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Credit card loan growth strong for Wells Fargo in 4Q14

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Wells Fargo increases focus on credit cards

Wells Fargo (WFC) has not always been strong in its credit card segment. Traditional credit card segment leaders have been JPMorgan (JPM), Bank of America (BAC), and Citibank (C). But in the last few years, Wells Fargo has been increasing its focus on credit cards.

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Wells Fargo reports strong growth in credit card loans

Total credit card loans outstanding at Wells Fargo stood at $31.12 billion at the end of 4Q14. This was a growth of 16% compared to 4Q14. The growth was driven by new account acquisitions and growth in private label and cobranded cards. Wells Fargo’s acquisition of Dillard’s card portfolio also helped create impressive growth.

Significant growth in this segment was due primarily to improvement of credit card penetration. Credit card penetration indicates the number of retail banking households with a Wells Fargo credit card. Penetration increased to 41.5% in 4Q14 from 36.99% in 4Q13.

However, on a negative note, the charge-offs on credit cards increased by 10 basis points. This is an indicator of increasing delinquency and a number that needs to be watched closely.

Growth in other consumer loans weak

Growth in other major types of consumer loans was weak at the end of 4Q14. The auto loan portfolio stood at $55.7 billion, a growth of 10% compared to 4Q13. But originations fell 1% compared to 4Q13. This was because Wells Fargo became more conservative. It also lost its top spot in auto loans to Ally Financial (ALLY).

Student lending remains stable

Wells Fargo’s private student lending portfolio stood at $11.9 billion at the end of 4Q14. This was a moderate growth of 5% compared to 4Q13. Wells Fargo focuses on quality of private student loans, and 80% of private student loans have cosigners. These loans have an average FICO score of 753.

The good consumer loan portfolio makes Wells Fargo one of the best placed banks in the Financial Select Sector SPDR (XLF).

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