Another set of reassuring monthly reports from the major credit card issuers underscores a major theme of the banking industry’s first-quarter results: loan loss reserve releases continue to pad profits.
Early-stage delinquency rates, or the percentage of balances past due by between 30 days and 60 days, were flat to down at most of the Big Six issuers in March from February. The monthly reports arrived Monday, the first business day after JPMorgan Chase (JPM) said a reduction in its allowance for bad credit cards lifted its first quarter net income by $310 million. (Data for the nation’s largest issuers is shown in the following graphic. Interactive controls are described in the captions. Text continues below.)
The credit card business accounts for the bulk of the tens of billions of dollars by which chargeoffs have exceeded loss provisions at JPMorgan Chase since 2010. The company once again warned that it was near the end of the road for such credit card reserve releases, but stuck with guidance for $1 billion during all of 2013. (The pre-tax release in the first quarter was $500 million.)
Citigroup (NYSE:C) said the release in its card business shrank substantially from the year prior, but the company still notched a $300 million drawdown of its allowance for bad loans in its core operations during the first quarter.
The drop in early-stage delinquencies was in line with the seasonal pattern in March, as was an uptick in chargeoff rates at several issuers. Three-month average payment rates, or the percentage of outstanding principal balances that cardholders pay off, strengthened at most of the Big Six, though it fell 10 basis points at Discover from February to 21.27% in March.
The change in three-month average portfolio yields, or revenues as a percentage of receivables, was mixed, though the figure has generally been falling at Bank of America (BAC) and Discover (DFS) for some time.
Citi said its card revenues held flat year-over-year in the first quarter despite a decline in receivables because of higher net interest margins. The company’s three-month average portfolio yield increased 40 basis points from February to 17.38% in March.
Receivables typically decline in the first quarter as late-year holiday borrowing recedes, but, even after seasonal adjustments, credit card lending appears stagnant. After collapsing by almost a fifth between late 2008 and mid-2011, total revolving credit in the country was only 1.7% higher than its post-recession low at $848 billion in February.