miniseries
A survey of October credit card metrics shows that the average credit card delinquency rate remains slightly below prepandemic levels, but the average net charge-off rate has risen above the 2019 level. Both show a continued deterioration of credit card metrics.
“October card results pointed generally towards above-trend higher NCOs (net charge-offs), possibly tied to student loan repayment resumptions and ongoing inflationary/macro exhaustion for the consumer,” Jefferies analyst John Hecht wrote in a note to clients.
Overall, the total credit card loans outstanding at eight lenders amounted to ~$483B, up 1.2% M/M and 12% Y/Y. Some companies, though, may be tightening up on credit standards. Balances fell from a year ago at JPMorgan Chase (NYSE:JPM), Bread Financial (NYSE:BFH), Citigroup (NYSE:C), and Bank of America (NYSE:BAC).
The data also highlight a divergence in the banks’ credit metrics, with several banks boasting stronger quality than before the pandemic. Delinquency and net charge-off rates at American Express (NYSE:AXP), Citigroup (C), and Bank of America (BAC) remain below the October 2019 rates, while JPMorgan’s (JPM) delinquency rate is still below the prepandemic level, but its charge-off rate has resumed a more normal reading.
Wolfe Research’s Bill Carcache is looking at unemployment claims for clues to credit trends. “We continue to believe that credit card stocks are unlikely to trough until initial claims peak, and our analysis suggests that initial claims are unlikely to peak until ~12 months after peak fed funds, suggesting the lagged effects of hikes to date may continue to induce labor market softness through most of 2024 despite the strength to date,” he said in a recent note.
Specifically, he sees the re-acceleration in deliquency rate formations at Bread Financial (BFH) and Synchrony Financial (NYSE:SYF), combined with the continued acceleration at Discover Financial (NYSE:DFS), as “evidence that the worst of the consumer credit headwinds is not yet behind us.”
| 2023 | Change in bps | |||||||
| Company | Ticker | Type | Oct. | Sept. | Aug. | 3-month average | Oct. 2019 | (Oct.’23 vs. ’19) |
| Capital One | NYSE:COF | delinquency | 4.48% | 4.31% | 4.09% | 4.29% | 3.79% | 69 |
| charge-off | 5.08% | 4.16% | 4.55% | 4.60% | 3.95% | 113 | ||
| American Express | AXP | delinquency | 1.30% | 1.30% | 1.20% | 1.27% | 1.60% | -30 |
| charge-off | 1.90% | 1.70% | 1.70% | 1.77% | 2.30% | -40 | ||
| JPMorgan | JPM | delinquency | 0.98% | 0.95% | 0.90% | 0.94% | 1.16% | -18 |
| charge-off | 1.65% | 1.60% | 1.68% | 1.64% | 1.61% | 4 | ||
| Synchrony | SYF | delinquency | 4.60% | 4.40% | 4.10% | 4.37% | 4.50% | 10 |
| adjusted charge-off | 5.60% | 4.40% | 4.70% | 4.90% | 5.10% | 50 | ||
| Discover | DFS | delinquency | 3.61% | 3.41% | 3.15% | 3.39% | 2.58% | 103 |
| charge-off | 4.42% | 4.15% | 4.16% | 4.24% | 3.27% | 115 | ||
| Bread Financial | BFH | delinquency | 6.50% | 6.30% | 5.90% | 6.23% | 5.90% | 60 |
| charge-off | 8.00% | 6.70% | 6.70% | 7.13% | 6.60% | 140 | ||
| Citigroup | C | delinquency | 1.39% | 1.33% | 1.28% | 1.33% | 1.58% | -19 |
| charge-off | 2.07% | 2.13% | 1.97% | 2.06% | 2.61% | -54 | ||
| Bank of America | BAC | delinquency | 1.37% | 1.30% | 1.26% | 1.31% | 1.62% | -25 |
| charge-off | 2.06% | 2.11% | 2.13% | 2.10% | 2.41% | -35 | ||
| Avg. delinquency | 3.03% | 2.84% | 2.68% | 2.85% | 3.18% | 19 | ||
| Avg.charge-off | 3.85% | 3.26% | 3.35% | 3.48% | 3.48% | 37 | ||