2nd UPDATE: Monthly Credit-Card Data Hint At A Turnaround
16 Aprile 2010 - 12:44AM
Dow Jones News
Monthly data released Thursday by the major U.S. credit-card
issuers hint of a turnaround in a sector hit by losses stemming
from souring loans and borrowers falling behind in paying their
bills.
The latest numbers on the performance of credit-card loans, from
issuers including Capital One Financial Corp. (COF), Discover
Financial Services (DFS), J.P. Morgan Chase & Co. (JPM) and
Bank of America Corp. (BAC), indicate that while credit losses
remain at elevated levels, their pace of increase is tempering for
most card issuers. Another bright spot: Delinquency rates, a key
gauge of future losses, are slowing.
The next challenge for credit-card issuers likely won't be
rising defaults, but the growth of their book of card loans. To
fight losses from card loans, companies have been scaling back on
credit and getting tougher about lending standards. Now, with the
worst likely behind them, they are tasked with the balancing act of
increasing lending to spur revenue but not loosening standards. In
addition, the clamor for credit may be tempered by consumers who,
stung by the recession, are borrowing less.
Issuers of credit cards--including Citigroup Inc. (C) and
American Express Co. (AXP)--are also coping with recently enacted
legislation that includes restrictions on rate increases, which
will bite into income.
"We are at the inflection point," said Sanjay Sakhrani, an
analyst at Keefe, Bruyette & Woods. "I think growth is going to
become a focus point not only among the companies, but also with
investors."
Card-issuer-turned-bank Capital One said charge-offs in its U.S.
credit-card business rose to 10.87% in March from 10.19% in
February, according to a filing with the U.S. Securities and
Exchange Commission. But borrowers at least a month behind on their
credit-card payments fell to 5.30% from 5.51% during the same
period, Capital One said.
The charge-off rate reported by Capital One and its peers is
annualized. In addition, this rate may be magnified because losses
are spread over a smaller portfolio as card issuers have whittled
down the size of their credit-card loans.
Discover said charge-offs in March totaled 8.51% of credit-card
loans that have been packaged into bonds, down from 9.11% in
February. The 30-day delinquency rate also fell to 5.39% from 5.50%
in February. Discover and its bigger rival, American Express, both
issue credit cards and process transactions.
American Express said U.S. borrowers at least a month behind
their card payments declined to 3.3% in March from 3.6% in
February. For the quarter ended Mar. 31, the 30-day delinquency
rate was 3.3%, according to preliminary data, down from 3.7% in the
fourth quarter.
AmEx wrote off 7.5% of its U.S. card loans last month, compared
to 7.4% in February. For the first quarter, the company wrote off
7.2% of its card loans, according to preliminary data, down from
7.5% in the fourth quarter. The company is slated to report
first-quarter results next week.
Bank of America wrote off 12.54% of its loans March, down from
13.51% in February. Total delinquencies were lower at 7.07% from
7.23% in February.
Citigroup wrote off 11.55% of card loans last month compared to
11.29% in February.
The monthly reports on the performance of credit-card loans,
including those packaged into bonds, come a day after J.P. Morgan
Chase posted strong first-quarter results and for the first time
since the housing bubble burst expressed hope the worst is over for
lenders. The banking giant also reduced its provision for credit
losses and reported an improvement in "early stage"
delinquencies--a sign consumers are having less trouble paying
their bills. It wrote off 10.54% of card loans in the first
quarter, up from 8.64% in the fourth quarter. But borrowers at
least a month behind payments fell to 4.99%, from 5.52% in the
fourth quarter.
Shares of Capital One closed Thursday at $45.15, down 1.98%;
Discover stock was at $16.12, up 0.50%; American Express shares
finished at $46.67, up 0.45%; Bank of America shares ended the day
at $19.48, up 0.41%; J.P. Morgan Chase stock was at $47.81, up
0.17%; and Citigroup at $4.81, down 2.43%.
-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729;
aparajita.saha-bubna@dowjones.com
(Tess Stynes contributed to this article.)
Grafico Azioni Discover Financial Servi... (NYSE:DFS)
Storico
Da Lug 2024 a Ago 2024
Grafico Azioni Discover Financial Servi... (NYSE:DFS)
Storico
Da Ago 2023 a Ago 2024