Late Credit-Card Payments Continue To Fall For US Lenders
16 February 2012 - 10:13AM
Dow Jones News
The rate of credit-card customers who were late on their
payments continued to decline in January for several U.S. lenders
despite signs some consumers are beginning to load up on debt
again.
Bank of America Corp. (BAC), Discover Financial Services (DFS)
and J.P. Morgan Chase & Co. (JPM), among the country's largest
credit-card issuers, said Wednesday their delinquency rates fell in
January from December, an ongoing trend that has helped the card
industry post improved earnings over the last year.
Long term, analysts expect delinquencies, or the rate of
borrowers 30 days or more behind a payment, to begin increasing as
banks try to expand lending and rates likely can't fall much
further. Discover, American Express Co. (AXP) and others say their
late payments are near historic lows.
Revolving credit, which consists primarily of credit-card loans,
increased for the second-straight month in December, to $801
billion, fueled in part by the holiday shopping season. That bodes
well for card issuers, who are trying to expand their loan
portfolios again after many scaled back lending following the
recession.
"We're growing the credit-card business," J.P. Morgan Chase
Chief Executive Jamie Dimon said in an interview on Fox Business
Network this week. "We've come out with new products, new
services...It's going to be a very good business, so we're happy
with it."
J.P. Morgan, which has been making a bigger push to go after
affluent borrowers and small businesses with new cards, said in a
regulatory filing the delinquency rate for card loans packaged into
securities fell to 2.45% in January from 2.48% in December.
However, net charge-offs, or loans deemed uncollectible, rose to
4.25% from 4.11%. The rate remains well below levels seen in 2009
and 2010.
Bank of America, whose credit-card performance improved later
than its competitors, said its delinquency rate for securitized
loans fell for the fourth-straight month. The rate was 3.8% in
January, down from 3.82% in December. Net charge-offs fell to 5.63%
from 6.05%.
The delinquency rate at Discover, which processes transactions
in addition to issuing cards, fell to 2.31% from 2.32%. Its net
charge-off rate fell to 2.75% from 3.15%.
"Credit quality appears to be trending better than our
expectations," Sanjay Sakhrani, an analyst with Keefe, Bruyette
& Woods, wrote in a research note on Discover's results.
American Express, whose more affluent customer base helped it
rebound from the recession more quickly than others, said its
delinquency rate was flat at 1.4%. Its net charge-off rate fell to
2.2% from 2.3%.
Some credit-card issuers are showing signs of stress,
though.
Capital One Financial Corp. (COF) and Citigroup Inc. (C) said
late card payments and charge-offs increased in January, though
they also remain below recessionary levels.
Capital One's delinquency rate rose to 3.78% from 3.66% in
December. Its net charge-off rate rose to 4.08% from 3.98%.
The delinquency rate at Citi was 3.13%, up from 3.11%. Its net
charge-off rate was 5.27%, up from 5.11%.
Whether the recent spurt in consumer debt is a sign borrowers
are feeling more confident about their financial situations or
reflective of consumer stress remains to be seen.
Recent improvements in employment and ongoing credit performance
did little to boost consumers' financial health in the fourth
quarter, according to CredAbility, a credit-counseling agency.
The Atlanta agency's Consumer Distress Index, released
Wednesday, was 67.6 in the fourth quarter, a slight improvement
from 66.7 in the third quarter. The index looks at employment,
household budget, credit and other data.
"After essential expenses, many households have little money
left to cut from their household budgets," Mark Cole, chief
operating officer of CredAbility, said.
-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214;
andrew.r.johnson@dowjones.com
Capital One Financial (NYSE:COF)
Historical Stock Chart
From Aug 2024 to Sep 2024
Capital One Financial (NYSE:COF)
Historical Stock Chart
From Sep 2023 to Sep 2024