“While credit quality trends remain favorable, Fitch views the buildout of credit card and other forms of unsecured variable-rate consumer debt in the late stage of the economic cycle as a potential risk,” said Fitch. “Consumer exposures have been building through direct lending as well as indirect platforms such as partnerships or bolt-on investments. The median YOY growth rate of credit cards was 8.7%, about a point and one-half above the FDIC average.”
IAT, which tracks the Dow Jones U.S. Select Regional Banks Index, holds 59 stocks. US Bancorp (etftrends.com/quote/USB) and PNC Financial Services Group Inc. (etftrends.com/quote/PNC) combine for a quarter of IAT’s roster. Large regional banks are also rewarding shareholders with higher dividends and increased buybacks.
“We estimate that, at the median, total capital payout will be at around100% of net income if share buyback programs are fully executed, which is somewhat of a ratings constraint in the near term. Aside from technology spending, excess capital will most likely be directed toward further smaller acquisitions or investments in non-bank areas such as insurance, capital markets and fintech,” according to Fitch.
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