Credit card delinquencies inched up at most of the Big Six issuers in January. Chargeoff rates generally fell, however, and card portfolios appear likely to extend a streak of strong credit performance in the months ahead.
Both moves were consonant with seasonal patterns, with the increase in loans written off as uncollectible echoing a slight rise in delinquencies in the autumn and the uptick in delinquency rates reflecting smaller denominators as cardholders paid off holiday bills. (Data for the nation’s largest issuers is shown in the following graphic. Interactive controls are described in the captions. Text continues below.)
JPMorgan Chase (JPM) bucked the seasonal trend by posting a decline of 3 basis points in the percentage of its securitized loans that were overdue by between one and two months to 0.51%. Bank of America Corp. (BAC) recorded a strong decline in its chargeoff rate from December to January, by 47 basis points to 4.18%.
Payment rates, or the percentage of outstanding principal balances that cardholders pay off, strengthened. The three-month average at American Express (AXP) jumped 85 basis points to 31.63%.
Portfolio yields, or revenues as a percentage of receivables, generally softened, though the three-month average for Amex, which fell in December while its competitors posted gains, recovered in January.
The weakening in yields in January might reflect a slowdown in transactions volume after the end of the holiday shopping season. Interchange revenue dropped sharply at all three issuers that report it after spiking in December.
Overall, loss rates look set to be roughly flat in the months ahead based on the recent pace at which late accounts have been translating into writeoffs.
Speaking to investors this month, Josh Silverman, Amex’s president of U.S. consumer services, said, “I don't know how much lower they can go. I think a lot of us thought they couldn't have gone lower last year and they went lower. So we feel very good about where we are.”
Gary Perlin, Capital One’s (COF) chief financial officer, said there is “no reason to believe credit would change” without a deterioration in the economy.
Discover (DFS) President Roger Hochschild said loss rates are currently running below the “new normal,” and forecast a gradual increase after a further period of “flattening.” But he estimated that the “new normal” would be in the range of 4% to 5%, or about 50 basis points below the baseline before the crisis.