DFS Discover Financial Services

Credit-card borrowers were more timely in their payments in February, and their lenders charged off fewer of their loans, monthly reports from large card lenders disclosed Tuesday.

There were indications, though, that lenders continued to have trouble expanding their books of credit-card loans.

February data generally showed fewer delinquencies at U.S. credit-card issuers including Capital One Financial Corp. (COF), American Express Co. (AXP), Discover Financial Services (DFS), Bank of America Corp. (BAC) and J.P. Morgan Chase & Co. (JPM).

With the exception of Capital One, shares of lenders fell Tuesday amid broader declines in U.S. stocks, joining a global market selloff that started in Tokyo as Japan's nuclear crisis deepens and worries escalate over the human and economic toll of last week's earthquake. Capital One shares rose 3.2% to $51.05 in recent trading.

The more that cardholders charge on their plastic, the more the companies earn in fees, so the amount that customers spend is critical to them. Card-loan balances--and, as a result, revenue--have been falling as companies, stung by steep losses during the economic slump, scaled back on credit and toughened lending standards. Revolving credit lines--mainly card balances--shrank by $4.2 billion in January from December, according to the Federal Reserve. That is an annualized rate of decline of 6.4%. Since the end of 2008, these balances have shrunk by $162 billion to $795.5 billion.

Credit-card issuing banks are also facing an erosion in profits and revenue stemming from new rules curbing income on credit and debit cards.

At Capital One, U.S. card loans at least a month behind payments fell to 3.83% in February from 4% in January. Charge-offs in its U.S. credit-card business dropped to an annualized 5.91% last month from 6.79% in January, according to a regulatory filing on Tuesday with the Securities and Exchange Commission.

Charge-offs are loans that a card issuer deems uncollectible because borrowers can't repay them; they are based on past delinquent balances. Delinquencies are loans that may be written off in the future. The delinquency rate is important because higher delinquencies force issuers to squirrel away capital to cover potential losses.

At American Express, which has an affluent cardholder base, the 30-day delinquency rate fell to 2% in February from 2.1% in January. In an SEC filing Tuesday, the company said it wrote off an annualized 3.8% of its U.S. card loans in February, unchanged from January.

Discover said charge-offs in February totaled 5.79% of credit-card loans that have been packaged into bonds, modestly up from 5.75% in January. The 30-day delinquency rate fell to 3.7% last month from 3.84% in January. Discover and its bigger rival, American Express, also process card transactions in addition to issuing credit cards.

J.P. Morgan Chase said charge-offs fell in February to 6.21% from 5.97% in January. In the same period, card loans with payments at least a month past due fell to 3.29% from 3.39%.

Bank of America, at a write-off rate of 8.84% in February, had the highest among its peers. But the rate was lower than the 9.20% in January. Bank of America has consistently reported a higher write-off rate than other major U.S. card issuers. Total delinquencies were lower at 5.09% last month, compared with 5.17% in January.

Citigroup Inc. (C) said it wrote off 7.95% of its card loans in February, up from 7.49% in the prior month.

-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; aparajita.saha-bubna@dowjones.com

(Matt Jarzemsky contributed to this report.)

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