Credit card delinquency rates fell again in February, providing further support to the view that loan losses in the sector either have maxed out or will do so soon.
The most encouraging signs in the data released Monday were the continued declines in early-stage delinquencies — loans that are 30 to 60 days past due.
"What we're starting to see in some of these portfolios is the people entering delinquency is starting to come down," said John Stilmar, an analyst at SunTrust Robinson Humphrey. "That is a positive because that foreshadows what will happen in the next five months of losses."
Chargeoff rates, which have been erratic over the last few months, remained so in February, reflecting seasonal factors and issuer idiosyncrasies.
Capital One Financial Corp. showed the biggest improvement on the delinquency front. The percentage of loans in the McLean, Va., issuer's portfolio that were 30 days or more past due at the end of February fell 29 basis points, to 5.51%.
Chargeoffs at Capital One also declined, breaking a three-month streak of increases. The rate of losses on its cards dipped 22 basis points, to 10.19%.
American Express Co., which has been showing the most consistent improvement, said its chargeoff rate rose for the first time in 10 months, by 40 basis points, to 7.40%. Delinquencies were unchanged at 3.60%.
Amex said in its regulatory filing that the increase in the chargeoff rate in February is consistent with its expectations, adding that the first-quarter loan loss rate is likely to be similar to the fourth-quarter rate of 7.5%, while second-quarter chargeoffs should be lower.
JPMorgan Chase & Co. showed the biggest improvement in chargeoffs last month — the loss rate on its credit cards dropped 170 basis points, to 9.21%.
The percentage of loans 30-59 days past due at JPMorgan Chase slid 3 basis points, to 1.09%, while delinquencies overall fell 8 basis points, to 4.67%.
February was the fifth month in a row that early-stage delinquencies — or loans 30 to 59 days overdue — declined at Discover Financial Services. They were 1.35% of all loans, and delinquencies overall fell 5 basis points, to 5.50%.
The chargeoff rate at Discover, however, climbed 56 basis points, to 10.01%. The Riverwoods, Ill., company will report results for its fiscal first quarter, which ended Feb. 28, today after the market closes.
Losses on Bank of America Corp.'s credit cards also increased slightly, to 13.51% from 13.25%. Still, delinquencies improved for the third month in a row. Overall delinquencies stood at 7.23%, better than the 7.35% rate in January.
Bucking the trend, Citigroup Inc.'s delinquencies rose 19 basis points to 5.94%, while chargeoffs jumped 1.49 percentage points to 11.29%.
Despite the improvement in chargeoffs at some issuers, the rates are still historically high overall. Sanjay Sakhrani, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., said that is because delinquencies are working their way through the portfolios and because balances are declining.
"If you look back six months ago, that's kind of when you hit upon peak delinquencies," he said. "The peak delinquency rates are flowing through to chargeoffs."
And seasonally, credit card balances tend to rise in the fourth quarter because of holiday spending and decline in the early part of the year as consumers pay down debt, usually spurred by tax rebates. A smaller balance can deflate the chargeoff rate, Sakhrani said.
Stilmar said there are also differences in each of the issuers' portfolios that are contributing to the inconsistent chargeoff figures.
"It's a combination of the portfolio dynamics of the customers as well as company risk management and origination decisions," he said. "Those three elements are really the large drivers of the variances in losses we've seen."
For example, a repricing of accounts in Capital One's portfolio "pushed some borrowers over the edge," Stilmar said, and affected the company's loss rate at the end of last year. Now some of those credit pressures are abating, he said. "We would expect Capital One should have positive credit momentum past the first quarter," Stilmar said.