Among an otherwise long string of reports of rising credit card defaults, American Express continued to break the trend and significantly outperformed its competitors. While credit card charge-offs for other card issuers resumed their upward climb after a short lull in October, Amex credit card charge-offs and late payments fell to their lowest levels so far in 2009.
Amex net charge-offs on loans more than 60 days behind payments fell for the seventh month in a row to 7.6 percent in November, down from 7.8 percent in October. Amex credit card delinquencies, i.e. loans at least 30 days overdue, also dropped, from 4.1 percent in October to 3.9 percent in November.
The other major credit card companies, however, had little but bad news to report. Citigroup saw credit card defaults jumping from 8.79 percent in October to 10.29 percent in November, a whopping 17 percent increase. Delinquencies were also up, from 5.67 percent to 5.81 percent in November.
The largest U.S. credit card issuer, JPMorgan Chase, reported defaults rising almost ten percent, to 8.81 percent in November from 8.02 percent in October. Chase delinquencies fell to 4.9 percent from 4.95 percent.
Other card issuers posted more modest increases in defaults. Credit card charge-offs at Capital One rose from 9.04 percent to 9.6 percent, with delinquent loans increasing from 5.72 to 5.87 percent. Discover write-offs rose from 8.54 percent to 8.98 percent, but the company also saw delinquencies edge downwards, from October’s 5.72 percent to 5.65 percent in November.
The nation’s second largest credit card lender, Bank of America, saw a slight drop in credit card defaults, posting write-offs at 13 percent, down from 13.22 percent. Still, that is likely of little comfort to BofA, which continues to struggle with the highest credit card defaults of all the major credit card issuers. BofA delinquencies also continue much higher, increasing month over month from 7.59 to 7.69 percent.
Taken together, the default data indicate that credit card lenders are not yet out of the woods. Despite the steps lenders have taken over the past year to tighten lending terms and rein in risky credit card portfolios, high unemployment rates continue to take their toll on consumer finances, and hence on cardholders’ ability to repay credit card debt.
Card issuers, who have predicted that credit card defaults would peak and begin to drop early next year, may have to wait for a bit longer for improvement. Credit card delinquency rates are usually an indication of future losses, and if the November numbers are any indication, card issuers will continue to struggle with losses from bad credit card debt for some time to come. Further, with the Holiday shopping season upon us, cash-strapped consumers may increase credit card spending even further, setting themselves and card issuers up for a rough landing come January.
The reports of continued high credit card defaults come even as the Obama White House is putting pressure on bank executives to increase lending to help stimulate the still ailing economy.
