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Banking industry

Credit Card Issuers Face Mixed News as Default Rate Drops But Delinquencies Rise

Strategic Insights

— 1 min read

Credit card issuers in the US have reported a decrease in the default rate for October, but delinquencies have increased, reflecting continuing stress on consumers. The drop in the default rate is attributed to declining late payments in the first half of the year, while the rise in delinquencies is a concern for the sector, indicating potential charge-offs in the coming quarters. The weak housing market and rising unemployment have contributed to consumer stress.

Key Takeaways:

  • The default rate for US credit card issuers decreased in October, with American Express Co. (NYSE: AXP) seeing a 60 basis point drop to 7.8%, Bank of America Corp. (NYSE: BAC) reducing 103 basis points to 13.22%, JPMorgan Chase & Co. (NYSE: JPM) declining 10 basis points to 8.02%, Citigroup Inc. (NYSE: C) falling 136 basis points to 8.79%, and Capital One Financial Corp. (NYSE: COF) decreasing 73 basis points to 9.04%.
  • Delinquencies rose in October, increasing 34 basis points to 5.72% at Capital One, 26 basis points to 4.95% at JPMorgan, and 6 basis points to 7.59% at Bank of America, while remaining unchanged at American Express.
  • The increase in delinquencies is a concern for the sector, indicating potential charge-offs in the coming quarters.
  • Fitch has expressed concern about the credit card issuers in the US, expecting their earnings to be challenged over the near term due to soaring unemployment, bankruptcies, and losses.
  • The weak housing market and rising unemployment have contributed to consumer stress.

Statistics:

  • The default rate for American Express Co. (NYSE: AXL) decreased by 60 basis points to 7.8% in October.
  • The default rate for Bank of America Corp. (NYSE: BAC) decreased by 103 basis points to 13.22% in October.
  • The default rate for JPMorgan Chase & Co. (NYSE: JPM) decreased by 10 basis points to 8.02% in October.
  • The default rate for Citigroup Inc. (NYSE: C) decreased by 136 basis points to 8.79% in October.
  • The default rate for Capital One Financial Corp. (NYSE: COF) decreased by 73 basis points to 9.04% in October.
  • Delinquencies increased to 5.72% at Capital One, 4.95% at JPMorgan, and 7.59% at Bank of America in October.

Sources:

  • Zacks.com
  • Zacks Equity Research
  • Fitch
  • American Express Co. (NYSE: AXP)
  • Bank of America Corp. (NYSE: BAC)
  • JPMorgan Chase & Co. (NYSE: JPM)
  • Citigroup Inc. (NYSE: C)
  • Capital One Financial Corp. (NYSE: COF)

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