Credit cards snapped their losing streak, and subprime auto loans continued to slip, according to reports on credit quality from two rating agencies.

More lenders-including Chase Manhattan Corp. and Citicorp-had fewer card chargeoffs in May than in April, reported Fitch Investors Service. With the improved performance, its index tracking writeoffs fell to 6.81% from 6.95% on a monthly basis.

While problems remain, "they will not accelerate at the brisk pace" of the past few months, said Michael R. Dean, a director in Fitch's credit card group.

He said a drop in bankruptcies, a slowing of borrowing against credit cards, and the trend toward using home equity loans to pay off credit card debt had all played parts in the improvement.

In fact, the credit card industry registered advances across the board in May-with yields, monthly payment rates, and excess spreads all improving, Fitch analysts said.

The development bodes well for the beleaguered card sector, which is trying to stem difficulties that became apparent late last year.

Among card issuers that saw big improvements from April to May, Advanta's chargeoffs fell to 7.07% from 8.31%, Chase's dipped to 7.87% from 8.51%, and Citicorp's dropped to 6.02% from 6.82%, Fitch said.

Laggards included Capital One, whose chargeoffs rose to 7.63% from 7.24%, and First USA, with an increase to 6.43% from 6.10%.

In contrast to the card issuers, the subprime auto sector chalked up more bad news than good as chargeoffs on securitized loans continued to climb, according to Moody's Investors Service.

The agency's index that tracks writeoffs rose 1.5 percentage point in May, to 112.45%, roughly 50 points higher than the year-earlier period.

Newer securities are faring worse than seasoned pools, "reflecting a continuing shift in the composition of the index-and the market-toward pools of borrowers with riskier credit profiles," said Jay Eisbruck, senior analyst in Moody's structured finance group.

Credit rating agencies aren't the only ones closely tracking the subprime sector. Gruntal & Co. reiterated its sell recommendation Tuesday for Mercury Finance, the beleaguered auto financier hit by charges of fraud early this year.

The Lake Forest, Ill., company has told Wall Street it expects to restore profits, but analysts are not convinced.

Mercury's loan portfolio-its chief source of income-has slipped 16% on an annualized basis, said Katrina Blecher, financial services analyst at Gruntal.

"If the company cannot grow its portfolio, chances of rising earnings are weak," Ms. Blecher said. "We also continue to be concerned about the company's funding capabilities going forward."

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