Market Overview Analysis by Avi Gilburt covering: Discover Financial Services, Capital One Financial Corporation, Ally Financial Inc. Read Avi Gilburt's latest article on Investing.com
But before we begin, I want to take this opportunity to remind you that we have reviewed many larger banks in our public articles. But I must warn you: The substance of that analysis is not looking too good for the future of the larger banks in the United States.
Moreover, if you believe that the banking issues have been addressed, I'm sorry to inform you that you likely only saw the tip of the iceberg. We were able to identify the exact reasons in our public article that caused SVB to fail well before anyone even considered these issues. And I can assure you that they have not been resolved. It's now only a matter of time.
If you have been following our work on banks, you would know that we have been discussing the issues to which Moody's was recently referring for the past 18 months. We also noted that Moody’s, as well as other rating agencies and research departments of investment banks, have mostly ignored several major issues that were revealed by the U.S. banks’ 1H23 results. In our view, each of these issues is a major risk for bank stability, and each of them is worth a separate article.
The most important thing here is that such a massive increase in credit card portfolios occurred in a rising rate environment. As the table below shows, according to the Fed, the average rate on credit cards surpassed 22% in May, and it was less than 17% before the pandemic.We believe that the pandemic-related savings are fading, but consumers want to continue spending more than they are earning. As a result, we see massive growth rates in credit cards.
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