Credit card chargeoffs rose in the second quarter, according to Standard & Poor's Corp.'s analysis of accounts in securitized portfolios.
But behind the darkening cloud is a ray of sunshine: a decline in delinquency rates, a leading indicator of chargeoffs, at many card issuers.
Although delinquency tends to be seasonal-it often rises after a holiday-the recent dip is a positive sign, said Alison Emmerich, an analyst for Standard & Poor's. Last year delinquency rose in the second quarter.
Standard & Poor's said analysts are hopeful that chargeoff rates will improve if bankruptcy and loss rates on mature accounts also improve.
The Standard & Poor's credit quality indexes showed chargeoffs on $225 billion of publicly rated credit card receivables stood at 6.9%. This was up from 6.6% in the first quarter and 5.9% in the fourth.
Master trusts-special-purpose companies set up to issue asset-backed securities-showed higher losses in February than in January. But Standard & Poor's said that by May about half of the 40 trusts it monitors reported declines in losses from previous months. Those that reported increases showed rises of 30 basis points or less.
The average delinquency rate for master trusts in June stood was 4.9%, higher than a year earlier but 70 basis points lower than in January.
In addition, the trend of delinquency moving from 30 days to 60 days past due also seems to be slowing. This can be a better indicator of future chargeoffs than delinquency in itself, said Ms. Emmerich.
Tighter credit standards already imposed by card issuers could mean lower chargeoff rates in the second half, she said, but more policy changes are needed.
Though credit card solicitations are down, she noted, the number of mailings remains high, average credit lines are still rising, and the consumer debt-to-income ratio remains elevated.