MS 4.25% 0.25% 8/1/2023 100%
Apple Card AAPL 4.15% N/A
American Express Bank AXP 4.15% 0.25% 5/10/2023 N/A
Cross River Bank 2.60% N/A
Charles Schwab Bank SCHW 0.48% 0.43% 5/9/2023 N/A
Source: FactSet, BestCashCow.com
Interest Rates
Bear steepener continues to lessen curve inversion. The bear steepener remained in place last week, with rising
long rates continuing to flatten the curve. The 2 year – 10 year spread narrowed by another 7bps to 66bps,
driven by a 10bp rise in the 10 year yield. Since the point of maximum inversion (-1.08% on July 3), the inversion
has declined by 42bps, due almost entirely to the corresponding 40bp increase in the 10 year yield.

Figure 13: The bear steepener continues to flatten the curve

Source: FactSet

Figure 14: The 2-10 spread narrowed last week to -66bps

2-10 Treasury Yield Spread

0.0

-0.2

-0.4

-0.6

-0.8

-1.0

-1.2

Source: FactSet
Fed Funds futures continue to get less dovish. The pace and degree of easing implied by Fed Funds futures
continues to moderate, as illustrated in Figure 15; the implied average effective Fed Funds rate for 4Q24 rose
to 4.46%, up 11bps on the week (and up 21bps over the past two weeks). Futures currently imply that the first
rate cut will come the May 1 FOMC meeting.

Figure 15: Fed Funds futures continue to turn less dovish

Effective Fed Funds Rate (Daily Average)

5.50%
5.25%
5.00%
4.75%
4.50%
4.25%
4.00%
3.75%
3.50%
22Q4 23Q1 23Q2 23Q3 23Q4 24Q1 24Q2 24Q3 24Q4 25Q1 25Q2 25Q3 25Q4

Current Week Ago

Source: FactSet

Figure 16: Fed Funds Futures imply the first rate cut happens in May 2024
Meeting Date 425-450 450-475 475-500 500-525 525-550 550-575 575-600
09/20/2023 - - - - 90.0% 10.0% -
11/01/2023 - - - - 67.7% 29.9% 2.5%
12/13/2023 - - - 7.3% 63.6% 26.9% 2.2%
01/31/2024 - - 1.8% 20.8% 54.8% 21.0% 1.7%
03/20/2024 - 0.7% 9.8% 35.1% 40.6% 12.9% 1.0%
05/01/2024 0.4% 5.6% 23.4% 38.0% 25.7% 6.5% 0.5%
Source: FactSet
Weekly Federal Reserve Balances
Federal Reserve borrowings keep rising. Total bank borrowings (BTFP combined with the Discount Window)
rose 0.4% to $109.2 billion, another post-April high. Total borrowings are now up 35% since May 3, though still
34% below the March 15 peak. Money market fund balances rose 72bps to $5.57 trillion, also a new high.

Weak loan growth, while small banks outperform large banks on deposits. Total loans in the banking system
fell 4bps and are tracking to 3% annualized growth in 3Q23 Total deposits declined 6bps last week, but the
outperformance of small banks continued. Large banks saw a decline of 32bps and are down 0.44% QTD and
5.16% over the past year, while at small banks, deposits rose 4bps, leaving them up 1.55% QTD, though still
down 1.64% over the past year.

Figure 17: Federal Reserve Balances

Balances and Rates as of 2023-08-09 2023-08-16 Weekly Change
Loans ($Millions)
Primary Credit 1,911 1,966 55 2.9%
Bank Term Funding Program 106,864 107,242 378 0.4%
Primary Credit + BTFP 108,775 109,208 433 0.4%
Other Credit Extensions 145,407 141,636 (3,771) -2.6%
Reverse Repos (excl foreign office & Int'l) 1,796,519 1,796,725 206 0.0%
Source: FactSet

Figure 18: Bank Term Funding Program usage reached another new peak last week

$180
$109,208

$160

$140

$120

$100
Billions of USD

$80

$60

$40

$20

$-

Primary Credit Bank Term Funding Program

Source: FactSet
Figure 19: Money Market Fund assets hit a new high last week
$6.0 $5,570

$5.5

$5.0

$4.5

$4.0

$3.5
Tillions of USD

$3.0

$2.5

$2.0

$1.5

$1.0

$0.5

$-

Retail Funds Institutional Funds

Source: FactSet

Figure 20: Deposits fell slightly last week

Total Deposits Change
($Billions) 2023-08-09 1 Week Since 3/8 QTD 1 Year
All Banks $17,344 -$11 -$219 $3 -$695
-0.06% -1.25% 0.01% -3.85%
Large US Banks $10,756 -$34 -$142 -$48 -$585
-0.32% -1.30% -0.44% -5.16%
Small US Banks $5,258 $2 -$111 $80 -$88
0.04% -2.08% 1.55% -1.64%
Source: FactSet

Figure 21: Total loan growth remains very sluggish

Change
Loans ($Billions) 2023-08-09 1 Week Since 3/8 QTD 1 Year
Total Loans $12,127 -$5 $39 $31 $531
-0.04% 0.32% 0.25% 4.58%
C&I Loans $2,746 -$6 -$53 -$4 $14
-0.22% -1.90% -0.16% 0.50%
CRE Loans $2,935 $2 $21 $12 $210
0.07% 0.72% 0.42% 7.72%
Source: FactSet