OREANDA-NEWS. Major US credit card issuing banks are experiencing multiple expense headwinds that have held back card segments from achieving consistent profit gains through mid-2015, says Fitch Ratings.

Regulation, technology upgrades, and soon, higher provisioning to a new post-crisis normal will likely prevent card issuers from fully capitalizing on the most clear bright spot for the sector -- the continuing trend of stronger asset quality. However, better asset quality has come at a cost - fewer customers are revolving borrowers and more customers pay off balances each month. These "transactors" tend to demand costly reward programs.

Over the near term, several factors, including more fraud-resistant payment technologies, the Oct. 1 liability shift on non-Europay MasterCard Visa (EMV) compliant merchants and the eventual rise in short-term rates could help offset the card sector's headwinds. But the ultimate effects of these three positive influences may take years to play out and may never surface as truly influential.

If the positives for the US card segments are to be material, it would be conditional on keeping the re-pricing of deposits contained, in our view. Successfully achieving good asset sensitivity, (i.e. stronger net interest margins as rates rise), will be challenging as Internet-sourced deposits and easy rate comparability will be unlike anything previously available to card holders during prior rate hikes. So, despite the positives within the card sector, Fitch remains cautious on card segments becoming strong profit and growth drivers for banks over the near term.

The report "US Card Issuers Hoping to Swipe Back at Sectors' Headwinds" may be found on www.fitchratings.com.