The numbers are in on banks' second-quarter credit card problems, but the jury is still out on when they will turn around.

Card bankers and Wall Street observers alike are saying delinquencies and chargeoffs will get worse before they get better.

So far, the alarm bells have been muted. Most major banks saw net income rose nicely last quarter despite higher chargeoffs, which they said they had prepared for.

"We knew this was coming all along," said Robert S. McCoy Jr., chief financial officer of Wachovia Corp.

Indeed, many credit card players doubled their loan-loss provisions in anticipation of losses. Such precautions seem "to be more widespread compared to any previous quarter," said Moody's Investment Services senior analyst David L. Fanger.

The second-quarter reports also showed regional banks are being hit hardest. Money-center institutions and specialty credit card issuers also suffered, but not to the same extent.

"Credit losses are up everywhere," said Sanford C. Bernstein & Co. analyst Moshe Orenbuch. "However, there are significant divergences between issuers."

First Chicago NBD Corp., Norwest Corp., Mellon Bank Corp., Barnett Banks Inc., Comerica Inc., and others were cited as examples of regionals wrestling with their card portfolios.

Barnett even said it is considering selling its card business or entering into a joint venture to offset the risks.

The chargeoff rate at First Chicago was 5.9% in the second quarter, up from 4.8% in the first quarter and 4% in the second quarter of 1995. Credit card losses due to bankruptcies were up sharply, to 110 basis points, compared with the industry average of 40 to 50 basis points, according to Sanford C. Bernstein research.

Cynthia Graham, chairman and chief executive of Barnett Card Services Corp., declined to discuss Barnett specifically, but she believes regional banks in general "have to rethink the way they do business," considering economies of scale.

"In the old days a $2 billion portfolio was large enough," but a successful marketing program today requires at least $2 billion to $5 billion, she said. Barnett is below her threshold, at $1.7 billion.

"Regional banks have been challenged by mono-line companies such as ourselves" that have invested heavily in technology, said James M. Zinn, senior vice president and chief financial officer of Capital One Financial Corp. "It wouldn't disappoint me if some of the regional institutions look at other opportunities.

On the plus side, People's Bank of Bridgeport, Conn., reported a decline from the first quarter in both the percentage and dollar amount of delinquencies.

Mark K. Vitelli, first vice president of consumer credit, attributed the decline in part to People's emphasis on technology.

Credit card chargeoffs rose by 17 basis points to 4.17% in the second quarter. Receivables increased 13% over the first quarter, to $2.3 billion.

Mr. Vitelli said some card issuers may have reached their peak in losses in the second quarter, but others "don't have an end in sight."

Analysts see card chargeoffs and delinquencies leveling off in the fourth quarter or early in 1997, in part because many issuers have slowed account solicitations and tightened underwriting criteria.

Dean Witter, Discover & Co. blamed increased Discover card writeoffs for a 26% decline in earnings from credit services, to $103.4 million in the June quarter. Philip J. Purcell, chairman and chief executive officer, said the company has stepped up collection efforts, imposed new over-limit fees and higher late fees, and is considering further price increases.

According to a survey conducted by R.K. Hammer Investment Bankers in June and July, card issuers have raised the bar on the credit scores they use to approve applicants in a stark reversal of recent trends. Said Robert K. Hammer, head of the firm in Thousand Oaks, Calif.: "These are positive signals and should help soften some of the impact of rising delinquencies and chargeoffs."

Jeremy Quittner contributed to this article.

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