CHICAGO, March 17, 2011 /PRNewswire/ -- Zacks.com Analyst
Blog features: Bank of America Corporation (NYSE: BAC),
Capital One Financial Corp. (NYSE: COF), American Express
Company (NYSE: AXP), Discover Financial Services (NYSE:
DFS), and Citigroup (NYSE: C).
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Here are highlights from Wednesday's Analyst Blog:
Card Default Plunges for 2 Banks
On Tuesday, in their regulatory filings, Bank of America
Corporation (NYSE: BAC) and Capital One Financial Corp.
(NYSE: COF) reported further drop in their respective credit card
defaults for February 2011. As a
result, both the companies continue to witness a healthy increase
in payments from their credit card customers.
Card companies usually write off the loans that are 180 days
past due and assume them as uncollectible. For BofA, net
charges-offs (NCOs) on an annualized basis were down to 8.84% of
the total balance in February compared with 9.20% in January 2011. This marked the lowest NCOs rate
for the company in the last two years.
Similarly, on an annualized basis, Capital One's NCOs also fell
88 basis points sequentially to 5.91% in February. The company's
NCOs had surged to 10.87% in April
2010 before following the downward trend. According to the
filings, the company's NCOs for international cards decreased to
5.42% in February from 5.72% in January. Similarly, the company's
car loan units' NCOs too dropped to 1.97% from 2.62% in
January.
Delinquency rate, indicating the future rate of default, also
plunged for both BofA and Capital One in February. BofA's
delinquency rate for 30 days or more (on an annualized basis)
declined to 5.09% from 5.17% in January
2011.
For Capital One, delinquency rate for 30 days or more (on an
annualized basis) decreased from 4% in January to 3.83% in
February. The company's delinquency rate for 30 days or more had
peaked to 5.8% in January 2009.
Further, Capital One's delinquency rate on auto loans dropped to
6.51% in February from 7.86% in January. However, the company's
delinquency rate for international cards inched up to 5.79% in
February from 5.73% in the earlier month.
Apart from BofA and Capital One, other card companies such as
American Express Company (NYSE: AXP), Discover Financial
Services (NYSE: DFS), and Citigroup (NYSE: C) showed
mixed results related to card defaults in their regulatory filings
for February. While NCOs were flat for American Express, they rose
for Discover Financial, JPMorgan and Citigroup. Similarly, though
delinquency rates for American Express were flat, they declined for
Discover Financial, Citigroup and JPMorgan.
Decline in card defaults and late payments reflect card owners'
improved financial ability to pay off their debts. This indicates
that the economy is stabilizing.
Currently, BofA retains a Zacks #4 Rank, which translates into a
short-term 'Sell' rating, while Capital One currently retains a
Zacks #3 Rank, which translates into a short-term 'Hold' rating.
However, for both the companies, we maintain a long-term "Neutral"
recommendation.
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