JPMorgan Chase and Bank of America, the top two general-purpose credit card issuers, reported improved outlooks for their card divisions in first-quarter reports, including a possible peaking in delinquencies, a trend generally reflective of the industry.
But concerns remain as charge-offs are still elevated from credit card loans deemed uncollectible at 180 days late. Those stem from delinquencies that first registered in the second half of last year. An account 30 days late qualifies as delinquent.
And the impact from new reform law restrictions on certain interest rate hikes and fees are reducing card revenues. So is an ongoing trend by American consumers in bringing down their credit card balances.
The Federal Reserve said revolving credit – mostly credit card debt - fell 13.1 percent to $858.1 billion in February. It marked the 16th credit decline in 17 months.
Nonetheless, a leveling off or a reversal in higher delinquencies would reign in losses in credit card revenues for Chase, Bank of America and the other major issuers.
Chase said its charge-off rate climbed to 9.51 percent in March from 9.21 percent in February. But its delinquency rate has seen steady declines from 4.75 percent in January and 4.67 percent in February to 4.51 percent in March.
Bank of America’s delinquency rate decreased to 7.07 percent in March, from 7.23 percent in February. Its charge-off rate fell in March to 12.54, from nearly a full point higher in February.
In its first quarter report, Chase said its managed provision for credit card losses was $3.5 billion, compared with $4.7 billion in the prior year and $4.2 billion in the prior quarter.
The current-quarter provision included a reduction of $1 billion for allowance of loan losses, “reflecting lower estimated losses, partially offset by continued high levels of charge-offs,” Chase said.
Managed net revenue in its credit card business was $4.4 billion, a decrease of $682 million, or 13 percent, from the prior year. Chase CEO Jamie Dimon has said that the new credit card reform laws, which took effect Feb. 22, would reduce card revenue significantly.
Dimon said the Credit CARD Act and Chase’s related policy modifications are expected to reduce after-tax income in 2010 by about $500 million to $750 million – “but this could possibly change as both consumers and competitors change their behavior.”
Bank of America’s Global Card Services reported a net income of $952 million “as credit costs declined.” Net revenue, though, declined 9 percent to $6.8 billion due to lower net interest income from a decrease in average loans, and lower fee income from adjustments to the credit card reform laws that took effect Feb. 22.
“With each day that passes, the 2010 story appears to be one of continuing credit recovery …” said Chief Executive Officer and President Brian T. Moynihan.
Here are March delinquency and charge-off rates for other major credit card issuers:
- American Express saw delinquencies decrease from 3.6 percent in February to 3.3 percent in March. Its charge-offs increased slightly to 7.5 percent, from 7.4 percent in February.
- Capital One delinquencies declined to 5.3 percent in March, from 5.51 percent. Its charge-offs rose to 10.87 percent in March, from 10.19 percent in February.
- Citigroup delinquencies increased to 6.06 percent in March, from 5.94 percent in February. Its charge-off rate increased to 11.55 percent in March, from 11.29 percent in February.
- Discover delinquencies came down slightly to 5.39 in March, from 5.5 percent in February. Its charge-off rate fell to 8.51 percent in March, from 9.11 percent in February.
