Citigroup (NYSE: C) bucked the seasonal trend and broke with the rest of the Big Six credit card issuers in September, posting a decline in late payments from the previous month.
A rapid improvement this year in the credit profile of Citi’s securitized card loans has put the company, which had been lagging for much of the recovery, firmly in the middle of the pack. (Performance data for the nation’s largest card lenders through reports filed this week is shown in the graphic below. Interactive controls are described in the captions. Text continues after the graphic.)
In fact, if the recent pace at which late accounts have been translating into loan writeoffs holds, Citi’s chargeoff rate appears set to improve through February while most of its biggest competitors look poised for upticks in losses. (Chargeoff rates represent the annualized amount of balances determined to be uncollectible, as a percentage of total outstanding loans.)
To be sure, credit card performance is strong across the board following a purging of bad accounts during the recession and a tightening of underwriting standards. Bank of America (BAC) said this week that its domestic chargeoff rate of 4.6% during the third quarter (including loans that do not back bonds) was the lowest since late 2006, and that its delinquencies were at an all-time low.
Further, issuers including Citi have said there is not much room for further improvement.
“While net credit losses are likely to improve modestly from current levels, we expect loan loss reserve releases to continue to decline in North America, as delinquency trends have stabilized in the card business,” John Gerspach, Citi’s chief financial officer, said during the company’s
At JPMorgan Chase (JPM), Chief Executive Jamie Dimon said last week that credit card writeoffs “are very low and you really should not expect much improvement from here.”
Loss reserves for the credit card business at JPMorgan Chase were about flat from the second quarter.
Releases of the allowance for the business line — or the amount by which chargeoffs exceed provisions — have accounted for about 70% of the company’s total $16 billion of releases since it began drawing down its loss cushion in the beginning of 2010.
Average payment rates, or the percentage of outstanding principal balances that cardholders pay off, over the last three months slipped in September from August. High payment rates are a
Citi’s Gerspach said, “I’m not quite sure you’re going to see loan growth in anybody’s portfolio because there still is certainly an element of consumer deleveraging going on.”
Instead, issuers are pinning their hopes on higher spending by customers who tend to pay their bills in full each month, and thus
Citi appears to have also lagged behind competitors in improving its ratio of transactions volume to amounts borrowed, but Gerspach said the company is continuing to retool for the new environment. “We’re still working our way through repositioning each one of our products, simplifying our product offering, retargeting” and fine-tuning rewards programs.
