Seriously delinquent credit card debt climbed to a possibly alarming $5.1 billion in the fourth quarter, according to data gathered by Veribanc Inc.

Serious delinquencies-90 days or more past due-rose to that record level from $4.96 billion a year earlier and represented 2.21% of the $231.1 billion of card debt held by banks at yearend 1998.

Bank card industry executives and analysts are not overly concerned, as delinquency measures have been fluctuating and in some categories have actually improved. But Veribanc's profitability analysis included another caution: A larger percentage of banks reported net losses than in any fourth quarter since 1992, even though the economy is humming and aggregate net earnings remain robust. (See page 7.)

"In one sense, (high delinquency levels) have become business as usual," said Warren G. Heller, research director at Veribanc in Wakefield, Mass. In the last few years, a high level of risk has become "increasingly accepted as normal" and tolerated. "That risk won't be acknowledged until we are well into the next downturn," the analyst said.

One way banks have stomached higher delinquencies has been to raise fees for cardholders who pay bills late or exceed credit limits. Veribanc found that among 57 credit card specialists, fee income rose 37% in 1998, to $16.2 billion.

Though serious card delinquencies were $670 million higher in the fourth quarter than in the third quarter, chargeoffs declined. At $2.59 billion, or 1.12% of card outstandings, they were down from $2.82 billion, or 1.29%, in the third quarter.

The number of dollars seriously delinquent in card accounts was the highest since the Federal Reserve began reporting such figures in March 1991, Mr. Heller said.

Had banks written off the added $670 million in seriously late card debt in the fourth quarter, chargeoffs would have been at 1.41%, the highest level since 1992, Mr. Heller said.

Fee income from credit cards buoyed bank profits in 1998, as did a collective lag in writing off debt, Mr. Heller said. But bad debt on the books will be reflected in this year's earnings, he predicted.

"This reluctance by banks to rid themselves of bad card loans will result in boosted chargeoff rates and a drag on profits during 1999," Mr. Heller said.

James Chessen, chief economist at the American Bankers Association, said there is lag time between reporting a delinquency and charging it off. Thus, he said, banks may be more active in writing off these debts than Veribanc's figures suggest.

"Banks learned long ago to charge off debt and get it behind them," Mr. Chessen said.

The Veribanc study was released shortly after the ABA's quarterly survey of bank consumer loans 30 days or more overdue. The association said card outstandings delinquent totaled 4.62% in the fourth quarter, versus 4.63% in the third quarter and 5.38% in the fourth quarter of 1997.

James Annable, senior vice president and chief economist at Bank One Corp. of Chicago, said higher card delinquencies are not in themselves cause for alarm.

Rising unemployment rates would be of far greater concern to the credit card industry, because they would be "characteristic of a recession," Mr. Annable said.

"Occasionally, you look for what is going to send a shock through the banking industry, like real estate did in the 1980s," Mr. Annable said. "There is probably an answer out there somewhere-but it's not credit cards."

In other lending categories tracked by Veribanc, serious delinquencies climbed more modestly. At yearend 1998, those in noncard consumer installment loans were at 1.05% of $351 billion in total debt. At yearend 1997, the percentage was 0.98% of $338 billion.

At yearend 1998, seriously delinquent commercial loans accounted for 1.15% of the total of $906 billion, up from 1.07% of $802 billion the previous year.

In all lending categories combined, Veribanc said 1% of $3.404 trillion was seriously delinquent. A year earlier it was 1.03% of $3.129 trillion.

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