"Credit cards are a barometer of consumer consumption. We're seeing a dramatic slowdown in consumption; some might call it a recession," Leumi Card Ltd. CEO Tamar Yassur told "Globes" today. "August was one of the weakest months in years by every measure. Growth fell from 9% to 2%. That is freefall. I'm afraid that it won't end in August.
Leumi Card reports double-digit revenue and profit growth for the second quarter of 2011, despite a drop in cross charges. Profit rose 24% to NIS 47 million from NIS 38 million for the corresponding quarter, giving a return on equity of 19%.
Revenue rose 10% to NIS 235 million for the corresponding quarter from NIS 213 million for the corresponding quarter.
Credit card use rose 9% to NIS 24.8 billion in the second quarter, include 19% increase in use of non-bank credit cards to NIS 6.5 billion. Non-bank credit cards accounted for 26% of all transactions, up from 23% in the corresponding quarter.
Most of Leumi Card's non-bank credit cards are issued by affiliated customers clubs: Azrieli, Shufersal Ltd. (TASE:SAE), and 365 Club of Rami Shavit-controlled New Hamashbir Lazarchan Ltd. (TASE:MSZB), which also includes Hamashbir subsidiary New Pharm Drugstores Ltd. and Office Depot Israel Ltd. Hamashbir will cease collaborating with the company in December, but Yassur is not worried, saying, "We don’t see eye-to-eye with Shavit. It's not the child we longed for, but it's immaterial and will not affect our financial results."
"Globes": How will the cut in cross charges to 0.64%, if approved by the Antitrust Authority, affect Leumi Card?
Yassur: "The structure of the cut is not known, but a charge of 0.64% will greatly affect profitability. Revenue across the sector will fall by hundreds of millions of shekels, and so will profits. There will a significant change in credit card business paradigm. We'll have to get used to lower profits."
Leumi Card's financing revenue rose to NIS 71 million in the first half of 2011, 15% of revenue. The company had 534,000 active non-bank credit cards at the end of June, 6.6% more than a year earlier, compared with a 2% increase in the number of bank credit cards. 60% of new credit cards are non-bank credit cards.
Non-bank retail credit rose 7.8% to NIS 1.4 billion, and the interest rate on non-bank credit cards rose to 12.6% in the second quarter from an average of 11.6% in 2010 and 10.5% in 2009.
Bank Leumi (TASE: LUMI) owns 80% of Leumi Card and Azrieli Group Ltd. (TASE: AZRG) owns 20%.
Published by Globes [online], Israel business news - www.globes-online.com - on August 29, 2011
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