--Delinquencies down for six largest credit-card lenders
--Charge-offs down for all but Discover
--Weak economic data spurs concerns of future strain for
borrowers
(Updated with details about loan growth in paragraphs 11-13,
executive comment in paragraph 14, details about Fed data in
paragraph 15.)
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. (COF), Discover Financial Services
(DFS) and Bank of America Corp. (BAC) 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. (C) and
American Express Co. (AXP) 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 as they tried to tried to win new customers and
grow their loan portfolios.
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.
Despite improvements in credit quality, lenders continue to
struggle grow loans as consumers remain cautious about ringing up
more debt.
American Express, the largest credit-card lender by spending,
saw a small increase in average outstanding U.S. card loans, which
were $52.2 billion in May.
Capital One, which recently completed its acquisition of HSBC
Holdings PLC's (HBC) U.S. credit-card business, average outstanding
card loans edged down slightly to $52.8 billion in May. The figure
doesn't include the HSBC portfolio.
The McLean, Va.-based bank expects to see "growing revenue tied
to measured loan growth on the legacy side of our business," Gary
Perlin, chief financial officer of Capital One, said at an investor
conference Wednesday. He noted loan growth has been led by auto
finance and commercial lending, not credit cards.
The Federal Reserve earlier this month said revolving credit,
primarily consisting of credit-card debt, held by U.S. consumers
fell by $3.44 billion in April to $862.29 billion.
Shares of the largest credit-card lenders closed up Friday.
American Express closed up 2.2% at $56.28, Discover closed up 1.9%
at $32.99 and Capital One closed up 1.5% at $53.81 on a day of
broader market increases.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com