Credit card delinquencies fell across the board at the Big Six issuers in December, reversing modest increases that had appeared in the preceding months.
The deterioration during the fall and the strong finish to end the year were in line with seasonal patterns. Analysts expect performance to continue to track closely with the rhythms of holiday spending, tax refunds and the like now that portfolios have recovered to loss rates that are lower than they were before the crisis. (Data for the nation’s largest issuers is shown in the following graphic. Interactive controls are described in the captions. Text continues below.)
Standard & Poor’s said in a report last week that it expects overall performance to stabilize “near current levels” and delinquencies to slip back to higher “historical norms through 2013.”
Chargeoff rates appear likely to pick up early this year, judging from the bump in delinquencies in the fall and the recent pace at which late accounts have been written off as uncollectible. That would also be in line with seasonal patterns.
Balances that are past due by one or two months dropped by 4 basis points to 8 basis points among the Big Six from November to December. Chargeoff rates fell at three of the issuers, but increased by as much as 64 basis points at Bank of America (BAC) to 4.65%.
Portfolio yields, or revenues (including finance charges and interchange fees) as a percentage of receivables, generally improved. Only the three-month average for American Express (AXP) fell, by 38 basis points from November to 19.34% in December.
Payment rates, or the percentage of outstanding principal balances that cardholders pay off, also strengthened. At Capital One (COF), the three-month average jumped 60 basis points to 22.59%.
High payment rates are simultaneously an indicator of consumers who can easily handle their bills and a drag on loan growth.
In addition to cautious borrowers, the analysts at S&P reckoned that lenders have modest appetites for portfolio growth.
“Issuers are reluctant to take on more risk,” particularly because they are adjusting to new capital requirements, they wrote. Moreover, lenders “have little pricing power on the asset side (with rates as low as they are) and little room on the funding side.”