Late Credit-Card Payments Continue To Fall For US Lenders

The rate of credit-card customers who were late on their payments continued to decline in January for several U.S. lenders despite signs some consumers are beginning to load up on debt again.

Bank of America Corp. (BAC), Discover Financial Services (DFS) and J.P. Morgan Chase & Co. (JPM), among the country's largest credit-card issuers, said Wednesday their delinquency rates fell in January from December, an ongoing trend that has helped the card industry post improved earnings over the last year.

Long term, analysts expect delinquencies, or the rate of borrowers 30 days or more behind a payment, to begin increasing as banks try to expand lending and rates likely can't fall much further. Discover, American Express Co. (AXP) and others say their late payments are near historic lows.

Revolving credit, which consists primarily of credit-card loans, increased for the second-straight month in December, to $801 billion, fueled in part by the holiday shopping season. That bodes well for card issuers, who are trying to expand their loan portfolios again after many scaled back lending following the recession.

"We're growing the credit-card business," J.P. Morgan Chase Chief Executive Jamie Dimon said in an interview on Fox Business Network this week. "We've come out with new products, new services...It's going to be a very good business, so we're happy with it."

J.P. Morgan, which has been making a bigger push to go after affluent borrowers and small businesses with new cards, said in a regulatory filing the delinquency rate for card loans packaged into securities fell to 2.45% in January from 2.48% in December. However, net charge-offs, or loans deemed uncollectible, rose to 4.25% from 4.11%. The rate remains well below levels seen in 2009 and 2010.

Bank of America, whose credit-card performance improved later than its competitors, said its delinquency rate for securitized loans fell for the fourth-straight month. The rate was 3.8% in January, down from 3.82% in December. Net charge-offs fell to 5.63% from 6.05%.

The delinquency rate at Discover, which processes transactions in addition to issuing cards, fell to 2.31% from 2.32%. Its net charge-off rate fell to 2.75% from 3.15%.

"Credit quality appears to be trending better than our expectations," Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods, wrote in a research note on Discover's results.

American Express, whose more affluent customer base helped it rebound from the recession more quickly than others, said its delinquency rate was flat at 1.4%. Its net charge-off rate fell to 2.2% from 2.3%.

Some credit-card issuers are showing signs of stress, though.

Capital One Financial Corp. (COF) and Citigroup Inc. (C) said late card payments and charge-offs increased in January, though they also remain below recessionary levels.

Capital One's delinquency rate rose to 3.78% from 3.66% in December. Its net charge-off rate rose to 4.08% from 3.98%.

The delinquency rate at Citi was 3.13%, up from 3.11%. Its net charge-off rate was 5.27%, up from 5.11%.

Whether the recent spurt in consumer debt is a sign borrowers are feeling more confident about their financial situations or reflective of consumer stress remains to be seen.

Recent improvements in employment and ongoing credit performance did little to boost consumers' financial health in the fourth quarter, according to CredAbility, a credit-counseling agency.

The Atlanta agency's Consumer Distress Index, released Wednesday, was 67.6 in the fourth quarter, a slight improvement from 66.7 in the third quarter. The index looks at employment, household budget, credit and other data.

"After essential expenses, many households have little money left to cut from their household budgets," Mark Cole, chief operating officer of CredAbility, said.

-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; [e-mail]