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Credit Card Defaults Delinquencies
Learn About Credit - What is a FICO Credit Report? - U.S. credit card companies said defaults and delinquencies were lower in June than analysts had feared, sending the companies’ shares up as much as 10% and helping the stock market rally on Wednesday.
And with American Express Co forecasting better business in the second half of the year, investors saw their first meaningful glimmer of hope about the credit picture since last fall.
American Express posted its first decline in chargeoffs -- loans the company does not expect to be repaid -- in a year, while JPMorgan Chase & Co and Discover Financial Services also surprised analysts with fewer defaults for the first time since October.
In addition, accounts at least 30 days delinquent -- often an indicator of future defaults -- fell in June, with American Express and Capital One Financial Corp posting their fourth-straight monthly declines.
The reports may signal that American consumers’ credit positions are not deteriorating as rapidly as feared, despite rising unemployment and the continuing housing slump.
“A lot of the weaker customer base has already charged off,” said Sanjay Sakhrani, an analyst at KBW. “You have a better core portfolio. But that is not to say that portfolio is not immune from what is going to be a weaker macroeconomic backdrop.”
American Express, the largest U.S. credit card company by sales volume, said its default rate inched down to 9.9% in June from 10% in May, according to a regulatory filing. It was its first monthly decline in a year.
The company said defaults rose to 10% in the second quarter from 8.5% in the first quarter but were below its estimated range of 10.5% to 11%.
American Express said it was highly likely that defaults would be lower than expected in the second half of 2009 “if delinquency and bankruptcy trends continue to be below previously expected levels.”
JPMorgan -- the largest issuer of Visa credit cards -- said defaults declined to 8.04% in June from 8.36% in May, while Discover said its defaults fell to 8.75% from 8.91%. Capital One’s chargeoff rate rose less than expected to 9.73% from 9.41%.
“Given the continued weak employment data -- increasing unemployment rate, fewer hours worked, stagnant wages -- we view the recent strength as seasonal,” FBR analysts said in a research note.
Following the reports, American Express shares rose 9.1% to US$26.69 in afternoon trading, while Capital One jumped 9.5% to US$25.30, Discover was up 5.5% to US$10.80, and JPMorgan gained 4.8% to US$36.35.
Abogados August 6, 2009 08:55 AM