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Clouds Parting Over Credit Card Troubles
Blog Post Date: Feb 21 2010
Clouds Parting Over Credit Card Troubles
Kelsey Swanekamp,
With joblessness still hovering at 10 percent and household budget under pressure, credit card issuers and lenders are still taking profits from their loans to consumers. Developments in delinquency figures could signal that lesser numbers of credit card defaults are ahead though, even as net charge-offs increased to 10.5 percent in January.
The figure is not too far below the August peak of 10.8 percent, but in a more encouraging bit of data delinquency rates, a measure used by credit card companies to crystal ball future defaults, decreased to 5.8 percent and the dollar amount of those delinquencies also fell, leading some to speculate that fewer charge-offs are ahead.
"Barring a spike in bankruptcies or another leg up in joblessness, we continue to anticipate an industry cycle peak" to occur in the first quarter of 2010. Wednesday, Citigroup analyst Donald Fandetti wrote in a note.
Citigroup has a positive outloook on card issuer stocks, Fandetti said, reprising a buy on American Express ( AXP - news - people ) and Capital One Financial ( COF - news - people ). Fandetti also advised buying the stocks on any fallback.
The recent data from individual firms was the backbone of Citi's positive view.
Bank of America ( BAC - news - people ) saw a slide in both net charge-offs and delinquency rates. U.S. largest lender disclosed that late payments fell to the lowest level in a year--7.4 percent in January. Write-offs of uncollectible loans also declined, to 13.3 percent from 13.5 percent.
VIA Forbes
keyword: credit card
Kelsey Swanekamp,
With joblessness still hovering at 10 percent and household budget under pressure, credit card issuers and lenders are still taking profits from their loans to consumers. Developments in delinquency figures could signal that lesser numbers of credit card defaults are ahead though, even as net charge-offs increased to 10.5 percent in January.
The figure is not too far below the August peak of 10.8 percent, but in a more encouraging bit of data delinquency rates, a measure used by credit card companies to crystal ball future defaults, decreased to 5.8 percent and the dollar amount of those delinquencies also fell, leading some to speculate that fewer charge-offs are ahead.
"Barring a spike in bankruptcies or another leg up in joblessness, we continue to anticipate an industry cycle peak" to occur in the first quarter of 2010. Wednesday, Citigroup analyst Donald Fandetti wrote in a note.
Citigroup has a positive outloook on card issuer stocks, Fandetti said, reprising a buy on American Express ( AXP - news - people ) and Capital One Financial ( COF - news - people ). Fandetti also advised buying the stocks on any fallback.
The recent data from individual firms was the backbone of Citi's positive view.
Bank of America ( BAC - news - people ) saw a slide in both net charge-offs and delinquency rates. U.S. largest lender disclosed that late payments fell to the lowest level in a year--7.4 percent in January. Write-offs of uncollectible loans also declined, to 13.3 percent from 13.5 percent.
VIA Forbes
keyword: credit card
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