March 29, 2024

Borrowing by Consumers Rose in June, Fed Reports

Consumers increased their borrowing by $13.8 billion in June from May, to a seasonally adjusted $2.85 trillion, the Federal Reserve said on Wednesday in its monthly report on consumer credit.

The category that includes credit card use dropped $2.7 billion in June. That followed a gain of $6.4 billion in May. Still, overall credit card debt remained 16.5 percent below its July 2008 peak.

Borrowing for autos and student loans rose $16.5 billion in June. These gains have lifted overall consumer credit to record levels in all but one month since June 2011.

And since January 2011, the measure of student and auto loans has risen $312.6 billion. During that same two-and-a-half-year period, credit card debt rose only $16 billion.

The Fed’s report does not separate student loans and auto loans. But the Federal Reserve Bank of New York tracks consumer credit on a quarterly basis and its reports show that student loan debt has been the biggest driver of borrowing since the recession officially ended in June 2009, partly because many unemployed Americans have returned to college.

More credit card borrowing could bolster consumer spending, which accounts for about 70 percent of economic activity. But many consumers have been hesitant to run up high-interest debt.

The economy grew at a lackluster annual rate of 1.4 percent in the first six months of this year. Many economists forecast that growth will accelerate to a rate of around 2.5 percent in the second half of this year, as the impact of higher Social Security taxes and spending cuts begins to fade. Hiring gains are also expected to increase consumer income, supporting more spending.

The Fed’s report excludes mortgages, home equity loans and other loans related to real estate.

Article source: http://www.nytimes.com/2013/08/08/business/economy/consumer-credit-rose-in-june-as-americans-borrowed-more-for-cars-and-college.html?partner=rss&emc=rss

DealBook: HSBC Profit Up 58%

HSBC said on Monday that profit rose 58 percent in the first quarter after the quality of its loan portfolio improved.

Net income rose to $4.2 billion from $2.6 billion in the period a year earlier, while charges for bad loans fell to $2.4 billion from $3.8 billion. Profit at its investment banking unit fell.

Stuart Gulliver, the chief executive, is scheduled to present a strategy overhaul to investors on Wednesday, including plans to reduce costs. Mr. Gulliver said on Monday that HSBC expected economic growth to slow this year from 2010.

“There remain a number of risks to the global recovery cycle in the short-term,” Mr. Gulliver said in a statement. “In the developed world, higher oil and food prices may slow the pace of recovery, while in emerging markets, higher inflation is dampening consumer sentiment.”

Earnings in Hong Kong and the rest of the Asia-Pacific region continued to grow in the first quarter even as the bank, which is based in London, spent more on employees and marketing. HSBC does not report more detailed profit figures on a quarterly basis.

HSBC continued to reduce its consumer finance portfolio in the United States and lending at its credit card business fell, the bank said. As a result, charges on bad loans fell by 30 percent. The business in North America remained profitable, but that profit fell 60 percent.

In Britain, HSBC set aside $440 million to cover possible claims by some customers that the bank had wrongly sold them a type of loan insurance. The step came after a British court ruled that several banks, including HSBC, were responsible to compensate customers. Barclays and the Lloyds Banking Group also provisioned for such costs.

Article source: http://feeds.nytimes.com/click.phdo?i=187cae5acb7f5597439903a4f27654a3