Credit-Card Customers Defy Recent Worries
06/15/2012| 04:11pm US/Eastern
By Andrew R. Johnson
The six largest credit-card lenders saw further improvements in borrower behavior in May, even as choppy economic data spark concerns over the financial state of U.S. consumers.
Capital One Financial Corp. (>> Capital One Financial Corp.), Discover Financial Services (>> Discover Financial Services) and Bank of America Corp. (>> Bank of America Corp) were among the card issuers posting declines in monthly delinquency rates, which measure the percentage of loans on which borrowers are behind paying, according to regulatory filings Friday.
J.P. Morgan Chase & Co. (JPM), Citigroup Inc. (>> Citigroup Inc.) and American Express Co. (>> American Express Company) also said delinquencies fell from April. All of the companies except for Discover also reported declines in their net charge-off rates, or the percentage of loans deemed uncollectible.
Discover, which has enjoyed among the best credit quality among its competitors, said the net charge-off rate for loans it packaged into securities ticked up to 2.65% in May from 2.6% in April. The rate is still near historic lows, and the increase is "less than typical seasonal trends" seen during the month, Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods, wrote in a research report.
The credit-card industry has seen ongoing improvements as many consumers focused on paying down debt following the recession, allowing lenders to sock away less money to cover future loan losses.
But recent indicators have renewed worries that consumers could be in for another tough slog ahead. Earlier this month, a disappointing U.S. jobs report for May caused a drop in financial stocks on concerns that a weak employment market could translate into trouble for borrowers.
Fears that mounting economic problems in European markets will spread to the U.S. have also weighed on consumer lenders.
Some credit-card lenders have pulled back on marketing, which surged last year they tried to tried to win new customers.
Banks mailed 260.6 million credit-card offers to U.S. consumers in April, down from 269.5 million in March and 389.6 million a year earlier, according to Mintel Comperemedia, a research firm that tracks direct mailings.
"Issuers have adopted a more cautious approach due to an uncertain economic environment," Andrew Davidson, senior vice president for Mintel Comperemedia, said in a press release.
Shares of the largest credit-card lenders were up Friday. Discover was up 2% at $33.02, American Express was up 1.9% at $56.07, and Capital One was up 1.7% at $53.90 in recent trading.
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