The latest quarterly results from some of the biggest U.S. issuers of plastic open a window into the rough road ahead for credit card companies.

Even as Citigroup Inc. (C) swung to a $1.6 billion first quarter profit Friday, on the heels of a $17.5 billion loss in the fourth quarter, net income at its card segment fell 66% from a year earlier to $417 million.

Citigroup's results, in addition to the dour outlook Thursday from card issuer JPMorgan Chase & Co. (JPM), are a stark reminder of continuing pain in this sector as growing numbers of cash-strapped and jobless borrowers are unable to make their monthly payments. And with unemployment expected to tick higher amid the ongoing recession, a quick turnaround in credit cards appears unlikely.

"People were hoping losses are bottoming out," says Scott Valentin, an analyst at FBR Capital Markets. "But with unemployment higher, there are a lot of issues for credit card companies to deal with, including higher losses and greater reserves."

U.S. employers shed 663,000 jobs in March, pushing the nation's unemployment rate, at 8.5%, to its highest level since 1983. The worsening trend in plastic means additional misery for financial firms, such as Capital One Financial Corp. (COF) and American Express Co. (AXP), who are reporting their quarterly results next week.

Citigroup said losses stemming from souring card loans globally rose to $1.94 billion in the first quarter, a 56% jump from a year ago. At the same time, the card issuer squirreled away $1.11 billion to reserve against potential losses, compared with $623 million a year earlier.

The company's so-called private-label credit card portfolio also experienced a steep rise in credit losses, at 12.40%, compared with 7.32% a year earlier. As of March 31, Citigroup had $152.7 billion of card loans, including $55.9 billion in private-label cards, on its books and bundled into debt securities. Unlike general-purpose cards branded by Visa Inc. (V) or MasterCard Inc. (MA) that can be used almost anywhere, private-label cards can be used only in specific stores.

Private-label cards traditionally have higher loss rates than general-purpose cards, in part, because cash-strapped consumers are likely to put their monthly private-label statements at the bottom of the bill pile. Although retailers may help to pitch the cards to customers and arrange marketing programs for them, it is the private-label issuer, in this case, Citigroup, that bears the financial responsibility of owning the loans.

"We think credit card companies underestimated how fast unemployment is increasing," says FBR's Valentin.

JPMorgan, whose credit card business generated its second consecutive quarterly loss Thursday, said the unit is likely to remain unprofitable this year.

Earlier this week, Capital One reported a sharp increase in credit card loan losses in March as part of a monthly report card on the performance of securities made up of card loans.

Monthly data from another card company, Discover Financial Services (DFS), indicate the rate at which credit card users are paying back their outstanding balances each month remains near a five-year low at 18.45% in March. A sustained decline in the amount borrowers repay each month is a leading indicator of credit losses. Analysts are concerned that more customers won't be able to pay at all, forcing issuers to write off loans. This would mean heavier losses on credit card debt already battered by rising unemployment.

In a reflection of deteriorating credit quality, JPMorgan's first-quarter results Thursday indicated the increasing inability of strapped borrowers to keep up with their card payments. A total of 6.16% were at least 30 days behind their payments in the first quarter compared with 3.66% a year ago, and 4.97% in the fourth quarter. The net charge-off rate - or the percentage of loans deemed uncollectible - was 7.72%, up from 4.37% last year, and 5.56% in the fourth quarter.

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