The media published information according to which Morgan Stanley upgraded its rating and price targets for shares of several credit card companies and lenders.
According to journalists, the mentioned decision of the specified financial institution is related to the stabilization of the situation in the consumer credit sector and expectations that a more favorable regulatory environment will be formed in the United States next year.
As reported by the media, last Thursday, December 19, Morgan Stanley analysts said that several tendencies would contribute to a more positive order of things in the consumer credit area next year. In this context, factors such as declined inflation, positive growth in real wages, rational lending standards, and stable or lower interest rates are implied.
Also, according to media reports, Morgan Stanley analysts expect the Consumer Financial Protection Bureau (CFPB) to dial back its rulemaking and enforcement, and form a positive regulatory backlog.
The University of Michigan’s Consumer Sentiment Index indicates that consumers in the United States positively assess the current economic conditions in the short term. Also in the US, consumer sentiment reached the highest level in the last seven months.
Data released by the Federal Reserve in the current month indicates that the volume of consumer credit in the United States in October amounted to $5,113 trillion. In September, the corresponding figure was recorded at $5,093 trillion. In October, consumer credit in the United States on a seasonally adjusted basis grew 4.5% year-on-year. In September, this indicator increased by 0.8%.
In October, Capital One reported that cardholders are continuing to embrace credit as their primary payment method. It was also noted that consumers remained in good shape. Moreover, Capital One reported that in the third quarter of the current year, the volume of card purchases increased by 5%. The net charge-off rate dropped to 5.6% from 6%. Card loan balances increased by 6%. The 30-day delinquency rate at quarter end was up 0.22% to 4.5%.
Capital One chief executive officer Richard Fairbank said that the pace of year-over-year increases in both the charge-off rate and the delinquency rate have been steadily declining for several quarters and continued to shrink in the third quarter.
The results of special industry research indicate that in the United States, consumers’ choice of credit cards or store cards is driven by loyalty and reward programs, cost considerations, and trust. Currently, in the United States, 27% of consumers with general-purpose cards and 20% of consumers with co-branded store cards say that low annual fees or low interest rates have become their main reason for choosing the appropriate cards.
It is worth noting that Morgan Stanley analysts are not the only ones who have raised price targets. Bread Financial Holding’s price target was lifted to $76 from $35. American Express’s corresponding indicator was set at $305, up from $252. The price target for SLM Corp. was raised to $32 from $26. SoFi Technologies’ indicator was set at $13, up from $7.5.
As we have reported earlier, Morgan Stanley CEO Says About End of Era of Zero Interest Rates and Inflation.
