The credit card delinquency problem may have peaked, an analysis of recent data indicates.
After rising seven straight quarters, the most serious card delinquencies - with payments at least 90 days past due - declined in the second quarter.
It could be the first sign that "banks' and card companies' mitigating efforts are starting to click in," said Warren G. Heller, research director at Veribanc Inc., which tracks serious delinquencies.
The Wakefield, Mass., firm said the "serious" indicator fell two basis points in the second quarter, to 1.68% of all banks' card loans.
The finding, which Mr. Heller bases on data from the Federal Reserve, came a week after the American Bankers Association's quarterly credit quality report showed card delinquencies at their highest level in at least 22 years.
At the end of June, 3.66% of ABA members' card accounts and 4.61% of borrowed dollars were at least 30 days past due, up by 13 basis points and 10 basis points, respectively, from March.
ABA chief economist James Chessen said it could take several quarters for banks' credit-tightening actions to show up in the numbers.
First Chicago NBD Corp. chief economist James Annable said it may be too early to draw conclusions. He said because people are filing for bankruptcy earlier, serious delinquency problems could be wiped away faster.
But Mr. Heller said delinquency growth does not have "as big a head of steam as some folks are saying." He also noted that growth in credit card debt has slowed, as has the rate of credit line expansions.
Bank card outstandings grew to $215 billion from $207 billion in the first quarter. The quarter-to-quarter rate slowed to 3.72% from 4% in 1995. (Outstandings fell 5.6% in the first quarter of 1996, but that is a common, seasonal phenomenon.)
Unused credit limits totaled $1.24 trillion at June 30, up from $1.18 trillion March 31. As a multiple of outstandings, unused limits were 5.77 in June, up from 5.71 in March and 5.22 in June 1995.
Also during the second quarter, net chargeoffs of credit card loans rose to $2.36 billion from $2.23 billion. As a percentage of outstanding debt, chargeoffs were 1.10%, three basis higher than in the first quarter. However, the quarter-to-quarter increase in the chargeoff rate was 2.8% in June, compared to 12.6% in March.
Despite the record level of chargeoffs, Veribanc found that of the 160 banks holding $100 million or more of credit card loans, only eight had net losses during the first six months. Of the 500 banks with the highest delinquency rates, 24 posted losses for the first half.
In 1995, when delinquency levels were lower, five of the biggest issuers lost money in the first half, as did 16 of the 500 banks with the highest past-due rates.
Veribanc's moderate stance on card delinquencies was supported by Elizabeth Laderman, economist at the Federal Reserve Bank of San Francisco. Writing in the bank's July 19 economics newsletter, Ms. Laderman said the rise in credit card chargeoff ratios was not unusual, given the stage of the business cycle.
She said that while heightened competition and bank risk taking may have been contributing factors, they do not account for "cyclical influences tied to the economy at large." She added: "We have seen increases in the credit card chargeoff ratio during upturns before."
Banks have seen a secular, as opposed to cyclical, chargeoff-rate increase since the mid-1980s, and have cushioned themselves with increases in capitalization.
"Banks are maintaining a relatively aggressive credit card marketing stance," Ms. Laderman concluded. "Consequently, we may continue to see relatively high credit card chargeoff ratios."
