August Credit-Card Loan Data Dash Hopes Of Quick Turnaround
September 15 2009 - 4:18PM
Dow Jones News
Data released Tuesday by major U.S. credit-card issuers offered
scant evidence of an imminent turnaround, dashing hopes that
positive trends from a month earlier were gaining momentum.
The latest numbers indicate that consumers are still struggling
to find their financial footing, as still-high jobless numbers
remain a threat.
"Broadly speaking, the data don't give us any evidence that
things are improving materially," said Sanjay Sakhrani, an analyst
at Keefe, Bruyette & Woods.
This monthly report card on the performance of credit-card
loans, including those packaged into bonds, comes amid heightened
scrutiny around credit as losses stemming from souring card loans
pile up.
Issuers of plastic, including Capital One Financial Corp. (COF),
JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC),
Citigroup Inc. (C), Discover Financial Services Inc. (DFS) and
American Express Co. (AXP) are also coping with sweeping
legislation that will bite into income. To fight the losses, card
issuers are scaling back on credit and getting tougher on whom they
lend to.
American Express said that U.S. borrowers at least a month
behind on their card payments decreased modestly to 4.1% in August
from 4.2% in July. A decline in delinquencies, a key gauge of
future losses, is important for issuers because higher
delinquencies force them to squirrel away capital to reserve for
potential losses; ultimately, companies must write off loans if
customers can't pay up.
AmEx and its peers have been hurt by cutbacks in spending and
customers who are falling behind on their bills in the current
economic slump. AmEx both issues cards and processes transactions.
It offers charge cards requiring a monthly payoff and credit cards
on which customers can carry a balance.
AmEx wrote off 9% of its card loans, including those packaged
into bonds, in August. In July, the company wrote off 9.2% of its
U.S. card loans.
Another card issuer, Capital One, said charge-offs - card loans
deemed uncollectible - declined to 9.32% in August from 9.83% in
July in its U.S. credit-card business. But cardholders at least 30
days behind payments rose to 5.09% last month from 4.83% in
July.
Discover said it wrote off 9.16% of credit-card loans that have
been packaged into bonds in August, up from 8.43% in July.
Delinquencies also edged up to 5.35% last month compared with 5.28%
in July.
Bank of America, at 14.54%, had the highest write-off rate in
August among the card issuers that released data Tuesday.
Officials at these companies were either unavailable for comment
or declined to comment.
Chase, a unit of JPMorgan Chase, said its annualized credit-card
charge-off rate rose to 8.73% in August.
"We continue to be concerned about the loss environment and we
believe we are taking the appropriate steps to continue mitigating
our risk," said Paul Hartwick, a Chase spokesman.
- By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729;
aparajita.saha-bubna@dowjones.com
(Tess Stynes in New York contributed to this article.)