The six largest credit-card lenders saw further improvements in borrower behavior in May, even as choppy economic data spark concerns over the financial state of U.S. consumers.
Capital One Financial Corp. (COF), Discover Financial Services (DFS) and Bank of America Corp. (BAC) were among the card issuers posting declines in monthly delinquency rates, which measure the percentage of loans on which borrowers are behind paying, according to regulatory filings Friday.
JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and American Express Co. (AXP) also said delinquencies fell from April. All of the companies except for Discover also reported declines in their net charge-off rates, or the percentage of loans deemed uncollectible.
Discover, which has enjoyed among the best credit-quality among its competitors, said the net charge-off rate for loans it packaged into securities ticked up to 2.65% in May from 2.6% in April. The rate is still near historic lows, and the increase is "less than typical seasonal trends" seen during the month, Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods, wrote in a research report.
The credit-card industry has seen ongoing improvements as many consumers focused on paying down debt following the recession, allowing lenders to sock away less money to cover future loan losses.
But recent indicators have renewed worries that consumers could be in for another tough slog ahead. Earlier this month, a disappointing U.S. jobs report for May caused a drop in financial stocks on concerns that a weak employment market could translate into trouble for borrowers.
Fears that mounting economic problems in European markets will spread to the U.S. have also weighed on consumer lenders.
Some credit-card lenders have pulled back on marketing, which surged last year as they tried to tried to win new customers and grow their loan portfolios.
Banks mailed 260.6 million credit-card offers to U.S. consumers in April, down from 269.5 million in March and 389.6 million a year earlier, according to Mintel Comperemedia, a research firm that tracks direct mailings.
"Issuers have adopted a more cautious approach due to an uncertain economic environment," Andrew Davidson, senior vice president for Mintel Comperemedia, said in a press release.
Despite improvements in credit quality, lenders continue to struggle grow loans as consumers remain cautious about ringing up more debt.
American Express, the largest credit-card lender by spending, saw a small increase in average outstanding U.S. card loans, which were $52.2 billion in May.
Capital One, which recently completed its acquisition of HSBC Holdings PLC's (HBC) U.S. credit-card business, average outstanding card loans edged down slightly to $52.8 billion in May. The figure doesn't include the HSBC portfolio.
The McLean, Va.-based bank expects to see "growing revenue tied to measured loan growth on the legacy side of our business," Gary Perlin, chief financial officer of Capital One, said at an investor conference Wednesday. He noted loan growth has been led by auto finance and commercial lending, not credit cards.
The Federal Reserve earlier this month said revolving credit, primarily consisting of credit-card debt, held by U.S. consumers fell by $3.44 billion in April to $862.29 billion.